EXECUTION COPY
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RESTATED STOCK PURCHASE AND EXCHANGE AGREEMENT
dated as of the 6th day of October, 1997
by and among
ADVANCED COMMUNICATIONS GROUP, INC.
(PURCHASER)
and
ADVANCED COMMUNICATIONS CORP.
(OLD ACG)
and
KIN NETWORK, INC.
(SELLER)
and
LIBERTY CELLULAR, INC.
(STOCKHOLDER)
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TABLE OF CONTENTS
1. DEFINITIONS...............................................................3
2. PURCHASE, SALE AND EXCHANGE...............................................7
2.1 Issuance of Seller Stock............................................7
2.2 Exchange of Common Stock............................................7
2.3 Section 351 Exchange Plan...........................................7
3. CLOSING...................................................................7
4. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF
SELLER AND STOCKHOLDER....................................................8
4.1 Due Organization....................................................8
4.2 Authorization.......................................................8
4.3 Capital Stock of Seller.............................................9
4.4 Transactions in Capital Stock.......................................9
4.5 No Bonus Shares.....................................................9
4.6 Subsidiaries........................................................9
4.7 Predecessor Status; etc.............................................9
4.8 Spinoff by the Seller...............................................9
4.9 Financial Statements...............................................10
4.10 Liabilities and Obligations........................................10
4.11 Permits and Intangibles............................................11
4.12 Environmental Matters..............................................11
4.13 Material Contracts and Commitments.................................12
4.14 Real Property......................................................12
4.15 Employee Plans.....................................................13
4.16 Employee Plans and Compliance with ERISA...........................14
4.17 Conformity with Law; Litigation....................................15
4.18 Tax Matters........................................................15
4.19 No Violations......................................................16
4.20 Absence of Changes................................................17
4.21 Disclosure.........................................................18
4.22 Prohibited Activities..............................................18
4.23 Insurance..........................................................18
4.24 Draft Registration Statement.......................................19
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5. ADDITIONAL REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS OF STOCKHOLDER................................................19
5.1 Due Organization...................................................19
5.2 Authorization......................................................19
5.3 No Violations......................................................19
5.4 No Plan of Distribution............................................20
5.5 No Retained Rights.................................................20
6. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF
PURCHASER................................................................20
6.1 Due Organization...................................................20
6.2 Authorization......................................................20
6.3 Capital Stock......................................................21
6.4 Transactions in Capital Stock, Organization Accounting.............21
6.5 Subsidiaries.......................................................21
6.6 Financial Statements...............................................21
6.7 Liabilities and Obligations........................................22
6.8 Conformity with Law; Litigation....................................22
6.9 No Violations......................................................22
6.10 Purchaser Securities...............................................23
6.11 Business; Real Property; Material Agreement........................23
6.12 Taxes..............................................................23
6.13 Draft Registration Statement.......................................23
7. OTHER COVENANTS PRIOR TO CLOSING.........................................23
7.1 Access and Cooperation; Due Diligence; Audits......................23
7.2 Conduct of Business Pending Closing................................24
7.3 Prohibited Activities..............................................25
7.4 Exclusivity........................................................25
7.5 Notification of Certain Matters....................................25
7.6 Amendment of Schedules.............................................26
7.7 Compliance with the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976 (the "Xxxx-Xxxxx Act").................................26
7.8 Further Assurance..................................................27
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDER AND SELLER ...........27
8.1 Representations and Warranties; Performance of Obligations.........27
8.2 Satisfaction.......................................................27
8.3 No Litigation......................................................27
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8.4 Opinion of Counsel.................................................27
8.5 Consents and Approvals.............................................28
8.6 Good Standing Certificates.........................................28
8.7 No Material Adverse Change.........................................28
8.8 Secretary's Certificates...........................................28
8.9 Closing of IPO.....................................................28
8.10 Stockholders' Agreement............................................28
8.11 FIRPTA Certificate.................................................28
8.12 Election of Director...............................................28
8.13 Network Service Agreement..........................................29
8.14 Switch Usage Agreement.............................................29
8.15 Consulting, Servicing and Equipment Purchasing Agreement...........29
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER.........................29
9.1 Representations and Warranties; Performance of Obligations.........30
9.2 No Litigation......................................................30
9.3 Seller's Secretary's Certificate...................................30
9.4 Stockholder's Secretary's Certificate..............................30
9.5 No Material Adverse Effect.........................................30
9.6 Satisfaction.......................................................30
9.7 Opinion of Counsel.................................................31
9.8 Consents and Approvals.............................................31
9.9 Good Standing Certificates.........................................31
9.10 FIRPTA Certificate.................................................31
9.11 Closing of IPO.....................................................31
9.12 Stockholders' Agreement............................................31
9.13 Network Service Agreement..........................................31
9.14 Switch Usage Agreement.............................................32
9.15 Consulting, Servicing and Equipment Purchasing Agreement...........32
10. TAX MATTERS..............................................................32
10.1 Liability for Taxes................................................32
10.2 Returns............................................................34
10.3 Tax Proceedings....................................................35
10.4 Payment of Taxes...................................................35
10.5 Cooperation and Exchange of Information............................35
10.6 Survival of Obligations............................................36
10.7 Conflict...........................................................36
10.8 Tax Allocation Arrangements........................................36
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11. TERMINATION OF AGREEMENT.................................................37
11.1 Termination........................................................37
11.2 Liabilities in Event of Termination................................37
12. NONDISCLOSURE OF CONFIDENTIAL INFORMATION................................38
12.1 Seller and Stockholder.............................................38
12.2 Purchaser..........................................................38
12.3 Damages............................................................39
12.4 Survival...........................................................39
13. TRANSFER RESTRICTIONS....................................................39
13.1 Stockholder........................................................39
13.2 Purchaser..........................................................40
14. INVESTMENT REPRESENTATIONS AND VOTING RESTRICTIONS.......................40
14.1 General............................................................40
14.2 Compliance With Law................................................41
14.3 Economic Risk, Sophistication......................................41
14.4 Application to Purchaser...........................................42
14.5 Voting, Ownership and Other Restrictions...........................42
15. REGISTRATION RIGHTS......................................................43
15.1 PiggyBack Registration Rights......................................43
15.2 Demand Registration Rights.........................................43
15.3 Registration Procedures............................................44
15.4 Other Registration Matters.........................................47
15.5 Indemnification....................................................47
15.6 Contribution.......................................................50
15.7 Availability of Rule 144...........................................51
16. GENERAL..................................................................51
16.1 Cooperation........................................................51
16.2 Successors and Assigns.............................................51
16.3 Entire Agreement...................................................51
16.4 Counterparts.......................................................52
16.5 Brokers and Agents.................................................52
16.6 Expenses...........................................................52
16.7 Notices............................................................52
16.8 Governing Law......................................................54
16.9 Survival of Representations and Warranties.........................54
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16.10 Exercise of Rights and Remedies....................................54
16.11 Time...............................................................54
16.12 Reformation and Severability.......................................54
16.13 Commitment to Nominate a Director..................................54
16.14 Remedies Cumulative................................................55
16.15 Captions...........................................................55
16.16 Public Statements..................................................55
16.17 Expansion of Fiber Network.........................................55
16.18 Amendments and Waivers.............................................55
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STOCK PURCHASE AND EXCHANGE AGREEMENT
THIS RESTATED STOCK PURCHASE AND EXCHANGE AGREEMENT (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"), KIN NETWORK,
INC., a Kansas corporation ("Seller"), and LIBERTY CELLULAR, INC., a Kansas
corporation ("Stockholder"), the owner of 300,000 shares of Common Stock, no
par value, of Seller ("Seller Stock"), representing all the issued and
outstanding capital stock of Seller outstanding on the date of this Agreement.
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
Stock Purchase and Exchange Agreement dated as of June 30, 1997 among Old
ACG, Seller and Stockholder ("Original Agreement"); 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 Stockholder and 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, Seller and Stockholder desire to amend
and restate the Original Agreement in its entirety and transform it into
this Agreement; and
WHEREAS, Purchaser desires to acquire 112,221 authorized but unissued
shares of Seller Stock directly from Seller for $10,000,000 as contemplated
herein, and Seller has agreed to sell such stock to Purchaser on the terms
and subject to the conditions hereinafter set forth; and
WHEREAS, Stockholder desires to exchange 89,767 issued and outstanding
shares of Seller Stock for the consideration set forth in Section 2.2 of
this Agreement, and
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Stockholder has agreed to sell such shares to Purchaser on the terms
and subject to the conditions hereinafter set forth; and
WHEREAS, following consummation of the transactions contemplated in
this Agreement, Purchaser and Stockholder will own 49% and 51%,
respectively, of the outstanding shares of Seller Stock;
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 4.8.
"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.
"Balance Sheet Date" has the meaning set forth in Section 4.9.
"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 3.
"Closing Date" has the meaning set forth in Section 3.
"Code" has the meaning set forth in the fifth recital of this Agreement.
Controlled Group" has the meaning set forth in Section 4.16.
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"Demand Registration" has the meaning set forth in Section 15.2.
"Draft Registration Statement" has the meaning set forth in the eighth
recital of this Agreement.
"Environmental Laws" has the meaning set forth in Section 4.12.
"ERISA" has the meaning set forth in Section 4.15.
"Founding Companies" has the meaning set forth in the first recital of this
Agreement.
"Founding Stockholders" has the meaning set forth in Section 15.2.
"Hazardous Wastes" and "Hazardous Substances" have the meanings set forth
in Section 4.12.
"Xxxx-Xxxxx Act" has the meaning set forth in Section 7.7.
"Initial Disclosure Date" means April 30, 1997.
"IPO" has the meaning set forth in the fourth recital of this Agreement.
"IPO Price" has the meaning set forth in the fourth recital of this
Agreement.
"June Balance Sheet" has the meaning set forth in Section 4.9.
"KINI" has the meaning set forth in Section 4.20(xvi).
"Liens" has the meaning set forth in Section 4.3.
"Management Agreement" has the meaning set forth in Section 4.20(xvi).
"Material Adverse Effect" has the meaning set forth in Section 4.1.
"Material Documents" has the meaning set forth in Section 4.19.
"Old ACG" has the meaning set forth in the first paragraph of this
Agreement.
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"Other Stockholders" means the Persons 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 owned an interest on or prior to the closing date of the IPO.
"Person" means an individual, a corporation, a partnership, an association,
a limited liability company, a joint stock company, a trust, or other
unincorporated organization.
"Pre-Closing Date Period" has the meaning set forth in Section 10.1(ii)
"Proceeding Notice" has the meaning set forth in Section 10.3.
"Prohibited Activities" has the meaning set forth in Paragraph 4.22.
"Prospectus" means the prospectus included in a Registration Statement,
including any preliminary prospectus, as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any
portion of the Registerable Securities covered by such Registration
Statement, and by all other amendments and supplements to such prospectus,
including post-effective amendments, and in each case including all
material incorporated by reference therein.
"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 fourth recital of this
Agreement.
"Qualified Plans" has the meaning set forth in Section 4.16.
"Registerable Securities" means the shares of Purchaser Stock acquired by
Stockholder pursuant to Section 2.2.
"Registration Statement" means any registration statement of Purchaser and
any other entity required to be a registrant with respect to such
registration statement pursuant to the requirements of the Securities Act
which covers any of the Registerable Securities, and all
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amendments and supplements to such registration statement, including
post-effective amendments in each case including the Prospectus contained
therein, all exhibits thereto and all materials incorporated by reference
therein.
"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.
"Seller" has the meaning set forth in the first paragraph of this
Agreement.
"Seller Financial Statements" has the meaning set forth in Section 4.9.
"Seller Notice" has the meaning set forth in Section 10.3.
"Seller Stock" has the meaning set forth in the first paragraph of this
Agreement.
"Stockholder" has the meaning set forth in the first paragraph of this
Agreement.
"Stockholder Charter Documents" has the meaning set forth in Section 5.1.
"Stockholder Documents" has the meaning set forth in Section 5.3.
"Stockholder Group" has the meaning set forth in Section 4.18.
"Stockholders' Agreement" means the Stockholders' Agreement to be dated as
of the Closing Date and in substantially the form of Annex III.
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"Switch" means Seller's DMS 100/200/500 Nortel Digital Switch located in
Moundridge, Kansas, together with all associated peripheral equipment,
software, spare parts and supplies.
"Tax" or "Taxes" has the meaning set forth in Section 10.1.
"Transfer Taxes" has the meaning set forth in Section 16.6.
"Unitary Return" has the meaning set forth in Section 10.1(i).
"1933 Act" means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
2. PURCHASE, SALE AND EXCHANGE
2.1 Issuance of Seller Stock. Pursuant to the terms of this Agreement, at
the Closing, Seller will sell, issue and deliver to Purchaser certificates
representing 112,221 shares of Seller Stock. On the terms and subject to the
conditions of this Agreement, at the Closing, Purchaser will purchase 112,221
newly issued shares of Seller Stock from Seller for Ten Million Dollars
($10,000,000) in immediately available funds.
2.2 Exchange of Common Stock. Pursuant to the terms of this Agreement, at
the Closing, Stockholder will transfer, convey and assign to Purchaser
certificates representing 89,767 shares of Seller Stock issued and outstanding
on the date of this Agreement, together with stock powers duly endorsed by
Stockholder so that the foregoing shares of Seller Stock may be duly registered
in Purchaser's name. On the terms and subject to the conditions of this
Agreement, at the Closing, Purchaser will acquire from Stockholder 89,767
shares of Seller Stock in exchange for such number of shares of Purchaser Stock
(rounded to the nearest whole share) as shall be determined by dividing
$10,000,000 by the IPO Price.
2.3 Section 351 Exchange Plan By executing this Agreement, Stockholder
approves and adopts the Section 351 Exchange Plan to the same extent as if a
duly authorized officer of Stockholder had executed the Section 351 Exchange
Plan for and in the name of and on behalf of Stockholder.
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3. 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.
4. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF SELLER AND
STOCKHOLDER
Seller and Stockholder, jointly and severally, represent, warrant, covenant
and agree (i) that all of the following representations and warranties in this
Section 4 are true at the date of this Agreement and, subject to Section 7.6,
shall be true at the Closing Date and (ii) that all of the covenants and
agreements in this Section 4 shall be materially complied with or performed at
and as of the Closing Date . None of the representations, warranties, covenants
and agreements set forth in this Section 4 shall survive the Closing Date.
4.1 Due Organization. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the state of Kansas, and is
duly authorized and qualified to do business and is in good standing under the
laws of each jurisdiction where such qualification is required except (i) as
set forth on Schedule 4.1 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 Seller (as used herein with respect to Seller or with respect to any other
Person, a "Material Adverse Effect"). Schedule 4.1 contains a list of all such
jurisdictions in which Seller is authorized or qualified to do business. True,
complete and correct copies of the Charter Documents and Bylaws, each as
amended, of Seller are attached hereto as Schedule 4.1. The stock records of
Seller as heretofore made available to Purchaser, are correct and complete in
all material respects. There are no minutes in the possession of Seller or
Stockholder which have not been made available to Purchaser, and all of such
minutes are correct and complete in all material respects.
4.2 Authorization. Seller has all requisite corporate power and authority
to enter into this Agreement and to perform its obligations hereunder. The
execution and delivery by Seller of this Agreement and its consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action of Seller. This Agreement has been duly executed and delivered
by Seller and is a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms.
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4.3 Capital Stock of Seller. The authorized capital stock of Seller
consists of 10,000,000 shares of Seller Stock, of which 300,000 shares are
issued and outstanding and owned of record and beneficially by Stockholder,
free and clear of all mortgages, liens, security interests, pledges, voting
trusts, restrictions, encumbrances and claims of every kind (collectively, the
"Liens") except as otherwise set forth on Schedule 4.3. All of the issued and
outstanding shares of the capital stock of Seller (i) have been duly authorized
and validly issued and (ii) are fully paid and nonassessable. Further, none of
such shares was issued in violation of the preemptive rights of any past or
present stockholder.
4.4 Transactions in Capital Stock. Except as set forth on Schedule 4.4,
Seller has not acquired any Seller Stock since January 1, 1993. No option,
warrant, call, conversion right or commitment of any kind exists which
obligates Seller to issue any of its authorized but unissued capital stock.
Seller 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. Neither the
voting stock structure of Seller nor the relative ownership of shares among any
of its stockholder group has been altered or changed in contemplation of the
transactions contemplated by this Agreement.
4.5 No Bonus Shares. None of the outstanding shares of Seller Stock was
issued pursuant to awards, grants or bonuses.
4.6 Subsidiaries. Seller has no subsidiaries; Seller 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 Person; and Seller is not directly or indirectly, a participant in any
joint venture, partnership or other non-corporate entity.
4.7 Predecessor Status; etc. Set forth in Schedule 4.7 is a listing of all
names of all predecessor companies of Seller, including the names of any
entities acquired by Seller (by stock purchase, merger or otherwise) or owned
by Seller or from whom Seller previously acquired material assets in excess of
$250,000, in any case, since January 1, 1991. Except as disclosed on Schedule
4.7, Seller 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.
4.8 Spinoff by the Seller. Except as set forth on Schedule 4.8, there has
not been any sale, spin-off or split-up of material assets in excess of
$250,000 of either Seller or any other Person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, Seller ("Affiliates") since January 1, 1991.
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4.9 Financial Statements. Attached hereto as Schedule 4.9 are copies of the
following financial statements of Seller (the "Seller Financial Statements"):
Seller's audited Balance Sheets as of December 31, 1996, 1995 and 1994 and its
unaudited Balance Sheet as of June 30, 1997 ("June Balance Sheet"), and audited
Statements of Operations, Stockholder's Equity and Cash Flows and related notes
thereto for each of the years in the three-year period ended December 31, 1996
and unaudited Statements of Operations, Stockholder's Equity and Cash Flows for
the six months ended June 30, 1997 and 1996 (June 30, 1997 being hereinafter
referred to as the "Balance Sheet Date"). The audited Seller 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 4.9). The unaudited Seller Financial
Statements were prepared in accordance with the books and records of Seller in
accordance with accounting principles consistently applied. Seller's Balance
Sheets as of December 31, 1996, 1995 and 1994 present fairly the financial
position of Seller as of the dates indicated thereon, and Seller's Statements
of Operations, Stockholder's Equity and Cash Flows for each of the three years
in the period ended December 31, 1996 present fairly the results of operations
for the periods indicated thereon in accordance with generally accepted
accounting principles. Seller's financial statements at and for the two years
in the period ended December 31, 1995 have been examined by Xxxxxxx and Xxx,
LLP, independent public accountants. Seller's financial statements for the year
ended December 31, 1996 have been examined by Xxxxxxx Xxxxxxxxx & Co.,
independent public accountants.
4.10 Liabilities and Obligations. Seller has no material liabilities of any
kind, character or description, whether accrued, absolute, secured or
unsecured, contingent or otherwise, that are not reflected on the June Balance
Sheet or otherwise reflected in the Seller Financial Statements at the Balance
Sheet Date, including loan agreements, indemnity or guaranty agreements, bonds,
mortgages, Liens, pledges or other security agreements. Except as set forth on
Schedule 4.10, since the Initial Disclosure Date Seller 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. Seller has also disclosed to
Purchaser on Schedule 4.10, 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.
4.11 Permits and Intangibles. Seller 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 Seller has delivered to
Purchaser an accurate list and summary description (which is set forth on
Schedule 4.11) 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 Seller (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 4.12). To
the knowledge of Seller, the licenses, franchises, permits and other
governmental authorizations listed on Schedules 4.11 and 4.12 are valid in all
material respects, and Seller 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. Seller has conducted and
is conducting its business in substantial compliance with the requirements,
standards, criteria and conditions set forth in the licenses, franchises,
permits and other governmental authorizations listed on Schedules 4.11 and 4.12
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 Seller.
Except as specifically provided in Schedule 4.11, the transactions contemplated
by this Agreement will not result in a material default under or a material
breach or violation of, or materially adversely affect the rights and benefits
afforded to Seller by, any such license, franchise, permit or government
authorization.
4.12 Environmental Matters. Except as set forth on Schedule 4.12, (i)
Seller has substantially 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) Seller has
obtained and substantially adhered to all necessary permits and other approvals
necessary to treat, transport, store, dispose of and otherwise handle Hazardous
Wastes and
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Hazardous Substances, a list of all of which permits and approvals is set forth
on Schedule 4.12 and reported to the appropriate authorities, to the extent
required by all Environmental Laws, all past and present sites owned and
operated by Seller 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 Seller except as permitted by
Environmental Laws; (iv) no on-site or off-site location to which Seller 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, could lead to any material claim against
Seller 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) Seller has no contingent liability in connection
with any release of any Hazardous Waste or Hazardous Substance into the
environment.
4.13 Material Contracts and Commitments. Seller has listed on Schedule 4.13
all material contracts, commitments and similar agreements to which Seller 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 other Schedules to
this Agreement, (x) in existence as of the Initial Disclosure Date and (y)
entered into since the Initial Disclosure Date, and in each case has delivered
true, complete and correct copies of such agreements to Purchaser. Seller has
complied with all material commitments and obligations pertaining to it, and is
not in material default under any contract or agreement listed on Schedule 4.13
and no notice of default under any such contract or agreement has been
received. Seller has also indicated on Schedule 4.13 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 $25,000 by
Seller.
4.14 Real Property. Seller has good and insurable title to the real
property owned or leased by it and used or held for use in its business,
subject to no Lien except for:
(w) Liens reflected on Schedules 4.10 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
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(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 are located which do not adversely
affect in any material respect the current use of the property.
All leases of new property by Seller are in full force and effect in all
material respects and constitute valid and binding agreements of the parties
(and their successors) thereto in accordance with their respective terms.
4.15 Employee Plans. Schedule 4.15 represents an accurate list of all
employee benefit plans of Seller, including all employment agreements and other
agreements or arrangements containing "golden parachute" or other similar
provisions, and deferred compensation agreements, and classifications of
employees covered thereby as of the Initial Disclosure Date. Except for the
employee benefit plans, if any, described on Schedule 4.15, Seller does not
sponsor, maintain or contribute to any plan program, fund or arrangement that
constitutes an "employee pension benefit plan," and Seller 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. Seller
has not sponsored, maintained or contributed to any employee pension benefit
plan other than the plans set forth on Schedule 4.15, nor is Seller 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 Seller's employees.
Seller 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
(other than for premium payments) or to any multi employer employee pension
benefit plan under the provisions of Title IV of ERISA.
All employee benefit plans listed on Schedule 4.15 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.
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All accrued contribution obligations of Seller with respect to any plan
listed on Schedule 4.15 have either been fulfilled in their entirety or are
fully reflected on the balance sheet of Seller as of the Balance Sheet Date.
4.16 Employee Plans and Compliance with ERISA. All employee benefit plans
listed on Schedule 4.15 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 4.15. Except as
disclosed on Schedule 4.15, 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 4.15. Neither Stockholder nor any such plan listed in
Schedule 4.15, nor Seller has engaged in any transaction prohibited under the
provisions of Section 4975 of the Code or Section 406 of ERISA. No employee
benefit plan listed on Schedule 4.15 has incurred an accumulated funding
deficiency, as defined in Section 412(a) of the Code and Section 302(1) of
ERISA; and Seller 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 (other than for premium payments). Furthermore:
(v) there have been no 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 4.15 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 4.15;
(y) Seller has not incurred liability under Section 4062 of ERISA; and
(z) no circumstances exist pursuant to which Seller could reasonably
be expected to have any direct or indirect liability whatsoever (including,
but not limited to, any liability to any multi employer 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
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heretofore maintained or contributed to by any entity other than
Seller 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 Seller
("Controlled Group")
The transactions contemplated by this Agreement together with any amounts paid
or payable by Company or any member of the Controlled Group has not resulted in
and will not result in payments to "disqualified individuals" (as defined in
Section 280G(c) of the Code) of Company or any member of the Controlled Group
which, individually or in the aggregate will constitute "excess parachute
payments" (as defined in Section 280G(b) of the Code) resulting in the
imposition of the excise tax under Section 4999 of the Code or the disallowance
of deductions under Section 280G of the Code.
4.17 Conformity with Law; Litigation. Except to the extent set forth on
Schedule 4.17, Seller 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
Seller which would have a Material Adverse Effect; and except to the extent set
forth on Schedule 4.17, there are no material claims, actions, suits or
proceedings, commenced or, to the knowledge of Seller, threatened, against or
affecting Seller, 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 Seller and no notice of any claim,
action, suit or proceeding, whether pending or threatened, has been received by
Seller or the Stockholder. Seller 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 all such permits, licenses, orders and other
governmental approvals set forth on schedules to this Agreement, and is not in
violation of any of the foregoing which might have a Material Adverse Effect.
4.18 Tax Matters. Except as otherwise expressly noted in this Section 4.18
or set forth in Schedule 4.18, the operations of Seller have been reflected in
the consolidated Federal income tax returns of the affiliated group of
corporations having Stockholder as its common parent (the "Stockholder Group")
that have been filed or will be timely filed pursuant to the Code, for the
taxable years ended on or before December 31, 1996 during which Stockholder
owned, directly or indirectly, 100% of the capital stock of Seller. Seller and
Stockholder have (or will have by the Closing) caused to be duly filed in a
timely manner (taking into account all extensions of due dates) with the
appropriate Federal, state, local, and other governmental authorities all
material Returns which are required to be filed by or with respect to any
member of the Stockholder Group, to the extent Seller could be liable for such
Taxes, and have (or will have by the Closing) caused to be paid or deposited or
made adequate provision in accordance with generally accepted accounting
principles consistently applied for the payment of all Taxes (including
estimated Taxes) required with respect
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to the periods covered by such Returns or by any taxing authority. Adequate
provision has been made for all Taxes due with respect to Seller and with
respect to each member of the Stockholder Group, to the extent Seller could be
liable for such Taxes, for all periods through the Balance Sheet Date, and
adequate provision will be made for all such Taxes for the period between the
Balance Sheet Date and the Closing Date. Except as set forth in Schedule 4.18
and except for Liens securing the payment of Taxes not yet due and payable, (i)
there are no Liens upon any assets of Seller, (ii) there are no outstanding
agreements or waivers by or with respect to Seller or any member of the
Stockholder Group extending the period for assessment or collection of any
Taxes for which Seller could be liable, (iii) there is no pending action,
proceeding or investigation, and, to the best knowledge of the Seller and
Stockholder, no action, proceeding or investigation has been threatened by any
governmental authority, for assessment or collection of Taxes with respect to
Seller or Taxes of any member of the Stockholder Group for which Seller could
be held liable, and (iv) no claim for assessment or collection of Taxes has
been asserted and no actual or proposed assessment has been made against Seller
with respect to the Taxes of Seller or Taxes of any member of the Stockholder
Group for which Seller could be held liable. No consent or election under
Section 341(f) of the Code has been filed by or on behalf of Seller.
4.19 No Violations. Seller is not in violation of its Charter Documents.
Neither Seller nor, to the knowledge of Seller, any other party thereto, is in
material default under any lease, instrument, agreement, license, or permit set
forth on any schedule to this Agreement, 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 4.19, (i) the rights and
benefits of Seller 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 material default under, any of
the terms or provisions of the Material Documents or the Charter Documents.
Except as set forth on Schedule 4.19, 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 in all material respect, and
consummation of the transactions contemplated hereby will not give rise to any
right to termination, cancellation or acceleration or loss of any material
right or benefit. Except as set forth on Schedule 4.19, to the knowledge of
Seller, none of the Material Documents prohibits the use or publication by
Seller or Purchaser of the name of any other party to such Material Document,
and none of the Material Documents prohibits or restricts Seller from freely
providing services to any other customer or potential customer of Seller,
Purchaser or any of the Other Founding Companies.
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4.20 Absence of Changes. Since the Initial Disclosure Date, except as set
forth on Schedule 4.20, there has not been:
(i) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of Seller;
(ii) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of
Seller;
(iii) any change in the authorized capital of Seller 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 Seller;
(v) any increase in the compensation, bonus, sales commissions or fee
arrangement payable or to become payable by Seller 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 labor claims filed,
or any other similar labor event or condition of any character, materially
adversely affecting the business of Seller;
(vii) any sale or transfer, or any agreement to sell or transfer, any
material assets, property or rights of Seller to any Person, including,
without limitation, Stockholder and its Affiliates outside the ordinary
course of business of Seller;
(viii) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to Seller, including without limitation any
indebtedness or obligation of Stockholder or any Affiliate thereof outside
the ordinary course of business of Seller;
(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 Seller or requiring consent of any party to the transfer and
assignment of any such assets, property or rights;
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(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 Seller's business;
(xi) any waiver of any material rights or claims of Seller;
(xii) any material breach, amendment or termination of any contract,
agreement, license, permit or other right to which Seller is a party:
(xiii) any transaction by Seller 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;
(xv) any other distribution of property or assets by Seller outside
the ordinary course of Seller's business; or
(xvi) any amendment of or modification to the Management Agreement
dated as of January 1, 1997 between XXXX, X.X., a Kansas limited liability
company ("KINI"), and Seller ("Management Agreement").
4.21 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 Seller for the time periods with respect to
which such information was requested. Seller'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 Seller is a party, or to which its properties are
subject, or by any other fact or circumstance regarding Seller (which fact or
circumstance was, or should reasonably, after due inquiry, have been known to
Seller) that is not disclosed pursuant hereto or thereto.
4.22 Prohibited Activities. Except as set forth on Schedule 4.22, Seller
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").
4.23 Insurance. Seller maintains such policies of workmen's compensation,
casualty, liability and other insurance as it considers appropriate under the
circumstance. Schedule 4.23 accurately identifies the types and coverage
amounts of such insurance.
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4.24 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 Seller and Stockholder 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.
5. ADDITIONAL REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF
STOCKHOLDER
Stockholder further represents warrants, covenants and agrees (i) that all
of the following representations and warranties in this Section 5 are true at
the date of this Agreement and, subject to Section 7.6, shall be true at the
Closing Date and (ii) that all of the covenants and agreements in this Section
5 shall be complied with or performed at and as of the Closing Date. The
representations and warranties set forth in this Section 5 shall survive until
the Expiration Date.
5.1 Due Organization. Stockholder is a corporation duly organized, validly
existing and in good standing under the laws of the state of Kansas, 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 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 Stockholder (the "Stockholder Charter Documents") are
attached hereto as Schedule 5.1.
5.2 Authorization. Stockholder has all requisite corporate power and
authority to enter into this Agreement and to perform its obligations
hereunder. The execution and delivery by Stockholder of this Agreement and its
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action of Stockholder. This Agreement has been duly
executed and delivered by Stockholder and is a valid and binding obligation of
Stockholder, enforceable against Stockholder in accordance with its terms.
5.3 No Violations. Stockholder is not in violation of any Stockholder
Charter Document. Neither the Stockholder nor, to the knowledge of Stockholder,
any other party thereto, is in default under any lease, instrument, agreement,
license, or permit to which Stockholder is a party, or by which Stockholder, or
any of its respective properties, are bound (collectively, the "Stockholder
Documents"); and 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
-19-
violation or breach or constitute a default under, any of the terms or
provisions of the Stockholder Documents or the Stockholder Charter Documents.
None of the Stockholder 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.
5.4 No Plan of Distribution. Stockholder has no 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.
5.5 No Retained Rights. Stockholder will not retain any right after the
Closing in any Seller 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
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 7.6,
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 none of the representations, warranties,
covenants or agreements set forth in this Section 6 shall survive the Closing
Date.
6.1 Due Organization. Purchaser and Old ACG each is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Delaware, 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
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 (collectively the "Purchaser
Charter Documents") are all attached hereto as Schedule 6.1.
6.2 Authorization. Each of Purchaser and Old ACG has all requisite
corporate power and authority to enter into this Agreement and to perform its
obligations hereunder. The execution and delivery by each of Purchaser and Old
ACG of this Agreement and its consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action of Purchaser
and Old ACG. This Agreement has been duly executed and delivered by each of
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Purchaser and Old ACG and is a valid and binding obligation of each 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
in 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 Purchaser 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 Purchaser. Subject to the consummation of the reverse
stock split referred to in the seventh 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 6.4 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 6.4 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
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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 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 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 in Schedule 6.8
or 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 its 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 is 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. Neither Purchaser nor Old ACG, to the knowledge of
Purchaser or Old ACG, or 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 its properties, are
bound (collectively, the "Purchaser Documents"); and (i) the rights and
benefits of Purchaser or 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
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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 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
Stockholder pursuant to this Agreement will have been duly authorized prior to
the Closing, and upon consummation of this Agreement in accordance with the
terms hereof, 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 other Founding Companies. Except as disclosed on Schedule 6.11, 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 Taxes. Old ACG has filed Federal, state and other Tax returns required
to be filed for any fiscal period ended on or before the Balance Sheet Date.
Any amount shown as an accrual for Taxes on Purchaser Financial Statements are
sufficient for the payment of all Taxes of the kinds indicated.
6.13 Draft 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.
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, Seller
will afford to the officers and authorized representatives of Purchaser
access to all of Seller's sites, properties, books and records and will
furnish Purchaser with such additional financial and
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operating data and other information as to the business and properties
of Seller as Purchaser may from time to time reasonably request. Seller
will cooperate with Purchaser, its representatives, auditors and counsel in
the preparation of any documents or other material that may be required in
connection with any documents or materials required by this Agreement.
Purchaser 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 12.
(ii) Between the date of this Agreement and the Closing, Purchaser
will afford to the officers and authorized representatives of Seller and
Stockholder access to all sites, properties, books and records of
Purchaser, Old ACG and the other Founding Companies, and will furnish
Seller and Stockholder 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 Seller and Stockholder may from
time to time reasonably request. Purchaser will cooperate with Seller and
Stockholder, their 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. Seller and
Stockholder 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 12.
7.2 Conduct of Business Pending Closing. Unless otherwise approved in
writing by Purchaser, between the date of this Agreement and the Closing Date,
Seller will:
(i) carry on business in substantially the same manner as it has
heretofore;
(ii) maintain its 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 obligations under
agreements relating to or affecting its respective assets, properties or
rights;
(iv) keep in full force and effect in all material respects the
present insurance policies or other comparable insurance coverage; and
(v) maintain material compliance with all material permits, laws,
rules and regulations, consent orders, and all other orders of applicable
courts, regulatory agencies and similar governmental authorities;
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7.3 Prohibited Activities. Between the date of this Agreement and the
Closing Date, Seller, will not, without prior written consent of Purchaser:
(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;
(iii) declare or pay any dividend, or make any distribution in respect
of Seller Stock, redeem or otherwise acquire or retire for value any shares
of Seller Stock;
(iv) merge or consolidate or agree to merge or consolidate with or
into any other corporation;
(v) commit a material breach or amend or terminate any material
agreement, permit, license or other right; or
(vi) modify or amend the Management Agreement.
7.4 Exclusivity. Neither Stockholder, nor Seller, nor any agent, officer,
director, trustee or any representative of either 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,
(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, Seller or merger, consolidation or business combination
of Seller.
7.5 Notification of Certain Matters. Stockholder and Seller 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 Seller or Stockholder contained herein to be untrue or
inaccurate in any material respect at or prior to the Closing Date and (ii) any
material
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failure of Stockholder or Seller 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 shall give prompt notice to Seller and
Stockholder 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 and 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 7.5 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 7.6, (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.
7.6 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 Seller, Stockholder, Purchaser or Old ACG that constitutes
or reflects an event or occurrence that would have a Material Adverse Effect
may be made unless Purchaser and Old ACG or Stockholder and Seller, 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 7.6. 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 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 or a supplementation of any Schedule hereto.
7.7 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 Seller and Stockholder 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 shall be
deemed a condition precedent in addition to the conditions
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precedent set forth in Section 8 of this Agreement, (iii) the parties agree to
cooperate and use their best efforts to cause all filings required under the
Xxxx-Xxxxx Act to be made, and (iv) Purchaser shall be responsible for all
filing fees under the Xxxx-Xxxxx Act.
7.8 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 STOCKHOLDER AND SELLER
The obligations of Stockholder and Seller 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. Upon Closing, all
conditions not satisfied shall be deemed to have been waived:
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 each of Purchaser
and Old ACG shall have been delivered to Seller and Stockholder.
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 Seller and Stockholder and
their 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 Seller
or Stockholder as a result of which the management of Seller or Stockholder
deems it inadvisable to proceed with the transactions hereunder.
8.4 Opinion of Counsel. Seller and 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 Seller and Stockholder, relating
to, insofar as Purchaser and Old ACG concerned, as the case may be, (a) the
authorization, execution, delivery, performance and enforceability of the
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Agreement and the Stockholders' Agreement and (b) the validity and due issuance
of the Purchaser Stock.
8.5 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.
8.6 Good Standing Certificates. Purchaser shall have delivered to Seller
and 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 Seller and Stockholder, in each state in which Purchaser is
authorized to do business, showing that Purchaser is in good standing and
authorized to do business and that all state franchise and/or income tax
returns and taxes for Purchaser, 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 that would constitute a Material Adverse
Effect.
8.8 Secretary's Certificates. Seller and Stockholder shall have received a
certificate or certificates, dated the Closing Date and signed by the Secretary
of each of Purchaser and Old ACG, certifying the completeness and accuracy of
the attached copies of Purchaser's Charter Documents (including amendments
thereto), By-Laws (including amendments thereto), and resolutions of the board
of directors approving Purchaser's and Old ACG's entering into this Agreement
and its 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, and Purchaser shall have
raised sufficient funds in the IPO to permit it to consummate, and Purchaser
shall have consummated, the acquisitions described on Schedule 8.9, unless
Seller and Stockholder shall otherwise agree.
8.10 Stockholders' Agreement. Purchaser shall have executed and delivered
the Stockholders' Agreement.
8.11 FIRPTA Certificate. Purchaser shall have delivered to Seller a
certificate to the effect that it is not a foreign Person under Section
1.1445-2(b) of the Treasury Regulations.
8.12 Election of Director. An individual designated by Stockholder and
reasonably qualified to serve on the board of directors of a publicly held
company shall have been elected a
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member of the Board of Directors of Purchaser; and Xxx X. Xxxxxxxxx shall have
entered into an agreement with Stockholder pursuant to which Xx. Xxxxxxxxx will
agree to vote all shares of Purchaser Stock owned by him in support of each
candidate for director of Purchaser nominated pursuant to Section 16.13.
8.13 Network Service Agreement. Seller and Purchaser shall have executed
and delivered a mutually acceptable network usage agreement pursuant to which
Seller will (i) provide Purchaser with DS3 and T1 capacity on its fiber optic
network at stipulated prices per DSO mile and termination services at
stipulated prices for interstate and intrastate terminations, (ii) increase the
capacity of its fiber optic network when requested by Purchaser and (iii)
service and maintain its fiber optic network, in each case in a timely,
professional manner that comports with generally recognized industry standards
and practices.
8.14 Switch Usage Agreement. Seller and Purchaser shall have entered into a
mutually acceptable switch usage agreement pursuant to which Seller will (i)
lease to and maintain for Purchaser, at a stipulated monthly port fee per T1 of
usage, the Switch for the purpose of switching Purchaser's calls within a 500
mile radius of the Switch, (ii) increase, at its cost and expense, the port
capacity of the Switch to a stipulated level as promptly as practicable
following the Closing Date and (iii) provide, at its cost and expense,
additional port capacity to the extent such increased capacity is requested by
Purchaser on a quarterly basis, in each case in a timely, professional manner
that comports with generally recognized industry standards and practices and
the guidelines of any equipment supplier to the extent relevant.
8.15 Consulting, Servicing and Equipment Purchasing Agreement. KINI and
Purchaser shall have entered into a mutually acceptable consulting, servicing
and cooperative purchasing agreement pursuant to which KINI will (i) provide to
Purchaser consulting services relating to network formation and switch
installations and the expansion and maintenance thereof and (ii) pool the
purchases of switches, switch bays, off-net termination agreements and other
equipment and services on behalf of Purchaser with similar purchases by other
communications companies managed by KINI to the end that all participants in
such pooled purchases can maximize the discounts available to the Persons
participating in a cooperative buying program.
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. Upon Closing, all conditions
not satisfied shall be deemed to have been waived.
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9.1 Representations and Warranties; Performance of Obligations. All the
representations and warranties of Seller and Stockholder 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 Seller and Stockholder on or
before the Closing Date shall have been duly performed or complied with in all
material respects; and Seller and Stockholder each shall have delivered to
Purchaser a certificate dated the Closing Date and signed by it 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 Seller's Secretary's Certificate. Purchaser shall have received a
certificate, dated the Closing Date and signed by the Secretary of Seller,
certifying the completeness and accuracy of the attached copies of Seller's
Charter Documents (including amendments thereto), By-Laws (including amendments
thereto), and resolutions of the board of directors approving the Seller's
entering into this Agreement and the consummation of the transactions
contemplated hereby.
9.4 Stockholder's Secretary's Certificate. Purchaser shall have received a
certificate, dated the Closing Date and signed by the Secretary of Stockholder,
certifying the completeness and accuracy of the attached copies of
Stockholder's Charter Documents (including amendments thereto), By-Laws
(including amendments thereto), and resolutions of the board of directors
approving the Stockholder entering into this Agreement and the consummation of
the transactions contemplated hereby.
9.5 No Material Adverse Effect. No event or circumstance shall have
occurred with respect to Seller which would constitute a Material Adverse
Effect, and Seller 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 Seller to conduct
its business.
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.
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9.7 Opinion of Counsel. Purchaser shall have received an opinion from
counsel to Seller and Stockholder, dated the Closing Date, in the form and
substance reasonably acceptable to the Purchaser, relating to, insofar as
Seller and Stockholder are concerned, (a) the authorization, execution,
delivery, performance and enforceability of the Agreement and the Stockholders'
Agreement and (b) the validity and the issuance of the shares of Seller Stock
issued by Seller and exchanged by Stockholder pursuant to this Agreement.
9.8 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
required consents and approvals of third parties shall have been obtained.
9.9 Good Standing Certificates. Seller 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 Seller's state
of incorporation and, unless waived by Purchaser, in each state in which Seller
is authorized to do business, showing Seller is in good standing and authorized
to do business and that all state franchise and/or income Tax returns and Taxes
for Seller for all periods prior to the Closing have been filed and paid.
9.10 FIRPTA Certificate Stockholder shall have delivered to Purchaser a
certificate to the effect that it is not a foreign Person under Section
1.1445-2(b) of the Treasury Regulations.
9.11 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 by this Agreement.
9.12 Stockholders' Agreement. Seller and Stockholder shall have executed
and delivered the Stockholders' Agreement.
9.13 Network Service Agreement. Seller and Purchaser shall have executed
and delivered a mutually acceptable network usage agreement pursuant to which
Seller will (i) provide Purchaser with DS3 and T1 capacity on its fiber optic
network at stipulated prices per DSO mile and termination services at
stipulated prices for interstate and intrastate terminations, (ii) increase the
capacity of its fiber optic network when requested by Purchaser and (iii)
service and maintain its fiber optic network, in each case in a timely,
professional manner that comports with generally recognized industry standards
and practices.
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9.14 Switch Usage Agreement. Seller and Purchaser shall have entered into a
mutually acceptable switch usage agreement pursuant to which Seller will (i)
lease to and maintain for Purchaser, at a stipulated monthly port fee per T1 of
usage, the Switch for the purpose of switching Purchaser's calls within a 500
mile radius of the Switch, (ii) increase, at its cost and expense, the port
capacity of the Switch to a stipulated level as promptly as practicable
following the Closing Date and (iii) provide, at its cost and expense,
additional port capacity to the extent such increased capacity is requested by
Purchaser on a quarterly basis, in each case in a timely, professional manner
that comports with generally recognized industry standards and practices and
the guidelines of any equipment supplier to the extent relevant.
9.15 Consulting, Servicing and Equipment Purchasing Agreement. KINI and
Purchaser shall have entered into a mutually acceptable consulting, servicing
and cooperative purchasing agreement pursuant to which KINI will (i) provide to
Purchaser consulting services relating to network formation and switch
installations and the expansion and maintenance thereof and (ii) pool the
purchases of switches, switch bays, off-net termination agreements and other
equipment and services on behalf of Purchaser with similar purchases by other
communications companies managed by KINI to the end that all participants in
such pooled purchases can maximize the discounts available to the Persons
participating in a cooperative buying program.
10. TAX MATTERS
10.1 Liability for Taxes.
(i) For purposes of this Agreement, "Taxes" means (x) all Federal,
foreign, state or local net or gross income, gross receipts, sales, use,
real property gains or transfer, ad valorem, property, value-added,
franchise, production, severance, windfall profit, withholding, payroll,
employment, excise or similar taxes, assessments, duties, fees, levies or
other governmental charges, together with any interest thereon, any
penalties, additions to tax or additional amounts with respect thereto and
any interest in respect of such penalties, additions or additional amounts,
and (y) liability for the payment of any consolidated or combined tax
(including, without limitation, any liability imposed pursuant to Treasury
Regulations Section 1.1502-6 as a result of being a member of the
Stockholder Group), together with any interest thereon, any penalties,
additions to Tax or additional amounts with respect thereto and any
interest in respect of such penalties, additions or additional amounts, of
the type described in clause (x) above. "Unitary Return" shall mean any
return with respect to any Taxes, other than Federal income Taxes, filed on
a consolidated, combined, or unitary basis by any group of corporations of
which Seller is a member.
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(ii) Stockholder shall be liable for, and shall indemnify and hold
Seller and its Affiliates harmless from, (x) any Taxes of Stockholder and
its Affiliates (other than Seller) imposed on Seller solely on the basis of
joint and several liability for such Taxes (including, without limitation,
any liability imposed pursuant to Treasury Regulations Section 1.1502-6 for
Federal income Taxes incurred by any member of the Stockholder Group), (y)
any Taxes (other than Taxes described in clause (x) above or Section 4.18)
imposed on or incurred by Seller for any taxable period ending on or before
the Closing Date (or the portion, determined as described in subsection
(iv) of this Section 10.1, of any such Taxes imposed on or incurred by
Seller for any taxable period beginning on or before and ending after the
Closing Date which is allocable to the portion of such period occurring on
or before the Closing Date (the "Pre-Closing Date Period")), excluding any
such Taxes arising from any event occurring on the Closing Date, but after
the Closing, which is outside the ordinary course of the business of Seller
and (z) any attorneys' fees or other litigation costs incurred by Seller in
connection with any payment from Stockholder under subsection (ii) of this
Section 10.1.
(iii) Seller shall be liable for, and shall indemnify and hold
Stockholder and its Affiliates (other than Seller) harmless from (x) any
Taxes imposed on or incurred by Seller for which Stockholder is not liable
under subsection (ii) of this Section 10.1, and (y) any attorneys' fees or
other litigation costs incurred by Stockholder in connection with any
payment from Seller under subsection (iii) of this Section 10.1.
(iv) Whenever it is necessary for purposes of subsection (ii) or (iii)
of this Section 10.1 to determine the portion of any Taxes imposed on or
incurred by Seller for a taxable period beginning on or before and ending
after the Closing Date which is allocable to the Pre-Closing Date Period,
the determination shall be made, in the case of property or ad valorem
Taxes or franchise Taxes (which are not measured by, or based upon, net
income), on a per diem basis and, in the case of other Taxes, by assuming
that the Pre-Closing Date Period constitutes a separate taxable period of
Seller (and any tax partnerships in which it has an interest) and by taking
into account the actual taxable events occurring during such period (except
that exemptions, allowances and deductions for a taxable period beginning
on or before and ending after the Closing Date that are calculated on an
annual or periodic basis, such as the deduction for depreciation, shall be
apportioned to the Pre-Closing Date Period ratably on a per diem basis).
(v) Seller agrees to pay to Stockholder any refund received (whether
by payment, credit, offset or otherwise) after the Closing Date by Seller,
in respect of any Taxes for which Stockholder is liable under subsection
(ii) of this Section 10.1, but only to the extent such
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refund has not been reflected as a receivable on the balance sheet of
Seller as of the Closing Date and does not result from the carryback of
losses or credits from a taxable period of Seller ending after the Closing
Date. Stockholder agrees to pay to Seller any refund received (whether by
payment, credit, offset or otherwise) by Stockholder or its Affiliates in
respect of any Taxes for which Seller is liable under subsection (iii) of
this Section 10.1. The parties shall cooperate in order to take all
necessary steps to claim any such refund. Any such refund received by a
party or its Affiliate for the account of the other party shall be paid to
such other party within 90 days after such refund is received.
(vi) Within 120 days after Closing, Stockholder will provide to Seller
a schedule which sets forth the following information: (w) a schedule of
the book/tax differences in the basis of assets and liabilities of Seller
for Tax purposes as of the Closing Date, (x) the changes in the earnings
and profits of Seller for the tax year ending December 31, 1997 through the
Closing Date, (y) all material consents and elections with respect to Taxes
of or with respect to Seller that have been filed with any taxing
authority, and (z) the amounts of any net operating loss, net capital loss,
foreign tax credit and tax credit carryforwards allocable to Seller as of
December 31, 1996. Stockholder shall provide and deliver to Seller a
schedule no later than 120 days after Closing showing for the short tax
year 1997 any and all adjustments for any net operating loss, capital
losses or alternative minimum tax credit allocable to Seller arising from
the short period for year 1997.
10.2 Returns.
(i) All Returns which relate to any Taxes of Seller (and any tax
partnerships in which (x) Seller owns an interest and (y) Stockholder has
responsibility for preparing and filing partnership returns or reports)
shall be prepared and filed by the party which is legally responsible
therefor. All income and deductions of Seller for the period beginning on
January 1, 1996 and extending through the Closing Date will be included in
the consolidated Federal income Tax return of the Stockholder Group for the
year ending December 31, 1997 and will be reported on a basis consistent
with previously filed returns. Seller shall cooperate with Stockholder and
shall make available all necessary records and timely take all action
necessary to allow Stockholder to prepare and file the Returns which it is
responsible for preparing and filing under subsection (i) of this Section
10.2.
(ii) Prior to the Closing, Stockholder will provide to Seller a
schedule setting forth the open tax years in each jurisdiction in which any
returns relating to income Taxes are filed by or with respect to Seller.
Tax information including copies of (x) pro forma separate Federal income
Tax returns for Seller as a member of the Stockholder Group and
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(y) state and local Tax returns of Seller or, with respect to Unitary
Returns and in lieu of providing copies thereof, a schedule showing the
modifications to compute Seller's state taxable income for each of the
taxable years ended December 31, 1993 through December 31, 1996, and the
short period for year 1997 shall be provided by Stockholder and delivered
to Seller as soon as practicable but no later than 120 days after the
Closing Date.
10.3 Tax Proceedings. In the event Seller receives notice (the "Proceeding
Notice") of any examination, claim, adjustment, or other proceeding with
respect to the liability of Seller for Taxes for any period for which
Stockholder is or may be liable under subsection (ii) of Section 10.1, Seller
shall notify Stockholder in writing thereof (the "Seller Notice") no later than
the earlier of (x) 30 days after the receipt by Seller of the Proceeding Notice
or (y) ten days prior to the deadline for responding to the Proceeding Notice.
As to any such Taxes for which Stockholder is solely liable under subsection
(ii) of Section 10.1, Stockholder shall be entitled at its expense to control
or settle the contest of such examination, claim, adjustment, or other
proceeding, provided (i) it notifies Seller in writing that it desires to do so
no later than the earlier of (x) 30 days after receipt of the Seller Notice or
(y) five days prior to the deadline for responding to the Proceeding Notice and
(ii) Stockholder may not, without the consent of Seller, agree to any
settlement which could result in an increase in the amount of Taxes for which
Seller is liable under subsection (iii) of Section 10.1. The parties shall
cooperate with each other and with their respective Affiliates, and will
consult with each other, in the negotiation and settlement of any proceeding
described in this Section 10.3. Seller will provide, or cause to be provided,
to Stockholder necessary authorizations, including powers of attorney, to
control any proceedings which Stockholder is entitled to control pursuant to
this Section 10.3.
10.4 Payment of Taxes. All Taxes with respect to Seller shall be paid by
the party that is legally responsible therefor. Except as otherwise provided in
this Section 10, any amount to which a party is entitled under this Section 10
shall be promptly paid to such party by the party obligated to make such
payment following written notice to the party so obligated stating that the
Taxes to which such amount relates have been paid or incurred and providing
details supporting the calculation of such amount.
10.5 Cooperation and Exchange of Information. Seller on the one hand, and
Stockholder on the other hand, will provide, or cause to be provided, to the
other party copies of all correspondence received from any taxing authority by
such party or any of its Affiliates in connection with the liability of any for
Taxes for any period for which such other party is or may be liable under
subsection (ii) or (iii) of Section 10.1. Stockholder shall assist Seller in
obtaining the consent of the partners in any tax partnership in which Seller
owns an interest to make (x) any elections in a return of the tax partnership
which Seller deems necessary and (y) an allocation of tax
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partnership items in the manner described in subsection (iv) of Section 10.1.
The parties will provide each other with such cooperation and information as
they may reasonably request of each other in preparing or filing any Return,
amended Return, or claim for refund, in determining a liability or a right of
refund, or in conducting any audit or other proceeding, in respect of Taxes
imposed on the parties or their respective Affiliates. Seller on the one hand,
and Stockholder on the other hand, and their Affiliates will preserve and
retain all Returns, schedules, work papers and all material records or other
documents relating to any such Returns, claims, audits, or other proceedings
until the expiration of the statutory period of limitations (including
extensions) of the taxable periods to which such documents relate and until the
final determination of any payments which may be required with respect to such
periods under this Agreement and shall make such documents available at the
then current administrative headquarters of such party to the other party or
any Affiliate thereof, and their respective officers, employees and agents,
upon reasonable notice and at reasonable times, it being understood that such
representatives shall be entitled to make copies of any such books and records
relating to Seller as they shall deem necessary. Seller on the one hand, and
Stockholder on the other hand, further agree to permit representatives of the
other party or any Affiliate thereof to meet with employees of such party on a
mutually convenient basis in order to enable such representatives to obtain
additional information and explanations of any documents provided pursuant to
this Section 10.5. Seller on the one hand, and Stockholder on the other hand,
shall make available to the representatives of the other party or any Affiliate
thereof sufficient work space and facilities to perform the activities
described in the two preceding sentences. Any information obtained pursuant to
this Section 10.5 shall be kept confidential, except as may be otherwise
necessary in connection with the filing of returns or claims for refund or in
conducting any audit or other proceeding. Each party shall provide the
cooperation and information required by this Section 10.5 at its own expense.
10.6 Survival of Obligations. The obligations of the parties set forth in
this Section 10 shall be unconditional and absolute and shall remain in effect
without limitation as to time.
10.7 Conflict. In the event of a conflict between the provisions of this
Section 10 and any other provisions of this Agreement, the provisions of this
Section 10 shall control.
10.8 Tax Allocation Arrangements. Effective as of the Closing Date, all
liabilities and obligations between Seller on one hand, and Stockholder or its
Affiliates on the other hand, under any tax allocation agreement or arrangement
in effect prior to the Closing Date shall be extinguished in full (without the
necessity of any payment with respect thereto) and any liabilities or rights
existing under any such agreement or arrangement shall terminate and shall no
longer be enforceable. Stockholder and its Affiliates shall execute any
documents necessary to effectuate the provisions of this Section 10.8.
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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 the boards of directors of Seller, Stockholder and
Purchaser;
(ii) by the Seller and Stockholder (acting through their boards of
directors), on the one hand, or by Purchaser (acting through its board of
directors), on the other hand, if the transactions contemplated by this
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 this Agreement to the extent required to
be performed by it prior to or on the Closing Date;
(iii) by Stockholder and Seller, 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 Seller and Stockholder, on the one hand, or by Purchaser, on
the other hand, if a material breach or default shall be made by the other
party or parties in the observance or in the due and timely performance of any
of the material 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 Seller and Stockholder, on the one hand, or by Purchaser, on the
other hand, if either such party or parties declines to consent to an amendment
or supplement to a Schedule proposed by the other party or parties pursuant to
Section 7.6 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
7.6, 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.
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12. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
12.1 Seller and Stockholder. Seller and Stockholder recognize and
acknowledge that they had in the past, currently have, and in the future may
have, access to certain confidential information of Purchaser and Old ACG, such
as operational policies, and pricing and cost policies that are valuable,
special and unique assets of Purchaser and Old ACG. Seller and Stockholder
agree that they will not disclose such confidential information to any Person
for any purpose or reason whatsoever, except (i) to authorized representatives
of Purchaser and (ii) to counsel and other advisers; provided that such
advisers (other than counsel) agree to the confidentiality provisions of this
Section 12.1, unless (x) such information becomes known to the public generally
through no fault of Seller and Stockholder, (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), Seller and
Stockholder, if possible, shall give immediate 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 either
Seller or Stockholder of the provisions of this Section 12.1, Purchaser and Old
ACG shall be entitled to an injunction (without the posting of bond or proof of
actual damages) restraining Seller or Stockholder, as the case may be, from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting Purchaser or Old ACG 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, Seller and Stockholder (including their representatives,
advisors and legal counsel) shall, within ten business days after a request
from Purchaser, deliver all copies of the confidential information of Purchaser
and Old ACG in their possession in any form whatsoever (including, but not
limited to, reports, memoranda or other materials prepared by Seller and
Stockholder or their representatives, advisors or legal counsel at their
direction).
12.2 Purchaser. Each of Purchaser and Old ACG recognizes and acknowledges
that it has in the past, currently has and in the future may have, prior to the
Closing, access to certain confidential information of Seller, such as
operational policies, and pricing and cost policies that are valuable, special
and unique assets of Seller. Each of Purchaser and Old ACG agrees that, prior
to the Closing, or if the transactions contemplated by this Agreement are not
consummated, it will not disclose such confidential information to any Person
for any purpose or reason whatsoever, except (i) to authorized representatives
of Seller, Stockholder or Other Founding Companies; and (ii) to counsel and
other advisers; provided that such advisers (other than counsel) agree to the
confidentiality provisions of this Section 12.2, unless (x) such information
becomes known to the public generally through no fault of Purchaser and Old
ACG(y) disclosure is required by law or the
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order of any governmental authority under color of law; provided, that prior to
disclosing any information pursuant to this clause (y), Purchaser shall, if
possible, give immediate prior written notice thereof to Seller and provide
Seller 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 Purchaser or Old ACG of the provisions of this Section
12.2, Seller shall be entitled to an injunction (without the posting of bond or
proof of actual damages) restraining Purchaser and Old ACG from disclosing, in
whole or in part, such confidential information. Nothing herein shall be
construed as prohibiting Seller 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,
Purchaser or Old ACG (including its representatives, advisors and legal
counsel) shall within ten business days after a request from Seller, deliver
all copies of the confidential information of Seller in their possession in any
form whatsoever (including, but not limited to, any reports, memoranda, or
other materials prepared by either Purchaser or Old ACG or its representatives,
advisors or legal counsel at its direction).
12.3 Damages. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 12.1 and 12.2 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 another party by injunction and restraining order.
12.4 Survival. The obligations of the parties under this Article 12 shall
survive the termination of this Agreement for a period of three years from the
Closing Date or the termination of this Agreement pursuant to Section 11.
13. TRANSFER RESTRICTIONS
13.1 Stockholder. For a period of one year from the Closing, except
pursuant to Section 16, Stockholder shall not sell, assign, exchange, transfer,
encumber, pledge, distribute, appoint, or otherwise dispose of any Purchaser
Stock received by Stockholder. The Purchaser Stock delivered to Stockholder
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
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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 TRANSFER AGENT) AFTER
THE DATE SPECIFIED ABOVE.
13.2 Purchaser. Except to the extent noted in the legend set forth below,
Purchaser shall not sell, assign, exchange, transfer, encumber, pledge,
distribute, appoint, or otherwise dispose of any Seller Stock acquired pursuant
to this Agreement. The Seller Stock delivered to Purchaser pursuant to Section
2 of this Agreement will bear a legend substantially in the form set forth
below and containing such other information as Seller 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
UNLESS AND UNTIL (A) THE SHARES REPRESENTED BY THIS SECURITY 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 THE SHARES
REPRESENTED BY THIS SECURITY 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 THE SHARES REPRESENTED BY THIS SECURITY 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.
14. INVESTMENT REPRESENTATIONS AND VOTING RESTRICTIONS
14.1 General. Stockholder acknowledges that the Purchaser Stock to be
delivered to Stockholder 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
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being acquired by Stockholder solely for its own account, for investment
purposes only, and not with a view to the distribution thereof.
14.2 Compliance With Law. Stockholder represents, warrants, covenants and
agrees 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 13 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.
THESE SECURITIES ARE ALSO SUBJECT TO THE VOTING RESTRICTIONS CONTAINED IN
SECTION 14.5 OF THE STOCK PURCHASE AND EXCHANGE AGREEMENT DATED AS OF JUNE 17,
1997 BY AND BETWEEN ADVANCED COMMUNICATIONS GROUP, INC., KIN NETWORK, INC. AND
LIBERTY CELLULAR, INC..
14.3 Economic Risk, Sophistication. Stockholder represents that it has
received, has read and understands the Draft Registration Statement, and in
particular the risk factors described therein. Stockholder further represents
that it 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 it
is capable of evaluating the merits and risks of the proposed investment in
Purchaser or (ii) together with the senior executives of Seller, with whom it
has consulted, has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of the proposed
investment in Purchaser.
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Stockholder has had an adequate opportunity to ask questions and receive
answers from the officers of Purchaser and Seller 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. Stockholder
has asked any and all questions in the nature described in the preceding
sentence and all questions have been answered to its satisfaction.
14.4 Application to Purchaser. The provisions of Sections 14.1, 14.2 and
14.3 shall apply, mutatis mutandis, to Purchaser and the Seller Stock acquired
by it from Seller and Stockholder pursuant to the terms of this Agreement.
14.5 Voting, Ownership and Other Restrictions.
(i) Stockholder agrees, as a stockholder, to be present, in person or
to be represented by proxy, at all meetings of stockholders of Purchaser so
that all shares of voting securities of Purchaser beneficially owned by it
may be counted for the purpose of determining the presence of a quorum at
such meetings.
(ii) Stockholder shall not, unless the prior approval of the Board of
Directors of Purchaser has been obtained (and then only to the extent
express approval has been obtained):
(w) deposit any voting securities of Purchaser in a voting trust
or subject them to a voting agreement or other arrangement of similar
effect (other than this Agreement);
(x) join a partnership, limited partnership, syndicate, or other
group for the purpose of acquiring, holding or disposing of voting
securities of Purchaser within the meaning of Section 13(d) of the
Securities Exchange Act of 1934, as amended;
(y) initiate, propose or otherwise solicit stockholders or become
a "participant" in a "solicitation" (as such terms are defined in
Regulation 14A under the Securities Exchange Act of 1934, as amended),
or induce or attempt to induce any other person to initiate a tender
offer or an exchange offer for voting securities of Purchaser or any
change of control of Purchaser; or
(z) take any action by written consent in lieu of a meeting.
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(iii) Stockholder's obligations under this Section 14.5 shall remain
in full force and effect until the tenth anniversary of the Closing Date.
15. REGISTRATION RIGHTS
15.1 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 Stockholder prompt written notice of its
intent to do so. Upon the written request of Stockholder given within 15
business days after receipt of such notice, Purchaser shall cause to be
included in such registration all Registerable 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
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 15.1 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.
15.2 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 Stockholder or its
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 an agreement) (the persons referred to in
clauses (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 the shares of 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,
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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 15.2 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 15.1.
15.3 Registration Procedures. All expenses incurred in connection with the
registrations under this Section 15 (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 15.1 and 15.2 Purchaser will, as expeditiously as
practicable:
(i) Prepare and file with the SEC a registration statement with
respect to such Registerable 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 15.2 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 of Purchaser holding a majority of the Registerable
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 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,
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that before filing a registration statement or prospectus relating to
the sale of Registerable Securities, or any amendments or supplements
thereto, Purchaser will furnish to counsel to each holder of Registerable
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 Registerable Securities covered by the
registration statement and to each underwriter, if any, of such
Registerable 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
Registerable Securities.
(iv) Use its best efforts to register or qualify the Registerable
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 Registerable 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 15.3(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 Registerable 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
Registerable Securities.
(vi) Immediately notify each seller of Registerable 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 15.3(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
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so that, as thereafter delivered to the purchasers of such
Registerable Securities, each 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 Registerable 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 Parent holding a majority of the shares of Registerable
Securities covered by the Registration Statement may reasonably request in
order to effect an underwritten public offering of such Registerable
Securities.
(xi) Make available for inspection by the seller of such Registerable
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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15.4 Other Registration Matters.
(i) Each Stockholder holding shares of Registerable Securities covered
by a Registration Statement referred to in this Section 15 will, upon
receipt of any notice from Purchaser of the happening of any event of the
kind described in Section 15.3(vi), forthwith discontinue disposition of
the Registerable Securities pursuant to the registration statement covering
such Registerable Securities until such holder's receipt of the copies of
the supplemented or amended prospectus contemplated by Section 15.3(vi).
(ii) If a registration pursuant to Section 15.1 or 15.2 involves an
underwritten offering, Stockholder and its permitted assigns agrees,
whether or not its shares of Registerable 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 Registerable
Securities, or of any security convertible into or exchangeable or
exercisable for any Registerable 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,
Stockholder agrees not to effect any sale or distribution, including any
sale pursuant to the registration rights provided in Section 15.1, of any
Registerable Securities, or of any security convertible into or
exchangeable or exercisable for any Registerable 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.
15.5 Indemnification.
(i) In the event of any registration of any securities of Purchaser
under the 1933 Act pursuant to Section 15.1 or 15.2, Purchaser will, and it
hereby agrees to, indemnify and hold harmless, to the extent permitted by
law, each seller of any Registerable 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:
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(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 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 the 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
Registerable Securities in any registration statement filed in accordance
with Section 15.1 or 15.2, that Purchaser shall have received an
undertaking reasonably satisfactory to it from the prospective seller of
such Registerable Securities or any underwriter, to indemnify and hold
harmless (in the same manner and to the same extent as set forth in Section
15.5(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
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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 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 15.5
are to be several and not joint; provided, however, that, with respect to
each claim pursuant to this Section 15.5, Purchaser shall be liable for the
full amount of such claim, and each such seller's liability under this
Section 15.5 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 Registerable 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 15.5, 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 15.5, 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 Registerable 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
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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 15.5(iii),
the indemnified party will have the right to defend such claim by all
appropriate proceedings, 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 15.5(iii), then such indemnifying party shall,
subject to the provisions of this Section 15.5, 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 Registerable 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.
15.6 Contribution. In order to provide for just and equitable contribution
in circumstances under which the indemnity contemplated by Section 15.5 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 Registerable 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 Registerable 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
-50-
considerations appropriate under the circumstances. Purchaser and each person
selling securities agree with each other that no seller of Registerable
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 15.5(ii) were available. Purchaser and each such seller
agree with each other and the underwriters of the Registerable 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
Registerable Securities. For purposes of this Section 15.6, 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 Registerable
Securities within the meaning of Section 15 of the 1933 Act shall have the same
rights to contribution as Purchaser or a seller of Registerable Securities, as
the case may be.
15.7 Availability of Rule 144. Purchaser shall not be obligated to register
shares of Registerable 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.
16. GENERAL
16.1 Cooperation. Seller, Stockholder and Purchaser shall deliver or cause
to be delivered to each 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.
16.2 Successors and Assigns. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law), and any such
purported assignment shall be void and of no legal force and effect.
16.3 Entire Agreement. This Agreement (including the Schedules and Annexes)
and the documents delivered pursuant hereto constitute the entire agreement and
understanding among the Seller, Stockholder, Purchaser and Old ACG 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 Seller,
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Stockholder, Purchaser and Old ACG, 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 each party to this Agreement shall make a good faith effort to
cross reference disclosures, as necessary or advisable, between related
Schedules.
16.4 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.
16.5 Brokers and Agents. Except as disclosed on Schedule 16.5, each party
represents and warrants that it employed no broker or agent in connection with
this transaction and agrees to indemnify the other 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.
16.6 Expenses. Whether or not the transactions herein contemplated shall be
consummated, Purchaser will pay the fees, expenses and disbursements of
Purchaser, Old ACG and Seller 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, Old ACG and Seller under this Agreement. Stockholder shall pay all
sales, use, transfer, real property transfer, gains, stock transfer and other
similar taxes ("Transfer Taxes") imposed in connection with the exchange of
shares of Seller Stock owned by it for shares of Purchaser Stock, the fees and
expenses of Stockholder's legal counsel and all other costs and expenses
incurred by the Stockholder in its performance and compliance with all
conditions to be performed by it under this Agreement.
16.7 Notices. All notices or 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.
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(x) If to Purchaser or Old ACG, addressed to Purchaser at:
Advanced Communications Group, 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
(y) If to Stockholder, addressed to it at:
Liberty Cellular, Inc.
000 Xxxxxxxx Xxxxxxxxx
Xxxxxx, Xxxxxx 00000
Attn: E. Xxxxxx Xxxxxxx
Telecopy No.: 000-000-0000
(z) If to Seller, addressed to it at:
KIN Network, Inc.
000 Xxxxxxxx Xxxxxxxxx
Xxxxxx, Xxxxxx 00000
Attn: E. Xxxxxx Xxxxxxx
Telecopy No.: 000-000-0000
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with a copy to:
Xxx Xxxxx Xxxxx, Esq.
000 Xxxxxxxx Xxxxxxxxx
Xxxxxx, Xxxxxx 00000
Telecopy No.: 000-000-0000
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 16.7 from time to time.
16.8 Governing Law. This Agreement shall be construed in accordance with
the laws of the State of Kansas.
16.9 Survival of Representations and Warranties. The representations,
warranties, covenants and agreements of the parties made herein and at the
Closing Date or in writing delivered pursuant to the provisions of this
Agreement shall survive the consummation of the transactions contemplated
hereby and any examination on behalf of the parties until the Expiration Date.
16.10 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.
16.11 Time. Time is of the essence with respect to this Agreement.
16.12 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.
16.13 Commitment to Nominate a Director. Subject to its fiduciary
obligations, Purchaser's Board of Directors agrees to nominate as a director,
at the expiration of the initial term of the individual appointed to
Purchaser's Board of Directors pursuant to Section 8.12 and thereafter as
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long as Stockholder beneficially owns at least 100,000 shares of Purchaser
Stock, an individual designated by Stockholder that is reasonably qualified to
serve on the board of directors of a publicly held company.
16.14 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.
16.15 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.
16.16 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.
16.17 Expansion of Fiber Network. As promptly as practicable following the
Closing Date, Seller will extend its fiber optic network from Wichita, Kansas
to Tulsa, Oklahoma substantially along the route and in the manner set forth in
Schedule 16.17.
16.18 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 Seller, Stockholder and Purchaser. Any amendment or waiver
effected in accordance with this Section 16.18 shall be binding upon each of
the parties hereto.
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: CHAIRMAN AND CHIEF EXECUTIVE
OFFICER
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ADVANCED COMMUNICATIONS CORP.
BY:
-------------------------------------
NAME: XXX X. XXXXXXXXX
TITLE: CHAIRMAN AND CHIEF EXECUTIVE
OFFICER
KIN NETWORK, INC.
BY:
-------------------------------------
NAME: E. XXXXXX XXXXXXX
TITLE: PRESIDENT
LIBERTY CELLULAR, INC.
BY:
-------------------------------------
NAME: E. XXXXXX XXXXXXX
TITLE: PRESIDENT
-56-
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.
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