STOCK PURCHASE AGREEMENT
By and Among
AQUIS COMMUNICATIONS, INC.
and
SUNSTAR COMMUNICATIONS, INC.
and
SUNSTAR ONE, L.L.C.
DATED AS OF JUNE 15, 1999
TABLE OF CONTENTS
Page
1. Definitions and Index of Defined Terms......................... 1
(a) Capitalized Terms........................................ 1
(b) Index of Defined Terms................................... 1
2. Sale of Stock.................................................. 6
(a) Purchase and Sale of Stock............................... 6
(b) Delivery of Possession and Instruments of Transfer....... 6
3. Closing........................................................ 6
4. Purchase Price and Payment/Adjustments......................... 7
5. Representations and Warranties of the Seller................... 7
(a) Organization, Good Standing, Power, Etc.................. 7
(b) Capital Stock............................................ 8
(c) Articles of Incorporation and By-Laws; Articles of
Organization and Operating Agreement........................... 8
(d) Subsidiaries, Divisions and Affiliates................... 8
(e) Equity Investments....................................... 9
(f) Authorization, Etc....................................... 9
(g) Effect of Agreement...................................... 9
(h) Restrictions............................................. 9
(i) Governmental and Other Consents.......................... 10
(j) Financial Statements............................... 10
(k) Absence of Certain Changes or Events..................... 11
(l) Title to Assets; Absence of Liens and
Encumbrances............................................. 11
(m) Property................................................. 12
(n) Equipment................................................ 13
(o) Insurance................................................ 13
(p) Agreements, Arrangements, Etc............................ 14
(q) Business Names; Patents, Trademarks,
Copyrights, Etc.......................................... 16
(r) Permits, Licenses, Etc................................... 17
(s) Compliance with Applicable Laws.......................... 17
(t) Litigation............................................... 17
(u) No Interest in Competitors............................... 18
(v) Customers, Suppliers, Distributors and Agents............ 18
(w) Books and Records........................................ 18
(x) Employee Benefit Plans................................... 18
(y) Powers of Attorney....................................... 19
(z) Sufficiency of Assets and Commitments.................... 19
(aa) Labor Disputes, Unfair Labor Practices................... 19
(bb) Past Due Obligations..................................... 20
(cc) Environmental Matters.................................... 20
(dd) Tax and Other Returns and Reports........................ 21
(ee) Recent Dividends and Other Distributions................. 21
i
(ff) Inventory................................................ 22
(gg) Purchase and Sale Obligations............................ 22
(hh) Other Information........................................ 22
(ii) Accounts Receivable...................................... 22
(jj) Brokers and Finders...................................... 22
(kk) Personnel................................................ 22
(ll) Insider Interests........................................ 23
(mm) Bank Accounts............................................ 23
(nn) Documents Relating to Business........................... 23
(oo) Books and Records........................................ 23
(pp) Payments................................................. 24
(qq) Schedules................................................ 24
(rr) Predecessor Entity....................................... 24
6. Representations and Warranties of the Purchaser................ 24
(a) Organization and Good Standing........................... 25
(b) Noncontravention......................................... 25
(c) Authorization............................................ 25
(d) Conflicts................................................ 25
(e) Approvals................................................ 25
(f) ......................................................... 25
(g) Brokers and Finders...................................... 25
7. Conditions Precedent to the Purchaser's Obligation to Close.... 26
8. Conditions Precedent to the Seller's Obligation to Close....... 28
9. Access......................................................... 29
10. Affirmative Covenants of the Seller............................ 30
(a) Conduct of Business...................................... 30
(b) Maintenance of Property.................................. 30
(c) Insurance................................................ 30
(d) Performance of Obligations............................... 30
(e) Maintenance and Preservation of Business................. 30
(f) Compliance with Laws..................................... 30
(g) Notice of Certain Events................................. 30
(h) Satisfaction of Conditions............................... 31
(i) Good Standing............................................ 31
11. Negative Covenants of the Seller............................... 31
(a) Material Commitments..................................... 31
(b) Inconsistent Agreements.................................. 31
12. Affirmative Covenants of the Purchaser......................... 31
(a) Good Standing............................................ 31
(b) Satisfaction of Conditions............................... 31
(c) Maintenance and Preservation of Business................. 31
(d) Compliance with Laws..................................... 31
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13. Termination.................................................... 32
(a) Grounds for Termination.................................. 32
(b) Consequences of Termination.............................. 32
14. Deliveries..................................................... 32
(a) The Seller............................................... 32
(b) Purchaser.......................................... 33
(c) Purchaser................................................ 33
(d) Purchaser................................................ 33
(e) Further Assurances....................................... 33
15. Consent of Lender.............................................. 33
16. Expenses....................................................... 34
17. Nondisclosure of Confidential Information...................... 34
18. Survival of Representations and Warranties..................... 34
19. Indemnification................................................ 34
20. Conflict of Interest........................................... 36
21. Notices........................................................ 36
22. Miscellaneous.................................................. 37
(a) Severability............................................. 37
(b) Assignment............................................... 37
(c) Counterparts............................................. 37
(d) No Waiver................................................ 37
(e) Entire Agreement; Amendments............................. 37
(f) Governing Law............................................ 37
(g) Headings................................................. 37
(h) Public Announcements..................................... 38
(i) Arbitration.............................................. 38
iii
Schedules
5(h) Restrictions
5(i) Governmental and Other Consents
5(k) Changes in Business
5(l) Title to Assets; Liens and Encumbrances
5(m) Property
5(n) Equipment
5(o) Insurance
5(p) Commitments
5(q) Business Names; Patents, Trademarks and Copyrights
5(t) Litigation
5(u) Interest in Competitors
5(v) Customers, Suppliers, Distributors, and Agents
5(x) Employee Benefit Plans
5(y) Powers of Attorney
5(z) Sufficiency of Assets and Commitments
5(aa) Labor Disputes
5(bb) Past Due Obligations
5(cc) Environmental Matter
5(dd) Tax Matters
5(ee) Dividends and Distributions
5(ii) Accounts Receivable
5(kk) Personnel
5(ll) Insider Interest
5(mm) Bank Accounts
5(pp) Payments
Exhibits
A. Escrow Agreement
B. Registration Rights Agreement
C. Legal Opinion of Seller's Counsel
D. Xxxx Xxxxx Employment Agreement
E. Legal Opinion of Purchaser's Counsel
iv
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is made as of this 15th
day of June, 1999, by and among Aquis Communications, Inc., a Delaware
corporation (the "Purchaser"), SunStar Communications, Inc., an Arizona
corporation (the "Company") and SunStar One, L.L.C., an Arizona limited
liability company, the sole shareholder of the Company (the "Seller").
RECITALS:
The Seller is the record and beneficial owner of 1,000 shares of
common stock, $ .01 par value per share, of the Company, which is one hundred
percent (100%) of the issued and outstanding capital stock of the Company (the
"SunStar Shares");
The Purchaser desires to purchase from the Seller, and the Seller desires
to sell to the Purchaser, the SunStar Shares on the terms and conditions set
forth in this Agreement;
In consideration of the foregoing, the mutual covenants and
agreements of the parties hereinafter set forth, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
1. Definitions and Index of Defined Terms.
(a) Capitalized Terms. Capitalized terms used in this
Agreement and not otherwise defined shall, unless expressly stated otherwise,
have the meanings specified in this Section 1. The single shall include the
plural and the masculine shall include the feminine and neuter, and vice versa.
(b) Index of Defined Terms.
(i) "Accountants" has the meaning set forth in Section
7(i) of this Agreement.
(ii) "Accounts Receivable" means monies or other
consideration reflected on the books of the Company as of the date of Closing
that are due to the Company.
(iii) "Affiliate" means, as applied to any person, any
other person directly or indirectly controlling, controlled by, or under common
control with, that person. For purposes of this definition, "control" (including
with correlative meanings, the terms "controlling", "controlled by", and "under
common control with") as applied to any person, means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
or policies of that person or
entity, whether through the ownership of voting securities, by contract, or
otherwise.
(iv) "Agreement" means this Stock Purchase Agreement.
(v) "Aquis Group" has the meaning set forth in Section
4(a)(ii) of this Agreement.
(vi) "Aquis Group Shares" has the meaning set forth in
Section 4(a)(ii) of this Agreement.
(vii) "Aquis Shares Delivery Date" means the later of
(i) the date which is 15 calendar days after Aquis files with the NASD the
"Nasdaq SmallCap Market Notification Form for Listing of Additional Shares"
relating to the Aquis Group Shares (the "NASDAQ Listing Application") and (ii)
the Closing Date.
(viii) "Assets" As used in this Agreement, the term
"Assets" shall mean all of the assets of the Company (as of the Closing),
including, without limitation, the following:
(1) the Business of the Company as a going concern, the goodwill
pertaining thereto and all of the Company's right, title and interest in
and to the name SunStar Communications, and all other trade names,
trademarks, servicemarks, logos or other identifying names used by the
Company or the Seller in the Business (collectively the "Trade Names"),
all as set forth in Schedule 5(q);
(2) all items of inventory owned by the Company including, without
limitation, all raw materials, work-in-progress and finished products of
the Company;
(3) all vehicles, machinery, equipment, furniture, fixtures,
computer and other office equipment and supplies of the Company, including
containers, packaging and shipping material, tools and spare parts and
other similar tangible personal property owned by the Company;
(4) all Rights;
(5) all books and records of the Company (including corporate and
tax records) including all in-house mailing lists, other customer and
supplier lists, trade correspondence, production and purchase records,
promotional literature, data storage tapes and computer disks, computer
software, order forms, accounts payable records (including invoices,
correspondence and all related documents), accounts receivable ledgers,
all documents relating to uncollected invoices, and all shipping records;
2
(6) all contracts, agreements (including, without limitation, the
confidentiality and non-disclosure agreements between the Company and each
of its employees) and purchase and sale orders for goods; all corporate
opportunities under discussion and related to the Business, including any
documentation related thereto;
(7) all trade receivables of the Company and all advance payments,
prepaid items, rights to offset and credits of all kinds of the Company;
(8) all tangible personal property owned by the Company which is not
specifically included in, or specifically excluded by, the foregoing
subsections (1) through (7);
(9) all real property owned or leased by the Company, together with
all fixtures attached thereto;
(10) all rights under or pursuant to all warranties, representations
and guarantees made by suppliers in connection with the Assets, all
claims, causes of action, rights of recovery and rights of set-off of any
kind against any person or entity relating to the Assets or the Business;
and
(11) any and all other assets, properties and rights of the Company
including those reflected as such under Assets on the April 30, 1999
Balance Sheet (the "April Balance Sheet") included among the Financial
Statements, with such additions thereto and deletions therefrom as have
occurred or shall occur in the ordinary course of business between April
30, 1999 and the Closing.
(ix) "Balance Sheet" has the meaning set forth in
Section 5(j) of this Agreement.
(x) "Balance Sheet Date" has the meaning set forth in
Section 5(j) of this Agreement.
(xi) "Business" means the business heretofore and
currently being conducted by the Company and the Seller, which consists of
providing access to virtual private network services and acting as an internet
service provider. The Seller acknowledges that all representations, warranties,
covenants and agreements contained herein shall relate to the Business as
heretofore defined and to the Company's predecessors in interest with regard to
the Business.
(xii) "Closing" has the meaning set forth in Section 3
of this Agreement.
(xiii) "Closing Date" has the meaning set forth in
Section 3 of this Agreement.
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(xiv) "Commitments" shall mean all agreements,
indentures, mortgages, plans, policies, arrangements, and other instruments,
including all amendments thereto (or where they are verbal, written summaries of
the material terms thereof), fixed or contingent, required to be disclosed on
Schedule 5(p).
(xv) "Employee Benefit Plans" has the meaning set forth
in Section 5(x) of this Agreement.
(xvi) "Environmental Claim" shall mean any written
demand, claim, governmental notice or threat of litigation or the actual
institution of any action, suit or proceeding which asserts that an
Environmental Condition constitutes a violation of any statute, ordinance,
regulation, or other governmental requirement relating to the emission,
discharge, or Release of any Hazardous Substance into the environment or the
generation, treatment, storage, transportation, or disposal of any Hazardous
Substance, prior to Closing Date in each case in contravention of any applicable
laws or regulations.
(xvii) "Environmental Condition" shall mean the presence
on any real property during the period from the date such real property was
first owned, leased or used by the Company or the Seller to the Closing Date, in
surface water, ground water, drinking water supply, land surface, subsurface
strata or ambient air of any Hazardous Substance arising out of or otherwise
related to the operations or other activities of the Company or the Seller,
conducted or undertaken prior to the Closing Date, and in each case in
contravention of any applicable laws or regulations.
(xviii) "Equipment" has the meaning set forth in Section
5(n) of this Agreement.
(xix) "Escrow Agreement" has the meaning set forth in
Section 4(a)(ii)(B) of this Agreement.
(xx) "Financial Statements" has the meaning set forth in
Section 5(j) of this Agreement.
(xxi) "Finova Consent" has the meaning set forth in
Section 15 of this Agreement.
(xxii) "Hazardous Substance" shall mean any substance
defined in the manner set forth in Section 101(14) of the U.S. Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, as
applicable on the Closing Date, and shall include any additional substances
designated under Section 102(a) thereof prior to the Closing Date.
(xxiii) "Knowledge of the Seller" in a representation or
warranty of the Seller means the actual knowledge of the members of the Seller
and the employees of the Seller and/or
4
the Company who are familiar with the Business and the Assets or the matters
with respect to which such representation or warranty is made, but does not
include, except as specifically provided hereafter, constructive knowledge.
Notwithstanding the foregoing, such phrase requires that such individuals: (i)
undertake a reasonable examination of their and the Company's files and the
assets relating to the Business to ascertain whether such files or asset
examination reveal facts relevant to the representation or warranty in question,
and (ii) make a reasonable inquiry of the other employees or agents of the
Company who they reasonably believe may have knowledge relating to the facts
relevant to such representation or warranty.
(xxiv) "Leases" has the meaning set forth in Section
5(m)(ii) of this Agreement.
(xxv) "Lien" means any security interest, mortgage,
pledge, lien, claim, encumbrance or other third party claim.
(xxvi) "NASDAQ" means the National Association of
Securities Dealers Automated Quotation System.
(xxvii) "Person" shall mean a corporation, partnership,
limited liability company, joint venture, trust, unincorporated organization,
government or a department or agency thereof, or any other entity, and, where
the context permits, an individual.
(xxviii) "Personal Property Leases" has the meaning set
forth in Section 5(m)(ii) of this Agreement.
(xxix) "Premises" has the meaning set forth in Section
5(m)(ii) of this Agreement.
(xxx) "Purchase Price" has the meaning set forth in
Section 4(a) of this Agreement.
(xxxi) "Purchaser" means Aquis IP Communications, Inc.,
a Delaware corporation.
(xxxii) "Registration Rights Agreement" has the meaning
set forth in Section 4(a)(ii) of this Agreement.
(xxxiii) "Rights" means all of the Company's and/or the
Seller's right, title and interest in and to the United States and foreign
rights with respect to copyrights, licenses, patents, trademarks, trademark
rights, trade names, service marks, service right marks, trade secrets, shop
rights, know-how, technical information (including, without limitation, all
software owned or utilized by the Company and/or the Seller in connection with
the Business), techniques, discoveries, designs, proprietary rights and
5
non-public information and registrations, reissues and extensions thereof and
applications and licenses therefor, owned or used, or proposed to be used in the
Business.
(xxxiv) "Seller" means SunStar One, LLC, an Arizona
limited liability company, the sole shareholder of the Company.
(xxxv) "SunStar Shares" has the meaning set forth in the
Recitals of this Agreement.
(xxxvi) "TTI Obligation" means the amount of $232,534
owing to Touch Technology International Inc. ("TTI") as reflected on the books
of the Seller as of April 30, 1999.
2. Sale of Stock.
(a) Purchase and Sale of Stock. In exchange for the
consideration specified herein, and subject to the terms and conditions of this
Agreement, the Purchaser agrees to purchase and acquire from the Seller, and the
Seller agrees to sell, assign, transfer, convey and deliver to the Purchaser,
all right, title and interest in and to the SunStar Shares.
(b) Delivery of Possession and Instruments of Transfer. At the
Closing, the Seller shall deliver to the Purchaser possession of all of the
certificates representing the SunStar Shares, duly endorsed in blank or
accompanied by duly executed stock powers with signatures guaranteed or
notarized, and such other instruments of transfer reasonably requested by and
satisfactory to the Purchaser and its counsel for consummation of the
transactions contemplated under this Agreement and as are necessary to vest in
the Purchaser, title in and to the SunStar Shares, free and clear of any lien,
encumbrance, security agreement, equity, option, claim, charge or restriction,
other than restrictions imposed by federal or applicable state securities laws.
3. Closing. The closing of the purchase and sale provided for in
this Agreement shall take place at the offices of Xxxxxxxx Xxxxx Xxxxxxxx Xxxx &
Ballon LLP, 666 Fifth Avenue, New York, New York, or such other place as the
parties may agree, on a date not more than five (5) business days after the date
upon which all of the conditions precedent to the closing stated in Sections 7
and 8 have been satisfied in full. (Such closing is hereinafter sometimes
referred to as the "Closing," and such time and date is hereinafter sometimes
referred to as the "Closing Date"). Notwithstanding the actual date of the
Closing, the parties agree that the purchase of the SunStar Shares shall be
effective as of June 15, 1999.
6
4. Purchase Price and Payment/Adjustments.
Purchase Price. The purchase price is as follows ("Purchase
Price"):
(i) The sum of one thousand dollars ($1,000), payable at
the Closing;
(ii) The sum of two hundred seventy-four thousand
dollars ($274,000), payable on or prior to July 31, 1999 (the "Cash
Consideration Delivery Date") as follows:
(A) $232,534 to be paid to TTI in satisfaction of the
TTI Obligation; and
(B) $41,466 to be paid to the Seller, plus
(iii) 1,150,000 shares of the common capital stock of
the Purchaser's parent company, Aquis Communications Group, Inc. ("Aquis
Group"), a Delaware corporation, (the "Aquis Group Shares"), to be delivered as
follows:
(A) 950,000 of the Aquis Group Shares to be delivered on the Aquis
Shares Delivery Date to the Seller or its designee; and
(B) 200,000 of the Aquis Group Shares to be delivered on the Aquis
Shares Delivery Date to Xxxxxxxx Xxxxx Xxxxxxxx Xxxx & Ballon LLP, as
escrow agent ("Escrow Agent"), such shares to be held and delivered
pursuant to an escrow agreement (the "Escrow Agreement") substantially in
the form annexed hereto as Exhibit A.
Aquis Group shall file with the Securities and Exchange Commission a
registration statement covering the Aquis Group Shares, as more fully described
in the Registration Rights Agreement to be entered into between Aquis Group and
the Seller on the Closing Date, which shall be substantially in the form of
Exhibit B hereto (the "Registration Rights Agreement").
5. Representations and Warranties of the Seller. As an
inducement for the Purchaser to enter into this Agreement and perform its
obligations hereunder, the Seller hereby represents and warrants to the
Purchaser as set forth below. Each of such representations and warranties are
correct and complete as of the date hereof and shall be correct and complete as
of the Closing, with the same effect as if said representations and warranties
had been made at and as of the Closing Date:
(a) Organization, Good Standing, Power, Etc. The Seller is a
limited liability company duly organized, validly existing and in good standing
under the laws of the State of
7
Arizona. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Arizona. The Company is authorized
or licensed to do business as a foreign corporation and is in good standing in
each jurisdiction in which the conduct of the Business requires such
qualification, except where the failure to so qualify would not have a material
adverse effect on the Business.
(b) Capital Stock.
(i) The Company has authorized capital stock consisting solely
of 1,000 shares of common stock, $ .01 par value, all of which are issued
and outstanding, and all of which are duly authorized, validly issued,
fully paid, non-assessable, free of preemptive rights, and were issued in
compliance with all federal and applicable state securities laws. The
SunStar Shares constitute all of the issued and outstanding capital stock
of the Company. The Seller owns the SunStar Shares free and clear of all
liens, charges, encumbrances or claims of any kind whatsoever, except for
restrictions imposed by federal or applicable state securities laws.
(ii) There are no outstanding offers, options, warrants,
rights, calls, commitments, obligations (verbal or written), conversion
rights, plans or other agreements (conditional or unconditional) of any
character provided for, required or permitting the sale, purchase or
issuance of any shares of capital stock or any other securities of the
Company that are reserved for issuance or are outstanding.
(c) Articles of Incorporation and By-Laws; Articles of
Organization and Operating Agreement.
(i) Included in Schedule 5(c)(i) attached hereto are correct
and complete copies of the Articles of Incorporation and By-laws of the Company,
as amended to date. Such Articles of Incorporation and By-laws are in full force
and effect.
(ii) Included in Schedule 5(c)(ii) attached hereto are correct
and complete copies of the Articles of Organization and Operating Agreement of
the Seller, as amended to date. Such Articles of Organization and Operating
Agreement are in full force and effect.
(d) Subsidiaries, Divisions and Affiliates. The Company has no
subsidiaries or divisions. Except as set forth in Schedule 5(d), the Business
has been conducted solely by the Company and not through any Affiliate, joint
venture or other entity, person or under any other name.
8
(e) Equity Investments. Except as set forth in Schedule 5(e),
the Company does not own or have any rights to any equity interest, directly or
indirectly, in any corporation, partnership, joint venture, firm or other
entity.
(f) Authorization, Etc. The Company has full power and
authority and has taken all action necessary to own, lease and operate the
Assets, to enter into this Agreement and to carry out the transactions
contemplated hereby. The Seller has full power and authority and has taken all
action necessary to enter into this Agreement and to carry out the transactions
contemplated hereby. The Seller and the Company have taken all action required
by law, by the Company's Articles of Incorporation and By-laws, or by the
Seller's Articles of Organization and Operating Agreement, or otherwise to be
taken by them to authorize the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby. This Agreement has been
duly executed and delivered by the Company and the Seller and is a legal, valid
and binding obligation of the Company and the Seller enforceable against each in
accordance with its terms except that (i) such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights and (ii) the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefore may be brought.
(g) Effect of Agreement. The execution, delivery and
performance of this Agreement by the Company and the Seller and the consummation
by the Company and the Seller of the transactions contemplated hereby, will not,
with or without the giving of notice and the lapse of time, or both, (i) violate
any provision of law, statute, rule, regulation or executive order to which the
Company, the Seller or the Business are subject; (ii) violate any judgment,
order, writ or decree of any court applicable to the Company, the Seller or the
Business; or (iii) result in the breach of or conflict with any term, covenant,
condition or provision of, or, constitute a default under, or result in the
creation or imposition of any lien, security interest, charge or encumbrance
upon any of the Assets or the SunStar Shares pursuant to any corporate charter,
by-law, commitment, contract or other agreement or instrument, including any of
the Commitments, to which the Company or the Seller is a party or by which any
of the Assets or the SunStar Shares are or may be bound or affected or from
which the Business derives benefits.
(h) Restrictions. Except as set forth on Schedule 5(h),
neither the Company nor the Seller is a party to any contract, commitment or
agreement, nor are any of them or the Assets or the SunStar Shares subject to,
or bound or affected by, any provision of the charter documents of the Company
or the Seller, or any order, judgment, decree, law, statute, ordinance,
9
rule, regulation or other restriction of any kind or character, which would,
individually or in the aggregate, materially adversely affect the Business, the
SunStar Shares or any of the Assets.
(i) Governmental and Other Consents. Except as set forth on
Schedule 5(i), (i) no notice to, consent, authorization or approval of, or
exemption by, any governmental or public body or authority is required in
connection with the execution, delivery and performance by the Company or the
Seller of this Agreement or any of the instruments or agreements herein referred
to, or the taking of any action herein contemplated; and (ii) no notice to,
consent, authorization or approval of, any Person under any agreement,
arrangement or commitment of any nature which the Company or the Seller is party
to or which the SunStar Shares or the Assets are bound by or subject to, or from
which the Company receives or is entitled to receive a benefit, is required in
connection with the execution, delivery and performance by the Company or the
Seller of this Agreement or any of the instruments or agreements herein referred
to, or the taking of any action herein contemplated.
(j) Financial Statements. The Seller has heretofore furnished
the Purchaser with (i) audited financial statements of the Seller, including
statements of income and retained earnings for the fiscal years then ended, for
the years from the commencement of the Business through the fiscal year ended
October 31, 1998 and (ii) unaudited financial statements of the Seller for the
period from November 1, 1998 through April 30, 1999 (the "Financial
Statements"). The Financial Statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") consistently applied, and said
Financial Statements fairly and accurately present the results of operations of
the Seller for the periods covered thereby and the financial condition of the
Seller as of the dates indicated thereon, and comply with the books and records
of the Seller. All items that could reasonably have a material adverse effect on
the willingness of a prospective purchaser to acquire the SunStar Shares have
been disclosed in the Financial Statements or in the Schedules to this
Agreement. There are no liabilities, obligations or claims of any nature of or
against the Seller or the Company (whether threatened, accrued, contingent,
absolute, unliquidated, asserted or otherwise, whether due or to become due)
which were not disclosed or reflected fully on the Balance Sheets, and there are
no such liabilities, obligations or claims of or against the Seller or the
Company, other than those disclosed or reflected in the Financial Statements.
Since the date of the last balance sheet (the "Balance Sheet") contained in the
Financial Statements ("Balance Sheet Date"), the Seller and the Company have
operated in the ordinary course of business and has, since the Balance Sheet
Date, and will, through the Closing Date, continue to operate only in the
ordinary course of business on the same basis as it has heretofore. Since the
Balance Sheet Date, there has been no materially adverse change
10
in the financial condition of the Seller or the Company, and the Seller knows of
no such pending change.
(k) Absence of Certain Changes or Events. Except as set forth
on Schedule 5(k), since April 30, 1999, neither the Seller nor the Company has:
(i) suffered any adverse change in, or the occurrence of any events which,
individually or in the aggregate, has or have had, or might reasonably be
expected to have, a material adverse effect on the financial condition or
results of operations of the Seller or the Company; (ii) incurred damage to or
destruction of any material Asset or Assets individually or in the aggregate
having a replacement cost in excess of $10,000, whether or not covered by
insurance; (iii) incurred any obligation or liability (fixed or contingent) not
in the ordinary course of business; (iv) made or entered into contracts or
commitments to make any capital expenditures in excess of $10,000; (v)
mortgaged, pledged or subjected to lien or any other encumbrance any of the
Assets; (vi) sold, transferred or leased any material Asset or Assets
individually or in the aggregate having a replacement cost in excess of $10,000,
or canceled or compromised any debt or material claims, except in each case, in
the ordinary course of business; (vii) sold, assigned, transferred or granted
any rights under or with respect to any licenses, agreements, patents, software,
inventions, trademarks, trade names, copyrights or formulae or with respect to
know-how or any other intangible asset including, but not limited to, the
Rights; (viii) amended or terminated any of the contracts, agreements, leases or
arrangements which otherwise would have been set forth on Schedule 5(p) hereto;
(ix) waived or released any other rights of material value; (x) declared or paid
any dividend on its capital stock, or set apart any money for distribution to or
for its shareholders; (xi) redeemed any portion of its capital stock; (xii)
entered into, or amended the terms of, any employment or consulting agreement
not terminable on more than 30-days notice without liability to the Seller or
the Company; (xiii) incurred any indebtedness for borrowed money or guaranteed
any such indebtedness of another entity or individual, or entered into any other
arrangement having the economic effect of any of the foregoing; or (xiv) entered
into any transactions not in the ordinary course of business which would,
individually or in the aggregate, materially adversely affect the Assets or the
Business.
(l) Title to Assets; Absence of Liens and Encumbrances. Except
as set forth on Schedule 5(l), the Company has good title to, and owns outright,
the Assets, free and clear of all mortgages, claims, liens, charges,
encumbrances, security interests, restrictions on use or transfer or other
defects as to title other than those disclosed in the Balance Sheet. The leases
and other agreements or instruments under which the Company holds, leases or is
entitled to the use of any real or personal property included in the Assets are
in full force and effect and all rentals, royalties or other payments due and
payable thereunder
11
prior to the date hereof have been duly paid. The Company enjoys peaceable and
undisturbed possession under all such leases, and the changes in ownership of
the capital stock of the Company and of the Assets will not adversely affect
such leases, other agreements and instruments. All Assets are in conformance
with all applicable zoning and other laws, ordinances, rules and regulations;
and no notice of violation of any law, ordinance, rule or regulation thereunder
has been received by the Company or the Seller.
(m) Property.
(i) The Company does not own real property.
(ii) Schedule 5(m) contains a complete and correct list
and description of all of the Company's leases (whether oral or written) with
respect to real property (the "Leases"), including a description of all
buildings, structures, improvements, transmitters, terminals and other equipment
located at each of the premises underlying such Leases (collectively, the
"Premises"), and all licensing arrangements and leases of personal property
relating to the Business ("Personal Property Leases"), to which the Company is a
party (either as lessor, lessee, licensor or licensee). The Seller has
heretofore furnished to the Purchaser true and complete copies of all Leases and
Personal Property Leases. All buildings, structures, appurtenances and material
items of machinery, equipment and other material tangible assets used by the
Company in the conduct of the Business are in good operating condition and
repair, reasonable wear and tear excepted, are usable in the ordinary course of
business, are adequate and suitable for the uses to which they are being put and
conform in all material respects to all applicable statutes, laws, regulations,
ordinances, codes, rules, judgments, orders, decrees, agreements or governmental
restrictions relating to their construction, use and operation. The Assets are
sufficient to operate and conduct the Business as presently conducted. All such
leases and licensing agreements are valid and effective in accordance with their
respective terms and there are no existing defaults or events of default or
events which with notice or lapse of time or both would constitute defaults or
which would interfere with the enjoyment by the Company or any assignee of the
benefits of such instrument or their use and enjoyment of the real or personal
property. Except as set forth on Schedule 5(m), no consents are required in
order to transfer any of the Leases, Personal Property Leases or licenses to the
Purchaser.
(iii) Except as set forth on Schedule 5(m), all
activities and operations conducted by the Seller and the Company on the
Premises, and all structures, improvements and fixtures by the Seller or the
Company on the Premises, conform to any and all applicable federal, state and
local laws, ordinances and regulations, including, without limitation, zoning
and building ordinances and health, environmental and safety laws, ordinances
12
and regulations, and the Premises are zoned for the various purposes for which
the Premises are currently being used.
(iv) Except as set forth on Schedule 5(m), to the
knowledge of the Seller, there is no condition resulting from the activities of
the Business which would adversely affect or impair the use of any of the
Premises for the purposes for which the Company is currently using the same or
which could result in the imposition of liability on the Purchaser.
(v) To the knowledge of the Seller, there are no
existing, pending or threatened condemnations or violations of other
governmental regulations giving rise to pending or threatened governmental or
administrative actions that will materially adversely affect or impair the use
of any of the Premises for the purposes to which the Company is currently using
the same.
(n) Equipment. Set forth on Schedule 5(n) is a correct and
complete list as of May 31, 1999 of all items of equipment used in the Business
(the "Equipment"), indicating for each piece of Equipment whether it is owned or
leased. Except as set forth on Schedule 5(n), none of the Equipment has been
disposed of since May 31, 1999. Except as noted on Schedule 5(n), all of the
Equipment and all other equipment used in the conduct of the Business (i) is in
good working condition, with no material defects, and generally has been
suitable for the uses for which it was designed or has been employed in the
Business and (ii) conforms in all material respects with any laws, ordinances,
regulations, orders or other similar governmental requirements relating to its
use, as the same are currently in effect.
(o) Insurance. There is now and there will be as of the
Closing, in full force and effect with a reputable insurance company fire and
extended insurance coverage with respect to all material tangible Assets in
reasonable commercial amounts. On Schedule 5(o) is set forth a correct and
complete list of (i) all currently effective insurance policies and bonds
covering the Assets or the Business, and their respective annual premiums (as of
the last renewal or purchase of new insurance), and (ii) since the inception of
the Business, (A) all accidents, casualties or damage occurring on or to the
Assets or relating to the Business which resulted in claims individually in
excess of $5,000, and (B) claims for product liability, damages, contribution or
indemnification and settlements (including pending settlement negotiations)
resulting therefrom which individually are in excess of $5,000. Except as set
forth on Schedule 5(o), as of the date hereof there are no disputes with
underwriters of any such policies or bonds, and all premiums due and payable
have been paid. There are no pending or, to the knowledge of the Seller,
threatened terminations or premium increases with respect to any of such
policies or bonds and there is no condition or circumstance known to the Seller
applicable to the Business, other than the sale of the SunStar Shares pursuant
to
13
this Agreement, which may result in such termination or increase. The Business
is in compliance with all material conditions contained in such policies or
bonds, except for noncompliance which, individually or in the aggregate, would
not have a material adverse effect on the Business, the SunStar Shares or the
Assets.
(p) Agreements, Arrangements, Etc.
(i) Except as set forth on Schedule 5(p), neither the Company
nor the Seller is a party to, nor are the Company, the Assets or the
SunStar Shares subject to or bound by, any:
(A) lease agreement (whether as lessor or lessee), where
the obligation of the Company exceeds $5,000;
(B) license agreement, assignment or contract (whether
as licensor or licensee, assignor or assignee) relating to software,
trademarks, trade names, patents, or copyrights (or applications
therefor), unpatented designs or processes, formulae, know-how or
technical assistance, or other proprietary rights;
(C) employment or other contract or agreement with an
employee or independent contractor which (1) may not be terminated
without liability to the Company upon notice to the employee or
independent contractor of not more than 30 days, or (2) provides
payments (contingent or otherwise) of more than $5,000 per year
(including all salary, bonuses and commissions);
(D) agreement, contract or order with any buying agent,
supplier or other individual or entity who assists, provides or is
otherwise involved in the acquisition, supplying or providing Assets
or other goods to the Business;
(E) non-competition, secrecy or con- fidentiality
agreements;
(F) agreement or other arrangement for the sale of goods
or services to any third party (including the government or any
other governmental authority);
(G) agreement with any labor union;
(H) agreement, contract with any distributor, dealer,
leasing company, sales agent or representative, other than contracts
or orders for the purchase, sale or license of goods made in the
usual and ordinary course of business at an aggregate price per
contract or more than
14
$5,000 and a term of more than six months under any such contract or
order;
(I) agreement, contract or order with any manufacturer,
leasing company, supplier or customer (including those agreements
which allow discounts or allowances or extended payment terms), of
more than $5,000;
(J) agreement with any distributor or brokerage company,
leasing company, management company or any other individual or
entity who assists, places, brokers or otherwise is involved with
the marketing or distribution of the products of the Business to its
customers;
(K) joint venture or partnership agreement with any
other person or entity;
(L) agreement guaranteeing, indemnifying or otherwise
becoming liable for the obligations or liabilities of another;
(M) agreement with any banks or other persons, for the
borrowing or lending of money or payment or repayment of draws on
letters of credit or currency swap or exchange agreements (other
than purchase money security interests which may, under the terms of
invoices from its suppliers, be granted to suppliers with respect to
goods so purchased);
(N) agreement with any bank, finance company or similar
organization which acquires from the Company receivables or
contracts for sales on credit;
(O) agreement granting any person a lien, security
interest or mortgage on any of the Assets, including, without
limitation, any factoring or agreement for the assignment of
receivables or inventory;
(P) agreement for the incurrence of any capital
expenditure in excess of $5,000;
(Q) advertising, publication or printing agreement;
(R) agreement which restricts the Company from doing
business anywhere in the world;
(S) agreement or statute or regulation giving any party
the right to renegotiate or require a reduction
15
in prices or the repayment of any amount previously paid; or
(T) other agreement or contract, not included in or
expressly excluded from the terms of the foregoing clauses (A)
through (S), materially affecting the Assets, the SunStar Shares or
the Business, except contracts or purchase orders for the purchase
or sale of goods or services made in the usual and ordinary course
of business.
Correct and complete copies of all items required to be shown on
Schedule 5(p) have been separately delivered to the Purchaser prior to the date
hereof.
(ii) Each of the Commitments is valid, in full force and
effect and enforceable in accordance with its terms.
(iii) Except as set forth on Schedule 5(p), the Company has
fulfilled, or has taken all action reasonably necessary to enable the Company to
fulfill when due, all of its obligations under the Commitments, except where the
failure to do so would not, individually or in the aggregate, have a material
adverse affect on the Business or the Assets. Furthermore, there has not
occurred any default or any event which, with the lapse of time or the election
of any person other than the Company, will become a default under any of the
Commitments, except for such defaults, if any, which (A) have not resulted and
will not result in any material loss to or liability of the Company or any of
its successors or assigns or (B) have been indicated on Schedule 5(p). The
Company is not in arrears in any material respect with respect to the
performance or satisfaction of the terms or conditions to be performed or
satisfied by it under any of the Commitments and to the knowledge of the Seller,
no waiver or variance has been granted by any of the parties hereto.
(iv) Except as set forth on Schedule 5(p), none of the
Commitments requires the consent of the other parties thereto as a result of the
transactions contemplated hereby and, with respect to any of the Commitments
which do require the consent of the other parties thereto as a result of the
transactions contemplated by this Agreement, the Seller will provide the
Purchaser with copies of material consents between the date hereof and the
Closing.
(q) Business Names; Patents, Trademarks, Copyrights, Etc. Schedule
5(q) sets forth any Trade Names used by the Company or the Seller as the
predecessor in interest to the Company used by the Business and all of the
business addresses of the Business since the commencement of the Business.
Schedule 5(q) also sets forth (i) the registered and beneficial owner and the
expiration date, to the extent applicable, for each of the Rights owned, used
16
or proposed to be used by the Company and (ii) the product, service, or products
or services of the Company which make use of, or are sold, licensed or made
under, each such Right. All of the Rights are included in the Assets and
constitute all Rights necessary for the conduct of the Business, as the Business
was being conducted immediately prior to the date hereof. Except as set forth on
Schedule 5(q), neither the Seller nor the Company has sold, assigned,
transferred, licensed, sub-licensed or conveyed the Rights, or any of them, or
any interest in the Rights, or any of them, to any person, and the Company has
the entire right or right, title and interest (free and clear of all security
interests, liens and encumbrances of every nature) in and to the Rights owned by
or used in the conduct of the Business as currently being conducted; neither has
the validity of such items been, nor is the validity of such items, nor the use
thereof by the Company, the subject of any pending or, to the knowledge of the
Seller, threatened opposition, interference, cancellation, nullification,
conflict, concurrent use, litigation or other proceeding. The conduct of the
Business as currently operated, and the use of the Assets does not and will not
conflict with, or infringe, legally enforceable rights of third parties. There
is no infringement of any proprietary right owned or licensed by the Company.
(r) Permits, Licenses, Etc. The Company has all permits, licenses,
registrations, memberships, orders or approvals of governmental or
administrative authorities required to permit them to carry on the Business as
currently conducted.
(s) Compliance with Applicable Laws. To the knowledge of the Seller,
the Seller and/or the Company have complied in all material respects with all
laws, regulations and orders affecting the Business and its operations.
(t) Litigation. Except as set forth on Schedule 5(t), there is no
claim, action, suit, proceeding, arbitration, reparation, investigation or
hearing or notice of hearing, pending or, to the knowledge of the Seller,
threatened, before any court or governmental, administrative or other competent
authority or private arbitration tribunal against or relating to or affecting
(directly or indirectly, including by way of indemnification), the Business or
the Assets, or the transactions contemplated by this Agreement; nor are any
facts known to the Seller which could reasonably give rise to any such claim,
action, suit, proceeding, arbitration, investigation or hearing, which may have
any material adverse affect, individually or in the aggregate, upon the
Business, the value of the Assets or the transactions contemplated by this
Agreement. Neither the Seller nor the Company has waived any statute of
limitations or other affirmative defense with respect to any of the aforesaid
matters. There is no continuing order, injunction or decree of any court,
arbitrator or governmental, administrative or other competent authority to which
the Seller or the Company is a party, or to which the Assets or
17
Business is subject. Neither the Seller nor the Company nor any current officer,
director, or employee of the Seller or the Company has been permanently or
temporarily enjoined or barred by order, judgment or decree of any court or
other tribunal or any agency or other body from engaging in or continuing any
conduct or practice in connection with the Business.
(u) No Interest in Competitors. Except as set forth on Schedule
5(u), no officer, director or shareholder of the Company or any Affiliate of any
of the foregoing, or any member of the Seller, directly or indirectly, owns more
than a two percent (2%) interest in or controls or is an employee, officer or
director of or participant in (but only to the extent such a participation
exceeds two percent (2%), or consultant to any corporation, partnership, limited
partnership, joint venture, association or other entity which is a competitor,
or current supplier or customer of the Business or has any type of business or
professional relationship with the Business.
(v) Customers, Suppliers, Distributors and Agents. Except as set
forth on Schedule 5(v), the Seller has no knowledge or reason to believe that
any customer, client, distributor, supplier or any other person or entity with
material business dealings with the Company, will or may cease to continue such
relationship, or will or may substantially reduce the extent of such
relationship, at any time prior to or after the Closing Date. Except for public
information, the Seller has no knowledge of (i) any other existing or
contemplated material and adverse modification or change in the business
relationship of the Company with, or (ii) any existing condition or state of
facts which has affected adversely, will adversely affect (in a material
manner), or has a reasonable likelihood of adversely affecting the business
relationship of the Company with its customers, clients, suppliers or other
persons or entities with material business dealings with the Company or which
has prevented or will prevent the business from being carried on under its new
ownership after the Closing in essentially the same manner as it is currently
carried on. Schedule 5(v) sets forth (i) the ten largest (in dollar value)
purchasers of services from the Company and (ii) the ten largest (in dollar
value) providers of goods and/or services to the Company.
(w) Books and Records. The books of account and other financial and
corporate records of the Company are in all material respects complete, correct
and up to date, with all necessary signatures, and are in all material respects
accurately reflected in the Financial Statements.
(x) Employee Benefit Plans. Except as described in Schedule 5(x),
the Company does not have any hospitalization, health insurance, pension,
retirement, profit sharing, stock option or similar plans (the "Employee
Benefits Plans"). For each such
18
employee pension plan, multi-employer plan or welfare plan as those terms are
defined in Section 3 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and for each Employee Benefit Plan with respect to which the
Company is a "party in interest" as defined in Section 3 of ERISA, or a
"disqualified person" as defined in Section 4975 of the Code, the Seller has
delivered to the Purchaser complete and accurate copies of (i) all Employee
Benefit Plans and all amendments thereto; (ii) the trust instrument or insurance
contract, if any, forming a part of the plans, and all amendments thereto; (iii)
the most recent and preceding year's Internal Revenue Service Form 5500 and all
schedules thereto; (iv) the most recent Internal Revenue Service determination
letter, or if no letter has been issued, any pending application to the Internal
Revenue Service for a determination letter regarding qualified status; (v) any
bond required by Section 412 of ERISA; and (vi) the summary plan description.
The Company has complied in all material respects with all of the rules and
regulations governing each of the Employee Benefit Plans maintained for the
benefit of its employees, including, without limitation, rules and regulations
promulgated pursuant to ERISA and the Internal Revenue Code, by the Department
of Treasury, Department of Labor, and the Pension Benefit Plans Guaranty
Corporation, and each of the Employee Benefit Plans now operated has since its
inception been operated in accordance with its provisions and is in compliance
with such rules and regulations. Neither the Company nor any Employee Benefit
Plans maintained by the Company or any fiduciaries thereof have engaged in any
prohibited transaction, as that term is defined in Section 406 of ERISA or
Section 4975 of the Code, nor have any of them committed any breach of fiduciary
responsibility with respect to any of the Employee Benefit Plans.
(y) Powers of Attorney. Except as set forth on Schedule 5(y), no
person has any power of attorney to act on behalf of the Company or the Seller
in connection with any of the Company's properties or business affairs other
than such powers to so act as normally pertain to the officers of the Company.
(z) Sufficiency of Assets and Commitments. Except as set forth in
Schedule 5(z), the Assets constitute all of the property and Rights necessary
for the continuation of the Business on a basis consistent with past operations.
(aa) Labor Disputes, Unfair Labor Practices. Except as set forth on
Schedule 5(aa), neither the Seller nor the Company has engaged in any labor
practice which would have a material adverse effect on the Assets or the
Business. There is no pending or threatened (i) unfair labor practice complaint,
charge, labor dispute, strike, slowdown, walkout or work stoppage before the
National Labor Relations Board or any other authority or (ii) grievance or
arbitration proceeding arising out of or under a collective bargaining agreement
involving employees of the Business. There have been no strikes, labor disputes,
slow-downs,
19
walkouts, or work stoppages involving employees of the Business. Union
representation of employees exists only as set forth on Schedule 5(aa). The
Company has not received notice from any of its employees of such employee's
intent to terminate his or her employment or bring any action for any reason
related to the transactions contemplated by this Agreement or for any other
reason.
(bb) Past Due Obligations. Except as set forth on Schedule 5(bb), no
past due obligations over $5,000 have given rise or shall give rise within five
(5) days after the Closing Date to any additional liability to the Purchaser on
account of their being past due.
(cc) Environmental Matters. Except as set forth on Schedule 5(cc),
(i) the Company is in compliance with all environmental laws, regulations,
permits and orders applicable to it, and with all laws, regulations, permits and
orders governing or relating to asbestos removal and abatement; (ii) the Company
has not transported, stored, treated or disposed, or arranged for any third
parties to transport, store, treat or dispose, of any Hazardous Substances to or
at any location other than a site lawfully permitted to receive such Hazardous
Substances for such purposes, or had performed or arranged for any method or
procedure for such transportation, storage, treatment or disposal in
contravention of any laws or regulations nor has the Company disposed of, or
arranged for any third parties to dispose of, Hazardous Substances upon property
owned or leased by it in contravention of any applicable laws or regulations;
(iii) there has not occurred, nor is there presently occurring, a Release of any
Hazardous Substance by the Company on, into or beneath the surface of any parcel
of real property in which the Company has an ownership interest or any leasehold
interest in contravention of any applicable laws or regulations; (iv) the
Company has not transported or disposed of, or allowed or arranged for any third
parties to transport or dispose of, any Hazardous Substance to or at a site
which, pursuant to the U.S. Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended ("CERCLA"), has been placed on the
National Priorities List or its Iowa equivalent; (v) the Company has not
received notice and has no actual knowledge of any facts which could give rise
to substantive notice, that the Company is a potentially responsible party for a
federal or state environmental cleanup site or for corrective action under
CERCLA or notice of any other Environmental Claim; (vi) the Company has not
undertaken (or been requested to undertake) any response or remedial actions or
cleanup actions of any kind at the request of any federal, state or local
governmental entity, or at the request of any other person or entity; and (vii)
there are no laws, regulations, ordinances, licenses, permits or orders relating
to environmental matters requiring any work, repairs, construction or capital
expenditures with respect to the Assets.
20
(dd) Tax and Other Returns and Reports.
(i) The Seller has timely filed or will file all Tax Returns and
information returns required to be filed and has paid all Taxes due and payable
in connection with the Business for all periods ending on or before the date
hereof. Adequate provision has been made in the books and records of the Company
and in the Financial Statements for all Taxes whether or not due and payable and
whether or not disputed. Schedule 5(dd) lists the date or dates through which
any governmental entity has examined any Tax Return of the Seller or the
Company. All required Tax Returns or extensions, including amendments to date,
have been prepared in good faith without willful misrepresentation and are
complete and accurate in all material respects. Except as set forth in Schedule
5(dd), no governmental entity has examined or is in the process of examining any
Tax Returns or extensions of the Seller or the Company. Except as set forth on
Schedule 5(dd), no governmental entity has proposed (tentatively or
definitively), asserted or assessed or threatened to propose or assert, any
deficiency, assessment, lien, or other claim for Taxes and there would be no
basis for any such delinquency, assessment, lien or claim. There are no
agreements, waivers or other arrangements providing for an extension of time
with respect to the assessment of any Taxes or deficiency against the Seller or
the Company in connection with the Business or with respect to any Tax Return
filed or to be filed by the Seller or the Company in connection with the
Business.
(ii) Certain Tax Definitions. For purposes of this Agreement, the
term "Taxes" means all taxes, including without limitation all Federal, state,
local, foreign and other income, franchise, sales, use, property, payroll,
withholding, environmental, alterative or add-on minimum and other taxes,
assessments, charges, duties, fees, levies or other governmental charges in the
nature of tax, and all estimated taxes, deficiency assessments, additions to
tax, penalties, and interest, and any contractual or other obligation to
indemnify or reimburse any person with respect to any such assessment. For
purposes of this Agreement, the term "Tax Return" shall mean any report,
statement, return, declaration of estimated tax or other information required to
be supplied by or on behalf of the Company to a taxing authority in connection
with Taxes, or with respect to grants of tax exemption, including any
consolidated, combined, unitary, joint or other return filed by any person that
properly includes the income, deductions or other tax information concerning the
Company.
(ee) Recent Dividends and Other Distributions. Except as set forth
on Schedule 5(ee), there has been no dividend or other distribution of assets or
securities whether consisting of money, property or any other thing of value,
declared, issued or paid to or for the benefit of the Seller or the Company
subsequent to the date of the most recent Financial Statements.
21
(ff) Inventory. All of the Company's inventory consists of items of
a quality usable, marketable or saleable in the normal course of the Business.
(gg) Purchase and Sale Obligations. All purchases, sales and orders
and all other commitments for purchases, sales and orders made by or on behalf
of the Company have been made in the usual and ordinary course of its business
in accordance with normal practices. On the Closing Date, the Company shall
deliver to the Purchaser a schedule of all such uncompleted purchase and sale
orders and other commitments with respect to any of the Company's obligations as
of a date not earlier than ten (10) days prior to the Closing.
(hh) Other Information. None of the representations and warranties
contained in this Agreement (including the Annexes and Schedules hereto) or any
ancillary document or any certificate or instrument delivered or to be delivered
by or on behalf of the Company or the Seller in connection with the transactions
contemplated hereby, does or will contain any untrue statement of a material
fact or omit a material fact necessary to make the information contained herein
or therein not misleading.
(ii) Accounts Receivable. All Accounts Receivable arose from bona
fide transactions made in the ordinary course of business and represent services
rendered in the ordinary course of business. All such Accounts Receivable are
fairly presented, and all the Accounts Receivable are the result of arms-length
transactions with third parties. The collectibility of the Accounts Receivable
will not be impaired by any statute of limitations, right of set-off,
counterclaim or defense. Set forth on Schedule 5(ii) are computer printouts
containing detailed listings of Accounts Receivable as of the dates specified
therein (which shall be updated through the Closing Date) and which reflect the
periods of time that such accounts have been outstanding as of the dates of such
listings.
(jj) Brokers and Finders. Neither the Seller nor the Company, or any
of their respective officers, directors, members or employees, has employed any
broker or finder or incurred any liability for any brokerage fees, commissions
or finders' fees in connection with the transactions contemplated by this
Agreement other than Deerfield Partners L.P. whose fee shall be paid entirely by
the Purchaser. The Seller agrees to indemnify and hold the Purchaser harmless
from any liability, loss, cost, claim and/or demand that any other broker or
finder may have in connection with this transaction as a result of actions taken
by the Company or the Seller.
(kk) Personnel. Schedule 5(kk) sets forth a true and complete list
of:
(i) the wage rates for non-salaried and nonexecutive salaried
employees of the Company by classification, the date of
22
the last increase in compensation and scheduled salary review dates;
(ii) the Company's employees, which list shall contain the following
information with respect to each such employee (A) whether such employee is
union or non-union; (B) the position, age, current base rate, total 1997 and
1998 compensation, time of service, and geographical work location; and (C) with
respect to employee salespersons, the details of his or her compensation
arrangement, including assigned customers, territory and commission rates; and
(iii) all non-employee salespersons of the Company and as to each
salesperson, the details of his or her compensation arrangement with the Company
including assigned customers, territory and commission rates.
(ll) Insider Interests. Except as set forth in Schedule 5(ll),
neither the Seller, any member or officer of the Seller nor any officer or
director of the Company is presently a party to any transaction with the Company
including, without limitation, any contract, agreement or arrangement (i)
providing for the furnishing of services; (ii) providing for rental, real or
personal property; or (iii) otherwise requiring payments to any such person,
trust, corporation or entity to which such person has any interest including in
any property, real or personal, tangible, including without limitation,
inventions, patents, trademarks or trade names, used in or pertaining to the
Business.
(mm) Bank Accounts. Schedule 5(mm) sets forth the names and
locations of all banks, trust companies, savings and loan associations and other
financial institutions at which the Company maintains safe deposit boxes, lock
boxes or accounts of any nature.
(nn) Documents Relating to Business. The Seller has furnished or
made available to the Purchaser every material agreement, instrument, letter,
pleading, consent, waiver, notice, note and every document of whatever nature
relating to the Business, and to the knowledge of the Seller, there is no other
document or instrument of any kind that the Company has failed to furnish that
would or might affect the truth, accuracy or completeness of the representations
and warranties contained herein. No representation or warranty by the Seller in
this Agreement or any Exhibit, Schedule or related agreement contains or will
contain any untrue statement of a material fact nor omits or will omit to state
a material fact necessary to make the statements contained therein not
misleading.
(oo) Books and Records. To the knowledge of the Seller, the
records of the Seller and the Company relating to one Business are complete and
accurate in all material respects. The financial books and records of the Seller
and the Company relating
23
to one Business have been maintained consistently in accordance with sound
business practices and are accurate and complete in all material respects.
(pp) Payments.
(i) Except as set forth on Schedule 5(pp), neither the
Seller nor the Company, nor any of their respective employees or agents, or any
other person acting on behalf of the Seller, the Company or the Business, has,
directly or indirectly, within the past five years given or agreed to give any
gift or similar benefit (other than legal price concessions to customers in the
ordinary course of business) to any customer, supplier, employee or agent of a
customer or supplier, or official or employee of any governmental agency or
instrumentality of any government (domestic or foreign) or any political party
or candidate for office or other person who is or may be in a position to help
or hinder the Business to any damage or penalty in any civil, criminal or
governmental litigation or proceeding or, (y) which if not given in the past,
might have had a materially adverse effect on the assets, business or operations
of the Business as reflected in the Financial Statements or (z) if not continued
in the future, might adversely affect the assets, business, operations or
prospects of the Business.
(ii) Neither the Seller nor the Company has obtained,
directly or indirectly, any property as a result of activities, or used any
property to conduct activities, which activities may constitute or result in a
violation of any federal, state or local law, rule or regulation, the penalty
for which could be forfeiture of such property.
(qq) Schedules. Each of the Schedules described in this
Agreement is dated the date of this Agreement, identified specifically as a
schedule to a particular Section and is certified by the Seller as being true
and complete. Any information disclosed in any Schedule described in this
Agreement shall be deemed disclosed for purposes of all other such Schedules to
which such information is relevant.
(rr) Predecessor Entity. The Assets, which were previously
owned by the Seller, were transferred from the Seller to the Company for reasons
unrelated to the transactions contemplated by this Agreement and deemed
reasonable by the managers of the Seller.
6. Representations and Warranties of the Purchaser.
As an inducement for the Seller to enter into this Agreement
and perform its obligations hereunder, the Purchaser hereby represents and
warrants to the Seller as set forth below. Each of such representations and
warranties are correct and
24
complete as of the date hereof and shall be correct and complete as of the
Closing, with the same effect as if said representations and warranties had been
made at and as of the Closing Date:
(a) Organization and Good Standing. The Purchaser is a
corporation duly organized, validly existing and in good standing under of the
laws of the State of Delaware.
(b) Noncontravention. The Purchaser is not a party to or
subject to any contract or agreement or any judgment, order, writ, injunction or
decree of any court or governmental body which will prevent its performance of
its obligations under this Agreement.
(c) Authorization. The execution and delivery of this
Agreement and the other agreements, certificates and documents contemplated
hereby or referred to herein have been duly authorized by its directors as
required under the laws of the State of Delaware, and no other corporate action
is required for the approval of this Agreement or such other agreements,
certificates and documents executed and delivered by the Purchaser, all of which
are valid and binding upon the Purchaser in accordance with their respective
terms.
(d) Conflicts. Neither the execution nor delivery of this
Agreement, nor the performance of the Purchaser in consummating the transactions
contemplated by this Agreement will conflict with or result in a violation or
breach of, or default under, any terms or provisions of the corporate charter or
bylaws of the Purchaser or of any terms or provisions of any agreement or
instrument to which the Purchaser is a party or by which it is bound.
(e) Approvals. No consent, approval or authorization of or
declaration or filing with any governmental authority is required in connection
with the execution or delivery of this Agreement by the Purchaser or the
consummation by the Purchaser of the transactions contemplated hereby.
(f) Pursuant to the terms of the Registration Rights
Agreement, within 180 days from the Closing Date, Aquis Group shall file a
registration statement on Form S-3 or any successor thereto (or other form of
registration statement if Form S-3 is not available) for public sale of the
Aquis Group Shares (the "Shelf Registration Statement"), and thereafter shall
use its reasonable efforts to have the Shelf Registration Statement declared
effective by the Securities and Exchange Commission.
(g) Brokers and Finders. Neither the Purchaser nor any of its
officers, directors, or employees, has employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finders' fees in connection
with the transactions
25
contemplated by this Agreement other than Deerfield Partners L.P. whose fee
shall be paid entirely by the Purchaser. The Purchaser agrees to indemnify and
hold the Seller harmless from any liability, loss, cost, claim and/or demand
that any other broker or finder may have in connection with this transaction as
a result of actions taken by the Purchaser.
7. Conditions Precedent to the Purchaser's Obligation to Close. (i)
All obligations of the Purchaser to close under this Agreement are subject to
the fulfillment of each of the following conditions, prior to or at the Closing:
(a) The representations and warranties made by the Seller
contained herein shall be true and correct at and as of the time of the Closing,
with the same effect as though such representations and warranties were made at
and as of such time, except in respects not materially adverse to the Company.
As used herein, the phrase "in respects not materially adverse to the Company"
shall mean in respects not materially adverse to the overall financial
condition, business or prospects of the Business.
(b) The Seller and the Company, on or before the Closing,
shall have performed and complied with all terms, covenants and conditions
required by this Agreement to be performed or complied with at or before the
Closing.
(c) No order, ruling or regulation (general or specific) of
any governmental authority shall have been issued or promulgated, and no
judicial or administrative action shall have been taken and shall have not been
rescinded, canceled or reversed, which action has the purpose or would have the
effect of prohibiting the transactions herein contemplated or the effect of
interfering with or materially affecting the right or ability of any party to
this Agreement to consummate any of the transactions contemplated hereby.
(d) [Intentionally left blank]
(e) The Seller shall have delivered to the Purchaser a
certificate, dated the Closing Date and signed by an appropriate officer of the
Seller, certifying (i) as to the fulfillment of the conditions set forth in
subsections (a), (b) and (c) of this Section 7 and (ii) that he is not aware of
any material omissions or facts that would materially alter any of the Financial
Statements, nor is he aware of any facts or factors that are reasonably likely
to occur, or if known to other parties, that could have a material adverse
effect on the financial condition, business, operations, assets, liabilities,
management or prospects of the Business.
(f) The Purchaser shall have been furnished with an opinion,
dated the Closing Date, of Xxxxx & Xxxxxx, L.L.P., counsel
26
to the Seller, in substantially the form of Exhibit C attached hereto.
(g) All consents and approvals and waivers of third parties,
including those set forth on Schedule 5(i), and consents, permits and approvals
of all regulatory agencies or other authorities having jurisdiction over the
transactions, contemplated by this Agreement, shall have been procured and
delivered to the Purchaser, and all other requirements prescribed by law shall
have been satisfied.
(h) No suit, action or other proceeding shall be pending or
directly threatened by any federal or state governmental agency having
jurisdiction or authority over either the Seller, the Company or the Purchaser
in which it is sought to restrain or prohibit consummation of the transactions
contemplated by this Agreement.
(i) The Purchaser shall not have been advised by the
Purchaser's accountants (the "Accountants"), at or prior to the Closing Date,
that, based upon a review (but not an audit) of the affairs of the Business
through the Closing Date, there has come to their attention facts or
circumstances causing them to believe that the Seller's and the Company's
representations and warranties relating to the Assets, the Financial Statements,
and the financial condition of the Business are not materially true and correct
as of the Closing Date. Any such advice shall be in writing and shall specify in
detail the particulars as to what facts or circumstances have caused the
Accountants to believe that any such representations or warranties are not
materially true and correct or that any such condition has not been fulfilled.
The Seller shall be given a reasonable opportunity (not to exceed five business
days after delivery to it of the advice) to explain or remedy any alleged
misrepresentation or breach of warranty. If the Closing thereafter occurs, it
shall be deemed to have occurred as of the originally scheduled Closing Date. In
preparing such advice the Accountants may rely upon written statements of the
Seller and the Company and need not audit the financial condition of the
Company.
(j) There shall not have been commenced, threatened or
received any proceeding, or notice thereof, which results or could result in the
citation of the Seller or the Business for violation of zoning ordinances in
connection with the use of the principal office of the Business or requiring the
cessation of such use.
(k) There shall have been no material adverse changes in the
financial condition, Business, operations, Assets, liabilities or management of
the Company.
(l) The Seller shall have delivered all consents, approvals
and waivers required under any contracts, licenses,
27
leases (including the Leases) or other agreements material to the Business or
shall have executed and delivered assignments of all such instruments.
(m) The Purchaser shall have received a certificate of the
office of the Secretary of State of Arizona and the Arizona State taxing
authority, dated within 10 days before the Closing Date, certifying that the
records of such state regarding the Company reflect neither a certificate of
dissolution, a court order declaring dissolution, a merger or consolidation
which terminated its existence, nor suspension of its powers, rights and
privileges, and that in accordance with the records of such state, the Company
is authorized to exercise all of its powers, rights and privileges in such
state.
(n) The Seller shall have delivered to the Purchaser the
certificates representing the SunStar Shares, duly executed for transfer or
accompanied by duly executed stock powers.
(o) An employment agreement between the Company and Xxxx
Xxxxx, substantially in the form of Exhibit D hereto, shall have been executed
between the Purchaser and Mr. Hobko.
(p) Confidentiality and non-disclosure agreements between each
of the Company's employees and the Company shall have been executed by each such
employee and the Company.
(q) The Seller and the Company shall have delivered such other
documents, opinions and certificates as are reasonably requested by counsel for
the Purchaser.
(r) The Finova Consent (as defined in Section 15 hereof) shall
have been obtained.
(ii) In the event Purchaser agrees to close the transactions
contemplated by this Agreement without Seller having obtained certain required
consents and approvals, including those relating to the First USA Merchant
Agreement, the Learning Company Distribution Agreement, the UniDial Agent
Agreement and the Planet Direct Internet Service Provider Agreement, the Seller
agrees to use its best efforts to obtain such consents promptly after the
Closing and to indemnify Purchaser and hold it harmless from any damage or loss
resulting from Seller's failure to obtain such consents prior to the Closing
(the "Consent Indemnification").
8. Conditions Precedent to the Seller's Obligation to Close. All
obligations of the Seller to close under this Agreement are subject to the
fulfillment of each of the following conditions prior to or at the Closing:
(a) The representations and warranties made by the Purchaser
contained herein shall be true and correct at and as of
28
the time of the Closing, with the same effect as though such representations and
warranties were made at and as of such time, except in respects not materially
adverse to the Purchaser. As used herein, the phrase "in respects not materially
adverse to the Purchaser" shall mean in respects not materially adverse to the
overall financial condition or business of the Purchaser.
(b) The Purchaser, on or before the Closing, shall have
performed and complied with all terms, covenants and conditions required by this
Agreement to be performed or complied with at or before the Closing.
(c) The Purchaser shall have delivered to the Seller a
certificate, dated the Closing Date and signed by an appropriate officer of the
Purchaser, certifying as to the fulfillment of the conditions set forth in
Subsections (a) and (b) of this Section 8.
(d) The Seller shall have been furnished with an opinion,
dated the Closing Date, of Xxxxxxxx Xxxxx Xxxxxxxx Xxxx & Ballon LLP, counsel to
the Purchaser, in substantially the form of Exhibit E hereto.
(e) No order, ruling or regulation (general or specific) of
any governmental authority shall have been issued or promulgated, and no
judicial or administrative action shall have been taken and shall have not been
rescinded, canceled or reversed, which action has the purpose or would have the
effect of prohibiting the transactions herein contemplated or the effect of
interfering with or materially affecting the right or ability of any party to
this Agreement to consummate any of the transactions contemplated hereby.
(f) All consents and approvals, and consents and approvals of
all regulatory agencies or other authorities having jurisdiction over the
transactions contemplated by this Agreement, shall have been procured, and all
other requirements prescribed by law shall have been satisfied.
(g) No suit, action or other proceeding shall be pending or
directly threatened by any federal or state governmental agency having
jurisdiction or authority over either the Seller or the Purchaser in which it is
sought to restrain or prohibit consummation of the transactions contemplated by
this Agreement.
9. Access.
(a) Prior to the Closing, the Seller and/or the Company will
give to the Purchaser and Purchaser's counsel, accountant or other
representatives full access (during normal business hours) to all properties,
documents, contracts, books, records and other data of the Business; provided,
however, that all
29
information received by the Purchaser, Purchaser's counsel, accountants or other
representatives shall be held wholly confidential by each of them and that in
taking advantage of such access, none of them shall interfere with the operation
of the Business, and, provided further, that if the transaction contemplated
hereby shall not be consummated, all data of every kind and nature and all
copies of documents taken by any of said persons shall upon request be returned
to the Seller and not otherwise utilized by the Purchaser.
(b) From and after the Closing, the Seller will give to the
Purchaser, Purchaser's counsel, accountants or other representatives full access
(during normal business hours) to all books and records of the Seller relating
to the Business with respect to the period ending on the Closing Date.
10. Affirmative Covenants of the Seller. Except as otherwise
consented to by the Purchaser, the Seller covenants that, throughout the period
commencing on the date hereof and ending on the Closing Date, the Company will:
(a) Conduct of Business. Conduct the Business only in the ordinary
course, consistent with prior practice;
(b) Maintenance of Property. Maintain and keep the material
properties, machinery and equipment of the Business in as good repair and
condition in all material respects as at present, except for depreciation due to
ordinary wear and tear;
(c) Insurance. Maintain in full force and effect insurance at least
as great as the amounts and comparable in scope of coverage to that now
maintained by the Business as described on Schedule 5(o) hereto;
(d) Performance of Obligations. Consistent with past business
practices, perform all material obligations under material contracts, leases and
documents relating to or affecting the material assets, properties and business
of the Business;
(e) Maintenance and Preservation of Business. Consistent with its
past practices, use his best efforts to maintain and preserve the Business;
(f) Compliance with Laws. Comply with and perform all material
obligations and duties imposed upon it by all federal and state laws and all
rules, regulations and orders imposed by federal or state governmental
authorities;
(g) Notice of Certain Events. By written notice to the Purchaser,
notify the Purchaser of the commencement of any litigation against the Company
or the Business involving an amount exceeding $5,000 in each instance or of the
existence of adverse
30
business conditions threatening the continued, normal business operations of the
Business;
(h) Satisfaction of Conditions. Use its best efforts to assure, as
soon as is reasonably practicable, the satisfaction of the conditions to the
effectiveness of the transactions contemplated in this Agreement and grant
Purchaser reasonable access to the Business and the Premises to permit
familiarization therewith; and
(i) Good Standing. Maintain the Company's existence as a corporation
validly existing and in good standing under the laws of the States of Arizona
and Florida.
11. Negative Covenants of the Seller. The Seller covenants that,
throughout the period commencing on the date hereof and ending on the Closing
Date, unless the Purchaser shall have otherwise consented in writing, the
Company will not:
(a) Material Commitments. Enter into or institute any material
Commitment or any material employment contract or other agreement not in the
normal course of the Business or, except as required by applicable law or
regulation, renew, amend or modify any such contract or agreement now in
existence; and
(b) Inconsistent Agreements. Enter into any agreement,
understanding or commitment, written or oral, with any other person which is in
any material respect inconsistent with the obligations of the Company or the
Seller arising under this Agreement.
12. Affirmative Covenants of the Purchaser. (i) Except as otherwise
consented to by the Seller, the Purchaser covenants that, throughout the period
commencing on the date hereof and ending on the Closing Date, it will:
(a) Good Standing. Maintain its existence as a corporation validly
existing and in good standing under the laws of the State of Delaware;
(b) Satisfaction of Conditions. Use its best efforts to assure, as
soon as is reasonably practicable, the satisfaction of the conditions to the
effectiveness of the transactions contemplated in this Agreement;
(c) Maintenance and Preservation of Business. Use its best efforts
to maintain and preserve its business; and
(d) Compliance with Laws. Comply with and perform all material
obligations and duties imposed upon it by all federal and state laws and all
rules, regulations and orders imposed by federal
31
or state governmental authorities, except in respects not materially adverse to
its financial condition or business.
(ii) The Purchaser covenants that it shall file the NASDAQ
Listing Application with the NASD on or before June 30, 1999.
13. Termination.
(a) Grounds for Termination. Notwithstanding anything in this
Agreement to the contrary, this Agreement may be terminated by written notice of
termination at any time before the Closing Date only as follows:
(i) by mutual consent of the Seller and the Purchaser;
(ii) by the nonbreaching party hereto, if (A) the other
party shall have (1) misstated any representation or been in breach of any
warranty contained herein and such misrepresentation or warranty has not been
cured within 10 days after notice from the non-breaching party, or (2) been in
breach of any covenant, undertaking or restriction contained herein and such
breach has not been cured within 10 days after notice from the non-breaching
party, or (b) a condition to Closing applicable to it hereunder has not been
satisfied by the Closing Date (or such earlier date as specified herein) and has
not been waived in writing by such party; or
(iii) by Seller or Purchaser if the Finova Consent has
not been obtained as provided in Section 15 hereof.
(b) Consequences of Termination. In the event of the
termination and abandonment hereof pursuant to the provisions of this Section
13, this Agreement shall become void and have no effect, without any liability
on the part of any of the partners, directors, officers or stockholders of the
terminating party, except for liability of any party then in breach, which shall
not be affected by such termination.
14. Deliveries.
(a) The Seller. At the Closing, the Seller shall deliver to
the Purchaser the following, duly executed by the Seller (unless otherwise
indicated):
(i) an officer's certificate of the Seller, as required
under Section 7(e) hereof;
(ii) the opinion required under Section 7(f) hereof;
32
(iii) original stock certificates for the SunStar
Shares;
(iv) the pay-off letter concerning the TTI Obligation;
(v) executed employment agreement between the Purchaser
and Xxxx Xxxxx; and
(vi) executed confidentiality and nondisclosure
agreements between the Company and each of its employees.
(b) Purchaser. At the Closing, the Purchaser shall deliver to
the Seller the following, duly authorized and executed by the Purchaser:
(i) an officer's certificate of the Purchaser, as
required under Section 8(c) hereof;
(ii) $1,000 of the cash consideration as set forth in
Section 4(a)(ii) hereof;
(iii) the Registration Rights Agreement; and
(iv) the opinion required under Section 8(d) hereof.
(c) Purchaser. On the Aquis Shares Delivery Date, the
Purchaser shall deliver to the Seller original stock certificates for the Aquis
Group Shares in accordance with Section 4(ii) hereof, bearing the appropriate
legend.
(d) Purchaser. On the Cash Consideration Delivery Date, the
Purchaser shall deliver the remainder of the cash consideration as set forth in
Section 4(a)(ii) hereof.
(e) Further Assurances. At any time and from time to time
after the Closing, at the request of any party and without further
consideration, the other party will execute and deliver such other instruments
of sale, transfer, conveyance, assignment and confirmation and take such action
as the requesting party may reasonably deem necessary or desirable in order to
more effectively transfer, convey and assign the properties transferred
hereunder and to effectuate the terms hereof, including, without limitation, a
name change certificate to be executed by the Seller for filing with the
Secretary of State of Arizona.
15. Consent of Lender. The Seller and the Purchaser hereby
acknowledge and agree that this Agreement and the transactions contemplated
hereunder are subject to and contingent upon the written consent of FINOVA
Capital Corporation ("FINOVA Consent"), the senior lender under a credit
facility with
33
Purchaser. Following execution of this Agreement by the parties, should
Purchaser be unable to obtain FINOVA Consent for any reason within sixty (60)
days from the date hereof, this Agreement may be terminated by Seller or
Purchaser pursuant to the terms of Section 13.
16. Expenses. The Purchaser and the Seller will each pay their
respective counsel, accountants and other expenses incurred in connection with
the negotiation and consummation of the transactions contemplated herein.
17. Nondisclosure of Confidential Information. The Purchaser, the
Company and the Seller each agree that if for any reason whatsoever the
transactions contemplated by this Agreement shall not be consummated, all
information disclosed to the other parties pursuant to Section 9 or otherwise
shall remain confidential and each party shall not use or furnish or divulge the
same to any other person.
18. Survival of Representations and Warranties.
(a) All representations, covenants and warranties made by the
Seller and the Purchaser under this Agreement in connection with the
transactions contemplated hereby or in any Exhibit, Schedule, certificate, list
or other instrument delivered pursuant hereto shall survive the Closing for a
period of one (1) year.
(b) Notwithstanding any right of the Purchaser to fully
investigate the affairs of the Company relating to the Business and
notwithstanding any knowledge of facts determined or determinable by the
Purchaser pursuant to such investigation or right of investigation, the
Purchaser has the right to rely fully upon the representations, warranties,
covenants and agreements of the Seller and the Company contained in this
Agreement or in any document delivered or to be delivered pursuant to this
Agreement by the Seller or any of the Seller's representatives or the Company
(including, but not limited to, any accountant or attorney representing the
Seller or the Company), in connection with the transactions contemplated by this
Agreement. Each warranty, representation, agreement and covenant contained
herein is independent of all warranties, representations, agreements and
covenants contained herein or in any Exhibit, Schedule, certificate, list or
other instrument or documents (whether or not covering identical or related
subject matter) and must be independently and separately complied with and
satisfied.
19. Indemnification.
(a) The Seller hereby indemnifies the Purchaser and agrees to
hold the Purchaser harmless from and against any and all damages, losses, costs
and expenses (including reasonable counsel
34
fees and expenses in connection with the contest of any claim) paid or incurred
by the Purchaser and arising out of the Consent Indemnification or any and all
inaccurate representations or breaches of covenant or warranty made by the
Seller under this Agreement in connection with the transactions contemplated
hereby or in any Exhibit, Schedule, certificate, list or other instrument
delivered pursuant hereto.
The Purchaser hereby indemnifies the Seller and agrees to hold the
Seller harmless from and against any and all damages, losses, costs and expenses
(including counsel fees and expenses in connection with the contest of any
claim) paid or incurred by the Seller and arising out of any and all inaccurate
representations or breach of covenant or warranty made by the Purchaser under
this Agreement in connection with the transactions contemplated hereby or in any
Exhibit, Schedule, certificate, list or other instrument delivered pursuant
hereto. The Purchaser shall have the right (but not the obligation) in enforcing
this Section 19(a) first to obtain reimbursement in satisfaction of any of the
Seller's obligations from the Aquis Group Shares held in escrow pursuant to the
Escrow Agreement, in accordance with the terms of such Escrow Agreement.
(b) Promptly after receipt by an indemnified party of notice
of the commencement of any action asserting a claim based upon any cause
enumerated herein, the indemnified party shall, if it claims the benefits of
indemnification pursuant to Section 19(a) with respect to such action, notify
the indemnifying party of the commencement thereof. Upon receipt of such notice,
the indemnifying party shall have the option of either assuming the defense of
such action (and the cost thereof) with counsel reasonably satisfactory to both
the indemnified and the indemnifying parties or participating in the defense of
such action at the sole expense, however, of the indemnifying party. In the
event of the indemnifying party's assumption of the defense of such action,
counsel selected by the indemnified party may at the election of the indemnified
party participate in any such defense, at the sole expense, however, of the
indemnified party. No settlement or compromise to be paid by the indemnifying
party shall be entered into without the written consent of the indemnifying
party, which consent shall not be unreasonably withheld.
(c) The indemnity provided in Section 19(a) shall be limited
in time, in that no party may assert a claim in respect of such indemnity at any
time after one (1) year after the Closing Date.
(d) Notwithstanding anything herein to the contrary, (i) no
party shall assert a claim for indemnity pursuant to Section 19(a) unless the
aggregate of all such claims by such indemnified party against such indemnifying
party shall exceed $30,000, in which event the indemnifying party's obligation
shall apply to all indemnified losses and (ii) the total amount for which
35
the Seller shall be liable shall not exceed the Purchase Price. For purposes of
this Section 19, the value per share of Aquis Group Shares included in the
Purchase Price shall equal the closing bid price of the common stock of Aquis
Group on the Closing Date.
20. Conflict of Interest. Each of the parties recognizes that Xxxx
Xxxxxxxx, a member of the Seller, is a director and a shareholder of the
Purchaser and, as such, is fully informed of the business and management
decisions of both parties. Notwithstanding the foregoing, in entering into this
Agreement, neither party has relied upon representations made by Xxxx Xxxxxxxx
and each party has relied solely upon its own due diligence and the
representations contained in this Agreement.
21. Notices. All notices and communications shall be in writing and
delivered as follows (or to such other address as any party may furnish to the
other in writing in accordance with the terms of this Section):
If to the Purchaser:
Aquis Communications, Inc.
0000X Xxxxx 00
Xxxxx 000
Xxxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxx X. Xxxxxxxx, President
with a copy to:
Xxxxxxxx Xxxxx Xxxxxxxx Xxxx & Ballon LLP
000 0xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxxxx, Esq.
If to the Company or the Seller:
SunStar Communications, Inc.
0000 Xxxx Xxxxxxx Xxxx.
Xxxxx 000
Xxxxx, Xxxxxxx 00000
Attn: Xxxx Xxxxx, President
with a copy to:
Xxxxx & Xxxxxx, L.L.P.
Xxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxx Xxxxxxxx, Esq.
Any notices and communications pursuant to this Agreement, shall be sent by
hand, by registered or certified first-class mail, postage prepaid, or by such
other form of delivery as shall provide the
36
sender with documentary evidence of delivery, and shall be deemed to be
delivered when sent.
22. Miscellaneous.
(a) Severability. If any term or provision of this Agreement
shall to any extent be invalid or unenforceable, the remainder of this Agreement
shall not be affected thereby, and each term and provision of the Agreement
shall be valid and enforced to the fullest extent permitted by law.
(b) Assignment. Neither the Purchaser nor the Seller may
assign this Agreement or any rights hereunder prior to the Closing without the
prior written consent of the other party; provided, however, that the Purchaser
may assign this Agreement or any of its rights hereunder to Aquis Group or any
subsidiary thereof. After the Closing, the terms, provisions, covenants and
conditions of this Agreement shall bind and benefit the parties hereto and their
respective heirs, successors, personal representatives and assigns.
(c) Counterparts. This Agreement may be executed in two or
more counterparts, each of which, when so executed and delivered, shall be an
original instrument, but such counterparts, together, shall constitute a single
agreement.
(d) No Waiver. No waiver of any breach or default under this
Agreement shall be considered valid unless in writing and signed by the party
giving such waiver, and no such waiver shall be deemed a waiver of any
contemporaneous or subsequent breach or default of the same or similar nature.
Any party hereto may, at or before the Closing, waive any conditions to its
obligations hereunder which are not fulfilled.
(e) Entire Agreement; Amendments. This Agreement, including
the Exhibits and Schedules referred to herein which are a part hereof, contains
the entire understanding of the parties hereto with respect to the subject
matter contained herein and may be amended only by a written instrument executed
by the Seller and the Purchaser or their respective successors or assigns. There
are no restrictions, promises, warranties, covenants or undertakings other than
those expressly set forth herein.
(f) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without
reference to the choice of law doctrine of such state.
(g) Headings. Headings are inserted for convenience and do not
form part of the Agreement.
37
(h) Public Announcements. No party shall issue a press
release, make publicly available any document or make any public announcement
concerning this Agreement, the terms hereof or the transactions contemplated
hereby without obtaining the prior written consent of the other party, which
consent shall not be unreasonably withheld or delayed, except to the extent that
such party, or a publicly held parent company of such party, is required to
issue such a press release, to make available such a document or to make such a
public statement under the rules of a stock exchange (or the NASD) on which such
party's or such party's parent company's securities are listed, or pursuant to
any applicable law or regulation, in which case such party shall provide prompt
notice of such disclosure to the other party.
(i) Arbitration. In the event that there shall be a dispute
among the parties arising out of or relating to this Agreement, including,
without limitation, the indemnities provided in Article 19, or the breach
thereof, the parties agree that such dispute shall be resolved by final and
binding arbitration before one arbitrator if such dispute involves an amount of
less than $150,000 and if such dispute involves an amount equal to or in excess
of $150,000 then before a panel of three arbitrators, in either case, in New
York, New York administered by the American Arbitration Association ("AAA"), in
accordance with AAA's commercial rules of practice then in effect or such other
procedures as the parties may agree to prior to the Closing. Any award issued as
a result of such arbitration shall be final and binding between the parties
thereto, and shall be enforceable by any court having jurisdiction over the
party against whom enforcement is sought. The arbitrator shall have the
authority in his or her discretion to award to the prevailing party the fees and
expenses of such arbitration (including reasonable attorneys' fees) or any
action to enforce an arbitration award.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Purchaser, the Company and the Seller sign
this Agreement as of the day and year first above written.
AQUIS COMMUNICATIONS, INC.
By: /s/ XXXX X. XXXXXXXX
---------------------------------
Xxxx X. Xxxxxxxx, President
SUNSTAR COMMUNICATIONS, INC.
By: /s/ XXXX X. XXXXXX
---------------------------------
Name: Xxxx X. Xxxxxx
---------------------------------
Title: PRESIDENT
---------------------------------
SUNSTAR ONE, L.L.C.
By: /s/ XXXX X. XXXXXX
---------------------------------
Name: Xxxx X. Xxxxxx
---------------------------------
Title: MANAGER
---------------------------------
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