EXECUTION COPY
-------------------------------------------------------------------------------
RESTATED ASSET PURCHASE AGREEMENT
dated as of the 6th day of October, 1997
by and between
ADVANCED COMMUNICATIONS GROUP, INC.
(PURCHASER)
and
ADVANCED COMMUNICATIONS CORP.
(OLD ACG)
and
SWITCHBOARD OF OKLAHOMA CITY, INC.
(SELLER)
and
XXXX XXXXX, XXXXXX XXXXXX, XXXXXXX XXXXXXX AND
XXXXX XXXXXX, AS ATTORNEY-IN-FACT FOR XXXXX XXXXXX, A MINOR
(SHAREHOLDERS)
-------------------------------------------------------------------------------
TABLE OF CONTENTS
1. DEFINITIONS...............................................................2
2. PURCHASE AND SALE; CLOSING; SECTION 351 EXCHANGE PLAN.....................9
2.1 Purchase and Sale of Purchased Assets...............................9
2.2 Assumption of Liabilities..........................................10
2.3 Purchase Price.....................................................10
2.4 Allocation of Purchase Price.......................................10
2.5 Post-Closing Adjustment............................................10
2.6 Section 351 Exchange Plan..........................................11
2.7 Closing............................................................11
3. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF THE
SELLER AND THE SHAREHOLDERS..............................................12
3.1 Due Organization...................................................12
3.2 Authority..........................................................12
3.3 Equity Interests in the Seller.....................................12
3.4 Subsidiaries.......................................................12
3.5 Financial Statements...............................................13
3.6 Liabilities and Obligations........................................13
3.7 Accounts and Notes Receivable......................................14
3.8 Permits and Intangibles............................................14
3.9 Environmental Matters..............................................15
3.10 Personal Property..................................................15
3.11 Significant Customers; Material Contracts and Commitments..........16
3.12 Real Property......................................................16
3.13 Insurance..........................................................17
3.14 Intellectual Property..............................................17
3.15 Labor Relations....................................................18
3.16 Employee Benefits..................................................18
3.17 Tax Matters........................................................19
3.18 Prior or Preferential Rights.......................................20
3.19 Sufficiency of Assets..............................................20
3.20 Conformity with Law; Litigation....................................20
3.21 No Violations......................................................21
3.22 Government Contracts...............................................21
3.23 Absence of Changes................................................21
3.24 Disclosure.........................................................22
-i-
3.25 Prohibited Activities..............................................23
3.26 Draft Registration Statement.......................................23
3.27 Tax Matters........................................................23
4. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF THE
PURCHASER AND OLD ACG....................................................23
4.1 Due Organization...................................................23
4.3 Capital Stock......................................................24
4.4 Transactions in Capital Stock, Organization Accounting.............24
4.5 Subsidiaries.......................................................24
4.6 Financial Statements...............................................24
4.7 Liabilities and Obligations........................................25
4.8 Conformity with Law; Litigation....................................25
4.9 No Violations......................................................25
4.10 Business; Real Property; Material Agreement........................26
4.11 Tax Matters........................................................26
4.12 Draft Registration Statement.......................................26
5. OTHER COVENANTS PRIOR TO CLOSING.........................................27
5.1 Access and Cooperation; Due Diligence; Audits......................27
5.2 Conduct of Business Pending Closing................................28
5.3 Prohibited Activities..............................................28
5.4 Exclusivity........................................................29
5.5 Notice to Bargaining Agents........................................30
5.6 Notification of Certain Matters....................................30
5.7 Amendment of Schedules.............................................30
5.8 Bulk Sales Laws....................................................31
5.9 Transfer Taxes and Recording Fees..................................31
5.10 Certain Provisions Relating to Consents............................31
5.11 Further Assurance..................................................32
5.12 Survival...........................................................32
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLER........................32
6.1 Representations and Warranties Performance of Obligations..........32
6.2 Satisfaction.......................................................33
6.3 No Litigation......................................................33
6.4 Opinion of Counsel.................................................33
6.5 Consents and Approvals.............................................33
6.6 No Material Adverse Change.........................................33
6.7 Secretary's Certificates...........................................33
-ii-
6.8 Closing of IPO.....................................................33
6.9 Employment Arrangements............................................33
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PURCHASER.....................34
7.1 Representations and Warranties; Performance of Obligations.........34
7.2 No Litigation......................................................34
7.3 No Material Adverse Effect.........................................34
7.4 Shareholders' Releases.............................................34
7.5 Satisfaction.......................................................34
7.6 Termination of Related Party Agreements............................34
7.7 Opinion of Counsel.................................................35
7.8 Consents and Approvals.............................................35
7.9 FIRPTA Certificate.................................................35
7.10 Closing of IPO.....................................................35
8. COVENANTS OF THE PURCHASER WITH THE SELLER AND THE
SHAREHOLDERS AFTER CLOSING...............................................35
8.1 Release From Guarantees............................................35
8.2 Employment.........................................................35
8.3 Health and Welfare Benefits........................................37
8.4 Change of Name.....................................................38
8.5 Compliance with the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976 (the "Xxxx-Xxxxx Act").................................38
9. TERMINATION OF AGREEMENT.................................................38
9.1 Termination........................................................38
9.2 Liabilities in Event of Termination................................39
9.3 Retention of Prepayment............................................39
10. NONDISCLOSURE OF CONFIDENTIAL INFORMATION................................39
10.1 The Shareholders and the Seller....................................39
10.2 The Purchaser......................................................40
10.3 Damages............................................................40
10.4 Survival...........................................................40
11. NONCOMPETITION...........................................................41
11.1 Prohibited Activities..............................................41
11.2 Damages............................................................42
11.3 Reasonable Restraint...............................................42
11.4 Severability, Reformation..........................................42
-iii-
11.5 Independent Covenant...............................................42
11.6 Materiality........................................................42
12. GENERAL..................................................................42
12.1 Cooperation........................................................42
12.2 Successors and Assigns.............................................43
12.3 Entire Agreement...................................................43
12.4 Counterparts.......................................................43
12.5 Brokers and Agents.................................................43
12.6 Expenses...........................................................43
12.7 Notices............................................................44
12.8 Governing Law......................................................45
12.9 Exercise of Rights and Remedies....................................45
12.10 Time...............................................................45
12.11 Reformation and Severability.......................................46
12.12 Remedies Cumulative................................................46
12.13 Captions...........................................................46
12.14 Public Statement...................................................46
12.15 Form of Payment....................................................46
12.16 Receivables........................................................46
12.17 Amendments and Waivers.............................................46
-iv-
RESTATED ASSET PURCHASE AGREEMENT
THIS RESTATED ASSET PURCHASE AGREEMENT (the "Agreement") is made as of the
6th day of October, 1997, by and between ADVANCED COMMUNICATIONS GROUP, INC., a
Delaware corporation organized in September 1997 ("Purchaser"), ADVANCED
COMMUNICATIONS CORP., (formerly named Advanced Communications Group, Inc.), a
Delaware corporation organized in June 1996 ("Old ACG"), SWITCHBOARD OF
OKLAHOMA CITY, INC., an Oklahoma corporation ("Seller"), and each of XXXX
XXXXX, XXXXXX XXXXXX, XXXXXXX XXXXXXX AND XXXXX XXXXXX, AS ATTORNEY-IN-FACT FOR
XXXXX XXXXXX, A MINOR (individually, a "Shareholder" and, collectively, the
"Shareholders"), the owners of all the issued and outstanding shares of capital
stock of Seller.
RECITALS
WHEREAS, the Seller is engaged in the business of reselling
long-distance telephone services ("Business"); and
WHEREAS, Old ACG has entered into agreements for, or negotiated the
terms of, the acquisition by merger, asset purchase or stock purchase of
ten companies (or interests therein) engaged in various aspects of the
telecommunications industry ("Founding Companies") for voting capital stock
and other consideration, including cash, one of such agreements being the
Asset Purchase Agreement dated as of January 29, 1997, as amended, among
Old ACG, Seller, and Shareholders (collectively, the "Original Agreement");
and
WHEREAS, Old ACG intended to close the acquisition of the Founding
Companies substantially contemporaneously with the consummation of an
initial underwritten public offering of its common stock; and
WHEREAS, the executive officers of Old ACG have determined that it is
desirable for licensing and other regulatory purposes to restructure the
acquisitions of the Founding Companies; and
WHEREAS, as the initial step in the implementation of the restructured
proposal, Old ACG formed Purchaser as a new Delaware corporation in
September 1997 to serve as the vehicle for the acquisition of the Founding
Companies substantially contemporaneously with the consummation of an
initial underwritten public offering ("IPO") of Common Stock, $.0001 par
value, of Purchaser ("Purchaser Stock") at the price to the public
reflected in the final prospectus of Purchaser relating to the IPO ("IPO
Price"); and
WHEREAS, under the restructured proposal, contemporaneously with the
consummation of the IPO and as part of a single transaction, the
stockholders of the
-1-
Founding Companies, including Shareholders and Old ACG, will transfer,
by stock or asset purchase or reverse triangular merger, the stock or
substantially all the assets of certain companies and other assets in which
they own an interest to Purchaser in exchange for voting capital stock of
Purchaser and other consideration, including cash, voting stock, options,
warrants, notes, convertible notes and other property of Purchaser, under
circumstances that will constitute a tax-free transfer of property under
Section 351 of the Internal Revenue Code of 1986, as amended, and the rules
and regulations thereunder ("Code"), to the extent of their receipt of
voting capital stock of Purchaser; and
WHEREAS, substantially contemporaneously with the execution of this
Agreement and in order to document the integrated Section 351 exchange plan
contemplated herein, (a) Old ACG, the other Founding Companies, their
stockholders and others are amending and restating their respective
acquisition agreements; and (b) Purchaser and Old ACG are entering into a
merger agreement pursuant to which Old ACG will become a wholly-owned
subsidiary of Purchaser substantially contemporaneously with the
consummation of the IPO; and
WHEREAS, it is contemplated that prior to the consummation of the IPO,
Old ACG will effect an approximately one-for-two reverse stock split, the
exact magnitude of which will be dependent upon the ultimate post IPO
valuation of Purchaser by the managing underwriters in the IPO and the
anticipated IPO Price; and
WHEREAS, the IPO, the acquisitions of the Founding Companies and Old
ACG are described in the Registration Statement on Form S-1 of Purchaser
(draft of October 2, 1997), a copy of which is attached to this Agreement
as Annex I ("Draft Registration Statement"); and
WHEREAS, Purchaser, Old ACG, Shareholders and the Seller desire to
amend and restate the Original Agreement in its entirety and transform it
into this Agreement; and
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties, covenants and agreements herein contained, the
parties hereby agree as follows:
1. DEFINITIONS
Unless the context otherwise requires, capitalized terms used in this
Agreement or in any schedule, or annex attached hereto and not otherwise
defined shall have the following meanings for all purposes of this Agreement:
-2-
"Accounts Payable" as of any date means the sum of (i) the Seller's
accounts and notes payable and (ii) the Seller's expenses incurred but not
invoiced.
"Accounts Receivable" as of any date means the sum of (i) the Seller's
accounts and notes receivable and (ii) the Seller's revenues that are
earned but not invoiced.
"Affiliate" means, with respect to any specific Person, any other Person
that directly, or indirectly through one or more intermediaries, controls,
or is controlled by, or is under common control with, such Person. The term
"control" (including, with correlative meaning, the terms "controlled by"
and "under common control with"), as used with respect to any Person, means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through
the ownership of voting securities, by contract or otherwise.
"Agreed Rate" means the prime rate of interest reported in The Wall Street
Journal on the Closing Date.
"Agreement" has the meaning set forth in the first paragraph of this
Agreement
"A/R Aging Reports" has the meaning set forth in Section 3.7.
"Arbitration" has the meaning set forth in Section 2.5(ii).
"Assumed Liabilities" refers to, collectively, all liabilities and
obligations of the Seller (i) relating to accounts and notes payable
arising in the ordinary course of the Business as of the Closing Date, (ii)
arising after the Closing Date with respect to the performance of the terms
of and the payment of all amounts due under the Contracts and the Leases,
excluding any liability or obligation resulting from any breach, violation,
failure to comply, act, omission, condition or circumstance with respect
thereto prior to the Closing Date and (iii) relating to Employees and
employee benefits to the extent specifically provided in Section 8.2.
"Assumption Agreement" refers to the Assumption Agreement to be executed at
Closing by the Purchaser.
"Balance Sheet Date" has the meaning set forth in Section 3.5.
"Base Price" and "Purchase Price" each means the aggregate amount of cash
payable to the Seller by the Purchaser pursuant to Section 2.3(ii).
"Xxxx of Sale" refers to the Xxxx of Sale to be executed at the Closing by
the Seller.
-3-
"Business" has the meaning set forth in the first recital to this
Agreement.
"Business Day" means any day, other than a Saturday or a Sunday, on which
commercial banks are not required or authorized to close in New York City.
"Cash" as of any date means the sum of the Seller's collected cash and cash
equivalents.
"Charter Documents" means the Certificate of Incorporation, Articles of
Incorporation or other instrument pursuant to which any corporation,
limited liability company, partnership or other business entity that is a
signatory to, or the subject of, this Agreement was formed or organized in
accordance with applicable law.
"Closing" has the meaning set forth in Section 2.7.
"Closing Date" has the meaning set forth in Section 2.7.
"Code" is defined in the sixth recital of this Agreement.
"Contracts" means, collectively, the documents and other matters listed on
Schedule 3.11.
"Controlled Group Member" has the meaning set forth in Section 3.16(ii).
"Disputed Matter" has the meaning set forth in Section 2.5(i).
"Draft Registration Statement" has the meaning set forth in the ninth
recital of this Agreement.
"Effective Time" means 12:01 a.m. on the Closing Date.
"Employees" has the meaning set forth in Section 8.2(i).
"Employee Benefit Plan" means an Employee Pension Benefit Plan, Employee
Welfare Benefit Plan (where no distinction is required by the context in
which the term is used), or any compensation plan, incentive plan (whether
or not stock related), bonus plan or fringe benefit plan.
"Employee Pension Benefit Plan" has the meaning set forth in Section 3(2)
of ERISA.
"Employee Welfare Benefit Plan" has the meaning set forth in Section 3(1)
of ERISA.
-4-
"Environmental Laws" has the meaning set forth in Section 3.9.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excluded Assets" means, collectively (i) any rights of the Seller or any
of its Affiliates to any Tax refund with respect to periods prior to the
Closing Date, (ii) any assets of any Employee Benefit Plan maintained by
the Seller, (iii) any property, casualty, workers' compensation or other
insurance policy or related insurance services contract relating to the
Seller and any rights of Seller or any of its Affiliates under such
insurance policy or contract, other than rights or proceeds under such
insurance policies or contracts with respect to any Assumed Liability or
any casualty affecting any of the Purchased Assets, (iv) any rights of the
Seller under this Agreement or under any other agreement between the Seller
and the Purchaser and (v) any assets, properties or rights of the Seller
listed on Schedule A.
"Excluded Liabilities" refers to, collectively, all obligations and
liabilities of the Seller and its Affiliates, contingent or direct, known
or unknown, other than the Assumed Liabilities. Without limiting the
generality of the foregoing, the Excluded Liabilities include (i) any
liability or obligation arising prior to, on or after the Closing Date in
connection with any Excluded Asset, (ii) any liability or obligation
arising prior to the Closing Date with respect to the Purchased Assets,
(iii) any liability or obligation arising under any Environmental Law in
connection with the ownership, use, maintenance or operation of any of the
present or former facilities or properties of the Seller or any of its
predecessors or otherwise in connection with the operation of the Business,
(iv) any liability or obligation (whether assessed or unassessed) of the
Seller or any of its Affiliates with respect to Taxes for any period prior
to the Closing Date, (v) any liability or obligation with respect to any
checks issued by the Seller prior to the Closing Date which are outstanding
as of the Closing Date, (vi) any liability or obligation of the Seller with
respect to employees or employee benefits not specifically assumed by the
Purchaser pursuant to Section 8.2 and (vii) any liabilities listed on
Schedule B.
"Final Schedule" has the meaning set forth in Section 2.5(iii)
"Founding Companies" has the meaning set in the second recital of this
Agreement.
"Xxxx-Xxxxx Act" has the meaning set forth in Section 8.5.
"Hazardous Wastes" and "Hazardous Substances" have the meanings set forth
in Section 3.9.
"IPO" has the meaning set forth in the fifth recital of this Agreement.
-5-
"IPO Price" has the meaning set forth in the fifth recital of this
Agreement.
"Initial Disclosure Date" means November 30, 1996.
"Intellectual Property" means all patents, trademarks, service marks,
copyrights and applications therefor, all tradenames, brand names, logos,
inventions, discoveries, improvements, processes, technologies, know-how,
formulae, drawings, specifications, trade secrets, plans, computer software
(including source codes and other documentation thereof), files, programs,
notebooks and records, all other proprietary, technical and other
information, data and intellectual property, and all licenses, Permits and
other rights to use the foregoing, whether patentable or unpatentable, used
or held for use in or associated with the ownership of the Purchased
Assets, or the conduct of the Business (or, if the Seller does not own any
such proprietary, technical or other information, data and intellectual
property, a paid-up or royalty-free, irrevocable license, permit or other
right to use the same), including, without limitation, the Intellectual
Property described in Schedule 3.14.
"IRS" or "Internal Revenue Service" means the Internal Revenue Service of
the Department of the Treasury.
"Leases" means all real and personal property leased by the Seller and
used, useful or held for use in connection with the Business.
"Liens" means all mortgages, liens, security interests, pledges, charges,
voting trusts, restrictions, encumbrances and claims of every kind.
"Material Adverse Effect" means a material adverse effect on the business,
operations, affairs, prospects, properties, assets or condition (financial
or otherwise) of a Person.
"Material Documents" has the meaning set forth in Section 3.21.
"Multiemployer Plan" has the meaning set forth in Section 3(37) of ERISA.
"November Balance Sheet" has the meaning set forth in Section 3.5.
"Old ACG" has the meaning set forth in the first paragraph of this
Agreement.
"Old ACG Financial Statements" has the meaning set forth in Section 4.6.
"Permit" means any permit, approval, authorization, license, franchise,
variance, certificate of occupancy or permission required by a governmental
authority under any applicable law.
-6-
"Person" means an individual, a corporation, a limited liability company, a
partnership, an association, a joint stock company, a trust or any
incorporated organization.
"Prepayment" has the meaning set forth in Section 2.3(iii).
"Prohibited Activities" has the meaning set forth in Section 3.25.
"Proscribed Business" has the meaning set forth in Section 11.1(i).
"Purchased Assets" means all the Seller's assets associated with the
Business or used, useful or held for use in connection with the operations
historically conducted by Seller at or in conjunction therewith, all as the
same may exist on the Closing Date, including, without limitation, the
following:
(i) all real property that is owned by the Seller, in each case together
with all improvements, fixtures, construction in process and all
other easements, rights and privileges appurtenant thereto and
rights in respect thereof;
(ii) all inventories of supplies and spare parts, all machinery, test
equipment, computers, telephone systems, expendables, vehicles,
furniture, file cabinets, office materials and other tangible
personal property, including the items listed on Schedule 3.10;
(iii) all Intellectual Property and all accounts and notes receivable;
(iv) all right, title and interest in, to and under all Contracts and
Leases (including all options to renew or extend the term of such
Leases or purchase all or any part of the leased property), subject
in each case to the terms of such Contracts and Leases;
(v) all books and records of the Business (including such books and
records as are contained in computerized storage media), including
books and records related to inventories, purchasing, accounting,
sales, research, engineering, maintenance, repairs, marketing,
banking, Intellectual Property, shipping records, personnel files
for Transferred Employees and all files, records, literature and
correspondence;
(vi) to the extent legally assignable, all Permits;
(vii) to the extent any of the following relate to any Assumed Liability
or any of the Purchased Assets: claims, deposits, prepayments,
prepaid assets, refunds (excluding Tax refunds with respect to
periods prior to the Closing Date), causes of action, rights of
recovery, rights of setoff and rights of recoupment of the Seller as
of the Closing
-7-
Date, including all rights of the Seller under any property,
casualty, workers' compensation or other insurance policy or related
insurance services contract;
(viii) any other tangible assets of the Seller which are used primarily in
the Business and which are of a nature not customarily reflected in
the books and records of a business, such as assets which have been
written off for accounting purposes but which are still used by or
of value to the Business;
(ix) all goodwill associated with the Business;
(x) all supplier lists, files, records and data relating to the
Business;
(xi) all customer lists, files, records and data relating to the
Business;
(xii) all capital expenditure plans and studies, engineering studies,
accounting, real property, environmental, Tax, employment, health
and safety, and other books, records, files, ledgers, documents and
correspondence used or held for use in or associated with the
operation of the Purchased Assets, the ownership of the Purchased
Assets, or the conduct of the Business, other than Excluded Assets;
(xiii) all rights to the use of the name Switchboard of Oklahoma City;
(xiv) all rights under express or implied warranties from the providers of
goods and services in connection with the operation of the Purchased
Assets, the ownership of the Purchased Assets, or the conduct of the
Business; and
(xv) all cash and cash equivalents of the Seller (including for this
purpose all collected funds and items in the process of collection
received in bank accounts associated with the Seller);
excluding in every instance all Excluded Assets.
"Purchaser" has the meaning set forth in the first paragraph of this
Agreement.
"Purchaser Charter Documents" has the meaning set forth in Section 4.1.
"Purchaser Documents" has the meaning set forth in Section 4.9.
"Purchaser Stock" has the meaning set forth in the fifth recital of this
Agreement.
-8-
"Return" means any return, report or statement (including any information
return) required to be filed for purposes of a particular Tax.
"Schedule" has the meaning set forth in Section 2.5(i).
"Section 351 Exchange Plan" means the Section 351 Exchange Plan in the form
of Annex II.
"Seller" has the meaning set forth in the first paragraph of this
Agreement.
"Seller Financial Statements" has the meaning set forth in Section 3.5.
"Shareholder" and "Shareholders" have the meanings set forth in the first
paragraph of this Agreement.
"Subsidiary" means, with respect to any Person, any corporation or other
organization, whether incorporated or unincorporated, of which (i) such
Person or any other Subsidiary of such Person is a general partner
(excluding partnerships, the general partnership interests of which held by
such Person or any Subsidiary of such Person do not have a majority of the
voting interests in such partnership) or (ii) at least a majority of the
securities or other interests having by their terms ordinary voting power
to elect a majority of the Board of Directors or others performing similar
functions with respect to such corporation or other organization is
directly or indirectly owned or controlled by such Person, by any one or
more of its Subsidiaries, or by such Person and one or more of its
Subsidiaries.
"Tax" or "Taxes" means all Federal, state, local or foreign net or gross
income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, bank shares, withholding, payroll, employment, excise, property,
deed, stamp, alternative or add on minimum, environmental or other taxes,
assessments, duties, fees, levies or other governmental charges of any
nature whatever, whether disputed or not, together with any interest,
penalties, additions to tax or additional amounts with respect thereto.
"Territory" has the meaning set forth in Section 11.1(i).
"Transferred Employee" has the meaning set forth in Section 8.2(ii).
2. PURCHASE AND SALE; CLOSING; SECTION 351 EXCHANGE PLAN
2.1 Purchase and Sale of Purchased Assets. On the terms and subject to the
conditions set forth in this Agreement, at the Closing, the Purchaser will
purchase from the Seller, and the Seller
-9-
will sell, transfer, assign, convey and deliver to the Purchaser the Purchased
Assets pursuant to the Xxxx of Sale.
2.2 Assumption of Liabilities. On the terms and subject to the conditions
set forth in this Agreement, at the Closing, the Purchaser will assume and
become responsible for all of the Assumed Liabilities pursuant to the
Assumption Agreement.
2.3 Purchase Price.
(i) The total consideration to be provided by the Purchaser to the
Seller for the Purchased Assets shall be the sum of the following items: (i)
cash in the amount of the Base Price and (ii) the assumption of the Assumed
Liabilities.
(ii) Old ACG delivered to the Seller cash in the amount of $51,000
(the "Prepayment") in partial payment of the purchase price for the Purchased
Assets, the receipt of which is acknowledged by the Seller. At the Closing, the
Purchaser shall deliver or cause to be delivered to the Seller cash in the
amount of $1,580,000.
2.4 Allocation of Purchase Price. The Seller and the Purchaser agree to
allocate the Purchase Price and the Assumed Liabilities among the Purchased
Assets in accordance with Schedule 2.4. The parties agree to file all Tax
reports, Returns and claims and other statements consistent with the allocation
set forth on Schedule 2.4 (and in particular to report the information required
by Section 1060(b) of the Code) in a manner consistent with such allocation and
shall not make any inconsistent written statement or take any inconsistent
position on any Returns, in any refund claim, during the course of any IRS or
other Tax audit, for any financial or regulatory purpose, in any litigation or
investigation or otherwise, so long as there exists a reasonable basis in law
to maintain such position. Each party shall notify the other party if it
receives notice that the IRS proposes any allocation different from Schedule
2.4.
2.5 Post-Closing Adjustment.
(i) As promptly as practicable following the Closing Date, but in no
event later than 15 days following the Closing Date, the Seller shall prepare a
schedule setting forth (i) the Seller's Cash as of the Closing Date, (ii) the
Seller's Accounts Receivable as of the Closing Date and (iii) the Seller's
Accounts Payable as of the Closing Date (the "Schedule"). A copy of the
Schedule shall be delivered to the Purchaser. Representatives of the Purchaser
shall have access to the Seller's books and records in order to verify the
accuracy of the Schedule. The parties shall endeavor to resolve any
disagreements relating to the Schedule within five days following its delivery
to the Purchaser. If all disagreements relating to the Schedule cannot be
resolved by the parties within the
-10-
foregoing time period, all matters in dispute (collectively, the "Disputed
Matter") shall be resolved by arbitration as set forth in Section 2.5(ii).
(ii) Any Disputed Matter shall be promptly submitted to and reviewed
by Deloitte & Touche LLP, or other nationally recognized independent accounting
firm mutually acceptable to the Seller and the Purchaser ("Arbitrator"). The
Arbitrator shall consider only the Disputed Matter and shall act promptly to
resolve in writing the Disputed Matter. The Arbitrator's decision with respect
to the Disputed Matter shall be final and binding on the Seller and the
Purchaser. The Seller and the Purchaser shall each be responsible for and pay
one-half of the fees and expenses of the Arbitrator. Each party shall be
responsible for and pay its own expenses incurred in connection with the
resolution of any Disputed Matter.
(iii) As promptly as practicable following the first to occur of (x)
an agreement between the Purchaser and the Seller with respect to the accuracy
of the Schedule or (y) a decision by the Arbitrator with respect to the
appropriate figures for inclusion in the Schedule (in either event, the "Final
Schedule"), the following action shall be taken:
(1) If the sum of the Accounts Receivable and the Cash reflected
in the Final Schedule exceeds the Accounts Payable reflected therein, the
amount of such excess, together with simple interest thereon from the Closing
Date at the Agreed Rate (calculated on the basis of a 365-day year), shall be
promptly remitted by the Purchaser to the Seller; or
(2) If the Accounts Payable reflected in the Final Schedule
exceed the sum of the Accounts Receivable and the Cash reflected therein, the
amount of such excess, together with simple interest thereon from the Closing
Date at the Agreed Rate (calculated on the basis of a 365-day year), shall be
promptly remitted by the Seller to the Purchaser.
(iv) The agreements and covenants in this Section 2.5 shall survive
the Closing.
2.6 Section 351 Exchange Plan. By executing this Agreement, each
Shareholder is deemed to have approved and adopted the Section 351 Exchange
Plan to the same extent as if he had subscribed his signature thereon and
Seller is deemed to have approved and adopted the Section 351 Exchange Plan to
the same extent as if a duly authorized officer of Seller had executed the
Section 351 Exchange Plan for and in the name of and on behalf of Seller.
2.7 Closing. The closing of the transactions contemplated by this Agreement
("Closing") shall take place on or before January 31, 1998 on the date of the
closing of the sale of shares of the Purchaser Stock in the IPO, or such other
date as the parties hereto may designate (the "Closing Date"), at such place in
New York City as the parties may mutually agree.
-11-
3. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF THE SELLER AND
THE SHAREHOLDERS
The Seller and the Shareholders jointly and severally, represent, warrant,
covenant and agree (i) that all of the following representations and warranties
in this Section 3 are true at the date of this Agreement and, subject to
Section 5.7, shall be true at the Closing Date and (ii) that all of the
covenants and agreements in this Section 3 shall be complied with or performed
at and as of the Closing Date. None of the representations, warranties,
covenants and agreements set forth in this Section 3 shall survive the Closing.
For purposes of this Section 3, the term Seller shall mean and refer to the
Seller and all of its Subsidiaries, if any.
3.1 Due Organization. The Seller is a corporation duly organized, validly
existing and in good standing under the laws of the state of Oklahoma, and is
duly authorized and qualified to do business under all applicable laws,
regulations, ordinances and orders of public authorities to carry on its
business in the places and in the manner as now conducted, except (i) as set
forth on Schedule 3.1 or (ii) where the failure to be so authorized or
qualified would not have a Material Adverse Effect. Schedule 3.1 sets forth all
jurisdictions in which the Seller is authorized or qualified to do business.
True, complete and correct copies of the Charter Documents and Bylaws, each as
amended, of the Seller are attached hereto as Schedule 3.1.
3.2 Authority. The Seller has full corporate power and authority to execute
and deliver this Agreement, and execution and delivery by the Seller of this
Agreement and its consummation of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate action on the part
of the Seller (including all requisite shareholder approval), and this
Agreement constitutes the legal, valid and binding obligation of the Seller.
Each Shareholder has the full legal right, power and authority to enter into
this Agreement. This Agreement has been duly executed and delivered by each
Shareholder and constitutes a legal, valid and binding obligation of each
Shareholder.
3.3 Equity Interests in the Seller. The authorized capital stock of the
Seller is as set forth in Schedule 3.3. All of the issued and outstanding
shares of capital stock the Seller are owned of record and beneficially by the
Shareholders in the amounts set forth in Schedule 3.3. Further, none of such
shares was issued in violation of the preemptive rights of any past or present
stockholder of the Seller.
3.4 Subsidiaries. Except as set forth in Schedule 3.4, (i) the Seller has
no Subsidiary, (ii) the Seller does not presently own, of record or
beneficially, or control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any Person and
(iii) the Seller is not directly or indirectly, a participant in any joint
venture, partnership or other non-corporate entity.
-12-
3.5 Financial Statements. Attached hereto as Schedule 3.5 are copies of the
following cash basis financial statements of the Seller beginning with the year
ended December 31, 1993 (the "Seller Financial Statements"): the Seller's
unaudited Balance Sheets as of December 31, 1995, 1994 and 1993 and its
unaudited Statements of Income, Cash Flows and Retained Earnings and any
related notes thereto for each of the years in the three-year period ended
December 31, 1995; the Seller's unaudited Balance Sheet as of November 30, 1996
("November Balance Sheet") (such November 30, 1996 being hereinafter also
referred to as the "Balance Sheet Date"); and unaudited Statements of Income,
Cash Flows and Retained Earnings and any related notes thereto for the eleven
months ended November 30, 1995 and 1996. The Seller Financial Statements have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated (except as noted
thereon or on Schedule 3.5). Except as set forth on Schedule 3.5, the foregoing
Balance Sheets present fairly the financial position of the Seller as of the
dates indicated thereon, and the foregoing Statements of Income, Retained
Earnings and Cash Flow present fairly the results of operations for the periods
indicated thereon, all on the cash basis of accounting in conformity with
generally recognized industry standards.
3.6 Liabilities and Obligations. Seller has no material liabilities of any
kind, character or description, whether accrued, absolute, secured or
unsecured, contingent or otherwise that are not reflected on the November
Balance Sheet or otherwise reflected in the Seller Financial Statements at the
Balance Sheet Date, including all loan agreements, indemnity or guaranty
agreements, bonds, mortgages, Liens, pledges or other security agreements. The
Seller has also disclosed to the Purchaser on Schedule 3.6, in the case of
those contingent liabilities of the Seller related to pending or threatened
litigation or other liabilities which are not fixed or otherwise accrued or
reserved, the following information:
(w) a summary description of the liability together with the following:
(1) copies of all relevant documentation relating thereto;
(2) amounts claimed and any other action or relief sought; and
(3) name of claimant and all other parties to the claim, suit or
proceeding;
-13-
(x) the name of each court or agency before which such claim, suit or
proceeding is pending;
(y) the date such claim, suit or proceeding was instituted; and
(z) a good faith and reasonable estimate of the maximum amount, if
any, which is likely to become payable with respect to each such liability.
If no estimate is provided, the estimate shall for purposes of this
Agreement be deemed to be zero.
3.7 Accounts and Notes Receivable. The Seller has delivered to the
Purchaser an accurate list (which is set forth on Schedule 3.7) of the accounts
and notes receivable of the Seller, as of the Initial Disclosure Date,
including receivables from and advances to employees and the Shareholders or
their Affiliates. The Seller shall also provide the Purchaser (x) an accurate
list of all receivables generated subsequent to the Initial Disclosure Date and
(y) an aging of all accounts and notes receivable showing amounts due in 30 day
aging categories, and such list and such aging report (the "A/R Aging Reports")
shall be current as of the Balance Sheet Date and shall be supplemented as of a
date five business days prior to the Closing Date. Except to the extent
reflected on Schedule 3.7 or as disclosed by the Seller to the Purchaser in a
writing accompanying the A/R Aging Reports, such accounts, notes and other
receivables are collectible in the amounts shown on Schedule 3.7, and shall be
collectible in the amounts shown on the A/R Aging Reports, net of reserves
reflected in the November Balance Sheet and as of the date of the A/R Aging
Reports, respectively.
3.8 Permits and Intangibles. The Seller holds all Permits the absence of
any of which could have a Material Adverse Effect on its Business, and the
Seller has delivered to the Purchaser an accurate list and summary description
(which is set forth on Schedule 3.8) of all Permits owned or held by the Seller
(it being understood and agreed that a list of all environmental Permits and
other environmental approvals is set forth on Schedule 3.9). To the knowledge
of the Seller, (i) the Permits listed on Schedules 3.8 and 3.9 are valid, and
(ii) the Seller has not received any notice that any governmental authority
intends to cancel, terminate or not renew any such Permit. The Seller has
conducted and is conducting the Business in compliance with the requirements,
standards, criteria and conditions set forth in the Permits listed on Schedules
3.8 and 3.9 and is not in violation of any of the foregoing except where such
non-compliance or violation would not have a Material Adverse Effect on the
Seller. Except as specifically provided in Schedule 3.8, the transactions
contemplated by this Agreement will not result in a default under or a breach
or violation of, or adversely affect the rights and benefits afforded to the
Seller by, any such Permit.
-14-
3.9 Environmental Matters. Except as set forth on Schedule 3.9, (i) the
Seller has complied with and is in compliance with all Federal, state, local
and foreign statutes (civil and criminal), laws, ordinances, regulations,
rules, notices, Permits, judgments, orders and decrees applicable to it or any
of its properties, assets, operations and businesses relating to environmental
protection (collectively "Environmental Laws") including, without limitation,
Environmental Laws relating to air, water, land and the generation, storage,
use, handling, transportation, treatment or disposal of Hazardous Wastes and
Hazardous Substances including petroleum and petroleum products (as such terms
are defined in any applicable Environmental Law); (ii) the Seller has obtained
and adhered to all Permits necessary to treat, transport, store, dispose of and
otherwise handle Hazardous Wastes and Hazardous Substances, a list of all of
which Permits is set forth on Schedule 3.9, and has reported to the appropriate
authorities, to the extent required by all Environmental Laws, all past and
present sites owned and operated by the Seller where Hazardous Wastes or
Hazardous Substances have been treated, stored, disposed of or otherwise
handled; (iii) there have been no releases or threats of releases (as defined
in Environmental Laws) at, from, in or on any property owned or operated by the
Seller except as permitted by Environmental Laws; (iv) the Seller knows of no
on-site or off-site location to which the Seller has transported or disposed of
Hazardous Wastes and Hazardous Substances or arranged for the transportation of
Hazardous Wastes and Hazardous Substances, which site is the subject of any
Federal, state, local or foreign enforcement action or any other investigation
which could lead to any claim against the Seller or the Purchaser, for any
clean-up cost, remedial work, damage to natural resources, property damage or
personal injury, including, but not limited to, any claim under the
comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended; and (v) the Seller has no contingent liability in connection with
any release of any Hazardous Waste or Hazardous Substance into the environment.
3.10 Personal Property. The Seller has delivered to the Purchaser an
accurate list (which is set forth on Schedule 3.10) of (i) all personal
property included (or that will be included) in "depreciable plant, property
and equipment" on the balance sheet of the Seller, (ii) all personal property
owned by the Seller with a value in excess of $5,000 (x) as of the Initial
Disclosure Date and (y) acquired since the Initial Disclosure Date and (iii)
all Leases and agreements in respect of personal property, including, in the
case of each of (i), (ii) and (iii), (1) true, complete and correct copies of
all such Leases and (2) an indication as to which assets are currently owned,
or were formerly owned, by Shareholders, relatives of any Shareholder, or
Affiliates of the Seller. Except as set forth on Schedule 3.10, (a) all
personal property used by the Seller in the Business is either owned by the
Seller or leased by the Seller pursuant to a Lease included on Schedule 3.10,
(b) all of the personal property listed on Schedule 3.10 is in good working
order and condition, ordinary wear and tear excepted and (c) all Leases and
agreements included on Schedule 3.10 are in full force and effect and
constitute valid and binding agreements of the parties (and their successors)
thereto in accordance with their respective terms.
-15-
3.11 Significant Customers; Material Contracts and Commitments. The Seller
has delivered to the Purchaser an accurate list (which is set forth on Schedule
3.11) of all significant customers, or Persons that are sources of a
significant number of customers, it being understood and agreed that a
"significant customer," for purposes of this Section 3.11, means a customer (or
Person) (i) representing 2% or more of the Seller's annual revenues as of the
Initial Disclosure Date or (ii) reasonably expected to represent 2% or more of
the Seller's revenues during the twelve-month period ending September 30, 1997.
Except to the extent set forth on Schedule 3.11, none of the Seller's
significant customers (or Persons that are sources of a significant number of
customers) has canceled or substantially reduced or, to the knowledge of the
Seller, is currently attempting or threatening to cancel a contract or
substantially reduce utilization of the services provided by the Seller.
The Seller has listed on Schedule 3.11 all material contracts, commitments
and similar agreements to which the Seller is a party or by which it or any of
its properties are bound (including, but not limited to, any contracts with
significant customers, joint venture or partnership agreements, contracts with
any labor organizations, strategic alliances and options to purchase land),
other than agreements listed on Schedule 3.6, 3.10 or 3.12, (x) in existence as
of the Initial Disclosure Date and (y) entered into since the Initial
Disclosure Date, and in each case have delivered true, complete and correct
copies of such agreements to the Purchaser. The Seller has complied with all
material commitments and obligations pertaining to it, and is not in default
under any contract or agreement listed on Schedule 3.11 and no notice of
default or termination under any such contract or agreement has been received.
The Seller has also indicated on Schedule 3.11 a summary description of all
plans or projects involving the acquisition of any personal property, business
or assets requiring, in any event, the payment of more than $5,000 by the
Seller.
Except as set forth on Schedule 3.11, all of the contracts, commitments and
similar agreements listed on Schedule 3.11 are in full force and effect and
constitute valid and binding agreements of the parties (and their successors)
thereto in accordance with their respective terms.
3.12 Real Property. Schedule 3.12 includes a list of all real property
owned or held pursuant to Leases by the Seller (i) as of the Initial Disclosure
Date and (ii) acquired since the Initial Disclosure Date, and all other
property, if any, used by the Seller in the conduct of its business. The Seller
has good and insurable title to the real property owned by it, including those
reflected on Schedule 3.12, subject to no Lien except for:
(w) Liens reflected on Schedules 3.6 or 3.11 as securing specified
liabilities (with respect to which no material default exists);
(x) Liens for current Taxes not yet payable and assessments not in
default;
-16-
(y) easements for utilities serving the property only; and
(z) easements, covenants and restrictions and other exceptions to
title shown of record in the office of the County Clerks in which the
properties, assets and leasehold estates are located which do not adversely
affect in any material respect the current use of the property.
Schedule 3.12 contains, without limitation, (1) true, complete and correct
copies of all title reports and title insurance policies currently in
possession of the Seller with respect to real property owned by the Seller, (2)
true, complete and correct copies of all leases and agreements in respect of
such real property leased by the Seller (which copies are attached to Schedule
3.12), and (3) an indication as to which such properties, if any, are currently
owned, or were formerly owned, by any Shareholder or business or personal
Affiliates of the Seller or any Shareholder.
Except as set forth on Schedule 3.12, all Leases included on Schedule 3.12 are
in full force and effect and constitute valid and binding agreements of the
parties (and their successors) thereto in accordance with their respective
terms.
3.13 Insurance. The Seller has delivered to the Purchaser, as set forth on
and attached to Schedule 3.13, (i) an accurate list as of the Initial
Disclosure Date of all insurance policies carried by the Seller, (ii) an
accurate list of all insurance loss runs on workers compensation claims
received for the past three policy years and (iii) true, complete and correct
copies of all insurance policies currently in effect. Such insurance policies
evidence all of the insurance that the Seller is required to carry pursuant to
all of its contracts and other agreements and pursuant to all applicable laws.
All of such insurance policies are currently in full force and effect and shall
remain in full force and effect through the Closing Date. No insurance carried
by the Seller has ever been canceled by the insurer and the Seller has never
been denied coverage.
3.14 Intellectual Property. Except as set forth in Schedule 3.14, the
Seller either owns or has the right to use by license, sublicense, agreement,
or permission all of the Seller's inventions, improvements, domestic and
foreign patents and applications therefor, customer lists, copyrights,
copyright registrations and applications therefor, trademarks, tradenames,
service marks, trade dress, logos, rights in computer software, and all rights
granted or retained in licenses under any of the foregoing which are used in
connection with the conduct of the Business as presently conducted. Except as
set forth on Schedule 3.14, none of the Intellectual Property which is used in
connection with the conduct of the Business is, or has been in the past five
years involved in, or the subject of, any pending or, to the knowledge of the
Seller, threatened infringement, interference, opposition or similar action,
suit or proceeding or, to the knowledge of Seller, has otherwise been
challenged in any way. Except as set forth on Schedule 3.14, the Intellectual
Property will afford the Purchaser the right to use all technology, know-how,
technical and other information, data and other
-17-
intellectual property, whether patentable or unpatentable, and whether owned by
the Seller, any other Person or others, necessary for the conduct of the
Business in a manner consistent with the Seller's prior practice. The license
fees, royalties and other amounts payable by the Seller in connection with the
use of the Intellectual Property, together with the terms and conditions on
which and periods for which such amounts are payable, are described in Schedule
3.14. Any licenses fees, royalties or other amounts payable as a result of the
transfer of any item of Intellectual Property by the Seller to the Purchaser
pursuant to this Agreement shall be paid by the Purchaser.
3.15 Labor Relations. Except as set forth on Schedule 3.15, the Seller is
not a party to any collective bargaining agreement; and there are no
controversies pending or, to the Seller's knowledge, threatened between the
Seller and any of its current or former employees or any labor or other
collective bargaining unit representing any current or former employee of the
Seller that could reasonably be expected to result in a labor strike, dispute,
slow-down or work stoppage or otherwise have a Material Adverse Effect. Seller
is not aware of any organizational effort presently being made or threatened by
or on behalf of any labor union with respect to employees of the Seller. To the
Seller's knowledge, no executive, key employee or group of employees of the
Seller has any plan to terminate employment with the Seller.
3.16 Employee Benefits.
(i) Schedule 3.16 lists all Employee Benefit Plans that the Seller
maintains or to which the Seller contributes for the benefit of any current
or former employee of the Seller in existence as of the Initial Disclosure
Date.
(ii) Neither the Seller nor any other organization that is a member of
a controlled group of organizations within the meaning of Code Sections
414(b), (c), (m) or (o) of which the Seller is a member ("Controlled Group
Member") contributes, or has contributed in the past, to any Employee
Pension Benefit Plan subject to Title IV of ERISA or any Multiemployer Plan
for the benefit of any current or former employee of the Seller or any
Controlled Group Member.
(iii) The Seller has delivered to the Purchaser complete and accurate
copies of all plans or summary plan descriptions for each Employee Benefit
Plan listed on Schedule 3.16. For each Employee Pension Benefit Plan listed
on Schedule 3.16 intended to qualify under Section 401(a) of the Code, the
Seller has delivered to the Purchaser (w) the three most recent annual
reports, (x) the three most recent annual and periodic accountings of plan
assets, (y) the most recent determination letter received from the IRS and
(z) where applicable, the three most recent actuarial valuations.
-18-
(iv) There are no liabilities, breaches, violations or defaults under
any Employee Benefit Plan sponsored or maintained by the Seller or any
Controlled Group Member that would subject the Purchaser to any Taxes or
other liabilities.
(v) With respect to each Employee Welfare Benefit Plan listed on
Schedule 3.16, the Seller or an Affiliate has complied with the
requirements of Code Section 4980B.
3.17 Tax Matters.
(i) The Seller is currently taxed under Subchapter C of the Code. The
Seller has filed all Tax Returns that it was required to file. All such Tax
Returns filed by the Seller were correct and complete in all material
respects or reserved for on its books. All Taxes owed by the Seller
(whether or not shown on any Tax Return) have been paid. Except as set
forth on Schedule 3.17, the Seller is not currently the beneficiary of any
extension of time within which to file any Tax Return. Since January 1,
1994, no claim with respect to the Seller has been made by an authority in
a jurisdiction where the Seller does not file Tax Returns that it is or may
be subject to taxation by that jurisdiction. There is no Lien affecting any
of the Purchased Assets that arose in connection with any failure or
alleged failure to pay any Tax.
(ii) The Seller has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, shareholder or other party.
(iii) The Seller does not expect any authority to assess any material
amount of additional Taxes for any period for which Tax Returns have been
filed. There is no material dispute or claim concerning any Tax liability
of the Seller either claimed or raised by any authority in writing or as to
which Seller has knowledge based upon direct inquiry by any agent of such
authority. Schedule 3.17(iii) lists all income Tax Returns of the Seller
for taxable periods ended on or after January 1, 1992, indicates those Tax
Returns of which the Seller is aware that have been audited and indicates
those Tax Returns that currently are the subject of audit. The Seller has
delivered to the Purchaser correct and complete copies of all Tax Returns,
examination reports and statements of deficiencies assessed against or
agreed to by the Seller for any taxable period ended on or after January 1,
1993.
(iv) Except as set forth on Schedule 3.17(iv), neither any Shareholder
nor the Seller has waived any statute of limitations in respect of Taxes or
agreed to any extension of time with respect to a Tax assessment or
deficiency.
-19-
(v) The Seller has not filed a consent under Section 341(f) of the
Code concerning collapsible corporations. The Seller has not made any
payments, is not obligated to make any payments and is not a party to any
agreement that under certain circumstances could obligate it to make any
payments that will not be fully deductible under Section 280G of the Code.
(vi) Except as set forth on Schedule 3.17(vi), none of the Purchased
Assets secures any debt, the interest on which is tax-exempt under Section
103(a) of the Code. None of the Purchased Assets are "tax-exempt use
property" within the meaning of Section 168(h) of the Code. The
transactions contemplated by this Agreement are not subject to Tax
withholding pursuant to the provisions of Section 3406 or Subchapter A of
Chapter 3 of the Code or any other provision of applicable law.
(vii) The Seller has not received a ruling from any taxing authority
or entered into any agreement regarding Taxes with any taxing authority
that would, individually or in the aggregate, apply to the Business, or the
Purchased Assets or the Purchaser after the Closing Date.
3.18 Prior or Preferential Rights. There are no prior or preferential
rights, rights of first refusal, or other similar rights in any party (other
than the Purchaser) to purchase or otherwise acquire the Business or any
Purchased Assets.
3.19 Sufficiency of Assets. The Purchased Assets are all of the assets,
properties and rights of the Seller (other than the Excluded Assets and
Excluded Liabilities) whether tangible or intangible, real, personal or mixed,
and known or unknown, and wherever located, used or held for use in or
associated with the conduct of the Business. The Purchased Assets are
sufficient to conduct the Business as a going concern on a basis consistent
with the Seller's prior practice, provided Purchaser supplies working capital
to the Business in an amount comparable to that maintained by the Seller prior
to the Closing.
3.20 Conformity with Law; Litigation. Except to the extent set forth on
Schedule 3.9 or 3.20, the Seller is not in violation of any law or regulation
or any order of any court or Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over the Seller which would have a Material Adverse Effect; and
except to the extent set forth on Schedule 3.6 or 3.9, there are no material
claims, actions, suits or proceedings, commenced or, to the knowledge of the
Seller, threatened, against or affecting the Seller, at law or in equity, or
before or by any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction over
the Seller and no notice of any claim, action, suit or proceeding, whether
pending or threatened, has been received by the Seller or the Shareholders. The
Seller has conducted and is conducting its business in substantial
-20-
compliance with the requirements, standards, criteria and conditions set forth
in applicable Federal, state and local statutes, ordinances and Permits,
including all such Permits set forth on Schedules 3.8 and 3.9, and is not in
violation of any of the foregoing which might have a Material Adverse Effect.
3.21 No Violations. The Seller is not in violation of its Charter
Documents. Neither the Seller nor, to the knowledge of the Seller, any other
party thereto, is in default under any Lease, Contract, Permit or other
instrument set forth on Schedule 3.8, 3.9, 3.10, 3.11 or 3.12, or any other
material agreement to which it is a party or by which its properties are bound
(the "Material Documents"); and, except as set forth in Schedule 3.21, (i) the
rights and benefits of the Seller under the Material Documents will not be
materially adversely affected by the transactions contemplated hereby and (ii)
the execution of this Agreement and the performance of the obligations
hereunder and the consummation of the transactions contemplated hereby will not
result in any material violation or breach or constitute a default under, any
of the terms or provisions of the Material Documents or the Charter Documents.
Except as set forth on Schedule 3.21, none of the Material Documents requires
notice to, or the consent or approval of, any governmental agency or other
third party with respect to any of the transactions contemplated hereby in
order to remain in full force and effect, and consummation of the transactions
contemplated hereby will not give rise to any right to termination,
cancellation or acceleration or loss of any right or benefit. Except as set
forth on Schedule 3.21, none of the Material Documents prohibits the use or
publication by the Seller or the Purchaser of the name of any other party to
such Material Document, and none of the Material Documents prohibits or
restricts the Seller from freely providing services to any other customer or
potential customer of the Seller, any of the other Founding Companies or
Purchaser.
3.22 Government Contracts. Except as set forth on Schedule 3.22, the Seller
is not a party to any governmental contract subject to price determination or
renegotiation.
3.23 Absence of Changes. Since the Initial Disclosure Date, except as set
forth on Schedule 3.11 or 3.23, there has not been:
(i) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of the Seller;
(ii) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of the
Seller;
(iii) any change in the authorized capital stock of the Seller or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
-21-
(iv) any increase in the compensation, bonus, sales commissions or fee
arrangement payable or to become payable by the Seller to any of its
officers, directors, stockholders, employees, consultants or agents, except
for ordinary and customary bonuses and salary increases for employees in
accordance with past practice;
(v) any work interruptions, labor grievances or claims filed, or any
event or condition of any character, materially adversely affecting the
business of the Seller;
(vi) any sale or transfer, or any agreement to sell or transfer, any
material assets, property or rights of the Seller to any Person, including,
without limitation, any Shareholder and its Affiliate;
(vii) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to the Seller, including without limitation any
indebtedness or obligation of any Shareholder or his Affiliate;
(viii) any plan, agreement or arrangement granting any preferential
right to purchase or acquire any interest in any of the assets, property or
rights of the Seller or requiring consent of any party to the transfer and
assignment of any such assets, property or rights;
(ix) any purchase or acquisition of, or agreement, plan or arrangement
to purchase or acquire, any property, right or asset outside of the
ordinary course of the Seller's business;
(x) any waiver of any material rights or claims of the Seller;
(xi) any material breach, amendment or termination of any contract,
agreement, license, Permit or other right to which the Seller is a party;
(xii) any transaction by the Seller outside the ordinary course of its
respective businesses;
(xiii) any cancellation or termination of a material contract with a
customer or client prior to the scheduled termination date; or
(xiv) any other distribution of property or assets by the Seller.
3.24 Disclosure. This Agreement, including the Schedules and Annexes
hereto, together with all other documents and information made available to the
Purchaser and its representatives in writing pursuant hereto, present fairly
the business and operations of the Seller for the time periods
-22-
with respect to which such information was requested. The Seller's rights under
the documents delivered pursuant hereto would not be materially adversely
affected by, and no statement made herein would be rendered untrue in any
material respect by, any other document to which the Seller is a party, or to
which its properties are subject, or by any other fact or circumstance
regarding the Seller (which fact or circumstance was, or should reasonably,
after due inquiry, have been known to the Seller) that is not disclosed
pursuant hereto or thereto.
3.25 Prohibited Activities. Except as set forth on Schedule 3.25, the
Seller has not, between the Initial Disclosure Date and the date of this
Agreement, taken any of the actions set forth in Sections 5.3 ("Prohibited
Activities") or 5.4 or failed to take the actions required in Sections 5.1 and
5.2.
3.26 Draft Registration Statement. The text of, and the financial
statements and other financial information contained in, the Draft Registration
Statement, insofar as they were provided by the Seller expressly for inclusion
therein but not otherwise, are true, accurate and complete in all material
respects and do not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading.
3.27 Tax Matters. Each Shareholder has been advised by his or her counsel
that the transactions contemplated by this Agreement are taxable sales of
property under the Code.
4. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF THE PURCHASER AND
OLD ACG
Purchaser and Old ACG, jointly and severally, represent, warrant, covenant
and agree: (i) that, except as disclosed in the Draft Registration Statement,
which supplements and qualifies the following representations and warranties,
all of the following representations and warranties in this Section 4 are true
at the date of this Agreement and, subject to Section 5.7, shall be true at the
Closing Date and (ii) that all of the covenants and agreements in this Section
4 shall be complied with or performed at and as of the Closing Date. None of
the representations and warranties of the Purchaser in this Section 6 shall
survive the Closing.
4.1 Due Organization. The Purchaser and Old ACG each is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Delaware, and is duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities to
carry on its business in the places and in the manner as now conducted, except
where the failure to be so authorized or qualified would not have a Material
Adverse Effect. True, complete and correct copies of the Charter Documents and
By-laws, each as amended, of the Purchaser and Old ACG (collectively the
"Purchaser Charter Documents") are attached hereto as Schedule 4.1.
-23-
4.2 Authorization. Each of Purchaser and Old ACG has all requisite
corporate power and authority to enter into this Agreement and to perform its
obligations hereunder. The execution and delivery by each of Purchaser and Old
ACG of this Agreement and its consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action of Purchaser
and Old ACG. This Agreement has been duly executed and delivered by each of
Purchaser and Old ACG and is a valid and binding obligation of each of
Purchaser and Old ACG, enforceable against each of them in accordance with its
terms.
4.3 Capital Stock. The authorized capital stock of Old ACG is as set forth
in Schedule 4.3. All of the issued and outstanding shares of the capital stock
of Old ACG (i) has been duly authorized and validly issued, (ii) is fully paid
and nonassessable, (iii) is owned of record and beneficially by the Persons set
forth on Schedule 4.3, and (iv) was offered, issued, sold and delivered by Old
ACG in compliance with all applicable state and Federal laws concerning the
offer, issuance, sale and delivery of securities. Further, none of such shares
was issued in violation of the preemptive rights of any past or present
stockholder of Old ACG. Subject to the consummation of the reverse stock split
referred to in the ninth recital of this Agreement and the consummation of
Purchaser's acquisition of Old ACG in the reverse triangular merger, the
capitalization of Purchaser will be identical to the capitalization of Old ACG
immediately prior to the consummation of the IPO.
4.4 Transactions in Capital Stock, Organization Accounting. Except as set
forth on Schedule 4.3 or contemplated to be issued in connection with the
acquisition of the Founding Companies, (i) no option, warrant, call, conversion
right or commitment of any kind exists which obligates Old ACG to issue any of
its authorized but unissued capital stock and (ii) Old ACG has no obligation
(contingent or otherwise) to purchase, redeem or otherwise acquire any of its
equity securities or any interests therein or to pay any dividend or make any
distribution in respect thereof. Schedule 4.3 also includes complete and
accurate copies of all stock option or stock purchase plans, including a list,
accurate as of the date hereof, of all outstanding options, warrants or other
rights to acquire shares of capital stock of Old ACG.
4.5 Subsidiaries. Neither Purchaser nor Old ACG has any Subsidiaries,
except for each of the companies identified on Schedule 4.5. Except as set
forth in the preceding sentence, neither Purchaser nor Old ACG presently owns,
of record or beneficially, or controls, directly or indirectly, any capital
stock, securities convertible into capital stock or any other equity interest
in any corporation, association or business entity, and neither Purchaser nor
Old ACG, directly or indirectly, is a participant in any joint venture,
partnership or other non-corporate entity.
4.6 Financial Statements. Old ACG was formed in June 1996, and Purchaser
was formed in September 1997. Neither has conducted any material business since
the date of its inception, except raising capital and in connection with this
Agreement and similar agreements with other companies involved in the
communications business and associated activities. Attached hereto as
-24-
Schedule 4.6 are copies of the following financial statements of the Old ACG,
which reflect the results of its operations from inception in June 1996 (the
"Old ACG Financial Statements"): Old ACG's audited Balance Sheet as of December
31, 1996 and its unaudited Balance Sheet as of June 30, 1997, and audited
Statements of Operations, Shareholders' Equity and Cash Flows and related notes
thereto for the period from June 10, 1996 through December 31, 1996 and
unaudited Statement of Operations, Shareholders' Equity and Cash Flows for the
six months ended June 30, 1997. The audited Old ACG Financial Statements have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the period indicated (except as noted
thereon or on Schedule 4.6). Except as set forth on Schedule 4.6, the foregoing
Balance Sheets presents fairly the financial position of Old ACG as of such
dates, and the foregoing Statement of Revenue and Expense presents fairly the
results of its operations for the period indicated, all on a cash basis of
accounting. Old ACG's Financial Statements at and for the period ended December
31, 1996 have been examined by KPMG Peat Marwick LLP, independent public
accountants.
4.7 Liabilities and Obligations. Except as set forth on Schedule 4.7,
neither the Purchaser nor Old ACG has any material liabilities, contingent or
otherwise, except as set forth in or contemplated by this Agreement or the
Draft Registration Statement and except for fees incurred in connection with
the transactions contemplated hereby and thereby.
4.8 Conformity with Law; Litigation. Except to the extent set forth on
Schedule 4.8, neither Purchaser nor Old ACG is in violation of any law or
regulation or any order of any court or Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over it which would have a Material Adverse Effect; and
except to the extent set forth in Schedule 4.8, there are no material claims,
actions, suits or proceedings, pending or, to the knowledge of either Purchaser
or Old ACG, threatened, against or affecting either Purchaser or Old ACG, at
law or in equity, or before or by any Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over it and no notice of any claim, action, suit or
proceeding, whether pending or threatened, has been received. Each of Purchaser
and Old ACG has conducted and is conducting its business in substantial
compliance with the requirements, standards, criteria and conditions set forth
in applicable Federal, state and local statutes, ordinances, Permits, licenses,
orders, approvals, variances, rules and regulations and is not in violation of
any of the foregoing which might have a Material Adverse Effect.
4.9 No Violations. Neither Purchaser nor Old ACG is in violation of any
Purchaser Charter Document. Neither Purchaser nor Old ACG, nor to the knowledge
of Purchaser or Old ACG, any other party thereto, is in default under any
lease, instrument, agreement, license, or permit to which the Purchaser or Old
ACG is a party, or by which the Purchaser or Old ACG or any of its respective
properties, are bound (collectively, the "Purchaser Documents"); and (i) the
rights and benefits of the Purchaser and Old ACG under the Purchaser Documents
will not be adversely
-25-
affected by the transactions contemplated hereby and (ii) the execution of this
Agreement and the performance of the obligations hereunder and the consummation
of the transactions contemplated hereby will not result in any material
violation or breach or constitute a default under, any of the terms or
provisions of the Purchaser Documents or the Purchaser Charter Documents.
Except as set forth on Schedule 4.9, none of the Purchaser Documents requires
notice to, or the consent or approval of, any governmental agency or other
third party with respect to any of the transactions contemplated hereby in
order to remain in full force and effect, and consummation of the transactions
contemplated hereby will not give rise to any right to termination,
cancellation or acceleration or loss of any right or benefit.
4.10 Business; Real Property; Material Agreement. For the reasons set forth
in Section 4.6 and except as disclosed in Section 4.6 or on Schedule 4.10, the
Purchaser has not conducted any material business since the date of its
inception, the Purchaser does not own, nor has it at any time owned, any real
property or any material personal property, and the Purchaser is not a party to
any material agreement.
4.11 Tax Matters.
(i) Old ACG has filed all Tax Returns that it was required to file.
All such Tax Returns filed by Old ACG were correct and complete in all
material respects. All Taxes owed by Old ACG (whether or not shown on any
Tax Return) have been paid. Old ACG is not currently the beneficiary of any
extension of time within which to file any Tax Return. Since Old ACG's
formation in June 1996 , no claim with respect to Old ACG has been made by
an authority in a jurisdiction where Old ACG does not file Tax Returns that
it is or may be subject to taxation by that jurisdiction. There is no Lien
affecting any of Old ACG's assets that arose in connection with any failure
or alleged failure to pay any Tax.
(ii) Old ACG has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder or other party.
(iii) Old ACG does not expect any authority to assess any material
amount of additional Taxes against it for any period for which Tax Returns
have been filed. There is no material dispute or claim concerning any Tax
liability of Old ACG either claimed or raised by any authority in writing
or as to which Old ACG has knowledge based upon direct inquiry by any agent
of such authority.
4.12 Draft Registration Statement. The text of and the financial statements
and other financial information contained in the Draft Registration Statement,
insofar as they relate to the Purchaser or Old ACG, but not otherwise, are
true, accurate and complete in all material respects and
-26-
do not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading.
5. OTHER COVENANTS PRIOR TO CLOSING
5.1 Access and Cooperation; Due Diligence; Audits.
(i) Between the date of this Agreement and the Closing Date, the
Seller and the Shareholders will afford to the officers and authorized
representatives of the Purchaser access to all of the Seller's sites,
properties, books and records and furnish the Purchaser with such
additional financial and operating data and other information as to the
business and properties of the Seller as the Purchaser may from time to
time reasonably request. The Seller and the Shareholders will cooperate
with the Purchaser, its representatives, auditors and counsel in the
preparation of any documents or other material that may be required in
connection with any documents or materials required by this Agreement,
including the preparation for and consummation of the IPO. The Purchaser
will treat all information obtained in connection with the negotiation and
performance of this Agreement as confidential in accordance with the
provisions of Section 10.
(ii) Between the date of this Agreement and the Closing, the Purchaser
will afford to the Shareholders and to the officers and authorized
representatives of the Seller and Shareholders access to all of the
Purchaser's sites, properties, books and records and will furnish the
Seller and the Shareholders with such additional financial and operating
data and other information as to the business and properties of Purchaser,
Old ACG and the other Founding Companies as Seller and Shareholders may
from time to time reasonably request. The Purchaser will cooperate with the
Seller, the Shareholders and their representatives, auditors and counsel in
the preparation of any documents or other material which may be required in
connection with (x) any documents or materials required by this Agreement
or (y) the preparation for and consummation of the IPO. The Seller and the
Shareholders and their respective Affiliates will treat all information
obtained in connection with the negotiation and performance of this
Agreement as confidential in accordance with the provisions of Section 10.
(iii) The Seller agrees to permit an independent accounting firm
selected by the Purchaser to audit and render a report on the Seller
Financial Statements and the comparable financial statements at and for the
year ending December 31, 1996, and any other period selected by the
Purchaser, provided that all the costs and expenses of such audits are paid
by the Purchaser.
-27-
5.2 Conduct of Business Pending Closing. Unless otherwise approved in
writing by the Purchaser, between the date of this Agreement and the Closing
Date, the Seller will:
(i) carry on its respective businesses in substantially the same
manner as it has heretofore and not introduce any material new method of
management, operation or accounting;
(ii) maintain its respective properties and facilities, including
those held under lease, in as good working order and condition as at
present, ordinary wear and tear excepted;
(iii) perform in all material respects all of its respective
obligations under agreements relating to or affecting its respective
assets, properties or rights;
(iv) keep in full force and effect present insurance policies or other
comparable insurance coverage;
(v) use its reasonable best efforts to maintain and preserve its
business organization intact, retain its respective present key employees
and maintain its respective relationships with suppliers, customers and
others having business relations with it;
(vi) maintain compliance with all material Permits, laws, rules and
regulations, consent orders, and all other orders of applicable courts,
regulatory agencies and similar governmental authorities;
(vii) maintain present debt and lease instruments and not enter into
new or amended debt or lease instruments; and
(viii) maintain or reduce present salaries and commission levels for
all officers, directors, employees and agents except for ordinary and
customary bonus and salary increases for employees in accordance with past
practices.
5.3 Prohibited Activities. Between the date of this Agreement and the
Closing Date, the Seller will not, without prior written consent of the
Purchaser:
(i) enter into any contract or commitment or incur or agree to incur
any liability or make any capital expenditures, except if it is in the
normal course of business (consistent with past practice) or involves an
amount not in excess of $5,000;
(ii) create, assume or permit to exist any Lien upon any asset or
property whether now owned or hereafter acquired, except (x) with respect
to purchase money Liens incurred
-28-
in connection with the acquisition of equipment with an aggregate cost
not in excess of $5,000 necessary or desirable for the conduct of its
businesses, (y) (1) Liens for Taxes either not yet due or being contested
in good faith and by appropriate proceedings (and for which contested Taxes
adequate reserves have been established and are being maintained) or (2)
materialmen's, mechanics', workers', repairmen's, employees' or other like
Liens arising in the ordinary course of business, or (3) Liens set forth on
Schedule 3.6 or 3.11;
(iii) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business;
(iv) negotiate for the acquisition of any business or the start-up of
any new business;
(v) merge or consolidate or agree to merge or consolidate with or into
any other corporation;
(vi) waive any material right or claim; provided that it may negotiate
and adjust bills in the course of good faith disputes with customers in a
manner consistent with past practice; provided, further, that such
adjustments shall not be deemed to be included in Schedule 3.7 unless
specifically listed thereon;
(vii) commit a material breach or amend or terminate any material
agreement, Permit, license or other right; or
(viii) enter into any other transaction outside the ordinary course of
its business or prohibited hereunder.
5.4 Exclusivity. Neither the Shareholders, nor Seller, nor any agent,
officer, director, trustee or any representative of the Seller or the
Shareholders, during the period commencing on the date of this Agreement and
ending with the earlier to occur of the Closing Date or the termination of this
Agreement in accordance with its terms, directly/or indirectly:
(i) solicit or initiate the submission of proposals or offers from any
Person for,
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any Person other than the Purchaser
or its authorized agents relating to
-29-
any acquisition or purchase of all or a material amount of the assets of, or
any equity interest in, the Seller or merger, consolidation or business
combination of the Seller.
5.5 Notice to Bargaining Agents. Prior to the Closing Date, the Seller
shall satisfy any requirement for notice of the transactions contemplated by
this Agreement under applicable collective bargaining agreements, and shall
provide the Purchaser with proof that any required notice has been sent.
5.6 Notification of Certain Matters. The Seller or the Shareholders shall
give prompt notice to the Purchaser of (i) the occurrence or non-occurrence of
any event the occurrence or non-occurrence of which would likely cause any
representation or warranty of the Seller or the Shareholders contained herein
to be untrue or inaccurate in any material respect at or prior to the Closing
Date and (ii) any material failure of the Seller or the Shareholders to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder as of such date. The Purchaser shall give prompt
notice to the Seller and the Shareholders of (i) the occurrence or
non-occurrence of any event the occurrence or non-occurrence of which would
likely cause any representation or warranty of the Purchaser and Old ACG
contained herein to be untrue or inaccurate in any material respect at or prior
to the Closing Date and (ii) any material failure of the Purchaser or Old ACG
to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder as of such date. The delivery of any notice
pursuant to this Section 5.6 shall not be deemed to (i) modify the
representations or warranties hereunder of the party delivering such notice,
which modification may only be made pursuant to Section 5.7, (ii) modify the
conditions set forth in Sections 6 and 7, or (iii) limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
5.7 Amendment of Schedules. Each party hereto agrees that, with respect to
the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until the Closing to supplement
or amend promptly the Schedules with respect to any matter hereafter arising or
discovered which, if existing or known at the date of this Agreement, would
have been required to be set forth or described in the Schedules.
Notwithstanding the foregoing sentence, no amendment or supplement to a
Schedule prepared by the Seller and the Shareholders or the Purchaser that
constitutes or reflects an event or occurrence that would have a Material
Adverse Effect may be made unless Purchaser and Old ACG or Shareholders and
Seller, as the case may be, consent to such amendment or supplement. For all
purposes of this Agreement, including without limitation for purposes of
determining whether the conditions set forth in Sections 6.1 and 7.1 have been
fulfilled, the Schedules shall be deemed to be the Schedules as amended or
supplemented pursuant to this Section 5.7. No party to this Agreement shall be
liable to any other party if this Agreement shall be terminated pursuant to the
provisions of Section 9.1(v). Neither the entry by the Purchaser into any other
agreement, such as this Agreement, after the date hereof for the acquisition of
one or more companies involved in or assets associated with the
-30-
telecommunication business, yellow page publishing business or related
activities nor the performance by the Purchaser of its obligations thereunder
shall be deemed to require the amendment to or the supplementation of any
Schedule hereto.
5.8 Bulk Sales Laws. The Purchaser hereby waives compliance with the
provisions of any bulk transfer laws applicable to the transactions
contemplated by this Agreement including, without limitation, bulk sales laws
under the Uniform Commercial Code or relating to the right or obligation of the
Purchaser to withhold any portion of the Purchase Price pending determination
by any governmental entities of the Seller's liability for any Tax obligations
to any such governmental entities.
5.9 Transfer Taxes and Recording Fees. Any sales, transfer, use or other
similar Taxes imposed as a result of the sale of the Purchased Assets to the
Purchaser pursuant to this Agreement shall be paid by the Purchaser. At the
Closing, the Purchaser shall remit to the Seller such properly completed resale
exemption certificates and other similar certificates or instruments as are
necessary to claim available exemptions from the payment of sales, transfer,
use or other similar Taxes under applicable law. All recording, transfer and
other similar Taxes and fees payable as a result of the public recordation of
the instruments of conveyance or transfer of the Purchased Assets executed and
delivered to Purchaser pursuant to this Agreement shall be paid by the Seller.
5.10 Certain Provisions Relating to Consents.
(i) The Seller will obtain, at its expense, and the Purchaser will use
its reasonable cooperative efforts (including furnishing financial
information on a confidential basis, where required) prior to and after the
Closing Date to assist the Seller in obtaining all third party consents
that are required in connection with the transactions contemplated by this
Agreement. The Seller will use reasonable efforts to obtain, and the
Purchaser will use its reasonable cooperative efforts prior to and after
the Closing Date to assist the Seller in obtaining from the landlords of
all of the Leases, estoppel agreements in form and substance reasonably
acceptable to the Purchaser containing to the extent necessary consents
from such landlords to the assignment of the Leases to the Purchaser. All
expenses incurred in connection with obtaining such consents and estoppel
agreements shall be paid by the party incurring the same. To the extent
such consents and/or estoppel agreements are not obtained by Closing, the
Seller shall continue to assist the Purchaser in obtaining such consents
and/or estoppel agreements after Closing and shall pay the costs thereof.
(ii) To the extent that any Contract, Permit or Lease is not capable
of being transferred by the Seller to the Purchaser pursuant to this
Agreement without the consent of a third party (including a governmental
entity) and such consent is not obtained prior to
-31-
Closing, or if such transfer or attempted transfer would constitute a
breach or a violation of any law, nothing in this Agreement will constitute
a transfer or an attempted transfer thereof.
(iii) In the event that any such consent is not obtained on or prior
to the Closing Date, the Seller will (x) provide to the Purchaser the
benefits of the applicable Contract, Permit or Lease if reasonably
possible, (y) cooperate in any reasonable and lawful arrangement designed
to provide such benefits to the Purchaser and (iii) enforce at the request
and expense of the Purchaser and for the account of the Purchaser, any
rights of the Seller arising from any such Contract or Lease (including the
right to elect to terminate such Contract or Lease in accordance with the
terms thereof upon the request of the Purchaser). If any Permit required
for the operation of the Business or the ownership or use of the Purchased
Assets is not transferred to the Purchaser at Closing, the Seller
authorizes (to the extent permitted by law) the Purchaser to operate under
any such Permit until the necessary consent to transfer or a new Permit is
obtained.
(iv) The Purchaser will perform the obligations arising under all
Contracts, Permits and Leases referred to in Section 5.10(ii) for the
benefit of the Seller and the other party or parties thereto, except for
any obligation under such Contract, Permit or Lease that constitutes an
Excluded Liability.
5.11 Further Assurance. The parties hereto agree to execute and deliver, or
cause to be executed and delivered, such further instruments or documents or
take such other action as may be reasonably necessary or convenient to carry
out the transactions contemplated by this Agreement or the IPO.
5.12 Survival. None of the covenants and agreements set forth in Sections
5.1 through 5.9 shall survive the Closing.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLER
The obligations of the Seller with respect to actions to be taken on the
Closing Date are subject to the satisfaction or waiver on or prior to the
Closing Date of all of the following conditions. Upon Closing, all conditions
not satisfied shall be deemed to have been waived.
6.1 Representations and Warranties Performance of Obligations. All
representations and warranties of the Purchaser and Old ACG contained in this
Agreement shall be true and correct in all material respects as of the Closing
Date with the same effect as though such representations and warranties had
been made on and as of such date; all of the terms, covenants and conditions of
this Agreement to be complied with or performed by the Purchaser and Old ACG on
or before the Closing Date shall have been duly complied with or performed in
all material respects; and a
-32-
certificate to the foregoing effect, dated the Closing Date and signed by the
President or any Vice President of each of Purchaser and Old ACG shall have
been delivered to the Seller.
6.2 Satisfaction. All actions, proceedings, instruments and documents
required to carry out this Agreement or incidental hereto and all other related
legal matters shall be reasonably satisfactory to the Seller and its counsel.
6.3 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to
restrain or prohibit consummation of the transactions contemplated in this
Agreement and no governmental agency or body shall have taken any other action
or made any request of the Seller, the Shareholders or the Purchaser as a
result of which the Seller deems it inadvisable to proceed with the
transactions hereunder.
6.4 Opinion of Counsel. The Seller shall have received an opinion from
counsel for the Purchaser and Old ACG, dated the Closing Date, in form and
substance reasonably acceptable to the Seller, relating to, insofar as the
Purchaser and Old ACG are concerned, as the case may be, (a) the authorization,
execution, delivery, performance and enforceability of the Agreement, (b) the
receipt of all required consents and approvals, and (c) such other legal
matters as the Seller may reasonably request.
6.5 Consents and Approvals. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made.
6.6 No Material Adverse Change. No event or circumstance shall have
occurred with respect to the Purchaser that would constitute a Material Adverse
Effect.
6.7 Secretary's Certificates. The Seller shall have received a certificate
or certificates, dated the Closing Date and signed by the Secretary of each of
Purchaser and Old ACG, certifying the completeness and accuracy of the attached
copies of the Purchaser's Charter Documents (including amendments thereto),
By-Laws (including amendments thereto), and resolutions of the board of
directors approving the Purchaser's and Old ACG's entering into this Agreement
their consummation of the transactions contemplated hereby.
6.8 Closing of IPO. The sale by the Purchaser of shares of Purchaser Stock
in the IPO shall have closed prior to or substantially contemporaneously with
the consummation of the transactions contemplated herein.
6.9 Employment Arrangements. The Purchaser shall have taken the actions
referred to on Schedule 6.9.
-33-
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PURCHASER
The obligations of the Purchaser with respect to actions to be taken on the
Closing Date are subject to the satisfaction or waiver on or prior to the
Closing Date of all of the following conditions. Upon Closing, all conditions
not satisfied shall be deemed to have been waived:
7.1 Representations and Warranties; Performance of Obligations. All the
representations and warranties of the Seller and the Shareholders contained in
this Agreement shall be true and correct in all material respects as of the
Closing Date with the same effect as though such representations and warranties
had been made on and as of such date; all of the terms, covenants and
conditions of this Agreement to be complied with or performed by the Seller and
the Shareholders on or before the Closing Date shall have been duly performed
or complied with in all material respects; and the Seller and the Shareholders
shall have delivered to the Purchaser a certificate dated the Closing Date and
signed by them to such effect.
7.2 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to
restrain or prohibit the consummation of the transactions contemplated herein
and no governmental agency or body shall have taken any other action or made
any request of the Purchaser, the Seller or the Shareholders as a result of
which the management of the Purchaser deems it inadvisable to proceed with the
transactions hereunder.
7.3 No Material Adverse Effect. No event or circumstance shall have
occurred with respect to the Seller which would constitute a Material Adverse
Effect, and the Seller shall not have suffered any material loss or damage to
any of its properties or assets, whether or not covered by insurance, which
change, loss or damage materially affects or impairs the ability of the Seller
to conduct its business.
7.4 Shareholders' Releases. The Shareholders shall have delivered to the
Purchaser an instrument dated the Closing Date releasing (i) the Purchased
Assets from any and all claims of the Shareholders and (ii) the obligations of
the Purchaser and Old ACG to the Shareholders, except for obligations arising
under this Agreement or the transactions contemplated hereby and thereby.
7.5 Satisfaction. All actions, proceedings, instruments and documents
required to carry out the transactions contemplated by this Agreement or
incidental hereto and all other related legal matters shall have been
reasonably satisfactory to the Purchaser and its counsel.
7.6 Termination of Related Party Agreements. Except as set forth on
Schedule 7.6, all existing agreements between the Seller and the Shareholders
affecting in any respect the Purchased Assets shall have been canceled
effective prior to or as of the Closing Date.
-34-
7.7 Opinion of Counsel. The Purchaser shall have received an opinion from
counsel to the Seller and the Shareholders, dated the Closing Date, in form and
substance reasonably acceptable to the Purchaser, relating to, insofar as the
Seller and the Shareholders are concerned, (a) the authorization, execution,
delivery, performance and enforceability of the Agreement, (b) the receipt of
all required consents and approvals, (c) the consummation of the transactions
contemplated herein and (d) such other legal matters as the Purchaser may
reasonably request.
7.8 Consents and Approvals. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; and all
consents and approvals of third parties listed on Schedule 3.21 shall have been
obtained.
7.9 FIRPTA Certificate. Each Shareholder shall have delivered to the
Purchaser a certificate to the effect that it is not a foreign Person under
Section 1.1445-2(b) of the Treasury regulations promulgated pursuant to the
Code.
7.10 Closing of IPO. The sale by the Purchaser of shares of Purchaser Stock
in the IPO shall have closed prior to or substantially contemporaneously with
the consummation of the transactions contemplated herein.
8. COVENANTS OF THE PURCHASER WITH THE SELLER AND THE SHAREHOLDERS AFTER
CLOSING
8.1 Release From Guarantees. The Purchaser shall use its best efforts to
have the Shareholders released from any and all guarantees on any indebtedness
relating to the Purchased Assets that any of them personally guaranteed and
from any and all pledges of assets that any of them pledged to secure such
indebtedness for the benefit of the Seller, with all such guarantees on
indebtedness being assumed by the Purchaser.
8.2 Employment.
(i) The Purchaser shall offer to hire, effective as of the Closing
Date, the active operating employees of the Business on the day immediately
prior to the Closing Date, and only those inactive operating employees on
temporary leave for purposes of jury duty, family and short-term medical
leave, vacation or annual two-week national military duty (such employees
who are to be given offers of hire being hereafter referred to as the
"Employees"). The Seller shall deliver to the Purchaser, at least 30 days
prior to the Closing Date, a schedule designating all Employees and all
inactive employees of the Business. Any person who has retired from the
Seller shall be considered an inactive employee. The Seller shall use its
reasonable efforts to cause such employees to accept the Purchaser's offers
of employment.
-35-
(ii) The Employees who accept and commence employment with the
Purchaser shall be referred to herein as the "Transferred Employees".
(iii) Except as expressly provided otherwise in this Section 8.2 and
in Section 8.3, the terms of the Transferred Employees' employment shall be
upon such terms and conditions as the Purchaser, in its sole discretion
shall determine. Upon request of the Purchaser, the Seller shall provide
the Purchaser reasonable access to data (including computer data) regarding
the ages, dates of hire, compensation and job description of Employees. The
Seller hereby authorizes the Purchaser to enter into discussions with and
to advise any of the Employees concerning the terms of any future
employment of such individuals by the Purchaser and will permit the
Purchaser reasonable access to Employees for such purpose.
(iv) In the event that an individual (x) retires from the Seller after
the date of this Agreement and prior to the Closing Date and (y)
subsequently commences employment with the Purchaser, such individual will
cease receiving post-retirement medical benefits from the Seller. The
Seller will advise such individuals of this condition before retirement.
The Purchaser shall not assume any liability for providing post-retirement
medical benefits upon such individual's termination of employment with the
Purchaser.
(v) (x) Except for liabilities and claims to be assumed by the
Purchaser under Section 8.3(v)(y), the Seller shall discharge all
liabilities to and claims of Transferred Employees or Employees of the
Seller arising out of their employment with the Seller, including but not
limited to, claims arising out of any Employee Benefit Plan maintained by
the Seller or for retiree medical benefits promised, provided or subsidized
by the Seller after the Closing Date.
(y) The Purchaser shall discharge all liabilities and claims based on
occurrences or conditions first occurring or commencing on or after the
Closing Date of Transferred Employees or employees of the Purchaser arising
out of their employment with the Purchaser after the Closing Date,
including but not limited to, any claims arising out of any employee
benefit plan maintained by the Purchaser.
-36-
(vi) The Seller and the Purchaser shall comply with Section 4 of the
Revenue Procedure 84-77, 1984-2 C.B. 753. The Seller shall furnish (or
cause to be furnished) to each Transferred Employee in accordance with
Section 4 of the Revenue Procedure a Treasury Form W-2 for 1997 for the
wages paid by the Seller, no later than January 31, 1998. The Purchaser
shall furnish (or cause to be furnished) to each Transferred Employee in
accordance with Section 4 of the Revenue Procedure a Treasury Form W-2 for
1997 for the wages paid by the Purchaser. The Purchaser shall file (or
cause to be filed) appropriate Treasury Forms W-2 and W-3 covering the
Transferred Employee with the Social Security Administration for wages paid
and amounts withheld by the Purchaser during 1997.
(vii) Nothing contained in this Agreement (x) shall confer upon any
former, current or future employee of the Seller or the Purchaser or any
legal representative or beneficiary thereof any rights or remedies,
including, without limitation, any right to employment or continued
employment of any nature, for any specified period, or (y) shall cause the
employment status of any former, present or future employee of the
Purchaser to be other than terminable at will.
8.3 Health and Welfare Benefits.
(i) The Seller shall provide all notices and fulfill all of its
obligations, if any, under Section 4980B(f) of the Code with respect to the
Transferred Employees. The Seller shall deliver to the Purchaser's present
or proposed insurance carriers or third-party administrators, on a census
basis, at least 20 days prior to the Closing Date, information with respect
to all health, accident, workers' compensation, disability and related
claims filed by the Transferred Employees (including, without limitation,
information regarding the total number of claims filed by, the total amount
of benefits claimed by, and the total amount of benefits paid to such
persons) since January 1, 1993, to the extent requested by any such
carriers. The Seller shall deliver to the Purchaser's health insurance
carriers or third-party administrators, on a census basis, to the extent
requested by any such carriers or administrators, an update of such
information through the Closing Date as soon as practicable but no later
than 15 days after the Closing Date. Such information, which may be
provided directly from the Seller's computer database, shall be
satisfactory in form and substance to such carriers and administrators.
(ii) Effective on the Closing Date, the Transferred Employees shall be
eligible for health and welfare benefits substantially equivalent to those
the Purchaser provides to similarly situated new employees hired by the
Purchaser after the Closing Date; provided, however, that the Purchaser
reserves the right to modify or terminate such benefits from time to time
after the Closing Date. Such Transferred Employees shall be eligible to
participate under the Purchaser's health and welfare benefit plans as of
the Closing Date, and the Purchaser shall not be responsible for any
hospitalization, medical, survivor benefits, life
-37-
insurance, or disability claims based upon occurrences or conditions
commencing, occurring or existing before the Closing Date, regardless of
whether such occurrences or conditions continue after the Closing Date, and
regardless of whether such claims are made before or after the Closing
Date. In no event shall the Purchaser be required to provide
post-retirement medical benefits to Transferred Employees.
8.4 Change of Name. Promptly after the Closing, the Seller shall change its
name to a name that does not conflict with the Purchaser's use of the name
"Switchboard of Oklahoma City".
8.5 Compliance with the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976 (the "Xxxx-Xxxxx Act"). All parties to this Agreement hereby recognize
that compliance with the Xxxx-Xxxxx Act may be required in connection with the
transactions contemplated herein and in the Other Agreement. If it is
determined by the parties to this Agreement that compliance with the Xxxx-Xxxxx
Act is required, then: (i) each of the parties hereto agrees to cooperate and
use its best efforts to comply with the Xxxx-Xxxxx Act, (ii) such compliance by
the Seller shall be deemed a condition precedent in addition to the conditions
precedent set forth in Section 7 of this Agreement, and such compliance by the
Purchaser shall be deemed a condition precedent in addition to the conditions
precedent set forth in Section 6 of this Agreement, and (iii) the parties agree
to cooperate and use their best efforts to cause all filings required under the
Xxxx-Xxxxx Act to be made.
9. TERMINATION OF AGREEMENT
9.1 Termination. This Agreement may be terminated at any time prior to the
Closing Date solely:
(i) by mutual consent of the boards of directors of the Purchaser and
the Seller;
(ii) by the Seller (acting through its board of directors), on the one
hand, or by Purchaser (acting through its board of directors), on the other
hand, if, prior to October 16, 1997, a registration statement on Form S-1
relating to the IPO has not been filed by Purchaser with the Securities and
Exchange Commission pursuant to the Securities Act of 1933;
(iii) by the Seller, if a material breach or default shall be made by
the Purchaser in the observance or in the due and timely performance of any of
the covenants, agreements or conditions contained herein, and the curing of
such default shall not have been made on or before the Closing Date;
(iv) by the Purchaser, if a material breach or default shall be made
by the Seller or the Shareholders in the observance or in the due and timely
performance of any of the covenants, agreements or conditions contained herein,
and the curing of such default shall not have been made on or before the
Closing Date;
-38-
(v) by the Seller, on the one hand, or by Purchaser, on the other
hand, if either such party or parties declines to consent to an amendment or
supplement to a Schedule proposed by the other party or parties pursuant to
Section 5.7 because such proposed amendment constitutes or reflects an event or
occurrence that would have a Material Adverse Effect on the party or parties
proposing the same.
(vi) by the Seller (acting through its board of directors), on the one
hand, or by Purchaser (acting through its board of directors), on the other
hand, if the transactions contemplated by the Agreement to take place at the
Closing shall not have been consummated by January 31, 1998, unless the failure
of such transactions to be consummated is due to the willful failure of the
party seeking to terminate this Agreement to perform any of its obligations
under the Agreement to the extent required to be performed by its prior to or
on the Closing Date;
9.2 Liabilities in Event of Termination. No party to this Agreement whose
breach or default with respect to any of its representations, warranties,
covenants or agreements in this Agreement occasions a termination of this
Agreement by another party hereto shall have any obligation or liability
arising therefrom to any other party to this Agreement, unless such breach or
default is due to a willful failure to perform. The failure of the Purchaser to
pay the balance of the Base Price at the Closing shall not constitute a default
due to a willful failure to perform.
9.3 Retention of Prepayment. The Seller shall be under no obligation to
refund the Prepayment upon termination of the Agreement, except where the
Purchaser elects to terminate the Agreement pursuant to Section 9.1(v).
10. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
10.1 The Shareholders and the Seller. The Shareholders and the Seller
recognize and acknowledge that they had in the past, currently have, and in the
future may have, access to certain confidential information of the Seller
and/or the Purchaser and Old ACG, such as operational policies, and pricing and
cost policies that are valuable, special and unique assets of the Seller and/or
the Purchaser and Old ACG. The Shareholders and the Seller agree that they will
not disclose such confidential information to any Person for any purpose or
reason whatsoever, except (i) to authorized representatives of the Purchaser;
(ii) following the Closing, such information may be disclosed by the
Shareholders as is required in the course of performing its duties for the
Purchaser or the Seller; and (iii) to counsel and other advisers; provided that
such advisers (other than counsel) agree to the confidentiality provisions of
this Section 10.1, unless (w) such information becomes known to the public
generally through no fault of a Shareholder or the Seller, (x) disclosure is
required by law or the order of any governmental authority under color of law;
provided, that prior to disclosing any information pursuant to this clause (y),
the affected Shareholder or the Seller shall give prior written notice thereof
to the Purchaser and provide the Purchaser with the opportunity to contest such
disclosure, or (z) the disclosing party reasonably believes that such
disclosure is required in
-39-
connection with the defense of a lawsuit against the disclosing party. In the
event of a breach or threatened breach by any of the Shareholders or the Seller
of the provisions of this Section 10.1, the Purchaser shall be entitled to an
injunction restraining such Shareholder and such Seller, as the case may be,
from disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting (1) any Shareholder from using
information acquired as the owner of the Seller in connection with activities
permitted under Section 11 or (2) the Purchaser from pursuing any other
available remedy for such breach or threatened breach, including the recovery
of damages. In the event the transactions contemplated by this Agreement are
not consummated, the abovementioned restrictions on the Shareholders' or the
Seller's ability to disseminate confidential information with respect to the
Seller shall become void.
10.2 The Purchaser. Each of Purchaser and Old ACG recognizes and
acknowledges that it has in the past, currently has and in the future may have,
prior to the Closing access to certain confidential information of the Seller,
such as operational policies, and pricing and cost policies that are valuable,
special and unique assets of the Seller. Each of Purchaser and Old ACG agrees
that, prior to the Closing, or if the transactions contemplated by this
Agreement are not consummated, it will not disclose such confidential
information to any Person for any purpose or reason whatsoever, except (i) to
authorized representatives of Seller, other Founding Companies or the
Shareholders; and (ii) to counsel and other advisers; provided that such
advisers (other than counsel) agree to the confidentiality provisions of this
Section 10.2, unless (x) such information becomes known to the public generally
through no fault of the Purchaser and Old ACG (y) disclosure is required by law
or the order of any governmental authority under color of law; provided, that
prior to disclosing any information pursuant to this clause (y), the Purchaser
shall, if possible, give prior written notice thereof to the Seller and provide
the Seller with the opportunity to contest such disclosure, or (z) the
disclosing party reasonably believes that such disclosure is required in
connection with the defense of a lawsuit against the disclosing party. In the
event of a breach or threatened breach by the Purchaser or Old ACG of the
provisions of this Section 10.2, the Seller shall be entitled to an injunction
restraining the Purchaser or Old ACG from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting the
Seller from pursuing any other available remedy for such breach or threatened
breach, including the recovery of damages.
10.3 Damages. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 10.1 and 10.2 and
because of the immediate and irreparable damage that would be caused for which
no other adequate remedy exists, the parties hereto agree that, in the event of
a breach by any of them of the foregoing covenants, the covenant may be
enforced against the other parties by injunction and restraining order.
10.4 Survival. The obligations of the parties under this Article 10 shall
survive the termination of this Agreement for a period of three years from the
Closing Date or the termination of this Agreement pursuant to Section 10.
-40-
11. NONCOMPETITION
11.1 Prohibited Activities. Each of the Shareholders will not, for a period
of 36 calendar months following the Closing Date, for any reason whatsoever,
directly or indirectly, for himself or herself or on behalf of or in
conjunction with any other Person:
(i) engage, as an officer, director, shareholder, owner, partner, joint
venturer, or in a managerial capacity, whether as an employee, independent
contractor, consultant or advisor, or as a sales representative, in the sale or
marketing of any communications, natural gas or electrical goods and services
(collectively, the "Proscribed Business"), within the States of Arkansas,
Kansas, Missouri, Oklahoma and Texas (the "Territory");
(ii) call upon any Person within the Territory who is employee of the
Purchaser (including the Subsidiaries thereof) in a sales representative or
managerial capacity for the purpose or with the intent of enticing such
employee away from or out of the employ of the Purchaser (including the
Subsidiaries thereof); provided that a Shareholder shall be permitted to call
upon and hire immediate family members;
(iii) call upon any Person which is or which has been, within one year
prior to the Closing Date or the Termination Date, as the case may be, a
customer of the Purchaser (including the Subsidiaries thereof), or of the
Seller within the Territory, for the purpose of soliciting or selling products
or services in direct competition with the Purchaser (including the
Subsidiaries thereof) within the Territory;
(iv) call upon any prospective acquisition candidate, on a Shareholder's
own behalf or on behalf of any competitor of the Purchaser (including the
Subsidiaries thereof) engaged in a Proscribed Business, which candidate, to the
actual knowledge of such Shareholder after due inquiry, was called upon by the
Purchaser (including the Subsidiaries thereof) or for which, to the actual
knowledge of such Shareholder after due inquiry, the Purchaser (or any
Subsidiary thereof) made an acquisition analysis, for the purpose of acquiring
such entity; or
(v) disclose existing or prospective customers of the Company to any Person
for any reason or purpose whatsoever except to the extent that the Seller has
in the past disclosed such information to the public for valid business
reasons.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit any Shareholder from acquiring and holding as a passive investment not
more than five percent of the capital stock of a competing business whose stock
is traded on a national securities exchange.
-41-
11.2 Damages. Because of the difficulty of measuring economic losses to the
Purchaser as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to the Purchaser for
which it would have no other adequate remedy, each Shareholder agrees that the
foregoing covenant may be enforced by the Purchaser in the event of breach by
such Shareholder, by injunction and restraining order.
11.3 Reasonable Restraint. It is agreed by the parties hereto that the
foregoing covenants in this Section 11 impose a reasonable restraint on the
Shareholders in light of the activities and business of the Purchaser
(including the Subsidiaries thereof) on the date of the execution of this
Agreement and the reasonably foreseeable plans of the Purchaser.
11.4 Severability, Reformation. The covenants in this Section 11 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention
of the parties that such restrictions be enforced to the fullest extent the
court deems reasonable, and the Agreement shall thereupon be automatically
reformed.
11.5 Independent Covenant. All of the covenants in this Section 11 shall be
construed as an agreement independent of any other provision in this Agreement,
and the existence of any claim or cause of action of a Shareholder against the
Purchaser (including the Subsidiaries thereof), whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by
the Purchaser of such covenants. It is specifically agreed that the period of
36 calendar months stated at the beginning of this Section 11, during which the
agreements and covenants of a Shareholder made in this Section 11 shall be
effective, shall be computed by excluding from such computation any time during
which such Shareholder is in violation of any provision of this Section 11. The
covenants contained in Section 11 shall not be affected by any breach of any
other provision hereof by any party hereto and shall become void if the
transactions contemplated by this Agreement are not consummated.
11.6 Materiality. Such Shareholder hereby agrees that the covenants set
forth in this Section 12 are a material and substantial part of the
transactions contemplated by this Agreement.
12. GENERAL
12.1 Cooperation. The Seller, the Shareholders, Old ACG and the Purchaser
shall deliver or cause to be delivered to each other on the Closing Date and at
such other times and places as shall be reasonably agreed to, such additional
instruments as the any of the others may reasonably request for the purpose of
carrying out this Agreement. The Seller will cooperate and use its reasonable
efforts to have the present officers, directors and employees of the Seller
cooperate with the Purchaser on and after the Closing Date in furnishing
information, evidence, testimony and other
-42-
assistance in connection with any actions, proceedings, arrangements or
disputes of any nature with respect to matters pertaining to all periods prior
to the Closing Date.
12.2 Successors and Assigns. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law), but if assigned by
operation of law, this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto, the successors of the Purchaser and the Seller
and the heirs and legal representatives of the Shareholders. Notwithstanding
the foregoing, the Purchaser may assign, convey, transfer or otherwise dispose
of all or any portion of its interest in, or its rights and obligations under,
this Agreement and such other documents and instruments to any Affiliate of the
Purchaser.
12.3 Entire Agreement. This Agreement (including the Schedules and Annexes)
and the documents delivered pursuant hereto constitute the entire agreement and
understanding among the Seller, the Shareholders and the Purchaser and Old ACG,
and supersede any prior agreement and understanding relating to the subject
matter of this Agreement. This Agreement, upon execution and delivery,
constitutes a valid and binding agreement of the parties hereto enforceable in
accordance with its terms and may be modified or amended only by a written
instrument executed by the Seller, the Shareholders and the Purchaser and Old
ACG, acting through their respective officers or representatives, duly
authorized by their respective Boards of Directors in the cases of Seller,
Purchaser and Old ACG. Any disclosure made on any Schedule delivered pursuant
hereto shall be deemed to have been disclosed for purposes of any other
Schedule required hereby; provided that each party to this Agreement shall make
a good faith effort to cross reference disclosures, as necessary or advisable,
between related Schedules.
12.4 Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
12.5 Brokers and Agents. Except as disclosed on Schedule 12.5, each party
represents and warrants that it employed no broker or agent in connection with
this transaction and agrees to indemnify the other parties hereto against all
loss, cost, damage or expense arising out of claims for fees or commission of
brokers employed or alleged to have been employed by such indemnifying party.
12.6 Expenses. Whether or not the transactions herein contemplated shall be
consummated, the Purchaser will pay the fees, expenses and disbursements of
Purchaser, Old ACG and Seller and their respective agents, representatives,
accountants and counsel incurred in connection with the subject matter of this
Agreement and any amendments thereto, including all costs and expenses incurred
in the performance and compliance with all conditions to be performed by
Purchaser, Old ACG and the Seller under this Agreement. The Shareholders shall
pay the respective fees and expenses of their legal counsel, and all other
costs and expenses incurred by them
-43-
in their performance and compliance with all conditions to be performed by them
under this Agreement. In addition, the Shareholders acknowledge that they, and
not the Seller or the Purchaser, will pay all Taxes due upon receipt of the
consideration payable pursuant to Section 2, and will assume all Tax risks and
liabilities of the Seller in connection with the transactions contemplated
hereby.
12.7 Notices. All notices of communications required or permitted hereunder
shall be in writing, addressed to the party to be notified, and may be given by
(i) depositing the same in United States mail, postage prepaid and registered
or certified with return receipt requested, (ii) by telecopying the same if
receipt thereof is confirmed or (iii) by delivering the same in person to an
officer or agent of such party.
(x) If to the Purchaser, addressed to it at:
Advanced Communications Group, Inc.
0000 Xxxx Xxxxxxx
Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attn: Xxx X. Xxxxxxxxx
Telecopy No.: 000-000-0000
with a copy to:
Bracewell & Xxxxxxxxx, L.L.P.
South Tower Pennzoil Place
000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000-0000
Attn: Xxxxx X. Xxxxxxx III
Telecopy No.: 000-000-0000
(y) If to the Seller, addressed to it at:
Switchboard of Oklahoma City, Inc.
Bank of Oklahoma Building, Suite 825
201 Xxxxxx X. Xxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Attn: Xxxx Xxxxx
Telecopy No.: 000-000-0000
-44-
with a copy to:
Xxxxxxxx, Xxxxx & Xxxxxxxxx, L.L.P.
000 X. Xxxx
Xxxxxx Xxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxxx 00000-0000
Attn: Xxxxxx X. Xxxxxxxx
Telecopy No.: 000-000-0000
(z) If to the Shareholders, addressed to them as follows:
c/o Xxxx Xxxxx
Bank of Oklahoma Building, Suite 825
201 Xxxxxx X. Xxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000
with a copy to:
Xxxxxxxx, Xxxxx & Xxxxxxxxx, L.L.P.
000 X. Xxxx
Xxxxxx Xxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxxx 00000-0000
Attn: Xxxxxx X. Xxxxxxxx
Telecopy No.: 000-000-0000
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 12.7 from time to time.
12.8 Governing Law. This Agreement shall be construed in accordance with
the laws of the State of Delaware.
12.9 Exercise of Rights and Remedies. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy accruing
to any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
12.10 Time. Time is of the essence with respect to this Agreement.
-45-
12.11 Reformation and Severability. In case any provision of this Agreement
shall be invalid, illegal or unenforceable, it shall, to the extent
practicable, be modified in such manner as to be valid, legal and enforceable
but so as to most nearly retain the intent of the parties, and if such
modification is not possible, such provision shall be severed from this
Agreement; and in either case the validity, legality and enforceability of the
remaining provisions of this Agreement shall not in any way be affected or
impaired thereby.
12.12 Remedies Cumulative. No right, remedy or election given by any term
of this Agreement shall be deemed exclusive but each shall be cumulative with
all other rights, remedies and elections available at law or in equity.
12.13 Captions. The headings of this Agreement are inserted for convenience
only, shall not constitute a part of this Agreement or be used to construe or
interpret any provision hereof.
12.14 Public Statement. The parties hereto shall consult with each other
and no party shall issue any public announcement or statement with respect to
the transactions contemplated hereby without the consent of the other parties,
unless the party desiring to make such announcement or statement, after seeking
such consent from the other parties, obtains advice from legal counsel that a
public announcement or statement is required by applicable law.
12.15 Form of Payment. All payments hereunder shall be made in United
States dollars and, unless the parties making and receiving such payments shall
agree otherwise or the provisions hereof provide otherwise, shall be made by
wire or interbank transfer of immediately available funds by 12:00 Noon, New
York time, on the date such payment is due to such account as the party
receiving payment may designate at least three business days prior to the
proposed date of payment.
12.16 Receivables. If any monies or other assets are received by the
Purchaser to which the Seller is entitled and that are not included in the
Purchased Assets, the Purchaser shall hold such monies and assets in trust for
the Seller and shall account for and pay the same to the Seller within 15 days
after receipt. If any monies or other assets are received by the Seller to
which the Purchaser is entitled and that are included in the Purchased Assets,
the Seller shall hold such monies and assets received by the Seller in trust
for the Purchaser and shall account for and pay the same to the Purchaser
within 15 days after receipt.
12.17 Amendments and Waivers. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived only with the
written consent of the Purchaser, Old ACG, the Seller and the Shareholders.
-46-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
PURCHASER:
ADVANCED COMMUNICATIONS GROUP, INC.
By:
-------------------------------------
Name: Xxx X. Xxxxxxxxx
Title: Chairman and Chief Executive
Officer
ADVANCED COMMUNICATIONS CORP.
By:
-------------------------------------
Name: Xxx X. Xxxxxxxxx
Title: Chairman and Chief Executive
Officer
SELLER:
SWITCHBOARD OF OKLAHOMA
CITY, INC.
By:
-------------------------------------
Name: Xxxx Xxxxx
Title: President
-47-
SHAREHOLDERS:
----------------------------------------
Xxxx Xxxxx
----------------------------------------
Xxxxxx Xxxxxx
----------------------------------------
Xxxxxxx Xxxxxxx
----------------------------------------
Xxxxx Xxxxxx, as Attorney-in-Fact for
Xxxxx Xxxxxx, a Minor
-48-
ANNEX I
DRAFT REGISTRATION STATEMENT
(separately provided)
ANNEX II
ADVANCED COMMUNICATIONS GROUP, INC.
SECTION 351 EXCHANGE PLAN
The Board of Directors of Advanced Communications Group, Inc., a
Delaware corporation organized in September 1997 ("Company"), has adopted this
Section 351 Exchange Plan effective as of October 3, 1997 ("Exchange Plan") in
order to comply with the requirements of Section 351 of the Internal Revenue
Code of 1986, as amended, and the rules and regulations promulgated thereunder
("Code"), and for purposes of defining the rights of various persons who may
make future transfers of voting capital stock and other consideration,
including cash and other assets (the items transferred being collectively
referred to herein as the "Assets") to the Company, all as more particularly
set forth below:
WHEREAS, the Company intends to acquire outstanding shares of capital
stock of certain corporations and other assets and acquire the outstanding
capital stock of ACG, Inc., a Delaware corporation, in a reverse triangular
merger, all as part of an integrated transaction as more particularly described
in the Company's Registration Statement in Form S-1 (draft of October 2, 1997)
("Draft Registration Statement") relating to its initial underwritten public
offering ("IPO"), the foregoing acquisitions being hereinafter collectively
referred to as the "Acquisitions"; and
WHEREAS, the various transactions comprising the Acquisitions will
occur substantially concurrently upon the consummation of the IPO;
NOW THEREFORE, in order to obtain the Assets, the Company may elect to
exchange, as a part of a single plan, shares of its voting capital stock and
other consideration, including cash, warrants, options and promissory notes,
for such Assets as shall be transferred to the Company by one or more of the
following individuals and entities: (i) the existing shareholders of the
predecessor to the Company in a reverse triangular merger; (ii) certain holders
of capital stock of other corporations or other assets that shall be acquired
by the Company pursuant to the Acquisitions; (iii) certain other persons or
entities who may assist the Company in the Acquisitions or in the manufacture
and or marketing of its products, (iv) purchasers of the Company's capital
stock in the IPO; and (v) certain other financial investors; and
FURTHERMORE, it is the expectation of the Company (without making any
representation with respect thereto) that the parties contributing such Assets
to the Company as part of the Acquisitions and the IPO will possess immediately
after the completion of the Acquisitions, at least 80% of the total combined
voting power of all classes of capital stock of the Company entitled to
vote and at least 80% of the total number of shares of all other classes of
capital stock of the Company; and
FURTHERMORE, it is also the intention of the Company (without making
any representation with respect thereto) that the foregoing transfers of Assets
to the Company shall qualify as tax free within the provisions of Section 351
of the Code; provided, however, that the Company does not assume any liability
or responsibility to any holder of capital stock of the Company or any other
person or entity in the event Section 351 of the Code does not apply to such
transfers of Assets; and
FURTHERMORE, it is the expectation of the Company that the parties to
the Acquisitions and the IPO will contribute Assets to the Company in the
approximate amounts contemplated by the Draft Registration Statement in
exchange for the voting capital stock, and other consideration, including cash,
options, warrants and promissory notes of the Company, in the approximate
amounts contemplated by the Draft Registration Statement.
The shares of voting capital stock and other consideration, including
cash, options, warrants and promissory notes of the Company, deliverable in the
Acquisitions may be subject to adjustment in accordance with the various
acquisition agreements between the Company and the contributing parties. This
Exchange Plan shall not obligate any party to any Acquisition to consummate
such Acquisition other than upon the terms of the definitive acquisition
agreement executed by such party with respect to such Acquisition.
By the execution of the acquisition agreement to which this Exchange
Plan is attached as Annex II, each of the contributing parties thereto
evidences such party's agreement with and adoption of this Exchange Plan.
-2-