EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
Dated as of May 28, 1997
among
SPECIALTY CONSTRUCTORS, INC.,
SPECIALTY TELECONSTRUCTORS, INC.,
PARAMOUNT COMMUNICATIONS SYSTEMS, INC.,
and
XXXXXXX XXXXXXXXX
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of this 28th day
of May, 1997, is entered into by and among Specialty Constructors, Inc., a New
Mexico corporation ("Buyer"), Specialty Teleconstructors, Inc., a Nevada
corporation ("Parent" and together with Buyer, the "Acquiring Companies"),
Paramount Communications Systems, Inc., a New Jersey corporation ("Seller") and
Xxxxxxx Xxxxxxxxx, the sole shareholder of Seller (the "Shareholder").
WITNESSETH:
WHEREAS, Seller owns all of the assets described in Section 1.1 of this
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Agreement and listed on Exhibits 1.1(a), 1.1(b), 1.1(d) and 1.1(e) attached
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hereto (collectively, the "Assets") and the real property and improvements, if
any, described in Section 1.1 of this Agreement and more fully described on
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Exhibit 1.1(g) attached hereto (the "Real Property"), and Seller desires to sell
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such Assets and Real Property to Buyer on the terms and conditions set forth in
this Agreement; and
WHEREAS, the Shareholder owns 100% of the outstanding equity of Seller; and
WHEREAS, Buyer desires to purchase the Assets and the Real Property on the
terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements, covenants, representations and warranties herein contained, and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
SALE AND PURCHASE OF THE ASSETS
1.1 Sale and Purchase of Assets. At the Closing (as hereinafter defined),
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subject to the terms and conditions herein set forth, and on the basis of the
representations, warranties and agreements herein contained, Seller shall sell
to Buyer, and Buyer shall purchase from Seller, all of Seller's interest in and
to the following described Assets and Real Property, free and clear of all
liens, claims, restrictions and encumbrances of any nature, except as otherwise
set forth in Section 1.2 hereof:
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(a) All customer and vendor contracts, personal property leases, real
property leases, licenses, permits and other agreements or commitments
related to the operation of the business of Seller as listed on Exhibit
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1.1(a) attached hereto;
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(b) All tangible personal property, including without limitation, all
equipment, furniture, fixtures, machinery, vehicles, spare parts,
inventories, leasehold improvements, supplies, and other personal property
used in the business of Seller, including, without limitation, as listed on
Exhibit 1.1(b) attached hereto;
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(c) All books, documents and records relating to the business of
Seller excluding only the minute book, corporate seal and stock records of
Seller and including customer records and lists, marketing and sales
records and literature, employee records and information, accounting books
and records, and insurance records;
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(d) All intangible or intellectual property of Seller, including,
without limitation, all rights in and to the name "Paramount
Communications Systems, Inc." and all patents, copyrights, trade names,
trademarks or service marks owned by Seller, including, without limitation,
as listed on Exhibit 1.1(d) hereto;
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(e) All prepaid expenses, deposits, prepaid taxes, accounts
receivable, notes receivable, other receivables and other monies,
securities, cash and cash equivalents of Seller as listed on Exhibit 1.1(e)
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attached hereto;
(f) All insurance proceeds arising in connection with damage to the
Assets or relating to the business of Seller occurring prior to the
Closing; and
(g) Fee simple title to the real property and improvements, if any,
more fully described on Exhibit 1.1(g) attached hereto.
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The Assets and the Real Property constitute all property and contractual rights
necessary for the conduct of the business of Seller.
1.2 Assumption of Liabilities. Buyer agrees to assume at Closing only the
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liabilities specifically listed or identified on Exhibit 1.2 hereto
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(collectively, the "Assumed Liabilities"). Notwithstanding anything to the
contrary contained herein, except for the Assumed Liabilities, Buyer shall not
assume, shall not be deemed to have assumed, and shall not be liable for, any
liabilities or obligations (whether absolute, accrued, contingent, direct,
indirect, due or becoming due, or otherwise) of Seller existing, arising out of
or in any way connected with the conduct of its business prior to the Closing
Date (as hereinafter defined), or the sale by Seller of the Assets and Real
Property to Buyer, including, without limitation, (i) any and all claims of
persons employed by Seller prior to the Closing Date, (ii) any and all liability
of Buyer arising as a result of the failure of Seller to file any tax returns or
to pay any income, sales, excise or other taxes, employment or workers'
compensation payments, and (iii) any and all losses, liabilities, damages or
expenses resulting from the assertion of claims made against the Assets by
creditors of Seller as a result of the failure to comply with any bulk sales
law. Seller and Shareholder agree to indemnify and hold the Acquiring Companies
harmless with respect to any such liabilities in accordance with Article IX of
this Agreement.
1.3 Consideration and Terms. As consideration for the Assets (the
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"Purchase Price"), at the Closing, Buyer will deliver or cause to be delivered
to Seller 186,047 newly issued shares (collectively, the "Parent Shares") of
Common Stock of Parent. Notwithstanding anything to the contrary contained
herein the Purchase Price shall be subject to reduction by an amount equal to
the sum of (a) the reduction, if any, described in Section 2.8 hereof and (b)
the sum of (i) aggregate amount claims, charges, liabilities or payables, if
any, that are paid by Buyer after the Closing Date but before the second
anniversary of the Closing Date (the "Final Determination Date"), which claims,
charges, liabilities or payables arise out of actions, events, liabilities or
other circumstances existing before the Closing Date that were not listed on
Exhibit 1.2 hereto (without duplication, however, of any reduction that was
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taken into account in the determination of the reductin, if any, described in
Section 2.8 hereof), and (ii) an amount equal to the lesser of (x) the an
amount equal to Loss of Experienced Employee Reduction as determined in
accordance with on Exhibit 1.3, and (y) $400,000. If on the Final Determination
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Date, the Purchase Price is required to be reduced in accordance with the
foregoing and Exhibit 1.3 hereto,
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then such reduction shall be effected by the cancellation by Parent of that
number of Parent Shares issued on the Closing Date to Seller having an aggregate
value (determined by valuing each such Parent Share at $10.75 per share (the
"Original Issue Price") equal to the amount of such reduction (shares so
canceled are referred to herein collectively as the "Canceled Parent Shares").
In order to facilitate the reduction of the Purchase Price, if any, that may
occur on the Final Determination Date, each of Seller and Shareholder agrees
that Parent may cancel the Canceled Parent Shares regardless of whether
certificates evidencing such Canceled Parent Shares are then in the possession
of Parent or Buyer.
1.4 Loan to Shareholder. On the Closing Date, Buyer or Parent shall loan
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to Shareholder the sum of $250,000, or such lesser amount as may be requested by
Shareholder, in accordance with the terms and conditions set forth in the
Promissory Note and Security Agreement attached as Exhibit 1.4 hereto
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(collectively, the "Shareholder Loan Documents"). On the first anniversary of
the Closing Date, if no default has occurred under the terms of the Shareholder
Loan Documents, then Buyer or Parent shall loan to Shareholder an additional
$250,000, or such lesser amount as may be requested by Shareholder, as a further
advance under the Shareholder Loan Documents. The amounts advanced to
Shareholder pursuant to this Section 1.4 and the Shareholder Loan Documents is
referred to herein as the "Shareholder Loan." Subject to the terms and
conditions set forth in the Shareholder Loan Documents, interest on the the
Shareholder Loan shall be due and payable quarterly in arrears and the
outstanding principal balance of the Shareholder Loan, if any, shall be due and
payable in four equal semi-annual installments, with the first such semi-annual
installment becoming due on the third anniversary of the Closing Date.
1.5 Instruments of Conveyance and Transfer. At the Closing, Seller shall
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execute and deliver to Buyer bills of sale and assignments and such other
instruments of conveyance and transfer, in form and substance satisfactory to
Buyer and its counsel, as shall be reasonably necessary or appropriate to vest
in Buyer good and indefeasible title to the Assets and the Real Property and to
comply with the purpose of this Agreement.
1.6 Certification as of Closing. At the Closing, Seller and each of the
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Acquiring Companies shall execute and deliver a written certification that its
representations and warranties contained in this Agreement remain true and
correct as of the Closing Date.
1.7 Transaction Taxes and Other Closing Costs. Any sales, use, transfer
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or similar taxes and any assumption, recording and other similar fees, arising
in connection with the transfer of the Assets from Seller to Buyer shall be
borne solely by Seller.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF SELLER AND THE SHAREHOLDER
In order to induce the Acquiring Companies to enter into this Agreement and
to consummate the transactions contemplated herein, Seller and the Shareholder
hereby, jointly and severally, represent and warrant, as of the date hereof and
as of the Closing Date as follows:
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2.1 Corporate Existence and Authority. Seller is a corporation duly
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organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all requisite corporate power, licenses,
permits and authority to own and lease its properties and assets and to carry on
its business as has been and is being conducted currently. Seller is qualified
to do business in every jurisdiction in which the character and location of the
assets owned or leased by Seller or the nature of the business transacted by
Seller makes such qualification necessary.
2.2 Articles of Incorporation and Bylaws. Attached as Exhibit 2.2 to this
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Agreement are complete and correct copies of Seller's Articles of Incorporation,
as amended to date, certified by the Secretary of State of the state of its
incorporation, and Seller's Bylaws, as currently in effect, certified by the
Secretary of Seller. Such Certificate of Incorporation and Bylaws were duly
adopted and are in full force and effect, and Seller is not in violation of any
provision thereof.
2.3 Books and Records. Seller keeps its books, records and accounts
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(including, without limitation, those kept for financial reporting purposes and
for tax purposes) in accordance with good business practice and in sufficient
detail to reflect accurately and fairly the transactions and dispositions of its
assets, liabilities and equities. The minute books of Seller contain complete
and accurate records of all of the meetings of its shareholders and directors
and of all action taken by such shareholders and directors. The stock
certificate book and stock transfer ledger of Seller are correct and complete
and reflect accurately the number of shares of stock held by its shareholders.
2.4 Capitalization. The authorized capital stock of Seller and the issued
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and outstanding shares thereof are set forth on Exhibit 2.4 attached hereto.
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All presently exercisable voting rights in Seller are vested exclusively in its
outstanding shares of common stock, each share of which is entitled to one (1)
vote on every matter to come before its shareholders, and there are no voting
trusts or other voting arrangements with respect to any of such common stock.
2.5 Subsidiaries and Affiliates. Except as and to the extent set forth on
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Exhibit 2.5 attached hereto, Seller does not own, directly or indirectly, any
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equity interest in any person, corporation, partnership, joint venture or other
business association.
2.6 Authorization and Effect of Agreement. Seller has all requisite power
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and authority to execute, deliver and perform its obligations under this
Agreement, and the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all requisite corporate and shareholder action. The execution and delivery
of this Agreement and the consummation of the transactions contemplated herein
do not and will not:
(a) violate, conflict with, modify or cause any default under or
acceleration of (or give any party any right to declare any default or
acceleration upon notice or passage of time or both), in whole or in part,
of any articles of incorporation, bylaws, mortgage, lien, deed of trust,
lease, agreement, instrument, order, decree, judgment, law or any other
restriction of any kind to which Seller is a party or by which it or any of
its properties are bound (assuming for purposes of the foregoing
representation, that Buyer pays in full on the Closing Date all amounts
then due and owing by Seller to Commerce Bank, N.A. (approximately
$150,000) and to Xxxxxxx Xxxxxxxxx (approximately $225,000);
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(b) result in the creation of any security interest, lien,
encumbrance, adverse claim or restriction on any property or asset of
Seller; or
(c) violate any law, rule or regulation of any federal or state
regulatory agency.
This Agreement has been duly executed and delivered by Seller and constitutes a
valid and binding obligation of Seller enforceable in accordance with its terms.
2.7 Financial Information. Attached as hereto as Exhibit 2.7 are true and
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complete copies of the following financial statements of Seller compiled or
audited as required by Xxxxx Xxxxx & Associates, certified public accountants,
(i) unaudited statements of income, changes in financial position and
shareholders equity for the fiscal years ended December 31, 1994, 1995 and 1996;
(ii) unaudited statement of income for the three-month (3-month) period ended
March 31, 1997; and (iii) unaudited balance sheet at December 31, 1996, and
unaudited balance sheet at March 31, 1997, (collectively, the "Financial
Statements"). The Financial Statements, together with the related notes
thereto, are true, correct and complete and present fairly the financial
condition of Seller. The Financial Statements have been prepared in conformity
with generally accepted accounting principles applied on a consistent basis
throughout the periods involved, except as otherwise expressly disclosed in such
Financial Statements.
2.8 Value of Net Assets Acquired; Adjustment of Purchase Price. If within
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60 days following the Closing Date, in good faith, Buyer determines that on the
Closing Date, the excess (the "Net Value of Assets Received") of the aggregate
fair market value of the assets acquired by Buyer pursuant to this Agreement as
set forth on Exhibits 1.1(a), (b), (d), (e) and (g) over the aggregate amount of
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liabilities assumed by Buyer pursuant to this Agreement as set forth on Exhibit
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1.2, was less than $400,000, then the Acquiring Companies may cancel that number
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of Parent Shares previously delivered or issued in the name of Seller that when
multiplied by the Original Issue Price equals the amount difference between the
Net Value of Assets Received and $400,000.
2.9 Tax Matters; Tax Allocation . Except as set forth in Exhibit 2.9
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attached hereto, Seller has timely filed with appropriate federal, state and
local governmental agencies all income, excise, corporate, franchise, property,
sales, payroll, withholding and other tax returns and reports required to be
filed and has paid all taxes and assessments shown to be due or claimed to be
due. The Parties agree to allocate the Purchase Price (and all other
capitalizable costs) among the Assets for all purposes (including financial
accounting and tax purposes) in accordance with the allocation schedule attached
hereto as Exhibit 2.9.
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2.10 Real Property and Improvements; Condition of Tangible Personal
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Property. All Real Property, if any, owned by Seller that is being sold to
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Buyer pursuant to this Agreement is described in Exhibit 1.1(g) attached hereto.
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Seller has good and marketable title to the Real Property and improvements, free
and clear of all mortgages, liens, pledges, charges or encumbrances, except (a)
mortgages and other encumbrances specifically set forth on Exhibit 1.1(g)
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attached hereto; and (b) liens for current taxes not yet due and payable. The
Assets comprised of items of tangible personal property are in good operating
condition and repair (except ordinary wear and tear and such minor defects that
do not affect their value or use in normal operations), are suitable and
sufficient for their current operations and comply in all material respects with
all applicable laws and ordinances. All items of tangible personal property or
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parcels of real property leased by Seller are listed on Exhibit 1.1(a) or
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Exhibit 1.1(b) attached hereto (or the agreements or documents attached or
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referred to in such Exhibits) and are held under valid, subsisting and enforce
able leases. Except as set forth on Exhibit 1.1(a) or Exhibit 1.1(b) attached
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hereto attached hereto, Seller has not received notice of any default under any
such lease and has no knowledge of any basis for default in any respect under
any such lease. All rentals due and payable under all such leases on or prior
to the date hereof and as of the Closing Date have been or will have been paid
in full.
2.11 Commitments and Contracts. Except as described on Exhibit 2.11
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attached hereto, as of the date hereof, Seller is not a party to or bound by any
oral or written (a) contract for the employment of any officer or employee that
is not terminable on notice of thirty (30) days (or less) without payment of any
amount on account of such termination; (b) bonus, deferred compensation,
savings, stock option, retirement, pension, profit sharing or severance pay
agreement, plan or arrangement; (c) agreement, contract or indenture relating to
the borrowing of money involving an aggregate unpaid balance of one thousand
dollars ($1,000) or more; (d) guaranty of any obligation for the borrowing of
money or otherwise, excluding endorsements made for collection; (e) management
agreement, consulting or other similar contract or arrangement; (f) collective
bargaining agreement; (g) agreement with any present or former officer, director
or shareholder; (h) license, whether as licensor or licensee; (i) contract or
commitment for the purchase of materials or supplies or for the performance of
services over a period of more than sixty (60) days not in the ordinary course
of business; (j) contract or commitment to make capital expenditures in excess
of $500 in the aggregate; (k) contract or option to purchase or sell any real
property; (l) consent decree; or (m) other contract, agreement or other
commitment that is material to the business, operations, prospects, properties
or assets or to the condition, financial or otherwise, of Seller. Except as
disclosed on Exhibit 2.11 attached hereto, as of the date hereof Seller is not
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aware of any basis for the termination or cancellation of any such contracts
other than the stated expiration thereof. As of the date hereof, all of the
contracts, commitments and agreements to which Seller is a party are in full
force and effect without any default or breach thereof in any material respect
by Seller or any other party thereto.
2.12 Customers. A complete and accurate list of all customers of Seller
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from January 1, 1994, through February 28, 1997, including addresses, telephone
numbers and the names of primary contacts with each customer, has been delivered
by Seller to Buyer, accompanied by a complete and accurate list of all of
Seller's standard prices and any applicable discounts by customer name.
2.13 Litigation and Proceedings. Except as set forth on Exhibit 2.13
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attached hereto, (a) there are no actions, suits or proceedings pending or
threatened and there are no claims against or affecting Seller or its properties
or assets, at law or in equity or before or by any governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, or
before any arbitrator of any kind, that involve the possibility of any judgment
or liability that may result in any material adverse change in the operations,
properties, or assets or in the condition, financial or otherwise, of Seller's
business, and (b) Seller is not in default under or in violation of any
judgment, order, writ, injunction, decree or award of any court, arbitrator or
governmental department, commission, board, bureau, agency or instrumentality.
2.14 Governmental Authorizations. Seller has all licenses, franchises,
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permits and other governmental authorizations that are legally required to
enable it to conduct its business in all respects as conducted on the date
hereof. Seller is in compliance with all applicable federal, state and local
laws, rules
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and regulations, including, without limitation, those imposing taxes; and the
execution, delivery and performance of this Agreement, and the consummation by
Seller of the transactions contemplated hereby, will not violate in any material
respect any provisions of, or constitute a default under, any applicable
judgment, order, writ, injunction, decree or award, of any court, arbitrator or
governmental department, commission, board, bureau, agency or instrumentality.
2.15 Insurance. All material insurable properties used by Seller in
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conducting its business are insured in amounts and against all risks usually
insured against by persons operating similar properties in the localities where
such properties are located. Seller maintains all other insurance coverage in
such amounts, types and forms as is customarily carried by persons similarly
situated to protect Seller and its operations, assets and properties, against
such casualties, risks and contingencies that may arise in the course of its
business and operations. All of the foregoing insurance policies are issued by
insurers of recognized responsibility, are in full force and effect and are
fully paid as to all premiums heretofore due. Exhibit 2.15 attached hereto
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contains a summary of the policies of fire, liability, worker's compensation and
other forms of insurance held by Seller that relate to the Assets, the Real
Property or Seller's business.
2.16 Inventory. All inventory of Seller (a) is in good and merchantable
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condition, of a quantity and quality usable or saleable in the normal course of
business and has a value, at March 31, 1997, as reflected in the Financial
Statements, fairly stated at the lower of cost (determined on last-in, first-out
basis) or market; and (b) is not obsolete or defective.
2.17 Employee Benefit Plans and ERISA. Seller does not maintain or sponsor
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or make and is not required to make contributions to any pension, profit-
sharing, stock bonus, stock option, thrift or other retirement plan, medical,
hospitalization, vision, dental, life, disability, vacation or other insurance
or benefit plan, employee stock ownership plan, deferred compensation plan,
stock ownership, stock purchase, performance share, bonus, benefit or other
incentive plan, severance plan or other similar plan, agreement, arrangement or
understanding relating to Seller or its employees, including, without
limitation, any such plan, agreement, arrangement or understanding subject to
the Employee Retirement Income Security Act of 1974 ("ERISA") (collectively, the
"Employee Benefit Plans").
2.18 Employees. Seller has provided Buyer with a copy of all written
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employment contracts with its officers or employees and a complete and accurate
list of the name and current annual compensation of each manager, salesman,
employee and independent contractor employed by Seller, together with each such
person's job title and amounts and forms of special fringe benefits. Seller is
in full compliance with all federal, state and local laws regarding employment,
wages and hours, and occupational safety and health standards with respect to
its employees. To the best knowledge, information and belief of Seller and
Shareholder, no officer, manager, salesman, other employee or independent
contractor employed by Seller has any plans to terminate his or her employment
with Seller.
2.19 Intellectual Property. Exhibit 1.1(d) attached hereto sets forth a
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complete and correct list of each trademark (whether or not registered), trade
xxxx application, trade name, service xxxx, copyright, patent, patent
application, and proprietary intellectual property (including, without
limitation, proprietary computer software, whether in object or source form)
(collectively, "Intellectual Property") owned, used or licensed by Seller and a
description of whether such Intellectual Property is owned or licensed by
Seller.
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Except as disclosed in such Exhibit 1.1(d), Seller has the exclusive right to
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use such Intellectual Property and the current use by Seller of such
Intellectual Property does not infringe the rights of any other person.
2.20 Toxic or Hazardous Substances. Except as disclosed on Exhibit 2.20
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attached hereto, Seller has not directly or indirectly used, stored, generated,
treated, buried, dumped, disposed of or transported any toxic or hazardous
substances on, to or from any real property owned or leased by Seller. To the
best knowledge and belief of Seller, (a) all real property owned or leased by
Seller or used in connection with its business has not been, and is not now,
listed on the Environmental Protection Agency's list of violating facilities
established pursuant to the Clean Water Act or the National Priorities List
established pursuant to the Comprehensive Environmental Response, Compensation
and Liability Act ("CERCLA"), (b) there are no orders, judgments, claims, suits,
actions or proceedings including, but not limited to, governmental
investigations or requests for information, that could have an adverse effect
upon the assets or business of Seller, and (c) there are no underground storage
tanks, contaminated soil, asbestos or other toxic or hazardous substances on the
real property owned or leased by Seller.
2.21 Liabilities. Except as reflected in the Financial Statements or
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disclosed on Exhibit 2.21 attached hereto, Seller has no liabilities or
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obligations, whether absolute, accrued, contingent, direct, indirect, due or
becoming due, or otherwise.
2.22 Title; Leased Assets. Upon consummation of the transactions
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contemplated hereby, (a) Buyer shall receive good, valid and marketable title to
the Assets and the Real Property, free and clear of all liens, claims and
encumbrances other than those securing the liabilities to be assumed pursuant to
Section 1.2 above and (b) Buyer will be entitled to use, as Lessee, all leased
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assets used in Seller's business, free and clear of all liens, claims and
encumbrances other than those securing the liabilities to be assumed pursuant to
Section 1.2 above.
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2.23 Brokers and Finders. There is no agent's, broker's or finder's fee or
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commission payable in connection with the transaction contemplated hereby by
virtue of or resulting from any action or agreement by Seller or the
Shareholder.
2.24 Full Disclosure. No representation or warranty made by Seller or the
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Shareholder in this Agreement and no documentation or certification furnished or
to be furnished to either or both of the Acquiring Companies pursuant to this
Agreement contains any untrue statement of a material fact or omits or will omit
to state a material fact necessary to make the statements contained herein or
therein not misleading.
2.25 Restrictive Documents. Except as disclosed on Exhibit 2.25 attached
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hereto, neither Seller nor the Shareholder is subject to, or a party to, any
charter, bylaw, hypothec, mortgage, lien, lease, license, permit, agreement,
contract, instrument, law, rule, ordinance, regulation, order, judgment or
decree, or any other restriction of any kind or character, that materially
adversely affects the business practices, operations or condition of Seller or
any of assets or property, or that would prevent consummation of the
transactions contemplated by this Agreement, compliance by the Shareholder with
the terms, conditions and provisions hereof or the operation by Buyer after the
Closing Date of the business conducted by Seller prior to the Closing Date on
substantially the same basis as heretofore operated or that would restrict the
ability of Buyer to acquire any property or conduct business in any area.
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2.26 Purchase for Investment; Restrictive Legend. Seller will acquire the
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Parent Shares for investment and not with a view to resale or for distributing
all or any part thereof in any transaction which would constitute a
"distribution" within the meaning of the Securities Act. The offering of the
Parent Shares to Seller was made only through direct, personal communication
between a duly authorized representative of Seller and a duly authorized
representative of Parent and not through public solicitation or advertising.
Seller and the Shareholder each acknowledges that the Parent Shares have not
been registered under the Securities Act and Parent is under no obligation to
file a registration statement with the United States Securities and Exchange
Commission with respect to the Parent Shares. Seller and the Shareholder each
understands and agrees that the Parent Shares may not be sold, transferred, or
otherwise disposed of without registration under the Securities Act or an
exemption therefrom, and that in the absence of an effective registration
statement covering the Parent Shares or an available exemption from registration
under the Securities Act and any applicable state laws, the Parent Shares must
be held indefinitely. In particular, Seller and the Shareholder each are aware
that the Parent Shares may not be sold pursuant to Rule 144 promulgated under
the Securities Act unless all of the conditions of that Rule are met. Seller
and the Shareholder each represents that, in the absence of an effective
registration statement covering the Parent Shares, Seller will sell, transfer,
or otherwise dispose of the Parent Shares only in a manner consistent with its
representations and agreements set forth herein and in that certain Lock-up
Letter (as hereinafter defined) executed by Seller as a condition to the Closing
and the consummation of the transactions contemplated by this Agreement. The
certificate(s) evidencing the Parent Shares will bear the following legend:
"THE SHARES OF THE COMMON STOCK REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. THE TRANSFERABILITY OF THESE SECURITIES IS SUBJECT
TO THE PROVISIONS OF LOCK-UP LETTER DATED AS OF MAY 28, 1997 AMONG
SPECIALTY CONSTRUCTORS, INC., A NEW MEXICO CORPORATION, SPECIALTY
TELECONSTRUCTORS, INC., A NEVADA CORPORATION AND PARAMOUNT
COMMUNICATIONS SYSTEMS, INC., A NEW JERSEY CORPORATION, A COPY OF
WHICH MAY BE OBTAINED WITHOUT CHARGE UPON WRITTEN REQUEST TO THE
PRINCIPAL PLACE OF BUSINESS OR THE REGISTERED OFFICE OF SPECIALTY
TELECONSTRUCTORS, INC."
2.27 Investor Qualification. Seller and the Shareholder each represent and
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warrant that it, he or she (a) has such knowledge and experience in financial
and business matters that it, he or she is capable of evaluating the merits and
risks of its, his or her investment in the Parent Shares and has the financial
ability to assume the monetary risk associated therewith; (b) is able to bear
the complete loss of its, his or her investment in the Parent Shares; (c) has
received such other documents and information as it, he or she has requested and
has had the opportunity to ask questions of, and receive answers from, Parent
and its management concerning Parent and the terms and conditions of the
offering of the Parent Shares and to obtain additional information; (d) is an
"accredited investor" as defined in Rule 501(a) of the Regulation D promulgated
under the Securities Act; (e) is not an entity formed solely to make this
investment; and (f) is not relying upon any statements or instruments made or
issued by any person other than Parent and its officers in making its decision
to invest in the Parent Shares.
9
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE ACQUIRING COMPANIES
In order to induce Seller and the Shareholder to enter into this Agreement
and to consummate the transactions contemplated herein, each of the Acquiring
Companies hereby represent and warrant as follows:
3.1 Organization and Capitalization. It is a corporation duly organized,
-------------------------------
validly existing and in good standing under the laws of its jurisdiction of
incorporation and has all requisite corporate power and authority to consummate
the transactions contemplated hereby.
3.2 Authorization and Effect of Agreement. The execution and delivery of
-------------------------------------
this Agreement and the consummation of the transactions contemplated herein have
been duly authorized and approved by its Board of Directors. No further
corporate approvals or authorizations on its part are necessary to authorize the
consummation of the transactions contemplated herein. This Agreement has been
duly executed and delivered by the Acquiring Companies and constitutes the valid
and binding obligation of the Acquiring Companies, enforceable in accordance
with its terms.
3.3 Consents and Approvals. Except as shall have been obtained prior to
----------------------
Closing, no filing with, and no permit, authorization, consent or approval of,
any public body or authority is necessary for the consummation by it of the
transactions contemplated hereby. The execution and delivery of this Agreement,
and the consummation by it of the transactions contemplated hereby, will not
conflict with any provisions of its Articles of Incorporation or Bylaws, and
will not violate any order, writ, injunction, decree, statute, rule or
regulation applicable to it.
3.4 Brokers and Finders. Buyer represents and warrants that there is no
-------------------
agent's, broker's or finder's fee or commission payable in connection with the
transactions contemplated herein by virtue of or resulting from any action or
agreement by it.
ARTICLE IV
COVENANTS OF SELLER AND THE SHAREHOLDER
Seller and the Shareholder hereby, jointly and severally, covenant and
agree with the Acquiring Companies as follows:
4.1 Conduct of Business. Prior to the Closing Date, Seller shall conduct
-------------------
its business only in the ordinary course consistent with present business
practices and policies and shall use all reasonable efforts to (a) preserve
intact its present business organization and relationships, (b) maintain and
keep the Assets and the Real Property in good repair and condition except for
deterioration due to ordinary wear and tear, (c) maintain in full force and
effect insurance comparable in amount and in scope of coverage to that now
maintained, (d) pay and perform, when due, all material obligations under
contracts, leases and documents relating to or affecting the assets, properties
and business of Seller, and (e) comply with and perform all material obligations
and duties imposed by federal, state and local laws, and all rules, regulations
and orders imposed by federal, state or local governmental authorities.
4.2 Access to Properties and Records. Between the date of this Agreement
--------------------------------
and the Closing Date, Seller shall afford to the officers and authorized
10
representatives of Buyer full access during normal business hours to the
properties, books and records (including tax returns filed and those in
preparation) of Seller in order that Buyer may have full opportunity to make
such investigation as it shall desire of the affairs and business of Seller, and
Seller's officers shall furnish Buyer and its representatives with such
additional financial and operating data and other information relating to the
business and properties of Seller as Buyer shall from time to time reasonably
request.
4.3 Approvals of Third Parties. As soon as practicable, Seller will use
--------------------------
its best efforts to secure all necessary approvals, if any, of third parties,
that are required of them in order to effect the transactions contemplated by
this Agreement or that are required to be obtained by them prior to the Closing
to permit Buyer to own after the Closing all of the Assets and the Real
Property.
4.4 Additional Documents. Prior to the Closing, Seller shall furnish to
--------------------
Buyer true and complete copies of all notes, mortgages, instruments and
documents relating to its ownership of the Real Property, all written contracts,
all insurance policies covering the Assets and all documents regarding Seller's
Intellectual Property.
4.5 Certain Changes. Notwithstanding anything in Section 4.1 to the
--------------- -----------
contrary, without the written consent of Buyer, Seller has not from March 31,
1997 to the date hereof and will not, from the date hereof until the Closing
Date:
(a) make any material change in the conduct of its business and will
operate its business in the ordinary course consistent with past practices;
(b) enter into, or amend in any material respect, any contract or
agreement of a type required to be disclosed pursuant to Section 2.11,
------------
other than in the ordinary course of business, or contract or commit to
make capital expenditures for more than five hundred dollars ($500) in the
aggregate;
(c) issue, deliver or agree to issue or deliver any stock, or other
securities of Seller, or grant or agree to grant any subscriptions,
options, warrants, rights or other agreements or commitments obligating
Seller to issue additional shares of its capital stock or any securities
convertible into its capital stock;
(d) borrow any funds or incur, or become subject to, any obligation or
liability (absolute or contingent), except obligations and liabilities
incurred in the ordinary course of business and in no event more than one
thousand dollars ($1,000) in the aggregate, other than trade payables,
normal accrued expenses and payroll expenses;
(e) declare or make any payment of dividends or distributions of any
kind whatsoever to the shareholders of Seller;
(f) except in the ordinary course of business and for adequate
consideration, sell, transfer or otherwise dispose of, any material assets;
(g) enter or agree to enter into any agreement or arrangement granting
any preferential rights to purchase any of its assets, properties or rights
or requiring the consent of any party to the transfer and assignment of any
such asset, property or right;
11
(h) make any loan, accrual or arrangement for payment of bonuses or
special compensation of any kind or any severance or termination pay to any
of its present or former officers, directors or employees;
(i) enter into an agreement with a person other than Buyer or any of
its affiliates to merge or consolidate with another corporation or to sell
all or substantially all of the assets of Seller, or acquire a material
amount of assets constituting all or substantially all of the business or
assets of any person;
(j) take any action that might reasonably be expected to impair the
business or assets of Seller or fail to take any action that would cause or
permit the representations made in Article II hereof to be inaccurate at
the time of the Closing;
(k) make any change in its articles of incorporation or bylaws; or
(l) commit itself to do any of the foregoing.
4.6 Notification of Material Events. Prior to the Closing, Seller will
-------------------------------
immediately advise Buyer in writing of (i) any event occurring subsequent to the
date hereof which would render any representation or warranty of Seller
contained in this Agreement, if made on or as of the date of such event or the
Closing Date, untrue or inaccurate in any material respect, and (ii) any other
event that would cause a material adverse change in the business of Seller.
4.7 Amendment to Articles of Incorporation. Immediately following the
--------------------------------------
Closing, Seller shall cease using the name "Paramount Communications Systems,
Inc." and take such steps as necessary to amend its Articles of Incorporation to
change its name.
ARTICLE V
COVENANTS OF BUYER
Buyer hereby covenants and agrees with Seller as follows:
5.1 Efforts. Buyer will use its best efforts to obtain from all third
-------
parties approvals necessary for the consummation of the transactions
contemplated by this Agreement.
ARTICLE VI
CONDITIONS TO RESPECTIVE OBLIGATIONS
The respective obligations of the Acquiring Companies, Seller and the
Shareholder to cause the transactions contemplated by this Agreement to be
consummated shall be subject to the satisfaction on or before the Closing Date
of all of the following conditions, except as such parties may waive such
conditions in writing:
6.1 Approvals and Consents. All consents, approvals and authorizations
----------------------
of, filings and registrations with, and notifications to, all applicable
governmental authorities, licensors or other parties required for the
consummation of the transactions contemplated by this Agreement shall have been
12
duly obtained or made in form and substance reasonably satisfactory to the
parties hereto and shall be in full force and effect.
6.2 Litigation. On the Closing Date, there shall not be pending or
----------
threatened litigation in any court or any proceeding by any governmental
commission, board or agency, with a view to seeking or in which it is sought to
restrain or prohibit consummation of the transactions contemplated by this
Agreement.
6.3 Employment Agreements. Buyer and Shareholder shall have entered into a
---------------------
mutually acceptable Employment Agreement on substantially the terms contained in
Exhibit 6.3 hereto and Buyer and each of the employees listed on Exhibit 6.3(a)
----------- --------------
hereto shall have entered into a mutually acceptable Employment Agreement on
substantially the terms contained in Exhibit 6.3(b) hereto.
--------------
6.4 Shareholder Loan Documents. Buyer and Shareholder shall have entered
--------------------------
into a mutually acceptable Shareholder Loan Documents on substantially the terms
contained in Exhibit 1.4 hereto.
-----------
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF SELLER AND SHAREHOLDER
The obligations of Seller and Shareholder to cause the transactions
contemplated by this Agreement to be consummated shall be subject to the
satisfaction on or before the Closing Date of all of the following conditions,
except as Seller and Shareholder may waive such conditions in writing:
7.1 Representations, Warranties and Covenants. All representations and
-----------------------------------------
warranties of the Acquiring Companies contained in this Agreement shall be true
in all material respects on the date of this Agreement and on and as of the
Closing Date as if such representations and warranties that are made on and as
of the Closing Date (except for representations and warranties that are made as
of a specified date).
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF THE ACQUIRING COMPANIES
The obligations of the Acquiring Companies to cause the transactions
contemplated by this Agreement to be consummated shall be subject to the
satisfaction on or before the Closing Date of all of the following conditions,
except as the Acquiring Companies may waive such conditions in writing:
8.1 Representations, Warranties and Covenants. All representations and
-----------------------------------------
warranties of Seller and Shareholder contained in this Agreement shall be true
in all material respects on the date of this Agreement and as of the Closing
Date as if such representations and warranties were made on and as of the
Closing Date (except for representations and warranties which are made as of a
specified date). Seller and Shareholder shall have complied in all material
respects with all agreements and covenants required by this Agreement to be
performed by them on or prior to the Closing Date and shall have furnished to
the Acquiring Companies a certificate, dated the Closing Date, signed by Seller
and Shareholder to such effect.
8.2 Documents of Transfer and Assignment; Lock- Up Letter . All documents
------------------------------------------------------
required to be executed and delivered by Seller at or prior to the Closing shall
have been so executed and delivered, including but not limited to,
13
a Lock-up Letter ("Lock-up Letter") in substantially the form attached hereto as
Exhibit 8.2, all bills of sale, assignments, deeds, transfers and other
-----------
documents of conveyance or instruments necessary to transfer the Assets and the
Real Property to Buyer and to consummate the transactions contemplated hereby.
8.3 Consent of Seller's Secured Lenders. Buyer shall have received from
-----------------------------------
each of the secured lenders, if any, listed on Exhibit 1.2 executed documents
-----------
(in form and substance reasonably satisfactory to Buyer) that (i) approve
Buyer's assumption of Seller's obligations to such secured creditors, and (ii)
modify the terms of such liabilities in a manner reasonably acceptable to Buyer.
8.4 Third Party Consents. Buyer shall have received all consents of third
--------------------
parties requested by Buyer pursuant to this Agreement or required to consummate
the transactions in accordance with this Agreement, including without
limitation, the transfer and assignment to Buyer of the Assets and the Real
Property and all assumed liabilities with the modifications requested by Buyer.
ARTICLE IX
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
9.1 Survival of Representations and Warranties. The representations and
------------------------------------------
warranties of the parties contained in this Agreement shall survive beyond the
Closing Date and any investigation by or on behalf of the Acquiring Companies.
9.2 Indemnification by Seller and the Shareholder.
---------------------------------------------
(a) Seller and the Shareholder, jointly and severally, hereby agree to
indemnify, defend and hold harmless each of the Acquiring Companies against
and in respect of any and all claims, demands, losses, costs (including
court costs and attorneys' fees), expenses, obligations, liabilities,
damages, including interest and penalties that it may incur or suffer as a
result or arising out of any breach of or failure by Seller or Shareholder
to perform any of their respective representations, warranties or covenants
contained in this Agreement or any exhibit or other instrument furnished or
to be furnished by Seller and the Shareholder under this Agreement.
(b) Seller and the Shareholder, jointly and severally, hereby agree to
indemnify, defend and hold harmless the Acquiring Companies against and in
respect of any and all claims, demands, losses, costs (including court
costs and attorneys' fees), expenses, obligations, liabilities, damages,
including interest and penalties that each of the Acquiring Companies may
incur or suffer as a result of or arising out of any act, omission,
transaction, circumstance, sale of goods or services, state of facts or
other condition which occurred or existed on or prior to the Closing,
whether or not then known, due or payable.
9.3 Indemnification by Buyer. The Acquiring Companies will indemnify,
------------------------
defend and hold harmless Seller and the Shareholder against and in respect of
any and all claims demands, losses, costs including court costs and attorneys
fees), expenses, obligations, liabilities, damages, including interest and
penalties that they may incur or suffer as a result of or arising out of any
breach of or failure by the Acquiring Companies to perform any of their
representations, warranties or covenants contained in this Agreement or in any
schedule, certificate, exhibit or other instrument furnished or to be furnished
by them under this Agreement.
14
ARTICLE X
GENERAL
10.1 Closing. The closing ("Closing") of the transactions contemplated by
-------
this Agreement shall be held at 2:00p.m., on the Closing Date at the offices of
Parent located at 00000 Xxx. 00 Xxxxx, Xxxxx Xxxxx, Xxx Xxxxxx 00000 or at such
other time on the Closing Date and place as the parties hereto may mutually
agree. The Closing Date (herein so called) shall be the later of (i) April 15,
1997 or (ii) as soon as practicable after the time each of the conditions set
forth in Articles VI through VIII have been satisfied or waived by the party or
parties entitled to the benefit of such conditions, but in no event later than
May 15, 1997.
10.2 Expenses. Each of the Acquiring Companies, Seller and Shareholder
--------
shall be responsible for all their respective costs and expenses incurred by
them in connection with the transactions contemplated by this Agreement.
10.3 Exhibits. All statements contained in the Exhibits hereto (and any
--------
amendments or supplements to this Agreement) shall be deemed additional
representations and warranties of Seller and the Shareholder.
10.4 Amendment. This Agreement may be amended at any time only by written
---------
agreement of the parties hereto. Any of the terms or conditions of this
Agreement may be waived in writing at any time or prior to the Closing Date by
the party that is entitled to the benefits thereof.
10.5 Termination. This Agreement may be terminated at any time prior to
-----------
the Closing:
(a) by the mutual consent in writing of the Acquiring Companies and
Seller;
(b) by either the Acquiring Companies or Seller if the Closing Date
shall not have occurred by November 30, 1996, provided that the right to
terminate under this provision may not be asserted by a party if the
failure to consummate the transactions contemplated herein is attributable
to a breach by such party of any of its representations and warranties
contained in this Agreement or a failure of such party to fulfill its
obligations pursuant to this Agreement;
(c) by either the Acquiring Companies or Seller if any court of
competent jurisdiction in the United States or other United States
governmental body shall have issued an order, decree or ruling or taken any
other action restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree, ruling
or other action shall have become final and non-appealable; or
15
(d) by the Acquiring Companies if there has been a material
misrepresentation or material breach on the part of Seller or Shareholder
in the representations, warranties and covenants of Seller or Shareholder
set forth herein or if there has been any failure by Seller or Shareholder
to comply with their respective obligations hereunder, or by Seller if
there has been a material misrepresentation or material breach on the part
of the Acquiring Companies in the representations, warranties or covenants
of the Acquiring Companies set forth herein or if there has been any
failure by the Acquiring Companies to comply with their obligations
hereunder.
In the event of the termination and abandonment of this Agreement pursuant
to this Section 10.5, this Agreement shall forthwith become void and have no
------------
effect, without any liability on the part of any party or its directors,
officers or shareholders (except the liability of any party for any breach of
this Agreement).
10.6 Bulk Transfer Laws. The Acquiring Companies hereby waive compliance
------------------
by Seller with the provisions of any applicable Bulk Transfer Laws of any state,
and Seller warrants and agrees to pay and discharge when due all claims of
creditors asserted against either of the Acquiring Companies by reason of such
noncompliance to the extent that such liabilities are not specifically assumed
by Buyer under this Agreement. Seller hereby indemnifies and agrees to hold
each of the Acquiring Companies harmless from, against and in respect of (and
shall on demand reimburse Buyer for) any loss, liability, costs or expenses,
including, without limitation, attorneys' fees, suffered or incurred by it by
reason of the failure of Seller to pay or discharge such claims.
10.7 Notices. All notices, requests, demands and other communications
-------
under this Agreement shall be in writing and shall be deemed to have been duly
given at the time either personally delivered or sent by certified mail, postage
prepaid, as follows:
(a) If to Seller, to:
----------------
Paramount Communications Systems, Inc.
000 Xxxxxxx Xxxxxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
With a copy to:
--------------
Xxxxx X. Xxxxxxx, Esq.
Flaster, Greenberg, Xxxxxxxxxxx, Xxxxxxxx,
Spirgel, Zuckerman, Xxxxxxx & Xxxxxxxx
Commerce Center
0000 Xxxxxx Xxxxxx West
Third Floor
Cherry Hill, New Jersey 08002
(b) If to the Shareholder, to:
-------------------------
Mr. Xxxxxxx Xxxxxxxxx
000 Xxxxxxx Xxxxxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
16
With a copy to:
--------------
Xxxxx X. Xxxxxxx, Esq.
Flaster, Greenberg, Xxxxxxxxxxx, Xxxxxxxx,
Spirgel, Zuckerman, Xxxxxxx & Xxxxxxxx
Commerce Center
0000 Xxxxxx Xxxxxx West
Third Floor
Cherry Hill, New Jersey 08002
(c) If to Buyer, to:
---------------
Specialty Constructors, Inc.
00000 Xxx. 00 Xxxxx
Xxxxx Xxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx, President
With a copy to:
--------------
Xxxxxxx X. Xxxxxx, Esq.
Xxxxxxx, Xxxxxx & Xxxxxxxxxx, PLLC
000 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
(d) If to Parent, to:
----------------
Specialty Teleconstructors, Inc.
00000 Xxx. 00 Xxxxx
Xxxxx Xxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx, President
With a copy to:
--------------
Xxxxxxx X. Xxxxxx, Esq.
Xxxxxxx, Xxxxxx & Xxxxxxxxxx, PLLC
000 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
10.8 Public Announcements. None of the Acquiring Companies, Seller or
--------------------
Shareholder shall issue any press release or otherwise make any public statement
with respect to the transactions contemplated hereby without the prior consent
of the other parties.
10.9 Assignment. This Agreement and all of the provisions hereof shall be
----------
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other parties; provided,
however, that Buyer shall have the right to assign to one (1) or more direct or
indirect wholly-owned subsidiaries of Buyer or Parent any and all of the rights
and obligations of Buyer under this Agreement (such subsidiary assuming all of
the obligations of Buyer in connection with the transactions contemplated herein
and making representations, warranties and covenants comparable to those made by
Buyer herein).
17
10.10 Miscellaneous. This Agreement may be executed in multiple
-------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one agreement. Headings contained in this Agreement
are for reference purposes only and shall not affect in any manner the meaning
or interpretation of this Agreement. This Agreement and the documents and
instruments referred to herein constitute the entire Agreement between the
parties hereto and supersedes all other understandings with respect to the
subject matter hereof. This Agreement shall be governed by and construed in
accordance with the laws of the State of New Mexico.
10.11 Severability. The provisions of this Agreement shall be deemed
------------
independent and severable, and the invalidity or partial invalidity or
unenforceability of any one (1) provision shall not affect the validity or
enforceability of any other provision.
10.12 Intent of the Parties With Respect to Tax Treatment. The parties
---------------------------------------------------
hereto hereby acknowledge that the acquisition of the Assets and the Real
Property contemplated by this Agreement is intended to qualify as a tax-free
exchange pursuant to Section 368 of the Internal Revenue Code of 1986, as
amended, to the extent of that portion of the Purchase Price (as the same may
ultimately be increased by the payment of Additional Consideration pursuant to
Section 1.4 hereof) that is paid with Parent Shares.
-----------
IN WITNESS WHEREOF, the undersigned have executed this Agreement to be
effective as of the date first above written.
BUYER:
SPECIALTY CONSTRUCTORS, INC.
a New Mexico corporation
By: /s/ Xxxxxxx X. Xxxxxxxx
-------------------------------
Xxxxxxx X. Xxxxxxxx, President
PARENT:
SPECIALTY TELECONSTRUCTORS, INC.
a Nevada corporation
By: /s/ Xxxxxxx X. Xxxxxxxx
-------------------------------
Xxxxxxx X. Xxxxxxxx, President
SELLER:
PARAMOUNT COMMUNICATIONS SYSTEMS, INC.
a New Jersey corporation
By: /s/ Xxxxxxx Xxxxxxxxx
------------------------------
Xxxxxxx Xxxxxxxxx, President
SHAREHOLDER:
/s/ Xxxxxxx Xxxxxxxxx
-------------------------------------
XXXXXXX XXXXXXXXX
18
