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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AMONG
PENTASTAR COMMUNICATIONS, INC.,
OC MERGERCO 1, INC.,
DMA VENTURES, INC.,
AND
XXXXXXX XXXXX, AS THE PRINCIPAL SHAREHOLDER
OF
DMA VENTURES, INC.
AS OF AUGUST 13, 1999
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TABLE OF CONTENTS
Page
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1. Definitions..............................................................................................1
2. The Merger...............................................................................................1
3. Representations and Warranties...........................................................................6
3.1. Representations and Warranties of the Company and the Shareholder...............................6
3.2. Additional Representations and Warranties of the Shareholder Relating to
Underwriting...................................................................................18
3.3. Representations and Warranties of the Shareholder..............................................18
3.4. Representations and Warranties of PentaStar....................................................20
3.5. Representations and Warranties of Acquiror.....................................................22
3.6. Survival of Representations....................................................................23
3.7. Representations as to Knowledge................................................................23
4. Pre-Closing Covenants...................................................................................23
4.1. General........................................................................................23
4.2. Operation and Preservation of Business.........................................................23
4.3. Full Access....................................................................................23
4.4. Notice of Developments.........................................................................23
4.5. Exclusivity....................................................................................24
4.6. Announcements..................................................................................24
4.7. Closing Date Liabilities.......................................................................24
5. Post-Closing Covenants..................................................................................24
5.1. Further Assurances.............................................................................24
5.2. Transition.....................................................................................24
5.3. Cooperation....................................................................................24
5.4. Confidentiality................................................................................25
5.5. Post-Closing Announcements.....................................................................25
5.6. Financial Statements...........................................................................25
5.7. Satisfaction of Liabilities....................................................................25
5.8. Repurchase of Unpaid Receivables...............................................................25
5.9. Termination of Obligations.....................................................................26
5.10. Transfer Restrictions..........................................................................26
5.11. Underwriter and Securities Act Restrictions....................................................27
6. Conditions to Closing...................................................................................27
6.1. Conditions to Obligation of PentaStar..........................................................27
6.2. Conditions to Obligation of the Shareholder....................................................29
7. Remedies for Breaches of this Agreement.................................................................29
7.1. Indemnification Provisions for Benefit of PentaStar and the Company............................29
(i)
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7.2. Indemnification Provisions for Benefit of the Shareholder......................................30
7.3. Matters Involving Third Parties................................................................31
7.4. Right of Offset................................................................................32
7.5. Other Remedies.................................................................................32
7.6. Ceiling........................................................................................32
8. Termination.............................................................................................32
8.1. Termination of Agreement.......................................................................32
8.2. Effect of Termination..........................................................................33
8.3. Confidentiality................................................................................33
9. Miscellaneous...........................................................................................33
9.1. No Third-Party Beneficiaries...................................................................33
9.2. Entire Agreement...............................................................................33
9.3. Succession and Assignment......................................................................33
9.4. Counterparts...................................................................................33
9.5. Headings.......................................................................................33
9.6. Notices........................................................................................34
9.7. Governing Law..................................................................................34
9.8. Amendments and Waivers.........................................................................34
9.9. Severability...................................................................................35
9.10. Expenses.......................................................................................35
9.11. Arbitration....................................................................................35
9.12. Construction...................................................................................36
9.13. Incorporation of Exhibits......................................................................36
(ii)
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Exhibits:
Exhibit 1.1(a) Defined Terms
Exhibit 1.1(b) Contracts Which After Closing May Give Rise to
DMA Obligations (Part (a) of Retained Liabilities)
Exhibit 2(k) Form of Principal Stockholder's Escrow and Contingent Stock Agreement
Exhibit 3.1(a)(i)(A) DMA's Amended Certified Articles of Incorporation and Certificate of Good
Standing
Exhibit 3.1(a)(i)(B) DMA's Amended Bylaws
Exhibit 3.1(b)(i) DMA Ownership
Exhibit 3.1(b)(ii) DMA Subsidiaries
Exhibit 3.1(c) Notices and Consents to be Obtained Prior to Closing
Exhibit 3.1(d)(i)(A) DMA Financial Statements
Exhibit 3.1(d)(i)(B) DMA Expenses Not Realized on an Ongoing Basis
Exhibit 3.1(e)(i) Absence of Certain Agreements
Exhibit 3.1(f)(iii) DMA Tax Returns
Exhibit 3.1(f)(v) DMA "S" Corporation Election
Exhibit 3.1(f)(vi) Basis in Assets/NOLs
Exhibit 3.1(h) DMA Contracts and Other Matters
Exhibit 3.1(i)(i) DMA Litigation
Exhibit 3.1(i)(ii) DMA Violations of Legal Requirements or Rights
Exhibit 3.1(k) DMA Liability Claims, Other Than Those Listed on Exhibit 3.1(i)(i)
Exhibit 3.1(l) DMA Insurance Claims
Exhibit 3.1(m)(i) Company Welfare Plans
Exhibit 3.1(m)(iii) DMA Benefit Arrangements
Exhibit 3.1(o)(i)(A) DMA Principal Customers
Exhibit 3.1(o)(i)(B) DMA Principal Providers
Exhibit 3.1(s) DMA Brokers' Fees
Exhibit 3.1(t) DMA Guarantors/Guaranties
Exhibit 3.2 Additional Shareholder Representations and Warranties Relating to
Underwriting
Exhibit 3.3(a)(ii) Other Information Relating to PentaStar
Exhibit 3.4(a) PentaStar's Certified Articles of Incorporation, Bylaws and Minute Book
Exhibit 3.4(b)(i) Capitalization of PentaStar
Exhibit 3.5(a) OC Mergerco 1, Inc.'s Certified Articles of Incorporation, Bylaws and Minute
Book
Exhibit 6.1(j) Form of Opinion of Shareholder's Counsel
Exhibit 6.1(q) Form of Employment Agreement
Exhibit 6.2(e) Form of Opinion of PentaStar's Counsel
(iii)
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This Agreement and Plan of Merger is entered into as of August 13, 1999
among PentaStar Communications, Inc., a Delaware corporation ("PentaStar"), OC
Mergerco 1, Inc., a Delaware corporation (the "Acquiror," and after the
Effective Time, the "Surviving Corporation"), DMA Ventures, Inc., a Colorado
corporation (the "Company"), and its principal shareholder, Xxxxxxx Xxxxx (the
"Shareholder").
Recitals
A. Prior to July 30, 1999, the Shareholder owned 99.875% of the issued
and outstanding capital stock of the Company. On July 30, 1999, the Shareholder
transferred all of his capital stock to OpCom, LLC, a Colorado limited liability
company (the "LLC"), in exchange for all of the Class A membership interests in
the LLC (the "Stock/LLC Exchange").
B. The Acquiror is a newly-formed, wholly-owned subsidiary of
PentaStar. The Acquiror desires to acquire all of the business operations of the
Company through a statutory merger of the Company with and into the Acquiror,
with the Acquiror as the surviving entity (the "Transaction").
C. The Boards of Directors of each of PentaStar, the Acquiror and the
Company has determined that the Transaction is in the best interests of their
respective corporations and shareholders.
D. It is intended that the Transaction will qualify as a reorganization
under the provisions of Section 368(a)(1)(A) pursuant to Section 368(a)(2)(D) of
the Code.
E. PentaStar, the Acquiror, the Company and the Shareholder desire to
make certain representations, warranties and agreements in connection with the
Transaction and also desire to set forth various conditions precedent thereto.
Agreement
NOW, THEREFORE, in consideration of the premises, the mutual
representations, warranties and covenants set forth herein and other good and
valuable consideration, the receipt and sufficiency of which are acknowledged,
the parties agree as follows:
1. Definitions. The terms defined in Exhibit 1.1(a) shall have the meanings
designated therein.
2. The Merger. Subject to the terms and conditions of this Agreement and the
corporation laws of the states of Delaware and Colorado, at the Effective Time,
the Company will be merged with and into the Acquiror (the "Merger") and the
separate existence of the Company will cease and the Acquiror will continue as
the surviving corporation in the Merger. From and after the
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Effective Time, and without any further action on the part of any Person, the
Merger will have all the effects provided by applicable law, including Sections
251 and 252 of the Delaware General Corporation Law and Section 0-000-000 of the
Colorado Business Corporation Act and, subject to applicable law, the following
additional effects:
(a) Basic Transaction. At the Effective Time, the Shareholder will
receive the consideration described in Section 2(k), and the Company Shares
owned by the Shareholder will be canceled and will cease to represent any
interest in the Company or the Surviving Corporation. As of the Effective Time,
the stock transfer books of the Company will be closed and no transfer or
issuance of shares of capital stock of the Company will be permitted.
(b) Certificate of Incorporation. At the Effective Time, the
Certificate of Incorporation of the Acquiror, as in effect immediately prior to
the Effective Time, will become the Certificate of Incorporation of the
Surviving Corporation, except that the name of the Surviving Corporation will
become "Access Communications, Inc.," and such Certificate of Incorporation may
thereafter be amended as provided therein and by the Delaware General
Corporation Law.
(c) Bylaws. At the Effective Time, the Bylaws of the Acquiror, as in
effect immediately prior to the Effective Time, will become the Bylaws of the
Surviving Corporation, and such Bylaws may thereafter be amended or repealed in
accordance with their terms and the Certificate of Incorporation of the
Surviving Corporation and as provided by the Delaware General Corporation Law.
(d) Directors. At the Effective Time, the directors of the Acquiror
immediately prior to the Effective Time will become the directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation and the Delaware General
Corporation Law until the earlier of his or her resignation or removal or until
his or her successor is duly elected and qualified, as the case may be.
(e) Officers. At the Effective Time, the officers of the Acquiror
immediately prior to the Effective Time will become the officers of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation and the Delaware General
Corporation Law until the earlier of his or her resignation or removal or until
his or her successor is duly appointed and qualified, as the case may be.
(f) Properties and Liabilities. At the Effective Time, all the
properties, rights, privileges, powers, and franchises of the Company and the
Acquiror will vest in the Surviving Corporation, and all debts, liabilities, and
duties of the Company and the Acquiror will become the debts, liabilities, and
duties of the Surviving Corporation.
(g) Documents. Subject to the terms and conditions in this Agreement,
the parties shall prepare, sign, and acknowledge, in accordance with the
Delaware General Corporation Law
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and the Colorado Business Corporation Act, a certificate of merger (the
"Certificate of Merger") and articles of merger (the "Articles of Merger") and
deliver the Certificate of Merger to the Secretary of State of the State of
Delaware for filing pursuant to the Delaware General Corporation Law on the
Closing Date and the Articles of Merger to the Secretary of State of the State
of Colorado for filing pursuant to the Colorado Business Corporation Act on the
Closing Date. The Merger will be effective on the date on which the Articles of
Merger and the Certificate of Merger have been duly filed with the Colorado
Secretary of State and the Delaware Secretary of State, respectively (the
"Effective Time").
(h) Share Conversion. At the Effective Time, by virtue of the Merger
and without any action on the part of the holder of any shares of capital stock
of any corporation, each share of capital stock of the Company will be converted
into the right to receive the consideration payable pursuant to Section 2(k).
Each share of the capital stock of the Company issued and outstanding
immediately prior to the Effective Time and owned directly or indirectly by the
Company as treasury stock, if any, will be cancelled and retired, and no cash,
PentaStar Shares or other consideration shall be delivered or payable in
exchange therefor. Each share of the capital stock of the Acquiror issued and
outstanding immediately prior to the Effective Time will remain issued and
outstanding.
(i) No Fractional Shares. No certificates or scrip representing
fractional shares of any class of PentaStar Shares will be issued pursuant to
the Merger. Such fractional share interests shall not entitle the owner thereof
to any rights as a security holder of the Surviving Corporation. In lieu of any
such fractional shares of any class of PentaStar Shares, the Shareholder will be
entitled to receive an amount in cash (without interest), rounded to the nearest
cent, determined by multiplying the value of an PentaStar Share issuable
pursuant to this Agreement (as determined as of the Closing Date) by the
fractional interest in such PentaStar Shares to which such Person would
otherwise be entitled.
(j) Estimated Closing Date Balance Sheet. No earlier than ten Business
Days prior to the Closing or later than three Business Days prior to the
Closing, the Shareholder will deliver a balance sheet for the Company prepared
as of the Closing Date (the "Estimated Closing Date Balance Sheet"). The
Estimated Closing Date Balance Sheet will be prepared in accordance with GAAP on
a basis consistent with the historical accounting practices of the Company used
in connection with the preparation of the Company's audited balance sheet for
the period ended December 31, 1998. The Estimated Closing Date Balance Sheet
will set forth, in addition to other items required by GAAP, the amount of (i)
cash held by the Company, (ii) the Closing Date Liabilities and each item
thereof, and (iii) the Retained Liabilities described in clauses (b), (c) and
(d) of the definition of Retained Liabilities and each item thereof.
(k) Consideration. The consideration payable by the Acquiror to the
Shareholder pursuant to the Merger will be an amount equal to the sum of (a) (1)
cash in an amount of $500,000, plus (2) the amount of cash set forth on the
Estimated Closing Date Balance Sheet, minus (3) the amount of the Closing Date
Liabilities as set forth on the Estimated Closing Date
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Balance Sheet; plus (b) 205,000 PentaStar Shares (collectively the "Purchase
Price"). The Purchase Price will be adjusted in accordance with Section 2(m). On
the Closing Date the Surviving Corporation will (i) pay to the Shareholder by
wire transfer in immediately available funds to an account or accounts
designated by the Shareholder in cash the cash portion of the Purchase Price as
set forth in the preceding clause (a); (ii) issue 205,000 shares of PentaStar
Common Stock to the Shareholder (in such amounts as set forth above); and (iii)
pay, or make provision for payment of, the Closing Date Liabilities set forth on
the Estimated Closing Date Balance Sheet. On the Closing Date, the Shareholder
will deposit 68,265 shares of PentaStar Common Stock (out of the 205,000 shares
he receives pursuant to the Merger) with PentaStar pursuant to the Principal
Stockholder's Escrow and Contingent Stock Agreement in the form attached as
Exhibit 2(k) (the "Escrow Agreement"). The Escrow Agreement provides that upon
the occurrence of certain conditions, the Shareholder may receive a greater or
lesser number of PentaStar Shares than the number initially deposited with
PentaStar pursuant to the Escrow Agreement. The parties agree that any
adjustment in the number of such shares will be treated as an adjustment to the
Purchase Price.
(l) Closing Date Balance Sheet. Within 60 days after the Closing Date
an audited balance sheet for the Company will be prepared as of the Closing Date
(the "Closing Date Balance Sheet") and delivered to PentaStar and the
Shareholder. The Closing Date Balance Sheet will be prepared by Xxxxxx Xxxxxxxx
LLP in accordance with GAAP on a basis consistent with the historical accounting
practices of the Company used in connection with the preparation of the
Company's audited balance sheet for the period ended December 31, 1998.
PentaStar will pay the fees and expenses of Xxxxxx Xxxxxxxx LLP incurred in
connection with the preparation of the Closing Date Balance Sheet. The Closing
Date Balance Sheet will set forth, in addition to other items required by GAAP,
the amount of (i) cash on hand of the Company, (ii) the Closing Date Liabilities
and each item thereof and (iii) the Retained Liabilities described in clauses
(b), (c) and (d) of the definition of Retained Liabilities and each item
thereof.
(m) Post-Closing Adjustment to the Purchase Price. Following delivery
of the Closing Date Balance Sheet in accordance with Section 2(l), the cash
portion of the Purchase Price will be adjusted as follows:
(i) Within 20 days after receipt of the Closing Date Balance
Sheet, PentaStar or the Shareholder, as the case may be, will, in a written
notice to the other either accept the Closing Date Balance Sheet or object to it
by describing in reasonably specific detail any proposed adjustments to the
Closing Date Balance Sheet and the estimated amounts of and reasons for such
proposed adjustments. The failure by PentaStar or the Shareholder to object to
the Closing Date Balance Sheet within such 20-day period will be deemed to be an
acceptance by such Person of the Closing Date Balance Sheet.
(ii) If any adjustments to the Closing Date Balance Sheet are
proposed, PentaStar and the Shareholder will negotiate in good faith to resolve
any dispute, provided that if the dispute is not resolved within 10 days
following the receipt of the proposed adjustments
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described in Section 2(m)(i), PentaStar and the Shareholder will retain the
Denver Colorado office of BDO Xxxxxxx to resolve such dispute, which resolution
will be final and binding. The fees and expenses of BDO Xxxxxxx will be shared
equally by PentaStar, on the one hand, and the Shareholder, on the other hand,
and BDO Xxxxxxx will be retained under a retention letter executed by the
parties that specifies that the determination by said firm of any such disputes
concerning the Closing Date Balance Sheet will be resolved in accordance with
GAAP on a basis consistent with the historical accounting practices of the
Company used in connection with the preparation of the Company's audited balance
sheet for the period ended December 31, 1998, by choosing the position of Xxxxxx
Xxxxxxxx LLP or the objecting party under Section 2(m)(i) without change, within
30 days of the expiration of the 10-day period described in this Section
2(m)(ii).
(iii) Within 10 Business Days after the later of the acceptance
of the Closing Date Balance Sheet by PentaStar and the Shareholder or the
resolution of any disputes under Section 2(m)(ii), as the case may be, the cash
portion of the Purchase Price will be adjusted as follows: First, to the extent
that the amount of the Closing Date Liabilities as set forth on the Closing Date
Balance Sheet is more than the amount of the Closing Date Liabilities as set
forth on the Estimated Closing Date Balance Sheet, the cash portion of the
Purchase Price will be reduced and the difference will be refunded in cash by
the Shareholder to PentaStar. If the amount of the Closing Date Liabilities as
set forth on the Closing Date Balance Sheet is less than the amount of the
Closing Date Liabilities as set forth on the Estimated Closing Date Balance
Sheet, the cash portion of the Purchase Price will be increased and the
difference will be paid in cash by PentaStar to the Shareholder. If the amount
of the Closing Date Liabilities as set forth on the Closing Date Balance Sheet
is equal to the amount of the Closing Date Liabilities as set forth on the
Estimated Closing Date Balance Sheet, no adjustment will be made in the Purchase
Price on account of any Closing Date Liabilities. Second, in addition to the
Purchase Price adjustment described above in this Section 2(m)(iii), if the
amount reflected as cash on the Closing Date Balance Sheet is less than the
amount reflected as cash on the Estimated Closing Date Balance Sheet, the cash
portion of the Purchase Price will be reduced and the difference will be
refunded in cash by the Shareholder to PentaStar. If the amount reflected as
cash on the Closing Date Balance Sheet exceeds the amount reflected as cash on
the Estimated Closing Date Balance Sheet, the cash portion of the Purchase Price
will be increased and the difference will be paid in cash by PentaStar to the
Shareholder. If the amount reflected as cash on the Closing Date Balance Sheet
is equal to the amount reflected as cash on the Estimated Closing Date Balance
Sheet, no adjustment will be made to the Purchase Price on account of any cash.
PentaStar will pay in cash to Shareholder the amount of the Purchase Price
increase required under this Section 2(m)(iii), if any, within the time period
described in the first sentence of this Section 2(m)(iii). In the event that the
amounts reflected on the final Closing Date Balance Sheet result in both a
Purchase Price reduction and a Purchase Price increase under this Section
2(m)(iii), the amounts of such reduction and increase will be offset against
each other and PentaStar or the Shareholder, as the case may be, will make a
payment to the other of the net amount of the adjustment to the Purchase Price.
(iv) Any adjustment in the Purchase Price made under this Section
2(m) will be allocated as an adjustment to the consideration paid for the
Company Shares.
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(n) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Xxxxxxx & Xxxxxx
L.L.C. concurrently with the closing of the IPO. All transactions contemplated
by this Agreement will be effective at 12:00 a.m. local time in Denver,
Colorado, on the day of the Closing (such effective time being the "Closing
Date").
(o) Deliveries at the Closing. At the Closing, (i) the Shareholder will
deliver to PentaStar the various certificates, instruments and documents
referred to in Section 6.1 and (ii) PentaStar will deliver to the Shareholder
the various certificates, instruments and documents referred to in Section 6.2.
3. Representations and Warranties.
3.1. Representations and Warranties of the Company and the Shareholder. The
Company and the Shareholder, jointly and severally, each represents and warrants
to PentaStar that the statements contained in this Section 3.1 are correct and
complete as of the date of this Agreement and will be correct and complete as of
the Closing Date (as though made then and as though the Closing Date were then
substituted for the date of this Agreement throughout this Section 3.1).
(a) Organization, Good Standing, Etc. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Colorado, and is not required to be qualified or authorized to do business as a
foreign corporation or required to be in good standing in any other
jurisdiction. The Company has all requisite corporate power and authority to
own, lease and operate its properties and to carry on its business as now being
conducted. The copies of the articles of incorporation (certified by the
Secretary of State of the State of Colorado) and the bylaws of the Company, both
as amended to date, which have been delivered to PentaStar by the Shareholder
and are attached as Exhibits 3.1(a)(i)(A) and 3.1(a)(i)(B), respectively, are
complete and correct, and the Company is not in default under or in violation of
any provision of its articles of incorporation or bylaws. The minute books
(which contain the records of all meetings of or actions by the shareholders,
the board of directors, and any committees of the board of directors) and the
stock certificate books and the stock record books of the Company, copies of
which have been delivered to PentaStar by the Shareholder, are correct and
complete.
(b) Ownership and Capitalization.
(i) The authorized capital stock of the Company consists of
25,000,000 shares of common stock, no par value and 10,000,000 shares of
preferred stock, no par value. Prior to the Stock/LLC Exchange, the Shareholder
owned, and immediately prior to the Closing the Shareholder will own,
beneficially and of record, free and clear of any Encumbrance or Tax, 10,000,000
shares of the common stock, no par value, of the Company (the "Company Shares"),
which immediately prior to the Closing will constitute all of the issued and
outstanding capital
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stock of the Company. All of the issued and outstanding shares of the Company's
capital stock have been duly authorized and validly issued, and are fully paid
and nonassessable, with no personal Liability attaching to the ownership
thereof. Except as set forth on Exhibit 3.1(b)(i), there is no authorized or
outstanding stock or security convertible into or exchangeable for, or any
authorized or outstanding option, warrant or other right to subscribe for or to
purchase, or convert any obligation into, any unissued shares of the Company's
capital stock or any treasury stock, and the Company has not agreed to issue any
security so convertible or exchangeable or any such option, warrant or other
right. There are no authorized or outstanding stock appreciation, phantom stock,
profit participation or similar rights with respect to the Company. There are no
voting trusts, voting agreements, proxies or other agreements or understandings
with respect to any capital stock of the Company. Except as set forth on Exhibit
3.1(b) (i), all of which the Shareholder shall cause to be terminated prior to
the Closing, there are no existing rights of first refusal, buy-sell
arrangements, options, warrants, rights, calls, or other commitments or
restrictions of any character relating to any of the Shares, except those
restrictions on transfer imposed by the Securities Act of 1993, as amended, and
applicable state securities laws.
(ii) Except as set forth on Exhibit 3.1(b)(ii), the Company has
no Subsidiaries and no capital stock, securities convertible into capital stock,
or any other equity interest in any other corporation, partnership, limited
partnership, limited liability company, association, joint venture or other
Person. Each of the entities listed on Exhibit 3.1(b)(ii) is wholly-owned,
directly or indirectly, by the Company, is a corporation duly organized, validly
existing and in good standing under the laws of its state of incorporation, as
set forth on Exhibit 3.1(b)(ii), and is qualified to do business as a foreign
corporation and is in good standing in the states set forth on Exhibit
3.1(b)(ii), which are the only jurisdictions in which the nature of the business
conducted by it or the properties owned, leased or operated by it, make such
qualification necessary. No Person has any right to acquire any interest in any
Subsidiary and there are no authorized or outstanding stock appreciation,
phantom stock, profit participation or similar rights with respect to any
Subsidiary. Each such Subsidiary has all requisite corporate power and authority
to own, lease and operate its properties and to carry on its business as now
being conducted.
(c) Authority; No Violation. (i) The Shareholder and each relative or
affiliate of the Company or of the Shareholder who is a party to any Other
Seller Agreement has full and absolute right, power, authority and legal
capacity to execute, deliver and perform this Agreement and all Other Seller
Agreements to which the Shareholder, relative or affiliate is a party, and this
Agreement constitutes, and the Other Seller Agreements will when executed and
delivered constitute, the legal, valid and binding obligations of, and shall be
enforceable in accordance with their respective terms against, the Shareholder,
relative or affiliate who is a party thereto. The execution, delivery and
performance of this Agreement and the Other Seller Agreements and the
consummation of the transactions contemplated hereby and thereby will not (A)
violate any Legal Requirement to which the Company, the Shareholder, or any
relative or affiliate of the Company or of the Shareholder who is a party to any
Other Seller Agreement is subject or any provision of the articles of
incorporation or bylaws of the Company or of any such affiliate, or (B) violate,
with
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or without the giving of notice or the lapse of time or both, or conflict with
or result in the breach or termination of any provision of, or constitute a
default under, or give any Person the right to accelerate any obligation under,
or result in the creation of any Encumbrance upon any properties, assets or
business of the Company, of the Shareholder, or of any such relative or
affiliate pursuant to any indenture, mortgage, deed of trust, lien, lease,
license, Permit, agreement, instrument or other arrangement to which the
Company, the Shareholder or any such relative or affiliate is a party or by
which the Company, the Shareholder, or any such relative or affiliate or any of
their respective assets and properties is bound or subject. Except for notices
that will be given and consents that will be obtained by the Shareholder prior
to the Closing (each of which is set forth in Exhibit 3.1(c)), neither the
Company, the Shareholder, nor any such relative or affiliate need give any
notice to, make any filing with or obtain any authorization, consent or approval
of any Governmental Authority or other Person in order for the parties to
consummate the transactions contemplated by this Agreement and the Other Seller
Agreements.
(d) Financial Statements; Absence of Liabilities. (i) The audited
balance sheets of the Company as of December 31, 1997 and December 31, 1998, the
related statements of income, shareholder's equity and cash flows for the fiscal
years then ended, the unaudited balance sheet of the Company as of June 30, 1999
(the latter being referred to as the "Latest Balance Sheet"), and the related
statements of income, shareholder's equity and cash flows for the six-month
period then ended, have been prepared in accordance with GAAP on a consistent
basis (except that the Latest Balance Sheet and the related statements of
income, shareholder's equity and cash flows for the six- month period ended June
30, 1999 may be subject to customary year-end adjustments none of which will be
material in amount), are in accordance with the books and records of the Company
(which books and records are complete and correct in all material respects), and
fairly present the financial position and results of operations of the Company
in all material respects as of such dates and for each of the periods indicated.
As of the date of each of such balance sheet, the Company had no Liability other
than those set forth on each such balance sheet. Copies of the financial
statements described in the first sentence in this Section 3.1(d) are attached
as Exhibit 3.1(d)(i)(A). The expenses itemized on Exhibit 3.1(d)(i)(B) and
reflected in the Company's financial performance for the 12-month period ended
December 31, 1998 will not be realized on an on-going basis.
(ii) Since the date of the Latest Balance Sheet, the Company has
not incurred or become subject to any Liability other than Liabilities incurred
in the ordinary course of business. As of the Closing, the Company will have no
Liability (and there is no basis for the assertion of any Liability), except for
the Retained Liabilities.
(e) Absence of Certain Agreements, Changes or Events. The Company is
not a party to or otherwise bound by any material contract or agreement (i)
pursuant to which the Company is obligated to furnish any services, product or
equipment and (ii) that has been prepaid with respect to any period after the
Closing Date. Except as disclosed in Exhibit 3.1(e)(i), since June 30, 1999, the
Company has not (i) incurred any debt, indebtedness or other Liability, except
current Liabilities incurred in the ordinary course of business; (ii) delayed or
postponed the
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payment of accounts payable or other Liabilities or accelerated the collection
of any receivable beyond stated, normal terms; (iii) sold or otherwise
transferred any of its assets or properties; (iv) cancelled, compromised,
settled, released, waived, written-off or expensed any account or note
receivable, right, debt or claim involving more than $5,000 in the aggregate, or
accelerated the collection of any account receivable other than in the ordinary
course of business consistent with past practice; (v) changed in any significant
manner the way in which it conducts its business; (vi) made or granted any
individual wage or salary increase in excess of 10% or $1.00 per hour, any
general wage or salary increase, or any additional benefits of any kind or
nature; (vii) except as otherwise expressly permitted by this Section 3.1(e),
(A) entered into any contracts or agreements, or made any commitments, involving
more than $5,000 individually or in the aggregate or (B) accelerated,
terminated, delayed, modified or cancelled any agreement, contract, lease or
license (or series of related agreements, contracts, leases and licenses)
involving more than $5,000 individually or in the aggregate; (viii) suffered any
material adverse fact or change, including, without limitation, to or in its
business, assets or financial condition or customer or service provider
relationships; (ix) made any payment or transfer to or for the benefit of any
shareholder, officer or director or any relative or affiliate thereof or
permitted any Person, including, without limitation, any shareholder, officer,
director or employee or any relative or affiliate thereof, to withdraw assets
from the Company (other than payment to the Shareholder of the proportionate
monthly amount of his respective normal annualized salary due and payable during
such period or due under pre-existing real property leases between the Company
and the Shareholder which are disclosed in Exhibit 3.1(h)); (x) or agreed to
incur, take, enter into, make or permit any of the matters described in clauses
(i) through (ix).
(f) Tax Matters.
(i) The Company has filed all Tax Returns that it was required to
file. All such Tax Returns were correct and complete in all respects. All Taxes
owed by the Company (whether or not shown on any Tax Return) have been paid. The
Company is not currently the beneficiary of any extension of time within which
to file any Tax Return. To the best knowledge of the Shareholder, no claim has
ever been made by an authority in a jurisdiction where the Company does not file
Tax Returns that it is or may be subject to taxation by that jurisdiction. There
are no Encumbrances on any of the assets of the Company that arose in connection
with any failure (or alleged failure) to pay any Tax.
(ii) The Company 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.
(iii) To the best knowledge of the Shareholder, there is no basis
for any authority to assess any additional Taxes for any period for which Tax
Returns have been filed. There is no pending or threatened dispute or claim
concerning any Tax Liability of the Company. Exhibit 3.1(f)(iii) lists all
federal, state, local and foreign income Tax Returns filed with respect to the
Company for taxable periods ended on or after December 31, 1992, indicates those
Tax
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Returns that have been audited and indicates those Tax Returns that currently
are the subject of audit. The Shareholder has delivered to PentaStar correct and
complete copies of all federal income Tax Returns, examination reports, and
statements of deficiencies filed or assessed against or agreed to by the Company
since December 31, 1992.
(iv) The Company has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(v) Neither the Company nor the Shareholder has ever filed (A) an
election pursuant to Section 1362 of the Code that the Company be taxed as an
"S" corporation, except as set forth on Exhibit 3.1(f)(v), or (B) a consent
pursuant to Section 341(f) of the Code relating to collapsible corporations. The
Company has not made any payments, is not obligated to make any payments and is
not a party to any agreement that under certain circumstances could obligate it
to make any payments that will not be deductible under Code Section 280G. The
Company has not been a United States real property holding corporation within
the meaning of Code Section 897(c)(2) during the applicable period specified in
Code Section 897(c)(1)(A)(ii). The Company has disclosed on its federal income
Tax Returns all positions taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of Code Section 6662.
The Company is not a party to any Tax allocation or sharing agreement. The
Company has not been a member of an Affiliated Group filing a consolidated
federal income Tax Return (other than a group the common parent of which was the
Company) and has no Liability for the Taxes of any Person (other than the
Company) under Treasury Regulation Section 1.1502-6 (or any similar provision of
state, local, or foreign law), as a transferee or successor, by contract or
otherwise. The total adjusted basis of the Acquired Assets exceeds the sum of
the Company's Liabilities plus the amount of Liabilities to which the Acquired
Assets are subject.
(vi) Exhibit 3.1(f)(vi) sets forth the following information with
respect to the Company as of the most recent practicable date (as well as on an
estimated pro forma basis as of the Closing giving effect to the consummation of
the transactions contemplated hereby): (A) the basis of the Company in its
assets; and (B) the amount of any net operating loss, net capital loss, unused
investment or other credit, unused foreign tax credit or excess charitable
contribution allocable to the Company.
(g) Assets and Properties.
(i) The Company has good title to, or a valid leasehold interest
or interest as a licensee in, the properties and assets used or held for use by
it, located on its Premises, or shown on the Latest Balance Sheet or acquired
after the date thereof. As of the Closing, all of the Acquired Assets will be
owned by the Company, free and clear of all Encumbrances except for the Retained
Liabilities. Since June 30, 1999, the Company has not entered into any contract
or made any commitment to sell all or any part of its assets. The Acquired
Assets constitute all of the real, personal and mixed assets and property, both
tangible and intangible, including Intellectual
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Property, which are being used or held for use by the Company in the conduct of
the business and operations of the Company, consistent with historical and
current practices. The Company owns or leases all equipment and other tangible
assets necessary for the conduct of its business as presently conducted and as
presently proposed to be conducted. Each such tangible asset material to the
Company's operations has been maintained in accordance with normal industry
practice and in each case is in a condition adequate for its intended purpose.
All leases of real property between the Company and the Shareholder, or any
officer or director or any relative or affiliate thereof are on fair market
terms (including rent at fair market value). Neither the Shareholder, nor any
relative or affiliate thereof, owns any asset, tangible or intangible, which is
used in the business of the Company, other than real property leased to the
Company at fair market value which leases are disclosed in Schedule 3.1(h).
(ii) The Premises constitute all of the real property, buildings
and improvements used by the Company in its business. To the best knowledge of
the Shareholder, the Premises have been occupied, operated and maintained by the
Company in accordance with applicable Legal Requirements. The Company has not
received notice of violation of any Legal Requirement or Permit relating to its
operations or its owned or leased properties.
(iii) No party to any lease with respect to any Premises has
repudiated any provision thereof, and there are no disputes, oral agreements or
forbearance programs in effect as to any such lease.
(h) Lists of Contracts and Other Matters. Attached as Exhibit 3.1(h) is
a correct and complete list setting forth the following items:
(i) the following contracts and other agreements in effect as of
the Closing Date to which the Company is a party:
(A) any agreement (or group of related agreements) for
the lease of personal property to or from any Person providing for lease
payments in excess of $5,000 per year;
(B) any agreement pursuant to which the Company, or the
Shareholder on behalf of the Company, has made a deposit in an amount greater
than $5,000;
(C) any agreement (or group of related agreements) for
the purchase or sale of supplies, products or other personal property, or for
the furnishing or receipt of services, the performance of which will extend over
a period of more than one year, result in a material loss to the Company or
involve consideration in excess of $10,000;
(D) any agreement concerning a partnership or joint
venture;
(E) any agreement (or group of related agreements)
under which it
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has created, incurred, assumed or guaranteed any indebtedness for borrowed
money, or any capitalized lease obligation in excess of $10,000 or under which
it has granted any Encumbrances on any of its assets, tangible or intangible;
(F) any agreement concerning confidentiality or
noncompetition;
(G) any agreement with the Shareholder or any relative
or affiliate thereof (other than the Company);
(H) any profit sharing, stock option, stock purchase,
phantom stock, stock appreciation, profit participation, deferred compensation,
severance or other plan or arrangement;
(I) any collective bargaining agreement;
(J) any agreement for the employment of any individual
on a full-time, part-time, consulting or other basis or any agreement providing
severance benefits;
(K) any agreement under which the Company has advanced
or loaned any amount to any of its directors, officers and employees outside the
ordinary course of business;
(L) any agreement obligating the Company to meet
another party's unspecified requirements for goods or services or obligating it
to purchase an unspecified amount of goods or services based on another party's
ability to supply them;
(M) any agreement under which the consequences of a
default or termination could have a material adverse effect on the business,
financial condition, operations, results of operations or future prospects of
the Company; or
(N) any other agreement (or group of related
agreements) the performance of which involves consideration in excess of
$10,000.
(ii) All material claims, deposits, causes of action, choses in
action, rights of recovery, rights of setoff and rights of recoupment of the
Company.
(iii) All material franchises, approvals, Permits, licenses,
Orders, registrations, certificates, variances and similar rights of the Company
(all of which are in full force and effect).
(iv) Each item of Intellectual Property owned by the Company or
which is used by the Company in its business and, in each case where the Company
is not the owner, the owner of the Intellectual Property.
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(v) The name of each bank or other financial institution or
entity in which the Company has an account or safe deposit box (with the
identifying account number or symbol) and the names of all persons authorized to
draw thereon or to have access thereto.
The Shareholder has delivered to PentaStar a correct and complete copy of
each written agreement and a written summary setting forth the terms and
conditions of each oral agreement referred to in Section 3.1(h)(i). With respect
to each such agreement: (A) the agreement is legal, valid, binding, enforceable
and in full force and effect; (B) the agreement will continue to be legal,
valid, binding, enforceable and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby; (C) neither
the Company nor, to the best knowledge of the Shareholder, any other party is in
breach or default, and, to the best knowledge of the Shareholder, no event has
occurred which, with notice or lapse of time, would constitute a breach or
default, or permit termination, modification or acceleration under the
agreement; and (D) to the best knowledge of the Shareholder, no party has
repudiated any provision of the agreement.
(i) Litigation; Compliance with Applicable Laws and Rights.
(i) There is no outstanding Order against, nor, except as set
forth on Exhibit 3.1(i)(i), is there any litigation, proceeding, arbitration or
investigation by any Governmental Authority or other Person pending or, to the
best knowledge of the Shareholder, threatened against, the Company, its assets
or its business or relating to the transactions contemplated by this Agreement,
nor is there any basis for any such action.
(ii) To the best knowledge of the Shareholder, except as set
forth on Exhibit 3.1(i)(ii), neither the Company nor the Company's assets are in
violation of any applicable Legal Requirement or Right. The Company has not
received notice from any Governmental Authority or other Person of any violation
or alleged violation of any Legal Requirement or Right, and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand or notice
has been filed or commenced or is pending or, to the best knowledge of the
Shareholder, threatened against, the Company alleging any such violation.
(j) Notes and Accounts Receivable. The notes and accounts receivable of
the Company reflected on its Latest Balance Sheet, and all notes and accounts
receivable arising on or prior to the Closing Date, arose and will arise from
bona fide transactions by the Company in the ordinary course of business and are
valid receivables with trade customers subject to no setoffs or counterclaims.
(k) Product Quality, Warranty and Liability. All services and products
sold, leased, provided or delivered by the Company to customers on or prior to
the Closing Date conform to applicable contractual commitments, express and
implied warranties, product and service specifications and quality standards,
and, to the best knowledge of the Shareholder, there is no basis for any
Liability for replacement or repair thereof or other damages in connection
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18
therewith. No service or product sold, leased, provided or delivered by the
Company to customers on or prior to the Closing is subject to any guaranty,
warranty or other indemnity beyond the applicable standard terms and conditions
of sale or lease. To the best knowledge of the Shareholder, the Company has no
Liability and there is no basis for any Liability arising out of any injury to a
Person or property as a result of the ownership, possession, provision or use of
any service or product sold, leased, provided or delivered by the Company on or
prior to the Closing Date. All product or service liability claims that have
been asserted against the Company since January 1, 1996, whether covered by
insurance or not and whether litigation has resulted or not, other than those
listed and summarized on Exhibit 3.1(i)(i), are listed and summarized on Exhibit
3.1(k).
(l) Insurance. The Company has policies of insurance (i) covering risk
of loss on the Acquired Assets that are customary and reasonable for the
business, (ii) covering products and services liability and liability for fire,
property damage, personal injury and workers' compensation coverage, and (iii)
for business interruption, all, to the best knowledge of the Shareholder, with
responsible and financially sound insurance carriers in adequate amounts and in
compliance with governmental requirements and in accordance with good industry
practice. All such insurance policies are valid, in full force and effect and
enforceable in accordance with their respective terms and no party has
repudiated any provision thereof. All such policies will remain in full force
and effect until the Closing Date. Neither the Company nor any other party to
any such policy is in breach or default (including with respect to the payment
of premiums or the giving of notices) in the performance of any of their
respective obligations thereunder, and no event exists which, with the giving of
notice or the lapse of time or both, would constitute a breach, default or event
of default, or permit termination, modification or acceleration under any such
policy. There are no claims, actions, proceedings or suits arising out of or
based upon any of such policies nor, to the best knowledge of the Shareholder,
does any basis for any such claim, action, suit or proceeding exist. All
premiums have been paid on such policies as of the date of this Agreement and
will be paid on such policies through the Closing Date. The Company has been
covered during the five years prior to the date of this Agreement by insurance
in scope and amount customary and reasonable for the businesses in which it has
engaged during the aforementioned period. All claims made during such five-year
period with respect to any insurance coverage of the Company, other than those
described on Exhibit 3.1(k), are set forth on Exhibit 3.1(l).
(m) Pension and Employee Benefit Matters.
(i) Exhibit 3.1(m)(i) lists each Employee Benefit Plan that is an
Employee Welfare Benefit Plan (the "Company Welfare Plans"). As of the Closing
Date and for the preceding three years, neither the Company nor any ERISA
Affiliate has sponsored, maintained, contributed to, or has had any obligation
under any Employee Benefit Plan, other than the Company Welfare Plans. Correct
and complete copies of each Company Welfare Plan have been delivered to
PentaStar by the Shareholder.
(ii) Each Company Welfare Plan has been maintained and
administered in
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substantial compliance with its terms and with all applicable Legal
Requirements.
(iii) Exhibit 3.1(m)(iii) lists each employment, severance or
other similar contract, arrangement or policy and each plan or arrangement
(written or oral) providing for insurance coverage (including any self-insured
arrangements), workers' compensation, disability benefits, supplemental
unemployment benefits, vacation benefits, retirement benefits, deferred
compensation, profit sharing, bonuses, stock options, stock appreciation rights
or other forms of incentive compensation, reduced interest or interest free
loans, mortgages, relocation assistance or post-retirement insurance,
compensation or other benefits that: (A) is not an Employee Benefit Plan; (B) is
entered into, maintained or contributed to, by the Company; and (C) covers any
employee or former employee of the Company or any relative thereof. Such
contracts, plans and arrangements as are described in this Section 3.1(m)(iii),
are hereinafter referred to collectively as the "Benefit Arrangements." Copies
and descriptions (including descriptions of the number and employment
classifications of employees covered by each such Benefit Arrangement) have been
delivered by the Shareholder to PentaStar and attached hereto as part of Exhibit
3.1(m)(iii). Each Benefit Arrangement has been maintained and administered in
substantial compliance with its terms and with the requirements prescribed by
any and all Legal Requirements that are applicable to each such Benefit
Arrangement.
(iv) No Company Welfare Plan is maintained in connection with any
trust described in Section 501(c)(9) of the Code.
(v) There have been no prohibited transactions with respect to
any Company Welfare Plan. No "Fiduciary" (as defined in Section 3(21) of ERISA)
has any Liability for breach of fiduciary duty or any other failure to act or
comply in connection with the administration or investment of the assets of any
such Company Welfare Plan. No action, suit, proceeding, hearing or investigation
with respect to the administration or the investment of the assets of any
Company Welfare Plan (other than routine claims for benefits) is pending or, to
the best knowledge of the Shareholder, is threatened. The Shareholder has no
knowledge of any basis for any such action, suit, proceeding, hearing or
investigation.
(vi) The Company does not maintain and has never maintained nor
contributes, or ever has contributed, or ever has been required to contribute,
to any Company Welfare Plan providing health or medical benefits for current or
future retired or terminated employees, their spouses or their dependents (other
than in accordance with Code Section 4980B). No condition exists that would
prevent the Company from amending or terminating any Company Welfare Plan or
Benefit Arrangement providing health or medical benefits in respect of any
active or retired employees of the Company.
(vii) Any Company Welfare Plan that is a "group health plan" (as
defined in Code Section 5000(b)(l)) has been administered in accordance with the
requirements of Part 6 of Subtitle B of Title I of ERISA and Code Section 4980B
and nothing done or omitted to be done in connection with the maintenance or
administration of any Company Welfare Plan that is a
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"group health plan" has made or will make the Company subject to any liability
under Title I of ERISA, excise Tax Liability under Code Section 4980B or has
resulted or will result in any loss of income exclusion for a participant under
Code Sections 105(h) or 106.
(viii) There is no contract, agreement, plan or arrangement
covering any employee or former employee of the Company that, individually or
collectively, could give rise to the payment of any amount that would not be
deductible pursuant to the terms of Section 280G or 162(a)(l) of the Code.
(ix) The Company has made, before the date of this Agreement, all
required contributions and premium payments under each Company Welfare Plan and
Benefit Arrangement for all completed fiscal years including contributions that
may not by law have otherwise been required to be made until the due date for
filing the Tax Return for any completed fiscal year.
(n) Employees and Labor. The Company acquires professional employment
services through a Client Service Agreement with Oasis Outsourcing, Inc.
("Oasis"). The Company is indemnified by Oasis for claims arising from employees
of such employee leasing company, their employment with the employee leasing
company, or their providing services to the Company relating to worker's
compensation, withholding tax and ERISA laws and actions taken by Oasis pursuant
to written policies. The Company has not received any notice, nor, to the best
knowledge of the Shareholder, is there any reason to believe that any executive
or key employee of the employee leasing company that leases employees to the
Company or any group of such employees has any plans to terminate his, her or
its employment with the Company. To the best knowledge of the Shareholder, no
such executive or key employee (including the Shareholder) is subject to any
agreement, obligation, Order or other legal hindrance that impedes or might
impede such executive or key employee from devoting his or her full business
time to the affairs of the Company prior to the Closing Date and, if such person
becomes an employee of PentaStar, to the affairs of PentaStar after the Closing
Date. The Company will not be required to give any notice under the Worker
Adjustment and Retraining Notification Act, as amended, (29 U.S.C.A. ss.2101 et
seq.) or any similar Legal Requirement as a result of this Agreement, the Other
Seller Agreements or the transactions contemplated hereby or thereby. The
Company does not have any labor relations problems or disputes, nor has the
Company experienced any strikes, grievances, claims of unfair labor practices or
other collective bargaining disputes. The Company is not a party to or bound by
any collective bargaining agreement, there is no union or collective bargaining
unit at the Company's facilities, and no union organization effort has been
threatened, initiated or is in progress with respect to any employees of the
Company.
(o) Customer and Service Provider Relationships. Exhibit 3.1(o)(i)(A)
lists each customer that individually or with its affiliates was, based on the
Company's revenues during the fiscal year ended December 31, 1998, one of the
Company's ten largest customers during such fiscal year or accounted for 2% or
more of the Company's revenues during such fiscal year (the "Principal
Customers"). Exhibit 3.1(o)(i)(B) lists each Person who is a service provider to
the Company as of the date of this Agreement (the "Principal Providers"). The
Company has good
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21
commercial working relationships with its Principal Customers and Principal
Providers and since December 31, 1998, no Principal Customer or Principal
Provider has cancelled or otherwise terminated its relationship with the
Company, materially decreased its purchases from or services supplied to the
Company, or threatened to take any such action. The Shareholder has no basis to
anticipate any problems with the Company's customer or service provider
relationships. To the best knowledge of the Shareholder, no Principal Customer
or Principal Provider has any plans to terminate their relationship with the
Company and the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby will not adversely affect the relationship
of the Company with any Principal Customer or Principal Provider prior to the
Closing Date or of PentaStar with any Principal Customer or Principal Provider
after the Closing Date.
(p) Environmental Matters. The Company is conducting and at all times
has conducted its business and operations, and has occupied, used and operated
the Premises and all other real property and facilities presently or previously
owned, occupied, used or operated by the Company, in compliance with all
Environmental Obligations and so as not to give rise to Liability under any
Environmental Obligations or to any impact on the Company's business or
activities. The Company has no Liability under any Environmental Obligation,
nor, to the best knowledge of the Shareholder, is there any basis for any such
Liability.
(q) Intellectual Property. The Company owns or has the legal right to
use each item of Intellectual Property required to be identified on Exhibit
3.1(h). To the best knowledge of the Shareholder, the continued operation of the
business of the Company as currently conducted will not interfere with, infringe
upon, misappropriate or conflict with any Intellectual Property rights of
another Person. To the best knowledge of the Shareholder, no other Person has
interfered with, infringed upon, misappropriated or otherwise come into conflict
with any Intellectual Property rights of the Company or any Intellectual
Property included in the Acquired Assets. Neither the Company nor any owner of
any Intellectual Property included in the Acquired Assets has granted any
license, sublicense or permission with respect to any Intellectual Property
owned or used in the Company's business. No claims are pending or, to the best
knowledge of the Shareholder, threatened, that the Company is infringing or
otherwise adversely affecting the rights of any Person with regard to any
Intellectual Property. To the best knowledge of the Shareholder, all of the
Intellectual Property that is owned by the Company is owned free and clear of
all Encumbrances and was not misappropriated from any Person, and all portions
of the Intellectual Property that are licensed by the Company are licensed
pursuant to valid and existing license agreements. The consummation of the
transactions contemplated by this Agreement will not result in the loss or
material diminution of any Intellectual Property or rights in Intellectual
Property.
(r) Year 0000 Xxxxxxxx. To the best knowledge of the Shareholder, the
computer software owned by the Company and all other Intellectual Property used
or held for use by the Company in its business accurately processes date/time
data (including calculating, comparing, and sequencing) from, into, and between
the twentieth and twenty-first centuries, and the years
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1999 and 2000 and leap year calculations and the date September 9, 1999 when
either (i) used as a standalone application, or (ii) integrated into or
otherwise used in conjunction with third party hardware, software, firmware and
data over which the Shareholder and the Company have no control ("Third Party
Products") with which such Company software or other Intellectual Property was
designated or intended to operate at the time such Company software was (i)
developed or (ii) first provided to the Company's customers, or tested by the
Company for such customers, whichever is later. Notwithstanding the foregoing,
the Company shall not be considered to be in breach of the representation and
warranty in the immediately preceding sentence if the failure of such Company
software to comply with such representation and warranty is attributable solely
to (x) a failure by any Third Party Product to accurately process date/time data
(including but not limited to, calculating, comparing, and sequencing) from,
into, and between the twentieth and twenty-first centuries, and the years 1999
and 2000 and leap year calculations and the date September 9, 1999; or (y) any
modification of the Company software by any party other than the Company (unless
such modification was made at the direction of the Company).
(s) Brokers' Fees. Except as set forth on Exhibit 3.1(s), the Company
does not have, and will not have as a result of the consummation of this
Agreement, any Liability to pay any fees or commissions to any broker, finder or
agent with respect to the transactions contemplated by this Agreement.
(t) Guaranties. The Company is not a guarantor or otherwise liable for
any Liability (including indebtedness for borrowed money) of any other Person.
Except as set forth on Exhibit 3.1(t), no Person is a guarantor or otherwise
liable for any Liability (including indebtedness for borrowed money) of the
Company.
(u) Disclosure. None of the documents or information provided to
PentaStar by the Company, the Shareholder or any agent or employee thereof in
the course of PentaStar's due diligence investigation and the negotiation of
this Agreement and Sections 3.1, 3.2 and 3.3 of this Agreement and the
disclosure Exhibits referred to therein, including the financial statements
referred to above in Section 3.1, contains any untrue statement of any material
fact or omit to state a material fact necessary in order to make the statements
contained herein or therein not misleading. There is no fact which materially
adversely affects the business, condition, affairs or operations of the Company
or any of its properties or assets which has not been set forth in this
Agreement or such Exhibits, including such financial statements.
Nothing in the disclosure Exhibits referred to in Section 3.1 shall be
deemed adequate to disclose an exception to a representation or warranty made
herein unless the applicable disclosure Exhibit identifies the exception with
particularity and describes the relevant facts in reasonable detail. Without
limiting the generality of the foregoing, the mere listing (or inclusion of a
copy) of a document or other item shall not be deemed adequate to disclose an
exception to a representation or warranty made herein (unless the representation
or warranty has to do with the existence of the document or other item itself).
Each of the Company and the Shareholder
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acknowledges and agrees that the fact that it or he has made disclosures
pursuant to Section 3.1, 3.2 or 3.3 or otherwise of matters, or did not have
knowledge of matters, which result in Adverse Consequences to PentaStar or the
Surviving Corporation shall not relieve the Shareholder of his obligation
pursuant to Section 7 to indemnify and hold PentaStar harmless from all Adverse
Consequences.
3.2. Additional Representations and Warranties of the Shareholder Relating
to Underwriting. The Shareholder represents and warrants to PentaStar that the
statements contained in Exhibit 3.2 will be correct and complete as of the
Closing Date and may be relied upon by PentaStar in making related
representations and warranties to the underwriters of PentaStar's IPO.
3.3. Representations and Warranties of the Shareholder. The Shareholder
represents and warrants to PentaStar that the statements contained in this
Section 3.3 are correct and complete as of the date of this Agreement and will
be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 3.3).
(a) Investment Representations. (i) The Shareholder is acquiring the
shares of PentaStar Common Stock to be issued to the Shareholder pursuant to the
Transaction (the "PentaStar Shares") for the Shareholder's own account and not
on behalf of any other Person; the Shareholder is aware and acknowledges that
the PentaStar Shares have not been registered under the Securities Act, or
applicable state securities laws, and may not be offered, sold, assigned,
exchanged, transferred, pledged or otherwise disposed of unless so registered
under the Securities Act and applicable state securities laws or an exemption
from the registration requirements thereof is available; (ii) the Shareholder
(or, if the Shareholder is not an "accredited investor" as defined in Rule
501(a) of Regulation D promulgated under the Securities Act, the Shareholder
through the Shareholder's purchaser representative ("Purchaser Representative")
as duly designated pursuant to documentation delivered and reasonably
satisfactory to PentaStar on or before the execution of this Agreement (the
"Purchaser Representative Documents")) has been furnished all information that
the Shareholder (and the Shareholder's Purchaser Representative, if the
Shareholder is not an "accredited investor") deems necessary to enable the
Shareholder (and the Shareholder's Purchaser Representative, if the Shareholder
is not an "accredited investor") to evaluate the merits and risks of an
investment in PentaStar (including without limitation the draft dated August 13,
1999 of PentaStar's Registration Statement on SEC Form SB-2 relating to the IPO
(the "Registration Statement") and the other information described on Exhibit
3.3(a)(ii); the Shareholder (and the Shareholder's Purchaser Representative if
the Shareholder is not an "accredited investor") has had a reasonable
opportunity to ask questions of and receive answers from PentaStar concerning
PentaStar, the PentaStar Shares and any and all matters relating to the
transactions described herein or in the Registration Statement, including,
without limitation, the background and experience of the current and proposed
officers and directors of PentaStar, the plans for the operations of the
business of PentaStar, the business, operations and financial condition of ICM
Communications Integration, Inc. and any plans for additional acquisitions, and
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all such questions, if any, have been answered to the full satisfaction of the
Shareholder (and the Shareholder's Purchaser Representative, if the Shareholder
is not an "accredited investor"); (iii) no Person other than the Shareholder has
(i) any rights in and to the PentaStar Shares, which rights were obtained
through or from the Shareholder; or (ii) any rights to acquire the PentaStar
Shares, which rights were obtained through or from the Shareholder; (iv) the
Shareholder (or the Shareholder's Purchaser Representative, if the Shareholder
is not an "accredited investor") has such knowledge and expertise in financial
and business matters (including knowledge and expertise in the business and
proposed business of PentaStar) that the Shareholder (or the Shareholder's
Purchaser Representative, if the Shareholder is not an "accredited investor") is
capable of evaluating the merits and risks involved in an investment in the
PentaStar Shares; and the Shareholder is financially able to bear the economic
risk of the investment in the PentaStar Shares, including a total loss of such
investment; (v) the Shareholder represents that he has adequate means of
providing for his current needs and has no need for liquidity in his investment
in the PentaStar Shares; the Shareholder has no reason to anticipate any
material change in his financial condition for the foreseeable future; (vi) the
Shareholder is aware that the acquisition of the PentaStar Shares is an
investment involving a risk of loss and that there is no guarantee that the
Shareholder will realize any gain from this investment, and that the Shareholder
could lose the total amount of his investment; (vii) the Shareholder understands
that no United States federal or state agency has made any finding or
determination regarding the fairness of the offering of the PentaStar Shares for
investment, or any recommendation or endorsement of the offering of the
PentaStar Shares; (viii) the Shareholder is acquiring the PentaStar Shares for
investment, with no present intention of dividing or allowing others to
participate in such investment or of reselling, or otherwise participating,
directly or indirectly, in a distribution of PentaStar Shares, and shall not
make any sale, transfer or pledge thereof without registration under the
Securities Act and any applicable securities laws of any state, unless an
exemption from registration is available, as established to the reasonable
satisfaction of PentaStar, by opinion of counsel or otherwise; (ix) except as
set forth herein, no representations or warranties have been made to the
Shareholder (or the Shareholder's Purchaser Representative, if the Shareholder
is not an "accredited investor") by PentaStar or any agent, employee or
affiliate of PentaStar, and in entering into this transaction the Shareholder is
not relying upon any information, other than from the results of independent
investigation by the Shareholder (or the Shareholder's Purchaser Representative,
if the Shareholder is not an "accredited investor"); and (x) the Shareholder
understands that the PentaStar Shares are being offered to the Shareholder in
reliance on specific exemptions from the registration requirements of United
States federal and state securities laws and that PentaStar is relying upon the
truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of the Shareholder set forth herein (and in
the Purchaser Representative Documents, if applicable) in order to determine the
applicability of such exemptions and the suitability of the Shareholder to
acquire the PentaStar Shares. The Shareholder is an "accredited investor" as
defined in Rule 501(a) of Regulation D promulgated under the Securities Act. The
Shareholder's state of residency is Colorado.
All the certificates representing PentaStar Shares shall bear the following
legend:
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THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") NOR UNDER ANY STATE SECURITIES LAWS AND CAN
NOT BE TRANSFERRED, SOLD, ASSIGNED OR HYPOTHECATED UNTIL EITHER (I) A
REGISTRATION STATEMENT WITH RESPECT THERETO IS DECLARED EFFECTIVE UNDER THE ACT
AND APPLICABLE STATE SECURITIES LAWS OR (II) THE COMPANY RECEIVES AN OPINION OF
COUNSEL TO THE COMPANY OR OTHER COUNSEL TO THE HOLDER OF SUCH SHARES, WHICH
OPINION IS SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH SECURITIES MAY
BE TRANSFERRED, SOLD, ASSIGNED OR HYPOTHECATED WITHOUT REGISTRATION UNDER THE
ACT OR APPLICABLE STATE SECURITIES LAWS.
3.4. Representations and Warranties of PentaStar. PentaStar represents and
warrants to the Shareholder that the statements contained in this Section 3.4
are correct and complete as of the date of this Agreement and will be correct
and complete as of the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement throughout this
Section 3.4).
(a) Organization, Good Standing, Power, Etc. PentaStar is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and is qualified to do business as a foreign corporation and
is in good standing in the State of Colorado, and all other jurisdictions in
which the nature of the business conducted by it or the properties owned, leased
or operated by it make such qualification necessary. This Agreement and the
Other PentaStar Agreements and the transactions contemplated hereby and thereby
have been duly approved by all requisite corporate action. PentaStar has full
corporate power and authority to execute, deliver and perform this Agreement and
the Other PentaStar Agreements, and this Agreement constitutes, and the Other
PentaStar Agreements will when executed and delivered constitute, the legal,
valid and binding obligations of PentaStar, and shall be enforceable in
accordance with their respective terms against PentaStar. The copies of the
articles of incorporation (certified by the Secretary of State of Delaware),
bylaws and minute book of PentaStar are attached as Exhibit 3.4(a) are complete
and correct and PentaStar is not in default under or in violation of any
provision of its articles of incorporation or bylaws.
(b) Ownership and Capitalization.
(i) As of the date hereof, the authorized, issued and outstanding
shares of the capital stock of PentaStar are as set forth on Exhibit 3.4(b)(i).
Upon the Closing, the authorized, issued and outstanding shares of capital stock
of PentaStar will be as set forth in the Prospectus included in the Registration
Statement at the time the Registration Statement is declared effective by the
SEC. All authorized or outstanding stock or security convertible into or
exchangeable for, or any authorized or outstanding option, warrant or other
right to subscribe for or to purchase, or convert any obligation into, any
unissued shares of PentaStar's capital stock or any treasury stock is identified
on Exhibit 3.4(b)(i).
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(ii) At the time of issuance thereof and delivery to the
Shareholder, the PentaStar Shares to be delivered to the Shareholder pursuant to
this Agreement will constitute valid, duly authorized and legally issued shares
of PentaStar's Common Stock, and will be fully paid and nonassessable. Such
PentaStar Shares shall at the time of such issuance and delivery be free and
clear of any Encumbrances of any kind or character, other than those arising
under applicable federal and state securities laws, under this Agreement or
under any Other Seller Agreement to which the Shareholder is a party.
(c) No Violation of Agreements, Etc. The execution, delivery and
performance of this Agreement and the Other PentaStar Agreements, and the
consummation of the transactions contemplated hereby and thereby will not (i)
violate any Legal Requirement to which PentaStar is subject or any provision of
the certificate of incorporation or bylaws of PentaStar or (ii) violate, with or
without the giving of notice or the lapse of time or both, or conflict with or
result in the breach or termination of any provision of, or constitute a default
under, or give any Person the right to accelerate any obligation under, or
result in the creation of any Encumbrance upon any properties, assets or
business of PentaStar pursuant to any indenture, mortgage, deed of trust, lien,
lease, license, agreement, instrument or other arrangement to which PentaStar is
a party or which PentaStar or any of its assets and properties is bound or
subject. Except for notices and consents that will be given or obtained by
PentaStar prior to the Closing, PentaStar does not need to give any notice to,
make any filing with or obtain any authorization, consent or approval of any
Governmental Authority or other Person in order for the parties to consummate
the transactions contemplated by this Agreement.
(d) At the time that the Registration Statement is declared effective
by the SEC, the Registration Statement will not contain any untrue statement of
material fact or omit to state a material fact necessary in order to make the
statements contained therein not misleading. There is no fact which materially
adversely affects the business, conditions, affairs or operations of PentaStar
or any of its properties or assets which will not be set forth in the
Registration Statement.
3.5. Representations and Warranties of Acquiror. Acquiror represents and
warrants to the Company and the Shareholder that the statements contained in
this Section 3.5 are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 3.5).
(a) Organization, Good Standing, Power, Etc. Acquiror is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. This Agreement and the transactions contemplated hereby and
thereby have been duly approved by all requisite corporate action of Acquiror.
Acquiror has full corporate power and authority to execute, deliver and perform
this Agreement, and this Agreement constitutes the legal, valid and binding
obligations of Acquiror, and shall be enforceable in accordance with its terms
against
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Acquiror. The copies of the articles of incorporation (certified by the
Secretary of State of Delaware), bylaws and minute book of Acquiror are attached
as Exhibit 3.5(a) are complete and correct and Surviving Corporation is not in
default under or in violation of any provision of its articles of incorporation
or bylaws.
(b) Ownership and Capitalization.
(i) As of the date hereof, all of the authorized, issued and
outstanding shares of the capital stock of Acquiror are owned by PentaStar.
(c) No Violation of Agreements, Etc. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby and thereby will not (i) violate any Legal Requirement to
which Acquiror is subject or any provision of the certificate of incorporation
or bylaws of Acquiror or (ii) violate, with or without the giving of notice or
the lapse of time or both, or conflict with or result in the breach or
termination of any provision of, or constitute a default under, or give any
Person the right to accelerate any obligation under, or result in the creation
of any Encumbrance upon any properties, assets or business of Acquiror pursuant
to, any indenture, mortgage, deed of trust, lien, lease, license, agreement,
instrument or other arrangement to which Acquiror is a party or which Acquiror
or any of its assets and properties is bound or subject. Except for notices and
consents that will be given or obtained by Acquiror prior to the Closing,
Acquiror does not need to give any notice to, make any filing with or obtain any
authorization, consent or approval of any Governmental Authority or other Person
in order for the parties to consummate the transactions contemplated by this
Agreement.
3.6. Survival of Representations. The representations and warranties
contained in Sections 3.1, 3.2, 3.3, 3.4 and 3.5 and the Liabilities of the
parties with respect thereto shall survive any investigation thereof by the
parties and shall survive the Closing for four years, except that the
Liabilities of the Shareholder with respect to the representations and
warranties set forth in Sections 3.1(a), 3.1(b), 3.1(c), 3.1(f), 3.1(m), 3.1(p),
3.1(q) and 3.1(u), 3.2 and 3.3 and the Liabilities of PentaStar and Acquiror
with respect to the representations and warranties set forth in Sections 3.4(a)
and 3.4(b), and Sections 3.5(a), 3.5(b) and 3.5(d), respectively, shall survive
without termination.
3.7. Representations as to Knowledge. The representations and warranties
contained in Section 3 hereof will in each and every case where an exercise of
discretion or a statement to the "best knowledge," "best of knowledge" or
"knowledge" is required on behalf of any party to this Agreement be deemed to
require that such exercise of discretion or statement be in good faith after
reasonable investigation (including, in the case of the Shareholder, inquiry of
the applicable employees of the Company), with due diligence, to the best
efforts of such party and be exercised always in a reasonable manner and within
reasonable times.
4. Pre-Closing Covenants. The parties agree as follows with respect to the
period between the execution of this Agreement and the Closing.
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4.1. General. Each of the parties will use its reasonable best efforts to
take all actions necessary, proper or advisable in order to consummate and make
effective the transactions contemplated by this Agreement (including the
satisfaction, but not the waiver, of the closing conditions set forth in Section
6) and the other agreements contemplated hereby. Without limiting the foregoing,
the Shareholder will, and will cause the Company to, give any notices, make any
filings and obtain any consents, authorizations or approvals needed to
consummate the transactions contemplated by this Agreement.
4.2. Operation and Preservation of Business. The Shareholder will not cause
or permit the Company to engage in any practice, take any action or enter into
any transaction outside the ordinary course of its business; provided, however,
that in no event will any action be taken or fail to be taken or any transaction
be entered into which would result in a breach of any representation, warranty
or covenant of the Company or the Shareholder. The Shareholder will cause the
Company to keep its business and properties, including its current operations,
physical facilities, working conditions and relationships with customers,
service providers, lessors, licensors and employees intact.
4.3. Full Access. The Shareholder will cause the Company to permit
PentaStar and its agents to have full access at all reasonable times, and in a
manner so as not to interfere with the normal business operations of the
Company, to all premises, properties, personnel, books, records (including Tax
records), contracts and documents of or pertaining to the Company.
4.4. Notice of Developments. The Shareholder will give prompt written
notice to PentaStar of any material development which occurs after the date of
this Agreement and before the Closing and affects the business, assets,
Liabilities, financial condition, operations, results of operations, future
prospects, representations, warranties, covenants or disclosure Exhibits of the
Company. No such written notice, however, will be deemed to amend or supplement
any disclosure Exhibit or to prevent or cure any misrepresentation, breach of
warranty or breach of covenant.
4.5. Exclusivity. The Shareholder will not and the Shareholder will not
cause or permit the Company to (a) solicit, initiate or encourage the submission
of any proposal or offer from any Person relating to the acquisition of any
capital stock or other voting securities, or any portion of the assets of, the
Company (including any acquisition structured as a merger, consolidation or
share exchange) or (b) participate in any discussions or negotiations regarding,
furnish any information with respect to, assist or participate in or facilitate
in any other manner any effort or attempt by any Person to do or seek any of the
foregoing. The Shareholder will not vote shares of the Company's stock in favor
of any such transaction. The Shareholder will notify PentaStar immediately if
any Person makes any proposal, offer, inquiry or contact with respect to any of
the foregoing.
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4.6. Announcements. Prior to the Closing, no party shall issue any press
release or make any public announcement relating to the subject matter of this
Agreement without the prior written approval of the other parties.
4.7. Closing Date Liabilities. Effective as of immediately prior to the
Closing Date, the Shareholder assumes, and agrees to pay, all Closing Date
Liabilities in excess of the amounts set forth on the Estimated Closing Date
Balance Sheet without further action by the Shareholder, the Company or any
other Person.
5. Post-Closing Covenants. The parties agree as follows with respect to the
period following the Closing.
5.1. Further Assurances. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other party
reasonably may request, all at the sole cost and expense of the requesting party
(unless the requesting party is entitled to indemnification therefor under
Section 7).
5.2. Transition. The Shareholder will not take any action at any time that
is designed or intended to have the effect of discouraging any customer,
supplier, lessor, licensor or other business associate of the Company from
establishing or continuing a business relationship with PentaStar after the
Closing except where such action is approved in writing by PentaStar.
5.3. Cooperation. In the event and for so long as any party actively is
contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand in connection with (a) any
transaction contemplated by this Agreement or (b) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act or transaction on or prior to the Closing Date
involving any of the Acquired Assets or the Company's business, each of the
other parties will cooperate with such party and its counsel in the contest or
defense, make available their personnel, and provide such testimony as shall be
reasonably necessary in connection with the contest or defense, all at the sole
cost and expense of the contesting or defending party (unless the contesting or
defending party is entitled to indemnification therefor under Section 7).
5.4. Confidentiality. Each party will treat and hold as confidential all
Confidential Information concerning the other parties and its or his business or
assets, refrain from using any such Confidential Information and deliver
promptly to the other or destroy, at the request and option of the disclosing
party, all of such Confidential Information in its or his possession.
5.5. Post-Closing Announcements. Following the Closing, the Shareholder
will not issue any press release or make any public announcement relating to the
subject matter of this Agreement without the prior written approval of
PentaStar.
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5.6. Financial Statements. The Shareholder will, upon request of PentaStar,
cooperate with PentaStar and render such assistance to PentaStar and its
accountants as may be required to produce such historical and on-going financial
statements and audits as PentaStar may request, all at the sole cost and expense
of PentaStar, but without additional consideration to the Shareholder. The
Shareholder acknowledges that PentaStar may be required by applicable law to
include audited financial statements with respect to the business of the Company
in reports filed with governmental agencies and that the inability to audit the
financial statements as of the Closing Date promptly after the Closing could
have a material adverse effect on PentaStar.
5.7. Satisfaction of Liabilities.
(a) Promptly following the Closing, the Shareholder will assume
Liability for, and pay, all Closing Date Liabilities in excess of the amounts
set forth on the Estimated Closing Date Balance Sheet or the Closing Date
Balance Sheet, as applicable, and any Taxes attributable to the transactions
contemplated by this Agreement.
(b) The Shareholder, at his expense, promptly will take or cause to be
taken any action necessary to remedy any failure of the Premises or the acquired
business to comply at the Closing Date with any Legal Requirement, upon receipt
of notice from PentaStar at any time.
(c) PentaStar will pay and perform, as and when due (except to the
extent the validity thereof or the Liability therefor is being contested by
PentaStar), the Retained Liabilities.
5.8. Repurchase of Unpaid Receivables. The Shareholder guarantees that the
Closing Accounts Receivables, net of any reserve established in accordance with
GAAP on the Latest Balance Sheet, will be fully paid to PentaStar in accordance
with their terms at their recorded amounts not later than 180 days from the
Closing Date. Upon demand by PentaStar at any time after 180 days from the
Closing Date, the Shareholder will pay to PentaStar the full amount of any
unpaid Closing Accounts Receivable which is the subject of such demand. Upon
such payment to PentaStar, the Closing Accounts Receivable which are so paid for
by the Shareholder shall, without further action of any party, become the
property of the Shareholder. From the Closing until 180 days after the Closing
Date, PentaStar will apply its standard accounts receivable collection
procedures to the Closing Accounts Receivables; provided, however, that
PentaStar will not be required to institute suit, utilize third-party collection
agencies or other agents or take other extraordinary collection actions with
respect to the Closing Accounts Receivables; and, provided further, that any
failure of any collection activities of PentaStar or any such collection agency
or other agent will not relieve the Shareholder from his guarantee of the
Closing Accounts Receivables as described in this Section 5.8.
5.9. Termination of Obligations. Effective as of the Closing Date, neither
the Company nor PentaStar shall have any Liability to the Shareholder or any
relative or affiliate thereof or of the Company, except as otherwise provided in
this Agreement or in an Other Seller Agreement.
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Effective as of the Closing Date, the Shareholder shall not have any Liability
to the Company or PentaStar, except as otherwise provided in this Agreement or
in an Other Seller Agreement.
5.10. Transfer Restrictions. Unless otherwise agreed by PentaStar, except
for transfers to (a) immediate family members who agree to be bound by the
restrictions set forth in this Section 5.10 (and a copy of such agreement is
furnished to PentaStar prior to the transfer), (b) trusts, limited partnerships
or other estate planning entities for the benefit of the Shareholder or family
members of the Shareholder, the trustees, partners or other persons having
authority to bind the trust, limited partnership or other estate planning entity
of which agree to be bound by such restrictions (and a copy of such agreement is
furnished to PentaStar prior to the transfer), or (c) any charitable
organization that qualifies for receipt of charitable contributions under
Section 170(c) of the Code and such organization agrees to be bound by such
restrictions, the Shareholder will not sell, assign, exchange, transfer, pledge,
or otherwise dispose of at any time prior to the date which is 18 months after
the Closing of any shares of PentaStar Shares received by the Shareholder as
part of the Purchase Price. Thereafter, up to 33.33% of the PentaStar Shares
received at the Closing as part of the Purchase Price by the Shareholder may be
resold at any time, and an additional 16.67% of the PentaStar Shares received at
the Closing as part of the Purchase Price by the Shareholder may be resold by
the Shareholder beginning 24 months after the Closing. Any remaining PentaStar
Shares, other than those subject to the Escrow Agreement, may not be sold until
the earlier to occur of (x) sale of all or substantially all of the assets or
outstanding shares of PentaStar or (y) five years after the Closing Date.
Certificates for the PentaStar Shares delivered to the Shareholder pursuant to
the Agreement will bear a legend substantially in the form set forth below as
long as applicable:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THAT CERTAIN AGREEMENT
AND PLAN OF MERGER DATED AS OF AUGUST 13, 1999 (THE "AGREEMENT"), BY AND AMONG
THE ISSUER AND OC MERGERCO 1, INC., ICM COMMUNICATIONS INTEGRATION, INC. AND THE
SHAREHOLDER OF ICM COMMUNICATIONS INTEGRATION, INC. PRIOR TO THE EXPIRATION OF
THE HOLDING PERIOD SET FORTH IN THE AGREEMENT, SUCH SHARES MAY NOT BE SOLD,
ASSIGNED, EXCHANGED, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF WITHOUT THE
WRITTEN CONSENT OF THE ISSUER, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE
EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE, TRANSFER, PLEDGE OR OTHER
DISPOSITION WHICH VIOLATES THE AGREEMENT. UPON THE WRITTEN REQUEST OF THE HOLDER
OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND
ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) WHEN THE HOLDING PERIOD HAS
EXPIRED.
PentaStar shall issue separate certificates to the Shareholder representing the
shares of PentaStar Shares subject to each of the three periods of restriction
contemplated by this Section 5.10.
5.11. Underwriter and Securities Act Restrictions. The restrictions set
forth in Section 5.10
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shall be in addition to any restrictions on transfer imposed by the underwriters
in connection with the IPO (not to exceed eighteen months) and by the Securities
Act. The Shareholder also agrees to comply with such restrictions.
6. Conditions to Closing.
6.1. Conditions to Obligation of PentaStar. The obligation of PentaStar to
consummate the transactions contemplated by this Agreement is subject to
satisfaction of the following conditions:
(a) the Shareholder's and the Company's representations and warranties
shall be correct and complete at and as of the Closing Date and the Closing and
any written notices delivered to PentaStar pursuant to Section 4.5 and the
subject matter thereof shall be satisfactory to PentaStar;
(b) the Shareholder and the Company shall have performed and complied
with all of their covenants hereunder through the Closing;
(c) the Shareholder and the Company shall have given all notices and
procured, or shall have caused the Company to procure, all of the third-party
consents, authorizations and approvals required to consummate the transactions
contemplated by this Agreement, including the Transaction, all in form and
substance reasonably satisfactory to PentaStar;
(d) no action, suit or proceeding shall be pending or threatened before
any Governmental Authority or any other Person wherein an unfavorable Order
would (i) prevent consummation of any of the transactions contemplated by this
Agreement, (ii) cause any of the transactions contemplated by this Agreement to
be rescinded following consummation or (iii) affect adversely the right of the
Acquiror to own the Company or the Acquired Assets and conduct the Company's
business, and no such Order shall be in effect;
(e) there shall have been no material adverse change in the Company,
the Acquired Assets or the Company's business between the date of execution of
this Agreement and the Closing;
(f) no Person other than the Shareholder shall hold any beneficial or
legal ownership interest in the equity of the Company;
(g) the LLC shall have been liquidated and dissolved;
(h) the Shareholder shall have delivered to PentaStar (i) a certificate
to the effect that each of the conditions specified above in Sections 6.1(a)
through (g) is satisfied in all respects, (ii) a good standing certificate,
dated within 10 days of the Closing, from the Secretary of State of the State of
Colorado, and (iii) a certificate setting forth the amount of the Retained
Liabilities (other than the Retained Liabilities described in clause (a) of the
definition thereof).
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(i) the Other Seller Agreements shall have been executed and delivered
by the Shareholder, as applicable;
(j) PentaStar shall have received from counsel to the Shareholder an
opinion in form and substance as set forth in Exhibit 6.1(j) addressed to
PentaStar and the underwriters of the IPO dated as of the Closing;
(k) the Registration Statement shall have been declared effective by
the SEC and not be subject to any stop order proceeding and the underwriters
named therein shall have agreed to acquire and shall have acquired PentaStar's
Common Stock on a firm commitment basis on terms satisfactory to PentaStar;
(l) PentaStar shall have received from the Shareholder or the Company
evidence of the termination of all Encumbrances filed against the Acquired
Assets;
(m) PentaStar shall have received the resignations, effective as of the
Closing, of each director and officer of the Company;
(n) stock certificates representing the Shares duly endorsed in blank
or accompanied by stock powers duly executed in blank, shall have been delivered
by the Shareholder to PentaStar;
(o) the Company shall have delivered to PentaStar possession and
control of the Company and the Acquired Assets, including, without limitation,
all stock certificate books, minute books, corporate seals, and all other
corporate and financial records of the Company;
(p) the Shareholder and the Company shall have delivered, or caused the
Company to deliver, to PentaStar such other instruments, certificates and
documents as are reasonably requested by PentaStar in order to consummate the
transactions contemplated by this Agreement, all in form and substance
reasonably satisfactory to PentaStar; and
(q) the Shareholder shall have entered into the Escrow Agreement.
PentaStar may waive any condition specified in this Section 6.1 at or prior to
the Closing.
6.2. Conditions to Obligation of the Shareholder. The obligation of the
Shareholder to consummate the transactions contemplated by this Agreement is
subject to satisfaction of the following conditions:
(a) PentaStar's and Acquiror's representations and warranties shall be
correct and complete at and as of the Closing Date and the Closing;
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(b) PentaStar shall have performed and complied with all of its
covenants hereunder through the Closing Date;
(c) PentaStar shall have delivered to the Shareholder a certificate to
the effect that each of the conditions specified above in Sections 6.2(a) and
(b) is satisfied in all respects;
(d) the Other PentaStar Agreements shall have been executed and
delivered by PentaStar;
(e) the Shareholder shall have received from counsel to PentaStar an
opinion in form and substance as set forth in Exhibit 6.2(e), addressed to the
Shareholder and dated as of the Closing;
(f) PentaStar shall have paid and deposited the Purchase Price pursuant
to Section 2; and
(g) the Registration Statement shall have been declared effective by
the SEC and not be subject to any stop order proceeding and the underwriters
named therein shall have agreed to acquire and shall have acquired PentaStar's
Common Stock on a firm commitment basis on terms satisfactory to PentaStar.
The Shareholder may waive any condition specified in this Section 6.2 at or
prior to the Closing.
7. Remedies for Breaches of this Agreement.
7.1. Indemnification Provisions for Benefit of PentaStar and the Company.
(a) If the Shareholder breaches (or if any Person other than PentaStar
alleges facts that, if true, would mean the Shareholder has breached) any of the
representations or warranties of the Shareholder or the Company contained herein
and PentaStar gives notice thereof to the Shareholder within the Survival
Period, or if the Shareholder breaches any covenants of the Shareholder or the
Company contained herein or any representations, warranties or covenants of the
Shareholder contained in any Other Seller Agreement and PentaStar gives notice
thereof to the Shareholder, then the Shareholder agrees to indemnify and hold
harmless PentaStar and the Surviving Corporation from and against any Adverse
Consequences PentaStar or the Surviving Corporation may suffer resulting from,
arising out of, relating to or caused by any of the foregoing regardless of
whether the Adverse Consequences are suffered during or after the Survival
Period. In determining whether there has been a breach of any representation or
warranty contained in Section 3.1, 3.2 and 3.3, and in determining for purposes
of the preceding sentence the amount of Adverse Consequences suffered by
PentaStar or the Surviving Corporation, such representations and warranties
shall not be qualified (other than by (A) the reference to "knowledge" set forth
in the last sentence of Section 3.1(o) and (B) the references to "material" set
forth in Section 3.1(u)) by "material," "materiality," "in all material
respects," "best
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knowledge," "best of knowledge" or "knowledge" or words of similar import, or by
any phrase using any such terms or words. The Shareholder also agrees to
indemnify and hold harmless PentaStar and the Surviving Corporation from and
against any Adverse Consequences PentaStar or the Surviving Corporation may
suffer which result from, arise out of, relate to or are caused by (i) any
Liability of the Company or the Shareholder not included in the Retained
Liabilities (other than Closing Date Liabilities in an amount not exceeding the
amount of the Closing Date Liabilities set forth on the Estimated Closing Date
Balance Sheet or the Closing Date Balance Sheet, as applicable) or (ii) any
condition, circumstance or activity existing prior to the Closing Date which
relates to any Legal Requirement or any act or omission of the Company or the
Shareholder or any predecessor with respect to, or any event or circumstance
related to, the Company's, the Shareholder's or any predecessor's ownership, use
or operation of any of the Acquired Assets, the Premises or any other assets or
properties or the conduct of its or their business, regardless, in the case of
(i) or (ii), of (A) whether or not such Liability, act, omission, event,
circumstance or matter was known or disclosed to PentaStar, was disclosed on any
Exhibit hereto or is a matter with respect to which the Shareholder did or did
not have knowledge, (B) when such Liability, act, omission, event, circumstance
or matter occurred, existed, occurs or exists and (C) whether a claim with
respect thereto was asserted before or is asserted after the Closing Date. If
any dispute arises concerning whether any indemnification is owing which cannot
be resolved by negotiation among the parties within 30 days of notice of claim
for indemnification from the party claiming indemnification to the party against
whom such claim is asserted, the dispute will be resolved by arbitration
pursuant to this Agreement.
7.2. Indemnification Provisions for Benefit of the Shareholder. If
PentaStar breaches (or if any Person other than the Shareholder alleges facts
that, if true, would mean PentaStar has breached) any of its representations or
warranties contained herein and the Shareholder gives notice of a claim for
indemnification against PentaStar within the Survival Period, or if PentaStar
breaches any of its covenants contained herein or any of its representations,
warranties or covenants contained in any Other PentaStar Agreement and the
Shareholder gives notice thereof to PentaStar, then PentaStar agrees to
indemnify and hold harmless the Shareholder from and against any Adverse
Consequences the Shareholder may suffer which result from, arise out of, relate
to, or are caused by the breach or alleged breach, regardless of whether the
Adverse Consequences are suffered during or after the Survival Period. In
determining whether there has been a breach of any representation or warranty
contained in Section 3.4 and in determining the amount of Adverse Consequences
suffered by the Shareholder for purposes of this Section 7.2, such
representations and warranties shall not be qualified by "material,"
"materiality," "in all material respects," "best knowledge," "best of knowledge"
or "knowledge" or words of similar import, or by any phrase using any such terms
or words. PentaStar also agrees to indemnify and hold harmless the Shareholder
for any Liability of the Company, the facts or circumstances giving rise to
which occur after the Closing Date. If any dispute arises concerning whether any
indemnification is owing which cannot be resolved by negotiation among the
parties within 30 days of notice of claim for indemnification from the party
claiming indemnification to the party against whom such claim is asserted, the
dispute will be resolved by arbitration pursuant to this Agreement.
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7.3. Matters Involving Third Parties.
(a) If any Person not a party to this Agreement (including, without
limitation, any Governmental Authority) notifies any party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may give rise
to a claim for indemnification against any other party (the "Indemnifying
Party"), then the Indemnified Party will notify each Indemnifying Party thereof
in writing within 15 days after receiving such notice. No delay on the part of
the Indemnified Party in notifying any Indemnifying Party will relieve the
Indemnifying Party from any obligation hereunder unless (and then solely to the
extent) the Indemnifying Party thereby is prejudiced.
(b) Any Indemnifying Party will have the right, at its sole cost and
expense, to defend the Indemnified Party against the Third Party Claim with
counsel of its choice satisfactory to the Indemnified Party so long as (i) the
Indemnifying Party notifies the Indemnified Party in writing within 10 days
after the Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to or caused by the Third Party Claim, (ii) the
Indemnifying Party provides the Indemnified Party with evidence reasonably
acceptable to the Indemnified Party that the Indemnifying Party will have the
financial resources to defend against the Third Party Claim and fulfill its
indemnification obligations hereunder, (iii) the Third Party Claim involves only
money damages and does not seek an injunction or other equitable relief, (iv)
settlement of, or an adverse judgment with respect to, the Third Party Claim is
not, in the good faith judgment of the Indemnified Party, likely to establish a
precedential custom or practice materially adverse to the continuing business
interests of the Indemnified Party, and (v) the Indemnifying Party conducts the
defense of the Third Party Claim actively and diligently. If the Indemnifying
Party does not assume control of the defense or settlement of any Third Party
Claim in the manner described above, it will be bound by the results obtained by
the Indemnified Party with respect to the Third Party Claim.
(c) So long as the Indemnifying Party is conducting the defense of the
Third Party Claim in accordance with Section 7.3(b) above, (i) the Indemnified
Party may retain separate co- counsel at its sole cost and expense and
participate in the defense of the Third Party Claim, (ii) the Indemnified Party
will not consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written consent of the
Indemnifying Party (not to be withheld unreasonably), and (iii) the Indemnifying
Party will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent of the
Indemnified Party (not to be withheld unreasonably).
(d) In the event any of the conditions in Section 7.3(b) above is or
becomes unsatisfied, however, (i) the Indemnified Party may defend against, and
consent to the entry of any judgment or enter into any settlement with respect
to, the Third Party Claim in any manner it reasonably may deem appropriate (and
the Indemnified Party need not consult with, or obtain any consent from, any
Indemnifying Party in connection therewith), (ii) the Indemnifying Parties will
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reimburse the Indemnified Party promptly and periodically for the costs of
defending against the Third Party Claim (including reasonable attorneys' fees
and expenses), and (iii) the Indemnifying Parties will remain responsible for
any Adverse Consequences the Indemnified Party may suffer resulting from,
arising out of, relating to or caused by the Third Party Claim to the fullest
extent provided in this Section 7.
7.4. Right of Offset. PentaStar will have the right to offset any Adverse
Consequences it may suffer against any amounts payable pursuant to this
Agreement or any Other Seller Agreement to the Shareholder or any relative or
affiliate of the Shareholder at or after the Closing.
7.5. Other Remedies. The foregoing indemnification provisions are in
addition to, and not in derogation of, any statutory, equitable or common law
remedy any party may have.
7.6. Ceiling. Notwithstanding any other provision of this Agreement, the
maximum amount that the Shareholder will be required to indemnify PentaStar and
the Surviving Corporation under this Section 7 will not exceed, in the
aggregate, the sum of (a) the cash received by the Shareholder under this
Agreement and (b) the value of the PentaStar Shares issued to the Shareholder
pursuant to Section 2(k) (as such value is determined on the Closing Date by
reference to the initial offering price of shares of PentaStar Common Stock
issued in the IPO).
8. Termination.
8.1. Termination of Agreement. The parties may terminate this Agreement as
provided below:
(a) PentaStar and the Shareholder may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(b) PentaStar may terminate this Agreement by giving written notice to
the Shareholder at any time prior to the Closing (i) in the event the
Shareholder has breached any representation, warranty or covenant contained in
this Agreement in any material way, PentaStar has notified the Shareholder of
the breach, and the breach has not been cured within 10 days after the notice of
breach or (ii) if the Closing has not occurred on or before January 31, 2000
because of the failure of any condition precedent to PentaStar's obligations to
consummate the Closing (unless the failure results primarily from PentaStar
breaching any representation, warranty or covenant contained in this Agreement
in any material way); or
(c) the Shareholder may terminate this Agreement by giving written
notice to PentaStar at any time prior to the Closing (i) if PentaStar has
breached any representation, warranty or covenant contained in this Agreement in
any material way, the Shareholder has notified PentaStar of the breach, and the
breach has not been cured within 10 days after the notice
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of breach or (ii) if the Closing has not occurred on or before January 31, 2000
because of the failure of any condition precedent to the Shareholder's
obligations to consummate the Closing (unless the failure results primarily from
the Shareholder breaching any representation, warranty or covenant contained in
this Agreement in any material way).
8.2. Effect of Termination. The termination of this Agreement by a party
pursuant to Section 8.1 will in no way limit any obligation or liability of any
other party based on or arising from a breach or default by such other party
with respect to any of its representations, warranties, covenants or agreements
contained in this Agreement, and the terminating party will be entitled to seek
all relief to which it is entitled under applicable law.
8.3. Confidentiality. If this Agreement is terminated, each party will
treat and hold as confidential all Confidential Information concerning the other
parties which it acquired from such other parties in connection with this
Agreement and the transactions contemplated hereby.
9. Miscellaneous.
9.1. No Third-Party Beneficiaries. This Agreement will not confer any
rights or remedies upon any Person other than the parties and their respective
successors and permitted assigns.
9.2. Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the parties and supersedes any
prior understandings, agreements or representations by or among the parties,
written or oral, to the extent they relate in any way to the subject matter
hereof.
9.3. Succession and Assignment. This Agreement will be binding upon and
inure to the benefit of the parties and their respective successors and
permitted assigns. The Shareholder may not assign this Agreement or any of his
rights, interests or obligations hereunder without the prior written approval of
PentaStar. PentaStar may assign its rights and obligations hereunder as
permitted by law, including, without limitation, to any debt or equity financing
source.
9.4. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
together shall be deemed to be one and the same instrument. The execution of a
counterpart of the signature page to this Agreement will be deemed the execution
of this Agreement. This Agreement may be delivered by facsimile and facsimile
signatures will be treated as original signatures for all applicable purposes.
9.5. Headings. The section headings contained in this Agreement are
inserted for convenience only and will not affect in any way the meaning or
interpretation of this Agreement. Terms used with initial capital letters will
have the meanings specified, applicable to both singular and plural forms, for
all purposes of this Agreement. The singular or plural includes the other, as
the context requires or permits. The word "include" (and any variations) is used
in an illustrative sense rather than a limiting sense.
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9.6. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if it is sent by
registered or certified mail, return receipt requested, postage prepaid, or by
courier, telecopy or facsimile, and addressed to the intended recipient as set
forth below:
If to the
Shareholder: Copy to:
Addressed to the Xxxxxxx X. Xxxxxx
the Shareholder at: Clanahan, Tanner, Xxxxxxx & Xxxxxxxx, P.C.
0000 Xxxxx Xxxxxxxxx Xxxxxx 000 00xx Xxxxxx, Xxxxx 000
Xxxxxxxxx Xxxxx, Xxxxxxxx 00000 Xxxxxx, Xxxxxxxx 00000
Telecopy: (000) 000-0000 Telecopy: (000) 000-0000
If to PentaStar: Copy to:
PentaStar Communications, Inc. Xxxxxxx & Xxxxxx L.L.C.
0000 Xxxxx Xxxxxx 000 Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000 Xxxxxx, Xxxxxxxx 00000
Attn: President Attn: B. Xxxxx Xxxxxxx
Telecopy: (000) 000-0000 Telecopy: (000) 000-0000
Notices will be deemed given three days after mailing if sent by certified mail,
when delivered if sent by courier, and upon receipt of confirmation by person or
machine if sent by telecopy or facsimile transmission. Any party may change the
address to which notices, requests, demands, claims and other communications
hereunder are to be delivered by giving the other parties notice in the manner
herein set forth.
9.7. Governing Law. This Agreement will be governed by and construed in
accordance with the domestic laws of the State of Colorado without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Colorado or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Colorado.
9.8. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same is in writing and signed by PentaStar
and the Shareholder. No waiver by any party of any default, misrepresentation or
breach of warranty or covenant hereunder, whether intentional or not, will be
deemed to extend to any prior or subsequent default, misrepresentation or breach
of warranty or covenant hereunder or affect in any way any rights arising by
virtue of any prior or subsequent such occurrence, and no waiver will be
effective unless set forth in writing and signed by the party against whom such
waiver is asserted.
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9.9. Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
9.10. Expenses. Except as otherwise provided in Section 8.2, (a) PentaStar
shall bear its own costs and expenses (including, without limitation, legal fees
and expenses) incurred either before or after the date of this Agreement in
connection with this Agreement or the transactions contemplated hereby and (b)
the Shareholder will bear all costs and expenses (including, without limitation,
all legal, accounting and tax related fees and expenses, all fees, commissions,
expenses and other amounts payable to any broker, finder or agent) incurred by
the Company prior to the Closing or by the Shareholder either before or after
the date of this Agreement in connection with this Agreement or the transactions
contemplated hereby (collectively, "Seller Transaction Expenses"); provided,
however, that prior to the Closing Date the Company may use any cash to pay
Seller Transaction Expenses.
9.11. Arbitration. Any disputes arising under or in connection with this
Agreement, including, without limitation, those involving claims for specific
performance or other equitable relief, will be submitted to binding arbitration
in Denver, Colorado before the Judicial Arbiter Group, but under the Commercial
Arbitration Rules of the American Arbitration Association under the authority of
federal and state arbitration statutes, and shall not be the subject of
litigation in any forum. If the Judicial Arbiter Group is unavailable to conduct
the arbitration, then it shall be before another arbitral body in Denver,
Colorado selected by PentaStar and the Shareholder or, if they cannot agree on
another arbitral body, the American Arbitration Association. EACH PARTY, BY
SIGNING THIS AGREEMENT, VOLUNTARILY, KNOWINGLY AND INTELLIGENTLY WAIVES ANY
RIGHTS SUCH PARTY MAY OTHERWISE HAVE TO SEEK REMEDIES IN COURT OR OTHER FORUMS,
INCLUDING THE RIGHT TO JURY TRIAL. The arbitrator shall have full authority to
order specific performance and other equitable relief and award damages and
other relief available under this Agreement or applicable law, but shall have no
authority to add to, detract from, change or amend the terms of this Agreement
or existing law. All arbitration proceedings, including settlements and awards,
shall be confidential. The decision of the arbitrators will be final and
binding, and judgment on the award by the arbitrators may be entered in any
court of competent jurisdiction. THIS SUBMISSION AND AGREEMENT TO ARBITRATE WILL
BE SPECIFICALLY ENFORCEABLE. The prevailing party or parties in any such
arbitration or in any action to enforce this Agreement will be entitled to
recover, in addition to any other relief awarded by the arbitrator, all
reasonable costs and expenses, including fees and expenses of the arbitrators
and attorneys, incurred in connection therewith. If each party prevails on
specific issues in the arbitration, the arbitrator may allocate the costs
incurred by all parties on a basis the arbitrator deems appropriate.
9.12. Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement will be construed as
if drafted jointly by the parties and no presumption or burden of
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41
proof will arise favoring or disfavoring any party by virtue of the authorship
of any of the provisions of this Agreement. The word "including" will mean
including without limitation. The parties intend that each representation,
warranty and covenant contained herein will have independent significance. If
any party breaches any representation, warranty or covenant contained herein in
any respect, the fact that there exists another representation, warranty or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which the party has not breached will not detract from or
mitigate the fact that the party is in breach of the first representation,
warranty or covenant.
9.13. Incorporation of Exhibits. The Exhibits identified in this Agreement
are incorporated herein by reference and made a part hereof.
[THE REMAINDER OF THIS PAGE LEFT BLANK INTENTIONALLY,
SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
PENTASTAR:
PENTASTAR COMMUNICATIONS, INC.
By: /s/ Xxxxx X. Xxxxxxxx
--------------------------------------
Name: Xxxxx X. Xxxxxxxx
--------------------------------------
Title: President
--------------------------------------
ACQUIROR:
OC MERGERCO 1, INC.
By: /s/ Xxxxx X. Xxxxxxxx
--------------------------------------
Name: Xxxxx X. Xxxxxxxx
--------------------------------------
Title: President
--------------------------------------
COMPANY:
DMA VENTURES, INC.
By: /s/ Xxxxxxx Xxxxx
--------------------------------------
Name: Xxxxxxx Xxxxx
--------------------------------------
Title: President
--------------------------------------
SHAREHOLDER:
/s/ Xxxxxxx Xxxxx
-------------------------------------------------
Xxxxxxx Xxxxx
[SIGNATURE PAGE TO ACCESS AGREEMENT AND PLAN OF MERGER]
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43
EXHIBIT 1.1(a)
DEFINED TERMS
Acquiror has the meaning given it in the preamble to this Agreement.
Acquired Assets means all right, title and interest of the Company in
and to all of the tangible and intangible assets of the Company.
Adverse Consequences means all actions, suits, proceedings,
investigations, complaints, claims, demands, Orders, Liabilities, liens, losses,
damages, penalties, fines, settlements, costs, remediation costs, expenses and
fees (including court costs and reasonable fees and expenses of counsel and
other experts), plus interest at a rate equal to two percentage points above the
prime rate quoted by PentaStar's principal lender from time to time accrued from
the date of such Adverse Consequence.
Affiliated Group means any affiliated group within the meaning of Code
Section 1504 or any similar group defined under a similar provision of state,
local or foreign law.
Articles of Merger has the meaning given it in Section 2(g).
Benefit Arrangement has the meaning set forth in Section 3.1(m)(iii).
Business Day means any day on which commercial banks are open for
business in Denver, Colorado.
Cash Covered Accrued Commission Liability means accrued sales
commissions payable by the Company resulting from any sale by the Company prior
to the Closing Date, if and only to the extent that the Company has not received
payment prior to the Closing Date of the amount in respect of which such accrued
sales commission was earned.
Certificate of Merger has the meaning given it in Section 2(g).
Client Services Agreement means the agreement between the Company and
Oasis under which the Company acquires professional services.
Closing and Closing Date have the meanings given in Section 2(n).
Closing Accounts Receivable means all accounts (including late fees and
interest charges thereon) and notes receivable of the Company which are in
existence as of the Closing Date.
Closing Date Balance Sheet has the meaning given it in Section 2(l).
Exhibit 1.1(a) - 1
44
Closing Date Liabilities means all Liabilities of the Company, but
excluding Retained Liabilities.
Code means the Internal Revenue Code of 1986, as amended.
Company has the meaning given it in the preamble to this Agreement,
except that for purposes of Sections 3.1, 3.2 and 3.3, the term the "Company"
shall mean the Company and all of its Subsidiaries.
Company Shares has the meaning given it in Section 3.1(b)(i).
Company Welfare Plan has the meaning given it in Section 3.1(m)(i).
Confidential Information means any information concerning the subject
Person or the subject Person's business, products, financial condition,
prospects and affairs that is not already generally available to the public.
Effective Time has the meaning set forth in Section 2(g).
Employee Benefit Plan means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan, as defined in ERISA Section 3(37)) or (d) Employee Welfare
Benefit Plan.
Employee Pension Benefit Plan has the meaning set forth in ERISA
Section 3(2).
Employee Welfare Benefit Plan has the meaning set forth in ERISA
Section 3(1).
Employment Agreement means the Employment and Noncompetition Agreement
between PentaStar and Xxxxxxx Xxxxx in the form of Exhibit 6.1(q).
Encumbrance means any mortgage, pledge, conditional sale agreement,
charge, claim, interest of another Person, lien, security interest, title defect
or other encumbrance.
Environmental Obligations means all present and future Legal
Requirements and Permits concerning land use, public health, safety, welfare or
the environment, including, without limitation, the Resource Conservation and
Recovery Act (42 U.S.C. Section 6901 et seq.), as amended, and the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C. Section 9601
et seq.), as amended.
ERISA means the Employee Retirement Income Security Act of 1974, as
amended, and any regulations, rules or orders promulgated thereunder.
Exhibit 1.1(a) - 2
45
ERISA Affiliate means any entity which is controlled by, or is under
common control with, the Company, as determined under ERISA Section 4001(a)(14).
Escrow Agreement has the meaning set forth in Section 2(k).
Estimated Closing Date Balance Sheet has the meaning given it in
Section 2(j).
GAAP means generally accepted accounting principles as in effect from
time to time in the United States.
Governmental Authority means the United States of America, any state,
commonwealth, territory or possession of the United States of America, any
political subdivision thereof (including counties, municipalities, home-rule
cities and the like), and any agency, authority or instrumentality of any of the
foregoing, including, without limitation, any court, tribunal, department,
bureau, commission or board.
Hazardous Materials means any material, chemical, compound, mixture,
hazardous substance, hazardous waste, pollutant or contaminant defined, listed,
classified or regulated under any Environmental Obligation.
IPO means the initial public offering of PentaStar's Common Stock
pursuant to the Registration Statement.
Indemnified Party has the meaning given it in Section 7.3(a).
Indemnifying Party has the meaning given it in Section 7.3(a).
Intellectual Property means all trade, corporate, business and product
names, trademarks, trademark rights, service marks, copyrights, patents, patent
rights, trade secrets, business, customer and technical information, and
computer software, all registrations, licenses and applications pertaining
thereto, and all related documentation and goodwill.
Latest Balance Sheet has the meaning given in it Section 3.1(d).
Legal Requirement means any constitution, statute, ordinance, code, or
other law (including common law), rule, regulation, Order, notice, standard,
procedure or other requirement enacted, adopted, applied or issued by any
Governmental Authority, including, without limitation, judicial decisions
applying or interpreting any such Legal Requirement.
Liability means any liability or obligation (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due).
LLC has the meaning given it in Recital A.
Exhibit 1.1(a) - 3
46
Merger has the meaning given it in Section 2.
Oasis has the meaning given it in Section 3.1(n).
PentaStar has the meaning given it in the preamble to this Agreement.
PentaStar Common Stock means the common stock par value $0.01 per
share, of PentaStar.
PentaStar Shares has the meaning set forth in Section 3.3(a).
Orders means all judgments, injunctions, orders, rulings, decrees,
directives, notices of violation or other requirements of any Governmental
Authority or arbitrator having jurisdiction in the matter, including a
bankruptcy court or trustee.
Other PentaStar Agreements means the Employment Agreement, the Escrow
Agreement and the other documents and instruments to be executed and delivered
by PentaStar pursuant to this Agreement.
Other Seller Agreements means the Employment Agreement, the Escrow
Agreement and other documents and instruments to be executed and delivered by
the Shareholder or any relative or affiliate of the Company or of the
Shareholder pursuant to this Agreement.
Permits means all permits, licenses, consents, franchises,
authorizations, approvals, privileges, waivers, exemptions, variances,
exclusionary or inclusionary Orders and other concessions, whether governmental
or private, including, without limitation, those relating to environmental,
public health, welfare or safety matters.
Person means an individual, partnership, corporation, association,
joint stock company, trust, joint venture, limited liability company,
unincorporated organization or Governmental Authority.
Premises means the real property, buildings and improvements thereon
constituting the business premises of the Company located at 0000 Xxxxx Xxxxx
Xxx, Xxxxxxxx X, Xxxxxxxxx, XX 00000.
Principal Customer has the meaning given it in Section 3.1(o).
Principal Provider has the meaning given it in Section 3.1(o).
Prospectus means the final prospectus included as a part of the
Registration Statement at the time such Registration Statement is declared
effective by the SEC.
Purchase Price has the meaning given it in Section 2(k).
Exhibit 1.1(a) - 4
47
Purchaser Representative has the meaning given it in Section 3.3(a).
Purchaser Representative Documents has the meaning given it in Section
3.3(a).
Registration Statement has the meaning given it in Section 3.3(a).
Retained Liabilities means (a) the obligations of the Company arising
after the Closing Date under those contracts which are identified by PentaStar
on Exhibit 1.1(b) with respect to the period after the Closing Date, (b) trade
payables incurred in the ordinary course of business which are not past due
based upon their normal, stated terms, (c) accrued liabilities incurred in the
ordinary course of business which are not past due based upon their normal,
stated terms (e.g., payroll), but excluding accrued bonus, accrued profit
sharing, accrued rent and accrued Liabilities for Taxes and (d) Cash Covered
Accrued Commission Liabilities. Retained Liabilities will not include any other
Liability.
Right means any right, property interest, concession, patent,
trademark, trade name, copyright, know-how or other proprietary right of another
Person.
SEC means the United States Securities and Exchange Commission.
Securities Act means the Securities Act of 1933, as amended.
Shareholder has the meaning given it in the preamble to this Agreement.
Shares means all of the issued and outstanding capital stock of the
Company.
Stock/LLC Exchange has the meaning given it in Recital A.
Subsidiary means, with respect to a Person, any Person controlled
(meaning possession of the direct or indirect power to direct or cause the
direction of the management and policies, whether through the ownership of
voting securities, by contract or otherwise) by such first Person directly or
through one or more intermediaries.
Survival Period means, with respect to a representation or warranty,
the applicable period after the Closing Date during which such representation or
warranty survives pursuant to Section 3.6.
Surviving Corporation has the meaning given it in the preamble to this
Agreement.
Tax means any federal, state, local or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Section 59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, documentary, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated or other tax of any kind whatsoever, including any interest,
penalty or addition thereto, whether disputed or not.
Exhibit 3.1(h)(i) - 5
48
Tax Return means any return, declaration, report, claim for refund or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
Third Party Claim has the meaning given it in Section 7.3(a).
Third Party Product has the meaning given it in Section 3.1(r).
Transaction has the meaning given it in Recital B.
Exhibit 3.1(h)(i) - 6
49
EXHIBIT 3.2
(a) The Company is a corporation duly organized and validly existing in
good standing under the laws of the jurisdiction of its organization, with full
corporate power and authority to own, lease, and operate its properties and to
conduct its business as described in the Prospectus. The Company is duly
qualified to do business and is in good standing in every jurisdiction in which
its ownership, leasing, licensing, or use of property and assets or the conduct
of its business makes such qualifications necessary.
(b) The financial statements of the Company included in the
Registration Statement and the Prospectus fairly present in all material
respects with respect to the Company the financial position, the results of
operations, and the other information purported to be shown therein at the
respective dates and for the respective periods to which they apply. Such
financial statements have been prepared in accordance with generally accepted
accounting principles, except to the extent that certain footnote disclosures
regarding any stub period may have been omitted in accordance with the
applicable rules of the Commission under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), consistently applied throughout the periods
involved, are correct and complete in all material respects, and are in
accordance with the books and records of the Company. There has at no time been
a material adverse change in the financial condition, results of operations,
business, properties, assets, liabilities, or future prospects of the Company
from the latest information set forth in the Registration Statement or the
Prospectus, except as may be properly described in the Prospectus.
(c) There is no litigation, arbitration, claim, governmental or other
proceeding (formal or informal), or investigation pending, or, to the knowledge
of the Company, threatened, or proposed with respect to the Company or any of
its operations, businesses, properties, or assets, except as may be properly
described in the Prospectus or such as individually or in the aggregate do not
now have and will not in the future have a material adverse effect upon the
operations, business, properties, or assets of the Company. The Company is not
in violation of, or in default with respect to, any law, rule, regulation,
order, judgment, or decree except as may be properly described in the Prospectus
or such as in the aggregate do not now have and will not in the future have a
material adverse effect upon the operations, business, properties, or assets of
the Company, nor is the Company required to take any action in order to avoid
any such violation or default.
(d) The Company has good and marketable title in fee simple absolute to
all real properties and good title to all other properties and assets which the
Prospectus indicates are owned by it, free and clear of all liens, security
interests, pledges, charges, encumbrances, and mortgages except as may be
properly described in the Prospectus or such as in the aggregate do not now have
and will not in the future have a material adverse effect upon the operations,
business, properties, or assets of the Company. No real property owned, leased,
licensed, or used by the Company lies in an area which is, or to the knowledge
of the Company will be, subject to zoning, use, or building code restrictions
which would prohibit, and no state of facts relating to the actions or inaction
of another person or entity or his or its ownership, leasing, licensing, or use
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of any real or personal property exists which would prevent, the continued
effective ownership, leasing, licensing, or use of such real property in the
business of the Company as presently conducted or as the Prospectus indicates it
contemplates conducting, except as may be properly described in the Prospectus
or such as in the aggregate do not now have and will not in the future have a
material adverse effect upon the operations, business, properties, or assets of
the Company.
(e) 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 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 material
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
could reasonably be expected to have in the future 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 Articles of
Incorporation (or other charter document) or by-laws.
(f) All patents, patent applications, trademarks, trademark
applications, trade names, service marks, copyrights, franchises, technology,
know-how and other intangible properties and assets that are material to the
Company (all of the foregoing being herein called "Intangibles") that the
Company owns or has pending, or under which it is licensed, are uncontested to
the knowledge of the Company. Except as otherwise disclosed in the Registration
Statement, the Intangibles are owned by the Company, free and clear of all
liens, security interests, pledges, and encumbrances. There is no right under
any Intangible necessary to the business of the Company as presently conducted
or as the Prospectus indicates it contemplates conducting (except as may be so
designated in the Prospectus). The Company 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, except for such infringements which in the
aggregate would not result in a material adverse effect on the Company. To the
knowledge of the Company, there is no Intangible of others which has had or
could reasonably be expected in the future to have a materially adverse effect
on the financial condition, results of operations, business, properties, assets,
liabilities, or future prospects of the Company.
(g) Neither the Company nor any director, officer, agent, employee, or
other person associated with or acting on behalf of the Company 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
by the International Anti-Bribery Act of 1998; or made any bribe, rebate,
payoff, influence payment, kickback, or
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other unlawful payment. The Company has not accepted any material advertising
allowances or marketing allowances from suppliers to the Company or, to the
extent any advertising allowance has been accepted, the Company has provided
proper documentation to the supplier with respect to advertising as to which the
advertising allowance has been granted.
(h) The Company has not, directly or indirectly, (i) taken any action
designed to cause or to result in, or that has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of any security of PentaStar to facilitate the sale or resale of shares
("Shares") of PentaStar's Common Stock to be purchased by the underwriter as
described in the Prospectus, or (ii) since the filing of the Registration
Statement, (A) sold, bid for, purchased, or paid anyone any compensation for
soliciting purchases of the Shares, or (B) paid or agreed to pay to any person
any compensation for soliciting another to purchase any other securities of
PentaStar.
(i) The Company has not distributed written offering material in
connection with the offering and sale of the Shares to be purchased by the
underwriter as described in the Prospectus.
(j) The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which it is engaged. The Company has no
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not have a material adverse effect, except as described in or contemplated
by the Prospectus.
(k) The Company is not presently doing business with the government of
Cuba or with any person or affiliate located in Cuba.
(l) Except as disclosed in the Prospectus, and to the Company's best
knowledge after reasonable investigation, all hardware, firmware, software and
computer systems of the Company and, to the Company's knowledge, of respective
material vendors and suppliers of the Company, will be by the Closing Date, year
2000 Compliant (as defined below) and will continue to function in accordance
with their independent purpose without material error or material interruption
as a result of the transition to the year 2000, to the extent that data
submitted or processed is unambiguous and date specific, except for such errors
and interruptions which in the aggregate could not reasonably be expected to
have a material adverse effect on the Company. The Company will not incur any
additional material costs for the Company to become year 2000 Compliant. For
purposes of this paragraph, "year 2000 Compliant" means, with respect to the
Company or its respective material vendors and suppliers, that the hardware,
firmware, software and computer systems of each of the foregoing (i) will
completely and accurately address, produce, store and calculate data involving
dates before, on or after January 1, 2000 and will not produce abnormally ending
or incorrect results involving such dates as used in any forward or regression
dated based functions, and (ii) will provide that date related functionalities
and data fields include the indication of century and millennium and will
perform calculations that involve a four-digit year.
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(m) Except as set forth in the Prospectus, there is no action, suit or
proceeding before any court, arbitration tribunal or governmental agency,
authority or body pending or, to the knowledge of the Company, threatened which
could reasonably be expected to result in judgments against the Company not
adequately covered by insurance or which collectively could reasonably be
expected to result in any material adverse change in the condition (financial or
otherwise), the business or the prospects of the Company or would materially
affect the properties or assets of the Company.
(n) Except as set forth in the Prospectus:
i. The Company 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, if
any, obtained 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,
if any, obtained by the Company.
ii. To the best knowledge of the Company's executive
officers, the Company 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 has not, and to the best knowledge
of the Company's executive officers, no 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. Except as provided to PentaStar in writing, 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).
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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.
(o) The Company is not a party to any agreement giving rise to any
obligation by the Company or any subsidiary to pay any third party royalties or
fees of any kind whatsoever with respect to any technology developed, employed,
used or licensed by the Company or any subsidiary, other than as disclosed in
the Prospectus.
(p) The issued and outstanding shares of common stock of the Company
and all other securities issued and sold or exchanged by the Company were not
required to be registered under any applicable state or federal securities laws
and regulations when issued and sold or exchanged and were issued and sold or
exchanged in compliance with applicable exemptions from registration under
federal and state securities laws.
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