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ASSET PURCHASE AGREEMENT
dated as of the 10th day of March, 1999
by and among
THE ALLIANCE GROUP, INC.
(Parent)
and
ALLIANCE ACQUISITION XIII CORP.
(Newco)
and
THE PHONE MAN SALES AND SERVICES, INC.
(Company)
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TABLE OF CONTENTS
1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. PURCHASE AND SALE. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.1 The Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.2 Acquired Assets. . . . . . . . . . . . . . . . . . . . . . . . . 5
2.3 Assumption of Liabilities. . . . . . . . . . . . . . . . . . . . 7
3. INSTRUMENTS OF TRANSFER. . . . . . . . . . . . . . . . . . . . . . . . . 7
4. PURCHASE PRICE; ALLOCATION . . . . . . . . . . . . . . . . . . . . . . . 7
4.1 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.2 Payment of Purchase Price. . . . . . . . . . . . . . . . . . . . 7
4.3 Allocation of Purchase Price . . . . . . . . . . . . . . . . . . 7
5. CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF COMPANY . . . . 8
6.1 Due Organization . . . . . . . . . . . . . . . . . . . . . . . . 8
6.2 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.3 Financial Statements . . . . . . . . . . . . . . . . . . . . . . 9
6.4 Title to Acquired Assets; Condition of Acquired Assets. . . . . 9
6.5 Real Property - Owned. . . . . . . . . . . . . . . . . . . . . . 9
6.6 Real and Personal Property - Leased. . . . . . . . . . . . . . . 9
6.7 Existing Contracts . . . . . . . . . . . . . . . . . . . . . . . 9
6.8 Governmental Licenses. . . . . . . . . . . . . . . . . . . . . . 10
6.9 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . 10
6.10 No Violation of Existing Agreements. . . . . . . . . . . . . . . 10
6.11 Litigation and Legal Proceedings . . . . . . . . . . . . . . . . 10
6.12 Environmental Compliance.. . . . . . . . . . . . . . . . . . . . 10
6.13 Employee Benefits and Employees. . . . . . . . . . . . . . . . . 11
6.14 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.15 Customers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.16 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.17 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.18 Undisclosed Liabilities. . . . . . . . . . . . . . . . . . . . . 12
6.19 Pricing of Services. . . . . . . . . . . . . . . . . . . . . . . 12
6.20 Proprietary Rights . . . . . . . . . . . . . . . . . . . . . . . 12
6.21 Accounts Receivable and Bad Debts. . . . . . . . . . . . . . . . 12
6.22 Certain Business Relationships with Company. . . . . . . . . . . 13
6.23 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
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6.24 Absence of Changes. . . . . . . . . . . . . . . . . . . . . . . 13
6.25 Prohibited Activities. . . . . . . . . . . . . . . . . . . . . . 14
7. [INTENTIONALLY OMITTED]. . . . . . . . . . . . . . . . . . . . . . . . . 15
8. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF PARENT
AND NEWCO. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.1 Due Organization . . . . . . . . . . . . . . . . . . . . . . . . 15
8.2 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.3 Capital Stock. . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.4 Transactions in Capital Stock. . . . . . . . . . . . . . . . . . 15
8.5 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.6 Liabilities and Obligations. . . . . . . . . . . . . . . . . . . 16
8.7 Conformity with Law; Litigation. . . . . . . . . . . . . . . . . 16
8.8 No Violations. . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.9 Parent Securities. . . . . . . . . . . . . . . . . . . . . . . . 16
8.10 Business; Real Property; Agreements. . . . . . . . . . . . . . . 16
9. OTHER COVENANTS PRIOR TO CLOSING . . . . . . . . . . . . . . . . . . . . 17
9.1 Access and Cooperation; Due Diligence; Audits. . . . . . . . . . 17
9.2 Conduct of Business Pending Closing. . . . . . . . . . . . . . . 17
9.3 Prohibited Activities by the Company . . . . . . . . . . . . . . 18
9.4 Exclusivity. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
9.5 Notification of Certain Matters. . . . . . . . . . . . . . . . . 19
9.6 Amendment of Schedules . . . . . . . . . . . . . . . . . . . . . 20
9.7 Further Assurance. . . . . . . . . . . . . . . . . . . . . . . . 20
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF COMPANY . . . . . . . . . . . . . 20
10.1 Representations and Warranties; Performance of
Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
10.2 No Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . 21
10.3 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . 21
10.4 Good Standing Certificates . . . . . . . . . . . . . . . . . . . 21
10.5 No Material Adverse Effect . . . . . . . . . . . . . . . . . . . 21
10.6 Secretary's Certificates . . . . . . . . . . . . . . . . . . . . 21
10.7 Closing of the IPO or the Private Placement. . . . . . . . . . . 21
11. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND NEWCO. . . . . . . . . 21
11.1 Representations and Warranties; Performance of
Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
11.2 No Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . 22
11.3 Secretary's Certificate. . . . . . . . . . . . . . . . . . . . . 22
11.4 No Material Adverse Effect . . . . . . . . . . . . . . . . . . . 22
11.5 Termination of Related Party Agreements. . . . . . . . . . . . . 22
11.6 Third Party Consents . . . . . . . . . . . . . . . . . . . . . . 22
11.7 Due Diligence. . . . . . . . . . . . . . . . . . . . . . . . . . 22
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11.8 Good Standing Certificates . . . . . . . . . . . . . . . . . . . 23
11.9 FIRPTA Certificate . . . . . . . . . . . . . . . . . . . . . . . 23
11.10 Closing of the IPO or Private Placement. . . . . . . . . . . . . 23
11.11 Financial Statements . . . . . . . . . . . . . . . . . . . . . . 23
11.12 Operation of Business. . . . . . . . . . . . . . . . . . . . . . 23
12. CASUALTY LOSSES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
13. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
13.1 General Indemnification by Company . . . . . . . . . . . . . . . 24
13.2 Indemnification by Parent. . . . . . . . . . . . . . . . . . . . 24
13.3 Third Person Claims. . . . . . . . . . . . . . . . . . . . . . . 24
13.4 Exclusive Remedy . . . . . . . . . . . . . . . . . . . . . . . . 25
13.5 Limitations on Indemnification . . . . . . . . . . . . . . . . . 25
14. TERMINATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . 25
14.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
14.2 Liabilities in Event of Termination. . . . . . . . . . . . . . . 26
15. NONCOMPETITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
15.1 Prohibited Activities. . . . . . . . . . . . . . . . . . . . . . 26
15.2 Damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
15.3 Reasonable Restraint . . . . . . . . . . . . . . . . . . . . . . 27
15.4 Severability; Reformation. . . . . . . . . . . . . . . . . . . . 27
15.5 Independent Covenant . . . . . . . . . . . . . . . . . . . . . . 27
15.6 Materiality. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
16. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. . . . . . . . . . . . . . . . 28
16.1 Company and Stockholders . . . . . . . . . . . . . . . . . . . . 28
16.2 Parent and Newco . . . . . . . . . . . . . . . . . . . . . . . . 28
16.3 Damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
16.4 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
17. TRANSFER RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 29
18. INVESTMENT REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . 30
18.1 Compliance With Law. . . . . . . . . . . . . . . . . . . . . . . 30
18.2 Economic Risk; Sophistication. . . . . . . . . . . . . . . . . . 31
19. REGISTRATION RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 31
19.1 PiggyBack Registration Rights. . . . . . . . . . . . . . . . . . 31
19.2 Demand Registration Rights . . . . . . . . . . . . . . . . . . . 31
19.3 Registration Procedures. . . . . . . . . . . . . . . . . . . . . 32
19.4 Other Registration Matters . . . . . . . . . . . . . . . . . . . 34
19.5 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . 35
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19.6 Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . 38
19.7 Undertaking to File Reports and Cooperate in Rule 144
Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . 38
20. GENERAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
20.1 Cooperation. . . . . . . . . . . . . . . . . . . . . . . . . . . 39
20.2 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . 39
20.3 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . 39
20.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 39
20.5 Brokers and Agents . . . . . . . . . . . . . . . . . . . . . . . 39
20.6 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
20.7 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . 40
20.8 Exercise of Rights and Remedies. . . . . . . . . . . . . . . . . 40
20.9 Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
20.10 Reformation and Severability . . . . . . . . . . . . . . . . . . 41
20.11 Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . . 41
20.12 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
20.13 Public Statements. . . . . . . . . . . . . . . . . . . . . . . . 41
20.14 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . 41
20.15 Collection Procedures. . . . . . . . . . . . . . . . . . . . . . 41
20.16 Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . 42
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made as of the
10th day of March, 1999, by and among THE ALLIANCE GROUP, INC., an Oklahoma
corporation ("Parent"), ALLIANCE ACQUISITION XIII CORP., an Oklahoma
corporation ("Newco"), and THE PHONE MAN SALES AND SERVICES, INC., an
Oklahoma corporation (the "Company").
RECITALS
WHEREAS, Newco is a corporation duly organized and existing
under the laws of the State of Oklahoma, having been incorporated on
March 9, 1999, solely for the purpose of completing the transaction
set forth herein, and Newco is a wholly-owned subsidiary of Parent, a
corporation organized and existing under the laws of the State of
Oklahoma; and
WHEREAS, Company is and has been engaged in the interconnect
and paging business (the "Business") and owns certain equipment,
inventory and other personal property used in the Business.
WHEREAS, Company desires to sell to Newco, and Newco desires
to purchase from Company, Company's equipment, inventory, accounts
receivable and certain other assets which are owned by Company and
associated with the ownership and operation of the Business (the
"Sale").
NOW, THEREFORE, in consideration of the premises and of the
mutual representations, warranties, covenants and agreements herein
contained, the parties hereto hereby agree as follows:
1. DEFINITIONS
Unless the context otherwise requires, capitalized terms used in
this Agreement or in any schedule or annex attached hereto and not otherwise
defined shall have the following meanings for all purposes of this Agreement.
"Acquired Assets" has the meaning set forth in Section 2.2.
"Adverse Effect" has the meaning set forth in Section 6.1.
"Affiliates" means a Person who directly or indirectly through one
or more intermediaries controls, is controlled by, or is under common control
with, the Company.
"Agreement" has the meaning set forth in the first paragraph of
this Agreement.
"Annex" means each Annex attached hereto that represents a document
relevant to the transactions contemplated in this Agreement.
"Assumed Liabilities" has the meaning set forth in Section 2.4.
"Authorizations" has the meaning set forth in Section 6.8.
"Balance Sheet Date" has the meaning set forth in Section 6.3.
"Cash Payment' has the meaning set forth in Section 4.1.
"Charter Documents" means the Certificate of Incorporation,
Articles of Incorporation or other instrument pursuant to which any
corporation, partnership or other business entity that is a signatory to this
Agreement was formed or organized in accordance with applicable law.
"Closing" has the meaning set forth in Section 5.
"Closing Date" has the meaning set forth in Section 5.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the first paragraph of this
Agreement.
"Company Financial Statements" has the meaning set forth in
Section 6.3.
"Company Stock" means the Company's $1.00 par value common stock.
"December Balance Sheet" has the meaning set forth in Section 6.3.
"Demand Registration" has the meaning set forth in Section 19.2.
"Effective Time" means the time as of which the Merger becomes
effective, which shall, in any case, occur on the Closing Date.
"Environmental Laws" has the meaning set forth in Section 6.12.
"Expiration Date" means (i) except as set forth in (iii) below, the
24th monthly anniversary of the Closing Date when used in connection with a
breach of any representation, warranty, covenant or agreement set forth in
Sections 6 or 8 of this Agreement, (ii) the 36th monthly anniversary of the
Closing Date when used in connection with the failure to observe the terms of
Section 15 and (iii) the date on which suit for the enforcement of any claims
for Taxes, claims under Environmental Laws or claims under any other covenant
or agreement set forth in this Agreement and not specified in (i) or (ii) above
becomes barred by the applicable statute of limitation.
"Founding Companies" has the meaning set forth in Section 9.1(ii).
"Founding Stockholders" has the meaning set forth in Section 19.2.
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"Governmental Authorities" has the meaning set forth in
Section 2.2(b).
"Hazardous Substance" has the meaning set forth in Section 6.12.
"Indemnified Party" has the meaning set forth in Section 13.3.
"Indemnifying Party" has the meaning set forth in Section 13.3.
"IPO" means the Parent's initial public offering of Parent Stock.
"IRS" or "Internal Revenue Service" means the Internal Revenue
Service of the Department of the Treasury.
"Leases" means all real and personal property leased by Company and
used, useful or held for use in connection with Company's Business.
"Liens" has the meaning set forth in Section 2.1.
"Net Current Assets" has the meaning set forth in Section 4.4.
"Newco" has the meaning set forth in the first paragraph of this
Agreement.
"Parent" has the meaning set forth in the first paragraph of this
Agreement.
"Parent Charter Documents" has the meaning set forth in Section 8.1.
"Parent Documents" has the meaning set forth in Section 8.8.
"Parent Stock" means Parent's $.01 par value common stock.
"Permitted Liens" has the meaning set forth in Section 2.1.
"Person" means an individual, a corporation, a partnership, an
association, a limited liability company, a joint stock company, a trust or
other unincorporated organization.
"Private Placement" means the Parent's private placement of Parent
Stock.
"Prohibited Activities" has the meaning set forth in Paragraph 6.25.
"Purchase Price" has the meaning set forth in Section 4.1.
"Registerable Securities" means the shares of Parent Stock
registerable pursuant to Section 19.
"Restricted Securities" has the meaning set forth in introductory
paragraph to Section 18.
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"Sale" has the meaning set forth in the third recital of this
Agreement.
"Schedule" means each Schedule attached hereto, which shall
reference the relevant sections of this Agreement, on which parties hereto
disclose information as part of their respective representations, warranties,
covenants and agreements.
"SEC" means the United States Securities and Exchange Commission.
"Stock Payment" has the meaning set forth in Section 4.1.
"Stockholders" has the meaning set forth in Section 15.1.
"Subsidiaries" means, with respect to any Person, any corporation
or other organization, whether incorporated or unincorporated, of which
(i) such Person or any other Subsidiary of such Person is a general partner
(excluding partnerships, the general partnership interests of which held by
such Person or any Subsidiary of such Person do not have a majority of the
voting interest in such partnership) or (ii) at least a majority of the
securities or other interests having by their terms ordinary voting power to
elect a majority of the Board of Directors or others performing similar
functions with respect to such corporation or other organization is directly
or indirectly owned or controlled by such Person, by any one or more of its
Subsidiaries or by such Person and one or more of its Subsidiaries.
"Tax" or "Taxes" have the meaning set forth in Section 6.14.
"Territory" has the meaning set forth in Section 15.1(i).
"Third Person" has the meaning set forth in Section 13.3.
"1933 Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
2. PURCHASE AND SALE
2.1 THE SALE. Subject to the terms and conditions set forth in
this Agreement, Company agrees to sell, convey, assign, transfer and deliver
to Newco, and Newco agrees to purchase from Company at Closing, all of
Company's right, title and interest in and to the Acquired Assets, free and
clear of all debts, liabilities, obligations and taxes other than Assumed
Liabilities, and free and clear of all security interests, liens, pledges,
charges, rights of third parties and encumbrances of every kind
(collectively, "Liens"), other than Permitted Liens. As used herein, the
term "Permitted Liens" means (i) any Lien for taxes and assessments not yet
past due or otherwise being contested in good faith and for which appropriate
reserves have been established, (ii) any Lien arising out of deposits made to
secure leases or other obligations of a like nature arising in the ordinary
course of business, (iii) any Lien affecting real property that does not
materially interfere with the use by Company of the property subject thereto
or affected thereby, (iv) as to leaseholds, interest of the lessors thereof
and Liens affecting the interests of such lessors and (v) any Lien set
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forth on Schedule 2.1 attached hereto.
2.2 ACQUIRED ASSETS. The assets to be conveyed to Newco shall
include all of Company's right, title and interest of whatever description
which relate in any way to the ownership, use or operation of the Business,
as owned, acquired or obtained by Company from the date hereof through the
date of Closing (collectively, the "Acquired Assets"). The Acquired Assets
shall include, but not be limited to, all of the rights, interests and
benefits of Company in:
(a) All operating agreements, interconnection
agreements, transit agreements, resale agreements, other agreements with
telecommunication companies, leases, Authorizations to the extent such
Authorizations may be transferred under applicable law, instruments,
commitments, guarantees, consents and revenue sharing agreements; all
easements, appurtenances, rights-of-way and construction permits, if any,
related to the Acquired Assets; all right, title and interest, if any, in and
to all streets, roads and public places, open or proposed; all agreements
between Company and any suppliers, telecommunication equipment or service
companies and customers, and all other similar rights and agreements,
including all applications therefor, which in any way may relate to or
concern the operation by Company of the Business.
(b) Originals or copies of all of Company's files of
correspondence, lists, records and reports concerning (i) customers,
prospective customers of the Business and customer service records related to
the Acquired Assets and (ii) all dealings with any federal, state, county,
municipal or foreign government agency, authority, utility instrumentality,
including without limitation, any agency, court, tribunal, department,
bureau, commission or board of competent jurisdiction ("Governmental
Authorities") with respect to the Acquired Assets.
(c) All of Company's right, title and interest in and
to machinery, equipment, motor vehicles, office equipment, computers and
related software, furniture and fixtures, supplies, inventory, spare parts
and other physical assets, if any, used in or relating to the Acquired
Assets, and all modifications, additions, restorations or replacements of the
whole or any part thereof.
(d) All of Company's right, title and interest in and
to agreements and contracts for: (i) paging, long-distance and local
telephone customers; (ii) Internet services including, without limitation,
Company's registered addresses; (iii) PIC and CIC codes, tariffs and
certifications, to the extent transferrable; (iv) agency agreements; and
(v) sale and service of telephone equipment.
(e) All of Company's right, title and interest to
engineering records, files, data, drawings, blueprints, schematics, maps,
reports, lists and plans and processes intended for use in connection with
the Acquired Assets provided that Company may retain a copy thereof.
(f) All of the following, along with all related
income, royalties, damages and payments, if any, due or payable as of the
Closing Date or thereafter: inventions, trademarks, service marks, trade
dress, trade names, logos and registrations and applications for a
registration thereof together with all of the goodwill associated therewith,
copyrights and copyrightable works and registrations and applications for the
registration thereof, computer software, data, data bases, documentation
thereof, trade secrets and other confidential information, other intellectual
property
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rights and intangible embodiments thereof (in whatever form or medium); all
data and records, wherever located, including books and records, customer
lists, call records, usage schedules, advertising materials, credit
information and correspondence, manuals, contract rights (including, without
limitation, letters of authority and other customer subscription/acquisition
contracts), together with all books, records, drawings and other indicia,
however evidenced.
(g) All electrical, mechanical, plumbing and other
building systems, security and surveillance systems and wiring and cable
installations owned by Company and located on the property leased by Company.
(h) All deposits, prepayments and prepaid expenses.
(i) All claims, causes of action, choses in action,
rights of recovery and rights of set-off of any kind.
(j) The right to receive and retain mail, accounts
receivable payments and other communications.
(k) The right to xxxx and receive payment for products
shipped or delivered and/or services performed but unbilled or unpaid as of
the Closing.
(l) The advertising, marketing and promotional
materials and all other related printing or written materials.
(m) All notes receivable, accounts receivable and
related records for such receivables (including customer receivables for
customers to be acquired by Newco).
(n) All 800 and 888 telephone numbers of Company.
(o) All goodwill associated with the Acquired Assets.
(p) Any assets of the type described above which are
acquired after the date hereof but prior to the Closing.
2.3 ASSUMPTION OF LIABILITIES. At Closing, Newco shall assume
and perform and discharge the following to the extent not previously
performed or discharged as of the Closing: (i) Company's obligations after
the Closing under the contracts being assigned to Newco and all other
obligations of Company related to the Business entered into during the period
from the date hereof to the Closing by Company in the ordinary course of its
business in accordance with the provisions of Sections 9.2 and 9.3 below that
were identified to and consented in writing by Newco; and (ii) all accounts
payable, notes payable and other indebtedness reflected on the December
Balance Sheet related to the Business (collectively, the "Assumed
Liabilities"). Newco shall not be liable for any other liabilities, debts,
contracts or agreements, including, without limitation, any liabilities or
obligations related to other obligations of Company of any nature whatsoever
other than the Assumed Liabilities.
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3. INSTRUMENTS OF TRANSFER
At the Closing, Company will deliver to Newco (i) one or more Bills
of Sale in substantially the form attached hereto as Annex I ("Xxxx of
Sale"), (ii) all such other good and sufficient instruments of sale, transfer
and conveyance, including, without limitation, assignments of leases in such
form and including such matters as Newco shall reasonably request and as
shall be reasonably acceptable to Company, as shall be effective to vest in
Newco all of Company's right and title to, and interest in, the Acquired
Assets; and (iii) all contracts and commitments, instruments, books and
records and other data included in the Acquired Assets.
4. PURCHASE PRICE; ALLOCATION
4.1 PURCHASE PRICE. The total purchase price for the Acquired
Assets shall be (i) $37,500 in cash (the "Cash Payment") and (ii) $37,500 of
Alliance common stock (the "Stock Payment") (collectively the "Purchase
Price").
4.2 PAYMENT OF PURCHASE PRICE. The Cash Payment shall be
payable by wire transfer of immediately available funds to Company at
Closing. The Stock Payment shall be issued to Company at Closing.
4.3 ALLOCATION OF PURCHASE PRICE. Attached hereto as Annex II
is the allocation of the Purchase Price in accordance with the respective
fair market value of the Acquired Assets being purchased and as provided for
under Section 1060 of the Code. Newco and Company each agree to file their
income tax returns and their other tax returns and IRS Form 8594 reflecting
the allocation as determined in this Section 4.3 unless otherwise required by
applicable legal requirements.
5. CLOSING
Subject to the terms and conditions hereof, the closing (the
"Closing") shall take place at the offices of McAfee & Xxxx A Professional
Corporation, 00xx Xxxxx, Xxx Xxxxxxxxxx Xxxxxx, Xxxxxxxx Xxxx, Xxxxxxxx 00000,
on May 31, 1999, or such other date as the parties hereto may designate (the
"Closing Date"). At Closing, each party shall deliver or cause to be
delivered to the other party the instruments of transfer referenced in
Section 3 of this Agreement and the other deliveries required by Section 10
(for Company) and Section 11 (for Newco) of this Agreement, and Newco shall
deliver to Company the Cash Payment and the Stock Payment as required
pursuant to Section 4.
6. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF COMPANY
Company represents, warrants, covenants and agrees (i) that all of
the following representations and warranties in this Section 6 are materially
true at the date of this Agreement and, subject to Section 9.6, shall be
materially true at the Closing Date and (ii) that all of the covenants and
agreements in this Section 6 shall be materially complied with or performed
at and as of the Closing Date.
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6.1 DUE ORGANIZATION. Company is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation, and is duly authorized and qualified to do business and is in
good standing under the laws of each jurisdiction where such qualification is
required except (i) as set forth on Schedule 6.1 or (ii) where the failure to
be so authorized or qualified would not have an adverse effect on the
business, operations, affairs, prospects, properties, assets or condition
(financial or otherwise) of Company taken as a whole (as used herein with
respect to Company, or with respect to any other Person, an "Adverse Effect").
6.2 AUTHORIZATION. Company has all requisite corporate power
and authority to enter into this Agreement and to perform its obligations
hereunder. The execution and delivery by Company of this Agreement and its
consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action of Company. This Agreement has
been duly executed and delivered by Company, and approved by all the
stockholders of Company, and is a valid and binding obligation of Company,
enforceable against Company in accordance with its terms.
6.3 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.3 are
copies of the following financial statements of Company (the "Company
Financial Statements"): Company's audited Balance Sheet as of December 31,
1997 and its audited Balance Sheet as of December 31, 1998 ("December Balance
Sheet"), and audited Statements of Income, Retained Earnings and Cash Flows,
and any related notes thereto, for the years ended December 31, 1997 and 1998
(December 31, 1998 being hereinafter referred to as the "Balance Sheet
Date"). The audited Company Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods indicated (except as noted thereon or
on Schedule 6.3). Except as set forth on Schedule 6.3, the Balance Sheets
referred to in this Section 6.3 present fairly the financial position of
Company as of the dates indicated thereon, and the Statements of Income,
Retained Earnings and Cash Flows referred to in this Section 6.3 present
fairly the results of operations for the periods indicated thereon in
accordance with generally accepted accounting principles. Company Financial
Statements at and for the years ended December 31, 1997 and 1998 have been
examined and reported on by Deloitte and Touche, LLP.
6.4 TITLE TO ACQUIRED ASSETS; CONDITION OF ACQUIRED ASSETS.
Company has, and will convey to Newco at Closing, good and marketable title
to the Acquired Assets, free and clear of all Liens other than Permitted
Liens. All Liens in effect on the date hereof which are to be discharged at
Closing, other than those to be discharged by Newco, are listed on Schedule 6.4
hereto. The tangible property included among the Acquired Assets is in good
working order and repair, reasonable wear and tear excepted, and is
technically sufficient and capable for use in the Business. Except as
disclosed on Schedule 6.22, no officer, director, stockholder or employee of
Company or any other Person other than the Company owns, leases or has any
right in any property, license or other assets related to the Acquired Assets.
6.5 REAL PROPERTY - OWNED. Company owns no real property and
the real property leased by Company related to the Business has never been
owned by Company.
6.6 REAL AND PERSONAL PROPERTY - LEASED. Company shall retain
all of its rights and
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obligations under all leased real and personal property.
6.7 EXISTING CONTRACTS. Schedule 6.7 sets forth all contracts,
commitments and agreements included as Acquired Assets in effect on the date
hereof (the "Existing Contracts"). Except as disclosed on Schedule 6.22, no
officer, director or employee of Company or any Person (other than Company)
controlling, controlled by or affiliated with or family member of any such
officer, director or employee has any contractual relationship relating to
the ownership or use of the Acquired Assets. Company has heretofore
delivered to Newco true and correct copies of the Existing Contracts. Except
as disclosed on Schedule 6.7, Company has no knowledge of any breach or
anticipated breach by the other parties to any Existing Contracts. The
Existing Contracts are in full force and effect and Company is in compliance
with its obligations under such Existing Contracts. Except for the Existing
Contracts, Company has not entered into any other contract, commitment or
agreement relating to the ownership or use of the Acquired Assets, including,
but not limited to, right-of-way, rights of entry, licenses, easements,
leases, or guaranty agreements. There are no claims by third parties that
Company is required to enter into other agreements to enable it to continue
to own or use the Acquired Assets.
6.8 GOVERNMENTAL LICENSES. Except as set forth on Schedule 6.8,
Company holds all licenses, consents, permits, approvals, tariffs and
authorizations of Governmental Authorities which are required in connection
with the ownership of the Acquired Assets and operation of the Business
(collectively referred to as the "Authorizations"). All Authorizations are
in full force and effect. Company has complied with the terms of the
Authorizations which it holds and there are no pending modifications,
amendments or revocations of the Authorizations which would adversely affect
the ownership of the Acquired Assets or the operation of the Business. All
fees due and payable from Company to Governmental Authorities pursuant to the
Authorizations have been timely filed and are accurate and complete. True
and correct copies of the Authorizations, and all amendments thereto to the
date hereof, have been delivered by Company to Newco.
6.9 COMPLIANCE WITH LAWS. Company is currently complying with
and has so complied with, and is not in default under or in violation of, and
neither the Business nor any of the Acquired Assets nor the operation or
maintenance thereof, contravenes any statute, law (including environmental or
employment laws), ordinance, decree, order, rule or regulation of any
Governmental Authority applicable to the Acquired Assets or the Business.
6.10 NO VIOLATION OF EXISTING AGREEMENTS. Subject to the
consents for the Existing Contracts identified in Schedule 6.10, the
execution, delivery and performance of this Agreement by Company and
Company's transfer of the Acquired Assets to Newco (i) will not violate any
provisions of any law, (ii) will not, with or without the giving of notice or
the passage of time, or both, conflict with or result in any breach of any of
the terms or conditions of, or constitute a default under any Existing
Contracts, and (iii) will not result in the creation of any Lien upon the
Acquired Assets or the Business other than Permitted Liens.
6.11 LITIGATION AND LEGAL PROCEEDINGS. Except as set forth on
Schedule 6.11, there is no outstanding judgment against Company or any
director, officer or stockholder of Company affecting the Business or the
Acquired Assets or which questions the validity of any action taken or to be
taken by Company pursuant to or in connection with the provisions of this
Agreement and
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there is no litigation, proceeding or investigation pending, or, to Company's
knowledge, threatened, against Company or any director, officer or
stockholder of Company affecting the Business or the Acquired Assets or which
questions the validity of any action taken or to be taken by Company pursuant
to or in connection with the provisions of this Agreement. Except as set
forth on Schedule 6.11, there are no proceedings pending to which Company or
any director, officer or stockholder of Company is a party or, to Company's
knowledge, threatened, nor has Company received written notice of any demands
by any Governmental Authority, utility or other party, to terminate, modify
or adversely change the terms and conditions of Company's rights with respect
to the Authorizations or Existing Contracts.
6.12 ENVIRONMENTAL COMPLIANCE. (i) Except as set forth on
Schedule 6.12 hereto, (w) Company has not generated, used, transported,
treated, stored, released or disposed of, or suffered or permitted anyone
else to generate, use, transport, treat, store, release or dispose of any
Hazardous Substance (as hereinafter defined) with respect to the Acquired
Assets or the Business in violation of any Environmental Laws (as hereinafter
defined); (x) there has not been any generation, use, transportation,
treatment, storage, release or disposal of any Hazardous Substance in
connection with Company's ownership or use of the Acquired Assets, the
conduct of the Business or on, in or under any property or facility used,
owned or leased by Company or any adjacent properties or facilities, which
has created or might reasonably be expected to create any liability under any
Environmental Laws or which would require reporting to or notification of any
governmental entity; (y) no friable asbestos or polychlorinated biphenyl, and
no underground storage tank, is contained in or located on or under any
property or facility owned, used or leased by Company; and (z) any Hazardous
Substance handled or dealt with in any way with respect to the Acquired
Assets or the Business by Company, or during Company's ownership or use of
the Acquired Assets or the Business, has been and is being handled or dealt
with in compliance with all Environmental Laws.
(ii) For purposes of this Agreement, the term "Hazardous
Substance" shall mean any substance which, as of the date of this Agreement,
is listed as hazardous or toxic in the regulations implementing the
Comprehensive Environmental Response Compensation and Liability Act of 1980,
as amended ("CERCLA"), the Response Compensation and Liability Act ("RCLA"),
the Resource Conservation and Recovery Act of 1976, as amended ("RCRA"), or
listed as a hazardous substance under any applicable state environmental
laws, or any substance which has been determined by regulation, ruling or
otherwise by any agency or court to be a hazardous or toxic substance
regulated under federal or state law, and shall include petroleum and
petroleum products.
(iii) For purposes of this Agreement, the term
"Environmental Laws" shall mean CERCLA, RCRA, RCLA and any applicable
statutes, regulations, rules, ordinances, codes, licenses, permits, orders,
approvals, plans, authorizations, concessions, franchises and similar items
of all Governmental Authorities and all applicable judicial, administrative
and regulatory decrees, judgments and orders, any of which relate to the
protection of human health or the environment from the effects of Hazardous
Substances, including but not limited to, those pertaining to reporting,
licensing, permitting, investigating and remediating emissions, discharges,
releases or threatened releases of Hazardous Substances into the air, surface
water, groundwater or land, or relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Substances.
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6.13 EMPLOYEE BENEFITS AND EMPLOYEES. Newco shall have no
obligation to any employee of Company for any reason.
6.14 TAX MATTERS. Except as set forth on Schedule 6.14 attached
hereto, (i) Company has timely filed all Tax (as defined below) returns and
statements which it is required to file; (ii) all such returns are complete
and accurate and disclose all Taxes required to be paid for the periods
covered thereby; (iii) Company has not waived any statute of limitations in
respect of Taxes or agreed to an extension of time with respect to a Tax
assessment or deficiency; (iv) no assessment of any additional Taxes for
periods for which returns have been filed has been asserted and no basis
exists therefor; (v) to Company's knowledge, there are no unresolved
questions or claims raised by any Taxing authority concerning the Tax
liability of Company; and (vi) all Taxes which Company is required by law to
withhold or to collect for payment have been duly withheld or collected and
have been paid. Company has paid all Taxes due prior to the date hereof and
will pay when due (or contest in good faith by appropriate proceedings) all
Taxes which may become due on or before the Closing Date. For purposes of
this Section 6.14, the term "Tax" or "Taxes" means all taxes, charges, fees,
levies, imposts and other assessments including all income, sales, use, goods
and services, value added, capital, capital gains, alternative net worth,
transfer, profits, withholding, payroll, employer health, excise, real
property and personal property taxes, and any other taxes, customs duties,
stamp duties, fees, assessments or similar charges in the nature of a tax,
together with any interest, fines and penalties imposed by any Governmental
Authority, and whether disputed or not.
6.15 CUSTOMERS. Company shall, by electronic transfer, deliver
to Newco a schedule of all relevant customer records on Company's computer
storage records.
6.16 INSURANCE. Prior to Closing, Company shall maintain
policies of title, liability, fire, worker's compensation and other forms of
insurance (including bonds) which insure against risks and liabilities to an
extent and in a customary industry manner and which are adequate to provide
coverage against risks of a nature to which Company would normally be exposed
in the operation of the Business. All such insurance policies and binders
are in full force and effect at the date of Closing. Company has complied in
all material respects with each of such insurance policies and binders and
has not failed to give any notice or present any claim thereunder in a due
and timely manner.
6.17 BROKERS. Company has not engaged any agent, broker or
other person acting pursuant to the express or implied authority of Company
which is or may be entitled to a commission or broker or finder's fee in
connection with the transactions contemplated by this Agreement or otherwise
with respect to the sale of the Acquired Assets or the Business.
6.18 UNDISCLOSED LIABILITIES. Company has no liabilities or
obligations of any nature, whether absolute, accrued, contingent or
otherwise, which are not reflected or reserved against the December Balance
Sheet except for liabilities and obligations that have arisen in the ordinary
and usual course of business and consistent with past practice (none of which
results from, arises out of, relates to, is in the nature of, or caused by
any breach of contract, breach of warranty, tort, infringement or violation
of law) and except for liabilities and obligations directly related to the
-11-
transactions contemplated hereby.
6.19 PRICING OF SERVICES. Schedule 6.19 sets forth a
description of all rate plans currently offered to customers of the Business.
6.20 PROPRIETARY RIGHTS. Company lawfully possesses, and the
Acquired Assets will include, all intellectual property rights that are
necessary to the conduct of the Business.
6.21 ACCOUNTS RECEIVABLE AND BAD DEBTS. All notes and accounts
receivable of Company which are Acquired Assets and shown on the December
Balance Sheet or thereafter acquired were or (to the extent not heretofore
collected) are valid and genuine, were acquired in the ordinary course of
business and are subject to no asserted counterclaims, defenses or setoffs.
Schedule 6.21 attached hereto sets forth a true, complete and accurate list,
as of the end of the most recent normal billing cycle of the Business,
listing the total amounts of customer receivables and the aging of such
customer receivables based on the following Schedule: 0-30 days, 31-60 days,
61-90 days and over 90 days, from the date thereof.
6.22 CERTAIN BUSINESS RELATIONSHIPS WITH COMPANY. Except as set
forth in Schedule 6.22 attached hereto, none of the officers or directors of
the Company and its affiliates or family members have been involved in any
business arrangement or relationship with Company within the past 12 months.
6.23 DISCLOSURE. No provision of this Agreement relating to
Company, the Business or the Acquired Assets or any other document, Schedule,
Annex or other information furnished by Company to Newco in connection with
the execution, delivery and performance of this Agreement, or the
consummation of the transactions contemplated hereby, contains or will
contain any untrue statement of a material fact or omits or will omit to
state a material fact required to be stated in order to make the statement,
in light of the circumstances in which it is made, not misleading. In
connection with the preparation of this Agreement and the documents,
descriptions, opinions, certificates, Annexes, Schedules or written material
prepared by Company and appended hereto or delivered or to be delivered
hereunder, Company agrees it will disclose to Newco any fact known to Company
which Company knows or believes would affect Newco's decision to proceed with
the execution of this Agreement. All Schedules attached hereto are accurate
and complete as of the date hereof. There is no fact now known to Company
relating to the Business or Acquired Assets which in Company's reasonable
opinion adversely affects the condition of the Acquired Assets, the status of
the Authorizations or the ownership, operation, financial condition or
prospects of the Business which has not been disclosed to Newco or set forth
in the Exhibits or Schedules attached hereto.
6.24 ABSENCE OF CHANGES. Since the Balance Sheet Date, except
as set forth on Schedule 6.24, there has not been:
(i) any adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or
business of Company taken as a whole;
(ii) any damage, destruction or loss (whether or not
covered by insurance)
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adversely affecting the properties or business of
Company;
(iii) any change in the authorized capital of Company or its
outstanding securities or any change in its ownership
interests or any grant of any options, warrants,
calls, conversion rights or commitments;
(iv) any declaration or payment of any dividend or
distribution in respect of the capital stock or any
direct or indirect redemption, purchase or other
acquisition of any of the capital stock of Company;
(v) any increase in the compensation, bonus, sales
commissions or fee arrangement payable or to become
payable by Company to any of its officers, directors,
stockholders, employees, consultants or agents, except
for ordinary and customary bonuses and salary
increases for employees in accordance with past
practice;
(vi) any work interruptions, labor grievances or labor
claims filed, or any other similar labor event or
condition of any character, adversely affecting the
business of Company;
(vii) any sale or transfer, or any agreement to sell or
transfer, any assets, property or rights of Company to
any person outside the ordinary course of business of
Company;
(viii) any cancellation, or agreement to cancel, any
indebtedness or other obligation owing to Company
outside the ordinary course of business of Company;
(ix) any plan, agreement or arrangement granting any
preferential right to purchase or acquire any interest
in any of the assets, property or rights of Company or
requiring consent of any party to the transfer and
assignment of any such assets, property or rights;
(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property,
right or asset outside of the ordinary course of
Company's business;
(xi) any waiver of any rights or claims of Company;
(xii) any breach, amendment or termination of any contract,
agreement, license, permit or other right to which
Company is a party;
(xiii) any transaction by Company outside the ordinary course
of its business;
(xiv) any cancellation or termination of a contract with a
customer or client prior to the scheduled termination
date; or
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(xv) any other distribution of property or assets by
Company outside the ordinary course of Company's
business.
6.25 PROHIBITED ACTIVITIES. Except as set forth on Schedule 6.25,
Company has not, between the Balance Sheet Date and the date of this Agreement,
taken any of the actions set forth in Section 9.3 ("Prohibited Activities").
7. [INTENTIONALLY OMITTED]
8. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF PARENT AND
NEWCO
Parent and Newco, jointly and severally, represent, warrant,
covenant and agree (i) that all of the following representations and
warranties in this Section 8 are materially true at the date of this
Agreement and, subject to Section 9.6, shall be materially true at the
Closing Date and (ii) that all of the covenants and agreements in this
Section 8 shall be materially complied with or performed at and as of the
Closing Date.
8.1 DUE ORGANIZATION. Parent and Newco are each corporations
duly organized, validly existing and in good standing under the laws of the
State of Oklahoma, and are duly authorized and qualified to do business under
all applicable laws, regulations, ordinances and orders of public authorities
to carry on their respective business in the places and in the manner as now
conducted, except where the failure to be so authorized or qualified would
not have an Adverse Effect. True, complete and correct copies of the Charter
Documents and Bylaws, each as amended, of Parent and Newco (the "Parent
Charter Documents") are all attached hereto as Schedule 8.1.
8.2 AUTHORIZATION. Parent and Newco each has all requisite
corporate power and authority to enter into this Agreement and to perform its
obligations hereunder. The execution and delivery of this Agreement by
Parent and Newco and their consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action of Parent
and Newco. This Agreement has been duly executed and delivered by Parent and
Newco and is a valid and binding obligation of Parent and Newco, enforceable
against each of them in accordance with its terms.
8.3 CAPITAL STOCK. The authorized capital stock of Parent and
Newco is as set forth in Schedule 8.3. All of the issued and outstanding
shares of the capital stock of Parent and Newco (i) have been duly authorized
and validly issued, (ii) are fully paid and nonassessable, (iii) are owned of
record and beneficially by the persons set forth on Schedule 8.3 and Parent,
respectively, and (iv) were offered, issued, sold and delivered by Parent and
Newco in compliance with all applicable state and Federal laws concerning the
offer, issuance, sale and delivery of securities. Further, none of such
shares was issued in violation of the preemptive rights of any past or
present stockholder of Parent or Newco.
8.4 TRANSACTIONS IN CAPITAL STOCK. Except as set forth on
Schedule 8.4, (i) no option, warrant, call, conversion right or commitment of
any kind exists which obligates Parent or Newco
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to issue any of its authorized but unissued capital stock and (ii) neither
Parent nor Newco has any obligation (contingent or otherwise) to purchase,
redeem or otherwise acquire any of its equity securities or any interests
therein or to pay any dividend or make any distribution in respect thereof.
Schedule 8.4 also includes complete and accurate copies of all stock option
or stock purchase plans, including a list, accurate as of the date hereof, of
all outstanding options, warrants or other rights to acquire shares of
capital stock of Parent.
8.5 SUBSIDIARIES. Newco has no Subsidiaries. Parent has no
Subsidiaries except for Newco and each of the other companies identified on
Schedule 8.5. Except as set forth in the preceding sentence, neither Parent
nor Newco presently owns, of record or beneficially, or controls, directly or
indirectly, any capital stock, securities convertible into capital stock or
any other equity interest in a Person nor is Parent or Newco, directly or
indirectly, a participant in any joint venture, partnership or other
non-corporation entity.
8.6 LIABILITIES AND OBLIGATIONS. Parent and Newco have no
liabilities, contingent or otherwise, except as set forth in or contemplated
by this Agreement or agreements similar to this Agreement with the Founding
Companies and except for fees incurred in connection with the transactions
contemplated hereby and thereby.
8.7 CONFORMITY WITH LAW; LITIGATION. Neither Parent nor Newco
is in violation of any law or regulation or any order of any court or
Federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality having jurisdiction over either of
them which would have a Adverse Effect; and there are no claims, actions,
suits or proceedings, pending or, to the knowledge of Parent or Newco,
threatened, against or affecting Parent or Newco, at law or in equity, or
before or by any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction over
either of them and no notice of any claim, action, suit or proceeding,
whether pending or threatened, has been received. Parent and Newco have no
operations.
8.8 NO VIOLATIONS. Neither Parent nor Newco is in violation of
any Parent Charter Document. None of Parent, Newco, or, to the knowledge of
Parent and Newco, any other party thereto, is in default under any lease,
instrument, agreement, license or permit to which Parent or Newco is a party
or by which Parent or Newco, or any of their respective properties, are bound
(collectively, the "Parent Documents"); and (i) the rights and benefits of
Parent and Newco under the Parent Documents will not be adversely affected by
the transactions contemplated hereby and (ii) the execution of this Agreement
and the performance of the obligations hereunder and the consummation of the
transactions contemplated hereby will not result in any violation or breach
or constitute a default under any of the terms or provisions of the Parent
Documents or the Parent Charter Documents. Except as set forth on
Schedule 8.8, none of the Parent Documents requires notice to, or the consent
or approval of, any governmental agency or other third party with respect to
any of the transactions contemplated hereby in order to remain in full force
and effect, and consummation of the transactions contemplated hereby will not
give rise to any right to termination, cancellation or acceleration or loss
of any right or benefit.
8.9 PARENT SECURITIES. The shares of Parent Stock deliverable
to Company pursuant to this Agreement will have been duly authorized prior to
the Closing and, upon consummation of the
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Sale in accordance with this Agreement, will be validly issued, fully paid
and nonassessable.
8.10 BUSINESS; REAL PROPERTY; AGREEMENTS. Parent was formed in
December 1998. Neither Parent nor Newco has conducted any business since the
date of its inception, except raising capital and in connection with this
Agreement and similar agreements with the Founding Companies. Except as
disclosed on Schedule 8.10, neither Parent nor Newco owns or has at any time
owned any real property or any personal property or is a party to any other
agreement.
9. OTHER COVENANTS PRIOR TO CLOSING
9.1 ACCESS AND COOPERATION; DUE DILIGENCE; AUDITS.
(i) Between the date of this Agreement and the Closing
Date, Company will afford to the officers and
authorized representatives of Parent access to all
of Company's sites, properties, books and records
and will furnish Parent with such additional
financial and operating data and other information
as to the business and properties of Company as
Parent may from time to time reasonably request.
Company will cooperate with Parent, its
representatives, auditors and counsel in the
preparation of any documents or other material that
may be required in connection with any documents or
materials required by this Agreement. Parent and
Newco will treat all information obtained in
connection with the negotiation and performance of
this Agreement as confidential in accordance with
the provisions of Section 16.
(ii) Between the date of this Agreement and the Closing,
Parent will afford to the officers and authorized
representatives of Company access to all of the
sites, properties, books and records of Parent,
Newco and the other companies listed on Schedule
9.1(ii) ("Founding Companies") and will furnish
Company with such additional financial and
operating data and other information as to the
business and properties of Parent, Newco and the
Founding Companies as Company may from time to time
reasonably request. Parent and Newco will
cooperate with Company, representatives, auditors
and counsel in the preparation of any documents or
other material which may be required in connection
with any documents or materials required by this
Agreement. Company will cause all information
obtained in connection with the negotiation and
performance of this Agreement to be treated as
confidential in accordance with the provisions of
Section 16.
9.2 CONDUCT OF BUSINESS PENDING CLOSING. Unless otherwise
approved in writing by Parent, between the date of this Agreement and the
Closing Date, Company will:
(i) carry on its business in substantially the same manner
as it has heretofore and not introduce any material
new method of management, operation or accounting;
(ii) maintain its properties and facilities, including
those held under lease, in as
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good of working order and condition as at present,
ordinary wear and tear excepted;
(iii) perform in all material respects all of its
obligations under agreements relating to or affecting
its respective assets, properties or rights;
(iv) keep in full force and effect in all material respects
the present insurance policies or other comparable
insurance coverage;
(v) use its reasonable best efforts to maintain and
preserve its business organization intact, retain its
respective present key employees and maintain its
respective relationships with suppliers, customers and
others having business relations with it;
(vi) maintain material compliance with all material
permits, laws, rules and regulations, consent orders,
and all other orders of applicable courts, regulatory
agencies and similar Governmental Authorities;
(vii) maintain present debt instruments and Leases and not
enter into new or amended debt instruments or Leases;
and
(viii) maintain or reduce present salaries and commission
levels for all officers, directors, employees and
agents except for ordinary and customary bonus and
salary increases for employees in accordance with past
practices.
9.3 PROHIBITED ACTIVITIES BY THE COMPANY. Between the date of
this Agreement and the Closing Date, Company will not, without prior written
consent of Parent:
(i) make any change in its Charter Documents or Bylaws;
(ii) issue any securities, options, warrants, calls,
conversion rights or commitments relating to its
securities of any kind;
(iii) declare or pay any dividend, or make any
distribution in respect of Company Stock whether
now or hereafter outstanding, or purchase, redeem
or otherwise acquire or retire for value any shares
of Company Stock;
(iv) enter into any contract or commitment or incur or
agree to incur any liability or make any capital
expenditures, except if it is in the normal course
of business (consistent with past practice), in
connection with the transactions contemplated by
this Agreement, or involves an amount not in excess
of $5,000;
(v) create, assume or permit to exist any Lien upon any
asset or property whether now owned or hereafter
acquired, except (x) with respect to purchase money
Liens incurred in connection with the acquisition of
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equipment with an aggregate cost not in excess of
$5,000 as necessary or desirable for the conduct of
its business, and (y) (1) Liens for Taxes either
not yet due or being contested in good faith and by
appropriate proceedings (and for which contested
Taxes adequate reserves have been established and
are being maintained) or (2) materialmen's,
mechanic's, worker's, repairmen's, employee's or
other like Liens arising in the ordinary course of
business, or (3) Liens set forth on appropriate
schedules hereto;
(vi) sell, assign, lease or otherwise transfer or dispose
of any property or equipment except in the normal
course of business;
(vii) negotiate for the acquisition of any business or the
start-up of any new business;
(viii) merge or consolidate or agree to merge or consolidate
with or into any other corporation;
(ix) waive any material right or claim; provided that it
may negotiate and adjust bills in the course of good
faith disputes with customers in a manner consistent
with past practice;
(x) commit a material breach or amend or terminate any
material agreement, permit, license or other right; or
(xi) enter into any other transaction outside the ordinary
course of its business or prohibited hereunder.
9.4 EXCLUSIVITY. Neither Company, nor any agent, officer,
director, trustee or any representative of Company will, during the period
commencing on the date of this Agreement and ending with the earlier to occur
of the Closing Date or the termination of this Agreement in accordance with
its terms, directly/or indirectly:
(i) solicit or initiate the submission of proposals or
offers from any person for,
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person other than
Parent or its authorized agents relating to,
any acquisition or purchase of all or a material amount of the assets of, or
any equity interest in, Company, or merger, consolidation or business
combination of Company.
9.5 NOTIFICATION OF CERTAIN MATTERS. Company shall give prompt
notice to Parent of (i) the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which would likely cause any representation
or warranty of Company contained herein to be untrue or inaccurate in any
respect at or prior to the Closing Date and (ii) any failure of Company to
comply with or
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satisfy any covenant, condition or agreement to be complied with or satisfied
by such Person hereunder as of such date. Parent and Newco shall give prompt
notice to the Company of (i) the occurrence or non-occurrence of any event
the occurrence or non-occurrence of which would likely cause any representation
or warranty of Parent or Newco contained herein to be untrue or inaccurate in
any respect at or prior to the Closing Date and (ii) any failure of Parent or
Newco to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder as of such date. The delivery of
any notice pursuant to this Section 9.5 shall not be deemed to (i) modify the
representations or warranties hereunder of the party delivering such notice,
which modification may only be made pursuant to Section 9.6, (ii) modify the
conditions set forth in Sections 10 and 11 or (iii) limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
9.6 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with
respect to the representations and warranties of such party contained in this
Agreement, such party shall have the continuing obligation until 11:59 p.m.
March 31, 1999 to supplement or amend promptly the Schedules with respect to
any matter hereafter arising or discovered which, if existing or known at the
date of this Agreement, would have been required to be set forth or described
in the Schedules. Notwithstanding the foregoing sentence, no amendment or
supplement to a Schedule prepared by Company or Parent that constitutes or
reflects an event or occurrence that would have an Adverse Effect may be made
unless the parties not making the amendment or supplement consent to such
amendment or supplement. For all purposes of this Agreement, including,
without limitation, for purposes of determining whether the conditions set
forth in Sections 10.1 and 11.1 have been fulfilled, the Schedules shall be
deemed to be the Schedules as amended or supplemented pursuant to this
Section 9.6. Except as otherwise specified in Section 16.3, no party to this
Agreement shall be liable to any other party if this Agreement shall be
terminated pursuant to the provisions of Section 14.1(iv). Neither the entry
by Parent into any other agreement, such as this Agreement, after the date
hereof for the acquisition of one or more companies nor the performance by
Parent of its obligations thereunder shall be deemed to require the amendment
to or a supplementation of any Schedule hereto.
9.7 FURTHER ASSURANCE. The parties hereto agree to execute and
deliver, or cause to be executed and delivered, such further instruments or
documents or take such other action as may be reasonably necessary or
convenient to carry out the transactions contemplated by this Agreement.
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF COMPANY
The obligations of Company with respect to actions to be taken on
the Closing Date are subject to the satisfaction or waiver on or prior to the
Closing Date of all of the following conditions.
10.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS.
All representations and warranties of Parent and Newco contained in this
Agreement shall be true and correct as of the Closing Date with the same
effect as though such representations and warranties had been made on and as
of such date; all of the terms, covenants and conditions of this Agreement to
be complied with or performed by Parent and Newco on or before the Closing
Date shall have been duly complied with or performed; and a certificate to
the foregoing effect dated the Closing Date, and
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signed by the President or any Vice President of Parent and of Newco shall
have been delivered to Company.
10.2 NO LITIGATION. No action or proceeding before a court or
any other governmental agency or body shall have been instituted or
threatened to restrain or prohibit the Sale and no governmental agency or
body shall have taken any other action or made any request of Company as a
result of which the management of Company deems it inadvisable to proceed
with the transactions hereunder.
10.3 CONSENTS AND APPROVALS. All necessary consents of and
filings with any governmental authority or agency relating to the consummation
of the transactions contemplated herein shall have been obtained and made.
10.4 GOOD STANDING CERTIFICATES. Parent and Newco each shall
have delivered to Company a certificate, dated as of a date no later than ten
days prior to the Closing Date, duly issued by the Oklahoma Secretary of
State, showing that each of Parent and Newco is in good standing and
authorized to do business and that all state franchise and/or income tax
returns and taxes for Parent and Newco, respectively, for all periods prior
to the Closing Date have been filed and paid to the extent required.
10.5 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall
have occurred with respect to Parent or Newco that would constitute a material
Adverse Effect.
10.6 SECRETARY'S CERTIFICATES. Company shall have received a
certificate or certificates, dated the Closing Date and signed by the
Secretary of Parent and of Newco, certifying the completeness and accuracy of
the attached copies of Parent's and Newco's respective Charter Documents
(including amendments thereto), Bylaws (including amendments thereto), and
resolutions of the boards of directors and, if required, the stockholders of
Parent and Newco approving Parent's and Newco's entering into this Agreement
and the consummation of the transactions contemplated hereby.
10.7 CLOSING OF THE IPO OR THE PRIVATE PLACEMENT. Parent shall
have received at least $15,000,000 in gross proceeds from Parent's IPO or
Private Placement.
11. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND NEWCO
The obligations of Parent and Newco with respect to actions to be
taken on the Closing Date are subject to the satisfaction or waiver on or
prior to the Closing Date of all of the following conditions.
11.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS.
All the representations and warranties of Company contained in this
Agreement shall be true and correct as of the Closing Date with the same
effect as though such representations and warranties had been made on and as
of such date; all of the terms, covenants and conditions of this Agreement to
be complied with or performed by Company on or before the Closing Date shall
have been duly complied with or performed; and Company each shall have
delivered to Parent a certificate dated
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the Closing Date and signed by them to such effect.
11.2 NO LITIGATION. No action or proceeding before a court or
any other governmental agency or body shall have been instituted or
threatened to restrain or prohibit the Sale and no governmental agency or
body shall have taken any other action or made any request of Parent as a
result of which the management of Parent deems it inadvisable to proceed with
the transactions hereunder.
11.3 SECRETARY'S CERTIFICATE. Parent shall have received a
certificate, dated the Closing Date and signed by the Secretary of the
Company, certifying the completeness and accuracy of the attached copies of
Company's Charter Documents (including amendments thereto), Bylaws (including
amendments thereto), and resolutions of the board of directors and
stockholders approving Company's entering into this Agreement and the
consummation of the transactions contemplated hereby.
11.4 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall
have occurred with respect to Company which would constitute a material
Adverse Effect, and Company shall not have suffered any material loss or
damages to any of its properties or assets, whether or not covered by
insurance, which change, loss or damage materially affects or impairs the
ability of Company to conduct its business.
11.5 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set
forth on Schedule 11.5, all existing agreements between Company and its
stockholders shall have been canceled effective prior to or as of the Closing
Date.
11.6 THIRD PARTY CONSENTS. Company shall have delivered to
Newco such instruments, consents and approvals of third parties (the form and
substance of which shall be reasonably satisfactory to Newco) as are
necessary to assign to Newco without modification thereof, as of the Closing,
the Acquired Assets and the Assumed Liabilities and Newco shall have obtained
all Authorizations necessary for the consummation of the transactions
contemplated by this Agreement. Prior to the Closing Date, each applicable
governmental authority shall have granted its necessary consent to the
assignment of the Authorizations to Newco and each such consent shall have
become final and non-appealable and all applicable waiting periods shall have
expired. Anything herein contrary notwithstanding, Newco shall have the
right (in its sole discretion) to waive the requirement set forth in the
preceding sentence by delivery to Company of a written notice to such effect.
11.7 DUE DILIGENCE. Newco and its agents and representative
shall have conducted a satisfactory legal, tax, accounting, engineering,
regulatory and business due diligence review of the Acquired Assets and the
Business, the results of which shall be satisfactory to Newco. Without
limiting the generality of the foregoing, Newco shall be satisfied that the
Acquired Assets constitute all assets, licenses and property necessary to the
operation of the Business as contemplated to be conducted by Newco, and that
the customer lists and customer composition previously provided to Newco by
Company is substantially similar to such information found by Newco pursuant
to its subsequent due diligence review.
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11.8 GOOD STANDING CERTIFICATES. The Company shall have
delivered to Parent a certificate, dated as of a date no earlier than ten
days prior to the Closing Date, duly issued by the appropriate governmental
authority in Company's state of incorporation and, unless waived by Parent,
in each state in which Company is authorized to do business, showing Company
is in good standing and authorized to do business and that all state
franchise and/or income Tax returns and Taxes for Company for all periods
prior to the Closing have been filed and paid.
11.9 FIRPTA CERTIFICATE. If required, Company shall have
delivered to Parent a certificate to the effect that it is not a foreign
person under Section 111445-2(b) of the Treasury regulations.
11.10 CLOSING OF THE IPO OR PRIVATE PLACEMENT. Parent shall have
received at least $15,000,000 in gross proceeds from Parent's IPO or Private
Placement.
11.11 FINANCIAL STATEMENTS. Company shall have provided Parent
audited Balance Sheets as of December 31, 1997 and 1998 and audited
Statements of Income, Retained Earnings and Cash Flows for each of the years
in the two-year period ended December 31, 1998.
11.12 OPERATION OF BUSINESS. Company shall have continued to
operate the Business and market the services of the Business in the normal
course of business and in accordance with past practice.
12. CASUALTY LOSSES
In the event that there shall have been suffered between the date
hereof and the Closing any casualty loss relating to the Acquired Assets that
becomes known to Company, Company will promptly notify Newco of such event.
Company shall, at its option, (i) repair, rebuild or replace the portion of
the Acquired Assets damaged, destroyed or lost prior to the Closing Date, or
(ii) assign to Newco at Closing all claims to insurance proceeds or other
rights of Company against third parties arising from such casualty loss (the
"Claims"); PROVIDED, HOWEVER that if such insurance proceeds are or will not
be sufficient in Newco's reasonable judgment to cover the entire casualty
loss, then the Company shall pay the difference at Closing. To the extent
any Claim is not assignable, such claim may be pursued by Newco, for its own
account and benefit, in the name of Company.
13. INDEMNIFICATION
Company, Parent and Newco each make the following covenants that
are applicable to them, respectively:
13.1 GENERAL INDEMNIFICATION BY COMPANY. Company covenants and
agrees that it will indemnify, defend, protect and hold harmless Parent and
Newco at all times, from and after the Closing Date until the Expiration
Date, from and against all claims, damages, actions, suits, proceedings,
demands, assessments, adjustments, costs and expenses (including
specifically, but without limitation, reasonable attorneys' fees and expenses
of investigation) incurred by Parent or Newco as a result of or arising from
any breach of any representation, warranty, covenant or
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agreement on the part of Company under this Agreement.
13.2 INDEMNIFICATION BY PARENT. Parent covenants and agrees
that it will indemnify, defend, protect and hold harmless Company at all
times from and after the Closing Date until the Expiration Date, from and
against all claims, damages, actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including specifically, but
without limitation, reasonable attorneys' fees and expenses of investigation)
incurred by Company as a result of or arising from any breach of any
representation, warranty, covenant or agreement on the part of Parent or
Newco under this Agreement.
13.3 THIRD PERSON CLAIMS. Promptly after any party hereto
(hereinafter the "Indemnified Party") has received notice of or has knowledge
of any claim by a person not a party to this Agreement ("Third Person"), or
the commencement of any action or proceeding by a Third Person, the
Indemnified Party shall, as a condition precedent to a claim with respect
thereto being made against any party obligated to provide indemnification
pursuant to Section 13.1 or 13.2 (hereinafter the "Indemnifying Party"), give
the Indemnifying Party written notice of such claim or the commencement of
such action or proceeding. Such notice shall state the nature and the basis
of such claim and a reasonable estimate of the amount thereof. The
Indemnifying Party shall have the right to defend and settle, at its own
expense and by its own counsel, any such matter so long as the Indemnifying
Party pursues the same diligently and in good faith; provided that the
Indemnifying Party shall not settle any criminal proceeding without the
written consent of the Indemnified Party. If the Indemnifying Party
undertakes to defend or settle, it shall promptly notify the Indemnified
Party of its intention to do so, and the Indemnified Party shall cooperate
with the Indemnifying Party and its counsel in the defense thereof and in any
settlement thereof. Such cooperation shall include, but shall not be limited
to, furnishing the Indemnifying Party with any books, records or information
reasonably requested by the Indemnifying Party that are in the Indemnified
Party's possession or control. All Indemnified Parties shall use the same
counsel, which shall be the counsel selected by Indemnifying Party; provided
that if counsel to the Indemnifying Party shall have a conflict of interest
that prevents counsel for the Indemnifying Party from representing the
Indemnified Party, the Indemnified Party shall have the right to participate
in such matter through counsel of its own choosing and the Indemnifying Party
shall be responsible for the reasonable expenses of such counsel. After the
Indemnifying Party has notified the Indemnified Party of its intention to
undertake to defend or settle any such asserted liability, and for so long as
the Indemnifying Party diligently pursues such defense, the Indemnifying
Party shall not be liable for any additional legal expenses incurred by the
Indemnified Party in connection with any defense or settlement of such
asserted liability, except to the extent such participation is requested by
the Indemnifying Party, in which event the Indemnified Party shall be
reimbursed by the Indemnifying Party for reasonable additional legal expenses
and out-of-pocket expenses. If the Indemnifying Party desires to accept a
final and complete settlement of any such Third Person claim and the
Indemnified Party refuses to consent to such settlement, then the
Indemnifying Party's liability under this Section 13.3 with respect to such
Third Person claim shall be limited to the amount so offered in settlement by
such Third Person. Upon agreement as to such settlement between such Third
Person and the Indemnifying Party, the Indemnifying Party shall, in exchange
for a complete release from the Indemnified Party, promptly pay to the
Indemnified Party the amount agreed to in such settlement and the Indemnified
Party shall, from that moment on, bear full responsibility for any additional
costs of defense which it subsequently incurs with respect to such claim and
all
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additional costs of settlement or judgment. If the Indemnifying Party does
not undertake to defend such matter to which the Indemnified Party is
entitled to indemnification hereunder or fails diligently to pursue such
defense, the Indemnified Party may undertake such defense through counsel of
its choice, at the cost and expense of the Indemnifying Party, and the
Indemnified Party may settle such matter upon consent of the Indemnifying
Party, which consent will not be unreasonably withheld, and the Indemnifying
Party shall reimburse the Indemnified Party for the amount paid in such
settlement and any other liabilities or expenses incurred by the Indemnified
Party in connection therewith. All settlements hereunder shall effect a
complete release of the Indemnified Party, unless the Indemnified Party
otherwise agrees in writing. Anything in this Agreement to the contrary
notwithstanding, any amounts owing from an Indemnifying Party to an
Indemnified Party under the provisions of this Section 13 shall be reduced to
the extent to which the Indemnified Party, or any other claimant, actually
receives any proceeds of any insurance policy that are paid with respect to
the matter or occurrence that gave rise to the Third Person claim.
Submission to insurance of any insurable claim otherwise giving rise to
indemnification under this Section 13 shall be a condition precedent to
seeking indemnification under this Section.
13.4 EXCLUSIVE REMEDY. The indemnification provided for in this
Section 13 shall be the exclusive remedy in any action seeking damages or any
other form of monetary relief brought by any party to this Agreement against
another party; provided that nothing herein shall be construed to limit the
right of a party, in a proper case, to seek injunctive relief for a breach of
this Agreement.
13.5 LIMITATIONS ON INDEMNIFICATION. No person shall be
entitled to indemnification under this Section 13 if and to the extent that
such person's claim for indemnification is directly or indirectly related to
a breach by such person of any representation, warranty, covenant or
agreement set forth in this Agreement.
14. TERMINATION OF AGREEMENT
14.1 TERMINATION. This Agreement may be terminated at any time
prior to the Closing Date solely:
(i) by mutual consent of the boards of directors of Parent
and Company;
(ii) by Company (acting through its board of directors),
on the one hand, or by Parent (acting through its
board of directors), on the other hand, if the
transactions contemplated by this Agreement to take
place at the Closing shall not have been
consummated by May 31, 1999 unless the failure of
such transactions to be consummated is due to the
willful failure of the party seeking to terminate
this Agreement to perform any of its obligations
under this Agreement to the extent required to be
performed by it prior to or on the Closing Date;
(iii) by Company, on the one hand, or by Parent, on the
other hand, if a material breach or default shall
be made by the other party in the observance or in
the due and timely performance of any of the
material covenants, agreements or
-24-
conditions contained herein, and the curing of such
default shall not have been made on or before the
Closing Date; or
(iv) by Company, on the one hand, or by Parent, on the
other hand, if either such party or parties
declines to consent to an amendment or supplement
to a Schedule proposed by the other party or
parties pursuant to Section 9.6 because such
proposed amendment constitutes or reflects an event
or occurrence that would have a material Adverse
Effect on the party or parties proposing the same.
14.2 LIABILITIES IN EVENT OF TERMINATION. Except as provided in
Section 9.6, the termination of this Agreement will in no way limit any
obligation or liability of any party based on or arising from a breach or
default by such party with respect to any of its representations, warranties,
covenants or agreements contained in this Agreement.
15. NONCOMPETITION
15.1 PROHIBITED ACTIVITIES. Each stockholder of the Company (a
"Stockholder") will not, for a period of one year following the Closing Date,
for any reason whatsoever, directly or indirectly, for himself or on behalf
of or in conjunction with any other Person:
(i) engage, as an officer, director, stockholder,
owner, partner, joint venturer, or in a managerial
capacity, whether as an employee, independent
contractor, consultant or advisor, or as a sales
representative, in the sale or marketing of
telecommunication services or interconnect services
within the state of Oklahoma (the "Territory");
(ii) call upon any person within the Territory who is an
employee of Parent (including the Subsidiaries
thereof) in a sales representative or managerial
capacity for the purpose or with the intent of
enticing such employee away from or out of the
employ of Parent (including the Subsidiaries
thereof);
(iii) call upon any Person which is or which has been,
within one year prior to the Closing Date, a
customer of Parent (including the Subsidiaries
thereof) for the purpose of soliciting or selling
products or services in direct competition with
Parent (or its Subsidiaries);
(iv) call upon any prospective acquisition candidate, on
any Stockholder's own behalf or on behalf of any
competitor of Parent (including the Subsidiaries
thereof) in the long-distance telephone or
interconnect business, which candidate, to the
knowledge of such Stockholder after due inquiry,
was called upon by Parent (including the
Subsidiaries thereof) or for which, to the
knowledge of such Stockholder after due inquiry,
Parent (or any Subsidiary thereof) made an
acquisition analysis for the purpose of acquiring
such entity; or
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(v) disclose existing or prospective customers of
Company to any Person for any reason or purpose
whatsoever except to the extent that the Company
has in the past disclosed such information to the
public for valid business reasons.
Notwithstanding the above, the foregoing covenants shall not be
deemed to prohibit any Stockholder from acquiring as an investment after the
date of this Agreement not more than five percent of the capital stock of a
competing business whose stock is traded on a national securities exchange or
the National Association of Securities Dealers' Automated Quotation System.
15.2 DAMAGES. Because of the difficulty of measuring economic
losses to Parent as a result of a breach of the foregoing covenants, and
because of the immediate and irreparable damage that could be caused to
Parent for which it would have no other adequate remedy, each Stockholder
agrees that the foregoing covenants may be enforced by Parent, in the event
of breach by such Stockholder, by injunction and restraining order.
15.3 REASONABLE RESTRAINT. It is agreed by the parties hereto
that the foregoing covenants in this Section 15 impose a reasonable restraint
on the Stockholders in light of the activities and business of Parent
(including the Subsidiaries thereof) on the date of the execution of this
Agreement and the reasonably foreseeable plans of Parent.
15.4 SEVERABILITY; REFORMATION. The covenants in this Section 15
are severable and separate, and the unenforceability of any specific covenant
shall not affect the provisions of any other covenant. Moreover, in the
event any court of competent jurisdiction shall determine that the scope,
time or territorial restrictions set forth are unreasonable, then it is the
intention of the parties that such restrictions be enforced to the fullest
extent the court deems reasonable, and the Agreement shall thereupon be
automatically reformed.
15.5 INDEPENDENT COVENANT. All of the covenants in this
Section 15 shall be construed as an agreement independent of any other
provision in this Agreement and the existence of any claim or cause of action
of any Stockholder against Parent (including the Subsidiaries thereof),
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by Parent of such covenants. It is specifically
agreed that the period of one year stated at the beginning of this Section 15,
during which the agreements and covenants of each Stockholder made in this
Section 15 shall be effective, shall be computed by excluding from such
computation any time during which such Stockholder is in violation of any
provision of this Section 15. The covenants contained in Section 15 shall not
be affected by any breach of any other provision hereof by any party hereto
and shall become nugatory if the transactions contemplated by this Agreement
are not consummated.
15.6 MATERIALITY. Stockholders hereby agree that the covenants
set forth in this Section 15 are a material and substantial part of the
transactions contemplated by this Agreement.
16. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
16.1 COMPANY AND STOCKHOLDERS. Company and Stockholders recognize
and
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acknowledge that they had in the past, currently have, and in the future may
have, access to certain confidential information of Company, the Founding
Companies and/or Parent, such as operational policies, and pricing and cost
policies that are valuable, special and unique assets of Company, the
Founding Companies and/or Parent. Company and Stockholders agree that they
will not disclose such confidential information to any Person for any purpose
or reason whatsoever, except (i) to authorized representatives of Parent;
(ii) following the Closing, such information may be disclosed by Company and
Stockholders as is required in the course of performing their duties for
Parent or Newco; and (iii) to counsel and other advisers; provided that such
advisers (other than counsel) agree to the confidentiality provisions of this
Section 16.1, unless (x) such information becomes known to the public
generally through no fault of Company or Stockholders, (y) disclosure is
required by law or the order of any governmental authority under color of
law; provided, that prior to disclosing any information pursuant to this
clause (y), Company or Stockholders, if possible, shall give immediate prior
written notice thereof to Parent and provide Parent with the opportunity to
contest such disclosure, or (z) the disclosing party reasonably believes that
such disclosure is required in connection with the defense of a lawsuit
against the disclosing party. In the event of a breach or threatened breach
by Company or any Stockholder of the provisions of this Section 16.1, Parent
shall be entitled to an injunction (without the posting of bond or proof of
actual damages) restraining Company or Stockholders from disclosing, in whole
or in part, such confidential information. Nothing herein shall be construed
as prohibiting Parent from pursuing any other available remedy for such
breach or threatened breach, including the recovery of damages. In the event
the transactions contemplated by this Agreement are not consummated, (1) the
above mentioned restrictions on Company or Stockholders' ability to
disseminate confidential information with respect to Company shall become
nugatory and (2) Company and Stockholders (including representatives,
advisors and legal counsel) shall within ten business days of the Parent's
request, deliver all copies of the confidential information of Parent in its
or his possession in any form whatsoever (including, but not limited to, any
reports, memoranda or other material prepared by Company or Stockholders or
their representatives, advisors or legal counsel).
16.2 PARENT AND NEWCO. Parent and Newco recognize and
acknowledge that they had in the past and currently have and in the future
may have, prior to the Closing, access to certain confidential information of
Company, such as operational policies and pricing and cost policies that are
valuable, special and unique assets of Company. Parent and Newco agree that,
prior to the Closing, or if the transactions contemplated by this Agreement
are not consummated, they will not disclose such confidential information to
any person for any purpose or reason whatsoever, except (i) to authorized
representatives of Company and (ii) to counsel and other advisers, provided
that such advisers (other than counsel) agree to the confidentiality
provisions of this Section 16.2, unless (x) such information becomes known to
the public generally through no fault of Parent or Newco; (y) disclosure is
required by law or the order of any governmental authority under color of
law, provided that, prior to disclosing any information pursuant to this
clause (y); Parent and Newco shall, if possible, give immediate prior written
notice thereof to Company and Stockholders and provide Company and Stockholders
with the opportunity to contest such disclosure; or (z) the disclosing party
reasonably believes that such disclosure is required in connection with the
defense of a lawsuit against the disclosing party. In the event of a breach
or threatened breach by Parent or Newco of the provisions of this Section 16.2,
Company and Stockholders shall be entitled to an injunction (without the
posting of bond or proof of actual damages) restraining Parent and Newco from
disclosing, in whole or in part, such confidential information. Nothing
herein shall be
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construed as prohibiting Company and Stockholders from pursuing any other
available remedy for such breach or threatened breach, including the recovery
of damages. In the event the transactions contemplated by this Agreement are
not consummated, Parent and Newco (including their representatives, advisors
and legal counsel) shall within ten business days after Company's request,
deliver all copies of the confidential information of Company in their
possession in any form whatsoever (including, but not limited to, any
reports, memoranda, or other materials prepared by Parent or Newco or their
representatives, advisors or legal counsel at the direction of Parent or
Newco).
16.3 DAMAGES. Because of the difficulty of measuring economic
losses as a result of the breach of the foregoing covenants in Section 16.1
and 16.2 and because of the immediate and irreparable damage that would be
caused for which no other adequate remedy exists, the parties hereto agree
that, in the event of a breach by any of them of the foregoing covenants, the
covenant may be enforced against the other parties by injunction and
restraining order.
16.4 SURVIVAL. The obligations of the parties under this
Section 16 shall survive the termination of this Agreement for a period of
three years from the Closing Date or the termination of this Agreement
pursuant to Section 14.
17. TRANSFER RESTRICTIONS
Except for transfers to Stockholders who agree to be bound by the
restrictions set forth in this Section 17 (or trusts for the benefit of
Stockholders, the trustees of which so agree), for a period of one year from
the consummation of the IPO (unless the IPO shall not be consummated by May 31,
1999), except pursuant to Section 19, the Company shall not sell, assign,
exchange, transfer, encumber, pledge, distribute, appoint or otherwise
dispose of any Parent Stock received by the Company in the Sale. The Parent
Stock delivered to the Company pursuant to Section 4 of this Agreement will
bear a legend substantially in the form set forth below and containing such
other information as Parent may deem necessary or appropriate:
EXCEPT AS OTHERWISE PERMITTED BY THE ISSUER, THIS SECURITY MAY NOT BE SOLD,
ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED, APPOINTED
OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT
TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE, PLEDGE,
DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION PRIOR TO THE FIRST ANNIVERSARY
OF THE CONSUMMATION OF ISSUER'S INITIAL UNDERWRITTEN PUBLIC OFFERING ("IPO").
UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER
AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE
TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE OR AFTER --, IF THE IPO HAS
NOT BEEN CONSUMMATED BY THAT DATE.
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18. INVESTMENT REPRESENTATIONS
Company acknowledges that the Parent Stock to be delivered to
Company pursuant to this Agreement (the "Restricted Securities") has not been
and will not be registered under the 1933 Act and therefore may not be resold
without compliance with the requirements of the 1933 Act and applicable state
securities laws. All of the Restricted Securities are being acquired by
Company solely for its own account, for investment purposes only and not with
a view to, or in connection with, a distribution thereof.
18.1 COMPLIANCE WITH LAW. Company represents, warrants,
covenants and agrees that none of the Restricted Securities will be offered,
sold, assigned, exchanged, transferred, encumbered, distributed, appointed or
otherwise disposed of except after full compliance with all of the applicable
provisions of the 1933 Act and the rules and regulations of the SEC
thereunder and the provisions of applicable state securities laws and
regulations. All of the Restricted Securities shall bear the following
legend in addition to the legend required under Section 17 of this Agreement:
THE SHARES REPRESENTED BY THIS SECURITY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY APPLICABLE STATE
SECURITIES LAWS (COLLECTIVELY, THE "ACTS") AND MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED UNLESS AND UNTIL (A) THE SHARES REPRESENTED BY THIS SECURITY
SHALL HAVE BEEN REGISTERED UNDER THE ACTS OR (B) THE HOLDER OF THE SHARES
REPRESENTED BY THIS SECURITY PROVIDES THE ISSUER WITH (X) AN UNQUALIFIED
WRITTEN OPINION OF LEGAL COUNSEL, WHICH COUNSEL AND OPINION (IN FORM AND
SUBSTANCE) SHALL BE REASONABLY SATISFACTORY TO THE ISSUER, TO THE EFFECT THAT
THE PROPOSED DISPOSITION OF THE SHARES REPRESENTED BY THIS SECURITY MAY BE
EFFECTED WITHOUT REGISTRATION UNDER THE ACTS OR (Y) SUCH OTHER EVIDENCE AS
MAY BE REASONABLY SATISFACTORY TO THE ISSUER THAT THE PROPOSED DISPOSITION
MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE ACTS.
18.2 ECONOMIC RISK; SOPHISTICATION. Company is able to bear the
economic risk of an investment in the Restricted Securities and can afford to
sustain a total loss of such investment and has such knowledge and experience
in financial and business matters that it is capable of evaluating the merits
and risks of the proposed investment in Parent. Company has had an adequate
opportunity to ask questions and receive answers from the officers of Parent
concerning any and all matters relating to the transactions described herein
including, without limitation, the background and experience of the current
and proposed officers and directors of Parent, the plans for the operations
of the business of Parent and any plans for additional acquisitions and the
like. Company has asked any and all questions in the nature described in the
preceding sentence and all questions have been answered to its satisfaction.
19. REGISTRATION RIGHTS
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19.1 PIGGYBACK REGISTRATION RIGHTS. At any time following the
date of consummation of the IPO, whenever Parent proposes to register any
Parent Stock for its own or the account of others under the 1933 Act for a
public offering, other than (i) any shelf registration of shares to be used
as consideration for acquisitions of additional businesses by Parent and
(ii) registrations relating to employee benefit plans, Parent shall give
Company prompt written notice of its intent to do so. Upon the written
request of Company given within 15 business days after receipt of such
notice, Parent shall cause to be included in such registration all
Registerable Securities (including any shares of Parent Stock issued as a
dividend or other distribution with respect to, or in exchange for, or in
replacement of such Registerable Securities) which any Company requests;
provided, however, if Parent is advised in writing in good faith by any
managing underwriter of an underwritten offering of the securities being
offered pursuant to any registration statement under this Section 19.1 that
the number of shares to be sold by Persons other than Parent is greater than
the number of such shares which can be offered without adversely affecting
the offering, Parent may reduce pro rata the number of shares offered for the
accounts of such Persons (based upon the number of shares held by such
Person) to a number deemed satisfactory by such managing underwriter.
19.2 DEMAND REGISTRATION RIGHTS. At any time after the date of
consummation of the IPO, the holders ("Founding Stockholders") of a majority
of the shares of Parent Stock (i) representing Registerable Securities owned
by Company or its permitted transferees or (ii) acquired by other stockholders
of Parent on or prior to the closing of the IPO in connection with the
acquisition of their companies by Parent pursuant to an agreement similar to
this Agreement, which shares have not been previously registered or sold and
which shares are not entitled to be sold under Rule 144(k) (or any similar or
successor provision) promulgated under the 1933 Act, may request in writing
that Parent file a registration statement under the 1933 Act covering the
registration of the shares of Parent Stock issued to and held by the Founding
Stockholders or their permitted transferees (including any stock issued as a
dividend or other distribution with respect to, or in exchange for, or in
replacement of such Parent Stock) (a "Demand Registration"). Within ten days
of the receipt of such request, Parent shall give written notice of such
request to all other Founding Stockholders and shall, as soon as practicable
but in no event later than 45 days after notice from the Founding
Stockholders requesting such registration, file and use its best efforts to
cause to become effective a registration statement covering all such shares.
Parent shall be obligated to effect only one Demand Registration for all
Founding Stockholders; provided, however, that Parent shall not be deemed to
have satisfied its obligation under this Section 19.2 unless and until a
Demand Registration covering all shares of Parent Stock requested to be
registered has been filed and becomes effective under the 1933 Act and has
remained current and effective for not less than 90 days (or such shorter
period as is required to complete the distribution and sale of all shares
registered thereunder).
Notwithstanding the foregoing paragraph, following such a demand, a
majority of the disinterested directors of Parent (i.e. directors who have
not demanded or elected to sell shares in any such public offering) may defer
the filing of the registration statement for a 30 day period.
If, at the time of any request for a Demand Registration, Parent
has formulated plans to file within 60 days after such request a registration
statement covering the sale of any of its securities in a public offering
under the 1933 Act, no registration of the Parent Stock shall be initiated
under this
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Section 19.2 until 90 days after the effective date of such registration
statement unless Parent is no longer proceeding diligently to secure the
effectiveness of such registration statement provided that Parent shall
provide the Founding Stockholders the right to participate in such public
offering pursuant to, and subject to, Section 19.1.
19.3 REGISTRATION PROCEDURES. All expenses incurred in
connection with the registrations under this Section 19 (including all
registration, filing, qualification, legal, printing and accounting fees, but
excluding underwriting commissions and discounts), shall be borne by Parent.
In connection with registrations under Sections 19.1 and 19.2, Parent will,
as expeditiously as practicable:
(i) Prepare and file with the SEC a registration statement
with respect to such Parent Stock and use its best
efforts to cause such registration statement to become
and remain effective, provided that Parent may
discontinue any registration of its securities that is
being effected pursuant to Section 19.1 at any time
prior to the effective date of the registration
statement relating thereto.
(ii) Prepare and file with the SEC such amendments
(including post-effective amendments) and
supplements to such registration statement and the
prospectus used in connection therewith as may be
necessary (x) to keep such registration statement
effective for a period as may be requested by the
stockholders holding a majority of the Parent Stock
covered thereby not exceeding 90 days and (y) to
comply with the provisions of the 1933 Act with
respect to the disposition of all securities
covered by such registration statement during such
period in accordance with the intended methods of
disposition by the seller or sellers thereof set
forth in such registration statement; provided,
that before filing a registration statement or
prospectus relating to the sale of Parent Stock, or
any amendments or supplements thereto, Parent will
furnish to counsel of each holder of Parent Stock
covered by such registration statement or
prospectus, copies of all documents proposed to be
filed, which documents will be subject to the
review of such counsel, and Parent will give
reasonable consideration in good faith to any
comments of such counsel.
(iii) Furnish to each holder of Parent Stock covered by
the registration statement and to each underwriter,
if any, of such Parent Stock, such number of copies
of a preliminary prospectus and prospectus for
delivery in conformity with the requirements of the
1933 Act, and such other documents, as such Person
may reasonably request, in order to facilitate the
public sale or other disposition of the Parent
Stock.
(iv) Use its best efforts to register or qualify the Parent
Stock covered by such registration statement under
such other securities or blue sky laws of such
jurisdictions as each seller shall reasonably request,
and do any and all other acts and things which may be
reasonably necessary or advisable to enable
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such seller to consummate the disposition of the
Parent Stock owned by such seller in such
jurisdictions, except that Parent shall not for any
such purpose be required (x) to qualify to do business
as a foreign corporation in any jurisdiction where,
but for the requirements of this Section 19.3(iv), it
is not then so qualified, (y) to subject itself to
taxation in any such jurisdiction, or (z) to take any
action which would subject it to general or unlimited
service of process in any such jurisdiction where it
is not then so subject.
(v) Use its best efforts to cause the Parent Stock
covered by such registration statement to be
registered with or approved by such other
governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof
to consummate the disposition of such Parent Stock.
(vi) Immediately notify each seller of Parent Stock
covered by such registration statement, at any time
when a prospectus relating thereto is required to
be delivered under the 1933 Act within the
appropriate period mentioned in Section 19.3(ii),
if Parent becomes aware that the prospectus
included in such registration statement, as then in
effect, includes an untrue statement of a material
fact or omits to state any material fact required
to be stated therein or necessary to make the
statements therein not misleading in the light of
the circumstances then existing, and, at the
request of any such seller, deliver a reasonable
number of copies of an amended or supplemental
prospectus as may be necessary so that, as
thereafter delivered to the Parents of such Parent
Stock, each prospectus shall not include an untrue
statement of a material fact or omit to state a
material fact required to be stated therein or
necessary to make the statements therein not
misleading in the light of the circumstances then
existing.
(vii) Otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC and
make generally available to its security holders,
in each case as soon as practicable, but not later
than 45 calendar days after the close of the period
covered thereby (90 calendar days in case the
period covered corresponds to a fiscal year of the
Parent), an earnings statement of Parent which will
satisfy the provisions of Section 11 (a) of the
1933 Act.
(viii) Use its best efforts in cooperation with the
underwriters to list such Parent Stock on each
securities exchange as they may reasonably
designate.
(ix) In the event the offering is an underwritten offering,
use its best efforts to obtain a "cold comfort" letter
from the independent public accountants for Parent in
customary form and covering such matters of the type
customarily covered by such letters.
(x) Execute and deliver all instruments and documents
(including in an underwritten offering an underwriting
agreement in customary form) and take such other
actions and obtain such certificates and opinions as
the
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stockholders holding a majority of the shares of
Parent Stock covered by the Registration Statement may
reasonably request in order to effect an underwritten
public offering of such Parent Stock.
(xi) Make available for inspection by the seller of such
Parent Stock covered by such registration
statement, by any underwriter participating in any
disposition to be effected pursuant to such
registration statement and by any attorney,
accountant or other agent retained by any such
seller or any such underwriter, all pertinent
financial and other records, pertinent corporate
documents and properties of Parent, and cause all
of Parent's officers, directors and employees to
supply all information reasonably requested by any
such seller, underwriter, attorney, accountant or
agent in connection with such registration
statement.
(xii) Obtain for delivery to the underwriter or agent an
opinion or opinions from counsel for Parent in
customary form and in form and scope reasonably
satisfactory to such underwriter or agent and its
counsel.
19.4 OTHER REGISTRATION MATTERS.
(i) Each stockholder holding shares of Parent Stock
covered by a registration statement referred to in
this Section 19 will, upon receipt of any notice
from Parent of the happening of any event of the
kind described in Section 19.3(vi), forthwith
discontinue disposition of the Parent Stock
pursuant to the registration statement covering
such Parent Stock until such holder's receipt of
the copies of the supplemented or amended
prospectus contemplated by Section 19.3(vi).
(ii) If a registration pursuant to Section 19.1 or 19.2
involves an underwritten offering, each of the
stockholders agrees, whether or not his shares of
Parent Stock are included in such registration, not
to effect any public sale or distribution,
including any sale pursuant to Rule 144 under the
1933 Act, of any Parent Stock, or of any security
convertible into or exchangeable or exercisable for
any Parent Stock (other than as part of such
underwritten offering), without the consent of the
managing underwriter, during a period commencing
eight calendar days before and ending 180 calendar
days (or such lesser number as the managing
underwriter shall designate) after the effective
date of such registration.
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19.5 INDEMNIFICATION.
(i) In the event of any registration of any securities
of Parent under the 1933 Act pursuant to Section
19.1 or 19.2, Parent will, and it hereby agrees to,
indemnify and hold harmless, to the extent
permitted by law, each seller of any Parent Stock
covered by such registration statement, each
Affiliate of such seller and their respective
directors, officers, employees and agents or
general and limited partners (and directors,
officers, employees and agents thereof) each other
Person who participates as an underwriter in the
offering or sale of such securities and each other
Person, if any, who controls such seller or any
such underwriter within the meaning of the 1933
Act, as follows:
(x) against any and all loss, liability, claim,
damage or expense whatsoever arising out of
or based upon an untrue statement or
alleged untrue statement of a material fact
contained in any registration statement (or
any amendment or supplement thereto),
including all documents incorporated
therein by reference, or the omission or
alleged omission therefrom of a material
fact required to be stated therein or
necessary to make the statements therein
not misleading, or arising out of an untrue
statement or alleged untrue statement of a
material fact contained in any preliminary
prospectus or prospectus (or any amendment
or supplement thereto) or the omission or
alleged omission therefrom of a material
fact necessary in order to make the
statements therein not misleading;
(y) against any and all loss, liability, claim,
damage and expense whatsoever to the extent of
the aggregate amount paid in settlement of any
litigation, or investigation or proceeding by
any governmental agency or body, commenced or
threatened, or of any claim whatsoever based
upon any such untrue statement or omission, or
any such alleged untrue statement or omission,
if such settlement is effected with the
written consent of Parent; and
(z) against any and all expense reasonably
incurred by them in connection with
investigating, preparing or defending
against any litigation, or investigation or
proceeding by any governmental agency or
body, commenced or threatened, or any claim
whatsoever based upon any such untrue
statement or omission, or any such alleged
untrue statement or mission to the extent
that any such expense is not paid under
subsection (x) or (y) above;
Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such
seller or any such director, officer, employee, agent,
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general or limited partner, investment advisor or agent,
underwriter or controlling Person and shall survive the
transfer of such securities by such seller.
(ii) Parent may require, as a condition to including any
Parent Stock in any registration statement filed in
accordance with Section 19.1 or 19.2, that Parent
shall have received an undertaking reasonably
satisfactory to it from the prospective seller of
such Parent Stock or any underwriter, to indemnify
and hold harmless (in the same manner and to the
same extent as set forth in Section 19.5(i)) Parent
with respect to any statement or alleged statement
in or omission or alleged omission from such
registration statement, any preliminary, final or
summary prospectus contained therein, or any
amendment or supplement, if such statement or
alleged statement or omission or alleged omission
was made in reliance upon and in conformity with
written information furnished to Parent by or on
behalf of such seller or underwriter specifically
stating that it is for use in the preparation of
such registration statement, preliminary, final or
summary prospectus or amendment or supplement. Such
indemnity shall remain in full force and effect
regardless of any investigation made by or on
behalf of Parent or any such director, officer or
controlling Person and shall survive the transfer
of such securities by such seller. In that event,
the obligations of the Parent and such sellers
pursuant to this Section 19.5 are to be several and
not joint; provided, however, that, with respect to
each claim pursuant to this Section 19.5, Parent
shall be liable for the full amount of such claim,
and each such seller's liability under this Section
19.5 shall be limited to an amount equal to the net
proceeds (after deducting the underwriting discount
and expenses) received by such seller from the sale
of Parent Stock held by such seller pursuant to
this Agreement.
(iii) Promptly after receipt by an indemnified party
hereunder of written notice of the commencement of
any action or proceeding involving a claim referred
to in this Section 19.5, such indemnified party
will, if a claim in respect thereof is to be made
against an indemnifying party, give written notice
to such indemnifying party of the commencement of
such action; provided, however, that the failure of
any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of
its obligations under this Section 19.5, except to
the extent (not including any such notice of an
underwriter) that the indemnifying party is
materially prejudiced by such failure to give
notice. In case any such action is brought against
an indemnified party, unless in such indemnified
party's reasonable judgment a conflict of interest
between such indemnified and indemnifying parties
may exist in respect of such claim (in which case
the indemnifying party shall not be liable for the
fees and expenses of more than one firm of counsel
selected by holders of a majority of the shares of
Parent Stock included in the offering or more than
one firm of counsel for the underwriters in
connection with any one action or separate but
similar or related actions), the indemnifying party
will be entitled to participate in and to assume
the
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defense thereof, jointly with any other
indemnifying party similarly notified, to the
extent that it may wish with counsel reasonably
satisfactory to such indemnified party, and after
notice from the indemnifying party to such
indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be
liable to such indemnified party for any legal or
other expenses subsequently incurred by such
indemnifying party in connection with the defense
thereof, provided that the indemnifying party will
not agree to any settlement without the prior
consent of the indemnified party (which consent
shall not be unreasonably withheld) unless such
settlement requires no more than a monetary payment
for which the indemnifying party agrees to
indemnify the indemnified party and includes a
full, unconditional and complete release of the
indemnified party; provided, however, that the
indemnified party shall be entitled to take control
of the defense of any claim as to which, in the
reasonable judgment of the indemnifying party's
counsel, representation of both the indemnifying
party and the indemnified party would be
inappropriate under the applicable standards of
professional conduct due to actual or potential
differing interests between them. In the event that
the indemnifying party does not assume the defense
of a claim pursuant to this Section 19.5(iii), the
indemnified party will have the right to defend
such claim by all appropriate proceedings, and will
have control of such defense and proceedings, and
the indemnified party shall have the right to agree
to any settlement without the prior consent of the
indemnifying party. Each indemnified party shall,
and shall cause its legal counsel to, provide
reasonable cooperation to the indemnifying party
and its legal counsel in connection with its
assuming the defense of any claim, including the
furnishing of the indemnifying party with all
papers served in such proceeding. In the event that
an indemnifying party assumes the defense of an
action under this Section 19.5(iii), then such
indemnifying party shall, subject to the provisions
of this Section 19.5, indemnify and hold harmless
the indemnified party from any and all losses,
claims, damages or liabilities by reason of such
settlement or judgment.
(iv) Parent and each seller of Parent Stock shall provide
for the foregoing indemnity (with appropriate
modifications) in any underwriting agreement with
respect to any required registration or other
qualification of securities under any federal or state
law or regulation of any governmental authority.
19.6 CONTRIBUTION. In order to provide for just and equitable
contribution in circumstances under which the indemnity contemplated by
Section 19.5 is for any reason not available or insufficient for any reason
to hold harmless an indemnified party in respect of any losses, claims,
damages or liabilities referred to therein, the parties required to indemnify
by the terms thereof shall contribute to the aggregate losses, liabilities,
claims, damages and expenses of the nature contemplated by such indemnity
agreement incurred by Parent, any seller of Parent Stock and one or more of
the underwriters, except to the extent that contribution is not permitted
under Section 11 (f) of the 1933 Act. In determining the amounts which the
respective parties shall contribute, there shall be considered the relative
benefits received by each party from the offering of
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the Parent Stock by taking into account the portion of the proceeds of the
offering realized by each, and the relative fault of each party by taking
into account the parties' relative knowledge and access to information
concerning the matter with respect to which the claim was asserted, the
opportunity to correct and prevent any statement or omission and any other
equitable considerations appropriate under the circumstances. Parent and
each Person selling securities agree with each other that no seller of Parent
Stock shall be required to contribute any amount in excess of the amount such
seller would have been required to pay to an indemnified party if the
indemnity under Section 19.5(ii) were available. Parent and each such seller
agree with each other and the underwriters of the Parent Stock, if requested
by such underwriters, that it would not be equitable if the amount of such
contribution were determined by pro rata or per capita allocation (even if
the underwriters were treated as one entity for such purpose) or for the
underwriters' portion of such contribution to exceed the percentage that the
underwriting discount bears to the initial public offering price of the
Parent Stock. For purposes of this Section 19.6, each Person, if any, who
controls an underwriter within the meaning of Section 15 of the 1933 Act
shall have the same rights to contribution as such underwriter, and each
director and each officer of Parent who signed the registration statement,
and each Person, if any, who controls Parent or a seller of Parent Stock
within the meaning of Section 15 of the 1933 Act shall have the same rights
to contribution as Parent or a seller of Parent Stock, as the case may be.
19.7 UNDERTAKING TO FILE REPORTS AND COOPERATE IN RULE 144
TRANSACTIONS. After Parent completes its initial underwritten public
offering and for as long thereafter as any stockholder shall continue to hold
any Restricted Securities, Parent shall use reasonable efforts to file, on a
timely basis, all annual, quarterly and other reports required to be filed by
it under Sections 13 and 15(d) of the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC thereunder, as amended from
time to time.
20. GENERAL
20.1 COOPERATION. Company, Parent and Newco shall deliver or
cause to be delivered to the other on the Closing Date and at such other
times and places as shall be reasonably agreed to, such additional
instruments as any of the others may reasonably request for the purpose of
carrying out this Agreement. Company will cooperate and use its reasonable
efforts to have its officers, directors and employees cooperate with Parent
on and after the Closing Date in furnishing information, evidence, testimony
and other assistance in connection with any Tax Return filing obligations,
actions, proceedings, arrangements or disputes of any nature with respect to
matters pertaining to all periods prior to the Closing Date.
20.2 SUCCESSORS AND ASSIGNS. This Agreement and the rights of
the parties hereunder may not be assigned (except by operation of law or as
permitted by Section 17), but if assigned by operation of law, this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto,
the successors of Parent, Newco and Company.
20.3 ENTIRE AGREEMENT. This Agreement (including the Schedules
and Annexes) and the documents delivered pursuant hereto constitute the
entire agreement and understanding among Company, Newco and Parent and
supersede any prior agreement and understanding relating to the subject
matter of this Agreement. This Agreement, upon execution and delivery,
constitutes a valid
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and binding agreement of the parties hereto enforceable in accordance with
its terms and may be modified or amended only by a written instrument
executed by Company, Newco and Parent, acting through their respective
officers or representatives, duly authorized by their respective Boards of
Directors. Any disclosure made on any Schedule delivered pursuant hereto
shall be deemed to have been disclosed for purposes of any other Schedule
required hereby; provided that Company shall make a good faith effort to
cross reference disclosures, as necessary or advisable, between related
Schedules.
20.4 COUNTERPARTS. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original and
all of which together shall constitute but one and the same instrument.
20.5 BROKERS AND AGENTS. Except as disclosed on Schedule 20.5,
each party represents and warrants that it employed no broker or agent in
connection with this transaction and agrees to indemnify the other parties
hereto against all loss, cost, damage or expense arising out of claims for
fees or commission of brokers employed or alleged to have been employed by
such indemnifying party.
20.6 NOTICES. All notices of communication required or
permitted hereunder shall be in writing, addressed to the party to be
notified, and may be given by (i) depositing the same in United States mail,
postage prepaid and registered or certified with return receipt requested,
(ii) by telecopying the same if receipt thereof is confirmed or (iii) by
delivering the same in person to an officer or agent of such party.
(x) If to Parent or Newco, addressed to them at:
The Alliance Group, Inc.
00000 Xxxxx Xxxxxxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxxx
Telecopy No.: (000) 000-0000
with a copy to:
McAfee & Xxxx A Professional Corporation
00xx Xxxxx, Xxx Xxxxxxxxxx Xxxxxx
000 Xxxxx Xxxxxxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxxxxxx, Esq.
Telecopy No.: (000) 000-0000
(y) If to the Company, addressed to it at:
The Phone Man Sales and Services, Inc.
0000 Xxxx Xxxxxx Xxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000
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Attn: Xxxxx Xxxx
Telecopy No.:
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 20.6 from time to time.
20.7 GOVERNING LAW. This Agreement Shall be construed in
accordance with the laws of the State of Oklahoma.
20.8 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise
provided herein, no delay of or omission in the exercise of any right, power
or remedy accruing to any party as a result of any breach or default by any
other party under this Agreement shall impair any such right, power or
remedy, nor shall it be construed as a waiver of or acquiescence in any such
breach or default, or of any similar breach or default occurring later; nor
shall any waiver of any single breach or default be deemed a waiver of any
other breach or default occurring before or after that waiver.
20.9 TIME. Time is of the essence with respect to this Agreement.
20.10 REFORMATION AND SEVERABILITY. In case any provision of
this Agreement shall be invalid, illegal or unenforceable, it shall, to the
extent practicable, be modified in such manner as to be valid, legal and
enforceable but so as to most nearly retain the intent of the parties, and if
such modification is not possible, such provision shall be severed from this
Agreement; and in either case the validity, legality and enforceability of
the remaining provisions of this Agreement shall not in any way be affected
or impaired thereby.
20.11 REMEDIES CUMULATIVE. Except as otherwise provided in
Section 13.4, no right, remedy or election given by any term of this
Agreement shall be deemed exclusive but each shall be cumulative with all
other rights, remedies and elections available at law or in equity.
20.12 CAPTIONS. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
20.13 PUBLIC STATEMENTS. The parties hereto shall consult with
each other and no party shall issue any public announcement or statement with
respect to the transactions contemplated hereby without the consent of the
other parties, unless the party desiring to make such announcement or
statement, after seeking such consent from the other parties, obtains advice
from legal counsel that a public announcement or statement is required by
applicable law.
20.14 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived only
with the written consent of Parent, Newco and Company. Any amendment or
waiver effected in accordance with this Section 20.14 be binding upon each of
the parties hereto.
20.15 COLLECTION PROCEDURES. From and after the Closing, Newco
shall have the right and authority, at its expense, to collect for its
account all items to which it is entitled as provided in
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this Agreement and to endorse with the name of the Company any checks or drafts
received on account of any such items.
20.16 ARBITRATION. Any claim, controversy or dispute arising out
of or relating to this Agreement, except as set forth herein, shall be
settled by arbitration in Oklahoma City, Oklahoma, in accordance with the
rules for arbitration of the American Arbitration Association. Any
arbitration shall be undertaken pursuant to the Federal Arbitration Act,
where possible, and the decision of the arbitrators shall be final, binding,
and enforceable in any court of competent jurisdiction. In any dispute in
which a party seeks in excess of $50,000 in damages, three arbitrators shall
be employed. Otherwise, a single arbitrator shall be employed. All costs
relating to the arbitration shall be borne equally by the parties, other than
their own attorneys' and experts' fees. The parties will bear their own
attorneys' and experts' fees. The arbitrators will not award punitive,
consequential or indirect damages. Each party hereby waives the right to such
damages and agrees to receive only those actual damages directly resulting
from the claim asserted. In resolving all disputes between the parties, the
arbitrators will apply the laws of the State of Oklahoma. Except as needed
for presentation in lieu of a live appearance, depositions will not be taken.
The parties will be entitled to conduct document discovery by requesting
production of documents. The arbitrators will resolve any discovery disputes
by such prehearing conferences as may be needed. Either party may be
entitled to pursue such remedies for emergency or preliminary injunctive
relief in any court of competent jurisdiction, provided that each party
agrees that it will consent to the stay of such judicial proceedings on the
merits of both this Agreement and the related transactions pending
arbitration of all underlying claims between the parties immediately
following the issuance of any such emergency or injunctive relief.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
THE ALLIANCE GROUP, INC.
BY: /s/ Xxxxx X. Xxxxxxxx
-------------------------------------
NAME: Xxxxx X. Xxxxxxxx
TITLE: President/Chief Executive Officer
ALLIANCE ACQUISITION IV CORP.
BY: /s/ Xxxxx X. Xxxxxxxx
-------------------------------------
NAME: Xxxxx X. Xxxxxxxx
TITLE: Chief Executive Officer
THE PHONE MAN SALES AND SERVICES, INC.
BY: /s/ Xxxxx Xxxx
-------------------------------------
NAME: Xxxxx Xxxx
TITLE: President
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