Exhibit 2.1.1
AGREEMENT AND PLAN
OF
MERGER
DATED JULY __, 1998
BY AND AMONG
ADVANCED TELECOMMUNICATIONS, INC.
AMERICAN TELEPHONE TECHNOLOGY, INC.
TELE-CONTRACTING SPECIALISTS, INC.
XXXXXXX X. XXXXXX
AND
XXXXXXX X. XXXXXXX
TABLE OF CONTENTS
Section Page
----
ARTICLE 1 The Merger.......................................................1
1.1 Merger...........................................................1
1.2 Closing Payments.................................................2
1.3 Working Capital..................................................2
1.4 Additional Purchase Price (Earnout)..............................3
1.5 Plan of Merger...................................................4
1.6 Release from Guaranties..........................................4
ARTICLE 2 The Closing......................................................5
2.1 Closing and Closing Date.........................................5
2.2 Closing Deliveries...............................................5
ARTICLE 3 Pre-Closing Deliveries and Filings...............................6
3.1 Company Deliveries...............................................6
3.2 Other Filings....................................................7
ARTICLE 4 Pre-Closing Covenants............................................7
4.1 Pending Closing..................................................7
4.2 Interim Financial Information....................................8
ARTICLE 5 Warranties and Representations of the Company and the
Shareholders.....................................................8
5.1 Duly Organized...................................................8
5.2 Qualification....................................................9
5.3 Investments......................................................9
5.4 Capital Stock....................................................9
5.5 Due Authorization................................................9
5.6 No Conflicts....................................................10
5.7 Good Title......................................................10
5.8 Real Property...................................................10
5.9 Litigation......................................................10
5.10 Compliance with Laws............................................11
5.11 Labor Matters...................................................11
5.12 Financial Statements............................................11
5.13 Undisclosed Balance Sheet Liabilities...........................11
5.14 Changes Since Balance Sheet Date................................11
5.15 Contracts.......................................................12
5.16 Intellectual Property...........................................12
5.17 Taxes...........................................................13
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5.18 Employee Plans..................................................13
5.19 Insurance.......................................................14
5.20 Restrictions on Subsequent Dispositions.........................14
5.21 Condition of Assets.............................................14
5.22 Transactions with Affiliates....................................15
5.23 Products........................................................15
5.24 Product Warranties..............................................15
5.25 Employees.......................................................15
5.26 Compliance with Environmental Laws..............................16
5.27 Licenses; Permits...............................................17
5.28 Customers; Suppliers............................................17
5.29 Accounts; Safe Deposit Boxes....................................17
5.30 Warranties True and Correct.....................................17
ARTICLE 6 Warranties and Representations of Purchaser and ATTI............17
6.1 Duly Organized..................................................17
6.2 Due Authorization...............................................18
6.3 No Conflicts....................................................18
6.4 Litigation......................................................18
ARTICLE 7 Conditions of Closing Applicable to Purchaser and ATTI..........18
7.1 No Termination..................................................18
7.2 Bring-Down of Warranties........................................19
7.3 No Injunction...................................................19
7.4 Necessary Proceedings...........................................19
7.5 Regulatory Approval.............................................19
7.6 Schedules.......................................................19
7.7 Resignations....................................................19
7.8 Addendum to Stockholders Agreement..............................19
ARTICLE 8 Conditions to Closing Applicable to the Company and the
Shareholders....................................................20
8.1 No Termination..................................................20
8.2 Bring-Down of Warranties........................................20
8.3 No Injunction...................................................20
8.4 Necessary Proceedings...........................................20
8.5 Regulatory Approval.............................................20
ARTICLE 9 Termination.....................................................21
9.1 Termination Events..............................................21
9.2 Effects of Termination..........................................21
ARTICLE 10 Indemnification.................................................22
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10.1 Indemnification of Purchaser....................................22
10.2 Indemnification of Shareholders.................................22
10.3 Procedure Relative to Indemnification...........................23
10.4 Limitation on Indemnification Liabilities.......................24
ARTICLE 11 Covenant Not to Compete.........................................24
11.1 Definitions. ..................................................24
11.2 Non-Competition.................................................26
11.3 Confidentiality.................................................26
11.4 Remedies in the Event of Breach.................................26
11.5 Reasonableness of Restrictions.................................26
11.6 Termination of Non-competition..................................27
ARTICLE 12 Miscellaneous...................................................27
12.1 Expenses........................................................27
12.2 Financial Advisors' Fees........................................28
12.3 Accrued Vacation Pay............................................28
12.4 Survival of Warranties and Representations......................28
12.5 Entire Agreement................................................28
12.6 Pre-Closing Publicity...........................................28
12.7 Counterparts....................................................29
12.8 Savings Clause..................................................29
12.9 Successors and Assigns..........................................29
12.10 No Third Party Beneficiary......................................29
12.11 Governing Law and Consent to Jurisdiction.......................29
12.12 Notices.........................................................29
12.13 Schedules.......................................................30
12.14 No Waiver.......................................................30
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EXHIBITS AND SCHEDULES
Exhibits
Exhibit A.................................................................1, 1
Exhibit B....................................................................5
Exhibit C....................................................................6
Schedules
Schedule 1.4.................................................................3
Schedule 4.1.............................................................7, 19
Schedule 5.2............................................................11, 14
Schedule 5.3.................................................................9
Schedule 5.4.................................................................9
Schedule 5.6................................................................10
Schedule 5.8................................................................10
Schedule 5.9................................................................10
Schedule 5.10...............................................................11
Schedule 5.11...............................................................11
Schedule 5.13...............................................................11
Schedule 5.14...............................................................11
Schedule 5.15...............................................................12
Schedule 5.16...........................................................12, 13
Schedule 5.17...............................................................13
Schedule 5.18...........................................................13, 14
Schedule 5.19...............................................................14
Schedule 5.21...............................................................14
Schedule 5.22...............................................................15
Schedule 5.23...............................................................15
Schedule 5.24...............................................................15
Schedule 5.25...............................................................15
Schedule 5.27...............................................................17
Schedule 5.28...............................................................17
Schedule 5.29...............................................................17
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AGREEMENT AND
PLAN OF MERGER
This Agreement is made as of the ____ day of July, 1998, by and
among Advanced Telecommunications, Inc., a Minnesota corporation ("Purchaser"),
American Telephone Technology, Inc., a Minnesota corporation ("ATTI"),
Tele-Contracting Specialists, Inc., a Colorado corporation (the "Company"),
Xxxxxxx Xxxxxx ("Xxxxxx"), and Xxxxxxx Xxxxxxx ("Whitney") (each of the
foregoing individuals being sometimes referred to as a "Shareholder" and such
individuals collectively as the "Shareholders").
RECITALS
A. The Company has authorized capital stock of 10,000 shares of
common stock, with no par value ("Company Common Stock") of which 1,000 shares
are outstanding as of the date hereof.
B. ATTI is a wholly-owned subsidiary of Purchaser.
C. Purchaser, ATTI, the Company and the Shareholders desire to have
the Company merge with and into ATTI pursuant to a transaction in which the
separate existence of the Company will cease and ATTI shall continue as the
surviving corporation. Each share of Company Common Stock will be exchanged for
either shares of Purchaser's Class A common stock or cash and the parties intend
that the transaction qualify as a tax free reorganization under Section 368(a)
of the Internal Revenue Code of 1986 (the "Code").
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, Purchaser, ATTI, the Company and
the Shareholders hereby agree as follows:
ARTICLE 1
The Merger
1.1 Merger. The acquisition of the Company by Purchaser shall be
effected through the merger (the "Merger") of the Company with and into ATTI
pursuant to which the separate existence of the Company shall cease, and ATTI
shall continue as the surviving corporation as a wholly-owned subsidiary of
Purchaser under the corporate name of American Telephone Technology, Inc. (ATTI
is herein sometimes referred to as the "Surviving Corporation") all in
accordance with the plan of merger (the "Plan of Merger") to be filed with the
Secretaries of State of Colorado and Minnesota in substantially the form of
Exhibit A attached hereto. At the Effective Time of the Merger:
(1) All shares of Company Common Stock outstanding immediately prior
to the Effective Time of the Merger will be exchanged for cash and shares
of Purchaser's Class A common stock ("Purchaser Common Stock"). Each share
of Purchaser Common Stock has an agreed value of $126.65.
(2) The "Effective Time of the Merger" shall be the time when the
Plan of Merger and all other necessary documents are accepted for filing
by the Secretaries of State of Minnesota and Colorado.
1.2 Closing Payments.
(1) At the Closing (as hereinafter defined) Purchaser shall deliver
the following cash and share considerations:
Purchaser Total Merger
Shareholder Share Value Cash Consideration
----------- ----------- ---- -------------
Xxxxxx 468,830 312,553 781,383
Whitney 156,276 104,185 260,461
TOTAL 625,106 416,738 1,041,844
(2) The cash portion of the consideration payable by Purchaser
pursuant to Section 1.2(a) shall be wire transferred on the Closing Date
(as herein defined) to a bank account designated by the Company (subject
to the rights of Pacific Acquisition, the business broker engaged by the
Company and the Shareholders) established for the benefit of the
Shareholders upon Purchaser's receipt of the certificates representing all
of the issued and outstanding Company Common Stock held by Shareholders.
At Closing, $51,167 of the cash consideration paid by Purchaser shall be
payable to Pacific Acquisition, such payment having the effect of ratably
reducing the cash payable to each of the Shareholders.
(3) To secure the Shareholders' obligations under Article 10 of this
Agreement and to further secure performance by the Company and the
Shareholders of their obligations under Section 1.3 below, the
Shareholders agree that Purchaser may hold in reserve 395 shares of the
Purchaser's Common Stock received by the Shareholders under this
Agreement. Such shares held in reserve and not subject to claim of
Purchaser at the end of twelve months from the date hereof and shall be
delivered to the Shareholders.
1.3 Working Capital. The Company will have Working Capital of not
less than $188,000 as of June 30, 1998. For purposes of this Section 1.3,
"Working Capital" is the sum of cash, accounts receivable less than 90 days past
due, and inventory, less any trade or other payables, accrued expenses and other
current liabilities. The parties to this Agreement have agreed that the
inventory of the Company has a value of $36,000.
Within 30 days after the Closing Date, Purchaser's accountants will
prepare a balance sheet accurately reflecting the actual Working Capital of the
Company as of June 30, 1998 (the "June Balance Sheet"). The amount of cash
payable to the Shareholders under Section 1.2 above shall be adjusted upward or
downward based upon Working Capital being more or less than $188,000 as set
forth in the June Balance Sheet. Any amounts owed by the Shareholders as a
result of such determination shall be paid to Purchaser within 30 days of
issuance of the June Balance Sheet. Any amount owed by Purchaser to the
Shareholders by reason of such adjustment shall be made within 30 days of the
issuance of the June Balance Sheet, payable as follows:
First, four percent (4%) of the excess Working Capital to Pacific
Acquisition;
Second, seventy-two percent (72%) of the excess Working Capital to
Xxxxxx; and
Third, twenty-four percent(24%) of the excess Working Capital to
Whitney.
1.4 Additional Purchase Price (Earnout). In addition to the purchase
price set forth in Section 1.2 hereof, cash and shares of Purchaser Common Stock
(as specified below) having a value of $250,000 (the "Earnout Proceeds"), shall
be paid by Purchaser to Shareholders as provided herein if Pro Forma TSI and
ATTI achieve certain specified levels of financial performance (Purchaser's
obligation to pay all or a portion of the Earnout Proceeds to Shareholders is
hereinafter referred to as the "Earnout"). For purposes of this Agreement, the
term "Pro Forma TSI" means the Company and all of the Company's income and
expense items accounted for after the Effective Date of the Merger as if the
Merger did not occur. The Earnout will be based on the Financial performance of
Pro Forma TSI over the twelve-month period ending on June 30, 1999, and ATTI
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(including Pro Forma TSI) over each of the succeeding four twelve-month periods
ending on June 30, 2000, 2001, 2002 and 2003. The maximum value of Earnout
Proceeds that can be received by the Shareholders pursuant to the Earnout in
each of the five twelve-month periods is $50,000.
In the first fiscal year after Closing the Earnout will work as
follows: First, Pro Forma TSI must achieve, on a quarterly bis, (a) the gross
revenue (net of sale tax) amounts and (b) the minimum levels of normal operating
earnings before interest, income taxes and amortization ("EBITA") set forth for
quarters 1, 2, 3 and 4 on Schedule 1.4 to this Agreement. Achievement of both
revenue and EBITA targets for a particular fiscal quarter will entitle the
Shareholders to Earnout Proceeds having a value of $12,500. The revenue targets
are accorded a 25% weighting and the EBITA targets are accorded a 75% weighting.
For example, if Pro Forma TSI meets the revenue target for quarter 1 it shall be
entitled to receive Earnout Proceeds having a value of $3,125. If in that same
quarter Pro Forma TSI meets the EBITA target, it shall be entitled to additional
Earnout Proceeds having a value of $9,375. Failure to achieve one of the
financial performance targets in a particular quarter will not prevent the
Shareholders from receiving Earnout Proceeds for meeting the other performance
target for such quarter. If Pro Forma TSI fails to achieve a performance target
in a particular fiscal quarter, it can still receive the Earnout Proceeds
attributable to that quarter if available from revenue or EBITA amounts which
exceed the targeted revenue and EBITA amounts achieved in the following two
fiscal quarters.
In the second through the fifth years of the Earnout, comparable
revenue and EBITA targets shall be agreed upon for ATTI (including Pro Forma
TSI) and the parties agree to negotiate in good faith the amounts of revenue and
EBITA target for ATTI. If the parties fail to so agree on revenue and EBITA
targets for ATTI, the Earnout shall continue to be based upon the revenue and
EBITA targets set forth on Schedule 1.4 with respect to Pro Forma TSI alone.
The EBITA for Pro Forma TSI and ATTI shall be calculated within
one-hundred twenty (120) days of fiscal year ends 1999, 2000, 2001, 2002, and
2003.
For the first three years of the Earnout (those ending June 30,
1999, 2000 and 2001), any portion of the Earnout Proceeds payable to
Shareholders shall be paid in Purchaser Common Stock (based on a fixed price per
share of $126.65). For the final two years of the Earnout (those ending June 30,
2002 and 2003), any portion of the Earnout Proceeds payable to the Shareholders
shall be paid in cash or Purchaser Common Stock at the then-prevailing "market
price", at the election of each of the Shareholders. For purposes of this
Agreement, the term "market price" of Purchaser Common Stock shall mean, for any
date, the average closing sale price of shares of such stock on any stock
exchange during the 30 trading days immediately preceding the date in question
or, if the shares are not listed on any such exchange, the "market value" is the
fair market value on the date in question of the shares as determined in good
faith by the Board of Directors of Purchaser.
1.5 Plan of Merger. As soon as practicable after the execution of
this Agreement, but prior to the Effective Time of the Merger, ATTI and the
Company shall execute the Plan of
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Merger and any and all other documents or instruments as may be required by
Colorado and Minnesota law. If this Agreement terminates and the Closing is not
held hereunder, the Plan of Merger shall be deemed to have been terminated and
abandoned pursuant to Section 2 of the Plan of Merger.
1.6 Release from Guaranties. After Closing, Purchaser will use its
best efforts to obtain the releases of the Shareholders from personal guaranties
given by such Shareholders to equipment suppliers and automobile lessors.
Purchaser agrees to indemnify the Shareholders and hold them harmless from and
against any and all claims, damages, losses, deficiencies, actions, demands,
judgments, costs and expenses (including, without limitation, attorneys' and
accountants' fees) of or against the Shareholders resulting from any guaranty of
obligations of the Company given by the Shareholders prior to the Closing Date.
ARTICLE 2
The Closing
1.7 Closing and Closing Date. Subject to the provisions of Articles
7 and 8 hereof, the closing (the "Closing") of the Merger will take place at
Purchaser's offices on June 18, 1998 or at such other place, at such other time,
or on such other date as the Company, the Shareholders and Purchaser may
collectively agree. The date on which the Closing takes place is referred to as
the "Closing Date."
1.8 Closing Deliveries. At the Closing:
(1) The executed Plan of Merger (together with the articles of
merger) satisfying the requirements of Colorado and Minnesota law shall be
filed by ATTI and the Company with the Secretaries of State of Colorado
and Minnesota.
(2) The Shareholders will execute and deliver to Purchaser 395
shares of Purchaser Common Stock to Purchaser together with Stock powers
exercised in blank.
(3) Purchaser and/or ATTI shall deliver to the Company and the
Shareholders the following:
(1) the certificates and other documents and instruments
referred to in Article 8 hereof;
(2) a true and complete copy of the Articles of Incorporation
of each of Purchaser and ATTI, including all amendments thereto, as
certified to by an appropriate governmental official;
5
(3) a copy of the resolutions adopted by the Board of
Directors of each of Purchaser and ATTI authorizing the execution
and delivery of this Agreement and the consummation of the Merger
and other transactions contemplated hereby, as certified to by the
Secretary of Purchaser and ATTI, respectively;
(4) an opinion of counsel for Purchaser and ATTI in
substantially the form of Exhibit B --------- attached hereto; and
(5) payment by ATTI of the amounts payable in respect of
accrued vacation pay as described in Section 12.3 of this Agreement.
(4) The Company and the Shareholders shall deliver to Purchaser the
following:
(1) the certificates and other documents and instruments
referred to in Article 7 hereof;
(2) A true and complete copy of the Articles of Incorporation
of the Company, including all amendments thereto, as certified to by
an appropriate governmental official, and a true and complete copy
of the By-Laws of the Company, as certified to by the Secretary of
the Company;
(3) A true and complete copy of each material contract,
agreement, commitment or plan described on any Schedule hereto;
(4) A copy of the resolutions adopted by the Board of
Directors of the Company authorizing the execution and delivery of
this Agreement and the Plan of Merger by the Company and the
consummation of the Merger and other transactions contemplated
hereby, as certified to by the Secretary of the Company;
(5) The resignations of the directors and officers of the
Company, effective as of the Closing Date;
(6) an opinion of counsel for the Company and Shareholders in
substantially the form of Exhibit C attached hereto;
(7) Noncompetition Agreements executed by Shareholders; and
(8) Employment letter agreements executed by Shareholders.
(9) Addendum to Stockholders Agreement executed by
Shareholders.
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ARTICLE 3
Pre-Closing Deliveries and Filings
1.9 Company Deliveries.
(1) The Company has heretofore delivered to Purchaser and ATTI, the
financial statements of the Company for the fiscal years ended December,
1995, 1996, and 1997 and the fiscal quarter ended March 31, 1998
(collectively, the Financial Statements"). The balance sheet of the
Company as of December 31, 1997 is hereinafter referred to as the "Balance
Sheet" and December 31, 1997 is hereinafter referred to as the "Balance
Sheet Date."
(2) The Company and the Shareholders shall prepare and deliver to
Purchaser all of the Schedules to this Agreement by June 15, 1998, and
shall from time to time prior to Closing promptly amend, supplement and
update the Schedules as necessary.
1.10 Other Filings. The Company and Purchaser agree to use all
commercially reasonable efforts to (a) promptly file, or cause to be promptly
filed, with any United States agency or any state or local governmental body or
agency, all such notices, applications or other documents as may be necessary to
consummate the transactions contemplated hereby; and (b) thereafter diligently
pursue all consents or approvals from any such governmental agencies or bodies
as may be necessary to consummate the transactions contemplated hereby.
ARTICLE 4
Pre-Closing Covenants
1.11 Pending Closing. From the date hereof until the Closing Date,
except as set forth on Schedule 4.1 or as otherwise required by this Agreement,
the Company shall, unless Purchaser shall otherwise agree in writing:
(1) carry on the business of the Company in the ordinary course;
(2) continue to insure the Company and its properties substantially
in accordance with its past practices;
(3) use reasonable efforts to preserve the Company's business
organization intact, keep available the Company's present management and
employees, and preserve the Company's present relationships with its
suppliers and customers and others with which it has business
relationships;
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(4) not solicit, initiate or intentionally encourage the submission
of offers or proposals from any Person (other than Purchaser and ATTI) for
the acquisition of the stock or any significant portion of the assets or
business of the Company;
(5) not issue, sell or otherwise dispose of any of its shares of
capital stock or grant any options, warrants or other rights to acquire
any of its shares of capital stock;
(6) not declare or pay any cash or non-cash dividends on its capital
stock or any other cash or non-cash distributions in respect of its
capital stock;
(7) pay all trade accounts and other accounts payable of the Company
when due in the ordinary course or in accordance with past practices
(provided that such practices are and have been reasonably acceptable to
the Company's creditors in the past);
(8) not extend or shorten the time for payment of the Company's
accounts receivable other than in accordance with past practices or in the
ordinary course;
(9) not (i) issue any debt securities or (ii) incur any indebtedness
for money borrowed whether long or short term other than trade payables
incurred in the ordinary course;
(10) not incur or agree to incur any obligations or liabilities
except current liabilities accrued in the ordinary course of business,
none of which materially adversely affect the Company's business or
assets;
(11) not sell, lease or otherwise dispose or agree to sell, lease or
otherwise dispose of any of its assets except sales of inventory to end
user customers at standard industry prices and terms, in the ordinary
course of business;
(12) not make any change in the rate of compensation, commission,
bonus or other remuneration payable or paid or agreed to be paid to any of
its employees; and
(13) make any write down or write up of the value of any of its
inventory.
If there is a breach of this Section 4.1(d), and the Closing is not
consummated, the Company and Shareholders jointly and severally agree to
pay Purchaser damages in the amount of $50,000 in cash plus all of
Purchaser's out-of-pocket expenses (including, but not limited to,
attorneys' and accountants' fees and expenses).
1.12 Interim Financial Information. The Company shall deliver to
Purchaser such financial information that is available to the Company and which
Purchaser shall reasonably request,
8
reflecting the results of operations for the Company subsequent to March 31,
1998, but prior to the Closing.
ARTICLE 5
Warranties and Representations of the Company and the Shareholders
The Company and the Shareholders jointly and severally warrant and
represent to and covenant with Purchaser as follows:
1.13 Duly Organized. The Company is a corporation, duly
incorporated, validly existing and in good standing under Colorado law. The
Company has the corporate power and holds all rights, privileges, franchises,
immunities, licenses, permits, authorizations and approvals (governmental or
otherwise) necessary to own and operate its properties and to conduct its
business as presently conducted, the failure of which to hold would have an
adverse effect on the financial condition or operations of the Company.
1.14 Qualification. Except as set forth in Schedule 5.2, the Company
is duly qualified to do business and in good standing as a foreign corporation
in each jurisdiction in which the nature or location of the Company's business
or properties requires such qualification, except such jurisdictions in which
the failure so to qualify is not likely to have a material adverse effect on the
financial condition or operations of the Company.
1.15 Investments. Except as set forth on Schedule 5.3, the Company
does not own, and on the Closing Date will not own, any securities or any other
direct or indirect interest in any person or entity.
1.16 Capital Stock.
(1) The total number of shares of capital stock and the par value
thereof which the Company is authorized to issue, the number of such
shares which are issued and outstanding, and the number of treasury shares
are set forth on Schedule 5.4. All of the issued and outstanding shares of
the Company's Common Stock are now, and will on the Closing Date, be owned
by the Shareholder and will be transferred to the Purchaser free and clear
of all mortgages, pledges, liens, security interests, restrictions,
adverse claims or charges or third party rights of any kind.
(2) Except as set forth on Schedule 5.4, there are no outstanding
options, conversion rights, warrants or other rights in existence to
acquire from the Company any of its shares of capital stock.
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(3) The issued and outstanding shares of capital stock of the
Company as of the date hereof and as of the Closing Date have been and
will be duly and validly issued and are fully paid and nonassessable and
have not been issued in violation of, and are not subject to, any
preemptive rights, and, except as set forth on Schedule 5.4, there are no
voting trust agreements or other contracts, agreements or arrangements to
which either the Company or either of the Shareholders is a party
restricting voting or dividend rights or transferability with respect to
the outstanding shares of capital stock of the Company.
1.17 Due Authorization. The Company has all right, power and
authority required for it to enter into, and, subject to the requisite approval
of the Shareholders, to perform its obligations under this Agreement and the
Plan of Merger; the Company has taken all corporate actions on its part
necessary or appropriate to execute, deliver and perform this Agreement and the
Plan of Merger and to consummate the Merger, and this Agreement has been duly
authorized, executed and delivered by the Company and is binding upon and
enforceable against the Company in accordance with its terms and conditions,
and, when executed and delivered by the Company, the Plan of Merger will be duly
authorized, executed and delivered by the Company and will be binding upon, and
enforceable against, the Company in accordance with its terms and conditions.
1.18 No Conflicts. Except as set forth on Schedule 5.6, neither the
execution or delivery by the Company of this Agreement or the Plan of Merger,
nor the performance by the Company of its obligations hereunder or thereunder,
does or will, after the giving of notice, or the lapse of time, or otherwise:
(1) conflict with, result in a breach of, or constitute a default
under, the Articles of Incorporation or By-Laws of the Company or (i) any
federal, state or local law, statute, code, ordinance, rule or regulation
applicable to it, (ii) any federal, state or local court or administrative
order or process to which the Company is a party or is bound, or (iii) any
material contract, agreement, arrangement, commitment, or plan to which
the Company is a party, or under which the Company may be obligated, or by
which the Company or any of its material rights, properties or assets may
be subject or bound;
(2) result in the creation of any mortgage, pledge, lien, claim,
charge, encumbrance or assessment upon any of the material rights,
properties or assets of the Company; or
(3) terminate, amend or modify, or give any party the right to
terminate, amend, modify, abandon or refuse to perform or comply with, any
material contract, agreement, arrangement, commitment or plan to which the
Company is a party, or under which the Company may be obligated, or by
which the Company or any of the rights, properties or assets of the
Company may be subject or bound.
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1.19 Good Title. On the Balance Sheet Date, the Company had, and on
the date hereof has, and on the Closing Date will have, good and marketable
title to all the properties and assets reflected on the Balance Sheet, subject
to no mortgages, pledges, security interests, liens, encumbrances or other
charges of any kind, except (a) as to personal property sold or otherwise
disposed of after the Balance Sheet Date in the ordinary course of business; (b)
mechanics', carriers', workmen's, repairmen's or other like liens arising or
incurred in the ordinary course of business; (d) liens for taxes, assessments
and other governmental charges which are not yet due and payable; and (d) other
imperfections of title or encumbrances which do not materially impair the use
and operations of the Company's assets or properties to which they relate in the
operation of the Company's business as presently conducted.
1.20 Real Property. Schedule 5.8 contains a true and complete list
and brief description of all real property owned or leased by the Company,
either as lessor or lessee.
1.21 Litigation. Except as set forth on Schedule 5.9 there are no
actions, suits or proceedings pending, threatened in writing against the
Company, at law or in equity, before any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, which if determined adversely to the Company would have a
material adverse effect on the financial condition or operations of the Company.
Except as set forth on Schedule 5.2, the Company is not operating under, or
subject to, any governmental order, writ, injunction or decree.
1.22 Compliance with Laws. The Company is not conducting its
business or affairs in violation of any applicable federal, state or local law,
statute, ordinance, rule, permit or regulation except (a) as set forth on
Schedule 5.10 or (b) for violations which individually or in the aggregate would
not have a material adverse effect on the financial condition or operations of
the Company.
1.23 Labor Matters. Except as set forth on Schedule 5.11, there is
no labor dispute, grievance, strike or request for union representation
affecting any of the Company's employees generally pending, or threatened
against the Company. The Company is not a party to any collective bargaining
agreement and no such contract is currently being negotiated with the Company.
No representation question exists or has been raised respecting the employees of
the Company, nor are there any campaigns being conducted to solicit cards from
the employees of the Company to authorize representation by any labor
organization.
1.24 Financial Statements. The Financial Statements were prepared
from the Company's books and records consistent with historical accounting
practices and present fairly in all material respects the financial position,
results of operations and changes in cash flows of the Company at the dates and
for the periods indicated therein. The accounts receivable reflected in the
Financial Statements were generated in the ordinary course and are collectible,
subject to the reserves in the Financial Statements for doubtful accounts.
11
1.25 Undisclosed Balance Sheet Liabilities. Except as set forth on
Schedule 5.13,
(1) on the Balance Sheet Date, the Company did not have any material
liability of a nature required to be reflected on a balance sheet prepared
in accordance with generally accepted accounting principles, which was not
disclosed, reflected or reserved against in the Balance Sheet; and
(2) except for liabilities which have been incurred in the ordinary
course of business, since the Balance Sheet Date, the Company has not
incurred any material liability of any nature which would be required to
be reflected on a balance sheet prepared in accordance with generally
accepted accounting principles.
1.26 Changes Since Balance Sheet Date. Since the Balance Sheet Date,
the Company has conducted its business in the ordinary course, and, except as
contemplated by this Agreement or as set forth on Schedule 5.14, there has not
been any:
(1) material adverse change in the financial condition or business
of the Company other than changes relating to general economic conditions
or developments affecting the Company's industry generally;
(2) sale, assignment, transfer, mortgage, pledge or lease of any
material amount of assets of the Company, except in the ordinary course of
business;
(3) declaration, payment or distribution in respect of, or purchase
or redemption of, any shares of the Company's capital stock;
(4) capital expenditures by the Company in excess of $5,000 for any
single item or $20,000 in the aggregate;
(5) damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of
the Company;
(6) loan by the Company to any Person or guaranty by the Company of
any loan, other than routine advances to employees in the ordinary course
of business;
(7) amendment of the Articles of Incorporation or By-Laws of the
Company; or
(8) agreement by the Company to do any of the foregoing.
12
1.27 Contracts.
(1) All contracts and agreements which are material to the financial
condition or operations of the Company (collectively, "Contracts") are
described on Schedule 5.15, except for the following contracts and
agreements which are not required to be set forth on Schedule 5.15: (i)
normal purchase and sale commitments heretofore or hereafter entered into
in the ordinary course of business; (ii) any Contract that involves an
aggregate commitment by the Company of less than $10,000; and (iii) any
Contract which is terminable by the Company by notice of not more than 30
days for a cost of less than $10,000.
(2) Each Contract listed on Schedule 5.15 is in full force and
effect. The Company has performed in all material respects all obligations
required to be performed by it to date under the Contracts and it is not
(with or without the lapse of time or the giving of notice, or both) in
breach or default thereunder.
1.28 Intellectual Property.
(1) Schedule 5.16 sets forth all patents, trade names, service marks
and copyrights (whether or not such trademarks, trade names, service marks
and copyrights are registered), and all pending applications therefor,
owned by the Company, or in which the Company has any interest, which are
material to the business of the Company.
(2) There is not any claimed or actual infringement or
misappropriation by the Company of any valid patent, trademark, trade
name, service xxxx or copyright which relates to the business of the
Company and which is owned by any third party, and which will have a
material adverse effect on the financial condition or operations of the
Company.
(3) Except as set forth on Schedule 5.16, there is no pending or
threatened claim asserted in writing by the Company against others for
infringement or misappropriation of any patent, trademark, trade name,
service xxxx or copyright owned by the Company.
(4) Except as set forth on Schedule 5.16, all applications to
register patents, trademarks, trade names, service marks or copyrights
which have been filed by or on behalf of the Company, and any resulting
registrations are owned by the Company, free and clear of any security
interest, lien, encumbrance or any interest of any nature of any third
party.
1.29 Taxes. The Company has timely filed without extensions or will
file all foreign, federal, state and local tax returns and estimates for all
years and periods (and portions thereof) through the Closing Date for which any
such returns, reports or estimates were due or will be due and any and all
amounts shown on such returns and reports to be due and payable through the
Closing Date have been or will be paid in full, and since the Balance Sheet
Date, the Company has not incurred any liability with respect to any taxes based
on income, gross revenues, gross
13
receipts, purchases, sales, business, capital stock or surplus, properties or
assets of the Company except in the ordinary course of business. The federal
income tax returns of the Company have never been examined by the Internal
Revenue Service. Except as set forth on Schedule 5.17, there are no pending
audits, investigations or examinations, by any federal, state, local or foreign
taxing authority of any payment, return or report made or filed by the Company
nor has there been any claim made against the Company alleging a failure to pay
or report any kind of tax which may be assessed by any such taxing authority
against the Company. Schedule 5.17 sets forth the states in which the Company
has made sales during the past three years.
1.30 Employee Plans.
(1) For the purposes of this Section 5.18, the term "Employee Plan"
includes all pension, retirement, disability, medical, dental or other
health insurance plans, life insurance or other death benefit plans,
profit sharing, deferred compensation, stock option, bonus or other
incentive plans, vacation benefit plans, severance plans, or other
employee benefit plans or arrangements, including, without limitation, any
pension plan as defined in Section 3(2) of The Employee Retirement Income
Security Act of 1974 ("ERISA") and any welfare plan as defined in Section
3(1) of ERISA, whether or not funded, to which the Company is a party.
(2) There are no Employee Plans other than those set forth on
Schedule 5.18.
(3) Prior to the date hereof, the Company has delivered to Purchaser
a copy of each Employee Plan set forth on Schedule 5.18.
(4) The Company does not maintain any "pension plans" as defined in
Section 3 (2) of ERISA other than those set forth on Schedule 5.18.
(5) Each Employee Plan, if any, and the administrators and
fiduciaries of each Employee Plan and the Company have complied, in all
material respects, with all applicable requirements of ERISA and of any
other applicable law (including regulations and rulings thereunder)
governing each Employee Plan.
(6) The Company has no obligation. to contribute to a
"Multi-Employer Plan," as defined in Section 3(37) of ERISA.
(7) No "reportable event" (as defined in ERISA) has occurred with
respect to any Employee Plan.
1.31 Insurance. The Company has in full force and effect all
policies of insurance set forth on Schedule 5.19; the Company will have in full
force and effect on the Closing Date such policies of insurance or policies of
insurance of substantially the same character and coverage AS
14
those set forth on Schedule 5.19; and the Company will notify Purchaser in
writing of any changes in such insurance coverage occurring prior to the Closing
which would have a material adverse effect on the financial condition or
operations of the Company.
1.32 Restrictions on Subsequent Dispositions. Each of the
Shareholders receiving shares of Purchaser's Common Stock in the Merger agrees
not to dispose of any shares in a manner that would cause the Merger to violate
the continuity of Shareholder interest requirements set forth in Treasury
Regulation ss. 1.368-1. Each of the Shareholders acknowledges that his right to
transfer any shares of Purchaser Common Stock will be further restricted
contractually pursuant to the terms of Purchaser's Stockholders Agreement dated
July 1, 1996, to which each Shareholder will become a party upon the Closing
Date. Each of the Shareholders receiving shares of Purchaser's Common Stock in
the Merger represents that such shares are being purchased for his own account
and for investment and without the intention of reselling or redistributing the
same; each such Shareholder further acknowledges that the shares to be received
in the Merger have not been registered under the Securities Act of 1933 or
relevant state securities laws and are, therefore, restricted.
1.33 Condition of Assets. Except as set forth in Schedule 5.21, all
of the tangible personal property of the Company is (i) in good operating
condition and repair, ordinary wear and tear excepted and (ii) maintained in
accordance with sound maintenance practices. The Company's assets are sufficient
for the operation of its business in the ordinary course and are suitable for
the purpose for which they are being used. The amount of the Company's inventory
and supplies currently on hand (i) is sufficient for the operation of the
Company's business in the ordinary course based on current levels of operation;
(ii) has been purchased in the ordinary course of business; (iii) is consistent
in quality and quantity with past practices of the Company; and (iv)is not
obsolete and is of a quality and quantity usable and salable in the ordinary
course of business within twelve (12) months subsequent to the Closing. All
property leased by the Company is in the condition required of such property by
the terms of the lease applicable thereto during the term of the lease and upon
the expiration thereof. None of the Shareholders has any direct or indirect
interest in any right, property or asset used or required by the Company in the
conduct of its business.
1.34 Transactions with Affiliates. Except as disclosed in Schedule
5.22, since December 31, 1992, no stockholder, director, officer or employee of
the Company, nor any ancestor, sibling, descendent or spouse (an "Affiliate") of
any such person, or any trust, partnership or corporation in which any of such
persons or their Affiliates have a material interest, has had: (i) except for
passive investments, any interest in any entity which has purchased, sold or
furnished to the Company any goods or services; (ii) a beneficial interest in
any lease, contract, commitment or understanding to which the Company is a party
or by which it is bound or affected; (iii) except for salary and bonuses in the
ordinary course of business consistent with past practices, any interest or
claim against the Company or any assets of the Company; or (iv) any interest in
any assets used in the business of the Company.
15
1.35 Products. Except as disclosed in Schedule 5.23, no claim for
product liability has ever been asserted against the Company and no event has
occurred which might give rise to the assertion of any such claim. There is no
deficiency or inadequacy in the manufacture, design or formulation of any of the
Company's products which may hereafter give rise to any such failure or result
in any such claim.
1.36 Product Warranties. All products sold and services provided by
the Company (and the delivery thereof) have been in conformity with all
applicable contractual commitments and all express or implied warranties by the
Company and its suppliers. No liability for any warranty claims exist for the
repair or replacement thereof or other damages in connection with such services,
sales or deliveries, except for any such claims incurred in the ordinary course
of business consistent in amount and character with past experience of the
Company. Copies of the standard terms and conditions of sale, delivery or lease
of the Company (including, without limitation, all warranty provisions) are
attached hereto as Schedule 5.24.
1.37 Employees. Attached Schedule 5.25 lists:
(1) all employee handbooks and/or manuals relating to the employees
of the Company, true and correct copies of which have been delivered to
Purchaser; and
(2) all employees of the Company, together with their job
descriptions, rates of salary or wages, vacation benefits, and each bonus,
deferred compensation, stock option, incentive compensation, severance or
termination pay agreement or employment benefit applicable to each such
employee, whether formal or informal and whether legally binding or not.
16
1.38 Compliance with Environmental Laws.
(1) Neither the Company, any Shareholder nor, to the Shareholders'
knowledge, any other user or owner of the Company's leased real property
(the "Real Estate") has violated or been threatened with or received a
notice, directive, violation report or charge asserting any violation of
the Federal Solid Waste Disposal Act, the Federal Clean Air Act, the
Federal Clean Water Act, the Federal Resource Conservation Recovery Act of
1976 ("RCRA"), the Federal Comprehensive Environmental Responsibility,
Cleanup and Liability Act of 1980 ("CERCLA"), the Toxic Substance Control
Act of 1976, or any other Laws regulating or otherwise affecting or
relating to the environment ("Environmental Laws"), as the same may have
been amended. To the Shareholder's knowledge, no action has been taken
against the Real Estate, any Shareholder, the Company or any other user or
owner of the Real Estate by any federal, state or local department or
agency concerning any Environmental Laws. To the Shareholders' knowledge
the Real Estate and the Company are, and at all times in the past have
been, in compliance with all Environmental Laws. No assets of the Company
are required to be upgraded, modified or replaced to be in compliance with
Environmental Laws.
(2) Neither the Company, any Shareholder nor, to the Shareholders'
knowledge, any user or owner of the Real Estate has generated, stored,
used, disposed of, spilled, discharged or released any substance in any
manner on the Real Estate and the improvements thereon or on property
adjacent to the Real Estate or performed an environmental cleanup on the
Real Estate or adjacent property which may form the basis for any present
or future claim against the Company based upon Environmental Laws, or any
demand or action seeking cleanup of any site, location or body of water,
surface or subsurface, under any Environmental Laws, or otherwise, or
which may subject the Company and/or Purchaser to claims for damages.
(3) To the Shareholders' knowledge, (i) no septic systems or xxxxx
exist on, in or under any of the Real Estate; (ii) the Real Estate has
never been used as a landfill, dump site or any other use which involves
the disposal of solid waste on the Real Estate in a manner which may
subject the Company to any claim for cleanup or damages under
Environmental Laws; and (iii) no hazardous or toxic substances or waste,
as defined under Environmental Laws, are located at, on or under any of
the Real Estate, or have been used, generated, treated, stored, disposed
of, handled or removed from any of the Real Estate.
(4) To the Shareholders' knowledge, (i) no above ground or
underground storage tanks have ever been located at, on or under any of
the Real Estate; (ii) at no time prior to or during the Company's use of
the Real Estate have hazardous or toxic substances or wastes, as defined
under Environmental Laws, been spilled, discharged, leaked, discarded,
released or otherwise deposited on any of the Real Estate;
and (iii) none of the Real Estate
17
is contaminated by hazardous or toxic substances or wastes, as defined
under Environmental Laws, originating from off-site sources.
(5) No environmental claims have been asserted or are threatened or
are anticipated to be asserted against the Company with respect to the
Real Estate, any of its assets and/or the operation of its business.
The phrase "to the Shareholders' knowledge," as used in this Section 5.26, means
the actual knowledge of either Shareholder without having made independent
inquiry concerning the factual matters referred to in this Section.
1.39 Licenses; Permits. Except as disclosed in Schedule 5.2, the
Company is in compliance with and has all permits, registrations and
authorizations required by all applicable Laws in the operation of the Company's
business. Attached hereto as Schedule 5.27 is a true and complete list of all
licenses, permits, registrations and authorities issued or granted to the
Company by local, state or federal government authorities or agencies. The
Company is not in breach or violation of any applicable Law relating thereto and
all such licenses, registrations, permits and authorities are current and
effective.
1.40 Customers; Suppliers. Schedule 5.28 attached hereto sets forth,
with respect to the last three (3) fiscal years of the Company, a list of the
ten (10) largest customers of the Company determined by dollar amount of goods
purchased from the Company. The Company and the Shareholders have received no
notice or indication, and have no reason to believe, that any customer, supplier
or third party to material contracts of the Company intends to cease doing
business or reduce in any material respect the business transacted with the
Company or to terminate or modify any agreements with the Company (whether as a
result of consummation of the transactions contemplated hereby or otherwise).
1.41 Accounts; Safe Deposit Boxes. Attached hereto as Schedule 5.29
is (i) a true and complete list of the bank and savings accounts, certificates
of deposit and safe deposit boxes of the Company and those persons authorized to
sign thereon, and (ii) true and correct copies of all corporate borrowing,
depository and transfer resolutions and those persons entitled to act
thereunder.
1.42 Warranties True and Correct. No warranty or representation by
the Shareholders contained in this Agreement or in any writing to be furnished
pursuant hereto contains or will contain any untrue statement of fact or omits
or will omit to state any material fact required to make the warranties or
representations herein or therein contained not misleading. The Company and the
Shareholders have disclosed to Buyer all material adverse facts known to the
Company or the Shareholders relating to the Company, its assets or business.
18
ARTICLE 6
Warranties and Representations of
Purchaser and ATTI
Purchaser and ATTI warrant and represent to and covenant with the
Company and the Shareholders as follows:
1.43 Duly Organized. Purchaser and ATTI are corporations duly
incorporated, validly existing and in good standing under the laws of Minnesota.
Each of Purchaser and ATTI has the corporate power and holds all rights,
privileges, franchises, immunities, licenses, permits, authorizations and
approvals (governmental or otherwise) necessary to own and operate its
properties and to conduct its business as presently conducted, the failure of
which to hold would have a material adverse effect on the financial condition or
operations of either Purchaser or ATTI.
1.44 Due Authorization. Each of Purchaser and ATTI has all right,
power and authority required for it to enter into and perform its obligations
under this Agreement and, in the case of ATTI, the Plan of Merger. Upon approval
of this Agreement by the Boards of Directors of Purchaser and ATTI, each of
Purchaser and ATTI will have taken all corporate actions on its part necessary
or appropriate to execute, deliver and perform this Agreement and, in the case
of ATTI, to consummate the Merger, and this Agreement will have been duly
authorized, executed and delivered by each of Purchaser and ATTI and will be
binding upon, and enforceable against it in accordance with its terms and
conditions; and, when executed and delivered by ATTI, the Plan of Merger will be
duly authorized, executed and delivered by ATTI and will be binding upon, and
enforceable against, ATTI in accordance with its terms and conditions.
1.45 No Conflicts. The execution and delivery of this Agreement by
Purchaser and ATTI, and the execution and delivery of the Plan of Merger by
ATTI, and the performance of their respective obligations hereunder and under
the Plan of Merger, will not conflict with or constitute a default under the
Articles of Incorporation or By-Laws of Purchaser or ATTI or to the knowledge of
Purchaser or ATTI, any material contract, agreement, note, debt instrument,
security agreement, mortgage, arrangement, commitment or plan to which Purchaser
or ATTI is a party, or under which Purchaser or ATTI may be obligated, or by
which Purchaser or ATTI or any of its material rights, properties or assets may
be subject or bound.
1.46 Litigation. There are no actions, suits or proceedings pending,
or to the knowledge of Purchaser and ATTI, threatened in writing against
Purchaser or ATTI, at law or in equity, before any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which if determined adversely to Purchaser
or ATTI, would have a material adverse effect on the ability of Purchaser or
ATTI to perform its respective obligations hereunder.
19
ARTICLE 7
Conditions of Closing Applicable to
Purchaser and ATTI
The obligations of Purchaser and ATTI under this Agreement are
subject to the following conditions precedent:
1.47 No Termination. Neither Purchaser nor the Company shall have
terminated this Agreement pursuant to Section 9.1 hereof.
1.48 Bring-Down of Warranties. The warranties and representations
made herein by the Company and the Shareholders to Purchaser and ATTI shall be
true and correct in all material respects on and as of the Closing Date with the
same effect as if such warranties and representations had been made on and as of
the Closing Date, and the Company and the Shareholders shall have performed and
complied in all material respects with all agreements, covenants and conditions
on their respective parts required to be performed or complied with on or prior
to the Closing Date; and at the Closing, Purchaser and ATTI shall have received
a certificate executed by the Company and the Shareholders to the foregoing
effect.
1.49 No Injunction. No court or other governmental Person shall have
issued an order which shall be in effect on the Closing Date restraining or
prohibiting the consummation of the transactions contemplated hereby.
1.50 Necessary Proceedings. All proceedings to be taken in
connection with the consummation of the transactions contemplated by this
Agreement and all documents incident thereto shall be reasonably satisfactory in
all material respects and in form and substance to Purchaser and its counsel,
and Purchaser shall have received copies of such documents as Purchaser and its
counsel may reasonably request in connection with said transactions.
1.51 Regulatory Approval. The approval or consent of all United
States agencies and all state and local governmental bodies and agencies as may
be necessary to consummate the transactions contemplated hereunder shall have
been received.
1.52 Schedules. All amendments or supplements to the Schedules
hereto made by the Company pursuant to Section 3.1(b) hereof which are
individually or in the aggregate material to the business, operations or
financial condition of the Company shall be acceptable to Purchaser and ATTI.
1.53 Resignations. The directors and officers of the Company shall
have resigned their positions as such as of the Closing Date.
20
1.54 Addendum to Stockholders Agreement. The Shareholders shall have
executed and delivered to Purchaser an Addendum to Stockholders Agreement in the
form submitted by Purchaser, pursuant to which each of the Shareholders agrees
to become a party to the Stockholders Agreement and be bound by all of the terms
thereof.
Except for the condition set forth in Section 7.5 hereof, Purchaser
and ATTI shall have the right to waive any of the foregoing conditions
precedent.
ARTICLE 8
Conditions to Closing Applicable to the Company and the Shareholders
The obligations of the Company and the Shareholders under this
Agreement are subject to the foregoing conditions precedent:
1.55 No Termination. Neither Purchaser nor the Company shall have
terminated this Agreement pursuant to Section 9.1 hereof.
1.56 Bring-Down of Warranties. All warranties and representations
made by Purchaser and ATTI herein to the Company shall be true and correct in
all material respects on and as of the Closing Date with the same effect as if
such warranties and representations had been made on and as of the Closing Date,
and Purchaser and ATTI shall have performed and complied in all material (except
for the payment obligations which shall be absolute) with all agreements,
covenants and conditions on their part required to be performed or complied with
on or prior to the Closing Date; and at the Closing, the Company shall have
received a certificate executed by the President or any Vice President of each
of Purchaser and ATTI to the foregoing effect.
1.57 No Injunction. No court or other governmental Person shall have
issued an order which shall be in effect on the Closing Date restraining or
prohibiting the consummation of the transactions contemplated hereby.
1.58 Necessary Proceedings. All proceedings to be taken in
connection with the consummation of the transactions contemplated by this
Agreement (including the approval of this Agreement by the Board of Directors of
Purchaser and ATTI) and all documents incident thereto shall be reasonably
satisfactory in all material respects and in form and substance to the Company,
the Shareholders and their respective counsel, and the Company, the Shareholders
and such counsel shall have received copies of such documents as they and
counsel may reasonably request in connection with the transactions.
21
1.59 Regulatory Approval. The approval or consent of all United
States agencies and all state and local governmental bodies and agencies as may
be necessary to consummate the transactions contemplated hereunder shall have
been received.
Except for the condition set forth in Sections 8.5 hereof, the
Company and the Shareholders shall have the right to waive any of the foregoing
conditions precedent.
ARTICLE 9
Termination
1.60 Termination Events. This Agreement may be terminated at any
time prior to the Closing as follows, and in no other manner:
(1) By mutual agreement of Purchaser and the Company (and the
Shareholders);
(2) By Purchaser or the Company (and the Shareholders), if at or
before the Closing any condition set forth herein for the benefit of
Purchaser or the Company (and the Shareholders), respectively, shall not
have been timely met and cannot be met on or before the Closing Date and
has not been waived, provided that the terminating party has not defaulted
in any material respect in the performance of any of its obligations under
this Agreement;
(3) By Purchaser or the Company, if the Closing of the transactions
contemplated by this Agreement shall not have occurred on or before June
30, 1998, or such later date as may have been agreed upon in writing by
the parties hereto, provided that any such failure to close is not due to
any default in any material in the performance of any obligation under
this Agreement by the terminating party;
(4) By Purchaser, if any warranty or representation made herein for
the benefit of Purchaser or in any certificate, schedule, or documents
furnished to Purchaser pursuant to this Agreement is untrue in any
material respect or the Company or the Shareholders shall have defaulted
in any material respect in the performance of any material obligation
under this Agreement;
(5) By the Company, if the board of Directors of Purchaser and/or
ATTI have not approved this Agreement (and notified the Company of the
same in writing) on or before June 18, 1998.
22
1.61 Effects of Termination.
(1) In the event of any termination of this Agreement pursuant to
Section 9.1, this Agreement shall forthwith become void and have no
further effect, and there shall be no liability on the part of any party
hereto.
(2) Notwithstanding any other provision of this Agreement, no
termination of this Agreement shall release any party from liability for
any breach of its obligations hereunder or any misrepresentation or other
violation of the terms and conditions of this Agreement.
ARTICLE 10
Indemnification
1.62 Indemnification of Purchaser. The Shareholders jointly and
severally agree to indemnify Purchaser and to hold it harmless from and against
any and all damages, losses, deficiencies, actions, demands, judgments, costs
and expenses (including, without limitation, attorneys' and accountants' fees)
(collectively, "Losses") of or against Purchaser or ATTI resulting from:
(1) any misrepresentation or breach of any warranty or
representation of the Company or the Shareholders, or any of them, in this
Agreement or in any document, instrument or agreement executed and/or
delivered pursuant to or in connection with this Agreement by
Shareholders;
(2) any breach or nonfulfillment of any agreement or covenant of the
Company or the Shareholders, or any of them, contained in this Agreement
or in any certificate, document or instrument executed and/or delivered
pursuant to or in connection with this Agreement by Shareholders;
(3) any assessments, claims or liabilities (including interest and
penalties) for federal, state or local income, sales, use, franchise or
other taxes relating to, imposed upon or assessed against the sales,
income, property or business of the Company for all periods prior to the
Closing Date, except for any federal, state or local tax liabilities which
are identified as such and fully reflected as a current liability on the
Balance Sheet; and
(4) third party claims (including fines and penalties sought to be
imposed or enforcement proceedings commenced by governmental agencies)
based upon, alleging or arising out of any act, omission or occurrence on
or before the Closing Date, including, without limitation, any claim for
nonperformance or breach of contract, any claim for worker's compensation
or unemployment compensation, and/or claims for personal injury or for
property damage.
23
1.63 Indemnification of Shareholders. Purchaser agrees to indemnify
the Shareholders and to hold them harmless from and against any and all Losses
of or against the Shareholders resulting from:
(1) any misrepresentation or breach of any warranty or
representation of Purchaser in this Agreement or in any document,
instrument or agreement executed and/or delivered by Purchaser pursuant to
or in connection with this Agreement;
(2) any breach or nonfulfillment of any agreement or covenant of the
Purchaser contained in this Agreement or in any certificate, document or
instrument executed and/or delivered by Purchaser pursuant to or in
connection with this Agreement; and
(3) third party claims (including fines and penalties sought to be
imposed or enforcement proceedings commenced by governmental agencies)
based upon, alleging or arising out of any act, omission or occurrence
after the Closing Date, including, without limitation, any claim for
nonperformance or breach of contract, any claim for worker's compensation
or unemployment compensation, and/or claims for personal injury or for
property damage.
1.64 Procedure Relative to Indemnification.
(1) If a party shall claim that it is entitled to be indemnified
pursuant to the terms of this Article, it (the "Claiming Party") shall so
notify the party or parties against which the claim is made (the
"Indemnifying Party") in writing of such claim within sixty (60) days
after the Claiming Party receives notice of any action, proceeding, demand
or assessment or otherwise has received notice of any claim of a third
party that may reasonably be expected to result in a claim for
indemnification by the Claiming Party against the Indemnifying Party;
provided, however, that failure to give such notification shall not affect
the indemnification provided hereunder except to the extent the
Indemnifying Party is actually prejudiced as a result of such failure.
Such notice shall specify the breach of representation, warranty or
agreement claimed by the Claiming Party and the Losses incurred by or
imposed upon the Claiming Party on account thereof. If such Losses are
liquidated in amount, the notice shall so state and such amount shall be
deemed the amount of the claim of the Claiming Party. If the amount is not
liquidated, the notice shall so state and in such event a claim shall be
deemed asserted against the Indemnifying Party on behalf of the Claiming
Party, but no payment shall be made on account thereof until the amount of
such claim is liquidated and the claim is finally determined.
(2) The following provisions shall apply to any claim of the
Claiming Party which is based upon (i) a suit, action or proceeding filed
or instituted by any third party, or (ii) any form of proceeding or
assessment instituted by any governmental entity:
24
(1) The Indemnifying Party shall, upon receipt of such written
notice and at its expense, actively and in good faith defend such claim in
its own name or, if necessary, in the name of the Claiming Party;
provided, however, that if the proceeding involves a matter solely of
concern to the Claiming Party in addition to the claim for which
indemnification under this Agreement is being sought, such matter shall be
within the sole responsibility of the Claiming Party and its counsel. The
Claiming Party will cooperate with and make available to the Indemnifying
Party such assistance and materials as may be reasonably requested of it,
and the Claiming Party shall have the right, at its expense, to
participate in the defense. The Indemnifying Party shall have the right to
settle and compromise such claim only with the consent of the Claiming
Party (which consent shall not be unreasonably withheld).
(2) If the Indemnifying Party notifies the Claiming Party that it
disputes any claim made by the Claiming Party and/or it fails to defend
such claim actively and in good faith, then the Claiming Party shall have
the right to conduct a defense against such claim and shall have the right
to settle and compromise such claim upon three (3) days notice to, but
without the consent of, the Indemnifying Party. Once the amount of such
claim is liquidated and the claim is finally determined, the Claiming
Party shall be entitled to pursue each and every remedy available to it at
law or in equity to enforce the indemnification provisions of this
Agreement and, in the event it is determined, or the Indemnifying Party
agrees, that it is obligated to indemnify the Claiming Party for such
claim, the Indemnifying Party agrees to pay all costs, expenses and fees,
including, without limitation, all reasonable attorneys' fees which may be
incurred by the Claiming Party in enforcing or attempting to enforce
indemnification under this Agreement, whether the same shall be enforced
by suit or otherwise.
1.65 Limitation on Indemnification Liabilities.
(1) Any claims asserted by the Shareholders against Purchaser on
account of Losses arising under Section 10.2 must be asserted in writing
within three (3) years from the Closing Date.
(2) Any claims asserted by Purchaser against the Shareholders on
account of Losses resulting from any misrepresentation or breach of any
warranty or representation of the Company or the Shareholders set forth in
this Agreement must be asserted in writing within three (3) years of the
Closing Date.
25
(3) Shareholders will not be obligated to indemnify, defend or hold
Purchaser harmless pursuant to Section 10.1 and unless the aggregate
Losses of or against Purchaser as a result of the matters described in
Sections 10.1(a), (b) or (c) exceed $10,000.
ARTICLE 11
Covenant Not to Compete
1.66 Definitions. For purposes of this Article 11, the following
definitions apply:
(1) "Competitive Business" means any business (i) which sells,
resells, services, leases, rents distributes or maintains any of the
products or services, or both, which the Company sold, resold, serviced,
leased, rented, distributed or maintained at any time during the five (5)
year period immediately prior to the Closing Date or (ii) which otherwise
competes with the Company in the sale, resale, service, lease, rental,
distribution or maintenance of telecommunication products or services,
anywhere within the Restricted Territory.
(2) "Competitive Product or Service" means the products and services
described in clauses (i) and (ii) of the definition of Competitive
Business set forth in subparagraph (a) above including, specifically, the
NEAX 2400 phone system product line (the "NEAX 2400") manufactured by NEC
America, Inc. ("NEC") or a successor NEC flagship PBX product should the
NEC NEAX 2400 system evolve or be discontinued.
(3) "Confidential Information" means (i) all technical information
relating to the Company; (ii) any information concerning any product or
service under development by, or being tested by, the Company but not yet
offered for sale; (iii) any information concerning the pricing policies of
the Company, the prices charged by the Company to any Customer, the volume
of orders of any Customer, any bids or negotiations being submitted by or
being conducted by the Company and all other information concerning the
transactions of the Company with any Customer or proposed Customer; (iv)
any information concerning the marketing programs or strategies of the
Company; (v) any financial information concerning the salaries or wages
paid to, the work records of or any other personnel information relating
to any employee of the Company; and (vi) any other information determined
by the Company to be confidential and proprietary and which is identified
as confidential and proprietary prior to or at the time of its disclosure
to the Shareholders. Notwithstanding the foregoing, no information will be
considered to be Confidential Information which (i) was generally
available to the public on the date of this Agreement, (ii) is disclosed
or published after the date hereof through no fault of the Shareholders,
or (iii) becomes general public information without disclosure by the
Shareholders after the date hereof.
26
(4) "Customer" means any person or entity regardless of where
located to whom the Company has (i) at any time sold products or services,
or both, or (ii) at any time during the three (3) year period immediately
prior to and including the Closing Date, solicited to sell products or
services, or both.
(5) "Related Entity" means Purchaser and any other entity which,
directly or indirectly, controls or is controlled by or is under common
control with Purchaser.
(6) "Restricted Period" means the five (5) year period immediately
after the Closing Date.
(7) "Restricted Territory" means the States of Washington and
Oregon.
(8) "Supplier" means any person or entity regardless of where
located from whom the Company has purchased or solicited to purchase
products or services, or both, during the three (3) year period
immediately prior to and including the Closing Date.
(9) "Authorized NEC NEAX 2400 Dealer" means an entity which has an
executed agreement in effect with NEC which authorizes the entity to
market, install and service the NEAX 2400 product line (or a successor NEC
flagship PBX product should the NEAX 2400 product line evolve or be
discontinued) within a specified geographical area with the complete
support of and access to NEC.
1.67 Non-Competition. Each Shareholder covenants and agrees that he
will not, during the Restricted Period, directly or indirectly, whether as
agent, stockholder (except as the holder of stock of Purchaser or of not more
than 5% of the stock of any publicly held company, provided such Shareholder
does not participate in the business of that publicly held company or render
advice or assistance to it), employee, officer, director, trustee, partner,
consultant, proprietor or otherwise, except on behalf of Purchaser, ATTI or any
Related Entity:
(1) acquire an ownership interest in, engage in or render advice or
assistance to any Competitive Business anywhere within the Restricted
Territory; or
(2) entice or attempt to entice any of the Suppliers or Customers so
as to cause, or attempt to cause, any Supplier or Customer not to do
business, or reduce its business, with the Company or to purchase any
Competitive Product or Service; or
(3) hire or attempt to hire any employees, contractors or agents of
any Related Entity, or attempt to induce any of those parties to leave
their employment, agency or independent contractor relationship with a
Related Entity.
1.68 Confidentiality. Each Shareholder covenants and agrees that he
will not, at any time during the Restricted Period, directly or indirectly,
disclose any Confidential Information
27
to any person or entity other than an employee or agent of any Related Entity
having the need to know that information in the ordinary course of business.
1.69 Remedies in the Event of Breach. Each Shareholder recognizes
that irreparable injury may result to the Purchaser and Related Entities and
their businesses and properties in the event of a breach by the Shareholders of
the restrictions imposed by this Agreement, and each Shareholder's acceptance of
those restrictions was a material factor in Purchaser's decision to enter into
this Agreement and consummate the transactions contemplated in this Agreement. A
Shareholder's engagement in any act in violation of this Agreement will entitle
the Purchaser or a Related Entity or both, in addition to any other remedies and
damages available to them, to an injunction prohibiting the offending
Shareholders from engaging in those acts.
1.70 Reasonableness of Restrictions. The Shareholders acknowledge
(i) that they are familiar with the nature of the Company's business and its
products and services; (ii) that Shareholders have read and understand the
nature and scope of the restrictions imposed by this Agreement; and (iii) that
the Purchaser has invested and will continue to invest substantial effort and
sums of money to develop and promote the products and services and goodwill of
the Related Entities. THE SHAREHOLDERS THEREFORE ACKNOWLEDGE AND REPRESENT THAT
THE SCOPE OF THOSE RESTRICTIONS ARE APPROPRIATE, NECESSARY AND REASONABLE FOR
THE PROTECTION OF THE BUSINESS, GOODWILL AND PROPERTY RIGHTS OF PURCHASER, ATTI
AND ANY OTHER RELATED ENTITY AND WILL NOT PREVENT THE SHAREHOLDERS FROM EARNING
A LIVING SUBSEQUENT TO THE DATE OF THIS AGREEMENT.
1.71 Termination of Non-competition. Notwithstanding anything in the
foregoing to the contrary, the non-competition restrictions of Section 11.2(a)
shall not apply to a Shareholder with respect to the sale, installation or
service of the NEAX 2400 or successor NEC product line within the Restricted
Territory where a Related Entity is not an Authorized NEC NEAX 2400 Dealer or
where such Related Entity has not actively tried to sell, install or service the
Competitive Product or Service during the immediately preceding one year period.
A Related Entity shall be deemed to have "actively tried to sell, install or
service" the Competitive Product or Service in a part of the Restricted
Territory if it is servicing a customer which has a NEAX 2400 and has made a
proposal to obtain a new NEAX 2400 customer or sell a new NEAX 2400 or successor
NEC system within the immediately preceding one year period. Additionally, after
a Shareholder's employment by ATTI or a Related Entity has terminated, any entry
by a Related Entity into an area which is not part of the Restricted Territory
shall have no effect on the Shareholder, whether or not the Shareholder is then
active in such area and shall be as if the Related Entity did not enter such
area.
28
ARTICLE 12
Miscellaneous 1.72 Expenses.
(1) The Shareholders shall pay for all attorneys' fees and other
legal costs and expenses, all investment banking or business brokerage
fees and all accountants' fees and other accounting costs and expenses
incurred by the Company and the Shareholders in connection with the
negotiation, preparation and execution of this Agreement and the
consummation of the Merger and the other transactions contemplated hereby;
(2) Except as provided in Section 4.1 of this Agreement or in
subsection (c) below, each of Purchaser and ATTI shall pay all attorneys'
fees and other legal costs and expenses and accountants' fees and other
accounting costs and expenses incurred by it in connection with its
negotiation, preparation and execution of this Agreement and its
consummation of the Merger and the other transactions contemplated hereby;
(3) If Closing of the Merger occurs, the Purchaser will pay the cost
of the financial due diligence investigation of the Company for the period
ended December 31, 1997, conducted by Ernst and Young prior to Closing. If
Closing does not occur by reason of the discovery by Purchaser, prior to
Closing, of a material adverse condition or fact with respect to the
Company or the Shareholders, the Shareholders will be responsible for
one-half of the cost of the Ernst and Young financial audit up to a
maximum amount of $5,000.
1.73 Financial Advisors' Fees. Except for the retention of Pacific
Acquisition by the Company and the Shareholders, and except for attorneys and
accountants for the respective parties, none of the Company, the Shareholders,
Purchaser or ATTI has retained any broker, finder, investment banker or
financial advisor in connection with this Agreement or the Merger or any other
transaction contemplated hereby
(1) The Company and the Shareholders have agreed to pay a commission
to Pacific Acquisition pursuant to a separate agreement. Such commission
shall be paid by the Company and the Shareholders from the cash proceeds
of the Merger.
(2) Agency Disclosure. Pacific Acquisition represents that it has
represented the Company and the Shareholders in this transaction and that
it has not had any agency relationship with the Purchaser or ATTI.
1.74 Accrued Vacation Pay. At Closing, ATTI will make the following
payments in respect of accrued vacation pay of certain employees of the Company:
29
----------------------------------
Xxxxxxx Xxxxxx $12,022.40
----------------------------------
Xxxxxxx Xxxxxxx $4,147.37
----------------------------------
Xxxxxxx Xxxxxx $1,809.47
----------------------------------
As of the Effective Time of the Merger, Xxxxxxx Xxxxxx, Xxxxxxx Xxxxxxx and Xxxx
Xxxxxx will each have 120 hours of accrued vacation on the books and records of
ATTI. Accrued vacation benefits of all other employees of the Company to be
employed by ATTI will be transferred to and assumed by ATTI. All accrued
vacation benefits of employees of the Company not used in the one year following
the Closing, shall be paid to such employees in cash.
1.75 Survival of Warranties and Representations. The warranties and
representations of the Company contained in this Agreement shall survive the
Effective Time of the Merger.
1.76 Entire Agreement. This Agreement (including all Schedules and
the Exhibits hereto and any other agreements executed and delivered herewith)
contain the entire understanding of the parties hereto with respect to the
subject matter contained herein and therein. This Agreement supersedes any and
all prior agreements and understandings between the parties with respect to such
subject matter. No waiver and no modification or amendment of any provision of
this Agreement shall be effective unless specifically made in writing and duly
signed by the party to be bound thereby.
1.77 Pre-Closing Publicity. Prior to the Closing Date, all notices
to third parties and all other publicity relating to the transaction
contemplated by this Agreement shall be jointly planned, coordinated and agreed
to by Purchaser and the Company. Prior to the Closing Date, none of the parties
hereto shall act unilaterally in this regard without the prior written approval
of the others, such approval not to be unreasonably withheld.
1.78 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original but all of which, together, shall
constitute one and the same instrument.
1.79 Savings Clause. If any provision hereof shall be held invalid
or unenforceable by any court of competent jurisdiction or as a result of future
legislative action, such holding or action shall be strictly construed and shall
not affect the validity or effect of any other provision hereof.
1.80 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the successors and permitted assigns of the parties
hereto. None of Purchaser, ATTI nor the Company or any of the Shareholders may
assign or transfer any of its or his rights or obligations under this Agreement,
except with the prior written consent of the other parties.
30
1.81 No Third Party Beneficiary. This Agreement is for the sole
benefit of the parties hereto and nothing herein expressed or implied shall give
or be construed to give any Person other than the parties hereto any legal or
equitable rights hereunder, except as otherwise set forth in Section 10.1
hereof.
1.82 Governing Law and Consent to Jurisdiction. THE VALIDITY,
INTERPRETATION AND EFFECT OF THIS AGREEMENT SHALL BE GOVERNED EXCLUSIVELY BY THE
LAWS OF THE STATE OF MINNESOTA, EXCLUDING THE "CONFLICT OF LAWS" RULES OF THAT
STATE.
1.83 Notices. All notices or other communications required or
permitted by this Agreement shall be in writing and shall be deemed to have been
duly received (a) if given by facsimile, when transmitted and the appropriate
telephonic confirmation received if transmitted on a Business Day and during
normal business hours of the recipient, and otherwise on the next Business Day
following transmission, (b) if given by certified or registered mail, return
receipt requested, postage prepaid, three Business Days after being deposited in
the U.S. mails and (c) if given by courier or other means, when received or
personally delivered, and addressed as follows:
To the Company or Shareholders: Tele-Contracting Specialists, Inc.
0000 000xx Xxxxxx X.X.
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xx. Xxxxxxx X. Xxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
To Purchaser or ATTI: Advanced Telecommunications, Inc.
000 Xxxxxx Xxxxxx Xxxxx
Xxxxx 000
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
With a copy to: Xxxxx X. Xxxxxxxx, Esq.
Robins, Kaplan, Xxxxxx & Xxxxxx L.L.P.
0000 XxXxxxx Xxxxx
000 XxXxxxx Xxx.
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000
Phone: (000) 000-0000
Fax: (000) 000-0000
or to such other addresses as may be specified by any party hereto to the other
parties pursuant to notice given by such party in accordance with the provisions
of this Section 12.12.
31
1.84 Schedules. A disclosure contained in any item of any Schedule
or in any section of this Agreement shall constitute a disclosure for all
relevant items of the Schedules and all relevant sections of this Agreement.
1.85 No Waiver. The failure of any party at any time or times to
require the performance of any provision hereof shall in no manner affect the
right at a later time to enforce the same. The waiver by any party of any
condition, or the breach of any provision, term, covenant, representation or
warranty contained in this Agreement, whether by conduct or otherwise, in any
one or more instances shall be deemed to be or construed as a further or
continuing waiver of any such condition or of the breach of any other provision,
term, covenant, representation or warranty of this Agreement.
The parties hereto have duly executed this Agreement on the day and
year first above written.
ADVANCED TELECOMMUNICATIONS, INC. AMERICAN TELEPHONE
TECHNOLOGY, INC.
By: By:
-------------------------------- -------------------------------------
Xxxxx X. Xxxxxxxx Xxxxxxx Xxxxx
Chief Executive Officer President
TELE-CONTRACTING SPECIALISTS, INC.
By:
------------------------------- -------------------------------------
Xxxxxxx X. Xxxxxx XXXXXXX X. XXXXXX
President
-------------------------------------
XXXXXXX X. XXXXXXX
32
EXHIBIT A
PLAN OF MERGER
This Plan of Merger (this "Plan of Merger"), dated as of July ___,
1998, is by and between Tele-Contracting Specialists, Inc., a Colorado
corporation (the "Company"), and American Telephone Technology, Inc., a
Minnesota corporation ("ATTI").
RECITALS:
A. The Company has authorized capital stock of 10,000 shares of
common stock, with no par value (the "Common Stock"), of which 1,000 shares are
outstanding as of the date hereof.
B. ATTI is a wholly-owned subsidiary of Advanced Telecommunications,
Inc., a Minnesota corporation ("Purchaser").
C. The Company, ATTI and Purchaser have entered into an Agreement
dated as of July __, 1998 (the "Merger Agreement") containing certain
warranties, representations, covenants, and agreements in connection with the
transactions contemplated therein and herein.
D. The Company, ATTI and Purchaser desire to have the Company merge
with and into ATTI pursuant to the terms and conditions set forth in this Plan
of Merger.
NOW, THEREFORE, in consideration of the mutual agreements and
covenants contained herein, the parties hereto agree that the Company and ATTI
shall be merged and that the terms and conditions of such merger and the mode of
carrying the same into effect shall be as follows:
13. Merger.
13.1 Merger. Pursuant to the applicable laws of Colorado and
Minnesota, the Company shall merge with and into ATTI, and ATTI shall be
the surviving corporation after the merger and shall continue to exist as
a corporation created and governed by the laws of Minnesota.
13.2 Surviving Corporation. At the Effective Time of the Merger (as
hereinafter defined):
1. The separate existence of the Company shall cease (ATTI and
the Company are sometimes collectively referred to herein as the
"Constituent
1
Corporations" and ATTI after the Merger is sometimes referred to
herein as the "Surviving Corporation").
2. The By-Laws of ATTI in effect immediately prior to the
Effective Time of the Merger shall be the By-laws of the Surviving
Corporation until altered, amended or repealed in accordance with
the Articles of Incorporation of the Surviving corporation and
applicable law.
3. The initial directors and officers of the surviving
corporation shall be as follows:
DIRECTORS OFFICE
Xxxxx Xxxxxxxx Chief Executive Officer
Xxxx Xxxx Chief Operating Officer
Xxxxxxx Xxxxx President
Xxxx Xxxxxxxxx Vice President
Xxxxxxx Xxxxxx Vice President
Xxxxxx Xxxxxxx Secretary/Treasurer
Xxxxxxx Xxxxxxxxxx
Xxxxxxx Xxxxxxx (Ex officio)
4. The Merger shall, from and after the Effective Time of the
Merger, have all of the effects provided by applicable law.
13.3 Effectiveness of Merger.
1. If all of the conditions precedent to the obligations of
each of the Company and the Purchaser as set forth in the Merger
Agreement shall have been satisfied or, to the extent permitted,
waived, articles of merger executed by duly authorized officers of
each of the Company and ATTI, complying in all respects with the
Colorado Business Corporation Act and the Minnesota Business
Corporation Act shall be filed with the Secretaries of State of
Colorado and Minnesota.
2. The "Effective Time of the Merger" shall be the time when
the Plan of Merger and all other necessary documents (including, but
not limited to, articles of merger) and certificates with respect
thereto are accepted for filing by the Secretaries of State of
Colorado and Minnesota.
13.4 Shares of Constituent Corporations. The manner and basis of
exchanging the capital stock of the Company for cash and the Stock of
Purchaser upon the Effective Time of the merger shall be as follows:
2
Each share of Company Stock which shall be outstanding immediately
prior to the Effective Time of the Merger and all rights in respect
thereof shall be exchanged for cash and/or shares of Purchaser's Stock
having an agreed value of One Hundred Twenty-six Dollars and Sixty-five
Cents ($126.65) per share. From and after the Effective Time of the
Merger, each holder of an outstanding certificate representing Company
Stock shall surrender the same to Purchaser. Until so surrendered, the
outstanding shares of Company Stock which are to be converted into the
stock of Purchaser as provided herein, may be treated by Purchaser for all
corporate purposes as evidencing the ownership of shares of Purchaser as
though the surrender and exchange had taken place.
14. Termination.
14.1 Termination. This Plan of Merger may be terminated at any time
prior to the Effective Time of the Merger by the Company or ATTI, by
written notice to the other party hereto if either such party has
terminated the Merger Agreement in accordance with its terms.
14.2 Effects of Termination.
1. Subject to Sections 2.2.B, in the event of any termination
of this Plan of Merger pursuant to Section 2.1, this Plan of Merger
shall forthwith become void and have no further effect, and there
shall be no liability on the part of any party hereto.
2. Notwithstanding any other provision of this Plan of Merger
(including Section 2.2.A), no termination of this Plan of Merger
shall release any party from liability for any knowing and
intentional breach of its obligations hereunder.
15. Further Assurances. In case at any time after the Effective Time
of the Merger any further action is reasonably necessary or desirable to carry
out the purposes of this Plan of Merger or to vest Purchaser with full title to
all properties, assets, rights, approvals, immunities and franchises of either
of the Constituent Corporations, the Company and ATTI and their respective
officers and directors shall take all such reasonably necessary action.
16. Amendment. At any time prior to the Effective Time of the
Merger, this Plan of Merger may be amended by the parties hereto by an agreement
in writing authorized by their respective Boards of Directors.
3
IN WITNESS WHEREOF, the parties have duly executed this Plan of
Merger as of the date first above written.
AMERICAN TELEPHONE TECHNOLOGY, INC.
By:
--------------------------------
Xxxxxxx Xxxxx
President
TELE-CONTRACTING SPECIALISTS, INC.
By:
--------------------------------
Xxxxxxx Xxxxxx
President
4
SCHEDULE 4.1
Pending Closing
As disclosed in Due Diligence, one employee (Xxxxxxxx X. Xxxx) has resigned her
position with the Company since the beginning of the Due Diligence period.
SCHEDULE 5.2
Foreign Qualification
TSI is a Colorado Corporation and registered and in good standing with the State
of Colorado. TSI maintains fixed offices in both the States of Washington and
Oregon. TSI is current in its tax filings, unemployment payments, workers
compensation payments, and withholding payments in Washington and Oregon.
TSI is not registered as a foreign corporation in Washington or Oregon.
SCHEDULE 5.3
Investments
With the exception of a small amount (90 shares) of Lamonts corporate stock, TSI
does not own any securities or direct or indirect interest in any person or
entity. The 90 Lamonts shares were awarded to TSI in conjunction with Lamonts'
bankruptcy reorganization and in payment for a long past due debt incurred prior
to Lamonts' bankruptcy.
SCHEDULE 5.4
Capital Stock
TSI's authorized capital consists of 10,000 shares of Common Stock, of which
1,000 are issued and outstanding. TSI's shareholders (Xxxxxxx Xxxxxx (750
shares) and Xxxxxxx Xxxxxxx (250 shares)) will be able to transfer all shares
free and clear on the closing date.
SCHEDULE 5.8
Real Property
1. Lease dated August 29, 1996 to 0000 - 000xx Xxx. X.X., Xxxxxxx, XX 00000
(Building P).
>> Premises: 3,847 sq. ft.
>> Landlord: Teachers Insurance & Annuity Association Teachers
Insurance & Annuity Association.
>> Term: 60 months commencing October 1, 1996 until September 30, 2001;
one option to renew the term for an additional 60 months on same
terms and conditions except for rent to be determined by the
landlord.
>> Rent: $3,975 with increase to $4,372 on October 1, 1999.
>> Operating Expenses: Tenant pays proportionate share of all operating
expenses as additional rent.
>> Security Deposit: $4,372.
Under Section 19 of this lease, the contemplated merger is deemed a
voluntary assignment of the lease and the tenant may not assign without
the prior written consent of the landlord which the landlord may withhold
or condition in its sole discretion. If tenant requests the landlord's
consent to a proposed assignment, tenant must pay to the landlord, whether
or not consent is ultimately given, $100 or landlord's reasonable
attorneys' fees incurred in connection with such request, whichever is
greater.
2. Lease dated August 29, 1996 to 0000 - 000xx Xxx. X.X., Xxxxxxx, XX 00000
(Building N).
>> Premises: 1,050 sq. ft.
>> Landlord: Teachers Insurance & Annuity Association.
>> Term: 60 months commencing October 1, 1996 through September 30,
2001; one option to extend the term for an additional 60 month term
upon the same terms and conditions except for rent which is to be
determined by the landlord.
>> Rent: $1,155 per month, adjusted October 1, 1999 to $1,270 per
month.
>> Operating Expense: Tenant is responsible for its pro rata share of
all of the building operating expenses as additional rent.
>> Security Deposit: $1,270.
This lease is identical with the lease described in paragraph 1 above
except for the square footage and, consequently, the base rent. These
premises have been subleased to CoreNet Services, Inc. for the period
October 1, 1997 through September 30, 1999. The same provisions concerning
the landlord's consent apply to this lease.
3. Lease dated May 28, 1996 to 0000 X.X. Xxxxxxx Xxxxx, Xxxxxxxxx, XX.
>> Premises: 665 rentable sq. ft. in Xxxxx Xxxx Xxxxxxxx Xxxxxx, Xxxxx
000.
>> Landlord: Science Park Limited Partnership I.
>> Term: 2 years commencing July 1, 1996 and terminating on July 1,
1998; no options to renew.
>> Rent: $498.75 per month plus tenant's share of operating expenses.
>> Security Deposit: $500.
TSI may not voluntarily or by operation of law (e.g., merger) assign the
premises without the prior written consent of the landlord which will not
be unreasonably withheld. In addition, the landlord has the right to
terminate this lease under Section 14.3 if the tenant requests the
landlord's consent to assign 50% or more of its interest in the lease.
SCHEDULE 5.10
Compliance with Laws
The Company has not obtained certificates of authority to do business as a
foreign corporation in Washington or Oregon.
SCHEDULE 5.13
Undisclosed Balance Sheet Liabilities
Additionally, as of 5/21/98 TSI is obligated to complete the following tasks for
which no additional revenue will be received:
Whidbey General Hospital: Send one Whidbey General Hospital employee
through an AVT training seminar at a cost of
$750.00;
Conduct one two day training seminar;
Complete miscellaneous programming changes
through the acceptance period;
We expect the 30 day acceptance period to
begin no later than 5/22/98. The system has
performed perfectly since cutover and we
have no reason to believe it will not be
completely accepted. However, Whidbey
General has the ability to reject the system
and obtain a complete refund should the
system not meet stated performance criteria.
In General: TSI may have a small quantity of client
obligations which are considered typical and
normal in this industry to maintain client
goodwill and satisfaction. It is not
expected but it would not be surprising if
some invoices have to be adjusted or a part
supplied but TSI does not expect the sum of
all outstanding (and unknown at this time)
obligations to have more than a minor impact
on the balance sheet.
SCHEDULE 5.15
Contacts
Applied Voice Technology, Inc. dated March 19, 1993.
SCHEDULE 5.16
Intellectual Property
Trade/Corporate Name: Tele-Contracting Specialists, Inc.
SCHEDULE 5.17
Taxes
As disclosed during the Due Diligence period TSI paid some employees bonuses at
the end of 1997. These bonuses were paid outside of the payroll system. A small
amount of payroll tax may be owed in the event TSI's books are audited for the
specified period. TSI's shareholders (Xxxxxxx Xxxxxx and Xxxxxxx Xxxxxxx) agree
to pay the payroll taxes should the need arise following an IRS audit.
TSI has made all sales through its Washington based corporate office during the
last three years. TSI technicians have been dispatched and have completed tasks
in the following States during the past three years; Washington; Oregon; Alaska;
Kentucky; Alabama; and Idaho.
TSI has undergone both a federal and state tax audit and the results of both
audits have been submitted to ATI auditors by TSI.
SCHEDULE 5.18
Employee Plans
TSI has paid all employees (with the exception of Xxxxxxx Xxxxxx and Xxxxxxx
Xxxxxxx) a $1 benefit per RT hour in lieu of a company insurance/health plan.
This was done at the employees' request.
SCHEDULE 5.19
Insurance
TSI currently has the following insurance policies in effect:
StateFarm 98-CT-0408-4 Property and General Liability Effective
2/14/98-2/14/99, $5,598.00 annual premium.
State Farm L057162F21-47A Automobile
Effective 12/21/97-12/21/98, $4,309.00 annual premium.
SCHEDULE 5.21
Condition of Assets
Xxxxxxx Xxxxxx owns personally a Micron laptop computer on which he maintains
information concerning the Company.
SCHEDULE 5.22
Transactions with Affiliates
None.
SCHEDULE 5.24
Product Warranties
[Attach copies of standard purchase agreement, maintenance agreement, and work
ticket]
SCHEDULE 5.25
Employees
Xxxx Xxxxxx
Xxxx Xxxxxxx
Xxxxxxxx Xxxxxxxxx
Xxxxx Xxxxxxxxx
Xxxxxxxx Xxxxxx
Xxxx Xxxxxx
Xxxxx Xxxxxx
Xxx Xxxxxx
Commission plan relative to Xxxxx Xxxxxxxxx. When Xxxxx was hired he was to
receive a sales commission on all approved sales. During the beginning of his
employment he did receive a few commission checks but his failure to satisfy any
reasonable sales quota has resulted in his receiving his salary but not
receiving any commission checks. This was not a written policy, but one which
was reached verbally between Xxxxx and Xxxx Xxxxxxx to enable him to maintain
his position with the company.
It had been TSI's desire to see Xxxxx succeed and we have kept him on the
payroll through the long negotiation between TSI and ATI. TSI does not see any
potential liability in this area. It is TSI's assumption Xxxxx will be absorbed
into the ATTI sales staff and he will be subjected to the policies and
procedures of the position he accepts.
SCHEDULE 5.27
Licenses; Permits
None.
SCHEDULE 5.28
Customers; Suppliers
CUSTOMERS
1997 Top 15 Clients By Sales Volume:
Alaska Airlines $281,935.00
Clinitech $210,690.00
Vancouver Clinic $154,722.00
Holland America $138,357.00
Xxxxx General $125,877.00
Lone Star Northwest $119,714.00
Xxxxx County $100,117.00
OGI Telecomm $ 89,813.00
CMI $ 73,155.00
Horizon House $ 50,097.00
IMS $ 32,073.00
World Technology $ 28,619.00
Travel Unlimited $ 24,181.00
Super Valu $ 24,049.00
Couer D'Alene Resort $ 23,871.00
SUPPLIERS
None.
SCHEDULE 5.29
Accounts; Safe Deposit Boxes
TSI maintains two bank accounts as follows:
Key Bank of Washington, #0082201955; and
Key Bank of Washington, #471821000661
The authorized signers on both accounts are:
Xxxxxxx X. Xxxxxx, President; and
Xxxxx X. Xxxxxx, Secretary/Treasurer.
I N P U T
AUTHOR: Xxxxxxxx, Xxxxx X 8592/8282 Flr 27 DATE/TIME:
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ATTORNEY TIME NUMBER: 164 DATASET: MP2
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FILE NO.: 028302-0028 DATE/TIME NEEDED:
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DOC# AND VERSION: 1178600-6 ORIGINAL TYPIST:
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Acquisition Agreement and Plan of Merger ATI & TCSI
Note: Word Processing only works on the most recent version.
FINAL FORMAT: 81/2x 11 Single Spaced Input Ethical Wall? No
-------- ------------------- --
Right Justified? Yes DATE/TIME DELIVERED:
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FOR BLACKLINED DOCUMENTS: PLEASE CIRCLE ONE
Continue Blacklining Blackline NEW changes only Copy and create new
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SPECIAL INSTRUCTIONS:
R E V I S I O N S
TO BE COMPLETED BY ATTORNEY TO BE COMPLETED BY W.P.
DATE/TIME DATE/TIME
ATTORNEY DELIV.NEEDED DRAFT FINAL PROOFED SPECIALIST DELIVERED
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Xxxxxxx 6/12 6/12 ASAP X Xxxxx Xxxxx 6/12; 7:08p
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Xxxxxxxx 6/16/98 ASAP X COOP 6/16/98
13:56
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Xxxxxxxx 6/16/98 ASAP X COOP 6/16/98
16:05
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Xxxxxxxx 6/24/98 asap x Kampff 6/24/98
1:57 p
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Xxxxxxxx 6/25/98 asap x Kampff 6/25/98
10:23 pm
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Xxxxxxxx 6/25/98 asap x Kampff 6/25/98
1:38 pm
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Xxxxxxxx 7/10/98 asap x Kampff 7/10/98
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