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STOCK PURCHASE AGREEMENT
by and among
FlashNet Communications, Inc.
and
Apogee Fund LP,
Xxxxxx X. Xxxxxx,
ISP Investors, L.P.,
Xxxxx X. Xxxxxxx,
J. Xxxxxx Xxxx, Xx.,
Xxxx X. Xxxxxxxx
and
Fourteen Hill Capital, LP
May 7, 1998
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TABLE OF CONTENTS
STOCK PURCHASE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I.
TERMS OF THE TRANSACTION. . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II.
CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . . 2
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF BUYERS. . . . . . . . . . . . . . . .25
ARTICLE V.
ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . .28
ARTICLE VI.
SHARE TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . .31
ARTICLE VII.
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION. . . . . . . . . . . . . .33
ARTICLE VIII.
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
i
ARTICLE IX.
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
ii
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of May 7,
1998 by and among (i) FlashNet Communications, Inc., a Texas corporation (the
"Company"), and (ii) Apogee Fund LP, a Delaware limited partnership, (iii)
Xxxxxx X. Xxxxxx, (iv) ISP Investors, L.P., a Texas limited partnership (v)
Xxxxx X. Xxxxxxx, (vi) J. Xxxxxx Xxxx, Xx., (vii) Xxxx X. Xxxxxxxx, and
(viii) Fourteen Hill Capital, LP, a Delaware limited partnership (each
individually, a "Buyer," and collectively, the "Buyers").
WHEREAS, the Company desires to sell to Buyers, and Buyers desire to
purchase, certain shares of the Company's Preferred Stock, par value $1.00
per share (the "Preferred Stock"), to be issued by the Company;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the Company and Buyers hereby agree as follows:
ARTICLE I.
TERMS OF THE TRANSACTION
1.1 AGREEMENT TO SELL AND TO PURCHASE SHARES. On the terms and subject
to the conditions set forth in this Agreement, the Company hereby delivers to
each Buyer, and each Buyer hereby purchases and accepts from the Company, the
number of shares of Series A Convertible Preferred Stock, par value $1.00 per
share, of the Company (the "Shares") as set forth beside its name on SCHEDULE
1.1.
1.2 PURCHASE PRICE AND PAYMENT. In consideration of the sale of the
Shares, each Buyer hereby agrees to pay to the Company at the Closing (as
defined below) the purchase price set forth beside its name on SCHEDULE 1.1,
the aggregate of which shall be the "Purchase Price." Each Buyer shall pay
its portion of the Purchase Price to the Company in immediately available
funds by confirmed wire transfer to a bank account heretofore designated by
the Company or in the form of a certified or bank cashier's check payable to
the order of the Company.
1
ARTICLE II.
CLOSING
The closing of the transactions contemplated hereby (the "Closing")
shall take place (i) at the offices of Xxxxxxxx & Xxxxxx, P.C., 000 Xxxxxx
Xxxxxx, Xxxxx 0000, Xxxx Xxxxx, XX 00000 at 10:00 a.m., local time, on May 7,
1998, or (ii) at such other time or place or on such other date as the
parties hereto shall agree. The date on which the Closing is required to
take place is herein referred to as the "Closing Date." All Closing
transactions shall be deemed to have occurred simultaneously.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Buyers that:
3.1 CORPORATE ORGANIZATION. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of Texas and
has all requisite corporate power and corporate authority to own, lease, and
operate its properties and to carry on its business as now being conducted.
No actions or proceedings to dissolve the Company are pending or, to the best
knowledge of the Company, threatened.
3.2 QUALIFICATION. The Company is duly qualified or licensed to do
business as a foreign corporation and is in good standing, or, as designated
on SCHEDULE 3.2, has applied for such qualification or licensing, in each of
the jurisdictions set forth on SCHEDULE 3.2, which are all the jurisdictions
in which it owns, leases, or operates property or in which such qualification
or licensing is required for the conduct of its business.
3.3 CHARTER AND BYLAWS. The Company has made available to Buyers
accurate and complete copies of (i) the charter and bylaws of each of the
Company and the Subsidiaries as currently in effect, (ii) the stock records
of each of the Company and the Subsidiaries, and (iii) the minutes of all
meetings of the respective Boards of Directors of the Company and the
Subsidiaries, any committees of such Boards, and the shareholders of the
Company and the Subsidiaries (and all consents in lieu of such meetings).
Such records, minutes, and consents accurately reflect the stock ownership of
the Company and the Subsidiaries and all actions taken by such Boards of
Directors, committees, and shareholders. Neither the Company nor any
Subsidiary is in violation of any provision of its charter or bylaws, other
than violations which, individually or in the aggregate, do not and will not
have a Material Adverse Effect.
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3.4 CAPITALIZATION OF THE COMPANY. The authorized capital stock of the
Company consists of 5,000,000 shares of Common Stock, no par value (the
"Common Stock"), of which, as of the date hereof, 1,613,888 shares are
outstanding and no shares are held in the Company's treasury, and 2,000,000
shares of Preferred Stock of which, as of the date hereof, no shares are held
in the Company's treasury. The Shares constitute all the outstanding shares
of Preferred Stock of the Company. All outstanding shares of capital stock
of the Company have been validly issued and are fully paid and nonassessable,
and no shares of capital stock of the Company are subject to, nor have any
been issued in violation of, preemptive or similar rights. Except as set
forth on SCHEDULE 3.14, all issuances, sales, and repurchases by the Company
of shares of its capital stock have been effected in compliance with all
Applicable Laws, including without limitation applicable federal and state
securities laws. As of the date hereof, an aggregate of 239,857 shares of
Common Stock of the Company are or shall be reserved for issuance and are
issuable upon the exercise of stock options granted under the Company's stock
option plan (such options currently outstanding are to purchase a total of
54,350 shares of Common Stock); furthermore, an aggregate of 504,955 shares
of Common Stock of the Company are reserved for issuance and are issuable
upon the exercise of outstanding warrants (subject to certain anti-dilution
provisions applicable thereto); furthermore, an aggregate of 41,300 shares of
Common Stock are reserved for issuance and are issuable upon the conversion
of outstanding convertible notes. Except as disclosed above in this Section,
there are outstanding (i) no shares of capital stock or other voting
securities of the Company, (ii) no securities of the Company convertible into
or exchangeable for shares of capital stock or other voting securities of the
Company, (iii) no options or other rights to acquire from the Company, and no
obligation of the Company to issue or sell, any shares of capital stock or
other voting securities of the Company or any securities of the Company
convertible into or exchangeable for such capital stock or voting securities,
and (iv) no equity equivalents, interests in the ownership or earnings, or
other similar rights of or with respect to the Company. There are no
outstanding obligations of the Company or any Subsidiary to repurchase,
redeem, or otherwise acquire any of the foregoing shares, securities,
options, equity equivalents, interests, or rights. The Company is not a
party to, and is not aware of, any voting agreement, voting trust, or similar
agreement or arrangement relating to any class or series of its capital stock.
3.5 AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has full
corporate power and corporate authority to execute, deliver, and perform this
Agreement and the Ancillary Documents to which it is a party and to
consummate the transactions contemplated hereby and thereby. The execution,
delivery, and performance by the Company of this Agreement and the Ancillary
Documents to which it is a party, and the consummation by it of the
transactions contemplated hereby and thereby, have been duly authorized by
all necessary corporate action of the Company. This Agreement has been duly
executed and delivered by the Company and constitutes, and each Ancillary
Document executed or to be executed by the Company has been, or when executed
will be, duly executed and delivered by the Company and constitute, or when
executed and delivered will constitute, valid and legally binding obligations
of the Company, enforceable against the
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Company in accordance with their respective terms, except that such
enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium, and similar laws affecting creditors' rights
generally and (ii) equitable principles which may limit the availability of
certain equitable remedies (such as specific performance) in certain
instances.
3.6 NONCONTRAVENTION. The execution, delivery, and performance by the
Company of this Agreement and the Ancillary Documents to which it is a party
and the consummation by it of the transactions contemplated hereby and
thereby do not and will not (i) conflict with or result in a violation of any
provision of the charter or bylaws of the Company or any Subsidiary, (ii)
conflict with or result in a violation of any provision of, or constitute
(with or without the giving of notice or the passage of time or both) a
default under, or give rise (with or without the giving of notice or the
passage of time or both) to any right of termination, cancellation, or
acceleration under, or require any consent, approval, authorization or waiver
of, or notice to, any party to, any bond, debenture, note, mortgage,
indenture, lease, contract, agreement, or other instrument or obligation to
which the Company or any Subsidiary is a party or by which the Company or any
Subsidiary or any of their respective properties may be bound or any Permit
held by the Company or any Subsidiary, (iii) result in the creation or
imposition of any Encumbrance upon the properties of the Company or any
Subsidiary, or (iv) assuming compliance with the matters referred to in
Section 3.7, violate any Applicable Law binding upon the Company or any
Subsidiary, except, in the case of clauses (ii), (iii), and (iv) above, for
any such conflicts, violations, defaults, terminations, cancellations,
accelerations, or Encumbrances which would not, individually or in the
aggregate, have a Material Adverse Effect, and except, in the case of clause
(ii) above, for (A) such consents, approvals, authorizations, and waivers
that have been obtained and are unconditional and in full force and effect
and such notices that have been duly given and (B) such consents, approvals,
authorizations, waivers, and notices that are disclosed on SCHEDULE 3.6.
3.7 GOVERNMENTAL APPROVALS. No consent, approval, order, or
authorization of, or declaration, filing, or registration with, any
Governmental Entity is required to be obtained or made by the Company or any
Subsidiary in connection with the execution, delivery, or performance by the
Company of this Agreement and the Ancillary Documents to which it is a party
or the consummation by it of the transactions contemplated hereby or thereby,
other than as set forth on SCHEDULE 3.7.
3.8 SUBSIDIARIES.
(a) The Company does not own, directly or indirectly, any capital stock
of, or other equity interest in, any corporation or have any direct or
indirect equity or ownership interest in any other person, other than the
Subsidiaries. SCHEDULE 3.8 lists each Subsidiary, the jurisdiction of
incorporation of each Subsidiary, and the authorized and outstanding capital
stock of each Subsidiary. Each Subsidiary is a corporation duly organized,
validly existing, and in good
4
standing under the laws of the jurisdiction of its incorporation. Each
Subsidiary has all requisite corporate power and corporate authority to own,
lease, and operate its properties and to carry on its business as now being
conducted. No actions or proceedings to dissolve any Subsidiary are pending,
or to the knowledge of the Company, threatened.
(b) Except as otherwise indicated on SCHEDULE 3.8, all the outstanding
capital stock or other equity interests of each Subsidiary are owned directly
or indirectly by the Company, free and clear of all Encumbrances. All
outstanding shares of capital stock of each Subsidiary have been validly
issued and are fully paid and nonassessable. No shares of capital stock or
other equity interests of any Subsidiary are subject to, nor have any been
issued in violation of, preemptive or similar rights.
(c) Except as set forth on SCHEDULE 3.8, there are outstanding (i) no
shares of capital stock or other voting securities of any Subsidiary, (ii) no
securities of the Company or any Subsidiary convertible into or exchangeable
for shares of capital stock or other voting securities of any Subsidiary,
(iii) no options or other rights to acquire from the Company or any
Subsidiary, and no obligation of the Company or any Subsidiary to issue or
sell, any shares of capital stock or other voting securities of any
Subsidiary or any securities convertible into or exchangeable for such
capital stock or voting securities, and (iv) no equity equivalents, interests
in the ownership or earnings, or other similar rights of or with respect to
any Subsidiary. There are no outstanding obligations of the Company or any
Subsidiary to repurchase, redeem, or otherwise acquire any of the foregoing
shares, securities, options, equity equivalents, interests, or rights.
3.9 SHARES. The Shares to be issued by the Company pursuant to this
Agreement have been duly authorized for such issuance and, when issued and
delivered by the Company in accordance with the provisions of this Agreement,
will be validly issued, fully paid, and nonassessable. The issuance of the
Shares under this Agreement is not subject to any preemptive or similar
rights. When issued, the Shares will represent 23.8% of the issued and
outstanding shares of capital stock of the Company, on a fully-diluted basis
reflecting all shares issuable upon the exercise of all outstanding rights to
acquire shares of the Company's capital stock.
3.10 FINANCIAL STATEMENTS. The Company has delivered to Buyers
accurate and complete copies of (i) the Company's audited consolidated
balance sheets as of December 31, 1995, 1996 and 1997, and the related
audited consolidated statements of income, stockholders' equity, and cash
flows for each of the years then ended, and the notes and schedules thereto,
together with the reports thereon of Deloitte & Touche, L.L.P., independent
public accountants (the "Audited Financial Statements"), and (ii) the
Company's unaudited consolidated balance sheet as of March 31, 1998 (the
"Latest Balance Sheet"), and the related unaudited consolidated statements of
income, stockholders' equity, and cash flows for the three-month period then
ended (together with the Latest Balance Sheet, the "Latest Financial
Statements"), certified by the Company's chief
5
financial officer (collectively, the "Financial Statements"). The Financial
Statements (i) represent actual bona fide transactions, (ii) have been
prepared from the books and records of the Company and its consolidated
Subsidiaries in conformity with U.S. GAAP applied on a basis consistent with
preceding years throughout the periods involved, except that the Latest
Financial Statements are not accompanied by notes or other textual disclosure
required by U.S. GAAP, and (iii) fairly present in all material respects the
Company's consolidated financial position as of the respective dates thereof
and its consolidated results of operations and cash flows for the periods
then ended. Except for a $1,000,000 consulting services fee received by the
Company in 1997 from American Communications Services, Inc., the statements
of income included in the Financial Statements do not contain any items of
special or nonrecurring income, and the balance sheets included in the
Financial Statements do not reflect any write-up or revaluation increasing
the book value of any assets, nor have there been any transactions since
March 31, 1998 giving rise to special or nonrecurring income or any such
write-up or revaluation. All financial projections, forecasts, and other
forward-looking information provided by the Company to Buyers were, as of
their respective dates, prepared in good faith and on a basis that management
of the Company believed to be reasonable.
3.11 ABSENCE OF UNDISCLOSED LIABILITIES. To the best knowledge of the
Company, neither the Company nor any Subsidiary has any liability or
obligation (whether accrued, absolute, contingent, unliquidated, or
otherwise, and whether due or to become due), except (i) liabilities
reflected on the Latest Balance Sheet, (ii) liabilities described in the
notes accompanying the Audited Financial Statements dated as of December 31,
1997, (iii) liabilities which have arisen since the date of the Latest
Balance Sheet in the ordinary course of business (none of which is a material
liability for breach of contract, breach of warranty, tort, or infringement),
(iv) liabilities arising under executory contracts entered into in the
ordinary course of business (none of which is a material liability for breach
of contract), (v) liabilities specifically set forth on SCHEDULE 3.11, and
(vi) other liabilities which, in the aggregate, are not material to the
Company and the Subsidiaries considered as a whole.
3.12 ABSENCE OF CERTAIN CHANGES. Except as disclosed on SCHEDULE
3.12, since March 31, 1998: (i) there has not been any change, development,
or effect, individually or in the aggregate, that has had, or might
reasonably be expected to have, a Material Adverse Effect on the Company or a
Subsidiary; (ii) the businesses of the Company and the Subsidiaries have been
conducted only in the ordinary course consistent with past practice; (iii)
neither the Company nor any Subsidiary has incurred any material liability,
engaged in any material transaction, or entered into any material agreement
outside the ordinary course of business consistent with past practice; (iv)
neither the Company nor any Subsidiary has suffered any material loss,
damage, destruction, or other casualty to any of its assets (whether or not
covered by insurance); and (v) neither the Company nor any Subsidiary has or
has taken action to:
6
(a) amend its charter or bylaws (other than to establish and
designate the Shares);
(b) (i) issue, sell, or deliver (whether through the issuance or
granting of options, warrants, commitments, subscriptions, rights to
purchase, or otherwise) any shares of its capital stock of any class or
any other securities or equity equivalents; or (ii) amend in any respect
any of the terms of any such securities outstanding as of the date
hereof;
(c) (i) split, combine, or reclassify any shares of its capital
stock; (ii) declare, set aside, or pay any dividend or other
distribution (whether in cash, stock, or property or any combination
thereof) in respect of its capital stock; (iii) repurchase, redeem, or
otherwise acquire any of its securities or any securities of any
Subsidiary; or (iv) adopt a plan of complete or partial liquidation or
resolutions providing for or authorizing a liquidation, dissolution,
merger, consolidation, restructuring, recapitalization, or other
reorganization of the Company or any Subsidiary;
(d) (i) except in the ordinary course of business consistent with
past practice, create, incur, guarantee, or assume any indebtedness for
borrowed money or otherwise become liable or responsible for the
obligations of any other person; (ii) make any loans, advances, or
capital contributions to, or investments in, any other person (other
than to wholly owned Subsidiaries); (iii) pledge or otherwise encumber
shares of capital stock of the Company or any Subsidiary; or (iv) except
in the ordinary course of business consistent with past practice,
mortgage or pledge any of its assets, tangible or intangible, or create
or suffer to exist any lien thereupon;
(e) (i) enter into, adopt, or (except as may be required by law)
amend or terminate any bonus, profit sharing, compensation, severance,
termination, stock option, stock appreciation right, restricted stock,
performance unit, stock equivalent, stock purchase, pension, retirement,
deferred compensation, employment, severance, or other employee benefit
agreement, trust, plan, fund, or other arrangement for the benefit or
welfare of any director, officer, or employee; (ii) except for normal
increases in the ordinary course of business consistent with past
practice that, in the aggregate, do not result in a material increase in
benefits or compensation expense to the Company, increase in any manner
the compensation or fringe benefits of any director, officer, or
employee; or (iii) pay to any director, officer, or employee any benefit
not required by any employee benefit agreement, trust, plan, fund, or
other arrangement as in effect on the date hereof;
(f) acquire, sell, lease, transfer, or otherwise dispose of, directly
or indirectly, any assets outside the ordinary course of business
consistent with past practice or any
7
assets that in the aggregate are material to the Company and the
Subsidiaries considered as a whole;
(g) acquire (by merger, consolidation, or acquisition of stock or
assets or otherwise) any corporation, partnership, or other business
organization or division thereof;
(h) make any capital expenditure or expenditures which,
individually, is in excess of $50,000 or, in the aggregate, are in
excess of $250,000;
(i) amend any Tax Return or make any Tax election or settle or
compromise any federal, state, local, or foreign Tax liability material
to the Company and the Subsidiaries considered as a whole;
(j) pay, discharge, or satisfy any claims, liabilities, or
obligations (whether accrued, absolute, contingent, unliquidated, or
otherwise, and whether asserted or unasserted), other than the payment,
discharge, or satisfaction in the ordinary course of business consistent
with past practice, or in accordance with their terms, of liabilities
reflected or reserved against in the Financial Statements or incurred
since January 1, 1998 in the ordinary course of business consistent with
past practice;
(k) enter into any lease, contract, agreement, commitment,
arrangement, or transaction outside the ordinary course of business
consistent with past practice;
(l) amend, modify, or change in any material respect any existing
lease, contract, or agreement, other than in the ordinary course of
business consistent with past practice;
(m) waive, release, grant, or transfer any rights of value, other
than in the ordinary course of business consistent with past practice;
(n) lay off any of its employees;
(o) change any of its banking or safe deposit arrangements;
(p) change any of the accounting principles or practices used by
it, except for any change required by reason of a concurrent change in
U.S. GAAP and notice of which has been given in writing by the Company
to Buyers; or
(q) authorize or propose, or agree in writing or otherwise to
take, any of the actions described in this Section.
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3.13 TAX MATTERS. Except as disclosed on SCHEDULE 3.13:
(a) the Company and each Subsidiary have duly filed all federal,
state, local, and foreign Tax Returns required to be filed by or with
respect to them with the IRS or other applicable Taxing authority, and
no extensions with respect to such Tax Returns have been requested or
granted;
(b) the Company and each Subsidiary have paid, or adequately
reserved against in the Financial Statements, all Taxes due, or claimed
by any Taxing authority to be due, from or with respect to them, except
Taxes that are being contested in good faith by appropriate legal
proceedings and for which adequate reserves have been set aside as
disclosed on SCHEDULE 3.13;
(c) there has been no issue raised or adjustment proposed (and
none is pending) by the IRS or any other Taxing authority in connection
with any of the Tax Returns;
(d) the Company and each Subsidiary have made all deposits
required with respect to Taxes;
(e) no waiver or extension of any statute of limitations as to any
federal, state, local, or foreign Tax matter has been given by or
requested from the Company or any Subsidiary; and
(f) the Company has not filed a consent under Section 341(f) of
the Code.
3.14 COMPLIANCE WITH LAWS. Except as disclosed on SCHEDULE 3.14, to
the best knowledge of the Company, the Company and the Subsidiaries have
complied with all Applicable Laws (including without limitation Applicable
Laws relating to securities, properties, business products and services,
manufacturing processes, advertising and sales practices, employment
practices, terms and conditions of employment, wages and hours, safety,
occupational safety, health, environmental protection, product safety, and
civil rights). Neither the Company nor any Subsidiary has received any
written notice, which has not been dismissed or otherwise disposed of, that
the Company or any Subsidiary has not so complied. Neither the Company nor
any Subsidiary is charged or, to the best knowledge of the Company,
threatened with, or, to the best knowledge of the Company, under
investigation with respect to, any violation of any Applicable Law relating
to any aspect of the business of the Company or any Subsidiary.
3.15 LEGAL PROCEEDINGS. There are no Proceedings pending or, to the
best knowledge of the Company, threatened against or involving the Company or
any Subsidiary (or any of their
9
respective directors or officers in connection with the business or affairs
of the Company or any Subsidiary) or any properties or rights of the Company
or any Subsidiary, except (i) as disclosed on SCHEDULE 3.15, (ii) for any
Proceedings that pertain to routine claims by persons other than Governmental
Entities that are fully covered by insurance (subject to applicable insurance
deductibles), (iii) for minor product or service warranty claims arising in
the usual and ordinary course of business which in the aggregate may be
satisfied at nominal cost to the Company, and (iv) for Proceedings which,
individually or in the aggregate, if prosecuted to judgment, would not have a
Material Adverse Effect on the Company. Except as disclosed on SCHEDULE
3.15, any and all potential liability of the Company and the Subsidiaries
under such Proceedings is adequately covered (except for standard deductible
amounts) by the existing insurance maintained by the Company and the
Subsidiaries described in Section 3.31. Neither the Company nor any
Subsidiary is subject to any judgment, order, writ, injunction, or decree of
any Governmental Entity which has had or is reasonably likely to have a
Material Adverse Effect. There are no Proceedings pending or, to the best
knowledge of the Company, threatened seeking to restrain, prohibit, or obtain
damages or other relief in connection with this Agreement or the transactions
contemplated hereby.
3.16 TITLE TO PROPERTIES. Each of the Company and the Subsidiaries has
good and indefeasible title, and in the case of real property insurable
title, to all properties (real, personal, and mixed, tangible and intangible)
it owns or purports to own, including without limitation the properties
reflected in its books and records and in the Latest Balance Sheet, other
than those disposed of after the date of such balance sheet in the ordinary
course of business consistent with past practice, free and clear of all
Encumbrances, except: as disclosed on SCHEDULE 3.16, as set forth in the
Latest Balance Sheet as securing specific liabilities, liens for Taxes not
yet due and payable, statutory liens (including materialmen's, mechanic's,
repairmen's, landlord's, and other similar liens) arising in connection with
the ordinary course of business securing payments not yet due and payable,
and such imperfections or irregularities of title, if any, as (A) are not
substantial in character, amount, or extent and do not materially detract
from the value of the property subject thereto, (B) do not materially
interfere with either the present or intended use of such property, and (C)
do not, individually or in the aggregate, materially interfere with the
conduct of the Company's or any Subsidiary's normal operations. Except as
disclosed on SCHEDULE 3.16, no financing statement (or other instrument
sufficient or effective as a financing statement) under the Uniform
Commercial Code with respect to any properties of the Company or any
Subsidiary has been filed and is effective in any jurisdiction, and the
Company and the Subsidiaries have not signed any such financing statement (or
other instrument) or any mortgage or security agreement authorizing any
secured party thereunder to file any such financing statement (or other
instrument).
3.17 SUFFICIENCY AND CONDITION OF PROPERTIES. The properties owned,
leased, or used by the Company and the Subsidiaries are (i) in the case of
tangible properties, in good operating
10
condition and repair (ordinary wear and tear excepted) and have been
maintained in accordance with standard industry practice, (ii) suitable for
the purposes used, and (iii) adequate and sufficient for the normal operation
of the Company's and the Subsidiaries' businesses, as presently conducted.
The Company and the Subsidiaries own or have a valid leasehold interest in,
or otherwise have a valid right to use, all such properties. To the best
knowledge of the Company, such properties and their uses conform in all
material respects to all Applicable Laws, and the Company has not, nor has
any Subsidiary, received any notice to the contrary. All such tangible
properties are in the Company's or a Subsidiary's possession or under their
control.
3.18 REAL PROPERTY.
(a) Set forth on SCHEDULE 3.18 is a list, by street address and (in the
case of owned real property) deed reference, of all real property owned or
leased by the Company or any Subsidiary (for purposes of this Section, the
"Real Property"), a summary description of the principal facilities and
structures (if any) located thereon, and, with respect to leased Real
Property, a summary description of the applicable leases and the material
terms thereof. There are no persons (other than the Company or a Subsidiary)
in possession of any portion of the Real Property as lessees, tenants at
sufferance, or trespassers, nor does any person (other than the Company or a
Subsidiary) have a lease, tenancy, or other right of occupancy or use of any
portion of the Real Property. The Real Property has full and free access to
and from public highways, streets, and roads, and the Company has no
knowledge of any pending or threatened Proceeding or any other fact or
condition which would limit or result in the termination of such access. To
the best knowledge of the Company, there exists no Proceeding or court order,
or building code provision, deed restriction, or restrictive covenant
(recorded or otherwise), or other private or public limitation, which might
in any way impede or adversely affect the continued use of the Real Property
by the Company and the Subsidiaries in the manner it is currently used.
(b) To the best knowledge of the Company, all buildings, improvements,
and fixtures situated on the Real Property conform in all material respects
to all Applicable Laws. All the Real Property is zoned for the various
purposes for which such Real Property is being used, and there exists no
pending or, to the best knowledge of the Company, threatened Proceeding which
might adversely affect the validity of such zoning.
(c) The Real Property is connected to and serviced by water, sewage
disposal, gas, telephone, and electric facilities which are adequate for the
current use of the Real Property and, to the best knowledge of the Company,
are in compliance with all Applicable Laws. To the best knowledge of the
Company, all public utilities required for the operation of the Real Property
enter the Real Property through adjoining public streets or, if they pass
through adjoining private land, do so in accordance with valid public
easements, and all utility lines and mains located on
11
the Real Property have been properly dedicated to, and are serviced and
maintained by, the appropriate public or quasi-public entity.
(d) The buildings, improvements, and fixtures situated on the Real
Property are in good condition and repair (excepting ordinary wear and tear
and minor maintenance and repair problems which would normally be associated
with such assets when used in connection with the operation of the Company's
and the Subsidiaries' businesses), free of any patent structural defects of a
material nature.
(e) Neither the whole nor any part of the Real Property is subject to
any pending Proceeding for condemnation or other taking by any Governmental
Entity, and, to the best knowledge of the Company, no such condemnation or
other taking is contemplated or threatened.
(f) There are no unpaid charges, debts, liabilities, claims, or
obligations incurred by or against the Company arising from the construction,
occupancy, ownership, use, or operation of the Real Property, or the
buildings, improvements, or fixtures situated thereon, or the business
operated thereon, which could give rise to any mechanic's or materialmen's or
other statutory lien against the Real Property, or the buildings,
improvements, or fixtures situated thereon, or any part thereof, or for which
the Company or any Subsidiary will be responsible.
(g) Except for the Company's facility at 1800 and 0000 Xxxxx Xxxxxx
Xxxx Xxxxxxxxx in Fort Worth, Texas, the Real Property is not within any area
determined by the Department of Housing and Urban Development to be flood
prone under the Federal Flood Disaster Protection Act of 1973.
(h) The Company has made available to Buyers accurate and complete
copies of all title insurance policies, title reports, other title documents,
surveys, certificates of occupancy, and Permits in the possession of the
Company relating to the Real Property or the buildings, improvements, or
fixtures situated thereon.
3.19 TANGIBLE PERSONAL PROPERTY. Set forth on SCHEDULE 3.19 is a list,
as of the most recent practicable date, of all furniture, equipment,
machinery, computer hardware, materials, motor vehicles, rolling stock,
apparatus, tools, implements, appliances, and other tangible personal
property (other than spare parts, supplies, and inventory) owned, leased, or
used by the Company or any Subsidiary, except for items having a value
individually of less than $10,000 which do not, in the aggregate, have a
value exceeding $100,000. The motor vehicles and rolling stock owned or
leased by the Company and the Subsidiaries are utilized solely for the
transportation by the Company or a Subsidiary, for its own account and not
for the account of others, of inventories, supplies, and other items relating
to the operation of the Company's and the Subsidiaries' businesses, and such
activities do not require the obtainment of any Permit.
12
3.20 LEASED PROPERTY. Set forth on SCHEDULE 3.20 is a list and summary
description of the material terms of all leases under which the Company or
any Subsidiary is the lessee of real or personal property. Each of the
Company and the Subsidiaries has good and valid leasehold interests in all
properties held by it under lease. The lessee under each such lease and its
predecessor under each such lease, if any, has been in peaceable possession
(or remedied any claims relating thereto) of the property covered thereby
since the commencement of the original term of such lease. No waiver,
indulgence, or postponement of the lessee's obligations under any such lease
has been granted by the lessor or of the lessor's obligations thereunder by
the lessee. The lessee under each such lease is not in breach of or in
default under such lease, nor has any event occurred which (with or without
the giving of notice or the passage of time or both) would constitute a
default by the lessee under such lease, and the lessee has not received any
notice from, or given any notice to, the lessor indicating that the lessee or
the lessor is in breach of or in default under such lease. To the best
knowledge of the Company, none of the lessors under such leases is in breach
thereof or in default thereunder. The lessee under each such lease has full
right and power to occupy or possess, as the case may be, all the property
covered by such lease.
3.21 SPECIAL REPRESENTATION REGARDING SUBSCRIBERS. As of March 31,
1998, the Company had a total of approximately 167,000 subscribers under
contract with the Company regarding the provision of Internet services.
3.22 RECEIVABLES. All receivables (including accounts and notes
receivable, employee advances, and accrued interest receivables) of the
Company and the Subsidiaries as reflected on the Latest Balance Sheet or
arising since the date thereof are valid obligations of the respective makers
thereof, have arisen in the ordinary course of business for goods or services
delivered or rendered, are not subject to any valid defenses, counterclaims,
or set offs, and have been collected or are collectible in full at their
recorded amounts in the ordinary course of business without the expectation
of the need to resort to litigation or other extraordinary collection
efforts, net of all cash discounts and doubtful accounts as reflected on the
Latest Balance Sheet (in the case of receivables so reflected) or on the
books of the Company and the Subsidiaries (in the case of receivables arising
since the date thereof). The allowances for doubtful accounts reflected on
the Latest Balance Sheet and on the books of the Company and the Subsidiaries
were determined in accordance with U.S. GAAP and were and are reasonable in
light of historical data and other relevant information.
3.23 INTELLECTUAL PROPERTY. Except for the trademarks, service marks,
and trade names set forth on SCHEDULE 3.23, the Company and the Subsidiaries
do not own, hold, use, or have pending any Intellectual Property. The
Company and the Subsidiaries own or have rights to use all trademarks,
service marks, and trade names, free from burdensome restrictions, that are
necessary for the operation of their respective businesses as presently
conducted. The Company and the Subsidiaries have not received any written
notice or claim of any infringement, violation,
13
misuse, or misappropriation by the Company or any Subsidiary of any
Intellectual Property owned or purported to be owned by any other person.
3.24 PERMITS. To the best knowledge of the Company, except for
qualifications or licenses to do business in the states expressly listed on
SCHEDULE 3.2 as states with which the Company has a pending application for
qualification or license, the Company and the Subsidiaries hold all Permits
necessary or required for the conduct of the business of the Company and the
Subsidiaries as currently conducted. Each of such Permits is in full force
and effect, the Company or such Subsidiary is in compliance with all its
obligations with respect thereto, and, to the best knowledge of the Company,
no event has occurred which permits, or with or without the giving of notice
or the passage of time or both would permit, the revocation or termination of
any thereof. Except as disclosed on SCHEDULE 3.24, no notice has been issued
by any Governmental Entity and no Proceeding is pending or, to the best
knowledge of the Company, threatened with respect to any alleged failure by
the Company or a Subsidiary to have any Permit the absence of which would
have a Material Adverse Effect.
3.25 AGREEMENTS.
(a) Set forth on SCHEDULE 3.25 is a list of all the following
agreements, arrangements, and understandings (written or oral, formal or
informal) (collectively, for purposes of this Section, "agreements") to which
the Company or any Subsidiary is a party or by which the Company or any
Subsidiary or any of their respective properties is otherwise bound:
(i) collective bargaining agreements and similar agreements
with employees as a group;
(ii) employee benefit agreements, trusts, plans, funds, or
other arrangements of any nature;
(iii) agreements with any current or former shareholder,
director, officer, employee, consultant, or advisor or any affiliate of
any such person;
(iv) agreements between or among the Company and any of the
Subsidiaries;
(v) indentures, mortgages, security agreements, notes, loan
or credit agreements, or other agreements relating to the borrowing of
money by the Company or any Subsidiary or to the direct or indirect
guarantee or assumption by the Company or any Subsidiary of any
obligation of others, including any agreement that has the economic
effect although not the legal form of any of the foregoing;
14
(vi) agreements relating to the acquisition or disposition
of assets, other than those entered into in the ordinary course of
business consistent with past practice;
(vii) agreements relating to the acquisition or disposition
of any interest in any business enterprise;
(viii) agreements with respect to the lease of real or
personal property;
(ix) agreements concerning the management or operation of
any real property;
(x) any broker, distributor, dealer, manufacturer's
representative, sales, agency, sales promotion, advertising, market
research, marketing, consulting, research and development,
maintenance, service, or repair agreement involving more than $10,000;
(xi) license, royalty, or other agreements relating to
Intellectual Property;
(xii) partnership, joint venture, and profit sharing
agreements;
(xiii) agreements with any Governmental Entity;
(xiv) agreements relating to the release or disposal of
hazardous material (as such term is defined in Section 3.27);
(xv) agreements in the nature of a settlement or a
conciliation agreement arising out of any claim asserted by any other
person;
(xvi) agreements containing any covenant limiting the
freedom of the Company or any Subsidiary to engage in any line of
business or compete with any other person in any geographic area or
during any period of time;
(xvii) powers of attorney granted by the Company or any
Subsidiary in favor of any person;
(xviii) agreements not made in the ordinary course of
business; and
(xix) other agreements, whether or not made in the ordinary
course of business, that are material to the business, assets,
results of operations, condition (financial or otherwise), or
prospects of the Company and the Subsidiaries considered as a whole.
15
(b) The Company has made available to Buyers accurate and complete
copies of the agreements listed on SCHEDULE 3.25. Each of such agreements is
a valid and binding agreement of the Company and the Subsidiaries (to the
extent each is a party thereto) and (to the best knowledge of the Company)
the other party or parties thereto, enforceable against the Company and the
Subsidiaries (to the extent each is a party thereto) and (to the best
knowledge of the Company) such other party or parties in accordance with its
terms. Except as set forth on SCHEDULE 3.25, neither the Company nor any
Subsidiary is in breach of or in default under, nor has any event occurred
which (with or without the giving of notice or the passage of time or both)
would constitute a default by the Company or any Subsidiary under, any of
such agreements, and neither the Company nor any Subsidiary has received any
notice from, or given any notice to, any other party indicating that the
Company or any Subsidiary is in breach of or in default under any of such
agreements. To the best knowledge of the Company, no other party to any of
such agreements is in breach of or in default under such agreements, nor has
any assertion been made by the Company or any Subsidiary of any such breach
or default.
(c) Neither the Company nor any Subsidiary has received notice of any
plan or intention of any other party to any agreement to exercise any right
of offset with respect to, or any right to cancel or terminate, any
agreement, and neither the Company nor any Subsidiary knows of any fact or
circumstance that would justify the exercise by any such other party of such
a right other than the automatic termination of such agreement in accordance
with its terms. Neither the Company nor any Subsidiary currently
contemplates, or has reason to believe any other person currently
contemplates, any amendment or change to any agreement, which amendment or
change could have a Material Adverse Effect.
3.26 ERISA.
(a) Set forth on SCHEDULE 3.26 is a list identifying each "employee
benefit plan", as defined in Section 3(3) of ERISA, (i) which is subject to
any provision of ERISA, (ii) which is maintained, administered, or
contributed to by the Company or any affiliate of the Company, and (iii)
which covers any employee or former employee of the Company or any affiliate
of the Company or under which the Company or any affiliate of the Company has
any liability. The Company has made available to Buyers accurate and
complete copies of such plans (and, if applicable, the related trust
agreements) and all amendments thereto and written interpretations thereof,
together with (i) the three most recent annual reports (Form 5500 including,
if applicable, Schedule B thereto) prepared in connection with any such plan
and (ii) the most recent actuarial valuation report prepared in connection
with any such plan. Such plans are referred to in this Section as the
"Employee Plans." For purposes of this Section only, an "affiliate" of any
person means any other person which, together with such person, would be
treated as a single employer under Section 414 of the Code. The only
Employee Plans which individually or collectively
16
would constitute an "employee pension benefit plan" as defined in Section
3(2) of ERISA are identified as such on SCHEDULE 3.26.
(b) Except as otherwise identified on SCHEDULE 3.26, (i) no Employee
Plan constitutes a "multiemployer plan", as defined in Section 3(37) of ERISA
(for purposes of this Section, a "Multiemployer Plan"), (ii) no Employee Plan
is maintained in connection with any trust described in Section 501(c)(9) of
the Code, (iii) no Employee Plan is subject to Title IV of ERISA or to the
minimum funding standards of ERISA and the Code, and (iv) during the past
five years, neither the Company nor any of its affiliates have made or been
required to make contributions to any Multiemployer Plan. There are no
accumulated funding deficiencies as defined in Section 412 of the Code
(whether or not waived) with respect to any Employee Plan. The fair market
value of the assets held with respect to each Employee Plan which is an
employee pension benefit plan, as defined in Section 3(2) of ERISA, exceeds
the actuarially determined present value of all benefit liabilities accrued
under such Employee Plan (whether or not vested) determined using reasonable
actuarial assumptions. Neither the Company nor any affiliate of the Company
has incurred any material liability under Title IV of ERISA arising in
connection with the termination of, or complete or partial withdrawal from,
any plan covered or previously covered by Title IV of ERISA. The Company and
all of the affiliates of the Company have paid and discharged promptly when
due all liabilities and obligations arising under ERISA or the Code of a
character which if unpaid or unperformed might result in the imposition of a
lien against any of the assets of the Company or any Subsidiary. Nothing
done or omitted to be done and no transaction or holding of any asset under
or in connection with any Employee Plan has or will make the Company or any
Subsidiary or any director or officer of the Company or any Subsidiary
subject to any liability under Title I of ERISA or liable for any Tax
pursuant to Section 4975 of the Code that could have a Material Adverse
Effect. There are no pending or, to the best knowledge of the Company,
threatened claims by or on behalf of the Employee Plans, or by any
participant therein, alleging a breach or breaches of fiduciary duties or
violations of Applicable Laws which could result in liability on the part of
the Company, its officers or directors, or such Employee Plans, under ERISA
or any other Applicable Law and there is no basis for any such claim.
(c) Each Employee Plan which is intended to be qualified under Section
401(a) of the Code is so qualified and has been so qualified since the date
of its adoption, and each trust forming a part thereof is exempt from Tax
pursuant to Section 501(a) of the Code. Accurate and complete copies of the
most recent IRS determination letters with respect to any such Plans have
been made available to Buyers. Each Employee Plan has been maintained in
compliance with its terms and with the requirements prescribed by all
Applicable Laws, including but not limited to ERISA and the Code, which are
applicable to such Plans.
17
(d) There is set forth on SCHEDULE 3.26 a list of 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 or
post-retirement insurance, compensation, or benefits which (i) is not an
Employee Plan, (ii) is entered into, maintained, or contributed to, as the
case may be, by the Company or any affiliate of the Company, and (iii) covers
any employee or former employee of the Company or any affiliate of the
Company or under which the Company or any affiliate of the Company has any
liability. Such contracts, plans, and arrangements as are described in the
preceding sentence are referred to for purposes of this Section as the
"Benefit Arrangements." Each Benefit Arrangement has been maintained in
substantial compliance with its terms and with the requirements prescribed by
Applicable Laws.
(e) Neither the Company nor any affiliate of the Company has performed
any act or failed to perform any act, and there is no contract, agreement,
plan, or arrangement covering any employee or former employee of the Company
or any affiliate 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 162(a)(1) or 280G of the Code, or could give rise to
any penalty or excise Tax pursuant to Section 4980B or 4999 of the Code.
(f) Except as disclosed on SCHEDULE 3.26, there has been no amendment,
written interpretation, or announcement (whether or not written) by the
Company or any affiliate of the Company of or relating to, or change in
employee participation or coverage under, any Employee Plan or Benefit
Arrangement which would increase materially the expense of maintaining such
Employee Plan or Benefit Arrangement above the level of the expense incurred
in respect thereof for the most recent fiscal year.
3.27 ENVIRONMENTAL MATTERS.
(a) Except as disclosed on SCHEDULE 3.27:
(i) to the best knowledge of the Company, the properties,
operations, and activities of the Company and the Subsidiaries comply
with all Applicable Environmental Laws (as defined below);
(ii) the Company and the Subsidiaries and the properties,
operations, and activities of the Company and the Subsidiaries are
not subject to any existing, pending, or, to the best knowledge of
the Company, threatened Proceeding under, or to any remedial
obligations under, any Applicable Environmental Laws;
18
(iii) to the best knowledge of the Company, all Permits, if
any, required to be obtained by the Company or any Subsidiary under
any Applicable Environmental Laws in connection with any aspect of
the business of the Company or the Subsidiaries, including without
limitation those relating to the treatment, storage, disposal, or
release of a hazardous material (as defined below), have been duly
obtained and are in full force and effect, and the Company and the
Subsidiaries are in compliance with the terms and conditions of all
such Permits;
(iv) to the best knowledge of the Company, the Company and the
Subsidiaries have satisfied and are currently in compliance with all
financial responsibility requirements applicable to their respective
operations and imposed by any Governmental Entity under any
Applicable Environmental Laws, and the Company and the Subsidiaries
have not received any notice of noncompliance with any such financial
responsibility requirements;
(v) to the best knowledge of the Company, there are no
physical or environmental conditions existing on any property owned
or leased by the Company or any Subsidiary or resulting from the
Company's or any Subsidiary's operations or activities, past or
present, at any location, that would give rise to any on-site or
off-site remedial obligations under any Applicable Environmental
Laws;
(vi) to the best knowledge of the Company, since the effective
date of the requirements of Applicable Environmental Laws, all
hazardous materials generated by the Company or any Subsidiary or
used in connection with their respective properties, operations, or
activities have been transported only by carriers authorized under
Applicable Environmental Laws to transport such materials, and have
been disposed of only at treatment, storage, and disposal facilities
authorized under Applicable Environmental Laws to treat, store, or
dispose of such materials, and, to the best knowledge of the Company,
such carriers and facilities have been and are operating in
compliance with such authorizations and are not the subject of any
existing, pending, or threatened Proceeding in connection with any
Applicable Environmental Laws;
(vii) to the best knowledge of the Company, there has been no
exposure of any person or property to hazardous materials, nor has
there been any release of hazardous materials into the environment,
by the Company or any Subsidiary or in connection with their
respective properties, operations, or activities that could
reasonably be expected to give rise to any claim for damages or
compensation; and
(viii) the Company and the Subsidiaries shall make available to
Buyers all internal and external environmental audits and studies and
all correspondence on substantial environmental matters in the
possession of the Company and the Subsidiaries relating to
19
any of the current or former properties, operations, or activities of
the Company and the Subsidiaries, provided that the Company and the
Subsidiaries shall not be required to make available any such audits,
studies, or correspondence that may be subject to the attorney-client
privilege or similar privilege.
(b) For purposes of this Agreement, "Applicable Environmental Laws"
means any and all Applicable Laws pertaining to health, safety, or the
environment in effect (currently or hereafter) in any and all jurisdictions
in which the Company or any Subsidiary has conducted operations or activities
or owned or leased property, including, without limitation, the Clear Air
Act, as amended, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, the Rivers and Harbors Act of 1899, as
amended, the Federal Water Pollution Control Act, as amended, the
Occupational Safety and Health Act of 1970, as amended, the Resource
Conservation and Recovery Act of 1976, as amended, the Safe Drinking Water
Act, as amended, the Toxic Substances Control Act, as amended, the Superfund
Amendments and Reauthorization Act of 1986, as amended, the Hazardous
Materials Transportation Act, as amended, the Texas Water Code, the Texas
Solid Waste Disposal Act, and other environmental conservation or protection
laws. For purposes of this Agreement, the term "hazardous material" means
(i) any substance which is listed or defined as a hazardous substance,
hazardous constituent, or solid waste pursuant to any Applicable
Environmental Laws and (ii) petroleum (including crude oil and any fraction
thereof), natural gas, and natural gas liquids.
(c) The representations and warranties contained in this Section would
continue to be true and correct following disclosure to the applicable
Governmental Entities of all relevant facts, conditions, and circumstances,
if any, pertaining to the properties, operations, and activities of the
Company and the Subsidiaries.
3.28 LABOR RELATIONS.
(a) Except as disclosed on SCHEDULE 3.28, (i) there are no collective
bargaining agreements or other labor union contracts applicable to any
employees to or by which the Company or any Subsidiary is a party or is
bound, no such agreement or contract has been requested by any employee or
group of employees of the Company or any Subsidiary, and no discussions have
occurred with respect thereto by management of the Company or any Subsidiary
with any such employees; (ii) no employees of the Company or any Subsidiary
are represented by any labor organization, collective bargaining
representative, or group of employees; (iii) no labor organization,
collective bargaining representative, or group of employees claims to
represent a majority of the employees of the Company or any Subsidiary in an
appropriate unit of the Company or any Subsidiary; (iv) neither the Company
nor any Subsidiary is aware of or involved with any representational campaign
or other organizing activities by any union or other organization or group
seeking to become the collective bargaining representative of any of its
20
employees; (v) neither the Company nor any Subsidiary is obligated to bargain
collectively with respect to wages, hours, and other terms and conditions of
employment with any recognized or certified labor organization, collective
bargaining representative, or group of employees; and (vi) neither the
Company nor any Subsidiary has experienced or is aware of any strikes, work
stoppages, work slowdowns, or lockouts or any threats thereof by or with
respect to any of its employees.
(b) To the best knowledge of the Company, the Company and the
Subsidiaries are in compliance in all material respects with all Applicable
Laws pertaining to employment and employment practices and wages, hours, and
other terms and conditions of employment in respect of their respective
employees and have no accrued liability for any arrears of wages or any Taxes
or penalties for failure to comply with any thereof. To the best knowledge
of the Company, the Company and the Subsidiaries are not engaged in any
unfair labor practices or unlawful employment practices. There is no pending
or, to the best knowledge of the Company, threatened Proceeding against or
involving the Company or any Subsidiary by or before, and neither the Company
nor any Subsidiary is subject to any judgment, order, writ, injunction, or
decree of or inquiry from, the National Labor Relations Board, the Equal
Employment Opportunity Commission, the Department of Labor, or any other
Governmental Entity in connection with any current, former, or prospective
employee of the Company or any Subsidiary.
(c) The Company believes that relations with the employees of the
Company and the Subsidiaries are satisfactory.
3.29 EMPLOYEES. Set forth on SCHEDULE 3.29 is a list of:
(a) all directors and officers of the Company and the Subsidiaries,
and
(b) the name, social security number, and dates of employment by the
Company or a Subsidiary of each employee, agent, and consultant of the
Company and the Subsidiaries as of March 31, 1998, whose annual rate of
compensation in the current fiscal year will equal or exceed $60,000,
together with the total amounts of salary, bonuses, and other compensation
paid or payable by the Company or any Subsidiary to each such person for
the current fiscal year and the immediately preceding fiscal year.
Except as disclosed on SCHEDULE 3.29, no severance payment, stay-on or
incentive payment, or similar obligation will be owed by the Company or any
Subsidiary to any of their respective directors, officers, or employees upon
consummation of, or as a result of, the transactions contemplated by this
Agreement, nor will any such director, officer, or employee be entitled to an
increase in severance payments or other benefits as a result of the
transactions contemplated by this Agreement in the event of the subsequent
termination of his or her employment.
21
3.30 INSIDER INTERESTS. Except as disclosed on SCHEDULE 3.30 no
shareholder, director, officer, or employee of the Company or any Subsidiary
or any associate of any such shareholder, director, officer, or employee is
presently, directly or indirectly, a party to any transaction with the
Company or any Subsidiary, including, without limitation, any agreement,
arrangement, or understanding, written or oral, providing for the employment
of, furnishing of services by, rental of real or personal property from, or
otherwise requiring payments to any such shareholder, director, officer,
employee, or associate. To the best knowledge of the Company, no
shareholder, director, officer, or employee of the Company or any Subsidiary
or any associate of any such shareholder, director, officer, or employee
owns, directly or indirectly, any interest in, or serves as a director,
officer, or employee of, any customer, supplier, or competitor of the Company
or any Subsidiary. For purposes of this Section only, an "associate" of any
shareholder, director, officer, or employee means (i) a spouse, parent,
sibling, child, mother- or father-in-law, son- or daughter-in-law, or
brother- or sister-in-law of such shareholder, director, officer, or employee
or (ii) any corporation, partnership, trust, or other entity in which such
shareholder, director, officer, or employee or associate thereof has a
substantial ownership or beneficial interest (other than an interest in a
public corporation which does not exceed three percent of its outstanding
securities) or is a director, officer, partner, or trustee or person holding
a similar position.
3.31 INSURANCE. The Company and the Subsidiaries maintain with sound
and reputable insurers, and there are currently in full force and effect,
policies of insurance with respect to their respective assets and operations
against such casualties and contingencies of such types and in such amounts
as are customary for corporations of similar size engaged in similar lines of
business. All premiums due and payable with respect to such policies have
been timely paid. No notice of cancellation of, or indication of an intention
not to renew, any such policy has been received by the Company or any
Subsidiary. During the past three years, no application by the Company or
any Subsidiary for insurance with respect to its assets or operations has
been denied for any reason.
3.32 FINANCIAL REQUIREMENTS. Set forth on SCHEDULE 3.32 is a list and
summary description of all bonds, deposits, financial assurance requirements,
and insurance coverage required, to the best knowledge of the Company, to be
submitted to Governmental Entities for the continued ownership and operation
of the business and assets of the Company and the Subsidiaries.
3.33 BANK ACCOUNTS AND POWERS OF ATTORNEY. Set forth on SCHEDULE 3.33
are: (i) the name and address of each bank or other financial institution
with which the Company or any Subsidiary has an account or safe deposit box
or vault, the account and safe deposit box and vault numbers thereof, the
purpose of each thereof, and the names of all persons authorized to draw
thereon or to have access thereto, (ii) the names of all persons authorized
to borrow funds on behalf of the Company or any Subsidiary and the names and
addresses of all entities from which
22
they are authorized to borrow funds, and (iii) the names of all persons, if
any, holding proxies, powers of attorney, or other like instruments from the
Company or any Subsidiary. No such proxies, powers of attorney, or other
like instruments are irrevocable.
3.34 INVESTMENTS. The temporary cash investments reflected on the
balance sheets included in the Financial Statements have maturities not more
than 12 months from the date of acquisition by the Company or a Subsidiary
and consist of: (i) securities issued or guaranteed or insured by the United
States of America or any agency or instrumentality thereof; (ii) time deposit
certificates of deposit and banker's acceptances of commercial banks
organized under the laws of the United States of America or any state thereof
with total assets of more than $50,000,000; (iii) commercial paper issued by
any person incorporated in the United States rated at least A-2 or the
equivalent thereof by Standard & Poor's Corporation or at least P-2 or the
equivalent thereof by Xxxxx'x Investors Service, Inc.; or (iv) shares of
money market funds substantially all of whose assets are comprised of
securities or assets of the type described in clauses (i) through (iii) above.
3.35 BOOKS AND RECORDS. All the books and records of the Company and
the Subsidiaries, including all personnel files, employee data, and other
materials relating to employees, are substantially complete and correct in
all material respects, have been maintained in accordance with good business
practice and, to the best knowledge of the Company, all Applicable Laws, and,
in the case of the books of account, have been prepared and maintained in
accordance with U.S. GAAP. Such books and records fairly reflect, in
reasonable detail, all material transactions, revenues, expenses, assets, and
liabilities of the Company and the Subsidiaries.
3.36 ILLEGAL PAYMENTS. To the best knowledge of the Company, none of
the Company or any Subsidiary or any director, officer, employee, or agent of
the Company or any Subsidiary has, directly or indirectly, paid or delivered
any fee, commission, or other sum of money or item of property however
characterized to any broker, finder, agent, government official, or other
person, in the United States or any other country, in any manner related to
the business or operations of the Company or any Subsidiary, which the
Company or any Subsidiary or any such director, officer, employee, or agent
knows or has reason to believe to have been illegal under any Applicable Law.
3.37 OFFERINGS OF SECURITIES. Except as disclosed on SCHEDULE 3.14,
all securities which have been offered or sold by the Company or any
Subsidiary have been registered pursuant to the Securities Act and applicable
state securities laws or were offered and sold pursuant to valid exemptions
therefrom. No registration statement, prospectus, private offering
memorandum, or other information furnished (whether in writing or orally) to
any offeree or purchaser of such securities, at the time such registration
statement became effective (in the case of a registered offering) or at the
time of delivery of such registration statement, prospectus, private offering
23
memorandum, or other information, contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements contained therein, in
light of the circumstances under which they were made, not misleading. To
the extent that any such securities were registered under the Securities Act,
the applicable registration statements and prospectuses filed with the
Securities and Exchange Commission pursuant to the Securities Act, at the
time each such registration statement became effective, and at all times when
delivery of a prospectus was required pursuant to the Securities Act,
complied in all material respects with the requirements of the Securities Act
and the rules and regulations thereunder.
3.38 REGISTRATION RIGHTS. Except for demand registration rights
granted to Ascend Communications, Inc. and except for "piggy-back"
registration rights granted to Xxxxxxx Xxxxxxx Xxxxxxxxx, Ascend
Communications, Inc., and holders of convertible notes issued by the Company
in 1996, and pursuant to the Registration Agreement (as defined below), the
Company has no obligation to register any of its securities under the
Securities Act.
3.39 BROKERAGE FEES. Except for fees payable to Columbia Capital
Corporation pursuant to an engagement letter with the Company dated September
19, 1997, neither the Company nor any of its affiliates has retained any
financial advisor, broker, agent, or finder or paid or agreed to pay any
financial advisor, broker, agent, or finder on account of this Agreement or
any transaction contemplated hereby. The Company shall indemnify and hold
harmless Buyers from and against any and all losses, claims, damages, and
liabilities (including legal and other expenses reasonably incurred in
connection with investigating or defending any claims or actions) with
respect to any finder's fee, brokerage commission, or similar payment in
connection with any transaction contemplated hereby asserted by any person on
the basis of any act or statement made or alleged to have been made by the
Company or any of its affiliates.
3.40 DISCLOSURE. No representation or warranty made by the Company in
this Agreement, and no statement of the Company contained in any document,
certificate, or other writing furnished or to be furnished by the Company
pursuant hereto or in connection herewith, contains or will contain, at the
time of delivery, any untrue statement of a material fact or omits or will
omit, at the time of delivery, to state any material fact necessary in order
to make the statements contained therein, in light of the circumstances under
which they are made, not misleading. The Company knows of no matter (other
than matters of a general economic character not relating solely to the
Company or any Subsidiary in any specific manner) which has not been
disclosed to Buyers pursuant to this Agreement which has or is reasonably
likely to have a Material Adverse Effect on the Company. The Company has
delivered or made available to Buyers accurate and complete copies of all
agreements, documents, and other writings referred to or listed in this
Article III or any Schedule hereto.
24
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF BUYERS
Each Buyer represents and warrants to the Company, severally and not
jointly, and only with respect to itself, that:
4.1 ORGANIZATION AND FORMATION. Each corporate Buyer is duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
corporate authority to own, lease, and operate its properties and to carry on
its business as now being conducted. Each partnership Buyer is duly formed
and is in good standing (as applicable) under the laws of the jurisdiction of
its formation. No actions or proceedings to dissolve any Buyer are pending
or, to the best knowledge of Buyers, threatened.
4.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Each Buyer has full power
and authority to execute, deliver, and perform this Agreement and the
Ancillary Documents to which it is a party and to consummate the transactions
contemplated hereby and thereby. The execution, delivery, and performance by
Buyers of this Agreement and the Ancillary Documents to which they are
parties, and the consummation by them of the transactions contemplated hereby
and thereby, have been duly authorized by all necessary corporate or
partnership action, as applicable, of Buyers. This Agreement has been duly
executed and delivered by Buyers and constitutes, and each Ancillary Document
executed or to be executed by Buyers has been, or when executed will be, duly
executed and delivered by each Buyer and constitute, or when executed and
delivered will constitute, valid and legally binding obligations of each
Buyer, enforceable against each Buyer in accordance with their respective
terms, except that such enforceability may be limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium, and similar laws
affecting creditors' rights generally and (ii) equitable principles which may
limit the availability of certain equitable remedies (such as specific
performance) in certain instances.
4.3 NONCONTRAVENTION. The execution, delivery, and performance by
Buyers of this Agreement and the Ancillary Documents to which they are
parties and the consummation by them of the transactions contemplated hereby
and thereby do not and will not (i) conflict with or result in a violation of
any provision of the charter or bylaws (or other governing documents), as
applicable, of Buyers, (ii) conflict with or result in a violation of any
provision of, or constitute (with or without the giving of notice or the
passage of time or both) a default under, or give rise (with or without the
giving of notice or the passage of time or both) to any right of termination,
cancellation, or acceleration under, or require any consent, approval,
authorization, or waiver of any party to, any bond, debenture, note,
mortgage, indenture, lease, contract, agreement, or other instrument or
obligation to which any Buyer is a party or by which any Buyer or any of its
25
properties may be bound or any Permit held by a Buyer, (iii) result in the
creation or imposition of any Encumbrance upon the properties of Buyers, or
(iv) violate any Applicable Law binding upon Buyers, except, in the case of
clauses (ii), (iii), and (iv) above, for any such conflicts, violations,
defaults, terminations, cancellations, accelerations, or Encumbrances which
would not, individually or in the aggregate, have a material adverse effect
on the business, assets, results of operations, condition (financial or
otherwise), or prospects of such Buyer and its subsidiaries considered as a
whole or on the ability of such Buyer to consummate the transactions
contemplated hereby.
4.4 GOVERNMENTAL APPROVALS. No consent, approval, order, or
authorization of, or declaration, filing, or registration with, any
Governmental Entity is required to be obtained or made by any Buyer in
connection with the execution, delivery, or performance by Buyers of this
Agreement and the Ancillary Documents to which they are parties or the
consummation by them of the transactions contemplated hereby or thereby,
other than as set forth on SCHEDULE 4.4.
4.5 DISCLOSURE OF INFORMATION. Buyers represent that they have had an
opportunity to ask questions of and receive answers from the Company
regarding the Company and its business, assets, results of operation, and
financial condition and the terms and conditions of the issuance of the
Shares. The foregoing, however, shall not limit or modify the
representations and warranties of the Company in Article III, shall not limit
the rights of Buyers prior to and in anticipation of any issuance of the
Shares pursuant hereto, and shall not limit the disclosure requirements of
applicable federal and state securities laws.
4.6 INVESTMENT EXPERIENCE. Each Buyer acknowledges that it is able to
fend for itself, can bear the economic risk of its investment in the Shares,
and has such knowledge and experience in financial and business matters that
it is capable of evaluating the merits and risks of an investment in the
Shares. Each Buyer is an accredited investor as such term is defined in
Regulation D promulgated under the Securities Act.
4.7 RESTRICTED SECURITIES. Each Buyer understands that the Shares will
not have been registered pursuant to the Securities Act or any applicable
state securities laws, that the Shares will be characterized as "restricted
securities" under federal securities laws, and that under such laws and
applicable regulations the Shares cannot be sold or otherwise disposed of
without registration under the Securities Act or an exemption therefrom. In
this connection, each Buyer represents that it is familiar with Rule 144
promulgated under the Securities Act, as currently in effect, and understands
the resale limitations imposed thereby and by the Securities Act. Stop
transfer instructions may be issued to the transfer agent for securities of
the Company (or a notation may be made in the appropriate records of the
Company) in connection with the Shares.
26
4.8 FURTHER LIMITATIONS ON DISPOSITION. It is agreed and understood by
each Buyer that the Shares shall be subject to the Company's right of first
offer as set forth in Article VI.
4.9 LEGEND. It is agreed and understood by Buyers that the
certificates representing the Shares shall each conspicuously set forth on
the face or back thereof, in addition to any legends required by Applicable
Law or other agreement, a legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. SUCH SHARES MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED UNLESS THEY ARE FIRST REGISTERED PURSUANT TO THAT ACT AND
APPLICABLE STATE SECURITIES LAWS OR UNLESS THE CORPORATION RECEIVES A
WRITTEN OPINION OF COUNSEL, WHICH OPINION AND COUNSEL ARE
SATISFACTORY TO THE CORPORATION, TO THE EFFECT THAT SUCH REGISTRATION
IS NOT REQUIRED. THE RIGHT TO SELL OR OTHERWISE TRANSFER THE SHARES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO CERTAIN RESTRICTIONS
SET FORTH IN A STOCK PURCHASE AGREEMENT DATED MAY 7, 1998 AMONG THE
CORPORATION AND CERTAIN SHAREHOLDERS, A COPY OF WHICH AGREEMENT IS ON
FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF THE CORPORATION.
4.10 INVESTMENT INTENT. Each Buyer is acquiring its portion of the
Shares for its own account for investment and not with a view to, or for sale
or other disposition in connection with, any distribution of all or any part
thereof, except in compliance with applicable federal and state securities
laws.
4.11 LEGAL PROCEEDINGS. There are no Proceedings pending or, to the
best knowledge of Buyers, threatened seeking to restrain, prohibit, or obtain
damages or other relief in connection with this Agreement or the transactions
contemplated hereby.
4.12 BROKERAGE FEES. No Buyer nor any of Buyers' affiliates has
retained any financial advisor, broker, agent, or finder or paid or agreed to
pay any financial advisor, broker, agent, or finder on account of this
Agreement or any transaction contemplated hereby. Buyers shall indemnify and
hold harmless the Company from and against any and all losses, claims,
damages, and liabilities (including legal and other expenses reasonably
incurred in connection with investigating or defending any claims or actions)
with respect to any finder's fee, brokerage commission, or similar payment in
connection with any transaction contemplated hereby asserted by any person on
the basis of any act or statement made or alleged to have been made by Buyers
or any of their affiliates.
27
4.13 DISCLOSURE. No representation or warranty made by Buyers in this
Agreement, and no statement of Buyers contained in any document, certificate,
or other writing furnished or to be furnished by Buyers pursuant hereto or in
connection herewith, contains or will contain, at the time of delivery, any
untrue statement of a material fact or omits, or will omit, at the time of
delivery, to state any material fact necessary in order to make the
statements contained therein, in the light of the circumstances under which
they are made, not misleading.
ARTICLE V.
ADDITIONAL AGREEMENTS
5.1 CONFIDENTIALITY. Buyers agree that all Confidential Information
(as defined below) shall be kept confidential by Buyers and shall not be
disclosed by Buyers in any manner whatsoever; provided, however, that (i) any
of such Confidential Information may be disclosed to such directors,
officers, employees, and authorized representatives (including without
limitation attorneys, accountants, consultants, bankers, and financial
advisors) of Buyers (collectively, for purposes of this Section, "Buyer
Representatives"), and to potential acquirers of the Shares (other than to
competitors of the Company, as defined according to SCHEDULE 6.1(b), which
shall require the consent of the Company, such consent not to be unreasonably
withheld) as need to know such information for the purpose of evaluating the
transactions contemplated hereby or the condition of the Company, (ii) any
disclosure of Confidential Information may be made to the extent to which the
Company consents in writing, and (iii) Confidential Information may be
disclosed by a Buyer or any Buyer Representative to the United States Small
Business Administration or the extent that a Buyer or Buyer Representative is
legally compelled to do so, provided that, prior to making such disclosure,
such Buyer or Buyer Representative, as the case may be, advises and consults
with the Company regarding such disclosure and provided further that such
Buyer or Buyer Representative, as the case may be, discloses only that
portion of the Confidential Information as is legally required. The term
"Confidential Information," as used herein, means all information
(irrespective of the form of communication) obtained by or on behalf of
Buyers from the Company or their representatives pursuant to Section 5.9
hereof and all similar information obtained from the Company or their
representatives by or on behalf of Buyers prior to the date of this
Agreement, other than information which (i) was or becomes generally
available to the public other than as a result of disclosure by Buyers or any
Buyer Representative, (ii) was or becomes available to Buyers on a
nonconfidential basis prior to disclosure to Buyers by the Company or its
representatives, or (iii) was or becomes available to Buyers from a source
other than the Company and its representatives, provided that such source is
not known by Buyers to be bound by a confidentiality agreement with the
Company.
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5.2 REGISTRATION RIGHTS AGREEMENT. The Company and Buyers shall enter
into a registration rights agreement (the "Registration Agreement") at the
Closing pursuant to which the Company shall agree to register the Common
Stock issuable upon conversion of the Shares under the Securities Act on the
terms and subject to the conditions set forth therein. The Registration
Agreement shall be in substantially the form set forth as EXHIBIT 5.2.
5.3 NONCOMPETITION AGREEMENTS. The Company shall enter into a
noncompetition and nondisclosure agreement (the "Noncompetition Agreement")
at the Closing with each individual listed on SCHEDULE 5.3(a), pursuant to
which such persons shall agree not to compete, directly or indirectly, with
the Company for the period and in the area of interest set forth therein.
Each Noncompetition Agreement shall be in substantially the form set forth as
EXHIBIT 5.3(b).
5.4 NONDISCLOSURE AGREEMENTS. The Company shall enter into a
nondisclosure agreement (the "Nondisclosure Agreement") at the Closing with
each individual listed on SCHEDULE 5.4(a). Each Nondisclosure Agreement
shall be in substantially the form set forth as EXHIBIT 5.4(b).
5.5 PUBLIC ANNOUNCEMENTS. Except as may be required by Applicable Law,
no Buyer, on the one hand, or the Company, on the other, shall issue any
press release or otherwise make any public statement with respect to this
Agreement or the transactions contemplated hereby without the prior written
consent of the other parties (which consent shall not be unreasonably
withheld). Any such press release or public statement required by Applicable
Law shall only be made after reasonable notice to the other parties.
5.6 FEES AND EXPENSES.
(a) The Company shall, promptly after receiving a billing statement
regarding same, pay all reasonable fees and expenses of legal counsel to
Buyers, as incurred in connection with the negotiation and preparation of
this Agreement and the Ancillary Documents and in connection with the
transactions contemplated hereby and thereby; provided, however, that the
Company shall not be required to pay pursuant to this paragraph more than
$40,000 in the aggregate.
(b) Except as otherwise expressly provided in this Agreement, all fees
and expenses, including fees and expenses incurred in connection with this
Agreement and the transactions contemplated hereby, shall be paid by the
party incurring such fee or expense.
5.7 TRANSFER TAXES. All sales, transfer, filing, recordation,
registration, stamp, and similar Taxes and fees arising from or associated
with the sale and transfer of the Shares as contemplated hereunder, whether
levied on Buyers or Seller, shall be borne by the Company and the Company
shall file all necessary documentation with respect to, and make all payments
of, such Taxes and fees on a timely basis.
29
5.8 USE OF PROCEEDS. The Company will use the proceeds from the sale
of the Shares for: (i) capital expenditures associated with the Company's
existing business, (ii) working capital needs, (iii) sales and administrative
expenses, (iv) repayment of existing indebtedness, and (v) general corporate
purposes. However, notwithstanding the foregoing, no portion of such proceeds
shall be used to prepay any of the Company's indebtedness under that certain
Secured Promissory Note dated December 10, 1997 issued by the Company to
Ascend Communications, Inc. in the original principal amount of $6,500,000.
5.9 INFORMATION. Until the consummation of a Qualified IPO or
Qualified Sale:
(a) The Company shall provide to Buyers:
(i) within 120 days after the end of each fiscal year, the audited
consolidated balance sheet of the Company as of the end of such fiscal
year, the related audited consolidated statements of income, stockholders'
equity, and cash flows for the year then ended, and the notes and schedules
thereto, together with the reports thereon of the Company's independent
public accountants;
(ii) within 45 days after the end of each fiscal quarter, an
unaudited consolidated balance sheet of the Company as of the end of such
fiscal quarter and the related unaudited consolidated statements of income,
stockholders' equity, and cash flows for the quarter then ended, together
with a report by senior management of the Company setting forth in
reasonable detail a discussion and analysis of the financial condition and
results of operations of the Company for such period (including a
comparison to the corresponding period in the preceding fiscal year);
(iii) within 30 days after the end of each calendar month, unaudited
financial statements of the Company for such month, with an accompanying
disclosure of variances from the Company's operating plan;
(iv) prior to the beginning of each fiscal year, a copy of the
Company's operating plan for such upcoming year; and
(v) other information and reports which Buyers from time to time
may reasonably request.
(b) Each Buyer shall be entitled, upon reasonable advance notice and at
such Buyer's expense, to inspect the books and records of the Company during
normal business hours.
30
(c) The Company shall immediately notify Buyers of the commencement of
any material Proceeding against the Company or upon the Company's knowledge
of any event that might reasonably be expected to create a liability under
ERISA.
5.10 BOARD APPROVAL OF CERTAIN CAPITAL EXPENDITURES. Until the
consummation of a Qualified IPO or Qualified Sale, the Company agrees that
any capital expenditure not expressly contemplated by the Company's capital
budget and that individually exceeds $150,000 shall be subject to the prior
approval of the full Board of Directors of the Company.
5.11 POST-CLOSING AMENDMENT. The Company agrees that during the
two-week period following the Closing, in the event any party desires to
purchase shares of Preferred Stock on the same terms as contained in this
Agreement, then the Company shall execute an amendment to this Agreement in
order to allow such party to make such purchase and to require such party to
become subject to the representations, warranties, covenants and other
provisions contained herein. The Company's obligation to admit additional
purchasers pursuant to this Section shall be limited to an aggregate
investment of $450,000.
5.12 SURVIVAL OF COVENANTS. Except for any covenant or agreement which
by its terms expressly terminates as of a specific date, the covenants and
agreements of the parties hereto contained in this Agreement shall survive
the Closing without contractual limitation.
ARTICLE VI.
SHARE TRANSFER RESTRICTIONS
6.1 RIGHT OF FIRST OFFER.
(a) In the event that any Buyer desires to transfer for value to a
nonaffiliate any shares of the capital stock of the Company, then such Buyer
shall first provide written notice to the Company of such desire and
containing the number shares to be transferred (the "Offered Shares"). Upon
receipt of such notice, the Company shall have five (5) business days in
which to notify the Buyer of the Company's intention to purchase all or part
of the Offered Shares, with such notice containing the nature and timing of
payment and all other material terms and conditions (the "Offer"). The Buyer
in its sole discretion may for any reason decline or accept the Offer, which
shall remain irrevocable for ten (10) business days following receipt by the
Buyer, by providing written notice to the Company. Following the earlier of
(i) the expiration of five (5) business days without Buyer having received an
Offer from the Company, (ii) Buyer providing written notice to the Company of
the Buyer's rejection of the Offer, or (iii) the expiration of ten (10) business
days following Buyer's acceptance of the Offer, without the
31
Company having consummated the transactions contemplated by the Offer (as
applicable, the "Transferability Date"), the Buyer may freely transfer
(subject to otherwise applicable restrictions) the Offered Shares to any
party and upon terms and conditions negotiated and agreed to by such Buyer in
its discretion (an "Allowed Transfer"), in which case the transferee must
agree in writing to take the Offered Shares subject to the obligations of the
Buyer-transferor contained in this Agreement. Any Allowed Transfer must take
place on terms and conditions that are more favorable (taking into account
factors such as timing, price, financing, type of consideration, feasibility
of consummation, etc.) than those contained in the Offer. In the event the
Buyer is unable, within ninety (90) days from the Transferability Date, to
agree upon such terms with a third party transferee, then Buyer's ability to
sell the Offered Shares shall again be restricted by the provisions of this
Section in the same manner as applicable immediately prior to the Buyer's
delivery to the Company of the notice regarding the Offered Shares as
required by the first sentence of this paragraph. The Buyer shall remain
subject to this Agreement during the time it retains any of its Shares.
(b) Notwithstanding anything to the contrary set forth in paragraph (a)
of this Section, in the event any Buyer negotiates and agrees on terms and
conditions for the sale of the Offered Shares to a party listed on
SCHEDULE 6.1(b) hereof, such Buyer shall provide written notice to the
Company of its intention to sell the Offered Shares to such party (the
"Transfer Notice"). The Transfer Notice shall include an offer to sell the
Offered Shares to the Company (the "Refusal Offer") on the same terms and
conditions as agreed to with the intended transferee referenced in the
Transfer Notice. The Transfer Notice shall set forth in reasonable detail
the terms and conditions, including number and price per share of the Offered
Shares, the method of payment and the proposed closing date (which shall in
no event be earlier than the expiration of twenty (20) business days
following the receipt by the Company of the Transfer Notice). The Company
shall have five (5) business days from the date it receives the Transfer
Notice to provide to the relevant Buyer a written acceptance or rejection of
the Refusal Offer. If the Company accepts the Refusal Offer, then such
acceptance shall provide the arrangements for closing, which shall occur no
later than the twentieth (20th) business day following the date the Company
received the Transfer Notice. In the event the Transfer Notice contemplates
a portion or all of the consideration to be paid in a form other than cash,
then the Company's right to purchase the Offered Shares shall be for the fair
market value equivalent of all consideration to be paid by the intended
transferee, with the determination of such equivalent to be determined in
good faith by the Board of Directors of the Company and the Buyer. Following
the earlier of: (i) the expiration of five (5) business days without Buyer
having received an acceptance of the Refusal Offer by the Company, (ii) the
written rejection by the Company of the Refusal Offer, (iii) the expiration
of twenty (20) business days without the Company having consummated the
transactions contemplated by the Refusal Offer, or (iv) the inability of the
Company and the relevant Buyer to agree in good faith on the fair market
value of the non-cash consideration to be paid by the Company, then the Buyer
shall be entitled to sell not less than all of the Offered Shares on the
terms described in the Transfer
32
Notice, in which case the transferee must agree in writing to take the
Offered Shares subject to the obligations of the Buyer-transferor contained
in this Agreement. The Buyer shall remain subject to this Agreement during
the time it retains any of its Shares.
ARTICLE VII.
SURVIVAL OF REPRESENTATIONS;
INDEMNIFICATION
7.1 SURVIVAL. The representations and warranties of the parties hereto
contained in this Agreement or in any certificate, instrument, or document
delivered pursuant hereto shall survive the Closing for a period of four
(4) years, regardless of any investigation made by or on behalf of any party.
7.2 INDEMNIFICATION BY COMPANY. Subject to the terms and conditions of
this Article VII, the Company shall indemnify, defend, and hold harmless
Buyers from and against any and all claims, actions, causes of action,
demands, assessments, losses, damages, liabilities, judgments, settlements,
penalties, costs, and expenses (including reasonable attorneys' fees and
expenses), of any nature whatsoever (collectively, "Damages"), asserted
against, resulting to, imposed upon, or incurred by Buyers, directly or
indirectly, by reason of or resulting from any breach by the Company of any
of its representations, warranties, covenants, or agreements contained in
this Agreement or in any certificate, instrument, or document delivered
pursuant hereto.
7.3 INDEMNIFICATION BY BUYERS. Subject to the terms and conditions of
this Article VII, Buyers shall severally indemnify, defend, and hold harmless
the Company from and against any and all Damages asserted against, resulting
to, imposed upon, or incurred by the Company, directly or indirectly, by
reason of or resulting from any breach by a Buyer of any of its
representations, warranties, covenants, or agreements contained in this
Agreement or in any certificate, instrument, or document delivered pursuant
hereto.
7.4 PROCEDURE FOR INDEMNIFICATION. Promptly after receipt by an
indemnified party under Section 7.2 or 7.3 of notice of the commencement of
any action, such indemnified party shall, if a claim in respect thereof is to
be made against an indemnifying party under such Section, give written notice
to the indemnifying party of the commencement thereof, but the failure so to
notify the indemnifying party shall not relieve it of any liability that it
may have to any indemnified party except to the extent the indemnifying party
demonstrates that the defense of such action is prejudiced thereby. In case
any such action shall be brought against an indemnified party and it shall
give written notice to the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate therein and, to the
extent that it may wish, to assume the
33
defense thereof with counsel reasonably satisfactory to such indemnified
party. If the indemnifying party elects to assume the defense of such
action, the indemnified party shall have the right to employ separate counsel
at its own expense and to participate in the defense thereof. If the
indemnifying party elects not to assume (or fails to assume) the defense of
such action, the indemnified party shall be entitled to assume the defense of
such action with counsel of its own choice, at the expense of the
indemnifying party. If the action is asserted against both the indemnifying
party and the indemnified party and there is a conflict of interests which
renders it inappropriate for the same counsel to represent both the
indemnifying party and the indemnified party, the indemnifying party shall be
responsible for paying for separate counsel for the indemnified party;
provided, however, that if there is more than one indemnified party, the
indemnifying party shall not be responsible for paying for more than one
separate firm of attorneys to represent the indemnified parties, regardless
of the number of indemnified parties. If the indemnifying party elects to
assume the defense of such action, (a) no compromise or settlement thereof
may be effected by the indemnifying party without the indemnified party's
written consent (which shall not be unreasonably withheld) unless the sole
relief provided is monetary damages that are paid in full by the indemnifying
party and (b) the indemnifying party shall have no liability with respect to
any compromise or settlement thereof effected without its written consent
(which shall not be unreasonably withheld).
7.5 INDEMNIFICATION DESPITE NEGLIGENCE. It is the express intention of
the parties hereto that each person to be indemnified pursuant to this
Article VII shall be indemnified and held harmless from and against all
Damages as to which indemnity is provided for under this Article VII
notwithstanding that any such Damages arise out of or result from the
ordinary, strict, sole, or contributory negligence of such person and
regardless of whether any other person (including the other parties to this
Agreement) is or is not also negligent.
ARTICLE VIII.
MISCELLANEOUS
8.1 NOTICES. All notices, requests, demands, and other communications
required or permitted to be given or made hereunder by any party hereto shall
be in writing and shall be deemed to have been duly given or made if (i)
delivered personally, (ii) transmitted by first class registered or certified
mail, postage prepaid, return receipt requested, (iii) sent by prepaid
overnight courier service, or (iv) sent by telecopy or facsimile
transmission, answer back requested, to the parties at the following
addresses (or at such other addresses as shall be specified by the parties by
like notice):
34
If to Buyers:
Apogee Fund LP
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx
Telefax: 817-335-1822
Xxxxxx X. Xxxxxx
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxxx, XX 00000
Telefax: 817-335-1822
ISP Investors, L.P.
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxxx, XX 00000
Attention: Xxxx Xxxxxxxxxx
Telefax: 000-000-0000
Xxxxx X. Xxxxxxx
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxxx, XX 00000
Telefax: 000-000-0000
J. Xxxxxx Xxxx, Xx.
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxxx, XX 00000
Telefax: 000-000-0000
Xxxx X. Xxxxxxxx
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxxx, XX 00000
Telefax: 000-000-0000
Fourteen Hill Capital, LP
0000 Xxxxxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxx Rodskog
Telefax: 000-000-0000
35
with a copy to:
Xxxxxxxx & Xxxxxx, P.C.
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Telefax: 817-347-1799
If to the Company:
FlashNet Communications, Inc.
0000 X. Xxxxxx Xxxx Xxxx.
Xxxx Xxxxx, XX 00000
Attention: Xxxxx Xxxxxx, President
Telefax: 000-000-0000
with, a copy to:
Xxxxxx & Hanger, L.L.P.
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxxx, XX 00000
Attention: Xxxx X. Xxxxxxxx, Esq.
Telefax: 817-877-2807
Such notices, requests, demands, and other communications shall be effective
(i) if delivered personally or sent by courier service, upon actual receipt
by the intended recipient, (ii) if mailed, upon the earlier of five days
after deposit in the mail or the date of delivery as shown by the return
receipt therefor, or (iii) if sent by telecopy or facsimile transmission,
when the answer back is received.
8.2 ENTIRE AGREEMENT. This Agreement, together with the Schedules,
Exhibits, Annexes, and other writings referred to herein or delivered
pursuant hereto, constitute the entire agreement between the parties hereto
with respect to the subject matter hereof and supersede all prior agreements
and understandings, both written and oral, between the parties with respect
to the subject matter hereof.
8.3 BINDING EFFECT; ASSIGNMENT; NO THIRD PARTY BENEFIT. This Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective heirs, legal
36
representatives, successors, and permitted assigns. Except as otherwise
expressly provided in this Agreement, neither this Agreement nor any of the
rights, interests, or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other parties, except
that a Buyer may assign to any affiliate of such Buyer any of such Buyer's
rights, interests, or obligations hereunder, upon notice to the other party
or parties, provided that no such assignment shall relieve such Buyer of its
obligations hereunder. Except as provided in Article VII, nothing in this
Agreement, express or implied, is intended to or shall confer upon any person
other than the parties hereto, and their respective heirs, legal
representatives, successors, and permitted assigns, any rights, benefits, or
remedies of any nature whatsoever under or by reason of this Agreement.
8.4 SEVERABILITY. If any provision of this Agreement is held to be
unenforceable, this Agreement shall be considered divisible and such provision
shall be deemed inoperative to the extent it is deemed unenforceable, and in all
other respects this Agreement shall remain in full force and effect; provided,
however, that if any such provision may be made enforceable by limitation
thereof, then such provision shall be deemed to be so limited and shall be
enforceable to the maximum extent permitted by Applicable Law.
8.5 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO
THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
8.6 FURTHER ASSURANCES. From time to time following the Closing, at the
request of any party hereto and without further consideration, the other party
or parties hereto shall execute and deliver to such requesting party such
instruments and documents and take such other action (but without incurring any
material financial obligation) as such requesting party may reasonably request
in order to consummate more fully and effectively the transactions contemplated
hereby.
8.7 DESCRIPTIVE HEADINGS. The descriptive headings herein are inserted
for convenience of reference only, do not constitute a part of this Agreement,
and shall not affect in any manner the meaning or interpretation of this
Agreement.
8.8 GENDER. Pronouns in masculine, feminine, and neuter genders shall be
construed to include any other gender, and words in the singular form shall be
construed to include the plural and vice versa, unless the context otherwise
requires.
8.9 REFERENCES. All references in this Agreement to Articles, Sections,
and other subdivisions refer to the Articles, Sections, and other subdivisions
of this Agreement unless expressly provided otherwise. The words "this
Agreement", "herein", "hereof", "hereby",
37
"hereunder", and words of similar import refer to this Agreement as a whole
and not to any particular subdivision unless expressly so limited. Whenever
the words "include", "includes", and "including" are used in this Agreement,
such words shall be deemed to be followed by the words "without limitation".
Each reference herein to a Schedule, Exhibit, or Annex refers to the item
identified separately in writing by the parties hereto as the described
Schedule, Exhibit, or Annex to this Agreement. All Schedules, Exhibits, and
Annexes are hereby incorporated in and made a part of this Agreement as if
set forth in full herein.
8.10 COUNTERPARTS. This Agreement may be executed by the parties hereto
in any number of counterparts, each of which shall be deemed an original, but
all of which shall constitute one and the same agreement. Each counterpart may
consist of a number of copies hereof each signed by less than all, but together
signed by all, the parties hereto.
8.11 INJUNCTIVE RELIEF. The parties hereto acknowledge and agree that
irreparable damage would occur in the event any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of the provisions of this
Agreement, and shall be entitled to enforce specifically the provisions of this
Agreement, in any court of the United States or any state thereof having
jurisdiction, in addition to any other remedy to which the parties may be
entitled under this Agreement or at law or in equity.
8.12 SCHEDULES (DISCLOSURE). Each of the Schedules to this Agreement
shall be deemed to include and incorporate all disclosures made on the other
Schedules to this Agreement. It is understood and agreed that the specification
of any dollar amount in the representations and warranties contained in this
Agreement or the inclusion of any specific item in the Schedules is not intended
to imply that such amounts or higher or lower amounts, or the items so included
or other items, are or are not material, and no party shall use the fact of the
setting of such amounts or the fact of the inclusion of any such item in the
Schedules in any dispute or controversy between the parties as to whether any
obligation, item, or matter not described herein or included in a Schedule is or
is not material for purposes of this Agreement.
8.13 SCHEDULES (CONSTRUCTION). The disclosures in the Schedules to this
Agreement, and those in any supplements thereto, shall relate to all of the
representations and warranties in this Agreement to which they substantively
relate and to no other representation or warranty in this Agreement. In the
event of any inconsistency between the statements in the body of this Agreement
and those in the Schedules (other than an exception expressly set forth as such
in the Schedules), those in this Agreement shall control.
38
8.14 CONSENT TO JURISDICTION.
(a) The parties hereto hereby irrevocably submit to the jurisdiction of
the courts of the State of Texas and the federal courts of the United States of
America located in Fort Worth, Texas, and appropriate appellate courts
therefrom, over any dispute arising out of or relating to this Agreement or any
of the transactions contemplated hereby, and each party hereby irrevocably
agrees that all claims in respect of such dispute or proceeding may be heard and
determined in such courts. The parties hereby irrevocably waive, to the fullest
extent permitted by Applicable Law, any objection which they may now or
hereafter have to the laying of venue of any dispute arising out of or relating
to this Agreement or any of the transactions contemplated hereby brought in such
court or any defense of inconvenient forum for the maintenance of such dispute.
Each of the parties hereto agrees that a judgment in any such dispute may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. This consent to jurisdiction is being given solely for
purposes of this Agreement and is not intended to, and shall not, confer consent
to jurisdiction with respect to any other dispute in which a party to this
Agreement may become involved.
(b) Each of the parties hereto hereby consents to process being served by
any party to this Agreement in any suit, action, or proceeding of the nature
specified in subsection (a) above by the mailing of a copy thereof in the manner
specified by the provisions of Section 8.1.
8.15 AMENDMENT. This Agreement may not be amended except by an instrument
in writing signed by or on behalf of all the parties hereto.
8.16 WAIVER. The Company, on the one hand, or Buyers, on the other, may:
(i) waive any inaccuracies in the representations and warranties of the other
contained herein or in any document, certificate, or writing delivered pursuant
hereto, or (ii) waive compliance by the other with any of the other's agreements
or fulfillment of any conditions to its own obligations contained herein. Any
agreement on the part of a party hereto to any such waiver shall be valid only
if set forth in an instrument in writing signed by or on behalf of such party.
No failure or delay by a party hereto in exercising any right, power, or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power, or privilege.
8.17 REMEDIES NOT EXCLUSIVE. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by law.
The rights and remedies of any party based upon, arising out of, or otherwise in
respect of any inaccuracy in or breach of any representation, warranty,
covenant, or agreement contained in this Agreement shall, subject to Sections
8.12 and 8.13, in no way be limited by the fact that the act, omission,
occurrence, or
39
other state of facts upon which any claim of any such inaccuracy or breach is
based may also be the subject matter of any other representation, warranty,
covenant, or agreement contained in this Agreement (or in any other agreement
between the parties) as to which there is no inaccuracy or breach.
8.18 SEVERAL LIABILITY OF BUYERS. The liability of Buyers with respect to
the agreements, covenants, representations and warranties of Buyers contained in
this Agreement or in any certificate, instrument, or document delivered pursuant
hereto shall be several (and expressly not joint and several), and each Buyer
shall only be liable with respect thereto to the extent such agreements,
covenants, representations or warranties applies to himself, herself, or itself
and not with respect to any other Buyer.
ARTICLE IX.
DEFINITIONS
9.1 CERTAIN DEFINED TERMS. As used in this Agreement, each of the
following terms has the meaning given it below:
"affiliate" means, with respect to any person, any other person that,
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such person. For the
purposes of this definition, "control" when used with respect to any person
means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such person, whether
through the ownership of voting securities, by contract, or otherwise; and
the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Affiliated Group" has the meaning set forth in Section 1504 of the
Code.
"Ancillary Documents" means each agreement, instrument, and document
(other than this Agreement) executed or to be executed in connection with
the transactions contemplated by this Agreement.
"Applicable Law" means any statute, law, rule, or regulation or any
judgment, order, writ, injunction, or decree of any Governmental Entity to
which a specified person or property is subject.
"Code" means the Internal Revenue Code of 1986, as amended.
40
"Encumbrances" means liens, charges, pledges, options, mortgages,
deeds of trust, security interests, claims, restrictions (whether on
voting, sale, transfer, disposition, or otherwise), easements, and other
encumbrances of every type and description, whether imposed by law,
agreement, understanding, or otherwise.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Governmental Entity" means any court or tribunal in any
jurisdiction (domestic or foreign) or any federal, state, municipal, or
other governmental body, agency, authority, department, commission,
board, bureau, or instrumentality (domestic or foreign).
"Intellectual Property" means patents, trademarks, service marks,
trade names, service names, brand names, copyrights, trade secrets,
know-how, technology, inventions, computer software (including
documentation and object and source codes), and similar rights, and all
registrations, applications, licenses, and rights with respect to any of
the foregoing.
"IRS" means the Internal Revenue Service.
"Material Adverse Effect" means any change, development, or effect
(individually or in the aggregate) which is, or is reasonably likely to
be, materially adverse (i) to the business, assets, results of
operations, condition (financial or otherwise), or prospects of a party,
or (ii) to the ability of a party to perform on a timely basis any
material obligation under this Agreement or any agreement, instrument,
or document entered into or delivered in connection herewith.
"Permits" means licenses, permits, franchises, consents, approvals,
variances, exemptions, and other authorizations of or from Governmental
Entities.
"person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, enterprise,
unincorporated organization, or Governmental Entity.
"Proceedings" means all proceedings, actions, claims, suits,
investigations, and inquiries by or before any arbitrator or
Governmental Entity.
41
"Qualified IPO" means a registered underwritten public offering of
the Common Stock: (i) resulting in gross proceeds (before deduction of
underwriters' commissions, discounts or expenses) to the Company of at
least $15,000,000, (ii) resulting in a pre-offering valuation of the
Company's outstanding equity by the underwriters of at least
$50,000,000, and (iii) immediately following the consummation of which
the Company is legally permitted to declare and pay (and the Company
does declare and pay) all accrued and unpaid dividends on the Shares
then outstanding.
"Qualified Sale" means any merger, reorganization, change of
control, or other transaction: (i) resulting in proceeds (before
directly attributable fees and expenses) to the Company or its
shareholders of cash and/or marketable securities having an aggregate
value of at least $38,000,000, and (ii) in which each share of Preferred
Stock is valued for at least $12.14 per share (if during the eighteen
months following the Closing Date) or at least $18.21 per share (if
subsequent to the eighteenth month following the Closing Date), and
(iii) in connection with which or immediately following the consummation
of which the Company is legally permitted to declare and pay (and the
Company does declare and pay) all accrued and unpaid dividends on the
Shares then outstanding.
"reasonable best efforts" means a party's reasonable best efforts
in accordance with reasonable commercial practice and without the
incurrence of unreasonable expense.
"Securities Act" means the Securities Act of 1933, as amended.
"Subsidiary" means any corporation more than 50% of whose
outstanding voting securities, or any general partnership, joint
venture, or similar entity more than 50% of whose total equity
interests, is owned, directly or indirectly, by the Company, or any
limited partnership of which the Company or any Subsidiary is a general
partner.
"Taxes" means any income taxes or similar assessments or any sales,
excise, occupation, use, ad valorem, property, production, severance,
transportation, employment, payroll, franchise, or other tax imposed by
any United States federal, state, or local (or any foreign or
provincial) taxing authority, including any interest, penalties, or
additions attributable thereto.
"Tax Return" means any return or report, including any related or
supporting information, with respect to Taxes.
"to the best knowledge" of a specified person (or similar
references to a person's knowledge) means all information to be
attributed to such person actually or constructively known to (a) such
person in the case of an individual or (b) in the case of a corporation
42
or other entity, an executive officer or employee who devoted
substantive attention to matters of such nature during the ordinary
course of his employment by such person. A person has "constructive
knowledge" of those matters which the individual involved could
reasonably be expected to have as a result of undertaking an
investigation of such a scope and extent as a reasonably prudent man
would undertake concerning the particular subject matter.
"U.S. GAAP" means generally accepted accounting principles in the
United States of America from time to time.
43
IN WITNESS WHEREOF, the parties have executed this Agreement, or caused
this Agreement to be executed by their duly authorized representatives, all
as of the day and year first above written.
THE COMPANY:
FLASHNET COMMUNICATIONS, INC.
By: /s/ Xxxxx Xxxxxx
------------------------------------
Name: M. Xxxxx Xxxxxx
-----------------------------
Title: President
----------------------------
BUYERS:
APOGEE FUND LP
By: Paradigm Capital
---------------------------------,
its General Partner
By: /s/ Xxxxxx Xxxxxx
-------------------------------
Name: Xxxxxx X. Xxxxxx
--------------------------
Title: President
-------------------------
/s/ Xxxxxx X. Xxxxxx
---------------------------------------
Xxxxxx X. Xxxxxx
ISP Investors, L.P.
By: Xxxxxxxxxx Capital Partners, LLC,
its General Partner
By: /s/ Xxxx Xxxxxxxxxx
-------------------------------
Name: Xxxx Xxxxxxxxxx
--------------------------
Title: General Partner
-------------------------
44
/s/ Xxxxx X. Xxxxxxx
---------------------------------------
Xxxxx X. Xxxxxxx
/s/ Xxxxxx Xxxx
---------------------------------------
J. Xxxxxx Xxxx, Xx.
/s/ Xxxx X. Xxxxxxxx
---------------------------------------
Xxxx X. Xxxxxxxx
FOURTEEN HILL CAPITAL, LP
By: Fourteen Hill Management, LLC,
its General Partner
By: Point West Capital Corporation,
its General Partner
By: /s/ Xxxxx X. Rodskog
-------------------------------
Name: Xxxxx X. Rodskog
--------------------------
Title: Senior Vice President
-------------------------
