FINAL EXECUTION COPY
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AGREEMENT AND PLAN OF EXCHANGE
dated as of the 6th day of October, 1997
by and among
ADVANCED COMMUNICATIONS GROUP, INC.
(the Parent)
ADVANCED COMMUNICATIONS CORP.
(Old ACG)
and
ACG ACQUISITION CORP.
(Newco)
and
VALU-LINE OF LONGVIEW, INC.
(the Company)
and
XXXXX X. XXXXXXXX
XXX XXXXXX
XXXXXXX XXXXX
XXXX XXXXX
and
XXXXXXXX XXXXX
(the Stockholders of the Company)
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TABLE OF CONTENTS
1. DEFINITIONS...............................................................2
2. PURCHASE, SALE AND EXCHANGE...............................................6
3. SECTION 351 EXCHANGE PLAN.................................................7
4. CLOSING...................................................................7
5. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF THE
COMPANY AND THE STOCKHOLDERS..............................................7
(A) Representations, Warranties, Covenants and Agreements of the
Company and the Stockholders........................................7
5.1 Due Organization....................................................8
5.2 Authorization.......................................................8
5.3 Capital Stock of the Company........................................8
5.4 Transactions in Capital Stock.......................................9
5.5 No Bonus Shares.....................................................9
5.6 Subsidiaries........................................................9
5.7 Predecessor Status..................................................9
5.8 Spinoff by the Company..............................................9
5.9 Financial Statements................................................9
5.10 Liabilities and Obligations........................................10
5.11 Accounts and Notes Receivable......................................11
5.12 Permits and Intangibles............................................11
5.13 Environmental Matters..............................................11
5.14 Personal Property..................................................12
5.15 Significant Customers; Material Contracts and Commitments..........12
5.16 Real Property......................................................13
5.17 Insurance..........................................................14
5.18 Compensation; Organized Labor Matters..............................14
5.19 Employee Plans.....................................................14
5.20 Compliance with ERISA..............................................15
5.21 Conformity with Law; Litigation....................................16
5.22 Tax Matters........................................................17
5.23 No Violations......................................................18
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5.24 Government Contracts...............................................18
5.25 Absence of Changes................................................18
5.26 Deposit Accounts; Powers of Attorney...............................20
5.27 Intentionally Deleted..............................................20
5.28 Relations with Governments.........................................20
5.29 Disclosure.........................................................20
5.30 Prohibited Activities..............................................21
5.31 Intentionally Omitted..............................................21
(B) Representations, Warranties, Covenants and Agreements of the
Stockholders.......................................................21
5.32 Authority..........................................................21
5.33 Preemptive Rights..................................................21
5.34 Tax Matters........................................................21
5.35 Affiliated Corporations............................................21
5.36 No Plan of Distribution............................................22
5.37 No Retained Rights.................................................22
6. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF
PARENT AND OLD ACG.......................................................22
6.1 Due Organization...................................................22
6.2 Authorization......................................................22
6.3 Capital stock......................................................23
6.4 Transactions in Capital Stock, Organization Accounting.............23
6.5 Subsidiaries.......................................................23
6.6 Financial Statements...............................................23
6.7 Liabilities and Obligations........................................24
6.8 Conformity with Law; Litigation....................................24
6.9 No Violations......................................................24
6.10 Parent Securities..................................................25
6.11 Business; Real Property; Material Agreement........................25
6.12 Tax Matters........................................................25
6.13 Registration Statement.............................................25
7. OTHER COVENANTS PRIOR TO CLOSING.........................................26
7.1 Access and Cooperation; Due Diligence; Audits......................26
7.2 Conduct of Business Pending Closing................................26
7.3 Prohibited Activities..............................................27
7.4 Exclusivity........................................................28
7.5 Notice to Bargaining Agents........................................29
7.7 Notification of Certain Matters....................................29
7.8 Amendment of Schedules.............................................29
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7.9 Further Assurance..................................................30
7.10 Registration Statement.............................................30
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS......................30
8.1 Representations and Warranties Performance of Obligations..........30
8.2 Satisfaction.......................................................31
8.3 No Litigation......................................................31
8.4 Opinion of Counsel.................................................31
8.5 Consents and Approvals.............................................31
8.6 Good Standing Certificates.........................................31
8.7 No Material Adverse Change.........................................31
8.8 Secretary's Certificates...........................................31
8.9 Closing of IPO.....................................................32
8.10 Election of Director...............................................32
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT............................32
9.1 Representations and Warranties; Performance of Obligations.........32
9.2 No Litigation......................................................32
9.3 Secretary's Certificate............................................32
9.4 No Material Adverse Effect.........................................33
9.5 Stockholders' Release..............................................33
9.6 Satisfaction.......................................................33
9.7 Termination of Related Party Agreements............................33
9.8 Opinion of Counsel.................................................33
9.9 Consents and Approvals.............................................33
9.10 Good Standing Certificates.........................................33
9.11 FIRPTA Certificate.................................................34
9.12 Closing of IPO.....................................................34
9.13 Acquisition of Affiliated Corporations.............................34
10. COVENANTS OF PARENT WITH THE STOCKHOLDERS AFTER CLOSING..................34
10.1 Release From Guarantees............................................34
10.2 Preparation and Filing of Tax Returns..............................34
10.3 Preservation of Employee Benefit Plans.............................35
10.4 Dividends..........................................................35
10.5 Compliance with the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976 (the "Xxxx-Xxxxx Act").................................35
10.6 Commitment to Nominate a Director..................................35
10.7 Rule 144 Filing....................................................35
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11. TERMINATION OF AGREEMENT.................................................36
11.1 Termination........................................................36
11.2 Liabilities in Event of Termination................................36
12. NONCOMPETITION...........................................................36
12.1 Prohibited Activities..............................................36
12.2 Damages............................................................37
12.3 Reasonable Restraint...............................................38
12.4 Severability, Reformation..........................................38
12.5 Independent Covenant...............................................38
12.6 Materiality........................................................38
13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION................................38
13.1 Stockholders.......................................................38
13.2 Parent.............................................................39
13.3 Damages............................................................40
13.4 Survival...........................................................40
14. TRANSFER RESTRICTIONS....................................................40
15. INVESTMENT REPRESENTATIONS...............................................40
15.1 Compliance With Law................................................41
15.2 Economic Risk, Sophistication......................................41
16. REGISTRATION RIGHTS......................................................42
16.1 PiggyBack Registration Rights......................................42
16.2 Demand Registration Rights.........................................42
16.3 Registration Procedures............................................43
16.4 Other Registration Matters.........................................45
16.5 Indemnification....................................................46
16.6 Contribution.......................................................49
16.7 Availability of Rule 144...........................................49
17. GENERAL..................................................................50
17.1 Cooperation........................................................50
17.2 Successors and Assigns.............................................50
17.3 Entire Agreement...................................................50
17.4 Counterparts.......................................................50
17.5 Brokers and Agents.................................................51
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17.6 Expenses...........................................................51
17.7 Notices............................................................51
17.8 Governing Law......................................................53
17.9 Exercise of Rights and Remedies....................................53
17.10 Time...............................................................53
17.11 Reformation and Severability.......................................53
17.12 Remedies Cumulative................................................53
17.13 Captions...........................................................53
17.14 Public Statements..................................................53
17.15 Amendments and Waivers.............................................53
17.16 Access and Information.............................................54
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AGREEMENT AND PLAN OF EXCHANGE
THIS AGREEMENT AND PLAN OF EXCHANGE (the "Agreement") is made as of
the 6th day of October, 1997, by and among ADVANCED COMMUNICATIONS GROUP, INC.,
a Delaware corporation organized in September 1997 ("Parent"), ADVANCED
COMMUNICATIONS CORP. (formerly named Advanced Communications Group, Inc.), a
Delaware corporation organized in June 1996 ("Old ACG"), ACG ACQUISITION CORP.,
a Delaware corporation ("Newco"), VALU-LINE OF LONGVIEW, INC., a Texas
corporation (the "Company"), and XXXXX X. XXXXXXXX, XXX XXXXXX, XXXXXXX XXXXX,
XXXX XXXXX and XXXXXXXX XXXXX, the only stockholders of the Company
(collectively, the "Stockholders") and the owners of 1,000 shares of common
stock, no par value of Company ("Company Stock"), representing all the capital
stock of Company issued and outstanding on the date of this Agreement
("Shares").
RECITALS
WHEREAS, Old ACG has entered into agreements for, or negotiated the
terms of, the acquisition by merger, asset purchase or stock purchase of
ten companies (or interests therein) engaged in various aspects of the
telecommunications industry ("Founding Companies") for voting capital stock
and other consideration, including cash, one of such agreements being the
Restated Agreement and Plan of Merger dated as of June 19, 1997 among Old
ACG, Newco, the Company and the Stockholders other than Xxxx Xxxxx (the
"Original Agreement"); and
WHEREAS, Old ACG intended to close the acquisition of the Founding
Companies substantially contemporaneously with the consummation of an
initial underwritten public offering of its common stock; and
WHEREAS, the executive officers of Old ACG have determined that it is
desirable for licensing and other regulatory purposes to restructure the
acquisitions of the Founding Companies; and
WHEREAS, as the initial step in the implementation of the restructured
proposal, Old ACG formed Parent as a new Delaware corporation in September
1997 to serve as the vehicle for the acquisition of the Founding Companies
substantially contemporaneously with the consummation of an initial
underwritten public offering ("IPO") of common stock, $.0001 par value, of
Parent ("Parent Stock") at the price to the public reflected in the final
prospectus of Parent relating to the IPO ("IPO Price"); and
WHEREAS, under the restructured proposal, contemporaneously with the
consummation of the IPO and as part of a single transaction, the
stockholders of the Founding Companies, including Stockholders and Old ACG,
will transfer, by stock or asset
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purchase or reverse triangular merger, the stock or substantially all the
assets of certain companies and other assets in which they own an interest
to Parent in exchange for voting capital stock of Parent and other
consideration, including cash, voting stock, options, warrants, notes,
convertible notes and other property of Parent, under circumstances that
will constitute a tax-free transfer of property under Section 351 of the
Internal Revenue Code of 1986, as amended, and the rules and regulations
thereunder ("Code"), to the extent of their receipt of voting capital stock
of Parent; and
WHEREAS, substantially contemporaneously with the execution of this
Agreement and in order to document the integrated Section 351 exchange plan
contemplated herein, (a) Old ACG, the other Founding Companies, their
stockholders and others are amending and restating their respective
acquisition agreements; and (b) Parent and Old ACG are entering into a
merger agreement pursuant to which Old ACG will become a wholly-owned
subsidiary of Parent substantially contemporaneously with the consummation
of the IPO; and
WHEREAS, it is contemplated that prior to the consummation of the IPO,
Old ACG will effect an approximately one-for-two reverse stock split, the
exact magnitude of which will be dependent upon the ultimate post IPO
valuation of Parent by the managing underwriters in the IPO and the
anticipated IPO Price; and
WHEREAS, the IPO, the acquisitions of the Founding Companies and Old
ACG are described in the Registration Statement on Form S-1 of Parent
(draft of October 2, 1997), a copy of which is attached to this Agreement
as Annex I ("Draft Registration Statement"); and
WHEREAS, Parent, Old ACG, Newco, Company and the Stockholders desire
to amend and restate the Original Agreement in its entirety and transform
it into this Agreement; and
WHEREAS, Parent desires to acquire all the Shares directly from
Stockholders for the consideration set forth in Section 2.2 of this
Agreement, and Stockholders have agreed to sell the Shares to Parent on the
terms and subject to the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties, covenants and agreements herein contained, the
parties hereby agree as follows:
1. DEFINITIONS
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Unless the context otherwise requires, capitalized terms used in this
Agreement or in any schedule, or annex attached hereto and not otherwise
defined shall have the following meanings for all purposes of this Agreement:
"Affiliated Corporations" has the meaning set forth in Section 5.35.
"Affiliates" has the meaning set forth in Section 5.8.
"Agreement" has the meaning set forth in the first paragraph of this
Agreement.
"Annex" means each Annex attached hereto that represents a document
relevant to the transactions contemplated in this Agreement.
"A/R Aging Reports" has the meaning set forth in Section 5.11.
"Balance Sheet Date" has the meaning set forth in Section 5.9.
"Charter Documents" means the certificate of incorporation, articles of
incorporation, or other instruments pursuant to which any corporation,
partnership or other business entity that is a signatory to this Agreement
was formed or organized in accordance with applicable law, as amended from
time to time.
"Closing" has the meaning set forth in Section 4.
"Closing Date" has the meaning set forth in Section 4.
"Code" has the meaning set forth in the fifth recital of this Agreement.
"Company" has the meaning set forth in the first paragraph of this
Agreement.
"Company Financial Statements" has the meaning set forth in Section 5.9.
"Company Stock" has the meaning set forth in the first paragraph of this
Agreement.
"Demand Registration" has the meaning set forth in Section 16.2.
"Environmental Laws" has the meaning set forth in Section 5.13.
"ERISA" has the meaning set forth in Section 5.19.
"Founding Companies" has the meaning set forth in the first recital of this
Agreement.
"Founding Stockholders" has the meaning set forth in Section 16.2.
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"Hazardous Wastes" and "Hazardous Substances" have the meanings set forth
in Section 5.13.
"Xxxx-Xxxxx Act" has the meaning set forth in Section 10.5.
"Initial Disclosure Date" means December 31, 1996.
"IPO" has the meaning set forth in the fourth recital of this Agreement.
"IPO Price" has the meaning set forth in the fourth recital of this
Agreement.
"June Balance Sheet" has the meaning set forth in Section 5.9.
"Key Employee" is any employee of the Company with annual compensation in
excess of $50,000.00.
"Knowledge" means actual knowledge without independent investigation and,
with respect to the Company, the actual knowledge of each of its officers
and directors.
"Liens" has the meaning set forth in Section 5.3.
"Material Adverse Effect" has the meaning set forth in Section 5.1.
"Material Documents" has the meaning set forth in Section 5.23.
"Newco" has the meaning set forth in the first paragraph of this Agreement.
"Old ACG" has the meaning set forth in the first paragraph of this
Agreement.
"Old ACG Financial Statements" has the meaning set forth in Section 6.6.
"Other Stockholders" means the persons and entities that receive shares of
Parent Stock, securities convertible into shares of Parent Stock and/or
cash upon the acquisition by Parent of assets or businesses in which such
persons and entities owned an interest on or prior to the closing date of
the IPO.
"Original Agreement" has the meaning set forth in the first recital of this
Agreement.
"Parent" has the meaning set forth in the first paragraph of this
Agreement.
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"Parent Charter Documents" has the meaning set forth in Section 6.1.
"Parent Documents" has the meaning set forth in Section 6.9.
"Parent Stock" has the meaning set forth in the fourth recital of this
Agreement.
"Prohibited Activities" has the meaning set forth in Paragraph 5.30.
"Prospectus" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, as amended or supplemented
by any prospectus supplement, with respect to the terms of the offering of
any portion of the Registerable Securities covered by such Registration
Statement, and by all other amendments and supplements to such prospectus,
including post-effective amendments, and in each case including all
material incorporated by reference therein.
"Qualified Plans" has the meaning set forth in Section 5.20.
"Registerable Securities" means the shares of Parent Stock acquired by the
Stockholders pursuant to this Agreement.
"Registration Statement" shall mean any registration statement of the
Parent and any other entity required to be a registrant with respect to
such registration statement pursuant to the requirements of the 1933 Act
which covers any of the Registerable Securities, and all amendments and
supplements to such registration statement, including post-effective
amendments in each case including the Prospectus contained therein, all
exhibits thereto and all materials incorporated by reference therein.
"Restricted Securities" has the meaning set forth in introductory paragraph
to Section 15.
"Returns" means any returns, reports or statements (including any
information returns) required to be filed for purposes of a particular Tax.
"Schedule" means each Schedule attached hereto, which shall reference the
relevant sections of this Agreement, on which parties hereto disclose
information as part of their respective representations, warranties,
covenants and agreements.
"SEC" means the United States Securities and Exchange Commission.
"Section 351 Exchange Plan" means the Section 351 Exchange Plan in the form
of Annex II.
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"Stock Component" has the meaning set forth in Section 2.
"Stockholders" has the meaning set forth in the first paragraph of this
Agreement.
"Tax" or "Taxes" means all Federal, state, local or foreign net or gross
income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, bank shares, withholding, payroll, employment, excise, property,
deed, stamp, alternative or add on minimum, environmental or other taxes or
assessments, whether disputed or not, together with any interest,
penalties, additions to tax or additional amounts with respect thereto.
"Territory" has the meaning set forth in Section 12.1(i).
"Transfer Taxes" has the meaning set forth in Section 17.6.
"1933 Act" means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
2. PURCHASE, SALE AND EXCHANGE
Pursuant to the terms of this Agreement, at the Closing, (x) Stockholders will
transfer, convey, assign and deliver to Parent the Shares, together with stock
powers duly endorsed by Stockholders so that the Shares may be duly registered
in Parent's name, and (y) Parent will acquire the Shares from Stockholders for
an aggregate consideration of $6.6 million in immediately available funds and
such number of shares of Parent Stock (rounded to the nearest whole share) as
shall be determined by dividing $5.2 million by the IPO Price ("Stock
Component"). The number of shares to be exchanged by each Stockholder and the
amount of cash and the number of shares of Parent Stock deliverable to each
Stockholder are set forth below opposite the name of such Stockholder:
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NUMBER OF AMOUNT OF NUMBER OF
NAME OF STOCKHOLDER SHARES CASH PARENT STOCK (1)
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Xxxxx X. Xxxxxxxx 500 $3,330,000 50%
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Xxx Xxxxxx 300 $1,980,000 30%
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Xxxxxxx Xxxxx 50 $330,000 5%
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Xxxx Xxxxx 50 $330,000 5%
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Xxxxxxxx Xxxxx 100 $660,000 10%
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TOTAL 1000 $6,600,000 100%
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(1) Expressed as a percentage of the Stock Component.
3. SECTION 351 EXCHANGE PLAN. By executing this Agreement, each Stockholder
is deemed to have approved and adopted the Section 351 Exchange Plan to the
same extent as if he had subscribed his signature thereon.
4. CLOSING
The Closing of the transactions contemplated by this Agreement ("Closing")
shall take place on the date of the closing of the sale of shares of the Parent
Stock in the IPO, or such other date as the parties hereto may designate (the
"Closing Date"), at such place in New York City as the parties may mutually
agree.
5. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF THE COMPANY AND
THE STOCKHOLDERS
(A) Representations, Warranties, Covenants and Agreements of the Company
and the Stockholders.
The Company and each Stockholder severally represent, warrant, covenant and
agree (i) that all of the following representations and warranties in this
Section 5(A) are true at the date of the Original Agreement (except as
otherwise expressly noted) and, subject to Section 7.8, shall be true at the
Closing Date and (ii) that all of the covenants and agreements in this Section
5(A) shall be materially complied with or performed at and as of the Closing
Date and (iii) that none of the representations, warranties, covenants and
agreements set forth in this Section 5(A), shall survive the Closing Date,
except that the representations and warranties set forth in Section 5.22 shall
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survive until such time as the limitations period has run for all Tax periods
ended on or prior to the Closing Date. For purposes of this Section 5, the term
Company shall mean and refer to the Company and all of its subsidiaries, if
any.
5.1 Due Organization. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation,
and is duly authorized and qualified to do business and is in good standing
under the laws of each jurisdiction where such qualification is required except
(i) as set forth on Schedule 5.1 or (ii) where the failure to be so authorized
or qualified would not have a material adverse effect on the business,
operations, affairs, prospects, properties, assets or condition (financial or
otherwise), of the Company taken as a whole (as used herein with respect to the
Company, or with respect to any other person, a "Material Adverse Effect").
Schedule 5.1 sets forth the jurisdiction in which the Company is incorporated
and contains a list of all such jurisdictions in which the Company is
authorized or qualified to do business. True, complete and correct copies of
the Charter Documents and Bylaws, each as amended, of the Company are all
attached hereto as Schedule 5.1. The stock records of the Company, as
heretofore made available to Parent, are correct and complete in all material
respects. To the Knowledge of the Company and the Stockholders, there are no
minutes in the possession of the Company or the Stockholders which have not
been made available to Parent, and all of such minutes are correct and complete
in all material respects.
5.2 Authorization. Company has all requisite corporate power and authority
to enter into this Agreement and to perform its obligations hereunder. The
execution and delivery by Company of this Agreement and its consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action of Company. This Agreement has been duly executed and
delivered by Company and is a valid and binding obligation of Company,
enforceable against Company in accordance with its terms.
5.3 Capital Stock of the Company. The authorized capital stock of the
Company consists of 100,000 shares of Company Stock, of which 1000 are issued
and outstanding. All of the issued and outstanding shares of the capital stock
of the Company are owned of record by the Stockholders in the amounts set forth
in Section 2 above, and further, except as set forth on Schedule 5.3, are owned
free and clear of all mortgages, liens, security interests, pledges, voting
trusts, restrictions, encumbrances and claims of every kind (collectively, the
"Liens"). All of the issued and outstanding shares of the capital stock of the
Company (i) have been duly authorized and validly issued and (ii) are fully
paid and nonassessable. Further, none of such shares was issued in violation of
the preemptive rights of any past or present stockholder.
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5.4 Transactions in Capital Stock. Except as set forth on Schedule 5.4, the
Company has not acquired any Company Stock since January 1, 1994. Except as set
forth on Schedule 5.4, (i) no option, warrant, call, conversion right or
commitment of any kind exists which obligates the Company to issue any of its
authorized but unissued capital stock; (ii) the Company has no obligation
(contingent or otherwise) to purchase, redeem or otherwise acquire any of its
equity securities or any interests therein or to pay any dividend or make any
distribution in respect thereof; and (iii) neither the voting stock structure
of the Company nor the relative ownership of shares among any of its respective
stockholders has been altered or changed in contemplation of the transactions
contemplated by this Agreement. Schedule 5.4 also includes complete and
accurate copies of all stock option or stock purchase plans, including a list
of all outstanding options, warrants or other rights to acquire shares of the
Company Stock.
5.5 No Bonus Shares. Except as set forth on Schedule 5.5, none of the
shares of Company Stock was issued pursuant to awards, grants or bonuses.
5.6 Subsidiaries. Except as set forth in Schedule 5.6, (i) the Company has
no subsidiaries, (ii) the Company does not presently own, of record or
beneficially, or control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any corporation,
association or business entity and (iii) the Company is not directly or
indirectly, a participant in any joint venture, partnership or other
non-corporate entity.
5.7 Predecessor Status. Set forth in Schedule 5.7 is a listing of all names
of all predecessor companies of the Company, including the names of any
entities acquired by the Company (by stock purchase, merger or otherwise) or
owned by the Company or from whom the Company previously acquired material
assets in excess of $250,000, in any case, since January 1, 1990. Except as
disclosed on Schedule 5.7, the Company has not been, within such period of
time, a subsidiary or division of another corporation or a part of an
acquisition which was later rescinded.
5.8 Spinoff by the Company. Except as set forth on Schedule 5.8, there has
not been any sale, spin-off or split-up of material assets in excess of
$250,000 of either the Company or any other person or entity that directly, or
indirectly through one or more intermediaries, controls, or is controlled by,
or is under common control with, the Company ("Affiliates") since January 1,
1994.
5.9 Financial Statements. Attached hereto as Schedule 5.9 are copies of the
following financial statements of the Company (the "Company Financial
Statements"): the Company's audited Balance Sheets as of December 31, 1996,
1995 and 1994 and its unaudited Balance Sheet as of June 30, 1997 ("June
Balance Sheet"), and audited Statements of Income, Retained Earnings and Cash
Flows and any related notes thereto for each of the years in the three-year
period ended December 31, 1996 and unaudited Statements of Income, Retained
Earnings and Cash Flows and any related notes thereto for the year ended June
30, 1997 (June 30, 1997 being hereinafter referred
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to as the " Balance Sheet Date"). The audited Company Financial Statements have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated (except as noted
thereon or on Schedule 5.9). The unaudited Company Financial Statements were
prepared in accordance with the books and records of the Company in accordance
with accounting principles consistently applied. Except as set forth on
Schedule 5.9, such Balance Sheets as of December 31, 1996, 1995 and 1994
present fairly the financial position of the Company as of the dates indicated
thereon, and the December 31, 1994, 1995 and 1996 Statements of Income,
Retained Earnings and Cash Flows present fairly the results of operations for
the periods indicated thereon in accordance with generally accepted accounting
principles. The Company Financial Statements at and for the three years in the
period ended December 31, 1996 have been examined by Xxxx + Associates, LLP,
independent public accountants.
5.10 Liabilities and Obligations. The Company has no material liabilities
of any kind, character or description, whether accrued, absolute, secured or
unsecured, contingent or otherwise, that are not reflected on the June Balance
Sheet or otherwise reflected in the Company Financial Statements at the Balance
Sheet Date including loan agreements, indemnity or guaranty agreements, bonds,
mortgages, liens, pledges or other security agreements. Except as set forth on
Schedule 5.10, since the Initial Disclosure Date, the Company has not incurred
any material liabilities of any kind, character and description, whether
accrued, absolute, secured or unsecured, contingent or otherwise, other than
liabilities incurred in the ordinary course of business. The Company has also
disclosed to Parent on Schedule 5.10, in the case of those contingent
liabilities related to pending or threatened litigation or other liabilities
which are not fixed or otherwise accrued or reserved, the following
information:
(i) a summary description of the liability together with the
following:
(x) copies of all relevant documentation relating thereto;
(y) amounts claimed and any other action or relief sought; and
(z) name of claimant and all other parties to the claim, suit
or proceeding;
(ii) the name of each court or agency before which such claim, suit
or proceeding is pending;
(iii) the date such claim, suit or proceeding was instituted; and
(iv) a good faith and reasonable estimate of the maximum amount, if
any, which is likely to become payable with respect to each such liability.
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5.11 Accounts and Notes Receivable. The Company has delivered to Parent an
accurate list (which is set forth on Schedule 5.11) of the accounts and notes
receivable of the Company, as of the Initial Disclosure Date, including
receivables from and advances to employees and the Stockholders. The Company
shall also provide Parent (x) an accurate list of all receivables generated
subsequent to the Initial Disclosure Date and (y) an aging of all accounts and
notes receivable showing amounts due in 30 day aging categories, and such list
and such aging report (the "A/R Aging Reports") shall be current as of a date
reasonably requested by Parent. Except to the extent reflected on Schedule 5.11
or as disclosed by the Company to Parent in a writing accompanying the A/R
Aging Reports, such accounts, notes and other receivables are collectible in
the amounts shown on Schedule 5.11, and shall be collectible in the amounts
shown on the A/R Aging Reports, net of reserves reflected in the June Balance
Sheet and as of the date of the A/R Aging Reports, respectively.
5.12 Permits and Intangibles. The Company holds all licenses, franchises,
permits and other governmental authorizations the absence of any of which could
have a Material Adverse Effect on its business, and the Company has delivered
to Parent an accurate list and summary description (which is set forth on
Schedule 5.12) of all such licenses, franchises, permits and other governmental
authorizations, including titles, certificates, trademarks, trade names,
patents, patent applications and copyrights owned or held by the Company
(including interests in software or other technology systems, programs and
intellectual property) (it being understood and agreed that a list of all
environmental permits and other environmental approvals is set forth on
Schedule 5.13). To the Knowledge of the Company, the licenses, franchises,
permits and other governmental authorizations listed on Schedules 5.12 and 5.13
are valid in all material respects, and the Company has not received any notice
that any governmental authority intends to cancel, terminate or not renew any
such license, franchise, permit or other governmental authorization. The
Company has conducted and is conducting its business in substantial compliance
with the requirements, standards, criteria and conditions set forth in the
licenses, franchises, permits and other governmental authorizations listed on
Schedules 5.12 and 5.13 and is not in violation of any of the foregoing except
where such non-compliance or violation would not have a Material Adverse Effect
on the Company. Except as specifically provided in Schedule 5.12, the
transactions contemplated by this Agreement will not result in a material
default under or a material breach or violation of, or materially adversely
affect the rights and benefits afforded to the Company by, any such license,
franchise, permit or government authorization.
5.13 Environmental Matters. Except as set forth on Schedule 5.13, (i) the
Company has substantially complied with and is in compliance with all Federal,
state, local and foreign statutes (civil and criminal), laws, ordinances,
regulations, rules, notices, permits, judgments, orders and decrees applicable
to it or any of its properties, assets, operations and businesses relating to
environmental protection (collectively "Environmental Laws") including, without
limitation, Environmental Laws relating to air, water, land and the generation,
storage, use, handling,
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transportation, treatment or disposal of Hazardous Wastes and Hazardous
Substances including petroleum and petroleum products (as such terms are
defined in any applicable Environmental Law); (ii) the Company has obtained and
substantially adhered to all necessary permits and other approvals necessary to
treat, transport, store, dispose of and otherwise handle Hazardous Wastes and
Hazardous Substances, a list of all of which permits and approvals is set forth
on Schedule 5.13, and has reported to the appropriate authorities, to the
extent required by all Environmental Laws, all past and present sites owned and
operated by the Company where Hazardous Wastes or Hazardous Substances have
been treated, stored, disposed of or otherwise handled; (iii) there have been
no releases or threats of releases (as defined in Environmental Laws) at, from,
in or on any property owned or operated by the Company except as permitted by
Environmental Laws; (iv) to the Knowledge of the Company no on-site or off-site
location to which the Company has transported or disposed of Hazardous Wastes
and Hazardous Substances or arranged for the transportation of Hazardous Wastes
and Hazardous Substances, which site is the subject of any Federal, state,
local or foreign enforcement action or any other investigation which could lead
to any material claim against the Company or Parent for any clean-up cost,
remedial work, damage to natural resources, property damage or personal injury,
including, but not limited to, any claim under the comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended; and (v) the
Company has no contingent liability in connection with any release of any
Hazardous Waste or Hazardous Substance into the environment.
5.14 Personal Property. The Company has delivered to Parent an accurate
list (which is set forth on Schedule 5.14) of (i) all personal property
included (or that will be included) in "depreciable plant, property and
equipment" on the balance sheet of the Company, (ii) all other personal
property owned by the Company with a value in excess of $10,000 (x) as of the
Initial Disclosure Date and (y) acquired since the Initial Disclosure Date and
(iii) all written leases and agreements in respect of personal property,
including, in the case of each of (i), (ii) and (iii), (1) true, complete and
correct copies of all such leases and (2) an indication as to which assets are
currently owned, or were formerly owned, by Stockholders, relatives of
Stockholders, or Affiliates of the Company. Except as set forth on Schedule
5.14, (a) all personal property used by the Company in its business is either
owned by the Company or leased by the Company pursuant to a lease included on
Schedule 5.14, (b) all of the personal property listed on Schedule 5.14 is in
good working order and condition, ordinary wear and tear excepted and (c) all
leases and agreements included on Schedule 5.14 are in full force and effect in
all material respects and to the Knowledge of the Company constitute valid and
binding agreements of the parties (and their successors) thereto in accordance
with their respective terms.
5.15 Significant Customers; Material Contracts and Commitments. The Company
has delivered to Parent an accurate list (which is set forth on Schedule 5.15)
of all significant customers, or persons or entities that are sources of a
significant number of customers, it being understood and agreed that a
"significant customer," for purposes of this Section 5.15, means a customer (or
person
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or entity) (i) representing 2% or more of the Company's annual revenues as of
the Initial Disclosure Date or (ii) reasonably expected to represent 2% or more
of the Company's revenues during the twelve-month period ending December 31,
1997. Except to the extent set forth on Schedule 5.15, none of the Company's
significant customers (or persons or entities that are sources of a significant
number of customers) have canceled or substantially reduced or, to the
Knowledge of the Company, are currently attempting or threatening to cancel a
contract or substantially reduce utilization of the services provided by the
Company.
The Company has listed on Schedule 5.15 all material contracts, commitments
and similar agreements to which the Company is a party or by which it or any of
its properties are bound (including, but not limited to, contracts with
significant customers, joint venture or partnership agreements, contracts with
any labor organizations, strategic alliances and options to purchase land),
other than agreements listed on Schedule 5.10, 5.14 or 5.16, (x) in existence
as of the Initial Disclosure Date and (y) entered into since the Initial
Disclosure Date, and in each case has delivered true, complete and correct
copies of such agreements to Parent. The Company has complied with all material
commitments and obligations pertaining to it, and is not in material default
under any contract or agreement listed on Schedule 5.15 and no notice of
default under any such contract or agreement has been received. The Company has
also indicated on Schedule 5.15 a summary description of all plans or projects
involving the acquisition of any personal property, business or assets
requiring, in any event, the payment of more than $10,000 by the Company.
5.16 Real Property. Schedule 5.16 includes a list of all real property
owned or leased by the Company (i) as of the Initial Disclosure Date and (ii)
acquired since the Initial Disclosure Date, and all other real property, if
any, used by the Company in the conduct of its business. The Company has good
and insurable title to the real property owned by it, including those reflected
on Schedule 5.16, subject to no Lien except for:
(w) Liens reflected on Schedules 5.10 or 5.15 as securing specified
liabilities (with respect to which no material default exists);
(x) Liens for current taxes not yet payable and assessments not in
default;
(y) easements for utilities serving the property only; and
(z) easements, covenants and restrictions and other exceptions to
title shown of record in the office of the County Clerks in which the
properties, assets and leasehold estates are located which do not adversely
affect in any material respect the current use of the property.
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Schedule 5.16 contains, without limitation, (1) true, complete and correct
copies of all title reports and title insurance policies currently in
possession of the Company with respect to real property owned by the Company,
(2) true, complete and correct copies of all leases and agreements in respect
of such real property leased by the Company (which copies are attached to
Schedule 5.16), and (3) an indication as to which such properties, if any, are
currently owned, or were formerly owned, by Stockholders or business or
personal Affiliates of the Company or Stockholders.
Except as set forth on Schedule 5.16, all of such leases included on Schedule
5.16 are in full force and effect in all material respects and to the Knowledge
of the Company constitute valid and binding agreements of the parties (and
their successors) thereto in accordance with their respective terms.
5.17 Insurance. The Company has delivered to Parent, as set forth on and
attached to Schedule 5.17, (i) an accurate list as of the Initial Disclosure
Date of all insurance policies carried by the Company, (ii) an accurate list of
all insurance loss runs on workers compensation claims received for the past
three policy years and (iii) true, complete and correct copies of all insurance
policies currently in effect. Such insurance policies evidence all of the
insurance that the Company is required to carry pursuant to all of its
contracts and other agreements and pursuant to all applicable laws. All of such
insurance policies are currently in full force and effect in all material
respects and shall remain in full force and effect in all material respect
through the Closing Date. No insurance carried by the Company has been canceled
by the insurer and the Company has never been denied coverage since January 1,
1992.
5.18 Compensation; Organized Labor Matters. The Company has delivered to
Parent an accurate list (which is set forth on Schedule 5.18) showing all
officers, directors and Key Employees of the Company and the rate of
compensation (and the portions thereof attributable to salary, bonus and other
compensation, respectively) of each of such persons as of (i) the Initial
Disclosure Date and (ii) March 19, 1997. Since the Initial Disclosure Date,
there have been no increases in the compensation payable or any special bonuses
to any officer, director, Key Employee or other employee, except ordinary
salary increases implemented on a basis consistent with past practices.
Except as set forth on Schedule 5.18, (w) the Company is not bound by or
subject to (and none of its respective assets or properties is bound by or
subject to) any arrangement with any labor union, (x) no employees of the
Company are represented by any labor union or covered by any collective
bargaining agreement, (y) to the Knowledge of the Company, no campaign to
establish such representation is in progress and (z) there is no pending or, to
the best of the Company's Knowledge, threatened labor dispute involving the
Company and any group of its employees nor has the Company experienced any
labor interruption over the past three years..
5.19 Employee Plans. The Stockholders have delivered to Parent an accurate
list (which is set forth on Schedule 5.19) showing all employee benefit plans
of the Company, including all
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employment agreements and other agreements or arrangements containing "golden
parachute" or other similar provisions, and deferred compensation agreements,
together with true, complete and correct copies of such plans, agreements and
any trusts related thereto, and classifications of employees covered thereby as
of the Initial Disclosure Date. Except for the employee benefit plans, if any,
described on Schedule 5.19, the Company does not sponsor, maintain or
contribute to any plan program, fund or arrangement that constitutes an
"employee pension benefit plan," and the Company does not have any obligation
to contribute to or accrue or pay any benefits under any deferred compensation
or retirement funding arrangement on behalf of any employee or employees (such
as, for example, and without limitation, any individual retirement account or
annuity, any "excess benefit plan" (within the meaning of Section 3(36) of the
Employee Retirement Income Security Act of 1974, as amended "ERISA") or any
non-qualified deferred compensation arrangement). For the purposes of this
Agreement, the term "employee pension benefit plan" shall have the same meaning
as is given that term in Section 3(2) of ERISA. The Company has not sponsored,
maintained or contributed to any employee pension benefit plan other than the
plans set forth on Schedule 5.19, nor is the Company required to contribute to
any retirement plan pursuant to the provisions of any collective bargaining
agreement establishing the terms and conditions or employment of any of the
Company's employees.
The Company is not now, nor as a result of its past activities can it
reasonably be expected to become, liable to the Pension Benefit Guaranty
Corporation (other than for premium payments) or to any multiemployer employee
pension benefit plan under the provisions of Title IV of ERISA.
All employee benefit plans listed on Schedule 5.19 and the administration
thereof are in substantial compliance with their terms and all applicable
provisions of ERISA and the regulations issued thereunder, as well as with all
other applicable Federal, state and local statutes, ordinances and regulations.
All accrued contribution obligations of the Company or any subsidiary with
respect to any plan listed on Schedule 5.19 have either been fulfilled in their
entirety or are fully reflected on the balance sheet of the Company as of the
Balance Sheet Date.
5.20 Compliance with ERISA. All employee benefit plans listed on Schedule
5.19 that are intended to qualify (the "Qualified Plans") under Section 401(a)
of the Code are, and have been so qualified and have been determined by the
Internal Revenue Service to be so qualified, and copies of such determination
letters are included as part of Schedule 5.19. Except as disclosed on Schedule
5.19, all reports and other documents required to be filed with any
governmental agency or distributed to plan participants or beneficiaries
(including, but not limited to, actuarial reports, audits or tax returns) have
been timely filed or distributed, and copies thereof are included as part of
Schedule 5.19. Neither the Stockholders, any such plan listed in Schedule 5.19,
nor the Company has engaged in any transaction prohibited under the provisions
of Section 4975 of the Code or
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Section 406 of ERISA. No employee benefit plan listed on Schedule 5.19 has
incurred an accumulated funding deficiency, as defined in Section 412(a) of the
Code and Section 302(1) of ERISA; and the Company has not incurred (i) any
liability for excise tax or penalty payable to the Internal Revenue Service or
(ii) any liability to the Pension Benefit Guaranty Corporation (other than for
premium payments). The Stockholders further represent that:
(v) there have been no terminations or discontinuance of contributions
to any Qualified Plan intended to qualify under Section 401(a) of the Code
without notice to and approval by the Internal Revenue Service;
(w) no plan listed on Schedule 5.19 that is subject to the provisions
of Title IV of ERISA has been terminated;
(x) there have been no "reportable events" (as that phrase is defined
in Section 4043 of ERISA) with respect to employee benefit plans listed in
Schedule 5.19;
(y) the Company has not incurred liability under Section 4062 of
ERISA; and
(z) no circumstances exist pursuant to which the Company could
reasonably be expected to have any direct or indirect liability whatsoever
(including, but not limited to, any liability to any multiemployer plan or
the Pension Benefit Guaranty Corporation under Title IV of ERISA or to the
Internal Revenue Service for any excise tax or penalty, or being subject to
any statutory Lien to secure payment of any such liability) with respect to
any plan now or heretofore maintained or contributed to by any entity other
than the Company that is, or at any time was, a member of a "controlled
group" (as defined in Section 412(n)(6)(B) of the Code) that includes the
Company.
5.21 Conformity with Law; Litigation. Except to the extent set forth on
Schedule 5.21 or 5.13, the Company is not in violation of any law or regulation
or any order of any court or Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over the Company which would have a Material Adverse Effect; and
except to the extent set forth on Schedule 5.10 or 5.13, there are no material
claims, actions, suits or proceedings, commenced or, to the Knowledge of the
Company, threatened, against or affecting the Company, at law or in equity, or
before or by any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction over
the Company and no notice of any claim, action, suit or proceeding, whether
pending or threatened, has been received by the Company or any Stockholder. The
Company has conducted and is conducting its business in substantial compliance
with the requirements, standards, criteria and conditions set forth in
applicable Federal, state and local statutes, ordinances, permits, licenses,
orders, approvals, variances, rules and regulations, including all such
permits, licenses, orders and other governmental
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approvals set forth on Schedules 5.12 and 5.13, and is not in violation of any
of the foregoing which might have a Material Adverse Effect.
5.22 Tax Matters.
(i) The Company is currently taxed under Subchapter S of the Code. The
Stockholders have filed all income Tax Returns that they were required to
file with respect to the Company, and the Company has filed all Tax Returns
that it was required to file. All such Tax Returns filed by the Company
were correct and complete in all material respects. All Taxes owed by the
Company (whether or not shown on any Tax Return) have been paid or reserved
for on its books. Except as set forth on Schedule 5.22, the Company is not
currently the beneficiary of any extension of time within which to file any
Tax Return. Since January 1, 1994, no claim with respect to the Company has
been made by an authority in a jurisdiction where the Company does not file
Tax Returns that it is or may be subject to taxation by that jurisdiction.
There is no Lien affecting any of the Company's assets that arose in
connection with any failure or alleged failure to pay any Tax.
(ii) The Company has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, shareholder or other party.
(iii) The Company does not expect any authority to assess any material
amount of additional Taxes for any period for which Tax Returns have been
filed. There is no material dispute or claim concerning any Tax liability
of the Company either claimed or raised by any authority in writing or as
to which the Company has Knowledge based upon direct inquiry by any agent
of such authority. Schedule 5.22(iii) lists all income Tax Returns of the
Company for taxable periods ended on or after January 1, 1993, indicates
those Tax Returns of which the Company is aware that have been audited and
indicates those Tax Returns that currently are the subject of audit. The
Company has delivered to the Parent correct and complete copies of all Tax
Returns, examination reports and statements of deficiencies assessed
against or agreed to by the Company for any taxable period ended on or
after January 1, 1993.
(iv) Except as set forth on Schedule 5.22(iv), neither the
Stockholders nor the Company has waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(v) The Company has not filed a consent under Section 341(f) of the
Code concerning collapsible corporations. The Company has not made any
material payments, is not obligated to make any material payments and is
not a party to any agreement that under
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certain circumstances could obligate it to make any material payments
that will not be fully deductible under Section 280G of the Code.
(vi) The Company has not received a ruling from any taxing authority
or entered into any agreement regarding Taxes with any taxing authority
that would, individually or in the aggregate, apply to the Surviving
Corporation after the Closing Date.
5.23 No Violations. The Company is not in violation of its Charter
Documents or Bylaws. Neither the Company nor, to the Knowledge of the Company,
any other party thereto, is in material default under any lease, instrument,
agreement, license, or permit set forth on Schedule 5.12, 5.13, 5.14, 5.15 or
5.16, or any other material agreement to which it is a party or by which its
properties are bound (the "Material Documents"); and, except as set forth in
Schedule 5.23, (i) the rights and benefits of the Company under the Material
Documents will not be materially adversely affected by the transactions
contemplated hereby and (ii) the execution of this Agreement and the
performance of the obligations hereunder and the consummation of the
transactions contemplated hereby will not result in any material violation or
breach or constitute a material default under, any of the terms or provisions
of the Material Documents or the Charter Documents. Except as set forth on
Schedule 5.23, none of the Material Documents requires notice to, or the
consent or approval of, any governmental agency or other third party with
respect to any of the transactions contemplated hereby in order to remain in
full force and effect in all material respect, and consummation of the
transactions contemplated hereby will not give rise to any right to
termination, cancellation or acceleration or loss of any material right or
benefit. Except as set forth on Schedule 5.23, to the Knowledge of the Company,
none of the Material Documents prohibits the use or publication by the Company
or Parent of the name of any other party to such Material Document, and none of
the Material Documents prohibits or restricts the Company from freely providing
services to any other customer or potential customer of the Company or Parent
or any Other Founding Company.
5.24 Government Contracts. Except as set forth on Schedule 5.24, the
Company is not a party to any governmental contracts subject to price
determination or renegotiation.
5.25 Absence of Changes. Since the Initial Disclosure Date, except as set
forth on Schedule 5.25, there has not been:
(i) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of the Company
taken as a whole;
(ii) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of the
Company;
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(iii) any change in the authorized capital of the Company or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
(iv) any declaration or payment of any dividend or distribution in
respect of the capital stock or any direct or indirect redemption, purchase
or other acquisition of any of the capital stock of the Company (except for
dividends which the Company may declare and pay pursuant to Section 10.4);
(v) any increase in the compensation, bonus, sales commissions or fee
arrangement payable or to become payable by the Company to any of its
officers, directors, stockholders, employees, consultants or agents, except
for ordinary and customary bonuses and salary increases for employees in
accordance with past practice;
(vi) any work interruptions, labor grievances or labor claims filed,
or any other similar labor event or condition of any character, materially
adversely affecting the business of the Company;
(vii) any sale or transfer, or any agreement to sell or transfer, any
material assets, property or rights of the Company to any person,
including, without limitation, the Stockholders and their Affiliates
outside the ordinary course of business of the Company;
(viii) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to the Company, including without limitation any
indebtedness or obligation of any Stockholder or any Affiliate thereof
outside the ordinary course of business of the Company;
(ix) any plan, agreement or arrangement granting any preferential
right to purchase or acquire any interest in any of the assets, property or
rights of the Company or requiring consent of any party to the transfer and
assignment of any such assets, property or rights;
(x) any purchase or acquisition of, or agreement, plan or arrangement
to purchase or acquire, any property, right or asset outside of the
ordinary course of the Company's business;
(xi) any waiver of any material rights or claims of the Company;
(xii) any material breach, amendment or termination of any contract,
agreement, license, permit or other right to which the Company is a party:
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(xiii) any transaction by the Company outside the ordinary course of
its respective businesses;
(xiv) any cancellation or termination of a material contract with a
customer or client prior to the scheduled termination date; or
(xv) any other distribution of property or assets by the Company
outside the ordinary course of the Company's business.
5.26 Deposit Accounts; Powers of Attorney. The Company has delivered to
Parent an accurate list (which is set forth on Schedule 5.26) as of the date of
the Original Agreement setting forth:
(i) the name of each financial institution in which the Company has
accounts or safe deposit boxes;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or have access
thereto.
Schedule 5.26 also sets forth the name of each person, corporation, firm or
other entity holding a general or special power of attorney from the Company
and a description of the terms of such power.
5.27 Intentionally Deleted.
5.28 Relations with Governments. Except for political contributions made in
a lawful manner which, in the aggregate, do not exceed $10,000 per year for
each year in which any Stockholder has been a stockholder of the Company, the
Company has not made, offered or agreed to offer anything of value to any
governmental official, political party or candidate for government office nor
has it otherwise taken any action which would cause the Company to be in
violation of the Foreign Corrupt Practices Act of 1977, as amended, or any law
of similar effect. If political contributions made by the Company have exceeded
$10,000 per year for each year in which any Stockholder has been a stockholder
of the Company, each contribution in the amount of $5,000 or more shall be
described on Schedule 5.28.
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5.29 Disclosure. This Agreement, including the Schedules and Annexes
hereto, together with all other documents and information made available to
Parent and its representatives in writing pursuant hereto, present fairly the
business and operations of the Company for the time periods with respect to
which such information was requested. The Company's rights under the documents
delivered pursuant hereto would not be materially adversely affected by, and no
statement made herein would be rendered untrue in any material respect by, any
other document to which the Company is a party, or to which its properties are
subject, or by any other fact or circumstance regarding the Company (which fact
or circumstance was, or should reasonably, after due inquiry, have been known
to the Company) that is not disclosed pursuant hereto or thereto.
5.30 Prohibited Activities. Except as set forth on Schedule 5.30, the
Company has not, between the Initial Disclosure Date and the date of this
Agreement, taken any of the actions set forth in Section 7.3 ("Prohibited
Activities").
5.31 Intentionally Omitted.
(B) Representations, Warranties, Covenants and Agreements of the
Stockholders.
Each Stockholder severally represents, warrants, covenants and agrees (i)
that the representations and warranties set forth below are true as of the date
of the Original Agreement and, subject to Section 7.8, shall be true at the
Closing Date, (ii) that all of the covenants and agreements in this Section
5(B) shall be materially complied with or performed at and as of the Closing
Date, and (iii) that none of the representations and warranties set forth in
Section 5(B) shall survive the Closing.
5.32 Authority. Each Stockholder has the full legal right, power and
authority to enter into this Agreement. This Agreement has been executed and
delivered by each Stockholder and constitutes a legal, valid and binding
obligation of such Stockholder.
5.33 Preemptive Rights. Each Stockholder does not have, or hereby waives,
any preemptive or other right to acquire shares of Company Stock or Parent
Stock that such Stockholder has or may have had other than rights of any
Stockholder to acquire Parent Stock pursuant to (i) this Agreement or (ii) any
option granted by Parent.
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5.34 Tax Matters. The Stockholders have been advised by their counsel and
are satisfied, as of the date hereof that certain aspects of the transactions
contemplated by this Agreement qualify for the deferral of gain pursuant to
Section 351 of the Code.
5.35 Affiliated Corporations. The Stockholders own all the issued and
outstanding capital stock of Shared Tenant Services, Inc., a Texas corporation,
and Value-Line of Louisiana, Inc., a Louisiana corporation (collectively, the
"Affiliate Corporations"), as set forth on Schedule 5.35, free and clear of any
Liens. Neither of the Affiliated Corporations has incurred any material
obligation to any person other than the Company since its inception and will
not have incurred any such obligation as of the Closing Date.
5.36 No Plan of Distribution. No Stockholder has any intention or
arrangement to sell or otherwise dispose of any Parent Stock to be received
pursuant to this Agreement and the Section 351 Exchange Plan.
5.37 No Retained Rights. No Stockholder will retain any right after the
Closing in any Company Stock to be transferred by him at the Closing but, to
the extent that such right may exist upon the consummation of the Closing, such
right shall be deemed to have been released and extinguished.
6. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF PARENT AND OLD ACG
Parent and Old ACG, jointly and severally, represent warrant, covenant and
agree (i) that all of the following representations and warranties in this
Section 6 are true at the date of this Agreement and, subject to Section 7.8,
shall be true at the Closing Date, (ii) that all of the covenants and
agreements in this Section 6 shall be complied with or performed at and as of
the Closing Date, and (iii) that the following representations and warranties
shall not survive the Closing Date, except that the representations and
warranties set forth in Section 6.12 shall survive until such time as the
limitations period has run for all Tax periods ended on or prior to the Closing
Date.
6.1 Due Organization. Parent and Old ACG are each corporations duly
organized, validly existing and in good standing under the laws of the state of
Delaware, and are duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities to
carry on their respective business in the places and in the manner as now
conducted, except where the failure to be so authorized or qualified would not
have a Material Adverse Effect. True, complete and correct copies of the
Charter Documents and By-laws, each as amended, of Parent and Old ACG (the
"Parent Charter Documents") are all attached hereto as Schedule 6.1.
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6.2 Authorization. Each of Parent and Old ACG has all requisite corporate
power and authority to enter into this Agreement and to perform its obligations
hereunder. The execution and delivery by each of Parent and Old ACG of this
Agreement and its consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action of Parent and Old ACG.
This Agreement has been duly executed and delivered by each of Parent and Old
ACG and is a valid and binding obligation of each of Parent and Old ACG,
enforceable against each of them in accordance with its terms.
6.3 Capital stock. The authorized capital stock of Old ACG is as set forth
on Schedule 6.3. All of the issued and outstanding shares of the capital stock
of Old ACG (i) have been duly authorized and validly issued, (ii) are fully
paid and nonassessable, (iii) are owned of record and beneficially by the
Persons set forth on Schedule 6.3, and (iv) were offered, issued, sold and
delivered by Old ACG in compliance with all applicable state and Federal laws
concerning the offer, issuance, sale and delivery of securities. Further, none
of such shares was issued in violation of the preemptive rights of any past or
present stockholder of Old ACG. Subject to the consummation of the reverse
stock split referred to in the eight recital of this Agreement and the
consummation of Parent's acquisition of Old ACG in the reverse triangular
merger, the capitalization of Parent will be identical to the capitalization of
Old ACG immediately prior to the consummation of the IPO.
6.4 Transactions in Capital Stock, Organization Accounting. Except as set
forth on Schedule 6.3 or contemplated to be issued in connection with the
acquisition of the Founding Companies, (i) no option, warrant, call, conversion
right or commitment of any kind exists which obligates Old ACG to issue any of
its authorized but unissued capital stock and (ii) Old ACG has no obligation
(contingent or otherwise) to purchase, redeem or otherwise acquire any of its
equity securities or any interests therein or to pay any dividend or make any
distribution in respect thereof. Schedule 6.3 also includes complete and
accurate copies of all stock option or stock purchase plans, including a list,
accurate as of the date hereof, of all outstanding options, warrants or other
rights to acquire shares of capital stock of Old ACG.
6.5 Subsidiaries. Neither Parent nor Old ACG has any Subsidiaries, except
for each of the companies identified on Schedule 6.5. Except as set forth in
the preceding sentence, neither Parent nor Old ACG presently owns, of record or
beneficially, or controls, directly or indirectly, any capital stock,
securities convertible into capital stock or any other equity interest in any
corporation, association or business entity, and neither Parent, nor Old ACG,
directly or indirectly, is a participant in any joint venture, partnership or
other non-corporation entity.
6.6 Financial Statements. Attached hereto as Schedule 6.6 are copies of the
following financial statements of Old ACG, which reflect the results of its
operations from inception in June 1996 (the "Old ACG Financial Statements"):
Old ACG's audited Balance Sheet as of December 31, 1996 and its unaudited
Balance Sheet as of June 30, 1997, and audited Statements of Operations,
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Stockholder's Equity and Cash Flows and related notes thereto for the period
from June 10, 1996 through December 31, 1996 and unaudited Statements of
Operations, Stockholder's Equity and Cash Flows for the six months ended June
30, 1997. The audited Old ACG Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis throughout the period indicated (except as noted thereon or on
Schedule 6.6). The unaudited Old ACG Financial Statements were prepared in
accordance with the books and records of Old ACG in accordance with accounting
principles consistently applied. Old ACG's Balance Sheets present fairly the
financial position of Old ACG as of the dates indicated thereon, and Old ACG's
Statements of Operations, Stockholder's Equity and Cash Flows included in the
Old ACG Financial Statements present fairly the results of operations for the
periods indicated thereon in accordance with generally accepted accounting
principles. Old ACG's Financial Statements at and for the period ended December
31, 1996 have been examined by KPMG Peat Marwick LLP, independent public
accountants.
6.7 Liabilities and Obligations. Except as set forth on Schedule 6.7,
neither Parent nor Old ACG has any material liabilities, contingent or
otherwise, except as set forth in or contemplated by this Agreement or the
Draft Registration Statement and except for fees incurred in connection with
the transactions contemplated hereby and thereby.
6.8 Conformity with Law; Litigation. Except to the extent set forth on
Schedule 6.8, or in the Draft Registration Statement, neither Parent nor Old
ACG is in violation of any law or regulation or any order of any court or
Federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality having jurisdiction over it which would have
a Material Adverse Effect; and except to the extent set forth on Schedule 6.8,
or in the Draft Registration Statement, there are no material claims, actions,
suits or proceedings, pending or, to the Knowledge of either Parent or Old ACG,
threatened, against or affecting either Parent or Old ACG, at law or in equity,
or before or by any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction over
it and no notice of any claim, action, suit or proceeding, whether pending or
threatened, has been received. Each of Parent and Old ACG has conducted and is
conducting its businesses in substantial compliance with the requirements,
standards, criteria and conditions set forth in applicable Federal, state and
local statutes, ordinances, permits, licenses, orders, approvals, variances,
rules and regulations and are not in violation of any of the foregoing which
might have a Material Adverse Effect.
6.9 No Violations. Neither Parent nor Old ACG is in violation of any Parent
Charter Document. None of Parent nor Old ACG, or, to the Knowledge of Parent
and Old ACG, any other party thereto, is in default under any lease,
instrument, agreement, license, or permit to which Parent or Old ACG is a
party, or by which Parent or Old ACG, or any of their respective properties,
are bound (collectively, the "Parent Documents"); and (i) the rights and
benefits of Parent and Old ACG under the Parent Documents will not be adversely
affected by the transactions contemplated hereby
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and (ii) the execution of this Agreement and the performance of the obligations
hereunder and the consummation of the transactions contemplated hereby will not
result in any material violation or breach or constitute a default under, any
of the terms or provisions of the Parent Documents or the Parent Charter
Documents. Except as set forth on Schedule 6.9, none of the Parent Documents
requires notice to, or the consent or approval of, any governmental agency or
other third party with respect to any of the transactions contemplated hereby
in order to remain in full force and effect, and consummation of the
transactions contemplated hereby will not give rise to any right to
termination, cancellation or acceleration or loss of any right or benefit.
6.10 Parent Securities. The shares of Parent Stock deliverable to the
Stockholders pursuant to this Agreement will have been duly authorized prior to
the Closing, and upon consummation of the transactions contemplated by this
Agreement, will be validly issued, fully paid and nonassessable.
6.11 Business; Real Property; Material Agreement Old ACG was formed in June
1996, and Parent was formed in September 1997. Neither Parent nor Old ACG has
conducted any material business since the date of its inception, except raising
capital and in connection with this Agreement and similar agreements with the
Founding Companies. Except as disclosed on Schedule 6.12, neither Parent nor
Old ACG owns or has at any time owned any real property or any material
personal property or is a party to any other material agreement.
6.12 Tax Matters.
(i) Old ACG has filed all Tax Returns that it was required to file.
All such Tax Returns filed by Old ACG were correct and complete in all
material respects. All Taxes owed by Old ACG (whether or not shown on any
Tax Return) have been paid. Old ACG is not currently the beneficiary of any
extension of time within which to file any Tax Return. Since Old ACG's
formation in June 1996 , no claim with respect to Old ACG has been made by
an authority in a jurisdiction where Old ACG does not file Tax Returns that
it is or may be subject to taxation by that jurisdiction. There is no Lien
affecting any of Old ACG's assets that arose in connection with any failure
or alleged failure to pay any Tax.
(ii) Old ACG has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder or other party.
(iii) Old ACG does not expect any authority to assess any material
amount of additional Taxes against Old ACG for any period for which Tax
Returns have been filed. There is no material dispute or claim concerning
any Tax liability of Parent either claimed
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or raised by any authority in writing or as to which Old ACG has
knowledge based upon direct inquiry by any agent of such authority.
6.13 Registration Statement. Parent shall cause the Registration Statement
and related Prospectus for the IPO and any amendment and supplement thereto to
comply in all material respects with the applicable requirements of the 1933
Act, the rules and regulations thereunder, and applicable state securities
laws.
7. OTHER COVENANTS PRIOR TO CLOSING
7.1 Access and Cooperation; Due Diligence; Audits.
(i) Between the date of this Agreement and the Closing Date, the
Company will afford to the officers and authorized representatives of
Parent access to all of such Company's sites, properties, books and records
and will furnish Parent with such additional financial and operating data
and other information as to the business and properties of the Company as
Parent may from time to time reasonably request. The Company will cooperate
with Parent, its representatives, auditors and counsel in the preparation
of and any documents or other material that may be required in connection
with any documents or materials required by this Agreement. Parent, Old
ACG, Newco, the Stockholders and the Company will treat all information
obtained in connection with the negotiation and performance of this
Agreement as confidential in accordance with the provisions of Section 13.
(ii) Between the date of this Agreement and the Closing, Parent will
afford to the officers and authorized representatives of the Company access
to all sites, properties, books and records of Parent, Old ACG and the
other Founding Companies, and will furnish the Company with such additional
financial and operating data and other information as to the business and
properties of Parent, Old ACG and the other Founding Companies as the
Company may from time to time reasonably request. Parent will cooperate
with the Company, its representatives, auditors and counsel in the
preparation of any documents or other material which may be required in
connection with any documents or materials required by this Agreement. The
Company will cause all information obtained in connection with the
negotiation and performance of this Agreement to be treated as confidential
in accordance with the provisions of Section 13.
(iii) The Company agrees to permit an independent accounting firm
selected by Parent to audit and render a report on its Company Financial
Statements and its comparable financial statements at and for the year
ending December 31, 1996, provided that all the costs and expenses of such
audits are paid by Parent.
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7.2 Conduct of Business Pending Closing. Unless otherwise approved in
writing by Parent, between the date of this Agreement and the Closing Date, the
Stockholders will cause the Company to:
(i) carry on its respective businesses in substantially the same
manner as it has heretofore and not introduce any material new method of
management, operation or accounting;
(ii) maintain its respective properties and facilities, including
those held under lease, in as good working order and condition as at
present, ordinary wear and tear excepted;
(iii) perform in all material respects all of its respective
obligations under agreements relating to or affecting its respective
assets, properties or rights;
(iv) keep in full force and effect in all material respects the
present insurance policies or other comparable insurance coverage;
(v) use its reasonable best efforts to maintain and preserve its
business organization intact, retain its respective present key employees
and maintain its respective relationships with suppliers, customers and
others having business relations with it;
(vi) maintain material compliance with all material permits, laws,
rules and regulations, consent orders, and all other orders of applicable
courts, regulatory agencies and similar governmental authorities;
(vii) maintain present debt and lease instruments and not enter into
new or amended debt or lease instruments; and
(viii) maintain or reduce present salaries and commission levels for
all officers, directors, employees and agents except for ordinary and
customary bonus and salary increases for employees in accordance with past
practices.
7.3 Prohibited Activities. Between the date of this Agreement and the
Closing Date, the Stockholders will not, without prior written consent of
Parent, permit the Company to:
(i) make any change in its Charter Documents or By-laws;
(ii) issue any securities, options, warrants, calls, conversion rights
or commitments relating to its securities of any kind other than in
connection with the exercise of options or warrants listed in Schedule 5.4;
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(iii) declare or pay any dividend, or make any distribution in respect
of Company Stock whether now or hereafter outstanding, or purchase, redeem
or otherwise acquire or retire for value any shares of Company Stock
(except the declaration and payment of dividends pursuant to Section 10.4);
(iv) enter into any contract or commitment or incur or agree to incur
any liability or make any capital expenditures, except if it is in the
normal course of business (consistent with past practice) or involves an
amount not in excess of $10,000;
(v) create, assume or permit to exist any Lien upon any asset or
property whether now owned or hereafter acquired, except (x) with respect
to purchase money Liens incurred in connection with the acquisition of
equipment with an aggregate cost not in excess of $10,000 as necessary or
desirable for the conduct of its businesses, (y) (1) Liens for Taxes either
not yet due or being contested in good faith and by appropriate proceedings
(and for which contested Taxes adequate reserves have been established and
are being maintained) or (2) materialmen's, mechanics', workers',
repairmen's, employees' or other like Liens arising in the ordinary course
of business, or (3) Liens set forth on Schedule 5.10 or 5.15;
(vi) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business;
(vii) negotiate for the acquisition of any business or the start-up of
any new business;
(viii) merge or consolidate or agree to merge or consolidate with or
into any other corporation;
(ix) waive any material right or claim; provided that it may negotiate
and adjust bills in the course of good faith disputes with customers in a
manner consistent with past practice, provided, further, that such
adjustments shall not be deemed to be included in Schedule 5.11 unless
specifically listed thereon;
(x) commit a material breach or amend or terminate any material
agreement, permit, license or other right; or
(xi) enter into any other transaction outside the ordinary course of
its business or prohibited hereunder.
7.4 Exclusivity. Neither any Stockholder, nor the Company, nor any agent,
officer, director, trustee or any representative of any of the foregoing will,
during the period commencing
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on the date of this Agreement and ending with, the earlier to occur of the
Closing Date or the termination of this Agreement in accordance with its terms,
directly/or indirectly:
(i) solicit or initiate the submission of proposals or offers from any
person for,
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person other than Parent or its
authorized agents relating to
any acquisition or purchase of all or a material amount of the assets of, or
any equity interest in, the Company or merger, consolidation or business
combination of the Company.
7.5 Notice to Bargaining Agents. Prior to the Closing Date, the Company
shall satisfy any requirement for notice of the transactions contemplated by
this Agreement under applicable collective bargaining agreements, and shall
provide Parent with proof that any required notice has been sent.
7.6 Agreements. The Stockholders and the Company shall terminate (i) any
Stockholders agreements, voting agreements, voting trusts, options, warrants
and employment agreements between the Company and any employee listed on
Schedule 5.18 and (ii) any existing agreement between the Company and any
Stockholder, on or prior to the Closing Date. Copies of such termination
agreements are listed on Schedule 7.6 and copies thereof are attached thereto.
7.7 Notification of Certain Matters. The Stockholders and the Company shall
give prompt notice to Parent of (i) the occurrence or non-occurrence of any
event the occurrence or non-occurrence of which would likely cause any
representation or warranty of the Company or the Stockholders contained herein
to be untrue or inaccurate in any material respect at or prior to the Closing
Date and (ii) any material failure of any Stockholder or the Company to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by such person hereunder as of such date. Parent and Old ACG shall
give prompt notice to the Company of (i) the occurrence or non-occurrence of
any event the occurrence or non-occurrence of which would likely cause any
representation or warranty of Parent or Old ACG contained herein to be untrue
or inaccurate in any material respect at or prior to the Closing Date and (ii)
any material failure of Parent or Old ACG to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder as of such date. The delivery of any notice pursuant to this Section
7.7 shall not be deemed to (i) modify the representations or warranties
hereunder of the party delivering such notice, which modification may only be
made pursuant to Section 7.8, (ii) modify the conditions set forth in Sections
8 and 9, or (iii) limit or otherwise affect the remedies available hereunder to
the party receiving such notice.
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7.8 Amendment of Schedules. Each party hereto agrees that, with respect to
the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until the Closing to supplement
or amend promptly the Schedules with respect to any matter hereafter arising or
discovered which, if existing or known at the date of this Agreement, would
have been required to be set forth or described in the Schedules.
Notwithstanding the foregoing sentence, no amendment or supplement to a
Schedule prepared by the Company or Parent that constitutes or reflects an
event or occurrence that would have a Material Adverse Effect may be made
unless Parent or the Company, as the case may be, consents to such amendment or
supplement. For all purposes of this Agreement, including without limitation
for purposes of determining whether the conditions set forth in Sections 8.1
and 9.1 have been fulfilled, the Schedules shall be deemed to be the Schedules
as amended or supplemented pursuant to this Section 7.8. No party to this
Agreement shall be liable to any other party if this Agreement shall be
terminated pursuant to the provisions of Section 11.1(v). Neither the entry by
Parent into any other agreement, such as this Agreement, after the date hereof
for the acquisition of one or more companies involved in or assets associated
with the telephone business and related activities nor the performance by
Parent of its obligations thereunder shall be deemed to require the amendment
to or a supplementation of any Schedule hereto.
7.9 Further Assurance. The parties hereto agree to execute and deliver, or
cause to be executed and delivered, such further instruments or documents or
take such other action as may be reasonably necessary or convenient to carry
out the transactions contemplated by this Agreement.
7.10 Registration Statement. Parent shall use its reasonable business
efforts to consummate the IPO. In furtherance, but not in limitation of that
covenant, Parent shall prepare, file and use its reasonable business efforts to
cause to become and remain effective a Registration Statement under the federal
securities laws (and any applicable state securities laws) and to engage one or
more underwriters, enter into a firm commitment underwriting, and perform all
"road shows" and other marketing activities, pursuant to which the IPO is
timely closed. Parent shall keep the Company and Stockholders fully informed at
all times regarding the preparation, filing and effectiveness of the
Registration Statement and shall make any changes in or for, including any
amendment or supplements to, the Registration Statement as may be reasonably
necessary to affect timely closing of the IPO.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS
The obligations of the Stockholders with respect to actions to be taken on
the Closing Date are subject to the satisfaction or waiver on or prior to the
Closing Date of all of the following
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conditions. Upon Closing, all conditions not satisfied shall be deemed to have
been waived, except that no such waiver shall be deemed to affect the survival
of the representations and warranties of Parent and Old ACG contained in
Section 6:
8.1 Representations and Warranties Performance of Obligations. All
representations and warranties of Parent and Old ACG contained in this
Agreement shall be true and correct in all material respects as of the Closing
Date with the same effect as though such representations and warranties had
been made on and as of such date; all of the terms, covenants and conditions of
this Agreement to be complied with or performed by Parent and Old ACG on or
before the Closing Date shall have been duly complied with or performed in all
material respects; and a certificate to the foregoing effect dated the Closing
Date, and signed by the President or any Vice President of Parent and of Old
ACG shall have been delivered to the Stockholders.
8.2 Satisfaction. All actions, proceedings, instruments and documents
required to carry out this Agreement or incidental hereto and all other related
legal matters shall be reasonably satisfactory to the Stockholders and their
counsel.
8.3 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to
restrain or prohibit the transactions contemplated herein and no governmental
agency or body shall have taken any other action or made any request of the
Company as a result of which the management of the Company deems it inadvisable
to proceed with the transactions hereunder.
8.4 Opinion of Counsel. The Stockholders shall have received an opinion
from counsel for Parent and Old ACG, dated the Closing Date, in the form and
substance reasonably acceptable to the Stockholders, relating to, insofar as
Parent and Old ACG are concerned, (a) the authorization, execution, delivery,
performance and enforceability of the Agreement, (b) the consummation of the
transactions contemplated herein and (c) such other legal matters as the
Stockholders may reasonably request.
8.5 Consents and Approvals. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made.
8.6 Good Standing Certificates. Parent and Old ACG each shall have
delivered to the Stockholders a certificate, dated as of a date no later than
ten days prior to the Closing Date, duly issued by the Delaware Secretary of
State and, unless waived by the Stockholders, in each state in which Parent or
Old ACG is authorized to do business, showing that each of Parent and Old ACG
is in good standing and authorized to do business and that all state franchise
and/or income tax
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returns and taxes for Parent and Old ACG, respectively, for all periods prior
to the Closing Date have been filed and paid to the extent required.
8.7 No Material Adverse Change. No event or circumstance shall have
occurred with respect to Parent or Old ACG that would constitute a Material
Adverse Effect.
8.8 Secretary's Certificates. The Stockholders shall have received a
certificate or certificates, dated the Closing Date and signed by the Secretary
of Parent and of Old ACG, certifying the completeness and accuracy of the
attached copies of Parent's and Old ACG's respective Charter Documents
(including amendments thereto), By-Laws (including amendments thereto), and
resolutions of the boards of directors of Parent and Old ACG approving Parent's
and Old ACG's entering into this Agreement and the consummation of the
transactions contemplated hereby.
8.9 Closing of IPO. The sale by Parent of shares of Parent Stock in the IPO
shall have closed prior to or substantially contemporaneously with the
consummation of the transactions contemplated herein.
8.10 Election of Director. Xxxxx X. Xxxxxxxx shall have been elected a
director of Parent.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT
The obligations of Parent with respect to actions to be taken on the
Closing Date are subject to the satisfaction or waiver on or prior to the
Closing Date of all of the following conditions. Upon Closing, all conditions
not satisfied shall be deemed to have been waived, except that no such waiver
shall be deemed to affect the survival of the representations and warranties of
the Company and the Stockholders contained in Section 5.
9.1 Representations and Warranties; Performance of Obligations. All the
representations and warranties of the Stockholders and the Company contained in
this Agreement shall be true and correct in all material respects as of the
Closing Date with the same effect as though such representations and warranties
had been made on and as of such date; all of the terms, covenants and
conditions of this Agreement to be complied with or performed by the
Stockholders and the Company on or before the Closing Date shall have been duly
performed or complied with in all material respects; and the Stockholders shall
have delivered to Parent a certificate dated the Closing Date and signed by
them to such effect.
9.2 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to
restrain or prohibit the transactions contemplated herein and no governmental
agency or body shall have taken any other action or made
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any request of Parent as a result of which the management of Parent deems it
inadvisable to proceed with the transactions hereunder.
9.3 Secretary's Certificate. Parent shall have received a certificate,
dated the Closing Date and signed by the Secretary of the Company, certifying
the completeness and accuracy of the attached copies of the Company's Charter
Documents (including amendments thereto), By-Laws (including amendments
thereto), and resolutions of the board of directors approving the Company's
entering into this Agreement and the consummation of the transactions
contemplated hereby.
9.4 No Material Adverse Effect. No event or circumstance shall have
occurred with respect to the Company which would constitute a Material Adverse
Effect, and the Company shall not have suffered any material loss or damages to
any of its properties or assets, whether or not covered by insurance, which
change, loss or damage materially affects or impairs the ability of the Company
to conduct its business.
9.5 Stockholders' Release. The Stockholders shall have delivered to Parent
an instrument dated the Closing Date releasing the Company from (i) any and all
claims of the Stockholders against the Company and Parent and (ii) obligations
of the Company and Parent to the Stockholders, except for (x) items
specifically identified on Schedules 5.10 and 5.15 as being claims of or
obligations to the Stockholders and (y) obligations arising under this
Agreement or the transactions contemplated hereby.
9.6 Satisfaction. All actions, proceedings, instruments and documents
required to carry out the transactions contemplated by this Agreement or
incidental hereto and all other related legal matters shall have been
reasonably satisfactory to Parent and its counsel.
9.7 Termination of Related Party Agreements. Except as set forth on
Schedule 9.7, all existing agreements between the Company and the Stockholders
shall have been canceled effective prior to or as of the Closing Date.
9.8 Opinion of Counsel. Parent shall have received an opinion from counsel
to the Company and the Stockholders, dated the Closing Date, in the form and
substance reasonably acceptable to the Parent, relating to, insofar as the
Company and the Stockholders are concerned, (a) the authorization, execution,
delivery, performance and enforceability of the Agreement, (b) the consummation
of the transactions contemplated herein and (c) such other matters as Parent
shall reasonably request.
9.9 Consents and Approvals. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the
transactions contemplated
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herein shall have been obtained and made; and all consents and approvals of
third parties listed on Schedule 5.23 shall have been obtained.
9.10 Good Standing Certificates. The Company shall have delivered to Parent
a certificate, dated as of a date no earlier than ten days prior to the Closing
Date, duly issued by the appropriate governmental authority in the Company's
state of incorporation and, unless waived by Parent, in each state in which the
Company is authorized to do business, showing the Company is in good standing
and authorized to do business and that all state franchise and/or income Tax
returns and Taxes for the Company for all periods prior to the Closing have
been filed and paid.
9.11 FIRPTA Certificate Each Stockholder shall have delivered to Parent a
certificate to the effect that he or she is not a foreign person under Section
1.1445-2(b) of the Treasury regulations.
9.12 Closing of IPO. The sale by Parent of shares of Parent Stock in the
IPO shall have closed prior to or substantially contemporaneously with the
consummation of the transactions contemplated herein.
9.13 Acquisition of Affiliated Corporations. Parent shall have acquired
title to all the issued and outstanding capital stock of each of the Affiliated
Corporations, free and clear of all Liens, from the stockholders of such
corporations for an aggregate purchase price of $5,000.
10. COVENANTS OF PARENT WITH THE STOCKHOLDERS AFTER CLOSING
10.1 Release From Guarantees. Parent shall, within 90 days after the
Closing Date, secure the full release of the Stockholders from any and all
guarantees on any indebtedness that they personally guaranteed and from any and
all pledges of assets that they pledged to secure such indebtedness for the
benefit of the Company.
10.2 Preparation and Filing of Tax Returns.
(i) The Stockholders shall file or cause to be filed all separate
Federal income Tax Returns (and any state and local Tax Returns filed on
the basis similar to that of S corporations under Federal income Tax rules)
of the Company for all taxable periods that end on or before the Closing
Date. Each Stockholder shall pay or cause to be paid all Tax liabilities
(in excess of all amounts already paid with respect thereto or properly
accrued or reserved with respect thereto on the Company Financial
Statements) shown by such Returns to be due.
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(ii) Parent shall file or cause to be filed all separate Returns of,
or that include, the Company for all taxable periods ending after the
Closing Date.
(iii) Each party hereto shall, and shall cause its subsidiaries and
Affiliates to, provide to each of the other parties hereto such cooperation
and information as any of them reasonably may request in filing any Return,
amended Return or claim for refund, determining a liability for Taxes or a
right to refund of Taxes or in conducting any audit or other proceeding in
respect of Taxes. Such cooperation and information shall include providing
copies of all relevant portions of relevant Returns, together with relevant
accompanying schedules and work papers, relevant documents relating to
rulings or other determinations by Taxing Authorities and relevant records
concerning the ownership and Tax basis of property, which such party may
possess. Each party shall make its employees reasonably available on a
mutually convenient basis at its cost to provide explanation of any
documents or information so provided. Subject to the preceding sentence,
each party required to file Returns pursuant to this Agreement shall bear
all costs of filing such Returns.
10.3 Preservation of Employee Benefit Plans. Following the Closing Date,
Parent shall not terminate any health insurance, life insurance or 401(k) plan
in effect at the Company until such time as Parent is able to replace such plan
with a plan that is applicable to Parent and all of its then existing
subsidiaries; provided that Parent shall have no obligation to provide
replacement plans that have the same terms and provisions as the existing
plans; provided, further, that any new health insurance plan shall provide for
coverage for preexisting conditions.
10.4 Dividends. The Company may, after the Initial Disclosure Date and
before the Closing Date, pay to each Stockholder, as of the end of each
calendar month and at Closing, his proportionate share of the cash balances in
the bank accounts of the Company, as of the end of such calendar month and at
Closing, net of any outstanding checks.
10.5 Compliance with the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976 (the "Xxxx-Xxxxx Act"). All parties to this Agreement hereby recognize
that compliance with the Xxxx-Xxxxx Act may be required in connection with the
transactions contemplated herein. If it is determined by the parties to this
Agreement that compliance with the Xxxx-Xxxxx Act is required, then: (i) each
of the parties hereto agrees to cooperate and use its best efforts to comply
with the Xxxx-Xxxxx Act, (ii) such compliance by the Stockholders and the
Company shall be deemed a condition precedent in addition to the conditions
precedent set forth in Section 9 of this Agreement, and such compliance by
Parent and Old ACG shall be deemed a condition precedent in addition to the
conditions precedent set forth in Section 8 of this Agreement, (iii) the
parties agree to cooperate and use their best efforts to cause all filings
required under the Xxxx-Xxxxx Act to be made, and (iv) Parent shall be
responsible for all filing fees under the Xxxx-Xxxxx Act.
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10.6 Commitment to Nominate a Director. Subject to its fiduciary
obligations, Parent's Board of Directors agrees to renominate Xxxxx X. Xxxxxxxx
as a director of Parent, from time to time, as long as Xx. Xxxxxxxx
beneficially owns at least 100,000 shares of Parent Stock at the time of each
such renomination.
10.7 Rule 144 Filing. Parent, from and after the IPO, shall use its efforts
to assure that Rule 144 under the 1933 Act will be available for sales of
shares by Stockholders after the first anniversary date of closing.
11. TERMINATION OF AGREEMENT
11.1 Termination. This Agreement may be terminated at any time prior to the
Closing Date solely:
(i) by mutual consent of the stockholders and board of directors of Parent;
(ii) by the Stockholders, on the one hand, or by Parent (acting through its
board of directors), on the other hand, if the transactions contemplated by
this Agreement to take place at the Closing shall not have been consummated by
January 31, 1998, unless the failure of such transactions to be consummated is
due to the willful failure of the party seeking to terminate this Agreement to
perform any of its obligations under this Agreement to the extent required to
be performed by it prior to or on the Closing Date;
(iii) by Stockholders, on the one hand, or by Parent, on the other hand,
if, prior to October 16, 1997, a Registration Statement on Form S-1 relating to
the IPO has not been filed by Parent with the SEC pursuant to the 1933 Act;
(iv) by the Stockholders, on the one hand, or by Parent, on the other hand,
if a material breach or default shall be made by the other party in the
observance or in the due and timely performance of any of the material
covenants, agreements or conditions contained herein, and the curing of such
default shall not have been made on or before the Closing Date; or
(v) by the Stockholders, on the one hand, or by Parent, on the other hand,
if either such party declines to consent to an amendment or supplement to a
Schedule proposed by the other party or parties pursuant to Section 7.8 because
such proposed amendment constitutes or reflects an event or occurrence that
would have a Material Adverse Effect on the party or parties proposing the
same.
11.2 Liabilities in Event of Termination. Except as provided in Section
7.8, the termination of this Agreement will in no way limit any obligation or
liability of any party based on
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or arising from a breach or default by such party with respect to any of its
representations, warranties, covenants or agreements contained in this
Agreement including, but not limited to, legal and audit costs and out of
pocket expenses.
12. NONCOMPETITION
12.1 Prohibited Activities. Each of the Stockholders will not, for a period
of three years following the Closing Date, for any reason whatsoever, directly
or indirectly, for himself or on behalf of or in conjunction with any other
person, Company, partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner, joint
venturer, or in a managerial capacity, whether as an employee, independent
contractor, consultant or advisor, or as a sales representative, in any
long-distance telephone business in direct competition with Parent or any of
the subsidiaries thereof, within 100 miles of where the Company or any of its
subsidiaries conducted business prior to the Effective Time (the "Territory");
(ii) call upon any person within the Territory who is an employee of Parent
(including the subsidiaries thereof) in a sales representative or managerial
capacity for the purpose or with the intent of enticing such employee away from
or out of the employ of Parent (including the subsidiaries thereof); provided
that each Stockholder shall be permitted to call upon and hire any member of
his immediate family;
(iii) call upon any person or entity which is or which has been, within one
year prior to the Closing Date, a customer of Parent (including the
subsidiaries thereof) within the Territory for the purpose of soliciting or
selling products or services in direct competition with Parent within the
Territory;
(iv) call upon any prospective acquisition candidate, on any Stockholder's
own behalf or on behalf of any competitor of Parent in the long-distance
telephone business, which candidate, to the Knowledge of such Stockholder after
due inquiry, was called upon by Parent (including the subsidiaries thereof) or
for which, to the Knowledge of such Stockholder after due inquiry, Parent (or
any subsidiary thereof) made an acquisition analysis, for the purpose of
acquiring such entity; or
(v) disclose existing or prospective customers of the Company to any
person, firm, partnership, corporation or business for any reason or purpose
whatsoever except to the extent that the Company has in the past disclosed such
information to the public for valid business reasons.
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Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit any Stockholder from acquiring as an investment not more than one
percent of the capital stock of a competing business whose stock is traded on a
national securities exchange.
12.2 Damages. Because of the difficulty of measuring economic losses to
Parent as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to Parent for which it
would have no other adequate remedy, each Stockholder agrees that the foregoing
covenant may be enforced by Parent in the event of breach by such Stockholder,
by injunction and restraining order.
12.3 Reasonable Restraint. It is agreed by the parties hereto that the
foregoing covenants in this Section 12 impose a reasonable restraint on the
Stockholders in light of the activities and business of Parent (including the
subsidiaries thereof) on the date of the execution of this Agreement and the
reasonably foreseeable plans of Parent.
12.4 Severability, Reformation. The covenants in this Section 12 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention
of the parties that such restrictions be enforced to the fullest extent the
court deems reasonable, and the Agreement shall thereupon be automatically
reformed.
12.5 Independent Covenant. All of the covenants in this Section 12 shall be
construed as an agreement independent of any other provision in this Agreement,
and the existence of any claim or cause of action of any Stockholder against
Parent (including the subsidiaries thereof), whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by
Parent of such covenants. It is specifically agreed that the period of three
years stated at the beginning of this Section 12, during which the agreements
and covenants of each Stockholder made in this Section 12 shall be effective,
shall be computed by excluding from such computation any time during which such
Stockholder is in violation of any provision of this Section 12. The covenants
contained in Section 12 shall not be affected by any breach of any other
provision hereof by any party hereto and shall become nugatory if the
transactions contemplated by this Agreement are not consummated.
12.6 Materiality. The Company and the Stockholders hereby agree that the
covenants set forth in this Section 12 are a material and substantial part of
the transactions contemplated by this Agreement.
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13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
13.1 Stockholders. The Stockholders recognize and acknowledge that they had
in the past, currently have, and in the future may have, access to certain
confidential information of the Company and/or Parent and Old ACG, such as
operational policies, and pricing and cost policies that are valuable, special
and unique assets of the Company and/or Parent and Old ACG. The Stockholders
agree that they will not disclose such confidential information to any person,
firm, corporation, association or other entity for any purpose or reason
whatsoever, except (i) to authorized representatives of Parent; (ii) following
the Closing, such information may be disclosed by the Stockholders as is
required in the course of performing their duties for Parent or the Company;
and (iii) to counsel and other advisers; provided that such advisers (other
than counsel) agree to the confidentiality provisions of this Section 13.1,
unless (x) such information becomes known to the public generally through no
fault of the Stockholders, (y) disclosure is required by law or the order of
any governmental authority under color of law; provided, that prior to
disclosing any information pursuant to this clause (y), the Stockholders, if
possible, shall give immediate prior written notice thereof to Parent and
provide Parent with the opportunity to contest such disclosure, or (z) the
disclosing party reasonably believes that such disclosure is required in
connection with the defense of a lawsuit against the disclosing party. In the
event of a breach or threatened breach by any of the Stockholders of the
provisions of this Section 13.1, Parent shall be entitled to an injunction
(without the posting of bond or proof of actual damages) restraining such
Stockholders from disclosing, in whole or in part, such confidential
information. Nothing herein shall be construed as prohibiting Parent from
pursuing any other available remedy for such breach or threatened breach,
including the recovery of damages. In the event the transactions contemplated
by this Agreement are not consummated, the abovementioned restrictions on the
Stockholder's ability to disseminate confidential information with respect to
the Company shall become nugatory.
13.2 Parent. Parent and Old ACG recognize and acknowledge that they had in
the past and currently have and in the future may have, prior to the Closing,
access to certain confidential information of the Company, such as operational
policies, and pricing and cost policies that are valuable, special and unique
assets of the Company. Parent and Old ACG agree that, prior to the Closing, or
if the transactions contemplated by this Agreement are not consummated, they
will not disclose such confidential information to any person, firm,
corporation, association or other entity for any purpose or reason whatsoever,
except (i) to authorized representatives of the Company; and (ii) to counsel
and other advisers; provided that such advisers (other than counsel) agree to
the confidentiality provisions of this Section 13.2, unless (x) such
information becomes known to the public generally through no fault of Parent or
Old ACG, (y) disclosure is required by law or the order of any governmental
authority under color of law; provided, that prior to disclosing any
information pursuant to this clause (y), Parent and Old ACG shall, if possible,
give immediate prior written notice thereof to the Company and the Stockholders
and provide the Company and the Stockholders
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with the opportunity to contest such disclosure, or (z) the disclosing party
reasonably believes that such disclosure is required in connection with the
defense of a lawsuit against the disclosing party. In the event of a breach or
threatened breach by Parent or Old ACG of the provisions of this Section 13.2,
the Company and the Stockholders shall be entitled to an injunction (without
the posting of bond or proof of actual damages) restraining Parent and Old ACG
from disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting the Company and the Stockholders from
pursuing any other available remedy for such breach or threatened breach,
including the recovery of damages. In the event the transactions contemplated
by this Agreement are not consummated, Parent and Old ACG (including their
representatives, advisors and legal counsel) shall within ten (10) business
days after the Company's request, deliver all copies of the confidential
information of the Company in their possession in any form whatsoever
(including, but not limited to, any reports, memoranda, or other materials
prepared by Parent, Old ACG or its representatives, advisors or legal counsel
at their direction).
13.3 Damages. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 13.1 and 13.2 and
because of the immediate and irreparable damage that would be caused for which
no other adequate remedy exists, the parties hereto agree that, in the event of
a breach by any of them of the foregoing covenants, the covenant may be
enforced against the other parties by injunction and restraining order.
13.4 Survival. The obligations of the parties under this Article 13 shall
survive the termination of this Agreement for a period of three years from the
Closing Date or the termination of this Agreement pursuant to Section 11.
14. TRANSFER RESTRICTIONS
Except for transfers to immediate family members who agree to be bound by
the restrictions set forth in this Section 14.1 (or trusts for the benefit of
the Stockholders or family members, the trustees of which so agree), for a
period of one year from the Closing, except pursuant to Xxxxxxx 00, xxxx of the
Stockholders shall sell, assign, exchange, transfer, encumber, pledge,
distribute, appoint, or otherwise dispose of any Parent Stock received by the
Stockholders in the transaction contemplated herein. The Parent Stock delivered
to the Stockholders pursuant to Section 2 of this Agreement will bear a legend
substantially in the form set forth below and containing such other information
as Parent may deem necessary or appropriate:
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THIS SECURITY MAY NOT BE SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED,
PLEDGED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL
NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE,
TRANSFER, ENCUMBRANCE, PLEDGE, DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION
PRIOR TO [FIRST ANNIVERSARY OF CLOSING DATE]. UPON THE WRITTEN REQUEST OF THE
HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND
(AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED
ABOVE.
15. INVESTMENT REPRESENTATIONS
The Stockholders acknowledge that the Parent Stock to be delivered to the
Stockholders pursuant to this Agreement (the "Restricted Securities") have not
been and will not be registered under the 1933 Act and therefore may not be
resold without compliance with the requirements of the 1933 Act and applicable
state securities laws. All of the Restricted Securities are being acquired by
the Stockholders solely for their own respective accounts, for investment
purposes only, and not with a view to the distribution thereof.
15.1 Compliance With Law. The Stockholders represent, warrant, covenant and
agree that none of the Restricted Securities will be offered, sold, assigned,
exchanged, transferred, encumbered, distributed, appointed or otherwise
disposed of except after full compliance with all of the applicable provisions
of the 1933 Act and the rules and regulations of the SEC thereunder and the
provisions of applicable state securities laws and regulations. All the
Restricted Securities shall bear the following legend in addition to the legend
required under Section 14 of this Agreement:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS (COLLECTIVELY, THE
"ACTS") AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED UNLESS AND UNTIL (A) THESE
SECURITIES SHALL HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND APPLICABLE STATE SECURITIES LAWS (COLLECTIVELY, THE "ACTS") OR (B)
THE HOLDER OF THESE SECURITIES PROVIDES THE ISSUER WITH (X) AN UNQUALIFIED
WRITTEN OPINION OF LEGAL COUNSEL, WHICH COUNSEL AND OPINION (IN FORM AND
SUBSTANCE) SHALL BE REASONABLY SATISFACTORY TO THE ISSUER, TO THE EFFECT THAT
THE PROPOSED DISPOSITION OF THESE SECURITIES MAY BE EFFECTED WITHOUT
REGISTRATION UNDER THE ACTS OR (Y) SUCH OTHER EVIDENCE AS MAY BE REASONABLY
SATISFACTORY TO THE ISSUER THAT THE PROPOSED DISPOSITION MAY BE EFFECTED
WITHOUT REGISTRATION UNDER THE ACTS.
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15.2 Economic Risk, Sophistication. Each Stockholder represents that he has
received, has read and understands the Draft Registration Statement, and in
particular the risk factors described therein. Each Stockholder further
represents that he is able to bear the economic risk of an investment in the
Restricted Securities and can afford to sustain a total loss of such investment
and either (i) has such knowledge and experience in financial and business
matters that he is capable of evaluating the merits and risks of the proposed
investment in Parent or (ii) together with the senior executives of the
Company, with whom he has consulted, has such knowledge and experience in
financial and business matters that he is capable of evaluating the merits and
risks of the proposed investment in Parent. Stockholders have had an adequate
opportunity to ask questions and receive answers from the officers of Parent
and the Company concerning any and all matters relating to the transactions
described herein including, without limitation, the background and experience
of the current and proposed officers and directors of Parent, the plans for the
operations of the business of Parent and any plans for additional acquisitions
and the like. Stockholders have asked any and all questions in the nature
described in the preceding sentence and all questions have been answered to
their satisfaction.
16. REGISTRATION RIGHTS
16.1 PiggyBack Registration Rights. At any time following the Closing Date,
whenever Parent proposes to register any Parent Stock for its own or the
account of others under the 1933 Act for a public offering, other than (i) any
registration of shares to be used as consideration for acquisitions of
additional businesses by Parent and (ii) registrations relating to employee
benefit plans, Parent shall give each of the Stockholders prompt written notice
of its intent to do so. Upon the written request of any of the Stockholders
given within 15 business days after receipt of such notice, Parent shall cause
to be included in such registration all Registrable Securities (including any
shares of Parent Stock issued as a dividend or other distribution with respect
to, or in exchange for, or in replacement of such Registerable Securities)
which any such Stockholder requests; provided, however, if Parent is advised in
writing in good faith by any managing underwriter of an underwritten offering
of the securities being offered pursuant to any registration statement under
this Section 16.1 that the number of shares to be sold by persons other than
Parent is greater than the number of such shares which can be offered without
adversely affecting the offering, Parent may reduce pro rata the number of
shares offered for the accounts of such persons (based upon the number of
shares held by such person) to a number deemed satisfactory by such managing
underwriter.
16.2 Demand Registration Rights. At any time after the first anniversary of
the Closing Date, the holders of a majority of the shares of Parent Stock (i)
representing Registerable Securities owned by the Stockholders or their
permitted transferees or (ii) representing Registrable Securities (as defined
in the agreements similar to this Agreement mentioned below) acquired by other
Stockholders of Parent on or prior to the closing of the IPO in connection with
the acquisition of
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their companies by Parent pursuant to an agreement, similar to this Agreement
(or upon exercise or conversion of securities of Parent received pursuant to
such agreement) (the persons referred to in clauses (i) and (ii) being
collectively referred to as the "Founding Stockholders"), which shares have not
been previously registered or sold and which shares are not entitled to be sold
under Rule 144(k) (or any similar or successor provision) promulgated under the
1933 Act, may request in writing that Parent file a registration statement
under the 1933 Act covering the registration of such shares of Parent Stock
issued to and held by the Founding Stockholders or their permitted transferees
(including any stock issued as a dividend or other distribution with respect
to, or in exchange for, or in replacement of such Parent Stock) (a "Demand
Registration"). Within ten days of the receipt of such request, Parent shall
give written notice of such request to all other Founding Stockholders and
shall, as soon as practicable but in no event later than 45 days after notice
from the Founding Stockholders requesting such registration, file and use its
best efforts to cause to become effective a registration statement covering all
such shares. Parent shall be obligated to effect only one Demand Registration
for all Founding Stockholders and will keep such Demand Registration current
and effective for not less than 90 days (or such shorter period as is required
to complete the distribution and sale of all shares registered thereunder).
Notwithstanding the foregoing paragraph, following such a demand a majority
of the disinterested directors of Parent (i.e. directors who have not demanded
or elected to sell shares in any such public offering) may defer the filing of
the registration statement for a 30 day period.
If at the time of any request for a Demand Registration Parent has
formulated plans to file within 60 days after such request a registration
statement covering the sale of any of its securities in a public offering under
the 1933 Act, no registration of the Parent Stock shall be initiated under this
Section 16.2 until 90 days after the effective date of such registration
statement unless Parent is no longer proceeding diligently to secure the
effectiveness of such registration statement; provided that Parent shall
provide the Founding Stockholders the right to participate in such public
offering pursuant to, and subject to, Section 16.1.
16.3 Registration Procedures. All expenses incurred in connection with the
registrations under this Section 16 (including all registration, filing,
qualification, legal, printing and accounting fees, but excluding underwriting
commissions and discounts), shall be borne by Parent. In connection with
registrations under Sections 16.1 and 16.2 Parent will, as expeditiously as
practicable:
(i) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause
such registration statement to become and remain effective; provided that
Parent may discontinue any registration of its securities that is being
effected pursuant to Section 16.2 at any time prior to the effective date
of the registration statement relating thereto. Parent shall be obligated
to effect only one Demand Registration for all Founding Stockholders,
provided, however, that Parent shall not be deemed to have satisfied its
obligation under Section 16.2 unless and until a Demand Registration
covering all shares of Registerable Securities requested to be registered
has been filed and become effective under the 1933 Act and has remained
current and effective for not less than 90 days (or such shorter period as
is required to complete the distribution and sale of all shares registered
thereunder).
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(ii) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to such registration statement
and the prospectus used in connection therewith as may be necessary to keep
such registration statement effective for a period as may be requested by
the stockholders of Parent holding a majority of the Registrable Securities
covered thereby of 90 days (or such shorter period as is required to
complete the distribution and sale of all shares registered thereunder) and
to comply with the provisions of the 1933 Act with respect to the
disposition of all securities covered by such registration statement during
such period in accordance with the intended methods of disposition by the
seller or sellers thereof set forth in such registration statement;
provided, that before filing a registration statement or prospectus
relating to the sale of Registrable Securities, or any amendments or
supplements thereto, Parent will furnish to counsel to each holder of
Registrable Securities covered by such registration statement or
prospectus, copies of all documents proposed to be filed, which documents
will be subject to the review of such counsel, and Parent will give
reasonable consideration in good faith to any comments of such counsel.
(iii) Furnish to each holder of Registrable Securities covered by the
registration statement and to each underwriter, if any, of such Registrable
Securities, such number of copies of a preliminary prospectus and
prospectus for delivery in conformity with the requirements of the 1933
Act, and such other documents, as such Person may reasonably request, in
order to facilitate the public sale or other disposition of the Registrable
Securities.
(iv) Use its best efforts to register or qualify the Registrable
Securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as each seller shall
reasonably request, and do any and all other acts and things which may be
reasonably necessary or advisable to enable such seller to consummate the
disposition of the Registrable Securities owned by such seller, in such
jurisdictions, except that Parent shall not for any such purpose be
required (x) to qualify to do business as a foreign corporation in any
jurisdiction where, but for the requirements of this Section 16.3(iv), it
is not then so qualified, or (y) to subject itself to taxation in any such
jurisdiction, or (z) to take any action which would subject it to general
or unlimited service of process in any such jurisdiction where it is not
then so subject.
(v) Use its best efforts to cause the Registrable Securities covered
by such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable
the seller or sellers thereof to consummate the disposition of such
Registrable Securities.
(vi) Immediately notify each seller of Registrable Securities covered
by such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the 1933 Act within the
appropriate period mentioned in Section 16.3(ii), if
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Parent becomes aware that the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing, and, at the request of any such seller,
deliver a reasonable number of copies of an amended or supplemental
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Securities, each prospectus shall not
include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
(vii) Otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC and make generally available to its
security holders, in each case as soon as practicable, but not later than
45 calendar days after the close of the period covered thereby (90 calendar
days in case the period covered corresponds to a fiscal year of the
Parent), an earnings statement of Parent which will satisfy the provisions
of Section 11 (a) of the 1933 Act.
(viii) Use its best efforts in cooperation with the underwriters to
list such Registrable Securities on each securities exchange as they may
reasonably designate.
(ix) In the event the offering is an underwritten offering, use its
best efforts to obtain a "cold comfort" letter from the independent public
accountants for Parent in customary form and covering such matters of the
type customarily covered by such letters.
(x) Execute and deliver all instruments and documents (including in an
underwritten offering an underwriting agreement in customary form) and take
such other actions and obtain such certificates and opinions as the
stockholders of Parent holding a majority of the shares of Registrable
Securities covered by the Registration Statement may reasonably request in
order to effect an underwritten public offering of such Registrable
Securities.
(xi) Make available for inspection by the seller of such Registrable
Securities covered by such registration statement, by any underwriter
participating in any disposition to be effected pursuant to such
registration statement and by any attorney, accountant or other agent
retained by any such seller or any such underwriter, all pertinent
financial and other records, pertinent corporate documents and properties
of Parent, and cause all of Parent's officers, directors and employees to
supply all information reasonably requested by any such seller,
underwriter, attorney, accountant or agent in connection with such
registration statement.
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(xii) Obtain for delivery to the underwriter or agent an opinion or
opinions from counsel for Parent in customary form and in form and scope
reasonably satisfactory to such underwriter or agent and its counsel.
16.4 Other Registration Matters.
(i) Each Stockholder holding shares of Registrable Securities covered
by a Registration Statement referred to in this Section 16 will, upon
receipt of any notice from Parent of the happening of any event of the kind
described in Section 16.3(vi), forthwith discontinue disposition of the
Registrable Securities pursuant to the registration statement covering such
Registrable Securities until such holder's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 16.3(vi).
(ii) If a registration pursuant to Section 16.1 or 16.2 involves an
underwritten offering, each Stockholder (including his permitted assigns)
agrees, if his shares of Registrable Securities are included in such
registration, not to effect any public sale or distribution, including any
sale pursuant to Rule 144 under the 1933 Act, of any Registrable
Securities, or of any security convertible into or exchangeable or
exercisable for any Registrable Securities (other than as part of such
underwritten offering), without the consent of the managing underwriter,
during a period commencing seven calendar days before and ending 180
calendar days (or such lesser number as the managing underwriter shall
designate) after the effective date of such registration. Similarly, each
of the Stockholders agrees not to effect any sale or distribution,
including any sale pursuant to the registration rights provided in Section
16.1, of any Registrable Securities, or of any security convertible into or
exchangeable or exercisable for any Registrable Securities, without the
consent of the managing underwriter of the IPO during a period commencing
on the effective date of the Draft Registration Statement and ending 365
calendar days (or such lesser number as such managing underwriter shall
designate) after such effective date.
16.5 Indemnification.
(i) In the event of any registration of any securities of Parent under
the 1933 Act pursuant to Section 16.1 or 16.2, Parent will, and it hereby
agrees to, indemnify and hold harmless, to the extent permitted by law,
each seller of any Registrable Securities covered by such registration
statement, each Affiliate of such seller and their respective directors,
officers, employees and agents or general and limited partners (and
directors, officers, employees and agents thereof) and, if such seller is a
portfolio or investment fund, its investment advisors or agents, each other
person who participates as an underwriter in the offering or sale of such
securities and each other person, if any, who controls such seller or any
such underwriter within the meaning of the 1933 Act, as follows:
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(x) against any and all loss, liability, claim, damage or expense
whatsoever arising out of or based upon an untrue statement or alleged
untrue statement of a material fact contained in any registration
statement (or any amendment or supplement thereto), including all
documents incorporated therein by reference, or the omission or
alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading, or
arising out of an untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus or prospectus
(or any amendment or supplement thereto) or the omission or alleged
omission therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading;
(y) against any and all loss, liability, claim, damage and
expense whatsoever to the extent of the aggregate amount paid in
settlement of any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, if such settlement is
effected with the written consent of Parent; and
(z) against any and all expense reasonably incurred by them in
connection with investigating, preparing or defending against any
litigation, or investigation or proceeding by any governmental agency
or body, commenced or threatened, or any claim whatsoever based upon
any such untrue statement or omission, or any such alleged untrue
statement or omission to the extent that any such expense is not paid
under subsection (x) or (y) above;
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such seller or any such director,
officer, employee, agent, general or limited partner, investment advisor or
agent, underwriter or controlling person and shall survive the transfer of
such securities by such seller.
(ii) Parent may require, as a condition to including any Registrable
Securities in any registration statement filed in accordance with Section
16.1 or 16.2, that Parent shall have received an undertaking reasonably
satisfactory to it from the prospective seller of such Registrable
Securities or any underwriter, to indemnify and hold harmless (in the same
manner and to the same extent as set forth in Section 16.5(i)) Parent with
respect to any statement or alleged statement in or omission or alleged
omission from such registration statement, any preliminary, final or
summary prospectus contained therein, or any amendment or supplement, if
such statement or alleged statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished
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to Parent by or on behalf of such seller or underwriter specifically
stating that it is for use in the preparation of such registration
statement, preliminary, final or summary prospectus or amendment or
supplement. Such indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of Parent or any such director,
officer or controlling person and shall survive the transfer of such
securities by such seller. In that event, the obligations of the Parent and
such sellers pursuant to this Section 16.5 are to be several and not joint;
provided, however, that, with respect to each claim pursuant to this
Section 16.5, Parent shall be liable for the full amount of such claim, and
each such seller's liability under this Section 16.5 shall be limited to an
amount equal to the net proceeds (after deducting the underwriting discount
and expenses) received by such seller from the sale of Registrable
Securities held by such seller pursuant to this Agreement.
(iii) Promptly after receipt by an indemnified party hereunder of
written notice of the commencement of any action or proceeding involving a
claim referred to in this Section 16.5, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party, give
written notice to such indemnifying party of the commencement of such
action; provided, however, that the failure of any indemnified party to
give notice as provided herein shall not relieve the indemnifying party of
its obligations under this Section 16.5, except to the extent (not
including any such notice of an underwriter) that the indemnifying party is
materially prejudiced by such failure to give notice. In case any such
action is brought against an indemnified party, unless in such indemnified
party's reasonable judgment a conflict of interest between such indemnified
and indemnifying parties may exist in respect of such claim (in which case
the indemnifying party shall not be liable for the fees and expenses of
more than one firm of counsel selected by holders of a majority of the
shares of Registrable Securities included in the offering or more than one
firm of counsel for the underwriters in connection with any one action or
separate but similar or related actions), the indemnifying party will be
entitled to participate in and to assume the defense thereof, jointly with
any other indemnifying party similarly notified, to the extent that it may
wish with counsel reasonably satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not
be liable to such indemnified party for any legal or other expenses
subsequently incurred by such indemnifying party in connection with the
defense thereof, provided that the indemnifying party will not agree to any
settlement without the prior consent of the indemnified party (which
consent shall not be unreasonably withheld) unless such settlement requires
no more than a monetary payment for which the indemnifying party agrees to
indemnify the indemnified party and includes a full, unconditional and
complete release of the indemnified party; provided, however, that the
indemnified party shall be entitled to take control of the defense of any
claim as to which, in the reasonable judgment of the indemnifying party's
counsel, representation of both the indemnifying party and the indemnified
party would be inappropriate under the applicable
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standards of professional conduct due to actual or potential differing
interests between them. In the event that the indemnifying party does not
assume the defense of a claim pursuant to this Section 16.5(iii), the
indemnified party will have the right to defend such claim by all
appropriate proceedings, and will have control of such defense and
proceedings, and the indemnified party shall have the right to agree to any
settlement without the prior consent of the indemnifying party. Each
indemnified party shall, and shall cause its legal counsel to, provide
reasonable cooperation to the indemnifying party and its legal counsel in
connection with its assuming the defense of any claim, including the
furnishing of the indemnifying party with all papers served in such
proceeding. In the event that an indemnifying party assumes the defense of
an action under this Section 16.5(iii), then such indemnifying party shall,
subject to the provisions of this Section 16.5, indemnify and hold harmless
the indemnified party from any and all losses, claims, damages or
liabilities by reason of such settlement or judgment.
(iv) Parent and each seller of Registrable Securities shall provide
for the foregoing indemnity (with appropriate modifications) in any
underwriting agreement with respect to any required registration or other
qualification of securities under any federal or state law or regulation of
any governmental authority.
16.6 Contribution. In order to provide for just and equitable contribution
in circumstances under which the indemnity contemplated by Section 16.5 is for
any reason not available or insufficient for any reason to hold harmless an
indemnified party in respect of any losses, claims, damages or liabilities
referred to therein, the parties required to indemnify by the terms thereof
shall contribute to the aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by such indemnity agreement incurred by
Parent, any seller of Registrable Securities and one or more of the
underwriters, except to the extent that contribution is not permitted under
Section 11 (f) of the 1933 Act. In determining the amounts which the respective
parties shall contribute, there shall be considered the relative benefits
received by each party from the offering of the Registrable Securities by
taking into account the portion of the proceeds of the offering realized by
each, and the relative fault of each party by taking into account the parties'
relative knowledge and access to information concerning the matter with respect
to which the claim was asserted, the opportunity to correct and prevent any
statement or omission and any other equitable considerations appropriate under
the circumstances. Parent and each person selling securities agree with each
other that no seller of Registrable Securities shall be required to contribute
any amount in excess of the amount such seller would have been required to pay
to an indemnified party if the indemnity under Section 16.5(ii) were available.
Parent and each such seller agree with each other and the underwriters of the
Registrable Securities, if requested by such underwriters, that it would not be
equitable if the amount of such contribution were determined by pro rata or per
capita allocation (even if the underwriters were treated as one entity for such
purpose) or for the underwriters' portion of such contribution to exceed the
percentage that the underwriting discount
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bears to the initial public offering price of the Registrable Securities. For
purposes of this Section 16.6, each person, if any, who controls an underwriter
within the meaning of Section 15 of the 1933 Act shall have the same rights to
contribution as such underwriter, and each director and each officer of Parent
who signed the registration statement, and each person, if any, who controls
Parent or a seller of Registrable Securities within the meaning of Section 15
of the 1933 Act shall have the same rights to contribution as Parent or a
seller of Registrable Securities, as the case may be.
16.7 Availability of Rule 144. Parent shall not be obligated to register
shares of Registrable Securities held by any Stockholder at any time when the
resale provisions of Rule 144(k) (or any similar or successor provision)
promulgated under the 1933 Act are available to such Stockholder.
17. GENERAL
17.1 Cooperation. The Company, each Stockholder, Parent and Old ACG shall
deliver or cause to be delivered to the other on the Closing Date and at such
other times and places as shall be reasonably agreed to, such additional
instruments as the any of the others may reasonably request for the purpose of
carrying out this Agreement. The Stockholders will cooperate and use their
reasonable efforts to have the present officers, directors and employees of the
Company cooperate with Parent on and after the Closing Date in furnishing
information, evidence, testimony and other assistance in connection with any
Tax Return filing obligations, actions, proceedings, arrangements or disputes
of any nature with respect to matters pertaining to all periods prior to the
Closing Date.
17.2 Successors and Assigns. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law), but if assigned by
operation of law, this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto, the successors of Parent, Old ACG and the
Company, and the heirs and legal representatives of the Stockholders.
Notwithstanding the foregoing, any Stockholder may assign his or its shares of
Parent Stock and rights thereunder, to a family or children's trust; provided
that the assignee agrees to be bound by the terms of this Agreement to the same
extent as his or its assignor.
17.3 Entire Agreement. This Agreement (including the Schedules and Annexes)
and the documents delivered pursuant hereto constitute the entire agreement and
understanding among the Stockholders, the Company, Old ACG and Parent and
supersede any prior agreement and understanding relating to the subject matter
of this Agreement. This Agreement, upon execution and delivery, constitutes a
valid and binding agreement of the parties hereto enforceable in accordance
with its terms and may be modified or amended only by a written instrument
executed by the Stockholders and by the Company, Old ACG and Parent, acting
through their respective officers or representatives, duly authorized by their
respective Boards of Directors. Any disclosure made on
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any Schedule delivered pursuant hereto shall be deemed to have been disclosed
for purposes of any other Schedule required hereby; provided that the Company
shall make a good faith effort to cross reference disclosures, as necessary or
advisable, between related Schedules.
17.4 Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
17.5 Brokers and Agents. Except as disclosed on Schedule 17.5, each party
represents and warrants that it employed no broker or agent in connection with
this transaction and agrees to indemnify the other parties hereto against all
loss, cost, damage or expense arising out of claims for fees or commission of
brokers employed or alleged to have been employed by such indemnifying party.
17.6 Expenses. Whether or not the transactions herein contemplated shall be
consummated, Parent will pay the fees, expenses and disbursements of Parent,
the Company and their respective agents, representatives, accountants and
counsel incurred in connection with the subject matter of this Agreement and
any amendments thereto, including all costs and expenses incurred in the
performance and compliance with all conditions to be performed by Parent and
the Company under this Agreement. In this connection, the Stockholders
acknowledge that Parent has paid legal counsel to the Company a retainer of
$45,000 ("Retainer"). If the Retainer is not required to pay the legal fees and
expenses of counsel to the Company in respect of the transactions contemplated
by this Agreement, the Stockholders will retain any unused portion. The
Retainer shall not be credited against any amounts owed by Parent pursuant to
this Agreement.. Each Stockholder shall pay all sales, use, transfer, real
property transfer, gains, stock transfer and other similar taxes ("Transfer
Taxes") imposed in connection with the transactions contemplated herein, the
fees and expenses of the Stockholders' legal counsel and all other costs and
expenses incurred by the Stockholders in their performance and compliance with
all conditions to be performed by them under this Agreement. Each Stockholder
shall file all necessary documentation and Returns with respect to such
Transfer Taxes. In addition, each Stockholder acknowledges that he or she, and
not the Company or Parent, will pay all Taxes due upon receipt of the
consideration payable pursuant to Section 2, and will assume all Tax risks and
liabilities of the Company in connection with the transactions contemplated
hereby.
17.7 Notices. All notices of communication required or permitted hereunder
shall be in writing, addressed to the party to be notified, and may be given by
(i) depositing the same in United States mail, postage prepaid and registered
or certified with return receipt requested, (ii) by telecopying the same if
receipt thereof is confirmed or (iii) by delivering the same in person to an
officer or agent of such party.
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(x) If to Parent, or Old ACG, addressed to Parent at:
Advanced Communications Group, Inc.
0000 Xxxx Xxxxxxx
Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attn: Xxx X. Xxxxxxxxx
Telecopy No.: 000-000-0000
with a copy to:
Bracewell & Xxxxxxxxx, L.L.P.
South Tower Pennzoil Place
000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000-0000
Attn: Xxxxx X. Xxxxxxx III
Telecopy No.: 000-000-0000
(y) If to the Stockholders, addressed to them at their addresses set forth
on Schedule 5.3, with copies to such counsel as is set forth with respect to
each Stockholder on such Schedule 5.3;
(z) If to the Company, addressed to it at:
Valu-Line of Longview, Inc.
0000 Xxxx Xxxxxxxx Xxx.
Xxxxxxxx, Xxxxx 00000
Attn: Xxx Xxxxxx
Telecopy No.: 000-000-0000
with a copy to:
Xxxxxxx X. Xxxxxx
City Center Tower II
301 Commerce, Suite 1500
Ft. Xxxxx, Xxxxx 00000
Telecopy No.: 000-000-0000
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or to such other address or counsel as any party hereto shall specify pursuant
to this Section 17.7 from time to time.
17.8 Governing Law. This Agreement Shall be construed in accordance with
the laws of the State of Delaware.
17.9 Exercise of Rights and Remedies. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy accruing
to any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
17.10 Time. Time is of the essence with respect to this Agreement.
17.11 Reformation and Severability. In case any provision of this Agreement
shall be invalid, illegal or unenforceable, it shall, to the extent
practicable, be modified in such manner as to be valid, legal and enforceable
but so as to most nearly retain the intent of the parties, and if such
modification is not possible, such provision shall be severed from this
Agreement; and in either case the validity, legality and enforceability of the
remaining provisions of this Agreement shall not in any way be affected or
impaired thereby.
17.12 Remedies Cumulative. No right, remedy or election given by any term
of this Agreement shall be deemed exclusive but each shall be cumulative with
all other rights, remedies and elections available at law or in equity.
17.13 Captions. The headings of this Agreement are inserted for convenience
only, shall not constitute a part of this Agreement or be used to construe or
interpret any provision hereof.
17.14 Public Statements. The parties hereto shall consult with each other
and no party shall issue any public announcement or statement with respect to
the transactions contemplated hereby without the consent of the other parties,
unless the party desiring to make such announcement or statement, after seeking
such consent from the other parties, obtains advice from legal counsel that a
public announcement or statement is required by applicable law.
17.15 Amendments and Waivers. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived only with the
written consent of Parent, Old ACG, the Company and the Stockholders. Any
amendment or waiver effected in accordance with this Section 18.16 shall be
binding upon each of the parties hereto.
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17.16 Access and Information. Following the Closing Date, Company and
Parent shall give Stockholders and Stockholders' counsel, accountants and other
representatives full access, during reasonable business hours, to the books and
records of the Company. Additionally, Parent shall provide the Stockholders
access to the in-house accountant for Company, Xxxxx Xxxxx, for purposes of
obtaining information necessary for the Tax Returns required to be filed by the
Stockholders pursuant to this Agreement and for Xxxxx Xxxxx to coordinate the
preparation of such Tax Returns with Stockholder's accountant and provide
materials and information as requested by Stockholder's accountant. Company
shall keep such books and records for a period of four (4) years after the
Closing Date. In the event Company or Parent desires to destroy any of such
books and records after the four (4) year period but prior to seven (7) years
after the Closing Date, it shall first give forty-five (45) days prior written
notice to Stockholders, and Stockholders shall thereupon have the right, at
their option, upon prior written notice to Company and/or Parent, as
applicable, within said forty-five (45) day period, to take possession of said
books and records within thirty (30) days after the date of Stockholders'
notice to Company, or Parent, as applicable.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
ADVANCED COMMUNICATIONS GROUP, INC.
BY:
-------------------------------------
NAME: XXX X. XXXXXXXXX
TITLE: CHAIRMAN AND CHIEF EXECUTIVE
OFFICER
ADVANCED COMMUNICATIONS CORP.
BY:
-------------------------------------
NAME: XXX X. XXXXXXXXX
TITLE: CHAIRMAN AND CHIEF EXECUTIVE
OFFICER
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ACG ACQUISITION CORP.
BY:
-------------------------------------
NAME: XXXX X. XXXXXXXXX
TITLE: PRESIDENT
VALU-LINE OF LONGVIEW, INC.
BY:
-------------------------------------
NAME:
TITLE:
STOCKHOLDERS:
----------------------------------------
XXXXX X. XXXXXXXX
----------------------------------------
XXX XXXXXX
----------------------------------------
XXXX XXXXX
----------------------------------------
XXXXXXX XXXXX
----------------------------------------
XXXXXXXX XXXXX
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ANNEX I
DRAFT REGISTRATION STATEMENT
(separately provided)
ANNEX II
ADVANCED COMMUNICATIONS GROUP, INC.
SECTION 351 EXCHANGE PLAN
The Board of Directors of Advanced Communications Group, Inc., a
Delaware corporation organized in September 1997 ("Company"), has adopted this
Section 351 Exchange Plan effective as of October 3, 1997 ("Exchange Plan") in
order to comply with the requirements of Section 351 of the Internal Revenue
Code of 1986, as amended, and the rules and regulations promulgated thereunder
("Code"), and for purposes of defining the rights of various persons who may
make future transfers of voting capital stock and other consideration,
including cash and other assets (the items transferred being collectively
referred to herein as the "Assets") to the Company, all as more particularly
set forth below:
WHEREAS, the Company intends to acquire outstanding shares of capital
stock of certain corporations and other assets and acquire the outstanding
capital stock of ACG, Inc., a Delaware corporation, in a reverse triangular
merger, all as part of an integrated transaction as more particularly described
in the Company's Registration Statement in Form S-1 (draft of October 2, 1997)
("Draft Registration Statement") relating to its initial underwritten public
offering ("IPO"), the foregoing acquisitions being hereinafter collectively
referred to as the "Acquisitions"; and
WHEREAS, the various transactions comprising the Acquisitions will
occur substantially concurrently upon the consummation of the IPO;
NOW THEREFORE, in order to obtain the Assets, the Company may elect to
exchange, as a part of a single plan, shares of its voting capital stock and
other consideration, including cash, warrants, options and promissory notes,
for such Assets as shall be transferred to the Company by one or more of the
following individuals and entities: (i) the existing shareholders of the
predecessor to the Company in a reverse triangular merger; (ii) certain holders
of capital stock of other corporations or other assets that shall be acquired
by the Company pursuant to the Acquisitions; (iii) certain other persons or
entities who may assist the Company in the Acquisitions or in the manufacture
and or marketing of its products, (iv) purchasers of the Company's capital
stock in the IPO; and (v) certain other financial investors; and
FURTHERMORE, it is the expectation of the Company (without making any
representation with respect thereto) that the parties contributing such Assets
to the Company as part of the Acquisitions and the IPO will possess immediately
after the completion of the Acquisitions, at least
80% of the total combined voting power of all classes of capital stock of the
Company entitled to vote and at least 80% of the total number of shares of all
other classes of capital stock of the Company; and
FURTHERMORE, it is also the intention of the Company (without making
any representation with respect thereto) that the foregoing transfers of Assets
to the Company shall qualify as tax free within the provisions of Section 351
of the Code; provided, however, that the Company does not assume any liability
or responsibility to any holder of capital stock of the Company or any other
person or entity in the event Section 351 of the Code does not apply to such
transfers of Assets; and
FURTHERMORE, it is the expectation of the Company that the parties to
the Acquisitions and the IPO will contribute Assets to the Company in the
approximate amounts contemplated by the Draft Registration Statement in
exchange for the voting capital stock, and other consideration, including cash,
options, warrants and promissory notes of the Company, in the approximate
amounts contemplated by the Draft Registration Statement.
The shares of voting capital stock and other consideration, including
cash, options, warrants and promissory notes of the Company, deliverable in the
Acquisitions may be subject to adjustment in accordance with the various
acquisition agreements between the Company and the contributing parties. This
Exchange Plan shall not obligate any party to any Acquisition to consummate
such Acquisition other than upon the terms of the definitive acquisition
agreement executed by such party with respect to such Acquisition.
By the execution of the acquisition agreement to which this Exchange
Plan is attached as Annex II, each of the contributing parties thereto
evidences such party's agreement with and adoption of this Exchange Plan.
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