1
EXHIBIT 10.11
ASSET PURCHASE AGREEMENT
Dated as of June 1, 1998
among
SPECIALTY CAPITAL SERVICES, INC.,
SPECIALTY TELECONSTRUCTORS, INC.,
TELEFORCE, LLC,
and
Xxxxxxx X. Xxxxxxx
and
Xxxxx X. Xxxxx
2
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of this 1st
day of June, 1998, is entered into by and among Specialty Capital Services,
Inc., Inc., a Nevada corporation ("Buyer"), Specialty Teleconstructors, Inc., a
Nevada corporation ("Parent" and together with Buyer, the "Acquiring
Companies"), Teleforce, LLC, a California limited liability company ("Seller")
and Xxxxxxx X. Xxxxxxx and Xxxxx X. Xxxxx, owners of 100% of the issued and
outstanding equity interests of Seller (collectively, the "Members").
WITNESSETH:
WHEREAS, Seller owns all of the assets described in Section 1.1 of this
Agreement and listed on Exhibits 1.1(a), 1.1(b), 1.1(d) and 1.1(e) attached
hereto (collectively, the "Assets") and the real property and improvements, if
any, described in Section 1.1 of this Agreement and more fully described on
Exhibit 1.1(g) attached hereto (the "Real Property"), and Seller desires to sell
such Assets and Real Property to Buyer on the terms and conditions set forth in
this Agreement; and
WHEREAS, the Member owns 10O% of the outstanding equity of Seller; and
WHEREAS, Buyer desires to purchase the Assets and the Real Property on
the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements, covenants, representations and warranties herein contained, and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
SALE AND PURCHASE OF THE ASSETS
1.1 Sale and Purchase of Assets. At the Closing (as hereinafter
defined), subject to the terms and conditions herein set forth, and on the
basis of the representations, warranties and agreements herein contained,
Seller shall sell to Buyer, and Buyer shall purchase from Seller, all of
Seller's interest in and to the following described Assets and Real Property,
free and clear of all liens, claims, restrictions and encumbrances of any
nature, except as otherwise set forth in Section 1.2 hereof:
(a) All customer and vendor contracts, personal property
leases, real property leases, licenses, permits and other agreements or
commitments related to the operation of the business of Seller as
listed on Exhibit 1.1(a) attached hereto;
(b) All tangible personal property, including without
limitation, all equipment, furniture, fixtures, machinery, vehicles,
spare parts, inventories, leasehold improvements, supplies, and other
personal property used in the business of Seller, including, without
limitation, as listed on Exhibit 1.1(b) attached hereto;
1
3
(c) All books, documents and records relating to the business
of Seller excluding only the minute book, corporate seal and stock
records of Seller and including customer records and lists, marketing
and sales records and literature, employee records and information,
accounting books and records, and insurance records;
(d) All intangible or intellectual property of Seller,
including, without limitation, all rights in and to the name
"Teleforce, LLC" and all patents, copyrights, trade names, trademarks
or service marks owned by Seller, including, without limitation, as
listed on Exhibit 1.1(d) hereto;
(e) All prepaid expenses, deposits, prepaid taxes, accounts
receivable, notes receivable, other receivables and other monies,
securities, cash and cash equivalents of Seller as listed on Exhibit
1.1(e) attached hereto;
(f) All insurance proceeds arising in connection with damage
to the Assets or relating to the business of Seller occurring prior to
the Closing; and
(g) Fee simple title to the real property and improvements,
if any, more fully described on Exhibit 1.1(g) attached hereto.
Seller and the Members, jointly and severally, represent that the Assets and
the Real Property constitute all property and contractual rights necessary for
the conduct of the business of Seller.
1.2 Assumption of Liabilities. Buyer agrees to assume at Closing only
the following liabilities (collectively, the "Assumed Liabilities"): liabilities
and obligations of Seller with respect to the period after the Closing Date
under contracts which meet all of the following conditions: (a) they are entered
in the ordinary course of the business of the Seller, (b) they are disclosed an
Exhibit 1.1(a) to this Agreement, and (c) they are conveyed to Buyer pursuant to
this Agreement. Notwithstanding anything to the contrary contained herein,
except for the Assumed Liabilities, Buyer shall not assume, shall not be deemed
to have assumed, and shall not be liable for, any liabilities or obligations
(whether absolute, accrued, contingent, direct, indirect, due or becoming due,
or otherwise) of Seller existing, arising out of or in any way connected with
the conduct of its business prior to the closing Date (as hereinafter defined),
or the sale by Seller of the Assets and Real Property to Buyer, including,
without limitation, (i) any and all claims of persons employed by Seller prior
to the closing Date, (ii) any and all liability of Buyer arising as a result of
the failure of Seller to file any tax returns or to pay any income, sales,
excise or other taxes, employment or workers, compensation payments, and (iii)
any and all losses, liabilities, damages or expenses resulting from the
assertion of claims made against the Assets by creditors of Seller as a result
of the failure to comply with any Bulk sales law. Seller and The Members agree
to indemnify and hold the Acquiring Companies harmless with respect to any such
liabilities in accordance with Article IX of this Agreement.
1.3 Consideration and Terms. As consideration for the Assets (the
"Purchase Price"), at the Closing, Buyer will deliver or cause to be delivered
2
4
to Seller $640,000 in the form of a cashier's check or wire transfer and 81,270
newly issued shares (collectively, as subject to adjustment in accordance with
the last sentence of this Section 1.3, the "Parent Shares") of Common Stock of
Parent (i.e. the same class of shares as the Parent's shares that are currently
traded on NASDAQ under the symbol SCTR). Notwithstanding anything to the
contrary contained herein the Purchase Price shall be subject to reduction by an
amount equal to the aggregate amount of claims, charges, liabilities or
payables, if any, that are paid by Buyer after the Closing Date but before the
first anniversary of the Closing Date (the "Final Determination Date"), which
claims, charges, liabilities or payables arise out of actions, events,
liabilities or other circumstances existing before the Closing Date that are not
Assumed Liabilities. If on the Final Determination Date, the Purchase Price is
required to be reduced in accordance with the foregoing, then such reduction
shall be effected by the cancellation by Parent of that number of Parent Shares
issued on the Closing Date to Seller having an aggregate value (determined by
valuing each such Parent Share at $31.50 per share (the "Original Issue Price")
equal to the amount of such reduction (shares so canceled are referred to herein
collectively as the "Canceled Parent Shares"), but in no case shall the cash
portion of the Purchase Price be reduced pursuant to this Section 1.3. In order
to facilitate the reduction of the Purchase Price, if any, that may occur on the
Final Determination Date, each of Seller and The Members agrees that Parent may
cancel the Canceled Parent Shares regardless of whether certificates evidencing
such Canceled Parent Shares are then in the possession of Parent or Buyer. This
Section 1.3 is subject to the terms of the Lock-Up Letter (as hereinafter
defined). In the event that, subsequent to the date of this Agreement but prior
to the date that all Parent Shares are released from the restrictions under the
Lock-Up Letter, the shares of the Parent shall have been changed into or
exchanged for a different number or kind of shares or securities through a
reorganization, recapitalization, stock dividend, stock split, reverse stock
split, or other similar change in capitalization, then an appropriate and
proportionate adjustment shall be made in the Parent Shares and the Original
Issue Price.
1.4 Instruments of Conveyance and Transfer. At the Closing, Seller
shall execute and deliver to Buyer bills of sale and assignments and such other
instruments of conveyance and transfer, in form and substance satisfactory to
Buyer and its counsel, as shall be reasonably necessary or appropriate to vest
in Buyer good and indefeasible title to the Assets and the Real Property and to
comply with the purpose of this Agreement.
1.5 Certification as of Closing. At the Closing, Seller and each of the
Acquiring Companies shall execute and deliver a written certification that its
representations and warranties contained in this Agreement remain true and
correct as of the Closing Date.
1.6 Transaction Taxes and Other Closing Costs. Any sales, use, transfer
or similar taxes and any assumption, recording and other similar fees, arising
in connection with the transfer of the Assets from Seller to Buyer shall be
borne solely by Seller.
3
5
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF SELLER AND THE MEMBERS
In order to induce the Acquiring companies to enter into this Agreement
and to consummate the transactions contemplated herein, Seller and the Members
hereby, jointly and severally, represent and warrant, as of the date hereof and
as of the Closing Date as follows:
2.1 Corporate Existence and Authority. Seller is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of California and has all requisite corporate power, licenses,
permits and authority to own and lease its properties and assets and to carry
on its business as has been and is being conducted currently. Seller is
qualified to do business in every jurisdiction in which the character and
location of the assets owned or leased by Seller or the nature of the business
transacted by Seller makes such qualification necessary.
2.2 Articles of Organization And Regulations. Attached as Exhibit 2.2
to this Agreement are complete and correct copies of Seller's Articles of
Organization, as amended to date, certified by the Secretary of State of the
State of California, and Seller's Regulations, as currently in effect,
certified by the Secretary of Seller (such Articles of Organization and
Regulations are sometimes referred to herein collectively as Seller's
"Organizational Documents"). Such Organizational Documents were duly adopted
and are in full force and effect, and Seller is not in violation of any
provision thereof.
2.3 Books and Records. Seller keeps its books, records and accounts
(including, without limitation, those kept for financial reporting purposes and
for tax purposes) in accordance with good business practice and in sufficient
detail to reflect accurately and fairly the transactions and dispositions of
its assets, liabilities and equities. The minute books of Seller contain
complete and accurate records of all of the meetings of its members and
managers and of all action taken by such members and managers. The stock
certificate book and stock transfer ledger of Seller are correct and complete
and reflect accurately the number of shares of stock held by its members.
2.4 Capitalization. Each of the Members owns 50% of the membership
interests in Seller; neither Member has conveyed or pledged any portion of such
membership interests. All presently exercisable voting rights in Seller are
vested exclusively in its outstanding equity interests and there are no voting
trusts or other voting arrangements with respect to any of such equity
interests.
2.5 Subsidiaries And Affiliates. Except as and to the extent set forth
on Exhibit 2.5 attached hereto, Seller does not own, directly or indirectly,
any equity interest in any person, corporation, partnership, joint venture or
other business association.
2.6 Authorization and Effect of Agreement. Seller has all requisite
power and authority to execute, deliver and perform its obligations under this
Agreement, and the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all requisite company and member action. The execution and delivery of this
4
6
Agreement and the consummation of the transactions contemplated herein do not
and will not:
(a) violate, conflict with, modify or cause any default under
or acceleration of (or give any party any right to declare any default
or acceleration upon notice or passage of time or both), in whole or in
part, of any Organizational Document, mortgage, lien, deed of trust,
lease, agreement, instrument, order, decree, judgment, law or any other
restriction of any kind to which Seller is a party or by which it or
any of its properties are bound;
(b) result in the creation of any security interest, lien,
encumbrance, adverse claim or restriction on any property or asset of
Seller; or
(c) violate any law, rule or regulation of any federal or
state regulatory agency.
This Agreement has been duly executed and delivered by Seller and constitutes a
valid and binding obligation of Seller enforceable in accordance with its
terms.
2.7 Financial Information. Attached as hereto as Exhibit 2.7 are
true and complete copies of the following financial statements of Seller
compiled or audited as required by ___________________ , certified public
accountants, (i) unaudited statements of income, changes in financial position
and shareholders equity for the fiscal period ended March 31, 1998; and (ii)
unaudited balance sheet at March 31, 1998 (collectively, the "Financial
Statements"). The Financial Statements, together with the related notes
thereto, are true, correct and complete and present fairly the financial
condition of Seller. The Financial Statements have been prepared in conformity
with generally accepted accounting principles applied on a consistent basis
throughout the periods involved, except as otherwise expressly disclosed in
such Financial Statements.
2.8 Value of Net Assets Acquired; Adjustment of Purchase Prime. If
within 60 days following the Closing Date, in good faith, Buyer determines that
on the Closing Date, the excess (the "Net Value of Assets Received") of the
aggregate fair market value of the assets acquired by Buyer pursuant to this
Agreement as set forth on Exhibits 1.1(a), (b), (d), (e) and (g) over the
aggregate amount of liabilities assumed by Buyer pursuant to this Agreement as
set forth in Section 1.2, was less than $375,000, then the Acquiring Companies
may cancel that number of Parent Shares previously delivered or issued in the
name of Seller that when multiplied by the Original Issue Price equals the
amount difference between the Net Value of Assets Received and $375,000. This
Section 2.8 is subject to the terms of the Lock-Up Letter (as hereinafter
defined).
2.9 Tax Matters: Tax Allocation. Except as set forth in Exhibit 2.9
attached hereto, Seller has timely filed with appropriate federal, state and
local governmental agencies all income, excise, corporate, franchise, property,
sales, payroll, withholding and other tax returns and reports required to be
filed and has paid all taxes and assessments shown to be due or claimed to be
due. The consummation of the transaction contemplated by this Agreement will
not
5
7
result in any transferee tax liability to the Acquiring Companies. The Parties
agree to allocate the Purchase Price (and all other capitalizable costs) among
the Assets for all purposes (including financial accounting and tax purposes)
in accordance with the allocation schedule to be prepared by Buyer following
the Closing.
2.10 Real Property and Improvements; Condition of Tangible Personal
Property. All Real Property, if any, owned by Seller that is being sold to Buyer
pursuant to this Agreement is described in Exhibit 1.1(g) attached hereto.
Seller has good and marketable title to the Real Property and improvements, free
and clear of all mortgages, liens, pledges, charges or encumbrances, except (a)
mortgages and other encumbrances specifically set forth on Exhibit 1.1.(g)
attached hereto; and (b) liens for current taxes not yet due and payable. The
Assets comprised of items of tangible personal property are in good operating
condition and repair (except ordinary wear and tear and such minor defects that
do not affect their value or use in normal operations), are suitable and
sufficient for their current operations and comply in all material respects with
all applicable laws and ordinances. All items of tangible personal property or
parcels of real property leased by Seller are listed on Exhibit 1.1.(a) or
Exhibit 1.1(b) attached hereto (or the agreements or documents attached or
referred to in such Exhibits) and are held under valid, subsisting and
enforceable leases. Except as set forth on Exhibit 1.1(a) or Exhibit 1.1(b)
attached hereto attached hereto, Seller has not received notice of any default
under any such lease and has no knowledge of any basis for default in any
respect under any such lease. All rentals due and payable under all such leases
on or prior to the date hereof and as of the Closing Date have been or will have
been paid in full.
2.11 Commitments and Contracts. Except as described on Exhibit 2.11
attached hereto, as of the date hereof, Seller is not a party to or bound by
any oral or written (a) contract for the employment of any officer or employee
that is not terminable on notice of thirty (30) days (or less) without payment
of any amount on account of such termination; (b) bonus, deferred compensation,
savings, stock option, retirement, pension, profit sharing or severance pay
agreement, plan or arrangement; (c) agreement, contract or indenture relating
to the borrowing of money involving an aggregate unpaid balance of one thousand
dollars ($1,000) or more; (d) guaranty of any obligation for the borrowing of
money or otherwise, excluding endorsements made for collection; (e) management
agreement, consulting or other similar contract or arrangement; (f) collective
bargaining agreement; (g) agreement with any present or former officer,
director or shareholder; (h) license, whether as licensor or licensee; (i)
contract or commitment for the purchase of materials or supplies or for the
performance of services over a period of more than sixty (60) days not in the
ordinary course of business; (j) contract or commitment to make capital
expenditures in excess of $500 in the aggregate; (k) contract or option to
purchase or sell any real property; (1) consent decree; or (m) other contract,
agreement or other commitment that is material to the business, operations,
prospects, properties or assets or to the condition, financial or otherwise, of
Seller. Except as disclosed on Exhibit 2.11 attached hereto, as of the date
hereof seller is not aware of any basis for the termination or cancellation of
any such contracts other than the stated expiration thereof. As of the date
hereof, all of the contracts, commitments and agreements to which Seller is a
party are in full
6
8
force and effect without any default or breach thereof in any material respect
by Seller or any other party thereto.
2.12 Customers. A complete and accurate list of all customers of Seller
from inception of Seller through March 31, 1998, including addresses, telephone
numbers and the names of primary contacts with each customer, has been
delivered by Seller to Buyer, accompanied by a complete and accurate list of
all of Seller's standard prices and any applicable discounts by customer name.
2.13 Litigation and Proceedings. Except as set forth on Exhibit 2.13
attached hereto, (a) there are no actions, suits or proceedings pending or
threatened and there are no claims against or affecting Seller or its
properties or assets, at law or in equity or before or by any governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, or before any arbitrator of any kind, that involve the possibility of
any judgment or liability that may result in any material adverse change in the
operations, properties, or assets or in the condition, financial or otherwise,
of Seller's business, and (b) Seller is not in default under or in violation of
any judgment, order, writ, injunction, decree or award of any court, arbitrator
or governmental department, commission, board, bureau, agency or
instrumentality.
2.14 Governmental Authorizations. Except as disclosed on Exhibit 2.14,
Seller has all licenses, franchises, permits and other governmental
authorizations that are legally required to enable it to conduct its business
in all respects as conducted on the date hereof. Seller is in compliance with
all applicable federal, state and local laws, rules and regulations, including,
without limitation, those imposing taxes; and the execution, delivery and
performance of this Agreement, and the consummation by Seller of the
transactions contemplated hereby, will not violate in any material respect any
provisions of, or constitute a default under, any applicable judgment, order,
writ, injunction, decree or award, of any court, arbitrator or governmental
department, commission, board, bureau, agency or instrumentality.
2.15 Insurance. Except as disclosed on Exhibit 2.15, all material
insurable properties used by Seller in conducting its business are insured in
amounts and against all risks usually insured against by persons operating
similar properties in the localities where such properties are located. Seller
maintains all other insurance coverage in such amounts, types and forms as is
customarily carried by persons similarly situated to protect Seller and its
operations, assets and properties, against such casualties, risks and
contingencies that may arise in the course of its business and operations. All
of the foregoing insurance policies are issued by insurers of recognized
responsibility, are in full force and effect and are fully paid as to all
premiums heretofore due. Exhibit 2.15, attached hereto contains a summary of
the policies of fire, liability, worker's compensation and other forms of
insurance held by Seller that relate to the Assets, the Real Property or
Seller's business.
2.16 Inventory. All inventory of Seller (a) is in good and merchantable
condition, of a quantity and quality usable or saleable in the normal course of
business and has a value, at March 31, 1998, as reflected in the financial
statements, fairly stated at the lower of cost (determined on last-in,
first-out basis) or market; and (b) is not obsolete or defective.
7
9
2.17 Employee Benefit Plans and ERISA. Except as disclosed on Exhibit
2.17, Seller does not maintain or sponsor or make and is not required to make
contributions to any pension, profit-sharing, stock bonus, stock option, thrift
or other retirement plan, medical, hospitalization, vision, dental, life,
disability, vacation or other insurance or benefit plan, employee stock
ownership plan, deferred compensation plan, stock ownership, stock purchase,
performance share, bonus, benefit or other incentive plan, severance plan or
other similar plan, agreement, arrangement or understanding relating to Seller
or its employees, including, without limitation, any such plan, agreement,
arrangement or understanding subject to the Employee Retirement Income Security
Act of 1974 ("ERISA") (collectively, the "Employee Benefit Plans").
2.18 Employees. Seller has provided Buyer with a copy of all written
employment contracts with its officers or employees and a complete and accurate
list of the name and current annual compensation of each manager, salesman,
employee and independent contractor employed by Seller, together with each such
person's job title and amounts and forms of special fringe benefits. Seller is
in full compliance with all federal, state and local laws regarding employment,
wages and hours, and occupational safety and health standards with respect to
its employees. To the best knowledge, information and belief of Seller and The
Members, no officer, manager, salesman, other employee or independent contractor
employed by Seller has any plans to terminate his or her employment with Seller.
2.19 Intellectual Property. Exhibit 1.1(d) attached hereto sets forth a
complete and correct list of each trademark (whether or not registered),
trademark application, trade name, service xxxx, copyright, patent, patent
application, and proprietary intellectual property (including, without
limitation, proprietary computer software, whether in object or source form)
(collectively, "Intellectual Property") owned, used or licensed by Seller and a
description of whether such Intellectual Property is owned or licensed by
Seller. Except as disclosed in such Exhibit 1.1 (d), Seller has the exclusive
right to use such Intellectual Property and the current use by Seller of such
Intellectual Property does not infringe the rights of any other person.
2.20 Toxic or Hazardous Substances. Except as disclosed on Exhibit 2.20
attached hereto, Seller has not directly or indirectly used, stored, generated,
treated, buried, dumped, disposed of or transported any toxic or hazardous
substances on, to or from any real property owned or leased by Seller. Except as
disclosed on Exhibit 2.20, to the best knowledge and belief of Seller, (a) all
real property owned or leased by Seller or used in connection with its business
has not been, and is not now, listed on the Environmental Protection Agency's
list of violating facilities established pursuant to the Clean Water Act or the
National Priorities List established pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), (b) there are no orders,
judgments, claims, suits, actions or proceedings including, but not limited to,
governmental investigations or requests for information, that could have an
adverse effect upon the assets or business of Seller, and (c) there are no
underground storage tanks, contaminated soil, asbestos or other toxic or
hazardous substances on the real property owned or leased by Seller.
2.21 Liabilities. Except as reflected in the Financial Statements or
disclosed on Exhibit 2.21 attached hereto, Seller has no liabilities or
8
10
obligations, whether absolute, accrued, contingent, direct, indirect, due or
becoming due, or otherwise.
2.22 Title; Leased Assets. Upon consummation of the transactions
contemplated hereby, (a) Buyer shall receive good, valid and marketable title
to the Assets and the Real Property, free and clear of all liens, claims and
encumbrances and (b) Buyer will be entitled to use, as Lessee, all leased
assets used in Seller's business, free and clear of all liens, claims and
encumbrances except for Assumed Liabilities.
2.23 Brokers and Finders. There is no agent's, broker's or finder's fee
or commission payable in connection with the transaction contemplated hereby by
virtue of or resulting from any action or agreement by Seller or the Members.
2.24 Full Disclosure. No representation or warranty made by Seller or
the Members in this Agreement and no documentation or certification furnished
or to be furnished to either or both of the Acquiring Companies pursuant to
this Agreement contains any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the statements contained
herein or therein not misleading.
2.25 Restrictive Documents. Except as disclosed on Exhibit 2.25
attached hereto, neither Seller nor either of the members is subject to, or a
party to, any charter, bylaw, hypothec, mortgage, lien, lease, license, permit,
agreement, contract, instrument, law, rule, ordinance, regulation, order,
judgment or decree, or any other restriction of any kind or character, that
materially adversely affects the business practices, operations or condition of
Seller or any of assets or property, or that would prevent consummation of the
transactions contemplated by this Agreement, compliance by the Members with the
terms, conditions and provisions hereof or the operation by Buyer after the
Closing Date of the business conducted by Seller prior to the Closing Date on
substantially the same basis as heretofore operated or that would restrict the
ability of Buyer to acquire any property or conduct business in any area.
2.26 Purchase for Investment; Restrictive Legend. Seller will acquire
the Parent Shares for investment and not with a view to resale or for
distributing all or any part thereof in any transaction which would constitute
a "distribution" within the meaning of the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder (the "Securities Act") The
offering of the Parent Shares to Seller was made only through direct, personal
communication between a duly authorized representative of Seller and a duly
authorized representative of Parent and not through public solicitation or
advertising. Seller and each of the Members acknowledge that the Parent Shares
have not been registered under the Securities Act and Parent is under no
obligation to file a registration statement with the United States Securities
and Exchange Commission with respect to the Parent Shares. Seller and each of
the members understand and agrees that the Parent Shares may not be sold,
transferred, or otherwise disposed of without registration under the Securities
Act or an exemption therefrom, and that in the absence of an effective
registration statement covering the Parent Shares or an available exemption
from registration under the Securities Act and any applicable state laws, the
Parent Shares must be held indefinitely. In particular, Seller and each of the
Members
9
11
are aware that the Parent Shares may not be sold pursuant to Rule 144
promulgated under the Securities Act unless all of the conditions of that Rule
are met. Seller and each of the Members represent that, in the absence of an
effective registration statement covering the Parent Shares, Seller will sell,
transfer, or otherwise dispose of the Parent Shares only in a manner consistent
with its representations and agreements set forth herein and in that certain
Lock-up Letter (as hereinafter defined) executed by Seller as a condition to
the Closing and the consummation of the transactions contemplated by this
Agreement. The certificate(s) evidencing the Parent Shares will bear the
following legend:
"THE SHARES OF THE COMMON STOCK REPRESENTED HEREBY HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS. THE TRANSFERABILITY OF THESE
SECURITIES IS SUBJECT TO THE PROVISIONS OF LOCK-UP LETTER
DATED AS OF ________________________, 1998 AMONG Specialty Capital
Services, Inc., A NEVADA CORPORATION, SPECIALTY
TELECONSTRUCTORS, INC., A NEVADA CORPORATION AND TELEFORCE,
LLC, A CALIFORNIA LIMITED LIABILITY COMPANY, A COPY OF WHICH
MAY BE OBTAINED WITHOUT CHARGE UPON WRITTEN REQUEST TO THE
PRINCIPAL PLACE OF BUSINESS OR THE REGISTERED OFFICE OF
SPECIALTY TELECONSTRUCTORS, INC."
2.27 Investor Qualification. Seller and the Members each represent and
warrant that it, he or she (a) has such knowledge and experience in financial
and business matters that it, he or she is capable of evaluating the merits and
risks of its, his or her investment in the Parent Shares and has the financial
ability to assume the monetary risk associated therewith; (b) is able to bear
the complete loss of its, his or her investment in the Parent Shares; (c) has
received such other documents and information as it, he or she has requested and
has had the opportunity to ask questions of, and receive answers from, Parent
and its management concerning Parent and the terms and conditions of the
offering of the Parent Shares and to obtain additional information; (d) is an
"accredited investor" as defined in Rule 501(a) of the Regulation D promulgated
under the securities Act; (e) is not an entity formed solely to make this
investment; and (f) is not relying upon any statements or instruments made or
issued by any person other than Parent and its officers in making its decision
to invest in the Parent Shares.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE ACQUIRING COMPANIES
In order to induce Seller and the Members to enter into this Agreement
and to consummate the transactions contemplated herein, each of the Acquiring
Companies hereby represent and warrant as follows:
3.1 Organization and Capitalization. It is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation and has all requisite corporate power and authority to consummate
the transactions contemplated hereby. Buyer is a subsidiary of Parent.
10
12
3.2 Authorization and Effect of Agreement. The execution and delivery
of this Agreement and the consummation of the transactions contemplated herein
have been duly authorized and approved by its Board of Directors. No further
corporate approvals or authorizations on its part are necessary to authorize
the consummation of the transactions contemplated herein. This Agreement has
been duly executed and delivered by the Acquiring Companies and constitutes the
valid and binding obligation of the Acquiring Companies, enforceable in
accordance with its terms.
3.3 Consents and Approvals. Except as shall have been obtained prior to
Closing, no filing with, and no permit, authorization, consent or approval of,
any public body or authority is necessary for the consummation by it of the
transactions contemplated hereby. The execution and delivery of this Agreement,
and the consummation by it of the transactions contemplated hereby, will not
conflict with any provisions of its Articles of Incorporation or Bylaws, and
will not violate any order, writ, injunction, decree, statute, rule or
regulation applicable to it.
3.4 Brokers and Finders. Buyer represents and warrants that there is no
agents', broker's or finder's fee or commission payable in connection with the
transactions contemplated herein by virtue of or resulting from any action or
agreement by it.
3.5 Litigation And Proceedings. There are no actions, suits or
proceedings pending or threatened and there are no claims against or affecting
the Acquiring Companies or their properties or assets, at law or in equity or
before or by any governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, or before any arbitrator of any kind,
that involve the possibility of any judgment or liability that may result in
any material adverse change in the operations, properties, or assets or in the
condition, financial or otherwise, of either Acquiring Company's business taken
as a whole.
3.6 Form 10-QSB. The Form 10-QSB filed by Parent with the U.S.
Securities and Exchange Commission for the quarterly period ended March 31,
1998, does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements contained therein not
misleading.
ARTICLE IV
COVENANTS OF SELLER AND THE MEMBERS
Seller and the Members hereby, jointly and severally, covenant and
agree with the Acquiring Companies as follows:
4.1 Conduct of Business. Prior to the Closing Date, Seller shall
conduct its business only in the ordinary course consistent with present
business practices and policies and shall use all reasonable efforts to (a)
preserve intact its present business organization and relationships, (b)
maintain and keep the Assets and the Real Property in good repair and condition
except for deterioration due to ordinary wear and tear, (c) maintain in full
force and effect insurance comparable in amount and in scope of coverage to
that now
11
13
maintained, (d) pay and perform, when due, all material obligations under
contracts, leases and documents relating to or affecting the assets, properties
and business of Seller, and (e) comply with and perform all material
obligations and duties imposed by federal, state and local laws, and all rules,
regulations and orders imposed by federal, state or local governmental
authorities.
4.2 Access to Properties and Records. Between the date of this
Agreement and the Closing Date, Seller shall afford to the officers and
authorized representatives of Buyer full access during normal business hours to
the properties, books and records (including tax returns filed and those in
preparation) of Seller in order that Buyer may have full opportunity to make
such investigation as it shall desire of the affairs and business of Seller,
and Seller's officers shall furnish Buyer and its representatives with such
additional financial and operating data and other information relating to the
business and properties of Seller as Buyer shall from time to time reasonably
request.
4.3 Approvals of Third Parties. As soon as practicable, Seller will use
its best efforts to secure all necessary approvals, if any, of third parties,
that are required of them in order to effect the transactions contemplated by
this Agreement or that are required to be obtained by them prior to the Closing
to permit Buyer to own after the Closing all of the Assets and the Real
Property.
4.4 Additional Documents. Prior to the Closing, Seller shall furnish to
Buyer true and complete copies of all notes, mortgages, instruments and
documents relating to its ownership of the Real Property, all written
contracts, all insurance policies covering the Assets and all documents
regarding Seller's Intellectual Property.
4.5 Certain Changes. Notwithstanding anything in Section 4.1 to the
contrary, Seller has not from December 31, 1997 to the date hereof (except as
disclosed on Exhibit 4.5) and will not, from the date hereof until the Closing
Date (without the written consent of Buyer):
(a) make any material change in the conduct of its business
and will operate its business in the ordinary course consistent with
past practices;
(b) enter into, or amend in any material respect, any contract
or agreement of a type required to be disclosed pursuant to Section
2.11, other than in the ordinary course of business, or contract or
commit to make capital expenditures for more than five hundred dollars
($500) in the aggregate;
(c) issue, deliver or agree to issue or deliver any stock, or
other securities of Seller, or grant or agree to grant any
subscriptions, options, warrants, rights or other agreements or
commitments obligating Seller to issue additional shares of its capital
stock or any securities convertible into its capital stock;
(d) borrow any funds or incur, or become subject to, any
obligation or liability (absolute or contingent), except obligations
and
12
14
liabilities incurred in the ordinary course of business and in no event
more than one thousand dollars ($1,000) in the aggregate, other than
trade payables, normal accrued expenses and payroll expenses;
(e) declare or make any payment of dividends or
distributions of any kind whatsoever to the Members of Seller except
a distribution to the Members no greater than an amount required to
pay income taxes estimated to be imposed on the Members solely by
reason of the inclusion in their income of the net income of Seller for
the period between January 1, 1998 and the Closing Date;
(f) except in the ordinary course of business and for
adequate consideration, sell, transfer or otherwise dispose of, any
material assets;
(g) enter or agree to enter into any agreement or
arrangement granting any preferential rights to purchase any of its
assets, properties or rights or requiring the consent of any party to
the transfer and assignment of any such asset, property or right;
(h) make any loan, accrual or arrangement for payment of
bonuses or special compensation of any kind or any severance or
termination pay to any of its present or former officers, directors or
employees;
(i) enter into an agreement with a person other than Buyer
or any of its affiliates to merge or consolidate with another
corporation or to sell all or substantially all of the assets of
Seller, or acquire a material amount of assets constituting all or
substantially all of the business or assets of any person;
(j) take any action that might reasonably be expected to
impair the business or assets of Seller or fail to take any action that
would cause or permit the representations made in Article II hereof to
be inaccurate at the time of the Closing;
(k) make any change in its articles of incorporation or
bylaws; or
(l) commit itself to do any of the foregoing.
4.6 Notification of Material Events. Prior to the Closing, Seller will
immediately advise Buyer in writing of (i) any event occurring subsequent to the
date hereof which would render any representation or warranty of Seller
contained in this Agreement, if made on or as of the date of such event or the
Closing Date, untrue or inaccurate in any material respect, and (ii) any other
event that would cause a material adverse change in the business of Seller.
4.7 Amendment to Organizational Documents. Immediately following the
Closing, Seller shall cease using the name "Teleforce, LLC" and take such steps
as necessary to amend its organizational documents to change its name.
13
15
ARTICLE V
COVENANTS OF BUYER
Buyer hereby covenants and agrees with Seller as follows:
5.1 Efforts. Buyer will use its best efforts to obtain from all third
parties approvals, if any, necessary for the consummation of the transactions
contemplated by this Agreement.
5.2 Notification of Material Events. Prior to the Closing, Buyer will
immediately advise Seller in writing of (i) any event occurring subsequent to
the date hereof which would render any representation or warranty of Buyer
contained in this Agreement, if made on or as of the date of such event or the
Closing Date, untrue or inaccurate in any material respect, and (ii) any other
event that would cause a material adverse change in the business of Parent on a
consolidated basis.
ARTICLE VI
CONDITIONS TO RESPECTIVE OBLIGATIONS
The respective obligations of the Acquiring Companies, Seller and the
Members to cause the transactions contemplated by this Agreement to be
consummated shall be subject to the satisfaction on or before the Closing Date
of all of the following conditions, except as such parties may waive such
conditions in writing:
6.1 Approvals And Consents. All consents, approvals and authorizations
of, filings and registrations with, and notifications to, all applicable
governmental authorities, licensors or other parties required for the
consummation of the transactions contemplated by this Agreement shall have been
duly obtained or made in form and substance reasonably satisfactory to the
parties hereto and shall be in full force and effect.
6.2 Litigation. On the Closing Date, there shall not be pending or
threatened litigation in any court or any proceeding by any governmental
commission, board or agency, with a view to seeking or in which it is sought to
restrain or prohibit consummation of the transactions contemplated by this
Agreement.
6.3 Employment Agreements. Buyer and each of the Members shall have
entered into a mutually acceptable Employment Agreement on substantially the
terms contained in Exhibit 6.3 hereto and Buyer and each of the employees of
Seller listed on Exhibit 6.3(a) hereto shall have entered into a mutually
acceptable Employment Agreement on substantially the terms contained in Exhibit
6.3(b) hereto.
14
16
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF SELLER AND THE MEMBERS
The obligations of Seller and the Members to cause the transactions
contemplated by this Agreement to be consummated shall be subject to the
satisfaction on or before the Closing Date of all of the following conditions,
except as Seller and The Members may waive such conditions in writing:
7.1 Representations, Warranties and Covenants. All representations and
warranties of the Acquiring Companies contained in this Agreement shall be true
in all material respects on the date of this Agreement and on and as of the
Closing Date as if such representations and warranties that are made on and as
of the Closing Date (except for representations and warranties that are made as
of a specified date).
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF THE ACQUIRING COMPANIES
The obligations of the Acquiring Companies to cause the transactions
contemplated by this Agreement to be consummated shall be subject to the
satisfaction on or before the Closing Date of all of the following conditions,
except as the Acquiring Companies may waive such conditions in writing:
8.1 Representations, Warranties and Covenants. All representations and
warranties of Seller and the Members contained in this Agreement shall be true
in all material respects on the date of this Agreement and as of the Closing
Date as if such representations and warranties were made on and as of the
Closing Date (except for representations and warranties which are made as of a
specified date). Seller and the Members shall have complied in all material
respects with all agreements and covenants required by this Agreement to be
performed by them on or prior to the Closing Date and shall have furnished to
the Acquiring Companies a certificate, dated the Closing Date, signed by Seller
and the Members to such effect.
8.2 Documents of Transfer and Assignment; Lock-Up Letter. All documents
required to be executed and delivered by Seller at or prior to the Closing
shall have been so executed and delivered, including but not limited to, a
Lock-up Letter ("Lock-up Letter") in substantially the form attached hereto as
Exhibit 8.2, all bills of sale, assignments, deeds, transfers and other
documents of conveyance or instruments necessary to transfer the Assets and the
Real Property to Buyer and to consummate the transactions contemplated hereby.
8.3 Consent of Seller's Secured Lenders. Buyer shall have received from
each of its secured lenders, if any, executed documents (in form and substance
reasonably satisfactory to Buyer) terminating their liens.
8.4 Third Party Consents. Buyer shall have received all consents of
third parties requested by Buyer pursuant to this Agreement or required to
consummate the transactions in accordance with this Agreement, including without
limitation, the transfer and assignment to Buyer of the Assets and the Real
Property and all assumed liabilities with the modifications requested by Buyer;
provided, however, that if (a) Seller and the Members have used best efforts to
15
17
obtain all third party consents, (b) as to contracts or other matters requiring
third party consents that have not been obtained as of the Closing
("Non-Consented Matters"), Seller and the Members will continue to use best
efforts to obtain such consents following the Closing, (c) Seller and the
Members will take all actions necessary or appropriate to convey to Buyer the
benefit of any Non-Consented Matters notwithstanding the lack of consent, and
(d) Buyer is satisfied that the Non-Consented Matters are not material and that
the benefits will be effectively conveyed to Buyer, then Buyer shall waive the
requirement of receiving consents with respect thereto.
ARTICLE IX
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
9.1 survival of Representation inns; and Warranties. The
representations and warranties of the parties contained in this Agreement shall
survive beyond the Closing Date and any investigation by or on behalf of the
Acquiring Companies.
9.2 Indemnification by Seller and the Members.
(a) Seller and the Members, jointly and severally, hereby
agree to indemnify, defend and hold harmless each of the Acquiring
Companies against and in respect of any and all claims, demands,
losses, costs (including court costs and attorneys I fees), expenses,
obligations, liabilities, damages, including interest and penalties
that it may incur or suffer as a result or arising out of any breach of
or failure by Seller or The Members to perform any of their respective
representations, warranties or covenants contained in this Agreement or
any exhibit or other instrument furnished or to be furnished by Seller
and the Members under this Agreement.
(b) Seller and the Members, jointly and severally, hereby
agree to indemnify, defend and hold harmless the Acquiring Companies
against and in respect of any and all claims, demands, losses, costs
(including court costs and attorneys' fees), expenses, obligations,
liabilities, damages, including interest and penalties that each of the
Acquiring Companies may incur or suffer as a result of or arising out
of any act, omission, transaction, circumstance, sale of goods or
services, state of facts or other condition which occurred or existed
on or prior to the Closing, whether or not then known, due or payable.
9.3 Indemnification by Buyer. The Acquiring Companies will indemnify,
defend and hold harmless Seller and the Members against and in respect of any
and all claims demands, losses, costs including court costs and attorneys'
fees), expenses, obligations, liabilities, damages, including interest and
penalties that they may incur or suffer as a result of or arising out of any
breach of or failure by the Acquiring Companies to perform any of their
representations, warranties or covenants contained in this Agreement or in any
schedule, certificate, exhibit or other instrument furnished or to be furnished
by them under this Agreement.
16
18
ARTICLE X
GENERAL
10.1 Closing. The closing ("Closing") of the transactions contemplated
by this Agreement shall be held at 2:00 p.m., on the Closing Date at the
offices of Parent located at 00000 Xxx. 00 Xxxxx, Xxxxx Xxxxx, Xxx Xxxxxx 00000
or at such other time on the Closing Date and place as the parties hereto may
mutually agree. The Closing Date (herein so called) shall be the later of (i)
May __, 1998 or (ii) as soon as practicable after the time each of the
conditions set forth in Articles VI through VIII have been satisfied or waived
by the party or parties entitled to the benefit of such conditions, but in no
event later than May 30, 1998.
10.2 Expenses. Each of the Acquiring Companies, Seller and the Members
shall be responsible for all their respective costs and expenses incurred by
them in connection with the transactions contemplated by this Agreement.
10.3 Exhibits. All statements contained in the Exhibits hereto (and any
amendments or supplements to this Agreement) shall be deemed additional
representations and warranties of Seller and the Members.
10.4 Amendment. This Agreement may be amended at any time only by
written agreement of the parties hereto. Any of the terms or conditions of this
Agreement may be waived in writing at any time or prior to the Closing Date by
the party that is entitled to the benefits thereof.
10.5 Termination. This Agreement may be terminated at any time prior
to the Closing:
(a) by the mutual consent in writing of the Acquiring
Companies and Seller;
(b) by either the Acquiring Companies or Seller if the Closing
Date shall not have occurred by June 30, 1998, provided that the right
to terminate under this provision may not be asserted by a party if the
failure to consummate the transactions contemplated herein is
attributable to a breach by such party of any of its representations
and warranties contained in this Agreement or a failure of such party
to fulfill its obligations pursuant to this Agreement;
(c) by either the Acquiring Companies or Seller if any court
of competent jurisdiction in the United States or other United States
governmental body shall have issued an order, decree or ruling or taken
any other action restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree,
ruling or other action shall have become final and non-appealable; or
17
19
(d) by the Acquiring Companies if there has been a material
misrepresentation or material breach on the part of Seller or the
Members in the representations, warranties and covenants of Seller or
the Members set forth herein or if there has been any failure by Seller
or the Members to comply with their respective obligations hereunder,
or by Seller if there has been a material misrepresentation or material
breach on the part of the Acquiring Companies in the representations,
warranties or covenants of the Acquiring Companies set forth herein or
if there has been any failure by the Acquiring Companies to comply with
their obligations hereunder; provided, in either case, the terminating
party must give the other party written notice and 10 days to cure any
such matter.
In the event of the termination and abandonment of this Agreement
pursuant to this Section 10.5, this Agreement shall forthwith become void and
have no effect, without any liability on the part of any party or its
directors, officers, shareholders or members (except the liability of any party
for any breach of this Agreement).
10.6 Bulk Transfer Laws. The Acquiring Companies hereby waive
compliance by Seller with the provisions of any applicable Bulk Transfer Laws
of any state, and Seller warrants and agrees to pay and discharge when due all
claims of creditors asserted against either of the Acquiring Companies by
reason of such noncompliance to the extent that such liabilities are not
specifically assumed by Buyer under this Agreement. Seller hereby indemnifies
and agrees to hold each of the Acquiring Companies harmless from, against and
in respect of (and shall on demand reimburse Buyer for) any loss, liability,
costs or expenses, including, without limitation, attorneys' fees, suffered or
incurred by it by reason of the failure of Seller to pay or discharge such
claims.
10.7 Notices. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given at the time either personally delivered or sent by certified mail,
postage prepaid, as follows:
(a) If to Seller or the Members, to:
Teleforce, LLC
00000 Xxxxxxxx Xxxxxx
Xxxxxx Xxxxx, Xxxxxxxxxx 00000
With a copy to:
Xxxxx Xxxxxxxx, Esq.
00000 Xxxxxxx Xxxx., Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
18
20
(b) If to the Acquiring Companies, to:
Specialty Teleconstructors, Inc.
00000 Xxx. 00 Xxxxx
Xxxxx Xxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx, President
With a copy to:
OmniAmerica, Inc.
0 Xxxxxx Xxxx Xxxxx
Xxxxx 000
Xxxxxxxxx, Xxxx 00000
Attention: F. Xxxxxx Xxxxxx,
Vice President and General Counsel
10.8 Public Announcements. None of the Acquiring Companies, Seller or
The Members shall issue any press release or otherwise make any public
statement with respect to the transactions contemplated hereby without the
prior consent of the other parties.
10.9 Assignment. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of the other parties;
provided, however, that Buyer shall have the right to assign to one (1) or more
direct or indirect wholly-owned subsidiaries of Buyer or Parent any and all of
the rights and obligations of Buyer under this Agreement (such subsidiary
assuming all of the obligations of Buyer in connection with the transactions
contemplated herein and making representations, warranties and covenants
comparable to those made by Buyer herein). No assignment shall relieve the
assignor of its obligations under this Agreement.
10.10 Miscellaneous. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which
together shall constitute one agreement. Headings contained in this Agreement
are for reference purposes only and shall not affect in any manner the meaning
or interpretation of this Agreement. This Agreement and the documents and
instruments referred to herein constitute the entire Agreement between the
parties HERETO AND SUPERSEDES all other understandings with respect to the
subject matter hereof. This Agreement shall be governed by and construed in
accordance with the laws of the State of New Mexico.
10.11 Severability. The provisions of this Agreement shall be deemed
independent and severable, and the invalidity or partial invalidity or
unenforceability of any one (1) provision shall not affect the validity or
enforceability of any other provision.
10.12 Intent of the Parties With Respect to Tax Treatment. The
parties hereto hereby acknowledge that the acquisition of the assets and the
Real Property contemplated by this Agreement is intended to qualify as a
tax-free
19
21
exchange pursuant to Section 368 of the Internal Revenue Code of 1986, as
amended, to the extent of that portion of the Purchase Price that is paid with
Parent Shares.
20
22
IN WITNESS WHEREOF, the undersigned have executed this
Agreement to be effective as of the date first above written.
BUYER:
Specialty Capital Services, Inc.
a Nevada corpora Mi
By: /s/ XXXXXXX X. XXXXXXXX
-----------------------------------
Xxxxxxx X. Xxxxxxxx, President
PARENT:
SPECIALTY TELECONSTRUCTORS, INC.
a Nevada corporation
By: /s/ XXXXXXX X. XXXXXXXX
-----------------------------------
Xxxxxxx X. Xxxxxxxx, President
SELLER:
TELEFORCE, LLC
a California limited liability company
By: /s/ XXXXXXX X. XXXXXXX
-----------------------------------
Xxxxxxx X. Xxxxxxx, Manager
By: /s/ XXXXX X. XXXXX
-----------------------------------
Xxxxx X Xxxxx, Manager
MEMBERS:
/s/ XXXXXXX X. XXXXXXX
--------------------------------------
Xxxxxxx X. Xxxxxxx
/s/ XXXXX X. XXXXX
--------------------------------------
Xxxxx X. Xxxxx
21
