AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement") is made this 29th day of
August 1997, by and among CONVERGENT COMMUNICATIONS, INC., a Colorado
corporation ("Purchaser"), CONVERGENT COMMUNICATIONS SERVICES, INC., a Colorado
corporation ("Merger Sub"), and A.T.T.EX CORPORATION, an Iowa corporation
("Company").
RECITALS
A. Company provides various telecommunications services, including sales,
service and installation of telephone key and PBX systems, as well as voice and
data fiber optic cable installation;
B. Purchaser owns 100% of the issued and outstanding capital stock of
Merger Sub; and
C. Purchaser desires to acquire the business of the Company by merging
the Company with and into Merger Sub in accordance with the terms and conditions
of this Agreement, and as a result of the Merger of the Company with and into
Merger Sub, as the Surviving Corporation, the assets and certain liabilities of
the Company will be merged with and into the Merger Sub.
NOW, THEREFORE, in consideration of the mutual promises contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
1. CERTAIN DEFINITIONS. As used herein, the following terms shall have
the following meanings unless the context otherwise requires:
1.1 "AGREEMENT" shall mean this Agreement and Plan of Merger.
1.2 "BANK DEBT" shall mean that portion of the Funded Debt identified
as Bank Debt on SCHEDULE 2.6(a) attached hereto.
1.3 "CASH CONSIDERATION" shall mean a total amount of $450,000 cash
less (i) the Xxxxxxx Money, (ii) Transactional Costs, (iii) Escrowed Funds, (iv)
any amount of Funded Debt in excess of zero dollars ("Funded Debt Threshold") as
of the Closing Date and (v) any amount by which the trades payable as of the
Closing Date listed in SCHEDULE 2.6(d)-2 exceeds the accounts receivable of the
Company as listed on Schedule 4.1(z) as of the Closing Date.
1.4 "CLOSING" shall mean the consummation of the transactions
contemplated by this Agreement.
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1.5 "CLOSING DATE" shall mean the date on which the Closing occurs
pursuant to Section 2.3(a).
1.6 "COMMON STOCK" shall mean the Common Stock, $1.00 par value per
share, of the Company.
1.7 "DEEMED EQUIVALENT" of a share of Purchaser Stock shall mean an
amount equal to $3.00 per share.
1.8 "DISCLOSURE SCHEDULE" shall mean the Schedule attached to this
Agreement at execution as contemplated in Section 4.1 hereof and which shall not
be modified or changed in any respect after the date hereof without the prior
written consent of Purchaser.
1.9 "DISSENTING SHARE" shall have the same meaning as defined in
Section 2.5(d)(i) hereof.
1.10 "XXXXXXX MONEY" shall mean the $25,000 cash previously advanced
by the Purchaser to the Company pursuant to that certain letter of intent
between Purchaser and Company dated June 19, 1997.
1.11 "EARNOUT SHARES" shall have the meaning as defined in Section
2.8.
1.12 "EFFECTIVE TIME" shall mean the time when the Merger of the
Company with and into Merger Sub becomes effective under applicable law.
1.13 "ESCROW FUND" shall mean the portion of the total Cash
Consideration set aside to pay the full amount of the appraised value of any
Dissenting Shares in accordance with Section 2.5(e) hereof.
1.14 "FAIR MARKET VALUE" shall mean for purposes of this
Agreement, $3.00 per share of Purchaser Stock.
1.15 "FUNDED DEBT" shall mean the indebtedness and other obligations
of the Company, including principal, accrued interest and other amounts payable
in connection therewith, identified on SCHEDULE 2.6(a), and all other
indebtedness for borrowed money incurred by the Company after the date hereof
and prior to the Closing Date subject to Section 5.1(a)(xviii) hereof. Such term
shall not include the trade payables incurred by the Company in the ordinary
course of business, except as specifically identified on SCHEDULE 2.6(a).
1.16 "MERGER" shall have the same meaning as set forth in Section
2.1(a) hereof.
1.17 "MERGER CONSIDERATION" shall mean the Cash Consideration and the
Stock Consideration but shall not include any cash paid by Purchaser to pay the
portion of the Funded Debt as provided in Sections 2.6(a) hereof.
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1.18 "PERMITTED ENCUMBRANCES" shall mean the following liens, charges
and other encumbrances of a similar nature with respect to the properties and
assets of the Company;
(i) liens for current state or local property taxes not yet
due and payable or subject to penalties;
(ii) zoning ordinances, building laws, restrictions and
regulations imposed by governmental authorities, if any, none of which is
materially violated by existing buildings and uses by the Company;
(iii) any assessment for local benefits levied by any
governmental authority and not now a lien upon all or any portion of any real
property; provided, however, neither the Company knows or has any reason to know
of any such assessment;
(iv) liens of carriers, warehousemen, mechanics and material
men, and other like liens in existence less than 120 days from the date of
creation thereof, all of which shall be satisfied and released on or prior to
the Closing Date;
(v) any mortgage, deeds of trust or other encumbrances on
leasehold properties which the Company is leasing from the third party which is
the owner of the property and leased by the Company subject to any such
encumbrance; and
(vi) such imperfections of title, liens, easements or
encumbrances, if any, which are not material in character, amount or extent and
do not, severely or in the aggregate, materially detract from the value or
materially or adversely interfere with the present use of the property subject
thereto or affected thereby or otherwise materially impair the business and
operations of the Company.
1.19 "PERSON" shall mean an individual, partnership, corporation,
limited liability company, trust, unincorporated organization, association, or
joint venture or a government, agency, political subdivision, or instrumentality
thereof.
1.20 "PURCHASER STOCK" shall mean the common stock, no par value, of
Purchaser.
1.21 "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, and the rules and regulations thereunder.
1.22 "STOCK" shall mean the Common Stock together with all other
equity securities of the Company.
1.23 "STOCK CONSIDERATION" shall mean 75,000 shares of Purchaser
Stock.
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1.24 "STOCKHOLDER INVESTMENT LETTER" means the letter agreement to be
executed by each stockholder of the Company receiving Purchaser Stock pursuant
to the terms of this Agreement. A form of Stockholder Investment Letter is
attached to this Agreement as EXHIBIT 1.24.
1.25 "SURVIVING CORPORATION" shall mean Merger Sub as the Surviving
Corporation after the Merger as provided in Section 2.1(a) hereof.
1.26 "TRANSACTIONAL COSTS" shall mean those costs and expenses which
relate, directly and indirectly, to the negotiation, revision, amendment,
execution, implementation and Closing of this Agreement (and the transactions
contemplated hereunder) by or on behalf of the Company which shall be borne by
the Company as provided in Section 6.17 hereof. The costs and expenses included
as Transactional Costs shall consist of attorneys', accountants' and other
advisors' fees and disbursements incurred by the Company in connection with the
Merger.
ARTICLE II
2.1 THE MERGER AND RELATED MATTERS.
(a) MERGER. At the Effective Time and subject to and upon the terms
and conditions of this Agreement and Colorado and Iowa law, the Company shall
merge (the "Merger") with and into the Merger Sub, the separate corporate
existence of the Company shall cease and Merger Sub shall continue as the
Surviving Corporation. The Merger will have the effect set forth in the
Colorado Business Corporation Act and the Iowa Business Corporation Act. The
Surviving Corporation may, at any time after the Effective Time, take any
action, including executing and delivering any certificates, instruments and
documents as shall be reasonably determined by the Board of Directors of the
Surviving Corporation to be necessary and appropriate, in the name and on behalf
of either the Company or Merger Sub in order to carry out and effectuate the
transactions contemplated by this Agreement.
(b) SURVIVING CORPORATION. The Company shall be merged with and into
Merger Sub, with Merger Sub as the Surviving Corporation, and the separate
existence of the Company shall cease. As a result of the Merger the
stockholders of the Company immediately prior to the Effective Time shall cease
to hold any Stock but will instead have the rights specified in Section 2.5
hereof and all rights, privileges, powers, franchises and interest of the
Company and all of its properties, whether real, personal or mixed, all debts
due on whatever account and every other interest of the Company, whether
tangible or intangible shall be deemed to vest in the Surviving Corporation
without further act or deed, and all claims, demands, property and every other
interest shall be as of the Effective Time the property of the Surviving
Corporation to the same extent as previously owned or held by the Company.
(c) ARTICLES OF INCORPORATION OF SURVIVING CORPORATION. The Articles
of Incorporation of the Merger Sub in effect at and as of the Effective Time
shall remain the Articles of Incorporation of the Surviving Corporation until
thereafter amended as provided by law.
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(d) BYLAWS OF SURVIVING CORPORATION. The Bylaws of Merger Sub as in
effect immediately prior to the Effective Time, shall be the Bylaws of the
Surviving Corporation until thereafter amended as provided by law.
(e) DIRECTORS AND OFFICERS. The number of directors of the Surviving
Corporation and the persons serving as Directors of the Surviving Corporation
shall be the same number of directors and the same persons serving on the Board
of Directors of Merger Sub immediately prior to the Effective Time and they
shall continue to hold office until their successors have been duly nominated,
elected or appointed as provided under the Surviving Corporation's Bylaws as may
subsequently be amended in accordance with the provisions thereof. The officers
of Merger Sub as constituted immediately prior to the Effective Time shall hold
the same offices in the Surviving Corporation following the Effective Time,
until such time as their successors have been duly appointed and qualified.
(f) EFFECT OF MERGER. The Merger, from and after the Effective Time,
shall have all the effects provided for a merger under Iowa and Colorado law,
provided that Colorado law shall govern the Surviving Corporation.
2.2 APPROVAL BY COMPANY STOCKHOLDERS. The Company, acting through its
Board of Directors, shall duly call, give notice of, convene and hold a special
meeting of the stockholders of the Company (the "Special Meeting") to consider
and vote upon the approval and adoption of this Agreement and the Merger
contemplated hereby, or shall seek the requisite written consent of its
stockholders, all in accordance with Iowa law and its Articles of Incorporation
and Bylaws. The Company shall hold the Special Meeting or obtain such written
consent as soon as practicable after the date hereof. Subject to its fiduciary
obligations, the Board of Directors of the Company will recommend that the
stockholders of the Company vote to adopt this Agreement and approve the Merger
at the Special Meeting and will use its best efforts to solicit from the
stockholders of the Company proxies in favor of the Merger and will take all
other action necessary or, in the opinion of Purchaser, advisable to secure the
vote or consent of the stockholders of the Company required by the Iowa Business
Corporation Act to effect the Merger. If this Agreement and the Merger are
approved and adopted by written consent of less than all of the stockholders of
the Company, the Company shall give prompt notice of such approval and adoption
in accordance with Iowa law to those stockholders who did not consent.
2.3 CLOSING
(a) CLOSING DATE AND LOCATION. The Closing shall take place at 10:00
a.m. (Denver time) at the offices of Merger Sub, 00 Xxxxxxxxx Xxxxx Xxxx, Xxxxx
000, Xxxxxxxxx, Xxxxxxxx, xx the second business day immediately following the
later to occur of (i) the Special Meeting approving the Merger if such a meeting
is held, (ii) the period required by Iowa law after the giving of notice to the
stockholders of the Company who did not consent, if the Merger is approved by
written consent of less than all stockholders of the Company, or (iii) the date
on which all notice periods have run or consents have been received for notices
to be given or consents to be received under Sections 3.1(g) and 3.2 (g) hereof,
or at such other time or place as is mutually agreed by the parties hereto. The
Closing shall be effective as of the Effective Time.
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(b) OBLIGATIONS OF THE COMPANY. At the Closing, the Company shall
deliver, or use its best efforts to cause to be delivered, to Purchaser the
following documents:
(i) stock certificates representing the shares of Common
Stock representing all of the issued and outstanding Stock of the Company as the
Closing Date, which stock certificates will be accompanied by stock powers duly
completed and executed in blank by the holders thereof;
(ii) a certificate of good standing from the State of Iowa
for the Company certified by the appropriate official of each such state, dated
as of the date not more than five (5) days prior to the Closing Date certifying
that the Company is duly qualified and in good standing and has filed all
franchise tax returns due up to the date of such certificate, that all taxes
shown on such return to be due have been paid in full, and that there are no
outstanding franchise tax claims or assessments against the Company as of the
date of such certificate;
(iii) the Certificate of the Secretary of the Company
pursuant to Section 3.1(d) hereof;
(iv) the Certificate of the President or Vice President
of the Company pursuant to Section 3.1(e) hereof;
(v) the opinion of Xxxxx X. Xxxxxxxxxx as counsel for
the Company pursuant to Section 3.1(f) hereof;
(vi) the consents and waivers, if any, pursuant to
Section 3.1(g) hereof;
(vii) the executed Employment Agreements pursuant to Section
2.7 hereof;
(viii) the resignation letters from the officers and
directors of the Company pursuant to Section 3.1(k) hereof;
(ix) the books and records referred to in Section 3.1(m)
hereof;
(x) Articles of Merger in the form of EXHIBIT 2.3(b)(x),
attached hereto;
(xi) documentation (including, without limitation, duly
executed UCC-3 termination statements) satisfactory in form and substance to
Purchaser and Merger Sub as requested by Purchaser and Merger Sub to release all
encumbrances securing all Funded Debt to be paid on the Closing Date, including
Bank Debt (to the extent available as of the Closing Date and otherwise by no
later than ten (10) days after the Closing Date).
(xii) a Schedule identifying all Stockholders of the Company
owning all of the issued and outstanding shares of the Company's Stock, which
Schedule shall set forth the
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name, address and social security number or employer identification number (to
the extent available to the Company) of each stockholder of the Company and the
number of shares of each class and series of stock owned by each such
stockholder;
(xiii) Stockholder Investment Letters from each stockholder
receiving Purchaser Stock pursuant to this Agreement;
(xiv) such other documents or instruments of further
assurance as shall be necessary and appropriate by Purchaser and Merger Sub.
(c) OBLIGATIONS OF PURCHASER AND MERGER SUB. Purchaser and Merger
Sub shall deliver to the Company and the stockholders of the Company the
following documents on the Closing Date:
(i) the Certificate of the Secretary or other officer of
Purchaser pursuant to Section 3.2(d) hereof;
(ii) the Certificate of the President or Vice President of
Purchaser pursuant to Section 3.2(e) hereof;
(iii) the opinion of Xxxxxx & Xxxxx, LLC as counsel for
Purchaser and Merger Sub pursuant to Section 3.2(f) hereof;
(iv) the consents and waivers, if any, pursuant to Section
3.2(g); and
(v) the Employment Agreements pursuant to Section 2.7;
(vi) the Merger Consideration as provided in Section 2.5
payable directly by Purchaser to those stockholders of the Company who have
delivered their stock certificates for surrender and cancellation as provided in
Section 2.3(b)(i) hereof.
(d) EXHIBITS AND SCHEDULES. In the event that the parties execute
this Agreement prior to completion of all of the Exhibits and Schedules to be
attached to this Agreement, the parties shall use their reasonable efforts to
complete all such Exhibits and Schedules and attach them to this Agreement
within fifteen (15) days of the date of this Agreement, but in no event later
than the Closing Date; provided, that, no party shall be obligated to consummate
the transactions contemplated by this Agreement until such time as the Exhibits
and Schedules are completed and attached to each parties satisfaction.
2.4 CONSUMMATION OF THE TRANSACTIONS. At the Closing, Purchaser, Merger
Sub and the Company will each carry out the procedures specified under the
applicable provisions of Iowa and Colorado law, to the end that the Merger shall
become effective. The Merger shall be consummated by filing Articles of Merger
with the Secretaries of State of Iowa and Colorado in each case in such form as
required by, and executed in accordance with the relevant provisions of the
applicable state law.
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2.5 COMPANY'S CAPITAL STOCK
(a) CONVERSION OF THE STOCK. At the Effective Time, by virtue of the
Merger and without any action on the part of Purchaser, Merger Sub, the Company
or the holders of any of their securities, the outstanding Common Stock of the
Company shall be converted into the right to receive (a) $212.50, less zero
(which are adjustments pursuant to Section 1.3(ii) through (v)) in cash per
share of Common Stock held by such stockholder from the Cash Consideration; and
(b) 37 1/2 shares of Purchaser Stock per share of Common Stock held by such
stockholder from the Stock Consideration. Each holder of a certificate
representing any Common Stock (except for Dissenting Shares) shall, after the
Effective Time, cease to have any rights with respect to such Common Stock,
except the right to receive the Merger Consideration for such Common Stock upon
the surrender of such certificate in accordance with Section 2.6(c) hereof.
(b) NO SUBSEQUENT TRANSFERS; LOST, STOLEN OR DESTROYED CERTIFICATES.
After the Effective Time, there shall be no transfers on the stock transfer
books of the Company of shares of Common Stock or Dissenting Shares that were
registered as outstanding immediately prior to the Effective Time. If any
registered certificate for Common Stock shall have been lost, stolen or
destroyed, the Surviving Corporation, upon the making of an affidavit of that
fact by the Person claiming such certificate to be lost, stolen or destroyed and
subject to the following sentence, shall pay the appropriate Merger
Consideration for the shares of Common Stock represented by such certificate in
accordance with this Section 2.5 and Section 2.6 hereof to the persons legally
entitled thereto. The Surviving Corporation, in its sole discretion and as a
condition precedent to the delivery of the Merger Consideration in exchange for
the shares of Common Stock represented by such certificate, may require the
owner of such lost, stolen or destroyed certificate to provide a bond or other
security in such sum as it reasonably may direct as indemnity against any claim
that may be made against the Surviving Corporation with respect to the
certificate alleged to have been so lost, stolen or destroyed.
(c) CONVERSION, RETENTION AND TRANSFER OF STOCK. Each stock
certificate representing the Common Stock and Dissenting Shares shall, after the
Effective Time, cease to have any rights except the right to receive the Merger
Consideration as provided in Section 2.5(a) hereof (or in the case of Dissenting
Shares, the right to receive amounts under Section 2.5(d)) upon the surrender of
such certificates accompanied by stock powers duly completed and executed in
blank and any other documents required to be delivered in connection therewith.
Until surrendered as contemplated by the preceding sentences each such
certificate shall be deemed for all purposes to represent only the right to
receive upon such surrender the Merger Consideration payable in respect thereof
as contemplated by this Agreement. As a consequence of the Merger and without
any action on the part of the parties to this Agreement, each of the issued and
outstanding shares of the Company's Common Stock shall be cancelled and retired
in exchange for the Merger Consideration (or in the case of Dissenting Shares,
the right to receive amounts under Section 2.5(d)). Each share of common stock,
no par value, of Merger Sub issued and outstanding immediately prior to the
Effective Time shall remain outstanding. Each such share of Merger Sub shall
continue as one share of the capital stock of the Surviving Corporation,
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and each certificate evidencing ownership of any such shares shall continue to
evidence the same number of shares of the Surviving Corporation.
(d) DISSENTING SHARES.
(i) Notwithstanding any provision of this Agreement to the
contrary, any shares of Common Stock held by a holder who has demanded and
perfected his right for appraisal of such shares in accordance with Iowa law and
who, as of the Effective Time, has not effectively withdrawn or lost such right
to appraisal ("Dissenting Shares"), shall not be converted into or represent the
right to receive the Merger Consideration pursuant to Section 2.5(a), but the
holder thereof shall be entitled only to such rights as are granted by Iowa law.
(ii) Notwithstanding Section 2.5(d)(i), if any holder of
shares of Common Stock who demands an appraisal of such shares under Iowa law
shall effectively withdraw or lose (through failure to perfect or otherwise) his
right to appraisal, then, as of the later of the Effective Time or the
occurrence of such event, such holder's shares shall no longer be Dissenting
Shares and shall automatically be converted into and represent only the right to
receive the Merger Consideration applicable to such shares as provided in this
Section 2.5, without interest, upon surrender of the certificate or certificates
representing such shares, in accordance with Section 2.5(a) hereof.
(iii) The Company shall give Purchaser notice of any written
demand for appraisal of any shares of Common Stock received prior to the
Effective Time and any withdrawal of such demands. Amounts payable by the
Surviving Corporation to holders of Dissenting Shares shall be paid from the
Escrow Fund.
(e) ESCROW FUND. In the event that there are any Dissenting Shares
then a portion of the Cash Consideration shall be held in a non-interest bearing
escrow fund ("Escrow Fund"). Payment to the holders of the Dissenting Shares
shall be made solely from the Escrow Fund. The Cash Consideration available to
holders of non-Dissenting Shares shall be reduced by the total amount paid, or
payable, to the holders of Dissenting Shares.
2.6 OTHER PAYMENTS MADE IN CONNECTION WITH THE MERGER.
(a) REPAYMENT OF DEBT. At the Closing, Purchaser will repay the
principal amount of the Bank Debt, including accrued and unpaid interest
thereon. The Funded Debt, including the Bank Debt, is more particularly
described in SCHEDULE 2.6(a) attached hereto. If the actual amount of the
Funded Debt, is less than the Funded Debt Threshold, the extent of
Purchaser's obligations to repay such Funded Debt shall be limited to the
actual amount of payment required to satisfy any such obligations, including
the benefit of any settlement or compromise of any such indebtedness. In
addition, SCHEDULE 2.6(a) shall be amended to list all of the Company's debt
as of the Closing Date comprising the total amount of the Funded Debt,
including any amounts in excess of the Funded Debt Threshold. SCHEDULE
2.6(a) shall include in addition to a detailed description of the
indebtedness comprising the Funded Debt and all accrued and unpaid interest
thereon and all other amounts then owed under the loan agreements, notes
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and other documents pursuant to which such funds were borrowed and sets forth
the names and addresses of the obligees of such debt, the maturity date and the
terms of repayment of such debt. Funded Debt other than the Bank Debt shall be
paid when due or on such earlier date as Purchaser may elect.
(b) REPAYMENT OF BALANCE OF FUNDED DEBT. The remaining balance of
the Funded Debt to the extent it exceeds the Funded Debt Threshold will be paid
from the Cash Consideration and to the extent of any such payment will reduce
the total amount of Cash Consideration available for distribution as part of the
Merger Consideration payable to the holders of the Common Stock as provided in
Section 2.5(a) hereof.
(c) MERGER CONSIDERATION. Purchaser shall pay to each stockholder of
Company the Merger Consideration upon surrender by such stockholder to Purchaser
of the certificates representing such stockholder's shares.
(d) REDUCTION OF CASH CONSIDERATION FOR TRADE PAYABLES. Effective as
of the Closing Date and in connection with the Merger, Purchaser will become
obligated for the trade payables of the Company that are listed on SCHEDULE
2.6(d)-1 attached hereto or that are incurred in the ordinary course of business
of each such corporation. A new SCHEDULE 2.6(d)-2, shall be delivered at
Closing, which shall include (i) all trade payables of the Company as of the
Closing Date, and (ii) all Transactional Costs. As contemplated by Section 1.3,
the total amount of cash available for distribution as part of the Merger
Consideration will be reduced by the amount of the Transactional Costs and the
amount, if any, by which the trade payables as of the Closing Date listed on
SCHEDULE 2.6(d)-2 exceed the accounts receivable of the Company as of the
Closing Date listed on SCHEDULE 4.1.
2.7 EMPLOYMENT AGREEMENTS . Xxxxx Xxxxxx ("Xxxxxx") and Xxx Xxxxxxx
("Xxxxxxx") will receive employment agreements with Merger Sub, in the forms of
EXHIBITS 2.7(1) and 2.7(2) ("Employment Agreements").
2.8 EARNOUT SHARES. In addition to the Merger Consideration and Xxxxxx'x
Employment Agreement, Xxxxxx will be paid Five Thousand (5,000) shares of
Purchaser Stock on each anniversary date of Xxxxxx'x Employment Agreement, up to
a maximum of Twenty-Five Thousand (25,000) shares.
ARTICLE III
CONDITIONS PRECEDENT
3.1 CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS. The obligations of
Purchaser and Merger Sub to consummate the transactions contemplated by this
Agreement shall be subject to the satisfaction, on or before the Closing Date,
of each of the following conditions, all or any of which may be waived, in whole
or part, by Purchaser:
(a) REPRESENTATIONS TRUE AT CLOSING. The representations and
warranties made by the Company in this Agreement or the attachments hereto shall
be true and correct in all
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material respects on the Closing Date with the same force and effect as though
such representations and warranties had been made on and as of such time, except
for changes previously disclosed to Purchaser or contemplated by this Agreement.
(b) COVENANTS. The Company shall have duly performed in all material
respects all of the covenants, acts, obligations, conditions, agreements and
undertakings to be performed by it on or prior to the Closing Date pursuant to
the terms of this Agreement.
(c) ABSENCE OF ADVERSE CHANGES. The Company shall not have suffered
any material adverse change in its financial condition, business, property or
assets since the Financial Statement Date (as herein defined).
(d) SECRETARY'S CERTIFICATES. Purchaser shall have received a
certificate of good standing from the Secretary of State of each of the states
in which the Company is operating, or in which it is necessary or desirable to
be qualified to do business, stating that the Company is qualified to do
business and is in good standing and a certificate of the Secretary or Assistant
Secretary of the Company certifying: (i) the Company's Articles of Incorporation
and Bylaws; (ii) the incumbency of all officers of the Company having authority
to execute and deliver this Agreement and the agreements and documents
contemplated hereby; and (iii) resolutions of the Company's Board of Directors
and stockholders approving the execution, delivery and performance of this
Agreement.
(e) OFFICER'S CERTIFICATE. Purchaser shall have received a
certificate from the President or a Vice President of the Company as to the
matters set forth in Sections 3.1(a), 3.1(b) and 3.1(c).
(f) OPINION OF COMPANY COUNSEL. An opinion of counsel for the
Company shall have been delivered to Purchaser and Merger Sub dated as of the
Closing Date, substantially in the form and substance of the opinion attached as
EXHIBIT 3.1(f), which shall include matters related to FCC and state utility
commission compliance of the Company.
(g) CONSENTS AND WAIVERS. The Company shall have obtained and
Purchaser shall have received a true and correct copy of the consents and
waivers described SCHEDULE 3.1(g) hereof, or otherwise required for the
execution of this Agreement and the consummation of the transactions
contemplated hereby.
(h) APPROVALS. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby shall have been approved by
all regulatory authorities, if any, whose approvals are required by contractual
requirements or by law.
(i) NO LITIGATION OR OTHER PROCEEDINGS. No action, proceeding,
investigation, regulation or legislation shall have been instituted, threatened
or proposed before any court, governmental agency or legislative body to enjoin,
restrain, prohibit or obtain substantial damages in respect of, or which is
related to, or arises out of, this Agreement or the consummation of the
transactions contemplated hereby. No suit, action or other proceeding shall
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be pending before any court or governmental agency, or threatened against or
affecting the Company which, if adversely determined, would have a material
adverse effect on the value of the business, assets or property of the Company.
(j) EMPLOYMENT AGREEMENTS. The Employment Agreements shall have been
executed and delivered.
(k) RESIGNATIONS OF OFFICERS AND DIRECTORS. Purchaser shall have
received the resignation of each officer and director of the Company.
(l) STOCKHOLDER APPROVAL; DISSENTERS RIGHTS. The stockholders of the
Company shall have approved the Merger and other transactions contemplated by
this Agreement in accordance with the Iowa Business Corporation Act and the
Company's Articles of Incorporation, and the total amount of the Merger
Consideration that would have been payable to the holders of shares that are
Dissenting Shares at the Closing (had they not sought appraisal for their
shares) shall not exceed $5,000.
(m) CORPORATE RECORDS. Purchaser shall have received the Stock
Books, Minute Books and Corporate Seal (if any) of the Company and any other
subsidiary in which the Company may have an interest.
(n) NO LIEN, INDEBTEDNESS. Except as set forth in SCHEDULE 2.6(a)
attached hereto, the Company shall not be subject to any indebtedness nor shall
any of their properties or assets be subject to liens or encumbrances of any
kind, other than (i) indebtedness and liens for current taxes, wages and
operating expenses in the normal course of business, payment of which at the
time of Closing shall not yet be due; (ii) indebtedness reflected in the
Financial Statements or any loans advanced to the Company subsequent to the
Financial Statement Date that are approved by Purchaser; (iii) accounts payable
incurred in the ordinary course of business subsequent to the Financial
Statement Date; and (iv) Permitted Encumbrances.
(o) NO ATTACHMENT. None of the assets or properties of the Company
shall have been attached or levied upon or placed in the hands of a receiver or
assignee for the benefit of creditors. No petition or similar instrument shall
have been filed with respect to the Company under any bankruptcy or insolvency
law, and no injunction or restraining orders shall have been instituted against
the Company that would have a material adverse effect on the Company.
(p) INDEMNIFICATION AGREEMENTS; POWERS OF ATTORNEY. The stockholders
of the Company listed in Schedule 6.11 shall have executed and delivered to
Purchaser an Indemnification Agreement in the form of EXHIBIT 3.1(p).
(q) STOCKHOLDER INVESTMENT LETTERS. The stockholders of the Company
receiving Purchaser Stock pursuant to the terms of this Agreement shall have
executed the Stockholder Investment Letters.
-12-
3.2 CONDITIONS PRECEDENT TO COMPANY'S OBLIGATIONS. The obligations of
the Company to consummate the transactions contemplated by this Agreement
shall be subject to the satisfaction, on or before the Closing Date, of each
of the following conditions, all or any of which may be waived, in whole or
part, by the Company:
(a) REPRESENTATIONS TRUE AT CLOSING. The representations and
warranties made by Purchaser and Merger Sub in this Agreement or the attachments
hereto shall be true and correct in all material respects on the Closing Date
with the same force and effect as though such representations and warranties had
been made on and as of such time, except for changes contemplated by this
Agreement.
(b) COVENANTS. Purchaser and Merger Sub shall have duly performed in
all material respects all of the covenants, acts and undertakings to be
performed by them on or prior to the Closing Date pursuant to the terms of this
Agreement.
(c) ABSENCE OF ADVERSE CHANGE. Purchaser shall not have suffered any
material adverse change in its financial condition, business, property or assets
since the date of this Agreement.
(d) SECRETARY'S CERTIFICATE. The Company shall have received a
certificate of the Secretary, Assistant Secretary or other officer of Purchaser
certifying (i) Purchaser's articles of incorporation and bylaws; (ii) the
incumbency of all officers of Purchaser having authority to execute and deliver
this Agreement and the agreements and documents contemplated hereby; and (iii)
resolutions of Purchaser's board of directors approving the execution, delivery
and performance of this Agreement.
(e) OFFICER'S CERTIFICATE. The Company shall have received a
certificate from the President or a Vice President of Purchaser as to the
matters set forth in Sections 3.2(a), 3.2(b) and 3.2(c).
(f) OPINION OF PURCHASER COUNSEL. An opinion of counsel for
Purchaser and Merger Sub shall have been delivered to the Company dated as of
the Closing Date, substantially in the form and substance of the opinion
attached as EXHIBIT 3.2(f).
(g) CONSENTS AND WAIVERS. Purchaser shall have obtained and the
Company shall have received a true and correct copy of the consents and waivers
described in SCHEDULE 3.2(g) hereof or otherwise required for the execution of
this Agreement and the consummation of the transactions contemplated hereby.
(h) APPROVALS. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby shall have been approved by
all regulatory authorities, if any, whose approvals are required by law.
(i) NO LITIGATION OR OTHER PROCEEDINGS. No action, proceeding,
investigation, regulation or legislation shall have been instituted, threatened
or proposed before
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any court, governmental agency or legislative body to enjoin, restrain, prohibit
or obtain substantial damages in respect of, or which is related to, or arises
out of, this Agreement or consummation of the transactions contemplated hereby.
(j) STOCKHOLDER APPROVAL; DISSENTER'S RIGHTS. The stockholders of
the Company shall have approved the Merger and other transactions contemplated
by this Agreement in accordance with the Iowa Business Corporation Act and the
Company's Articles of Incorporation, and the total amount of the Merger
Consideration that would have been payable to the holders of shares that are
Dissenting Shares at the closing had they not sought appraisal for their shares
shall not exceed $5,000.
(k) EMPLOYMENT AGREEMENTS. Merger Sub shall have executed the
Employment Agreements.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company makes the
representations and warranties set forth below, except as set forth in the
Disclosure Schedule. Each exception to the representations and warranties set
forth in the Disclosure Schedule shall reference by Section number the
representation and/or warranty to which it applies.
(a) ORGANIZATION AND CORPORATE POWER. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Iowa, and is duly qualified to do business as a foreign corporation in
good standing in each jurisdiction in which the properties owned, leased or
operated by it, or the nature of its activities or proposed activities makes
such qualification necessary, except in such jurisdictions where the failure to
be so qualified or in good standing would not have a material adverse effect on
the business, results of operations or financial condition of the Company taken
as a whole. The Company has all required corporate power and authority to own
properties and to carry on its business as now conducted. The Company has
furnished to Purchaser accurate and complete copies of the Articles of
Incorporation and Bylaws as in effect on the date hereof. Attached hereto as
SCHEDULE 4.1(a) is a list of all of the states in which the Company is qualified
to do business as a foreign corporation or in which qualification is necessary
or desirable to carry on the business and operations of the Company as presently
conducted. The Company has no other subsidiaries or affiliates.
(b) CORPORATE AUTHORIZATION. The Company has all power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of the Company and as such all corporate
action necessary for the approval or ratification of this Agreement has been
taken and no other corporate proceedings on the part of the Company is necessary
to authorize the execution and delivery of this Agreement or to consummate the
transactions so contemplated (subject to the approval and adoption of this
Agreement and the
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transactions contemplated hereby by the stockholders of the Company required in
accordance with the Iowa Business Corporation Act, and the Articles of
Incorporation and Bylaws of the Company).
(c) BINDING EFFECT. This Agreement constitutes a legal, valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except to the extent that the enforceability thereof may be
limited by applicable bankruptcy, insolvency, reorganization or other similar
laws affecting the enforcement of creditors' rights generally and by principles
of equity regarding the availability of remedies.
(d) CONSENTS. Except as set forth in SCHEDULE 3.1(g) and/or the
Disclosure Schedule, there are no consents, authorizations, approvals (other
than stockholder approval as set forth in Section 2.2 hereof), governmental,
judicial, administrative or other, under any Contract, lease, License, Permit,
indenture, promissory note, agreement, mortgage or any other instrument to which
the Company is a party or is bound or to which its assets are subject or under
any statute, rule, regulation, judgment, decree or order of any court, agency or
other authority to which jurisdiction the Company is subject, which are required
for the execution, delivery and performance of this Agreement and the
transactions contemplated hereby.
(e) CAPITALIZATION.
(i) The authorized capital stock of the Company consists of
100,000 shares of Common Stock, of which 2,000 shares are issued and
outstanding. SCHEDULE 4.1(e)(i) attached hereto includes a complete and correct
list of the present stockholders of record of the Company, showing the number of
shares of Stock owned by each such stockholder as well as the other information
to be set forth therein. All of the issued and outstanding Stock of the Company
has been duly authorized, is validly issued, fully paid and nonassessable. All
indebtedness of the Company for money borrowed as of the date hereof is
reflected on SCHEDULE 2.6(a) attached hereto. SCHEDULES 4.1(e)(i) and 2.6(a)
shall be updated by the Company on the Closing Date and as often as is necessary
for such schedules to remain true and accurate.
(ii) SCHEDULE 4.1(e)(ii) attached hereto includes a complete
and correct list of the Company's outstanding options to purchase its capital
stock ("Outstanding Options") and the Company's outstanding warrants to purchase
its capital stock ("Outstanding Warrants"), in each case showing the date of
issuance, the expiration date, the exercise price, the holders thereof and the
number of shares of capital stock subject thereto. The Company has furnished to
Purchaser accurate and complete copies of the Outstanding Options and
Outstanding Warrants. The copies of the Outstanding Options and Outstanding
Warrants represent the terms, conditions, provisions, agreements, obligations
and undertakings of the Company with respect to all Outstanding Options and
Outstanding Warrants. Except for the Outstanding Options and the Outstanding
Warrants, the Company does not have outstanding any stock or other securities
which are, in either case, convertible into or exchangeable for any shares of
its Stock, any warrants, options, purchase rights, subscription rights or other
contract rights or commitments or appreciation, phantom stock, profit
participation or similar rights to purchase or acquire any shares of its Stock
or any stock or securities convertible into or exchangeable for any of the Stock
-15-
of the Company and is not subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of its capital stock. No
stockholder of the Company has any preemptive or other purchase rights with
respect to the issue or sale of any Stock. The Company's stock transfer records
accurately reflect all issuances and transfers of Stock and other securities and
the minutes of meetings of incorporators, directors and stockholders completely
and correctly reflect all of their respective actions in all material respects.
(f) FINANCIAL STATEMENTS. As soon as possible, and in any event
prior to the Closing Date, the Company shall furnish Purchaser with the
following financial statements:
(i) an unaudited balance sheet of the Company for the
fiscal years ended December 31, 1995and December 31, 1996, and the related
statements of income and retained earnings and changes in financial position of
the Company for such periods; and
(ii) an unaudited balance sheet of the Company as at June
30, 1997 ("Financial Statement Date"), and the related statements of income and
retained earnings of the Company for the six (6) month period then ended.
Such financial statements, including any related schedules and notes
thereto (the "Financial Statements"), have been prepared in accordance with
generally accepted accounting principles ("GAAP") consistently applied
throughout the period or periods in question (except as specifically disclosed
therein) and show all liabilities, direct or contingent, of the Company required
to be shown in accordance with GAAP consistently applied throughout the period
or periods in question (except as specifically disclosed therein) and fairly
present the financial position and the results of the Company for the periods
indicated therein.
(g) NO ADVERSE CHANGE IN FINANCIAL CONDITION. Since the Financial
Statement Date, there has not been (i) any event, condition or fact that has
resulted or may reasonably be expected to result in any material adverse change
in the financial condition, business, sales, income, properties, assets or
liabilities of the Company shown on the Financial Statements; or (ii) any
material adverse change with respect to any Contract to which the Company is a
party or any event, circumstance, fact or other occurrence which may result in
any material adverse change to the condition (financial or otherwise), results
of operations, business, sales, income, properties or assets of the Company; or
(iii) any material damage, destruction or loss to the properties, assets or
business of the Company, whether or not covered by insurance, as the result of
any fire, explosion, accident, casualty, labor disturbance or interruption,
requisition or other taking of property by governmental body or agency, flood,
embargo, or act of God or the public enemy, or cessation, interruption or
diminution of operations, whether or not covered by insurance, which has
materially and adversely affected or impaired or which could reasonably be
expected to materially or adversely affect or impair the conduct of the
operations or business of the Company; or (iv) any labor trouble other than
routine grievances (including without limitation any negotiation, or request for
negotiation, for any representation or any labor contract) or to the Company's
knowledge any event or condition of any character which has materially and
adversely affected or which may be reasonably expected to materially and
adversely affect or impair the conduct of the Company's operations or business;
or (v) any declaration, setting aside, or
-16-
payment of, any dividend or any distribution, in respect of the Common Stock; or
(vi) any redemption, purchase or other acquisition by the Company of any shares
of the Common Stock; or (vii) any significant loss of customers of the Company.
(h) ABSENCE OF UNDISCLOSED LIABILITIES. Except as and to the extent
reflected or reserved against in the Financial Statements, the Company does not
have any liabilities, debts or obligations, whether absolute, accrued,
contingent, unliquidated or otherwise and whether due or to become due
(including without limitation any liability for breach of contract, breach of
warranty, torts, infringements, claims or lawsuits), arising out of any
transaction entered into on or prior to the Financial Statement Date, other than
contractual obligations incurred in the ordinary course of business not required
to be disclosed in accordance with GAAP.
(i) TITLE TO PROPERTIES; LIENS. SCHEDULE 4.1(i) attached hereto
sets forth, as of the date hereof, an accurate and complete list of all leases
and purchases and ownership by the Company of all real properties, license
agreements and all leases and purchases and ownership of all personal properties
(covering properties with a purchase price as of the date hereof greater than
$1,000) to which the Company is a party (whether as purchaser, lessor, lessee,
licensor or licensee) collectively the "Leases and Licenses". The Company, as
lessee or licensee, has entered into all such Leases and Licenses which the
Company reasonably believes may be necessary for the conduct of its business and
operations as now conducted. The Company has furnished to Purchaser accurate
and complete copies of all such Leases and Licenses. The Company has title to
each of the leasehold and other interests created by the Leases and Licenses
free and clear of all security interest, claims, liens and encumbrances of any
nature, other than Permitted Encumbrances. To the best of the knowledge of the
Company, each such Lease and License is in full force and effect. Each Lease
and License constitutes the legal, valid and binding obligation of the Company,
to the knowledge of the Company, enforceable against the Company in accordance
with its respective terms accept as may be limited by bankruptcy, insolvency,
reorganization, readjustment of debt, moratorium, general principles of equity
or other laws of general application related to or affecting the enforcement of
creditors rights generally. The Company has not received notice, or does not
have any reason to know, of any claim of default under any such Lease or
License. All Leases are fully effective and afford the Company, peaceful and
undisturbed possession of the property which is the subject matter of each such
Lease. All of the Contracts, agreements, Permits, authorizations and other
intangible assets of a similar nature of the Company are valid and binding
obligations of the parties thereto, and the Company does not have any knowledge
of an intention of or basis (other than the terms thereof) for any termination
of any such intangible assets by any party.
(j) MARKETABLE TITLE. Except for Permitted Encumbrances (as defined
herein) or as set forth on SCHEDULE 4.1(j) attached hereto, the Company has good
and marketable title to all of its assets and property as set forth in the
SCHEDULE 4.1(i) attached hereto, free and clear of all mortgages, liens,
pledges, charges, claims (real or assertive) or encumbrances of any nature
whatsoever.
(k) CONDITION OF TANGIBLE ASSETS. All material tangible portions
of the assets and properties owned by the Company, including all real
properties or leasehold interest in real
-17-
property and structures thereon, are to the best of the Company's knowledge,
in good condition and repair, subject only to ordinary wear and tear in light
of their respective ages and there respective uses for which they are
currently used. The uses of the tangible properties and assets conform and
comply in all material respects with all rules, regulations and standards
applicable to the Company or its assets or properties, imposed by applicable
federal, state or local laws or regulations.
(l) ALL ASSETS. The properties and assets of the Company as of the
date hereof and the Closing Date include (i) all properties and assets whether
or not reflected on the balance sheet included in the Financial Statements,
including Licenses, Permits, Leases, Contracts, customer lists, goodwill and any
other tangible or intangible assets as disclosed in the Schedules attached to
this Agreement, and (ii) assets and properties acquired by the Company after the
Financial Statement Date up to and including the Closing Date as set forth in
SCHEDULE 4.1(l) which will be updated immediately prior to Closing, other than
such properties and assets as shall have been transferred or otherwise disposed
of by the Company in the ordinary course of business as shall be disclosed in
SCHEDULE 4.1(l).
(m) CERTAIN TAX MATTERS. The Company has prepared and duly filed
(and to the best of its knowledge has done so accurately and correctly) all
federal, state, county and local income, franchise, use, real property and
personal property tax returns and reports required to be filed as of the date
hereof with respect to the Company and has duly paid, withheld or reserved for
all taxes, penalties and other governmental charges required to be paid that
have been assessed or levied against or upon the Company or any of its
properties, assets, income, franchises, licenses or sales, including without
limitation, income, gross receipt, property taxes or to the extent that they
relate to periods on or prior to the Financial Statement Date are reflected as a
liability on the Financial Statements, or if not paid, is contesting such amount
in good faith by appropriate proceedings. In the event the Company is
contesting such amounts in good faith, the Company has established or reserved
accounts sufficient to satisfy the assessment or levy being contested which
reserve accounts shall automatically transfer to the Surviving Corporation as a
result of the Merger. The Company does not know and has no reason to know of any
proposal by any taxing authority for additional taxes or assessments against or
upon the Company. To the best of the knowledge of Company all monies required
to be held by the Company from employees for income taxes, social security and
unemployment insurance taxes, have been collected or withheld or either paid to
the respective governmental agencies or set aside in cash for such purpose. The
Company has not entered into any agreement for the extension of time or the
assessment of any tax or tax delinquency, nor has the Company received any
outstanding or unresolved notices from the Internal Revenue Service or any
taxing authority of any proposed examination or any proposed deficiency or
assessment or of any tax returns or tax liabilities due and payable. The
Company is not a United States real property holding corporation within the
meaning of Section 897(c)(2) of the Code. The Company has delivered to
Purchaser an accurate, correct and complete copy of each return or statement
filed by on behalf of or including the Company for federal income tax purposes
or state and local income or franchise tax purposes for the last three (3) tax
years of the Company. All material elections with respect to the taxes
affecting the Company as of the date hereof are set forth in SCHEDULE 4.1(m)
attached hereto. After the date
-18-
hereof, no written election will be made by the Company without the Purchaser's
express written consent.
(n) FINANCIAL DISCLOSURE. The Company has made available to the
Purchaser and Merger Sub all information known to the Company with respect to
(i) accounts, borrowings resolutions and deposit boxes maintained by the Company
at any bank or any financial institution and the account numbers and the names
and addresses of all the persons authorized to effect transactions in such
accounts and pursuant to such resolutions and with access to such boxes, and
(ii) the names of all persons, firms, associations, corporations or business
organizations holding general or special powers of attorney from the Company. A
summary of the terms of any such powers of attorney is set forth on SCHEDULE
4.1(n) attached hereto.
(o) INSURANCE. SCHEDULE 4.1(o) attached hereto sets forth, as of the
date hereof, an accurate and complete list and brief description of the terms of
all policies of insurance carried by the Company and designating the Company as
the insured thereunder. The description of each policy consists of a
description of the subject property, the insurance coverage, the deductibles and
the additional insurance. The Company has furnished to Purchaser and Merger Sub
an accurate and complete copy of all such insurance polices. No insurance
carrier has refused any application for insurance by the Company or any other
person on behalf of the Company on any of its properties or assets.
(p) PATENTS, TRADE SECRETS, ETC. SCHEDULE 4.1(p) attached hereto
sets forth, as of the date hereof, an accurate and complete list of all letters
patent, patents applications, trade marks, service marks, trade names, brands,
logos, copyrights and licenses, both domestic and foreign, and rights with
respect to the foregoing, whether or not registerable with any governmental
authority, now owned or used by the Company. In addition, SCHEDULE 4.1(p)
attached hereto includes a separate list of all products, prototypes and
research work which is currently being undertaken by the Company to develop
products as well as drawings, schematics, engineering specifications, reports
and other similar instruments and documents used in the connection with the
development of such product to be owned or used in connection with the business
of the Company (collectively "Development Products"). The Company has not
received notice, or otherwise has no reason to know, of any claim or threatened
infringement of the rights of others with respect to any patents, trademarks,
service marks, trade names, brands, logos, copyrights and licenses used or owned
by the Company, the loss of which would have a material adverse effect upon the
business, operations, assets or financial condition of the Company. The Company
possess all patents, patent rights or licenses, trademarks, trademark rights and
copyrights that are required to conduct its business as now conducted. To the
best of the Company's knowledge, the Company owns all trade secrets and all
other rights to all Development Products which are being developed by the
Company, which may or may not be patented or patentable. The Company has no
knowledge that it is infringing upon or otherwise violating the rights of any
third party with respect to any patent, trademark, trade name, service xxxx or
copyright. The Company has the right to use, free and clear of claims or rights
of others, all trade secrets, customer lists and manufacturing or other
processes required for, used or to be used in, or incident to its business as
now conducted, and to the best knowledge of the Company and its executive
officers, after due inquiry, no current or former employee of the Company is or
was a party to any confidentiality
-19-
agreement and/or agreement not to compete which restricts or forbids or
restricted or forbade at any time during such employee's employment by the
Company, such employee's performance of the Company's business, as the case may
be, or any activity that the employee has been hired to perform. To the best
knowledge of the Company, the Company is not now using, and has not in the past
used without appropriate authorization, any confidential information or trade
secrets of any third party. The Company has not received any notice alleging
such conduct.
(q) NO CONFLICTS. The execution, delivery and performance of this
Agreement, and the performance of the transactions contemplated hereby and the
compliance with the respective terms hereof by the Company, do not and will not
(i) conflict with or result in a breach of the terms, conditions or provisions
of, (ii) constitute a default under, (iii) result in the creation of any lien,
security interest, charge or encumbrance upon the Company's capital stock or
assets, (iv) give any third party the right to accelerate any obligation under,
or (v) result in a violation of (A) the Articles of Incorporation or Bylaws of
the Company or any other organization or governing instrument of the Company,
(B) any Contract, Lease, indenture, promissory note, agreement, mortgage or
other instrument to which the Company is a party or is bound or to which its
assets are subject or affected, or (C) any law, License, Permit, statute, rule,
regulation, judgment, decree or order of any Court, agency or other authority to
which jurisdiction the Company is subject.
(r) LITIGATION, ETC. Except as set forth on SCHEDULE 4.1(r) there
are no actions, suits, proceedings, arbitration proceedings, orders,
investigations or claims pending or threatened against or affecting the Company
or any of its properties at law or in equity, or before or by any governmental
or other department, commission, board, bureau, agency or instrumentality; there
are no governmental inquiries (including inquiries as to the qualification of
the Company to hold or receive any License or Permit) pending; and, to the best
of the Company's knowledge, there is no basis for any of the foregoing.
(s) PERMITS. The Company has all franchises, permits, licenses,
governmental authorizations, zoning variances, rights of way, easements and
other authorizations, rights and privileges (collectively "Permits") necessary
to permit it to own its properties and to conduct its business as now conducted.
All such Permits are listed and described in SCHEDULE 4.1(s) attached hereto.
All such Permits are in full force and effect and no revocation, cancellation or
withdrawal thereof has been effective or to the best knowledge of the Company
threatened. Except as disclosed in SCHEDULE 4.1(s) attached hereto, the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereunder will not result in the termination of,
or change in, any such Permits.
(t) NO VIOLATION OF LAWS OR REGULATIONS. To the best knowledge of
the Company, the Company has materially complied with, and is not in any
material respect in default under or in violation of, any laws, ordinances,
requirements, regulations or orders applicable to its business and properties,
including without limitation the rules and regulations of the Federal
Communications Commissions ("FCC") or any state public utilities commission
having jurisdiction over the business and operations of the Company, nor is the
Company in violation of or in default under any order, writ, injunction,
judgment or decree of any court, arbitrator, or
-20-
federal, state or local department official, commission, authority, port,
bureau, agency or other instrumentality issued or pending against the Company
which might adversely affect the ability of the Company to execute, deliver and
perform its obligations under this Agreement or to consummate the transactions
contemplated hereby or which challenges or seeks to prevent, enjoin, alter or
materially delay any such transactions. The Company has not received notice or
otherwise has no reason to know, of any claim, default or violation with respect
to any of the foregoing. There have been no illegal payments, kickbacks, bribes
or political contributions made by the Company to any Person in the United
States or any foreign country or political subdivision. The Company does not
have any license or authorization from the FCC or any state public utility
commission and the Company is not required to obtain or have in effect any such
permits or licenses with the FCC or state public utility commission.
(u) CONTRACTS. SCHEDULE 4.1(u) attached hereto sets forth, as of the
date hereof and as of the Closing Date, an accurate and complete list of the
following:
(i) except for the Leases and Licenses, all agreements,
contracts, arrangements, commitments, understandings or obligations, oral or
written of the Company which are to be performed in whole or in part on or after
the date hereof and which require or may require the payment of Company in an
amount, or under which the Company is required or may be required to provide
goods or services of a value, greater than one thousand dollars ($1,000) during
any period of twelve (12) consecutive months;
(ii) any agreement to which the Company is a party or by
which the properties or assets of the Company are bound which limits the freedom
of the Company to compete in any line of business or with any Persons; and
(iii) all other agreements, contracts, arrangements,
commitments, understandings or obligations, oral or written (other than oral
contracts of employment) between the Company on the one part or any officer or
director of the Company on the other part or in which any of such persons or
entities has any financial interest, direct or indirect (including without
limitation any agreements affecting the properties or assets of the Company and
agreements to make loans). The Company has furnished Purchaser a copy of each
agreement, contract, arrangement, commitment or obligation set forth in SCHEDULE
4.1(u) attached hereto. Collectively, the contracts, agreements, arrangements,
commitments or obligations described in this Section 4.1(u) and listed in
SCHEDULE 4.1(u) are referred to herein as the "Contracts". Each such Contract
is in full force and effect and to the best of the Company's knowledge the
Company has performed in all material respects all of the obligations under each
Contract required to be performed by it, and no such contract is in default, nor
has any event occurred, which with the passage of time or the giving of notice
or both, will result in the occurrence of a default under any such Contract or
in the receipt of any claim of default with respect to any Contract to which the
Company is a party or is otherwise bound or to which its assets are subject.
The Company has no present expectation or intention of not fully performing
in all material respects all such obligations; the Company has no knowledge of
any breach or anticipated breach by other parties of any Contract or commitment
to which it is a party or is otherwise
-21-
bound; and the Company is not a party or otherwise bound to any materially
adverse or burdensome Contract or commitment.
(v) CERTAIN CONTRACTS AND COMMITMENTS. Except for the Outstanding
Options and the Outstanding Warrants, the Company is not a party to, or
otherwise bound by, nor has the Company ever established, had in effect,
obligated to fund or make contributions to any written or oral plan, program or
arrangement relating to a pension, profit sharing, retirement savings, thrift,
deferred compensation, stock option, stock purchase, group insurance, accident,
sickness, medical, dental, disability or other plan providing for deferred or
other compensation to employees. Except as set forth in SCHEDULE 4.1(v)
attached hereto, the Company is not obligated to fund any vacation pay,
severance pay, incentive compensation, consulting agreement, bonus or other
employee benefits or fringe benefits either currently or as to any time in the
past (including health insurance, life insurance or other benefit plans
maintained for retirees or former employees) whether or not such plan, program
and arrangement constitute "employee benefit plans" within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") and whether or not any such plan, program or arrangement are in the
nature of formal or informal understandings. All such plans, programs and
arrangements referred to in this Section 4.1(v) are collectively referred to
herein as "Benefit Plans".
(w) EMPLOYEES AND LABOR. The Company is not aware that any executive
or key employee, or any group of employees of the Company has any plans to
terminate his, her or their employment with the Company, or that any executive
or key employee is subject to any agreement, obligation or other legal hindrance
that impedes or might impede such executive or key employee from devoting his or
her full business time to the affairs of the Company. The Company has complied
in all material respects with all laws relating to wages, hours, equal
opportunity, collective bargaining and the payment of social security and other
taxes, and the Company has no material labor relations problems. Except as
reflected on the Financial Statements, the Company is not indebted to any
officer, director or employee whether by loan, advance or otherwise, other than
for out-of-pocket expenses incurred in the ordinary course of business, nor is
any officer, director, employee or shareholder so indebted to the Company.
SCHEDULE 4.1(w) attached hereto describes the respective salaries as in effect
on the date hereof for the employees who constitute the sole officers and
employees of the Company. The Company is not a party to any agreement,
contract, arrangement, plan, commitment or understanding which has resulted or
would result, upon the consummation of the transactions contemplated under this
Agreement or otherwise, separately or in the aggregate, in the payment of any
"excess parachute payment" within the meaning of Section 280G of the Code. The
Company is not a party to any Benefit Plan, or any Contract, whether collective
bargaining agreements or other arrangements with any labor union or any
employment or consulting contracts not terminable at will without penalty to
which the Company is a party.
(x) ERISA. The Company has fulfilled its obligations under the
minimum funding standards of ERISA and the Code with respect to each Pension
Plan (as defined in Section 4001 of ERISA), and is in compliance in all material
respects with the provisions of ERISA and the Code. The Company has not
incurred any liability to the Pension Benefit Guaranty Corporation ("PBGC")
(other than annual premiums due to the PBGC) or a Pension
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Plan under Title IV of ERISA. SCHEDULE 4.1(x) attached hereto lists each
employee Benefit Plan covered by ERISA maintained or contributed to by the
Company at any time since January 1, 1990. The Company is not subject to any
obligations or liabilities under COBRA or any other employee Benefit Plan
existing prior to, but not on or after, January 1, 1990.
(y) ENVIRONMENTAL MATTERS. To the best knowledge of the Company, the
Company has duly complied with, and the operation of its businesses, equipment
and other assets in the facilities owned or leased by the Company are in
compliance with the provisions of all applicable federal, state and local
environmental, health and safety laws, statutes, ordinances, rules and
regulations of any governmental or a quasi governmental authority relating to
(i) errors or omissions, (ii) discharges to surface water or ground water, (iii)
solid or liquid waste disposal, (iv) the use, storage, generation, handling,
transport, discharge, release or disposal of toxic or hazardous substances or
waste, (v) the emission of non-ionizing electromagnetic radiation or (vi) other
environmental, health or safety matters, including without limitation, the
Comprehensive Environmental Response Compensation and Liability Act of 1980 as
amended by the Superfund Amendments and Authorization Act of 1986; the
Occupational Safety and Health Act; the Resource Conservation Recovery Act of
1976; the Federal Water Pollution Control Act of 1970; the Safe Drinking Water
Act of 1974; the Toxic Substances Control Act of 1976; the Emergency Planning
Community Right to Know Act of 1986, as amended; and the Clean Air Act, as
amended, (collectively "Environmental and Health Laws") or the Federal
Communications Act, as amended, ("FCC Law"). To the best knowledge of Company,
there are no investigations, administrative proceedings, judicial actions,
orders, claims or notices which are pending, anticipated or threatened against
the Company, relating to violations of the Environmental and Health Laws and the
FCC Law. The Company has not received a notice of, and does not know or have any
reason to suspect, any facts which constitute a violation of any Environmental
and Health Laws or the FCC Law which relate to the use, ownership or occupancy
of any property or facilities used by the Company in connection with the
operation of its business or any activity of the business of the Company which
would result in a violation or threatened violation of any Environmental or
Health Laws or the FCC Law.
(z) ACCOUNTS RECEIVABLE. All of the accounts receivable of the
Company constitute valid receivables, have been incurred in the ordinary course
of business consistent with past practices and, to the knowledge of the Company,
are collectable in the ordinary course of business, except for the reserve for
bad debts or doubtful accounts as reflected in the Financial Statements and are
not subject to any setoffs or counterclaims. To the Company's knowledge, no
part of such accounts receivable is contingent upon the performance by the
Company of any obligation, and no agreements for deduction or discounts have
been made with respect to any part of such receivables. The Company shall
deliver a SCHEDULE 4.1(z) at the Closing listing all of the accounts receivable
of the Company as of the Closing Date.
(aa) PAYABLES. The list of itemized accounts payable of the Company
as shown in SCHEDULE 4.1(aa) attached hereto and such payables to be shown in
SCHEDULE 4.1(aa) to be updated at the Closing will represent a complete list of
the accounts payable of the Company to its creditors other than those not posted
to the Company's accounting records that were incurred
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in the ordinary course of business. Except as set forth in SCHEDULE 4.1(aa)
attached hereto none of the accounts payable as so listed are currently in
default.
(bb) DIRECTORS AND OFFICERS. The SCHEDULE 4.1(bb) attached hereto is
a correct and complete list as of the date hereof showing the names of each of
the Officers and Directors of the Company, each of whom has been duly elected or
appointed.
(cc) INVENTORY. The inventories of finished goods, work in process
and raw materials of the Company, including, without limitation, those set forth
on the Company's balance sheet as of the Financial Statement Date, other than
inventory sold in the ordinary course of business sold through the Closing Date
(collectively, the "Inventory"), are of a quality usable or saleable in the
normal course of the Company's business. The value of the Inventory as carried
on the Company's books and records reflect the normal inventory valuation policy
used by the Company and is in accordance with generally accepted accounting
principles, consistently applied, stating the value of the Inventory at the
lower of cost or market on a specific identification basis.
(dd) FULL DISCLOSURE. None of the written information provided by the
Company to Purchaser and Merger Sub in connection with the negotiation of this
Agreement contains any intentionally misleading statement of a material fact.
There is no fact which the Company has not disclosed to Purchaser or Merger Sub
in writing which materially affects or which will materially affect adversely
the Company's business, sales, income, properties, assets, liabilities,
activities, customers, or the ability of the Company to perform under this
Agreement.
4.2 REPRESENTATIONS AND WARRANTIES OF PURCHASER AND MERGER SUB. Purchaser
and Merger Sub represent and warrant to the Company as follows:
(a) ORGANIZATION AND CORPORATE POWER OF PURCHASER AND MERGER SUB.
Each of Purchaser and Merger Sub is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, and is duly qualified to do business as a foreign corporation in
good standing in each jurisdiction in which the properties owned, leased or
operated by it, or the nature of its activities or proposed activities makes
such qualification necessary, except in such jurisdictions where the failure to
be so qualified or in good standing would not have a material adverse effect on
the business, results of operations or financial condition of the Purchaser and
its subsidiaries taken as a whole. Each of Purchaser and Merger Sub has all
required corporate power and authority to own its property and to carry on its
business as now conducted.
(b) CORPORATE AUTHORIZATION. Each of Purchaser and Merger Sub has
full power and authority to execute and deliver this Agreement and to consummate
the transactions contemplated hereby and thereby. The execution and delivery of
this Agreement, and the consummation of the transactions contemplated hereby
have been duly and validly authorized by all corporate action on the part of
Purchaser or Merger Sub, and no other corporate proceedings on the part of
either Purchaser or Merger Sub are necessary to authorize the execution and
delivery of this Agreement or to consummate the transactions so contemplated.
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(c) BINDING EFFECT. This Agreement constitutes the legal, valid and
binding agreement of Purchaser and Merger Sub enforceable against Purchaser and
Merger Sub in accordance with its terms, except to the extent that the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditor's
rights generally and by principles of equity regarding the availability of
remedies.
(d) CAPITALIZATION.
(i) The authorized capital of Merger Sub consists of 10,000,000
shares of common stock, no par value per share, 7,500,010 of which have been
issued to and are owned 100% by Purchaser, and 1,000,000 shares of preferred
stock, no par value per share, none of which have been issued. The authorized
capital of Purchaser consists of 50,000,000 shares of Purchaser Stock and
1,000,000 shares of preferred stock, no par value. The number of shares of
Purchaser Stock which are issued and outstanding as of the date hereof is set
forth in SCHEDULE 4.2(d)(i) attached hereto. There are no shares of preferred
stock issued or outstanding All of such outstanding shares are validly issued
and outstanding, fully paid and nonassessable. All shares of Purchaser Stock to
be issued to the stockholders of the Company in the Merger will be validly
issued, fully paid and nonassessable.
(ii) The description of the capitalization of Purchaser as set
forth in the Disclosure Documents (as defined in Section 4.2(f)), is true and
correct. There is no right of first refusal or similar restrictions on the
transferability of shares of its capital stock imposed by Purchaser's Articles
of Incorporation or Bylaws, as amended, or by any agreement to which Purchaser
is a party, (other than provisions of agreements that require compliance with
securities laws). Except as set forth in SCHEDULE 4.2(d)(ii) no person has the
right to cause Purchaser to effect the registration under the Securities Act, of
any shares of its capital stock or any other securities (including debt
securities) of Purchaser. No shareholder of Purchaser has any preemptive or
other purchase rights with respect to the issue or sale of any of its capital
stock.
(e) NO CONFLICTS. The execution, delivery and performance of this
Agreement, and the performance of the transactions contemplated hereby and the
compliance with the respective terms hereof by Purchaser and Merger Sub, do not
and will not (i) conflict with or result in a breach of the terms, conditions or
provisions of, (ii) constitute a default under, (iii) result in the creation of
any lien, security interest, charge or encumbrance upon Purchaser's or Merger
Sub's capital stock or assets pursuant to, (iv) give any third party the right
to accelerate any obligation under, (v) result in a violation of, or (vi)
require any authorization, consent, approval, exemption or other action by or
notice to any court or administrative or governmental body or any other Person
pursuant to (A) the Articles of Incorporation or Bylaws of Purchaser or the
Articles of Incorporation or Bylaws of Merger Sub or any other organization or
governing instrument of Purchaser or Merger Sub, (B) any Contract, Lease,
indenture, promissory note, agreement, mortgage or other instrument to which
Purchaser or Merger Sub is a party or is bound or to which their assets are
subject or affected, or (C) any law, License, Permit, statute, rule, regulation,
judgment, decree or order of any Court, agency or other authority to which
Purchaser or Merger Sub is subject.
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(f) DISCLOSURE. Purchaser has furnished to the Company its most
recent (as of the date hereof) annual report to its shareholders and
consolidated audited financial statements for the year ended December 31, 1996
(the "Disclosure Documents"). The Disclosure Documents, including all financial
statements contained therein, do not contain any untrue statement of material
fact nor does any Disclosure Document or financial statement contained therein
omit to state any material fact necessary to make the statements made, in the
context in which made, not materially misleading. Except as set forth in
SCHEDULE 4.2(f) attached hereto, there is no fact which Purchaser or Merger Sub
has not disclosed to the Company that might materially adversely affect the
business, condition, or prospects (financial or other) of Purchaser or the
ability of Purchaser or Merger Sub to perform this Agreement or any of the
transactions contemplated hereby.
ARTICLE V
COVENANTS OF THE COMPANY
5.1 COVENANTS OF THE COMPANY . The Company covenants and agrees that:
(a) CONDUCT OF THE COMPANY. From the date hereof until the Effective
Time, the Company will conduct its business in the ordinary course consistent
with past practice and will use its best efforts to preserve intact its business
organization and relationships with third parties and to keep available the
services of its present officers and employees. Without limiting the generality
of the foregoing, from the date hereof until the Effective Time and without the
written consent of Purchaser:
(i) The Company will not declare, set aside or pay any
dividend or other distribution with respect to any shares of Stock of the
Company;
(ii) The Company will not amend or alter any material term
of any outstanding Stock;
(iii) The Company will not (A) issue or sell any securities
convertible into or exchangeable for debt securities of the Company; or (B)
issue or sell any options, warrants or other rights to acquire from the Company,
directly or indirectly, any debt securities of the Company or any securities
convertible into or exchangeable for any such debt securities;
(iv) The Company will not create, assume or incur any lien
on any material asset of the Company that will not be discharged at the Closing;
(v) Except as set forth in SCHEDULE 5.1(a)(v) attached
hereto and except for the issuance of shares pursuant to the exercise of the
Outstanding Options or the Outstanding Warrants, the Company will not (A) issue
or sell any additional Stock or (B) redeem, repurchase or otherwise acquire any
additional Stock;
(vi) The Company will not relinquish any material contract
or other material right of the Company, make any payment (direct or indirect) of
any liability of the
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Company before the same becomes due in accordance with its terms or make any
change in its operations that is in any such case material to the Company, its
business, prospects and financial condition taken as a whole;
(vii) The Company will not adopt any change in any method of
accounting or accounting practice used by the Company other than by reason of a
concurrent change in GAAP and upon the recommendation of the Company's
independent public accountants;
(viii) Except for the agreements referenced in SCHEDULE
5.1(a)(viii), which the Company may amend with the prior written consent of
Purchaser (which will not be unreasonably withheld), the Company will not (A)
grant or make any severance or termination payments to any officer, director or
employee of the Company, except pursuant to written agreements in effect on the
date hereof, (B) enter into any employment, deferred compensation or other
similar agreement (or enter into any amendment to any such existing agreement)
with any officer, director or employee of the Company, (C) without the consent
of Purchaser pay any officer, director, or employee compensation which is in
excess of the current compensation level of each employee, officer or director,
except for standard periodic increases to non-management employees consistent
with past practices in terms of timing and amount; (D) materially accelerate or
increase benefits payable under any existing severance or termination pay
policies or employment agreements, or (E) accelerate, vest, pay or provide for
any increase in compensation, bonus, or other benefits payable to officers,
directors or employees of the Company except for normal increases to
non-managerial employees consistent with past practice, to the extent required
under existing employment and labor agreements.
(ix) The Company will not amend its Articles of
Incorporation or Bylaws or change its corporate name or, except as set forth in
SCHEDULE 5.1(ix) attached hereto, permit the use thereof by any other Person;
(x) Subject to the fiduciary duties of its Board of
Directors, the Company will not merge or consolidate with any Person, acquire
any stock or other ownership interest in any Person, or the assets of any
business as an entity, or liquidate, dissolve or otherwise reorganize or seek
protection from creditors;
(xi) Subject to the fiduciary duties of its Board of
Directors, the Company will not intentionally take any action, the taking of
which, would reasonably be expected to cause any of the representations and
warranties in Section 4.1 hereof to be inaccurate in any material respect at or
as of any time prior to the Effective Time;
(xii) Except for the sale of inventory and the disposition of
obsolete or defective equipment or other assets in the ordinary course of
business, the Company will not sell, transfer, mortgage, or otherwise dispose
of, or encumber, or agree to sell, transfer, mortgage or otherwise dispose of or
encumber, any assets or properties, real, personal or mixed;
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(xiii) Subject to the fiduciary duties of its Board of
Directors, the Company will not (A) enter into any other agreements, commitments
or contracts (including without limitation joint venture agreements or material
license agreements) which, individually or in the aggregate, are material to the
Company, except agreements, commitments or contracts for the purchase, sale or
lease of goods or services, consistent with past practice or (B) otherwise make
any material change in any existing material agreement, commitment or
arrangement, except in the ordinary course of business;
(xiv) The Company will not make any investment of a capital
nature either by purchase of stock or securities, contributions to capital,
property transfers or otherwise, or by the purchase of any property or assets of
any other Person, except the purchase of fixed assets as permitted by Section
5.1(a)(xv) hereof;
(xv) The Company will not purchase any fixed assets which,
singly or in the aggregate have an installed purchase price greater than $1,000;
(xvi) The Company will not distribute or otherwise circulate
any notices, directives or other communications directed to all or groups of
customers, vendors, employees, distributors or others associated with its
business without consulting with Purchaser and giving Purchaser reasonable
opportunity to comment thereon;
(xvii) The Company will not make any changes in management
without prior written consent of Purchaser;
(xviii) The Company will not increase the amount of any
indebtedness outstanding under any loan agreement, mortgage or borrowing
arrangement in existence on the date hereof or obtain any additional loans or
incur any additional indebtedness, unless the Company first advises Purchaser
and receives Purchaser's consent thereto (which consent shall not be
unreasonably withheld);
(xix) The Company shall pay when due in accordance with past
practices all of its accounts payable and trade obligations;
(xx) The Company shall use its best efforts to maintain its
facilities, assets and properties in good operating repair, order and condition,
reasonable wear and tear excepted, and notify Purchaser promptly upon any loss
of, damage to, or destruction of any of its facilities, properties or assets;
(xxi) The Company shall maintain in full force and effect all
insurance coverage of the types and in the amounts set forth in the Schedules
attached hereto and apply the proceeds received under any insurance policy or as
a result of, damage to, or destruction of any of its facilities, properties or
assets to the repair or replacement of such facilities, properties or assets;
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(xxii) The Company shall maintain in full force and effect all
Licenses and Permits, and shall use its best efforts to maintain in full force
and effect all Leases and Contracts, for or related to the operation of the
Company's business and in all respects and in all places as such business is now
conducted;
(xxiii) The Company shall use its best efforts to preserve its
business organizations intact, to keep available the services of its present
employees and to preserve the good will of its customers and others having
business relations with the Company;
(xxiv) The Company shall promptly advise Purchaser in writing
of the commencement of, and any known threat to commence, any suit, claim,
action, arbitration, legal or administrative proceedings, governmental
investigation or tax audit against the Company;
(xxv) The Company shall deliver to Purchaser as soon as
available monthly financial statements ("Monthly Financial Statements") of the
Company commencing with the month of July, 1997, and for each calendar month
thereafter prior to the Closing Date;
(xxvi) Promptly following the execution of this Agreement, the
Company shall have notified any Person having Outstanding Options of the matters
contemplated by the Company's outstanding stock option plans, and any Person
having Outstanding Warrants of the matters as to which notice is required to be
given in accordance with their respective notice provisions. The Company shall
use its best efforts to obtain from the holders of the Outstanding Warrants and
Outstanding Options listed in SCHEDULE 5.1(a)(xxvi) attached hereto a written
agreement as to the termination and cancellation of their Outstanding Warrants
and Outstanding Options.
(xxvii) The Company shall pay all payroll withholding expenses
with respect to the exercise, prior to the Closing Date, of any Outstanding
Options or Outstanding Warrants outstanding as of the date hereof and all other
expenses and costs incurred by the Company in the ordinary course of business as
such expenses and costs shall become due and payable.
(xxviii) The Company shall not incur any liability or be
obligated to fund any vacation pay, severance pay, incentive, compensation,
consulting agreement, bonus or other employee benefit or fringe benefit. The
Company shall not incur any additional accounts payable between the date hereof
and the Closing Date other than in the ordinary course of business without
Purchaser's express written consent.
(xxix) The Company shall not agree or commit to do any of the
matters specified in Section 5.1(a)(i) through 5.1(a)(xviii) and Section
5.1(a)(xxviii) hereof and the Company will take action and perform the matters
set forth in Sections 5.1(a)(xix) through 5.1(a)(xxvii) hereof.
(b) ACCESS TO INFORMATION. The Company will give Purchaser, its
counsel, financial advisors, auditors and other authorized representatives full
access to the offices,
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properties, books and records of the Company and will promptly furnish to
Purchaser, its counsel, financial advisors, auditors and authorized
representatives such financial and operating data and other information as such
persons may reasonably request and will instruct the officers, directors,
employees, counsel and financial advisors of the Company to discuss the business
operations, affairs and assets of such corporations and otherwise fully
cooperate with the other party in its investigation of the business of the
Company. No investigation pursuant to this Section 5.1(b) will affect any
representation or warranty given by the Company to Purchaser hereunder.
(c) NOTICE OF CERTAIN EVENTS. The Company will promptly notify
Purchaser of:
(i) any notice or other communication from any Person
alleging that the consent of such Person is or may be required in connection
with the transactions contemplated by this Agreement;
(ii) any notice or other communication from any governmental
or regulatory agency or authority in connection with the transactions
contemplated by this Agreement;
(iii) any actions, suits, claims, investigations or
proceedings commenced or, to the best of the Company's knowledge, threatened
against, relating to or involving or otherwise affecting the Company which
relate to the consummation of the transactions contemplated by this Agreement or
which, if pending on the date of this Agreement, would have been required to
have been disclosed in the Disclosure Schedule; and
(iv) any other event or change of fact or circumstance
causing any representation contained in Section 4.1 of this Agreement to be, as
of the date of such event or change, incorrect or misleading in any material
respect.
(d) CONSENTS, APPROVALS AND FILINGS. Subject to the terms and
conditions herein provided and without being required to waive any conditions
herein, the Company will use its best efforts to obtain as promptly as possible
all necessary approvals, authorizations, consents, clearances or orders
("Consents") of governmental and regulatory authorities required in order for
the Company to perform its obligations hereunder. The receipt of such Consents
shall be a condition of Closing.
(e) BEST EFFORTS. The Company shall use its best efforts (i) to
cause to be fulfilled and satisfied all of the conditions to the Merger to be
fulfilled and satisfied by the Company, and (ii) to cause to be performed all of
the matters required of it at or prior to the Effective Time.
(f) EXCLUSIVITY. In order to induce Purchaser to enter into this
Agreement, the Company agrees that subject to the fiduciary duties of the Board
of Directors of the Company, the Company will not, prior to the Closing Date,
take any further action to solicit, initiate or encourage any offer or
indication of interest from any Person other than Purchaser relating to the
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merger, consolidation or sale of the Company or its Stock or properties and
assets of the Company, including without limitation, any such further action
through any investment banker, broker, finder or other intermediary previously
engaged or which may be engaged for the purpose of soliciting, initiating or
encouraging such offer or indication of interest.
5.2 COVENANTS OF PURCHASER. Purchaser covenants and agrees that:
(a) BEST EFFORTS. Subject to the terms and conditions herein
provided and without being required to waive any conditions herein, Purchaser
shall use its best efforts to (i) cause to be fulfilled and satisfied all of the
conditions to the Merger to be fulfilled and satisfied by it, and (ii) cause to
be performed all of the matters required of it at or prior to the Effective
Time.
(b) CONSENTS, APPROVALS AND FILINGS. Purchaser will use its best
efforts to obtain as promptly as possible all necessary approvals,
authorizations, consents, licenses, clearances or orders of governmental and
regulatory authorities required in order for Purchaser to perform its
obligations hereunder.
(c) ADVICE OF CHANGES. Purchaser will promptly advise the Company
orally and in writing of (i) any event occurring subsequent to the date of this
Agreement which would render any representation or warranty of Purchaser
contained in this Agreement, if made on or as of the date of such event or the
Effective Time, untrue, inaccurate or incomplete in any material respect and
(ii) any material adverse change in the financial condition, assets, liabilities
(whether absolute, accrued, contingent or otherwise), operating profits,
business or prospects of Purchaser.
ARTICLE VI
MISCELLANEOUS
6.1 SURVIVAL OF REPRESENTATIONS. The representations, warranties,
covenants, and agreements of the Company, Purchaser and Merger Sub made herein
or any certificate delivered by the Company or Purchaser and Merger Sub pursuant
to Sections 4.1 and 4.2 hereof, as the case may be, shall survive without
limitation the execution hereof and thereof and the delivery of the Merger
Consideration and shall remain in full force and effect for a period of five (5)
years after the Closing Date.
6.2 INCORPORATION BY REFERENCE. Except for the Disclosure Schedule and
Schedule 2.6(a) which will be attached as of the date of execution of this
Agreement, the Schedules, Exhibits and Attachments contemplated under this
Agreement shall be appended to this Agreement within five (5) days business
after the execution of this Agreement by the parties hereto. All Schedules,
Exhibits and Attachments to this Agreement and all documents delivered pursuant
to or referred to in this Agreement are incorporated herein by reference and
made a part hereof. Such Exhibits, Schedules and Attachments may be appended
hereto, amended or modified by a party provided that the other party ("Receiving
Party") has been furnished with a copy of the proposed amendment or modification
to such Schedule, Exhibit or Attachment; provided, however, that if any such
Schedule, Exhibit, Attachment or amendment thereto shall materially adversely
affect the economics, financial or business considerations of the transactions
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contemplated under this Agreement as determined by the Receiving Party, such
Receiving Party may terminate this Agreement in accordance with Section
6.16(a)(vii) hereof. The Schedules, Exhibits and Attachments to this Agreement
shall not be deemed to be part of the Plan of Merger.
6.3 PARTIES IN INTEREST. All covenants, agreements, representations,
warranties and undertakings in this Agreement made by and on behalf of any of
the parties hereto shall bind and inure to the benefit of their respective
successors and assigns and the term "Purchaser" herein shall apply to the
successors and assigns of Purchaser.
6.4 AMENDMENTS AND WAIVERS. This Agreement may be amended, or compliance
with any terms, covenants, agreement, condition or provision set forth herein
may be waived (either generally or in a particular instance and either
retroactively or prospectively) if agreed to in writing by the Company,
Purchaser and Merger Sub upon the approval of their respective Boards of
Directors at any time prior to filing the Articles of Merger with the Secretary
of State of Iowa or Colorado, respectively.
6.5 GOVERNING LAW; SEVERABILITY. This Agreement, together with the rights
and obligations of the parties hereunder, shall be governed by, construed and
enforced in accordance with the laws of the State of Colorado without giving
effect to the conflict of laws provisions thereof. If any provision of this
Agreement or the application of any such provision to any party shall be held by
a court of competent jurisdiction to be contrary to law, the remaining
provisions of this Agreement shall remain in full force and effect.
6.6 NOTICES. All notices, requests, consents and demands shall be in
writing and shall be deemed to have been sufficiently given, upon receipt, if
sent, postage prepaid, by registered or certified mail, return receipt
requested, to the Company at 000 - 0xx Xxxxxx, Xxx Xxxxxx, Xxxx 00000, Attn:
President, with a copy to Xxxxx X. Xxxxxxxxxx, Esq. 000 00xx Xxxxxx, Xxxxx 00,
Xxx Xxxxxx, Xxxx 00000; to the Purchaser or Merger Sub at 00 Xxxxxxxxx Xxxxx
Xxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxx 00000, Attn: Legal Department, or to such
other address as may from time to time be furnished in writing to the other
parties hereto.
6.7 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
6.8 CAPTIONS. The captions and headings of this Agreement are for
convenience only and are not to be construed as defining or limiting the scope
or intent of any of the provisions hereof.
6.9 COMPLETE AGREEMENT. This document, and the Exhibits and Schedules
hereto, embodies the complete agreement and understanding between and among the
parties hereto with respect to the subject matter hereof, and supersedes and
preempts any prior understandings, agreements, or representations by or among
the parties, written or oral, which may have related to the subject matter
hereof.
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6.10 ARBITRATION. Any and all disputes arising out of, under, in
connection with, or relating to this Agreement shall be finally settled by
arbitration in Denver, Colorado, or in such other place as the parties hereto
agree, in accordance with the rules then in effect of the American Arbitration
Association. The board of arbitrators shall be composed of three arbitrators,
being qualified to make evaluations of the kind under dispute. Such arbitrators
shall be selected in accordance with the procedures of the American Arbitration
Association and shall be reasonably acceptable to both Purchaser and the
stockholders of the Company. The arbitration award, based upon written findings
of fact and conclusions of law, shall be final and binding on the parties. Each
party will pay its own expenses associated with such arbitration, provided that
the prevailing party in any arbitration shall be entitled to reimbursement of
reasonable attorney's fees and expenses (including, without limitation,
arbitration expenses) relating to such arbitration. Any arbitration award may
be enforced in any court having jurisdiction over the party against which
enforcement is sought.
6.11 INDEMNIFICATION BY COMPANY STOCKHOLDERS. The stockholders of the
Company identified in SCHEDULE 6.11 attached hereto (the "Indemnifying
Stockholders") will indemnify, defend and save and hold Purchaser and Merger Sub
harmless from and against any costs, expenses, damages, liabilities, losses or
deficiencies, including, without limitation, reasonable attorneys' fees and
other costs incident to any suit, action or proceeding (collectively "Losses")
suffered or incurred by Purchaser or Merger Sub, respectively, arising out of or
resulting from, and will pay Purchaser and Merger Sub on demand the full amount
of any amounts which Purchaser or Merger Sub as the Surviving Corporation,
respectively, may pay or may become obligated to pay in respect of:
(i) any material inaccuracy in any representation or
document delivered under or pursuant to this Agreement or the material breach of
any warranty made by the Company in or pursuant to this Agreement;
(ii) any misrepresentations in or omission from any
schedule, exhibit or any other attachment to this Agreement;
(iii) any failure by the Company duly to perform or observe
any term, provision, covenant, or agreement in this Agreement to be performed or
observed on the part of the Company for periods prior to the Closing Date; or
(iv) any action, suit, investigation, proceeding, demand,
assessment, audit, judgment and claim, including any employment-related claim
arising out of the foregoing paragraphs (i), (ii) and (iii) (collectively
"Claims") against the Company accruing prior to the Closing Date, even though
such claims may not come to light until after the Closing Date.
Purchaser and Merger Sub hereby covenant and agree to immediately provide
the Indemnifying Stockholders any and all notifications or other correspondence
that either such corporation receives related to matters which may affect this
indemnity and hereby agree to allow the Indemnifying Stockholders to defend any
and all actions affecting this indemnity and shall not settle any action or
dispute affecting this indemnity without obtaining the prior written consent of
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the Indemnifying Stockholders. However, failure to provide any such
notifications or other correspondence in a timely manner will not relieve the
Indemnifying Stockholders of their obligations to indemnify Purchaser and Merger
Sub under this Section 6.11; provided, however, that the Indemnifying
Stockholders shall have no obligation to indemnify Purchaser or Merger Sub in
the event Purchaser fails to timely notify the Indemnifying Stockholders of any
such Claim for indemnification which results in a material adverse effect on the
ability of the Indemnifying Stockholders to defend the Claim or in the event
such failure to so notify is willful. The Indemnifying Stockholders shall have
the right to select counsel of their choice, subject to the reasonable approval
of Purchaser, and to assume the defense of such claim. The Indemnifying
Stockholders shall give notice to Purchaser of the name of the counsel selected
by the Indemnifying stockholders and Purchaser shall have fifteen (15) days to
approve or disapprove such counsel. Purchaser or Merger Sub shall have the right
to employ separate counsel with respect to any such Claim and to participate in
the defense thereof, but the fees and expenses of such counsel shall be at the
expense of the indemnified party unless (i) the Indemnifying Stockholders have
agreed in writing to pay such fees and expenses, (ii) the Indemnifying
Stockholders have failed to assume defense and employ counsel, or (iii) the
named parties to such action include both Indemnifying Stockholders and an
indemnified party and the Indemnifying Stockholders have been advised by their
counsel that representation of such indemnified party and Indemnifying
Stockholders by the same counsel would be inappropriate under applicable
standards of professional conduct due to actual or potential differing interests
between them (in which case the Indemnifying Stockholders shall not have the
right to assume the defense of such action on behalf of Purchaser or Merger
Sub).
Except with respect to any failure of a representation or warranty or an
omission which makes any representation or warranty set forth in Section 4.1
hereof, or in any Schedule, Exhibit or any other Attachment to this Agreement
inaccurate or misleading and such failure is a result of fraud, gross negligence
or willful or wanton disregard by the Company as to the truth and accuracy of
the matters stated therein of which such stockholders had any knowledge, the
obligation of such stockholders of the Company to indemnify Purchaser and the
Merger Sub, as provided hereunder, shall not exceed the aggregate amount equal
to the Merger Consideration received by the Indemnifying Stockholders. The
aggregate amount of the Claims to be indemnified hereunder shall be shared
proportionally by the Indemnifying Stockholders based on the percentage that the
Merger Consideration received by each such Indemnifying Stockholder bears to the
Merger Consideration received by all such Indemnifying Stockholders of the
Company who are obligated to indemnify Purchaser and Merger Sub hereunder.
Otherwise, in the case of any failure of a representation or warranty or an
omission making the representation or warranty set forth in Section 4.1 hereof
or in any Schedule, Exhibit or other Attachment to this Agreement misleading,
which failure or omission involves fraud, gross negligence or willful and wanton
disregard on the part of the Company of which such Indemnifying Stockholders had
knowledge ("Knowledgeable Misrepresentation"), the obligation to indemnify the
amount of the Claims suffered or incurred by Purchaser or Merger Sub shall not
exceed the aggregate amount equal to the Merger Consideration received by the
Indemnifying Stockholders plus the total amount of the Bank Debt paid by
Purchaser or Merger Sub. Such obligation to indemnify shall be shared by such
Indemnifying Stockholders of the Company having knowledge of such fraud, gross
negligence or willful and wanton disregard in the proportion of the Merger
Consideration received
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by each such Indemnifying Stockholder and a percentage of the Merger
Consideration received by all such Indemnifying Stockholders of the Company
having such knowledge.
6.12 PURCHASER'S INDEMNIFICATION. Purchaser and Merger Sub agree that
notwithstanding the Closing and regardless of any investigation of any item made
by or on behalf of the Company or any information the stockholders of the
Company may have in respect thereof, the Purchaser or Merger Sub will indemnify
and save and hold the stockholders of the Company harmless from and against any
Losses suffered or incurred by the stockholders of the Company arising out of or
resulting from, and will pay the stockholders of the Company on demand the full
amount of any such amounts which the stockholders of the Company may pay or
become obligated to pay in respect of:
(i) any material inaccuracy in any representation or the
breach of any warranty made by Purchaser or Merger Sub in or pursuant to this
Agreement;
(ii) any failure by Purchaser or Merger Sub of their duty to
perform or observe any item, provision, covenant or agreement in this Agreement
to be performed or observed on the part of Purchaser or Merger Sub; or
(iii) any claim for damages arising after the Closing Date
for any act or omission of Purchaser or Merger Sub occurring after the Closing
Date.
6.13 LIMITATION OF INDEMNITY. Notwithstanding any provision herein to the
contrary, except as set forth in Section 6.14 hereof relating to brokers and
finders, neither Purchaser nor Merger Sub, on the one hand, nor the Indemnifying
Stockholders on the other hand, shall be required to indemnify the other for any
misrepresentation, breach of warranty or failure to fulfill any covenant or
agreement herein except to the extent that the aggregate amount which the
Indemnifying Stockholders, on the one hand, or Purchaser and Merger Sub, on the
other hand, respectively would otherwise (but for this provision) be liable on
account thereof exceeds in the aggregate the sum of five thousand dollars
($5,000) (the "Threshold Amount") and then only to the extent of such excess;
provided, however, for purposes of calculating whether the Threshold Amount has
been reached, any specific materiality provision contained in the
representations and warranties shall be disregarded. The obligations of the
Indemnifying Stockholders to indemnify Purchaser or Merger Sub under Section
6.11 shall terminate five years after the Closing Date except as to matters as
to which notice of a Claim has been given to the Indemnifying Stockholders under
Section 6.11 prior to the expiration of such five year period.
6.14 BROKERAGE COMMISSIONS. Each party to this Agreement warrants to the
other that it has not engaged or utilized the services of any broker or finder
in connection with the transaction contemplated by this Agreement, and no
commissions are payable with respect to the transactions contemplated by this
Agreement. Each such party hereto agrees to indemnify and hold the other
harmless from and against any liability for any claims of any broker or finder
claiming by, through, or under such party.
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6.15 PUBLICITY. Prior to the Closing Date, all notices to third parties
and all other publicity relating to the transactions contemplated by this
Agreement shall be jointly planned, coordinated and approved by the Company,
Purchaser and Merger Sub.
6.16 TERMINATION.
(a) TERMINATION. This Agreement may be terminated, and the Merger
contemplated by this Agreement may be abandoned, at any time prior to the
Effective Time, notwithstanding the adoption of this Agreement and the approval
of the Merger by the stockholders of the Company:
(i) By mutual written consent duly authorized by the Board
of Directors of Purchaser and by the Board of Directors of the Company;
(ii) By either Purchaser or the Company if the Merger has
not been consummated by October 31, 1997, except that the right to terminate
this Agreement under this Section 6.16(a)(ii) will not be available to any party
whose willful failure to perform any material obligation or to fulfill any
material condition under this Agreement has been the proximate cause of, or
resulted in, the failure of the Effective Time to occur on or before that date;
(iii) By either Purchaser or the Company if a court of
competent jurisdiction or an administrative, governmental, or regulatory
authority has issued a final nonappealable order, decree, or ruling, or taken
any other action, having the effect of permanently restraining, enjoining, or
otherwise prohibiting the Merger;
(iv) By Purchaser if (A) Purchaser is not in material breach
of its obligations under this Agreement and (B) there has been (1) a material
breach by the Company of any of its representations and warranties under this
Agreement such that the conditions in Section 3.1(a) can not be satisfied or (2)
a material failure by the Company to perform any of its obligations under this
Agreement such that the conditions in Section 3.1(b) can not be satisfied, and,
in both case (1) and case (2), the breach or failure cannot be cured by the
Company within 30 calendar days following receipt by the Company of notice of
the breach;
(v) By the Company if (A) the Company is not in material
breach of its obligations under this Agreement and (B) there has been (1) a
material breach by Purchaser of any of its representations and warranties under
this Agreement such that the conditions in Section 3.2(a) will not be satisfied
or (2) a material failure by Purchaser to perform any of its obligations under
this Agreement such that the conditions in Section 3.2(b) will not be satisfied,
and, in both case (1) and case (2), the breach or failure cannot be cured by
Purchaser within 30 calendar days following receipt by Purchaser of notice of
the breach;
(vi) By the Purchaser if the total value of the appraisal
rights of the Dissenting Shares as determined under the applicable provisions of
the Iowa Business Corporation Act exceeds the amount set forth in Section 3.1(l)
hereof; and
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(vii) By either of the Purchaser or the Company, such party
not then being in breach of the Agreement, if any Exhibit, Schedule or
Attachment appended hereto subsequent to the date of the Agreement or any
amendment to any Exhibit, Schedule or Attachment hereto made subsequent to the
date of the Agreement shall materially adversely affect the economics, financial
or business considerations of the transactions contemplated under this Agreement
as determined by the Receiving Party.
This Agreement may be terminated by the Board of Directors of either the
Company or Purchaser in accordance with the foregoing provisions notwithstanding
the approval of the Agreement by the stockholders of the Company or Merger Sub.
(b) EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to Section 6.16(a)(i),(ii) (unless the failure to consummate
the transactions contemplated hereunder is caused by the acts or omissions of
Purchaser), (iii), (iv), (vi) and/or (vii) hereof, the Company shall return the
Xxxxxxx Money received from Purchaser. In the event of the termination of this
Agreement pursuant to Subsections 6.16(a)(ii) (if the failure to consummate the
transactions hereunder is caused by the acts or omissions of Purchaser) or (v),
the Company shall be entitled to retain the Xxxxxxx Money received from
Purchaser.
6.17 COSTS AND EXPENSES OF MERGER. The Company shall be responsible
for the payment of all Transactional Costs as provided in SCHEDULE 6.17 and
Purchaser and Merger Sub shall be responsible for the payment of their costs and
expenses, including, without limiting the generality thereof, the costs and
expenses of its attorneys, accountants and other consultants engaged by such
party in connection with the investigation or due diligence review of documents
of the other party, filing fees, recording and notification fees, travel,
entertainment and lodging expenses and any other expenses or costs relating to
the consummation of the transactions contemplated under this Agreement up to and
including the Closing Date. The amount of the Transactional Costs shall reduce
the total amount of the Cash Consideration in accordance with this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first set forth above.
CONVERGENT COMMUNICATIONS, INC.,
a Colorado corporation
By: /s/ Xxxx X. Xxxxx
-------------------------------------
Xxxx X. Xxxxx, Chief Executive Officer
CONVERGENT COMMUNICATIONS SERVICES, INC.
a Colorado corporation
By: /s/ Xxxx X. Xxxxx
-------------------------------------
Xxxx X. Xxxxx
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Xxxx X. Xxxxx, Chief Executive Officer
A.T.T.EX CORPORATION
an Iowa corporation
By: /s/ Xxxxx Xxxxxx
------------------------------------
Xxxxx Xxxxxx, President
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