AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement") is made this 13th day of
March 1998, by and among CONVERGENT COMMUNICATIONS SERVICES, INC., a Colorado
corporation ("Purchaser"), CONVERGENT COMMUNICATIONS, INC., a Colorado
corporation ("Guarantor"), COMMUNICATION SERVICES OF COLORADO, INC., a Wyoming
corporation ("Company") and XXXXX XXXXX, an individual resident of the State of
Colorado ("Xxxxx").
RECITALS
A. Company provides various telecommunications services, including long
distance resale;
B. Purchaser desires to acquire the business of the Company by merging
the Company with and into Purchaser in accordance with the terms and conditions
of this Agreement, and as a result of the Merger of the Company with and into
Purchaser, as the Surviving Corporation, the assets and certain liabilities of
the Company will be merged with and into the Purchaser.
NOW, THEREFORE, in consideration of the mutual promises contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
1. CERTAIN DEFINITIONS. As used herein, the following terms shall have
the following meanings unless the context otherwise requires:
1.1 "AGREEMENT" shall mean this Agreement and Plan of Merger.
1.2 "ASSUMED ASSETS" shall have the meaning set forth in Section
4.1(l).
1.3 "BANK DEBT" shall mean that portion of the Funded Debt
identified as Bank Debt on SCHEDULE 2.6(a) attached hereto.
1.4 "CLOSING" shall mean the consummation of the transactions
contemplated by this Agreement.
1.5 "CLOSING DATE" shall mean the date on which the Closing occurs
pursuant to Section 2.3(a).
1.6 "COMMON STOCK" shall mean the voting common stock, no par
value per share, of the Company.
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1.7 "CONSIDERATION" shall mean a total amount of $1,005,000 less
(i) the Xxxxxxx Money, (ii) Transactional Costs in excess of $5,000, (iii)
Escrowed Funds, if any, and (iv) any amount of Funded Debt in excess of zero
dollars ("Funded Debt Threshold") as of the Closing Date.
1.8 "DISCLOSURE SCHEDULE" shall mean the Schedule attached to this
Agreement at execution as contemplated in Section 4.1 hereof and which shall not
be modified or changed in any respect after the date hereof without the prior
written consent of Purchaser.
1.9 "DISSENTING SHARE" shall have the same meaning as defined in
Section 2.5(d)(i) hereof.
1.10 "XXXXXXX MONEY" shall mean the $25,000 cash previously
advanced by the Purchaser to Xxxxx, the sole shareholder of the Company,
pursuant to that certain letter of intent between Purchaser and Company dated
February 3, 1998.
1.11 "EFFECTIVE TIME" shall mean the time when the Merger of the
Company with and into Purchaser becomes effective under applicable law.
1.12 "ESCROW FUND" shall mean the portion of the total
Consideration set aside to pay the full amount of the appraised value of any
Dissenting Shares in accordance with Section 2.5(e) hereof.
1.13 "FUNDED DEBT" shall mean the indebtedness and other
obligations of the Company, including principal, accrued interest and other
amounts payable in connection therewith, identified on SCHEDULE 2.6(a), and all
other indebtedness for borrowed money incurred by the Company after the date
hereof and prior to the Closing Date subject to Section 5.1(a)(xviii) hereof.
Such term shall not include the trade payables incurred by the Company in the
ordinary course of business, except as specifically identified on SCHEDULE
2.6(a).
1.14 "MERGER" shall have the same meaning as set forth in Section
2.1(a) hereof.
1.15 "MERGER CONSIDERATION" shall mean the Consideration but shall
not include any cash paid by Purchaser to pay any portion of the Funded Debt as
provided in Sections 2.6(a) hereof, if any.
1.16 "PERMITTED ENCUMBRANCES" shall mean the following liens,
charges and other encumbrances of a similar nature with respect to the
properties and assets of the Company;
(i) liens for current state or local property taxes not
yet due and payable or subject to penalties;
(ii) zoning ordinances, building laws, restrictions and
regulations imposed by governmental authorities, if any, none of which is
materially violated by existing buildings and uses by the Company;
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(iii) any assessment for local benefits levied by any
governmental authority and not now a lien upon all or any portion of any real
property; provided, however, neither the Company knows or has any reason to know
of any such assessment;
(iv) liens of carriers, warehousemen, mechanics and
material men, and other like liens in existence less than 120 days from the date
of creation thereof, all of which shall be satisfied and released on or prior to
the Closing Date;
(v) any mortgage, deeds of trust or other encumbrances on
leasehold properties which the Company is leasing from the third party which is
the owner of the property and leased by the Company subject to any such
encumbrance; and
(vi) such imperfections of title, liens, easements or
encumbrances, if any, which are not material in character, amount or extent and
do not, severely or in the aggregate, materially detract from the value or
materially or adversely interfere with the present use of the property subject
thereto or affected thereby or otherwise materially impair the business and
operations of the Company.
1.17 "PERSON" shall mean an individual, partnership, corporation,
limited liability company, trust, unincorporated organization, association, or
joint venture or a government, agency, political subdivision, or instrumentality
thereof.
1.18 "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, and the rules and regulations thereunder.
1.19 "STOCK" shall mean the Common Stock together with all other
equity securities of the Company.
1.20 "SURVIVING CORPORATION" shall mean Purchaser as the Surviving
Corporation after the Merger as provided in Section 2.1(a) hereof.
1.21 "TRANSACTIONAL COSTS" shall mean those costs and expenses
which relate, directly and indirectly, to the negotiation, revision, amendment,
execution, implementation and Closing of this Agreement (and the transactions
contemplated hereunder) by or on behalf of the Company which shall be borne by
the Company as provided in Section 6.17 hereof. The costs and expenses included
as Transactional Costs shall consist of attorneys', accountants' and other
advisors' fees and disbursements incurred by the Company in connection with the
Merger.
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ARTICLE II
2.1 THE MERGER AND RELATED MATTERS.
(a) MERGER. At the Effective Time and subject to and upon the
terms and conditions of this Agreement and Colorado and Wyoming law, the Company
shall merge (the "Merger") with and into the Purchaser, the separate corporate
existence of the Company shall cease and Purchaser shall continue as the
Surviving Corporation. The Merger will have the effect set forth in the
Colorado Business Corporation Act. The Surviving Corporation may, at any time
after the Effective Time, take any action, including executing and delivering
any certificates, instruments and documents as shall be reasonably determined by
the Board of Directors of the Surviving Corporation to be necessary and
appropriate, in the name and on behalf of either the Company or Purchaser in
order to carry out and effectuate the transactions contemplated by this
Agreement.
(b) SURVIVING CORPORATION. The Company shall be merged with and
into Purchaser, with Purchaser as the Surviving Corporation, and the separate
existence of the Company shall cease. As a result of the Merger the
stockholders of the Company immediately prior to the Effective Time shall cease
to hold any Stock but will instead have the rights specified in Section 2.5
hereof and all rights, privileges, powers, franchises and interest of the
Company and all of its properties, whether real, personal or mixed, all debts
due on whatever account and every other interest of the Company, whether
tangible or intangible shall be deemed to vest in the Surviving Corporation
without further act or deed, and all claims, demands, property and every other
interest shall be as of the Effective Time the property of the Surviving
Corporation to the same extent as previously owned or held by the Company.
(c) ARTICLES OF INCORPORATION OF SURVIVING CORPORATION. The
Articles of Incorporation of the Purchaser in effect at and as of the Effective
Time shall remain the Articles of Incorporation of the Surviving Corporation
until thereafter amended as provided by law.
(d) BYLAWS OF SURVIVING CORPORATION. The Bylaws of Purchaser as
in effect immediately prior to the Effective Time, shall be the Bylaws of the
Surviving Corporation until thereafter amended as provided by law.
(e) DIRECTORS AND OFFICERS. The number of directors of the
Surviving Corporation and the persons serving as Directors of the Surviving
Corporation shall be the same number of directors and the same persons serving
on the Board of Directors of Purchaser immediately prior to the Effective Time
and they shall continue to hold office until their successors have been duly
nominated, elected or appointed as provided under the Surviving Corporation's
Bylaws as may subsequently be amended in accordance with the provisions thereof.
The officers of Purchaser as constituted immediately prior to the Effective Time
shall hold the same offices in the Surviving Corporation following the Effective
Time, until such time as their successors have been duly appointed and
qualified.
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(f) EFFECT OF MERGER. The Merger, from and after the Effective
Time, shall have all the effects provided for a merger under Colorado law and
Wyoming law, and Colorado law shall govern the Surviving Corporation.
(g) SALE OF ASSET ALTERNATIVE. In the event that the Merger is
not effective for any reason, including, without limitation, as a result of the
Company's failure to comply with the Wyoming Business Corporation Act or the
Colorado Business Corporation Act at any time since the Company's first
inception, then at the Closing, and without further action of the parties, Xxxxx
and the Company shall be deemed to have conveyed, sold and transferred all
right, title and interest in and to the Assumed Assets, free and clear of all
claims, liens and encumbrances of any kind or nature (the "Asset Sale"). The
parties hereto agree that as between themselves, the Merger shall be effective
and that for the Merger to not be effective, an action must be commenced by a
third party, or a determination must be made by the Secretary of State of
Wyoming or Colorado or by an appropriate Court that the Merger is not effective.
Purchaser shall not assume any liabilities of Xxxxx or the Company other than
those listed in SCHEDULE 2.6(d)-2.
(h) POWER OF ATTORNEY. In the event that the parties are deemed
to have consummated the Asset Sale, each of Xxxxx and the Company hereby
constitutes and appoints Purchaser, its successors and assigns, the true and
lawful attorney of each of Xxxxx and the Company, with full power of
substitution, in the name of Purchaser, or in the name of Xxxxx or the Company,
but for the benefit and at the expense of Purchaser:
(i) to collect, demand and receive the Assumed Assets
hereby sold and transferred to Buyer;
(ii) to institute and prosecute any and all actions, suits
or proceedings which Purchaser may deem proper in order to collect, assert or
enforce any claim, right or title of any kind in or to the Assumed Assets sold
and transferred to Purchaser, to defend or compromise any and all actions, suits
or proceedings in respect of any of the Assumed Assets, and to do all such acts
and things in relation thereto as Purchaser shall deem advisable;
(iii) to take any and all reasonable actions designed to
vest more fully in Purchaser the Assumed Assets sold and transferred to
Purchaser, and in order to provide for Purchaser the benefit, use, enjoyment and
possession of the Assumed Assets. Each of Xxxxx and the Company acknowledges
that the foregoing powers are coupled with an interest and shall be irrevocable
by them in any manner or for any reason. Purchaser shall be entitled to retain
for its own account any amounts collected pursuant to the foregoing powers,
including any amounts payable as interest with respect thereto.
2.2 APPROVAL BY COMPANY STOCKHOLDERS. The Company, acting through its
Board of Directors, shall duly call, give notice of, convene and hold a special
meeting of the stockholders of the Company (the "Special Meeting") to consider
and vote upon the approval and adoption of this Agreement and the Merger
contemplated hereby, or shall seek the requisite written consent of its
stockholders, all in accordance with Wyoming law and its Articles
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of Incorporation and Bylaws. The Company shall hold the Special Meeting or
obtain such written consent as soon as practicable after the date hereof.
Subject to its fiduciary obligations, the Board of Directors of the Company will
recommend that the stockholders of the Company vote to adopt this Agreement and
approve the Merger at the Special Meeting and will use its best efforts to
solicit from the stockholders of the Company proxies in favor of the Merger and
will take all other action necessary or, in the opinion of Purchaser, advisable
to secure the vote or consent of the stockholders of the Company required by the
Colorado Business Corporation Act to effect the Merger. If this Agreement and
the Merger are approved and adopted by written consent of less than all of the
stockholders of the Company, the Company shall give prompt notice of such
approval and adoption in accordance with Wyoming law to those stockholders who
did not consent.
2.3 CLOSING
(a) CLOSING DATE AND LOCATION. The Closing shall take place at
10:00 a.m. (Denver time) at the offices of Purchaser, 00 Xxxxxxxxx Xxxxx Xxxx,
Xxxxx 000, Xxxxxxxxx, Xxxxxxxx, xx the second business day immediately following
the later to occur of (i) the Special Meeting approving the Merger if such a
meeting is held, (ii) the period required by Colorado law and Wyoming law after
the giving of notice to the stockholders of the Company who did not consent, if
the Merger is approved by written consent of less than all stockholders of the
Company, or (iii) the date on which all notice periods have run or consents have
been received for notices to be given or consents to be received under Sections
3.1(g) and 3.2 (g) hereof, or at such other time or place as is mutually agreed
by the parties hereto. The Closing shall be effective as of the Effective Time.
(b) OBLIGATIONS OF THE COMPANY. At the Closing, the Company shall
deliver, or use its best efforts to cause to be delivered, to Purchaser the
following documents:
(i) stock certificates representing the shares of Common
Stock as well as stock certificates representing all of the other issued and
outstanding Stock of the Company as of the Closing Date, which stock
certificates will be accompanied by stock powers duly completed and executed in
blank by the holders thereof;
(ii) a certificate of good standing from the States of
Colorado and Wyoming for the Company certified by the appropriate official of
each such state, dated as of the date not more than five (5) days prior to the
Closing Date certifying that the Company is duly qualified and in good standing
and has filed all franchise tax returns due up to the date of such certificate,
that all taxes shown on such return to be due have been paid in full, and that
there are no outstanding franchise tax claims or assessments against the Company
as of the date of such certificate;
(iii) the combined Officers' Certificate of the Company
pursuant to Sections 3.1(d) and (e) hereof;
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(iv) the opinion of Xxxxxxx X. Xxxx, P.C. as counsel for
the Company pursuant to Section 3.1(f) hereof;
(v) the consents and waivers, if any, pursuant to Section
3.1(g) hereof;
(vi) the executed Employment Agreement pursuant to Section
2.7 hereof;
(vii) the resignation letters from the officers and
directors of the Company pursuant to Section 3.1(k) hereof;
(viii) the books and records referred to in Section 3.1(m)
hereof;
(ix) Articles of Merger in the form of EXHIBIT 2.3(b)(ix),
attached hereto;
(x) documentation (including, without limitation, duly
executed UCC-3 termination statements) satisfactory in form and substance to
Purchaser as requested by Purchaser to release all encumbrances securing all
Funded Debt to be paid on the Closing Date, including Bank Debt (to the extent
available as of the Closing Date and otherwise by no later than ten (10) days
after the Closing Date).
(xi) a Schedule identifying all Stockholders of the Company
owning all of the issued and outstanding shares of the Company's Stock, which
Schedule shall set forth the name, address and social security number or
employer identification number (to the extent available to the Company) of each
stockholder of the Company and the number of shares of each class and series of
stock owned by each such stockholder;
(xii) such other documents or instruments of further
assurance as shall be necessary and appropriate by Purchaser;
(xiii) executed Indemnification Agreements pursuant to
Section 3.1(p).
(c) OBLIGATIONS OF PURCHASER . Purchaser shall deliver to the
Company and the stockholders of the Company the following documents on the
Closing Date:
(i) the Combined Officer's Certificate of Purchaser
pursuant to Sections 3.2(d) and (3) hereof;
(ii) the opinion of Xxxxxx X. Xxxxxxx as counsel for
Purchaser pursuant to Section 3.2(f) hereof;
(iii) the consents and waivers, if any, pursuant to Section
3.2(g); and
(iv) the Employment Agreement pursuant to Section 2.7;
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(v) the Merger Consideration as provided in Section 2.5
payable directly by Purchaser to those stockholders of the Company who have
delivered their stock certificates for surrender and cancellation as provided in
Section 2.3(b)(i) hereof.
(d) EXHIBITS AND SCHEDULES. In the event that the parties execute
this Agreement prior to completion of all of the Exhibits and Schedules to be
attached to this Agreement, the parties shall use their reasonable efforts to
complete all such Exhibits and Schedules and attach them to this Agreement
within fifteen (15) days of the date of this Agreement, but in no event later
than the Closing Date; provided, that, no party shall be obligated to consummate
the transactions contemplated by this Agreement until such time as the Exhibits
and Schedules are completed and attached to each parties satisfaction.
2.4 CONSUMMATION OF THE TRANSACTIONS. At the Closing, Purchaser and the
Company will each carry out the procedures specified under the applicable
provisions of Colorado and Wyoming law, to the end that the Merger shall become
effective. The Merger shall be consummated by filing Articles of Merger with
the Secretaries of State of Colorado and Wyoming in each case in such form as
required by, and executed in accordance with the relevant provisions of the
applicable state law.
2.5 COMPANY'S CAPITAL STOCK
(a) CONVERSION OF THE STOCK. At the Effective Time, by virtue of
the Merger and without any action on the part of Purchaser, the Company or the
holders of any of their securities, the outstanding Common Stock of the Company
shall be converted into the right to receive (a) $41.1176 ($450,000 divided by
10,200 (which is the cash component of the Consideration less the Xxxxxxx
Money)) less _____ (which are adjustments pursuant to Section 1.6(ii) through
(v)) in cash per share of Common Stock held by such stockholder from the
Consideration; and (b) a promissory note ("Purchaser Note") in the amount of
$51.9608 ($530,000 divided by 10,200). Each Purchaser Note shall be in
substantially the form of EXHIBIT 2.5(a). Each holder of a certificate
representing any Common Stock (except for Dissenting Shares) shall, after the
Effective Time, cease to have any rights with respect to such Common Stock,
except the right to receive the Merger Consideration for such Common Stock upon
the surrender of such certificate in accordance with Section 2.6(c) hereof.
(b) NO SUBSEQUENT TRANSFERS; LOST, STOLEN OR DESTROYED
CERTIFICATES. After the Effective Time, there shall be no transfers on the
stock transfer books of the Company of shares of Common Stock or Dissenting
Shares that were registered as outstanding immediately prior to the Effective
Time. If any registered certificate for Common Stock shall have been lost,
stolen or destroyed, the Surviving Corporation, upon the making of an affidavit
of that fact by the Person claiming such certificate to be lost, stolen or
destroyed and subject to the following sentence, shall pay the appropriate
Merger Consideration for the shares of Common Stock represented by such
certificate in accordance with this Section 2.5 and Section 2.6 hereof to the
persons legally entitled thereto. The Surviving Corporation, in its sole
discretion and as a condition precedent to the delivery of the Merger
Consideration in exchange for the shares of
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Common Stock represented by such certificate, may require the owner of such
lost, stolen or destroyed certificate to provide a bond or other security in
such sum as it reasonably may direct as indemnity against any claim that may be
made against the Surviving Corporation with respect to the certificate alleged
to have been so lost, stolen or destroyed.
(c) CONVERSION, RETENTION AND TRANSFER OF STOCK. Each stock
certificate representing the Common Stock and Dissenting Shares shall, after the
Effective Time, cease to have any rights except the right to receive the Merger
Consideration as provided in Section 2.5(a) hereof (or in the case of Dissenting
Shares, the right to receive amounts under Section 2.5(d)) upon the surrender of
such certificates accompanied by stock powers duly completed and executed in
blank and any other documents required to be delivered in connection therewith.
Until surrendered as contemplated by the preceding sentences each such
certificate shall be deemed for all purposes to represent only the right to
receive upon such surrender the Merger Consideration payable in respect thereof
as contemplated by this Agreement. As a consequence of the Merger and without
any action on the part of the parties to this Agreement, each of the issued and
outstanding shares of the Company's Common Stock shall be cancelled and retired
in exchange for the Merger Consideration (or in the case of Dissenting Shares,
the right to receive amounts under Section 2.5(d)). Each share of common stock,
no par value, of Purchaser issued and outstanding immediately prior to the
Effective Time shall remain outstanding. Each such share of Purchaser shall
continue as one share of the capital stock of the Surviving Corporation, and
each certificate evidencing ownership of any such shares shall continue to
evidence the same number of shares of the Surviving Corporation.
(d) DISSENTING SHARES.
(i) Notwithstanding any provision of this Agreement to the
contrary, any shares of Common Stock held by a holder who has demanded and
perfected his right for appraisal of such shares in accordance with Iowa law and
who, as of the Effective Time, has not effectively withdrawn or lost such right
to appraisal ("Dissenting Shares"), shall not be converted into or represent the
right to receive the Merger Consideration pursuant to Section 2.5(a), but the
holder thereof shall be entitled only to such rights as are granted by Colorado
law.
(ii) Notwithstanding Section 2.5(d)(i), if any holder of
shares of Common Stock who demands an appraisal of such shares under Colorado
law shall effectively withdraw or lose (through failure to perfect or otherwise)
his right to appraisal, then, as of the later of the Effective Time or the
occurrence of such event, such holder's shares shall no longer be Dissenting
Shares and shall automatically be converted into and represent only the right to
receive the Merger Consideration applicable to such shares as provided in this
Section 2.5, without interest, upon surrender of the certificate or certificates
representing such shares, in accordance with Section 2.5(a) hereof.
(iii) The Company shall give Purchaser notice of any written
demand for appraisal of any shares of Common Stock received prior to the
Effective Time and any withdrawal of such demands. Amounts payable by the
Surviving Corporation to holders of Dissenting Shares shall be paid from the
Escrow Fund.
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(e) ESCROW FUND. In the event that there are any Dissenting
Shares then a portion of the Cash Consideration shall be held in a non-interest
bearing escrow fund ("Escrow Fund"). Payment to the holders of the Dissenting
Shares shall be made solely from the Escrow Fund. The Consideration available to
holders of non-Dissenting Shares shall be reduced by the total amount paid, or
payable, to the holders of Dissenting Shares.
2.6 OTHER PAYMENTS MADE IN CONNECTION WITH THE MERGER.
(a) REPAYMENT OF DEBT. Prior to the Closing, the Company will
repay the principal amount of the Bank Debt, including accrued and unpaid
interest thereon. The Funded Debt, including the Bank Debt, is more
particularly described in SCHEDULE 2.6(a) attached hereto. To the extent that
any Funded Debt or Bank Debt is not repaid by the Company prior to the Closing,
then if the actual amount of the Funded Debt, is less than the Funded Debt
Threshold, the extent of Purchaser's obligations to repay such Funded Debt shall
be limited to the actual amount of payment required to satisfy any such
obligations, including the benefit of any settlement or compromise of any such
indebtedness. In addition, SCHEDULE 2.6(a) shall be amended to list all of the
Company's debt as of the Closing Date comprising the total amount of the Funded
Debt, including any amounts in excess of the Funded Debt Threshold. SCHEDULE
2.6(a) shall include in addition to a detailed description of the indebtedness
comprising the Funded Debt and all accrued and unpaid interest thereon and all
other amounts then owed under the loan agreements, notes and other documents
pursuant to which such funds were borrowed and sets forth the names and
addresses of the obligees of such debt, the maturity date and the terms of
repayment of such debt. Funded Debt other than the Bank Debt shall be paid
when due or on such earlier date as Purchaser may elect.
(b) REPAYMENT OF BALANCE OF FUNDED DEBT. The remaining balance of
the Funded Debt to the extent it exceeds the Funded Debt Threshold will be paid
from the Consideration and to the extent of any such payment will reduce the
total amount of Consideration available for distribution as part of the Merger
Consideration payable to the holders of the Common Stock as provided in Section
2.5(a) hereof.
(c) MERGER CONSIDERATION. Purchaser shall pay to each stockholder
of Company the Merger Consideration upon surrender by such stockholder to
Purchaser of the certificates representing such stockholder's shares.
(d) TRADE PAYABLES. Effective as of the Closing Date and in
connection with the Merger, Purchaser will become obligated for the trade
payables of the Company that are listed on SCHEDULE 2.6(d)-1 attached hereto
or that are incurred in the ordinary course of business of each such
corporation. A new SCHEDULE 2.6(d)-2, shall be delivered at Closing, which
shall include (i) all trade payables of the Company as of the Closing Date,
and (ii) all Transactional Costs. As contemplated by Section 1.6, the total
amount of cash available for distribution as part of the Merger Consideration
will be reduced by the amount of the Transactional Costs.
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2.7 EMPLOYMENT AGREEMENT . Xxxxx will receive an employment agreement
with Purchaser, in the form of EXHIBIT 2.7 ("Employment Agreement").
2.8 GUARANTY AND SECURITY INTEREST.
(a) The Purchaser Notes will be secured by the Assumed Assets.
Purchaser will execute a Security Agreement in substantially the same form as
EXHIBIT 2.8(a).
(b) The Purchaser Notes will also be guaranteed by Guarantor.
Guarantor will execute a Guaranty in substantially the same form as EXHIBIT
2.8(b).
ARTICLE III
CONDITIONS PRECEDENT
3.1 CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS. The obligations of
Purchaser to consummate the transactions contemplated by this Agreement shall be
subject to the satisfaction, on or before the Closing Date, of each of the
following conditions, all or any of which may be waived, in whole or part, by
Purchaser:
(a) REPRESENTATIONS TRUE AT CLOSING. The representations and
warranties made by the Company in this Agreement or the attachments hereto shall
be true and correct in all material respects on the Closing Date with the same
force and effect as though such representations and warranties had been made on
and as of such time, except for changes previously disclosed to Purchaser or
contemplated by this Agreement.
(b) COVENANTS. The Company shall have duly performed in all
material respects all of the covenants, acts, obligations, conditions,
agreements and undertakings to be performed by it on or prior to the Closing
Date pursuant to the terms of this Agreement.
(c) ABSENCE OF ADVERSE CHANGES. The Company shall not have
suffered any material adverse change in its financial condition, business,
property or assets since the Financial Statement Date (as herein defined).
(d) SECRETARY'S CERTIFICATES. Purchaser shall have received a
certificate of good standing from the Secretary of State of each of the states
in which the Company is operating, or in which it is necessary or desirable to
be qualified to do business, stating that the Company is qualified to do
business and is in good standing and a certificate of the Secretary or Assistant
Secretary of the Company certifying: (i) the Company's Articles of Incorporation
and Bylaws; (ii) the incumbency of all officers of the Company having authority
to execute and deliver this Agreement and the agreements and documents
contemplated hereby; and (iii) resolutions of the Company's Board of Directors
and stockholders approving the execution, delivery and performance of this
Agreement.
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(e) OFFICER'S CERTIFICATE. Purchaser shall have received a
certificate from the President or a Vice President of the Company as to the
matters set forth in Sections 3.1(a), 3.1(b) and 3.1(c).
(f) OPINION OF COMPANY COUNSEL. An opinion of counsel for the
Company shall have been delivered to Purchaser dated as of the Closing Date,
substantially in the form and substance of the opinion attached as EXHIBIT
3.1(f), which shall include matters related to FCC and state utility commission
compliance of the Company.
(g) CONSENTS AND WAIVERS. The Company shall have obtained and
Purchaser shall have received a true and correct copy of the consents and
waivers described SCHEDULE 3.1(g) hereof, or otherwise required for the
execution of this Agreement and the consummation of the transactions
contemplated hereby.
(h) APPROVALS. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby shall have been
approved by all regulatory authorities, if any, whose approvals are required by
contractual requirements or by law.
(i) NO LITIGATION OR OTHER PROCEEDINGS. No action, proceeding,
investigation, regulation or legislation shall have been instituted, threatened
or proposed before any court, governmental agency or legislative body to enjoin,
restrain, prohibit or obtain substantial damages in respect of, or which is
related to, or arises out of, this Agreement or the consummation of the
transactions contemplated hereby. No suit, action or other proceeding shall be
pending before any court or governmental agency, or threatened against or
affecting the Company which, if adversely determined, would have a material
adverse effect on the value of the business, assets or property of the Company.
(j) EMPLOYMENT AGREEMENT. The Employment Agreement shall have
been executed and delivered.
(k) RESIGNATIONS OF OFFICERS AND DIRECTORS. Purchaser shall have
received the resignation of each officer and director of the Company.
(l) STOCKHOLDER APPROVAL; DISSENTERS RIGHTS. The stockholders of
the Company shall have approved the Merger and other transactions contemplated
by this Agreement in accordance with the Colorado Business Corporation Act and
the Company's Articles of Incorporation, and the total amount of the Merger
Consideration that would have been payable to the holders of shares that are
Dissenting Shares at the Closing (had they not sought appraisal for their
shares) shall not exceed $1,000.
(m) CORPORATE RECORDS. Purchaser shall have received the Stock
Books, Minute Books and Corporate Seal (if any) of the Company and any other
subsidiary in which the Company may have an interest.
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(n) NO LIEN, INDEBTEDNESS. Except as set forth in SCHEDULE 2.6(a)
attached hereto, the Company shall not be subject to any indebtedness nor shall
any of their properties or assets be subject to liens or encumbrances of any
kind, other than (i) indebtedness and liens for current taxes, wages and
operating expenses in the normal course of business, payment of which at the
time of Closing shall not yet be due; (ii) indebtedness reflected in the
Financial Statements or any loans advanced to the Company subsequent to the
Financial Statement Date that are approved by Purchaser; (iii) accounts payable
incurred in the ordinary course of business subsequent to the Financial
Statement Date; and (iv) Permitted Encumbrances.
(o) NO ATTACHMENT. None of the assets or properties of the
Company shall have been attached or levied upon or placed in the hands of a
receiver or assignee for the benefit of creditors. No petition or similar
instrument shall have been filed with respect to the Company under any
bankruptcy or insolvency law, and no injunction or restraining orders shall have
been instituted against the Company that would have a material adverse effect on
the Company.
(p) INDEMNIFICATION AGREEMENTS. Xxxxx shall have executed and
delivered to Purchaser an Indemnification Agreement in the form of EXHIBIT
3.1(p) ("Indemnification Agreement").
3.2 CONDITIONS PRECEDENT TO COMPANY'S OBLIGATIONS. The obligations of
the Company to consummate the transactions contemplated by this Agreement shall
be subject to the satisfaction, on or before the Closing Date, of each of the
following conditions, all or any of which may be waived, in whole or part, by
the Company:
(a) REPRESENTATIONS TRUE AT CLOSING. The representations and
warranties made by Purchaser in this Agreement or the attachments hereto shall
be true and correct in all material respects on the Closing Date with the same
force and effect as though such representations and warranties had been made on
and as of such time, except for changes contemplated by this Agreement.
(b) COVENANTS. Purchaser shall have duly performed in all
material respects all of the covenants, acts and undertakings to be performed by
it on or prior to the Closing Date pursuant to the terms of this Agreement.
(c) ABSENCE OF ADVERSE CHANGE. Purchaser shall not have suffered
any material adverse change in its financial condition, business, property or
assets since the date of this Agreement.
(d) SECRETARY'S CERTIFICATE. The Company shall have received a
certificate of the Secretary, Assistant Secretary or other officer of Purchaser
certifying (i) Purchaser's articles of incorporation and bylaws; (ii) the
incumbency of all officers of Purchaser having authority to execute and deliver
this Agreement and the agreements and documents contemplated hereby; and (iii)
resolutions of Purchaser's board of directors approving the execution, delivery
and performance of this Agreement.
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(e) OFFICER'S CERTIFICATE. The Company shall have received a
certificate from the President or a Vice President of Purchaser as to the
matters set forth in Sections 3.2(a), 3.2(b) and 3.2(c).
(f) OPINION OF PURCHASER COUNSEL. An opinion of counsel for
Purchaser shall have been delivered to the Company dated as of the Closing Date,
substantially in the form and substance of the opinion attached as EXHIBIT
3.2(f).
(g) CONSENTS AND WAIVERS. Purchaser shall have obtained and the
Company shall have received a true and correct copy of the consents and waivers
described in SCHEDULE 3.2(g) hereof or otherwise required for the execution of
this Agreement and the consummation of the transactions contemplated hereby;
provided that Purchaser shall pay the costs associated with obtaining the
transfer of the Company's certificate of public convenience and necessity to
provide resold operator services.
(h) APPROVALS. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby shall have been
approved by all regulatory authorities, if any, whose approvals are required by
law.
(i) NO LITIGATION OR OTHER PROCEEDINGS. No action, proceeding,
investigation, regulation or legislation shall have been instituted, threatened
or proposed before any court, governmental agency or legislative body to enjoin,
restrain, prohibit or obtain substantial damages in respect of, or which is
related to, or arises out of, this Agreement or consummation of the transactions
contemplated hereby.
(j) STOCKHOLDER APPROVAL; DISSENTER'S RIGHTS. The stockholders of
the Company shall have approved the Merger and other transactions contemplated
by this Agreement in accordance with the Colorado Business Corporation Act and
the Company's Articles of Incorporation, and the total amount of the Merger
Consideration that would have been payable to the holders of shares that are
Dissenting Shares at the closing had they not sought appraisal for their shares
shall not exceed $1,000.
(k) EMPLOYMENT AGREEMENT. Purchaser shall have executed the
Employment Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company makes
the representations and warranties set forth below, except as set forth in the
Disclosure Schedule. Each exception to the representations and warranties set
forth in the Disclosure Schedule shall reference by Section number the
representation and/or warranty to which it applies.
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(a) ORGANIZATION AND CORPORATE POWER. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Wyoming, and is duly qualified to do business as a foreign
corporation in good standing in each jurisdiction in which the properties owned,
leased or operated by it, or the nature of its activities or proposed activities
makes such qualification necessary, except in such jurisdictions where the
failure to be so qualified or in good standing would not have a material adverse
effect on the business, results of operations or financial condition of the
Company taken as a whole. The Company has all required corporate power and
authority to own properties and to carry on its business as now conducted. The
Company has furnished to Purchaser accurate and complete copies of the Articles
of Incorporation and Bylaws as in effect on the date hereof. Attached hereto as
SCHEDULE 4.1(a) is a list of all of the states in which the Company is qualified
to do business as a foreign corporation or in which qualification is necessary
or desirable to carry on the business and operations of the Company as presently
conducted. The Company has no other subsidiaries or affiliates.
(b) CORPORATE AUTHORIZATION. The Company has all power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of the Company and as such all
corporate action necessary for the approval or ratification of this Agreement
has been taken and no other corporate proceedings on the part of the Company is
necessary to authorize the execution and delivery of this Agreement or to
consummate the transactions so contemplated (subject to the approval and
adoption of this Agreement and the transactions contemplated hereby by the
stockholders of the Company required in accordance with the Colorado Business
Corporation Act, and the Articles of Incorporation and Bylaws of the Company).
(c) BINDING EFFECT. This Agreement constitutes a legal, valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except to the extent that the enforceability thereof may be
limited by applicable bankruptcy, insolvency, reorganization or other similar
laws affecting the enforcement of creditors' rights generally and by principles
of equity regarding the availability of remedies.
(d) CONSENTS. Except as set forth in SCHEDULE 3.1(g) and/or the
Disclosure Schedule, there are no consents, authorizations, approvals (other
than stockholder approval as set forth in Section 2.2 hereof), governmental,
judicial, administrative or other, under any Contract, lease, License, Permit,
indenture, promissory note, agreement, mortgage or any other instrument to which
the Company is a party or is bound or to which its assets are subject or under
any statute, rule, regulation, judgment, decree or order of any court, agency or
other authority to which jurisdiction the Company is subject, which are required
for the execution, delivery and performance of this Agreement and the
transactions contemplated hereby.
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(e) CAPITALIZATION.
(i) The authorized capital stock of the Company consists
of 50,000 shares of Common Stock, of which 10,200 shares are issued and
outstanding. SCHEDULE 4.1(e)(i) attached hereto includes a complete and correct
list of the present stockholders of record of the Company, showing the number of
shares of Stock owned by each such stockholder as well as the other information
to be set forth therein. All of the issued and outstanding Stock of the Company
has been duly authorized, is validly issued, fully paid and nonassessable. All
indebtedness of the Company for money borrowed as of the date hereof is
reflected on SCHEDULE 2.6(a) attached hereto. SCHEDULES 4.1(e)(i) and 2.6(a)
shall be updated by the Company on the Closing Date and as often as is necessary
for such schedules to remain true and accurate.
(ii) SCHEDULE 4.1(e)(ii) attached hereto includes a
complete and correct list of the Company's outstanding options to purchase its
capital stock ("Outstanding Options") and the Company's outstanding warrants to
purchase its capital stock ("Outstanding Warrants"), in each case showing the
date of issuance, the expiration date, the exercise price, the holders thereof
and the number of shares of capital stock subject thereto. The Company has
furnished to Purchaser accurate and complete copies of the Outstanding Options
and Outstanding Warrants. The copies of the Outstanding Options and Outstanding
Warrants represent the terms, conditions, provisions, agreements, obligations
and undertakings of the Company with respect to all Outstanding Options and
Outstanding Warrants. Except for the Outstanding Options and the Outstanding
Warrants, the Company does not have outstanding any stock or other securities
which are, in either case, convertible into or exchangeable for any shares of
its Stock, any warrants, options, purchase rights, subscription rights or other
contract rights or commitments or appreciation, phantom stock, profit
participation or similar rights to purchase or acquire any shares of its Stock
or any stock or securities convertible into or exchangeable for any of the Stock
of the Company and is not subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of its capital stock. No
stockholder of the Company has any preemptive or other purchase rights with
respect to the issue or sale of any Stock. The Company's stock transfer records
accurately reflect all issuances and transfers of Stock and other securities and
the minutes of meetings of incorporators, directors and stockholders completely
and correctly reflect all of their respective actions in all material respects.
(f) FINANCIAL STATEMENTS. As soon as possible, and in any event
prior to the Closing Date, the Company shall furnish Purchaser with the
following financial statements:
(i) an unaudited balance sheet of the Company for the
fiscal years ended December 31, 1996 and December 31, 1997, and the related
statements of income and retained earnings and changes in financial position of
the Company for such periods; and
(ii) an unaudited balance sheet of the Company as at
February 28, 1998 ("Financial Statement Date"), and the related statements of
income and retained earnings of the Company for the two (2) month period then
ended.
-16-
Such financial statements, including any related schedules and notes
thereto (the "Financial Statements"), have been prepared in accordance with
generally accepted accounting principles ("GAAP") consistently applied
throughout the period or periods in question (except as specifically disclosed
therein) and show all liabilities, direct or contingent, of the Company required
to be shown in accordance with GAAP consistently applied throughout the period
or periods in question (except as specifically disclosed therein) and fairly
present the financial position and the results of the Company for the periods
indicated therein.
(g) NO ADVERSE CHANGE IN FINANCIAL CONDITION. Since the Financial
Statement Date, there has not been (i) any event, condition or fact that has
resulted or may reasonably be expected to result in any material adverse change
in the financial condition, business, sales, income, properties, assets or
liabilities of the Company shown on the Financial Statements; or (ii) any
material adverse change with respect to any Contract to which the Company is a
party or any event, circumstance, fact or other occurrence which may result in
any material adverse change to the condition (financial or otherwise), results
of operations, business, sales, income, properties or assets of the Company; or
(iii) any material damage, destruction or loss to the properties, assets or
business of the Company, whether or not covered by insurance, as the result of
any fire, explosion, accident, casualty, labor disturbance or interruption,
requisition or other taking of property by governmental body or agency, flood,
embargo, or act of God or the public enemy, or cessation, interruption or
diminution of operations, whether or not covered by insurance, which has
materially and adversely affected or impaired or which could reasonably be
expected to materially or adversely affect or impair the conduct of the
operations or business of the Company; or (iv) any labor trouble other than
routine grievances (including without limitation any negotiation, or request for
negotiation, for any representation or any labor contract) or to the Company's
knowledge any event or condition of any character which has materially and
adversely affected or which may be reasonably expected to materially and
adversely affect or impair the conduct of the Company's operations or business;
or (v) any declaration, setting aside, or payment of, any dividend or any
distribution, in respect of the Common Stock; or (vi) any redemption, purchase
or other acquisition by the Company of any shares of the Common Stock; or (vii)
any significant loss of customers of the Company.
(h) ABSENCE OF UNDISCLOSED LIABILITIES. Except as and to the
extent reflected or reserved against in the Financial Statements, the Company
does not have any liabilities, debts or obligations, whether absolute, accrued,
contingent, unliquidated or otherwise and whether due or to become due
(including without limitation any liability for breach of contract, breach of
warranty, torts, infringements, claims or lawsuits), arising out of any
transaction entered into on or prior to the Financial Statement Date, other than
contractual obligations incurred in the ordinary course of business not required
to be disclosed in accordance with GAAP.
(i) TITLE TO PROPERTIES; LIENS. SCHEDULE 4.1(i) attached hereto
sets forth, as of the date hereof, an accurate and complete list of all leases
and purchases and ownership by the Company of all real properties, license
agreements and all leases and purchases and ownership of all personal properties
(covering properties with a purchase price as of the date hereof greater than
$1,000) to which the Company is a party (whether as purchaser, lessor, lessee,
licensor or licensee) collectively the "Leases and Licenses". The Company, as
lessee or licensee, has entered
-17-
into all such Leases and Licenses which the Company reasonably believes may be
necessary for the conduct of its business and operations as now conducted. The
Company has furnished to Purchaser accurate and complete copies of all such
Leases and Licenses. The Company has title to each of the leasehold and other
interests created by the Leases and Licenses free and clear of all security
interest, claims, liens and encumbrances of any nature, other than Permitted
Encumbrances. To the best of the knowledge of the Company, each such Lease and
License is in full force and effect. Each Lease and License constitutes the
legal, valid and binding obligation of the Company, to the knowledge of the
Company, enforceable against the Company in accordance with its respective terms
accept as may be limited by bankruptcy, insolvency, reorganization, readjustment
of debt, moratorium, general principles of equity or other laws of general
application related to or affecting the enforcement of creditors rights
generally. The Company has not received notice, or does not have any reason to
know, of any claim of default under any such Lease or License. All Leases are
fully effective and afford the Company, peaceful and undisturbed possession of
the property which is the subject matter of each such Lease. All of the
Contracts, agreements, Permits, authorizations and other intangible assets of a
similar nature of the Company are valid and binding obligations of the parties
thereto, and the Company does not have any knowledge of an intention of or basis
(other than the terms thereof) for any termination of any such intangible assets
by any party.
(j) MARKETABLE TITLE. Except for Permitted Encumbrances (as
defined herein) or as set forth on SCHEDULE 4.1(j) attached hereto, the Company
has good and marketable title to all of its assets and property as set forth in
the SCHEDULE 4.1(i) attached hereto, free and clear of all mortgages, liens,
pledges, charges, claims (real or assertive) or encumbrances of any nature
whatsoever.
(k) CONDITION OF TANGIBLE ASSETS. All material tangible portions
of the assets and properties owned by the Company, including all real properties
or leasehold interest in real property and structures thereon, are to the best
of the Company's knowledge, in good condition and repair, subject only to
ordinary wear and tear in light of their respective ages and there respective
uses for which they are currently used. The uses of the tangible properties and
assets conform and comply in all material respects with all rules, regulations
and standards applicable to the Company or its assets or properties, imposed by
applicable federal, state or local laws or regulations.
(l) ALL ASSETS. The properties and assets of the Company as of
the date hereof and the Closing Date include (i) all properties and assets
whether or not reflected on the balance sheet included in the Financial
Statements, including Licenses, Permits, Leases, Contracts, customer lists,
goodwill and any other tangible or intangible assets as disclosed in the
Schedules attached to this Agreement, and (ii) assets and properties acquired by
the Company after the Financial Statement Date up to and including the Closing
Date as set forth in SCHEDULE 4.1(l) which will be updated immediately prior to
Closing, other than such properties and assets as shall have been transferred or
otherwise disposed of by the Company in the ordinary course of business as shall
be disclosed in SCHEDULE 4.1(l) (collectively, the "Assumed Assets").
-18-
(m) CERTAIN TAX MATTERS. The Company has prepared and duly filed
(and to the best of its knowledge has done so accurately and correctly) all
federal, state, county and local income, franchise, use, real property and
personal property tax returns and reports required to be filed as of the date
hereof with respect to the Company and has duly paid, withheld or reserved for
all taxes, penalties and other governmental charges required to be paid that
have been assessed or levied against or upon the Company or any of its
properties, assets, income, franchises, licenses or sales, including without
limitation, income, gross receipt, property taxes or to the extent that they
relate to periods on or prior to the Financial Statement Date are reflected as a
liability on the Financial Statements, or if not paid, is contesting such amount
in good faith by appropriate proceedings. In the event the Company is
contesting such amounts in good faith, the Company has established or reserved
accounts sufficient to satisfy the assessment or levy being contested which
reserve accounts shall automatically transfer to the Surviving Corporation as a
result of the Merger. The Company does not know and has no reason to know of any
proposal by any taxing authority for additional taxes or assessments against or
upon the Company. To the best of the knowledge of Company all monies required
to be held by the Company from employees for income taxes, social security and
unemployment insurance taxes, have been collected or withheld or either paid to
the respective governmental agencies or set aside in cash for such purpose. The
Company has not entered into any agreement for the extension of time or the
assessment of any tax or tax delinquency, nor has the Company received any
outstanding or unresolved notices from the Internal Revenue Service or any
taxing authority of any proposed examination or any proposed deficiency or
assessment or of any tax returns or tax liabilities due and payable. The
Company is not a United States real property holding corporation within the
meaning of Section 897(c)(2) of the Code. The Company has delivered to
Purchaser an accurate, correct and complete copy of each return or statement
filed by on behalf of or including the Company for federal income tax purposes
or state and local income or franchise tax purposes for the last three (3) tax
years of the Company. All material elections with respect to the taxes
affecting the Company as of the date hereof are set forth in SCHEDULE 4.1(m)
attached hereto. After the date hereof, no written election will be made by the
Company without the Purchaser's express written consent.
(n) FINANCIAL DISCLOSURE. The Company has made available to the
Purchaser all information known to the Company with respect to (i) accounts,
borrowings resolutions and deposit boxes maintained by the Company at any bank
or any financial institution and the account numbers and the names and addresses
of all the persons authorized to effect transactions in such accounts and
pursuant to such resolutions and with access to such boxes, and (ii) the names
of all persons, firms, associations, corporations or business organizations
holding general or special powers of attorney from the Company. A summary of
the terms of any such powers of attorney is set forth on SCHEDULE 4.1(n)
attached hereto.
-19-
(o) INSURANCE. SCHEDULE 4.1(o) attached hereto sets forth, as of
the date hereof, an accurate and complete list and brief description of the
terms of all policies of insurance carried by the Company and designating the
Company as the insured thereunder. The description of each policy consists of a
description of the subject property, the insurance coverage, the deductibles and
the additional insurance. The Company has furnished to Purchaser an accurate
and complete copy of all such insurance polices. No insurance carrier has
refused any application for insurance by the Company or any other person on
behalf of the Company on any of its properties or assets.
(p) PATENTS, TRADE SECRETS, ETC. SCHEDULE 4.1(p) attached hereto
sets forth, as of the date hereof, an accurate and complete list of all letters
patent, patents applications, trade marks, service marks, trade names, brands,
logos, copyrights and licenses, both domestic and foreign, and rights with
respect to the foregoing, whether or not registerable with any governmental
authority, now owned or used by the Company. In addition, SCHEDULE 4.1(p)
attached hereto includes a separate list of all products, prototypes and
research work which is currently being undertaken by the Company to develop
products as well as drawings, schematics, engineering specifications, reports
and other similar instruments and documents used in the connection with the
development of such product to be owned or used in connection with the business
of the Company (collectively "Development Products"). The Company has not
received notice, or otherwise has no reason to know, of any claim or threatened
infringement of the rights of others with respect to any patents, trademarks,
service marks, trade names, brands, logos, copyrights and licenses used or owned
by the Company, the loss of which would have a material adverse effect upon the
business, operations, assets or financial condition of the Company. The Company
possess all patents, patent rights or licenses, trademarks, trademark rights and
copyrights that are required to conduct its business as now conducted. To the
best of the Company's knowledge, the Company owns all trade secrets and all
other rights to all Development Products which are being developed by the
Company, which may or may not be patented or patentable. The Company has no
knowledge that it is infringing upon or otherwise violating the rights of any
third party with respect to any patent, trademark, trade name, service xxxx or
copyright. The Company has the right to use, free and clear of claims or rights
of others, all trade secrets, customer lists and manufacturing or other
processes required for, used or to be used in, or incident to its business as
now conducted, and to the best knowledge of the Company and its executive
officers, after due inquiry, no current or former employee of the Company is or
was a party to any confidentiality agreement and/or agreement not to compete
which restricts or forbids or restricted or forbade at any time during such
employee's employment by the Company, such employee's performance of the
Company's business, as the case may be, or any activity that the employee has
been hired to perform. To the best knowledge of the Company, the Company is not
now using, and has not in the past used without appropriate authorization, any
confidential information or trade secrets of any third party. The Company has
not received any notice alleging such conduct.
(q) NO CONFLICTS. The execution, delivery and performance of this
Agreement, and the performance of the transactions contemplated hereby and the
compliance with the respective terms hereof by the Company, do not and will not
(i) conflict with or result in a breach of the terms, conditions or provisions
of, (ii) constitute a default under, (iii) result in the creation of any lien,
security interest, charge or encumbrance upon the Company's capital stock or
assets,
-20-
(iv) give any third party the right to accelerate any obligation under, or (v)
result in a violation of (A) the Articles of Incorporation or Bylaws of the
Company or any other organization or governing instrument of the Company, (B)
any Contract, Lease, indenture, promissory note, agreement, mortgage or other
instrument to which the Company is a party or is bound or to which its assets
are subject or affected, or (C) any law, License, Permit, statute, rule,
regulation, judgment, decree or order of any Court, agency or other authority to
which jurisdiction the Company is subject.
(r) LITIGATION, ETC. There are no actions, suits, proceedings,
arbitration proceedings, orders, investigations or claims pending or threatened
against or affecting the Company or any of its properties at law or in equity,
or before or by any governmental or other department, commission, board, bureau,
agency or instrumentality; there are no governmental inquiries (including
inquiries as to the qualification of the Company to hold or receive any License
or Permit) pending; and, to the best of the Company's knowledge, there is no
basis for any of the foregoing.
(s) PERMITS. The Company has all franchises, permits, licenses,
governmental authorizations, zoning variances, rights of way, easements and
other authorizations, rights and privileges (collectively "Permits") necessary
to permit it to own its properties and to conduct its business as now conducted.
All such Permits are listed and described in SCHEDULE 4.1(s) attached hereto.
All such Permits are in full force and effect and no revocation, cancellation or
withdrawal thereof has been effective or to the best knowledge of the Company
threatened. Except as disclosed in SCHEDULE 4.1(s) attached hereto, the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereunder will not result in the termination of,
or change in, any such Permits.
(t) NO VIOLATION OF LAWS OR REGULATIONS. To the best knowledge of
the Company, the Company has materially complied with, and is not in any
material respect in default under or in violation of, any laws, ordinances,
requirements, regulations or orders applicable to its business and properties,
including without limitation the rules and regulations of the Federal
Communications Commissions ("FCC") or any state public utilities commission
having jurisdiction over the business and operations of the Company, nor is the
Company in violation of or in default under any order, writ, injunction,
judgment or decree of any court, arbitrator, or federal, state or local
department official, commission, authority, port, bureau, agency or other
instrumentality issued or pending against the Company which might adversely
affect the ability of the Company to execute, deliver and perform its
obligations under this Agreement or to consummate the transactions contemplated
hereby or which challenges or seeks to prevent, enjoin, alter or materially
delay any such transactions. The Company has not received notice or otherwise
has no reason to know, of any claim, default or violation with respect to any of
the foregoing. There have been no illegal payments, kickbacks, bribes or
political contributions made by the Company to any Person in the United States
or any foreign country or political subdivision. The Company does not have any
license or authorization from the FCC or any state public utility commission and
the Company is not required to obtain or have in effect any such permits or
licenses with the FCC or state public utility commission.
-21-
(u) CONTRACTS. SCHEDULE 4.1(u) attached hereto sets forth, as of
the date hereof and as of the Closing Date, an accurate and complete list of the
following:
(i) except for the Leases and Licenses, all agreements,
contracts, arrangements, commitments, understandings or obligations, oral or
written of the Company which are to be performed in whole or in part on or after
the date hereof and which require or may require the payment of Company in an
amount, or under which the Company is required or may be required to provide
goods or services of a value, greater than one thousand dollars ($1,000) during
any period of twelve (12) consecutive months;
(ii) any agreement to which the Company is a party or by
which the properties or assets of the Company are bound which limits the freedom
of the Company to compete in any line of business or with any Persons; and
(iii) all other agreements, contracts, arrangements,
commitments, understandings or obligations, oral or written (other than oral
contracts of employment) between the Company on the one part or any officer or
director of the Company on the other part or in which any of such persons or
entities has any financial interest, direct or indirect (including without
limitation any agreements affecting the properties or assets of the Company and
agreements to make loans). The Company has furnished Purchaser a copy of each
agreement, contract, arrangement, commitment or obligation set forth in SCHEDULE
4.1(u) attached hereto. Collectively, the contracts, agreements, arrangements,
commitments or obligations described in this Section 4.1(u) and listed in
SCHEDULE 4.1(u) are referred to herein as the "Contracts". Each such Contract
is in full force and effect and to the best of the Company's knowledge the
Company has performed in all material respects all of the obligations under each
Contract required to be performed by it, and no such contract is in default, nor
has any event occurred, which with the passage of time or the giving of notice
or both, will result in the occurrence of a default under any such Contract or
in the receipt of any claim of default with respect to any Contract to which the
Company is a party or is otherwise bound or to which its assets are subject.
The Company has no present expectation or intention of not fully
performing in all material respects all such obligations; the Company has no
knowledge of any breach or anticipated breach by other parties of any Contract
or commitment to which it is a party or is otherwise bound; and the Company is
not a party or otherwise bound to any materially adverse or burdensome Contract
or commitment.
(v) CERTAIN CONTRACTS AND COMMITMENTS. Except for the Outstanding
Options and the Outstanding Warrants, the Company is not a party to, or
otherwise bound by, nor has the Company ever established, had in effect,
obligated to fund or make contributions to any written or oral plan, program or
arrangement relating to a pension, profit sharing, retirement savings, thrift,
deferred compensation, stock option, stock purchase, group insurance, accident,
sickness, medical, dental, disability or other plan providing for deferred or
other compensation to employees. Except as set forth in SCHEDULE 4.1(v)
attached hereto, the Company is not obligated to fund any vacation pay,
severance pay, incentive compensation, consulting agreement, bonus or other
employee benefits or fringe benefits either currently or as to any time in the
past (including
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health insurance, life insurance or other benefit plans maintained for retirees
or former employees) whether or not such plan, program and arrangement
constitute "employee benefit plans" within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") and
whether or not any such plan, program or arrangement are in the nature of formal
or informal understandings. All such plans, programs and arrangements referred
to in this Section 4.1(v) are collectively referred to herein as "Benefit
Plans".
(w) EMPLOYEES AND LABOR. The Company is not aware that any
executive or key employee, or any group of employees of the Company has any
plans to terminate his, her or their employment with the Company, or that any
executive or key employee is subject to any agreement, obligation or other legal
hindrance that impedes or might impede such executive or key employee from
devoting his or her full business time to the affairs of the Company. The
Company has complied in all material respects with all laws relating to wages,
hours, equal opportunity, collective bargaining and the payment of social
security and other taxes, and the Company has no material labor relations
problems. Except as reflected on the Financial Statements, the Company is not
indebted to any officer, director or employee whether by loan, advance or
otherwise, other than for out-of-pocket expenses incurred in the ordinary course
of business, nor is any officer, director, employee or shareholder so indebted
to the Company. SCHEDULE 4.1(w) attached hereto describes the respective
salaries as in effect on the date hereof for the employees who constitute the
sole officers and employees of the Company. The Company is not a party to any
agreement, contract, arrangement, plan, commitment or understanding which has
resulted or would result, upon the consummation of the transactions contemplated
under this Agreement or otherwise, separately or in the aggregate, in the
payment of any "excess parachute payment" within the meaning of Section 280G of
the Code. The Company is not a party to any Benefit Plan, or any Contract,
whether collective bargaining agreements or other arrangements with any labor
union or any employment or consulting contracts not terminable at will without
penalty to which the Company is a party.
(x) ERISA. The Company has fulfilled its obligations under the
minimum funding standards of ERISA and the Code with respect to each Pension
Plan (as defined in Section 4001 of ERISA), and is in compliance in all material
respects with the provisions of ERISA and the Code. The Company has not
incurred any liability to the Pension Benefit Guaranty Corporation ("PBGC")
(other than annual premiums due to the PBGC) or a Pension Plan under Title IV of
ERISA. SCHEDULE 4.1(x) attached hereto lists each employee Benefit Plan covered
by ERISA maintained or contributed to by the Company at any time since January
1, 1990. The Company is not subject to any obligations or liabilities under
COBRA or any other employee Benefit Plan existing prior to, but not on or after,
January 1, 1990.
(y) ENVIRONMENTAL MATTERS. To the best knowledge of the Company,
the Company has duly complied with, and the operation of its businesses,
equipment and other assets in the facilities owned or leased by the Company are
in compliance with the provisions of all applicable federal, state and local
environmental, health and safety laws, statutes, ordinances, rules and
regulations of any governmental or a quasi governmental authority relating to
(i) errors or omissions, (ii) discharges to surface water or ground water, (iii)
solid or liquid waste disposal, (iv) the use, storage, generation, handling,
transport, discharge, release or disposal of toxic or
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hazardous substances or waste, (v) the emission of non-ionizing electromagnetic
radiation or (vi) other environmental, health or safety matters, including
without limitation, the Comprehensive Environmental Response Compensation and
Liability Act of 1980 as amended by the Superfund Amendments and Authorization
Act of 1986; the Occupational Safety and Health Act; the Resource Conservation
Recovery Act of 1976; the Federal Water Pollution Control Act of 1970; the Safe
Drinking Water Act of 1974; the Toxic Substances Control Act of 1976; the
Emergency Planning Community Right to Know Act of 1986, as amended; and the
Clean Air Act, as amended, (collectively "Environmental and Health Laws") or the
Federal Communications Act, as amended, ("FCC Law"). To the best knowledge of
Company, there are no investigations, administrative proceedings, judicial
actions, orders, claims or notices which are pending, anticipated or threatened
against the Company, relating to violations of the Environmental and Health Laws
and the FCC Law. The Company has not received a notice of, and does not know or
have any reason to suspect, any facts which constitute a violation of any
Environmental and Health Laws or the FCC Law which relate to the use, ownership
or occupancy of any property or facilities used by the Company in connection
with the operation of its business or any activity of the business of the
Company which would result in a violation or threatened violation of any
Environmental or Health Laws or the FCC Law.
(z) ACCOUNTS RECEIVABLE. All of the accounts receivable of the
Company constitute valid receivables, have been incurred in the ordinary course
of business consistent with past practices and, to the knowledge of the Company,
are collectable in the ordinary course of business, except for the reserve for
bad debts or doubtful accounts as reflected in the Financial Statements and are
not subject to any setoffs or counterclaims. To the Company's knowledge, no
part of such accounts receivable is contingent upon the performance by the
Company of any obligation, and no agreements for deduction or discounts have
been made with respect to any part of such receivables. The Company shall
deliver a SCHEDULE 4.1(z) at the Closing listing all of the accounts receivable
of the Company as of the Closing Date.
(aa) PAYABLES. The list of itemized accounts payable of the
Company as shown in SCHEDULE 2.6(d)-1 attached hereto and such payables to be
shown in SCHEDULE 2.6(d)-1 to be updated with SCHEDULE 2.6(d)-2 at the Closing
will represent a complete list of the accounts payable of the Company to its
creditors other than those not posted to the Company's accounting records that
were incurred in the ordinary course of business. Except as set forth in
SCHEDULE 2.6(d)-1 attached hereto none of the accounts payable as so listed are
currently in default.
(bb) DIRECTORS AND OFFICERS. The SCHEDULE 4.1(bb) attached hereto
is a correct and complete list as of the date hereof showing the names of each
of the Officers and Directors of the Company, each of whom has been duly elected
or appointed.
(cc) INVENTORY. The inventories of finished goods, work in process
and raw materials of the Company, including, without limitation, those set forth
on the Company's balance sheet as of the Financial Statement Date, other than
inventory sold in the ordinary course of business sold through the Closing Date
(collectively, the "Inventory"), are of a quality usable or saleable in the
normal course of the Company's business. The value of the Inventory as carried
on the Company's books and records reflect the normal inventory valuation policy
used by the
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Company and is in accordance with generally accepted accounting principles,
consistently applied, stating the value of the Inventory at the lower of cost or
market on a specific identification basis.
(dd) FULL DISCLOSURE. None of the written information provided by
the Company to Purchaser in connection with the negotiation of this Agreement
contains any intentionally misleading statement of a material fact. There is no
fact which the Company has not disclosed to Purchaser in writing which
materially affects or which will materially affect adversely the Company's
business, sales, income, properties, assets, liabilities, activities, customers,
or the ability of the Company to perform under this Agreement.
4.2 REPRESENTATIONS AND WARRANTIES OF PURCHASER AND GUARANTOR.
Purchaser and Guarantor represent and warrant to the Company as follows:
(a) ORGANIZATION AND CORPORATE POWER OF PURCHASER AND GUARANTOR.
Each of Guarantor and Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, and is duly qualified to do business as a foreign corporation in
good standing in each jurisdiction in which the properties owned, leased or
operated by it, or the nature of its activities or proposed activities makes
such qualification necessary, except in such jurisdictions where the failure to
be so qualified or in good standing would not have a material adverse effect on
the business, results of operations or financial condition of the Guarantor or
Purchaser, as the case may be, and its subsidiaries taken as a whole. Each of
Guarantor and Purchaser has all required corporate power and authority to own
its property and to carry on its business as now conducted.
(b) CORPORATE AUTHORIZATION. Each of Guarantor and Purchaser has
full power and authority to execute and deliver this Agreement and to consummate
the transactions contemplated hereby and thereby. The execution and delivery of
this Agreement, and the consummation of the transactions contemplated hereby
have been duly and validly authorized by all corporate action on the part of
each of Guarantor and Purchaser, and no other corporate proceedings on the part
of either of Guarantor or Purchaser are necessary to authorize the execution and
delivery of this Agreement or to consummate the transactions so contemplated.
(c) BINDING EFFECT. This Agreement constitutes the legal, valid
and binding agreement of each of Guarantor and Purchaser enforceable against
Guarantor and Purchaser in accordance with its terms, except to the extent that
the enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditor's
rights generally and by principles of equity regarding the availability of
remedies.
(d) NO CONFLICTS. The execution, delivery and performance of this
Agreement, and the performance of the transactions contemplated hereby and the
compliance with the respective terms hereof by each of Guarantor and Purchaser,
do not and will not (i) conflict with or result in a breach of the terms,
conditions or provisions of, (ii) constitute a default under, (iii) result in
the creation of any lien, security interest, charge or encumbrance upon
Guarantor's or Purchaser's capital stock or assets pursuant to, (iv) give any
third party the right to accelerate any obligation under, (v) result in a
violation of, or (vi) require any authorization, consent, approval,
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exemption or other action by or notice to any court or administrative or
governmental body or any other Person pursuant to (A) the Articles of
Incorporation or Bylaws of Guarantor or Purchaser or any other organization or
governing instrument of Guarantor or Purchaser, (B) any Contract, Lease,
indenture, promissory note, agreement, mortgage or other instrument to which
Guarantor or Purchaser is a party or is bound or to which their assets are
subject or affected, or (C) any law, License, Permit, statute, rule, regulation,
judgment, decree or order of any Court, agency or other authority to which
Guarantor or Purchaser is subject.
ARTICLE V
COVENANTS OF THE COMPANY
5.1 COVENANTS OF THE COMPANY. The Company covenants and agrees that:
(a) CONDUCT OF THE COMPANY. From the date hereof until the
Effective Time, the Company will conduct its business in the ordinary course
consistent with past practice and will use its best efforts to preserve intact
its business organization and relationships with third parties and to keep
available the services of its present officers and employees. Without limiting
the generality of the foregoing, from the date hereof until the Effective Time
and without the written consent of Purchaser:
(i) The Company will not declare, set aside or pay any
dividend or other distribution with respect to any shares of Stock of the
Company;
(ii) The Company will not amend or alter any material term
of any outstanding Stock;
(iii) The Company will not (A) issue or sell any securities
convertible into or exchangeable for debt securities of the Company; or (B)
issue or sell any options, warrants or other rights to acquire from the Company,
directly or indirectly, any debt securities of the Company or any securities
convertible into or exchangeable for any such debt securities;
(iv) The Company will not create, assume or incur any lien
on any material asset of the Company that will not be discharged at the Closing;
(v) Except as set forth in SCHEDULE 5.1(a)(v) attached
hereto and except for the issuance of shares pursuant to the exercise of the
Outstanding Options or the Outstanding Warrants, the Company will not (A) issue
or sell any additional Stock or (B) redeem, repurchase or otherwise acquire any
additional Stock;
(vi) The Company will not relinquish any material contract
or other material right of the Company, make any payment (direct or indirect) of
any liability of the Company before the same becomes due in accordance with its
terms or make any change in its operations that is in any such case material to
the Company, its business, prospects and financial condition taken as a whole;
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(vii) The Company will not adopt any change in any method of
accounting or accounting practice used by the Company other than by reason of a
concurrent change in GAAP and upon the recommendation of the Company's
independent public accountants;
(viii) Except for the agreements referenced in SCHEDULE
5.1(a)(viii), which the Company may amend with the prior written consent of
Purchaser (which will not be unreasonably withheld), the Company will not (A)
grant or make any severance or termination payments to any officer, director or
employee of the Company, except pursuant to written agreements in effect on the
date hereof, (B) enter into any employment, deferred compensation or other
similar agreement (or enter into any amendment to any such existing agreement)
with any officer, director or employee of the Company, (C) without the consent
of Purchaser pay any officer, director, or employee compensation which is in
excess of the current compensation level of each employee, officer or director,
except for standard periodic increases to non-management employees consistent
with past practices in terms of timing and amount; (D) materially accelerate or
increase benefits payable under any existing severance or termination pay
policies or employment agreements, or (E) accelerate, vest, pay or provide for
any increase in compensation, bonus, or other benefits payable to officers,
directors or employees of the Company except for normal increases to
non-managerial employees consistent with past practice, to the extent required
under existing employment and labor agreements.
(ix) The Company will not amend its Articles of
Incorporation or Bylaws or change its corporate name or permit the use thereof
by any other Person;
(x) Subject to the fiduciary duties of its Board of
Directors, the Company will not merge or consolidate with any Person, acquire
any stock or other ownership interest in any Person, or the assets of any
business as an entity, or liquidate, dissolve or otherwise reorganize or seek
protection from creditors;
(xi) Subject to the fiduciary duties of its Board of
Directors, the Company will not intentionally take any action, the taking of
which, would reasonably be expected to cause any of the representations and
warranties in Section 4.1 hereof to be inaccurate in any material respect at or
as of any time prior to the Effective Time;
(xii) Except for the sale of inventory and the disposition
of obsolete or defective equipment or other assets in the ordinary course of
business, the Company will not sell, transfer, mortgage, or otherwise dispose
of, or encumber, or agree to sell, transfer, mortgage or otherwise dispose of or
encumber, any assets or properties, real, personal or mixed; provided, that
Xxxxx shall be allowed to retain the personal items listed in SCHEDULE
5.1(a)(xii);
(xiii) Subject to the fiduciary duties of its Board of
Directors, the Company will not (A) enter into any other agreements, commitments
or contracts (including without limitation joint venture agreements or material
license agreements) which, individually or in the aggregate, are material to the
Company, except agreements, commitments or contracts for the purchase, sale or
lease of goods or services, consistent with past practice or (B) otherwise
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make any material change in any existing material agreement, commitment or
arrangement, except in the ordinary course of business;
(xiv) The Company will not make any investment of a capital
nature either by purchase of stock or securities, contributions to capital,
property transfers or otherwise, or by the purchase of any property or assets of
any other Person, except the purchase of fixed assets as permitted by Section
5.1(a)(xv) hereof;
(xv) The Company will not purchase any fixed assets which,
singly or in the aggregate have an installed purchase price greater than $1,000;
(xvi) The Company will not distribute or otherwise circulate
any notices, directives or other communications directed to all or groups of
customers, vendors, employees, distributors or others associated with its
business without consulting with Purchaser and giving Purchaser reasonable
opportunity to comment thereon;
(xvii) The Company will not make any changes in management
without prior written consent of Purchaser;
(xviii) The Company will not increase the amount of any
indebtedness outstanding under any loan agreement, mortgage or borrowing
arrangement in existence on the date hereof or obtain any additional loans or
incur any additional indebtedness, unless the Company first advises Purchaser
and receives Purchaser's consent thereto (which consent shall not be
unreasonably withheld);
(xix) The Company shall pay when due in accordance with past
practices all of its accounts payable and trade obligations;
(xx) The Company shall use its best efforts to maintain its
facilities, assets and properties in good operating repair, order and condition,
reasonable wear and tear excepted, and notify Purchaser promptly upon any loss
of, damage to, or destruction of any of its facilities, properties or assets;
(xxi) The Company shall maintain in full force and effect
all insurance coverage of the types and in the amounts set forth in the
Schedules attached hereto and apply the proceeds received under any insurance
policy or as a result of, damage to, or destruction of any of its facilities,
properties or assets to the repair or replacement of such facilities, properties
or assets;
(xxii) The Company shall maintain in full force and effect
all Licenses and Permits, and shall use its best efforts to maintain in full
force and effect all Leases and Contracts, for or related to the operation of
the Company's business and in all respects and in all places as such business is
now conducted;
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(xxiii) The Company shall use its best efforts to preserve its
business organizations intact, to keep available the services of its present
employees and to preserve the good will of its customers and others having
business relations with the Company;
(xxiv) The Company shall promptly advise Purchaser in writing
of the commencement of, and any known threat to commence, any suit, claim,
action, arbitration, legal or administrative proceedings, governmental
investigation or tax audit against the Company;
(xxv) The Company shall deliver to Purchaser as soon as
available monthly financial statements ("Monthly Financial Statements") of the
Company commencing with the month of January, 1998, and for each calendar month
thereafter prior to the Closing Date;
(xxvi) Promptly following the execution of this Agreement,
the Company shall have notified any Person having Outstanding Options of the
matters contemplated by the Company's outstanding stock option plans, and any
Person having Outstanding Warrants of the matters as to which notice is required
to be given in accordance with their respective notice provisions. The Company
shall use its best efforts to obtain from the holders of the Outstanding
Warrants and Outstanding Options listed in SCHEDULE 5.1(a)(xxvi) attached hereto
a written agreement as to the termination and cancellation of their Outstanding
Warrants and Outstanding Options.
(xxvii) The Company shall pay all payroll withholding expenses
with respect to the exercise, prior to the Closing Date, of any Outstanding
Options or Outstanding Warrants outstanding as of the date hereof and all other
expenses and costs incurred by the Company in the ordinary course of business as
such expenses and costs shall become due and payable.
(xxviii) The Company shall not incur any liability or be
obligated to fund any vacation pay, severance pay, incentive, compensation,
consulting agreement, bonus or other employee benefit or fringe benefit. The
Company shall not incur any additional accounts payable between the date hereof
and the Closing Date other than in the ordinary course of business without
Purchaser's express written consent.
(xxix) The Company shall not agree or commit to do any of the
matters specified in Section 5.1(a)(i) through 5.1(a)(xviii) and Section
5.1(a)(xxviii) hereof and the Company will take action and perform the matters
set forth in Sections 5.1(a)(xix) through 5.1(a)(xxvii) hereof.
(b) ACCESS TO INFORMATION. The Company will give Purchaser, its
counsel, financial advisors, auditors and other authorized representatives full
access to the offices, properties, books and records of the Company and will
promptly furnish to Purchaser, its counsel, financial advisors, auditors and
authorized representatives such financial and operating data and other
information as such persons may reasonably request and will instruct the
officers, directors, employees, counsel and financial advisors of the Company to
discuss the business operations, affairs and assets of such corporations and
otherwise fully cooperate with the other party in its
-29-
investigation of the business of the Company. No investigation pursuant to this
Section 5.1(b) will affect any representation or warranty given by the Company
to Purchaser hereunder.
(c) NOTICE OF CERTAIN EVENTS. The Company will promptly notify
Purchaser of:
(i) any notice or other communication from any Person
alleging that the consent of such Person is or may be required in connection
with the transactions contemplated by this Agreement;
(ii) any notice or other communication from any
governmental or regulatory agency or authority in connection with the
transactions contemplated by this Agreement;
(iii) any actions, suits, claims, investigations or
proceedings commenced or, to the best of the Company's knowledge, threatened
against, relating to or involving or otherwise affecting the Company which
relate to the consummation of the transactions contemplated by this Agreement or
which, if pending on the date of this Agreement, would have been required to
have been disclosed in the Disclosure Schedule; and
(iv) any other event or change of fact or circumstance
causing any representation contained in Section 4.1 of this Agreement to be, as
of the date of such event or change, incorrect or misleading in any material
respect.
(d) CONSENTS, APPROVALS AND FILINGS. Subject to the terms and
conditions herein provided and without being required to waive any conditions
herein, the Company will use its best efforts to obtain as promptly as possible
all necessary approvals, authorizations, consents, clearances or orders
("Consents") of governmental and regulatory authorities required in order for
the Company to perform its obligations hereunder. The receipt of such Consents
shall be a condition of Closing.
(e) BEST EFFORTS. The Company shall use its best efforts (i) to
cause to be fulfilled and satisfied all of the conditions to the Merger to be
fulfilled and satisfied by the Company, and (ii) to cause to be performed all of
the matters required of it at or prior to the Effective Time.
(f) EXCLUSIVITY. In order to induce Purchaser to enter into this
Agreement, the Company agrees that subject to the fiduciary duties of the Board
of Directors of the Company, the Company will not, prior to the Closing Date,
take any further action to solicit, initiate or encourage any offer or
indication of interest from any Person other than Purchaser relating to the
merger, consolidation or sale of the Company or its Stock or properties and
assets of the Company, including without limitation, any such further action
through any investment banker, broker, finder or other intermediary previously
engaged or which may be engaged for the purpose of soliciting, initiating or
encouraging such offer or indication of interest.
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5.2 COVENANTS OF PURCHASER. Purchaser covenants and agrees that:
(a) BEST EFFORTS. Subject to the terms and conditions herein
provided and without being required to waive any conditions herein, Purchaser
shall use its best efforts to (i) cause to be fulfilled and satisfied all of the
conditions to the Merger to be fulfilled and satisfied by it, and (ii) cause to
be performed all of the matters required of it at or prior to the Effective
Time.
(b) CONSENTS, APPROVALS AND FILINGS. Purchaser will use its best
efforts to obtain as promptly as possible all necessary approvals,
authorizations, consents, licenses, clearances or orders of governmental and
regulatory authorities required in order for Purchaser to perform its
obligations hereunder.
(c) ADVICE OF CHANGES. Purchaser will promptly advise the Company
orally and in writing of (i) any event occurring subsequent to the date of this
Agreement which would render any representation or warranty of Purchaser
contained in this Agreement, if made on or as of the date of such event or the
Effective Time, untrue, inaccurate or incomplete in any material respect and
(ii) any material adverse change in the financial condition, assets, liabilities
(whether absolute, accrued, contingent or otherwise), operating profits,
business or prospects of Purchaser.
ARTICLE VI
MISCELLANEOUS
6.1 SURVIVAL OF REPRESENTATIONS. Except as may be provided in the
Indemnification Agreement the representations, warranties, covenants, and
agreements of the Company and Purchaser made herein or any certificate delivered
by the Company or Purchaser pursuant to Sections 4.1 and 4.2 hereof, as the case
may be, shall survive without limitation the execution hereof and thereof and
the delivery of the Merger Consideration and shall remain in full force and
effect for a period of three (3) years after the Closing Date.
6.2 INCORPORATION BY REFERENCE. Except for the Disclosure Schedule and
Schedule 2.6(a) which will be attached as of the date of execution of this
Agreement, the Schedules, Exhibits and Attachments contemplated under this
Agreement shall be appended to this Agreement within five (5) days business
after the execution of this Agreement by the parties hereto. All Schedules,
Exhibits and Attachments to this Agreement and all documents delivered pursuant
to or referred to in this Agreement are incorporated herein by reference and
made a part hereof. Such Exhibits, Schedules and Attachments may be appended
hereto, amended or modified by a party provided that the other party ("Receiving
Party") has been furnished with a copy of the proposed amendment or modification
to such Schedule, Exhibit or Attachment; provided, however, that if any such
Schedule, Exhibit, Attachment or amendment thereto shall materially adversely
affect the economics, financial or business considerations of the transactions
contemplated under this Agreement as determined by the Receiving Party, such
Receiving Party may terminate this Agreement in accordance with Section
6.16(a)(vii) hereof. The Schedules, Exhibits and Attachments to this Agreement
shall not be deemed to be part of the Plan of Merger.
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6.3 PARTIES IN INTEREST. All covenants, agreements, representations,
warranties and undertakings in this Agreement made by and on behalf of any of
the parties hereto shall bind and inure to the benefit of their respective
successors and assigns and the term "Purchaser" herein shall apply to the
successors and assigns of Purchaser.
6.4 AMENDMENTS AND WAIVERS. This Agreement may be amended, or
compliance with any terms, covenants, agreement, condition or provision set
forth herein may be waived (either generally or in a particular instance and
either retroactively or prospectively) if agreed to in writing by the Company
and Purchaser upon the approval of their respective Boards of Directors at any
time prior to filing the Articles of Merger with the Secretaries of State of
Colorado and Wyoming.
6.5 GOVERNING LAW; SEVERABILITY. This Agreement, together with the
rights and obligations of the parties hereunder, shall be governed by, construed
and enforced in accordance with the laws of the State of Colorado without giving
effect to the conflict of laws provisions thereof. If any provision of this
Agreement or the application of any such provision to any party shall be held by
a court of competent jurisdiction to be contrary to law, the remaining
provisions of this Agreement shall remain in full force and effect.
6.6 NOTICES. All notices, requests, consents and demands shall be in
writing and shall be deemed to have been sufficiently given, upon receipt, if
sent, postage prepaid, by registered or certified mail, return receipt
requested, to the Company at 0000 Xxxx Xxxxxxxx Xxxx, Xxxxx 000, Xxxxxxxxx,
Xxxxxxxx 00000, Attn: President, with a copy to Xxxxxxx X. Xxxx, P.C., 0000 Xxxx
Xxxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxx 00000; to the Purchaser at 00 Xxxxxxxxx
Xxxxx Xxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxx 00000, Attn: Legal Department, or to
such other address as may from time to time be furnished in writing to the other
parties hereto.
6.7 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
6.8 CAPTIONS. The captions and headings of this Agreement are for
convenience only and are not to be construed as defining or limiting the scope
or intent of any of the provisions hereof.
6.9 COMPLETE AGREEMENT. This document, and the Exhibits and Schedules
hereto, embodies the complete agreement and understanding between and among the
parties hereto with respect to the subject matter hereof, and supersedes and
preempts any prior understandings, agreements, or representations by or among
the parties, written or oral, which may have related to the subject matter
hereof.
6.10 ARBITRATION. Any and all disputes arising out of, under, in
connection with, or relating to this Agreement shall be finally settled by
arbitration in Denver, Colorado, or in such other place as the parties hereto
agree, in accordance with the rules then in effect of the American Arbitration
Association. The board of arbitrators shall be composed of three arbitrators,
being
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qualified to make evaluations of the kind under dispute. Such arbitrators shall
be selected in accordance with the procedures of the American Arbitration
Association and shall be reasonably acceptable to both Purchaser and the
stockholders of the Company. The arbitration award, based upon written findings
of fact and conclusions of law, shall be final and binding on the parties. Each
party will pay its own expenses associated with such arbitration, provided that
the prevailing party in any arbitration shall be entitled to reimbursement of
reasonable attorney's fees and expenses (including, without limitation,
arbitration expenses) relating to such arbitration. Any arbitration award may
be enforced in any court having jurisdiction over the party against which
enforcement is sought.
6.11 INDEMNIFICATION BY COMPANY STOCKHOLDERS. Xxxxx will indemnify
Purchaser and Convergent pursuant to the Indemnification Agreement.
6.12 PURCHASER'S INDEMNIFICATION. Purchaser agrees that notwithstanding
the Closing and regardless of any investigation of any item made by or on behalf
of the Company or any information the stockholders of the Company may have in
respect thereof, the Purchaser will indemnify and save and hold the stockholders
of the Company harmless from and against any Losses suffered or incurred by the
stockholders of the Company arising out of or resulting from, and will pay the
stockholders of the Company on demand the full amount of any such amounts which
the stockholders of the Company may pay or become obligated to pay in respect
of:
(i) any material inaccuracy in any representation or the
breach of any warranty made by Purchaser in or pursuant to this Agreement;
(ii) any failure by Purchaser of its duty to perform or
observe any item, provision, covenant or agreement in this Agreement to be
performed or observed on the part of Purchaser; or
(iii) any claim for damages arising after the Closing Date
for any act or omission of Purchaser occurring after the Closing Date.
6.13 LIMITATION OF INDEMNITY. Except as provided in the Indemnification
Agreement as it relates to the indemnification by Xxxxx of the Purchaser and
Convergent, and except as set forth in Section 6.14 hereof relating to brokers
and finders, neither Purchaser and Convergent, on the one hand, nor the
Indemnifying Stockholders on the other hand, shall be required to indemnify the
other for any misrepresentation, breach of warranty or failure to fulfill any
covenant or agreement herein except to the extent that the aggregate amount
which the Indemnifying Stockholders, on the one hand, or Purchaser and
Convergent, on the other hand, respectively would otherwise (but for this
provision) be liable on account thereof exceeds in the aggregate the sum of five
thousand dollars ($5,000) (the "Threshold Amount") and then only to the extent
of such excess; provided, however, for purposes of calculating whether the
Threshold Amount has been reached, any specific materiality provision contained
in the representations and warranties shall be disregarded. Except as provided
in the Indemnification Agreement the obligations of the Indemnifying
Stockholders to indemnify Purchaser and Convergent under Section 6.11 shall
terminate two years after the Closing Date except as to matters as to which
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notice of a Claim has been given to the Indemnifying Stockholders under Section
6.11 prior to the expiration of such two year period.
6.14 BROKERAGE COMMISSIONS. Each party to this Agreement warrants to the
other that it has not engaged or utilized the services of any broker or finder
in connection with the transaction contemplated by this Agreement, and no
commissions are payable with respect to the transactions contemplated by this
Agreement. Each such party hereto agrees to indemnify and hold the other
harmless from and against any liability for any claims of any broker or finder
claiming by, through, or under such party.
6.15 PUBLICITY. Prior to the Closing Date, all notices to third parties
and all other publicity relating to the transactions contemplated by this
Agreement shall be jointly planned, coordinated and approved by the Company and
Purchaser.
6.16 TERMINATION.
(a) TERMINATION. This Agreement may be terminated, and the Merger
contemplated by this Agreement may be abandoned, at any time prior to the
Effective Time, notwithstanding the adoption of this Agreement and the approval
of the Merger by the stockholders of the Company:
(i) By mutual written consent duly authorized by the Board
of Directors of Purchaser and by the Board of Directors of the Company;
(ii) By either Purchaser or the Company if the Merger has
not been consummated by April 30, 1998, except that the right to terminate this
Agreement under this Section 6.16(a)(ii) will not be available to any party
whose willful failure to perform any material obligation or to fulfill any
material condition under this Agreement has been the proximate cause of, or
resulted in, the failure of the Effective Time to occur on or before that date;
(iii) By either Purchaser or the Company if a court of
competent jurisdiction or an administrative, governmental, or regulatory
authority has issued a final nonappealable order, decree, or ruling, or taken
any other action, having the effect of permanently restraining, enjoining, or
otherwise prohibiting the Merger;
(iv) By Purchaser if (A) Purchaser is not in material
breach of its obligations under this Agreement and (B) there has been (1) a
material breach by the Company of any of its representations and warranties
under this Agreement such that the conditions in Section 3.1(a) can not be
satisfied or (2) a material failure by the Company to perform any of its
obligations under this Agreement such that the conditions in Section 3.1(b) can
not be satisfied, and, in both case (1) and case (2), the breach or failure
cannot be cured by the Company within 30 calendar days following receipt by the
Company of notice of the breach;
(v) By the Company if (A) the Company is not in material
breach of its obligations under this Agreement and (B) there has been (1) a
material breach by Purchaser of any
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of its representations and warranties under this Agreement such that the
conditions in Section 3.2(a) will not be satisfied or (2) a material failure by
Purchaser to perform any of its obligations under this Agreement such that the
conditions in Section 3.2(b) will not be satisfied, and, in both case (1) and
case (2), the breach or failure cannot be cured by Purchaser within 30 calendar
days following receipt by Purchaser of notice of the breach;
(vi) By the Purchaser if the total value of the appraisal
rights of the Dissenting Shares as determined under the applicable provisions of
the Colorado Business Corporation Act exceeds the amount set forth in Section
3.1(l) hereof; and
(vii) By either of the Purchaser or the Company, such party
not then being in breach of the Agreement, if any Exhibit, Schedule or
Attachment appended hereto subsequent to the date of the Agreement or any
amendment to any Exhibit, Schedule or Attachment hereto made subsequent to the
date of the Agreement shall materially adversely affect the economics, financial
or business considerations of the transactions contemplated under this Agreement
as determined by the Receiving Party.
This Agreement may be terminated by the Board of Directors of either the
Company or Purchaser in accordance with the foregoing provisions notwithstanding
the approval of the Agreement by the stockholders of the Company or Purchaser.
(b) EFFECT OF TERMINATION. In the event of the termination of
this Agreement pursuant to Section 6.16(a)(i),(ii) (unless the failure to
consummate the transactions contemplated hereunder is caused by the acts or
omissions of Purchaser), (iii), (iv), (vi) and/or (vii) hereof, the Company
shall return the Xxxxxxx Money received from Purchaser. In the event of the
termination of this Agreement pursuant to Subsections 6.16(a)(ii) (if the
failure to consummate the transactions hereunder is caused by the acts or
omissions of Purchaser) or (v), the Company shall be entitled to retain the
Xxxxxxx Money received from Purchaser.
6.17 COSTS AND EXPENSES OF MERGER. The Company shall be
responsible for the payment of all Transactional Costs as provided in SCHEDULE
6.17 and Purchaser shall be responsible for the payment of their costs and
expenses, including, without limiting the generality thereof, the costs and
expenses of its attorneys, accountants and other consultants engaged by such
party in connection with the investigation or due diligence review of documents
of the other party, filing fees, recording and notification fees, travel,
entertainment and lodging expenses and any other expenses or costs relating to
the consummation of the transactions contemplated under this Agreement up to and
including the Closing Date. The amount of the Transactional Costs shall reduce
the total amount of the Cash Consideration in accordance with this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first set forth above.
CONVERGENT COMMUNICATIONS SERVICES, INC.
a Colorado corporation
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By:
----------------------------------------
Xxxx X. Xxxxx, Chief Executive Officer
CONVERGENT COMMUNICATIONS, INC.
a Colorado corporation
By: /s/ Xxxx X. Xxxxx
----------------------------------------
Xxxx X. Xxxxx, Chief Executive Officer
COMMUNICATIONS SERVICES OF COLORADO, INC.
a Colorado corporation
By: /s/ Xxxxx Xxxxx
----------------------------------------
Xxxxx Xxxxx, President
XXXXX XXXXX
/s/ Xxxxx Xxxxx
--------------------------------------------
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