AGREEMENT AND PLAN OF MERGER
among
ADDVANTAGE MEDIA GROUP, INC.,
XXX CATV CORPORATION,
TULSAT CORPORATION,
DIAMOND W INVESTMENTS, INC.,
XXXXX X. XXXXXXXX
and
XXXXXXX X. XXXXXXXX
Dated as of November 22, 1999
TABLE OF CONTENTS
Page
ARTICLE I - DEFINITIONS .............................................. 1
1.1 Defined Terms .................................................... 1
1.2 References and Titles ............................................ 9
ARTICLE II - THE MERGER; CLOSING ..................................... 10
2.1 The Merger ....................................................... 10
2.2 Effective Time of the Merger ..................................... 10
2.3 Organizational Documents; Directors and Officers ................. 10
2.4 Closing .......................................................... 11
2.5 Conversion of the Shares in the Merger ........................... 11
2.6 Delivery of Merger Consideration ................................. 12
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF DIAMOND .............. 12
3.1 Organization; Good Standing; Power, Etc. ......................... 12
3.2 Authorization of Agreement, Etc. ................................. 12
3.3 Authorization of Shareholders .................................... 14
3.4 Ownership of Diamond Shares ...................................... 14
3.5 Financial Statements ............................................. 14
3.6 Compliance With Other Instruments ................................ 14
3.7 Consents and Approvals ........................................... 15
3.8 Litigation ....................................................... 15
3.9 Tax Treatment ................................................ 15
3.10 Brokers ...................................................... 15
3.11 Transfer of AMG Securities ................................... 16
3.12 Capitalization ............................................... 17
3.13 Absence of Certain Changes or Events ......................... 18
3.14 Tax Matters .................................................. 19
3.15 Trademarks, Copyrights, Etc. ................................. 20
3.16 Title to Properties; Encumbrances ............................ 20
3.17 Condition and Sufficiency of Assets .......................... 21
3.18 Accounts Receivable .......................................... 21
3.19 Inventory .................................................... 21
3.20 No Undisclosed Liabilities ................................... 21
3.21 Employee Benefit Plans ....................................... 22
3.22 Insurance .................................................... 24
3.23 Compliance with Laws ......................................... 24
3.24 Certain Payments ............................................. 25
3.25 Disclosure ................................................... 25
-i-
3.26 Relationships With Related Persons ........................... 26
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF AMG,
MERGER SUB AND TULSAT ................................................ 26
4.1 Organization and Standing ........................................ 26
4.2 Corporate Power .................................................. 26
4.3 Subsidiaries ..................................................... 28
4.4 Capitalization ................................................... 28
4.5 Authorization .................................................... 28
4.6 Disclosure Materials ............................................. 29
4.7 Compliance With Other Instruments ................................ 29
4.8 Consents and Approvals ........................................... 29
4.9 Untrue Statements ................................................ 29
4.10 Securities Registration and Filings .......................... 30
4.11 Litigation .............................................. 30
4.12 Brokers ...................................................... 30
4.13 Absence of Certain Changes or Events ......................... 30
4.14 Compliance with Laws ......................................... 30
4.15 Disclosure ................................................... 31
4.16 Tax Treatment ................................................ 32
ARTICLE V - COVENANTS ................................................ 32
5.1 Certificate of Designation ....................................... 32
5.2 Expenses ......................................................... 32
5.3 Further Assurances ............................................... 32
5.4 Public Announcement .............................................. 32
5.5 Conduct of Business by Diamond Pending Closing ................... 32
5.6 Lease Agreement .................................................. 34
5.7 Distribution of Subsidiaries ..................................... 34
5.8 Access and Investigation ......................................... 35
5.9 Negative Covenant ................................................ 35
5.10 Required Approvals ........................................... 35
5.11 Notification ................................................. 35
5.12 No Negotiation ............................................... 35
5.13 Best Efforts ................................................. 36
5.14 Approval of Merger ........................................... 36
5.15 Use of Xxx Enterprise Name ................................... 36
5.16 Cooperation of Management Pending Merger ..................... 36
5.17 Increase in Authorized Common Stock .......................... 36
5.18 Loans ........................................................ 37
5.19 Conveyance of Record Title to Property ....................... 37
-ii-
ARTICLE VI - CONDITIONS .............................................. 37
6.1 Consents and Approvals ........................................... 37
6.2 Certain Actions, etc. ............................................ 37
ARTICLE VII - CONDITIONS PRECEDENT TO OBLIGATIONS OF AMG,
MERGER SUB AND TULSAT ................................................ 38
7.1 Accuracy of Representations and Warranties ....................... 38
7.2 Performance of Covenants, Agreements and Conditions .............. 38
7.3 Certificates, Etc. ............................................... 38
7.4 Employment and Noncompete Agreements ............................. 38
7.5 No Material Adverse Change ....................................... 38
7.6 Deed to Property ................................................. 38
ARTICLE VIII - CONDITIONS PRECEDENT TO OBLIGATIONS OF DIAMOND
AND SHAREHOLDERS ..................................................... 39
8.1 Accuracy of Representations and Warranties ....................... 39
8.2 Performance of Covenants, Agreements and Conditions .............. 39
8.3 Officers' Certificates Etc. ...................................... 39
8.4 Authorization of AMG Securities .................................. 39
8.5 No Material Adverse Change ....................................... 39
ARTICLE IX - TERMINATION, AMENDMENTS AND WAIVER ...................... 40
9.1 Termination ...................................................... 40
9.2 Effect of Termination ............................................ 40
9.3 Amendment ........................................................ 41
9.4 Waiver ........................................................... 41
ARTICLE X - OTHER AGREEMENTS ......................................... 41
10.1 Additional Agreements ........................................ 41
10.2 Available Remedies ........................................... 41
ARTICLE XI - SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION; REMEDIES ............................................ 41
11.1 Survival; Right to Indemnification Not Affected by Knowledge.. 41
11.2 Indemnification and Payment of Damages by Shareholders ....... 42
11.3 Indemnification and Payment of Damages by AMG ................ 43
11.4 Right of Set-Off ............................................. 43
11.5 Procedure for Indemnification-Third Party Claims ............. 43
11.6 Participation ................................................ 44
11.7 Procedure for Indemnification-Other Claims ................... 44
-iii-
11.8 Limitations .................................................. 44
11.9 Sales Tax Claims ............................................. 45
11.10 Action Subsequent to Closing ................................. 45
ARTICLE XII - REGISTRATION RIGHTS .................................... 45
12.1 Registration of Securities ................................... 45
12.2 Demand Registration .......................................... 46
12.3 AMG's Obligations with Respect to Demand Registration ........ 46
12.4 Piggy-Back Registration ...................................... 47
12.5 Public Information Requirements .............................. 48
12.6 Expenses of Registration ..................................... 48
12.7 Indemnification .............................................. 48
ARTICLE XIII - GENERAL PROVISIONS .................................... 50
13.1 Confidentiality .............................................. 50
13.2 Arbitration .................................................. 51
13.3 Notices ...................................................... 52
13.4 Governing Law ................................................ 52
13.5 Waiver ....................................................... 53
13.6 Entire Agreement and Modification ............................ 53
13.7 Disclosure Schedule .......................................... 53
13.8 Assignments, Successors, and No Third-Party Rights ........... 53
13.9 Severability ................................................. 54
13.10 Time of Essence .............................................. 54
13.11 Counterparts ................................................. 54
13.12 Construction ................................................. 54
13.13 Incorporation of Exhibits and Schedules ...................... 54
-iv-
LIST OF EXHIBITS
Exhibit A - Certificate of Designation for Series C Preferred Stock
Exhibit B - Form of Promissory Note
Exhibit C - Lease Agreement
Exhibit D - Form of Employment Agreement with Xxxxx X. Xxxxxxxx
Exhibit E - Form of Noncompete Agreement with Xxxxxxx X. Xxxxxxxx
-v-
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger is dated as of November 22, 1999 (this
"Agreement"), by and among ADDvantage Media Group, Inc., an Oklahoma corporation
("AMG"), Xxx CATV Corporation, a Nebraska corporation ("Merger Sub"), Diamond W
Investments, Inc., a Nebraska corporation ("Diamond"), Xxxxx X. Xxxxxxxx and
Xxxxxxx X. Xxxxxxxx ("Shareholders"). TULSAT Corporation, an Oklahoma
corporation ("TULSAT"), joins in this Agreement for purposes of making the
representations and warranties applicable to it set forth in Article IV hereof
and making the covenants and commitments and obtaining the rights and benefits
set forth herein.
WHEREAS, AMG desires to acquire, on the terms, in the manner and subject
to the conditions reflected below, Diamond and the business conducted by
Diamond;
WHEREAS, Diamond believes that it is desirable and in the best interests
of Diamond and its Shareholders that it be acquired by AMG by the merger of
Diamond with and into Merger Sub as provided herein; and
WHEREAS, for federal income tax purposes, it is intended that such merger
qualify as a "reorganization" within the meaning of Section 368 of the Internal
Revenue Code of 1986, as amended.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements herein set forth, the
parties to this Agreement have agreed, and hereby agree subject to the terms
and conditions hereinafter set forth, as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINED TERMS. As used in this Agreement, each of the following
terms has the meaning given in this Section 1.1 or in the Sections referred to
below:
"AMG" has the meaning set forth in the first paragraph of this Agreement.
"AMG Advisors" has the meaning set forth in Section 5.8 of this Agreement.
"AMG Common Stock" means the common stock, par value $.01 per share,
of AMG.
"AMG Preferred Stock" means the Series C Convertible Preferred Stock, par
value $1.00 per share, of AMG, with a stated value of $36.75 per share which
initially will be convertible into shares of AMG Common Stock at a conversion
price of $3.675 per share, subject to adjustment, the terms of which are set
forth in that form of certificate of designation attached hereto as Exhibit A.
"AMG Securities" means AMG Preferred Stock and the Promissory Note.
"Accounts Receivable" has the meaning set forth in Section 3.18 of this
Agreement.
"Agreement" means this Agreement and Plan of Merger, including the
Attachments and Exhibits hereto, and the Disclosure Schedule as amended,
supplemented or modified from time to time.
"Articles of Merger and Share Exchange" means the articles of merger and
share exchange prepared and executed in accordance with the applicable
provisions of Nebraska Law, filed with the Secretary of State of Nebraska to
reflect the consummation of the Merger.
"Balance Sheet" means the balance sheet of Diamond, as of December 31,
1998 which is included as a part of the Diamond Financial Statements.
"Best Efforts" means the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to ensure that such result
is achieved as expeditiously as possible; provided, however, that an obligation
to use Best Efforts under this Agreement does not require the Person subject to
that obligation to take actions that would result in a materially adverse change
in the benefits to such Person of this Agreement and the Contemplated
Transactions.
"Breach" means the breach of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be deemed to have occurred if there is or has
been (a) any inaccuracy in or breach of, or any failure to perform or comply
with, such representation, warranty, covenant, obligation, or other provision,
or (b) any occurrence or circumstance that is or was inconsistent with such
representation, warranty, covenant, obligation, or other provision, and the
term "Breach" means any such inaccuracy, breach, failure, occurrence, or
circumstance.
"Closing" means the closing and consummation of the Contemplated
Transactions.
"Closing Date" means the date on which the Closing occurs, which date
shall be November 22, 1999 or such other date as is agreed upon by the parties
to this Agreement.
"Code" has the meaning set forth in the recitals to this Agreement.
"Consent" means any approval, consent, ratification, waiver, or other
authorization (including any Governmental Action).
"Contemplated Transactions" all of the transactions contemplated by this
Agreement, including:
(a) the Merger of Diamond with and into Merger Sub;
-2-
(b) the conversion of the Shares into the right to receive the
Merger Consideration and the issuance by AMG of the Merger Consideration
to Shareholders;
(c) the execution, delivery, and performance of the Promissory
Note, the Employment Agreement and the Noncompetition Agreements; and
(d) the performance by AMG, Merger Sub, TULSAT, Diamond and
Shareholders of their respective covenants and obligations under this
Agreement.
"Contract" means any agreement, contract, lease, obligation, franchise,
license, promise, or undertaking (whether written or oral and whether express or
implied) that is legally binding.
"Damages" has the meaning set forth in Section 11.2.
"Diamond" has the meaning set forth in the first paragraph of this
Agreement.
"Diamond Benefit Plan," "Diamond Benefit Program or Agreement," "Diamond
Employee Benefit Plans" and "Diamond Plans" have the respective meanings set
forth in Section 3.21.
"Diamond Financial Statements" means the unaudited financial statements of
Diamond for the period ending December 31, 1998, prepared in accordance with the
income tax basis of accounting.
"Disclosure Schedule" means the disclosure schedule attached hereto and
any documents listed on such Disclosure Schedule and expressly incorporated
therein by reference.
"Disclosure Materials" has the meaning set forth in Section 3.11.
"Effective Time of the Merger" has the meaning set forth in Section 2.2.
"Encumbrance" means any charge, claim, community property interest,
mortgage, condition, equitable interest, lien, option, deed of trust, pledge,
security interest, right of first refusal, or restriction of any kind, including
any restriction on use, voting, transfer, receipt of income, or exercise of any
other attribute of ownership.
"Environment" means soil, land surface or subsurface strata, surface
waters (including navigable waters, ocean waters, streams, ponds, drainage
basins, and wetlands), groundwaters, drinking water supply, stream sediments,
ambient air (including indoor air), plant and animal life, and any other
environmental medium or natural resource.
-3-
"Environmental Law" means any Legal Requirement that requires or relates
to:
(a) advising appropriate authorities, employees, and the public of
intended or actual releases of pollutants or hazardous substances or
materials, violations of discharge limits, or other prohibitions and of
the commencements of activities, such as resource extraction or
construction, that could have significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release of
pollutants or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release, or minimizing
the hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated, packaged, and
used so that they do not present unreasonable risks to human health or the
Environment when used or disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or other
potentially harmful substances;
(g) cleaning up pollutants that have been released, preventing the
threat of release, or paying the costs of such clean up or prevention; or
(h) making responsible parties pay private parties, or groups of
them, for damages done to their health or the Environment, or permitting
self-appointed representatives of the public interest to recover for
injuries done to public assets.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor law, and regulations and rules issued pursuant to that
Act or any successor law.
"Exchange Act" means the Securities and Exchange Act of 1934, as amended,
or any successor law, and regulations and rules issued pursuant to that Act or
any successor law.
"Facilities" means any real property, leaseholds, or other interests
currently or formerly owned or operated by Diamond and any buildings, plants,
structures, or equipment (including motor vehicles and rolling stock) currently
or formerly owned or operated by Diamond.
"Governmental Action" means any authorization, application, approval,
consent, exemption, filing, license, notice, registration, permit or other
requirement of, to or with any Governmental Authority.
-4-
"Governmental Authority" means any national, state, county or municipal
government, domestic or foreign, any agency, board, bureau, commission, court,
department or other instrumentality of any such government, or any arbitrator in
any case that has jurisdiction over TULSAT, AMG, Merger Sub or Shareholders or
any of their respective properties or assets.
"Hazardous Materials" means any waste or other substance that is listed,
defined, designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, including any admixture or solution thereof, and specifically
including petroleum and all derivatives thereof or synthetic substitutes
therefore and asbestos or asbestos-containing materials.
"Indemnified Persons" has the meanings set forth in Section 11.2 and
Section 11.3.
"Intellectual Property" has the meaning set forth in Section 3.15.
"Interim Balance Sheet" means the balance sheet of Diamond as of
September 30, 1999 which is included as part of the Interim Financial
Statements.
"Interim Financial Statements" means the unaudited financial statements
of Diamond for the nine-month period ended September 30, 1999, prepared on a
basis consistent with that of the Diamond Financial Statements, subject,
however, to changes resulting from normal year-end adjustments that will not,
in the aggregate be material.
"IRS" means the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
"Legal Requirement" means any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.
"Material Adverse Effect" means (a) when used with respect to Diamond, a
result or consequence that would materially adversely affect the condition
(financial or otherwise), results of operations or business of Diamond or the
aggregate value of its assets, would materially impair the ability of Diamond to
own, hold, develop and operate its assets, or would impair Diamond's ability to
perform its obligations hereunder or consummate the Contemplated Transactions or
prevent or materially delay the performance of this Agreement; (b) when used
with respect to AMG, a result or consequence that would materially adversely
affect the condition (financial or otherwise), results of operations or
business of AMG and its subsidiaries as a whole, or the aggregate value of their
assets, would materially impair their ability to own, hold, develop and operate
their assets, or would impair AMG's or Merger Sub's ability to perform its
obligations hereunder or consummate the Contemplated Transactions or prevent or
materially delay the performance of this Agreement and (c) when used with
respect to Shareholders or any Shareholder, a result or consequence that would
-5-
impair his or her ability to perform his or her respective obligations
hereunder or consummate the Contemplated Transactions or prevent or materially
delay the performance of this Agreement.
"Merger" has the meaning set forth in Section 2.1.
"Merger Consideration" means the shares of AMG Preferred Stock and the
Promissory Note into which the Shares will be converted in connection with the
consummation of the Merger and the other Contemplated Transactions.
"Merger Sub"has the meaning set forth in the first paragraph of this
Agreement.
"Nebraska Law" means the Nebraska Business Corporation Act.
"Oklahoma Law" means the Oklahoma General Corporation Act.
"Order" means any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Authority or by any arbitrator.
"Ordinary Course of Business" means an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such
Person and is taken in the ordinary course of the normal day-to-day
operations of such Person; and
(b) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority).
"Organizational Documents" means (a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership agreement and
any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) articles of organization, operating agreement and similar
documents of a limited liability company; (e) any charter or similar document
adopted or filed in connection with the creation, formation, or organization of
a Person; and (f) any amendment to any of the foregoing.
"PBGC" has the meaning set forth in Section 3.21(c).
"Person" means any natural person, corporation, company, limited or
general partnership, joint stock company, joint venture, association, limited
liability company, trust, bank, trust company, land trust, business trust or
other entity or organization, whether or not a Governmental Authority.
-6-
"Proceeding" means any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Authority or arbitrator.
"Promissory Note" means the promissory note to be issued to the holders of
the Shares upon consummation of the Merger pursuant to the terms of this
Agreement and which constitutes a part of the Merger Consideration. The form of
Promissory Note is attached to this Agreement as Exhibit B attached hereto and
incorporated herein by reference.
"Related Person" means with respect to a particular individual:
(a) each other member of such individual's Family (as defined
below);
(b) any Person that is directly or indirectly controlled by such
individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material
Interest (as defined below); and
(d) any Person with respect to which such individual or one or
more members of such individual's Family serves as a director, officer,
partner, executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly
or indirectly controlled by, or is directly or indirectly under common
control with such specified Person;
(b) any Person that holds a Material Interest in such specified
Person;
(c) each Person that serves as a director, officer, partner,
executor, or trustee of such specified Person (or in a similar capacity);
(d) any Person in which such specified Person holds a Material
Interest (as defined below);
(e) any Person with respect to which such specified Person serves
as a general partner or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in clause (b)
or (c).
For purposes of this definition, (a) the "Family" of an individual includes (i)
the individual, (ii) the individual's spouse, (iii) any children, step children
and grandchildren (including step grandchildren) of
-7-
such individual or such individual's spouse, and (iv) any other natural person
who resides with such individual, and (b) "Material Interest" means direct or
indirect beneficial ownership (as defined in Rule 13d-3 under the Exchange Act)
of voting securities or other voting interests representing at least 20% of the
outstanding voting power of a Person or equity securities or other equity
interests representing at least 20% of the outstanding equity securities or
equity interests in a Person.
"Release" means any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment, whether
intentional or unintentional.
"Representative" means with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"Shareholders" means, collectively, Xxxxx X. Xxxxxxxx and Xxxxxxx X.
Xxxxxxxx.
"Shares" means all of the issued and outstanding shares of capital stock
of Diamond as defined in Section 3.12.
"Subsidiary" with respect to any Person (the "Owner"), any corporation or
other Person of which securities or other interests having the power to elect a
majority of that corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred) are held by the Owner or one or more of its Subsidiaries; when
used without reference to a particular Person, "Subsidiary" means a Subsidiary
of Diamond.
"Surviving Corporation" has the meaning set forth in Section 2.1.
"TULSAT" has the meaning set forth in the first paragraph of this
Agreement.
"Taxes" all net income, gross income, gross receipt, sales and use, ad
valorem, franchise, profits, licenses, withholding, payroll, excise, severance,
stamp, occupation, property, customs duties or other taxes, fees or charges if
any kind whatsoever imposed by a foreign, federal, state, county or local
taxing authority together with any interests or penalty thereon.
"Tax Return" any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Authority in connection with the determination, assessment, collection, or
payment of any Taxes or in connection with the administration, implementation,
or enforcement of or compliance with any Legal Requirement relating to any
Taxes.
-8-
"Third-Party Consent" means the consent or approval of any Person other
than TULSAT, AMG, Merger Sub, Diamond, a Shareholder or any Governmental
Authority.
"Threat of Release" means a substantial likelihood of a Release that may
require action in order to prevent or mitigate damage to the Environment that
may result from such Release.
"Threatened" means a claim, Proceeding, dispute, action, or other matter
will be deemed to have been "Threatened" if any demand or statement has been
made (orally or in writing) or any notice has been given (orally or in writing),
or if any other event has occurred or any other circumstances exist, that would
lead a prudent Person to conclude that such a claim, Proceeding, dispute,
action, or other matter is likely to be asserted, commenced, taken, or otherwise
pursued in the future.
"Worker Safety Laws" has the meaning set forth in Section 3.23.
1.2 References and Titles.
(a) All references in this Agreement to Exhibits, Schedules,
Articles, Sections, subsections and other subdivisions refer to the
corresponding Exhibits, Schedules, Articles, Sections, subsections and
other subdivisions of this Agreement unless expressly provided otherwise.
Titles appearing at the beginning of any Article, Section, subsection or
other subdivision of this Agreement are for convenience only, do not
constitute any part of this Agreement, and shall be disregarded in
construing the language hereof. The words "this Agreement," "herein,"
"hereby," "hereunder," and "hereof," and words of similar import, refer to
this Agreement as a whole and not to any particular subdivision unless
expressly so limited. The words "this Article," "this Section," and "this
subsection," and words of similar import, refer only to the Article,
Section or subsection hereof in which such words occur. The word "or" is
not exclusive, and the word "including" (in its various forms) means
including without limitation.
(b) Pronouns in masculine, feminine or neuter genders shall be
construed to state and include any other gender.
(c) Words, terms and titles (including terms defined herein) in
the singular form shall be construed to include the plural and vice versa,
unless the context otherwise requires.
(d) As used in the representations and warranties contained in
this Agreement, the phrase "to the knowledge" of the representing party
shall mean that, in the case of AMG, TULSAT, Merger Sub or Diamond,
responsible officers of such corporation, individually or collectively,
and, in the case of Shareholders, either of them, either (a) know that the
matter being represented and warranted is true and accurate or (b) have no
reason, after reasonable inquiry, to believe that the matter being
represented and warranted is not true and accurate.
-9-
ARTICLE II
THE MERGER; CLOSING
2.1 The Merger. Upon the terms and subject to the conditions hereof,
and in accordance with the relevant provisions of Nebraska Law, Diamond will be
merged with and into Merger Sub as soon as practicable following the
satisfaction or waiver, if permissible, of the conditions set forth in this
Agreement, and with Shareholders receiving the Merger Consideration. Following
the Merger, Merger Sub will continue as the surviving corporation
(the "Surviving Corporation") under the name "Xxx CATV Corporation" and will
continue its existence under the laws of the State of Nebraska, and the separate
corporate existence of Diamond will cease.
2.2 Effective Time of the Merger. The Merger shall not become effective
until, and, subject to the terms and conditions of this Agreement, shall become
effective when the following actions shall have in all respects been completed:
(a) this Agreement shall have been approved by the shareholders
of Merger Sub and Diamond in accordance with the requirements of Nebraska
Law; and
(b) the Articles of Merger and Share Exchange shall have been
filed, in accordance with the requirements of Nebraska Law, in the office
of the Secretary of State of Nebraska.
The date and time when the Merger shall become effective as aforesaid is herein
referred to as the "Effective Time of the Merger."
2.3 Organizational Documents; Directors and Officers.
(a) The Organizational Documents of Merger Sub, as in effect
immediately prior to the Effective Time of the Merger, shall be the
Organizational Documents of the Surviving Corporation from and after the
Effective Time of the Merger until amended in accordance with Nebraska
Law.
(b) The officers of Merger Sub in office immediately prior to the
Effective Time of the Merger shall be the officers of the Surviving
Corporation from and after the Effective Time of the Merger, each to hold
office in accordance with the Organizational Documents of the Surviving
Corporation.
(c) The directors of Merger Sub in office immediately prior to the
Effective Time of the Merger shall be the directors of the Surviving
Corporation from and after the Effective Time of the Merger plus Xxxxx X.
Xxxxxxxx, and each shall hold such office until his successor shall have
been elected or qualified or as otherwise provided in the Organizational
Documents of the Surviving Corporation.
-10-
2.4 Closing. The consummation of the transactions contemplated by
Section 2.1 together with the delivery of the various certificates, agreements,
opinions and other documents required or contemplated by this Agreement is
called the "Closing." The Closing will take place at the offices of AMG at
000 Xxxxx 00xx Xxxxxx, Xxxxxx Xxxxx, Xxxxxxxx, at 10:00 a.m. (local time) on
the Closing Date or at such other time and place as the parties may agree.
Subject to the provisions of Article IX, failure to consummate the Merger on the
date and time and at the place determined pursuant to this Section 2.4 will not
result in the termination of this Agreement and will not relieve any party of
any obligation under this Agreement.
2.5 Conversion of the Shares in the Merger.
(a) By virtue of the consummation of the Merger, each of the
outstanding Shares shall be converted into the right to receive the Merger
Consideration in the manner and at the time provided for in
Section 2.5(b). The total Merger Consideration provided herein is to be
shares of AMG Preferred Stock having a deemed value for purposes of this
Agreement of $1,000,000 (which deemed value is to be determined in
accordance with Section 2.5(e) below) and a Promissory Note (in the form
of Exhibit B to this Agreement) in the aggregate original principal amount
determined subparagraph (b) below (the "Merger Consideration").
(b) It is intended that the Promissory Note in the form of Exhibit
B shall represent the difference determined by subtracting from $850,000
the sum of (i) the amount of cash and assets distributed to Shareholders
as described in the Disclosure Schedule effective immediately prior to
Closing, plus (ii) the sum of $9,368.31 (the amount of the accrued
vacation and sick leave of the Diamond employees at the time of Closing);
plus (iii) the amount of the cash bonuses paid to be paid to employees of
Diamond as reflected in Section 3.13 of the Disclosure Schedule; plus (iv)
the amount of the liability or obligation of Diamond, if any, to pay any
federal income tax, employee withholding, social security, medicare or
other such taxes or amounts arising by reason of the cash and AMG stock
bonuses referred to in Section 3.13 of the Disclosure Schedule (excluding
any amounts which are withheld from, or paid by, the recipients of the
bonuses and any taxes which may be payable by Shareholders rather than
Diamond); plus (v) the amount of any personal property taxes or ad valorem
taxes due with respect to any of the equipment, inventory, supplies and
other personal property of Diamond which are payable at the time of
Closing or which are attributable to the periods prior to the Closing Date
on a pro rated basis for the current tax period.
(c) At the Effective Time of the Merger, each of the outstanding
Shares shall, by virtue of the Merger and without any action on the part
of the holder thereof, be converted into the right to receive one one-
thousandth of (i) the total number shares of AMG Preferred Stock to be
included in the Merger Consideration (as provided in Section 2.5(d)
below), and (ii) the aggregate amount of the Promissory Note determined as
provided above in subparagraph (b).
-11-
(d) For these purposes, the stated value of each share of AMG
Preferred Stock shall be ten times the average of the closing per share
sales price of the outstanding AMG Common Stock as reported on the Nasdaq
Bulletin Board for the five consecutive trading days ending at the close
of trading on Friday, November 19, 1999. The number of shares of AMG
Preferred Stock which will be issued upon conversion of each Share of
Diamond capital stock will equal the total number of shares of AMG
Preferred Stock divided by 1,000, the total number of outstanding Shares
of Diamond capital stock.
2.6 Delivery of Merger Consideration. Upon surrender of the certificates
representing all of the outstanding Shares of Diamond's capital stock to AMG at
or immediately following the Effective Time of the Merger, AMG shall issue and
deliver to Shareholders the AMG Preferred Stock and the Promissory Note to which
they are thereby entitled. After the Effective Time of the Merger, there shall
be no transfers on the stock transfer books of Diamond of the Shares of
Diamond's capital stock which were outstanding immediately prior to the
Effective Time of the Merger.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF DIAMOND
Diamond and Shareholders, jointly and severally, hereby represent and
warrant to AMG and Merger Sub as follows:
3.1 Organization; Good Standing; Power, Etc. Diamond is a corporation
duly incorporated and validly existing under the laws of the State of Nebraska
and has all requisite power and authority to own, operate and lease its
properties and assets and to carry on its business as now being conducted.
Diamond does not have any Subsidiaries. Diamond is duly qualified to do
business and is in good standing as a foreign corporation or other entity in
each other jurisdiction in which the ownership, operation or leasing of its
properties or assets or the nature of its business requires such qualification
except where the failure so to qualify would not have a Material Adverse Effect
on the business, financial condition or properties of Diamond.
3.2 Authorization of Agreement, Etc.
(a) Diamond has all requisite corporate power and authority to
enter into and perform all of its obligations under this Agreement. The
execution and delivery of this Agreement by Diamond and the consummation
by Diamond of the Contemplated Transactions have been duly authorized by
all necessary corporate action on the part of Diamond. This Agreement has
been duly executed and delivered by Diamond and constitutes the legal,
valid and binding obligation of Diamond, enforceable against Diamond in
accordance with its terms.
-12-
(b) Neither the execution and delivery of this Agreement by
Diamond nor the consummation of the Contemplated Transactions to be
performed by Diamond will (i) violate or conflict with any provision of
the Organizational Documents as currently in effect, of Diamond or
(ii) violate or conflict with any provision of any law, rule, regulation,
order, permit, certificate, writ, judgment, injunction, decree,
determination, award or other decision of any Governmental Authority,
other regulatory or self-regulatory body or association or arbitrator
binding upon Diamond or any of its properties, except where such
violations or conflicts would not in the aggregate have a Material Adverse
Effect on the business, properties, financial condition or results of
operations of Diamond or on the ability of Diamond to consummate the
Contemplated Transactions, and except for violations that will be cured,
waived or terminated prior to the Effective Time of the Merger.
(c) Except as set forth in the Disclosure Schedule, neither the
execution and delivery of this Agreement nor the consummation of the
Contemplated Transactions to be performed by Diamond will result in a
breach of or constitute a default (or with notice or lapse of time or both
result in a breach of or constitute a default) under, or give rise to a
right of termination, cancellation, acceleration or repurchase of any
obligation or a right of first refusal with respect to any material
property or asset or a loss of a material benefit or the imposition of a
material penalty under, any of the terms, conditions or provisions of (i)
any mortgage, indenture, loan or credit agreement or any other agreement
or instrument evidencing indebtedness for money borrowed to which Diamond
is a party or by which it or any of its properties is bound or affected,
or pursuant to which Diamond has guaranteed the indebtedness or preferred
stock of any Person, or (ii) any Contract or instrument to which Diamond
is a party or by which it or any of its properties is bound or affected,
except for any such breaches, defaults, rights, losses or penalties that
do not have a Material Adverse Effect on the business, properties,
financial condition or results of operations of Diamond or on the ability
of Diamond to consummate the Contemplated Transactions, or with respect to
which the Consents, listed on the Disclosure Schedule attached hereto will
be obtained prior to the Effective Time of the Merger.
(d) Neither the execution and delivery by Diamond of this
Agreement nor the consummation of the Contemplated Transactions to be
performed by Diamond will result in, or require, the creation or
imposition of any Encumbrance of any nature upon or with respect to any of
the properties or other assets now or hereafter owned by Diamond, except
where such would not in the aggregate have a Material Adverse Effect on
the business, properties, financial condition or results of operations of
Diamond or on the ability of Diamond to consummate the Contemplated
Transactions.
(e) Except as set forth in the Disclosure Schedule, Diamond
has made or obtained each registration, filing,
submission, license, permit, certificate, determination
or governmental approval necessary to enable it to carry
on its business, except for those which the failure to
have does not have a Material Adverse Effect on the
business, properties, financial condition or results of
operations of Diamond. All such registrations, filings
and submissions with any Governmental Authority relating
to the operations of Diamond were in
-13-
material compliance with applicable law when filed, and no material
deficiencies have been asserted by any such authority with respect to such
registrations, filing or submissions.
3.3 Authorization of Shareholders. This Agreement has been duly and
validly executed and delivered by or on behalf of each Shareholder and
constitutes the legal, valid and binding obligation of such Shareholder,
enforceable in accordance with its terms. The execution, delivery and
performance by each Shareholder of this Agreement is within his or her full
legal right, power and authority, do not contravene, permit the termination of
or constitute a default under any agreement, declaration of trust or other
instrument binding upon such Shareholder, and will not result in the creation
or imposition of any Encumbrance in favor of any third Person upon the Diamond
Shares owned by such Shareholder. The execution, delivery and performance by
such Shareholder of this Agreement does not require the Consent of any Person,
and does not require any action by or in respect of any filing with, or the
consent, approval or authorization of, any Governmental Authority, except those
consents, approvals or authorizations that have been obtained, and do not
violate any provision of any applicable law or regulation or any judgment,
decree or order to which such Shareholder is subject.
3.4 Ownership of Diamond Shares. The Diamond Shares being transferred
by each Shareholder are owned by such Shareholder beneficially and of record,
free and clear of any Encumbrance.
3.5 Financial Statements. True and complete copies of the Diamond
Financial Statements and the Interim Financial Statements have been delivered to
AMG. The Diamond Financial Statements fairly present the financial position of
Diamond and the results of operations of Diamond for the period covered by such
financial statements. The Interim Financial Statements fairly present the
financial positions of Diamond on June 30, 1999, and the results of operations
of the Diamond for the six months ended on June 30, 1999, applied on a basis
consistent with that of the Diamond Financial Statements, subject, however, to
changes resulting from normal year-end audit adjustments that will not, in the
aggregate be material.
3.6 Compliance With Other Instruments. Diamond is not in violation of
any terms of any of its Organizational Documents, or in any material respect of
any mortgage, indenture, contract, agreement, instrument, or, to the knowledge
of Shareholders, any judgment, decree, order, statute, rule, or regulation
applicable to Diamond. The execution, delivery, and performance by Diamond and
Shareholders of this Agreement, and the consummation of the Contemplated
Transactions, will not result in any such violation or be in conflict with or
constitute a default under any such term, or cause the acceleration of maturity
of any loan or material obligation to which Diamond is a party or by which it is
bound or with respect to which it is an obligor or guarantor, or result in the
creation or imposition of any material lien, claim, charge, restriction, equity
or encumbrance of any kind whatsoever upon, or, to the knowledge of
Shareholders, give to any other person any interest or right (including any
right of termination or cancellation) in or with respect to any of the material
properties, assets, business or agreements of Diamond.
-14-
3.7 Consents and Approvals. No Consent, registration, declaration or
filing with, or permit from, any Governmental Authority is required by or with
respect to Shareholders or Diamond in connection with the execution and delivery
of this Agreement by Diamond and Shareholders or the consummation of the
Contemplated Transactions, except for the following: (a) any such Consent,
registration, declaration, filing or permit which the failure to obtain or make
would not, individually or in the aggregate, have a Material Adverse Effect on
Diamond or Shareholders; (b) such other compliance with the Exchange Act and the
Securities Act and the rules and regulations of the SEC thereunder as may be
required in connection with this Agreement and the Contemplated Transactions and
the obtaining from the SEC of such orders as may be so required; (c) such
filings and approvals as may be required by any applicable state securities,
"blue sky" or takeover laws and (d) such filings and approvals as may be
required by any pre-merger notification, securities, corporate or other law,
rule or regulation. No Third-Party Consent is required by or with respect to
Diamond or Shareholders in connection with the execution and delivery of this
Agreement or the consummation of the Contemplated Transactions, except for any
such Third-Party Consent which the failure to obtain would not, individually or
in the aggregate, have a Material Adverse Effect on Shareholders or Diamond.
3.8 Litigation. Except as set forth on the Disclosure Schedule, there
is no litigation, proceeding or investigation pending or, to the knowledge of
Shareholders, threatened or investigation pending against or affecting Diamond
is reasonably likely to have a Material Adverse Effect on Diamond or that
questions the validity or enforceability of this Agreement or any other
document, instrument or agreement to be executed and delivered by Diamond or
Shareholders in connection with the Contemplated Transactions. Except as set
forth in the Disclosure Schedule, Diamond is not subject to any outstanding
order.
3.9 Tax Treatment. Neither Diamond nor a Shareholder has taken, has
agreed or failed to take, or intends to take any action or has any knowledge of
any fact or circumstance that would prevent the Merger from qualifying as a
reorganization within the meaning of Section 368 of the Code.
3.10 Brokers. No broker, finder, investment banker or other Person is or
will be, in connection with the Contemplated Transactions, entitled to any
brokerage, finder's or other fee or compensation based on any arrangement made
by or on behalf of Diamond or Shareholders and for which AMG, Diamond, Merger
Sub, or Shareholders will have any obligation or liability.
-15-
3.11 Transfer of AMG Securities.
(a) AMG has furnished to Shareholders copies of AMG's Annual
Report on Form 10-KSB for the year ended December 31, 1998, Quarterly
Report on Form 10-QSB2 for the calendar quarter ended June 30, 1999, a
copy of the Proxy Statement of AMG prepared and distributed by AMG in
connection with the solicitation of proxies for the annual meeting of
Shareholders of AMG held during 1999, copies of the current reports on
Form 8-K filed with the SEC on September 24, 1999 and October 14, 1999 and
a copy of the Disclosure Statement sent to the AMG shareholders on
October 8, 1999 in compliance with Rule 14b-1 under the Exchange Act,
together with all additional information requested concerning the proposed
operations, affairs and current financial condition of AMG, Merger Sub and
TULSAT ("Disclosure Materials"). Such information and access have been
available to the extent Shareholders consider necessary and advisable to
aid Shareholders and Shareholders have reviewed such information having
any and all questions answered in making an intelligent investment
decision regarding an investment in the AMG Securities. Shareholders
understand that the securities received could result in the loss of
Shareholders' entire investment.
(b) The AMG Securities to be acquired by Shareholders will be
acquired solely for the account of Shareholders, for investment purposes
only and not with a view to the resale or distribution thereof within the
meaning of the Securities Act, are not being purchased for subdivision or
fractionalization thereof, and Shareholders have no contract, undertaking,
agreement or arrangement with any person to sell or transfer such shares
to any Person and do not intend to enter into such contract or
arrangement.
(c) Shareholders have such knowledge and experience in financial
and business matters as to be capable of evaluating the risks and merits
of their investment in the AMG Securities and in protecting their
interests and the securities to be acquired are suitable for their
investment therein.
(d) Shareholders are capable of bearing the economic risks of an
investment in the AMG Securities, including the complete loss of such
investment.
(e) Shareholders understand that the AMG Securities have not been
registered under the Securities Act by reason of their issuance in a
transaction exempt from the registration and prospectus delivery
requirements of the Securities Act pursuant to Sections 3(b) or 4(2)
thereof, and that AMG Securities must be held by each Shareholder
indefinitely and each Shareholder must therefore bear the economic risk of
such investment indefinitely, unless a subsequent disposition thereof is
registered under the Securities Act or is exempt from registration.
(f) Shareholders are accredited investors as that term is defined
in Rule 501(a) of Regulation D promulgated by the SEC under the Securities
Act.
-16-
(g) Each instrument representing AMG Securities may be endorsed
with the following legends:
(i) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, THE
SECURITIES ACT OF NEBRASKA OR THE OKLAHOMA SECURITIES ACT. NEITHER
THE RECORD NOR THE BENEFICIAL OWNERSHIP OF SAID SHARES MAY BE SOLD
OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR SAID SHARES UNDER BOTH OF SAID ACTS AND ANY OTHER APPLICABLE
STATE SECURITIES LAWS OR RULES UNLESS IN THE OPINION OF COUNSEL
REASONABLY SATISFACTORY TO ADDVANTAGE MEDIA GROUP, INC. EXEMPTIONS
FROM THE REGISTRATION REQUIREMENTS OF SAID ACTS ARE AVAILABLE WITH
RESPECT TO SUCH SALE OR TRANSFER AND SAID SALE OR TRANSFER IS MADE
PURSUANT TO AND IN STRICT COMPLIANCE WITH THE TERMS AND CONDITIONS
OF SAID EXEMPTIONS.
(ii) Any other legend required by any state securities laws.
AMG need not register a transfer of legended AMG Securities, and may also
instruct its transfer agent not to register the transfer of AMG
Securities, unless one of the conditions specified in each of the
foregoing legends is satisfied.
(h) Shareholders understand that AMG Common Stock has been
recently de-listed from trading on the Nasdaq Small Cap Market and is not
listed for trading on any national exchange. AMG can give no assurance
when, if ever, that AMG Common Stock will be re-admitted for trading on
the Nasdaq Small Cap Market or admitted for trading on any other national
securities exchange.
3.12 Capitalization. The authorized capital stock of Diamond consists of
10,000 shares of common stock, par value $1.00. As of the date of this
Agreement, 1,000 shares of Common Stock are issued and outstanding. All shares
of capital stock of Diamond have been duly authorized, validly issued, fully
paid and nonassessable, and are not subject to, or issued in violation of, any
preemptive rights. There are no shares of capital stock of Diamond authorized
or outstanding, and there are no subscriptions, options to purchase shares of
the capital stock of Diamond, conversion or exchange rights, warrants,
preemptive rights or other agreements, claims or commitments of any nature
whatsoever (whether firm or conditional) obligating Diamond to issue, transfer,
deliver or sell, or cause to be issued, transferred, delivered or sold,
additional shares of the capital stock or other securities or interests of
Diamond or obligating Diamond to grant, extend or enter into any such agreement
or commitment.
-17-
3.13 Absence of Certain Changes or Events. Except as has occurred in the
Ordinary Course of Business, as disclosed in the Disclosure Schedule or as
specifically contemplated by this Agreement, since June 30, 1999, Diamond has
not:
(i) borrowed, or agreed to borrow, funds,
(ii) incurred or become subject to, or agreed to incur or become
subject to, any material obligation or liability, contingent or otherwise,
except current liabilities incurred, and obligations under Contracts
entered into, in the ordinary course of its business,
(iii) discharged or satisfied any material lien, charge or
encumbrance or paid any material obligation or liability, contingent or
otherwise, other than current liabilities shown in the Interim Balance
Sheet, current liabilities incurred since June 30, 1999 in the Ordinary
Course of Business and prepayments of obligations in accordance with
normal and customary past practices,
(iv) declared, set aside or paid any dividend or other distribution
(whether in cash, stock or property) in respect of its capital stock,
(v) mortgaged, pledged or subjected to any Encumbrance, or agreed
so to do, any of the assets material to the operation of its business,
tangible or intangible,
(vi) sold, assigned, transferred, conveyed, leased or otherwise
disposed of or agreed to sell, assign, transfer, convey, lease or
otherwise dispose of any of its assets or properties,
(vii) canceled or compromised any debt or claim, except for
immaterial adjustments made in the ordinary course of business, or waived
or released any rights, regardless of whether in the ordinary course of
business, which, in the aggregate, are material,
(viii) entered into any material transaction, contract or
commitment,
(ix) declared, set aside, or made any payment to its executives,
board members, employees or any other person either in contemplation of
this Agreement or otherwise in the form of a bonus or other form of
incentive or other nonrecurring compensation,
(x) increased, or agreed to increase, the monthly rate of
compensation payable or to become payable by it to any of its officers,
directors or other key management employees over the rate being paid to
-18-
them or accrued for at June 30, 1999,
(xi) increased, or agreed to increase, the rate of compensation
payable or to become payable by it to any of its employees (other than
officers, directors and other key management employees) over the rate
being paid to them or accrued for at June 30, 1999, or other than in
accordance with its established procedures for annual or other periodic
reviews and increments,
(xii) made or permitted, or agreed to make or permit, any amendment
or termination of any material contract, mortgage, lease, license,
agreement or other instrument to which it is a party or by which any of
its properties or assets are bound,
(xiii) made, or agreed to make, any accrual or arrangement for
or payment of bonuses or special compensation in excess of $5,000 of any
kind to any employee (or $15,000 in the aggregate for all employees),
(xiv) directly or indirectly paid, or agreed to pay, any severance
or termination pay to any employee in excess of $5,000 (or $15,000 in the
aggregate for all employees) which was not accrued for at June 30, 1999,
(xv) made, or agreed to make, any changes in its accounting methods
or practices,
(xvi) made capital expenditures which, in the aggregate, exceed
$25,000, or, entered into any commitment therefor, or
(xvii) experienced any Material Adverse Effect.
3.14 Tax Matters.
(a) Except as provided in the Disclosure Schedule, (a) all (i) Tax
Returns required to be filed on or before the Closing Date by or with
respect to Diamond or the business operations of Diamond have been or will
be duly and timely filed, (ii) items of income, gain, loss, deduction and
credit or other items required to be included in each such Tax Return have
been or will be so included and all information provided in each such Tax
Return is true, correct and complete, (iii) Taxes which have become or
will become due with respect to the period covered by each such Tax Return
and for any period from the end of the period covered by such Tax Return
to the Effective Time of the Merger have been or will be timely paid in
full (by Shareholders in the case of federal and state income Taxes
incurred by virtue of the business operations and affairs of Diamond), and
(iv) withholding Tax requirements imposed on or with respect to Diamond
have been or will be satisfied in full in all respects. In addition, no
penalty, interest or other charge is or will become due with respect to
the late filing of any such Tax Return or late payment of any such Tax.
(b) Except as set forth in the Disclosure Schedule, there is no
claim against Diamond or any Shareholder for any Taxes, and no assessment,
deficiency or adjustment has been asserted or proposed with respect to any
Tax Return of or with respect to Diamond.
-19-
(c) Except as set forth in the Disclosure Schedule, there is not
in force any extension of time with respect to the due date for the filing
of any Tax Return of or with respect to Diamond or any waiver or agreement
for any extension of time for the assessment or payment of any Tax of or
with respect to Diamond.
(d) Diamond is not a party to any Tax allocation or sharing
agreement and no payments are due or will become due by Diamond pursuant
to any such agreement or arrangement.
(e) Except as set forth in the Disclosure Schedule, none of the
property of Diamond is held in an arrangement that could be classified as
a partnership for Tax purposes.
3.15 Trademarks, Copyrights, Etc.
(a) Diamond owns or has the right to use all patents, patent
rights, trademarks, trade names, service marks, trade secrets, copyrights
and other proprietary intellectual property rights ("Intellectual
Property"), as are necessary in connection with the business of Diamond,
taken as a whole, except where the failure to have such Intellectual
Property, individually or in the aggregate, has not had, and would not
reasonably be expected to have, a Material Adverse Effect on Diamond.
(b) There have not been asserted against Diamond any claims that
any product, activity, name, xxxx, design or operation of Diamond
infringes upon or involves, or had resulted in the infringement of, any
proprietary right of any other person, corporation or other entity; and no
proceedings have been instituted, are pending or are threatened which
challenge the rights of Diamond with respect thereto, in each case, which
would have a Material Adverse Effect on the business, properties,
financial condition or results of operations of Diamond.
3.16 Title to Properties; Encumbrances. The Disclosure Schedule contains
a complete and accurate list of all real property, leaseholds, and related
equipment, vehicles and other tangible property or equipment owned by Diamond
which individually has a book value in excess of $5,000. Diamond owns (with
good and marketable title in the case of real property, subject only to the
matters permitted by the following sentence) all the properties and assets
(whether real, personal, or mixed and whether tangible or intangible) that it
purports to own or which are reflected as owned in the books and records of
Diamond, including all of the properties and assets reflected in the Balance
Sheet and the Interim Balance Sheet (except for assets held under capitalized
leases disclosed or not required to be disclosed in the Disclosure Schedule and
personal property sold since the date of the Balance Sheet and the Interim
Balance Sheet, as the case may be, in the Ordinary Course of Business), and all
of the properties and assets purchased or otherwise acquired by Diamond since
the date of the Balance Sheet (except for personal property acquired and sold
since the date of the Balance Sheet in the Ordinary Course of Business and
consistent with past practice). Except as noted in the Disclosure Schedule, all
-20-
material properties and assets reflected in the Balance Sheet and the Interim
Balance Sheet are free and clear of all Encumbrances and are not, in the case of
real property, subject to any rights of way, building use restrictions,
exceptions, variances, reservations, or limitations of any nature except, with
respect to all such properties and assets, (a) liens for current taxes not yet
due, minor imperfections of title, if any, none of which is substantial in
amount, materially detracts from the value or impairs the use of the property
subject thereto, or impairs the operations of Diamond, and (b) with respect to
real property, rights of way, building use restrictions, exceptions, variances,
reservations, limitations of any nature,zoning laws and other land use
restrictions that do not materially impair the present use of the property
subject thereto.
3.17 Condition and Sufficiency of Assets. The buildings, plants,
structures, and equipment of Diamond are structurally and mechanically sound,
are in good operating condition and repair, and are adequate for the uses to
which they are being put, and none of such buildings, plants, structures, or
equipment is in need of maintenance or repairs except for ordinary, routine
maintenance and repairs consistent with Diamond's Ordinary Course of Business.
The building, plants, structures, and equipment of Diamond are sufficient for
the continued conduct of Diamond's business after the Closing in substantially
the same manner as conducted prior to the Closing.
3.18 Accounts Receivable. All accounts receivable of Diamond that are
reflected on the Balance Sheet or the Interim Balance Sheet or on the accounting
records of Diamond as of the Closing Date (collectively, the "Accounts
Receivable") represent or will represent valid obligations arising from sales
actually made or services actually performed in the Ordinary Course of Business.
Unless paid prior to the Closing Date, the Accounts Receivable to the knowledge
of Shareholders are or will be as of the Closing Date collectible. Each of the
Accounts Receivable either has been or will be collected in full, without any
set-off, within 120 days after the day on which it first becomes due and
payable. There is no contest or claim, other than returns in the Ordinary Course
of Business, under any Contract with any obligor of an Accounts Receivable
relating to the amount or validity of such Accounts Receivable.
3.19 Inventory. All inventory of Diamond, whether or not reflected in
the Balance Sheet or the Interim Balance Sheet, consists of a quality and
quantity usable and salable in the Ordinary Course of Business, except for
obsolete items and items of below-standard quality, all of which have been
written off or written down to net realizable value in the Balance Sheet or
Interim Balance Sheet or on the accounting records of Diamond as of the Closing
Date, as the case may be. All inventories not written off have been priced at
cost. The quantities of each item of inventory (whether raw materials,
work-in-process, or finished goods) are not excessive, but are reasonable in
the present circumstances of Diamond.
3.20 No Undisclosed Liabilities. Diamond has no liabilities or
obligations of any nature (whether known or unknown and whether absolute,
accrued, contingent, or otherwise) except for liabilities or obligations set
forth in the Disclosure Schedule, otherwise disclosed herein or reflected in the
Balance Sheet or Interim Balance Sheet and current liabilities incurred in the
Ordinary Course of Business since the respective dates thereof.
-21-
3.21 Employee Benefit Plans.
(a) The Disclosure Schedule sets forth a complete and accurate
list of each of the following which is or has been sponsored, maintained
or contributed to by Diamond or any trade or business, whether or not
incorporated (a "Diamond ERISA Affiliate"), or in which any employee or
co-employee of Diamond participates or is covered, that together with
Diamond would be considered affiliated with Diamond under Section 414(b),
(c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA for the benefit
of any person who, as of the Closing, is a current or former employee or
subcontractor of Diamond or any Diamond ERISA Affiliate: (i) each
"employee benefit plan," as such term is defined in Section 3(3) of ERISA
(each, a "Diamond Plan"); and (ii) each personnel policy, stock option
plan, bonus plan or arrangement, incentive award plan or arrangement,
vacation policy, severance pay plan, policy, program or agreement,
deferred compensation agreement or arrangement, executive compensation or
supplemental income arrangement, retiree benefit plan or arrangement,
fringe benefit program or practice (whether or not taxable), employee
loan, consulting agreement, employment agreement and each other employee
benefit plan, agreement, arrangement, program, practice or understanding
which is not described in Section 3.21(c) (each, a "Diamond Benefit
Program or Agreement") (such Diamond Plans and Diamond Benefit Programs or
Agreements are sometimes collectively referred to in this Agreement as the
"Diamond Employee Benefit Plans").
(b) True, correct and complete copies of each of the Diamond Plans
and related trusts, if applicable, including all amendments thereto, have
been furnished or made available to AMG. There has also been furnished or
made available to AMG, with respect to each Diamond Plan required to file
such report and description, the report on Form 5500 for the past three
years, to the extent applicable, and the most recent summary plan
description. True, correct and complete copies or descriptions of all
Diamond Benefit Programs or Agreements have also been furnished or made
available to AMG.
(c) Except as otherwise set forth in the Disclosure
Schedule: (i) neither Diamond nor any Diamond ERISA Affiliate
contributes to or has an obligation to contribute to, nor has at any time
contributed to or had an obligation to contribute to, a multiemployer plan
within the meaning of Section 3(37) of ERISA or any other plan subject to
Title IV of ERISA; (ii) each of Diamond and the Diamond ERISA Affiliates
has performed all obligations, whether arising by operation of law or by
contract, including ERISA and the Code, required to be performed by it in
connection with the Diamond Employee Benefit Plans, and, to the knowledge
of Diamond or Shareholders, there have been no defaults or violations by
any other party to the Diamond Employee Benefit Plans; (iii) all reports,
returns, notices, disclosures and other documents relating to the Diamond
Plans required to be filed with or furnished to governmental entities,
plan participants or plan beneficiaries have been timely filed or
furnished in accordance with applicable law, and each Diamond Employee
Benefit Plan has been administered in compliance with its governing
written documents; (iv) each of the Diamond Plans intended to be qualified
under Section 401 of the Code satisfies the requirements of such Section
-22-
and has received a favorable determination letter from the IRS regarding
such qualified status and has not been amended, operated or
administered in a way which would adversely affect such qualified status;
(v) there are no actions, suits or claims pending (other than routine
claims for benefits) or, to the knowledge of Diamond or Shareholders,
contemplated or threatened against, or with respect to, any of the
Diamond Employee Benefit Plans or their assets; (vi) each trust
maintained in connection with each Diamond Plan, which is qualified
under Section 401 of the Code, is tax exempt under Section 501 of
the Code; (vii) all contributions required to be made to the Diamond
Employee Benefit Plans have been made timely; (viii) no accumulated
funding deficiency, whether or not waived, within the meaning of
Section 302 of ERISA or Section 412 of the Code has been incurred,
and there has been no termination or partial termination of any
Diamond Plan within the meaning of Section 411(d)(3) of the Code;
(ix) to the knowledge of Diamond or Shareholders, no act, omission
or transaction has occurred which could result in imposition on
Diamond or any Diamond ERISA Affiliate of (A) breach of fiduciary
duty liability damages under Section 409 of ERISA, (B) a civil
penalty assessed pursuant to subsections (c), (i) or (1) of Section
502 of ERISA or (C) a tax imposed pursuant to Chapter 43 of
Subtitle D of the Code; (x) to the knowledge of Diamond or
Shareholders, there is no matter pending with respect to any of the
Diamond Plans before the IRS, the Department of Labor or the Pension
Benefit Guaranty Corporation (the "PBGC"); (xi) each of the Diamond
Employee Benefit Plans complies, in form and operation, with the
applicable provisions of the Code and ERISA; (xii) each Diamond
Employee Benefit Plan may be unilaterally amended or terminated in
its entirety without any liability or other obligation; (xiii)
Diamond and the Diamond ERISA Affiliates have no liabilities or
other obligations, whether actual or contingent, under any Diamond
Employee Benefit Plan for post-employment benefits of any nature
(other than COBRA continuation coverage); and (xiv) all employees of
Diamond and all of the Diamond ERISA Affiliates are employed at
will such employment may be terminated by Diamond, any of the
Diamond ERISA Affiliates or AMG without material obligation
commitment or obligation.
(d) Except as otherwise set forth on the Disclosure Schedule, no
employee is currently on a leave of absence due to sickness or disability
and no claim is pending or expected to be made by an employee, former
employee or independent contractor for workers' compensation benefits.
(e) With respect to the Diamond Employee Benefit Plans, there
exists no condition or set of circumstances in connection with Diamond
that could be expected to result in liability reasonably likely to have a
Material Adverse Effect on Diamond under ERISA, the Code or any other
applicable law. With respect to the Diamond Employee Benefit Plans,
individually and in the aggregate, there are no unfunded benefit
obligations which have not been disclosed in Section 3.20 hereof, on the
financial statements of Diamond which obligations are reasonably likely to
have a Material Adverse Effect on Diamond.
-23-
(f) Except as set forth in the Disclosure Schedule, neither the
execution or delivery of this Agreement nor the consummation of the
Contemplated Transactions will result in any payment becoming due to any
employee or group of employees of Diamond.
3.22 Insurance. The insurance coverage maintained by Diamond at the date
of this Agreement is in the judgment of Diamond and Shareholders adequate in
scope and amount in view of the properties owned and operations carried on by
it. Diamond has complied in all material respects with the provisions of all
such policies. The Disclosure Schedule lists each of the insurance policies
issued to Diamond providing coverage for Diamond or any of its directors,
officers, employees, agents or other representatives, for property damage,
liability, workers' compensation, employers' liability, casualty, auto,
executive or key man life, officer and director liability, fiduciary liability,
business interruption, and any other coverage deemed by Diamond and Shareholders
to be material to Diamond's operations, assets or personnel. The Disclosure
Schedule sets forth the coverage of each of such policies and the limits of such
coverage.
3.23 Compliance with Laws. Except as described in the Disclosure
Schedule:
(a) Diamond is in compliance in all material respects with all
Legal Requirements applicable to any of its properties or assets and/or
the ownership, operation and use thereof, and Diamond has not received
notice of any noncompliance or alleged noncompliance with any Legal
Requirement relating or applicable to any of its properties or assets or
to the operation of its business, the existence or enforcement of which
would have a Material Adverse Effect on AMG's or TULSAT's ability to
operate them on the same basis as currently conducted and operated or
which would require the payment of material refunds, fines, penalties or
restitution in respect of matters occurring prior to the Effective Time of
the Merger, including, without limitation, any Legal Requirement relating
to (i) wages, hours, hiring, non-discrimination, promotion, retirement,
benefits, pensions or working conditions, (ii) air, water, noise, odor or
solid or liquid waste (including the generation, treatment, storage,
disposal or transportation thereof), (iii) health and safety, (iv) zoning,
(v) the production, processing, advertising, sales or warranty of products
or services of its business or (vi) trade or antitrust regulations.
(b) Without limiting the generality of the foregoing, except as
otherwise set forth in the Disclosure Schedule, (i) the properties, assets
and operations of Diamond are in compliance in all material respects with
all applicable Legal Requirements relating to public and worker health and
safety(collectively, "Worker Safety Laws") and Environmental Laws, except
for any violation that, individually or in the aggregate, has not had, or
would not reasonably be expected to have, a Material Adverse Effect on
Diamond; and (ii) with respect to such properties, assets and operations,
including any previously owned, leased or operated properties, assets or
operations, as of the date hereof and at the Effective Time of the Merger,
there are no past, present or, to the knowledge of Diamond and
Shareholders, reasonably anticipated future events, conditions,
circumstances, activities, practices, incidents, actions or plans of
Diamond that may interfere with or prevent compliance or continued
compliance with applicable Worker Safety Laws and Environmental Laws,
other than any such interference or prevention that, individually or in
the aggregate, has not had, or would not reasonably be expected to have, a
Material Adverse Effect on Diamond.
-24-
(c) (i) To the knowledge of Diamond and the Shareholders, Diamond
has not caused or permitted any property, asset, operation, including any
previously owned property, asset or operation, to use generate,
manufacture, refine, transport, treat, store, handle, dispose, transfer or
process hazardous or toxic materials, substances, wastes, pollutants or
contaminants, except in material compliance with all Environmental Laws
and Worker Safety Laws, other than any such activity that, individually or
in the aggregate, has not had, and would not reasonably be expected to
have, a Material Adverse Effect on Diamond; (ii) Diamond has not reported
to any Governmental Authority any material violation of an Environmental
Law or any Release, discharge or emission of any Hazardous Materials,
pollutants or contaminants, other than any such violation, release,
discharge or emission that, individually or in the aggregate, has not had,
and would not reasonably be expected to have, a Material Adverse Effect on
Diamond, and (iii) as of the date hereof and at the Effective Time of the
Merger, neither Diamond nor any Shareholder has any Knowledge of any
pending, threatened or reasonably anticipated claims or liabilities under
CERCLA, 42 U.S.C. sec. 9601 et seq., RCRA, 42 U.S.C. sec.6901 et seq., or
equivalent state law provisions and no knowledge that any current or
former property, asset or operation is identified or currently proposed
for the National Priorities List at 40 CFR sec. 300, Appendix B, or the
CERCLIS or equivalent state lists or hazardous substances release sites.
3.24 Certain Payments. Diamond has not nor has any director, officer,
agent, Shareholder or employee of Diamond, or any other Person associated with
or acting for or on behalf of Diamond, directly or indirectly, (a) made any
illegal contribution, gift, bribe, rebate, payoff, influence payment, kickback,
or other payment to any Person, private or public, regardless of form, whether
in money, property, or services other than routine entertainment expenses (i)
to obtain favorable treatment in securing business, (ii) to pay for favorable
treatmentfor business secured, (iii) to obtain special concessions or for
special concessions already obtained, for or in respect of Diamond or any
Related Personof Diamond, or (iv) in violation of any Legal Requirement, (b)
established or maintained any fund or asset that has not been recorded in the
books and records of Diamond.
3.25 Disclosure.
(a) No representation or warranty of Diamond or any of
Shareholders in this Agreement is false or misleading in any material
respect and no statement in the Disclosure Schedule omits to state a
material fact necessary to make the statements herein or therein, in light
of the circumstances in which they were made, not misleading.
(b) There is no fact known to either Diamond or any of
Shareholders that has specific application to either Shareholders or
Diamond (other than general economic or industry conditions) and that
-25-
materially adversely affects or materially threatens, the assets,
business, prospects, financial condition, or results of operations of
Diamond that has not been set forth in this Agreement or the Disclosure
Schedule.
3.26 Relationships With Related Persons. Except as set forth in the
Disclosure Schedule, neither Shareholders nor any Related Person of Shareholders
nor Diamond has, or since the first day of the next to last completed fiscal
year of Diamond has had, any interest in any property (whether real, personal,
or mixed and whether tangible or intangible), used in or pertaining to Diamond's
businesses. Except as set forth in the Disclosure Schedule, no Shareholder or
any Related Person of Shareholders or of Diamond is, or since the first day of
the next to last completed fiscal year of Diamond has owned (of record or as a
beneficial owner) an equity interest or any other financial or profit interest
in, a Person that has (i) had business dealings or a material financial interest
in any transaction with Diamond, or (ii) engaged in competition with Diamond
with respect to any line of the products or services of Diamond in any market
presently served by Diamond. Except as disclosed in the Disclosure Schedule,
no Shareholder or any Related Person of Shareholders or of Diamond is a party to
any Contract with, or has any claim or right against, Diamond.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF AMG, MERGER SUB AND TULSAT
AMG, Merger Sub and TULSAT hereby jointly and severally represent and
warrant to Diamond and Shareholders as follows:
4.1 Organization and Standing. Each of AMG, Merger Sub and TULSAT is a
corporation duly organized and existing under, and by virtue of, the laws of the
respective states of their incorporation and is in good standing under such
laws. Each of AMG, Merger Sub and TULSAT has the requisite corporate power and
authority to own, operate and lease its properties and assets, and to carry on
its business as presently conducted and as proposed to be conducted. Each of
AMG, Merger Sub and TULSAT is qualified, licensed or domesticated as a foreign
corporation in all jurisdictions where the nature of its business conducted or
the character of its properties owned or leased makes such qualification,
licensing or domestication necessary at this time except in those jurisdictions
where the failure to be so qualified or licensed and in good standing does not
and will not have a Material Adverse Effect on AMG, Merger Sub and TULSAT taken
as a whole, the conduct of their business, their financial condition, or the
ownership or operation of their properties.
4.2 Corporate Power.
(a) Each of AMG, Merger Sub and TULSAT has all requisite corporate
power and authority to enter into and perform all of its obligations under
this Agreement. The execution and delivery of this Agreement by AMG,
Merger Sub and TULSAT and the consummation by Diamond of the Contemplated
Transactions have been duly authorized by all necessary corporate action
on the part of AMG, Merger Sub and TULSAT. This Agreement has been duly
-26-
executed and delivered by AMG, Merger Sub and TULSAT and constitutes the
legal, valid and binding obligation of AMG, Merger Sub and TULSAT,
enforceable against AMG, Merger Sub and TULSAT in accordance with its
terms.
(b) Neither the execution and delivery of this Agreement by AMG,
Merger Sub and TULSAT nor the consummation of the Contemplated
Transactions to be performed by AMG, Merger Sub and TULSAT will (i)
violate or conflict with any provision of the Organizational Documents as
currently in effect, of AMG, Merger Sub and TULSAT or (ii) violate or
conflict with any provision of any law, rule, regulation, order, permit,
certificate, writ, judgment, injunction, decree, determination, award or
other decision of any Governmental Authority, other regulatory or self-
regulatory body or association or arbitrator binding upon AMG, Merger Sub
and TULSAT or any of their properties, except where such violations or
conflicts would not in the aggregate have a Material Adverse Effect on the
business, properties, financial condition or results of operations of AMG,
Merger Sub and TULSAT or on the ability of AMG, Merger Sub and TULSAT to
consummate the Contemplated Transactions, and except for violations that
will be cured, waived or terminated prior to the Effective Time of the
Merger.
(c) Neither the execution and delivery of this Agreement nor the
consummation of the Contemplated Transactions to be performed by AMG,
Merger Sub and TULSAT will result in a breach of or constitute a default
(or with notice or lapse of time or both result in a breach of or
constitute a default) under, or give rise to a right of termination,
cancellation, acceleration or repurchase of any obligation or a right of
first refusal with respect to any material property or asset or a loss of
a material benefit or the imposition of a material penalty under, any of
the terms, conditions or provisions of (i) any mortgage, indenture, loan
or credit agreement or any other agreement or instrument evidencing
indebtedness for money borrowed to which either AMG or TULSAT is a party
or by which AMG, Merger Sub and TULSAT or any of their properties if bound
or affected, or pursuant to which either AMG or TULSAT has guaranteed the
indebtedness or preferred stock of any Person, or (ii) any Contract or
instrument to which either AMG or TULSAT is a party or by which AMG,
Merger Sub and TULSAT or any of their properties is bound or affected,
except for any such breaches, defaults, rights, losses or penalties that
do not have a Material Adverse Effect on the business, properties,
financial condition or results of operations of either AMG or TULSAT or on
the ability of either AMG or TULSAT to consummate the Contemplated
Transactions, or with respect to which the Consents, listed on the
Disclosure Schedule attached hereto will be obtained prior to the
Effective Time of the Merger.
(d) AMG, Merger Sub and TULSAT have made or obtained each
registration, filing, submission, license, permit, certificate,
determination or governmental approval necessary to enable them to carry
on their business, except for those which the failure to have does not
have a Material Adverse Effect on the business, properties, financial
condition or results of operations of either AMG or TULSAT. All such
registrations, filings and submissions with any Governmental Authority
relating to the operations of AMG, Merger Sub and TULSAT were in material
compliance with applicable law when filed, and no material deficiencies
-27-
have been asserted by any such authority with respect to such
registrations, filings or submissions.
4.3 Subsidiaries. AMG has no Subsidiaries other than TULSAT and Merger
Sub. AMG does not own, directly or indirectly, shares of stock or other
interests in any other corporation, association, joint venture, or business
organization except for a 27% interest that AMG acquired in Ventures Education
Systems Corporation, a New York corporation. TULSAT has no Subsidiaries.
4.4 Capitalization. The authorized capital stock of AMG consists solely
of 10,000,000 shares of AMG Common Stock, par value $.01 per share, of which a
total of 9,720,846 shares were outstanding on November 22, 1999, and 1,000,000
shares of AMG preferred stock, par value $1.00 per share, of which 200,000
shares of its Series A 5% Cumulative Convertible Preferred Stock and 300,000
shares of its Series B 7% Cumulative Preferred Stock were outstanding on
November 22, 1999. The issued and outstanding shares of AMG common stock and
preferred stock are and, upon consummation of the Contemplated Transactions, the
issued AMG Preferred Stock will be, fully paid and nonassessable. Except as
disclosed in the Disclosure Materials or the Disclosure Schedule, there are no
outstanding options, warrants or other rights, including preemptive rights,
entitling the holder thereof to purchase or acquire shares of the AMG capital
stock.
4.5 Authorization.
(a) All corporate action on the part of AMG, Merger Sub and
TULSAT, and their respective officers, directors, and shareholders
necessary for the sale and issuance of AMG Securities pursuant thereto and
the performance of AMG's and TULSAT's obligations hereunder has been taken
or will be taken prior to the Closing. This Agreement has been duly
executed and delivered on behalf of AMG, Merger Sub and TULSAT and is a
legal, valid and binding obligation of AMG, Merger Sub and TULSAT,
enforceable against AMG, Merger Sub and TULSAT in accordance with its
terms. The execution, delivery and performance by AMG, Merger Sub and
TULSAT of this Agreement does not require the Consent of any Person, and
does not require any action by or in respect of any filing with, or the
consent, approval or authorization of, any Governmental Authority, except
those consents, approvals or authorizations that have been obtained, and
do not violate any provision of any applicable law or regulation or any
judgment, decree or order to which either AMG or TULSAT is subject.
(b) The AMG Securities, when issued in compliance with the
provisions of this Agreement, will be validly issued, fully paid and
nonassessable, and will be free of any Encumbrances; provided, however,
that such securities will be subject to restrictions on transfer under
state and/or federal securities laws as set forth herein, and as may be
required by future changes in such laws.
(c) No shareholder of AMG has any right of first refusal or any
preemptive rights in connection with the issuance of AMG Securities or of
any other capital stock of AMG.
-28-
4.6 Disclosure Materials. AMG has provided to Shareholders a copy of the
Disclosure Materials pursuant to this Agreement. Each of the Disclosure
Materials, on the date of filing thereof with the SEC, conformed or will conform
in all material respects with the requirements of the Securities Act and the
Exchange Act and the rules and regulations promulgated by the SEC thereunder.
4.7 Compliance With Other Instruments. None of AMG, Merger Sub nor
TULSAT is in violation of any terms of its Organizational Documents, or in any
material respect of any mortgage, indenture, contract, agreement, instrument,
or, to the knowledge of AMG, Merger Sub and TULSAT, any Order of Legal
Requirement applicable to it. The execution, delivery, and performance by AMG,
Merger Sub and TULSAT of this Agreement, and the issuance of the AMG Securities
pursuant hereto, will not result in any such violation or be in conflict with or
constitute a default under any such term, or cause the acceleration of maturity
of any loan or material obligation to which AMG or TULSAT is a party or by which
it is bound or with respect to which it is an obligor or guarantor, or result in
the creation or imposition of any material Encumbrance of any kind whatsoever
upon, or, to the knowledge of AMG, Merger Sub and TULSAT, give to any other
Person any interest or right (including any right of termination or
cancellation) in or with respect to any of the material properties, assets,
business or agreements of AMG or TULSAT.
4.8 Consents and Approvals. No Consent, registration, declaration or
filing with, or permit from, any Governmental Authority is required by or with
respect to AMG or TULSAT in connection with the execution and delivery of this
Agreement by AMG, Merger Sub and TULSAT or the consummation by AMG of the
Contemplated Transactions, except for the following: (a) any such Consent,
registration, declaration, filing or permit which the failure to obtain or make
would not, individually or in the aggregate, have a Material Adverse Effect on
AMG, Merger Sub and TULSAT taken as a whole; (b) such other compliance with the
Exchange Act and the Securities Act and the rules and regulations of the SEC
thereunder as may be required in connection with this Agreement and the
Contemplated Transactions and the obtaining from the SEC of such orders as may
be so required; (c) such filings and approvals as may be required by any
applicable state securities, "blue sky" or takeover laws; and (d) such filings
and approvals as may be required by any pre-merger notification, securities,
corporate or other law, rule or regulation. No Third-Party Consent is required
by or with respect to AMG or TULSAT in connection with the execution and
delivery of this Agreement or the consummation of the Contemplated Transactions,
except for any such Third-Party Consent which the failure to obtain would not,
individually or in the aggregate, have a Material Adverse Effect on AMG, Merger
Sub and TULSAT taken as a whole.
4.9 Untrue Statements. The Disclosure Materials, at the respective dates
thereof, did not include any untrue statement of a material fact or omit to
state any material fact necessary to make the statements made therein not
misleading.
4.10 Securities Registration and Filings. The outstanding shares of AMG's
Common Stock are registered pursuant to Section 12(g) of the Exchange Act. AMG
-29-
has timely filed all reports required by Section 13 or 15(d) of the Exchange Act
from September 30, 1999, through the date hereof. All of such reports were, at
the time they were filed, complete and accurate in all material respects and did
not include an untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
4.11 Litigation. There is no litigation, proceeding or investigation
pending or, to the knowledge of AMG, Merger Sub and TULSAT, threatened or
investigation pending against or affecting AMG, Merger Sub and TULSAT that is
reasonably likely to have a Material Adverse Effect on AMG or TULSAT or that
questions the validity or enforceability of this Agreement or any other
document, instrument or agreement to be executed and delivered by AMG, Merger
Sub and TULSAT in connection with the Contemplated Transactions. Except as set
forth in the Disclosure Schedule, None of AMG, Merger Sub nor TULSAT is subject
to any outstanding Order.
4.12 Brokers. No broker, finder, investment banker or other Person is or
will be, in connection with the Contemplated Transactions, entitled to any
brokerage, finder's or other fee or compensation based on any arrangement or
agreement made by or on behalf of AMG or TULSAT and for which Shareholders shall
have any obligations or liability.
4.13 Absence of Certain Changes or Events. To the knowledge of AMG,
Merger Sub and TULSAT, since June 30, 1999, none of AMG, Merger Sub nor TULSAT
has suffered any Material Adverse Effect.
4.14 Compliance with Laws. Except as described in the Disclosure
Schedule:
(a) AMG, Merger Sub and TULSAT are in compliance in all material
respects with all Legal Requirements applicable to any of their properties
or assets and/or the ownership, operation and use thereof, and None of
AMG, Merger Sub nor TULSAT has received notice of any noncompliance or
alleged noncompliance with any Legal Requirement relating or applicable to
any of their properties or assets or to the operation of their business,
the existence or enforcement of which would have a Material Adverse Effect
on AMG's or TULSAT's ability to operate them on the same basis as
currently conducted and operated or which would require the payment of
material refunds, fines, penalties or restitution in respect of matters
occurring prior to the Effective Time of the Merger, including, without
limitation, any Legal Requirement relating to (i) wages, hours, hiring,
non-discrimination, promotion, retirement, benefits, pensions or working
conditions, (ii) air, water, noise, odor or solid or liquid waste
(including the generation, treatment, storage, disposal or transportation
thereof), (iii) health and safety, (iv) zoning, (v) the production,
processing, advertising, sales or warranty of products or services of its
business or (vi) trade or antitrust regulations.
(b) Without limiting the generality of the foregoing, except as
otherwise set forth in the Disclosure Schedule, (i) the properties, assets
and operations of AMG, Merger Sub and TULSAT are in compliance in all
material respects with all applicable Legal Requirements relating to
-30-
public and worker health and safety (collectively, "Worker Safety Laws")
and Environmental Laws, except for any violation that, individually or in
the aggregate, has not had, or would not reasonably be expected to have, a
Material Adverse Effect on AMG, Merger Sub and TULSAT; and (ii) with
respect to such properties, assets and operations, including any
previously owned, leased or operated properties, assets or operations, as
of the date hereof and at the Effective Time of the Merger, there are no
past, present or, to the Knowledge of AMG, Merger Sub and TULSAT,
reasonably anticipated future events, conditions, circumstances,
activities, practices, incidents, actions or plans of AMG, Merger Sub and
TULSAT that may interfere with or prevent compliance or continued
compliance with applicable Worker Safety Laws and Environmental Laws,
other than any such interference or prevention that, individually or in
the aggregate, has not had, or would not reasonably be expected to have, a
Material Adverse Effect on AMG, Merger Sub and TULSAT.
(c)(i) To the knowledge of AMG, Merger Sub and TULSAT, none of AMG,
Merger Sub nor TULSAT has caused or permitted any property, assets,
operation, including any previously owned property, asset or operation, to
use, generate, manufacture, refine, transport, treat, store, handle,
dispose, transfer or process hazardous or toxic materials, substances,
wastes, pollutants or contaminants, except in material compliance with all
Environmental Laws and Worker Safety Laws, other than any such activity
that, individually or in the aggregate, has not had, and would not
reasonably be expected to have, a Material Adverse Effect on AMG, Merger
Sub and TULSAT; (ii) none of AMG, Merger Sub nor TULSAT has reported to
any Governmental Authority any material violation of an Environmental Law
or any Release, discharge or emission of any Hazardous Materials,
pollutants or contaminants, other than any such violation, release,
discharge or emission that, individually or in the aggregate, has not had,
and would not reasonably be expected to have, a Material Adverse Effect on
AMG, Merger Sub and TULSAT, and (iii) as of the date hereof and at the
Effective Time of the Merger, none of AMG, Merger Sub nor TULSAT has any
knowledge of any pending, threatened or reasonably anticipated claims or
liabilities under CERCLA, 42 U.S.C. sec. 9601 et seq., RCRA, 42 U.S.C.
sec. 6901 et seq., or equivalent state law provisions and no knowledge
that any current or former property, asset or operation is identified or
currently proposed for the National Priorities List at 40 CFR sec. 300,
Appendix B, or the CERCLIS or equivalent state lists or hazardous
substances release sites.
4.15 Disclosure.
(a) No representation or warranty of AMG or TULSAT in this
Agreement is false or misleading in any material respect and no statement
in the Disclosure Schedule omits to state a material fact necessary to
make the statements herein or therein, in light of the circumstances in
which they were made, not misleading.
(b) There is no fact known to either AMG or TULSAT that has
specific application to either AMG or TULSAT (other than general economic
-31-
or industry conditions) and that materially adversely affects or
materially threatens, the assets, business, prospects, financial
condition, or results of operations of either AMG or TULSAT that has not
been set forth in this Agreement or the Disclosure Schedule.
4.16 Tax Treatment. None of AMG, Merger Sub nor TULSAT has taken, agreed
or failed to take, or intends to take any action or has any knowledge of any
fact or circumstance that would prevent the Merger from qualifying as a
reorganization within the meaning of Section 368 of the Code.
ARTICLE V
COVENANTS
5.1 Certificate of Designation. Prior to the Closing, AMG shall take
all such reasonable actions as may be required or appropriate to approve the
certificate of designation in the form attached hereto as Exhibit A, thereby
creating, designating and authorizing the issuance of the AMG Preferred Stock to
be issued in connection with the Closing.
5.2 Expenses. All legal, accounting and other fees and expenses
incurred by Shareholders and/or Diamond in connection with this Agreement and
the transactions contemplated herein shall be paid by Shareholders. AMG shall
bear its own and those of TULSAT expenses incurred in connection with this
Agreement and the transactions contemplated herein.
5.3 Further Assurances. Each of the parties hereto shall execute such
further documents, agreements, certificates and other instruments and take such
further actions as may be reasonably necessary or appropriate to carry out the
provisions hereof and the transactions provided for herein.
5.4 Public Announcement. Prior to the Closing, Diamond, Shareholders and
AMG shall consult with each other before they or TULSAT issues any press release
or otherwise makes any public statements with respect to the Contemplated
Transactions none of such parties shall issue any press release or make any such
public statement prior to (a) obtaining the approval of the other party or (b)
setting the stated value of the AMG Preferred Stock pursuant to Section 2.5(d)
hereof; provided, however, that such approval shall not be required where such
release or announcement is required by applicable law; and provided further,
that either Shareholders, Diamond or AMG may respond to inquiries by the press
or others regarding the Contemplated Transactions, so long as such responses are
consistent with such party's previously issued press releases.
5.5 Conduct of Business by Diamond Pending Closing. From the date of
this Agreement until Closing, Diamond will conduct its business only in the
ordinary and usual course consistent with past practices to maintain Diamond's
value, customers, reputation and goodwill. In addition, and without limiting
the breadth or force of the foregoing covenant, Diamond agrees that prior to
Closing:
-32-
(a) Except as provided in the Disclosure Schedule or elsewhere in
this Agreement, Diamond will not (i) amend its certificate of
incorporation or bylaws; (ii) split, combine or reclassify any of its
outstanding capital stock or equity interests; (iii) declare, set aside or
pay any dividends or other distributions (whether payable in cash,
property or securities) with respect to its capital stock or equity
interests; (iv) issue, sell or agree to issue or sell any securities,
including its capital stock, any rights, options or warrants to acquire
its capital stock, or securities convertible into or exchangeable or
exercisable for its capital stock or equity interests; (v) purchase,
cancel, retire, redeem or otherwise acquire any of its outstanding capital
stock or other securities or equity interests; (vi) merge or consolidate
with, or transfer all or a substantial portion of its assets to, another
corporation or other business entity; (vii) liquidate, wind-up or dissolve
(or suffer any liquidation or dissolution); or (viii) enter into any
contract, agreement, commitment or arrangement with respect to any of the
foregoing.
(b) Diamond will not change its method of accounting for the
assets, liabilities, income and expense of Diamond from the method used to
generate the Diamond Financial Statements and Interim Financial
Statements.
(c) Diamond will not (i) acquire any corporation, partnership or
other business entity or any interest therein; (ii) sell, lease or
sublease, transfer, farmout or otherwise dispose of or mortgage, pledge or
otherwise encumber any of its properties or other assets; (iii) sell,
transfer or otherwise dispose of or mortgage, pledge or otherwise encumber
any securities of any other Person; (iv) make any material loans, advances
or capital contributions to, or investments in, any Person; (v) enter into
any material agreement or any other agreement not terminable by any of the
Diamond upon notice of 30 days or less and without penalty or other
obligation; or (vi) enter into any contract, agreement, commitment or
arrangement with respect to any of the foregoing.
(d) Except as provided in the Disclosure Schedule, Diamond will
not (i) permit to be outstanding at any time indebtedness for borrowed
money in excess of $10,000 in the aggregate; (ii) incur any indebtedness
for borrowed money; (iii) assume, endorse (other than endorsements of
negotiable instruments in the ordinary course of business), guarantee or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the liabilities or obligations of any Person; or (iv) enter
into any contract, agreement, commitment or arrangement with respect to
any of the foregoing.
(e) Diamond will not (i) enter into or otherwise become liable or
obligated under or pursuant to (A) any employee benefit, pension or other
plan (whether or nor subject to ERISA), (B) any other stock option, stock
purchase, incentive or deferred compensation plans or arrangements or
other Diamond Plan, or (C) any consulting, employment, severance,
termination or similar agreement with any Person, or amend or extend any
such plan, arrangement or agreement; (ii) except for payments made
pursuant to any Diamond Employee Benefit Plan or any plan, agreement or
-33-
arrangement described in the Disclosure Schedule, grant, or otherwise
become liable for or obligated to pay, any severance or termination
payments, bonuses (other than as provided in the Disclosure Schedule) or
increases in compensation or benefits to, or forgive any indebtedness of,
any employee or consultant; or (iii) enter into any contract, agreement,
commitment or arrangement to do any of the foregoing.
(f) Diamond will neither dispose of any material amount of assets
nor create, incur, assume or permit to exist any Encumbrance on any of its
assets except as set forth in the Disclosure Schedule.
(g) Diamond will (i) pay all Taxes, assessments and other
governmental charges imposed upon any of its assets or with respect to
their franchises, business or assets before any penalty or interest
accrues thereon (except that Shareholders shall pay any federal and state
income Taxes incurred by virtue of the business, results, operations and
affairs of Diamond); (ii) pay all claims (including claims for labor,
services, materials and supplies) that have become due and payable and
which by law have or may become a lien upon any of their assets prior to
the time when any penalty or fine shall be incurred with respect thereto
or any such lien shall be imposed thereon; and (iii) comply in all
material respects with the requirements of all applicable Legal
Requirements, obtain or take all Governmental Actions necessary in the
operation of their businesses, and comply with and enforce the provisions
of all Diamond material Contracts.
(h) Diamond will at all times preserve and keep in full force and
effect its corporate existence and rights and franchises material to its
performance under this Agreement.
(i) Diamond will not engage in any practice, take any action or
permit by inaction any of its representations and warranties contained in
this Agreement to become untrue.
5.6 Lease Agreement. Effective as of the Closing, Diamond will enter
into a lease agreement with Shareholders covering the real property and
improvements currently used by Diamond as its headquarters. The lease shall be
for a period of five (5) years at a rental of Nine- Hundred Dollars ($900) per
month and shall be in the form attached hereto as Exhibit C.
5.7 Distribution of Subsidiaries. Prior to Closing it is agreed that the
assets and the liabilities identified in the Disclosure Schedule, shall be
distributed and assigned to Shareholders. Shareholders shall thereby assume,
and hold AMG, Merger Sub and TULSAT harmless from, any and all liabilities,
commitments, obligations, duties, claims, charges, duties, losses, and other
claims to which Diamond, TULSAT or AMG may become subject by virtue of such
dividend occurring at any time, whether before or after the transfer and
assignment of the ownership of such assets and liabilities to Shareholders.
-34-
5.8 Access and Investigation. Diamond and its Representatives will, (a)
afford AMG and its Representatives and prospective lenders and their
Representatives (collectively, "AMG Advisors") full and free access to Diamond
personnel, equipment, properties, contracts, books and records, and other
documents and data, (b) furnish AMG and AMG Advisors with copies of all such
contracts, books and records, and other existing documents and data as AMG may
reasonably request, and (c) furnish AMG and AMG Advisors with such additional
financial, operating, and other data and information as AMG may reasonably
request.
5.9 Negative Covenant. Except as otherwise expressly permitted by this
Agreement, neither Diamond nor either of Shareholders will, without the prior
written consent of AMG, take any affirmative action, or fail to take any
reasonable action within its control, as a result of which any of the changes or
events listed in Section 3.13 is likely to occur.
5.10 Required Approvals. As promptly as practicable after the date of
this Agreement, Diamond and Shareholders will make all filings required by Legal
Requirements to be made by them in order to consummate the Contemplated
Transactions. Shareholders and Diamond will cooperate with AMG, Merger Sub and
TULSAT with respect to all filings that AMG elects to make or is required by
Legal Requirements to make in connection with the Contemplated Transaction.
5.11 Notification. The parties will promptly notify each other in writing
if any of them becomes aware of any fact or condition that causes or constitutes
a Breach of any of their respective representations and warranties as of the
date of this Agreement, or if any of them becomes aware of the occurrence after
the date of this Agreement of any fact or condition that would (except as
expressly contemplated by this Agreement) cause or constitute a Breach of any
such representation or warranty had such representation or warranty been made as
of the time of occurrence or discovery of such fact or condition. Should any
party become aware of any such fact or condition requiring any change in the
Disclosure Schedule if the Disclosure Schedule were dated the date of the
occurrence or discovery of any such fact or condition, such party will promptly
deliver to the other party a supplement to the Disclosure Schedule specifying
such change. During the same period, each party will promptly notify the other
parties of the occurrence of any Breach of any covenant in this Article V or of
the occurrence of any event that may make the satisfaction of the conditions in
Articles VI or VII impossible or unlikely.
5.12 No Negotiation. Until such time, if any, as this Agreement is
terminated pursuant to Article IX, neither Diamond nor any of Shareholders will,
nor any of their respective Representatives, directly or indirectly solicit,
initiate, or encourage any inquiries or proposals from, discuss or negotiate
with, provide any non-public information to, or consider the merits of any
unsolicited inquiries or proposals from, any Person (other than AMG) relating to
any transaction involving the sale of the business or assets (other than in the
Ordinary Course of Business) of Diamond, or any of the capital stock of AMG, or
any merger, consolidation, business combination, or similar transaction
involving Diamond.
-35-
5.13 Best Efforts. Diamond, Shareholders, AMG, Merger Sub and TULSAT will
use their Best Efforts to cause the conditions in Articles VI, VII and VIII to
the respective obligations of the other parties to be satisfied.
5.14 Approval of Merger. Each of Shareholders agrees that he or she will
sign consents to action in lieu of a special meeting of the shareholders of
Diamond or take any other action as may be appropriate to approve the Merger in
accordance with the provisions of Nebraska Law.
5.15 Use of Xxx Enterprise Name. Shareholders and Diamond understand and
agree that pursuant to the Merger, AMG, Merger Sub and TULSAT will acquire the
proprietary right to the name "Xxx Enterprise." It is the current intent of the
Surviving Corporation to operate the business of Diamond after the Merger as a
division of the Surviving Corporation, using such name or a name similar
thereto. Each of Shareholders agrees he or she will not use the name "Xxx
Enterprise" or any name deceptively similar thereto or any related Intellectual
Property in the conduct of any business comparable, or similar to the current
business of Diamond and TULSAT or in any other manner which might create
confusion in the minds of the customers or potential customers of TULSAT, the
Surviving Corporation or AMG of the identity, ownership or operations of any
such business.
5.16 Cooperation of Management Pending Merger. Diamond and Shareholders
covenant and agree that between the date hereof and the Effective Time of the
Merger, Diamond's management will cooperate with AMG, Merger Sub and TULSAT and
endeavor to help persons designated by AMG to become familiar with Diamond's
business, its operations, properties, business prospects, needs, employees and
any other matters pertaining to AMG's business and operations.
5.17 Increase in Authorized Common Stock. AMG covenants that as soon as
reasonably practicable after the Closing (expected to be at its annual meeting
of shareholders which it contemplates holding in February or March of 2000), it
shall propose to its shareholders approval of an amendment to AMG's certificate
of incorporation increasing the number of authorized shares of AMG Common Stock
to an amount which is at least sufficient to have available the full number of
shares of AMG Common Stock that would be issuable upon a conversion in full of
all of the outstanding shares of AMG Preferred Stock. Thereafter, AMG shall at
all times reserve and keep available out of its authorized AMG Common Stock the
full number of shares of AMG Common Stock deliverable upon the conversion of all
outstanding shares of AMG Preferred Stock and shall take all such action as may
be required from time to time in order that it may validly and legally issue
fully paid and nonassessable shares of AMG Common Stock upon conversion of AMG
Preferred Stock. In the event that the certificate of incorporation of AMG has
not been amended as contemplated hereby by the first anniversary of the date of
the Closing, AMG shall pay to the Shareholders cash in the amount of 20% of the
aggregate stated value of the Preferred Stock then held by them respectively.
In the event that the certificate of incorporation of AMG has not been amended
as contemplated hereby by the second anniversary of the date of the Closing, AMG
shall pay to the Shareholders cash in the amount of 20% In the event that the
certificate of incorporation of AMG has not been amended as contemplated hereby
by the third anniversary of the date of the Closing, AMG will offer to
repurchase from Shareholders all of the issued and outstanding shares of AMG
Preferred Stock then held by them at a price of 120% of the stated value
thereof, which Shareholders may accept in their sole discretion.
-36-
5.18 Loans. Following the Effective Time of the Merger, AMG and
the Surviving Corporation shall use reasonable efforts to have the Shareholders
released from the personal guarantees of the Diamond promissory notes set forth
in the Disclosure Schedule. In the event that AMG or the Surviving Corporation
cannot obtain releases of any such guarantees on or prior to ninety (90) days
subsequent to the Effective Time of the Merger, AMG or the Surviving Corporation
shall pay off or otherwise refinance or retire such indebtedness.
5.19 Conveyance of Record Title to Property. Prior to Closing, the
Shareholders will convey to Diamond record title to the real property and
improvements in which certain inventory is kept.
ARTICLE VI
CONDITIONS
Notwithstanding any other provision of this Agreement, the obligation of
each of the parties to consummate the Contemplated Transactions shall be subject
to the fulfillment, prior to or at the Effective Time of the Merger, of each of
the following conditions precedent, any one of which may be waived by such
entity:
6.1 Consents and Approvals. All approvals of, and consents by, all
Governmental Authorities and other persons, and all permits by and all filings
with and submissions to all such Governmental Authorities and other persons as
may be required for the consummation of the Contemplated Transactions, shall
have been obtained or made and reasonably satisfactory evidence thereof shall
have been received.
6.2 Certain Actions, etc. There shall not have been instituted and be
continuing or threatened against any of the parties hereto or any of their
respective directors or officers any action, suit or proceeding by or before
any Governmental Authority that would (i) restrain, prohibit or invalidate, or
result in the payment of substantial damages in respect of, the Merger or any
other Contemplated Transaction, (ii) impose or confirm material limitations on
the ability of AMG effectively to exercise full rights of ownership of the
shares of capital stock of TULSAT or Diamond or (iii) prohibit any of the
parties' ownership or operation of all or a material portion of such party's
business, properties or assets, or compel AMG or TULSAT to dispose of or hold
separate all or a material portion of Diamond's business, properties or assets.
-37-
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF AMG, MERGER SUB
AND TULSAT
Notwithstanding any other provision of this Agreement, the obligation of
AMG, Merger Sub and TULSAT to consummate the Contemplated Transaction shall be
subject to the fulfillment, prior to or at the Effective Time of the Merger, of
each of the following conditions precedent, any one of which may be waived by
AMG.
7.1 Accuracy of Representations and Warranties. The representations and
warranties of Diamond and Shareholders set forth in Article II shall be true and
correct in all material respects as of the date of this Agreement and as of the
Effective Time of the Merger with the same effect as though such representations
and warranties had been made at and as of the Effective Time of the Merger
except for such changes with respect thereto which are contemplated by this
Agreement or the passage of time.
7.2 Performance of Covenants, Agreements and Conditions. Diamond and
each of Shareholders shall have duly performed, complied with and satisfied in
all material respects all covenants, agreements and conditions required by this
Agreement to be performed, complied with or satisfied by each of them at or
prior to the Effective Time of the Merger.
7.3 Certificates, Etc. AMG, Merger Sub and TULSAT shall have received
(i) a certificate, dated the date of the Effective Time of the Merger and
signed by the President of Diamond, and by each of Shareholders to the effect
set forth in Sections 7.1, 7.2 and 7.5 and (ii) such other certificates,
instruments and documents as shall be reasonably requested by AMG for the
purpose of verifying the accuracy of such representations and warranties and
the performance and satisfaction of such covenants and conditions.
7.4 Employment and Noncompete Agreements. TULSAT shall have entered
into an employment and noncompete agreement in the form of Exhibit D to this
Agreement with Xxxxx X. Xxxxxxxx and a noncompete agreement in the form of
Exhibit E to this Agreement with Xxxxxxx X. Xxxxxxxx.
7.5 No Material Adverse Change. Since the date of this Agreement, there
shall have been no event or occurrence which has had or reasonably could be
expected to have a Material Adverse Effect on the business, properties,
financial condition or results of operations of Diamond or on the ability of
Diamond or any of Shareholders to consummate the Contemplated Transactions.
7.6 Deed to Property. Shareholders shall have conveyed record title to
the property in which certain inventory is stored as contemplated by Section
5.19.
-38-
ARTICLE VIII
CONDITIONS PRECEDENT TO
OBLIGATIONS OF DIAMOND AND SHAREHOLDERS
Notwithstanding any other provision of this Agreement, the obligations of
Diamond and Shareholders to consummate the Contemplated Transactions shall be
subject to the fulfillment, prior to or at the Effective Time of the Merger, of
each of the following conditions precedent, any one of which may be waived by
Diamond.
8.1 Accuracy of Representations and Warranties. The representations and
warranties of AMG, Merger Sub and TULSAT set forth in Article III shall be true
and correct in all material respects as of the date of this Agreement and as of
the Effective Time of the Merger with the same effect as though such
representations and warranties had been made at and as of the Effective Time of
the Merger except for such changes with respect thereto which are contemplated
by this Agreement or the passage of time.
8.2 Performance of Covenants, Agreements and Conditions. AMG, Merger
Sub and TULSAT shall have duly performed, complied with and satisfied all
covenants, agreements and conditions required by this Agreement to be performed,
complied with or satisfied by them, at or prior to the Effective Time of the
Merger.
8.3 Officers' Certificates Etc. Diamond and Shareholders shall have
received (i) certificates, dated the date of the Effective Time of the Merger
and signed by the President or any Vice President of AMG, Merger Sub and TULSAT,
to the effect set forth in Sections 8.1, 8.2 and 8.5, insofar as such Sections
relate to AMG, Merger Sub and TULSAT and (ii) such other certificates,
instruments and documents as shall be reasonably requested by Diamond and
Shareholders for the purpose of verifying the accuracy of such representations
and warranties and the performance and satisfaction of such covenants and
conditions.
8.4 Authorization of AMG Securities. The Board of Directors of AMG
shall have taken all necessary corporate action to provide for the issuance and
reservation of such number of shares and principal amounts of AMG Preferred
Stock and AMG Promissory Note as may be required to carry out the terms of this
Agreement.
8.5 No Material Adverse Change. Since the date of this Agreement, there
shall have been no event or occurrence which has had or reasonably could be
expected to have a Material Adverse Effect on the business, properties,
financial condition or results of operations of AMG, Merger Sub and TULSAT taken
as a whole or on the ability of AMG, Merger Sub and TULSAT to consummate the
Contemplated Transactions.
-39-
ARTICLE IX
TERMINATION, AMENDMENTS AND WAIVER
9.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time of the Merger:
(a) by mutual written consent of AMG and Diamond; or
(b) by either AMG or Diamond if the Merger shall not have been
consummated on or before December 31, 1999 (other than due to the failure
of the party seeking to terminate this Agreement to perform its
obligations under this Agreement required to be performed at or prior to
the Effective Time); or
(c) by either AMG or Diamond, if any Governmental Authority shall
have issued a final order, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting the Merger and
such order, decree, ruling or other action shall have become final and
nonappealable, provided that the party seeking to terminate shall have
used its Best Efforts to appeal such order, decree, ruling or other
action; or
(d) by AMG, if Diamond or either of Shareholders has failed to
perform in any respect any of its obligations required to be performed by
it under this Agreement and such failure continues for more than 30 days
after notice unless failure to so perform has been caused by or results
from a Breach of this Agreement by AMG or TULSAT, except where such
failure or failures would not in the aggregate have a Material Adverse
Effect on the business, properties, financial condition or results of
operations of Diamond, AMI or TULSAT on the ability of any party hereto to
consummate the Contemplated Transactions; or
(e) by Diamond, if AMG or TULSAT shall have failed to perform in
any respect any of its obligations required to be performed by it under
this Agreement and such failure continues for more than 30 days after
notice unless failure to so perform has been caused by or results from a
Breach of this Agreement by Diamond or either of Shareholders, except
where such failure or failures would not in the aggregate have a Material
Adverse Effect on the business, properties, financial condition or
results of operations of Diamond or on the ability of Diamond to
consummate the Contemplated Transactions.
9.2 Effect of Termination. If either AMG or Diamond terminates this
Agreement as provided in the foregoing Section, this Agreement will forthwith
become void, and there will be no liability or obligation on the part of AMG,
TULSAT, Diamond or Shareholders or their respective officers or directors except
as set forth in Sections 5.2 (relating to expenses and fees), 3.09 and 4.12
(relating to brokers or finders), and 13.1 (relating to confidentiality), and
except to the extent that such termination results from the willful Breach by a
party of any of its representations, warranties or agreements in this Agreement.
-40-
9.3 Amendment. This Agreement may be amended by the parties hereto, by
action taken by the respective Boards of Directors of AMG and Diamond at any
time prior to Closing. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
9.4 Waiver. Any term or provision of this Agreement may be waived in
writing at any time by AMG, if it or TULSAT is entitled to the benefits thereof,
or by Diamond, if it or either of Shareholders is entitled to the benefits
thereof.
ARTICLE X
OTHER AGREEMENTS
10.1 Additional Agreements. Subject to this Agreement, each of the
parties agrees to use its Best Efforts to take, or cause to be taken, all action
and to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
Contemplated Transactions. If at any time after the Effective Time of the
Merger any further action is necessary or desirable to carry out the purposes of
this Agreement, the proper officers and directors of each corporation that is a
party to this Agreement will take all such necessary action.
10.2 Available Remedies. Each party expressly agrees that, consistent
with its intention and agreement to be bound by the terms of this Agreement and
to consummate the Contemplated Transactions, subject only to the performance or
satisfaction of conditions precedent, the remedy of specific performance shall
be available to a non-breaching and non-defaulting party to enforce performance
of this Agreement by a breaching or defaulting party, including, without
limitation, to require the consummation of the Closing.
ARTICLE XI
SURVIVAL OF REPRESENTATIONS AND
WARRANTIES; INDEMNIFICATION; REMEDIES
-41-
11.1 Survival; Right to Indemnification Not Affected by Knowledge. All
representations, warranties and covenants contained in Articles III and IV and
Sections 5.5, 5.9 and 5.11, the Disclosure Schedule, and the supplements to the
Disclosure Schedule, the certificates delivered pursuant to Sections 7.3 and
8.3, and any other certificate or document delivered pursuant to this Agreement
will survive the Effective Time of the Merger for a period of one (1) year. All
other covenants and agreements contemplated by this Agreement will survive the
Effective Time of the Merger in accordance with their respective terms. The
right to indemnification, payment of Damages or other remedy based on such
representations, warranties, covenants, and obligations will not be affected by
any investigation conducted with respect to, or any knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
and delivery of this Agreement or the Closing Date, with respect to the accuracy
or inaccuracy of or compliance with, any such representation, warranty,
covenant, or obligation. The waiver of any condition based on the accuracy of
any representation or warranty, or on any failure of performance of or
compliance with any covenant or obligation, for purposes of Article VII or VIII
will not affect the right to indemnification, payment of Damages, or other
remedy based on such representations, warranties, covenants, and obligations
unless specifically so provided in such waiver. Any party hereto with actual
knowledge at the time of Closing of any facts or occurrences clearly
constituting a breach of any representation, warranty or covenant of another
party hereto with respect to which it is expected that a claim against such
other party for indemnification hereunder will be submitted after Closing shall
notify such other party of such facts or occurrences prior to Closing; provided,
however, that any inadvertent or unintentional failure to provide such notice
prior to Closing shall not prevent any claim for indemnification hereunder
unless such other party is materially prejudiced thereby.
11.2 Indemnification and Payment of Damages by Shareholders.
Shareholders, jointly and severally, will indemnify and hold harmless AMG,
TULSAT, and their respective Representatives, stockholders, controlling persons,
and Related Persons (collectively, the "Indemnified Persons") for, and will pay
to the Indemnified Persons the amount of, any loss, liability, claim, damage,
expense (including costs of investigation and defense and reasonable attorneys'
fees), whether or not involving a third-party claim (collectively, "Damages"),
arising, directly or indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by Diamond
or Shareholders in this Agreement (without giving effect to any supplement
to the Disclosure Schedule), the Disclosure Schedule, the supplements to
the Disclosure Schedule, or any other certificate or document delivered by
Shareholders or Diamond pursuant to this Agreement;
(b) any Breach of any representation or warranty made by the
Diamond or Shareholders in this Agreement as if such representation or
warranty were made on and as of the Effective Time of the Merger without
giving effect to any supplement to the Disclosure Schedule, other than any
such Breach that is disclosed in a supplement to the Disclosure Schedule
and is expressly identified in the certificate delivered pursuant to
Section 7.3; or
-42-
(c) any Breach by any Shareholder or Diamond of any covenant or
obligation of Shareholder or Diamond under this Agreement.
The procedure described in Section 11.5 will apply to any claim solely for
monetary Damages relating to a matter covered by this Section 11.2. The
remedies provided in this Article XI will the exclusive remedy of any party
hereto for any breach of or failure of performance required hereunder by any
other party hereto; provided, however, that any right or remedy of a party
hereto by reason of the fraud or intentional Breach of any other party hereto
shall not be so limited.
11.3 Indemnification and Payment of Damages by AMG. AMG and TULSAT,
jointly and severally, will indemnify and hold harmless Shareholders and their
Representatives ("Indemnified Persons"), and will pay to Indemnified Persons
the amount of any Damages arising, directly or indirectly, from or in
connection with:
(a) any Breach of any representation or warranty made by AMG,
Merger Sub or TULSAT in this Agreement or in any certificate or
document delivered by AMG, Merger Sub or TULSAT pursuant to this
Agreement; or
(b) any Breach by AMG, Merger Sub or TULSAT of any covenant or
obligation of AMG, Merger Sub or TULSAT in this Agreement.
11.4 Right of Set-Off. Upon at least 30 days' notice to Shareholders
specifying in reasonable detail the basis for such set-off, AMG may set off any
amount to which it or TULSAT may be entitled under this Article XI against
amounts otherwise payable under the Promissory Note. Neither the exercise of
nor the failure to exercise such right of set-off will constitute an election
of remedies or limit AMG in any manner in the enforcement of any other remedies
that may be available to it.
11.5 Procedure for Indemnification-Third Party Claims.
(a) Promptly after receipt by an Indemnified Person under Section
11.2 or Section 11.3, of notice of the commencement of any Proceeding
against it, such Indemnified Person will, if a claim is to be made against
an indemnifying Person under such Section, give notice to the indemnifying
Person of the commencement of such claim, but the failure to notify the
indemnifying Person will not relieve the indemnifying Person of any
liability that it may have to any Indemnified Person, except to the extent
that the indemnifying Person demonstrates that the defense of such action
is prejudiced by the Indemnified Person's failure to give such notice.
(b) If any Proceeding referred to in Section 11.5(a) is brought
against an Indemnified Person and it gives notice to the indemnifying
Person of the commencement of such Proceeding, the indemnifying Person
will, unless the claim involves Taxes, be entitled to participate in such
-43-
Proceeding and, to the extent that it wishes (unless (i) the indemnifying
Person is also a party to such Proceeding and the Indemnified Person
determines in good faith that joint representation would be inappropriate,
or (ii) the indemnifying Person fails to provide reasonable assurance to
the Indemnified Person of its financial capacity to defend such Proceeding
and provide indemnification with respect to such Proceeding), to assume
the defense of such Proceeding with counsel satisfactory to the
Indemnified Person and, after notice from the indemnifying Person to the
Indemnified Person of its election to assume the defense of such
Proceeding, the indemnifying Person will not, as long as it diligently
conducts such defense, be liable to the Indemnified Person under this
Article XI for any fees of other counsel or any other expenses with
respect to the defense of such Proceeding, in each case subsequently
incurred by the Indemnified Person in connection with the defense of such
Proceeding, other than reasonable costs of investigation. If the
indemnifying Person assumes the defense of a Proceeding, (i) no compromise
or settlement of such claims may be effected by the indemnifying Person
without the Indemnified Person's consent unless (A) there is no finding or
admission of any violation of Legal Requirements or any violation of the
rights of any Person and no effect on any other claims that may be made
against the Indemnified Person, and (B) the sole relief provided is
monetary damages that are paid in full by the indemnifying Person; and
(ii) the Indemnified Person will have no liability with respect to any
compromise or settlement of such claims effected without its consent.
(c) Notwithstanding the foregoing, if an Indemnified Person
determines in good faith that there is a reasonable probability that a
Proceeding may adversely affect it or its Related Persons other than as a
result of monetary damages for which it would be entitled to
indemnification under this Agreement, the Indemnified Person may, by
notice to the indemnifying Person, assume the exclusive right to defend,
compromise, or settle such Proceeding, but the indemnifying Person will
not be bound by any determination of a Proceeding so defended or any
compromise or settlement effected without its consent (which may not be
unreasonably withheld).
(d) The parties hereto hereby consent to the non-exclusive
jurisdiction of any court in which a Proceeding is brought against any
Indemnified Person for purposes of any claim that an Indemnified Person
may have under this Agreement with respect to such Proceeding or the
matters alleged therein, and agree that process may be served on any of
the parties hereto with respect to such a claim anywhere in the world.
11.6 Participation. The Person not controlling the defense of a
Proceeding shall have the right to be represented by advisory counsel and
accountants (at its own expense) in connection with any Proceeding, and shall be
kept reasonably informed by the defending party of the status of such Proceeding
at reasonable times at all stages thereof, whether or not such party is so
represented. The indemnifying Person and Indemnified Persons agree to make
available to each other, their counsel and accountants all information and
documents reasonably available to them which relate to such action, suit or
proceeding, and agree to render to each other such assistance as they may
reasonably require of each other in order to ensure the proper and adequate
defense of any such Proceeding.
-44-
11.7 Procedure for Indemnification-Other Claims. A claim for
indemnification for any matter not involving a third-party claim may be asserted
by notice to the party from whom indemnification is sought.
11.8 Limitations. Notwithstanding Shareholders' obligations under
Section 11.2, Shareholders shall have no liability until the aggregate liability
of Shareholders exceeds Twenty-Five Thousand Dollars ($25,000) and in no event
shall the aggregate liability of Shareholders exceed the Merger Consideration
valued as of Closing. The amount of any liability of Shareholders under
Section 11.2 shall by computed net of any insurance proceeds received by the
Surviving Corporation or AMG with respect to the matter out of which such
liability arose. Each party agrees to use commercially reasonable efforts to
mitigate any damage or expense resulting from any matter giving rise to
liability under this Article XI.
11.9 Sales Tax Claims. Notwithstanding anything in this Article XI to the
contrary, it is agreed that Shareholders will indemnify AMG, Merger Sub and
TULSAT from any expenses, claims, losses, damages or liabilities for sales
taxes or use taxes for which Diamond may be liable for transactions consummated,
services performed or other actions taken by or on behalf of Diamond prior to
the Closing Date. The indemnity obligations of this Section 11.9 shall not be
subject to the limitations set forth in Section 11.8.
11.10 Action Subsequent to Closing. AMG and TULSAT agree that subsequent
to Closing, the Surviving Corporation may (a) enter into such tax agreements
with the states where Diamond conducted trucking activities substantially in the
form previously provided to AMG and TULSAT, (b) form a subsidiary to conduct its
trucking activities, and (c) subject to the approval of AMG and TULSAT which
will not be unreasonably withheld or delayed, take such other legally proper
action as the Shareholders deem appropriate to reduce or minimize their
potential liability under Section 11.9 hereof; provided, however, nothing
contained in this Section shall impair the rights of AMG, the Surviving
Corporation and TULSAT, or the obligations of the Shareholders, under
Section 11.9.
ARTICLE XII
REGISTRATION RIGHTS
12.1 Registration of Securities. As used in this Agreement, the term
"Registration Securities" means (i) any and all of the shares of AMG Common
Stock issued or issuable upon conversion of the AMG Preferred Stock issued to
Shareholders as contemplated by this Agreement, and (ii) any other securities
AMG may hereafter issue in exchange therefor or in respect thereof in the form
of a stock split, dividend, reorganization, merger or similar event. As to any
particular Registration Securities, once issued, such Registration Securities
shall cease to be Registration Securities when (i) such securities have been
registered under the Securities Act, in accordance with the terms of this
Agreement, the registration statement in connection therewith has been declared
effective, and such securities have been disposed of by Shareholders pursuant to
such effective registration statement, (ii) such securities are distributed to
the public pursuant to and in accordance with Rule 144 (or any similar
provisions then in force under the Securities Act), (iii) such securities are
-45-
otherwise transferred and AMG has delivered new certificates evidencing
ownership and are not subject to legal or other restriction, (iv) such
securities have ceased to be subject to restrictions on the public offer and
sale thereof by virtue of the application of Rule 144(k) promulgated by the SEC
pursuant to the Securities Act or (v) such securities have ceased to be
outstanding.
12.2 Demand Registration. In case AMG shall receive, on or after
November 1, 2000, from a Shareholder a written request for AMG to effect a
registration under the Securities Act with respect to not less than 33_% of the
Registration Securities ("Demand Registration"), AMG shall:
(a) Promptly give written notice of the proposed registration,
qualification or compliance to all other Shareholders of the Registration
Securities; and
(b) As soon as practicable, use its best efforts to effect such
registration (including, without limitation, appropriate compliance with
applicable regulations issued under the Securities Act and any other
governmental requirements or regulations) as may be so requested and as
would permit or facilitate the sale and distribution of all or such
portion of such Registration Securities as are specified in such request,
together with all or such portion of the Registration Securities of any
Shareholder joining in such request as are specified in a written request
received by AMG within 90 days after receipt of such written notice from
AMG. AMG may include such additional shares of AMG's Common Stock for
registration pursuant to the Demand Registration as AMG, in its sole
discretion, may deem appropriate or desirable. AMG shall keep the Demand
Registration continuously effective for a period of at least six months
following the date of the effectiveness thereof. Shareholders shall agree
to furnish AMG such information regarding the distribution of such
Registration Securities as AMG may from time to time reasonably request in
writing and such other information as may be legally required in
connection with the Demand Registration. Shareholders may request up to
three Demand Registrations pursuant to this Article XII.
12.3 AMG's Obligations with Respect to Demand Registration. To facilitate
the sale of Registration Securities in accordance with the provisions of this
Agreement, AMG shall:
(a) supplement or make amendments to the Demand Registration, if
required by the registration form utilized by AMG for such Demand
Registration, the instructions applicable to such registration form, the
Securities Act, or the rules and regulations promulgated by the SEC under
the Securities Act;
(b) furnish to Shareholders copies in such numbers as may be
reasonably requested by Shareholders of any such supplement or amendment
prior to its being used or filed with the SEC;
-46-
(c) use reasonable efforts to register or qualify the Registration
Securities under such other securities or "blue sky" laws of such
jurisdictions in the United States as any Shareholder shall request (and
maintain such registration and qualifications effective until all
Registration Securities covered by the Demand Registration have been sold
pursuant to the Demand Registration or are no longer outstanding) and do
any and all other acts and things that may be necessary to enable AMG to
consummate the disposition in such jurisdictions of the Registration
Securities, provided however, that AMG shall in no event be required to
qualify to do business as a foreign corporation in any jurisdiction where
it is not so qualified, conform the composition of its assets at the time
to the securities or "blue sky" laws or such jurisdiction, execute or file
any general consent to service of process under the laws of any
jurisdiction, take any action that would subject it to service of process
in suits other than those arising out of the offer or sale of the
Registration Securities, or subject itself to taxation in any jurisdiction
where it has not heretofore done so; and
(d) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC and shall make generally available to its
security holders, as soon as reasonably practicable, an earnings statement
covering a period of 12 months, commencing not later than the first day of
the fiscal quarter next succeeding the effective date of such Demand
Registration, which earnings statement will satisfy the provisions of
Section 11(a) of the Securities Act.
12.4 Piggy-Back Registration.
(a) If at any time or from time to time, AMG shall determine to
register any of its securities, either of its own account or the account
of a security holder, except for registration by AMG on Securities Act
forms S-8 or S-4 or any successor registration forms (or their respective
small business counterparts), AMG shall (i) promptly give each Shareholder
notice thereof; and (ii) include in such registration (and any related
qualification under "blue sky" laws or other compliance), and in any
underwriting involved therein, all the Registration Securities specified
in a written request or requests, made within 20 days after receipt of
such written notice from AMG, by any Shareholder (said registration
hereinafter referred to as "Piggy-Back Registration").
(b) The inclusion of the Registration Securities in any Piggy Back
Registration shall not preclude the exercise by any Shareholder of his
rights against AMG for any alleged breach of its obligation to file a
Demand Registration under this Section 12.3 and 12.4.
(c) AMG shall use its best efforts to cause the managing
underwriter or underwriters of a proposed underwritten offering to permit
Shareholders to include such Registration Securities as they may propose
in such offering on the same terms and conditions as any similar
securities of AMG included therein. Notwithstanding the foregoing, if the
managing underwriter or underwriters of such offering delivers a written
opinion to Shareholders that the total amount or kind of securities which
it and any other persons or entities intend to include in such offering
-47-
would adversely affect the success of such offering (and it is otherwise
reasonably impractical to cause the Piggy Back Registration to include a
best efforts offering of the Registration Securities), then the amount of
securities to be offered for the account of Shareholders shall be reduced
pro rata with all other persons for whom securities are being registered
to the extent necessary to reduce the total amount of securities to be
included in such offering to the amount recommended by such managing
underwriter or excluded in its entirety, as the case may be. In the event
that the contemplated distribution does not involve an underwritten public
offering, such determination that the inclusion of such Registration
Securities shall adversely affect the success of the offering shall be
made by AMG in its reasonable discretion.
12.5 Public Information Requirements. Regardless of whether AMG files a
Demand Registration or Piggy-Back Registration is available, AMG shall take such
action on a timely basis as is necessary or appropriate to ensure that it has
met the current public information requirements contained in paragraph (c) of
Rule 144 promulgated by the SEC pursuant to the Securities Act.
12.6 Expenses of Registration. AMG shall pay all costs and expenses
incident to the performance of or compliance with this Article VII specifically
including, without limitation, in connection with the Demand Registration and
Piggy-Back Registration, all registration and filing fees, fees and expenses of
compliance with securities or "blue sky" laws, and fees and disbursements of
counsel and special experts retained by AMG, but specifically excluding fees and
expenses of counsel to any Shareholder incurred in connection with the Demand
Registration or the Piggy-Back Registration and any commissions, underwriting
discounts or other fees or charges payable strictly by virtue of the sale of the
Registration Securities.
12.7 Indemnification.
(a) AMG shall indemnify each Shareholder and each person
controlling such Shareholder within the meaning of Section 15 of the
Securities Act, with respect to which registration, qualification or
compliance as been effected pursuant to this Article XII, and each
underwriter, if any, and each person who controls any underwriter within
the meaning of Section 15 of the Securities Act, against all expenses,
claims, losses, damages or liabilities (or actions in respect thereof),
including any of the foregoing incurred in settlement of any litigation,
commenced or threatened, arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular or other document,
or any amendment or supplement thereto, incident to any such registration,
qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
in which they were made, not misleading, or any violation or alleged
violation by AMG of the Securities Act, the Exchange Act, any state
securities laws or any rule or regulation promulgated under the Securities
Act, the Exchange Act, any state securities laws applicable to AMG in
-48-
connection with any such registration, qualification or compliance, and
AMG will reimburse each such Shareholder and each person controlling such
Shareholder, each such underwriter and each person who controls any such
underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating, preparing or defending any such claim,
loss, damage, liability or action; provided that, the indemnity agreement
contained in this subsection (a) shall not apply to amounts paid in
settlement of any such claim, loss, damage, liability or expense if such
settlement is effected without the consent of AMG (which such consent
shall not be unreasonably withheld), nor shall AMG be liable in any such
case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission or alleged
untrue statement or omission, made in reliance upon and in conformity with
written information furnished to AMG by such Shareholder, controlling
person or underwriter and stated to be specifically for use therein.
(b) Each Shareholder shall, if Registration Securities held by
such Shareholder are included in the securities as to which such
registration, qualification or compliance is being effected, indemnify
AMG, each of its directors, officers and shareholders, each underwriter,
if any, of the Registration Securities covered by such a registration
statement, each person who controls AMG or such underwriter within the
meaning of Section 15 of the Securities Act, against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or
based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering
circular or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and shall reimburse AMG, such
directors, officers, shareholders, persons, underwriters or control
persons for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or
alleged omission) is made in such registration statement, prospectus,
offering circular or other document in reliance upon and in conformity
with written information furnished to AMG by such Shareholder and stated
to be specifically for use therein; provided that, the indemnity agreement
contained in this subsection (b) shall not apply to amounts paid in
settlement of any such claim, loss, damage, liability or expense if such
settlement is effected without the consent of each Shareholder (which such
consent shall not be unreasonably withheld). Notwithstanding the
foregoing, the liability of each Shareholder under this subsection (b)
shall be limited to an amount equal to the initial public offering price
of the shares of Registration Securities sold by such Shareholder.
(c) Each party entitled to indemnification under this Section 12.7
(the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity
may be sought, and shall permit the Indemnifying Party to assume the
defense of any such claim or any litigation resulting therefrom, provided
that counsel for the Indemnifying Party, who shall conduct the defense of
such claim or litigation, shall be approved by the Indemnified Party
(whose approval shall not unreasonably be withheld), and the Indemnified
-49-
Party may participate in such defense at such party's expense, and
provided further that the failure of any Indemnified Party to give notice
as provided herein shall not relieve the Indemnifying Party of its
obligations under this Section 12.7 unless the failure to give such notice
is materially prejudicial to an Indemnifying Party's ability to defend
such action and provided further, that the Indemnifying Party shall not
assume the defense for matters as to which there is a conflict of
interest or separate and different defenses. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of
each Indemnified Party, consent to entry of any judgment or enter into
any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release
from all liability in respect to such claim or litigation.
(d) If the indemnification provided for in this Section 12.7 is
held by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any loss, liability, claim, damage or
expense referred to herein, then the Indemnifying Party, in lieu of
indemnifying such Indemnified Party hereunder, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such loss,
liability, claim, damage or expense in such proportion as is appropriate
to reflect the relative fault of the Indemnifying Party on the one hand
and of the Indemnified Party on the other in connection with the
statements or omissions that resulted in such loss, liability, claim,
damage or expense, as well as any other relevant equitable considerations.
The relative fault of the Indemnifying Party and of the Indemnified Party
shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission to
state a material fact relates to information supplied by the Indemnifying
Party or by the Indemnified Party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent
such statement or omission.
(e) The obligations of AMG and Shareholders under this
Section 12.7 shall survive the completion of any offering of the
Registration Securities in a registration statement under this Article
XII, and otherwise.
ARTICLE XIII
GENERAL PROVISIONS
13.1 Confidentiality. Between the date of this Agreement and the
Effective Time of the Merger, AMG, TULSAT, Diamond and Shareholders will
maintain in confidence, and will cause the directors, officers, employees,
agents, and advisors of AMG, TULSAT, Diamond and Shareholders to maintain in
confidence, the confidential and proprietary information originally furnished by
another party in connection with this Agreement or the Contemplated
Transactions, unless (a) such information is already known to such party or to
-50-
others not bound by a duty of confidentiality or such information becomes
publicly available through no fault of such party, (b) the use of such
information is necessary or appropriate in making any filing or obtaining any
consent or approval required for the consummation of the Contemplated
Transactions, or (c) the furnishing or use of such information is required by or
necessary or appropriate in connection with legal proceedings. If the
Contemplated Transactions are not consummated, each party will return or destroy
as much of such confidential or proprietary information as the other party may
reasonably request.
13.2 Arbitration.
(a) The parties shall attempt in good faith to resolve any dispute
arising out of or relating to this Agreement or any agreement entered into
pursuant to this Agreement promptly by negotiation between persons who
have authority to settle the controversy. Any party may give the other
party written notice of any dispute not resolved in the normal course of
business. Within 15 days after delivery of the notice, the receiving
party shall submit to the other a written response. The notice and the
response shall include (a) a statement of each party's position and a
summary of arguments supporting that position, and (b) if the party is a
company, the name and title of the executive who will represent that party
and of any other person who will accompany the executive. Within 30 days
after delivery of the disputing party's notice, the both parties shall
meet at a mutually acceptable time and place, and thereafter as often as
they reasonably deem necessary, to attempt to resolve the dispute. All
reasonable requests for information made by one party to the other will be
honored. All negotiations pursuant to this clause are confidential and
shall be treated as compromise and settlement negotiations for purposes of
applicable rules of evidence.
(b) Any dispute arising out of or relating to this Agreement or
any agreement entered into pursuant to this Agreement or the breach,
termination or validity thereof which has not been resolved by negotiation
as provided herein within 45 days of the disputing party's notice, or if
the parties failed to meet, shall be settled by arbitration conducted
expeditiously in accordance with the Center for Public Resources Rules for
Non-Administered Arbitration of Business Disputes by a sole arbitrator.
The arbitration shall be governed by the United States Arbitration Act, 9
U.S.C. 1-16, and judgment upon the award rendered by the arbitrators may
be entered by any court having jurisdiction thereof. The place of
arbitration shall be Tulsa, Oklahoma, unless otherwise agreed to by the
parties hereto. The arbitrator is not empowered to award consequential,
indirect, special, punitive, or exemplary damages, and each party hereby
irrevocably waives such damages.
(c) Notwithstanding anything in this section to the contrary, this
section shall not apply in the event any claim, suit, demand, or
proceeding (collectively, a "Claim") is asserted in a court of law against
one or all parties hereto by a third party and any party hereto asserts,
in such legal proceedings, the provisions of this Agreement against the
other either as a defense to such Claim or as a basis for indemnification
against such Claim. Each of the parties consents to the jurisdiction of
any such court (and of the appropriate appellate courts) in any such
action or proceeding and waives any objection to venue laid therein.
Process in any action or proceeding referred to in this subparagraph (c)
may be served on any party anywhere in the world.
-51-
13.3 Notices. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by telecopier (with written confirmation of receipt), provided that a copy
is mailed by certified mail, return receipt requested, or (c) when received by
the addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
For purposes of notice under this Agreement, Shareholders designate the
following person to receive any notices to be delivered to any or all of
Shareholders:
Diamond and Xxxxx X. Xxxxxxxx
Shareholders: X.X. Xxx 000
000 0xx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
with a copy to: Xxxxxxx, Xxxxxx & Xxxxx
000 Xxxxxxx Xxxxxx
000 Xxxxx 00xx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxx X'Xxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
AMG, Merger Sub and TULSAT: ADDvantage Media Group, Inc.
000 Xxxxx 00xx Xxxxxx
Xxxxxx Xxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
-52-
with a copy to: Xxxxxx & Xxxxxxx,
A Professional Corporation
0000 Xxxxx Xxxxx Tower
00 Xxxx 0xx Xxxxxx
Xxxxx, Xxxxxxxx 00000
Attention: Lynnwood X. Xxxxx, Xx.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
13.4 Governing Law. This Agreement will be governed by the laws of the
State of Oklahoma without regard to conflicts of laws principles; provided,
however, that the Merger will be governed by the corporate laws of the State of
Nebraska.
13.5 Waiver. The rights and remedies of the parties to this Agreement
are cumulative and not alternative. Neither the failure nor any delay by any
party in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out
of this Agreement or the documents referred to in this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation of
the claim or right unless in writing signed by the party or parties to be bound
thereby; (b) no waiver that may be given by a party will be applicable except in
the specific instance for which it is given; and (c) no notice to or demand on
one party will be deemed to be a waiver of any obligation of such party or of
the right of the party giving such notice or demand to take further action
without notice or demand as provided in this Agreement or the documents
referred to in this Agreement.
13.6 Entire Agreement and Modification. This Agreement supersedes all
prior agreements between the parties with respect to its subject matter
constitutes (along with the documents referred to in this Agreement) a complete
and exclusive statement of the terms of the agreement between the parties with
respect to its subject matter. This Agreement may not be amended except by a
written agreement executed by the party to be charged with the amendment.
13.7 Disclosure Schedule.
(a) The disclosures in the Disclosure Schedule, and those in any
Supplement thereto, must relate only to the representations and warranties
in the Section of the Agreement to which they expressly relate and not to
any other representation or warranty in this Agreement.
(b) In the event of any inconsistency between the statements in
the body of this Agreement and those in the Disclosure Schedule (other
-53-
than an exception expressly set forth as such in the Disclosure Schedule
with respect to a specifically identified representation or warranty),
the statements in the body of this Agreement will control.
13.8 Assignments, Successors, and No Third-Party Rights. No party may
assign any of its rights under this Agreement without the prior consent of the
other parties. Subject to the preceding sentence, this Agreement will apply to,
be binding in all respects upon, and inure to the benefit of the successors and
permitted assigns of the parties. Nothing expressed or referred to in this
Agreement will be construed to give any Person other than the parties to this
Agreement any legal or equitable right, remedy, or claim under or with respect
to this Agreement or any provision of this Agreement. This Agreement and all of
its provisions and conditions are for the sole and exclusive benefit of the
parties to this Agreement and their successors and assigns.
13.9 Severability. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
13.10 Time of Essence. With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.
13.11 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
13.12 Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship of
any of the provisions of this Agreement. Any reference to any federal, state,
local, or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise.
13.13 Incorporation of Exhibits and Schedules. The Exhibits and
Disclosure Schedule identified in this Agreement are incorporated herein by
reference and made a part hereof.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
ADDvantage Media Group, Inc.
By \s\ Xxxxx X. Xxxxxxx
Xxxxx X. Xxxxxxx, Chairman of the Board
-54-
Xxx CATV Corporation
By \s\ Xxxxx X. Xxxxxxx
Xxxxx X. Xxxxxxx, Vice President
TULSAT Corporation
By \s\ Xxxxx X. Xxxxxxx
Xxxxx X. Xxxxxxx, President
-55-
