ASSET PURCHASE AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into the as of the
1st day of November, 1995, by and among:
1. PEOPLES TELEPHONE COMPANY, INC., a New York corporation, with its
principal executive offices located at 0000 XX 00xx Xxxxx, Xxxxx, XX 00000
("PTC") and PTC CELLULAR, INC., a Delaware corporation and a wholly-owned
subsidiary of PTC, with its principal executive offices located at 0000 XX 00xx
Xxxxx, Xxxxx, XX 00000 ("Seller"); and
2. SHARED TECHNOLOGIES CELLULAR, INC., a Delaware corporation, with
its principal executive offices located at 000 Xxxxx Xxxxxx Xxxx, Xxxxxxxxxxxx,
XX 00000 ("Buyer").
WHEREAS, Seller, is engaged in the business of providing cellular phone
rentals to travelers and other customers primarily at locations operated by car
rental companies (the "Business");
WHEREAS, Seller desires to sell, and Buyer desires to acquire certain
assets used in the Business in consideration of the payment of the purchase
price on the terms and subject to the conditions contained in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements and covenants hereinafter set forth, Seller and Buyer hereby agree as
follows:
ARTICLE 1. DEFINITIONS
As used in this Agreement, the following terms have the following
meanings:
Affiliate: As to any person or entity who or which controls, is
controlled by, or is under common control with, any party hereto. For purposes
of this Agreement, Seller and PTC are deemed to be Affiliates of each other. For
purposes of this Agreement, licensees and franchisees of Buyer or of an
affiliate of Buyer are deemed not to be affiliates of Buyer, except that in the
event that the amount of Smart Phone Revenue, as defined in Section 5.4,
generated by such licensees and franchisees of Buyer exceeds the
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amount of Smart Phone Revenue generated by Buyer, then such licensees and
franchisees shall be deemed to be Affiliates for purposes of this definition.
Closing: As defined in Section 6.1.
Closing Date: As defined in Section 6.1.
Code: The Internal Revenue Code of 1986, as amended, and
regulations promulgated thereunder.
Employee Benefit Plans: Any plan maintained by Seller for the benefit
of its employees that is an "employee pension benefit plan" or an "employee
welfare benefits plan" as those terms are defined in the Employee Retirement
Income Security Act of 1974, as amended.
Enforceable: A document or other obligation is Enforceable if it can be
enforced in accordance with its terms (subject to (a) applicable bankruptcy,
reorganization, insolvency, fraudulent conveyance and moratorium laws and other
laws applicable generally to creditors' rights from time to time in effect and
(b) judicial limitations on the remedy of specific performance, injunctive
relief and other equitable remedies).
Exchange Act Filing: As defined in Section 7.2.4.
Lien: Any lien, encumbrance, mortgage, hypothecation, equity, charge,
restriction, possibility of reversion or any other similar conflicting ownership
or security interest.
No Default: There is No Default under a document or other obligation if
no occurrence or circumstance exists which constitutes a material breach or
default (or which, by the lapse of time or giving of notice, would constitute a
material breach or default) with respect thereto or thereunder. The phrase "Any
Default," when used in negative sentences, has the same meaning as "No Default."
Permitted Liens:
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(a) Liens for taxes, assessments and other governmental charges, if
such taxes, assessments and charges are attributable to periods prior to the
Closing Date, are accrued in the ordinary course of the Business and that are
not due and payable on or before the Closing Date;
(b) artisans', mechanics', carriers', workers', repairmen's,
warehousemen's, materialmen's, judgment or other like liens (inchoate or
otherwise) for obligations arising or incurred in the ordinary course of
business which are attributable to periods prior to the Closing Date, and are
not due and payable on or before the Closing Date; or
(c) encumbrances not having separately or in the aggregate any material
adverse effect on the value or intended use of the Acquired Assets or the
operation of the Business on or after the Closing Date;
(d) encumbrances consisting of zoning restrictions, easements, or other
restrictions on the use of real property for the purposes intended; or
(e) Liens described on Schedule 1 attached hereto.
ARTICLE 2. PURCHASE AND SALE OF ASSETS
2.1 ACQUIRED ASSETS. Except as expressly otherwise stated herein and
except as provided in Section 5.3, subject to the terms and conditions of this
Agreement, on and as of the Closing Date (as defined in Section 6.1 hereof),
Seller shall sell, transfer, assign and delegate to Buyer, and Buyer shall
purchase and assume from Seller, all right, title and interest of Seller in and
to certain of the assets and goodwill of the Seller used in the Business, as
expressly described in Sections 2.1.1 through 2.1.11 (collectively, the
"Acquired Assets"), but (i) subject to the Permitted Liens, and (ii) excluding
the Excluded Assets described in Section 2.2. To the extent that Buyer does not
assume a particular asset or liability, then Buyer shall not obtain any rights
with respect to such asset or liability.
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2.1.1 All cellular telephone equipment set forth on
Schedule 2.1.1;
2.1.2 All computer equipment and software set forth
on Schedule 2.1.2;
2.1.3 All trademark and patent rights set forth on
Schedule 2.1.3.
2.1.4 All tools, supplies, furniture, fixtures, leasehold
improvements, inventory and all other tangible personal property set forth on
Schedule 2.1.4.
2.1.5 All rights of Seller under the leases, leaseholds or
rental agreements for all premises in or from which Seller conducts the Business
set forth on Schedule 2.1.5 hereto (the "Real Property Leases");
2.1.6 All rights of Seller under all leases of
personal property used in the Business set forth on Schedule 2.1.6;
2.1.7 All licenses, permits, tariffs and other
authorizations (collectively, "Permits") of every name, nature, and description
necessary in and relating exclusively to the operation of the Business set forth
on Schedule 2.1.7;
2.1.8 All rights of Seller in and under those certain
agreements with cellular communications carriers set forth on Schedule 2.1.8;
2.1.9 All rights of Seller in and under those certain
agreements with car rental agencies as set forth on Schedule 2.1.9;
2.1.10 All rights of Seller in and under such other
contracts set forth on Schedule 2.1.10;
2.1.11 Any claim or right against a third party to the
extent it relates solely to any Acquired Asset or Assumed Liability accrued
prior to the Closing Date; and
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2.1.12 All accounts receivable arising in connection with
the Business accruing on and after the Closing Date.
2.2 EXCLUDED ASSETS. Except as expressly otherwise stated herein and
except as provided in Section 5.3, Buyer shall not acquire and Seller shall not
sell, transfer or assign to Buyer any of the other assets or properties of
Seller, including, without limitation, any of the following rights, properties
and assets (the "Excluded Assets"):
2.2.1 All assets owned by any third party (except for
Seller's leasehold interest in those assets), including without limitation any
interest of any landlord in any leasehold improvements.
2.2.2 All accounts receivable arising in connection with
the Business accruing prior to the Closing Date.
ARTICLE 3. ASSUMPTION OF LIABILITIES BY BUYER
3.1 ASSUMED LIABILITIES. Except as expressly otherwise stated herein
and except as provided in Section 5.3, subject to the terms and conditions of
this Agreement, Buyer hereby fully assumes and agrees to pay, perform and
discharge when due all debts, obligations, contracts and liabilities of Seller
of any kind, character, or nature, absolute or contingent, relating to the
Acquired Assets which arise or are to be performed on or after the Closing Date
(collectively, the "Assumed Liabilities"), but not the Excluded Liabilities
described in Section 3.2.
3.2 EXCLUDED LIABILITIES. Except as expressly otherwise stated herein,
and except as provided in Section 5.3, Buyer shall not assume or be obligated
for, and Seller shall retain, pay, perform and discharge, all of the following
debts, contracts, liabilities and obligations (the "Excluded Liabilities"):
3.2.1 Liabilities of any kind or nature, absolute or
contingent which arise or are to be performed before the Closing Date and which
relate to the Business, including, without limitation, those relating to the
Acquired Assets or the Assumed Liabilities.
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3.2.2 Any and all liabilities and obligations of the Seller
related exclusively to the conduct of any business other than the Business;
3.2.3 All liabilities and obligations of Seller for taxes
(federal, state or local) of any kind, which arose before the Closing Date,
including, without limitation, property taxes (other than property taxes
relating to the Acquired Assets arising on or after the Closing Date), franchise
taxes, payroll taxes and taxes based on the income or capital of Seller,
including any interest, fines or penalties thereon;
3.2.4 Any tax or other liabilities of Seller arising or
resulting from the consummation of the transactions contemplated by the
Agreement, including, without limitation, liability for any sales taxes;
3.2.5 Employee benefits (including vacation and sick pay)
accruing prior to the Closing Date for the benefit of any employee of Seller;
3.2.6 Any liabilities and expenses of Seller arising out of
or relating to this Agreement or the performance of the transactions
contemplated by this Agreement, including without limitation, legal or
accounting fees, investment banking fees, any broker's commissions or finder's
fees, and any costs, expenses or liabilities incurred by Seller to obtain the
consent or approval of any third party that is required in order for Seller to
enter into this Agreement and consummate the transactions contemplated hereby,
including without limitation consents or approvals to the assignment of leases
or other contracts from Seller to Buyer;
3.2.7 Seller's obligations under any contract or agreement
of employment with any officer, director or employee, to the extent that such
contract or agreement is not an Acquired Asset;
3.2.8 Seller's obligations with respect to any "related
party" (i.e., between or among Seller, PTC and their Affiliates or any of them)
accounts, debts or notes payable and any "related party" cause of action or
other claim against Seller;
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3.2.9 Liability for any severance pay or other severance
benefit paid or payable by Seller to any employee of Seller who is terminated
from employment for any reason before the Closing Date;
3.2.10 Any Employee Benefit Plans of Seller or any
liabilities of any kind or nature under or related to such plans;
3.2.11 Any liability, cost or obligation of Seller on
account of or related to any activity of Seller following the Closing Date other
than such as may be incurred on Buyer's behalf pursuant to specific prior
written authorization of Buyer, which shall not be unreasonably withheld;
3.2.12 Any past, present or future costs, assessments,
fines, penalties or related contingencies assessed or assessable under any
environmental, labor, employee safety, wage and hour or other statute, rule or
regulation, arising out of or relating to any transaction, fact, event, act or
omission, or any obligations, arising prior to the Closing Date, of Seller or
any of its Affiliates or of any officers, directors, shareholders or employees
of Seller or any of its Affiliates;
3.2.13 Any workers' compensation, contingent liability or
tort claims arising out of or relating to any transaction, fact, event, act,
omission or obligation arising prior to the Closing Date, of Seller or any of
its Affiliates or of any officers, directors, shareholders or employees of
Seller or any of its Affiliates; and
3.2.14 Any claims, liabilities or contingencies relating to
any past or present litigation, labor dispute, governmental investigation or
administrative proceeding against or affecting Seller or any of its Affiliates.
ARTICLE 4. CONSENTS TO ASSIGNMENT
4.1 NO ASSIGNMENT WITHOUT CONSENT. To the extent that the conveyance,
assignment, sublease or delegation by Seller to Buyer of any of the Acquired
Assets or the assumption of any Assumed Liability by Buyer shall require the
consent or approval
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of any third party, this Agreement shall not constitute a conveyance,
assignment, sublease, delegation or assumption thereof if such attempted
conveyance, assignment, sublease, delegation or assumption would constitute a
breach thereof.
4.2 PERFORMANCE, ENJOYMENT BY BUYER. The parties acknowledge that all
of the consents and approvals of third parties called for hereunder have not and
will not be obtained or available by the Closing Date. On and after the Closing
Date and until the required consents or approvals of third parties with respect
to the conveyance, assignment or sublease by Seller to Buyer of any of the
Acquired Assets or to the assumption of any Assumed Liability by Buyer shall
have been obtained, Buyer, as Seller's agent, shall perform or discharge all of
Seller's liabilities, responsibilities, obligations and commitments which arise
on and after the Closing Date, and shall enjoy all of Seller's rights, benefits
and entitlements, under same. Following the Closing, and for a period of six (6)
months, Seller shall continue to use its reasonable best efforts at its cost and
expense to obtain the following, as reasonably required by Buyer. After such six
(6) month period, Seller shall continue to provide its reasonable efforts
therefor, except that Buyer shall reimburse Seller for its reasonable costs and
expenses thereby incurred:
(i) any necessary consent or approval of:
(a) any landlord or overlandlord in connection with any
of the Real Property Leases;
(b) any governmental body or agency or instrumentality
thereof; and
(c) any other person whose consent or approval is
required as a condition to the consummation by Seller of the transactions
contemplated hereby.
ARTICLE 5. PURCHASE PRICE
5.1 PURCHASE PRICE. At the Closing, (or as otherwise provided herein),
in consideration for acquiring the Acquired Assets from the Seller, Buyer shall
pay to the Seller, or to the
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Seller's nominee upon reasonable notice, the following portion of the purchase
price (the "Purchase "Price"):
(i) cash in the sum of $1,500,000, of which $300,000 (the "Cash")
shall be paid in cash at Closing and $1,200,000 (the "Holdback") shall be
retained by Buyer as a holdback, in accordance with Section 5.3 hereof;
(ii) a promissory note duly executed by Buyer to the order of Seller
in the principal amount of $2,000,000 (the "Note"), in the form as attached
hereto as Exhibit 5.1(ii)A with appropriate insertions, having a term of five
(5) years, bearing interest at the rate of eight percent (8%) per year, payable
in ten (10) semiannual installments of principal in the amount of $200,000 each
plus accrued interest under the Note, which Note shall be secured by a perfected
first priority security interest in that portion of the Acquired Assets
identified in Sections 2.1.1 and 2.1.2 and a security interest that portion of
the Acquired Assets identified in Section 2.1.3 of this Agreement subordinated
to a $5,000,000 senior facility pursuant, and as more particularly described in,
Security Agreement (the "Security Agreement") in the form attached hereto as
Exhibit 5.1(ii)B entered into by and among the parties hereto as of the date
hereof, and
(iii) 100,000 shares of Buyers common stock, $.01 par value (the
"Shares") issued by Buyer to Seller or Seller's nominee. However, in the event
that Buyer fails to obtain the consent for issuance of the Shares of the
underwriter of its initial public offering within four (4) business days of the
Closing, then the Shares shall not be issuable to Seller and, in lieu thereof,
the principal amount of the Note shall be increased by an amount representing
the market value of the Shares based on the greater of (a) the average of the
closing bid and asked prices for Buyer's Common Stock, as quoted on the Nasdaq
market, on the date of Closing, or (b) the average of such closing bid and asked
prices for Buyer's Common Stock for the period of November 13, 1995 through
November 16, 1995.
(iv) Buyer agrees to pay to Seller semi-annual royalties in accordance
with Section 5.4 hereof.
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5.2 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be paid by
Buyer to Seller at Closing, except for the Holdback, by (a) payment to Seller
of the Cash by bank cashier's check or wire transfer in immediately available
U.S. federal funds, (b) subject to Section 5.1(iii), within five (5) business
days of the Closing, delivery by Buyer to Seller of duly executed certificate(s)
for the Shares registered in Seller's name or in such other name(s) as Seller
has heretofore designated in writing to Buyer, indicating name, address, tax
identification number and number of Shares for each person or entity in whose
name Shares are to be registered, and (c) delivery by Buyer to Seller of the
Note duly executed and completed by Buyer. Seller shall have the right to
transfer the Note to PTC.
5.3 HOLDBACK.
(a) Set forth in Schedule 5.3 hereof is a listing of certain
payment obligations of Seller existing prior to the Closing Date (the
"Conditionally Assumed Payables") and a listing of certain trade accounts
receivable of Seller existing prior to the Closing Date (the "Conditionally
Assumed Receivables"). Buyer agrees to pay the Conditionally Assumed Payables on
a reasonably timely basis for the benefit of Seller. Buyer also shall have a
duty to diligently exercise all reasonable efforts to collect the Conditionally
Assumed Receivables. Buyer further agrees to exercise its reasonable best
efforts to compromise such portion of the Conditionally Assumed Payables as it
is reasonably able to compromise, and Buyer shall permit Seller to provide its
reasonable cooperation in discussions with creditors for the purpose of
negotiating reductions in the Conditionally Assumed Payables prior to payment.
Buyer shall have a duty to keep Seller advised of the status of Buyer's payment
of the Conditionally Assumed Payables and shall endeavor to cooperate with
Seller in efforts to compromise such Conditionally Assumed Payables, including
providing notice to Seller for approval, such approval not to be unreasonably
withheld, prior to payment of any Conditionally Assumed Payable, except when
otherwise mutually agreed.
(b) Buyer shall satisfy the Conditionally Assumed Payables from
the Holdback amount and from Conditionally Assumed Receivables that are
collected by Buyer.
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(c) In the event that the Conditionally Assumed Payables are fully
satisfied, any then remaining portion of the Holdback shall be promptly paid to
Seller by Buyer in cash, but in any event no later than ten (10) business days
after Buyer achieves such a surplus. Thereafter, any residual portion of the
Conditionally Assumed Receivables shall be paid over to Seller as soon as
practicable after they are received by Buyer, not to exceed ten (10) business
days.
(d) In the event that the Buyer exhausts the Holdback and all
collected Conditionally Assumed Receivables in paying down the Conditionally
Assumed Payables and the Holdback and such collected Conditionally Assumed
Receivables are insufficient to satisfy all of the Conditionally Assumed
Payables (a "Deficiency"), then Buyer shall have no further obligation with
respect to any such Deficiency. However, in the event of a Deficiency, Seller
may elect within ten (10) days of receipt of notice of such Deficiency, to have
Buyer pay such Deficiency and, in consideration therefor, upon payment by Buyer,
the then outstanding amount of the Note shall be reduced to the extent of such
Deficiency, applying the Deficiency first to any then outstanding interest and
then to principal. Notwithstanding the foregoing, in no event shall Seller have
the right to cause Buyer to pay for any Deficiency in excess of $200,000. As to
any Deficiency for which Seller is obligated to pay, Seller shall promptly pay
such amount.
5.4 ROYALTY. Buyer shall pay a royalty ("Royalties") to Seller, at
Seller's address established under Article 11, in the amount of three percent
(3%) of the total worldwide revenues ("Smart Phone Revenues") generated by
Buyer, its Affiliates and their respective successors and assigns from the use,
operation, rental and sale of the proprietary technology associated with the
Smart Phones, the rights to which are being conveyed by Seller to Buyer
hereunder (the "Smart Phone Technology").
(i) Royalties shall be paid until such time as an aggregate
of $2,500,000 in Royalty payments have been made to Seller, except as follows.
In the event that the agreement between Seller and Avis Rent A Car System, Inc.
("Avis") dated January 17, 1995 that is being assigned to Buyer hereunder is
terminated by Avis by reason of problems which are unresolvable by Buyer after
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using its reasonable best efforts with the Ericcson phones and associated
technology, then the aggregate Royalty amount payable shall be reduced by
$500,000.
(ii) Royalties shall be paid semi-annually in arrears within
forty-five (45) days following the end of each fiscal six (6) month period of
Buyer.
(iii) Buyer shall not, within three (3) years of the Closing
Date, sell, assign or transfer the Smart Phone Technology, except to Affiliates,
licensees or franchisees of Buyer, unless (a) Buyer gives Seller advance written
notice of any such sale, assignment or transfer; (b) Buyer provides Seller a
copy of the definitive agreement or other document purporting to accomplish the
sale, assignment or transfer; and (c) each such purchaser, assignee or
transferee agrees to be bound by the provisions of this Subsection 5.4 and make
Royalty payments to Seller in accordance herewith. This Subparagragh 5.4(iii)
shall be of no further effect after such time as Buyer has paid the aggregate
amount of Royalties payable to Seller under this Agreement.
(iv) For so long as Royalty payments are payable under this
Subsection 5.4, Buyer, its Affiliates and their respective successors and
assigns shall provide to Seller semi-annual statements of Smart Phone Revenues
which statements shall be certified as true and correct by Buyer's chief
financial officer and delivered to Seller on or before the date of each
corresponding semi-annual Royalty payment.
(v) Buyer shall keep true and complete books of account and
other records in sufficient detail for two (2) years after the end of the year
to which such books and records apply so that the Royalty payable to Seller
hereunder can be properly ascertained. Seller shall have the right to access and
audit such books and records, upon reasonable notice, during normal business
hours and at Seller's expense, from time to time but not to exceed two (2) times
per year, and Buyer shall provide its reasonable cooperation therewith. In the
event that Seller disagrees with the amount of Royalties paid by Buyer, Seller
shall notify Buyer of such disagreement within fifteen (15) days following
completion of the examination of the books of Buyer. Buyer shall within fifteen
(15)
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days of receipt of such notice submit to Seller a list of three independent
public accounting firms. One of the independent accounting firms on such list
shall be selected by Seller within fifteen (15) days of receipt of such list
and, failing such selection, such selection shall be made by Buyer. In the event
Buyer shall fail to submit such list within such fifteen (15) day period, Seller
shall select an independent public accounting firm. The matter shall then be
submitted to such selected independent public accounting firm for a
determination of the correctness of the report or payment in dispute, and such
determination shall be conclusive and binding upon the parties. The cost, fees
and expenses of such independent public accounting firm shall be borne by Seller
unless the report of such accounting firm concludes that the Royalties paid by
Buyer which were the subject of such audit were deficient by more than five
(5%), in which event Buyer shall bear the reasonable cost, fees and expenses of
such accounting firm.
5.5 ALLOCATION. The parties acknowledge that the transaction
contemplated by this Agreement is a taxable transaction and is an asset purchase
within the meaning of Section 1060 of the Code. The Purchase Price paid by Buyer
shall be allocated among the Acquired Assets in accordance with a schedule,
which will meet the requirements of Section 1060 of the Code, to be mutually
prepared and agreed upon by Buyer and Seller within 60 days after the Closing
Date. The parties will prepare and file their respective tax returns and all
other required filings (including any necessary elections) based on such
allocation. In the event the parties are not able to mutually agree on such an
allocation schedule, each party shall be entitled to prepare and file its tax
returns and all other required filings (including any necessary election) based
on an allocation which is determined independently by such party in its
discretion.
ARTICLE 6. CLOSING
6.1 THE CLOSING. The closing hereunder ("Closing") shall take place
concurrently with the execution of this Agreement, which shall be effected by
exchange, via facsimile transmission of signature pages of all applicable
documents, followed by exchange of original documents by overnight courier. The
parties anticipate
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effecting such Closing on November 13, 1995. Notwithstanding the foregoing
sentence, as used herein the term "Closing Date" shall mean 12:01 a.m. on
November 1, 1995, which the parties have agreed to constitute the effective date
of the transaction contemplated hereby.
6.2 SELLER'S OBLIGATIONS AT CLOSING. Except as acknowledged by the
parties in first sentence of Section 4.2 and except as otherwise waived by
Buyer, at the Closing Seller shall deliver to Buyer the following, at the
expense of Seller, duly executed and acknowledged by Seller, in form and
substance reasonably satisfactory to Buyer and its counsel:
(a) Assignments of all leases, licenses, contracts, permits and
authorizations to be acquired by Buyer pursuant to Article 2.
(b) All other appropriate bills of sale, assignments, and other
good and sufficient instruments of transfer necessary to transfer to Buyer title
to the Acquired Assets in accordance with Article 2 of this Agreement.
(c) A receipt for the Purchase Price.
(d) To the extent that the execution and delivery of this
Agreement by Seller and the consummation of the transactions contemplated hereby
requires the consent of any governmental entity at or prior to Closing, evidence
that all such consents shall have been procured.
(e) To the extent that any material personal property lease or any
other material contract assigned to Buyer as part of the Acquired Assets
requires the consent or approval of a third party or parties, evidence that all
such consents shall have been procured without modification of any such lease or
contract, except as heretofore approved in writing by Buyer, and without the
requirement for any payment by Buyer as a condition to such consent. For
purposes of this Section 6.2(e), a lease or other contract is material if it
involves the payment of $25,000 or more in the aggregate during any consecutive
three (3) month period
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following the Closing Date or if it involves the payment of $50,000 or more for
the remaining term thereof following the Closing Date.
(f) With respect to the Real Property Leases, the consents and
approvals of all landlords whose consent or approval is required under any such
Real Property Lease in order for seller to assign to Buyer all of its rights
thereunder, without modification of any such Real Property Lease, except as
heretofore approved in writing by Buyer, and without the requirement for any
payment by Buyer as a condition to such consent or approval.
(g) Termination statements and instruments of release, releasing
and discharging all Liens (other than Permitted Liens) on the Acquired Assets
shall be filed by Seller and copies thereof shall be provided by Seller to Buyer
as soon as practicable following the Closing, but in no event later than twenty
(20) business days after the Closing.
(h) Evidence of all appropriate corporate action taken by Seller's
Board of Directors and by PTC as stockholder of Seller to authorize the
execution, delivery and performance of this Agreement and the transactions
contemplated hereby.
6.3 BUYER'S OBLIGATIONS AT CLOSING. At the Closing, Buyer has delivered
to Seller the following, at the expense of Buyer, duly executed and acknowledged
by Buyer, in form and substance reasonably acceptable to Seller and its counsel:
(a) Payment and delivery of the Purchase Price and all instruments
and certificates representing any part of the Purchase Price as provided in
Section 5.2.
(b) Security Agreement. The Security Agreement, duly executed and
completed in the form of Exhibit 5.1(ii)B, attached hereto and made a part
hereof.
(c) Collateral Documents. Each document (including, without
limitation, any UCC financing statement) required by the Security Agreement or
under law or required by Seller to be filed, registered, recorded and/or
delivered in order to create, in favor
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of Seller, a perfected first Lien on and security interest in that portion of
the Acquired Assets identified in Sections 2.1.1 and 2.1.2 of this Agreement and
a subordinated security interest in that portion of the Acquired Assets identied
in Section 2.1.3 hereof, which shall be filed, registered or recorded by Seller
on or after the Closing Date in each jurisdiction in which the filing,
registration or recordation thereof is so required or reasonably requested. Each
such document, the Security Agreement and any other document required to
collaterally assign to Seller any and all of Buyer's right, title and interest
in, to and under the Acquired Assets, are collectively referred to herein as the
"Collateral Documents."
(d) Registration Rights Agreement. The Registration Rights
Agreement, duly executed and completed in the form of Exhibit 6.3(d), attached
hereto and made a part hereof (the "Registration Rights Agreement").
(e) Incumbency Certificate of Buyer. A signed certificate of the
Secretary or Assistant Secretary of Buyer which shall certify the names of the
officers of Buyer authorized to sign the Note, the Security Agreement, the other
Collateral Documents, and the other documents or certificates to be delivered by
such person pursuant to this Agreement, the Note, the Security Agreement, the
other Collateral Documents and the Registration Rights Agreement, together with
the true signatures of each of such officers. Seller may conclusively rely on
the certificate of Buyer until Seller shall have received a further certificate
of the Secretary or Assistant Secretary of Buyer canceling or amending the prior
certificate and submitting the signature of the officers named in such further
certificate.
(f) Insurance. Certificates of insurance evidencing that Buyer
obtained the insurance policies required by each of the Collateral Documents.
(g) Instruments of assumption of the Assumed Liabilities as Seller
may reasonably request (collectively, the "Assumption Documents").
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(h) Evidence of all appropriate corporate action taken by Seller's
Board of Directors to authorize the execution, delivery and performance of this
Agreement and the transactions contemplated hereby.
(i) To the extent that the execution and delivery of this
Agreement by Buyer and the consummation of the transactions contemplated hereby
requires the consent or approval of any governmental entity, evidence that all
such consents shall have been procured.
ARTICLE 7. REPRESENTATIONS AND WARRANTIES
7.1 REPRESENTATIONS AND WARRANTIES BY SELLER AND PTC. Seller and PTC,
jointly and severally, represent and warrant to Buyer as follows:
7.1.1 Corporate Data and Authority.
(a) Seller and PTC are corporations duly organized, validly
existing and in good standing under the laws of the State of Delaware and New
York, respectively. Seller and PTC each have heretofore furnished to Buyer a
complete and correct copy of each of their respective charter documents, as
amended, certified as of a recent date by the Secretary of State of New York and
each of their respective By-laws, as amended, certified as of a recent date by
their respective corporate secretaries, which charter documents and By-laws are
in full force and effect and have not been amended or modified in any respect
since the date of the copies delivered to Buyer. Seller and PTC are not in
violation of any of the provisions thereof in any manner which would have a
material adverse effect on the Acquired Assets or on the Business or the
transactions contemplated by this Agreement.
(b) Seller has corporate power and authority to carry on the
Business as it is now conducted and to own or hold under lease the properties,
real and personal, it purports to own or hold under lease which relate to the
Business.
(c) Seller and PTC each have corporate power to execute,
deliver and perform this Agreement; the execution, delivery and
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performance of this Agreement have been duly authorized by all necessary
corporate action on the part of Seller and PTC and each of their respective
stockholders and Boards of Directors and no other stockholder or board of
directors approval is necessary for the consummation of the transactions
contemplated hereby.
(d) Except as set forth in Schedule 7.1.1(d), the execution
and delivery of this Agreement by Seller and PTC and the consummation by Seller
and PTC of the transactions contemplated hereby are not prohibited by and do not
violate any provision of the charter documents or By-laws, as amended to date,
of Seller or PTC, and do not violate any material provision of, and will not
result in the breach of, or accelerate or permit the acceleration of the
performance required by, any material term of any material contract, agreement,
indenture, mortgage, note, bond, commitment, license or other instrument to
which Seller or PTC is a party or by which any of the Acquired Assets is bound,
the breach, violation or acceleration of which would result in the creation or
imposition of any Lien on any of the Acquired Assets.
(e) This Agreement has been duly executed by Seller and PTC
and constitutes a valid, legally binding, and Enforceable obligation of Seller
and PTC.
(g) Seller, as debtor, has not: filed, or had filed against
it, a petition in bankruptcy or a petition to take advantage of any other
insolvency act; admitted in writing its inability to pay its debts generally;
made an assignment for the benefit of creditors; consented to the appointment of
a receiver for itself or any part of its property nor has any such receiver been
appointed nor is there any application for the appointment of such a receiver
pending; or generally committed any act of insolvency (including the failure to
pay obligations as they become due) or bankruptcy.
7.1.2 PROPERTY INTERESTS.
(a) Seller has good and marketable title to, or has valid
leasehold interests in, the Acquired Assets, free and clear of all Liens except
the Permitted Liens and except as set forth on Schedule 7.1.2(a) hereto.
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(b) Schedules 2.1.1, 2.1.2 and 2.1.4 set for a complete list
of all tangible personal property comprising the Acquired Assets (except for
personal property held by Seller as lessee under a lease other than a lease
required under generally accepted accounting principles to be capitalized),
setting forth a description of each such item of tangible personal property. The
tangible personal property included in the Acquired Assets is in good working
condition subject only to reasonable wear and tear and is fit for its intended
purposes and no material amounts are required to be expended for the repair and
maintenance of said personal property other than amounts that are consistent
with the amounts Seller has historically expended for such repair and
maintenance.
(c) Schedule 2.1.6 is a complete list of all leases of
tangible personal property comprising part of the Acquired Assets, together with
a description of the leased property, the termination date of each lease, the
name and address of the lessor, and the amount of the regular periodic payments
under the lease. True and complete copies of all personal property leases listed
on Schedule 2.1.6 have heretofore been delivered to Buyer. Except as set forth
in Schedule 2.1.6 no consent of any lessor under any such lease is required in
order for Seller to assign such lease to Buyer.
(d) Schedule 2.1.5 is a complete list of all leases, as
amended to date, under which Seller, as lessee, leases any premises that are
used in the Business and which comprise part of the Acquired Assets, together
with the location of the premises. Except as set forth in Schedule 2.1.5, no
consent of any landlord under any such lease is required in order for Seller to
assign such lease to Buyer.
(e) All leases of real and personal property pursuant to
which Seller leases from others real or personal property comprising part of the
Acquired Assets are valid, subsisting and Enforceable in accordance with their
respective terms, and there is not, under any such lease, Any Default.
(f) Seller is not in violation of, or in default under, any
law, ordinance, order, regulation, authorization, permit or certificate
pertaining to the Acquired Assets or the Business that
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remains uncured or that has not been waived, which violation or default would
have a material adverse effect upon the condition (financial or otherwise), of
the Business, the Assumed Liabilities or the Acquired Assets.
7.1.3 TRADEMARKS, ETC.
(a) Seller does not use any trademarks, trade names, service
marks or copyrights in connection with the Business, and does not have pending
any applications therefor.
(b) Except for such portion of the Acquired Assets set forth
in Section 2.1.3, Seller does not own and does not use any trade secret,
process, development, design, technique, customer or supplier list, blueprint,
specification, promotional idea, marketing or purchasing strategy, invention,
computer program, confidential data or information, or know-how that is material
in connection with the operation of the Business.
7.1.4 NO BROKER. Except as set forth in Schedule 7.1.4,
neither Seller nor PTC has retained a broker or finder in connection with the
transactions contemplated by this Agreement so as to give rise to any valid
claim against either Seller, PTC or Buyer for any fee, commission or similar
payment.
7.1.5 EMPLOYEE MATTERS.
(a) Schedule 7.1.5(a) includes a complete list of the
following, copies or, in the case of oral agreements, written summaries of which
will be provided to Buyer upon its request:
(i) each oral or written contract, commitment or understanding
between Seller and any current employee of Seller employed in the Business whose
current rate of annual compensation (including bonuses) is $25,000 or more,
other than any contract, commitment or understanding between Seller and any
employee of Seller who is employed at will by Seller;
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(ii) each material oral or written consulting agreement, deferred
compensation agreement, covenant not to compete, and confidentiality agreement
relating to the Business and to which Seller is a party; and
(iii) each profit-sharing, bonus, stock option, stock purchase,
pension, retirement, savings, health, hospitalization, insurance or similar plan
or arrangement, formal or informal, providing benefits to any current or former
employee of Seller assigned to the Business.
(b) Except as provided in any agreement described on Schedule
7.1.5(a), all employees of Seller assigned to the Business are employed at will
by Seller.
(c) Except as set forth in Schedule 7.1.5(a),
(i) Seller is not currently involved in any labor dispute,
proceeding, work stoppage or disturbance involving employees of
Seller who are assigned to the Business, other than routine
grievances which are not material, and
(ii) during the past two years, there have been no strikes, work
stoppages or labor union organizational campaigns involving
employees assigned to the Business, and Seller is not aware of
any threat of any such strikes, work stoppages or organizational
campaigns.
(iii) Seller is not a party to any collective bargaining agreement or
any other contract or arrangement with any labor organization
relating to the Business.
7.1.6 ABSENCE OF MATERIAL ADVERSE CHANGES.
Since September 30, 1995, Seller has not, except as disclosed in
Schedule 7.1.6:
(a) operated the Business other than in the usual, regular and
ordinary course in substantially the same manner as theretofore conducted;
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(b) suffered any physical damage, destruction or loss (whether
or not covered by insurance) materially adversely affecting the Acquired Assets
or the Business;
(c) suffered or experienced any material adverse change in, or
event or condition materially adversely affecting, its condition (financial or
other), properties, liabilities, business, operations, or prospects other than
adverse changes, events or conditions that are not, individually or in the
aggregate, material as they relate to the Acquired Assets and the Business;
(d) other than in the usual and ordinary course of Business,
made or suffered any amendment or termination, other than upon expiration, of
any material contract, agreement, lease or license to which it is a party which
relates to the Acquired Assets or the Business;
(e) sold, assigned, transferred, granted, amended, terminated or
waived any right that is material to the Acquired Assets or the Business; or
(f) except as heretofore described, entered into any material
agreement with respect to, or otherwise obligated itself to do, any of the
foregoing.
7.1.7 MATERIAL CONTRACTS.
(a) Schedule 2.1.8, 2.1.9 and 2.1.10 set forth a complete list
of all material agreements, contracts and commitments (collectively, the
"Material Contracts") of the following types, whether written or oral, relating
to the Business or the Acquired Assets, to which Seller is a party:
(i) mortgages, indentures, security agreements and other agreements
and instruments relating to the borrowing of money by, or any
extension of credit to Seller;
(ii) agreements, orders or commitments for the purchase of goods or
equipment, in each case involving payments or receipts in excess
of $25,000 in the aggregate;
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(iii) partnership, joint venture or other arrangements or agreements
involving a sharing of profits or expenses;
(iv) contracts or commitments to sell, lease or otherwise dispose of
any of the Acquired Assets other than in the ordinary course of
Business;
(v) contracts or commitments, including without limitation,
non-competition, patent rights and royalty agreements;
(vi) contracts or commitments limiting the freedom of Seller to
compete in any line of business or in any geographic area or with
any person or entity; and
(vii) any other agreement, contract or commitment which in any case
involves more than $25,000 individually or $50,000 in the
aggregate or has a term that will continue for six (6) months or
more following the Closing Date.
(b) The Material Contracts are valid, subsisting and Enforceable
in accordance with their respective terms and there is not, under any Material
Contract, Any Default, and Seller is not aware of Any Default thereunder by any
other party thereto.
(c) Seller has heretofore delivered to Buyer complete copies of
all written Material Contracts, together with all amendments thereto, and
memoranda summarizing the material terms of all Material Contracts that are
oral.
(d) Seller has no outstanding powers of attorney relating to the
Acquired Assets or the Business.
7.1.8 ENVIRONMENTAL MATTERS.
(a) To Seller's knowledge, Seller has not released or caused to
be released any hazardous substance, hazardous material, oil or hazardous waste,
as such terms are defined in applicable Environmental Laws, which could
reasonably be expected to result or has resulted in surface or underground
contamination of the real
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estate and related improvements which are the subject of the Real Property
Leases (the "Property").
(b) To Seller's knowledge, Seller is in material compliance with
all applicable federal, state and local environmental laws and regulations (the
"Environmental Laws") applicable to the Business and the Property, and there is
not now pending or to Seller's knowledge threatened or, to Seller's knowledge,
any basis for any action, suit, lien, investigation or proceeding against the
Property or Seller in connection with any past or present noncompliance with
such Environmental Laws.
7.1.9 NO LITIGATION. Except as disclosed in Schedule 7.1.9,
there is no action or proceeding pending or, to Seller's knowledge, threatened
or, to Seller's knowledge, any basis for, any litigation or claim by or against
Seller of any kind or nature which could reasonably have a material adverse
effect on the Acquired Assets, the Business or the Assumed Liabilities.
7.1.10 PRIVATE PLACEMENT.
(a) Seller understands that (i) the issuance of the Shares to
Seller as part of the Purchase Price is intended to be exempt from registration
under the Securities Act of 1993, as amended (the "Securities Act") pursuant to
Section 4(2) of the Securities Act.
(b) The Shares acquired by Seller pursuant to this Agreement are
being acquired for its own account and without a view to the resale or
distribution except as provided in Section 7.1.10(e).
(c) Seller is an "Accredited Investor" as such term is defined
in Regulation D promulgated under the Securities Act.
(d) Seller has been furnished with and carefully read Buyer's
Exchange Act Filings filed since Buyer's initial public offering on April 21,
1995 and has been given the opportunity to ask questions of, and receive answers
from, Buyer's management concerning the Shares, Buyer's business and other
related matters. Seller further represents and warrants to Buyer that Buyer has
made
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available to Seller or its agents all documents and information relating to an
investment in the Shares requested by or on behalf of Seller.
(e) Seller agrees that the Shares may be resold or otherwise
transferred only, (i) inside the United States to a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act) in a transaction
meeting the requirements of Rule 144A, (ii) to an Accredited Investor who, prior
to such transfer, furnishes to Seller a signed letter to the effect of this
paragraph, (iii) outside the United States in a transaction meeting the
requirements of Rule 904 under the Securities Act, (iv) pursuant to the
exemption from registration provided by Rule 144 under the Securities Act, (v)
other valid exemptions under the Securities Act, or (vi) pursuant to a
registration statement declared effective under the Securities Act. Seller
agrees that, in the case of any resale or other transfer pursuant to clauses (i)
through (iv) of the preceding sentence, it will furnish to Buyer or its transfer
agent such certifications, legal opinions or other information as it may
reasonably require to confirm that such resale or other transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act.
(f) Each certificate for the Shares issued to Seller or to a
subsequent transferee shall (except for any transferee pursuant to clauses (iv)
and (vi) of the first sentence of Section 7.1.10(e)) bear a legend in
substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE
OR FOREIGN JURISDICTION AND MAY NOT BE OFFERED OR SOLD WITHOUT
COMPLIANCE WITH APPLICABLE FEDERAL, STATE OR FOREIGN SECURITIES
LAWS.
PROVIDED, however, that Buyer shall remove such legend at such time that Seller
becomes eligible to transfer the Shares under Rule 144(k) under the Securities
Act.
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7.1.11 DISCLOSURE. No representation or warranty by Seller
contained in this Agreement or in any Schedule or in any statement or
certificate furnished by Seller to Buyer or their representatives in connection
herewith or pursuant hereto contains any untrue statement of a material fact, or
omits to state any material fact required to make the statements herein or
therein contained not misleading.
7.1.12 WARRANTY DISCLAIMER. EXCEPT AS EXPRESSLY SET FORTH IN
THIS AGREEMENT AND IN THE SCHEDULES HERETO, SELLER MAKES NO REPRESENTATIONS OR
WARRANTIES OF ANY KIND OR CHARACTER, EXPRESS OR IMPLIED, AS TO THE ACQUIRED
ASSETS.
7.1.13 LICENSES AND PERMITS. Schedule 2.1.7 lists all Permits
issued to Seller used exclusively in the Business and relating to the Acquired
Assets.
7.2 REPRESENTATIONS AND WARRANTIES AS TO BUYER. Buyer
represents and warrants to Seller as follows:
7.2.1 CORPORATE DATA AND AUTHORITY.
(a) Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. Buyer has
heretofore furnished to Buyer a complete and correct copy of (a) its Certificate
of Incorporation, as amended, certified as of a recent date by the Secretary of
State of Delaware and (b) its By-laws, as amended, certified as of a recent date
by its corporate secretary, which Certificate of Incorporation and By-laws are
in full force and effect and have not been amended or modified in any respect
since the date of the copies delivered to Buyer. Buyer is not in violation of
any of the provisions thereof in any manner which would have a material adverse
effect on the transactions contemplated by this Agreement.
(b) Buyer has corporate power and authority to own, hold,
lease, pay and perform the rights, properties, assets, obligations and
liabilities it will acquire, hold, lease or assume pursuant to this Agreement
and to carry on the operation of the Business after the Closing as contemplated
by this Agreement. Buyer has corporate power and authority to pay and perform
its
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obligations and liabilities pursuant to the Note and the Collateral Documents,
the Registration Rights Agreement and the Assumption Agreements.
(c) Buyer has corporate power to execute, deliver and perform
this Agreement, the Note and the Collateral Documents, the Registration Rights
Agreement and the Assumption Agreements. The execution, delivery and performance
of this Agreement, the Note, the Collateral Documents, the Registration Rights
Agreement and the Assumption Documents have been duly authorized by all
necessary corporate action on the part of Buyer, and no stockholder approval or
other approval of the Board of Directors of Buyer (or any committee thereof) is
necessary for the consummation of the transactions contemplated hereby.
(d) The execution and delivery of this Agreement, the Note,
the Collateral Documents, the Registration Rights Agreement and the Assumption
Documents by Buyer and the consummation by Buyer of the transactions
contemplated hereby are not prohibited by, and do not violate any provision of
the Certificate of Incorporation or By-laws, as amended to date, of Buyer and do
not violate any provision of, and will not result in the breach of, or
accelerate or permit the acceleration of the performance required by, any term
of any material contract, agreement, indenture, mortgage, note, bond,
commitment, license, or other instrument to which Buyer is a party or by which
it or any of Buyer's properties are bound and will not result in the creation of
any Lien on any of the Acquired Assets or any other assets of Buyer, nor
restrict the payment of the Purchase Price to Seller.
(e) This Agreement has been duly executed by Buyer and
constitutes the valid, legally binding and Enforceable obligation of Buyer.
(f) The Shares are duly authorized, validly issued, fully
paid and non-assessable. Upon delivery of the Shares to Seller pursuant to this
Agreement, Seller will acquire good, valid and marketable title to the Shares
free and clear of all Liens, claims, options, puts, calls, straddles,
pre-emptive rights, proxies or voting or other agreements whatsoever, and
restrictions
- 28 -
on transfer imposed by applicable securities law, except as expressly provided
in this Agreement.
(g) Buyer, as debtor, has not: filed, or had filed against
it, a petition in bankruptcy or a petition to take advantage of any other
insolvency act; admitted in writing its inability to pay its debts generally;
made an assignment for the benefit of creditors; consented to the appointment of
a receiver for itself or any substantial part of its property nor has any such
receiver been appointed nor is there any application for the appointment of such
a receiver pending; or generally committed any act of insolvency (including the
failure to pay obligations as they become due) or bankruptcy.
7.2.2 NO LITIGATION. Except as disclosed in Schedule 7.2.2,
there is not in effect any preliminary or permanent injunction prohibiting Buyer
from acquiring the Acquired Assets and assuming the Assumed Liabilities. There
is no action or proceeding pending or, to the Buyer's knowledge, threatened or,
to Buyer's knowledge, threatened, or to Buyer's knowledge, any basis for any
litigation or claims, before or by any governmental or regulatory body or agency
or instrumentality or any court or tribunal, domestic or foreign, (i) by or
against Buyer of any kind or nature, (ii) challenging the acquisition by Buyer
of the Acquired Assets or otherwise seeking to restrain or prohibit the
consummation of the transactions contemplated by this Agreement or seeking
material damages in connection therewith; or (iii) seeking to restrain or
prohibit Buyer's direct or indirect ownership or operation of the Business.
Except as disclosed in Schedule 7.2.2, there is no litigation pending or, to
Buyer's knowledge, threatened or, to Buyer's knowledge, any basis for, any
litigation or claim by or against Buyer which, individually or in the aggregate,
would have a material adverse effect against the Buyer.
7.2.3 NO BROKER. Except as set forth on Schedule 7.2.3, Buyer
has not retained any broker, investment banker, or finder in connection with the
transactions contemplated by this Agreement so as to give rise to any valid
claim against either Seller or Buyer for a finder's fee, brokerage commission,
investment banking fee or similar payment.
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7.2.4 DISCLOSURE. Buyer has delivered to Seller a true and
complete copy of (i) Buyer's Registration Statement on Form SB-2, Registration
No. 33-87242, as filed with the Securities and Exchange Commission ("SEC") under
the Securities Act of 1933, as amended (the "Securities Act") and declared
effective on April 20, 1995, as amended to date (the "Registration Statement")
and (ii) all reports, statements or schedules required to be filed (during
Buyer's current and immediately past fiscal years) by Buyer pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act")(each an
"Exchange Act Filing"). All Exchange Act filings have been so filed as of their
respective filing dates. The Registration Statement and the Exchange Act Filings
comply in all material respects with the requirements of the Securities Act or
Exchange Act and the rules and regulations (including accounting rules) of the
SEC, and at the date of its filing, neither the Registration Statement nor any
Exchange Act Filing contained any untrue statement of a material fact or omitted
to state any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading. Without limiting the foregoing, each of the consolidated balance
sheets included in or incorporated by reference into the Exchange Act Filings or
the Registration Statement fairly presented the consolidated financial position
of Buyer and its subsidiaries as of its date and each of the consolidated
statements of income, stockholder's equity and cash flows included in or
incorporated by reference into the Exchange Act Filings or the Registration
Statement fairly presented the results of operations, stockholders' equity and
cash flows of Buyer and its subsidiaries for the period set forth therein
(subject, in the case of unaudited statements, to normal year-end audit
adjustments which would not be material), in each case in accordance with
generally accepted accounting principles ("GAAP") consistently applied during
the periods involved. Since the date of Buyer's Registration Statement, there
has not occurred any material adverse development with respect to the earnings,
business, assets, financial condition or operations of Buyer and its
subsidiaries taken as a whole. No representation or warranty by Buyer contained
in this Agreement, the Note, the Collateral Documents, the Registration Rights
Agreement or in any Schedule or in any statement or certificate furnished or to
be furnished by Buyer to Seller or its representatives in connection herewith or
- 30 -
therewith or pursuant hereto or thereto contains or will contain any untrue
statement of a material fact, or omits or will omit to state any material fact
required to make the statements herein or therein contained not misleading.
7.2.5 CAPITAL STRUCTURE OF BUYER.
(a) The authorized capital stock of Buyer consists of
10,000,000 shares of common stock, $.01 par value ("Common Stock") and 5,000,000
shares of preferred stock, $.01 par value ("Preferred Stock"). At the close of
business on November 10, 1995, (i) 2,989,189 shares of Common Stock were issued
and outstanding; (ii) no shares of Preferred Stock were outstanding; (iii)
274,797 shares of Common Stock were reserved for issuance upon exercise of
options (the "Options") under stock option plans, of which Options to purchase
223,333 shares of Common Stock were outstanding; and (iv) 95,000 shares of
Common Stock were reserved for issuance upon exercise of underwriter's warrants
(the "Warrants"), of which Warrants to purchase 95,000 shares of Common Stock
were outstanding. All of the outstanding shares of Common Stock are, and any
shares of Common Stock issuable upon exercise of any Option, when issued
pursuant to such exercise, will be duly authorized, validly issued, fully paid
and nonassessable and not subject to preemptive rights created by statute,
Buyer's Certificate of Incorporation or By-laws.
(b) Except for the Options and Warrants, there are no
options, warrants, calls, rights, commitments or agreements of any character to
which Buyer is a party or by which it is bound which would obligate Buyer to
issue additional shares of capital stock of Buyer or granting any holder any
registration rights relating to Buyer's securities.
(c) Buyer owns no capital stock of Seller.
7.2.6 NO ADVERSE RESTRICTIONS OR DEFAULTS. Buyer is not a party to any
agreement or instrument or subject to any court order or judgment, government
decree, charter or other corporate restriction adversely affecting its business,
properties or assets, operations or condition (financial or otherwise), nor is
Buyer in default in the performance, observance or fulfillment of any
- 31 -
obligations or agreements, which restriction or default would have a material
adverse affect on this Agreement or on Buyer. Buyer is not in violation of, or
in default under, any law, ordinance, order, regulation, authorization, permit
or certificate pertaining to Buyer that remains uncured or that has not been
waived, which violation or default would have a material adverse effect upon the
condition (financial or otherwise) of Buyer.
7.2.7 PROPERTY INTERESTS. Buyer has good and marketable title to, or
has valid leasehold interests in, all property and assets reflected on the
latest balance sheets referred to in Section 7.2.4 (except property and assets
sold or otherwise disposed of by Buyer subsequent to such date in the ordinary
course), free and clear of all Liens.
ARTICLE 8. PARTICULAR COVENANTS OF SELLER AND BUYER
8.1 COVENANTS OF SELLER and PTC.
(a) Seller hereby covenants and agrees that after the Closing,
Seller will furnish to Buyer such other instruments (executed as required) and
information as Buyer may reasonably request in order effectively to convey to
and vest in Buyer title to the Acquired Assets consistent with the provisions of
Section 2.1 of this Agreement.
(b) Seller hereby covenants and agrees to permit Buyer to use,
at no rental cost to Buyer, the current headquarters offices and warehouse space
currently utilized by the Seller for the Business that are leased by Seller,
located in Miami, Florida, from Closing for a transitionary period to extend no
later than January 31, 1996. However, in the event that Buyer fails to vacate
such leased space by February 1, 1996, then Buyer shall pay Seller monthly
rental therefor at the rate of $5,000 per month for February and March. In any
event, Buyer shall vacate such space by March 31, 1996 unless otherwise may be
agreed to by the parties. Buyer agrees to pay for the cost of its phones used in
such leased space and Seller agrees to pay for all other utilities used in the
ordinary course of the Business. Seller further agrees to permit Buyer to use in
the ordinary course of the Business, at no cost to
- 32 -
Buyer, Seller's Platinum accounting system during such transition period,
limited to the extent that such system applies to the Business.
8.2 COVENANTS OF BUYER.
(a) Buyer hereby covenants and agrees that after the Closing,
Buyer will furnish to Seller such other instruments (executed as required) and
information as Seller may reasonably request in order to evidence and confirm
Buyer's assumption of the Assumed Liabilities.
(b) Buyer hereby covenants and agrees to exercise its best good
faith efforts to obtain, within four (4) months after Closing, financing in the
amount of $4,000,000 and, within six (6) months after Closing, financing in the
amount of $3,000,000, for the purchase of additional cellular phones (from third
parties) and for general working capital purposes. In the event that Buyer fails
to obtain such financing in accordance with the above time frames or, in the
alternative, within six (6) months of the Closing Buyer fails to have
manufactured or commenced the manufacturing of an addition 6,500 Smart Phones
(inclusive of those being purchased hereunder), then Seller shall have the right
to take back from Buyer the patent rights being sold to Buyer by Seller
hereunder.
(c) Buyer agrees to comply with all transfer obligations relating
to software components of the Acquired Assets, except that Seller shall pay any
transfer fees or expenses that may be required by a software transferor.
(d) Buyer shall be responsible for any termination fees incurred
in connection with the termination of any carrier contracts assumed by Buyer
pursuant hereto which are terminated subsequent to the Closing.
(e) Buyer agrees to provide, at the request of Seller, quarterly
and annual financial reports of Buyer. Provided that Buyer is subject to the
financial reporting requirements of the Exchange Act, then copies of such
Exchange Act financial reports shall suffice.
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(f) Buyer agrees to notify its insurance broker or to make the
necessary arrangements with its broker for coverage, as of the Closing, of all
of Seller's vehicles, which are being transfered to Buyer hereunder,
(approximately 17 vehicles).
8.3 REGISTRATION OF SHARES BY BUYER. The Shares shall be subject to the
terms of the Registration Rights Agreement, as referenced in Section 6.3(d) of
this Agreement.
8.4 COVENANTS OF BUYER, SELLER AND PTC. Buyer, Seller and PTC hereby
covenant and agree that:
(a) For a period of three (3) years following the Closing, or for
such longer periods as may be required to satisfy record retention requirements
of applicable law, PTC and Buyer will retain all business records relating to
the Business, including all records required to be retained pursuant to
obligations imposed by applicable law.
(b) Buyer and Seller or PTC shall each provide duly authorized
representatives of the other party access to all records relating to the
Business for bona fide business reasons at any time during regular business
hours, with reasonable prior notice, for a period of three (3) years after the
Closing Date or until such later time as all Federal, state and local tax audits
of Seller's taxable years during which it owned the Business have been
completed, including any litigation related thereto, and such other party may
make abstracts from, or make copies of, any such records at its own expense. In
connection with any review of records relating to the Business as set forth in
this Subsection, Buyer and Seller shall each provide to such duly authorized
representatives of the other party (i) access to employees of Buyer, Seller and
PTC, as the case may be, who are familiar with such records and who can assist
such representatives of the other party, at the other party's expense, in
locating, explaining or otherwise reviewing such records; and (ii) permission to
use Buyer's, Seller's or PTC's copying facilities, clerical services and
telephones, as reasonably required, at the other party's expense. No party shall
destroy any books, accounts, journals, information, records or computer tapes or
diskettes relating to the Business within the period referred
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to above without written permission of the other, which permission shall not be
unreasonably withheld or delayed.
(c)(i) If, in connection with the conduct by Seller of any
litigation or similar proceeding with any third party relating to Seller's
conduct of the Business prior to the Closing ("Legal Proceedings"), Seller shall
request access to any business records included in the Acquired Assets, Buyer
shall afford Seller such access upon reasonable notice. Seller shall be
permitted to use or, if original documents are required to respond to legal
process, remove such business records temporarily from Buyer's premises for the
purpose of responding to legal process or making copies thereof.
(ii) If, in connection with Legal Proceedings, Seller or
PTC shall require the assistance of former employees (including officers) of
Seller employed by Buyer, Seller, PTC and Buyer shall cooperate to establish a
schedule reasonably acceptable to both parties whereby Buyer shall provide to
Seller and PTC access to such employees as is reasonably required by Seller and
PTC; provided, however, Buyer shall have no obligation to provide such
assistance if to do so would, in Buyer's reasonable judgment, unreasonably
interfere with the conduct of Buyer's business. Seller and PTC, as the case may
be, shall pay out-of-pocket costs incurred in connection with such use of
Buyer's employees and shall reimburse Buyer for the number of whole business
days spent by each such employee in providing such services at the rate equal to
the average daily gross pay per day (including applicable payroll and employee
taxes and the value of employee benefits) of such employee during the calendar
month in which such services are performed.
(iii) If, in connection with Legal Proceedings, Buyer shall
require the assistance of Seller's or PTC's employees (including officers),
Seller, PTC and Buyer shall cooperate to establish a schedule reasonably
acceptable to both parties whereby Seller and PTC shall provide such employees
to Buyer as is reasonably required by Buyer;provided, however, Seller shall have
no obligation to provide such assistance if to do so would, in Seller's
reasonable judgment, unreasonably interfere with the conduct of Seller's
business. Buyer shall pay out-of-pocket costs incurred in connection with such
use of Seller's or PTC's
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employees, as the case may be, and shall reimburse Seller or PTC for the number
of whole business days spent by each such employee in providing such services at
the rate equal to the average daily gross pay per day (including applicable
payroll and employee taxes and the value of employee benefits) of such employee
during the calendar month in which such services are performed.
ARTICLE 9. EMPLOYEES AND EMPLOYEE MATTERS
9.1 EMPLOYMENT OF PERSONNEL. Buyer has offered employment to certain of
Seller's employees who are assigned to the Business commencing on or about the
day following the Closing. Seller shall cooperate with Buyer in Buyer's efforts
to hire people who are employed by Seller and who are assigned to the Business
on the Closing. Seller has terminated, as of the Closing, the employment of all
such employees of Seller who have been offered employment by Buyer. It is
Buyer's intent, and Seller understands, that any employee of Seller who is
employed by Buyer as contemplated by this subsection shall be an employee at
will of Buyer, and nothing in this Agreement shall constitute an employment
agreement between Buyer and any such employee. Buyer shall have no liability for
any loss, cost or damage solely arising from or related to Buyer's decision to
hire or not to hire any person who is an employee of Seller as of the day
following the Closing. Buyer agrees to reimburse Seller for all salary expenses
actually incurred by Seller for all of Seller's employees assigned exclusively
to the Business for the period of November 1, 1995 through the November 15,
1995, such reimbursement to occur promptly, but in no event later than December
15, 1995. Seller shall offer COBRA insurance to all of its employees terminated
as of the Closing. Buyer shall obtain health insurance coverage for those
employees of Seller who are hired by Buyer as of the day following the Closing,
which insurance shall be effective as of January 1, 1996.
9.2 SELLER'S CONTINUING EMPLOYEES. Except as provided in this section
9.2, Buyer shall have no obligation or liability with respect to any of Seller's
employees who do not become employees of Buyer as provided in Section 9.1,
including without limitation all obligations arising under COBRA.
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ARTICLE 10. INDEMNIFICATION
10.1 INDEMNIFICATION OF SELLER. Buyer shall defend, indemnify and hold
harmless Seller and PTC, and each of their employees, officers and directors
from and against any and all claims, demands, causes of action, suits,
judgments, debts, liabilities and expenses (including but not limited to court
costs and related expenses, reasonable fees and disbursements of counsel, and
any incidental or consequential damages) (a "Claim") suffered or incurred by
reason of or in connection with:
(a) any misrepresentation of a material fact or omission to state
a material fact, any breach of warranty or any breach or nonfulfillment of any
agreement or covenant by Buyer contained herein or in any certificate, document
or instrument delivered to Seller pursuant hereto or in connection herewith;
(b) any of the Assumed Liabilities;
(c) any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses, including, without limitation,
reasonable legal fees and expenses, incident to any of the foregoing or incurred
in investigating or attempting to avoid the same or to oppose the imposition
thereof, or in enforcing this indemnity.
10.2 INDEMNIFICATION OF BUYER. Seller and PTC, jointly and severally,
shall defend, indemnify and hold harmless Buyer, its employees, officers and
directors from and against any and all Claims suffered or incurred by reason of
or in connection with any of the following:
(a) any misrepresentation of a material fact or omission to state
a material fact, breach of warranty or nonfulfillment of any covenant by Seller
contained herein or in any certificate, document or instrument delivered to
Buyer pursuant hereto or in connection herewith;
(b) any of the Excluded Liabilities;
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(c) any and all loss, liability or damage arising out of or
resulting from the failure of Seller to comply with any bulk sales or similar
law applicable to the transactions contemplated by this Agreement; and
(d) any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses, incident to Subsections (a), (b) and
(c) above or incurred in investigating or attempting to avoid the same or to
oppose the imposition thereof, or in enforcing this indemnity.
10.3 INDEMNIFICATION PROCEDURES.
(a) The party seeking indemnification hereunder (the
"Indemnitee") shall give to the party from which indemnification is sought
hereunder (the "Indemnitor") written notice of any Claim which is subject to the
indemnity obligations set forth in Section 10.1 or 10.2, as applicable, with
sufficient promptness as not to prejudice the other party's interests in respect
of such Claim and any obligation of indemnity arising therefrom. Such notice
shall set forth all facts and other information which the Indemnitee has with
respect to the Claim. As part of such notice, the Indemnitee shall furnish the
Indemnitor with copies of any pleadings, correspondence or other documents
relating thereto that are in the Indemnitee's possession. The Indemnitee's
failure to notify the Indemnitor of any such Claim shall not release the
Indemnitor, in whole or in part, from its obligations under Sections 10.1 or
10.2, as applicable, except to the extent that the Indemnitee's ability to
defend against such claim is actually materially prejudiced thereby. The
Indemnitor shall, within 15 business days of receipt of such notice, (i) deny in
writing the Claim, (ii) pay the amount of the Claim if a monetary amount is
involved, or (iii) if a Claim of a third party is involved, by notice to the
Indemnitee, assume the defense of such Claim.
(b) Upon giving such notice to the Indemnitee, the Indemnitor
shall have the exclusive right to conduct and control, through counsel of its
own choosing, who is reasonably satisfactory to the Indemnitee, the defense of
any such Claim or any action arising therefrom, provided, that (i) the
Indemnitee is reasonably satisfied that the Indemnitor will have financial
resources, or
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valid insurance, available to satisfy the liabilities arising under such Claim;
and (ii) in conducting the defense of any such Claim or action, the Indemnitor
shall, and shall cause its counsel to, consult with the Indemnitee and its
counsel, if any, and shall keep the Indemnitee and its counsel, if any, fully
advised of the progress thereof.
(c) If the Indemnitor elects to assume and control the
defense of the Claim, the Indemnitee shall have the right to employ counsel
separate from counsel employed by such Indemnitor in any such action and to
participate in the defense thereof. The fees and expenses of such counsel
employed by the Indemnitee shall be at the expense of the Indemnitee unless (i)
the employment thereof has been specifically authorized by such Indemnitor in
writing, (ii) the Indemnitor has failed to promptly assume the defense and
employ counsel or the Indemnitor or its counsel has failed to provide and
adequate defense in a timely manner, or (iii) the Indemnitor is a party to such
claim and the Indemnitor has been advised by counsel that there are additional
or separate defenses, or there is otherwise a conflict of interest, between the
Indemnitee and the Indemnitor. In any such case the fees and expenses of the
Indemnitee's counsel shall be paid by the Indemnitor, provided that the
Indemnitor shall not in such event be responsible hereunder for the fees and
expenses of more than one firm or separate counsel in connection with any such
action in the same jurisdiction, in addition to any local counsel. If the
Indemnitor fails or refuses to assume the conduct and control of the defense of
any such Claim or action, then the Indemnitee shall have the exclusive right to
conduct and control such defense. The Indemnitor shall not be liable for any
settlement of any Claims effected without it written consent, which consent
shall not be unreasonably withheld or delayed. No settlement of any Claim for
which indemnification is sought hereunder shall be made without the release of
the Indemnitee from all liability relating to such Claim, in form and substance
reasonably satisfactory to the Indemnitee and its counsel.
(d) No claim for indemnification pursuant to Section 10.1 or
10.2 may be made subsequent to the date which is one (1) year from Closing,
except as follows. With respect to Claims relating to Ericsson phones or
technology, Cellular Technical
- 39 -
Services or CellOne of Florida, no such time limitation shall apply, provided
that the basis for such Claim(s) arose prior to Closing. With respect to Claims
relating to patents or patent rights transferred or purported to be transferred
under this Agreement (excluding enhancements or changes made after Closing), no
such time limitation shall apply regardless of when the basis for such Claim(s)
arose or arises. The indemnification provisions of this Article 10 are in
addition to, and not in derogation of, any statutory or common law remedy any
party may have for misrepresentation, breach of warranty or breach of covenant.
10.4 OTHER PROVISIONS RELATING TO INDEMNIFICATION.
(a) Seller and PTC shall not be obligated to indemnify Buyer
pursuant to Section 10.2, unless and until Buyer's Claims under Section 10.2
aggregate $25,000, and unless such Claims shall be made within the time period
specified in Section 10.3(d), at which point Seller and PTC shall then be
obligated to indemnify Buyer for all Claims in excess of $25,000, up to a
maximum of $3,000,000, except that with respect to Special Claims no such dollar
limitation shall apply.
(b) An Indemnitee shall not be entitled to duplicate recovery
from the Indemnitor and any other person on account of the same Claim.
10.5 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
All of the representations and warranties contained in this Agreement shall
survive for a period of one (1) year after the Closing. The covenants and
agreements set forth in this Agreement shall survive the Closing and shall
continue until all obligations set forth therein shall have been performed or
satisfied or they shall have terminated in accordance with their terms.
ARTICLE 11. MISCELLANEOUS
11.1 EXPENSES. Each party shall each pay its own expenses incidental to
the negotiation, preparation and performance of this Agreement and the
transactions contemplated hereby.
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11.2 NOTICES. Any notices or other communications required or permitted
hereunder shall be in writing, and such notice shall be given by certified mail,
postage prepaid, return receipt requested; or by private courier requesting
evidence of receipt as a part of its service, addressed as follows:
To Buyer: Shared Technologies Cellular, Inc.
Attn: Legal Department
000 Xxxxx Xxxxxx Xxxx
Xxxxxxxxxxxx, XX 00000
To Seller
or to PTC: Peoples Telephone Company, Inc.
Attn: Legal Department/General Counsel
0000 XX 00xx Xxxxx
Xxxxx, XX 00000
and to:
PTC Cellular, Inc.
Attn: Legal Department
0000 XX 00xx Xxxxx
Xxxxx, XX 00000
or to such other address as may be designated in writing by any party from time
to time in accordance herewith, and any notice shall be deemed delivered upon
the earliest to occur of delivery when so placed in the mails or when delivered
to such delivery service as aforesaid.
11.3 CAPTIONS. Article titles and headings to Sections herein are for
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Agreement. The Schedules referred to
herein shall be construed with and as an integral part of this Agreement.
11.4 SUCCESSORS AND ASSIGNS; OTHER PARTIES. This Agreement shall be
binding upon and inure to the benefit of each party hereto and their respective
successors and assigns, provided that this Agreement may not be assigned by any
party without the prior
- 41 -
written consent of the other parties. No assignment shall relieve a party of any
of its obligations hereunder without the prior written consent of the other
party.
11.5 ENTIRE AGREEMENT. This Agreement (together with the Schedules
referred to herein), the Note, the Registration Rights Agreement, the Assumption
Documents and the Collateral Documents, supersede any other agreement, whether
written or oral, that may have been made or entered into by the parties hereto
(or by any director, officer or representative of such parties) relating to the
matters contemplated hereby. This Agreement (together with such Schedules)
constitutes the entire agreement by the parties hereto and there are no
agreements or commitments except as expressly set forth herein.
11.6 WAIVER. Except as otherwise expressly provided in this Agreement,
neither the failure nor any delay on the part of any party to exercise any
right, power or privilege hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any right, power or privilege preclude any
other or further exercise thereof, or the exercise of any other right, power or
privilege available at law or in equity.
11.7 PARTIAL INVALIDITY. Whenever possible, each provision hereof shall
be interpreted in such manner as to be effective and valid under applicable law,
but in case any one or more of the provisions contained herein shall, for any
reason, be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provisions
of this Agreement, and this Agreement shall be construed as if such invalid,
illegal or unenforceable provision or provisions had never been contained
herein.
11.8 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, any or all of which shall constitute one and the same instrument.
11.9 AMENDMENT AND TERMINATION. This Agreement may not be amended
orally, but only by an instrument in writing duly executed by the parties.
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11.10 GOVERNING LAW. This Agreement shall in all respects be governed
by and construed in accordance with the laws of the State of Delaware applicable
to contracts made and to be performed therein, without giving effect to any
principle of conflict-of-laws that would require the application of the law of
any other jurisdiction. In the event of any dispute arising in connection with
this Agreement, the Note, the Registration Rights Agreement, the Assumption
Agreements and/or the Collateral Documents, the prevailing party shall be
entitled to recovery of its reasonable legal costs and fees, including its
reasonable attorneys fees.
IN WITNESS WHEREOF, this Agreement has been executed as of the date
first above written.
Shared Technologies Cellular, Inc.
By:____________________________________
Xxxxxxx X. Xxxxxxxx
President
PTC Cellular, Inc.
By:_____________________________________
Peoples Telephone Company, Inc.
By:_____________________________________
