STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is entered into effective this
1st day of March, 1997 by and between CONVERGENT COMMUNICATIONS, INC., a
Colorado corporation ("CCI") whose address is 00 Xxxxxxxxx Xxxxx Xxxx,
Xxxxxxxxx, Xxxxxxxx 00000, INTEGRATED COMMUNICATION NETWORKS, INC., a Colorado
corporation ("ICN") whose address is 00 Xxxxxxxxx Xxxxx Xxxx, Xxxxxxxxx,
Xxxxxxxx 00000, COMMUNICATIONS SERVICES OF IOWA, INC., an Iowa corporation
("CSI)" whose address is 0000 Xxxxxx Xxxx, Xxxxx 0, Xxxx Xxx Xxxxxx, Xxxx 00000,
and XXXX XXXXXXXXXXXX, an individual whose address is 7004 Xxxxxxxx, Xxxxxxxxx,
Xxxx 00000 ("Schlepphorst") (hereinafter collectively referred to as "the
parties").
RECITALS
X. Xxxxxxxxxxxx is the President of CSI and owns or controls all of the issued
and outstanding shares of CSI;
B. ICN is a wholly owned subsidiary of CCI;
C. ICN wishes to acquire all of the issued and outstanding shares of CSI from
Schlepphorst.
THEREFORE, IT IS AGREED AS FOLLOWS:
1. STOCK PURCHASE. Schlepphorst shall transfer, assign and deliver to
ICN Three Thousand (3,000) shares of the common stock, $1.00 par value ("CSI
Stock"), which represents one hundred percent (100%) of the issued and
outstanding shares of CSI's stock ("Common Stock"), and ICN shall pay the sum of
Two Hundred Thousand Dollars ($200,000) and the issuance of Fifty Thousand
(50,000) shares of the $0.01 par value common stock of CCI ("CCI Stock") (the
cash consideration paid by ICN together with the CCI Stock are collectively
referred to herein as the "Purchase Price") as follows:
1.1 PAYMENT OF PURCHASE PRICE.
1.1.1 Application of the xxxxxxx money deposit in the
amount of Five Thousand Dollars ($5,000), which the parties acknowledge had be
previously paid by ICN to CSI on February 18, 1997 ("Xxxxxxx Money").
1
1.1.2 Ninety-Five Thousand Dollars ($95,000) payable to
Schlepphorst on the Closing Date, as herein defined.
1.1.3 A promissory note ("Note") from ICN, guaranteed by
CCI, to Schlepphorst delivered on the Closing Date in the amount of One Hundred
Thousand Dollars ($100,000) bearing simple interest at the rate of eight percent
(8%) per annum and payable one (1) year after the Closing Date, in substantially
the same form attached hereto as EXHIBIT 1.1.3.
1.1.4 The issuance of the CCI Stock to Schlepphorst on the
Closing Date.
1.2 EMPLOYMENT AGREEMENT. On the Closing Date, ICN and Schlepphorst
shall enter into an employment agreement ("Employment Agreement"), in
substantially the same form as EXHIBIT 1.2 attached hereto, which will include,
but not be limited to, the following terms and conditions: (i) a base annual
salary of $65,000 to be paid bi-monthly; (ii) a bonus of up to 25% annually
based upon certain performance criteria established by ICN; (iii) a monthly car
allowance of $500.00; (iv) 50,000 CCI stock options at an exercise price of
$2.00 per share vested over a five (5) year period; (v) all other benefits,
including 401(k), medical insurance and vacation, as available to other ICN
employees; (vi) a term of three (3) years, renewable at the option of ICN; (vii)
a termination provision whereby ICN would be entitled to terminate the
Employment Agreement without cause, subject to the payment to Schlepphorst of
the remaining balance of the base annual salary due under the then existing term
of the Employment Agreement; (viii) a non-compete covenant whereby, during the
two (2) year period following the termination of the Employment Agreement,
Schlepphorst would not, directly or indirectly, whether acting alone or in
concert with any other person, carry on or be engaged in or concerned with or
interested in, any business, enterprise or undertaking which is directly
competitive with the business of ICN, or any of its affiliates at the time of
termination; and (ix) a confidentiality covenant.
2 CLOSING.
2.1 CLOSING DATE. The Closing Date shall be that date which is three
(3) days after any and all required approvals, including any required approval
of any regulatory agency, have
2
become final and the transactions contemplated under this Agreement are no
longer subject to administrative or judicial review, or such other date as shall
be agreed upon by the parties.
2.2 CLOSING EVENTS. The following shall occur on the Closing Date
and at the Closing, each such requirement being considered as occurring
simultaneously:
2.2.1 Schlepphorst shall deliver to ICN a stock
certificate, or certificates, together with duly executed stock powers executed
in blank, representing all of the issued and outstanding shares of the CSI
Stock, free and clear of all liens, encumbrances, equities and claims;
2.2.2 CSI shall deliver to ICN a copy of resolutions
adopted by its Board of Directors approving the transactions contemplated
hereby, which shall be certified by CSI's Secretary to be a true and correct
copy of the original and that the original thereof was duly, validly and
regularly obtained;
2.2.3 CSI shall deliver to ICN the opinion of CSI's counsel
substantially in the form appended hereto as EXHIBIT 2.2.3 which opinion shall
include among other opinions, counsel's opinion that any and all corporate
action necessary for the approval and ratification of this Agreement by CSI have
been taken, and all required director and shareholder approvals and
ratifications have been duly and regularly obtained.
2.2.4 CSI and Schlepphorst shall deliver to ICN the
certificate, in the form appended hereto as EXHIBIT 2.2.4 dated as of the
Closing Date, that Schlepphorst and the officers of CSI are not aware of any
violation or breach of this Agreement which exists or existed on or as of the
date of this Agreement, the Closing Date, or at any time between the date of
this Agreement and the Closing Date;
2.2.5 ICN and CCI shall deliver to Schlepphorst the
Purchase Price, including the Note and the CCI Stock;
2.2.6 ICN and Schlepphorst shall execute and deliver the
Employment Agreement.
2.2.7 CSI shall deliver the resignations of each
3
of its officers and directors, along with the corporate books and seals of CSI.
2.2.8 CCI shall deliver the guarantee of the Note, in
substantially the form appended hereto as EXHIBIT 2.2.8 ("Note Guarantee").
3 CONDITIONS PRECEDENT TO OBLIGATIONS.
3.1 CONDITIONS PRECEDENT TO ICN'S AND CCI'S OBLIGATIONS. The
obligations of ICN and CCI to be performed under this Agreement at Closing are
subject to each and all of the following conditions, any one or more of which
may, however, be waived in whole or in part by ICN and/or CCI, as applicable, in
which event the waived condition(s) shall be treated as conditions subsequent to
ICN's and CCI's obligations pursuant to Section 6.1 hereof:
3.1.1 REPRESENTATIONS AND WARRANTIES. The representations
and warranties of CSI and Schlepphorst herein contained shall be true on and as
of the date hereof and as of the Closing Date in all material respects with the
same force and effect as though made on and as of said date.
3.1.2 PERFORMANCE OF OBLIGATIONS. Schlepphorst and CSI
shall have performed in all material respects all of Schlepphorst's and CSI's
obligations and agreements under this Agreement and complied with all of the
material covenants and conditions contained in this Agreement to be performed by
CSI and Schlepphorst.
3.1.3 PERFORMANCE AT CLOSING. Schlepphorst and CSI shall
have performed each of the acts they are required to perform and delivered each
of the certificates and other documents they are required to deliver, or
appeared at Closing ready, willing and able to perform each of the acts they are
required to perform and deliver each of the certificates and other documents
they are required to deliver.
3.1.4 ABSENCE OF RESTRAINING ACTION. No suit, action or
other proceeding shall be pending, or threatened, before any court or
governmental agency in which it will be, or it is, sought to restrain or
prohibit or to obtain damages or other relief in connection with this Agreement
or the consummation of the
4
transactions contemplated hereunder.
3.1.5 ABSENCE OF LITIGATION. No suit, action or other
proceeding shall be pending before any court or governmental agency, or
threatened against or affecting CSI or Schlepphorst which, if adversely
determined, would have a material adverse effect on the value of the business,
assets, or properties of CSI, or the value of the CSI Stock.
3.1.6 NO ATTACHMENT. None of CSI's assets or properties
shall have been attached or levied upon or passed into the hands of a receiver
or assignee for the benefit of creditors. No petition or similar instrument
shall have been filed with respect to Schlepphorst or CSI under any bankruptcy
or insolvency law, and no injunction or restraining order shall have been
instituted against Schlepphorst or CSI that would have a material adverse effect
on CSI.
3.1.7 NO LIENS, INDEBTEDNESS. CSI shall not be subject to
indebtedness nor its properties and or assets 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; and (ii) indebtedness identified in CSI's
Financial Statements as set forth in EXHIBIT 3.1.7 attached hereto.
3.1.8 CONSENTS. All consents from third parties, including
without limitation any governmental or regulatory bodies, necessary for the
consummation of the transactions contemplated hereby shall have been obtained.
3.2 CONDITIONS PRECEDENT TO CSI'S AND SCHLEPPHORST'S OBLIGATIONS. The
obligations of CSI and Schlepphorst to be performed under this Agreement at
Closing are subject to each and all of the following conditions, any one or more
of which may, however, be waived in whole or in part by CSI or Schlepphorst, as
applicable:
3.2.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of ICN and CCI set forth in this Agreement shall be true and correct
in all material respects on and as of the date hereof and as of the Closing Date
with the same effect as if made on and as of the said date.
5
3.2.2 PERFORMANCE OF OBLIGATIONS. ICN and CCI shall have
performed all of ICN's and CCI's obligations and agreements herein to be
performed, as applicable, on or before Closing and complied with all of the
covenants and conditions contained in this Agreement to be performed by ICN and
CCI, as applicable.
3.2.3 PERFORMANCE AT CLOSING. ICN and CCI shall have performed
each of the acts they are required to perform and delivered each of the
certificates and other documents they are required to deliver, or appeared at
Closing ready, willing and able to perform each of the acts they are required to
perform and deliver each of the certificates and other documents they are
required to deliver.
4 REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS AND WARRANTIES OF SCHLEPPHORST AND CSI. CSI and
Schlepphorst (for purposes hereof the term "Company" shall include CSI's
subsidiaries, if any, whether or not specific reference is made to the
subsidiaries in the representations and warranties set forth below), jointly and
severally, represent and warrant to ICN and CCI as of the date hereof and as of
the Closing Date, as follows:
4.1.1 GOOD STANDING. CSI is a corporation duly organized,
validly existing and in good standing under the laws of the State of its
incorporation, with full corporate power and authority to own, operate and lease
its properties and to carry on its business as now being conducted. Each of
CSI's subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the state where each such subsidiary was incorporated
as set forth in EXHIBIT 4.1.1 attached hereto, with full corporate power and
authority to own, operate and lease its properties and to carry on its business
as now being conducted. CSI and each of its subsidiaries are qualified to do
business and in good standing in all jurisdictions where their properties,
assets and/or activities and operations so require, which states are listed in
EXHIBIT 4.1.1 attached hereto. A true and correct copy of CSI's and of each
subsidiary's Articles of Incorporation or Charter and all amendments thereto and
restatements thereof, certified by the secretary of state or other appropriate
state office in the state of CSI's or such subsidiary's incorporation and CSI's
and each subsidiary's By-Laws and all amendments thereof and
6
restatements thereto, certified as true, complete and accurate by the Secretary
of CSI are set forth in EXHIBIT 4.1.1 attached hereto. Certificates of Good
Standing for each jurisdiction where CSI and each of its subsidiaries are duly
qualified to transact business as foreign corporations will be included in
EXHIBIT 4.1.1.
4.1.2 BINDING AGREEMENT. This Agreement, executed by
Schlepphorst and CSI, constitutes the valid and binding obligation of
Schlepphorst and CSI enforceable in accordance with its terms, and will not
conflict with, breach, violate or be in contravention of or result in a default
under CSI's Articles of Incorporation or any other organizational or governing
instrument of CSI, or of any contract, lease, indenture, promissory notes,
agreement, mortgage or other instrument to which CSI and/or Schlepphorst is a
party or by which any of CSI's assets or property is bound or affected or, to
the best of CSI's knowledge, any law, rule, license, regulation, judgment,
decree or order of any court, agency or other authority to which jurisdiction
CSI is subject. All corporate action necessary for the approval and/or
ratification of this Agreement has been taken.
4.1.3 AUTHORIZED STOCK. The only authorized capital stock
of CSI is Three Thousand (3,000) shares of its $1.00 par value Common Stock, of
which, as of the date hereof, Three Thousand (3,000) shares of CSI Common Stock
are issued and outstanding. Schlepphorst owns all of the issued and outstanding
shares of CSI Common Stock. No other person has any legal ownership interest in
and to any shares of the CSI Common Stock, and there are no outstanding or
authorized options, warrants, purchase rights, subscription rights or other
contract rights or commitments or appreciation, phantom stock, profit
participation or similar rights, with respect to the CSI Common Stock nor any
outstanding or authorized stock.
4.1.4 STOCK FULLY PAID. All issued and outstanding shares
of the CSI Common Stock have been duly authorized and validly issued and are
fully paid and non-assessable. As of the Closing Date, there will not be any
(i) options, warrants or other rights to purchase any shares of the CSI Common
Stock or any debt or securities convertible into such shares or (ii) obligations
of CSI or Schlepphorst, contractual or contingent, to issue any such options,
warrants, rights or shares.
7
4.1.5 OWNERSHIP OF SECURITIES. As of the date hereof,
record ownership of the CSI Common Stock is held 100% by Schlepphorst. CSI and
Schlepphorst represent and warrant that the CSI Stock is free and clear of all
pledges, liens, security interests, encumbrances or other restrictions
(excluding restrictions imposed on the transfer of the CSI Stock under the
Securities Act) and of all voting trusts, voting agreements, proxies and other
voting restrictions.
4.1.6 MARKETABLE TITLE. ICN will obtain good and
marketable title to the shares of the CSI Stock to be transferred pursuant to
the terms hereof and such shares at the Closing will be presented to ICN, free
and clear of all liens, encumbrances, equities and claims.
4.1.7 NO AGREEMENTS. There are no agreements with any
person with respect to (i) the sale, lease, exchange or other disposition of any
of CSI's properties or assets, except in the ordinary course of its business; or
(ii) the sale, hypothecation, transfer, assignment or other disposition of the
ownership, direct or indirect, of any of the shares of the CSI Stock, the
operation of which may in the future result in a change in control of CSI.
4.1.8 FINANCIAL REPRESENTATIONS. Attached hereto as
EXHIBIT 4.1.8 are a Balance Sheet, Statement of Income (Loss and Deficit) and
Statement of Changes in Financial Position (including notes to such financial
statements) at December 31, 1996 and for the fiscal year then ended (the
"Financial Statements"). The Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis, except as disclosed therein, and present fairly the financial position of
CSI as of February 28, 1997, ("Financial Statement Date") and the results of
operations for the year then ended.
4.1.9 NO LIABILITIES. As of the Financial Statement Date
CSI had no liabilities or obligations of any nature (whether accrued, absolute,
contingent, and due or to become due) except as disclosed or reflected in the
Financial Statements, and as set forth in EXHIBIT 4.1.9 attached hereto.
4.1.10 NO CHANGE IN FINANCIAL CONDITION. Except
8
as set forth in EXHIBIT 4.1.10 attached hereto, since the Financial Statement
Date, there has not been, and neither CSI nor Schlepphorst know of (i) any
event, condition or state of facts 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 CSI from that
shown on the Financial Statements; or (ii) any material adverse change with
respect to any contracts to which Schlepphorst is a party or any event,
circumstance fact or other occurrence which may result in any material adverse
change to the financial conditions, business, sales, income, properties or
assets of CSI; or (iii) any material damage, destruction or loss to the
properties, assets or business of CSI, whether or not covered by insurance, as
the result of any fire, explosion, accident, casualty, labor disturbance or
interruption, requisition or taking of property by any 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 may be
reasonably expected to materially or adversely affect or impair the conduct of
CSI's operations or business; 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 CSI's and
Schlepphorst'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 CSI's operations or
business; or (v) any declaration, setting aside or payment of any dividend, or
any distribution, in respect of the CSI Stock; or (vi) any redemption, purchase
or other acquisition by CSI of any shares of the CSI Stock; or (vii) any
significant loss of customers of CSI.
4.1.11 CERTAIN TAX MATTERS. CSI 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 CSI and has duly paid, withheld or reserved for all
taxes, penalties and other governmental charges required to be paid as of the
date hereof that have been assessed or levied against or upon it or its
properties, assets, income, franchises, licenses or sales, including, without
limitation, income, gross receipt
9
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 amounts in good faith by the
appropriate proceedings. In the event CSI is contesting such amounts in good
faith, CSI has established a reserve account sufficient to satisfy the
assessment or levy being contested. CSI does not know or have any reason to
know of any proposal by any taxing authority for additional taxes or assessments
against or upon CSI. To the best of CSI's and Schlepphorst's knowledge and
belief, all monies required to be withheld by CSI from employees for income
taxes, social security and unemployment insurance taxes have, as of the date
hereof, been collected or withheld, and either paid to the respective
governmental agencies or set aside in cash for such purpose. CSI has not
entered into any agreement for the extension of time or the assessment of any
tax or tax delinquency, nor has CSI received any outstanding or unresolved
notices from the Internal Revenue Service or any taxing body of any proposed
examination or of any proposed deficiency or assessment or of any tax returns or
tax liabilities due and payable. At least thirty (30) days prior to the Closing
Date, CSI will deliver to ICN an accurate, correct and complete copy of each
return or statement filed by, on behalf of or including CSI for federal income
tax purposes or state and local income or franchise tax purposes for the last
three (3) tax years of CSI. All material elections with respect to the taxes
affecting CSI as of the date hereof are set forth in EXHIBIT 4.1.11. After the
date hereof, no written election will be made by CSI without ICN's express
written consent.
4.1.12 FINANCIAL DISCLOSURE. CSI and Schlepphorst have made
available to ICN and/or CCI, all information known to CSI or Schlepphorst with
respect to (i) accounts, borrowing resolutions and deposit boxes maintained by
CSI at any bank or other financial institution and the account numbers and the
names and addresses of all of 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 Schlepphorst or
CSI and a summary of the terms thereof.
4.1.13 CONDITION OF TANGIBLE ASSETS. To the best of CSI's
and Schlepphorst's knowledge, all material tangible
10
portions of the assets, and properties owned by CSI, including all real
properties or leasehold interests in real property and structures thereon, are
in good condition and repair, subject only to ordinary wear and tear in light of
their respective ages and the respective uses for which they are currently used,
and that the use of such tangible properties and assets conform and comply in
all material respects with all rules, regulations and standards applicable to
CSI or its assets or property, imposed by applicable federal, state or local
laws or regulations.
4.1.14 ALL ASSETS. The properties and assets of CSI as of
the date hereof include (i) all properties and assets reflected on the balance
sheet included in the Financial Statements, and (ii) assets acquired by CSI
after such date and on or before the date hereof, other than such properties and
assets as shall have been transferred or otherwise disposed of by CSI in the
ordinary course of business, any such disposition being set forth at EXHIBIT
4.1.14 attached hereto.
4.1.15 STOCK TRANSFER RECORDS AND MINUTE BOOKS. The stock
transfer records and corporate minutes books of CSI and its subsidiaries will be
made available to ICN for inspection at least ten (10) days prior to the Closing
Date and will be complete and correct in all respects. The minutes books will
accurately reflect all meetings, comments and other actions of the shareholders
and Board of Directors of CSI and its subsidiaries since their incorporation.
4.1.16 MARKETABLE TITLE. Except for Permitted Encumbrances
(as defined herein), CSI has good and marketable title to all of its assets and
properties, including fee interests in real property and title to all its other
properties and assets owned as of the date hereof, free and clear of all
mortgages, liens, pledges, charges, claims (real or asserted) or encumbrances of
any nature whatsoever.
4.1.17 PERMITTED ENCUMBRANCES. The following liens, charges
and other encumbrances of a similar nature are collectively referred to herein
as the "Permitted Encumbrances" with respect to the properties and assets of
CSI:
(i) liens for current state or local property
11
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 CSI;
(iii) any assessment for local benefits levied by any
governmental authority and not now a lien upon all or any portion of such real
property; provided, however, neither CSI nor Schlepphorst know or have reason to
know of any such assessment;
(iv) liens of carriers, warehousemen, mechanics and
materialmen, 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 CSI is leasing from a third party which is the owner
of the property being leased by CSI subject to any such encumbrance; and
(vi) such imperfections of title, liens, easements or
encumbrances, if any, as are not material in character, amount or extent and do
not, severally or in the aggregate, materially detract from the value or
materially and adversely interfere with the present use of the property subject
thereto or affected thereby or otherwise materially impair the business and
operations of CSI.
4.1.18 LEASES AND LICENSES. EXHIBIT 4.1.18 attached hereto
sets forth, as of the date hereof and as of the Closing Date, an accurate and
complete list of all leases and purchases of real property, license agreements
and leases and purchases of personal property (covering property with a purchase
price as of the date hereof greater than $1,000) to which CSI is a party
(whether as purchaser, lessor, lessee, licensor or licensee) (collectively, the
"Leases and Licenses"). CSI, as purchaser, lessee or licensee, has entered into
all such Leases and Licenses which CSI reasonably believes may be necessary for
the conduct of the business and operation as now conducted. CSI has furnished
to ICN accurate and complete copies of all such Leases and Licenses.
12
CSI has title to each of the leasehold and other interests created by the Leases
and Licenses, free and clear of all security interests, claims, liens and
encumbrances of any nature, other than Permitted Encumbrances. To the best of
the knowledge of CSI and Schlepphorst each such Lease and License is in full
force and effect. Each such Lease and License constitutes the legal, valid and
binding obligation of CSI and, to the best of CSI's and Schlepphorst's knowledge
the other party thereto, enforceable against CSI in accordance with its
respective terms except as may be limited by bankruptcy, insolvency,
reorganization, readjustment of debt, moratorium or other law of general
application related to or affecting the enforcement of creditor's rights
generally. Neither Schlepphorst nor CSI has received notice or have any reason
to know, of any claimed default under any such Lease and License.
4.1.19 INSURANCE. EXHIBIT 4.1.19 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 CSI and
designating CSI 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 insureds. CSI has furnished to ICN an accurate
and complete copy of all such insurance policies. No insurance carrier has
refused any application for insurance by CSI or any other person on behalf of
CSI on any of its properties or assets.
4.1.20 INTELLECTUAL PROPERTY RIGHTS. EXHIBIT 4.1.20
attached hereto sets forth, as of the date hereof, an accurate and complete list
of all letters patent, patent applications, trademarks, service marks, trade
names, brands, logos, copyrights and licenses both domestic and foreign, and
rights with respect to the foregoing, whether or not registered or registrable
with any governmental authority, now owned or used by CSI. Neither CSI nor
Schlepphorst have received notice, or otherwise have any reason to know, of any
claimed 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 CSI, the loss of which would have a material adverse
effect upon the business, operations, assets or financial condition of CSI.
4.1.21 NO LITIGATION. To the best of CSI's and
Schlepphorst's knowledge, except as set forth in EXHIBIT 4.1.21
13
there are no pending or threatened suits, actions, claims, or litigation,
administrative, arbitration or other proceedings or governmental investigations
or inquiries to which Schlepphorst or CSI is a party or to which any of the
properties or assets thereof is subject.
4.1.22 NO VIOLATION OF LAWS OR REGULATIONS. To the best of
CSI's and Schlepphorst's knowledge, CSI 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 businesses and
properties, including without limitation the rules and regulations of the
Federal Communications Commission ("FCC"), nor is CSI in violation of or in
default of any order, writ, injunction, judgment or decree of any court,
arbitrator, or federal, state or local department official, commission,
authority, board, bureau, agency or other instrumentality issued or pending
against CSI which might adversely affect Schlepphorst's or CSI's ability to
execute, deliver and perform their 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. Neither CSI
nor Schlepphorst have received notice, or otherwise have any reason to know, of
any claimed default or violation with respect to any of the foregoing. There
have been no illegal payments, kickbacks, bribes or political contributions made
by Schlepphorst or CSI to any person, entity or governmental or regulatory body
in the United States or any foreign country or political subdivision.
4.1.23 APPROVALS. All consents necessary or required for
the consummation of the transactions contemplated hereby are set forth in
EXHIBIT 4.1.23. CSI and Schlepphorst will have obtained, on or before Closing,
all such consents, approvals and authorizations of all designations,
declarations and notices on the part of CSI and Schlepphorst required to be
obtained or given, as the case may be, pursuant to the Articles of Incorporation
or the Bylaws of CSI or, to the best of CSI's knowledge, any Lease, contract,
License, Permit, agreement, indenture or other instrument to which either of
them is a party or by which any of them or any of their properties or assets is
bound in connection with the execution, delivery and performance of this
Agreement and the consummation of each transaction referred to in this
Agreement. Subject to obtaining the approvals set forth in EXHIBIT 4.1.23,
14
neither the execution, delivery or performance of this Agreement nor the
conclusion of any transaction contemplated by this Agreement will result in any
violation of, be in conflict with or constitute a default under any term or
provision of the Articles of Incorporation or the Bylaws of CSI or any such
agreement, indenture or other instrument or the rules and regulations of any
regulatory body. CSI has furnished to ICN accurate and complete copies of the
Articles of Incorporation and Bylaws of CSI, each as in effect as of the date
hereof.
4.1.24 COMPLIANCE WITH LAWS. The entering into and
consummation of the transactions contemplated hereunder will not result in any
default under or violation of any of the terms and provisions of any contract,
lease or other agreement to which CSI or Schlepphorst are a party or by which
CSI or Schlepphorst is bound or, to the knowledge of CSI and/or Schlepphorst,
any law, rule, license, regulation, judgment, order or decree governing or
affecting CSI and/or Schlepphorst. Except as provided in EXHIBIT 4.1.23, no
consent, approval or authorization by any person is required in connection with
CSI's execution, delivery or performance of this Agreement.
4.1.25 LABOR AGREEMENTS. To the best of CSI's and
Schlepphorst's knowledge, there are no collective bargaining agreements between
CSI and any labor union or other representative of employees, including local
agreements, amendments, supplements, letters and memoranda of understanding of
all kinds and all employment or consulting contracts not terminable at will
without penalty to which CSI is a party.
4.1.26 CONTRACTS. EXHIBIT 4.1.26 attached hereto sets
forth, as of the date hereof and as of the Closing Date, accurate and complete
lists of the following:
(i) except for the Leases and Licenses, all agreements,
contracts, arrangements, commitments, understandings or obligations, oral or
written, of CSI which are to be performed in whole or in part on or after the
date hereof and which require or may require the payment by CSI in an amount, or
under which CSI 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;
15
(ii) any agreement to which CSI is a party or by which its
properties or assets are bound that limits the freedom of such corporation to
compete in any line of business or with any person; and
(iii) all other agreements, contracts, arrangements,
commitments, understandings or obligations, oral or written (other than oral
contracts of employment), between CSI on the one part and Schlepphorst or any
other officer or director of CSI 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 CSI's properties or assets and
agreements to make loans). CSI has furnished ICN a copy of each agreement,
contract, arrangement, commitment or obligation set forth on EXHIBIT 4.1.26.
Collectively the contracts, agreements, arrangements, commitments or obligations
set forth in this Section and listed in EXHIBIT 4.1.26 are referred to herein as
the "Contracts." Each such Contract is in full force and effect and to the best
of Schlepphorst's and CSI's knowledge CSI has performed in all material respects
all of the obligations under each Contract required to be performed by it as of
the date hereof and as of the Closing Date and no such Contract is in default,
nor has any event occurred which with the passage of time or giving of notice or
both will result in the occurrence of a default under any such Contract.
4.1.27 EMPLOYEES. CSI 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 Internal
Revenue Code of 1986, as amended ("Code") nor is CSI obligated to pay any
severance arrangements with any current or former employees of CSI or any of its
subsidiaries. Attached hereto as EXHIBIT 4.1.27 is a true and complete list of
all employees of CSI compensated by CSI. There are no employees of CSI who have
employment contracts or employee benefit rights which cannot be terminated upon
reasonable notice. Schlepphorst and CSI acknowledge that neither ICN nor CCI is
obligated to retain any other employees of CSI and that ICN will have the right
to review each current employee and to make a determination of whether or not to
offer such employee continued employment, in ICN's sole discretion. Any
liability or termination fees for any employees
16
not retained by ICN will be Schlepphorst's responsibility.
4.1.28 ENVIRONMENTAL MATTERS. To the best knowledge of
Schlepphorst and CSI, CSI has duly complied with, and the operation of its
business, equipment and other assets in the facilities owned or leased by CSI
and its subsidiaries are in compliance with the provisions of all applicable
federal, state and local environmental, health and safety laws, statutes,
ordinance, rules and regulations of any governmental or quasi governmental
authority relating to (i) error 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
and Recovery Act of 1976, as amended; 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 and 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 Laws"). To
the best knowledge of Schlepphorst and CSI, there are no investigations,
administrative proceedings, judicial actions, orders, claims or notices which
are pending, anticipated or threatened against CSI, relating to violations of
the Environmental and Health Laws and the FCC Laws. CSI has not received a
notice of, and does not know or have any reason to suspect, any facts which
might constitute a violation of any Environmental or Health Laws which relate to
the use, ownership or occupancy of any property or facilities used by CSI in
connection with the operation of its business or any activity of CSI's business
which would result in a violation or threaten violation of any Environmental or
Health Laws and the FCC Laws.
4.1.29 STOCK REPRESENTATIONS. Schlepphorst (i) intends to
acquire the shares of CCI Stock pursuant to Section 1 hereof solely for the
purpose of investment and not for the resale and distribution thereof, and has
no present intention to offer, sell, pledge, hypothecate, assign or otherwise
dispose of the same; (ii) understands and acknowledges that the sale of such
shares of
17
CCI Stock will not be registered under the Securities Act of 1933, as amended
(the "Securities Act"), the CCI Stock being acquired pursuant to this Agreement
constitute "restricted securities" as that term is defined under Rule 144
promulgated under the Securities Act and may not be sold except pursuant to a
registration statement under the Securities Act or pursuant to an exemption
available under federal and applicable Securities laws, and such shares may be
required to be held indefinitely unless the shares are subsequently registered
under the Securities Act or an exemption from such registration is available,
(iii) agrees that he will not offer, sell, pledge, hypothecate, transfer, assign
or otherwise dispose of any such shares of CCI Stock unless such shares and such
offer, pledge, hypothecation, transfer, assignment or other disposition shall be
registered or exempt from registration under the Securities Act and shall comply
with all applicable federal and state securities laws, and (iv) agrees and
acknowledges that the stock certificates representing the shares of CCI Stock
which will be acquired by Schlepphorst under this Agreement will contain a
legend restricting the transferability of the shares as provided herein and that
stop order instructions may be imposed by CCI's transfer agent restricting the
transferability of each shares.
4.1.30 LICENSES, FACILITIES.
(i) All licenses and authorizations material to the
operation of CSI's facilities, such facilities being identified at EXHIBIT
4.1.30, and/or to the conduct of CSI's business are listed at EXHIBIT 4.1.30
attached hereto. CSI is operating the facilities identified in full compliance
with the authorizations identified; neither CSI nor Schlepphorst have any
knowledge of any matters which might result in the suspension or revocation of
such authorizations, or the issuance of any citation or forfeiture to CSI.
There are no unsatisfied citations or notices of apparent liability issued or
investigations ongoing, by the FCC or any other agency of the federal or any
state government with respect to the facilities or their operation.
(ii) CSI owns all of the equipment necessary or useful in
the operation of the facilities in accordance with their licenses and with CSI
obligations under any agreements now in effect (the "Equipment"). All of the
Equipment is in good repair and operable condition and have been, and will be
operated in
18
accordance with the authorizations for the facilities and the Rules and
Regulations of the FCC or any other regulatory agency.
(iii) ICN, CSI and Schlepphorst will cooperate in seeking
consent to the transfer of control of the authorizations, if any, and will each
pay one-half (1/2) of the applicable filing fees incurred in requesting such
consent. CSI and Schlepphorst, jointly and severally, and ICN shall cooperate
fully in responding promptly to any inquiries or objections related to such
applications.
4.1.31 ACCOUNTS RECEIVABLE. All of the accounts receivable
of CSI constitute valid receivables, have been incurred in the ordinary course
of business consistent with past practices and, except to the extent of the
reserve for bad debts shown on the balance sheet of CSI as of the date of such
Financial Statement, and to Schlepphorst's and CSI's knowledge are fully
collectable in the ordinary course of CSI's business and are not subject to any
set-off or counterclaim. To the best of CSI's knowledge, no part of such
accounts receivable is contingent upon the performance by CSI of any obligation,
and no agreements for deduction or discounts have been made with respect to any
part of such receivables.
4.1.32 PAYABLES. The list of itemized accounts payable of
CSI as shown on EXHIBIT 4.1.32 attached hereto represent a complete list of all
of CSI's accounts payable to its creditors, are true and correct and are not
currently in default as of the date hereof and as of the Closing Date. CSI
shall not incur any additional accounts payable between the date hereof and the
Closing Date other than in the ordinary course of business without ICN's express
written consent.
4.1.33 PERMITS. To the best knowledge of Schlepphorst and
CSI, CSI has obtained all permits, licenses, zoning variances, approval, rights
of way, easements and other authorizations (collectively "Permits") necessary
for the operation of its business as presently operated. All such Permits are
listed in EXHIBIT 4.1.33. All such Permits are presently valid and in full
force and effect and no renovation, cancellation, or withdrawal thereof has been
effective or to the best of the knowledge of Schlepphorst and CSI, threatened.
Except as disclosed herein, the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby, will
19
not result in the termination of, or change in, any such Permits.
4.1.34 EMPLOYEE BENEFIT MATTERS.
(i) EMPLOYEE BENEFITS. EXHIBIT 4.1.34 attached hereto
constitutes a true and complete list of all plans, programs and arrangements
providing profit sharing, retirement, pension, savings, thrift, deferred
compensation, stock options, stock purchases, group insurance, accident,
sickness, medical, dental and disability benefits, and all vacation pay,
severance pay, incentive compensation, consulting agreements, bonus and other
employee benefits or fringe benefits maintained currently or at any time in past
three (3) years by CSI or with respect to which contributions are made or have
been made at any time in the past six (6) years by CSI (including health
insurance, life insurance and other benefit plans maintained for retirees)
whether or not such plans, programs and arrangements constitute "employee
benefit plans" within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), whether or not such plans,
programs and arrangements are in the nature of formal or informal
understandings, and whether or not such plans, programs and arrangements are
pursuant to any collective bargaining arrangements. Such plans, programs and
arrangements are collectively referred to herein as "Benefit Plans."
(ii) COMPLIANCE WITH ERISA. To the best knowledge of
Schlepphorst and CSI, each Benefit Plan of CSI or any of its subsidiaries, which
is covered by ERISA complies in all material respects and has been administered
in all material respects in accordance with the applicable provisions of ERISA
and the Code, including, without limitation, the satisfaction of all applicable
recording, disclosure, fiduciary and tax qualification requirements under ERISA
and the Code. CSI has filed or caused to be filed with the Internal Revenue
Service annual reports on a Form 5500 or 5500C or 5500R, as applicable, for each
Benefit Plan for all years and periods for which such reports were required. To
the best knowledge of Schlepphorst and CSI, all statements and disclosures made
on the documents or forms filed or distributed pursuant to the applicable
reporting and disclosure requirements under ERISA and the Code have been true
and complete in all material respects and have been filed or distributed timely.
No Benefit Plan has incurred any excise tax liability.
20
(iii) FUNDING. CSI has made all payments and contributions
to all Benefit Plans on a timely basis as required by the terms of each such
plan, ERISA and the Code. All such payments and contributions have been
deducted fully by CSI for federal income tax purposes. Such deductions have not
been challenged or disallowed by any governmental authority and CSI has no
reason to believe that such deductions are not properly allowable. CSI has
funded or will fund each Benefit Plan in accordance with the terms of each
Benefit Plan and, with respect to the current plan year for benefits accrued
through the Closing Date, including the payment of applicable premiums on any
insurance contract funding a Benefit Plan for coverage provided through the date
hereof.
(iv) PROHIBITED TRANSACTIONS. To the best knowledge of
Schlepphorst and CSI, no "prohibited transaction," as defined in Section 406 of
ERISA or Section 4975 of the Code, has occurred with respect to any Benefit
Plan. To the best knowledge of Schlepphorst and CSI, no fiduciary violations,
as defined in Section 404 of ERISA, have occurred with respect to which CSI
could have any present or future liability or obligations. To the best
knowledge of Schlepphorst and CSI, each Benefit Plan is, and has been, operated
and administered in accordance with the appropriate written plan documents.
(v) DETERMINATION LETTERS. The Internal Revenue Service
has issued to CSI letters determining that any Benefit Plan operated by CSI is a
qualified plan under Section 401(a), 401(k) and related Sections of the Code to
the extent applicable, and the related trusts of such Benefit Plans operated as
qualified plans are exempt from federal income tax under Section 501(a) of the
Code. To the best knowledge of Schlepphorst and CSI, there have been no
occurrences since the date of any such determination letter which have adversely
effected or which could adversely effect such qualification.
(vi) MEDICAL PLANS. To the best knowledge of Schlepphorst
and CSI, each Benefit Plan which provides medical and related benefits has been
operated in compliance with all requirements of Section 601 through 608 of ERISA
and either (i) Section 162(1) and any other applicable provisions of the Code,
relating to the continuation of coverage under certain circumstances in which
coverage would otherwise cease. EXHIBIT
21
4.1.34 contains a true and complete list of all former employees of CSI and its
subsidiaries and their respective beneficiaries who, as of the date hereof and
as of the Closing Date, will be receiving or will be eligible to elect to
receive benefits pursuant to such Benefit Plans and the continued coverage
provisions of ERISA and the Code. No Benefit Plan maintained by CSI or any of
its subsidiaries provides post-retirement medical benefits, post-retirement
death benefits or other post-retirement welfare benefits, except to the extent
of the continuation coverage rules as provided under the applicable provisions
of ERISA and the Code.
4.1.35 DIRECTORS AND OFFICERS. EXHIBIT 4.1.35 attached
hereto is a correct and complete list as of the date hereof showing the names of
each of the Officers and Directors, each of whom has been duly elected or
appointed, and the names of each of the Officers and Directors of each of CSI's
subsidiaries, each of whom has been duly elected or appointed by each such
subsidiary. Each such officer and director shall deliver his or her resignation
from CSI and each of CSI's subsidiaries on the Closing Date.
4.1.36 FULL DISCLOSURE. None of the written information
provided by Schlepphorst and CSI to ICN in connection with the negotiation of
this Agreement contains any untrue or misleading statement of a material fact.
There is no fact which Schlepphorst or CSI has not disclosed to ICN in writing
which materially affects or which will materially affect adversely CSI's
business, sales, income, properties, assets, liabilities, activities, customers,
or the ability of CSI and Schlepphorst to perform under this Agreement.
4.2 REPRESENTATIONS AND WARRANTIES OF CCI AND ICN. CCI and ICN
represent to CSI as follows:
4.2.1 GOOD STANDING. ICN and CCI are each corporations
duly organized, validly existing and in good standing under the laws of the
state of Colorado, with full corporate power and authority to own, operate and
lease their properties and to carry on their business as now being conducted.
Each of CCI and ICN is qualified to do business and in good standing in all
jurisdictions where its properties, assets and operations so require. Each of
CCI and ICN has all requisite power and authority to enter into this Agreement
and perform its obligations under this
22
Agreement.
4.2.2 BINDING AGREEMENT. This Agreement, as executed by
CCI and ICN, constitutes the valid and binding obligation of each of CCI and ICN
enforceable in accordance with its terms, except as such enforcement may be
limited by applicable bankruptcy, insolvency, moratorium or similar laws
affecting the rights of creditors generally. This Agreement and the performance
of this Agreement by each of CCI and ICN will not conflict with, breach, violate
or be in contravention of or result in a default under either of CCI's or ICN's
Articles of Incorporation or any other organizational or governing instrument of
CCI or ICN, or of any agreement, mortgage or other instrument to which either of
CCI or ICN is a party or by which any of its assets or property is bound or
affected or, to the best of CCI's and ICN's knowledge, any law, rule, license,
regulation, judgment, decree or order of any court, agency or other authority
which has jurisdiction over the business, properties, assets and activities of
either of CCI or ICN, as applicable. All corporate action necessary for the
approval and/or ratification of this Agreement has been, or will be, prior to
Closing, taken.
4.2.3 STOCK ACQUIRED FOR INVESTMENT. ICN (i) intends to
acquire the CSI Stock solely for the purpose of investment and not for the
resale and distribution thereof and has no present intention to offer, sell,
pledge, hypothecate, assign or otherwise dispose of the same, (ii) understands
and acknowledges that the sale of the CSI stock will not be registered under the
Securities Act, and such shares may be required to be held indefinitely unless
the share are subsequently registered under the Securities Act or an exemption
from such registration is available, and (iii) agrees that it will not offer,
sell, pledge, hypothecate, transfer, assign or otherwise dispose of any such
shares unless such shares and such offer, pledge, hypothecation, transfer,
assignment or other disposition shall be registered or exempt from registration
under the Securities Act and shall comply with all applicable federal and state
securities laws.
4.2.4 LITIGATION; COMPLIANCE WITH LAWS. There are no
pending or threatened suits, actions, claims, arbitrations, administrative or
legal or other proceedings or governmental investigations or inquires pending or
to which CCI or ICN is a party or to which any of its properties or assets
thereof is
23
subject, nor in any material respect any failure to comply with, nor any default
under, any law, ordinance, requirement, regulation or order applicable to either
of CCI or ICN and their businesses and properties nor any violation of or
default with respect to any order, writ, injunction, judgment or decree of any
court, arbitrator, or federal, state or local department, official, commission,
authority, board, bureau, agency or other instrumentality, issued or pending
against either of CCI or ICN which might adversely affect CCI's or ICN's ability
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 transaction.
5. ACTIVITIES PRIOR TO THE CLOSING DATE
5.1 OPERATION OF CSI'S BUSINESS. CSI and Schlepphorst (for purposes
of this Section 5, all references to the "Company" shall include each of CSI's
subsidiaries) hereby agree that from and after the date hereof to the Closing
Date, except as otherwise contemplated by this Agreement, CSI, shall and
Schlepphorst shall cause CSI to, conduct its business solely in the ordinary
course consistent with past practices, and CSI shall, and Schlepphorst shall
cause CSI to:
5.1.1 ORGANIZATIONAL DOCUMENTS. Not amend its Articles of
Incorporation or Charter or Bylaws, except as may be necessary to carry out this
Agreement or as required by law;
5.1.2 CORPORATE NAME. Not change its corporate name or
permit the use thereof by any other corporation, person or entity;
5.1.3 COMPENSATION. Not pay or agree to pay any employee,
officer, or director, without the consent of ICN, 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;
5.1.4 MANAGEMENT. Not make any changes in management
without the prior written consent of ICN;
24
5.1.5 REORGANIZATIONS OR OTHER RELATED TRANSACTIONS. Not
merge or consolidate with any other corporation, or acquire, agree to acquire or
be acquired by any corporation, association, partnership, joint venture or other
entity without the prior written consent of ICN;
5.1.6 DISPOSITION OF ASSETS. Not sell, transfer or
otherwise dispose of any of its properties or assets without the prior written
consent of ICN, except in the ordinary course of business;
5.1.7 INDEBTEDNESS. Not create, incur, assume or guarantee
any indebtedness for money borrowed except for trade indebtedness incurred in
the ordinary course of business;
5.1.8 ENCUMBRANCES. Not create or suffer to exist any
Encumbrance on any of its properties or assets, except those in existence on the
date hereof;
5.1.9 INCREASE OF INDEBTEDNESS. Not increase the amount of
any indebtedness outstanding under any loan agreement, mortgage or borrowing
arrangement in existence on the date hereof, except for additional borrowings
required to fund the working capital needs of CSI in the ordinary course of
business under any line of credit loan identified in CSI's Financial Statements
to the extent permitted thereunder by the documentation relating thereto in
effect as of the date hereof and then only to the extent that CSI has first
notified ICN of any such borrowings under the line of credit subsequent to the
date hereof and ICN approves such borrowings;
5.1.10 PAYABLES. Pay when due in accordance with past
practices all of its accounts payables and trade obligations;
5.1.11 MAINTENANCE OF ASSETS. Maintain its facilities,
assets and properties in good operating repair, order and condition, reasonable
wear and tear excepted, and notify ICN promptly upon any loss of, damage to or
destruction of any of its facilities, properties or assets;
5.1.12 INSURANCE. Maintain in full force and effect all
insurance coverage of the types and in the amounts set forth in the Exhibits
attached hereto and apply the proceeds
25
received under any insurance policy or as a result of any loss of, damage to, or
destruction of any of its facilities, properties or assets to the repair or
replacement of such facilities, properties or assets;
5.1.13 CONTRACTS AND PERMITS. Maintain in full force and
effect all Contracts and Permits for or related to the operation of its business
in all respects and in all places as its business is now conducted;
5.1.14 GOODWILL. Use its best efforts to preserve its
business organization in tact, to keep available the services of its present
employees and to preserve the goodwill of its customers and others having
business relations with it;
5.1.15 ISSUANCE OF SECURITIES. Not issue any additional
capital stock, options, warrants, or other rights to purchase capital stock or
securities convertible into or exchangeable for capital stock of CSI; not
declare, set aside or pay any dividend or make any other distributions in
respect of any of CSI's shares of capital stock;
5.1.16 REPURCHASE OF SECURITIES AND REPAYMENT OF
INDEBTEDNESS. Except as approved by ICN after first being notified of any such
event, not make any direct or indirect redemption, purchase or other acquisition
of shares of CSI's capital stock or make any direct or indirect repurchase,
repayment or retirement of any principal of, or interest on, any indebtedness
other than regularly scheduled payments of principal and interest as provided in
the promissory note evidencing any of CSI's indebtedness;
5.1.17 LITIGATION. Promptly advised ICN in writing of the
commencement of, and of any known threat to commence, any suit, claim, action,
arbitration, legal or administrative proceedings, governmental investigation or
tax audit against CSI;
5.1.18 MONTHLY FINANCIAL STATEMENTS. Deliver to ICN as soon
as available monthly financial statements ("Monthly Financial Statements") of
CSI commencing with the month of February, 1997, and for each calendar month
thereafter prior to the Closing Date; and
26
5.1.19 MISCELLANEOUS. Not enter into any agreement or
otherwise agree to take any action in violation of the negative covenants set
forth in this Section 5 or take, agree to take or omit to take any action that
would make any representation or warranty inaccurate.
5.2 ACCESS TO INFORMATION. CSI will cooperate fully with ICN, and
CSI shall provide, and Schlepphorst shall cause CSI to provide, to ICN and its
Accountants, counsel and other representatives (collectively "Advisors") during
normal business hours, (i) full access to the books, records, equipment, real
estate and contracts other assets of CSI and all work papers relating to CSI of
CSI's independent accountants and (ii) full opportunity to discuss CSI's
business affairs and assets with its officers, employees, agents and independent
accounts ("CSI's Representatives") and furnish to ICN and its Advisors copies of
such documents, records and information with respect to the affairs of CSI as
ICN or its Advisors may reasonably request.
5.3 CONFIDENTIALITY. ICN and CCI shall retain in confidence and
shall cause its Advisors to retain in confidence, all information obtained by
them pursuant to the investigations made by each of ICN and CCI or their
advisors pursuant to this Section (the "Confidential Information").
Schlepphorst, CSI, its officers, directors and employees and CSI's Advisor shall
retain in confidence, all information obtained by them in connection with any
investigation undertaken by such persons as a result of CCI and/or ICN providing
such persons such access to information of CCI and/or ICN as provided in this
Agreement. The parties agree that Confidential Information shall not include
information which (i) was or becomes generally available to the public other
than as a result of a disclosure by CCI, ICN, CSI, Schlepphorst or any of their
officers, directors or employees or any of their Advisors, (ii) was or becomes
available to CCI, ICN, CSI, Schlepphorst, any of their officers, directors or
employees or their Advisors on a non-confidential basis from a source other than
CCI, ICN, CSI, Schlepphorst or CSI's Representatives, provided that such source
is not bound by a confidential agreement or (iii) was, or in the future is,
developed independently by CCI, ICN or their Advisors or by CSI, Schlepphorst or
their Advisors without reference to the information furnished by CCI, ICN, CSI,
Schlepphorst or CSI's Representatives, as the case may be. The parties
understand and agree that all of the Confidential Information supplied to CCI,
ICN
27
or their Representative or to CSI, Schlepphorst or CSI's Representatives is
provided on the understanding that such Confidential Information remains the
property of CCI, ICN or CSI, as the case may be, and that all copies and
originals will be returned to any such party promptly upon its request after
termination of this Agreement pursuant to Section 7 hereof.
5.4 BENEFIT PLANS. Between the date hereof and the Closing Date, CSI
shall maintain, and Schlepphorst shall cause CSI to maintain, in full force and
effect the Benefit Plans as they pertain to CSI's employees or former employees
and in connection therewith;
5.4.1 PLAN CHANGES. Except as may be required by law or as
may be necessary to continue the qualified status under Section 401 of the Code,
CSI shall not adopt, terminate, amend, extend, or otherwise change any Benefit
Plan without the prior written consent of ICN, and Schlepphorst and CSI shall
give ICN prior written notice of CSI's intention to take any such action
required by law or necessary to continue the qualified status of any Benefit
Plans as they pertain to CSI's employees or its former employees; and
5.4.2 CONTRIBUTIONS AND PAYMENTS. CSI shall not make,
cause to be made, or agree to make any contribution, award or payment under any
Benefit Plans as they pertain to CSI's employees or former employees, except at
the time and to the extent required by the written terms thereof, without the
prior written consent of ICN.
5.5 BEST EFFORTS AND STANDSTILL. Subject to the other provisions of
this Agreement, each of CSI and Schlepphorst will use their commercially
reasonable efforts to cause the conditions listed in Section 3.1 hereof to be
satisfied on or before the Closing Date. Subject to the other conditions of
this Agreement, each of ICN and CCI will use their commercially reasonable
efforts to cause the conditions listed in Section 3.2 hereof to be satisfied on
or before the Closing Date. Each of CSI and Schlepphorst further agrees that
they will not enter into, request, solicit or engage in any discussions,
negotiations, understandings or agreements with any person or entity other than
CCI and ICN relating to the sale of the CSI Stock or the properties and assets
of CSI (other than in the ordinary course of business) unless this
28
Agreement is terminated pursuant to Section 7 hereof.
6. POST-CLOSING COVENANTS. CSI, Schlepphorst, CCI and ICN agree as
follows with respect to the period following the Closing.
6.1 PERFORMANCE OF WAIVED CONDITIONS. To the extent that any
conditions under Section 3.1 hereof are waived by CCI or ICN, as the case may
be, as a condition precedent to CCI's and ICN's obligation to close the
transactions contemplated hereby, such waived condition to the extent required
by CCI or ICN, as the case may be, shall be performed by Schlepphorst within the
time period agreed upon by the parties hereto, but in any event no later than
sixty (60) days following the Closing Date, unless CCI or ICN, as the case may
be, agrees to a extended period of time in which such performance can be
completed.
6.2 CONFIDENTIAL INFORMATION. CSI and its former officers and
directors will treat and hold as such all of the Confidential Information,
refrain from using any of the Confidential Information except in connection with
this Agreement, and deliver promptly to CCI and/or ICN or destroy, at the
request and option of CCI and ICN, all tangible correspondence, documents,
instruments, memorandums and all other writings (and all copies thereof) which
embody the Confidential Information which are in such persons' possession. If
CSI or its former officers or directors are requested or required (by oral
question or request for information or document in any legal proceeding,
interrogatory, subpoena, civil investigative demand, or similar process) to
disclose any Confidential Information, CSI and its former officers or directors
will notify CCI and ICN promptly of any such request or requirement to enable
CCI and ICN to seek an appropriate injunction or waive compliance with the
provisions of this Section. The foregoing provision shall not apply to any
Confidential Information which is generally available to the public immediately
prior to the time of disclosure.
6.3 SCHLEPPHORST'S COOPERATION AFTER CLOSING. In case at any time
after the Closing Date any further action is necessary or desirable to carry out
and accomplish the purposes of this Agreement and the transactions contemplated
hereunder, Schlepphorst will take such further action as ICN and/or CCI, as the
case may be, may request, including executing and delivering such further
instruments and documents as shall be necessary or appropriate to
29
accomplish and effectuate such transaction.
7. TERMINATION
7.1 EVENTS OF TERMINATION. Anything contained elsewhere in this
Agreement to the contrary notwithstanding, prior to the Closing Date, this
Agreement may be terminated by written notice of termination as follows:
7.1.1 MUTUAL CONSENT. Anytime by mutual consent of CSI,
Schlepphorst, CCI and ICN;
7.1.2 PRIOR TO CLOSING DATE. By CSI and Schlepphorst or
CCI and ICN if the other party shall have (i) misstated any representation or
been in breach of any warranty contained herein, (ii) been in breach of any
covenant, undertaking or restriction contained herein and such misstatement or
breach is not been cured by the earlier of (a) thirty (30) days after the giving
of notice of such party of such misstatement or breach or (b) the Closing Date;
or (iii) the failure to consummate the transactions contemplated herein through
the fault of the other party;
7.2 CONSEQUENCES OF TERMINATION. In the event of a termination and
abandonment hereof pursuant to the provisions of this Section 7, this Agreement
shall become void and have no effect, without any liability on any of the
parties or their directors or officers or stockholder in respect of this
Agreement. Notwithstanding anything contained in the foregoing to the contrary,
if this Agreement is terminated be CCI and ICN due to a failure of CSI or
Schlepphorst to perform the conditions precedent to the Closing hereunder, the
Xxxxxxx Money shall be refunded to ICN in full by Schlepphorst and CSI. If this
Agreement is terminated by CSI as a result of a failure of CCI or ICN to perform
the conditions precedent to the Closing hereunder, the Xxxxxxx Money deposited
by ICN shall be retained by CSI.
8. MISCELLANEOUS
8.1 NOTICES. Any notices under this Agreement shall be in writing,
signed by the party giving the same and transmitted by registered or certified
United States Mail or by a generally accepted national courier service providing
confirmation of
30
delivery, and addressed to the party to receive the notice at the address set
forth below or such other address as any party may specify by notice to the
other party, and shall be deemed properly given and received when actually given
and received:
If to ICN: Convergent Communications, Inc.
or CCI 00 Xxxxxxxxx Xxxxx Xxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attn.: Chief Executive Officer
with a copy to: Xxxxxx X. Xxxxxxx, Esq.
Xxxxxx & Xxxxx, L.L.C.
000 Xxxxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
if to CSI: Communications Services of Iowa, Inc.
or Schlepphorst 0000 Xxxxxx Xxxx, Xxxxx 0
Xxxx Xxx Xxxxxx, Xxxx 00000
Attn.: President
8.2 BROKERAGE COMMISSIONS.
8.2.1 CSI and Schlepphorst hereby represent and warrant to ICN
that neither CSI nor Schlepphorst has engaged or utilized the services of any
broker or finder in connection with this transaction and that no commissions are
payable with respect to this transaction. CSI and Schlepphorst hereby agree to
indemnify and hold CCI and ICN harmless from and against any liability for any
claims of any broker or finder claiming by, through or under CSI or
Schlepphorst.
8.2.2 CCI and ICN hereby represent and warrant to CSI and
Schlepphorst that neither CCI nor ICN has engaged or utilized the services of
any broker or finder in connection with this transaction and that no commissions
are payable with respect to this transaction. ICN and CCI hereby agree to
indemnify and hold CSI and Schlepphorst harmless from and against any liability
for any claims of any other broker or finder claiming by, through or under CCI
or ICN.
8.3 SUCCESSORS AND ASSIGNS. This Agreement is personal to the
parties hereto and may not be assigned, transferred, delegated or nullified
without the prior written consent of all of
31
the parties hereto. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, personal
representatives, successors and permitted assigns.
8.4 ARBITRATION. Notwithstanding anything to the contrary herein,
any dispute arising pursuant to or in any way related to this Agreement or the
transactions contemplated hereby shall be settled by arbitration at a mutually
agreed upon location in Denver, Colorado; provided, however, that nothing in
this Section shall restrict the right of any party to apply to a court of
competent jurisdiction for emergency relief pending final determination of a
claim by arbitration in accordance with this Section. All arbitration shall be
conducted in accordance with the rules and regulations of the American
Arbitration Association, in force at the time of any such dispute, by a panel of
three (3) arbitrators, one (1) selected by Schlepphorst, one (1) selected by
ICN, and the third (3rd) selected by the other two (2) arbitrators. Each party
shall pay its own expenses associated with such arbitration, including the
expenses of any arbitrator selected by such party and 50% of the expenses of the
third arbitrator, provided that the prevailing party in any arbitration shall be
entitled to reimbursement of reasonable attorneys' fees and expenses (including,
without limitation, arbitration expenses) relating to such arbitration. The
decision of the arbitrators, based upon written findings of fact and conclusions
of law, shall be binding upon the parties; and judgment in accordance with that
decision may be entered in any court having jurisdiction thereof. In no event
shall the arbitrators be authorized to grant any punitive, incidental or
consequential damages of any nature or kind whatsoever.
8.5 NO ORAL MODIFICATIONS. No amendments or modifications to this
Agreement shall be made or deemed to have been made unless in writing executed
and delivered by the party to be bound thereby. Any provision of this Agreement
may be waived, amended, supplemented or modified only by agreement in writing of
the parties hereto.
8.6 WAIVER. The failure of any party to this Agreement to insist
upon strict performance of any of the terms of this Agreement will not
constitute a waiver of any of its rights under this Agreement or its right
subsequently to assert, rely upon, or enforce any provision of this Agreement.
32
8.7 GOVERNING LAW. This Agreement shall be interpreted, governed by
and enforced according to the laws of the State of Colorado.
8.8 SEVERABILITY. If any provision of this Agreement shall be held
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions of this Agreement will not in any way be affected or
impaired thereby.
8.9 HEADINGS AND CAPTIONS FOR CONVENIENCE. The headings and
captions contained in this Agreement are for convenience only and shall not be
considered in interpreting the provisions hereof.
8.10 COUNTERPARTS. This agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, all of
which together shall constitute one and the same instrument.
8.11 REPRESENTATIONS, WARRANTIES AND COVENANTS. Notwithstanding any
investigation made by or on behalf of Schlepphorst, CSI, CCI or ICN prior to or
after the Closing Date, all representations, warranties and covenants of the
parties hereto contained herein shall survive and remain in full force and
effect for a period of three (3) years after the Closing Date.
8.12 SCHLEPPHORST'S INDEMNIFICATION. Notwithstanding the Closing and
regardless of any investigation at any time made by or on behalf of CCI or ICN
or of any information CCI or ICN may have in respect thereof, Schlepphorst will
indemnify, defend and save and hold CCI and ICN harmless from and against any
costs, expenses, damages, liabilities, losses or deficiencies, including,
without limitation, reasonable attorneys' fees and other costs and expenses
incident to any suit, action or proceeding (collectively "Losses") suffered or
incurred by CCI and/or ICN arising out of or resulting from, and will pay CCI
and/or ICN on demand the full amount of any such amounts which CCI and/or ICN
may pay or may become obligated to pay in respect of:
(a) any material inaccuracy in any representation or document
delivered under or pursuant to this Agreement or the material breach of any
warranty made by CSI or Schlepphorst in or pursuant to this Agreement;
33
(b) any misrepresentations in or omission from any Exhibit,
Schedule, or other attachment to this Agreement;
(c) any failure by CSI or Schlepphorst duly to perform or
observe any term, provision, covenant, or agreement in this Agreement to be
performed or observed on the part of CSI or Schlepphorst; or
(d) any action, suit, investigation, proceeding, demand,
assessment, audit, judgment and claim, including any employment-related claim
arising out of the foregoing (collectively "Claims") against CSI or any of its
subsidiaries, even though such Claims may not be filed or come to light until
after the Closing Date.
Each of ICN and CCI hereby covenants and agrees to immediately provide to
Schlepphorst any and all notifications or other correspondence it receives
related to matters which may affect this indemnity and hereby agrees to allow
Schlepphorst 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 Schlepphorst. However, failure to provide any such
notifications or other correspondence in a timely manner will not relieve
Schlepphorst of his obligation to indemnify ICN under this Section 4.15. If CCI
and/or ICN becomes unsatisfied with the conduct of the defense of the Claims,
CCI and/or ICN may defend against, and consent to the entry of any judgment or
enter into any settlement with respect to such Claims in any manner it may deem
to be appropriate and Schlepphorst shall reimburse CCI and/or ICN promptly for
the acts of defending against such Claims and will otherwise remain responsible
for any Loss which CCI and/or ICN may suffer from, arising out of, relating to
or caused by such Claims to the full extent provided in this Section.
All statements of fact contained in any written statement (including the
Financial Statements), deed, certificate, schedule or other document delivered
to CCI and/or ICN by or on behalf of CSI or Schlepphorst pursuant to this
Agreement shall be deemed representations and warranties by CSI and Schlepphorst
hereunder.
8.13 ICN'S INDEMNIFICATION. ICN agrees that notwithstanding the
Closing and regardless of any investigation of any time made by or on behalf of
Schlepphorst or CSI or any
34
information Schlepphorst or CSI may have in respect thereof, ICN will indemnify
and save and hold Schlepphorst and CSI harmless from and against any Losses
suffered or incurred by Schlepphorst or CSI arising out of or resulting from,
and will pay Schlepphorst or CSI on demand the full amount of any such amounts
which Schlepphorst or CSI may pay or may become obligated to pay in respect of:
(a) any material inaccuracy in any representation or the breach
of any warranty made by CCI and/or ICN in or pursuant to this Agreement; or
(b) any failure by CCI and/or ICN duly to perform or observe any
item, provision, covenant or agreement in this Agreement to be performed or
observed on the part of CCI or ICN, as applicable.
8.14 NO BENEFIT TO OTHERS. The representations, warranties, covenants
and agreements contained in this Agreement are for the sole benefit of the
parties hereto and their respective heirs, successors, assigns, and such
representations, warranties, covenants and agreements shall not be construed as
conferring, and are not intended to confer, any rights on any other persons.
8.15 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
Schlepphorst, on behalf of CSI and himself, and ICN and CCI; provided, however,
that such approval shall not be unreasonably withheld.
8.16 ENTIRE AGREEMENT. This Agreement, together with Exhibits,
Schedules and Attachments hereto, represents the entire agreement between the
parties hereto with respect to the subject matter hereof and all prior
agreements, understandings or negotiations shall be deemed merged herein. No
representations, warranties, promises or agreements, express or implied, shall
exist between the parties, except as stated herein.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above written.
INTEGRATED COMMUNICATION NETWORKS, INC.,
a Colorado corporation
35
By: /s/ Xxxx X. Xxxxx
------------------------------------
Its: Chief Executive Office
------------------------------------
CONVERGENT COMMUNICATIONS, INC.,
a Colorado corporation
By: /s/ Xxxx X. Xxxxx
------------------------------------
Its: Chief Executive Office
------------------------------------
XXXX XXXXXXXXXXXX
/s/ XXXX XXXXXXXXXXXX
------------------------------------
COMMUNICATIONS SERVICES OF IOWA, INC.,
an Iowa corporation
By: /s/ XXXX XXXXXXXXXXXX
--------------------------------
Its: President
-------------------------------
36
