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EXHIBIT 2.15
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AGREEMENT AND PLAN OF MERGER
AMONG
PENTASTAR COMMUNICATIONS, INC.,
PENTASTAR ACQUISITION CORP. V
VISION COMMUNICATIONS GROUP, INC.
AND THE
SHAREHOLDER
OF
VISION COMMUNICATIONS GROUP, INC.
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TABLE OF CONTENTS
Page
1. Definitions............................................................................................................1
2. Merger.................................................................................................................1
2.1. Basic Transaction.............................................................................................1
2.2. The Closing..................................................................................................10
2.3. Deliveries at the Closing....................................................................................10
3. Representations and Warranties........................................................................................10
3.1. Representations and Warranties of the Shareholder............................................................10
3.2. Representations and Warranties of PentaStar..................................................................23
3.3. Survival of Representations..................................................................................24
3.4. Representations as to Knowledge..............................................................................25
4. Pre-Closing Covenants.................................................................................................25
4.1. General......................................................................................................25
4.2. Operation and Preservation of Business.......................................................................25
4.3. Full Access..................................................................................................25
4.4. Notice of Developments.......................................................................................25
4.5. Exclusivity..................................................................................................25
4.6. Announcements; Securities Law Restrictions...................................................................26
4.7. Closing Date Liabilities and Excluded Assets. ..............................................................26
4.8. Conveyance of Shareholder Property...........................................................................26
5. Post-Closing Covenants................................................................................................26
5.1. Further Assurances...........................................................................................26
5.2. Transition...................................................................................................27
5.3. Cooperation..................................................................................................27
5.4. Confidentiality..............................................................................................27
5.5. Post-Closing Announcements...................................................................................27
5.6. Financial Statements.........................................................................................27
5.7. Satisfaction of Liabilities..................................................................................27
5.8. Repurchase of Unpaid Receivables.............................................................................28
5.9. Termination of Obligations...................................................................................28
5.10. Transfer Restrictions........................................................................................28
5.11. Tax Returns..................................................................................................29
5.12. Conduct During Earn-Out Period...............................................................................30
5.13. Employment...................................................................................................30
5.14. Seller Provider Agreements...................................................................................30
5.15. Valley Bank..................................................................................................30
5.16. Commission Protection........................................................................................30
5.17. Outstanding Consents.........................................................................................30
6. Conditions to Closing.................................................................................................31
6.1. Conditions to Obligation of PentaStar........................................................................31
(2)
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6.2. Conditions to Obligation of the Shareholder..................................................................32
7. Remedies for Breaches of This Agreement...............................................................................33
7.1. Indemnification Provisions for Benefit of PentaStar and the Surviving Corporation............................33
7.2. Indemnification Provisions for Benefit of the Shareholder....................................................35
7.3. Matters Involving Third Parties..............................................................................35
7.4. Right of Offset..............................................................................................36
7.5. Other Remedies...............................................................................................36
8. Termination...........................................................................................................37
8.1. Termination of Agreement.....................................................................................37
8.2. Effect of Termination........................................................................................37
8.3. Confidentiality..............................................................................................37
9. Miscellaneous.........................................................................................................37
9.1. No Third-Party Beneficiaries.................................................................................37
9.2. Entire Agreement.............................................................................................37
9.3. Succession and Assignment....................................................................................37
9.4. Counterparts.................................................................................................38
9.5. Headings.....................................................................................................38
9.6. Notices......................................................................................................38
9.7. Governing Law................................................................................................38
9.8. Amendments and Waivers.......................................................................................39
9.9. Severability.................................................................................................39
9.10. Expenses.....................................................................................................39
9.11. Arbitration..................................................................................................39
9.12. Construction.................................................................................................40
9.13. Incorporation of Exhibits....................................................................................40
(3)
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EXHIBITS
Exhibit 1.1(a)
Exhibit 1.1(b)
Exhibit 1.1(c)
Exhibit 1.1(d)
Exhibit 1.1(e)
Exhibit 1.1(f)
Exhibit 1.1(g)
Exhibit 1.1(h)
Exhibit 1.1(i)
Exhibit 2.1(n)(v)(B)
Exhibit 3.1(a)(i)
Exhibit 3.1(a)(ii)
Exhibit 3.1(b)(ii)
Exhibit 3.1(c)
Exhibit 3.1(d)(i)(A)
Exhibit 3.1(d)(i)(B)
Exhibit 3.1(e)(i)
Exhibit 3.1(e)(ii)(F)
Exhibit 3.1(e)(iii)
Exhibit 3.1(e)(iv)
Exhibit 3.1(f)(iii)
Exhibit 3.1(f)(vi)
Exhibit 3.1(g)(i)
Exhibits 3.1(h)
Exhibit 3.1(i)(i)
Exhibit 3.1(i)(ii)
Exhibit 3.1(k)
Exhibit 3.1(l)(i)
Exhibit 3.1(l)(ii)
Exhibit 3.1(m)(i)
Exhibit 3.1(m)(iii)
Exhibit 3.1(n)(i)
Exhibit 3.1(n)(ii)
Exhibit 3.1(o)(i)(A)
Exhibit 3.1(o)(i)(B)
Exhibit 3.1(s)
Exhibit 3.1(t)
Exhibit 3.1(u)(ii)
Exhibit 3.1(u)(xi)
Exhibit 3.2(b)(i)
Exhibit 5.13
Exhibit 5.14
Exhibit 5.17
Exhibit 6.1(h)
Exhibit 6.2(e)
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This Agreement and Plan of Merger is entered into on October 25, 2000,
to be effective as set forth herein, among PentaStar Communications, Inc., a
Delaware corporation ("PentaStar"), PentaStar Acquisition Corp. V, a Delaware
corporation (the "Acquiror"), Vision Communications Group, Inc. a New Jersey
corporation (the "Company"), and Xxxx X. Xxxxxxx ("the Shareholder").
Recitals
A. The Shareholder owns all of the issued and outstanding capital stock
of the Company.
B. The Acquiror is a newly formed, wholly owned subsidiary of
PentaStar. The Acquiror desires to acquire all of the business operations of the
Company through a statutory merger of the Company with and into the Acquiror,
with the Acquiror as the surviving entity (the "Transaction").
C. The Boards of Directors of each of PentaStar, the Acquiror and the
Company has determined that the Transaction is in the best interests of their
respective corporations and shareholders.
D. It is intended that the Transaction qualify as a reorganization
under the provisions of Section 368(a)(1)(A) pursuant to Section 368(a)(2)(D) of
the Code.
E. PentaStar, the Acquiror and the Shareholder desire to make certain
representations, warranties and agreements in connection with the Transaction
and also desire to set forth various conditions precedent thereto.
Agreement
NOW, THEREFORE, in consideration of the premises, the mutual
representations, warranties and covenants set forth herein and other good and
valuable consideration, the receipt and sufficiency of which are acknowledged,
the parties agree as follows:
1. Definitions. The terms defined in Exhibit 1.1(a) shall have the
meanings designated therein.
2. Merger.
2.1. Basic Transaction. Subject to the terms and conditions of this
Agreement and the corporation laws of the States of Delaware and New Jersey, at
the Closing, but effective for accounting purposes as of 12:01 a.m. New Jersey
time on October 1, 2000 (the "Effective Date"), the Company shall be merged with
and into the Acquiror (the "Merger") and the separate existence of the Company
shall cease and the Acquiror shall continue as the surviving corporation in the
Merger (the "Surviving Corporation"). The Merger shall have all the effects
provided by applicable Legal Requirement, including Sections 251 and 252 of the
Delaware General Corporation Law and Sections 14A:10-7 and 14A:10-4.1 of the New
Jersey Business Corporation Act (the "BCA"). For Federal income Tax purposes,
the parties intend that the Merger be treated as a tax-free reorganization
within the meaning of Section 368(a)(1)(A) of the Code, by reason of Section
368(a)(2)(D) of the Code, and that this Agreement shall be, and is hereby,
adopted as a plan or reorganization for purposes of Section 368 of the Code. No
party shall take a position on any Tax return inconsistent with this Section
2.1, and each party shall use its reasonable efforts to maintain such reporting
in the context of an audit. Each party shall give the other parties prompt
notice of any challenges or investigations undertaken by any taxing agency in
connection with such reporting, and shall keep such other parties fully informed
of all aspects of such ongoing challenge or investigation. If, at or after the
Closing, PentaStar or the Acquiror
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intentionally takes, fails to take or causes to be taken or not be taken any
action within its or their control ("Action") which results in the Merger not
being treated as a tax-free reorganization within the meaning of Section
368(a)(1)(A) of the Code, by reason of Section 368(a)(2)(D) of the Code, then a
number of PentaStar Shares which are then the subject of restriction pursuant to
the second or third sentences of Section 5.10 having an aggregate Fair Market
Value as of the date of the Action equal to the additional Taxes to the
Shareholder directly resulting from the Merger not being treated as such a
tax-free reorganization as a result of such Action shall cease to be subject to
such restriction (the shares having the shorter period of restriction being the
first shares to cease being subject to such restriction). The terms of the
Merger shall be as follows:
(a) General. At the Closing, the Shareholder shall receive the
consideration described in Section 2.1(k) in respect of the Company Shares owned
by the Shareholder, and the Company Shares owned by the Shareholder shall be
canceled and shall cease to represent any interest in the Company or the
Surviving Corporation. As of the Closing Date, the stock transfer books of the
Company shall be closed and no transfer or issuance of shares of capital stock
of the Company shall be permitted.
(b) Certificate of Incorporation. At the Closing Date, the Certificate
of Incorporation of the Acquiror, as in effect immediately prior to the Closing
Date, shall continue to be the Certificate of Incorporation of the Surviving
Corporation, and the name of the Surviving Corporation shall remain "PentaStar
Acquisition Corp. V." Such Certificate of Incorporation may thereafter be
amended as provided therein and by the Delaware General Corporation Law.
(c) Bylaws. At the Closing Date, the Bylaws of the Acquiror, as in
effect immediately prior to the Closing Date, shall continue to be the Bylaws of
the Surviving Corporation, and such Bylaws may thereafter be amended or repealed
in accordance with their terms and the Certificate of Incorporation of the
Surviving Corporation and as provided by the Delaware General Corporation Law.
(d) Directors. At the Closing Date, the directors of the Acquiror
immediately prior to the Closing Date shall continue to be the directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation and the Delaware General
Corporation Law until the earlier of his or her resignation or removal or until
his or her successor is duly elected and qualified, as the case may be.
(e) Officers. At the Closing Date, the officers of the Acquiror
immediately prior to the Closing Date shall continue to be the officers of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation and the Delaware General
Corporation Law until the earlier of his or her resignation or removal or until
his or her successor is duly appointed and qualified, as the case may be.
(f) Properties and Liabilities. At the Closing Date, and after giving
effect to the distribution of the Excluded Assets and the assumption of the
Closing Date Liabilities pursuant to Section 4.7, all the properties, rights,
privileges, powers, and franchises of the Company and the Acquiror shall vest in
the Surviving Corporation, and all debts, liabilities, and duties of the Company
and Acquiror shall become the debts, liabilities, and duties of the Surviving
Corporation.
(g) Documents. Subject to the terms and conditions in this Agreement,
the parties shall prepare, sign, and acknowledge, in accordance with the
Delaware General Corporation Law and the BCA, a certificate of merger (the
"Certificate of Merger") and deliver the Certificate of Merger to the Secretary
of
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State of the State of Delaware for filing pursuant to the Delaware General
Corporation Law on the Closing Date and deliver a certified copy or executed
counterpart of the Certificate of Merger to the Secretary of State of the State
of New Jersey for filing pursuant to the BCA. The Merger shall be completed upon
the filing of the Certificate of Merger with the Secretary of State of the State
of Delaware and the Certificate of Merger with the Secretary of State of the
State of New Jersey, but shall be effective for accounting purposes as of the
Effective Date.
(h) Share Conversion. At the Closing Date, by virtue of the Merger and
without any action on the part of the holder of any shares of capital stock of
any corporation, each issued and outstanding share of capital stock of the
Company shall be converted into the right to receive the consideration payable
pursuant to Section 2.1(k); provided, however, that each share of capital stock
of the Company issued and outstanding immediately prior to the Closing Date and
owned directly or indirectly by the Company (treasury stock), if any, shall be
cancelled and retired, and no cash, PentaStar Shares or other consideration
shall be delivered or payable in exchange therefor. Each share of the capital
stock of the Acquiror issued and outstanding immediately prior to the Closing
Date shall remain issued and outstanding.
(i) No Fractional Shares. No certificates or scrip representing
fractional shares of any class of PentaStar Shares shall be issued pursuant to
the Merger. Such fractional share interests shall not entitle the owner thereof
to any rights as a security holder of the Surviving Corporation. In lieu of any
such fractional shares of any class of PentaStar Shares the Shareholder shall be
entitled to receive PentaStar Shares in the Merger pursuant to this Agreement
shall be entitled to receive an amount in cash (without interest), rounded to
the nearest cent, determined by multiplying the Fair Market Value of a PentaStar
Share issuable pursuant to this Agreement (as set forth in Section 2.1(k) or, in
the case of PentaStar Shares issued as part of the Earn-Out Amount, as
determined pursuant to Section 2.1(n)) by the fractional interest in such
PentaStar Share to which the Shareholder would otherwise be entitled.
(j) Estimated Closing Date Financial Information.
(i) Estimated Closing Date Balance Sheet. No earlier than ten
Business Days prior to the Closing nor later than three Business Days
prior to the Closing, the Shareholder shall deliver a balance sheet for
the Company prepared as of the Closing Date (the "Estimated Closing
Date Balance Sheet"). The Estimated Closing Date Balance Sheet shall be
prepared in accordance with GAAP, on a basis consistent with the
accounting practices of PentaStar. The Estimated Closing Date Balance
Sheet shall set forth, in addition to other items required by
PentaStar's application of GAAP, the amount, as of the Closing Date, of
(A) [RESERVED],
(B) the Interim Cash Requirement,
(C) the aggregate amount of accounts receivable,
residual payment rights and notes receivable collected by the
Company or any Seller after May 19, 2000 (whether by
collection of cash, offset or otherwise, and whether or not
any cash or other amount received in respect thereof is on
hand or has been used by the Company or any Seller) as a
result of the accelerated collection thereof beyond normal
stated terms or outside the ordinary course of business
consistent with past practice or as a set-off against future
payments against accounts receivable, residual payments rights
or notes receivable,
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(D) the Retained Liabilities described in clause (b)
of the definition of Retained Liabilities and each item
thereof and
(E) all Closing Date Liabilities and each item
thereof.
On or before the Closing Date, the Shareholder shall pay or cause the Company to
pay all Closing Date Liabilities and the Estimated Closing Date Balance Sheet
shall reflect those payments. As a result, the only Liabilities reflected on the
Estimated Closing Date Balance Sheet should be the Retained Liabilities, unless
the Shareholder has failed to pay any Closing Date Liabilities prior to the
Closing.
(ii) Estimated Interim Period Cash Flow Statement. No earlier
than ten Business Days prior to the Closing nor later than three
Business Days prior to the Closing, the Shareholder shall deliver a
projected cash flow statement for the Surviving Corporation prepared
for the Interim Period (the "Estimated Interim Period Cash Flow
Statement"). The Estimated Interim Period Cash Flow Statement shall set
forth, the amount, as of the Closing Date, of (A) the estimated amount
of cash collections by the Surviving Corporation during the Interim
Period and each item thereof, and the specific dates on which payments
are due from service suppliers, (B) the estimated amount of cash
disbursements by the Surviving Corporation during the Interim Period
for Liabilities, including payroll, commissions, rent and accounts
payable, and each item thereof, and (C) the difference between (A) over
(B).
(k) Consideration.
(i) Subject to adjustment as provided in Section 2.1(m), the
aggregate consideration (the "Purchase Price") payable to the
Shareholder pursuant to the Merger shall be as follows:
(A) cash in the amount of the sum of
(1) $167,000, minus
(2) [RESERVED]; minus
(3) the aggregate amount of accounts receivable,
residual payment rights and notes receivable collected by the
Company or any Seller after May 19, 2000 (whether by
collection of cash, offset or otherwise, and whether or not
any cash or other amount received in respect thereof is on
hand or has been used by the Company or any Seller) as a
result of the accelerated collection thereof beyond normal
stated terms or outside the ordinary course of business
consistent with past practice, or as a set-off against future
payments against accounts receivable, residual payment rights
or notes receivable, minus
(4) the amount of any Closing Date Liabilities
reflected on the Estimated Closing Date Balance Sheet or the
amount of any Closing Date Liabilities not paid by the
Shareholder or the Company prior to the Closing Date (the net
amount described in this clause (A) being referred to as the
"Cash Portion" of the Purchase Price);
(B) a number of shares of PentaStar Common Stock (subject to
Section 2.1(i)) as have an aggregate Fair Market Value as of the
Closing Date equal to $1,200,000 (the "Closing Shares"); and
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(C) the Earn-Out Amount payable pursuant to Section 2.1(n).
The Purchase Price shall be adjusted in accordance with Section 2.1(m), and
shall be payable and issuable to the Shareholder in accordance with the
following:
Number of Company Percentage of
Shareholder Shares Owned Purchase Price
----------- ----------------- --------------
Xxxx X. Xxxxxxx 100 100%
(ii) On the Closing Date PentaStar shall (A) pay to the
Shareholder by wire transfer to an account or accounts designated by
the Shareholder the Cash Portion of the Purchase Price; and (B) issue
the Closing Shares to the Shareholder and deliver any payment in lieu
of a fractional share pursuant to Section 2.1(i). On the Closing Date,
the Shareholder shall deposit a number of Closing Shares having a Fair
Market Value as of the Closing Date equal to $900,000 (the "EBITA
Escrow") with the Escrow Agent pursuant to the Escrow Agreement to be
held under the Escrow Agreement until the EBITA Escrow Release Date. If
the Earn-Out EBITA (as determined pursuant to Section 2.1(n)(ii)) is
less than $350,000, an amount of Closing Shares from the EBITA Escrow
having a Fair Market Value as of the Closing Date (not to exceed
$900,000) equal to four times the difference between $350,000 and the
Earn-Out EBITA shall be deducted from the EBITA Escrow and returned to
PentaStar. For purposes of determining the number of Closing Shares
deducted from the EBITA Escrow, if any, each of the shares of PentaStar
Common Stock shall be valued at the share price at which it was issued
pursuant to Section 2.1(k)(i). The Shareholder shall have no further
Liability if such EBITA is less than $350,000 except for any Liability
arising under Section 7 as a result of the breach by the Shareholder of
any representation, warranty or covenant of the Shareholder (subject to
the survival limitations set forth in Section 3.3 for representations
and warranties).
(iii) On the Closing Date, the Shareholder shall designate a
percentage (not less than 25% nor more than 50% of the total PentaStar
Shares which the Shareholder may receive as Purchase Price (but in no
event less than a number of shares having a Fair Market Value as of the
Closing Date of $100,000)) shall be delivered to PentaStar to be held
subject to the Principal Shareholder's Escrow Agreement. If any shares
of PentaStar Common Stock become issuable to the Shareholder in respect
of the Earn-Out Amount and such shares are to be subject to the
Principal Shareholder's Escrow Agreement, then such shares shall also
be delivered to PentaStar to be held subject to the Principal
Shareholder's Escrow Agreement. The Principal Shareholder's Escrow
Agreement provides that upon the occurrence of certain conditions, the
Shareholder may receive a greater or lesser number of shares of
PentaStar Common Stock than the number deposited with PentaStar
pursuant to the Principal Shareholder's Escrow Agreement.
(iv) The parties agree that any adjustment in the number of
shares pursuant to Section 2.1(k)(ii), Section 2.1(k)(iii), Section
2.1(n)(v)(A) or Section 2.1(n)(v)(B) shall be treated as an adjustment
to the Purchase Price. Because (A) the total number of PentaStar Shares
included in the Purchase Price shall not be known until the Earn-Out
Amount, if any, is paid, or the Purchase Price is redetermined pursuant
to Section 2.1(n)(v)(B), and (B) certain of the Closing Shares shall be
held by the Escrow Agent pursuant to the Escrow Agreement, they shall
initially not be available for delivery to PentaStar as contemplated by
the Principal Shareholder's Escrow Agreement if they are designated by
the Shareholder to be subject to the Principal Shareholder's Escrow
Agreement. However, as soon as (A) PentaStar Shares, if any, are issued
in respect of the Earn-Out Amount or pursuant to Section 2.1(n)(v)(B),
or (B) any Closing Shares are released from the Escrow Agreement for
delivery to any Shareholder, they shall be delivered to
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PentaStar until the number of PentaStar Shares so delivered equals the
number of PentaStar Shares which have been designated to be subject to
the Principal Shareholder's Escrow Agreement. In the event that any
PentaStar Shares which are designated to be subject to the Principal
Shareholder's Escrow Agreement are delivered to PentaStar or the
Acquiror in satisfaction of the indemnification obligations of the
Shareholder under this Agreement, or pursuant to a deduction from the
EBITA Escrow under Section 2.1(k)(ii), or in connection with a
redetermination of the Purchase Price pursuant to Section 2.1(n)(v)(B)
or in satisfaction of any other obligation to PentaStar or the Acquiror
secured by such shares, the number of shares subject to the Principal
Shareholder's Escrow Agreement for the Shareholder shall remain the
specified percentage of the remaining PentaStar Shares.
(l) Closing Date Financial Information.
(i) Closing Date Balance Sheet. Within 60 days after the
Closing Date an unaudited balance sheet for the Company shall be
prepared as of the Closing Date (the "Closing Date Balance Sheet") by
PentaStar and delivered by PentaStar to the Shareholder. The Closing
Date Balance Sheet shall be prepared in accordance with GAAP, on a
basis consistent with the accounting practices of PentaStar. The
Closing Date Balance Sheet shall set forth, in addition to other items
required by PentaStar's application of GAAP, the amount, as of the
Closing Date, of
(A) [RESERVED],
(B) the Interim Cash Requirement,
(C) the aggregate amount of accounts receivable,
residual payment rights and notes receivable collected by the
Company or any Seller after May 19, 2000 (whether by
collection of cash, offset or otherwise, and whether or not
any cash or other amount received in respect thereof is on
hand or has been used by the Company or any Seller) as a
result of the accelerated collection thereof beyond normal
stated terms or outside the ordinary course of business
consistent with past practice or as a set-off against future
payments against accounts receivable, residual payments rights
or notes receivable,
(D) the Retained Liabilities described in clause (b)
of the definition of Retained Liabilities and each item
thereof and
(E) all Closing Date Liabilities and each item
thereof.
Within 30 days after receipt of the Closing Date Balance Sheet, the Shareholder
shall, in a written notice to PentaStar, either accept the Closing Date Balance
Sheet or object to it by describing in reasonably specific detail any proposed
adjustments to the Closing Date Balance Sheet and the estimated amounts of and
reasons for such proposed adjustments. The failure by the Shareholder to object
to the Closing Date Balance Sheet within such 30-day period shall be deemed to
be an acceptance by the Shareholder of the Closing Date Balance Sheet. If any
adjustments to the Closing Date Balance Sheet are proposed by the Shareholder
within such 30-day period, the dispute shall be resolved as provided in Section
2.1(o).
(ii) Interim Period Cash Flow Statement. Within 60 days after
the Closing Date an unaudited cash flow statement for the Surviving
Corporation for the Interim Period (the "Interim Period Cash Flow
Statement") shall be prepared by PentaStar and delivered by PentaStar
to the Shareholder. The Interim Period Cash Flow Statement shall be
prepared based upon the actual cash flows of the Surviving Corporation
during the Interim Period and shall set forth (A) the actual amount of
cash collections by the Surviving
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Corporation during the Interim Period and each item thereof, and the
specific dates on which such collections were received, (B) the
aggregate amount of cash disbursements by the Surviving Corporation
during the Interim Period for Liabilities, including payroll,
commissions, rent and accounts payable, and each item thereof, and (C)
the difference between (A) over (B). Within 30 days after receipt of
the Interim Period Cash Flow Statement, the Shareholder shall, in a
written notice to PentaStar, either accept the Interim Period Cash Flow
Statement, or object to it by describing in reasonable specific detail
any proposed adjustments to the Interim Period Cash Flow Statement and
the estimated amounts of and reasons for such proposed adjustments. The
failure by the Shareholder to object to the Interim Period Cash Flow
Statement within such 30-day period shall be deemed to be an acceptance
by the Shareholder of the Interim Period Cash Flow Statement. If any
adjustments to the Interim Period Cash Flow Statement are proposed by
the Shareholder within such 30-day period, the dispute shall be
resolved as provided in Section 2.1(o).
(m) Post-Closing Adjustments to the Purchase Price. Within 10 Business
Days after the later of the acceptance of the Closing Date Balance
Sheet and the Interim Period Cash Flow Statement by the Shareholder or
the resolution of any disputes under Section 2.1(o), as the case may
be, the Cash Portion of the Purchase Price shall be redetermined as
provided in Section 2.1(k)(i) based on the Closing Date Balance Sheet
rather than the Estimated Closing Date Balance Sheet, and based upon
the Interim Period Cash Flow Statement rather than the Estimated
Interim Period Cash Flow Statement, and an appropriate adjusting cash
payment shall be made by the Surviving Corporation to the Shareholder
or by the Shareholder to the Surviving Corporation, as the case may be,
so that the Cash Portion of the Purchase Price actually paid equals the
Cash Portion of the Purchase Price determined on the basis of the
Closing Date Balance Sheet and the Interim Period Cash Flow Statement.
If the Closing Date Balance Sheet reflects Closing Date Liabilities
that have not previously been paid by the Shareholder, such Closing
Date Liabilities shall be paid at the time the adjusting payment is
made under this Section 2.1(m), either by the Surviving Corporation out
of any adjusting payment due from it hereunder or, if no such payment
is due or such payment is less than the unpaid Closing Date
Liabilities, by the Shareholder. If the Surviving Corporation has
previously paid any such Closing Date Liability, it shall be reimbursed
for said payment at the time the adjusting payment is made under this
Section 2.1(m), either by offset against any adjusting payment due
hereunder or, if no such payment is due or such payment is less than
the reimbursement amount, by the Shareholder. Any adjustment in the
Purchase Price made under this Section 2.1(m) shall be allocated as an
adjustment to the consideration paid for the Company Shares.
(n) Earn-Out. In addition to the Cash Portion of the Purchase Price and
the Closing Shares payable and issuable at the Closing pursuant to this
Section 2.1, the Shareholder shall be entitled to receive the Earn-Out
Amount determined and payable as provided in this Section 2.1(n).
(i) PentaStar agrees that, during the Earn-Out Period, the
Surviving Corporation shall conduct the operations previously conducted
by the Company in the Montclair Region as a separate subsidiary or
division of PentaStar with no other operations. The Surviving
Corporation shall account for its operations in the Montclair Region in
accordance with the accounting practices of PentaStar.
(ii) As soon as reasonably practicable after June 30, 2001 and
in any event by August 31, 2001, PentaStar shall cause Xxxxxx Xxxxxxxx
L.L.P. ("Xxxxxx Xxxxxxxx") to determine (A) the Earn-Out EBITA and (B)
prepare a written calculation of the Earn-Out Amount (collectively, the
"Earn-Out Financial Statements"). Xxxxxx Xxxxxxxx'x determination under
this Section 2.1(n)(ii) shall be made in accordance with GAAP, on a
basis consistent with the accounting practices of PentaStar. PentaStar
shall
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promptly provide a copy of the Earn-Out Financial Statements to the
Shareholder. Within 30 days after receipt of the Earn-Out Financial
Statements, each of PentaStar and the Shareholder shall, in a written
notice to the other, either accept the Earn-Out Financial Statements or
object to them by describing in reasonably specific detail any proposed
adjustments to the Earn-Out Financial Statements and the estimated
amounts of and reasons under PentaStar's application of GAAP for such
proposed adjustments. The failure by PentaStar or the Shareholder to
object to the Earn-Out Financial Statements within such 30-day period
shall be deemed to be an acceptance by the Shareholder or PentaStar, as
the case may be, of the Earn-Out Financial Statements. If any
adjustments to the Earn-Out Financial Statements are proposed by
PentaStar or the Shareholder within such 30-day period, the dispute
shall be resolved as provided in Section 2.1(o). The fees and expenses
of Xxxxxx Xxxxxxxx for the preparation of the Earn-Out Financial
Statements shall be paid by PentaStar.
(iii) Within 10 Business Days after the later of the
acceptance of the Earn-Out Financial Statements by PentaStar and the
Shareholder or the resolution of any disputes under Section 2.1(o), as
the case may be, PentaStar shall pay the Earn-Out Amount, if any, to
the Shareholder (the time of such payment being referred to as the
"Second Closing"). The Earn-Out Amount shall be payable as follows:
(A) the first $100,000 of the Earn-Out Amount (if any
is earned) shall be paid in cash; and
(B) the remainder of the Earn-Out Amount (if any is
earned) shall be paid, in PentaStar's sole discretion, in cash
or PentaStar Common Stock, or any combination thereof.
Notwithstanding the foregoing, the amount of cash included in the payment of the
Earn-Out Amount shall not be such as to cause the Purchase Price, taken as a
whole, not to comply with the continuity of interest test for a tax-free
reorganization under Section 368 of the Code, as determined in good faith by
PentaStar based on advice of counsel. If any portion of the Earn-Out Amount is
paid in PentaStar Common Stock, the number of shares of PentaStar Common Stock
to be issued (which shall be rounded down to the nearest whole shall, and
PentaStar shall pay the Shareholder cash for any such fractional share as
specified in Section 2.1(i)) shall be determined by dividing (A) the Earn-Out
Amount that is being paid in PentaStar Common Stock by (B) the Fair Market Value
of a share of PentaStar Common Stock as of June 30, 2001. The cash portion of
the Earn-Out Amount shall be paid by wire transfer to an account or accounts
designated by the Shareholder. Certificates representing any shares of PentaStar
Common Stock issued in payment of the Earn-Out Amount shall be delivered to the
Shareholder at the Shareholder's address for notice purposes under this
Agreement.
(iv) In the event that PentaStar sells the operations
conducted by the Acquiror (whether separately or as part of a sale of
all or substantially all of the assets or operations of PentaStar, and
whether by sale of assets or stock of PentaStar or the Acquiror, by
merger of PentaStar or the Acquiror or otherwise) prior to the end of
the Earn-Out Period, PentaStar shall require the purchaser to continue
to account for such operations separately and agree to assume the
obligation of PentaStar to pay the Earn-Out Amount as provided in this
Section 2.1(n). In this event, the purchaser may pay the Earn-Out
Amount, in its sole discretion, in cash, such purchaser's or any
parent's common equity securities based on the fair market value of
such securities on the relevant date as provided in this Section
2.1(n), or any combination thereof.
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(v) (A) If a PentaStar Liquidity Event occurs prior to
the end of the Earn-Out Period, then the Shareholder shall
have the option, exercisable by notice to PentaStar at least
ten Business Days prior to the date of the Liquidity Event, of
annualizing the Earn-Out EBITA for the period from July 1,
2000 until the Liquidity Event for purposes of calculating the
deemed Earn-Out EBITA for the period commencing July 1, 2000
and ending June 30, 2001.
(B) If the Shareholder does not exercise his option
to annualize the Earn-Out EBITA, then PentaStar shall have the
option, exercisable by notice to the Shareholder on or before
the date of the Liquidity Event, to pay a total Purchase Price
equal to (1) $1,200,000 if the PentaStar Liquidity Event
occurs on or before December 31, 2000, or (2) $900,000 if the
PentaStar Liquidity Event occurs between January 1, 2001 and
June 30, 2001. If PentaStar exercises its option pursuant to
this Section 2.1(n)(v)(B), then the Shareholder shall have no
further right to receive the Earn-Out Amount. If PentaStar
exercises such option, the Purchase Price paid at the Closing
shall be offset against the $1,200,000 or $900,000 amount
referred to in the first sentence of this Section
2.1(n)(v)(B), as the case may be, and any additional amounts
payable by PentaStar to the Shareholder or to the Shareholder
by PentaStar, as the case may be, shall come from the
PentaStar Shares in the EBITA Escrow (at the per share price
at which such shares were issued in the Closing). All amounts
payable pursuant to this Section 2.1(n)(v)(B) shall be paid
within ten Business Days after the Liquidity Event. An example
of the calculation is set forth on Exhibit 2.1(n)(v)(B).
(C) If the Shareholder does not exercise his option
pursuant to Section 2.1(n)(v)(A) and PentaStar does not
exercise its option pursuant to Section 2.1(n)(v)(B), then the
Earn-Out shall continue as set forth in Section 2.1(n).
(o) Resolution of Disputes. If any adjustments to the Closing Date
Balance Sheet, the Interim Period Cash Flow Statement or the Earn-Out Financial
Statements are proposed by PentaStar or the Shareholder pursuant to Section
2.1(l) or 2.1(n), PentaStar and the Shareholder shall negotiate in good faith to
resolve any dispute, provided that if the dispute is not resolved within 10 days
following the receipt of the proposed adjustments then PentaStar and the
Shareholder shall retain the Denver, Colorado office of BDO Xxxxxxx LLC to
resolve such dispute, which resolution shall be final and binding. The fees and
expenses of BDO Xxxxxxx LLC shall be paid by the losing party in the dispute.
BDO Xxxxxxx LLC shall be retained under a retention letter executed by the
parties that specifies that the determination by said firm of any such disputes
shall be resolved in accordance with this Agreement (including the definitions
set forth in this Agreement) by choosing the position of PentaStar in the case
of the Closing Date Balance Sheet or the Interim Period Cash Flow Statement,
Xxxxxx Xxxxxxxx in the case of the Earn-Out Financial Statements, or, in either
case, the objecting party under Section 2.1(l) or 2.1(n), as the case may be,
without change, within 30 days of the expiration of the applicable 30-day period
described in Section 2.1(l) or 2.1(n)(ii), as the case may be.
2.2. The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Xxxxxxx & Xxxxxx
L.L.C. at 9:00 a.m. Denver, Colorado time on September 29, 2000, or as soon
thereafter as the conditions to closing set forth in Section 6 are satisfied
(the date upon which the Closing actually occurs being referred to as the
"Closing Date").
2.3. Deliveries at the Closing. At the Closing, (a) the Shareholder
shall deliver or cause to be delivered to PentaStar the various certificates,
instruments and documents, and take or cause to be taken the actions, referred
to in Section 6.1 and (b) PentaStar shall deliver or cause to be delivered to
the Shareholder
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the various certificates, instruments and documents, and take or cause to be
taken the actions, referred to in Section 6.2.
3. Representations and Warranties.
3.1. Representations and Warranties of the Shareholder. The Shareholder
represents and warrants to PentaStar and the Acquiror that the statements
contained in this Section 3.1 are correct and complete as of the date of this
Agreement and shall be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were then substituted for the date of
this Agreement throughout this Section 3.1). Since July 1, 2000, the Company has
not undertaken any material action except with the prior written consent of
PentaStar.
(a) Organization, Good Standing, Etc. The Company and each of the
Sellers is a corporation duly organized, validly existing and in good standing
under the laws of the State of New Jersey. The Company is not legally qualified
to transact business as a foreign corporation in any other jurisdiction, and the
nature of its properties and the conduct of its business do not require such
qualification. The Company has all requisite corporate power and authority to
own, lease and operate its properties and to carry on its business as now being
conducted. The copies of the articles of incorporation (certified by the
Secretary of State of New Jersey) and the bylaws of the Company, both as amended
to date, which have been delivered to PentaStar by the Shareholder and are
attached as Exhibits 3.1(a)(i) and 3.1(a)(ii), respectively, are complete and
correct, and the Company is not in default under or in violation of any
provision of its articles of incorporation or bylaws. The minute books (which
contain the records of all meetings of or actions by the shareholders, the board
of directors, and any committees of the board of directors) and the stock
certificate books and the stock record books of the Company, copies of which
have been delivered to PentaStar by the Shareholder, are true, correct and
complete.
(b) Ownership and Capitalization.
(i) The authorized capital stock of the Company consists of
50,000 shares of common stock, no par value. The Shareholder owns,
beneficially and of record, free and clear of any Encumbrance or Tax,
(A) the number of shares of the common stock, no par value, of the
Company (the "Company Shares") set forth opposite the Shareholder's
name in Section 2.1(k)(i), and the Company Shares reflected in Section
2.1(k)(i) constitute all of the issued and outstanding capital stock of
the Company, and (B) all of the outstanding shares of capital stock of
each of the Sellers. All of the issued and outstanding shares of the
Company's capital stock have been duly authorized and validly issued,
and are fully paid and nonassessable, with no personal Liability
attaching to the ownership thereof. There is no authorized or
outstanding stock or security convertible into or exchangeable for, or
any authorized or outstanding option, warrant or other right to
subscribe for or to purchase, or convert any obligation into, any
unissued shares of the Company's or any Seller's capital stock or any
treasury stock, and neither the Company nor any Seller has agreed to
issue any security so convertible or exchangeable or any such option,
warrant or other right. There are no authorized or outstanding stock
appreciation, phantom stock, profit participation or similar rights
with respect to the Company or any Seller. There are no voting trusts,
voting agreements, proxies or other agreements or understandings with
respect to any capital stock of the Company or of any Seller. There are
no existing rights of first refusal, buy-sell arrangements, options,
warrants, rights, calls, or other commitments or restrictions of any
character relating to any of the Company Shares or any capital stock of
any Seller, except those restrictions on transfer imposed by the
Securities Act and applicable state securities laws.
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(ii) Except as set forth on Exhibit 3.1(b)(ii), the Company
has no Subsidiaries and no capital stock, securities convertible into
capital stock, or any other equity interest in any other corporation,
partnership, limited partnership, limited liability company,
association, joint venture or other Person. Each of the entities listed
on Exhibit 3.1(b)(ii) is wholly-owned, directly or indirectly, by the
Company, is a corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation as set forth on
Exhibit 3.1(b)(ii), and is qualified to do business as a foreign
corporation and is in good standing in the states set forth on Exhibit
3.1(b)(ii), which are the only jurisdictions in which the nature of the
business conducted by it or the properties owned, leased or operated by
it make such qualification necessary. No Person has any right to
acquire any interest in any Subsidiary and there are no authorized or
outstanding stock appreciation, phantom stock, profit participation or
similar rights with respect to any Subsidiary. Each such Subsidiary has
all requisite corporate power and authority to own, lease and operate
its properties and to carry on its business as now being conducted.
(c) Authority; No Violation. The Shareholder, each Seller and each
relative or affiliate of the Company, of any Seller or of the Shareholder who is
a party to any Other Seller Agreement has full and absolute right, power,
authority and legal capacity to execute, deliver and perform this Agreement and
all Other Seller Agreements to which such Shareholder, Seller, relative or
affiliate is a party, and this Agreement constitutes, and the Other Seller
Agreements shall when executed and delivered constitute, the legal, valid and
binding obligations of, and shall be enforceable in accordance with their
respective terms against, each such Shareholder, Seller, relative or affiliate
who is a party thereto, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect affecting the enforcement of creditors' rights
generally and further subject to general principals of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
The execution, delivery and performance of this Agreement and the Other Seller
Agreements and the consummation of the transactions contemplated hereby and
thereby shall not (i) violate any Legal Requirement to which the Company, the
Shareholder, any Seller or any relative or affiliate of the Company, any Seller
or of the Shareholder who is a party to any Other Seller Agreement is subject or
any provision of the articles of incorporation or bylaws of the Company, any
Seller or of any such affiliate, or (ii) violate, with or without the giving of
notice or the lapse of time or both, or conflict with or result in the breach or
termination of any provision of, or constitute a default under, or give any
Person the right to accelerate any obligation under, or result in the creation
of any Encumbrance upon any properties, assets or business of the Company, of
any Seller, of the Shareholder, or of any such relative or affiliate pursuant
to, any indenture, mortgage, deed of trust, lien, lease, license, Permit,
agreement, instrument or other arrangement to which the Company, any Seller, the
Shareholder or any such relative or affiliate is a party or by which the
Company, any Seller, the Shareholder, or any such relative or affiliate or any
of their respective assets and properties is bound or subject. Except for
notices that shall be given and consents that shall be obtained by the
Shareholder prior to the Closing (each of which is set forth in Exhibit 3.1(c)),
neither the Company, any Seller, the Shareholder, nor any such relative or
affiliate need give any notice to, make any filing with or obtain any
authorization, consent or approval of any Governmental Authority or other Person
in order for the parties to consummate the transactions contemplated by this
Agreement and the Other Seller Agreements.
(d) Financial Statements; Absence of Liabilities. (i) The unaudited
balance sheet of the Company as of December 31, 1999, the related statement of
income, shareholder's equity and cash flows for the fiscal year then ended, and
the audited balance sheet of the Company as of June 30, 2000 (the latter being
referred to as the "Latest Balance Sheet"), and the related unaudited statements
of income, shareholder's equity and cash flows for the twelve-period then ended,
have been prepared in accordance with GAAP on
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a consistent basis, are in accordance with the books and records of the Company
(which books and records are complete and correct in all material respects), and
fairly present the financial position and results of operations of the Company
in all material respects as of such dates and for each of the periods indicated.
As of the date of each of such balance sheet, the Company had no Liability other
than those set forth on each such balance sheet. Copies of the financial
statements described in the first sentence in this Section 3.1(d) are attached
as Exhibit 3.1(d)(i)(A). The expenses itemized on Exhibit 3.1(d)(i)(B) and
reflected in the Company's financial performance for the 12-month period ended
December 31, 1999 shall not be realized on an on-going basis after the Closing
Date.
(ii) Since the date of the Latest Balance Sheet, the Company
has not incurred or become subject to any Liability other than
Liabilities incurred in the ordinary course of business consistent with
past practice. As of the Closing, the Company shall have no Liability
(and there shall be no basis for the assertion of any Liability),
except for the Retained Liabilities.
(e) Absence of Certain Agreements, Changes or Events.
(i) The Company is not, except as set forth on Exhibit
3.1(e)(i), a party to or otherwise bound by any material contract or
agreement (A) pursuant to which the Company is obligated to furnish any
services, product or equipment and (B) that has been prepaid with
respect to any period after the Closing Date.
(ii) Since December 31, 1999, the Company has not (A) incurred
any debt, indebtedness or other Liability, except current Liabilities
incurred in the ordinary course of business consistent with past
practice; (B) delayed or postponed the payment of accounts payable or
other Liabilities beyond stated, normal terms; (C) sold or otherwise
transferred any of its assets or properties (other than the Excluded
Assets distributed to the Shareholder pursuant to Section 4.7); (D)
cancelled, compromised, settled, released, waived, written-off or
expensed any account or note receivable, right, debt or claim involving
more than $5,000 in the aggregate or accelerated the collection of any
account or note receivable; (E) changed in any significant manner the
way in which it conducts its business; (F) made or granted any
individual wage or salary increase in excess of 10%, or except as set
forth on Exhibit 3.1(e)(ii)(F) $1.00 per hour, any general wage or
salary increase, or any additional benefits of any kind or nature; (G)
except as otherwise expressly permitted by this Section 3.1(e)(ii), (1)
entered into any contracts or agreements, or made any commitments,
involving more than $5,000 individually or in the aggregate or (2)
accelerated, terminated, delayed, modified or cancelled any agreement,
contract, lease or license (or series of related agreements, contracts,
leases and licenses) involving more than $5,000 individually or in the
aggregate; (H) suffered any material adverse fact or change, including,
without limitation, to or in its business, assets or financial
condition or customer or service provider relationships; (I) made any
payment or transfer to or for the benefit of any shareholder, officer
or director or any relative or affiliate thereof or permitted any
Person, including, without limitation, any shareholder, officer,
director or employee or any relative or affiliate thereof, to withdraw
assets from the Company (other than payment to the Shareholder of the
proportionate monthly amount of (1) his normal annualized salary due
and payable during such period or (2) rent due under pre-existing real
property leases between the Company and the Shareholder which are
disclosed on Exhibit 3.1(g)(i)); or (J) agreed to incur, take, enter
into, make or permit any of the matters described in clauses (A)
through (I). Since December 31, 1999, no Seller has accelerated the
collection of any account or note receivable or residual payment right,
or agreed to take, enter into or permit any such acceleration.
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(iii) Exhibit 3.1(e)(iii) lists all orders booked and all
customer contracts entered into by the Company, by month, during the
twelve-month period from August 1, 1999 through July 31, 2000 and the
current status of each such order or contract.
(iv) The communications lines associated with the deferred
revenue item recognized by the Company as revenue in July 2000 were
installed by Verizon Communications in July 2000 at the offices of the
customer identified on Exhibit 3.1(e)(iv). The existing lease agreement
between Xxxxxx Associates, L.L.C. and the Company has been terminated
effective as of the Closing Date. The Company's line of credit with
Valley National Bank has been paid in full and terminated prior to the
Closing Date. Prior to the Merger, the Shareholder has paid, or caused
to be paid, in full all Liabilities with respect to that certain
mortgage dated April 30, 1998 given by Xxxxxx Associates, L.L.C. to
Valley National Bank and the related $350,000 principal amount loan,
promissory note and other loan and security documents (collectively,
the "Valley Loan Documents"), and all Liabilities of the Company under
and with respect to the Loan Documents have been terminated.
(f) Tax Matters.
(i) The Company has filed all Tax Returns that it was required
to file. All such Tax Returns were correct and complete in all
respects. All Taxes owed by the Company (whether or not shown on any
Tax Return) have been paid when due. The Company is not currently the
beneficiary of any extension of time within which to file any Tax
Return. No claim has ever been made by an authority in a jurisdiction
where the Company does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction. There are no Encumbrances on
any of the assets of the Company that arose in connection with any
failure (or alleged failure) to pay any Tax.
(ii) The Company has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to
any employee, independent contractor, creditor, shareholder or other
third party.
(iii) To the best knowledge of the Shareholder, there is no
basis for any authority to assess any additional Taxes for any period
for which Tax Returns have been filed. There is no pending or
threatened dispute or claim concerning any Tax Liability of the
Company. Exhibit 3.1(f)(iii) lists all federal, state, local and
foreign income Tax Returns filed with respect to the Company for
taxable periods ended on or after December 31, 1993, indicates those
Tax Returns that have been audited and indicates those Tax Returns that
currently are the subject of audit. The Shareholder has delivered to
PentaStar correct and complete copies of all federal income Tax
Returns, examination reports, and statements of deficiencies filed or
assessed against or agreed to by the Company since December 31, 1993.
(iv) The Company has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a
Tax assessment or deficiency.
(v) Neither the Company nor any of its shareholders has ever
filed a consent pursuant to Section 341(f) of the Code relating to
collapsible corporations. The Company has filed with the Internal
Revenue Service, and has had in effect since the later of (A) the date
of the Company's incorporation or (B) ten years prior to the Closing
Date, an election pursuant to Section 1362 of the Code that the Company
be taxed as an "S" corporation. The Company has not made any payments,
is not obligated to make any
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payments and is not a party to any agreement that under certain
circumstances could obligate it to make any payments that shall not be
deductible under Code Section 280G. The Company has not been a United
States real property holding corporation within the meaning of Code
Section 897(c)(2) during the applicable period specified in Code
Section 897(c)(1)(A)(ii). The Company has disclosed on its federal
income Tax Returns all positions taken therein that could give rise to
a substantial understatement of federal income Tax within the meaning
of Code Section 6662. The Company is not a party to any Tax allocation
or sharing agreement. The Company has not been a member of an
Affiliated Group filing a consolidated federal income Tax Return (other
than a group the common parent of which was the Company) and has no
Liability for the Taxes of any Person (other than the Company) under
Treasury Regulation Section 1.1502-6 (or any similar provision of
state, local, or foreign law), as a transferee or successor, by
contract or otherwise.
(vi) Exhibit 3.1(f)(vi) sets forth the following information
with respect to the Company as of the most recent practicable date (as
well as on an estimated pro forma basis as of the Closing giving effect
to the consummation of the transactions contemplated hereby): (A) the
basis of the Company in its assets; and (B) the amount of any net
operating loss, net capital loss, unused investment or other credit,
unused foreign tax credit or excess charitable contribution allocable
to the Company.
(g) Assets and Properties.
(i) The Company has good and marketable title to, or a valid
leasehold interest or interest as a lessee in, the assets and
properties used or held for use by it, located on its Premises, or
shown on the Latest Balance Sheet or acquired after the date thereof.
As of the Closing, (A) all of the Acquired Assets shall be owned by the
Company and (B) all of the Xxxx of Sale Assets shall be owned by one or
more of the Sellers, in each case free and clear of all Encumbrances
other than Permitted Encumbrances in respect of the period prior to the
Closing Date; provided, however, that such Permitted Encumbrances shall
be Closing Date Liabilities and the responsibility of the Shareholder,
and the Shareholder shall indemnify and hold the Surviving Corporation
harmless from such Permitted Encumbrances. Neither the Company nor any
Seller entered into any contract or made any commitment to sell all or
any part of its assets. The Acquired Assets constitute all of the real,
personal and mixed assets and property, both tangible and intangible,
including Intellectual Property, which are being used or held for use
by the Company in the conduct of the business and operations of the
Company, consistent with historical and current practices. The Company
owns or leases all equipment and other tangible assets necessary for
the conduct of its business as presently conducted. Each such tangible
asset material to the Company's operations is in adequate operating
condition for its current use. All leases of real property between the
Company and any shareholder, officer or director or any relative or
affiliate thereof or of the Company are on fair market terms (including
rent at fair market value). Neither the Shareholder, nor any relative
or affiliate thereof or of the Company, own any asset, tangible or
intangible, which is used in the business of the Company, other than
real property leased to the Company on fair market terms and at fair
market value pursuant to leases set forth on Exhibit 3.1(g)(i).
(ii) The Premises constitute all of the real property,
buildings and improvements used by the Company in its business. To the
best knowledge of the Shareholder, the Premises have been occupied,
operated and maintained in accordance with applicable Legal
Requirements. The Company has not received notice of violation of any
Legal Requirement or Permit relating to its operations or its owned or
leased properties.
(iii) No party to any lease with respect to any Premises has
repudiated any provision thereof, and there are no disputes, oral
agreements or forbearance programs in effect as to any such lease.
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(h) Lists of Contracts and Other Matters. Attached as Exhibit 3.1(h) is
a correct and complete list setting forth the following items:
(i) the following contracts and other agreements in effect as
of the date of this Agreement or as of the Closing Date to which the
Company is a party or by which the Company is bound:
(A) any agreement (or group of related agreements)
for the lease of personal property to or from any Person
providing for lease payments in excess of $5,000 per year;
(B) any agreement pursuant to which the Company, or
the Shareholder on behalf of the Company, has made a deposit
in an amount greater than $5,000;
(C) any agreement (or group of related agreements)
for the purchase or sale of supplies, products or other
personal property, or for the furnishing or receipt of
services, the performance of which shall extend over a period
of more than one year, result in a material loss to the
Company or involve consideration in excess of $5,000;
(D) any agreement concerning a partnership or joint
venture;
(E) any agreement (or group of related agreements)
under which the Company has created, incurred, assumed or
guaranteed any indebtedness for borrowed money, or any
capitalized lease obligation, in excess of $5,000 or under
which it has granted any Encumbrances on any of its assets,
tangible or intangible;
(F) any agreement concerning confidentiality or
noncompetition;
(G) any agreement with any of its current or former
shareholders, directors of officers or any relative or
affiliate thereof (other than the Company);
(H) any profit sharing, stock option, stock purchase,
phantom stock, stock appreciation, profit participation,
deferred compensation, severance or other plan or arrangement;
(I) any collective bargaining agreement;
(J) any agreement for the employment of any
individual on a full-time, part-time, consulting or other
basis or any agreement providing severance benefits;
(K) any agreement under which the Company has
advanced or loaned any amount to any of its directors,
officers and employees outside the ordinary course of
business;
(L) any agreement obligating the Company to meet
another party's unspecified requirements for goods or services
or obligating it to purchase an unspecified amount of goods or
services based on another party's ability to supply them;
(M) any agreement under which the consequences of a
default or termination could have a material adverse effect on
the business, financial condition, operations, results of
operations or future prospects of the Company;
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(N) any other agreement (or group of related
agreements) the performance of which involves consideration in
excess of $10,000; or
(O) any agreement with any communications service
provider or communications hardware provider.
(ii) All material claims, deposits, causes of action, chooses
in action, rights of recovery, rights of setoff and rights of
recoupment of the Company.
(iii) All material franchises, approvals, Permits, licenses,
Orders, registrations, certificates, variances and similar rights of
the Company (all of which are in full force and effect).
(iv) Each item of Intellectual Property owned by the Company
or which is used by the Company in its business and, in each case where
the Company is not the owner, the owner of the Intellectual Property.
(v) The name of each bank or other financial institution or
entity in which the Company has an account or safe deposit box (with
the identifying account number or symbol) and the names of all persons
authorized to draw thereon or to have access thereto.
(vi) any other agreement with any communications hardware
provider.
The Shareholder has delivered to PentaStar a correct and complete copy
of each written agreement and a written summary setting forth the terms and
conditions of each oral agreement referred to in Section 3.1(h)(i). With respect
to each such agreement: (A) the agreement is legal, valid, binding, enforceable
and in full force and effect; (B) the agreement shall continue to be legal,
valid, binding, enforceable and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby; (C) neither
the Company nor, to the best knowledge of the Shareholder, any other party is in
breach or default, and, to the best knowledge of the Shareholder, no event has
occurred which, with notice or lapse of time, would constitute a breach or
default, or permit termination, modification or acceleration, under the
agreement; and (D) no party has repudiated any provision of the agreement.
(i) Litigation; Compliance with Applicable Laws and Rights.
(i) There is no outstanding Order against, nor, except as set
forth on Exhibit 3.1(i)(i), is there any litigation, proceeding,
arbitration or investigation by any Governmental Authority or other
Person pending or, to the best knowledge of the Shareholder, threatened
against, the Company, its assets or its business or relating to the
transactions contemplated by this Agreement, nor to the best knowledge
of the Shareholder is there any basis for any such action.
(ii) To the best knowledge of the Shareholder, except as set
forth on Exhibit 3.1(i)(ii), neither the Company nor the Company's
assets are in violation of any applicable Legal Requirement or Right.
The Company has not received notice from any Governmental Authority or
other Person of any violation or alleged violation of any Legal
Requirement or Right, and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand or notice has been
filed or commenced
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or is pending or, to the best knowledge of the Shareholder, threatened
against the Company alleging any such violation.
(j) Notes and Accounts Receivable. The notes and accounts receivable
(including residual payment rights) of the Company reflected on its Latest
Balance Sheet, and all notes and accounts receivable (including residual payment
rights) arising on or prior to the Closing Date, are the result of bona fide
transactions by the Company in the ordinary course of business and are valid
receivables with trade customers subject to no setoffs or counterclaims other
than as reflected on the Latest Balance Sheet.
(k) Product Quality, Warranty and Liability. All services and products
sold, leased, provided or delivered by the Company to customers on or prior to
the Closing Date conform to applicable contractual commitments, express and
implied warranties, product and service specifications and quality standards,
and there is no basis for any Liability for replacement or repair thereof or
other damages in connection therewith. No service or product sold, leased,
provided or delivered by the Company to customers on or prior to the Closing is
subject to any guaranty, warranty or other indemnity beyond the applicable
standard terms and conditions of sale or lease. The Company has no Liability and
there is no basis for any Liability arising out of any injury to a Person or
property as a result of the ownership, possession, provision or use of any
service or product sold, leased, provided or delivered by the Company on or
prior to the Closing Date. All product or service liability claims that have
been asserted against the Company since December 31, 1995, whether covered by
insurance or not and whether litigation has resulted or not, other than those
listed and summarized on Exhibit 3.1(i)(i), are listed and summarized on Exhibit
3.1(k).
(l) Insurance. The Company has valid, outstanding and enforceable
policies of insurance covering (i) risk of loss on its assets, (ii) products and
services liability and liability for fire, property damage, personal injury and
workers' compensation coverage and (iii) for business interruption as set forth
on Exhibit 3.1(l)(i), all, to the best knowledge of the Shareholder, with
responsible and financially sound insurance carriers. All such insurance
policies are valid, in full force and effect and enforceable in accordance with
their respective terms and no party has repudiated any provision thereof. All
such policies shall remain in full force and effect until the Closing Date.
Neither the Company nor, to the best knowledge of the Shareholder, any other
party to any such policy is in breach or default (including with respect to the
payment of premiums or the giving of notices) in the performance of any of their
respective obligations thereunder, and, to the best knowledge of the
Shareholder, no event exists which, with the giving of notice or the lapse of
time or both, would constitute a breach, default or event of default, or permit
termination, modification or acceleration under any such policy. There are no
claims, actions, proceedings or suits arising out of or based upon any of such
policies nor, to the best knowledge of the Shareholder, does any basis for any
such claim, action, suit or proceeding exist. All premiums have been paid on
such policies as of the date of this Agreement and shall be paid on such
policies through the Closing Date. The Company has been covered during the five
years prior to the date of this Agreement by insurance in scope and amount
customary and reasonable for the businesses in which it has engaged during the
aforementioned period. All claims made during such five-year period with respect
to any insurance coverage of the Company, other than those described on Exhibit
3.1(k), are set forth on Exhibit 3.1(l)(ii).
(m) Pension and Employee Benefit Matters.
(i) Exhibit 3.1(m)(i) lists each Employee Benefit Plan that is
an Employee Welfare Benefit Plan (the "Company Welfare Plans") or is an
Employee Pension Benefit Plan (the "Company Retirement Plans"). As of
the Closing Date and for the preceding three years, neither the Company
nor any
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ERISA Affiliate has sponsored, maintained, contributed to, or has had
any obligation under any Employee Benefit Plan, other than the Company
Welfare Plans and the Company Retirement Plans. Correct and complete
copies of each Employee Benefit Plan have been delivered to PentaStar
by the Shareholder.
(ii) Each Employee Benefit Plan has been maintained and
administered in substantial compliance with its terms and with all
applicable Legal Requirements.
(iii) Exhibit 3.1(m)(iii) lists each employment, severance or
other similar contract, arrangement or policy and each plan or
arrangement (written or oral) providing for insurance coverage
(including any self-insured arrangements), workers' compensation,
disability benefits, supplemental unemployment benefits, vacation
benefits, retirement benefits, deferred compensation, profit sharing,
bonuses, stock options, stock appreciation rights or other forms of
incentive compensation, reduced interest or interest free loans,
mortgages, relocation assistance or post-retirement insurance,
compensation or other benefits that: (A) is not an Employee Benefit
Plan; (B) is entered into, maintained or contributed to, by the
Company; and (C) covers any employee or former employee of the Company
or any relative thereof. Such contracts, plans and arrangements as are
described in this Section 3.1(m)(iii), are hereinafter referred to
collectively as the "Benefit Arrangements." Copies and descriptions
(including descriptions of the number and employment classifications of
employees covered by each such Benefit Arrangement) have been delivered
by the Shareholder to PentaStar and attached hereto as part of Exhibit
3.1(m)(iii). Each Benefit Arrangement has been maintained and
administered in substantial compliance with its terms and with the
requirements prescribed by any and all Legal Requirements that are
applicable to each such Benefit Arrangement.
(iv) No Company Welfare Plan is maintained in connection with
any trust described in Section 501(c)(9) of the Code.
(v) There have been no prohibited transactions with respect to
any Employee Benefit Plan. No "Fiduciary" (as defined in Section 3(21)
of ERISA) has any Liability for breach of fiduciary duty or any other
failure to act or comply in connection with the administration or
investment of the assets of any such Employee Benefit Plan. No action,
suit, proceeding, hearing or investigation with respect to the
administration or the investment of the assets of any Employee Benefit
Plan (other than routine claims for benefits) is pending or, to the
best knowledge of the Shareholder is threatened. The Shareholder has no
knowledge of any basis for any such action, suit, proceeding, hearing
or investigation.
(vi) The Company does not maintain and has never maintained
nor contributes, or ever has contributed, or ever has been required to
contribute, to any Company Welfare Plan providing health or medical
benefits for current or future retired or terminated employees, their
spouses or their dependents (other than in accordance with Code Section
4980B). No condition exists that would prevent the Company from
amending or terminating any Company Welfare Plan or Benefit Arrangement
providing health or medical benefits in respect of any active or
retired employees of the Company.
(vii) Any Company Welfare Plan that is a "group health plan"
(as defined in Code Section 5000(b)(l)) has been administered in
accordance with the requirements of Part 6 of Subtitle B of Title I of
ERISA and Code Section 4980B and nothing done or omitted to be done in
connection with the maintenance or administration of any Company
Welfare Plan that is a "group health plan" has made or shall make the
Company subject to any liability under Title I of ERISA, excise Tax
Liability under Code Section
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4980B or has resulted or shall result in any loss of income exclusion
for a participant under Code Sections 105(h) or 106.
(viii) There is no contract, agreement, plan or arrangement
covering any employee or former employee of the Company that,
individually or collectively, could give rise to the payment of any
amount that would not be deductible pursuant to the terms of Section
280G or 162(a)(l) of the Code.
(ix) The Company has made, before the date of this Agreement,
all required contributions and premium payments under each Employee
Benefit Plan and Benefit Arrangement for all completed fiscal years
including contributions that may not by law have otherwise been
required to be made until the due date for filing the Tax Return for
any completed fiscal year.
(n) Employees and Labor.
(i) The Company has not received any notice, nor, to the best
knowledge of the Shareholder, is there any reason to believe that any
Key Employee of the Company or any group of employees of the Company
has any plans to terminate his, her or its employment with the Company.
To the best knowledge of the Shareholder, no Key Employee is subject to
any agreement, obligation, Order or other legal hindrance that impedes
or might impede such Key Employee from devoting his or her full
business time to the affairs of the Company prior to the Closing Date
and, if such person becomes an employee of the Acquiror or PentaStar,
to the affairs of the Acquiror or PentaStar after the Closing Date. The
Company shall not be required to give any notice under the Worker
Adjustment and Retraining Notification Act, as amended, or any similar
Legal Requirement as a result of this Agreement, the Other Seller
Agreements or the transactions contemplated hereby or thereby. Except
as set forth on Exhibit 3.1(n)(i), the Company does not have any labor
relations problems or disputes nor has the Company experienced any
strikes, grievances, claims of unfair labor practices or other
collective bargaining disputes. The Company is not a party to or bound
by any collective bargaining agreement, there is no union or collective
bargaining unit at the Company's facilities, and no union organization
effort has been threatened, initiated or is in progress with respect to
any employees of the Company.
(ii) Exhibit 3.1(n)(ii) lists (A) the name of each salesperson
(whether such salesperson was an employee or independent contractor) of
the Company who has left the employment of the Company in the 12-month
period prior to the date of this Agreement, (B) the date such
salesperson left the employment of the Company and (C) the dollar
amount of orders booked by the Company during the 12-month period prior
to the date such salesperson left the employment of the Company which
were attributable to such salesperson or for which such salesperson was
responsible.
(o) Customer and Service Provider Relationships. Exhibit 3.1(o)(i)(A)
lists each customer that individually or with its affiliates was, based on the
Company's revenues during the fiscal year ended December 31, 1999 or the
twelve-month period ended June 30, 2000, one of the Company's ten largest
customers during such fiscal year or twelve-month period or accounted for 2% or
more of the Company's revenues during such fiscal year or twelve-month period
(the "Principal Customers"). Exhibit 3.1(o)(i)(B) lists each Person who is a
service provider (including Verizon Communications (f/k/a Xxxx Atlantic) and
Cable & Wireless) to the Company's customers, or a Sub-Agent of the Company, as
of the date of this Agreement (the "Principal Providers"). To the best knowledge
of the Shareholder, the Company has good commercial working relationships with
its Principal Customers and Principal Providers. Since December 31, 1999, no
Principal Customer or Principal Provider has cancelled or otherwise terminated
its relationship
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with the Company, materially decreased its purchases from or services supplied
to the Company or its customers, or threatened to take any such action. The
Shareholder has no basis to anticipate any problems with or loss of business
with respect to the Company's customer, service provider or Sub-Agent
relationships. To the best knowledge of the Shareholder, no Principal Customer
or Principal Provider has any plans to terminate their relationship with the
Company and the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby shall not adversely affect the relationship
of the Company with any Principal Customer or Principal Provider prior to the
Closing Date or of the Acquiror or PentaStar with any Principal Customer or
Principal Provider after the Closing Date.
(p) Environmental Matters. To the best knowledge of the Shareholder,
the Company is conducting and at all times has conducted its business and
operations, and has occupied, used and operated the Premises and all other real
property and facilities presently or previously owned, occupied, used or
operated by the Company, in compliance with all Environmental Obligations and so
as not to give rise to Liability under any Environmental Obligations or to any
impact on the Company's business or activities. The Company has received no
notice of Liability under any Environmental Obligation, and, to the best
knowledge of the Shareholder, there is no basis for any such Liability.
(q) Intellectual Property. The Company owns or has the legal right to
use each item of Intellectual Property required to be identified on Exhibit
3.1(h). To the best knowledge of the Shareholder, the continued operation of the
business of the Company as currently conducted shall not interfere with,
infringe upon, misappropriate or conflict with any Intellectual Property rights
of another Person. To the best knowledge of the Shareholder, no other Person has
interfered with, infringed upon, misappropriated or otherwise come into conflict
with any Intellectual Property rights of the Company or any Intellectual
Property included in the Acquired Assets. Neither the Company nor any owner of
any Intellectual Property included in the Acquired Assets has granted any
license, sublicense or permission with respect to any Intellectual Property
owned or used in the Company's business. No claims are pending or, to the
knowledge of the Shareholder, threatened, that the Company is infringing or
otherwise adversely affecting the rights of any Person with regard to any
Intellectual Property. To the best knowledge of the Shareholder, all of the
Intellectual Property that is owned by the Company is owned free and clear of
all Encumbrances and was not misappropriated from any Person, and all portions
of the Intellectual Property that are licensed by the Company are licensed
pursuant to valid and existing license agreements. The consummation of the
transactions contemplated by this Agreement shall not result in the loss or
material diminution of any Intellectual Property or rights in Intellectual
Property.
(r) Year 0000 Xxxxxxxx. To the best knowledge of the Shareholder, the
computer software owned by the Company and all other Intellectual Property used
or held for use by the Company in its business accurately processes and has
accurately processed date/time data (including calculating, comparing, and
sequencing) from, into, and between the twentieth and twenty-first centuries,
and the years 1999 and 2000 and leap year calculations and the date September 9,
1999 when either (i) used as a standalone application, or (ii) integrated into
or otherwise used in conjunction with the third party hardware, software,
firmware and data over which the Shareholder and the Company have no control
("Third Party Products") with which such Company software or other Intellectual
Property was designated or intended to operate at the time such Company software
was (i) developed or (ii) first provided to the Company's customers, or tested
by the Company for such customers, whichever is later. Notwithstanding the
foregoing, the Company shall not be considered to be in breach of the
representation and warranty in the immediately preceding sentence if the failure
of such Company software to comply with such representation and warranty is
attributable solely to (x) a failure by any Third Party Product to accurately
process date/time data (including
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but not limited to, calculating, comparing, and sequencing) from, into, and
between the twentieth and twenty-first centuries, and the years 1999 and 2000
and leap year calculations and the date September 9, 1999; or (y) any
modification of the Company software by any party other than the Company (unless
such modification was made at the direction of the Company).
(s) Brokers' Fees. Except as set forth on Exhibit 3.1(s), the Company
does not have, and shall not have as a result of the consummation of this
Agreement, any Liability to pay any fees or commissions to any broker, finder or
agent with respect to the transactions contemplated by this Agreement.
(t) Guaranties. Except as set forth on Exhibit 3.1(t), the Company is
not a guarantor or otherwise liable for any Liability (including indebtedness
for borrowed money) of any other Person. Except as set forth on Exhibit 3.1(t),
no Person is a guarantor or otherwise liable for any Liability (including
indebtedness for borrowed money) of the Company.
(u) Investment Representations. (i) The Shareholder is acquiring the
shares of PentaStar Common Stock to be issued to the Shareholder pursuant to
this Agreement (the "PentaStar Shares") for the Shareholder's own account and
not on behalf of any other Person; the Shareholder is aware and acknowledges
that the PentaStar Shares have not been registered under the Securities Act, or
applicable state securities laws, and may not be offered, sold, assigned,
exchanged, transferred, pledged or otherwise disposed of unless so registered
under the Securities Act and applicable state securities laws or an exemption
from the registration requirements thereof is available; (ii) the Shareholder
has been furnished all information that the Shareholder deems necessary to
enable the Shareholder to evaluate the merits and risks of an investment in
PentaStar, including, without limitation, the information described on Exhibit
3.1(u)(ii); the Shareholder has had a reasonable opportunity to ask questions of
and receive answers from PentaStar concerning PentaStar, the PentaStar Shares
and any and all matters relating to the transactions described herein or in the
information described on Exhibit 3.1(u)(ii), and all such questions, if any,
have been answered to the full satisfaction of the Shareholder; (iii) no Person
other than the Shareholder has (A) any rights in and to the PentaStar Shares,
which rights were obtained through or from the Shareholder; or (B) any rights to
acquire the PentaStar Shares, which rights were obtained through or from the
Shareholder; (iv) the Shareholder has such knowledge and experience in financial
and business matters (including knowledge and experience in the business and
proposed business of PentaStar) that the Shareholder is capable of evaluating
the merits and risks involved in an investment in the PentaStar Shares; and the
Shareholder is financially able to bear the economic risk of the investment in
the PentaStar Shares, including a total loss of such investment; (v) the
Shareholder has adequate means of providing for the Shareholder's current needs
and has no need for liquidity in the Shareholder's investment in the PentaStar
Shares; the Shareholder has no reason to anticipate any material change in the
Shareholder's financial condition for the foreseeable future; (vi) the
Shareholder is aware that the acquisition of the PentaStar Shares is an
investment involving a risk of loss and that there is no guarantee that the
Shareholder shall realize any gain from this investment, and that the
Shareholder could lose the total amount of its investment; (vii) the Shareholder
understands that no United States federal or state agency has made any finding
of determination regarding the fairness of the offering of the PentaStar Shares
for investment, or any recommendation or endorsement of the offering of the
PentaStar Shares; (viii) the Shareholder is acquiring the PentaStar Shares for
investment, with no present intention of dividing or allowing others to
participate in such investment or of reselling, or otherwise participating,
directly or indirectly, in a distribution of PentaStar Shares, and shall not
make any sale, transfer or pledge thereof without registration under the
Securities Act and any applicable securities laws of any state, unless an
exemption from registration is available, as established to the reasonable
satisfaction of PentaStar, by opinion of counsel or otherwise; (ix) except as
set forth herein and in the Other PentaStar Agreements, no
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representations or warranties have been made to the Shareholder by PentaStar or
any agent, employee or affiliate of PentaStar, and in entering into this
transaction the Shareholder is not relying upon any information, other than from
the results of independent investigation by the Shareholder; and (x) the
Shareholder understands that the PentaStar Shares are being offered to the
Shareholder in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that
PentaStar is relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgments and understandings of the Shareholder
set forth herein in order to determine the applicability of such exemptions and
the suitability of the Shareholder to acquire the PentaStar Shares; and (xi) the
Shareholder is an "accredited investor" as defined in Rule 501(a) of Regulation
D promulgated under the Securities Act, and Exhibit 3.1(u)(xi) sets forth the
Shareholder's state of residency.
All the certificates representing PentaStar Shares shall bear the
following legend, in addition to the legend required by Section 5.10:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") NOR UNDER ANY STATE SECURITIES LAWS AND CAN
NOT BE TRANSFERRED, SOLD, ASSIGNED OR HYPOTHECATED UNTIL EITHER (I) A
REGISTRATION STATEMENT WITH RESPECT THERETO IS DECLARED EFFECTIVE UNDER THE ACT
AND APPLICABLE STATE SECURITIES LAWS OR (II) THE COMPANY RECEIVES AN OPINION OF
COUNSEL TO THE COMPANY OR OTHER COUNSEL TO THE HOLDER OF SUCH SHARES, WHICH
OPINION IS SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH SECURITIES MAY
BE TRANSFERRED, SOLD, ASSIGNED OR HYPOTHECATED WITHOUT REGISTRATION UNDER THE
ACT OR APPLICABLE STATE SECURITIES LAWS.
(v) Disclosure. None of the documents or information provided to
PentaStar by the Company, the Shareholder or any agent or employee thereof in
the course of PentaStar's due diligence investigation and the negotiation of
this Agreement and Section 3.1 of this Agreement and the disclosure Exhibits
referred to therein, including the financial statements referred to above in
Section 3.1, contains any untrue statement of any material fact or omit to state
a material fact necessary in order to make the statements contained herein or
therein not misleading. There is no fact which materially adversely affects the
business, condition, affairs or operations of the Company or any of its assets
or properties which has not been set forth in this Agreement or such Exhibits,
including such financial statements.
Nothing in the disclosure Exhibits referred to in Section 3.1 shall be
deemed adequate to disclose an exception to a representation or warranty made
herein unless the applicable disclosure Exhibit identifies the exception with
particularity and describes the relevant facts in reasonable detail. Without
limiting the generality of the foregoing, the mere listing (or inclusion of a
copy) of a document or other item shall not be deemed adequate to disclose an
exception to a representation or warranty made herein (unless the representation
or warranty has to do with the existence of the document or other item itself).
The Shareholder acknowledges and agrees that the fact that they have made
disclosures pursuant to Section 3.1 or otherwise of matters, or did not have
knowledge of matters, which result in Adverse Consequences to PentaStar or the
Surviving Corporation shall not relieve the Shareholder of his obligation
pursuant to Section 7 of this Agreement to indemnify and hold PentaStar and the
Surviving Corporation harmless from all Adverse Consequences.
3.2. Representations and Warranties of PentaStar. PentaStar represents
and warrants to the Shareholder that the statements contained in this Section
3.2 are correct and complete as of the date of this
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Agreement and shall be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Section 3.2).
(a) Organization, Good Standing, Power, Etc. PentaStar and the Acquiror
are each corporations duly organized, validly existing and in good standing
under the laws of the State of Delaware and are qualified to do business as
foreign corporations and are in good standing in all jurisdictions in which the
nature of the respective businesses conducted by each of them or the respective
properties owned, leased or operated by each of them make such qualification
necessary. This Agreement and the Other PentaStar Agreements and the
transactions contemplated hereby and thereby have been duly approved by all
requisite corporate action. Each of PentaStar and the Acquiror have full
corporate power and authority to execute, deliver and perform this Agreement and
the Other PentaStar Agreements to which it is a party, and this Agreement
constitutes, and the Other PentaStar Agreements shall when executed and
delivered constitute, the legal, valid and binding obligations of PentaStar or
the Acquiror, as the case may be, and shall be enforceable in accordance with
their respective terms against PentaStar or the Acquiror, as the case may be.
(b) Capitalization.
(i) The authorized, issued and outstanding shares of the
capital stock of PentaStar are as set forth on Exhibit 3.2(b)(i).
(ii) At the time of issuance thereof and delivery to the
Shareholder, the PentaStar Shares to be delivered to the Shareholder
pursuant to this Agreement shall be duly authorized and validly issued
shares of PentaStar's Common Stock, and shall be fully paid and
nonassessable. Such PentaStar Shares shall at the time of such issuance
and delivery be free and clear of any Encumbrances of any kind or
character, other than those arising under applicable federal and state
securities laws, under this Agreement or under any Other Seller
Agreement to which the Shareholder is a party.
(iii) All of the issued and outstanding capital stock of the
Acquiror is owned by PentaStar.
(c) No Violation of Agreements, Etc. The execution, delivery and
performance of this Agreement and the Other PentaStar Agreements, and the
consummation of the transactions contemplated hereby and thereby shall not (i)
violate any Legal Requirement to which PentaStar or the Acquiror is subject or
any provision of the certificate of incorporation or bylaws of PentaStar or the
Acquiror or (ii) violate, with or without the giving of notice or the lapse of
time or both, or conflict with or result in the breach or termination of any
provision of, or constitute a default under, or give any Person the right to
accelerate any obligation under, or result in the creation of any Encumbrance
upon any properties, assets or business of PentaStar or of the Acquiror pursuant
to, any indenture, mortgage, deed of trust, lien, lease, license, agreement,
instrument or other arrangement to which PentaStar or the Acquiror is a party or
by which PentaStar or the Acquiror or any of their respective assets and
properties is bound or subject. Except for notices and consents that shall be
given or obtained by PentaStar prior to the Closing, neither PentaStar nor the
Acquiror need to give any notice to, make any filing with or obtain any
authorization, consent or approval of any Governmental Authority or other Person
in order for the parties to consummate the transactions contemplated by this
Agreement.
(d) SEC Filings; Financial Statements; Change.
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(i PentaStar has filed all reports, registration statements
and other filings, together with an amendments or supplements required
to be made with respect thereto, that it has been required to file with
the SEC under the Securities Act and the Exchange Act. As of the
respective dates of their filing with the SEC, the SEC Filings complied
in all material respects with the applicable provisions of the
Securities Act and the Exchange Act and did not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements made therein,
in the light of the circumstances under which they were made, not
misleading.
(ii Each of the historical consolidated financial statements
of PentaStar (including any related notes or schedules) included in the
SEC Filings was prepared in accordance with GAAP (except as may be
disclosed therein) and complied in all material respects with the
applicable rules and regulations of the SEC. Such financial statements
fairly present in all material respects the consolidated financial
position of PentaStar and its consolidated Subsidiaries as of the dates
thereof and the consolidated results of operations, cash flows and
changes in stockholders' equity for the periods then ended (subject, in
the case of the unaudited interim financial statements, to normal,
recurring year-end audit adjustments).
(iii Except as disclosed in the SEC Filings and except that
PentaStar has incurred additional losses since June 30, 2000 consistent
with those of the quarter ended June 30, 2000 and PentaStar's third
quarter revenues have been negatively impacted by the Verizon employee
strike (which has been settled), since June 30, 2000 there has been no
material adverse change in the business of PentaStar and its
Subsidiaries taken as a whole.
3.3. Survival of Representations. The representations and warranties
contained in Sections 3.1 and 3.2 and the Liabilities of the parties with
respect thereto shall survive any investigation thereof by the parties and shall
survive the Closing for four years, except that (a) the Liabilities of the
Shareholder with respect to the representations and warranties set forth in
Sections 3.1(f), 3.1(m) and 3.1(p), and the Liabilities of PentaStar with
respect to the representations and warranties set forth in Section 3.2(d), shall
survive until the end of the applicable statute of limitations and (b) the
Liabilities of the Shareholder with respect to the representations and
warranties set forth in Sections 3.1(a), 3.1(b), 3.1(c), 3.1(g), 3.1(q), 3.1(u)
and 3.1(v), and the Liabilities of PentaStar with respect to the representations
and warranties set forth in Sections 3.2(a), 3.2(b) and 3.2(c), shall survive
without termination.
3.4. Representations as to Knowledge. The representations and
warranties contained in Article 3 hereof shall in each and every case where a
statement to the "best knowledge," "best of knowledge" or "knowledge" is
required on behalf of any party to this Agreement mean the actual good faith
knowledge or awareness of such party.
4. Pre-Closing Covenants. The parties agree as follows with respect to the
period between the execution of this Agreement and the Closing.
4.1. General. Each of the parties shall use its reasonable best efforts
to take all actions necessary, proper or advisable in order to consummate and
make effective the transactions contemplated by this Agreement (including the
satisfaction, but not the waiver, of the closing conditions set forth in Section
6) and the other agreements contemplated hereby. Without limiting the foregoing,
the Shareholder shall, and shall cause the Company to, give any notices, make
any filings and obtain any consents, authorizations or approvals needed to
consummate the transactions contemplated by this Agreement.
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4.2. Operation and Preservation of Business. The Shareholder shall not
cause or permit the Company to engage in any practice, take any action or enter
into any transaction outside the ordinary course of its business consistent with
past practice; provided, however, that in no event shall any action be taken or
fail to be taken or any transaction be entered into which would result in a
breach of any representation, warranty or covenant of the Shareholder. The
Shareholder shall cause the Company to keep its business and properties,
including its current operations, physical facilities, working conditions and
relationships with customers, service providers, Sub-Agents, lessors, licensors
and employees, intact.
4.3. Full Access. The Shareholder shall cause the Company to permit
PentaStar and its agents to have full access at all reasonable times, and in a
manner so as not to interfere with the normal business operations of the
Company, to all premises, properties, personnel, books, records (including Tax
records), contracts and documents of or pertaining to the Company.
4.4. Notice of Developments. The Shareholder shall give prompt written
notice to PentaStar of any material development which occurs after the date of
this Agreement and before the Closing and affects the business, assets,
Liabilities, financial condition, operations, results of operations, future
prospects, representations, warranties, covenants or disclosure Exhibits of the
Company. No such written notice, however, shall be deemed to amend or supplement
any disclosure Exhibit or to prevent or cure any misrepresentation, breach of
warranty or breach of covenant.
4.5. Exclusivity. The Shareholder shall not, and the Shareholder shall
not cause or permit the Company to, (a) solicit, initiate or encourage the
submission of any proposal or offer from any Person relating to the acquisition
of any capital stock or other voting securities, or any portion of the assets
of, the Company (including any acquisition structured as a merger, consolidation
or share exchange) or (b) participate in any discussions or negotiations
regarding, furnish any information with respect to, assist or participate in or
facilitate in any other manner any effort or attempt by any Person to do or seek
any of the foregoing. The Shareholder shall not vote shares of the Company's
stock in favor of any such transaction. The Shareholder shall notify PentaStar
immediately if any Person makes any proposal, offer, inquiry or contact with
respect to any of the foregoing.
4.6. Announcements; Securities Law Restrictions. Prior to the Closing,
neither the Shareholder nor the Company shall disclose to any Person, nor issue
any press release or make any public announcement concerning, the existence,
terms or subject matter of this Agreement without the prior written approval of
PentaStar, except (and only to the extent) previously publicly announced by
PentaStar or to obtain consents required by this Agreement. Further, neither the
Shareholder nor the Company shall violate the United States securities laws
which restrict the Shareholder and the Company, as Persons with material
non-public information concerning PentaStar obtained directly or indirectly from
PentaStar, from purchasing or selling securities of PentaStar or from
communicating such information to any other Person under any circumstances in
which it is reasonably foreseeable that such Person is likely to purchase or
sell such securities.
4.7. Closing Date Liabilities and Excluded Assets.
(a Prior to the Closing Date, the Shareholder shall pay, or shall cause
the Company to pay prior to the Closing Date, in full all Closing Date
Liabilities in excess of the amounts set forth on the Estimated Closing Date
Balance Sheet; provided, that no funds received in respect of accounts or notes
receivable described in Section 2.1(k)(i)(A)(3) shall be used for such purpose.
Effective as of immediately prior to the Closing Date, the Shareholder hereby
assumes all Closing Date Liabilities in excess of the
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amounts set forth on the Estimated Closing Date Balance Sheet without further
action by the Shareholder, the Company or any other Person.
(b Prior to the Closing Date, the Shareholder shall cause the Company
to distribute to the Shareholder the Excluded Assets.
4.8. Conveyance of Shareholder Property. Prior to the Closing Date, the
Shareholder shall convey, and shall cause each relative or affiliate of the
Company or of the Shareholder to convey, to the Company, free and clear of any
Encumbrance or Tax, all of the Shareholder's and each such relative's or
affiliate's right, title and interest to any tangible or intangible asset
(excluding real property, improvements and fixtures, other than trade fixtures)
which is used by the Company in its business and owned or leased by the
Shareholder or relative or affiliate of the Company or of the Shareholder (the
"Shareholder Property"). In the event that any of the Shareholder Property is
leased rather than owned by a Shareholder or relative or affiliate of the
Company or of the Shareholder, the Shareholder shall cause the lessee thereof to
purchase such property prior to the Closing Date in order to be able to convey
it to the Company as required by this Section.
5. Post-Closing Covenants. The parties agree as follows with respect to
the period following the Closing.
5.1. Further Assurances. In case at any time after the Closing any
further action is necessary or desirable to carry out the purposes of this
Agreement, each of the parties shall take such further action (including the
execution and delivery of such further instruments and documents) as any other
party reasonably may request, all at the sole cost and expense of the requesting
party (unless the requesting party is entitled to indemnification therefor under
Section 7).
5.2. Transition. The Shareholder shall not take any action at any time
that is designed or intended to have the effect of discouraging any customer,
service provider, Sub-Agent, lessor, licensor, employee or other business
associate of the Company from establishing or continuing a business relationship
with the Acquiror or PentaStar after the Closing.
5.3. Cooperation. In the event and for so long as any party actively is
contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand in connection with (a) any
transaction contemplated by this Agreement or (b) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act or transaction on or prior to the Closing
involving any of the Acquired Assets or the Company's business, each of the
other parties shall cooperate with such party and its counsel in the contest or
defense, make available their personnel, and provide such testimony as shall be
reasonably necessary in connection with the contest or defense, all at the sole
cost and expense of the contesting or defending party (unless the contesting or
defending party is entitled to indemnification therefor under Section 7).
5.4. Confidentiality. The Shareholder shall treat and hold as
confidential all Confidential Information concerning PentaStar, the Company's
business or the Acquired Assets, refrain from using any such Confidential
Information and deliver promptly to PentaStar or destroy, at the request and
option of PentaStar, all of such Confidential Information in its or their
possession.
5.5. Post-Closing Announcements. Following the Closing, the Shareholder
shall not issue any press release or make any public announcement relating to
the subject matter of this Agreement without the prior written approval of
PentaStar.
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5.6. Financial Statements. The Shareholder shall, upon request of
PentaStar, cooperate with PentaStar and render such assistance to PentaStar and
its accountants as may be required to produce such historical and on-going
financial statements and audits as PentaStar may request, including, without
limitation, signing management representation letters reasonably requested by
PentaStar's auditors, all at the sole cost and expense of PentaStar, but without
additional consideration to the Shareholder. The Shareholder acknowledges that
PentaStar may be required by Legal Requirement to include audited financial
statements with respect to the business of the Company in reports filed with
governmental agencies and that the inability to audit the financial statements
as of the Effective Date promptly after the Closing could have a material
adverse effect on PentaStar. PentaStar and the Acquiror shall make available to
the Shareholder such existing books and records of the Company as are required
by the Shareholder to produce Tax Returns, financial statements and audit
responses with respect to periods ending prior to the Closing Date.
5.7. Satisfaction of Liabilities.
(a Promptly following the Closing, the Shareholder shall pay when due
all Closing Date Liabilities in excess of the amounts set forth on the Estimated
Closing Date Balance Sheet to the extent not previously paid by the Shareholder
at or prior to the Closing Date and any Taxes attributable to the transactions
contemplated by this Agreement. In addition, any and all Taxes attributable to
the assumption of the Closing Date Liabilities under Section 4.7(a) or to the
distribution of the Excluded Assets under Section 4.7(b), and to any other
pre-Closing distribution or dividend of assets, including, without limitation,
any recognition by the Company of taxable income or gain with respect to the
distribution or dividend of the Excluded Assets or any pre-Closing distribution
or dividend of assets, shall be Closing Date Liabilities and shall be paid in
full by the Shareholder, and neither the Company nor the Acquiror shall have any
Liability with respect thereto. The Shareholder shall use his best efforts to
have the Motor Vehicle Lease Agreement with Xxxxxx Infinity, Inc. referred to in
the definition of Closing Date Liabilities transferred out of the Company's
name, and whether or not such transfer occurs, the Shareholder shall indemnify
the Acquiror from all Liabilities with respect to such Lease Agreement, the
related vehicle and its use.
(b The Shareholder, at his expense, promptly shall take or cause to be
taken any action necessary to remedy any failure of the Premises or the acquired
business to comply at the Closing Date with any Legal Requirement, upon receipt
of notice from PentaStar at any time.
(c The Acquiror shall pay and perform, as and when due (except to the
extent the validity thereof or the liability therefor is being contested by the
Acquiror), the Retained Liabilities.
5.8. Repurchase of Unpaid Receivables. The Shareholder guarantees that
the Closing Accounts Receivable, net of any reserve established on the Latest
Balance Sheet in accordance with GAAP on a basis consistent with the historical
accounting practice of PentaStar, shall be fully paid to the Acquiror in
accordance with their terms at their recorded amounts not later than 180 days
from the Closing Date. Upon demand by PentaStar at any time after 180 days from
the Closing Date, the Shareholder shall pay to the Acquiror the full amount of
any unpaid Closing Accounts Receivable which is the subject of such demand. Upon
such payment to the Acquiror, the Closing Accounts Receivable which are so paid
for by the Shareholder shall, without further action of any party, become the
property of the Shareholder, who may pursue collection thereof; provided,
however, that the Shareholder shall notify the account obligor that such
collection efforts are not being undertaken on behalf of the Acquiror or
PentaStar. From the Closing until 180 days after the Closing Date, PentaStar
(through the Acquiror) shall apply its standard accounts receivable
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collection procedures to the Closing Accounts Receivable; provided, however,
neither the Acquiror nor PentaStar shall not be required to institute suit,
utilize third-party collection agencies or other agents or take other
extraordinary collection actions with respect to the Closing Accounts
Receivable; and, provided further, that any failure of any collection activities
of the Acquiror, PentaStar or any such collection agency or other agent shall
not relieve the Shareholder from his guarantee of the Closing Accounts
Receivable as described in this Section 5.8.
5.9. Termination of Obligations. Effective as of the Closing Date,
neither the Surviving Corporation nor PentaStar shall have any Liability to the
Shareholder or any relative or affiliate thereof or of the Company, except as
otherwise provided in this Agreement or in an Other Seller Agreement. Effective
as of the Closing Date, the Shareholder shall not have any Liability to the
Surviving Corporation or PentaStar, except as otherwise provided in this
Agreement, in an Other Seller Agreement or in any other written agreement
entered into on or after the Closing Date.
5.10. Transfer Restrictions. Unless otherwise agreed by PentaStar,
except for transfers by the Shareholder to (a) immediate family members of the
Shareholder who agree to be bound by the restrictions set forth in this Section
5.10 (and a copy of such agreement is furnished to PentaStar prior to the
transfer), (b) trusts, limited partnerships or other estate planning entities
for the benefit of the Shareholder or family members of the Shareholder, the
trustees, partners or other persons having authority to bind the trust, limited
partnership or other estate planning entity of which agree to be bound by such
restrictions (and a copy of such agreement is furnished to PentaStar prior to
the transfer), or (c) any charitable organization that qualifies for receipt of
charitable contributions under Section 170(c) of the Code and such organization
agrees to be bound by such restrictions (and a copy of such agreement is
furnished to PentaStar prior to the transfer), the Shareholder agrees that the
Shareholder shall not sell, assign, exchange, transfer, pledge or otherwise
dispose of at any time prior to the date which is 18 months after the Closing
any of the PentaStar Shares received by the Shareholder as part of the Purchase
Price. Thereafter, up to 33% of the PentaStar Shares received as part of the
Purchase Price by the Shareholder may be resold at any time, and an additional
17% of the PentaStar Shares received as part of the Purchase Price by the
Shareholder may be resold by the Shareholder beginning 24 months after the
Closing. Any remaining PentaStar Shares may not be sold until the earlier to
occur of (w) the sale of all or substantially all of the assets or outstanding
shares of PentaStar, whether by way of merger, acquisition or other method
(except a merger or consolidation immediately after which the Persons who were
shareholders of PentaStar before the transaction own a majority of the
outstanding equity securities of the surviving or resulting entity) or (x)
October 26, 2004. Notwithstanding anything to the contrary in this Section 5.10,
(y) none of the PentaStar Shares which are the subject of the Escrow Deposit may
be sold, assigned, exchanged, transferred, pledged or otherwise disposed of
unless and until released to the Shareholder from the Escrow Deposit and (z)
none of the PentaStar Shares which are subject to the Principal Shareholder's
Escrow Agreement may be sold, assigned, exchanged, transferred, pledged or
otherwise disposed of except as set forth in the Principal Stockholder's Escrow
Agreement. Certificates for the PentaStar Shares delivered to the Shareholder
pursuant to the Agreement shall bear a legend substantially in the form set
forth below as long as applicable:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THAT CERTAIN AGREEMENT
AND PLAN OF MERGER ENTERED INTO ON OCTOBER 25, 2000, (THE "AGREEMENT") BY AND
AMONG THE ISSUER, PENTASTAR ACQUISITION CORP V, VISION COMMUNICATIONS GROUP,
INC. AND THE SHAREHOLDER OF VISION COMMUNICATIONS GROUP, INC. PRIOR TO THE
EXPIRATION OF THE HOLDING PERIODS SET FORTH IN THE AGREEMENT, SUCH SHARES MAY
NOT BE SOLD, ASSIGNED, EXCHANGED, TRANSFERRED,
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PLEDGED OR OTHERWISE DISPOSED OF WITHOUT THE WRITTEN CONSENT OF THE ISSUER, AND
THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE,
ASSIGNMENT, EXCHANGE, TRANSFER, PLEDGE OR OTHER DISPOSITION WHICH VIOLATES THE
AGREEMENT. UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE
ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER RELATING TO
THIS RESTRICTIVE LEGEND PLACED WITH THE TRANSFER AGENT) WHEN THE APPLICABLE
HOLDING PERIOD HAS EXPIRED.
PentaStar shall issue separate certificates to the Shareholder
representing the shares of PentaStar Shares subject to each of the three periods
of restriction contemplated by this Section 5.10.
The restrictions set forth above in this Section 5.10 shall be in
addition to any restrictions on transfer set forth in Section 3.1(u) or imposed
by the Securities Act and applicable state securities laws. The Shareholder also
agrees to comply with such restrictions.
5.11. Tax Returns. The Shareholder shall be responsible for the timely
filing of the Company's Tax Returns for the 1999 tax year and the short tax year
from January 1, 2000 through the Closing Date and for the timely payment of all
income or other Taxes relating to those periods. The Surviving Corporation shall
make the books and records of the Company available to the Shareholder as
required for the preparation of such Tax Returns or for any subsequent audit or
examination of any Tax Return of the Company for any period ending with or prior
to the Closing Date. The Surviving Corporation shall notify the Shareholder of
any inquiry, audit or examination of which the Surviving Corporation receives
notice relating to the Company's Tax Returns for any period ending with or prior
to the Closing Date and the Shareholder shall have the right, subject to Section
7, to control the defense and settlement of any such inquiry, audit or
examination. The Surviving Corporation shall not file any amended Tax Return for
the Company for any period ending with or prior to the Closing Date without the
consent of the Shareholder, unless required to do so by applicable Legal
Requirement. The Shareholder shall afford the Surviving Corporation a reasonable
opportunity tor review any new or amended Tax Return for the Company filed by
the Shareholder hereunder and shall not make any election or take any other
action on any such return that would increase the Tax Liability of the Surviving
Corporation for periods after the Closing Date.
5.12. Conduct During Earn-Out Period. During the Earn-Out Period,
PentaStar shall (a) operate the business of the Acquiror in the usual and
ordinary course of PentaStar's business operations and (b) not engage in any
actions designed to intentionally deprive the Shareholder of the potential
benefit of the Earn-Out arrangement.
5.13. Employment. The Acquiror shall offer continued employment, on an
at-will basis, to all persons who are employees of the Company immediately prior
to the Closing Date at compensation levels approximately not less than those
received by such employees as of July 1, 2000 (or, if first hired after July 1,
2000, as of the date of first hire), which compensation levels are set forth on
Exhibit 5.13. Such continuing employees shall be given credit for all service
with the Company under PentaStar's health, medical and vacation plans in which
they become participants for purposes of eligibility, vesting and benefit
accrual.
5.14. Seller Provider Agreements. The Shareholder shall use his best
efforts to have each Seller's rights to receive accounts receivable and residual
payments under the service provider agreements identified on Exhibit 5.14
assigned to the Acquiror and to have each of such agreements terminated.
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5.15. Valley Bank. Within 45 days of the Closing Date, the Shareholder
shall cause Valley National Bank (and the Small Business Administration) to
release, in form and substance reasonably satisfactory to PentaStar, all
Encumbrances with respect to the Surviving Corporation relating to or arising
from the Valley Loan Documents or from the Company's line of credit which is
described in Section 3.1(e)(iv).
5.16. Commission Protection. If Verizon Communications asserts a claim
against the Surviving Corporation for a refund, offset, "claw-back" or similar
right with respect to all or any portion of the commission payments made to the
Company in respect of sales to the customer identified on Exhibit 3.1(e)(iv),
then the Shareholder shall make such payment in cash directly to Verizon
Communications.
5.17. Outstanding Consents. As of the Closing, the Shareholder has not
obtained the third party consents, estoppels, nondisturbance agreements,
landlord waivers, contract terminations and Encumbrance (UCC) terminations set
forth on Exhibit 5.17 (collectively, the "Outstanding Consents"). With respect
to the Outstanding Consents, PentaStar, the Acquiror and the Shareholder agree
as follows: (a) the Closing shall occur even though the Outstanding Consents
have not been obtained by the Closing; (b) it is the obligation of the
Shareholder to obtain the Outstanding Consents, and neither PentaStar nor the
Acquiror has waived the obligation of the Shareholder to obtain the Outstanding
Consents and to indemnify and hold harmless PentaStar and the Acquiror from any
Adverse Consequences which either of them may suffer resulting from, arising out
of, relating to or caused by the failure of the Shareholder to obtain any such
Outstanding Consent; and (c) the Shareholder shall obtain each Outstanding
Consent as soon as practicable after Closing, with the provisions of Section
6.1(c) continuing to apply to such Outstanding Consents.
6. Conditions to Closing.
6.1. Conditions to Obligation of PentaStar. The obligation of PentaStar
to consummate the transactions contemplated by this Agreement is subject to
satisfaction of the following conditions:
(a the Shareholder's representations and warranties shall be correct
and complete at and as of the Closing Date and the Closing and any written
notices delivered to PentaStar pursuant to Section 4.4 and the subject matter
thereof shall be satisfactory to PentaStar;
(b the Shareholder shall have performed and complied with all of their
covenants hereunder through the Closing;
(c the Shareholder shall have given, or shall have caused the Company
to give, all notices and shall have procured, or shall have caused the Company
to procure, all of the third-party consents, authorizations and approvals
required to consummate the transactions contemplated by this Agreement,
including the Transaction, all in form and substance reasonably satisfactory to
PentaStar;
(d no action, suit or proceeding shall be pending or threatened before
any Governmental Authority or any other Person wherein an unfavorable Order has
been sought which would (i) prevent consummation of any of the transactions
contemplated by this Agreement, (ii) cause any of the transactions contemplated
by this Agreement to be rescinded following consummation or (iii) affect
adversely the right of the Acquiror to own the Acquired Assets and conduct the
Company's business, and no such Order shall be in effect;
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(e there shall have been no adverse change in the Company, the Acquired
Assets or the Company's business between the date of execution of this Agreement
and the Closing;
(f the Shareholder shall have delivered to PentaStar (i) a certificate
to the effect that each of the conditions specified above in Sections 6.1(a)
through (e) is satisfied in all respects and (ii) a good standing certificate,
dated within 10 days of the Closing, from the Secretary of State of the State of
the Company's jurisdiction of incorporation and each other state in which the
Company is qualified or authorized to do business as a foreign corporation;
(g (i) the Other Seller Agreements shall have been executed and
delivered by the parties thereto other than PentaStar and the Acquiror, (ii)
PentaStar shall have received from the Shareholder evidence of payment in full
of the obligations of the Shareholder under that certain Stock Purchase
Agreement dated April 14, 1998 among the Shareholder, Xxxxxx X. XxXxxxx and the
Company, pursuant to which the Shareholder acquired all of Xx. XxXxxxx'x
interest in the Company, the Sellers and other entities, free and clear of any
Encumbrances, and (iii) the Shareholder shall have paid in full to the Company
the principal, and all interest thereon, with respect to the employee loan
referred to in the definition of Excluded Assets and shall have delivered
evidence thereof to PentaStar;
(h PentaStar shall have received from counsel to the Shareholder an
opinion in form and substance as set forth in Exhibit 6.1(h) addressed to
PentaStar and the Acquiror dated as of the Closing;
(i PentaStar shall have completed its due diligence with respect to the
Company with results satisfactory to PentaStar;
(j [RESERVED];
(k PentaStar shall have received from the Shareholder UCC, lien,
litigation and judgment searches with respect to the Company, evidence from
Valley National Bank of pay-off and termination of (A) the Company's line of
credit described in Section 3.1(e)(iv) and (B) the loan which is the subject of
the Valley Loan Documents and evidence of the termination of all Encumbrances
filed against the Company or any Acquired Assets, except as set forth in Section
5.15;
(l PentaStar shall have received the resignations, effective as of the
Closing, of each director and officer of the Company;
(m stock certificates representing the Shares duly endorsed in blank or
accompanied by stock powers duly executed in blank, shall have been delivered by
the Shareholder to PentaStar;
(n the Shareholder shall have delivered to PentaStar possession and
control of the Company and the Acquired Assets, including, without limitation,
all stock certificate books, minute books, corporate seals, and all other
corporate and financial records of the Company; and
(o the Shareholder shall have delivered, or caused the Company to
deliver, to PentaStar such other instruments, certificates and documents as are
reasonably requested by PentaStar in order to consummate the transactions
contemplated by this Agreement, all in form and substance reasonably
satisfactory to PentaStar.
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PentaStar may waive any condition specified in this Section 6.1 at or prior to
the Closing.
6.2. Conditions to Obligation of the Shareholder. The obligation of the
Shareholder to consummate the transactions contemplated by this Agreement is
subject to satisfaction of the following conditions:
(a PentaStar's representations and warranties shall be correct and
complete at and as of the Closing Date and the Closing;
(b PentaStar shall have performed and complied with all of its
covenants hereunder through the Closing Date;
(c PentaStar shall have delivered to the Shareholder a certificate to
the effect that each of the conditions specified above in Sections 6.2(a) and
(b) is satisfied in all respects;
(d the Other PentaStar Agreements shall have been executed and
delivered by PentaStar and the Acquiror, as the case may be;
(e the Shareholder shall have received from counsel to PentaStar an
opinion in form and substance as set forth in Exhibit 6.2(e), addressed to the
Shareholder and dated as of the Closing; and
(f PentaStar shall have paid, issued and deposited the portion of the
Purchase Price due at the Closing pursuant to Section 2.1, and shall have paid
to each Seller the amount due such Seller pursuant to the Xxxx of Sale.
The Shareholder may waive any condition specified in this Section 6.2 at or
prior to the Closing.
7. Remedies for Breaches of This Agreement.
7.1. Indemnification Provisions for Benefit of PentaStar and the
Surviving Corporation.
(a If the Shareholder breaches (or if any Person other than PentaStar
or the Surviving Corporation alleges any fact that, if true, would mean the
Shareholder has breached) any of the representations or warranties of the
Shareholder contained herein and PentaStar gives notice thereof to the
Shareholder within the Survival Period, or if the Shareholder breaches (or if
any Person other than PentaStar or the Surviving Corporation alleges any fact
that, if true, would mean the Shareholder has breached) any covenants of the
Shareholder contained herein or any representations, warranties or covenants of
the Shareholder contained in any Other Seller Agreement and PentaStar gives
notice thereof to the Shareholder, then the Shareholder agrees to indemnify and
hold harmless PentaStar and the Surviving Corporation from and against any
Adverse Consequences PentaStar or the Surviving Corporation may suffer resulting
from, arising out of, relating to or caused by any of the foregoing regardless
of whether the Adverse Consequences are suffered during or after the Survival
Period; provided, however, that the Shareholder shall not have any obligation to
indemnify PentaStar or the Surviving Corporation from and against any Adverse
Consequences based upon the breach (or alleged breach) of any representation or
warranty of the Shareholder contained in Section 3.1 (other than those contained
in Section 3.1(a), 3.1(b), 3.1(c), 3.1(e)(iv), 3.1(f), 3.1(g), 3.1(m), 3.1(u)
and 3.1(v)) or of the covenant of the Shareholder contained in the first
sentence of Section 5.8 until PentaStar and the Surviving Corporation have
collectively suffered Adverse Consequences by reason of any or all such breaches
(or alleged breaches) in excess of $25,000 in the aggregate, at which point the
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Shareholder shall be obligated to indemnify PentaStar and the Surviving
Corporation from and against the entirety of all Adverse Consequences from the
first dollar; and provided, further, that the aggregate indemnification
obligation of the Shareholder (excluding the matters set forth in the last
sentence of Section 5.7, in Section 5.15 or in Section 5.16) shall be limited to
the Purchase Price plus the amount paid by the Acquiror under the Xxxx of Sale.
In determining whether there has been a breach of any representation or warranty
contained in Section 3.1 and in determining for purposes of the preceding
sentence the amount of Adverse Consequences suffered by PentaStar or the
Surviving Corporation, such representations and warranties shall not be
qualified (other than by the references to "knowledge" set forth in the first
sentence of Section 3.1(n)(i) or in the last sentence of Section 3.1(o)) by
"material," "materiality," "in all material respects," "best knowledge," "best
of knowledge" or "knowledge" or words of similar import, or by any phrase using
any such terms or words. The Shareholder shall also indemnify and hold harmless
PentaStar and the Surviving Corporation from and against any Adverse
Consequences PentaStar or the Surviving Corporation may suffer which result
from, arise out of, relate to or are caused by (i) any Liability of the Company
or the Shareholder not included in the Retained Liabilities or (ii) any
condition, circumstance or activity existing prior to the Closing Date which
relates to any Legal Requirement or any act or omission of the Company or the
Shareholder or any predecessor with respect to, or any event or circumstance
related to, the Company's, the Shareholder's or any predecessor's ownership, use
or operation of any of the Acquired Assets, the Excluded Assets, the Premises or
any other assets or properties or the conduct of its or their business,
regardless, in the case of (i) or (ii), of (A) whether or not such Liability,
act, omission, event, circumstance or matter was known or disclosed to
PentaStar, was disclosed on any Exhibit hereto or is a matter with respect to
which the Shareholder did or did not have knowledge, (B) when such Liability,
act, omission, event, circumstance or matter occurred, existed, occurs or exists
and (C) whether a claim with respect thereto was asserted before or is asserted
after the Closing Date. If any dispute arises concerning whether any
indemnification is owing which cannot be resolved by negotiation among the
parties within 30 days of notice of claim for indemnification from the party
claiming indemnification to the party against whom such claim is asserted, the
dispute shall be resolved by arbitration pursuant to this Agreement; provided,
however, that if PentaStar or the Surviving Corporation is sued in an action
relating in whole or in part to a claim against which it is or may be entitled
to indemnification hereunder, it may, at its option, join the Shareholder in
that action and have its right to indemnification adjudicated by the court.
(b Amounts needed to cover any indemnification claims by PentaStar or
the Surviving Corporation against the Shareholder during the Escrow Period may
be taken by PentaStar or the Surviving Corporation out of the Escrow Deposit,
subject to the requirement of the Escrow Agreement that amounts are to be
released form the Escrow Deposit only upon the joint written instruction of
PentaStar and the Shareholder. At the end of the Escrow Period, amounts of the
Escrow Deposit which may reasonably be needed to cover pending indemnification
claims made by PentaStar or the Surviving Corporation (such amounts to be
determined by PentaStar based upon the good faith exercise of its business
judgment) shall be retained in the Escrow Account until such claims are
resolved, and any excess amount of the Escrow Deposit shall be paid to the
Shareholder. For purposes of indemnification claims, each of the shares of
PentaStar Common Stock shall be valued at its Fair Market Value as of the date
that it is delivered from the Escrow Account. PentaStar and the Shareholder
shall jointly give instructions to the Escrow Agent to carry out the intent of
this Section 7.1(b). Any disputes concerning the escrowed property shall be
settled by arbitration as provided in this Agreement. PentaStar and the
Surviving Corporation, on the one hand, and the Shareholder, on the other hand,
shall each be responsible for one-half of the fees, charges and expenses payable
to the Escrow Agent pursuant to the Escrow Agreement. Nothing in this Section
7.1(b) shall be construed to limit PentaStar's or the Surviving Corporation
right to indemnification to amounts on deposit in the Escrow Account or to
require that the Escrow Account first be exhausted before PentaStar or the
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Surviving Corporation may resort to any other remedy available under this
Agreement or otherwise. The Shareholder shall be liable to PentaStar and the
Surviving Corporation for any amounts needed to cover claims by PentaStar or the
Surviving Corporation, which amounts shall be paid directly to PentaStar or the
Surviving Corporation, as the case may be.
(c During the time that any PentaStar Shares are held in the Escrow
Deposit, the Shareholder shall have the right to vote such shares and shall have
the economic benefit of any dividends paid on such shares. All such dividends
shall be retained in the Escrow Deposit and shall be available for the payment
of indemnification claims under Section 7.1(b). In the event that PentaStar or
the Acquiror proposes to take any shares from the Escrow Deposit to satisfy an
indemnification claim, the Shareholder shall have the right, in his sole
discretion, to pay to the Escrow Agent an amount of cash equal to the Fair
Market Value of the shares proposed to be taken, determined as of the date such
payment is made, and receive from the Escrow Agent certificates representing
such shares. If the Shareholder exercises that right, PentaStar and the
Shareholder shall execute joint written instructions to the Escrow Agent to
deliver the cash so paid to PentaStar and to transfer the appropriate number of
shares of PentaStar Common Stock to the Shareholder. If the Shareholder does not
exercise that right, PentaStar may nonetheless require the Shareholder to
substitute cash for the shares (in an amount equal to the Fair Market Value of
the shares determined as of the date such payment is required by PentaStar or
the Acquiror to be made) to be taken from the Escrow Deposit if, in the good
faith opinion of PentaStar, based on advice of counsel, the taking of shares
from the Escrow Deposit would cause the Purchase Price, taken as a whole, not to
comply with the continuity of interest test for a tax-free reorganization under
Section 368 of the Code. For that purpose, the parties agree that, under current
Legal Requirements, such continuity of interest test would not require that the
PentaStar Shares constitute more than half of the total Purchase Price, after
all adjustments and taking into account any reacquisition by PentaStar or the
Acquiror of any of the PentaStar Shares.
7.2. Indemnification Provisions for Benefit of the Shareholder. If
PentaStar breaches (or if any Person other than the Shareholder alleges facts
that, if true, would mean PentaStar has breached) any of its representations or
warranties contained herein and the Shareholder gives notice of a claim for
indemnification against PentaStar within the Survival Period, or if PentaStar or
the Surviving Corporation breaches (or if any Person other than the Shareholder
alleges facts that, if true, would mean PentaStar or the Surviving Corporation
has breached) any of its respective covenants contained herein or any of its
respective representations, warranties or covenants contained in any Other
PentaStar Agreement and the Shareholder gives notice thereof to PentaStar, then
PentaStar or the Surviving Corporation, as the case may be, agrees to indemnify
and hold harmless the Shareholder from and against any Adverse Consequences the
Shareholder may suffer which result from, arise out of, relate to, or are caused
by the breach or alleged breach by such Person, regardless of whether the
Adverse Consequences are suffered during or after the Survival Period. In
determining whether there has been a breach of any representation or warranty
contained in Section 3.2 and in determining the amount of Adverse Consequences
suffered by the Shareholder for purposes of this Section 7.2, such
representations and warranties shall not be qualified by "material,"
"materiality," "in all material respects," "best knowledge," "best of knowledge"
or "knowledge" or words of similar import, or by any phrase using any such terms
or words. If any dispute arises concerning whether any indemnification is owing
which cannot be resolved by negotiation among the parties within 30 days of
notice of claim for indemnification from the party claiming indemnification to
the party against whom such claim is asserted, the dispute shall be resolved by
arbitration pursuant to this Agreement; provided, however, that if the
Shareholder is sued in an action relating in whole or in part to a claim against
which he or she is or may be entitled to indemnification hereunder, he or she
may, at its option, join PentaStar or the Surviving Corporation in that action
and have his right to indemnification adjudicated by the court.
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7.3. Matters Involving Third Parties.
(a If any Person not a party to this Agreement (including, without
limitation, any Governmental Authority) notifies any party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may give rise
to a claim for indemnification against any other party (the "Indemnifying
Party"), then the Indemnified Party shall notify each Indemnifying Party thereof
in writing within 15 days after receiving such notice. No delay on the part of
the Indemnified Party in notifying any Indemnifying Party shall relieve the
Indemnifying Party from any obligation hereunder unless (and then solely to the
extent) the Indemnifying Party thereby is prejudiced.
(b Any Indemnifying Party shall have the right, at its sole cost and
expense, to defend the Indemnified Party against the Third Party Claim with
counsel of its choice satisfactory to the Indemnified Party so long as (i) the
Indemnifying Party notifies the Indemnified Party in writing within 10 days
after the Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party shall indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to or caused by the Third Party Claim, (ii) the
Indemnifying Party provides the Indemnified Party with evidence reasonably
acceptable to the Indemnified Party that the Indemnifying Party shall have the
financial resources to defend against the Third Party Claim and fulfill its
indemnification obligations hereunder, (iii) the Third Party Claim involves only
money damages and does not seek an injunction or other equitable relief, (iv)
settlement of, or an adverse judgment with respect to, the Third Party Claim is
not, in the good faith judgment of the Indemnified Party, likely to establish a
precedential custom or practice materially adverse to the continuing business
interests of the Indemnified Party, and (v) the Indemnifying Party conducts the
defense of the Third Party Claim actively and diligently. If the Indemnifying
Party does not assume control of the defense or settlement of any Third Party
Claim in the manner described above, it shall be bound by the results obtained
by the Indemnified Party with respect to the Third Party Claim.
(c So long as the Indemnifying Party is conducting the defense of the
Third Party Claim in accordance with Section 7.3(b) above, (i) the Indemnified
Party may retain separate co-counsel at its sole cost and expense and
participate in the defense of the Third Party Claim, (ii) the Indemnified Party
shall not consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written consent of the
Indemnifying Party (not to be withheld unreasonably), and (iii) the Indemnifying
Party shall not consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim without the prior written
consent of the Indemnified Party (not to be withheld unreasonably).
(d In the event any of the conditions in Section 7.3(b) above is or
becomes unsatisfied, however, (i) the Indemnified Party may defend against, and
consent to the entry of any judgment or enter into any settlement with respect
to, the Third Party Claim in any manner it reasonably may deem appropriate (and
the Indemnified Party need not consult with, or obtain any consent from, any
Indemnifying Party in connection therewith), (ii) the Indemnifying Party shall
reimburse the Indemnified Party promptly and periodically for the costs of
defending against the Third Party Claim (including reasonable attorneys' fees
and expenses), and (iii) the Indemnifying Party shall remain responsible for any
Adverse Consequences the Indemnified Party may suffer resulting from, arising
out of, relating to or caused by the Third Party Claim to the fullest extent
provided in this Section 7.
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7.4. Right of Offset. PentaStar and the Surviving Corporation shall
have the right to offset any Adverse Consequences either of them may suffer or
any other amounts due to either of them hereunder against any amounts payable
(other than compensation payable to the Shareholder pursuant to the Employment
Agreement) or shares of PentaStar Common Stock to be issued pursuant to this
Agreement or any Other Seller Agreement to the Shareholder or any relative or
affiliate of the Shareholder at or after the Closing. For purposes of effecting
any offset against shares of PentaStar Common Stock, such shares shall be valued
at their Fair Market Value as of the date the set-off is effected by PentaStar
or the Surviving Corporation.
7.5. Other Remedies. The foregoing indemnification provisions are the
sole and exclusive remedy any party may have with respect to any claim arising
out of this Agreement (but such limitation shall not apply with respect to the
Other PentaStar Agreements and the Other Seller Agreements, which shall each be
governed by its own terms).
8. Termination.
8.1. Termination of Agreement. The parties may terminate this Agreement
as provided below:
(a) PentaStar and the Shareholder may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(b) PentaStar may terminate this Agreement by giving written notice to
the Shareholder at any time prior to the Closing (i) in the event the
Shareholder has breached any representation, warranty or covenant contained in
this Agreement in any material way, PentaStar has notified the Shareholder of
the breach, and the breach has not been cured within 10 days after the notice of
breach or (ii) if the Closing has not occurred on or before October 12, 2000
because of the failure of any condition precedent to PentaStar's obligations to
consummate the Closing (unless the failure results primarily from PentaStar
breaching any representation, warranty or covenant contained in this Agreement
in any material way); or
(c) the Shareholder may terminate this Agreement by giving written
notice to PentaStar at any time prior to the Closing (i) if PentaStar has
breached any representation, warranty or covenant contained in this Agreement in
any material way, the Shareholder has notified PentaStar of the breach, and the
breach has not been cured within 10 days after the notice of breach or (ii) if
the Closing has not occurred on or before October 12, 2000 because of the
failure of any condition precedent to the Shareholder's obligations to
consummate the Closing (unless the failure results primarily from the
Shareholder breaching any representation, warranty or covenant contained in this
Agreement in any material way).
8.2. Effect of Termination. The termination of this Agreement by a
party pursuant to Section 8.1 shall in no way limit any obligation or liability
of any other party based on or arising from a breach or default by such other
party with respect to any of its representations, warranties, covenants or
agreements contained in this Agreement, and the terminating party shall be
entitled to seek all relief to which it is entitled under applicable law.
8.3. Confidentiality. If this Agreement is terminated, each party shall
treat and hold as confidential all Confidential Information concerning the other
parties which it acquired from such other parties in connection with this
Agreement and the transactions contemplated hereby.
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9. Miscellaneous.
9.1. No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the parties and their respective
successors and permitted assigns.
9.2. Entire Agreement. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the parties and supersedes any
prior understandings, agreements or representations by or among the parties,
written or oral, to the extent they relate in any way to the subject matter
hereof.
9.3. Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
permitted assigns. The Shareholder may not assign this Agreement or any of his
or her rights, interests or obligations hereunder without the prior written
approval of PentaStar. PentaStar and the Acquiror may assign their respective
rights and obligations hereunder as permitted by law, including, without
limitation, to any debt or equity financing source; provided, however, that no
such assignment shall relieve the assigning party of responsibility for
performance of any of its obligations hereunder.
9.4. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
together shall be deemed to be one and the same instrument. The execution of a
counterpart of the signature page to this Agreement shall be deemed the
execution of a counterpart of this Agreement. This Agreement may be delivered by
facsimile and facsimile signatures shall be treated as original signatures for
all purposes.
9.5. Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.6. Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if it is sent
by registered or certified mail, return receipt requested, postage prepaid, or
by courier, telecopy or facsimile, and addressed to the intended recipient as
set forth below:
If to the
Shareholder: Copy to:
Addressed to the Xxxxxxxxxx Xxxxxxx, PC
Shareholder at: 00 Xxxxxxxxxx Xxxxxx
00 Xxxx Xxxxxx Xxxxxxxx, XX 00000
Xxxxxxxxx, XX 00000 Attention: Xxxxxx X. Xxxxxx, Esq.
Telecopy: (000) 000-0000 Telecopy: (000) 000-0000
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If to PentaStar: Copy to:
PentaStar Communications, Inc. Xxxxxxx & Xxxxxx L.L.C.
0000 Xxxxxxx Xxxxxx, Xxxxx 0000 000 Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000 Xxxxxx, Xxxxxxxx 00000
Attn: Chief Executive Officer Attn: B. Xxxxx Xxxxxxx, Esq.
Telecopy: (000) 000-0000 Telecopy: (000) 000-0000
Notices shall be deemed given three days after mailing if sent by certified
mail, when delivered if sent by courier, and upon receipt of confirmation by
person or machine if sent by telecopy or facsimile transmission. Any party may
change the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other parties notice
in the manner herein set forth.
9.7. Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Colorado without giving
effect to any choice or conflict of law provision or rule (whether of the State
of Colorado or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Colorado.
9.8. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same is in writing and signed by PentaStar
and the Shareholder. No waiver by any party of any default, misrepresentation or
breach of warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default, misrepresentation or breach
of warranty or covenant hereunder or affect in any way any rights arising by
virtue of any prior or subsequent such occurrence, and no waiver shall be
effective unless set forth in writing and signed by the party against whom such
waiver is asserted.
9.9. Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
9.10. Expenses. Except as otherwise provided in Section 8.2, (a)
PentaStar shall bear its own costs and expenses (including, without limitation,
legal fees and expenses) incurred either before or after the date of this
Agreement in connection with this Agreement or the transactions contemplated
hereby and (b) the Shareholder shall bear all costs and expenses (including,
without limitation, all legal, accounting and tax related fees and expenses, all
fees, commissions, expenses and other amounts payable to any broker, finder or
agent) incurred by the Company prior to the Closing or by the Shareholder either
before or after the date of this Agreement in connection with this Agreement or
the transactions contemplated hereby (collectively, "Seller Transaction
Expenses"); provided, however, that prior to the Closing Date the Company may
use any cash (other than the Interim Cash Requirement or cash received in
respect of accounts or notes receivable described in Section 2.1(k)(i)(A)(3)) to
pay Seller Transaction Expenses so long as the Shareholder is liable for any Tax
consequences to the Company or the Surviving Corporation arising therefrom, and
any such Liability shall be a Closing Date Liability.
9.11. Arbitration. Any disputes arising under or in connection with
this Agreement, including, without limitation, those involving claims for
specific performance or other equitable relief, shall be submitted to binding
arbitration in Denver, Colorado before the Judicial Arbiter Group, but under the
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Commercial Arbitration Rules of the American Arbitration Association under the
authority of federal and state arbitration statutes, and shall not be the
subject of litigation in any forum. If the Judicial Arbiter Group is unavailable
to conduct the arbitration, then it shall be before another arbitral body in
Denver, Colorado selected by PentaStar and the Shareholder or, if they cannot
agree on another arbitral body, the American Arbitration Association. EACH
PARTY, BY SIGNING THIS AGREEMENT, VOLUNTARILY, KNOWINGLY AND INTELLIGENTLY
WAIVES ANY RIGHTS SUCH PARTY MAY OTHERWISE HAVE TO SEEK REMEDIES IN COURT OR
OTHER FORUMS, INCLUDING THE RIGHT TO JURY TRIAL. The arbitrator shall have full
authority to order specific performance and other equitable relief and award
damages and other relief available under this Agreement or applicable law, but
shall have no authority to add to, detract from, change or amend the terms of
this Agreement or existing law. All arbitration proceedings, including
settlements and awards, shall be confidential. The decision of the arbitrators
shall be final and binding, and judgment on the award by the arbitrators may be
entered in any court of competent jurisdiction. THIS SUBMISSION AND AGREEMENT TO
ARBITRATE SHALL BE SPECIFICALLY ENFORCEABLE. The prevailing party or parties in
any such arbitration or in any action to enforce this Agreement shall be
entitled to recover, in addition to any other relief awarded by the arbitrator,
all reasonable costs and expenses, including fees and expenses of the
arbitrators and attorneys, incurred in connection therewith. If each party
prevails on specific issues in the arbitration or action, the arbitrator or
court may allocate the costs incurred by all parties on a basis it deems
appropriate. If any party files a judicial or administrative action asserting
claims subject to arbitration, as prescribed under this Section 9.11, and
another party successfully stays such action and/or compels arbitration of said
claims, the party filing said action shall pay the other party's costs and
expenses incurred in seeing such stay and/or compelling arbitration, including
reasonable attorneys' fees.
9.12. Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. The word "including" shall mean including
without limitation. The parties intend that each representation, warranty and
covenant contained herein shall have independent significance. If any party
breaches any representation, warranty or covenant contained herein in any
respect, the fact that there exists another representation, warranty or covenant
relating to the same subject matter (regardless of the relative levels of
specificity) which the party has not breached shall not detract from or mitigate
the fact that the party is in breach of the first representation, warranty or
covenant.
9.13. Incorporation of Exhibits. The Exhibits identified in this
Agreement are incorporated herein by reference and made a part hereof.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
October 25, 2000.
PENTASTAR:
PENTASTAR COMMUNICATIONS, INC.
By: /s/ Xxxxxx X. Xxxxxxx
---------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Chief Executive Officer
ACQUIROR:
PENTASTAR ACQUISITION CORP. V
By: /s/ Xxxxxx X. Xxxxxxx
---------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Chief Executive Officer
COMPANY:
VISION COMMUNICATIONS GROUP
By: /s/ Xxxx X. Xxxxxxx
---------------------------
Name: Xxxx X. Xxxxxxx
Title: President
SHAREHOLDER:
/s/ Xxxx X. Xxxxxxx
-------------------------------
Xxxx X. Xxxxxxx
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
Exhibit 1.1(a)
Exhibit 1.1(a)
Exhibit 1.1(a) - 1
45
DEFINED TERMS
Acquiror has the meaning given it in the preamble to this Agreement.
Acquired Assets means all right, title and interest of the Company in
and to all of the tangible and intangible assets of the Company, including
customer information and data, but excluding the Excluded Assets.
Adverse Consequences means all actions, suits, proceedings,
investigations, complaints, claims, demands, Orders, Liabilities, liens, losses,
damages, penalties, fines, settlements, costs, remediation costs, expenses and
fees (including court costs and reasonable fees and expenses of counsel and
other experts), plus interest at a rate equal to two percentage points above the
prime rate quoted by PentaStar's principal lender from time to time accrued from
the date of such Adverse Consequence. All damages shall be computed net of any
insurance payment actually received in respect thereof or tax benefit actually
realized (including the net effect of tax refunds) which reduces the damages
that would otherwise be sustained.
Affiliated Group means any affiliated group within the meaning of Code
Section 1504 or any similar group defined under a similar provision of state,
local or foreign law.
BCA has the meaning given it in Section 2.1.
Benefit Arrangement has the meaning set forth in Section 3.1(m).
Xxxx of Sale means the Xxxx of Sale from the Sellers to the Acquiror in
the form of Exhibit 1.1(b).
Xxxx of Sale Assets means all customer information and data and all
accounts (including late fees and interest charges thereon) and notes receivable
and residual payment rights of each of the Sellers which are in existence as of
the Closing Date.
Business Day means any day on which commercial banks are open for
business in Denver, Colorado.
Cash Portion of the Purchase Price has the meaning set forth in Section
2.1(k)(i).
Closing Accounts Receivable means all accounts (including late fees and
interest charges thereon) and notes receivable of the Company or of any Seller
which are in existence as of the Closing Date, including residual payment
rights.
Closing and Closing Date have the meanings given in Section 2.2.
Closing Date Balance Sheet has the meaning given it in Section
2.1(l)(i).
Closing Date Liabilities means (a) all Liabilities (including those
designated as Closing Date Liabilities under Sections 5.7(a), 5.15 or 9.10 and
including all Liabilities with respect to the Motor Vehicle Lease Agreement
dated November 7, 1998 among Xxxxxx Infinity, Inc., the Company and the
Shareholder) of the Company, other than the Retained Liabilities, (b) the
Permitted Encumbrances and (c) all Liabilities of any Seller.
Exhibit 1.1(a) - 2
46
Closing Shares has the meaning given in Section 2.1(k).
Code means the Internal Revenue Code of 1986, as amended.
Company has the meaning given it in the preamble to this Agreement,
except that for purposes of Section 3.1, the term the "Company" shall mean the
Company and all of its Subsidiaries.
Company Shares has the meaning given it in Section 3.1(b)(i).
Company Welfare Plan has the meaning given it in Section 3.1(m)(i).
Confidential Information means any information concerning the subject
Person or the subject Person's business, products, financial condition,
prospects and affairs that is not already generally available to the public.
Earn-Out Amount means the remainder of four times the Earn-Out EBITA,
minus (a) $200,000, minus (c) the amount described in Section 2.1(k)(i)(A)(3)
(as finally determined pursuant to Section 2.1(m)), minus (d) the amount
described in Section 2.1(k)(i)(A)(4) (as finally determined pursuant to Section
2.1(m)), minus (e) the $1,200,000 amount described in Section 2.1(k)(i)(B),
minus (f) amounts paid by PentaStar or the Surviving Corporation in respect of
Closing Date Liabilities (other than those Closing Date Liabilities in respect
of which there is a reduction of the Purchase Price pursuant to Section
2.1(k)(i)(A)(4)); provided, however, that in no event shall the Earn-Out Amount
be such as would cause the Purchase Price plus the amounts referred to in
clauses (c), (d) and (f) of this definition to exceed $2,200,000.
Earn-Out EBITA means the EBITA of the Acquiror from the Montclair
Region for the Earn-Out Period, including for purposes of such determination the
EBITA of the Company from July 1, 2000 until the Closing Date; provided,
however, that in any event Earn-Out EBITA shall not include (a) any allocation
of PentaStar corporate headquarters expense but shall include allocation of a
pro rata portion of direct expenses of PentaStar to the extent PentaStar
provides services to the Surviving Corporation, (b) commission revenue earned by
the Acquiror in respect of hardware sales in an amount in excess of 10% of all
hardware sales revenues; provided, that hardware sales revenues shall not
represent more than 10% of total revenues during the Earn-Out Period, (c) any
other revenue or compensation in respect of hardware sales, (d) the
out-of-pocket cost of PentaStar's standard welfare plan benefits for each new
employee of the Surviving Corporation who is hired, with PentaStar's consent,
after the Closing Date and was not an employee of the Company prior to the
Closing Date, (e) any amount in excess of $50,000 (representing an agreed-upon
portion of the deferred revenue recognized as revenue in July 2000 in respect of
the communications lines referred to in the first sentence of Section
3.1(e)(iv), minus the referral fee expensed against such deferred revenue item)
of revenues attributable to the communications lines referred to in the first
sentence of Section 3.1(e)(iv) or (f) any revenue of the Company associated with
any sale which is the subject of a claim by Verizon Communications (f/k/a Xxxx
Atlantic) for a refund, offset, "claw-back" or similar right with respect to all
or any portion of the total commission payments made in respect of purchases by
the customer identified on Exhibit 3.1(e)(iv).
Earn-Out Financial Statements has the meaning given in Section
2.1(n)(ii).
Earn-Out Period means the period commencing July 1, 2000 and ending
June 30, 2001.
Exhibit 1.1(a) - 3
47
EBITA means earnings before interest, taxes and amortization,
determined in accordance with GAAP and on a basis consistent with the accounting
practices of PentaStar, including PentaStar's GAAP methods of revenue
recognition for residual commission payments and GAAP consistent with booking
prior paid salesperson commissions as prepaid commissions less an appropriate
reserve for contract cancellations and salesperson terminations.
EBITA Escrow has the meaning set forth in Section 2.1(k)(iii).
EBITA Escrow Release Date means the earlier of (a) the date on which
the Earn-Out Amount is paid pursuant to Section 2.1(n) (including pursuant to
Section 2.1(n)(v)(A), (b) the date upon which it is determined that no Earn-Out
Amount is payable or (c) the date upon which a PentaStar Liquidity Event occurs
and the total Purchase Price becomes payable pursuant to Section 2.1(n)(v)(B).
Effective Date has the meaning given it in Section 2.1.
Employee Benefit Plan means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan, as defined in ERISA Section 3(37)) or (d) Employee Welfare
Benefit Plan.
Employee Pension Benefit Plan has the meaning set forth in ERISA
Section 3(2).
Employee Welfare Benefit Plan has the meaning set forth in ERISA
Section 3(1).
Employment Agreements means the Employment and Noncompetition Agreement
between the Acquiror and the Shareholder in the form of Exhibit 1.1(c).
Encumbrance means any mortgage, pledge, conditional sale agreement,
charge, claim, interest of another Person, lien, security interest, title defect
or other encumbrance.
Environmental Obligations means all present and future Legal
Requirements and Permits concerning land use, public health, safety, welfare or
the environment, including, without limitation, the Resource Conservation and
Recovery Act (42 U.S.C.ss.6901 et seq.), as amended, and the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C.ss.9601 et
seq.), as amended.
ERISA means the Employee Retirement Income Security Act of 1974, as
amended, and any regulations, rules or orders promulgated thereunder.
ERISA Affiliate means any entity which is controlled by, or is under
common control with, the Company, as determined under ERISA Section 4001(a)(14).
Escrow Agent means Xxxxx Fargo Bank West, National Association.
Escrow Agreement means the Escrow Agreement among PentaStar, the
Shareholder and the Escrow Agent in form of Exhibit 1.1(d).
Exhibit 1.1(a) - 4
48
Escrow Deposit means the Closing Shares deposited with the Escrow
Agent, all cash, securities or other property received by the Shareholder or the
Escrow Agent in respect of or in exchange for such Closing Shares and all
earnings thereon.
Escrow Period means the period commencing on the Closing Date and
ending on the EBITA Escrow Release Date.
Estimated Closing Date Balance Sheet has the meaning given it in
Section 2.1(j)(i).
Estimated Interim Period Cash Flow Statement has the meaning given it
in Section 2.1(j)(ii).
Exchange Act means the Securities Exchange Act of 1934, as amended.
Excluded Assets means the mutual fund interests and the loan from the
Company to one of its employees identified on Exhibit 1.1(e) and all cash on
hand immediately prior to the Closing Date in excess of the Interim Cash
Requirement.
Fair Market Value of the PentaStar Common Stock means (a), as of the
Closing Date, the average of the closing prices of the PentaStar Common Stock
for the 10 trading days ending two trading days prior to the Closing Date, as
quoted by Nasdaq, (b) for the Second Closing, the average of the closing prices
of PentaStar Common Stock for the 10 trading days ending June 30, 2001 (or in
the case of an issuance involving Section 2.1(n)(v)(A), the 10 trading days
ending two trading days prior to the Liquidation Event), as quoted by Nasdaq and
(c) as of any other date, the average of the closing prices of the PentaStar
Common Stock for the 10 trading days ending two trading days prior to such date.
If closing prices are not quoted for the PentaStar Common Stock, the closing
price for each such day shall be deemed to be the average of the last bid and
last asked prices for the PentaStar Common Stock for that day, as quoted by
Nasdaq. If the PentaStar Common Stock is not quoted on Nasdaq, the closing price
for each such day shall be deemed to be the average of the high and low sales
prices for the PentaStar Common Stock on that day (or if no sales prices are
reported, the average of the high and low asked prices) as reported by the
principal regional stock exchange, or if not so reported, as reported by Nasdaq
or a quotation system of general circulation to brokers and dealers. If the Fair
Market Value of the PentaStar Common Stock cannot be determined as provided
above, Fair Market Value shall be determined by the board of directors of
PentaStar by any reasonable method chosen by it.
GAAP means generally accepted accounting principles as in effect from
time to time in the United States.
Governmental Authority means the United States of America, any state,
commonwealth, territory or possession of the United States of America, any
political subdivision thereof (including counties, municipalities, home-rule
cities and the like), and any agency, authority or instrumentality of any of the
foregoing, including, without limitation, any court, tribunal, department,
bureau, commission or board.
Hazardous Materials means any material, chemical, compound, mixture,
hazardous substance, hazardous waste, pollutant or contaminant defined, listed,
classified or regulated under any Environmental Obligation.
Intellectual Property means all trade, corporate, business and product
names, trademarks, trademark rights, service marks, copyrights, patents, patent
rights, trade secrets, inventions, processes,
Exhibit 1.1(a) - 5
49
formulae, discoveries, improvements, business, customer or technical
information, computer software, all registrations, licenses and applications
pertaining thereto, and all related documentation and goodwill.
Interim Cash Requirement means the amount of the positive difference,
if any, between (a) the aggregate amount of cash disbursements by the Surviving
Corporation during the Interim Period for Liabilities, including payroll,
commissions, rent and accounts payable, over (b) the aggregate amount of cash
collections by the Surviving Corporation during the Interim Period.
Interim Period means the period between the Closing Date and the date
of receipt of the first regularly scheduled Verizon Communications (f/k/a Xxxx
Atlantic) commission payment following the Closing Date.
Interim Period Cash Flow Statement has the meaning given it in Section
2.1(1)(ii).
Key Employee means (a) each employee of the Company other than clerical
employees and (b) if any salesperson is an independent contractor rather than an
employee, each such salesperson. Key Employees include, without limitation,
executives and salespersons.
Latest Balance Sheet has the meaning given it in Section 3.1(d).
Legal Requirement means any constitution, statute, ordinance, code, or
other law (including common law), rule, regulation, Order, notice, standard,
procedure or other requirement enacted, adopted, applied or issued by any
Governmental Authority, including, without limitation, judicial decisions
applying or interpreting any such Legal Requirement.
Liability means any liability or obligation (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due).
Merger has the meaning given it in Section 2.1.
Montclair Region means the locations in which the Company is conducting
its business as of the Closing Date; provided, however, that nothing in this
definition or elsewhere in this Agreement shall preclude PentaStar from
simultaneously selling into the Montclair Region through other subsidiaries or
its own activities.
Noncompetition Agreement means the Noncompetition Agreement among
PentaStar, the Acquiror and the Shareholder in the form of Exhibit 1.1(f).
Orders means all judgments, injunctions, orders, rulings, decrees,
directives, notices of violation or other requirements of any Governmental
Authority or arbitrator having jurisdiction in the matter, including a
bankruptcy court or trustee.
Other PentaStar Agreements means the Xxxx of Sale, the Employment
Agreement, the Escrow Agreement, the Noncompetition Agreement, the Principal
Shareholder's Escrow Agreement, the Shareholder Premises Lease and the other
documents and instruments to be executed and delivered by PentaStar or the
Acquiror pursuant to this Agreement.
Exhibit 1.1(a) - 6
50
Other Seller Agreements means the Xxxx of Sale, the Employment
Agreement, the Escrow Agreement, the Noncompetition Agreement, the Principal
Shareholder's Escrow Agreement, the Shareholder Premises Lease and other
documents and instruments to be executed and delivered by the Shareholder or any
relative or affiliate of the Company or of the Shareholder pursuant to this
Agreement.
PentaStar Common Stock means the common stock, par value $.0001 per
share, of PentaStar.
PentaStar Liquidity Event means the earlier to occur of (a) the sale of
all or substantially all of the assets or outstanding shares of PentaStar,
whether by way of merger, acquisition or other method (except a merger or
consolidation immediately after which the Persons who were shareholders of
PentaStar before the transaction own a majority of the outstanding equity
securities of the surviving or resulting entity) or (b) October 26, 2004.
PentaStar Shares has the meaning set forth in Section 3.2(a).
Permitted Encumbrances means (a) liens securing current Taxes,
assessments, fees or other governmental charges or levies not yet delinquent;
(b) inchoate mechanics and materialmen's liens for construction in progress; (c)
liens of warehousemen and carriers arising in the ordinary course of business;
(d) liens incurred or deposits made in the ordinary course of business (i) in
connection with workers' compensation, unemployment insurance, social security
and other similar laws or (ii) to secure the performance of bids, tenders,
sales, contracts, public or statutory obligations, customs, appeal and
performance bonds.
Permits means all permits, licenses, consents, franchises,
authorizations, approvals, privileges, waivers, exemptions, variances,
exclusionary or inclusionary Orders and other concessions, whether governmental
or private, including, without limitation, those relating to environmental,
public health, welfare or safety matters.
Person means an individual, partnership, corporation, association,
joint stock company, trust, joint venture, limited liability company,
unincorporated organization or Governmental Authority.
Premises means the real property, buildings and improvements thereon
constituting the business premises of the Company located at 00 Xxxx Xxxxxx,
Xxxxxxxxx, Xxx Xxxxxx 00000.
Principal Shareholder's Escrow Agreement means the Principal
Shareholder's Escrow and Contingent Stock Agreement between PentaStar and the
Shareholder in the form of Exhibit 1.1(g).
Purchase Price has the meaning given it in Section 2.1(k).
Retained Liabilities means (a) the obligations of the Company arising
after the Closing Date under those contracts (which shall include the Resource
Capital Corporation lease on computer equipment, with a monthly lease payment of
$259) which are identified by PentaStar on Exhibit 1.1(h) with respect to the
period after the Closing Date; provided, however, that such obligations shall
not include any Liability of the type contemplated in clause (ii) of the third
sentence of Section 7.1(a) which results from, arises out of or relates to the
period on or before the Closing Date, and (b) current liabilities in existence
as of the Closing Date which (i) have been incurred by the Company in the
ordinary course of business consistent with past practice (excluding, however,
in all cases any Liability for interest bearing debt; bank debt; loans for the
acquisition of equipment or other fixed assets; loans or debt with respect to
the acquisition of any business
Exhibit 1.1(a) - 7
51
or entity (regardless of how structured); capital, operating or other leases;
Liabilities to any shareholder, director officer or affiliate of the Company or
any relative or affiliate of any such Person; past due payables or Liabilities;
compensation, bonuses or commissions associated with revenues that have been
received by the Company prior to the Closing Date; accrued bonuses; accrued
commissions; accrued profit sharing; accrued rent; accrued Taxes; Taxes which
are the responsibility of the Shareholder pursuant to Section 5.11; and all
expenses or Liabilities which are required by GAAP to be accrued as of the
Closing Date but which have not been so accrued (including expenses and
Liabilities attributable to bonuses, commissions, profit sharing, rent and
Taxes)), and (ii) are set forth on the Closing Date Balance Sheet as Retained
Liabilities rather than as Closing Date Liabilities. Retained Liabilities shall
not include any other Liability and shall not include any Liability of any
Seller.
Right means any right, property interest, concession, patent,
trademark, trade name, copyright, know-how or other proprietary right of another
Person.
SEC means the Securities and Exchange Commission.
SEC Filings means all reports, registration statements and other
filings filed by PentaStar with the SEC on or prior to the Closing Date.
Second Closing has the meaning set forth in Section 2.1(n)(iii).
Securities Act means the Securities Act of 1933, as amended.
Sellers has the meaning given it in the Xxxx of Sale.
Shareholder has the meaning given it in the preamble to this Agreement.
Shareholder Premises Lease means the Lease Agreement between the
Acquiror and Xxxxxx Associates, L.L.C. in the form of Exhibit 1.1(i).
Shareholder Property has the meaning given it in Section 4.8.
Sub-Agent means a Person, not an employee of the Company, who markets
or sells goods or services of the Company to third parties. The term Sub-Agent
includes the Persons listed as such on Exhibit 3.1(o)(i)(B).
Subsidiary means, with respect to a Person, any Person controlled
(meaning possession of the direct or indirect power to direct or cause the
direction of the management and policies, whether through the ownership of
voting securities, by contract or otherwise) by such first Person directly or
through one or more intermediaries.
Survival Period means, with respect to a representation or warranty,
the applicable period after the Closing Date during which such representation or
warranty survives pursuant to Section 3.3.
Surviving Corporation has the meaning given it in Section 2.1(a).
Tax means any federal, state, local or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes
Exhibit 1.1(a) - 8
52
under Code Section 59A), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, documentary, personal property, sales, use, transfer, registration,
value added, alternative or add-on minimum, estimated or other tax of any kind
whatsoever, including any interest, penalty or addition thereto, whether
disputed or not.
Tax Return means any return, declaration, report, claim for refund or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
Transaction has the meaning given it in the preamble to this Agreement.
Valley Loan Documents has the meaning given it in Section 3.1(e)(iv).
Exhibit 1.1(a) - 9
