STOCK PURCHASE AGREEMENT
By and Between
PICK COMMUNICATIONS CORP.
and
XXXXX INVESTMENTS LTD.
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Dated as of September 13, 1999
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TABLE OF CONTENTS
Page
ARTICLE I
PURCHASE AND SALE...............................................................................................-1-
SECTION 1.1 Agreement to Sell and Purchase Capital Stock; Consideration...............................-1-
SECTION 1.2 Elimination of Intercompany and Other Debt................................................-2-
SECTION 1.3 Closing...................................................................................-2-
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER...........................................................-3-
SECTION 2.1 Title to Shares...........................................................................-3-
SECTION 2.2 Due Authorization.........................................................................-3-
SECTION 2.3 No Conflicts; Consents and Approvals......................................................-3-
SECTION 2.4 Corporate Existence and Power; Capitalization; Subsidiaries...............................-4-
SECTION 2.5 Charter Documents and Corporate Records...................................................-4-
SECTION 2.6 Financial Information.....................................................................-5-
SECTION 2.7 Liabilities...............................................................................-5-
SECTION 2.8 Receivables...............................................................................-6-
SECTION 2.9 Inventories...............................................................................-6-
SECTION 2.10 Absence of Certain Changes...............................................................-6-
SECTION 2.11 Properties; Title........................................................................-7-
SECTION 2.12 Material Contracts.......................................................................-8-
SECTION 2.13 Intangible Property and Warranties.......................................................-8-
SECTION 2.14 Claims and Proceedings...................................................................-9-
SECTION 2.15 Taxes....................................................................................-9-
SECTION 2.16 Employee Benefit Plans..................................................................-10-
SECTION 2.17 Employee-Related Matters................................................................-11-
SECTION 2.18 Insurance...............................................................................-12-
SECTION 2.19 Compliance with Laws....................................................................-12-
SECTION 2.20 Permits and Licenses....................................................................-13-
SECTION 2.21 Environmental Matters...................................................................-13-
SECTION 2.22 Finders' Fees...........................................................................-13-
SECTION 2.23 Depositories; Powers of Attorney, Etc...................................................-13-
SECTION 2.24 Disclosure; Schedules...................................................................-14-
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER...........................................................-14-
SECTION 3.1 Authority Relative to This Agreement.....................................................-14-
SECTION 3.2 No Conflicts; Consents...................................................................-14-
SECTION 3.3 Corporate Existence and Power............................................................-15-
SECTION 3.4 Finders' Fees............................................................................-15-
SECTION 3.5 Investment...............................................................................-15-
SECTION 3.6 Tax Returns..............................................................................-15-
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ARTICLE IV
COVENANTS AND AGREEMENTS PRIOR TO
AND SUBSEQUENT TO CLOSING.............................................................................-15-
SECTION 4.1 Conduct of Business......................................................................-15-
SECTION 4.2 Corporate Examinations and Investigations................................................-17-
SECTION 4.3 Consents, Filings and Authorizations; Efforts to Consummate..............................-17-
SECTION 4.4 Negotiations With Others.................................................................-18-
SECTION 4.5 Notices of Certain Events................................................................-18-
SECTION 4.6 Public Announcements.....................................................................-18-
SECTION 4.7 Confidentiality..........................................................................-19-
SECTION 4.8 Expenses.................................................................................-20-
SECTION 4.9 Further Assurances.......................................................................-20-
SECTION 4.10 Tax Matters..............................................................................-20-
SECTION 4.11 Seller's Board Representation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -
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ARTICLE V
CONDITIONS TO CLOSING.................................................................................-21-
SECTION 5.1 Conditions to the Obligations of Seller and Purchaser....................................-21-
SECTION 5.2 Conditions to the Obligations of Seller..................................................-21-
SECTION 5.3 Conditions to the Obligations of Purchaser...............................................-22-
ARTICLE VI
TERMINATION...........................................................................................-24-
SECTION 6.1 Termination..............................................................................-24-
SECTION 6.2 Effect of Termination; Right to Proceed..................................................-25-
ARTICLE VII
INDEMNIFICATION.......................................................................................-25-
SECTION 7.1 Survival of Representations and Warranties...............................................-25-
SECTION 7.2 Obligation of Seller to Indemnify........................................................-26-
SECTION 7.3 [Intentionally Left Blank]
SECTION 7.4 Notice and Opportunity to Defend Third Party ............................................-27-
SECTION 7.5 Limitation on Indemnification; Payment of Indemnification Amounts........................-27-
SECTION 7.6 Other Remedies...........................................................................-28-
ARTICLE VIII
MISCELLANEOUS.........................................................................................-28-
SECTION 8.1 Notices..................................................................................-28-
SECTION 8.2 Entire Agreement.........................................................................-29-
SECTION 8.3 Waivers and Amendments; Non-Contractual Remedies;
Preservation of Remedies...................................................-30-
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SECTION 8.4 Governing Law............................................................................-30-
SECTION 8.5 Consent to Jurisdiction and Service of Process; Waiver of Jury Trial.....................-30-
SECTION 8.6 Binding Effect; Assignment and the PICK Net Option.......................................-31-
SECTION 8.7 Exhibits.................................................................................-31-
SECTION 8.8 Severability.............................................................................-31-
SECTION 8.9 Counterparts.............................................................................-32-
ARTICLE IX
DEFINITIONS...........................................................................................-32-
SECTION 9.1 Definitions..............................................................................-32-
SECTION 9.2 Interpretation...........................................................................-35-
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SCHEDULES
Schedule 2.3 - Required Consents
Schedule 2.4 - Capitalization
Schedule 2.7 - Liabilities
Schedule 2.8 - Receivables
Schedule 2.9 - Inventories
Schedule 2.10 - Adverse Changes
Schedule 2.11 - Properties
Schedule 2.12 - Material Contracts
Schedule 2.13 - Intellectual Property
Schedule 2.14 - Litigation
Schedule 2.15 - Taxes
Schedule 2.16 - Employee Benefit Plans
Schedule 2.17 - Employee-Related Matters
Schedule 2.18 - Insurance
Schedule 2.20 - Permits and Licenses
Schedule 2.21 - Environmental Matters
Schedule 2.22 - Broker
Schedule 2.23 - Powers of Attorney
Schedule 3.2 - Consents
Schedule 4.7 - Confidential Information
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (the "Agreement") is made as of September
13, 1999, between PICK COMMUNICATIONS CORP., a Nevada corporation (the
"Seller"), and XXXXX INVESTMENTS LTD., a British Virgin Islands corporation (or
an affiliate thereof) (the "Purchaser").
W I T N E S S E T H :
WHEREAS, the Seller provides telecommunications services through its
wholly-owned subsidiaries, PICK Net Inc., a New Jersey corporation ("PICK Net
USA") and PICK Net UK PLC, a public limited company organized under the laws of
England ("PICK Net UK" and, together with PICK Net USA, the "Subsidiaries"); and
WHEREAS, the Seller has determined that each of the Subsidiaries has a
negative tangible net worth and that the continued operation of such
Subsidiaries by the Seller will hamper the long-term growth potential of the
Seller and its other consolidated subsidiaries; and
WHEREAS, the board of directors of the Seller has determined that the
disposition of the Subsidiaries pursuant to the terms and conditions of this
Agreement are in the best interests of the Seller and its stockholders; and
WHEREAS, the Seller desires to sell and transfer to the Purchaser, and
the Purchaser desires to purchase and acquire from the Seller, all of Seller's
right, title and interest in and to 100% of the issued and outstanding capital
stock of PICK Net USA and PICK Net UK (the "Acquisition"); and
WHEREAS, in furtherance of the consummation of the Acquisition and the
other transactions contemplated hereby (the "Other Contemplated Transactions"),
the parties hereto desire to enter into this Agreement (certain capitalized
terms used herein have the respective meanings set forth in Article IX).
NOW, THEREFORE, in consideration of the foregoing premises, the
promises contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby expressly acknowledged, the parties
hereto agree as follows:
ARTICLE I
PURCHASE AND SALE
SECTION 1.1 Agreement to Sell and Purchase Capital Stock;
Consideration. Subject to the terms and conditions of this Agreement, at the
Closing the Seller shall sell, assign, convey, transfer and deliver to the
Purchaser, and the Purchaser shall purchase, acquire and take assignment and
delivery of, all of the Seller's right, title and interest in and to all of the
issued
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and outstanding shares of capital stock of PICK Net USA and PICK Net UK (the
"Purchased Shares"). The parties hereto agree that the aggregate purchase price
to be paid at Closing by the Purchaser in consideration of the Purchased Shares
will be equal to two United States Dollars ($2.00) in cash (the "Purchase
Price").
SECTION 1.2 Elimination of Intercompany and Other Debt.
(a) At the Closing, the Seller and each consolidated subsidiary of the
Seller that is not a Subsidiary shall release and forever discharge PICK Net USA
and PICK Net UK from any and all inter-company liabilities of the Subsidiaries,
including notes payable and Receivables that are due or that will come due from
such Subsidiaries that arose on or prior to the Closing Date.
(b) At the Closing, each of the Subsidiaries shall release and forever
discharge the Seller and each consolidated subsidiary of the Seller that is not
PICK Net USA or PICK Net UK from any and all inter-company liabilities of the
Seller, including notes payable and Receivables that are due or that will come
due from the Seller or such other subsidiaries that arose on or prior to the
Closing Date.
(c) Prior to the Closing, Seller shall deliver to the Purchaser all
pleadings and other information reasonably requested by Purchaser relating to
the arbitration proceeding (the "Arbitration") commenced by the Seller against
American Telephone and Telegraph ("AT&T") on or about November 5, 1997. The
Seller shall assume as the primary obligor, and shall indemnify and hold
harmless each of the Subsidiaries, against payment of all amounts in excess of
$1.1 million either (i) due and payable on or prior to the date of this
Agreement, whether or not disputed, to AT&T or (ii) to be paid to AT&T under the
terms of any judgment for or settlement of the Arbitration.
(d) At the Closing, the Seller shall assume as the primary obligor, the
payment of any liabilities owed to vendors and creditors ("Subsidiary Debt") of
the Subsidiaries which in the aggregate exceed eight million nine hundred
thousand dollars ($8,900,000), including up to nine hundred-twenty thousand
dollars ($920,000) of obligations under outstanding debit telephone cards of
PICK US Inc., which is being assumed by the Subsidiaries pursuant to a service
agreement to be entered into with PICK US Inc., but exclusive of the AT&T
obligation referred to in Subsection (c) above, and shall indemnify the
Purchaser against payment of all amounts in excess of $8,900,000.
SECTION 1.3 Closing. The closing (the "Closing") of the Acquisition and
the Other Contemplated Transactions shall take place at the offices of Snow
Xxxxxx Xxxxxx P.C., 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, at 10:00 local
time on October 29, 1999, or at such other time or place the parties hereto
shall agree. The date of the Closing is hereinafter called the "Closing Date."
All events which shall occur at the Closing shall be deemed to occur
simultaneously.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants to the Purchaser, as of the
date hereof and as of the Closing Date (as if each such representation and
warranty was remade on the Closing Date), that:
SECTION 2.1 Title to Shares. (a) The Seller owns all of the Purchased
Shares, free and clear of any and all Liens (other than restrictions on transfer
arising under applicable securities law) and, immediately prior to the Closing,
will be owned by the Seller, free and clear of any and all Liens (other than
restrictions on transfer arising under applicable securities law). Immediately
prior to the Closing, the Seller will be the only holder of record of all of the
outstanding capital stock of each of the Subsidiaries.
(b) There are no options, warrants, rights, convertible
securities or other agreements or commitments obligating the Seller, with
respect to the shares of capital stock of the Subsidiaries owned by the Seller,
to transfer or sell, or cause the issuance, transfer or sale of, any shares of
capital stock of any of the Subsidiaries.
SECTION 2.2 Due Authorization. The Seller has full corporate power and
authority to execute and deliver this Agreement and each other Transaction
Document to which it is a party and to consummate the Acquisition and the Other
Contemplated Transactions. The execution, delivery and performance by the Seller
of this Agreement and the consummation by it of the Acquisition and Other
Contemplated Transactions have been duly and validly authorized and approved by
the Seller's board of directors and no other corporate proceedings on the part
of the Seller are necessary to authorize the execution and delivery by or on
behalf of the Seller of this Agreement or the other Transaction Documents to
which it is a party or the consummation of the Acquisition and the Other
Contemplated Transactions. This Agreement and each other Transaction Document to
which the Seller is a party has been duly and validly executed and delivered by
the Seller, and (assuming the valid execution and delivery thereof by the other
parties hereto) constitutes the legal, valid and binding agreement of the
Seller, enforceable against the Seller in accordance with its terms, except as
such obligations and their enforceability may be limited by applicable
bankruptcy and other similar Laws (as defined herein) affecting the enforcement
of creditors' rights generally and except that the availability of equitable
remedies is subject to the discretion of the court before which any proceeding
therefor may be brought (whether at law or in equity).
SECTION 2.3 No Conflicts; Consents and Approvals. Except as set forth
in Schedule 2.3 attached hereto (the "Required Consents"), neither the
execution, delivery and performance by the Seller of this Agreement and each
other Transaction Document to which it is a party, nor the consummation of the
Acquisition and the Other Contemplated Transactions, (i) violates any provision
of the Certificate of Incorporation or by-laws (or comparable charter documents)
of the
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Seller or any of the Subsidiaries; (ii) requires the Seller or any of the
Subsidiaries to obtain any consent, approval, Permit or action of or waiver
from, or make any filing with, or give any notice to, any Governmental Body or
any other Person; (iii) violates, conflicts with or results in a breach or
default under (after the giving of notice or the passage of time or both), or
permits the termination of, any Contract, right, other obligation or restriction
relating to or which affects the Purchased Shares or the Seller or any of the
Subsidiaries to which the Seller or any of the Subsidiaries is a party or by
which either of them or its Assets or the Business may be bound or subject, or
results in the creation of any Lien upon the Purchased Shares or upon any of the
Assets of the Seller or the Subsidiaries pursuant to the terms of any such
Contract; (iv) violates or conflicts with any Law or Order of any Governmental
Body against, or binding upon, the Seller or the Subsidiaries or upon their
respective Assets or the Business or the Purchased Shares; or (v) violates or
results in the revocation or suspension of any Permit.
SECTION 2.4 Corporate Existence and Power; Capitalization;
Subsidiaries. (a) Each Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, and has all requisite power and all material Permits required to
own, lease and operate its respective properties and to conduct the Business as
currently conducted. Except in any such jurisdiction where failure to so qualify
would not have a Material Adverse Effect, each Subsidiary is duly qualified to
do business as a foreign corporation and is in good standing in each
jurisdiction where the character of the property owned or leased by it or the
nature of its activities makes such qualification necessary.
(b) The entire authorized capital stock of PICK Net USA
consists of 1,000,000 shares of common stock, no par value per share (the "PICK
Net USA Common Stock"). Of such authorized shares 1,000,000 shares of PICK Net
USA Common Stock are issued and outstanding. The entire authorized capital of
PICK Net UK consists of (pound)50,000 divided into 50,000 ordinary shares of
(pound)1 each (the "PICK Net UK Ordinary Shares"). Of such authorized share
capital, 12,499 ordinary shares of PICK Net UK Ordinary Shares are issued and
outstanding and held by Seller and one qualifying share held by Xxxxx Xxxxx. All
of the outstanding shares of capital stock of each of the Subsidiaries are
validly issued, fully paid and nonassessable, and no shares were issued in
violation of the preemptive rights of any stockholder. At the Closing, the
aggregate number of Purchased Shares shall represent all of the outstanding
shares of the capital stock of PICK Net USA and PICK Net UK.
(c) Except as set forth in Schedule 2.4 attached hereto, there
are no options, warrants, rights, convertible securities or other agreements or
commitments obligating the Seller or any of the Subsidiaries to issue, transfer
or sell, or cause the issuance, transfer or sale of, any shares of capital stock
of any of the Subsidiaries or to make any payments in respect of the value of
any shares any of the Subsidiaries.
SECTION 2.5 Charter Documents and Corporate Records. The Seller has
heretofore delivered to Purchaser true and complete copies of the Certificate of
Incorporation and by-laws (or comparable charter documents) of the Seller and
each of the Subsidiaries, as in effect
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on the date hereof. The stock and transfer books (or comparable documents) of
the Seller and each of the Subsidiaries shall be made available to the Purchaser
for its inspection prior to the Closing and shall be true and complete.
SECTION 2.6 Financial Information. The Seller has furnished to the
Purchaser true and complete copies of (i) the audited, consolidated financial
statements of the Seller at and for the years ended December 31, 1998, 1997 and
1996 (the "Annual Statements"), (ii) the unaudited, consolidated financial
statements of the Seller at and for the six (6) months ended June 30, 1999 (the
"Interim Statements"), and (iii) the unaudited balance sheets of each of the
Subsidiaries as of July 31, 1999 (the "Subsidiaries' Balance Sheets") and
unaudited statements of revenues and expenses of each of the Subsidiaries for
the seven months ended July 31, 1999 (the "Subsidiary Operating Statements").
The Annual Statements and Interim Statements have been prepared in accordance
with GAAP consistently applied. Each of the Annual and Interim Statements
presents fairly, in all material respects, the consolidated financial position
of the Seller as of its date, and its earnings and cash flows for the periods
then ended, except that there is no statement of stockholders' equity for the
Interim Statements. Each balance sheet contained in the Annual Statements fully
sets forth on a consolidated basis all Assets and Liabilities of the Seller
existing as of its date which, under GAAP, should be set forth therein, and each
statement of earnings contained therein sets forth the items of income and
expense of the Seller which should appear therein under GAAP. The Interim
Statements have been prepared in accordance with GAAP (except that notes have
not been included) in a manner consistent with the Seller's past practices and
present fairly, in all material respects, the consolidated financial position of
the Subsidiaries as of its date and results of operations for the period then
ended, subject to normal year-end adjustments and accruals. The audited
consolidated financial statements of the Seller included in all reports,
schedules, forms, statements and other documents required to be filed with the
Securities and Exchange Commission ("SEC") in accordance with the Securities
Exchange Act of 1934, as amended ("Exchange Act"), from January 1, 1996 through
the date hereof fairly present, in all material respects, the consolidated
financial position and the consolidated results of operations and cash flows
(and changes in financial position, if any) of the Seller and its consolidated
subsidiaries as of the times and for the periods referred to therein, subject,
in the case of the Interim Statements, to the lack of footnotes and normal
year-end adjustments and to any other adjustments or exceptions described
therein, all in accordance with GAAP applied on a consistent basis through the
periods involved (except as may be indicated therein or in the notes thereto).
The Subsidiaries' Balance Sheets present fairly in accordance with GAAP the
financial position of each of the Subsidiaries as of July 31, 1999, except that
there are no footnotes to said Balance Sheets. All material information required
by GAAP to be disclosed in footnotes to a balance sheet of each of the
Subsidiaries as of July 31, 1999 is disclosed in one or more of the schedules to
this Agreement. The Subsidiary Operating Statements are consistent with the
Assumptions made in the Pro Forma Financial Statements and were prepared on a
consistent basis with the Interim Financial Statements, although they were not
necessarily prepared in accordance with GAAP.
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SECTION 2.7 Liabilities. Except as described in Schedule 2.7 attached
hereto and as and to the extent reflected in the Subsidiaries' Balance Sheets at
July 31, 1999, the Subsidiaries did not have, as of July 31, 1999, any
Liabilities (other than obligations of continued performance under Contracts and
other commitments and arrangements entered into in the ordinary course of the
Business); and except as described in Schedule 2.7 attached hereto, none of the
Subsidiaries has incurred any Liabilities since July 31, 1999, except (i)
current Liabilities for trade or business obligations incurred in the ordinary
course of the Business and consistent with past practice, (ii) Liabilities in
respect of this Agreement, and (iii) Liabilities that are otherwise disclosed
pursuant to any other representation herein.
SECTION 2.8 Receivables. Except to the extent of the amount of reserves
for doubtful accounts reflected in the Interim Statements or as set forth in
Schedule 2.8 attached hereto, all the Receivables of the Subsidiaries reflected
in the Subsidiaries' Balance Sheets and all Receivables that have arisen since
July 31, 1999 (except Receivables that have been collected since such date) are
valid and enforceable claims, and constitute bona fide Receivables resulting
from the sale of goods and services in the ordinary course of the Business.
Schedule 2.8 attached hereto sets forth a true and complete list of all
Receivables that are due and owing at the date hereof, or that will become due
and owing within 60 days after the Closing Date, from the Seller or the
consolidated subsidiaries of the Seller (other than PICK Net USA and PICK Net
UK) to any of the Subsidiaries which shall be eliminated as set forth in Section
1.2(b) above. Schedule 2.8 attached hereto sets forth a true and complete list
of all Receivables that are due and owing at the date hereof, or that will
become due and owing within 60 days after the Closing Date, from the
Subsidiaries to the Seller or any of the consolidated subsidiaries of the Seller
other than PICK Net USA and PICK Net UK which shall be eliminated as set forth
in Section 1.2(a) above.
SECTION 2.9 Inventories. All Inventory is free and clear of all Liens,
except for the Liens described in Schedule 2.9 attached hereto.
SECTION 2.10 Absence of Certain Changes. Since the Latest Balance Sheet
Date, except as set forth in this Agreement or disclosed in Schedule 2.10
attached hereto, the Seller has conducted the Business in the ordinary course
consistent with past practices and there has not been:
(a) Except for material changes in general economic or
industry conditions, any changes in the Assets of the Subsidiaries, or the
financial condition or the results of operations of the Subsidiaries
(collectively, the "Condition of the Business") which would have a Material
Adverse Effect, or, to the knowledge of the Seller, any event, occurrence or
circumstance that would have a Material Adverse Effect;
(b) Any transaction or Contract involving a total commitment
by or to any of the Subsidiaries of at least $50,000 or, together with all other
such transactions or contracts, $250,000 in the aggregate with respect to the
purchase, acquisition, lease, disposition or transfer
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of any Assets or any capital expenditure (in each case, other than in the
ordinary course of the Business) or creation of any Lien on any Asset;
(c) Any declaration, setting aside or payment of any dividend
or other distribution with respect to any interest in any of the Subsidiaries;
(d) Any damage, destruction or other casualty loss (whether or
not covered by insurance), condemnation or other taking of the Assets of any of
the Subsidiaries with a book value exceeding, in the aggregate, $50,000;
(e) Any change in any method of accounting or accounting
practice by the Seller;
(f) Other than in the ordinary course of the Business with
respect to employees of any of the Subsidiaries whose annual compensation is not
more than $100,000, any increase in the compensation payable or to become
payable to any officer, sales representative or employee of any of the
Subsidiaries, or any material alteration in the benefits payable to any thereof;
(g) Except for any changes made in the ordinary course of the
Business, any change in any of the Seller's or the Subsidiaries' business
policies which would have a Material Adverse Effect;
(h) Any material modification, termination, amendment or other
alteration or change in the terms or provisions of any Contract.
SECTION 2.11 Properties; Title. (a) None of the Subsidiaries owns any
real property. Schedule 2.11 attached hereto is a correct and complete list of
all material leases under which any Subsidiary is a lessee (the "Leased
Property"), true and complete copies of which have been delivered to the
Purchaser.
(b) To the knowledge of the Seller, all structures and
buildings of the Business are in good operating condition (subject to normal
wear and tear).
(c) Except as disclosed in Schedule 2.11 attached hereto, or
as reflected on the Subsidiaries' Balance Sheets Statements, each Subsidiary has
good, valid, marketable, legal and beneficial title to (or valid leasehold
interest in) all of its Assets and is the lawful owner of its Assets, free and
clear of all Liens. The machinery, equipment and other tangible personal
property constituting part of the Assets of the Subsidiaries (whether owned or
leased) have been maintained in a commercially reasonable manner, are in
generally good condition and repair (subject to normal wear and tear). There are
no outstanding options, warrants, commitments, agreements or any other rights of
any character, entitling any Person other than the Purchaser to acquire any
interest in all, or any part of, the Assets. Schedule 2.11 attached hereto
contains a list
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and description of all (i) equipment, and (ii) other tangible personal property
of the Subsidiaries with a book value (before depreciation) of $50,000 or more,
in each case, excluding Inventory.
(d) Except as disclosed in Schedule 2.11, the Subsidiaries do
not use any assets, tangible or intangible, which are owned by Seller or any
subsidiary of Seller other than the Subsidiaries. At or prior to the Closing,
Seller will transfer and cause each of its subsidiaries to transfer to the one
of the Subsidiaries good valid, marketable, legal and beneficial title to all
such assets free and clear of all Liens.
SECTION 2.12 Material Contracts. Schedule 2.12 attached hereto sets
forth an accurate and complete list of all material Contracts relating to the
Purchased Shares, the Business or the Subsidiaries, involving $50,000 or more in
any year, including any such Contracts to which Seller or any of its
subsidiaries other than the Subsidiaries are parties. The Seller has heretofore
delivered to the Purchaser true, correct and complete copies of all of the
material Contracts listed in Schedule 2.12. At or prior to the Closing, Seller
will, and will cause each of its subsidiaries to, assign to one of the
Subsidiaries, free and clear of all liens, all of the right, title and interest
of the Seller or its subsidiaries in and to each of the Contracts to which
Seller or one of its subsidiaries other than the Subsidiaries is a party.
SECTION 2.13 Intangible Property and Warranties. (a) Schedule 2.13
attached hereto sets forth a true, correct and complete list of all material
patents, registered trademarks, registered copyrights, registered service marks
or registered trade names (and all applications for any of the foregoing),
Permits, license agreements, grants and licenses running to or from, or used by,
any of the Subsidiaries in the conduct of the Business, and there are no other
material patents, trademarks, material copyrights, material service marks,
material trade names or other material intangible assets, properties or rights
that are used in the Business (the "Intellectual Property Rights").
(b) Except as disclosed in Schedule 2.13 attached hereto:
(i) the Subsidiaries own the entire United States and
United Kingdom right, title and interest in and to the respective Intellectual
Property Rights;
(ii) the Seller has no knowledge that the
Intellectual Property Rights are either invalid or unenforceable;
(iii) the Seller has no knowledge that the business
activities of the Subsidiaries has infringed or conflicts with, or does infringe
or conflict with, patent or any other intellectual property rights of any third
party;
(iv) none of the Subsidiaries has ever granted any
license or permission to any third party to use the Intellectual Property
Rights; and
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(v) the Acquisition and the Other Contemplated
Transactions will not adversely affect any right of the Purchaser to enjoy as
owner all of the Intellectual Property Rights in the same manner thereof as if
the Purchaser were the Seller.
SECTION 2.14 Claims and Proceedings. Except as set forth in Schedule
2.14 attached hereto, there are no outstanding Orders of any Governmental Body
against or directly involving by name any of the Subsidiaries, the Assets of the
Subsidiaries, or the Business. Except as set forth in Schedule 2.14 attached
hereto, there are no actions, suits, asserted claims or counterclaims or legal,
administrative or arbitral proceedings or, to the Seller's knowledge,
investigations (collectively, "Claims") (whether or not the defense thereof or
Liabilities in respect thereof are covered by insurance), pending or, to the
knowledge of the Seller, threatened on the date hereof, against or involving any
of the Subsidiaries, the Purchased Shares, the Assets or the Business. Schedule
2.14 attached hereto also indicates those Claims the defense thereof or
Liabilities in respect thereof are covered by insurance. Except as set forth on
Schedule 2.14 attached hereto, on the date hereof there are no Claims pending
or, to the knowledge of the Seller, threatened, other than Claims not in excess
of $100,000. There are no Claims pending or, to the knowledge of the Seller,
threatened that would give rise to any right of indemnification on the part of
any director or officer of any of the Subsidiaries or the heirs, executors or
administrators of such director or officer, against any of the Subsidiaries.
SECTION 2.15 Taxes. (a) Except as set forth in Schedule 2.15 attached
hereto:
(i) the Seller and each of the Subsidiaries have
timely filed except as set forth in subsection (iii) below all federal, state or
foreign Tax Returns required to be filed by it for all taxable periods ending on
or before the Closing Date and all such Tax Returns are, true, correct and
complete in all material respects. Copies of all such Tax Returns for periods
ending on or after December 31, 1996, have been given to the Purchaser;
(ii) each of the Subsidiaries has paid or, if payment
is not yet due, has established, in accordance with GAAP and consistent with
past practice, accruals that are reflected on the Subsidiaries' Balance Sheets
for the payment of, all Taxes imposed on the Subsidiary or for which the
Subsidiary is liable, whether to taxing authorities or to other Persons
(pursuant to a tax sharing agreement or otherwise);
(iii) extensions of time have been requested and
granted for the Seller or the Subsidiaries to file by September 15, 1999 Tax
Returns for the year ended December 31, 1998 that have not yet been filed and
for which the Tax that has not yet been paid;
(iv) the Seller or the Subsidiaries has not received
notice of a determination by a Tax Authority that Taxes are owed by the Seller
or any of the Subsidiaries (such determination to be referred to as a "Tax
Deficiency") and, to the knowledge of the Seller, no Tax Deficiency is proposed
or threatened;
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(v) no issue has been raised in any examination,
investigation, audit, suit, action, claim or proceeding relating to Taxes (a
"Tax Audit") which, by application of similar principles to any past, present or
future period, would result in a Tax Deficiency for such period;
(vi) there are no pending or, to the knowledge of the
Seller, threatened, Tax Audits of the Seller or any of the Subsidiaries;
(b) None of the Subsidiaries has any (i) income reportable for
a period ending after the Closing Date, but attributable to a transaction (e.g.,
installment sale) or a change in accounting method occurring in or made for a
period ending on or prior to the Closing Date which resulted in a deferred
reporting on income from such transaction or from such change in accounting
method (other than a deferred intercompany transaction), or (ii) a deferred gain
or loss arising out of any deferred intercompany transaction, which income, gain
or loss has been reflected on the Subsidiary Operating Statements in accordance
with GAAP, but for which no Tax liability accrual has been reflected on the
Interim Statement.
(c) Schedule 2.15 attached hereto contains (i) a schedule of
the filing dates of all Tax Returns required to be filed by the Seller or the
Subsidiaries, (ii) a description of all past Tax Audits involving the Seller,
(iii) a list of the states, territories and jurisdictions (whether foreign or
domestic) to which any Tax is properly payable by the Seller or the
Subsidiaries. Except as set forth in Schedule 2.15 attached hereto, the Seller
has retained all supporting and backup papers, receipts, spreadsheets and other
information necessary for (i) the preparation of all Tax Returns that have not
yet been filed, and (ii) the defense of all Tax Audits involving taxable periods
either ending on or during the four (4) years prior to the Closing Date or from
which there are unutilized net operating loss, capital loss or investment tax
credit carryovers.
(d) Except for sales, use and similar Taxes which do not
exceed $100,000 in the aggregate, the Seller or the Subsidiaries has collected
and remitted to the appropriate Tax Authority all sales and use or similar Taxes
required to have been collected, including any interest and any penalty,
addition to tax or additional amount unpaid, and has been furnished properly
completed exemption certificates for all exempt transactions. To the knowledge
of the Seller, the Seller or the Subsidiaries has collected and/or remitted to
the appropriate Tax Authority all withholding, payroll, employment, property,
customs duty, fee, assessment or charge of any kind whatsoever (including Taxes
assessed to real property and water and sewer rents relating thereto), including
any interest and any penalty, addition to tax or additional amount unpaid.
SECTION 2.16 Employee Benefit Plans. (a) Set forth in Schedule 2.16
attached hereto is a list of each employee benefit plan (within the meaning of
Section 3(3) of ERISA), current, accurate and complete copies of each to be
delivered to Purchaser at the Closing, written or oral employment or consulting
agreement, severance pay plan or agreement, employee relations policy (or
practice, agreement or arrangement), agreements with respect to leased or
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temporary employees, vacation plan or arrangement, sick pay plan, stock purchase
plan, stock option plan, fringe benefit plan, incentive plan, bonus plan,
cafeteria or flexible spending account plan and any deferred compensation
agreement (or plan, program, or arrangement) covering any present or former
employee of the Subsidiaries and which is, or at any time during the last two
(2) years was, sponsored or maintained by (or to which contributions are
required to be, were during the last two (2) years or were required to have been
during the last two (2) years) the Seller or any of the Subsidiaries. Each and
every such plan, program, policy, practice, arrangement and agreement included
on the list set forth in Schedule 2.16 attached hereto is hereinafter referred
to as an "Employee Benefit Plan".
(b) With respect to any employee benefit plan (within the
meaning of Section 3(3) of ERISA), stock purchase plan, stock option plan,
fringe benefit plan, bonus plan or any deferred compensation agreement, plan or
program (whether or not any such plan, program or agreement is currently in
effect): there are no actions, suits or claims (other than routine claims for
benefits in the ordinary course) pending or, to the knowledge of the Seller,
threatened, and the Seller has no knowledge of any facts which could reasonably
give rise to any such actions, suits or claims (other than routine claims for
benefits in the ordinary course), which could subject any Subsidiary to any
liability.
(c) (i) except as set forth in Schedule 2.16 attached hereto,
neither the Seller nor any of the Subsidiaries is subject to any legal,
contractual, equitable or other obligation to (1) establish as of any date any
employee benefit plan of any nature, including any pension, profit sharing,
welfare, post-retirement welfare, stock option, stock or cash award,
non-qualified deferred compensation or executive compensation plan, policy or
practice, or (2) continue any employee benefit plan of any nature, including any
Employee Benefit Plan or any other pension, profit sharing, welfare or
post-retirement welfare plan, or any stock option, stock or cash award,
non-qualified deferred compensation or executive compensation plan, policy or
practice (or to continue their participation in any such benefit plan, policy or
practice) on or after the date hereof;
(ii) the Seller may, in any manner, subject to the
limitations imposed by applicable law, and without the consent of any employee,
beneficiary or other Person, prospectively terminate, modify or amend any such
Employee Benefit Plan or any other plan, program or practice (or its
participation in such Employee Benefit Plan or any other plan, program or
practice) effective as of any date on or after the date hereof; and
(iii) except as set forth in Schedule 2.16 attached
hereto, to the knowledge of the Seller, no representations or communications
(directly or indirectly, orally, in writing or otherwise) with respect to
participation, eligibility for benefits, vesting, benefit accrual coverage or
other material terms of any Employee Benefit Plan have been made to any
employee, beneficiary or other Person other than those which are in accordance
with the terms and provisions of each such Plan as in effect immediately prior
to the date hereof and the Closing Date.
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SECTION 2.17 Employee-Related Matters. (a) Schedule 2.17 attached
hereto contains a true and correct list of each officer and employee of the
Subsidiaries whose aggregate compensation exceeds $100,000 per annum, including
any agreement, whether oral or written, relating thereto, and a general
description of the rate and nature of all compensation and benefits payable by
the Subsidiaries to each such Person. Schedule 2.17 attached hereto also
contains a general description of all existing severance, accrued vacation
obligations or retiree benefits of any current or former director, officer or
employee (to the extent not included in Schedule 2.17 attached hereto)
including, but not limited to, stay-in-place bonuses to those employees listed
on Schedule 2.17 whom Buyer has agreed to continue to employ. Except as set
forth in such Schedule 2.17 attached hereto, the employment or contractual
arrangement of all such Persons is terminable at will without additional or
further economic obligation on the part of any of the Subsidiaries.
(b) Except as set forth in Schedule 2.17 attached hereto, (i)
none of the Subsidiaries is a party to any Contract with any labor organization
or other representative of its employees; (ii) there is no unfair labor practice
charge or complaint pending or, to the knowledge of the Seller, threatened
against any of the Subsidiaries, nor has any been pending or threatened within
the past three (3) years; (iii) no Subsidiary has experienced any labor strike,
picketing, hand billing, slowdown, work stoppage or similar labor controversy
within the past three (3) years; (iv) no representation question is pending or
has been raised respecting any of the employees of the Subsidiaries working
within the past three (3) years, nor, to the knowledge of the Seller, are there
any campaigns being conducted to solicit authorization from the employees of the
Subsidiaries to be represented by any labor organization; (v) no Claim before
any Governmental Body brought by or on behalf of or relating to any employee,
prospective employee, former employee, retiree, labor organization or other
representative of the employees of the Subsidiaries or relating to their
employment practices, is pending or, to the knowledge of the Seller, threatened
against any of the Subsidiaries; (vi) none of the Subsidiaries is a party to, or
otherwise bound by, any Order relating to its employees or employment practices;
and (vii) each of the Subsidiaries has paid in full to all of its employees all
wages, salaries, commissions, bonuses, benefits and other compensation due and
payable to such employees consistent with past practices (except for disputed
amounts).
SECTION 2.18 Insurance. Schedule 2.18 attached hereto sets forth a list
of all insurance policies, fidelity and surety bonds and fiduciary liability
policies (the "Insurance Policies") covering the Assets, the Business,
operations, employees, officers and directors of the Subsidiaries and true and
complete copies of all such Insurance Policies have been delivered to the
Purchaser. Schedule 2.18 attached hereto also sets forth a true and complete
list of Claims made in respect of Insurance Policies during the two (2) years
prior to the date hereof (other than under health or other employee benefit
policies). All Insurance Policies are in full force and effect and will remain
in effect up to the Closing and thereupon terminate. To the knowledge of the
Seller, there is not any threatened termination of, premium increase with
respect to, or uncompleted requirements under, any material Insurance Policy.
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SECTION 2.19 Compliance with Laws. To the knowledge of the Seller,
neither the Seller nor any of the Subsidiaries is in violation of any order,
judgment, injunction, award, citation, decree, consent decree or writ
(collectively, "Orders"), or any law, statute, code, ordinance, rule, regulation
or other requirement (collectively, "Laws"), of any government or political
subdivision thereof, whether federal, state, local or foreign, or any agency or
instrumentality of any such government or political subdivision, or any court or
arbitrator (collectively, "Governmental Bodies") affecting its Assets of any of
the Subsidiaries or the Business, except where any such violation would not have
a Material Adverse Effect.
SECTION 2.20 Permits and Licenses. Each Subsidiary has obtained all
licenses, permits (including environmental permits), certificates, certificates
of occupancy, orders, authorizations and approvals (collectively, "Permits"),
and has made all required registrations and filings with, any Governmental Body
that are required for the conduct of the Business. All Permits that are required
for the conduct of the Business (the "Required Permits") are listed in Schedule
2.20 attached hereto and are in full force and effect; no violations are or have
been recorded in respect of any Permit; and no proceeding is pending or
threatened to revoke or limit any Required Permit. Except as listed in Schedule
2.20 attached hereto, no Permit will terminate by reason of the Acquisition and
the Other Contemplated Transactions. To the knowledge of the Seller, this
Agreement and the Acquisition and the Other Contemplated Transactions will not
invalidate, revoke or otherwise adversely affect the validity of any such
Permit.
SECTION 2.21 Environmental Matters. Except as set forth in Schedule
2.21 attached hereto:
(i) to the best knowledge of the Seller, the
Subsidiaries are in material compliance with all Environmental Laws;
(ii) to the best knowledge of the Seller, there have
been no Releases of Hazardous Substances by any Subsidiary or violations of
Environmental Laws by any Subsidiary;
(iii) neither the Seller nor any Subsidiary has
received oral or written notice of a violation or of a claim of potential or
actual liability by any Governmental Body or third-party against any Subsidiary
under Environmental Laws, nor are any such potential claims known to the Seller
or any Subsidiary;
SECTION 2.22 Finders' Fees. There is no investment banker, broker,
finder or other intermediary which has been retained by or is authorized to act
on behalf of the Seller or any Subsidiary who might be entitled to any fee or
commission from the Parent, the Purchaser, the Seller or any Subsidiary upon
consummation of the Acquisition and the Other Contemplated Transactions.
SECTION 2.23 Depositories; Powers of Attorney, Etc. Schedule 2.23
attached hereto sets forth (i)the name of each bank or similar entity in which
any Subsidiary has an account, lock
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box or safe deposit box and the names of all Persons authorized to draw thereon
or to have access thereto, and (ii) the name of each Person holding a general or
special power of attorney from the Seller or the Subsidiary and a description of
the terms thereof.
SECTION 2.24 Disclosure; Schedules. Neither this Agreement nor the
Schedules, nor any audited or unaudited financial statements, documents or
certificates furnished or to be furnished to the Purchaser or any of its Agents
or Affiliates by or on behalf of the Seller or the Subsidiary pursuant to this
Agreement or in connection with the Acquisition and the Other Contemplated
Transactions contain or will contain any untrue statement of a material fact or
omit or will omit a material fact necessary in order to make the statements
contained herein or therein not misleading. All representations and warranties
made by the Seller will be deemed to have been relied on by the Purchaser
(notwithstanding any investigation by the Purchaser). The Seller will deliver to
the Purchaser complete and correct schedules, in form and substance reasonably
acceptable to the Buyer, prior to the Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
The Purchaser, represents and warrants to the Seller as of the date of
this Agreement and as of the Closing Date (as if each such representation and
warranty was made on the Closing Date), that:
SECTION 3.1 Authority Relative to This Agreement. The Purchaser has
full corporate power and authority to execute and deliver this Agreement and
each other Transaction Document to which it is a party and to consummate the
Acquisition and the Other Contemplated Transactions. The execution, delivery and
performance by the Purchaser of this Agreement and the other Transaction
Documents to which it is a party and the consummation by it of the Acquisition
and the Other Contemplated Transactions have been duly and validly authorized
and approved by the Purchaser's board of directors, and no other corporate
proceedings on the part of the Purchaser is necessary to authorize the execution
and delivery by the Purchaser of this Agreement or the other Transaction
Documents to which the Purchaser is a party or the consummation of the
Acquisition and the Other Contemplated Transactions to which the Purchaser is a
party. This Agreement has been duly and validly executed and delivered by the
Purchaser and (assuming the valid execution and delivery of this Agreement by
the other parties hereto) constitutes the legal, valid and binding agreement of
the Purchaser, enforceable against the Purchaser in accordance with its terms,
except as such obligations and their enforceability may be limited by applicable
bankruptcy and other similar laws affecting the enforcement of creditors' rights
generally and except that the availability of equitable remedies is subject to
the discretion of the court before which any proceeding therefor may be brought
(whether at law or in equity).
SECTION 3.2 No Conflicts; Consents. Except as set forth in Schedule 3.2
attached hereto, neither the execution, delivery and performance by the
Purchaser of this Agreement and
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each other Transaction Document to which it is a party nor the consummation of
the Acquisition and the Other Contemplated Transactions to which the Purchaser
is a party (i) violates any provision of the Certificate of Incorporation or
by-laws (or comparable charter documents) of the Purchaser; (ii) requires the
Purchaser to obtain any consent, approval or action of or waiver from, or make
any filing with, or give any notice to, any Governmental Body or any other
Person; (iii) violates, conflicts with or results in the breach or default under
(after the giving of notice or the passage of time), or permits the termination
of, any material Contract to which the Purchaser is a party or by which any of
them or any of their respective assets may be bound or subject; or (iv) violates
any Law or Order of any Governmental Body against, or binding upon, the
Purchaser or upon its assets or businesses.
SECTION 3.3 Corporate Existence and Power. The Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the British Virgin Islands and has all requisite powers and all material
Permits required to own, lease and operate its properties and to conduct its
business as currently conducted. The Purchaser is duly qualified to do business
as a foreign corporation and is in good standing in each jurisdiction where the
character of the property owned or leased by the Purchaser or the nature of its
activities, makes such qualification necessary, except for those jurisdictions
where the failure to be so qualified would not have a material adverse effect on
the business, assets, financial condition or the results of operations of the
Purchaser.
SECTION 3.4 Finders' Fees. There is no investment banker, broker,
finder or other intermediary which has been retained by or is authorized to act
on behalf of the Purchaser who might be entitled to any fee or commission from
the Seller or any of the Subsidiaries upon consummation of the Acquisition and
the Other Contemplated Transactions.
SECTION 3.5 Investment. The Purchaser is not acquiring the Purchased
Shares with a view to or for sale in connection with any distribution thereof
within the meaning of the Securities Act of 1933, as amended.
SECTION 3.6 Tax Returns. The Purchaser shall prepare or cause to be
prepared and file or cause to be filed all Tax Returns for the Subsidiaries for
all periods ending on or prior to the Closing Date which are to be filed after
the Closing Date.
ARTICLE IV
COVENANTS AND AGREEMENTS PRIOR TO
AND SUBSEQUENT TO CLOSING
SECTION 4.1 Conduct of Business. From the date hereof through the
Closing Date, the Seller agrees, and the Seller agrees to cause the
Subsidiaries:
(i) To operate the Business according to the ordinary
and usual course of the Business consistent with past practice, but in
accordance with terms mutually agreed to
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with the Purchaser to preserve intact their present business, to use
commercially reasonable efforts to preserve and maintain their Assets and the
goodwill of the Business;
(ii) To maintain in the ordinary course of the
Business, consistent with past practice and in accordance with Contracts to
which either of them is a party, the Leased Property and all their material
structures, equipment and other tangible property in their present repair, order
and condition, subject to ordinary wear and tear;
(iii) To maintain the books and records relating to
the Business in the usual and ordinary manner and in a manner that fairly and
correctly reflects the income, expenses, Assets and Liabilities of the
Subsidiaries consistent with GAAP, and to record and effect sales in the usual
and ordinary manner consistent with past practices;
(iv) Except for short term indebtedness, not to incur
any Liability (other than Liabilities incurred in the ordinary course of the
Business, consistent with past practice);
(v) Not to undertake (nor permit to be undertaken)
any of the actions specified in Section 2.10;
(vi) Not to pay, discharge or satisfy any material
Claim or Liability, other than the payment, discharge or satisfaction in the
ordinary course of the Business of Claims or Liabilities incurred in the
ordinary course of the Business, consistent with past practice;
(vii) Not to sell, transfer, convey, assign or
otherwise dispose of any Assets, including Inventory, except in the ordinary
course of the Business consistent with past practice, or create, incur or assume
any Lien on any Assets of any of the Subsidiaries;
(viii) Not to waive, release or cancel any material
claims against third parties or debts owing to any of the Subsidiaries or any
material rights which have any value or make any Tax election or settle or
compromise any federal, state, local or foreign income Tax liability, or waive
or extend the statute of limitations in respect of any such Taxes;
(ix) Not to authorize for issuance, issue, sell,
deliver or agree or commit to issue, sell or deliver (whether through the
issuance or granting of options, warrants, convertible or exchangeable
securities, commitments, subscriptions, rights to purchase or otherwise) any
shares of the Subsidiaries' capital stock or any other securities, or amend any
of the terms of any such securities;
(x) Not to amend their respective Certificates of
Incorporation or by-laws (or comparable charter documents); and
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(xi) Not to merge into or consolidate with any other
entity or permit any other entity to merge into or consolidate with it, or
liquidate or sell or dispose of any material assets other than in the ordinary
course of business.
(xii) Not to make any change in compensation
policies.
(xiii) Not engage in any other transactions not in
the ordinary course of business.
(b) From the date hereof through the Closing Date, the Seller
agrees and the Seller agrees to cause the Subsidiaries to consult with the
Purchaser prior to any renewal, amendment, extension or termination of, waiver
of any material right under, or any failure to renew, any material Contract to
which any Subsidiary is a party and not to take any such action if the Purchaser
objects thereto in writing; provided, however, that such objection shall not be
unreasonably withheld.
(c) From the date hereof through the Closing Date, the Seller
agrees and the Seller agrees to cause the Subsidiaries to continue to carry all
Insurance Policies and shall not allow any termination, cancellation or material
breach or default of such Insurance Policies to occur or exist.
SECTION 4.2 Corporate Examinations and Investigations. Prior to the
Closing Date, the Seller agrees that the Purchaser shall be entitled, through
its directors, officers, Affiliates, employees, attorneys, accountants,
representatives, lenders, consultants and other agents (collectively, the
"Agents") to make such investigation of the Business and the Assets and
operations of the Seller and the Subsidiaries, and such examination of the
books, records, properties, assets and financial condition of the Seller and the
Subsidiaries, as the Purchaser shall deem necessary or appropriate. Any such
investigation and examination shall be conducted at reasonable times, under
reasonable circumstances and upon reasonable notice, and the Seller shall, and
the Seller shall cause the Subsidiaries to, cooperate fully therein. In that
connection, the Seller shall make available to the Agents during such period,
without however causing any unreasonable interruption in the operations of the
Business, all such information and copies of such documents and records
concerning the affairs of the Seller and the Subsidiaries as the Agents may
reasonably request, shall permit the Agents access to the Assets of the Seller
and the Subsidiaries and all parts thereof and to the Seller's and Subsidiaries'
Agents, customers, suppliers and others, and shall cause the Seller's and
Subsidiaries' Agents to cooperate fully in connection with such review and
examination. No investigation by the Purchaser shall diminish or obviate any of
the representations, warranties, covenants or agreements of the Seller contained
in this Agreement.
SECTION 4.3 Consents, Filings and Authorizations; Efforts to
Consummate. As promptly as practicable after the date hereof, the Purchaser and
the Seller shall, and the Seller
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shall cause the Subsidiaries to, make all filings and submissions under such
Laws as are applicable to them or to their respective Affiliates, as may be
required for them to consummate the Acquisition and the Other Contemplated
Transactions in accordance with the terms of this Agreement and shall furnish
copies thereof to each other party prior to such filing and shall not make any
such filing or submission to which the Seller or the Purchaser, as the case may
be, reasonably objects in writing. All such filings shall comply in form and
content in all material respects with applicable Law. Subject to the terms and
conditions herein, each party hereto, without payment or further consideration,
shall use its best efforts to take or cause to be taken all action and to do or
cause to be done all things necessary, proper or advisable under applicable
Laws, Permits and Orders, to consummate and make effective, as soon as
reasonably practicable, the Acquisition and the Other Contemplated Transactions,
including the obtaining of all Required Consents and Permits or consents of any
third party, whether private or governmental, required in connection with such
party's performance of such transactions and each party hereto shall cooperate
with the other in all of the foregoing.
SECTION 4.4 Negotiations With Others. From and after the date hereof
unless and until this Agreement shall have been terminated in accordance with
its terms, the Seller and hereby agrees that (i) the Seller and its Agents shall
immediately cease any existing discussions or negotiations with any parties
conducted heretofore with respect to any sale of any of the Subsidiaries, or any
substantial portion of the Business or the Assets of any of the Subsidiaries or
the Subsidiaries' capital stock, directly or by merger or consolidation; and
(ii) the Seller and its Agents will not solicit, initiate, encourage, continue
or enter into negotiations or discussions of any type, directly or indirectly,
with, or furnish any information or data to, any Person relating to any such
sale, including any Person with whom the Seller is currently negotiating, other
than the Purchaser, with respect to an offer for the sale of the Subsidiaries,
or any substantial portion of the Business, the Subsidiaries Assets, or the
Subsidiaries' capital stock, directly or by merger or consolidation.
SECTION 4.5 Notices of Certain Events. Prior to the Closing Date, the
Seller and the Purchaser shall promptly notify each other of:
(a) any notice or other communication from any Person alleging
that the consent of such Person is or may be required in connection with the
Acquisition and the Other Contemplated Transactions;
(b) any notice or other communication from any Governmental
Body in connection with the Acquisition and the Other Contemplated Transactions;
and
(c) any event, condition or circumstance occurring from the
date hereof through the Closing Date that would constitute a violation or breach
of any representation or warranty, whether made as of the date hereof or as of
the Closing Date, or that would constitute a violation or breach of any covenant
of any party contained in this Agreement.
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SECTION 4.6 Public Announcements. The Seller and the Purchaser will
consult with each other before issuing any press release or otherwise making any
public statement with respect to the Acquisition and the Other Contemplated
Transactions, and will not issue any such press release or make any such public
statement without the prior approval of the Seller or the Purchaser, as the case
may be, except as may be required by applicable Law in which event the other
party shall have the right to review and comment upon (but not approve) any such
press release or public statement prior to its issuance.
SECTION 4.7 Confidentiality. (a) The Purchaser shall hold in strict
confidence, and shall use its best efforts to cause all of its Agents to hold in
strict confidence, unless compelled to disclose by judicial or administrative
process, or by other requirements of Law, all Confidential Information (defined
below) concerning the Seller or the Subsidiaries which any of them has obtained
from the Seller or the Subsidiaries or their Agents prior to, on or after the
date hereof, in connection with the Acquisition and the Other Contemplated
Transactions, and the Purchaser shall not use or disclose to others, or permit
the use of or disclosure of, any such Confidential Information so obtained, and
will not release or disclose such information to any other Person, except the
Agents who need to know such information in connection with this Agreement (and
who shall be advised of the provisions of this Section 4.7). The foregoing
provisions shall not apply to any such information to the extent (i) known by
Purchaser prior to the date such information was provided to Purchaser by or on
behalf of the Seller, the or the Subsidiaries in connection with the Acquisition
and the Other Contemplated Transactions, (ii) made known to the Purchaser from a
third party, to the knowledge of the Purchaser, not in breach of any
confidentiality requirement, or (iii) made public through no fault of the
Purchaser or any of its Agents.
(b) If this Agreement is terminated as provided herein and the
Acquisition and the Other Contemplated Transactions are not consummated and if
requested by the Seller, the Purchaser shall return to the Seller all tangible
evidence of such information regarding the Seller and the Subsidiaries, or
provide, at the Purchaser's option, a certificate to the Seller stating that
such information has been destroyed.
(c) The term "Confidential Information" shall mean all written
information provided to the Purchaser or the Parent by, for or on behalf of the
Seller or the Subsidiaries or their Agents and will also include, without
limitation, any Confidential Information obtained through due diligence
activities, as well as all notes, compilations and analyses derived therefrom
and all copies, summaries, notes and other written materials so provided.
(d) In the event that the Purchaser or any of their Agents are
requested in any legal or governmental proceeding to disclosure any of the
Confidential Information, the Purchaser or such Agents, as the case may be,
shall give the Seller prompt written notice of such request so that the Seller
may seek an appropriate order or decree restricting such disclosure. If, in the
absence of such an order or decree, the Purchaser or its Agents are nonetheless
compelled to disclose any Confidential Information, the Purchaser or such Agent,
as the case may be, may
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disclose such information in such proceeding without liability hereunder
provided that the Purchaser or such Agent gives the Seller written notice of the
Confidential Information to be disclosed as far in advance of its disclosure as
is practicable and, upon the Seller's request and at its expense, the Purchaser
or such Agent shall use its reasonable commercial efforts to assist the Seller
to obtain assurances that confidential treatment will be accorded to such
information.
(e) The Confidential Information will be kept confidential by
the Purchaser and will not be photocopied, distributed or disclosed to any
person other than their Agents for the sole purpose of the Acquisition and the
Other Contemplated Transactions. Each Agent of the Purchaser shall be advised of
this Agreement by the Purchaser, and shall agree to be bound by the terms of
this Agreement and shall not disclose such information to any other individual
or entity other than to another Agent or to the Purchaser or as permitted by
Section 4.7(a). The Purchaser agrees to be responsible for the breach of this
Section 4.7 by its Agents.
(f) The Purchaser understands and acknowledges the economic
and competitive value and the confidential nature of the Confidential
Information and each further agrees that the breach of this Section 4.7 by it or
its Agents will result in irreparable harm to the Seller and that remedies at
law, alone, will be inadequate to remedy any breach of this Agreement and,
therefore, the Purchaser (i) consents to the issuance of injunctive or other
equitable relief against it and its Agents to prevent or end any violation of
this Agreement in such event and (ii) waives the requirement of the posting of
any bond or other security by the Seller in connection therewith.
SECTION 4.8 Expenses. Except as otherwise specifically provided in this
Agreement, the parties hereto shall bear their respective expenses incurred in
connection with the preparation, execution and performance of this Agreement and
the Acquisition and the Other Contemplated Transactions, including all fees and
expenses of their respective Agents, however, the Seller has agreed to pay up to
$10,000 of actual invoiced expenses of Purchaser.
SECTION 4.9 Further Assurances. The Seller hereby agrees, without
further consideration, to execute and deliver, or to cause to be executed and
delivered on its behalf, following the Closing such other instruments of
transfer and take such other action as the Purchaser may reasonably request in
order to put the Purchaser in possession of, and to vest in the Purchaser, good,
valid, and unencumbered title to the Purchased Shares in accordance with this
Agreement and to consummate the Acquisition and the Other Contemplated
Transactions. The Purchaser hereby agrees, without further consideration, to
take such other action following the Closing and execute and deliver such other
documents as the Seller may reasonably request in order to consummate the
Acquisition and the Other Contemplated Transactions in accordance with this
Agreement.
SECTION 4.10 Tax Matters. (i) All sales Taxes (including any penalties
and interest) incurred in connection with the transfer of the Purchased Shares
or the consummation of the Acquisition and the Other Contemplated Transactions
shall be borne and paid by the Seller when
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due, and the Seller will, at its own expense, file all necessary Tax Returns and
other documentation with respect to all such Taxes and fees.
(ii) If the Buyer or its assignees shall ask the Seller to
timely file an election under Section 338(h)(10) of the Code, the Seller shall
take all necessary or appropriate action to effect such election.
SECTION 4.11 Seller's Board Representation. Until such time as the PICK
Net Option described in Section 8.6(b) is exercised, the Purchaser and the
Companies shall cause to be elected to the boards of directors of the Companies,
one person appointed by the Seller and shall permit the Seller to remove and
replace such person on the boards of directors of the Companies at any time.
ARTICLE V
CONDITIONS TO CLOSING
SECTION 5.1 Conditions to the Obligations of Seller and Purchaser. The
obligations of the Seller and the Purchaser to consummate the Acquisition and
the Other Contemplated Transactions are subject to the satisfaction of the
following conditions on or prior to the Closing Date:
(a) No Injunction. No provision of any applicable Law and no
Order shall prohibit the consummation of the Acquisition and the Other
Contemplated Transactions.
(b) No Proceeding or Litigation. No Claim instituted by any
Person shall have been commenced or pending against the Seller, any of the
Subsidiaries, or the Purchaser or any of their respective Affiliates, officers
or directors which Claim seeks to restrain, prevent, change or delay in any
material respect the Acquisition and the Other Contemplated Transactions or
seeks to challenge any of the material terms or provisions of this Agreement or
seeks material damages in connection with any of such transactions, except as
would not have a Material Adverse Effect.
SECTION 5.2 Conditions to the Obligations of Seller. All obligations of
the Seller to consummate the Acquisition and the Other Contemplated Transactions
are subject to the fulfillment (or waiver by the Seller) on or prior to the
Closing Date of each of the following further conditions:
(a) Performance. The Purchaser shall have performed and
complied with all agreements, obligations and covenants required by this
Agreement to be performed or complied with by it on or prior to the Closing
Date.
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(b) Representations and Warranties. The representations and
warranties of the Purchaser contained in this Agreement and in any certificate
or other writing delivered by the Purchaser pursuant hereto shall be true in all
material respects at and as of the Closing Date as if made at and as of such
time.
(c) Purchase Price. The Purchase Price shall have been paid by
the Purchaser in accordance with Section 1.1 on the Closing Date.
SECTION 5.3 Conditions to the Obligations of Purchaser. All obligations
of the Purchaser to consummate the Acquisition and the Other Contemplated
Transactions hereunder are subject to the fulfillment (or waiver by the
Purchaser) on or prior to the Closing of each of the following further
conditions:
(a) Performance. The Seller shall have performed and complied,
in all material respects, with all agreements, obligations and covenants
required by this Agreement to be performed or complied with by it on or prior to
the Closing Date.
(b) Representations and Warranties of the Seller. The
representations and warranties of the Seller contained in this Agreement and in
any certificate or other writing delivered by the Seller pursuant hereto shall
be true at and as of the Closing Date, in all material respects, as if made at
and as of such time.
(c) No Adverse Change. During the period from July 31, 1999 to
the Closing Date, there shall not have been (A) any material adverse change in
the financial condition, Business or prospects of the Subsidiaries, or; (B) any
damage, destruction, casualty, determination or other event to or affecting the
Assets of any of the Subsidiaries or (C) any Claims or Liens filed or threatened
against or affecting the Subsidiaries or their Assets which would have a
Material Adverse Effect.
(d) Required Consents. The Seller shall deliver written
evidence that all Required Consents shall have been obtained.
(e) Required Permits. All Required Permits shall be in full
force and effect and the Seller shall have taken all steps necessary to assure
that all Required Permits, including, but not limited, to all licenses granted
or issued to the Subsidiaries by the United States Federal Communications
Commission, may be held indirectly by the Affiliates of the Parent.
(f) Releases. The Seller shall have obtained and delivered to
the Purchaser all general releases and discharges required pursuant to Section
1.2 herein in form and substance reasonably acceptable to the Purchaser and its
legal counsel.
(g) Documentation. There shall have been delivered to the
Purchaser the following:
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(i) A certificate, dated the Closing Date, of the
Seller and the Seller confirming the matters set forth in Sections 5.3(a), (b)
and (c);
(ii) A certificate, dated the Closing Date, of the
Seller certifying that attached to such certificate (A) is a true and correct
copy of the Certificate of Incorporation and by-laws (or comparable instruments)
of the Seller and all amendments, if any, thereto as of the date thereof; (B)
are the names of the directors and officers of the Seller; (C) is a true copy of
all corporate actions taken by the board of directors of the Seller (which
actions shall have been taken prior to the date of entering into this Agreement)
to authorize the Acquisition and the Other Contemplated Transactions; and (D)
are the names and signatures of the duly elected or appointed officers of the
Seller who are authorized to execute and deliver this Agreement, the other
Transaction Documents to which the Seller is a party and any certificate,
document or other instrument in connection herewith;
(iii) True, correct and complete copies of all the
Required Consents and Permits;
(iv) The resignation of all officers and directors of
the Seller and Subsidiaries, as may have been requested by the Purchaser;
(v) Good standing certificates of the Seller and
Subsidiaries from the Secretary of State (or comparable authority) of each
jurisdiction in which the Seller or a Subsidiary is organized;
(vi) A signed opinion of Seller's counsel, dated the
Closing Date, addressed to the Purchaser in form and substance satisfactory to
the Purchaser and its assignees;
(vii) certificates evidencing all of the Purchased
Shares, which certificates shall be duly endorsed in blank or accompanied by
duly executed stock powers assigning them to the Purchaser;
(viii) evidence of Gulfsat's firm commitment to put
into service 18 additional E-1s in 1999 and use its best efforts or attempt to
obtain post-closing additional E-1s in 2000 and 2001 on the schedule assumed in
the pro forma financial statements delivered by Seller to Purchaser on July 23,
1999, as subsequently amended (the "Proforma Financials");
(ix) written confirmation from Gulfsat that the
prices payable to Gulfsat fluctuate as the "market prices" for carrying traffic
to the countries involved fluctuate and that such market prices are determined
by the prices the Subsidiaries are able to set for carrying such traffic;
(x) true correct and complete copies of the pleadings
in connection with the arbitration with AT&T referred to in Section 1.2 above;
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(xi) executed copy of a Consulting Agreement and
Non-Compete Agreement between Xxxxxx Xxxx and PICK Net US in form and substance
satisfactory to Purchaser and its assignees;
(xii) confirmation from each vendor and creditor of
Seller of the amount owing by Seller in connection with the elimination of debt
referred to in Section 1.2 above;
(xiii) agreements by each vendor and creditor of
Seller to stretch out the terms of payment of the amounts owing by Seller which,
in the aggregate, conform to the payment schedule for such indebtedness assumed
in the Proforma Financials.
ARTICLE VI
TERMINATION
SECTION 6.1 Termination. This Agreement may be terminated and the
Acquisition and the Other Contemplated Transactions may be abandoned at any time
prior to the Closing:
(a) By mutual written consent of the parties hereto, and after
October 29, 1999, by any party hereto, if the Closing has not occurred by that
date and if failure to close is not the result of a breach of this Agreement or
a willful failure to complete closing conditions by the party seeking to
terminate this Agreement. However, if all necessary consents and lien releases
to permit the Closing of the Acquisition in accordance with its terms (with the
exception of FCC approval to the transfer to PICK Net USA of the 214 license
currently held by Seller or the obtaining by PICK Net USA of a new 214 license)
and to permit the transfer to PICK Net USA of all assets, permits and licenses
contemplated as being used by PICK Net USA which are currently held by Seller or
another subsidiary of Seller have not been obtained by October 29, 1999, or if
the necessary FCC approvals for the transfer of the 214 license or the obtaining
by PICK Net USA of a new 214 license have not been obtained by October 29, 1999,
Purchaser may waive such conditions to Closing and close the sale of the
Purchased Shares without such consents, releases and approvals having been
obtained, and, in such event, Seller will reimburse the Subsidiaries and
Purchaser for the cost of providing the Subsidiaries with substitute equipment,
leased space and licenses.
(b) By the Purchaser if (i) there has been a misrepresentation
or breach of warranty on the part of the Seller in the representations and
warranties contained herein and such misrepresentation or breach of warranty, if
curable, is not cured within thirty (30) days after written notice thereof from
the Purchaser, but in any event prior to October 29, 1999, (ii) the Seller has
committed a breach of any covenant imposed upon it hereunder and fails to cure
such breach within thirty (30) days after written notice thereof from the
Purchaser, but in any event prior to October 29, 1999, or (iii) any condition to
the Purchaser's obligations hereunder becomes incapable of fulfillment through
no fault of the Purchaser and is not waived by the Purchaser.
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(c) By the Purchaser, on the one hand, or by the Seller, on
the other hand, if there shall be any Law that makes consummation of the
Acquisition and the Other Contemplated Transactions illegal or otherwise
prohibited, or if any Order enjoining the Purchaser, on the one hand, or the
Seller, on the other hand, from consummating the Acquisition and the Other
Contemplated Transactions is entered and such Order shall have become final and
nonappealable.
SECTION 6.2 Effect of Termination; Right to Proceed. (a) In the event
of termination of this Agreement by the Seller, on the one hand, or the
Purchaser, on the other hand, as provided in Section 6.1, this Agreement
forthwith shall become null and void and there shall be no liability on the part
of the Seller, the Purchaser or the Parent, except that upon termination of this
Agreement pursuant to:
(i) Section 6.1(b), the Purchaser shall have no
further obligation to the Seller under this Agreement or otherwise, except with
respect to the agreements contained in Sections 4.6, 4.7 and 4.8; and
(ii) Section 6.1(c), the Seller shall remain liable
to the Purchaser for any misrepresentation or breach of warranty or
nonfulfillment of or failure to perform any covenant or agreement of the Seller
existing at the time of such termination, and in such event the Purchaser may
seek such remedies, including Losses against the Seller with respect to any such
breach as are provided in this Agreement or as are otherwise available at Law or
in equity and, without limiting the generality of the foregoing, the Seller
shall reimburse the Purchaser for all costs and expenses resulting from any such
breach.
(b) The agreements contained in Sections 4.6, 4.7 and 4.8
shall survive the termination of this Agreement.
ARTICLE VII
INDEMNIFICATION
SECTION 7.1 Survival of Representations and Warranties. (a)
Notwithstanding any right of the Purchaser fully to investigate the affairs of
the Seller and the Subsidiaries and any knowledge of facts determined or
determinable by the Purchaser pursuant to such investigation or right of
investigation, the Purchaser has the right to rely fully upon the
representations, warranties, covenants and agreements of the Seller contained in
this Agreement, or listed or disclosed on any Schedule attached hereto or in any
instrument delivered in connection with or pursuant to any of the foregoing.
(b) All representations, warranties, covenants and agreements
shall survive the execution and delivery of this Agreement and the Closing
hereunder for a period of two (2) years
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following the Closing Date; provided, however, that the representations and
warranties contained in Section 2.1 (Title to Shares) shall survive in
perpetuity and the representations and warranties contained in Sections 2.15
(Taxes), 2.16 (Employee Benefit Plans) and 2.21 (Environmental Matters) shall
survive for any applicable statute of limitations.
SECTION 7.2 Obligation of Seller to Indemnify. Subject to the
limitations set forth in Section 7.5, the Seller hereby agrees to indemnify,
defend and hold harmless the Purchaser and the Subsidiaries (and their
directors, officers, employees, Affiliates, successors, assigns and Agents) from
and against all Claims, losses, liabilities, damages, deficiencies, judgments,
settlements, costs of investigation or other expenses (including interest,
penalties and reasonable attorneys' fees and disbursements and expenses incurred
in enforcing this indemnification or in any litigation between the parties or
with third parties) (collectively, the "Losses") suffered or incurred by the
Purchaser or any of the foregoing Persons arising out of (a) any breach of the
representations, warranties, covenants and agreements of the Seller or contained
in this Agreement, the Schedules attached hereto or any other Transaction
Document; (b) any Claim, including any Claim arising out of or relating to
Environmental Laws, whether made before or after the date of this Agreement, or
any litigation, proceeding or governmental investigation, including any Claim
arising out of or relating to Environmental Laws, whether commenced before or
after the date of this Agreement, arising out of the Business, or otherwise
relating to the Seller or the Subsidiaries, prior to the Closing, or otherwise
arising out of any act or occurrence prior to, or any state or facts existing as
of, the Closing, and (c) any liabilities existing at the Closing Date or arising
out of acts, omissions or events occurring prior to the Closing Date, except any
liabilities to be assumed by the Purchaser pursuant to Section 1.2(d)
SECTION 7.3 [Intentionally Left Blank]
SECTION 7.4 Notice and Opportunity to Defend Third Party
(a) Promptly after receipt by any party hereto (the "Indemnitee") of
notice of any demand, claim, circumstance or Tax Audit which would or might give
rise to a claim or the commencement (or threatened commencement) of any action,
proceeding or investigation (an "Asserted Liability") that may result in a Loss,
the Indemnitee shall give prompt notice thereof (the "Claims Notice") to the
party or parties obligated to provide indemnification pursuant to Section 7.2 or
7.3 (the "Indemnifying Party"). The Claims Notice shall describe the Asserted
Liability in reasonable detail and shall indicate the amount (estimated, if
necessary, and to the extent feasible) of the Loss that has been or may be
suffered by the Indemnitee.
(b) The Indemnifying Party may elect to defend, at its own
expense and with its own counsel satisfactory to Indemnitee, any Asserted
Liability, unless (i) the Asserted Liability seeks an Order, injunction or other
equitable or declaratory relief against the Indemnitee, or (ii) the Indemnitee
shall have reasonably concluded that (x) there is a conflict of interest between
the Indemnitee and the Indemnifying Party in the conduct of such defense, or (y)
the Indemnitee shall have one or more defenses not available to the Indemnifying
Party;
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provided, however, that the Indemnifying Party shall not be permitted to make
such election if the Indemnifying Party fails to provide Indemnitee with
evidence reasonably acceptable to Indemnitee that the Indemnifying Party will
have the financial resources to defend against the Asserted Liability and
fulfill its indemnification obligations hereunder. If the Indemnifying Party
elects to defend such Asserted Liability, it shall within thirty (30) calendar
days (or sooner, if the nature of the Asserted Liability so requires) notify the
Indemnitee of its intent to do so, and the Indemnitee shall cooperate, at the
expense of the Indemnifying Party, in the defense of such Asserted Liability. If
the Indemnifying Party assumes the defense against any Asserted Liability it
will be conclusively established for purposes of this Agreement that such
Asserted Liability is within the scope of, and subject to, indemnification. If
the Indemnifying Party elects not to defend the Asserted Liability, is not
permitted to defend the Asserted Liability by reason of the first sentence of
this Section 7.4(b), fails to notify the Indemnitee of its election as herein
provided or contests its obligation to indemnify under this Agreement with
respect to such Asserted Liability, the Indemnitee may pay, compromise or defend
such Asserted Liability at the sole cost and expense of the Indemnifying Party.
Notwithstanding the foregoing, neither the Indemnifying Party nor the Indemnitee
may settle or compromise any claim over the reasonable written objection of the
other, provided, however, that the Indemnitee may settle or compromise any claim
as to which the Indemnifying Party has failed to notify the Indemnitee of its
election as herein provided or is contesting its indemnification obligations
hereunder. In any event, the Indemnitee and the Indemnifying Party may
participate, at their own expense, in the defense of such Asserted Liability. If
the Indemnifying Party chooses to defend any Asserted Liability, the Indemnitee
shall make available to the Indemnifying Party any books, records or other
documents within its control that are necessary or appropriate for such defense.
Any expenses of any Indemnitee for which indemnification is available hereunder
shall be paid upon written demand therefor.
SECTION 7.5 Limitation on Indemnification; Payment of Indemnification
Amounts. (a) The Sellers' liability for indemnifiable damages pursuant to this
Article VII shall accrue but shall not be payable until the amount of Losses
suffered or incurred by the Purchaser (and their directors, officers, employees,
Affiliates, successors, assigns and other Agents) exceeds in the aggregate
$100,000 (the "Basket Amount"), and then the Seller shall be responsible for the
payment only of amounts in excess of such Basket Amount as may be payable by
Sellers pursuant to this Article VII; provided, however, that all Losses arising
as a result of an inaccuracy or breach of the representations and warranties
contained in Sections 2.1 (Title to Shares) and 2.15 (Taxes) shall become
immediately due and payable without giving effect to the Basket Amount.
(b) The parties hereto will act in good faith so that any
amounts payable by an Indemnifying Party to an Indemnitee pursuant to this
Article VII shall be treated, for Tax purposes, as an adjustment to the Purchase
Price, unless a Final Determination with respect to an Indemnitee or any of its
Affiliates causes any such payment not to be treated as an adjustment to
Purchase Price for United States federal income tax purposes. If such payment
cannot be treated as an adjustment to the Purchase Price for Tax purposes, then
such indemnification payment shall
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be increased to take account of any net Tax cost incurred by the Indemnitee as a
result of the receipt or accrual of such payments.
(c) The Purchaser will not be entitled to indemnification:
(i) with respect to punitive damages, except where
such damages are incurred by or awarded to a third party making a claim against
such an indemnitee;
(ii) with respect to any claim by or liability to any
employee employed by any of the Subsidiaries arising as the result of the
termination of such employee's employment with such Subsidiary subsequent to the
Closing Date or any action by the Purchaser subsequent to the Closing Date
(except with respect to any misrepresentation or breach of a warranty or
covenant by the Seller);
(iii) to the extent of any reserves, accruals or
amounts recorded as of the Closing Date with respect to any obligation,
liability or matter for which reserves or accruals are reflected in the Interim
Statements; and
(iv) with respect to any obligation, liability or
matter, including environmental remediation and clean-up, arising under Laws
that arise or are promulgated or announced after the Closing Date.
(d) Any amounts payable under this Article VII shall be
calculated after giving effect to any net proceeds actually received from
insurance policies covering the damage, loss, liability or expense that is the
subject to the claim for indemnity.
SECTION 7.6 Other Remedies. The provisions of this Article VII shall
not restrict or otherwise limit the legal remedies that a party to this
Agreement may seek under applicable law or otherwise for any breaches of the
representations, warranties, covenants or agreements contained herein.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Notices. (a) Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally by
hand or by recognized overnight courier, telecopied or mailed (by registered or
certified mail, postage prepaid) as follows:
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If to the Purchaser, one copy to:
Xxxxx Investments Ltd.
c/o Trident Trust Co., BVI Ltd.
Trident Xxxxxxxx
Xxxxxxx Xxx
X.X. Xxx 000
Xxxxxxxx, Xxxxxxx BVI
Telecopier: ________________
Attention: Xxxxxx Xxxxxx, Director
If to the Seller one copy to:
PICK Communications Corp.
000 Xxxxx 00 Xxxx
Xxxxx Xxxxxxxxxxx Xxxxx XX
Xxxxx, Xxx Xxxxxx 00000
Telecopier: (000) 000-0000
Attention: Xxxxx Xxxxx
with a simultaneous copy to:
Snow Xxxxxx Xxxxxx P.C.
000 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
(b) Each such notice or other communication shall be effective
(i) if given by telecopier, when such telecopy is transmitted to the telecopier
number specified in Section 8.1(a) (with confirmation of transmission), or (ii)
if given by any other means, when received at the address specified in Section
8.1(a). Any party by notice given in accordance with this Section 8.1 to the
other party may designate another address (or telecopier number) or Person for
receipt of notices hereunder. Notices by a party may be given by counsel to such
party.
SECTION 8.2 Entire Agreement. This Agreement (including the Exhibits
and Schedules hereto) and the collateral agreements executed in connection with
the consummation of the Acquisition and the Other Contemplated Transactions
contain the entire agreement between the parties with respect to the subject
matter hereof and related transactions and supersede all prior agreements,
written or oral, with respect thereto.
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SECTION 8.3 Waivers and Amendments; Non-Contractual Remedies;
Preservation of Remedies. This Agreement may be amended, superseded, canceled,
renewed or extended only by a written instrument signed by the parties hereto.
The provisions hereof may be waived in writing by the parties hereto. No delay
on the part of any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any waiver on the part of any party
of any such right, power or privilege, nor any single or partial exercise of any
such right, power or privilege, preclude any further exercise thereof or the
exercise of any other such right, power or privilege. Except as otherwise
provided herein, the rights and remedies herein provided are cumulative and are
not exclusive of any rights or remedies that any party may otherwise have at law
or in equity.
SECTION 8.4 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed entirely within such State, without regard
to the conflict of laws rules thereof.
SECTION 8.5 Consent to Jurisdiction and Service of Process; Waiver of
Jury Trial. IN THE EVENT ANY PARTY TO THIS AGREEMENT COMMENCES ANY LITIGATION,
PROCEEDING OR OTHER LEGAL ACTION IN CONNECTION WITH OR RELATING TO THIS
AGREEMENT, ANY OTHER TRANSACTION DOCUMENT OR ANY MATTERS DESCRIBED OR
CONTEMPLATED HEREIN OR THEREIN, THE PARTIES TO THIS AGREEMENT HEREBY (A) AGREE
UNDER ALL CIRCUMSTANCES ABSOLUTELY AND IRREVOCABLY TO INSTITUTE ANY LITIGATION,
PROCEEDING OR OTHER LEGAL ACTION IN A COURT OF COMPETENT JURISDICTION LOCATED
WITHIN THE STATE OF NEW YORK AND THE COUNTY OF NEW YORK, WHETHER A STATE OR
FEDERAL COURT; (B)AGREE THAT IN THE EVENT OF ANY SUCH LITIGATION, PROCEEDING OR
ACTION, SUCH PARTIES WILL CONSENT AND SUBMIT TO PERSONAL JURISDICTION IN ANY
SUCH COURT DESCRIBED IN CLAUSE (A) OF THIS SECTION AND TO SERVICE OF PROCESS
UPON THEM IN ACCORDANCE WITH THE RULES AND STATUTES GOVERNING SERVICE OF PROCESS
(IT BEING UNDERSTOOD THAT NOTHING IN THIS SECTION SHALL BE DEEMED TO PREVENT ANY
PARTY FROM SEEKING TO REMOVE ANY ACTION TO A FEDERAL COURT IN NEW YORK); (C)
AGREE TO WAIVE TO THE FULL EXTENT PERMITTED BY LAW ANY OBJECTION THAT THEY MAY
NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH LITIGATION, PROCEEDING OR ACTION
IN ANY SUCH COURT OR THAT ANY SUCH LITIGATION, PROCEEDING OR ACTION WAS BROUGHT
IN AN INCONVENIENT FORUM; (D) DESIGNATE, APPOINT AND DIRECT CORPORATION SERVICE
COMPANY AS ITS AUTHORIZED AGENT TO RECEIVE ON ITS BEHALF SERVICE OF ANY AND ALL
PROCESS AND DOCUMENTS IN ANY LEGAL PROCEEDING IN THE STATE OF NEW YORK; (E)
AGREE TO NOTIFY THE OTHER PARTIES TO THIS AGREEMENT IMMEDIATELY IF SUCH AGENT
SHALL REFUSE TO ACT, OR BE PREVENTED FROM ACTING, AS AGENT AND, IN SUCH EVENT,
PROMPTLY TO DESIGNATE ANOTHER AGENT IN THE STATE OF NEW YORK, SATISFACTORY TO
SELLERS AND PURCHASER, TO SERVE IN PLACE OF SUCH
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AGENT AND DELIVER TO THE OTHER PARTY WRITTEN EVIDENCE OF SUCH SUBSTITUTE AGENT'S
ACCEPTANCE OF SUCH DESIGNATION; (F) AGREE, AS AN ALTERNATIVE METHOD OF SERVICE
OF PROCESS IN ANY LEGAL PROCEEDING, TO MAILING OF COPIES OF SERVICE OF PROCESS
TO SUCH PARTY AT ITS ADDRESS SET FORTH IN SECTION 8.1 FOR COMMUNICATIONS TO SUCH
PARTY; (G)AGREE THAT ANY SERVICE MADE AS PROVIDED HEREIN SHALL BE EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT; AND (H)AGREE THAT NOTHING HEREIN SHALL AFFECT
THE RIGHTS OF ANY PARTY TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW. EACH PARTY HERETO WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY
DISPUTE IN CONNECTION WITH OR RELATING TO THIS AGREEMENT, ANY TRANSACTION
DOCUMENT OR ANY MATTERS DESCRIBED OR CONTEMPLATED HEREIN OR THEREIN, AND AGREE
TO TAKE ANY AND ALL ACTION NECESSARY OR APPROPRIATE TO EFFECT SUCH WAIVER.
SECTION 8.6 Binding Effect; Assignment and the PICK Net Option.
(a) This Agreement and all of its provisions, rights and obligations
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors, heirs and legal representatives. This Agreement may
not be assigned (including by operation of Law) by a party without the express
written consent of the Purchaser (in the case of assignment by the Seller) or
the Seller (in the case of assignment by the Purchaser) except to Atlantic
Tele-Network, Inc. ("ATN") as provided in subsection (b) below and any purported
assignment, unless so consented to, shall be void and without effect. Nothing
herein express or implied is intended or shall be construed to confer upon or to
give anyone other than the parties hereto and their respective heirs, legal
representatives and successors any rights or benefits under or by reason of this
Agreement and no other party shall have any right to enforce any of the
provisions of this Agreement.
(b) Purchaser has granted to ATN on this date an option (the "PICK Net
Option") for the 12-month period following the Closing to purchase from the
Purchaser all of the capital stock of PICK Net USA and PICK Net UK at a purchase
price of $2.00. The Purchaser agrees that, as long as this Agreement is
outstanding and the Closing has not yet occurred, ATN will be permitted to
observe and participate in the management of the business of the Subsidiaries.
Upon exercise of the PICK Net Option, ATN shall become an assignee of all rights
of Purchaser under this Agreement. It is expressly understood and agreed,
however, that ATN shall have no liability or responsibility for any obligations
of Purchaser under this Agreement.
SECTION 8.7 Exhibits. All Exhibits and Schedules attached hereto are
hereby incorporated by reference into, and made a part of, this Agreement.
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SECTION 8.8 Severability. If any provision of this Agreement for any
reason shall be held to be illegal, invalid or unenforceable, such illegality
shall not affect any other provision of this Agreement, but this Agreement shall
be construed as if such illegal, invalid or unenforceable provision had never
been included herein.
SECTION 8.9 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original as against any
party whose signature appears thereon, and all of which shall together
constitute one and the same instrument. This Agreement shall become binding when
one or more counterparts hereof, individually or taken together, shall bear the
signatures of all of the parties reflected hereon as the signatories.
ARTICLE IX
DEFINITIONS
SECTION 9.1 Definitions. (a) The following terms, as used herein, have
the following meanings:
"Affiliate" of any Person means any other Person directly or indirectly
through one or more intermediary Persons, controlling, controlled by or under
common control with such Person.
"Agreement" or "this Agreement" means, and the words "herein", "hereof"
and "hereunder" and words of similar import refer to, this agreement as it from
time to time may be amended.
"Assets" means properties, rights, interests and assets of every kind,
real, personal or mixed, tangible and intangible, used or usable in the
Business.
The term "audit" or "audited" when used in regard to financial
statements means an examination of the financial statements by a firm of
independent certified public accountants in accordance with generally accepted
auditing standards for the purpose of expressing an opinion thereon.
"Business" means the business of each of the Subsidiaries as presently
conducted and as presently proposed to be conducted.
"Certificate of Incorporation" means, in the case of any corporation,
the certificate of incorporation, articles of incorporation or charter of a
corporation, howsoever denominated under the laws of the jurisdiction of its
incorporation.
"Code" means the Internal Revenue Code of 1986, as amended.
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"Contract" means any contract, agreement, indenture, note, bond, lease,
conditional sale contract, mortgage, license, franchise, instrument, commitment
or other binding arrangement, whether written or oral.
The term "control", with respect to any Person, means the power to
direct the management and policies of such Person, directly or indirectly, by or
through stock ownership, agency or otherwise, or pursuant to or in connection
with an agreement, arrangement or understanding (written or oral) with one or
more other Persons by or through stock ownership, agency or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the foregoing.
"Environmental Laws" means any and all Laws (including common law),
Orders, Permits, agreements or any other requirement or restriction promulgated,
imposed, enacted or issued by any federal, state, local and/or foreign
Governmental Bodies relating to human health or the environment, including the
emission, discharge or Release of pollutants, contaminants, Hazardous Substances
or wastes into the environment (which includes ambient air, surface water,
ground water, or land), and the remediation thereof, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, Hazardous Substances or
wastes or the clean-up or other remediation thereof, including the Clean Air
Act, the Comprehensive Environmental Response, Compensation and Liability Act,
the Emergency Planning and Community Right To Know Act, the Federal Water
Pollution Control Act, the Oil Pollution Act of 1990, the Pollution Prevention
Act of 1990, the Resource Conservation and Recovery Act, the Safe Drinking Water
Act, the Endangered Species Act, the Toxic Substances Control Act, each as
amended, any state or local counterparts thereof and any state or local laws of
a similar nature for the protection of human health and welfare.
"Environmental Permits" with respect to any Subsidiaries means those
Permits, authorizations, approvals and permission required to be obtained by the
Subsidiary under Environmental Laws in connection with the Business or the use
and operation of the Assets owned or leased by them.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"GAAP" means generally accepted accounting principles in effect on the
date hereof as set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as may be approved by a significant
segment of the accounting profession of the United States.
"Hazardous Substances" means any dangerous, toxic, reactive, corrosive,
ignitable, radioactive, caustic or otherwise hazardous material, pollutant,
contaminant, chemical, waste or substance defined, listed or described as any of
such in or governed by any Environmental Law, including urea-formaldehyde,
solvents, acids, bases, heavy metals, polychlorinated biphenyls,
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asbestos or asbestos-containing materials, radon, explosives, known carcinogens,
petroleum and its derivatives or petroleum products.
"Inventory" means, as of any date, collectively, all inventories of
merchandise and other products owned by any of the Subsidiaries and held for
resale or for distribution, together with packaging and samples thereof owned by
any of the Subsidiaries as of such date.
"IRS" means the Internal Revenue Service.
"knowledge of the Seller" shall mean actual knowledge, after
performance of the duties reasonably within the scope of each such person's
responsibility in the position held, of any officer of the Seller.
"Liability" means any direct or indirect indebtedness, liability,
assessment, claim, loss, damage, deficiency, obligation or responsibility, fixed
or unfixed, xxxxxx or inchoate, liquidated or unliquidated, secured or
unsecured, accrued, absolute, actual or potential, contingent or otherwise
(including any liability under any guaranties, letters of credit, performance
credits or with respect to insurance loss accruals).
"Lien" means, with respect to any Asset, any mortgage, lien (including
mechanics, warehousemen, laborers and landlords liens), claim, pledge, charge,
security interest, preemptive right, right of first refusal, option, judgment,
title defect or encumbrance of any kind in respect of or affecting such Asset.
"Material Adverse Effect" shall mean an effect on the Condition of the
Business which is or would be materially adverse.
"Person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity, including a government or political subdivision or
an agency or instrumentality thereof.
"Receivables" means as of any date any trade accounts receivable
arising in the ordinary course of business.
"Regulatory Actions" means any claim, demand, action, suit or
proceeding brought or instigated by any Governmental Body in connection with any
Environmental Law, including civil, criminal and/or administrative proceedings,
whether or not seeking costs, damages, penalties, expenses or injunctive relief.
"Release" means the intentional or unintentional, spilling, leaking,
disposing, discharging or disturbance of, or emitting, depositing, injecting,
leaching, escaping or any other release or threatened release, however defined,
of any Hazardous Substance.
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"Tax" (including, with correlative meaning, the terms "Taxes" and
"Taxable") means (i) any net income, gross income, gross receipts, sales, use,
ad valorem, transfer, transfer gains, franchise, profits, license, withholding,
payroll, employment, social security (or similar), unemployment, disability,
excise, severance, stamp, rent, recording, registration, occupation, premium,
real or personal property, intangibles, environmental (including taxes under
Code ss. 59A) or windfall profits tax, alternative or add-on minimum tax,
capital stock, customs duty or other tax, fee, duty, levy, impost, assessment or
charge of any kind whatsoever (including taxes assessed to real property and
water and sewer rents relating thereto), together with any interest and any
fine, penalty, addition to tax or additional amount or deductions imposed by any
Governmental Body (domestic or foreign) (a "Tax Authority") responsible for the
imposition of any such tax, whether disputed or not, including any liability
arising under any tax sharing agreement, with respect to the Seller or any
Subsidiary, the Business or the Assets (or the transfer thereof); (ii) any
liability for the payment of any amount of the type described in the immediately
preceding clause (i) as a result of the Seller or any Subsidiary being a member
of an affiliated or combined group with, or as a successor to or transferee
from, any other corporation at any time on or prior to the Closing Date; and
(iii) any liability of the Seller or any Subsidiary for the payment of any
amounts of the type described in the immediately preceding clause (i) as a
result of a contractual obligation to indemnify any other person.
"Tax Return" means any return or report (including elections,
declarations, disclosures, schedules, attachments, estimates and information
returns) relating to Taxes required to be supplied to any Tax Authority, and
including any amendment thereof.
"Transaction Documents" means, collectively, this Agreement and each of
the other agreements, instruments, certificates and other documents to be
executed and delivered by all or some of the parties hereto in connection with
the consummation of the Acquisition and the Other Contemplated Transactions.
SECTION 9.2 Interpretation. Unless the context otherwise requires, the
terms defined in Section 9.1 shall have the meanings herein specified for all
purposes of this Agreement, applicable to both the singular and plural forms of
any of the terms defined herein. All accounting terms defined in Section 9.1,
and those accounting terms used in this Agreement not defined in Section 9.1,
except as otherwise expressly provided herein, shall have the meanings
customarily given thereto in accordance with GAAP. When a reference is made in
this Agreement to Sections or Exhibits, such references shall be to a Section of
or Exhibit to this Agreement, unless otherwise indicated. The headings contained
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. Whenever the words
"include", "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation".
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
PICK COMMUNICATIONS CORP.
By: /s/ Xxxxx Xxxxx
----------------------------------
Name: Xxxxx Xxxxx
Title: Chairman of the Board
XXXXX INVESTMENTS LTD.
By: /s/ Xxxxxx Xxxxxx
----------------------------------
Name: Xxxxxx Xxxxxx
Title: Director
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