STOCK PURCHASE AGREEMENT
By and Among
XXXX XXXXXX,
TRIUMPH-CONNECTICUT LIMITED PARTNERSHIP,
XXXXXXX XXXXXXXXX DAY SCHOOL OF GREATER HARTFORD, INC.,
FSC CORP.,
XXXXXX COMMUNICATIONS HOLDING COMPANY, INC.
And
USN COMMUNICATIONS, INC.
January 7, 1998
TABLE OF CONTENTS
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ARTICLE I
PURCHASE AND SALE OF SECURITIES
1.1 Transfer of Securities................................................. 1
1.2 Consideration.......................................................... 2
1.3 Indemnification Escrow Amount.......................................... 3
1.4 The Closing............................................................ 3
1.5 Deliveries of the Parties.............................................. 4
1.6 Post-Closing Adjustment................................................ 7
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND SELLERS
2.1 Corporate Organization................................................ 8
2.2 Capital Stock......................................................... 9
2.3 Ownership of Stock.................................................... 9
2.4 Authorization, Etc.................................................... 9
2.5 Financial Statements.................................................. 10
2.6 No Approvals or Conflicts............................................. 11
2.7 Compliance with Law; Governmental Authorizations...................... 12
2.8 Litigation............................................................ 12
2.9 Changes............................................................... 12
2.10 Taxes................................................................. 12
2.11 Employee Benefits..................................................... 14
2.12 Labor Relations....................................................... 15
2.13 Contracts and Leases.................................................. 16
2.14 Environmental Matters................................................. 16
2.15 Title to Assets and Leases............................................ 16
2.16 Numbers of Customers and Units........................................ 17
2.17 Intellectual Property................................................. 17
2.18 Insurance............................................................. 17
2.19 Affiliated Transactions............................................... 18
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2.20 No Brokers' or Other Fees............................................ 18
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
3.1 Organization.......................................................... 18
3.2 Authorization, Etc.................................................... 18
3.3 No Approvals or Conflicts............................................. 19
3.4 Periodic Reports...................................................... 19
3.5 No Distribution....................................................... 20
3.6 Compliance with Law; Governmental Authorizations...................... 20
3.7 Buyer's Registration Statement........................................ 20
3.8 No Brokers' or Other Fees............................................. 21
ARTICLE IV
CONDITIONS TO EACH PARTY'S OBLIGATIONS
4.1 Regulatory Consents................................................... 21
4.2 Injunctions........................................................... 21
4.3 Transfer of Whitecap and CMI Assets................................... 21
4.4 Indemnification Escrow Agreement...................................... 21
ARTICLE V
CONDITIONS TO SELLERS' OBLIGATIONS
5.1 Representations and Warranties........................................ 22
5.2 Performance........................................................... 22
5.3 Officer's Certificate................................................. 22
5.4 Closing Deliveries.................................................... 22
5.5 Opinion of Counsel.................................................... 22
5.6 Deposit Escrow Amount................................................. 22
5.7 Consents.............................................................. 23
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ARTICLE VI
CONDITIONS TO BUYER'S OBLIGATIONS
6.1 Representations and Warranties........................................ 23
6.2 Performance........................................................... 23
6.3 Officer's Certificate................................................. 23
6.4 Closing Deliveries.................................................... 23
6.5 Opinion of Counsel.................................................... 23
6.6 Consents.............................................................. 24
6.7 Resignations.......................................................... 24
6.8 Noncompetition Agreements............................................. 24
6.9 Employment Agreements................................................. 24
6.10 Financing............................................................. 24
ARTICLE VII
COVENANTS AND AGREEMENTS
7.1 Conduct of Business................................................... 24
7.2 Access to Books and Records........................................... 26
7.3 Approvals and Consents................................................ 27
7.4 Further Assurances.................................................... 28
7.5 Confidentiality Agreement............................................. 28
7.6 Tax Matters........................................................... 28
7.7 Schedule of Employees................................................. 31
7.8 Supplements to Disclosure Schedule.................................... 31
7.9 Covenant to Satisfy Conditions........................................ 31
7.10 Financing............................................................. 31
7.11 Affiliated Transactions............................................... 32
7.12 Financial Statements and Reports...................................... 32
7.13 Transfer of Whitecap and CMI Assets................................... 32
7.14 Disclosure............................................................ 33
7.15 No Solicitation....................................................... 33
7.16 Delivery of Disclosure Schedule....................................... 34
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ARTICLE VIII
TERMINATION
8.1 Termination........................................................... 35
8.2 Effect of Termination................................................. 35
ARTICLE IX
INDEMNIFICATION
9.1 Indemnification by Sellers............................................ 36
9.2 Indemnification by Buyer.............................................. 37
9.3 Notification of Claims................................................ 38
ARTICLE X
MISCELLANEOUS
10.1 Termination of Representations and Warranties, Etc.................. 39
10.2 Fees and Expenses................................................... 39
10.3 Governing Law....................................................... 40
10.4 Amendment........................................................... 40
10.5 No Assignment....................................................... 40
10.6 Waiver.............................................................. 40
10.7 Notices............................................................. 40
10.8 Complete Agreement.................................................. 42
10.9 Counterparts........................................................ 43
10.10 Publicity........................................................... 43
10.11 Headings............................................................ 43
10.12 Severability........................................................ 43
10.13 Time of the Essence................................................. 43
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EXHIBITS
Sellers' Holdings and Purchase Price Share........................... Exhibit A
Form of Deposit Escrow Agreement..................................... Exhibit B
Form of Indemnification Escrow Agreement............................. Exhibit C
Form of Noncompetition Agreement..................................... Exhibit D
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STOCK PURCHASE AGREEMENT
------------------------
This STOCK PURCHASE AGREEMENT ("Agreement") is made and entered into
as of January 7, 1998, by and among Xxxx Xxxxxx, Triumph- Connecticut Limited
Partnership, a Connecticut limited partnership, Xxxxxxx Xxxxxxxxx Day School of
Greater Hartford, Inc., a not-for-profit educational institution ("SSDS"), FSC
Corp., a Massachusetts corporation (collectively, "Sellers"), Xxxxxx
Communications Holding Company, Inc., a Connecticut corporation (the "Company"),
and USN Communications, Inc., a Delaware corporation ("Buyer").
WHEREAS, the Company has a capitalization consisting of 71,650
authorized shares of Class A Common Stock, $.01 par value per share (the "Class
A Common Stock"), of which 71,650 shares are issued and outstanding; 33,350
shares of Class B Common Stock, $.01 par value per share (the "Class B Common
Stock" and, together with the Class A Common Stock, the "Common Stock"), of
which no shares are issued and outstanding; warrants (the "Warrants") to
purchase 28,350 shares of Class B Common Stock (the "Warrant Shares"); and 7,000
shares of Series A Cumulative Redeemable Preferred Stock, $.01 par value per
share (the "Preferred Stock"), of which 7,000 shares are issued and outstanding,
all of which Common Stock, Warrants, Warrant Shares, if applicable, and
Preferred Stock (collectively, the "Securities") are owned as of the date of
this Agreement by Sellers in the respective amounts set forth opposite each
Seller's name on Exhibit A hereto; and
WHEREAS, Sellers desire to sell the Securities to Buyer, and Buyer
desires to purchase the Securities from Sellers.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained in this Agreement, Sellers and Buyer agree as
follows:
ARTICLE I
PURCHASE AND SALE OF SECURITIES
1.1 Transfer of Securities. On the Closing Date (as defined herein)
and subject to the terms and conditions set forth in this Agreement, Sellers
will sell, assign, transfer and deliver to Buyer the Securities (other than the
shares of Preferred Stock, it being understood that such shares of Preferred
Stock will be redeemed by the Company simultaneously with the Closing (as
defined herein)), in each case free
and clear of all options, pledges, security interests, liens, charges or other
encum brances or restrictions on transfer ("Encumbrances") of any kind
whatsoever, other than the restrictions imposed by federal and state securities
laws.
1.2 Consideration. (a) On the Closing Date and subject to the terms
and conditions set forth in this Agreement, in reliance on the representations,
warranties, covenants and agreements of the parties contained herein and in
consideration of the sale, assignment, transfer and delivery of the Securities
(other than the shares of Preferred Stock), Buyer will pay to Sellers
$68,000,000, less (i) the amount of the Company's and Included Subsidiaries' (as
defined herein) outstanding indebtedness for borrowed money under the Second
Amended and Restated Master Credit Agreement, by and among the Company and its
Subsidiaries, BankBoston, N.A. and State Street Bank, dated May 23, 1997, the
Amended and Restated Subordinated Promissory Note payable to Xxxxxxx Xxxxxx,
dated January 30, 1997 and all replacements to the aforementioned indebtedness
and all additions to outstanding indebtedness for borrowed money, other than
outstanding indebtedness incurred in respect of the advertising and marketing
expenses referred to in Section 7.1(b)(iv) and in respect of the capital
expenditures referred to in Section 7.1(b)(vii) of the Disclosure Schedule (as
defined herein) (the "Closing Indebtedness"), at Closing (as defined herein),
(ii) the total obligations of the Company for redemption of the Preferred Stock
(the "Preferred Stock Redemption Price") at Closing, (iii) if applicable, the
amount of the Deposit Escrow Amount (as defined herein), (iv) the aggregate
amount of the obligations referred to in Section 2.11(d) hereof, (v) the
Indemnification Escrow Amount (as defined herein), payable as set forth in
Section 1.2(b) herein and (vi) the amount of the NOL Shortfall (as defined in
the immediately following sentence), if any (the "Purchase Price"). For
purposes of this Section 1.2(a), "NOL Shortfall" shall mean the amount by which
the NOLs (as defined herein) of the Company are not sufficient in amount to
offset and currently reduce to zero any Transfer Income or Gain (as defined in
Section 2.10 hereof). The pro rata share of the Purchase Price and, if
applicable, the Deposit Escrow Amount payable to each Seller shall be as set
forth on Exhibit A hereto.
(b) On the Closing Date and subject to the terms and conditions set
forth in this Agreement, the Purchase Price and, if applicable, the Deposit
Escrow Amount shall be payable to Sellers as follows:
(i) a cash payment of immediately available funds in an amount
equal to the Purchase Price; and
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(ii) if applicable, the release to Sellers from escrow of
$2,500,000 (the "Deposit Escrow Amount"), pursuant to the terms and
conditions of an escrow agreement to be entered into by Sellers, Buyer and
the escrow agent thereunder substantially in the form set forth in Exhibit
B hereto (the "Deposit Escrow Agreement").
(c) On the Closing Date and subject to the terms and conditions set
forth in this Agreement, the Preferred Stock Redemption Price shall be payable
by the Company to the holders of the Preferred Stock, as set forth on Exhibit A
hereto, by wire transfer of immediately available funds.
1.3 Indemnification Escrow Amount. On the Closing Date and subject
to the terms and conditions set forth in this Agreement, $5 million in
immediately available funds (the "Indemnification Escrow Amount") shall be
deposited into an escrow account (the "Indemnification Escrow Account") pursuant
to the terms of an escrow agreement substantially in the form set forth in
Exhibit C hereto (the "Indemnification Escrow Agreement") for the purpose of
partially securing the obligations of Sellers pursuant to Sections 9.1(a)(ii),
9.1(b) and 9.1(c) hereto. Sellers shall have until 5:00 p.m., New York time, on
January 21, 1998 (the "Notification Time") to notify Buyer of Sellers' election
to deposit into the Indemnification Escrow Account on the Closing Date, in lieu
of $5 million in immediately available funds, a $5 million letter of credit in
form and substance reasonably satisfactory to Buyer issued by a bank reasonably
satisfactory to Buyer to secure the obligations of Sellers described in the
immediately preceding sentence, in which case Buyer and Sellers shall negotiate
in good faith such changes to the form of Indemnification Escrow Agreement as
are necessary to give effect to such election. In such event, Sellers shall be
required, if necessary, to renew from time to time such letter of credit during
the term of the Indemnification Escrow Agreement, as such term may be extended
to take into account claims existing on July 31, 1999. In the event that
Sellers do not so notify Buyer on or prior to the Notification Time, the
Indemnification Escrow Account shall be funded with $5 million in immediately
available funds.
1.4 The Closing. The closing (the "Closing") of the transactions
contemplated in this Agreement shall take place at the offices of Skadden, Arps,
Slate, Xxxxxxx & Xxxx LLP, New York, New York at 10:00 a.m. local time, on the
second business day following the date on which all of the conditions set forth
in Article IV, Article V and Article VI hereof shall have been satisfied or
waived, or at such other
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place and time as may be agreed upon in writing by Sellers and Buyer (the
"Closing Date").
1.5 Deliveries of the Parties.
(a) Deliveries of Sellers. At or prior to the Closing, Sellers shall
deliver or cause to be delivered to Buyer the following:
(i) certificates evidencing the shares of Common Stock, which
certificates shall be properly endorsed for transfer or accompanied by duly
executed stock powers, in either case executed in blank or in favor of
Buyer or its nominee as Buyer may have directed prior to the Closing Date,
and otherwise in a form acceptable for transfer on the books of the
Company;
(ii) certificates evidencing the shares of Preferred Stock;
(iii) certificates evidencing the Warrants, if applicable, which
certificates shall be properly endorsed for transfer in favor of Buyer or
its nominee as Buyer may have directed prior to the Closing Date, and
otherwise in a form acceptable for transfer on the books of the Company;
(iv) certificates or instruments evidencing the Warrant
Shares, if applicable, which certificates shall be properly endorsed for
transfer or accompanied by duly executed stock powers, in either case
executed in blank or in favor of Buyer or its nominee as Buyer may have
directed prior to the Closing Date, and otherwise in a form acceptable for
transfer on the books of the Company;
(v) evidence reasonably satisfactory to Buyer of each of the
Closing Indebtedness and the Preferred Stock Redemption Price;
(vi) a copy of the charter of each of the Company and the
Included Subsidiaries (as defined herein), certified as of a date within 30
days of the Closing Date by the Secretary of State of the State of
Connecticut, and certified by the respective corpo-
4
rate secretary as to the absence of any amendments to such charter between
the date of such certification by the Secretary of State of the State of
Connecticut and the Closing Date;
(vii) a good standing certificate for each of the Company and
the Included Subsidiaries, certified as of a date within ten days of the
Closing Date by the Secretary of State of the State of Connecticut;
(viii) a certificate of the corporate secretary of the Company
attaching thereto true and correct copies of the bylaws of each of the
Company and the Included Subsidiaries and the resolutions of the Board of
Directors of the Company authorizing this Agreement and the consummation of
the transactions contemplated hereby;
(ix) the Sellers' certificate required by Section 6.3 hereof;
(x) all books and records of the Company, including its minute
book, seal, stock ledger book and all financial and tax records and
information;
(xi) all licenses, permits, orders, consents, approvals,
registrations, authorizations, qualifications, filings and waivers required
to be obtained and delivered by Sellers pursuant to Section 6.6 hereof;
(xii) the opinions of counsel for Sellers required by Section
6.5 hereof;
(xiii) the resignations of the members of the Board of Directors
of the Company and those officers of the Company designated by Buyer as
required by Section 6.7 hereof;
(xiv) the Noncompetition Agreements required by Section 6.8
hereof;
(xv) the employment agreements required by Section 6.9 hereof;
and
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(xvi) all other previously undelivered documents required to be
delivered by Sellers or the Company to Buyer at or prior to the Closing
Date in connection with the transactions contemplated hereby as required
hereunder.
(b) Deliveries by Buyer. At or prior to the Closing, Buyer shall
deliver or cause to be delivered to Sellers the following:
(i) the Purchase Price by wire transfer of immediately
available funds to an account or accounts designated by Sellers;
(ii) if applicable, the Deposit Escrow Amount by release of
$2,500,000 of such funds pursuant to the terms of the Deposit Escrow
Agreement;
(iii) the Preferred Stock Redemption Price;
(iv) a copy of the charter of Buyer certified as of a date
within 30 days of the Closing Date by the Secretary of State of the State
of Delaware, and certified by the corporate secretary of Buyer as to the
absence of any amendments to such charter between the date of certification
by the Secretary of State of the State of Delaware and the Closing Date;
(v) a certificate from the Secretary of State of the State of
Delaware as to the good standing of Buyer in Delaware, certified as of a
date within ten days of the Closing Date;
(vi) a certificate of the corporate secretary of Buyer
attaching thereto a true and correct copy of the bylaws of Buyer and the
resolutions of the Board of Directors of Buyer authorizing this Agreement
and the consummation of the transactions contemplated hereby;
(vii) the Buyer's certificate required by Section 5.3 hereof;
6
(viii) the opinion of counsel for Buyer required by Section 5.5
hereof; and
(ix) all other previously undelivered documents required to be
delivered by Buyer to Seller at or prior to the Closing Date in connection
with the transactions contemplated hereby as required hereunder.
1.6 Post-Closing Adjustment. Buyer shall prepare and present not
later than 45 days after the Closing a special purpose statement (the "Special
Purpose Statement") which shall set forth Buyer's true and correct determination
as of the Special Purpose Statement date of the Closing Indebtedness. To the
extent that the Closing Indebtedness as reflected in the Special Purpose
Statement is greater than the amount of the Closing Indebtedness pursuant to
which the Purchase Price was calculated at Closing, then such difference shall
be refunded to Buyer by Sellers pro rata in accordance with Exhibit A hereto in
immediately available funds within two business days after completion of the
dispute resolution process set forth in this Section 1.6 below.
The Special Purpose Statement shall be certified by the Company as
being prepared on a basis consistent with that of the balance sheets contained
in the financial statements referred to in Section 2.5 hereof. In the event
that Sellers shall make a preliminary determination that the Special Purpose
Statement has not been prepared in accordance with the previous sentence,
Sellers shall have ten business days after receipt of such statement to notify
Buyer in writing thereof. In the event that Sellers do not object to the
Special Purpose Statement within such ten business day period, Sellers shall be
deemed to have accepted it and no challenge to the Special Purpose Statement
shall be recognized. In the event of a disagreement, the parties shall then
have 15 business days to resolve the matter. If the matter cannot be resolved
in this manner during the 15 business day period, the parties shall submit
within five business days after such 15 business day period the matter to an
independent accounting firm mutually satisfactory to the parties (the
"Auditor"). The Auditor shall have 30 business days to audit the Special
Purpose Statement. The audit will be performed using generally accepted
auditing standards and will address whether the information contained in the
Special Purpose Statement presents fairly, in all material respects, the Closing
Indebtedness as of the Closing Date in accordance with generally accepted
accounting principles on a basis consistent with that of the balance sheets
contained in the financial statements referred to in Section 2.5 hereof. The
costs of retaining the Auditor, including their reasonable out-of-pocket
expenses
7
(collectively, the "Accounting Costs"), in connection with the procedures set
forth in this Section 1.6 shall be shared equally by Sellers, on the one hand,
and Buyer, on the other.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND SELLERS
The Company and Sellers, jointly and severally, represent and warrant
to Buyer as follows:
2.1 Corporate Organization. The Company is duly organized, validly
existing and in good standing under the laws of the State of Connecticut and has
full corporate power and authority to own and operate its properties and assets
and to carry on its business as it is now being conducted. The Company is duly
qualified or licensed to do business as a foreign corporation in good standing
in the jurisdictions in which the ownership of property or the conduct of its
business requires such qualification, except jurisdictions in which the failure
to be so qualified would not, individually or in the aggregate, have a material
adverse effect on the business, operations, assets, liabilities or financial
condition of the Company and the Included Subsidiaries, taken as a whole, or on
the ability of the Company and Sellers to consummate the transactions
contemplated hereby (hereinafter referred to as a "Material Adverse Effect").
Sellers have previously delivered to Buyer complete and correct copies of the
charter and all amendments thereto and the bylaws as presently in effect of each
of the Company and the Subsidiaries. The Company owns all of the issued and
outstanding capital stock of Connecticut Telephone and Communications Systems,
Inc. ("CTCSI"), Connecticut Mobilecom, Inc. ("CMI"), US East Telecommunications
of Massachusetts, Inc. and US East Telecommunications of Rhode Island, Inc. (the
"Included Subsidiaries") and, as of the date of this Agreement, Whitecap
Technologies, Inc. ("Whitecap" and, together with the Included Subsidiaries, the
"Subsidiaries"). Each Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has full corporate power and authority to own and operate its
properties and assets and to carry on its business as it is now being conducted.
Except as set forth in Section 2.1 of the Disclosure Schedule relating to this
Agreement (the "Disclosure Schedule"), the Company does not own, directly or
indirectly, any capital stock or other equity securities of any corporation or
have any direct or indirect equity or ownership interest in any partnership,
joint venture or other business.
8
2.2 Capital Stock. The authorized capital stock of the Company
consists of 71,650 shares of Class A Common Stock, of which 71,650 shares are
issued and outstanding; 33,350 shares of Class B Common Stock, of which no
shares are issued and outstanding; and 7,000 shares of Preferred Stock, of which
7,000 shares are issued and outstanding. Other than the Warrants and except as
set forth in Section 2.2 of the Disclosure Schedule as of the date of this
Agreement only (it being understood that any existing as of the date of this
Agreement will be extinguished on or prior to Closing), there are no
subscriptions, options, warrants, calls, rights, contracts, commitments,
understandings, restrictions or arrangements relating to the issuance, sale or
transfer by Sellers, the Company or any of the Subsidiaries of any shares of
such capital stock, including any rights of conversion or exchange under any
outstanding securities or other instruments. All outstanding shares of capital
stock of the Company have been duly authorized and validly issued and are fully
paid, nonassessable and free of preemptive rights. All of the issued and
outstanding shares of each Included Subsidiary and, as of the date of this
Agreement, of Whitecap, are owned by the Company, free and clear of all
Encumbrances of any kind whatsoever (except as set forth in Section 2.2 of the
Disclosure Schedule as of the date of this Agreement only (it being understood
that any existing as of the date of this Agreement will be extinguished on or
prior to Closing)), other than the restrictions imposed by the federal and state
securities laws, and all such shares have been duly authorized and validly
issued and are fully paid, nonassessable and free of preemptive rights. The
Preferred Stock is redeemable at the option of the Company and will be redeemed
on the Closing Date. The CMI Assets (as defined in Section 7.13 hereof)
constitute all of the assets of or related to Smartlink Development, L.P. and
Smartlink, Inc. held by the Company and the Included Subsidiaries.
2.3 Ownership of Stock. The Securities are owned by Sellers (as more
specifically set forth in Exhibit A hereto), free and clear of all Encumbrances
of any kind whatsoever, other than the restrictions imposed by federal and state
securities laws. Upon the consummation of the transactions contemplated hereby,
Buyer will acquire title to the Securities (other than the shares of Preferred
Stock, which will be redeemed by the Company), free and clear of all
Encumbrances of any kind whatsoever, other than the restrictions imposed by
federal and state securities laws.
2.4 Authorization, Etc. Each Seller has full power, authority and
capacity, and the Company has full corporate power and authority, to execute and
deliver this Agreement, the Indemnification Escrow Agreement and, if applicable,
the Deposit Escrow Agreement and to carry out the transactions contemplated
hereby and thereby. The Board of Directors of the Company has duly approved and
authorized
9
the execution and delivery of this Agreement, the Indemnification Escrow
Agreement and, if applicable, the Deposit Escrow Agreement and the consummation
of the transactions contemplated hereby and thereby, and no other proceedings,
corporate or other, on the part of Sellers or the Company are necessary to
approve and authorize the execution and delivery of this Agreement, the
Indemnification Escrow Agreement and, if applicable, the Deposit Escrow
Agreement by Sellers and the Company and the consummation by Sellers and the
Company of the transactions contemplated hereby and thereby. This Agreement and
the Indemnification Escrow Agreement constitute, and, if applicable, the Deposit
Escrow Agreement will constitute, valid and binding agreements of each of
Sellers and the Company enforceable against Sellers and the Company in
accordance with their respective terms, except that the enforcement hereof and
thereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law).
2.5 Financial Statements. The audited consolidated financial
statements of the Company for the year ended April 30, 1997, and the unaudited
consolidated financial statements of the Company for the six months ended
October 31, 1997 are set forth in Section 2.5(a) of the Disclosure Schedule.
Such financial statements are referred to herein as the "Financial Statements."
The Financial Statements have been prepared in accordance with generally
accepted accounting principles consistently applied and, subject, in the case of
the six month consolidated financial statements, to normal year-end adjustments,
fairly present in all material respects the financial condition of the Company
and the consolidated results of operations of the Company for the periods
indicated, except as set forth in the notes thereto. Except as disclosed in the
Financial Statements or in Section 2.5(a) of the Disclosure Schedule, neither
the Company nor the Subsidiaries have any liabilities or obligations, whether
accrued, absolute, contingent or otherwise, which (i) would be required to be
disclosed on a financial statement prepared in conformity with generally
accepted accounting principles or (ii) are material to the consolidated business
or operations of the Company and the Included Subsidiaries (the "Business"),
except for obligations incurred or paid in connection with transactions since
October 31, 1997 by the Company and the Subsidiaries in the ordinary course of
business consistent with past practice, and except for routine, ongoing
compliance obligations under statutes, regulations and ordinances of general
applicability to the Business and liabilities and obligations under this
Agreement and the agreements contemplated hereby. Set forth in Section 2.5(b) of
the Disclosure Schedule is a description of each
10
outstanding indebtedness for borrowed money of each of the Company and any
Subsidiary as of the date of this Agreement.
2.6 No Approvals or Conflicts. Except as set forth in Section 2.6 of
the Disclosure Schedule, neither the execution and delivery by Sellers and the
Company of this Agreement, the Indemnification Escrow Agreement and, if
applicable, the Deposit Escrow Agreement nor the consummation by Sellers and the
Company of the transactions contemplated hereby and thereby will (i) violate,
conflict with or result in a breach of any provision of the charter or bylaws of
any of the Company and the Subsidiaries, (ii) conflict with or result in a
breach of any provision of, or constitute a default under, or result in the
termination or cancellation of, or accelerate the performance required by, or
result in the creation of any lien, security interest, charge or encumbrance
upon any of the properties of any of the Company and the Subsidiaries or upon
any Seller's interest in the Securities under, any note, bond, mortgage,
indenture, deed of trust, license, franchise, permit, lease, contract, agreement
or other instrument or commitment or obligation to which any Seller or any of
the Company and the Subsidiaries or any of their respective properties may be
bound or affected, (iii) violate any order, writ, injunction, decree, judgment,
ruling, law, rule or regulation of any court or governmental authority, domestic
or foreign, applicable to any Seller or any of the Company and the Subsidiaries
or any of their respective properties, or (iv) except for applicable
requirements of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), and approvals of the Federal Communications Commission
(the "FCC") and the Connecticut Department of Public Utility Control (the
"PUC"), require any consent, approval or authorization of, or notice to, or
declaration, filing or registration with, any governmental or regulatory
authority or other third party in connection with the execution, delivery and
performance of this Agreement by any Seller or the Company or to enable the
Company and the Included Subsidiaries to continue fully to conduct the Business
after the Closing Date in a manner which is in all material respects consistent
with that in which it is presently conducted, which, in the case of clauses
(ii), (iii) and (iv) above, would, individually or in the aggregate, be
reasonably likely to have a Material Adverse Effect. The Company has received
from Southern New England Telephone Company ("SNET") a waiver of any and all
rights SNET and its affiliates may have with respect to the transactions
contemplated by this Agreement. A true and correct copy of the aforementioned
waiver has been delivered to Buyer.
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2.7 Compliance with Law; Governmental Authorizations. Neither the
Company nor any of the Subsidiaries is in violation of any applicable law,
statute, order, rule or regulation (including those relating to the protection
of the environment) promulgated or judgment entered by any federal, state, local
or United States court or governmental authority relating to or affecting the
operation, conduct or ownership of any property or business of any of the
Company and the Subsidiaries which, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect. Except as set forth in
Section 2.7 of the Disclosure Schedule, the licenses, permits and other
governmental authorizations held by the Company and the Subsidiaries are valid
and sufficient for the conduct of the Business as currently conducted.
2.8 Litigation. Except as otherwise set forth in Section 2.8 of the
Disclosure Schedule, there are no claims, actions, proceedings or investigations
pending or, to the best knowledge of Sellers and the Company, threatened against
the Company or any of the Subsidiaries before any court or governmental or
regulatory authority or body which, individually or in the aggregate, is
reasonably likely to have a Material Adverse Effect. Neither the Company, the
Subsidiaries nor any of their respective properties is subject to any order,
judgment, injunction or decree which, individually or in the aggregate, would be
likely to have a Material Adverse Effect.
2.9 Changes. Since October 31, 1997, except as otherwise disclosed in
Section 2.9 of the Disclosure Schedule:
(a) the Business has been conducted only in the ordinary course and
consistent with past practice in all material respects;
(b) neither the Company nor any of the Subsidiaries has suffered any
Material Adverse Effect; and
(c) the Company has not taken any action which would require the
consent of Buyer under Section 7.1(b) had such action been taken by the Company
after the date hereof.
2.10 Taxes. (a) The Company, or an affiliate or other representative
of the Company on its behalf, has (i) duly filed with the appropriate Federal,
state, local and foreign taxing authorities all material Tax Returns (as defined
below) required to be filed by or with respect to the Company and the
Subsidiaries, and (ii) paid or made provision for in the Financial Statements
all Taxes (as defined below)
12
due and required to be paid by the Company and the Subsidiaries regardless of
whether shown as being owed on such required Tax Returns. The Company is the
common parent of an affiliated group of corporations that includes each
Subsidiary (the "Tax Group"), and no member of the Tax Group is or was at any
time a member of any other consolidated, combined or unitary group. Except as
set forth in Section 2.10 of the Disclosure Schedule, as of the date of this
Agreement, (i) neither Sellers, the Company, any Subsidiary nor any affiliate
or, to the Company's knowledge, other representative of the Company has received
any written notice of deficiency or assessment from any Federal, state, local or
foreign taxing authority with respect to liabilities for Taxes of any member of
the Tax Group which have not been paid or finally settled and any such
deficiency or assessment disclosed in Section 2.10 of the Disclosure Schedule is
being contested in good faith through appropriate proceedings; (ii) no audit of
any Tax Return concerning any member of the Tax Group is pending, being
conducted, or, to the knowledge of the Company and the Sellers, threatened to be
instituted by a Tax authority; (iii) no extension of the statute of limitations
on the assessment of any Taxes has been granted to any member of the Tax Group
or is currently in effect with respect to any member of the Tax Group; (iv) no
consent under Section 341(f) of the Internal Revenue Code of 1986, as amended
(the "Code"), has been filed with respect to any member of the Tax Group; (v)
neither the Company nor any Subsidiary is a party to any agreement or
arrangement that would result, separately or in the aggregate, in the actual or
deemed payment by the Company or any Subsidiary of any "excess parachute
Payments" within the meaning of Section 280G of the Code that is not exempted
from the provisions of Section 280G(a) of the Code; (vi) except with respect to
Smartlink Development Limited Partnership, neither the Company nor any
Subsidiary has been at any time a member of any partnership or joint venture or
the holder of a beneficial interest in any trust for any period for which the
statute of limitations for any Tax has not expired; (vii) the Company has not
been a United States real property holding corporation within the meaning of
Section 897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code; (viii) neither the Company nor any Subsidiary is
doing business in or engaged in a trade or business in any jurisdiction in which
it has not filed all required income or franchise Tax Returns; (ix) all Taxes
required to be withheld, collected or deposited by or with respect to the
Company or the Subsidiaries have been timely withheld, collected or deposited,
as the case may be, and, to the extent required, have been paid to the relevant
taxing authority; (x) no power of attorney that is currently in force has been
granted with respect to any matter relating to Taxes that could materially
affect the Tax liability of the Company or the Subsidiaries; (xi) neither the
Company nor any Subsidiary is a party to any written or unwritten tax sharing
agreement or Indemnity agreement or agreement executed or
13
agreed to on or prior to the date of this Agreement; and (xii) the Company and
the Subsidiaries have no liability for the Taxes of any person other than the
members of the Tax Group under Treasury regulation section 1.1502-6 (or any
similar provision of state, local or foreign law). Section 2.10 of the
Disclosure Schedule sets forth the true and correct amount of net operating
losses ("NOLs") of the Company in all material respects as of September 30,
1997. The NOLs will be available under applicable law and, except as set forth
in Section 2.10 of the Disclosure Schedule, will be sufficient in amount to
offset and currently reduce to zero any income or gain (the "Transfer Income or
Gain") recognized by the Company or any Subsidiary for federal, state or local
tax purposes (exclusive of the alternative minimum tax) by reason of the
transfer prior to Closing of the capital stock of Whitecap and the CMI Assets
(as defined in Section 7.13 hereof), as contemplated by Section 7.13 hereof.
(b) For purposes of this Agreement, "Taxes" shall mean all taxes,
charges, fees, levies, penalties or other assessments imposed by any United
States Federal, state, local or foreign taxing authority, including, but not
limited to, income, gross receipts, service, leasing, occupation, excise,
property, sales and use, transfer, gains, franchise, payroll, withholding,
social security or other taxes, including any interest, penalties or additions
attributable thereto.
(c) For purposes of this Agreement, "Tax Return" shall mean any
return, amended return, report, information return or other document (including
any related or supporting information) filed or required to be filed with any
taxing authority with respect to Taxes.
2.11 Employee Benefits. (a) Section 2.11(a) of the Disclosure
Schedule sets forth a true and complete list of each employee benefit or
compensation plan, program and contract, including, but not limited to, any
employee benefit plan within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and any
multiemployer plan within the meaning of Section 3(37) of ERISA, to which the
Company or any Subsidiary is a party, under which any employee or former
employee of the Company or any Subsidiary has any present or future right to
benefits, with respect to which the Company or any Subsidiary could incur
liability under ERISA or the Code that is maintained for employees or former
employees of the Company or any Subsidiary and to which the Company or any
Subsidiary or any trade or business, whether or not incorporated, that together
with the Company or any Subsidiary would be deemed a "single employer" within
the meaning of Section 4001(b) of ERISA (an "ERISA Affiliate"), is obligated to
contribute (the "Plans"). Each Plan has been maintained in substantial
14
compliance with all applicable laws and has been operated in all material
respects in compliance with its terms. Except as set forth in Section 2.11(a)
of the Disclosure Schedule, (i) no Plan has an accumulated or waived funding
deficiency within the meaning of Section 412 of the Code, and (ii) no
proceedings have been instituted to terminate any Plan that is subject to Title
IV of ERISA. Any Plan intended to be "qualified" (within the meaning of Section
401(a) of the Code) either (x) has received a favorable Determination Letter
from the Internal Revenue Service and, to the knowledge of Sellers and the
Company, no event has occurred nor condition exists which could reasonably be
expected to result in the revocation of such Determination Letter, or (y) is the
subject of an application for such a Determination Letter.
(b) No event has occurred which would subject the Company or any
Subsidiary to any material liability under the terms of any Plan (including
solely for this purpose, any Plan maintained by any ERISA Affiliate of the
Company) under ERISA, the Code or any other applicable law.
(c) Section 2.11(c) of the Disclosure Schedule contains a summary of
each employment, severance, termination or similar agreement entered into by the
Company and/or any of the Included Subsidiaries that is in effect on the date
hereof.
(d) Except as set forth in Section 2.11(d) of the Disclosure
Schedule, the consummation of the transactions contemplated by this Agreement
will not (i) entitle any current or former employee or officer of the Company or
any of the Subsidiaries to severance pay, unemployment compensation or any other
payment or (ii) accelerate the time of payment or vesting or increase the amount
of compensation due any such employee or officer.
2.12 Labor Relations. Except as set forth in Section 2.12 of the
Disclosure Schedule, neither the Company nor any of the Subsidiaries is a party
to any collective bargaining agreement, labor contract or letter of
understanding with a union or labor organization applicable to employees of the
Company or any of the Subsidiaries, nor are any of their employees represented
by any other union or labor organization. Except as set forth in Section 2.12
of the Disclosure Schedule, (i) each of the Company and the Subsidiaries is in
material compliance with all applicable laws respecting employment and
employment practices, terms and conditions of employment and wages and hours,
(ii) neither the Company nor any of the Subsidiaries is engaged in any unfair
labor practice which, individually or in the aggregate, has had or is reasonably
expected to have a Material Adverse Effect, and (iii) there is no labor
15
strike, material slowdown or stoppage or material labor dispute actually pending
or, to the knowledge of the Company, threatened against the Company.
2.13 Contracts and Leases. Section 2.13(a) of the Disclosure
Schedule identifies each of the material contracts, leases, agreements and
understandings to which any of the Company and the Subsidiaries is a party or by
which any of their respective assets or operations may be bound, other than
customer contracts (a "Material Contract"). Section 2.14(b) of the Disclosure
Schedule contains the form or forms of customer contract presently in use by the
Company and/or any of its Subsidiaries (the "Customer Contracts"). Except as
otherwise disclosed in Section 2.13(c) of the Disclosure Schedule, each Material
Contract and Customer Contract is in full force and effect, except where the
failure to be in full force and effect would not, individually or in the
aggregate, have a Material Adverse Effect. There are no existing defaults by
any of the Company and the Subsidiaries under any Material Contract, which
defaults would, individually or in the aggregate, result in a Material Adverse
Effect.
2.14 Environmental Matters. Except as set forth in Section 2.14 of
the Disclosure Schedule or except as failure of the following to be true and
correct would not, individually or in the aggregate, have a Material Adverse
Effect, none of the Sellers, the Company nor any of the Subsidiaries has
received any written notice alleging the past or present violation of any
applicable federal, state and local laws and regulations related to the
protection of human health or the environment ("Environmental Laws"), and (i)
each of the Company and the Subsidiaries is in compliance in all material
respects with all Environmental Laws; (ii) each of the Company and the
Subsidiaries has obtained and complies in all material respects with all
required governmental environmental permits with respect to the Business as
currently conducted; (iii) no storage, treatment or disposal of hazardous waste,
substance or material on the real estate owned, and to the knowledge of the
Company, leased or managed by any of the Company and the Subsidiaries has been
made except in compliance in all material respects with applicable Environmental
Laws; and (iv) each of the Company and the Subsidiaries has lawfully disposed in
all material respects of its hazardous waste products with respect to the
operations of the Business.
2.15 Title to Assets and Leases. (a) Except as set forth in Section
2.15 of the Disclosure Schedule relating to Whitecap and/or the CMI Assets, on
October 31, 1997, either the Company or a Subsidiary had and, except with
respect to assets disposed of in the ordinary course of business since October
31, 1997, now
16
has, good and marketable title to all real property and all other properties and
assets reflected on the Financial Statements or which would have been reflected
thereon had they not been fully depreciated, free and clear of all Encumbrances
except for (i) Encumbrances which secure indebtedness or obligations which are
properly reflected on the Financial Statements; (ii) liens for Taxes accrued but
not yet payable; (iii) liens arising as a matter of law in the ordinary course
of business, provided that the obligations secured by such liens are not
delinquent or are being contested in good faith; (iv) such imperfections of
title and encumbrances, if any, as do not materially interfere with the present
use of any of its properties and assets; and (v) leases, if any, to third
parties which, if material, are set forth on Section 2.15 of the Disclosure
Schedule. Either the Company or an Included Subsidiary owns, or has valid
leasehold interests in, all material properties and assets used in the conduct
of the Business.
(b) Neither the Company nor any of the Included Subsidiaries has any
legal obligation, absolute or contingent, to any other person to sell or
otherwise dispose of any substantial part of its assets, or to sell or otherwise
dispose of any of its assets except in the ordinary course of business and
except as provided in Section 7.13 hereof.
2.16 Numbers of Customers and Units. As of the date of this
Agreement, the Company and the Included Subsidiaries provide cellular telephone
services to not less than 64,800 revenue producing cellular telephone access
numbers and paging services to not less than 15,100 revenue producing paging
units.
2.17 Intellectual Property. (a) Except as set forth in Section 2.17
of the Disclosure Schedule, segregated by ownership, license or use, the Company
and the Included Subsidiaries do not own, license or use any patents,
trademarks, tradenames or other intellectual property and have not filed any
applications or registrations therefor.
(b) Neither the Company nor any of the Subsidiaries is knowingly, in
any material respect, or has received written notice alleging that the Company
or any of the Subsidiaries is, infringing or violating any patents, trademarks,
service marks, trade names, trade secrets, copyrights, royalty rights, design
rights or other intellectual property rights, or applications or registrations
therefor, foreign or domestic, of any person.
2.18 Insurance. (a) Set forth in Section 2.18 of the Disclosure
Schedule is a list of all material policies and binders of insurance held by or
on behalf
17
of the Company and/or the Subsidiaries or relating to their respective
businesses and properties (specifying the amount of the coverage, the type of
the coverage and any pending claims thereunder). Each of these policies and
binders is valid and enforceable in accordance with its terms and is outstanding
and duly in force.
(b) Neither the Company nor any of the Subsidiaries is in material
default with respect to any provision contained in any such policy or binder,
nor has there been any failure to give notice or to present any claim relating
to the Company or any of the Subsidiaries under any such policy or binder in a
timely fashion or in the manner or detail required by the policy or binder.
There are no outstanding unpaid premiums (except premiums not yet due and
payable), and no notice of cancellation or nonrenewal with respect to, or
disallowance of any claim under, any such policy or binder has been received by
the Company or any of the Subsidiaries.
2.19 Affiliated Transactions. Set forth in Section 2.19 of the
Disclosure Schedule is a list of all contracts, arrangements or obligations
between the Company or any of the Subsidiaries, on the one hand, and Sellers or
any of their affiliates, on the other hand, either (i) entered into since April
30, 1997 or (ii) in force and effective as of the date of this Agreement.
2.20 No Brokers' or Other Fees. Except as set forth in Section 2.20
of the Disclosure Schedule, no broker, finder or investment banker is entitled
to any brokerage, finder or other fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf of
any Seller, the Company or any affiliate thereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Sellers as follows:
3.1 Organization. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
3.2 Authorization, Etc. Buyer has full corporate power and authority
to execute and deliver this Agreement, the Indemnification Escrow Agreement and,
if applicable, the Deposit Escrow Agreement and to carry out the transactions
contemplated hereby and thereby. The Board of Directors of Buyer has duly ap-
18
proved and authorized the execution and delivery of this Agreement, the
Indemnification Escrow Agreement and, if applicable, the Deposit Escrow
Agreement and the consummation of the transactions contemplated hereby and
thereby, and no other corporate proceedings on the part of Buyer are necessary
to approve and authorize the execution and delivery of this Agreement, the
Indemnification Escrow Agreement and, if applicable, the Deposit Escrow
Agreement by Buyer and the consummation by Buyer of the transactions
contemplated hereby and thereby. This Agreement and the Indemnification Escrow
Agreement constitute, and, if applicable, the Deposit Escrow Agreement will
constitute, valid and binding obligations of Buyer enforceable against Buyer in
accordance with their respective terms, except that the enforcement hereof and
thereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity).
3.3 No Approvals or Conflicts. Except as set forth in Section 3.3 of
the Disclosure Schedule, neither the execution and delivery by Buyer of this
Agreement, the Indemnification Escrow Agreement and, if applicable, the Deposit
Escrow Agreement nor the consummation by Buyer of the transactions contemplated
hereby and thereby will (i) violate, conflict with or result in a breach of any
provision of the organizational documents of Buyer, (ii) conflict with or result
in a breach of any provision of, or constitute a default under, or result in the
termination or cancellation of, or accelerate the performance required by, or
result in the creation of any lien, security interest, charge or encumbrance
upon any of Buyer's properties under, any note, bond, mortgage, indenture, deed
of trust, license, franchise, permit, lease, contract, agreement or other
instrument or commitment or obligation to which Buyer or any of its properties
may be bound or affected, (iii) violate any order, writ, injunction, decree,
judgment, ruling, law, rule or regulation of any court or governmental
authority, domestic or foreign, applicable to Buyer or any of its properties, or
(iv) except for applicable requirements of the HSR Act and approvals of the FCC
and the PUC, require any consent, approval or authorization of, or notice to, or
declaration, filing or registration with, any governmental or regulatory
authority in connection with the execution, delivery and performance of this
Agreement by Buyer, which, in the case of clauses (ii), (iii) and (iv) above,
would, individually or in the aggregate, reasonably likely have a material
adverse effect on the business, assets, liabilities, operations or financial
condition of Buyer.
3.4 Periodic Reports. Buyer has filed all periodic reports and other
documents required to be filed by it under the Securities Exchange Act of 1934,
as
19
amended (the "Exchange Act"), with the Securities and Exchange Commission (the
"SEC") since December 31, 1996, pursuant to the federal securities laws and the
SEC rules and regulations thereunder, all of which, as of their respective
filing dates, complied in all material respects with all applicable requirements
of the Exchange Act (as such documents have been amended since the time of their
filing, collectively, the "Buyer SEC Reports"). None of the Buyer SEC Reports
filed prior to the date hereof, including, without limitation, any financial
statements or schedules included therein, as of their respective dates or, if
amended, as of the date of the last such amendment, contained, and any Buyer SEC
Reports filed subsequent to the date hereof will not contain, any untrue
statement of a material fact or omitted, or will omit, any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, or will be
made, not misleading.
3.5 No Distribution. The Securities will not be taken by Buyer with a
view to the public distribution thereof, and will not be transferred except in a
transaction registered or exempt from registration under the Securities Act of
1933, as amended.
3.6 Compliance with Law; Governmental Authorizations. Buyer is not in
violation of any applicable law, statute, order, rule or regulation (including
those relating to the protection of the environment) promulgated or judgment
entered by any federal, state, local or United States court or governmental
authority relating to or affecting the operation, conduct or ownership of any
property or business of Buyer which, individually or in the aggregate, would
reasonably be expected to have a material adverse effect on the business,
operations, assets, liabilities or financial condition of Buyer or on the
ability of Buyer to consummate the transactions contemplated hereby. The
licenses, permits and other governmental authorizations held by Buyer are valid
and sufficient for the conduct of the businesses of Buyer as currently
conducted.
3.7 Buyer's Registration Statement. The Registration Statement
referred to in Section 7.10 hereof, when it becomes effective, will comply in
all material respects with all applicable requirements of the Securities Act of
1933, as amended; such Registration Statement at such time will not contain any
untrue statement of a material fact or omit any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they will be made, not misleading.
20
3.8 No Brokers' or Other Fees. Except as set forth in Section 3.8
of the Disclosure Schedule, no broker, finder or investment banker is entitled
to any brokerage, finder or other fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf of
Buyer.
ARTICLE IV
CONDITIONS TO EACH PARTY'S OBLIGATIONS
The obligation of Sellers to sell the Securities and the obligation of
Buyer to purchase the Securities are subject to the satisfaction or waiver by
Sellers and Buyer, at or prior to the Closing, of each of the following
conditions.
4.1 Regulatory Consents. All waiting periods applicable under the
HSR Act with respect to the transactions contemplated hereby shall have expired
or been terminated and all applicable approvals of the FCC and the PUC shall
have been received and all material approvals of any other governmental agency
or authority shall have been received.
4.2 Injunctions. On the Closing Date there shall be no injunction,
writ, preliminary restraining order or other order in effect of any nature
issued by a court or governmental agency of competent jurisdiction directing
that the transactions provided for herein not be consummated as provided herein.
4.3 Transfer of Whitecap and CMI Assets. The capital stock of
Whitecap and the CMI Assets shall have been transferred in accordance with the
provisions of Section 7.13 hereof.
4.4 Indemnification Escrow Agreement. It shall be a condition to
Buyer's obligations hereunder that each of Sellers, together with the escrow
agent thereunder, shall have executed and delivered the Indemnification Escrow
Agreement. It shall be a condition to Sellers' obligations hereunder that Buyer,
together with the escrow agent thereunder, shall have executed and delivered the
Indemnification Escrow Agreement.
21
ARTICLE V
CONDITIONS TO SELLERS' OBLIGATIONS
The obligations of Sellers under this Agreement are subject to the
satisfaction, at or prior to the Closing, of each of the following conditions,
unless waived in writing by Sellers.
5.1 Representations and Warranties. The representations and
warranties made by Buyer in this Agreement that are qualified by materiality
shall be true and correct in all respects on the Closing Date as though such
representations and warranties were made at such date, except to the extent such
representations and warranties speak only as of an earlier date, in which case
they shall be true in all respects as of such earlier date, and the
representations and warranties made by Buyer in this Agreement that are not
qualified by materiality shall be true and correct in all material respects on
the Closing Date as though such representations and warranties were made at such
date, except to the extent such representations and warranties speak only as of
an earlier date, in which case they shall be true in all material respects as of
such earlier date.
5.2 Performance. Buyer shall have performed and complied in all
material respects with all agreements, obligations and conditions required by
this Agreement to be so performed or complied with by Buyer prior to the
Closing.
5.3 Officer's Certificate. Buyer shall have delivered to Sellers a
certificate, dated the date of the Closing and executed by an appropriate
officer of Buyer, certifying to the fulfillment of the conditions specified in
Sections 5.1 and 5.2 hereof.
5.4 Closing Deliveries. Sellers shall have received from Buyer those
items set forth in Section 1.5(b) hereof.
5.5 Opinion of Counsel. Sellers shall have received the opinion of
counsel for Buyer in form and substance reasonably satisfactory to Sellers with
respect to the matters contained in Sections 3.1 and 3.2 hereof.
5.6 Deposit Escrow Amount. If applicable, the Deposit Escrow
Amount shall have been released to Sellers in accordance with the terms of the
Deposit Escrow Agreement.
22
5.7 Consents. All consents referred to in Section 7.3(b) hereof shall
have been obtained.
ARTICLE VI
CONDITIONS TO BUYER'S OBLIGATIONS
6.1 Representations and Warranties. The representations and
warranties made by Sellers and the Company in this Agreement that are qualified
by materiality shall be true and correct in all respects on the Closing Date as
though such representations and warranties were made at such date, except to the
extent such representations and warranties speak as of an earlier date, in which
case they shall be true in all respects as of such earlier date, and the
representations and warranties made by Sellers and the Company in this Agreement
that are not qualified by materiality shall be true and correct in all material
respects on the Closing Date as though such representations and warranties were
made at such date, except to the extent such representations and warranties
speak as of an earlier date, in which case they shall be true in all material
respects as of such earlier date.
6.2 Performance. Sellers and the Company shall have performed and
complied in all material respects with all agreements, obligations and
conditions required by this Agreement to be so performed or complied with by
Sellers and the Company prior to the Closing.
6.3 Officer's Certificate. Sellers and the Company shall have
delivered to Buyer a certificate, dated the date of the Closing and executed by
the Chief Executive Officer of the Company certifying to the fulfillment of the
conditions specified in Sections 6.1 and 6.2 hereof.
6.4 Closing Deliveries. Buyer shall have received from Sellers or
the Company those items set forth in Section 1.5(a) hereof.
6.5 Opinion of Counsel. Buyer shall have received the opinion of
Xxxxxxxx & Xxxxxxxx in form and substance reasonably satisfactory to Buyer with
respect to the matters contained in Sections 2.1, 2.2, 2.3, 2.4, 2.6, 2.7, 2.8
and 2.13 hereof (provided that certain matters may be addressed by other counsel
for Sellers reasonably satisfactory to Buyer).
23
6.6 Consents. All consents referred to in Section 7.3(b) hereof shall
have been obtained.
6.7 Resignations. Buyer shall have received the resignations from
such of the directors and officers of the Company and the Included Subsidiaries
as Buyer shall specify in a notice given to Sellers not less than five business
days prior to the Closing.
6.8 Noncompetition Agreements. Buyer shall have received executed
copies of noncompetition agreements in the form attached as Exhibit D hereto
(the "Noncompetition Agreements") from each of the parties set forth in Section
6.8 of the Disclosure Schedule.
6.9 Employment Agreements. Buyer shall have entered into
employment agreements reasonably satisfactory to Buyer with the persons set
forth in Section 6.9 of the Disclosure Schedule.
6.10 Financing. Buyer shall have completed the financing referred to
in Section 7.10 hereof.
ARTICLE VII
COVENANTS AND AGREEMENTS
7.1 Conduct of Business. Sellers and the Company covenant that,
except for actions specifically contemplated hereby or as consented to in
writing by Buyer, from and after the date of this Agreement and until the
Closing Date they shall:
(a) use all reasonable efforts consistent with good business judgment
to: (i) preserve the present business organization of the Company and the
Subsidiaries intact; (ii) consistent with prior practice, keep available the
services of employees of the Company and the Subsidiaries; and (iii) operate the
Company and the Subsidiaries in the ordinary course consistent with prior
practice;
(b) except as otherwise provided in Section 7.1 of the Disclosure
Schedule and as provided in Section 7.13 hereof, not (i) issue or sell any
shares of capital stock or other securities of the Company or any of the
Subsidiaries or any options, warrants or commitments of any kind with respect
thereto; (ii) directly or indi-
24
rectly purchase, redeem or otherwise acquire or dispose of any shares of capital
stock of the Company or any of the Subsidiaries; (iii) except for a payment of
up to $500,000 pursuant to the terms of the Recapitalization Agreement by and
among the Company, Triumph-Connecticut Limited Partnership, FSC Corp. and Xxxx
Xxxxxx, dated May 23, 1997 (the "Recapitalization Agreement"), declare, set
aside or pay any dividend or other distribution or advance on its capital stock
or make any other distribution to its stockholders; (iv) except in order to make
a payment of up to $500,000 pursuant to the terms of the Recapitalization
Agreement, and except in order to fund advertising and marketing expenses of the
Company and/or the Included Subsidiaries in an aggregate amount not to exceed
$345,000, and except for borrowings in the ordinary course of business under the
existing credit facilities as of the date of this Agreement, borrow or agree to
borrow any funds or incur, whether directly or by way of guarantee, any
obligation for borrowed money; (v) subject any of the property or assets of the
Company or any of the Subsidiaries (real, personal or mixed, tangible or
intangible) to any Encumbrance or otherwise permit or allow the sale or other
disposition of any material property or assets of the Company or any of the
Subsidiaries (real, personal or mixed, tangible or intangible), other than the
sale of products in the ordinary course of business consistent with past
practice and other than Encumbrances under existing credit facilities as of the
date of this Agreement with respect to newly acquired properties or assets
permitted to be acquired pursuant to the terms of this Agreement; (vi) make any
material change in its accounting policies from those applied in the preparation
of the Financial Statements; (vii) make any capital expenditures not set forth
in the budget set forth in Section 7.1 of the Disclosure Schedule, except for
capital expenditures not in excess of $200,000 individually or $500,000 in the
aggregate; (viii) modify or change in any material respect in a manner adverse
to the Company, or enter into or terminate, any material contract or commitment;
(ix) acquire an equity interest in, or the assets of, any other corporation or
entity; (x) waive any claims or rights relating to the Company's business,
except with respect to customers and suppliers in the ordinary course of
business and consistent with past practice and otherwise in an amount not to
exceed $100,000 in the aggregate; (xi) permit the Company and the Included
Subsidiaries to alter their billing and collection practices; (xii) permit the
Company and the Included Subsidiaries to increase the aging of trade and other
payables, except with respect to payables which the Company and the Included
Subsidiaries can reasonably demonstrate to Buyer are being contested in good
faith; (xiii) increase the compensation payable or to become payable to any of
the officers or employees of the Company or any of the Subsidiaries or take any
action with respect to the grant of any severance or termination pay, or stay
bonus or other incentive arrangement (other than pursuant to benefit plans and
policies in effect on the date of this Agreement), except any
25
increases made in the ordinary course of business consistent with past practice;
(xiv) make or change any material Tax election, other than in the ordinary
course of business consistent with past practice or pay any amounts under, or in
respect of, any tax sharing agreement or arrangement; (xv) amend the charter or
bylaws of the Company or any of the Subsidiaries; (xvi) enter into any
agreements or arrangements with an affiliate; (xvii) take any action that would,
or that could reasonably be expected to, result in any of the representations or
warranties of Sellers or the Company set forth in this Agreement to become
untrue; or (xviii) agree to do any of the foregoing (unless such agreement is
explicitly contingent upon, and is reasonably not designed to result in, the
failure to consummate the transactions contemplated by this Agreement); and
(c) maintain the books and records of the Company and the
Subsidiaries in accordance with prior practice.
7.2 Access to Books and Records. The Company shall, and shall cause
each of the Subsidiaries to, afford to Buyer, and to Buyer's accountants,
counsel and other representatives, reasonable access and permit them to make
such inspections as they may reasonably require during normal business hours,
including all available environmental reviews or audits, during the period from
the date of this Agreement through the Closing to their respective properties,
books, contracts, commitments and records. The Company and the Subsidiaries
shall furnish or cause to be furnished to Buyer such financial and operating
data and other information with respect to the business and properties of the
Company and the Subsidiaries, including access to the work papers of the
Company's independent auditors, as Buyer may from time to time reasonably
request, and Buyer and its representatives shall be entitled, in consultation
with the Company, to such access to the representatives, officers and employees
of the Company and the Subsidiaries as Buyer may reasonably request. Without
limiting the generality of the foregoing, for the purpose of assisting Buyer in
connection with the financing referred to in Section 7.10 hereof, the Company
shall cause all necessary audited and unaudited financial statements of the
Company and the Subsidiaries through October 31, 1997, and all necessary related
consents of the Company's independent accountants, to be delivered to Buyer no
later than January 21, 1998. Buyer will hold, and will cause its affiliates,
associates and representatives to hold, any nonpublic information in accordance
with the terms of the Confidentiality Agreement, dated as of December 1, 1997,
between Buyer and the Company (the "Confidentiality Agreement").
26
7.3 Approvals and Consents. (a) After the execution hereof, each of
the Company and Sellers, on the one hand, and Buyer, on the other: (i) shall
promptly prepare and make any required filings under the HSR Act and under the
regulations of the FCC and the PUC, as required, and (ii) shall use all
reasonable efforts to obtain and to cooperate in obtaining any consent,
approval, authorization or order of, or in making any registration or filing
with, any governmental agency or body required in connection with the execution,
delivery or performance of this Agreement. The Company and Buyer will furnish to
one another such necessary information and reasonable assistance as may be
requested in connection with the preparation of necessary filings or submissions
under the provisions of the HSR Act and under the regulations of the FCC and the
PUC. Sellers and Buyer will supply to one another copies of all correspondence,
filings or communications (or memoranda setting forth the substance thereof)
between Buyer or Sellers or their respective representatives, on the one hand,
and the Federal Trade Commission, the Antitrust Division of the U.S. Department
of Justice, the FCC, the PUC or any other governmental agency or authority or
their respective staffs, on the other hand, with respect to this Agreement or
the transactions contemplated hereby, other than confidential or proprietary
information therein.
(b) Sellers and the Company shall use all reasonable efforts to
obtain at the earliest practicable date and prior to the Closing all consents,
waivers and/or approvals required in connection with the performance of this
Agreement and the consummation of the transactions contemplated hereby pursuant
to the terms of (i) all Material Contracts and (ii) any other contracts, leases,
agreements and understandings to which any of the Company and the Subsidiaries
is a party or by which any of their respective assets or operations may be
bound, except in the case of this clause (ii) for any consents, waivers and/or
approvals which the failure to obtain would not impair in any material respect
the transactions contemplated hereby or the ability of the Company and the
Subsidiaries to operate the Business following the Closing. The Sellers and the
Company shall also proceed in good faith to obtain prior to the Closing all
other consents that may be required in connection with the performance of this
Agreement pursuant to the terms of other agreements or instruments of the
Company and the Subsidiaries. Buyer shall use all reasonable efforts to obtain
at the earliest practicable date and prior to the Closing all consents, waivers
and/or approvals required in connection with the performance of this Agreement
and the consummation of the transactions contemplated hereby pursuant to the
terms of any contracts, leases, agreements and understandings to which Buyer is
a party or by which any of its assets or operations may be bound, except for any
consents, waivers and/or approvals which the failure to obtain would not impair
in any material respect the transactions contemplated hereby.
27
7.4 Further Assurances. After the Closing, each party hereto shall
from time to time, at the request of the other party and without further cost or
expense to such other party, execute and deliver or cause to be executed and
delivered such other instruments of conveyance and transfer and such other
certificates and other documents and take such other actions as such other party
may reasonably request in order to more effectively consummate the transactions
contemplated hereby.
7.5 Confidentiality Agreement. The Confidentiality Agreement will
survive and remain in full force and effect following the Closing or the
termination of this Agreement. Buyer also agrees that for a period of 12 months
following the termination of this Agreement it will not solicit for employment
employees of the Company and/or the Subsidiaries.
7.6 Tax Matters. (a) Sellers Indemnification. Subject to the third
proviso of Section 9.1(a) hereof with respect to state sales and use taxes,
Sellers shall be liable for, and shall indemnify and hold Buyer, the Company,
the Included Subsidiaries and their affiliates harmless against, all Taxes (i)
imposed on any person (other than the Company or the Included Subsidiaries)
under Treas. Reg. (S) 1.1502-6 (or any similar provision under state, local or
foreign law) (including as a transferee or successor, by conduct or otherwise);
or (ii) of the Company or the Subsidiaries for any taxable year or taxable
period ending on or before the Closing Date due or payable with respect to the
income, operations, assets or business of the Company or the Subsidiaries on or
before the Closing Date, but only to the extent that the aggregate amount of
such Taxes exceeds the amount of Taxes that have been reserved for in the
Financial Statements. In order to appropriately apportion any income taxes
relating to any taxable year beginning before (and ending after) the Closing
Date, the parties hereto shall apportion such income taxes to the taxable period
ending on or before the Closing Date by a closing of the Company's and the
Subsidiaries' books, except that exemptions, allowances or deductions that are
calculated on a time basis, such as the deduction for depreciation, shall be
apportioned on a time basis. In order to appropriately apportion any non-income
taxes relating to any taxable year beginning before (and ending after) the
Closing Date, the parties hereto shall apportion such non-income taxes to the
taxable period ending on or before the Closing Date as follows: (x) ad valorem
taxes (including, without limitation, real and personal property taxes) shall be
accrued on a monthly basis over the period for which such taxes are levied, or
if it cannot be determined over what period such taxes are being levied, over
the fiscal period of the relevant taxing authority, in each case irrespective of
the lien or assessment date of such taxes, (y) all Taxes relating to actions
outside the ordinary course of business occurring on or prior to the Closing
Date shall be
28
apportioned to the period ending on or prior to Closing, including, without
limitation and notwithstanding any provision herein to the contrary, all Taxes
relating directly or indirectly to the transfer of the capital stock of Whitecap
and the CMI Assets as contemplated by Section 7.13 herein, and (z) franchise and
other privilege taxes not measured by income shall be accrued on a monthly basis
over the period to which the privilege relates. Any tax allocation agreement or
arrangement between the Company and Sellers or any of their affiliates in effect
prior to the Closing (other than this Agreement) shall cease to exist as of the
Closing Date.
(b) Company's Indemnification. Except as otherwise provided in
Section 7.6(a) hereof, the Company and Buyer shall be liable for, and shall
indemnify and hold Sellers or any affiliate of Sellers harmless against, any and
all Taxes imposed on the Company or the Included Subsidiaries relating to any
taxable year ending after the Closing Date.
(c) Refunds or Credits. The Company shall promptly pay to Sellers any
refunds or credits of Taxes for which Sellers may be liable under Section 7.6(a)
hereof. For purposes of this Section 7.6(c), the term "refund" shall include a
reduction in Taxes and the use of an overpayment of Taxes as an audit or other
tax offset and receipt of a refund shall occur upon the filing of a return or an
adjustment thereto using such reduction, overpayment or offset, or upon the
receipt of cash. Upon the reasonable request of Sellers, the Company shall
prepare and file, or cause to be prepared and filed, all claims for refunds
relating to such Taxes; provided, however, that the Company shall not be
required to file such claims for refund to the extent such claims for refund
would have a Material Adverse Effect on the Company and the Included
Subsidiaries in future periods or to the extent the claims for refund relate to
a carryback of an item. The Company shall be entitled to all other refunds and
credits of Taxes.
(d) Mutual Cooperation. As soon as practicable, but in any event
within 15 days after either Sellers' or Buyer's request, as the case may be,
Buyer shall deliver to Sellers or Sellers shall deliver to Buyer, as the case
may be, such information and other data relating to the Tax Returns and Taxes of
the Company and the Subsidiaries and shall provide such other assistance as may
reasonably be requested, to cause the completion and filing of all Tax Returns
or to respond to audits by any taxing authorities with respect to any Tax
Returns or taxable periods or to otherwise enable Sellers, Buyer or the Company
to satisfy their accounting or Tax requirements. For a period of five years from
and after the Closing, Buyer and Sellers shall, and shall cause their affiliates
to, maintain and make available to the
29
other party, on such other party's reasonable request, copies of any and all
information, books and records referred to in this Section 7.6(d). After such
five-year period, Buyer or Sellers may dispose of such information, books and
records, provided that prior to such disposition Buyer or Sellers shall give the
other party the opportunity to take possession of such information, books and
records. Sellers shall be responsible for preparing and filing the federal
income tax return for the period ending on the Closing Date which return shall
be timely filed and the Taxes with respect thereto timely paid.
(e) Contests. Whenever any taxing authority asserts a claim, makes an
assessment, or otherwise disputes the amount of Taxes for which Sellers or
Whitecap are or may be liable under this Agreement, Buyer shall, if informed of
such an assertion, promptly inform Sellers, and Sellers shall have the right to
control any resulting proceedings and to determine whether and when to settle
any such claim, assessment or dispute to the extent such proceedings or
determinations affect the amount of Taxes for which Sellers are liable under
this Agreement. Whenever any taxing authority asserts a claim, makes an
assessment or otherwise disputes the amount of Taxes for which Buyer is liable
under this Agreement, Sellers shall, if informed of such an assertion, promptly
inform Buyer, and Buyer shall have the right to control any resulting
proceedings and to determine whether and when to settle any such claim,
assessment or dispute, except to the extent such proceedings affect the amount
of Taxes for which Sellers are liable under this Agreement.
(f) Resolution of Disagreements Between Sellers and Buyer. If Sellers
and Buyer disagree as to the amount of Taxes for which Sellers or Buyer may be
liable under this Agreement, Sellers and Buyer shall promptly consult each other
in an effort to resolve such dispute. If any such point of disagreement cannot
be resolved within 60 days of the date of consultation, Sellers and Buyer shall
within 10 days after such 60-day period jointly select a nationally recognized
independent public accounting firm which has not, except pursuant to this
Section 7.6(f), performed any services since January 1, 1992, for either Sellers
or Buyer or their respective subsidiaries, to act as an arbitrator to resolve,
within 60 days after their selection, all points of disagreement concerning tax
matters with respect to this Agreement and presented to such accounting firm at
the time of its selection. If the parties cannot agree on the selection of an
accounting firm within such ten-day period, within two business days after such
ten-day period the parties shall petition the Chief Judge of the United States
District Court for the Northern District of Illinois to select such accounting
firm. The cost of any such independent public accounting firm shall be paid
equally by the parties.
30
(g) Survival of Obligations. The obligations of the parties set forth
in this Section 7.6 shall be unconditional and absolute, and shall remain in
effect without limitation as to time or amount of recovery.
7.7 Schedule of Employees. A schedule shall be delivered to Buyer by
the Company prior to the Closing Date, setting forth the name and position of
each person employed on a full-time or part-time basis by the Company and/or the
Subsidiaries and the aggregate compensation (including salary, bonuses and
commissions) paid to each such person for the period commencing January 1, 1997,
and ending with the pay period not more than 30 days prior to the Closing Date,
together with the date of most recent commencement of service of each such
person and the accrued holiday, vacation, sick leave, long-service entitlement
(if any) of each such person and permitted time off due as compensation for
additional time worked by each person.
7.8 Supplements to Disclosure Schedule. From time to time prior to
the Closing, Sellers, the Company and Buyer will promptly supplement or amend
the sections of the Disclosure Schedule relating to their respective
representations and warranties in this Agreement with respect to any matter,
condition or occurrence hereafter arising which, if existing or occurring at the
date of this Agreement, would have been required to be set forth or described in
their respective sections of the Disclosure Schedule. No such supplement or
amendment by Sellers, the Company or Buyer shall have any effect for the purpose
of (i) determining satisfaction by Sellers of the conditions set forth in
Sections 5.1 and 5.2 hereof or (ii) determining satisfaction by Buyer of the
conditions set forth in Sections 6.1 and 6.2 hereof.
7.9 Covenant to Satisfy Conditions. Each party agrees to use all
reasonable efforts to insure that the conditions set forth in Article IV,
Article V and Article VI hereof are satisfied, insofar as such matters are
within the control of such party.
7.10 Financing. Buyer has filed a registration statement on Form S-1
with the SEC with respect to an initial public offering of its common stock,
copies of which have been provided to Sellers. As promptly as practicable, Buyer
shall provide to Sellers copies of any amendments to such registration statement
which are filed with the SEC. Buyer shall use all reasonable efforts to
consummate as soon as practicable an initial public offering of its common stock
at a price per share equal to or in excess of the price per share referred to in
the letter of Buyer dated even date herewith which results in gross proceeds of
at least $125,000,000.
31
7.11 Affiliated Transactions. Except as provided herein or as set
forth in Section 7.11 of the Disclosure Schedule, prior to or concurrently with
the Closing, all contracts, arrangements or obligations between the Company or
any of the Subsidiaries, on the one hand, and Sellers or any of their
affiliates, on the other hand, shall be terminated without the payment of any
monies required by the Company or the Subsidiaries.
7.12 Financial Statements and Reports. (a) As promptly as
practicable, the Company shall provide to Buyer true and complete copies of the
Company's monthly unaudited balance sheets and statements of operations,
stockholders' deficit and cash flows, together with the notes thereto, if any
(the "Interim Financial Statements"). The Interim Financial Statements shall be
prepared on a basis consistent with the Financial Statements referred to in
Section 2.5 hereof and shall fairly present in all material respects the
financial position and results of operations of the Company in accordance with
GAAP as of the dates and for the periods set forth in such interim financial
statements. As promptly as practicable, the Company shall deliver to Buyer true
and complete copies of such other regularly prepared financial statements,
reports and analyses as may be prepared by the Company and delivered to the
Company's existing lenders under its credit facilities.
(b) Sellers shall use their best efforts to cause KPMG Peat Marwick,
no later than January 15, 1998, to conduct a Statement on Auditing Standards No.
71 review and provide financial statement accounting comfort, in form and
substance reasonably satisfactory to Buyer, in each case with respect to the
consolidated financial statements of the Company for the twelve month period
ended December 31, 1996 and for the nine month periods ended September 30, 1996
and September 30, 1997. Sellers also shall use their best efforts to cause the
delivery, no later than January 21, 1998, of audited financial statements in
form and substance reasonably satisfactory to Buyer for CTCSI and CMI for the
year ending April 30, 1995. Sellers also shall use their best efforts to cause
the independent accounting firms that conducted such audits to provide one or
more consents as may be required in connection with the financing referred to in
Section 7.10 hereof. In the event that the obligations of the three immediately
preceding sentences are satisfied but the Closing does not occur, Buyer shall be
liable for the actual out-of-pocket costs to the Company in satisfying such
obligations.
7.13 Transfer of Whitecap and CMI Assets. Sellers shall, prior to
Closing, (i) effectuate a spin-off of the capital stock Whitecap or otherwise
cause the transfer of the capital stock of Whitecap from the Company and (ii)
transfer from CMI
32
all of the assets listed in Section 7.13 of the Disclosure Schedule (the "CMI
Assets"), in each case in a manner reasonably satisfactory to Buyer. Sellers
shall provide Buyer with any information Buyer may reasonably request with
respect to the status of the transactions specified in clauses (i) and (ii)
above and shall provide Buyer reasonable opportunity to review and comment upon
draft documentation relating to such transactions. Sellers shall, prior to
Closing, deliver to Buyer a fairness opinion in form and substance reasonably
satisfactory to Buyer prepared by an appraiser agreed upon in writing by Sellers
and Buyer which sets forth the fair market value of the capital stock of
Whitecap and the CMI Assets.
7.14 Disclosure. Sellers and the Company shall promptly notify Buyer
of, and furnish Buyer with any information Buyer may reasonably request with
respect to the occurrence, to the best knowledge of Sellers and the Company of,
any event or condition or the existence of any fact that would cause any of the
conditions to Buyer's obligations to consummate the transactions contemplated by
this Agreement not to be fulfilled. Buyer shall promptly notify Sellers of, and
furnish Sellers with any information Sellers may reasonably request with respect
to the occurrence, to the best knowledge of Buyer, of any event or condition or
the existence of any fact that would cause any of the conditions to Sellers'
obligations to consummate the transactions contemplated by this Agreement not to
be fulfilled.
7.15 No Solicitation. (a) The Company shall not, directly or
indirectly, through any officer, director, employee, investment banker,
attorney, representative or agent of the Company or any of the Subsidiaries (in
any case, a "Representative"), solicit, initiate or encourage any inquiries or
proposals that constitute, or could reasonably be expected to lead to, an offer
or proposal for, or indication of interest in, a merger or other business
combination involving the Company or the acquisition of any equity interest in,
or a substantial portion of the assets of, the Company or any Included
Subsidiary (an "Acquisition Proposal"); provided that, subject to the provisions
set forth in Section 7.15(b) and (c) below, nothing contained in this Agreement
shall prevent the Company from furnishing information or data to, or entering
into discussions or negotiations with, any person in connection with an
unsolicited Acquisition Proposal; provided, further, that in no event shall the
Company, any Subsidiary or any of their respective Representatives provide to
any other party the identity of Buyer or the terms of this Agreement.
(b) The Company shall (i) promptly (and in no event later than 24
hours after receipt of any Acquisition Proposal) notify Buyer after receipt by
it (or any of its Representatives) of any Acquisition Proposal or any inquiries
indicating that any
33
person is considering making or wishes to make an Acquisition Proposal, (ii)
promptly notify Buyer after receipt of any request for information relating to
it or any of the Subsidiaries or for access to its or any of the Subsidiaries'
properties, books or records by any person, identifying the information
requested by such person that may be considering making, or has made, an
Acquisition Proposal and promptly provide Buyer with any information which is
given to such person pursuant to this Section 7.15(b), and (iii) keep Buyer
advised on a timely basis as of the status and principal financial terms of any
such Acquisition Proposal, indication or request.
(c) In the event that the Company receives a bona fide written
Acquisition Proposal for all of the outstanding Securities or all or
substantially all of the assets of the Company and the Included Subsidiaries
which is (i) payable in cash and/or publicly traded securities in an aggregate
amount greater than $68 million (which price includes satisfaction of all of the
obligations of the Company for its outstanding indebtedness for borrowed money
and for redemption of its preferred stock), exclusive of any consideration for
Whitecap and the CMI Assets and (ii) received in a manner consistent with the
provisions of Section 7.15(a) and (b) hereof (a "Competing Proposal"), then the
Company shall give notice to Buyer of such Competing Proposal and shall deliver
to Buyer a copy of such Competing Proposal, and Buyer shall have the option,
within five days of the receipt of such notice, to deposit in an escrow account
the Deposit Escrow Amount pursuant to the terms of the Deposit Escrow Agreement.
In the event that Buyer exercises its option to deposit in escrow the Deposit
Escrow Amount, Sellers shall immediately terminate all discussions with the
person making the Competing Proposal and shall be prohibited from responding to
any further inquiries from any party other than Buyer and its Representatives
about any Acquisition Proposal. In the event that Buyer does not so exercise its
option to deposit the Deposit Escrow Amount, this Agreement shall be terminable
by delivery of written notice to Buyer by the Sellers within two business days
after the five day period referred to above.
7.16 Delivery of Disclosure Schedule. Sellers shall deliver to Buyer
a copy of the Disclosure Schedule required to be prepared by Sellers hereunder
on or prior to 5:00 p.m., New York time, on the sixth business day following the
date of this Agreement. Buyer shall have five business days following its
receipt of the Disclosure Schedule to review such Disclosure Schedule and to
notify Sellers of its intention not to proceed with the transactions
contemplated by this Agreement and to terminate this Agreement. In the event
that Buyer does not so notify Sellers of its intention to terminate this
Agreement within such five-day period, Buyer's right to terminate this Agreement
pursuant to Section 8.1(f) shall expire.
34
ARTICLE VIII
TERMINATION
8.1 Termination. This Agreement may be terminated and abandoned at
any time prior to Closing:
(a) by the mutual consent of Sellers and Buyer;
(b) by either Sellers or Buyer in the event the Closing has not
occurred by March 1, 1998 (the "Cutoff Date"), unless the failure of such
consummation shall be due to the failure of the party seeking to terminate this
Agreement to comply in all material respects with the agreements and covenants
contained herein to be performed by such party on or before the Cutoff Date;
(c) by either Sellers or Buyer in the event any court of competent
jurisdiction in the United States or other federal, state or local governmental
body shall have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the transactions contemplated
hereby and such order, decree or ruling or other action shall have become final
and nonappealable;
(d) by Sellers, pursuant to the terms of Section 7.15 hereof;
(e) by Buyer in the event that the deliveries contemplated by Section
7.12(b) are not satisfied; or
(f) by Buyer, pursuant to the terms of Section 7.16 hereof.
8.2 Effect of Termination. In the event of any termination of this
Agreement, neither party to this Agreement will have any liability to the other,
except for (i) any breach of any provisions of this Agreement and (ii)
obligations arising out of Section 7.5 hereof.
35
ARTICLE IX
INDEMNIFICATION
9.1 Indemnification by Sellers. (a) Sellers jointly and severally
(except with respect to each of SSDS and FSC Corp., which shall be several in
proportion to its holding of Securities as set forth on Exhibit A hereto)
(including their successors and assigns) agree to indemnify promptly Buyer, its
successors and assigns, and any officer, director, employee or affiliate of
Buyer (collectively, the "Buyer Parties") against and hold the Buyer Parties
harmless from and in respect of any and all assessments, liens, losses, claims,
damages (excluding consequential damages), fines, penalties, judgments,
settlements, liabilities, costs, reasonable expenses (including, without
limitation, reasonable expenses of investigation and defense fees and
disbursements of counsel and other professionals) and any other obligations of
any nature whatsoever which may be incurred by any of the Buyer Parties directly
or indirectly by virtue of or resulting from the breach (collectively, the
"Losses") of (i) any covenant or agreement made by the Company prior to Closing
or Sellers in this Agreement or (ii) any of the representations and warranties
made by the Company prior to Closing or Sellers in this Agreement, in each case
without regard to any "materiality" or "Material Adverse Effect" or similar
limitations, thresholds or exceptions contained in such representations and
warranties and without regard to whether any such Loss is incurred prior to or
after the Closing Date, provided, that Sellers shall not be required to
indemnify any of the Buyer Parties for claims under this clause (ii) of Section
9.1(a) unless and until (but only to the extent that) the aggregate amount of
Losses exceeds $500,000; provided, further, that Sellers shall not be required
to indemnify any of the Buyer Parties for claims under this clause (ii) of
Section 9.1(a) to the extent that the aggregate amount of Losses exceeds $34
million; provided, further, that the provisions of this Article IX shall not
apply to the covenants and agreements contained in Section 7.6 hereof, which
shall be controlled by the terms therein (other than with respect to state sales
and use taxes, which shall be controlled by the terms of this Section 9.1(a));
provided, further, that indemnification for breaches of the representations and
warranties listed in clause (ii) of this Section 9.1(a) shall not be available
except with respect to claims of breaches made thereunder by any Buyer Party
prior to July 31, 1999 other than claims of breaches under Sections 2.10 or
2.11, which shall survive the applicable statute of limitations, and other than
claims of breaches under Sections 2.2 or 2.3, which shall survive indefinitely;
provided, further, that any claims for indemnification under clause (ii) of this
Section 9.1(a) shall be decreased or refunded to Sellers, pro rata in accordance
with Exhibit A hereto, as the case may be, dollar for dollar to the extent of
any actual
36
insurance recoveries or actual recoveries from other unaffiliated third parties
with respect to matters for which claims for indemnification were made under
such clause.
(b) Sellers and Whitecap jointly and severally (except with respect
to each of SSDS and FSC Corp., which shall be several in proportion to its
holding of Securities as set forth on Exhibit A hereto) (including their
successors and assigns) agree to indemnify promptly the Buyer Parties against
and hold the Buyer Parties harmless from and in respect of any and all Losses
which may be incurred by any of the Buyer Parties directly or indirectly which
relate to or arise out of the operations of Whitecap, the CMI Assets or
Smartlink Development, L.P. or the transactions contemplated by Section 7.13
hereof (including, without limitation, any liability for Taxes), whether such
Losses arise before or after the Closing Date and regardless of whether such
Losses result from a breach of any representation or warranty or any covenant
contained in this Agreement.
(c) Sellers jointly and severally (except with respect to each of
SSDS and FSC Corp., which shall be several in proportion to its holding of
Securities as set forth on Exhibit A hereto) (including their successors and
assigns) agree to indemnify promptly the Buyer Parties against and hold the
Buyer Parties harmless from and in respect of any and all Losses
(notwithstanding anything to the contrary contained in Section 9.1(a) hereof)
which may be incurred by any of the Buyer Parties directly or indirectly by
virtue of any discrepancy between the actual amount of the Closing Indebtedness
and the amount of the Closing Indebtedness represented to Buyers pursuant to
Section 1.6(a)(v).
9.2 Indemnification by Buyer. Buyer (including its successors and
assigns) agrees to indemnify promptly Sellers, their successors and assigns, and
any affiliate of any of Sellers (collectively the "Seller Parties") against and
hold the Seller Parties harmless from and in respect of any and all Losses which
may be incurred by any of the Seller Parties directly or indirectly by virtue of
or resulting from the breach of (i) any covenant or agreement made by Buyer in
this Agreement or (ii) any of the representations and warranties made by Buyer
in this Agreement, in each case without regard to any "materiality" or "Material
Adverse Effect" or similar limitations, thresholds or exceptions contained in
such representations and warranties and without regard to whether any such Loss
is incurred prior to or after the Closing Date, provided, that Buyer shall not
be required to indemnify any of the Seller Parties for claims under this Section
9.2(ii) unless and until (but only to the extent that) the aggregate amount of
Losses exceeds $500,000; provided, further, that Buyer shall not be required to
indemnify any of the Seller Parties for claims under this Section 9.2(ii)
37
to the extent that the aggregate amount exceeds $34 million; provided, further,
that the provisions of this Article IX shall not apply to the covenants and
agreements contained in Section 7.6 hereof, which shall be controlled by the
terms therein; provided, further, that any claims for indemnification under
clause (ii) of this Section 9.2 shall be decreased or refunded to Buyer, as the
case may be, dollar for dollar to the extent of any actual insurance recoveries
or actual recoveries from unaffiliated third partes with respect to matters for
which claims for indemnification were made under such clause.
9.3 Notification of Claims. (a) A party entitled to be indemnified
pursuant to Section 9.1 or 9.2 hereof (the "Indemnified Party") shall notify the
party liable for such indemnification (the "Indemnifying Party") in writing of
any claim or demand which the Indemnified Party has determined has given or
could give rise to a right of indemnification under this Agreement. Such notice
must be given, in the case of a third-party claim, within twenty (20) days after
actual receipt by the Indemnified Party of written notice of the third-party
claim; provided, however, that the Indemnified Party shall in any event give
written notice to the Indemnifying Party within such reasonable period of time
as shall be necessary to allow the Indemnifying Party to respond to any judicial
pleading or other document for which a timely response is required.
(b) If the Indemnified Party shall notify the Indemnifying Party of
any claim or demand pursuant to Section 9.3(a) hereof, and if such claim or
demand relates to a claim or demand asserted by a third party against the
Indemnified Party which the Indemnifying Party acknowledges is a claim or demand
for which it must indemnify or hold harmless the Indemnified Party under Section
9.1 or 9.2 hereof, the Indemnifying Party shall have the right to employ counsel
reasonably acceptable to the Indemnified Party and to control the defense of any
such claim or demand asserted against the Indemnified Party. The Indemnified
Party shall have the right to cooperate in the defense of any such claim or
demand at its own expense. The Indemnifying Party shall notify the Indemnified
Party in writing, within 30 days after the date of the notice of claim given by
the Indemnified Party to the Indemnifying Party under Section 9.3(a) hereof, of
its election to defend in good faith any such third-party claim or demand. So
long as the Indemnifying Party is defending in good faith any such claim or
demand asserted by a third party against the Indemnified Party, the Indemnified
Party shall not settle or compromise such claim or demand. The Indemnified Party
shall make available to the Indemnifying Party or its agents all records and
other materials in the Indemnified Party's possession, and employees and
accountants of the Indemnified Party, reasonably required by the Indemnifying
Party
38
for its use in contesting any third-party claim or demand. If the Indemnifying
Party does not assume the defense of a third-party claim or demand, the
Indemnified Party shall defend such claim or demand and the Indemnifying Party
shall have the right to participate in such defense. The Indemnified Party
shall, in such defense, have the right, in its sole discretion, to settle or
compromise such claim or demand, provided that such settlement or compromise is
solely for the payment of money and includes a full release of the Indemnified
Party for the subject matter of such claim or demand; otherwise the Indemnified
Party shall not settle or compromise such claim or demand, except with the
written consent of the Indemnifying Party, which shall not be unreasonably
withheld or delayed.
(c) Except for specific performance, injunctive relief and/or
recoveries for claims of fraud, indemnification pursuant to this Article IX
shall be the sole remedy available to the parties hereto for the indemnifiable
subject matter.
ARTICLE X
MISCELLANEOUS
10.1 Termination of Representations and Warranties, Etc. Except as
set forth in this Agreement and the Disclosure Schedule, no representations or
warranties are being made by any of the parties hereto. Except as set forth in
Section 9.1 hereof, the respective representations and warranties of the
Company, Sellers and Buyer contained herein or in any certificates or other
documents delivered prior to or at the Closing shall expire with and be
terminated and extinguished as of the Closing, and thereafter neither Sellers
nor Buyer nor any officer, director or principal thereof shall be under any
liability whatsoever with respect to any such representation or warranty.
10.2 Fees and Expenses. Each of the parties shall bear its own
expenses in connection with the negotiation and consummation of the transactions
contemplated by this Agreement. If any of the parties has retained a broker or
finder in connection with the transactions contemplated herein, such party shall
bear the fees and expenses of such broker or finder; provided, that Sellers
shall be solely responsible for the fees and expenses of any broker or finder
employed by or on behalf of Sellers, the Company or any of the Subsidiaries.
39
10.3 Governing Law. This Agreement shall be construed under and
governed by the laws of the State of Delaware without regard to the
conflicts-of-laws provisions thereof.
10.4 Amendment. This Agreement may not be amended, modified or
supplemented except upon the execution and delivery of a written agreement
executed by the parties hereto.
10.5 No Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by either party hereto
without the prior written consent of the other party; provided, that Buyer may
assign its rights and obligations hereunder (except pursuant to Section 7.10
hereof) to an affiliate of Buyer without the consent of any other party;
provided, that no such assignment shall relieve Buyer of its obligations to the
Company and Sellers hereunder.
10.6 Waiver. Any of the terms or conditions of this Agreement which
may be lawfully waived may be waived in writing at any time by the party which
is entitled to the benefits thereof. Any waiver of any of the provisions of this
Agreement by any party hereto shall be binding only if set forth in an
instrument in writing signed on behalf of such party. No failure to enforce any
provision of this Agreement shall be deemed to or shall constitute a waiver of
such provision, and no waiver of any of the provisions of this Agreement shall
be deemed to or shall constitute a waiver of any other provision hereof (whether
or not similar) nor shall such waiver constitute a continuing waiver.
10.7 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given by hand,
overnight delivery service, delivery, telex, telecopier or mail (registered or
certified by mail, postage prepaid, return receipt requested) to the respective
parties as follows:
If to Buyer:
USN Communications, Inc.
00 X. Xxxxxxxxx Xxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Attention: Mr. J. Xxxxxx Xxxxxxx
(000) 000-0000 (telecopier)
(000) 000-0000 (telephone)
40
with copies to:
USN Communications, Inc.
00 X. Xxxxxxxxx Xxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
(000) 000-0000 (telecopier)
(000) 000-0000 (telephone)
and
Xxxx X. Xxxxxx, Esq.
Skadden, Arps, Slate, Xxxxxxx
& Xxxx (Illinois)
000 Xxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
(000) 000-0000 (telecopier)
(000) 000-0000 (telephone)
If to Sellers:
Xxxx Xxxxxx
00 Xxxxxxxx Xxxx Xxxx
Xxxxxxxxxx, Xxxxxxxxxxx 00000
(000) 000-0000 (telecopier)
(000) 000-0000 (telephone)
with a copy, post-closing, to:
Xxxxxxxx Xxxxxxxx, Esq.
0 Xxxxxxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxxxxxx 00000
41
and with an additional copy, pre-closing, to:
Xxxxxx Xxxxxxxxxx
Xxxxxx Communications Holding Company, Inc.
0000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxxxx 00000
(000) 000-0000 (telecopier)
(000) 000-0000 (telephone)
and
Triumph-Connecticut Limited Partnership
00 Xxxxx Xxxxxx, 00/xx/ Xxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxx
(000) 000-0000 (telecopier)
(000) 000-0000 (telephone)
FSC Corp.
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxx Xxxxxx
(000) 000-0000 (telecopier)
(000) 000-0000 (telephone)
or to such other address as any party hereto may, from time to time, designate
in a written notice given in like manner.
Notices shall be deemed given, in the case of hand delivery, upon
receipt, in the case of overnight delivery service, on the second business day
after delivery to a recognized overnight delivery service, in the case of telex
and telecopy, upon telephonic confirmation of transmission and, in the case of
mail, upon the fifth business day after deposit with the U.S. mail.
10.8 Complete Agreement. This Agreement, the Disclosure Schedule, the
Deposit Escrow Agreement, the Indemnification Escrow Agreement, the
Confidentiality Agreement and the other documents and writings referred to
herein or delivered pursuant hereto contain the entire understanding of the
parties with respect to its subject matter. There are no restrictions,
agreements, promises, warran-
42
ties, covenants or undertakings other than those expressly set forth in such
documents with respect to the subject matter of this Agreement. Except for the
Confidentiality Agreement, which shall remain in full force and effect, this
Agreement supersedes all prior agreements and understandings, both written and
oral, between the parties with respect to this subject matter. This Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors.
10.9 Counterparts. This Agreement may be executed in one or more
counterparts all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
10.10 Publicity. No publication and/or press release of any nature
shall be issued pertaining to this Agreement or the transactions contemplated
hereby without the prior consent of the parties hereto (which shall not be
unreasonably withheld) or except as may be required by the federal securities
laws.
10.11 Headings. The headings contained in this Agreement are for
reference only and shall not affect in any way the meaning or interpretation of
this Agreement.
10.12 Severability. Any provision of this Agreement which is invalid,
illegal or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity, illegality, or unenforceability,
without affecting in any way the remaining provisions hereof in such
jurisdiction or rendering that or any other provision of this Agreement invalid,
illegal or unenforceable in any other jurisdiction.
10.13 Time of the Essence. The parties agree that the Cutoff Date and
the other dates contained herein pursuant to which actions are to be completed
are significant to the transactions contemplated hereby and that time is of the
essence in satisfying the conditions and/or obligations subject to such dates.
43
IN WITNESS WHEREOF, the Company, Sellers and Buyer have executed this
Agreement or caused this Agreement to be executed by their duly authorized
officers as of the day and year first above written.
/s/ Xxxx Xxxxxx
----------------------------------------
Xxxx Xxxxxx
TRIUMPH-CONNECTICUT
LIMITED PARTNERSHIP
By /s/ Xxxxxxx X. Xxxxxxxx
-------------------------------------
Title: General Partner of its General
Partner
XXXXXXX XXXXXXXXX DAY SCHOOL
OF GREATER HARTFORD, INC.
By /s/ Xxxxx X. Xxxxxxx
-------------------------------------
Title: President
FSC CORP.
By /s/ Xxxx X. Xxxxxx
-------------------------------------
Title: Vice President
XXXXXX COMMUNICATIONS
HOLDING COMPANY, INC.
By /s/ Xxxx Xxxxxx
-------------------------------------
Title: President
USN COMMUNICATIONS, INC.
By /s/ J. Xxxxxx Xxxxxxx
---------------------------------------
Title: Chairman of the Board, President and
Chief Executive Officer
For purposes of Section 9.1(b) only:
WHITECAP TECHNOLOGIES, INC.
By /s/ Xxxxx XxXxx
---------------------------------------
Title: President
