EXECUTION COPY
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STOCK PURCHASE AGREEMENT
BY AND AMONG
RCP COMMUNICATIONS, INC.,
THE STOCKHOLDERS NAMED HEREIN,
AND
ONEPOINT SERVICES, L.L.C.
DATED AS OF NOVEMBER 30, 1999
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TABLE OF CONTENTS
Page
ARTICLE I PURCHASE AND SALE OF STOCK................................................. 1
1.1 Stock Purchase............................................................. 1
1.2 Purchase Price for Company Stock........................................... 1
1.3 Closing Transactions....................................................... 1
1.4 Hold-back Payment.......................................................... 2
1.5 Earn-out................................................................... 3
1.6 Indebtedness Adjustment.................................................... 5
ARTICLE II CONDITIONS TO CLOSING...................................................... 6
2.1 Conditions to Buyer's Obligations.......................................... 6
2.2 Conditions to Each Sellers' Obligations.................................... 9
ARTICLE III COVENANTS PRIOR TO CLOSING................................................ 11
3.1 Affirmative Covenants of the Company and Each Seller....................... 11
3.2 Negative Covenants of Company and Each Seller.............................. 12
3.3 Covenants of Buyer......................................................... 14
ARTICLE IV REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY AND EACH SELLER...... 14
4.1 Organization and Corporate Power........................................... 14
4.2 Authorization of Transactions.............................................. 14
4.3 Capitalization............................................................. 15
4.4 Subsidiaries; Investments.................................................. 15
4.5 Absence of Conflicts....................................................... 16
4.6 Financial Statements....................................................... 16
4.7 Absence of Undisclosed Liabilities......................................... 16
4.8 Absence of Certain Developments............................................ 16
4.9 Title to Properties........................................................ 18
4.10 Accounts Receivable........................................................ 20
4.11 Inventory.................................................................. 20
4.12 Taxes...................................................................... 20
4.13 Contracts and Commitments.................................................. 21
4.14 Proprietary Rights......................................................... 23
4.15 Litigation; Proceedings.................................................... 24
4.16 Brokerage.................................................................. 25
4.17 Governmental Licenses and Permits.......................................... 25
4.18 Employees.................................................................. 25
4.19 Employee Benefit Plans..................................................... 25
4.20 Insurance.................................................................. 27
4.21 Officers and Directors; Bank Accounts...................................... 27
4.22 Affiliate Transactions..................................................... 27
4.23 Compliance with Laws....................................................... 27
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4.24 Environmental Matters..................................................... 28
4.25 Projections............................................................... 29
4.26 Powers of Attorney; Guarantees............................................ 29
4.27 Product Warranties........................................................ 29
4.28 Indebtedness.............................................................. 30
4.29 Disclosure................................................................ 30
4.30 Closing Date.............................................................. 30
4.31 Knowledge................................................................. 30
ARTICLE V REPRESENTATIONS AND WARRANTIES WITH RESPECT TO SELLERS..................... 30
5.1 Authorization of Transactions............................................. 30
5.2 Absence of Conflicts...................................................... 31
5.3 Brokerage................................................................. 31
5.4 Shares.................................................................... 31
5.5 No Guarantee of Debt...................................................... 31
5.6 Legal and Tax Advice...................................................... 31
5.7 Closing Date.............................................................. 31
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER................................... 32
6.1 Organization and Corporate Power.......................................... 32
6.2 Authorization............................................................. 32
6.3 No Violation.............................................................. 32
6.4 Governmental Authorities and Consents..................................... 32
6.5 Litigation................................................................ 32
6.6 Brokerage................................................................. 33
6.7 Closing Date.............................................................. 33
ARTICLE VII TERMINATION.............................................................. 33
7.1 Termination............................................................... 33
7.2 Effect of Termination..................................................... 33
ARTICLE VIII INDEMNIFICATION AND RELATED MATTERS..................................... 34
8.1 Survival.................................................................. 34
8.2 Indemnification........................................................... 34
ARTICLE IX ADDITIONAL AGREEMENTS..................................................... 38
9.1 Continuing Assistance..................................................... 38
9.2 Tax Matters............................................................... 38
9.3 Press Releases and Announcements.......................................... 38
9.4 Further Transfers......................................................... 39
9.5 Specific Performance...................................................... 39
9.6 Transition Assistance..................................................... 39
9.7 Investigation............................................................. 39
9.8 Expenses.................................................................. 39
9.9 Exclusivity............................................................... 40
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9.10 Books and Records......................................................... 40
9.11 Non-Competition, Non-Solicitation and Confidentiality..................... 40
ARTICLE X MISCELLANEOUS............................................................... 42
10.1 Amendment and Waiver...................................................... 42
10.2 Notices................................................................... 42
10.3 Binding Agreement; Assignment............................................. 43
10.4 Severability.............................................................. 43
10.5 No Strict Construction.................................................... 44
10.6 Captions.................................................................. 44
10.7 Entire Agreement.......................................................... 44
10.8 Counterparts.............................................................. 44
10.9 Governing Law............................................................. 44
10.10 Parties in Interest...................................................... 44
10.11 WAIVER OF JURY TRIAL..................................................... 44
10.12 CONSENT TO JURISDICTION.................................................. 44
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INDEX OF EXHIBITS
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Exhibit A Sellers' Certificate
Exhibit B Buyer's Certificate
Exhibit C Form of Opinion -- Buyer's Counsel
Exhibit D Form of Opinion -- Seller's Counsel
Exhibit E Operating Agreement of OnePoint Services, L.L.C.
INDEX OF SCHEDULES
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Schedule 1.1 Stock Ownership
Schedule 4.1 Organization and Corporate Power
Schedule 4.5 Absence of Conflicts
Schedule 4.7 Absence of Undisclosed Liabilities
Schedule 4.8 Absence of Certain Developments
Schedule 4.8(o) Tax Liabilities
Schedule 4.9(b) Real Property Leases and Subleases
Schedule 4.9(d) Personal Property
Schedule 4.10 Accounts Receivable
Schedule 4.12 Taxes
Schedule 4.13 Contracts and Commitments
Schedule 4.14 Proprietary Rights
Schedule 4.15 Litigation; Proceedings
Schedule 4.16 Brokerage (Company)
Schedule 4.17 Governmental Licenses and Permits
Schedule 4.18 Employees
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Schedule 4.19 Employee Benefit Plans
Schedule 4.20 Insurance
Schedule 4.21 Officers and Directors; Bank Accounts
Schedule 4.22 Affiliate Transactions
Schedule 4.23 Compliance with Laws
Schedule 4.24 Environmental Matters
Schedule 4.25 Projections
Schedule 4.26 Powers of Attorney; Guarantees
Schedule 4.27 Product Warranties
Schedule 4.28 Closing Indebtedness
Schedule 5.3 Brokerage (Seller)
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INDEX OF DEFINED TERMS
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Accounting Firm........................................................ 6
Acquired Stock......................................................... 1
Affiliate.............................................................. 27
Affiliated Group....................................................... 21
Anniversary Date....................................................... 3
Applicable Limitation Date............................................. 34
Basket................................................................. 35
Buyer.................................................................. 1
Buyer Common Units..................................................... 1
Buyer Parties.......................................................... 34
Cash Earn-out.......................................................... 3
Cash Earn-out Payments................................................. 3
CERCLA................................................................. 28
Closing................................................................ 1
Closing Date........................................................... 2
Closing Indebtedness................................................... 30
Closing Transactions................................................... 2
COBRA.................................................................. 26
Code................................................................... 21
Company................................................................ 1
Confidential Information............................................... 41
Controlled Group....................................................... 26
Dispute Notice......................................................... 5
Earn-out Unit Grants................................................... 4
Environmental and Safety Requirements.................................. 29
Environmental Lien..................................................... 29
ERISA.................................................................. 25
Estimated Excess Indebtedness.......................................... 2
Excess FET Indebtedness................................................ 5
Excess Indebtedness.................................................... 5
Excess MCI/WorldCom Indebtedness....................................... 5
FET Indebtedness....................................................... 8
Financial Statements................................................... 16
Founder Employment Agreements.......................................... 8
Hold-back.............................................................. 2
Indebtedness........................................................... 13
Indebtedness Statement................................................. 5
Indemnified Party...................................................... 36
Indemnifying Party..................................................... 36
Indirectly............................................................. 41
Initial Holdback Amount................................................ 2
Insiders............................................................... 27
Item of Dispute........................................................ 5
Knowledge.............................................................. 30
Latest Balance Sheets.................................................. 16
Leased Properties...................................................... 18
Licenses............................................................... 25
Lien................................................................... 19
Loss................................................................... 34
Losses................................................................. 34
Material Adverse Change................................................ 7
Material Adverse Effect................................................ 14
MCI/WorldCom Indebtedness.............................................. 7
MCI/WorldCom Release................................................... 8
Non-Compete Period..................................................... 40
Ordinary Course of Business............................................ 11
Parties................................................................ 1
Party.................................................................. 1
Person................................................................. 15
Proprietary Rights..................................................... 23
Purchase Price......................................................... 1
Quarterly Statement.................................................... 4
Release................................................................ 29
Reserved Claims........................................................ 3
Revenue................................................................ 3
Seller................................................................. 1
Seller Employment Agreements........................................... 8
Sellers................................................................ 1
Sellers Threshold...................................................... 36
Sellers' Basket........................................................ 36
Slow-moving............................................................ 20
Stock.................................................................. 1
Subsidiary............................................................. 15
Tax.................................................................... 21
Tax Returns............................................................ 21
Taxes.................................................................. 21
Threshold.............................................................. 35
Transaction Documents.................................................. 14
Wholly-owned Subsidiaries.............................................. 43
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STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made as of November 23, 1999, by and among RCP
Communications, Inc., an Arizona corporation (the "Company"), the stockholders
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listed on the signature page hereto (the "Sellers" and individually, a
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"Seller"), and OnePoint Services, L.L.C., a Delaware limited liability company
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("Buyer"). The Company, Sellers and Buyer are collectively referred to herein
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as the "Parties" and individually as a "Party."
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The authorized capital stock of the Company consists of 2,000 shares
of Common Stock, par value $1.00 per share (the "Stock"), of which 2,000 shares
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are issued and outstanding. Sellers own beneficially and of record 100% of the
outstanding Stock.
Buyer desires to acquire from each Seller, and each Seller desires to
sell to Buyer, all of the shares of the Stock owned by such Seller.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF STOCK
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I.1 Stock Purchase. On and subject to the terms and conditions set
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forth in this Agreement, on the Closing Date (as defined in Section 1.3(a)),
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Buyer shall purchase from each Seller, and each Seller shall sell and transfer
to Buyer, all of the shares of the Stock owned by such Seller as such ownership
is set forth on Schedule 1.1 (the "Acquired Stock"), free and clear of any
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restrictions on transfer (other than any restrictions under the Securities Act
of 1933, as amended, and the state securities laws), claims, taxes, Liens,
pledges, options, warrants, rights, contract, calls, commitments, equities,
proxies or demands.
I.2 Purchase Price for Company Stock. The aggregate purchase price
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to be paid to Sellers for the Acquired Stock (the "Purchase Price") shall be
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equal to$984,694, subject to the Initial Hold-back Amount minus any adjustments
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thereto as contemplated under Section 1.6 or Article VIII, plus $7,125 in
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capital contributions credited by the Buyer to capital accounts of the Sellers
as consideration for 1,425,000 common units of interest of Buyer ("Buyer Common
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Units"), such units to be Restricted Common Units as defined by and subject to
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the provisions of the Limited Liability Company Agreement of the Buyer (the
"Operating Agreement") dated as of November 23, 1999 and as may be amended from
time to time. The Purchase Price shall be allocated among Sellers in
proportion to their respective holdings of the Acquired Stock as set forth on
Schedule 1.1.
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I.3 Closing Transactions.
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(a) Closing. The closing of the transactions contemplated by this
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Agreement (the "Closing") shall take place at the offices of Xxxxxxxx & Xxxxx,
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000 X. Xxxxxxxx Xxxxx, Xxxxxxx,
Xxxxxxxx, commencing at 10:00 a.m. on November 23, 1999, or at such other place
or on such other date as may be mutually agreeable to Buyer and Sellers, but in
no event later than November 30, 1999. The date and time of the Closing are
herein referred to as the "Closing Date."
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(b) Closing Transactions. Subject to the conditions set forth in
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this Agreement, the Parties shall consummate the following "Closing
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Transactions" on the Closing Date:
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(i) Each Seller shall deliver to Buyer certificates representing the
Acquired Stock owned by such Seller, duly endorsed for transfer or
accompanied by duly executed stock powers with all requisite state and
federal transfer stamps affixed thereto;
(ii) Buyer shall deliver to Sellers the Purchase Price equal to (A)
(1) $984,694, minus (2) $891,819 (the "Initial Holdback"), specified in
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clause (iii) below, minus (3) the amount of any Indebtedness, as defined in
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Section 3.2(f) below (other than the Indebtedness described in Sections
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2.1(h) and 4.28(a) below), as of the Closing, as estimated by the Sellers
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and the Company, and agreed to by the Buyer at Closing (the "Estimated
Excess Indebtedness"), and (B) the Buyer Common Units specified in clause
(iv) below;
(iii) Buyer shall retain $891,819 of the Purchase Price (the "Initial
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Holdback Amount") pursuant to the terms and provisions set forth in Section
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1.4 below;
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(iv) Buyer shall credit Sellers' capital accounts pursuant to the
provisions of the Operating Agreement in the amount of a $3,562.50 Capital
Contribution (as defined in the Operating Agreement) for each Seller, and
deliver to Sellers an aggregate of 1,425,000 Buyer Common Units (375,000
Buyer Common Units shall be subject to divestiture and repurchase as set
forth in the Unitholders Agreement and 1,050,000 Buyer Common Units shall
be subject to performance vesting, divestiture and repurchase as set forth
in the Unitholder Agreement and Section 1.5 below) such Buyer Common Units
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to be subject to the restrictions set forth in the Operating Agreement and
a Unitholders Agreement by and between each Seller and the Buyer;
(v) Subject to receipt of a full and complete release from
MCI/WorldCom (the "MCI/WorldCom Release"), Buyer shall deliver to
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MCI/WorldCom $884,375 as full and complete satisfaction of the MCI/WorldCom
Indebtedness;
(vi) Company, Sellers and Buyer, as applicable, shall deliver the
opinions, certificates and other documents and instruments required to be
delivered by or on behalf of such Party under Article II; and
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(vii) Each Seller shall deliver to Buyer all corporate books and
records of the Company in such Seller's possession.
I.4 Hold-back Payment. The Initial Hold-back Amount plus simple
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interest accrued at the prime interest rate reported in the Wall Street Journal
on the day before the Closing Date less any offsets pursuant to Article VIII of
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this Agreement is referred to herein as the "Hold-back." On the first
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anniversary of the Closing Date (the "Anniversary Date"), the amount of the
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Hold-back less any existing reserves against the Hold-back for pending claims
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(the "Reserved Claims"), shall be promptly paid to the Sellers by Buyer if, and
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only if, for the twelve (12) month period after the Closing Date and prior to
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the Anniversary Date, the net monthly Revenue of the Business Unit (as defined
below) averages $1,000,000 per month and the EBITDA of the Business Unit during
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such period is an average of at least five percent (5%) per month over the
twelve (12) month period. Upon the final resolution of the Reserved Claims, any
remaining amount of the Hold-back in excess of such amounts offset as payment
with respect to the Reserved Claims will be paid promptly by the Buyer to the
Sellers.
(a) For the purposes of this Agreement, the definitions of Revenue,
EBITDA, and Business Unit are:
(i) "Revenue" for the Business Unit in respect of any period means
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its consolidated gross income from the sale of goods or services less
returns and sales allowances, determined in accordance with GAAP.
(ii) "EBITDA" for the Business Unit in respect of any period means
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its consolidated net income for such period plus the amount of the
provision for federal, state and local income taxes for such period, plus
the amount of interest expense during such period for indebtedness for
borrowed money, plus the amount of the provision for amortization and
depreciation for such period, determined on a consolidated basis in
accordance with GAAP.
(iii) "Business Unit" means RCP Services, a division of Buyer.
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(b) For purposes of this Agreement, and the determination of Revenue
and EBITDA, the Cash Earn-out Payments, Holdback Amount and any Reserved Claims
shall not be considered expenses of the Business Unit.
(c) For purposes of this Agreement and the determination of Revenue
and EBITDA, any allocations of fees or expenses from Company or Manager to the
Business Unit shall be limited to the type contemplated in the projections
attached as Schedule 4.25 hereto, unless otherwise agreed.
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I.5 Earn-out. Additional compensation in an aggregate amount up to
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$800,000 in cash (the "Cash Earn-out") may be paid to the Sellers, and Sellers
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may earn performance vesting ("Vesting") in an aggregate of 1,050,000 Buyer
Common Units (the "Earn-out Units") subject to the Business Unit's achievement
of future EBITDA and Revenue targets.
(a) Cash Earn-out Payments. So long as Sellers are employed by
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Company, Cash Earn-out payments not to exceed $800,000 in the aggregate may be
earned by Sellers on a quarterly basis over the eight (8) fiscal quarters
starting with the first quarter of fiscal 2000 (i.e., January 1- March 31, 2000)
(the "Cash Earn-out Payments"). Cash Earn-out Payments (i) shall be calculated
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as of the end of each quarter as the current period end trailing twelve (12)
month Revenue minus the previous period end trailing twelve (12) month Revenue,
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then dividing the result by one (1) million and then multiplying that result by
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$30,000, and (ii) shall be paid only if EBITDA for
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such quarter equals at least five percent (5%) of such quarter's Revenue;
provided, however, that if Seller's employment is terminated without cause, or
as a result of death or disability, then Sellers shall be entitled to Cash Earn-
out Payments as if they were still employed by the Company in the fiscal quarter
in which such termination occurs and the fiscal quarter immediately following.
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Cash Earn-out Payments in all subsequent fiscal quarters shall be forfeited.
(b) Earn-out Units. At Closing, 1,050,000 Restricted Buyer Common
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Units will be issued to Sellers, subject to vesting as set forth in this Section
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1.5, and subject to divestiture and repurchase and other restrictions set forth
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in the Operating Agreement and Unitholders Agreement. Vesting of Earn-out Units
not to exceed 1,050,000 Restricted Buyer Common Units in the aggregate may be
earned by Sellers on a quarterly basis over the twelve (12) fiscal quarters
starting with the first quarter of fiscal 2000 (i.e., January 1-March 31, 2000)
(the "Earn-out Unit Vesting") commencing January 1, 2000. Earn-out Unit Vesting
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shall be calculated as of the end of each fiscal quarter as the sum of (i) the
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current period end trailing twelve (12) month Revenue minus the previous period
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end trailing twelve (12) month Revenue, then dividing the result by one (1)
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million, and then multiplying that result by 7,000 Buyer Common Units and (ii)
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current period end trailing twelve (12) month EBITDA minus the previous period
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end trailing twelve (12) month EBITDA, then dividing the result by 100,000, and
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then multiplying that result by 7,000 Buyer Common Units. The resultant number
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of Earn-out Units shall be vested. At the end of the twelve (12) fiscal quarter
period, any and all Earn-out Units not vested shall be forfeited to the Company
without cost to or compensation by the Company.
(c) Determination and Delivery of Cash Earn-out Payments and Earn-
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out Unit Vesting.
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(i) Within forty-five (45) days after the end of each fiscal
quarter, except the final quarter of each fiscal year, and within ninety
(90) days after the end of the final quarter of each fiscal year, Buyer
will prepare and deliver to Sellers a statement setting forth its
calculation of cumulative Revenue and EBITDA as of the close of business
such day (the "Quarterly Statement"). The Quarterly Statement shall reflect
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the results of operations of Business Unit at the close of business on the
last day of each of the relevant fiscal quarters (and on a cumulative
basis) and shall be prepared in accordance with GAAP.
(ii) Within fifteen (15) days after the delivery of the relevant
quarterly statement, Buyer shall deliver to Sellers, subject to Sections
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1.5(b) and 1.5(c) above, the Cash Earn-out Payment and Earn-out Unit
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Vesting, if any, owed to Seller for such fiscal quarter; provided that
Buyer, at Buyer's sole discretion, may pay such Cash Earn-out Payment or
vest such Earn-out Units early based on an estimated Cash Earn-out, subject
to a reconciliation at the next Cash Earn-out Payment. Such early payment
by the Buyer or acceptance by the Sellers shall not affect the rights of
the parties as set forth in Section 1.5(c)(iii) and (iv) below.
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(iii) Sellers and their accountants shall have access to all
pertinent books and records of Buyer, and Buyer will make available all
necessary information in order to enable Sellers to verify the calculation
of amounts listed on the Quarterly Statement. If Sellers disagree with any
items on the Quarterly Statement, Sellers shall within ten (10) days of
receiving the Quarterly Statement notify Buyer in writing of (i) such
disagreement; and (ii)
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request any information which Sellers may reasonably require to understand
the calculation, provided, however, that Sellers may further request
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additional information within five (5) days of the receipt of information
requested pursuant to this section, and such five day extensions may
continue until the date which is thirty (30) days after the notice setting
forth the basis for such disagreement in reasonable detail. Both Sellers
must disagree for the purposes of this Section.
(iv) Buyer and Sellers shall thereafter negotiate in good faith to
resolve any such disagreements. If Buyer and Sellers are unable to resolve
any such disagreement within thirty (30) days after Sellers' receipt of the
information requested pursuant to the preceding subsection, Buyer and
Sellers shall submit the disagreement to Ernst & Young to resolve the
disagreements. The fees and expenses of the auditor shall be shared
equally by Buyer and Sellers. Upon resolution of the disagreements by the
auditor, Buyer shall pay to Sellers the amount determined by the auditor to
be owed to Sellers.
I.6 Indebtedness Adjustment.
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(a) The Indebtedness Statement. Promptly, but in any event within
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thirty (30) days after (i) learning of any MCI/World Com Indebtedness incurred
prior to Closing and in excess of that paid pursuant to Section 1.3(v) above
(the "Excess MCI/WorldCom Indebtedness") or any FET indebtedness, interest,
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penalty, or other liability related thereto incurred prior to Closing and not
included in the amounts specified in Section 2.1(h) or 4.28(i) and (ii) below
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(the "Excess FET Indebtedness" and collectively with the "Excess MCI/WorldCom
Indebtedness" the "Excess Indebtedness"), (ii) learning that the amount of the
MCI/WorldCom Indebtedness incurred prior to closing to be paid pursuant to
Section 1.3(v) above is less than the amount stated therein or any FET
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Indebtedness, interest, penalty or other liability related thereto incurred
prior to Closing is less than the amounts specified therefor in Sections 2.1(h)
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or 4.28(i) and (ii) below, or (iii) that the amount of payments actually made in
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full settlement of any indebtedness included in the Estimated Excess
Indebtedness is more or less than the amount included in the Estimated Excess
Indebtedness, the Buyer shall prepare a statement showing any and all such
differences in the amounts actually paid or due and the amounts specified in
Sections 2.1(h) or 4.28(i) and (ii) below, or the Estimated Excess Indebtedness,
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as the case may be, (the "Indebtedness Statement"), and deliver such
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Indebtedness Statement to the Sellers. Unless within the 30-day period following
the Sellers' receipt of the Indebtedness Statement, the Sellers' deliver written
notice to Buyer (the "Dispute Notice") setting forth in reasonable detail any
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and all items of disagreement related to the Indebtedness Statement (each, an
"Item of Dispute"), the Indebtedness Statement shall be conclusive and binding
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upon the Sellers and Buyer. Buyer and the Sellers shall cooperate fully, as and
to the extent reasonably requested by the other Party, in connection with the
preparation of the Indebtedness Statement and the Dispute Notice (if any).
(b) Dispute Resolution. If the Sellers deliver the Dispute Notice to
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Buyer within such 30-day period, Buyer and the Sellers shall use reasonable
efforts to resolve their differences concerning the Items of Dispute, and if any
Item of Dispute is so resolved the Indebtedness Statement shall be modified as
necessary to reflect such resolution. If all Items of Dispute are so resolved,
the Indebtedness Statement (as so modified) shall be conclusive and binding on
the Sellers and Buyer. If any Item of Dispute remains unresolved for a period
of 20 days after Buyer's receipt
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of the Dispute Notice, Buyer and the Sellers shall submit the dispute to Ernst &
Young (the "Accounting Firm") within 10 business days after the end of such 20-
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day period. Buyer and the Sellers shall request that the Accounting Firm render
a determination as to each unresolved Item of Dispute within 45 days after its
retention, and Buyer and the Sellers shall cooperate fully with the Accounting
Firm so as to enable it to make such determination as quickly and as accurately
as practicable. The Accounting Firm's determination as to each Item of Dispute
submitted to it shall be in writing and shall be conclusive and binding upon
Buyer and the Sellers, and the Closing Statement shall be modified to the extent
necessary to reflect such determination. The fees and expenses of the Accounting
Firm shall be allocated to be paid by Buyer and/or the Sellers based upon the
percentage which the portion of the contested amount not awarded to each party
bears to the amount actually contested by such party, as determined by the
Accounting Firm.
(c) Indebtedness Adjustment. If the aggregate amount of differences
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reflected on the aggregate of all Indebtedness Statements which have become
conclusive (i) is in the Buyer's favor, then Sellers shall reimburse Buyers for
such difference as set forth below, or (ii) is in the Seller's favor, then
Buyers shall pay Sellers for such aggregate differences as set forth below.
(d) Adjustment Amount. The amount owed by Buyer or the Sellers
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pursuant to Section 1.6(c) above (the "Adjustment Amount") shall be calculated
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as an adjustment to the Purchase Price on the first business day on which the
Indebtedness Statement becomes conclusive and binding. The Adjustment Amount
shall bear simple interest at a rate of 8% per annum measured from the Closing
Date to the date of such payment. Amounts owing by the Sellers, if any,
pursuant to this Section 1.6 shall be paid by the Sellers (on a joint and
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several basis) (i) first by off-set against the Hold-back amount, or (ii) if the
Hold-back amount is insufficient to cover the full or part amount of such
payment, then such remaining amount shall be next off-set against the Cash Earn-
out earned and payable to the Sellers, or (iii) if the Hold-back amount and the
Cash Earn-out amount earned and payable to the Sellers is insufficient to cover
the full or part amount of such payment, then by immediately available funds
within ten (10) business days after the quarterly determination pursuant to
Section 1.5(c)(ii) above date of final determination. Amounts owing by Buyer,
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if any, pursuant to this Section 1.6 shall be paid by Buyer by delivery of
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immediately available funds to an account or accounts designated by the Sellers
within ten (10) business days after the date of final determination of such
amount pursuant to Section 1.6(c) above.
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ARTICLE II
CONDITIONS TO CLOSING
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II.1 Conditions to Buyer's Obligations. The obligation of Buyer to
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consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions as of the Closing Date:
(a) The representations and warranties set forth in Article IV and
Article V hereof shall be true and correct in all material respects at and as of
the Closing Date as though then made and as though the Closing Date were
substituted for the date of this Agreement throughout such representations and
warranties (without taking into account any disclosures made by the Company or
Sellers to Buyer pursuant to Sections 3.1(i), 4.30 and 5.7 hereof);
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(b) The Company and each Seller shall have performed and complied in
all material respects with all of the covenants and agreements required to be
performed by each of them under this Agreement on or prior to the Closing
including, without limitation, the simultaneous transfer of all the capital
stock of the Company;
(c) All consents by third parties that are required for the transfer
of the Acquired Stock to Buyer, that are required for the consummation of the
transactions contemplated hereby or that are required in order to prevent a
breach of or a default under or a termination or modification of or any
acceleration of any obligations under any material contract, agreement,
instrument or lease to which the Company is a party or to which any material
portion of the property of the Company is subject, shall have been obtained, and
payoff letters with respect to all Indebtedness for borrowed money outstanding
as of the Closing and releases of any and all Liens held by third parties shall
have been obtained, all on terms reasonably satisfactory to Buyer;
(d) All governmental filings, authorizations and approvals that are
required for the transfer of the Acquired Stock to Buyer and the consummation of
the transactions contemplated hereby shall have been duly made and obtained on
terms reasonably satisfactory to Buyer;
(e) No action, suit, or proceeding shall be pending or, to the
Knowledge of Company, threatened before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator wherein an unfavorable judgment, decree, injunction,
order or ruling would prevent the performance of this Agreement or any of the
transactions contemplated hereby, declare unlawful the transactions contemplated
by this Agreement, cause such transactions to be rescinded or materially and
adversely affect the right of Buyer to own, operate or control the Company, and
no judgment, decree, injunction, order or ruling shall have been entered which
has any of the foregoing effects;
(f) Except as otherwise specified in writing by Buyer to the
Representative, all of the Company's officers and directors shall have resigned
as such effective as of the Closing Date;
(g) There shall have been no material adverse change in the business,
assets, operations, condition (financial or otherwise), operating results,
earnings, customer and supplier relations, employee and sales representative
relations or business prospects of the Company (a "Material Adverse Change")
-----------------------
since April 1, 1999;
(h) The Company shall not have any outstanding Indebtedness other
than: (i) Indebtedness under a credit line with MCI/WorldCom (the "MCI/WorldCom
------------
Indebtedness"); provided that such MCI/WorldCom Indebtedness shall not exceed
------------
$884,375 in the aggregate, net of the application of any deposits held by
MCI/WorldCom on behalf of the Company;(ii) Indebtedness for unpaid federal
excise tax (the "FET Indebtedness") incurred prior to Closing; provided that
----------------
such FET Indebtedness shall not exceed $1,169,980; and (iii) the Estimated
Excess Indebtedness subject to Section 1.6 above.
-----------
(i) At or prior to Closing, the Company shall have received a full and
complete release from MCI/WorldCom subject only to the repayment of the
MCI/WorldCom Indebtedness
-viii-
in an amount not to exceed $884,375, net of the application of any deposits held
by MCI/WorldCom on behalf of the Company (the "MCI/WorldCom Release").
--------------------
(j) At or prior to Closing, the MCI/WorldCom shall have entered into a
technical services contract with Buyer, and extended credit to Buyer on terms
satisfactory to Buyer.
(k) At or prior to Closing, the Buyer shall have received from Sellers
and Company the Closing Indebtedness set forth as Schedule 4.28.
-------------
(l) At or prior to Closing, Buyer and Company shall have become
Subsidiary Guarantors to that certain Indenture dated as of May 21, 1998 among
OnePoint Communications Corp., the Subsidiary Guarantors (as defined therein)
and Xxxxxx Trust and Savings Bank, as trustee.
(m) Each of Xxxxx Xxxxxx, Xx. ("Xxxxxx") and Xxxxx X. Xxxxx ("Xxxxx")
shall have entered into agreements relating to their employment with Buyer and
their covenant as employees not to compete with Buyer (collectively, the "Seller
------
Employment Agreements"), each in form and on terms satisfactory to Buyer, and
---------------------
such agreements shall be in full force and effect;
(n) Buyer shall have received an opinion, dated the Closing Date, of
Xxxxxxxx, Xxxxxx and Xxxxxx, PLLC, counsel to the Company and Sellers, in form
of Exhibit D attached hereto;
---------
(o) Buyer shall have received a certificate in respect of all expenses
related to this Agreement and all transactions contemplated by this Agreement
that Sellers' legal counsel, investment bankers and other agents and
representatives have been paid in full, or will be paid in full within thirty
days of Closing and that the Company has no liability to any of Sellers' legal
counsel, investment bankers, accountants, agents or representatives, and such
evidence shall be in form and substance satisfactory to Buyer;
(p) Each of Xx Xxxxxxxx and Xxx Xxxxxxxxx shall have entered into
agreements relating to their employment with Buyer and their covenant as
employees not to compete with Buyer (collectively, the "Founder Employment
------------------
Agreements"), each in form and on terms satisfactory to Buyer, and such
----------
agreements shall be in full force and effect.
(q) On or prior to the Closing Date, Sellers shall have delivered to
Buyer all of the following:
(i) a certificate from the Company and Sellers in the form set forth
in Exhibit A attached hereto, dated the Closing Date, stating that the
---------
preconditions specified in Sections 2.1(a) through (i) have been satisfied;
---------------------------
(ii) copies of all third party and governmental consents, approvals,
filings, releases and terminations required in connection with the
consummation of the transactions contemplated herein;
(iii) certified copies of the resolutions of the Company's board of
directors approving the transactions contemplated by this Agreement;
-ix-
(iv) certificates of the secretary of state of the state in which
the Company is incorporated and each state where it is qualified to do
business (including, without limitation, the states listed on Schedule 4.1)
------------
stating that the Company is in good standing;
(v) copies of the resignations described in Section 2.1(f);
--------------
(vi) copies of all documents and records relating to the business of
the Company that are in any Seller's possession;
(vii) a certificate in compliance with Treas. Reg. (S)(S)1.897-2(h)
and 1.1445-2(c)(3) that the Company is not a "United States real property
holding corporation" as defined under Section 897 of the Code;
(viii) such landlord consents and estoppel certificates with respect
to each Leased Properties as Buyer may request, in form and substance
satisfactory to Buyer;
(ix) such other documents or instruments as Buyer may reasonably
request to effect the transactions contemplated hereby; and
(r) All proceedings to be taken by the Company and each Seller in
connection with the consummation of the Closing Transactions and the other
transactions contemplated hereby and all certificates, opinions, instruments and
other documents required to be delivered by each Seller to effect the
transactions contemplated hereby reasonably requested by Buyer shall be
reasonably satisfactory in form and substance to Buyer.
Any condition specified in this Section 2.1 may be waived by
-----------
Buyer; provided that no such waiver shall be effective unless it is set forth in
a writing executed by Buyer or unless Buyer agrees in writing to consummate the
transactions contemplated by this Agreement without satisfaction of such
condition.
II.2 Conditions to Each Sellers' Obligations. The obligation of each
---------------------------------------
Seller to consummate the transactions contemplated by this Agreement is subject
to the satisfaction of the following conditions as of the Closing Date:
(a) The representations and warranties set forth in Article VI shall
be true and correct in all material respects at and as of the Closing Date as
though then made and as though the Closing Date were substituted for the date of
this Agreement throughout such representations and warranties (without taking
into account any disclosures made by Buyer to Sellers pursuant to Sections
3.3(a) and 6.7 hereof);
(b) Buyer shall have performed and complied in all material respects
with all of the covenants and agreements required to be performed by it under
this Agreement on or prior to the Closing;
(c) All governmental filings, authorizations and approvals that are
required for the consummation of the transactions contemplated hereby shall have
been duly made and obtained;
-x-
(d) No action, suit or proceeding shall be pending before any court or
quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator wherein an unfavorable judgment, decree,
injunction, order or ruling would prevent the performance of this Agreement or
any of the transactions contemplated hereby, declare unlawful the transactions
contemplated by this Agreement or cause such transactions to be rescinded, and
no judgment, decree, injunction, order or ruling shall have been entered which
has any of the foregoing effects;
(e) Buyer shall have entered into the Seller Employment Agreements
with Xxxxxx and Xxxxx.
(f) On or prior to the Closing Date, Buyer shall have delivered to
Sellers all of the following:
(i) a certificate from Buyer in the form set forth in Exhibit B
---------
attached hereto, dated the Closing Date, stating that the preconditions
specified in Sections 2.2(a) through (d), inclusive, have been satisfied;
---------------------------
(ii) an opinion dated the Closing Date, of Xxxxxxxx & Xxxxx,
Buyer's counsel, in the form set forth in Exhibit C attached hereto;
(iii) certified copies of the resolutions of Buyer's board of
directors approving the transactions contemplated by this Agreement;
(iv) a certificate of good standing and a certified copy of the
Articles of Formation for Buyer.
(v) such other documents or instruments as Sellers may reasonably
request to effect the transactions contemplated hereby; and
(vi) Operating Agreement of OnePoint Services, L.L.C. in the form
attached hereto as Exhibit E, duly executed by all members of the limited
---------
liability company other than Sellers.
(g) All proceedings to be taken by Buyer in connection with the
consummation of the Closing Transactions and the other transactions contemplated
hereby and all certificates, opinions, instruments and other documents required
to be delivered by Buyer to effect the transactions contemplated hereby
reasonably requested by Sellers shall be reasonably satisfactory in form and
substance to Sellers.
(h) Company shall assign to Sellers all rights to collect that certain
debt owed by In Touch in the amount of approximately $156,089.75 for equipment
and services, including all liens on such equipment and rights to hold, return
or possess such equipment.
-xi-
Any condition specified in this Section 2.2 may be waived by Sellers;
-----------
provided that no such waiver shall be effective unless it is set forth in a
writing executed by Sellers or unless Sellers agree in writing to consummate the
transactions contemplated by this Agreement without the satisfaction of such
condition.
ARTICLE III
COVENANTS PRIOR TO CLOSING
III.1 Affirmative Covenants of the Company and Each Seller. Prior to
----------------------------------------------------
the Closing, unless Buyer otherwise agrees in writing, each Seller shall cause
the Company to, and the Company shall (and in the case of paragraphs 3.1 (i) and
(l) each Seller also shall):
(a) conduct its business and operations only in the ordinary course
of business consistent with past custom and practice (including with respect to
quantity and frequency) ("Ordinary Course of Business") (including, without
---------------------------
limitation, with respect to maintenance of working capital balances, collection
of accounts receivable, payment of employee compensation, payment of accounts
payable and cash management practices generally);
(b) use its reasonable efforts to cause its current insurance (or
reinsurance) policies not to be canceled or terminated or any of the coverage
thereunder to lapse, unless simultaneously with such termination, cancellation
or lapse, replacement policies providing coverage equal to or greater than the
coverage under the canceled, terminated or lapsed policies for substantially
similar premiums are in full force and effect;
(c) keep in full force and effect its corporate existence and all
rights, franchises and intellectual property relating or pertaining to its
business;
(d) use its reasonable efforts to carry on the business of the
Company in the same manner as presently conducted and to keep the Company's
business organization and properties intact, including its present business
operations, physical facilities, working conditions and employees and its
present relationships with lessors, licensors, suppliers and customers and
others having business relations with it;
(e) maintain the material assets of the Company in good repair, order
and condition consistent with current needs, replace in accordance with prudent
practices its inoperable, worn out or obsolete assets with assets of good
quality consistent with prudent practices and current needs and, in the event of
a casualty, loss or damage to any of such assets or properties prior to the
Closing Date, whether or not the Company is insured, either repair or replace
such damaged property or use the proceeds of such insurance in such other manner
as mutually agreed upon by Sellers and Buyer;
(f) maintain the books, accounts and records of the Company in
accordance with past custom and practice as used in the preparation of the
Financial Statements;
-xii-
(g) encourage employees to continue their employment with the
Company, as applicable, after the Closing;
(h) use its reasonable efforts to obtain releases of the Company on
any guarantees, suretyship obligations or other promises of payment or
performance given by the Company as requested in writing by Buyer;
(i) promptly (once the Company or Seller obtains Knowledge thereof)
inform Buyer in writing of any variances from the representations and warranties
contained in Article IV or Article V hereof or any breach of any covenant
hereunder by the Company or any Seller;
(j) maintain in full force and effect the existence of all
Proprietary Rights owned by, issued to, or licensed to the Company;
(k) comply with all material legal requirements and contractual
obligations applicable to the operations and business of the Company and pay all
applicable Taxes, except FET Indebtedness, when due and payable;
(l) cooperate with Buyer and use reasonable efforts to cause the
conditions to Buyer's obligation to close to be satisfied (including, without
limitation, the execution and delivery of all agreements contemplated hereunder
to be so executed and delivered and the making and obtaining of all third party
and governmental notices, filings, authorizations, approvals, consents, releases
and terminations);
(m) confer on a regular and reasonable basis with representatives of
Buyer to report on operational matters and the general status of ongoing
operations; and
(n) obtain the MCI/WorldCom Release.
III.2 Negative Covenants of Company and Each Seller. Prior to the
---------------------------------------------
Closing, without Buyer's prior written consent, Sellers shall cause the Company
not to, and the Company shall not:
(a) take any action that would require disclosure under Section 4.8;
-----------
(b) make any loans, enter into any transaction with any Insider or
make or grant any increase in any employee's or officer's compensation or make
or grant any increase in any employee benefit plan, incentive arrangement or
other benefit covering any of the employees of the Company;
(c) establish or, except in accordance with past practice, contribute
to any pension, retirement, profit sharing or stock bonus plan or multiemployer
plan covering the employees of the Company;
(d) except as specifically contemplated by this Agreement, enter into
any contract, agreement or transaction, other than in the Ordinary Course of
Business and at arm's length
-xiii-
with unaffiliated Persons, except for the assignment of the In Touch debt, liens
and equipment to the Sellers as set forth in Section 2.2(h) above;
--------------
(e) declare, pay, make or otherwise effectuate any dividends,
distributions, redemptions, equity repurchases or other transactions involving
the Company's capital stock or equity securities other than distributions made
to Sellers in the Ordinary Course of Business for the purpose of paying
estimates of federal, state and local income taxes attributable to the taxable
income of the Company for periods ending on or prior to the Closing (provided
that such distribution is not disruptive or detrimental to the Company);
(f) incur any Indebtedness other than (x) the MCI/WorldCom
Indebtedness, provided that such MCI/World Indebtedness shall not exceed
$884,375 in the aggregate, net of the application of any deposits held by
MCI/WorldCom on behalf of the Company or (y) FET Indebtedness incurred prior to
Closing, provided that such FET Indebtedness shall not exceed an aggregate of
$1,169,980 or (z) the Estimated Excess Indebtedness. For purposes of this
Agreement, "Indebtedness" means (i) any indebtedness for borrowed money or
------------
issued in substitution for or exchange of indebtedness for borrowed money, (ii)
any indebtedness evidenced by any note, bond, debenture or other debt security,
(iii) any indebtedness for the deferred purchase price of property or services
with respect to which a Person is liable, contingently or otherwise, as obligor
or otherwise (other than trade payables and other current liabilities incurred
in the Ordinary Course of Business which are not more than six months past due),
(iv) any commitment by which a Person assures a creditor against loss
(including, without limitation, contingent reimbursement obligations with
respect to letters of credit), (v) any indebtedness guaranteed in any manner by
a Person (including, without limitation, guarantees in the form of an agreement
to repurchase or reimburse), (vi) any obligations under capitalized leases with
respect to which a Person is liable, contingently or otherwise, as obligor,
guarantor or otherwise, or with respect to which obligations a Person assures a
creditor against loss, (vii) any indebtedness secured by a Lien on a Person's
assets and (viii) any unsatisfied obligation for "withdrawal liability" to a
"multiemployer plan" as such terms are defined under ERISA;
(g) sell, transfer, contribute, distribute, or otherwise dispose of
any securities or assets of the Company, or agree to do any of the foregoing,
to any Person, or negotiate or have any discussions with any Person with respect
to any of the foregoing, other than sales of inventory in the Ordinary Course
of Business, except for the assignment of the In Touch debt, liens and equipment
to the Sellers as set forth in Section 2.2(h) above; and
--------------
(h) fail to take any action which failure could reasonably be
anticipated to have a material adverse effect upon the business, assets,
operations, financial condition, operating results, earnings, customer and
supplier relations, employee and sales representative relations or business
prospects of the Company (a "Material Adverse Effect").
-----------------------
III.3 Covenants of Buyer. Prior to the Closing, Buyer shall:
------------------
(a) promptly (once it obtains Knowledge thereof) inform Sellers in
writing of any variances from the representations and warranties contained in
Article VI or any breach of any covenant hereunder by Buyer;
-xiv-
(b) cooperate with Sellers and use its reasonable efforts to cause the
conditions to each Seller's obligation to close to be satisfied (including,
without limitation, the execution and delivery of all agreements contemplated
hereunder to be so executed and delivered and the making and obtaining of all
third party and governmental filings, authorizations, approvals, consents,
releases and terminations).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
CONCERNING THE COMPANY AND EACH SELLER
--------------------------------------
As a material inducement to Buyer to enter into this Agreement, the
Company and each Seller jointly and severally hereby represents and warrants
that:
IV.1 Organization and Corporate Power. The Company is a corporation
--------------------------------
duly organized, validly existing and in good standing under the laws of the
State of Arizona and is qualified to do business in every jurisdiction in which
the failure to so qualify has had or would reasonably be expected to have a
Material Adverse Effect. All such jurisdictions in which the Company is
qualified are set forth on Schedule 4.1. The Company has full corporate power
------------
and authority and all material licenses, permits and authorizations necessary to
own and operate its properties, to carry on its business as now conducted and
presently proposed to be conducted. The copies of the Company's articles of
incorporation and by-laws which have been furnished to Buyer reflect all
amendments made thereto at any time prior to the date of this Agreement and are
correct and complete. The minute books containing the records of meetings of the
stockholders and board of directors, the stock certificate books and the stock
record books of the Company which have been furnished to Buyer are correct and
complete. The Company is not in default under or in violation of any provision
of its articles of incorporation or by-laws.
IV.2 Authorization of Transactions. The Company has full corporate
-----------------------------
power and authority to execute and deliver this Agreement, and all other
agreements contemplated hereby to which the Company is a party (collectively,
the "Transaction Documents") and to consummate the transactions contemplated
---------------------
hereby and thereby. The board of directors of the Company has duly approved this
Agreement and all other Transaction Documents contemplated hereby to which the
Company is a party and has duly authorized the execution and delivery of this
Agreement and all other Transaction Documents and the consummation of the
transactions contemplated hereby and thereby. No other corporate proceedings on
the part of the Company are necessary to approve and authorize the execution and
delivery of this Agreement or the other Transaction Documents and the
consummation of the transactions contemplated hereby and thereby. This Agreement
and all other Transaction Documents have been duly executed and delivered by the
Company and constitute the valid and binding agreements of the Company,
enforceable against the Company in accordance with their terms.
IV.3 Capitalization. The authorized, issued and outstanding stock of
--------------
the Company is as set forth in the second paragraph of the recitals of this
Agreement. All of the issued and outstanding shares of the Acquired Stock have
been duly authorized, are validly issued, fully paid
-xv-
and nonassessable, are not subject to, nor were they issued in violation of, any
preemptive rights or rights of first refusal, and are owned of record and
beneficially by the respective Sellers as set forth on Schedule 1.1 free and
------------
clear of all Liens. The respective Sellers have owned all issued and outstanding
shares of the Acquired Stock since the date(s) set forth on Schedule 1.1. There
------------
are no outstanding or authorized options, warrants, rights, contracts, calls,
puts, rights to subscribe, conversion rights or other agreements or commitments
to which the Company is a party or which are binding upon the Company providing
for the issuance, disposition or acquisition of any of its capital stock (other
than this Agreement). There are no outstanding or authorized stock appreciation,
phantom stock or similar rights with respect to the Company. There are no voting
trusts, proxies or any other agreements or understandings with respect to the
voting of the capital stock of the Company. The Company is not subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its capital stock.
IV.4 Subsidiaries; Investments. The Company does not own or hold any
-------------------------
shares of stock or any other security or interest in any other Person or any
rights to acquire any such stock or other security or interest, and the Company
has never owned any Subsidiary. For purposes of this Agreement, "Person" means
------
an individual, a partnership, a limited liability company a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization and a governmental entity or any department, agency or political
subdivision thereof, and "Subsidiary" means, with respect to any Person, any
----------
corporation, partnership, association or other business entity of which (i) if a
corporation, a majority of the total voting power of shares of stock entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other Subsidiaries
of that Person or a combination thereof, or (ii) if a partnership, limited
liability company, association or other business entity, a majority of the
partnership or other similar ownership interest thereof is at the time owned or
controlled, directly or indirectly, by any Person or one or more Subsidiaries of
that Person or a combination thereof. For purposes hereof, a Person or Persons
shall be deemed to have a majority ownership interest in a partnership, limited
liability company, association or other business entity if such Person or
Persons shall be allocated a majority of partnership, association or other
business entity gains or losses or shall be or control the managing director or
general partner of such partnership, association or other business entity.
IV.5 Absence of Conflicts. Except as set forth in Schedule 4.5, the
-------------------- ------------
execution, delivery and performance of this Agreement and the other Transaction
Documents and the consummation of the transactions contemplated hereby and
thereby by the Company and/or each Seller do not and shall not (a) conflict with
or result in any breach of any of the terms, conditions or provisions of, (b)
constitute a default under, (c) result in a violation of, (d) give any third
party the right to modify, terminate or accelerate any obligation under, (e)
result in the creation of any Lien upon the Acquired Stock or the assets of
either Company, or (f) require any authorization, consent, approval, exemption
or other action by or notice or declaration to, or filing with, any court or
administrative or other governmental body or agency, under the provisions of the
articles of incorporation or by-laws of any Company or any indenture, mortgage,
lease, loan agreement or other agreement or instrument to which any Company is
bound or affected, or any law, statute, rule or regulation to which the Company
is subject or any judgment, order or decree to which the Company is subject.
-xvi-
IV.6 Financial Statements. The Company has furnished Buyer with
--------------------
copies of its (i) unaudited balance sheet as of September 30, 1999 (the "Latest
------
Balance Sheet") and the related statement of operations for the six-month period
-------------
then ended and (ii) unaudited balance sheets and statements of operations,
shareholders' equity and cash flows for the fiscal years ended June 30, 1999,
and December 31, 1997 and 1996, and January 1, 1998 to June 30, 1998. Each of
the foregoing financial statements (including in all cases the notes thereto, if
any) (the "Financial Statements") is accurate and complete in all material
--------------------
respects, is consistent with the Company's books and records (which, in turn,
are accurate and complete in all material respects), present fairly in all
material respects the Company's financial condition and results of operations as
of the times and for the periods referred to therein and have been prepared on a
consistent basis for the periods covered.
IV.7 Absence of Undisclosed Liabilities. The Company does not have
----------------------------------
any obligations or liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise, whether or not known, whether due or to become due
and regardless of when asserted) arising out of transactions entered into at or
prior to the Closing, or any action or inaction at or prior to the Closing, or
any state of facts existing at or prior to the Closing, including Taxes with
respect to or based upon transactions or events occurring on or before the
Closing, except (i) obligations under contracts or commitments described in
Schedule 4.13 or under contracts and commitments which are not required to be
-------------
disclosed thereon (but not liabilities for breaches thereof), (ii) liabilities
reflected on the liabilities side of the Latest Balance Sheet, (iii) liabilities
which have arisen after the date of the Latest Balance Sheet in the Ordinary
Course of Business or otherwise in accordance with the terms and conditions of
this Agreement (none of which is a liability for breach of contract, breach of
warranty, tort or infringement or a claim or lawsuit or an environmental
liability) and (iv) liabilities disclosed on Schedule 4.7.
------------
IV.8 Absence of Certain Developments. Except as set forth in
-------------------------------
Schedule 4.8 and except as expressly contemplated by this Agreement, since June
------------
30, 1999 the Company has not:
(a) suffered a Material Adverse Change or suffered any theft, damage,
destruction or casualty loss in excess of $5,000, to its assets, whether or not
covered by insurance or suffered any substantial destruction of the Company's
books and records;
(b) redeemed or repurchased, directly or indirectly, any shares of
capital stock or other equity security or declared, set aside or paid any
dividends or made any other distributions (whether in cash or in kind) with
respect to any shares of its capital stock or other equity security other than
distributions made to Sellers in the Ordinary Course of Business for the purpose
of paying estimates of federal, state and local income taxes attributable to the
taxable income of the Company for periods ending on or prior to the Closing
(provided that such distribution is not disruptive or detrimental to the
Company);
(c) issued, sold or transferred any notes, bonds or other debt
securities, any equity securities, any securities convertible, exchangeable or
exercisable into shares of its capital stock or other equity securities, or
warrants, options or other rights to acquire shares of its capital stock or
other equity securities of the Company;
-xvii-
(d) borrowed any amount or incurred or become subject to any
liabilities, except liabilities incurred in the Ordinary Course of Business;
(e) discharged or satisfied any Lien or paid any obligation or
liability, other than liabilities paid in the Ordinary Course of Business, or
prepaid any amount of Indebtedness for borrowed money other than the
MCI/WorldCom Indebtedness and the FET Indebtedness;
(f) subjected any portion of its properties or assets to any Lien;
(g) sold, leased, assigned or transferred (including, without
limitation, transfers to Sellers or any Insider) a portion of its tangible
assets, except for sales of inventory in the Ordinary Course of Business, or
cancelled without fair consideration any material debts or claims owing to or
held by it;
(h) sold, assigned, licensed or transferred (including, without
limitation, transfers to Sellers or any Insider) any Proprietary Rights owned
by, issued to or licensed to the Company or disclosed any confidential
information (other than pursuant to agreements requiring the disclosure to
maintain the confidentiality of and preserving all rights of the Company in such
confidential information) or received any confidential information of any third
party in violation of any obligation of confidentiality;
(i) suffered any extraordinary losses or waived any rights of
material value, whether or not in the Ordinary Course of Business;
(j) entered into, amended or terminated any material lease, contract,
agreement or commitment, or taken any other action or entered into any other
transaction other than in the Ordinary Course of Business;
(k) entered into any other material transaction, whether or not in
the Ordinary Course of Business, or materially changed any business practice;
(l) made or granted any bonus or any wage, salary or compensation
increase in excess of $4,000 per year to any single director, officer, employee
or sales representative or consultant or made or granted any increase in any
employee benefit plan or arrangement, or amended or terminated any existing
employee benefit plan or arrangement or adopted any new employee benefit plan or
arrangement;
(m) made any other change in employment terms for any of its
directors, officers, and employees outside the Ordinary Course of Business;
(n) incurred intercompany charges or conducted its cash management
customs and practices other than in the Ordinary Course of Business (including,
without limitation, with respect to maintenance of working capital balances,
collection of accounts receivable and payment of accounts payable);
(o) incurred any Tax Liability, except those for which reserves have
been established and disclosed on the Latest Balance Sheet or such as are
disclosed on Schedule 4.8(o);
---------------
(p) made any capital expenditures or commitments for capital
expenditures that aggregate in excess of $10,000;
(q) made any loans or advances to, or guarantees for the benefit of,
any Persons;
(r) made any charitable contributions, pledges, association fees or
dues in excess of $1,000;
(s) entered into any lease of capital equipment or real property
involving rental in excess of $5,000 per annum; or
(t) changed or authorized any change in its articles of incorporation
or by-laws.
IV.9 Title to Properties.
-------------------
(a) The Company does not own real property.
(b) The real property leases and subleases described on Schedule
--------
4.9(b) are valid, binding, enforceable and in full force and effect and have not
------
been modified (except to the extent disclosed in the documents delivered to
Buyer), and the Company holds a valid and existing leasehold interest under such
leases or subleases for the term set forth in Schedule 4.9(b). The leases and
---------------
subleases described in Schedule 4.9(b) (the "Leased Properties") constitute all
--------------- -----------------
of the leases and subleases under which each Company holds leasehold or
subleasehold interests in real property. The Company has delivered to Buyer
complete and accurate originals of each of the leases or subleases described in
Schedule 4.9(b) (or certified copies thereof if the originals are not
---------------
available). With respect to each lease and sublease listed on Schedule 4.9(b):
---------------
(i) the lease or sublease shall continue to be legal, valid,
binding, enforceable and in full force and effect on identical terms
following the Closing;
(ii) neither Company nor any other party to the lease or sublease
is in breach or default, and no event has occurred which, with notice or
lapse of time, would constitute such a breach or default or permit
termination, modification or acceleration under the lease or sublease;
(iii) no party to the lease or sublease has repudiated any
provision thereof and there are no disputes, oral agreements or forbearance
programs in effect as to the lease or sublease;
(iv) the Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust or encumbered any interest in the leasehold or
subleasehold;
-xix-
(v) all buildings, improvements or other property leased or
subleased thereunder have received all approvals of governmental
authorities required in connection with the operation thereof and have been
operated and maintained in accordance with applicable laws, rules and
regulations; and
(vi) as of the Closing, (A) Sellers shall have obtained the
consent of each landlord to the transactions contemplated hereunder and
under the other Transaction Documents or (B) the lease or sublease does not
prohibit the transactions contemplated hereunder and under the other
Transaction Documents.
(c) The real property described in Schedule 4.9(b) constitutes
--------------
all of the real property used or occupied by the Company.
(d) Except as set forth on Schedule 4.9(d), the Company owns
---------------
good and marketable title to, or a valid leasehold interest in, free and
clear of all Liens, all of the personal property and assets which are shown
on the applicable Latest Balance Sheet or acquired thereafter or located on
the Leased Properties or used by such Company. For purposes of this
Agreement, "Lien" means any mortgage, pledge, security interest,
----
encumbrance, lien or charge of any kind (including, without limitation, any
conditional sale or other title retention agreement or lease in the nature
thereof), any sale of receivables with recourse against Companies or any
Affiliate, any filing or agreement to file a financing statement as debtor
under the Uniform Commercial Code or any similar statute other than to
reflect ownership by a third party of property leased to Companies under a
lease which is not in the nature of a conditional sale or title retention
agreement, or any subordination arrangement in favor of another Person
(other than any subordination arising in the Ordinary Course of Business).
(e) The buildings, machinery, equipment, personal properties,
vehicles and other tangible assets of the Company located upon or used in
connection with the Leased Properties (other than assets that are not necessary
for the operation of the business of the Company) are operated in conformity
with all applicable laws and regulations, are in good condition and repair,
reasonable wear and tear excepted, and are usable in the Ordinary Course of
Business. The Company owns or leases under valid leases all buildings,
machinery, equipment and other tangible assets necessary for the conduct of its
business.
IV.10 Accounts Receivable. Except as set forth on Schedule 4.10, all
------------------- -------------
of the notes and accounts receivable of the Company reflected on its Latest
Balance Sheet are good and valid receivables (subject to no counterclaims or
offset) and shall be collected (net of the allowance for doubtful accounts
recorded on the applicable Latest Balance Sheet) within 90 days after the
Closing Date at the aggregate amount recorded therefor on the applicable Latest
Balance Sheet. There are no individual accounts receivable which are over
$5,000 and 90 days past due, except as set forth on Schedule 4.10. As of the
-------------
Closing Date, no Person shall have any Lien on such receivables or any part
thereof, and no agreement for deduction, free goods, discount or other deferred
price or quantity adjustment shall have been made with respect to any such
receivables.
IV.11 Inventory. The inventories of the Company reflected on its
---------
Latest Balance Sheet are of a quantity and quality usable and saleable in the
Ordinary Course of Business without
-xx-
discount, are not damaged, defective, slow-moving or obsolete, and are
merchantable and fit for their particular purpose. For the purpose of this
Agreement, "slow-moving" means any item which it has taken or it is likely to
-----------
take over 12 months to sell.
IV.12 Taxes.
-----
(a) Except as set forth on Schedule 4.12, (i) the Company has timely
-------------
filed all Tax Returns which are required to be filed on or before the Closing
Date, and all such Tax Returns are true, complete and accurate in all respects
and have been prepared in compliance with all applicable laws and regulations,
(ii) all Taxes due and payable by the Company, whether or not shown on a Tax
Return, have been paid by the Company or Sellers and all Taxes accrued but not
yet due are accrued on the Latest Balance Sheet and no Taxes are delinquent,
(iii) no deficiency or proposed adjustment for any amount of Tax has been
asserted or assessed by a taxing authority against the Company and neither the
Company nor any Seller reasonably expects that any such assertion or assessment
of Tax liability will be made, (iv) the Company has not consented to extend the
time in which any Tax may be assessed or collected by any taxing authority to a
date later than the date hereof, (v) the Company has not been a member of an
Affiliated Group, (vi) no claim has ever been made by any taxing authority in a
jurisdiction where the Company does not file Tax Returns that the Company is or
may be subject to Taxes assessed by such jurisdiction, (vii) the Company has no
liability for Taxes of any other Person under Treasury Regulations Section
1.1502-6 (or any similar provision or state, local or foreign Tax law), as a
transferee, by contract, or otherwise, (viii) 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, stockholder or
other third party and (ix) the Company has neither made any payments, nor is or
shall become obligated (under any contract entered into on or before the Closing
Date) to make any payments, that shall be non-deductible under Section 280G of
the Code (or any corresponding provision of state, local or foreign income Tax
law). The Company is not a party to any tax sharing, allocation or similar
agreement. Schedule 4.12 contains a list of states, territories and
-------------
jurisdictions (whether foreign or domestic) in which the Company is required to
file Tax Returns. The Company made a valid election under Section 1362 of the
Code and all corresponding state or local tax provisions to be an S corporation
for its taxable year beginning July 1, 1997 and ending December 31, 1997, and
for its taxable year beginning January 1, 1998 and ending June 30, 1998. Such
elections were valid when taken. For all taxable periods beginning on or after
July 1, 1998, the Company has no valid election to be taxed as an S corporation
under the Code (or under any corresponding provision of state, local or foreign
income Tax law).
(b) As used in this Agreement, the following terms shall have the
following respective meanings:
(i) "Affiliated Group" means an affiliated group as defined in
----------------
Section 1504 of the Code (or any similar combined, consolidated or unitary
group defined under state, local or foreign income Tax law).
(ii) "Code" means the Internal Revenue Code of 1986, as amended.
----
-xxi-
(iii) "Tax" or "Taxes" means any federal, state, local or foreign
--- -----
income, gross receipts, franchise, alternative or add-on minimum,
estimated, sales, use, transfer, registration, value added, excise, stamp,
environmental, customs, duties, real property, personal property, capital
stock, license, social security, unemployment, disability, payroll,
employee or other withholding, or other tax, of any kind whatsoever,
including any interest, penalties or additions to tax or additional amounts
in respect of the foregoing.
(iv) "Tax Returns" means returns, declarations, reports, claims for
-----------
refund, information returns or other documents (including any related or
supporting schedules, statements or information) filed or required to be
filed in connection with the determination, assessment or collection of
Taxes of any party or the administration of any laws, regulations or
administrative requirements relating to any Taxes.
IV.13 Contracts and Commitments.
-------------------------
(a) Except as specifically contemplated by this Agreement and except
as set forth in Schedule 4.13, the Company is neither a party to nor bound by,
-------------
whether written or oral, any:
(i) collective bargaining agreement or contract with any labor
union or any bonus, pension, profit sharing, retirement or any other form
of deferred compensation plan or any stock purchase, stock option,
hospitalization insurance or similar plan or practice, whether formal or
informal;
(ii) contract for the employment of any officer, individual
employee or other person on a full-time or consulting basis or any
severance agreements;
(iii) agreement or indenture relating to the borrowing of money or
to mortgaging, pledging or otherwise placing a Lien on any of its assets;
(iv) agreements with respect to the lending or investing of
funds;
(v) license or royalty agreements;
(vi) guaranty of any obligation, other than endorsements made for
collection;
(vii) lease or agreement under which it is lessee of, or holds or
operates, any personal property owned by any other party calling for
payments in excess of $2,000 annually;
(viii) lease or agreement under which it is lessor of or permits
any third party to hold or operate any property, real or personal, owned or
controlled by it;
(ix) contract or group of related contracts with the same party
for the purchase or sale of supplies, products or other personal property
or for the furnishing or receipt of services which either calls for
performance over a period of more than one year (except if such contracts
do not involve a sum in excess of $2,000 annually) or involves a sum in
excess of $2,000;
-xxii-
(x) contract or group of related contracts with the same party
continuing over a period of more than six months from the date or dates
thereof, not terminable by it on 30 days or less notice without penalties
or involving more than $2,000;
(xi) contract which prohibits it from freely engaging in business
anywhere in the world;
(xii) contract relating to the distribution, marketing or sales of
its products;
(xiii) agreements, contracts or understandings pursuant to which
the Company subcontracts work to third parties; or
(xiv) other agreement material to it whether or not entered into
in the Ordinary Course of Business.
(b) Except as disclosed in Schedule 4.13, (i) to the Knowledge
-------------
of the Company, no contract or commitment required to be disclosed on Schedule
--------
4.13 has been breached or cancelled by the other party since December 31, 1998,
----
and the Company has no Knowledge of any anticipated breach by any other party to
any contract set forth on Schedule 4.13, (ii) since December 31, 1998, no
-------------
customer or supplier has indicated in writing or orally to the Company or any
Seller that it shall stop or decrease the rate of business done with either
Company or that it desires to renegotiate its contract with the Company, (iii)
the Company has performed all the obligations required to be performed by it in
connection with the contracts or commitments required to be disclosed on
Schedule 4.13 and is not in default under or in breach of any contract or
-------------
commitment required to be disclosed on the Schedule 4.13, and no event has
-------------
occurred which with the passage of time or the giving of notice or both would
result in a default or breach thereunder, (iv) the Company does not have a
present expectation or intention of not fully performing any obligation pursuant
to any contract set forth on Schedule 4.13, (vi) each agreement is legal, valid,
-------------
binding, enforceable and in full force and effect and will continue as such
following the consummation of the transactions contemplated hereby, and (vii) no
unfilled customer order or commitment obligating the Company to process or
deliver products or perform services shall result in a loss to the Company upon
completion of performance.
(c) Schedule 4.13 lists the ten largest customers and the ten
-------------
largest suppliers of the Company during the 12-month period ended September 30,
1999.
(d) Sellers have provided Buyer with a true and correct copy of
all written contracts which are required to be disclosed on Schedule 4.13, in
-------------
each case together with all amendments, waivers or other changes thereto (all of
which are disclosed on Schedule 4.13). Schedule 4.13 contains an accurate and
------------- -------------
complete description of all material terms of all oral contracts referred to
therein.
IV.14 Proprietary Rights.
------------------
-xxiii-
(a) "Proprietary Rights" shall mean all of the following items along
------------------
with all income, royalties, damages and payments due or payable at the Closing
or thereafter, including, without limitation, damages and payments for past,
present or future infringements or misappropriations thereof, the right to xxx
and recover for past infringements or misappropriations thereof and any and all
corresponding rights that, now or hereafter, may be secured throughout the
world: (i) patents, patent applications, patent disclosures and inventions
(whether or not patentable and whether or not reduced to practice) and any
reissue, continuation, continuation-in-part, division, revision, extension or
reexamination thereof; (ii) trademarks, service marks, trade dress, logos, trade
names and corporate names, together with all goodwill associated therewith;
registered and unregistered copyrights, copyrightable works and mask works;
(iii) all registrations, applications and renewals for any of the foregoing;
(iv) trade secrets and confidential information (including, without limitation,
ideas, formulae, compositions, know-how, manufacturing and production processes
and techniques, research and development information, drawings, specifications,
designs, plans, proposals, technical data, financial, business and marketing
plans, and customer and supplier lists and related information); (v) computer
software and software systems (including, without limitation, data, databases
and related documentation); (vi) other proprietary rights; (vii) licenses or
other agreements to or from third parties regarding the foregoing; and (viii)
all copies and tangible embodiments of the foregoing (in whatever form or
medium), in each case including, without limitation, the items set forth on
Schedule 4.14.
-------------
(b) Schedule 4.14 sets forth a complete and correct list of: (i) all
-------------
patented or registered Proprietary Rights and all pending patent applications or
other applications for registration of Proprietary Rights owned, filed or used
by the Company; (ii) all trade names and unregistered trademarks used by the
Company; (iii) all material unregistered copyrights, mask works and computer
software owned or used by the Company; and (iv) all licenses or similar
agreements or arrangements to which the Company is a party, either as licensee
or licensor, for the Proprietary Rights, in each case identifying the subject
Proprietary Rights.
(c) Except as set forth in Schedule 4.14, (i) the Company owns and
-------------
possesses all right, title and interest in and to, or has a valid and
enforceable right to use, each of the Proprietary Rights listed on Schedule
--------
4.14, free and clear of all Liens, and no claim by any third party contesting
----
the validity, enforceability, use or ownership of any of the Proprietary Rights
has been made, is currently outstanding or, to the Knowledge of either Company,
is threatened, and there are no grounds for same, (ii) the Proprietary Rights
listed on Schedule 4.14 comprise all proprietary rights necessary for the
-------------
operation of the Company's businesses as currently conducted, and as currently
proposed to be conducted, (iii) the loss or expiration of any Proprietary Right
owned by, issued to or licensed to the Company or related group of Proprietary
Rights has not and would not have a Material Adverse Effect, and no such loss or
expiration is pending or, to the Knowledge of Companies, threatened or
reasonably foreseeable, (iv) the Company has neither received any notices of,
nor is the Company aware of any facts which indicate a likelihood of, any
infringement or misappropriation by, or conflict with, any third party with
respect to any Proprietary Right owned by, issued to or licensed to the Company
(including, without limitation, any demand or request that the Company license
rights from a third party), (v) the Company has not infringed, misappropriated
or otherwise conflicted with any rights of any third parties and the Company is
not aware of any infringement, misappropriation or conflict which shall occur as
a result of the continued operation of the Company's businesses as currently
conducted or as currently proposed to be conducted, and
-xxiv-
(vi) to the Company's Knowledge, the Proprietary Rights owned or licensed to the
Company have not been infringed, misappropriated or conflicted by any third
party.
(d) The transactions contemplated by this Agreement shall have no
adverse effect on the Company's right, title and interest in and to any of the
Proprietary Rights. The Company has disclosed any of its trade secrets or
confidential information to any third party other than pursuant to a written
confidentiality agreement. The Company has entered into written confidentiality
agreements and written proprietary rights agreements with all of its employees
and independent contractors acknowledging the Company's ownership of all
inventions created or developed by its employees and independent contractors
within the scope of their employment. The Company has taken all other necessary
and desirable actions to maintain and protect its Proprietary Rights and shall
continue to maintain and protect those rights prior to the Closing so as to not
adversely affect the validity or enforcement of such Proprietary Rights. To the
Company's Knowledge, the owners of any Proprietary Rights licensed to the
Company have taken all necessary and desirable actions to maintain and protect
the Proprietary Rights which are subject to such licenses.
IV.15 Litigation; Proceedings. Except as set forth in Schedule 4.15,
----------------------- -------------
there are no actions, suits, proceedings, orders, judgments, decrees or
investigations pending or, to the Company's Knowledge, threatened against or
affecting the Company at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, and to the Knowledge of either Company
there is no basis known for any of the foregoing. Except as set forth on
Schedule 4.15, the Company has not received any opinion or legal advice in
-------------
writing to the effect that the Company is exposed from a legal standpoint to any
liability or disadvantage which may be material to the Company's business as
previously or presently conducted or business prospects. The Company is not
subject to any outstanding order, judgment or decree issued by any court or
quasi-judicial or administrative agency of any federal, state, local or foreign
jurisdiction or any arbitrator.
IV.16 Brokerage. Except as set forth in Schedule 4.16, there are no
--------- -------------
claims for brokerage commissions, finders' fees or similar compensation in
connection with the transactions contemplated by this Agreement based on any
arrangement or agreement made by or on behalf of the Company.
IV.17 Governmental Licenses and Permits. Schedule 4.17 contains a
--------------------------------- -------------
complete listing and summary description of all permits, licenses, franchises,
certificates, approvals and other authorizations of foreign, federal, state and
local governments or other similar rights (collectively, the "Licenses") owned
--------
or possessed by the Company or used by the Company in the conduct of its
business. Except as indicated on Schedule 4.17, the Company owns or possesses
-------------
all right, title and interest in and to all Licenses which are necessary to
conduct its business as presently conducted and as proposed to be conducted and
shall use its reasonable efforts to maintain all such Licenses. No loss or
expiration of any License is pending or, to the Company's Knowledge, threatened
or reasonably foreseeable (including, without limitation, as a result of the
transactions contemplated hereby) other than expiration in accordance with the
terms thereof.
IV.18 Employees. Except as set forth on Schedule 4.18, to the
--------- -------------
Knowledge of the Company, no key executive employee and no group of employees
or independent contractors of the
-xxv-
Company has any plans to terminate his, her or its employment or relationship as
an independent contractor with the Company. The Company has complied with all
applicable laws relating to the employment of personnel and labor, including
provisions thereof relating to wages, hours, equal opportunity, collective
bargaining and the payment of social security and other taxes, the Worker
Adjustment and Retraining Act, and the Immigration Reform and Control Act of
1986. The Company is not a party to or bound by any collective bargaining
agreement, nor has it experienced any strikes, grievances, unfair labor
practices claims or other material employee or labor disputes. The Company has
not engaged in any unfair labor practice. The Company does not have any
Knowledge of any organizational effort presently being made or threatened by or
on behalf of any labor union with respect to employees of the Company.
Schedule 4.18 sets forth the names, present annual or, as the case may be,
-------------
hourly rate of compensation (including salary, bonuses and commissions) of all
persons employed by the Company (including independent contractors) and their
job descriptions.
IV.19 Employee Benefit Plans.
----------------------
(a) Except as set forth on Schedule 4.19, with respect to current or
-------------
former employees of the Company, the Company does not maintain or contribute to
or have any actual or potential liability with respect to any (i) deferred
compensation or bonus or retirement plans or arrangements, (ii) qualified or
nonqualified defined contribution or defined benefit plans or arrangements which
are employee pension benefit plans (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974 ("ERISA")), or (iii) employee welfare
-----
benefit plans, (as defined in Section 3(1) of ERISA), stock option or stock
purchase plans, or material fringe benefit plans or programs whether in writing
or oral and whether or not terminated. The Company has never contributed to any
multiemployer pension plan (as defined in Section 3(37) of ERISA), and the
Company has never maintained or contributed to any defined benefit plan (as
defined in Section 3(35) of ERISA). The Company neither maintains nor
contributes to any employee welfare benefit plan which provides health, accident
or life insurance benefits to former employees, their spouses or dependents,
other than in accordance with Section 4980B of the Internal Revenue Code of 1986
(the "Code") ("COBRA").
---- -----
(b) The employee pension benefit plans and employee welfare benefit
plans (and related trusts and insurance contracts) comply in form and in
operation in all respects with the requirements of applicable laws and
regulations, including ERISA and the Code and the nondiscrimination rules
thereof; and the employee pension benefit plans which are intended to be
"qualified plans" qualify under Section 401(a) of the Code, and each such
employee pension benefit plan, and each trust (if any) forming a part thereof,
has received a favorable determination letter from the Internal Revenue Service
as to the qualification under the Code of such plan and the tax-exempt status of
such related trust and nothing has occurred since the date of such determination
letter that could adversely affect the qualification of such plan or the tax
exempt status of such related trust.
(c) All required reports and descriptions (including Form 5500 Annual
Reports, Summary Annual Reports and Summary Plan Descriptions) with respect to
the employee pension benefit plans and employee welfare benefit plans have been
properly and timely filed with the appropriate government agency and distributed
to participants as required. The Company has complied with the requirements of
COBRA.
-xxvi-
(d) With respect to each employee pension benefit plan, all
contributions which are due (including all employer contributions and employee
salary reduction contributions) have been paid to such employee pension benefit
plan, all contributions for prior plan years which are not yet due and with
respect to the current plan year for the period ending on the Closing Date have
been made or accrued in accordance with GAAP, and, with respect to the employee
welfare benefit plans, all premiums or other payments which are due have been
paid.
(e) The Company has not incurred any liability to the Pension
Benefit Guarantee Corporation, the Internal Revenue Service, any multiemployer
plan or otherwise with respect to any employee pension benefit plan currently or
previously maintained by members of the controlled group of companies (as
defined in Sections 414(b) and (c) of the Code) that includes or included either
Company (the "Controlled Group") that has not been satisfied in full, and no
----------------
condition exists that presents a material risk to any Company or any member of
the Controlled Group of incurring such a liability.
(f) With respect to each employee pension benefit plan and each
employee welfare benefit plan, (i) there have been no prohibited transactions as
defined in Section 406 of ERISA or Section 4975 of the Code, (ii) no fiduciary
(as defined in Section 3(21) of ERISA) has any liability for breach of fiduciary
duty or any other failure to act or comply in connection with the administration
or investment of the assets of such plans, and (iii) no actions, investigations,
suits or claims with respect to the assets thereof (other than routine claims
for benefits) are pending or threatened, and the Company does not have any
Knowledge of any facts which would give rise to or could reasonably be expected
to give rise to any such actions, suits or claims.
(g) With respect to each of the plans listed on Schedule 4.19,
-------------
Sellers have furnished to Buyer true and complete copies of (i) the plan
documents, summary plan descriptions and summaries of material modifications and
other material employee communications, (ii) the most recent determination
letter received from the Internal Revenue Service, (iii) the Form 5500 Annual
Report (including all schedules and other attachments for the most recent three
years), (iv) all related trust agreements, insurance contracts or other funding
agreements which implement such plans and (v) all contracts relating to each
such plan, including, without limitation, service provider agreements, insurance
contracts, investment management agreements and recordkeeping agreements.
IV.20 Insurance. Schedule 4.20 lists and briefly describes each
--------- -------------
insurance policy maintained by the Company with respect to its properties,
assets and business, together with a claims history for the past five years.
All of such insurance policies are in full force and effect, and the Company is
not in default with respect to its obligations under any such insurance policies
and the Company has not been denied insurance coverage. The insurance coverage
of Companies is customary for corporations of similar size engaged in similar
lines of business. Except as set forth on Schedule 4.20, the Company does not
-------------
have any self-insurance or co-insurance programs, and the reserves set forth on
the Latest Balance Sheets are adequate to cover all anticipated liabilities with
respect to self-insurance or coinsurance programs.
-xxvii-
IV.21 Officers and Directors; Bank Accounts. Schedule 4.21 lists all
------------------------------------- -------------
officers and directors of the Company, and all bank accounts, safety deposit
boxes and lock boxes (designating each authorized signatory with respect
thereto) for the Company.
IV.22 Affiliate Transactions. Except as disclosed on Schedule 4.22,
---------------------- -------------
no officer, director, employee, stockholder, or Affiliate of the Company or any
individual related by marriage or adoption to any such individual or any entity
in which any such Person owns any beneficial interest (collectively, the
"Insiders"), is a party to any agreement, contract, commitment or transaction
---------
with either Company or which is pertaining to the business of the Company or has
any interest in any property, real or personal or mixed, tangible or intangible,
used in or pertaining to the business of the Company. For purposes of this
Agreement, "Affiliate" of any particular Person means any other Person
---------
controlling, controlled by or under common control with such particular Person,
where "control" means the possession, directly or indirectly, of the power to
direct the management and policies of a Person whether through the ownership of
voting securities or otherwise.
IV.23 Compliance with Laws. Except as set forth on Schedule 4.23,
-------------------- -------------
the Company and its officers, directors, agents and employees have complied with
all applicable laws, regulations and ordinances of foreign, federal, state and
local governments and all agencies thereof which are applicable to the business,
business practices (including, but not limited to, the Company's production,
marketing, sales and distribution of its products and services) or any owned or
leased properties of the Company and to which the Company may be subject, and no
claims have been filed against such Company alleging a violation of any such
laws or regulations, and the Company has not received notice of any such
violations.
IV.24 Environmental Matters.
----------------------
(a) The Company has complied with and is currently in compliance
with all Environmental and Safety Requirements, and the Company has not received
any oral or written notice, report or information regarding any liabilities
(whether accrued, absolute, contingent, unliquidated or otherwise) or any
corrective, investigatory or remedial obligations arising under Environmental
and Safety Requirements which relate to the Company or any of its properties or
facilities.
(b) Without limiting the generality of the foregoing, the Company
has obtained and complied with, and is currently in compliance with, all
permits, licenses and other authorizations that may be required pursuant to any
Environmental and Safety Requirements for the occupancy of its properties or
facilities or the operation of its businesses. A list of all such permits,
licenses and other authorizations which are material to the Company is set forth
on Schedule 4.24.
-------------
(c) Neither this Agreement or the other Transaction Documents nor
the consummation of the transactions contemplated hereby and thereby shall
impose any obligations on the Company or otherwise for site investigation or
cleanup, or notification to or consent of any government agencies or third
parties under any Environmental and Safety Requirements (including, without
limitation, any so called "transaction-triggered" or "responsible property
transfer" laws and regulations).
-xxviii-
(d) None of the following exists at any property or facility owned,
occupied or operated by the Company: (i) underground storage tanks or surface
impoundments; (ii) asbestos-containing material in any form or condition; or
(iii) materials or equipment containing polychlorinated biphenyls.
(e) The Company has not treated, stored, disposed of, arranged for or
permitted the disposal of, transported, handled or Released any substance
(including, without limitation, any hazardous substance) or owned, occupied or
operated any facility or property, so as to give rise to liabilities of the
Company for response costs, natural resource damages or attorneys fees pursuant
to the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA"), or any other Environmental and Safety Requirements.
------
(f) Without limiting the generality of the foregoing, no facts,
events or conditions relating to the past or present properties, facilities or
operations of the Company shall prevent, hinder or limit continued compliance
with Environmental and Safety Requirements, give rise to any corrective,
investigatory or remedial obligations pursuant to Environmental and Safety
Requirements or give rise to any other liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise) pursuant to Environmental and Safety
Requirements, including, without limitation, those liabilities relating to
onsite or offsite Releases or threatened Releases of hazardous materials,
substances or wastes, personal injury, property damage or natural resources
damage.
(g) The Company has, neither expressly or by operation of law,
assumed nor undertaken any liability or corrective investigatory or remedial
obligation of any other Person relating to any Environmental and Safety
Requirements.
(h) No Environmental Lien has attached to any property owned, leased
or operated by the Company.
(i) For purposes of this Agreement, the following terms shall have
the following respective meanings:
(i) "Environmental and Safety Requirements" shall mean all federal,
-------------------------------------
state, local and foreign statutes, regulations, ordinances and other
provisions having the force or effect of law, all judicial and
administrative orders and determinations, all contractual obligations and
all common law, in each case concerning public health and safety, worker
health and safety and pollution or protection of the environment,
(including, without limitation, all those relating to the presence, use,
production, generation, handling, transport, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, Release, threatened
Release, control or cleanup of any hazardous or otherwise regulated
materials, substances or wastes, chemical substances or mixtures,
pesticides, pollutants, contaminants, toxic chemicals, petroleum products
or byproducts, asbestos, polychlorinated biphenyls, noise or radiation.
(ii) "Release" shall have the meaning set forth in CERCLA.
-------
-xxiv-
(iii) "Environmental Lien" shall mean any Lien, whether recorded or
------------------
unrecorded, in favor of any governmental entity, relating to any liability
of the Company arising under any Environmental and Safety Requirements.
IV.25 Projections. Attached as Schedule 4.25 is a true and complete
------------ -------------
copy of the latest projections of the income and cash flows of the Company for
the fiscal years ending December 31, 1999, December 31, 2000, and December 31,
2001. Such projections are based on underlying assumptions of the Company which
provide a reasonable basis for the projections contained therein. Such
projections have been prepared on the basis of the assumptions set forth
therein, which the Company reasonably believes are fair and reasonable in light
of the historical financial performance of the Company and of current and
reasonably foreseeable business conditions, including the access to capital and
cost reductions as set forth in such assumptions.
IV.26 Powers of Attorney; Guarantees. Except as set forth on
------------------------------
Schedule 4.26, there are no outstanding powers of attorney executed on behalf of
-------------
the Company. The Company is not a guarantor or otherwise liable for any
Indebtedness of any other person, firm or corporation other than endorsements
for collection in the Ordinary Course of Business.
IV.27 Product Warranties. The Company has not made any warranties
------------------
with respect to the products [manufactured and/or] sold by it other than those
warranties expressly made in the literature accompanying such products, copies
of which are attached hereto as Schedule 4.27.
-------------
IV.28 Indebtedness. The Company does not have any Indebtedness other
------------
than as set forth on Schedule 4.28 (the "Closing Indebtedness"). The Closing
-------------
Indebtedness set forth on Schedule 4.28 shall clearly identify: (i) the
-------------
MCI/WorldCom Indebtedness, and such MCI/WorldCom Indebtedness shall not exceed
in the aggregate $884,375 net of the application of any deposits held by
MCI/WorldCom on the Company's behalf; (ii) FET Indebtedness accrued prior to
Closing, and such FET Indebtedness shall not exceed $1,169,980, and (iii) the
Estimated Excess Indebtedness and each element thereto.
IV.29 Disclosure. Neither this Agreement, the other Transaction
----------
Documents, nor any of the schedules, attachments or Exhibits hereto, contain any
untrue statement of a material fact or omit a material fact necessary to make
each statement contained herein or therein, not misleading. There is no fact
which has not been disclosed to Buyer of which the Company has Knowledge which
has had a Material Adverse Effect or could reasonably be anticipated to have a
Material Adverse Effect.
IV.30 Closing Date. All of the representations and warranties
------------
contained in this Article IV and elsewhere in this Agreement and all information
delivered in any schedule, attachment or Exhibit hereto or in any writing
delivered to Buyer are true and correct in all material respects on the date of
this Agreement and shall be true and correct in all material respects on the
Closing Date, except to the extent that any Seller has advised Buyer otherwise
in writing prior to the Closing.
IV.31 Knowledge. As used in this Article IV and elsewhere in this
--------- ----------
Agreement, the term "Knowledge" as used in the phrases "to the Knowledge of
Company," "to the Knowledge
-xxx-
of the Buyer," "to Company's Knowledge" or phrases of similar import shall mean
and include the actual knowledge or awareness of the Company or Buyer (which
shall include actual knowledge and awareness of the officers, directors and key
employees of the entity and the stockholders of the entity) after making
reasonable inquiry and using reasonable diligence with respect to the particular
matter in question. In particular, the knowledge or awareness of each Seller
shall be imputed to the Company.
ARTICLE V
REPRESENTATIONS AND WARRANTIES WITH RESPECT TO SELLERS
------------------------------------------------------
As a material inducement to Buyer to enter into this Agreement, each
Seller severally represents and warrants to Buyer that:
V.1 Authorization of Transactions. Such Seller has full power,
-----------------------------
authority and legal capacity to enter into this Agreement and the other
documents contemplated hereby to which such Seller is a party and to perform his
obligations hereunder and thereunder. This Agreement and the other documents
contemplated hereby to which such Seller is a party have been duly executed and
delivered by such Seller and constitute the valid and binding agreements of such
Seller, enforceable in accordance with their respective terms.
V.2 Absence of Conflicts. Neither the execution and the delivery of
--------------------
this Agreement and the other documents contemplated hereby to which such Seller
is a party, nor the consummation of the transactions contemplated hereby and
thereby, shall (a) conflict with, result in a breach of any of the provisions
of, (b) constitute a default under, (c) result in the violation of, (d) give any
third party the right to terminate or to accelerate any obligation under, (e)
result in the creation of any Lien upon the Acquired Stock owned by such Seller,
or (f) require any authorization, consent, approval, execution or other action
by or notice to any court or other governmental body, under the provisions of
any indenture, mortgage, lease, loan agreement or other agreement or instrument
to which such Seller is bound or affected, or any statute, regulation, rule,
judgment, order, decree or other restriction of any government, governmental
agency or court to which such Seller is subject. No notice to, filing with or
authorization, consent or approval of any government or governmental agency by
such Seller is necessary for the consummation of the transactions contemplated
by this Agreement and the other documents contemplated hereby to which such
Seller is a party.
V.3 Brokerage. Except as set forth on Schedule 5.3, there are no
--------- ------------
claims for brokerage commissions, finders' fees or similar compensation in
connection with the transactions contemplated by this Agreement based on any
arrangement or agreement made by or on behalf of such Seller.
V.4 Shares. Such Seller holds of record and owns beneficially the
------
shares of Acquired Stock as indicated on Schedule 1.1, free and clear of any
------------
restrictions on transfer (other than any restrictions under the Securities Act
of 1933, as amended, and the state securities laws), claims, taxes, Liens,
options, warrants, rights, contracts, calls, commitments, equities, proxies and
demands. Such Seller is not a party to any option, warrant, right, contract,
call, put or other agreement or
-XXXI-
commitment providing for the disposition or acquisition of any capital stock of
the Company (other than this Agreement). Such Seller is not a party to any
voting trust, proxy or other agreement or understanding with respect to the
voting of any capital stock of the Company.
V.5 No Guarantee of Debt. Neither Seller has guaranteed the
--------------------
MCI/WorldCom Indebtedness.
V.6 Legal and Tax Advice. Sellers have retained independent legal
--------------------
and tax advisors and have not relied on the legal or tax advice of the Buyer or
Buyer's attorneys.
V.7 Closing Date. All of the representations and warranties
------------
concerning such Seller contained in this Article V and elsewhere in this
---------
Agreement and all information delivered in any schedule, attachment or Exhibit
hereto or in any writing delivered to Buyer are true and correct in all material
respects on the date of this Agreement and shall be true and correct in all
material respects on the Closing Date except to the extent that Sellers have
advised Buyer otherwise in writing prior to the Closing.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
As a material inducement to Sellers to enter into this Agreement,
Buyer hereby represents and warrants to Sellers that:
VI.1 Organization and Corporate Power. Buyer is a limited liability
--------------------------------
company duly organized, validly existing and in good standing under the laws of
the State of Delaware, with full corporate power and authority to enter into
this Agreement and the other agreements contemplated hereby to which Buyer is a
party and perform its obligations hereunder and thereunder. The copies of the
Buyer's Articles of Formation and Operating Agreement which have been furnished
to Buyer reflect all amendments made thereto at any time prior to the date of
this Agreement and are correct and complete. The Buyer is not in default under
or in violation of this Agreement or any provision of its Articles of Formation
or Operating Agreement.
VI.2 Authorization of Transaction. The execution, delivery and
----------------------------
performance of this Agreement and the other agreements contemplated hereby to
which Buyer is a party have been duly and validly authorized by all requisite
corporate action on the part of Buyer, and no other company proceedings on its
part are necessary to authorize the execution, delivery or performance of this
Agreement. This Agreement constitutes, and each of the other agreements
contemplated hereby to which Buyer is a party shall when executed constitute, a
valid and binding obligation of Buyer, enforceable in accordance with their
terms.
VI.3 No Violation. Buyer is not subject to or obligated under its
------------
certificate of formation, its operating agreement, any applicable law, or rule
or regulation of any governmental authority, or any agreement or instrument, or
any license, franchise or permit, or subject to any order, writ, injunction or
decree, which would be breached or violated by its execution, delivery or
-xxxii-
performance of this Agreement and the other agreements contemplated hereby to
which Buyer is a party.
VI.4 Governmental Authorities and Consents. Buyer is not required to
-------------------------------------
submit any notice, report or other filing with any governmental authority in
connection with the execution or delivery by it of this Agreement and the other
agreements contemplated hereby to which Buyer is a party or the consummation of
the transactions contemplated hereby or thereby. No consent, approval or
authorization of any governmental or regulatory authority or any other party or
person is required to be obtained by Buyer in connection with its execution,
delivery and performance of this Agreement and the other agreements contemplated
hereby to which Buyer is a party or the transactions contemplated hereby or
thereby.
VI.5 Litigation. There are no actions, suits, proceedings or orders
----------
pending or, to Buyer's Knowledge, threatened against or affecting Buyer at law
or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, which would adversely affect Buyer's performance under this
Agreement and the other agreements contemplated hereby to which Buyer is a party
or the consummation of the transactions contemplated hereby or thereby.
VI.6 Brokerage. There are no claims for brokerage commissions,
---------
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by or
on behalf of Buyer.
VI.7 Closing Date. All of the representations and warranties
------------
contained in this Article VI and elsewhere in this Agreement and all information
delivered in any schedule, attachment or Exhibit hereto or in any writing
delivered to Sellers are true and correct in all material respects on the date
of this Agreement and shall be true and correct in all material respects on the
Closing Date, except to the extent that Buyer has advised Sellers otherwise in
writing prior to the Closing.
ARTICLE VII
TERMINATION
-----------
VII.1 Termination. This Agreement may be terminated at any time
-----------
prior to the Closing:
(a) by mutual written consent of Sellers and Buyer;
(b) by Sellers or Buyer if there has been a material
misrepresentation or breach on the part of the other Party of the
representations, warranties or covenants set forth in this Agreement or if
events have occurred which have made it impossible to satisfy a condition
precedent to the terminating Party's obligations to consummate the transactions
contemplated hereby unless such terminating Party's willful or knowing breach of
this Agreement has caused the condition to be unsatisfied; or
-xxxiii-
(c) by Sellers or Buyer if the Closing has not occurred on or prior
to November 30, 1999; provided, however, that neither Buyer nor Sellers shall
be entitled to terminate this Agreement pursuant to this Section 7.1(c) if such
--------------
Party's or Parties' willful or knowing breach of this Agreement has prevented
the consummation of the transactions contemplated hereby at or prior to such
time.
VII.2 Effect of Termination. In the event of termination of this
---------------------
Agreement by either Sellers or Buyer as provided in Section 7.1, this Agreement
-----------
shall forthwith become void and there shall be no liability on the part of any
Party to any other Party or its stockholders or directors or officers under this
Agreement, except for the provisions of Sections 9.3 and 9.8 and Article X shall
-------------------- ---------
continue in full force and effect and except that nothing herein shall relieve
any Party from liability for any breach of this Agreement prior to such
termination.
ARTICLE VIII
INDEMNIFICATION AND RELATED MATTERS
-----------------------------------
VIII.1 Survival. All representations, warranties set forth in this
--------
Agreement or in any writing or certificate delivered in connection with this
Agreement shall survive the Closing Date and the consummation of the
transactions contemplated hereby and shall not be affected by any examination
made for or on behalf of Buyer, the Knowledge of any of its officers, directors,
stockholders, employees or agents, or the acceptance of any certificate or
opinion. Notwithstanding the foregoing, no Party shall be entitled to recover
for any Loss (as defined in Section 8.2) pursuant to Section 8.2(a)(i) or
----------- -----------------
Section 8.2(c) unless written notice of a claim thereof is delivered to the
--------------
other Party prior to the Applicable Limitation Date. For purposes of this
Agreement, the term "Applicable Limitation Date" shall mean November 23, 2002;
--------------------------
provided that the Applicable Limitation Date with respect to the following
Losses shall be as follows: (i) with respect to any Loss arising from or
related to a breach of the representations and warranties of the Company or the
Sellers set forth in Section 4.12 (Taxes), the Applicable Limitation Date shall
------------
be the 30th day after expiration of the statute of limitations (including any
extensions thereto to the extent that such statute of limitations may be tolled)
applicable to the Tax which gave rise to such Loss and (ii) with respect to any
Loss arising from or related to a breach of the representations and warranties
of the Company or the Sellers set forth in Section 4.1 (Organization and
-----------
Corporate Power), Section 4.2 (Authorization of Transactions), Section 4.3
----------- -----------
(Capitalization), Section 4.5 (Absence of Conflicts), Section 4.16 (Brokerage)
----------- ------------
or Article V (Representations and Warranties with Respect to Sellers), or of the
---------
Buyer's set forth in Article VI (Representations and Warranties with respect to
----------
Buyers), there shall be no Applicable Limitation Date (i.e., such
representations and warranties shall survive forever).
-xxxiv-
VIII.2 Indemnification.
---------------
(a) Each Seller shall jointly and severally indemnify Buyer and
the Company and each of their respective officers, directors, stockholders
(other than Sellers), employees, agents, representatives, affiliates, successors
and permitted assigns (collectively, the "Buyer Parties") and hold each of them
-------------
harmless from and against and pay on behalf of or reimburse such Buyer Parties
in respect of any loss (including diminution in value), liability, demand,
claim, action, cause of action, cost, damage, deficiency, tax, penalty, fine or
expense, whether or not arising out of third party claims (including, without
limitation, interest, penalties, reasonably attorneys' fees and expenses, court
costs and all amounts paid in investigation, defense or settlement of any of the
foregoing) (collectively, "Losses" and individually, a "Loss") which any such
------ ----
Buyer Party may suffer, sustain or become subject to, as a result of, in
connection with, relating or incidental to or by virtue of:
(i) the breach of any representation or warranty made by the
Company or any Seller contained in Article IV of this Agreement or any
----------
certificate delivered by the Company or any Seller to Buyer with respect
thereto in connection with the Closing;
(ii) the breach of any representation or warranty made by such
Seller contained in Article V of this Agreement or any certificate
---------
delivered by such Seller to Buyer with respect thereto in connection with
the Closing;
(iii) the breach of any representation, warranty (other than
representations or warranties set forth in Articles IV and V), covenant or
-----------------
agreement made by the Company or any Seller contained in this Agreement,
the other Transaction Documents, any Exhibit hereto or any certificate
delivered by the Company or any Seller to Buyer with respect thereto in
connection with the Closing; or
(iv) any Taxes, excluding FET Indebtedness not to exceed $1,169,980
or those set forth on Schedule 4.28 for which an adequate reserve has been
-------------
established in the Company's Latest Balance Sheet, incurred by the Company
in any period (or any portion thereof) ending on or before the Closing Date
or otherwise attributable to the conduct of the Company's business on or
prior to the Closing Date, including any Tax under Code (S) 197(f)(9)(B) or
Code (S) 1374.
(v) any fees due and payable to Sellers' legal counsel, investment
bankers, accountants, agents or representatives relating to the sale of the
stock in the Company or the associated transactions pursuant to this
Agreement.
(vi) any and all liabilities, claims, counterclaims, or obligations
arising from or as a result of the litigation currently styled RCP
---
Communications Inc. v. Xxxx Xxxxxx et al, which litigation has been
------------------------------------------
assigned to Sellers, or from the assignment of the In Touch debt liens or
equipment to Sellers as set forth in Section 2.2(h) above.
--------------
The remedy of the Buyer Parties for any indemnification of Losses hereunder
shall be offset (i) first from the Hold-back to the extent of the Hold-back,
(ii) then if the Hold-back is depleted, against the
-xxxv-
Cash Earn-out, if any, that has been earned and is payable to the Sellers, and
(iii) then if the Hold-back and the Cash Earn-out payable to the Sellers is
depleted, the Buyer Parties may proceed against each Seller individually.
(b) The indemnification provided for in Section 8.2(a) above is
subject to the following limitations:
(i) Sellers will be liable to the Buyer Parties with respect to
claims referred to in subsection (a) above only if any Buyer Party gives
Sellers written notice thereof within the Applicable Limitation Date; and
(ii) Sellers shall not be liable to Buyer Parties for any Loss
arising under subsection (a)(i) above (A) in respect of any individual Loss
of less than $1,000 (the "Threshold") and (B) unless the aggregate amount
---------
of all such Losses exceeds $25,000 in the aggregate (the "Basket"), in
------
which case Sellers shall be liable only for the amount of such Losses in
excess of the Basket; provided that the foregoing limitations (i.e., the
Basket and the Threshold) shall not apply with respect to any Loss arising
from or related to a breach of the representations and warranties of the
Company or Seller set forth in Section 4.1 (Organization and Corporate
Power), Section 4.2 (Authorization of Transaction), Section 4.3
(Capitalization), Section 4.5 (Absence of Conflicts), Section 4.10
(Accounts Receivable), Section 4.12 (Taxes), Section 4.16 (Brokerage),
Section 4.28 (Indebtedness) or any Loss with respect to Taxes as set forth
in Section 8.2(a)(iv) or any Loss arising from or related to a breach of
any such Seller's covenants or agreements in such Seller's Employment
Agreements. Notwithstanding any implication to the contrary contained in
this Agreement, so long as any Buyer Party delivers written notice of a
claim to Sellers no later than the Applicable Limitation Date, Sellers
shall be required to indemnify Buyer Parties for all Losses which Buyer
Parties may incur (subject to the Basket and, if applicable, the Threshold)
in respect of the matters which are the subject of such claim, regardless
of when incurred.
(c) Buyer shall indemnify Sellers and hold each Seller harmless from
and against and pay on behalf of or reimburse such Sellers in respect of any
Loss which Sellers may suffer, sustain or become subject to, as the result of,
in connection with, relating to or incidental to or by virtue of the breach by
Buyer of any representation, warranty, covenant, or agreement made by Buyer
contained in this Agreement, any other Transaction Document or any certificate
delivered by Buyer to Sellers with respect thereto in connection with the
Closing. Notwithstanding the foregoing, in no event shall Buyer be liable to
Sellers by reason of application of this Section 8.2(c) for any Loss (A) in
respect of any individual Loss of less than $1,000 (the "Sellers' Threshold")
------------------
and (B) unless and until the aggregate amount of such Losses thereunder exceeds
$25,000 in the aggregate (the "Sellers' Basket"), in which case Buyer shall be
---------------
liable only for the amount of such Losses in excess of the Sellers' Basket;
provided that the foregoing limitations (i.e., the Sellers' Basket and the
Sellers' Threshold) shall not apply with respect to any Loss arising from or
related to a breach of the representations and warranties of Buyer set forth in
Section 6.6 (Brokerage), or any Loss arising from or related to a breach of the
Buyer's covenant or agreements made by Buyer in Section 1.4 or 1.5 of this
Agreement, or in the Sellers' Employment Agreements.
-xxxvi-
(d) If a party hereto seeks indemnification under this Article VIII,
------------
such party (the "Indemnified Party") shall give written notice to the other
-----------------
party (the "Indemnifying Party") after receiving written notice of any action,
------------------
lawsuit, proceeding, investigation or other claim against it (if by a third
party) or discovering the liability, obligation or facts giving rise to such
claim for indemnification, describing the claim, the amount thereof (if known
and quantifiable), and the basis thereof; provided that the failure to so notify
the Indemnifying Party shall not relieve the Indemnifying Party of its or his
obligations hereunder except to the extent such failure shall have harmed the
Indemnifying Party. In that regard, if any action, lawsuit, proceeding,
investigation or other claim shall be brought or asserted by any third party
which, if adversely determined, would entitle the Indemnified Party to indemnity
pursuant to Article VIII, the Indemnified Party shall promptly notify the
Indemnifying Party of the same in writing, specifying in detail the basis of
such claim and the facts pertaining thereto and the Indemnifying Party shall be
entitled to participate in the defense of such action, lawsuit, proceeding,
investigation or other claim giving rise to the Indemnified Party's claim for
indemnification at its expense, and at its option (subject to the limitations
set forth below) shall be entitled to appoint lead counsel of such defense with
a nationally recognized reputable counsel acceptable to the Indemnified Party;
provided that, as a condition precedent to the Indemnifying Party's right to
assume control of such defense, it must first:
(i) enter into an agreement with the Indemnified Party (in form and
substance reasonably satisfactory to the Indemnified Party) pursuant to
which the Indemnifying Party agrees to be fully responsible (with no
reservation of right) for all Losses relating to such claims and that it
will provide full indemnification (whether or not otherwise required
hereunder) to the Indemnified Party for all Losses relating to such claim),
and
(ii) unconditionally guarantees the payment and performance of any
liability or obligation which may arise with respect to such claim or the
facts giving rise to such claim for indemnification (without regard to the
Threshold, the Basket, Sellers' Basket or the Sellers' Threshold), and
(iii) furnish the Indemnified Party with reasonable evidence that the
Indemnifying Party is and will be able to satisfy any such liability;
and provided further that the Indemnifying Party shall not have the right to
assume control of such defense and shall pay the fees and expenses of counsel
retained by the Indemnified Party, if the claim which the Indemnifying Party
seeks to assume control (i) seeks non-monetary relief, (ii) involves criminal
or quasi-criminal allegations, (iii) involves a claim to which the Indemnified
Party reasonably believes an adverse determination would be detrimental to or
injure the Indemnified Party's reputation or future business prospects, or (iv)
involves a claim which, upon petition by the Indemnified Party, the appropriate
court rules that the Indemnifying Party failed or is failing to vigorously
prosecute or defend.
If the Indemnifying Party is permitted to assume and control the defense
and elects to do so, the Indemnified Party shall have the right to employ
counsel separate from counsel employed by the Indemnifying Party in any such
action and to participate in the defense thereof, but the fees and expenses of
such counsel employed by the Indemnified Party shall be at the expense of the
Indemnified Party unless (i) the employment thereof has been specifically
authorized by the
-xxxvii-
Indemnifying Party in writing, or (ii) the Indemnifying Party has been advised
by counsel that a reasonable likelihood exists of a conflict of interest between
the Indemnifying Party and the Indemnified Party.
If the Indemnifying Party shall control the defense of any such claim, the
Indemnifying Party shall obtain the prior written consent of the Indemnified
Party (which shall not be unreasonably withheld) before entering into any
settlement of a claim or ceasing to defend such claim, if pursuant to or as a
result of such settlement or cessation, injunction or other equitable relief
will be imposed against the Indemnified Party or if such settlement does not
expressly unconditionally release the Indemnified Party from all liabilities and
obligations with respect to such claim, without prejudice.
(e) The Indemnifying Party shall pay the Indemnified Party in
immediately available funds promptly after the Indemnified Party provides the
Indemnifying Party with written notice of a claim hereunder and the Parties
reasonably agree that there is a reasonable basis for such claim. Without
limiting the foregoing, any payments to be made by the Sellers pursuant to this
Article VIII shall be offset first against the Hold-back and, to the extent such
amount has been completely offset, from the Sellers directly.
(f) Amounts paid to or on behalf of Sellers or Buyer as
indemnification shall be treated as adjustments to the Purchase Price.
(g) Effective upon the Closing, each Seller hereby irrevocably
waives, releases and discharges the Company from any and all liabilities and
obligations to such Seller of any kind or nature whatsoever, whether in his
capacity as Seller hereunder, as a stockholder, officer or director of the
Company or otherwise (including, without limitation, in respect of rights of
contribution or indemnification), in each case whether absolute or contingent,
liquidated or unliquidated, and whether arising hereunder or under any other
agreement or understanding or otherwise at law or equity, and each Seller shall
not seek to recover any amounts in connection therewith or thereunder from the
Company.
ARTICLE IX
ADDITIONAL AGREEMENTS
---------------------
IX.1 Continuing Assistance. Subsequent to the Closing, each Seller
---------------------
and Buyer (at their own cost) shall assist each other (including making records
available) in the preparation of their respective Tax Returns and the filing and
execution of tax elections, if required, as well as any audits or litigation
that ensue as a result of the filing thereof, to the extent that such assistance
is reasonably requested.
-xxxviii-
IX.2 Tax Matters.
-----------
(a) All transfer, documentary, sales, use, stamp, registration and
other such Taxes and fees (including any penalties and interest thereon)
incurred in connection with this Agreement shall be paid by Sellers when due,
and each Seller shall, at his own expense, file all necessary Tax Returns and
other documentation with respect to all such transfer, documentary, sales, use,
stamp, registration and other Taxes and fees, and if required by applicable law,
Buyer shall, and shall cause its affiliates to, join in the execution of any
such Tax Returns and other documentation.
(b) Subsequent to the Closing, each Seller shall make, or refrain
from making, an election under Section 197 of the Code in accordance with the
written request of Buyer.
IX.3 Press Releases and Announcements. Prior to the Closing Date, no
--------------------------------
press releases related to this Agreement and the transactions contemplated
herein, or other announcements to the employees, customers or suppliers of the
Company shall be issued without the mutual approval of all Parties, except for
any public disclosure which any Party in good faith believes is required by law
or regulation (in which case the disclosure shall be prepared jointly by the
Company and Buyer). After the Closing Date, no press releases related to this
Agreement and the transactions contemplated herein, or other announcements to
the employees, customers or suppliers of the Company shall be issued without
Buyer's consent (which shall not be unreasonably withheld).
IX.4 Further Transfers. Each Seller shall execute and deliver such
-----------------
further instruments of conveyance and transfer and take such additional action
as Buyer may reasonably request to effect, consummate, confirm or evidence the
transfer to Buyer of the Acquired Stock and any other transactions contemplated
hereby.
IX.5 Specific Performance. Buyer and Seller acknowledges that the
--------------------
Company's business is unique and recognizes and affirms that in the event of a
breach of this Agreement, money damages may be inadequate and the non-breaching
party may have no adequate remedy at law. Accordingly, Sellers and Buyer agree
that the non-breaching party shall have the right, in addition to any other
rights and remedies existing in its favor, to enforce its rights and such
breaching party's obligations hereunder not only by an action or actions for
damages but also by an action or actions for specific performance, injunctive
and/or other equitable relief.
IX.6 Transition Assistance. Each Seller shall not in any manner take
---------------------
any action which is designed, intended, or might be reasonably anticipated to
have the effect of discouraging customers, suppliers, lessors, licensors and
other business associates from maintaining the same business relationships with
the Company after the date of this Agreement as were maintained with such
Company prior to the date of this Agreement.
-xxxix-
IX.7 Investigation.
-------------
(a) Prior to the Closing Date, Buyer may make or cause to be made
such investigation of the business and properties of the Company as it deems
necessary or advisable to familiarize itself therewith. Each Seller shall, and
shall cause the Company and its officers, directors, employees and agents to,
permit Buyer and its employees, agents, accounting, legal and other authorized
representatives to (i) have full access to the premises, books and records of
the Company at reasonable hours, (ii) visit and inspect any of the properties of
the Company, and (iii) discuss the affairs, finances and accounts of the Company
with the directors, officers, key employees, key customers, key sales
representatives, key suppliers and independent accountants of the Company.
(b) Prior to the Closing Date, Sellers and Buyer shall mutually
agree upon all communications with customers and suppliers of the Company
relating to this Agreement and the transactions contemplated hereunder (it being
understood that Buyer shall have the right to contact such customers and
suppliers in connection with its investigation of the business of the Company).
(c) Prior to the Closing Date, Buyer shall provide to each Seller
such information as such Seller may reasonably request regarding Buyer's
business and financial condition.
IX.8 Expenses. Except as otherwise provided herein, each Seller and
--------
Buyer shall pay all of their own fees, costs and expenses (including, without
limitation, fees, costs and expenses of legal counsel, investment bankers,
brokers or other representatives and consultants and appraisal fees, costs and
expenses) incurred in connection with the negotiation of the Letter of Intent
dated August 10, 1999, by and among the Parties, this Agreement, the performance
of its obligations hereunder, and the consummation of the transactions
contemplated hereby; it being understood that Sellers shall pay the fees, costs
and expenses of the Company and that the Company shall not pay any of Sellers'
fees, costs and expenses (including, without limitation, legal and accounting
fees, costs and expenses) arising in connection with the transactions
contemplated hereby if the transactions are consummated.
IX.9 Exclusivity. Until this Agreement is terminated by its terms,
-----------
neither the Company nor Sellers (and none of Company or Sellers shall cause or
permit any Insider or agent or any other Person acting on behalf of any Seller,
the Company or its Affiliates to), (a) solicit, initiate or encourage the
submission of any proposal or offer from any Person (including any of them)
relating to any (i) liquidation, dissolution or recapitalization of, (ii) merger
or consolidation with or into, (iii) acquisition or purchase of assets of or any
equity interest in or (iv) similar transaction or business combination involving
the Company 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 other Person to do or seek any
of the foregoing. The Company and each Seller agrees that it will discontinue
immediately any negotiations or discussion with respect to any of the foregoing.
Until this Agreement is terminated by its terms, Sellers and Company shall
notify Buyer immediately if any Person makes any proposal, offer, inquiry or
contact with respect to any of the foregoing.
-xi-
IX.10 Books and Records. Unless otherwise consented to in writing by
-----------------
Sellers or Buyer (as the case may be), Buyer and Sellers will not, for a period
of seven years following the date hereof, destroy, alter or otherwise dispose
of any of the books and records of the Company acquired by Buyer hereunder or
retained by Seller without first offering to surrender to Sellers or Buyer such
books and records or any portion thereof of which Sellers or Buyer may intend to
destroy, alter or dispose. Buyer and Sellers will allow the other party's
representatives, attorneys and accountants access to such books and records,
upon reasonable request for during such party's normal business hours, for the
purpose of examining and copying the same in connection with any matter whether
or not related to or arising out of this Agreement or the transactions
contemplated hereby.
IX.11 Non-Competition, Non-Solicitation and Confidentiality.
-----------------------------------------------------
(a) Non-Competition. In consideration of the mutual covenants
---------------
provided for herein to Sellers at the Closing, during the period beginning on
the Closing Date and ending on the fourth anniversary of the Closing Date (the
"Non-Compete Period"), none of Sellers shall engage (whether as an owner,
------------------
operator, manager, employee, officer, director, consultant, advisor,
representative or otherwise) directly or indirectly in any business that the
Company conducts or proposes to conduct as of the Closing Date in any geographic
area in which the Company conducts its business as of the Closing Date; provided
that ownership of less than 1% of the outstanding stock of any publicly-traded
corporation shall not be deemed to be engaging solely by reason thereof in any
of its businesses. Seller acknowledges that the business that Company currently
conducts or proposes to conduct includes, without limitation, the development,
marketing, distribution and sale of pre-paid telecommunications services,
including, but not limited to, pre-paid local and long distance calling cards,
pre-paid cellular telephone service and pre-paid residential telephone service.
If the final judgment of a court of competent jurisdiction declares that any
term or provision of this Section 9.11(a) is invalid or unenforceable, the
---------------
Parties agree that the court making the determination of invalidity or
unenforceability shall have the power to reduce the scope, duration, or area of
the term or provision, to delete specific words or phrases, or to replace any
invalid or unenforceable term or provision with a term or provision that is
valid and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision, and this Agreement shall be
enforceable as so modified after the expiration of the time within which the
judgment may be appealed.
(b) Non-Solicitation. Each Seller agrees that, during the Non-
----------------
Compete Period, such Seller (i) shall not, and shall use his best efforts not to
permit such Seller's affiliates to, directly or indirectly contact, approach or
solicit for the purpose of offering employment to or hiring (whether as an
employee, consultant, agent, independent contractor or otherwise) or actually
hire any person employed by the Company at any time prior to the Closing Date or
during the Non-Compete Period, without the prior written consent of the Company;
provided, however, that nothing herein shall prevent Sellers from working
together if neither Seller is employed by the Company at the time such
association is initiated, and (ii) shall not induce or attempt to induce any
customer or other business relation of the Company into any business
relationship which might materially harm the Company. The term "indirectly" as
----------
used in this Section 9.11 is intended to mean any acts authorized or directed by
------------
or on behalf of any Seller or any person controlled by such Seller.
-xii-
(c) Confidentiality. Each Seller shall treat and hold as
---------------
confidential any information concerning the business and affairs of the Company
that is not already generally available to the public (the "Confidential
------------
Information"), refrain from using any of the Confidential Information except in
-----------
connection with this Agreement, and deliver promptly to Buyer or destroy, at the
request and option of Buyer, all tangible embodiments (and all copies) of the
Confidential Information which are in his possession or under his control. In
the event that any Seller is requested or required (by oral question or request
for information or documents in any legal proceeding, interrogatory, subpoena,
civil investigative demand, or similar process) to disclose any Confidential
Information, such Seller shall notify Buyer promptly of the request or
requirement so that Buyer may seek an appropriate protective order or waive
compliance with the provisions of this Section 9.11(c). If, in the absence of a
protective order or the receipt of a waiver hereunder, any Seller is, on the
advice of counsel, compelled to disclose any Confidential Information to any
tribunal or else stand liable for contempt, such Seller may disclose the
Confidential Information to the tribunal; provided that such disclosing Seller
shall use his best efforts to obtain, at the request of Buyer, an order or other
assurance that confidential treatment shall be accorded to such portion of the
Confidential Information required to be disclosed as Buyer shall designate.
(d) Trade Name. No Seller shall use or permit any of his affiliates
----------
to use the name "RCP Communications, Inc." or any name confusingly similar
thereto in any manner anywhere in the world after Closing.
(e) Remedy for Breach. Each Seller acknowledges and agrees that in
-----------------
the event of a breach by any Seller of any of the provisions of this Section
-------
9.11, monetary damages shall not constitute a sufficient remedy. Consequently,
----
in the event of any such breach, the Company, Buyer and/or their respective
successors or assigns may, in addition to other rights and remedies existing in
their favor, apply to any court of law or equity of competent jurisdiction for
specific performance and/or injunctive or other relief in order to enforce or
prevent any violations of the provisions hereof, in each case without the
requirement of posting a bond or proving actual damages.
ARTICLE X
MISCELLANEOUS
-------------
X.1 Amendment and Waiver. This Agreement may be amended and any
--------------------
provision of this Agreement may be waived, provided that any such amendment or
waiver shall be binding upon a Party only if such amendment or waiver is set
forth in a writing executed by Buyer and each Seller. No course of dealing
between or among any persons having any interest in this Agreement shall be
deemed effective to modify, amend or discharge any part of this Agreement or any
rights or obligations of any Party under or by reason of this Agreement.
X.2 Notices. All notices, demands and other communications given or
-------
delivered under this Agreement shall be in writing and shall be deemed to have
been given on the date of receipt when personally delivered, mailed by first
class mail, return receipt requested, or delivered by express courier service or
telecopied with confirmation of delivery (with hard copy to follow). Notices,
demands and communications to each Seller shall, unless another address is
specified in
-xiii-
writing, or unless receipt of notice has been specifically delegated to the
Representatives under this Agreement, be sent to the address or telecopy number
indicated on the signature page attached hereto, and notices, demands and
communications to the Representative, the Company and Buyer shall, unless
another address is specified in writing, be sent to the address or telecopy
number indicated below:
Notices to Representative: with a copy which shall not constitute notice to:
------------------------- ------------------------------------------------
Xx. Xxxxx X. Xxxxx Xxxxxxxx, Xxxxxx & Xxxxxx, PLLC
00000 Xxxxx 0/xx/ Xxxxxx 0000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000 Xxxxxxx, XX 00000
Attention: G. Xxxxxx Xxxxxx
Telecopy: (000) 000-0000
Notices to Seller: with a copy which shall not constitute notice to:
----------------- ------------------------------------------------
Xx. Xxxxx X. Xxxxx Xxxxxxxx, Xxxxxx & Xxxxxx, PLLC
00000 Xxxxx 0/xx/ Xxxxxx 0000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000 Xxxxxxx, XX 00000
Attention: G. Xxxxxx Xxxxxx
Xx. Xxxxx Xxxxxx, Xx. Telecopy: (000) 000-0000
0000 Xxxx Xxxxx Xxxxx
Xxxxxxx, XX 00000
Notices to Buyer: with a copy which shall not constitute notice to:
---------------- ------------------------------------------------
OnePoint Services, L.L.C. Xxxxxxxx & Xxxxx
0000 Xxxxxxxx Xxxx, Xxxxx X-000 000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxxxxxx, XX 00000 Xxxxxxx, XX 00000
Attention: Xx Xxxxxxxx Attention: Xxxxxxx X. Xxxxxxxx, P.C.
Telecopy: (000) 000-0000 Telecopy: (000) 000-0000
X.3 Binding Agreement; Assignment.
-----------------------------
(a) This Agreement and all of the provisions hereof shall be binding
upon and inure to the benefit of the Parties and their respective successors and
permitted assigns; provided that neither this Agreement nor any of the rights,
interests or obligations hereunder may be assigned by any Seller without the
prior written consent of Buyer or by Buyer (except as otherwise provided in this
Agreement) without the prior written consent of each Seller. Without limiting
the generality of the foregoing:
(i) Buyer may (at any time prior to the Closing), at its sole
discretion, assign, in whole or in part, its rights and obligations
pursuant to this Agreement to one or more of its
-xiiii-
wholly-owned Subsidiaries. (Buyer's "wholly-owned Subsidiaries" include
Subsidiaries which may be organized subsequent to the date hereof);
(ii) Buyer may assign its rights under this Agreement for collateral
security purposes to any lender providing financing to Buyer, Company or
any of their Affiliates and any such lender may exercise all of the rights
and remedies of the Buyer hereunder; and
(iii) Buyer may assign its rights under this Agreement, in whole or
in part, to any subsequent purchaser of any Company or any of its divisions
or any material portion of its assets (whether such sale is structured as a
sale of stock, a sale of assets, a merger or otherwise).
X.4 Severability. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provisions or the remaining provisions of this Agreement.
X.5 No Strict Construction. The language used in this Agreement
----------------------
shall be deemed to be the language chosen by the Parties to express their mutual
intent, and no rule of strict construction shall be applied against any person.
X.6 Captions. The captions used in this Agreement are for
--------
convenience of reference only and do not constitute a part of this Agreement and
shall not be deemed to limit, characterize or in any way affect any provision of
this Agreement, and all provisions of this Agreement shall be enforced and
construed as if no caption had been used in this Agreement.
X.7 Entire Agreement. This Agreement and the Transaction Documents,
----------------
and the other documents referred to herein contain the entire agreement between
the Parties and supersede any prior understandings, agreements or
representations by or between the Parties, written or oral, which may have
related to the subject matter hereof in any way.
X.8 Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute one and the same instrument.
X.9 Governing Law. All questions concerning the construction,
-------------
validity and interpretation of this Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Illinois, without giving
effect to any choice of law or conflict of law provision (whether of the State
of Illinois or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Illinois.
X.10 Parties in Interest. Nothing in this Agreement, express or
-------------------
implied, is intended to confer on any person other than the Parties and their
respective successors and assigns any rights or remedies under or by virtue of
this Agreement.
-xiiv-
X.11 WAIVER OF JURY TRIAL. AS A SPECIFICALLY BARGAINED INDUCEMENT
--------------------
FOR EACH OF THE PARTIES TO ENTER INTO THIS AGREEMENT (EACH PARTY HAVING HAD
OPPORTUNITY TO CONSULT COUNSEL), EACH PARTY EXPRESSLY WAIVES THE RIGHT TO TRIAL
BY JURY IN ANY LAWSUIT OR PROCEEDING RELATING TO OR ARISING IN ANY WAY FROM THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREIN.
X.12 CONSENT TO JURISDICTION. THE PARTIES AGREE THAT JURISDICTION
-----------------------
AND VENUE IN ANY ACTION BROUGHT BY ANY PARTY PURSUANT TO THIS AGREEMENT SHALL
PROPERLY (BUT NOT EXCLUSIVELY) LIE IN ANY FEDERAL OR STATE COURT LOCATED IN LAKE
COUNTY, ILLINOIS. BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF SUCH COURTS FOR HIMSELF AND IN
RESPECT OF HIS PROPERTY WITH RESPECT TO SUCH ACTION. THE PARTIES IRREVOCABLY
AGREE THAT VENUE WOULD BE PROPER IN SUCH COURT, AND HEREBY WAIVE ANY OBJECTION
THAT SUCH COURT IS AN IMPROPER OR INCONVENIENT FORUM FOR THE RESOLUTION OF SUCH
ACTION. THE PARTIES FURTHER AGREE THAT THE MAILING BY CERTIFIED OR REGISTERED
MAIL, RETURN RECEIPT REQUESTED, OF ANY PROCESS REQUIRED BY ANY SUCH COURT SHALL
CONSTITUTE VALID AND LAWFUL SERVICE OF PROCESS AGAINST THEM, WITHOUT NECESSITY
FOR SERVICE BY ANY OTHER MEANS PROVIDED BY STATUTE OR RULE OF COURT.
* * * *
-xiv-
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first written above.
___________________________________
Xxxxx X. Xxxxxx, Xx.
___________________________________
Xxxxx X. Xxxxx
ONEPOINT SERVICES, L.L.C.
By: RCP COMMUNICATIONS, INC.
Its: Manager
By: _______________________________
Its: ______________________________
-xivi-
