1
EXHIBIT 2.6
================================================================================
PURCHASE AGREEMENT
AMONG
PENTASTAR COMMUNICATIONS, INC.,
OC MERGERCO 3, INC.,
NETWORK COMMUNICATIONS INTEGRATION, INC.
AND THE
SHAREHOLDERS
OF
NETWORK COMMUNICATIONS INTEGRATION, INC.
AS OF JANUARY 7, 2000
================================================================================
2
TABLE OF CONTENTS
Page
----
1. Definitions...........................................................................................................1
2. Purchase and Sale.....................................................................................................1
2.1. Basic Transaction............................................................................................1
2.2. Assumption of Certain Liabilities............................................................................1
2.3. Purchase Price; Payment......................................................................................1
2.4. Sales Taxes, Etc.............................................................................................2
3. Representations and Warranties........................................................................................2
3.1. Representations and Warranties of the Company and the Shareholders...........................................2
3.2. Representations and Warranties of PentaStar.................................................................12
3.3. Survival of Representations.................................................................................13
3.4. Representations as to Knowledge.............................................................................13
4. Pre-Closing Covenants................................................................................................13
4.1. General.....................................................................................................13
4.2. Operation and Preservation of Business......................................................................14
4.3. Full Access.................................................................................................14
4.4. Notice of Developments......................................................................................14
4.5. Exclusivity.................................................................................................14
4.6. Announcements; Securities Law Restrictions..................................................................14
4.7. Bulk Sales Laws.............................................................................................14
5. Post-Closing Covenants...............................................................................................15
5.1. Further Assurances..........................................................................................15
5.2. Transition..................................................................................................15
5.3. Cooperation.................................................................................................15
5.4. Confidentiality.............................................................................................15
5.5. Post-Closing Announcements..................................................................................15
5.6. Financial Statements........................................................................................15
5.7. Satisfaction of Liabilities.................................................................................15
5.8. Repurchase of Unpaid Receivables............................................................................16
5.9. Termination of Obligations..................................................................................16
6. Conditions to Closing................................................................................................16
6.1. Conditions to Obligation of PentaStar.......................................................................16
6.2. Conditions to Obligation of the Company and the Shareholders................................................18
7. Remedies for Breaches of This Agreement..............................................................................18
7.1. Indemnification Provisions for Benefit of PentaStar. ......................................................18
7.2. Indemnification Provisions for Benefit of the Company and the Shareholders..................................19
7.3. Matters Involving Third Parties.............................................................................19
7.4. Other Remedies..............................................................................................20
(i)
3
7.5. Basket......................................................................................................20
8. Termination..........................................................................................................21
8.1. Termination of Agreement....................................................................................21
8.2. Effect of Termination.......................................................................................21
8.3. Confidentiality.............................................................................................21
9. Miscellaneous........................................................................................................22
9.1. No Third-Party Beneficiaries................................................................................22
9.2. Entire Agreement............................................................................................22
9.3. Succession and Assignment...................................................................................22
9.4. Counterparts................................................................................................22
9.5. Headings and Terms..........................................................................................22
9.6. Notices.....................................................................................................22
9.7. Governing Law...............................................................................................23
9.8. Amendments and Waivers......................................................................................23
9.9. Severability................................................................................................23
9.10. Expenses....................................................................................................23
9.11. Arbitration.................................................................................................23
9.12. Construction................................................................................................24
9.13. Incorporation of Exhibits...................................................................................24
9.14. Shareholders' Agent.........................................................................................24
(ii)
4
Exhibits:
Exhibit 1.1(a) Exhibit 3.1(f)(iii)
Exhibit 1.1(b) Exhibit 3.1(f)(v)
Exhibit 1.1(c)(i) Exhibit 3.1(f)(vi)
Exhibit 1.1(c)(ii) Exhibit 3.1(h)
Exhibit 1.1(d) Exhibit 3.1(i)(i)
Exhibit 3.1(b)(ii) Exhibit 3.1(i)(ii)
Exhibit 3.1(c) Exhibit 3.1(k)
Exhibit 3.1(d)(i) Exhibit 3.1(l)
Exhibit 3.1(d)(ii) Exhibit 3.1(m)
Exhibit 3.1(e)(i) Exhibit 3.1(n)
Exhibit 3.1(e)(iv) Exhibit 3.1(s)
Exhibit 3.1(e)(vi) Exhibit 3.1(t)
Exhibit 3.1(e)(vii) Exhibit 5.8
(iii)
5
This Purchase Agreement is entered into as of January 7, 2000 among
PentaStar Communications, Inc., a Delaware corporation ("PentaStar"), OC
Mergerco 3, Inc., a Delaware corporation (the "Acquiror"), Network
Communications Integration, Inc., a Washington corporation (the "Company"), and
the Persons identified on the signature page hereto as Shareholders
(individually, a "Shareholder" and collectively, the "Shareholders").
Recitals
A. The Shareholders own all of the issued and outstanding capital
stock of the Company.
B. The Acquiror is a newly-formed, wholly-owned subsidiary of
PentaStar. The Acquiror desires to acquire from the Company, and the Company
desires to sell to the Acquiror, substantially all of the Company's assets as
provided in this Agreement.
C. PentaStar, the Acquiror, the Company and the Shareholders desire
to make certain representations, warranties and agreements in connection with
such transaction and also desire to set forth various conditions precedent
thereto.
Agreement
NOW, THEREFORE, in consideration of the premises, the mutual
representations, warranties and covenants set forth herein and other good and
valuable consideration, the receipt and sufficiency of which are acknowledged,
the parties agree as follows:
1. Definitions. The terms defined in Exhibit 1.1(a) shall have the meanings
designated therein.
2. Purchase and Sale.
2.1. Basic Transaction. Subject to the terms and conditions set forth in
this Agreement, the Acquiror agrees to purchase from the Company, and the
Company agrees to sell to the Acquiror, all the Acquired Assets free and clear
of any Encumbrance or Tax, for the consideration specified in Section 2.3. The
Acquiror will have no obligation under this Agreement to purchase less than all
of the Acquired Assets.
2.2. Assumption of Certain Liabilities. Subject to the terms and conditions
set forth in this Agreement, the Acquiror agrees to assume and become
responsible at the Closing for all of the Assumed Liabilities. The Acquiror will
not assume or have any responsibility with respect to any other Liability not
expressly included within the definition of Assumed Liabilities.
2.3. Purchase Price; Payment.
(a) The consideration payable by the Acquiror to the Company for the
Acquired Assets will be (i) cash in an amount of $10,000, (ii) the termination
as of the Closing Date (pursuant to Section 5.9) of the NCI Liabilities and
(iii) the assumption of the Assumed Liabilities (collectively the "Purchase
Price"). On the Closing the Acquiror will pay to the Company by wire transfer to
an account designated by the Company in cash the amount of the cash portion of
the Purchase Price.
6
(b) The allocation of the total consideration for the Acquired Assets
for Tax reporting purposes shall be as follows: (i) to cash and cash
equivalents, the amount thereof; (ii) to Closing Accounts Receivable, the amount
determined by the Acquiror from the Company's records, adjusted by the Acquiror
to conform to GAAP; (iii) to inventory, the amount determined by the Acquiror
from the Company's records, adjusted by the Acquiror to conform to GAAP; (iv) to
leasehold improvements, the greater of fair market value (determined by the
Acquiror from its historical experience, or in the Acquiror's sole discretion,
by independent appraisal) or the current book value thereof as reflected in the
Company's records, adjusted by the Acquiror to conform to GAAP; and (v) the
entire remaining balance of the consideration shall be allocated to the goodwill
of the Company's business or, at the Acquiror's sole discretion, to the other
intangible assets which are included in the Acquired Assets. The parties
acknowledge that such allocations for Tax reporting purposes were determined
pursuant to arm's length bargaining regarding the fair market values of the
Acquired Assets in accordance with the provisions of Code Section 1060. The
parties agree to be bound by these allocations for all federal, state and local
Tax reporting purposes, including for purposes of determining any income, gain,
loss, depreciation or other deductions in respect of such assets. The parties
further agree to prepare and file all Tax Returns (including Form 8594 under the
Code) in a manner consistent with such allocations. If the Acquiror makes
adjustments to conform to GAAP pursuant to clauses (ii), (iii) or (iv) above,
the Acquiror will bear any out-of-pocket expense of making such adjustments.
2.4. Sales Taxes, Etc. The Company will pay all sales, use, transfer,
licensing and other Taxes, fees and charges payable in respect of or as a result
of the sale and transfer of the Acquired Assets to the Acquiror pursuant to this
Agreement.
2.5. The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Xxxxxxx & Xxxxxx
L.L.C. at 10:00 a.m. Denver, Colorado time on January 7, 2000 or as soon
thereafter as possible. PentaStar may, at any time, waive any unsatisfied
closing conditions specified in Section 6.1 and, upon payment by the Acquiror of
the $10,000 cash portion of the Purchase Price and execution by the Acquiror of
the Assignment and Assumption Agreement, the Closing shall be deemed to have
occurred, and all of the Company's right, title and interest to the Acquired
Assets shall be deemed conveyed to the Acquiror. All transactions contemplated
by this Agreement will be effective at 12:00 a.m. local time in Seattle,
Washington on the day of the Closing (such effective time being the "Closing
Date").
2.6. Deliveries at the Closing. At the Closing, (a) the Company will
deliver to PentaStar the various certificates, instruments and documents, and
take the actions, referred to in Section 6.1 and (b) PentaStar will deliver to
the Company the various certificates, instruments and documents, and take the
actions, referred to in Section 6.2.
3. Representations and Warranties.
3.1. Representations and Warranties of the Company and the Shareholders.
The Company and the Shareholders each represent and warrant to PentaStar that
the statements contained in this Section 3.1 are correct and complete as of the
date of this Agreement and will be correct and complete as of the Closing Date
(as though made then and as though the Closing Date were then substituted for
the date of this Agreement throughout this Section 3.1).
-2-
7
(a) Organization, Good Standing, Etc. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Washington, and is qualified and authorized to do business as a foreign
corporation and is in good standing in Oregon, which is the only jurisdiction in
which the nature of the business conducted by it or the properties owned, leased
or operated by it make such qualification necessary. The Company has all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as now being conducted.
(b) Ownership and Capitalization.
(i) The authorized capital stock of the Company consists of
1,000,000 shares of common stock, no par value. Each Shareholder owns,
beneficially and of record, free and clear of any Encumbrance or Tax, the number
of shares of the common stock, no par value, of the Company (the "Company
Shares") set forth opposite such Shareholder's name on Exhibit 3.1(b)(i) and the
Company Shares reflected on Exhibit 3.1(b)(i) constitute all of the issued and
outstanding capital stock of the Company.
(ii) Except as set forth on Exhibit 3.1(b)(ii), the Company has
no Subsidiaries and no capital stock, securities convertible into capital stock,
or any other equity interest in any other corporation, partnership, limited
partnership, limited liability company, association, joint venture or other
Person. Each of the entities listed on Exhibit 3.1(b)(ii) is wholly-owned,
directly or indirectly, by the Company, is a corporation duly organized, validly
existing and in good standing under the laws of its state of incorporation, as
set forth on Exhibit 3.1(b)(ii), and is qualified to do business as a foreign
corporation and is in good standing in the states set forth on Exhibit
3.1(b)(ii), which are the only jurisdictions in which the nature of the business
conducted by it or the properties owned, leased or operated by it make such
qualification necessary. No Person has any right to acquire any interest in any
Subsidiary and there are no authorized or outstanding stock appreciation,
phantom stock, profit participation or similar rights with respect to any
Subsidiary. Each such Subsidiary has all requisite corporate power and authority
to own, lease and operate its properties and to carry on its business as now
being conducted.
(c) Authority; No Violation. This Agreement and the Other Seller
Agreements and the consummation of the transactions contemplated hereby and
thereby have been duly and unanimously approved by the board of directors and
shareholders of the Company in accordance with the articles of incorporation and
bylaws of the Company and applicable Legal Requirements, and this Agreement and
the Other Seller Agreement to which the Company is a party have been duly
executed and delivered by the Company. The Company has full corporate power and
authority to execute, deliver and perform this Agreement and the Other Seller
Agreement to which the Company is a party, each Shareholder and each relative or
affiliate of the Company or of a Shareholder who is a party to any Other Seller
Agreement has full and absolute right, power, authority and legal capacity to
execute, deliver and perform this Agreement and all Other Seller Agreements to
which such Shareholder, relative or affiliate is a party, and this Agreement
constitutes, and the Other Seller Agreements will when executed and delivered
constitute, the legal, valid and binding obligations of, and shall be
enforceable in accordance with their respective terms against, the Company and
each such Shareholder, relative or affiliate who is a party thereto. The
execution, delivery and performance of this Agreement and the Other Seller
Agreements and the consummation of the transactions contemplated hereby and
thereby will not (i) violate any Legal Requirement to which the Company, any
Shareholder, or any relative or affiliate of the Company or of any Shareholder
who is a party to any Other Seller Agreement is subject or any provision of the
articles of incorporation or bylaws of the Company or of any such affiliate, or
(ii) violate, with or without the giving of notice or the lapse of time or both,
or conflict with or result in the breach or termination of any provision of, or
constitute a default under, or give any
-3-
8
Person the right to accelerate any obligation under, or result in the creation
of any Encumbrance upon any properties, assets or business of the Company, of
any Shareholder, or of any such relative or affiliate pursuant to, any
indenture, mortgage, deed of trust, lien, lease, license, Permit, agreement,
instrument or other arrangement to which the Company, any Shareholder or any
such relative or affiliate is a party or by which the Company, any Shareholder,
or any such relative or affiliate or any of their respective assets and
properties is bound or subject. Except for notices that will be given and
consents that will be obtained by the Company and the Shareholders prior to the
Closing (each of which is set forth in Exhibit 3.1(c)), neither the Company, any
Shareholder, nor any such relative or affiliate need give any notice to, make
any filing with or obtain any authorization, consent or approval of any
Governmental Authority or other Person in order for the parties to consummate
the transactions contemplated by this Agreement and the Other Seller Agreements.
(d) Financial Statements
(i) The unaudited balance sheet of the Company as of December
31, 1998, the related statements of income, shareholders' equity and cash flows
for the fiscal year then ended, the unaudited balance sheet of the Company as of
November 30, 1999 (the latter being referred to as the "Latest Balance Sheet"),
and the related statements of income, shareholders' equity and cash flows for
the eleven-month period then ended have been prepared on a consistent basis
(except that the Latest Balance Sheet and the related statements of income,
shareholders' equity and cash flows for the eleven-month period ended November
30, 1999 may be subject to customary year-end adjustments, none of which will be
material in amount), are in accordance with the books and records of the Company
(which books and records are complete and correct in all material respects),
and, to the best knowledge of the Company and the Shareholders, fairly present
the financial position and results of operations of the Company in all material
respects as of such dates and for each of the periods indicated. As of the date
of each of such balance sheet, to the best knowledge of the Company and the
Shareholders, the Company had no Liability other than those set forth on each
such balance sheet. Copies of the financial statements described in the first
sentence in this Section 3.1(d) are attached as Exhibit 3.1(d)(i). The expenses
itemized on Exhibit 3.1(d)(ii) and reflected in the Company's financial
performance for the 12-month period ended December 31, 1998 will not be realized
on an on-going basis after the Closing Date.
(ii) As of the Closing, the Company will, after giving effect to
the assumption of the Assumed Liabilities and the termination of the NCI
Liabilities, have no Liability (and there is no known basis for the assertion of
any Liability).
(e) Absence of Certain Agreements, Changes or Events. The Company is
not, except as set forth on Exhibit 3.1(e)(i), a party to or otherwise bound by
any material contract or agreement (i) pursuant to which the Company is
obligated to furnish any services, product or equipment and (ii) that has been
prepaid with respect to any period after the Closing Date. Since November 30,
1999, the Company has not (i) incurred any debt, indebtedness or other
Liability, except current Liabilities incurred in the ordinary course of
business; (ii) delayed or postponed the payment of accounts payable or other
Liabilities or accelerated the collection of any receivable beyond stated,
normal terms; (iii) sold or otherwise transferred any of its assets or
properties; (iv) except as disclosed in Exhibit 3.1(e)(iv), cancelled,
compromised, settled, released, waived, written-off or expensed any account or
note receivable, right, debt or claim involving more than $5,000 in the
aggregate; (v) changed in any significant manner the way in which it conducts
its business; (vi) except as disclosed in Exhibit 3.1(e)(vi), made or granted
any individual wage or salary increase in excess of 10% or $1.00 per hour, as
applicable, any general wage or salary increase, or any additional benefits of
any kind or nature; (vii) except as disclosed in 3.1(e)(vii), (A) entered into
any contracts or agreements, or made any
-4-
9
commitments, involving more than $5,000 individually or in the aggregate or (B)
accelerated, terminated, delayed, modified or cancelled any agreement, contract,
lease or license (or series of related agreements, contracts, leases and
licenses) involving more than $5,000 individually or in the aggregate; (viii) to
the best knowledge of the Company and the Shareholders, suffered any material
adverse fact or change, including, without limitation, to or in its business,
assets or financial condition or customer or service provider relationships;
(ix) made any payment or transfer to or for the benefit of any shareholder,
officer or director or any relative or affiliate thereof or permitted any
Person, including, without limitation, any Shareholder, officer, director or
employee or any relative or affiliate thereof, to withdraw assets from the
Company (other than payment to the Shareholders of the proportionate monthly
amount of their respective normal annualized salaries due and payable during
such period); or (x) agreed to incur, take, enter into, make or permit any of
the matters described in clauses (i) through (ix).
(f) Tax Matters.
(i) The Company has filed all Tax Returns that it was required
to file. All such Tax Returns were correct and complete in all material
respects. To the best knowledge of the Company and the Shareholders, all
material Taxes due and owing by the Company (whether or not shown on any Tax
Return) have been paid. The Company is not currently 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 the Company does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction. There are
no Encumbrances on any of the assets of the Company that arose in connection
with any failure (or alleged failure) to pay any Tax.
(ii) To the best knowledge of the Company and the Shareholders,
the Company 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) To the best knowledge of the Company and the Shareholders,
there is no basis for any authority to assess any additional Taxes for any
period for which Tax Returns have been filed. There is no pending or threatened
dispute or claim concerning any Tax Liability of the Company. Exhibit
3.1(f)(iii) lists all federal, state, local and foreign income Tax Returns
(except federal payroll Tax Returns) filed with respect to the Company for
taxable periods ended on or after December 31, 1992, indicates those Tax Returns
that have been audited and indicates those Tax Returns that currently are the
subject of audit. To the best knowledge of the Company and the Shareholders, the
Shareholders have delivered to PentaStar correct and complete copies of all
federal income Tax Returns, examination reports, and statements of deficiencies
filed or assessed against or agreed to by the Company since December 31, 1992.
(iv) The Company has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(v) Neither the Company nor any of its shareholders has ever
filed (A) an election pursuant to Section 1362 of the Code that the Company be
taxed as an "S" corporation, except as set forth on Exhibit 3.1(f)(v), or (B) a
consent pursuant to Section 341(f) of the Code relating to collapsible
corporations. The Company has not made any payments, is not obligated to make
any payments and is not 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. The Company has not been a United States real property
holding corporation within the meaning of Code Section 897(c)(2) during the
applicable period specified in
-5-
10
Code Section 897(c)(1)(A)(ii). The Company has disclosed on its federal income
Tax Returns all positions taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of Code Section 6662.
The Company is not a party to any Tax allocation or sharing agreement. The
Company has not been a member of an Affiliated Group filing a consolidated
federal income Tax Return (other than a group the common parent of which was the
Company) and has no Liability for the Taxes of any Person (other than the
Company) under Treasury Regulation Section 1.1502-6 (or any similar provision of
state, local, or foreign law), as a transferee or successor, by contract or
otherwise.
(vi) Exhibit 3.1(f)(vi) sets forth the following information with
respect to the Company as of the most recent practicable date: (A) the basis of
the Company in its assets; and (B) the amount of any net operating loss, net
capital loss, unused investment or other credit, unused foreign tax credit or
excess charitable contribution allocable to the Company.
(g) Assets and Properties.
(i) The Company has good and marketable title to, or a valid
leasehold interest or interest as a licensee in, the properties and assets used
or held for use by it, located on its Premises, or shown on the Latest Balance
Sheet or acquired after the date thereof. As of the Closing, all of the Acquired
Assets will be owned by the Company, free and clear of all Encumbrances except
for the Assumed Liabilities; provided, however, that PentaStar and the Acquiror
hereby acknowledge and agree that the Company has not trademarked its name or
"NCI" and has not performed or requested a trademark search. Accordingly, it is
possible some other Person has trademarked the Company name or "NCI" or some
form thereof and the Company does not warrant that there are no other Persons
using its name, except that the Company does represent and warrant that it has
not granted any Person the right to use the Company's name or "NCI" or any
deviation thereof. Since November 30, 1999, the Company has not entered into any
contract or made any commitment to sell all or any part of its assets. The
Acquired Assets constitute all of the real, personal and mixed assets and
property, both tangible and intangible, including Intellectual Property, which
are being used or held for use by the Company in the conduct of the business and
operations of the Company, consistent with historical and current practices. The
Company owns or leases all equipment and other tangible assets necessary for the
conduct of its business as presently conducted. Each such tangible asset
material to the Company's operations has been maintained in accordance with
normal industry practice and is in good operating condition and repair (subject
to normal wear and tear). All leases of real property between the Company and
any Shareholder, officer or director or any relative or affiliate thereof are on
fair market terms (including rent at fair market value). None of the
Shareholders, nor any relative or affiliate thereof, own any asset, tangible or
intangible, which is used in the business of the Company, other than real
property leased to the Company at fair market value, which leases are set forth
on Exhibit 3.1(h).
(ii) The Company does not lease the Premises, but employees of
the Company occupy space in the premises of OC Mergerco 2, Inc. in Seattle,
Washington.
(h) Lists of Contracts and Other Matters. Attached as Exhibit 3.1(h)
is a correct and complete list setting forth the following items, to the extent
such items relate to the Acquired Assets, the Assumed Liabilities or the
business represented by the Acquired Assets:
(i) the following contracts and other agreements in effect as of
the Closing Date to which the Company is a party:
-6-
11
(A) 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 year;
(B) any agreement pursuant to which the Company, or any of
the Shareholders on behalf of the Company, has made a deposit in an amount
greater than $5,000;
(C) any agreement (or group of related agreements) for the
purchase or sale of 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, result in a material loss to the Company or its
business or involve consideration in excess of $10,000;
(D) any agreement in which the Company participates in a
partnership or joint venture;
(E) any agreement (or group of related agreements) under
which the Company has created, incurred, assumed or guaranteed any indebtedness
for borrowed money, or any capitalized lease obligation, in excess of $10,000 or
under which it has granted any Encumbrances on any of its assets, tangible or
intangible;
(F) any agreement concerning confidentiality or
noncompetition;
(G) any agreement with any of the Shareholders or any
relative or affiliate thereof (other than the Company);
(H) any profit sharing, stock option, stock purchase,
phantom stock, stock appreciation, profit participation, deferred compensation,
severance or other plan or arrangement;
(I) any collective bargaining agreement;
(J) any agreement for the employment of any individual on a
full-time, part-time, consulting or other basis or any agreement providing
severance benefits;
(K) any agreement under which the Company has advanced or
loaned any amount to any of its directors, officers and employees outside the
ordinary course of business;
(L) any agreement obligating the Company to meet another
party's unspecified requirements for goods or services or obligating it to
purchase an unspecified amount of goods or services based on another party's
ability to supply them;
(M) any agreement under which the consequences of a default
or termination could have a material adverse effect on the business, financial
condition, operations, results of operations or future prospects of the Company;
or
(N) any other agreement (or group of related agreements)
the performance of which involves consideration in excess of $10,000 in any one
year.
-7-
12
(ii) All material claims, deposits, causes of action, choses in
action, rights of recovery, rights of setoff and rights of recoupment of the
Company.
(iii) All material franchises, approvals, Permits, licenses,
Orders, registrations, certificates, variances and similar rights of the Company
(all of which are in full force and effect to the best knowledge of the Company
and the Shareholders).
(iv) Each item of Intellectual Property owned by the Company or
which is used by the Company in its business and, in each case where the Company
is not the owner, the owner of the Intellectual Property.
(v) The name of each bank or other financial institution or
entity in which the Company has an account or safe deposit box (with the
identifying account number or symbol) and the names of all persons authorized to
draw thereon or to have access thereto.
The Shareholders have delivered to PentaStar a correct and complete copy of
each written agreement and a written summary setting forth the terms and
conditions of each oral agreement referred to in Section 3.1(h)(i). With respect
to each such agreement, and except to the extent that such enforcement may be
limited by applicable bankruptcy, reorganization, insolvency and other laws of
general application affecting enforcement of creditors' rights generally: (A)
the agreement is legal, valid, binding, enforceable and in full force and
effect; (B) the agreement will 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 the Company nor, to the best
knowledge of the Shareholders, any other party is in breach or default, and, to
the best knowledge of the Shareholders, 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) no party has
repudiated any provision of the agreement.
(i) Litigation; Compliance with Applicable Laws and Rights.
(i) There is no outstanding Order against, nor, except as set
forth on Exhibit 3.1(i)(i), is there any litigation, proceeding, arbitration or
investigation by any Governmental Authority or other Person pending or, to the
best knowledge of the Company and the Shareholders, threatened against, the
Company, its assets or its business or relating to the transactions contemplated
by this Agreement, nor, to the best knowledge of the Company and the
Shareholders, is there any basis for any such action.
(ii) To the best knowledge of the Company and the Shareholders,
except as set forth on Exhibit 3.1(i)(ii), neither the Company nor the Company's
assets are in violation of any applicable Legal Requirement or Right. The
Company has not received notice from any Governmental Authority or other Person
of any violation or alleged violation of any Legal Requirement or Right, and no
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand or notice has been filed or commenced or is pending or, to the best
knowledge of the Company and the Shareholders, threatened against the Company
alleging any such violation.
(j) Notes and Accounts Receivable. The notes and accounts receivable
of the Company reflected on its Latest Balance Sheet, and all notes and accounts
receivable arising on or prior to the Closing
-8-
13
Date, arose and will arise from bona fide transactions by the Company in the
ordinary course of business and will be paid to the Acquiror as set forth in
Section 5.8.
(k) Product Quality, Warranty and Liability. To the best knowledge of
the Company and the Shareholders, all services and products sold, leased,
provided or delivered by the Company to customers on or prior to the Closing
Date conform to applicable contractual commitments, express and implied
warranties, product and service specifications and quality standards, and there
is no basis for any Liability for replacement or repair thereof or other damages
in connection therewith. Except as disclosed in Exhibit 3.1(k), no service or
product sold, leased, provided or delivered by the Company to customers on or
prior to the Closing is subject to any guaranty, warranty or other indemnity
beyond the applicable standard terms and conditions of sale or lease. The
Company has no Liability and, to the best knowledge of the Company and the
Shareholders, there is no basis for any Liability arising out of any injury to a
Person or property as a result of the ownership, possession, provision or use of
any service or product sold, leased, provided or delivered by the Company on or
prior to the Closing Date. All product or service liability claims that have
been asserted against the Company since January 1, 1996, whether covered by
insurance or not and whether litigation has resulted or not, other than those
listed and summarized on Exhibit 3.1(i)(i), are listed and summarized on Exhibit
3.1(k).
(l) Insurance. The Company has policies of insurance (i) covering
risk of loss on the Acquired Assets and (ii) covering products and services
liability and liability for fire, property damage, personal injury and workers'
compensation coverage, all, to the best knowledge of the Company and the
Shareholders, with responsible and financially sound insurance carriers in
adequate amounts and in compliance with governmental requirements and in
accordance with good industry practice. All such insurance policies are valid,
in full force and effect and enforceable in accordance with their respective
terms and no party has repudiated any provision thereof. All such policies will
remain in full force and effect until the Closing Date. Neither the Company nor,
to the best knowledge of the Company and the Shareholders, any other party to
any such policy is in breach or default (including with respect to the payment
of premiums or the giving of notices) in the performance of any of their
respective obligations thereunder, and no event exists which, with the giving of
notice or the lapse of time or both, would constitute a breach, default or event
of default, or permit termination, modification or acceleration under any such
policy. There are no claims, actions, proceedings or suits arising out of or
based upon any of such policies nor, to the best knowledge of the Company and
the Shareholders, does any basis for any such claim, action, suit or proceeding
exist. All premiums have been paid on such policies as of the date of this
Agreement and will be paid on such policies through the Closing Date. The
Company has been covered since the inception of the Company by insurance in
scope and amount customary and reasonable for the businesses in which it has
engaged during the aforementioned period. All claims made during such period
with respect to any insurance coverage of the Company, other than those
described on Exhibit 3.1(k), are set forth on Exhibit 3.1(l).
(m) Pension and Employee Benefit Matters. Neither the Acquiror nor
PentaStar will suffer any Liability or Adverse Consequence from the Company's
administration or termination of any of its Employee Benefit Plans or from any
failure of any pre-Closing or post-Closing distribution of benefits to employees
of the Company to be made by the Company in compliance with all applicable Legal
Requirements. Neither the Acquiror nor PentaStar will have any obligation to
employ any employee of the Company or to continue any Employee Benefit Plan, and
will have no Liability under any plan or arrangement maintained by the Company
for the benefit of any employee. The Company will remain liable for all costs of
employee compensation, including benefits and Taxes relating to employment and
employees attributable to periods through the Closing Date, whether reported by
the Closing Date or thereafter, and all
-9-
14
group health plan continuation coverage to which any employee, former employee
or dependent is entitled because of a qualifying event (as defined in Section
4980B(f)(3) of the Code) occurring through the Closing Date or as a result of
termination of employment with the Company because of the transactions
contemplated by this Agreement and any benefit or excise tax liability or
penalty or other costs arising from any failure by the Company to provide group
health plan continuation coverage. Except as set forth on Exhibit 3.1(m),
neither the Company nor any Affiliated Group which includes the Company (if any)
maintains, administers or contributes to, has maintained, administered or
contributed to, or has any Liability to contribute to, any Employee Benefit
Plan. Exhibit 3.1(m) lists each Employee Benefit Plan that is, or at any time
during the past six years was, maintained, administered, contributed to or
required to be contributed to by the Company or any Affiliated Group (if any)
which includes or has included the Company, and the date of termination of each
such Employee Benefit Plan (if any) which has been terminated. The Company has
no Liability (and there is no basis for the assertion of any Liability) as a
result of the Company's or any such Affiliated Group's maintenance,
administration or termination of, or contribution to, any Employee Benefit Plan.
Neither the Company nor any member of any Affiliated Group (if any) which
includes or has included the Company has ever been required to contribute to any
Multiemployer Plan (as defined in ERISA Section 3(37)) nor has incurred any
Liability under Title IV of ERISA.
(n) Employees and Labor. Except as set forth on Exhibit 3.1(n), the
Company has not received any notice, nor, to the best knowledge of the Company
and the Shareholders, is there any reason to believe that any executive or Key
Employee of the Company or any material group of employees of the Company has
any plans to terminate his, her or its employment with the Company. To the best
knowledge of the Company and the Shareholders, no executive or Key Employee is
subject to any agreement, obligation, Order or other legal hindrance that
impedes or might impede such executive or Key Employee from devoting his or her
full business time to the affairs of the Company prior to the Closing Date and,
if such person becomes an employee of the Acquiror or PentaStar, to the affairs
of the Acquiror or PentaStar after the Closing Date. The Company will not be
required to give any notice under the Worker Adjustment and Retraining
Notification Act, as amended (29 U.S.C.A. Section 2101, et. seq.), or any
similar Legal Requirement as a result of this Agreement, the Other Seller
Agreements or the transactions contemplated hereby or thereby. To the best
knowledge of the Company and the Shareholders, the Company does not have any
labor relations problems or disputes, nor has the Company experienced any
strikes, grievances, claims of unfair labor practices or other collective
bargaining disputes. The Company is not a party to or bound by any collective
bargaining agreement, there is no union or collective bargaining unit at the
Company's facilities, and, to the best knowledge of the Company and the
Shareholders, no union organization effort has been threatened, initiated or is
in progress with respect to any employees of the Company.
(o) Customer and Service Provider Relationships. Each customer that
individually or with its affiliates was, based on the Company's revenues during
the fiscal year ended December 31, 1998 or the eleven-month period ended
November 30, 1999, one of the Company's ten largest customers during such fiscal
year or period or accounted for 2% or more of the Company's revenues during such
fiscal year or period is referred to as a "Principal Customer." Each Person who
is a service provider to the Company as of the date of this Agreement is
referred to as a "Principal Provider." To the best knowledge of the Company and
the Shareholders, the Company has good commercial working relationships with its
Principal Customers and Principal Providers and since December 31, 1998, no
Principal Customer or Principal Provider has cancelled or otherwise terminated
its relationship with the Company, materially decreased its purchases from or
services supplied to the Company, or threatened to take any such action. The
Company and the Shareholders have no reasonable basis to anticipate any problems
with the Company's customer or service provider relationships. To the best
knowledge of the Company and the Shareholders, no Principal Customer or
-10-
15
Principal Provider has any plans to terminate their relationship with the
Company and the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby will not adversely affect the relationship
of the Company with any Principal Customer or Principal Provider prior to the
Closing Date or of the Acquiror or PentaStar with any Principal Customer or
Principal Provider after the Closing Date.
(p) Environmental Matters. To the best knowledge of the Company and
the Shareholders, the Company is conducting and at all times has conducted its
business and operations, and has occupied, used and operated the Premises and
all other real property and facilities presently or previously owned, occupied,
used or operated by the Company, in compliance with all Environmental
Obligations and so as not to give rise to Liability under any Environmental
Obligations or to any impact on the Company's business or activities. To the
best knowledge of the Company and the Shareholders, the Company has no Liability
under any Environmental Obligation, nor is there any basis for any such
Liability.
(q) Intellectual Property. To the best knowledge of the Company and
the Shareholders and with the proviso as to the Company name and tradename set
forth in Section 3.1(g)(i), the Company owns or has the legal right to use each
item of Intellectual Property required to be identified on Exhibit 3.1(h).
Except as provided on Exhibit 3.1(h) and with the proviso as to the Company name
and tradename set forth in Section 3.1(g)(i), to the best knowledge of the
Company and the Shareholders, the continued operation of the business of the
Company as currently conducted will not interfere with, infringe upon,
misappropriate or conflict with any Intellectual Property rights of another
Person. To the best knowledge of the Company and the Shareholders, no other
Person has interfered with, infringed upon, misappropriated or otherwise come
into conflict with any Intellectual Property rights of the Company or any
Intellectual Property included in the Acquired Assets. The Company has not
granted any license, sublicense or permission with respect to any Intellectual
Property owned or used in the Company's business. No claims are pending or, to
the knowledge of the Company and the Shareholders, threatened, that the Company
is infringing or otherwise adversely affecting the rights of any Person with
regard to any Intellectual Property. To the best knowledge of the Company and
the Shareholders and with the proviso as to the Company name and tradename set
forth in Section 3.1(g)(i), all of the Intellectual Property that is owned by
the Company is owned free and clear of all Encumbrances and was not
misappropriated from any Person, and all portions of the Intellectual Property
that are licensed by the Company are licensed pursuant to valid and existing
license agreements. To the best knowledge of the Company and the Shareholders,
the consummation of the transactions contemplated by this Agreement will not
result in the loss or material diminution of any Intellectual Property or rights
in Intellectual Property.
(r) Year 0000 Xxxxxxxx. To the best knowledge of the Company and the
Shareholders, the computer software owned by the Company and all other
Intellectual Property used or held for use by the Company in its business
accurately processes date/time data (including calculating, comparing, and
sequencing) from, into, and between the twentieth and twenty-first centuries,
and the years 1999 and 2000 and leap year calculations and the date September 9,
1999 when either (i) used as a standalone application, or (ii) integrated into
or otherwise used in conjunction with the third party hardware, software,
firmware and data over which the Shareholders and the Company have no control
("Third Party Products") with which such Company software or other Intellectual
Property was designated or intended to operate at the time such Company software
was (i) developed or (ii) first provided to the Company's customers, or tested
by the Company for such customers, whichever is later. Notwithstanding the
foregoing, the Company shall not be considered to be in breach of the
representation and warranty in the immediately preceding sentence if the failure
of such Company software to comply with such representation and warranty is
attributable solely to
-11-
16
(x) a failure by any Third Party Product to accurately process date/time data
(including but not limited to, calculating, comparing, and sequencing) from,
into, and between the twentieth and twenty-first centuries, and the years 1999
and 2000 and leap year calculations and the date September 9, 1999; or (y) any
modification of the Company software by any party other than the Company (unless
such modification was made at the direction of the Company).
(s) Brokers' Fees. Except as set forth on Exhibit 3.1(s), neither the
Company nor any Shareholder has, and will not have as a result of the
consummation of this Agreement, any Liability to pay any fees or commissions to
any broker, finder or agent with respect to the transactions contemplated by
this Agreement.
(t) Guaranties. The Company is not a guarantor or otherwise liable
for any Liability (including indebtedness for borrowed money) of any other
Person. Except as set forth on Exhibit 3.1(t), no Person is a guarantor or
otherwise liable for any Liability (including indebtedness for borrowed money)
of the Company.
(u) Disclosure. To the best knowledge of the Company and the
Shareholders, one of the documents or information provided to PentaStar by the
Company, any Shareholder or any agent or employee thereof in the course of
PentaStar's due diligence investigation and the negotiation of this Agreement
and Section 3.1 of this Agreement and the disclosure Exhibits referred to
therein, including the financial statements referred to above in Section 3.1,
contains any untrue statement of any material fact or omit to state a material
fact necessary in order to make the statements contained herein or therein not
misleading. To the best knowledge of the Company and the Shareholders, there is
no fact which materially adversely affects the business, condition, affairs or
operations of the Company or any of its properties or assets which has not been
set forth in this Agreement or such Exhibits, including such financial
statements.
Nothing in the disclosure Exhibits referred to in Section 3.1 shall be
deemed adequate to disclose an exception to a representation or warranty made
herein unless the applicable disclosure Exhibit identifies the exception with
particularity and describes the relevant facts in reasonable detail. Without
limiting the generality of the foregoing, the mere listing (or inclusion of a
copy) of a document or other item shall not be deemed adequate to disclose an
exception to a representation or warranty made herein (unless the representation
or warranty has to do with the existence of the document or other item itself).
Each of the Company and the Shareholders acknowledge and agree that the fact
that they have made disclosures pursuant to Section 3.1 or otherwise of matters,
or did not have knowledge of matters, which result in Adverse Consequences to
PentaStar or the Acquiror shall not relieve the Company and the Shareholders of
their obligation pursuant to Section 7 of this Agreement to indemnify and hold
PentaStar and the Acquiror harmless from all Adverse Consequences, to the extent
provided in this Agreement.
3.2. Representations and Warranties of PentaStar. PentaStar represents and
warrants to the Company and the Shareholders that the statements contained in
this Section 3.2 are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 3.2).
(a) Organization, Good Standing, Power, Etc. PentaStar and the
Acquiror are each corporations duly organized, validly existing and in good
standing under the laws of the State of Delaware. This Agreement and the Other
PentaStar Agreements and the transactions contemplated hereby and thereby have
been duly approved by all requisite corporate action. Each of PentaStar and the
Acquiror have full
-12-
17
corporate power and authority to execute, deliver and perform this Agreement and
the Other PentaStar Agreements to which it is a party, and this Agreement
constitutes, and the Other PentaStar Agreements will when executed and delivered
constitute, the legal, valid and binding obligations of PentaStar or the
Acquiror, as the case may be, and shall be enforceable in accordance with their
respective terms against PentaStar or the Acquiror, as the case may be.
(b) Capitalization. All of the issued and outstanding capital stock
of the Acquiror is owned by PentaStar.
(c) No Violation of Agreements, Etc. The execution, delivery and
performance of this Agreement and the Other PentaStar Agreements, and the
consummation of the transactions contemplated hereby and thereby will not (i)
violate any Legal Requirement to which PentaStar or the Acquiror is subject or
any provision of the certificate of incorporation or bylaws of PentaStar or the
Acquiror or (ii) violate, with or without the giving of notice or the lapse of
time or both, or conflict with or result in the breach or termination of any
provision of, or constitute a default under, or give any Person the right to
accelerate any obligation under, or result in the creation of any Encumbrance
upon any properties, assets or business of PentaStar or of the Acquiror pursuant
to, any indenture, mortgage, deed of trust, lien, lease, license, agreement,
instrument or other arrangement to which PentaStar or the Acquiror is a party or
by which PentaStar or the Acquiror or any of their respective assets and
properties is bound or subject. Except for notices and consents that will be
given or obtained by PentaStar prior to the Closing, neither PentaStar nor the
Acquiror need to give any notice to, make any filing with or obtain any
authorization, consent or approval of any Governmental Authority or other Person
in order for the parties to consummate the transactions contemplated by this
Agreement.
3.3. Survival of Representations. The representations and warranties
contained in Sections 3.1 and 3.2 and the Liabilities of the parties with
respect thereto shall survive any investigation thereof by the parties and shall
survive the Closing for 30 months, except that the Liabilities of the
Shareholders with respect to the representations and warranties set forth in
Sections 3.1(a), 3.1(b), 3.1(c), 3.1(f), 3.1(m) and 3.1(p) and the Liabilities
of PentaStar with respect to the representations and warranties set forth in
Sections 3.2(a) and 3.2(b), shall survive without termination.
3.4. Representations as to Knowledge. The representations and warranties
contained in Article 3 hereof will in each and every case where an exercise of
discretion or a statement to the "best knowledge," "best of knowledge" or
"knowledge" is required on behalf of any party to this Agreement be deemed to
require that such exercise of discretion or statement be in good faith after
reasonable investigation (including, in the case of the Company and the
Shareholders, inquiry of the applicable employees of the Company), with due
diligence, to the best efforts of such party and be exercised always in a
reasonable manner and within reasonable times.
4. Pre-Closing Covenants. The parties agree as follows with respect to the
period between the execution of this Agreement and the Closing.
4.1. General. Each of the parties will use its reasonable best efforts to
take all actions necessary, proper or advisable in order to consummate and make
effective the transactions contemplated by this Agreement (including the
satisfaction, but not the waiver, of the closing conditions set forth in Section
6) and the other agreements contemplated hereby. Without limiting the foregoing,
the Shareholders will, and will
-13-
18
cause the Company to, give any notices, make any filings and obtain any
consents, authorizations or approvals needed to consummate the transactions
contemplated by this Agreement.
4.2. Operation and Preservation of Business. The Company will not, and the
Shareholders will not cause or permit the Company to, engage in any practice,
take any action or enter into any transaction outside its ordinary course of
business; provided, however, that in no event will any action be taken or fail
to be taken or any transaction be entered into which would result in a breach of
any representation, warranty or covenant of the Company or any Shareholder. The
Company will, and the Shareholders will cause the Company to, keep its business
and properties, including its current operations, physical facilities, working
conditions and relationships with customers, service providers, lessors,
licensors and employees, intact.
4.3. Full Access. The Company will, and the Shareholders will cause the
Company to, permit PentaStar and its agents to have full access at all
reasonable times, and in a manner so as not to interfere with the normal
business operations of the Company, to all premises, properties, personnel,
books, records (including Tax records), contracts and documents of or pertaining
to the Company.
4.4. Notice of Developments. The Company and the Shareholders will give
prompt written notice to PentaStar of any material development which occurs
after the date of this Agreement and before the Closing and affects the
business, assets, Liabilities, financial condition, operations, results of
operations, future prospects, representations, warranties, covenants or
disclosure Exhibits of the Company. No such written notice, however, will be
deemed to amend or supplement any disclosure Exhibit or to prevent or cure any
misrepresentation, breach of warranty or breach of covenant.
4.5. Exclusivity. Neither the Company nor any Shareholder will, and the
Shareholders will not cause or permit the Company to, (a) 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 portion
of the assets of, the Company (including any acquisition structured as a merger,
consolidation or share exchange) or (b) 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. No Shareholder will vote shares of
the Company's stock in favor of any such transaction. The Company and the
Shareholders will notify PentaStar immediately if any Person makes any proposal,
offer, inquiry or contact with respect to any of the foregoing.
4.6. Announcements; Securities Law Restrictions. Prior to the Closing,
neither any Shareholder nor the Company shall disclose to any Person, nor issue
any press release or make any public announcement concerning, the existence,
terms or subject matter of this Agreement without the prior written approval of
PentaStar, except (and only to the extent) previously publicly announced by
PentaStar. Further, neither any Shareholder nor the Company shall violate the
United States securities laws which restrict each Shareholder and the Company,
as Persons with material non-public information concerning PentaStar obtained
directly or indirectly from PentaStar, from purchasing or selling securities of
PentaStar or from communicating such information to any other Person under any
circumstances in which it is reasonably foreseeable that such Person is likely
to purchase or sell such securities.
4.7. Bulk Sales Laws. In reliance upon its indemnification rights set forth
in Section 7, the Acquiror waives compliance by the Company with the bulk
transfer law and any other similar law of any applicable jurisdiction in respect
to the transactions contemplated by this Agreement. The parties acknowledge that
the States of Washington and Colorado have repealed their bulk sales laws in
toto.
-14-
19
5. Post-Closing Covenants. The parties agree as follows with respect to the
period following the Closing.
5.1. Further Assurances. 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 7).
5.2. Transition. No Shareholder will knowingly take any action at any time
that is designed or intended to have the effect of discouraging any customer,
supplier, lessor, licensor or other business associate of the Company from
establishing or continuing a business relationship with PentaStar after the
Closing, except where such action is approved in writing by PentaStar.
5.3. Cooperation. 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 (a) any
transaction contemplated by this Agreement or (b) 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 Acquired Assets or the Company's business, each of the
other parties will cooperate with such party and its counsel in the contest or
defense, make available their personnel, and provide such testimony 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 7).
5.4. Confidentiality. The Company and the Shareholders will treat and hold
as confidential all Confidential Information concerning PentaStar, the Company's
business or the Acquired Assets, refrain from using any such Confidential
Information and deliver promptly to PentaStar or destroy, at the request and
option of PentaStar, all of such Confidential Information in its or their
possession.
5.5. Post-Closing Announcements. Following the Closing, no Shareholder will
issue any press release or make any public announcement relating to the subject
matter of this Agreement without the prior written approval of PentaStar.
5.6. Financial Statements. The Company and the Shareholders will, upon
request of PentaStar, cooperate with PentaStar and render such assistance to
PentaStar and its accountants as may be required to produce such historical and
on-going financial statements and audits as PentaStar may request, all at the
sole cost and expense of PentaStar, but without additional consideration to the
Shareholders. The Shareholders acknowledge that PentaStar may be required by
applicable law to include audited financial statements with respect to the
business of the Company in reports filed with governmental agencies and that the
inability to audit the financial statements as of the Closing Date promptly
after the Closing could have a material adverse effect on PentaStar.
5.7. Satisfaction of Liabilities.
(a) The Company and the Shareholders will pay and perform, as and
when due, all Liabilities (other than the Assumed Liabilities) relating to the
Company, the business of the Company and
-15-
20
the Acquired Assets, including without limitation, all Taxes attributable to the
transactions contemplated by this Agreement.
(b) The Company and the Shareholders, at their expense, promptly will
take or cause to be taken any action necessary to remedy any failure of the
Premises or the acquired business to comply at the Closing Date with any Legal
Requirement, upon receipt of notice from PentaStar at any time.
(c) The Acquiror will pay and perform, as and when due (except to the
extent the validity thereof or the Liability therefor is being contested by the
Acquiror), the Assumed Liabilities.
5.8. Repurchase of Unpaid Receivables. The Company and the Shareholders
guarantee that the Closing Accounts Receivable in the amount set forth in the
footnote to the balance sheet attached as Exhibit 5.8 will be fully paid to the
Acquiror in accordance with their terms at their recorded amounts not later than
180 days from the Closing Date. Upon demand by PentaStar at any time after 180
days from the Closing Date, the Company and the Shareholders shall pay to the
Acquiror the full amount of any unpaid Closing Accounts Receivable which is the
subject of such demand; provided, however, that no Shareholder shall be required
to pay more than 150% of the Shareholder's Pro Rata Amount. Upon such payment to
PentaStar, the Closing Accounts Receivable which are so paid for by the
Shareholders shall, without further action of any party, become the property of
the Shareholders. From the Closing until 180 days after the Closing Date,
PentaStar (through the Acquiror) will apply its standard accounts receivable
collection procedures to the Closing Accounts Receivable; provided, however,
neither the Acquiror nor PentaStar will not be required to institute suit,
utilize third-party collection agencies or other agents or take other
extraordinary collection actions with respect to the Closing Accounts
Receivable; and, provided further, that any failure of any collection activities
of the Acquiror, PentaStar or any such collection agency or other agent will not
relieve the Shareholders from their guarantee of the Closing Accounts Receivable
as described in this Section 5.8. With respect to the foregoing, all collections
for Closing Accounts Receivable shall be applied to the invoice to which such
collection relates; provided that if such invoice cannot be reasonably
identified by the Acquiror, such collections will be applied on a "first in,
first out" or FIFO basis, with the specific exception that a payment made by a
customer will not be applied against the oldest outstanding invoice for such
customer if such invoice has been disputed by the customer.
5.9. Termination of Obligations. Effective as of the Closing Date, but only
if the Closing occurs, (a) the Mutual Acknowledgement and Agreement, the
Commissions Agreement and the sublease described in the definition of "NCI
Liabilities" and (b) any instruments, contracts or agreements (other than this
Agreement) pursuant to which PentaStar or OC Mergerco 2, Inc. may have Liability
to the Company are terminated.
6. Conditions to Closing.
6.1. Conditions to Obligation of PentaStar. The obligation of PentaStar to
consummate the transactions contemplated by this Agreement is subject to
satisfaction of the following conditions:
(a) the Company's and each Shareholder's representations and
warranties shall be correct and complete at and as of the Closing Date and the
Closing and any written notices delivered to PentaStar pursuant to Section 4.5
and the subject matter thereof shall be satisfactory to PentaStar;
-16-
21
(b) the Company and the Shareholders shall have performed and
complied with all of their covenants hereunder through the Closing;
(c) the Company and the Shareholders shall have given all notices and
procured all of the third-party consents, authorizations and approvals required
to consummate the transactions contemplated by this Agreement, all in form and
substance reasonably satisfactory to PentaStar;
(d) no action, suit or proceeding shall be pending or threatened
before any Governmental Authority or any other Person wherein an unfavorable
Order would (i) prevent consummation of any of the transactions contemplated by
this Agreement, (ii) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation or (iii) affect adversely the
right of the Acquiror to own the Acquired Assets and conduct the acquired
business, and no such Order shall be in effect;
(e) there shall have been no material adverse change in the Company,
the Acquired Assets or the Company's business between the date of execution of
this Agreement and the Closing;
(f) the Company and the Shareholders shall have delivered to
PentaStar (i) a certificate to the effect that each of the conditions specified
above in Sections 6.1(a) through (e) is satisfied in all respects, (ii) a
certificate as to the adoption of resolutions by the board of directors and
shareholders of the Company authorizing the execution, delivery and performance
of this Agreement and the Other Seller Agreements and the consummation of the
transactions contemplated hereby and thereby, (iii) a certificate of existence,
dated within 10 days of the Closing, from the Secretary of State of the State of
the Company's jurisdiction of incorporation and each other state in which the
Company is qualified or authorized to do business as a foreign corporation and
(iv) Exhibit 1.1(d), and the NCI Liabilities Amount set forth on thereon shall
have been agreed upon by the Company and PentaStar.
(g) the Other Seller Agreements shall have been executed and
delivered by the Shareholders, as applicable;
(h) PentaStar shall have received from the Company evidence of the
termination of all Encumbrances filed against the Acquired Assets;
(i) the Shareholders shall have delivered to PentaStar possession and
control of the Acquired Assets;
(j) the Company and the Shareholders shall have executed and
delivered to PentaStar an amendment to the Company's articles of incorporation
for the purpose of changing its name to a name that does not include the term
"Network Communications" or any derivation thereof; and
(k) the Company and the Shareholders shall have delivered to
PentaStar such other instruments, certificates and documents as are reasonably
requested by PentaStar in order to consummate the transactions contemplated by
this Agreement, all in form and substance reasonably satisfactory to PentaStar.
PentaStar may waive any condition specified in this Section 6.1 at or prior
to the Closing.
-17-
22
6.2. Conditions to Obligation of the Company and the Shareholders. The
obligation of the Company and the Shareholders to consummate the transactions
contemplated by this Agreement is subject to satisfaction of the following
conditions:
(a) PentaStar's representations and warranties shall be correct and
complete at and as of the Closing Date and the Closing;
(b) PentaStar shall have performed and complied with all of its
covenants hereunder through the Closing Date;
(c) PentaStar shall have delivered to the Company a certificate to
the effect that each of the conditions specified above in Sections 6.2(a) and
(b) is satisfied in all respects; provided, however, that if PentaStar exercises
its right to close pursuant to the second sentence of Section 2.5, the exercise
of such right shall constitute PentaStar's certification that the conditions
specified in Sections 6.2(a) and (b) are satisfied in all respects and no
certificate need be delivered;
(d) the Other PentaStar Agreements shall have been executed and
delivered by PentaStar; and
(e) PentaStar shall have paid the Purchase Price pursuant to Section
2.3.
The Shareholders' Agent may waive any condition specified in this Section 6.2 at
or prior to the Closing.
7. Remedies for Breaches of This Agreement.
7.1. Indemnification Provisions for Benefit of PentaStar. If the Company or
any Shareholder breaches any of the representations or warranties of the Company
or any Shareholder contained herein and PentaStar gives notice thereof to the
Shareholders' Agent within the Survival Period, or if the Company or any
Shareholder breaches any covenants of the Company or any Shareholder contained
herein or any representations, warranties or covenants of the Company or any
Shareholder contained in any Other Seller Agreement and PentaStar gives notice
thereof to the Shareholders' Agent, then, subject to Section 7.6, the Company
and each Shareholder agree to indemnify and hold harmless PentaStar and the
Acquiror from and against any Adverse Consequences PentaStar or the Acquiror may
suffer resulting from, arising out of, relating to or caused by any of the
foregoing regardless of whether the Adverse Consequences are suffered during or
after the Survival Period, up to, but in no event to exceed, 150% of the sum of
all Shareholder's Pro Rata Amounts. In determining for all purposes under this
Agreement (including this Section 7 and Section 8) whether there has been a
breach of any representation or warranty contained in Section 3.1 and in
determining for purposes of the preceding sentence the amount of Adverse
Consequences suffered by PentaStar or the Acquiror, such representations and
warranties shall not be qualified (other than by (A) the reference to
"knowledge" set forth in the last sentence of Section 3.1(o) and (B) the
references to "material" set forth in Section 3.1(u)) by "material,"
"materiality," "in all material respects," "best knowledge," "best of knowledge"
or "knowledge" or words of similar import, or by any phrase using any such terms
or words. Each Majority Shareholder also agrees to indemnify and hold harmless
PentaStar and the Acquiror from and against any Adverse Consequences PentaStar
or the Acquiror may suffer, up to, but in no event to exceed, 150% of the
Shareholder's Pro Rata Amount of such Majority Shareholder, and each Minority
Shareholder agrees to indemnify and hold harmless PentaStar and the Acquiror
from and against any Adverse Consequences PentaStar or the Acquiror may suffer,
but in no event to exceed 100% of the Shareholder's Pro
-18-
23
Rata Amount of such Minority Shareholder, which result from, arise out of,
relate to or are caused by (i) any Liability of the Company or any Shareholder
not included in the Assumed Liabilities or (ii) any condition, circumstance or
activity existing prior to the Closing Date which relates to any Legal
Requirement or any act or omission of the Company or any Shareholder or any
predecessor with respect to, or any event or circumstance related to, the
Company's, any Shareholder's or any predecessor's ownership, use or operation of
any of the Acquired Assets, the Premises or any other assets or properties or
the conduct of its or their business, regardless, in the case of (i) or (ii), of
(A) whether or not such Liability, act, omission, event, circumstance or matter
was known or disclosed to PentaStar, was disclosed on any Exhibit hereto or is a
matter with respect to which the Company or any Shareholder did or did not have
knowledge, (B) when such Liability, act, omission, event, circumstance or matter
occurred, existed, occurs or exists and (C) whether a claim with respect thereto
was asserted before or is asserted after the Closing Date and (iii) any
Liability resulting from any failure of the parties to comply with any
applicable bulk sales or transfer Legal Requirement in connection with the
transactions contemplated by this Agreement. If any dispute arises concerning
whether any indemnification is owing which cannot be resolved by negotiation
among the parties within 30 days of notice of claim for indemnification from the
party claiming indemnification to the party against whom such claim is asserted,
the dispute will be resolved by arbitration pursuant to this Agreement.
Notwithstanding the foregoing, the Liability of the Shareholders to indemnify
PentaStar and the Acquiror in the aggregate under this Section 7.1 shall not
exceed the sum of all Shareholder's Pro Rata Amounts. The date of any notice of
any claim for indemnification given by PentaStar to the Shareholders' Agent
shall be referred to as a "Notice Date."
7.2. Indemnification Provisions for Benefit of the Company and the
Shareholders. If PentaStar breaches (or if any Person other than the Company or
a Shareholder alleges facts that, if true, would mean PentaStar has breached)
any of its representations or warranties contained herein and the Shareholders'
Agent gives notice of a claim for indemnification against PentaStar within the
Survival Period, or if PentaStar breaches any of its covenants contained herein
or any of its representations, warranties or covenants contained in any Other
PentaStar Agreement and the Shareholders' Agent gives notice thereof to
PentaStar, then PentaStar agrees to indemnify and hold harmless the Company and
the Shareholders from and against any Adverse Consequences the Company and the
Shareholders may suffer which result from, arise out of, relate to, or are
caused by the breach or alleged breach, regardless of whether the Adverse
Consequences are suffered during or after the Survival Period. In determining
whether there has been a breach of any representation or warranty contained in
Section 3.3 and in determining the amount of Adverse Consequences suffered by
the Company and the Shareholders for purposes of this Section 7.2, such
representations and warranties shall not be qualified by "material,"
"materiality," "in all material respects," "best knowledge," "best of knowledge"
or "knowledge" or words of similar import, or by any phrase using any such terms
or words. If any dispute arises concerning whether any indemnification is owing
which cannot be resolved by negotiation among the parties within 30 days of
notice of claim for indemnification from the party claiming indemnification to
the party against whom such claim is asserted, the dispute will be resolved by
arbitration pursuant to this Agreement.
7.3. Matters Involving Third Parties.
(a) If any Person not a party to this Agreement (including, without
limitation, any Governmental Authority) notifies 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"), then the Indemnified Party will notify each Indemnifying Party thereof
in writing within 15 days after receiving such notice. No delay on the part of
the Indemnified Party in notifying any Indemnifying Party will
-19-
24
relieve the Indemnifying Party from any obligation hereunder unless (and then
solely to the extent) the Indemnifying Party thereby is prejudiced.
(b) Any Indemnifying Party will have the right, at its sole cost and
expense, to defend the Indemnified Party against the Third Party Claim with
counsel of its choice satisfactory to the Indemnified Party so long as (i) the
Indemnifying Party notifies the Indemnified Party in writing within 10 days
after the Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to or caused by the Third Party Claim, (ii) 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, (iii) the Third Party Claim involves only
money damages and does not seek an injunction or other equitable relief, (iv)
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 (v) the Indemnifying Party conducts the
defense of the Third Party Claim actively and diligently. If the Indemnifying
Party does not assume control of the defense or settlement of any Third Party
Claim in the manner described above, it will be bound by the results obtained by
the Indemnified Party with respect to the Third Party Claim.
(c) So long as the Indemnifying Party is conducting the defense of
the Third Party Claim in accordance with Section 7.3(b) above, (i) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
and participate in the defense of the Third Party Claim, (ii) 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 (iii) 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).
(d) In the event any of the conditions in Section 7.3(b) above is or
becomes unsatisfied, however, (i) 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 therewith), (ii) 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 (iii) the Indemnifying Parties will remain responsible for
any Adverse Consequences the Indemnified Party may suffer resulting from,
arising out of, relating to or caused by the Third Party Claim to the fullest
extent provided in this Section 7.
7.4. Other Remedies. The foregoing indemnification provisions are in
addition to, and not in derogation of, any statutory, equitable or common law
remedy any party may have.
7.5. Basket. Notwithstanding anything to the contrary in this Section 7,
the Company and the Shareholders will not have any obligation to indemnify
PentaStar or the Acquiror from and against any Adverse Consequences resulting
from, arising out of, relating to, in the nature of, or caused by the breach of
any representation or warranty of the Company or the Shareholders set forth in
Section 3.1 until PentaStar and the Acquiror have suffered Adverse Consequences
by reason of any or of all such breaches in excess of
-20-
25
Ten Thousand Dollars ($10,000) in the aggregate, after which point the Company
and the Shareholders will be obligated to indemnify PentaStar and the Acquiror
from and against the entirety of any such Adverse Consequences exceeding Ten
Thousand Dollars ($10,000).
8. Termination.
8.1. Termination of Agreement. The parties may terminate this Agreement as
provided below:
(a) PentaStar and the Shareholders' Agent may terminate this
Agreement by mutual written consent at any time prior to the Closing;
(b) PentaStar may terminate this Agreement by giving written notice
to the Shareholders' Agent at any time prior to the Closing (i) in the event the
Company or any Shareholder has breached any representation, warranty or covenant
contained in this Agreement in any material way, PentaStar has notified the
Shareholders' Agent of the breach, and the breach has not been cured within 10
days after the notice of breach or (ii) if the Closing has not occurred on or
before January 15, 2000 because of the failure of any condition precedent to
PentaStar's obligations to consummate the Closing (unless the failure results
primarily from PentaStar breaching any representation, warranty or covenant
contained in this Agreement in any material way); or
(c) the Shareholders' Agent may terminate this Agreement by giving
written notice to PentaStar at any time prior to the Closing (i) if PentaStar
has breached any representation, warranty or covenant contained in this
Agreement in any material way, the Shareholders' Agent has notified PentaStar of
the breach, and the breach has not been cured within 10 days after the notice of
breach or (ii) if the Closing has not occurred on or before January 15, 2000
because of the failure of any condition precedent to the Company's and the
Shareholders' obligations to consummate the Closing (unless the failure results
primarily from the Company or any Shareholder breaching any representation,
warranty or covenant contained in this Agreement in any material way).
8.2. Effect of Termination. Neither the Company and the Shareholders, on
the one hand, nor PentaStar and the Acquiror, on the other hand, will have any
liability or obligation to the other upon termination of this Agreement for any
reason whatsoever, unless the termination is directly based on or arising from a
material breach of any representations, warranties or covenants contained in
this Agreement of the Company and the Shareholders, on the one hand, or
PentaStar and the Acquiror, on the other hand, and such breach results in,
relates to or concerns an item, fact or circumstance that is materially adverse
to the Company, on the one hand, or PentaStar or the Acquiror, on the other
hand, as applicable. In the case of such a breach, the Company and the
Shareholders, on the one hand, or PentaStar and the Acquiror, on the other hand,
shall be entitled to seek all relief to which it or they are entitled under
applicable law from PentaStar and the Acquiror, on the one hand, and the
Company, on the other hand, as applicable, but not from any Shareholder.
Notwithstanding anything herein in this Agreement to the contrary, no
Shareholders shall have any liability to PentaStar or the Acquiror upon the
termination of this Agreement for any reason whatsoever.
8.3. Confidentiality. If this Agreement is terminated, each party will
treat and hold as confidential all Confidential Information concerning the other
parties which it acquired from such other parties in connection with this
Agreement and the transactions contemplated hereby.
-21-
26
9. Miscellaneous.
9.1. No Third-Party Beneficiaries. This Agreement will not confer any
rights or remedies upon any Person other than the parties and their respective
successors and permitted assigns.
9.2. 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 relate in any way to the subject matter
hereof.
9.3. Succession and Assignment. This Agreement will be binding upon and
inure to the benefit of the parties and their respective successors and
permitted assigns. Neither the Company nor any Shareholder may assign this
Agreement or any of its, his or her rights, interests or obligations hereunder
without the prior written approval of PentaStar. PentaStar may assign its rights
and obligations hereunder as permitted by law, including, without limitation, to
any debt or equity financing source.
9.4. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
together shall be deemed to be one and the same instrument. The execution of a
counterpart of the signature page to this Agreement will be deemed the execution
of a counterpart of this Agreement. This Agreement may be delivered by facsimile
and facsimile signatures will be treated as original signatures for all
applicable purposes.
9.5. Headings and Terms. The section headings contained in this Agreement
are inserted for convenience only and will not affect in any way the meaning or
interpretation of this Agreement. Terms used with initial capital letters will
have the meanings specified, applicable to both singular and plural forms, for
all purposes of this Agreement. The singular or plural includes the other, as
the context requires or permits. The word "include" (and any variation) is used
in an illustrative sense rather than a limiting sense.
9.6. 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 it is sent by
registered or certified mail, return receipt requested, postage prepaid, or by
courier, telecopy or facsimile, and addressed to the intended recipient as set
forth below:
If to the Company or any
Shareholder: Copy to:
Addressed to the
Shareholders' Agent at:
870 Skyline Tower Xxxxxxxxx Law Firm
Network Communications 000 Xxxxxxxx Xxx, Xxxxx 000
Integration, Inc. Post Office Box 786
4122 128th Avenue, S.E., Suite 300 Kirkland, Washington 98083-0786
Xxxxxxxx, Xxxxxxxxxx 00000 Attn: Jaye Xxxx Xxxxxxxxx
Attn: Xxxxxx Xxxxxxxxxxx Telecopy: (000) 000-0000
Telecopy: (000) 000-0000
-22-
27
If to PentaStar: Copy to:
PentaStar Communications, Inc. Xxxxxxx & Xxxxxx L.L.C.
0000 Xxxxx Xxxxxx 000 Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000 Xxxxxx, Xxxxxxxx 00000
Attn: Chief Executive Officer Attn: B. Xxxxx Xxxxxxx
Telecopy: (000) 000-0000 Telecopy: (000) 000-0000
Notices will be deemed given three days after mailing if sent by certified mail,
when delivered if sent by courier, and upon receipt of confirmation by person or
machine if sent by telecopy or facsimile transmission. Any party may change the
address to which notices, requests, demands, claims and other communications
hereunder are to be delivered by giving the other parties notice in the manner
herein set forth.
9.7. Governing Law. This Agreement will be governed by and construed in
accordance with the domestic laws of the State of Colorado (with the exception
of the bulk sales laws, which shall be governed by and construed in accordance
with the domestic laws of the State of Washington) without giving effect to any
choice or conflict of law provision or rule (whether of the State of Colorado or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Colorado.
9.8. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same is in writing and signed by PentaStar
and the Shareholders' Agent. No waiver by any party of any default,
misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, will 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, and
no waiver will be effective unless set forth in writing and signed by the party
against whom such waiver is asserted.
9.9. 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.
9.10. Expenses. Except as otherwise provided in Section 8.2, (a) PentaStar
shall bear its own costs and expenses (including, without limitation, legal fees
and expenses) incurred either before or after the date of this Agreement in
connection with this Agreement or the transactions contemplated hereby and (b)
the Company and the Shareholders will bear all costs and expenses (including,
without limitation, all legal, accounting and tax related fees and expenses, all
fees, commissions, expenses and other amounts payable to any broker, finder or
agent) incurred by the Company or by any Shareholder either before or after the
date of this Agreement in connection with this Agreement or the transactions
contemplated hereby.
9.11. Arbitration. Any disputes arising under or in connection with this
Agreement, including, without limitation, those involving claims for specific
performance or other equitable relief, will be submitted to binding arbitration
in Denver, Colorado before the Judicial Arbiter Group, but under the Commercial
Arbitration Rules of the American Arbitration Association under the authority of
federal and state arbitration statutes, and shall not be the subject of
litigation in any forum. If the Judicial Arbiter Group is unavailable to conduct
the arbitration, then it shall be before another arbitral body in Denver,
Colorado selected by PentaStar and the Shareholders' Agent or, if they cannot
agree on another arbitral body, the American
-23-
28
Arbitration Association. EACH PARTY, BY SIGNING THIS AGREEMENT, VOLUNTARILY,
KNOWINGLY AND INTELLIGENTLY WAIVES ANY RIGHTS SUCH PARTY MAY OTHERWISE HAVE TO
SEEK REMEDIES IN COURT OR OTHER FORUMS, INCLUDING THE RIGHT TO JURY TRIAL. The
arbitrator shall have full authority to order specific performance and other
equitable relief and award damages and other relief available under this
Agreement or applicable law, but shall have no authority to add to, detract
from, change or amend the terms of this Agreement or existing law. All
arbitration proceedings, including settlements and awards, shall be
confidential. The decision of the arbitrators will be final and binding, and
judgment on the award by the arbitrators may be entered in any court of
competent jurisdiction. THIS SUBMISSION AND AGREEMENT TO ARBITRATE WILL BE
SPECIFICALLY ENFORCEABLE. The prevailing party or parties in any such
arbitration or in any action to enforce this Agreement will be entitled to
recover, in addition to any other relief awarded by the arbitrator, all
reasonable costs and expenses, including fees and expenses of the arbitrators
and attorneys, incurred in connection therewith. If each party prevails on
specific issues in the arbitration, the arbitrator may allocate the costs
incurred by all parties on a basis the arbitrator deems appropriate.
9.12. 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 will be construed as
if drafted jointly by the parties and no presumption or burden of proof will
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. The word "including" will mean including
without limitation. The parties intend that each representation, warranty and
covenant contained herein will have independent significance. If any party
breaches 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 will not detract from or mitigate
the fact that the party is in breach of the first representation, warranty or
covenant.
9.13. Incorporation of Exhibits. The Exhibits identified in this Agreement
are incorporated herein by reference and made a part hereof.
9.14. Shareholders' Agent. The Company and each Shareholder hereby
authorize and appoint the Shareholders' Agent as its, his or her exclusive agent
and attorney-in-fact to act on behalf of each of them with respect to all
matters which are the subject of this Agreement, including, without limitation,
(a) receiving or giving all notices, instructions, other communications,
consents or agreements that may be necessary, required or given hereunder and
(b) asserting, settling, compromising, or defending, or determining not to
assert, settle, compromise or defend, (i) any claims which the Company or any
Shareholder may assert, or have the right to assert, against PentaStar, or (ii)
any claims which PentaStar or the Acquiror may assert, or have the right to
assert, against the Company or any Shareholder. The Shareholders' Agent hereby
accepts such authorization and appointment. Upon the receipt of written evidence
satisfactory to PentaStar to the effect that the Shareholders' Agent has been
substituted as agent of the Company and the Shareholders by reason of his death,
disability or resignation, PentaStar shall be entitled to rely on such
substituted agent to the same extent as they were theretofore entitled to rely
upon the Shareholders' Agent with respect to the matters covered by this Section
9.14. Neither the Company nor any Shareholder shall act with respect to any of
the matters which are the subject of this Agreement except through the
Shareholders' Agent. The Company and the Shareholders acknowledge and agree that
PentaStar may deal exclusively with the Shareholders' Agent in respect of such
matters, that the enforceability of this Section 9.14 is material to PentaStar,
and that PentaStar has relied upon the enforceability of this Section 9.14 in
entering into this Agreement.
-24-
29
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
PENTASTAR:
PENTASTAR COMMUNICATIONS, INC.
By: /s/ Xxxxxx Xxxxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxxxx
---------------------------------
Title: CEO
--------------------------------
ACQUIROR:
OC MERGERCO 3, INC.
By: /s/ Xxxxxx Xxxxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxxxx
---------------------------------
Title: CEO
--------------------------------
COMPANY:
NETWORK COMMUNICATIONS
INTEGRATION, INC.
By: /s/ Xxxxxxx xxx Xxxxxx
-----------------------------------
Name: Xxxxxxx xxx Xxxxxx
---------------------------------
Title: President
--------------------------------
SHAREHOLDERS:
/s/ Xxxxxx X. Xxxxxxxxxxx
--------------------------------------
Xxxxxx X. Xxxxxxxxxxx
/s/ Xxxxxxx xxx Xxxxxx
--------------------------------------
Xxxxxxx xxx Xxxxxx
-25-
30
/s/ Xxxxx X. Xxxxxxx
--------------------------------------
Xxxxx Xxxxxxx
/s/ Xxxx X. Xxxx
--------------------------------------
Xxxx Xxxx
/s/ Xxxxxxx X. Xxxxxx
--------------------------------------
Xxxxxxx Xxxxxx
-26-
31
Spouses of Shareholders (not Shareholders)
/s/ Xxxxxx Xxxxxxxxxxx
-------------------------
Xxxxxx Xxxxxxxxxxx
/s/ Xxxxxxx xxx Xxxxxx
-------------------------
Xxxxxxx xxx Xxxxxx
/s/ Xxxxx X. Xxxxxxx
-------------------------
Xxxxx X. Xxxxxxx
/s/ Xxxx Xxxxxx
-------------------------
Xxxx Xxxxxx
/s/ Xxxxxx X. Xxxxxxxxx
-------------------------
Xxxxxx Xxxxxxxxx
[SIGNATURE PAGE TO PURCHASE AGREEMENT]
-27-
32
Exhibit 1.1(a)
DEFINED TERMS
Acquiror has the meaning given it in the preamble to this Agreement.
Acquired Assets means all right, title and interest of the Company in
and to all of the tangible and intangible assets, including cash and cash
equivalents, of the Company.
Adverse Consequences means all actions, suits, proceedings,
investigations, complaints, claims, demands, Orders, Liabilities, liens, losses,
damages, penalties, fines, settlements, costs, remediation costs, expenses and
fees (including court costs and reasonable fees and expenses of counsel and
other experts), plus interest at a rate equal to two percentage points above the
prime rate quoted by PentaStar's principal lender from time to time accrued from
the date of such Adverse Consequence.
Affiliated Group means any affiliated group within the meaning of Code
Section 1504 or any similar group defined under a similar provision of state,
local or foreign law.
Assignment and Assumption Agreement means the Assignment and
Assumption Agreement between the Company and the Acquiror in the form of Exhibit
1.1(b) pursuant to which the Acquiror will assume the Assumed Liabilities.
Assumed Liabilities means (a) the obligations of the Company arising
after the Closing Date under those contracts which are identified by PentaStar
on Exhibit 1.1(c)(i) with respect to the period after the Closing Date, and (b)
the obligations of the Company in the amounts expressly set forth on Exhibit
1.1(c)(ii). Assumed Liabilities will not include any other Liability.
Business Day means any day on which commercial banks are open for
business in Denver, Colorado.
Closing Accounts Receivable means all accounts (including late fees
and interest charges thereon) and notes receivable of the Company which are in
existence as of the Closing Date.
Closing and Closing Date have the meanings given in Section 2.5.
Code means the Internal Revenue Code of 1986, as amended.
Company has the meaning given it in the preamble to the Agreement,
except that for purposes of Section 3.1 the term the "Company" shall mean the
Company and all of its Subsidiaries.
Confidential Information means any information concerning the subject
Person or the subject Person's business, products, financial condition,
prospects and affairs that is not already generally available to the public.
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
Exhibit 1.1(a)-1
33
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, as defined in ERISA Section 3(37)) or (d)
Employee Welfare Benefit Plan.
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).
Encumbrance means any mortgage, pledge, conditional sale agreement,
charge, claim, interest of another Person, lien, security interest, title defect
or other encumbrance.
Environmental Obligations means all present and future Legal
Requirements and Permits concerning land use, public health, safety, welfare or
the environment, including, without limitation, the Resource Conservation and
Recovery Act (42 U.S.C. Section 6901 et seq.), as amended, and the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C. Section 9601
et seq.), as amended.
ERISA means the Employee Retirement Income Security Act of 1974, as
amended, and any regulations, rules or orders promulgated thereunder.
GAAP means generally accepted accounting principles as in effect from
time to time in the United States.
Governmental Authority means the United States of America, any state,
commonwealth, territory or possession of the United States of America, any
political subdivision thereof (including counties, municipalities, home-rule
cities and the like), and any agency, authority or instrumentality of any of the
foregoing, including, without limitation, any court, tribunal, department,
bureau, commission or board.
Hazardous Materials means any material, chemical, compound, mixture,
hazardous substance, hazardous waste, pollutant or contaminant defined, listed,
classified or regulated under any Environmental Obligation.
Indemnified Party has the meaning given it in Section 7.3(a).
Indemnifying Party has the meaning given it in Section 7.3(a).
Intellectual Property means all trade, corporate, business and product
names, trademarks, trademark rights, service marks, copyrights, patents, patent
rights, trade secrets, business, customer and technical information, and
computer software, all registrations, licenses and applications pertaining
thereto, and all related documentation and goodwill.
Key Employee means an employee, other than an executive, whose
responsibilities are integral or material to the sustained operations of the
business or implementation of the business plan.
Latest Balance Sheet has the meaning given it in Section 3.1(d).
Legal Requirement means any constitution, statute, ordinance, code, or
other law (including common law), rule, regulation, Order, notice, standard,
procedure or other requirement enacted, adopted,
Exhibit 1.1(a)-2
34
applied or issued by any Governmental Authority, including, without limitation,
judicial decisions applying or interpreting any such Legal Requirement.
Liability means any liability or obligation (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).
Majority Shareholder means a Shareholder owning more than three
percent (3%) of the issued and outstanding shares of the Company, as determined
from Exhibit 3.1(b)(i).
Minority Shareholder means a Shareholder other than a Majority
Shareholder.
NCI Liabilities means (i) the principal and accrued interest through
the Closing Date under that certain Secured Promissory Note dated August 12,
1999 from the Company to ICM Communications Integration, Inc. ("ICM"), in the
original principal amount of $540,000, (ii) all amounts due and owing through
the Closing Date by the Company to OC Mergerco 2, Inc. under that certain Mutual
Acknowledgement and Agreement dated July 31, 1999 between ICM and the Company,
(iii) all amounts due and owing through the Closing Date by the Company to OC
Mergerco 2, Inc. under that certain Commissions Agreement dated October 26, 1999
between ICM and the Company and (iv) all amounts due and owing through the
Closing Date by the Company under the sublease for Suite 400, 4122 128th Avenue,
S.E., Bellevue, Washington, between ICM, as lessor, and the Company, as lessee.
The Company and the Shareholders acknowledge that OC Mergerco 2, Inc., a
wholly-owned subsidiary of PentaStar, has succeeded to the rights of ICM under
the above-referenced instruments, contracts and agreements as a result of the
October 29, 1999 merger of ICM into OC Mergerco 2, Inc.
NCI Liabilities Amount means the aggregate amount of the NCI
Liabilities as of the Closing Date, as set forth on Exhibit 1.1(d) as of the
Closing. Exhibit 1.1(d) shall be prepared by the Company and delivered to
PentaStar three Business Days prior to the Closing. If PentaStar accepts such
Exhibit, it shall be attached to this Agreement. If PentaStar rejects such
Exhibit, the Company and PentaStar shall attempt in good faith to agree upon
such Exhibit, and if so agreed to it shall be attached to this Agreement as
Exhibit 1.1(d).
Notice Date has the meaning given it in Section 7.1.
Orders means all judgments, injunctions, orders, rulings, decrees,
directives, notices of violation or other requirements of any Governmental
Authority or arbitrator having jurisdiction in the matter, including a
bankruptcy court or trustee.
Other PentaStar Agreements means the Assignment and Assumption
Agreement, the Xxxx of Sale and the other documents and instruments to be
executed and delivered by PentaStar or the Acquiror pursuant to this Agreement.
Other Seller Agreements means the Assignment and Assumption Agreement,
the Xxxx of Sale and the other documents and instruments to be executed and
delivered by the Company, any Shareholder or any relative or affiliate of the
Company or of any Shareholder pursuant to this Agreement.
PentaStar has the meaning given it in the preamble to this Agreement.
Exhibit 1.1(a)-3
35
Permits means all permits, licenses, consents, franchises,
authorizations, approvals, privileges, waivers, exemptions, variances,
exclusionary or inclusionary Orders and other concessions, whether governmental
or private, including, without limitation, those relating to environmental,
public health, welfare or safety matters.
Person means an individual, partnership, corporation, association,
joint stock company, trust, joint venture, limited liability company,
unincorporated organization or Governmental Authority.
Premises means the real property, buildings and improvements thereon
constituting the business premises of the Company located at 0000 000xx Xxxxxx,
X.X., Xxxxx 000, Xxxxxxxx, Xxxxxxxxxx.
Principal Customer has the meaning given it in Section 3.1(o).
Principal Provider has the meaning given it in Section 3.1(o).
Purchase Price has the meaning given it in Section 2.3.
Right means any right, property interest, concession, patent,
trademark, trade name, copyright, know-how or other proprietary right of another
Person.
Shareholder's Pro Rata Amount means, with respect to a particular
Shareholder, the dollar amount determined by multiplying (a) that Shareholder's
percentage ownership of the Company determined based upon Exhibit 3.1(b)(i), by
(b) the sum of (i) the cash portion of the Purchase Price, (ii) the NCI
Liabilities Amount and (iii) the amount of the obligations set forth on Exhibit
1.1(c)(ii).
Shareholders has the meaning given it in the preamble to this
Agreement.
Shareholders' Agent means Xxxxxx Xxxxxxxxxxx (or the substituted agent
described in Section 9.14) acting as agent for the Company and the Shareholders
pursuant to Section 9.14.
Shares means all of the issued and outstanding capital stock of the
Company.
Subsidiary means, with respect to the Company, any corporation,
partnership, limited liability company or entity in which the Company has an
equity interest.
Survival Period means, with respect to a representation or warranty,
the applicable period after the Closing Date during which such representation or
warranty survives pursuant to Section 3.3.
Tax means any federal, state, local or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Section 59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, documentary, 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.
Exhibit 1.1(a)-4
36
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 given it in Section 7.3(a).
Third Party Product has the meaning given it in Section 3.1(r).
Exhibit 3.1(h)(i)-5
37
Exhibit 3.1(b)(i)
SHAREHOLDER NUMBER OF COMPANY SHARES OWNED
----------- ------------------------------
Xxxxxx X. Xxxxxxxxxxx
Xxxxxxx xxx Xxxxxx
Xxxxx Xxxxxxx
Xxxx Xxxx
Xxxxxxx Xxxxxx
Exhibit 3.1(b)(i)-1
