EXECUTION COPY
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AGREEMENT AND PLAN OF EXCHANGE
dated as of the 6th day of October, 1997
by and among
ADVANCED COMMUNICATIONS GROUP, INC.
(Purchaser)
and
ADVANCED COMMUNICATIONS CORP.
(Old ACG)
1+ USA V ACQUISITION CORP.
(Newco)
and
XXXXX LONG DISTANCE SERVICE, INC.
(the Company)
and
XXXXXX X. XXXXX
XXXXXXX XXXXX
and
OTHERS
(the Stockholders of the Company)
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TABLE OF CONTENTS
1. DEFINITIONS............................................................................................. 3
2. PURCHASE, SALE AND EXCHANGE............................................................................. 6
3. SECTION 351 EXCHANGE PLAN............................................................................... 7
4. CLOSING................................................................................................. 7
5. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF THE
COMPANY AND THE STOCKHOLDERS............................................................................ 8
5.1 Due Organization............................................................................... 8
5.2 Authorization.................................................................................. 8
5.3 Capital Stock of the Company................................................................... 9
5.4 Transactions in Capital Stock.................................................................. 9
5.5 No Bonus Shares................................................................................ 9
5.6 Subsidiaries................................................................................... 9
5.7 Predecessor Status; etc........................................................................ 9
5.8 Spinoff by the Company.........................................................................10
5.9 Financial Statements...........................................................................10
5.10 Liabilities and Obligations....................................................................10
5.11 Accounts and Notes Receivable..................................................................11
5.12 Permits and Intangibles........................................................................11
5.13 Environmental Matters..........................................................................12
5.14 Personal Property..............................................................................12
5.15 Significant Customers; Material Contracts and Commitments......................................13
5.16 Real Property..................................................................................13
5.17 Insurance......................................................................................14
5.18 Compensation; Organized Labor Matters..........................................................14
5.19 Employee Plans.................................................................................15
5.20 Compliance with ERISA..........................................................................16
5.21 Conformity with Law; Litigation................................................................17
5.22 Taxes..........................................................................................17
5.23 No Violations..................................................................................17
5.24 Government Contracts...........................................................................18
5.25 Absence of Changes.............................................................................18
5.26 Deposit Accounts; Powers of Attorney...........................................................19
5.27 Relations with Governments.....................................................................20
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5.28 Disclosure.....................................................................................20
5.29 Prohibited Activities..........................................................................20
5.30 Draft Registration Statement...................................................................20
5.31 Authority......................................................................................21
5.32 Preemptive Rights..............................................................................21
5.33 Tax Matters....................................................................................21
5.34 No Plan of Distribution........................................................................21
5.35 No Retained Rights.............................................................................21
6. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF
PURCHASER AND OLD ACG...................................................................................21
6.1 Due Organization...............................................................................22
6.2 Authorization..................................................................................22
6.3 Capital Stock..................................................................................22
6.4 Transactions in Capital Stock, Organization Accounting.........................................22
6.5 Subsidiaries...................................................................................23
6.6 Financial Statements...........................................................................23
6.7 Liabilities and Obligations....................................................................23
6.8 Conformity with Law; Litigation................................................................23
6.9 No Violations..................................................................................24
6.10 Purchaser Securities...........................................................................24
6.11 Business; Real Property; Material Agreement....................................................24
6.12 Tax Matters....................................................................................24
6.13 ...............................................................................................25
7. OTHER COVENANTS PRIOR TO CLOSING........................................................................25
7.1 Access and Cooperation; Due Diligence; Audits..................................................25
7.2 Conduct of Business Pending Closing............................................................26
7.3 Prohibited Activities..........................................................................27
7.4 Exclusivity....................................................................................28
7.5 Notice to Bargaining Agents....................................................................28
7.7 Notification of Certain Matters................................................................29
7.8 Amendment of Schedules.........................................................................29
7.9 Further Assurance..............................................................................29
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS.....................................................30
8.1 Representations and Warranties Performance of Obligations......................................30
8.2 Satisfaction...................................................................................30
8.3 No Litigation..................................................................................30
8.4 Opinion of Counsel.............................................................................30
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8.5 Consents and Approvals.........................................................................30
8.6 Good Standing Certificates.....................................................................31
8.7 No Material Adverse Change.....................................................................31
8.8 Secretary's Certificates.......................................................................31
8.9 Closing of IPO.................................................................................31
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER........................................................31
9.1 Representations and Warranties; Performance of Obligations.....................................31
9.2 No Litigation..................................................................................32
9.3 Secretary's Certificate........................................................................32
9.4 No Material Adverse Effect.....................................................................32
9.5 Stockholders' Release..........................................................................32
9.6 Satisfaction...................................................................................32
9.7 Termination of Related Party Agreements........................................................32
9.8 Opinion of Counsel.............................................................................32
9.9 Consents and Approvals.........................................................................33
9.10 Good Standing Certificates.....................................................................33
9.11 Agreement Regarding Prepaid Advertising........................................................33
9.12 FIRPTA Certificate.............................................................................33
9.13 Agreement Regarding Free Advertising Space.....................................................33
9.14 Noncompetition Agreement.......................................................................34
9.15 Agreement Regarding Office Space...............................................................34
9.16 Agreement Regarding Internet Services..........................................................34
10. COVENANTS OF PURCHASER WITH THE STOCKHOLDERS AFTER CLOSING
34
10.1 Release From Guarantees........................................................................34
10.3 Preservation of Employee Benefit Plans.........................................................35
10.4 Dividends......................................................................................35
11. TERMINATION OF AGREEMENT................................................................................36
11.1 Termination....................................................................................36
11.2 Liabilities in Event of Termination............................................................36
12. NONCOMPETITION..........................................................................................37
12.2 Damages........................................................................................38
12.3 Reasonable Restraint...........................................................................38
12.4 Severability, Reformation......................................................................38
12.5 Independent Covenant...........................................................................38
12.6 Materiality....................................................................................38
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13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION...............................................................39
13.1 Stockholders...................................................................................39
13.2 Purchaser......................................................................................39
13.3 Damages........................................................................................40
13.4 Survival.......................................................................................40
14. TRANSFER RESTRICTIONS...................................................................................40
14.1 Transfer Restrictions..........................................................................40
15. INVESTMENT REPRESENTATIONS..............................................................................41
15.1 Compliance With Law............................................................................41
15.2 Economic Risk, Sophistication..................................................................41
16. REGISTRATION RIGHTS.....................................................................................42
16.1 PiggyBack Registration Rights..................................................................42
16.2 Demand Registration Rights.....................................................................42
16.3 Registration Procedures........................................................................43
16.4 Other Registration Matters.....................................................................46
16.5 Indemnification................................................................................46
16.6 Contribution...................................................................................49
16.7 Availability of Rule 144.......................................................................50
17. GENERAL.................................................................................................50
17.1 Cooperation....................................................................................50
17.2 Successors and Assigns.........................................................................50
17.3 Entire Agreement...............................................................................50
17.4 Counterparts...................................................................................51
17.5 Brokers and Agents.............................................................................51
17.6 Expenses.......................................................................................51
17.7 Notices........................................................................................51
17.8 Governing Law..................................................................................53
17.9 Exercise of Rights and Remedies................................................................53
17.10 Time...........................................................................................53
17.11 Reformation and Severability...................................................................53
17.12 Remedies Cumulative............................................................................53
17.13 Captions.......................................................................................53
17.14 Amendments and Waivers.........................................................................53
17.15 Public Statements..............................................................................53
17.16 Use of Xxxxx Name..............................................................................53
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AGREEMENT AND PLAN OF EXCHANGE
THIS AGREEMENT AND PLAN OF EXCHANGE (the "Agreement") is made as of
the 6th day of October, 1997, by and among ADVANCED COMMUNICATIONS GROUP, INC.,
a Delaware corporation organized in September 1997 ("Purchaser"), ADVANCED
COMMUNICATIONS CORP. (formerly named Advanced Communications Group, Inc.), a
Delaware corporation organized in June 1996 ("Old ACG"), 1+ USA V ACQUISITION
CORP., a Delaware corporation ("Newco"), XXXXX LONG DISTANCE SERVICE, INC., a
Kansas corporation (the "Company"), and XXXXXX X. XXXXX, XXXXXXX XXXXX, XXX X.
XXXXX, XXXX X. XXXXX, XXXX XXXXX XXX, XXXXX XXXXX ALEFS, XXXXX X. XXXXX and
XXXX X. XXXXX, the only Stockholders of the Company (collectively, the
"Stockholders") and the owners of 10,000 shares of Common Stock, no par value
of Company ("Company Stock"), representing all the Capital Stock of Company
issued and outstanding on the date of this Agreement ("Shares").
RECITALS
WHEREAS, Old ACG has entered into agreements for, or
negotiated the terms of, the acquisition by merger, asset purchase or
stock purchase of ten companies (or interests therein) engaged in
various aspects of the telecommunications industry ("Founding
Companies") for voting capital stock and other consideration,
including cash, one of such agreements being the Agreement and Plan of
Merger dated as of November 15, 1996, as amended as of June 24, 1997,
among Old ACG, Newco, the Company and the Stockholders ("Original
Agreement"); and
WHEREAS, promptly following the execution of the amendment to
the Original Agreement in June 1997, Xxxx X. Xxxxx was elected
President of Newco; Xx. Xxxxx entered into an Employment Agreement
with Newco; and Xx. Xxxxx was awarded the stock options referred to
therein; and
WHEREAS, Old ACG intended to close the acquisition of the
Founding Companies substantially contemporaneously with the
consummation of an initial underwritten public offering of its common
stock; and
WHEREAS, the executive officers of Old ACG have determined
that it is desirable for licensing and other regulatory purposes to
restructure the acquisitions of the Founding Companies; and
WHEREAS, as the initial step in the implementation of the
restructured proposal, Old ACG formed Purchaser as a new Delaware
corporation in September 1997 to serve as the vehicle for the
acquisition of the Founding Companies substantially contemporaneously
with
the consummation of an initial underwritten public offering ("IPO") of
Common Stock, $.0001 par value, of Purchaser ("Purchaser Stock") at
the price to the public reflected in the final prospectus of Purchaser
relating to the IPO ("IPO Price"); and
WHEREAS, under the restructured proposal, contemporaneously
with the consummation of the IPO and as part of a single transaction,
the stockholders of the Founding Companies, including Stockholders and
old ACG, will transfer, by stock or asset purchase or reverse
triangular merger, the stock or substantially all the assets of
certain companies and other assets in which they own an interest to
Purchaser in exchange for voting capital stock of Purchaser and other
consideration, including cash, voting stock, options, warrants, notes,
convertible notes and other property of Purchaser, under circumstances
that will constitute a tax-free transfer of property under Section 351
of the Internal Revenue Code of 1986, as amended, and the rules and
regulations thereunder ("Code"), to the extent of their receipt of
voting capital stock of Purchaser; and
WHEREAS, substantially contemporaneously with the execution
of this Agreement and in order to document the integrated Section 351
exchange plan contemplated herein, (a) Old ACG, the other Founding
Companies, their stockholders and others are amending and restating
their respective acquisition agreements; and (b) Purchaser and Old ACG
are entering into a merger agreement pursuant to which Old ACG will
become a wholly-owned subsidiary of Purchaser substantially
contemporaneously with the consummation of the IPO; and
WHEREAS, it is contemplated that prior to the consummation of
the IPO, Old ACG will effect an approximately one-for-two reverse
stock split, the exact magnitude of which will be dependent upon the
ultimate post IPO valuation of Purchaser by the managing underwriters
in the IPO and the anticipated IPO Price; and
WHEREAS, the IPO, the acquisitions of the Founding Companies
and Old ACG are described in the Registration Statement on Form S-1 of
Purchaser (draft of October 2, 1997), a copy of which is attached to
this Agreement as Annex I ("Draft Registration Statement"); and
WHEREAS, Purchaser, Old ACG, Newco, Company and the
Stockholders desire to amend and restate the Original Agreement in its
entirety and transform it into this Agreement; and
WHEREAS, Purchaser desires to acquire all the Shares directly
from Stockholders for the consideration set forth in Section 2 of this
Agreement, and Stockholders have agreed to sell the Shares to
Purchaser on the terms and subject to the conditions hereinafter set
forth;
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NOW, THEREFORE, in consideration of the premises and of the
mutual representations, warranties, covenants and agreements herein
contained, the parties hereby agree as follows:
1. DEFINITIONS
Unless the context otherwise requires, capitalized terms used in this
Agreement or in any schedule, or annex attached hereto and not otherwise
defined shall have the following meanings for all purposes of this Agreement:
"Affiliates" has the meaning set forth in Section 5.8.
"Agreement" has the meaning set forth in the first paragraph of this
Agreement.
"Annex" means each Annex attached hereto that represents a document
relevant to the transactions contemplated in this Agreement.
"A/R Aging Reports" has the meaning set forth in Section 5.11.
"Balance Sheet Date" has the meaning set forth in Section 5.9.
"Charter Documents" means the Certificate of Incorporation, Articles
of Incorporation or other instrument pursuant to which any
corporation, partnership or other business entity that is a signatory
to this Agreement was formed or organized in accordance with
applicable law.
"Closing" has the meaning set forth in Section 4.
"Closing Date" has the meaning set forth in Section 4.
"Code" has the meaning set forth in the sixth recital of this
Agreement.
"Company" has the meaning set forth in the first paragraph of this
Agreement.
"Company Financial Statements" has the meaning set forth in Section
5.9.
"Company Stock" has the meaning set forth in the first paragraph of
this Agreement.
"Demand Registration" has the meaning set forth in Section 16.2.
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"Directory" means each and every yellow page directory published by
FPI and its Affiliates at the date of this Amendment.
"Draft Registration Statement" has the meaning set forth in the eighth
recital of this Agreement.
"Environmental Laws" has the meaning set forth in Section 5.13.
"ERISA" has the meaning set forth in Section 5.19.
"Fillers" means the irregular sized spaces in each Directory that
cannot be sold to advertisers.
"Founding Companies" has the meaning set forth in the first recital of
this Agreement.
"Founding Stockholders" has the meaning set forth in Section 17.2.
"FPI" means Xxxxx Publications, Inc., a Kansas corporation.
"FSI" means Xxxxx Systems, Inc., a Kansas corporation.
"Hazardous Wastes" and "Hazardous Substances" have the meanings set
forth in Section 5.13.
"Xxxx-Xxxxx Act" has the meaning set forth in Section 10.5.
"Initial Disclosure Date" means September 30, 1996.
"IPO" has the meaning set forth in the fifth recital of this
Agreement.
"IPO Price" has the meaning set forth in the fifth recital of this
Agreement.
"June Balance Sheet" has the meaning set forth in Section 5.9.
"Liens" has the meaning set forth in Section 5.3.
"Material Adverse Effect" has the meaning set forth in Section 5.1.
"Material Documents" has the meaning set forth in Section 5.23.
"Newco" has the meaning set forth in the first paragraph of this
Agreement.
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"Old ACG Financial Statements" has the meaning set forth in Section
6.6.
"Original Agreement" has the meaning set forth in the first recital of
this Amendment.
"Other Stockholders" means the persons and entities that receive
shares of Purchaser Stock, securities convertible into shares of
Purchaser Stock and/or cash upon the acquisition by Purchaser of
assets or businesses in which such persons and entities owned an
interest on or prior to the closing date of the IPO.
"Prohibited Activities" has the meaning set forth in Paragraph 5.29.
"Proscribed Business" has the meaning set forth in Section 12(i).
"Purchaser" has the meaning set forth in the first paragraph of this
Agreement.
"Purchaser Charter Documents" has the meaning set forth in Section
6.1.
"Purchaser Documents" has the meaning set forth in Section 6.9.
"Purchaser Stock" has the meaning set forth in the fifth recital of
this Agreement.
"Qualified Plans" has the meaning set forth in Section 5.20.
"Registerable Securities" means the shares of Purchaser Stock acquired
by the Stockholders pursuant to this Agreement.
"Restricted Securities" has the meaning set forth in Section 15.
"Returns" means any returns, reports or statements (including any
information returns) required to be filed for purposes of a particular
Tax.
"Schedule" means each Schedule attached hereto, which shall reference
the relevant sections of this Agreement, on which parties hereto
disclose information as part of their respective representations,
warranties, covenants and agreements.
"SEC" means the United States Securities and Exchange Commission.
"Section 351 Exchange Plan" means the Section 351 Exchange Plan in the
form of Annex II.
"Stockholders" has the meaning set forth in the first paragraph of
this Agreement.
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"Tax" or "Taxes" means all Federal, state, local or foreign net or
gross income, gross receipts, net proceeds, sales, use, ad valorem,
value added, franchise, bank shares, withholding, payroll, employment,
excise, property, deed, stamp, alternative or add on minimum,
environmental or other taxes, assessments, duties, fees, levies or
other governmental charges of any nature whatever, whether disputed or
not, together with any interest, penalties, additions to tax or
additional amounts with respect thereto.
"Territory" has the meaning set forth in Section 12.1(i).
"Transfer Taxes" has the meaning set forth in Section 17.6.
"1933 Act" means the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.
2. PURCHASE, SALE AND EXCHANGE
Pursuant to the terms of this Agreement, at the Closing, (x)
Stockholders will transfer, convey, assign and deliver to Purchaser the Shares,
together with stock powers duly endorsed by Stockholders so that the Shares may
be duly registered in Purchaser's name, (y) those Stockholders who are payees
of the Company's promissory note in the outstanding principal amount of
$659,450 at the date of the Original Agreement will transfer, convey, assign
and deliver to Purchaser such note, together with all unpaid interest thereon,
and (z) Purchaser will acquire the Shares from Stockholders for an aggregate
consideration of $5 million in immediately available funds and such number of
shares of Purchaser Stock (rounded to the nearest whole share) as shall be
determined by dividing $10 million by the IPO Price ("Stock Component");
provided, however, that the Stock Component shall be determined using $8
million rather than $10 million if the contractual arrangements described in
Sections 9.11, 9.13, 9.15 and 9.16 of the Agreement are not in full force and
effect immediately prior to the Closing. The number of Shares to be exchanged
by each Stockholder and the amount of cash and shares of Purchaser Stock
deliverable to each Stockholder are set forth below opposite the name of such
Stockholder:
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NUMBER OF
SHARES OF
AMOUNT OF PURCHASER
NUMBER OF CASH STOCK
NAME OF STOCKHOLDER SHARES DELIVERABLE DELIVERABLE(1)
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Xxxxxx X. Xxxxx 2,000 $ 1,000,000 20%
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Xxxxxxx Xxxxx 2,000 1,000,000 20
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Xxx X. Xxxxx 1,000 500,000 10
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Xxxx X. Xxxxx 1,000 500,000 10
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Xxxx Xxxxx Xxx 1,000 500,000 10
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Xxxxx Xxxxx Alefs 1,000 500,000 10
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Xxxxx X. Xxxxx 1,000 500,000 10
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Xxxx X. Xxxxx 1,000 500,000 10
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TOTAL 10,000 $ 5,000,000 100%
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(1) Expressed as a percentage of the Total Shares Stock Component.
3. SECTION 351 EXCHANGE PLAN.
By executing this Agreement, each Stockholder is deemed to have
approved and adopted the Section 351 Exchange Plan to the same extent as if he
had subscribed his signature thereon.
4. CLOSING
The Closing of the transactions contemplated by this Agreement
("Closing") shall take place on the date of the closing of the sale of shares
of the Purchaser Stock in the IPO, or such other date as the parties hereto may
designate (the "Closing Date"), at such place in New York City as the parties
may mutually agree.
5. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF
THE COMPANY AND THE STOCKHOLDERS
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(A) Representations, Warranties, Covenants and Agreements of the
Company and the Stockholders.
Each of the Company and the Stockholders, jointly and severally,
represents, warrants, covenants and agrees (i) that all of the following
representations and warranties in this Section 5(A) are true at the date of
this Agreement and, subject to Section 7.8, shall be true at the Closing Date,
(ii) that all of the covenants and agreements in this Section 5(A) shall be
complied with or performed at and as of the Closing Date and (iii) that none of
the representations, warranties, covenants and agreements set forth in this
Section 5(A) shall survive the Closing Date, except that the representations
and warranties set forth in Section 5.22 shall survive until such time as the
limitations period has run for all Tax periods ended on or prior to the Closing
Date. For purposes of this Section 5, the term Company shall mean and refer to
the Company and all of its subsidiaries, if any.
5.1 Due Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation, and is duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities to
carry on its business in the places and in the manner as now conducted except
(i) as set forth on Schedule 5.1 or (ii) where the failure to be so authorized
or qualified would not have a material adverse effect on the business,
operations, affairs, prospects, properties, assets or condition (financial or
otherwise), of the Company taken as a whole (as used herein with respect to the
Company, or with respect to any other person, a "Material Adverse Effect").
Schedule 5.1 sets forth the jurisdiction in which the Company is incorporated
and contains a list of all such jurisdictions in which the Company is
authorized or qualified to do business. True, complete and correct copies of
the Charter Documents and Bylaws, each as amended, of the Company are all
attached hereto as Schedule 5.1. The stock records of the Company, as
heretofore made available to Purchaser, are correct and complete in all
material respects. There are no minutes in the possession of the Company or the
Stockholders which have not been made available to Purchaser, and all of such
minutes are correct and complete in all material respects. The most recent
minutes of the Company, which are dated no earlier than ten business days prior
to the date hereof, affirm and ratify all prior acts of the Company, and of its
officers and directors on behalf of the Company.
5.2 Authorization. The Company has all requisite corporate power and
authority to enter into the Agreement and to perform its obligations
thereunder. The execution and delivery by the Company of the Agreement and its
consummation of the transactions contemplated thereby have been duly authorized
by all necessary corporate action of the Company. The Agreement has been duly
executed and delivered by the Company, and is a valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms.
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5.3 Capital Stock of the Company. The authorized capital stock of the
Company consists of 10,000 shares of Company Stock. All of the issued and
outstanding shares of the capital stock of the Company are owned of record and
beneficially by the Stockholders in the amounts set forth in Section 2 and
further, except as set forth on Schedule 5.3, are owned free and clear of all
mortgages, liens, security interests, pledges, charges, voting trusts,
restrictions, encumbrances and claims of every kind (collectively, the
"Liens"). All of the issued and outstanding shares of the capital stock of the
Company (i) have been duly authorized and validly issued, (ii) are fully paid
and nonassessable, and (iii) were offered, issued, sold and delivered by the
Company in compliance with all applicable state and Federal laws concerning the
offer, issuance, sale and delivery of securities. Further, none of such shares
was issued in violation of the preemptive rights of any past or present
stockholder.
5.4 Transactions in Capital Stock. Except as set forth on Schedule 5.4,
the Company has not acquired any Company Stock since January 1, 1994. Except as
set forth on Schedule 5.4, (i) no option, warrant, call, conversion right or
commitment of any kind exists which obligates the Company to issue any of its
authorized but unissued capital stock; (ii) the Company has no obligation
(contingent or otherwise) to purchase, redeem or otherwise acquire any of its
equity securities or any interests therein or to pay any dividend or make any
distribution in respect thereof; and (iii) neither the voting stock structure
of the Company nor the relative ownership of shares among any of its respective
Stockholders has been altered or changed in contemplation of the transactions
contemplated herein. Schedule 5.4 also includes complete and accurate copies of
all stock option or stock purchase plans, including a list of all outstanding
options, warrants or other rights to acquire shares of the Company Stock.
5.5 No Bonus Shares. Except as set forth on Schedule 5.5, none of the
shares of Company Stock was issued pursuant to awards, grants or bonuses.
5.6 Subsidiaries. Except as set forth in Schedule 5.6, (i) the Company
has no subsidiaries, (ii) the Company does not presently own, of record or
beneficially, or control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any corporation,
association or business entity and (iii) the Company is not directly or
indirectly, a participant in any joint venture, partnership or other
non-corporate entity.
5.7 Predecessor Status; etc. Set forth in Schedule 5.7 is a listing of
all names of all predecessor companies of the Company, including the names of
any entities acquired by the Company (by stock purchase, merger or otherwise)
or owned by the Company or from whom the Company previously acquired material
assets, in any case, from the earliest date upon which any Stockholder acquired
his or her stock in any Company. Except as disclosed on Schedule 5.7, the
Company has not been, within such period of time, a subsidiary or division of
another corporation or a part of an acquisition which was later rescinded.
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5.8 Spinoff by the Company. Except as set forth on Schedule 5.8, there
has not been any sale, spin-off or split-up of material assets of either the
Company or any other person or entity that directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is under common
control with, the Company ("Affiliates") since January 1, 1994.
5.9 Financial Statements. Attached hereto as Schedule 5.9 are copies of
the following financial statements of the Company (the "Company Financial
Statements"): the Company's audited Balance Sheet as of December 31, 1996 and
its unaudited Balance Sheets as of December 31, 1995 and 1994 and June 30, 1997
("June Balance Sheet"), the Company's audited Statements of Operations,
Retained Earnings and Cash Flows for the year ended December 31, 1996 and its
unaudited Statements of Operations, Retained Earnings and Cash Flows and any
related notes thereto for each of the years in the two-year period ended
December 31, 1995 and for the six months ended June 30, 1996 and 1997 (June 30,
1997 being hereinafter referred to as the "Balance Sheet Date"). The Company
Financial Statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated (except as noted thereon or on Schedule 5.9). Except as set forth on
Schedule 5.9, such Balance Sheets as of December 31, 1996, 1995, and 1994 and
June 30, 1997 present fairly the financial position of the Company as of the
dates indicated thereon, and such Statements of Operations, Retained Earnings
and Cash Flows present fairly the results of operations for the periods
indicated thereon in accordance with generally accepted accounting principles.
The Company Financial Statements of and for the year ended December 31, 1996
have been examined by KMPG Peat Marwick LLP.
5.10 Liabilities and Obligations. The Company has no material
liabilities of any kind, character or description, whether accrued, absolute,
secured, unsecured, contingent or otherwise, that are not reflected on the June
Balance Sheet or otherwise reflected in the Company Financial Statements at the
Balance Sheet Date, including all loan agreements, indemnity or guaranty
agreements, bonds, mortgages, liens, pledges or other security agreements.
Except as set forth on Schedule 5.10, since the Initial Disclosure Date the
Company has not incurred any material liabilities of any kind, character and
description, whether accrued, absolute, secured or unsecured, contingent or
otherwise, other than liabilities incurred in the ordinary course of business.
The Company has also disclosed to Purchaser on Schedule 5.10, in the case of
those contingent liabilities related to pending or threatened litigation or
other liabilities which are not fixed or otherwise accrued or reserved, the
following information:
(i) a summary description of the liability together with the
following:
(x) copies of all relevant documentation
relating thereto;
(y) amounts claimed and any other action or
relief sought; and
(z) name of claimant and all other parties to
the claim, suit or proceeding;
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(ii) the name of each court or agency before which such
claim, suit or proceeding is pending;
(iii) the date such claim, suit or proceeding was instituted;
and
(iv) a good faith and reasonable estimate of the maximum
amount, if any, which is likely to become payable with respect to each
such liability. If no estimate is provided, the estimate shall for
purposes of this Agreement be deemed to be zero.
5.11 Accounts and Notes Receivable. The Company has delivered to
Purchaser an accurate list (which is set forth on Schedule 5.11) of the
accounts and notes receivable of the Company, as of the Initial Disclosure,
including receivables from and advances to employees and the Stockholders. The
Company shall also provide Purchaser (x) an accurate list of all receivables
generated subsequent to the Initial Disclosure Date and (y) an aging of all
accounts and notes receivable showing amounts due in 30 day aging categories,
and such list and such aging report (the "A/R Aging Reports") shall be current
as of a date reasonably requested by Purchaser. Except to the extent reflected
on Schedule 5.11 or as disclosed by the Company to Purchaser in a writing
accompanying the A/R Aging Reports, such accounts, notes and other receivables
are collectible in the amounts shown on Schedule 5.11, and shall be collectible
in the amounts shown on the A/R Aging Reports, net of reserves reflected in the
June Balance Sheet and as of the date of the A/R Aging Reports, respectively.
5.12 Permits and Intangibles. The Company holds all licenses,
franchises, permits and other governmental authorizations the absence of any of
which could have a Material Adverse Effect on its business, and the Company has
delivered to Purchaser an accurate list and summary description (which is set
forth on Schedule 5.12) of all such licenses, franchises, permits and other
governmental authorizations, including titles, certificates, trademarks, trade
names, patents, patent applications and copyrights owned or held by the Company
(including interests in software or other technology systems, programs and
intellectual property) (it being understood and agreed that a list of all
environmental permits and other environmental approvals is set forth on
Schedule 5.13). To the knowledge of the Company, the licenses, franchises,
permits and other governmental authorizations listed on Schedules 5.12 and 5.13
are valid, and the Company has not received any notice that any governmental
authority intends to cancel, terminate or not renew any such license,
franchise, permit or other governmental authorization. The Company has
conducted and is conducting its business in compliance with the requirements,
standards, criteria and conditions set forth in the licenses, franchises,
permits and other governmental authorizations listed on Schedules 5.12 and 5.13
and is not in violation of any of the foregoing except where such
non-compliance or violation would not have a Material Adverse Effect on the
Company. Except as specifically provided in Schedule 5.12, the transactions
contemplated by this Agreement will not result in a default under or a breach
or violation of, or adversely affect the rights and benefits afforded to the
Company by, any such license, franchise, permit or government authorization.
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5.13 Environmental Matters. Except as set forth on Schedule 5.13, (i)
the Company has complied with and is in compliance with all Federal, state,
local and foreign statutes (civil and criminal), laws, ordinances, regulations,
rules, notices, permits, judgments, orders and decrees applicable to it or any
of its properties, assets, operations and businesses relating to environmental
protection (collectively "Environmental Laws") including, without limitation,
Environmental Laws relating to air, water, land and the generation, storage,
use, handling, transportation, treatment or disposal of Hazardous Wastes and
Hazardous Substances including petroleum and petroleum products (as such terms
are defined in any applicable Environmental Law); (ii) the Company has obtained
and adhered to all necessary permits and other approvals necessary to treat,
transport, store, dispose of and otherwise handle Hazardous Wastes and
Hazardous Substances, a list of all of which permits and approvals is set forth
on Schedule 5.13, and have reported to the appropriate authorities, to the
extent required by all Environmental Laws, all past and present sites owned and
operated by the Company where Hazardous Wastes or Hazardous Substances have
been treated, stored, disposed of or otherwise handled; (iii) there have been
no releases or threats of releases (as defined in Environmental Laws) at, from,
in or on any property owned or operated by the Company except as permitted by
Environmental Laws; (iv) the Company knows of no on-site or off-site location
to which the Company has transported or disposed of Hazardous Wastes and
Hazardous Substances or arranged for the transportation of Hazardous Wastes and
Hazardous Substances, which site is the subject of any Federal, state, local or
foreign enforcement action or any other investigation which could lead to any
claim against the Company or Purchaser for any clean-up cost, remedial work,
damage to natural resources, property damage or personal injury, including, but
not limited to, any claim under the comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended; and (v) the Company had no
contingent liability in connection with any release of any Hazardous Waste or
Hazardous Substance into the environment.
5.14 Personal Property. The Company has delivered to Purchaser an
accurate list (which is set forth on Schedule 5.14) of (i) all personal
property included (or that will be included) in "depreciable plant, property
and equipment" on the balance sheet of the Company, (ii) all other personal
property owned by the Company with a value in excess of $10,000 (x) as of the
Initial Disclosure Date and (y) acquired since the Initial Disclosure Date and
(iii) all leases and agreements in respect of personal property, including, in
the case of each of (i), (ii) and (iii), (1) true, complete and correct copies
of all such leases and (2) an indication as to which assets are currently
owned, or were formerly owned, by Stockholders, relatives of Stockholders, or
Affiliates of the Company. Except as set forth on Schedule 5.14, (a) all
personal property used by the Company in its business is either owned by the
Company or leased by the Company pursuant to a lease included on Schedule 5.14,
(b) all of the personal property listed on Schedule 5.14 is in good working
order and condition, ordinary wear and tear excepted and (c) all leases and
agreements included on Schedule 5.14 are in full force and effect
and constitute valid and binding agreements of the parties (and their
successors) thereto in accordance with their respective terms.
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5.15 Significant Customers; Material Contracts and Commitments. The
Company has delivered to Purchaser an accurate list (which is set forth on
Schedule 5.15) of all significant customers, or persons or entities that are
sources of a significant number of customers, it being understood and agreed
that a "significant customer," for purposes of this Section 5.15, means a
customer (or person or entity) (i) representing 5% or more of the Company's
annual revenues as of the Initial Disclosure Date or (ii) reasonably expected
to represent 5% or more of the Company's revenues during the twelve-month
period ending September 30, 1997. Except to the extent set forth on Schedule
5.15, none of the Company's significant customers (or persons or entities that
are sources of a significant number of customers) have canceled or
substantially reduced or, to the knowledge of the Company, are currently
attempting or threatening to cancel a contract or substantially reduce
utilization of the services provided by the Company.
The Company has listed on Schedule 5.15 all material contracts,
commitments and similar agreements to which the Company is a party or by which
it or any of its properties are bound (including, but not limited to, contracts
with significant customers, joint venture or partnership agreements, contracts
with any labor organizations, strategic alliances and options to purchase
land), other than agreements listed on Schedule 5.10, 5.14 or 5.16, (x) in
existence as of the Initial Disclosure Date and (y) entered into since the
Balance Street Date, and in each case has delivered true, complete and correct
copies of such agreements to Purchaser. The Company has complied with all
material commitments and obligations pertaining to it, and is not in default
under any contract or agreement listed on Schedule 5.15 and no notice of
default under any such contract or agreement has been received. The Company has
also indicated on Schedule 5.15 a summary description of all plans or projects
involving the acquisition of any personal property, business or assets
requiring, in any event, the payment of more than $50,000 by the Company.
5.16 Real Property. Schedule 5.16 includes a list of all real property
owned or leased by the Company (i) as of the Initial Disclosure Date and (ii)
acquired since the Initial Disclosure Date, and all other property, if any,
used by the Company in the conduct of its business. The Company has good and
insurable title to the real property owned by it, including those reflected on
Schedule 5.16, subject to no Lien except for:
(w) Liens reflected on Schedules 5.10 or 5.15 as securing
specified liabilities (with respect to which no material default
exists);
(x) Liens for current taxes not yet payable and assessments
not in default;
(y) easements for utilities serving the property only; and
(z) easements, covenants and restrictions and other
exceptions to title shown of record in the office of the County Clerks
in which the properties, assets and leasehold estates
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are located which do not adversely affect in any material respect the
current use of the property.
Schedule 5.16 contains, without limitation, (1) true, complete and correct
copies of all title reports and title insurance policies currently in
possession of the Company with respect to real property owned by the Company,
(2) true, complete and correct copies of all leases and agreements in respect
of such real property leased by the Company (which copies are attached to
Schedule 5.16), and (3) an indication as to which such properties, if any, are
currently owned, or were formerly owned, by Stockholders or business or
personal affiliates of the Company or Stockholders.
Except as set forth on Schedule 5.16, all of such leases included on Schedule
5.16 are in full force and effect and constitute valid and binding agreements
of the parties (and their successors) thereto in accordance with their
respective terms.
5.17 Insurance. The Company has delivered to Purchaser, as set forth on
and attached to Schedule 5.17, (i) an accurate list as of the Initial
Disclosure Date of all insurance policies carried by the Company, (ii) an
accurate list of all insurance loss runs or workers compensation claims
received for the past three policy years and (iii) true, complete and correct
copies of all insurance policies currently in effect. Such insurance policies
evidence all of the insurance that the Company is required to carry pursuant to
all of its contracts and other agreements and pursuant to all applicable laws.
All of such insurance policies are currently in full force and effect and shall
remain in full force and effect through the Closing Date. No insurance carried
by the Company has ever been canceled by the insurer and the Company has never
been denied coverage.
5.18 Compensation; Organized Labor Matters. The Company has delivered
to Purchaser an accurate list (which is set forth on Schedule 5.18) showing all
officers, directors and key employees of the Company and the rate of
compensation (and the portions thereof attributable to salary, bonus and other
compensation, respectively) of each of such persons as of (i) the Initial
Disclosure Date and (ii) the date of this Agreement. Since the Initial
Disclosure Date, there have been no increases in the compensation payable or
any special bonuses to any officer, director, key employee or other employee,
except ordinary salary increases implemented on a basis consistent with past
practices.
Except as set forth on Schedule 5.18, (w) the Company is not bound by
or subject to (and none of its respective assets or properties is bound by or
subject to) any arrangement with any labor union, (x) no employees of the
Company are represented by any labor union or covered by any collective
bargaining agreement, (y) no campaign to establish such representation is in
progress and (z) there is no pending or, to the best of the Company's
knowledge, threatened labor dispute involving the Company and any group of its
employees nor has the Company experienced any labor interruption over the past
three years. The Company believes its relationship with employees to be good.
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5.19 Employee Plans. The Stockholders have delivered to Purchaser an
accurate list (which is set forth on Schedule 5.19) showing all employee
benefit plans of the Company, including all employment agreements and other
agreements or arrangements containing "golden parachute" or other similar
provisions, and deferred compensation agreements, together with true, complete
and correct copies of such plans, agreements and any trusts related thereto,
and classifications of employees covered thereby as of the Initial Disclosure
Date. Except for the employee benefit plans, if any, described on Schedule
5.19, the Company does not sponsor, maintain or contribute to any plan program,
fund or arrangement that constitutes an "employee pension benefit plan," and
the Company does not have any obligation to contribute to or accrue or pay any
benefits under any deferred compensation or retirement funding arrangement on
behalf of any employee or employees (such as, for example, and without
limitation, any individual retirement account or annuity, any "excess benefit
plan" (within the meaning of Section 3(36) of the Employee Retirement Income
Security Act of 1974, as amended "ERISA") or any non-qualified deferred
compensation arrangement). For the purposes of this Agreement, the term
"employee pension benefit plan" shall have the same meaning as is given that
term in Section 3(2) of ERISA. The Company has not sponsored, maintained or
contributed to any employee pension benefit plan other than the plans set forth
on Schedule 5.19, nor is the Company required to contribute to any retirement
plan pursuant to the provisions of any collective bargaining agreement
establishing the terms and conditions or employment of any of the Company's
employees.
The Company is not now, nor as a result of its past activities can it
reasonably be expected to become, liable to the Pension Benefit Guaranty
Corporation or to any multiemployer employee pension benefit plan under the
provisions of Title IV of ERISA.
All employee benefit plans listed on Schedule 5.19 and the
administration thereof are in substantial compliance with their terms and all
applicable provisions of ERISA and the regulations issued thereunder, as well
as with all other applicable Federal, state and local statutes, ordinances and
regulations.
All accrued contribution obligations of the Company or any subsidiary
with respect to any plan listed on Schedule 5.19 have either been fulfilled in
their entirety or are fully reflected on the balance sheet of the Company as of
the Initial Disclosure Date.
5.20 Compliance with ERISA. All employee benefit plans listed on
Schedule 5.19 that are intended to qualify (the "Qualified Plans") under
Section 401(a) of the Code are, and have been so qualified and have been
determined by the Internal Revenue Service to be so qualified, and copies of
such determination letters are included as part of Schedule 5.19. Except as
disclosed on Schedule 5.19, all reports and other documents required to be
filed with any governmental agency or distributed to plan participants or
beneficiaries (including, but not limited to, actuarial reports, audits or tax
returns) have been timely filed or distributed, and copies thereof are included
as part of Schedule 5.19. Neither the Stockholders, any such plan listed in
Schedule 5.19, nor the Company has engaged in any transaction
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prohibited under the provisions of Section 4975 of the Code or Section 406 of
ERISA. No employee benefit plan listed on Schedule 5.19 has incurred an
accumulated funding deficiency, as defined in Section 412(a) of the Code and
Section 302(1) of ERISA; and the Company has not incurred (i) any liability for
excise tax or penalty payable to the Internal Revenue Service or (ii) any
liability to the Pension Benefit Guaranty Corporation. The Stockholders further
represent that:
(v) there have been no terminations, partial terminations or
discontinuance of contributions to any Qualified Plan intended to
qualify under Section 401(a) of the Code without notice to and
approval by the Internal Revenue Service;
(w) no plan listed on Schedule 5.19 that is subject to the
provisions of Title IV of ERISA has been terminated;
(x) there have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to employee benefit
plans listed in Schedule 5.19;
(y) the Company has not incurred liability under Section 4062
of ERISA; and
(z) no circumstances exist pursuant to which the Company
could reasonably be expected to have any direct or indirect liability
whatsoever (including, but not limited to, any liability to any
multiemployer plan or the Pension Benefit Guaranty Corporation under
Title IV of ERISA or to the Internal Revenue Service for any excise
tax or penalty, or being subject to any statutory Lien to secure
payment of any such liability) with respect to any plan now or
heretofore maintained or contributed to by any entity other than the
Company that is, or at any time was, a member of a "controlled group"
(as defined in Section 412(n)(6)(B) of the Code) that includes the
Company.
5.21 Conformity with Law; Litigation. Except to the extent set forth on
Schedule 5.21 or 5.13, the Company is not in violation of any law or regulation
or any order of any court or Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over the Company which would have a Material Adverse Effect; and
except to the extent set forth on Schedule 5.10 or 5.13, there are no material
claims, actions, suits or proceedings, commenced or, to the knowledge of the
Company, threatened, against or affecting the Company, at law or in equity, or
before or by any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction over
the Company and no notice of any claim, action, suit or proceeding, whether
pending or threatened, has been received by the Company or any Stockholder. The
Company has conducted and is conducting its business in substantial compliance
with the requirements, standards, criteria and conditions set forth in
applicable Federal, state and local statutes, ordinances, permits, licenses,
orders, approvals, variances, rules and regulations, including
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all such permits, licenses, orders and other governmental approvals set forth
on Schedules 5.12 and 5.13, and is not in violation of any of the foregoing
which might have a Material Adverse Effect.
5.22 Taxes. The Company has timely filed all requisite Federal, state
and other Tax returns or extension requests for all fiscal periods ended on or
before the Initial Disclosure Date; and except as set forth on Schedule 5.22,
there are no examinations in progress or claims against it for Federal, state
and other Taxes for any period or periods prior to and including the Balance
Sheet Date and no notice of any claim for Taxes, whether pending or threatened,
has been received. All Tax (whether or not shown on any Tax return) owed by the
Company, any member of an affiliated or consolidated group which includes or
included the Company or with respect to any payment made or deemed made by the
Company has been paid. The amounts shown as accruals for Taxes on the Company
Financial Statements are sufficient for the payment of all Taxes of the kinds
indicated for all fiscal periods ended on or before that date. Copies of (i)
any tax examinations, (ii) extensions of statutory limitations and (iii) the
Federal and local income Tax returns and franchise tax returns of Company for
its last three fiscal years, or such shorter period of time as it shall have
existed, are attached hereto as Schedule 5.22. The Company made an election to
be taxed under the provisions of Subchapter S of the Code and has not, within
the past five years, been taxed under the provisions of Subchapter C of the
Code. The Company has a taxable year ended December 31 and has not made an
election to retain a fiscal year other than December 31 under Section 444 of
the Code. The Company's methods of accounting have not changed in the past five
years. The Company is not an investment Company as defined in Section 351(e)(1)
of the Code.
5.23 No Violations. The Company is not in violation of its Charter
Documents. Neither the Company nor, to the knowledge of the Company, any other
party thereto, is in default under any lease, instrument, agreement, license,
or permit set forth on Schedule 5.12, 5.13, 5.14, 5.15 or 5.16, or any other
material agreement to which it is a party or by which its properties are bound
(the "Material Documents"); and, except as set forth in Schedule 5.23, (i) the
rights and benefits of the Company under the Material Documents will not be
materially adversely affected by the transactions contemplated hereby and (ii)
the execution of this Agreement and the performance of the obligations
hereunder and the consummation of the transactions contemplated hereby will not
result in any material violation or breach or constitute a default under, any
of the terms or provisions of the Material Documents or the Charter Documents.
Except as set forth on Schedule 5.23, none of the Material Documents requires
notice to, or the consent or approval of, any governmental agency or other
third party with respect to any of the transactions contemplated hereby in
order to remain in full force and effect, and consummation of the transactions
contemplated hereby will not give rise to any right to termination,
cancellation or acceleration or loss of any right or benefit. Except as set
forth on Schedule 5.23, none of the Material Documents prohibits the use or
publication by the Company or Purchaser of the name of any other party to such
Material Document, and none of the Material Documents prohibits or restricts
the Company from freely providing services to any other customer or potential
customer of the Company or Purchaser or any Other Founding Company.
-17-
5.24 Government Contracts. Except as set forth on Schedule 5.24, the
Company is not a party to any governmental contracts subject to price
determination or renegotiation.
5.25 Absence of Changes. Since the Initial Disclosure Date, except as
set forth on Schedule 5.25, there has not been:
(i) any material adverse change in the financial condition,
assets, liabilities (contingent or otherwise), income or business of
the Company;
(ii) any damage, destruction or loss (whether or not covered
by insurance) materially adversely affecting the properties or
business of the Company;
(iii) any change in the authorized capital of the Company or
its outstanding securities or any change in its ownership interests or
any grant of any options, warrants, calls, conversion rights or
commitments;
(iv) any declaration or payment of any dividend or
distribution in respect of the capital stock or any direct or indirect
redemption, purchase or other acquisition of any of the capital stock
of the Company (except for dividends which the Company may declare and
pay pursuant to Section 10.4);
(v) any increase in the compensation, bonus, sales
commissions or fee arrangement payable or to become payable by the
Company to any of its officers, directors, Stockholders, employees,
consultants or agents, except for ordinary and customary bonuses and
salary increases for employees in accordance with past practice;
(vi) any work interruptions, labor grievances or claims
filed, or any event or condition of any character, materially
adversely affecting the business of the Company;
(vii) any sale or transfer, or any agreement to sell or
transfer, any material assets, property or rights of the Company to
any person, including, without limitation, the Stockholders and their
Affiliates;
(viii) any cancellation, or agreement to cancel, any
indebtedness or other obligation owing to the Company, including
without limitation any indebtedness or obligation of any Stockholders
or any Affiliate thereof;
(ix) any plan, agreement or arrangement granting any
preferential right to purchase or acquire any interest in any of the
assets, property or rights of the Company or requiring consent of any
party to the transfer and assignment of any such assets, property or
rights;
-18-
(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, right or asset
outside of the ordinary course of the Company's business;
(xi) any waiver of any material rights or claims of the
Company;
(xii) any material breach, amendment or termination of any
contract, agreement, license, permit or other right to which the
Company is a party:
(xiii) any transaction by the Company outside the ordinary
course of its respective businesses;
(xiv) any cancellation or termination of a material contract
with a customer or client prior to the scheduled termination date; or
(xv) any other distribution of property or assets by the
Company.
The Company, notwithstanding the provisions of Section 5.25, may negotiate with
ECON-A-CALL, INC., a corporation located in Hays, Kansas (the "Target"),
concerning the acquisition of Target but shall not reach any agreement with the
Target without obtaining the prior written approval of Purchaser. The Company
shall keep Purchaser fully informed throughout the negotiations.
5.26 Deposit Accounts; Powers of Attorney. The Company has delivered
to Purchaser an accurate list (which is set forth on Schedule 5.26) as of the
date of the Original Agreement setting forth:
(i) the name of each financial institution in which the
Company has accounts or safe deposit boxes;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or
have access thereto.
Schedule 5.26 also sets forth the name of each person, corporation, firm or
other entity holding a general or special power of attorney from the Company
and a description of the terms of such power.
5.27 Relations with Governments. Except for political contributions
made in a lawful manner which, in the aggregate, do not exceed $10,000 per year
for each year in which any Stockholder has been a stockholder of the Company,
the Company has not made, offered or agreed to offer anything of value
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to any governmental official, political party or candidate for government
office nor has it otherwise taken any action which would cause the Company to
be in violation of the Foreign Corrupt Practices Act of 1977, as amended, or
any law of similar effect. If political contributions made by the Company have
exceeded $10,000 per year for each year in which any Stockholder has been a
stockholder of the Company, each contribution in the amount of $5,000 or more
shall be described on Schedule 5.27.
5.28 Disclosure. This Agreement, including the Schedules and Annexes
hereto, together with all other documents and information made available to
Purchaser and its representatives in writing pursuant hereto, present fairly
the business and operations of the Company for the time periods with respect to
which such information was requested. The Company's rights under the documents
delivered pursuant hereto would not be materially adversely affected by, and no
statement made herein would be rendered untrue in any material respect by, any
other document to which the Company is a party, or to which its properties are
subject, or by any other fact or circumstance regarding the Company (which fact
or circumstance was, or should reasonably, after due inquiry, have been known
to the Company) that is not disclosed pursuant hereto or thereto.
5.29 Prohibited Activities. Except as set forth on Schedule 5.30, the
Company has not, between the Initial Disclosure Date and the date of this
Agreement, taken any of the actions set forth in Section 7.3 ("Prohibited
Activities").
5.30 Draft Registration Statement. The text of, and the financial
statements and other financial information contained, in the Draft Registration
Statement, insofar as they were provided by the Company expressly for inclusion
therein but not otherwise, are true, accurate and complete in all material
respects and do not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading.
(B) Representations, Warranties, Covenants and Agreements of the
Stockholders.
Each Stockholder severally represents, warrants, covenants and agrees
(i) that the representations and warranties set forth below are true as of the
date of this Agreement and, subject to Section 7.8, shall be true at the
Closing Date, (ii) that all of the covenants and agreements in this Section
5(B) shall be materially complied with or performed at and as of the Closing
Date and (iii) that none of the representations and warranties set forth in
Section 5(B) shall survive the Closing Date.
5.31 Authority. Each Stockholder has the full legal right, power and
authority to enter into this Agreement. This Agreement has been executed and
delivered by each Stockholder and constitutes a legal, valid and binding
obligation of such Stockholder.
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5.32 Preemptive Rights. Each Stockholder does not have, or hereby
waives, any preemptive or other right to acquire shares of Company Stock or
Purchaser Stock that such Stockholder has or may have had other than rights of
any Stockholder to acquire Purchaser Stock pursuant to (i) this Agreement or
(ii) any option granted by Purchaser.
5.33 Tax Matters. The Stockholders have been advised by their counsel
and are satisfied, as of the date hereof that contains aspects of the
transaction contemplated by this Agreement qualify for the deferral of gain
pursuant to Section 351 of the Code.
5.34 No Plan of Distribution. No Stockholder has any intention or
arrangement to sell or otherwise dispose of any Purchaser Stock to be received
pursuant to this Agreement and the Section 351 Exchange Plan.
5.35 No Retained Rights. No Stockholder will retain any right after the
Closing in any Company Stock to be transferred by him at the Closing but, to
the extent that such right may exist upon the consummation of the Closing, such
right shall be deemed to have been released and extinguished.
6. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF
PURCHASER AND OLD ACG
Purchaser and Old ACG, jointly and severally, represent warrant,
covenant and agree (i) that all of the following representations and warranties
in this Section 6 are true at the date of this Agreement and, subject to
Section 7.8, shall be true at the Closing Date, (ii) that all of the covenants
and agreements in this Section 6 shall be complied with or performed at and as
of the Closing Date, and (iii) that the following representations and
warranties shall not survive the Closing Date, except that the representations
and warranties set forth in Section 6.12 shall survive until such time as the
limitations period has run for all Tax periods ended on or prior to the Closing
Date.
6.1 Due Organization. Purchaser and Old ACG are each corporations duly
organized, validly existing and in good standing under the laws of the state of
Delaware, and are duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities to
carry on their respective business in the places and in the manner as now
conducted, except where the failure to be so authorized or qualified would not
have a Material Adverse Effect. True, complete and correct copies of the
Charter Documents and By-laws, each as amended, of Purchaser and Old ACG (the
"Purchaser Charter Documents") are all attached hereto as Schedule 6.1.
6.2 Authorization. Purchaser and Old ACG each has all requisite
corporate power and authority to enter into the Agreement and to perform its
obligations thereunder. The execution and delivery of the Agreement by
Purchaser and Old ACG and their consummation of the transactions contemplated
thereby have been duly authorized by all necessary corporate action of
Purchaser and Old ACG. The Agreement has been duly executed and delivered by
Purchaser and Old ACG, and is a valid and
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binding obligation of Purchaser and Old ACG, enforceable against each of them
in accordance with its terms.
6.3 Capital Stock. The authorized capital stock of Old ACG is as set
forth on Schedule 6.3. All of the issued and outstanding shares of the capital
stock of Old ACG (i) have been duly authorized and validly issued, (ii) are
fully paid and nonassessable, (iii) are owned of record and beneficially by the
Persons set forth on Schedule 6.3, and (iv) were offered, issued, sold and
delivered by Old ACG in compliance with all applicable state and Federal laws
concerning the offer, issuance, sale and delivery of securities. Further, none
of such shares was issued in violation of the preemptive rights of any past or
present stockholder of Old ACG. Subject to the consummation of the reverse
stock split referred to in the eight recital of this Agreement and the
consummation of Purchaser's acquisition of Old ACG in the reverse triangular
merger, the capitalization of Purchaser will be identical to the capitalization
of Old ACG immediately prior to the consummation of the IPO.
6.4 Transactions in Capital Stock, Organization Accounting. Except as
set forth on Schedule 6.3 or contemplated to be issued in connection with the
acquisition of the Founding Companies, (i) no option, warrant, call, conversion
right or commitment of any kind exists which obligates Old ACG to issue any of
its authorized but unissued capital stock and (ii) Old ACG has no obligation
(contingent or otherwise) to purchase, redeem or otherwise acquire any of its
equity securities or any interests therein or to pay any dividend or make any
distribution in respect thereof. Schedule 6.3 also includes complete and
accurate copies of all stock option or stock purchase plans, including a list,
accurate as of the date hereof, of all outstanding options, warrants or other
rights to acquire shares of capital stock of Old ACG.
6.5 Subsidiaries. Neither Purchaser nor Old ACG has any Subsidiaries,
except for each of the companies identified on Schedule 6.5. Except as set
forth in the preceding sentence, neither Purchaser nor Old ACG presently owns,
of record or beneficially, or controls, directly or indirectly, any capital
stock, securities convertible into capital stock or any other equity interest
in any corporation, association or business entity, and neither Purchaser, nor
Old ACG, directly or indirectly, is a participant in any joint venture,
partnership or other non-corporation entity.
6.6 Financial Statements. Attached hereto as Schedule 6.6 are copies of
the following financial statements of Old ACG, which reflect the results of its
operations from inception in June 1996 (the "Old ACG Financial Statements"):
Old ACG's audited Balance Sheet as of December 31, 1996 and its unaudited
Balance Sheet as of June 30, 1997, and audited Statements of Operations,
Stockholder's Equity and Cash Flows and related notes thereto for the period
from June 10, 1996 through December 31, 1996 and unaudited Statements of
Operations, Stockholder's Equity and Cash Flows for the six months ended June
30, 1997. The audited Old ACG Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis throughout the period indicated (except as noted thereon or on
Schedule 6.6). The unaudited Old ACG Financial
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Statements were prepared in accordance with the books and records of Old ACG in
accordance with accounting principles consistently applied. Old ACG's Balance
Sheets present fairly the financial position of Old ACG as of the dates
indicated thereon, and Old ACG's Statements of Operations, Stockholder's Equity
and Cash Flows included in the Old ACG Financial Statements present fairly the
results of operations for the periods indicated thereon in accordance with
generally accepted accounting principles. Old ACG's Financial Statements at and
for the period ended December 31, 1996 have been examined by KPMG Peat Marwick
LLP, independent public accountants.
6.7 Liabilities and Obligations. Except as set forth on Schedule 6.7,
neither Purchaser nor Old ACG has any material liabilities, contingent or
otherwise, except as set forth in or contemplated by this Agreement or the
Draft Registration Statement and except for fees incurred in connection with
the transactions contemplated hereby and thereby.
6.8 Conformity with Law; Litigation. Except to the extent set forth on
Schedule 6.8, or in the Draft Registration Statement, neither Purchaser nor Old
ACG is in violation of any law or regulation or any order of any court or
Federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality having jurisdiction over it which would have
a Material Adverse Effect; and except to the extent set forth on Schedule 6.8,
or in the Draft Registration Statement, there are no material claims, actions,
suits or proceedings, pending or, to the Knowledge of either Purchaser or Old
ACG, threatened, against or affecting either Purchaser or Old ACG, at law or in
equity, or before or by any Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over it and no notice of any claim, action, suit or proceeding,
whether pending or threatened, has been received. Each of Purchaser and Old ACG
has conducted and is conducting is businesses in substantial compliance with
the requirements, standards, criteria and conditions set forth in applicable
Federal, state and local statutes, ordinances, permits, licenses, orders,
approvals, variances, rules and regulations and are not in violation of any of
the foregoing which might have a Material Adverse Effect.
6.9 No Violations. Neither Purchaser nor Old ACG is in violation of
any Purchaser Charter Document. None of Purchaser, Old ACG, or, to the
knowledge of Purchaser and Old ACG, any other party thereto, is in default
under any lease, instrument, agreement, license, or permit to which Purchaser
or Old ACG is a party, or by which Purchaser or Old ACG, or any of their
respective properties, are bound (collectively, the "Purchaser Documents"); and
(i) the rights and benefits of Purchaser and Old ACG under the Purchaser
Documents will not be adversely affected by the transactions contemplated
hereby and (ii) the execution of this Agreement and the performance of the
obligations hereunder and the consummation of the transactions contemplated
hereby will not result in any material violation or breach or constitute a
default under, any of the terms or provisions of the Purchaser Documents or the
Purchaser Charter Documents. Except as set forth on Schedule 6.9, none of the
Purchaser Documents requires notice to, or the consent or approval of, any
governmental agency or other third party with respect to any of the
transactions contemplated hereby in order to remain in full force and
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effect, and consummation of the transactions contemplated hereby will not give
rise to any right to termination, cancellation or acceleration or loss of any
right or benefit.
6.10 Purchaser Securities. The shares of Purchaser Stock deliverable to
the Stockholders pursuant to this Agreement will have been duly authorized
prior to the Closing, and upon consummation of the transactions contemplated by
this Agreement, will be validly issued, fully paid and nonassessable.
6.11 Business; Real Property; Material Agreement Old ACG was formed in
June 1996, and Purchaser was formed in September 1997. Neither Purchaser nor
Old ACG has conducted any material business since the date of its inception,
except raising capital and in connection with this Agreement and similar
agreements with the Founding Companies. Except as disclosed on Schedule 6.12,
neither Purchaser nor Old ACG owns or has at any time owned any real property
or any material personal property or is a party to any other material
agreement.
6.12 Tax Matters.
(i) Old ACG has filed all Tax Returns that it was required to
file. All such Tax Returns filed by Old ACG were correct and complete
in all material respects. All Taxes owed by Old ACG (whether or not
shown on any Tax Return) have been paid. Old ACG is not currently the
beneficiary of any extension of time within which to file any Tax
Return. Since Old ACG's formation in June 1996 , no claim with respect
to Old ACG has been made by an authority in a jurisdiction where Old
ACG does not file Tax Returns that it is or may be subject to taxation
by that jurisdiction. There is no Lien affecting any of Old ACG's
assets that arose in connection with any failure or alleged failure to
pay any Tax.
(ii) Old ACG has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder or other
party.
(iii) Old ACG does not expect any authority to assess any material
amount of additional Taxes against it for any period for which Tax
Returns have been filed. There is no material dispute or claim
concerning any Tax liability of Old ACG either claimed or raised by
any authority in writing or as to which Old ACG has knowledge based
upon direct inquiry by any agent of such authority.
6.13Draft Registration Statement. The text of, and the financial
statements and other financial information contained in, the Draft Registration
Statement, insofar as they relate to Purchaser or Old ACG but not otherwise,
are true, accurate and complete in all material respects and do not include an
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading.
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7. OTHER COVENANTS PRIOR TO CLOSING
7.1 Access and Cooperation; Due Diligence; Audits.
(i) Between the date of this Agreement and the Closing Date, the
Company will afford to the officers and authorized representatives of
Purchaser access to all of such Company's sites, properties, books and
records and will furnish Purchaser with such additional financial and
operating data and other information as to the business and properties
of the Company as Purchaser may from time to time reasonably request.
The Company will cooperate with Purchaser, its representatives,
auditors and counsel in the preparation of and any documents or other
material that may be required in connection with any documents or
materials required by this Agreement. Purchaser, Old ACG, the
Stockholders and the Company will treat all information obtained in
connection with the negotiation and performance of this Agreement as
confidential in accordance with the provisions of Section 13.
(ii) Between the date of this Agreement and the Closing,
Purchaser will afford to the officers and authorized representatives
of the Company access to all sites, properties, books and records of
Purchaser, Old ACG and the other Founding Companies and will furnish
the Company with such additional financial and operating data and
other information as to the business and properties of Purchaser, Old
ACG and the Other Founding Companies as the Company may from time to
time reasonably request. Purchaser will cooperate with the Company,
its representatives, auditors and counsel in the preparation of any
documents or other material which may be required in connection with
any documents or materials required by this Agreement. The Company
will cause all information obtained in connection with the negotiation
and performance of this Agreement to be treated as confidential in
accordance with the provisions of Section 13.
(iii) The Company agrees to permit an independent accounting firm
selected by Purchaser to audit and render a report on its Company
Financial Statements and its comparable financial statements at and
for the year ending December 31, 1996, provided that all the costs and
expenses of such audits are paid by Purchaser.
7.2 Conduct of Business Pending Closing. Unless otherwise approved in
writing by Purchaser, between the date of this Agreement and the Closing Date,
the Stockholders will cause the Company to:
(i) carry on its respective businesses in substantially the
same manner as it has heretofore and not introduce any material new
method of management, operation or accounting;
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(ii) maintain its respective properties and facilities, including
those held under lease, in as good working order and condition as at
present, ordinary wear and tear excepted;
(iii) perform in all material respects all of its respective
obligations under agreements relating to or affecting its respective
assets, properties or rights;
(iv) keep in full force and effect present insurance policies
or other comparable insurance coverage;
(v) use its reasonable best efforts to maintain and preserve
its business organization intact, retain its respective present key
employees and maintain its respective relationships with suppliers,
customers and others having business relations with it;
(vi) maintain compliance with all material permits, laws,
rules and regulations, consent orders, and all other orders of
applicable courts, regulatory agencies and similar governmental
authorities;
(vii) maintain present debt and lease instruments and not
enter into new or amended debt or lease instruments; and
(viii) maintain or reduce present salaries and commission
levels for all officers, directors, employees and agents except for
ordinary and customary bonus and salary increases for employees in
accordance with past practices.
7.3 Prohibited Activities. Between the date of this Agreement and the
Closing Date, the Stockholders will not, without prior written consent of
Purchaser, permit the Company to:
(i) make any change in its Charter Documents or By-laws;
(ii) issue any securities, options, warrants, calls,
conversion rights or commitments relating to its securities of any
kind other than in connection with the exercise of options or warrants
listed in Schedule 5.4;
(iii) declare or pay any dividend, or make any distribution
in respect of Company Stock whether now or hereafter outstanding, or
purchase, redeem or otherwise acquire or retire for value any shares
of Company Stock (except the declaration and payment of dividends
pursuant to Section 10.4);
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(iv) enter into any contract or commitment or incur or agree
to incur any liability or make any capital expenditures, except if it
is in the normal course of business (consistent with past practice) or
involves an amount not in excess of $10,000;
(v) create, assume or permit to exist any Lien upon any asset
or property whether now owned or hereafter acquired, except (x) with
respect to purchase money Liens incurred in connection with the
acquisition of equipment with an aggregate cost not in excess of
$10,000 necessary or desirable for the conduct of its businesses, (y)
(1) Liens for Taxes either not yet due or being contested in good
faith and by appropriate proceedings (and for which contested Taxes
adequate reserves have been established and are being maintained) or
(2) materialmen's, mechanics', workers', repairmen's, employees' or
other like Liens arising in the ordinary course of business, or (3)
Liens set forth on Schedule 5.10 or 5.15;
(vi) sell, assign, lease or otherwise transfer or dispose of
any property or equipment except in the normal course of business;
(vii) negotiate for the acquisition of any business or the
start-up of any new business;
(viii) merge or consolidate or agree to merge or consolidate
with or into any other corporation;
(ix) waive any material right or claim; provided that it may
negotiate and adjust bills in the course of good faith disputes with
customers in a manner consistent with past practice, provided,
further, that such adjustments shall not be deemed to be included in
Schedule 5.11 unless specifically listed thereon;
(x) commit a material breach or amend or terminate any
material agreement, permit, license or other right; or
(xi) enter into any other transaction outside the ordinary
course of its business or prohibited hereunder.
7.4 Exclusivity. Neither any Stockholder, nor the Company, nor any
agent, officer, director, trustee or any representative of any of the foregoing
will, during the period commencing on the date of this Agreement and ending
with, the earlier to occur of the Closing Date or the termination of this
Agreement in accordance with its terms, directly/or indirectly:
(i) solicit or initiate the submission of proposals or offers
from any person for,
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(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person other than
Purchaser or its authorized agents relating to
any acquisition or purchase of all or a material amount of the assets of, or
any equity interest in, the Company or merger, consolidation or business
combination of the Company.
7.5 Notice to Bargaining Agents. Prior to the Closing Date, the Company
shall satisfy any requirement for notice of the transactions contemplated by
this Agreement under applicable collective bargaining agreements, and shall
provide Purchaser with proof that any required notice has been sent.
7.6 Agreements. The Stockholders and the Company shall terminate (i)
any Stockholders agreements, voting agreements, voting trusts, options,
warrants and employment agreements between the Company and any employee listed
on Schedule 5.18 and (ii) any existing agreement between the Company and any
Stockholder, on or prior to the Closing Date. Copies of such termination
agreements are listed on Schedule 7.6 and copies thereof are attached thereto.
7.7 Notification of Certain Matters. The Stockholders and the Company
shall give prompt notice to Purchaser of (i) the occurrence or non-occurrence
of any event the occurrence or non-occurrence of which would likely cause any
representation or warranty of the Company or the Stockholders contained herein
to be untrue or inaccurate in any material respect at or prior to the Closing
Date and (ii) any material failure of any Stockholder or the Company to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by such person hereunder as of such date. Purchaser and Old ACG shall
give prompt notice to the Company of (i) the occurrence or non-occurrence of
any event the occurrence or non-occurrence of which would likely cause any
representation or warranty of Purchaser or Old ACG contained herein to be
untrue or inaccurate in any material respect at or prior to the Closing Date
and (ii) any material failure of Purchaser or Old ACG to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
hereunder as of such date. The delivery of any notice pursuant to this Section
7.7 shall not be deemed to (i) modify the representations or warranties
hereunder of the party delivering such notice, which modification may only be
made pursuant to Section 7.8, (ii) modify the conditions set forth in Sections
8 and 9, or (iii) limit or otherwise affect the remedies available hereunder to
the party receiving such notice.
7.8 Amendment of Schedules. Each party hereto agrees that, with respect
to the representations and warranties of such party contained in this
Agreement, such party shall have the continuing obligation until the Closing to
supplement or amend promptly the Schedules with respect to any matter hereafter
arising or discovered which, if existing or known at the date of this
Agreement, would have been required to be set forth or described in the
Schedules. Notwithstanding the foregoing sentence, no amendment or supplement
to a Schedule prepared by the Company or Purchaser that constitutes or reflects
an
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event or occurrence that would have a Material Adverse Effect may be made
unless Purchaser or the Company, as the case may be, consents to such amendment
or supplement. For all purposes of this Agreement, including without limitation
for purposes of determining whether the conditions set forth in Sections 8.1
and 9.1 have been fulfilled, the Schedules shall be deemed to be the Schedules
as amended or supplemented pursuant to this Section 7.8. No party to this
Agreement shall be liable to any other party if this Agreement shall be
terminated pursuant to the provisions of Section 11.1(v). Neither the entry by
Purchaser into any other agreement, such as this Agreement, after the date
hereof for the acquisition of one or more companies involved in or assets
associated with the telephone business and related activities nor the
performance by Purchaser of its obligations thereunder shall be deemed to
require the amendment to a supplementation of any Schedule hereto.
7.9 Further Assurance. The parties hereto agree to execute and deliver,
or cause to be executed and delivered, such further instruments or documents or
take such other action as may be reasonably necessary or convenient to carry
out the transactions contemplated by this Agreement.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS
The obligations of the Stockholders with respect to actions to be
taken on the Closing Date are subject to the satisfaction or waiver on or prior
to the Closing Date of all of the following conditions. All conditions not
satisfied shall be deemed to have been waived, except that no such waiver shall
be deemed to affect the survival of the representations and warranties of
Purchaser and Old ACG contained in Section 6:
8.1 Representations and Warranties Performance of Obligations. All
representations and warranties of Purchaser and Old ACG contained in this
Agreement shall be true and correct in all material respects as of the Closing
Date with the same effect as though such representations and warranties had
been made on and as of such date; all of the terms, covenants and conditions of
this Agreement to be complied with or performed by Purchaser and Old ACG on or
before the Closing Date shall have been duly complied with or performed in all
material respects; and a certificate to the foregoing effect dated the Closing
Date, and signed by the President or any Vice President of Purchaser and of Old
ACG shall have been delivered to the Stockholders.
8.2 Satisfaction. All actions, proceedings, instruments and documents
required to carry out this Agreement or incidental hereto and all other related
legal matters shall be reasonably satisfactory to the Company and its counsel.
8.3 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to
restrain or prohibit the transactions contemplated herein and no governmental
agency or body shall have taken any other action or made any request of the
Company
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as a result of which the management of the Company deems it inadvisable to
proceed with the transactions hereunder.
8.4 Opinion of Counsel. The Stockholder shall have received an opinion
from counsel for Purchaser and Old ACG, dated the Closing Date, in the form and
substance reasonably acceptable to the Stockholders, relating to, insofar as
Purchaser and Old ACG, are concerned, (a) the authorization, execution,
delivery, performance and enforceability of the Agreement, (b) the receipt of
all required consents and approvals and (c) such other legal matters as the
Stockholder may reasonably request.
8.5 Consents and Approvals. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transaction contemplated herein shall have been obtained and made.
8.6 Good Standing Certificates. Purchaser and Old ACG each shall have
delivered to the Stockholder a certificate, dated as of a date no later than
ten days prior to the Closing Date, duly issued by the Delaware Secretary of
State and, unless waived by the Stockholder, in each state in which Purchaser
or Old ACG is authorized to do business, showing that each of Purchaser and Old
ACG is in good standing and authorized to do business and that all state
franchise and/or income tax returns and taxes for Purchaser and Old ACG,
respectively, for all periods prior to the Closing Date have been filed and
paid to the extent required.
8.7 No Material Adverse Change. No event or circumstance shall have
occurred with respect to Purchaser or Old ACG that would constitute a Material
Adverse Effect.
8.8 Secretary's Certificates. The Stockholders shall have received a
certificate or certificates, dated the Closing Date and signed by the Secretary
of Purchaser and of Old ACG, certifying the completeness and accuracy of the
attached copies of Purchaser's and Old ACG's respective Charter Documents
(including amendments thereto), By-Laws (including amendments thereto), and
resolutions of the boards of directors of Purchaser and Old ACG approving
Purchaser's and Old ACG's entering into this Agreement and the consummation of
the transactions contemplated hereby.
8.9 Closing of IPO. The sale by Purchaser of shares of Purchaser Stock
in the IPO shall have closed prior to or substantially contemporaneously with
the consummation of the transactions contemplated herein.
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9. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser with respect to actions to be taken on
the Closing Date are subject to the satisfaction or waiver on or prior to the
Closing Date of all of the following conditions. All conditions not satisfied
shall be deemed to have been waived, except that no such waiver shall be deemed
to affect the survival of the representations and warranties of the Company and
the Stockholders contained in Section 5.
9.1 Representations and Warranties; Performance of Obligations. All the
representations and warranties of the Stockholders and the Company contained in
this Agreement shall be true and correct in all material respects as of the
Closing Date with the same effect as though such representations and warranties
had been made on and as of such date; all of the terms, covenants and
conditions of this Agreement to be complied with or performed by the
Stockholders and the Company on or before the Closing Date shall have been duly
performed or complied with in all material respects; and the Stockholders shall
have delivered to Purchaser a certificate dated the Closing Date and signed by
them to such effect.
9.2 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to
restrain or prohibit the transactions contemplated herein and no governmental
agency or body shall have taken any other action or made any request of
Purchaser as a result of which the management of Purchaser deems it inadvisable
to proceed with the transactions hereunder.
9.3 Secretary's Certificate. Purchaser shall have received a
certificate, dated the Closing Date and signed by the Secretary of the Company,
certifying the completeness and accuracy of the attached copies of the
Company's Charter Documents (including amendments thereto), By-Laws (including
amendments thereto), and resolutions of the board of directors approving the
Company's entering into this Agreement and the consummation of the transactions
contemplated hereby.
9.4 No Material Adverse Effect. No event or circumstance shall have
occurred with respect to the Company which would constitute a Material Adverse
Effect, and the Company shall not have suffered any material loss or damages to
any of its properties or assets, whether or not covered by insurance, which
change, loss or damage materially affects or impairs the ability of the Company
to conduct its business.
9.5 Stockholders' Release. The Stockholders shall have delivered to
Purchaser an instrument dated the Closing Date releasing the Company from (i)
any and all claims of the Stockholders against the Company and Purchaser and
(ii) obligations of the Company and Purchaser to the Stockholders, except for
(x) items specifically identified on Schedules 5.10 and 5.15 as being claims of
or obligations to the
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Stockholders, (y) continuing obligations to Xxxx X. Xxxxx relating to his
employment by the Company and (z) obligations arising under this Agreement or
the transactions contemplated hereby.
9.6 Satisfaction. All actions, proceedings, instruments and documents
required to carry out the transactions contemplated by this Agreement or
incidental hereto and all other related legal matters shall have been
reasonably satisfactory to Purchaser and its counsel.
9.7 Termination of Related Party Agreements. Except as set forth on
Schedule 9.7, all existing agreements between the Company and the Stockholders
shall have been canceled effective prior to or as of the Closing Date.
9.8 Opinion of Counsel. Purchaser shall have received an opinion from
counsel to the Company and the Stockholders, dated the Closing Date, in the
form and substance reasonably acceptable to the Purchaser, relating to, insofar
as the Company and the Stockholders are concerned, (a) the authorization,
execution, delivery, performance and enforceability of the Agreement, (b) the
receipt of all required consents and approvals and (c) such other legal matters
as the Purchaser may reasonably request.
9.9 Consents and Approvals. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; and all
consents and approvals of third parties listed on Schedule 5.23 shall have been
obtained.
9.10 Good Standing Certificates. The Company shall have delivered to
Purchaser a certificate, dated as of a date no earlier than ten days prior to
the Closing Date, duly issued by the appropriate governmental authority in the
Company's state of incorporation and, unless waived by Purchaser, in each state
in which the Company is authorized to do business, showing the Company is in
good standing and authorized to do business and that all state franchise and/or
income Tax returns and Taxes for the Company for all periods prior to the
Closing have been filed and paid.
9.11 Agreement Regarding Prepaid Advertising. An irrevocable agreement
in the form attached hereto as Annex IV between FPI and the Company, pursuant
to which FPI and its Affiliates agree to provide Company, at no additional cost
to Company, the exclusive right to include the copy for eight pages in the
front of each existing Directory published by FPI or one of its Affiliates at
any time after the date of this Amendment and on or before the fifth
anniversary of the Closing Date shall be in full force and effect. For purposes
of the preceding sentence, an existing Directory is one that has been published
by FPI or one of its Affiliates prior to the date of this Amendment. The copy
to be provided by Company and published by FPI or one of its Affiliates
pursuant to the foregoing agreement will be used to familiarize prospective
customers of Company with the various services offered by Company and will
provide instructions on how to order such services.
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9.12 FIRPTA Certificate Each Stockholder shall have delivered to
Purchaser a certificate to the effect that he or she is not a foreign person
under Section 1.1445-2(b) of the Treasury regulations.
9.13 Agreement Regarding Free Advertising Space. An irrevocable
agreement in the form attached hereto as Annex IV between FPI and Company,
pursuant to which FPI and its Affiliates agree to permit Company to include, at
no cost to Company, (x) two half pages of advertising copy in each Directory
and (y) Company designated Fillers for up to approximately 10% of the total
Fillers in each Directory, subject in each case to FPI's approval of the
contents of such advertising copy and Fillers, such approval not to be
unreasonably withheld.
9.14 Noncompetition Agreement. The key employees listed on Schedule
5.18 who are not Stockholders shall have signed noncompete and non-solicitation
agreements incorporating the terms set forth in Section 13 of this Agreement.
9.15 Agreement Regarding Office Space. An irrevocable agreement in the
form attached hereto as Annex III among FPI, FSI and the Company, pursuant to
which FPI and FSI each agrees to permit the Purchaser and Company, to use the
office space, support facilities and personnel in the offices of FPI and FSI at
000 X. Xxxx, Xxxxx 0000, Xxxxxxx, Xxxxxx 00000, shall be in full force and
effect. The foregoing agreement shall provide that (i) irrespective of past
practices, Purchaser and Company will pay their proportionate shares of the
expenses actually incurred by FPI, FSI and their Affiliates in respect of such
office space, support facilities and personnel; (ii) FPI and FSI shall submit
an itemized monthly invoice to Purchaser and Company covering their
proportionate share of such expenses, and Purchaser and Company shall pay
promptly all amounts properly due and owing to FPI and FSI; and (iii) Purchaser
and Company shall submit an itemized monthly invoice to FPI and FSI for any
services rendered by them, and FPI and FSI shall pay promptly all amounts
properly due and owing to Purchaser and Company.
9.16 Agreement Regarding Internet Services. An irrevocable agreement in
the form attached hereto as Annex V between FSI and Company, pursuant to which
FSI and its Affiliates agree to permit Company and its Affiliates to resell
FSI's dial-up Internet services at a cost equal to 75% of the advertised retail
rate that FSI regularly quotes prospective customers, shall be in full force
and effect. The foregoing agreement shall provide that (i) FSI will notify
Company promptly of any change in its advertised retail rate that occurs after
the Closing Date and (ii) FSI and Company each agree to invoice and pay
promptly, and in no event less frequently than monthly, any amounts that may be
payable to the other pursuant to such agreement.
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10. COVENANTS OF PURCHASER WITH THE STOCKHOLDERS AFTER CLOSING
10.1 Release From Guarantees. Purchaser shall use its best efforts to
have the Stockholders released from any and all guarantees on any indebtedness
that they personally guaranteed and from any and all pledges of assets that
they pledged to secure such indebtedness for the benefit of the Company, with
all such guarantees on indebtedness being assumed by Purchaser.
10.2 Preparation and Filing of Tax Returns.
(i) The Stockholders shall file or cause to be filed all
separate Federal income Tax Returns (and any state and local Tax
Returns filed on the basis similar to that of S corporations under
Federal income Tax rules) of the Company for all taxable periods that
end on or before the Closing Date. Each Stockholder shall pay or cause
to be paid all Tax liabilities (in excess of all amounts already paid
with respect thereto or properly accrued or reserved with respect
thereto on the Company Financial Statements) shown by such Returns to
be due.
(ii) Purchaser shall file or cause to be filed all separate
Returns of, or that include, the Company for all taxable periods
ending after the Closing Date.
(iii) Each party hereto shall, and shall cause its
subsidiaries and affiliates to, provide to each of the other parties
hereto such cooperation and information as any of them reasonably may
request in filing any Return, amended Return or claim for refund,
determining a liability for Taxes or a right to refund of Taxes or in
conducting any audit or other proceeding in respect of Taxes. Such
cooperation and information shall include providing copies of all
relevant portions of relevant Returns, together with relevant
accompanying schedules and work papers, relevant documents relating to
rulings or other determinations by Taxing Authorities and relevant
records concerning the ownership and Tax basis of property, which such
party may possess. Each party shall make its employees reasonably
available on a mutually convenient basis at its cost to provide
explanation of any documents or information so provided. Subject to
the preceding sentence, each party required to file Returns pursuant
to this Agreement shall bear all costs of filing such Returns.
10.3 Preservation of Employee Benefit Plans. Following the Closing
Date, Purchaser shall not terminate any health insurance, life insurance or
401(k) plan in effect at the Company until such time as Purchaser is able to
replace such plan with a plan that is applicable to Purchaser and all of its
then existing subsidiaries; provided that Purchaser shall have no obligation to
provide replacement plans that have the same terms and provisions as the
existing plans; provided, further, that any new health insurance plan shall
provide for coverage for preexisting conditions.
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10.4 Dividends. The Company may, after the Balance Sheet Date and
before the Closing Date, pay to each Stockholder the amount equal to the sum of
his or her estimated Federal, state and local income Taxes on the Company
Subpart S earnings taxable to such Stockholder for the period after December
31, 1996 and before the Closing Date.
10.5 Compliance with the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976 (the "Xxxx-Xxxxx Act"). All parties to this Agreement hereby recognize
that compliance with the Xxxx-Xxxxx Act may be required in connection with the
transactions contemplated herein. If it is determined by the parties to this
Agreement that compliance with the Xxxx-Xxxxx Act is required, then: (i) each
of the parties hereto agrees to cooperate and use its best efforts to comply
with the Xxxx-Xxxxx Act, (ii) such compliance by the Stockholders and the
Company shall be deemed a condition precedent in addition to the conditions
precedent set forth in Section 9 of this Agreement, and such compliance by
Purchaser and Old ACG shall be deemed a condition precedent in addition to the
conditions precedent set forth in Section 8 of this Agreement, and (iii) the
parties agree to cooperate and use their best efforts to cause all filings
required under the Xxxx-Xxxxx Act to be made.
11. TERMINATION OF AGREEMENT
11.1 Termination. This Agreement may be terminated at any time prior
to the Closing Date solely:
(i) by mutual consent of Stockholders and the board of directors of
Purchaser;
(ii) by the Stockholders, on the one hand, or by Purchaser (acting
through its board of directors), on the other hand, if the transactions
contemplated by the Agreement to take place at the Closing shall not have been
consummated by January 31, 1998, unless the failure of such transactions to be
consummated is due to the willful failure of the party seeking to terminate
this Agreement to perform any of its obligations under the Agreement to the
extent required to be performed by its prior to or on the Closing Date;
(iii) by Stockholders, on the one hand, or by Purchaser, on the other
hand, if, prior to October 16, 1997, a registration statement on Form S-1
relating to the IPO has not been filed by Purchaser with the SEC pursuant to
the 1933 Act;
(iv) by the Stockholders, on the one hand, or by Purchaser, on the
other hand, if a material breach or default shall be made by the other party in
the observance or in the due and timely performance of any of the covenants,
agreements or conditions contained herein, and the curing of such default shall
not have been made on or before the Closing Date; or
(v) by the Stockholders, on the one hand, or by Purchaser, on the other
hand, if either such Party declines to consent to an amendment or supplement to
a Schedule proposed by the other party or parties
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pursuant to Section 7.8 because such proposed amendment constitutes or reflects
an event or occurrence that would have a Material Adverse Effect on the party
or parties proposing the same.
11.2 Liabilities in Event of Termination. Except as provided in Section
7.8, the termination of this Agreement will in no way limit any obligation or
liability of any party based on or arising from a breach or default by such
party with respect to any of its representations, warranties, covenants or
agreements contained in this Agreement including, but not limited to, legal and
audit costs and out of pocket expenses.
12. NONCOMPETITION
12.1 Prohibited Activities. Each of the Stockholders will not, for a
period of two years following the Closing Date (or such earlier period as
provided in Annex IV), for any reason whatsoever, directly or indirectly, for
himself or on behalf of or in conjunction with any other person, Company,
partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, major shareholder, owner,
partner, joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales representative, in
the sale or marketing of local and long distance and natural gas or electrical
goods and services ("Proscribed Business") within the states of Arkansas,
Kansas, Missouri, Oklahoma and Texas (the "Territory");
(ii) call upon any person within the Territory who is employee of
Purchaser (including the subsidiaries thereof) in a sales representative or
managerial capacity for the purpose or with the intent of enticing such
employee away from or out of the employ of Purchaser (including the
subsidiaries thereof); provided that each Stockholder shall be permitted to
call upon and hire any member of his immediate family;
(iii) call upon any person or entity which is or which has been,
within one year prior to the Closing Date, a customer of Purchaser (including
the subsidiaries thereof), of the Company within the Territory for the purpose
of soliciting or selling local or long distance services in direct competition
with Purchaser within the Territory;
(iv) call upon any prospective acquisition candidate, on any
Stockholder's own behalf or on behalf of any competitor of Purchaser in the
long-distance telephone business, which candidate, to the actual knowledge of
such Stockholder after due inquiry, was called upon by Purchaser (including the
subsidiaries thereof) or for which, to the actual knowledge of such Stockholder
after due inquiry, Purchaser (or any subsidiary thereof) made an acquisition
analysis, for the purpose of acquiring such entity; or
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(v) disclose existing or prospective customers of the Company to any
person, firm, partnership, corporation or business for any reason or purpose
whatsoever except to the extent that the Company has in the past disclosed such
information to the public for valid business reasons.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit any Stockholder from acquiring as an investment not more than one
percent of the capital stock of a competing business whose stock is traded on a
national securities exchange.
12.2 Damages. Because of the difficulty of measuring economic losses to
Purchaser as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to Purchaser for which it
would have no other adequate remedy, each Stockholder agrees that the foregoing
covenant may be enforced by Purchaser in the event of breach by such
Stockholder, by injunction and restraining order.
12.3 Reasonable Restraint. It is agreed by the parties hereto that the
foregoing covenants in this Section 12 impose a reasonable restraint on the
Stockholders in light of the activities and business of Purchaser (including
the subsidiaries thereof) on the date of the execution of this Agreement and
the reasonably foreseeable plans of Purchaser.
12.4 Severability, Reformation. The covenants in this Section 12 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention
of the parties that such restrictions be enforced to the fullest extent the
court deems reasonable, and the Agreement shall thereupon be automatically
reformed.
12.5 Independent Covenant. All of the covenants in this Section 12
shall be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any Stockholder
against Purchaser (including the subsidiaries thereof), whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement
by Purchaser of such covenants. It is specifically agreed that the period of
three years stated at the beginning of this Section 12, during which the
agreements and covenants of each Stockholder made in this Section 12 shall be
effective, shall be computed by excluding from such computation any time during
which such Stockholder is in violation of any provision of this Section 12. The
covenants contained in Section 12 shall not be affected by any breach of any
other provision hereof by any party hereto and shall become nugatory if the
transactions contemplated by this Agreement are not consummated.
12.6 Materiality. The Company and the Stockholders hereby agree that
the covenants set forth in this Section 12 are a material and substantial part
of the transactions contemplated by this Agreement.
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13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
13.1 Stockholders. The Stockholders recognize and acknowledge that
they had in the past, currently have, and in the future may have, access to
certain confidential information of the Company and/or Purchaser and Old ACG,
such as operational policies, and pricing and cost policies that are valuable,
special and unique assets of the Company and/or Purchaser and Old ACG. The
Stockholders agree that they will not disclose such confidential information to
any person, firm, corporation, association or other entity for any purpose or
reason whatsoever, except (i) to authorized representatives of Purchaser; (ii)
following the Closing, such information may be disclosed by the Stockholders as
is required in the course of performing their duties for Purchaser or the
Company; and (iii) to counsel and other advisers; provided that such advisers
(other than counsel) agree to the confidentiality provisions of this Section
13.1, unless (x) such information becomes known to the public generally through
no fault of the Stockholders, (y) disclosure is required by law or the order of
any governmental authority under color of law; provided, that prior to
disclosing any information pursuant to this clause (y), the Stockholders shall
give prior written notice thereof to Purchaser and provide Purchaser with the
opportunity to contest such disclosure, or (z) the disclosing party reasonably
believes that such disclosure is required in connection with the defense of a
lawsuit against the disclosing party. In the event of a breach or threatened
breach by any of the Stockholders of the provisions of this Section 13.1,
Purchaser shall be entitled to an injunction restraining such Stockholders from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting Purchaser from pursuing any other available
remedy for such breach or threatened breach, including the recovery of damages.
In the event the transactions contemplated by this Agreement are not
consummated, the abovementioned restrictions on the Stockholder's ability to
disseminate confidential information with respect to the Company shall become
nugatory.
13.2 Purchaser. Purchaser and Old ACG recognize and acknowledge that
they had in the past and currently have access to certain confidential
information of the Company, such as operational policies, and pricing and cost
policies that are valuable, special and unique assets of the Company. Purchaser
and Old ACG agree that, prior to the Closing, or if the transactions
contemplated by this Agreement are not consummated, they will not disclose such
confidential information to any person, firm, corporation, association or other
entity for any purpose or reason whatsoever, except (i) to authorized
representatives of the Company; and (ii) to counsel and other advisers;
provided that such advisers (other than counsel) agree to the confidentiality
provisions of this Section 13.2, unless (x) such information becomes known to
the public generally through no fault of Purchaser or Old ACG, (y) disclosure
is required by law or the order of any governmental authority under color of
law; provided, that prior to disclosing any information pursuant to this clause
(y), Purchaser and Old ACG shall, if possible, give prior written notice
thereof to the Company and the Stockholders and provide the Company and the
Stockholders with the opportunity to contest such disclosure, or (z) the
disclosing party reasonably believes that such disclosure is required in
connection with the defense of a lawsuit
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against the disclosing party. In the event of a breach or threatened breach by
Purchaser or Old ACG of the provisions of this Section 13.2, the Company and
the Stockholders shall be entitled to an injunction restraining Purchaser and
Old ACG from disclosing, in whole or in part, such confidential information.
Nothing herein shall be construed as prohibiting the Company and the
Stockholders from pursuing any other available remedy for such breach or
threatened breach, including the recovery of damages.
13.3 Damages. Because of the difficulty of measuring economic losses as
a result of the breach of the foregoing covenants in Section 13.1 and 13.2 and
because of the immediate and irreparable damage that would be caused for which
no other adequate remedy exists, the parties hereto agree that, in the event of
a breach by any of them of the foregoing covenants, the covenant may be
enforced against the other parties by injunction and restraining order.
13.4 Survival. The obligations of the parties under this Article 13
shall survive the termination of this Agreement for a period of three years
from the Closing Date.
14. TRANSFER RESTRICTIONS
14.1 Transfer Restrictions. Except for transfers to immediate family
members who agree to be bound by the restrictions set forth in this Section
14.1 (or trusts for the benefit of the Stockholders or family members, the
trustees of which so agree), for a period of one year from the Closing, except
pursuant to Xxxxxxx 00, xxxx of the Stockholders shall sell, assign, exchange,
transfer, encumber, pledge, distribute, appoint, or otherwise dispose of any
Purchaser Stock received by the Stockholders in the transactions contemplated
herein. The Purchaser Stock delivered to the Stockholders pursuant to Section 2
of this Agreement will bear a legend substantially in the form set forth below
and containing such other information as Purchaser may deem necessary or
appropriate:
THIS SECURITY MAY NOT BE SOLD, ASSIGNED, EXCHANGED,
TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED, APPOINTED OR
OTHERWISE DISPOSED OF, AND THE ISSUER SHALL NOT BE REQUIRED
TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE,
TRANSFER, ENCUMBRANCE, PLEDGE, DISTRIBUTION, APPOINTMENT OR
OTHER DISPOSITION PRIOR TO [FIRST ANNIVERSARY OF CLOSING
DATE]. UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS
CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE
LEGEND (AND ANY STOP ORDER PLACED WITH THE
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TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE.
15. INVESTMENT REPRESENTATIONS
The Stockholders acknowledge that the Purchaser Stock to be delivered to the
Stockholders pursuant to this Agreement (the "Restricted Securities") have not
been and will not be registered under the 1933 Act and therefore may not be
resold without compliance with the requirements of the 1933 Act and applicable
state securities laws. All of the Restricted Securities are being acquired by
the Stockholders solely for their own respective accounts, for investment
purposes only, and not with a view to the distribution thereof.
15.1 Compliance With Law. The Stockholders represent, warrant,
covenant and agree that none of the Restricted Securities will be offered,
sold, assigned, exchanged, transferred, encumbered, distributed, appointed or
otherwise disposed of except after full compliance with all of the applicable
provisions of the 1933 Act and the rules and regulations of the SEC thereunder
and the provisions of applicable state securities laws and regulations. All the
Restricted Securities shall bear the following legend in addition to the legend
required under Section 14 of this Agreement:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS (COLLECTIVELY, THE
"ACTS") AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED UNLESS AND UNTIL (A) THESE
SECURITIES SHALL HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND APPLICABLE STATE SECURITIES LAWS (COLLECTIVELY, THE "ACTS") OR (B)
THE HOLDER OF THESE SECURITIES PROVIDES THE ISSUER WITH (X) AN UNQUALIFIED
WRITTEN OPINION OF LEGAL COUNSEL, WHICH COUNSEL AND OPINION (IN FORM AND
SUBSTANCE) SHALL BE REASONABLY SATISFACTORY TO THE ISSUER, TO THE EFFECT THAT
THE PROPOSED DISPOSITION OF THESE SECURITIES MAY BE EFFECTED WITHOUT
REGISTRATION UNDER THE ACTS OR (Y) SUCH OTHER EVIDENCE AS MAY BE REASONABLY
SATISFACTORY TO THE ISSUER THAT THE PROPOSED DISPOSITION MAY BE EFFECTED
WITHOUT REGISTRATION UNDER THE ACTS.
15.2 Economic Risk, Sophistication. Each Stockholder represents that he
has received, has read and understands the Draft Registration Statement, and in
particular the risk factors described therein. Each Stockholder further
represents that he is able to bear the economic risk of an investment in the
Restricted Securities and can afford to sustain a total loss of such investment
and either (i) has such knowledge and experience in financial and business
matters that he is capable of evaluating the merits and risks of the proposed
investment in Purchaser or (ii) together with the senior executives of the
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Company, with whom he has consulted, has such knowledge and experience in
financial and business matters that he is capable of evaluating the merits and
risks of the proposed investment in Purchaser. Stockholders have had an
adequate opportunity to ask questions and receive answers from the officers of
Purchaser and the Company concerning any and all matters relating to the
transactions described herein including, without limitation, the background and
experience of the current and proposed officers and directors of Purchaser, the
plans for the operations of the business of Purchaser and any plans for
additional acquisitions and the like. Stockholders have asked any and all
questions in the nature described in the preceding sentence and all questions
have been answered to their satisfaction.
16. REGISTRATION RIGHTS
16.1 PiggyBack Registration Rights. At any time following the Closing
Date, whenever Purchaser proposes to register any Purchaser Stock for its own
or the account of others under the 1933 Act for a public offering, other than
(i) any registration of shares to be used as consideration for acquisitions of
additional businesses by Purchaser and (ii) registrations relating to employee
benefit plans, Purchaser shall give each of the Stockholders prompt written
notice of its intent to do so. Upon the written request of any of the
Stockholders given within 5 business days after receipt of such notice,
Purchaser shall cause to be included in such registration all Registrable
Securities (including any shares of Purchaser Stock issued as a dividend or
other distribution with respect to, or in exchange for, or in replacement of
such Registerable Securities) which any such Stockholder requests; provided,
however, if Purchaser is advised in writing in good faith by any managing
underwriter of an underwritten offering of the securities being offered
pursuant to any registration statement under this Section 16.1 that the number
of shares to be sold by persons other than Purchaser is greater than the number
of such shares which can be offered without adversely affecting the offering,
Purchaser may reduce pro rata the number of shares offered for the accounts of
such persons (based upon the number of shares held by such person) to a number
deemed satisfactory by such managing underwriter.
16.2 Demand Registration Rights. At any time after the first
anniversary of the Closing Date, the holders of a majority of the shares of
Purchaser Stock (i) representing Registerable Securities owned by the
Stockholders or their permitted transferees or (ii) representing Registerable
Securities (as defined in the agreements similar to this Agreement mentioned
below) acquired by other Stockholders of Purchaser on or prior to the closing
of the IPO in connection with the acquisition of their companies by Purchaser
pursuant to an agreement similar to this Agreement (or upon exercise or
conversion of securities of Purchaser received pursuant to such agreement) (the
persons referred to in clause (i) and (ii) being collectively referred to as
the "Founding Stockholders") which shares have not been previously registered
or sold and which shares are not entitled to be sold under Rule 144(k) (or any
similar or successor provision) promulgated under the 1933 Act, may request in
writing that Purchaser file a registration statement under the 1933 Act
covering the registration of such shares of
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Purchaser Stock issued to and held by the Founding Stockholders or their
permitted transferees (including any stock issued as a dividend or other
distribution with respect to, or in exchange for, or in replacement of such
Purchaser Stock) (a "Demand Registration"). Within ten days of the receipt of
such request, Purchaser shall give written notice of such request to all other
Founding Stockholders and shall, as soon as practicable but in no event later
than 45 days after notice from the Founding Stockholders requesting such
registration, file and use its best efforts to cause to become effective a
registration statement covering all such shares. Purchaser shall be obligated
to effect only one Demand Registration for all Founding Stockholders and will
keep such Demand Registration current and effective for not less than 90 days
(or such shorter period as is required to complete the distribution and sale of
all shares registered thereunder).
Notwithstanding the foregoing paragraph, following such a demand a
majority of the disinterested directors of Purchaser (i.e. directors who have
not demanded or elected to sell shares in any such public offering) may defer
the filing of the registration statement for a 30 day period.
If at the time of any request for a Demand Registration Purchaser has
formulated plans to file within 60 days after such request a registration
statement covering the sale of any of its securities in a public offering under
the 1933 Act, no registration of the Purchaser Stock shall be initiated under
this Section 16.2 until 90 days after the effective date of such registration
statement unless Purchaser is no longer proceeding diligently to secure the
effectiveness of such registration statement; provided that Purchaser shall
provide the Founding Stockholders the right to participate in such public
offering pursuant to, and subject to, Section 16.1.
16.3 Registration Procedures. All expenses incurred in connection with
the registrations under this Section 16 (including all registration, filing,
qualification, legal, printing and accounting fees, but excluding underwriting
commissions and discounts), shall be borne by Purchaser. In connection with
registrations under Sections 16.1 and 16.2 Purchaser will, as expeditiously as
practicable:
(i) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to
cause such registration statement to become and remain effective;
provided that Purchaser may discontinue any registration of its
securities that is being effected pursuant to Section 16.2 at any time
prior to the effective date of the registration statement relating
thereto.
(ii) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to such registration
statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective for a period
as may be requested by the Stockholders holding a majority of the
Registrable Securities covered thereby not exceeding 90 days and to
comply with the provisions of the 1933 Act with respect to the
disposition of all securities covered by such registration
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statement during such period in accordance with the intended methods
of disposition by the seller or sellers thereof set forth in such
registration statement; provided, that before filing a registration
statement or prospectus relating to the sale of Registrable
Securities, or any amendments or supplements thereto, Purchaser will
furnish to counsel to each holder of Registrable Securities covered by
such registration statement or prospectus, copies of all documents
proposed to be filed, which documents will be subject to the review of
such counsel, and Purchaser will give reasonable consideration in good
faith to any comments of such counsel.
(iii) Furnish to each holder of Registrable Securities covered by
the registration statement and to each underwriter, if any, of such
Registrable Securities, such number of copies of a preliminary
prospectus and prospectus for delivery in conformity with the
requirements of the 1933 Act, and such other documents, as such Person
may reasonably request, in order to facilitate the public sale or
other disposition of the Registrable Securities.
(iv) Use its best efforts to register or qualify the Registrable
Securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as each seller shall
reasonably request, and do any and all other acts and things which may
be reasonably necessary or advisable to enable such seller to
consummate the disposition of the Registrable Securities owned by such
seller, in such jurisdictions, except that Purchaser shall not for any
such purpose be required (x) to qualify to do business as a foreign
corporation in any jurisdiction where, but for the requirements of
this Section 16.3(iv), it is not then so qualified, or (y) to subject
itself to taxation in any such jurisdiction, or (z) to take any action
which would subject it to general or unlimited service of process in
any such jurisdiction where it is not then so subject.
(v) Use its best efforts to cause the Registrable Securities
covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof to consummate the
disposition of such Registrable Securities.
(vi) Immediately notify each seller of Registrable Securities
covered by such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the 1933 Act within
the appropriate period mentioned in Section 16.3(ii), if Purchaser
becomes aware that the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing, and, at
the request of any such seller, deliver a reasonable number of copies
of an amended or supplemental prospectus as may be necessary so that,
as thereafter delivered to the purchasers of such Registrable
Securities, each
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prospectus shall not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light
of the circumstances then existing.
(vii) Otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC and make generally available to its
security holders, in each case as soon as practicable, but not later
than 45 calendar days after the close of the period covered thereby
(90 calendar days in case the period covered corresponds to a fiscal
year of the Purchaser), an earnings statement of Purchaser which will
satisfy the provisions of Section 11 (a) of the 1933 Act.
(viii) Use its best efforts in cooperation with the underwriters to
list such Registrable Securities on each securities exchange as they
may reasonably designate.
(ix) In the event the offering is an underwritten offering, use
its best efforts to obtain a "cold comfort" letter from the
independent public accountants for Purchaser in customary form and
covering such matters of the type customarily covered by such letters.
(x) Execute and deliver all instruments and documents (including
in an underwritten offering an underwriting agreement in customary
form) and take such other actions and obtain such certificates and
opinions as the stockholders of Purchaser holding a majority of the
shares of Registrable Securities covered by the Registration Statement
may reasonably request in order to effect an underwritten public
offering of such Registrable Securities.
(xi) Make available for inspection by the seller of such
Registrable Securities covered by such registration statement, by any
underwriter participating in any disposition to be effected pursuant
to such registration statement and by any attorney, accountant or
other agent retained by any such seller or any such underwriter, all
pertinent financial and other records, pertinent corporate documents
and properties of Purchaser, and cause all of Purchaser's officers,
directors and employees to supply all information reasonably requested
by any such seller, underwriter, attorney, accountant or agent in
connection with such registration statement.
(xii) Obtain for delivery to the underwriter or agent an opinion
or opinions from counsel for Purchaser in customary form and in form
and scope reasonably satisfactory to such underwriter or agent and its
counsel.
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16.4 Other Registration Matters.
(i) Each Stockholder holding shares of Registrable Securities
covered by a Registration Statement referred to in this Section 16
will, upon receipt of any notice from Purchaser of the happening of
any event of the kind described in Section 16.3(vi), forthwith
discontinue disposition of the Registrable Securities pursuant to the
registration statement covering such Registrable Securities until such
holder's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 16.3(vi).
(ii) If a registration pursuant to Section 16.1 or 16.2 involves
an underwritten offering, each Stockholder (including his permitted
assigns) agrees, if his shares of Registrable Securities are included
in such registration, not to effect any public sale or distribution,
including any sale pursuant to Rule 144 under the 1933 Act, of any
Registrable Securities, or of any security convertible into or
exchangeable or exercisable for any Registrable Securities (other than
as part of such underwritten offering), without the consent of the
managing underwriter, during a period commencing seven calendar days
before and ending 180 calendar days (or such lesser number as the
managing underwriter shall designate) after the effective date of such
registration. Similarly, each of the Stockholders agrees not to effect
any sale or distribution, including any sale pursuant to the
registration rights provided in Section 16.1, of any Registrable
Securities, or of any security convertible into or exchangeable or
exercisable for any Registrable Securities, without the consent of the
managing underwriter of the IPO during a period commencing on the
effective date of the Draft Registration Statement and ending 365
calendar days (or such lesser number as such managing underwriter
shall designate) after such effective date.
16.5 Indemnification.
(i) In the event of any registration of any securities of
Purchaser under the 1933 Act pursuant to Section 16.1 or 16.2,
Purchaser will, and it hereby agrees to, indemnify and hold harmless,
to the extent permitted by law, each seller of any Registrable
Securities covered by such registration statement, each Affiliate of
such seller and their respective directors, officers, employees and
agents or general and limited partners (and directors, officers,
employees and agents thereof) and, if such seller is a portfolio or
investment fund, its investment advisors or agents, each other person
who participates as an underwriter in the offering or sale of such
securities and each other person, if any, who controls such seller or
any such underwriter within the meaning of the 1933 Act, as follows:
(x) against any and all loss, liability, claim,
damage or expense whatsoever arising out of or based upon an
untrue statement or alleged untrue statement of a material
fact contained in any registration statement (or any
amendment or supplement
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thereto), including all documents incorporated therein by
reference, or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to
make the statements therein not misleading, or arising out of
an untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus or prospectus
(or any amendment or supplement thereto) or the omission or
alleged omission therefrom of a material fact necessary in
order to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(y) against any and all loss, liability, claim,
damage and expense whatsoever to the extent of the aggregate
amount paid in settlement of any litigation, or investigation
or proceeding by any governmental agency or body, commenced
or threatened, or of any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue
statement or omission, if such settlement is effected with
the written consent of Purchaser; and
(z) against any and all expense reasonably incurred
by them in connection with investigating, preparing or
defending against any litigation, or investigation or
proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue
statement or mission to the extent that any such expense is
not paid under subsection (x) or (y) above;
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such seller or any such
director, officer, employee, agent, general or limited partner,
investment advisor or agent, underwriter or controlling person and
shall survive the transfer of such securities by such seller.
(ii) Purchaser may require, as a condition to including any
Registrable Securities in any registration statement filed in
accordance with Section 16.1 or 16.2, that Purchaser shall have
received an undertaking reasonably satisfactory to it from the
prospective seller of such Registrable Securities or any underwriter,
to indemnify and hold harmless (in the same manner and to the same
extent as set forth in Section 16.5(i)) Purchaser with respect to any
statement or alleged statement in or omission or alleged omission from
such registration statement, any preliminary, final or summary
prospectus contained therein, or any amendment or supplement, if such
statement or alleged statement or omission or alleged omission was
made in reliance upon and in conformity with written information
furnished to Purchaser by or on behalf of such seller or underwriter
specifically stating that it is for use in the preparation of such
registration statement, preliminary, final or summary prospectus or
amendment or supplement. Such indemnity shall remain in full force and
effect regardless of
-46-
any investigation made by or on behalf of Purchaser or any such
director, officer or controlling person and shall survive the transfer
of such securities by such seller. In that event, the obligations of
the Purchaser and such sellers pursuant to this Section 16.5 are to be
several and not joint; provided, however, that, with respect to each
claim pursuant to this Section 16.5, Purchaser shall be liable for the
full amount of such claim, and each such seller's liability under this
Section 16.5 shall be limited to an amount equal to the net proceeds
(after deducting the underwriting discount and expenses) received by
such seller from the sale of Registrable Securities held by such
seller pursuant to this Agreement.
(iii) Promptly after receipt by an indemnified party
hereunder of written notice of the commencement of any action or
proceeding involving a claim referred to in this Section 16.5, such
indemnified party will, if a claim in respect thereof is to be made
against an indemnifying party, give written notice to such
indemnifying party of the commencement of such action; provided,
however, that the failure of any indemnified party to give notice as
provided herein shall not relieve the indemnifying party of its
obligations under this Section 16.5, except to the extent (not
including any such notice of an underwriter) that the indemnifying
party is materially prejudiced by such failure to give notice. In case
any such action is brought against an indemnified party, unless in
such indemnified party's reasonable judgment a conflict of interest
between such indemnified and indemnifying parties may exist in respect
of such claim (in which case the indemnifying party shall not be
liable for the fees and expenses of more than one firm of counsel
selected by holders of a majority of the shares of Registrable
Securities included in the offering or more than one firm of counsel
for the underwriters in connection with any one action or separate but
similar or related actions), the indemnifying party will be entitled
to participate in and to assume the defense thereof, jointly with any
other indemnifying party similarly notified, to the extent that it may
wish with counsel reasonably satisfactory to such indemnified party,
and after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying
party will not be liable to such indemnified party for any legal or
other expenses subsequently incurred by such indemnifying party in
connection with the defense thereof, provided that the indemnifying
party will not agree to any settlement without the prior consent of
the indemnified party (which consent shall not be unreasonably
withheld) unless such settlement requires no more than a monetary
payment for which the indemnifying party agrees to indemnify the
indemnified party and includes a full, unconditional and complete
release of the indemnified party; provided, however, that the
indemnified party shall be entitled to take control of the defense of
any claim as to which, in the reasonable judgment of the indemnifying
party's counsel, representation of both the indemnifying party and the
indemnified party would be inappropriate under the applicable
standards of professional conduct due to actual or potential differing
interests between them. In the event that the indemnifying party does
not assume the defense of a claim pursuant to this Section 16.5(iii),
the indemnified party will have the right to defend such claim by all
appropriate proceedings,
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and will have control of such defense and proceedings, and the
indemnified party shall have the right to agree to any settlement
without the prior consent of the indemnifying party. Each indemnified
party shall, and shall cause its legal counsel to, provide reasonable
cooperation to the indemnifying party and its legal counsel in
connection with its assuming the defense of any claim, including the
furnishing of the indemnifying party with all papers served in such
proceeding. In the event that an indemnifying party assumes the
defense of an action under this Section 16.5(iii), then such
indemnifying party shall, subject to the provisions of this Section
16.5, indemnify and hold harmless the indemnified party from any and
all losses, claims, damages or liabilities by reason of such
settlement or judgment.
(iv) Purchaser and each seller of Registrable Securities shall
provide for the foregoing indemnity (with appropriate modifications)
in any underwriting agreement with respect to any required
registration or other qualification of securities under any federal or
state law or regulation of any governmental authority.
16.6 Contribution. In order to provide for just and equitable
contribution in circumstances under which the indemnity contemplated by Section
16.5 is for any reason not available or insufficient for any reason to hold
harmless an indemnified party in respect of any losses, claims, damages or
liabilities referred to therein, the parties required to indemnify by the terms
thereof shall contribute to the aggregate losses, liabilities, claims, damages
and expenses of the nature contemplated by such indemnity agreement incurred by
Purchaser, any seller of Registrable Securities and one or more of the
underwriters, except to the extent that contribution is not permitted under
Section 11 (f) of the 1933 Act. In determining the amounts which the respective
parties shall contribute, there shall be considered the relative benefits
received by each party from the offering of the Registrable Securities by
taking into account the portion of the proceeds of the offering realized by
each, and the relative fault of each party by taking into account the parties'
relative knowledge and access to information concerning the matter with respect
to which the claim was asserted, the opportunity to correct and prevent any
statement or omission and any other equitable considerations appropriate under
the circumstances. Purchaser and each person selling securities agree with each
other that no seller of Registrable Securities shall be required to contribute
any amount in excess of the amount such seller would have been required to pay
to an indemnified party if the indemnity under Section 16.5(ii) were available.
Purchaser and each such seller agree with each other and the underwriters of
the Registrable Securities, if requested by such underwriters, that it would
not be equitable if the amount of such contribution were determined by pro rata
or per capita allocation (even if the underwriters were treated as one entity
for such purpose) or for the underwriters' portion of such contribution to
exceed the percentage that the underwriting discount bears to the initial
public offering price of the Registrable Securities. For purposes of this
Section 16.6, each person, if any, who controls an underwriter within the
meaning of Section 15 of the 1933 Act shall have the same rights to
contribution as such underwriter, and each director and each officer of
Purchaser who signed the registration statement, and each Person, if any, who
controls Purchaser or a seller of Registrable
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Securities within the meaning of Section 15 of the 1933 Act shall have the same
rights to contribution as Purchaser or a seller of Registrable Securities, as
the case may be.
16.7 Availability of Rule 144. Purchaser shall not be obligated to
register shares of Registrable Securities held by any Stockholder at any time
when the resale provisions of Rule 144(k) (or any similar or successor
provision) promulgated under the 1933 Act are available to such Stockholder.
17. GENERAL
17.1 Cooperation. The Company, each Stockholder, Purchaser and Old ACG
shall deliver or cause to be delivered to the other on the Closing Date and at
such other times and places as shall be reasonably agreed to, such additional
instruments as the any of the others may reasonably request for the purpose of
carrying out this Agreement. The Company will cooperate and use its reasonable
efforts to have the present officers, directors and employees of the Company
cooperate with Purchaser on and after the Closing Date in furnishing
information, evidence, testimony and other assistance in connection with any
Tax Return filing obligations, actions, proceedings, arrangements or disputes
of any nature with respect to matters pertaining to all periods prior to the
Closing Date.
17.2 Successors and Assigns. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of law), but if
assigned by operation of law, this Agreement shall be binding upon and shall
inure to the benefit of the parties hereto, the successors of Purchaser, Old
ACG and the Company, and the heirs and legal representatives of the
Stockholders.
17.3 Entire Agreement. This Agreement (including the Schedules and
Annexes) and the documents delivered pursuant hereto constitute the entire
agreement and understanding among the Stockholders, the Company, Old ACG and
Purchaser and supersede any prior agreement and understanding relating to the
subject matter of this Agreement. This Agreement, upon execution and delivery,
constitutes a valid and binding agreement of the parties hereto enforceable in
accordance with its terms and may be modified or amended only by a written
instrument executed by the Stockholders, the Company, Old ACG and Purchaser,
acting through their respective officers or representatives, duly authorized by
their respective Boards of Directors. Any disclosure made on any Schedule
delivered pursuant hereto shall be deemed to have been disclosed for purposes
of any other Schedule required hereby; provided that the Company shall make a
good faith effort to cross reference disclosures, as necessary or advisable,
between related Schedules.
17.4 Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original and all of
which together shall constitute but one and the same instrument.
17.5 Brokers and Agents. Except as disclosed on Schedule 17.5, each
party represents and warrants that it employed no broker or agent in connection
with this transaction and agrees to indemnify the other
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parties hereto against all loss, cost, damage or expense arising out of claims
for fees or commission of brokers employed or alleged to have been employed by
such indemnifying party.
17.6 Expenses. Whether or not the transactions herein contemplated
shall be consummated, Purchaser will pay the fees, expenses and disbursements
of Purchaser, the Company and their respective agents, representatives,
accountants and counsel incurred in connection with the subject matter of this
Agreement and any amendments thereto, including all costs and expenses incurred
in the performance and compliance with all conditions to be performed by
Purchaser and the Company under this Agreement. Each Stockholder shall pay all
sales, use, transfer, real property transfer, recording, gains, stock transfer
and other similar taxes and fees ("Transfer Taxes") imposed in connection with
the transactions contemplated herein, the fees and expenses of the
Stockholders' legal counsel and all other costs and expenses incurred by the
Stockholders in their performance and compliance with all conditions to be
performed by them under this Agreement. Each Stockholder shall file all
necessary documentation and Returns with respect to such Transfer Taxes. In
addition, each Stockholder acknowledges that he or she, and not the Company or
Purchaser, will pay all Taxes due upon receipt of the consideration payable
pursuant to Section 2, and will assume all Tax risks and liabilities of the
Company in connection with the transactions contemplated hereby.
17.7 Notices. All notices of communication required or permitted
hereunder shall be in writing, addressed to the party to be notified, and may
be given by (i) depositing the same in United States mail, postage prepaid and
registered or certified with return receipt requested, (ii) by telecopying the
same if receipt thereof is confirmed or (iii) by delivering the same in person
to an officer or agent of such party.
(x) If to Purchaser, or Old ACG, addressed to Purchaser at:
1+ USA, inc.
0000 Xxxx Xxxxxxx
Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attn: Xxx X. Xxxxxxxxx
Telecopy No.: 000-000-0000
with a copy to:
Bracewell & Xxxxxxxxx, L.L.P.
South Tower Pennzoil Place
000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000-0000
Attn: Xxxxx X. Xxxxxxx III
Telecopy No.: 000-000-0000
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(y) If to the Stockholders, addressed to them at their addresses set
forth on Schedule 5.3, with copies to such counsel as is set forth with respect
to each Stockholder on such Schedule 5.3;
(z)If to the Company, addressed to it at:
Xxxxx Long Distance Service, Inc.
000 X. Xxxx, Xxxxx 0000
Xxxxxxx, Xxxxxx 00000
Attn: Xx. Xxxxxxx Xxxxx, Chairman
Telecopy No.: 000-000-0000
with a copy to:
Xxxx X. Xxxxx
000 X. Xxxx, Xxxxx 0000
Xxxxxxx, Xxxxxx 00000
Telecopy No.: 000-000-0000
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 17.7 from time to time.
17.8 Governing Law. This Agreement Shall be construed in accordance
with the laws of the State of Delaware.
17.9 Exercise of Rights and Remedies. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or
of any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
17.10 Time. Time is of the essence with respect to this Agreement.
17.11 Reformation and Severability. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
practicable, be modified in such manner as to be valid, legal and enforceable
but so as to most nearly retain the intent of the parties, and if such
modification is not possible, such provision shall be severed from this
Agreement; and in either case the validity, legality and enforceability of the
remaining provisions of this Agreement shall not in any way be affected or
impaired thereby.
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17.12 Remedies Cumulative. No right, remedy or election given by any
term of this Agreement shall be deemed exclusive but each shall be cumulative
with all other rights, remedies and elections available at law or in equity.
17.13 Captions. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
17.14 Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived only with the
written consent of Purchaser, Old ACG, the Company and the Stockholders. Any
amendment or waiver effected in accordance with this Section 17.14 shall be
binding upon each of the parties hereto.
17.15 Public Statements. The parties hereto shall consult with each
other and no party shall issue any public announcement or statement with
respect to the transactions contemplated hereby without the consent of the
other parties, unless the party desiring to make such announcement or
statement, after seeking such consent from the other parties, obtains advice
from legal counsel that a public announcement or statement is required by
applicable law.
17.16 Use of Xxxxx Name. The parties to this Amendment hereby grant the
Company a royalty-free, non-exclusive license to use the name Xxxxx Long
Distance Service, Inc. for a period of two years following the Closing, subject
to the Company's right to request one or more two-year extensions of such
license at lease six months prior to the expiration of the then current license
term; provided, however, that the foregoing license shall in any event
terminate upon the sixth monthly anniversary of the termination of employment
of Xxxx X. Xxxxx by the Company, Purchaser or any other Affiliate of Purchaser,
unless such license has not been in effect for at least one year at the date of
termination of Xx. Xxxxx'x employment, in which event the license shall
terminate on the 18th monthly anniversary of the Closing.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
ADVANCED COMMUNICATIONS GROUP, INC.
BY:
-------------------------------------------
NAME: XXX X. XXXXXXXXX
TITLE: AUTHORIZED OFFICER
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ADVANCED COMMUNICATIONS CORP.
BY:
-------------------------------------------
NAME: XXX X. XXXXXXXXX
TITLE: CHAIRMAN AND CHIEF EXECUTIVE OFFICER
1+ USA V ACQUISITION CORP.
BY:
-------------------------------------------
NAME: XXXX X. XXXXXXXXX
TITLE: PRESIDENT
XXXXX LONG DISTANCE SERVICE, INC.
BY:
-------------------------------------------
NAME: XXXXXXX XXXXX
TITLE: CHAIRMAN OF THE BOARD
BY:
-------------------------------------------
NAME: XXXX X. XXXXX
TITLE: PRESIDENT
-53-
STOCKHOLDERS:
-------------------------------------------
XXXXXX X. XXXXX
-------------------------------------------
XXXXXXX XXXXX
-------------------------------------------
XXX X. XXXXX
-------------------------------------------
XXXX X. XXXXX
-------------------------------------------
XXXX XXXXX XXX
-------------------------------------------
XXXXX XXXXX ALEFS
-------------------------------------------
XXXXX X. XXXXX
-------------------------------------------
XXXX X. XXXXX
-54-
ANNEX I
DRAFT REGISTRATION STATEMENT
(separately provided)
ANNEX II
ADVANCED COMMUNICATIONS GROUP, INC.
SECTION 351 EXCHANGE PLAN
The Board of Directors of Advanced Communications Group, Inc., a
Delaware corporation organized in September 1997 ("Company"), has adopted this
Section 351 Exchange Plan effective as of October 3, 1997 ("Exchange Plan") in
order to comply with the requirements of Section 351 of the Internal Revenue
Code of 1986, as amended, and the rules and regulations promulgated thereunder
("Code"), and for purposes of defining the rights of various persons who may
make future transfers of voting capital stock and other consideration,
including cash and other assets (the items transferred being collectively
referred to herein as the "Assets") to the Company, all as more particularly
set forth below:
WHEREAS, the Company intends to acquire outstanding shares of capital
stock of certain corporations and other assets and acquire the outstanding
capital stock of ACG, Inc., a Delaware corporation, in a reverse triangular
merger, all as part of an integrated transaction as more particularly described
in the Company's Registration Statement in Form S-1 (draft of October 2, 1997)
("Draft Registration Statement") relating to its initial underwritten public
offering ("IPO"), the foregoing acquisitions being hereinafter collectively
referred to as the "Acquisitions"; and
WHEREAS, the various transactions comprising the Acquisitions will
occur substantially concurrently upon the consummation of the IPO;
NOW THEREFORE, in order to obtain the Assets, the Company may elect to
exchange, as a part of a single plan, shares of its voting capital stock and
other consideration, including cash, warrants, options and promissory notes,
for such Assets as shall be transferred to the Company by one or more of the
following individuals and entities: (i) the existing shareholders of the
predecessor to the Company in a reverse triangular merger; (ii) certain holders
of capital stock of other corporations or other assets that shall be acquired
by the Company pursuant to the Acquisitions; (iii) certain other persons or
entities who may assist the Company in the Acquisitions or in the manufacture
and or marketing of its products, (iv) purchasers of the Company's capital
stock in the IPO; and (v) certain other financial investors; and
FURTHERMORE, it is the expectation of the Company (without making any
representation with respect thereto) that the parties contributing such Assets
to the Company as part of the Acquisitions and the IPO will possess immediately
after the completion of the Acquisitions, at least
80% of the total combined voting power of all classes of capital stock of the
Company entitled to vote and at least 80% of the total number of shares of all
other classes of capital stock of the Company; and
FURTHERMORE, it is also the intention of the Company (without making
any representation with respect thereto) that the foregoing transfers of Assets
to the Company shall qualify as tax free within the provisions of Section 351
of the Code; provided, however, that the Company does not assume any liability
or responsibility to any holder of capital stock of the Company or any other
person or entity in the event Section 351 of the Code does not apply to such
transfers of Assets; and
FURTHERMORE, it is the expectation of the Company that the parties to
the Acquisitions and the IPO will contribute Assets to the Company in the
approximate amounts contemplated by the Draft Registration Statement in
exchange for the voting capital stock, and other consideration, including cash,
options, warrants and promissory notes of the Company, in the approximate
amounts contemplated by the Draft Registration Statement.
The shares of voting capital stock and other consideration, including
cash, options, warrants and promissory notes of the Company, deliverable in the
Acquisitions may be subject to adjustment in accordance with the various
acquisition agreements between the Company and the contributing parties. This
Exchange Plan shall not obligate any party to any Acquisition to consummate
such Acquisition other than upon the terms of the definitive acquisition
agreement executed by such party with respect to such Acquisition.
By the execution of the acquisition agreement to which this Exchange
Plan is attached as Annex II, each of the contributing parties thereto
evidences such party's agreement with and adoption of this Exchange Plan.
-2-
ANNEX III
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into as of June 12,
1997, by Xxxx X. Xxxxx ("Employee") and 1+ USA V Acquisition Company, a
Delaware corporation ("Company") (collectively referred to as the "Parties").
The Company and Employee agree as follows:
1. Employment.
In consideration of the mutual covenants and agreements contained in this
Agreement and for other good and valuable consideration, the receipt and
sufficiency of which are acknowledged by Employee and the Company, the Company
employs Employee, and Employee accepts employment subject to the terms and
conditions of this Agreement. The Company is a wholly-owned subsidiary of
Advanced Communications Group, Inc. ("ACG"), a Delaware corporation. Unless the
content otherwise clearly requires, all references to ACG in this Agreement
shall include ACG, the Company and ACG's other subsidiaries.
The Company, ACG, Xxxxx Long Distance Service, Inc. ("Xxxxx"), the stockholders
of Xxxxx, including Employee, and other affiliates of Xxxxx have entered into
an Agreement and Plan of Merger, as amended by Amendment No. 1 thereto ("Merger
Agreement"). Upon the consummation of the merger contemplated by the Merger
Agreement ("Merger"), Xxxxx will be merged into the Company, and the name of
the Company will be changed to Xxxxx Long Distance Services, Inc.
Notwithstanding any other term of this Agreement, this Agreement shall
terminate upon the termination of the Merger Agreement pursuant to Article 12
thereof.
If requested by the Employee following the consummation of the Merger, the
Company will enter into a new Employment Agreement with Employee, substantially
in the form of this Agreement, that gives effect to the consummation of the
Merger.
2. Term.
This Agreement shall commence and become effective on the date hereof and end
on the fifth anniversary of the Closing Date. Such term of employment may be
renewed for successive periods of one year thereafter upon the mutual agreement
of the Parties.
3. Compensation and other Benefits.
3.1 As compensation for his services to the Company under this
Agreement, the Company shall pay to Employee during the term
of this Agreement a base salary ("Base Salary") payable in
equal semi-monthly installments, subject only to such payroll
and withholding deductions as may be required by law and
other deductions applied generally to employees of the
Company for any employee benefit plans. Prior to the
consummation of the Merger or the termination of the Merger
Agreement, the Base Salary payable to Employee pursuant to
this Agreement shall be $12,000 per annum. Commencing on the
effective date of the Merger, the Base Salary payable to
Employee pursuant to this Agreement shall be increased to not
less than $110,000 per annum.
3.2 After the first twelve consecutive months of employment after
the Closing Date, and after every consecutive twelve-month
period thereafter, Employee shall be eligible to receive a
potential cash bonus up to 63% of Employee's Base Salary
("Bonus") to be based upon his performance as determined by
the Compensation Committee of the Board of Directors
("Compensation Committee") of ACG. The standards required to
be met by Employee to qualify for the cash bonus potential
will be communicated to Employee prior to the commencement of
such twelve-month period, beginning in 1998. Employee agrees
that the decision as to whether to award a Bonus and the
percentage amount thereof will be made by the Compensation
Committee and will be based upon the criteria set by such
committee.
3.3 Employee will be entitled to two weeks of paid vacation
annually during the term of this Agreement.
3.4 Employee will be awarded 250,000 options to acquire common
stock in ACG for a price of $2.50. The options shall have a
term of ten years and shall become exercisable in one-third
increments on each anniversary date of the Closing Date.
Accordingly, the options shall become fully vested three
years from the Closing Date; provided, however, that the
vesting of such options will be accelerated in the event of
the termination of Employee's employment hereunder pursuant
to Section 6.1(d). The options shall, except as provided
herein, be granted pursuant to ACG's 1997 Stock Awards Plan,
a copy of which has heretofore been delivered to Employee.
3.5 Employee shall receive benefits commensurate with his level
of employment under any health plan of ACG.
-2-
3.6 In the event ACG completes an initial underwritten public
offering of ACG common stock, par value $.00001 per share
(the "IPO"), prior to October 31, 1997, Company shall pay the
Employee a one-time bonus of $50,000 within two weeks after
the closing of the IPO.
4. Duties and Extent of Service.
Employee shall hold the office of President of the Company. Employee agrees to
perform the duties incidental to his position, as determined from time to time
by the Chief Executive Officer of ACG. Employee shall devote such time,
attention, and energy to the business of the Company as are required to perform
his duties and responsibilities hereunder and shall not after the Closing Date
and during the remaining term of this Agreement be engaged, directly or
indirectly, in any other business activity if pursued for gain, profit, or
other pecuniary advantage without the prior written consent of the Chief
Executive Officer of ACG; provided, however, that Employee shall be permitted
to continue to serve as a member of the Board of Directors of Xxxxx
Publications, Inc. and receive compensation for serving in such capacity. In
any event after the Closing Date, Employee shall not take any action
inconsistent with Employee's relationship and responsibilities as an employee
or the Company, or take any action which is intended, or may be reasonably
expected, to harm the reputation, business, prospects, or operations of ACG.
5. Protection of Confidential Information and Employee Non-Competition.
5.1 Employee recognizes and acknowledges that he will have access
to certain confidential information and trade secrets of ACG
("Confidential Information"). Such Confidential Information
includes, but is not limited to: customer names; contracts;
products purchased by customers; production capabilities and
processes; customer account and credit data; referral
sources; computer programs and software; names and
information relating to potential acquisition candidates;
financing sources and other business relationships;
information relating to confidential or secret designs,
processes, formulae, plans, devices, or materials of ACG's
business and marketing plans, confidential information and
trade secrets relating to the distribution and marketing of
ACG's products and services; patents pending; confidential
characteristics of ACG's products and services; customer
comments; troubleshooting requirements; product and service
development; market development; manuals written by ACG;
management, accounting, and reporting systems, procedures,
and programs; off net contracts, leases, marketing
agreements, sales employee compensation information, plans,
and programs; marketing and financial analysis, plans,
research, programs, and related information and data; forms,
agreements, and legal documents;
-3-
regulatory and supervisory reports; correspondence;
statements; corporate books and records; and other similar
information.
5.2 Employee acknowledges and agrees that this Confidential
Information constitutes valuable, special, and unique
property of ACG.
5.3 Employee will not, at any time during or after the term of
this Agreement or his employment with Company, disclose any
Confidential Information to any person, firm, corporation,
association, or other entity for any reason or purpose.
5.4 The foregoing restrictions shall not apply to: (a) any
information in Employee's possession before its disclosure to
Employee by ACG; or (b) information that is or shall lawfully
be published or become part of the general knowledge through
no act or omission of Employee. The Confidential Information
disclosed to Employee under this Agreement is not within the
foregoing exceptions merely because such information is
embraced by more general information in the public domain or
in Employee's possession; or merely because portions thereof
are in the public domain or in Employee's possession.
5.5 To protect the confidentiality of the Confidential
Information, Employee further agrees that while employed by
the Company and for a period of three years immediately after
the termination of this Agreement or his employment with the
Company, regardless of whether such termination of employment
is voluntary or involuntary, he will not, for himself, or on
behalf of any other person, firm, partnership, company, or
corporation (i) generally compete in any manner whatsoever
with ACG or solicit, accept, divert, or take away from ACG
the business of any person, company, or business; (ii)
directly or indirectly induce or attempt to influence any
employee, officer, director, consultant, agent, vendor or
other entity related to ACG to terminate his or her
employment or association in any manner whatsoever with ACG;
or (iii) engage in any commercial or technical activity
involving the development, formulation, manufacture,
production, distribution, marketing or sale of any product
and services that ACG designs, produces, manufactures,
distributes, markets or sells during the term of this
Agreement or Employee's employment with the Company. The
prescribed territory in which Employee shall not compete with
ACG as outlined in this Paragraph 5.5 shall consist of all of
those areas of the United States in which ACG is doing
business at the time of Employee's termination of employment.
Notwithstanding anything to the contrary in this Paragraph
5.5, the provisions of this Paragraph 5.5 shall not apply to
Employee (a) until the Closing Date and (b) if the
-4-
Company declines to renew this Agreement upon the expiration
of its stated term.
5.6 Employee understands and acknowledges that, due to the unique
nature of the products and services provided by ACG and the
need for sales personnel to have a relatively high degree of
technical knowledge concerning these products and services,
employment by the Company for sales, including the special
training, knowledge, and confidential information that will
be acquired in the course of such employment, will give
Employee distinct and substantial advantages for potential
sales activities concerning such products and services.
Employee further understands and acknowledges that: because
of the definition of products and services covered by this
Agreement, the highly specialized nature of those products
and services, the limited size and number of business
entities in the business of developing and/or selling those
products and services, and the much more numerous
opportunities for Employee to work in his trade with respect
to products and services not covered by this Agreement, the
limitations as to time and geographic area contained in
Paragraph 5.5 are reasonable and are not unduly onerous on
Employee. Employee therefore agrees that the limitations as
to time, geographic area, and scope of activity contained in
Paragraph 5.5 do not impose a greater restraint than is
necessary to protect the Confidential Information, goodwill,
and other business interests of ACG. Employee also agrees
that in light of the facts acknowledged above, the
substantial investment of ACG in developing its business and
providing special training to Employee, and the certain and
substantial harm that ACG would suffer if Employee were to
engage in any of the activities described in Paragraph 5.5,
ACG's need for the protection afforded by Paragraph 5.5 is
greater than any hardship Employee might experience by
complying with its terms. Employee also agrees that, if any
provision of the covenant set forth in Paragraph 5.5 is found
to be invalid in part or whole, ACG may elect, but shall not
be required, to have such provision reformed, whether as to
time, geographic area, scope of activity, or otherwise, as
and to the extent required for its validity under applicable
law, and, as so reformed, such provisions shall be
enforceable.
5.7 Employee acknowledges that a violation or attempted violation
on his part of any provision in this Paragraph 5 may cause
irreparable damage to ACG. Accordingly, in the event of a
breach or threatened breach by Employee of the provisions of
this Paragraph 5, Employee agrees that ACG shall be entitled
as a matter of right to an injunction, out of any court of
competent jurisdiction, restraining any violation or further
violation of such agreements by Employee or his agents,
without showing any evidence of actual monetary
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loss resulting from such breach, including, but not limited
to, restraining Employee from using or disclosing, in whole
or in part, such Confidential Information or trade secrets;
rendering any services to any person, firm, corporation, or
other entity to whom any of such information may have been
disclosed or is threatened to be disclosed; and/or violating
the non-competition provision. Nothing herein shall be
construed as prohibiting ACG from pursuing any other remedies
available to it for such breach or threatened breach,
including the recovery of damages and attorneys' fees from
Employee.
6. Termination of Employment.
6.1 Employee's employment under this Agreement shall terminate on
the occurrence of any of the following events:
(a) End of Term: If the term of employment under the
Agreement or any term of renewal ends.
(b) Death or Disability of Employee: If Employee dies or
becomes disabled such that he no longer is
reasonably able to perform his duties as
contemplated by this Agreement, the Company shall
pay to Employee, or to the estate of Employee if he
dies, that part of his Base Salary which would
otherwise be payable to Employee through the end of
the month in which his death or disability occurs,
after giving effect to accrued sick leave benefits
and accrued vacation time, if any. Upon such
payment, as well as applicable insurance benefits,
if any, all obligations of the Company to the
Employee or his estate shall be fully satisfied, and
this Agreement shall terminate.
(c) Resignation of Employee: If Employee resigns prior
to the end of the term of this Agreement, this
Agreement shall terminate immediately, and the
Company shall pay to Employee that part of his Base
Salary which would otherwise be payable to Employee
through the effective date of his resignation. Upon
such payment, all obligations in any manner
whatsoever of the Company to Employee shall be fully
satisfied.
(d) Change in Ownership, Management, or Employee's
Responsibilities: If there is a change in the
ownership or management of the Company after the
Closing Date, and either of these changes
significantly alters Employee's job responsibilities
or compensation, Employee may resign from his
position within 60 days of such a change. If
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Employee resigns pursuant to this paragraph, the
Company will continue to provide Employee with his
monthly compensation and benefits for a period of
one year after the initial date of any such change.
Employee is not entitled to receive any Bonus if he
resigns as provided in this paragraph. For the
period after Employee's resignation during which
Employee will be paid, Employee will not have any
authority to act on behalf of the Company.
(e) Termination by the Company "With Cause." If Employee
(i) violates any provision of this Agreement; (ii)
fails to perform the services required of him
pursuant to this Agreement; (iii) commits acts of
fraud or dishonesty against ACG; (iv) is convicted
of a crime other than a routine traffic violation;
and/or (v) violates any policies of ACG as outlined
in any ACG policy handbook, the Company may
terminate the employment of Employee with cause. If
Employee is terminated "with cause," Employee shall
not be entitled to receive any further salary or
benefits under this Agreement other than payment for
that part of Employee's compensation that would
otherwise be payable to Employee through the last
date of his employment with the Company. Upon such
payment, all obligations of the Company to Employee
shall be fully satisfied, and this Agreement will
terminate. Employee shall not be entitled to receive
any Bonus or accrued vacation pay if his termination
is "with cause."
(f) Termination by the Company Without Cause. In the
event the Company terminates Employee's employment
for any reason other than described in (e) above,
Employee shall be entitled to that part of the Base
Salary and benefits payable to Employee through the
last date of his employment and such compensation
and benefits shall continue thereafter for a period
of six (6) months from termination.
6.2 Termination of this Agreement shall not relieve Employee of
any continuing obligations expressly provided in this
Agreement, including, without limitation, those set forth in
Paragraphs 5.1 through 5.6.
7. Return of ACG Property.
7.1 All data, drawings, documents, contracts, computerized data,
information printouts, and tapes, tape recordings, documents,
data, accounting records, personnel files, computer
terminals, equipment, and other records and written material
prepared or compiled by Employee or furnished to Employee
while in the employ of the Company shall be the sole and
exclusive property of
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ACG, and none of such data, drawings or other records and
written material, or copies thereof, shall be retained by
Employee upon termination of his employment. This ACG
property shall not be removed from Company premises without
the Company's prior written consent.
7.2 Upon termination of this Agreement or whenever requested by
the Company, Employee immediately shall deliver to the
Company all of the ACG property or any of ACG's documents in
Employee's possession or under Employee's control, including,
but not limited to, all documents or data, Confidential
Information, accounting records, computer terminals, data,
discs, printouts and tapes, accounting machines, and all
office furniture and fixtures, supplies, equipment, and other
personal property placed in the office of Company. No copies
of any such data shall be retained by Employee.
8. Notices.
Any notice required or permitted to be given under this Agreement shall be in
writing and addressed to Employee at 10201 Peppertree, Xxxxxxx, Xxxxxx 00000,
and to the Company, c/o Xxx X. Xxxxxxxxx, 0000 Xxxx Xxxxxxx, Xxxxx 000,
Xxxxxxx, Xxxxx 00000, or to such other address as either party shall designate
by written notice to the other. Notices may be sent by messenger or by
registered or certified mail, postage prepaid, addressed to the party or
parties to be notified, with return receipt requested. Notices sent by
messenger shall be deemed received upon their actual receipt of the party to
whom they are directed. Notices sent by registered or certified mail shall be
deemed received on the third day following their deposit with the United States
Postal Service.
9. Arbitration.
Exclusive jurisdiction with respect to any dispute, controversy, or claim
brought by the Company or Employee concerning the subject matter contained in
this Agreement, including, but not limited to, Employee's employment,
termination from, and/or affiliation with the Company, shall be settled by
arbitration in Houston, Texas, in accordance with the Employment Dispute
Resolution Rules of the American Arbitration Association, and judgment upon the
award rendered by the arbitrator may be entered in any court having
jurisdiction. In reaching his or her decision, the arbitrator shall have no
authority to change or modify any provision of this Agreement. Any and all
charges that may be made for the cost of the arbitration and the fees and
expenses of the arbitrator shall be borne equally by the parties; attorneys'
fees and witness expenses shall be borne by the party incurring them.
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10. Miscellaneous.
10.1 The rights and obligations of the Company under this
Agreement shall inure to the benefit of and shall be binding
upon the successors and assigns of the Company. This
Agreement shall be binding upon the Employee and his agents,
heirs, executors, administrators and legal representatives.
The rights and obligations of Employee hereunder shall not be
assignable by Employee.
10.2 This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
10.3 This Agreement may be executed in multiple counterparts, each
of which shall be deemed an original and all of which shall
constitute one instrument.
10.4 This Agreement contains the entire agreement of the parties
pertaining to the subject matter hereof and supersedes all
prior agreements, understandings, negotiations and
discussions, whether oral or written, and there are no other
warranties, representations, covenants or agreements among
the Company, the Employee and Xxx X. Xxxxxxxxx in connection
with the subject matter hereof.
10.5 The waiver by the Company of a breach of any provision of
this Agreement by Employee shall not operate or be construed
as a waiver by the Company of any subsequent breach by
Employee.
10.6 If a court of competent jurisdiction shall adjudge to be
invalid any clause, sentence, subparagraph, paragraph or
section of this Agreement, such judgment or decree shall not
affect, impair, invalidate, or nullify the remainder of this
Agreement, but the effect thereof shall be confined to the
clause, sentence, subparagraph, paragraph, or section so
adjudged to be invalid.
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The parties have executed this Agreement to be effective as of the day
and year first above written.
1+ USA V ACQUISITION CORP.
-------------------------------------- -----------------------------------
By: Xxx X. Xxxxxxxxx Xxxx X. Xxxxx
Its: Chairman
"COMPANY" "EMPLOYEE"
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ANNEX IV
ADVERTISEMENT AGREEMENT
THIS AGREEMENT, executed this _____ day of ____________, 1997, by and
between XXXXX PUBLICATIONS, INC. ("FPI") and XXXXX LONG DISTANCE SERVICE, INC.
("FLD").
IT IS AGREED between the parties hereto as follows:
1. WHITE PAGE INFORMATION. FPI agrees to publish free of cost to
FLD up to eight white pages of forward text information in
front of each of the 15 Xxxxx Telephone Directories FPI
currently publishes for the next five years after
_____________, 1997. The copy for such pages shall be
supplied by FLD and shall in general be a copy used to
familiarize prospective phone customers of FLD of the various
services offered by FLD and to provide them with instructions
on how to use and order services. The text shall be inserted
before the "telephone companies" portion of the forward white
pages text in each of FPI directories and shall be subject to
FPI approval as to content. Should FLD elect to omit the
eight pages in a certain directory, FPI will not be held
responsible to extend this agreement.
2. YELLOW PAGE ADVERTISING. FPI agrees to provide FLD free of
charge with two half page yellow page ads and approximately
10% of the total number of fillers in FPI's yellow pages for
the above mentioned directories published by FPI for the next
five years after ___________, 1997. All such ads and fillers
shall be subject to FPI's approval as to content.
3. PROSPECT EXCHANGE. FLD and FPI agree to continue to exchange
prospect information of customers and potential customers
that enquire about the other's services.
4. BINDING EFFECT. This agreement shall be binding upon the
parties hereto and their successors and assigns. FPI may
terminate this Advertisment Agreement without liability to
any party on thirty (30) days advance written notice if
Advanced Communications Group, Inc. or any company which
Advanced Communications Group, Inc. controls (collectively,
"ACG") publishes a yellow pages directory covering any New
Territory. "New Territory" means any city or county meeting
the following three conditions: (i) Great Western
Directories, Inc. has not previously published a yellow pages
directory covering such city or county, (ii) FPI published a
directory covering such city or county within the previous
twelve months, and (iii) FPI published a directory covering
such city or county within the twelve months prior to the
date first set forth above.
XXXXX PUBLICATIONS, INC.
By:
--------------------------------
Xxx Xxxxx, President
XXXXX LONG DISTANCE SERVICES, INC.
By:
--------------------------------
Xxxx X. Xxxxx, President
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