EXHIBIT 2.3
MERGER AGREEMENT
by and among
DAKOTA COOPERATIVE TELECOMMUNICATIONS, INC.,
DAKOTA ACQUISITION CORP. #2
and
I-WAY PARTNERS, INC.
November 27, 1996
TABLE OF CONTENTS
PAGE
ARTICLE 1 - THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1. Merger of I-WAY with and into Acquisition Corp.. . . 1
Section 1.2. Shareholder Approval . . . . . . . . . . . . . . . . 1
Section 1.3. Closing. . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.4. Effective Time . . . . . . . . . . . . . . . . . . . 2
Section 1.5. Effects of the Merger . . . . . . . . . . . . . . . 2
Section 1.6. Surviving Corporation. . . . . . . . . . . . . . . . 2
Section 1.7. Conversion of I-WAY Shares . . . . . . . . . . . . . 2
Section 1.8. Conveyances to Surviving Corporation . . . . . . . . 3
ARTICLE 2 - REPRESENTATIONS AND WARRANTIES
OF SELLERS AND I-WAY . . . . . . . . . . . . . . . . . . . . 4
Section 2.1. Disclosure Schedule. . . . . . . . . . . . . . . . . 4
Section 2.2. Organization and Good Standing . . . . . . . . . . . 4
Section 2.3. Capitalization of I-WAY; Ownership . . . . . . . . . 4
Section 2.4. Financial Statements.. . . . . . . . . . . . . . . . 4
Section 2.5. Books and Records. . . . . . . . . . . . . . . . . . 5
Section 2.6. Taxes . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.7. No Material Adverse Change; Absence of Restricted
Events . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.8. Employees; Labor Relations . . . . . . . . . . . . . 6
Section 2.9. Employee Benefit Plans . . . . . . . . . . . . . . . 6
Section 2.10. Title to and Condition of Properties;
Encumbrances . . . . . . . . . . . . . . . . . . . . 7
Section 2.11. Litigation . . . . . . . . . . . . . . . . . . . . . 8
Section 2.12. Authorization and Enforceability; No Conflict with
Other Instruments or Proceedings . . . . . . . . . . 8
Section 2.13. Contracts. . . . . . . . . . . . . . . . . . . . . . 9
Section 2.14. Intellectual Property. . . . . . . . . . . . . . . . 9
Section 2.15. Insurance. . . . . . . . . . . . . . . . . . . . . . 9
Section 2.16. Certain Relationships. . . . . . . . . . . . . . . 10
Section 2.17. Permits, Tariffs and Licenses; Compliance with
Legal Requirements . . . . . . . . . . . . . . . . . 10
Section 2.18. Investment Intent. . . . . . . . . . . . . . . . . 10
Section 2.19. No Broker's Fees . . . . . . . . . . . . . . . . . 11
Section 2.20. Accuracy of Statements . . . . . . . . . . . . . . 11
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES OF DAKOTA AND
ACQUISITION CORP.. . . . . . . . . . . . . . . . . . . . . 11
Section 3.1. Organization and Good Standing . . . . . . . . . . 11
Section 3.2. Capitalization of Acquisition Corp. . . . . . . . 11
Section 3.3. Books and Records . . . . . . . . . . . . . . . . 12
Section 3.4. Taxes . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.5. No Material Adverse Change; Absence of Restricted
Events . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.6. Litigation . . . . . . . . . . . . . . . . . . . . 12
Section 3.7. Authorization and Enforceability; No Conflict with
Other Instruments or Proceedings . . . . . . . . . 13
Section 3.8. Permits, Tariffs and Licenses; Compliance with
Legal Requirements . . . . . . . . . . . . . . . . 13
Section 3.9. No Broker's Fees . . . . . . . . . . . . . . . . . 14
Section 3.10. Accuracy of Statements . . . . . . . . . . . . . . 14
ARTICLE 4 - INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . 14
Section 4.1. Indemnification and Reimbursement by Sellers . . . . 14
Section 4.2. Indemnification and Reimbursement by Dakota and
Acquisition Corp . . . . . . . . . . . . . . . . . . 14
Section 4.3. Indemnification Procedures.. . . . . . . . . . . . . 15
Section 4.4. Basket . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 5 - DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 6 - GENERAL. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 6.1. Non-Compete. . . . . . . . . . . . . . . . . . . . . 23
Section 6.2. Survival of Representations, Warranties, Covenants
and Agreements . . . . . . . . . . . . . . . . . . . 24
Section 6.3. Binding Effect; Benefits; Assignment . . . . . . . . 24
Section 6.4. Entire Agreement . . . . . . . . . . . . . . . . . . 24
Section 6.5. Amendment and Waiver . . . . . . . . . . . . . . . . 25
Section 6.6. Governing Law. . . . . . . . . . . . . . . . . . . . 25
Section 6.7. Public Disclosure. . . . . . . . . . . . . . . . . . 25
Section 6.8. Notices. . . . . . . . . . . . . . . . . . . . . . . 25
Section 6.9. Counterparts . . . . . . . . . . . . . . . . . . . . 26
Section 6.10. Expenses . . . . . . . . . . . . . . . . . . . . . . 26
Section 6.11. Severability . . . . . . . . . . . . . . . . . . . . 26
Section 6.12. Headings; Construction; Time of Essence. . . . . . . 26
EXHIBITS
Exhibit A--List of Sellers
Exhibit B--Agreement Regarding Dakota Preferred Stock
Exhibit C--Articles of Merger and related Plan of Merger
Exhibit D--Form of Warrant
Exhibit E--Form of Standstill Agreement
DISCLOSURE SCHEDULE
Schedule 1--Organization and Good Standing of I-WAY
Schedule 2--Financial Statements
Schedule 3--Taxes
Schedule 4--Restricted Events
Schedule 5--Employees; Labor Relations
Schedule 6--Employee Benefit Plans
Schedule 7--Real Property, Leaseholds or other interests
Schedule 8--Authorization and Enforceability; No Conflict
Schedule 9--Contracts
Schedule 10--Intellectual Property
Schedule 11--Insurance
Schedule 12--Certain Relationships
Schedule 13--Permits and Licenses; Compliance with Legal Requirements
MERGER AGREEMENT
THIS MERGER AGREEMENT (the "Agreement") is made as of
November 27, 1996, by and among Dakota Cooperative Telecommunications,
Inc., a South Dakota cooperative corporation ("Dakota"), Dakota Acquisition
Corp. #2, a South Dakota corporation and wholly owned subsidiary of Dakota
("Acquisition Corp.") and I-Way Partners, Inc., a South Dakota corporation
("I-WAY"). This Agreement is joined in by all of the shareholders of I-WAY
as identified on EXHIBIT A to this Agreement (each a "Seller" and
collectively "Sellers"). Capitalized terms used in this Agreement and not
otherwise defined are defined in Article 5 of this Agreement.
Sellers and the boards of directors of Dakota, Acquisition Corp.
and I-WAY each deem it desirable and in the best interests of their
respective corporations for I-WAY to become affiliated with Dakota through
the merger of I-WAY with and into Acquisition Corp. (the "Merger") in
accordance with the provisions of the South Dakota Business Corporation Act
(the "Act") and the terms and conditions of this Agreement. The boards of
directors and shareholders of Acquisition Corp. and I-WAY have unanimously
approved this Agreement and the transactions contemplated hereby (including
the Merger).
ACCORDINGLY, in consideration of the representations, warranties
and covenants contained in this Agreement, the Parties agree as follows:
ARTICLE 1
THE MERGER
SECTION 1.1. MERGER OF I-WAY WITH AND INTO ACQUISITION CORP.
Subject to the other conditions set forth in this Agreement, I-WAY and
Acquisition Corp. will be, at the Effective Time, merged into a single
surviving corporation, which will be Acquisition Corp. (sometimes referred
to in this Agreement as the "Surviving Corporation"). The Surviving
Corporation will continue its corporate existence under the name "Iway,
Inc." and will remain a South Dakota corporation governed by and subject to
the laws of that state.
SECTION 1.2. SHAREHOLDER APPROVAL. This Agreement and the
Merger have been approved by the shareholders of I-WAY and Acquisition
Corp. in accordance with the applicable laws of the State of South Dakota.
SECTION 1.3. CLOSING. The closing of the transactions
contemplated by this Agreement (the "Closing") will take place at the
offices of Dakota, Xxxx Xxxxxxx 00, Xxxxx, Xxxxx Xxxxxx 00000, at 10 a.m.
local time, on November 27, 1996, or at such other place or time as the
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Parties may agree. At the Closing, the Parties will cause the Articles of
Merger to be filed in accordance with the Act and shall take all other
lawful actions and do all other lawful things called for by this Agreement
or necessary to cause the Merger to become effective and to consummate the
transactions contemplated by this Agreement. In addition, at the Closing
the Parties will execute the agreements attached as EXHIBITS B, D and E to
this Agreement, and Sellers will deliver a letter of resignation and
release of claims executed by each director and officer of I-WAY and such
additional agreements, instruments or certificates as Dakota may reasonably
require.
SECTION 1.4. EFFECTIVE TIME. The Merger will become effective
at the date and time set forth in the Articles of Merger and related Plan
of Merger attached as EXHIBIT C to this Agreement following the issuance of
a Certificate of Merger by the Secretary of the State of South Dakota. The
time and date on which the Merger shall become effective is referred to in
this Agreement as the "Effective Time."
SECTION 1.5. EFFECTS OF THE MERGER. The effect of the Merger on
I-WAY and Acquisition Corp. will be as provided in Sections 47-6-9 through
47-6-12, inclusive, of the Act with respect to the merger of two domestic
corporations where the surviving corporation will be governed by the laws
of the State of South Dakota.
SECTION 1.6. SURVIVING CORPORATION. Immediately after the
Effective Time, the Surviving Corporation will have the following
attributes until they are subsequently changed in the manner provided by
law: (i) the name of the Surviving Corporation will be "Iway, Inc.";
(ii) the articles of incorporation and bylaws of Acquisition Corp. (except
for the name as described above) will be the articles of incorporation and
bylaws of the Surviving Corporation; and (iii) the persons who, immediately
before the Effective Time, constitute the board of directors and officers
of Acquisition Corp. will be the directors and officers, respectively, of
the Surviving Corporation and will hold office until their respective
successors are duly elected and qualified.
SECTION 1.7. CONVERSION OF I-WAY SHARES. As a result of the
Merger, the I-WAY Shares will automatically be converted into shares of
Dakota Preferred Stock as follows:
(a) CONVERSION OF I-WAY SHARES. At the Effective Time,
each of the I-WAY Shares outstanding immediately before the
Effective Time will automatically become and be converted into
the right to receive (i) .00344 validly issued, fully paid and
nonassessable shares of Non-Voting, Non-Cumulative Preferred
Stock, par value $100 per share, of Dakota (the "Dakota Preferred
Stock"), issued pursuant to the terms of Dakota's Articles of
Incorporation and subject to the additional terms as provided in
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EXHIBIT B to this Agreement, and (ii) warrants to acquire .00049
additional shares of Dakota Preferred Stock in accordance with
the terms and conditions of EXHIBIT D to this Agreement (the
"Warrants").
(b) CONVERSION OF ACQUISITION CORP. COMMON STOCK. At the
Effective Time, each share of Acquisition Corp.'s common stock,
no par value per share, outstanding immediately before the
Effective Time will continue to be outstanding without change and
will constitute all of the outstanding capital stock of the
Surviving Corporation as of such date.
(c) EXCHANGE OF I-WAY CERTIFICATES. At the Effective Time,
Sellers will surrender their outstanding certificate or
certificates representing the I-WAY Shares to Dakota and receive
in exchange therefor certificates representing the number of
shares of Dakota Preferred Stock into which the I-WAY Shares
represented by the certificate or certificates so surrendered
will have been converted as described above. The holders of I-WAY
Shares outstanding immediately before the Effective Time will
have no rights as I-WAY shareholders as of the Effective Time and
each certificate representing the I-WAY Shares will represent
only the right to receive shares of Dakota Preferred Stock and
Warrants as provided in this Agreement. On and after the
Effective Time, there will be no transfer of I-WAY Shares on the
stock books of I-WAY and ownership of I-WAY Shares may be
transferred only on the stock books of Acquisition Corp.
SECTION 1.8. CONVEYANCES TO SURVIVING CORPORATION. I-WAY hereby
agrees that from time to time after the Effective Time, as and when
requested by the Surviving Corporation, or by its successors and assigns,
it will execute and deliver, or cause to be executed and delivered, all
such deeds, conveyances, assignments, assurances and other instruments, and
will take or cause to be taken such further or other action as the
Surviving Corporation, its successors or assigns, may deem necessary or
desirable to vest or perfect in or confirm to the Surviving Corporation,
its successors and assigns, title to and possession of all the property,
rights, privileges, powers, immunities, franchises, interests and assets
acquired or to be acquired by the Surviving Corporation as a result of, or
in connection with, the Merger and to otherwise carry out the intent and
purposes of this Agreement. I-WAY hereby grants to the Surviving
Corporation an irrevocable power of attorney to execute and deliver all
such deeds, conveyances, assignments and assurances and to do all acts
necessary, proper or convenient to accomplish this purpose. The directors
and officers of the Surviving Corporation will be fully authorized in the
name of I-WAY to take any and all such action contemplated by this
Agreement.
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ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF SELLERS AND I-WAY
Sellers and I-WAY, jointly and severally, represent and warrant
to Dakota and Acquisition Corp. as follows:
SECTION 2.1. DISCLOSURE SCHEDULE. Sellers have delivered to
Dakota and Acquisition Corp. a disclosure schedule (the "Disclosure
Schedule"), which includes the numbered schedules specifically referred to
in this Article 2. The information contained in the Disclosure Schedule is
complete and accurate in all respects and all documents that are attached
to or form a part of the Disclosure Schedule are true and complete copies
of the genuine original documents they purport to represent.
SECTION 2.2. ORGANIZATION AND GOOD STANDING. I-WAY is a
corporation duly organized, validly existing and in good standing under the
laws of the State of South Dakota, with full corporate power and authority
to conduct its business as it is now being conducted, to own or use the
properties and assets that it purports to own or use and to perform its
obligations under Applicable Contracts. I-WAY is duly qualified to do
business as a foreign corporation and is in good standing in each state or
other jurisdiction in which either the ownership or use of the properties
owned or used by I-WAY or the nature of the activities conducted by I-WAY
requires such qualification. Copies of I-WAY's Organizational Documents
are attached to SCHEDULE 1 of the Disclosure Schedule. I-WAY does not
have any subsidiaries and, except as disclosed on SCHEDULE 1, does not own
or have any right to acquire any equity interest in any other Person.
SECTION 2.3. CAPITALIZATION OF I-WAY; OWNERSHIP. The
authorized capital stock of I-WAY consists 500,000 shares of common stock,
$1 par value per share, of which 70,000 shares are issued and outstanding
(i.e., the I-WAY Shares). There are no other authorized classes or series
of capital stock or other equity securities of I-WAY. All of the I-WAY
Shares were validly issued, are fully paid and nonassessable and were not
issued in violation of any preemptive or similar rights of any shareholder.
There are no outstanding Contracts that require Sellers to sell any I-WAY
Shares or that require I-WAY to issue or sell any shares of capital stock
of I-WAY or securities convertible into shares of capital stock of I-WAY.
Sellers own, beneficially and of record, all of the I-WAY Shares, as set
forth on EXHIBIT A to this Agreement, free and clear of all Encumbrances.
After the Effective Time, the I-WAY Pre-Incorporation Agreement dated as of
November 15, 1994, as the same may have been amended, shall automatically
terminate and be of no further effect and neither I-WAY nor the Surviving
Corporation shall have any obligation thereunder.
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SECTION 2.4. FINANCIAL STATEMENTS. Copies of the compiled
financial statements for I-WAY at and for the fiscal year ended
December 31, 1995, together with the notes thereto, are attached to
SCHEDULE 2 of the Disclosure Schedule (the "Financial Statements"). Also
attached to SCHEDULE 2 are copies of the interim balance sheets and interim
statements of income of I-WAY at and for each month-end during the current
fiscal year (through September 30, 1996), each prepared internally by I-WAY,
together with the notes thereto, if any (the "Interim Financial
Statements"). The Interim Financial Statements include the balance sheet
of I-WAY at September 30, 1996 (the "Balance Sheet"). The Financial
Statements and Interim Financial Statements are correct and complete in all
respects and present fairly the financial condition of I-WAY at the dates
indicated and its results of operations for the periods then ended, all in
accordance with GAAP applied on a basis consistent throughout such periods
and consistent with prior periods (subject, in the case of the Interim
Financial Statements, to (a) normal recurring year-end adjustments, the
effect of which will not individually or in the aggregate be materially
adverse, and (b) the absence of notes to the Interim Financial Statements
which, if presented, would not differ materially from those included in the
Financial Statements for the fiscal year ended December 31, 1995). I-WAY
has no liabilities, obligations or contingencies of any nature (whether
known or unknown and whether absolute, accrued, contingent or otherwise),
except for liabilities, obligations or contingencies (including
contingencies for bad debt) as and to the extent reflected or reserved
against in the Balance Sheet and current liabilities incurred in the
Ordinary Course of Business since September 30, 1996, which will not,
individually or in the aggregate, materially adversely affect I-WAY or its
business. Except for the reserve for bad debt reflected on the Balance
Sheet or as disclosed on SCHEDULE 2 of the Disclosure Schedule, all
accounts receivable of I-WAY are valid and will be collected in full within
60 days following the Closing Date.
SECTION 2.5. BOOKS AND RECORDS. The books of account, minute
books, stock record books and other records of I-WAY, all of which have
been made available to Dakota and Acquisition Corp., are complete and
correct and have been maintained in accordance with sound business
practices and applicable Legal Requirements and reflect only actual
transactions. The minute books of I-WAY contain accurate and complete
records of all meetings held and all corporate action taken by the
shareholders or board of directors of I-WAY (or any committee of the board
of directors). All of these books and records are in the possession of I-WAY.
SECTION 2.6. TAXES. I-WAY has timely (a) filed all Tax Returns
pursuant to applicable Legal Requirements; (b) paid or made proper
provision for payment of all Taxes due and payable by it; and (c) withheld
or collected all Taxes required by applicable Legal Requirements and, to
the extent required, paid such Taxes to the proper Governmental Body or
other Person. The charges, accruals and reserves with respect to the Taxes
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on the books of I-WAY are adequate (determined in accordance with GAAP) and
are at least equal to I-WAY's liability for Taxes. I-WAY has not signed
an extension with any Governmental Body concerning any liability for Taxes
and no open matters exist for any prior periods, nor has I-WAY signed any
waiver of any limitations period. There is no proposed Tax assessment
against I-WAY and no deficiency has been asserted against I-WAY as a result
of any examination by the IRS or other Governmental Body that has not been
paid or finally settled and no grounds exist for the assertion of any
deficiency for any periods that have not been audited by the IRS or other
applicable Governmental Body. There is no Proceeding pending or, to the
Knowledge of Sellers and I-WAY, Threatened for collection of Taxes with
respect to I-WAY. A copy of I-WAY's federal income Tax Return with
supporting schedules filed for the fiscal year ended December 31, 1995 is
attached to SCHEDULE 3 of the Disclosure Schedule.
SECTION 2.7. NO MATERIAL ADVERSE CHANGE; ABSENCE OF RESTRICTED
EVENTS. Since January 1, 1996, I-WAY has conducted its operations and
affairs only in the Ordinary Course of Business; there has not been any
material adverse change in the business, operations, properties, prospects,
assets, financial condition, income or expenses of I-WAY; and no event has
occurred or circumstance exists that may result in such a material adverse
change. Except as disclosed on SCHEDULE 4 of the Disclosure Schedule,
since January 1, 1996, no Restricted Event has occurred with respect to I-WAY.
SECTION 2.8. EMPLOYEES; LABOR RELATIONS. SCHEDULE 5 of the
Disclosure Schedule contains the following information for each employee of
I-WAY (including each employee on leave of absence or layoff status):
name; job title; current compensation paid or payable; vacation accrued;
and service credited for purposes of vesting and eligibility to participate
under any of I-WAY's Employee Benefit Plans. To the Knowledge of Sellers
and I-WAY, no key employee of I-WAY intends to terminate his or her
employment with I-WAY. Each of I-WAY's employees is employed on an "at
will" basis. I-WAY is not now and has never been a party to any collective
bargaining or other labor Contract. Since January 1, 1996, there has not
been, there is not presently pending or existing and to the Knowledge of
Sellers and I-WAY there is not Threatened, any Labor Activity. No event
has occurred or circumstance exists that could provide the basis for any
Labor Activity. There is no lockout of any employees by I-WAY and no such
action is contemplated by I-WAY. I-WAY complies and has complied, in all
material respects, with all Legal Requirements relating to employment,
equal employment opportunity, nondiscrimination, disability, affirmative
action, conditions of employment, immigration, wages, hours, benefits,
collective bargaining, the payment of social security and similar Taxes,
occupational safety and health and plant closing. I-WAY is not liable for
the payment of any Taxes, fines, penalties or other amounts, however
designated, for failure to comply with any of the foregoing Legal
Requirements. The books and records of I-WAY reflect all existing
obligations of I-WAY to make employment-related payments to present or
former employees.
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SECTION 2.9. EMPLOYEE BENEFIT PLANS. SCHEDULE 6 of the
Disclosure Schedule sets forth each Employee Benefit Plan maintained by
I-WAY or covering current or former (including retired) employees of I-WAY.
Copies of all written Employee Benefit Plans and all agreements adopted or
other material used in connection with or relating to such Employee Benefit
Plans (including descriptions of vacation, separation and other personnel
policies together with copies of Forms 5500) are also attached to
SCHEDULE 6. I-WAY has timely performed all of its obligations (including,
to the extent applicable, reporting, disclosure, prohibited transaction,
IRS qualification and funding and contribution payment obligations) under
its Employee Benefit Plans. Each Employee Benefit Plan and the
administration of each Employee Benefit Plan, complies and has complied
with all applicable Legal Requirements. Neither I-WAY nor any predecessor
or Affiliate of I-WAY has ever established, maintained or contributed to or
otherwise participated in, or had an obligation to establish, maintain,
contribute to or otherwise participate in, any Multi-Employer Retirement
Plan. No Employee Benefit Plan has incurred an "accumulated funding
deficiency" within the meaning of the Code. All terminations (total or
partial) of Employee Benefit Plans have been done in compliance with the
Code and with notice and disclosure to the Pension Benefit Guaranty
Corporation and all such terminations have been completed.
SECTION 2.10. TITLE TO AND CONDITION OF PROPERTIES;
ENCUMBRANCES. I-WAY does not own or have any interest in real property
other than leasehold interests. SCHEDULE 7 of the Disclosure Schedule
contains a list of all leaseholds interests of I-WAY. Except as disclosed
on SCHEDULE 7, I-WAY owns and has good and marketable title to all the
properties and assets (whether tangible or intangible) located in or at the
facilities operated by I-WAY or reflected as owned in the books and records
of I-WAY, including all of the properties and assets reflected in the
Balance Sheet (except for personal property sold since the date of the
Balance Sheet in the Ordinary Course of Business). Except as disclosed on
SCHEDULE 7 of the Disclosure Schedule, all properties and assets reflected
in the Balance Sheet are free and clear of all Encumbrances. All personal
property owned by I-WAY will be in the possession of I-WAY on the Closing
Date or at such other location as is specified on SCHEDULE 7. To the
Knowledge of Sellers, all buildings, plants and structures leased by I-WAY
lie wholly within the boundaries of the real property owned or leased by
I-WAY and do not encroach upon the property of, or otherwise conflict with
the property rights of, any other Person and no other Person's property
encroaches upon the property of, or otherwise conflicts with the property
rights of, I-WAY. None of I-WAY's property is the subject of any proposed
or pending condemnation action. All boundaries are what they appear to be
from visual inspection. The buildings, plants, structures and equipment of
I-WAY (a) are structurally sound, are in good operating condition and
repair and are adequate for the uses to which they are being put and
adequately serviced by utilities; (b) do not need maintenance or repairs
except for ordinary, routine maintenance and repairs that are not material
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in nature or cost; (c) are sufficient for the continued conduct of I-WAY's
business after the Closing in substantially the same manner as conducted
before the Closing; and (d) comply with all Legal Requirements and
restrictive covenants. To the Knowledge of Sellers, no real property
previously or currently owned or leased by I-WAY (or any predecessor or
Affiliate of I-WAY) has been or is in violation of any Environmental Law.
To the Knowledge of Sellers, no Encumbrance exists and no condition exists
which could result in the filing or creation of an Encumbrance against any
property of I-WAY or the Surviving Corporation under any Environmental Law.
I-WAY has not been requested or required by any Governmental Body to
perform any investigatory or remedial activity under or in connection with
an Environmental Law, nor has it received any notice from any Person under
any Environmental Law.
SECTION 2.11. LITIGATION. There is no Proceeding or Order
pending against I-WAY or that otherwise relates to or may affect the
business of, or any of the property or assets owned or used by, I-WAY or
that may interfere with the transactions contemplated by this Agreement.
No such Proceeding or Order has been, to the Knowledge of I-WAY, Threatened
and no event has occurred or circumstance exists that may give rise to or
serve as a basis for any such Proceeding or Order.
SECTION 2.12. AUTHORIZATION AND ENFORCEABILITY; NO CONFLICT WITH
OTHER INSTRUMENTS OR PROCEEDINGS.
(a) Sellers and I-WAY have full capacity, power and
authority to enter into, deliver and perform this Agreement and
to carry out the transactions contemplated by this Agreement.
This Agreement is binding upon Sellers and I-WAY and is
enforceable against Sellers and I-WAY in accordance with its
terms.
(b) The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated
by this Agreement have been authorized by all necessary corporate
actions and will not (i) contravene the Organizational Documents
or result in a Breach of any provision of, or constitute a
default under, any Applicable Contract; (ii) violate any Legal
Requirement or Order or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate or modify any
Governmental Authorization applicable to I-WAY; (iii) result in
the imposition of any Tax on I-WAY or the Surviving Corporation
or accelerate any indebtedness of I-WAY or increase the rate of
interest payable by I-WAY with respect to any indebtedness;
(iv) result in any Encumbrance being created or imposed upon or
with respect to any of the property or assets owned or used by I-WAY;
or (v) subject Dakota or the Surviving Corporation to
liability for or claims of tortious interference with contractual
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rights. Except for the filings to be made on the Closing Date
with the Secretary of the State of South Dakota as contemplated
by Article 1 of this Agreement, all consents, approvals or
authorizations of or declarations, filings or registrations with
any Person required in connection with the execution, delivery or
performance of this Agreement or the consummation of the
transactions contemplated by this Agreement are set forth on
SCHEDULE 8 of the Disclosure Schedule and will be obtained or
made, as applicable, by Sellers or I-WAY before the Closing.
SECTION 2.13. CONTRACTS. SCHEDULE 9 of the Disclosure Schedule
sets forth (and includes a copy of) each Material Contract to which I-WAY
is a party or by which I-WAY is bound or affected. Each Material Contract
is in full force and effect and is valid and enforceable in accordance with
its terms. I-WAY and each other Person that is a party to a Material
Contract has complied and is complying with the terms of the applicable
Material Contract and no event has occurred or circumstance exists that
(with or without notice or lapse of time) may contravene, conflict with or
result in a violation or Breach of, or give I-WAY or any other Person the
right to declare a default under, any Material Contract. No Material
Contract contains any provision that would interfere with the Surviving
Corporation's assumption, after the Merger, of obligations and benefits
under the Contract upon the same terms that are currently applicable to
I-WAY, and I-WAY is not bound by or subject to any Contracts which may be
accelerated, terminated or otherwise materially affected by virtue of the
change of control of I-WAY upon consummation of the Merger.
SECTION 2.14. INTELLECTUAL PROPERTY. SCHEDULE 10 of the
Disclosure Schedule sets forth all registered Intellectual Property Assets
presently owned or used by I-WAY. Unless otherwise indicated on
SCHEDULE 10, I-WAY will own the entire right, title and interest in and to
all Intellectual Property Assets on the Closing Date free and clear of all
Encumbrances, and following the Closing the Surviving Corporation will have
the right to use such Intellectual Property Assets without payment to any
other Person. There is no infringement of or unlawful use by any Person of
any Intellectual Property Assets owned or used by I-WAY, and I-WAY has not
infringed or unlawfully used any Intellectual Property Assets of any other
Person. SCHEDULE 10 also sets forth a list of all Contracts relating to
Intellectual Property Assets to which I-WAY is a party or by which I-WAY is
bound or affected. The Intellectual Property Assets are all those
necessary for the operation of I-WAY's business as presently conducted and
are sufficient in form and quality so that after the Closing the Surviving
Corporation can sell the products and provide the services sold or provided
by I-WAY before the Closing in a manner that meets applicable
specifications and conforms to commercially acceptable quality standards.
SECTION 2.15. INSURANCE. SCHEDULE 11 of the Disclosure Schedule
contains a list of all policies of liability, crime, fidelity, life, fire,
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product liability, workers' compensation, health, director and officer
liability and other forms of insurance owned or maintained by I-WAY,
including for each policy: the name of the insurer; the amount of
coverage; the type of insurance; the policy number; the renewal or
expiration date; and all pending claims under the policy. All of the
insurance policies listed on SCHEDULE 11 are outstanding and in full force,
all premiums with respect to the policies are currently paid and all duties
of the insureds under the policies have been fully discharged.
SECTION 2.16. CERTAIN RELATIONSHIPS. Except as disclosed on
SCHEDULE 12 of the Disclosure Schedule, no Seller or any Related Person is
an owner, shareholder, creditor, director, agent, consultant or employee
of, or lender to, any Person engaged in a business that acts as a supplier
of any goods or services to I-WAY or any part of which is in actual or
potential competition with I-WAY. Except as disclosed in SCHEDULE 12 of the
Disclosure Schedule, I-WAY does not have any outstanding indebtedness to
Sellers or any Related Person and neither Sellers nor any Related Person
has any outstanding indebtedness to I-WAY.
SECTION 2.17. PERMITS, TARIFFS AND LICENSES; COMPLIANCE WITH
LEGAL REQUIREMENTS. All Governmental Authorizations necessary for I-WAY to
carry on its business as presently conducted are identified on SCHEDULE 13
of the Disclosure Schedule and have been timely obtained, are in full force
and effect and have been complied with. All fees and charges incident to
those Governmental Authorizations have been fully paid and are current and
no suspension, revocation, cancellation or limitation of any Governmental
Authorization has been, to the Knowledge of Sellers and I-WAY, Threatened
or could result by reason of the transactions contemplated by this
Agreement. I-WAY is not subject to, nor, to the Knowledge of Sellers and
I-WAY, has it been Threatened with, any Adverse Consequence as the result
of a failure to comply with any Legal Requirement applicable to it or the
conduct or operation of its business or the ownership or use of any of its
properties or assets and no event has occurred or circumstance exists (with
or without notice or lapse of time) that may give rise to any such Adverse
Consequence. I-WAY is presently and during all applicable limitations
periods has been, in all material respects, in full compliance with all
applicable Legal Requirements. Neither I-WAY nor any other Person
associated with or acting on behalf of I-WAY has used any I-WAY funds for
unlawful contributions, gifts, entertainment or other expenses or made any
direct or indirect unlawful payments from I-WAY funds or established or
maintained any unlawful or unrecorded funds. Neither I-WAY nor any
predecessor or Affiliate of I-WAY is or has been in violation of, or has
Environmental Liability under, any Environmental Law. There are no past or
present conditions, circumstances, activities, practices, omissions, plans
or contractual undertakings that will interfere with or prevent continued
compliance by the Surviving Corporation with Environmental Laws and the
requirements of any permits or licenses issued under any Environmental Law
or that will give rise to any Environmental Liability or other obligation
under any Environmental Law.
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SECTION 2.18. INVESTMENT INTENT. Sellers are acquiring the
Dakota Preferred Stock for their own accounts and not with a view to their
distribution within the meaning of the Securities Act of 1933, as amended
("Securities Act"). Sellers have no plan or intention to sell or otherwise
dispose of the shares of Dakota Preferred Stock to be received by them in
the Merger or any shares of Dakota common stock received by them upon the
automatic conversion of Dakota Preferred Stock in the event Dakota's common
stock is registered under the Securities Act.
SECTION 2.19. NO BROKER'S FEES. Neither Sellers, I-WAY nor
anyone acting on Sellers' or I-WAY's behalf has incurred any liability or
obligation to pay fees or commissions to any broker, finder or agent with
respect to the transactions contemplated by this Agreement for which
Dakota, I-WAY or the Surviving Corporation could be liable.
SECTION 2.20. ACCURACY OF STATEMENTS. No representation or
warranty made by Sellers in this Agreement, the Disclosure Schedule or any
statement, certificate or schedule furnished to Dakota or Acquisition Corp.
pursuant to this Agreement or in connection with the transactions
contemplated by this Agreement contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements
contained therein not misleading.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF DAKOTA AND ACQUISITION CORP.
Dakota and Acquisition Corp., jointly and severally, represent
and warrant to Sellers and I-WAY as follows:
SECTION 3.1. ORGANIZATION AND GOOD STANDING. Dakota is a
cooperative corporation and Acquisition Corp. is a business corporation
each duly organized, validly existing and in good standing under the laws
of the State of South Dakota, with full corporate power and authority to
conduct their business as they are now being conducted, to own or use the
properties and assets that they purport to own or use and to perform their
obligations under Applicable Contracts. Neither the ownership or use of
the properties owned or used by Dakota or Acquisition Corp. nor the nature
of the activities conducted by Dakota or Acquisition Corp. requires them to
be qualified or registered to do business in any state or jurisdiction
other than South Dakota.
SECTION 3.2. CAPITALIZATION OF ACQUISITION CORP.; OWNERSHIP.
The authorized capital stock of Acquisition Corp. consists of 2,000 shares
of common stock, no par value per share, of which 1,000 shares are issued
and outstanding. All of the issued and outstanding common shares of
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Acquisition Corp. are owned by Dakota. The authorized capital stock of
Dakota consists of 15,000 shares of common stock, $5 par value per share,
of which approximately 6,000 shares are issued and outstanding and 63,000
shares of preferred stock, $100 par value per share, none of which is
outstanding. All Dakota Preferred Stock to be issued in the Merger or
pursuant to the Warrants will, when issued, be duly authorized, validly
issued, fully paid and nonassessable and will not be subject to any
preemptive rights. Except as provided in Dakota's Organizational Documents
and the Warrants, there are no outstanding Contracts that require Dakota or
Acquisition Corp. to sell any of their common or preferred shares or that
require Dakota or Acquisition Corp. to issue or sell any shares of capital
stock or securities convertible into shares of capital stock of Dakota or
Acquisition Corp.
SECTION 3.3. BOOKS AND RECORDS. The books of account, minute
books, stock record books and other records of Dakota and Acquisition Corp.
are complete and correct and have been maintained in accordance with sound
business practices and applicable Legal Requirements and reflect only
actual transactions. The minute books of Dakota and Acquisition Corp.
contain accurate and complete records of all meetings held, and all
corporate action taken, by their respective shareholders or board of
directors (or any committee of the board of directors).
SECTION 3.4. TAXES. Dakota has timely (a) filed all Tax Returns
pursuant to applicable Legal Requirements; (b) paid or made proper
provision for payment of all Taxes due and payable by it; and (c) withheld
or collected all Taxes required by applicable Legal Requirements and, to
the extent required, paid such Taxes to the proper Governmental Body or
other Person. The charges, accruals and reserves with respect to the Taxes
on the books of Dakota are adequate (determined in accordance with GAAP)
and are at least equal to Dakota's liability for Taxes. Dakota has not
signed an extension with any Governmental Body concerning any liability for
Taxes and no open matters exist for any prior periods, nor has Dakota
signed any waiver of any limitations period. There is no proposed Tax
assessment against Dakota and no deficiency has been asserted against
Dakota as a result of any examination by the IRS or other Governmental Body
that has not been paid or finally settled, and no grounds exist for the
assertion of any deficiency for any periods that have not been audited by
the IRS or other applicable Governmental Body. There is no Proceeding
pending or, to the Knowledge of Dakota, Threatened for collection of Taxes
with respect to Dakota. Copies of Dakota's federal income Tax Returns with
supporting schedules filed for the fiscal years ended December 31, 1995 and
December 31, 1994 have been provided to Sellers.
SECTION 3.5. NO MATERIAL ADVERSE CHANGE; ABSENCE OF RESTRICTED
EVENTS. Since January 1, 1996, Dakota has conducted its operations and
affairs only in the Ordinary Course of Business; there has not been any
material adverse change in the business, operations, properties, prospects,
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assets, financial condition, income or expenses of Dakota; and no event
has occurred or circumstance exists that may result in such a material
adverse change. Since January 1, 1996, no Restricted Event has occurred
with respect to Dakota.
SECTION 3.6. LITIGATION. Except for docketed Proceedings before
the South Dakota Public Utilities Commission (which will not, individually
or in the aggregate, materially adversely affect Dakota or its business),
there is no Proceeding or Order pending against Dakota or that otherwise
relates to or may affect the business of, or any of the property or assets
owned or used by, Dakota or that may interfere with the transactions
contemplated by this Agreement. No such Proceeding or Order has been, to
the Knowledge of Dakota, Threatened and no event has occurred or
circumstance exists that may give rise to or serve as a basis for any such
Proceeding or Order.
SECTION 3.7. AUTHORIZATION AND ENFORCEABILITY; NO CONFLICT WITH
OTHER INSTRUMENTS OR PROCEEDINGS.
(a) Dakota and Acquisition Corp. have full capacity, power
and authority to enter into, deliver and perform this Agreement
and to carry out the transactions contemplated by this Agreement.
This Agreement is binding upon Dakota and Acquisition Corp. and
is enforceable against Dakota and Acquisition Corp. in accordance
with its terms.
(b) The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated
by this Agreement have been authorized by all necessary corporate
actions and will not (i) contravene the Organizational Documents
or result in a Breach of any provision of, or constitute a
default under, any Applicable Contract; (ii) violate any Legal
Requirement or Order or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate or modify any
Governmental Authorization applicable to Dakota or the Surviving
Corporation; (iii) result in the imposition of any Tax on the
Surviving Corporation or accelerate any indebtedness of Dakota or
the Surviving Corporation or increase the rate of interest
payable by Dakota or the Surviving Corporation with respect to
any indebtedness; or (iv) result in any Encumbrance being created
or imposed upon or with respect to any of the property or assets
owned or used by Dakota or Acquisition Corp.
SECTION 3.8. PERMITS, TARIFFS AND LICENSES; COMPLIANCE WITH
LEGAL REQUIREMENTS. All Governmental Authorizations necessary for Dakota
to carry on its business as presently conducted have been timely obtained,
are in full force and effect and have been complied with. All fees and
charges incident to those Governmental Authorizations have been fully paid
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and are current and no suspension, revocation, cancellation or limitation
of any Governmental Authorization has been, to the Knowledge of Dakota,
Threatened or could result by reason of the transactions contemplated by
this Agreement. Dakota is not subject to, nor, to the Knowledge of Dakota
has it been Threatened with, any Adverse Consequence as the result of a
failure to comply with any Legal Requirement applicable to it or the
conduct or operation of its business or the ownership or use of any of its
properties or assets and no event has occurred or circumstance exists (with
or without notice or lapse of time) that may give rise to any such Adverse
Consequence. Dakota is presently and during all applicable limitations
periods has been, in all material respects, in full compliance with all
applicable Legal Requirements. Neither Dakota nor any other Person
associated with or acting on behalf of Dakota has used any Dakota funds for
unlawful contributions, gifts, entertainment or other expenses or made any
direct or indirect unlawful payments from Dakota funds or established or
maintained any unlawful or unrecorded funds. Neither Dakota nor any
predecessor or Affiliate of Dakota is or has been in violation of, or has
Environmental Liability under, any Environmental Law. There are no past or
present conditions, circumstances, activities, practices, omissions, plans
or contractual undertakings that will interfere with or prevent continued
compliance by the Dakota with Environmental Laws and the requirements of
any permits or licenses issued under any Environmental Law or that will
give rise to any Environmental Liability or other obligation under any
Environmental Law.
SECTION 3.9. NO BROKER'S FEES. Neither Dakota, Acquisition
Corp., nor anyone acting on their behalf has incurred any liability or
obligation to pay fees or commissions to any broker, finder or agent with
respect to the transactions contemplated by this Agreement for which
Sellers or I-WAY could become liable.
SECTION 3.10. ACCURACY OF STATEMENTS. No representation or
warranty made by Dakota or Acquisition Corp. in this Agreement or any
statement, certificate or schedule furnished to Sellers or I-WAY pursuant
to this Agreement or in connection with the transactions contemplated by
this Agreement contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements contained therein
not misleading.
ARTICLE 4
INDEMNIFICATION
SECTION 4.1. INDEMNIFICATION AND REIMBURSEMENT BY SELLERS.
Sellers will jointly and severally indemnify and hold harmless Dakota,
Acquisition Corp. and their respective Representatives and Affiliates, and
will reimburse Dakota, Acquisition Corp. and their respective
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Representatives and Affiliates, for all Adverse Consequences arising from
or related to (a) any Breach by Sellers or I-WAY of any representation,
warranty, covenant or obligation of Sellers in this Agreement or any other
instrument or document delivered by Sellers or I-WAY to Dakota or
Acquisition Corp. pursuant to this Agreement; and (b) the enforcement of
indemnification rights under this Article 4.
SECTION 4.2. INDEMNIFICATION AND REIMBURSEMENT BY DAKOTA AND
ACQUISITION CORP. Dakota and Acquisition Corp. will jointly and severally
indemnify and hold harmless Sellers and their respective Representatives
and Affiliates, and will reimburse Sellers and their respective
Representatives and Affiliates, for all Adverse Consequences arising from
or related to (a) any Breach by Dakota or Acquisition Corp. of any
representation, warranty, covenant or obligation of Dakota or Acquisition
Corp. in this Agreement or any other instrument or document delivered by
Dakota or Acquisition Corp. to Sellers or I-WAY pursuant to this Agreement;
and (b) the enforcement of indemnification rights under this Article 4.
SECTION 4.3. INDEMNIFICATION PROCEDURES.
(a) THIRD-PARTY CLAIMS.
(i) Promptly after receipt by a Person entitled to be
indemnified under this Article 4 (an "Indemnified Party") of
notice of the commencement of any Proceeding against it,
such Indemnified Party will, if a claim for indemnification
is to be made against a Party (an "Indemnifying Party")
under this Article 4, give notice to the Indemnifying Party
of the commencement of such Proceeding. The failure to
promptly notify the Indemnifying Party will not relieve the
Indemnifying Party of any liability that it may have to an
Indemnified Party except to the extent that the defense of
such action was irreparably and materially prejudiced by the
Indemnifying Party's failure to provide prompt notice.
(ii) If any Proceeding is brought against an
Indemnified Party and it gives notice to the Indemnifying
Party of the commencement of such Proceeding, the
Indemnifying Party will, unless the claim involves Taxes, be
entitled to participate in such Proceeding and, to the
extent that it wishes (unless (A) the Indemnifying Party is
also a party to such Proceeding and the Indemnified Party
determines in good faith that joint representation would be
inappropriate or (B) the Indemnifying Party fails to provide
reasonable assurances to the Indemnified Party of its
financial capacity to defend such Proceeding and provide
indemnification with respect to such Proceeding), to assume
the defense of such Proceeding with counsel satisfactory to
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the Indemnified Party. Following a proper assumption of
defense by an Indemnifying Party, as long as the
Indemnifying Party diligently conducts such defense, it will
not be liable for any subsequent fees of legal counsel or
other expenses incurred by the Indemnified Party in
connection with the defense of such Proceeding, other than
reasonable costs of investigation. If the Indemnifying
Party assumes the defense of a Proceeding, (A) it will be
conclusively established for purposes of this Agreement that
the claims made in that Proceeding are within the scope of
and subject to indemnification; (B) no compromise or
settlement of such claims may be effected by the
Indemnifying Party without the Indemnified Party's consent
unless (x) there is no finding or admission of any violation
of Legal Requirements or any violation of the rights of any
Person and no effect on any other claims that may be made by
or against the Indemnified Party and (y) the sole relief
provided is monetary damages that are paid in full by the
Indemnifying Party concurrently with the compromise or
settlement; and (C) the Indemnifying Party will have no
liability with respect to any compromise or settlement of
such claims effected without its consent. If notice is
given to an Indemnifying Party of the commencement of any
Proceeding and the Indemnifying Party does not within ten
days give notice to the Indemnified Party of its election to
assume the defense of such Proceeding, the Indemnifying
Party will be bound by any determination made in such
Proceeding or any compromise or settlement effected by the
Indemnified Party.
(iii) Notwithstanding the foregoing, if an
Indemnified Party determines in good faith that there is a
reasonable probability that a Proceeding may adversely
affect it or its Affiliates other than as a result of
monetary damages for which it would be entitled to
indemnification under this Agreement, the Indemnified Party
may, by notice to the Indemnifying Party, assume the
exclusive right to defend, compromise or settle such
Proceeding, but the Indemnifying Party will not be bound by
any determination of a Proceeding so defended or any
compromise or settlement effected without its consent (which
may not be unreasonably withheld).
(iv) The Parties will make available to each other and
each other's legal counsel and other professional advisors
all of its or his books and records relating to a third-party
claim and each Party will render to the other assistance as may
be reasonably required in order to insure the proper and adequate
defense of a third-party claim.
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(v) Each Party hereby consents to the non-exclusive
jurisdiction of any court in which a Proceeding is brought
against any Indemnified Party for purposes of any claim that
an Indemnified Party may have under this Agreement with
respect to such Proceeding or the matters alleged therein.
(b) OTHER CLAIMS. A claim for indemnification for any
matter not involving a third-party claim may be asserted by
notice to the Party from whom indemnification is sought.
SECTION 4.4. BASKET. No Party will have any liability under
this Article 4 with respect to claims for Breach of any representation or
warranty set forth in this Agreement until the aggregate amount of
liability relating to Breaches of representations or warranties exceeds
$20,000 (the "Basket"); provided that the Basket shall not be applicable to
and there shall be first dollar indemnity for Breach of Sections 2.19 and
3.9, the last sentence of Section 2.3, actual fraud or an intentional
Breach.
ARTICLE 5
DEFINITIONS
For purposes of this Agreement, the following terms shall have
the meanings specified or referred to in this Article 5:
"ACQUISITION CORP." has the meaning set forth in the first
paragraph of this Agreement.
"ACT" has the meaning set forth in the second paragraph of this
Agreement.
"ADVERSE CONSEQUENCE" means any loss, cost, liability, penalty,
Tax, claim, damage, expense (including cost of investigation, defense,
settlement and reasonable attorneys' and other professional fees),
responsibility, disability, remedial action or diminution of value, in any
case net of insurance recoveries or tax benefits actually received by the
applicable Party.
"AFFILIATE" means, with respect to a specified Person, a Person
that directly, or indirectly through one or more subsidiaries, controls, is
controlled by, or is under common control with the specified Person.
"AGREEMENT" has the meaning set forth in the first paragraph of
this Agreement.
"APPLICABLE CONTRACT" means any Contract (a) under which the
applicable Party has or may acquire any rights; (b) under which the
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applicable Party is or may become subject to any obligation or liability;
or (c) by which the applicable Party or any of the property or assets owned
or used by the applicable Party is or may become bound.
"BALANCE SHEET" has the meaning set forth in Section 2.4 of this
Agreement.
"BASKET" has the meaning set forth in Section 4.4 of this
Agreement.
"BREACH" means, as to any representation, warranty, covenant,
obligation or other provision of this Agreement or any instrument or
document delivered pursuant to this Agreement, (a) any inaccuracy in, or
any failure to perform or comply with, such representation, warranty,
covenant, obligation or other provision or (b) any claim by any Person or
other occurrence or circumstance that is or was inconsistent with such
representation, warranty, covenant, obligation or other provision, in
either case regardless of whether deliberate, reckless, negligent, innocent
or unintentional.
"CLOSING" has the meaning set forth in Section 1.3 of this
Agreement.
"CLOSING DATE" means the date and time as of which the Closing
actually takes place.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONTRACT" means any agreement, contract, obligation, promise or
undertaking (whether written or oral and whether express or implied) that
is legally binding.
"DAKOTA" has the meaning set forth in the first paragraph of this
Agreement.
"DAKOTA PREFERRED STOCK" has the meaning set forth in
Section 1.7(a) of this Agreement.
"DISCLOSURE SCHEDULE" has the meaning set forth in Section 2.1 of
this Agreement.
"EFFECTIVE TIME" has the meaning set forth in Section 1.4 of this
Agreement.
"EMPLOYEE BENEFIT PLAN" means any "employee pension benefit plan"
or "employee welfare benefit plan" as defined under ERISA, any incentive
compensation plan, benefit plan for retired employees, plan or Contract
providing for bonuses, pensions, profit-sharing, stock options, stock
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purchase rights, restricted or deferred stock, deferred compensation,
insurance, health care or retirement benefits of any nature, in each case
whether written or oral, together with any trusts created thereunder.
"ENCUMBRANCE" means any charge, claim, community property
interest, condition, equitable interest, mortgage, lien, option, pledge,
security interest, right of first refusal or restriction of any kind,
including any restriction on use, voting (in the case of any security),
transfer, receipt of income or exercise of any other attribute of
ownership.
"ENVIRONMENT" means soil, land surface or subsurface strata,
surface waters (including navigable waters and ocean waters), groundwaters,
drinking water supply, steam sediments, ambient air (including indoor air),
plant and animal life and any other environmental medium or natural
resource.
"ENVIRONMENTAL LAW" means any Legal Requirement designed: (a) to
advise appropriate authorities, employees and the public of intended,
Threatened or actual releases of pollutants or hazardous substances or
materials, violations or discharge limits or other prohibitions and of the
commencements of activities, such as resource extraction or construction,
that could have significant impact on the Environment; (b) to prevent or
acceptably minimize the release or emission of pollutants or hazardous
substances or materials into the Environment; (c) to reduce the quantities,
prevent the release and minimize the hazardous characteristics of wastes
that are generated; (d) to regulate the generation, treatment, storage,
handling or disposal of hazardous substances; (e) to assure that products
are designed, formulated, packaged or used so that they do not present
unreasonable risks to human health or the Environment when used or disposed
of; (f) to protect resources, species or ecological amenities; (g) to
acceptably minimize the risks inherent in transportation of hazardous
substances, pollutants, oil or other potentially harmful substances; (h) to
clean up pollutants that have been released, prevent the threat of release
or pay the costs of such clean up or prevention; (i) to make responsible
parties pay private parties, or groups of them, for damages done to their
health or Environment, or to permit self-appointed representatives of the
public interest to recover for injuries done to public assets; or (j) to
regulate in any manner the potential impact of an activity on the
Environment.
"ENVIRONMENTAL LIABILITY" means any Adverse Consequence arising
from or relating to Environmental Law or Occupational Safety and Health Law
with respect to acts or omissions by I-WAY or any predecessor or Affiliate
or conditions in existence or events or circumstances having occurred, in
each case on or before the Closing Date, including (a) any environmental,
health or safety matters or conditions (including on-site or off-site
contamination, occupational safety and health and regulation of chemical
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substances or products); and (b) any responsibility for response costs,
corrective action or actions to achieve compliance, including any cleanup,
removal, containment or other remediation or response action ("Cleanup")
required by applicable Environmental Law or Occupational Safety and Health
Law (whether or not such Cleanup has been required or requested by any
Governmental Body or any other Person) and for any natural resource
damages. The terms "removal," "remedial," and "response action" include
the types of activities covered by the United States Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C.
9601 et seq., as amended, or any similar state law.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"FINANCIAL STATEMENTS" has the meaning set forth in Section 2.4
of this Agreement.
"GAAP" means generally accepted United States accounting
principles.
"GOVERNMENTAL AUTHORIZATION" means any approval, consent,
certificate, tariff, license, permit, waiver or other authorization issued,
granted, given or otherwise made available by or under the authority of any
Governmental Body or pursuant to any Legal Requirement.
"GOVERNMENTAL BODY" means any: (a) nation, state, county, city,
town, village, district or other jurisdiction of any nature; (b) federal,
state, local, municipal, foreign or other government; (c) governmental or
quasi-governmental authority of any nature (including any governmental
agency, branch, department, official or entity and any court or other
tribunal); (d) multi-national organization or body; or (e) body exercising,
or entitled or purporting to exercise, any administrative, executive,
judicial, legislative, police, regulatory or taxing authority or power of
any nature.
"I-WAY" has the meaning set forth in the first paragraph of this
Agreement.
"I-WAY SHARES" means all of the outstanding shares of common
stock of I-WAY, $1 par value per share.
"INDEMNIFIED PARTY" has the meaning set forth in Section 4.3 of
this Agreement.
"INDEMNIFYING PARTY" has the meaning set forth in Section 4.3 of
this Agreement.
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"INTELLECTUAL PROPERTY ASSETS" include all (a) legal names of
Persons, fictional business names, trading names, registered and
unregistered trademarks, service marks and applications for any of them;
(b) patents and patent applications; (c) copyrights both in published works
and unpublished works; (d) rights in mask works; (e) trade dress; and (f)
know-how, trade secrets, confidential information, software, technical
information, process technology, plans, drawings, specifications, bills of
material, blue prints and other similar data.
"INTERIM FINANCIAL STATEMENTS" has the meaning set forth in
Section 2.4 of this Agreement.
"IRS" means the Internal Revenue Service.
"KNOWLEDGE" means actual awareness of a particular fact or other
matter or awareness that a reasonably prudent individual could be expected
to obtain in the course of conducting a reasonably comprehensive
investigation concerning the existence of such fact or other matter.
"LABOR ACTIVITY" means any strike, slowdown, picketing, work
stoppage, labor arbitration or Proceeding concerning the grievance of any
employee, application or complaint filed by an employee or union with the
National Labor Relations Board or any comparable Governmental Body,
organizational activity, application for certification of a collective
bargaining agent or other labor dispute against or affecting I-WAY or its
premises.
"LEGAL REQUIREMENT" means any federal, state, local, municipal,
foreign, international, multinational or other constitution, law,
ordinance, principle of common law, statute, code, regulation, rule, treaty
or tariff.
"MATERIAL CONTRACT" means any Applicable Contract: (a) that
involves performance of services or delivery of goods or materials by or to
I-WAY of an amount in excess of $5,000; (b) that involves expenditures or
receipts by or of I-WAY in excess of $5,000; (c) that relates to the
ownership, sale or use of real or personal property, except those relating
to personal property having a value per item or aggregate payments of less
than $5,000 and with a term of less than one year; (d) that relates to
Intellectual Property Assets; (e) that involves the sharing of profits,
losses, costs or liabilities by I-WAY with any other Person or by any other
Person with I-WAY; (f) that provides for payments to or by any Persons
based on sales, purchases or profits, other than direct payments for goods;
(g) that grants a power of attorney; (h) that was entered into other than
in the Ordinary Course of Business and contains or provides for an
undertaking by I-WAY to be responsible for consequential damages; (i) that
relates to capital expenditures in excess of $5,000; (j) that limits the
freedom of I-WAY to compete in any line of business or geographic area;
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(k) that contains a guaranty by I-WAY of performance or payment by another
Person; (1) that relates to indebtedness for borrowed money or that creates
an Encumbrance in any of I-WAY's properties or assets; (m) that relates to
the length, duration or condition of employment or the termination thereof
and which cannot be terminated by I-WAY on notice without liability;
(n) that is with any customer of I-WAY; and (o) that amends, supplements or
modifies any of the foregoing.
"MERGER" has the meaning set forth in the second paragraph of
this Agreement.
"MULTI-EMPLOYER RETIREMENT PLAN" has the meaning set forth in
Section 3(37)(A) of ERISA.
"OCCUPATIONAL SAFETY AND HEALTH LAW" means any Legal Requirement
designed to provide safe and healthful working conditions and to reduce
occupational safety and health hazards and any program, whether
governmental or private, designed to provide safe and healthful working
conditions.
"ORDER" means any award, decision, injunction, judgment, order,
ruling, subpoena or verdict entered, issued, made or rendered by any court,
administrative agency or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS" means in accordance with the usages
of trade prevailing in the industry in which the applicable Party operates
and in accordance with the applicable Party's historical and customary
day-to-day practices with respect to the activity in question.
"ORGANIZATIONAL DOCUMENTS" means the complete articles or
certificate of incorporation and the bylaws of the applicable Party,
including all amendments.
"PARTY" or "PARTIES" means the signatories to this Agreement, or
any of them as the context indicates.
"PERSON" means any individual, corporation (including any non-
profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization or other
entity or Governmental Body.
"PROCEEDING" means any action, arbitration, audit, hearing,
investigation, litigation or suit (whether civil, criminal, administrative,
investigative or informal) commenced, brought, conducted or heard by or
before, or otherwise involving, any Governmental Body or arbitrator.
"RELATED PERSON" means with respect to a particular individual:
(a) each other member of such individual's Family; (b) any Person that is
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directly or indirectly controlled by any one or more members of such
individual's Family; (c) any Person in which members of such individual's
Family hold (individually or in the aggregate) a Material Interest; and (d)
any Person with respect to which one or more members of such individual's
Family serves as a director, officer, partner, executor or trustee (or in a
smaller capacity). For purposes of this definition, (a) the "Family" of an
individual includes (i) the individual; (ii) the individual's spouse;
(iii) any other natural person who is related to the individual or the
individual's spouse within the second degree; and (iv) any other natural
person who resides with such individual; and (b) "Material Interest" means
direct or indirect beneficial ownership (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934, as amended) of voting securities or other
voting interests representing at least 20% of the outstanding voting power
of a Person or equity securities or other equity interests representing at
least 20% of the outstanding equity securities or equity interests in a
Person.
"REPRESENTATIVE" means with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor or other
representative of such Person, including legal counsel, accountants and
financial advisors.
"RESTRICTED EVENT" means (a) any declaration or payment of any
dividend or other distribution or payment in respect of shares of capital
stock; (b) any amendment of the Organizational Documents; (c) any payment
or increase of any bonuses, salaries or other compensation to any
shareholder, director, officer or (except in the Ordinary Course of
Business) employee or entry into any employment, severance or similar
Contract with any director, officer or employee; (d) the adoption of, or
increase in the payments to or benefits under, any Employee Benefit Plan
for or with any employees of the applicable Party; (e) any damage to or
destruction or loss of any property or assets of the applicable Party,
whether or not covered by insurance, materially and adversely affecting the
properties, assets, business, financial condition, operations, income,
expenses or prospects of the applicable Party; (f) the entry into,
termination of or receipt of notice of termination of any license,
distributorship, dealer, sales representative, joint venture, credit or
similar Contract or transaction involving a total remaining commitment by
the applicable Party of more than $10,000; (g) any sale (other than sales
of inventory in the Ordinary Course of Business), lease or other
disposition of any property or asset of the applicable Party or the
imposition of any Encumbrance on any material property or asset of the
applicable Party, including the sale, lease or disposition of any
Intellectual Property Asset; (h) the cancellation or waiver of any claims
or rights with a value to the applicable Party in excess of $10,000; (i)
any material change in the accounting methods used by the applicable Party;
or (j) any agreement or commitment, whether written or oral, to do any of
the foregoing.
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"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SELLER" has the meaning set forth in the first paragraph of this
Agreement.
"SELLERS" has the meaning set forth in the first paragraph of
this Agreement and when used in the Agreement means the Sellers
collectively and each of them individually.
"SURVIVING CORPORATION" has the meaning set forth in Section 1.1
of this Agreement.
"TAX" means any tax (including, without limitation, any income
tax, capital gains tax, value-added tax, sales tax, property tax, gift tax,
estate tax or withholding tax), levy, assessment, tariff, duty (including
any customs duty), deficiency or other fee and any related charge or amount
(including any fine, penalty or interest), imposed, assessed or collected
by or under the authority of any Governmental Body or payable pursuant to
any tax-sharing agreement or any other Contract relating to the sharing of
payment of any such tax, levy, assessment, tariff, duty, deficiency or fee.
"TAX RETURN" means any return (including, without limitation, any
information return), report, statement, schedule, notice, form or other
document or information filed with or submitted to, or required to be filed
with or submitted to, any Governmental Body in connection with the
determination, assessment, collection or payment of any Tax or in
connection with the administration, implementation or enforcement of or
compliance with any Legal Requirement relating to any Tax.
"THREATENED" means, as to any claim, Proceeding, dispute, action
or other matter, that a demand or statement has been made (orally or in
writing), a notice has been given (orally or in writing) or an event has
occurred or some other circumstance exists that would lead a prudent Person
to conclude that such a claim, Proceeding, dispute, action or other matter
is reasonably likely to be asserted, commenced, taken or otherwise pursued
in the future.
"WARRANTS" has the meaning set forth in Section 1.7(a) of this
Agreement.
ARTICLE 6
GENERAL
SECTION 6.1. NON-COMPETE. In consideration of the consummation
of the transactions contemplated by this Agreement and other good and
valuable consideration, Sellers agree that they will not for the shorter of
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(a) a period of five years from the Closing Date or (b) as long as Dakota
and/or the Surviving Corporation are engaged in the business of providing
telecommunications service, directly or indirectly compete or participate
in the ownership, management, financing or control of, or act as a
consultant or agent for, any Person which competes or plans to compete,
directly or indirectly, with Dakota, the Surviving Corporation or any of
their respective Affiliates. The geographic scope of the foregoing
covenant is the entire United States, including each and every state,
county and municipality therein. Sellers further agree that, for the
period specified, they will not induce any employee of the Surviving
Corporation to leave the Surviving Corporation's employment or directly or
indirectly assist any other Person in requesting or inducing any employee
of the Surviving Corporation to leave his or her employment. Finally,
Sellers agree that they will not, from the date of this Agreement and
forever afterward, use or disclose to any Person any proprietary, secret or
confidential information concerning I-WAY or the Surviving Corporation,
including customer names and business and trade secrets. If any court of
competent jurisdiction finds that the time period of the foregoing
covenants is too lengthy, that the geographic scope is too large or that
the scope of the restrictions is too broad, the restrictive time period
shall be deemed to be the longest period permissible by law and the
geographic scope and the scope of the restrictions shall be deemed to
comprise the largest scope permissible by law under the circumstances. It
is the Parties' intent to protect and preserve the business and goodwill of
I-WAY to be acquired by Acquisition Corp. and thus the Parties agree and
direct that the time period and scope of the covenants set forth in this
Section 6.1 be the maximum permissible duration and size. The foregoing
shall not prohibit Sellers from owning not more than five percent (5%) of
the outstanding capital stock of any company whose stock is listed on a
national securities exchange or quoted on NASDAQ.
SECTION 6.2. SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS
AND AGREEMENTS. Except as otherwise expressly indicated in this Agreement,
all representations, warranties, covenants and agreements made by any Party
to this Agreement will survive the Closing and any investigation at any
time made by or on behalf of any Party before or after the Closing for a
period of two years from the Closing Date. Notwithstanding the foregoing,
the representations and warranties set forth in Sections 2.6, 2.10, 2.17,
2.19 and 3.8 of this Agreement, and Sections 2.20 and 3.10 to the extent
they relate to the foregoing sections, shall survive until the statute of
limitation periods applicable to the underlying claims which may give rise
to an indemnity claim expire and the representations and warranties set
forth in Sections 2.3 and 3.2 of this Agreement shall survive forever. The
making of a claim for indemnification under Article 4 will toll the running
of the applicable limitations period set forth above with respect to such
claim.
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SECTION 6.3. BINDING EFFECT; BENEFITS; ASSIGNMENT. All of the
terms of this Agreement will be binding upon, inure to the benefit of and
be enforceable by and against the heirs and legal representatives of
Sellers and the successors and authorized assigns of Dakota and Acquisition
Corp. Except as otherwise expressly provided in this Agreement, nothing in
this Agreement, express or implied, is intended to confer upon any other
Person any rights or remedies under or by reason of this Agreement, this
Agreement being for the exclusive benefit of the Parties and their
respective heirs, legal representatives, successors and assigns. Neither
Party will assign any of its or his respective rights or obligations under
this Agreement to any other Person without the prior written consent of the
other Parties.
SECTION 6.4. ENTIRE AGREEMENT. This Agreement, and the exhibits
and schedules to this Agreement (including the Disclosure Schedule), and
the agreements referred to in this Agreement set forth the entire agreement
and understanding of the Parties in respect of the transactions
contemplated by this Agreement and supersede all prior agreements,
arrangements and understandings relating to the subject matter hereof. No
representation, promise, inducement or statement of intention has been made
by either Party that is not embodied in this Agreement or in the documents
referred to in this Agreement, and neither Party will be bound by or liable
for any alleged representation, promise, inducement or statement of
intention not so set forth.
SECTION 6.5. AMENDMENT AND WAIVER. This Agreement may be
amended, modified, superseded or canceled and any of the terms, covenants,
representations, warranties or conditions hereof may be waived only by a
written instrument executed by the Parties or, in the case of a waiver, by
or on behalf of the Party waiving compliance. The failure of any Party at
any time to require performance of any provision of this Agreement will in
no manner affect the right of that Party at a later time to enforce such
provision. No waiver by any Party of any condition or of any Breach of any
term, covenant, representation or warranty contained in this Agreement, in
any one or more instances, will be deemed to be or construed as a further
or continuing waiver of any such condition or of any Breach of the term,
covenant, representation or warranty or any other term, covenant,
representation or warranty set forth in this Agreement.
SECTION 6.6. GOVERNING LAW. This Agreement will be governed by
and construed in accordance with the laws of the State of South Dakota as
applicable to Contracts made and to be performed in the State of South
Dakota without regard to conflict of laws principles.
SECTION 6.7. PUBLIC DISCLOSURE. Except as may be required by
applicable law or the rules of any national securities exchange or
quotation system, no Party will make any public disclosure of the existence
or terms of this Agreement or the transactions contemplated by this
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Agreement without the prior written consent of the other Parties, which
consent will not be unreasonably withheld.
SECTION 6.8. NOTICES. All notices, requests, demands and other
communications to be given pursuant to the terms of this Agreement will be
in writing and will be deemed to have been duly given if delivered by hand,
sent by facsimile with confirmation, sent by a nationally recognized
overnight mail service or mailed first class, postage prepaid:
(a) If to Dakota or with a copy to:
Acquisition Corp.:
Dakota Cooperative Xxxxxx Xxxxxxxx & Xxxx LLP
Telecommunications, Inc. 900 Old Kent Building
X.X. Xxx 00, Xxxxxxx 00 111 Lyon Street, N.W.
Xxxxx, South Dakota 57037 Xxxxx Xxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000 Telephone: (000) 000-0000
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
Attention: Xx. Xxxxx X. Xxxxxxxx Attention: Xxxxx X. Xxxxxx,
Esq.
(b) If to Sellers: with a copy to:
To the individuals at the Xxxxxxx, Street and Deinard
addresses and telephone and 000 Xxxxx Xxxxx Xxxxxx,
facsimile numbers listed on Ste 2300
EXHIBIT A to this Agreement Xxxxxxxxxxx, Xxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxxxx, Esq.
A Party may change its address, telephone number or facsimile number by
prior written notice to the other Parties.
SECTION 6.9. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which when so executed will be deemed to be an
original and such counterparts will together constitute one and the same
agreement.
SECTION 6.10. EXPENSES. Each Party will pay its or his own
respective expenses, costs and fees (including attorneys' and accountants'
fees) incurred in connection with the negotiation, preparation, execution
and delivery of this Agreement and the consummation of the transactions
contemplated by this Agreement, and none of such expenses, costs or fees
will be paid by I-WAY.
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SECTION 6.11. SEVERABILITY. Any provision, or clause of any
provisions, of this Agreement that may be found to be contrary to South
Dakota law or otherwise unenforceable will not affect the remaining terms
of this Agreement, which will be construed as if the unenforceable
provision or clause were absent from this Agreement.
SECTION 6.12. HEADINGS; CONSTRUCTION; TIME OF ESSENCE. The
headings of the sections and paragraphs in this Agreement have been
inserted for convenience of reference only and will not restrict or
otherwise modify any of the terms or provisions of this Agreement. Unless
otherwise expressly provided, the word "including" whenever used in this
Agreement does not limit the preceding words or terms. With regard to all
dates and time periods set forth or referred to in this Agreement, time is
of the essence.
[The remainder of this page is intentionally left blank.]
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The Parties have executed this Agreement as of the date stated in
the first paragraph of this Agreement.
DAKOTA COOPERATIVE
TELECOMMUNICATIONS, INC.
By /s/ XXXXX X. XXXXXXXX
Its VICE PRESIDENT
"Dakota"
DAKOTA ACQUISITION CORP. #2
By /s/ XXXXX X. XXXXXXXX
Its VICE PRESIDENT
"Acquisition Corp."
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I-WAY PARTNERS, INC.
By /s/ XXXX XXXXXXXXX
Its PRESIDENT
"I-WAY"
/s/ XXXX X. XXXXX
Xxxx X. Xxxxx
/s/ XXXX X. XXXXXX
Xxxx X. Xxxxxx
/s/ XXXXXXX X. XXXXXX
Xxxxxxx X. Xxxxxx
/s/ XXXXXX X. XXXXXX
Xxxxxx X. Xxxxxx
/s/ XXXX XXXXXXXXX
Xxxx Xxxxxxxxx
/s/ XXXX XXXX
Xxxx Xxxx
/s/ XXXXXXX ENGLISH
Xxxxxxx English
"Sellers"
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EXHIBIT A
LIST OF SELLERS
NAME AND ADDRESS OF SELLER NUMBER OF I-WAY SHARES OWNED
Xx. Xxxx X. Xxxxx 7,000
Xxxxx, Xxxxx & Xxxxxx, P.C.
000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 000
X.X. Xxx 000
Xxxxx Xxxxx, XX 00000-0000
Xx. Xxxx X. Xxxxxx 7,000
Xxxxx, Xxxxx & Xxxxxx, P.C.
000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 000
X.X. Xxx 000
Xxxxx Xxxxx, XX 00000-0000
Mr. Xxxxxxx Xxxxxx 7,000
Xxxxxx Transfer & Storage
0000 X Xxxxxx
Xxxxx Xxxxx, XX 00000
Xx. Xxxxxx X. Xxxxxx 7,000
Surgical Associates, Ltd.
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxxx, XX 00000
Mr. Xxxx Xxxxxxxxx 7,000
000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxxx, XX 00000
Xx. Xxxx Xxxx 17,500
0000 Xxxxx Xxxx
Xxxxx Xxxxx, XX 00000
Xx. Xxxxxxx English 17,500
000 Xxxx Xxxxx Xxxx
Xxxxx Xxxxx, XX 00000
EXHIBIT C
ARTICLES OF MERGER
and related
PLAN OF MERGER
EXHIBIT D
FORM OF WARRANT
EXHIBIT E
FORM OF STANDSTILL AGREEMENT
