EXHIBIT 2
STOCK PURCHASE AGREEMENT
DATED AS OF
DECEMBER 3, 2002
BY AND BETWEEN
FLORIDA EAST COAST INDUSTRIES, INC.
AND
ODYSSEY TELECORP, INC
TABLE OF CONTENTS
DESCRIPTION PAGE
ARTICLE 1 - DEFINITIONS.......................................................1
ARTICLE 2 - PURCHASE AND SALE OF SHARES.......................................7
Section 2.1 Closing.................................................7
Section 2.2 Purchase and Sale of Shares.............................7
Section 2.3 Purchase Price..........................................7
Section 2.4 Earnout Amount: Audit Rights of Seller.................7
Section 2.5 Bank Account Matters....................................8
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES OF SELLER..........................9
Section 3.1 Organization............................................9
Section 3.2 Authorization of Transaction............................9
Section 3.3 Seller Noncontravention.................................9
Section 3.4 Financial Statements....................................9
Section 3.5 Capitalization.........................................10
Section 3.6 Absence of Changes.....................................10
Section 3.7 Tax Matters............................................11
Section 3.8 Contracts..............................................12
Section 3.9 Real Property..........................................13
Section 3.10 Intellectual Property..................................13
Section 3.11 Litigation.............................................13
Section 3.12 Labor and Employment...................................13
Section 3.13 Legal Compliance.......................................14
Section 3.14 Permits................................................14
Section 3.15 Brokers' Fees..........................................14
Section 3.16 Bank Accounts..........................................14
Section 3.17 Intercompany Obligation................................14
Section 3.18 Limitation on Warranties...............................14
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES OF PURCHASER......................15
Section 4.1 Organization...........................................15
Section 4.2 Authorization of Transaction...........................15
Section 4.3 Purchaser Noncontravention.............................15
Section 4.4 Litigation.............................................15
Section 4.5 Availability of Funds..................................15
Section 4.6 Brokers' Fees..........................................15
Section 4.7 Investment Intent......................................15
Section 4.8 Plan of Purchaser......................................15
ARTICLE 5 - SECTION 338(H)(10) ELECTION.....................................16
Section 5.1 Section 338(h)(10) Election............................16
ARTICLE 6 - POST-CLOSING COVENANTS...........................................16
Section 6.1 General................................................16
Section 6.2 Litigation Support.....................................16
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Section 6.3 Agreements Regarding Tax Matters.......................16
Section 6.4 Records and Documents..................................18
Section 6.5 Use of Seller's Trademarks.............................18
Section 6.6 Non-Competition........................................18
Section 6.7 Non-Solicitation of Employees..........................19
Section 6.8 Employee Benefits Matters..............................19
Section 6.9 Insurance Matters......................................21
Section 6.10 Guaranteed Obligations.................................22
Section 6.11 Series A Preferred Stock...............................22
Section 6.12 EPIK Latin America.....................................22
Section 6.13 360networks Claim......................................23
Section 6.13 Amendment to FECR License..............................23
ARTICLE 7 - CLOSING CONDITIONS...............................................23
Section 7.1 Conditions to Obligation of Purchaser..................23
Section 7.2 Conditions to Obligation of Seller.....................24
ARTICLE 8 - REMEDIES FOR BREACHES OF THIS AGREEMENT..........................25
Section 8.1 Indemnification by Seller..............................25
Section 8.2 Indemnification by Purchaser...........................26
Section 8.3 Procedure for Indemnification..........................26
Section 8.4 Certain Limitations....................................27
Section 8.5 Certain Benefits.......................................27
Section 8.6 Treatment of Indemnity Payments........................27
ARTICLE 9 - MISCELLANEOUS....................................................27
Section 9.1 Survival of Obligations................................27
Section 9.2 Public Announcements...................................27
Section 9.3 Expenses...............................................27
Section 9.4 Disclosure Schedules...................................28
Section 9.5 Specific Performance...................................28
Section 9.6 Amendment; Successors and Assigns......................28
Section 9.7 Waiver.................................................28
Section 9.8 Severability...........................................29
Section 9.9 Counterparts...........................................29
Section 9.10 Descriptive Headings...................................29
Section 9.11 Notices................................................29
Section 9.12 No Third-Party Beneficiaries...........................30
Section 9.13 Force Majeure..........................................30
Section 9.14 Confidentiality........................................30
Section 9.15 Entire Agreement.......................................31
Section 9.16 Construction...........................................31
Section 9.17 Schedules..............................................31
Section 9.18 Consent to Jurisdiction................................31
Section 9.19 Governing Law..........................................31
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SCHEDULES
Schedule 3.4 Financial Statements
Schedule 3.5 Capitalization
Schedule 3.6 Absence of Changes
Schedule 3.7 Tax Matters
Schedule 3.8 Contracts
Schedule 3.9 Real Property
Schedule 3.10 Intellectual Property
Schedule 3.11 Litigation
Schedule 3.12 Labor and Employment
Schedule 3.16 Bank Accounts
Schedule 6.3 Certain Pre-Closing Taxes Paid by Purchaser
Schedule 6.9 Transition Insurance Policies
Schedule 6.10 Guaranteed Obligations
EXHIBITS
Exhibit A Form of Escrow Agreement
Exhibit B Form of Registration Rights Agreement
Exhibit C Form of Stock Purchase Warrant
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT, dated effective as of December 3, 2002,
is made by and between Florida East Coast Industries, Inc., a Florida
corporation (the "Seller"), and Odyssey Telecorp, Inc., a Delaware corporation
(the "Purchaser").
RECITALS
WHEREAS, this Agreement contemplates a transaction in which Purchaser
will acquire, in exchange for cash, all of the issued and outstanding shares of
Class A common stock, $.10 par value per share (the "Shares"), of EPIK
Communications Incorporated, a Delaware corporation (the "Company").
WHEREAS, the Company has issued and outstanding shares of Series A
preferred stock, $.10 par value per share ("Series A Preferred Stock"), which
shares of Series A Preferred Stock shall be redeemed, retired or cancelled at or
prior to the closing of the stock purchase transaction contemplated by this
Agreement.
WHEREAS, Seller owns all of the Shares, which shares shall at the time
of the closing of the transactions contemplated by this Agreement constitute all
of the issued and outstanding shares of capital stock of the Company.
WHEREAS, Purchaser desires to purchase and acquire from Seller, and
Seller desires to sell and transfer to Purchaser, the Shares, on the terms and
subject to the conditions set forth in this Agreement.
NOW THEREFORE, in consideration of the mutual agreements contained
herein, and for other good and valuable consideration, the value, receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE 1
DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
set forth below:
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act of 1934, as amended.
"Affiliated Group" has the meaning set forth in Section 1502 of the
Code (or any analogous combined, consolidated or unitary group defined under any
state, local or foreign income Tax Law of which the Company is or has been a
member).
"Agreement" means this Stock Purchase Agreement, as the same may be
amended from time to time in accordance with its terms.
"Allocation Statement" has the meaning set forth in Section 5.6(a).
"Arbiter" has the meaning set forth in Section 2.4(c).
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"Asset Transfer Agreement" means that Asset Transfer Agreement dated as
of the Closing Date by and between the Company and EPIK Latin America.
"Bank Accounts" means those bank accounts of the Company set forth on
Schedule 3.16.
"Cash Purchase Price" has the meaning set forth in Section 2.3.
"Claims" has the meaning set forth in Section 8.2(a).
"Closing" has the meaning set forth in Section 2.1.
"Closing Date" has the meaning set forth in Section 2.1.
"Closing Time" has the meaning set forth in Section 2.1.
"Code" means the Internal Revenue Code of 1986, as amended (together
with the rules and regulations thereunder).
"Company" has the meaning set forth in the Recitals.
"Company Claims" has the meaning set forth in Section 6.9.
"Company Contracts" has the meaning set forth in Section 3.8(a).
"Company Intellectual Property" means all patents, patent applications,
licenses, trademarks, trade names, domain names, computer software, data,
copyrights, documentation, trade secrets, confidential business information
(including formulas, compositions, inventions, manufacturing and production
processes and techniques, technical drawings and designs, technical data,
customer and supplier data, pricing and cost information), associated goodwill,
all results and other information related to any research and development
project, including all rights thereunder, remedies against infringement and
rights to protection of interests therein under the Laws of all jurisdictions,
in each case to the extent legally assignable and used exclusively by the
Company or the Subsidiaries as of the Closing Date.
"Company Liabilities" has the meaning set forth in Section 6.9(d).
"Competitive Business" means the business of serving as a "carriers'
carrier" providing wholesale bandwidth, IP, waves and dark fiber (and related
collocation) to competitive local exchange carriers, Internet service providers,
long distance companies and wireless and international telecom services
providers in Florida and Georgia; provided, however, that the term "Competitive
Business" shall not include any telecommunications-related activities of the
type engaged in by Seller or any of its other Affiliates (other than the
Company) that are comparable to activities which are or have been undertaken by
Seller or any of its other Affiliates on or prior to the date hereof, as well as
(i) leasing or selling conduit to telecommunications companies and entering into
agreements with such companies to grant the access and use of certain property
of Seller or any of its other Affiliates (other than the Company), including,
without limitation, the property of Florida East Coast Railway, LLC, (ii) using,
leasing or selling dark fiber owned by Seller or any of its other Affiliates
(other than the Company) immediately after the Closing, and
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(iii) the provision of private network or other similar services related to the
internal telecommunications or data transmission requirements of Seller and its
other Affiliates.
"Credit and Pledge Agreement" means the Credit and Pledge Agreement,
dated March 22, 2001, among Seller, the banks parties thereto, Bank of America,
N.A., as administrative agent, First Union National Bank, as syndication agent,
and SunTrust Bank, as documentation agent, as amended as of November 9, 2001 and
as the same may be further amended from time to time.
"Deductible" has the meaning set forth in Section 8.1(b).
"Designated Auditor" means that auditor designated in Exhibit A to the
Escrow Agreement.
"Disclosure Schedules" means, collectively, the various Schedules
referred to in this Agreement.
"Earnout Amount" has the meaning set forth in Section 2.3.
"Earnout Objection Notice" has the meaning set forth in Section 2.4(c).
"Employee Welfare Benefit Plan" has the meaning set forth in Section
3(1) of ERISA, without regard to the exclusions described in DOL Reg. Section
2510-3.1.
"Employees" means collectively, all of (a) the employees of the Company
and its Subsidiaries who are employed as of the Closing Date, and (b) the former
employees of the Company and its Subsidiaries terminated prior to the Closing
Date to whom the Company, Seller or any of their respective Affiliates has a
remaining obligation to provide a benefit or compensation.
"EPIK Latin America" means EPIK Latin America, Inc., a Florida
corporation and a wholly owned subsidiary of Seller as of the Closing.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended (together with the rules and regulations thereunder).
"Escrow Agreement" means the Escrow Agreement dated as of the Closing
Date by and among the Seller, the Purchaser and Wachovia Bank NA, as escrow
agent, attached hereto as Exhibit A.
"FCC" means the U.S. Federal Communications Commission.
"FECR" means Florida East Coast Railway, LLC, a Florida limited
liability company and wholly owned subsidiary of Seller.
"Financial Statements" has the meaning set forth in Section 3.4(a).
"Force Majeure Event" has the meaning set forth in Section 9.13.
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"GAAP" means United States generally accepted accounting principles, as
in effect as of the date of this Agreement.
"Governmental Entity" means any government or any agency, bureau,
board, commission, court, department, official, political subdivision, tribunal
or other agency or instrumentality of any government, whether federal, state or
local, in the United States.
"Indemnitee" has the meaning set forth in Section 8.3.
"Indemnitor" has the meaning set forth in Section 8.3.
"Independent Accounting Firm" has the meaning set forth in Section
2.4(e).
"Intercompany Obligation" means the aggregate amounts payable to Seller
or any Affiliates by the Company and or the Company's Subsidiaries as of the
Closing Date, excluding (i) post-Closing obligations to Florida East Coast
Railway, L.L.C. under blanket license agreements with the Company with respect
to right-of-way crossings and under indefeasible rights of use agreements with
the Company, and (ii) other post-Closing obligations to the Seller or its
Affiliates expressly contemplated by this Agreement or any post-Closing
transition services agreements.
"Interim Balance Sheet" has the meaning set forth in Section 3.4(a).
"Interim Financial Statements" has the meaning set forth in Section
3.4(a).
"International Section 214 Authorization" means the International
Telecommunications Certificate (ITC-214-20010810-00427) granted to the Company
by the FCC and authorizing, as of September 7, 2001, the provision of global or
limited global facilities-based and resale service.
"IP" means Internet protocol, as such term is commonly understood and
used in the telecommunications industry.
"IRS" means the United States Internal Revenue Service or any successor
thereto.
"Laws" means any applicable federal, state or local, law, statute,
rule, regulation, ordinance, permit, order, writ, injunction, judgment or
decree.
"Lien" means any lien, pledge, security interest, charge, claim or
other encumbrance.
"Material Adverse Effect" means an effect on the Company's business or
assets which is shown to have had a measurable, material, and adverse impact on
the operational results or financial condition of the Company and the
Subsidiaries taken as a whole, or the ability of Seller to consummate the
transactions contemplated hereby; provided, however, that the term "Material
Adverse Effect" shall not include any change in, or effect on, the Company
directly or indirectly arising out of or attributable to (a) any change in Law,
(b) changes or effects that generally affect (i) the industry in which the
Company operates, or (ii) any of the markets for wholesale bandwidth, waves, IP
services, collocation, hosting or dark fiber, (c) the initiation by any Person
other than the Company or the Subsidiaries of proceedings under Chapter 11 of
the United States
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Bankruptcy Code or other similar statutes or laws or any adverse developments
related to any such proceeding, (d) changes in general economic, regulatory or
political conditions, or (e) changes arising out of, or attributable to, the
announcement of the execution of this Agreement, the consummation of the
transactions contemplated hereby or the identity of Purchaser or effects caused
by or under the responsibility of Purchaser.
"Net Cash Revenues" shall mean for the relevant period gross
contractual revenues received from the Company's customer base existing as of
the Closing Date (including any revenues related to the renewal or extension,
with respect to quantity or geographic scope, of services currently provided on
the Company's network (as in existence on the Closing Date) provided to such
customers or their Affiliates following the Closing), less the cash cost of any
directly attributable third party circuits and interconnect charges necessary to
provide services to such customers.
"Permits" means all licenses, permits, franchises, certificates of
authority or orders, or any waiver of the foregoing, issued by any Governmental
Entity.
"Person" means any individual, partnership, corporation, limited
liability company, association, joint stock company, trust, joint venture,
unincorporated organization or Governmental Entity.
"Post-Closing Periods" shall mean that portion of any taxable period
occurring and ending after the Closing Date.
"Pre-Closing Periods" shall mean that portion of any taxable period
occurring or ending before the Closing Date.
"Purchase Price" has the meaning set forth in Section 2.3.
"Purchaser" has the meaning set forth in the Preamble.
"Purchaser Claims" has the meaning set forth in Section 8.1(a).
"Purchaser Indemnified Party" has the meaning set forth in Section
8.1(a).
"Registration Rights Agreement" means the Registration Rights Agreement
dated as of the Closing Date by and between the Purchaser and the Seller,
attached hereto as Exhibit B.
"Required Account Balance" has the meaning set forth in Section 2.5(a).
"Schedule" means, unless the context otherwise requires, the referenced
Schedule included in the Disclosure Schedules.
"SEC" means the U.S. Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller" has the meaning set forth in the Preamble.
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"Seller Claims" has the meaning set forth in Section 8.2(a).
"Seller Parties" means Seller, the Company and the Subsidiaries.
"Seller Indemnified Parties" has the meaning set forth in Section
8.2(a).
"Seller's Insurance Policies" has the meaning set forth in Section
6.9(d).
"Seller's Knowledge" means the actual knowledge of E. Xxxxx Xxxxxxx,
Xxxxxx X. Xxxxx, Xxx Xxxxxxxx, Xxxxxxxx Xxxxxxx, Xxx Xxxxxxx or Xxx Xxxxxxxx.
"Series A Preferred Stock" has the meaning set forth in the Recitals.
"Shares" has the meaning set forth in the Recitals.
"Stock Purchase Warrant" means the Stock Purchase Warrant dated as of
the Closing Date issued by the Purchaser to the Seller, attached hereto as
Exhibit C.
"Subsidiaries" means (a) EPIK Leasing Company, a Delaware corporation
and a wholly owned subsidiary of the Company, (b) EPIK NAP, Inc., a Delaware
corporation and a wholly owned subsidiary of the Company, (c) EPIK Chile, S.A.,
a Chilean corporation and subsidiary of the Company, and (d) EPIK Venezuela,
C.A., a Venezuelan corporation and subsidiary of the Company.
"Tax Authority" means any governmental authority having the power to
regulate, impose or collect Taxes, including, but not limited to, the IRS and
any similar state agency or department of revenue.
"Tax Controversy" has the meaning set forth in Section 6.3(f).
"Tax Returns" means any returns, forms, declarations, reports, claims
for refund, information returns or other documents (including any related or
supporting schedules, statements or information) filed or required to be filed
in connection with the determination, assessment, collection, payment or refund
of any Taxes of the Affiliated Group, any members of the Affiliated Group, the
Company or any Affiliates of such parties or the administration of any Laws
relating to any Taxes.
"Taxes" means all federal, state, county, municipal, local or foreign
income, gross receipts, franchise, estimated, alternative minimum, add-on
minimum, sales, use, transfer, registration, value added, excise, natural
resources, severance, stamp, occupation, premium, windfall profit,
environmental, customs, duties, real property, personal property, intangibles,
capital stock, social security, unemployment, disability, payroll, license,
employee or other withholding, or other tax, of any kind whatsoever, including
any interest, penalties or additions to tax or additional amounts in respect to
the foregoing, including any transferee or secondary liability for a tax and any
liability assumed by agreement or arising as a result of being or ceasing to be
a member of any Affiliated Group, or being included or required to be included
in any Tax Return relating thereto.
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"Treasury Regulations" shall mean all final, temporary and proposed
treasury regulations promulgated under the Code.
"Year-End Financial Statements" has the meaning set forth in Section
3.4.
ARTICLE 2
PURCHASE AND SALE OF SHARES
Section 2.1 Closing. Unless this Agreement has been terminated in
accordance with its terms, or unless another date, time or place is agreed to in
writing by the parties, the closing of the transactions contemplated herein (the
"Closing") will take place at 2:00 p.m., local time, on December 3, 2002, (the
"Closing Date"), at the offices of Jenner & Block, LLC, 000 Xxxxxxxxxx Xxxxxx,
XX, Xxxxxxxxxx, XX 00000. The actual time on the Closing Date at which the
Closing occurs shall be referred to as the "Closing Time".
Section 2.2 Purchase and Sale of Shares. On the terms and subject to
the conditions set forth in this Agreement, at the Closing, Purchaser will
purchase from Seller, and Seller will sell, transfer, assign, convey and deliver
to Purchaser, all of Seller's right, title and interest in and to the Shares.
Section 2.3 Purchase Price. On the terms and subject to the
conditions set forth in this Agreement, effective as of the Closing, Purchaser
agrees that it will pay Seller: (a) cash in the amount of Five Hundred Thousand
Dollars ($500,000) to be delivered to Seller at the Closing; (b) an amount of
cash equal to the lesser of (i) seventy-five percent (75%) of the Net Cash
Revenues generated in the twenty four (24) month period following the Closing,
or (ii) Thirty Million Dollars ($30,000,000) (the "Earnout Amount"), together
with a written calculation thereof, within ninety (90) days after the second
anniversary of the Closing (collectively with the amount specified in clause
(a), the "Cash Purchase Price"); and (c) the warrant or warrants, in
substantially the form attached hereto as Exhibit C, granting Seller the right
to acquire fifteen (15) percent (on a fully diluted basis) of the shares of
common stock, $0.01 par value, of Purchaser following the Closing with an
exercise price of Seven Million Dollars ($7,000,000) (the "Warrants"). The
portion of the Cash Purchase Price specified in clause (a) above shall be paid
at the Closing by bank wire transfer of immediately available funds to an
account or accounts designated in writing by Seller, and the portion of the Cash
Purchase Price specified in clause (b) above shall be paid within ninety (90)
days after the second anniversary of the Closing in the same manner.
Section 2.4 Earnout Amount: Audit Rights of Seller.
(a) Immediately following the date that the Earnout Amount and written
calculation are due pursuant to Section 2.3 above, Seller's accountants and
representatives will be afforded reasonable access to any and all documents used
by Purchaser or its representatives to calculate the Earnout Amount and any
other relevant books, workpapers or records necessary to determine the accuracy
of such calculation.
(b) Each of the parties will pay its own costs for the preparation and
review of the Earnout Amount and the calculation thereof. The parties will agree
to reasonable extensions of the time limits set forth in this Section 2.4, but
only to the extent necessary to obtain or respond to relevant information.
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(c) On or prior to the 45th day after the date that the Earnout Amount
is due to Seller, Seller will have the right to provide a written notice to
Purchaser stating in reasonable detail Seller's objections (an "Earnout
Objection Notice") to the calculation of the Earnout Amount. If Seller does not
provide such notice within the 45-day period, then the Earnout Amount calculated
by Purchaser will be binding on the parties, and will not be subject any form of
review or appeal.
(d) If Seller provides Purchaser with a timely Earnout Objection Notice
as described in Section 2.4(c), Seller and Purchaser will attempt in good faith
to resolve their disputes as reflected in the Earnout Objection Notice, and any
adjustment to the Earnout Amount at issue will be agreed upon in writing by
Seller and Purchaser, and will be conclusive and binding upon the parties and
not subject to any form of review or appeal.
(e) If Seller and Purchaser do not resolve all disputes reflected in
the Earnout Objection Notice on or prior to the 30th day after the Earnout
Objection Notice is delivered, then Seller and Purchaser will, within ten days
thereof, agree upon and retain the Designated Auditor to determine the correct
calculation of the Earnout Amount, based solely on its resolution of the
disputed matters set forth in the Earnout Objection Notice as presented and not
on independent review, other than the Designated Auditor's due inquiry of each
of the parties, as soon as practicable. The Designated Auditor will deliver its
written resolution within 30 days of its engagement for purposes of this Section
2.4. The Earnout Amount determined by the Designated Auditor will be conclusive
and binding upon the parties for purposes of this Section 2.4, and not be
subject to any form of review or appeal. The fees and expenses of the Designated
Auditor will be paid 50% by Purchaser and 50% by Seller.
(f) Any increase in the Earnout Amount will be paid to Seller within
ten days of final calculation as agreed upon by the parties or as determined by
the Designated Auditor in accordance with this Section 2.4. Any decrease in the
Earnout Amount will be paid to Purchaser within ten days of final calculation as
agreed upon by the parties or as determined by the Designated Auditor in
accordance with this Section 2.4.
Section 2.5 Bank Account Matters.
(a) At the Closing Time, the collective balance of the Bank Accounts
will be no less than the total amount of all checks issued on the Bank Accounts
prior to December 4, 2002 that also remain outstanding at the Closing Time, less
a float allowance of $100,000 (the "Required Account Balance").
(b) To the extent that the collective balance of the Bank Accounts at
the Closing Time is less than the Required Account Balance, the Seller will
reimburse the Purchaser for such difference. To the extent that the collective
balance of the Bank Accounts at the Closing Time is greater than the Required
Account Balance, the Purchaser will reimburse the Seller for such difference.
(c) Commencing the first business day after Closing, any funds received
in the Seller's lockbox for the Company will be remitted to the Company on the
first business day following the receipt of such funds. Any funds in the
Seller's lockbox for the Company, which were received prior to the first
business day after Closing, will be retained by the Seller.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser as follows:
Section 3.1 Organization.
(a) Seller is a corporation duly organized, validly existing and in
good standing under the laws of the State of Florida. Seller is duly qualified
or licensed to do business as a foreign corporation and is in good standing in
each jurisdiction in which the ownership or lease of its assets or the operation
of its business requires such qualification or license, except where the failure
to so qualify or be so licensed would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
(b) Each of the Company and the Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation. Each of the Company and the Subsidiaries is duly
qualified or licensed to do business as a foreign corporation and is in good
standing in each jurisdiction in which the ownership or lease of its assets or
the operation of its business requires such qualification or license, except
where the failure to so qualify or be so licensed would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect. Each of
the Company and the Subsidiaries has all requisite corporate power and authority
to carry on the business currently conducted by it.
Section 3.2 Authorization of Transaction. Seller has full corporate
power and authority to execute, deliver and perform as required by this
Agreement, and to consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered by Seller and constitutes the
valid and legally binding obligation of Seller, enforceable against it in
accordance with its terms and conditions, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar Laws of general applicability relating to or
affecting creditors' rights, or by general equity principles, including
principles of commercial reasonableness, good faith and fair dealing.
Section 3.3 Seller Noncontravention . Neither the execution and
delivery of this Agreement by Seller, nor the consummation by Seller of the
transactions contemplated hereby, will conflict with or result in a breach of
any provision of the certificate of incorporation or bylaws of any of the Seller
Parties; except to the extent that such conflict or breach would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
Section 3.4 Financial Statements.
(a) Set forth on Schedule 3.4 of the Disclosure Schedules are correct
and complete copies of (i) the audited consolidated balance sheets of the
Company and the Subsidiaries as of December 31, 2001, December 31, 2000 and
December 31, 1999 and the related consolidated statements of income and cash
flows for, in the case of the December 31, 1999 balance sheet, the eight-month
period then ended, and the case of the December 31, 2000 and 2001 balance
sheets, the year then ended (the "Year-End Financial Statements"), and (ii) the
unaudited consolidated balance sheet of the Company and the Subsidiaries as of
September 30, 2002 (the "Interim Balance Sheet") and the related consolidated
statements of income and cash flows for the ten (10) month period then ended
(the "Interim Financial Statements," and collectively with the
9
Year-End Financial Statements, the "Financial Statements"). Except as set forth
on Schedule 3.4, the Financial Statements were prepared in accordance with GAAP,
consistently applied, and present fairly in all material respects the financial
position and the results of operations of the Company and the Subsidiaries as of
the dates and for the periods indicated therein, and in the case of the Interim
Financial Statements subject to normal year-end adjustments, any other
adjustments described therein and the absence of footnotes and other
presentation items.
(b) Except as included on the Interim Balance Sheet or as set forth in
Schedule 3.4 of the Disclosure Schedules, the Company does not have any debts,
liabilities or obligations of any nature, other than (i) liabilities incurred in
the ordinary and usual course of business since the date of the Interim Balance
Sheet, (ii) liabilities not required by GAAP to be included on a pro forma
balance sheet, and (iii) liabilities that would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
Section 3.5 Capitalization. The authorized capital stock of the Company
consists of 11,000,000 shares, of which (a) 10,000,000 shares are common stock,
$.10 par value per share, which stock is further divided into two classes
consisting of 9,500,000 shares of Class A common stock and 500,000 shares of
Class B common stock, and (b) 1,000,000 shares are Series A Preferred Stock. As
of the date of this Agreement, 9,500,000 shares of Class A common stock, no
shares of Class B common stock and no shares of Series A Preferred Stock are
issued and outstanding. All of the issued and outstanding Shares have been duly
authorized and are validly issued, fully paid and nonassessable. Seller holds of
record and owns beneficially all of the Shares free and clear of any
restrictions on transfer (other than restrictions under the Securities Act and
applicable state securities laws), Liens, options, warrants, purchase rights,
commitments, claims or demands. There are no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights, exchange
rights or other commitments that could require Seller to sell, transfer or
otherwise dispose of any capital stock of the Company or that could require the
Company or any of the Subsidiaries to issue, sell or otherwise cause to become
outstanding any of its own capital stock. Except as set forth on Schedule 3.5 of
the Disclosure Schedules, there are no outstanding stock appreciation, phantom
stock, profit participation or similar rights with respect to the Company. The
minute books and stock record books of the Company are correct and complete in
all material respects. Except for the Subsidiaries, the Company does not control
directly or indirectly or have any direct or indirect equity ownership or
participation in any Person.
Section 3.6 Absence of Changes. Since August 31, 2002, except as set
forth in Schedule 3.6 of the Disclosure Schedules:
(a) the Company has not sold, leased, transferred or assigned any
material tangible or intangible assets, other than in the ordinary course of
business except for those assets identified in Schedule 3.6(a);
(b) the Company has not, directly or indirectly, caused or induced a
pre-payment or otherwise accelerated the payment or collection of any customer
revenues (regardless of whether payable monthly or otherwise);
(c) no party (including the Company) has accelerated, terminated or
cancelled any agreement, contract, lease or license (or series of related
agreements, contracts, leases and
10
licenses) involving more than $1,000,000 to which the Company is a party or by
which it is bound;
(d) the Company has not delayed or postponed the payment of accounts
payable and other material liabilities outside the ordinary course of business
or paid, discharged or satisfied any material liability, debt or obligation
outside the ordinary course of business;
(e) the Company has not cancelled, compromised, waived or released any
right or claim (or series of related rights and claims) involving more than
$1,000,000 outside the ordinary course of business;
(f) the Company has not experienced any damage, destruction or loss
(not covered by insurance) to any of its property that has a Material Adverse
Effect on the Company; and
(g) the Company has not committed to do any of the foregoing.
Section 3.7 Tax Matters. Except as set forth in Schedule 3.7 of the
Disclosure Schedules:
(a) each of the Company and the Subsidiaries has timely filed all Tax
Returns that it was required to file, and has timely paid all Taxes shown
thereon as owing, except where the failure to timely file Tax Returns or to
timely pay Taxes would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect;
(b) Schedule 3.7 of the Disclosure Schedules contains a list of all Tax
Returns filed with respect to the Company and the Subsidiaries for taxable
periods ended on or after December 31, 1999, and indicates which of those Tax
Returns that have been audited or which currently are the subject of an ongoing
audit. The Company has made available to Purchaser correct and complete copies
of (i) all Tax Returns filed by the Company or, in the case of those Tax Returns
of Seller which include the Company, pro forma tax information of the Company
and the Subsidiaries, and (ii) examination reports and statements of
deficiencies assessed against or agreed to by any of the Company and its
Subsidiaries since December 31, 1999;
(c) the Company has not waived, extended or tolled (under a tolling or
other similar agreement) any statute of limitations in respect of Taxes, or
agreed to any extension of time with respect to a Tax assessment or deficiency;
(d) any Tax allocation or sharing agreements will be terminated at
Closing;
(e) the transactions contemplated by this Agreement are not subject to
tax withholding pursuant to the provisions of Section 3406 or Subchapter A of
Chapter 3 of the Code or any other provision of applicable Law;
(f) there are no Liens for Taxes (other than for current Taxes not yet
due and payable) upon the assets of the Company or the Subsidiaries;
(g) Seller is not a Person other than a United States Person within the
meaning of the Code; and
11
(h) the Company has never been a member of an Affiliated Group other
than the Affiliated Group of which Seller is the parent corporation.
Section 3.8 Contracts.
(a) To Seller's Knowledge, Seller has delivered or made available to
Purchaser copies of all of the following written agreements, contracts or other
binding commitments to which the Company or a Subsidiary is a party as of the
date hereof or with respect to which Seller has guaranteed the obligations of
the Company or any Subsidiary (collectively, the "Company Contracts"):
(i) material mortgage, loan, security agreement, indenture, note or
other instrument relating to borrowing of money;
(ii) guarantee of any material obligation;
(iii) agreement for the sale or lease by the Company or a
Subsidiary to any Person of any material amount of its assets, products or
services outside the ordinary course of business ;
(iv) agreement requiring the payment by the Company or a Subsidiary
of more than $1,000,000 in any 12-month period for the purchase or lease of any
machinery, equipment or other capital assets;
(v) employment, severance or consulting agreement or agreement
providing for severance payments by the Company in the event of the sale of the
Company, excluding any such agreements that will be fully performed as of
December 31, 2002, or involving liabilities on the part of the Company of less
than $50,000 per contract outstanding as of December 31, 2002;
(vi) partnership, joint venture or teaming agreement;
(vii) license of patent, trademark or other material Company
Intellectual Property rights;
(viii) agreement between (A) the Company or a Subsidiary and
(B) Seller or any of its other subsidiaries;
(ix) any other agreement requiring the payment to the Company or a
Subsidiary by any other Person (other than Seller or any of its other
subsidiaries) of more than $1,000,000 in any 12-month period; and
(x) any other agreement requiring the payment by the Company or a
Subsidiary to any Person (other than Seller or any of its other subsidiaries) of
more than $1,000,000 in any 12-month period.
(b) Each Company Contract is a valid, binding and enforceable
obligation of the applicable Seller Party, and, to Seller's Knowledge, of the
other party or parties thereto except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and similar Laws of general applicability relating to or affecting
creditors' rights, or by general equity principles, including principles of
commercial
12
reasonableness, good faith and fair dealing, and to Seller's Knowledge, each
Company Contract is in full force and effect.
(c) To Seller's Knowledge, neither the applicable Seller Party nor any
other party thereto is in breach of or default under any term of any Company
Contract or has repudiated any term of any Company Contract, except as set forth
in Schedule 3.8 of the Disclosure Schedules and except for any such breaches,
defaults or repudiations (i) that would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect or (ii) that arise out
of the bankruptcy or insolvency of any such other party thereto.
Section 3.9 Real Property.
To Seller's Knowledge, Schedule 3.9(a) of the Disclosure Schedules
describes in reasonable detail each parcel of real property owned by the Company
and/or the Subsidiaries. To Seller's Knowledge, Schedule 3.9(b) of the
Disclosure Schedules lists all lease, sublease and license agreements relating
to real property leased, subleased or licensed by the Company and/or the
Subsidiaries from any third party.
Section 3.10 Intellectual Property.
(a) To Seller's Knowledge, Schedule 3.10 of the Disclosure Schedules
identifies each patent, copyright registration, trademark and service xxxx
registration, domain name, pending patent or trademark application, applications
for registration with respect to any material Company Intellectual Property, and
each material license, sublicense, agreement or other permission that the
Company or any of the Subsidiaries has granted to any third party with respect
to any Company Intellectual Property. Seller has delivered or made available to
Purchaser copies of all such patents, registrations, applications, licenses,
sublicenses, agreements and permissions, each as amended to date.
(b) To Seller's Knowledge, Schedule 3.10 of the Disclosure Schedules
identifies each material license, sublicense, agreement or other permission
pursuant to which the Company or any of the Subsidiaries uses any material item
of intellectual property owned by a third party. Except as prohibited by Law, by
the terms therein or under any confidentiality agreement, Seller has made
available to Purchaser copies of all such licenses, sublicenses, agreements and
permissions, each as amended to date.
Section 3.11 Litigation. To Seller's Knowledge, except as set forth in
Schedule 3.11 of the Disclosure Schedule, there are no legal, administrative,
arbitration or other formal proceedings or governmental investigations pending
or threatened against (a) the Company or any of its Subsidiaries that would,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company, or (b) any of the Seller Parties that question
the validity of this Agreement or any action taken or to be taken by Seller in
connection with this Agreement.
Section 3.12 Labor and Employment. With respect to the Company and the
Subsidiaries, except as set forth in Schedule 3.12 of the Disclosure Schedules,
to Seller's Knowledge: (a) there are no strikes, work stoppages or material
disputes pending, or to Seller's Knowledge, threatened, that involve any
Employees, (b) the Employees are not currently represented by any labor union,
and no union organization campaign is in progress with respect to the Employees,
13
and no question concerning representation exists respecting such Employees, (c)
there is no unfair labor practice charge or complaint against the Company
pending or threatened, before the National Labor Relations Board, (d) there is
no pending or threatened grievance, arbitration, demand letter or claim
involving an Employee claiming damages in excess of $150,000, and (e) there is
no discrimination charge by any Employee with respect to or relating to the
Company pending before the Equal Employment Opportunity Commission or any other
similar Governmental Entity responsible for the prevention of unlawful
employment practices that would, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
Section 3.13 Legal Compliance. To Seller's Knowledge, the methods and
means used by the Company and the Subsidiaries in the day-to-day conduct of
their respective businesses in the ordinary course comply in all material
respects with all applicable Laws, and no action, proceeding, investigation,
complaint, demand or notice has been filed or commenced or, to Seller's
Knowledge, threatened against the Company or any of the Subsidiaries alleging
any failure to so comply, except for any of the foregoing that would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
Section 3.14 Permits. To Seller's Knowledge, the Company and the
Subsidiaries have obtained or applied for, and are in material compliance with,
all material Permits that are required by any Governmental Entity to permit the
Company and the Subsidiaries to conduct their respective day-to-day operations
as presently conducted in the ordinary course, except for such failures to hold
or comply with such Permits that would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
Section 3.15 Brokers' Fees. Except for any fees or commissions payable
to Xxxxxx Xxxxxxx & Co. Incorporated, which Seller shall pay, none of the Seller
Parties has any liability or obligation to pay any fees or commissions to any
broker, finder or agent with respect to the transactions contemplated by this
Agreement.
Section 3.16 Bank Accounts. To Seller's Knowledge, Schedule 3.16 of the
Disclosure Schedules lists each bank, trust company, savings institution,
brokerage firm, mutual fund or other financial institution with which the
Company or any of the Subsidiaries has an account or safe deposit box relating
to the Company or any of the Subsidiaries and the names and identification of
all Persons authorized to draw thereon or to have access thereto. Neither
Seller, nor any employee, officer or director thereof, has withdrawn,
transferred or received, whether pursuant to a "sweep" agreement or otherwise,
any funds from the various bank accounts of the Company or any Subsidiary
thereof on or after December 1, 2002.
Section 3.17 Intercompany Obligation. The obligations of the Company
with respect to the Intercompany Obligation have been fully terminated with no
further liability to the Company.
Section 3.18 Limitation on Warranties. EXCEPT AS EXPRESSLY SET FORTH IN
THIS ARTICLE 3, SELLER MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED,
AT LAW OR IN EQUITY, IN RESPECT OF THE SHARES, THE COMPANY OR THE SUBSIDIARIES,
INCLUDING, WITHOUT LIMITATION, WITH RESPECT TO ENVIRONMENTAL MATTERS,
MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE. ALL OTHER REPRESENTATIONS
OR WARRANTIES ARE HEREBY DISCLAIMED.
14
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller as follows:
Section 4.1 Organization. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Purchaser is duly qualified or licensed to do business as a foreign corporation
and is in good standing in each jurisdiction in which the ownership or operation
of its assets and properties requires such qualification or license, except
where the failure to so qualify or be so licensed would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect on the
ability of Purchaser to consummate the transactions contemplated hereby.
Purchaser has all requisite corporate power and authority to carry on its
business as currently conducted.
Section 4.2 Authorization of Transaction. Purchaser has full corporate
power and authority to execute, deliver and perform this Agreement and to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Purchaser and constitutes the valid and
legally binding obligation of Purchaser, enforceable against it in accordance
with its terms and conditions, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and similar Laws of general applicability relating to or affecting
creditors' rights, or by general equity principles, including principles of
commercial reasonableness, good faith and fair dealing.
Section 4.3 Purchaser Noncontravention. Neither the execution and
delivery of this Agreement by Purchaser, nor the consummation by Purchaser of
the transactions contemplated hereby, will conflict with or result in a breach
of any provision of the charter, bylaws or similar organizational documents of
Purchaser.
Section 4.4 Litigation. There are no legal, administrative, arbitration
or other formal proceedings or governmental investigations pending or, to
Purchaser's knowledge, threatened that question the validity of this Agreement
or any action taken or to be taken by Purchaser in connection with this
Agreement.
Section 4.5 Availability of Funds. Purchaser has sufficient funds
available to perform its obligations pursuant to this Agreement in accordance
with the terms and conditions contained herein.
Section 4.6 Brokers' Fees. Purchaser has no liability or obligation to
pay any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement.
Section 4.7 Investment Intent. Purchaser is acquiring the Shares for
its own account for the purpose of investment, not as a nominee or agent, and
not with a view to or for sale, resale or other distribution thereof in any
manner that is in violation of the Securities Act.
Section 4.8 Plan of Purchaser. Purchaser has no current plan or
intention to liquidate or to merge into the Company.
15
ARTICLE 5
SECTION 338(H)(10) ELECTION
Purchaser and Seller agree that:
Section 5.1 Section 338(h)(10) Election. Purchaser and Seller shall
join in making an election under Code Section 338(h)(10) by jointly executing
and delivering five copies of IRS Form 8023 at the Closing. Immediately after
the Closing, the parties shall cause such forms to be filed with the IRS. As
soon as reasonably practicable after the Closing, but no later than December 15,
2002, the parties shall jointly make any corresponding elections under state,
local, or foreign tax law.
ARTICLE 6
POST-CLOSING COVENANTS
Purchaser and Seller agree that with respect to the period following
the Closing:
Section 6.1 General. In case at any time after the Closing Date any
further action is reasonably necessary to carry out the purposes of this
Agreement, each of the parties will take such further action (including the
execution and delivery of such further instruments and documents) as the other
party reasonably may request, at the sole cost and expense of the requesting
party (unless otherwise specified herein).
Section 6.2 Litigation Support. In the event and for so long as either
party is actively contesting or defending against any third-party charge,
complaint, action, suit, proceeding, hearing, investigation, claim or demand in
connection with any fact, situation, circumstance, status, condition, activity,
practice, plan, occurrence, event, incident, action, failure to act or
transaction involving the Company or any of the Subsidiaries, the other party
will reasonably cooperate with the contesting or defending party and its counsel
in the contest or defense, make available its personnel and provide such
testimony and access to its books and records as may be reasonably requested in
connection with the contest or defense, at the sole cost and expense of the
contesting or defending party (unless the contesting or defending party is
entitled to indemnification therefor under Article 8).
Section 6.3 Agreements Regarding Tax Matters.
(a) Seller shall be solely responsible for, and shall promptly and
timely pay: (i) all federal, state and local income taxes, which may be imposed
on, assessed against, or otherwise be due and payable by the Company and/or the
Subsidiaries with respect to Pre-Closing Periods; (ii) all sales/use and/or
employment taxes (including, as part thereof, any withholding obligations with
respect to compensation paid to its officers and/or employees), which may be
imposed on, assessed against, or otherwise be due and payable by the Company
and/or the Subsidiaries with respect to Pre-Closing Periods and which are not
disclosed on Schedule 6.3 attached hereto (as to the amount and the taxing
authority to which the amounts are due and payable); (iii) all Taxes imposed as
a result of the Section 338(h)(10) election described above in Article 5 ; and
(iv) any federal and state income taxes imposed on the Company or any of the
Subsidiaries because they were members of any affiliated group filing a Tax
Return on a consolidated, combined or unitary basis for a Pre-Closing Period.
16
(b) The Company and the Subsidiaries shall be solely responsible for
all Taxes imposed on them for any Pre-Closing or Post-Closing Period, other than
those Taxes which Seller is responsible to pay, and has agreed to promptly and
timely pay, under Section 6.3(a) above and Section 6.3(i) below.
(c) Seller shall timely prepare and file all federal and state income
Tax Returns of, or consolidated, combined or unitary federal and state income
tax returns which include, the Company and the Subsidiaries for any Pre-Closing
Period, and Seller shall timely pay all federal and state income taxes shown as
due on such Tax Returns. Seller shall have the sole right to amend and/or file
refund claims with respect to any Tax Return described in the preceding
sentence, provided, that any refunds of federal, state or local income taxes
shall be for the sole benefit of, and thus retained by, the Seller, while any
refunds of Taxes other than federal, state and local income taxes shall be
received by Seller in trust for the Company, and shall be paid by Seller to the
Company within ten (10) days of the date the same is received by Seller.
(d) Purchaser shall prepare and file, or cause the Company to prepare
and file, all Tax Returns for the Company or the Subsidiaries for any period
that includes the Closing Date for all taxes other than those Tax Returns, which
Seller is required to prepare relating to federal, state and local income Taxes.
Seller shall promptly pay or provide funds to the Company or its subsidiaries
(after having been given notice) for all Taxes for which Seller is responsible
under Section 6.3(a).
(e) (i) Seller will retain all income Tax Returns for states which
recognize the Section 338(h)(10) Election, along with supporting work papers and
other related records for the Company and the Subsidiaries for all Pre-Closing
Periods for a period of seven (7) years following the Closing; (ii) the Company
shall retain all non-income Tax Returns, along with supporting work papers and
other related records for the Company and the Subsidiaries for a period of seven
(7) years following the Closing; and (iii) Seller shall be entitled to copies,
at its cost and expense, of all non-income Tax Returns, supporting work
schedules or other records retained by the Company under this Section 6.3(e),
provided the request is made before the end of the period the records, etc. are
required to be retained.
(f) Purchaser and/or the Company shall promptly notify Seller in
writing as soon as it becomes aware of any audit, administrative or judicial
proceeding involving the Company or any of the Subsidiaries that relates to any
Pre-Closing Period Tax Return (a "Tax Controversy") for which Seller has sole
liability pursuant to this Section 6.3. Seller shall have the absolute right to
control the conduct of any such Tax Controversy.
(g) Seller and Purchaser will provide each other with such assistance
and information relating to the Company or any of the Subsidiaries as may
reasonably be requested in connection with a party's preparation or review of
any Tax Returns, or participation in any Tax Controversy, and will each retain
and provide to the other party all records and other information which may be
relevant thereto which they may have in their possession and/or control at the
time the request is made.
(h) Neither Purchaser nor Seller will settle any Tax liability or
compromise any Tax claim relating to the Company or the Subsidiaries, which may
affect the liability for Taxes hereunder (or right to Tax benefit) of the other
party, without the other party's consent, which consent will not be unreasonably
withheld or delayed.
17
(i) Purchaser and Seller will each be responsible for fifty percent of
any transfer, sales use and other Taxes due in connection with the purchase of
the Shares; provided, however, that Seller shall be responsible for any federal,
state or local income taxes resulting or arising by reason of the Section
338(h)(10) election to be filed pursuant to Section 5.1 hereof.
(j) Seller, Purchaser, the Company and the Subsidiaries shall comply
with all requirements of Section 5.1 as may occur after Closing.
Section 6.4 Records and Documents. Unless otherwise expressly indicated
herein, Purchaser and Seller will preserve and keep all books and records that
relate to the Company and the periods prior to the Closing Date for a period of
seven (7) years following the Closing Date. After such seven-year period, each
party will provide the other with at least sixty (60) days prior written notice
of its intent to dispose of any such books and records, and, subject to the
proviso below, the party so notified will be given the opportunity, at its cost
and expense, to remove and retain all or any part of such books or records as it
may select. During such seven-year period, duly authorized representatives of
each party will, upon reasonable notice, have access thereto during normal
business hours to examine, inspect and copy such books and records of the other
party that relate to both the Company and Pre-Closing Periods; provided,
however, that Purchaser shall have access only to pro forma federal and state
income tax returns for the Company and the Subsidiaries for Pre-Closing Periods,
and provided further that if Purchaser requires access to books and records
supporting such federal and state income tax returns, Seller shall make copies
of such books and records available to Purchaser, at Purchaser's expense, in a
redacted form that does not reveal any information relating to the income tax
and other books and records of Purchaser's other businesses. Purchaser
acknowledges that immediately following the Closing and for a period of at least
sixty (60) days thereafter, Seller requires full and complete access to the
Company's books and records that relate to Pre-Closing Periods for purposes of
inspection and copying. In addition to Purchaser's other obligations hereunder,
Purchaser will, and will cause the Company to, grant such access to Seller and
its representatives during regular business hours every business day requested
by Seller for such period.
Section 6.5 Use of Seller's Trademarks. No interest in or right to use
the name, logo or other trade dress of Seller is being conveyed pursuant to this
Agreement. As promptly as practicable following the Closing, but in no event
later than ninety (90) days after the Closing Date, Purchaser will remove or
cover references to Seller that appear on any assets or properties of the
Company or any of the Subsidiaries, including without limitation, signs,
promotional or advertising literature, labels, stationery, office forms and
packaging materials. Neither Purchaser nor its Affiliates will in any way use
any such items, or use any trademark, trade name, service xxxx, brand name,
trade dress or logo that is likely to cause confusion with any trademark, trade
name, service xxxx, brand name, trade dress or logo of Seller after the Closing
Date.
Section 6.6 Non-Competition.
(a) Seller agrees that, for a period commencing on the Closing Date and
terminating two (2) years after the Closing Date, it will not directly, or
indirectly through any of its Affiliates, engage in any Competitive Business
anywhere in the States of Florida and Georgia.
(b) Notwithstanding the provisions of this Section 6.6, (i) no
Affiliate of Seller will be prohibited from engaging in any business currently
conducted by such Affiliate or any natural extensions thereof and (ii) the
acquisition (by asset purchase, stock purchase, merger,
18
consolidation or otherwise) by Seller or any of its Affiliates of the stock,
business or assets of any Person that at the time of such acquisition is engaged
in any Competitive Business, and the continuation of such Competitive Business
following such acquisition, will not be prohibited hereunder if the portion of
the revenues of such Person and its subsidiaries on a consolidated basis for the
fiscal year ending prior to the date of such acquisition that are attributable
to the Competitive Business by such Person and its subsidiaries account for less
than 25% of the revenues of such Person and its subsidiaries on a consolidated
basis for such fiscal year.
(c) Nothing in this Section 6.6 will restrict or prevent Seller or any
of its Affiliates from holding a stock warrant or any other equity interest in
Purchaser or maintaining and/or undertaking passive investments in Persons
primarily engaged in the Competitive Business so long as the aggregate interest
represented by such investments does not exceed five percent (5%) of any class
of the outstanding equity securities of any such Person.
(d) If the final judgment of a court of competent jurisdiction declares
that any term or provision of this Section 6.6 is invalid or unenforceable, the
parties agree that the court making the determination of invalidity or
unenforceability will have the power to reduce the scope, duration or area of
the term or provision, to delete specific words or phrases or to replace any
invalid or unenforceable term or provision with a term or provision that is
valid and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision, and this Agreement will be
enforceable as so modified.
Section 6.7 Non-Solicitation of Employees. For a period commencing on
the Closing Date and terminating two (2) years after the Closing Date, (a)
Purchaser will not, and will cause its Affiliates not to, solicit any employee
of Seller for employment by Purchaser or any of its Affiliates without the prior
written consent of Seller, and (b) Seller will not, and will cause its
Affiliates not to, solicit any employee of the Company for employment by Seller
or any of its Affiliates, without the prior written consent of Purchaser. For
purposes of this Section 6.7, an employee will not be deemed to have been
solicited for employment if such employee or its agent has initiated any
communication or contact for the purpose of discussing any potential employment
of such employee, or such employee responds to a general public advertisement or
other general solicitation of employment. Nothing herein will prohibit either of
the parties or any of their respective Affiliates from employing or offering to
employ any employee if such employee was not solicited for employment.
Section 6.8 Employee Benefits Matters.
(a) Effective as of the Closing Date, Seller will vest all Employees in
their 401(k) plan account balances and treat such Employees as terminated under
such plan, such that the Employees will cease to participate in Seller's 401(k)
plans and be eligible for account distributions.
(b) Effective as of the Closing Date, the Employees will cease to
participate in any Employee Welfare Benefit Plans of Seller and will be eligible
to participate in all Employee Welfare Benefit Plans of Purchaser that are
generally available to employees of Purchaser, except in cases where the Company
has a corresponding Employee Welfare Benefit Plan. Any restrictions on coverage
for pre-existing conditions under each such Employee Welfare Benefit Plan of
Purchaser will be waived for the Employees and the Employees will receive credit
under each such Employee Welfare Benefit Plan of Purchaser for payments under a
deductible limit
19
made by them and for out-of-pocket maximums applicable to them during the plan
year of the Employee Welfare Benefit Plan of Seller, in the event that Seller
maintained a corresponding Employee Welfare Benefit Plan. The benefits provided
to the Employees under each Employee Welfare Benefit Plan of Purchaser will not
be deemed to be continuations of or successors to any Employee Welfare Benefit
Plan of Seller or the Company.
(c) As between Purchaser and Seller: (1) Purchaser shall assume and
thereafter pay, perform and discharge, or cause the Company to pay, perform and
discharge, any and all employment, compensation, severance and employee benefit
liabilities, responsibilities and obligations of the Company and any of its
Subsidiaries with respect to their Employees, including, without limitation, any
and all claims under the Worker Adjustment and Retraining Notification Act, any
and all claims of employment discrimination under any local, state, or federal
Law or ordinance, including, without limitation, Title VII of the Civil Rights
Act of 1964, as amended; the Civil Rights Act of 1991; the American with
Disabilities Act of 1990; the Age Discrimination in Employment Act of 1967, as
amended by the Older Workers Benefit Protection Act of 1990; and Section 510 of
ERISA, whether such liabilities, responsibilities and obligations are incurred
as the result of incidents occurring before or after the Closing, while (2)
Seller shall assume and thereafter pay, perform and discharge: (A) any and all
severance payments that may be owed to Xxx Xxxxxxxx, Xxxxxxxx Xxxxxxx, Xxxxx
Xxx, Xxxxx Xxxxxx and Xxxxx Xxxxxx upon the occurrence of or in connection with
the proposed sale of the Shares pursuant to this Agreement and/or a change in
control event at the Company (as such terms are defined in, and only to the
extent such obligations are provided for under, agreements currently in effect
between each of the foregoing and the Company), but excluding any commissions,
salary, bonuses and other compensation and benefits to which such persons would
be entitled in the ordinary course of business if the transactions contemplated
by this Agreement did not occur and (B) any and all payments that may be owed to
E. Xxxxx Xxxxxxx and Xxxxxx Xxxxx pursuant to agreements currently in effect
between each of them and Seller. Seller agrees that Purchaser may, however,
cause the Company to retain the services of one or more of the individuals named
above in this Section 6.8(c) for a period of up to sixty (60) days following the
Closing (the "Transition Period"), in which case, as between the parties: (i)
the Company shall pay the base salary and applicable benefit costs for each such
individual for services rendered during the Transition Period and (ii) Seller
shall pay any and all amounts described above which may be due and payable to
said individuals on account of the sale of the Shares pursuant to this
Agreement, or by reason of the change of control resulting therefrom, if and
when they are terminated by Purchaser. Except with respect to the liabilities
expressly retained by Seller for the named individuals pursuant to subclause
(2)(A) and (2)(B) above, in the event that Seller or an Affiliate of Seller
(other than the Company and its Subsidiaries) or any Employee Welfare Benefit
Plan maintained by Seller or any of such other Affiliates directly or indirectly
incurs any costs, liabilities, obligations or legal expenses related to any such
incidents, Purchaser shall reimburse and indemnify Seller and its Affiliates for
any and all such costs, liabilities, obligations and expenses.
(d) For a period beginning on the Closing Date and ending on the second
anniversary thereof, Purchaser agrees that it will not rehire or otherwise
retain the services of any of the individuals named in subclause (2)(A) of
Section 6.8(c) within two years of the termination date of such individual. If
Purchaser does rehire or otherwise retain the services of any of the foregoing
individuals within two years of the termination date of such individual,
Purchaser shall reimburse and indemnify Seller and its Affiliates for a pro rata
portion of all severance payments described in subclause (2)(A) of Section
6.8(c) paid, or to be paid, to or on behalf of such
20
individual. The Purchaser's pro rata portion shall be equal to (i) the total
amount of all severance payments described in subclause (2)(A) of Section 6.8(c)
paid, or to be paid, to or on behalf of such individual (ii) multiplied by the
percentage equal to (x) the total number of calendar days from the date of
rehire (or other engagement of services) until the second anniversary of the
termination date (y) divided by 730 (total number of days in the two year
period). The Purchaser's pro rata portion shall be due and payable to the Seller
within thirty days of the date of rehire (or other engagement of services).
Section 6.9 Insurance Matters.
(a) Subject to the terms and conditions set forth herein, Seller agrees
to take any and all actions necessary to ensure that, for the period beginning
on the Closing Date and ending on the sixtieth (60th) day thereafter (the
"Transition Period"), the Company is a named insured, and/or an additional
insured, and shall have, as a result thereof, the same insurance coverage,
protection and rights with respect to any claims made against it, its assets or
its current or former employees, whether such claims arise prior to, on or after
the Closing Date, which the Company had or has (directly or through Seller's
insurance policies) immediately prior to the Closing Date under those insurance
policies set forth on Schedule 6.9 hereof to the extent permitted by the
applicable insurer; provided, however that, the Company, not Seller, will bear
the cost of all claims, that would, as of the Closing Date be self-insured
claims, as well as all other claims for which the Company has no third-party
coverage as of the Closing Date, and the Company will pay the premiums (or its
proportionate share of applicable premiums) for all coverage available to it
during such 60-day period.
(b) Notwithstanding the provisions of Section 6.9(a), Seller will have
no obligation to pursue any claims or coverage disallowed by the Company's
insurers, or to litigate to enforce any Company claim, and Purchaser hereby
indemnifies and holds Seller harmless from and against all costs, expenses or
other liabilities (including applicable premiums, fees and compliance costs,
other than standard administrative costs) incurred by Seller or any of its
Affiliates as a result of the coverages being provided and the handling of
claims thereunder.
(c) Upon the termination of the 60-day period described in Section
6.9(a), Seller will continue to allow claims to made by the Company pursuant to
any third-party insurance policy covering the Company, and will cooperate with
Purchaser and the Company in submitting Company Claims (or pursuing Company
Claims previously made) on behalf of Purchaser or the Company under Seller's
Insurance Policies, but solely with respect to occurrences arising on or before
the end of the Transition Period, and only to the extent accepted by the
insurer.
(d) Notwithstanding the foregoing, to the extent that (i) any insurance
policies controlled by Seller and its Affiliates ("Seller's Insurance Policies")
cover any loss, liability, claim, damage or expense relating to the Company, the
Subsidiaries or their businesses, assets or current or former employees
("Company Liabilities") and relating to or arising out of occurrences through
the date of the Closing and (ii) Seller's Insurance Policies continue after the
Closing to permit claims to be made thereunder with respect to Company
Liabilities relating to or arising out of occurrences through the date of the
Closing ("Company Claims"), Seller shall cooperate and cause its Affiliates to
cooperate with Purchaser and the Company in submitting Company Claims (or
pursuing Company Claims previously made) on behalf of Purchaser or the Company
under Seller's Insurance Policies; provided that Seller shall be under no
obligation to commence or maintain litigation to enforce any Company Claim and
that Purchaser shall reimburse, indemnify
21
and hold Seller and its Affiliates harmless from all liabilities, costs and
expenses (including without limitation, all present or future premiums,
deductibles, legal and administrative costs, attorney's fees, overhead and costs
of compliance under Seller's Insurance Policies) of any nature actually incurred
by Seller or its Affiliates as a result of Company Claims made under Seller's
Insurance Policies. Upon the incurrence or accrual of any such liability, cost
or expense relating to Company Claims made under Seller's Insurance Policies and
upon receipt from Seller of a statement of the amount of such liabilities, costs
and expenses in reasonable detail, from time to time, Purchaser agrees to pay
promptly to Seller or its Affiliates the amount indicated in such statement.
Section 6.10 Guaranteed Obligations. From and after the Closing,
Purchaser will cause the Company or a Subsidiary, as appropriate, fully to
perform and observe all of the obligations required to be performed and observed
by the Company or such Subsidiary under each agreement, instrument or other
obligation listed on Schedule 6.10 of the Disclosure Schedules with respect to
which Seller or any of its Affiliates other than the Company and the
Subsidiaries is obligated in any fashion as a guarantor, sponsor or otherwise;
provided, however, that Purchaser shall use commercially reasonable efforts to
obtain the complete release and discharge of Seller and such Affiliates from
such obligations by duly executed instruments in form reasonably satisfactory to
Seller as soon as practicable after the Closing. Pending such complete release
and discharge or termination, Purchaser shall not permit the Company, the
Subsidiaries or any of their successors to amend or modify the terms of any such
obligation for which Seller or any of its Affiliates other than the Company and
the Subsidiaries is liable for or obligated to pay in any way, directly or
indirectly, or exercise any right to, or agree to, extend the terms of such
obligation or assign or subcontract any agreement or arrangement containing any
such obligation to any party in any manner which in any case increases the
amount or duration of Seller's or its Affiliates' responsibility thereunder.
Section 6.11 Series A Preferred Stock. Seller agrees to take, and to
cause the Company and each of Seller's other Affiliates to take, any additional
actions as may be necessary in order to ensure that the issued and outstanding
Series A Preferred Stock have been redeemed, retired or cancelled at or prior to
the Closing.
Section 6.12 EPIK Latin America.
(a) Within ten days following the Closing Date, Purchaser shall file or
cause the Company to file with the FCC an application seeking the consent of the
FCC to transfer control of EPIK Latin America to the Company or, as Seller and
Purchaser may mutually agree, the assignment by EPIK Latin America to the
Company of the International Section 214 Authorization held by EPIK Latin
America. Seller shall cooperate, and shall cause EPIK Latin America to cooperate
with the Company to prepare such application. Each of Seller and Purchaser shall
use its reasonable commercial efforts to obtain expeditious approval of such
application.
(b) Within five days after the FCC's approval of the application
seeking transfer of control or assignment of the International 214 Authorization
to the Company is effective, Seller shall transfer, assign, convey and deliver
to the Company, and Seller shall cause the Company to accept, all of Seller's
right, title and interest in and to all of the issued and outstanding shares of
capital stock of EPIK Latin America, free and clear of all Liens.
22
(c) Until Seller transfers ownership of EPIK Latin America to the
Company, Seller shall not permit EPIK Latin America to engage in any business
other than the performance of its obligations under the contracts listed on
Schedule A to the Asset Transfer Agreement.
(d) Notwithstanding any other provision hereof, those contracts listed
on Schedule A to the Asset Transfer Agreement shall be treated as if they were
retained by the Company for purposes of defining Net Cash Revenues; provided,
however, that any administrative fees charged by EPIK Latin America under those
contracts prior to the transfer of the stock of EPIK Latin America to the
Company shall not be included in the calculation of gross contractual revenue.
Section 6.13 360networks Claim. Seller agrees to take such actions as
may be necessary in order to provide the Purchaser with twenty-five percent
(25%) of the proceeds (whether in cash or equity) from any recovery that the
Seller receives, within thirty (30) days of such receipt by Seller, with respect
to any disposition in the Reorganization of 360networks (USA) Inc. et. al.
pursuant to Case No. 01-12721 in the U.S. Bankruptcy Court for the Southern
District of New York; provided that Seller shall be responsible for all
administrative costs related to such case.
Section 6.14 Amendment to FECR License. Seller agrees to take, or to
cause its Affiliates to take, such actions as may be necessary in order to amend
Section 2.4 of the License Agreement between FECR and the Company dated as of
April 30, 2000, as amended, to provide that no consideration shall be required
by the Company to renew such license.
ARTICLE 7
CLOSING CONDITIONS
Section 7.1 Conditions to Obligation of Purchaser. The obligation of
Purchaser to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction on or prior to the Closing Date of
the following conditions:
(a) the representations and warranties of Seller set forth in Article 3
will be true and correct in all material respects as of the Closing Date (except
to the extent expressly made as of an earlier date, in which case as of such
date);
(b) there will not be any judgment, order, decree, stipulation,
injunction or charge in effect preventing consummation of the transactions
contemplated by this Agreement;
(c) Seller will have delivered to Purchaser a certificate executed as
of the Closing Date by an executive officer of Seller to the effect that the
conditions specified in clause (a) above have been satisfied;
(d) Seller will have delivered to Purchaser:
(i) stock certificates representing all of the Shares, endorsed in
blank or accompanied by duly executed assignment document documents;
(ii) resignations of the directors and officers of the Company and
the Subsidiaries requested by Purchaser; and
23
(iii) a certified copy of the resolutions of the board of directors
of Seller authorizing and approving this Agreement and the consummation of the
transactions contemplated by this Agreement;
(e) the obligations of the Company with respect to the Intercompany
Obligation shall have been fully terminated with no further liability to the
Company;
(f) Seller and the Escrow Agent will have executed and delivered to
Purchaser the Escrow Agreement, and Seller will have deposited by wire transfer
$17,000,000 in the escrow account established pursuant to the Escrow Agreement
subject only to the Closing of this transaction; and
(g) Seller has delivered to Purchaser a full and complete release, in a
form acceptable to Purchaser's counsel, reflecting the release of the pledge,
liens and any other encumbrances created or imposed on the shares under the
Credit and Pledge Agreement.
Purchaser may waive any condition specified in this Section 7.1 if it
executes a written waiver to that effect at or prior to the Closing.
Section 7.2 Conditions to Obligation of Seller. The obligation of
Seller to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
(a) the representations and warranties of Purchaser set forth in
Article 4 will be true and correct in all material respects as of the Closing
Date (except to the extent expressly made as of an earlier date, in which case
as of such date);
(b) there will not be any judgment, order, decree, stipulation,
injunction or charge in effect preventing consummation of the transactions
contemplated by this Agreement;
(c) Purchaser will have delivered to Seller a certificate executed as
of the Closing Date by an executive officer of Purchaser to the effect that the
conditions specified in clause (a) above have been satisfied;
(d) Purchaser will have delivered to Seller a certified copy of the
resolutions of the board of directors of Purchaser authorizing and approving
this Agreement and the consummation of the transactions contemplated by this
Agreement;
(e) Purchaser will have executed and delivered to Seller the Escrow
Agreement, the Registration Rights Agreement and the Stock Purchase Warrant; and
(f) Seller shall have obtained a release, in a form acceptable to
Purchaser's counsel, from Seller's lenders under the Credit and Pledge Agreement
with respect to the transactions contemplated by this Agreement.
Seller may waive any condition specified in this Section 7.2, except
for Section 7.2(f), if it executes a written waiver to that effect at or prior
to the Closing.
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ARTICLE 8
REMEDIES FOR BREACHES OF THIS AGREEMENT
Section 8.1 Indemnification by Seller.
(a) Subject to the terms and conditions of this Article 8, and as
Purchaser's sole and exclusive remedy (in contract, tort or otherwise) in
connection with the transactions contemplated by this Agreement, Seller agrees
to indemnify and hold Purchaser and its Affiliates (each, a "Purchaser
Indemnified Party") harmless from, against and in respect of all damages,
losses, liabilities, claims, deficiencies or expenses resulting from, or arising
out of, any of the following (collectively, "Purchaser Claims"):
(i) any breach of the representations and warranties made by Seller
in this Agreement;
(ii) the nonfulfillment of any covenant or agreement of Seller
pursuant to this Agreement, other than Seller's obligations under Article 6 or
Article 9; and
(iii) Seller's obligations under Article 6 or Article 9 of this
Agreement;
(iv) together with any and all actions, suits, claims, proceedings,
investigations, audits, demands, assessments, fines, judgments, costs and other
expenses (including, without limitation, reasonable audit and legal fees)
incurred by a Purchaser Indemnified Party in connection therewith.
(b) The obligations of Seller pursuant to this Section 8.1 shall: (i)
terminate on (A) the six-month anniversary of the Closing Date with respect to
Purchaser Claims arising under provisions identified in paragraphs (A) and (B)
of subclause 8.1(b)(iii), and (B) the one-year anniversary of the Closing Date
with respect to Purchaser Claims arising under provisions identified in
paragraph (C) of subclause 8.1(b)(iii); provided, however, that any Purchaser
Claim with respect to Liens on the Shares pursuant to Section 3.5, any Purchaser
Claim with respect to Section 3.17 or any Purchaser Claim pursuant to Section
8.1(a)(iii) shall survive indefinitely except as otherwise provided in Article 6
or Article 9; (ii) except with respect to Purchaser Claims under paragraphs (i),
(iii) and (iv) of Section 6.3(a) and Section 3.17, not apply to any Purchaser
Claims, or the costs of defense thereof, until the aggregate of all losses,
liabilities, damages and expenses actually incurred by all Purchaser Indemnified
Parties resulting therefrom total an aggregate of $500,000 (the "Deductible"),
in which event this indemnity shall apply to all subsequent Purchaser Claims in
excess of the Deductible; and (iii) except with respect to Purchaser Claims
under paragraphs (i), (iii) and (iv) of Section 6.3(a) and Section 3.17, be
limited to, and shall not, exceed, the following amounts:
(A) For Purchaser Claims related to Sections 3.3, 3.8, 3.10,
3.11, 3.12, 3.13, 3.14, and 3.16, the indemnity applicable to said
Purchaser Claims shall be the lesser of (i) the aggregate amount of all
Purchaser Claims relating thereto, less the Deductible, or (ii)
$200,000;
(B) For Purchaser Claims related to Sections 3.4, 3.6, and 3.9
the indemnity applicable to said Purchaser Claims shall be the lesser
of (i) the aggregate amount of all Purchaser Claims relating thereto,
less the Deductible, or (ii) $300,000;
25
(C) For all other Purchaser Claims, the indemnity applicable
to said Purchaser Claims shall be the lesser of (i) the aggregate
amount of all Purchaser Claims relating thereto, less the Deductible,
or (ii) $1,000,000.
Notwithstanding subclause 8.1(b)(i) above, but subject to the remainder of
Section 8.1, any Purchaser Claim timely made in accordance with Section 8.3
shall survive until resolved.
Section 8.2 Indemnification by Purchaser.
(a) Subject to the terms and conditions of this Article 8, and as
Seller's sole and exclusive remedy (in contract, tort or otherwise) in
connection with the transactions contemplated by this Agreement, Purchaser
agrees to indemnify and hold Seller and its present and future Affiliates
(collectively, the "Seller Indemnified Parties") harmless from, against and in
respect of any and all damages, losses, liabilities, claims, deficiencies or
expenses resulting from, or arising out of, any of the following (collectively
"Seller Claims," and together with the Purchaser Claims, the "Claims"):
(i) any breach of the representations and warranties made by
Purchaser in this Agreement or Purchaser's ownership and operation of the
Company after the Closing Date;
(ii) the nonfulfillment of any covenant or agreement of Purchaser
pursuant to this Agreement, other than Purchaser's obligations under Article 6
or Article 9; and
(iii) Purchaser's obligations under Article 6 or Article 9 of this
Agreement;
(iv) together with any and all actions, suits, claims, proceedings,
investigations, audits, demands, assessments, fines, judgments, costs and other
expenses (including, without limitation, reasonable audit and legal fees)
incurred by a Seller Indemnified Party in connection therewith.
(b) Purchaser's obligations pursuant to this Section 8.2 shall
terminate on the one-year anniversary of the Closing Date; provided, however,
that any Seller Claim pursuant to Section 8.2(a)(iii) shall survive indefinitely
except as otherwise provided in Article 6 or Article 9. Notwithstanding the
preceding sentence, but subject to the remainder of Section 8.2, any Seller
Claim timely made in accordance with Section 8.3 shall survive until resolved.
Section 8.3 Procedure for Indemnification. No party hereto shall be
liable for any Claim for indemnification under this Article 8 unless written
notice of a Claim for indemnification is delivered by the party seeking
indemnification (the "Indemnitee") to the party from whom indemnification is
sought (the "Indemnitor") prior to the expiration of the applicable survival
period, if any, set forth in Sections 8.1 and 8.2. All notices given pursuant to
this Section shall set forth with reasonable specificity the basis of the Claims
for indemnification. In case of any claim by a third party, any suit, any claim
by any Governmental Entity, or any legal, administrative or arbitration
proceeding with respect to which Seller or Purchaser may have liability under
the indemnity agreements contained in this Article 8, the Indemnitor shall be
entitled to participate therein, and, to the extent desired, to assume the
defense thereof, and after notice of its election to assume the defense thereof,
the Indemnitor will not be liable to the Indemnitee for any legal or other
expenses subsequently incurred by the Indemnitee in connection with the defense
thereof, other than reasonable costs of investigation, unless the
26
Indemnitor does not actually assume the defense thereof following notice of such
election. The Indemnitee and the Indemnitor shall make available to each other
and their attorneys and representatives at all reasonable times, all books and
records relating to such Claim, and will render to each other such assistance as
may reasonably be requested in order to ensure proper and adequate defense of
any such Claim. Neither the Indemnitee nor the Indemnitor will make any
settlement of any Claim that might give rise to liability of the other under the
indemnity agreements contained in this Article 8 without the consent of the
other, which consent shall not be unreasonably withheld. If the Indemnitor
elects to settle any such Claim and the Indemnitee refuses to consent to such
compromise or settlement, then the liability of the Indemnitor to the Indemnitee
shall be limited to the amount offered by the Indemnitor in compromise or
settlement.
Section 8.4 Certain Limitations. An Indemnitor shall not be liable
under this Article 8 for a Claim resulting from any event relating to a breach
of any representation or warranty if the Indemnitor can establish that the
Indemnitee had actual knowledge of such event on or before the Closing Date. An
Indemnitor shall not be liable for any Claim for indemnification under this
Article 8 with respect to incidental, special, punitive or consequential damages
of any kind, including consequential damages resulting from business
interruption or lost profits.
Section 8.5 Certain Benefits. The amount of any indemnification payable
under this Article 8 shall be net of (i) any Tax benefits for which the
Indemnitee actually receives a benefit (all Indemnitees being obligated to take
reasonable actions to receive such benefits, however, no Indemnitee shall be
obligated to take any actions that may otherwise adversely affect such
Indemnitee or its Affiliates) by reason of the Claim giving rise to the
indemnification payment and (ii) the receipt of any insurance proceeds paid or
payable to the Indemnitee under any policies of insurance covering the loss
giving rise to the Claim. The Indemnitee will use reasonable commercial efforts
to collect any such insurance and will account to the Indemnitor therefor. The
parties agree to respond within a reasonable time to any inquiry by the other
party as to the status of any such insurance payment.
Section 8.6 Treatment of Indemnity Payments. All indemnification
payments made pursuant to this Agreement will be treated by the parties as
adjustments to the Purchase Price.
ARTICLE 9
MISCELLANEOUS
Section 9.1 Survival of Obligations. The representations, warranties
and covenants or other agreements of the parties contained in this Agreement
shall survive as provided in Sections 8.1(b) and 8.2(b) hereof.
Section 9.2 Public Announcements. No party shall issue any press
release or public announcement relating to the subject matter of this Agreement
prior to the Closing without the prior written approval of the other party,
provided, however, that any party may make any public disclosure it believes in
good faith is required by applicable Law or any listing or trading agreement
concerning its publicly-traded securities (in which case the disclosing party
will use its reasonable commercial efforts to advise the other party prior to
making the disclosure).
Section 9.3 Expenses. Each of Purchaser and Seller will bear its own
costs and expenses (including legal and investment banking fees and expenses)
incurred in connection with this
27
Agreement and the transactions contemplated hereby, whether or not such
transactions are consummated. Seller agrees to indemnify and hold harmless
Purchaser from and against any liability or obligation to pay any fees or
commissions to any broker, finder or agent engaged or employed by Seller with
respect to the transactions contemplated by this Agreement (including the fee
payable by Seller to Xxxxxx Xxxxxxx & Co., if any, as set forth above), and
Purchaser agrees to indemnify and hold harmless Seller from and against any
liability or obligation to pay any fees or commissions to any broker, finder or
agent engaged or employed by Purchaser with respect to the transactions
contemplated by this Agreement. This Section 9.3 shall survive the termination
of this Agreement.
Section 9.4 Disclosure Schedules. The representations and warranties of
Seller set forth in this Agreement are made and given subject to the disclosures
contained in the Disclosure Schedules. Seller shall not be, or be deemed to be,
in breach of any such representations and warranties (and no claim shall lie in
respect thereof) in respect of any such matter so disclosed in the Disclosure
Schedules. Where only brief particulars of a matter are set out or referred to
in the Disclosure Schedules, or a reference is made only to a particular part of
a disclosed document, full particulars of the matter and the full contents of
the document are deemed to be disclosed. The specific disclosures set forth in
the Disclosure Schedules have been organized to correspond to section references
in this Agreement to which the disclosure may be most likely to relate, but such
disclosure shall apply to and shall be deemed to be disclosed for the purposes
of this Agreement generally, and shall be deemed to be exceptions to or
modifications or qualifications of all of the representations and warranties
contained herein to the extent applicable. Purchaser shall be deemed to be aware
of and there are deemed to have been disclosed to Purchaser as if herein set
forth (a) all matters fairly disclosed or referred to or contained in this
Agreement and in all documents specifically referred to therein, (b) the
contents of and all matters referred to in the documents specifically listed in
the Disclosure Schedules, and (c) all matters contained in the Financial
Statements. In the event that there is any inconsistency between this Agreement
and matters disclosed in the Disclosure Schedules, information contained in the
Disclosure Schedules shall prevail and shall be deemed to be the relevant
disclosure.
Section 9.5 Specific Performance. The parties agree that irreparable
damage would occur in the event any of the provisions of this Agreement are not
performed in accordance with their specific terms. It is accordingly agreed that
the parties will be entitled to specific performance of the terms of this
Agreement, without posting a bond or other security, this being in addition to
any other remedy to which they are entitled at law or in equity.
Section 9.6 Amendment; Successors and Assigns. This Agreement may be
amended by the execution and delivery of a written instrument by or on behalf of
Seller and Purchaser. Neither this Agreement nor any of the rights, interests or
obligations provided by this Agreement may be assigned by any of the parties
(whether by operation of Law or otherwise) without the prior written consent of
the other party. Subject to the preceding sentence, this Agreement will be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
Section 9.7 Waiver. No agreement extending or waiving any provision of
this Agreement will be valid or binding unless it is in writing and is executed
and delivered by or on behalf of the party against which it is sought to be
enforced.
28
Section 9.8 Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable Law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable Law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
Section 9.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all such
counterparts taken together will constitute one and the same Agreement.
Section 9.10 Descriptive Headings. The descriptive headings of this
Agreement are inserted for convenience only and will not constitute a part of
this Agreement.
Section 9.11 Notices. Any notice, request, instruction or other
document to be given hereunder shall be in writing and delivered personally or
sent by registered or certified mail, postage prepaid, by reputable national
express courier, shipping cost prepaid, or by facsimile, according to the
instructions set forth below. Such notices shall be deemed given: at the time
delivered by hand, if personally delivered; three business days after having
been sent by registered or certified mail; one business day after having been
sent by express courier; and at the time when receipt is confirmed by the
receiving facsimile machine if sent by facsimile.
If to Seller: Florida East Coast Industries, Inc.
Xxx Xxxxxx Xxxxxx
X.X. Xxx 0000
Xx. Xxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxx, Executive Vice
President and General Counsel
Facsimile No.: (000) 000-0000
With a copy (which will not
constitute notice) to: Jenner & Block, LLC
Suite 1200 South
000 Xxxxxxxxxx Xxxxxx, XX
Xxxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxx
Facsimile No.: (000) 000-0000
If to Purchaser: Odyssey Telecorp, Inc.
c/o Venture Asset Group
000 Xxxx Xxxxxx, Xxxxx 000
Xxxx Xxxx, XX 00000
Attention: Xxxx Xxxxxxx, President
Facsimile No.: (000) 000-0000
29
With a copy (which will not
constitute notice) to: Xxxxxxx Xxxxxx, Esq.
c/o Xxxxxx X. Xxxx, Esq.
Xxxxxx, Xxxxxxxx, xx.xx
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000-0000
Facsimile No.: (000) 000-0000
or to such other address or to the attention of such other party that the
recipient party has specified by prior written notice to the sending party in
accordance with the preceding.
Section 9.12 No Third-Party Beneficiaries. The terms and provisions of
this Agreement will not confer third-party beneficiary rights or remedies upon
any Person or entity other than the parties hereto and their respective
successors and permitted assigns.
Section 9.13 Force Majeure. No party hereto will be liable to the other
party for any failure or delay in the performance of its obligations under this
Agreement to the extent such failure or delay is the direct result of a fire,
flood, earthquake, hurricane, riot, civil disorder, war, labor dispute, act of
terrorism or any other cause beyond the reasonable control of the party whose
performance is delayed or otherwise affected by such event (each such event, a
"Force Majeure Event"). The party whose performance is affected by a Force
Majeure Event will use reasonable commercial efforts to avoid, remove or
minimize the impact of such event on the performance of its obligations at the
required level at the earliest possible date. If any party is, or anticipates it
is likely to be, delayed or prevented from performing its obligations in
connection with a Force Majeure Event, such party will promptly notify the other
party by telephone with confirmation in writing within two business days after
the inception of such delay.
Section 9.14 Confidentiality. Seller agrees that for a period
commencing on the Closing Date and terminating two years after the Closing Date,
it will keep confidential and will use its reasonable commercial efforts to
cause its Affiliates and representatives to keep confidential (except as may be
disclosed to Seller's attorneys, accountants, financial advisors or other
representatives, or as required by Law) all confidential information relating
directly to the Company that remains in the possession of Seller or its
Affiliates after the Closing. Notwithstanding the foregoing, the term
"confidential information" will not be deemed to include any information that
(a) is or becomes generally known by the public (other than as a result of a
breach of this Agreement) or is a recognized standard industry practice, (b) was
or becomes available to Seller on a non-confidential basis from a Person who is
not known to Seller to be legally prohibited from transmitting the information
to Seller, or (c) was or is developed by Seller independently of and without
reference to any confidential information. In addition to the foregoing, in no
event shall the terms or provisions of this Agreement be disclosed to any party
except (i) the financial and/or tax advisors of each party, provided said
disclosure is undertaken pursuant to a signed confidentiality agreement which
precludes further disclosure by the same without the consent of the parties
hereto, or (ii) as may be required by law, in which case, the party believing
that it is legally required to disclose the same will first give written notice
to the other party. Notwithstanding the foregoing, Purchaser acknowledges that
Seller may file this Agreement and any exhibits and schedules hereto with the
SEC and may provide written descriptions of such documents in filings with the
SEC to the extent that Seller, in its sole discretion, deems such filings
necessary.
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Section 9.15 Entire Agreement. This Agreement (including all schedules
hereto, which are incorporated herein by this reference), the Warrants, the
Registration Rights Agreement and the Escrow Agreement collectively constitute
the entire agreement between the parties and supersede any prior and
contemporaneous understandings, agreements or representations by or among the
parties, written or oral, that may have related in any way to the subject matter
hereof.
Section 9.16 Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent
and no rule of strict construction will be applied against any party. The use of
the word "including" in this Agreement means "including without limitation" and
is intended by the parties to be by way of example rather than limitation.
Section 9.17 Schedules. The Schedules attached to this Agreement are
made a part of this Agreement as if set forth in full herein.
Section 9.18 Consent to Jurisdiction. Each of the parties to this
Agreement consents to submit to the personal jurisdiction of any state or
federal court sitting in the State of Florida, in any action or proceeding
arising out of or relating to this Agreement, agrees that all claims in respect
of the action or proceeding may be heard and determined in any such court and
agrees not to bring any action or proceeding arising out of or relating to this
Agreement in any other court. Each of the parties to this Agreement agrees not
to assert in any action or proceeding arising out of or relating to this
Agreement that the venue is improper, and waives any defense of inconvenient
forum to the maintenance of any action or proceeding so brought and waives any
bond, surety or other security that might be required of any other party with
respect thereto.
Section 9.19 Governing Law. THIS AGREEMENT WILL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING
EFFECT TO ANY LAW OR RULE THAT WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER
THAN THE STATE OF NEW YORK TO BE APPLIED.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the date first written above.
FLORIDA EAST COAST INDUSTRIES, INC.
By:____________________________________
Xxxxxx X. XxxXxxxx
Vice Chairman
ODYSSEY TELECORP, INC.
By:____________________________________
Xxxx X. Xxxxxxx
President
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Schedules and Attachments to Stock Purchase Agreement
The following are either exhibits attached to the Stock Purchase Agreement (SPA)
or disclosure schedules referenced in and attached to the SPA. A copy of any of
the following will be supplied to the Commission upon request:
Schedule 3.4 Audited Financial Statements
Audited Financial Statements of EPIK Communications
Incorporated for the years ended December 31, 2001 and
2000 and the period May 1, 1999 (inception) to
December 31, 1999 and unaudited Interim Financial
Statements as of September 30, 2002.
Schedule 3.5 Capitalization
Listing of Stock Appreciation Rights of EPIK that remain
outstanding
Schedule 3.6 Absence of Changes
Schedule of various transactions and commitments of EPIK
entered into after August 31, 2002.
Schedule 3.7 Tax Matters
List of Tax Returns filed with respect to EPIK
Schedule 3.8 Contracts
Description of certain breaches or defaults with respect
to EPIK contracts
Schedule 3.9 Real Property
List of Real Property owned and or leased by EPIK
Schedule 3.10 Intellectual Property
Description of Intellectual Property owned by EPIK or
subject to license agreements
Schedule 3.11 Litigation
Description of pending EPIK litigation
Schedule 3.12 Labor and Employment
Description of pending Equal Employment Opportunity
Commission matter
Schedule 3.16 Bank Accounts
Description of EPIK bank accounts
Schedule 6.3 Certain Pre-Closing Taxes paid by Purchaser
Identification of certain pre-closing taxes
to be paid by Odyssey Telecorp, Inc.
Schedule 6.9 Transition Insurance Policies
Description of EPIK Insurance Policies in place during
transition
Schedule 6.10 Guaranteed Obligations
List of EPIK Obligations guaranteed by FECI
Exhibit A Form of Escrow Agreement
Escrow Agreement, dated as of December 3, 2002, by and
among the Florida East Coast Industries, Inc., Odyssey
Telecorp, Inc., and Wachovia Bank, N.A.
Exhibit B Form of Registration Rights Agreement
Registration Rights Agreement, as of December 3, 2002,
between Odyssey Telecorp, Inc. and Florida East Coast
Industries, Inc.
Exhibit C Form of Stock Purchase Warrant
Stock Purchase Warrant Agreement, dated December 3, 2002
between Odyssey Telecorp, Inc. and Florida East Coast
Industries, Inc.
