STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made this 31st day of March, 1998, by and between C&L
Acquisitions, Inc., a Nevada corporation ("Seller" or "C&L"), Valley
Communications, Inc., a California corporation ("VCI"), and Technology Services
Corporation, a Delaware corporation ("Purchaser" or "TSC").
W I T N E S S E T H
WHEREAS, the principal business of VCI includes, but is not necessarily
limited to, the design, engineering, installation, testing and management of all
major structural wiring system for both voice and data networking and design
services; and
WHEREAS, Seller owns 80% of the issued capital stock of VCI; and
WHEREAS, Seller desires to sell its entire interest in VCI's stock to
Purchaser; and
WHEREAS, Purchaser desires to purchase all of Seller's interest in the
issued capital stock of VCI on the terms and subject to the conditions herein
contained;
NOW, THEREFORE, it is agreed as follows:
ARTICLE I
Purchase and
Sale of VCI Shares
1.1 Sale of Shares. Subject to the terms and conditions hereof, Seller
will sell to Purchaser and Purchaser will purchase from Seller 60,000 shares of
capital stock of VCI for a purchase price as specified in Section 1.2 hereof.
1.2 Purchase Price. The purchase price is Three Million Eight
Hundred Eighty-Six Thousand Three Hundred Twenty-seven and .12 Dollars
($3,886,327.12).
ARTICLE II
Closing Date: Payment and Delivery
2.1 Closing Date. The closing of the purchase and sale of the Shares
hereunder shall be held at the offices of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, 000
Xxxx Xxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx as of 10:00 a.m., local time, March 31,
1998 (the "Closing") or at such other time and place as shall be mutually agreed
upon between TSC and Seller (the date of the Closing is hereinafter referred to
as the "Closing Date").
2.2 Payment and Delivery. At the Closing, Seller shall grant Purchaser
the right to Purchase all of Seller's right, title and interest in and to all of
the issued and outstanding shares of capital stock of VCI owned by Seller.
Seller shall deliver a certificate or certificates to be held in escrow and
released as described below, registered in Seller's name and representing 60,000
shares capital stock of VCI (the "C&L Shares") against the purchase price of
$3,886,327.12. $3,075,000 of the Purchase Price shall be paid in the form of a
promissory note (the "Note") substantially in the form attached hereto as
Exhibit 2.2, and $811,327.12 shall be paid by the assumption by TSC (only upon
the release of the C&L Shares to TSC pursuant to Section 2.3) of Seller's entire
liability under those certain promissory notes by and among Seller and certain
other shareholders of VCI dated August 14, 1995.
2.3 Release of Shares. The C&L Shares shall be released from escrow to
TSC upon the occurrence of all of the following conditions:
(a) Seller's receipt of the first installment under the Note,
in the amount of $1,000,000 on or before May 18, 1998.
(b) TSC obtaining a firm financing commitment, in a form
reasonably acceptable to Seller's auditors and no later
than May 20, 1998, for the final payment required under
the Note, less any transaction fees; and
(c) Seller's receipt, no later than May 29, 1998, of all
amounts due under the Note; provided, that Purchaser
shall have a period of seven days (through June 5, 1998)
to cure such non-payment.
Or, immediately upon full payment and satisfaction of the Notes.
2.4 Transaction Escrow. At the Closing, Seller shall execute, deliver
and comply with an Escrow and Indemnity Agreement in the form attached hereto as
Exhibit 2.4 ("Escrow Agreement").
2.5 Cancellation. If the final payment under the note is not timely
received, Seller may, at its election, cancel the transaction by providing 7
days written notice and opportunity for the Buyer to cure within such period. In
the event of cancellation, Seller is entitled to keep $250,000 of the first
$1,000,000 payment under the Note, retrieve the Shares from escrow and receive
from TSC such payment as equals the amount of any indebtedness incurred after
the Closing Date and secured by the assets of VCI, minus (i) cash payments to
Seller (exclusive of $250,000 of the first $1,000,000 payment under the Note),
(ii) payments made in reduction of the August 14, 1995 notes referenced in
Section 2.2, and (iii) working capital invested in VCI. In the event of a
cancellation of this Agreement, (i) the Note and all obligations thereunder
shall be canceled, (ii) the Note shall be returned to TSC marked "canceled" and
(iii) any assumption of any liabilities or obligations under the August 14, 1995
notes from Seller to the other shareholders of VCI shall be canceled.
ARTICLE III
Representations and Warranties of Seller and VCI
Representations and Warranties of Seller. As an inducement to TSC to
enter into this Agreement and to consummate the transactions contemplated
herein, VCI and Seller jointly and severally warrant and represent to TSC and
agree as set forth below:
3.1 Organization. VCI is duly organized, validly existing, and in good
standing under the laws of the State of California. VCI has the corporate power
and authority necessary or required to carry on its business as now conducted.
3.2 Subsidiaries. VCI has no subsidiaries.
3.3 Authority. This Agreement and the transactions contemplated herein
have been duly approved by all necessary action on the part of VCI and Seller,
as the case may be. This Agreement, when executed and delivered by VCI and
Seller, and assuming the due execution hereof by TSC, will constitute the valid,
legal, and binding agreement of VCI and Seller, enforceable in accordance with
its terms. Neither the execution and delivery nor the consummation of the
transactions contemplated in this Agreement, nor compliance with nor fulfillment
of the terms and provisions hereof will (i) conflict with or result in a breach
of the terms, conditions, or provisions of or constitute a default under the
Certificate of Incorporation or By-Laws of VCI or Seller, any instrument to
which VCI or Seller is a party or by which it is bound (including, without
limitation, any agreement with a bank, union, landlord or vendor), or any
statute or regulatory provisions affecting VCI or Seller; (ii) give any party to
or with rights under any such instrument, agreement, mortgage, judgment, order,
award, decree, or other restrictions the right to terminate, modify, or
otherwise change the rights or obligations of VCI or Seller under such
instrument, agreement, mortgage, judgment, order, award, decree, or other
restrictions, or (iii) require the approval, consent, or authorization of or any
filing with or notification to any federal, state, or local court, governmental
authority or regulatory body. Each of VCI and Seller has full power and
authority to do and perform all acts and things required to be done by it under
this Agreement. VCI has delivered to TSC true and complete copies of the
Certificate of Incorporation and By-Laws of VCI.
3.4 Capital Structure. The authorized capital stock of VCI consists of
500,000 shares of Common Stock, of which 75,000 shares are issued and
outstanding and 60,000 shares owned by Seller. Except for this Agreement, there
are no agreements, arrangements, options, warrants, or other rights or
commitments of any character relating to the issuance, sale, purchase, or
redemption of any shares of capital stock of VCI, and no such agreements,
arrangements, options, warrants, or other rights or commitments will be entered
into or granted between the date hereof and the Closing Date. All of the
outstanding shares of VCI are validly issued, fully paid, and nonassessable with
no liability attaching to the ownership thereof, and are owned of record and
beneficially by Seller, free and clear of any liens, claims, encumbrances, or
restrictions of any kind; the transfer and delivery of the C&L Shares by Seller
to TSC, as contemplated by this Agreement, will be sufficient to transfer good
and marketable record and beneficial title to the C&L Shares, free and clear of
liens, claims, encumbrances, and restrictions of any kind.
3.5 Financial Statements. VCI agrees to furnish to TSC VCI's financial
statements for March 31, 1998 (the "VCI Financial Statements"). All of the VCI
Financial Statements (attached hereto as Exhibit 3.5) are true, correct, and
complete in all material respects and fairly present the financial position of
VCI as of the date thereof, have been prepared in accordance with generally
accepted accounting principles consistently applied throughout all periods, and
the balance sheet discloses all of VCI's debts, liabilities and obligations of
any nature (whether absolute, accrued, contingent (including guarantees of
indebtedness or otherwise, and whether due or to become due) and includes
appropriate reserves, to the extent required by generally accepted accounting
principles, for all taxes and other liabilities accrued or due at such date but
not then payable.
3.6 Material Changes. Since March 31, 1998, the business of VCI has been
operated only in the ordinary course and, whether or not in the ordinary course
of business, other than as disclosed in this Agreement or the schedules referred
to herein there has not been, occurred or arisen: (i) any material adverse
change in the financial condition of VCI from that shown on the VCI Financial
Statements referred to in Section 3.5 hereof; (ii) any damage or destruction in
the nature of a casualty loss, whether covered by insurance or not, to any
property or business of VCI which is material to the financial condition,
operations or business of VCI; (iii) any material increase in any employee
benefit plan; (iv) any amendment or termination of any agreement, or
cancellation or reduction of any debt owing to VCI or waiver or relinquishment
of any right of material value to VCI or (v) any other event, condition or state
of facts of any character which materially and adversely affects the results of
operations or business, financial condition or property of VCI.
3.7 Contracts. Except as set forth in Schedule 3.7 hereto or any other
schedule referred to herein, VCI is not a party to (i) any contract for the
purchase or sale of real property to or from any third party; (ii) any contract
for the lease or sublease of personal property from or to any third party which
provides for annual rentals in excess of $50,000, or any group of contracts for
the lease or sublease of similar kinds of personal property from or to third
parties which provides in the aggregate for annual rentals in excess of $50,000;
(iii) any contract for the purchase or sale of equipment, computer software,
lists of clients, insurance carriers or agents, or similar information,
commodities, merchandise, supplies, other materials or personal property or for
the furnishing or receipt of services which calls for performance over a period
of more than 60 days and involves more than the sum of $25,000; (iv) any license
agreement involving the use of copyrights, franchises, licenses, trademarks, or
information owned by VCI or others; (v) any broker's representative, sales,
agency or advertising contract which is not terminable on notice of 30 days or
less; (vi) any contract involving the borrowing or lending of money or the
guarantee of the obligations of officers, directors, employees or others; (vii)
any agency, agent's, general agents, brokerage or expense allowance agreement or
any other agreements pursuant to which VCI has binding authority in the
placement of insurance coverage or its currently obligated to make payments in
connection with the sale of insurance; (viii) any contract with any other
shareholder of VCI; (ix) any contract regarding any of the acquisitions
contemplated in this Agreement or (x) any other contract, whether or not made in
the ordinary course of business which is material to the business or assets of
VCI. Copies of all contracts and agreements identified in Schedule 3.7 have been
made available to TSC. No outstanding purchase commitment by VCI is in excess of
its ordinary business requirements or at a price in excess of market price at
the date hereof. Except as set forth in Schedule 3.7 or any other schedule
referred to herein, to the knowledge of VCI, none of such contracts and
agreements will expire or be terminated or be subject to any modification of
terms or conditions by reason of the consummation of the transactions
contemplated by this Agreement. VCI is not in default in any material respect
under the terms of any such contract nor is it in default in the payment of any
insurance premiums due to insurance carriers nor any principal of or interest on
any indebtedness for borrowed money nor has any event occurred which with the
passage of time or giving of notice would constitute such a default by VCI and,
to the best knowledge of VCI, no other party to any such contract is in default
in any material respect thereunder nor has any such event occurred with respect
to such party. Without the written consent of TSC, VCI will not cause or permit
any changes or modification in any of the foregoing, nor incur any further
obligations or commitments, nor make any further additions to its properties,
except in each case in the ordinary course of business and as contemplated by
this Agreement.
3.8 Availability of Assets and Legality of Use. The assets owned or
leased by VCI constitute all of the assets which are being used in its business,
and such assets are in good and serviceable condition, normal wear and tear
excepted, and suitable for the uses for which intended and such assets and their
uses conform in all material respects to all applicable laws.
3.9 Title to Property. VCI has good and marketable title to all of its
assets, including the assets reflected on the VCI Financial Statements referred
to in Section 3.5 hereto, free and clear of all liens and encumbrances, and all
of the assets thereafter acquired by it except to the extent that such assets
have thereafter been disposed of for fair value in the ordinary course of
business.
3.10 Accounts Receivable. All accounts receivable reflected on the VCI
Financial Statements referred to in Section 3.5 hereto arising prior to the date
hereof, and not collected at the date hereof, have arisen from bona fide
transactions in the ordinary course of VCI's business. To the knowledge of VCI,
none of such receivables is subject to material counterclaims or material
set-offs or is in dispute and all of such accounts are good and collectible in
the ordinary course of business at the aggregate recorded amounts thereof,
subject in each case to the allowance for possible losses shown on such
Financial Statement. To VCI's knowledge, all accounts receivable existing on the
Closing Date will be good and collectible in the ordinary course of business at
the aggregate recorded amounts thereof, net of any applicable allowance for
doubtful accounts, which allowance will be determined on a basis consistent with
the basis used in determining the allowance for doubtful accounts reflected in
the VCI Financial Statements referred to in Section 3.5 hereof. Attached hereto
as Schedules 3.10 and 3.11, respectively, are lists of customer accounts as of
the dates thereof, which are not prior to ninety (90) days from the date hereof,
with balances in excess of $20,000 and a list of all customer accounts over 90
days old with balances in excess of $5,000.
3.11 Inventory. All inventory reflected on the VCI Financial Statements
referred to in Section 3.5 hereto is owned by VCI and does not include any
inventory consigned to it from others. To the knowledge of VCI, adequate reserve
for obsolescence has been provided for excess and obsolete inventory.
3.12 Notes Receivable - Stockholders and Officers. Attached hereto as
Schedule 3.12 is an itemized list of all amounts due from stockholders and
officers of VCI as reflected on the March 31, 1998 VCI Financial Statements. No
changes will have occurred in the balances prior to the Closing Date, except for
the normal accrual of earned interest.
3.13 Notes Payable. Attached hereto as Schedule 3.13 is an itemized list
of all short-term and long-term notes payable as of March 31, 1998. No notes
have principal or interest past due, except as noted thereon.
3.14 Accounts Payable. All trade obligations are reflected in the VCI
Financial Statements referred to in Section 3.5 hereto. Schedule 3.14 reflects
all such obligations to individual vendors or suppliers with balances in excess
of $10,000. No significant changes have occurred in such obligations up to the
Closing Date other than in the ordinary course of business.
3.15 Accrued Liabilities. All accrued liabilities are reflected in the
March 31, 1998 VCI Financial Statements referred to in Section 3.5 hereto,
subject to normal year-end adjustments and the absence of notes. Schedule 3.15
reflects all such obligations with balances in excess of $10,000 as of that
date. No significant changes have occurred in such obligations up to the Closing
Date other than in the ordinary course of business.
3.16 Governmental Permits. VCI possesses all licenses, permits and other
authorizations necessary to own or lease and operate its properties and to
conduct its business as now conducted. All of such licenses, permits and
authorizations of VCI are hereinafter collectively called (the "Permits").
Attached hereto as Schedule 3.16 is a list of all of the Permits. All Permits
are in full force and effect and will continue in effect after the date hereof
and the Closing Date without the consent, approval or act of, or the making of
any filing with, any governmental or regulatory agency, commission or authority.
VCI is not in violation of the terms of any Permit, and VCI has not received
notice of any violation or claimed violation thereunder.
3.17 Real Property and Leases. VCI does not own any real property except
as set forth on Schedule 3.17 hereto. Attached hereto as part of Schedule 3.17
is a list of all leases or agreements under which VCI is lessee or sublessee of
any real property owned by a third party, a true and correct copy of each has
heretofore been provided to TSC. Each of such leases and agreements is in full
force and effect and constitutes a legal, valid and binding obligation of VCI
and the other parties thereto. VCI is not in default in any material respect
under any such lease or agreement nor has any event occurred which with the
passage of time or giving of notice would constitute such a default nor will VCI
take any action or fail to take required action between the date hereof and the
Closing Date which would permit any such default or event to occur. Except as
set forth on Schedule 3.17, none of such leases and agreements requires the
consent of any party thereto to the transactions contemplated by this Agreement.
3.18 Insurance. VCI maintains policies of fire and casualty, product and
other liability and other forms of insurance in such amounts and against such
risks and losses as are adequate and reasonable for its business and properties.
3.19 Conduct of Business.
(a) Schedule 3.19 hereto lists all claims which are pending or
threatened against VCI and correctly sets forth the date reflected therein. No
insurance carrier listed therein has denied coverage of any claim listed
opposite its name or accepted investigation of any such loss or defense of any
such claim under a reservation of rights.
(b) To the best knowledge of VCI after due inquiry, no employee,
agent or representative of VCI has, in relation to VCI's business, at any time
exceeded the authority or abused or wrongfully exercised any discretion granted
to him with regard to the acceptance of business on behalf of VCI. VCI has not
exceeded any authority granted to it by any party to bind it in connection with
VCI's business.
3.20 No Undisclosed Liabilities. To the knowledge of VCI, VCI is not
subject to any material liability (including unasserted claims), absolute or
contingent, which is not shown or which is in excess of amounts shown or
reserved for in the March 31, 1998 balance referred to in Section 3.5 hereto,
other than liabilities of the same nature as those set forth in such Financial
Statement and reasonably incurred in the ordinary course of its business after
March 31, 1998.
3.21 No Default, Violation or Litigation. Except as set forth in
Schedule 3.21 hereto, VCI is not in default in any material respect under any
agreement, lease or other document to which it is a party, or in violation of
any law, rule, order, writ, injunction or decree of any court or federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality. Except as set forth and described in Schedules 3.19 and 3.21,
there are no lawsuits, proceedings, claims or governmental investigations
pending or threatened against VCI or against the properties or business thereof,
and VCI knows of no factual basis for any such lawsuits, proceedings, claims or
investigations and there is no action, suit, proceeding or investigation
pending, threatened or contemplated which questions the legality, validity or
propriety of the transactions contemplated by this Agreement.
3.22 Tax Liabilities. Except as set forth on Schedule 3.22, to the
knowledge of VCI, the amounts reflected as liabilities for taxes on the VCI
Financial Statements referred to in Section 3.5 hereof are sufficient for the
payment of all unpaid federal, state, county, local and foreign taxes of VCI
accrued for or applicable to the period ended on such VCI Financial Statements'
date and all years prior thereto. Attached hereto as Schedule 3.22 is a complete
list of all tax obligations, as reflected on the March 31, 1998 VCI Financial
Statements referred to in Section 3.5 hereto, itemized by jurisdiction,
obligation type and taxing period. Except as set forth on Schedule 3.22, all
federal, state, county, local and foreign income, use, excise, property, sales,
business activity and other tax returns which are required to be filed by or in
respect of VCI up to and including the date hereto have been filed and all
taxes, including any interest and penalties thereon, which have become due
pursuant to such returns or pursuant to any assessment have been paid and no
extension of the time for filing of any such return is presently in effect. To
the knowledge of VCI, all such returns which have been filed or are under
extension or will be filed by or in respect of VCI for any period ending on or
before the Closing Date are or will be true and correct.
3.23 Employee Agreements. Listed on Schedule 3.23 hereto are all plans,
contracts and arrangements, oral or written, including but not limited to union
contracts and employee benefit plans, whereunder VCI has any obligations, other
than obligations to make current wage or salary payments terminable on notice of
30 days or less, to or on behalf of its officers, employees earning in excess of
$75,000 per year or their beneficiaries or whereunder any of such persons owes
money to VCI.
3.24 Employee Relations. To the knowledge of VCI, VCI has not engaged in
any unfair labor practice, unlawful employment practice or unlawful
discriminatory practice in the conduct of its business. VCI has complied in all
material respect with all applicable laws, rules and regulations relating to
employee civil rights, equal employment opportunities, collective bargaining,
wages and hours and has withheld all amounts required by agreement to be
withheld from the wages or salaries of employees. VCI has entered into and is
subject to only one collective bargaining agreement (a copy of which is attached
hereto as Exhibit 3.24). There are no presently pending or threatened labor
problems which do or may in the future materially and adversely affect the
business, operations or financial condition of VCI. Pursuant to Article X
hereof, Seller agrees to indemnify and hold harmless TSC for any compensatory or
punitive damages arising from any unfair labor practice arising prior to the
Closing Date.
3.25 Employee Retirement Income Security Act. VCI does not maintain any
employee benefit plans within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended, ("ERISA") and has no
liability with respect to any employee benefit plans. VCI is not required, and
was not required within the immediately preceding five years, to make any
contribution to any "multiemployer plan" within the meaning of Section 3(37) of
ERISA. VCI has no liability in respect of any employee benefit plans established
or maintained or to which contributions are or were made by it to the Pension
Benefit Guaranty Corporation ("PBGC") or to any beneficiary of such plans.
3.26 Conflicts; Sensitive Payments. There are (i) no material situations
involving the interests of VCI or any officer or director of VCI which may be
generally characterized as a "conflict of interest", including but not limited
to, the leasing of property to or from VCI, or direct or indirect interests in
the business of competitors, suppliers, or customers of VCI, and (ii) to the
knowledge of VCI, no situations involving illegal payments or payments of
doubtful legality from corporate funds of VCI since its date of incorporation to
governmental officials or others which may be generally characterized as a
"sensitive payment."
3.27 Corporate Name. VCI owns and possesses, to the exclusion of its
shareholders and its affiliates, all rights to the use of the name
"Valley Communications, Inc."
3.28 Trademarks and Proprietary Rights. All trademarks, tradenames,
copyrights and applications therefor which are owned or used or registered in
the name of or licensed to VCI are listed and briefly described in Schedule
3.28. Other than as specified in Schedule 3.28, no proceedings have been
instituted or are pending or threatened or, to the best knowledge of VCI,
contemplated which challenge the validity of the ownership of VCI of any of such
trademarks, trade names, copyrights or applications. VCI has not licensed anyone
to use any of the foregoing or any other technical know-how or other proprietary
rights of VCI, has no knowledge of the infringing use of any such trademarks and
trade names or the infringement of any such copyrights by any person except as
set forth in Schedule 3.28. VCI owns all trademarks, trade names, copyrights,
processes and other technical know-how and other proprietary rights now used in
the conduct of its business and has not received any notice of conflict with the
asserted rights of others except as specified in Schedule 3.28.
3.29 Net Assets of VCI. Seller and VCI warrant that the net assets of
VCI as of the Closing Date shall be equal to or greater than One Million Two
Hundred Thousand Dollars ($1,200,000).
3.30 Suppliers and Customers. To the best knowledge of Seller and VCI,
no supplier or customer of VCI intends to discontinue or diminish its business
relationship with VCI on account of the transactions contemplated hereunder or
otherwise.
3.31 No Omissions. None of the representations or warranties of VCI
contained herein, none of the information contained in the schedules referred to
in this Article II, and none of the other information or documents furnished to
TSC or its representatives by VCI in connection with this Agreement is false or
misleading in any material respect or omits to state a fact herein or therein
necessary to make the statements herein or therein not misleading in any
material respect. To the best knowledge of VCI, there is no fact which adversely
affects, or in the future is likely to adversely affect, the business or assets
of VCI in any material respect which has not been disclosed in writing to TSC.
3.32 TSC Capitalization. Seller acknowledges its understanding that TSC
may, in the course of its efforts to capitalize and otherwise generate funds for
TSC and/or VCI and to fulfill any obligations under this Agreement and any
related agreements in the contemplated transactions (including, without
limitation, any payments due under the Note), leverage any of the assets of VCI
for such purpose; provided, however, that any such funds shall be paid to the
other shareholders of VCI (in amounts not to exceed $211,327.12), Planned
Financial Solutions (in an amount not to exceed $125,000 at the time of the
initial $1,000,000 (net) received by Seller), C&L and/or VCI.
3.33 Brokers. With the exception of any engagement of Planned Financial
Solutions relating to this transaction, it has not incurred, and will not incur,
directly or indirectly, as a result of any action taken by it, any liability for
any brokerage or finders' fees or commissions or any similar charges in
connection with this Agreement.
3.34 Certain Tax Matters. C&L represents that VCI has no existing or
future tax liabilities of any kind or nature arising from Seller's or any
affiliate of Seller's use of consolidated tax filings or returns.
ARTICLE IV
Representations and Warranties of Purchaser. Purchaser represents and
warrants to Seller, with respect to the purchase of the C&L Shares, as follows:
4.1 Authority. It has the power and authority to enter into this
Agreement and to perform its obligations hereunder. This Agreement has been duly
executed and delivered by it and constitutes its legal, valid and binding
obligation, enforceable in accordance with its terms.
4.2 No Conflicts. Neither the execution nor the delivery of this
Agreement by it will conflict with, result in any breach or violation of, or
require any consent, approval, registration or filing under, any judgment, order
or decree, or statute, law, ordinance, rule or regulation applicable to it, or
violate or conflict with, result in a breach under or require any consent or
approval under, any agreement, instrument or document to which any it is
subject. No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, governmental authority or instrumentality
or other third party is required to be obtained or made by it in connection with
the execution and delivery of this Agreement or compliance with the terms and
provisions of this Agreement.
4.3 Brokers. With the exception of any engagement of Planned Financial
Solutions relating to this transaction, it has not incurred, and will not incur,
directly or indirectly, as a result of any action taken by it, any liability for
any brokerage or finders' fees or commissions or any similar charges in
connection with this Agreement.
ARTICLE V
Conduct Pending Closing
5.1 Investigation. VCI shall afford to the officers, employees and
authorized representatives of TSC including, without limitation, independent
public accountants and attorneys of TSC such access during normal working hours
to the offices, properties, business and financial and other records of VCI as
TSC shall reasonably deem necessary or desirable, and shall furnish to TSC or
its authorized representatives such additional financial and operating and other
data as shall be reasonably requested, including all such information and data
as shall be necessary in order to enable TSC or its representatives to verify to
their satisfaction the accuracy of the Financial Statements of VCI and the
representations and warranties contained in Article III of this Agreement. No
investigation made by TSC or its representatives, except to the extent of actual
knowledge by TSC of any inaccuracy or breach contained herein, shall affect the
representations and warranties of VCI hereunder or the liability of VCI with
respect thereto.
5.2 Confidential Nature of Information. Each party agrees that in the
event that the transactions contemplated herein shall not be consummated, each
will treat in confidence all documents, materials and other information which
either shall have obtained during the course of the negotiations leading to this
Agreement, the investigation of the other party hereto and the preparation of
this Agreement and other documents relating to this Agreement, and shall return
to the other party all copies of non-public documents and materials which have
been furnished in connection therewith.
5.3 Preserve Accuracy of Representations and Warranties. Seller shall
not authorize or knowingly permit VCI to take any action which would render any
representation and/or warranty contained in Article III of this Agreement
inaccurate as of the Closing Date hereunder. Seller will promptly notify TSC of
any lawsuits, claims, proceedings or investigations that, to the knowledge of
Seller, may be threatened, brought, asserted or commenced against VCI or its
officers or directors (i) involving in any way the transactions contemplated by
this Agreement or (ii) which would, if determined adversely, have a material
adverse impact on the business, properties or assets of VCI.
5.4 Maintain the Company as a Going Concern. Seller shall take all
reasonable steps to ensure that VCI conducts its business in accordance with
past practices and to use its best efforts to maintain the business organization
of VCI intact and preserve the goodwill of its employees, clients and others
having business relations with it. VCI shall provide TSC promptly with interim
monthly financial information and any other management reports, as and when they
shall become available.
5.5 Make No Material Change in the Company. Prior to the Closing Date,
Seller shall not, without the prior written approval of TSC, cause or permit VCI
to (i) make any material change in the business or operations of the Company;
(ii) make any material change in the accounting policies applied in the
preparation of the Financial Statements referred to in Section 3.5 hereof; (iii)
declare any dividends on its issued and outstanding shares of capital stock or
make any other distribution of any kind in respect thereof; (iv) issue, sell or
otherwise distribute any authorized but unissued shares of its capital stock or
effect any stock split or reclassification of any such shares or grant or commit
to grant any option, warrant or other rights to subscribe for or purchase or
otherwise acquire any shares of capital stock of VCI or any security convertible
or exchangeable for any such shares; (v) purchase or redeem any of the capital
stock of the VCI; (vi) incur or be liable for indebtedness to VCI or any of its
affiliates; (vii) make any material change in the compensation of officers or
key employees of VCI; (viii) enter into any contract, license, franchise or
commitment other than in the ordinary course of business or waive any rights of
substantial value; (ix) make any donation to any charitable, civic, educational
or other eleemosynary institution in excess of donations made in comparable past
periods or (x) enter into any other transaction affecting in any material
respect the business of VCI other than in the ordinary course of business and in
conformity with past practices or as contemplated by this Agreement.
5.6 No Public Announcement. Seller shall not, without the prior approval
of TSC, make any announcement or press release, except as deemed necessary, in
the opinion of Seller's counsel, to comply with the securities laws and
obligations of Seller's parent company. TSC shall be permitted to release and
make a public announcement or filing with respect to the transactions
contemplated by this Agreement.
ARTICLE VI
Conditions Precedent to Obligations of Purchaser
The obligations of TSC under this Agreement to acquire the C&L Shares
shall be, at the option of TSC, subject to the satisfaction, on or prior to the
Closing Date, of the following conditions:
6.1 No Misrepresentations or Breach of Covenants and Warranties.
Subject to changes incurred in the normal course of business, there shall have
been no breach by VCI in the performance of any of its covenants and agreements
herein, each of the representations and warranties of VCI contained or referred
to in this Agreement shall be true and correct in all material respects on the
Closing Date as though made on the Closing Date, and there shall have been
delivered to TSC a certificate or certificates to that effect, dated the Closing
Date and signed on behalf of VCI.
6.2 No Changes in Assets. Since the date of this Agreement, there has
been no material adverse change in the condition, financial or otherwise, of
VCI.
6.3 Opinion of Counsel for VCI. TSC shall have received from counsel
for VCI, an opinion dated the Closing Date, in form and substance satisfactory
to TSC and its counsel, to the effect that:
(a) VCI is a corporation duly organized, validly existing, and in good
standing under the laws of the State of California, and VCI has full corporate
power and authority to carry on its business as now conducted. VCI has no
subsidiaries.
(b) The authorized capital stock of VCI consists of 500,000 shares of
common stock, no par value, of which 75,000 shares are issued and outstanding
and 60,000 shares are owned by C&L. Except for this Agreement, there are no
agreements, arrangements, options, warrants, or other rights or commitments of
any character relating to the issuance, sale, purchase or redemption of any
shares of capital stock of VCI, and all of the issued and outstanding shares of
capital stock of VCI on the Closing Date are validly issued, fully paid, and
nonassessable with no liability attaching to the ownership thereof.
(c) This Agreement and the transactions contemplated herein have been
duly approved by all necessary action on the part of VCI. This Agreement has
been duly and validly executed and delivered by VCI, and the Agreement, assuming
due execution by TSC, is the valid and binding agreement of VCI and enforceable
against them in accordance with its terms, except as enforcement of such
agreement may be limited by bankruptcy, insolvency, or other similar laws
affecting creditors' rights generally and that the remedy of specific
performance is subject to the discretion of the court before which proceedings
therefor are brought.
(d) VCI has full power and authority to execute and deliver the
Agreement and to perform its obligations thereunder. Neither the execution and
delivery of this Agreement, nor the consummation of the transactions
contemplated herein, nor compliance with and fulfillment of the terms and
provisions hereof (i) conflicts with or results in the breach of the terms,
conditions, or provisions of, or constitutes a default under, the Certificate of
Incorporation or the By-Laws of VCI or any agreement or instrument known to
counsel to which VCI is a party or by which any of them is bound; (ii) gives any
party to or with rights under any such agreement or instrument the right to
terminate, modify, or otherwise change the rights or obligations of VCI under
any such agreement or instrument, or (iii) requires the consent, approval, or
authorization of or any filing with or notification to any federal, state, or
local court, governmental authority, or regulatory body not already obtained or
made, as the case may be.
(e) Counsel does not know of any action, suit, proceeding, or
investigation pending or threatened against VCI which might result in a material
adverse change in the business or assets or in the condition, financial or
otherwise, of VCI, or that any action, suit, proceeding, or investigation is
pending, or to their knowledge threatened which questions the legality,
validity, or propriety of this Agreement or of any action taken or to be taken
by VCI pursuant to or in connection with this Agreement.
(f) To such further effect, with respect to legal matters relating to
this Agreement, as TSC or its counsel may reasonably request.
6.4 Opinion of C&L's Counsel. TSC shall have received from counsel for
C&L an opinion dated the Closing Date, in form and substance satisfactory to TSC
and its counsel, to the effect that:
(a) To the best of counsel's knowledge, after due investigation, C&L is
the lawful owner of the C&L Shares, free and clear of all adverse claims, with
unrestricted right and power to transfer and deliver the C&L Shares to TSC. C&L
has executed and delivered to TSC the instruments sufficient to vest good and
marketable title to the C&L Shares upon TSC's fulfillment of the terms of this
Agreement.
(b) To such further effect, with respect to legal matters relating to
this Agreement, as TSC or its counsel may reasonably request.
In giving the opinions described in Section 6.3 and 6.4, counsel
for VCI and counsel for C&L, respectively, may rely, as to matters of fact upon
certificates of officers of VCI and/or C&L, and as to matters relating to the
law of any state other than the State of California, upon opinions of other
counsel satisfactory to them, provided that such other counsel shall state that
they believe they are justified in relying upon such certificates and opinions,
and deliver copies thereof to TSC prior to the Closing Date.
6.5 Approval by Counsel. All matters, proceedings, instruments, and
documents required to carry out this Agreement or incidental thereto, and all
other relevant legal matters shall have been approved at or prior to the Closing
Date by Wilson, Sonsini, Xxxxxxxx & Xxxxxx, which approval shall not be
unreasonably withheld.
6.6 Other Shareholder Transactions. All matters, proceedings,
instruments, and documents required to carry out those certain agreements by and
among all other shareholders of VCI and TSC including, without limitation, a
stock purchase agreement, shall have been executed and delivered to TSC at or
prior to the Closing Date.
ARTICLE VII
Conditions Precedent to Obligations of Seller
7.1 The obligations of Seller to sell the C&L Shares under this
Agreement are subject to the satisfaction, at or before the Closing, of all the
conditions set forth below in this Article VII. Seller may waive (in writing)
any or all of these conditions in whole or in part without prior notice;
provided, however, that no such waiver of a condition shall constitute a waiver
by Seller of any other condition or of their respective other rights or
remedies, at law or in equity, if Purchaser shall be in default of any of their
representations, warranties, or covenants under this Agreement:
(a) Each representation and warranty made by Purchaser in this
Agreement shall be true and correct on and as of the date of the
Closing with the same effect as though each such representation and
warranty had been made or given on and as of such date.
(b) Purchaser shall have performed and complied with all of
its obligations under this Agreement which are to be performed or
complied with by it prior to or at the Closing.
(c) No suit, action, investigation, inquiry or other
proceeding by any governmental authority or other person or legal or
administrative proceeding shall have been instituted or threatened
which questions the validity or legality of the transactions
contemplated hereby or which otherwise seeks to affect, or could
affect, the transactions contemplated hereby or impose damages or
penalties upon any party hereto if such transactions are consummated.
(d) Purchaser shall have tendered delivery of the items
required under Article VIII.
ARTICLE VIII
Deliveries At Closing
8.1. Deliveries by Seller at the Closing. At the Closing, Seller shall
deliver to Purchaser the following:
(a) Stock certificates evidencing the C&L Shares, duly
endorsed for transfer in blank or accompanied by appropriate stock
powers duly endorsed in blank, to be held in escrow by Seller's counsel
pursuant to the terms of Sections 2.2 and 2.3.
(b) A certificate executed by each Seller, in the form of
Exhibit 8.1(b), certifying to the best of Seller's knowledge and
reasonable belief (as an 80% owner of VCI and a member of VCI's board
of directors) to the fulfillment of the conditions set forth in Article
VI.
(c) An opinion from Reinhart, Boerner, XxxXxxxxx, Xxxxxx &
Rieselbach, P.C., counsel to Seller, dated as of the date of Closing,
substantially in the form of Exhibit 8.1(c).
(d) Written resignations effective as of the date of Closing
of such directors of VCI as Purchaser may request.
(e) A mutual release (to be executed by Seller and those
certain individuals owning 20% of the outstanding capital stock of VCI)
in the form of Exhibit 8.1(e).
(f) The stock books, stock ledgers, minute books and corporate
seal of VCI.
(g) The Non-Competition Agreement in the form of Exhibit
8.1(g).
(h) The Escrow Agreement in the form of Exhibit 2.5.
8.2. Deliveries by Purchaser at the Closing. At the Closing (or at such
other time as set forth below), Purchaser shall deliver to Seller the following:
(a) $1,000,000 (on or before May 18, 1998)
(b) The Note in accordance with Section 2.2.
(c) A certificate executed by Purchaser, in the form of
Exhibit 8.2(b), certifying to the fulfillment of the conditions set
forth in Section 7.1
ARTICLE IX
Additional Covenants and Agreements of the Parties
9.1. No Solicitation. Upon execution of this Agreement and payment of
the first $1,000,000 due under the Note, Seller shall not, nor shall Seller
permit VCI to, directly or indirectly, before June 30, 1998, initiate contact
with or solicit or incur any inquiries or proposals by, enter into any
discussions or negotiations or agreements with, or disclose directly or
indirectly any information not customarily disclosed concerning the business and
properties of VCI to, or offer any access to their properties, books and records
to, any person in connection with any possible proposal regarding a sale of the
capital stock of VCI, or a merger or consolidation involving VCI, or a sale of
all or a substantial portion of the assets of VCI, or any similar transaction.
Seller shall be released from this clause and eligible to solicit back-up offers
if the conditions of Sections 2.3(a) or 2.3(b) are not timely met; provided,
however, if Seller solicits back-up offers, Purchaser shall retain a priority
right to purchase the C&L Shares over a third party potential purchaser until
the time of closing of a sale to a third party potential purchaser if Purchaser
can remedy the unsatisfied condition within such time period.
9.2 Supplemental TSC Rights. In the event that (a) and (b) of Section
2.3 are satisfied by TSC in a timely manner, Seller grants TSC the exclusive
right to purchase the C&L Shares through June 30, 1998.
9.3 Third Parties. Prior to the Closing Date, Seller shall obtain and
shall deliver at Closing all third party consents, approvals and waivers
(including, without limitation, those from banks, unions, landlords and vendors)
necessary to transfer the C&L Shares to Purchaser free and clear of all liens
and encumbrances and to avoid violations of any agreements with such third
parties.
9.4 Payments to Xxxxxxx Xxxxxxxx. Seller shall be responsible for any
fees or obligations to Xxxxxxx Xxxxxxxx arising or relating in any way to the
transactions proposed by this Agreement.
9.5 Reasonable Efforts. Subject to the terms and conditions herein
provided, Seller and Purchaser each agree to use their respective best efforts
to take, or to cause to be taken, all actions and to do, or cause to be done,
all things necessary, proper or advisable to consummate and make effective the
transactions contemplated by this Agreement.
ARTICLE X
Indemnification
10.1. Survival of Representations and Warranties. The representations
and warranties of each party contained in this Agreement or in any document
delivered pursuant hereto shall be deemed continuing and shall survive the
Closing and any investigation made by any party or its representatives for a
period of 12 months (except Section 3.22 which shall survive for the applicable
statute of limitations) after May 15, 1998 (12 months following payment in full
of the Note in the case of representations and warranties in the Note) and any
claim for breach thereof must be made within this time period.
10.2. Indemnification of Purchaser. Seller agrees to indemnify
Purchaser and to hold it harmless from and against any loss, cost, expense or
other damage (including without limitation reasonable attorneys' fees) suffered
by Purchaser resulting from, arising out of or incurred with respect to the
falsity or breach of any representation, warranty or covenant made by Seller
herein, in any exhibit attached hereto, or in any document delivered pursuant
hereto (including instruments of conveyance); except that in regard to the
representations and warranties contained in Sections 3.5 to 3.31, inclusive,
Seller's liability to Buyer under this Section shall be limited to those matters
known, or which in the exercise of reasonable due diligence as an 80% owner in
VCI and a member of VCI's board of directors, should have been known.
10.3. Indemnification of Seller. Purchaser agrees to indemnify and hold
Seller harmless from and against any loss, cost, expense or other damage
(including, without limitation, reasonable attorneys' fees) suffered by Seller
resulting from, arising out of or incurred with respect to the falsity or breach
of any representation, warranty or covenant made by Purchaser herein, in any
exhibit hereto, or in any document delivered pursuant hereto.
10.4. Limitations. Notwithstanding the foregoing, the Seller's
liability pursuant to Section 10.2 will be subject to the following limitations:
(i) Basket. The Purchaser acknowledges that the Seller has not
been active in the day to day management of the Company, and, to such
extent, the Seller may not have actual knowledge regarding certain
matters with respect to which representations and warranties are being
made. The Purchaser further acknowledges that it is entering into an
agreement with Xxx Xxxxx, Xxxxx Xxxx and Xxxxx X'Xxxxxx to acquire the
remaining outstanding capital stock of the Company (the "Shareholder
Agreement"), and such agreement contains identical representations and
warranties with respect to the Company. The Purchaser hereby agrees
that it will exhaust all remedies for a breach of representation or
warranty contained in the Shareholder Agreement prior to pursuing its
rights hereunder and Buyer shall provide notice to Seller of any claim
submitted to the Shareholders pursuant to this section. The Seller
shall not be liable for any losses described in Section 10.2 above
unless and until the aggregate amount of all such losses described in
such section exceeds $600,000, after which point the Seller shall be
obligated, to the extent required by Section 10.2, to indemnify the
Purchaser for all such amounts incurred in excess of such amount;
provided, however, that the basket shall not apply to any
misrepresentation or breach of warranty committed by Seller and
relating to the matters described or materials provided by Seller in
connection with Sections 8.1(b), 8.1(c), 3.1 to 3.4, inclusive, 3.34,
and 5.3 to 5.5, inclusive.
(ii) Cap. Notwithstanding the foregoing, the maximum amount of
indemnification payable by Seller in no event shall exceed the net cash
consideration paid to Seller under this Agreement, which consists of
the Note payments minus any amounts paid to Planned Financial Solutions
pursuant to Section 3.33 or the related Agency Agreement.
(iii) Sole Remedy; Waiver of Known Breaches. The
indemnification provisions of this Section shall be the exclusive
remedy, exclusive of all other remedies, causes of actions or claims
(whether based upon contract, tort or statute), of the Purchaser for
any monetary relief or monetary recovery against the Seller in
connection with any claim arising out of this Agreement or the
transactions contemplated hereby. Furthermore, if the Purchaser elects
to close the transactions contemplated by this Agreement
notwithstanding its knowledge of any breach of a representation or
warranty made by the Seller herein, then such election to close shall
constitute a complete waiver and release of any claim by the Purchaser
against the Seller for indemnification or otherwise, with respect to
such matter but only to the extent of such actual knowledge of
Purchaser.
10.5. Procedure Relative to Indemnification.
(a) In the event that any party hereto shall claim that such
party is entitled to be indemnified pursuant to the terms of this
Article X, he or it (the "Claiming Party") shall so notify the party or
parties against which the claim is made (the "Indemnifying Party") in
writing of such claim within thirty (30) days after receipt of a notice
of such claim or notice of any claim of a third party that may
reasonably be expected to result in a claim by such party against the
party to which such notice is given; provided, however, that failure to
give such notification shall not affect the indemnification provided
hereunder except to the extent that the Indemnifying Party shall have
been actually prejudiced as a result of such failure. Such notice shall
specify the basis of the claim and the liability, loss, cost or expense
incurred by, or imposed upon the Claiming Party on account thereof. If
such liability, loss, cost or expense is liquidated in amount, the
notice shall so state and such amount shall be deemed the amount of the
claim of the Claiming Party. If the amount is not liquidated, the
notice shall so state and in such event a claim shall be deemed
asserted against the Indemnifying Party on behalf of the Claiming
Party, but no payment shall be made on account thereof until the amount
of such claim is liquidated and the claim is finally determined.
(b) The Indemnifying Party shall, upon receipt of such written
notice and at its expense, defend such claim in its own name or, if
necessary, in the name of the Claiming Party; provided, however, that
if the proceeding involves a matter solely of concern to the Claiming
Party in addition to the claim for which indemnification under this
Article X is being sought, such matter shall be within the sole
responsibility of the Claiming Party and its legal counsel. The
Claiming Party will cooperate with and make available to the
Indemnifying Party such assistance and materials as may be reasonably
requested of it, and the Claiming Party shall have the right, at its
expense, to participate in the defense. The Indemnifying Party shall
have the right to settle and compromise such claim only with the
consent of the Claiming Party (which consent shall not be unreasonably
withheld).
(c) In the event the Indemnifying Party shall notify the
Claiming Party that it disputes any claim made by the Claiming Party
and/or it shall refuse to conduct a defense against such claim, then
the Claiming Party shall have the right to conduct a defense against
such claim and shall have the right to settle and compromise such claim
upon five (5) days notice to, but without the consent of, the
Indemnifying Party. Once the amount of such claim is liquidated and the
claim is finally determined, the Claiming Party shall be entitled to
pursue each and every remedy available to it at law or in equity to
enforce the indemnification provisions of this Article X and, in the
event it is determined, or the Indemnifying Party agrees, that it is
obligated to indemnify the Claiming Party for such claim, the
Indemnifying Party agrees to pay all costs, expenses and fees,
including all reasonable attorneys' fees which may be incurred by the
Claiming Party in attempting to enforce indemnification under this
Article X, whether the same shall be enforced by suit or otherwise.
ARTICLE XII
Miscellaneous
12.1. Expenses Incident to Transaction. Each party shall bear his or
its own expenses and costs relating to the negotiation, execution and
performance of this Agreement.
12.2. Further Assurances. After the Closing, each of the parties agrees
to execute and deliver such further instruments and take such other actions as
another party may reasonably request to carry out the transactions contemplated
by this Agreement.
12.3. Governing Law. This Agreement shall be governed, construed and
interpreted in all respects according to the laws of the State of California so
applied to agreements made and performed in California by residents of the State
of California.
12.4. Notices. All notices and other communications required or
permitted to be given under this Agreement shall be in writing and shall be
considered to be given and received in all respects when hand delivered, when
sent by prepaid express or courier delivery service, when sent by facsimile
transmission actually received by the receiving equipment, or three (3) days
after being deposited in the United States Mail, certified mail, postage
prepaid, return receipt requested, in each case addressed as follows, or to such
other address as shall be designated by notice duly given:
If to Seller:
Xxx Xxxxxx, President
Coyote Network Systems, Inc.
0000 Xxxx Xxxxxxx Xxxxx
Xxxxxxxx Xxxxxxx, XX 00000
With a copy to:
Xxxxxxx X. Xxxxxxxx
Reinhart, Boerner, Van Deuren, Xxxxxx & Rieselbach, P.C.
0000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000-0000
If to Purchaser to:
Xxx X. Xxxxxx
Technology Services Corporation
0000 Xxxxxxx
Xxxxxxxxxx, XX 00000
With a copy to:
Xxxxxxx X. Xxxxxxx
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000-0000
12.5. Set Off. If Purchaser claim any setoffs against Seller, Purchaser
may, in addition to any other remedies which may be available to Purchaser, set
off such amounts against any amounts otherwise due or owing to Seller.
12.6. Entire Agreement. This Agreement embodies the entire agreement
and understanding among the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof.
12.7. Modification. Except as expressly provided herein, no
modification, amendment, discharge, termination or waiver of any of the
provisions of this Agreement or consent to any departure therefrom shall be
effective unless in writing and signed by the party against whom enforcement of
any such modification, amendment, discharge, termination or waiver is sought.
12.8. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be an original but all of which shall
constitute but one and the same agreement and shall become binding upon the
parties when each party hereto has executed one or more counterparts.
12.9. Benefit. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns. This
Agreement shall not be deemed to confer any rights or remedies upon any person
other than the parties hereto and their respective successors and assigns.
12.10. Access. After the Closing, Purchaser shall, and shall cause VCI
to, provide Seller and its representatives and ouTSCde accountants with
reasonable administrative support (including preparation of reports and
schedules consistent with past practice) and reasonable access to VCI's books
and records sufficient to enable Seller to prepare, file and make all of its
necessary tax filings and to prepare audited consolidated financial statements
which include periods prior to the Closing Date.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
C&L ACQUISITIONS, INC.
/s/ Xxxxxx X. Xxxxxx
Name: Xxxxxx X. Xxxxxx
Title: President
VALLEY COMMUNICATIONS, INC.
/s/ Xxxxx Xxxx
Name: Xxxxx Xxxx
Title: President
TECHNOLOGY SERVICES CORPORATION
/s/ Xxx X. Xxxxxx
Name: Xxx X. Xxxxxx
Title: President
