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EXHIBIT 2.2
STOCK EXCHANGE AGREEMENT
AMONG
AVANA TELECOMMUNICATIONS GROUP, INC.,
GRACE DEVELOPMENT, INC.
AND
P.V. TEL. INC.,
AND THE SHAREHOLDERS THEREOF
February 15, 2000
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STOCK EXCHANGE AGREEMENT
Agreement entered into as of February 15, 2000, by and among Grace
Development, Inc., a Colorado corporation ("Parent"), Avana Telecommunications
Group, Inc., a Georgia corporation and wholly-owned subsidiary of Parent
("Avana"), P.V. Tel. Inc., a South Carolina corporation (the "Target") and the
shareholders of Target listed on Schedule I hereto (collectively the
"Shareholders"). Avana, Parent, Target and the Shareholders are referred to
collectively herein as the "Parties."
The Shareholders in the aggregate own all of the outstanding capital
stock of the Target.
This Agreement contemplates a transaction in which Avana will acquire
from the Shareholders, and the Shareholders will convey to Avana, all of the
outstanding capital stock of the Target in return for shares of the common
stock, no par value (the "Common Stock") of Parent. The parties intend that the
Exchange is to qualify as a tax-free "reorganization" within the meaning of
Section 368(a)(1)(B) of the Code (as hereinafter defined).
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1. Definitions.
"Accredited Investor" has the meaning set forth in Regulation D
promulgated under the Securities Act.
"Adverse Consequences" means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including court costs and reasonable attorneys' fees and
expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of
Code ss.1504 or any similar group defined under a similar provision of state,
local or foreign law.
"Applicable Rate" means the corporate base rate of interest announced
from time to time by Bank of America.
"Avana" has the meaning set forth in the preface above.
"Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or reasonably could form the
basis for any specified consequence.
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"Closing" has the meaning set forth in Section 2(c) below.
"Closing Date" has the meaning set forth in Section 2(c) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" has the meaning set forth in the preface above.
"Confidential Information" means any information concerning the
businesses and affairs of the Target and its Subsidiaries that is not already
generally available to the public, including, without limitation, the SEC
Letter.
"Controlled Group of Corporations" has the meaning set forth in Code
Section 1563.
"Deferred Intercompany Transaction" has the meaning set forth in
Treas. Reg. Section 1.1502-13.
"Disclosure Schedule" has the meaning set forth in Section 4 below.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan), or (d) Employee Welfare Benefit Plan or
material fringe benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
Section 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 3(1).
"Environmental, Health, and Safety Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational Safety and Health
Act of 1970, each as amended, together with all other laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings,
and charges thereunder) of federal, state, local, and foreign governments (and
all agencies thereof) concerning pollution or protection of the environment,
public health and safety, or employee health and safety, including laws
relating to emissions, discharges, releases, or threatened releases of
pollutants, contaminants, or chemical, industrial, hazardous, or toxic
materials or wastes into ambient air, surface water, ground water, or lands or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes.
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"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means Xxxxxx & Xxxxxx, LLP, a Georgia limited liability
partnership.
"Escrow Agreement" means the agreement so entitled, the form of which
is attached hereto as Exhibit E.
"Escrow Shares" has the meaning set forth in Section 2(b) below.
"Excess Loss Account" has the meaning set forth in Treas. Reg. Section
1.1502-19.
"Extremely Hazardous Substance" has the meaning set forth in Section
302 of the Emergency Planning and Community Right-to-Know Act of 1986, as
amended.
"Fair Market Value" means, with respect to the Common Stock, the
closing price of the Common Stock on the securities exchange having the
greatest trading volume on a given trading day, or, if there have been no sales
on a particular trading day, the average of the last reported bid and asked
quotations on such exchange at the close of business for such trading day.
"Fiduciary" has the meaning set forth in ERISA Section 3(21).
"Financial Statement" has the meaning set forth in Section 4(g) below.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Indemnified Party" has the meaning set forth in Section 8(d) below.
"Indemnifying Party" has the meaning set forth in Section 8(d) below.
"Indemnifying Shareholders" means the Shareholders listed on Schedule
2(b) attached hereto, except Xxxxx Xxxxxx.
"Intellectual Property" means (a) all inventions (whether patentable
or unpatentable and whether or not reduced to practice), all improvements
thereto, and all patents, patent applications, and patent disclosures, together
with all reissuances, continuations, continuations-in-part, revisions,
extensions, and reexaminations thereof, (b) all trademarks, service marks,
trade dress, logos, trade names, and corporate names, together with all
translations, adaptations, derivations, and combinations thereof and including
all goodwill associated therewith, and all applications, registrations, and
renewals in connection therewith, (c) all copyrightable works, all copyrights,
and all applications, registrations, and renewals in connection therewith, (d)
all mask works and all applications, registrations, and renewals in connection
therewith, (e) all trade secrets and confidential business information
(including ideas, research and development, know-how, formulas, compositions,
manufacturing and production processes and techniques, technical data, designs,
drawings, specifications, customer and supplier lists, pricing and cost
information, and business and marketing plans and proposals), (f) all computer
software (including data and
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related documentation), (g) all other proprietary rights, and (h) all copies
and tangible embodiments thereof (in whatever form or medium).
"Investment Letter" means that certain letter to be delivered to the
Parent at the Closing by each of the Shareholders and V. T. Xxxxxx, the form of
which is attached hereto as Exhibit A.
"Knowledge" means actual knowledge after reasonable investigation.
"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Material Adverse Change" has the meaning set forth in Section 4(h)
below.
"Material Adverse Effect" means a material and adverse effect upon the
business, properties, operations, financial condition or results of operations
of Target or any of its Subsidiaries.
"Most Recent Balance Sheet" means the balance sheet contained within
the Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in
Section 4(g) below.
"Most Recent Fiscal Month End" has the meaning set forth in Section
4(g) below.
"Most Recent Fiscal Year End" has the meaning set forth in Section
4(g) below.
"Multiemployer Plan" has the meaning set forth in ERISA Section 3(37).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity
and frequency).
"Parent" has the meaning set forth in the preface above.
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"Prohibited Transaction" has the meaning set forth in ERISA Section
406 and Code Section 4975.
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"PV Tel Note" means those certain promissory notes dated as of
November 1, 1999 and December 21, 1999 given by the Target to Parent, and the
related Stock Pledge Agreements given by certain Shareholders to secure the
obligations thereunder.
"Registration Rights Agreement" means the agreement so entitled, the
form of which is attached hereto as Exhibit F.
"Reportable Event" has the meaning set forth in ERISA Section 4043.
"Requisite Shareholders" means Shareholders holding a majority in
interest of the Target Shares as set forth in Section 4(b) of the Disclosure
Schedule.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for Taxes not yet due and payable or for Taxes
that the taxpayer is contesting in good faith through appropriate proceedings,
(c) purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business
and not incurred in connection with the borrowing of money.
"Share Consideration" means Two Million Thirty Thousand (2,030,000)
shares of Common Stock.
"Shareholders" has the meaning set forth in the preface above.
"Shareholder Notes" means those certain promissory notes given by
Coastal Growth Partners, L.P., a limited partnership formed under the laws of
the State of South Carolina and Xxxxx Xxxx, an individual resident of the State
of Virginia, to the Parent in the aggregate principal amount of $450,000, the
forms of which are attached hereto as Exhibit G-1 and G-2.
"Subsidiary" means any corporation or other business entity,
including, without limitation, any limited liability company, with respect to
which a specified Person (or a Subsidiary thereof) owns a majority of the
common stock or membership interests or has the power to vote or direct the
voting of sufficient securities or other equity interests to elect a majority
of the directors or otherwise control the affairs of such business entity.
"Target" has the meaning set forth in the preface above.
"Target Shares" means any share of the capital stock of the Target as
set forth in Section 4(b) hereof.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental
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(including taxes under Code Section 59A), customs duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in Section 8(d) below.
2. Exchange of Target Shares.
(a) Basic Transaction. On and subject to the terms and conditions
of this Agreement, Avana agrees to acquire from each of the Shareholders, and
each of the Shareholders agrees to convey to Avana, all of his or its Target
Shares for the consideration specified below in this Section 2.
(b) Share Consideration. Avana and Parent agree to deliver the
Share Consideration to the Shareholders at the Closing by delivery of
certificates for whole shares of Common Stock as follows: (i) Seven Hundred
Fifty Thousand (750,000) shares of the Share Consideration shall be delivered
to the Escrow Agent pursuant to the terms of the Escrow Agreement (the "Escrow
Shares") and (ii) the balance of the Share Consideration shall be delivered to
Shareholders. The Share Consideration shall be allocated among the Shareholders
in accordance with Schedule 2(b) attached hereto.
(c) The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Xxxxxx &
Xxxxxx LLP in Atlanta, Georgia, commencing at 9:00 a.m. local time on the
second business day following the satisfaction or waiver of all conditions to
the obligations of the Parties to consummate the transactions contemplated
hereby (other than conditions with respect to actions the respective Parties
will take at the Closing itself) or such other date as Avana and the Requisite
Shareholders may mutually determine (the "Closing Date"); provided, however,
that the Closing Date shall be no later than February 29, 2000.
(d) Deliveries at the Closing. At the Closing, (i) the
Shareholders will deliver to Avana the various certificates, instruments, and
documents referred to in Section 7(a) below, (ii) Avana will deliver to the
Shareholders the various certificates, instruments, and documents referred to
in Section 7(b) below, (iii) each of the Shareholders will deliver to Avana
stock certificates representing all of his or its Target Shares, endorsed in
blank or accompanied by duly executed assignment documents, and (iv) Avana will
deliver to the Shareholders and the Escrow Agent the Share Consideration as
specified in Section 2(b) above.
3. Representations and Warranties Concerning the Transaction.
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(a) Representations and Warranties of the Shareholders. Each of
the Shareholders, severally (and in proportion to their respective shares of
the Share Consideration) and not jointly, represents and warrants to Avana that
the statements contained in this Section 3(a) are correct and complete as of
the date of this Agreement with respect to himself or itself, except as set
forth in Annex I attached hereto.
(i) Organization of Certain Shareholders. If one or more
of the Shareholders is a corporation, partnership or other business
entity, such Shareholder is duly organized, validly existing, and in
good standing under the laws of the jurisdiction of its incorporation
or organization.
(ii) Authorization of Transaction. Each Shareholder has
full power and authority (including, if one or more of the
Shareholders is a corporation or other business entity, full corporate
or other organizational power and authority) to execute and deliver
this Agreement and to perform his, her or its obligations hereunder.
This Agreement constitutes the valid and legally binding obligation of
each Shareholder, enforceable in accordance with its terms and
conditions. No Shareholder is required to give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order to consummate the
transactions contemplated by this Agreement.
(iii) Noncontravention. Neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (A) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental agency, or court
to which any Shareholder is subject or, if the Shareholder is a
corporation, any provision of its charter or bylaws or (B) result in a
breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or
cancel, or require any notice under any agreement, contract, lease,
license, instrument, or other arrangement to which any Shareholder is
a party or by which he or it is bound or to which any of his, her or
its assets is subject.
(iv) Brokers' Fees. No Shareholder has any Liability or
obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement
for which Avana could become liable or obligated, except for V. T.
Xxxxxx, a resident of the State of Georgia, to whom Avana and Parent
have agreed to issue One Hundred Twenty Thousand (120,000) shares of
Common Stock in consideration therefor on the Closing Date (the
"Xxxxxx Fee").
(v) Investment. Each Shareholder (A) understands that
the Share Consideration has not been, and, except as otherwise
provided in the Registration Rights Agreement, will not be, registered
under the Securities Act, or under any state securities laws, and is
being offered and sold in reliance upon federal and state exemptions
for transactions not involving any public offering, (B) is acquiring
the Share Consideration solely for his or its own account for
investment purposes, and not with a view to the distribution thereof,
(C) is a sophisticated investor with knowledge and experience in
business and financial
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matters, (D) has received certain information concerning Avana and has
had the opportunity to obtain additional information as desired in
order to evaluate the merits and the risks inherent in holding the
Share Consideration, and (E) is able to bear the economic risk and
lack of liquidity inherent in holding the Share Consideration.
(vi) Target Shares. Each Shareholder holds of record and
owns beneficially the number of Target Shares set forth next to his or
its name in Section 4(b) of the Disclosure Schedule, free and clear of
any restrictions on transfer (other than any restrictions under the
Securities Act and state securities laws), Taxes, Security Interests,
options, warrants, purchase rights, contracts, commitments, equities,
claims, and demands. No Shareholder is a party to any option, warrant,
purchase right, or other contract or commitment that could require the
Shareholder to sell, transfer, or otherwise dispose of any capital
stock of the Target (other than this Agreement). No Shareholder is a
party to any voting trust, proxy, or other agreement or understanding
with respect to the voting of any capital stock of the Target.
(b) Representations and Warranties of Avana. Avana represents and
warrants to the Shareholders that the statements contained in this Section 3(b)
are correct and complete as of the date of this Agreement, except as set forth
in Annex II attached hereto.
(i) Organization of Avana. Avana is a corporation duly
organized, validly existing, and in good standing under the laws of
the jurisdiction of its incorporation.
(ii) Authorization of Transaction. Avana has full power
and authority (including full corporate power and authority) to
execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement constitutes the valid and legally binding
obligation of Avana, enforceable in accordance with its terms and
conditions. Avana need not give any notice to, make any filing with,
or obtain any authorization, consent, or approval of any government or
governmental agency in order to consummate the transactions
contemplated by this Agreement.
(iii) Noncontravention. Neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (A) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental agency, or court
to which Avana is subject or any provision of its charter or bylaws or
(B) result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement
to which Avana is a party or by which it is bound or to which any of
its assets is subject.
(iv) Brokers' Fees. Avana has no Liability or obligation
to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement for which
any Shareholders could become liable or obligated.
(v) Investment. Avana is not acquiring the Target Shares
with a view to or for
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sale in connection with any distribution thereof within the meaning of
the Securities Act.
(c) Representations and Warranties of the Parent. Parent
represents and warrants to the Shareholders that the statements contained in
this Section 3(c) are correct and complete as of the date of this Agreement,
except as set forth in Annex II attached hereto.
(i) Organization of Parent. Parent is a corporation duly
organized, validly existing, and in good standing under the laws of
the jurisdiction of its incorporation.
(ii) Authorization of Transaction. Parent has full power
and authority (including full corporate power and authority) to
execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement constitutes the valid and legally binding
obligation of Parent, enforceable in accordance with its terms and
conditions. Parent does not need to give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement.
(iii) Noncontravention. Neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby will (i) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental agency, or court
to which Parent is subject or any provision of its charter or bylaws
or (ii) result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement
to which Parent is a party or by which it is bound or to which any of
its assets is subject.
(iv) Brokers' Fees. Except for the Xxxxxx Fee, Parent has
no Liability or obligation to pay any fees or commissions to any
broker, finder, or agent with respect to the transactions contemplated
by this Agreement for which any Shareholder could become liable or
obligated.
(v) Capitalization; Share Consideration. The authorized
capital stock of Parent consists of 800,000,000 shares of Common Stock
and 10,000,000 of preferred stock, no par value, (the "Preferred
Stock"), of which 75,308,457 shares of Common Stock and no shares of
Preferred Stock are issued and outstanding as of the date hereof. The
shares of Common Stock constituting the Share Consideration, when
issued in accordance with the terms and conditions of this Agreement,
will be duly authorized, validly issued, fully paid and nonassessable.
(vi) SEC Reports and Parent Financial Statements. Since
September 28, 1999, Parent has filed with the Securities and Exchange
Commission (the "SEC") all forms, reports, schedules, statements and
other documents, and amendments thereto, required to be filed by it
through the date hereof, under the Securities Exchange Act (such
forms, reports, schedules, statements, amendments and other documents,
to the extent filed and publicly available prior to the date of this
Agreement, other than preliminary filings, are referred to as the "SEC
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Reports"). Except with respect to matters previously disclosed to the
Shareholders in that certain letter from Parent dated February 9,
2000, including all information and attachments incorporated therein
by reference, (the "SEC Letter"), the SEC Reports, at the time filed,
(a) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances
under which they were made, not misleading and (b) complied as to form
in all material respects with the applicable requirements of the
Exchange Act. Except with respect to matters previously disclosed in
the SEC Letter, the financial statements of Parent (including the
related notes and schedules thereto) included in the SEC Reports (the
"Parent Financial Statements") (i) comply as to form in all material
respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto, (ii)
have been prepared in accordance with GAAP applied on a consistent
basis during the periods involved (except as may be indicated in the
notes thereto, or, in the case of the unaudited statements, as
permitted by the Instructions to Form 10-QSB promulgated by the SEC)
and (iii) fairly present (subject, in the case of the unaudited
statements, to normal year-end adjustments) (A) the financial position
of Parent, (B) the results of its operations and (C) cash flows, in
each case, as of the dates thereof or for the period indicated, as the
case may be.
(vii) No Material Adverse Change. Since September 30,
1999, there has not been any material adverse change in the business, financial
condition, operations or results of operations of Parent.
(viii) Tax Matters. Each of Parent and Avana has filed all
material Tax Returns that each of them were required to file. All such Tax
Returns were correct and complete in all material respects. All material Taxes
due and payable by Parent or Avana (whether or not shown on any Tax Return)
have been paid or adequate provisions has been made therefor. There are not
Security Interests on any of the assets of the Parent or Avana that arose in
connection with any failure (or alleged failure) to pay any Tax. There is no
asserted deficiency, dispute or claim concerning any tax Liability of Parent or
Avana claimed or raised by any authority in writing.
4. Representations and Warranties Concerning the Target and Its
Subsidiaries. Target and the Shareholders, jointly and severally, represent and
warrant to Avana and Parent that the statements contained in this Section 4 are
correct and complete as of the date of this Agreement, except as set forth in
the disclosure schedule delivered by the Shareholders to Avana and Parent on
the date hereof and initialed by the Parties (the "Disclosure Schedule"). The
Disclosure Schedule will be arranged in paragraphs corresponding to the
lettered and numbered paragraphs contained in this Section 4.
(a) Organization, Qualification, and Corporate Power. Each of the
Target and its Subsidiaries is a corporation or other business entity duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation or organization. Each of the Target and its
Subsidiaries is duly authorized to conduct business and is in good standing
under the laws of each jurisdiction where such qualification is required,
except where such failure to be so qualified would not have a Material Adverse
Effect. Each of the Target and its Subsidiaries
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has full corporate power and authority and all licenses, permits, and
authorizations necessary to carry on the businesses in which it is engaged and
in which it presently proposes to engage and to own and use the properties
owned and used by it, except such licenses, permits and authorizations the
failure so to have would not have a Material Adverse Effect. Section 4(a) of
the Disclosure Schedule lists the directors and officers of each of the Target
and its Subsidiaries. The Shareholders have delivered to Avana correct and
complete copies of the charter, bylaws or other organizational and governance
documents of each of the Target and its Subsidiaries (as amended to date). The
minute books (containing the records of meetings of the stockholders, members,
the board of directors, the managers and any committees of the board of
directors or managers), the certificate books, and the stock or membership
record books of each of the Target and its Subsidiaries are correct and
complete in all material respects. None of the Target and its Subsidiaries is
in default under or in violation of any provision of its charter, bylaws or
other organizational or governance documents.
(b) Capitalization. The entire authorized capital stock of the
Target consists of 11,000 shares of common stock, par value $.001, and 2,500
shares of preferred stock, par value $500, of which 7,500 shares of common
stock and 2,500 shares of preferred stock are issued and outstanding. All of
the issued and outstanding Target Shares have been duly authorized, are validly
issued, fully paid, and nonassessable, and are held of record by the respective
Shareholders as set forth in Section 4(b) of the Disclosure Schedule. There are
no outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, or other contracts or commitments
that could require the Target to issue, sell, or otherwise cause to become
outstanding any of its capital stock. There are no outstanding or authorized
stock appreciation, phantom stock, profit participation, or similar rights with
respect to the Target. There are no voting trusts, proxies, or other agreements
or understandings with respect to the voting of the capital stock of the
Target.
(c) Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby,
will (i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which any of the Target and its
Subsidiaries is subject or any provision of the charter or bylaws of any of the
Target and its Subsidiaries or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license, instrument, or other arrangement
to which any of the Target and its Subsidiaries is a party or by which it is
bound or to which any of its assets is subject (or result in the imposition of
any Security Interest upon any of its assets). None of the Target and its
Subsidiaries needs to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order for the Parties to consummate the transactions contemplated by this
Agreement.
(d) Brokers' Fees. None of the Target and its Subsidiaries has
any Liability or obligation to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated by this
Agreement.
(e) Title to Assets. The Target and its Subsidiaries have good and
marketable title to, or
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a valid leasehold or license interest in, the properties and assets used by
them, located on their premises, or shown on the Most Recent Balance Sheet or
acquired after the date thereof, free and clear of all Security Interests,
except for properties and assets disposed of in the Ordinary Course of Business
since the date of the Most Recent Balance Sheet.
(f) Subsidiaries. Section 4(f) of the Disclosure Schedule sets
forth for each Subsidiary of the Target (i) its name and jurisdiction of
incorporation or organization, (ii) the number of shares of authorized capital
stock or membership interests of each class of its capital stock or other
equity interest, (iii) the number of issued and outstanding shares of each
class of its capital stock or membership or other equity interests, the names
of the holders thereof, and the number of shares or interests held by each such
holder, and (iv) the number of shares of its capital stock, membership
interests or other equity interest held in treasury. All of the issued and
outstanding shares of capital stock or equity interests of each Subsidiary of
the Target have been duly authorized and are validly issued, fully paid, and
nonassessable. The Target or one of its Subsidiaries holds of record and owns
beneficially all of the outstanding shares or equity interests of each
Subsidiary of the Target, free and clear of any restrictions on transfer (other
than restrictions under the Securities Act and state securities laws), Taxes,
Security Interests, options, warrants, purchase rights, contracts, commitments,
equities, claims, and demands. There are no outstanding or authorized options,
warrants, purchase rights, conversion rights, exchange rights, or other
contracts or commitments that could require any of the Target or its
Subsidiaries to sell, transfer, or otherwise dispose of any capital stock or
other equity interest of any of its Subsidiaries or that could require any
Subsidiary of the Target to issue, sell, or otherwise cause to become
outstanding any of its own capital stock or other equity interest. There are no
outstanding stock appreciation, phantom stock, profit participation, or similar
rights with respect to any Subsidiary of the Target. There are no voting
trusts, proxies, or other agreements or understandings with respect to the
voting of any capital stock of any Subsidiary of the Target. None of the Target
or its Subsidiaries controls directly or indirectly or has any direct or
indirect equity interest in any corporation, partnership, trust, or other
business association which is not a Subsidiary of the Target.
(g) Financial Statements. Attached hereto as Exhibit B are the
following financial statements (collectively the "Financial Statements"): (i)
audited consolidated and unaudited consolidating balance sheets and statements
of income, changes in shareholders' equity, and cash flow as of and for the
fiscal year ended December 31, 1998 (the "Most Recent Fiscal Year End") for the
Target and its Subsidiaries; and (ii) unaudited consolidated balance sheet and
statements of income, expenses and retained earnings, and cash flow (the "Most
Recent Financial Statements") as of and for the three months ended December 31,
1999 for the Target and its Subsidiaries. The Financial Statements (including
the notes thereto) have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby, present fairly the
financial condition of the Target and its Subsidiaries on a consolidated basis
as of such dates and the results of operations of the Target and its
Subsidiaries on a consolidated basis for such periods, are correct and complete
in all material respects, and are consistent with the books and records of the
Target and its Subsidiaries (which books and records are correct and complete
in all material respects); provided, however, that the Most Recent Financial
Statements are subject to normal year-end adjustments (which will not be
material individually or in the aggregate) and lack footnotes and other
presentation items.
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(h) Events Subsequent to Most Recent Financial Statements. Since
the date of the Most Recent Financial Statements, there has not been any
material adverse change in the business, financial condition, operations or
results of operations of any of the Target and its Subsidiaries (a "Material
Adverse Change"), taken as a whole. Without limiting the generality of the
foregoing, since that date:
(i) none of the Target and its Subsidiaries has sold,
leased, transferred, or assigned any of its assets, tangible or
intangible, other than in the Ordinary Course of Business;
(ii) none of the Target and its Subsidiaries has entered
into any agreement, contract, lease, or license (or series of related
agreements, contracts, leases, and licenses) either involving more
than $7,500 or otherwise outside the Ordinary Course of Business;
(iii) no party (including any of the Target and its
Subsidiaries) has accelerated, terminated, modified, or cancelled any
agreement, contract, lease, or license (or series of related
agreements, contracts, leases, and licenses) involving more than
$7,500 to which any of the Target and its Subsidiaries is a party or
by which any of them is bound;
(iv) none of the Target and its Subsidiaries has imposed
any Security Interest upon any of its assets, tangible or intangible;
(v) none of the Target and its Subsidiaries has made any
capital expenditure (or series of related capital expenditures) either
involving more than $7,500 or otherwise outside the Ordinary Course of
Business;
(vi) none of the Target and its Subsidiaries has made any
capital investment in, any loan to, or any acquisition of the
securities or assets of, any other Person (or series of related
capital investments, loans, and acquisitions) either involving more
than $7,500 or otherwise outside the Ordinary Course of Business;
(vii) none of the Target and its Subsidiaries has issued
any note, bond, or other debt security or created, incurred, assumed,
or guaranteed any indebtedness for borrowed money or capitalized lease
obligation either involving more than $2,000 singly or $7,500 in the
aggregate;
(viii) none of the Target and its Subsidiaries has delayed
or postponed the payment of accounts payable and other Liabilities
outside the Ordinary Course of Business;
(ix) none of the Target and its Subsidiaries has
cancelled, compromised, waived, or released any right or claim (or
series of related rights and claims) either involving more than $7,500
or otherwise outside the Ordinary Course of Business;
(x) none of the Target and its Subsidiaries has granted
any license or sublicense
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of any rights under or with respect to any Intellectual Property;
(xi) there has been no change made or authorized in the
charter or bylaws of any of the Target and its Subsidiaries;
(xii) none of the Target and its Subsidiaries has issued,
sold, or otherwise disposed of any of its capital stock, or granted
any options, warrants, or other rights to purchase or obtain
(including upon conversion, exchange, or exercise) any of its capital
stock;
(xiii) none of the Target and its Subsidiaries has
declared, set aside, or paid any dividend or made any distribution
with respect to its capital stock (whether in cash or in kind) or
redeemed, purchased, or otherwise acquired any of its capital stock;
(xiv) none of the Target and its Subsidiaries has
experienced any damage, destruction, or loss (whether or not covered
by insurance) to its property that would have a Material Adverse
Effect, taken as a whole;
(xv) none of the Target and its Subsidiaries has made any
loan to, or entered into any other transaction with, any of its
directors, officers, and employees outside the Ordinary Course of
Business;
(xvi) none of the Target and its Subsidiaries has entered
into any employment contract or collective bargaining agreement,
written or oral, or modified the terms of any existing such contract
or agreement;
(xvii) none of the Target and its Subsidiaries has granted
any increase in the base compensation of any of its directors,
officers, and employees outside the Ordinary Course of Business;
(xviii) none of the Target and its Subsidiaries has adopted,
amended, modified, or terminated any bonus, profit-sharing, incentive,
severance, or other plan, contract, or commitment for the benefit of
any of its directors, officers, and employees (or taken any such
action with respect to any other Employee Benefit Plan);
(xix) none of the Target and its Subsidiaries has made any
other change in employment terms for any of its directors, officers,
and employees outside the Ordinary Course of Business;
(xx) none of the Target and its Subsidiaries has made or
pledged to make any charitable or other capital contribution outside
the Ordinary Course of Business;
(xxi) there has not been any other occurrence, event,
incident, action, failure to act, or transaction outside the Ordinary
Course of Business involving any of the Target and its Subsidiaries
that reasonably could be expected to have a Material Adverse Effect,
taken as a whole;
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(xxii) none of the Target or its Subsidiaries has
surrendered, forfeited or otherwise terminated any license, permit or
authorization to conduct its business; and
(xxiii) none of the Target and its Subsidiaries has
committed to any of the foregoing.
(i) Undisclosed Liabilities. None of the Target and its
Subsidiaries has any Liability (and there is no Basis of which any of Target,
its Subsidiaries or the Shareholders is aware for any present or future action,
suit, proceeding, hearing, investigation, charge, complaint, claim, or demand
against any of them giving rise to any Liability), except for (i) Liabilities
set forth on the face of the Most Recent Balance Sheet (or in any notes
thereto); (ii) Liabilities which have arisen after the date of the Most Recent
Financial Statements in the Ordinary Course of Business (none of which results
from, arises out of, relates to, is in the nature of, or was caused by any
breach of contract, breach of warranty, tort, infringement, or violation of
law); and (iii) Liabilities that, individually or in the aggregate, have not
had or would not reasonably be expected to have a Material Adverse Effect,
taken as a whole.
(j) Legal Compliance. Each of the Target and its Subsidiaries has
complied with all applicable laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder) of
federal, state, local, and foreign governments (and all agencies thereof),
except for such noncompliance that would not have a Material Adverse Effect,
taken as a whole, and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, or notice has been filed or commenced against
any of them alleging any failure so to comply.
(k) Tax Matters.
(i) Each of the Target and its Subsidiaries has filed
all material Tax Returns that it was required to file. All such Tax
Returns were correct and complete in all material respects. All
material Taxes due and payable by any of the Target and its
Subsidiaries (whether or not shown on any Tax Return) have been paid
or adequate provision has been made therefor. None of the Target and
its Subsidiaries currently is the beneficiary of any extension of time
within which to file any Tax Return. No claim has ever been made by an
authority in a jurisdiction where any of the Target and its
Subsidiaries does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction. There are no Security Interests on any
of the assets of any of the Target and its Subsidiaries that arose in
connection with any failure (or alleged failure) to pay any Tax.
(ii) Each of the Target and its Subsidiaries has withheld
and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent
contractor, creditor, Shareholder, or other third party.
(iii) There is no dispute or claim concerning any Tax
Liability of any of the Target and its Subsidiaries claimed or raised
by any authority in writing. Section 4(k) of the Disclosure Schedule
lists all federal, state, local, and foreign income Tax Returns
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filed with respect to any of the Target and its Subsidiaries for
taxable periods ended on or after December 31, 1996, indicates those
Tax Returns that have been audited, and indicates those Tax Returns
that currently are the subject of audit. The Shareholders have
delivered to Avana correct and complete copies of all federal income
Tax Returns, examination reports, and statements of deficiencies
assessed against or agreed to by any of the Target and its
Subsidiaries since December 31, 1996.
(iv) None of the Target and its Subsidiaries has waived
any statute of limitations in respect of Taxes or agreed to any
extension of time with respect to a Tax assessment or deficiency.
(v) None of the Target and its Subsidiaries has filed a
consent under Code Section 341(f) concerning collapsible corporations.
None of the Target and its Subsidiaries has made any payments, is
obligated to make any payments, or is a party to any agreement that
under certain circumstances could obligate it to make any payments
that will not be deductible under Code Section 280G. None of the
Target and its Subsidiaries 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). None of the Target and its Subsidiaries is a party
to any Tax allocation or sharing agreement. None of the Target and its
Subsidiaries (A) has been a member of an Affiliated Group filing a
consolidated federal income Tax Return (other than a group the common
parent of which was or is the Target) or (B) has any Liability for the
Taxes of any Person (other than any of the Target and its
Subsidiaries) under Treas. Reg. Section 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
(vi) As of the date of the Most Recent Financial
Statements, all Taxes of the Target and its Subsidiaries required to
be accrued under GAAP (excluding any deferred Taxes established to
reflect timing differences between book and Tax income) are set forth
in the Most Recent Balance Sheet (or in any notes thereto).
(l) Real Property.
(i) Section 4(l)(i) of the Disclosure Schedule lists and
describes briefly all real property leased or subleased to any of the
Target and its Subsidiaries. The Shareholders have delivered to Avana
correct and materially complete copies of the leases and subleases
listed in Section 4(l)(i) of the Disclosure Schedule (as amended to
date). With respect to each lease and sublease listed in Section
4(l)(i) of the Disclosure Schedule:
(A) the lease or sublease is, with respect to
Target and its Subsidiaries, legal, valid, binding,
enforceable, and in full force and effect;
(B) the lease or sublease will, with respect to
Target and its Subsidiaries, continue to be legal, valid,
binding, enforceable, and in full force and effect on
identical terms following the consummation of the
transactions contemplated hereby;
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(C) neither Target nor any of its Subsidiaries,
nor, to the Shareholders' Knowledge, any other party to the
lease or sublease, is in breach or default, and no event has
occurred which, with notice or lapse of time, would
constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(D) neither Target nor any of its Subsidiaries,
nor, to the Shareholders' Knowledge, any other party to the
lease or sublease, has repudiated any provision thereof;
(E) there are no disputes, oral agreements, or
forbearance programs in effect as to the lease or sublease;
(F) with respect to each sublease, the
representations and warranties set forth in Subsections (A)
through (E) above are, to the Shareholders' Knowledge, true
and correct with respect to the underlying lease;
(G) none of the Target and its Subsidiaries has
assigned, transferred, conveyed, mortgaged, deeded in trust,
or encumbered any interest in the leasehold or subleasehold;
(H) to the Shareholders' Knowledge, all
facilities leased or subleased thereunder have received all
approvals of governmental authorities (including licenses and
permits) required in connection with the operation thereof
and have been operated and maintained in accordance with
applicable laws, rules, and regulations;
(I) all facilities leased or subleased
thereunder are supplied with utilities and other services
necessary for the operation of said facilities; and
(J) to the Shareholders' Knowledge, the owner
of the facility leased or subleased has good and marketable
title to the parcel of real property, free and clear of any
Security Interest, easement, covenant, or other restriction,
except for installments of special easements not yet
delinquent and recorded easements, covenants, and other
restrictions which do not impair the current use, occupancy,
or value, or the marketability of title, of the property
subject thereto.
(m) Intellectual Property.
(i) The Target and its Subsidiaries own or have the
right to use pursuant to license, sublicense, agreement, or permission
all Intellectual Property necessary for the operation of the
businesses of the Target and its Subsidiaries as presently conducted
and as presently proposed to be conducted. Each item of Intellectual
Property owned or used by any of the Target and its Subsidiaries
immediately prior to the Closing hereunder will be owned or available
for use by the Target or the Subsidiary on identical terms and
conditions immediately subsequent to the Closing hereunder. Each of
the Target and its
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Subsidiaries has taken all reasonably necessary action to maintain and
protect each item of Intellectual Property that it owns or uses.
(ii) None of the Target or its Subsidiaries has infringed
upon or misappropriated any Intellectual Property rights of third
parties, and none of the Shareholders and the directors and officers
(and employees with responsibility for Intellectual Property matters)
of the Target and its Subsidiaries is currently in receipt of, or know
of the Basis for, any charge, complaint, claim, demand, or notice
alleging any such infringement, misappropriation, or violation
(including any claim that any of the Target and its Subsidiaries must
license or refrain from using any Intellectual Property rights of any
third party). To the Knowledge of any of the Shareholders and the
directors and officers (and employees with responsibility for
Intellectual Property matters) of the Target and its Subsidiaries, no
third party has infringed upon, misappropriated, or otherwise come
into conflict with any Intellectual Property rights of any of the
Target and its Subsidiaries.
(iii) Section 4(m)(iii) of the Disclosure Schedule
identifies each patent or registration which has been issued to any of
the Target and its Subsidiaries with respect to any of its
Intellectual Property, identifies each pending patent application or
application for registration which any of the Target and its
Subsidiaries has made with respect to any of its Intellectual
Property, and identifies each license, agreement, or other permission
which any of the Target and its Subsidiaries has granted to any third
party with respect to any of its Intellectual Property (together with
any exceptions). The Shareholders have delivered or made available to
Avana correct and materially complete copies of all such patents,
registrations, applications, licenses, agreements, and permissions (as
amended to date) and have made available to Avana correct and
materially complete copies of all other written documentation
evidencing ownership and prosecution (if applicable) of each such
item. Section 4(m)(iii) of the Disclosure Schedule also identifies
each trade name or unregistered trademark used by any of the Target
and its Subsidiaries in connection with any of its businesses. With
respect to each item of Intellectual Property required to be
identified in Section 4(m)(iii) of the Disclosure Schedule:
(A) the Target and its Subsidiaries possess all
right, title, and interest in and to the item, free and clear
of any Security Interest, license, or other restriction;
(B) the item is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;
(C) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending
or, to the Knowledge of any of the Shareholders and the
directors and officers (and employees with responsibility for
Intellectual Property matters) of the Target and its
Subsidiaries, is threatened which challenges the legality,
validity, enforceability, use, or ownership of the item; and
(D) none of the Target and its Subsidiaries has
an existing agreement to
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indemnify any Person for or against any interference,
infringement, misappropriation, or other conflict with
respect to the item.
(iv) Section 4(m)(iv) of the Disclosure Schedule
identifies each item of Intellectual Property that any third party
owns and that any of the Target and its Subsidiaries uses pursuant to
license, sublicense, agreement, or permission. The Shareholders have
delivered or made available to Avana correct and materially complete
copies of all such licenses, sublicenses, agreements, and permissions
(as amended to date). With respect to each item of Intellectual
Property required to be identified in Section 4(m)(iv) of the
Disclosure Schedule:
(A) the license, sublicense, agreement, or
permission covering the item is, with respect to the Target
and its Subsidiaries, legal, valid, binding, enforceable, and
in full force and effect;
(B) the license, sublicense, agreement, or
permission will, with respect to the Target and its
Subsidiaries, continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms
following the Closing;
(C) neither Target nor any of its Subsidiaries,
nor, to the Shareholders' Knowledge, any other party to the
license, sublicense, agreement, or permission is in breach or
default, and no event has occurred which with notice or lapse
of time would constitute a breach or default or permit
termination, modification, or acceleration thereunder;
(D) neither Target nor any of its Subsidiaries,
nor, to the Shareholders' Knowledge, any other party to the
license, sublicense, agreement, or permission has repudiated
any provision thereof;
(E) with respect to each sublicense, the
representations and warranties set forth in Subsections (A)
through (D) above are true and correct, to the Shareholders'
knowledge, with respect to the underlying license;
(F) to the Shareholders' knowledge, the
underlying item of Intellectual Property is not subject to
any outstanding injunction, judgment, order, decree, ruling,
or charge;
(G) to the Knowledge of any of the Shareholders
and the directors and officers (and employees with
responsibility for Intellectual Property matters) of the
Target and its Subsidiaries, no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand
is pending or threatened which challenges the legality,
validity, or enforceability of the underlying item of
Intellectual Property; and
(H) none of the Target and its Subsidiaries has
granted any sublicense or similar right with respect to the
license, sublicense, agreement, or permission.
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(v) To the Knowledge of any of the Shareholders and the
directors and officers (and employees with responsibility for
Intellectual Property matters) of the Target and its Subsidiaries,
neither Target nor any of its Subsidiaries will interfere with,
infringe upon or misappropriate any Intellectual Property rights of
third parties as a result of the continued operation of its business
as presently conducted and as presently proposed to be conducted.
(n) Tangible Assets. The Target and its Subsidiaries own or lease
all buildings, machinery, equipment, and other tangible assets necessary for
the conduct of their businesses as presently conducted and as presently
proposed to be conducted. Each such tangible asset is free from defects, has
been maintained in accordance with normal industry practice, is in good
operating condition and repair (subject to normal wear and tear), and is
suitable for the purposes for which it presently is used and presently is
proposed to be used, except for such defects, maintenance and operating
conditions as would not have a Material Adverse Effect, taken as a whole.
(o) Contracts. Section 4(o) of the Disclosure Schedule lists the
following contracts and other agreements to which any of the Target and its
Subsidiaries is a party:
(i) any agreement (or group of related agreements) for
the lease of personal property to or from any Person providing for
lease payments in excess of $5,000 per annum;
(ii) any agreement (or group of related agreements) for
the purchase or sale of raw materials, commodities, supplies,
products, or other personal property, or for the furnishing or receipt
of services, the performance of which will extend over a period of
more than one year, or involve consideration in excess of $5,000;
(iii) any agreement concerning a partnership or joint
venture;
(iv) any agreement (or group of related agreements) under
which it has created, incurred, assumed, or guaranteed any
indebtedness for borrowed money, or any capitalized lease obligation,
in excess of $5,000 or under which it has imposed a Security Interest
on any of its assets, tangible or intangible;
(v) any agreement concerning confidentiality or
noncompetition;
(vi) any agreement with any of the Shareholders and their
Affiliates (other than the Target and its Subsidiaries);
(vii) any profit sharing, stock option, stock purchase,
stock appreciation, deferred compensation, severance, or other
material plan or arrangement for the benefit of its current or former
directors, officers, and employees;
(viii) any collective bargaining agreement;
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(ix) any agreement for the employment of any individual
on a full-time, part-time, consulting, or other basis providing annual
compensation in excess of $35,000 or providing severance benefits;
(x) any agreement under which it has advanced or loaned
any amount to any of its directors, officers, and employees outside
the Ordinary Course of Business;
(xi) any agreement under which the consequences of a
default or termination could have a Material Adverse Effect; or
(xii) any other agreement (or group of related agreements)
the performance of which involves consideration in excess of $5,000.
The Shareholders have delivered to Avana a correct and materially complete copy
of each written agreement listed in Section 4(o) of the Disclosure Schedule (as
amended to date) and a written summary setting forth the terms and conditions
of each oral agreement listed in Section 4(o) of the Disclosure Schedule. With
respect to each such agreement: (A) the agreement is, with respect to Target
and its Subsidiaries, legal, valid, binding, enforceable, and in full force and
effect; (B) the agreement will, with respect to Target and its Subsidiaries,
continue to be legal, valid, binding, enforceable, and in full force and effect
on identical terms following the consummation of the transactions contemplated
hereby; (C) neither Target nor its Subsidiaries, nor to any Shareholder's
Knowledge, any other party is in breach or default, and no event has occurred
which with notice or lapse of time would constitute a breach or default, or
permit termination, modification, or acceleration, under the agreement; and (D)
neither Target nor its Subsidiaries, nor to any Shareholder's Knowledge, any
other party has repudiated any provision of the agreement.
(p) Notes and Accounts Receivable. All notes and accounts
receivable of the Target and its Subsidiaries are reflected properly on their
books and records, are valid receivables subject to no setoffs or
counterclaims, are current and collectible, and will be collected in accordance
with their terms at their recorded amounts, subject only to the reserve for bad
debts set forth on the face of the balance sheet included in the Most Recent
Financial Statements (or in any notes thereto) as adjusted for the passage of
time through the Closing Date in accordance with the past custom and practice
of the Target and its Subsidiaries.
(q) Powers of Attorney. There are no outstanding powers of
attorney executed on behalf of any of the Target or its Subsidiaries.
(r) Insurance. Section 4(r) of the Disclosure Schedule sets forth
the following information with respect to each insurance policy (including
policies providing property, casualty, liability, and workers' compensation
coverage and bond and surety arrangements) to which any of the Target and its
Subsidiaries is a party, a named insured, or otherwise the beneficiary of
coverage:
(i) the name, address, and telephone number of the
agent;
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(ii) the name of the insurer, the name of the
policyholder, and the name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the
coverage was on a claims made, occurrence, or other basis) and amount
(including a description of how deductibles and ceilings are
calculated and operate) of coverage; and
(v) a description of any retroactive premium adjustments
or other loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, enforceable, and in full force and effect with respect to the Target
and its Subsidiaries; (B) the policy will continue to be legal, valid, binding,
enforceable, and in full force and effect with respect to the Target and its
Subsidiaries on identical terms following the consummation of the transactions
contemplated hereby; (C) neither any of the Target and its Subsidiaries, nor to
any Shareholder's Knowledge, any other party to the policy is in breach or
default (including with respect to the payment of premiums or the giving of
notices), and no event has occurred which, with notice or the lapse of time,
would constitute such a breach or default, or permit termination, modification,
or acceleration, under the policy; and (D) neither any of the Target and its
Subsidiaries nor, to any Shareholder's Knowledge, any other party to the policy
has repudiated any provision thereof. Each of the Target and its Subsidiaries
has been covered during the respective periods in which each has been in
operation by insurance in scope and amount customary and reasonable for the
businesses in which it has engaged during the aforementioned period. Section
4(r) of the Disclosure Schedule describes any self-insurance arrangements
affecting any of the Target and its Subsidiaries.
(s) Litigation. Section 4(s) of the Disclosure Schedule sets
forth each instance in which any of the Target and its Subsidiaries (i) is
subject to any outstanding injunction, judgment, order, decree, ruling, or
charge or (ii) is a party or , to the Knowledge of any of the Shareholders and
the directors and officers (and employees with responsibility for litigation
matters) of the Target and its Subsidiaries, is threatened to be made a party
to any action, suit, proceeding, hearing, or investigation of, in, or before
any court or quasi-judicial or administrative agency of any federal, state,
local, or foreign jurisdiction or before any arbitrator. Except as set forth in
Section 4(s) of the Disclosure Schedule, none of the actions, suits,
proceedings, hearings or investigations set forth in Section 4(s) of the
Disclosure Schedule could reasonably be expected to result in any Material
Adverse Change or have a Material Adverse Effect. None of the Shareholders and
the directors and officers (and employees with responsibility for litigation
matters) of the Target and its Subsidiaries has any reason to believe that any
such action, suit, proceeding, hearing, or investigation that could reasonably
be expected to have a Material Adverse Effect may be brought or threatened
against any of the Target and its Subsidiaries.
(t) Product Warranty;Y2K. (i) Each product or service
manufactured, sold, leased, performed or delivered by any of the Target and its
Subsidiaries has been in conformity in all
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material respects with all applicable contractual commitments and all express
and implied warranties, and none of the Target and its Subsidiaries has any
Liability (and, to any Shareholder's Knowledge, there is no Basis for any
present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against any of them giving rise to any Liability)
for replacement or repair thereof or other damages in connection therewith that
could resonably be expected to have a Material Adverse Effect, taken as a
whole, subject only to the reserve for product warranty claims set forth on the
face of the Most Recent Balance Sheet (or in any notes thereto) as adjusted for
the passage of time through the Closing Date in accordance with the past custom
and practice of the Target and its Subsidiaries. No product or service
manufactured, sold, leased, performed or delivered by any of the Target and its
Subsidiaries is subject to any guaranty, warranty, or other indemnity beyond
the applicable standard terms and conditions of sale or lease. Section 4(t) of
the Disclosure Schedule includes copies of the standard terms and conditions of
sale or lease for each of the Target and its Subsidiaries (containing
applicable guaranty, warranty, and indemnity provisions). (ii) The computer
hardware and software systems used for the storage and processing of the
Target's data ("Systems") are Millennium Compliant, to the Shareholders'
Knowledge, none of the Systems, operations or business functions will be
materially adversely affected by any third party's failure to be Millennium
Compliant, to the Shareholders' Knowledge, all of the Target's suppliers,
customers and third party providers (as such Persons affect the services to be
provided to the Target hereunder) are Millennium Compliant, and the Target is
taking, or has taken, all necessary and appropriate action to address and
remedy any deficiencies in the Systems from becoming Millennium Compliant. As
used in this Agreement, "Millennium Compliant" shall mean the ability of the
Systems to provide the following functions, without human intervention,
individually and in combination with other products or systems: (A)
consistently handle date information before, during and after January 1, 2000,
including but not limited to accepting date input, providing date output and
performing calculations on dates or portions of dates; (B) function accurately
and without interruption before, during and after January 1, 2000 (including
leap year computations), without any change in operations associated with the
advent of a new century; (C) respond to two-digit date input in a way that
resolves any ambiguity as to century in a disclosed, defined and predetermined
manner; and (D) store and provide output of date information in ways that are
unambiguous as to century.
(u) Product Liability. None of the Target and its Subsidiaries
has any Liability (and, to any Shareholder's Knowledge, there is no Basis for
any present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against any of them giving rise to any Liability)
arising out of any injury to individuals or property as a result of the
ownership, possession, or use of any product or service manufactured, sold,
leased, provided or delivered by any of the Target and its Subsidiaries.
(v) Employees. To the Knowledge of any of the Shareholders and
the directors and officers (and employees with responsibility for employment
matters) of the Target and its Subsidiaries, no executive, key employee, or
group of employees has any plans to terminate employment with any of the Target
and its Subsidiaries. None of the Target and its Subsidiaries is a party to or
bound by any collective bargaining agreement, nor has any of them experienced
any strikes, grievances, claims of unfair labor practices, or other collective
bargaining disputes. None of the Target and its Subsidiaries has committed any
unfair labor practice. None of the
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Shareholders and the directors and officers (and employees with responsibility
for employment matters) of the Target and its Subsidiaries has any Knowledge of
any organizational effort presently being made or threatened by or on behalf of
any labor union with respect to employees of any of the Target and its
Subsidiaries.
(w) Employee Benefits.
(i) Section 4(w) of the Disclosure Schedule lists each
Employee Benefit Plan that any of the Target and its Subsidiaries
maintains or to which any of the Target and its Subsidiaries
contributes.
(A) Each such Employee Benefit Plan (and each
related trust, insurance contract, or fund) complies in form
and in operation in all material respects with the applicable
requirements of ERISA, the Code, and other applicable laws.
(B) All required reports and descriptions
(including Form 5500 Annual Reports, Summary Annual Reports,
PBGC-1's, and Summary Plan Descriptions) have been filed or
distributed appropriately with respect to each such Employee
Benefit Plan. The requirements of Part 6 of Subtitle B of
Title 1 of ERISA and of Code Section 4980B have been met with
respect to each such Employee Benefit Plan which is an
Employee Welfare Benefit Plan.
(C) All contributions (including all employer
contributions and employee salary reduction contributions)
which are due have been paid to each such Employee Benefit
Plan which is an Employee Pension Benefit Plan and all
contributions for any period ending on or before the Closing
Date which are not yet due have been paid to each such
Employee Pension Benefit Plan or accrued in accordance with
the past custom and practice of the Target and its
Subsidiaries. All premiums or other payments for all periods
ending on or before the Closing Date have been paid with
respect to each such Employee Benefit Plan which is an
Employee Welfare Benefit Plan.
(D) Each such Employee Benefit Plan which is an
Employee Pension Benefit Plan and which is intended to meet
the requirements of a "qualified plan" under Code Section
401(a) and has received, within the last two years, a
favorable determination letter from the Internal Revenue
Service.
(E) The representations set forth in the
preceding paragraphs (A) through (D) apply with respect to an
Employee Benefit Plan that is a Multiemployer Plan only to
the extent of the Knowledge of the Target and its
Subsidiaries.
(F) The market value of the assets under each
such Employee Benefit Plan which is an Employee Pension
Benefit Plan (other than any Multiemployer Plan or an
Employee Pension Benefit Plan that is intended to be
unfunded) equals or exceeds the present value of all vested
and nonvested Liabilities thereunder determined in accordance
with PBGC methods, factors, and assumptions
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applicable to an Employee Pension Benefit Plan terminating on
the date for determination.
(G) The Shareholders have delivered or made
available to Avana correct and complete copies of the plan
documents and summary plan descriptions, the most recent
determination letter received from the Internal Revenue
Service, the most recent Form 5500 Annual Report, and all
related trust agreements, insurance contracts, and other
funding agreements which implement each such Employee Benefit
Plan (other than any Multiemployer Plan).
(ii) Neither the Target, its Subsidiaries or the
Controlled Group of Corporations which includes the Target and its
Subsidiaries has incurred any material Liability which has not been
satisfied with respect to any Employee Benefit Plan that any of the
Target, its Subsidiaries, and the Controlled Group of Corporations
which includes the Target and its Subsidiaries maintains or ever has
maintained or to which any of them contributes, ever has contributed,
or ever has been required to contribute, for:
(A) A complete or partial termination or a
Reportable Event as to which notices would be required to be
filed with the PBGC or any proceeding by the PBGC to
terminate any such Employee Pension Benefit Plan (other than
any Multiemployer Plan;
(B) A Prohibited Transaction, breach of
fiduciary duty or any other failure to act or comply in
connection with the administration or investment of the
assets of any such Employee Benefit Plan; or
(C) Any Liability to the PBGC (other than PBGC
premium payments) or otherwise under Title IV of ERISA
(including any withdrawal Liability) or under the Code with
respect to any such Employee Benefit Plan which is an
Employee Pension Benefit Plan.
(iii) No action, suit, proceeding, hearing or
investigation with respect to the administration or the investment of
the assets of any such Employee Benefit Plan that is not a
Multiemployer Plan (other than routine claims for benefits) is pending
or, to the Knowledge of any of the Shareholders and the directors and
officers (and employees with responsibility for employee benefits
matters) of the Target and its Subsidiaries, threatened. None of the
Shareholders and the directors of the Target and its Subsidiaries has
any Knowledge of any Basis for any such action, suit, proceeding,
hearing or investigation. To the Knowledge of any of the Shareholders
and the directors and officers (and employees with responsibility for
employee benefits matters), no action, suit, proceeding, hearing or
investigation with respect to the administration or the investment of
the assets of any Employee Benefit Plan that is a Multiemployer Plan
(other than routine claims for benefits) and to which the Target or a
Subsidiary is a party, is pending or threatened and none of the
Shareholders and the directors of the Target and its Subsidiaries has
any Knowledge of any Basis for any such action, suit, proceeding,
hearing or investigation.
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(iv) None of the Target, its Subsidiaries, and the other
members of the Controlled Group of Corporations that includes the
Target and its Subsidiaries contributes to, ever has contributed to,
or ever has been required to contribute to any Multiemployer Plan or
has any Liability (including withdrawal Liability) under any
Multiemployer Plan.
(v) None of the Target and its Subsidiaries maintains or
ever has maintained or contributes, ever has contributed, or ever has
been required to contribute to any Employee Welfare Benefit Plan
providing medical, health, or life insurance or other welfare-type
benefits for current or future retired or terminated employees, their
spouses, or their dependents (other than in accordance with Code
Section 4980B).
(x) Guaranties. None of the Target and its Subsidiaries is a
guarantor or otherwise is liable for any Liability or obligation (including
indebtedness) of any other Person.
(y) Environment, Health, and Safety.
(i) Each of the Target, its Subsidiaries, and their
respective predecessors has complied in all material respects with all
Environmental, Health, and Safety Laws, and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand,
or notice has been filed or commenced against any of them alleging any
failure so to comply. Without limiting the generality of the preceding
sentence, each of the Target, its Subsidiaries, and their respective
predecessors has obtained and is in material compliance with all of
the terms and conditions of all permits, licenses, and other
authorizations which are required under, and has complied in all
material respects with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations,
schedules, and timetables which are contained in, all Environmental,
Health, and Safety Laws.
(ii) None of the Target and its Subsidiaries has any
Liability (and none of the Target, its Subsidiaries, and their
respective predecessors has handled or disposed of any substance,
arranged for the disposal of any substance, exposed any employee or
other individual to any substance or condition, or owned or operated
any property or facility in any manner that reasonably could form the
Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of the
Target and its Subsidiaries giving rise to any Liability) for damage
to any site, location, or body of water (surface or subsurface), for
any illness of or personal injury to any employee or other individual,
or for any reason under any Environmental, Health, and Safety Law.
(iii) All properties and equipment used in the business of
the Target, its Subsidiaries, and their respective predecessors are
free of asbestos, PCB's, methylene chloride, trichloroethylene,
1,2-trans-dichloroethylene, dioxins, dibenzofurans, and Extremely
Hazardous Substances.
(z) Certain Business Relationships with the Target and Its
Subsidiaries. None of the
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Shareholders and their Affiliates owns any asset, tangible or intangible, which
is used in the business of any of the Target and its Subsidiaries.
(aa) Disclosure. No representation or warranty of the Target or
the Shareholders in this Agreement and no statement in the Disclosure Schedule
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading.
5. Pre-Closing Covenants. The Parties agree as follows with
respect to the period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use his or its reasonable
best efforts to take all action and to do all things necessary, proper, or
advisable in order to consummate and make effective the transactions
contemplated by this Agreement (including satisfaction, but not waiver, of the
closing conditions set forth in Section 7 below).
(b) Notices and Consents. The Shareholders will cause each of the
Target and its Subsidiaries to give any notices to third parties, and will
cause each of the Target and its Subsidiaries to use its reasonable best
efforts to obtain any third party consents, that Avana reasonably may request
in connection with the matters referred to in Section 4(c) above. Each of the
Parties will (and the Shareholders will cause each of the Target and its
Subsidiaries to) give any notices to, make any filings with, and use its
reasonable best efforts to obtain any authorizations, consents, and approvals
of governments and governmental agencies in connection with the matters
referred to in Section 3(a)(ii), Section 3(b)(ii), and Section 4(c) above.
(c) Operation of Business. The Shareholders will not cause or
permit any of the Target and its Subsidiaries to engage in any practice, take
any action, or enter into any transaction outside the Ordinary Course of
Business. Without limiting the generality of the foregoing, the Shareholders
will not cause or permit any of the Target and its Subsidiaries to (i) declare,
set aside, or pay any dividend or make any distribution with respect to its
capital stock or redeem, purchase, or otherwise acquire any of its capital
stock, or (ii) otherwise engage in any practice, take any action, or enter into
any transaction of the sort described in Section 4(h) above.
(d) Preservation of Business. The Shareholders will cause each of
the Target and its Subsidiaries to use their reasonable best efforts to keep
its business and properties substantially intact, including its present
operations, physical facilities, working conditions, and relationships with
lessors, licensors, suppliers, customers, and employees.
(e) Full Access. Each of the Shareholders will permit, and the
Shareholders will cause each of the Target and its Subsidiaries to permit,
representatives of Avana to have full access at all reasonable times, and in a
manner so as not to interfere with the normal business operations of the Target
and its Subsidiaries, to all premises, properties, personnel, books, records
(including Tax records), contracts, and documents of or pertaining to each of
the Target and its Subsidiaries.
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(f) Notice of Developments. The Shareholders will give prompt
written notice to Avana of any Material Adverse Change causing a breach of any
of the representations and warranties in Section 4 above. Each Party will give
prompt written notice to the others of any Material Adverse Change causing a
breach of any of his or its own representations and warranties in Section 3
above. No disclosure by any Party pursuant to this Section 5(f), however, shall
be deemed to amend or supplement Annex I, Annex II, or the Disclosure Schedule
or to prevent or cure any misrepresentation, breach of warranty, or breach of
covenant.
(g) Exclusivity. None of the Shareholders will (and the
Shareholders will not cause or permit any of the Target and its Subsidiaries
to) (i) solicit, initiate, or encourage the submission of any proposal or offer
from any Person relating to the acquisition of any capital stock or other
voting securities, or any substantial portion of the assets of, any of the
Target and its Subsidiaries (including any acquisition structured as a merger,
consolidation, or share exchange) or (ii) participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt by any
Person to do or seek any of the foregoing. None of the Shareholders will vote
their Target Shares in favor of any such acquisition structured as a merger,
consolidation, or share exchange. The Shareholders will notify Avana
immediately if any Person makes any proposal, offer, inquiry, or contact with
them with respect to any of the foregoing.
6. Post-Closing Covenants. The Parties agree as follows with
respect to the period following the Closing.
(a) General. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other Party
reasonably may request, all at the sole cost and expense of the requesting
Party (unless the requesting Party is entitled to indemnification therefor
under Section 8 below). The Shareholders acknowledge and agree that from and
after the Closing Avana will be entitled to possession of all documents, books,
records (including Tax records), agreements, and financial data of any sort
relating to the Target and its Subsidiaries.
(b) Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any third-party claim or action in connection with the transaction
contemplated under this Agreement or (ii) any fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction on or prior to the Closing Date
involving any of the Target and its Subsidiaries, each of the other Parties
will cooperate with him or it and his or its counsel in the contest or defense,
make available their personnel, and provide such testimony and access to their
books and records as shall be reasonably necessary in connection with the
contest or defense, all at the sole cost and expense of the contesting or
defending Party (unless the contesting or defending Party is entitled to
indemnification therefor under Section 8 below).
(c) Transition. For a period of three years following the Closing
Date, none of the Shareholders will take any action that is designed or
intended to have the effect of discouraging
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any lessor, licensor, customer, supplier, or other business associate of any of
the Target and its Subsidiaries from maintaining the same business
relationships with the Target and its Subsidiaries after the Closing as it
maintained with the Target and its Subsidiaries prior to the Closing. Each of
the Shareholders will refer all customer inquiries relating to the businesses
of the Target and its Subsidiaries to Avana from and after the Closing.
(d) Confidentiality. Each of the Shareholders will treat and hold
as such all of the Confidential Information, refrain from using any of the
Confidential Information except in connection with this Agreement, and deliver
promptly to Avana or destroy, at the request and option of Avana, all tangible
embodiments (and all copies) of the Confidential Information which are in his
or its possession. In the event that any of the Shareholders is requested or
required (by oral question or request for information or documents in any legal
proceeding, interrogatory, subpoena, civil investigative demand, or similar
process) to disclose any Confidential Information, that Shareholders will
notify Avana promptly of the request or requirement so that Avana may seek an
appropriate protective order or waive compliance with the provisions of this
Section 6(d). If, in the absence of a protective order or the receipt of a
waiver hereunder, any of the Shareholders is, on the advice of counsel,
compelled to disclose any Confidential Information to any tribunal or else
stand liable for contempt, that Shareholder may disclose the Confidential
Information to the tribunal; provided, however, that the disclosing Shareholder
shall use his or its reasonable best efforts to obtain, at the reasonable
request and sole expense of Avana, an order or other assurance that
confidential treatment will be accorded to such portion of the Confidential
Information required to be disclosed as Avana shall designate. The foregoing
provisions shall not apply to any Confidential Information which is generally
available to the public immediately prior to the time of disclosure.
(e) Non-Solicitation.. For a period of three years from and after
the Closing Date, none of the Shareholders who do not otherwise become
employees of Avana or its Affiliates will solicit, or participate in any
solicitation of, the customers, suppliers, officers, directors, employees or
representatives of the Parent, Avana or any of their respective subsidiaries or
affiliated companies, to breach any contract with such company, terminate any
relationship with such company or leave the employ of such company. If the
final judgment of a court of competent jurisdiction declares that any term or
provision of this Section 6(e) is invalid or unenforceable, the Parties agree
that the court making the determination of invalidity or unenforceability shall
have the power to reduce the scope, duration, or area of the term or provision,
to delete specific words or phrases, or to replace any invalid or unenforceable
term or provision with a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid or unenforceable
term or provision, and this Agreement shall be enforceable as so modified after
the expiration of the time within which the judgment may be appealed.
(f) Share Consideration. (i) Certificates representing the Escrow
Shares will be imprinted with a legend substantially in the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RECOUPMENT PROVISIONS SET FORTH IN THAT CERTAIN STOCK EXCHANGE AGREEMENT DATED
AS OF FEBRUARY 15, 2000 AMONG THE ISSUER OF THIS CERTIFICATE AND CERTAIN OTHER
PERSONS. THIS CERTIFICATE WAS
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ORIGINALLY ISSUED ON ____, 2000.
(ii) Certificates representing the Share Consideration, including the
Escrow Shares, will be imprinted with a legend substantially in the following
form:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED
WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE
144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER HEREOF AND
ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED. THE TRANSFER OF THE SHARES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO CERTAIN RESTRICTIONS SET FORTH IN
THAT CERTAIN STOCK EXCHANGE AGREEMENT DATED AS OF FEBRUARY 15, 2000 AMONG THE
ISSUER OF THIS CERTIFICATE AND CERTAIN OTHER PERSONS. THE ISSUER OF THIS
CERTIFICATE WILL FURNISH A COPY OF THESE PROVISIONS TO THE HOLDER HEREOF
WITHOUT CHARGE UPON WRITTEN REQUEST.
Prior to the second anniversary of the Closing Date, each Shareholder desiring
to transfer any of the Share Consideration first must furnish Parent with (i) a
written opinion reasonably satisfactory to Parent in form and substance from
counsel reasonably satisfactory to Parent by reason of experience to the effect
that the holder may transfer such shares as desired without registration under
the Securities Act; (ii) a written undertaking executed by the desired
transferee reasonably satisfactory to Parent in form and substance agreeing to
be bound by the recoupment provisions, if applicable, and the restrictions on
transfer contained herein, if applicable, and (iii) comply with any other
applicable terms and conditions contained in the Investment Letter to which
such Shareholder is a party. Parent will cause the applicable legends to be
removed from such certificates promptly following the termination of the
restrictions referred to therein.
(g) Cancellation of the PV Tel Note. Promptly following the
Closing, Parent shall cancel the PV Tel Notes and shall deliver to the
Shareholders evidence of such cancellation.
(h) Trading in Parent Securities. At any time that any of the
Shareholders are in possession of any material, nonpublic information regarding
the Parent, including, without limitation, the information contained in the SEC
Letter, such Shareholders shall refrain from purchasing or selling any shares
of the Common Stock or disclosing such information to any other person. The
provisions of this Section 6(h) shall survive the termination of this Agreement
for any reason.
7. Conditions to Obligation to Close.
(a) Conditions to Obligation of Avana. The obligation of Avana to
consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in
Section 3(a) and Section 4 above shall be true and correct in all
material respects at and as of the Closing Date;
(ii) the Shareholders shall have performed and complied
with all of their
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covenants hereunder in all material respects through the Closing;
(iii) the Target and its Subsidiaries shall have procured
all of the third party consents specified in Section 5(b) above;
(iv) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency
of any federal, state, local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order, decree,
ruling, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement, (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, (C) affect adversely the right of Avana to own the
Target Shares and to control the Target and its Subsidiaries, or (D)
have a Material Adverse Effect, taken as a whole, upon the right of
any of the Target and its Subsidiaries to own its assets and to
operate its businesses (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect);
(v) the Shareholders shall have delivered to Avana a
certificate to the effect that each of the conditions specified above
in Section 7(a)(i)-(iv) is satisfied in all respects;
(vi) the Parties, the Target, and its Subsidiaries shall
have received all other authorizations, consents, and approvals of
governments and governmental agencies referred to in Section 3(a)(ii),
Section 3(b)(ii), and Section 4(c) above;
(vii) Avana shall have received from counsel to the
Shareholders an opinion in form and substance as set forth in Exhibit
C attached hereto, addressed to Avana, and dated as of the Closing
Date;
(viii) Avana shall have received the resignations,
effective as of the Closing, of each director and officer of the
Target and its Subsidiaries other than those whom Avana shall have
specified in writing at least five business days prior to the Closing;
(ix) each of the Shareholders shall have executed and
delivered the Investment Letter;
(x) each of the Shareholders, Avana and the Escrow Agent
shall have executed and delivered the Escrow Agreement;
(xi) Coastal Growth Partners, L.P. and Xxxxx Xxxx shall
have executed and delivered the Shareholder Notes;
(xii) Avana shall have received evidence, in form and
substance reasonably satisfactory to it, of the settlement of the
litigation referred to in Section 4(s) of the Disclosure Schedule;
(xiii) Avana shall have received evidence, in form and
substance reasonably satisfactory to it, of the termination or
cancellation of the matters and agreements set forth on
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Exhibit H attached hereto; and
(xiv) Avana shall have received from Target in form and
substance reasonably satisfactory to Avana, back-up materials with
respect to the balance sheet included in Most Recent Financial
Statements; and
(xv) all actions to be taken by the Shareholders in
connection with consummation of the transactions contemplated hereby
and all certificates, opinions, instruments, and other documents
required to effect the transactions contemplated hereby will be
reasonably satisfactory in form and substance to Avana.
Avana may waive any condition specified in this Section 7(a) if it executes a
writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Shareholders. The obligation
of the Shareholders to consummate the transactions to be performed by them in
connection with the Closing is subject to satisfaction of the following
conditions:
(i) the representations and warranties set forth in
Section 3(b) and (c) above shall be true and correct in all material
respects at and as of the Closing Date;
(ii) Avana shall have performed and complied with all of
its covenants hereunder in all material respects through the Closing;
(iii) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency
of any federal, state, local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order, decree,
ruling, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement; (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation (and no such injunction, judgment, order, decree, ruling,
or charge shall be in effect); or (C) affect adversely in any material
respect the right of the Shareholders to own the Share Consideration;
(iv) Avana shall have delivered to the Shareholders a
certificate to the effect that each of the conditions specified above
in Section 7(b)(i)-(iii) is satisfied in all respects;
(v) the Parties, the Target, and its Subsidiaries shall
have received all other authorizations, consents, and approvals of
governments and governmental agencies referred to in Section 3(a)(ii),
Section 3(b)(ii), and Section 4(c) above;
(vi) the relevant parties shall have entered into the
Registration Rights Agreements in form and substance as set forth in
Exhibit F and the same shall be in full force and effect;
(vii) the Shareholders shall have received from counsel to
Avana an opinion in form and substance as set forth in Exhibit D
attached hereto, addressed to the
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Shareholders, and dated as of the Closing Date;
(viii) all actions to be taken by Avana in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Shareholders; and
(ix) the Shareholders shall have received, in form and
substance reasonably satisfactory to each of them, an opinion of
Hunton & Xxxxxxxx to the effect that, for federal income tax purposes,
(a) the share exchange described in Section 2 hereof will qualify as a
reorganization under Section 368(a)(1)(B) of the Code, (b) no gain
will be recognized by the Target upon consummation of the
Shareholders' exchange of the capital stock of Target for the shares
of Share Consideration and (c) no gain will be recognized by a
Shareholder on the exchange of the capital stock of Target for the
shares of Share Consideration. In rendering such opinion, Hunton &
Xxxxxxxx may require and rely upon (and may incorporate by reference)
representations and covenants of the Parties, including those
contained in certificates of officers of the Parties.
The Shareholders may waive any condition specified in this Section 7(b) if they
execute a writing so stating at or prior to the Closing.
8. Remedies for Breaches of This Agreement.
(a) Survival of Representations and Warranties.
All of the representations, warranties and covenants contained in this
Agreement shall survive the Closing (even if the damaged Party knew or had
reason to know of any misrepresentation or breach of warranty at the time of
Closing). Such representations, warranties and covenants shall continue in full
force and effect (i) forever thereafter (but no longer than any applicable
statutes of limitations) with respect to the representations and warranties
contained in Section 4(k), (w) and (y), and in Section 3(a) and the covenants
contained herein or (ii) the first anniversary of the Closing Date with respect
to the other representations and warranties contained in Sections 3 and 4.
(b) Indemnification Provisions for Benefit of Avana.
(i) In the event Target or any of the Shareholders
breaches (or in the event any third party alleges facts that, if true,
would mean Target or any of the Shareholders has breached) any of
their representations, warranties, and covenants contained herein
(other than the provisions of Section 3(a) hereof, which shall be
governed by the provisions of Section 8(b)(ii) hereof) and, if there
is an applicable survival period pursuant to Section 8(a) above,
provided that Avana makes a written claim for indemnification against
any of the Indemnifying Shareholders pursuant to Section 11(h) below
within such survival period, then each of the Indemnifying
Shareholders agrees to indemnify Avana from and against the entirety
of any Adverse Consequences Avana may suffer through and after
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35
the date of the claim for indemnification (including any Adverse
Consequences Avana may suffer after the end of any applicable survival
period) resulting from, arising out of, relating to, in the nature of,
or caused by the breach (or the alleged breach), provided, however,
that no Indemnifying Shareholder shall be liable for any Adverse
Consequences suffered with respect to the breach (or alleged breach)
of the representations and warranties referenced in Section 8(a)(ii)
and contained in Sections 4(k),(w) and (y) to the extent such Adverse
Consequences exceed the value of the Escrow Shares available for
recoupment pursuant to Section 8(f) hereof. In the event that (a)
Avana suffers any Adverse Consequences with respect to the breach (or
alleged breach) of the representations and warranties contained in
Sections 4 (k), (w) and (y), and (b) a claim with respect thereto is
made after the release of the Escrow Shares pursuant to the terms of
the Escrow Agreement, then Avana's recovery with respect thereto shall
be limited to the Share Consideration Fair Market Value (as defined in
the Escrow Agreement) multiplied by the number of Escrow Shares
released from Escrow and distributed to the Indemnifying Shareholders
in accordance with the terms of the Escrow Agreement.
(ii) In the event any of the (a) Target or the
Shareholders breaches (or in the event any third party alleges facts
that, if true, would mean any of Target or the Shareholders has
breached) any covenant contained herein or (b) Shareholders breach any
of his or its representations and warranties in Section 3(a) above,
and, if there is an applicable survival period pursuant to Section
8(a) above, provided that Avana makes a written claim for
indemnification against the Shareholders pursuant to Section 11(h)
below within such survival period, then the Shareholders, severally
(and in proportion to their respective share of the Share
Consideration) and not jointly, agree to indemnify Avana from and
against the entirety of any Adverse Consequences that Avana may suffer
through and after the date of the claim for indemnification (including
any Adverse Consequences Avana may suffer after the end of any
applicable survival period) resulting from, arising out of, relating
to, in the nature of, or caused by the breach (or the alleged breach),
provided, however, that no Shareholder shall be liable for any such
Adverse Consequences to the extent such Adverse Consequences exceed
the value of such Shareholder's proportionate share of the Share
Consideration.
(c) Indemnification Provisions for Benefit of the Shareholders.
In the event Avana or Parent breaches (or in the event any third party alleges
facts that, if true, would mean Avana or Parent has breached) any of their
representations, warranties, and covenants contained herein, and, if there is
an applicable survival period pursuant to Section 8(a) above, provided that any
of the Shareholders makes a written claim for indemnification against Avana or
Parent pursuant to Section 11(h) below within such survival period, then Avana
and Parent, jointly and severally agree to indemnify each of the Shareholders
from and against the entirety of any Adverse Consequences the Shareholders may
suffer through and after the date of the claim for indemnification (including
any Adverse Consequences the Shareholders may suffer after the end of any
applicable survival period) resulting from, arising out of, relating to, in the
nature of, or caused by the breach (or the alleged breach). Any such indemnity
payment by Avana to the Shareholders shall be paid in additional shares of
Common Stock, the number of which shall be determined by dividing the value of
the amount of such payment by the average Fair Market
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36
Value of the Common Stock for the five (5) day period immediately preceding the
date of payment in respect thereto.
(d) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party
Claim") which may give rise to a claim for indemnification against any
other Party (the "Indemnifying Party") under this Section 8, then the
Indemnified Party shall promptly notify each Indemnifying Party
thereof in writing; provided, however, that no delay on the part of
the Indemnified Party in notifying any Indemnifying Party shall
relieve the Indemnifying Party from any obligation hereunder unless
(and then solely to the extent) the Indemnifying Party thereby is
prejudiced.
(ii) Any Indemnifying Party will have the right to defend
the Indemnified Party against the Third Party Claim with counsel of
its choice reasonably satisfactory to the Indemnified Party so long as
(A) the Indemnifying Party notifies the Indemnified Party in writing
within 15 days after the Indemnified Party has given notice of the
Third Party Claim that the Indemnifying Party will indemnify the
Indemnified Party to the extent provided in this Section 8 from and
against the entirety of any Adverse Consequences the Indemnified Party
may suffer resulting from, arising out of, relating to, in the nature
of, or caused by the Third Party Claim, (B) the Indemnifying Party
provides the Indemnified Party with evidence reasonably acceptable to
the Indemnified Party that the Indemnifying Party will have the
financial resources to defend against the Third Party Claim and
fulfill its indemnification obligations hereunder, (C) the Third Party
Claim involves only money damages and does not seek an injunction or
other equitable relief, (D) settlement of, or an adverse judgment with
respect to, the Third Party Claim is not, in the good faith judgment
of the Indemnified Party, likely to establish a precedential custom or
practice materially adverse to the continuing business interests of
the Indemnified Party, and (E) the Indemnifying Party conducts the
defense of the Third Party Claim actively and diligently.
(iii) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 8(d)(ii)
above, (A) the Indemnified Party may retain separate co-counsel at its
sole cost and expense and participate in the defense of the Third
Party Claim, (B) the Indemnified Party will not consent to the entry
of any judgment or enter into any settlement with respect to the Third
Party Claim without the prior written consent of the Indemnifying
Party (not to be withheld unreasonably), and (C) the Indemnifying
Party will not consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim without the prior
written consent of the Indemnified Party (not to be withheld
unreasonably).
(iv) In the event any of the conditions in Section
8(d)(ii) above is or becomes unsatisfied, however, (A) the Indemnified
Party may defend against, and consent to the entry of any judgment or
enter into any settlement with respect to, the Third Party Claim in
any manner it reasonably may deem appropriate (and the Indemnified
Party need not consult with, or obtain any consent from, any
Indemnifying Party in connection
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therewith), (B) the Indemnifying Parties will reimburse the
Indemnified Party promptly and periodically for the costs of defending
against the Third Party Claim (including reasonable attorneys' fees
and expenses), and (C) the Indemnifying Parties will remain
responsible for any Adverse Consequences the Indemnified Party may
suffer resulting from, arising out of, relating to, in the nature of,
or caused by the Third Party Claim to the fullest extent provided in
this Section 8.
(e) Determination of Adverse Consequences. The Parties shall take
into account the time cost of money (using the Applicable Rate as the discount
rate) in determining Adverse Consequences for purposes of this Section 8.
(f) Recoupment Under Escrow Agreement. Avana's sole source of
recovery for any Adverse Consequences suffered as a result of breach of the
representations and warranties for which it is entitled to indemnity pursuant
to Section 8(a)(ii) shall be recoupment against the Escrow Shares. Avana shall
notify the Shareholders that Avana intends to satisfy any such claim by
proceeding in accordance with the Escrow Agreement against the portion of the
Share Consideration held pursuant thereto. With respect to any Adverse
Consequences suffered by Avana with respect to a breach (or alleged breach) of
the representations and warranties contained in Sections 4(k), (w) and (y) or
Section 3(a), recovery of which is sought on or before the first anniversary of
the Closing Date, Avana shall first seek recovery thereof by recoupment against
the Escrow Shares. Thereafter, the recovery for such Adverse Consequences may
be sought directly from the Shareholders to the extent permitted hereunder.
(g) Other Indemnification Provisions. The indemnification
provisions in this Section 8 are in lieu of any statutory, equitable, or common
law remedy any Party may have for breach of any representation, warranty, or
covenant. Each of the Shareholders hereby agrees that he or it will not make
any claim for indemnification against any of the Target and its Subsidiaries by
reason of the fact that he or it was a director, officer, employee, or agent of
any such entity or was serving at the request of any such entity as a partner,
trustee, director, officer, employee, or agent of another entity (whether such
claim is for judgments, damages, penalties, fines, costs, amounts paid in
settlement, losses, expenses, or otherwise and whether such claim is pursuant
to any statute, charter document, bylaw, agreement, or otherwise) with respect
to any action, suit, proceeding, complaint, claim, or demand brought by Avana
based on a breach of the provisions of this Agreement.
(h) The amount of any indemnification payable under any of the
preceding provisions of this Section 8 shall be calculated (i) net of any
federal or state income Tax benefit realized or the then-present value (based
on a discount rate of 9%) of any such income Tax benefit to be realized by the
Indemnified Party by reason of the facts and circumstances giving rise to the
indemnification, and (ii) increased by the amount of any federal or state
income Tax required to be paid by the Indemnified Party on the accrual or
receipt of the indemnification payment. For purposes of the preceding sentence,
the amount of any state income Tax benefit or cost shall take into account the
federal income Tax effect of such benefit or cost.
9. Tax Matters. The following provisions shall govern the
allocation of responsibility as between Avana and Shareholders for certain Tax
matters following the Closing Date:
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38
(a) Tax Returns. Avana shall prepare or cause to be prepared and
timely file or cause to be timely filed all Tax Returns for the Target and its
Subsidiaries which are required to be filed after the Closing Date. All Tax
Returns of the Target and its Subsidiaries filed after the Closing Date for Tax
years ending on or before the Closing Date shall be based on the same tax
accounting methods and elections as used by the Target and its Subsidiaries for
the tax year immediately preceding the period of such Tax Return, except as
otherwise required by law or as agreed upon by Avana and the Shareholders.
After the consummation of the transactions contemplated in this Agreement,
except as required by law, neither Avana, the Target, a Subsidiary of Target,
nor any Affiliate of any of them shall, without the prior written consent of
the Shareholders (which consent shall not be unreasonably withheld), (i) file
or permit to be filed any amended Tax Return by or on behalf of the Target or
any of its Subsidiaries or (ii) take any other action affecting Taxes of the
Target or any of its Subsidiaries for any taxable period ending on or before
the Closing Date. Notwithstanding any other provision of this agreement, the
Shareholders shall have no liability under this Agreement with respect to (and
Avana shall hold the Shareholders harmless from any liability for) Taxes or any
other liability to the extent such Taxes or other liability result from any
action in contravention of this Section 9(a).
(b) Income Tax Status of the Exchange. The Parties acknowledge
that the Shareholders' exchange of the capital stock of Target for the Share
Consideration is intended to qualify as a "reorganization" within the meaning
of Section 368(a)(1)(B) of the Code and that the exchange of the capital stock
of Target for shares of the Common Stock is intended to be pursuant to a "plan
of reorganization" within the meaning of Section 354 of the Code. The Parties
covenant that they will report (and cause the Target to report ) the
Shareholders' exchange of the capital stock of Target for the Share
Consideration in accordance with such intent for income Tax purposes. Avana and
Parent represent and warrant that neither of them has, and on the Closing Date
neither will have, any plan or intention to take any action that would (i)
cause the Parent not to own directly stock of Avana possessing at least 80% of
the total combined voting power of all classes of Avana stock entitled to vote
and at least 80% of the total number of shares of each other class of Avana
stock (ii) cause Avana not to own directly the capital stock of the Target
possessing at least 80% of the total combined voting power of all classes of
Target stock entitled to vote and at least 80% of the total number of shares of
each other class of Target stock(disregarding any planned or intended transfer
or successive transfers of the capital stock fo Target to one or more
corporations controlled in each case by the transferor corporation as permitted
pursuant to Section 368(a)(2)(C) of the Code and Section 1.368-2(k) of the
Treasury Regulations), (iii) cause or permit the Target neither to conduct the
business currently conducted by the Target nor to use at least 50% of the
assets owned by the Target on the Closing Date in a business, or (iv) cause or
permit the Target to liquidate, merge into another corporation, or otherwise
transfer a substantial portion of its assets outside the ordinary course of
business.
(c) Cooperation on Tax Matters.
(i) Avana, the Target and its Subsidiaries and
Shareholders shall cooperate fully, as and to the extent reasonably
requested by the other party, in connection with the filing of Tax
Returns pursuant to this Section and any audit, litigation or other
proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon the other party's
38
39
request) the provision of records and information which are reasonably
relevant to any such audit, litigation or other proceeding and making
employees available on a mutually convenient basis to provide
additional information and explanation of any material provided
hereunder. The Parties agree (A) to retain all books and records with
respect to Tax matters pertinent to the Target and its Subsidiaries
relating to any taxable period beginning before the Closing Date until
the expiration of the statute of limitations (and, to the extent
notified by Avana or 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) to give the
other party reasonable written notice prior to transferring,
destroying or discarding any such books and records and, if the other
party so requests, the party in possession thereof, as the case may
be, shall allow the other party to take possession of such books and
records.
(ii) Avana and Shareholders further agree, upon request,
to provide the other party with all information that either party may
be required to report pursuant to Section 6043 of the Code and all
Treasury Department Regulations promulgated thereunder.
10. Termination.
(a) Termination of Agreement. Certain of the Parties may
terminate this Agreement as provided below:
(i) Avana and the Shareholders may terminate this
Agreement by mutual written consent at any time prior to the Closing;
(ii) Avana may terminate this Agreement by giving written
notice to the Shareholders at any time prior to the Closing (A) in the
event any of the Shareholders has breached any material
representation, warranty, or covenant contained in this Agreement in
any material respect, Avana has notified the Shareholders of the
breach, and the breach has continued without cure for a period of 30
days after the notice of breach or (B) if the Closing shall not have
occurred on or before February 29, 2000, by reason of the failure of
any condition precedent under Section 7(a) hereof (unless the failure
results primarily from Avana itself breaching any representation,
warranty, or covenant contained in this Agreement); and
(iv) the Shareholders may terminate this Agreement by
giving written notice to Avana at any time prior to the Closing (A) in
the event Avana has breached any material representation, warranty, or
covenant contained in this Agreement in any material respect, any of
the Shareholders has notified Avana of the breach, and the breach has
continued without cure for a period of 30 days after the notice of
breach or (B) if the Closing shall not have occurred on or before
February 29, 2000, by reason of the failure of any condition precedent
under Section 7(b) hereof (unless the failure results primarily from
any of the Shareholders themselves breaching any representation,
warranty, or covenant contained in this Agreement).
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to Section
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10(a) above, all rights and obligations of the Parties hereunder shall
terminate without any Liability of any Party to any other Party (except for any
Liability of any Party then in breach).
11. Miscellaneous.
(a) Nature of Certain Obligations.
(i) The covenants of each of the Shareholders in Section
2(a) above concerning the sale of his or its Target Shares to Avana
and the representations and warranties of each of the Shareholders in
Section 3(a) above concerning the transaction are several obligations.
This means that the particular Shareholders making the representation,
warranty, or covenant will be solely responsible to the extent
provided in Section 8 above for any Adverse Consequences Avana may
suffer as a result of any breach thereof.
(ii) The remainder of the representations, warranties,
and covenants in this Agreement are joint and several obligations.
This means that each Shareholder will be responsible to the extent
provided in Section 8 above for the entirety of any Adverse
Consequences Avana may suffer as a result of any breach thereof.
(b) Press Releases and Public Announcements. No Party shall issue
any press release or make any public announcement relating to the subject
matter of this Agreement without the prior written approval of Avana and the
Requisite Shareholders; provided, however, that any Party may make any public
disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities (in
which case the disclosing Party will use its best efforts to advise the other
Parties prior to making the disclosure).
(c) No Third Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or among
the Parties, written or oral, to the extent they related in any way to the
subject matter hereof.
(e) Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of his or its rights, interests, or obligations hereunder without the prior
written approval of Avana and the Requisite Shareholders; provided, however,
that Avana may (i) assign any or all of its rights and interests hereunder to
one or more of its Affiliates and (ii) designate one or more of its Affiliates
to perform its obligations hereunder (in any or all of which cases Avana
nonetheless shall remain responsible for the performance of all of its
obligations hereunder).
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same
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instrument.
(g) Headings. The Section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning
or interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and then
two business days after) it is sent by registered or certified mail, return
receipt requested, postage prepaid, and addressed to the intended recipient as
set forth below:
If to the Shareholders:
To the addresses set forth on Schedule I
Copy to:
Hunton & Xxxxxxxx
000 Xxxx Xxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000-0000
Attention : Xxxxxxx X. Xxxxx
Xxxxxxx X. Xxxxxx, Xx.
If to Avana and Parent:
Avana Telecommunications Group, Inc.
C/O Grace Development, Inc.
0000 Xxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxx Xxxxxxxxx
Copy to:
Xxxxxx & Hardin, LLP
2700 International Tower
000 Xxxxxxxxx Xxxxxx XX
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx Xxxxxxxxxx
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been
duly given unless and until it actually is received by the intended recipient.
Any Party may change the address to which notices, requests, demands, claims,
and other communications
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42
hereunder are to be delivered by giving the other Parties notice in the manner
herein set forth.
(i) Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Georgia without
giving effect to any choice or conflict of law provision or rule (whether of
the State of Georgia or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Georgia.
(j) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by
Avana and the Requisite Shareholders. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(k) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(l) Expenses. Each of the Parties will bear his or its own costs
and expenses (including legal fees and expenses) incurred in connection with
this Agreement and the transactions contemplated hereby. The Shareholders agree
that none of the Target and its Subsidiaries has borne or will bear any of the
Shareholders' costs and expenses (including any of their legal fees and
expenses) in connection with this Agreement or any of the transactions
contemplated hereby.
(m) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof
shall arise favoring or disfavoring any Party by virtue of the authorship of
any of the provisions of this Agreement. Any reference to any federal, state,
local, or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
(n) Incorporation of Exhibits, Annexes, and Schedules. The
Exhibits, Annexes, and Schedules identified in this Agreement are incorporated
herein by reference and made a part hereof.
(o) Specific Performance. Each of the Parties acknowledges and
agrees that the other Parties would be damaged irreparably in the event any of
the provisions of this Agreement are
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43
not performed in accordance with their specific terms or otherwise are
breached. Accordingly, each of the Parties agrees that the other Parties shall
be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically this Agreement and the
terms and provisions hereof in any action instituted in any court of the United
States or any state thereof having jurisdiction over the Parties and the matter
(subject to the provisions set forth in Section 11(p) below), in addition to
any other remedy to which they may be entitled, at law or in equity.
(p) Submission to Jurisdiction. Each of the Parties submits to
the jurisdiction of any state or federal court sitting in Atlanta, Georgia in
any action or proceeding arising out of or relating to this Agreement and
agrees that all claims in respect of the action or proceeding may be heard and
determined in any such court. Each Party also agrees not to bring any action or
proceeding arising out of or relating to this Agreement in any other court.
Each of the Parties waives any defense of inconvenient forum to the maintenance
of any action or proceeding so brought and waives any bond, surety, or other
security that might be required of any other Party with respect thereto. Any
Party may make service on any other Party by sending or delivering a copy of
the process to the Party to be served at the address and in the manner provided
for the giving of notices in Section 11(h) above. Nothing in this Section
11(p), however, shall affect the right of any Party to serve legal process in
any other manner permitted by law or at equity. Each Party agrees that a final
judgment in any action or proceeding so brought shall be conclusive and may be
enforced by suit on the judgment or in any other manner provided by law or at
equity.
*****
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
the date first above written.
AVANA TELECOMMUNICATIONS GROUP, INC.
By: /s/
--------------------------------------
Title: President
-----------------------------------
GRACE DEVELOPMENT, INC.
By: /s/
--------------------------------------
Title: President
-----------------------------------
P.V. TEL. INC.
By: /s/
--------------------------------------
Title:
-----------------------------------
THE SHAREHOLDERS
COASTAL GROWTH PARTNERS, L.P.
Coastal Growth, LLC, its General Partner
By: /s/ V.T. Xxxxxx, Jr.
--------------------------------------
Its: Chairman
/s/ Xxxxxx Xxxx
----------------------------
Xxxxxx Xxxx
/s/ Xxxx Xxxxxxxx
----------------------------
Xxxx Xxxxxxxx
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45
/s/ Xxxxxxx X. Xxxx
----------------------------
Xxxxxxx Xxxx
/s/ Xxxxx Xxxx
----------------------------
Xxxxx Xxxx
/s/ Xxxxx Xxxxxx
----------------------------
Xxxxx Xxxxxx
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INDEX TO EXHIBITS
Exhibit A--Form of Investment Letter
Exhibit B--Historical Financial Statements
Exhibit C--Form of Opinion of Counsel to the Shareholders
Exhibit D--Form of Opinion of Counsel to Avana
Exhibit E--Form of Escrow Agreement
Exhibit F--Form of Registration Rights Agreement
Exhibit G-1 and G-2--Forms of Shareholder Note
Exhibit H- Terminated Agreements
Annex I--Exceptions to the Shareholders' Representations and Warranties
Concerning the Transaction
Annex II--Exceptions to Avana's and Parent's Representations and Warranties
Concerning the Transaction
Disclosure Schedule--Exceptions to Representations and Warranties Concerning
the Target and Its Subsidiaries
Schedule I - List of Shareholders and Addresses
Schedule 2(b) - Share Allocation
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EXHIBIT A
February __, 2000
Board of Directors of
Grace Development, Inc.
0000 Xxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxx 00000
To whom it may concern:
Reference is made to that certain Stock Exchange Agreement dated as of
February 15, 2000 (the "Exchange Agreement") pursuant to which a wholly-owned
subsidiary of Grace Development, Inc., a Colorado corporation (the
"Corporation"), will exchange shares (the "Shares") of the common stock, $.01
par value per share (the "Common Stock"), of the Corporation for all of the
capital stock of P.V. Tel. Inc., a South Carolina corporation (the "Company").
Capitalized terms used herein that are not otherwise defined herein shall have
the same meaning as in the Exchange Agreement. As used herein the term
"Exchange Agreement" shall mean the Exchange Agreement and any documents or
agreements ancillary thereto. Pursuant to the terms and conditions of the
Exchange Agreement, I will be issued _________ Shares. In consideration of the
Corporation's issuance of the Shares to me upon the terms and conditions set
forth herein and in the Exchange Agreement, I hereby represent, warrant and
agree as follows:
1. I have sufficient knowledge and experience in financial and
business matters to be able to evaluate the risks and merits of the investment
represented by the acquisition of the Shares.
2. I am aware that the business of the Corporation involves
significant and material economic variables and risks that could adversely
affect my investment in the Shares.
3. I am able to bear the economic risks of such investment,
including the risk of losing all of such investment, and I have no need for
liquidity with respect to such investment.
4. I am over twenty-one years of age (or the age of majority in
my jurisdiction of residence).
48
Board of Directors of
Grace Development, Inc.
February __, 2000
Page 2
5. I understand that no prospectus, offering circular or other
offering statement containing information with respect to the Corporation and
the Shares or with respect to the Corporation's business is being issued and I
have made my own inquiry and analysis with respect to the Corporation, the
Shares, the Corporation's business and other material factors affecting the
investment in the Shares.
6. The Shares were not offered to me by means of publicly
disseminated advertisements or sales literature, or as a part of a general
solicitation, nor am I aware of any offers made to other persons by such means.
7. I acknowledge that I have either been supplied with or have
had access to information to which a reasonable investor would attach
significance in making investment decisions, including, without limitation, the
SEC Letter, and I have had the opportunity to ask questions and receive answers
from knowledgeable individuals concerning the Corporation, its business and the
Shares so that as a reasonable investor, I have been able to make an informed
decision to acquire the Shares. In determining to proceed with this investment,
I have relied solely on the results of my own independent investigation with
respect to the Shares, the Corporation and upon the representations,
warranties, covenants and statements of the Corporation set forth herein and in
the Exchange Agreement. Such representations, warranties, covenants and
statements by the Corporation constitute the sole and exclusive
representations, warranties, covenants and statements of the Corporation and
its officers, directors, shareholders and other affiliates to me in connection
with this investment, and I understand, acknowledge and agree that all other
representations, warranties, covenants and statements of any kind or nature,
whether oral or contained in any writing other than this Agreement or the
Exchange Agreement are specifically disclaimed by the Corporation.
8. I understand that, except as set forth in the Registration
Rights Agreement, the Shares (a) are not being registered (or, with respect to
state securities or Blue Sky laws, otherwise qualified for sale) under the
Securities Act of 1933, as amended (the "Act"), or under the securities or Blue
Sky laws and regulations of any state including, without limitation, Section
10-5-5 of the Georgia Securities Act of 1973, in reliance upon exemptions from
registration, (b) are not being listed on any securities exchange, (c) will not
be readily marketable, and (d) cannot be sold, transferred or otherwise
disposed of unless subsequently registered under the Act and applicable state
securities or Blue Sky laws or pursuant to an exemption from such registration
which is available at the time of desired sale, and will bear a legend to that
effect.
9. I am an "accredited investor" as defined in Rule 501(a) of
Regulation D, promulgated under the Act.
10. I am acquiring the Shares for my own account and not with a
view to resale or other distribution thereof inconsistent with or in violation
of the federal securities laws or the securities or Blue Sky laws of any state.
I am acquiring the Shares for my own account with my own funds and not for the
account of any other person or entity or with the funds of any other
49
Board of Directors of
Grace Development, Inc.
February __, 2000
Page 3
person or entity. Upon the consummation of the transactions described in the
Exchange Agreement, I am not obligated to transfer the Shares or any portion
thereof to any other person or entity nor do I have any agreement or
understanding to do so.
11. I am aware that the Corporation will be under no obligation
to register the Shares, or any portion thereof, except as set forth in the
Registration Rights Agreement, or to comply with any exemption available for
the offer or sale of the Shares, or any portion thereof, without registration,
except as set forth in the Registration Rights Agreement.
12. I acknowledge and agree that I may not, directly or
indirectly, sell, assign, pledge, give, subject to lien or security interest or
otherwise dispose of or encumber (collectively, "Transfer") any of the Shares
except as set forth in the Exchange Agreement and the Registration Rights
Agreement. I will, prior to making any Transfer of any Shares (other than a
Transfer to the Corporation), comply with the provisions of the Exchange
Agreement and Registration Rights Agreement regarding Transfers of Shares.
13. I have considered the following risks, among others, in
making this investment:
i) There are a number of companies that currently
compete with the Corporation. Many of these companies have far greater
capital, marketing and other resources than the Corporation.
Furthermore, there can be no assurance that these or other companies
or firms will not develop new or enhanced products that are more
effective than any that have been or may be developed by the
Corporation.
ii) The markets for telecommunications equipment and
services are subject to rapid technological change. As more
technologically advanced platforms for such products emerge, the
Corporation may be required to alter the design, production and
delivery of is products and services in a way in which it is incapable
of doing.
iii) The Corporation's targeted customers may not accept
the Corporation as an alternative provider of local telecommunications
products and related services. On the other hand, general acceptance
of such a system may encourage competition by companies or firms with
greater resources to develop, sell and service their products and
service offerings.
v) The Corporation has previously provided me with the
following documents:
(a) The Corporation's Current Report on Form
8-K dated September 28, 1999, as amended on
October 13, 1999, November 5, 1999,
November 16, 1999, December 8, 1999,
December 21, 1999, December 28, 1999, and
January 21, 2000;
50
Board of Directors of
Grace Development, Inc.
February __, 2000
Page 4
(b) The Corporation's Quarterly Report on Form
10-QSB for the quarter ended September 30,
1999, as amended on December 28, 1999;
(c) The Corporation's Information Statement
filed pursuant to Rule 14f-1 of the
Securities Exchange Act of 1934, as amended
on September 7, 1999 and October 7, 1999;
and
(d) The SEC Letter.
14. I confirm that I have been advised that I should rely on my
own professional accounting, tax, legal and financial advisors with respect to
an investment in the Corporation and an acquisition of the Shares, and obtain,
to the extent I deem necessary, such professional advice with respect to the
risks inherent in an investment in the Shares and the suitability of an
investment in the Shares in light of my financial condition and investment
needs.
15. I shall indemnify and hold harmless the Corporation, its
officers, directors and employees and any of its professional advisors, from
and against any and all loss, damage, liability or expense, including costs and
reasonable attorneys' fees, to which they may become subject or which they may
incur by reason of or in connection with any misrepresentation I have made
herein, any breach of any of my representations or warranties made herein, or
my failure to fulfill any of my covenants or agreements herein.
16. The information about the Corporation which has been
disclosed to me in connection with my acquisition of the Shares is deemed to be
"Confidential Information" of the Corporation and I represent and warrant to,
and hereby agree with, the Corporation, that unless the Corporation has
consented in writing to the contrary, I will not disclose such Confidential
Information to others or use any part of such Confidential Information that has
been disclosed to me, except any part thereof (i) which may be in the public
domain other than through improper disclosure by me or (ii) which may be
independently disclosed to me by any third party not itself in a confidential
relationship with the Corporation or (iii) which may already be in my
possession (otherwise than through disclosure by the Corporation or by any
third party that is in a confidential relationship with the Corporation) or
(iv) which I may be required to disclose by order of a court or administrative
agency having competent jurisdiction; provided, however, that this paragraph
shall be terminated and be of no force or effect with respect to any such
Confidential Information upon such Confidential Information becoming a part of
the public domain through action by anyone other than me.
17. I agree that this agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes any and all prior or contemporaneous representations, warranties,
agreements and understandings in connection therewith. This agreement may only
be amended by a writing executed by all the parties hereto.
18. I agree that this agreement shall be governed by and construed in
accordance with the laws of the State of Georgia, without regard to its
principles of conflicts-of-laws.
51
Board of Directors of
Grace Development, Inc.
February __, 2000
Page 5
19. The agreements, representations and warranties made herein
extend to and apply to all of the Shares. The acceptance by me of the
certificate representing the Shares shall constitute my confirmation that all
agreements and representations made herein shall be true and correct at such
time.
Dated as of the ___ day of February, 2000.
SHAREHOLDER
------------------------------- ------------------------------
Witness [Name]
------------------------------
[Address]
AGREED TO AND ACCEPTED:
GRACE DEVELOPMENT, INC.
By:
---------------------------
Date: January __, 2000
52
EXHIBIT B
P.V. TEL, INC.
FINANCIAL STATEMENTS
(UNAUDITED)
December 31, 1999
53
ACCOUNTANTS' COMPILATION REPORT
To the Board of Directors
P.V. TEL, Inc.
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
We have compiled the accompanying balance sheet of P.V. TEL, Inc. (a
corporation) as of December 31, 1999, and the related statements of income and
retained earnings and cash flows for the three months then ended in accordance
with Statements on Standards for Accounting and Review Services issued by the
American Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements, and accordingly do not express
an opinion or any other form of assurance on them.
Management has elected to omit substantially all of the disclosures required by
generally accepted accounting principles. If the omitted disclosures were
included in the financial statements, they might influence the user's
conclusions about the Company's financial position, results of operations, and
cash flows. Accordingly, these financial statements are not designed for those
who are not informed about such matters.
XXXXXXXXX, CHILDERS & XXXXXXXX, PLC
February 15, 2000
2
54
P.V. TEL, INC.
BALANCE SHEET
December 31, 1999
ASSETS
Current Assets:
Cash in Bank $ 35,542
Accounts Receivable 266,235
Unbilled Revenue 81,804
Letters of Credit 50,000
----------
Total Current Assets 433,581
Property, Plant and Equipment:
Leasehold Improvements 64,297
Furniture and Fixtures 41,716
Machinery and Equipment 507,974
Office Equipment 167,063
----------
781,050
Less: Accumulated Depreciation (79,250)
----------
Net Property, Plant and Equipment 701,800
Other Assets:
Security Deposits 2,225
----------
Total Other Assets 2,225
---------
Total Assets 1,137,606
=========
3
55
P.V. TEL, INC.
BALANCE SHEET
December 31, 1999
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Deferred Income 27,420
Accounts Payable 634,956
Accrued Excise Taxes 21,329
Sales Tax Payable 40,645
Payroll Taxes Payable 712
Other Taxes Payable 5,758
Customer Deposits 4,424
Current Portion of Notes Payable 199,128
----------
Total Current Liabilities 934,372
Noncurrent Liabilities:
Note Payable 480,516
Leases Payable 504,469
Less: Current Portion (199,128)
----------
Total Noncurrent Liabilities 785,857
----------
Total Liabilities 1,720,229
Stockholders' Equity:
Common Stock, Par Value $35.295 per share, 8,500 shares
authorized and 8,500 shares issued and outstanding 300,009
Preferred Stock, Par Value $700 per share, 2,500 shares
authorized and 2,500 shares issued and outstanding 1,750,000
Retained Earnings (2,632,632)
----------
Total Stockholders' Equity (582,623)
---------
Total Liabilities and Stockholders' Equity 1,137,606
=========
SEE ACCOUNTANTS' COMPILATION REPORT.
4
56
P.V. TEL, INC.
STATEMENTS OF INCOME, EXPENSES AND RETAINED EARNINGS
For the Three Months Ended December 31, 1999
Sales $ 721,657
Cost of Goods Sold 712,411
----------
Gross Profit on Sales 9,246
Operating Expenses:
Advertising 828
Network Expenses 11,550
Bad Debts 73,051
Bad Debts (Prepaid) 67,794
Commissions 30,100
Legal Expenses (Litigation) 29,503
Contract Labor 11,982
Depreciation 18,903
Dues and Subscriptions 674
Employee Benefits 8,658
Equipment Rental 2,866
Insurance 2,328
Interest Expense 11,240
Freight 3,676
Professional Fees 24,419
Meals and Entertainment 907
Miscellaneous 172
Bank Service Charges 999
Office Expenses 12,120
Rent 15,174
Salaries and Wages 115,661
Taxes and Licenses 19,959
Postage 2,798
Telephone 22,093
Printing 1,421
Late Fees 12,406
Travel 8,607
Utilities 3,435
----------
Total Operating Expenses 513,324
--------
Operating Income (Loss) (504,078)
--------
SEE ACCOUNTANTS' COMPILATION REPORT.
5
57
P.V. TEL, INC.
STATEMENTS OF INCOME, EXPENSES AND RETAINED EARNINGS
For the Three Months Ended December 31, 1999
Other Income (Expenses):
Late Fees 6,540
Miscellaneous Income 1,663
-----
Total Other Income (Expenses) 8,203
----------
Net Income (Loss) (495,875)
Retained Earnings, October 1 (2,136,757)
----------
Retained Earnings, December 31 (2,632,632)
==========
SEE ACCOUNTANTS' COMPILATION REPORT.
6
58
P.V. TEL, INC.
STATEMENT OF CASH FLOWS
For the Three Months Ended December 31, 1999
Cash Flows from Operating Activities:
Net Income (Loss) $ (495,875)
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation 18,903
Changes in Assets and Liabilities:
(Increase) Decrease in Accounts Receivable 169,235
(Increase) Decrease in Security Deposits 400
Increase (Decrease) in Deferred Revenue 27,420
Increase (Decrease) in Accounts Payable 12,730
Increase (Decrease) in Contractual Obligation (157,888)
Increase (Decrease) in Customer Deposits 387
Increase (Decrease) in Accrued Liabilities 38,166
--------
Total Adjustments 109,353
--------
Net Cash Provided by (Used for) Operating Activities (386,522)
Cash Flows from Investing Activities:
Additions to Property, Plant & Equipment (14,020)
--------
Net Cash Used for Investing Activities (14,020)
Cash Flows from Financing Activities:
Proceeds from Note Payable 434,500
Principal Payment on Line of Credit (363)
Principal Payment on Notes Payable (7,117)
Principal Payment on Capital Leases (20,481)
--------
Net Cash Provided by (Used for) Financing Activities 406,539
-------
Net Increase (Decrease) in Cash 5,997
Cash at October 1 29,545
-------
Cash at December 31 35,542
=======
SEE ACCOUNTANTS' COMPILATION REPORT.
7
59
EXHIBIT C
FORM OF OPINION OF COUNSEL FOR TARGET AND THE SHAREHOLDERS
1. Target and each of the Subsidiaries are corporations or other legal
entities duly organized, validly existing and in good standing under
the laws of their respective states of incorporation or organization,
and each has all requisite corporate or other organizational power and
authority to own, lease and operate its properties and to carry on its
business as now being conducted.
2. Each of Target and Coastal Partners has full corporate or other
organizational power and authority to execute and deliver the
Agreement and to perform their respective obligations thereunder and
to consummate the other transactions contemplated in the Agreement.
The execution and delivery of the Agreement by each of the Target and
Coastal Partners, and the performance by each of the Target and
Coastal Partners of their respective obligations thereunder and the
consummation of the transactions provided for in the Agreement have
been duly and validly authorized by all necessary corporate or other
organizational action on their respective parts. The Board of
Directors of the Target and the shareholders of the Target have
approved the execution, delivery and performance of the Agreement and
the consummation of the transactions contemplated therein. The
Agreement has been duly executed and delivered by each of the Target
and the Shareholders and, assuming due execution and delivery by the
other parties to the Agreement, constitutes the valid and binding
obligation of each of the Target and the Shareholders, enforceable
against each of them in accordance with its terms, subject to
applicable bankruptcy, insolvency and other similar laws affecting the
enforceability of creditors' rights generally, general equitable
principles and the discretion of courts granting equitable remedies.
3. The execution, delivery and performance of the Agreement, the
consummation of the transactions contemplated by the Agreement and the
fulfillment of and compliance with the terms and conditions of the
Agreement do not and will not with the passing of time or giving of
notice or both, violate, constitute a breach of or default under or
permit the acceleration of any obligation under, (i) any term or
provision of the Articles of Incorporation or Bylaws of the Target,
(ii) to our knowledge, any judgment, decree or order of any court or
governmental authority or agency to which the Target is a party or by
which the Target, any of its properties, or any shares of the capital
stock of the Target is bound, (iii) to our knowledge, any material
contracts or obligations of the Target or (iv) any statute, law,
regulation or rule applicable to the Target.
4. The authorized capital stock of the Target consists of _____ shares of
common stock, __ par value, of which 7,500 shares of common stock are
issued and
60
outstanding as of the date hereof and ____ shares of preferred stock,
__ par value, of which 2,500 shares of preferred stock are issued and
outstanding as of the date hereof. Each such share of common stock and
preferred stock that is outstanding as of the date hereof is duly
authorized, validly issued, fully paid and nonassessable and free of
preemptive rights. There are no outstanding or authorized (i) options,
warrants, purchase rights, subscription rights, conversion rights,
exchange rights, or other contracts or commitments that could require
the Target to issue, sell, or otherwise cause to become outstanding
any of its capital stock; (ii) stock appreciation, phantom stock,
profit participation, or similar rights with respect to the Target; or
(iii) voting trusts, proxies, or other agreements or understandings
with respect to the voting of the capital stock of the Target.
5. To the knowledge of such counsel, no authorization, consent, approval
of or qualification with any federal or state governmental authority
is required for the execution, delivery or performance by the Target
or any of the Shareholders of this Agreement or the transactions
contemplated by the Agreement.
6. To the knowledge of such counsel, except as set forth in the
Disclosure Schedule, there are no suits, actions, claims, proceedings
or investigations pending or threatened against, or involving the
Target (or any of its officers or directors in such capacities) before
any court, arbitrator or administrative or governmental body.
61
EXHIBIT D
FORM OF OPINION OF COUNSEL TO AVANA
1. Based solely on a Certificate from the Secretary of State of the
State of Colorado, dated February 16, 2000, Parent is in good standing and is
authorized and competent to transact business or to conduct its affairs within
the State of Colorado. Avana is a corporation duly organized and validly
existing under the laws of the State of Georgia. Each of Parent and Avana has
all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted.
2. Each of Avana and Parent has full power and authority (including
full corporate power and authority) to execute and deliver this Agreement and
to perform its obligations thereunder and to consummate the other transactions
contemplated in the Agreement. The execution and delivery of the Agreement by
each of Parent and Avana, and the performance by each of Parent and Avana of
their respective obligations thereunder and the consummation of the
transactions provided for in the Agreement have been duly and validly
authorized by all necessary corporate or other organizational action on their
respective parts. The Board of Directors of the Parent, and the Board of
Directors and shareholders of Avana have approved the execution, delivery and
performance of the Agreement and the consummation of the transactions
contemplated therein. The Agreement has been duly executed and delivered by
each of Parent and Avana and, assuming due execution and delivery by the other
parties to the Agreement, constitutes the valid and legally binding obligation
of each of Avana and Parent, enforceable against each of them in accordance
with its terms, subject to applicable bankruptcy, insolvency and other similar
laws affecting the enforceability of creditors' rights generally, general
equitable principles and the discretion of courts granting equitable remedies.
3. The execution, delivery and performance of the Agreement, the
consummation of the transactions contemplated by the Agreement and the
fulfillment of and compliance with the terms and conditions of the Agreement do
not and will not with the passing of time or giving of notice or both, violate,
constitute a breach of or default under or permit the acceleration of any
obligation under, (i) any term or provision of the Articles of Incorporation or
Bylaws of the Parent or Avana, (ii) to our knowledge, any judgment, decree or
order of any court or governmental authority or agency to which the Parent or
Avana is a party or by which the Parent or Avana, any of their respective
properties, or any shares of the capital stock of the Parent or Avana is bound,
(iii) to our knowledge, any material contracts or obligations of the Parent or
Avana or (iv) any statute, law, regulation or rule applicable to the Parent or
Avana.
4. The authorized capital stock of Parent consists of 800,000,000
shares of Common Stock and 10,000,000 of preferred stock, no par value, (the
"Preferred Stock"), of which, to our knowledge and subject to the information
contained in the SEC Reports, ________ shares of Common Stock and no shares of
Preferred Stock were issued and
62
outstanding as of the date of the Agreement. The shares of Common Stock
constituting the Share Consideration, when issued in accordance with the terms
and conditions of this Agreement, will be duly authorized, validly issued,
fully paid and nonassessable.
5. To the knowledge of such counsel, no authorization, consent,
approval of or qualification with any federal or state governmental authority
is required for the execution, delivery or performance by the Parent or Avana
of this Agreement or the transactions contemplated by the Agreement.
63
EXHIBIT E
ESCROW AGREEMENT
This Escrow Agreement (the "Agreement") is made and entered into this
____ day of February, 2000 by and among Grace Development, Inc., a Colorado
corporation ("Grace"), P.V. Tel. Inc., a South Carolina corporation (the
"Company"), the parties listed on Schedule I hereto (the "Stockholders") and
Xxxxxx & Xxxxxx, L.L.P. (the "Escrow Agent"), a Georgia limited liability
partnership. Capitalized terms used herein that are not otherwise defined shall
have the same meaning as defined in that certain Stock Exchange Agreement (the
"Exchange Agreement") dated as of February 15, 2000 by and among Grace, the
Company, the Stockholders and Avana Telecommunications, Inc., a Georgia
corporation ("Avana").
W I T N E S S E T H:
WHEREAS, Grace, the Company and the Stockholders are parties to the
Exchange Agreement pursuant to which Avana, a wholly-owned subsidiary of Grace,
will acquire all of the capital stock of the Company;
WHEREAS, in order to induce Grace to enter into the Exchange
Agreement, the Company and the Stockholders made certain representations,
warranties and covenants and agreed that the Escrow Shares would be available
to Grace to satisfy certain indemnification obligations of the Stockholders for
Adverse Consequences suffered by Grace in breach thereof; and
WHEREAS, pursuant to Section 2(b) of the Exchange Agreement, the
parties thereto have agreed that the Escrow Agent shall receive, hold and
distribute the Escrow Shares in accordance with the terms hereof.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth, the parties agree as follows:
1. ESCROW DEPOSIT.
On the Closing Date, Grace shall deliver to the Escrow Agent the
Escrow Shares to the Escrow Agent Trust Account described on Exhibit A attached
hereto and incorporated herein by this reference (the "Escrow"). The Escrow
Agent shall allocate the Escrow Shares to the Stockholders in accordance with
the allocations set forth in Exhibit B attached hereto (the "Proportionate
Interests").
2. DISTRIBUTION OF THE ESCROW SHARES TO THE STOCKHOLDERS.
The Escrow Agent shall distribute any Escrow Shares remaining in
escrow hereunder to the Stockholders on the later of (a) the first anniversary
of the Closing Date (the "Termination Date), provided, however, that if, on the
Termination Date, there are any pending Adverse
64
Consequences Claims (as hereinafter defined), the Escrow Agent shall continue
to hold that number of the Escrow Shares equal to the aggregate Estimated Value
(as hereinafter defined) of all such claims divided by the Fair Market Value of
the Common Stock as of the Closing Date (the "Share Consideration Fair Market
Value"), or (b) if, prior to the Termination Date, the Escrow Agent receives a
notice from Grace that it has suffered Adverse Consequences under the Exchange
Agreement (such notice to contain a good faith estimate by Grace of the value
of such claim (the "Estimated Value") and has made a claim against the
Stockholders, either jointly in respect of a breach of the representations and
warranties contained in Section 4 of the Exchange Agreement, or against an
individual Stockholder in respect of any breach of Section 3(a) of the Exchange
Agreement or any covenant contained therein (an "Affected Stockholder") (each
an "Adverse Consequences Claim"), the date that the Escrow Agent receives a
notice, signed by both Grace and the Stockholders or Affected Stockholder, as
the case may be, that all such Adverse Consequences Claim or Claims have been
cured or satisfied.
4. DISTRIBUTION OF THE ESCROW SHARES TO GRACE.
Upon receipt of a notice signed by both Grace and the Stockholders or
the Affected Stockholder (as the case may be) that an Adverse Consequences
Claim shall be satisfied by distribution of all or a portion of the Escrow
Shares, the Escrow Agent shall distribute to Grace the number of Escrow Shares
equal to the value of such Adverse Consequences Claim as provided in the notice
with respect thereto, divided by the greater of the Share Consideration Fair
Market Value.
5. ALLOCATION OF ESCROW SHARES.
Upon distribution of Escrow Shares to Grace in respect of an Adverse
Consequences Claim for which (a) the Stockholders are jointly liable, the
Escrow Agent shall allocate such distribution to each Stockholder in accordance
with their Proportionate Interests, or (b) only an Affected Stockholder is
liable, the Escrow Agent shall allocate such distribution entirely to such
Affected Stockholder.
3. DUTIES OF THE ESCROW AGENT.
The acceptance by the Escrow Agent of its duties under this Agreement
is subject to the following terms and conditions, which the parties to this
Agreement hereby agree shall fully govern and control with respect to the
Escrow Agent's rights, duties, liabilities and immunities:
(a) The Escrow Agent shall be protected in acting upon any
written notice, request, waiver, consent, receipt or other paper or document
which the Escrow Agent believes in good faith emanates from one of the parties
hereto, not only as to its due execution and the validity and effectiveness of
its provisions, but also as to the truth and accuracy of any information
contained therein. The Escrow Agent is also relieved from the necessity of
satisfying itself as to the authority of the persons executing this Agreement
in a representative capacity.
(b) The Escrow Agent shall not be liable for any error of
judgment, or for any act done or step taken or omitted by it in good faith, or
for any mistake of fact or law, or for
-2-
65
anything that it may do or refrain from doing in connection herewith, except
for its own gross negligence or willful misconduct.
(c) The Escrow Agent shall have no duties except those set forth
herein, and the Escrow Agent shall not be subject to, or obliged to recognize,
any other agreement between, or direction or instruction of, any or all of the
parties hereto. The Escrow Agent shall not be bound by any notice of a claim,
demand or objection with respect to any of the Escrow, or any waiver,
modification, termination or rescission of this Agreement, unless received by
it in writing, and if its duties herein are affected, unless it shall have
given its consent thereto.
(d) The Escrow Agent's acceptance of the appointment as escrow
agent hereunder shall not prevent it from representing any party hereto in any
dispute over disbursement of, or conflicting claims to, any of the Escrow, or
otherwise. If any dispute arises over disbursement of, or conflicting claims
to, any of the Escrow, then unless both parties agree upon and direct the
Escrow Agent to act in a specific manner, the Escrow Agent shall interplead
such contested Escrow into a court of proper jurisdiction of its choosing, and
thereupon the Escrow Agent shall be fully and completely discharged of its
duties as escrow agent with respect to such contested Escrow.
(e) The Escrow Agent shall provide the parties hereto with
written notice at least five days before filing any action to determine the
responsibilities of the Escrow Agent or the entitlement of either party to
disbursement of the Escrow, in order to facilitate resolution of any such
issues by the parties; provided, however, that the Escrow Agent shall not be
required to give such notice if the Escrow Agent determines that any such delay
could have an adverse effect on the value of the Escrow.
4. INDEMNIFICATION AND EXPENSE REIMBURSEMENT OF THE ESCROW AGENT.
Grace and the Stockholders jointly and severally agree to
indemnify, defend and hold harmless the Escrow Agent from any and all costs,
expenses, damages or liability of any kind whatsoever (excluding legal fees)
arising by virtue of its services as escrow agent hereunder, except for
liabilities due to the Escrow Agent's negligence or willful misconduct, and to
reimburse the Escrow Agent for all reasonable costs and expenses incurred by
the Escrow Agent in connection with the performance of its duties hereunder. As
between Grace and the Stockholders, each agrees to bear 50% of such costs and
expenses and to contribute (or reimburse the other party) its respective
portion of such amounts incurred.
5. NOTICE.
Unless otherwise expressly required hereby, all deliveries,
notices, certificates and other communications required or permitted hereunder
shall be in writing and shall be sufficiently given and shall be deemed given
when transmitted by facsimile (transmission confirmed) or five days after
mailing (except that mailed notices to the Escrow Agent shall be effective only
when received by the Escrow Agent) when mailed, with proper postage prepaid, by
registered or certified U.S. mail, return receipt requested addressed as
follows:
-3-
66
To the Escrow Agent: Xxxxxx & Xxxxxx, L.L.P.
0000 Xxxxxxxxxxxxx Xxxxx, Xxxxxxxxx Xxxxxx
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx Xxxxxxxxxx, Esq.
To the Stockholders: To the addresses set forth in Schedule I of
the Exchange Agreement
With a copy to: Hunton & Xxxxxxxx
Riverfront Plaza
000 Xxxx Xxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
Xxxxxxx Xxxxxx, Esq.
To Grace: Grace Development, Inc.
0000 Xxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxx Xxxxxxxxx
with a copy to: Xxxxxx & Xxxxxx, L.L.P.
0000 Xxxxxxxxxxxxx Xxxxx, Xxxxxxxxx Xxxxxx
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx Xxxxxxxxxx, Esq.
Any party may, by notice given hereunder, designate any future or
different addresses to which subsequent notices, certificates and other
communications shall be sent.
3. APPLICABLE LAW.
This Agreement shall be construed under and governed exclusively by
the laws of the State of Georgia, without regard to its principles of conflicts
of law.
4. AMENDMENT.
This Agreement may be amended or modified only in a writing signed by
all parties hereto.
5. ACKNOWLEDGEMENT OF RELATIONSHIP.
The parties hereto acknowledge that the Escrow Agent serves as legal
counsel to Grace in connection with certain matters, including these
transactions, and agree that Escrow Agent's service as escrow agent hereunder
shall in no way limit, restrict, impair or otherwise interfere with Escrow
Agent's ability to represent Grace in any respect, including, without
limitation, in
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connection with the transactions contemplated by the Exchange Agreement. There
are no representations, warranties, covenants, promises or agreements on the
part of any party hereto to any other party hereto with respect to the matters
set forth herein which are not explicitly set forth herein or in the Exchange
Agreement and the agreements contemplated therein.
6. ASSIGNMENT AND BINDING EFFECT.
The Stockholders may not transfer any interest in the Escrow Shares,
the Escrow, or any other right under this Agreement to any other party, by
operation of law or otherwise, except that upon prior written notice from the
legal representative of the estate of a Stockholder to the Escrow Agent, the
rights of the Stockholder under this Agreement may be transferred to the estate
of the Stockholder, and subsequently to any beneficiary thereof, in the event
of the death of the Stockholder; provided, however, that any such beneficiary
or legal representative of the Stockholder's estate shall be bound by the
provisions of this Agreement. Neither Grace nor the Escrow Agent may assign
this Agreement or any interest herein without the prior written consent of the
Stockholders (such consent not to be unreasonably withheld or delayed), and any
purported assignment without such consent shall be void. Subject to the
foregoing, this Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors and permitted assigns.
7. EXECUTION; COUNTERPARTS.
This Agreement may be executed by facsimile, and it may be executed in
two or more counterparts, each of which shall be an original but all of which
shall constitute but one and the same agreement and shall become binding upon
the parties when each party hereto has executed one or more counterparts.
8. RIGHT TO RELEASE ESCROW SHARES; DIVIDENDS AND PROXIES WITH RESPECT TO
THE ESCROW SHARES; VOTING RIGHTS.
Nothing herein shall be construed as prohibiting or otherwise limiting
Grace, in its sole discretion, from authorizing the release of any of the
Escrow Shares prior to the Termination Date. Any stock dividends or shares of
Common Stock received on account of the Escrow Shares shall be held in, and
become a part of, the Escrow, pending disposition thereof in accordance with
this Agreement. Any cash dividends or distributions received on account of the
Escrow Shares shall be disbursed as soon as practicable by the Escrow Agent to
the Stockholders in accordance with their Proportionate Interests. So long as
the Escrow Shares are held in Escrow, the Escrow Agent shall be the record
holder thereof, but the Stockholders shall be the beneficial owners thereof.
Each Stockholder shall have the right to exercise any and all voting and
consensual rights and powers with respect to the portion of the Escrow Shares
allocable to each such Stockholder.
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IN WITNESS WHEREOF, Escrow Agent, Grace, and the Stockholders have
each caused this Agreement to be executed and have delivered this Agreement as
of the date and year first written above.
XXXXXX & XXXXXX, L.L.P.
By:
---------------------------------------
Xxxxxxx Xxxxxxxxxx, a Partner
GRACE DEVELOPMENT, INC.
By:
---------------------------------------
Its:
THE STOCKHOLDERS
COASTAL GROWTH PARTNERS, L.P.
By:
---------------------------------------
Its: General Partner
-------------------------------------------
Xxxxxx Xxxx
-------------------------------------------
Xxxx Xxxxxxxx
-------------------------------------------
Xxxxxxx Xxxx
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Xxxxx Xxxx
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V.T. Xxxxxx
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EXHIBIT F
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered
into as of the __th day of February, 2000, by and among GRACE DEVELOPMENT,
INC., a Colorado corporation (the "Company"), and each of the persons and
entities listed on Schedule 1 hereto (each such person a "Shareholder" and,
collectively, the "Shareholders").
IN CONSIDERATION of the mutual promises and covenants set forth
herein, and intending to be legally bound, the parties hereto hereby agree as
follows:
1. RESTRICTIONS ON TRANSFERABILITY OF SECURITIES; REGISTRATION RIGHTS
1.1 CERTAIN DEFINITIONS. Any capitalized terms used herein without
definition shall have the meaning ascribed to such terms in the Stock Exchange
Agreement dated as of February 15, 2000 to which the Company and certain other
persons are parties relating to the acquisition by a wholly-owned subsidiary of
the Company of the capital stock of P.V. Tel. Inc., a South Carolina
corporation ("PV Tel"), from the shareholders of PV Tel (the "Stock Exchange
Agreement"). In addition, the following terms shall have the meanings set forth
below:
(a) "Additional Shares" shall have the meaning set forth in
Section 3.1 hereof.
(b) "Base Price" shall have the meaning set forth in Section
3.1 hereof.
(c) "Closing Price" means the last quoted price of the Common
Stock as reported by the National Association of Securities Dealers, Inc.
("NASD") Automated Quotations System or such other NASD system upon which the
Common Stock is quoted, or, if there have been no sales on a particular trading
day, the average of the last reported bid and asked quotations on such system.
(d) "Effective Date" shall have the meaning set forth in
Section 3.1 hereof.
(e) "Excluded Shares" shall have the meaning set forth in
Section 1.3(b) hereof.
(f) "Holder" shall mean any Shareholder who holds Registrable
Securities and any holder of Registrable Securities to whom the rights
conferred by this Agreement have been transferred in compliance with Section
1.2 hereof.
(g) "Other Stockholders" shall mean persons who, by virtue of
agreements with the Company other than this Agreement, are entitled to include
their securities in certain registrations hereunder.
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(h) "Registrable Securities" shall mean up to an aggregate of
One Million Four Hundred Thousand shares of the Share Consideration and the
Xxxxxx Fee issued to the Shareholders pursuant to the Stock Exchange Agreement,
provided that Registrable Securities shall not include (i) any of the Escrow
Shares, (ii) any shares of Common Stock which have previously been registered
or which have been sold to the public or which have been sold in a private
transaction in which the transferor's rights under this Agreement are not
assigned, (iii) any of the Share Consideration that is effectively registered
under the Securities Act (as hereinafter defined) and disposed of in accordance
with a registration statement covering them, (iv) any of the Share
Consideration that is salable by the holder thereof pursuant to Rule 144(k) or
(v) any of the Share Consideration that is sold to the public pursuant to Rule
144; and, as a result of an event or circumstance described in any of the
foregoing clauses (iv) and (v), the legends with respect to transfer
restrictions required under the Securities Act are removed or removable.
(i) The terms "register," "registered" and "registration"
shall refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act and applicable rules and
regulations thereunder and the declaration or ordering of the effectiveness of
such registration statement.
(j) "Registration Expenses" shall mean all expenses incurred
in effecting any registration pursuant to this Agreement, including, without
limitation, all registration, qualification, and filing fees, printing
expenses, escrow fees, fees and disbursements of counsel for the Company, blue
sky fees and expenses, and expenses of any regular or special audits incident
to or required by any such registration, but shall not include (i) Selling
Expenses, (ii) the compensation of regular employees of the Company, which
shall be paid in any event by the Company, and (iii) blue sky fees and expenses
incurred in connection with the registration or qualification of any
Registrable Securities in any state, province or other jurisdiction in a
registration pursuant to Section 1.3 hereof to the extent that the Company
shall otherwise be making no offers or sales in such state, province or other
jurisdiction in connection with such registration.
(k) "Restricted Securities" shall mean any Registrable
Securities required to bear the legend set forth in Section 1.2(c) hereof.
(l) "Rule 144" shall mean Rule 144 as promulgated by the SEC
under the Securities Act, as such Rule may be amended from time to time, or any
similar successor rule that may be promulgated by the SEC.
(m) "SEC" shall mean the Securities and Exchange Commission.
(n) "Securities Act" means the Securities Act of 1933, as
amended.
(o) "Selling Expenses" shall mean all underwriting discounts,
selling commissions and stock transfer taxes applicable to the sale of
Registrable Securities.
(p) "Strike Price" means $3.00 per share of Common Stock.
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(q) "Penalty Shares" shall have the meaning set forth in
Section 3.2 hereof.
(r) "Prospectus" means the prospectus included in any
registration statement filed by the Company pursuant to the Securities Act
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any amendment or prospectus supplement, including
post-effective amendments, and all material incorporated by reference or deemed
to be incorporated by reference in such Prospectus.
1.2 RESTRICTIONS ON TRANSFER.
(a) Each Holder agrees not to make any disposition of all or
any portion of the Registrable Securities unless and until (i) there is then in
effect a registration statement under the Securities Act covering such proposed
disposition and such disposition is made in accordance with such registration
statement, or (ii) (A) such Holder shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition and (B)
such Holder shall have furnished the Company with an opinion of counsel,
reasonably satisfactory to the Company, that such disposition will not require
registration of such shares under the Securities Act.
(b) Notwithstanding the provisions of subparagraphs (i) and
(ii) of paragraph (a) above, no such registration statement or opinion of
counsel shall be necessary for a transfer by a Holder which is (A) a
partnership to its partners in accordance with their partnership interests, (B)
a limited liability company to its members in accordance with their member
interests or (C) to the Holder's family member or a trust for the benefit of an
individual Holder or one or more of his family members, provided the transferee
will be subject to the terms of this Section 1.2 to the same extent as if he
were an original Holder hereunder.
(c) Each certificate representing Registrable Securities
shall (unless otherwise permitted by the provisions of this Agreement) be
stamped or otherwise imprinted with a legend substantially similar to the
following (in addition to any legend required under applicable state securities
laws):
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR
TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER SUCH ACT OR UNLESS THE COMPANY HAS RECEIVED AN
OPINION OF COUNSEL OR OTHER EVIDENCE, SATISFACTORY TO THE COMPANY AND
ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
(d) The Company shall be obligated to promptly reissue
unlegended certificates at the request of any Holder thereof if the Holder
shall have obtained an opinion of counsel (which counsel may be counsel to the
Company) reasonably acceptable to the Company
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to the effect that the securities proposed to be disposed of may lawfully be so
disposed of in compliance with the Securities Act without registration,
qualification or legend.
(e) Any legend endorsed on an instrument pursuant to
applicable state securities laws and the stop-transfer instructions with
respect to such securities shall be removed upon receipt by the Company of an
order of the appropriate blue sky authority authorizing such removal or if the
Holder shall request such removal and shall have obtained and delivered to the
Company an opinion of counsel reasonably acceptable to the Company to the
effect that such legend and/or stop-transfer instructions are no longer
required pursuant to applicable state securities laws.
1.3 COMPANY REGISTRATION.
(a) Right to Participate. If at any time prior to the one
year anniversary of the date hereof the Company shall determine to register any
of its Common Stock, either for its own account or the account of a security
holder or holders exercising their respective registration rights, other than a
registration relating solely to employee benefit plans, or a registration
relating solely to a transaction subject to Rule 145 under the Securities Act,
or a registration on any registration form that does not permit secondary
sales, the Company will:
(i) promptly give to each Holder written notice
thereof, which notice briefly describes the Holder's rights under this Section
1.3 (including notice deadlines); and
(ii) use its best efforts to include in such
registration (and any related filing or qualification under applicable blue sky
laws), except as set forth in Section 1.3(b) below, and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests, made by any Holder and received by the Company within ten (10) days
after the written notice from the Company described in clause (i) above is
received by the Holder, provided that such Holders shall have requested for
inclusion in such registration at least fifty-one (51%) of the aggregate number
of the Registrable Securities which have been issued to the Holders prior to the
date of such written request. Such written request may specify all or a part of
a Holder's Registrable Securities.
(b) Underwriting. If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 1.3(a)(i). In such event, the right of any Holder to
registration pursuant to this Section 1.3 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting
shall (together with the Company and the other holders of securities of the
Company with registration rights to participate therein distributing their
securities through such underwriting) enter into an underwriting agreement in
customary form with the representative of the underwriter or underwriters
selected by the Company.
Notwithstanding any other provision of this Section 1.3, if
the representative of the underwriters advises the Company in writing that
marketing factors require a limitation on
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the number of shares to be underwritten, the representative may (subject to the
limitations set forth below) exclude up to fifty percent (50%) (the "Excluded
Shares") of the Registrable Securities that such Holders have requested to be
included in such registration pursuant to Section 1.3(a) hereof. The Company
shall so advise all Holders of securities requesting registration, and the
number of shares of securities that are entitled to be included in the
registration and underwriting shall be allocated first to the Company for
securities being sold for its own account, second to the Registrable Securities
that are not Excluded Shares and thereafter as set forth in Section 1.10. If
any person does not agree to the terms of any such underwriting, he shall be
excluded therefrom by written notice from the Company or the underwriter. Any
Registrable Securities or other securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration.
If shares are so withdrawn from the registration and if the
number of shares of Registrable Securities to be included in such registration
was previously reduced as a result of marketing factors, the Company shall then
offer to all persons who have retained the right to include securities in the
registration the right to include additional securities in the registration in
an aggregate amount equal to the number of shares so withdrawn, with such
shares to be allocated among the persons requesting additional inclusion in
accordance with Section 1.10. hereof.
1.4 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Section 1.3 hereof shall be borne by the Company. All Selling Expenses relating
to securities so registered shall be borne by the holders of such securities
pro rata on the basis of the number of shares of securities so registered on
their behalf.
1.5 REGISTRATION PROCEDURES. In the case of each registration effected
by the Company pursuant to Section 1.3 hereof, the Company will keep each
Holder advised in writing as to the initiation of each registration and as to
the completion thereof. At its expense, the Company will use its best efforts
to:
(a) keep such registration effective for a period of one
hundred eighty (180) days or until the Holder or Holders have completed the
distribution described in the registration statement relating thereto,
whichever first occurs;
(b) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply with
the provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement;
(c) furnish such number of prospectuses and other documents
incident thereto, including any amendment of or supplement to the prospectus,
as a Holder from time to time may reasonably request;
(d) notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the
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Securities Act of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading or incomplete in the light of the circumstances then existing, and
at the request of any such Holder, prepare and furnish to such Holder a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
or incomplete in the light of the circumstances then existing; provided,
however, the Company shall not be obligated to prepare and furnish any such
prospectus supplements or amendments relating to any material nonpublic
information at any such time as the Board of Directors of the Company has
determined that, for good business reasons, the disclosure of such material
nonpublic information at that time is contrary to the best interests of the
Company in the circumstances and is not otherwise required under applicable law
(including applicable securities laws);
(e) cause all such Registrable Securities registered
hereunder to be listed on each securities exchange and/or included in any
national quotation system on which similar securities issued by the Company are
then listed or included;
(f) provide a transfer agent and registrar for all
Registrable Securities registered pursuant to such registration statement and a
CUSIP number for all such Registrable Securities, in each case not later than
the effective date of such registration; and
(g) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering the
period of at least twelve (12) months, beginning with the first month after the
effective date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act.
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1.6 INDEMNIFICATION. (a) The Company will indemnify each Holder, each
of its officers, directors and partners, legal counsel, and accountants and
each person controlling such Holder within the meaning of Section 15 of the
Securities Act, with respect to which registration, qualification, or
compliance has been effected pursuant to this Section 1, and each underwriter,
if any, and each person who controls within the meaning of Section 15 of the
Securities Act any underwriter, against all expenses, claims, losses, damages,
and liabilities (or actions, proceedings, or settlements in respect thereof)
arising out of or based on any untrue statement (or alleged untrue statement)
of a material fact contained in any prospectus, offering circular, or other
document (including any related registration statement, notification, or the
like) incident to any such registration, qualification, or compliance, or based
on any omission (or alleged omission) to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, or any violation by the Company of the Securities Act or any rule
or regulation thereunder applicable to the Company or relating to action or
inaction required of the Company in connection with any such registration,
qualification, or compliance, and will reimburse each such Holder, each of its
officers, directors, partners, legal counsel, and accountants and each person
controlling such Holder, each such underwriter, and each person who controls
any such underwriter, for any legal and any other expenses reasonably incurred
in connection with investigating and defending or settling any such claim,
loss, damage, liability, or action, provided that the Company will not be
liable in any such case to the extent that any such claim, loss, damage,
liability, or expense arises out of or is based on any untrue statement or
omission based upon written information furnished to the Company by such Holder
or underwriter and stated to be specifically for use therein; provided,
however, that the Company shall not be liable in any such case to the extent
that any such loss, damage, liability or expense arises out of or is based upon
an untrue statement or alleged untrue statement or omission or alleged omission
made in any preliminary prospectus if (i) such Holder failed to send or deliver
a copy of the Prospectus with or prior to the delivery of written confirmation
of the sale of Registrable Securities and (ii) the Prospectus would have
corrected such untrue statement or omission; and provided further, that the
Company shall not be liable in any such case to the extent that any such loss,
damage, liability or expense arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission in the Prospectus,
if such untrue statement or alleged untrue statement, omission or alleged
omission is corrected in an amendment or supplement to the Prospectus and if,
having previously been furnished by or on behalf of the Company with copies of
the Prospectus as so amended or supplemented, such Holder thereafter fails to
deliver such Prospectus, as so amended or supplemented, prior to or
concurrently with the sale of a Registrable Security to the person asserting
such loss, damage, liability or expense who purchased such Registrable Security
which is the subject thereof from such Holder. It is agreed that the indemnity
agreement contained in this Section 1.6(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld).
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(b) Each Holder will, if Registrable Securities held by him
are included in the securities as to which such registration, qualification, or
compliance is being effected, indemnify the Company, each of its directors,
officers, partners, legal counsel, and accountants and each underwriter, if
any, of the Company's securities covered by such a registration statement, each
person who controls the Company or such underwriter within the meaning of
Section 15 of the Securities Act, each other such Holder and Other Stockholder,
and each of their officers, directors, and partners, and each person
controlling such Holder or Other Stockholder, against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any such registration statement, prospectus, offering circular, or
other document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Company and such Holders, Other
Stockholders, directors, officers, partners, legal counsel, and accountants,
persons, underwriters, or control persons for any legal or any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability, or action,, in each case to the extent, but
only to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by such Holder and
stated to be specifically for use therein; provided, however, that the
obligations of such Holder hereunder shall not apply to amounts paid in
settlement of any such claims, losses, damages, or liabilities (or actions in
respect thereof) if such settlement is effected without the consent of such
Holder (which consent shall not be unreasonably withheld) and (ii) that in no
event shall any indemnity under this Section 1.6 exceed the gross proceeds from
the offering received by such Holder.
(c) Each party entitled to indemnification under this Section
1.6 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may
be sought, and shall permit the Indemnifying Party to assume the defense of
such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not unreasonably be withheld), and the Indemnified Party
may participate in such defense at such party's expense, and provided further
that the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this Section
1.6, to the extent such failure is not prejudicial. No Indemnifying Party, in
the defense of any such claim or litigation, shall, except with the consent of
each Indemnified Party, consent to entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the giving by
the claimant or plaintiff of a release to such Indemnified Party from all
liability in respect to such claim or litigation. Each Indemnified Party shall
furnish such information regarding itself or the claim in question as an
Indemnifying Party may reasonably request in writing and as shall be reasonably
required in connection with defense of such claim and litigation resulting
therefrom.
(d) If the indemnification provided for in this Section 1.6
is held by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any loss,
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liability, claim, damage, or expense referred to therein, then the Indemnifying
Party, in lieu of indemnifying such Indemnified Party hereunder, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such loss, liability, claim, damage, or expense in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party on the one
hand and of the Indemnified Party on the other in connection with the conduct,
statements or omissions that resulted in such loss, liability, claim, damage,
or expense as well as any other relevant equitable considerations. The relative
fault of the Indemnifying Party and of the Indemnified Party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Indemnifying Party or by the Indemnified
Party and the parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into by the Indemnifying Party and the Indemnified Party in
connection with the underwritten public offering are in conflict with the
foregoing provisions, the provisions in the underwriting agreement shall
control.
1.7 INFORMATION BY HOLDER. Each Holder of Registrable Securities shall
furnish to the Company such information regarding such Holder and the
distribution proposed by such Holder as the Company may reasonably request in
writing and as shall be reasonably required in connection with any
registration, qualification, or compliance referred to in this Section 1.
1.8 RULE 144 REPORTING. With a view to making available the benefits
of certain rules and regulations of the SEC that may permit the sale of the
Restricted Securities to the public without registration, the Company agrees to
use its best efforts to:
(a) make and keep adequate public information regarding the
Company available as those terms are understood and defined in Rule 144 under
the Securities Act;
(b) file with the SEC in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act; and
(c) so long as a Holder owns any Restricted Securities,
furnish to the Holder forthwith upon written request a written statement by the
Company as to its compliance with the reporting requirements of Rule 144 and of
the Securities Act and the Exchange Act, a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents so filed
as a Holder may reasonably request in availing itself of any rule or regulation
of the SEC allowing a Holder to sell any such securities without registration.
1.9 DELAY OF REGISTRATION. No Holder shall have any right to take any
action to restrain, enjoin, or otherwise delay any registration as the result
of any controversy that might arise with respect to the interpretation or
implementation of this Section 1.
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1.10 ALLOCATION OF REGISTRATION OPPORTUNITIES. In any circumstance in
which all of the Excluded Shares and other shares of the Company with
registration rights (the "Other Shares") requested to be included in a
registration on behalf of the Holders or Other Stockholders cannot be so
included as a result of limitations of the aggregate number of shares of
Excluded Shares and Other Shares that may be so included, the number of shares
of Excluded Shares and Other Shares that may be so included shall be allocated
among the Holders and Other Stockholders requesting inclusion of shares pro
rata on the basis of the number of shares of Excluded Shares and Other Shares
held by such Holders and Other Stockholders; provided, however, that such
allocation shall not operate to reduce the aggregate number of Excluded Shares
and Other Shares to be included in such registration. If any Holder or Other
Stockholder does not request inclusion of the maximum number of shares of
Excluded Shares and Other Shares allocated to him pursuant to the
above-described procedure, the remaining portion of his allocation shall be
reallocated among those requesting Holders and Other Stockholders whose
allocations did not satisfy their requests pro rata on the basis of the number
of shares of Excluded Shares and Other Shares which would be held by such
Holders and Other Stockholders, assuming conversion, and this procedure shall
be repeated until all of the shares of Excluded Shares and Other Shares which
may be included in the registration on behalf of the Holders and Other
Stockholders have been so allocated.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
SHAREHOLDERS
2.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Shareholders as follows:
(a) The execution, delivery and performance of this Agreement
by the Company have been duly authorized by all requisite corporate action and
will not violate any provision of law, any order of any court or other agency
of government, the Articles of Incorporation or Bylaws of the Company, or any
provision of any material indenture, agreement or other instrument to which it
or any of its properties or assets is bound, or result in a breach of or
constitute (with due notice or lapse of time or both) a default under any such
material indenture, agreement or other instrument, or result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of the properties or assets of the Company.
(b) This Agreement has been duly executed and delivered by
the Company and constitutes the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, subject
to applicable bankruptcy, insolvency and other similar laws affecting the
enforceability of creditors' rights generally, general equitable principles,
the discretion of courts in granting equitable remedies and public policy
considerations.
10
80
2.2 REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS. The
Shareholders severally represent and warrant to the Company as follows:
(a) The execution, delivery and performance of this Agreement
by the Shareholders will not violate any provision of law, any order of any
court or any agency or government, or any provision of any material indenture
or agreement or other instrument to which they or any of their respective
properties or assets is bound, or result in a breach of or constitute (with due
notice or lapse of time or both) a default under any such material indenture,
agreement or other instrument, or result in the creation or imposition of any
lien, charge, or encumbrance of any nature whatsoever upon any of the
properties or assets of the Shareholders.
(b) This Agreement has been duly executed and delivered by
the Shareholders and constitutes the legal, valid and binding obligation of the
Shareholders, enforceable against the Shareholders in accordance with its
terms, subject to applicable bankruptcy, insolvency and other similar laws
affecting the enforceability of creditors' rights generally, general equitable
principles, the discretion of courts in granting equitable remedies and public
policy considerations.
3. ADDITIONAL COVENANTS
3.1 PRICE PROTECTION. If, upon effectiveness of a registration
statement or registrations statements of which the Holders shall have received
notice pursuant to Section 1.3(a)(i) hereof (each an "Effective Date"), the
offering price of the Common Stock so registered (the "Base Price") shall have
been less than the Strike Price, then within ten (10) days following the
Effective Date, the Company shall issue to each of the Holders additional
shares of Common Stock as hereinafter determined (the "Additional Shares"). The
Additional Shares shall be deemed to be Share Consideration, of which eighty
percent (80%) shall be Registrable Securities and twenty percent (20%) shall be
delivered to the Escrow Agent and be included with the Escrow Shares. The
number of Additional Shares so issuable shall be determined as follows: the
Base Price shall be subtracted from the Strike Price and the difference shall
be multiplied by the aggregate number of shares received as Share Consideration
(increased, in such case, by the number of Penalty Shares (as hereinafter
defined) and reduced, in each case, by the reduction, if any, in the number of
Escrow Shares allocable to such Holder pursuant to the terms of the Escrow
Agreement). The product thereof shall be divided by the Base Price, the
dividend of which shall, subject to the next succeeding sentence, be the number
of Additional Shares so issuable. No fractional shares shall be issued and any
fractional amounts shall be rounded downward. If, on the first anniversary of
the Closing Date, the Base Price on such date shall be less than the Strike
Price, Additional Shares shall also be issuable to any Holder to whom, as of
the first anniversary of the Closing Date, the Company has not afforded the
opportunity to register all of such Holder's Registrable Securities (including,
without limitation, any Excluded Shares and any Additional Shares or Penalty
Shares issued or required to be issued prior to the first anniversary of the
Closing Date that are Registrable Securities) in a registration statement or
registration statements of which such Holders shall have received notice
pursuant to Section 1.3(a)(i) hereof, but only in respect of the number of
Registrable Securities held by such Holder which have not been included in such
registration statement or statements. Notwithstanding the immediately preceding
sentence, in no event shall the Company be obligated to issue such
11
81
Additional Shares to a Holder to the extent such Holder has declined to have
its or his Registrable Securities included in any such registration statement.
3.2 POSTPONED REGISTRATION. If an Effective Date shall not have
occurred on or before June 30, 2000, the Company shall issue to the Holders
within ten (10) days thereof an aggregate of Seventy Thousand shares of Common
Stock (the "Penalty Shares"). Penalty Shares shall be deemed to be Share
Consideration, all of which shall be Registrable Securities and subject to the
provisions of Section 3.1 hereof. The Company shall issue Penalty Shares to the
Holders each month (within ten (10) days of the beginning of such month)
thereafter that an Effective Date shall not have occurred; provided, however,
that the Company shall have no obligation to issue additional Penalty Shares
following the earlier of (a) the first Effective Date and (b) the first
anniversary of the Closing Date.
3.3 CANCELLATION OF SHAREHOLDER NOTE. In the event that, on the first
anniversary of the Closing Date, the Company has not afforded the Holders who
are also the issuers of the Shareholder Notes the opportunity to register all
of their Registrable Securities (including, without limitation, any Excluded
Shares and any Additional Shares or Penalty Shares issued, or required to be
issued, prior to the first anniversary of the Closing Date that are Registrable
Securities) in a registration statement or registration statements of which
such Holders shall have received notice pursuant to Section 1.3(a)(i) hereof,
then the Company agrees to cancel the Shareholder Notes in full, and such
Holders shall have no further liabilities or obligations under such Shareholder
Notes. Notwithstanding the immediately preceding sentence, in no event shall
the Company be obligated to cancel a Shareholder Note if the Holder who issued
such Shareholder Note has declined to have all or any part of its or his
Registrable Securities included in any such registration statement.
4. MISCELLANEOUS
4.1 GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the State of Georgia, as if entered into by and between Georgia
residents exclusively for performance entirely within Georgia.
4.2 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
4.3 ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement constitutes
the full and entire understanding and agreement between the parties with regard
to the subject hereof and thereof. Neither this Agreement nor any term hereof
may be amended, waived, discharged or terminated, except by a written
instrument signed by the Company and the Holders of at least fifty-one percent
(51%) of the Registrable Securities and any such amendment, waiver, discharge
or termination shall be binding on all the Holders, but in no event shall the
obligation of any Holder hereunder be materially increased, or any right or
benefit materially decreased, except upon the written consent of such Holder.
12
82
4.4 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by United States
first-class mail, postage prepaid, or delivered personally by hand or
nationally recognized courier addressed (a) if to a Holder, as indicated in the
stock records of the Company or at such other address as such Holder shall have
furnished to the Company in writing, or (b) if to the Company, at 0000
Xxxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxx 00000, or at such other address as the
Company shall have furnished to each Holder in writing, together with a copy to
Xxxxxx & Xxxxxx LLP, 2700 International Tower, 000 Xxxxxxxxx Xxxxxx, Xxxxxxx,
Xxxxxxx 00000, Attn: Xxxxxxx Xxxxxxxxxx. All such notices and other written
communications shall be effective on the later of delivery or five (5) days
after mailing.
4.5 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to any Holder, upon any breach or default of the
Company under this Agreement shall impair any such right, power or remedy of
such Holder nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default therefor or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any Holder of any breach or default under this Agreement or any
waiver on the part of any Holder of any provisions or conditions of this
Agreement must be made in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement or by law or otherwise afforded to any Holder, shall be cumulative
and not alternative.
4.6 RIGHTS; SEVERABILITY. Unless otherwise expressly provided herein,
a Holder's rights hereunder are several rights, not rights jointly held with
any of the other Holders. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
4.7 INFORMATION CONFIDENTIAL. Each Holder acknowledges that the
information received by them pursuant hereto may be confidential and for its
use only, and it will not use such confidential information in violation of the
Exchange Act or reproduce, disclose or disseminate such information to any
other person (other than its employees or agents having a need to know the
contents of such information, and its attorneys), except in connection with the
exercise of rights under this Agreement, unless the Company has made such
information available to the public generally or such Holder is required to
disclose such information by a governmental body.
4.8 TITLES AND SUBTITLES. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
4.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
13
83
IN WITNESS WHEREOF, the parties hereto have duly executed and sealed
this Agreement or have caused this Agreement to be duly executed under seal on
its behalf by an officer or representative thereto duly authorized, all as of
the date first above written.
THE SHAREHOLDERS
COASTAL GROWTH PARTNERS, L.P.
By:
-------------------------------------
Its:
----------------------------------------
Xxxxxx Xxxx
----------------------------------------
Xxxx Xxxxxxxx
----------------------------------------
Xxxxxxx Xxxx
----------------------------------------
Xxxxx Xxxx
----------------------------------------
Xxxxx Xxxxxx
14
84
GRACE DEVELOPMENT, INC.
By:
-------------------------------------
Its:
---------------------------------
15
85
EXHIBIT G-1
PROMISSORY NOTE
$257,400.00 February __, 0000
Xxxxxxx, Xxxxxxx
FOR VALUE RECEIVED, Xxxxx Xxxx, a resident of the State of Virginia
(hereinafter referred to as "Maker"), promises to pay to the order of Grace
Development, Inc., a corporation chartered under the laws of the State of
Colorado (hereinafter referred to as "Payee") and any subsequent holder of this
promissory note ("Note") (being hereinafter referred to collectively as
"Holder"), on the Maturity Date (as hereinafter defined), the principal sum of
Two Hundred Fifty-Seven Thousand Four Hundred Dollars ($257,400.00), or so much
thereof as shall from time to time be outstanding and unpaid, together with
interest thereon at the rate hereinafter set forth, in lawful money of the
United States of America, which at the time of payment shall be legal tender in
payment of all debts and dues, public and private, such principal and interest
to be paid in the manner hereinafter provided.
From and after the date hereof (until maturity or default as
hereinafter provided), interest on the principal balance hereof outstanding
from time to time shall accrue at a rate per annum equal to NINE PERCENT
(9.00%). Interest shall be computed on a 365-day year, simple interest basis,
based upon the actual number of days elapsed.
All outstanding principal, as well as all accrued but unpaid interest
shall be paid, in full, by Maker to the Holder no later than five (5) business
days following the Effective Date (as defined in that certain Registration
Rights Agreement of even date herewith between the Payee, Maker and the other
parties listed therein (the "Rights Agreement")) (the "Maturity Date").
Notwithstanding the foregoing, in the event that, on the first anniversary of
the Closing Date (as defined in that certain Stock Exchange Agreement dated
February 15, 2000, among the Payee, Maker and the other parties listed
therein), the Payee has not afforded the Maker hereof the opportunity to
register all of its Registrable Securities (as defined in the Rights Agreement)
in accordance with the provisions of the Rights Agreement, then this Note shall
be cancelled in full, and the Maker shall have no further liabilities or
obligations under this Note. Notwithstanding the immediately preceding
sentence, in no event shall this Note be cancelled if the Maker has declined to
have all or any part of its Registrable Securities included in any such
registration statement.
The indebtedness evidenced by this Note may be prepaid in whole or in
part from time to time and at any time without payment of any prepayment
premium, fee or penalty.
Time is of the essence of this Note.
86
Presentment for payment, demand, protest and notice of demand, protest
and non-payment and all other notices, are hereby waived by Maker. No
acceptance of a past due installment or indulgences granted from time to time
shall be construed (i) as a novation of this Note or as a reinstatement of the
indebtedness evidenced hereby or as a waiver of Holder thereafter to insist
upon strict compliance with the terms of this Note or (ii) to prevent the
exercise of any right granted hereunder or by the laws of the State of Georgia;
and Maker hereby expressly waives the benefit of any statute or rule of law or
equity now provided, or which may hereafter be provided, which would produce a
result contrary to or in conflict with the foregoing. No extension of the time
for the payment of this Note or any payment due hereunder, made by agreement
with any person now or hereafter liable for the payment of this Note, shall
operate to release, discharge, modify, change or affect the original liability
of Maker under this Note, either in whole or in part, unless Holder agrees
otherwise in writing. This Note may not be changed orally, but only by an
agreement in writing signed by the party against whom enforcement of any
waiver, change, modification or discharge is sought.
This Note is secured by the pledge of 85,800 shares of the common
stock, no par value, of the Payee (the "Pledged Stock"), which Pledged Stock is
beneficially owned by Maker. In the event of a default in payment under this
Note, the Holder shall satisfy Maker's obligations hereunder solely by recourse
against the Pledged Stock. The Holder shall have no recourse directly against
Maker for any payment default hereunder.
This Note is intended as a contract under and shall be construed and
enforceable in accordance with the laws of the State of Georgia.
As used herein, the terms "Maker" and "Holder" shall be deemed to
include their respective successors, legal representatives and assigns, whether
by voluntary action of the parties or by operation of law.
IN WITNESS WHEREOF, Maker has executed this Note under seal on the
date first above written.
MAKER
[SEAL]
-------------------------------
Xxxxx Xxxx
2
87
EXHIBIT G-2
PROMISSORY NOTE
$192,600.00 February __, 0000
Xxxxxxx, Xxxxxxx
FOR VALUE RECEIVED, Coastal Growth Partners, L.P., a South Carolina
limited partnership (hereinafter referred to as "Maker"), promises to pay to
the order of Grace Development, Inc., a corporation chartered under the laws of
the State of Colorado (hereinafter referred to as "Payee") and any subsequent
holder of this promissory note ("Note") (being hereinafter referred to
collectively as "Holder"), on the Maturity Date (as hereinafter defined), the
principal sum of One Hundred Ninety-Two Thousand Six Hundred Dollars
($192,600.00), or so much thereof as shall from time to time be outstanding and
unpaid, together with interest thereon at the rate hereinafter set forth, in
lawful money of the United States of America, which at the time of payment
shall be legal tender in payment of all debts and dues, public and private,
such principal and interest to be paid in the manner hereinafter provided.
From and after the date hereof (until maturity or default as
hereinafter provided), interest on the principal balance hereof outstanding
from time to time shall accrue at a rate per annum equal to NINE PERCENT
(9.00%). Interest shall be computed on a 365-day year, simple interest basis,
based upon the actual number of days elapsed.
All outstanding principal, as well as all accrued but unpaid interest
shall be paid, in full, by Maker to the Holder no later than five (5) business
days following the Effective Date (as defined in that certain Registration
Rights Agreement of even date herewith between the Payee, Maker and the other
parties listed therein (the "Rights Agreement")) (the "Maturity Date").
Notwithstanding the foregoing, in the event that, on the first anniversary of
the Closing Date (as defined in that certain Stock Exchange Agreement dated
February 15, 2000, among the Payee, Maker and the other parties listed
therein), the Payee has not afforded the Maker hereof the opportunity to
register all of its Registrable Securities (as defined in the Rights Agreement)
in accordance with the provisions of the Rights Agreement, then this Note shall
be cancelled in full, and the Maker shall have no further liabilities or
obligations under this Note. Notwithstanding the immediately preceding
sentence, in no event shall this Note be cancelled if the Maker has declined to
have all or any part of its Registrable Securities included in any such
registration statement.
The indebtedness evidenced by this Note may be prepaid in whole or in
part from time to time and at any time without payment of any prepayment
premium, fee or penalty.
Time is of the essence of this Note.
88
Presentment for payment, demand, protest and notice of demand, protest
and non-payment and all other notices, are hereby waived by Maker. No
acceptance of a past due installment or indulgences granted from time to time
shall be construed (i) as a novation of this Note or as a reinstatement of the
indebtedness evidenced hereby or as a waiver of Holder thereafter to insist
upon strict compliance with the terms of this Note or (ii) to prevent the
exercise of any right granted hereunder or by the laws of the State of Georgia;
and Maker hereby expressly waives the benefit of any statute or rule of law or
equity now provided, or which may hereafter be provided, which would produce a
result contrary to or in conflict with the foregoing. No extension of the time
for the payment of this Note or any payment due hereunder, made by agreement
with any person now or hereafter liable for the payment of this Note, shall
operate to release, discharge, modify, change or affect the original liability
of Maker under this Note, either in whole or in part, unless Holder agrees
otherwise in writing. This Note may not be changed orally, but only by an
agreement in writing signed by the party against whom enforcement of any
waiver, change, modification or discharge is sought.
This Note is secured by the pledge of 64,200 shares of the common
stock, no par value, of the Payee (the "Pledged Stock"), which Pledged Stock is
beneficially owned by Maker. In the event of a default in payment under this
Note, the Holder shall satisfy Maker's obligations hereunder solely by recourse
against the Pledged Stock. The Holder shall have no recourse directly against
Maker for any payment default hereunder.
This Note is intended as a contract under and shall be construed and
enforceable in accordance with the laws of the State of Georgia.
As used herein, the terms "Maker" and "Holder" shall be deemed to
include their respective successors, legal representatives and assigns, whether
by voluntary action of the parties or by operation of law.
IN WITNESS WHEREOF, Maker has executed this Note under seal on the
date first above written.
MAKER
COASTAL GROWTH PARTNERS, L.P.
By:
---------------------------
Its:
2
89
EXHIBIT H
AGREEMENTS TO BE TERMINATED
1. Agreement to Replace Owner's Security dated August 1, 1998 by and
among P.V. Tel. LLC, Xxxxxx X. Xxxx III , Xxxxxxx X. Xxxx and Xxxx
Xxxxxxxx.
2. Investment Agreement's dated September 23rd, 1998 by and among P.V.
Tel. Inc. , Coastal Growth Partners Limited and Seruus Telecom Fund
Limited.
3. Registration Right's Agreement's dated September 23rd, 1998 by and
among P.V. Tel. Inc., Coastal Growth Partners Limited and Seruus
Telecom Fund Limited.
4. Executive Employment Agreement dated September 23rd, 1998 between
Xxxxxx X. Xxxx III and P.V. Tel. Inc. (the contribution and ownership
agreement mentions providing management services, we have not seen the
employment agreement)
5. Executive Employment Agreement dated September 23rd, 1998 between Xxxx
Xxxxxxxx and P.V. Tel. Inc. (same as above)
6. Executive Employment Agreement dated September 23rd, 1998 between
Xxxxxxx X. Xxxx and P.V. Tel. Inc. (same as above)
7. Contribution and Ownership Agreement dated August 4th, 1998 between
P.V. Tel. of Tennessee, LLC and Comtelco, Inc. giving Comtelco ability
to earn membership interest of up to 9%.
8. Contribution and Ownership Agreement dated September 18th, 1998
between Myrtle Beach Telephone Company, LLC and Ameritel
Communications, LLC. giving Ameritel ability to earn membership
interest of up to 9%.
9. Commercial Lease Agreement dated July 1st, 1999 between P.V. Tel,
Inc., as Tenant, and Xxxxxxx & Xxxxxxx Xxxxxx as Landlord.
10. Equipment Lease Agreement dated August 23rd, 1999 between P.V. Tel.
Inc as Lessee, and Data General as Lessor. Billing System
mini-mainframe computer lease: total financed amount is: $165,000.00
for a period of 36 months.
90
DISCLOSURE SCHEDULE
EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES
OF THE TARGET AND ITS SUBSIDIARIES
PROVIDED PURSUANT TO AND AS A PART OF
A
STOCK EXCHANGE AGREEMENT
AMONG
AVANA TELECOMMUNICATIONS GROUP, INC.
GRACE DEVELOPMENT, INC.
AND
P.V. TEL. INC.
AND THE SHAREHOLDERS THEREOF
DATED AS OF FEBRUARY 15, 2000
Any information disclosed in these Disclosure Schedules will be deemed
disclosed and incorporated into each Disclosure Schedule included within the
following Disclosure Schedules where such disclosure would be appropriate.
Unless the context otherwise requires, all capitalized terms in the following
Disclosure Schedules shall have the meanings defined in the Agreement.
91
SCHEDULE 4(A)
ORGANIZATION, QUALIFICATION AND CORPORATE POWER
Officers and Directors of Target:
Xx. Xxxxxx X. Xxxx III President and Chief Operating Officer;
Director
Mr. Xxxx Xxxxxxxx Vice President; Director
Mr. Xxxxxxx Xxxx Vice President; Director
Xx. Xxxxx Xxxx Director
Xx. Xxxx Xxxxxx Director
P.V. Tel. Inc. is the managing and sole member of each of the limited liability
company subsidiaries listed below, except for P.V. Tel. of Tennessee, LLC,
which required two members to be organized. Xxxxxx X. Xxxx III and P.V. Tel.
Inc. are the two members and P.V. Tel. Inc is the managing member of P.V. Tel.
of Tennessee, LLC.
P.V. Tel. of Alabama, LLC P.V. Tel. of Virginia, LLC
P.V. Tel. of North Carolina, LLC P.V. Tel. of Georgia, LLC
P.V. Tel. of Mississippi, LLC P.V. Tel. of Florida, LLC
P.V. Tel. of Louisiana, LLC P.V. Tel. of Illinois, LLC
P.V. Tel. of Kentucky, LLC P.V. Tel. of Tennessee, LLC
P.V. Tel. of Ohio, LLC Myrtle Beach Telephone Co. LLC
2
92
SCHEDULE 4(B)
CAPITALIZATION
Coastal Growth Partners, L.P. 1,000 shares Preferred Stock
Xxxxx Xxxx 1,500 shares Preferred Stock
G. Xxxxx Xxxxxx 500 shares Common Stock
Xxxxxx X. Xxxx III 2,333.33 shares Common Stock
Xxxxxxx X. Xxxx 2,333.33 shares Common Stock
Xxxx Xxxxxxxx 2,333.33 shares Common Stock
3
93
SCHEDULE 4(C)
NONCONTRAVENTION
Regulatory notices will be filed with the following regulatory authorities:
1. Federal Communications Commission
2. Alabama Public Service Commission
3. Kentucky Public Service Commission
4. Mississippi Public Service Commission
5. North Carolina Utilities Commission
6. South Carolina Public Service Commission
7. Tennessee Regulatory Authority
8. Virginia State Corporation Commission
9. Florida State Public Service Commission
10. Illinois Public Service Commission.
Notices will be provided in connection with the following contracts:
1. Lease Agreement dated August 1st, 1997 between P.V. Tel of Tennessee
LLC, as Tenant, and Xxxxx & Xxxxxxx Xxxxxxx and Xxxxx & Xxxxxx
XxXxxxxxxx, as Landlord.
2. Commercial Lease Agreement dated July 1st, 1999 between P.V. Tel,
Inc., as Tenant, and Xxxxxxx & Xxxxxxx Xxxxxx as Landlord.
3. Equipment Lease Agreement dated August 11th, 1998 between P.V. Tel.
Inc as Lessee, and BA Credit Corp as Lessor. Xxxxxx 20/20 Central
Office equipment lease: total financed amount is: $424,872.00 for a
period of 36 months.
4
94
4. Equipment Lease Agreement dated March 10th, 1999 between P.V. Tel. Inc
as Lessee, and Copelco Capital as Lessor. Central Office equipment &
modules lease: total financed amount is: $117,120.00 for a period of
60 months.
5. Equipment Lease Agreement dated March 15th, 1999 between P.V. Tel. Inc
as Lessee, and NewCourt Leasing Corporation as Lessor. Office
Computers, Power system and Generator lease: total financed amount is:
$231,611.00 for a period of 60 months.
6. Equipment Lease Agreement dated July 3rd, 1999, 1999 between P.V. Tel.
Inc as Lessee, and Copelco Capital Corporation as Lessor. Misc. key
systems, Xxxxxx Startech & Cisco Routers lease: total financed amount
is: $120,060.00 for a period of 60 months.
7. Equipment Lease Agreement dated September 24th, 1999 between P.V. Tel.
Inc as Lessee, and Imperial Bank as Lessor. Xxxxxx ACD PBX system
lease: total financed amount is: $131,580.00 for a period of 36
months.
8. Equipment Lease Agreement dated July 12th, 1999 between P.V. Tel. Inc
as Lessee, and Tokia/Xxxxxx Financial Services as Lessor. CSR Office
Furniture lease: total financed amount is: $37,512.00 for a period of
36 months.
9. Equipment Lease Agreement dated August 18thh, 1999 between P.V. Tel.
Inc as Lessee, and Sunrise Leasing as Lessor. ISP routers & ISDN
equipment lease: total financed amount is: $20,592.00 for a period of
24 months.
10. Equipment Lease Agreement dated August 23rd, 1999 between P.V. Tel.
Inc as Lessee, and Data General as Lessor. Billing System
mini-mainframe computer lease: total financed amount is: $165,000.00
for a period of 36 months.
11. Equipment Lease Agreement dated July 12th, 1999 between P.V. Tel. Inc
as Lessee, and NewCourt Leasing Corporation as Lessor. Office
Computers, Power system and Generator lease: total financed amount is:
$34,800.00 for a period of 60 months.
5
95
SCHEDULE 4(F)
SUBSIDIARIES
SUBSIDIARY ISSUED AND OUTSTANDING
AND JURISDICTION MEMBERSHIP INTERESTS
OF ORGANIZATION
-------------------------------------------- ---------------------------------------------------
P.V. Tel of Alabama, LLC 100% owned by P.V. Tel. Inc.
State of Alabama
-------------------------------------------- ---------------------------------------------------
P.V. Tel of Florida, LLC 100% owned by P.V. Tel. Inc.
State of Florida
-------------------------------------------- ---------------------------------------------------
P.V. Tel of Georgia, LLC 100% owned by P.V. Tel. Inc.
State of Georgia
-------------------------------------------- ---------------------------------------------------
P.V. Tel of Illinois, LLC 100% owned by P.V. Tel. Inc.
State of Illinois
-------------------------------------------- ---------------------------------------------------
P.V. Tel of Kentucky, LLC 100% owned by P.V. Tel. Inc.
State of Kentucky
-------------------------------------------- ---------------------------------------------------
P.V. Tel of Louisiana,, LLC 100% owned by P.V. Tel. Inc.
State of Louisiana
-------------------------------------------- ---------------------------------------------------
P.V. Tel of Mississippi, LLC 100% owned by P.V. Tel. Inc.
State of Mississippi
-------------------------------------------- ---------------------------------------------------
P.V. Tel of Ohio, LLC 100% owned by P.V. Tel. Inc.
State of Ohio
-------------------------------------------- ---------------------------------------------------
P.V. Tel of North Carolina, LLC 100% owned by P.V. Tel. Inc.
State of North Carolina
-------------------------------------------- ---------------------------------------------------
P.V. Tel of Tennessee, LLC 100% owned by P.V. Tel. Inc.
State of Tennessee
-------------------------------------------- ---------------------------------------------------
P.V. Tel of Virginia, LLC 100% owned by P.V. Tel. Inc.
State of Virginia
-------------------------------------------- ---------------------------------------------------
Myrtle Beach Telephone Co. 100% owned by P.V. Tel. Inc.
LLC
State of South Carolina
-------------------------------------------- ---------------------------------------------------
Outstanding contracts that could require Target to transfer capital stock of its
subsidiaries:
1. Contribution and Ownership Agreement dated September 18th, 1998 between
Myrtle Beach Telephone Company, LLC and Ameritel Communications, LLC. Giving
Ameritel ability to earn membership interest of up to 9%.
2. Contribution and Ownership Agreement dated August 4th, 1998 between P.V.
Tel. of Tennessee, LLC and Comtelco, Inc. Giving Comtelco ability to earn
membership interest of up to 9%.
6
96
SCHEDULE 4(H)
EVENTS SUBSEQUENT TO MOST RECENT FISCAL MONTH END
The following schedule sets forth the accounts payable of Target and/or its
Subsidiaries as of February 13, 2000 that were overdue after December 31, 1999:
7
97
ACCOUNTS PAYABLE
02/13/2000 TC DUE CATE-
VENDORS DATE GORY AMOUNT PAYMENT DATE CK # BALANCE
-----------------------------------------------------------------------------------------------------------------------------------
Boult Xxxxxxxx Xxxxxxx & Xxxxx 07/27/99 (71556) 8/27 3 $ 710.78 $ 710.78
-----------------------------------------------------------------------------------------------------------------------------------
Xxxxxx & Xxxxxx 06/30/1999 (10183) 8/27 3 $ 370.33 $ 370.33
-----------------------------------------------------------------------------------------------------------------------------------
Boult Xxxxxxxx Xxxxxxx & Xxxxx 08/31/1999 (73678) 8/31 3 $ 456.65 $ 456.65
-----------------------------------------------------------------------------------------------------------------------------------
United Tel.- E911 Surcharges 8/10 9/3 3 $ 7,006.25 $ 7,006.25
-----------------------------------------------------------------------------------------------------------------------------------
Xxxxxxxxxx & Xxxxxx, P.A 07/21/1999 (19) 9/10 3 $ 2,901.75 $ 1,000.00 11/12 1674 $ 1,901.75
-----------------------------------------------------------------------------------------------------------------------------------
Blackburn, Childers, & Xxxxxxxx 8/9 9/10 3 $ 4,300.00 $ 1,000.00 11/12 1652 $ 3,300.00
-----------------------------------------------------------------------------------------------------------------------------------
Market Competitive Svcs 5/11/1999 (PVT 92035) 9/10 3 $13,562.50 $13,562.50
-----------------------------------------------------------------------------------------------------------------------------------
Smiles Communications 07/29/1999 (64981) 9/17 3 $ 1,160.52 $ 1,160.52
-----------------------------------------------------------------------------------------------------------------------------------
P3 Millennium Corporation 09/02/1999 (787) Tape Conv. 9/18 2 $ 8,920.59 $ 8,920.59
-----------------------------------------------------------------------------------------------------------------------------------
Xxxxxx & Xxxxxx 08/31/1999 (10285) 9/24 3 $ 1,895.75 $ 1,895.75
-----------------------------------------------------------------------------------------------------------------------------------
Xxxxxx Communication Prod 09/14/1999 (221147) 9/24 3 $ 949.38 $ 949.38
-----------------------------------------------------------------------------------------------------------------------------------
Xxxxxxxxx Construction 08/23/1999 (899-3) 9/24 3 $55,849.00 $ 2,000.00 9/24 1470
-----------------------------------------------------------------------------------------------------------------------------------
$ 500.00 10/1 1503
-----------------------------------------------------------------------------------------------------------------------------------
$ 1,000.00 10/15 1545
-----------------------------------------------------------------------------------------------------------------------------------
$ 1,000.00 10/20 1566
-----------------------------------------------------------------------------------------------------------------------------------
$ 2,349.00 11/2 1600
-----------------------------------------------------------------------------------------------------------------------------------
$ 1,000.00 11/4 1629
-----------------------------------------------------------------------------------------------------------------------------------
$ 2,000.00 11/12 1676
-----------------------------------------------------------------------------------------------------------------------------------
$ 1,000.00 11/17 1690
-----------------------------------------------------------------------------------------------------------------------------------
$ 1,000.00 11/19 1705
-----------------------------------------------------------------------------------------------------------------------------------
$ 1,000.00 12/1 1716
-----------------------------------------------------------------------------------------------------------------------------------
$ 1,000.00 1/21 1810
-----------------------------------------------------------------------------------------------------------------------------------
$ 1,000.00 1/26 1830
-----------------------------------------------------------------------------------------------------------------------------------
Finance Charge 9/30 4 $ 342.74
-----------------------------------------------------------------------------------------------------------------------------------
Finance Charge 10/31 4 $ 347.10
-----------------------------------------------------------------------------------------------------------------------------------
Finance Charge 11/30 4 $ 308.82
-----------------------------------------------------------------------------------------------------------------------------------
7-1
98
ACCOUNTS PAYABLE
02/13/2000 TC DUE CATE-
VENDORS DATE GORY AMOUNT PAYMENT DATE CK # BALANCE
-----------------------------------------------------------------------------------------------------------------------------------
Finance Charge 12/31 4 $ 312.29
-----------------------------------------------------------------------------------------------------------------------------------
Finance Charge 01/31/2000 4 $ 308.03 $42,618.98
-----------------------------------------------------------------------------------------------------------------------------------
Telco Communications 9/1 10/1 1 $20,097.61 $ 5,000.00 11/17 1693
-----------------------------------------------------------------------------------------------------------------------------------
$ 5,000.00 11/19 1706 $10,097.61
-----------------------------------------------------------------------------------------------------------------------------------
Kean, Miller, Hawthorne 8/13 10/1 3 $ 1,283.45 $ 1,283.45
-----------------------------------------------------------------------------------------------------------------------------------
Xxxxxxxxxx & Xxxxxx, P.A 08/25/1999 (20) 10/8 3 $ 3,023.26 $ 3,023.26
-----------------------------------------------------------------------------------------------------------------------------------
FTI Consulting, Inc 9/14 10/15 3 $ 8,294.18
-----------------------------------------------------------------------------------------------------------------------------------
Retainer Applied ($ 2,500.00) $ 5,794.18
-----------------------------------------------------------------------------------------------------------------------------------
Xxxxxxx Xxxxx 9/17 10/15 3 $ 150.00 $ 150.00
-----------------------------------------------------------------------------------------------------------------------------------
Brunini, Grantham, Grower 9/7 10/22 3 $ 3,082.55 $ 3,082.55
-----------------------------------------------------------------------------------------------------------------------------------
Randstad 09/22/1999 (99-37-05281) Xxxxx X. 10/22 2 $ 880.00 $ 880.00
-----------------------------------------------------------------------------------------------------------------------------------
Xxxxxx & Xxxxxx 08/31/1999 (10285) 10/27 3 $ 1,895.75 $ 1,895.75
-----------------------------------------------------------------------------------------------------------------------------------
Blackburn, Childers, & Xxxxxxxx 9/27 10/27 3 $ 2,400.00 $ 2,400.00
-----------------------------------------------------------------------------------------------------------------------------------
Office Equipment & Computers 08/18/1999 (45339) Printer 10/27 3 $ 462.70 $ 462.70
-----------------------------------------------------------------------------------------------------------------------------------
Finance Charge 3 $ 82.95 $ 82.95
-----------------------------------------------------------------------------------------------------------------------------------
Finance Charge 3 $ 27.65 $ 27.65
-----------------------------------------------------------------------------------------------------------------------------------
Xxxxxxxx Communications 09/24/1999 (749029) Xxxx X. 10/29 2 $ 820.00 $ 820.00
-----------------------------------------------------------------------------------------------------------------------------------
Qwest Communications 09/30/1999 (37860168) 10/29 1 $10,691.46 $ 5,691.46 12/22 1787 $ 5,000.00
-----------------------------------------------------------------------------------------------------------------------------------
National Independent Billing 9/24 10/29 1 $ 2,211.71 $ 2,211.71
-----------------------------------------------------------------------------------------------------------------------------------
Dimensional Marketing 09/30/1999 (1176709) 10/29 3 $ 7,837.37
-----------------------------------------------------------------------------------------------------------------------------------
Credits Issued 10/29 3($ 4,333.94) $ 3,503.43
-----------------------------------------------------------------------------------------------------------------------------------
Randstad 09/22/1999 (99-38-06983) Xxxxx X. 10/29 2 $ 880.00 $ 880.00
-----------------------------------------------------------------------------------------------------------------------------------
Telco Communications 10/01/1999 (2332954) 11/1 1 $14,067.57 $14,067.57
-----------------------------------------------------------------------------------------------------------------------------------
Gentle, Xxxxxxx & Xxxxxxx 10/1 11/5 3 $ 770.55 $ 770.55
-----------------------------------------------------------------------------------------------------------------------------------
FirsTeam Personnel 10/07/1999 (3551) Xxxxx, May 11/5 2 $ 868.00 $ 868.00
-----------------------------------------------------------------------------------------------------------------------------------
X'Xxxxx Xxxxxxxx Xxxxx 09/27/99 (15721) 11/5 3 $ 812.50 $ 812.50
-----------------------------------------------------------------------------------------------------------------------------------
7-2
99
ACCOUNTS PAYABLE
02/13/2000 TC DUE CATE-
VENDORS DATE GORY AMOUNT PAYMENT DATE CK # BALANCE
-----------------------------------------------------------------------------------------------------------------------------------
Xxxxxxxx Communications 10/01/1999 (749030) Xxxx X. 11/5 2 $ 820.00 $ 820.00
-----------------------------------------------------------------------------------------------------------------------------------
Boult Xxxxxxxx Xxxxxxx & Xxxxx 11/12 3 $ 9,185.97 $ 9,185.97
-----------------------------------------------------------------------------------------------------------------------------------
09/28/1999 (75266) $ 137.68
-----------------------------------------------------------------------------------------------------------------------------------
09/28/1999 (75259) $ 127.50
-----------------------------------------------------------------------------------------------------------------------------------
09/28/1999 (75260) $ 102.00
-----------------------------------------------------------------------------------------------------------------------------------
09/28/1999 (75261) $ 68.46
-----------------------------------------------------------------------------------------------------------------------------------
09/28/1999 (75262) $ 42.70
-----------------------------------------------------------------------------------------------------------------------------------
09/28/1999 (75263) $ 14.80
-----------------------------------------------------------------------------------------------------------------------------------
09/28/1999 (75264) $ 573.42
-----------------------------------------------------------------------------------------------------------------------------------
09/28/1999 (75265) $ 1,350.58
-----------------------------------------------------------------------------------------------------------------------------------
09/28/1999 (75258) $ 6,768.83
-----------------------------------------------------------------------------------------------------------------------------------
$ 9,185.97
-----------------------------------------------------------------------------------------------------------------------------------
Xxxx, Xxx Expense Reimbursement 11/12 3 $ 337.47 $ 337.47
-----------------------------------------------------------------------------------------------------------------------------------
Xxxxxxxx Communications 10/08/1999 (749031) Xxxx X. 11/12 2 $ 820.00 $ 820.00
-----------------------------------------------------------------------------------------------------------------------------------
Xxxx, Xxx Expense Reimbursement 11/12 3 $ 776.20 $ 776.20
-----------------------------------------------------------------------------------------------------------------------------------
Parker, Poe, Xxxxx & Xxxxxxxxx 10/15/1999 (34760) 11/19 3 $ 2,732.00 $ 2,732.00
-----------------------------------------------------------------------------------------------------------------------------------
GTE South 10/28/1999 (3849) 11/19 1 $ 3,093.90 $ 3,093.90
-----------------------------------------------------------------------------------------------------------------------------------
National Furniture Liquidators 10/26/1999 (595) 11/19 3 $ 995.90 $ 995.90
-----------------------------------------------------------------------------------------------------------------------------------
FirsTeam Personnel 11/03/1999 (3612) Xxxxx 11/19 2 $ 336.00 $ 336.00
-----------------------------------------------------------------------------------------------------------------------------------
Xxxxxx & Xxxxxx 09/30/1999 (10333) 11/19 3 $ 743.30 $ 743.30
-----------------------------------------------------------------------------------------------------------------------------------
FirsTeam Personnel 10/20/1999 (3578) Xxxxx, May 11/19 2 $ 815.50 $ 815.50
-----------------------------------------------------------------------------------------------------------------------------------
FTI Consulting, Inc. 10/14 11/19 3 $ 9,356.10
-----------------------------------------------------------------------------------------------------------------------------------
Waived by FTI ($ 3,428.75) $ 5,927.35
-----------------------------------------------------------------------------------------------------------------------------------
National Independent Billing 10/22 11/19 1 $ 2,493.48 $ 2,493.48
-----------------------------------------------------------------------------------------------------------------------------------
Frontier Communications 10/25 11/19 1 $16,753.23 $16,753.23
-----------------------------------------------------------------------------------------------------------------------------------
Credit Bureau of Kingsport 11/2 11/22 2 $ 268.00 $ 268.00
-----------------------------------------------------------------------------------------------------------------------------------
7-3
100
ACCOUNTS PAYABLE
02/13/2000 TC DUE CATE-
VENDORS DATE GORY AMOUNT PAYMENT DATE CK # BALANCE
-----------------------------------------------------------------------------------------------------------------------------------
Xxxxxxxxxx & Xxxxxx, P.A 10/25/1999 (22) 11/26 3 $ 9,846.87 $ 9,846.87
-----------------------------------------------------------------------------------------------------------------------------------
FirsTeam Personnel 10/28/1999 (3602) Xxxxx,May 11/26 2 $ 868.00 $ 868.00
-----------------------------------------------------------------------------------------------------------------------------------
Qwest Communications 10/31/1999 (37889615) 11/26 1 $30,383.72 $30,383.72
-----------------------------------------------------------------------------------------------------------------------------------
Qwest Communications 10/31/1999 (37860168) 11/26 1 $ 7,652.15 $ 7,652.15
-----------------------------------------------------------------------------------------------------------------------------------
Boult Xxxxxxxx Xxxxxxx & Xxxxx 10/28/1999 (76823) 11/26 3 $ 7,413.70 $ 7,413.70
-----------------------------------------------------------------------------------------------------------------------------------
Xxxx, Xxx Expense Reimbursement 11/26 2 $ 107.77 $ 107.77
-----------------------------------------------------------------------------------------------------------------------------------
GFC Communications 11/10/1999 (17050) 11/30 1 $ 1,140.78 $ 1,140.78
-----------------------------------------------------------------------------------------------------------------------------------
Xxxxxx, Xxxxxxx(Clerk Of Court) December 1999 Rent 12/1 2 $ 7,083.33 $ 7,083.33
-----------------------------------------------------------------------------------------------------------------------------------
Imperial Bank Nov. Late Fees 12/1 4 $ 49.22 $ 49.22
-----------------------------------------------------------------------------------------------------------------------------------
Sprint 11/16/1999 (178) 12/2 1 $ 9,160.78 $ 9,160.78
-----------------------------------------------------------------------------------------------------------------------------------
GTE South 11/10/1999 (3843) 12/2 1 $ 1,519.78 $ 1,519.78
-----------------------------------------------------------------------------------------------------------------------------------
GTE South 11/10/1999 (3833) 12/2 1 $ 1,124.82 $ 1,124.82
-----------------------------------------------------------------------------------------------------------------------------------
Community Business Centers 11/22/1999 (865) Myrtle Beach 12/2 3 $ 292.00 $ 292.00
-----------------------------------------------------------------------------------------------------------------------------------
Thermocopy 11/12/1999 (223434) S0625 12/3 2 $ 613.26 $ 613.26
-----------------------------------------------------------------------------------------------------------------------------------
Telcordia Technologies 11/03/1999 (9864260) 12/3 2 $ 285.00 $ 285.00
-----------------------------------------------------------------------------------------------------------------------------------
Thermocopy 11/09/1999 (2123193) S0523 12/3 2 $ 450.10 $ 450.10
-----------------------------------------------------------------------------------------------------------------------------------
Technologies Management 11/01/1999 (9105513T) 12/3 2 $ 19.16 $ 19.16
-----------------------------------------------------------------------------------------------------------------------------------
GTE South 11/04/1999 (3841) 12/3 1 $ 3,336.91 $ 3,336.91
-----------------------------------------------------------------------------------------------------------------------------------
Sprint Yellow Pages 11/17 12/3 2 $ 15.25 $ 15.25
-----------------------------------------------------------------------------------------------------------------------------------
Time & Pay 11/22/1999 (41131) 12/3 2 $ 77.50 $ 77.50
-----------------------------------------------------------------------------------------------------------------------------------
Advantage Printing 11/08/1999 (19298) 12/3 2 $ 919.00 $ 919.00
-----------------------------------------------------------------------------------------------------------------------------------
Thermocopy 12/01/1999 (224664) S0502 12/5 2 $ 227.55 $ 227.55
-----------------------------------------------------------------------------------------------------------------------------------
Parker, Poe, Xxxxx & Xxxxxxxxx 11/08/1999 (36704) 12/8 3 $ 581.90 $ 581.90
-----------------------------------------------------------------------------------------------------------------------------------
GTE South 11/16/1999 (3845) 12/8 1 $ 6,515.30 $ 6,515.30
-----------------------------------------------------------------------------------------------------------------------------------
National Furniture Liquidators 11/30/1999 (628) 12/8 2 $ 995.90 $ 995.90
-----------------------------------------------------------------------------------------------------------------------------------
Myrtle Beach Communications 11/29/1999 (10009850) 12/9 2 $ 44.00 $ 44.00
-----------------------------------------------------------------------------------------------------------------------------------
7-4
101
ACCOUNTS PAYABLE
02/13/2000 TC DUE CATE-
VENDORS DATE GORY AMOUNT PAYMENT DATE CK # BALANCE
-----------------------------------------------------------------------------------------------------------------------------------
Altech, Inc 11/29/1999 (5217) 12/10 2 $ 292.79 $ 292.79
-----------------------------------------------------------------------------------------------------------------------------------
Xxxxxxxx, Xxxx Expense Reimbursement 12/10 2 $ 69.20 $ 69.20
-----------------------------------------------------------------------------------------------------------------------------------
United Supply 11/12/1999 (26874) 12/10 2 $ 252.90 $ 252.90
-----------------------------------------------------------------------------------------------------------------------------------
Xxxx, Xxxxx REFUND 12/10 5 $ 25.00 $ 25.00
-----------------------------------------------------------------------------------------------------------------------------------
FirsTeam Personnel 11/23/1999 (3658) XxXxxxxxx 12/10 2 $ 445.20 $ 445.20
-----------------------------------------------------------------------------------------------------------------------------------
P3 Millennium Corporation 11/15/1999 (870) Tape Conv. 12/10 2 $ 2,270.00 $ 2,270.00
-----------------------------------------------------------------------------------------------------------------------------------
Kwik Kafe Company 11/16/1999 (433256) 12/10 2 $ 34.20 $ 34.20
-----------------------------------------------------------------------------------------------------------------------------------
Sign Time 12/01/1999 (10262) 12/12 2 $ 1,247.75 $ 1,247.75
-----------------------------------------------------------------------------------------------------------------------------------
Kingsport Times News 11/30 12/14 2 $ 30.55 $ 30.55
-----------------------------------------------------------------------------------------------------------------------------------
Pitney Xxxxx 01/30/2000 (516289) Late Charge 12/14 4 $ 5.00 $ 5.00
-----------------------------------------------------------------------------------------------------------------------------------
Credit Bureau of Kingsport 12/2 12/14 2 $ 189.60 $ 189.60
-----------------------------------------------------------------------------------------------------------------------------------
Xxxxxxxx, Xxxxxx REFUND Apples 12/14 5 $ 49.00 $ 49.00
-----------------------------------------------------------------------------------------------------------------------------------
Pitney Xxxxx 12/14/1999 (5162889) Meter Rental 12/14 2 $ 184.14 $ 184.14
-----------------------------------------------------------------------------------------------------------------------------------
Sprint 11/16/1999 (186) 12/14 1 $ 4,217.40 $ 4,217.40
-----------------------------------------------------------------------------------------------------------------------------------
Sprint 11/16/1999 (184) 12/14 1 $ 1,067.97 $ 1,067.97
-----------------------------------------------------------------------------------------------------------------------------------
Bristol Herald Courier 11/30 12/14 2 $ 37.95 $ 37.95
-----------------------------------------------------------------------------------------------------------------------------------
Sprint 11/16/1999 (185) 12/14 1 $ 1,109.07 $ 1,109.07
-----------------------------------------------------------------------------------------------------------------------------------
FirsTeam Personnel 11/30/1999 (3679) XxXxxxxxx 12/14 2 $ 252.00 $ 252.00
-----------------------------------------------------------------------------------------------------------------------------------
FirsTeam Personnel 12/08/1999 (3688) XxXxxxxxx 12/15 2 $ 448.00 $ 448.00
-----------------------------------------------------------------------------------------------------------------------------------
Sprint 11/16/1999 (186) 12/15 1 $ 4,217.40 $ 4,217.40
-----------------------------------------------------------------------------------------------------------------------------------
GTE South 11/22/1999 (3847) 12/16 1 $ 7,024.73 $ 7,024.73
-----------------------------------------------------------------------------------------------------------------------------------
GTE South 11/22/1999 (3837) 12/16 1 $ 476.19 $ 476.19
-----------------------------------------------------------------------------------------------------------------------------------
XxXxxxxxx, Van 11/7 12/17 2 $ 1,666.83 $ 1,666.83
-----------------------------------------------------------------------------------------------------------------------------------
Xxxxxxxx Co. Property Taxes 57492 12/17 3 $ 3,131.53 $ 3,131.53
-----------------------------------------------------------------------------------------------------------------------------------
Time & Pay 12/07/1999 (41372) 12/17 2 $ 78.00 $ 78.00
-----------------------------------------------------------------------------------------------------------------------------------
Newcourt Leasing 11/19/1999 (710002) 12/17 2 $ 152.87 $ 152.87
-----------------------------------------------------------------------------------------------------------------------------------
7-5
102
ACCOUNTS PAYABLE
02/13/2000 TC DUE CATE-
VENDORS DATE GORY AMOUNT PAYMENT DATE CK # BALANCE
-----------------------------------------------------------------------------------------------------------------------------------
Newcourt Leasing 11/19/1999 (721496) 12/17 2 $ 671.12 $ 671.12
-----------------------------------------------------------------------------------------------------------------------------------
Unishippers (Airborne) 12/06/1999 (23205) 12/17 2 $ 373.10 $ 373.10
-----------------------------------------------------------------------------------------------------------------------------------
FTI Consulting, Inc. 11/16 12/17 2 $ 715.54 $ 715.54
-----------------------------------------------------------------------------------------------------------------------------------
Xxxxxx & Xxxxxx 10/31/1999 (10386) 12/17 2 $ 586.69 $ 586.69
-----------------------------------------------------------------------------------------------------------------------------------
GTE South 11/25/1999 (3838) 12/18 1 $ 538.88 $ 538.88
-----------------------------------------------------------------------------------------------------------------------------------
GTE South 11/25/1999 (3848) 12/18 1 $ 2,788.21 $ 2,788.21
-----------------------------------------------------------------------------------------------------------------------------------
GTE South 11/28/1999 (3849) 12/21 1 $ 4,405.90 $ 4,405.90
-----------------------------------------------------------------------------------------------------------------------------------
Illuminet 11/25/1999 (25581) 12/21 1 $ 3,842.34 $ 3,842.34
-----------------------------------------------------------------------------------------------------------------------------------
Technologies Management 12/02/1999 (9115513T) 12/21 2 $ 61.76 $ 61.76
-----------------------------------------------------------------------------------------------------------------------------------
GTE South 11/28/1999 (3150) 12/21 1 $ 16.84 $ 16.84
-----------------------------------------------------------------------------------------------------------------------------------
National Independent Billing 11/24 12/21 1 $ 2,341.28 $ 2,341.28
-----------------------------------------------------------------------------------------------------------------------------------
Sonitrol of the Tri Cities 12/01/1999 (SK-404) 12/21 2 $ 25.38 $ 25.38
-----------------------------------------------------------------------------------------------------------------------------------
GTE South 11/28/1999 (3839) 12/21 1 $ 550.91 $ 550.91
-----------------------------------------------------------------------------------------------------------------------------------
Kingsport Answering Service 12/01/1999 (AS-98) 12/21 2 $ 71.02 $ 71.02
-----------------------------------------------------------------------------------------------------------------------------------
HTC 11/26/1999 (00-0000-0) Fred's Cell 12/23 2 $ 160.74 $ 160.74
-----------------------------------------------------------------------------------------------------------------------------------
GTE South 12/01/1999 (3840) 12/23 1 $ 103.87 $ 103.87
-----------------------------------------------------------------------------------------------------------------------------------
GTE South 12/01/1999 (3830) 12/24 1 $ 164.50 $ 164.50
-----------------------------------------------------------------------------------------------------------------------------------
XxXxxxxxx Xxxxxx 11/18 12/24 2 $ 22.57 $ 22.57
-----------------------------------------------------------------------------------------------------------------------------------
Kwik Kafe Company 11/30/1999 (434261) 12/24 2 $ 43.30 $ 43.30
-----------------------------------------------------------------------------------------------------------------------------------
Business Journal 11/30/1999 (1150) 12/24 2 $ 236.60 $ 236.60
-----------------------------------------------------------------------------------------------------------------------------------
Boult Xxxxxxxx Xxxxxxx & Xxxxx 11/24/1999 (78849) 12/24 3 $ 301.23 $ 301.23
-----------------------------------------------------------------------------------------------------------------------------------
Boult Xxxxxxxx Xxxxxxx & Xxxxx 11/24/1999 (78848) 12/24 3 $ 128.70 $ 128.70
-----------------------------------------------------------------------------------------------------------------------------------
Boult Xxxxxxxx Xxxxxxx & Xxxxx 11/24/1999 (78850) 12/24 3 $ 13.80 $ 13.80
-----------------------------------------------------------------------------------------------------------------------------------
Frontier Communications 11/29 12/27 1 $ 9,467.68 $ 9,467.68
-----------------------------------------------------------------------------------------------------------------------------------
7-6
103
ACCOUNTS PAYABLE
02/13/2000 TC DUE CATE-
VENDORS DATE GORY AMOUNT PAYMENT DATE CK # BALANCE
-----------------------------------------------------------------------------------------------------------------------------------
BA Credit Corp. 11/25 Switch Lease 12/27 2 $11,801.02 $11,801.02
-----------------------------------------------------------------------------------------------------------------------------------
Late Charges 4 $ 2,655.28 $ 2,655.28
-----------------------------------------------------------------------------------------------------------------------------------
GTE South 12/04/1999 (3831) 12/27 1 $ 804.88 $ 804.88
-----------------------------------------------------------------------------------------------------------------------------------
GTE South 12/04/1999 (3841) 12/27 1 $ 3,681.13 $ 3,681.13
-----------------------------------------------------------------------------------------------------------------------------------
Xxxxxxxx, Xxxx Ex. Reimbursement 10/02/99) 12/28 2 $ 210.10 $ 210.10
-----------------------------------------------------------------------------------------------------------------------------------
De Xxxx Xxxxxx 12/7 12/28 2 $ 573.43 $ 573.43
-----------------------------------------------------------------------------------------------------------------------------------
Qwest Communications 11/30/1999 (37889615) 12/28 1 $30,781.61 $30,781.61
-----------------------------------------------------------------------------------------------------------------------------------
Kean, Miller, Hawthorne 11/18 12/29 2 $ 24.00 $ 24.00
-----------------------------------------------------------------------------------------------------------------------------------
Office Depot 12/08/1999 (Dec Stmt) 12/29 2 $ 545.29 $ 545.29
-----------------------------------------------------------------------------------------------------------------------------------
GTE South 12/07/1999 (3842) 12/30 1 $ 3,500.89 $ 3,500.89
-----------------------------------------------------------------------------------------------------------------------------------
GTE South 12/07/1999 (3832) 12/30 1 $ 851.60 $ 851.60
-----------------------------------------------------------------------------------------------------------------------------------
Xxxxxx & Xxxxxx 11/30/1999 (10413) 12/30 3 $ 824.02 $ 824.02
-----------------------------------------------------------------------------------------------------------------------------------
Qwest Communications 11/30/1999 (37860168) 12/30 1 $ 3,276.19 $ 3,276.19
-----------------------------------------------------------------------------------------------------------------------------------
Kingsport Chamber of Commerce 11/29/1999 (5963) 12/31 2 $ 240.00 $ 240.00
-----------------------------------------------------------------------------------------------------------------------------------
GFC Communications 12/05/1999 (17050) 12/31 1 $ 685.27 $ 685.27
-----------------------------------------------------------------------------------------------------------------------------------
Xxxx, Xxx Expense Reimbursement 12/31 3 $ 271.64 $ 271.64
-----------------------------------------------------------------------------------------------------------------------------------
Sprint 12/16/1999 (178) 1/1 1 $ 9,747.44 $ 9,747.44
-----------------------------------------------------------------------------------------------------------------------------------
Community Business Centers 12/23/1999 (865) Myrtle Beach 1/1 2 $ 296.81 $ 296.81
-----------------------------------------------------------------------------------------------------------------------------------
U.P.S. 12/25/1999 (4440944316-529) 1/1 3 $ 11.75 $ 11.75
-----------------------------------------------------------------------------------------------------------------------------------
Imperial Bank 01/01/2000 (1443) 1/1 2 $ 3,614.08
-----------------------------------------------------------------------------------------------------------------------------------
Late Charges $ 54.21 $ 3,668.29
-----------------------------------------------------------------------------------------------------------------------------------
Xxxxxxx, Xxxxx REFUND Apples 1/2 5 $ 69.00 $ 69.00
-----------------------------------------------------------------------------------------------------------------------------------
Sprint 12/16/199 (188) 1/2 1 $49,247.88 $49,247.88
-----------------------------------------------------------------------------------------------------------------------------------
XxXxxxx Xxxx 11/30/1999 (70853) 1/2 3 $ 274.38 $ 274.38
-----------------------------------------------------------------------------------------------------------------------------------
Xxxxxxxxx, Xxxxxxx REFUND Apples 1/2 5 $ 69.00 $ 69.00
-----------------------------------------------------------------------------------------------------------------------------------
GTE South 12/10/1999 (3833) 1/2 1 $ 680.39 $ 680.39
-----------------------------------------------------------------------------------------------------------------------------------
7-7
104
ACCOUNTS PAYABLE
02/13/2000 TC DUE CATE-
VENDORS DATE GORY AMOUNT PAYMENT DATE CK # BALANCE
-----------------------------------------------------------------------------------------------------------------------------------
GTE South 12/10/1999 (3843) 1/2 1 $ 1,719.61 $ 1,719.61
-----------------------------------------------------------------------------------------------------------------------------------
Copelco Capital, Inc. 12/08/1999 (1312941) 1/2 2 $ 2,553.54 $ 2,553.54
-----------------------------------------------------------------------------------------------------------------------------------
Sprint Yellow Pages 12/18 1/3 2 $ 15.34 $ 15.34
-----------------------------------------------------------------------------------------------------------------------------------
Unishippers (Airborne) 12/20/1999 (23524) 1/3 2 $ 338.01 $ 338.01
-----------------------------------------------------------------------------------------------------------------------------------
Xxxxx, Xxxx REFUND Apples 1/3 5 $ 69.00 $ 69.00
-----------------------------------------------------------------------------------------------------------------------------------
Advantage Printing 12/08/1999 (19376) 1/4 2 $ 292.95 $ 292.95
-----------------------------------------------------------------------------------------------------------------------------------
GTE South 12/13/1999 (3844) 1/5 1 $ 180.05 $ 180.05
-----------------------------------------------------------------------------------------------------------------------------------
GTE South 12/13/1999 (3834) 1/5 1 $ 480.76 $ 480.76
-----------------------------------------------------------------------------------------------------------------------------------
Kwik Kafe Company 12/14/1999 (435339) 1/7 2 $ 66.84 $ 66.84
-----------------------------------------------------------------------------------------------------------------------------------
Altech, Inc 12/21/1999 (5304) 1/8 3 $ 195.19 $ 195.19
-----------------------------------------------------------------------------------------------------------------------------------
Unishippers (Airborne) 12/27/1999 (23838) 1/8 2 $ 370.65 $ 370.65
-----------------------------------------------------------------------------------------------------------------------------------
U.P.S. 01/01/2000 (4440944316-010) 1/8 3 $ 15.50 $ 15.50
-----------------------------------------------------------------------------------------------------------------------------------
P3 Millennium Corporation 12/10/1999 (890) Tape Conv. 1/8 2 $ 1,150.00 $ 1,150.00
-----------------------------------------------------------------------------------------------------------------------------------
National Furniture Liquidators 12/31/1999 (652) 1/8 2 $ 995.90 $ 995.90
-----------------------------------------------------------------------------------------------------------------------------------
GTE South 12/16/1999 (3845) 1/8 1 $ 5,091.33 $ 5,091.33
-----------------------------------------------------------------------------------------------------------------------------------
GTE South 12/16/1999 (3835) 1/8 1 $ 594.36 $ 594.36
-----------------------------------------------------------------------------------------------------------------------------------
Myrtle Beach Communications 12/28/1999 (10011793) 1/9 2 $ 44.00 $ 44.00
-----------------------------------------------------------------------------------------------------------------------------------
Time & Pay 12/20/1999 (41601) 1/10 2 $ 74.50 $ 74.50
-----------------------------------------------------------------------------------------------------------------------------------
Bristol Herald Courier 12/31 1/10 2 $ 30.57 $ 30.57
-----------------------------------------------------------------------------------------------------------------------------------
Xxxx, Xxxx REFUND Apples 1/10 5 $ 79.00 $ 79.00
-----------------------------------------------------------------------------------------------------------------------------------
Xxxxxx, Xxxxx REFUND 1/10 5 $ 94.00 $ 94.00
-----------------------------------------------------------------------------------------------------------------------------------
GTE South 12/19/1999 (3846) 1/10 1 $ 19.80 $ 19.80
-----------------------------------------------------------------------------------------------------------------------------------
GTE South 12/19/1999 (3836) 1/10 1 $ 308.26 $ 308.26
-----------------------------------------------------------------------------------------------------------------------------------
Business Journal 12/31/1999 (1150) 1/10 3 $ 263.60 $ 263.60
-----------------------------------------------------------------------------------------------------------------------------------
Credit Bureau Of Kingsport 01/04/2000 1/13 2 $ 287.20 $ 287.20
-----------------------------------------------------------------------------------------------------------------------------------
Copelco Capital, Inc. 12/16/1999 (1312940) 1/13 2 $ 2,176.12 $ 2,176.12
-----------------------------------------------------------------------------------------------------------------------------------
7-8
105
ACCOUNTS PAYABLE
------------------------------------------------------------------------------------------------------------------------------------
02/13/2000 TC DUE CATE-
VENDORS DATE GORY AMOUNT PAYMENT DATE CK # BALANCE
------------------------------------------------------------------------------------------------------------------------------------
Newcourt Leasing 12/20/1999 (710002) 1/13 2 $ 152.69 $ 152.69
------------------------------------------------------------------------------------------------------------------------------------
GTE South 12/22/1999 (3847) 1/13 1 $ (393.62) $ (393.62)
------------------------------------------------------------------------------------------------------------------------------------
GTE South 12/22/99 (3837) 1/13 1 $ 354.75 $ 354.75
------------------------------------------------------------------------------------------------------------------------------------
Kingsport Times News 12/31 1/14 2 $ 30.00 $ 30.00
------------------------------------------------------------------------------------------------------------------------------------
Time & Pay 01/07/2000 (41775) 1/14 2 $ 76.00 $ 76.00
------------------------------------------------------------------------------------------------------------------------------------
Boult Xxxxxxxx Xxxxxxx & Xxxxx 12/20/1999 (80587) 1/15 3 $ 602.06 $ 602.06
------------------------------------------------------------------------------------------------------------------------------------
FirsTeam Personnel 12/16/1999 (3701) XxXxxxxxx 1/15 2 $ 448.00 $ 448.00
------------------------------------------------------------------------------------------------------------------------------------
Boult Xxxxxxxx Xxxxxxx & Xxxxx 12/20/1999 (80586) 1/15 3 $ 25.50 $ 25.50
------------------------------------------------------------------------------------------------------------------------------------
Illuminet 12/25/1999 (25581) 1/15 1 $ 3,862.81 $ 3,862.81
------------------------------------------------------------------------------------------------------------------------------------
Kingsport Answering Service 01/01/2000 (AS-98) 1/15 2 $ 72.09 $ 72.09
------------------------------------------------------------------------------------------------------------------------------------
Sonitrol of the Tri Cities 01/01/2000 (SK-404) 1/15 2 $ 25.39 $ 25.39
------------------------------------------------------------------------------------------------------------------------------------
National Independent Billing 12/23 1/15 1 $ 1,339.97 $ 1,339.97
------------------------------------------------------------------------------------------------------------------------------------
Sprint - (Credit) 12/14/1999 $(1,356.25 X 12) Double Billed 1/17 1 $(16,275.00) $(16,275.00)
------------------------------------------------------------------------------------------------------------------------------------
P3 Millennium Corporation 01/04/2000 (907) Tape Conv. 1/17 2 $ 1,300.00 $ 1,300.00
------------------------------------------------------------------------------------------------------------------------------------
Sprint 12/16/1999 (186) 1/17 1 $ 4,217.40 $ 4,217.40
------------------------------------------------------------------------------------------------------------------------------------
Sprint 12/16/1999 (184) 1/17 1 $ 1,089.09 $ 1,089.09
------------------------------------------------------------------------------------------------------------------------------------
Sprint 12/16/1999 (185) 1/17 1 $ 1,193.38 $ 1,193.38
------------------------------------------------------------------------------------------------------------------------------------
BellSouth Credit (615N) 1/20 1 $ (98.68) $ (98.68)
------------------------------------------------------------------------------------------------------------------------------------
Xxxxxxxxxx & Xxxxxx, P.A 12/20/1999 (24) 1/20 3 $ 916.33 $ 916.33
------------------------------------------------------------------------------------------------------------------------------------
BellSouth 01/05/2000 (601) 1/21 1 $ 656.69
------------------------------------------------------------------------------------------------------------------------------------
Dispute $ (8.08) $ 648.61
------------------------------------------------------------------------------------------------------------------------------------
BellSouth 01/05/2000 (615) 1/21 1 $ 28,008.54
------------------------------------------------------------------------------------------------------------------------------------
Dispute $ (1,044.77) $ 26,963.77
------------------------------------------------------------------------------------------------------------------------------------
BellSouth 01/05/2000 (205) 1/21 1 $ 190.27 $ 190.27
------------------------------------------------------------------------------------------------------------------------------------
BellSouth 01/05/2000 (502) 1/21 1 $ 448.20
------------------------------------------------------------------------------------------------------------------------------------
7-9
106
ACCOUNTS PAYABLE
----------------------------------------------------------------------------------------------------------------------------------
02/13/2000 TC DUE CATE-
VENDORS DATE GORY AMOUNT PAYMENT DATE CK # BALANCE
----------------------------------------------------------------------------------------------------------------------------------
Dispute $ (23.92) $ 424.28
----------------------------------------------------------------------------------------------------------------------------------
BellSouth Credit (615S) 1/24 1 $ (5.41) $ (5.41)
----------------------------------------------------------------------------------------------------------------------------------
ZFX, Inc. 01/10/2000 (3207) 1/24 3 $ 95.00 $ 95.00
----------------------------------------------------------------------------------------------------------------------------------
GTE South 01/01/2000 (3840) 1/24 1 $ 467.33 $ 467.33
----------------------------------------------------------------------------------------------------------------------------------
Altech, Inc. 01/12/2000 (5370) 1/24 3 $ 97.60 $ 97.60
----------------------------------------------------------------------------------------------------------------------------------
Unishippers (Airborne) 01/10/2000 (200174) 1/24 2 $ 284.31 $ 284.31
----------------------------------------------------------------------------------------------------------------------------------
Kwik Kafe Company 12/18/1999 (436523) 1/25 2 $ 32.47 $ 32.47
----------------------------------------------------------------------------------------------------------------------------------
BellSouth 01/05/2000 (843) 1/25 1 $15,278.38
----------------------------------------------------------------------------------------------------------------------------------
Dispute $(2,081.05) $13,197.33
----------------------------------------------------------------------------------------------------------------------------------
Frontier Communications 12/28 1/26 1 $12,105.04 $12,105.04
----------------------------------------------------------------------------------------------------------------------------------
Blackburn, Childers, & Xxxxxxxx 12/29/1999 1/26 3 $10,000.00 $10,000.00
----------------------------------------------------------------------------------------------------------------------------------
BA Credit Corporation 12/26/1999(350241) Switch Lease 1/26 2 $11,801.02 $11,801.02
----------------------------------------------------------------------------------------------------------------------------------
Late Charges 4 $ 2,655.28 $ 2,655.28
----------------------------------------------------------------------------------------------------------------------------------
Newcourt Leasing 01/04/2000 (708632) 1/27 2 $ 1,931.53
----------------------------------------------------------------------------------------------------------------------------------
Late Charges $ 386.96 $ 2,318.49
----------------------------------------------------------------------------------------------------------------------------------
GTE South 01/04/2000 (3841) 1/27 1 $ 5,275.22 $ 5,275.22
----------------------------------------------------------------------------------------------------------------------------------
United Cities Gas Company 12/28/1999 (69966-9) JC Switch 1/27 2 $ 13.10 $ 13.10
----------------------------------------------------------------------------------------------------------------------------------
WRZK Radio 12/28/1999 (3607) Radio Adv. 1/27 3 $ 210.00 $ 210.00
----------------------------------------------------------------------------------------------------------------------------------
Waste Management 01/03/2000 (2113-0069499) 1/27 2 $ 38.00 $ 38.00
----------------------------------------------------------------------------------------------------------------------------------
GTE South 01/04/2000 (3831) 1/27 1 $ 885.55 $ 885.55
----------------------------------------------------------------------------------------------------------------------------------
Technologies Management 01/04/2000 (9125513T) 1/28 2 $ 22.16 $ 22.16
----------------------------------------------------------------------------------------------------------------------------------
Advantage Printing 12/30/1999 (19422) 1/28 2 $ 595.67 $ 595.67
----------------------------------------------------------------------------------------------------------------------------------
WTFM 98.5 Radio 12/28/1999 (28138) Radio Adv. 1/28 3 $ 465.00 $ 465.00
----------------------------------------------------------------------------------------------------------------------------------
Time & Pay 01/18/2000 (041964) 1/28 2 $ 76.00 $ 76.00
----------------------------------------------------------------------------------------------------------------------------------
Xxxxxxx, Xxxxxx REFUND Apples 1/28 5 $ 54.10 $ 54.10
----------------------------------------------------------------------------------------------------------------------------------
Kingsport Water Dept 01/10/2000 (Dec) 1/28 2 $ 40.42 $ 40.42
----------------------------------------------------------------------------------------------------------------------------------
7-10
107
ACCOUNTS PAYABLE
-----------------------------------------------------------------------------------------------------------------------------------
02/13/2000 TC DUE CATE-
VENDORS DATE GORY AMOUNT PAYMENT DATE CK # BALANCE
-----------------------------------------------------------------------------------------------------------------------------------
WKPT Radio 12/29/1999 (24408) Radio Adv. 1/29 2 $ 100.00 $ 100.00
-----------------------------------------------------------------------------------------------------------------------------------
Xxxxxxx Press, Inc. 01/04/2000 (788262) Osha Comlp Gu 1/29 3 $ 198.25 $ 198.25
-----------------------------------------------------------------------------------------------------------------------------------
National Furniture Liquidators 01/19/2000 (670) 1/29 2 $ 995.90 $ 995.90
-----------------------------------------------------------------------------------------------------------------------------------
GTE South 01/07/2000 (3832) 1/30 1 $ 660.41 $ 660.41
-----------------------------------------------------------------------------------------------------------------------------------
GTE South 01/07/2000 (3842) 1/30 1 $ 1,583.98 $ 1,583.98
-----------------------------------------------------------------------------------------------------------------------------------
Qwest Communications 12/31/1999 (37889615) 1/30 1 $25,860.79 $25,860.79
-----------------------------------------------------------------------------------------------------------------------------------
De Xxxx Xxxxxx 01/07/2000 (27012344) 1/31 2 $ 558.99 $ 558.99
-----------------------------------------------------------------------------------------------------------------------------------
U.P.S 01/15/2000 (4440944316-030) 1/31 2 $ 25.00 $ 25.00
-----------------------------------------------------------------------------------------------------------------------------------
GFC Communications 01/05/2000 (17050) 1/31 1 $ 1,170.97 $ 1,170.97
-----------------------------------------------------------------------------------------------------------------------------------
Office Depot 01/06/2000 (Jan Stmt) 1/31 2 $ 262.75 $ 262.75
-----------------------------------------------------------------------------------------------------------------------------------
RKI 01/31/2000 (010100) MB Rent - Jan 1/31 2 $ 500.00 $ 500.00
-----------------------------------------------------------------------------------------------------------------------------------
Community Business Centers 01/28/2000 (884) Myrtle Beach 2/1 3 $ 275.00 $ 275.00
-----------------------------------------------------------------------------------------------------------------------------------
Imperial Bank 12/14/1999 (1687) 2/1 2 $ 3,614.08 $ 3,614.08
-----------------------------------------------------------------------------------------------------------------------------------
Xxxxxx, Xxxxxxx February 2000 Rent 2/1 2 $ 7,083.33 $ 7,083.33
-----------------------------------------------------------------------------------------------------------------------------------
Xxxxxxx Xxxx 12/31/1999 (72038) 2/1 3 $ 355.18 $ 355.18
-----------------------------------------------------------------------------------------------------------------------------------
Time & Pay 02/01/2000 (042193) 4th Qtr Rpts 2/1 2 $ 150.00 $ 150.00
-----------------------------------------------------------------------------------------------------------------------------------
GTE South 01/02/2000 (DBA3653110-00002) 2/1 1 $ 491.28 $ 491.28
-----------------------------------------------------------------------------------------------------------------------------------
Santee Xxxxxx 01/15/2000 (2-519-27370) MB Electricity 2/1 2 $ 124.11 $ 124.11
-----------------------------------------------------------------------------------------------------------------------------------
Postmaster Postage for Meter 2/1 3 $ 1,000.00 $ 1,000.00
-----------------------------------------------------------------------------------------------------------------------------------
American Express 01/16/2000 (61001) 2/1 2 $ 361.82 $ 361.82
-----------------------------------------------------------------------------------------------------------------------------------
Copelco Capital, Inc. 01/07/2000 (1312941) 2/2 2 $ 2,564.99 $ 2,564.99
-----------------------------------------------------------------------------------------------------------------------------------
GTE South 01/10/2000 (3843) 2/2 1 $ 2,281.94 $ 2,281.94
-----------------------------------------------------------------------------------------------------------------------------------
GTE South 01/10/2000 (3833) 2/2 1 $ 564.76 $ 564.76
-----------------------------------------------------------------------------------------------------------------------------------
Telcordia Technologies 01/05/2000 (9870973) 2/2 2 $ 285.00 $ 285.00
-----------------------------------------------------------------------------------------------------------------------------------
Gentle, Xxxxxxx & Xxxxxxx 01/04/2000 (32213-1) AL Certification 2/3 3 $ 75.00 $ 75.00
-----------------------------------------------------------------------------------------------------------------------------------
Sprint Yellow Pages 1/17 2/3 3 $ 15.58 $ 15.58
-----------------------------------------------------------------------------------------------------------------------------------
7-11
108
ACCOUNTS PAYABLE
-----------------------------------------------------------------------------------------------------------------------------------
02/13/2000 TC DUE CATE-
VENDORS DATE GORY AMOUNT PAYMENT DATE CK # BALANCE
-----------------------------------------------------------------------------------------------------------------------------------
Sprint 01/16/2000 (178) 2/4 1 $ 8,070.63 $ 8,070.63
-----------------------------------------------------------------------------------------------------------------------------------
Sprint 01/16/2000 (188) 2/4 1 $39,242.76 $39,242.76
-----------------------------------------------------------------------------------------------------------------------------------
StorageMax 01/26/2000 (E-48) JC Storage 2/4 2 $ 85.00 $ 85.00
-----------------------------------------------------------------------------------------------------------------------------------
BellSouth 01/07/2000 (615 C) 2/4 2 $ 73.28 $ 73.28
-----------------------------------------------------------------------------------------------------------------------------------
GTE South 01/13/2000 (3834) 2/5 1 $ 431.66 $ 431.66
-----------------------------------------------------------------------------------------------------------------------------------
GTE South 01/13/2000 (3844) 2/5 1 $ 184.61 $ 184.61
-----------------------------------------------------------------------------------------------------------------------------------
Advantage Printing 01/06/2000 (19432) 2/5 3 $ 1,489.16 $ 1,489.16
-----------------------------------------------------------------------------------------------------------------------------------
Berkeley, Xxxxxxx 01/27/2000 (SC20784) Apples Refund 2/7 5 $ 97.00 $ 97.00
-----------------------------------------------------------------------------------------------------------------------------------
Unishippers (Airborne) 01/24/2000 (200475) 2/7 3 $ 456.76 $ 456.76
-----------------------------------------------------------------------------------------------------------------------------------
SunCom (CellularOne) Xxxx Xxxxxxxx Cellular 2/8 2 $ 79.97 $ 79.97
-----------------------------------------------------------------------------------------------------------------------------------
Stowaway Storage February 2000 Kingsport 2/8 2 $ 70.00 $ 70.00
-----------------------------------------------------------------------------------------------------------------------------------
GTE South 01/16/2000 (3845) 2/8 1 $ 6,923.25 $ 6,923.25
-----------------------------------------------------------------------------------------------------------------------------------
Xxxxx, Xxxxx 01/28/2000 (615-384-8261) Apples Refund 2/8 5 $ 59.00 $ 59.00
-----------------------------------------------------------------------------------------------------------------------------------
Ford System, Inc. The 01/10/2000 (11201) 2/8 3 $ 30.85 $ 30.85
-----------------------------------------------------------------------------------------------------------------------------------
Kwik Kafe Company 01/11/2000 (437609) 2/8 3 $ 36.80 $ 36.80
-----------------------------------------------------------------------------------------------------------------------------------
Sprint 01/16/2000 (188) 2/8 1 $ 197.57 $ 197.57
-----------------------------------------------------------------------------------------------------------------------------------
GTE South 01/16/2000 (3835) 2/8 1 $ 533.64 $ 533.64
-----------------------------------------------------------------------------------------------------------------------------------
Myrtle Beach Communications 01/27/2000 (10012587) 2/10 3 $ 44.00 $ 44.00
-----------------------------------------------------------------------------------------------------------------------------------
GTE South 01/19/2000 (3846) 2/10 1 $ 34.73 $ 34.73
-----------------------------------------------------------------------------------------------------------------------------------
Copelco Capital, Inc. 01/14/2000 (1312940) 2/10 3 $ 2,200.81 $ 2,200.81
-----------------------------------------------------------------------------------------------------------------------------------
Credit Bureau Of Kingsport 02/01/2000 2/10 3 $ 237.50 $ 237.50
-----------------------------------------------------------------------------------------------------------------------------------
GTE South 01/19/2000 (3836) 2/10 1 $ 51.18 $ 51.18
-----------------------------------------------------------------------------------------------------------------------------------
N. Carolina Utilites Comm 4th Qtr Reg Fee Report 2/11 3 $ 25.00 $ 25.00
-----------------------------------------------------------------------------------------------------------------------------------
Newcourt Leasing 01/20/2000 (703470) 000-0000000-000 2/13 2 $ 153.69 $ 153.69
-----------------------------------------------------------------------------------------------------------------------------------
P3 Millennium Corporation 02/01/2000 (932) Tape Conv. 2/13 2 $ 1,325.00 $ 1,325.00
-----------------------------------------------------------------------------------------------------------------------------------
P3 Millennium Corporation 02/01/2000 (933) Mo Sys Lease 2/13 2 $ 520.00 $ 520.00
-----------------------------------------------------------------------------------------------------------------------------------
7-12
109
ACCOUNTS PAYABLE
-----------------------------------------------------------------------------------------------------------------------------------
02/13/2000 TC DUE CATE-
VENDORS DATE GORY AMOUNT PAYMENT DATE CK # BALANCE
-----------------------------------------------------------------------------------------------------------------------------------
GTE South 01/22/2000 (3837) 2/13 1 $ 401.15 $ 401.15
-----------------------------------------------------------------------------------------------------------------------------------
Newcourt Leasing 01/20/2000 (703470) 000-0000000-000 2/13 2 $ 677.12 $ 677.12
-----------------------------------------------------------------------------------------------------------------------------------
GTE South 01/22/2000 (3847) 2/13 1 $ 6,075.73 $ 6,075.73
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
$718,767.30 $32,540.46 $686,226.84
-----------------------------------------------------------------------------------------------------------------------------------
7-13
110
SCHEDULE 4(K)
TAX MATTERS
Target and/or Subsidiaries have filed the following tax returns:
1998
P. V. TEL. INC. 00-0000000
-------------------------------------------------------------------------------
U. S. Corporate Income Tax Return (1120)
Tennessee Franchise, Excise Tax Return (FAE150)
Tennessee Ad Valorum Tax Report
Employer's Quarterly Federal Tax Return (Payroll) (941)
F.U.T.A. Tax Return (Payroll) (940)
Tennessee S.U.T.A. Tax Return (Payroll)
South Carolina State Income Tax Return (Payroll)
Virginia State Income Tax Return (Payroll)
Federal Excise Tax Quarterly Returns
P. V. TEL. OF TENNESSEE 62-1772115
-------------------------------------------------------------------------------
U.S. Partnership Return Of Income
P. V. TEL. LLC 00-0000000
-------------------------------------------------------------------------------
U.S. Partnership Return Of Income
Alabama Sales Tax Returns
North Carolina Sales Tax Returns
Tennessee Sales Tax Returns
Virginia Sales Tax Returns
West Virginia Sales Tax Returns
Georgia Sales Tax Returns
Employer's Quarterly Federal Tax Return (Payroll) 941
F.U.T.A Tax Return (Payroll) 940
MYRTLE BEACH TELEPHONE COMPANY 00-0000000
-------------------------------------------------------------------------------
U.S. Partnership Return of Income
South Carolina "C" Corporation Income Tax Return (SC1120)
South Carolina Sales Tax Returns
Employer's Quarterly Federal Tax Returns (Payroll) 941
South Carolina Withholding Tax (Payroll) WH-1605
8
111
1999
P. V. TEL. INC. 00-0000000
-------------------------------------------------------------------------------
Employer's Quarterly Federal Tax Return (Payroll) 941
F.U.T.A. Tax Returns (Payroll) 940
Tennessee S.U.T.A. Tax Returns (Payroll)
South Carolina State Income Tax Returns (Payroll)
Virginia State Income Tax Returns (Payroll)
Federal Excise Tax Quarterly Returns
P. V. TEL. LLC 00-0000000
-------------------------------------------------------------------------------
Alabama Sales Tax Returns
North Carolina Sales Tax Returns
Tennessee Sales Tax Returns
Virginia Sales Tax Returns
Georgia Sales Tax Returns
West Virginia Sales Tax Returns
MYRTLE BEACH TELEPHONE COMPANY 00-0000000
-------------------------------------------------------------------------------
South Carolina Sales Tax Returns
Employer's Quarterly Federal Tax Return (Payroll) 941
South Carolina Withholding Tax Returns (Payroll) WH1605
9
112
SCHEDULE 4(L)(I)
REAL PROPERTY
Target and its Subsidiaries lease real property pursuant to the following
leases:
1. Lease Agreement dated August 1st, 1997 between P.V. Tel of Tennessee
LLC, as Tenant, and Xxxxx & Xxxxxxx Xxxxxxx and Xxxxx & Xxxxxx
XxXxxxxxxx, as Landlord, for a 5 year lease on building and property
located at 000 Xxxx Xxxxxxx Xxxxxx, Xxxx 0, Xxxxxxx Xxxx, Xx.
2. Commercial Lease Agreement dated July 1st, 1999 between P.V. Tel,
Inc., as Tenant, and Xxxxxxx & Xxxxxxx Xxxxxx as Landlord, for a 7
year lease on building and property located at 000 Xxxx Xxxxxx Xxxxxx,
Xxxxxxxxx, Xx.
10
113
SCHEDULE 4(M)(III)
INTELLECTUAL PROPERTY OWNED
NONE
11
114
SCHEDULE 4(M)(IV)
INTELLECTUAL PROPERTY LICENSED FOR USE
Target is licensed to use intellectual property pursuant to the following
agreement:
1. Software License, Services and Maintenance Agreement for billing
software dated January 14th, 1998 between P.V. Tel. Inc. and P3
Millenium. License fee $560.00 per month.
12
115
SCHEDULE 4(O)
CONTRACTS
1. Equipment Lease Agreement dated August 11th, 1998 between P.V. Tel.
Inc as Lessee, and BA Credit Corp as Lessor. Xxxxxx 20/20 Central
Office equipment lease: total financed amount is: $424,872.00 for a
period of 36 months.
2. Equipment Lease Agreement dated March 10th, 1999 between P.V. Tel. Inc
as Lessee, and Copelco Capital as Lessor. Central Office equipment &
modules lease: total financed amount is: $117,120.00 for a period of
60 months.
3. Equipment Lease Agreement dated March 15th, 1999 between P.V. Tel. Inc
as Lessee, and NewCourt Leasing Corporation as Lessor. Office
Computers, Power system and Generator lease: total financed amount is:
$231,611.00 for a period of 60 months.
4. Equipment Lease Agreement dated July 3rd, 1999, 1999 between P.V. Tel.
Inc as Lessee, and Copelco Capital Corporation as Lessor. Misc. key
systems, Xxxxxx Startech & Cisco Routers lease: total financed amount
is: $120,060.00 for a period of 60 months.
5. Equipment Lease Agreement dated September 24th, 1999 between P.V. Tel.
Inc as Lessee, and Imperial Bank as Lessor. Xxxxxx ACD PBX system
lease: total financed amount is: $131,580.00 for a period of 36
months.
6. Equipment Lease Agreement dated July 12th, 1999 between P.V. Tel. Inc
as Lessee, and Tokia/Xxxxxx Financial Services as Lessor. CSR Office
Furniture lease: total financed amount is: $37,512.00 for a period of
36 months.
7. Equipment Lease Agreement dated August 18thh, 1999 between P.V. Tel.
Inc as Lessee, and Sunrise Leasing as Lessor. ISP routers & ISDN
equipment lease: total financed amount is: $20,592.00 for a period of
24 months.
8. Equipment Lease Agreement dated August 23rd, 1999 between P.V. Tel.
Inc as Lessee, and Data General as Lessor. Billing System
mini-mainframe computer lease: total financed amount is: $165,000.00
for a period of 36 months.
9. Equipment Lease Agreement dated July 12th, 1999 between P.V. Tel. Inc
as Lessee, and NewCourt Leasing Corporation as Lessor. Office
Computers, Power system and Generator lease: total financed amount is:
$34,800.00 for a period of 60 months.
10. Executive Employment Agreement dated September 23rd, 1998 between
Xxxxxx X. Xxxx III and P.V. Tel. Inc.
13
116
11. Executive Employment Agreement dated September 23rd, 1998 between Xxxx
Xxxxxxxx and P.V. Tel. Inc.
12. Executive Employment Agreement dated September 23rd, 1998 between
Xxxxxxx X. Xxxx and P.V. Tel. Inc.
13. Software License, Services and Maintenance Agreement dated January
1998 between P.V. Tel. Inc. and P3 Millenium Corporation. License fee
$560 per month.
14. Contribution and Ownership Vesting Agreement dated September 18th,
1998 between Myrtle Beach Telephone Company, LLC and Ameritel
Communications, LLC.
15. Contribution and Ownership Vesting Agreement dated August 4th, 1998
between P.V. Tel. Of Tennessee, LLC and Comtelco, Inc.
16. Agent Agreement dated March 20h, 1998 between P.V. Tel, LLC and T.B.
Enterprises.
17. Agent Agreement dated January 1st, 1999 between P.V. Tel, LLC and Dot
Xxxxxxx.
18. Agent Agreement dated March 2nd, 1999 between P.V. Tel of Tennessee,
LLC and Xxxx Xxxx.
19. Agent Agreement dated December 28th, 1998 between P.V. Tel, Inc. and
Global Telecom Services, Inc.
20. Agent Agreement dated September 2nd, 1999 between P.V. Tel of
Tennessee, LLC and Xxxxx XxXxxxxx.
21. Agent Agreement dated February 20th, 1998 between P.V. Tel, LLC and
Lighthouse Computers, Inc.
22. Agent Agreement dated June 20th, 1997 between P.V. Tel, LLC and
Pro-Page, Inc.
23. Agent Agreement dated September 10th, 1999 between P.V. Tel. Of
Tennessee, LLC and Xxxx Xxxxxxx.
24. Agent Agreement dated February 2nd, 1999 between P.V. Tel. Of
Tennessee LLC and The Wire Company.
25. Agent Agreement dated January 1st, 1999 between P.V. Tel, LLC and
Xxxxxxxx Xxxxxxxx.
26. Agent Agreement dated May 1st, 1998 between P.V. Tel. Of Tennessee LLC
and Comtelco, Inc.
27. Pre-Paid Agent Agreement dated October 15th, 1999 between P.V. Tel.,
Inc. and Easy Title Loans, Inc.
14
117
28. Pre-Paid Agent Agreement dated November 10th, 1999 between P.V. Tel.,
Inc. and F&N Enterprises, Inc.
29. Pre-Paid Agent Agreement dated November 22nd, 1999 between P.V. Tel.,
Inc. and Gateway Communications.
30. Pre-Paid Agent Agreement dated November 22nd, 1999 between P.V. Tel.,
Inc. and P.B.M., Inc.
31. Pre-Paid Agent Agreement dated November 8th , 1999 between P.V. Tel.,
Inc. and Pro-Page, Inc.
32. Pre-Paid Agent Agreement dated November 3rd , 1999 between P.V. Tel.,
Inc. and Smokey Mountain Chamber of Commerce, Inc.
33. Pre-Paid Agent Agreement dated November 3rd , 1999 between P.V. Tel.,
Inc. and Wild Waynes, Inc.
34. Pre-Paid Agent Agreement dated November 15th, 1999 between P.V. Tel.,
Inc. and World Class Communications, Inc.
35. Pre-Paid Agent Agreement dated January 26th , 1999 between P.V. Tel.,
Inc. and Pre-Paid Services, Inc.
36. Pre-Paid Agent Agreement dated October 20th, 1999 between P.V. Tel.,
Inc. and Beufort Reconnect, Inc.
37. Pre-Paid Agent Agreement dated November 22nd, 1999 between P.V. Tel.,
Inc. and Quality Business Systems. Inc.
38. Confidentiality Agreement by and between P.V. Tel. Inc. and Sun
Technology Solutions, LLC dated September 21st , 1999.
39. Confidentiality Agreement by and between P.V. Tel. Inc. and KMC, Inc.
dated September 13th , 1999.
40. Confidentiality Agreement by and between P.V. Tel. Inc. and CSG, Inc.
dated May 1st , 1999.
41. Confidentiality Agreement by and between P.V. Tel. Inc. and Lucent
Technologies dated June 1st, 1999.
42. Resale and UNE Contract by and between P.V. Tel. Of North Carolina and
Sprint Telecommunications dated September 1st, 1999.
43. Resale and UNE Contract by and between P.V. Tel. Of North Carolina and
GTE Telecommunications dated July 13th, 1999.
15
118
44. Resale Contract by and between P.V. Tel. Of North Carolina and
BellSouth dated August 10th, 1999.
45. Resale and UNE Contract by and between Myrtle Beach Telephone Co. and
Sprint Telecommunications dated April 14th, 1999.
46. Resale and UNE Contract by and between Myrtle Beach Telephone Co. and
GTE Telecommunications dated April 18th, 1999.
47. Resale Contract by and between Myrtle Beach Telephone Co. and
BellSouth dated February 11th, 1998.
48. Resale and UNE Contract by and between P.V. Tel. Of Tennessee and
Sprint Telecommunications dated January 15th, 1998 and May 15th, 1999
respectively.
49. Resale Contract by and between P.V. Tel. Of Tennessee and BellSouth
dated January 15th, 1998.
50. Resale and UNE Contract by and between P.V. Tel. Of Kentucky and GTE
Telecommunications dated July 20th, 1999.
51. Resale Contract by and between P.V. Tel. Of Kentucky and BellSouth
dated July 9th, 1999.
52. Resale and UNE Contract by and between P.V. Tel. Of Virginia and
Sprint Telecommunications dated September 1st, 1999.
53. Resale and UNE Contract by and between P.V. Tel. Of North Carolina and
GTE Telecommunications dated October 6th, 1999.
54. Resale and UNE Contract by and between P.V. Tel. Of Florida and Sprint
Telecommunications dated September 1st, 1999.
55. Resale and UNE Contract by and between P.V. Tel. Of Florida and GTE
Telecommunications dated July 27th, 1999.
56. Resale Contract by and between P.V. Tel. Of Florida and BellSouth
dated March 16th, 1998.
57. Resale and UNE Contract by and between P.V. Tel. Of Ohio and Sprint
Telecommunications dated September 1st, 1999.
58. Resale and UNE Contract by and between P.V. Tel. Of Ohio and GTE
Telecommunications dated October 28th , 1999.
59. Resale Contract by and between P.V. Tel. Of Mississippi and BellSouth
dated June 29th , 1999.
60. Resale Contract by and between P.V. Tel. Of Alabama and BellSouth
dated June 5th , 1999.
16
119
61. Resale and UNE Contract by and between P.V. Tel. Of Illinois and GTE
Telecommunications dated July 27th , 1999.
62. Carrier Agreement by and between P.V. Tel. LLC and Telco Holdings,
Inc. dated October 23rd, 1998.
63. Carrier Agreement by and between P.V. Tel. LLC and Qwest
Communications, Inc. dated March 5th, 1998.
64. Carrier Agreement by and between P.V. Tel. LLC and Frontier
Communications, Inc. dated February 16th, 1999.
65. Agreement to Replace Owner's Security dated August 1st, 1998 by and
among P.V. Tel. LLC, Xxxxxx X. Xxxx III , Xxxxxxx X. Xxxx and Xxxx
Xxxxxxxx.
66. Investment Agreement's dated September 23rd, 1998 by and among P.V.
Tel. Inc., Coastal Growth Partners Limited and Seruus Telecom Fund
Limited.
67. Registration Right's Agreement's dated September 23rd, 1998 by and
among P.V. Tel. Inc., Coastal Growth Partners Limited and Seruus
Telecom Fund Limited.
68. Demand Promissory Note to Grace Development, Inc. dated December 21st,
1999 in the amount of $450,000.00.
69. Stock Pledge Agreement to Grace Development dated November 1st, 1999.
17
120
SCHEDULE 4(R)
INSURANCE
(i) Xxxxxx Xxxxx and Xxx Xxxxxx
Kingsport Development Company
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxxxx, Xx. 00000
(000)000-0000
(ii) CNA Insurance (Continental Casualty Company)
P. O. Xxx 000000
Xxxxxxxx, XX 00000-0000
0-000-000-0000
Insured Name: P.V. Tel. Inc and Subsidiaries
Scope of Insurance: Equipment Liability.
CCC - Continental Casualty Company
XXXX Business policy #1080133149
Policy Term - 04/01/1999 - 04/01/2002
Insured Name: P.V. Tel. and Subsidiaries
Scope of Insurance: Building Liability
NF - National Fire Insurance Of Hartford
Workers Compensation #1080133152
Policy Term - 03/08/1999 - 03/08/2000
Insured Name: P.V. Tel. Inc. and Subsidiaries
Scope of Insurance: Worker's Comp.
Blue Cross/Blue Shield of Tennessee
000 Xxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
(000)000-0000 Xxxxx Xxxxxxxxxxx (Billing Questions)
800-565-9140 Ext 5969 Membership Services
Group Number 81740
Scope of Insurance: Employee Health, Dental and Life Insurance
Insured Name: P.V. Tel. Inc. and Subsidiaries
There are no outstanding insurance claims or issues.
18
121
SCHEDULE 4(S)
LITIGATION
NONE
19
122
SCHEDULE 4(T)
PRODUCT WARRANTY
Standard Terms and Conditions unless otherwise provided by state or federal
tariffs:
THIS AGREEMENT IS MADE BETWEEN
------------------------------------------------------------------------------------------------------------------------
II.
------------------------------------------------------------------------------------------------------------------------
Customer Name: P.V. Tel entity Name:
------------------------------------------------------------------------------------------------------------------------
Service Location Address: Street Address: 1293D Professional Dr.
------------------------------------------------------------------------------------------------------------------------
City: State: Zip: City: State: Zip:
------------------------------------------------------------------------------------------------------------------------
Billing Street Address: Customer Service Contact Number: 000 000-0000
------------------------------------------------------------------------------------------------------------------------
City: State: Zip: Repair Contact Number: 000 000-0000
------------------------------------------------------------------------------------------------------------------------
Contact Name: Customer Service Contact Name:
------------------------------------------------------------------------------------------------------------------------
1. SERVICE: In conjunction with subscription to ______________Network
services pursuant to applicable tariff, Customer orders the network
services set out in this Agreement and applicable Attachment(s) (the
"Service"). This service order becomes a binding contract for the Service
when this Agreement has been accepted by P.V. TEL.
2. INSTALLATION DATE:_______________________ The installation date is a date
that is mutually agreed upon between Customer and P.V. TEL. The in-service
date for the Service shall commence on the day a P.V. TEL. employee
notifies Customer that the service requested has been operational ( the
in-Service Date"). This notification may be communicated in person, by
telephone or in writing.
3. AGREEMENT TERM AND TERMINATION: Customer agrees to purchase the Service
for an initial term of _____________ months from the in-Service Date.
Unless either of the parties notifies the other party in writing of its
election not to renew this agreement at least 60 days prior to the end of
the initial term, this Agreement shall remain in effect following the
expiration of the initial term until there after terminated by either
party upon 60 days written notice to the other party, or as otherwise
provided for in this Agreement. This Agreement may also be terminated
under the provisions entitled Default, Delayed Performance or Insolvency.
20
123
4. CHARGES AND PAYMENTS:
a) The Installation Charge and Monthly Recurring Charge are
listed on page 2 of this agreement or its attachment(s). The
installation Charge will be billed when the service is
established. The Monthly Recurring Charge will commence on
the in-Service and will be billed in advance each month.
Rates and charges may be adjusted periodically to reflect
changes in P.V. TEL.'s filed rates and charges. After the
initial term of this Agreement, P.V. TEL. may adjust the
rates and charges upon 60 days written notice to Customer.
b) Payment is due by the date indicated on the xxxx. Amounts
remaining unpaid after the date payment is due may be
assessed a late payment charge as specified and P.V. TEL.'s
state tariff.
5. TERMINATION CHARGE: If prior to the in-Service Date, or during the
initial term of this Agreement, Customer cancels all or any part of
the Service, monetary charges shall apply as stated in the applicable
tariff(s). An explanation of these charges will be provided upon
request.
6. COMMISSION REGULATION: To the extent the Service is subject to the
jurisdiction of a state utility regulatory commission and/or the
Federal Communications Commission, the Agreement and the Service shall
at all times be subject to changes, modifications, orders and rulings
by these agencies. This includes changes in the Subscriber Line Charge
and other charges that are regulated by these agencies. If provision
of any Service pursuant to this agreement is subject to advance
approval of a state regulatory commission, this Agreement shall not
become effective with respect to such Service until 15 days after
receipt by P.V. TEL. of written notice of such approval. If the state
regulatory commission accepts this Agreement in part and rejects it in
part, either party may cancel this Agreement without penalty or
liability.
7. MAINTENANCE: P.V. TEL. will maintain the service at no additional
charge to Customer. Customer agrees to pay P.V. TEL. its then
prevailing rates for time and materials for maintenance service
provided by P.V. TEL. to identify or correct any failure caused by
facilities or equipment not furnished by P.V. TEL. or to repair damage
or interruptions caused by Customer or Customer's equipment.
8. FACILITIES AND EQUIPMENT: Customer will obtain customer premises
equipment, as necessary, which is compatible with the Service from
another vendor or from P.V. TEL. pursuant to a separate agreement.
Except as provided in that separate agreement, if any, P.V. TEL. is
not responsible for interconnection or compatibility of any customer
premises equipment with the Service. P.V. TEL. will terminate the
Service on Customer's premises at Customer's point of demarcation.
Extension of the termination beyond this demarcation point may be
provided by P.V. TEL. at the request of Customer for an additional
charge at P.V. TEL.'s prevailing time and materials rates. P.V. TEL.
shall retain ownership of all facilities necessary to provide the
Service to Customer's point of demarcation, including specially
constructed facilities.
21
124
-----------------------------------------------------------------------------------------------------------------------
P.V. Tel provides and Customer purchases the Services and Installation as
described herein. This Agreement includes important provisions concerning the
limitations and liabilities, warranties and responsibilities for long distance,
toll and other telecommunications charges incurred on this Service.
This Agreement is effective on the date accepted by P.V. Tel.
-----------------------------------------------------------------------------------------------------------------------
Agreed by Customer: Accepted by P.V. Tel.
-----------------------------------------------------------------------------------------------------------------------
Signature: Signature:
-----------------------------------------------------------------------------------------------------------------------
Printed Name: Printed Name:
-----------------------------------------------------------------------------------------------------------------------
Title Date: Title Date:
-----------------------------------------------------------------------------------------------------------------------
22
125
SCHEDULE 4(W)
EMPLOYEE BENEFITS
Individual Blue Cross & Blue Shield Group Benefit Plan, including:
- Medical
- Dental
- Short Term Disability
- Long Term Disability
- Life
- Supplemental Life
- Accidental Death and Dismemberment
- Supplemental Dependent Life
- Worker's Compensation
- Unemployment Compensation
- Paid Vacation Plan
- Executive Supplemental (Family) Medical Insurance.
- Executive Individual Disability
- Executive Life Insurance Plan
- Executive Paid Vacation Plan
23
126
ANNEX II
EXCEPTIONS TO THE REPRESENTATIONS AND WARRANTIES
OF
GRACE DEVELOPMENT, INC.
AND
AVANA TELECOMMUNICATIONS GROUP, INC.
PROVIDED PURSUANT TO AND AS A PART OF
A
STOCK EXCHANGE AGREEMENT
AMONG
AVANA TELECOMMUNICATIONS GROUP, INC.
GRACE DEVELOPMENT, INC.
AND
P.V. TEL, INC.
AND THE SHAREHOLDERS THEREOF
DATED AS OF FEBRUARY 16, 2000
(THE "AGREEMENT")
Any information disclosed in these Disclosure Schedules will be deemed
disclosed and incorporated into each Disclosure Schedule included within the
following Disclosure Schedules where such disclosure would be appropriate.
Unless the context otherwise requires, all capitalized terms in the following
Disclosure Schedules shall have the meanings defined in the Agreement.
127
SCHEDULE 3(B)(I)
ORGANIZATION OF AVANA
None.
128
SCHEDULE 3(B)(II)
AUTHORIZATION OF TRANSACTION
None.
129
SHCEDULE 3(B)(III)
NONCONTRAVENTION
None.
130
SCHEDULE 3(B)(IV)
BROKERS' FEES
None.
131
SCHEDULE 3(B)(V)
INVESTMENT
None.
132
SCHEDULE 3(C)(I)
ORGANIZATION OF PARENT
None.
133
SCHEDULE 3(C)(II)
AUTHORIZATION
None.
134
SCHEDULE 3(C)(III)
NONCONTRAVENTION
None.
135
SCHEDULE 3(C)(IV)
BROKERS' FEES
None.
136
SCHEDULE 3(C)(V)
CAPITALIZATION; SHARE CONSIDERATION
None.
137
SCHEDULE 3(C)(VI)
SEC REPORTS AND PARENT FINANCIAL STATEMENTS
None.
138
SCHEDULE 3(C)(VII)
NO MATERIAL ADVERSE CHANGE
None.
139
SCHEDULE 3(C)(VIII)
TAX MATTERS
The following Tax Returns have not been filed:
1. Grace Development, Inc. as of June 30, 1999. Original due date was
September 15, 1999. No extension and no taxes are due.
2. New Millennium Multimedia, Inc. as of September 29, 1999. Consolidated
return with Grace Development. Original due date was December 15,
1999. Extension until June 15, 2000. No taxes are due.
3. WebWizard, Inc. as of December 31, 1999. Original due date is March
15, 2000.
4. WebWizard, Inc. as of January 21, 2000.
140
SCHEDULE I
Coastal Growth Partners, L.P.
c/o Xxxxxx Xxxxxx
000 X Xxxxx Xx. XXX000
Xxxxxxxx, XX 00000
Tax I.D. No.: 00-0000000
Xxxxx Xxxx
0000 Xxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Tax I.D. No.: ###-##-####
G. Xxxxx Xxxxxx
00000 Xxxxxx Xx.
Xxxxxx, XX 00000
Tax I.D. No.: ###-##-####
Xxxxxx X. Xxxx III
0000 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Tax I.D. No.: ###-##-####
Xxxxxxx X. Xxxx
000 Xxxxxxxxx Xx.
Xxxxxxxx, XX 00000
Tax I.D. No.: ###-##-####
Xxxx Xxxxxxxx
000 Xxxxx Xx.
Xxxxxx Xxxxx, XX 00000
Tax I.D. No.: ###-##-####
141
SCHEDULE 2(b)
SHARE ALLOCATION
------------------------------------------------------------------------------------------------------
Gross Shares Escrow Percentage to Net Shares
Escrow
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
Xxx Xxxx 200,000 75,000 10% 125,000
------------------------------------------------------------------------------------------------------
Xxxx Xxxxxxxx 197,275 75,000 10% 122,275
------------------------------------------------------------------------------------------------------
Xxxx Xxxx 197,275 75,000 10% 122,275
------------------------------------------------------------------------------------------------------
Coastal Growth 606,670 225,000 30% 381,670
Partners
------------------------------------------------------------------------------------------------------
Xxxxx Xxxx 810,780 300,000 40% 510,780
------------------------------------------------------------------------------------------------------
Xxxxx Xxxxxx 18,000 -- -- 18,000
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
Total 2,030,000 750,000 100% 1,280,000
------------------------------------------------------------------------------------------------------
