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EXHIBIT 2.2
AGREEMENT AND PLAN OF EXCHANGE
THIS AGREEMENT AND PLAN OF EXCHANGE (the "Agreement") dated as of
October 23, 1997, is made by and among HARBOUR CAPITAL CORP., a Delaware
corporation (the "Company"), METRO TELECOMMUNICATIONS SERVICES, INC., a
Virginia corporation ("Metro") and Xxx Xxxxxxx and Xxxxxx Xxxxxx, as the owners
of record of all of the issued and outstanding shares of Metro (the "Metro
Shareholders").
WHEREAS, the Company and Metro have entered into discussions which
contemplate that all of the outstanding equity securities of Metro will be
acquired by the Company pursuant to the terms of an agreement and plan of
exchange;
WHEREAS, the Metro Shareholders wish to exchange all of the issued and
outstanding shares of Metro in a transaction intended to qualify as a
reorganization within the meaning of Section 368(a)(1)(B) of the Internal
Revenue Code; and
WHEREAS, the Company, Metro and the Metro Shareholders wish to provide
in this Agreement for the terms and conditions upon which such a transaction
will be consummated;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants, representations, warranties and agreements herein contained, the
parties hereto agree as follows:
ARTICLE I
THE EXCHANGE AND RELATED MATTERS
SECTION 1.1. THE EXCHANGE.
(a) Subject to the terms and conditions of this Agreement, at the
Closing (as defined below) 100% of the issued and outstanding shares of capital
stock of Metro (the "Metro Shares") shall be voluntarily surrendered by the
Metro Shareholders in exchange for shares of Common Stock of the Company valued
at $765,694.80 (the "Company Shares"). For purposes of this Section 1.1(a), the
Company Shares shall be valued based on the average of the closing bid and ask
prices of the Company's Common stock during the 20 trading days preceding the
Closing. After the Closing, Metro shall continue to exist as a Virginia
corporation wholly-owned by the Company, and the Metro Shareholders shall
become shareholders of the Company. Neither the Metro Shares nor the Company
Shares have been registered under the Securities Act of 1933, as amended (the
"Securities Act") or any state securities laws and the Company shall have no
obligation to register the Company Shares. The Company Shares will constitute
"restricted securities" within the meaning of Rule 144 promulgated under the
Securities Act.
(b) The issuance of Company Shares in exchange for the Metro Shares
(the "Exchange") and the closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of the Company on the
date on which the last of the conditions contained in Article VII is fulfilled
or waived, or at such other date and place as the parties hereto may agree;
provided, however, that the Closing shall occur not later than October 31,
1997, subject to any extensions which may be agreed upon by the parties.
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SECTION 1.2. DELIVERY OF THE CERTIFICATES.
(a) At the Closing, each Metro Shareholder shall surrender
certificates representing Metro Shares in exchange for Company Shares, which
shall be issued at the rate determined pursuant to Section 1.1(a). Until
surrendered, each certificate representing Metro Shares shall be deemed for all
purposes to evidence only the right to receive the Company Shares in accordance
with this Agreement. Certificates representing Metro Shares shall be endorsed
in blank or accompanied by stock powers executed in blank, with all signatures
notarized.
(b) If any Company Shares are to be delivered to a person other than
the person in whose name the certificate surrendered in exchange therefor is
registered, it shall be a condition of the delivery thereof that the
certificate be properly endorsed and otherwise in proper form for transfer.
(c) In the event any certificate representing Metro Shares shall have
been lost or destroyed, the Company will deliver, upon receipt of an affidavit
of loss and indemnity bond from the person claiming such certificate to be lost
or destroyed, a certificate representing the number of Company Shares into
which the shares represented by such lost or destroyed certificate are to be
exchanged.
(d) At the Closing and from time to time thereafter, each party hereto
will execute such additional instruments and take such other action as any
other party may reasonably request in order to effect the transactions
contemplated herein.
(e) The Company will not issue fractional shares of Common Stock but
instead will round up any fraction of a share to the next whole share for each
certificate holder who would otherwise be entitled to receive a fractional
share.
SECTION 1.3. CHARTERS. The Certificate of Incorporation of the Company
and the Articles of Incorporation of Metro, as in effect immediately prior to
the Closing, shall continue to be the Certificate of Incorporation of the
Company and the Articles of Incorporation of Metro, respectively, until the
same are amended and changed as provided by law.
SECTION 1.4. BY-LAWS. The By-Laws of the Company and of Metro, as in
effect immediately prior to the Closing, shall continue to be the By-Laws of
the Company and of Metro, respectively, until the same are amended and changed
as provided by law.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF METRO
Metro hereby represents and warrants to the Company as follows:
SECTION 2.1. ORGANIZATION AND QUALIFICATION. Metro is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Virginia, is duly qualified and authorized
to do business as a foreign corporation and is in good standing in each other
jurisdiction in which the
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nature of the business conducted by it or the properties owned, leased or
operated by it makes such qualification necessary, and has the requisite
corporate power to own all of its properties and assets and to carry on its
business as it is now being conducted.
SECTION 2.2. CAPITALIZATION. As of the date hereof, the authorized
capital stock of Metro consists of 1,000 shares of Common Stock, $1.00 par
value, 1,000 shares of which are duly authorized, validly issued and
outstanding, fully paid and nonassessable. As of the Closing, there shall be no
options, warrants or other rights, agreements or commitments obligating Metro
to issue shares of its capital stock. Except as disclosed on Schedule 2.2,
there shall be no (i) authorized or outstanding stock appreciation, phantom
stock, profit participation or similar rights with respect to Metro shares,
(ii) voting trusts, voting agreements, proxies or other agreements or
understandings with respect to the voting of the capital stock of Metro, or
(iii) rights to require Metro to effect a registration of shares under the
Securities Act or any state securities laws of securities of Metro.
SECTION 2.3. AUTHORITY RELATIVE TO THIS AGREEMENT. Metro has the
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution, delivery
and performance by Metro of this Agreement and the consummation by it of the
transactions contemplated hereby have been duly authorized by its Board of
Directors, and no other corporate proceedings on the part of Metro are
necessary to authorize the execution and delivery by Metro of this Agreement
and the consummation by it of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by, and constitutes a legal,
valid and binding agreement of, Metro, enforceable against it in accordance
with its terms, except to the extent that enforceability may be limited by
applicable bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally and except that the availability of equitable
remedies, including specific performance, is subject to the discretion of the
court before which any proceeding therefor may be brought, except as described
in Schedule 2.3. The entities listed on Schedule 2.3 shall have consented to
the transaction contemplated hereby as of the Closing.
SECTION 2.4. NO CONFLICTING AGREEMENTS. The execution and delivery of
this Agreement by Metro does not, and consummation by Metro of the transactions
contemplated hereby will not, (a) violate any existing term or provision of any
law, regulation, order, writ, judgment, injunction or decree applicable to
Metro, or (b) conflict with or result in a breach of any of the terms,
conditions or provisions of the Articles of Incorporation or Bylaws of Metro or
of any agreement or instrument to which Metro is a party.
SECTION 2.5. LITIGATION. There is no claim, suit, action or proceeding
pending or, to the knowledge of Metro, threatened against or affecting Metro or
any of its properties, except as described in the letters dated as of the date
of this Agreement addressed to the Company from Xxxxxxx, Xxxxxxx & Xxxxxxx and
Xxxxxxx Xxxx Xxxxx (the "Litigation Comfort Letters"), copies of which are
attached hereto as Exhibit 2.5. The Litigation Comfort Letters accurately
describe the current status of the actions described therein and the assessment
by Metro and its counsel of Metro's potential liability in such actions.
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SECTION 2.6. GOVERNMENTAL APPROVALS. After due investigation by its
officers, Metro is not aware of any governmental consent, approval, hearing,
filing, registration or other action, including the passage of time, that is
necessary to permit the transactions contemplated by this Agreement to occur
and to be valid and binding upon Metro.
SECTION 2.7. FINANCIAL STATEMENTS. Metro has previously provided the
Company with a balance sheet as of April 30, 1997 and December 31, 1996, 1995
and 1994 and related statements of income and retained earnings for the four
months and the years then ended compiled by Xxxxxx Xxxx Xxxxxx (the "Metro
Financial Statements"). The Metro Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis. Since April 30, 1997, there have been no material adverse
changes in the condition, financial or otherwise, of Metro, or in the earnings,
affairs or business prospects of Metro; there have been no material
transactions entered into by Metro other than those in the ordinary course of
business; and there has been no dividend or distribution of any kind declared,
paid or made by Metro on its capital stock, except as disclosed on Schedule
2.7.
SECTION 2.8. TAXES. Except for up to $20,000 in federal withholding
and excise taxes which may be payable at the time of Closing, Metro has timely
paid all federal, state and local taxes and assessments, if any, which have
been due or owing by it; has filed all local, state and federal tax returns
which Metro has been required to file; and has withheld and paid all taxes
required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, shareholder or other
third party. No deficiency for any taxes has been proposed, asserted or
assessed against Metro; there has been no tax audit or other administrative
proceeding or court proceeding with respect to any taxes, nor is any such audit
or other proceeding pending, nor has there been any notice to Metro by any
taxing authority regarding any such tax, audit or other proceeding or, to the
best knowledge of Metro, is any such tax audit or other proceeding threatened
with regard to any taxes.
SECTION 2.9. SHAREHOLDER AGREEMENTS. Except as disclosed on Schedule
2.2, there are no agreements, arrangements or understandings concerning the
voting of Metro Shares, nor are there any agreements, arrangements or
understandings concerning any transfer of control (whether voting or otherwise)
of Metro Shares.
SECTION 2.10. TITLE TO ASSETS. Metro has good title to all of its
assets, as listed in the Metro Financial Statements, free and clear of all
security interests, mortgages, deeds of trust, liens, claims or other
encumbrances, except as disclosed on Schedule 2.10.
SECTION 2.11. GOVERNMENTAL PERMITS. After due investigation by its
officers, Metro in good faith believes, and has not been otherwise advised,
that it has obtained and currently maintains in full force and effect all
approvals, permits and other consents which it has been required to obtain from
any federal, state or local government agency or body in connection with the
ownership, development and use of its assets and in connection with the sale
and distribution of all products and services which it is currently marketing.
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SECTION 2.12. MATERIAL MISSTATEMENTS OR OMISSIONS. Neither this
Agreement nor any other document, certificate or statement furnished to the
Company by or on behalf of Metro in connection with this Agreement contains any
untrue statement of a material fact, or omits any material fact necessary to
make the statements contained herein or therein not misleading in light of the
context in which they were made.
SECTION 2.13. NO KNOWN ADVERSE EFFECTS. There is no fact known to
Metro (including its officers and directors) which materially adversely affects
or will materially adversely affect, the business of Metro which has not been
set forth in writing in this Agreement or disclosed in the other documents,
certificates or written statements furnished to the Company by or on behalf of
Metro in connection herewith.
SECTION 2.14. ABSENCE OF UNDISCLOSED OR CONTINGENT LIABILITIES. Metro
is not aware, and has not been advised, of any liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise, whether due or to become due,
whether known or unknown, and regardless of when asserted) except as set forth
in the Metro Unaudited Financial Statements.
SECTION 2.15. ABSENCE OF DEVELOPMENTS. Except as otherwise disclosed
herein, or except as set forth in documents provided by Metro to the Company
prior to the execution hereof, since the date of the most current balance sheet
contained in the Metro Financial Statements, Metro has (i) conducted its
business and operations only in the regular and ordinary course; maintained
reasonable business insurance; committed no waste of its assets; and has used
its best efforts to maintain and preserve its business organization intact and
maintain its relationships with suppliers, employees, customers and others;
(ii) refrained from making capital expenditures or commitments for additions to
the property, plant or equipment or entered into transactions which materially
alter or affect operations, except as otherwise have been approved in writing
by the Company; and (iii) refrained from paying the officers or directors or
their affiliates, whether in the capacities of shareholders, directors,
officers or employees, any bonuses or any other forms of compensation except in
accordance with current practice or as provided in written employment or
consulting agreements, copies of which have been provided to the Company.
SECTION 2.16. TITLE TO PROPERTIES. Metro does not own any real
property. Each real property lease to which Metro is a party, true and complete
copies of which have been provided to the Company, is in full force and effect,
and Metro holds a valid and existing leasehold interest in each such lease for
the term set forth in such lease. Except for up to $34,000 in switch space rent
which is due and payable, Metro is not in default, and no circumstances exist
which, if unremedied would, either with or without notice or the passage of
time or both, result in a default under such lease that is material to the
transaction contemplated hereby. Metro owns, or leases under valid leases, all
equipment and other tangible assets necessary for the conduct of its business.
SECTION 2.17. EMPLOYEES. Except as disclosed in Schedule 2.17, (a) to
the best knowledge of Metro's President and the Metro Shareholders, each
executive employee of Metro or any group of Metro's employees has no plan or
intention to terminate his, her or its employment following the Closing; (b)
Metro has complied with all laws relating to the employment of labor, including
provisions thereof relating to wages, hours, equal opportunity, collective
bargaining and the payment of social security and other taxes; (c) Metro has no
material labor relations problem pending and in
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good faith believes its labor relations are satisfactory; (d) Metro is not
aware, and its President has not been advised, of any workmen's compensation,
sexual harassment, discrimination or claims pending against Metro nor is Metro
aware of any facts that would give rise to such claims; (e) no employee of
Metro is subject to any secrecy or non-competition agreement or any other
agreement or restriction of any kind that would impede in any way the ability
of such employee to carry out fully all activities of such employee in
furtherance of the business of Metro; and (f) Metro is not aware, and has not
been advised, that any employee or former employee of Metro has any actual,
pending or threatened claim with respect to any intellectual property rights of
Metro.
SECTION 2.18. EMPLOYMENT MATTERS. Metro shall not, directly or
indirectly, except in the ordinary course of business and with notice to the
Company prior to the Closing, (i) enter into or modify any employment,
severance or similar agreements or arrangements with, or grant any bonuses,
salary increases, severance or termination pay to any officers, directors or
consultants, or (ii) take any action with respect to the grant of any bonuses,
salary increases, severance or termination pay or with respect to any increase
of benefits payable in effect on the date hereof. Metro shall not adopt or
amend any bonus, profit sharing, compensation, stock option, pension,
retirement, deferred compensation, employment or other employee benefit plan,
trust, fund or group arrangement for the benefit or welfare of any employees or
any bonus, profit sharing, compensation, stock option, pension, retirement,
deferred compensation, employment or other employee benefit plan, agreement,
trust, fund or arrangements for the benefit or welfare of any director.
SECTION 2.19. INSURANCE. Metro shall not cancel or terminate its
current insurance policies or cause any of the coverage thereunder to lapse,
unless simultaneously with such termination, cancellation or lapse, replacement
policies providing coverage equal to or greater than the coverage under the
cancelled, terminated or lapsed policies for substantially similar premiums are
in full force and effect.
SECTION 2.20. VIOLATION OR BREACH. Neither Metro nor any other party
is now or is expected by Metro to be in violation or breach of, or in default
with respect to complying with, any material provision of any contract,
agreement, instrument, lease, license, arrangement, or understanding which is
material to Metro, and each such material contract, agreement, instrument,
lease, license, arrangement, and understanding is in full force and is the
legal, valid, and binding obligation of the parties thereto and is enforceable
as to them in accordance with its terms. Metro enjoys peaceful and undisturbed
possession under all leases and licenses under which it is operating. Except
for contracts entered into in the ordinary course of business with customers
for the production of cards or provision of services, Metro is not a party to
or bound by any contract, agreement, instrument, lease, license, arrangement,
or understanding, or subject to any charter or other restriction, which has had
or may in the future reasonably be expected to have a material adverse effect
on the financial condition, results of operations, business, properties,
assets, liabilities, or future prospects of Metro. Metro is not in violation or
breach of, or in default with respect to, any term of its Articles of
Incorporation (or other charter document) or by-laws. Any exceptions to the
representations contained in this Section 2.20 are noted in Schedule 2.20.
SECTION 2.21. INTANGIBLES. All patents, patent applications,
trademarks, trademark applications, trade names, service marks, copyrights,
franchises, technology, know-how and other intangible properties and assets
(all of the foregoing being herein called "Intangibles") which Metro owns or
for which Metro has applications pending, or which are licensed to Metro, and
are in good
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standing and uncontested. Metro believes in good faith that, except
as otherwise disclosed in writing to the Company, that Metro has the legal
right to use and exploit all of the Intangibles. Metro has not granted any
security interests in, or permitted the lien, pledge or encumbrance of, any of
the Intangibles. There is no right under any Intangible necessary to the
business of Metro as presently conducted. Metro in good faith believes that it
has not infringed, is not infringing, and has not received notice of
infringement with respect to asserted Intangibles of others. To the knowledge
of Metro, there is no infringement by others of Intangibles of Metro.
SECTION 2.22. UNLAWFUL PAYMENTS. Neither Metro nor any of its
directors, officers, employees or agents, has directly or indirectly: used any
corporate funds for unlawful contributions, gifts, entertainment, or other
unlawful expenses relating to political activity; made any unlawful payment to
foreign or domestic government officials or employees or to foreign or domestic
political parties or campaigns from corporate funds; violated any provision of
the Foreign Corrupt Practices Act of 1977, as amended; or made any bribe,
rebate, payoff, influence payment, kickback, or other unlawful payment. Metro
has not accepted any material advertising allowances or marketing allowances
from suppliers to Metro and, to the extent any advertising allowance has been
accepted, Metro has provided proper documentation to the supplier with respect
to such advertising as to which the advertising allowance has been granted.
SECTION 2.23. OTHER ACTIONS. Except as otherwise disclosed on Schedule
2.23, subsequent to the respective dates as of which information is given
herein, Metro has not (i) issued any securities or incurred any liability or
obligation, primary or contingent, for borrowed money, (ii) entered into any
transaction not in the ordinary course of business, or (iii) declared or paid
any dividend on its capital stock.
SECTION 2.24. STABILIZATION. Neither Metro nor any of its officers,
directors, or affiliates has taken or will take, at any time up to and
including Closing, directly or indirectly, any action designed to influence or
affect the price of any security of the Company.
SECTION 2.25. ENVIRONMENTAL LIABILITIES.
i. Metro in good faith believes that it has obtained
all permits, licenses and other authorizations which are
required under the Environmental Laws for the ownership, use
and operation of each location operated or leased by Metro
(the "Property"), all such permits, licenses and
authorizations are in effect, no appeal nor any other action
is pending to revoke any such permit, license or
authorization, and Metro is in full compliance with all terms
and conditions of all such permits, licenses and
authorizations.
ii. Metro in good faith believes that it and the
Property are in compliance with all Environmental Laws
including, without limitation, all restrictions, conditions,
standards, limitations, prohibitions, requirements,
obligations, schedules and timetables contained in the
Environmental Laws or contained in any regulation, code,
plan, order, decree, judgment, injunction, notice or demand
letter issued, entered, promulgated or approved thereunder.
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iii. Metro in good faith believes that neither it,
nor to the best knowledge of Metro's executive officers, any
other person has, released, placed, stored, buried or dumped
any Hazardous Substances, Oils, Pollutants or Contaminants or
any other wastes produced by, or resulting from, any
business, commercial, or industrial activities, operations,
or processes, on, beneath, or adjacent to the Property or any
property formerly owned, operated or leased by Metro except
for inventories of such substances to be used, and wastes
generated therefrom, in the ordinary course of business of
Metro (which inventories and wastes, if any, were and are
stored or disposed of in accordance with applicable laws and
regulations and in a manner such that there has been no
release of any such substances into the environment).
iv. There exists no written or tangible report,
synopsis or summary of any asbestos, toxic waste or Hazardous
Substances, Oils, Pollutants or Contaminants investigation
made with respect to all or any portion of the assets of
Metro (whether or not prepared by experts and whether or not
in the possession of the executive officers of Metro).
v. Definitions: As used herein:
(1) Environmental Laws means all federal, state and
local laws, regulations, rules and ordinances relating to
pollution or protection of the environment, including,
without limitation, laws relating to Releases or threatened
Releases of Hazardous Substances, Oils, Pollutants or
Contaminants into the indoor or outdoor environment
(including, without limitation, ambient air, surface water,
groundwater, land, surface and subsurface strata) or
otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, Release, transport or
handling of Hazardous Substances, Oils, Pollutants or
Contaminants.
(2) Hazardous Substances, Oils, Pollutants or
Contaminants means all substances defined as such in the
National Oil and Hazardous Substances Pollutant Contingency
Plan, 40 C.F.R. ss.300.6, or defined as such under any
Environmental Law.
(3) Release means any release, spill, emission,
discharge, leaking, pumping, injection, deposit, disposal,
discharge, dispersal, leaching or migration into the indoor
or outdoor environmental (including, without limitation,
ambient air, surface water, groundwater, and surface or
subsurface strata) or into or out of any property, including
the movement of Hazardous Substances, Oils, Pollutants or
Contaminants through or in the air, soil, surface water,
groundwater or any property.
SECTION 2.26. SUBSIDIARIES. Metro has no subsidiaries.
SECTION 2.27. ACCOUNTING. Metro maintains a system of internal
accounting controls sufficient to provide reasonable assurances that (i) access
to assets is permitted only in accordance with management's general or specific
authorization, and (ii) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF METRO SHAREHOLDERS
The Metro Shareholders represent and warrant to the Company, with
respect to such shareholder's personal circumstance only, as follows:
SECTION 3.1. TITLE TO METRO SHARES. The Metro Shareholders are the
owners, free and clear of any liens and encumbrances, of the number of Metro
Shares which the Metro Shareholders have contracted to exchange as shown on
Exhibit A hereto.
SECTION 3.2. INVESTMENT REPRESENTATIONS.
(a) The Metro Shareholders are acquiring the Company Shares solely for
their own respective accounts, for investment purposes, and not with a view to
resale or in connection with any distribution of the Company's securities. The
Metro Shareholders represent that the entire legal and beneficial interest of
the Company Shares is being acquired, and will be held, for each respective
Metro Shareholder's account and that they have no commitment or present
intention to sell or otherwise dispose of the Company Shares.
(b) The Metro Shareholders have had an opportunity to receive and
evaluate the Company and its plans, operations and financial condition and all
such information as the Metro Shareholders have deemed necessary and
appropriate to evaluate the financial risk inherent in making an investment in
the Company Shares, and the Metro Shareholders have received satisfactory and
complete information concerning the business and financial condition of the
Company in response to all inquiries made by the Metro Shareholders, except as
provided in Section 7.1(i).
(c) Each Metro Shareholder has retained his or her own investment or
legal advisor with sufficient knowledge and experience to advise such
shareholder in this transaction, or has sufficient knowledge and experience in
financial and business matters so as to be capable of evaluating the merits and
risks of investments generally and of the Company Shares in particular and
realizes that acquisition of the Company Shares is a speculative investment and
involves a high degree of risk, and the Metro Shareholders are able, without
impairing their respective individual financial condition, to hold the Company
Shares for an indefinite period of time and incur a complete loss of his or her
investment.
(d) The Metro Shareholders understand and acknowledge that the Company
Shares have not been registered under the Securities Act; the Company Shares
must be held indefinitely unless subsequently registered under the Act or an
exemption from such registration is available; and, except pursuant to the
registration rights granted pursuant to Section 6.6, the Company has no
obligation to register the Company Shares under the Securities Act or under any
state securities laws.
(e) The Metro Shareholders agree that their respective certificates
representing the Company Shares shall have endorsed upon issuance thereon a
restrictive legend substantially as follows:
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THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.
SECTION 3.3. REPRESENTATIONS. The representations and agreements
contained in this section are made to induce the Company to issue the Company
Shares to the Metro Shareholders and to induce the various parties hereto to
execute and to fulfill the terms and conditions of this Agreement; and each
representation and warranty herein constitutes a material portion of the
consideration therefor.
SECTION 3.4. AUTHORITY. This Agreement has been duly executed and
delivered by, and constitutes a legal, valid and binding agreement of, the
Metro Shareholders, enforceable against the person providing such
representation, in accordance with its terms, except to the extent that
enforceability may be limited by applicable bankruptcy, insolvency or similar
laws affecting the enforcement of creditors' rights generally and except that
the availability of equitable remedies, including specific performance, is
subject to the discretion of the court before which any proceeding therefor may
be brought.
SECTION 3.5. SHAREHOLDER AGREEMENTS. Except as otherwise disclosed
herein or in the Schedules hereto, there are no agreements, arrangements or
understandings concerning the voting of Metro Shares, nor are there any
agreements, arrangements or understandings concerning any transfer of control
(whether voting or otherwise) of Metro Shares.
SECTION 3.6. REPORTS. Following the Closing, the Metro Shareholders
agree to file all reports required of them under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), which may include Form 3, Form 4 and
Schedule 13D, which filings shall be prepared at the expense of each Metro
Shareholder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Metro as follows:
SECTION 4.1. ORGANIZATION AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has the requisite corporate power to own all
of its properties and assets and to carry on its business as it is now being
conducted. Neither the nature of the business conducted by the Company nor the
properties owned, leased or operated by it make qualification as a foreign
corporation necessary in any other jurisdiction.
SECTION 4.2. CAPITALIZATION. As of the date hereof, and after giving
effect to the recapitalization completed as of September 16, 1997, the
authorized capital stock of the Company consists of 50,000,000 shares of Common
Stock, $.00001 par value, of which 17,697,750 shares are validly issued and
outstanding and fully paid and nonassessable, and 20,000 shares of Preferred
Stock, $.00001 par value, of which no shares are authorized or issued or
outstanding. In addition, there are
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851,690 Class A warrants to purchase 851,690 shares of
Common Stock and 851,690 Class B warrants to purchase 851,690 shares of Common
Stock issued and outstanding. Except for (i) the Class A Warrants and Class B
Warrants and (ii) as disclosed on Schedule 4.2, there are no other options,
warrants or other rights, agreements or commitments obligating the Company to
issue shares of its capital stock or to effect a registration of its securities
under the Securities Act or any state securities laws.
SECTION 4.3. AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has the
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution, delivery
and performance by the Company of this Agreement and the consummation by it of
the transactions contemplated hereby have been duly authorized by its Board of
Directors. No other corporate proceedings on the part of the Company or its
shareholders are necessary to authorize the execution and delivery by the
Company of this Agreement and the consummation by it of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by,
and constitutes a legal, valid and binding agreement of, the Company,
enforceable against it in accordance with its terms, except to the extent that
enforceability may be limited by applicable bankruptcy, insolvency or similar
laws affecting the enforcement of creditors' rights generally and except that
the availability of equitable remedies, including specific performance, is
subject to the discretion of the court before which any proceeding therefor may
be brought.
SECTION 4.4. NO CONFLICTING AGREEMENTS. The execution and delivery of
this Agreement by the Company does not, and consummation by the Company of the
transactions contemplated hereby will not, (a) violate any existing term or
provision of any law, regulation, order, writ, judgment, injunction or decree
applicable to the Company, or (b) conflict with or result in a breach of any of
the terms, conditions or provisions of the Articles of Incorporation or Bylaws
of the Company or of any agreement or instrument to which the Company is a
party.
SECTION 4.5. LITIGATION. There is no claim, suit, action or proceeding
pending or, to the knowledge of the Company, threatened against or affecting
the Company or any of its properties.
SECTION 4.6. GOVERNMENTAL APPROVALS. No governmental consent,
approval, hearing, filing, registration or other action, including the passage
of time, is necessary to permit the transactions contemplated by this Agreement
to occur and to be valid and binding upon the Company.
SECTION 4.7. FINANCIAL STATEMENTS. The Company has previously
delivered to Metro quarterly reports on Form 10-Q commencing with the quarter
ended October 31, 1993 and continuing through July 31, 1997, and annual reports
on Form 10-K for fiscal years ended April 30, 1994 through April 30, 1997. The
financial statements contained in such quarterly and annual reports
(collectively, the "Company Financial Statements") present fairly the financial
position of the Company at the dates indicated and the results of operations
for the periods specified and have been prepared on a consistent basis. Since
the date of the most current balance sheet contained in the Company Financial
Statements, there have been no material adverse changes in the condition,
financial or otherwise, of the Company, or in the earnings, affairs or business
prospects of the Company; there have been no material transactions entered into
by the Company other than those in the ordinary course of business and those
contemplated in Schedule 4.23; and there has been no dividend or distribution
of any kind declared, paid or made by the Company on its capital stock.
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SECTION 4.8. TAXES. The Company has timely paid all federal, state and
local taxes and assessments, if any, which have been due or owing by it; has
timely filed all local, state and federal tax returns which the Company has
been required to file; and has withheld and paid all taxes required to have
been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, shareholder or other third party.
No deficiency for any taxes has been proposed, asserted or assessed against the
Company; there has been no tax audit or other administrative proceeding or
court proceeding with respect to any taxes, nor is any such audit or other
proceeding pending, nor has there been any notice to the Company by any taxing
authority regarding any such tax, audit or other proceeding or, to the best
knowledge of the Company, is any such tax audit or other proceeding threatened
with regard to any taxes.
SECTION 4.9. SHAREHOLDER AGREEMENTS. There are no agreements,
arrangements or understandings concerning the voting of any shares of Common
Stock of the Company, nor are there any agreements, arrangements or
understandings concerning any transfer of control (whether voting or otherwise)
of any shares of Common Stock of the Company.
SECTION 4.10. TITLE TO ASSETS. The Company has good title to all of
its assets, as listed in the Company Financial Statements, free and clear of
all security interests, mortgages, deeds of trust, liens, claims or other
encumbrances.
SECTION 4.11. GOVERNMENTAL PERMITS. The Company has not been required
to obtain any approvals, permits and other consents from any federal, state or
local government agency or body in connection with the ownership, development
and use of its assets.
SECTION 4.12. MATERIAL MISSTATEMENTS OR OMISSIONS. Neither this
Agreement nor any other document, certificate or statement furnished to Metro
by or on behalf of the Company in connection with this Agreement contains any
untrue statement of a material fact, or omits any material fact necessary to
make the statements contained herein or therein not misleading in light of the
context in which they were made.
SECTION 4.13. NO KNOWN ADVERSE EFFECTS. There is no fact known to the
Company, its officers, directors or employees which materially adversely
affects or will materially adversely affect, the business of the Company which
has not been set forth in writing in this Agreement or disclosed in the other
documents, certificates or written statements furnished to the Company by or on
behalf of the Company in connection herewith.
SECTION 4.14. ABSENCE OF UNDISCLOSED OR CONTINGENT LIABILITIES. The
Company has no liabilities (whether accrued, absolute, contingent, unliquidated
or otherwise, whether due or to become due, whether known or unknown, and
regardless of when asserted) except as otherwise set forth in the Company
Financial Statements.
SECTION 4.15. ABSENCE OF DEVELOPMENTS. Since the date of the most
current balance sheet contained in the Company's Financial Statements, and
except as otherwise disclosed by the Company to Metro, the Company has (i)
conducted its business and operations only in the regular and ordinary course;
committed no waste of its assets; and has used its best efforts to maintain and
preserve its business organization intact; (ii) refrained from making capital
expenditures or capital commitments or entered into transactions which could
materially alter or affect operations, except as otherwise have
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been approved in writing by Metro; and (iii) refrained from paying the officers
or directors or their affiliates, whether in the capacities of shareholders,
directors, officers or employees, any bonuses or any other forms of
compensation except for non-bonus compensation in accordance with current
practice.
SECTION 4.16. TITLE TO PROPERTIES. The Company does not own any real
property. Each real property lease to which the Company is a party, true and
complete copies of which have been provided to Metro, is in full force and
effect, and the Company holds a valid and existing leasehold interest in each
such lease for the term set forth in such lease. The Company is not in default,
and no circumstances exist which, if unremedied would, either with or without
notice or the passage of time or both, result in a default under such lease
that is material to the transaction contemplated hereby. The Company owns, or
leases under valid leases, all equipment and other tangible assets necessary
for the conduct of its business.
SECTION 4.17. EMPLOYEES. Except as disclosed to Metro, (a) to the best
knowledge of the Company's President and the Company Shareholders, each
executive employee of the Company or any group of the Company's employees has
no plan or intention to terminate his, her or its employment following the
Closing; (b) the Company has complied with all laws relating to the employment
of labor, including provisions thereof relating to wages, hours, equal
opportunity, collective bargaining and the payment of social security and other
taxes; (c) the Company has no material labor relations problem pending and in
good faith believes its labor relations are satisfactory; (d) the Company is
not aware, and its President has not been advised, of any workmen's
compensation, sexual harassment, discrimination or claims pending against the
Company nor is the Company aware of any facts that would give rise to such
claims; (e) no employee of the Company is subject to any secrecy or
non-competition agreement or any other agreement or restriction of any kind
that would impede in any way the ability of such employee to carry out fully
all activities of such employee in furtherance of the business of the Company;
and (f) the Company is not aware, and has not been advised, that any employee
or former employee of the Company has any actual, pending or threatened claim
with respect to any intellectual property rights of the Company.
SECTION 4.18. EMPLOYMENT MATTERS. The Company shall not, directly or
indirectly, except in the ordinary course of business and with notice to Metro
prior to the Closing, (i) enter into or modify any employment, severance or
similar agreements or arrangements with, or grant any bonuses, salary
increases, severance or termination pay to any officers, directors or
consultants, or (ii) take any action with respect to the grant of any bonuses,
salary increases, severance or termination pay or with respect to any increase
of benefits payable in effect on the date hereof. The Company shall not adopt
or amend any bonus, profit sharing, compensation, stock option, pension,
retirement, deferred compensation, employment or other employee benefit plan,
trust, fund or group arrangement for the benefit or welfare of any employees or
any bonus, profit sharing, compensation, stock option, pension, retirement,
deferred compensation, employment or other employee benefit plan, agreement,
trust, fund or arrangements for the benefit or welfare of any director.
SECTION 4.19. INSURANCE. The Company shall not cancel or terminate its
current insurance policies or cause any of the coverage thereunder to lapse,
unless simultaneously with such termination, cancellation or lapse, replacement
policies providing coverage equal to or greater than the coverage under the
cancelled, terminated or lapsed policies for substantially similar premiums are
in full force and effect.
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SECTION 4.20. VIOLATION OR BREACH. Neither the Company nor any other
party is now or is expected by the Company to be in violation or breach of, or
in default with respect to complying with, any material provision of any
contract, agreement, instrument, lease, license, arrangement, or understanding
which is material to the Company, and each such material contract, agreement,
instrument, lease, license, arrangement, and understanding is in full force and
is the legal, valid, and binding obligation of the parties thereto and is
enforceable as to them in accordance with its terms. The Company enjoys
peaceful and undisturbed possession under all leases and licenses under which
it is operating. The Company is not a party to or bound by any contract,
agreement, instrument, lease, license, arrangement, or understanding, or
subject to any charter or other restriction, which has had or may in the future
reasonably be expected to have a material adverse effect on the financial
condition, results of operations, business, properties, assets, liabilities, or
future prospects of the Company. The Company is not in violation or breach of,
or in default with respect to, any term of its Certificate of Incorporation (or
other charter document) or by-laws.
SECTION 4.21. INTANGIBLES. All patents, patent applications,
trademarks, trademark applications, trade names, service marks, copyrights,
franchises, technology, know-how and other intangible properties and assets
(all of the foregoing being herein called "Intangibles") which the Company owns
or for which the Company has applications pending, or which are licensed to the
Company, are in good standing and uncontested. The Company believes in good
faith that, except as otherwise disclosed in writing to Metro, that the Company
has the legal right to use and exploit all of the Intangibles. The Company has
not granted any security interests in, or permitted the lien, pledge or
encumbrance of, any of the Intangibles. There is no right under any Intangible
necessary to the business of the Company as presently conducted. The Company in
good faith believes that it has not infringed, is not infringing, and has not
received notice of infringement with respect to asserted Intangibles of others.
To the knowledge of the Company, there is no infringement by others of
Intangibles of the Company. To the knowledge of the Company, there is no
Intangible of others which has had or may in the future have a materially
adverse effect on the financial condition, results of operations, business,
properties, assets, liabilities, or future prospects of the Company.
SECTION 4.22. UNLAWFUL PAYMENTS. Neither the Company nor any of its
directors, officers, employees or agents, has directly or indirectly: used any
corporate funds for unlawful contributions, gifts, entertainment, or other
unlawful expenses relating to political activity; made any unlawful payment to
foreign or domestic government officials or employees or to foreign or domestic
political parties or campaigns from corporate funds; violated any provision of
the Foreign Corrupt Practices Act of 1977, as amended; or made any bribe,
rebate, payoff, influence payment, kickback, or other unlawful payment. The
Company has not accepted any material advertising allowances or marketing
allowances from suppliers to the Company and, to the extent any advertising
allowance has been accepted, the Company has provided proper documentation to
the supplier with respect to such advertising as to which the advertising
allowance has been granted.
SECTION 4.23. OTHER ACTIONS. Except as otherwise disclosed on Schedule
4.23, subsequent to the respective dates as of which information is given
herein, the Company has not (i) issued any securities or incurred any liability
or obligation, primary or contingent, for borrowed money, (ii) entered into any
transaction not in the ordinary course of business, or (iii) declared or paid
any dividend on its capital stock.
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SECTION 4.24. STABILIZATION. Neither the Company nor any of its
officers, directors, or affiliates has taken or will take, at any time up to
and including Closing, directly or indirectly, any action designed to influence
or affect the price of any security of the Company.
SECTION 4.25. ENVIRONMENTAL LIABILITIES.
i. The Company in good faith believes that it has
obtained all permits, licenses and other authorizations which
are required under the Environmental Laws for the ownership,
use and operation of each location operated or leased by the
Company (the "Property"), all such permits, licenses and
authorizations are in effect, no appeal nor any other action
is pending to revoke any such permit, license or
authorization, and the Company is in full compliance with all
terms and conditions of all such permits, licenses and
authorizations.
ii. The Company in good faith believes that it and
the Property are in compliance with all Environmental Laws
including, without limitation, all restrictions, conditions,
standards, limitations, prohibitions, requirements,
obligations, schedules and timetables contained in the
Environmental Laws or contained in any regulation, code,
plan, order, decree, judgment, injunction, notice or demand
letter issued, entered, promulgated or approved thereunder.
iii. The Company in good faith believes that neither
it, nor to the best knowledge of the Company's executive
officers, any other person has, released, placed, stored,
buried or dumped any Hazardous Substances, Oils, Pollutants
or Contaminants or any other wastes produced by, or resulting
from, any business, commercial, or industrial activities,
operations, or processes, on, beneath, or adjacent to the
Property or any property formerly owned, operated or leased
by the Company except for inventories of such substances to
be used, and wastes generated therefrom, in the ordinary
course of business of the Company (which inventories and
wastes, if any, were and are stored or disposed of in
accordance with applicable laws and regulations and in a
manner such that there has been no release of any such
substances into the environment).
iv. There exists no written or tangible report,
synopsis or summary of any asbestos, toxic waste or Hazardous
Substances, Oils, Pollutants or Contaminants investigation
made with respect to all or any portion of the assets of the
Company (whether or not prepared by experts and whether or
not in the possession of the executive officers of the
Company).
v. Definitions: As used herein:
(1) Environmental Laws means all federal, state and
local laws, regulations, rules and ordinances relating to
pollution or protection of the environment, including,
without limitation, laws relating to Releases or threatened
Releases of Hazardous Substances, Oils, Pollutants or
Contaminants into the indoor or outdoor environment
(including, without limitation, ambient air, surface water,
groundwater, land, surface and subsurface strata) or
otherwise relating to the
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manufacture, processing, distribution, use, treatment,
storage, Release, transport or handling of Hazardous
Substances, Oils, Pollutants or Contaminants.
(2) Hazardous Substances, Oils, Pollutants or
Contaminants means all substances defined as such in the
National Oil and Hazardous Substances Pollutant Contingency
Plan, 40 C.F.R. ss.300.6, or defined as such under any
Environmental Law.
(3) Release means any release, spill, emission,
discharge, leaking, pumping, injection, deposit, disposal,
discharge, dispersal, leaching or migration into the indoor
or outdoor environmental (including, without limitation,
ambient air, surface water, groundwater, and surface or
subsurface strata) or into or out of any property, including
the movement of Hazardous Substances, Oils, Pollutants or
Contaminants through or in the air, soil, surface water,
groundwater or any property.
SECTION 4.26. SUBSIDIARIES. Benefits Administration, Inc., a Florida
corporation, is a wholly-owned subsidiary of the company. The Company has no
other subsidiaries.
SECTION 4.27. ACCOUNTING. The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or specific
authorization, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets, (iii) access
to assets is permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE EXCHANGE
SECTION 5.1. CONDUCT OF BUSINESS BY THE COMPANY AND METRO PENDING THE
EXCHANGE. Each of the Company and Metro covenants and agrees that, prior to the
Closing, unless the other shall otherwise agree in writing or as otherwise
contemplated by this Agreement:
(a) It shall conduct its business only in the ordinary and usual
course;
(b) It shall not (i) amend its Articles of Incorporation or By-Laws,
or (ii) split, combine or reclassify the outstanding shares of its capital
stock, or (iii) declare, set aside or pay any dividend payable in cash, stock
or property with respect to the shares of its capital stock, except as
contemplated by this Agreement; and
(c) It shall not issue or agree to issue any additional shares of, or
rights of any kind to acquire any shares of, its capital stock of any class.
(d) It shall file all reports which are required of it under the
Exchange Act, which in the case of the Company may include one or more reports
on Form 8-K.
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(e) Except as contemplated hereby, neither it, its officers, directors
or shareholders shall cause it to, directly or indirectly, through any officer,
director, agent or otherwise, solicit, initiate or encourage submission of any
proposal or offer from any person or entity (including any of its or their
officers or employees) relating to any liquidation, dissolution,
recapitalization, merger, consolidation or acquisition or the purchase of all
or a material portion of its assets or any equity interest in it, or any
similar transaction or business combination involving it, or participate in any
negotiations regarding, or furnish to any other person, any information with
respect to, or otherwise cooperate in any way with, or assist or participate
in, facilitate or encourage, any effort or attempt by any other person or
entity to do or seek any of the foregoing. Either party receiving any such
proposal or offer, or any inquiry from or contact with any person with respect
thereto shall within two business days notify the other party of such proposal
or offer and shall promptly provide such information regarding such proposal,
offer, inquiry or contact as the other party may request.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1. ACCESS AND INFORMATION. The Company and Metro shall each
afford to the other party and to the other party's accountants, counsel and
other representatives full access during normal business hours from the date
hereof through the Closing to all of its properties, books, records, contracts,
commitments and records so that the other party make undertake a due diligence
investigation of business, operations and financial activities. In the event of
the termination of this Agreement, each party will deliver to the other all
documents, work papers and other material, and all copies thereof, obtained by
such party from the other party as a result of this Agreement. All information
contained in such documents will be held in confidence until such time as such
information is otherwise publicly available.
SECTION 6.2. ADDITIONAL AGREEMENTS. Subject to the terms and
conditions herein, each of the parties hereto agrees to use all reasonable
efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement, including using its best and commercially reasonable efforts to
obtain all necessary waivers, consents and approvals and to effect all
necessary registrations and filings.
SECTION 6.3. NONDISCLOSURE. The parties agree that any publicity
release, regulatory filing or other communication, whether written or oral,
identifying this proposed transaction shall not identify Metro at any time
prior to Closing unless required by applicable securities laws or regulations.
Metro shall timely review and approve any public communication before its
dissemination and release.
SECTION 6.4. FILING OBLIGATIONS. Within 70 days after Closing, Metro
shall provide to the Company (i) audited financial statements as of and for the
fiscal years ended December 31, 1995 and 1996, which statements shall be
audited in accordance with generally accepted accounting principles by
independent certified public accountants designated by Metro, and at Metro's
sole cost and expense, and (iii) unaudited financial statements as of and for
the nine month period ended September 30, 1997.
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SECTION 6.5. CONSULTING AGREEMENT. At or before Closing, a consulting
agreement shall be entered into between the Company and Xxx Xxxxxxx or an
entity controlled by Xxx Xxxxxxx for a term of not less than seven years
substantially in the form attached hereto as Exhibit 6.5 (the "Consulting
Agreement").
SECTION 6.6 REGISTRATION RIGHTS. As of the Closing, the Company shall
enter into a "piggyback" registration rights agreement in the form attached
hereto as Exhibit 6.6.
ARTICLE VII
CONDITIONS
SECTION 7.1. CONDITIONS TO METRO AND METRO SHAREHOLDERS' OBLIGATIONS
TO EFFECT THE EXCHANGE. The obligation of Metro and the Metro Shareholders to
effect the Exchange shall be subject to the fulfillment of the following
conditions on or before October 31, 1997:
(a) No court of competent jurisdiction shall have issued any order,
decree or injunction restraining or preventing the consummation of the
Exchange; in the event such order, decree or injunction is issued, Metro, the
Metro Shareholders and the Company shall use their best efforts, and shall
cooperate with the others, to have such order, decree or injunction dissolved;
(b) All representations and warranties made by the Company herein
shall be true and correct in all material respects as of the Closing, with the
same force and effect as though made on and as of the Closing, except for any
changes resulting from activities or transactions which may have taken place
after the date hereof which are expressly permitted by this Agreement or which
have been entered into in the ordinary course of business and are not expressly
prohibited by this Agreement; and the Company shall have performed all
obligations and complied with all covenants required to be performed or to be
complied with by the Company under this Agreement prior to or at the Closing
including the delivery of all documents required at the Closing; and Metro
shall have received a certificate dated the Closing and signed by the President
of the Company to the effect that the representations and warranties made by
the Company in this Agreement are true and accurate in all material respects as
of the Closing (or, where applicable, as of the earlier specified date);
(c) The Company shall have complied in all material respects with
its agreements and covenants contained herein;
(d) From the date of this Agreement through the Closing, there shall
be no change in the financial condition or operating results of the Company
which materially adversely affects the Company, its assets, or the prospects
for its future business operations; and
(e) The Company shall have provided all due diligence materials
requested by Metro; Metro shall have completed its due diligence investigation;
and Metro shall not have discovered any material fact or circumstance existing
as of the date of this Agreement which has not been disclosed to Metro as of
the date of this Agreement regarding the business, assets, liabilities,
properties, condition (financial or otherwise), results of operations or
prospects of the Company which is,
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individually or in the aggregate with other such facts and circumstances,
materially adverse to the Company or Metro.
SECTION 7.2. CONDITIONS TO THE COMPANY'S OBLIGATION TO EFFECT THE
EXCHANGE. The obligation of the Company to effect the Exchange shall be subject
to the fulfillment of the following conditions on or before October 31, 1997:
(a) No court of competent jurisdiction shall have issued any order,
decree or injunction restraining or preventing the consummation of the
Exchange; in the event such order, decree or injunction is issued, Metro, the
Metro Shareholders and the Company shall use their best efforts, and shall
cooperate with the others, to have such order, decree or injunction dissolved;
(b) All representations and warranties made by Metro and the Metro
Shareholders herein shall be true and correct in all material respects as of
the Closing, with the same force and effect as though made on and as of the
Closing, except for any changes resulting from activities or transactions which
may have taken place after the date hereof which are expressly permitted by
this Agreement or which have been entered into in the ordinary course of
business and are not expressly prohibited by this Agreement; Metro and the
Metro Shareholders shall have performed all obligations and complied with all
covenants required to be performed or to be complied with by Metro or the Metro
Shareholders under this Agreement prior to or at the Closing Date including the
delivery of all documents required at the Closing; and the Company shall have
received a certificate dated the Closing and signed by the President of Metro
and the Metro Shareholders to the effect that the representations and
warranties made by Metro and the Metro Shareholders in this Agreement are true
and accurate in all material respects as of the Closing (or, where applicable,
as of the earlier specified date);
(c) Metro and the Metro Shareholders shall have complied in all
material respects with their respective agreements and covenants contained
herein;
(d) From the date of this Agreement through the Closing, there shall
be no change in the financial condition or operating results of Metro which
materially adversely affects Metro, its assets, or the prospects for its future
business operations; and
(e) Metro shall have provided all due diligence materials requested by
the Company, which the Company acknowledges receiving from Metro; the Company
shall have completed its due diligence investigation; and the Company shall not
have discovered any material fact or circumstance existing as of the date of
this Agreement which has not been disclosed to the Company as of the date of
this Agreement regarding the business, assets, liabilities, properties,
condition (financial or otherwise), results of operations or prospects of Metro
which is, individually or in the aggregate with other such facts and
circumstances, materially adverse to Metro or the Company.
(f) As of the Closing, there shall be no material litigation or
other legal proceedings pending or threatened against Metro. Without
limitation, the following actions shall have been settled and dismissed with
prejudice on or before the Closing: Xxxxxxx Xxxxx v. Metro Telecommunications
Services, Incorporated and Xxxxxxx Xxxxx v. Metro Telecommunications Services,
Incorporated. In the alternative, Metro shall provide the Company with comfort
letters from its legal
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counsel describing the status of any such litigation which are acceptable to
the Company in its sole discretion.
(g) As of the Closing, the following obligations of Metro shall have
been paid in full or, in the alternative, arrangements which will result in the
full and complete release of such obligations shall have been entered into by
Metro on terms and conditions which are satisfactory to the Company:
Accounts Payable to Shareholders $ 141,514.90
Notes Payable to Shareholders $ 256,160.00
Note Payable to City National Bank $ 305,520.00
Note Payable to TMC of Washington, D.C., Inc. $ 62,499.90
-------------
Total $ 765,694.80
In addition, Metro shall have entered into a payout arrangement with
the carriers identified on Schedule 7.2(g) on terms acceptable to the Company
concerning Metro's existing obligations to such carriers.
(h) Metro shall have delivered to the Company an engagement letter
with a certified public accounting firm which is acceptable to the Company
providing for the audit of Metro's balance sheet as of December 31, 1996 and
its statement of operations for the years ended December 31, 1995 and 1996. The
terms and conditions of such engagement letter shall be acceptable to Company,
and the engagement letter shall confirm the certified public accounting firm's
ability to render their report (without any scope qualification) as of the
dates and covering the periods described above.
(i) With respect to any transfer or assignment of Company Shares which
Metro or Metro Shareholders intend to complete in connection with the payment
of the obligations set forth in paragraph 7.2(g), the Company shall have
received an investment letter from each proposed transferee and such additional
documentation, all in forms which are acceptable to the Company, which
establish to the Company's satisfaction that each such proposed transfer may be
completed in compliance with applicable state and federal securities laws.
SECTION 7.3. WAIVER. Any party may waive any or all of the conditions
precedent set forth in this Article VI, either prospectively or retroactively,
by giving written notice of such waiver to the other parties. No waiver of any
condition precedent pursuant to this paragraph shall, unless otherwise
expressly stated in such written notice of waiver, extend to any covenant or
agreement contained herein or to any other condition precedent.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1. INDEMNIFICATION. Metro and the Metro Shareholders,
jointly and severally, agree to indemnify in respect of, and hold the Company
harmless against, any and all damages, claims, deficiencies, losses, and
expenses (collectively "Damages") resulting from (i) any material
misrepresentation, breach of warranty, or nonfulfillment or failure to perform
any covenant or agreement on the part of Metro or the Metro Shareholders made
as a part of or contained in this Agreement or in any certificate executed and
delivered pursuant to this Agreement or in connection
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with the transactions contemplated hereby, except for Damages resulting from
any such misrepresentations, breach of warranty or nonfulfillment or failure to
perform any such covenant or agreement known to the Company prior to the
Closing and (ii) Metro's operation of its business through the date of Closing.
The Company agrees to indemnify in respect of, and hold Metro and the Metro
Shareholders harmless against, any and all Damages resulting from (i) any
material misrepresentation, breach of warranty, or nonfulfillment or failure to
perform any covenant or agreement on the part of the Company made as a part of
or contained in this Agreement or in any certificate executed and delivered
pursuant to this Agreement or in connection with the transactions contemplated
hereby except for Damages resulting from any such misrepresentations, breach of
warranty or nonfulfillment or failure to perform any such covenant or agreement
known to Metro prior to the Closing and (ii) the Company's operation of its
business through the date of Closing. The party or parties claiming
indemnification hereunder is hereinafter referred to as the "Indemnified Party"
and the party or parties against whom such claims are asserted hereunder is
hereinafter referred to as the "Indemnifying Party". Damages for which a claim
or action may be asserted hereunder are hereinafter referred to as a "Loss".
SECTION 8.2. LIMITATION OF LIABILITY. No party shall be liable to the
other parties to this Agreement except to the extent that the aggregate amount
of Losses for which they would otherwise (but for this provision) be liable
under this Article VIII exceeds in the aggregate the sum of $10,000 and then
only to the extent of such excess. In no event shall the aggregate liability of
the Company or the Metro Shareholders under this Article VIII exceed $375,000.
Any claim for indemnification under this Article VIII must be asserted within
18 months of the Closing; no party shall have any obligation or liability with
respect to claims asserted after such date.
SECTION 8.3. METHOD OF ASSERTING CLAIMS. All claims for
indemnification by any Indemnified Party under this Article VIII shall be
asserted and resolved as follows:
(a) In the event that any claim or demand for which an
Indemnifying Party would be liable to an Indemnified Party hereunder
is asserted against or sought to be collected from such Indemnified
Party by a third party, said Indemnified Party shall, within sixty
(60) days of such claim or demand being made, notify the Indemnifying
Party of such claim or demand, specifying the nature of and specific
basis for such claim or demand and the amount or the estimated amount
thereof to the extent then feasible (the "Claim Notice"). The estimate
of Loss contained in the Claim Notice shall not limit the amount of
the Indemnifying Party's ultimate liability under the claim. The
Indemnifying Party shall not be obligated to indemnify the Indemnified
Party with respect to any such claim or demand if the Indemnified
Party fails to notify the Indemnifying Party thereof in accordance
with the provisions of this Agreement within said sixty (60) day
period. The Indemnifying Party shall have 30 days from the personal
delivery or mailing of the Claim Notice (the "Notice Period") to
notify the Indemnified Party (i) whether or not the liability of the
Indemnifying Party to the Indemnified Party hereunder with respect to
such claim or demand is disputed, and (ii) whether or not the
Indemnifying Party desires, at the sole cost and expense of the
Indemnifying Party, to defend the Indemnified Party against such claim
or demand; provided, however, that any Indemnified Party is hereby
authorized prior to and during the Notice Period to file any motion,
answer or other pleading which it shall deem necessary or appropriate
to protect its interest or those of the Indemnifying Party and not
unreasonably prejudicial to the Indemnifying Party. In the
event that the Indemnifying Party notifies the Indemnified Party
within the Notice Period that
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it desires to defend the Indemnified Party against such claim or
demand, then, except as hereinafter provided, the Indemnifying Party
shall have the right to defend by all appropriate proceedings, which
proceedings shall be promptly settled or prosecuted by it to a final
conclusion. If the Indemnified Party desires to participate in any
such defense or settlement it may do so at its sole cost and expense,
but it shall not in any event control the defense offered by the
Indemnifying Party. If requested by the Indemnifying Party, the
Indemnified Party agrees to cooperate with the Indemnifying Party and
its counsel in contesting any claim or demand which the Indemnifying
Party elects to contest, or, if appropriate and related to the claim
in question, in making any counterclaim against the person asserting
the third party claim or demand, or any cross complaint against any
person but in any such case at the sole cost and expense of the
Indemnifying Party. No claim for which the Indemnified Party seeks
indemnification may be settled without the consent of the Indemnifying
Party, unless such settlement includes the complete release of the
Indemnifying Party.
(b) In the event any Indemnified Party should have a claim
against any Indemnifying Party hereunder which does not involve a
claim or demand being asserted against or sought to be collected from
it by a third party, the Indemnified Party shall send a Claim Notice
with respect to such claim to the Indemnifying Party. If the
Indemnifying Party does not notify the Indemnified Party within the
Notice Period that it disputes such claim, the amount of such claim
shall be conclusively deemed a liability of the Indemnifying Party
hereunder. If the Indemnifying Party has disputed such claim, as
provided above, such dispute shall be resolved by arbitration.
SECTION 8.4. PAYMENT OF CLAIM. Upon the determination of the liability
of Metro, the Metro Shareholders or the Company under this Article VIII through
settlement, final judgment or any other legal proceeding which results in a
final determination, and notice thereof to the Indemnifying Party, the
Indemnifying Party shall within ninety (90) days after receipt of such notice
of determination of Loss pay to the Indemnified Party the amount of the
payment, judgment, settlement or Loss, as the case may be.
SECTION 8.5. OTHER RIGHTS AND REMEDIES NOT AFFECTED. The
indemnification rights of the parties under this Article VIII are the sole and
exclusive remedies of the parties for any misrepresentation, breach of warranty
or failure to fulfill any agreement or covenant hereunder on the part of any
party hereto.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.1. TERMINATION. This Agreement may be terminated at any
time prior to the Closing:
(a) By mutual consent of Metro, the Company and the Metro
Shareholders;
(b) By any of the parties if the Closing has not occurred on or
before September 30, 1997, subject to any authorized extensions;
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(c) By the Company, if in its reasonable belief there has been a
material misrepresentation or breach of warranty on the part of Metro or any
Metro Shareholder in the representations and warranties set forth in this
Agreement;
(d) By either of the Metro Shareholders, if in the reasonable belief
of the Metro Shareholders there has been a material misrepresentation or breach
of warranty on the part of the Company in the representations and warranties
set forth in this Agreement;
(e) By Metro, if in its reasonable belief there has been a material
misrepresentation or breach of warranty on the part of the Company in the
representations and warranties set forth in this Agreement; and
(f) By the Company, if in its opinion or that of its counsel, the
issuance of the Company Shares in connection with the Exchange will not qualify
for an exemption from registration under applicable federal and state
securities laws;
SECTION 9.2. EFFECT OF TERMINATION. In the event of termination of
this Agreement as provided above, this Agreement shall become void and there
shall be no liability on the part of any party hereto.
SECTION 9.3. AMENDMENT. This Agreement may be amended by an
instrument in writing signed by or on behalf of each of the parties hereto.
SECTION 9.4. EXTENSION; WAIVER. At any time prior to the Closing,
Metro, the Metro Shareholders and the Company may (i) extend the time for the
performance of any of the obligations or other acts of any of the parties
hereto, (ii) in whole or in part, waive any inaccuracy in the representations
and warranties of the other party contained herein or in any schedule hereto or
in any document delivered pursuant hereto, and (iii) in whole or in part, waive
compliance with any of the agreements of the other party hereto or conditions
contained herein. Any agreement to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed and delivered by the
parties hereto.
ARTICLE X
CLOSING
SECTION 10.1 CLOSING. The Closing shall occur at a place, date and
time mutually agreed upon by the parties hereto, but in no event later than
October 31, 1997.
SECTION 10.2 METRO AND METRO SHAREHOLDERS' DELIVERIES AT CLOSING. At
the Closing, Metro and the Metro Shareholders will deliver the following
documents to the Company, all of which shall be reasonably satisfactory in form
and substance to the Company and its counsel:
(a) One or more stock certificates representing the Metro Shares.
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(b) All consents, approvals and authorizations, all notices and all
registrations and filings required to be obtained, given or made under any law,
statute, rule, regulation, judgment, order, injunction, contract, agreement or
other instrument to which Metro or the Metro Shareholders are subject, bound or
a party, or by which Metro or the Metro Shareholders or any of their properties
are bound or subject, in each case which is required to permit the consummation
of the transactions contemplated by this Agreement without contravention,
violation or breach by Metro or the Metro Shareholders of any of the terms
thereof.
(c) The Consulting Agreement executed by Xxx Xxxxxxx in the form
attached hereto as Exhibit 6.5.
(d) The engagement letter required by Section 7.2(h).
(e) The investment letters and related documentation required by
the Company pursuant to Section 7.2(i).
(f) Evidence of the dismissal with prejudice of the actions described
in Section 7.2(f) or, in the alternative, Litigation Comfort Letters which in
form and substance are acceptable to the Company.
(g) Evidence which demonstrates to the satisfaction of the Company
that the obligations set forth in Section 7.2(g) have been paid in full or, in
the alternative, that arrangements have been entered into which will result in
the full and complete release of such obligations.
(h) The Registration Rights Agreement executed by the Metro
Shareholders in the form attached hereto as Exhibit 6.6.
(i) Such other documents, instruments, certificates and
agreements, as the Company and its counsel may reasonably request.
SECTION 10.3 THE COMPANY'S DELIVERIES AT CLOSING. At the Closing, the
Company shall deliver the following to the Metro Shareholders, all of which
shall be in a form reasonably acceptable to the Metro Shareholders and their
counsel:
(a) The Company Shares.
(b) The Registration Rights Agreement executed by the Company in
the form attached hereto as Exhibit 6.6
(c) All consents, approvals and authorizations, all notices and all
registrations and filings required to be obtained, given or made under any law,
statute, rule, regulation, judgment, order, injunction, contract, agreement or
other instrument to which the Company is a party, or by which it or any of its
properties is bound or subject, in each case which is required to permit the
consummation of the transactions contemplated by this Agreement without
contravention, violation or breach by the Company of any of the terms thereof.
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(d) The Consulting Agreement executed by the Company in the form
attached hereto as Exhibit 6.5.
(e) Such other documents, instruments, certificates and
agreements as the Metro Shareholders and their counsel may reasonably request.
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.1. INVESTIGATION; SURVIVAL OF REPRESENTATIONS AND
WARRANTIES. The respective representations and warranties of the parties
contained herein or in any certificates or other documents delivered prior to
or at the Closing shall not be deemed waived or otherwise affected by any
investigation made by any party hereto. Each and every such representation and
warranty shall survive the closing of the transactions contemplated hereby.
SECTION 11.2. NOTICES. All notices and communications required or
permitted to be given hereunder shall be in writing, signed by the sender, and
delivered by personal delivery overnight courier service or by registered or
certified mail to:
If to the Company: R. Xxxxxx Xxxx
Harbour Capital Corp.
000 Xxxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxxx 00000
(000) 000-0000 (Fax)
With a copy to: Xxxxxx X. Xxxxxx, Esq.
Berliner Xxxxxx Xxxxxx & Xxxxxxxx, P.C.
0000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000-0000
(000) 000-0000 (Fax)
If to Metro or the
Metro Shareholders: Xxx Xxxxxxx, Secretary/Treasurer
Metro Telecommunications Services,
Incorporated
000 Xxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxx Xxxxx, Xxxxxxxxx 00000
(000) 000-0000 (Fax)
With a copy to: Xxxxxx X. Xxxx, Esq.
Xxxxxxxxx, Xxxxxx & Xxxxxx, L.L.P.
Twenty-Third Floor, One American Xxxxx
Xxxx Xxxxxx Xxx 0000
Xxxxx Xxxxx, Xxxxxxxxx 00000-0000
or such other address as shall have been furnished in writing. Receipt by, or
filing with, the respective parties of any communications shall be deemed to
have occurred for the purpose of this
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Agreement, when personally delivered or sent by facsimile transmission, or next
business day if sent by overnight courier, or two days after deposit thereof,
postage prepaid, properly addressed, in the United States mail.
SECTION 11.3. INTERPRETATION. The headings contained in this
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
SECTION 11.4. MISCELLANEOUS. This Agreement and any exhibits or
schedules hereto constitutes the entire agreement and supersedes all other
prior agreements and understandings, both written and oral, between the parties
with respect to the subject matter hereof; and are not intended to and shall
not confer upon any other person any rights or remedies hereunder or otherwise
with respect to the subject matter hereof; and shall not be assigned by
operation of law or otherwise. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but which together
shall constitute a single agreement.
SECTION 11.5. BINDING EFFECT; BENEFIT. This Agreement shall inure to
the benefit of and be binding upon the parties hereto. Nothing in this
Agreement, expressed or implied, is intended to confer on any person other than
the parties hereto or their respective successors and assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
SECTION 11.6. BROKERS' AND INVESTMENT BANKERS' FEES; LEGAL EXPENSES.
Metro, the Metro Shareholders and the Company each represent that no agent,
broker, investment banker, or other firm or person is or will be entitled to
any broker's or finder's fee, or any other commission or similar fee in
connection with any of the transactions contemplated by this Agreement based
upon arrangements made by or on behalf of such party. All rights of indemnity
under Article VIII hereof shall apply to any claim relating to Damages arising
out of this Agreement for any fee, commission or similar payment. Each party
shall be responsible for its own expenses incurred through Closing.
SECTION 11.7. GOVERNING LAW. This Agreement shall be construed and
enforced in accordance with and governed by the laws of the State of Virginia
without regard to conflicts of laws principles.
SECTION 11.8. COUNTERPARTS. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be an original,
but all of which together shall constitute one and the same Agreement.
IN WITNESS WHEREOF, the Company, Metro and the Metro Shareholders have
caused this Agreement to be executed all as of the date first written above.
HARBOUR CAPITAL CORP.
By: /s/ R. Xxxxxx Xxxx
--------------------------------
R. Xxxxxx Xxxx, President
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METRO TELECOMMUNICATIONS SERVICES,
INCORPORATED
By: /s/ Xxx Xxxxxxx
----------------------------------
Xxx Xxxxxxx, Secretary/Treasurer
METRO SHAREHOLDERS
/s/ Xxx Xxxxxxx
-------------------------------------
Xxx Xxxxxxx
/s/ Xxxxxx Xxxxxx
--------------------------------------
Xxxxxx Xxxxxx
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TABLE OF ATTACHMENTS
EXHIBIT OR SCHEDULE DESCRIPTION
------------------- ---------------------------------
A Shareholders of Metro
2.2 Exceptions to Representations Regarding Capitalization
2.3 Consents to the Exchange Agreement
2.5 Litigation Affecting Metro
2.7 Dividends or Distributions by Metro
2.10 Exceptions to Title to Metro Assets
2.17 Employment Matters of Metro
2.20 Exceptions to Representations Regarding Violations or Breaches
2.23 Exceptions to Representations Regarding Other Actions by Metro
4.2 Exceptions to Representations Regarding Capitalization
4.23 Exceptions to Representations Regarding Other Actions by Harbour
6.5 Consulting Agreement
6.6 Registration Rights Agreement
7.2(g) List of Carriers of Metro Entering Into Payout Arrangements
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