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STOCK PURCHASE AGREEMENT
AMONG
XXXXXX WIRELINE COMPANY
AND
THE SHAREHOLDERS OF
AMERICAN TELCO, INC. AND
AMERICAN TELCO NETWORK SERVICES, INC.
DATED AS OF MARCH 26, 1998
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TABLE OF CONTENTS
Page
1. DEFINITIONS....................................................... 1
2. PURCHASE AND SALE OF STOCK........................................ 8
2.1. Purchase of Stock................................................. 8
2.2. Purchase Price Payment............................................ 8
2.3. Deposit........................................................... 8
2.4. Payment of Purchase Price:........................................ 8
2.5. Closing Balance Sheet............................................. 9
2.6. Adjustment to the Purchase Price; Procedure....................... 9
2.7. Taxes, Etc........................................................ 10
2.8. Asset Purchase Treatment.......................................... 10
3. CLOSING........................................................... 12
3.1. Closing Date...................................................... 12
3.2. Deliveries at the Closing......................................... 12
4. REPRESENTATIONS AND WARRANTIES OF THE SELLERS..................... 12
4.1. Valid Existence; Good Standing, Etc............................... 12
4.2. Authorization; Non Contravention.................................. 12
4.3. Capitalization.................................................... 13
4.4. Financial Statements; Undisclosed Liabilities..................... 14
4.5. Absence of Certain Changes or Events.............................. 15
4.6. Business.......................................................... 15
4.7. Tax Matters....................................................... 15
4.8. Assets and Properties............................................. 17
4.9. Material Contracts and Obligations................................ 18
4.10. Indebtedness to and from Directors, Officers, and Others.......... 19
4.11. Solvency.......................................................... 19
4.12. FCC and State-Related Representations............................. 20
4.13. Litigation; Compliance with Applicable Laws, Rights and Permits... 20
4.14. Insurance......................................................... 21
4.15. Labor Matters..................................................... 22
4.16. Environmental Matters............................................. 22
4.17. Intellectual Property............................................. 23
4.18. Benefit Plans; ERISA Compliance................................... 23
4.19. Brokers........................................................... 26
5. REPRESENTATIONS OF BUYER.......................................... 26
5.1. Valid Existence................................................... 26
5.2. Authorization..................................................... 26
5.3. Brokers........................................................... 27
5.4. Investment........................................................ 27
5.5. Financial Statements; Undisclosed Liabilities..................... 27
5.6. Intercompany Obligations.......................................... 27
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6. PRE-CLOSING COVENANTS............................................. 28
6.1. General........................................................... 28
6.2. Financial Statements; Information................................. 28
6.3. Governmental Approvals............................................ 28
6.4. Access............................................................ 29
6.5. Conduct of Business............................................... 29
6.6. Employees......................................................... 31
6.7. Notice of Developments............................................ 31
6.8. Exclusivity....................................................... 31
6.9. Announcement...................................................... 32
6.10. Distribution...................................................... 32
6.11. Financing Matters................................................. 32
7. POST-CLOSING COVENANTS............................................ 32
7.1. Further Assurances................................................ 33
7.2. Post-Closing Announcements........................................ 33
7.3. Timely Payment of Liabilities..................................... 33
7.4. Payment of Taxes.................................................. 33
8. CONDITIONS TO CLOSING............................................. 33
8.1. Conditions to Obligation of the Buyer............................. 33
8.2. Conditions to Obligation of the Sellers........................... 35
9. INDEMNIFICATION AND REMEDIES...................................... 37
9.1. Indemnification Provisions for Benefit of the Buyer and the
Companies......................................................... 37
9.2. Indemnification Provisions for Benefit of the Sellers............. 38
9.3. Matters Involving Third Parties................................... 38
9.4. Basket and Deductible............................................. 38
9.5. Limitations....................................................... 39
9.6. Continuation of Indemnification Obligations of Companies.......... 40
10. TERMINATION....................................................... 41
10.1. Termination of Agreement.......................................... 41
10.2. Effect of Termination............................................. 42
11. MISCELLANEOUS..................................................... 42
11.1. Survival of Representations, Warranties and Covenants............. 42
11.2. Additional Covenants Regarding Intercompany Transactions.......... 42
11.3. [INTENTIONALLY OMITTED]........................................... 43
11.4. No Third-Party Beneficiaries...................................... 43
11.5. Entire Agreement.................................................. 43
11.6. Succession and Assignment......................................... 43
11.7. Counterparts...................................................... 43
11.8. Headings, Terms................................................... 43
11.9. Notices:.......................................................... 43
11.10. Governing Law..................................................... 44
11.11. Amendments and Waivers............................................ 44
11.12. Severability...................................................... 44
11.13. Expenses.......................................................... 44
11.14. Construction...................................................... 45
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11.15. Incorporation..................................................... 45
11.16. Sellers' Agent.................................................... 45
11.17. Confidentiality................................................... 45
11.18. Consent to the Exclusive Jurisdiction of the Court of the State
of Texas.......................................................... 46
11.20. Equitable Remedies................................................ 47
11.21. Waiver of Buy-Sell Provisions..................................... 47
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made as of the 26th day of March,
1998, among Xxxxxx Wireline Company, an Oklahoma corporation ("BUYER"), and
Xx. Xxxxxx X. Xxxxxxxxx, Xx. Xxxxxxx X. Xxxxxxxxx, Xx. Xxxxx Xxxxxxxxx
Xxxxxx, Xx. Xxxxx Xxxxxxxxx Xxxxxxxx, The Estate of Xxxxxx X. Xxxxxxxxx, The
Xxxxxx X. Xxxxxxxxx "A" Trust u/t/a dated February 20, 1998, Xxxxxx X.
Xxxxxxxxx, Grantor, The Xxxxxx X. Xxxxxxxxx "B" Trust u/t/a dated February
20, 1998, Xxxxxx X. Xxxxxxxxx, Grantor, The J. Nes Kirneh Trust u/t/a dated
February 25, 1998, Xxxxxxx X. Xxxxxxxxx and Xxxx Xxxxxxxxx, Grantors, The L.
K. Xxxxxx "M" Trust u/t/a dated February 24, 1998, Xxxxxxx Xxxxxx Xxxxxx, Xx.
and Xxxxx Xxxxxxxxx Xxxxxx, Grantors and The L. K. Xxxxxx "A" Trust u/t/a
dated February 24, 1998, Xxxxxxx Xxxxxx Xxxxxx, Xx., and Xxxxx Xxxxxxxxx
Xxxxxx, Grantors (collectively, the "SELLERS", and individually, a "SELLER").
R E C I T A L S:
WHEREAS, the Sellers own all of the issued and outstanding capital
stock of American Telco, Inc., a Texas corporation ("ATI"), and American
Telco Network Services, Inc., a Texas corporation ("ATNS") (individually, ATI
and ATNS are sometimes referred to herein as a "COMPANY", and together ATI
and ATNS are sometimes referred to herein as the "COMPANIES"); and
WHEREAS, the Sellers wish to sell to Buyer, and Buyer wishes to
purchase from Sellers, all of the issued and outstanding stock of each of the
Companies, subject to the terms and conditions set forth in this Agreement;
WHEREAS, the parties to this Agreement intend that the purchase of each
of the Companies shall be consummated as a purchase that qualifies as a
"qualified stock purchase" (within the meaning of Section 338(d)(3) of the
Code) and the parties agree to make the election under Section 338(h)(10) of
the Code;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements set forth below, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereby agree as follows:
A G R E E M E N T:
1. DEFINITIONS
The following terms shall have the following meanings for purposes of
this Agreement:
"ADJUSTED NET WORKING CAPITAL" means the difference between (i) the sum
of the cash and accounts receivable, prepaid expenses and Net Investment
Amount and (ii) the sum of the Liabilities (which shall include any
prepayment premiums associated with such liabilities) shown
on the Working Capital Estimate or Closing Date Balance Sheet (as finally
determined), as the case may be.
"AFFILIATE" means, with respect to either Company, each Seller and any
officer, director or employee of such Company, and with respect to any other
Person, any Person Controlling, Controlled by or under common Control with
such Person, and any family member within one degree of affinity or
consanguinity of the foregoing.
"AFFILIATED GROUP" means any affiliated group within the meaning of
Code Section 1504 or any similar group defined under a similar provision of
state, local or foreign law.
"AFFINITY ARRANGEMENT" means any marketing arrangement pursuant to
which either Company is permitted to use the name or trademark of another
Person or either Company and such other Person agree jointly to use such
Company's or such other Person's name or trademark for marketing and sales
purposes, and in connection therewith a Company is required to pay such
Person an amount based upon the sales made to such Person's customers or
members.
"ANTITRUST DIVISION" means the Antitrust Division of the Department of
Justice.
"ASSETS" means, with respect to any Company, all right, title and
interest of such Company in and to the tangible and intangible assets of such
Company.
"ATI" has the meaning given in the recitals to this Agreement.
"ATNS" has the meaning given in the recitals to this Agreement.
"BASKET AMOUNT" has the meaning given in SECTION 9.4.
"BUILDING ACCESS AGREEMENTS" means those certain agreements between the
Companies and the owners or managers of certain buildings respecting the
granting to the Companies of the right to access such buildings, locate its
equipment in such buildings, and to sell and perform telecommunications
services in and to such buildings.
"BUSINESS DAY" means any day on which commercial banks are open for
business in Houston, Texas.
"BUYER" has the meaning given in the preamble to this Agreement.
"BUYER FINANCIAL STATEMENTS" has the meaning given in SECTION 5.5(a).
"BUYER INDEMNIFIED PARTIES" has the meaning given in SECTION 9.1(a).
"CLOSING" and "CLOSING DATE" have the meanings given in SECTION 3.1.
"CLOSING DATE BALANCE SHEET" has the meaning given in SECTION 2.5.
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"CODE" means the Internal Revenue Code of 1986, as amended, and the
regulations of the Department of the Treasury promulgated thereunder.
"COMMUNICATIONS ACT" means the Communications Act of 1934, as amended.
"COMPANY" and "COMPANIES" have the meanings given in the recitals to
this Agreement.
"COMPANY BENEFIT PLAN" has the meaning given in SECTION 4.18(a).
"CONFIDENTIAL INFORMATION" has the meaning given in the Non-Disclosure
Agreement.
"CONFIDENTIALITY OBLIGATIONS" has the meaning given in SECTION 11.17.
"CONTRACTS" has the meaning given in SECTION 4.9.
"CONTROL" means the power to direct the management or policies of any
Person, through the power to vote shares or other equity interests, by
contract or otherwise.
"DAMAGES" means all losses, liabilities, judgments, suits, costs and
expenses incurred or sustained by an Indemnified Party.
"DCC" means Xxxxxx Communications Corporation, an Oklahoma corporation.
"DEBT COMMITMENT" has the meaning given in Section 6.11.
"DEPARTMENT" means the U.S. Department of Labor.
"DEPOSIT ESCROW AGREEMENT" has the meaning given in SECTION 2.3.
"DOJ" means the U.S. Department of Justice.
"EASEMENTS" means easements, rights-of-way and other interests that
the Companies have contracted for or otherwise been granted, granting the
Companies the right or license to occupy certain areas for the purposes of
constructing, installing, maintaining and operating their Networks. This
includes, but is not limited to, those areas upon, above, along, across,
under, and over those streets, roads, lanes, courts, ways, alleys, boulevards
and other places necessary for the provision of Network services.
"EMPLOYEE AGREEMENT" has the meaning given in SECTION 4.18(a).
"ENCUMBRANCE" means any mortgage, pledge, conditional sale agreement,
charge, claim, interest of another Person, option, community property rights,
lien, security interest, title defect or other encumbrance.
"ENVIRONMENTAL OBLIGATIONS" means all applicable Legal Requirements and
Permits concerning land use, public health, safety, welfare or the
environment, including, without
3
limitation, the Resource Conservation and Recovery Act (42 U.S.C. Section
6901 ET SEQ.), as amended, and the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. Section 9601 et seq.), as amended.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any regulations, rules or orders promulgated under the Employee
Retirement Income Security Act of 1974, as amended.
"ERISA AFFILIATE" has the meaning given in SECTION 4.18(b).
"ESCROW AGENT" has the meaning given in SECTION 2.3.
"FCC" means the Federal Communications Commission, or any successor
thereto.
"FTC" means the Federal Trade Commission, or any successor thereto.
"FINANCIAL STATEMENTS" has the meaning given in SECTION 4.4(a).
"FORMS" has the meaning given in SECTION 2.8(d).
"GAAP" means (a) in the case of Financial Statements, generally
accepted accounting principles, in effect in the United States as of the date
of such Financial Statements and as consistently applied by the Companies and
(b) in other cases, such principles as of the date hereof.
"GOVERNMENTAL AUTHORITY" means the United States of America or any
foreign jurisdiction, any state, commonwealth, territory or possession of the
United States of America or any such foreign jurisdiction, any political
subdivision of any of them (including counties, municipalities, home-rule
cities and the like), and any agency, authority or instrumentality of any of
the foregoing, including, without limitation, any court, tribunal,
department, bureau, commission or board of competent jurisdiction.
"XXXX-XXXXX ACT" has the meaning set forth in SECTION 6.3(b).
"HAZARDOUS MATERIALS" means any material, chemical, compound, mixture,
hazardous substance, hazardous waste, pollutant or contaminant defined,
listed, classified or regulated under any Environmental Obligation.
"INDEMNIFICATION ESCROW AGREEMENT" has the meaning given in SECTION 2.4.
"INDEMNIFICATION ESCROW PAYMENT" has the meaning given in SECTION 2.4.
"INDEMNIFIED PARTY" has the meaning given in SECTION 9.3(a).
"INDEMNIFYING PARTY" has the meaning given in SECTION 9.3(a).
4
"INTELLECTUAL PROPERTY" means all trade, corporate, business and
product names, trademarks, trademark rights, service xxxx, copyrights,
patents, patent rights, trade secrets, trade names, business, customer and
technical information, inventions, formulas and computer software, all
registrations, licenses and applications pertaining to any of them, and all
related documentation and goodwill.
"INTERIM FINANCIAL STATEMENTS" has the meaning given in SECTION 6.2.
"INVOLVED PARTY" has the meaning given in SECTION 2.8(c).
"IRS" has the meaning given in SECTION 4.18(c).
"JANUARY BALANCE SHEET" has the meaning given in SECTION 4.4(a).
"LEGAL REQUIREMENT" means any constitution, statute, ordinance, code,
or other law, rule, regulation, Order, notice, standard, procedure or other
requirement enacted, adopted, applied or issued by any Governmental Authority.
"LIABILITY" means any liability or obligation, the existence of which
would be required to be accrued or reserved for pursuant to GAAP.
"MATERIAL", whether or not capitalized, means, as to any Company or the
Companies, an event, condition, circumstance or obligation, as the case may
be, that is material to the business of ATI and ATNS taken as a whole.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the
financial condition, assets, business or prospects of ATI and ATNS taken as a
whole; provided, however, in no event shall any event or condition be deemed
to be or to have a Material Adverse Effect if the event or condition affects
other companies in the Companies' industry and its markets generally or
affects the United States economy or the United States equity market
generally.
"NET INVESTMENT AMOUNT" means an amount equal to the result of
multiplying (a) the number of actual new interconnect lines installed by the
Companies and connected to the switching equipment of the Companies during
the period beginning on the date this Agreement is executed and ending on the
Closing Date in excess of the estimated number of new interconnect lines to
be installed by the Companies during such period as set forth in the
Operating Plan by (b) $600. For purposes of computing the foregoing amount,
the estimated number of interconnect lines to be installed in any partial
month during such period shall be prorated based on the number of days that
are actually within such period (and rounded to the nearest whole number).
For example, if this Agreement is executed on March 26, 1998 and the Closing
Date is June 15, 1998, the estimated number of new interconnect lines would
be equal to two hundred thirty-eight (238), assuming that the estimated
number of such lines to be installed in March, April, May and June are 48,
48, 120 and 120, respectively.
"NETWORK" shall mean each competitive local exchange network owned or
operated by a Company.
5
"NON-DISCLOSURE AGREEMENT" means the Non-Disclosure Agreement between
ATI and DCC dated December 1997.
"NONCOMPETITION AGREEMENT" means the Noncompetition Agreement between
the Buyer and Xx. Xxx Xxxxxxxxx the form of which is attached as EXHIBIT A.
"OPERATING PLAN" means the planned (though not projected) additions of
new customers and capital expenditures for the period January 1, 1998 through
June 30, 1998 attached hereto as EXHIBIT B.
"ORDERS" means all judgments, injunctions, orders, rulings, decrees,
directives, notices of violation or other written requirements of any
Governmental Authority or arbitrator having competent jurisdiction in the
matter, including a bankruptcy court or trustee.
"OTHER BUYER AGREEMENTS" means the Noncompetition Agreement, the
Deposit Escrow Agreement, the Indemnification Escrow Agreement and the other
documents and instruments executed and delivered by the Buyer pursuant to
this Agreement.
"OTHER PARTY" has the meaning given it in SECTION 2.8(c).
"OTHER SELLER AGREEMENTS" means the Noncompetition Agreement, the
Deposit Escrow Agreement, the Indemnification Escrow Agreement and the other
documents and instruments executed and delivered by the Sellers pursuant to
this Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PERMITS" means all permits, licenses, consents, franchises, tariffs,
authorizations, approvals, privileges, waivers, exemptions, variances,
exclusionary or inclusionary Orders and other concessions, whether
governmental or private, including, without limitation, those relating to
telecommunications, environmental, public health, welfare or safety matters.
"PERMITTED ENCUMBRANCES" means (i) any Encumbrance for taxes and
assessments not yet past due or otherwise being contested in good faith for
which appropriate reserves have been established on the Closing Balance
Sheet, (ii) any Encumbrance arising out of deposits made to secure leases or
other obligations of a like nature arising in the ordinary course of business
(excluding in any event indebtedness for borrowed money and capital lease
obligations), (iii) any Encumbrance affecting real property that does not
materially interfere with the use by Sellers of the property subject thereto
or affected thereby (including any easements, rights of way, restrictions,
installation of public utilities, minor title imperfections and other similar
Encumbrances), and (iv) any Encumbrance set forth on SCHEDULE 4.8(a).
"PERSON" means an individual, and a partnership, corporation,
association, joint stock company, trust, joint venture, limited liability
company, unincorporated organization, Governmental Authority or other entity.
6
"PREMISES" means the real property, buildings and improvements on such
real property constituting the business premises of each of the Companies as
described on SCHEDULE 4.8(b).
"PUC" means the Public Utilities Commission of Texas and any public
utilities commission of any other state that has supervisory powers over the
Companies.
"PURCHASE PRICE" has the meaning given in SECTION 2.2.
"REQUIRED APPROVAL" has the meaning given in SECTION 10.1(c).
"RIGHT" means any right, property interest, concession, patent,
trademark, trade name, copyright, know-how or other proprietary right of
another Person.
"SCHEDULES" means the disclosure schedules to this Agreement.
"SELLER" and "SELLERS" have the meanings given in the preamble to this
Agreement.
"SELLER INDEMNIFYING PARTIES" has the meaning given in SECTION 9.4.
"SELLERS' AGENT" means Xx. Xxx Xxxxxxxxx, an individual.
"SHARES" means all of the issued and outstanding capital stock of each
of the Companies.
"STATE ACT" shall mean the law of any state in which any Company does
business that governs the provision of telecommunications services within
such state, and as implemented by the applicable PUC or any court of
competent jurisdiction.
"SURVIVAL PERIOD" shall have the meaning given the term in SECTION 11.1.
"TAX" means any federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, documentary,
personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated or other tax of any kind whatsoever,
or any escheat obligations including any interest, penalty or addition,
whether disputed or not.
"TAX RETURN" means any return, declaration, report, claim for refund or
information return or statement relating to Taxes, including any schedule or
attachment to any of them, and including any amendment of any of them.
"THIRD PARTY CLAIM" has the meaning given in SECTION 9.3(a).
"WORKING CAPITAL ESTIMATE" has the meaning given in SECTION 2.4.
7
2. PURCHASE AND SALE OF STOCK
2.1. PURCHASE OF STOCK. Subject to the terms and conditions set forth
in this Agreement, the Sellers agree to sell to Buyer, and Buyer agrees to
purchase from the Sellers, all of the Shares, free and clear of any
Encumbrances or Tax, for the consideration specified in SECTION 2.2.
2.2. PURCHASE PRICE PAYMENT. The aggregate purchase price for the
Shares is One Hundred Thirty Million Dollars ($130,000,000) (the "BASE
PRICE"), as adjusted in accordance with SECTIONS 2.4 and 2.6, payable in cash
or immediately available funds as provided in this Agreement (as adjusted,
the "PURCHASE PRICE"). For purposes of allocating the Purchase Price among
the Shares issued by both Companies, the sales price of the Shares issued by
ATNS shall be equal to the net book value of ATNS, as reflected on its
Closing Date Balance Sheet. The sales price of the Shares issued by ATI shall
be equal to the Purchase Price less the aggregate sales price of the Shares
issued by ATNS.
2.3. DEPOSIT. Buyer has previously deposited as a good faith deposit
Five Million Dollars ($5,000,000) (the "DEPOSIT") with CoreStates Bank, N.A.
(the "ESCROW AGENT"), to be held, invested and disbursed pursuant to the
terms of the Deposit Escrow Agreement, as amended by Amendment No.1 thereto
dated as of the date hereof, an executed copy of which is attached hereto as
EXHIBIT C (the "DEPOSIT ESCROW AGREEMENT"). If the Closing occurs, then (a)
as provided in SECTION 2.4, the Deposit shall be held as the Indemnification
Escrow Payment pursuant to SECTION 2.4 and (b) all earnings on the Deposit
shall be paid to Sellers pursuant to the Deposit Escrow Agreement, and Buyer
will receive a credit against the Purchase Price for such amounts. If
Sellers' Agent terminates this Agreement in accordance with SECTION
10.1(d)(i), then Sellers shall be entitled to the Deposit and all earnings on
the Deposit; provided, however, that in addition Sellers will have and be
entitled to pursue any and all remedies, it being understood that the Deposit
and earnings thereon will be paid to them in exchange for their agreements
set forth in SECTION 6.8 for the period prior to the date of such
termination; provided, however, Sellers shall not be entitled to recover
Damages in excess of a total of $15,000,000 (less the Deposit and earnings
thereon paid to Sellers) from the Buyer with respect to Buyer's failure to
consummate the transactions contemplated hereby. If this Agreement is
terminated other than by Sellers' Agent pursuant to SECTION 10.1(d)(i), the
Deposit and all earnings thereon shall be paid to Buyer. All payments by the
Escrow Agent shall be made in accordance with the procedures and other
provisions set forth in the Deposit Escrow Agreement.
2.4. PAYMENT OF PURCHASE PRICE. At the Closing, Buyer will pay the
Base Price by wire transfer of immediately available funds to Sellers at
Closing in accordance with the relative ownership percentages of the Sellers
set forth on SCHEDULE 4.3(b), subject to the following adjustments:
(a) the Buyer and the Sellers will direct the Escrow Agent to hold
from the Deposit, and the amount payable to Sellers at Closing shall be
reduced by, an amount equal to Five Million Dollars ($5,000,000) (the
"INDEMNIFICATION ESCROW PAYMENT"), which Indemnification Escrow Payment shall
be held, invested and disbursed by the Escrow Agent pursuant to the terms
8
of the Indemnification Escrow Agreement substantially in the form of EXHIBIT
D attached hereto (the "INDEMNIFICATION ESCROW AGREEMENT"); and
(b) at Closing, the Sellers will provide Buyer with an estimate of
the Adjusted Net Working Capital as of the Closing Date (the "WORKING CAPITAL
ESTIMATE"). To the extent that the same is less than zero, the amount paid
to Sellers at Closing will be reduced; to the extent the same is more than
zero, the amount paid to Sellers at Closing will be increased.
As provided in the Indemnification Escrow Agreement, amounts held by
the Escrow Agent pursuant thereto will be paid to the Sellers to the extent
not required to satisfy amounts paid in connection with indemnification
claims. Payments to Sellers pursuant to the Indemnification Escrow Agreement
shall be treated as a payment of a deferred portion of the Purchase Price.
2.5. CLOSING BALANCE SHEET. Within sixty (60) Business Days after the
Closing Date, an audited combined balance sheet for the Companies will be
prepared as of the Closing Date along with a supplemental computation of the
Net Investment Amount (collectively, the "CLOSING DATE BALANCE SHEET") and
delivered to the Buyer and the Sellers' Agent. The Closing Date Balance
Sheet will be prepared by Price Waterhouse, L.L.P. in accordance with GAAP
(except that the supplemental computation of the Net Investment Amount will
be prepared in accordance with procedures proposed by Sellers, subject to
acceptance by Buyer, which acceptance will not be unreasonably withheld).
The Buyer and the Sellers will each pay one-half of the fees and expenses of
such accounting firm.
2.6. ADJUSTMENT TO THE PURCHASE PRICE; PROCEDURE. Following delivery
of the Closing Date Balance Sheet in accordance with SECTION 2.5, the
Purchase Price will be adjusted as follows:
(a) Within fifteen (15) Business Days after receipt of the Closing
Date Balance Sheet, the Buyer or the Sellers' Agent, as the case may be, may
in a written notice to the other object to the Closing Date Balance Sheet by
describing in specific detail any proposed adjustments to same and the
amounts of and reasons for such proposed adjustments. The failure by the
Buyer or the Sellers' Agent to object to the Closing Date Balance Sheet
within such fifteen (15) Business Day period shall be deemed to be an
acceptance by such Person of the Closing Date Balance Sheet.
(b) If any adjustments to the Closing Date Balance Sheet are proposed,
the Buyer and the Sellers' Agent will negotiate in good faith to resolve any
dispute, provided that if the dispute is not resolved within ten (10)
Business Days following the receipt of the proposed adjustments described in
SECTION 2.6(a), the Buyer and the Sellers' Agent will retain a mutually
acceptable nationally recognized "Big Six" independent public accounting firm
to resolve such dispute, which resolution will be final and binding. The
fees and expenses of any such accounting firm will be shared equally by the
Buyer and the Sellers, and such accounting firm will be retained by a
retention letter executed by the parties that (i) specifies that the
determination by said firm of any such disputes concerning the Closing Date
Balance Sheet will be resolved in accordance with GAAP (except that the
supplemental computation of the Net Investment Amount will be
9
prepared based upon the agreed upon procedures proposed by Sellers, subject
to acceptance by Buyer (which acceptance will not be unreasonably withheld))
within twenty (20) Business Days of the expiration of the ten (10) Business
Day period described in this paragraph and (ii) attaches the written
positions of each party (which position, which in the case of the objecting
party, shall consist of its written notice delivered to the other party
pursuant to SECTION 2.6(a)).
(c) Within twenty (20) Business Days after the later of acceptance of
the Closing Date Balance Sheet by the Buyer and the Sellers' Agent or the
resolution of any disputes, then to the extent that the estimated Adjusted
Net Working Capital set forth in the Working Capital Estimate is different
from the Adjusted Net Working Capital as set forth on the Closing Date
Balance Sheet, the Purchase Price will be appropriately adjusted, and Buyer
will pay Sellers, or Sellers will pay Buyer, the amount of the underpayment
or overpayment of the Purchase Price, respectively, as the case may be.
Amounts due to Buyer pursuant to this SECTION 2.6(c) will be paid out of the
funds held pursuant to the Indemnification Escrow Agreement. Amounts due to
Sellers pursuant to this SECTION 2.6(c) will be paid by Buyer by wire
transfer of immediately available funds in accordance with the relative
ownership percentages of the Sellers set forth on SCHEDULE 4.3(b).
(d) If the Sellers shall have been unable to obtain any legally
required consent from any PUC (other than the consent of the Texas Public
Utilities Commission, which must be obtained prior to the Closing) on or
before by July 31, 1998, with respect to each state in which such consent has
not been obtained from such state's public utilities commission and in which
the Buyer wishes for the Companies to continue to conduct their business, the
amount payable to the Sellers will be reduced by an amount equal to the
product of (i) the Base Price multiplied by (ii) a fraction, the numerator of
which is the aggregate revenues earned by the Companies in such state during
January 1998, and the denominator of which is the aggregate revenues earned
by the Companies during January 1998, which were $5,150,415. Any amount due
to Buyer pursuant to this SECTION 2.6(d) will be paid out of the funds held
pursuant to the Indemnification Escrow Agreement.
2.7. TAXES, ETC. The Sellers will pay all income, sales, use,
transfer, licensing, recording, stamp and other Taxes, fees and charges
payable as a result of the sale and transfer of the Shares to the Buyer
pursuant to this Agreement.
2.8. ASSET PURCHASE TREATMENT.
(a) (i) Buyer and the Sellers agree that, for federal Tax purposes,
the purchase and sale of the Shares pursuant to this Agreement shall be
treated as a purchase and sale of the assets of each Company in accordance
with the provisions of Code Section 338 generally and Code Section 338(h)(10)
specifically. Buyer, Sellers and the Sellers' Agent agree to make timely all
elections (and to cause the Companies to make such elections, as applicable)
necessary to carry out the provisions of this SECTION 2.8(a)(i) and to report
the purchase and sale of the Shares consistent with the preceding sentence
and in accordance with the provisions of this SECTION 2.8.
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(ii) Buyer and the Sellers agree that, for state income Tax
purposes, the purchase and sale of the Shares shall be treated as a purchase
and sale of the assets of each Company to the greatest extent permitted by
applicable law. Buyer and the Sellers agree to make timely all elections (and
to cause the Companies to make such elections, as applicable) necessary to
carry out the provisions of this SECTION 2.8(ii) and to report the purchase
and sale of the Shares consistent with the preceding sentence and in
accordance with the provisions of this SECTION 2.8.
(b) Buyer and the Sellers hereby agree that the fair market value of
the Assets of each Company for purposes of allocating the consideration to be
paid for, and the amount realized on the sale of, the Assets, in accordance
with the provisions of Code Section 1060(a), shall be no greater than the net
tax book value of the Assets as of the Closing, and which amounts are set
forth in SCHEDULE 2.8. The fair market valuations of the Assets of the
Companies agreed upon pursuant to this SECTION 2.8(b) shall be the fair
market valuations of such Assets for Tax purposes and shall be binding upon
the Sellers and Buyer as provided in this Agreement. The consideration in
excess of the net tax book value of the Assets will constitute purchased
goodwill.
(c) Neither the Sellers nor Buyer nor any Affiliate of the Sellers or
Buyer shall take a position in any tax proceeding, tax audit or otherwise
inconsistent with the fair market values described in the preceding
paragraph; provided, however, that nothing contained herein shall require the
Sellers or Buyer to contest any challenge to such values beyond, or otherwise
than by the exhaustion of, administrative remedies before any taxing
authority or agency, and neither the Sellers nor Buyer shall be required to
litigate before any court any proposed deficiency or adjustment by any taxing
authority or agency which challenges such fair market values. In the event
that any claim shall be made by any taxing authority against either Buyer or
any Company, on the one hand, or the Sellers, on the other hand, that, if
successful, would have the effect of altering such fair market values, then
the party that is the subject of such claim (the "INVOLVED PARTY") shall give
notice thereof to the other party (the "OTHER PARTY") in writing within ten
Business Days thereof. Thereafter, the Involved Party shall have control of
any contest relating thereto, but the Involved Party shall consider in good
faith any request or suggestion by the Other Party for any conference,
hearing or proceeding relating to such contest, shall (to the extent it is
feasible to do so) permit the Other Party to participate therein at such
Other Party's expense and shall not object to such Other Party's submission
of briefs and memoranda of law relating thereto, and shall provide the Other
Party with any relevant information reasonably requested by such Other Party.
(d) Buyer and the Sellers each agree to prepare and file (and cause
the Companies to file, as applicable) all Internal Revenue Service forms and
the required schedules thereto, and all requisite State and local forms and
schedules (the "FORMS") required to be filed by either or both of them (or
any Company) providing for the treatment of the purchase and sale of the
Shares as purchases and sales of the Assets of the Companies in accordance
with the provisions of SECTION 2.8(a). Buyer shall request in writing from
the Sellers, or the Sellers shall request in writing from Buyer, any
information (reasonably with the knowledge or possession of the Person from
whom requested) necessary to complete the Forms, which information shall be
11
provided no later than thirty days following any such request. All such
Forms shall be prepared consistent with the fair market valuations of the
Assets determined under SECTION 2.8(b).
3. CLOSING
3.1. CLOSING DATE. The transactions contemplated by this Agreement
and delivery of Shares referred to in SECTION 1 hereof (hereinafter referred
to as the "CLOSING") shall take place within two (2) Business Days after the
satisfaction or waiver of all conditions set forth in SECTIONS 8.1 and 8.2,
at the offices of Mayor, Day, Xxxxxxxx & Xxxxxx, L.L.P., or at such other
time, place and date as Buyer and the Sellers may mutually agree (the
"CLOSING DATE").
3.2. DELIVERIES AT THE CLOSING. At the Closing, (a) the Sellers will
deliver, or cause to be delivered, to the Buyer the certificates, instruments
and documents referred to in SECTION 8.1, (b) the Buyer will deliver to the
Sellers the certificates, instruments and documents referred to in SECTION
8.2, and (c) the Buyer will pay and deposit the Purchase Price and the
Indemnification Escrow Payment in accordance with SECTION 2.4.
4. REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Each of the Sellers, severally (but not jointly) represents and
warrants to Buyer, as of the date of this Agreement and as of the Closing, as
follows:
4.1. VALID EXISTENCE; GOOD STANDING, ETC. Each of ATI and ATNS is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Texas, with all requisite power and authority to own,
lease and operate its respective properties, to carry on its respective
business as such business is now being owned, leased and operated and to
enter into and perform its obligations under this Agreement and the Other
Seller Agreements. Each Company is licensed or qualified to do business and
is in good standing as a foreign corporation in each jurisdiction where the
nature of the properties owned, leased or operated by it and the business
transacted by it require such licensing or qualification. The jurisdictions
in which each Company is licensed or qualified to do business as a foreign
corporation are set forth on SCHEDULE 4.1. None of the Companies owns any
equity or other interest issued by any corporation, partnership or other
Person. Copies of the Articles of Incorporation (certified by the Secretary
of State of the State of Texas) and Bylaws, as amended, of each Company are
all attached hereto as part of SCHEDULE 4.1. Copies of all minutes of all
meetings (or written consents in lieu of meetings) of the boards of directors
(and all committees thereof) and Shareholders of each Company have been
provided to Buyer, and are correct and complete.
4.2. AUTHORIZATION; NON CONTRAVENTION.
(a) Each Seller has full legal right, power and authority to enter
into this Agreement and the Other Seller Agreements to which it is a party.
Assuming the due authorization, execution and delivery by the other parties
thereto, this Agreement constitutes, and the Other Seller Agreements when
executed and delivered by the parties thereto will constitute, the legal,
valid and binding obligations of, and will be enforceable in accordance with
their respective terms against, each Seller.
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(b) Except as set forth on SCHEDULE 4.2(b), no consent, authorization
or approval of, filing or registration with any Governmental Authority or any
other Person pursuant to the terms of a Contract is necessary, on the part of
the Sellers or the Companies, in order for the parties to consummate the
transactions contemplated by this Agreement and the Other Seller Agreements.
(c) Except as set forth on SCHEDULE 4.2(b), 4.2(c), 4.8(b) or 4.9,
the execution, delivery and performance of this Agreement and the Other
Seller Agreements and the consummation of the transactions contemplated
thereby will not (i) violate any Legal Requirement to which any Company or
any Seller is subject (assuming the consents and approvals referred to in
SECTION 4.2(b) are received); (ii) violate or conflict with, result in the
loss of any benefit under, result in a breach or termination of, constitute a
default or give any third party any additional right (including a termination
right) under, result in the creation of any Encumbrance upon any of the
Shares or the assets or properties of any Company under, or result in or
constitute a circumstance which, with or without notice or lapse of time or
both, would constitute any of the foregoing under, any Contract; (iii) permit
the acceleration of the maturity of any indebtedness or any other obligation
of any Seller or any Company or indebtedness or obligation secured by their
respective assets or properties; (iv) violate or conflict with any provision
of any of the charter, by-laws or similar organizational instruments of any
Company; or (v) violate any judgment, injunction, order or decree applicable
to the Sellers, any Company or their respective properties or assets.
4.3. CAPITALIZATION.
(a) The authorized and issued capital stock of each Company is as set
forth on SCHEDULE 4.3(a). There are no accrued dividends or other amounts
due and owing with respect to the Shares. There are no authorized or
outstanding stock appreciation, phantom stock or similar rights with respect
to any Company. Except as contemplated by SCHEDULE 4.3(a) or SECTION 11.16,
there are no voting trusts, voting agreements, proxies or other agreements or
understanding with respect to any capital stock of any Company. There is no
authorized or outstanding security convertible into or exchangeable for any
unissued shares of any of the Companies' capital stock or any treasury stock,
and no Company has agreed to issue any security so convertible or
exchangeable or any such option, warrant or other right. Except as disclosed
in SCHEDULE 4.3(a), there are no existing rights of first refusal, preemptive
rights, buy-sell arrangements, options, warrants, rights, calls or other
commitments or restrictions of any character relating to any of the Shares,
except those restrictions on transfer imposed by the Securities Act of 1933,
as amended, and applicable state securities laws.
(b) The Sellers own, beneficially and of record, free and clear of
any Encumbrance or Tax, all of the issued and outstanding capital stock of
the Companies, in such amounts as set forth on SCHEDULE 4.3(b). All of the
Shares have been duly authorized and validly issued, and are fully paid and
nonassessable with no personal liability attaching to the ownership of such
stock.
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4.4. FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES.
(a) The Sellers have delivered to the Buyer true and complete copies
of each Company's (i) audited balance sheets and related statements of
income, Sellers' equity and cash flows for and as of the years ended December
31, 1996 and December 31, 1997 and all notes and schedules to such balance
sheets and (ii) unaudited balance sheet and related statements of income at
and as of the monthly period ending January 31, 1998 (the balance sheet as of
January 31, 1998 being referred to herein as a "JANUARY BALANCE SHEET")
(collectively, and including any footnotes to such audited statements, the
"FINANCIAL STATEMENTS"). The Financial Statements have been prepared in
accordance with GAAP in accordance with each Company's historical accounting
practices (except for changes noted in the footnotes thereto or in SCHEDULE
4.5) and applied on a consistent basis throughout the periods covered and
present fairly each Company's financial position, results of operations and
changes in financial position as of the dates and for the periods indicated,
subject in the case of the unaudited Financial Statements only to normal
year-end adjustments (none of which will be material in amount) and the
omission of footnotes. Copies of the financial statements described herein
are attached as SCHEDULE 4.4(a).
(b) Other than as set forth in SCHEDULE 4.4(b), no Company had as of
the date of the January Balance Sheet financial liabilities of any nature,
whether absolute, accrued, contingent or otherwise, of the type that should
be reflected on the January Balance Sheet, except for (i) liabilities that
are reflected or reserved against in such Company's January Balance Sheet and
(ii) liabilities and obligations not required by GAAP to be reflected on a
balance sheet and that individually or in the aggregate do not have, and are
not reasonably be expected to have, a Material Adverse Effect.
4.5. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1997,
and except as disclosed in SCHEDULE 4.5, the Financial Statements or any
other Schedule, no Company has (a) incurred any debt, indebtedness or other
Liability, except in the ordinary course of business; (b) delayed or
postponed the payment of accounts payable or other Liabilities or accelerated
the collection of any receivable beyond stated, normal terms; (c) sold,
leased, subleased, assigned or otherwise transferred any of its equipment or
other assets or properties to another Person other than in the ordinary
course of business, consistent with past practice; (d) changed in any
significant manner the way in which it conducts business; (e) made any
increase in the compensation payable or to become payable to the officers,
directors or employees of such Company, except for periodic increases in base
compensation for officers and employees made pursuant to compensation
policies or practices consistent with that of prior years; (f) paid any
bonuses, deferred or otherwise, or deferred any compensation to any of its
directors, officers or employees except for bonuses or compensation deferrals
made pursuant to policies or practices on a basis consistent with that of
prior years; (g) amended, terminated, delayed, modified or cancelled any
agreement, contract, lease or license outside the ordinary course of
business, consistent with past practice; (h) engaged in any transaction with
an Affiliate other than consistent with past practices; (i) canceled, waived
or compromised any debts or claims, or waived any rights, not in the ordinary
course of business; (j) made any distribution of any of its assets to any
Affiliate other than distributions described on SCHEDULES 4.5 and 6.10; (k)
suffered damage, destruction or other casualty loss, or forfeiture of, any
property or assets, whether or not covered by insurance; (l) made any capital
expenditures, additions or improvements or
14
commitments for the same, except those which do not individually exceed
$125,000; (m) made any change in accounting procedures or practices; (n)
mortgaged or pledged any of its properties or assets, tangible or intangible,
or subjected them to any Encumbrance; (o) entered into any agreement or
arrangement granting any rights to purchase or lease any of its assets,
properties or rights or requiring the consent of any Person to the transfer,
assignment or lease of any such assets, properties or rights; (p) suffered
any other significant occurrence, event, or transaction outside the ordinary
course of business consistent with past practice, and other than occurrences,
events or transactions affecting other companies in the markets of the
Companies generally; or (q) entered into any contract or commitment to do or
permit any of the foregoing matters described in this SECTION 4.5.
4.6. BUSINESS. Each Company will own as of the Closing Date, free and
clear of any Encumbrances, the Networks set forth opposite such Company's
name on SCHEDULE 4.6 attached hereto. SCHEDULE 4.6 describes for each
Network, (a) a description of its service area, (b) the number of access
lines or access line equivalents maintained with respect to such Network as
of the date hereof, and (c) the number of billed long distance minutes of use
billed with respect to such Network for the 1997 calendar year and the first
month of 1998. SCHEDULE 4.6 also describes (y) the invoice history report as
of January 31, 1998 with respect to the twenty (20) largest customers of the
Companies taken as a whole that were invoiced during January 1998; and (z)
the accounts receivable aged invoice report as of January 31, 1998 reflecting
all open invoices to such twenty (20) largest customers of the Companies
taken as a whole invoiced as of January 31, 1998. As of the date of this
Agreement, at least ninety-five percent (95%) of the revenues of the
Companies derive from the provision of telecommunication services to business
customers, the Companies have at least 15,500 active business customers in
the aggregate, and less than one-half of one percent (.5%) of the revenues of
the Companies are derived from the provision of telecommunication services to
wholesale customers.
4.7. TAX MATTERS.
(a) Each of the Companies has timely filed all Tax Returns required
to be filed. All such Tax Returns are correct and complete in all material
respects. All Taxes owed by each Company and by each Seller (whether or not
shown on any Tax Return) have been paid or reserved for payment on the
Financial Statements for periods ending on or before the date of the
Financial Statements. Except as disclosed on SCHEDULE 4.7(a), no Company and
no Seller has requested any extension of time within which to file any Tax
Return, which has not since been filed. Except as disclosed on SCHEDULE
4.7(a), no claim has ever been made by an authority in a jurisdiction where
any Company does not file Tax Returns that such Company is or may be subject
to taxation by that jurisdiction. There are no Encumbrances (other than
Permitted Encumbrances) on any of the assets of any Company or any Seller
that arose in connection with any failure (or alleged failure) to pay any Tax
that is due and payable but remains unpaid.
(b) Each of the Companies has complied (and until the Closing Date
will comply) with all applicable laws, rules and regulations relating to the
payment and withholding of Taxes (including, without limitation, withholding
of Taxes pursuant to Sections 1441 and 1442 of the Code) and have, within the
time and in the manner prescribed by law, withheld from employee
15
wages and paid over the proper Governmental Authorities all amounts required
to be so withheld and paid over under all applicable laws.
(c) Except as disclosed on SCHEDULE 4.7(c), there is no pending or,
to the knowledge of Sellers, threatened dispute or claim concerning any Tax
Liability of any Company or of any Seller. SCHEDULE 4.7(c) lists all
federal, state, local and foreign income Tax Returns filed with respect to
each Company for taxable periods ended on or after December 31, 1991,
identifies those Tax Returns that have been audited and identifies those Tax
Returns that currently are the subject of audit. The Sellers have delivered
to the Buyer correct and complete copies of all federal income Tax Returns,
examination reports and statements of deficiencies filed or assessed against
or agreed to by each Company since December 31, 1991. Except as set forth on
SCHEDULE 4.7(a), (c) or (g), no action, suit, proceeding, audit,
investigation or claim is pending or, to the knowledge of Sellers, threatened
by any Governmental Authority regarding any Taxes or any Tax Return of the
Companies (except as set forth in such Schedule). Except as set forth on
SCHEDULE 4.7(c), no examination of any Tax Return of the Company is currently
in progress.
(d) No Company and no Seller has waived any statute of limitations
with respect to Taxes or agreed to any extension of time with respect to a
Tax assessment or deficiency.
(e) No Company and no Seller has ever filed a consent pursuant to
Section 341(f) of the Code (or any comparable state, local or foreign tax
provision) relating to collapsible corporations. No Company has made any
payments, is not obligated to make any payments and is not a party to any
agreement or arrangement that separately or in the aggregate could obligate
it to make any payments that will not be deductible under Code Section 280G
or Section 162. No Company is or has been a United States real property
holding corporation within the meaning of Code Section 897(c)(2) during the
applicable period specified in Code Section 897(c)(1)(A)(ii). Each Company
disclosed on its federal income Tax Returns all positions taken that could
give rise to a substantial understatement of federal income Tax within the
meaning of Code Section 6662 (or former Code Section 6661). No Company is or
has been a party to any Tax allocation or sharing agreement. With respect to
tax periods beginning on or after February 1, 1989, no Company is or has been
a member of an Affiliated Group filing a consolidated federal income Tax
Return and no Company has Liability for the Taxes of any Person (other than
such Company) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or successor, by
contract or otherwise.
(f) Each of the Companies has made an election to be treated as an S
Corporation as defined in Code Section 1361(a) (and any similar provision of
any applicable law) and will continue to be an S Corporation until the
Closing Date. The date of the filing and the effectiveness of the S
Corporation election on U.S. Treasury Form 2553 for each Company is set forth
on SCHEDULE 4.7(f).
(g) Such election has been in full force and effect for all taxable
years beginning on February 1, 1989 and shall remain in full force and effect
through the Closing Date. Except as set forth on SCHEDULE 4.7(g), beginning
with the Company's taxable year ending on December 31, 1989, the Shareholders
and each of the Companies have filed all federal, state, foreign and locate
income tax returns reporting income and operations of the Company based on
16
the status of the Company as an S Corporation within the meaning of Section
1361 of the Code (or such similar state, local or foreign provision).
(h) None of the assets of either Company contain built-in gain (as
defined in Section 1374 of the Code) which would subject either of the
Companies to tax under Section 1374 of the Code.
(i) No power of attorney has been granted by any Company with respect
to any matter relating to Taxes which is currently in force.
(j) Each of the Sellers who is a natural person is a resident of the
United States of America.
(k) No property of either Company is property that is or will be
required to be treated as being owned by another Person pursuant to the
provisions of Section 168(f)(8) of the Code (as in effect prior to amendment
by Tax Reform Act of 1986) or is "tax exempt use property" within the meaning
of Section 168 of the Code.
(l) Neither of the Companies is required to include in income any
adjustments pursuant to Section 481(a) of the Code by reason of a voluntary
change in accounting method initiated by such Company and no such adjustment
or change in accounting method has been proposed by any taxing authority.
4.8. ASSETS AND PROPERTIES.
(a) Each Company has good title to (or, in the case of the Assets
that are leased, valid leasehold interests in) the tangible Assets it uses
regularly in the conduct of its business, free and clear of all Encumbrances
other than Encumbrances listed on SCHEDULE 4.8(a), other than Permitted
Encumbrances and other than Encumbrances accompanying leased property, which
are not required to be disclosed on SCHEDULE 4.8(a). The Assets constitute
all of the assets that were used in the Business that generated the revenues
reflected in the Financial Statements. Except as disclosed on SCHEDULE
4.8(a), no officer, director, stockholder or employee of any Company owns,
leases or has any rights in any of the assets.
(b) SCHEDULE 4.8(b) lists the real property, buildings and
improvements leased, occupied or otherwise used by each Company in its
business (the "PREMISES"). The Premises have received all approvals of
Governmental Authorities (including Permits) required in connection with the
occupation and operation of the Premises and have been occupied, operated and
maintained in accordance with applicable Legal Requirements.
(c) Neither Company owns real property, and the real property leased
by the Companies has never been owned by either of the Companies.
(d) SCHEDULE 4.8(d) lists all real property leases to which either
Company is a party. Neither Company is in default under such real property
leases in any respect, and the lease
17
property has been maintained by the Company that leases such property in
accordance in all respects with the requirements under each relevant lease.
4.9. MATERIAL CONTRACTS AND OBLIGATIONS.
(a) SCHEDULE 4.9 lists, to the extent not reflected elsewhere in the
Schedules, all of the outstanding contracts, leases, and commitments and
other agreements entered into by any Company of the sort described below that
are in writing and, except for clauses (iii), (vii), (ix), (x) and (xi)
below, that require average monthly payments in excess of $15,000 during a
twelve (12) month period or require payments in excess of $125,000 per year
(collectively, the "CONTRACTS"):
(i) each operating agreement, interconnection agreement,
transit agreement, resale agreement and any other agreement with a
telecommunications service provider;
(ii) each Contract relating to the lease of or right to use
(either as lessor or lessee) fiber optic cable or switches setting forth
the names of the lessor and lessee, and a description of the property
and property interest leased;
(iii) all Contracts or arrangements providing for stock options
or stock purchases, bonuses, pensions, deferred or incentive
compensation, retirement or severance payments, profit-sharing,
insurance or other benefit plans or programs for any officer,
consultant, manager or employee any Company;
(iv) all Contracts for construction or for the purchase of real
estate, improvements, fixtures, equipment, machinery and other items that
under GAAP constitute capital expenditures;
(v) all Contracts relating to the rental or use of equipment,
vehicles, other personal property or fixtures (other than the Contracts
listed in clause (ii) of this SECTION 4.9(a));
(vi) all Contracts relating in any way to direct or indirect
indebtedness (whether secured or unsecured) of or to any Company,
including but not limited to, indebtedness by way of lease or installment
purchase arrangement, guarantee, reimbursement obligations pertaining to
letters of credit, purchase price discount obligations, undertakings on
which others rely in extending credit, or otherwise, and all mortgages,
pledges, conditional sales contracts, chattel and purchase-money
mortgages and other security arrangements with respect to any real
estate, improvements, equipment, other personal property or fixtures,
used or owned by any Company;
(vii) all Contracts substantially restricting any Company from
engaging in any line of business or competing with any Person or in any
geographical area;
18
(viii) all license agreements, either as licensor or licensee,
other than licenses for software used for management information and
general office tasks;
(ix) all joint venture Contracts and other Contracts involving a
sharing of profits, revenue or cash flow, including any such Contracts
related to the sharing of revenue, profit or cash flow from the lease of
fiber optic cable, but excluding any arrangements pursuant to which
either Company is a party to an Affinity Arrangement;
(x) all Contracts between either Company and any Affiliate of
any Company (other than the Other Seller Agreements);
(xi) all written Contracts of employment with any officer,
consultant, manager or employee and any oral Contracts which are not
terminable at will by a Company;
(xii) all Building Access Agreements; and
(xiii) all Easements.
(b) The Contracts are valid, in full force and effect, and
enforceable in accordance with their respective terms for the period stated,
except as such enforcement may be subject to (i) any applicable bankruptcy,
insolvency, reorganization or similar laws relating to or effecting
creditors' rights and (ii) general principles of equity, including, without
limitation, concepts of reasonableness, good faith and fair dealing, and
other similar doctrines affecting the enforceability of agreements generally
(regardless of whether considered in a proceeding in equity or at law). No
Company has repudiated any provision of any such Contract and no action or
claim by any Company is pending or threatened to revoke, modify, terminate or
render invalid any of such provisions. No Company is in breach or default in
performance of any of its obligations under any Contract, and no event exists
which, with the giving of notice or lapse of time or both, would constitute a
breach, default or event of default on the part of a Company, under any of
the foregoing agreements that is continuing unremedied.
4.10. INDEBTEDNESS TO AND FROM DIRECTORS, OFFICERS, AND OTHERS. Except
as set forth on SCHEDULE 4.10, no Company is currently indebted to any of its
directors, officers, or to any of their Affiliates, except for amounts due as
salaries, wages or reimbursement of ordinary business expenses or routine
employee advances for expenses not exceeding $125,000 in the aggregate for
all such Persons and not exceeding $15,000 for any such Person and except for
distributions in accordance with historic practices. Except as set forth on
SCHEDULE 4.10, no director, officer, or any Affiliate of any Company, is now,
or on the Closing Date will be, indebted to such Company, except for ordinary
business expense advances.
4.11. SOLVENCY. No Company is contemplating either the filing of a
petition by it under any state or federal bankruptcy or insolvency laws or
the liquidation of all or a substantial portion of its property, and the
Sellers have no knowledge of any Person contemplating the filing of any such
petition against either Company.
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4.12. FCC AND STATE-RELATED REPRESENTATIONS.
(a) Except as set forth on SCHEDULE 4.12(a), there is no outstanding
or unresolved (i) application by any Company for any FCC or PUC authorization
(including any renewal of any Permit), or (ii) complaint to the FCC or any
PUC regarding any Company or any of its Permits, or (iii) pending or, to the
knowledge of Sellers, threatened litigation, investigation, enforcement
proceeding, or other inquiry, by or before the FCC or any PUC against any
Company or with respect to any of their Permits, including, without
limitation, any notice of violation, any notice of apparent liability for
forfeiture, or any forfeiture.
(b) The Permits identified on SCHEDULES 4.12(b), 4.13(c), (d) or (e)
hereto include all of the Permits required by the Federal Communications Act
or any State Act for the operation of the business of the Companies as the
same is currently being operated. Each such Permit is validly outstanding
and effective and has been renewed (as applicable) by the FCC or any PUC
without condition for a full term in accordance with the Federal
Communications Act or any State Act. Except as set forth on SCHEDULES 4.12(b)
or 4.13(c), (d) or (e), there are no modifications, amendments or revocations
of any Permit pending or, to the knowledge of Sellers, threatened.
4.13. LITIGATION; COMPLIANCE WITH APPLICABLE LAWS, RIGHTS AND PERMITS.
Except with respect to matters described in SECTIONS 4.7, 4.8(b), 4.12,
4.16 and 4.18:
(a) There is no outstanding Order against, nor, except as set forth
on SCHEDULE 4.13(a), is there, nor has there been at any time since December
31, 1996, any litigation, proceeding, arbitration or investigation by any
Governmental Authority or other Person pending against any Company, its
properties or business or relating to the transactions contemplated by this
Agreement.
(b) Except as set forth in SCHEDULE 4.13(a) or 4.13(b), the
Companies and their Assets (including their Premises, facilities, machinery
and equipment and the use thereof) are not in violation of any applicable
Legal Requirement or Right in any respect. There is no pending notice from
any Governmental Authority or other Person of any violation or alleged
violation of any Legal Requirement by the Companies in any respect.
(c) SCHEDULE 4.13(c) lists all of the states in which intrastate
long distance service is being provided by each of the Companies. SCHEDULE
4.13(c) also lists all of the certificates of Public Convenience and
Necessity, or their equivalent, issued by the applicable state regulatory
commission in each state listed that grants each Company the authority to
provide intrastate long distance service in such state. Each certificate
listed in SCHEDULE 4.13(c) is valid and effective. No Company is in violation
of any of the terms and conditions of any of the certificates listed in
SCHEDULE 4.13(c). For each state listed in SCHEDULE 4.13(c), each Company
has filed all required regulatory reports and other filings, including tariff
filings, and has paid all annual and other regulatory fees, surcharges,
universal service fund payments, infrastructure fund payments and all other
regulatory assessments, except as may be disclosed in SCHEDULE 4.13(c). True
and
20
complete copies of each such authorization have been delivered to the Buyer
or provided to the Buyer for inspection.
(d) SCHEDULE 4.13(d) lists all of the states and cities in which
local exchange telecommunication services are being provided. SCHEDULE
4.13(d) also lists all of the state and municipal authorizations held by each
Company that grants such Company authority to provide local exchange
telecommunication service, including all franchises and right-of-way permits
and agreements. Each authorization listed in SCHEDULE 4.13(d) is valid and
effective, and no appeals of such authorizations are pending. No Company is
in violation of any of the terms and conditions of any such authorization.
With respect to each authorization listed in SCHEDULE 4.13(d), the
appropriate Company has made all required regulatory reports and other
filings, including tariff filings, and other regulatory assessments,
including all E911 surcharges, except as may be disclosed in SCHEDULE
4.13(d). True and complete copies of each such authorization have been
delivered to the Buyer or provided to the Buyer for inspection.
(e) SCHEDULE 4.13(e) lists all authorizations held by each Company
with respect to the provision of interstate and international
telecommunications services, including authority granted under Section 214 of
the Communications Act to provide international telecommunications services,
and all radio licenses issued by the FCC to each Company. Each such
authorization is valid and effective, and no Company is in violation of any
of the terms, conditions and requirements of such authorizations. Each
Company has made all required regulatory reports and other filings with the
FCC, including tariff filings, and has paid all annual and other regulatory
fees, surcharges and other regulatory assessments, except as may be disclosed
in SCHEDULE 4.13(e). True and complete copies of each such authorization
have been provided to the Buyer for inspection.
(f) SCHEDULE 4.13(f) lists all of the tariffs currently on file with
any state regulatory commission or the FCC, or both, covering each Company's
intrastate, local exchange, interstate and international telecommunications
services. Such tariffs are valid and effective, and the rates, terms and
conditions, and services listed in such tariffs are the only rates charged
and services being provided by each Company, except as may be disclosed in
SCHEDULE 4.13(f). True and complete copies of each such tariff have been
delivered to the Buyer or provided to the Buyer for inspection.
4.14. INSURANCE.
(a) SCHEDULE 4.14(a) contains an accurate and complete list of all
insurance policies of the Companies presently in effect. All premiums with
respect thereto covering all periods up to and including the Closing Date
have been paid, and no notice of cancellation or termination has been
received by the Companies with respect to any such policy. Such policies are
valid, outstanding and enforceable, and provide types and amounts of
insurance customarily obtained by businesses in the same industry as the
Companies.
(b) SCHEDULE 4.14(b) sets forth a list of all claims greater than
$130,000 that have been made by any Company during the last three years
pursuant to any insurance policy
21
applicable to any Company, other than (i) claims made pursuant to health
insurance policies and (ii) claims for worker's compensation.
4.15. LABOR MATTERS. SCHEDULE 4.15 sets forth an accurate list of all
officers, full-time employees who are entitled to receive employee benefits
and are eligible to take vacations, and directors of each Company and the
rate of compensation (and the portions thereof attributable to salary, bonus
and other compensations respectively) of such officers, employees and
directors. No Company is delinquent in payments to any of its employees for
any wages, salaries, commissions, bonuses or other direct compensation for
any services performed by the date hereof or amounts required to be
reimbursed by them to the date hereof. In addition, no Company is bound by
or subject to (and none of the assets or properties of any Company is bound
by or subject to) any agreement with any labor union, and no labor union has,
to the knowledge of the Sellers, sought to represent any of the employees,
representatives or agents of any Company. Except as set forth on SCHEDULE
4.15, there are no pending or, to the knowledge of the Sellers, threatened
(a) employment discrimination (including age, racial or handicapped
discrimination) charges or complaints against or involving any Company,
before any federal, state or local board, department, commission or agency or
(b) unfair labor practice charges or complaints, disputes or grievances
affecting any Company.
4.16. ENVIRONMENTAL MATTERS.
(a) Each Company has conducted and is conducting its business and
operations, and has occupied, used and operated the Premises, in compliance
with all Environmental Obligations so as not to give rise to any liability
under any Environmental Obligations.
(b) Neither Company has performed any act or made any omission with
respect to the occupation, use or operation of the Premises, or with respect
to any real estate formerly owned, leased or occupied by such Company, which
could give rise to any liability under any Environmental Obligations. There
are no outstanding, pending or, to the knowledge of the Sellers, threatened
Orders of any kind against any Seller concerning any Environmental
Obligations. There are no actions, suits, or administrative, arbitration or
other proceedings pending or, to the knowledge of the Sellers, threatened
against any Company at law or in equity with respect to any Environmental
Obligations.
(c) Neither Company has generated, stored, transported or disposed
of any Hazardous Materials except in accordance with applicable Legal
Requirements and Environmental Obligations, and all waste materials generated
as part of the business of each Company have been stored, transported and
disposed of in accordance with applicable Legal Requirements and
Environmental Obligations.
(d) No underground or above ground storage tanks (i) have been
during the period of the Company's occupancy located on the Premises or (ii)
were located on other real estate formerly owned, leased or occupied by any
Company during the time of such ownership, lease or occupation by such
Company.
22
4.17. INTELLECTUAL PROPERTY. Except as set forth on SCHEDULE 4.17,
each Company owns or has the legal right to use the Intellectual Property
used by such Company in connection with its business. The continued
operation of the business of such Company as currently conducted will not
interfere with, infringe upon, misappropriate or conflict with any
Intellectual Property rights of another Person. To the knowledge of Sellers,
no other Person has interfered with, infringed upon, misappropriated or
otherwise come into conflict with any Intellectual Property rights of any
Company. Except as set forth on SCHEDULE 4.17, no Company has granted any
license, sublicense or permission with respect to any Intellectual Property
owned or used in such Company's business.
4.18. BENEFIT PLANS; ERISA COMPLIANCE.
(a) SCHEDULE 4.18(a) hereto contains a true and complete list of (i)
each material, written plan, contract or agreement providing for
compensation, severance, termination pay, performance awards, stock or stock
related awards, fringe benefits or other employee benefits of any kind, which
is now sponsored, maintained, contributed to or required to be contributed to
by any Company or any ERISA Affiliate or pursuant to which any Company or any
ERISA Affiliate has or may have any liability, contingent or otherwise,
including, but not limited to, any "employee benefit plan" within the meaning
of Section 3(3) of ERISA (each, a "Company Benefit Plan"); and (ii) each
written management, employment, bonus, option, equity (or equity related),
severance, consulting, non-compete, confidentiality or similar agreement or
contract, pursuant to which any Company or any ERISA Affiliate has any
liability, contingent or otherwise, to any Employee or director of any
Company (each, an "Employee Agreement"). Except as identified on SCHEDULE
4.18(a), neither a Company, nor any ERISA Affiliate, currently sponsors,
maintains, contributes to, or is required to contribute to, nor has any
Company or any ERISA Affiliate ever sponsored, maintained, contributed to or
been required to contribute to, or incurred any liability to, (i) any
"multiemployer plan" (as defined in ERISA Section 3(37)) or (ii) any Company
Benefit Plan which provides, or has any liability to provide, life insurance,
medical, severance or other employee welfare benefits to any such Employee
upon his or her retirement or termination of employment, except as required
by Section 4980B of the Code or similar state law.
(b) "ERISA AFFILIATE" shall mean any entity which is (or at any
relevant time was) a member of a "controlled group of corporations" with,
under "common control" with, or a member of any "affiliated service group"
with or otherwise required to be aggregated with, any Company as set forth in
Section 414(b), (c), (m) or (o) of the Code.
(c) The Sellers have provided to Buyer current, accurate and
complete copies of all documents embodying each Company Benefit Plan and each
Employee Agreement, including all amendments thereto, trust or funding
agreements relating thereto (if any), the three most recent annual reports
(Series 5500 and related schedules) required under ERISA (if any), summary
annual reports, the most recent determination letter (if any) received from
the Internal Revenue Service ("IRS"), the most recent summary plan
description (with all material modifications) (if any), if any Company
Benefit Plan is funded, the most recent annual and periodic accounting of
assets of such Company Benefit Plan, and, subject to laws relating to
confidentiality of employee information, all written communications (other
than correspondence relating to routine benefits
23
claims) to any such Employee relating to any Company Benefit Plan or Employee
Agreement. Neither the Sellers nor any Company has communicated to any
employees or other persons any additional Company Benefit Plan not set forth
in SCHEDULE 4.18(a) or any change or termination of any existing Company
Benefit Plan.
(d) Except as set forth on SCHEDULE 4.18(d), with respect to each
Company Benefit Plan and Employee Agreement (i) each Company and each ERISA
Affiliate has performed in all material respects all obligations required to
be performed by it under each Company Benefit Plan and Employee Agreement and
neither any Company nor any ERISA Affiliate is in default in any material
respect under or in violation in any material respect of, any Company Benefit
Plan; (ii) each Company Benefit Plan has been established and maintained in
accordance with its terms and in compliance in all material respects with all
applicable laws, including but not limited to ERISA and the Code, including
without limiting the foregoing, the timely filing of all required reports,
documents and notices, where applicable, with the IRS and the Department;
(iii) each Company Benefit Plan intended to qualify under Section 401 of the
Code is, and since its inception has been, so qualified and a determination
letter that includes any new or modified requirements under the Tax Reform
Act of 1986 and subsequently enacted legislation that amended the Code has
been issued by the IRS to the effect that each such Company Benefit Plan is
so qualified and that each trust forming a part of any such Company Benefit
Plan is exempt from tax pursuant to Section 501(a) of the Code or the period
for filing an application for such determination letter has not yet expired
and no circumstances exist which would adversely affect this qualification or
exemption; (iv) no "prohibited transactions" within the meaning of Section
4975 of the Code or Section 406 of ERISA, has occurred with respect to any
Company Benefit Plan nor has any fiduciary (as defined in Section 3(21) of
ERISA) incurred any liability for breach of any fiduciary duty under Title I
of ERISA (including but not limited to Sections 409 and 502 of ERISA) or any
liability under Title IV of ERISA; (v) there are no actions, proceedings,
arbitrations, suits or claims pending, or to the knowledge of the Sellers,
threatened or anticipated (other than routine claims for benefits) against a
Company or any ERISA Affiliate or any administrator, trustee or other
fiduciary of any Company Benefit Plan with respect to any Company Benefit
Plan or Employee Agreement, or against any Company Benefit Plan or against
the assets of any Company Benefit Plan; (vi) no event or transaction has
occurred with respect to any Company Benefit Plan that would result in the
imposition of any tax under Chapter 43 of Subtitle D of the Code; (vii) each
Company Benefit Plan can be amended, terminated or otherwise discontinued
without liability to the Company or any ERISA Affiliate; and (viii) no
Company Benefit Plan is under audit or investigation by the IRS or the
Department or the PBGC, and no such audit or investigation is pending or, to
the knowledge of the Sellers, threatened.
(e) Except as set forth on SCHEDULE 4.18(e), the execution of, and
performance of the transactions contemplated in, this Agreement will not
(either alone or upon the occurrence of any additional or subsequent events)
(i) constitute an event under any Company Benefit Plan or Employee Agreement
that will or may result in any payment (whether of severance pay or
otherwise), acceleration, forgiveness of indebtedness, vesting, distribution,
increase in benefits or obligations to fund benefits with respect to any
Employee of any Company, or (ii) result in the triggering or imposition of
any restrictions or limitations on the right of any Company or the Buyer to
amend or terminate any Company Benefit Plan or any Employee Agreement.
24
(f) Except as set forth on SCHEDULE 4.18(f), the execution of this
Agreement or the consummation of the transactions contemplated by this
Agreement will not give rise to any, or trigger any, change of control,
severance or other similar provisions in any Company Benefit Plan or any
Employee Agreement. The consummation of any transaction contemplated by this
Agreement will not result in any (i) payment (whether of severance pay or
otherwise) becoming due from any Company to any officer, employee, former
employee or director thereof or to the trustee under any "rabbi trust" or
similar arrangement; (ii) benefit under any Company Benefit Plan or any
Employee Agreement being established or becoming accelerated, vested or
payable; or (iii) payment or series of payments by any Company, directly or
indirectly, to any person that would constitute an "excess parachute payment"
within the meaning of Section 280G of the Code.
(g) No Company nor any ERISA Affiliate sponsors, maintains or
contributes to (or has an obligation to contribute to) or, at any time within
the five (5) consecutive calendar year period immediately preceding the first
day of the calendar year in which the Closing Date occurs, previously
sponsored maintained or contributed to (or had an obligation to contribute
to) any defined benefit plan described in Section 3(35) of ERISA or Section
414(j) of the Code, or any other pension benefit plan that is subject to the
minimum funding standards of Section 302 of ERISA or Section 412 of the Code.
No Company nor any ERISA Affiliate participates in, contributes to or has an
obligation to contribute to any multiemployer plan as defined in Section
4001(a)(3) of ERISA or Section 414(f) of the Code. At no time during the
five (5) consecutive calendar year period immediately preceding the first day
of the calendar year in which the Closing Date occurs, has any Company or any
ERISA Affiliate participated in, contributed to or had an obligation to
contribute to any such multiemployer plan as is described in the immediately
preceding sentence. No Company nor any ERISA Affiliate provides
post-retirement medical, health, disability or death protection coverage or
contributes to or maintains any employee welfare benefit plan which provides
for medical, health, disability or death benefit coverage following
termination of employment by any officer, director or employee except as is
required by Section 4980B(f) of the Code or other applicable statute, nor has
it made any representations, agreements, covenants or commitments to provide
that coverage.
(h) No Company has and will not have any liability or obligation for
Taxes, penalties, contributions, losses, claims, damages, judgments,
settlement costs, expenses, costs, or any other liability or liabilities of
any nature whatsoever arising out of or in any manner relating to any Company
Benefit Plan (including but not limited to employee benefit plans such as
foreign plans which are not subject to ERISA), that has been, or is,
contributed to by any ERISA Affiliate.
4.19. BROKERS. Except for Xxxxxxx & Associates, L.P., the Companies
have not engaged any agent, broker or other person acting pursuant to the
express or implied authority of the Companies who is or may be entitled to a
commission or broker or finder's fee in connection with the transactions
contemplated by this Agreement or otherwise with respect to the sale of the
Shares.
25
4.20. DISCLOSURE. The representations and warranties set forth in
this Section 4 do not contain any untrue statements of any material fact or
omit to state a material fact necessary in order to make such representations
and warranties, in light of the circumstances under which they were made, not
misleading. Buyer acknowledges that the representations and warranties made
in this Section 4 are the sole representations and warranties of the Sellers
made hereunder, and the only representations and warranties upon which the
Buyer shall be permitted to rely.
5. REPRESENTATIONS OF BUYER
Buyer represents and warrants to the Sellers that all of the following
representations and warranties are true as of the date of the Agreement and
shall be true at the time of Closing:
5.1. VALID EXISTENCE. The Buyer is validly existing and in good
standing under the laws of the State of Oklahoma and is duly authorized,
qualified and licensed under all applicable laws, regulations, and ordinances
of public authorities to carry on its business in the places and in the
manner as now conducted except for where the failure to be so authorized,
qualified or licensed would not have a material adverse affect on its
business.
5.2. AUTHORIZATION.
(a) The Buyer has full legal right, power and authority to enter into
this Agreement and the Other Buyer Agreements. The execution and delivery of
this Agreement by Buyer, and the consummation by the Buyer of the
transactions contemplated on its part by this Agreement and the Other Buyer
Agreements, have been duly authorized by the Buyer's Board of Directors. No
other corporate approvals on the part of the Board of Directors or
shareholders of the Buyer are necessary to authorize the execution and
delivery of this Agreement or the Other Buyer Agreements. Assuming the due
authorization, execution and delivery by the other parties thereto, this
Agreement constitutes, and the Other Buyer Agreements when executed and
delivered by the parties thereto will constitute, the legal, valid and
binding obligations, and will be enforceable in accordance with their
respective terms against, the Buyer.
(b) Except as set forth on Schedule 5.2(b), and except for such
consents and approvals that are required by Governmental Authorities that
have regulatory authority over the Companies or Sellers or under contracts to
which any of the Companies or Sellers are a party, no consent, authorization
or approval of, filing or registration with, or cooperation from, any
Governmental Authority or any other Person not a party to this Agreement is
necessary in order for the Buyer to consummate the transactions contemplated
by this Agreement and the Other Buyer Agreements.
(c) The execution, delivery and performance of this Agreement and the
Other Buyer Agreements and the consummation of the transactions contemplated
thereby will not (i) violate any Legal Requirement to which the Buyer is
subject in any respect (assuming the consents and approvals described in
SECTION 5.2(b) are received); (ii) violate or conflict with, result in the
loss of any benefit under, result in a breach or termination of, constitute a
default or give any third party any additional right (including a termination
right) under, result in the creation of any Encumbrance upon any of the
assets or properties of the Buyer under, or result in or constitute a
26
circumstance which, with or without notice or lapse of time or both, would
constitute any of the foregoing under, any agreement to which the Buyer is a
party or by which the Buyer or any of its assets or properties are bound;
(iii) permit the acceleration of the maturity of any indebtedness or any
other obligation of the Buyer or indebtedness or obligation secured by its
assets or properties; (iv) violate or conflict with any provision of any of
the charter, by-laws or similar organizational instruments of the Buyer; or
(v) violate any judgment, injunction, order, decree applicable to the Buyer
or its respective properties or assets.
5.3. BROKERS. No broker, finder or other investment banker is
entitled to receive any brokerage, finder's or other fee or commission in
connection with this Agreement or the transactions contemplated hereby based
upon agreements made by or on behalf of the Buyer.
5.4. INVESTMENT. The Buyer is acquiring the Shares for its own
account for investment purposes only and not with a view to or for sale in
connection with any distribution thereof, except in accordance with
applicable federal and state securities laws.
5.5. FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES.
(a) The Buyer has delivered to Sellers true and complete copies of
Buyer's (a) unaudited balance sheets and related statements of income,
Buyer's equity and cash flows for and as of the years ended December 31, 1996
and December 31, 1997 and (b) unaudited balance sheet and related statements
of income at and as of the monthly period ending January 31, 1998
(collectively, the "BUYER FINANCIAL STATEMENTS"). The Buyer Financial
Statements have been prepared in accordance with generally accepted
accounting principles in accordance with Buyer's historical accounting
practices and applied on a consistent basis throughout the periods covered
and present fairly Buyer's financial position, results of operations and
changes in financial position as of the dates and for the periods indicated,
subject only to normal year-end adjustments (none of which will be material
in amount) and the omission of footnotes. Copies of the financial statements
described herein are attached as SCHEDULE 5.5(a).
(b) The Buyer did not have as of January 31, 1998 financial
liabilities of any nature, whether absolute, accrued, contingent or
otherwise, of the type that should be reflected on the balance sheet and
related statements of income at and as of the monthly period ending January
31, 1998, except for (i) liabilities that are reflected or reserved against
in such balance sheet and (ii) liabilities and obligations not required by
generally accepted accounting principles to be reflected on a balance sheet
and that individually or in the aggregate do not have, and are not reasonably
be expected to have, a material adverse effect on the financial condition,
assets, business or prospects of Buyer.
5.6. INTERCOMPANY OBLIGATIONS. Neither Buyer nor any of its direct
and indirect subsidiaries is indebted to, or has any liabilities or
obligations of any kind whatsoever payable to, any Affiliate of Buyer other
than Buyer and Buyer's direct and indirect subsidiaries. Any liabilities
reflected on the Buyer Financial Statements as being owed to any such
Affiliate other than Buyer and Buyer's direct and indirect subsidiaries have
been contributed to the capital of Buyer.
27
6. PRE-CLOSING COVENANTS
The parties agree as follows with respect to the period between the
execution of this Agreement and the Closing.
6.1. GENERAL. Each of the parties will use reasonable efforts to take
all actions necessary or advisable in order to consummate and make effective
the transactions contemplated by this Agreement (including the satisfaction,
but not the waiver, of the closing conditions set forth in SECTION 8) and the
other agreements contemplated hereby.
6.2. FINANCIAL STATEMENTS; INFORMATION. The Sellers covenant and
agree that during the period after the execution of this Agreement and prior
to the Closing, Sellers shall provide Buyer, within thirty (30) calendar days
of the end of each calendar month, each Company's unaudited balance sheet and
income statement for such month ("INTERIM FINANCIAL STATEMENTS"). The
Interim Financial Statements will be prepared in accordance with GAAP in
accordance with each Company's historical accounting practices (except for
changes noted in the footnotes thereto) and will present fairly each
Company's financial position, results of operations and changes in financial
position, subject normal year-end adjustments (none of which will be material
in amount) and the omission of footnotes.
6.3. GOVERNMENTAL APPROVALS.
(a) Sellers covenant and agree to use their commercially reasonable
efforts to obtain all governmental and third party consents and approvals
necessary for the transfer to Buyer of the Shares, including consents
required under any material Permit, contract or agreement to which a Seller
or Company is a party. Buyer covenants and agrees that it will cooperate
with Sellers, and do all things reasonably necessary to assist Sellers, to
obtain all consents and approvals necessary for Seller to transfer the Shares
to Buyer. Each of Buyer and Sellers hereby agrees to file the necessary
forms with the FCC and the PUC that are required to be filed in connection
with the transactions contemplated hereby as promptly as practical after the
date of execution of this Agreement to the extent any such filings have not
been made prior to the date of execution of this Agreement. Buyer shall
provide all information relating to Buyer and its Affiliates required by
Sellers in order to permit Sellers to complete any forms or applications to
be submitted to the Texas Public Utilities Commission in connection with the
conditions contemplated in SECTIONS 8.1(e)(i) AND (ii) and 8.2(e)(i) AND
(ii). Sellers will pay all filing fees in connection with any filings
pursuant to this SECTION 6.3(a). In addition, the Sellers will make a good
faith effort to obtain good standing certificates, dated within ten (10)
calendar days prior to the Closing, from the Secretary of State of each state
in which each Company is qualified or authorized to do business as a foreign
corporation.
(b) Sellers and Buyer shall each cooperate and use their reasonable
efforts to prepare and file with the FTC and the Antitrust Division and other
Governmental Authorities as promptly as possible all requisite applications
and amendments thereto together with related information, data and exhibits
necessary to satisfy the requirements of the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act ("XXXX-XXXXX ACT"). The parties agree to make the initial
filing required under
28
the Xxxx-Xxxxx Act as promptly as practical following the date of this
Agreement. Buyer shall pay all filing fees in connection with any filings
pursuant to this SECTION 6.3(b).
6.4. ACCESS.
(a) Buyer and its attorneys and agents, and until April 9, 1998,
Buyer's sources of financing, shall have the right, during normal business
hours, after reasonable notice (which may be oral) to Sellers and without
undue disruption to the normal business activities of the Companies, to
conduct a reasonable inspection of the properties of the Companies and to
make abstracts and reproductions of all books and records of the Companies as
Buyer may, from time to time reasonably request, including, without
limitation, applications and reports to the PUC and FCC, financial
information relevant to the business of the Companies, employee records, and
engineering and environmental reports, and Sellers shall furnish Buyer with
such information respecting the business of the Companies and shall provide
reasonable access to the personnel of the Companies; provided, however, that
while information regarding the identity of the customers of the Companies
may be inspected by Buyer and its attorneys and agents (and, until April 9,
1998, by Buyer's sources of financing) at the Companies' offices, and under
the supervision of Sellers' Agent, abstracts or reproductions of such
customer information shall not be made by the inspecting parties; and
provided further, Seller's Agent may in his sole discretion condition the
granting of access to any information relating to either Company to any
Person other than Buyer's attorneys and agents upon the execution and
delivery by such Person of a non-disclosure agreement with the same terms as
the Non-Disclosure Agreement in favor of the Companies.
(b) Sellers shall allow Buyer the opportunity to conduct an
engineering review of the Assets to confirm that the Assets comply with the
PUC and FCC Permits and the Legal Requirements of the PUC and FCC and are
otherwise in good condition and repair, reasonable wear and tear excepted.
6.5. CONDUCT OF BUSINESS. From and after the date hereof and through
the Closing Date, Sellers shall cause the Companies to:
(a) operate their business in the ordinary course and in
accordance with the PUC and FCC Permits, and comply in all material
respects with all Legal Requirements applicable to the Companies,
including the Legal Requirements of the PUC and FCC;
(b) refrain from making any sale, lease, transfer or other
disposition of any of the Assets other than in the ordinary course of
business consistent with past practice, except as set forth on SCHEDULE
6.10;
(c) refrain from modifying, amending or altering in any
material respect, or terminating any of the Contracts, or waiving any
material rights thereunder;
29
(d) maintain insurance on the Assets comparable to that
maintained prior to the date hereof and use the proceeds of any claims
for loss under such policies, together with such other funds as may be
required, to repair, replace, or restore to their former condition any
Assets which may be damaged by fire or other casualty, all as soon as
reasonably possible;
(e) maintain their books and records in accordance with prior
practice and otherwise operate their business in the ordinary course in
accordance with past practices;
(f) refrain from increasing the compensation payable or to
become payable to any employee, except for customary increases
consistent with past practice and refrain from entering into any
contract or renewal of any existing contract for the employment of any
employee other than "at will" employees;
(g) use their commercially reasonable efforts to (x) keep their
business organization intact, (y) retain the services of their key
employees and (z) maintain good relationships with its employees,
suppliers, advertisers, customers, agents and others having business
relations with them, in each case in accordance with past practices;
(h) refrain from changing their articles of incorporation or
by-laws in any way that would materially adversely affect their power
or authority to enter into and perform this Agreement, or that would
otherwise materially adversely affect its performance of this Agreement;
(i) refrain from subjecting any of the Assets to any new
Encumbrance other than in the ordinary course of business, consistent
with past practice;
(j) provide to the Buyer, concurrently with filing thereof,
copies of all reports to and other filings with the PUC and the FCC;
(k) not permit any of the Permits to expire or to be
surrendered or voluntarily modified in a matter adverse to their
business, and refrain from taking any action which would reasonably be
expected to cause any Governmental Authority to institute proceedings
for the suspension, revocation or limitation of rights under any of the
Permits; or fail to prosecute with due diligence any pending
applications to any Governmental Authority;
(l) notify Buyer in writing promptly after learning of the
institution or threat of any material action against any Company in any
court, or any action against any Company before any Governmental
Authority, and notify Buyer in writing promptly upon receipt of any
administrative or court order relating to the Assets or the business of
the Companies;
30
(m) pay or cause to be paid or provide for all Taxes of or
relating to the Companies, the Assets and their employees due and
payable to Governmental Authorities up to the Closing Date;
(n) cooperate with Buyer in connection with Buyer's efforts to
identify the current employees of the Companies that Buyer would like
the Companies to retain following the Closing consistent with all
applicable federal, state and/or local employment laws, rules and
regulations; and
(o) continue to advertise, promote and market the business and
services of each Company in a manner consistent with past practice.
6.6. EMPLOYEES. Attached as SCHEDULE 6.6 is a list of employees of
the Companies to whom bonuses in the amounts set forth thereon will be paid
to encourage such employees to continue working for such Companies through
the Closing. Buyer shall pay or cause the payment of such amounts upon the
earlier to occur of Closing or June 30, 1998, and such responsibility shall
survive any termination of this Agreement. Notwithstanding anything herein
to the contrary, however, nothing contained in this Agreement shall confer
upon any employee of any Company any right with respect to continued
employment by such Company or Buyer. Except for the arrangements relating to
the bonus payments described in the first two sentences of this Section (as
to which the employees of the Companies are express and intended third party
beneficiaries), no provision of this Agreement shall create any third-party
rights in any such employee, or any beneficiary or dependent thereof, with
respect to the compensation, terms and conditions of employment and benefits
that may be provided to such employee by Buyer or under any benefit plan that
Buyer may maintain.
6.7. NOTICE OF DEVELOPMENTS. The Sellers will give prompt written
notice to the Buyer of any material development which occurs after the date
of this Agreement and affects (a) the business, Assets, liabilities,
financial condition, operations, results of operations, that would result in
a Material Adverse Effect, or (b) affects in any material respect the
representations, warranties, covenants or Schedules of any Company. The Buyer
shall give prompt written notice to the Sellers of any Material Adverse
Effect or matter that adversely affects in any material respect the
representations, warranties, covenants or Schedules which becomes known to
Buyer as a result of its due diligence permitted under SECTION 6.4. The
Sellers shall be entitled to update the Schedules to reflect developments and
agreements occurring subsequent to the execution of this Agreement. In
addition, Sellers shall be entitled to update the Schedules with respect to
any matter existing as of the date hereof by giving Buyer written notice
thereof; provided, however, that no such updated disclosure referred to in
this sentence shall be deemed to cure any breach of any representation or
warranty of Sellers made in this Agreement unless Buyer fails to object in
writing to Sellers' Agent to any such updated disclosure within ten (10)
Business Days after Buyer's receipt thereof.
6.8. EXCLUSIVITY. Neither the Sellers nor their Affiliates, advisors
or representatives shall (a) solicit, initiate or encourage the submission of
any proposal or offer from any Person relating to the acquisition of any
capital stock or other voting securities of any Company, or any portion of
the Assets of, any Company (including any acquisition structured as a merger,
31
consolidation or share exchange), outside the ordinary course the Companies'
business and consistent with past practices, or (b) participate in any
discussions or negotiations regarding, furnish any information with respect
to, assist or participate in or facilitate in any other manner any effort or
attempt by any Person to do or seek any of the foregoing. The Sellers' Agent
will notify the Buyer immediately if any Person make any proposal, offer,
inquiry or contact with respect to any of the foregoing.
6.9. ANNOUNCEMENT. Prior to the Closing, except as may be required by
law, no party shall issue any press release or make any public announcement
relating to the subject matter of this Agreement without the prior written
approval of the other parties.
6.10. DISTRIBUTION. Notwithstanding the provisions of SECTION 6.5,
between the date hereof and the Closing Date, the Sellers may cause each
Company to (a) make such cash distributions to the Sellers, in a manner
consistent with past practice, as well as any special cash dividends, as the
Sellers determine in their sole discretion, (b) make such cash payments to a
Seller or any Affiliate of a Seller as may be necessary to settle any
accounts with such Seller or Affiliate, (c) make such cash distributions to
the Sellers as may be necessary to pay any taxes that have accrued through
the Closing and (d) distribute to the Sellers the Assets described on
SCHEDULE 6.10.
6.11. FINANCING MATTERS. Buyer has received a binding written
commitment, addressed to Buyer from Xxxxxx Xxxxxxx Bridge Fund, L.L.C. (the
"DEBT COMMITMENT"), a true and correct copy of which was furnished to
Sellers, to obtain the financing necessary to pay the Purchase Price. It is
the good faith belief of Buyer, as of the date hereof, that the financing
contemplated by the Debt Commitment will be available to be drawn on or
before the Closing. Buyer agrees that it will not agree to any amendment or
termination of such Debt Commitment without the prior written consent of the
Sellers, will not waive or fail to exercise any of its rights or remedies
with respect to the Debt Commitment in order to obtain the financing
contemplated thereby, and Buyer shall use its best efforts to fulfill or
cause the fulfillment of any of the conditions to the obtaining of such
financing. Subject to the satisfaction of the conditions to the Buyer's
obligations set forth in SECTION 8.1, Buyer shall use all of its cash, draw
upon any funds that may be available pursuant to such financing, and to
obtain such other financing or financial resources to make the payment of the
Purchase Price to Sellers on the Closing Date in accordance with the terms
hereof. In addition, Buyer shall use its best efforts to fulfill all of the
conditions set forth in SECTION 8.2. Notwithstanding the foregoing, Buyer
acknowledges and agrees that its obligations hereunder are not conditioned
upon its ability to obtain any financing, that if the conditions set forth in
Section 8.1 are satisfied it is obligated to consummate the transactions
contemplated hereby on the Closing Date and that the terms of this Section
are not intended to create and do not create any financing condition.
7. POST-CLOSING COVENANTS
The parties agree as follows with respect to the period following the
Closing:
7.1. FURTHER ASSURANCES. If at any time after the Closing any further
action is necessary to carry out the purposes of this Agreement, each of the
parties will take such further
32
action (including the execution and delivery of such further instruments and
documents) as any other party reasonably may request, at the sole cost an
expense of the requesting party.
7.2. POST-CLOSING ANNOUNCEMENTS. Following the Closing, no Seller
will issue any press release or make any public announcement relating to the
subject matter of this Agreement without the prior written approval of the
Buyer.
7.3. TIMELY PAYMENT OF LIABILITIES. Following the Closing, the Buyer
shall cause each Company to pay all of the liabilities incurred by such
Company prior to the Closing in a timely manner.
7.4. PAYMENT OF TAXES.
(a) The Sellers shall cause the Companies to prepare Tax Returns of
the Companies for any period, including any federal and state income Tax
Returns for an S Corporation (Form 1120S) that includes or ends with the
Closing Date.
(b) The Sellers shall be obligated to reimburse the Companies for any
Taxes due with respect to any Tax Return for any period that begins after
December 31, 1997 and that ends on or with the Closing Date, except to the
extent that any such Taxes have been accrued on the Closing Date Balance
Sheet.
8. CONDITIONS TO CLOSING
8.1. CONDITIONS TO OBLIGATION OF THE BUYER. The obligations of the
Buyer to consummate the transactions contemplated by this Agreement are
subject to satisfaction of the following conditions:
(a) the representations and warranties of the Sellers shall be
correct and complete in all material respects at and as of the Closing;
(b) the Sellers shall have performed and complied in all material
respects with all of their covenants hereunder through the Closing Date;
(c) no action, suit or proceeding shall be pending or threatened
before any Governmental Authority or any other Person wherein an unfavorable
Order would (i) prevent consummation of any of the transactions contemplated
by this Agreement, (ii) cause any of the transactions contemplated by this
Agreement to be rescinded following such consummation or (iii) materially or
adversely affect the right of the Buyer (or any Company, as the case may be)
to own the Shares or the Assets of any Company, or conduct the business
represented by such Assets, and no such Order shall be in effect;
(d) no action shall have been taken and be continuing, and no
statute, rule, regulation, judgment or administrative interpretation shall
have been enacted, promulgated, entered, enforced or deemed applicable to the
transactions contemplated by this Agreement, which would make illegal or
prohibit the consummation of such transactions;
33
(e) prior to the Closing Date,
(i) the Buyer or the Companies, as appropriate, shall have
obtained a Special Temporary Authority or other requisite approval from
the FCC with respect to the change of control of the Permits or
Licenses issued by the FCC to the Companies;
(ii) any approval of the Texas Public Utilities Commission
necessary for the consummation of the sale of the Shares to Buyer shall
have been obtained;
(iii) all applicable waiting periods under the Xxxx-Xxxxx Act (if
applicable to the transactions contemplated by this Agreement) shall
have expired or been terminated and no objection shall have been made
by the FTC or the DOJ;
(f) other than changes affecting business in the Companies' industry
generally, there shall not have been any material adverse change in the
financial condition, Assets, business or prospects of the Companies from
October 31, 1997 to the Closing;
(g) the Other Seller Agreements shall have been executed and
delivered by the Sellers or other relevant Persons, as applicable;
(h) the Sellers shall have delivered to Buyer such instruments,
consents and approvals of third parties (the form and substance of which
shall be reasonably satisfactory to Buyer) as are required pursuant to the
terms of the Contracts that are material to the business of the Companies
(including any Contracts involving the license of software to any Company)
and require consent as a result of Buyer's purchase of the Shares;
(i) the Sellers shall have delivered to the Buyer (i) a certificate
to the effect that each of the conditions specified above in SECTIONS 8.1(a)
and (b) has been satisfied in all material respects, and (ii) a good standing
certificate, dated within ten calendar days of the Closing, from the
Secretary of State of Texas;
(j) the Buyer shall have received from Mayor, Day, Xxxxxxxx & Xxxxxx,
L.L.P., special counsel to the Sellers, an opinion in form and substance as
set forth in EXHIBIT E addressed to the Buyer;
(k) the Buyer shall have received from Xxxxxxxxx & Xxxxxxxxx,
L.L.P., PUC counsel to the Companies, an opinion in form and substance as set
forth in EXHIBIT F-1 addressed to the Buyers, and from Xxxxxx & Associates.,
FCC counsel to the Companies, an opinion in form and substance as set forth
in EXHIBIT F-2 addressed to the Buyers;
(l) the Buyer shall have received stock certificates representing the
Shares, duly endorsed in blank or accompanied by stock powers duly executed
in blank, free and clear of any Encumbrances or Taxes;
34
(m) the Sellers shall have provided to Buyer, in a form reasonably
satisfactory to Buyer, the resignations of each officer of each Company and
each member of each Company's Board of Directors other than those persons
designated in writing by Buyer to such Company as persons who shall continue
in office;
(n) the Sellers shall have provided to Buyer, in a form satisfactory
to Buyer, a payoff letter from every lender to such Company stating the
outstanding principal balance of all existing indebtedness, all interest
accrued on such indebtedness and all prepayment premiums and other amounts
due in order to pay all such indebtedness as of the Closing Date; and
(o) Each Seller shall have delivered an executed Form 8023-A at the
Closing authorizing the Code Section 338(h)(10) election contemplated by
SECTION 2.8.
8.2. CONDITIONS TO OBLIGATION OF THE SELLERS. The obligation of the
Sellers to consummate the transactions contemplated by this Agreement is
subject to satisfaction of the following conditions:
(a) the Buyer's representations and warranties shall be correct and
complete in all material respects at and as of the Closing;
(b) the Buyer shall have performed and complied in all material
respects with all of its covenants hereunder through the Closing Date;
(c) no action, suit or proceeding shall be pending or threatened
before any Governmental Authority or any other Person wherein an unfavorable
Order would (i) prevent consummation of any of the transactions contemplated
by this Agreement or (ii) cause any of the transactions contemplated by this
Agreement to be rescinded following such consummation;
(d) no action shall have been taken and be continuing, and no
statute, rule, regulation, judgment or administrative interpretation shall
have been enacted, promulgated, entered, enforced or deemed applicable to the
transactions contemplated by this Agreement, which would make illegal or
prohibit the consummation of such transactions;
(e) prior to the Closing Date,
(i) the Buyer or the Companies, as appropriate, shall have
obtained a Special Temporary Authority or other requisite approval from
the FCC with respect to the change of control of the Permits or
Licenses issued by the FCC to the Companies;
(ii) any approval of the Texas Public Utilities Commission
necessary for the consummation of the sale of the Shares to Buyer shall
have been obtained;
(iii) all applicable waiting periods under the Xxxx-Xxxxx Act (if
applicable to the transactions contemplated by this Agreement) shall
have expired or been terminated and no objection shall have been made
by the FTC or the DOJ;
35
(f) the Other Buyer Agreements shall have been executed and delivered
by the Buyer;
(g) all of the instruments, consents and approvals contemplated by
SECTION 8.1(h) shall have been received;
(h) the Buyer shall deliver to Sellers copies of the resolutions of
the board of directors of Buyer authorizing the execution, delivery and
performance of this Agreement, the Other Buyer Documents and all instruments
and documents to be delivered in connection with the transactions
contemplated hereby, duly certified by an officer of Buyer;
(i) the Sellers shall have received a certificate or certificates of
an officer of Buyer, certifying as to the genuineness of the signatures of
officers of Buyer authorized to take certain actions or execute any
certificate, document, instrument or agreement to be delivered pursuant to
this Agreement or the Other Buyer Agreements, which incumbency certificate
shall include the true signatures of such officers;
(j) the Buyer shall have delivered to the Sellers (i) a certificate
to the effect that each of the conditions specified above in SECTIONS 8.2(a)
and (b) has been satisfied in all respects, and (ii) a good standing
certificate, dated within ten calendar days of the Closing, from the
Secretary of State of Oklahoma;
(k) the Sellers shall have received from Xxxxxxx & Xxxxxx, special
counsel to the Buyer, an opinion in form and substance a set forth in EXHIBIT
G, addressed to the Sellers and dated as of the Closing;
(l) the Buyer shall have wire transferred the Purchase Price for the
Shares pursuant to SECTION 2.2; and
(m) the Buyer shall have delivered an executed Form 8023-A at the
Closing the Code Section 338(h)(10) election contemplated by SECTION 2.8.
36
9. INDEMNIFICATION AND REMEDIES
9.1. INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE BUYER AND THE
COMPANIES.
(a) Subject to the limitations of SECTIONS 9.4 and 9.5 and the other
provisions of this Agreement, if any Seller breaches (or if any Person other
than the Buyer alleges facts that, if true, would mean any Seller has
breached) any of the representations, warranties, covenants or agreements of
any Seller contained herein and the Buyer gives notice thereof to the
Sellers' Agent within the applicable Survival Period, then the Sellers agree
to severally (but not jointly) indemnify and hold harmless the Buyer, each
Company and their respective officers, directors and shareholders (the "Buyer
Indemnified Parties") from and against any Damages they may suffer resulting
from, arising out of, relating to or caused by any of the foregoing. For the
purposes (and solely for the purposes) of this SECTION 9 the disclosure of
the matter described on SCHEDULE 4.4(b)5 (and related disclosures on other
Schedules) shall be treated as if such disclosure had not been made.
(b) Amounts needed to cover any indemnification claims resolved in
favor of the Buyer against any Seller will be paid out of the funds escrowed
pursuant to the Indemnification Escrow Agreement; provided, however, that if
any such claim relates to a matter for which reserves were established in the
Companies' books and records, including their general ledger, and are taken
into account on the Closing Date Balance Sheet, then amounts needed to cover
any such indemnification claims resolved in favor of the Buyer against any
Seller shall first be offset against such reserves, and which reserves, as to
such claims, shall be added to the Basket Amount. Subject to the limitations
of SECTIONS 9.4 and 9.5, the Sellers will have several (but not joint)
liability for any additional amounts needed to satisfy the indemnification
claim for Damages pursuant to SECTION 9.1(a), which amounts will be paid
directly to the Buyer. Two hundred seventy-four (274) calendar days after the
Closing Date an amount equal to fifty percent (50%) of the Indemnification
Escrow Account less amounts previously withdrawn from the Indemnification
Escrow and the amounts withheld as provided in the proviso at the end of this
sentence shall be released to Sellers, and the entire amount remaining in the
Indemnification Escrow Account shall be released to the Sellers five hundred
forty-eight (548) calendar days after the Closing Date; provided, however,
that any such release shall be subject to the right of the Buyer to require
the Escrow Agent to retain an amount that is reasonably sufficient, taking
into account both any claims of the Buyer that have been paid as of such
time under SECTION 9.1 and any claims of Buyer pending in good faith under
SECTION 9.1, to satisfy any remaining obligations of the Sellers under
SECTION 9.1, subject to the limitations of SECTIONS 9.4 and 9.5. Any amounts
so retained shall be promptly released by the Escrow Agent to the Sellers
upon the resolution of all such claims. All payments by the Escrow Agent to
the Sellers shall be by wire transfer of immediately available funds in
accordance with the relative ownership percentages of the Sellers set forth
on SCHEDULE 4.3(b). The Buyer and the Sellers shall jointly give
instructions to the Escrow Agent to carry out the intent of this SECTION
9.1(b). The fees, charges and expenses payable to the Escrow Agent shall be
paid out of the funds held in the Indemnification Escrow Account.
9.2. INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE SELLERS. If the
Buyer breaches (or if any Person other than a Seller alleges facts that, if
true, would mean the Buyer has breached)
37
any of its representations or warranties contained herein and the Sellers'
Agent gives notice of a claim for indemnification against the Buyer within
the Survival Period, then the Buyer agrees to indemnify and hold harmless the
Sellers from and against any Damages the Sellers may suffer which result
from, arise out of, relate to, or are caused by the breach or alleged breach.
9.3. MATTERS INVOLVING THIRD PARTIES.
(a) If any Person not a party to this Agreement (including, without
limitation, any Governmental Authority) notifies any party (the "INDEMNIFIED
PARTY") with respect to any matter (a "THIRD PARTY CLAIM") with respect to
which the Indemnified Party proposes to make a claim for indemnification
against any other party (the "INDEMNIFYING PARTY"), then the Indemnified
Party will notify each Indemnifying Party thereof in writing within thirty
(30) calendar days after receiving such notice.
(b) Any Indemnifying Party will have the right, at its sole cost and
expense, to defend the Indemnified Party against the Third Party Claim with
counsel of its choice satisfactory to the Indemnified Party so long as (i) if
Buyer is to be the Indemnified Party, the Damages to be incurred by the
Indemnifying Party are reasonably expected to exceed the Basket Amount in the
event the Person pursuing the Third Party Claim is successful on the merits
of such claim; (ii) the Indemnifying Party notifies the Indemnified Party in
writing within thirty (30) calendar days after the Indemnified Party has
given notice of the Third Party Claim that it intends to defend the claim;
and (iii) the Indemnifying Party conducts the defense of the Third Party
Claim in good faith. If the Indemnifying Party does not assume control of
the defense or settlement of any Third Party Claim in the manner described
above, the Indemnified Party shall do so.
(c) If the Indemnifying Party is conducting the defense of the Third
Party Claim in accordance with SECTION 9.3(b), the Indemnified Party may
retain separate co-counsel at its sole cost and expense and participate in
the defense of the Third Party Claim (although the Indemnifying Party and its
counsel shall control such defense). If the Indemnified Party is conducting
the defense of the Third Party Claim in accordance with SECTION 9.3(b) above
the Indemnifying Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim (although the
Indemnified Party and its counsel shall control such defense). The
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior
written consent of the Indemnifying Party (which consent will not be
unreasonably withheld) and the Indemnifying Party will not consent to the
entry of any judgment or enter into any settlement with respect to the Third
Party Claim without the prior written consent of the Indemnified Party (which
consent will not be unreasonably withheld).
9.4. BASKET AND DEDUCTIBLE. Notwithstanding anything herein to the
contrary, no Buyer Indemnified Party will be entitled to indemnification from
the Sellers (the "SELLER INDEMNIFYING PARTIES") under this Agreement unless
and until the Buyer Indemnified Parties have suffered an aggregate amount of
Damages as to which they would be entitled to indemnification under this
Agreement, if this SECTION 9.4 were not applicable, in excess of $1,300,000
(the "BASKET AMOUNT") and then the Buyer Indemnified Parties shall be liable
for Damages only in excess of such Basket Amount, subject to the provisions
and limitations in this
38
SECTION 9. The Basket Amount shall not be applicable to Damages arising from
or related to (a) representations in SECTION 4.3(b) (Title to Shares),
SECTION 4.7 (Tax Matters), SECTION 4.13(a) (Litigation), fines and penalties
assessed by Governmental Authorities with respect to a violation of a Legal
Requirement that occurred prior to the Closing Date that is covered by
SECTION 4.13(b) (Compliance with Applicable Laws) or with respect to the
matter disclosed on SCHEDULE 4.4(b)5 (and on related Schedules), or an
adjustment to the Purchase Price pursuant to SECTION 2.4 or 2.6
(collectively, the "Specific Claims"). With respect to all claims by any
Buyer Indemnified Party hereunder other than Specific Claims, the Basket
Amount shall be deducted from the aggregate amount the Buyer Indemnified
Parties are entitled to receive from the Seller Indemnifying Parties under
this SECTION 9 and the Buyer Indemnified Parties shall be entitled to
indemnification payments, to the extent not otherwise limited, as to such
excess amount, subject to SECTION 9.5.
9.5. LIMITATIONS.
(a) Except with respect to the breach of representations and
warranties set forth in SECTION 4 as to which Sellers had actual knowledge
(and without constructive or imputed knowledge), (i) the sole and exclusive
remedies of Buyer (and/or, after the Closing, the Companies) as against any
of or all of the Sellers, and the sole and exclusive liability of Sellers to
Buyer (and/or, after the Closing to the Companies) with respect to any
obligation, matter, event, circumstance, transaction, relationship, claim or
responsibility arising out of or relating to this Agreement, the Other Seller
Agreements (other than the Noncompetition Agreement) or any of the
transactions contemplated hereby shall be the indemnification provisions of
this SECTION 9 and the liabilities that arise by virtue of the breach of the
express terms of this Agreement that are covered by such indemnification
provisions and (ii) the Buyer agrees not to assert (on its own behalf, or
effective on and after the Closing, on behalf of any Company) any claim, or
to seek any remedy, whether based on statute, contract, tort or otherwise, as
against any or all of Sellers, except and only to the extent of the
indemnification provisions set forth in this SECTION 9, as limited by the
provisions in SECTIONS 9.4 or 9.5.
(b) The indemnities of the Sellers set forth in this SECTION 9 and
all representations, warranties, covenants and agreements of the Sellers
contained in this Agreement shall expire upon the expiration of the relevant
Survival Period provided in SECTION 11.1, and Sellers shall have no liability
under the indemnification provisions of SECTIONS 9.1 or 9.3 hereof or
otherwise have any liability under this Agreement, any of the Other Seller
Agreements or otherwise (whether in connection with the transactions
contemplated by this Agreement or otherwise) as to any given claim or matter
unless Buyer gives written notice to Sellers of its claim as to such claim or
matter, setting forth in reasonable detail the specific facts and
circumstances pertaining thereto, before the expiration of such relevant
Survival Period.
(c) Notwithstanding anything to the contrary contained in this
Agreement or otherwise, in the event that any Seller nevertheless becomes
liable to a Buyer Indemnified Party, in no event shall (i) the aggregate
amount of such liability of the Sellers (including, but not limited, to any
and all liabilities of Sellers for costs, expenses and attorneys' fees paid
or incurred in connection therewith or in connection with the curing of any
and all misrepresentations or breaches of warranties or covenants under this
Agreement) exceed the difference between
39
$17,000,000 and indemnification amounts previously paid by Sellers (except
in the case of (A) a breach of a representation or warranty set forth in
SECTION 4.3(b) or (B) any Damages for Taxes incurred by the Buyer
Indemnified Parties as a result of an invalid Subchapter S election by
either Company, in which case the aggregate amount of liabilities of the
Sellers shall be the amount of the Purchase Price), nor (ii) the
aggregate amount of such liability of a Seller (including, but not
limited, to any and all liabilities of such Seller for costs, expenses
and attorneys' fees paid or incurred in connection therewith or in
connection with the curing of any and all misrepresentations or breaches
of warranties or covenants under this Agreement) exceed such Seller's
pro rata share (in accordance with SCHEDULE 4.3(b)) of the Purchase
Price.
(d) Notwithstanding anything to the contrary contained in this
Agreement, the assets of the Companies shall not include, and the Companies
hereby release, effective as of the Closing, any debt, liability or
obligation of, or claim against, any and all Sellers (in all capacities,
whether as shareholder, director, officer or otherwise), whether known or
unknown, other than the obligations under this Agreement and the Other Buyer
Agreements and all Sellers (in all capacities, whether as shareholder,
director, officer or otherwise) hereby release effective as of the Closing,
any debt, liability or obligation of, or claim against, each of the
Companies, whether known or unknown, other than the obligations under this
Agreement, the Other Seller Agreements and the Non-Disclosure Agreement.
9.6. CONTINUATION OF INDEMNIFICATION OBLIGATIONS OF COMPANIES.
(a) The Buyer agrees that all rights to indemnification existing in
favor of the present or former directors, officers and employees of any
Company (as such) or present or former directors of any Company serving or
who served at any Company's request as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise, as provided in such Company's charter document or
Bylaws, as in effect as of the date hereof with respect to matters occurring
at or prior to the Closing Date shall survive the Closing and shall continue
in full force and effect and without modification (other than modifications
which would enlarge the indemnification rights) for a period of not less than
the statutes of limitations applicable to such matters, and the Buyer shall
comply fully with its obligations hereunder and thereunder. Without limiting
the foregoing, any such Company shall, and after the Closing Date, the Buyer
shall periodically advance expenses as incurred with respect to the foregoing
(including with respect to any action to enforce rights to indemnification or
the advancement of expenses) to the fullest extent permitted under applicable
law; provided, however, that the person to whom the expenses are advanced
provides an undertaking to repay such advance if it is ultimately determined
that such person is not entitled to indemnification. Notwithstanding the
foregoing, no Seller shall be entitled to indemnification from the Company
for claims arising out of breach of this Agreement or the Other Seller
Agreements or claims as to which such Seller has sought indemnification to
the extent that such Seller is obligated to make an indemnification payment
under this SECTION 9 relating to the same.
(b) The Buyer shall pay all reasonable costs and expenses, including
attorneys' fees, that may be incurred by an indemnified parties in enforcing
the indemnity and other obligations provided for in this SECTION 9.6.
40
(c) In the event the Buyer or any of its respective successors or
assigns (i) consolidates with or merges into any other person and is not the
continuing or surviving corporation or entity of such consolidation or merger
or (ii) transfers all or substantially all of its properties and assets to
any person, proper provisions shall be made so that the successors and
assigns of the Buyer assumes the obligations set forth in this SECTION 9.6.
(d) This SECTION 9.6, which shall survive the consummation of the
transactions contemplated hereby at the Closing and shall continue for the
periods specified herein, is intended to benefit each Company, the Sellers,
and any Person referenced in this SECTION 9.6 or indemnified hereunder, each
of whom may enforce the provisions of this SECTION 9.6 (whether or not
parties to this Agreement).
10. TERMINATION
10.1. TERMINATION OF AGREEMENT. The parties may terminate this
Agreement and the transactions contemplated herein may be abandoned, by
written notice given to the other parties hereto, as provided below:
(a) the Buyer and the Sellers' Agent may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(b) the Buyer may terminate this Agreement by giving written notice
to the Sellers' Agent at any time prior to the Closing Date in the event a
Material Adverse Effect has occurred after October 31, 1997;
(c) the Buyer may terminate this Agreement by giving written notice
to the Sellers' Agent at any time (i) on or before the Closing Date, in the
event any Seller has breached any representation, warranty or covenant
contained in this Agreement in any material way, the Buyer has notified the
Sellers' Agent of the breach, and the breach has not been cured within ten
(10) calendar days after the notice of breach or (ii) prior to Closing, if
the Closing has not occurred on or before the later of (A) May 20, 1998 and
(B) five (5) Business Days following receipt of all necessary regulatory
and/or governmental approvals from the FTC, Antitrust Division and Texas
Public Utilities Commission, to the extent any such approvals are required;
provided, however, that if the Closing has not occurred by May 20, 1998
because the approval of the Texas Public Utilities Commission (the "REQUIRED
APPROVAL") has not been obtained, the Buyer may not terminate under this
SECTION 10.1(c) unless the Required Approval is not obtained by June 30,
1998, and Buyer shall be entitled to terminate this Agreement on or after
such date if Closing has not occurred prior to such termination; and provided
further that the Buyer's right to terminate under this SECTION 10.1(c) shall
not be available if the Buyer's failure to fulfill any of its obligations
under this Agreement has been the cause of or has resulted in the failure of
the Closing Date to occur on or before such date;
(d) the Sellers' Agent may terminate this Agreement by giving written
notice to the Buyer at any time (i) on or before the Closing Date, if the
Buyer has breached any representation, warranty or covenant contained in this
Agreement in any material way, the Sellers' Agent has notified the Buyer of
the breach, and the breach has not been cured within ten
41
(10) calendar days after the notice of breach or (ii) prior to the Closing,
if the Closing has not occurred on or before the later of (A) May 20, 1998
and (B) five (5) Business Days following receipt of all necessary regulatory
and/or governmental approvals from the FTC, Antitrust Division and Texas
Public Utilities Commission, to the extent any such approvals are required;
provided, however, that if the Closing has not occurred by May 20, 1998
because the Required Approval has not been obtained, the Sellers' Agent may
not terminate under this SECTION 10.1(d) unless the Required Approval is not
obtained by June 30, 1998, and Sellers' Agent shall be entitled to terminate
this Agreement on or after such date if Closing has not occurred prior to
such termination; and provided further that the Sellers' Agent's right to
terminate under this SECTION 10.1(d) shall not be available if the Sellers'
failure to fulfill any of their obligations under this Agreement has been the
cause of or has resulted in the failure of the Closing Date to occur on or
before such date; and
(e) the Buyer or the Sellers' Agent may terminate this Agreement by
giving written notice to the other, if any court of competent jurisdiction in
the United States or any other Governmental Authority shall have issued an
order, decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the transactions contemplated hereby and such order,
decree or ruling or other action shall have become final and nonappealable.
10.2. EFFECT OF TERMINATION. If this Agreement is terminated pursuant
to SECTION 10.1, all further obligations of the parties under this Agreement
shall terminate, provided that the terms of the Non-Disclosure Agreement,
SECTIONS 6.6, 9.6 and 11.17 shall survive any such termination, and that
nothing in this SECTION 10.2 shall relieve any party from liability for any
breach of this Agreement, subject to the limitations on liability of the
Sellers contained in SECTIONS 9.4 and 9.5 and of Buyer under SECTION 2.3.
11. MISCELLANEOUS
11.1. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations, warranties and covenants contained in this Agreement or in
any instrument delivered pursuant hereto or in connection herewith shall
survive the Closing Date (the "SURVIVAL PERIOD") for a period of five hundred
forty-eight (548) calendar days, except that the representations and
warranties of the Sellers (a) in SECTION 4.3(b) shall survive the Closing
Date for an unlimited duration, (b) in SECTION 4.7 shall survive the Closing
Date until the expiration of all applicable statutes of limitation with
respect to any claims that could be brought regarding such matters and (c) in
SECTION 4.16 shall survive the Closing Date for a period of five (5) years.
11.2. ADDITIONAL COVENANTS REGARDING INTERCOMPANY TRANSACTIONS. Buyer
covenants and agrees that until the Closing shall have occurred or this
Agreement shall have been terminated for reasons other than the Buyer's
breach of this Agreement or any Other Buyer Agreement, Buyer shall not sell
or transfer (with or without consideration), or permit the sale or transfer
(with or without consideration) of, any shares of capital stock of any direct
or indirect subsidiary of Buyer to any Person other than Buyer or a direct or
indirect subsidiary of Buyer, except that sales of such shares shall be
permitted to any Person who is not an Affiliate of Buyer, provided that such
sale is for cash consideration equal to the fair market value of the shares
being sold and that all cash proceeds from such sale are delivered to Buyer
or Buyer's direct or indirect
42
subsidiaries. In addition, Buyer shall not, and shall not permit any of its
direct or indirect subsidiaries to, directly or indirectly, convey,
distribute, lend, pledge, sell or transfer any assets (with or without
consideration, whether by payment, dividend, or otherwise) of any such entity
to any Affiliate of Buyer other than Buyer and its direct and indirect
subsidiaries.
11.3. [INTENTIONALLY OMITTED].
11.4. NO THIRD-PARTY BENEFICIARIES. Except as otherwise provided in
SECTIONS 6.6 and 9.6, this Agreement will not confer any rights or remedies
upon any person other than the parties and their respective successors and
permitted assigns.
11.5. ENTIRE AGREEMENT. This Agreement (including the Exhibits,
Schedules and documents referred to herein), the Other Buyer Agreements, the
Other Seller Agreements and the Non-Disclosure Agreement constitute the
entire agreement among the parties and supersedes any prior understandings,
agreements or representations by or among the parties, written or oral.
11.6. SUCCESSION AND ASSIGNMENT. This Agreement will be binding upon
and inure to the benefit of the parties and their respective successors and
permitted assigns. No party hereto may assign any of its rights or
obligations hereunder without the prior written consent of all other parties
hereto, except that the Buyer shall have the right to assign its rights under
this Agreement after the Closing to any institutional lender.
11.7. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
together shall be deemed to be one and the same instrument.
11.8. HEADINGS, TERMS. The section headings contained in this
Agreement are inserted for convenience only and will not affect in any way
the meaning or interpretation of this Agreement. Terms used with initial
capital letters will have the meanings specified, applicable to both singular
and plural forms, for all purposes of this Agreement. All pronouns (and any
variation) will be deemed to refer to the masculine, feminine or neuter, as
the identity of the Person may require. The word include (and any variation)
is used in an illustrative sense rather than a limiting sense.
11.9. NOTICES. All notices, requests, demands, claims and other
communications hereunder will be in writing. Any notice, request, demand,
claim or other communication hereunder shall be deemed duly given if it is
sent by registered or certified mail, return receipt requested, postage
prepaid, or by recognized overnight deliver service, telecopy or facsimile,
and addressed to the intended recipient as set forth below:
43
IF TO THE SELLERS: COPY TO:
Addressed to the Sellers' Agent at: Mayor, Day, Xxxxxxxx & Xxxxxx, L.L.P.
700 Louisiana, Suite 1900
Xx. Xxxxxx Xxxxxxxxx Xxxxxxx, XX 00000
0000 Xxxxxx Xxxx Xxxx: Xxxx X. Xxxx, Esq.
Xxxxxxx, XX 00000 Telecopy: (000) 000-0000
Telecopy: (000) 000-0000
IF TO THE BUYER: COPY TO:
00000 X. Xxxxxxxx Extension Xxxxxxx & Xxxxxx
Xxxxxxxx Xxxx, XX 00000 2800 Hospital Trust Tower
Attn: Xxxxxxx Xxxxxx, CEO Xxxxxxxxxx, XX 00000
Telecopy: (000) 000-0000 Attn: Xxxxx X. Xxxxxxx, Esq.
Telecopy: (000) 000-0000
Notices will be deemed given seven days after mailing if sent by certified
mail, when delivered if sent by recognized overnight deliver service, and
upon receipt of confirmation by person or machine if sent by telecopy or
facsimile transmission. Any party may change the address to which notices,
requests, demands, claims and other communications hereunder are to be
delivered by giving the other parties notice in the manner herein set forth.
11.10. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF TEXAS WITHOUT GIVING
EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISIONS OR RULE (WHETHER OF THE
STATE OF TEXAS OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF
THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF TEXAS.
11.11. AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same is in writing and signed by the
Buyer and the Sellers' Agent. No waiver by any party of any default,
misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, will be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent
such occurrence, and no waiver will be effective unless set forth in writing
and signed by the party against whom such waiver is asserted.
11.12. SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision
in any other situation or in any other jurisdiction.
11.13. EXPENSES. The Buyer, on the one hand, and the Sellers, on the
other hand, shall each bear their own costs and expenses (including, without
limitation, legal fees and expenses) incurred either before or after the date
of this Agreement in connection with this Agreement or
44
the transactions contemplated hereby, including the costs and expenses of all
filing fees payable to any Governmental Authority in connection with the
transaction, except for the filing fees required under the Xxxx-Xxxxx Act,
which fees shall be paid by the Buyer. In addition, the Buyer, on the one
hand, and the Sellers, on the other hand, shall each pay one-half of the fees
and expenses of the independent accountants described in SECTION 2.
11.14. CONSTRUCTION. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement will be construed
as if drafted jointly by the parties and no presumption or burden of proof
will arise favoring or disfavoring any party by virtue of the authorship of
any of the provisions of this Agreement.
11.15. INCORPORATION. The Exhibits and Schedules identified in this
Agreement are incorporated herein by reference and made a part hereof.
11.16. SELLERS' AGENT. Each Seller hereby authorizes and appoints the
Sellers' Agent as its, his or her exclusive agent and attorney-in-fact to act
on behalf of each of them with respect to all matters which are the subject
of this Agreement, including, without limitation, (a) receiving or giving all
notices, instructions, other communications, consents or agreements that may
be necessary, required or given hereunder and (b) asserting, settling,
compromising, or defending, or determining not to assert, settle, compromise
or defend, (i) any claims which any Seller may assert, or have the right to
assert, against the Buyer, or (ii) any claims which the Buyer may assert, or
have the right to assert, against any Seller. The Sellers' Agent hereby
accepts such authorization and appointment, provided that Sellers' Agent
shall have no duty or liability whatsoever to the Buyer or DCC in his
capacity as Sellers' Agent. In addition, the Sellers agree that the Sellers'
Agent shall have no personal liability to the Sellers for any action taken
hereunder or for any omission to act where such action or omission is not the
result of gross negligence or willful misconduct on the part of the Sellers'
Agent. Upon the receipt of written evidence satisfactory to the Buyer to the
effect that the Sellers' Agent has been substituted as agent of the Sellers
by reason of his death, disability or resignation, the Buyer shall be
entitled to rely on such substituted agent to the same extent as they were
theretofore entitled to rely upon the Sellers' Agent with respect to the
matters covered by this SECTION 11.16. No Seller shall act with respect to
any of the matters which are the subject of this Agreement except through the
Sellers' Agent. The Sellers acknowledge and agree that the Buyer may deal
exclusively with the Sellers' Agent in respect of such matters, that the
enforceability of this SECTION 11.16 is material to the Buyer, and that the
Buyer has relied upon the enforceability of this SECTION 11.16 in entering
into this Agreement.
11.17. CONFIDENTIALITY. Notwithstanding anything herein to the
contrary, the Buyer agrees and acknowledges that Buyer, DCC and its
representatives are bound by the provisions of the Non-Disclosure Agreement
(which are incorporated herein by reference), that all information that has
been or will be provided (or to which access has been or will be provided) by
the Sellers or the Companies constitutes "Confidential Information" and that
all such provisions are binding and enforceable; provided, however, that
Buyer shall be permitted to disclose such information relating to the
Companies as may be reasonably required to be included in a confidential
private placement memorandum relating to an offering of debt securities by
Buyer or an Affiliate of
45
Buyer pursuant to Rule 144A of the Securities Act of 1933, as amended;
provided that the Companies shall be given an opportunity to approve any
disclosures relating to them or their financial information, which approval
will not be unreasonably withheld. The parties further agree that the
provisions of the Non-Disclosure Agreement shall survive the execution and
delivery and any termination of this Agreement, and shall remain in full
force and effect. Nothing in this Agreement shall supersede any of the terms
of the Non-Disclosure Agreement, which remains in effect as a separate and
independent agreement, except that the disclosure of financial information
contemplated in the first sentence of this Section is expressly permitted.
Without limiting any other remedy at law or equity that any party may have by
reason of the breach of this SECTION 11.17 or of the provisions of such
Non-Disclosure Agreement (the "CONFIDENTIALITY OBLIGATIONS"), the Sellers or
Buyer may terminate this Agreement if any other party shall have breached its
Confidentiality Obligations. In addition, and notwithstanding any other
provisions herein to the contrary, any termination by any party of this
Agreement (whether under this Section or any other section) shall not relieve
any party of its Confidentiality Obligations (which obligations shall survive
any termination) and shall not be deemed a waiver of, or discharge any party
from liability with respect to, breaches of the Confidentiality Obligations
by any party (including the terminating party) occurring on or before the
date of termination. This Agreement constitutes a "binding commitment"
referred to in Section 8 of the Non-Disclosure Agreement. Upon receipt by
Sellers of the payment contemplated by SECTION 2.4 and the Closing of the
transactions contemplated hereby, the provisions of this SECTION 11.17 shall
terminate.
11.18. CONSENT TO THE EXCLUSIVE JURISDICTION OF THE COURT OF THE STATE
OF TEXAS.
(a) EACH OF THE PARTIES HERETO HEREBY CONSENTS TO THE EXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF TEXAS AND THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT IN THE STATE OF TEXAS, AS WELL AS TO
THE JURISDICTION OF ALL COURTS TO WHICH AN APPEAL MAY BE TAKEN FROM ANY SUCH
COURTS, FOR THE PURPOSE OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT
OF, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER TRANSACTION
DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY,
INCLUDING WITHOUT LIMITATION, ANY PROCEEDING RELATING TO ANCILLARY MEASURES
IN AID OF ARBITRATION, PROVISIONAL REMEDIES AND INTERIM RELIEF, OR ANY
PROCEEDING TO ENFORCE ANY ARBITRAL DECISION OF AWARD.
(b) EACH PARTY HEREBY EXPRESSLY WAIVES ANY AND ALL RIGHTS TO BRING
ANY SUIT, ACTION OR OTHER PROCEEDING IN OR BEFORE ANY COURT OR TRIBUNAL OTHER
THAN THE COURTS OF THE STATE OF TEXAS AND COVENANTS THAT IT SHALL NOT SEEK IN
ANY MANNER TO RESOLVE ANY DISPUTE OTHER THAN AS SET FORTH IN THIS SECTION
11.18 OR TO CHALLENGE OR SET ASIDE ANY DECISION, AWARD OR JUDGMENT OBTAINED
IN ACCORDANCE WITH THE PROVISIONS HEREOF.
(c) EACH OF THE PARTIES HERETO HEREBY EXPRESSLY WAIVES ANY AND ALL
OBJECTIONS IT MAY HAVE TO VENUE, INCLUDING, WITHOUT LIMITATION, THE
INCONVENIENCE OF SUCH FORUM, IN ANY OF SUCH COURTS. IN ADDITION, EACH OF THE
PARTIES CONSENTS TO THE SERVICE OF PROCESS BY PERSONAL SERVICE OR ANY MANNER
IN WHICH NOTICE MAY BE DELIVERED HEREUNDER IN ACCORDANCE WITH SECTION 11.9.
46
11.19. WAIVER OF JURY TRIAL.
EACH OF THE PARTIES HERETO HEREBY VOLUNTARILY AND IRREVOCABLY WAIVES
TRIAL BY JURY IN ANY ACTION OR OTHER PROCEEDING BROUGHT IN CONNECTION WITH
THIS AGREEMENT, ANY OF THE OTHER TRANSACTION DOCUMENTS OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
11.20. EQUITABLE REMEDIES. The parties recognize and acknowledge that
in the event any party hereto shall fail to perform its obligations under
this Agreement, money damages alone may not be adequate to compensate the
injured party. The parties, therefore, agree and acknowledge that in the
event any party shall fail to perform its obligations under this Agreement
prior to Closing, the injured parties shall be entitled, in addition to any
action for monetary damages on account of such failure, to specific
performance of the terms of this Agreement and of the covenants and
obligations hereunder.
11.21. WAIVER OF BUY-SELL PROVISIONS. The Sellers hereby waive, and
covenant to cause ATI to waive, any and all rights they may have pursuant to
the First Amended and Restated Shareholders Agreement dated June 20, 1996 to
the extent the exercise of any such rights would conflict with the
consummation of the transactions contemplated hereby.
47
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
BUYER
XXXXXX WIRELINE COMPANY
By: /s/ Xxxxxxx X. Xxxxxx
----------------------------------
Name: Xxxxxxx X. Xxxxxx
----------------------------------
Title: Chairman of the Board
----------------------------------
SELLERS
XXXXXX X. XXXXXXXXX "A" TRUST
U/T/A DATED FEBRUARY 20, 1998,
XXXXXX X. XXXXXXXXX, GRANTOR
/s/ Xxxxxx X. Xxxxxxxxx
--------------------------------------
Xxxxxx X. Xxxxxxxxx By: /s/ Xxxxxx X. Xxxxxxxxx
--------------------------------------
Xxxxxx X. Xxxxxxxxx, Trustee
XXXXXX X. XXXXXXXXX "B" TRUST
U/T/A DATED FEBRUARY 20, 1998,
XXXXXX X. XXXXXXXXX, GRANTOR
/s/ Xxxxxxx X. Xxxxxxxxx
--------------------------------------
Xxxxxxx X. Xxxxxxxxx By: /s/ Xxxxxx X. Xxxxxxxxx
--------------------------------------
Xxxxxx X. Xxxxxxxxx, Trustee
THE J. NES KIRNEH TRUST U/T/A
/s/ Xxxxx Xxxxxxxxx Xxxxxx DATED FEBRUARY 25, 1998, XXXXXXX
-------------------------------------- X. XXXXXXXXX AND XXXX XXXXXXXXX,
Xxxxx Xxxxxxxxx Xxxxxx GRANTORS
/s/ Xxxxx Xxxxxxxxx Xxxxxxxx
--------------------------------------
Xxxxx Xxxxxxxxx Xxxxxxxx By: /s/ Xxxxxxx X. Xxxxxxxxx
----------------------------------
Xxxxxxx X. Xxxxxxxxx, Trustee
The Estate of Xxxxxx X. Xxxxxxxxx THE L. K. XXXXXX "M" TRUST, U/T/A
DATED FEBRUARY 24, 1998, XXXXXXX
XXXXXX XXXXXX, XX. AND XXXXX
XXXXXXXXX XXXXXX, GRANTORS
Xxxxxxx X. Xxxxxxxxx
--------------------------------------
By: /s/ Xxxxxxx X. Xxxxxxxxx
-----------------------------------
Its: Personal Representative By: /s/ Xxxxx Xxxxxxxxx Xxxxxx
----------------------------------
Xxxxx Xxxxxxxxx Xxxxxx, Trustee
THE L. K. XXXXXX "A" TRUST U/T/A
DATED FEBRUARY 24, 1998, XXXXXXX
XXXXXX XXXXXX, XX. AND XXXXX
XXXXXXXXX XXXXXX, GRANTORS
By: /s/ Xxxxx Xxxxxxxxx Xxxxxx
----------------------------------
Xxxxx Xxxxxxxxx Xxxxxx, Trustee
