1
EXHIBIT 2.1
=================================================
STOCK PURCHASE AGREEMENT
by and among
MCC ACQUISITION CORP.,
PRIORITY INTERNATIONAL COMMUNICATIONS, INC.
and
THE SHAREHOLDERS OF
PRIORITY INTERNATIONAL COMMUNICATIONS, INC.
dated as of
August 22, 1997
=================================================
2
STOCK PURCHASE AGREEMENT
TABLE OF CONTENTS
ARTICLE I. PURCHASE AND SALE OF SHARES.............................
1.1 Purchase and Sale of Shares.............................
1.2 Closing of Purchase and Sale of Shares..................
ARTICLE II. CONDITIONS TO OBLIGATIONS...............................
2.1 Conditions to Obligations of MCCAC, PIC
and the PIC Shareholders................................
2.2 Conditions to Obligations of MCCAC......................
2.3 Conditions to the Obligations of the
PIC Shareholders........................................
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF PIC
AND THE PIC SHAREHOLDERS................................
3.1 Corporate Organization..................................
3.2 Subsidiaries and Other Entities.........................
3.3 Corporate Authorization.................................
3.4 Capital Stock...........................................
3.5 Options.................................................
3.6 Compliance with Laws....................................
3.7 No Conflict.............................................
3.8 Litigation..............................................
3.9 Insurance...............................................
3.10 Intellectual Property...................................
3.11 Assets..................................................
3.12 Financial Statements....................................
3.13 Liabilities.............................................
3.14 Transactions Not in the Ordinary Course.................
3.15 Capital Projects........................................
3.16 Taxes...................................................
3.17 Bank Accounts; Powers of Attorney.......................
3.18 Real Estate.............................................
3.19 Title to Properties.....................................
3.20 Contracts...............................................
3.21 Brokers.................................................
3
3.22 Special Liabilities; Warranties.........................
3.23 Employee Benefit Matters................................
3.24 Materially Correct......................................
3.25 Information.............................................
3.26 Relationships with Related Persons......................
ARTICLE IV. ADDITIONAL REPRESENTATIONS AND
WARRANTIES OF THE PIC SHAREHOLDERS
4.1 Authority...............................................
4.2 Ownership of Shares.....................................
4.3 No Conflict.............................................
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF MCCAC
5.1 Corporate Organization; Authorization...................
5.2 No Conflict.............................................
5.3 Brokers.................................................
ARTICLE VI. COVENANTS OF PIC AND THE PIC SHAREHOLDERS
6.1 Conduct of Business.....................................
6.2 Reasonable Efforts......................................
6.3 Inspection..............................................
6.4 Best Efforts............................................
6.5 Update Information......................................
6.6 Trading Prohibitions....................................
ARTICLE VII. JOINT COVENANTS
7.1 Support of Transactions.................................
ARTICLE VIII. INDEMNIFICATION
8.1 Survival; Right to Indemnification Not
Affected by Knowledge...................................
8.2 Indemnification and Payment of Damages by
PIC Shareholders........................................
8.3 Indemnification and Payment of Damages by
MCCAC...................................................
8.4 Procedure for Indemnification...........................
8.5 The Shareholder Representative..........................
8.6 Limitations on Indemnification Obligations of the
PIC Shareholders........................................
8.7 Additional Indemnification Obligations of the
PIC Shareholders........................................
ii
4
ARTICLE IX. TERMINATION.............................................
9.1 Termination.............................................
9.2 Effect..................................................
ARTICLE X. DEFINITIONS.............................................
10.1 Defined Terms...........................................
10.2 Other Definitional Provisions...........................
ARTICLE XI. MISCELLANEOUS...........................................
11.1 Waiver..................................................
11.2 Notices.................................................
11.3 Assignment..............................................
11.4 Rights of Third Parties.................................
11.5 Reliance................................................
11.6 Expenses................................................
11.7 Construction............................................
11.8 Captions; Counterparts..................................
11.9 Entire Agreement........................................
11.10 Amendments..............................................
11.11 Publicity...............................................
iii
5
EXHIBITS
Exhibit A - PIC Shareholders
Exhibit B - Form of Promissory Note
Exhibit C - Form of Opinion of Ford & Xxxxxxx
Exhibit D - Form of Shareholder Agreement and Release
Exhibit E - Form of Non-Competition Agreement
Exhibit F - Collateral Pledge and Security Agreement
Exhibit G - PIC Disclosure Statement
Exhibit H - Guaranty Agreement
iv
6
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement is entered into as of August ___, 1997 by
and among MCC Acquisition Corp. ("MCCAC"), an Iowa corporation and a wholly
owned subsidiary of Xxxxxxx Communications Corporation ("Xxxxxxx"), Priority
International Communications, Inc., a Texas corporation ("PIC"), and Xxxxx
Xxxxxx and Xxxxxx Xxxxxxxxx being the majority shareholders of PIC (the "PIC
Majority Shareholders").
Unless the context otherwise requires, terms that are capitalized and not
otherwise defined in context have the meanings set forth or cross-referenced in
Article X of this Agreement.
RECITALS
A. MCCAC desires to purchase from the shareholders of PIC (the "PIC
Shareholders") all of the issued and outstanding shares of capital stock of
PIC, and the PIC Shareholders desire to sell to MCCAC the shares of PIC Stock
listed on Exhibit A hereto which together constitute all of the issued and
outstanding capital stock of PIC (the "Acquisition").
B. Simultaneously with the Acquisition, MCCAC will purchase all of the
issued and outstanding capital stock of PIC Resources Corp. ("PICR") and ATN
Communications Inc. ("ATN").
AGREEMENT
In order to consummate the Acquisition and the other transactions
contemplated hereby, and in consideration of the mutual agreements hereinafter
contained, MCCAC, PIC and each of the PIC Majority Shareholders agree as
follows:
ARTICLE I. PURCHASE AND SALE OF SHARES
1.1 Purchase and Sale of Shares. Subject to the terms and conditions set
forth in this Agreement, on the Closing Date, each of the PIC Shareholders
shall sell to MCCAC, and MCCAC shall purchase from each of the PIC Majority
Shareholders, the shares of PIC Common Stock set forth opposite each such PIC
Majority Shareholder's name on Exhibit A hereto, in each case free and clear of
all Encumbrances, except as stated herein, for such PIC Shareholder's
Proportional Share of the aggregate purchase price payable to the PIC
Shareholders at Closing of $3,250,000 (the "Purchase Price").
7
The Purchase Price will be payable as follows: (a) $1,340,000 payable by
transfer of immediately available funds at Closing; and (b) $1,910,000 payable
by delivery of promissory notes ("Notes") issued to the PIC Majority
Shareholders, Xxxxx Xxxxxx and Xxxxx Xxxx, in their respective Proportional
Shares, in the form attached as Exhibit B. The Notes shall be secured by a
Collateral Pledge and Security Agreement in the form attached hereto as Exhibit
F ("the Security Agreement"). The Notes shall be guarantied by Xxxxxxx
pursuant to guaranty agreements to be executed and delivered by Xxxxxxx at
Closing in the form of Exhibit H (the "Guaranty").
1.2 Closing of Purchase and Sale of Shares. The closing of the purchase
and sale of shares of PIC Stock contemplated herein (the "Closing") will occur
after all of the conditions set forth in Article II have either been fulfilled
or waived. Subject to the prior fulfillment or waiver of the conditions in
Article II, the parties will make the following deliveries at the Closing:
(a) MCCAC will deliver to each PIC Shareholder that Shareholder's
Proportional Share of the Purchase Price, payable in the manner described in
section 1.1(a) and (b); and
(b) each PIC Shareholder will deliver to MCCAC certificates
representing the shares of PIC Common Stock, duly endorsed (or accompanied by
duly executed stock powers) for transfer to MCCAC.
ARTICLE II. CONDITIONS TO OBLIGATIONS
2.1 Conditions to Obligations of MCCAC, PIC and the PIC Majority
Shareholders. The obligations of MCCAC, PIC and the PIC Majority Shareholders
to consummate, or cause to be consummated, the Acquisition are subject to the
satisfaction of the following conditions, any one or more of which may be
waived in writing by such parties:
(a) All necessary approvals, clearances and consents of governmental
and regulatory authorities required to be procured by MCCAC or PIC in
connection with the transactions contemplated by this Agreement, and all
material approvals and consents of third parties that are required to be
obtained in connection with the transactions contemplated by this Agreement,
shall have been procured.
(b) There shall not be in force any order or decree, statute, rule
or regulation nor shall there be on file any complaint by a governmental agency
2
8
seeking an order or decree, restraining, enjoining or prohibiting the
consummation of the transactions contemplated by this Agreement, and none of
MCCAC, PIC or the PIC Majority Shareholders shall have received notice from any
governmental agency that it has determined to institute any suit or proceeding
to restrain or enjoin the consummation of the transactions contemplated by this
Agreement or to nullify or render ineffective this Agreement if consummated, or
to take any other action which would result in the prohibition or material
change in the transactions contemplated by this Agreement.
2.2 Conditions to Obligations of MCCAC. The obligation of MCCAC to
consummate, or cause to be consummated, the transactions contemplated by this
Agreement is subject to the satisfaction of the following additional
conditions, any one or more of which may be waived in writing by MCCAC:
(a) Each of the representations and warranties of PIC and the PIC
Majority Shareholders contained in this Agreement shall be true and correct in
all material respects both on the date hereof and as of the Closing, as if made
anew at and as of that time, and each of the covenants and agreements of PIC,
and the PIC Majority Shareholders to be performed as of or prior to the Closing
shall have been duly performed, except in each case for changes after the date
hereof which are contemplated or expressly permitted by this Agreement.
(b) PIC shall have delivered to MCCAC a certificate signed by its
President, dated the Closing Date, certifying, in form reasonably satisfactory
to MCCAC and to its counsel that, to the best of the knowledge and belief of
such officer, the conditions specified in Section 2.1 and Section 2.2(a) as
they relate to PIC and in Section 2.2(e) and (i) have been fulfilled.
(c) Each PIC Shareholder shall have delivered to MCCAC a
certificate, dated the Closing Date, certifying, in form reasonably
satisfactory to MCCAC and to its counsel that, to the best of the knowledge and
belief of such PIC Shareholder, the conditions specified in Section 2.1 as they
relate to PIC and such PIC Shareholder and in Sections 2.2(a), (e) and (i) have
been fulfilled.
(d) MCCAC shall have received opinions, dated the Closing Date,
from Ford & Xxxxxxx in the form of Exhibit C.
(e) PIC shall have no liabilities or obligations except Permitted
Liabilities. The terms of any such Permitted Liabilities outstanding as of the
Closing Date shall permit payment in full at the borrower's election, without
prepayment penalties, similar charges or any lender's or third party consents.
3
9
(f) MCCAC shall have received an executed sale agreement and
release in the form of Exhibit D to this Agreement (the "Release Agreement")
from each of the PIC Shareholders, other than the PIC Majority Shareholders.
(g) Each of the PIC Options shall have been exercised in full or
otherwise terminated, and any person who receives shares of PIC Common Stock
upon exercise of any PIC Option shall have executed the Release Agreement.
(h) Each PIC Majority Shareholder shall have entered into a
Non-Disturbance and Non-Solicitation Agreement with MCCAC in substantially the
form attached as Exhibit E to this Agreement (the "Non-Competition Agreement").
(i) The assets to be held by PIC after the Closing Date shall be
free and clear of any Encumbrances except for Permitted Liens.
(j) Xxxxxxx shall have obtained new equity financing, on terms and
conditions reasonably satisfactory to Xxxxxxx, in an aggregate issue amount not
less than $3,000,000.
(k) This Agreement shall have been approved by Xxxxxxx'x Board of
Directors.
(l) Acknowledging that the parties have signed this Agreement
without attaching the PIC Disclosure Statement, the matters described on the PIC
Disclosure Statement must be acceptable to MCCAC in its sole discretion. PIC
agrees to deliver the PIC Disclosure Statement to MCCAC as soon as reasonably
possible after the date of this Agreement.
2.3 Conditions to the Obligations of the PIC Majority Shareholders. The
obligation of the PIC Majority Shareholders to consummate the Acquisition is
subject to the satisfaction of the following additional conditions, any one or
more of which may be waived in writing by all of the PIC Majority Shareholders:
(a) Each of the representations and warranties of MCCAC contained
in this Agreement shall be true and correct in all material respects both
on the date hereof and as of the Closing, as if made anew at and as of that
time, and each of the covenants and agreements of MCCAC to be performed as of
or prior to the Closing shall have been duly performed, except in each case for
changes after the date hereof which are contemplated or expressly permitted by
this Agreement.
4
10
(b) MCCAC shall have delivered to the PIC Majority Shareholders a
certificate signed by an officer of MCCAC, dated the Closing Date, certifying,
in form reasonably satisfactory to the PIC Majority Shareholders and their
counsel, to the effect that to the best of the knowledge and belief of such
officer, the conditions specified in Section 2.1 as they relate to MCCAC and in
Section 2.3(a) have been fulfilled.
(c) MCCAC shall have delivered to the PIC Majority Shareholders,
Xxxxx Xxxxxx and Xxxxx Xxxx the Security Agreement, the Notes and the
Guaranties, duly executed by MCCAC.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
OF PIC AND THE PIC SHAREHOLDERS
For purposes of this Article III, references to the knowledge of PIC or
the PIC Majority Shareholders shall mean matters within the actual knowledge of
either PIC Majority Shareholder and matters which either PIC Majority
Shareholder should have known after due investigation concerning the subjects
discussed in this Article III.
PIC and the PIC Majority Shareholders jointly and severally represent and
warrant to MCCAC, except as set forth on the PIC Disclosure Statement to be
attached as Exhibit F to this Agreement, as the same may be updated prior to
Closing, that:
3.1 Corporate Organization.
(a) PIC has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Texas and has the
corporate power and authority to own or lease its properties and to conduct its
business as it has been and is now being conducted. The copies of the Articles
of Incorporation of PIC, certified by the Secretary of State of the State of
Texas, and the By-Laws of PIC, certified by the Secretary of PIC, previously
delivered by PIC to MCCAC, are true, correct and complete.
(b) There are no PIC Subsidiaries.
(c) PIC is duly licensed or qualified and in good standing as a
foreign corporation in all jurisdictions identified on Section 3.1(c) of the PIC
Disclosure Statement and such jurisdictions are the only ones in which their
ownership of property or the character of their activities requires them to be
so licensed or qualified.
5
11
3.2 Subsidiaries and Other Entities. Except as set forth in Section 3.2
of the PIC Disclosure Statement, PIC does not own, directly or indirectly, any
partnership, equity, profit, participation or similar ownership interest in any
corporations, partnerships, joint ventures, trusts, unincorporated
organizations, associations or similar entities.
3.3 Corporate Authorization. The Board of Directors of PIC has approved
the transactions contemplated by this Agreement. PIC has all necessary
corporate power and authority to enter into this Agreement and to perform all
of the obligations to be performed by it hereunder. Upon the execution and
delivery hereof by MCCAC, this Agreement will constitute the valid and legally
binding obligation of PIC, enforceable against PIC in accordance with its
terms, except as enforceability thereof may be limited by applicable
bankruptcy, reorganization, insolvency or other similar laws affecting
creditors' rights generally, by equitable principles of general applicability
with respect to the availability of equitable remedies, or by public policies
applicable to securities laws.
3.4 Capital Stock. The entire authorized capital stock of PIC consists
solely of 1,000,000 shares of PIC Common Stock, of which 189,644 shares are
issued and outstanding and 500,000 shares of preferred stock of which 10,185
shares have been issued. All of the issued and outstanding shares of PIC
capital Stock (the "PIC Stock") are owned by the PIC Shareholders as set forth
on Exhibit A hereto. All of the outstanding shares of PIC Stock (and any
shares issuable pursuant to presently outstanding options, if exercised and
purchased at the applicable exercise price) were duly authorized and will be,
when issued and the option price paid (if applicable), validly issued, fully
paid and nonassessable. None of the capital stock or other securities of PIC
is entitled or subject to preemptive rights or registration rights. The
authorization or consent of no person is required in order to consummate the
transactions contemplated herein by virtue of any such person having an
equitable or beneficial interest in the PIC Stock. There are not now, and at
the Closing Date there will not be, any voting trusts or other agreements or
understandings to which PIC or any PIC Shareholder is a party or is bound with
respect to the voting of PIC Stock. All outstanding shares of PIC Common Stock
were offered, sold and issued in compliance with all applicable laws and
regulations, including, without limitation, federal and state securities laws.
Some of the shares of the PIC Stock owned by the PIC Majority Shareholders are
pledged to secure a debt to United Network, Inc., as disclosed in section 3.4
of the PIC disclosure Statement.
3.5 Options. Except as described in Section 3.5 of the PIC Disclosure
Schedule, there are no PIC Options or other commitments or obligations of PIC,
6
12
either firm or conditional, to issue, deliver or sell, whether under offers,
stock option agreements, stock bonus agreements, stock purchase plans,
incentive compensation plans, warrants, conversion rights or otherwise, any
authorized but unissued shares, or treasury shares, of PIC Stock or other
securities of PIC.
3.6 Compliance with Laws. To the best knowledge of the PIC Majority
Shareholders and except as set forth in Section 3.6 of the PIC Disclosure
Statement, (i) PIC is not currently in violation (nor is any of them currently
liable or otherwise currently responsible with respect to prior violations) of
any statute, law or regulation applicable to any of its presently or formerly
owned properties or to the conduct of its current or past businesses; (ii) PIC
has timely obtained all licenses and permits and timely filed all reports
required to be filed under any applicable laws or regulations; (iii) neither
PIC nor any other person has stored, dumped or otherwise disposed of any
chemical substances, including any "Hazardous Substances," "Pollutants" or
"Contaminants" (as such terms are defined in the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended ("CERCLA")) on,
beneath or about any of the properties of PIC or its Subsidiaries; (iv) PIC has
not received any written notice that it is a "potentially responsible party"
under any environmental law or of any violation of any environmental, zoning or
other land use ordinance, law or regulation relating to the operation of its or
their businesses, or to any of the processes followed, results obtained,
services provided or products made, modified or installed (in the ordinary
course of its or their businesses or otherwise), including, but not limited to,
the Toxic Substances Control Act of 1976, as amended, the Resource Conservation
Recovery Act of 1976, as amended, the Clean Air Act, as amended, the Federal
Water Pollution Control Act, as amended, CERCLA or the Occupational Safety and
Health Act of 1970, as amended, nor is PIC aware of any such violation. PIC
has listed in Section 3.6 of the PIC Disclosure Statement all environmental
reports known to PIC relating to any owned or leased real property of PIC and
has previously delivered to MCCAC a true, correct and complete copy of each
report so listed.
3.7 No Conflict. To the best knowledge of the PIC Majority Shareholders
and except as set forth in Section 3.7 of the PIC Disclosure Statement, the
execution and delivery of this Agreement by PIC and the PIC Majority
Shareholders and the consummation of the transactions contemplated hereby do
not, and will not constitute an event which, after notice or lapse of time or
both would (a) violate any provision of, or result in the breach of, or
accelerate or permit the acceleration of the performance required by the terms
of: (i) any applicable law, rule or regulation of any governmental body, (ii)
the Articles of Incorporation or By-Laws of PIC; (iii) any indenture, material
agreement, or other material instrument to which PIC is a party or by which PIC
may be bound; or
7
13
(iv) any order, judgment or decree applicable to PIC, or (b) terminate or
result in the termination of any indenture, material agreement or other
material instrument, or result in the creation of any Encumbrance upon any of
the properties or assets of PIC under any agreement to which PIC is a party.
3.8 Litigation. Except as set forth in section 3.8 of the PIC Disclosure
Statement, there are no actions, suits, proceedings, claims or investigations
formally instituted and pending or, to the knowledge of PIC or any of the PIC
Majority Shareholders, threatened against or specifically affecting PIC, or
involving any of its properties or assets, at law or in equity, or before or by
any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, or any
arbitration panel or alternative dispute resolution body. PIC is not subject
to or in default under, any order, writ, injunction or decree of any court or
Federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, or any arbitration panel or alternative
dispute resolution body.
3.9 Insurance. Set forth in Section 3.9 of the PIC Disclosure Statement
is a list of (a) all insurance policies held by PIC (indicating the insurer,
type, amount and term of coverage, deductible, description of vehicles, latest
property insurable values by location, workers' compensation payroll
(separately for clerical, sales and technical employees), and additional named
insureds with respect to each such policy); and (b) all claims pending under
any of such insurance policies. All of these policies are in full force and
effect and all premiums due thereon have been paid or accrued. PIC has
previously delivered to MCCAC complete copies of each such insurance policy.
3.10 Intellectual Property. Except as set forth in Section 3.10 of the
PIC Disclosure Statement, there are no patents or patent applications;
trademarks, service marks, trade dress, trade names, corporate names or any
applications to register any of the foregoing marks or names; copyrights or
copyright registrations; or any licenses, other than software licenses acquired
solely through the purchase of the underlying software, to or from third
parties with respect to any of the foregoing (including, without limiting the
generality of the foregoing, all computer software, data and documentation)
relating to PIC's business as now conducted or as presently proposed to
be conducted. PIC has not infringed, misappropriated or otherwise conflicted
with any proprietary rights of any third parties. PIC is not aware of any
infringement, misappropriation or conflict which will occur as a result of the
continued operation of PIC's business as now conducted or as presently proposed
to be conducted. PIC has not received any notices of any infringement or
misappropriation from any third party.
8
14
3.11 Assets. Section 3.11 of the PIC Disclosure Statement lists all
fixed capital assets owned by PIC (the "Asset List"). The assets on the Asset
List include (i) substantially all of the tangible assets presently used by PIC
in the conduct of its business and (ii) all assets reflected under "Property,
Plant & Equipment" on the Interim Balance Sheet.
3.12 Financial Statements. PIC will, prior to Closing, deliver to MCCAC
the following financial statements (including any notes thereto), all of which
have been prepared in accordance with GAAP consistently applied throughout the
periods involved and present fairly in all material respects the financial
position of PIC, at the dates stated in such financial statements and the
results of their operations for the periods stated therein (subject in the case
of the financial statements referenced in paragraph (b) to the absence of notes
and to normal year-end adjustments):
(a) a Balance Sheet at December 31, 1996, and a Statement of
Income and Retained Earnings, Statement of Liabilities and Stockholders' Equity
for the year ended December 31, 1991; and
(b) a Sheet at June 30, 1997 (the "Interim Balance Sheet"), and a
Statement of Income and a Statement of Cash Flows for the six months ended June
30, 1997.
3.13 Liabilities. Except as set forth in section 3.13 of the PIC
Disclosure Statement, PIC has no liability or obligation, secured or unsecured
(whether accrued, absolute, contingent or otherwise), except:
(i) trade payables and accrued expenses incurred in the
ordinary course of business and consistent with past practices for which
the stated due date has not passed ("Current Payables");
(ii) those liabilities or obligations (for which the stated
due date has not passed) relating to operating contracts or leases entered
into in the ordinary course of business consistent with past practice;
(iii) liabilities and obligations of the type shown on the
Interim Balance Sheet; and
(iv) the Transaction Costs.
3.14 Transactions Not in the Ordinary Course. Except as set forth in
Section 3.14 of the PIC Disclosure Statement or as otherwise contemplated by
this
9
15
Agreement, during the period commencing June 1, 1997 and ending on the
date of this Agreement, PIC has not (a) incurred any liability or obligation
not in the ordinary course of business or entered into any transaction other
than in the ordinary course of business; (b) declared or made any payment or
distribution to shareholders or other holders of equity or other similar
ownership or participation interests, including stock splits, stock dividends
and profit distributions, or purchased or redeemed any shares or other equity
or other similar ownership or participation interests except as provided for in
this Agreement; (c) placed any Encumbrance on any of its assets, tangible or
intangible; (d) sold or transferred any of its other assets, tangible or
intangible, except in the ordinary course of business; (e) canceled any debts
or claims except in each case in the ordinary course of business; (f) increased
the rate of compensation of any officer or of any employee receiving (giving
effect to such increase) more than $50,000 per annum or paid or declared any
bonus (excluding fixed-formula compensation incentive payments such as may be
paid to certain sales employees from time to time); or (g) agreed to or amended
or instituted any employment contract, bonus plan, stock option plan, profit
sharing plan, pension plan, retirement plan or other similar arrangement or
plan.
3.15 Capital Projects. Set forth in Section 3.15 of the PIC Disclosure
Statement is a description of all Capital Expenditures currently committed for
or authorized by PIC.
3.16 Taxes. Except as set forth in Section 3.16 of the PIC Disclosure
Statement, (i) PIC has accurately prepared and has duly and timely filed with
all appropriate Federal, foreign, state and local governmental agencies, all
tax returns and reports required to be filed by it; (ii) all taxes owed or
withheld, or which may be claimed to be owed or required to be withheld, to or
for the benefit of any governmental agency for or with respect to the periods
covered by such returns and reports or with respect to any period (or portions
thereof) ending at or before the Closing, and all interest, penalties,
assessments and deficiencies connected therewith, have been or will be timely
paid in full or provided for in full; (iii) PIC has not executed or filed with
any taxing authority any agreement extending the period for assessment or
collection of any taxes; (iv) PIC is not a party to any pending audit, inquiry,
action or proceeding, nor has PIC been notified of the inception of any such
audit, inquiry, action or proceeding by any Federal, foreign, state or local
governmental entity or municipality or subdivision thereof or any authority,
department, commission, board, bureau, agency, court or instrumentality for the
assessment or collection of taxes; (v) no deficiency or assessment notices or
reports or statements of tax due have been received by PIC in respect of any of
its tax returns; and (vi) the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will have no material
effect
10
16
upon the tax treatment of any previously consummated transaction in which PIC
acquired all or any part of the assets or capital stock of another entity.
3.17 Bank Accounts; Powers of Attorney. Set forth in Section 3.17 of the
PIC Disclosure Statement is a complete list of (a) all banks in which PIC has
an account or safe deposit box and the names of all persons authorized to draw
thereon or have access thereto; and (b) the names of all persons holding powers
of attorney from PIC and a summary statement of the terms thereof.
3.18 Real Estate. Section 3.18 of the PIC Disclosure Statement lists all
real estate, real estate options and leaseholds owned or held by PIC. To the
best knowledge of the PIC Majority Shareholders and except as set forth in
Section 3.18 of the PIC Disclosure Statement, there are no title defects,
issues of validity or enforceability, deficiencies in rights of possession or
use or similar matters relating to or affecting any real estate owned or
leased, or which is subject to an option to buy, sell or lease, of or by PIC.
Except for Permitted Liens, PIC has good leasehold interests in all of its
leaseholds, none of which interests will be materially and adversely affected
by the transactions contemplated hereby, and each lease with an initial term of
more than one year is, to the knowledge of PIC, enforceable against the lessor
thereunder and PIC, as the case may be, enjoys quiet possession of all
leaseholds.
3.19 Title to Properties. To the best knowledge of the PIC Majority
Shareholders, PIC has good title to all of its personal properties and assets,
tangible and intangible (including, without limitation, those on the Asset
List) and, except for Encumbrances set forth in Section 3.19 of the PIC
Disclosure Statement (which identifies those that will be removed prior to the
Closing), none of such properties or assets is subject to any Encumbrance other
than (a) any Encumbrances connected with operating leases entered into in the
ordinary course of business consistent with past practice, (b) such other
Encumbrances that do not secure indebtedness and do not materially detract
from the value of, or interfere with the present or future use of, the property
subject thereto and affected thereby or otherwise materially impair the
business, financial condition, results of operations or operations of PIC, or
(c) as otherwise disclosed to and approved by MCCAC in writing (collectively,
"Permitted Liens").
3.20 Contracts. Except as set forth in Section 3.20 of the PIC
Disclosure Statement, PIC is not a party to, and none of its properties is
bound by, any (a) agreement or other arrangement not made in the ordinary
course of business, involving payments or receipts in excess of $10,000
individually or more than $50,000 in the aggregate; (b) employment or
consulting contract; (c) contract with any labor union; (d) employee bonus,
pension, profit-sharing, retirement, stock
11
17
purchase or other benefit or welfare plan or agreement; (e) lease with
respect to real or personal property, whether as lessor or lessee; (f) contract
or commitment for the purchase of raw materials or supplies or the sale of
products involving more than $10,000 per annum or $50,000 in the aggregate;
(g) indenture, agreement, note, mortgage, guaranty or other writing which
evidences or relates to any loan of money to, or indebtedness for money
borrowed by PIC; (h) license agreement or other contract or agreement relating
to patents, trademarks, trade names, techniques or copyrights or applications
for any thereof, inventions, trade secrets or other proprietary know-how or
technical assistance; or (i) any loan to officers, directors or employees of
PIC. Except as set forth in Section 3.20 of the PIC Disclosure Statement, to
the knowledge of PIC, PIC is not in default under the terms of any commitments
described in Subsections (a) through (i) of this Section.
3.21 Brokers. PIC has not directly or indirectly dealt with anyone
acting in the capacity of a finder or broker and none of them has incurred nor
will they incur any obligation for any finder's or broker's fees or commissions
in connection with this Agreement or the Acquisition.
3.22 Special Liabilities; Warranties. Except as set forth in Section
3.22 of the PIC Disclosure Statement, (i) PIC has no liability under any
contracts under which the consideration to be paid or received by PIC is
determined in whole or in part based on profits or operating results, nor are
there any contingent payments owing to any person in connection with the
acquisition of any business, entity, frequency or channel by PIC; (ii) PIC has
not extended any warranties to its customers; and (iii) PIC is not now subject
to any outstanding, pending or, to the knowledge of PIC, threatened claims
based on warranty coverage.
3.23 Employee Benefit Matters. Except as set forth in Section 3.23 of
the PIC Disclosure Statement:
(a) PIC does not have and never has had any obligation to
contribute to any "multiemployer plan" (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) or any
"multiple employer plan" described in Section 210(a) of ERISA or Section 413(C)
of the Code. PIC does not maintain, contribute to, or have any liability under
or with respect to any plan or arrangement, whether or not terminated, which
provides or provided medical, health, life insurance or other welfare-type
benefits for current or future retired or terminated employees (except for
limited continued medical benefit coverage required to be provided under
Section 4980B of the Code or as required under applicable state law). PIC does
not maintain, contribute to or have any liability under or with respect to any
employee plan which is a "defined benefit plan" (as defined in Section 3(35) of
12
18
ERISA), whether or not terminated. PIC does not maintain, contribute to or
have any liability under or with respect to any employee plan which is a
"defined contribution plan" (as defined in Section 3(34) of ERISA), whether or
not terminated.
(b) PIC does not maintain, contribute to or have any liability
under or with respect to any "employee benefit plan" (within the meaning of
Section 3(3) of ERISA) or any other plan or arrangement providing benefits to
current or former employees or directors, including any bonus plan, plan for
deferred compensation, employee health or other welfare benefit plan or other
arrangement, whether or not terminated (any such plan or arrangement, an
"Employee Plan"). For purposes of this Section 3.23, "PIC" includes all
organizations that now are or that have been, within the past six years, under
common control with PIC pursuant to Section 414(b) or (c) of the Code. PIC
previously has delivered to MCCAC true, complete and correct copies of each of
the Employee Plans, including all amendments thereto, and any other documents
or other instruments relating thereto reasonably requested by MCCAC.
(c) All Employee Plans are being, and have been, maintained,
operated and administered in all material respects in accordance with their
respective terms and in compliance with all applicable laws.
(d) No Employee Plan is funded through a "welfare benefit fund" as
defined in Section 419(e) of the Code.
(e) There have been no prohibited transactions or breaches of any
of the duties imposed on "fiduciaries" (within the meaning of Section 3(21) of
ERISA) by ERISA with respect to any Employee Plan that could result in PIC
becoming liable directly or indirectly (by indemnification or otherwise)
for any material excise tax, penalty or other liability under ERISA or the
Code.
(f) There are no actions or claims pending or, to the knowledge of
PIC, threatened, with respect to any Employee Plan (other than routine claims
for benefits), and there are no investigations or audits of any Employee Plan
by any governmental authority currently pending and there have been no such
investigations or audits that have been concluded that resulted in any
liability of PIC that has not been fully discharged.
(g) All (i) insurance premiums required to be paid with respect to,
(ii) benefits, expenses, and other amounts due and payable under, and (iii)
contributions, transfers, or payments required to be made to, any Employee Plan
have been paid. With respect to any insurance policy providing funding for
13
19
benefits under any Employee Plan, (iv) there is no liability of PIC in the
nature of a retroactive or retrospective rate adjustment, loss sharing
arrangement, or other actual or contingent liability, nor would there be any
such liability if such insurance policy was terminated on the date hereof, and
(v) no insurance company issuing any such policy is in receivership,
conservatorship, liquidation or similar proceeding and, to the knowledge of
PIC, no such proceedings with respect to any insurer are imminent.
(h) Each Employee Plan that is a group health plan subject to
Section 4980B of the Code (or which was subject to Section 162(k) of the Code)
has been operated in material compliance with the continuation coverage
requirements of Section 4980B of the Code and Section 162(k) of the Code, as
applicable, and Part 6 of Subtitle B of Title I of ERISA.
(i) Each Employee Plan that is subject to Section 1862(b)(1) of the
Social Security Act has been operated in compliance with the secondary payer
requirements of Section 1862(b)(1) of such Act.
(j) The execution, delivery and performance of this Agreement will
not, solely in and of itself, (i) constitute a stated triggering event under any
Employee Plan that will result in any payment (whether of severance pay or
otherwise) becoming due from PIC to any present or former officer, employee,
director, shareholder or consultant, or former employee (or dependents of any
thereof), or (ii) accelerate the time of payment or vesting, or increase the
amount, of compensation due to any employee, officer, director, shareholder or
consultant of PIC.
(k) PIC has not agreed or committed to make any amendments to any
of the Employee Plans not already embodied in the documents comprising any such
Employee Plan, other than any amendments required by law.
(l) All contributions, transfers, and payments by PIC in respect
of any Employee Plan have been or are fully deductible under the Code.
(m) PIC's financial statements at and for the period ended June
30, 1997 contain and, at and for the period ending on the Closing, will contain
adequate accruals for (i) bonuses, sales commissions and vacation pay earned
but not received as of such dates and (ii) incurred or continuing but unpaid
claims under Employee Plans not funded by insurance.
14
20
(n) No Employee Plan provides benefits to any individual who is
not a current or former employee of PIC, or the dependents or other
beneficiaries of any such individual.
(o) No "excess parachute payments" within the meaning of Section
280G of the Code will be made in connection with or as a result of any
transaction contemplated by this Agreement (without regard to whether any such
payment might be reasonable compensation for personal services performed or to
be performed in the future).
(p) Each Employee Plan intended to be qualified under Section
401(a) of the Code is so qualified and has heretofore been determined by the
Internal Revenue Service (the "IRS") to be so qualified, and each trust created
thereunder has heretofore been determined by the IRS to be exempt from tax
under the provisions of Section 501(a) of the Code, and nothing has occurred
since the date of any such determination that could reasonably be expected to
give the IRS grounds to revoke such determination.
(q) All (i) insurance premiums required to be paid with respect to,
(ii) benefits, expenses, and other amounts due and payable under, and (iii)
contributions, transfers, or payments required to be made to, any Employee Plan
prior to the Closing Date will have been paid, made or accrued on or before the
Closing Date.
(r) Each "fiduciary" and every "plan official" (as defined in
Section 412 of ERISA) of each Employee Plan is bonded to the extent required by
Section 412 of ERISA.
3.24 Materially Correct. To the best knowledge of the PIC Majority
Shareholders, Article III of this Agreement together with the PIC Disclosure
Statement does not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the disclosures contained
therein in the light of the circumstances under which they are made, not
misleading.
3.25 Information. PIC has delivered to MCCAC on or prior to the date
hereof all private placement, confidential offering or similar memoranda and
other offering or solicitation materials used at any time by PIC or anyone
acting on its behalf in connection with any offer or sale of securities of PIC.
15
21
3.26 Relationships with Related Persons. Except as set forth in Section
3.26 of the PIC Disclosure Statement, no PIC Majority Shareholder or any
Related Person of any PIC Majority Shareholder:
(a) has, or since January 1, 1996 has had any interest in any
property (whether real, personal or mixed and whether tangible or intangible),
used in or pertaining to the business of PIC;
(b) has owned (beneficial or of record) an equity interest or any
other financial or profit interest in an entity that has had business dealings
or a material financial interest in any transaction with PIC or engaged in
competition with PIC; or
(c) is a party to any contract with, or has any claim or right
against, PIC.
ARTICLE IV. ADDITIONAL REPRESENTATIONS AND
WARRANTIES OF THE PIC
SHAREHOLDERS
Each of the PIC Majority Shareholders, individually and not jointly and
severally, represents and warrants to MCCAC that:
4.1 Authority. He has all necessary power and authority to execute and
deliver this Agreement and consummate the transactions contemplated hereby.
Upon the execution and delivery hereof by, respectively, MCCAC, PIC and the
other PIC Majority Shareholders, this Agreement will constitute his valid and
legally binding obligation, enforceable against him in accordance with its
terms, except as enforceability thereof may be limited by applicable
bankruptcy, reorganization, insolvency or other similar laws affecting
creditors' rights generally, by equitable principles of general applicability
with respect to the availability of equitable remedies, or by public policies
applicable to securities laws.
4.2 Ownership of Shares. He owns the shares of PIC Common Stock set
forth opposite his name on Exhibit A hereto free and clear of all Encumbrances,
except as disclosed in the PIC Disclosure Statement.
4.3 No Conflict. Neither the execution, delivery and performance of
this Agreement nor the consummation by him of the transactions contemplated
hereby will require the consent, waiver, approval, license or authorization of
or filing with any person or public authority and will not conflict with,
constitute a violation of
16
22
or default under or result in a breach of any contract, commitment, agreement,
arrangement, judgment, order, ordinance, regulation, decree or restriction of
any kind to which he is a party or by which he or his shares of PIC Common
Stock is bound.
ARTICLE V. REPRESENTATIONS AND WARRANTIES
OF MCCAC
MCCAC represents and warrants to PIC and the PIC Shareholders that:
5.1 Corporate Organization; Authorization.
(a) MCCAC has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Iowa and has the
corporate power and authority to own or lease its properties and to conduct its
business as it is now being conducted.
(b) MCCAC has all necessary corporate power and authority to enter
into this Agreement and to perform all of the obligations to be performed by it
hereunder. The execution, delivery and performance of this Agreement by MCCAC
have been duly authorized by MCCAC, and upon the execution and delivery hereof
by MCCAC, this Agreement will constitute the valid and legally binding
obligation of MCCAC, enforceable against it in accordance with its terms,
except as enforceability thereof may be limited by applicable bankruptcy,
reorganization, insolvency or other similar laws affecting creditors' rights
generally or by equitable principles of general applicability with respect to
the availability of equitable remedies.
5.2 No Conflict. The execution and delivery of this Agreement by MCCAC
and the consummation of the transactions contemplated hereby do not and will
not violate any provision of, or result in the breach of, or accelerate or
permit the acceleration of the performance required by the terms of, any
applicable law, rule or regulation of any governmental body, the Certificate
of Incorporation or the By-Laws of MCCAC or any agreement, indenture or other
instrument to which MCCAC is a party or by which MCCAC may be bound, or of any
order, judgment or decree applicable to it, or terminate or result in the
termination of any such agreement, indenture or instrument, or result in the
creation of any Encumbrance upon any of the properties or assets of MCCAC under
any agreement to which it is a party, or constitute an event which, after
notice or lapse of time or both, would result in any such violation, breach,
acceleration, termination or creation of an Encumbrance, except where any such
violation, breach, acceleration, termination or creation would not impair
MCCAC's ability to
17
23
perform, in any material respect, its obligations under this Agreement or any
other document or instrument to which MCCAC is a party in connection with the
transactions contemplated herein.
ARTICLE VI. COVENANTS OF PIC AND THE PIC
MAJORITY SHAREHOLDERS
6.1 Conduct of Business. From the date of this Agreement until the
Closing Date, PIC shall conduct its business, only in the ordinary course in
substantially the same manner as heretofore conducted and, without limiting the
generality of the foregoing, PIC shall not, without the written consent of
MCCAC:
(a) dispose of or contract to dispose of any other assets,
tangible or intangible, except in the ordinary course of business, consistent
with past practice and, with respect to capital assets, in connection with the
replacement of the asset being disposed of;
(b) voluntarily incur any absolute or contingent debt obligation
except in the ordinary course of business under currently existing lines of
credit;
(c) enter into any material contract, including, without
limitation, any lease or contract for the purchase or sale of real estate or of
any interest therein;
(d) encumber any property or other assets except for Encumbrances
constituting Permitted Liens;
(e) declare or pay any dividend or purchase or redeem any of its
shares, notes or other securities or make any other distribution to
shareholders;
(f) adopt any new or amend any existing employee benefit plan or
any employment agreement or amend any PIC Option;
(g) form or cause to be formed any subsidiary;
(h) issue, sell, distribute or dispose of any shares, notes or
other securities of PIC or commit itself to do so;
(i) make any commitments for Capital Expenditures; or
18
24
(j) fail to keep its properties insured substantially to the same
extent as they are currently insured.
6.2 Reasonable Efforts. The PIC Majority Shareholders and PIC shall use
all reasonable efforts to preserve intact its business organization and to
preserve its goodwill as to customers, suppliers and others having business
relations with it.
6.3 Inspection. PIC shall permit representatives of MCCAC, upon
reasonable prior notice, during normal business hours and under reasonable
circumstances, to examine PIC's properties, books, contracts, tax returns and
other records, and shall furnish such representatives with all such information
concerning such affairs as they may reasonably request.
6.4 Best Efforts. PIC and the PIC Majority Shareholders shall use their
reasonable best efforts to obtain all approvals or consents necessary to permit
the consummation of the transactions contemplated by this Agreement.
6.5 Update Information. On or before the Closing Date, PIC shall correct
and supplement in writing any information furnished on the PIC Disclosure
Statement that, to the knowledge of PIC, is incorrect or incomplete (or
otherwise expressly contemplated by Article III of this Agreement), and shall
promptly furnish such corrected and supplemented information to MCCAC, so that
such information shall be correct and complete at the time such updated
information is so provided. Thereafter, to the Closing, PIC shall notify
MCCAC in writing of any changes or supplements to the updated information
needed, to the knowledge of PIC, to make such information correct and complete
at all times to the Closing. It is agreed that the furnishing of such
corrected and supplemental information, in and of itself, shall not create any
presumption that such information constitutes or evidences the existence of a
material change or any breach or violation by PIC of any provision of this
Agreement.
6.6 Trading Prohibitions. PIC and each PIC Majority Shareholder hereby
acknowledges that as a result of disclosures by MCCAC contemplated under this
Agreement, PIC and its Affiliates may, from time to time, have material,
non-public information concerning Xxxxxxx. PIC and each PIC Majority
Shareholder confirms that it and its Affiliates are aware and PIC has advised
its representatives that (a) the United States securities laws may prohibit a
person who has material, non-public information from purchasing or selling
securities of any company to which such information relates, and (b) material
non-public information shall not be communicated to any other person except as
permitted herein.
19
25
ARTICLE VII. JOINT COVENANTS
7.1 Support of Transactions. MCCAC, PIC, the PIC Majority Shareholders
and their respective Affiliates shall each (a) use his or its reasonable best
efforts to assemble, prepare and file any information (and, as needed, to
supplement such information) as may be reasonably necessary to obtain as
promptly as practicable all governmental and regulatory consents required under
Article II, (b) exert his or its reasonable best efforts to obtain all material
consents and approvals of third parties that any of MCCAC, PIC, the PIC
Shareholders or their respective Affiliates are responsible to obtain in order
to consummate the transactions contemplated by this Agreement, (c) take such
other action as may reasonably be necessary or as another party may reasonably
request to satisfy the conditions of Article II or otherwise to comply with
this Agreement, and (d) provide the other parties, and such other party's
employees, officers, accountants, lawyers, financial advisors and other
representatives with access to its personnel, properties, business and records
under all reasonable circumstances.
ARTICLE VIII. INDEMNIFICATION
8.1 Survival; Right to Indemnification Not Affected by Knowledge. All
representations, warranties, covenants, and obligations of PIC, the PIC
Majority Shareholders and MCCAC in this Agreement, the Transaction Documents,
the certificates delivered pursuant to Section 2.2, and any other certificate
or document delivered pursuant to this Agreement will survive the Closing. The
waiver of any condition based on the accuracy of any representation or
warranty, or on the performance of or compliance with any covenant or
obligation, will not affect the right to indemnification, payment of Damages,
or other remedy based on such representations, warranties, covenants, and
obligations.
8.2 Indemnification and Payment of Damages by PIC Majority Shareholders.
The PIC Majority Shareholders, jointly and severally, will indemnify and hold
harmless MCCAC and its representatives, officers, directors, employees, agents,
stockholders, controlling persons, subsidiaries and Affiliates (collectively,
the "MCCAC Indemnitees") for, and will pay to the MCCAC Indemnitees the amount
of, any Damages arising, directly or indirectly, from or in connection with:
(a) any breach of any representation or warranty made by PIC or
the PIC Majority Shareholders in this Agreement, the PIC Disclosure Statement,
as supplemented, any Transaction Document or any other certificate or document
delivered by PIC or the PIC Majority Shareholders pursuant to this Agreement
20
26
(except that the indemnification with respect to representations and warranties
in Article IV of this Agreement shall be several and not joint for each PIC
Majority Shareholder for Damages arising, directly or indirectly, from or in
connection with a breach of any of such PIC Majority Shareholder's
representations or warranties in Article IV);
(b) any breach by PIC or any PIC Majority Shareholder of any
covenant or obligation of PIC or any PIC Majority Shareholder in this Agreement
or any Transaction Document;
(c) any claim by any person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such person with PIC or any PIC Majority
Shareholder (or any person acting on their behalf) in connection with any of
the transactions contemplated by this Agreement;
(d) any liabilities or obligations not incurred in the ordinary
course of business by PIC prior to the Closing Date (whether known or unknown)
that are not disclosed in the PIC Disclosure Statement or reflected on the
Interim Balance Sheet; or
(e) any claims, liabilities or obligations known but not disclosed
relating to any of the PIC Employees, including, without limitation, any
liability under any employee benefit plan or relating to severance or wrongful
termination; or
The remedies provided in this Section 8.2 will not be exclusive of or
limit any other remedies that may be available to MCCAC or the other MCCAC
Indemnitees.
8.3 Indemnification and Payment of Damages by MCCAC. MCCAC will
indemnify and hold harmless each of the PIC Majority Shareholders and each of
their respective representatives, officers, directors, employees, agents,
stockholders, controlling persons, subsidiaries and Affiliates (collectively,
the "PIC Indemnitees") for, and will pay to the PIC Indemnitees the amount of,
any Damages arising, directly or indirectly, from or in connection with:
(a) any breach of any representation or warranty made by MCCAC in
this Agreement, any Transaction Document or any other certificate or document
delivered by MCCAC;
21
27
(b) any breach by MCCAC of any covenant or obligation of MCCAC in
this Agreement or any Transaction Document;
(c) any claim by any person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such person with MCCAC (or any person acting
on its behalf) in connection with any of the transactions contemplated by this
Agreement; or
(d) any liabilities or obligations incurred by PIC prior to the
Closing in the ordinary course of business as disclosed to MCCAC in this
Agreement or in the PIC Disclosure Statement and any liabilities or obligations
incurred by PIC after the Closing Date.
The remedies provided in this Section 8.3 will not be exclusive of or
limit any other remedies that may be available to the PIC Majority Shareholders
or the other PIC Indemnitees.
8.4 Procedure for Indemnification.
(a) As soon as is reasonably practicable after any MCCAC
Indemnitee or PIC Indemnitee becomes aware of any claim, event or circumstance
(a "Claim") that has or might give rise to an indemnification obligation under
Section 8.2 or Section 8.3 of this Agreement, such MCCAC Indemnitee or PIC
Indemnitee, as the case may be (an "Indemnified Person"), shall give written
notice thereof (a "Claim Notice") to the party or parties from which
indemnification is sought (the "Indemnifying Persons"). The Claim Notice shall
describe the Claim in reasonable detail, and shall indicate the amount
(estimated if necessary and to the extent feasible) of the Damages that have
been or may be suffered by the Indemnified Person. The failure of any
Indemnified Person to promptly give the Indemnifying Persons a Claim Notice
shall not preclude such Indemnified Person from obtaining indemnification under
this Article VIII, except to the extent, and only to the extent, that such
Indemnified Person's failure has actually prejudiced the rights or increased
the liabilities and obligations of any of the Indemnifying Persons hereunder.
(b) With respect to any Claim Notice, the Indemnifying Persons
shall have the right by written notice to the Indemnified Person not later than
30 days after receipt of such Claim Notice, to assume the control of the
defense, compromise or settlement of such Claim, provided that (i) such
assumption shall, by its terms, be without cost to the Indemnified Person,
(ii) each of the Indemnifying Persons agree in writing that they are
responsible to indemnify (fully
22
28
and completely) the Indemnified Person for such Claim, and (iii) any settlement
of such Claim shall involve only the payment of money damages by the
Indemnifying Persons.
(c) Upon the assumption of control by the Indemnifying Persons as
provided in Section 8.4(b), the Indemnifying Persons shall diligently proceed
with the defense, compromise or settlement of the Claim at the Indemnifying
Persons' sole expense, including employment of counsel reasonably satisfactory
to the Indemnified Person and, in connection therewith, the Indemnified Person
shall cooperate fully, but at the expense of the Indemnifying Persons, to make
available to the Indemnifying Persons all pertinent information and witnesses
under the Indemnified Person's control, and to take such other steps as in the
opinion of counsel for the Indemnifying Persons are necessary to enable the
Indemnifying Persons to conduct such defense.
(d) The final, non-appealable determination of any Claim,
including all related costs and expenses, shall be binding and conclusive upon
the Indemnifying Persons and the Indemnified Person as to the amount of the
indemnification; provided, however, that in the Indemnifying Persons' defense
of such Claim, except with the written consent of the Indemnified Person, the
Indemnifying Persons shall not consent to entry of any judgment or enter into
any settlement, which does not include as an unconditional term thereof the
provision by the claimant to the Indemnified Person of a release of the
Indemnified Person from all liability in respect of such Claim.
(e) Should the Indemnifying Persons fail to give notice to the
Indemnified Person as provided in Section 8.4(b), the Indemnified Person shall
be entitled to defend, settle or compromise the Legal Claim as in its sole
discretion may appear advisable, and such final determination, settlement or
compromise of the Legal Claim shall be binding upon the Indemnifying Persons.
8.5 The Shareholder Representative. (a) Each Majority PIC Shareholder
hereby irrevocably makes, constitutes and appoints Xxxxxx Xxxxxxxxx as his
agent (the "Shareholder Representative") and authorizes and empowers him to
fulfill the role of Shareholder Representative hereunder.
(b) In the event of the death, resignation or incapacity of Xx.
Xxxxxxxxx, his successor shall be appointed by consent of the majority in
interest in PIC Common Stock held by the PIC Majority Shareholders as of the
Closing Date within 30 days of such event. The decisions and actions of any
successor Shareholder Representative shall be, for all purposes, those of
a Shareholder Representative as if originally named herein. The death or
incapacity
23
29
of any Shareholder Representative shall not terminate the authority and agency
of the Shareholder Representatives. The Shareholder Representative may resign
at any time upon notice to MCCAC and each PIC Majority Shareholder given at
least 30 days prior to the effective date of such resignation, provided that no
such resignation shall be effective until his successor has been appointed in
accordance with this Section 8.5(b), and has accepted such appointment.
(c) The Shareholder Representative shall take any actions as he
may deem appropriate with respect to any Claim Notice as provided in this
Article VIII. The PIC Majority Shareholders agree that the Shareholder
Representative shall have full power and authority to receive all Claims
Notices with respect to Claims by any MCCAC Indemnitee, to control the defense,
compromise or settlement of any Claims by any MCCAC Indemnitee and otherwise to
act on behalf of the PIC Majority Shareholders for all purposes of Section 8.4,
and any action by the Shareholder Representative within the scope of such
authority shall be binding on all of the PIC Majority Shareholders. In
performing any of his duties hereunder, the Shareholder Representative shall
not incur any liability to anyone for damages, losses or expenses, except for
willful misconduct.
8.6 Limitations on Indemnification Obligations of the PIC Majority
Shareholders.
(a) The indemnification obligations of the PIC Majority
Shareholders pursuant to this Article VIII will not exceed $325,000 for Xxxxxx
Xxxxxxxxx and $2,925,000 for Xxxxx Xxxxxx which must be enforced first by
setoff of any amounts owed by MCCAC on the Notes issued to them respectively.
(b) The PIC Majority Shareholders will have no indemnification
obligations pursuant to this Article VIII until the aggregate losses incurred by
Indemnified Persons exceed $20,000 (the "Indemnification Threshold");
thereafter, the PIC Majority Shareholders will, subject to the other
limitations set forth in this Section 8.6, indemnify the Indemnified Persons
for all Losses, including those used in calculating the Indemnification
Threshold.
8.7 Additional Indemnification Obligations of the PIC Majority
Shareholders. Without regard to the limitations set forth in section 8.6, the
PIC Majority Shareholders will indemnify and hold harmless MCCAC from and
against all Damages incurred by PIC or MCCAC after the date of Closing relating
to the involvement of PIC or any of its current or former Affiliates relating
to Telecom America, Inc. bankruptcy proceedings or arising in connection with
such entity.
24
30
ARTICLE IX. TERMINATION
9.1 Termination. This Agreement may be terminated and the transactions
contemplated hereby abandoned:
(a) By mutual written consent of PIC, the PIC Majority
Shareholders and MCCAC at any time prior to the Closing.
(b) By PIC or MCCAC, upon written notice to each of the other
parties hereto, if the Closing has not occurred on or prior to September 15,
1997.
(c) Prior to the Closing, by written notice to PIC from MCCAC, if
(i) there is a material breach of any representation, warranty, covenant or
agreement on the part of PIC or any PIC Majority Shareholder set forth in this
Agreement, or if a representation or warranty of PIC or any PIC Majority
Shareholder shall be untrue in any material respect, in either case such that
the condition specified in Sections 2.2(a), 2.2(b) or 2.2(c) would not be
satisfied at Closing (a "Terminating PIC Breach"), except that, if such
Terminating PIC Breach is curable by PIC through the exercise of its reasonable
best efforts, then, for up to 30 days, but only as long as PIC continues to
exercise such reasonable best efforts, MCCAC may not terminate this Agreement
under this Section 9.1(c)(i), (ii) any governmental or regulatory consent or
approval required for consummation of the transactions contemplated hereby is
denied by or in a final order or other final action issued or taken by the
appropriate governmental or regulatory authority, agency or similar body or
(iii) consummation of any of the transactions contemplated hereby is enjoined,
prohibited or otherwise restrained by the terms of a final, non-appealable
order or judgment of a court of competent jurisdiction.
(d) Prior to the Closing, by written notice to MCCAC from PIC or
from the holders of a majority of shares of PIC Stock, if (i) there is a
material breach of any representation, warranty, covenant or agreement on the
part of MCCAC set forth in this Agreement, or if a representation or warranty
of MCCAC shall be untrue in any material respect, in either case such that the
condition specified in Sections 2.3(a) or 2.3(b) would not be satisfied at
Closing (a "Terminating MCCAC Breach"), except that, if such Terminating MCCAC
Breach is curable by MCCAC through the exercise of its reasonable best
efforts then for up to 30 days, but only as long as MCCAC continues to exercise
such reasonable best efforts, PIC may not terminate this Agreement under this
Section 9.1(d)(i), (ii) any governmental or regulatory consent or approval
required for consummation of the transactions contemplated hereby is denied by
or in a final
25
31
order or other final action issued or taken by the appropriate governmental or
regulatory authority, agency or similar body, or (iii) consummation of any of
the transactions contemplated hereby is enjoined, prohibited or otherwise
restrained by the terms of a final, non-appealable order or judgment of a court
of competent jurisdiction.
9.2 Effect. Any termination of this Agreement, however effected, shall
not release MCCAC, PIC or any of the PIC Majority Shareholders from any
liability or other consequences arising from any breach or violation by any
such party of the terms of this Agreement prior to the effective time of such
termination, nor shall any such termination release any party from its
obligations or duties under this Agreement which, by their terms and/or
expressed intent, may require performance subsequent to any such termination,
and all provisions of this Agreement which set forth such obligations or duties
and such other general or procedural provisions which may be relevant to any
attempt to enforce such obligations or duties, shall survive any such
termination of this Agreement until such obligations or duties shall have been
performed or discharged in full.
ARTICLE X. DEFINITIONS
10.1 Defined Terms. As used in this Agreement, the following terms have
the following meanings:
"AFFILIATES" means, as to any person or entity, another person or
entity that directly or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such person or
entity, provided, however, that MCCAC's Affiliates will not include any person
or entity that may be deemed to control Xxxxxxx.
"CAPITAL EXPENDITURES" means investments in property, plant or
equipment either (i) for MCCAC, or (ii) involving the expenditure of more than
$10,000 in any single case or more than $50,000 in the aggregate.
"CLAIM" has the meaning set forth in section 8.4.
"CLOSING" has the meaning set forth in Section 1.2.
"CLOSING DATE" means the date on which the Closing occurs as
provided in Section 1.2.
"CODE" means the Internal Revenue Code of 1986, as amended, and all
regulations promulgated thereunder, as in effect from time to time.
26
32
"DAMAGES" means any loss, liability, claim, damage (including
incidental and consequential damages), expense (including costs of
investigation and defense and reasonable attorneys' fees) or diminution of
value, whether or not involving a third-party claim.
"ENCUMBRANCE" means any lien, claim, charge, security interest,
option, mortgage, pledge or other legal or equitable encumbrance, excluding any
encumbrance arising under or pursuant to federal or state securities laws.
"FAMILY" means, with respect to a particular individual, (i) the
individual, (ii) such individual's spouse, parents, children, siblings, mothers
and fathers-in-law, sons and daughters-in-law, and brothers and sisters-in-law
(i) the individual, and (iii) any other natural person who resides with such
individual.
"GAAP" means generally accepted accounting principles consistently
applied throughout the periods involved.
"NON-COMPETITION AGREEMENTS" have the meaning set forth in Section
2.2(h).
"PERMITTED LIABILITIES" means the liabilities and obligations
described in clauses (i), (ii) and (iv) of Section 3.13.
"PERMITTED LIENS" has the meaning set forth in Section 3.19.
"PIC STOCK" means the shares of PIC's Common and Preferred Stock.
"PIC OPTIONS" means all warrants, options, subscriptions and other
convertible instruments or agreements pursuant to which PIC is obligated to
issue, transfer, deliver or sell shares of PIC Common Stock, including, without
limitation, pursuant to the PIC Stock Option Plan.
"PIC SUBSIDIARY" means any entity of which at least 50% of the
equity interests are owned, directly or indirectly, by PIC.
"PROPORTIONAL SHARE" means, with respect to any PIC Shareholder,
the amount of cash or Note stated with respect to such PIC Shareholder on
Exhibit A. .
"PURCHASE PRICE" has the meaning set forth in Section 1.3.
27
33
"RELATED PERSON" means, with respect to a particular individual,
(i) each other member of such individual's Family, (ii) any entity that is
directly or indirectly controlled by such individual or one or more members of
such individual's Family, (iii) any entity in which such individual or members
of such individual's Family directly or indirectly beneficially own
(individually or in the aggregate) at least 10% of the outstanding equity
securities or equity interests, and (iv) any entity with respect to which such
individual or one or more members of such individual's Family serves as a
director, officer, partner, executor, or trustee (or in a similar capacity).
"SHAREHOLDER REPRESENTATIVE" has the meaning set forth in section
8.5.
"TRANSACTION COSTS" means reasonable accounting, legal, printing
and financial advisory fees and expenses incurred by PIC and the PIC Majority
Shareholders in connection with the Agreement and the transactions contemplated
hereby.
"TRANSACTION DOCUMENTS" means this Agreement, the Notes, the
Security Agreement and the Non-Competition Agreement.
10.2 Other Definitional Provisions.
(a) All terms defined in this Agreement have the defined meanings
when used in any certificate, report or other documents made or delivered
pursuant hereto, unless the context otherwise requires.
(b) Terms defined in the singular have a comparable meaning when
used in the plural, and vice versa.
(c) As used herein, the neuter gender also denotes the masculine
and feminine, and the masculine gender also denotes the neuter and feminine,
where the context so permits.
(d) The words "hereof," "herein" and "hereunder" and words of
similar import refer to this Agreement as a whole and not to any particular
provision of this Agreement.
(e) The words "include," "including" and "or" mean without
limitation by reason of enumeration.
28
34
ARTICLE XI. MISCELLANEOUS
11.1 Waiver. Any party to this Agreement may, at any time prior to the
Closing, waive any of the terms or conditions of this Agreement or agree to an
amendment or modification to this Agreement by an agreement in writing executed
in the same manner (but not necessarily by the same persons) as this Agreement.
11.2 Notices. All notices and other communications among the parties
shall be in writing and shall be deemed to have been duly given when (i)
delivered in person, (ii) one day after delivery to a reputable overnight
courier service, (iii) five days after posting in the United States mail having
been sent registered or certified mail return receipt requested, or (iv)
delivered by telecopy, and promptly confirmed by delivery in person or post as
aforesaid in each case, with postage prepaid, addressed as follows:
(a) If to MCCAC, to:
MCC Acquisition Corporation
Attn: Xxxxxx X. Xxxxxxx
0000 00xx Xxxxxx, X.X.
Xxxxx Xxxxxx, XX 00000
Telephone No.: 000-000-0000
Telecopier No.: 000-000-0000
with a copy (which shall not
constitute notice) to:
Xxxxxx X. Xxx, Esq.
Reinhart, Boerner, Van Deuren,
Xxxxxx & Rieselbach, s.c.
0000 Xxxxx Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxx, XX 00000
Telephone No.: 000-000-0000
Telecopier No.: 414-298-8097
(b) If to PIC or any PIC Majority Shareholder, to:
Xx. Xxxxxx Xxxxxxxxx
0000 Xxxx Xxxxx, Xxxxx 000
Xxxxxx, XX 00000
Telephone No.: 000-000-0000
29
35
Telecopier No. 000-000-0000
with a copy (which shall not
constitute notice) to:
Xxxxxx X. Xxxxx, Esq.
Xxxxxx X. Xxxx, Esq.
Ford & Xxxxxxx
2000 San Jacinto Center
00 Xxx Xxxxxxx Xxxxxxxxx
Xxxxxx, XX 00000
Telephone No.: 000-000-0000
Telecopier No.: 512-477-5267
or to such other address or addresses as the parties may from time to time
designate in writing.
11.3 Assignment. Except as provided in Section 7.1, and except that
MCCAC may assign this Agreement, or any right or benefit hereunder, to Xxxxxxx,
no party hereto shall assign this Agreement or any part hereof without the
prior written consent of the other parties. Except as otherwise provided
herein, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective permitted successors and assigns.
11.4 Rights of Third Parties. Nothing expressed or implied in this
Agreement is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto, any subsidiary of MCCAC or
Xxxxxxx joining this Agreement under the circumstances described in Section 7.1
or any Indemnified Person described in Section 8.4, any right or remedies under
or by reason of this Agreement.
11.5 Reliance. Each of the parties to this Agreement shall be deemed to
have relied upon the accuracy of the written representations and warranties
made to it in or pursuant to this Agreement, notwithstanding any investigations
conducted by or on its behalf or notice, knowledge or belief to the contrary.
11.6 Expenses. MCCAC shall bear its own expenses incurred in connection
with this Agreement and the transactions herein contemplated whether or not
such transactions shall be consummated, including, without limitation, all fees
of its legal counsel and accountants. The PIC Shareholders shall bear the
legal, financial advisory and accounting fees and expenses of PIC, the PIC
30
36
Subsidiaries and the PIC Shareholders incurred in connection with this
Agreement and the transactions herein contemplated in excess of $10,000.
11.7 Construction. This Agreement shall be construed and enforced in
accordance with the laws of the State of Iowa without regard to conflicts of
law principles. Unless otherwise stated, references to Sections, Articles or
Exhibits refer to the Sections, Articles and Exhibits to this Agreement. The
parties have participated jointly in the negotiation and drafting of this
Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the parties
and no presumption or burden of proof shall arise favoring or disfavoring any
party by virtue of the authorship of any provisions of this Agreement.
11.8 Captions; Counterparts. The captions in this Agreement are for
convenience only and shall not be considered a part of or affect the
construction or interpretation of any provision of this Agreement. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
11.9 Entire Agreement. This Agreement (together with the other
Transaction Documents, the Exhibits and other writings referred to herein or
delivered pursuant hereto), constitutes the entire agreement among the parties
and supersedes any other agreements, whether written or oral, that may have
been made or entered into by or among Xxxxxxx or its subsidiaries, PIC or the
PIC Subsidiaries, the PIC Shareholders or by any director or directors or
officer or officers of such parties relating to the transactions contemplated
hereby, or incident hereto. No representations, warranties, covenants,
understandings or agreements, oral or otherwise, relating to the transactions
contemplated by this Agreement, exist between the parties except as expressly
set forth in this Agreement.
11.10 Amendments. This Agreement may be amended or modified in whole or
in part, only by a duly authorized agreement in writing executed in the same
manner as this Agreement and which makes reference to this Agreement.
11.11 Publicity. All press releases or other public communications of
any nature whatsoever relating to the transactions contemplated by this
Agreement, and the method of the release for publication thereof, shall be
subject to the prior mutual approval of MCCAC and PIC, which approval shall not
be unreasonably withheld by any party; provided, however, that nothing
herein shall prevent any party from publishing such press releases or other
public communications as such
31
37
party may consider necessary in order to satisfy such party's legal or
contractual obligations.
IN WITNESS WHEREOF the parties have hereunto caused this Agreement to be
duly executed as of the date first above written.
MCC ACQUISITION CORP.
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------------
Title: Chief Executive Officer
----------------------------
PRIORITY INTERNATIONAL
COMMUNICATIONS, INC.
By: /s/ Xxxxxx Xxxxxxxxx
-------------------------------
Title: Vice President
PIC MAJORITY SHAREHOLDERS
/s/ Xxxxxx Xxxxxxxxx, Attorney-in Fact
--------------------------------------
Xxxxx Xxxxxx
/s/ Xxxxxx Xxxxxxxxx
--------------------------------------
Xxxxxx Xxxxxxxxx
32
