ASSET PURCHASE AND SALE AGREEMENT
THIS ASSET PURCHASE AND SALE AGREEMENT ("Agreement"), is entered into
effective August 25, 1997, by and between INTERNATIONAL FIBERCOM, INC., an
Arizona corporation ("IFC"), SCP ACQUISITION CORP., an Arizona corporation
("SCP") in formation, which will be a wholly-owned subsidiary of IFC, SOUTHERN
COMMUNICATIONS PRODUCTS, INC., a Florida corporation (the "Company"), XXXXXXX X.
XXXX ("Xxxx") and XXXX X. XXXX (Xxxx and Xxxx X. Xxxx shall be referred to
collectively as the "Selling Shareholders").
R E C I T A L S :
WHEREAS, the Company is in the business of purchasing, selling and
otherwise dealing in telecommunications products;
WHEREAS, IFC, through SCP, desires to purchase and the Company desires
to sell all of its right, title and interest in all or substantially all of the
tangible and intangible assets utilized in the Company's business as now
conducted (the "Company Assets"); and
WHEREAS, IFC, through SCP, desires to purchase and the Selling
Shareholders desire to sell all of their right, title and interest in certain
improved and unimproved real property (the "Real Estate Assets"). The Real
Estate Assets and the Company Assets are collectively referred to herein as the
"Assets."
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, IFC, SCP, the Company and the Selling Shareholders hereby agree as
follows:
C O V E N A N T S :
1. Purchase and Sale of Assets. Subject to the terms and conditions of
this Agreement, on the Closing Date, as defined in Paragraph 4, "Closing Date,"
the Selling Shareholders shall sell, convey, transfer and assign to SCP and SCP
shall purchase from the Selling Shareholders, all of the Company's right, title
and interest in and to the Company Assets, as described in Schedule 1.1.
Further, subject to the terms and conditions of this Agreement, on the Closing
Date, the Selling Shareholders shall sell convey, transfer and assign to SCP and
SCP shall purchase from the Selling Shareholders, all of the Selling
Shareholders' right, title and interest in and to the Real Estate Assets, under
the terms and conditions of a real estate purchase agreement between the parties
("Real Estate Purchase Agreement") attached hereto as Exhibit A. SCP shall pay
the consideration set forth in Xxxxxxxxx 0, "Xxxxxxxx Price," to purchase the
Assets. Exhibit A, Schedule 1.1 and all other Exhibits and Schedules attached to
this Agreement are made a part of the Agreement by this reference.
2. Assumption of Liabilities. Subject to the terms and conditions of
this Agreement, SCP shall assume certain specified liabilities and obligations
of the Company and the Selling Shareholders as set forth in Schedule 2.1. Except
as set forth in Schedule 2.1, SCP shall not assume any other liabilities or
obligations in connection with its purchase of the Assets.
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3. Purchase Price. SCP will acquire the Assets in consideration for
payment ("Purchase Price") consisting of cash, restricted shares of voting
Common Stock, no par value, of IFC ("IFC Shares"), a convertible promissory note
("Note") and in consideration for the assumption by SCP of the liabilities as
set forth in Schedule 2.1. The Purchase Price shall be allocated among the
Assets according to Schedule 3.1
3.1 SCP will pay the cash, issue the IFC Shares and execute
the Note to the Selling Shareholders and the Company as follows:
3.1.1 Twelve million dollars ($12,000,000) in cash
wired to the Selling Shareholders and the Company on the Closing Date according
to the wiring instructions in Schedule 3.1.1;
3.1.2 Three million dollars ($3,000,000) in IFC
Shares. The number of IFC Shares to be issued on the Closing Date will be
determined by dividing $3,000,000 by the Average Share Price. The "Average Share
Price" will be the average of the closing prices of IFC Shares on the Nasdaq
SmallCap Market for the ten (10) trading days from July 7 through July 18, 1997;
and
3.1.3 the Note, attached hereto as Exhibit B, in the
principal amount of Six Million Four Hundred Thousand Dollars ($6,400,000)
bearing interest at the rate of 8.5% per annum. The Note will be amortized as
follows: one half of the outstanding principal and accrued interest thereon will
be due and payable eighteen (18) months after the Closing Date and the balance
of the outstanding principal and accrued interest thereon will be due and
payable thirty-six (36) months after the Closing Date. The Selling Shareholders
will have the right to convert up to $3,200,000 of the principal amount of the
Note into IFC Shares at the Closing based on the Average Share Price of the IFC
Shares, as determined by the same method as in subparagraph 3.1.2. The principal
amount of the Note will be subject to offset or reduction, as specified in the
Note, if the Company's book value, as determined in accordance with the
historical accounting practices of the Company consistently applied, is not at
least $2,640,000. The Note will be secured by those Assets which SCP has not
pledged as security for the third parties providing the debt or credit facility
to SCP to finance the acquisition of the Assets as set forth in Paragraph 8.9,
"Private Placement," and in Schedule 3.1.3- 1. The Security Agreement securing
the Note will be in the form set forth as Exhibit C. Schedule 3.1.3-2 sets forth
the financial plan of IFC and SCP under which SCP and IFC will service the Note
and the debt or credit facility provided by the third parties.
3.2 SCP shall deposit one percent (1%) of the gross sales
price with X.X. X'Xxxxx, legal counsel for the Company and the Selling
Shareholders, in the form of IFC Shares ("Deposit Shares") within five (5)
business days after execution of this Agreement in accordance with the terms of
the Deposit Shares Escrow Agreement ("Escrow Agreement") attached hereto as
Exhibit D. The value of the Deposit Shares shall be determined based upon the
average closing price of IFC Shares on the Nasdaq SmallCap Market for the five
(5) trading days immediately preceding the date of execution of this Agreement.
The Deposit Shares shall be applied toward the number of IFC Shares SCP will
deliver as part of the payment of the Purchase Price on the Closing Date
computed in accordance with subparagraph 3.1.2 above. If SCP does not consummate
the transaction contemplated by this Agreement, except upon failure of the
conditions set forth in Paragraph 8, "Conditions Precedent to the Obligations of
IFC and SCP," the Deposit Shares shall be retained by the Company as agreed upon
liquidated damages for failure to close the purchase of the Assets as provided
in the Escrow Agreement.
3.3 The IFC Shares and the Deposit Shares will bear, and be
subject to, the restrictions contained in the legend set forth in Schedule 3.3.
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3.4 The Selling Shareholders and the Company will transfer
title to the Assets and make the Corporate Records of the Company to SCP
available for copying on the Closing Date. The term "Corporate Records" shall
mean any and all records kept by the Company in its current and prior operations
including, but not limited to the financial records, inventory records, all
magnetic media, any transferable licenses issued by the federal government or
any state or municipal government acquired by the Company in its current or
prior operations, tax returns and any other items specified in Schedule 3.4.
4. Closing Date.
4.1 The closing under this Agreement shall take place at the
law offices of X.X. X'Xxxxx, Esq., 000 Xxxxx Xxxxx, Xxxxxxxxxxx, Xxxxxxx 00000
on a date ("Closing Date") as soon as practicable after:
4.1.1 Execution of this Agreement;
4.1.2 Consent of the Selling Shareholders and the
Company to the transactions contemplated by this Agreement;
4.1.3 Completion of the due diligence investigation
contemplated under Paragraph 7, "Due Diligence Inspection of Premises and
Confidential Information";
4.1.4 Satisfaction of all conditions to closing set
forth in Paragraph 8, "Conditions Precedent to Obligations of IFC and SCP," and
Paragraph 9, "Conditions Precedent to the Obligations of the Company and the
Selling Shareholders"; and
4.1.5 Receipt by IFC and/or SCP of any required
approvals under Arizona and Florida corporate law and any other required
regulatory approvals.
4.2 The Closing Date shall be no later than 45 days after
delivery of the financial statements of the Company for the fiscal year ended
December 31, 1996, and for the period through September 30, 1997, which have
been prepared by the Company on an unaudited basis and which are attached hereto
as Exhibits E and F ("Financial Statements"), or November 15, 1997, whichever
comes first, provided that IFC may extend the Closing Date for an additional
thirty (30) days upon written notice to the Company and the Selling
Shareholders. Any further extension of the Closing Date may be made only with
the written consent of IFC, the Company and the Selling Shareholders. The
Selling Shareholders shall have the option of extending the Closing Date until
January 1998 in order to take advantage of changes in the federal tax laws
respecting capital gains.
5. Representations and Warranties of the Company and the Selling
Shareholders. The Selling Shareholders and the Company represent and warrant to
IFC and SCP that:
5.1 Organization and Good Standing. The Company is a
corporation duly organized and existing in good standing under the laws of the
State of Florida. The Company has full corporate power and authority to carry on
its business as now conducted and to own or lease and operate the properties and
assets now owned or leased and operated by it. The Company is duly qualified to
transact business in the State of Florida and in all states and jurisdictions in
which the business or ownership of its property makes it necessary so to qualify
(other than jurisdictions in which the nature of the property owned or business
conducted, when
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considered in relation to the absence of serious penalties, renders
qualification as a foreign corporation unnecessary as a practical matter).
5.2 Capitalization. The authorized capital stock of the
Company consists solely of 7,500 shares of Common Stock, $1.00 par value per
share, of which 1,000 shares are issued and outstanding ("Company Shares"). The
Company Shares are validly issued, are fully paid and non-assessable and are
subject to no restrictions on transfer. The Company Shares shown as outstanding
constitute the only outstanding shares of the capital stock of the Company of
any nature whatsoever, voting and non-voting. All Company Shares are required to
be certificated, and the Company has executed and delivered no certificates for
shares in excess of the number of Company Shares set forth above. There are, and
as of the Closing Date there will be, no outstanding options, warrants, rights,
calls, commitments, conversion rights, plans or other agreements of any
character providing for the purchase, issuance or sale of, or any securities
convertible into, capital stock of the Company, whether issued, unissued or held
in its treasury.
5.3 No Subsidiaries. The Company has no subsidiaries and does
not own five percent (5%) or more of the securities having voting power of any
corporation (or would own such securities in such amount upon the closing of any
existing purchase obligations for securities).
5.4 Ownership and Authority.
5.4.1 Except as set forth on Schedule 5.4.1, the
Company is the sole owner of the Company Assets and has the requisite power and
authority to own and transfer the Company Assets, to enter into this Agreement
and to carry out the transactions contemplated hereby. The execution, delivery
and performance of this Agreement by the Company has been duly authorized by its
Board of Directors. This Agreement is valid and binding upon the Company, and is
enforceable against the Company in accordance with its terms, subject to
bankruptcy, reorganization, insolvency, fraudulent conveyance, moratorium,
receivership or other similar laws relating to or affecting creditors' rights
generally. The execution, delivery and performance of this Agreement by the
Company will not result in the violation or breach of any term or provision of
charter instruments applicable to the Company or constitute a material default
under any indenture, mortgage, deed of trust or other contract or agreement to
which the Company is a party or by which the Company or the Company Assets are
bound or will not cause the creation of a lien or encumbrance on the Company
Assets.
5.4.2 Except as set forth in the Real Estate Purchase
Agreement, the Selling Shareholders are the sole owners of the Real Estate
Assets and have the requisite power and authority to own and transfer the Real
Estate Assets, to enter into this Agreement and to carry out the transactions
contemplated hereby. The Selling Shareholders have read and understand this
Agreement and have consulted with legal and accounting representatives to the
extent they deemed necessary. The Selling Shareholders have the capacity to
enter into this Agreement and to carry out the transactions contemplated hereby
without the consent of any third party or shall have obtained any necessary
approvals, consents, and waivers, including those of any landlord or tenant
respecting the Real Estate Assets, by the Closing Date.
5.5 Liabilities and Obligations.
5.5.1 Except to the extent set forth in Schedule
5.5.1, the Company has no liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) secured by a pledge or a lien on the
Company Assets. SCP shall assume only those obligations set forth on Schedule
2.1. Any
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obligations listed on Schedule 5.5.1 shall be discharged and satisfied in full
by the Company as of the Closing Date.
5.5.2 Except to the extent set forth in the Real
Estate Purchase Agreement, there are no liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) secured by a pledge or a
lien on the Real Estate Assets. SCP shall assume only those obligations set
forth on Schedule 2.1. Any obligations listed in the Real Estate Purchase
Agreement which are not also listed on Schedule 2.1 shall be discharged and
satisfied in full by the Company as of the Closing Date.
5.6 Financial Statements. The Financial Statements (i) have
been prepared on an unaudited basis from the books and records of the Company by
an independent certified public accountant acceptable to SCP, (ii) fairly and
accurately present the financial condition of the Company as of the dates
thereof in conformity with the historical accounting practices of the Company
consistently applied, and (iii) contain and reflect all necessary adjustments
for fair and accurate presentation of the financial condition as of the dates
thereof in accordance with such practices. Except as set forth on Schedule
5.6.1, there has not been any change between the date of the Financial
Statements and the date of this Agreement, and there will not be any such change
in the Financial Statements between the date of this Agreement and the Closing
Date, which has had or will have an adverse effect on the financial position or
results of operations of the Company. Except as and to the extent reflected or
reserved against in such Financial Statements, or otherwise expressly disclosed
therein, or except as disclosed in Schedule 2.1, the Company has no liabilities
or obligations, contingent or otherwise, of a nature required to be reflected in
the Financial Statements in accordance with the historical accounting practices
of the Company consistently applied.
5.7 Absence of Certain Changes. During the period from August
15, 1997 through and including the Closing Date, the Company has not:
5.7.1 Suffered any adverse change affecting its
Assets, liabilities, financial condition or business;
5.7.2 Made any change in the compensation payable or
to become payable to any of its employees or agents, or made any bonus payments,
except for the bonuses which have historically been made in the ordinary course
of business and those approved by IFC, or compensation arrangements to or with
any of its employees or agents, whether direct or indirect;
5.7.3 Paid or declared any dividends, distributions
or other payments due or owing to the Selling Shareholders which will result in
a reduction of the book value of the Company of $2,640,000, calculated for the
period ending August 15, 1997 in accordance with the historical accounting
practices of the Company consistently applied as of the Closing Date;
5.7.4 Issued any stock, or granted any stock options
or warrants to purchase stock or issued any securities convertible into common
stock of the Company;
5.7.5 Sold or transferred any of its assets or
canceled any indebtedness or claims owing to it, except in the ordinary course
of business and consistent with its past practices;
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5.7.6 Sold, assigned or transferred any formulas,
inventions, patents, patent applications, trademarks, trade names, copyrights,
licenses, computer programs or software, know-how or other intangible assets;
5.7.7 Amended or terminated any contract, agreement
or license to which it is a party otherwise than in the ordinary course of
business or as may be necessary or appropriate for the consummation of the
transactions described herein;
5.7.8 Borrowed any money or incurred, directly or
indirectly (as a guarantor or otherwise), any indebtedness in excess of $25,000,
except in the ordinary course of business and consistent with its past
practices;
5.7.9 Discharged or satisfied any lien or encumbrance
or paid any obligation or liability (absolute or contingent), other than current
liabilities shown in the Financial Statements or current liabilities incurred
since such date in the ordinary course of business, consistent with its past
practices;
5.7.10 Mortgaged, pledged or subjected to lien,
charge or other encumbrance any of its Assets, except in the ordinary course of
business and consistent with its past practices; or
5.7.11 Entered into or committed to any other
transaction other than in the ordinary course of business, consistent with past
practices, except as set forth in Schedule 5.7.11.
5.8 Taxes. The Company (and any predecessor corporation or
partnership as to which either of them is the transferee or successor) has
timely filed, or has timely secured an extension and will (within the permitted
extension) file, all tax returns, including federal, state, local and foreign
tax returns, tax reports and forms, as to which the due date for filing is prior
to the Closing Date; has reported all reportable income on such returns; and has
not changed any methods of accounting without compliance with procedures
required by law; has not deducted any expenses or charges or claimed any credits
which are not allowable; and except as set forth in Schedule 5.8.1, has paid, or
accrued and reserved for, all taxes, penalties and interest shown to be due or
required to be paid pursuant to the returns as filed, or as adjusted pursuant to
amendment or correction. The Company shall also provide copies of all federal
and state income and sales tax returns filed, FICA and state income taxes
withholding returns filed and evidence of payment of such taxes as listed on
Schedule 5.8.2 hereto. The Selling Shareholders have (i) paid or will pay by the
Closing Date their pro rata share of any property taxes owed with respect to the
Assets through the Closing Date; and (ii) no knowledge of any deficiency or
assertion of any deficiency relating to property taxes on the Assets. No
examination, audit, or inquiry of any tax return, federal, state or otherwise of
the Company is currently in progress and neither the Company nor the Selling
Shareholders have received notice of intent to commence any inquiry, audit or
examination of any tax return from any taxing authority. There are no
outstanding agreements or waivers extending the statutory period of limitation
applicable to any tax return of the Company.
5.9 Assets. The Assets are located solely in the states of
Florida, Alabama and Pennsylvania. The Company Assets are either in good working
order and condition or are marketable and will be delivered in the same state to
SCP on the Closing Date, except as set forth in Schedule 5.9. The Real Estate
Assets will be transferred in the condition required by the Real Estate Purchase
Agreement.
5.10 Title to the Assets. The Company has good and marketable
title to all of the Assets, free and clear of all security interests, liens,
encumbrances, mortgages or charges of any nature whatsoever
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other than those liabilities set forth in the Financial Statements. Any security
interests, liens, encumbrances, mortgages or charges not set forth in the
Company's Financial Statements shall be discharged in full on or before the
Closing Date and evidenced by UCC Releases delivered by the Company on the
Closing Date. The Selling Shareholders hold title to the Real Estate Assets in
the manner required by the Real Estate Purchase Agreement.
5.11 Accounts Receivable. The amount of all accounts
receivable, unbilled invoices and other debts due as recorded in the records and
books of account of the Company as being due to the Company as of the Closing
Date (less the amount of any provision or reserve therefor made in the records
and books of the account of the Company) will be good and collectible in full in
the ordinary course of business and in any event not later than ninety (90) days
after the Closing Date; and none of such accounts receivable or other debts is
or will at the Closing Date be subject to any counterclaim or set-off except to
the extent of any such provision or reserve. To the knowledge of the Selling
Shareholders, there have been no material adverse changes since August 15, 1997
in the amount of accounts receivable or other debts due the Company or the
allowances with respect thereto, or accounts payable of the Company from that
reflected in the Financial Statements, except as set forth on Schedule 5.11.
5.12 Material Documents. Set forth in Schedule 5.12 is a
complete list of all material documents to which the Company is a party. All
such documents listed on and attached to Schedule 5.12 are valid, enforceable
and accurate and complete copies of such material documents (or, with the
consent of SCP, forms thereof) as have been requested by SCP have been provided
to the SCP. Except as disclosed in Schedule 5.12, the Company is not or will not
be, merely with the passage of time, in default under any such material document
nor is there any requirement for any of such material documents to be novated or
to have the consent of the other contracting party in order for such material
documents to be valid, effective and enforceable by the Company after the
Closing Date as it was immediately prior thereto.
5.13 Intellectual Properties. The Company has no interest in
and owns no domestic and foreign letters, patent, patents, patent applications,
patent licenses, software licenses and know how licenses, trade names,
trademarks, copyrights, unpatented inventions, service xxxx registrations and
applications and copyright registrations and applications owned or used by the
Company in the operation of its business (collectively, the "Intellectual
Property").
5.14 No Default. The Company and the Selling Shareholder are
not in default under any provision of any contract, commitment, or agreement
respecting the Company or the Assets to which the Company or the Selling
Shareholders are parties or by which they are bound.
5.15 Litigation. Except as set forth in Schedule 5.15, there
are no actions, claims or proceedings pending or threatened before any court,
administrative agency or governmental body against the Company, the Assets, or
the Company's employees which may have an adverse effect on the Company, the
Assets, or the Company's financial condition.
5.16 Finders. Other than a finder's fee due to Xxx Xxxxxx, the
Company and the Selling Shareholders owe no fees or commissions, or other
compensation or payments to any broker, finder, financial consultant, or similar
person claiming to have been employed or retained by or on behalf of the Company
or the Selling Shareholders in connection with this Agreement or the
transactions contemplated hereby.
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5.17 Employees. Schedule 5.17 hereto sets forth the name and
current monthly salary and any accrued benefit for each employee of the Company,
and there will be no changes in Schedule 5.17 through the Closing Date unless
agreed to by SCP and the Company.
5.18 Compliance With Laws. The Company has conducted and is
continuing to conduct its business in compliance with, and is in compliance
with, all applicable statutes, orders, rules and regulations promulgated by
governmental authorities relating in any respect to its operations, conduct of
business or use of properties, including, without limitation, any applicable
statute, order, rule or regulation relating to (i) wages, hours, hiring,
nondiscrimination, retirement, benefits, pensions, working conditions, and
worker safety and health; (ii) air, water, toxic substances, noise, or solid,
gaseous or liquid waste generation, handling, storage, disposal or
transportation; (iii) zoning and building codes; (iv) the production, storage,
processing, advertising, sale, distribution, transportation, disposal, use and
warranty of products; or (v) trade and antitrust regulations. The execution,
delivery and performance of this Agreement by the Selling Shareholders and the
Company and the consummation by the Selling Shareholders and the Company of the
transactions contemplated by this Agreement will not, separately or jointly,
violate, contravene or constitute a default under any applicable statutes,
orders, rules and regulations promulgated by governmental authorities or cause a
lien on any property used, owned or leased by the Company to be created
thereunder. To the knowledge of the Selling Shareholders, there are no proposed
changes in any applicable statutes, orders, rules and regulations promulgated by
governmental authorities that would cause any representation or warranty
contained in this Paragraph 5.18 to be untrue or have an adverse effect on its
operations, conduct of business or use of properties.
5.19 Filings. The Company and the Selling Shareholders have
made all filings and reports required under all local, state and federal laws
with respect to its business and of any predecessor entity or partnership,
except filings and reports in those jurisdictions in which the nature of the
property owned or business conducted, when considered in relation to the absence
of serious penalties, renders the required filings or reports unnecessary as a
practical matter.
5.20 Certain Activities. The Company has not, directly or
indirectly, engaged in or been a party to any of the following activities:
5.20.1 Bribes, kickbacks or gratuities to any person
or entity, including domestic or foreign government officials or any other
payments to any such persons or entity, whether legal or not legal, to obtain or
retain business or to receive favorable treatment of any nature with regard to
business (excluding commissions or gratuities paid or given in full compliance
with applicable law and constituting ordinary and necessary expenses incurred in
carrying on its business in the ordinary course);
5.20.2 Contributions (including gifts), whether legal
or not legal, made to any domestic or foreign political party, political
candidate or holder of political office;
5.20.3 Holding of or participation in bank accounts,
funds or pools of funds created or maintained in the United States or any
foreign country, without being reflected on the corporate books of account, or
as to which receipts or disbursements therefrom have not been reflected on such
books, the purpose of which is to obtain or retain business or to receive
favorable treatment with regard to business;
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5.20.4 Receiving or disbursing monies, the actual
nature of which has been improperly disguised or intentionally misrecorded on or
improperly omitted from the corporate books of account;
5.20.5 Paying fees to domestic or foreign consultants
or commercial agents which exceed the reasonable value of the ordinary and
customary consulting and agency services purported to have been rendered;
5.20.6 Paying or reimbursing (including gifts)
personnel of the Company for the purpose of enabling them to expend time or to
make contributions or payments of the kind or for the purposes referred to in
subparagraphs 5.20.1 through 5.20.5 above;
5.20.7 Participating in any manner in any activity
which is illegal under the international boycott provisions of the Export
Administration Act, as amended, or the international boycott provisions of the
Internal Revenue Code, or guidelines or regulations thereunder; and
5.20.8 Making or permitting unlawful charges,
mischarges or defective or fraudulent pricing under any contract or subcontract
under a contract with any department, agency or subdivision thereof, of the
United States government, state or municipal government or foreign government.
5.21 Employment Relations. The Company is in compliance with
all Federal, state or other applicable laws, domestic or foreign, respecting
employment and employment practices, terms and conditions of employment and
wages and hours, and has not and is not engaged in any unfair labor practice
which would result in a material adverse effect on the Company; no unfair labor
practice complaint against the Company is pending before the National Labor
Relations Board; there is no labor strike, dispute, slow down or stoppage
actually pending or threatened against or involving the Company; no labor
representation question exists respecting the employees of the Company; no
grievance which might have an adverse effect upon the Company or the conduct of
its business exists; no arbitration proceeding arising out of or under any
collective bargaining agreement is currently being negotiated by the Company;
and the Company has not experienced any material labor difficulty during the
last three (3) years.
5.22 Insurance Coverage. The policies of fire, liability or
other forms of insurance of the Company are described in Schedule 5.22.
5.23 Charter and By-Laws. The Company has heretofore delivered
to SCP true, accurate and complete copies of the Articles of Incorporation and
By-Laws of the Company, together with all amendments to each of the same as of
the date hereof.
5.24 Corporate Minutes. The minute books of the Company made
available to SCP for copying at the Closing are the correct and only such minute
books and do and will contain complete and accurate records of any and all
proceedings and actions at all meetings, including written consents executed in
lieu of meetings of its shareholders, Board of Directors and committees thereof
through the Closing Date. The stock records of the Company made available to SCP
at the Closing for copying are the correct and only such stock records and
accurately reflects all issues and transfers of record of the capital stock of
the Company.
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5.25 Default on Indebtedness. The Company is not in monetary
default or in material default in any other respect under any evidence of
indebtedness for borrowed money.
5.26 Indebtedness. Except as described in Schedule 5.26, the
Selling Shareholders and any corporation or entity with which they are
affiliated are not indebted to the Company, and the Company has no indebtedness
or liability to the Selling Shareholders and any corporation or entity with
which they are affiliated.
5.27 Agreements, Judgment and Decrees Affecting the Company
and the Selling Shareholders. The Company and the Selling Shareholders jointly
and severally represent and warrant that the Selling Shareholders and the
Company are not subject to any agreement, judgment or decree adversely affecting
their or its ability to enter into this Agreement, to consummate the
transactions contemplated herein, or, in the case of Xxxx, to act as a
consultant of the Company after Closing. The Company and the Selling
Shareholders further represent and warrant that there are no laws or regulations
prohibiting the consummation of the transactions contemplated by this Agreement.
5.28 Governmental Approvals. No consent, approval or
authorization of, or notification to or registration with, any governmental
authority, either federal, state or local, is required in connection with the
execution, delivery and performance of this Agreement by the Selling
Shareholders or the Company.
5.29 Investment Intent. The Selling Shareholders are taking
the IFC Shares for their own account and for investment, with no present
intention of dividing their interest with others or of reselling or otherwise
disposing of all or any portion of the IFC Shares. The Selling Shareholders do
not intend to sell the IFC Shares, either currently or after the passage of a
fixed or determinable period of time or upon the occurrence or non-occurrence of
any predetermined event or circumstance. The Selling Shareholders have no
present or contemplated agreement, undertaking, arrangement, obligation,
indebtedness or commitment providing for, or which is likely to compel, a
disposition of the IFC Shares. The Selling Shareholders are not aware of any
circumstances presently in existence which are likely in the future to prompt a
disposition of the IFC Shares. The Selling Shareholders are "accredited
investors" as defined in Regulation D under the Securities Act of 1933, as
amended. The Selling Shareholders possess the experience in business in which
IFC is involved necessary to make an informed decision to acquire the IFC Shares
and the Selling Shareholders have the financial means to bear the economic risk
of the investment in the IFC Shares as of the Closing Date. The Selling
Shareholders have received and read IFC's Annual Report on Form 10-KSB for the
year ended December 31, 1996; Quarterly Reports on Form 10-QSB for the three and
six months ended March 31, 1997 and June 30, 1997 and Proxy Statement for its
1997 Annual Meeting of Shareholders and any additional information they have
requested. The Selling Shareholders have had the opportunity to ask questions of
the directors and officers of IFC concerning IFC.
5.30 Completeness of Representations and Schedules. The
Schedules hereto, where applicable to the Selling Shareholders and the Company,
completely and correctly present in all material respects the information
required by this Agreement. This Agreement, the certificates to be delivered by
the Company and the Selling Shareholders at the Closing, the Schedules and the
representations and warranties contained in this Paragraph 5, and the documents
and written information pertaining to the Company furnished to SCP or its agents
by or on behalf of the Selling Shareholders or the Company, do not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make this Agreement, or such certificates, schedules, documents or
written information not misleading.
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6. Representations and Warranties of IFC and SCP. IFC and SCP represent
and warrant to the Selling Shareholders and the Company that:
6.1 Organization and Good Standing.
6.1.1 SCP is a corporation duly organized and
existing in good standing under the laws of the State of Arizona. SCP has full
corporate power and authority to carry on its business as now conducted. SCP is
duly qualified to transact business in the States of Arizona and Florida and in
all states and jurisdictions in which the business or ownership of the Assets
makes it necessary so to qualify (other than jurisdictions in which the nature
of the property owned or business conducted, when considered in relation to the
absence of serious penalties, renders qualification as a foreign corporation
unnecessary as a practical matter).
6.1.2 IFC is a publicly held company and is a
reporting company under the Securities Exchange Act of 1934 as amended
("Exchange Act"). All reports due under the Exchange Act have been filed as of
the date of this Agreement and are true, correct and complete in all material
respects.
6.2 Capacity. SCP represents and warrants to the Company and
the Selling Shareholders that SCP has read and understands this Agreement, has
consulted legal and accounting representatives to the extent deemed necessary
and has the capacity to enter into this Agreement and to carry out the
transactions contemplated hereby without the consent of any third party.
6.3 Finders. No agent, broker, person or firm acting on behalf
of IFC or SCP is, or will be, entitled to any commission or broker's or finder's
fees from any of the parties to this Agreement, or from any person controlling,
controlled by or under common control with any of the parties to this Agreement,
in connection with any of the transactions contemplated in this Agreement.
6.4 Authority and Consent. The execution, delivery and
performance of this Agreement by IFC and SCP have been duly authorized by their
respective Boards of Directors. This Agreement is valid and binding upon IFC and
SCP, and is enforceable against IFC and SCP in accordance with its terms,
subject to bankruptcy, reorganization, insolvency, fraudulent conveyance,
moratorium, receivership or other similar laws relating to or affecting
creditors' rights generally.
6.5 Validity of Agreement. Neither the execution nor the
delivery of this Agreement by IFC and SCP, nor the performance by IFC and SCP of
any of the respective covenants or obligations to be performed by IFC and SCP
hereunder, will result in any violation of any order, decree or judgment of any
court or other governmental body, or statute or law applicable to IFC or SCP, or
in any breach of any terms or provisions of either the Articles of Incorporation
or Bylaws of IFC or SCP, or constitute a default under any indenture, mortgage,
deed of trust or other contract to which IFC or SCP is a party or by which IFC
or SCP is bound.
6.6 Government Approvals. No consent, approval or
authorization of, or notification to or registration with, any governmental
authority, either federal, state or local, is required in connection with the
execution, delivery and performance of this Agreement by IFC or SCP.
6.7 Financial Statements and Public Reports. The audited
consolidated financial statements of IFC for the fiscal years ended December 31,
1996 and 1995, with accompanying notes, all as
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contained in IFC's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1996, and the financial statements contained in IFC's Quarterly
Reports on Form 10-QSB for the three and six months ended June 30, 1997,
delivered to the Selling Shareholders, fairly and accurately present, in all
material respects, the financial position of IFC at such dates, the results of
its operation and changes in its financial position for the periods and years
ended on such dates, in conformity with accounting generally accepted accounting
principles consistently applied. Such financial statements will contain and
reflect all necessary adjustments for a fair and accurate presentation of the
financial condition as of the date of such statements.
6.8 Subsidiaries. IFC currently has two subsidiaries as of the
date of this Agreement: Xxxxxx Construction, Inc., an Arizona corporation,
("Xxxxxx") and Concepts in Communication, Inc, a Tennessee corporation
("Concepts"). IFC owns all of the outstanding capital stock of both Xxxxxx and
Concepts.
6.9 No Default. Neither IFC nor SCP is in default under any
provision of any material contract, commitment or any agreement respecting IFC
or SCP.
6.10 Litigation. Except as set forth in Schedule 6.10, there
are no actions, claims or proceedings pending or threatened before any court,
administrative agency or governmental body against IFC or SCP, which may have a
material adverse effect on IFC or SCP or the financial condition of IFC or SCP.
6.11 Monetary Default. Neither IFC nor SCP is in monetary
default or in material default in any other respect under any evidence of
indebtedness for borrowed money.
6.12 Agreements, Judgments and Decrees Affecting IFC and SCP.
IFC and SCP represent and warrant that neither is subject to any agreement,
judgment or decree adversely affecting the ability of IFC or SCP to enter into
this Agreement or to consummate the transactions as contemplated herein.
6.13 Completeness of Representations and Schedules. The
Schedules and Exhibits hereto completely and correctly present in all material
respects the information required by this Agreement. This Agreement, the
certificates to be delivered by the officers of IFC and SCP at the Closing, any
Schedules and Exhibits to be delivered under this Agreement and the
representations and warranties of this Paragraph 6, and the documents and
written information pertaining to IFC furnished to the Company or its agents and
the Selling Shareholders by or on behalf of IFC, do not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make this Agreement, or such certificates, schedules, documents or written
information, not misleading.
7. Due Diligence Inspection and Confidential Information.
7.1 Due Diligence Inspection. During the period after
execution of this Agreement and prior to the Closing Date, SCP and its
representatives shall have the right to inspect all plant, equipment and
operations of the Company, its premises and its financial and other records at
reasonable times upon the approval of the Company and the Selling Shareholders,
which approval will not be unreasonably withheld. SCP shall also have the right
to discuss the affairs of the Company with Xxxx, managers, customers,
prospective customers, employees, suppliers, advertisers, retailers, banking and
other financial institutions, lessors and such other parties as SCP deems
appropriate, upon reasonable notice of the proposed times and dates thereof. SCP
shall complete its preliminary due diligence within 30 days after the execution
of this Agreement, and shall complete its comprehensive due diligence within 60
days after execution of this
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Agreement, provided it has received the cooperation of the Company and Selling
Shareholders contemplated in this Paragraph 7.1. The Company and the Selling
Shareholders shall likewise have the right, upon the execution of this
Agreement, to inspect IFC and SCP, their financial and other records and to
discuss the affairs of IFC and SCP with appropriate parties under the same terms
and conditions and upon the same schedule as SCP shall have to complete its due
diligence. IFC, SCP, the Company and the Selling Shareholders will cooperate
with all reasonable requests by the other party for information and will use
their best efforts to secure the cooperation of the foregoing third parties who
may reasonably be requested to furnish information to each other.
7.2 Confidential Information. All information furnished under
this Agreement by any party to any other party ("Confidential Information")
shall be kept strictly confidential by the party or parties to whom the
Confidential Information has been furnished at all times prior to the Closing
Date. The Selling Shareholders, the Company, SCP and IFC shall not disclose, in
whole or in part, any Confidential Information received from the other party to
this transaction nor use the Confidential Information other than in connection
with the transaction contemplated by this Agreement. No party to this Agreement
shall be liable for disclosure of Confidential Information if such disclosure is
required by law or if the disclosure is of information already publicly
available. IFC, SCP, the Company and the Selling Shareholders shall disclose the
Confidential Information only to those agents, representatives and employees
who, in the reasonable judgment of IFC, SCP, the Company or the Selling
Shareholders, require such information for the purposes of evaluating or funding
the transaction contemplated by this Agreement. Any third party to whom IFC,
SCP, the Company or the Selling Shareholders reveal Confidential Information
shall be informed of the nature of the Confidential Information and shall agree
in writing to act in accordance with the terms and conditions of this
subparagraph 7.2. IFC, SCP, the Company and the Selling Shareholders each agree
to use its or their best efforts to keep the Confidential Information
confidential and safeguard the Confidential Information from unauthorized
disclosure by third parties. IFC, SCP, the Company and the Selling Shareholders
each agree to be responsible for any breach of the provisions of this
subparagraph 7.2 by any third party to whom IFC, SCP, the Company or the Selling
Shareholders have revealed the Confidential Information.
7.3 Return of Confidential Information. If this Agreement is
terminated or the transaction contemplated by this Agreement fails to close for
any reason, SCP, IFC, the Company and the Selling Shareholders shall return all
documents and copies of documents comprising the Confidential Information which
they have received from the other parties within seven (7) days of the
termination or failure to close and shall not disclose or use such Confidential
Information in any manner which damages the businesses or prospects of the
Company, or of SCP or IFC, as the case may be. If the Agreement is terminated or
the transaction contemplated by this Agreement fails to close for any reason,
each party to this Agreement will hold in absolute confidence any Confidential
Information obtained from another party, except to the extent (i) such party is
required to disclose such Confidential Information by law or regulation, (ii)
disclosure of such Confidential Information is necessary or desirable in
connection with the pursuit or defense of a claim, (iii) such Confidential
Information was known by such party prior to such disclosure developed or
obtained by such party independent of such disclosure, or (iv) such Confidential
Information becomes generally available to the public or is otherwise no longer
confidential. Prior to any disclosure of Confidential Information under the
exception in clause (i) or (ii) in the preceding sentence, the party intending
to disclosure the same shall so notify the party which provided the Confidential
Information in order that such party may seek a protective order or other
appropriate remedies should that party choose to do so.
7.4 Sanctions. If IFC, SCP, the Company or the Selling
Shareholders breach this Paragraph 7, "Due Diligence Inspection and Confidential
Information," or if in good faith and upon reasonable
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cause, IFC, SCP, the Company or the Selling Shareholders, determine that a
breach appears to be imminent, the party or parties who are or may be adversely
affected shall be entitled to all legal and equitable remedies afforded to them
or it by law. In addition to any and all other forms of relief, each party may
recover from the party in breach all reasonable costs and attorney's fees
incurred by them or it if the party pursuing the action is successful in
obtaining relief. The parties agree that money damages alone would not be a
sufficient remedy for a breach of the provisions of this Paragraph 7, "Due
Diligence Inspection and Confidential Information." Therefore, if such a breach
occurs or if a party in good faith and upon reasonable cause determines that a
breach is imminent, that party may obtain an injunction restraining such breach
or imminent breach without having to establish that any actual damages have been
or will be sustained. Damages resulting from a breach of this Paragraph 7, "Due
Diligence Inspection and Confidential Information," shall be in addition to and
not be a part of the liquidated damages provision contained in subparagraph 3.2
and the Escrow Agreement.
8. Conditions Precedent to the Obligations of IFC and SCP . The
obligations of IFC and SCP pursuant to this Agreement are, at the option of IFC
and SCP, subject to the fulfillment to the satisfaction of IFC and SCP on or
before the Closing Date of each of the following conditions:
8.1 Execution of this Agreement and Exhibits. The Company and
the Selling Shareholders have duly executed and delivered this Agreement and the
Schedules and Exhibits which are contemplated to be executed and delivered by
them under this Agreement to IFC and SCP.
8.2 Representations and Warranties Accurate.
8.2.1 The Company and the Selling Shareholders shall
deliver the Disclosure Schedule required to be delivered by them under this
Agreement to SCP within fifteen (15) days of the date of this Agreement. SCP
shall have fifteen (15) days after its receipt of the Disclosure Schedule to
determine, in its sole discretion, whether or not SCP shall accept the
representations and warranties as modified or amplified by the Disclosure
Schedule. If SCP determines that any part of the Disclosure Schedule is
unacceptable, SCP may provide the Company and the Selling Shareholders
additional time to remedy the matter or may terminate this Agreement in
accordance with its provisions.
8.2.2 All representations and warranties of the
Selling Shareholders and the Company contained in this Agreement shall have been
true in all respects when made on the date of execution of this Agreement, and
also at and as of the Closing Date as if such representations and warranties
were made at and as of the Closing Date. The Company and the Selling
Shareholders shall furnish SCP with a certificate, dated the Closing Date and
signed on behalf of the Company and by a duly authorized officer thereof, and by
each of the Selling Shareholders, stating the above in such form as SCP may
reasonably request. The acceptance of the Purchase Price by the Company and the
Selling Shareholders shall constitute an affirmation by the Company and the
Selling Shareholders of the truth, as of the Closing Date, of the
representations and warranties made by the Selling Shareholders in this
Agreement.
8.3 Performance of Company and Selling Shareholders. The
Company and the Selling Shareholders shall have performed and complied with all
agreements, terms and conditions required by this Agreement to be performed or
complied with by them, and the Company and the Selling Shareholders shall
deliver a certificate, in form and substance satisfactory to SCP, to that
effect, dated the Closing Date, and signed in the manner set forth in Paragraph
8.1 above on or before the Closing Date.
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8.4 Title. At or prior to the Closing Date, there shall have
been delivered to SCP the following documents transferring title to the Assets
to SCP:
8.4.1 Appropriate bills of sales, assignments and
other instruments giving and conveying to IFC all right, title and interest in
and to the Assets described or referred to in Exhibit A and Schedule 1.1; and
8.4.2 Duly executed UCC-2 Releases, as described in
Paragraph 5.10, "Title to the Assets," of this Agreement, or evidence that no
liens have been recorded against the Company Assets and consents to the
assignment and transfer by the Company to SCP of all rights of the Company in
and to all contracts, agreements, commitments and other assets to be assigned
and transferred to SCP hereunder in all instances in which the same may be
necessary to vest in SCP all of Company's right title and interest therein and
thereto.
8.4.3 Duly executed Real Estate Purchase Agreement
with all necessary attachments and all necessary conditions completed.
8.5 Consent of Principal Customers. Prior to Closing, the
Company shall have obtained all approvals in conjunction with the transfer of
the Assets to SCP as may be required by any contracts between the Company and
any of its principal customers and such approvals shall be issued in written
form and substance satisfactory to IFC and their counsel or IFC shall have
waived such requirements.
8.6 Net Worth Certification. SCP shall have received a
certificate, dated the Closing Date, from the Company and the Selling
Shareholders in form and substance satisfactory to IFC that the Company has at
least $306,000 in cash, a book value of at least $2,640,000 and an aggregate
minimum of cash and accounts receivable of $1,553,000, as adjusted for $348,000
of accounts payable at May 31, 1997, on the Closing Date, as calculated in
accordance with the historical accounting practice of the Company consistently
applied; provided, however, that the parties may change these financial
requirements by mutual agreement on or prior to the Closing Date.
8.7 Possession. The Company and the Selling Shareholders shall
deliver to SCP possession of the Assets, including any consents of any third
parties required to the sale and transfer of the Assets.
8.8 Employment Agreements. As of the Closing Date, the
employees identified in Schedule 8.8.1 shall have entered into employment and
non-compete agreements with the Company in the form attached as Exhibit H and at
the annual salaries set forth in Schedule 8.8.1.
8.9 Private Placement. IFC shall have completed a private
placement of its debt or equity securities and arranged for a credit facility to
complete the acquisition of the Assets to yield total net proceeds of at least
$12,000,000 on terms and conditions acceptable to IFC. The Company will provide
IFC with all the information regarding the Company required by IFC in connection
with IFC's preparation of the offering and credit facility materials and
documents and completion of the offering and credit facility.
8.10 Opinion of Counsel. IFC and SCP shall have received an
opinion of counsel for the Company and the Selling Shareholders in the form set
forth in Exhibit F.
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8.11 Financial and Other Conditions. The Company shall have no
contingent or other liabilities connected with its business, except as disclosed
in the Financial Statements or as described in Schedule 2.1. The review of the
business, premises and operations of the Company and the Financial Statements by
SCP at its expense shall not have revealed any matter which, in the sole
judgment of SCP, makes the acquisition on the terms herein set forth inadvisable
for SCP.
8.12 Escrow of Termination Fee. The Company and the Selling
Shareholders shall have entered into the Escrow Agreement with SCP.
8.13 Legal Prohibition. On the Closing Date, there shall exist
no injunction or final judgment, law or regulation prohibiting the consummation
of the transactions contemplated by this Agreement.
8.14 Key Man Insurance. SCP, at its expense, shall have
obtained key man insurance on Xxxx in an amount not less than $3,000,000,
payable first to the estate of Xxxx or Xxxx'x heirs to the extent of any
outstanding principal and accrued interest on the Note. Any remaining balance
from such life insurance proceeds shall be paid to SCP.
8.15 Bulk Transfer Compliance. The Company and the Selling
Shareholders shall have complied with the provisions of any applicable Bulk
Transfer Law with respect to the transfer of the Company Assets and Real Estate
Assets in accordance with the terms of this Agreement.
8.16 All Contracts Continued. All lines of credit, debts,
financing arrangements, leases and other contracts of the Company shall be
acceptable to IFC and shall continue under their present terms and conditions
after the Closing Date and all approvals relating to the sale of the Assets, and
to effect the transactions contemplated hereby, required by the foregoing
instruments and arrangements shall have been obtained by the Closing Date.
9. Conditions Precedent to the Obligations of the Company and the
Selling Shareholders. The obligations of the Company and the Selling
Shareholders under this Agreement are, at the option of the Company or the
Selling Shareholders, subject to the fulfillment to the Company or the Selling
Shareholders satisfaction on or before the Closing Date of each of the following
conditions:
9.1 Delivery of Disclosure Schedules. IFC shall deliver the
Disclosure Schedule required to be delivered by IFC under this Agreement to the
Company and the Selling Shareholders within fifteen (15) days of the date of
this Agreement. The Company and the Selling Shareholders shall have fifteen (15)
days after their receipt of the Disclosure Schedule to determine, in their sole
discretion, whether or not they shall accept the representations and warranties
as modified or amplified by the Disclosure Schedule. If the Company or the
Selling Shareholders determine that any part of the Disclosure Schedule is
unacceptable, they may provide IFC additional time to remedy the matter or may
terminate this Agreement in accordance with its provisions.
9.2 Execution and Approval of Agreement and Exhibits. IFC and
SCP shall have duly executed and delivered this Agreement and all Schedules and
Exhibits which are contemplated to be executed and delivered under this
Agreement to the Company and the Selling Shareholders.
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9.3 Payment. Subject to the terms and conditions hereof, SCP
shall have wired the cash, transferred the SCP Shares, executed the Note and
assumed the Liabilities of the Company and the Selling Shareholders in exchange
for the Assets as described in Xxxxxxxxx 0, "Xxxxxxxx Price."
9.4 Employment Agreements. As of the Closing Date, the
employees identified in Schedule 8.9.1 shall have entered into employment and
non-compete agreements with the Company in a form satisfactory to SCP on the
terms and conditions and annual salaries set out in Schedule 8.9.1.
9.5 Registration Rights. IFC shall have prepared and duly
executed a Registration Rights Agreement, attached hereto as Exhibit G,
respecting the IFC Shares to be issued to the Company and the Selling
Shareholders as part of the Purchase Price.
9.6 Payment of Finder's Fee. In addition to the Purchase
Price, SCP shall pay a finder's fee to Xxx Xxxxxx in connection with the
transactions contemplated by this Agreement equal to 1% of the Purchase Price
paid for the Company Assets in IFC Shares issued on the Closing Date. The value
of such IFC Shares shall be based upon the average closing price of the IFC
Shares on the Nasdaq SmallCap Market for the five (5) trading days immediately
preceding the Closing Date. The Company and the Selling Shareholders agree to
hold IFC and SCP harmless from all other claims, commissions, and finder's or
broker's fees because of the act, omission, or statement of the Company or the
Selling Shareholders pertaining to the transactions contemplated herein.
9.7 Security and Capital Plan. IFC and SCP shall have
satisfied the requirements for providing security for the Note and a financial
plan as specified in subparagraph 3.4.
9.8 Representations and Warranties. The representations and
warranties made to the Company and the Selling Shareholders in this Agreement or
in any document, statement, list or certificate furnished pursuant hereto shall
be true and correct when made and shall be true and correct on and as of the
Closing Date.
10. Indemnification.
10.1 Survival of Representations, Warranties and Certain
Covenants. The representations and warranties made by the parties in this
Agreement and in the certificates delivered at the Closing, and all of the
covenants of the parties in this Agreement, shall survive the execution and
delivery of this Agreement and the Closing Date and shall expire on the second
anniversary of the Closing Date. Any claim for indemnification shall be
effective only if notice of such claim is given by the party claiming
indemnification or other relief to the party against whom such indemnification
or other relief is claimed on or before the second anniversary of the Closing
Date.
10.2 Indemnification by IFC and SCP.
10.2.1 IFC and SCP agree to indemnify and hold the
Company and the Selling Shareholders harmless, from and after the Closing Date,
against and in respect of all matters in connection with any losses,
liabilities, costs or damages (including reasonable attorneys' fees) incurred by
the Selling Shareholders that result from any misrepresentation or breach of the
warranties by SCP in Paragraph 6, "Representations and Warranties of IFC and
SCP," or any breach or nonfulfillment of any agreement or covenant on the part
of IFC and SCP contained in this Agreement, and all suits, actions, proceedings,
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demands, judgments, costs and expenses incident to the foregoing matters,
including reasonable attorneys' fees.
10.2.2 In no event shall the liability of IFC and SCP
under Paragraph 10.2.1 above to the Company and the Selling Shareholders (other
than for costs and reasonable attorneys' fees incurred by such Selling
Shareholders to which they may be entitled pursuant to Paragraph 10.4 or 12.3)
collectively exceed the Purchase Price. No claim for indemnification may be made
under this Paragraph 10 after the second anniversary of the Closing Date.
10.3 Indemnification by the Selling Shareholders.
10.3.1 The Selling Shareholders agree to indemnify
and hold IFC and SCP harmless, from and after the Closing Date, against and in
respect of all matters in connection with any losses, liabilities or damages
(including reasonable attorneys' fees) incurred by IFC and SCP resulting from
any misrepresentation or breach of their warranties in Paragraph 5,
"Representations and Warranties of the Company and the Selling Shareholders," or
any breach or nonfulfillment of any agreement or covenant on the part of the
Company and the Selling Shareholders contained in this Agreement and all suits,
actions, proceedings, demands, judgments, costs and expenses incident to the
foregoing matters, including reasonable attorneys' fees.
10.3.2 Notwithstanding the provisions of Paragraph
10.3.1 above, IFC and SCP shall be entitled to seek indemnification from the
Selling Shareholders pursuant to Paragraph 10.3.1 only for the portion of the
aggregate of the losses, liabilities, costs and damages (including reasonable
attorneys' fees) incurred by IFC and SCP which they would be entitled to claim
under such Paragraph 10.3.1 that exceeds $50,000. Upon such occurrence, the
collective liability of the Selling Shareholders under Paragraph 10.3.1 above to
IFC and SCP (other than for costs and reasonable attorneys' fees incurred by IFC
and SCP to which they may be entitled pursuant to Paragraphs 10.4 or 12.3) will
not exceed the Purchase Price paid to the Company and the Selling Shareholders.
No claim for indemnification may be made under this Paragraph 10 after the
second anniversary of the Closing Date.
10.4 Arbitration. If IFC or SCP believes that a matter has
occurred that entitles it to indemnification under Paragraph 10.3,
"Indemnification by the Selling Shareholders," or the Selling Shareholders
believe that a matter has occurred that entitles them to indemnification under
Paragraph 10.2, "Indemnification by IFC and SCP," IFC, SCP or the Selling
Shareholders, as the case may be (the "Indemnified Party"), shall give written
notice to the party or parties against whom indemnification is sought (each of
whom is referred to herein as an "Indemnifying Party") describing such matter in
reasonable detail. The Indemnified Party shall be entitled to give such notice
prior to the establishment of the amount of its losses, liabilities, costs or
damages, and to supplement its claim from time to time thereafter by further
notices as they are established. Each Indemnifying Party shall send a written
response to such claim for indemnification within thirty (30) days after receipt
of the claim stating its acceptance or objection to the indemnification claim,
and explaining its position in respect thereto in reasonable detail. If such
Indemnifying Party does not timely so respond, it will be deemed to have
accepted the Indemnified Party's indemnification claim as specified in the
notice given by the Indemnified Party. If the Indemnifying Party gives a timely
objection notice, then the parties will negotiate in good faith to attempt to
resolve the dispute, and upon the expiration of an additional thirty (30) day
period from the date of the objection notice or such longer period as to which
the Indemnified and Indemnifying Parties may agree, any such dispute shall be
submitted to arbitration in Orlando, Florida to a member of the American
Arbitration Association mutually appointed by
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the Indemnified Party and Indemnifying Party (or, in the event the Indemnified
Party and Indemnifying Party cannot agree on a single such member, to a panel of
three members of such Association selected in accordance with the rules of such
Association), who shall promptly arbitrate such dispute in accordance with the
rules of such Association and report to the parties upon such disputed items,
and such report shall be final, binding and conclusive on the parties. Judgment
upon the award by the arbitrator(s) may be entered in any court having
jurisdiction. The prevailing party in any such arbitration shall be entitled to
recover from, and have paid by, the other party hereto all fees and
disbursements of such arbitrator or arbitrators. For this purpose, a party shall
be deemed to be the prevailing party only if such party would be deemed to be a
prevailing party under Paragraph 12.1.3.
10.5 No Finders. IFC and SCP represent and warrant to the
Company and the Selling Shareholders and the Company and the Selling
Shareholders represent and warrant to IFC and SCP that there are no obligations
to pay any fee or commission to any broker, finder or intermediary for or on
account of the transactions contemplated by this Agreement, except for the fee
payable to Xxx Xxxxxx under Paragraph 9.5, "Payment of Finder's Fee." IFC and
SCP agree to indemnify and hold the Selling Shareholders harmless from any
breach of their representation in the previous sentence, and the Selling
Shareholders agree to indemnify and hold IFC and SCP harmless from any breach of
their representation in the previous sentence.
10.6 Third Person Claim Procedures. If any third person
asserts a claim against an Indemnified Party in connection with the matter
involved in such claim, the Indemnified Party shall promptly (but in no event
later than ten (10) days prior to the time at which an answer or other
responsive pleading or notice with respect to the claim is required) notify the
Indemnifying Party of such claim. The Indemnifying Party shall have the right,
at its election, to take over the defense or settlement of such claim by giving
prompt notice to the Indemnified Party that it will do so, such election to be
made and notice given in any event at least five (5) days prior to the time at
which an answer or other responsive pleading or notice with respect thereto is
required. If the Indemnifying Party makes such election, the Indemnifying Party
may conduct the defense of such claim through counsel of its choosing (subject
to the Indemnified Party's approval, not to be unreasonably withheld), will be
responsible for the expenses of such defense, and shall be bound by the results
of its defense or settlement of the claim to the extent it produces damage or
loss to the Indemnified Party. The Indemnifying Party shall not settle such
claims without prior notice to and consultation with the Indemnified Party, and
no such settlement involving any injunction or material and adverse effect on
the Indemnified Party may be agreed to without its consent. As long as the
Indemnifying Party is diligently contesting any such claim in good faith, the
Indemnified Party shall not pay or settle any such claim. If the Indemnifying
Party does not make such election, or having made such election does not proceed
diligently to defend such claim prior to the time at which an answer or other
responsive pleading or notice with respect thereto is required, or does not
continue diligently to contest such claim, then the Indemnified Party may take
over defense and proceed to handle such claim in its exclusive discretion, and
the Indemnifying Party shall be bound by any defense or settlement that the
Indemnified Party may make in good faith with respect to such claim. The parties
agree to cooperate in defending such third party claims, and the defending party
shall have access to records, information and personnel in control of the other
part which are pertinent to the defense thereof.
10.7 Limitation of Remedies. No party to this Agreement shall
be liable to any other party or parties or have any remedies against any other
party or parties under this Agreement other than as provided in Paragraph 7,
"Due Diligence Inspection and Confidential Information," Paragraph 10,
"Indemnification," and Paragraph 11, "Termination." The parties understand that
this requires that all disputed claims shall be submitted to arbitration in
accordance with Paragraph 10.4, "Arbitration."
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10.8 Indemnification Limits. The indemnification rights and
obligations of the parties shall cease with respect to any matter as to which
notice has not been given to the Indemnifying Party prior to the second
anniversary of the Closing Date. The maximum amount for which an Indemnifying
Party shall be liable for is the Purchase Price paid to the Company and the
Selling Shareholders under this Agreement, as described under Xxxxxxxxx 0,
"Xxxxxxxx Price."
11. Termination.
11.1 Termination Events. This Agreement may be terminated and
abandoned, by notice given in the manner hereinafter provided:
11.1.1 By SCP, if without the fault of SCP, all of
the conditions set forth in Paragraph 8, "Conditions Precedent to the
Obligations of IFC and SCP," shall not have been satisfied (or are incapable of
being satisfied) on or before the Closing Date and have not been waived by SCP
on or before such dates, as the case may be.
11.1.2 By the Company or the Selling Shareholders, if
without their fault all of the conditions set forth in Paragraph 9, "Conditions
Precedent to the Obligations of the Company and the Selling Shareholders," shall
not have been satisfied (or are incapable of being satisfied) on or before the
Closing Date and have not been waived by the Company and the Selling
Shareholders on or before such date.
11.2 Effect of Termination. In the event this Agreement is
terminated pursuant to Paragraph 11.1, "Termination Events," this Agreement
shall forthwith become void, and, except as provided in the Escrow Agreement,
there shall be no liability or continuing obligations on the part of the parties
hereunder, except as to the provisions relating to Confidential Information
contained in Paragraph 7, "Due Diligence Inspection and Confidential
Information."
12. Expenses and Transfer Taxes.
12.1 SCP shall be solely responsible for paying its own
expenses and costs incident to the preparation of this Agreement and to the
consummation of the transactions contemplated by this Agreement, and shall have
no obligation for paying such expenses or costs of the other parties.
12.2 The Company and the Selling Shareholders shall be solely
responsible for paying their own expenses and costs incident to the preparation
of this Agreement and to the consummation of the transactions contemplated by
this Agreement. The Company and the Selling Shareholders shall have no
obligation to reimburse the expenses or costs of IFC or SCP.
12.3 Notwithstanding any of the other provisions hereof, in
the event of arbitration and/or litigation with respect to the interpretation or
enforcement of this Agreement or any provisions hereof, the prevailing party in
any such matter shall be entitled to recover from the other party their or its
reasonable costs and expense, including reasonable attorneys' fees, incurred in
such arbitration and/or litigation. For purposes of this subparagraph 12.3, a
party shall be deemed to be the prevailing party only if such party (A)(i)
receives an award or judgment in such arbitration and/or litigation for more
than 50% of the disputed amount involved in such matter, or (ii) is ordered to
pay the other party less than 50% of the disputed amount involved in such matter
or (B)(i) succeeds in having imposed a material equitable remedy on the other
party (such as an
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injunction or order compelling specific performance), or (ii) succeeds in
defeating the other party's request for such an equitable remedy.
12.4 Schedule 12.4 sets forth the sales or transfer taxes that
will be due as a result of the sale and transfer of the Assets as contemplated
in this Agreement. SCP shall pay any sales or transfer taxes which may become
due on the sale or transfer of the Assets under this Agreement.
13. Risk of Loss. The risk of loss or destruction of all or any part of
the Assets prior to the Closing Date from any cause (including, without
limitation, fire, theft, acts of God or public enemy) shall be upon the Company
and the Selling Shareholders. Such risk shall be upon SCP if such loss occurs
after the Closing Date.
14. Notification of Claims. Each party will promptly notify the other
of any third party claims against any party relating to the Company or the
Assets of which it receives knowledge or notice so as to permit such party an
opportunity to prepare a timely defense to such claim or to attempt settlement.
15. Post-Closing Name of SCP. On the Closing Date, IFC will change the
name of SCP to Southern Communications Products, Inc. The Company shall give all
consents required for such name change and the Company shall change its name to
permit the foregoing to occur.
16. SCP Board of Directors. On the Closing Date, the Board of Directors
and officers of SCP shall consist of such persons as IFC and SCP shall select.
17. Miscellaneous.
17.1 Binding Agreement. The parties covenant and agree that
this Agreement, when executed and delivered by the parties, will constitute a
legal, valid and binding agreement between the parties and will be enforceable
in accordance with its terms.
17.2 Assignment. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto,
their legal representatives, successors and assigns.
17.3 Entire Agreement. This Agreement and its exhibits and
schedules constitute the entire contract among the parties hereto with respect
to the subject matter thereof, superseding all prior communications and
discussions and no party hereto shall be bound by any communication on the
subject matter hereof unless such is in writing signed by any necessary party
thereto and bears a date subsequent to the date hereof. The exhibits and
schedules shall be construed with and deemed as an integral part of this
Agreement to the same extent as if the same had been set forth verbatim herein.
Information set forth in any exhibit, schedule or provision of this Agreement
shall be deemed to be set forth in every other exhibit, schedule or provision of
this Agreement and therefore shall be deemed to be disclosed for all purposes of
this Agreement.
17.4 Modification. This Agreement may be waived, changed,
amended, discharged or terminated only by an agreement in writing signed by the
party against whom enforcement of any waiver, change, amendment, discharge or
termination is sought.
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17.5 Notices. All notices, requests, demands and other
communications shall be deemed to have been duly given three (3) days after
postmark of deposit in the United States mail, if mailed, certified or
registered mail, postage prepaid:
If to the Company or the Selling Shareholders:
Southern Communications Products, Inc.
X.X. Xxx 0000
Xxxxxxxx, Xxxxxxx 00000
Attn: Xxxxxxx X. Xxxx
With copy to:
X.X. X'Xxxxx, Esq.
000 Xxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxx 00000
If to IFC:
International FiberCom, Inc.
0000 Xxxxx 00xx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxxxx
With a copy to:
Xxxxxxxxx X. Xxxxxxxx, III, Esq.
Xxxxxxx Xxxx, P.A.
Renaissance Xxx
Xxx X. Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
or to such other address as any party shall designate to the other in writing.
The parties shall promptly advise each other of changes in addresses for such
notices.
17.6 Choice of Law. This Agreement shall be governed by,
construed, interpreted and enforced according to the laws of the State of
Florida. The venue will be Orange County, Florida, except for any matter
relating to the Note, which will be Xxxxxxx County, Florida.
17.7 Severability. If any portion of this Agreement shall be
finally determined by any court or governmental agency of competent jurisdiction
to violate applicable law or otherwise not to conform to requirements of law
and, therefore, to be invalid, the parties will cooperate to remedy or avoid the
invalidity, but, in any event, will not upset the general balance of
relationships created or intended to be created between them as manifested by
this Agreement and the instruments referred to herein. Except insofar as it
would be an abuse of the foregoing principle, the remaining provisions hereof
shall remain in full force and effect.
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17.8 Other Documents. The parties shall upon reasonable
request of the other, execute such documents as may be necessary or appropriate
to carry out the intent of this Agreement.
17.9 Headings and the Use of Pronouns. The paragraph headings
hereof are intended solely for convenience of reference and shall not be
construed to explain any of the provisions of this Agreement. All pronouns and
any variations thereof and other words, as applicable, shall be deemed to refer
to the masculine, feminine, neuter, singular or plural as the identity of the
person or matter may require.
17.10 Time is of the Essence. Time is of the essence of this
Agreement.
17.11 No Waiver and Remedies. No failure or delay on a parties
part to exercise any right or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise by a party of a right or
remedy hereunder preclude any other or further exercise. No remedy or election
hereunder shall be deemed exclusive but it shall, where ever possible, be
cumulative with all other remedies in law or equity.
17.12 Counterparts. This Agreement may be executed in two or
more counterparts, and by the different parties hereto on separate counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
17.13 Further Assurances. Each of the parties hereto shall use
commercially practicable efforts to fulfill all of the conditions set forth in
this Agreement over which it has control or influence (including obtaining any
consents necessary for the performance of such party's obligations hereunder)
and to consummate the transactions contemplated hereby, and shall execute and
deliver such further instruments and provide such documents as are necessary to
effect this Agreement.
17.14 Rules of Construction. The normal rules of construction
which require the terms of an agreement to be construed most strictly against
the drafter of such agreement are hereby waived since each party have been
represented by counsel in the drafting and negotiation of this Agreement.
17.15 Third Party Beneficiaries. Each party hereto intends
this Agreement shall not benefit or create any right or cause of action in or on
behalf of any person other than the parties hereto.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMPANY: SCP:
SOUTHERN COMMUNICATIONS SCP ACQUISITION CORP., an Arizona
PRODUCTS, INC., a Florida Corporation corporation in formation
/s/ Xxxxxxx X. Xxxx /s/ Xxxxxx X. Xxxxx
----------------------------------------- -----------------------------------
By Xxxxxxx X. Xxxx By Xxxxxx X. Xxxxx
Its President and Chief Executive Officer Its Chairman of the Board and
President
SELLING SHAREHOLDERS: IFC:
INTERNATIONAL FIBERCOM, INC., an
Arizona corporation
/s/ Xxxxxxx X. Xxxx
-----------------------------------------
Xxxxxxx X. Xxxx
/s/ Xxxxxx X. Xxxxx
-----------------------------------
By Xxxxxx X. Xxxxx
Its Chairman of the Board and
President
/s/ Xxxx X. Xxxx
-----------------------------------------
Xxxx X. Xxxx
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ASSET PURCHASE AND SALE AGREEMENT
LIST OF SCHEDULES AND EXHIBITS
EXHIBIT A - REAL ESTATE PURCHASE AGREEMENT
EXHIBIT B - PROMISSORY NOTE
EXHIBIT C - SECURITY AGREEMENT
EXHIBIT D - ESCROW AGREEMENT
EXHIBIT E - UNAUDITED FINANCIAL STATEMENT FOR FISCAL 1996
EXHIBIT F - UNAUDITED FINANCIAL STATEMENT FOR THE NINE-MONTHS ENDING SEPTEMBER
30, 1997
EXHIBIT G - REGISTRATION RIGHTS AGREEMENT
EXHIBIT H - FORM OF EMPLOYMENT AND NON-COMPETE AGREEMENT
SCHEDULE 1.1 - LIST OF COMPANY ASSETS
SCHEDULE 2.1 - LIABILITIES OF THE COMPANY AND THE SELLING SHAREHOLDERS TO BE
ASSUMED BY SCP
SCHEDULE 3.1 - ALLOCATION OF PURCHASE PRICE
SCHEDULE 3.1.1 - WIRING INSTRUCTIONS
SCHEDULE 3.1.3-1 - ASSETS SUBJECT TO SECURITY AGREEMENT
SCHEDULE 3.1.3-2 - FINANCIAL PLAN OF IFC AND SCP
SCHEDULE 3.3 - LEGEND FOR DEPOSIT SHARES AND IFC SHARES
SCHEDULE 3.4 - LIST OF CORPORATE RECORDS
SCHEDULE 5.4.1 - ENCUMBRANCES ON COMPANY ASSETS
SCHEDULE 5.5.1 - LIABILITIES ON COMPANY ASSETS NOT ASSUMED BY SCP
SCHEDULE 5.6.1 - CHANGES IN FINANCIAL STATEMENTS
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SCHEDULE 5.7.11 - TRANSACTIONS NOT IN ORDINARY COURSE OF BUSINESS
SCHEDULE 5.8.1 - UNPAID TAX LIABILITIES
SCHEDULE 5.8.2 - TAX RETURNS AND PAYMENT OF TAXES
SCHEDULE 5.9 - COMPANY ASSETS WHICH ARE OR MAY NOT BE MARKETABLE
SCHEDULE 5.11 - CHANGES IN ACCOUNTS RECEIVABLE OR PAYABLES
SCHEDULE 5.12 - MATERIAL DOCUMENTS
SCHEDULE 5.15 - LITIGATION - COMPANY
SCHEDULE 5.17 - EMPLOYEE LIST AND ACCRUED BENEFITS
SCHEDULE 5.22 - INSURANCE POLICIES
SCHEDULE 5.26 - INDEBTEDNESS OF THE SELLING SHAREHOLDERS AND AFFILIATES TO THE
COMPANY
SCHEDULE 6.10 - LITIGATION - IFC AND SCP
SCHEDULE 8.9.1 - EMPLOYEES EXECUTING EMPLOYMENT AGREEMENTS AND SALARIES
SCHEDULE 12.4 - SALES AND TRANSFER TAXES
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