Exhibit 99.1
ASSET PURCHASE AGREEMENT
by and among
XXXXXX HOLDINGS, INC.,
a Delaware corporation
and
INVISION TELECOM, INC., a Georgia corporation and COMMUNICATIONS
CENTRAL INC., a Georgia corporation
Dated as of August 21, 1997
ASSET PURCHASE AGREEMENT
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THIS ASSET PURCHASE AGREEMENT ("Agreement") is made as of August 21,
1997, by and among XXXXXX HOLDINGS, INC., a Delaware corporation ("Buyer") and
INVISION TELECOM, INC., a Georgia corporation (the "Company" or the "Seller")
and COMMUNICATIONS CENTRAL, INC., a Georgia corporation ("CCI" or "Parent
Entity").
RECITALS
WHEREAS, the Company is engaged in the business of providing inmate pay
telephone service and related and/or ancillary services or systems to jails and
other inmate or correctional facilities.
WHEREAS, CCI is the owner and holder of all the issued and outstanding
stock of the Company.
WHEREAS, for the consideration and on the terms set forth in this
Agreement, the Seller desires to sell, and Buyer desires to purchase, all of the
assets, rights, leases, fixtures and contracts used in the operation of the
Company, including, without limitation, those assets, rights, leases and
fixtures referred to in Section 3.6 hereof, but specifically excluding the
Excluded Assets described in Section 2.1(b) hereof.
NOW, THEREFORE, for and in consideration of the mutual promises contained
herein, and for other good and valuable consideration, the receipt, sufficiency
and adequacy of which are hereby acknowledged, the parties intending to be
legally bound, do hereby agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"Billing and Collection Agreement": any billing and collection
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agreement, local exchange company billing agreement or other Contract relating
to the provision of billing and collection services to the Company.
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"Breach": a "Breach" of a representation, warranty, covenant,
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obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be deemed to have occurred if there is or has
been any material inaccuracy in or breach of, or any material failure to perform
or comply with, such representation, warranty, covenant, obligation, or other
provision.
"Consent": any approval, consent, ratification, waiver, or other
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authorization (including any Governmental Authorization).
"Contemplated Transactions": all of the transactions contemplated by
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this Agreement, including: (a) the sale by the Seller to Buyer and the purchase
(and payment therefor) by Buyer from the Seller of the Company Assets; (b) the
execution, delivery and performance of the Non-Competition Agreement, the
Employment Agreements and the Intellectual Property Assignment; and (c) the
performance by Buyer, the Parent Entity and the Seller of their respective
agreements, covenants and obligations under this Agreement, including without
limitation their obligations under Section 2 hereof.
"Contract": any agreement, contract, license, obligation, promise or
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undertaking: (a) under which the Company has or may acquire any rights, (b)
under which the Company has or may become subject to any obligation or
liability, or (c) by which the Company or any of the assets owned or used by it
is or may become bound.
"Encumbrance": any charge, claim, community property interest,
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condition, equitable interest, lien, option, pledge, security interest, right of
first refusal, or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income, or exercise of any other attribute of
ownership.
"ERISA": the Employee Retirement Income Security Act of 1974 or any
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successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"GAAP": generally accepted United States accounting principles, applied
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on a consistent basis.
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"Governmental Authorization": any approval, consent, license, permit,
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waiver, tariff, or other written authorization issued, granted, given, or
otherwise made available by or under the authority of any Governmental Body or
pursuant to any Legal Requirement. The term Governmental Authorization shall
not include Inmate Telephone Agreements.
"Governmental Body": any: (a) nation, state, county, city, town,
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village, district, or other properly constituted local government; (b) federal,
state, local, municipal, foreign, or other government; (c) governmental
authority of any nature (including any governmental agency, branch, department,
official, or entity and any court or other tribunal); (d) any properly
constituted and authorized body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory, or taxing
authority or power of any nature in the United States.
"HSR Act": the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976 (as
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amended) or any successor law, and regulations and rules issued pursuant to that
Act or any successor law.
"Inmate Telephones": any of the collect call only telephones, owned or
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operated by the Company, including any hardware, software or any other personal
property installed with any Inmate Telephone.
"Inmate Telephone Agreements": all written lease agreements, telephone
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location agreements, telephone service agreements, license agreements, royalty
agreements or other contracts relating to the Installed Inmate Telephones
located in jails or other inmate or correctional facilities, which agreements
grant the right to the Company to install and operate the Installed Inmate
Telephones upon the premises set forth within any such document.
"Installed Inmate Telephone": an Inmate Telephone that is subject to an
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Inmate Telephone Agreement, and is installed at the location provided for in its
related Inmate Telephone Agreement.
"Installed Line": any telephone lines and related facilities providing
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telephone service to Installed Inmate
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Telephones, including those telephone lines identified by installation,
location and telephone number in Exhibit 3.6(a)(ii).
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"Intellectual Property Assets": the Intellectual Property Assets,
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Trademarks and Computer Systems as defined in the Intellectual Property
Assignment.
"Intellectual Property Assignment": the Intellectual Property Assignment
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to be executed and delivered at Closing in the form attached hereto as Exhibit
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2.4(a)(ii).
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"IRC": the Internal Revenue Code of 1986 or any successor law, and
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regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS": the United States Internal Revenue Service or any successor agency,
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and, to the extent relevant, the United States Department of the Treasury.
"Knowledge": information known to a party without independent investigation
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beyond such party's officers and directors.
"Legal Requirement": any federal, state, local, municipal, foreign,
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international, multinational, or other administrative order, constitution, law,
ordinance, ruling, regulation, or statute (as to representations and warranties
set forth in this Agreement, such orders, constitutions, laws, ordinances,
rulings, regulations, or statutes in effect as of the date such representation
or warranty is made).
"Long Distance Service Agreements": any long distance service provider
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agreement, telecommunications agreement or other Contract relating to provision
of long distance service or other similar services to the Company.
"Material Adverse Effect": any change or effect that when taken together
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with all other such changes and effects has a material adverse effect on the
financial condition, results of operations, business or operations of the
Company taken as a whole.
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"Order": any award, decision, injunction, judgment, order, ruling,
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subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"Ordinary Course of Business": an action taken by a Person will be deemed
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to have been taken in the "Ordinary Course of Business" only if such action is
consistent with the past practices of such Person and is taken in the ordinary
course of the normal day-to-day operations of such Person.
"Organizational Documents": (a) the articles or certificate of
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incorporation and the bylaws of a corporation; (b) the partnership agreement and
any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) any charter, articles of organization, shareholders agreement,
operating agreement or similar document adopted or filed in connection with the
creation, formation, or organization of a Person; and (e) any amendment to any
of the foregoing.
"Parts and Supplies Agreement": any Contract relating to the provision of
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Inmate Telephone parts, inventory or equipment, or other parts, equipment or
services to the Company.
"Person": any individual, corporation (including any non-profit
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corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"Proceeding": any action, arbitration, audit, hearing, investigation,
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litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"Representative": with respect to a particular Person, any director,
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officer, employee, agent, consultant, advisor, partner or other representative
of such Person, including legal counsel, accountants, and financial advisors.
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"Securities Act": the Securities Act of 1933 or any successor law, and
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regulations and rules issued pursuant to that Act or any successor law.
"Service Agreements": any Long Distance Service Agreement, Billing and
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Collection Agreement, Parts and Supplies Agreement, or similar agreement or
Contract relating to the provision of parts, equipment or services to or by the
Company.
"Taxes": any tax, charge, fee, duty, levy or other assessment related to
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the Company Assets, including all applicable penalties and interest.
"Tax Return": any return (including any information return), report,
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statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment of
any Tax or in connection with the administration, implementation, or enforcement
of or compliance with any Legal Requirement relating to any Tax.
"Threatened": a claim, Proceeding, dispute, action, or other matter will
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be deemed to have been "Threatened" if to the knowledge of the Company any
demand or statement has been made (orally or in writing) or any notice has been
given (orally or in writing), or if to the knowledge of the Company any other
event has occurred or any other circumstances exist that would lead a prudent
Person to conclude that such a claim, Proceeding, dispute, action, or other
matter is likely to be asserted, commenced, taken, or otherwise pursued in the
future.
2. PURCHASE AND SALE OF ASSETS, CLOSING AND OTHER AGREEMENTS
2.1 Assets
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(a) Company Assets. Subject to the terms and conditions of this
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Agreement, Seller shall grant, sell, convey, assign, transfer and deliver to the
Buyer (and/or, at Buyer's election, to an affiliate or subsidiary of Buyer), and
the Buyer shall purchase and acquire from the Seller, all the assets, rights,
leases, fixtures, accessions, claims and contracts of the Seller at the Closing
Date, including all of the following assets,
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rights, leases, fixtures, accessions, claims and contracts: (a) those underlying
the Interim Balance Sheet (excluding all cash) with such changes to such assets
as may occur from the date thereof to the Closing Date in the Ordinary Course of
Business; (b) those located at the Seller's facilities in Louisville, Kentucky
(the "Principal Office") on the Closing Date; and (c) those otherwise
substantially related to the operation of the business of the Company on the
Closing Date, including, without limitation, the assets, or categories thereof,
referred to in Section 3.6 hereof (all such assets, rights, leases, fixtures,
accessions, claims and contracts being hereinafter collectively referred to as
the "Company Assets").
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(b) Excluded Assets. Notwithstanding anything to the contrary
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provided in Section 2.1(a) hereof, none of the assets set forth on Exhibit
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2.1(a) hereto shall be included in the Company Assets to be purchased and sold
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hereunder.
2.2 Purchase Price.
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(a) Purchase Price. The aggregate purchase price (the "Purchase
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Price") for the Company Assets will be (i) $42,000,000 cash, plus (ii) capital
expenditures paid or incurred by the Company under Inmate Telephone Agreements
entered into or renewed after August 1, 1997, less (iii) an amount equal the
Company's EBITDA (as calculated in accordance with GAAP and the Company's past
practices) for the period beginning August 1, 1997 to the Closing Date. In
addition, Buyer shall assume the liabilities set forth on Exhibit 2.2 and the
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Purchase Price shall be reduced by the amount of such liabilities so assumed,
such amount not to exceed $2,000,000.
(b) Liquidation of Accounts Receivable. The Company and Buyer agree
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to use good faith efforts to collect Accounts Receivable existing as of the
Closing Date in the Ordinary Course of Business, and to remit and pay to Buyer,
if, as and when collected, one-half of the amounts so collected until Buyer has
received an aggregate amount under this Section 2.2(b) equal to $1,200,000.
Thereafter, all proceeds of Accounts Receivable collected by the Company or
Buyer shall be the property of the Company.
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2.3 Closing and Transition
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(a) Closing The closing of the transactions contemplated by this
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Agreement (the "Closing") will take place at the offices of Buyer's counsel in
Dallas, Texas (or such other location within or outside of Dallas, Texas as
Buyer shall designate) at 10:00 a.m. (local time) on September 30, 1997, or
within five business days of the satisfaction or waiver of the last condition to
Closing contained in Articles 6 and 7, whichever is later (the "Closing Date").
(b) Transition. At Closing, Buyer and Seller shall enter into a
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mutually satisfactory Transition Agreement whereby Seller agrees to make
available its employees to Buyer for a period of 90 days to assist in transition
and Buyer agrees to reimburse Seller for all costs associated with such
employees, including salary, wages and fringe benefits.
2.4 Closing Obligations
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At the Closing:
(a) Seller or the Parent Entity, as applicable, will deliver or
cause to be delivered to Buyer:
(i) such bills of sale, endorsements, consents, assignments, and
other good and sufficient instruments of conveyance and assignment as
shall be reasonably required by the Buyer and its counsel and as shall
be effective to vest in the Buyer good and marketable title in and to
all the Company Assets, together with copies of all the contracts,
agreements, commitments, books, records, files, computer data,
computer disks, electronic storage media, documents and the like
relating to the Company Assets.
(ii) the Intellectual Property Assignment in the form attached
hereto as Exhibit 2.4(a)(ii).
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(iii) separate Employment Agreements for each of the employees
listed on Exhibit 2.4(a)(iii)-1 and in the form attached hereto as
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Exhibit 2.4(a)(iii)-2 (the "Employment Agreements");
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(iv) the Non-Competition Agreement in the form attached hereto as
Exhibit 2.4(a)(iv) (the "Non-Competition Agreement");
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(v) a certificate executed by Seller and the Parent Entity
representing and warranting to Buyer that each of Seller's and the
Parent Entity's representations and warranties in this Agreement was
accurate in all material respects as of the date of this Agreement and
is accurate in all material respects as of the Closing Date as if made
on the Closing Date (the "Seller's Closing Certificate");
(vi) opinion(s) of counsel, dated the Closing Date, in the form
of Exhibit 2.4(a)(vi); and
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(vii) such other documents as Buyer may reasonably request for the
purpose of (1) enabling its counsel to provide the opinion referred to
in Section 2.4(b), (2) evidencing the accuracy of any of Seller's
and/or the Parent Entity's representations and warranties, (3)
evidencing the performance by Seller of, or the compliance by Seller
with, any covenant or obligation required to be performed or complied
with by the Seller, or (4) otherwise facilitating the consummation or
performance of any of the Contemplated Transactions.
(b) Buyer will deliver to the Seller (or to such other Persons
designated below):
(i) the cash portion of the Purchase Price and appropriate
agreements evidencing the assumption of certain liabilities (as
provided in Sections 2.2(a) and 2.5 below);
(ii) the Non-Competition Agreement and the Employment Agreements,
all executed by Buyer;
(iii) a certificate executed by Buyer representing and warranting
to the Seller and the Parent Entity that each of Buyer's
representations and warranties in
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this Agreement was accurate in all material respects as of the date of
this Agreement and is accurate in all material respects as of the
Closing Date as if made on the Closing Date (the "Buyer's Closing
Certificate").
(iv) opinion(s) of counsel, dated the Closing Date, in the
form of Exhibit 2.4(b)(iv); and
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(v) such other documents as Seller may reasonably request for
the purpose of (1) enabling its counsel to provide the opinion
referred to in Section 2.4(a), (2) evidencing the accuracy of any
representation or warranty of Buyer, (3) evidencing the performance by
Buyer of, or the compliance by Buyer with, any covenant or obligation
required to be performed or complied with by Buyer, or (4) otherwise
facilitating the consummation of the Contemplated Transactions.
2.5 Treatment of Certain Matters and Adjustments
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(a) Seller shall discharge on or at Closing, and Buyer will
acquire the Company Assets free of all the Company's loans, lines of credit,
installment or conditional sale agreements, capital leases, financing and other
indebtedness.
(b) Seller shall also discharge on or at Closing, all obligations
or liabilities to third parties or Seller's employees which may vest or become
payable as a result of the sale of or change of ownership or control of the
Company Assets, including, without limitation, any liability arising out of or
triggered by the Contemplated Transactions.
(c) As additional consideration for the purchase of the Company
Assets, the Buyer assumes, and agrees to pay, perform and discharge when due,
the following liabilities and obligations of the Seller: all obligations arising
from and after the Closing Date under the terms of the Inmate Telephone
Agreements, the Installed Lines, the Services Agreements and the other Contracts
listed on Exhibit 3.6(a)(i)-(iii) and (ix).
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(d) Notwithstanding anything in this Agreement to the contrary,
except as expressly provided in Section 2.5(c), the Buyer shall not assume any,
and the Seller shall retain and be responsible for all, of the liabilities and
obligations of the Seller and its affiliates.
2.6 Name Change. On the Closing Date, the Company will cease using the name
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"Invision" and/or any name similar thereto, and will assign to the Buyer all
rights in and to the name "Invision".
2.7 Allocation. The Purchase Price shall be allocated among the Company
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Assets in such a manner as shall be agreed upon by Seller and Buyer prior to the
Closing consistent with Section 1060 of the IRC. The parties agree to use such
allocations with respect to all filings with the IRS relating to the purchase
and sale of Company Assets.
2.8 Regulatory. In the event at the time of Closing, Buyer has not obtained
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the Governmental Authorizations (as contemplated in Section 6.1 hereof) from the
appropriate Governmental Bodies necessary to consummate the Contemplated
Transactions without causing a breach of applicable Legal Requirements, the
following provisions shall apply:
(a) Buyer shall provide at Closing a list of the states where such
Governmental Authorizations have not been obtained (the
"Remaining States").
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(b) [Intentionally deleted]
(c) The Inmate Telephone Agreements applicable to facilities located
in the Remaining States (collectively, the "Remaining Inmate
Telephone Agreements") shall be retained by Seller and shall not
be transferred to Buyer at Closing.
(d) Buyer shall diligently and in good faith seek to obtain all
necessary Governmental Authorizations from the appropriate
Governmental Bodies in the Remaining States.
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As soon as reasonably practicable after such Governmental
Authorizations are obtained, Seller shall assign and transfer to
Buyer, the Remaining Inmate Telephone Agreements (and related
Company Assets) applicable to facilities located in such Remaining
States.
(e) Until the necessary Consents and Governmental Authorizations are
obtained as aforesaid, the Remaining Inmate Telephone Agreements
shall continue to be owned by Seller but operated under a
Management Agreement in the form attached hereto as Exhibit
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2.8(e), which the parties will enter into at Closing.
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2.9 HSR Act. The Buyer and the Seller shall, in cooperation with each
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other, file (or cause to be filed) with each of the Department of
Justice ("DOJ") and the Federal Trade Corporation ("FTC") any reports
or notifications that may be required to be filed by them under the
HSR Act in connection with the transactions contemplated by this
Agreement. The Buyer and the Seller shall promptly comply with all
requests for further documents and information made by the DOJ or the
FTC, and shall furnish to the others all such information in its
possession as may be necessary for the completion of the reports or
notifications to be filed by the others. All fees due from any party
to the FTC or the DOJ under the HSR Act in connection with the filing
of any of those reports or notifications shall be borne by the party
making such filing.
3. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller and the Parent Entity represent and warrant to Buyer as follows:
3.1 Organization and Good Standing
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(a) The Company is a corporation duly organized, validly existing,
and in good standing under the laws of its jurisdiction of incorporation, with
full corporate power and authority to conduct its business as it is now being
conducted, to own or use the properties and assets that it purports to own
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or use, and to perform all its obligations under the Contracts. The Company is
duly qualified to do business as a foreign corporation and is in good standing
under the laws of the states in which the nature of the activities conducted by
it requires such qualification except where the failure to be so qualified would
not have a Material Adverse Effect. The Company does not have and never has had
any subsidiaries.
(b) The Company's principal place of business is, and has been for
the last five (5) years or if it has not done business for five (5) years, for
the entire period that it has done business, in Louisville, Kentucky and the
Company has not had any other offices, other corporate names or done business in
any other names during said five (5) year period.
3.2 Authority; No Conflict
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(a) This Agreement constitutes the legal, valid, and binding
obligation of the Seller and the Parent Entity enforceable against the Seller
and the Parent Entity in accordance with its terms except as such enforcement
may be limited by applicable bankruptcy laws and principles of equity. Upon the
execution and delivery of the Employment Agreements, the Non-Competition
Agreement, the Intellectual Property Assignment, the Management Agreement, and
Seller's Closing Certificate (collectively, the "Seller's Closing Documents"),
the Seller's Closing Documents will constitute the legal, valid, and binding
obligations of the parties (other than Buyer) enforceable against each of them
in accordance with their respective terms except as such enforcement may be
limited by applicable bankruptcy laws. The Seller and the Parent Entity have
the absolute and unrestricted right, power, authority, and capacity to execute
and deliver this Agreement and the Seller's Closing Documents to which each is a
party and to perform their obligations under this Agreement and the Seller's
Closing Documents to which each is a party.
(b) Neither the execution, delivery or performance of this Agreement
nor any other consummation or performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time):
(i) contravene, conflict with, or result in a violation of (A) any
provision of the Organizational
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Documents of the Company or the Parent Entity, (B) any resolution adopted
by the board of directors or the stockholders of the Company or the Parent
Entity, (C) any duty owed by the Company or the Parent Entity to any Person
(except as contemplated by Section 8.3), or (D) any Legal Requirement, any
Governmental Authorization or any Order to which the Company or the Parent
Entity, or any of the Company Assets may be subject, except for regulatory
approvals required in connection with the Contemplated Transactions; or
(ii) contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the right to declare a
default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any Contract, or any
contract or other agreement to the Parent Entity or Seller is a party,
except as contemplated by Section 8.3.
3.3 Options
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There are no options, warrants, rights of first refusal or other rights to
acquire all or any portion of the Company Assets.
3.4 Financial Statements
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The Company has delivered to Buyer: (a) audited balance sheets of the
Company as at June 30, in each of the years 1995 and 1996, and the related
audited statements of income, changes in stockholders' equity, and cash flow for
each of the fiscal years then ended, and (b) an unaudited balance sheet of the
Company as at June 30, 1997 (the "Interim Balance Sheet") and the related
unaudited statements of income and cash flow. The Company shall deliver to
Buyer such other balance sheets, statements of income, cash flow and other
financial statements of the Company as Buyer may reasonably request. All such
financial statements and notes fairly present the financial condition and the
results of operations, and cash flow of the Company as at the respective dates
of and for the periods referred to in such financial statements, all in
accordance with GAAP, subject, in the case of Interim Balance Sheet, to normal
recurring year-end adjustments (the effect of which will not,
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individually or in the aggregate, be materially adverse) and the absence of
notes. The financial statements referred to in this Section 3.4 reflect the
consistent application of such accounting principles throughout the periods
involved, except as disclosed in the notes to such financial statements. No
financial statements of any Person other than the Company are required by GAAP
to be included in the financial statements of the Company.
3.5 Books and Records
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The books of account, ledgers, financial data and other records of the
Company, all of which have been made available to Buyer, are complete and
correct in all material respects. At the Closing, all of such books of account
and records will be delivered to Buyer to the extent that they relate to the
Company Assets.
3.6 Company Assets
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(a) Company Assets. On the Closing Date, the Company shall convey,
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and the Buyer shall own and have, good and marketable title, without
Encumbrance, to all of the Company Assets (which assets are accurately reflected
in the Company's Interim Balance Sheet) including, without limitation:
(i) all rights and interest of the Company in and under the Inmate
Telephone Agreements listed on Exhibit 3.6(a)(i) and any Inmate
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Telephone Agreements, entered into by the Company after the date
hereof;
(ii) all Installed Lines listed on Exhibit 3.6(a)(ii);
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(iii) all rights and interests of the Company in and under the Service
Agreements listed on Exhibit 3.6(a)(iii);
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(iv) all uninstalled Inmate Telephones, parts, hardware and equipment
listed on Exhibit 3.6(a)(iv) (subject to turn over of inventory
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in the Ordinary Course of Business);
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(v) all vehicles listed on Exhibit 3.6(a)(v);
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(vi) [Intentionally Deleted];
(vii) all Installed Inmate Telephones;
(viii) all Intellectual Property Assets;
(ix) all rights and interest of the Company in the office lease
agreements listed on Exhibit 3.6(a)(ix) pertaining to the
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Principal Office;
(x) all other furniture, fixtures, equipment, personalty or
intangibles of any kind used by the Company in the operation of
its business, including without limitation, each of those items
listed on Exhibit 3.6(a)(x); and
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(xi) all tariffs and Governmental Authorizations that relate to the
business of, or to any assets of the Company including those
listed on Exhibit 3.12 except as may be limited by applicable
------------
law.
3.7 Accounts Receivable
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All accounts receivable of the Company that are reflected on the Interim
Balance Sheet or on the accounting records of the Company as of the Closing Date
(collectively, the "Accounts Receivable") represent or will represent
obligations arising from sales actually made or services actually performed in
the Ordinary Course of Business.
3.8 Relationships with Related Persons
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Except as set forth in Exhibit 3.8 hereof, neither the Parent Entity nor
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any Person related or affiliated with the Parent Entity or the Company is a
party to any Contract with, or has any claim or right against, the Company.
Neither the Parent Entity nor any Person related or affiliated with the Parent
Entity owns, directly or indirectly, any interest in any person or entity that
is a competitor, customer or supplier of the Company, that otherwise has any
business dealings with the
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Company or that is engaged in the same or similar business as the Company.
3.9 Taxes
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(a) The Company has filed or caused to be filed all Tax Returns that
are or were required to be filed by it, either separately or as a member of a
group of corporations, pursuant to applicable Legal Requirements. Seller has
made available to Buyer copies of all Tax Returns, filed since 1996 (including
the Tax Returns for the year ended June 30, 1996). The Company has paid, or
made provision for the payment of, all Taxes that have or may have become due
pursuant to those Tax Returns or otherwise, or pursuant to any assessment
received by the Company, except such Taxes, if any, as are listed in Exhibit 3.9
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hereof and are being contested in good faith and as to which adequate reserves
(determined in accordance with GAAP) have been provided in the Interim Balance
Sheet. All Tax Returns filed by (or that include on a consolidated basis) the
Company are true, correct and complete in all material respects.
(b) To the knowledge of the Company, there exists no proposed tax
assessment against the Company and/or the Company Assets except as disclosed in
the Interim Balance Sheet or in Exhibit 3.9 hereof. All Taxes that the Company
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is or was required by Legal Requirements to withhold or collect have been duly
withheld or collected and, to the extent required, have been paid to the proper
Governmental Body or other Person.
3.10 No Material Adverse Change
--------------------------
Except as set forth on Exhibit 3.10, since the date of the Interim Balance
------------
Sheet, there has not been any material adverse change in the business, client
relations, operations, or assets of the Company, and to the knowledge of the
Seller and the Parent Entity, no event has occurred or circumstance exists that
may result in such a material adverse change. Without in any way limiting the
generality of the foregoing, to the knowledge of the Company and subject to
general economic and regulatory conditions, there exists no actual or threatened
terminations, cancellations or limitations of, or any modification or change in
(i) the current business relationship of the Company with any material customer
or group of customers whose business is
17
material to the operation of the Company's business; or (ii) the current
business relationship of the Company with any supplier, and the Company has no
reason to believe that any such customers or suppliers shall not continue a
business relationship with Buyer subsequent to the Closing on a basis no less
favorable to Buyer than that heretofore conducted (except where such change
would not have a material adverse effect on the Company); and (iii) there exists
no other condition or state of facts or circumstances which would materially
adversely affect the Company's business or prevent Buyer from conducting such
business after the Closing on a basis not materially adversely less favorable to
Buyer than that of which it has heretofore been conducted by the Company.
3.11 Employee Benefits
-----------------
(a) The term "Employee Benefit Plan" means any "employee benefit
plan" (as defined in the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")), any plan or policy providing for "fringe benefits"
(including but not limited to vacation, paid holidays, personal leave, employee
discount, educational benefit or similar programs), and any other bonus,
incentive, compensation, profit-sharing, stock, severance, retirement, health,
life, disability, group insurance, employment, fringe benefit, or any other
similar plan, agreement, policy or understanding (whether written or oral,
qualified or nonqualified), and any trust, escrow, or other agreement related
thereto. Except as set forth on Exhibit 3.11, the Company maintains no Employee
------------
Benefit Plans. Each Employee Benefit Plan set forth on Exhibit 3.11 has been
------------
operated in compliance, in all material respects, with ERISA, applicable tax
qualification requirements and all other applicable laws.
(b) Notwithstanding any provision in this Agreement to the contrary,
Buyer has not agreed to, and shall not, assume, adopt or succeed to, or have any
liability or responsibility with respect to, any Employee Benefit Plan
maintained or formerly maintained by Seller or any affiliate, or any obligations
under any such plans, and Seller shall indemnify Buyer to the extent Buyer
incurs any liability with respect to any such plans.
3.12 Compliance with Legal Requirements; Governmental
------------------------------------------------
Authorizations and Orders
-------------------------
18
(a) The Company is, and at all times has been, in compliance with
each Legal Requirement, Governmental Authorization and Order that is or was
applicable to it or to the conduct or operation of its business or the ownership
or use of any of its assets, and no event has occurred or circumstance exists
that (with or without notice or lapse of time) may constitute or result in a
violation by the Company of, or a failure on the part of the Company to comply
with, any Legal Requirement, Governmental Authorization or Order, except for any
such non-compliance or violation as would not have a Material Adverse Effect.
(b) Exhibit 3.12 contains a complete and accurate list of each
------------
material Governmental Authorization that relates to the business of, or to any
of the assets used in the operation of the Company. Each Governmental
Authorization of the Company is valid and in full force and effect. The Company
has all of the Governmental Authorizations necessary to permit the Company to
lawfully conduct and operate the business of the Company in the manner they
currently conduct and operate such business and to permit the Company to own and
use the assets used in the operation of the Company in the manner in which they
currently own and use such assets. A true and complete copy of each
Governmental Authorization listed in Exhibit 3.12 has been made available to
------------
Buyer.
3.13 Legal Proceedings
-----------------
(a) Except as set forth in Exhibit 3.13(a) hereof, there is no
---------------
pending Proceeding: (i) that has been commenced by or against the Company or
that otherwise relates to or may affect the business of, or any of the assets
owned or used by, the Company; or (ii) that challenges, or that may have the
effect of preventing, delaying, making illegal, or otherwise interfering with,
any of the Contemplated Transactions or any Contract. Except as set forth in
Exhibit 3.13(a) hereof, to the best knowledge of the Seller and the Parent
---------------
Entity, no such Proceeding has been Threatened, and no event has occurred or
circumstance exists that may reasonably be expected to give rise to or serve as
a basis for the commencement of any such Proceeding. The Proceedings listed in
Exhibit 3.13(a) hereof
---------------
19
will not have a material adverse effect on the business, operations or assets of
the Company.
(b) All Proceedings in which the Company has been named or otherwise
involved since 1996 are listed on Exhibit 3.13(b). Seller has made available to
---------------
Buyer true and complete copies of all material pleadings and other documentation
relating to each Proceeding listed on Exhibit 3.13(b).
---------------
3.14 Absence of Certain Changes and Events
-------------------------------------
Except as set forth in Exhibit 3.14 hereof, since the date of the Interim
------------
Balance Sheet, the Company has conducted its business only in the Ordinary
Course of Business and there has not been any:
(a) damage to or destruction or loss of any asset or property of the
Company, whether or not covered by insurance, materially and adversely affecting
the properties, assets, business or financial condition of the Company or its
business;
(b) termination of, or receipt of notice of termination of any
material Contract;
(c) sale (other than sales in the Ordinary Course of Business),
lease, or other disposition of any asset or property of the Company or mortgage,
pledge, or imposition of any lien or other encumbrance on any material asset or
property of the Company;
(d) material change in the accounting methods used by the Company;
(e) material change in the financial condition, assets, liabilities
or business of the Company;
(f) material change in the method of collecting accounts receivable
or acceleration in the collection of accounts receivable;
(g) material failure to pay expenses incurred in connection with the
operation of the Company on a timely basis.
20
3.15 Contracts; No Defaults
----------------------
(a) Seller has made available to Buyer true and complete copies of
the Contracts referred to in Section 3.6;
(b) Except as set forth in Exhibit 3.15(b) hereof, with respect to
---------------
each Contract referred to in Section 3.6:
(i) such Contract is in full force and effect and is valid and
enforceable in accordance with its terms;
(ii) the Company is, and at all times since the later of 1996 or the
Contract's date of inception, has been, in compliance with all applicable
terms and requirements of such Contract except where the failure to be in
substantial compliance has not had and would not reasonably be expected to
have a Material Adverse Effect on the Company;
(iii) each other Person that has or had any obligation or liability
under such Contract is, and at all times since the later of 1996 or the
Contract's date of inception, has been, in substantial compliance with all
applicable terms and requirements of such Contract except where the failure
to be in substantial compliance has not had and would not reasonably be
expected to have a Material Adverse Effect on the Company;
(iv) no event has occurred or circumstance exists (including without
limitation, the Contemplated Transaction) that (with or without notice or
lapse of time) may contravene, conflict with, or result in a violation or
breach of, or give the Company or other Person the right to declare a
default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any such Contract
except for any such event, the occurrence of which would not have a
Material Adverse Effect on the Company;
(v) neither the Company nor the Parent Entity has given to or
received from any other Person, at any time since the later of 1996 or the
Contract's date of
21
inception, any notice or other communication (whether oral or written)
regarding any actual, alleged, possible, or potential violation or breach
by the Company of, or default by the Company under such Contract except for
any such violation, breach or default that would not have a Material
Adverse Effect on the Company;
(vi) to the best knowledge of the Parent Entity and the Company,
there are no renegotiations of, attempts to renegotiate, or outstanding
rights to renegotiate any material amounts paid or payable to the Company
under such Contracts with any Person (and, no such Person has made written
demand for such renegotiation) where the effect of such renegotiation would
have a material adverse effect on the Company or its operations;
(vii) such Contracts constitute the sole and entire agreement
among the parties thereto with respect to the subject matter thereof, and
there are no other enforceable agreements among the parties which in any
way pertain to or otherwise affect such Contracts.
3.16 Insurance
---------
Seller has delivered or made available to Buyer true and complete copies of
all policies of insurance to which the Company is a party or under which the
Company is or has been covered at any time since 1996. All such policies: (i)
are valid, outstanding, and enforceable; (ii) taken together, provide in the
reasonable judgment of the Company and the Parent Entity adequate insurance
coverage for the assets and the operations of the Company; (iii) are sufficient
for compliance with all Legal Requirements and Contracts to which the Company is
a party or by which it is bound; and (iv) will continue in full force and effect
following the consummation of the Contemplated Transactions with respect to
losses or claims accruing or arising prior to the Closing Date.
3.17 Environmental Matters
---------------------
(a) The Company and the Company Assets are, and at all times have
been, in material compliance with, and have not been and are not in violation of
or liable under, any Environmental Laws.
22
(b) The Company has not generated, handled, manufactured, processed,
treated, stored, used, transferred, released, disposed of or otherwise conducted
any hazardous process or activity with respect to (collectively, "Hazardous
Activities") any hazardous substances, hazardous wastes, hazardous wastes
constituents and reaction by-products, hazardous materials, pesticides, oil and
other petroleum products, pollutants, and/or toxic substances, including
asbestos and polychlorinated biphenyls as those terms are defined pursuant to
Environmental Laws (collectively, "Hazardous Substances"), except in full
compliance with Environmental Laws, or where any alleged noncompliance is not
material.
(c) To the best of the Company's and the Parent Entity's knowledge,
neither the Parent Entity nor the Company has any basis to expect, nor has any
of them or any other Person for whose conduct they are or may be held to be
responsible received, any actual or Threatened Order, notice, or other
communication from any Person that relates to Hazardous Activities, Hazardous
Substances, or any alleged actual or potential violation or failure to comply
with any Environmental Law with respect to any properties or assets (whether
real, personal, or mixed) in which the Company has or had an interest.
(d) For purposes hereof, Environmental Laws shall mean all Legal
Requirements that relate or pertain to environmental matters, pollution and/or
public health, safety or welfare, including without limitation, the Resource
Conservation and Recovery Act (42 U.S.C. 6901 et seq.), as amended, the
------
Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C.
9601 et seq.), as amended, the Federal Clean Water Act (33 U.S.C. 1251 et seq.),
------ ------
as amended, and state and federal environmental clean up programs.
3.18 Employees
---------
(a) Exhibit 3.18 hereof contains a complete and accurate list of the
------------
following information for each employee of the Company: name; job title; current
compensation paid or payable and any change in compensation since January 1,
1997; vacation accrued; service credited for purposes of vesting and
23
eligibility to participate under any Employee Benefit Plan; severance pay;
vacation pay; and any other employee benefit.
(b) Notwithstanding anything to the contrary contained herein, Buyer
shall have no liability for or obligation to (i) hire or offer employment to any
employee or officer of the Company, (ii) assume or otherwise honor any
employment agreement, contract or arrangement with any employee or officer of
the Company, or (iii) assume or pay any severance or other benefit payable to
any employee of the Company.
(c) Except as set forth in Exhibit 3.18, to the best knowledge of the
------------
Parent Entity and the Company, no employee of the Company is a party to, or is
otherwise bound by, any agreement or arrangement, including any confidentiality,
noncompetition, or proprietary rights agreement, between such employee and any
other Person ("Proprietary Rights Agreement") that in any way adversely affects
or will affect the conduct of the Company's business (either before or after the
consummation of the Contemplated Transactions).
3.19 Labor Relations; Compliance
---------------------------
Since 1996, the Company has not been nor is a party to any collective
bargaining or other labor Contract. Since 1996, there has not been, there is
not presently pending or existing, and to the best knowledge of Seller and the
Parent Entity, there is not Threatened, (a) any strike, slowdown, picketing,
work stoppage, or employee grievance process, (b) any Proceeding against or
affecting the Company relating to the alleged violation of any Legal Requirement
pertaining to labor relations or employment matters, including any charge or
complaint filed by an employee or union with the National Labor Relations Board,
the Equal Employment Opportunity Commission, or any comparable Governmental
Body, organizational activity, or other labor or employment dispute against or
affecting any of the Company or their premises, or (c) any application for
certification of a collective bargaining agent.
3.20 Intellectual Property
---------------------
The representations and warranties set forth in Section 3 of the
Intellectual Property Assignment, when agreed to by the
24
parties as contemplated in Section 11.15 hereof, shall be incorporated herein
and shall be made a part hereof, and shall be made and affirmed by Seller and
the Parent Entity as of the date hereof.
3.21 Certain Payments
----------------
Since 1996, neither the Company nor any director, officer, agent, or
employee of the Company, nor any Representative, has, to the knowledge of the
Company, directly or indirectly (a) made any contribution, gift, bribe, rebate,
payoff, influence payment, kickback, or other payment to any Person, private or
public, regardless of form, whether in money, property, or services (i) to
obtain favorable treatment in securing business, (ii) to pay for favorable
treatment for business secured, (iii) to obtain special concessions or for
special concessions already obtained, for or in respect of the Company, or (iv)
in violation of any Legal Requirement, and/or (b) established or maintained any
fund or asset that has not been recorded in the books and records of the
Company.
3.22 Brokers or Finders
------------------
Except as set forth in Exhibit 3.23, Seller and its agents have incurred no
------------
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
4.1 Organization and Good Standing
------------------------------
Buyer is a corporation duly organized, validly existing, and in good
standing under the laws of the state of its incorporation. Buyer is duly
qualified to do business as a foreign corporation and is in good standing under
the laws of the states in which the nature of the activities conducted by it
requires such qualification.
4.2 Authority; No Conflict
----------------------
25
(a) This Agreement constitutes the legal, valid, and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms.
Upon the execution and delivery by Buyer of the Employment Agreements, the Non-
Competition Agreement, the Intellectual Property Assignment, the Management
Agreement, and the Buyer's Closing Certificate (collectively, the "Buyer's
Closing Documents"), the Buyer's Closing Documents will constitute the legal,
valid, and binding obligations of Buyer, enforceable against Buyer in accordance
with their respective terms. Buyer has the absolute and unrestricted right,
power, and authority to execute and deliver this Agreement and the Buyer's
Closing Documents and to perform its obligations under this Agreement and the
Buyer's Closing Documents.
(b) Except for any filings or approvals in order to comply with Legal
Requirements, including obtaining appropriate Governmental Authorizations (as
contemplated in Section 6.1), neither the execution and delivery of this
Agreement by Buyer nor the consummation or performance of any of the
Contemplated Transactions by Buyer will give any Person the right to prevent,
delay, or otherwise interfere with any of the Contemplated Transactions pursuant
to:
(i) any provision of Buyer's Organizational Documents;
(ii) any resolution adopted by the board of directors or the
stockholders of Buyer;
(iii) any Order to which Buyer may be subject; or
(iv) any contract to which Buyer is a party or by which Buyer may
be bound.
Except for any filings or approvals in order to comply with Legal
Requirements, including obtaining appropriate Governmental Authorizations (as
contemplated in Section 6.1), Buyer is not and will not be required to obtain
any Consent from any Person in connection with the execution and delivery of
this Agreement or the consummation or performance of any of the Contemplated
Transactions.
26
4.3 Certain Proceedings
-------------------
There is no pending or Threatened Proceeding that has been commenced
against Buyer and that challenges, or may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the Contemplated
Transactions.
4.4 Brokers or Finders
------------------
Except as set forth in Exhibit 4.4, Buyer and its officers and agents have
-----------
incurred no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection with
this Agreement and will indemnify and hold Seller harmless from any such payment
alleged to be due by or through Buyer as a result of the action of Buyer or its
officers or agents.
4.5 Financing
---------
Buyer has the financing capability sufficient to consummate the
Contemplated Transactions.
5. COVENANTS OF THE SELLER PRIOR TO/ON CLOSING DATE
5.1 Required Approvals
------------------
As promptly as practicable after the date of this Agreement, Seller will
use its good faith efforts to make all filings required by Legal Requirements to
be made by them in order to consummate the Contemplated Transactions. Between
the date of this Agreement and the Closing Date, Seller will cooperate with
Buyer with respect to all filings and approvals that Buyer elects to make or
seek or is required by Legal Requirements to make or seek in connection with the
Contemplated Transactions (and/or the financing thereof).
5.2 Current Information and Access
------------------------------
(a) During the period from the date of this Agreement to the Closing
Date, the Company shall cause one or more of its Representatives to confer on a
regular and frequent basis with Representatives of Buyer to report on the
general status of the
27
ongoing operations of the Company. The Company shall promptly notify Buyer of
any material change in the normal course of its business or in the operation of
its properties and of any governmental complaints, investigations, or hearings
(or communications indicating that the same may be contemplated), or the
institution or the threat of material litigation involving such party, and will
keep Buyer fully informed with respect to such events.
(b) Between the date of this Agreement and the Closing Date, the
Company will, and will cause their Representatives during reasonable business
hours and as coordinated with the Company's management, to, (a) afford Buyer and
its Representatives and advisors (collectively, "Buyer's Advisors") reasonable
access to all Company employees and personnel and to all Company Contracts,
books and records, and other documents and data, (b) make available to Buyer and
Buyer's Advisors copies of all such Contracts, books and records, and other
existing documents and data as Buyer may reasonably request, and (c) make
available to Buyer and Buyer's Advisors with such additional financial,
operating, and other data and information as Buyer may reasonably request.
5.3 Operations Prior to Closing Date
--------------------------------
(a) In addition to any other express obligation under this Agreement,
between the date of this Agreement and the Closing Date, the Company will do
each of the following, and the Company also represents that from the date of the
Interim Balance Sheet to the date of this Agreement the Company has done the
following:
(i) conduct the business of the Company only in the usual, regular
and ordinary manner, on a basis consistent with past practice, maintain the
Company's books, accounts and records in the usual, regular and ordinary
manner, on a basis consistent with past practices, maintain and comply in
all material respects with the terms of all licenses, permits and other
Legal Requirements, and otherwise conduct the business of the Company only
in the Ordinary Course of Business;
28
(ii) use its reasonable efforts to preserve intact the current
organization of the Company, keep available the services of the current
officers, employees, and agents of the current organization of the Company,
and maintain the relations and good will with all suppliers, customers,
landlords, creditors, employees, agents, and others having business
relationships with the Company;
(iii) conduct the business and affairs of the Company in a manner so
that all representations and warranties herein will be true and correct at
Closing in all material respects;
(iv) maintain all of the Company Assets in good repair, order and
condition, and perform all of the Company's obligations under the Contracts
in all material respects; and
(v) pay all expenses and accounts payable incurred in connection with
the operation of the Company's business in the Ordinary Course of Business
on a basis consistent with past practice.
(b) Except as set forth in Exhibit 3.14, the Company agrees that
------------
during the period from the date of this Agreement to and including the Closing
Date, without the prior written consent of Buyer, it will not do any of the
following and the Company also represents that from the date of the Interim
Balance Sheet to the date of this Agreement the Company has not done any of the
following:
(i) permit any of the Company Assets to be subjected to any
Encumbrance;
(ii) sell, transfer or otherwise dispose of any Company Assets except
in the Ordinary Course of Business;
(iii) write off as uncollectible any note or accounts receivable,
except write-offs in the Ordinary Course of Business charged to applicable
reserves, which individually or in the aggregate are not material to the
Company;
29
(iv) accelerate the collection of any accounts receivable or other
amounts payable to the Company other than in the Ordinary Course of
Business;
(v) cancel or waive any claims or rights of substantial value; or
(vi) make any material change in any method of accounting or auditing
practice.
5.4 No Negotiation
--------------
(a) Until such time, if any, as this Agreement is terminated pursuant to
Section 9, the Parent Entity and the Company will not, and will not permit any
of their Representatives to, directly or indirectly solicit, initiate or
encourage any inquiries or proposals from, discuss or negotiate with, provide
any non-public information to, any Person (other than Buyer) relating to any
transaction involving the sale of the business or assets (other than in the
Ordinary Course of Business) of the Company, or any of the capital stock of the
Company, or any merger, consolidation, business combination, or similar
transaction involving the Company ("Acquisition Proposal"), except that nothing
contained in this Section 5.4 or any other provision hereof shall prohibit the
Company or the Parent Entity or the Board of Directors of the Parent Entity from
(i) taking and disclosing to the Parent Entity's shareholders a position with
respect to a tender or exchange offer by a third party pursuant to Rules 14d-9
and 14e-2 promulgated under the Exchange Act, or (ii) making such disclosure as,
in the good faith judgment of the Board of Directors of the Parent Entity, after
receiving advice from outside counsel, is required under applicable law;
provided that, except as permitted by this Section 5.4, neither the Board of
Directors of the Parent Entity nor any Committee thereof shall (x) approve or
recommend or propose to approve or recommend any Acquisition Proposal, (y) enter
into any agreement with respect to any Acquisition Proposal, or (z) withdraw or
modify, in a manner adverse to the Buyer, the approval or recommendation by such
Board of Directors or any such committee of this Agreement. The Company will
immediately cease any existing activities, discussions or negotiations with any
30
parties conducted heretofore with respect to any of the foregoing.
(b) Notwithstanding the foregoing, the Company or the Parent Entity may
furnish information concerning its business, properties or assets to any
corporation, partnership, person or other entity or group pursuant to
appropriate confidentiality agreements, and may negotiate and participate in
discussions and negotiations with such entity or group concerning an Acquisition
Proposal if (x) such entity or group has on an unsolicited basis submitted a
bona fide written proposal to the Company relating to any such transaction which
the Board of Directors of the Parent Entity determines in good faith, after
receiving advice from a nationally recognized investment banking firm,
represents a superior transaction to the Contemplated Transactions and which the
Board of Directors determines in good faith can be financed and (y) in the
opinion of the Board of Directors of the Parent Entity, only after receipt of
advice from outside counsel to the Parent Entity, the failure to provide such
information or access or to engage in such discussions or negotiations could
reasonably be expected to cause the Board of Directors of the Parent Entity to
violate its fiduciary duties to the shareholders of the Parent Entity under
applicable law (an Acquisition Proposal which satisfies clauses (x) and (y)
being referred to herein as a "Superior Proposal"). The Company shall within
two business days following receipt of a Superior Proposal notify the Buyer of
the receipt of the same. The Company shall promptly provide to the Buyer any
material non-public information regarding the Company provided to any other
party which was not previously provided to Buyer. At any time after two
business days following notification to Buyer of the Company's intent to do so
(which notification shall include the identity of the bidder and the material
terms and conditions of the proposal) and if the Company has otherwise complied
with the terms of this Section 5.4(b), the Board of Directors of the Parent
Entity may withdraw or modify its approval or recommendation of the Contemplated
Transaction.
(c) In the event of a Superior Proposal, the Company may enter into an
agreement with respect to such Superior Proposal no sooner than three days after
giving the Buyer written notice of its intention to enter into such agreement;
provided that the
31
Buyer has not, prior to the expiration of such three-day period, advised the
Company, in writing, of its intention to increase the Purchase Price to exceed
the value of such Superior Proposal. Upon expiration of such three-day period
without such action by the Buyer, the Company may enter into an agreement with
respect to such Superior Proposal (with the bidder and on terms no less
favorable than those specified in such notification), provided it shall
concurrently with entering into such agreement pay or cause to be paid to the
Buyer the amount specified in Section 9.1(v) hereof.
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE
6.1 Approvals of Governmental Bodies
--------------------------------
As promptly as practicable after the date of this Agreement, Buyer will use
its good faith efforts to make all filings and seek all approvals required by
Legal Requirements and obtain all Governmental Authorizations necessary or
advisable to consummate the Contemplated Transactions (including, without
limitation, those filings, approvals and authorizations necessary or advisable
for the Buyer's financing of the Contemplated Transactions). Between the date
of this Agreement and the Closing Date, Buyer will cooperate with Seller with
respect to all filings that Seller is required by Legal Requirements to make in
connection with the Contemplated Transactions.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Company Assets and to take the other
actions required to be taken by Buyer at the Closing are subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by Buyer, in whole or in part):
7.1 Accuracy of Representations
---------------------------
All of the representations and warranties of the Parent Entity and the
Company in this Agreement (considered collectively), and each of these
representations and warranties
32
(considered individually), must have been materially accurate as of the date of
this Agreement, and must be materially accurate as of the Closing Date as if
made on the Closing Date.
7.2 Performance
-----------
(a) All of the covenants and obligations that the Parent Entity and
the Company are required to perform or to comply with pursuant to this Agreement
at or prior to the Closing (considered collectively), and each of these
covenants and obligations (considered individually), must have been duly
performed and complied with in all material respects.
(b) Each document required to be delivered by Seller pursuant to
Section 2.4 must have been delivered.
7.3 [Intentionally deleted]
7.4 No Prohibition
--------------
Neither the consummation nor the performance of any of the Contemplated
Transactions (or the financing thereof) will, directly or indirectly (with or
without notice or lapse of time), materially contravene, or conflict with, or
result in a material violation of, or cause Buyer or any Person affiliated with
Buyer to suffer any material adverse consequence under, (a) any applicable Legal
Requirement or Order, or (b) any Legal Requirement or Order that has been
published, introduced, or otherwise formally proposed by or before any
Governmental Body.
7.5 Material Adverse Change
-----------------------
There shall not have occurred any change in the Company's financial
condition, business or property nor shall have there occurred any change in the
business condition of the Company's customers or suppliers which in the judgment
of Buyer materially adversely affects the Company, the business of the Company
or the condition (financial or otherwise) of the Company.
In the event that each and every one of these conditions precedent to the
obligations of Buyer shall not have been satisfied prior to or at the Closing,
then Buyer may (but shall not be obligated to) waive such unsatisfied condition
or extend
33
the Closing Date to allow additional time for such condition to be satisfied.
Any such waiver or extension shall be without prejudice to any other rights and
remedies Buyer may have hereunder or at law or in equity.
8. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE
Seller's obligation to sell the Company Assets and to take the other
actions required to be taken by Seller at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by Seller, in whole or in part):
8.1 Accuracy of Representations
---------------------------
All of Buyer's representations and warranties in this Agreement (considered
collectively), and each of these representations and warranties (considered
individually), must have been materially accurate as of the date of this
Agreement and must be materially accurate as of the Closing Date as if made on
the Closing Date.
8.2 Buyer's Performance
-------------------
(a) All of the covenants and obligations that Buyer is required to
perform or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of these covenants and obligations
(considered individually), must have been performed and complied with in all
material respects.
(b) Each of the documents required to be delivered by Buyer pursuant to
Section 2.4 must have been delivered and Buyer must have made the cash payments
required to be made by Buyer pursuant to Section 2.4.
8.3 Other Conditions
----------------
(a) Seller shall have received the opinion of an investment banking
firm, dated as of or prior to the Closing Date, to the effect that the
consideration to be received pursuant to the terms and conditions of this
Agreement is fair from a financial point of view.
34
(b) Seller shall have obtained all approvals, consents, releases and
other documents from First Union National of Georgia (or an affiliate thereof)
necessary to allow Seller and Parent Entity to consummate the transactions
contemplated by this Agreement and to transfer the Company Assets without
Encumbrance.
9. TERMINATION
9.1 Termination
-----------
(a) This Agreement may be terminated:
(i) by Buyer, if a Breach of any provision of this Agreement
has been committed by Seller and/or any Parent Entity and such Breach
has not been waived;
(ii) by Seller, if a Breach of any provision of this
Agreement has been committed by Buyer and such Breach has not been
waived;
(iii) by Buyer: if any of the conditions in Section 7 have
not been satisfied as of October 31, 1997; or if satisfaction of such
a condition is or becomes impossible (other than through the failure
of Buyer to comply with its obligations under this Agreement) and
Buyer has not waived such condition on or before October 31, 1997;
(iv) by Seller: if any of the conditions in Section 8 have
not been satisfied as of October 31, 1997; or if satisfaction of such
a condition is or becomes impossible (other than through the failure
of Seller to comply with their obligations under this Agreement) and
Seller has not waived such condition on or before October 31, 1997; or
(v) by Seller, under the circumstances contemplated by Section
5.4, provided that contemporaneously with such termination, the Seller
-------- ----
pays to the Buyer a termination fee of $1,500,000 plus
35
actual, reasonable out-of-pocket fees and expenses of the Buyer not to
exceed $150,000.
(vi) by mutual consent of Buyer and Seller.
(b) If this Agreement is terminated pursuant to Section 9.1(a), all
further obligations of the parties under this Agreement will terminate, except
that the obligations in Section 11.3 will survive; provided, however, that if
this Agreement is terminated by a party because of the Breach of the Agreement
by the other party or because one or more of the conditions to the terminating
party's obligations under this Agreement is not satisfied as a result of the
other party's failure to comply with its obligations under this Agreement, then
the terminating party's right to seek damages will survive such termination
unimpaired.
(c) The aforesaid right of termination shall be in addition to, and
not in lieu of, any other legal or equitable remedy, including specific
performance.
10. INDEMNIFICATION; REMEDIES
10.1 Survival
--------
All representations, warranties, covenants, and obligations in this
Agreement, the certificates delivered pursuant to Section 2.4(a) and (b), and
any other certificate or document delivered pursuant to this Agreement shall
survive the Closing for the following periods after the Closing Date:
(a) The representations and warranties set forth in Sections 3.9 and
3.13 shall survive until one (1) day after the expiration of the applicable
statute of limitations; and
(b) All other representations and warranties of Buyer, Seller and
Parent Entity shall survive for a period of eighteen (18) months after the
Closing Date.
10.2 Indemnification and Payment of Damages by Seller
------------------------------------------------
(a) The Company and the Parent Entity, jointly and severally, will
indemnify and hold harmless Buyer and its
36
respective Representatives, stockholders, controlling persons, and affiliates
(collectively, the "Indemnified Persons") for, and will pay to the Indemnified
Persons the amount of, any loss, liability, claim, damage (including incidental
and consequential damages), or expense (including costs of investigation and
defense and reasonable attorneys' fees), whether or not involving a third-party
claim (collectively, "Damages"), arising or resulting from, directly or
indirectly, from or in connection with:
(i) any Breach of any representation or warranty made by the
Company or the Parent Entity in this Agreement or any other certificate or
document delivered by the Company or the Parent Entity pursuant to this
Agreement;
(ii) [Intentionally deleted]; or
(iii) third party claims or causes of action asserted against
Buyer based upon the operation, management or ownership of the Company
Assets, arising or related to the period on or prior to the Closing Date
(whether known or unknown on the Closing Date), but excluding those matters
expressly to be assumed by Buyer under Section 2.5(c) hereof; or
(iv) any noncompliance with any bulk transfer or bulk sales law
applicable to the Contemplated Transaction.
(b) With respect to the aforesaid indemnification obligation, the
parties agree as follows:
(i) The aggregate amount of Damages that Buyer may recover from
Seller and the Parent Entity, collectively, with respect to indemnification
under Section 10.2(a)(i)above, shall not exceed the aggregate sum of Six
Hundred Thousand Dollars ($600,000), provided that the aggregate amount of
Damages that Buyer may recover from Seller and the Parent Entity shall not
exceed the Purchase Price as computed in accordance with Section 2.2(a):
(x) with respect to indemnification under Sections 10.2(a)(iii) or (iv)
above, or (y) in connection with any Breach of the representations and
warranties set forth in Section 3.9 and 3.13, or (z) in connection with any
fraudulent misrepresentation by Seller or Parent Entity.
37
(ii) Buyer shall not be entitled to assert any right to
indemnification under Section 10(a)(i) above against Seller or the Parent
Entity until all Damages for which Seller or the Parent Entity would
otherwise be required to indemnify Buyer hereunder exceeds the aggregate
amount of $200,000, whereupon Seller and the Parent Entity shall thereafter
pay to Buyer all further Damages in excess of such amount (subject to the
limitation described in subpart (i) above.
10.3 Indemnification and Payment of Damages by Buyer
-----------------------------------------------
Buyer will indemnify and hold harmless the Seller and its respective
Representatives, stockholders, controlling persons, and affiliates
(collectively, the "Seller's Indemnified Persons"), and will pay to Seller's
Indemnified Persons the amount of any Damages arising, directly or indirectly,
from or in connection with:
(a) any Breach of any representation or warranty made by Buyer in
this Agreement or in any certificate delivered by Buyer pursuant to this
Agreement.
(b) [Intentionally deleted]
10.4 Procedure for Indemnification--Third Party Claims
-------------------------------------------------
(a) Promptly after receipt by an indemnified party under Section 10.2
or 10.3 of notice of the commencement of any Proceeding against it or of notice
that such Proceeding has been Threatened against it, such indemnified party
will, if a claim is to be made against an indemnifying party under such Section,
give notice to the indemnifying party of the commencement of such claim or
threatened Proceeding, but the failure to notify the indemnifying party will not
relieve the indemnifying party of any liability that it may have to any
indemnified party, except to the extent that the indemnifying party demonstrates
that the defense of such action or the ability of the indemnifying party to
obtain otherwise available insurance proceeds is materially prejudiced by the
indemnified party's failure to give such notice.
38
(b) If any Proceeding referred to in Section 10.4(a) is brought
against an indemnified party and it gives notice to the indemnifying party of
the commencement of such Proceeding, the indemnifying party will be entitled to
participate in such Proceeding and, to the extent that it wishes (unless (i) the
indemnifying party is also a party to such Proceeding and the indemnified party
determines in good faith that joint representation would be inappropriate, or
(ii) the indemnifying party fails to provide reasonable assurance to the
indemnified party of its financial capacity to defend such Proceeding and
provide indemnification with respect to such Proceeding), to assume the defense
of such Proceeding with counsel satisfactory to the indemnified party and, after
notice from the indemnifying party to the indemnified party of its election to
assume the defense of such Proceeding, the indemnifying party will not, as long
as it diligently conducts such defense, be liable to the indemnified party under
this Section 10 for any fees of other counsel or any other expenses with respect
to the defense of such Proceeding, in each case subsequently incurred by the
indemnified party in connection with the defense of such Proceeding, other than
reasonable costs of investigation. If the indemnifying party assumes the
defense of a Proceeding, (i) no compromise or settlement of such claims may be
effected by the indemnifying party without the indemnified party's consent
unless (A) there is no finding or admission of any violation of Legal
Requirements or any violation of the rights of any Person and no effect on any
other claims that may be made against the indemnified party, and (B) the sole
relief provided is monetary damages that are paid in full by the indemnifying
party; and (ii) the indemnified party will have no liability with respect to any
compromise or settlement of such claims effected without its consent. If notice
is given to an indemnifying party of the commencement of any Proceeding and the
indemnifying party does not, within ten days after the indemnified party's
notice is given, give notice to the indemnified party of its election to assume
the defense of such Proceeding, the indemnifying party will be bound by any
determination made in such Proceeding or any compromise or settlement effected
by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party determines
in good faith that there is a reasonable probability that a Proceeding may
materially adversely affect it or its affiliates other than as a result of
monetary damages for which
39
it would be entitled to indemnification under this Agreement, the indemnified
party may, by notice to the indemnifying party, and following a good faith
attempt to consult with the indemnifying party, assume the exclusive right to
defend, compromise, or settle such Proceeding, but the indemnifying party will
not be bound by any determination of a Proceeding so defended or any compromise
or settlement effected without its consent (which may not be unreasonably
withheld).
10.5 Procedure for Indemnification--Other Claims
-------------------------------------------
A claim for indemnification for any matter not involving a third-party
claim may be asserted by notice to the party from whom indemnification is
sought.
11. GENERAL PROVISIONS
11.1 Expenses
--------
Except as otherwise expressly provided in this Agreement, each party to
this Agreement will bear its respective expenses incurred in connection with the
preparation, execution, and performance of this Agreement and the Contemplated
Transactions, including all fees and expenses of agents, representatives,
counsel, and accountants.
11.2 Seller's Obligations and Decisions
----------------------------------
Any and all representations, warranties, covenants, obligations and or
agreements of the Seller contained herein are made and given jointly and
severally by the Seller and the Parent Entity, and each of the Seller and the
Parent Entity shall be jointly and severally liable for all such
representations, warranties, covenants, obligations and agreements.
11.3 Confidentiality
---------------
(a) Prior to Closing, no party or affiliate of a party hereto will issue or
cause publication of any press release or other announcement or public
communications with respect to the
40
Contemplated Transactions, including without limitation a general announcement
to such party's employees, without the prior consent of the other parties
hereto, which consent will not be unreasonably withheld; provided, however, that
nothing herein will prohibit any party (or affiliate) from issuing or causing
publication of any such press release, announcement or public communication to
the extent that such party (or affiliate) reasonably determines such action to
be required by law, any regulatory agency or the rules of any national stock
exchange or association applicable to it, in which case the party (or affiliate)
making such determination will use reasonable efforts to allow the other party
reasonable time to comment on such release or announcement in advance of its
issuance or to make any disclosure necessary to obtain any consents required or
deemed appropriate by Buyer.
(b) Buyer, Seller and Parent Entity agree that each will use their best
efforts to maintain the confidentiality of the information and materials
delivered to them or made available for their inspection in connection with this
Agreement. In the event the Closing does not occur, Buyer, Seller and Parent
Entity will as soon as practicable return all material of or concerning Buyer,
Seller or Parent Entity obtained from such other party then in its possession
and hereby covenant to keep confidential any information concerning the other
party and ascertained in connection with this Agreement for a period of three
(3) years commencing upon the termination of this Agreement, provided, however,
that the foregoing shall not apply to any information (a) in the public domain
not as a result of the violation of Buyer's, Seller's or Parent Entity's
undertaking herein, (b) available to Buyer, Seller or Parent Entity on a non-
confidential basis without regard to the disclosure by Buyer, Seller or Parent
Entity, or (c) available to Buyer, Seller or Parent Entity from a source other
than the other party (provided that such source in so acting is not violating
any duty or agreement of confidentiality).
11.4 Notices
-------
All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by facsimile
(with written
41
confirmation of receipt), provided that a copy is mailed by registered mail,
return receipt requested, or (c) when received by the addressee, if sent by a
nationally recognized overnight delivery service (receipt requested), in each
case to the appropriate addresses and facsimile numbers set forth below (or to
such other addresses and facsimile numbers as a party may designate by notice to
the other parties):
If to Buyer:
0000 Xxxxxx Xxxxx Xxxxxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxxxx
With a copy to:
Xxxxxxxx & Bromberg, a Professional Corporation
0000 Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxxxxxx
If to any Seller and/or CCI:
Communications Central Inc.
0000 Xxxxxxxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: President
42
With copy to:
Hunton & Xxxxxxxx
NationsBank Plaza
Suite 4100
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: J. Xxxxxxx Xxxxxxx
11.5 Further Assurances
------------------
The parties agree (a) to furnish upon request to each other such further
information, (b) to execute and deliver to each other such other documents, and
(c) to do such other acts and things, all as the other party may reasonably
request for the purpose of carrying out the intent of this Agreement and the
documents referred to in this Agreement.
11.6 Waiver
------
The rights and remedies of the parties to this Agreement are cumulative and
not alternative. Neither the failure nor any delay by any party in exercising
any right, power, or privilege under this Agreement or the documents referred to
in this Agreement will operate as a waiver of such right, power, or privilege,
and no single or partial exercise of any such right, power, or privilege will
preclude any other or further exercise of such right, power, or privilege or the
exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, (a) no claim or right arising out of this Agreement
or the documents referred to in this Agreement can be discharged by one party,
in whole or in part, by a waiver or renunciation of the claim or right unless in
writing signed by the other party; (b) no waiver that may be given by a party
will be applicable except in the specific instance for which it is given; and
(c) no notice to or demand on one party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.
43
11.7 Entire Agreement and Modification
---------------------------------
This Agreement supersedes all prior agreements between the parties with
respect to its subject matter and constitutes (along with the documents referred
to in this Agreement) a complete and exclusive statement of the terms of the
agreement between the parties with respect to its subject matter. This
Agreement may not be amended except by a written agreement executed by the party
to be charged with the amendment.
11.8 Assignments, Successors, and No Third-Party Rights
--------------------------------------------------
No party may assign any of its rights under this Agreement without the
prior consent of the other parties, except that Buyer may assign this Agreement
and/or any of its rights under this Agreement to (i) any affiliate of Buyer, or
(ii) any bank, financial institution and/or other party providing any loans or
financing to Buyer. Subject to the preceding sentence, this Agreement will
apply to, be binding in all respects upon, and inure to the benefit of the
successors and permitted assigns of the parties. Nothing expressed or referred
to in this Agreement will be construed to give any Person other than the parties
to this Agreement any legal or equitable right, remedy, or claim under or with
respect to this Agreement or any provision of this Agreement. This Agreement
and all of its provisions and conditions are for the sole and exclusive benefit
of the parties to this Agreement and their successors and assigns.
11.9 Severability
------------
If any provision of this Agreement is held invalid or unenforceable by any
court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid
or unenforceable only in part or degree will remain in full force and effect to
the extent not held invalid or unenforceable.
11.10 Section Headings, Construction
------------------------------
The headings of Sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation. All references to
"Section" or "Sections" refer
44
to the corresponding Section or Sections of this Agreement. All words used in
this Agreement will be construed to be of such gender or number as the
circumstances require. Unless otherwise expressly provided, the word "including"
does not limit the preceding words or terms. The parties, in acknowledgment that
all of them have been represented by counsel and that this Agreement has been
carefully negotiated, agree that the construction and interpretation of this
Agreement and other documents entered into in connection herewith shall not be
affected by the identity of the party or parties under whose direction or at
whose expense this Agreement and such documents were prepared or drafted.
11.11 Time of Essence
---------------
With regard to all dates and time periods set forth or referred to in this
Agreement, time is of the essence.
11.12 Governing Law
-------------
This Agreement will be governed by the laws of the State of Delaware
without regard to conflicts of laws principles.
11.13 Counterparts
------------
This Agreement may be executed in one or more counterparts, each of which
will be deemed to be an original copy of this Agreement and all of which, when
taken together, will be deemed to constitute one and the same agreement.
11.14 Cure
----
Notwithstanding anything to the contrary set forth in this Agreement, no
party shall be entitled to (i) terminate this Agreement pursuant to Section 9
hereof, or (ii) indemnification pursuant to Section 10 hereof, if such breaching
or indemnifying party, within 30 days after its receipt of notice from the
terminating or indemnified party, cures or corrects the set of facts from which
the basis for such termination or indemnification arose.
11.15 Exhibits
--------
45
Buyer, Seller and the Parent Entity agree that as of the date of the
execution and delivery of this Agreement, the Exhibits have not been agreed to
by the parties. The parties agree that they shall use their good faith efforts
to finalize and complete all Exhibits on or before September 5, 1997. At such
time, the Exhibits will be attached hereto and be deemed a part hereof,
effective as of the date hereof.
--------------
46
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
BUYER: SELLER:
----- ------
XXXXXX HOLDINGS, INC. INVISION TELECOM,
a Delaware corporation INC., a Georgia corporation
By: /s/ Xxxx X. Xxxxxxx By: /s/ Xxxxxx X. Xxxxxxx
--------------------- ----------------------
Name: Xxxx X. Xxxxxxx Name: Xxxxxx X. Xxxxxxx
Title: Vice President Title: President
CCI:
---
COMMUNICATIONS CENTRAL INC.,
a Georgia corporation
By: /s/ Xxxxxx X. Xxxxxxx
----------------------
Name: Xxxxxx X. Xxxxxxx
Title: President
47
LIST OF EXHIBITS
----------------
Exhibit 2.1(a): Excluded Assets
Exhibit 2.4(a)(ii): Intellectual Property Assignment
Exhibit 2.4(a)(iii)-1: List of employees signing
Employment Agreements
Exhibit 2.4(a)(iii)-2: Employment Agreement
Exhibit 2.4(a)(iv): Non-Competition Agreement
Exhibit 2.4(a)(vi): Legal Opinion - Seller's counsel
Exhibit 2.4(b)(iv): Legal Opinion - Buyer's counsel
Exhibit 2.8(e): Management Agreement
Exhibit 3.6(a)(i): Inmate Telephone Agreements
Exhibit 3.6(a)(ii): Installed Lines
Exhibit 3.6(a)(iii): Service Agreements
Exhibit 3.6(a)(iv): Inventory
Exhibit 3.6(a)(v): Vehicles
Exhibit 3.6(a)(ix): Office Lease
Exhibit 3.6(a)(x): Furniture, Fixtures and Equipment
Exhibit 3.7: Accounts Receivable
Exhibit 3.8: Related Party Contracts
Exhibit 3.9: Contested Taxes and Proposed
Assessments
Exhibit 3.10: Material Adverse Change
Exhibit 3.11: Employee Benefit Plans
Exhibit 3.12: Governmental Authorizations
Exhibit 3.13(a): Pending Proceedings
Exhibit 3.13(b) Past Proceedings
Exhibit 3.14: Events outside the Ordinary
Course of Business
Exhibit 3.15(b): Contract Defaults
Exhibit 3.18: List of Employees
Exhibit 3.23: Seller's Brokers
Exhibit 4.4: Buyer's Brokers
