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EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
AMONG
O2WIRELESS SOLUTIONS, INC.,
O2WIRELESS, INC.,
AND
XXXXXXX X. XXXXX
FOR THE PURCHASE AND
SALE OF ALL ISSUED AND OUTSTANDING
CAPITAL STOCK OF
YOUNG & ASSOCIATES, INC.,
DATED AS OF JANUARY 2, 2001
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TABLE OF CONTENTS
Page
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ARTICLE 1 SALE OF STOCK........................................................................................ 1
1.1 Sale of Stock...................................................................................... 1
1.2 Purchase Price..................................................................................... 2
1.3 Adjustment to Purchase Price Relating to Section 338(h)(10) Election............................... 2
1.4 Time and Place of Closing.......................................................................... 2
1.5 Deliveries at Closing.............................................................................. 3
1.6 Restrictive Legend................................................................................. 4
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER.................................................... 4
2.1 Corporate.......................................................................................... 4
2.2 Authorization; Validity............................................................................ 5
2.3 No Violation....................................................................................... 6
2.4 Financial Statements............................................................................... 6
2.5 Absence of Undisclosed Liabilities................................................................. 7
2.6 Title to Properties; Encumbrances.................................................................. 7
2.7 Compliance with Laws............................................................................... 7
2.8 Litigation......................................................................................... 9
2.9 Contracts and Commitments.......................................................................... 9
2.10 Real Estate........................................................................................ 11
2.11 Accounts Receivable................................................................................ 11
2.12 Trade Rights....................................................................................... 11
2.13 Broker's or Finder's Fees.......................................................................... 13
2.14 Employee Benefit Plans............................................................................. 13
2.15 Employment Compensation............................................................................ 14
2.16 Labor Matters...................................................................................... 14
2.17 Tax Matters........................................................................................ 14
2.18 Insurance.......................................................................................... 16
2.19 Absence of Certain Changes......................................................................... 17
2.20 Major Customers and Suppliers...................................................................... 18
2.21 Securities Laws Matters............................................................................ 19
2.22 Power of Attorney.................................................................................. 19
2.23 Affiliates' Relationships.......................................................................... 19
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF O2WIRELESS AND BUYER............................................... 20
3.1 Due Incorporation and Qualification................................................................ 20
3.2 Authorization...................................................................................... 20
3.3 Capitalization..................................................................................... 20
3.4 Non-Contravention.................................................................................. 21
3.5 Authority of Buyer................................................................................. 21
3.6 Litigation......................................................................................... 21
3.7 Broker's or Finder's Fees.......................................................................... 22
3.8 SEC Reports and Financial Statements............................................................... 22
3.9 Absence of Certain Changes......................................................................... 22
3.10 No Undisclosed Liabilities......................................................................... 22
3.11 Compliance with Law................................................................................ 22
ARTICLE 4 COVENANTS............................................................................................ 23
4.1 Third Party Consents............................................................................... 23
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4.2 Securities Law Matters............................................................................. 23
4.3 Attainment of Tax Clearance Certificates........................................................... 23
4.4 Tax Matters........................................................................................ 23
4.5 Employee Options................................................................................... 25
4.6 Proceeds from Criminal Proceedings................................................................. 25
4.7 Registration Statement on Form S-8................................................................. 25
ARTICLE 5 CONDITIONS PRECEDENT TO OBLIGATION OF BUYER TO CLOSE................................................. 25
5.1 Consent of Wachovia Bank, N.A., First Union National Bank and Underwriters......................... 26
5.2 Representations and Covenants...................................................................... 26
5.3 Litigation......................................................................................... 26
5.4 Good Standing Certificates, Etc.................................................................... 26
5.5 Consents........................................................................................... 26
5.6 Employment and Restrictive Covenants Agreements.................................................... 26
5.7 Agreements With Key Employees...................................................................... 26
5.8 Release Agreement.................................................................................. 26
5.9 Governmental Permits and Approvals................................................................. 26
5.10 Registration Rights Agreement...................................................................... 26
5.11 Opinion of Counsel to the Shareholder.............................................................. 27
5.12 Investment Letter.................................................................................. 27
5.13 Other Documents.................................................................................... 27
ARTICLE 6 CONDITIONS PRECEDENT TO OBLIGATION OF THE SHAREHOLDER TO CLOSE....................................... 27
6.1 Litigation......................................................................................... 27
6.2 Representations and Warranties..................................................................... 27
6.3 Governmental Permits and Approvals................................................................. 27
6.4 Resolutions........................................................................................ 27
6.5 Good Standing Certificates, Etc.................................................................... 28
6.6 Employment and Restrictive Covenants Agreement..................................................... 28
6.7 Registration Rights Agreement...................................................................... 28
6.8 Opinion of Counsel to Buyer and o2wireless......................................................... 28
6.9 Other Documents.................................................................................... 28
6.10 Establishment of Bonus Plan for Company Employees.................................................. 28
ARTICLE 7 INDEMNIFICATION...................................................................................... 28
7.1 Survival........................................................................................... 28
7.2 Indemnification by the Shareholder................................................................. 29
7.3 Indemnification by Buyer........................................................................... 29
7.4 Limitations of Claims.............................................................................. 29
7.5 Procedures......................................................................................... 29
7.6 Adjustment of Liability............................................................................ 32
ARTICLE 8 MISCELLANEOUS........................................................................................ 32
8.1 Further Assurances................................................................................. 32
8.2 Assignment; Parties in Interest.................................................................... 32
8.3 Law Governing Agreement............................................................................ 33
8.4 Amendment and Modification......................................................................... 33
8.5 Notice............................................................................................. 33
8.6 Expenses........................................................................................... 34
8.7 Entire Agreement................................................................................... 34
8.8 Counterparts....................................................................................... 34
8.9 Headings........................................................................................... 34
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EXHIBITS
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Exhibit A Form of Registration Rights Agreement
Exhibit B Form of Investment Letter
Exhibit C Form of Employment Agreement with Shareholder
Exhibit D Form of Restrictive Covenants Agreement with Shareholder
Exhibit E Form of Employment Agreements with Selected Employees
Exhibit F Form of Release Agreement
Exhibit G Form of Opinion of Counsel to the Shareholder
Exhibit H Form of Opinion of Counsel of Buyer and o2wireless
Exhibit I Form of Bonus Plan
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SCHEDULES
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Schedule 2.1(e) Authorized Capital Stock
Schedule 2.4 Company Statements
Schedule 2.5 Undisclosed Liabilities
Schedule 2.6(a) Title to Assets
Schedule 2.6(b) Condition of Property
Schedule 2.7(a) Compliance with Laws
Schedule 2.7(b) Licenses and Permits
Schedule 2.7(c) Environmental Matters
Schedule 2.8 Litigation
Schedule 2.9(a) Real Property Leases
Schedule 2.9(b) Personal Property Leases
Schedule 2.9(d) Sales Commitments
Schedule 2.9(e) Contracts with Certain Persons
Schedule 2.9(h) Loan Agreements
Schedule 2.9(j) Other Material Contracts
Schedule 2.10(a) Real Property
Schedule 2.11(a) Accounts Receivable Schedule
Schedule 2.11(b) Accounts Receivable Aging
Schedule 2.13 Broker's or Finder's Fees
Schedule 2.14 Employee Benefit Plans
Schedule 2.15 Employment Compensation
Schedule 2.16 Labor Matters
Schedule 2.17(a) Provisions for Taxes
Schedule 2.17(b) Tax Returns Filed
Schedule 2.18(a) Insurance
Schedule 2.18(b) Worker's Compensation Claims
Schedule 2.19 Certain Changes
Schedule 2.20(a) Major Customers
Schedule 2.20(b) Major Suppliers
Schedule 2.23(a) Contracts with Affiliates
Schedule 2.23(c) Affiliate Obligations
Schedule 3.5 Authority of Buyer
Schedule 3.6 Litigation
Schedule 5.7 Selected Employees
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of the 2nd day of January, 2001 (the
"Agreement"), by and among O2WIRELESS SOLUTIONS, INC. (together with its
successors and assigns, "o2wireless"), O2WIRELESS, INC. (formerly Clear
Communications Group, Inc.), a Georgia corporation and a wholly owned subsidiary
of o2wireless ("Buyer"), and Xxxxxxx X. Xxxxx ("Shareholder"), being the sole
shareholder of YOUNG & ASSOCIATES, INC., a Nevada corporation, (the "Company").
WITNESSETH:
WHEREAS, the Company is engaged in the business of providing
consulting, site acquisition and development, construction management and
related services for the wireless telecommunications industry;
WHEREAS, the Shareholder owns all of the issued and outstanding shares
of the capital stock of the Company (the "Stock"); and
WHEREAS, the Shareholder desires to sell, and Buyer desires to
purchase, the Stock pursuant to this Agreement (the "Acquisition"); and
WHEREAS, it is the intention of the parties hereto that upon
consummation of the purchase and sale of the Stock pursuant to this Agreement,
Buyer shall own all of the issued and outstanding shares of capital stock of the
Company;
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto covenant and agree as follows:
ARTICLE 1
SALE OF STOCK
1.1 Sale of Stock. Subject to the terms and conditions of this
Agreement, and on the basis of the representations and warranties hereinafter
set forth, at the Closing (as hereinafter defined), the Shareholder shall sell,
assign, transfer and deliver the Stock to Buyer, and Buyer shall purchase the
Stock from the Shareholder. The certificates representing the Stock shall be
duly endorsed in blank, or accompanied by stock powers duly executed in blank by
the Shareholder, with all necessary transfer tax and other revenue stamps,
acquired at the Shareholder's expense, affixed and canceled. The Shareholder
agrees at any time after Closing, without further compensation, to cure any
deficiencies with respect to the endorsements of the certificates representing
the Stock, or with respect to the stock power accompanying any such
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certificates, other than those created by Buyer, and to take any other actions
reasonably necessary to fully and completely transfer ownership of the Stock to
Buyer free and clear of all liens, encumbrances, equities, restrictions, claims
and obligations, other than those created by Buyer.
1.2 Purchase Price. In full consideration for the purchase by
Buyer of the Stock, Buyer shall pay to the Shareholder the following (the
"Purchase Price"):
(a) Common Stock Consideration. 303,282 shares of
o2wireless' common stock, $.0001 par value per share, to be issued to
Seller at Closing; and
(b) Cash Consideration. $9,590,750 payable in immediately
available funds at Closing (the "Cash Consideration").
1.3 Adjustment to Purchase Price Relating to Section 338(h)(10)
Election. If Buyer decides to make a Section 338(h)(10) Election (as defined in
Section 4.4(a)) with respect to the purchase of the Stock, Buyer shall pay to
the Shareholder at the time specified below such amount as is necessary to place
the Shareholder in the same after-tax position as if no Section 338(h)(10)
Election had been made (the "Gross-Up Payment"). Except for penalties and
interest resulting from the acts or omissions of Shareholder, the Gross-Up
Payment shall include reimbursement for any penalties and interest that
Shareholder may incur as a result of the Section 338(h)(10) Election; provided,
however, the Gross-Up Payment shall not include any state income, franchise or
other taxes payable by the Company as a result of the Section 338(h)(10)
Election. Buyer agrees that the Buyer shall be solely responsible for the
payment of any state income, franchise or other taxes payable by the Company as
a result of the Section 338(h)(10) Election and Buyer further agrees that the
Gross-Up Payment shall take into account any amounts that may be deemed
additional taxable consideration to Shareholder as a result of these payments.
Shareholder shall give to Buyer written notice of the amount of the Gross-Up
Payment together with such documentation and other supporting information as the
Buyer may reasonably request to verify the amount of the Gross-Up Payment. Buyer
will make the required Gross-Up Payment upon the later of (i) April 1, 2001, or
(ii) thirty (30) days after receipt of the required notice and supporting
documentation from the Shareholder.
1.4 Time and Place of Closing. The parties shall cause the closing
of the transactions contemplated by this Agreement (the "Closing") to take place
at 10:00 a.m. on the date hereof, or such other date as the parties may mutually
agree (the date on which the Closing actually occurs, the "Closing Date"). The
place of the Closing shall be at the offices of Xxxxx, Xxxxxxxx & Xxxxxxx, LLP,
Promenade II, Suite 3100, 1230 Peachtree Street, N.E., Atlanta, Georgia, or such
other location as may be mutually agreed by the parties.
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1.5 Deliveries at Closing.
(a) Deliveries by the Shareholder. At the
Closing, the Shareholder shall deliver to Buyer:
(i) stock certificates or other instruments
representing all of the Stock, endorsed in blank or
accompanied by stock powers executed in blank, or such other
instruments of transfer as shall be necessary in order to
validly vest in Buyer good legal and beneficial title to the
Stock;
(ii) the Registration Rights Agreement
substantially in the form set forth in Exhibit A hereto, duly
authorized and executed by Shareholder;
(iii) an Investment Letter substantially in the
form set forth in Exhibit B hereto, executed by the
Shareholder (the "Investment Letter");
(iv) the Employment Agreement substantially in
the form set forth in Exhibit C hereto, executed by the
Shareholder (the "Employment Agreement");
(v) the Restrictive Covenants Agreement
substantially in the form set forth in Exhibit D hereto,
executed by the Shareholder (the "Restrictive Covenants
Agreement");
(vi) the employment agreements substantially in
the form set forth in Exhibit E hereto, executed by each of
the Selected Employees; and
(vii) such other certificates and documents as may
be required by the terms of this Agreement or as Buyer or its
counsel may reasonably request.
(b) Deliveries by Buyer. At the Closing, the Buyer shall
deliver to the Shareholder:
(i) the Purchase Price;
(ii) the Registration Rights Agreement, duly
authorized and executed by o2wireless and Buyer;
(iii) the Employment Agreement, executed by Buyer;
(iv) the Restrictive Covenants Agreement,
executed by Buyer;
(v) the employment agreements with the Selected
Employees, executed by Buyer; and
(vi) such other certificates and documents as may
be required by the terms of this Agreement or as the
Shareholder or their counsel may reasonably request.
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1.6 Restrictive Legend. The Common Stock Consideration to be
issued pursuant to this Agreement shall be "restricted securities," as defined
in Rule 144 under the Securities Act of 1933, as amended (the "Securities Act")
and each certificate representing any such securities shall bear any legend or
legends required by applicable state securities laws or otherwise, as well as a
legend substantially similar to the following:
"THE SECURITIES EVIDENCED HEREBY WERE ISSUED AND
SOLD WITHOUT REGISTRATION UNDER THE FEDERAL
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"),
OR THE SECURITIES LAWS OF ANY STATE, IN RELIANCE
UPON CERTAIN EXEMPTIVE PROVISIONS OF SAID ACTS. SAID
SECURITIES CANNOT BE SOLD OR TRANSFERRED UNLESS SUCH
SALE OR TRANSFER WOULD BE: (1) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT
OR PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION;
AND (2) IN A TRANSACTION WHICH IS EXEMPT UNDER
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH LAWS, OR
IN A TRANSACTION WHICH IS OTHERWISE IN COMPLIANCE
WITH SUCH LAWS."
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER
As an inducement to o2wireless and Buyer to enter into this Agreement
and to consummate the transactions contemplated hereby, and with the knowledge
that o2wireless and Buyer shall rely thereon, the Shareholder hereby represents
and warrants to o2wireless and Buyer, as of the date hereof, as set forth below.
2.1 Corporate.
(a) Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Nevada. The Company was incorporated on August 9, 1995 and has
elected to be taxed as an "S - corporation." No entity has ever merged
with or been consolidated into the Company.
(b) Corporate Power. The Company has all requisite
corporate power and authority to own, operate and lease its properties
and to carry on its business as and where such is now being conducted.
The Company is duly qualified or otherwise authorized as a foreign
corporation to transact business and is in good standing in each
jurisdiction in which a failure to be so qualified would have a
Material Adverse Effect (as defined in Section 2.19 hereof).
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(c) Subsidiaries. The Company does not own, directly or
indirectly, any capital stock or other equity securities of any
corporation or have any direct or indirect equity or other ownership
interest in any entity or business.
(d) Corporate Documents, Etc. Copies of the certificate
or articles of incorporation and bylaws of the Company, including any
amendments thereto, which have been delivered by the Company to Buyer
are true, correct and complete copies of such instruments as presently
in effect. The corporate minute book and stock records of the Company
which have been made available to Buyer for inspection are true,
correct and complete in all material respects and accurately reflect
all material corporate action binding on the Company as of the date
hereof, including all transactions and actions with respect to the
capital stock of the Company.
(e) Capitalization and Title to Stock. The authorized
capital stock of the Company is as set forth in Schedule 2.1(e). No
shares of such capital stock are issued and outstanding except for
shares identified in Schedule 2.1(e). All of the shares of capital
stock of the Company are owned of record and beneficially by the
Shareholder. All shares of capital stock identified on Schedule 2.1(e)
are validly issued, fully paid and nonassessable and the Shareholder
has full power and authority to convey, free and clear of all liens,
encumbrances, restrictions, claims and obligations of every kind
("Encumbrances"), all such shares of capital stock and, upon delivery
of such shares of capital stock, as provided in Section 1.5, Buyer will
acquire good and marketable title to the capital stock of the Company,
free and clear of all Encumbrances. Except as set forth on Schedule
2.1(e), there are no (i) securities convertible into or exchangeable
for the capital stock or other securities of the Company, (ii) options,
warrants or other rights to purchase or subscribe to capital stock or
other securities of the Company, or securities which are convertible
into or exchangeable for capital stock or other securities of the
Company, or (iii) contracts, commitments, agreements, understandings or
arrangements of any kind relating to the issuance, sale or transfer of
any capital stock or other equity securities of the Company, any such
convertible or exchangeable securities or any such options, warrants or
other rights. Schedule 2.1(e) sets forth, with respect to each issuance
of stock of the Company, the date of issuance, the purchaser(s), and
the consideration received therefor. Except as set forth on Schedule
2.1(e), no person or entity has, or ever has had, any ownership
interest in the assets, properties or business of the Company. There
are no options, contracts, commitments, agreements, understandings or
arrangements of any kind to purchase any equity ownership interest in
the Company or any of its properties, businesses or material assets.
2.2 Authorization; Validity. The execution and delivery of this
Agreement and the other agreements, instruments and documents contemplated
hereby (such other agreements, instruments and documents sometimes referred to
herein as the "Ancillary Instruments") and the performance of the obligations
set forth herein and therein, have been duly authorized by the Shareholder, and
no other or further corporate act on the part of the Shareholder is necessary
therefor. The Shareholder has approved the Acquisition. This Agreement has been
duly and validly executed and delivered by the Shareholder and assuming
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due authorization, execution and delivery of this Agreement and the Ancillary
Instruments by the Buyer and o2wireless, is, and when executed and delivered the
Ancillary Instruments to be executed and delivered by the Shareholder pursuant
hereto will be, legal, valid and binding obligations of him, enforceable in
accordance with their respective terms, except that such enforcement may be
subject to bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights generally, and the
remedy of specific performance and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
2.3 No Violation. No consent, authorization or approval of, or
declaration, filing or registration with, any governmental, administrative or
regulatory body, or any consent, authorization or approval of any other third
party, is necessary in order to enable the Shareholder to enter into and perform
his obligations under this Agreement and to consummate the transactions
contemplated hereby, and neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will:
(a) be in violation of the articles of incorporation or
bylaws of the Company or constitute a breach of the terms of any evidence of
indebtedness or agreement relating to the Company's business to which the
Company is a party;
(b) cause a default under any mortgage or deed of trust
or other lien, charge or encumbrance to which any asset of the Company or the
Stock is subject or under any contract relating to the Company's business to
which the Company is a party, or permit the termination of any such contract by
another person;
(c) result in the creation or imposition of any security
interest, lien, charge or other encumbrance upon any asset of the Company or the
Stock under any agreement or commitment to which the Company is bound;
(d) accelerate, or constitute an event entitling, or which
would, upon notice or lapse of time or both, entitle the holder of any
indebtedness of the Company to accelerate the maturity of any such indebtedness;
(e) conflict with or result in the breach of any writ,
injunction or decree of any court or governmental instrumentality binding on the
Company or the Shareholder; or
(f) violate any statute, law or regulation of any
jurisdiction known to Shareholder as such statute, law or regulation relates to
the properties or business of the Company.
2.4 Financial Statements. Attached as Schedule 2.4 are copies of
the unaudited balance sheet, and statement of income and retained earnings of
the Company as of and for the years ended December 31, 1999, 1998 and 1997 and
the unaudited balance sheet and statement of income and retained earnings of the
Company as of and for the period ended September 30, 2000 (together, the
"Company Statements"). The Company Statements (i) were prepared from
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the books and records of the Company, and (ii) except as set forth on Schedule
2.4, fairly present the financial condition of the Company as of the dates
thereof.
2.5 Absence of Undisclosed Liabilities. All material liabilities,
commitments or obligations of the Company with respect to the Company's business
(whether secured or unsecured and whether accrued, absolute, contingent, direct
or indirect or otherwise and whether due or to become due) are set forth or
adequately reserved against in the Company Statements, except for commercial
liabilities and obligations incurred since the date of the Company Statements in
the ordinary course of business and consistent with past practice and which will
not have a Material Adverse Effect and except as set forth on Schedule 2.5
hereto.
2.6 Title to Properties; Encumbrances.
(a) Merchantable Title. Except as set forth in Schedule
2.6(a), the Company has good and merchantable title to all of its assets,
businesses and properties used or useful in its business and necessary to permit
it to carry on its business as presently conducted, and with respect to real
property leased by the Company for use in its business, good and marketable
leasehold estates or lessee's interests, including, without limitation, all such
properties (tangible and intangible) reflected in the Company Statements (except
for inventory disposed of in the ordinary course of business since the date of
such Company Statements) free and clear of all mortgages, liens (statutory or
otherwise), security interests, claims, pledges, licenses, options to purchase
or use, conditional sales contracts, assessments, levies, or Encumbrances of any
nature whatsoever (collectively, "Liens"). None of the assets, businesses or
properties of the Company used or useful in the Company's businesses are subject
to any restrictions with respect to the transferability thereof and title
thereto will not be adversely affected in any way by the transactions
contemplated hereby other than as disclosed in Schedule 2.6(a).
(b) Condition. Except as set forth on Schedule 2.6(b),
all property and assets owned or utilized by the Company in the Company's
business are in good operating condition and repair (except such minor defects
as do not interfere with the use thereof in the conduct of normal operations).
2.7 Compliance with Laws.
(a) Compliance. Except as set forth on Schedule 2.7(a),
the Company (including all of its operations, practices, properties,
real or personal, owned or leased, and assets) is in compliance with
all applicable federal, state, local and foreign laws, ordinances,
orders, rules and regulations (collectively, "Laws") the violation of
which, if uncured, would have a Material Adverse Effect, including
without limitation, Laws applicable to the offer or sale of securities,
discrimination in employment, the Americans with Disabilities Act,
occupational safety and health, trade practices, competition and
pricing, building and sanitation, employment, retirement and labor
relations, product advertising and the Environmental Laws (as
hereinafter defined). The Company has not at any time owned any Real
Property (as hereinafter defined). Except as set forth in Schedule
2.7(a), the Company has not received notice of any violation or alleged
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violation of, or is subject to liability (whether accrued, absolute,
contingent, direct or indirect) for past or continuing violation of,
any Laws. To the knowledge of the Shareholder, all reports and returns
required to be filed by the Company with any governmental authority
have been filed, and were accurate and complete in all material
respects when filed. Without limiting the generality of the foregoing:
(i) the operation of the Company's business as
now conducted does not, nor does any condition resulting from
the actions of the Company existing at any of the facilities
in which the Company's business is conducted (collectively,
the "Facilities"), in any manner constitute a breach or
violation of any lease or other agreement to which the Company
is a party governing the use of such Facilities. Neither the
Company nor the Shareholder has received any notice of or
otherwise have any knowledge about any existing or threatened
claim that the operation of the Company's business as now
conducted or any condition resulting from the actions of the
Company existing at the Facilities allegedly constitutes a
nuisance or other tortious interference with the rights of any
person or persons in such a manner as to give rise to or
constitute the grounds for a suit, action, claim or demand by
any such person or persons seeking compensation or damages or
seeking to restrain, enjoin or otherwise prohibit any aspect
of the conduct of such businesses or the manner in which they
are now conducted;
(ii) the Company has made all required payments
to its unemployment compensation reserve accounts with the
appropriate governmental departments of the states where it is
required to maintain such accounts, and, to the knowledge of
the Shareholder, such accounts have a positive balance;
(iii) the Company, for the past three (3) years,
has not been required to file any reports under the federal
Occupational Safety and Health Act of 1970, as amended, or
under all other applicable health and safety laws and
regulations, except for reports, the failure to file which
would not, individually or in the aggregate, have a Material
Adverse Effect.
(b) Licenses and Permits. Except as set forth on Schedule
2.7(b), the Company does not require any licenses, permits, approvals,
authorizations, or consents from any governmental and regulatory
authorities for the conduct of the Company's business (as presently
conducted), or for the Company's operation of the Facilities as
currently operated. The Company (including its operations, properties,
whether owned or leased, and assets) (i) is and has been in material
compliance with all such permits and licenses (including professional
licenses), approvals, authorizations and consents applicable to the
conduct of the Company's business in the State of California, and (ii)
except for such items, the failure to obtain which would not,
individually or in the aggregate, have a Material Adverse Effect, is
and has been in material compliance with all such permits and licenses,
approvals, authorizations and consents applicable to the conduct of its
business outside of the State of California.
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(c) Environmental Matters. The applicable Laws relating
to pollution or protection of the environment, including Laws relating
to emissions, discharges, generation, storage, release or threatened
release of pollutants, contaminants, asbestos, lead-based paints,
chemicals or industrial, toxic, hazardous or petroleum or
petroleum-based substances or wastes ("Waste") into the environment
(including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Waste including, without limitation,
the Clean Water Act, the Clean Air Act, the Resource Conservation and
Recovery Act, the Toxic Substances Control Act and the Comprehensive
Environmental Response Compensation Liability Act ("CERCLA"), as
amended, and their state and local counterparts are herein collectively
referred to as the "Environmental Laws." Except as set forth on
Schedule 2.7(c), to the knowledge of the Shareholder, (i) the Company
is in compliance with all applicable Environmental Laws except where
such failure to comply would not have a Material Adverse Effect; (ii)
the Company has not received any written communication or notice that
alleges that the Company is not in compliance with applicable
Environmental Laws; and (iii) there is no civil, criminal or
administrative action, suit, demand, notice or demand letter, claim,
hearing, notice of violation, investigation or proceeding pending, or,
to the knowledge of the Shareholder, threatened, against the Company,
or to the knowledge of the Shareholder, any landlord of the Company,
relating in any way to the Environmental Laws.
2.8 Litigation. Except as set forth in Schedule 2.8, there is no
action, suit, arbitration proceeding, investigation or inquiry, pending before
any court, arbitrator or federal, state, foreign, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
or, to the knowledge of the Shareholder, threatened, against the Company or
their respective officers or directors (in their capacity as officers or
directors of the Company), business or assets. Except as set forth in Schedule
2.8, neither the Company, its business or assets is subject to any judgment,
order, writ or injunction of any court, arbitrator or federal, state, foreign,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality.
2.9 Contracts and Commitments.
(a) Real Property Leases. Except as set forth in Schedule
2.9(a), the Company is not a party to any leases of real property which
are used or useful in the Company's business.
(b) Personal Property Leases. Except as set forth in
Schedule 2.9(b), the Company is not a party to any leases of personal
property which are used or useful in the Company's business involving
consideration or other expenditure in excess of $25,000 per year or
involving performance over a period of more than twelve (12) months.
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(c) Purchase Commitments. The Company is not a party to
any purchase commitments for items or supplies for use in the Company's
business that require expenditures in excess of $25,000 per year.
(d) Customer Contracts. Except as set forth on Schedule
2.9(d), the Company is not a party to (i) any sales contracts or
commitments to customers with respect to the Company's business which
involve payments by or to the Company by any one customer (or group of
affiliated customers) in excess of $25,000, or (ii) any sales contracts
or commitments with respect to the Company's business except those made
in the ordinary course of business.
(e) Employment and Consulting Contracts. Except as set
forth on Schedule 2.9(e), the Company is not a party to any agreement,
understanding, contract or commitment (written or oral) with any
current or former officer, director, employee, agent, or consultant
with respect to their respective businesses that is not cancelable by
the Company on notice of not longer than thirty (30) days without
liability, penalty or premium of any nature or kind whatsoever.
(f) Power of Attorney. The Company has not given any
power of attorney with respect to the Company's business, which is
currently in effect, to any person, firm or corporation for any purpose
whatsoever.
(g) Collective Bargaining Agreements. The Company is not
a party to any collective bargaining agreements with any unions,
guilds, shop committees or other collective bargaining groups.
(h) Loan Agreements. Except as set forth in Schedule
2.9(h), the Company is not obligated under any loan agreement,
promissory note, letter of credit, or other evidence of indebtedness as
a signatory, guarantor or otherwise.
(i) Guarantees. The Company has not guaranteed the
payment or performance of any person, firm or corporation, agreed to
indemnify any person or act as a surety, or otherwise agreed to be
contingently or secondarily liable for the obligations of any person
other than agreements to indemnify the Company's officers, directors
and employees acting within the scope of their duties for the Company.
(j) Other Material Contracts. Except as described in
Schedule 2.9(j) or in any other Schedule, the Company is not a party to
any lease, contract or commitment of any nature involving consideration
or other expenditure by or to the Company in excess of $25,000 per
year, or involving performance over a period of more than twelve (12)
months, or which is otherwise individually material to the operations
of its business.
(k) No Default. The Company is not in default under any
lease, contract or commitment, nor has any event or omission occurred
which through the passage of time or the giving of notice, or both,
would constitute a material default thereunder or cause the
acceleration of any material obligations of the Company thereunder,
result in the
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creation of any Lien on any of the assets owned, used or occupied by
the Company in connection with the Company's business or give rise to
an automatic termination, or the right of discretionary termination
thereof by the other party to the contract. To the Shareholder's
knowledge, no third party is in default under any lease, contract or
commitment to which the Company is a party, nor has any event or
omission occurred which, through the passage of time or the giving of
notice, or both, would constitute a default thereunder or give rise to
an automatic termination, or the right of discretionary termination,
thereof.
2.10 Real Estate.
(a) Real Property. The Company does not own and has not
at any time during the course of its existence or during the course of
the existence of any predecessor owned any real property. Schedule
2.10(a) sets forth all real property used or occupied by the Company in
the conduct of the Company's business (the "Real Property"). Schedule
2.10(a) identifies the leases (oral or written) and all amendments
thereto and extensions thereof, under which the Company now uses any
such Real Property (the "Leases"), as well as any guarantors of
tenant's obligations under such Leases, true and correct copies of
which written Leases (or descriptions of oral Leases or arrangements)
have been made available to Buyer. There are no subtenants, tenants,
assignees, licensees, concessionaires or other entities which have a
right to occupy all or any portion of the Real Property located in San
Diego, California.
(b) Leases. All of the Leases, true and complete copies
of which have been delivered or made available to Buyer, are in effect
and the Company is not in default under or with respect to any material
term of the Leases, nor has the Company received or sent any notice of
any default under or with respect to any of the same. To the
Shareholder's knowledge, no other party to any of the Leases is in
material default under or with respect to any of the same.
2.11 Accounts Receivable. All accounts receivable of the Company
reflected on the Company Statements, other than as described in Schedule
2.11(a), and those arising since the date of the Company Statements, represent
sales actually made in the ordinary course of business; to the Shareholder's
knowledge, are collectible in the ordinary course of business; to the
Shareholder's knowledge, are subject to no counterclaim or set off; and to the
Shareholder's knowledge, are not in dispute. Schedule 2.11(b) contains an aged
schedule of accounts receivable with respect to the Company included in the
Company Statements and as of a date not more than twenty (20) days prior to the
date hereof. The Company is not owed any receivable by any customer as a result
of any retainage of funds by such customer pursuant to any installation
agreement or other contractual agreement with the Company which has been owed to
the Company for a period of time exceeding six months in length (to be
calculated as of the Closing Date).
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2.12 Trade Rights.
(a) Schedule 2.12 lists all Trade Rights (as defined
below) of the type described in clauses (i), (ii), (iii) and (iv) and,
to the extent practicable, clause (v) of Section 2.12 in which the
Company (with respect to the Company's business) now has any interest,
specifying whether such Trade Rights are owned, controlled, used or
held (under license or otherwise) by it, and also indicating which of
such Trade Rights are registered.
(b) All Trade Rights shown as registered in Schedule 2.12
have been properly registered, all pending registrations and
applications have been properly made and filed and all annuity,
maintenance, renewal and other fees relating to registrations or
applications are current.
(c) To the Shareholder's knowledge, the Company does not
require any Trade Rights that it does not already have to conduct the
Company's businesses as such is currently being conducted. To the
knowledge of the Shareholder, the Company is not infringing nor has
infringed any Trade Rights of another in the operation of the Company's
business, nor to the knowledge of the Shareholder is any other person
infringing the Trade Rights of the Company. Except as set forth on
Schedule 2.12, the Company has not granted any license or made any
assignment of any Trade Rights listed on Schedule 2.12, nor does the
Company pay any royalties or other consideration for the right to use
any Trade Rights of others. To the Shareholder's knowledge, there are
no inquiries, investigations, or claims or litigation, challenging or
threatening to challenge the right, title and interest of the Company
with respect to its continued use and right to preclude others from
using any of its Trade Rights. To the Shareholder's knowledge, all
Trade Rights of the Company are enforceable and in good standing, and
there are no equitable or statutory defenses to enforcement based on
any act or omission of the Company. The consummation of the
transactions contemplated hereby will not alter or impair any Trade
Rights owned or used by the Company.
(d) As used herein, the term "Trade Rights" shall mean
and include: (i) all United States, state and foreign trademark rights,
business identifiers, trade dress, service marks, trade names and brand
names, including all claims for infringement, and all registrations
thereof and applications therefor and all goodwill associated with the
foregoing accruing from the dates of first use thereof; (ii) all United
States and foreign copyrights, copyright registrations and copyright
applications, including all claims for infringement, and all other
rights associated with the foregoing and the underlying works of
authorship; (iii) all United States and foreign patents and patent
applications, including all claims for infringement and all
international proprietary rights associated therewith; (iv) all
contracts or agreements granting any right, title, license or privilege
under the intellectual property rights of any third party; and (v) all
inventions, mask works and mask work registrations, know-how,
discoveries, improvements, designs, trade secrets, shop and royalty
rights, employee and third party covenants and agreements respecting
confidentiality, intellectual property and non-competition (including
without limitation agreements executed by potential purchasers of the
Company's business, or any part thereof).
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2.13 Broker's or Finder's Fees. Except as set forth on Schedule
2.13, no agent, broker, person or firm acting on behalf of the Company or the
Shareholder is, or will be, entitled to any commission or broker's or finder's
fees from any of the parties hereto, or from any person controlling, controlled
by or under common control with any of the parties hereto, in connection with
any of the transactions contemplated herein.
2.14 Employee Benefit Plans.
(a) Disclosure. Schedule 2.14(a) sets forth all pension,
thrift, savings, profit sharing, retirement, incentive bonus or other bonus,
medical, dental, life, accident insurance, benefit, employee welfare,
disability, group insurance, stock purchase, stock option, stock appreciation,
stock bonus, executive or deferred compensation, hospitalization and other
similar fringe or employee benefit plans, programs and arrangements, and any
employment or consulting contracts, "golden parachutes," collective bargaining
agreements, severance agreements or plans, vacation and sick leave plans,
programs, arrangements and policies, including, without limitation, all
"employee benefit plans" (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), all employee manuals and all
written or binding oral statements of policies, practices or understandings
relating to employment, which are provided to, for the benefit of, or relate to,
any persons employed by the Company ("Company Employees"). The items described
in the foregoing sentence are hereinafter sometimes referred to collectively as
"Employee Plans/Agreements," and each individually as an "Employee
Plan/Agreement." True and correct copies of all the Employee Plans/Agreements,
including all amendments thereto, have heretofore been made available to Buyer.
No Employee Plan/Agreement is a "multi-employer plan" (as defined in Section 401
of ERISA), and the Company has never contributed or been obligated to contribute
to any such multi-employer plan.
(b) Prohibited Transactions. There have been no
"prohibited transactions" within the meaning of Section 406 or 407 of ERISA or
Section 4975 of the Internal Revenue Code of 1986 (the "Code") for which a
statutory or administrative exemption does not exist with respect to any
Employee Plan/Agreement, and no event or omission has occurred in connection
with which the Company or any of the Company's assets or any Employee
Plan/Agreement, directly or indirectly, could be subject to any liability under
ERISA or the Code which is reasonably likely to result in a Material Adverse
Effect.
(c) Payments and Compliance. With respect to each
Employee Plan/Agreement, all payments due from the Company to date have been
made and all amounts properly accrued to date as liabilities of the Company
which have not been paid have been properly recorded on its books and to the
extent they relate to employees employed as of the date thereof, are reflected
in the Company Statements.
(d) Post-Retirement Benefits. With respect to each
Employee Plan/Agreement which provides welfare benefits of the type described in
Section 3(1) of ERISA: (i) no such Employee Plan/Agreement provides medical
benefits with respect to current or former employees, directors or consultants
of the Company beyond their termination of employment, other than coverage
mandated by Sections 601-608 of ERISA and 4980B(f) of the
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Code; (ii) each such Employee Plan/Agreement has been administered in compliance
with Sections 601-608 of ERISA and 4980B(f) of the Code, except for such matters
of non-compliance as would not, individually or in the aggregate, have a
Material Adverse Effect; and (iii) no such Employee Plan / Agreement has
reserves, assets, surpluses or prepaid premiums.
(e) No Triggering of Obligations. The consummation of the
transactions contemplated by this Agreement will not (i) entitle any current or
former employee of the Company to severance pay, any payment pursuant to any
"golden parachute" or other agreement providing for payment to any employee upon
a change in control of the Company, unemployment compensation or any other
payment, except as expressly provided in this Agreement, (ii) accelerate the
time of payment or vesting, or increase the amount of compensation due to any
such employee or former employee or (iii) result in any prohibited transaction
described in Section 406 of ERISA or Section 4975 of the Code for which an
exemption is not available.
(f) Future Commitments. There are no announced plans or
legally binding commitments to create any additional Employee Plans/Agreements
or to amend or modify any existing Employee Plan/Agreement.
2.15 Employment Compensation. Schedule 2.15 contains a true and
correct list of all employees to whom the Company is paying compensation,
including bonuses and incentives for services rendered or otherwise, the annual
salary, average commission, or hourly wage compensation of each such employee,
and any bonus paid to each respective employee relating to services rendered
during the 1999 fiscal year.
2.16 Labor Matters. The Company is currently in compliance with all
applicable laws, rules and regulations relating to the employment of labor,
including those related to wages, hours and authorizations, except for such
matters of non-compliance as would not, individually or in the aggregate, have a
Material Adverse Effect. The Company has paid or caused to be paid all
compensation, including bonuses and accrued vacation pay, if any, due and
payable to its employees through the date hereof and will cause such amounts to
be paid through the Closing Date. Except as set forth in Schedule 2.16, within
the last five (5) years the Company has not experienced any labor disputes,
union organization attempts or any work stoppage due to labor disagreements.
Except to the extent set forth in Schedule 2.16, (i) there is no unfair labor
practice charge or complaint against the Company pending, or to the
Shareholder's knowledge, threatened; (ii) there is no labor strike, dispute,
request for representation, slowdown or stoppage actually pending, or to the
Shareholder's knowledge, threatened against or materially affecting the Company;
(iii) to the Shareholder's knowledge, no question concerning representation has
been raised or is threatened respecting the employees of the Company; and (iv)
there is no grievance which might have a Material Adverse Effect.
2.17 Tax Matters.
(a) Provision For Taxes. Except as set forth on Schedule
2.17(a), the provision made for taxes on the Company Statements is
sufficient for the payment of all
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xxxxxxx, xxxxx, xxxxxxx, county, local and other income, ad valorem,
excise, profits, franchise, occupation, property, payroll, sales, use,
gross receipts and other taxes (and any interest and penalties) and
assessments, whether or not disputed, for which the Company may be
liable at the date of such Company Statements and for all years and
periods prior thereto. Since the date of such Company Statements, the
Company has not incurred any taxes other than taxes incurred in the
ordinary course of business consistent in type and amount with past
practices.
(b) Tax Returns Filed. Except as set forth on Schedule
2.17(b), all federal, state, foreign, county, local and other tax
returns required to be filed by or on behalf of the Company as of the
date of this Agreement have been timely filed (or if filed late all
applicable penalties and interest have been paid) and when filed were
true and correct in all material respects, and the taxes shown as due
thereon have been paid. True and complete copies of the tax returns
filed by the Company for the three (3) most recent fiscal years have
been made available to Buyer. The Company has duly withheld and paid
all taxes which were required to have been withheld and paid relating
to amounts paid or owing to any employee, independent contractor,
creditor, shareholder or other third party.
(c) Tax Audits. The federal and state income tax returns
of the Company have not been audited by the Internal Revenue Service
("IRS") or any state taxing authorities and the Company has not
received from the Internal Revenue Service or from the tax authorities
of any state, county, local or other jurisdiction any notice of
underpayment of taxes or other deficiency which has not been paid nor
any objection to any return or report filed. There are outstanding no
agreements or waivers extending the statutory period of limitations
applicable to any tax return or report.
(d) S Corporation Status. The Company has been an
electing S corporation within the meaning of the Code at all times
since its incorporation, and will remain an S corporation through the
Closing Date.
(e) Section 338(h)(10) Election. The Company has not, in
the past ten (10) years, (A) acquired assets from another corporation
in a transaction in which the Company's tax basis for the acquired
assets was determined, in whole or in part, by reference to the tax
basis of acquired assets (or any other property) in the hands of the
transferor or (B) acquired the stock of any corporation which is a
qualified Subchapter S subsidiary under the Code.
(f) Other Tax Matters. The Company has not filed a
consent under Section 341(f) of the Internal Revenue Code, as amended
(the "Code") concerning collapsible corporations. The Company has not
made any payments, is not obligated to make any payments, and is not a
party to any agreement that could obligate it to make any payments that
will not be deductible under Section 280G of the Code. The Company has
not been a United States real property holding corporation within the
meaning of Section 897(c)(2) of the Code during the applicable period
specified in Section 897(c)(1)(A)(ii)
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of the Code. The Company is not a party to any tax allocation or
sharing agreement. The Company (i) has not been a member of an
affiliated group filing a consolidated federal income tax return (other
than a group the common parent of which was the Company) or (ii) has
liability for the taxes of any person or entity under Reg. 1.1502-6 (or
any similar provision of state, local, or foreign law), as a transferee
or successor, by contract or otherwise.
2.18 Insurance.
(a) Policies in Effect. Set forth in Schedule 2.18(a) is
a complete and accurate list of all policies of fire, liability,
product liability, workers compensation, health and other forms of
insurance presently in effect with respect to the business and
properties of the Company, true and correct copies of which have been
made available to Buyer. All such policies are valid, outstanding and
enforceable policies and provide insurance coverage for the properties,
assets and operations of the Company as set forth therein; and no such
policy (nor any previous policy) provides for or is subject to any
currently enforceable retroactive rate or premium adjustment, loss
sharing arrangement or other actual or contingent liability arising
wholly or partially out of events arising prior to the date hereof. The
Company has not been refused any insurance with respect to any aspect
of the operation of its business nor has its coverage been limited by
any insurance carrier to which it has applied for insurance or with
which it has carried insurance during the last three years. To the
knowledge of the Shareholder, the Company has duly and timely made all
material claims it has been entitled to make under each policy of
insurance. The Shareholder has no notice or knowledge of any claim by
the Company pending under any such policies as to which coverage has
been questioned, denied or disputed by the underwriters of such
policies. Except as set forth on Schedule 2.18(a), the Company has not
received any written notice from or on behalf of any insurance carrier
issuing any such policy that insurance rates therefor will hereafter be
substantially increased (except to the extent that insurance rates may
be increased for all similarly situated risks) or that there will
hereafter be a cancellation or termination of such policy or an
increase in a deductible (or an increase in premiums in order to
maintain an existing deductible) or non-renewal of any such policy.
(b) Workers' Compensation Coverage.
(i) Current Claims. Set forth separately in
Schedule 2.18(b) is (1) a list of all claims made for
work-related injuries or other work-related claims for which
the Company or its insurer has continuing obligations to any
current or former employee under any state workers'
compensation law or any policy of workers' compensation
insurance, including without limitation the obligation to pay
temporary or total disability benefits, medical benefits,
periods of open medical treatment which may require payments
of medical benefits in the future, or any other obligations
(the "Workers' Compensation Claims"), and (2) a list of all
the current or former employees of the Company who have or had
a Workers' Compensation Claim, including current or former
employees of the Company
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who have given notice of an injury or work-related claim which
has not yet resulted in a Workers' Compensation Claim in the
past twelve (12) months, including the date of the accident or
occurrence giving rise to such claim, the total payments made
to or on behalf of such current or former employee and, if
known, the date on which any obligations to each such employee
terminate.
(ii) Increased Risk or Premium. The Company has
never been denied workers' compensation insurance or been
placed in a high-risk or increased-risk pool or been
categorized under a similar rating system reflecting an
above-average incidence of work-related injuries for purposes
of determining the workers' compensation insurance premium.
2.19 Absence of Certain Changes. Except as and to the extent set
forth in Schedule 2.19 (or specifically required by the terms of this
Agreement), since the date of the Company Statements there has been no:
(a) Adverse Change. Material adverse change in the
financial condition, assets, liabilities or operations of the Company
(a "Material Adverse Effect");
(b) Damage. Material loss, damage or destruction, whether
covered by insurance or not, affecting the business or properties
(owned or leased) of the Company;
(c) Increase in Compensation. Increase in the
compensation, salaries or wages payable or to become payable to any
employee or agent of the Company (including, without limitation, any
increase or change pursuant to any bonus, pension, profit sharing,
retirement or other plan or commitment), other than changes in the
ordinary course of business consistent with past practices, or any
bonus or other employee benefit granted, made or accrued, except those
made in the ordinary course of business consistent with past practices;
(d) Labor Disputes. Labor dispute or disturbance, other
than routine labor union or individual grievances which are not
material to the business, financial condition or results of operations
of the Company;
(e) Commitments. Material commitment or transaction by
the Company which involve payments by the Company in excess of $25,000
(including, without limitation, any borrowing or capital expenditure)
other than in the ordinary course of business consistent with past
practice;
(f) Dividends. Except as disclosed in Schedule 2.19(f),
declaration, setting aside, or payment of any dividend or any other
distribution in respect of capital stock of the Company; any
redemption, purchase or other acquisition by the Company of any of its
capital stock, or any security relating thereto, including any options
or rights to purchase or acquire capital stock of the Company;
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(g) Disposition of Property. Sale, lease or other
transfer or disposition of any material properties or assets of the
Company used or useful in the Company's business, except in the
ordinary course of business;
(h) Indebtedness. Material indebtedness for borrowed
money incurred, assumed or guaranteed by the Company;
(i) Liens. Mortgage, pledge, Lien or Encumbrance made on
or affecting any of the assets of the Company;
(j) Amendment of Contracts. Entering into, amendment,
extension or termination by the Company of any material contract or
lease, or any waiver of material rights thereunder, other than in the
ordinary course of business;
(k) Payments, Loans and Advances. Any payment, loan or
advance (other than advances to employees in the ordinary course of
business for travel and entertainment in accordance with past practice)
to any person;
(l) Credit. Any change in the policies or practices of
the Company with respect to the Company's business and the granting of
credit;
(m) Payments to Affiliates. Payment to any Affiliate of
the Company. For purposes of this Agreement, the term "Affiliate" shall
mean: any organization or entity that directly, or indirectly, through
one or more intermediaries, controls, is controlled by, or is under
common control with, the Company; the Shareholder, officers and
directors of the Company; the spouse of any such person; any person who
would be the heir or descendant of any such person if he or she were
not living; and any entity in which any of the foregoing has a direct
or indirect interest, except through ownership of less than five
percent (5%) of the outstanding shares of any entity whose securities
are listed on a national securities exchange or traded in the national
over-the-counter market; or
(n) Status of Employees. Change in status or continuation
of employment of any employee identified in Section 2.15 of this
Agreement, other than changes occurring in the ordinary course of
business.
2.20 Major Customers and Suppliers.
(a) Major Customers. Schedule 2.20(a) contains a list of
the ten (10) largest customers of the Company for the most recent
fiscal year (determined on the basis of the total dollar amount of
revenues realized by the Company). Neither the Company nor the
Shareholder has received notice that any of the customers listed on
Schedule 2.20(a) will not continue to be customers after the Closing.
(b) Major Suppliers. Schedule 2.20(b) contains a list of
the ten (10) largest suppliers to the Company for the period beginning
on January 1, 1999 and ending September 30, 2000 (determined on the
basis of the total dollar amount of purchases).
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Neither the Company nor the Shareholder has received notice that any of
the suppliers listed on Schedule 2.20(b) will not continue to be
suppliers to the Company after the Closing.
2.21 Securities Laws Matters. The Shareholder who receives the
Common Stock Consideration (the "Securities") pursuant to this Agreement will
acquire such Securities for investment for his own account, not on behalf of
others and not with a view to resell or otherwise distribute such Securities.
The Shareholder acknowledges that the Securities, at the time of issuance, shall
not have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), or under any state securities laws, but shall enjoy the
registration rights set forth in the Registration Rights Agreement attached
hereto as Exhibit A. Until the Securities are registered under the Registration
Rights Agreement, or unless an exemption from registration is available, the
Securities may not be sold, transferred or disposed of and the Shareholder must
bear the risk of an investment in the Securities for an indefinite period of
time. The financial condition of the Shareholder is currently adequate to bear
the substantial risk of an investment in the Securities. The Shareholder has
sufficient knowledge and experience in investment and business matters to
understand the economic risk of such an investment and the risk involved in a
commercial enterprise such as that of o2wireless. The Shareholder is a bona fide
resident of California, and all communications and information have been
directed to him and have been received in such place of residence. The
Shareholder has had the opportunity to ask questions of, and receive answers
from, officers of o2wireless concerning o2wireless and the Securities and to
obtain any additional information which the Shareholder reasonably requested.
The Shareholder has been provided copies of (i) o2wireless' Registration
Statement on Form S-1, as amended, including the final prospectus as filed with
the Securities and Exchange Commission on August 16, 2000 pursuant to Rule
424(b) of the Securities Act, and (ii) o2wireless' Quarterly Report on Form 10-Q
for the quarter ended September 30, 2000 (the "o2wireless SEC Documents"). The
Shareholder shall, at or prior to the Closing, complete and deliver to Buyer an
investment letter substantially in the form attached hereto as Exhibit B.
2.22 Power of Attorney. The Shareholder has not given any power of
attorney with respect to the Stock, which is currently in effect, to any person,
firm or corporation for any purpose whatsoever.
2.23 Affiliates' Relationships.
(a) Contracts With Affiliates. All leases, contracts,
agreements or other arrangements between the Company and any Affiliate
are summarized on Schedule 2.23(a).
(b) No Adverse Interests. No Affiliate has any direct or
indirect interest in (i) any entity which does business with the
Company or is competitive with the Company's business, or (ii) any
property, asset or right which is used by the Company in the conduct of
the Company's business.
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(c) Obligations. All obligations of any Affiliate to the
Company, and all obligations of the Company to any Affiliate, are
listed on Schedule 2.23(c).
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF O2WIRELESS and BUYER
o2wireless and Buyer hereby, jointly and severally, represent and
warrant to the Shareholder the following, as of the date hereof and as of the
Closing Date:
3.1 Due Incorporation and Qualification. Each of o2wireless and
Buyer is a corporation duly organized, validly existing and in good standing
under the laws of its state of incorporation, and has the corporate power to
carry on its business as and where such is now being conducted and to own or
lease its properties and assets as now owned, leased or operated by it. Each of
o2wireless and Buyer is duly qualified or otherwise authorized as a foreign
corporation to transact business and is in good standing in each jurisdiction in
which a failure to be so qualified would have a material adverse effect on the
business of o2wireless or Buyer.
3.2 Authorization. Each of o2wireless and Buyer has full corporate
power and authority under its respective articles of incorporation and bylaws,
and the Board of Directors of each of o2wireless and Buyer has taken all
necessary corporate action to authorize o2wireless and Buyer to execute and
deliver this Agreement and the Ancillary Instruments and to consummate the
transactions contemplated hereby, and assuming the due authorization, execution
and delivery of this Agreement by the Shareholder, this Agreement and the
Ancillary Instruments constitute the valid and binding obligation of o2wireless
and Buyer, enforceable in accordance with their terms, except that such
enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to creditors' rights
generally and the remedy of specific performance and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
3.3 Capitalization. The authorized capital stock of o2wireless
consists of 100,000,000 shares of common stock, $.0001 par value per share, of
which 26,900,804 shares were issued and outstanding as of November 1, 2000,
100,000 shares of Class A Preferred Stock, $.01 par value per share, none of
which are outstanding, and 10,000,000 shares of serial preferred stock, no par
value per share, none of which are outstanding. The authorized capital stock of
Buyer consists of 15,000,000 shares, $.0001 par value per share, of which 100
shares are issued and outstanding and all of which are owned beneficially and of
record by o2wireless, 50,000 shares of Class A Preferred Stock, $.01 par value
per share, none of which are outstanding, and 5,000,000 shares of serial
preferred stock, no par value, none of which are outstanding. The shares of
o2wireless common stock to be issued in connection with this Agreement, will,
upon such issuance and delivery to the recipients designated under the terms of
this Agreement, be duly authorized, validly issued, fully paid and
non-assessable, and free of any preemptive rights.
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3.4 Non-Contravention. Neither the execution and delivery of this
Agreement or the other agreements contemplated hereby nor the consummation of
the transactions contemplated hereby does or will violate, result in a breach of
any provision of, constitute a default under, result in the termination of or
permit any third party to terminate (with or without notice, lapse of time or
pursuant to any legal or equitable principle) or accelerate the performance
required on the part of o2wireless or Buyer by the terms of, or accelerate the
maturity of or require the prepayment of any indebtedness of o2wireless or Buyer
under, any judgment, order, decree, material agreement or instrument to or by
which o2wireless or Buyer or any of their assets is subject or bound.
3.5 Authority of Buyer. Except as set forth on Schedule 3.5, no
consent, authorization or approval of, or declaration, filing or registration
with, any governmental, administrative or regulatory body or third party, is
necessary in connection with the performance of o2wireless' and Buyer's
obligations under this Agreement and the Ancillary Instruments and neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will:
(a) be in violation of the articles of incorporation or
bylaws of o2wireless or the Buyer or constitute a breach of the terms of any
evidence of indebtedness or agreement relating to o2wireless' or the Buyer's
business to which either o2wireless or the Buyer is a party;
(b) cause a default under any mortgage or deed of trust
or other lien, charge or encumbrance to which any asset of o2wireless or the
Buyer or the Stock is subject or under any contract relating to o2wireless' or
the Buyer's business to which o2wireless or the Buyer is a party, or permit the
termination of any such contract by another person;
(c) accelerate, or constitute an event entitling, or
which would, upon notice or lapse of time or both, entitle the holder of any
indebtedness of o2wireless or the Buyer to accelerate the maturity of any such
indebtedness;
(d) conflict with or result in the breach of any writ,
injunction or decree of any court or governmental instrumentality binding on
o2wireless or the Buyer; or
(e) violate any statute, law or regulation of any
jurisdiction known to o2wireless or Buyer as such statute, law or regulation
relates to the properties or business of o2wireless or the Buyer.
3.6 Litigation. Except as set forth in Schedule 3.6, there are no
claims, actions, suits, proceedings or investigations pending or, to the
knowledge of Buyer, threatened by or against o2wireless or Buyer, at law or in
equity or before or by any federal, state, municipal, foreign or other
governmental department, commission, board, agency, instrumentality or authority
which, individually or in the aggregate, is reasonably likely to have a Material
Adverse Effect on o2wireless or the Buyer taken as a whole.
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3.7 Broker's or Finder's Fees. No agent, broker, person or firm
acting on behalf of o2wireless or Buyer is, or will be, entitled to any
commission or broker's or finder's fees from any of the parties hereto, or from
any person controlling, controlled by or under common control with any of the
parties hereto, in connection with any of the transactions contemplated herein.
3.8 SEC Reports and Financial Statements. o2wireless has filed
with the Securities and Exchange Commission ("SEC") all material forms,
statements, reports and documents (including all exhibits, amendments and
supplements thereto) required to be filed by it under the Securities Act and the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations thereunder, all of which were true and correct in all material
respects as of their filing and complied in all material respects with all
applicable requirements of the appropriate acts and the rules and regulations
thereunder. The audited consolidated financial statements and unaudited interim
consolidated financial statements of o2wireless included in such reports (the
"o2wireless Financial Statements") have been prepared in accordance with GAAP
(except as may be indicated therein or in the notes thereto) and fairly present
the financial position of o2wireless and its subsidiaries on a consolidated
basis as of the dates thereof and the results of their operations and changes in
financial position for the periods then ended, subject, in the case of the
unaudited interim financial statements, to normal year-end and audit adjustments
and any other adjustments described therein.
3.9 Absence of Certain Changes. Except as disclosed in the
o2wireless SEC Documents, since September 30, 2000, there has not occurred: (i)
any event, change or effect (including the incurrence of any liabilities of any
nature, whether or not accrued, contingent or otherwise) having or, which would
be reasonably likely to have, in the aggregate, a Material Adverse Effect on
o2wireless and Buyer taken as a whole; (ii) any declaration, setting aside or
payment of any distribution (whether in cash, shares or property) with respect
to the equity interests of o2wireless or Buyer; or (iii) any change by
o2wireless or Buyer in accounting principles or methods, except for any such
change required by reason of a change in GAAP.
3.10 No Undisclosed Liabilities.Except (i) to the extent disclosed
in the o2wireless SEC Documents and (ii) for liabilities and obligations
incurred in the ordinary course of business consistent with past practice, since
September 30, 2000, neither o2wireless nor Buyer has incurred any liabilities or
obligations of any nature, whether or not accrued, contingent or otherwise, that
have, or would be reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on o2wireless and Buyer taken as a whole.
3.11 Compliance with Law.o2wireless and Buyer have complied in all
material respects with all laws, statutes, regulations, rules, ordinances and
judgments, decrees, orders, writs and injunctions, of any court or governmental
entity relating to any of the property owned, leased or used by them, or
applicable to their business, except to the extent that any such non-compliance
would not have a Material Adverse Effect on o2wireless and Buyer taken as a
whole.
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ARTICLE 4
COVENANTS
4.1 Third Party Consents. The Shareholder agrees to use its best
efforts to obtain such consents and approvals as may be required from parties to
material contracts or other agreements with the Company in order to prevent the
Company from suffering a Material Adverse Effect as a result of the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby, provided that the Shareholder shall not be required to make
any monetary payments to such parties in connection with obtaining such consents
and approvals. Buyer agrees to provide to the Shareholder such assistance and
information as may be required to obtain the consents and approvals referred to
above. Notwithstanding anything in this Agreement to the contrary, this
Agreement shall not constitute an agreement by the Company to assign, or Buyer
to assume and agree to pay, perform or otherwise discharge, any material
contracts or other agreements if an attempted assignment or assumption thereof
without the consent of a third person would constitute a breach thereof, unless
and until such consent is obtained.
4.2 Securities Law Matters. The Shareholder agrees not to sell,
transfer, convey or otherwise distribute the Securities received pursuant to
this Agreement over which such Shareholder has direct or indirect control
without registration under the Securities Act and applicable federal and state
securities laws, except pursuant to an exemption from registration thereunder
reasonably acceptable to and approved by legal counsel to Buyer.
4.3 Attainment of Tax Clearance Certificates. The Shareholder
shall obtain tax clearance certificates for the Company as requested by Buyer.
4.4 Tax Matters.
(a) Section 338(h)(10) Election. At the Buyer's option,
the Company and the Shareholder will join with the Buyer in making an
election under Section 338(h)(10) of the Code (and any corresponding
election under applicable state, local or foreign tax law) with respect
to the purchase and sale of the Stock hereunder (a "Section 338(h)(10)
Election"). The Shareholder will include any income, gain, loss,
deduction or other tax item resulting from the 338(h)(10) Election on
his tax returns to the extent required by applicable law.
(b) Allocation of Purchase Price. Buyer, the Company and
the Shareholder agree that the Purchase Price and the liabilities of
the Company (plus other relevant items) will be allocated to the assets
of the Company for all purposes (including tax and financial
accounting) as mutually agreed by Buyer and the Shareholder. Buyer, the
Company and the Shareholder will file all tax returns (including
amended returns and claims for refund) and information reports in a
manner consistent with such allocation schedule.
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(c) Tax Periods Ending on or before the Closing Date.
Buyer shall prepare or cause to be prepared and file or cause to be
filed all tax returns for the Company for all periods ending on or
prior to the Closing Date which are filed after the Closing Date. Buyer
shall permit the Shareholder to review and comment on each such tax
returns described in the preceding sentence prior to filing and shall
make such revisions to such tax returns as are reasonably requested by
the Shareholder. To the extent permitted by applicable law, the
Shareholder shall include any income, gain, loss, deduction or other
tax items for such periods on his tax returns in a manner consistent
with the Schedule K-1s furnished by the Company to the Shareholder for
such periods. The Shareholder shall reimburse Buyer for any taxes of
the Company with respect to such periods within fifteen (15) days after
payment by Buyer or the Company of such taxes to the extent such taxes
are not reflected in the reserve for tax liability (rather than any
reserve for deferred taxes established to reflect timing differences
between book and tax income) shown on the face of the September 30
Balance Sheet, provided, however, the Shareholder shall not be required
to reimburse Buyer for (i) any taxes due as a result of the operations
of the Company from September 30 through the Closing Date, (ii) any
taxes due as a result of the Section 338(h)(10) Election; or (iii) the
state income and franchise taxes set forth on Schedule 2.4.
(d) Tax Periods Beginning Before and Ending After the
Closing Date. Buyer shall prepare or cause to be prepared and file or
cause to be filed any tax returns of the Company for tax periods which
begin before the Closing Date and end after the Closing Date. The
Shareholder shall pay to Buyer within fifteen (15) days after the date
on which taxes are paid with respect to such periods an amount equal to
the portion of such taxes which relates to the portion of such taxable
period ending on the Closing Date to the extent such Taxes are not
reflected in the reserve for tax liability (rather than any reserve for
deferred Taxes established to reflect timing differences between book
and tax income) shown on the face of the September 30 Balance Sheet,
provided, however, the Shareholder shall not be required to reimburse
Buyer for (i) any taxes due as a result of the operations of the
Company from September 30 through the Closing Date, (ii) any taxes due
as a result of the Section 338(h)(10) Election; or (iii) the state
income and franchise taxes set forth on Schedule 2.4. For purposes of
this Section 4.4(d), in the case of any taxes that are imposed on a
periodic basis and are payable for a taxable period that includes (but
does not end on) the Closing Date, the portion of such tax which
relates to the portion of such taxable period ending on the Closing
Date shall (x) in the case of any taxes other than taxes based upon or
related to income or receipts, be deemed to be the amount of such tax
for the entire taxable period multiplied by a fraction the numerator of
which is the number of days in the taxable period ending on the Closing
Date and the denominator of which is the number of days in the entire
taxable period, and (y) in the case of any tax based upon or related to
income or receipts be deemed equal to the amount which would be payable
if the relevant taxable period ended on the Closing Date. Any credits
relating to a taxable period that begins before and ends after the
Closing Date shall be taken into account as though the relevant taxable
period ended on the Closing Date. All determinations necessary to give
effect to the foregoing allocations shall be made in a manner
consistent with prior practice of the Company.
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(e) Cooperation on Tax Matters. Each of the Buyer, the
Company and the Shareholder shall cooperate fully, as and to the extent
reasonably requested by the other party, in connection with the filing
of tax returns pursuant to this Section 4.4 and in connection with any
audit, litigation or other proceeding with respect to taxes. Such
cooperation shall include the retention and (upon the request of any
other party) the provision of records and information which are
reasonably relevant to any such audit, litigation or other proceeding
and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder. The Shareholder and the Buyer agree (i) to retain all books
and records with respect to tax matters pertinent to the Company
relating to any taxable period beginning before the Closing Date until
the expiration of the statute of limitations (and, to the extent
notified by Buyer or the Company, any extensions thereof) of the
respective taxable periods, and to abide by all record retention
agreements entered into with any taxing authority, and (ii) to give the
other party and the Company reasonable written notice prior to
transferring, destroying or discarding any such books and records and,
if the Buyer or the Company so requests, the Shareholder shall allow
the Buyer to take possession of such books and records in its control.
Buyer and the Shareholder further agree to use their reasonable best
efforts to obtain, upon request, any certificate or other document from
any governmental authority or any other person or entity as may be
necessary to mitigate, reduce or eliminate any tax that could be
imposed (including, without limitation, with respect to the
transactions contemplated hereby).
4.5 Employee Options. On January 2, 2001, o2wireless shall grant
incentive stock options to the individuals listed on Schedule 4.5 hereto
pursuant to the o2wireless 1998 Stock Option Plan to purchase the number of
shares of o2wireless common stock indicated next to their name, pursuant to the
terms and conditions of individual stock option agreements as approved by the
Stock Option Committee of the Board of Directors of o2wireless.
4.6 Proceeds from Criminal Proceedings. The Buyer shall, upon
receipt by the Company of proceeds from any sale of assets belonging to Mr.
Xxxxxxx Xxxx in criminal proceedings against Xx. Xxxx in relation to Xx. Xxxx'x
service to the Company, remit the amount of such proceeds to Shareholder within
thirty (30) days of the receipt of such proceeds.
4.7 Registration Statement on Form S-8. Within one (1) year from
the date of Closing, o2wireless shall file a Registration Statement on Form S-8
with the Securities and Exchange Commission to register the shares of o2wireless
common stock to be issued pursuant to the Bonus Plan to be established by
o2wireless pursuant to Section 6.10 hereof.
ARTICLE 5
CONDITIONS PRECEDENT TO OBLIGATION OF BUYER TO CLOSE
The obligations of o2wireless and Buyer to complete the Closing is
subject to the fulfillment on or prior to the Closing Date of the following
conditions, any of which may be waived by o2wireless and Buyer only in writing:
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5.1 Consent of Wachovia Bank, N.A., First Union National Bank and
Underwriters. Buyer shall have received the consent of each of (i) Wachovia
Bank, N.A., (ii) First Union National Bank, and (iii) Chase Securities Inc., on
behalf of the underwriters set forth on Schedule I to the Underwriting Agreement
entered into by o2wireless in connection with its initial public offering, to
enter into this Agreement and the transactions contemplated by this Agreement.
5.2 Representations and Covenants. The representations and
warranties of the Shareholder contained in this Agreement shall be true and
correct in all material respects on and as of the Closing Date. The Shareholder
shall have performed and complied with all covenants and agreements (including,
without limitation, those contained in Article 4) required by this Agreement to
be performed or complied with by the Shareholder on or prior to the Closing
Date.
5.3 Litigation. No action, suit or proceeding shall have been
instituted before any court or governmental or regulatory body, or instituted or
threatened by any governmental or regulatory body, to restrain or prevent the
carrying out of the transactions contemplated by this Agreement or to seek
damages in connection with such transactions, that has or could reasonably be
expected to have, in the opinion of the attorneys of Buyer, a Material Adverse
Effect.
5.4 Good Standing Certificates, Etc. The Shareholder shall have
delivered all such certificates, documents or instruments with respect to the
Company's corporate existence and authority as Buyer's counsel may have
reasonably requested prior to the Closing Date.
5.5 Consents. The Shareholder shall have obtained and delivered to
Buyer such third party consents as are required to effect the transactions
contemplated hereby.
5.6 Employment and Restrictive Covenants Agreements. Buyer shall
have received the Employment Agreement and Restrictive Covenants Agreement
specified in Section 1.5 hereto, executed by the parties to be bound thereby.
5.7 Agreements With Key Employees. Buyer shall have received an
employment agreement, executed by the parties to be bound thereby other than the
Buyer or o2wireless, from the Selected Employees listed on Schedule 5.7 of this
Agreement (the "Selected Employees").
5.8 Release Agreement. The Shareholder shall have executed and
delivered to the Company the Release Agreement substantially in the form
attached hereto as Exhibit F.
5.9 Governmental Permits and Approvals. All permits and approvals
from any governmental or regulatory body required for the lawful consummation of
the Closing shall have been obtained.
5.10 Registration Rights Agreement. Buyer shall have received the
registration Rights Agreement, executed by the parties to be bound thereby other
than the Buyer or o2wireless.
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5.11 Opinion of Counsel to the Shareholder. Buyer shall have
received an opinion of counsel to the Shareholder, dated the Closing Date, in
form and substance reasonably satisfactory to Buyer, substantially to the effect
set forth in Exhibit G hereto.
5.12 Investment Letter. Buyer shall have received the Investment
Letter, executed by the Shareholder.
5.13 Other Documents. The Shareholder and the Company shall have
delivered all other documents, instruments or writings required to be delivered
to Buyer at or prior to the Closing pursuant to this Agreement and such other
certificates of authority (including good standing certificates), documents,
instruments or writings as Buyer may reasonably request.
ARTICLE 6
CONDITIONS PRECEDENT TO OBLIGATION OF THE SHAREHOLDER TO CLOSE
The obligation of the Shareholder to complete the Closing is subject to
the fulfillment, on or prior to the Closing Date, of the following conditions,
any of which may be waived by the Shareholder only in writing:
6.1 Litigation. No action, suit or proceeding shall have been
instituted before any court or governmental or regulatory body, or instituted or
threatened by any governmental or regulatory body, to restrain or prevent the
carrying out of the transactions contemplated by this Agreement or to seek
damages in connection with such transactions, that has or could reasonably be
expected to have, in the opinion of the attorneys of the Shareholder, a
materially adverse effect on the assets, properties, business, operations or
financial condition of o2wireless or Buyer.
6.2 Representations and Warranties. The representations and
warranties of Buyer contained in this Agreement shall be true and correct in all
material respects on and as of the Closing Date. Buyer shall have performed and
complied with all covenants and agreements (including, without limitation, those
contained in Article 4) required by this Agreement to be performed or complied
with by o2wireless or Buyer on or prior to the Closing Date.
6.3 Governmental Permits and Approvals. All permits and approvals
from any governmental or regulatory body required for the lawful consummation of
the Closing shall have been obtained.
6.4 Resolutions. There shall have been delivered to the
Shareholder a copy of the resolutions duly adopted by the board of directors of
each of o2wireless and Buyer, and certified accurate by an executive officer of
each of o2wireless and Buyer as of the Closing Date, authorizing and approving
the execution and delivery by o2wireless and Buyer of this Agreement and the
consummation by o2wireless and Buyer of the transactions contemplated hereby.
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6.5 Good Standing Certificates, Etc. Each of o2wireless and Buyer
shall have delivered all such certified resolutions, certificates, documents or
instruments with respect to o2wireless' and Buyer's corporate existence and
authority as the Shareholder's counsel may have reasonably requested prior to
the Closing Date.
6.6 Employment and Restrictive Covenants Agreement. Shareholder
shall have received the Employment Agreement and the Restrictive Covenants
Agreement with Xxxxxxx X. Xxxxx specified in Section 1.5 hereto executed by the
parties to be bound thereby.
6.7 Registration Rights Agreement. Shareholder shall have received
the Registration Rights Agreement executed by the parties to be bound thereby.
6.8 Opinion of Counsel to Buyer and o2wireless. Shareholder shall
have received an opinion of counsel of o2wireless and Buyer, dated the Closing
Date, in form and substance reasonably satisfactory to Shareholder,
substantially to the effect set forth in Exhibit H hereto.
6.9 Other Documents. Each of o2wireless and Buyer shall have
delivered all other documents, instruments or writings required to be delivered
to the Shareholder at or prior to the Closing pursuant to this Agreement and
such other certificates of authority (including good standing certificates),
documents, instruments or writings as the Shareholder may reasonably request.
6.10 Establishment of Bonus Plan for Company Employees. On or
before the Closing Date, o2wireless shall have established a bonus plan (the
"Bonus Plan") for the benefit of employees of the Company in the form attached
hereto as Exhibit I providing for the issuance of 195,264 shares of o2wireless
common stock and payment of $1,456,250 in cash as deferred compensation to such
employees, with the effectiveness of the Bonus Plan being contingent upon the
Closing.
ARTICLE 7
INDEMNIFICATION
For purposes of this Article 7, it is agreed and understood that the
Buyer shall not obtain recovery, nor shall the Shareholder be liable, more than
one time or under more than one section of this Agreement for the same
underlying claim or breach.
7.1 Survival. The representations and warranties contained in this
Agreement shall survive the Closing until the expiration of twelve (12) months
following the Closing (the "Limitations Period"), provided, however, that (a)
the representations and warranties of the Shareholder contained in Section
2.1(e) shall survive the Closing indefinitely and (b) the representations and
warranties of the Shareholder with respect to tax matters set forth in Section
2.17 of this Agreement shall survive for the period of time equal to the statute
of limitations applicable to such matter or matters.
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7.2 Indemnification by the Shareholder. The Shareholder shall
indemnify, defend and hold harmless Buyer (which term shall include, for
purposes of this Article 7, Buyer's successors, assigns, directors, officers,
employees and agents) against any and all losses, damages, deficiencies, suits,
claims, demands, judgments, costs, expenses (including reasonable attorney's
fees incurred in any matter subject to this provision or incurred in the
enforcement of this provision) or other liabilities ("Losses") resulting from,
arising from, or relating to (i) any breach of a representation or warranty of
the Shareholder contained in Article 2 of this Agreement (but only if such
indemnity is sought during the Limitations Period), (ii) any failure by the
Shareholder to perform or comply with any agreement or obligation contained in
this Agreement, (iii) any of the matters described on Schedule 2.8 (Litigation)
or on Schedule 2.13 (Broker's or Finder's Fees), or (iv) the assertion by any
person or entity that such person has or had any rights with respect to the
Stock purchased pursuant to this Agreement, including consideration payable with
respect to the Stock, which assertion results in a successful and proven claim
by such third party against Buyer.
7.3 Indemnification by Buyer. Buyer and o2wireless, jointly and
severally, shall indemnify and hold harmless the Shareholder against any and all
Losses resulting from, arising from, or relating to (i) any breach of a
representation or warranty of Buyer or o2wireless contained in Article 3 of this
Agreement (but only if such indemnity is sought during the Limitations Period),
and (ii) any failure by Buyer or o2wireless to perform or comply with any
agreement or obligation contained in this Agreement.
7.4 Limitations of Claims.
(a) Except for Losses that have resulted from a breach of
the representations and warranties contained in Section 2.17, no
indemnification pursuant to this Article 7 shall be available to any
party with respect to a breach of representation or warranty until the
aggregate of all Losses exceeds $50,000, provided, however, that
thereafter claims may be made against the indemnifying party for the
full aggregate amount of such Losses, without deduction of any such
threshold amount.
(b) Notwithstanding anything to the contrary in this
Agreement, except for indemnification from the Shareholder pursuant to
Section 7.2(iii) and indemnification with respect to any Losses that
have resulted proximately from (i) the fraud or willful breach of
either party, or (ii) a breach of the representations and warranties by
the Shareholder contained in Section 2.1(e), the aggregate
indemnification to be provided by any Indemnifying Party pursuant to
this Article 7 shall not exceed $5,000,000 (the "Cap Amount").
7.5 Procedures.
(a) A party seeking indemnification pursuant to Sections
7.2 or 7.3 (an "Indemnified Party") shall give prompt notice to the
party from whom such indemnification is sought (the "Indemnifying
Party") of the assertion of any claim or assessment, or the
commencement of any action, suit, audit or proceeding, by a third
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party in respect of which indemnity may be sought hereunder (a "Third
Party Claim") and will give the Indemnifying Party such information
with respect thereto as the Indemnifying Party may reasonably request,
but no failure to give such notice shall relieve the Indemnifying Party
of any liability hereunder (except to the extent the Indemnifying Party
has suffered actual prejudice thereby). The Indemnifying Party shall
have the right, exercisable by written notice (the "Notice") to the
Indemnified Party within thirty (30) days of receipt of notice from the
Indemnified Party of the commencement or assertion of any Third Party
Claim, to assume the defense of such Third Party Claim, using counsel
selected by the Indemnifying Party and reasonably acceptable to the
Indemnified Party. Should the Indemnifying Party so elect to assume the
defense of a Third Party Claim, the Indemnifying Party shall be deemed
to have irrevocably accepted the matter as a claim subject to
indemnification pursuant to this Article 7, and provided that the
Indemnifying Party thereafter diligently and continuously pursues the
defense of the Third Party Claim, the Indemnifying Party shall not be
liable to the Indemnified Party for legal expenses subsequently
incurred by the Indemnified Party in connection with the defense
thereof. If the Indemnifying Party shall fail to assume the defense of
the Third Party Claim within such thirty (30) day period, or
subsequently fails to diligently and continuously pursue the defense of
the Third Party Claim, the Indemnified Party shall have the right to
undertake the defense of such Third Party Claim on behalf of the
Indemnifying Party. In the event the Indemnifying Party elects to
assume the defense of any such Third Party Claim, the Indemnified Party
shall not admit any liability with respect to, or settle, compromise or
discharge such Third Party Claim without the Indemnifying Party's prior
written consent.
(b) The Indemnifying Party or the Indemnified Party, as
the case may be, shall in any event have the right to participate, at
its own expense, in the defense of any Third Party Claim which the
other is defending.
(c) The Indemnifying Party, if it shall have assumed the
defense of any Third Party Claim in accordance with the terms hereof,
shall have the right, upon five (5) days' prior written notice to the
Indemnified Party, to consent to the entry of judgment with respect to,
or otherwise settle such Third Party Claim, provided that such consent,
judgment or settlement includes a release of the Indemnified Party and
the settlement or judgment involves an amount to be paid on behalf of
or by the Indemnified Party that is less than the Cap Amount.
Notwithstanding the foregoing, in no event shall the Indemnifying Party
have the right to consent to the entry of judgment or otherwise settle
such Third Party Claim if: (i) the Third Party Claim involves equitable
or other non-monetary damages, or (ii) in the reasonable judgment of
the Indemnified Party, such settlement would have a continuing material
adverse effect on the Indemnified Party's business (including any
material impairment of its relationships with customers and suppliers),
in which case such settlement only may be made with the written consent
of the Indemnified Party, which consent shall not be unreasonably
withheld.
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(d) Whether or not the Indemnifying Party chooses to
defend or prosecute any claim involving a third party, all the parties
hereto shall cooperate in the defense or prosecution thereof and shall
furnish records, information and testimony, and attend such
conferences, discovery proceedings, hearings, trials and appeals as may
be reasonably requested in connection therewith. Such cooperation shall
include access during normal business hours afforded to the
Indemnifying Party of records and information which are reasonably
relevant to such Third Party Claim, and making employees available on a
mutually convenient basis to provide additional information and
explanation of any material provided hereunder, and the Indemnifying
Party shall reimburse the Indemnified Party for all its reasonable
out-of-pocket expenses in connection therewith.
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7.6 Adjustment of Liability. In the event an Indemnifying Party is
required to make any payment under this Article 7 in respect of any damages,
liability, obligation, loss, claim, or other amount indemnified hereunder, such
Indemnifying Party shall pay the Indemnified Party an amount (the "Adjusted
Amount") which is equal to the sum of (i) the amount of such damages, liability,
obligation, loss, claim or other amount, minus (ii) the amount of any insurance
proceeds the Indemnified Party actually receives with respect thereto, minus
(iii) any third party payments actually received by the Indemnified Party with
respect to such damages, liability, obligation, loss, claim or other amount
(with the consent of the Indemnified Party which will not be unreasonably
withheld), plus (iv) the amount of the Net Tax Liability. "Net Tax Liability"
shall be equal to the amount, if any, by which, the sum of all federal, state,
and local taxes, if any, required to be paid by such Indemnified Party in
respect of the receipt or accrual of the Adjusted Amount exceeds the sum of (a)
the value of any reduction in taxes of such Indemnified Party by reason of
deductions, credits or allowances in respect of the payment or accrual of the
damages, liability, obligation, loss, claim or other amount included in clause
(i) above recognized by such Indemnified Party in the same year in which the
taxes in respect of the receipt or accrual by such Indemnified Party of the
Adjusted Amount would be payable and (b) the net present value of any reduction
in taxes of such Indemnified Party by reason of deductions, credits or
allowances in respect of the payment or accrual of the damages, liability,
obligation, loss, claim or other amount included in clause (i) above recognized
by such Indemnified Party in years thereafter. The net present value of any such
reduction in taxes shall be determined by discounting the amount of such
reduction in taxes semi-annually from the date such tax saving is recognized or
reasonably expected to be recognized (which shall be deemed to be the date the
applicable tax return on which such tax saving would be properly reflected is
due, without extensions) to the date of payment of the applicable indemnity by
such Indemnifying Party, applying a discount factor equal to the interest rate
on federal income tax deficiencies in effect at the time of such adjustment. For
purposes of determining the amount of any taxes required to be paid and any tax
savings recognized or reasonably expected to be recognized by such Indemnified
Party hereunder, it shall be assumed that such Indemnified Party is subject to
tax in each applicable taxing jurisdiction at the highest applicable marginal
rate then in effect in such jurisdiction. In the event that the sum of clause
(a) and (b) above is greater than the amount of tax payable as a result of
receiving the Adjusted Amount, such excess amount or tax credit shall be
credited to the amount due from the Indemnifying Party.
ARTICLE 8
MISCELLANEOUS
8.1 Further Assurances. The parties agree (a) to furnish upon
request to each other such further information, (b) to execute and deliver to
each other such other documents, and (c) to do such other acts and things, all
as the other party may reasonably request for the purposes of carrying out the
intent of this Agreement and the transactions contemplated hereby.
8.2 Assignment; Parties in Interest. Except as expressly provided
herein, the rights and obligations of a party hereunder may not be assigned,
transferred or encumbered without the
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prior written consent of the other parties. Buyer may assign its rights and
obligations hereunder, subject to a guaranty from Buyer of the assignee's
performance thereof, to any direct or indirect subsidiary or other entity
controlled by Buyer, or to any parent corporation of Buyer, for purposes of
consummating the transactions contemplated herein. This Agreement shall be
binding upon, inure to the benefit of, and be enforceable by the respective
successors and permitted assigns of the parties hereto. Nothing contained herein
shall be deemed to confer upon any other person or entity any right or remedy
under or by reason of this Agreement.
8.3 Law Governing Agreement. This Agreement shall be construed and
interpreted according to the internal laws of the State of Georgia, excluding
any choice of law rules that may direct the application of the laws of another
jurisdiction.
8.4 Amendment and Modification. Buyer, o2wireless and the
Shareholder may amend, modify and supplement this Agreement in such manner as
may be agreed upon in writing among them.
8.5 Notice. All notices, requests, demands and other
communications hereunder shall be given in writing and shall be: (a) personally
delivered; (b) sent by telecopier, facsimile transmission or other electronic
means of transmitting written documents; or (c) sent to the parties at their
respective addresses indicated herein by registered or certified U.S. mail,
return receipt requested and postage prepaid, or by private overnight mail
courier service. The respective addresses to be used for all such notices,
demands or requests are as follows:
(a) If to Buyer or o2wireless, to:
o2wireless Solutions, Inc.
000 Xxxxxxxxxx Xxxxxxx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
with a copy to:
Xxxxx, Xxxxxxxx & Xxxxxxx, LLP
1230 Peachtree Road, X.X.
Xxxxxxxxx XX, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxx Xxxxxxx Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
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(b) If to the Shareholder:
Xxxxxxx X. Xxxxx
0000 Xxxxxxxx Xxxxxx
Xx Xxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
with a copy to:
Xxxx Xxxx Xxxx & Freidenrich LLP
0000 Xxxxxxxxx Xxxxx, Xxxxx 0000
Xxx Xxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
If personally delivered, such communication shall be deemed delivered
upon actual receipt; if electronically transmitted pursuant to this paragraph,
such communication shall be deemed delivered the next business day after
transmission (and sender shall bear the burden of proof of delivery); if sent by
overnight courier pursuant to this paragraph, such communication shall be deemed
delivered upon receipt; and if sent by U.S. mail pursuant to this paragraph,
such communication shall be deemed delivered as of the date of delivery
indicated on the receipt issued by the relevant postal service, or, if the
addressee fails or refuses to accept delivery, as of the date of such failure or
refusal. Any party to this Agreement may change its address for the purposes of
this Agreement by giving notice thereof in accordance with this Section 8.5.
8.6 Expenses. Regardless of whether or not the transactions
contemplated hereby are consummated, each of the parties shall bear its or his
own legal expenses and the expenses of its agents in connection with the
transactions contemplated hereby; provided, however, that the Shareholder shall
pay the legal expenses and the expenses of the agents of the Company through the
Closing Date.
8.7 Entire Agreement. This Agreement, including the Exhibits and
Schedules attached hereto (which Exhibits and Schedules are hereby incorporated
herein by reference and made a part hereof), embodies the entire agreement among
the parties with respect to the transactions contemplated hereby, and supersedes
all prior agreements and understandings among the parties with respect thereto.
8.8 Counterparts. This Agreement may be executed in one or more
counterparts, which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
8.9 Headings. The table of contents and article and section
headings herein are for convenience of reference only, do not constitute a part
of this Agreement, and shall not be deemed to limit or affect any of the
provisions hereof.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement, or
caused their duly authorized representatives to execute this Agreement as of the
date first above written.
O2WIRELESS, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
------------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
-------------------------------------
Title: Chief Financial Officer
------------------------------------
O2WIRELESS SOLUTIONS, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
------------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
-------------------------------------
Title: Chief Financial Officer
------------------------------------
SHAREHOLDER
/s/ Xxxxxxx X. Xxxxx
---------------------------------------------
Xxxxxxx X. Xxxxx
