ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT, made this 19th day September,
1997 by and between XXXXX X. XXXXXXX ("Xxxxxxx"), XXXXX X. XXXXX
("Xxxxx") and XXXXXX XXXXXXXXXX ("Hutcheison") (hereinafter
collectively referred to as "Securityholder"), TCS
COMMUNICATIONS, INC., a Texas corporation ("Seller"), ARGUSS
HOLDINGS, INC., a Delaware corporation (the "Parent"), and WHITE
MOUNTAIN CABLE CONSTRUCTION CORP. ("Buyer"), a Delaware
corporation and a 100% subsidiary of Parent.
INTRODUCTORY STATEMENT
A. Seller is a full service multimedia communications
contractor engaged in the construction, reconstruction,
maintenance, repair, and expansion of CATV, SMATV systems and
other related systems in the telecommunications industry.
B. Securityholders Xxxxxxx and Xxxxx collectively own 100%
of the voting shares and more than two-thirds of the outstanding
shares of capital stock of Seller, and join in this Agreement for
the purpose of making the representations and warranties required
under Articles 3 and 5, and the indemnifications under Articles 3
and 11.
C. Seller has agreed to sell and Buyer has agreed to buy
the assets of Seller under the terms and conditions hereinafter
set forth.
D. The parties intend that this transaction qualify as a
tax free reorganization under Section 368(a)(1)(C) of the
Internal Revenue Code of 1986, as amended.
NOW, THEREFORE, WITNESSETH, for and in consideration of the
premises and the mutual representations, warranties, covenants
and agreements herein contained and other good and valuable
consideration, receipt of which is hereby acknowledged, the
parties do agree as follows.
DEFINITIONS
The following terms when used in this ACQUISITION AGREEMENT
shall have the following meanings:
"Accounts Receivable" means accounts receivable, notes
due from all sources of the Seller, and credits for returned or
damaged merchandise.
"Act" shall mean the Securities Act of 1933, as the
same has been and shall be amended from time to time.
"Adverse Consequences" means all actions, suits,
proceedings, hearings, investigations, charges, complaints,
claims, demands, injunctions, judgments, orders, decrees,
rulings, damages, dues, penalties, fines, costs, liabilities,
obligations, taxes, liens, losses, expenses, and fees, including
court costs and attorneys' fees and expenses, net of all tax
savings and insurance proceeds actually received by an Indemnitee
with respect to any of the foregoing.
"Agreed Value of the Assets" shall mean a sum equal to
the product of Three and One-Half (3-1/2) times the "August 1998
12 Month Adjusted Cash Flow", as that term is defined in this
Agreement, plus the sum of One Million Dollars ($1,000,000).
"Agreement" means this ACQUISITION AGREEMENT.
"Arguss" shall mean the Parent, Arguss Holdings, Inc.,
a Delaware corporation with its principal offices located at Xxx
Xxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxx 00000, and its
successors and assigns.
"Arguss Stock" shall mean authorized capital stock of
Arguss.
"Assets" means all property, rights, things of value
and other assets of the Seller described, referred to, or listed,
in paragraph 1.2 of this Agreement.
"Assumed Liabilities" means all liabilities of the
Seller specifically included in paragraph 3.2 of this Agreement.
"Buyer" has the meaning set forth in the preface above.
"Closing" means the transfer of the Initial Stock to
Buyer or Securityholder pursuant to this Agreement, deposit of
the Escrowed Stock into escrow, and the transfer of the Assets to
Buyer.
"Closing Date" means the date of Closing, established
under Article 4 of this Agreement.
"Code" means the United States Federal Internal Revenue
Code of 1986, as amended.
"DGCL" means Delaware General Corporation Law.
"December 1996 Audit" shall mean the audit of the
Seller for the twelve (12) month period ending December 31, 1996,
prepared in accordance with generally accepted accounting
principals consistently applied by the accounting firm of Xxxxxx
& Lara, P.A. Parent and Buyer acknowledge that this audit and
the Financial Statement defined hereinafter have also been
presented to them adjusted to an accrual basis, as if Seller were
a subchapter C corporation.
"December 1996 12 Month Adjusted Cash Flow" shall, for
the purposes of this Agreement, equal Three Million, Two Hundred
and Thirty-One Thousand Five Hundred and Thirty-Two and No/100
Dollars ($3,231,532).
"Employment Agreement" means the Employment Agreements
to be executed by the Seller, Xxxxxxx, Xxxxx and other key
employees of Seller at Closing pursuant to paragraph 7.7 hereof.
"Environmental, Health, and Safety Laws" means the
United States federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource Conservation
and Recovery Act of 1976, and the Occupational Safety and Health
Act of 1970, each as amended, together with all other laws
(including rules, regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings, and charges thereunder of
federal, state, local, and foreign governmental and all agencies
thereof) concerning pollution or protection of the environment,
public health and safety, or employee health and safety,
including laws relating to emissions, discharges, releases, or
threatened releases of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes (including
asbestos and oil or petroleum) (collectively, "Hazardous
Materials") into ambient air, surface, water, ground water, or
lands or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes.
"Escrow Agent" shall mean Seller's counsel as set out
in paragraph 15.9 of this Agreement.
"Escrow Agreement" shall mean the Escrow Agreements
executed by the Buyer and Seller pursuant to paragraph 7.5
hereof.
"Escrowed Stock" shall mean that amount of Stock equal
in value to the difference between (a) the product of three and
one-half (3 1/2) times the December 1996 12 Month Adjusted Cash
Flow, and (b) the sum of Eight Million Four Hundred Eighty Two
Thousand Seven Hundred Seventy Two Dollars ($8,482,772).
"Extremely Hazardous Substance" has the meaning set
forth in Section 302 of the Emergency Planning and Community
Right-to-Know Act of 1986, as amended.
"Financial Statement" means the audited financial
statement of the Seller for the Seller's fiscal year ending in
1996, including the notes thereto, prepared by Xxxxxx and Lara,
P.A., the Seller's regular independent certified public
accountant.
"GAAP" shall mean in accordance with generally accepted
accounting principles, consistently applied.
"Hutcheison" shall mean Xxxxxx Xxxxxxxxxx, a
stockholder of Seller and signatory of this Agreement.
"Initial Stock" shall mean Arguss Stock transferred to
Seller at closing which is equal in value to Nine Million, Four
Hundred Eighty Two Thousand Seven Hundred Seventy Two and No/100
Dollars ($9,482,772).
"August 1998 Audit" shall mean the audit of the TCS
Division of Buyer for the twelve (12) month period ending August
31, 1998, prepared on an accrual basis in accordance with
generally accepted accounting principles consistently applied by
the accounting firm of Xxxxxx & Lara, P.A., and acceptable to the
accounting firm of KPMG Peat Marwick.
"August 1998 12 Month Adjusted Cash Flow" shall mean
that value determined in accordance with generally accepted
accounting principles consistently applied, and based on the
August 1998 Audit, equal to the difference between (a) that
number equal to the twelve (12) month net income of the TCS
Division of Buyer through August 31, 1998, adjusted by adding
back all deductions taken in determining such number, if any, for
interest, depreciation, amortization, and income taxes and (b)
the number equal to sixty per cent (60%) of the TCS Division's
depreciation for that same period. Notwithstanding the form of
the August 1998 Audit, no expense of any kind of Parent or Buyer,
or any of their subsidiaries or affiliates, shall be allocated or
attributed to the TCS Division of Buyer, and no assets of the TCS
Division shall be written off, in determining the August 1998 12
Month Adjusted Cash Flow, without the prior written consent of
Securityholder.
"Net Worth of Seller" shall mean the total assets of
the Seller, reduced by any value placed on the intangible assets
of the Seller, including but not limited to, goodwill, less the
total liabilities of the Seller as those terms are shown on the
Financial Statement, including the deferred income tax
liabilities that would have been recorded by the Seller as if
such taxpayer were a subchapter C corporation, which shall be the
sum of Three Million Six Hundred Thousand Dollars ($3,600,000) on
the Closing Date, as provided in paragraph 2.1(d) herein.
"Xxxxx" shall mean Xxxxx X. Xxxxx, a stockholder,
officer and director of the Seller, and a signatory to this
Agreement.
"Purchase Price" means the aggregate consideration set
forth in Article II hereof.
"Registered Arguss Stock" means Arguss Stock registered
in compliance with the Securities Act of 1933, as amended, and
saleable by Seller or Securityholder on or after November 1,
1997.
"Registration Rights Agreement" shall mean the
Registration Rights Agreement executed by Securityholder and
Parent pursuant to paragraph 7.11 hereof.
"Xxxxxxx" shall mean Xxxxx X. Xxxxxxx, a stockholder,
officer and director of the Seller, and a signatory to this
Agreement.
"TGCL" means Texas General Corporation Law.
ARTICLE I
THE TRANSACTION
1.1 Purchase and Sale. On the Closing Date, Seller shall
transfer the Assets free and clear of all liens or encumbrances
(other than the Assumed Liabilities) to the Buyer in exchange for
the Purchase Price.
1.2 Assets. Except as specifically excluded below, the
Assets sold shall be all of Seller's interest in Seller's
business as a going concern; Seller agrees to sell, convey,
assign, transfer and deliver to the Buyer:
1.2.1 All of Seller's machinery, equipment (which shall
be transferred "as is"), transportation equipment, and all
furniture, furnishings, fixtures, trade names, phone numbers,
services marks, service xxxx registration, tax refunds, trade
secrets and technical know-how, all licenses, permits and
approvals necessary for, or related to, the operation of the
business of Seller (the "Business"), and all of Seller's right,
title and interest in client and customer lists, customer files,
correspondence and all documentation relating to the Business,
and work product, exhibits and studies related thereto. The
Assets include but are not limited to the tangible equipment,
personal property and leasehold improvements summarized on
Exhibit 5.9 and all of Seller's right, title and interest in the
Leases and the security deposits deposited in accordance with
their terms set forth in Exhibit 5.9 and 5.11.
If notified by Buyer prior to Closing, and subject to
any required agreement of any insurer, Seller shall allow Buyer
to succeed to Seller's Xxxxxxx'x Compensation and unemployment
insurance ratings, insurance policies, deposits and other
interests of the business and other ratings for insurance or
other purposes, provided that Buyer shall not be obligated to
succeed to any such rating, insurance policy or other interest
except as it may elect.
1.2.2 All leasehold improvements associated with and
located at 00000 XX Xxxxxxx 00, Xxxxx, Xxxxx 000, Xxxx Xxxxxx,
Xxxxxxx.
1.2.3 All transferable contracts, leases, and other
agreements and all transferable policies of insurance in effect
on the Closing Date.
1.2.4 All cash, cash equivalents, accounts receivable,
merchandise, work-in-process, finished goods, and goods in
transit, inventory of every kind and nature, including but not
limited to supplies and materials owned by Seller as of the
Closing Date; and it being further agreed and understood that the
current inventory shall not be disposed of except in the ordinary
course of business form the date hereof to the date of closing.
1.2.5 All right and interest in and to the telephone
number(s) currently used by Seller. Seller shall execute any and
all documents or consents necessary to convey the number(s) to
Buyer.
1.2.6 All right and interest in the name "TCS
Communications", the exclusive use of the above name, and Seller
agrees that Buyer may use the name "TCS Communications" in all
advertising, including but not limited to telephone listing and
window advertisements.
1.2.7 Excluded from the "Assets" are the following:
(1) Those items of equipment which may have been
disposed of in the ordinary course of business since the date of
this Agreement and before Closing.
(2) Corporate seal, minute book, and tax records
of Seller.
(3) Seller's lease for the following vehicles
specified on the List of Vehicles, attached as Exhibit 1.2.7(3).
(4) Such additional items of personal property,
if any, as shall be agreed to by Buyer and specified on the List
of Equipment, attached as Exhibit 1.2.7(4).
1.2.8 All right, title and interest in and to all
other names or other intellectual property used by or in the
business of the Seller.
1.3 Liquidation and Dissolution of Seller. Seller shall in
compliance with the applicable laws of the State of Texas, duly
call a special meeting of the holders of its capital stock
entitled to vote thereon for the purpose of approving this
Agreement, the transfer of its assets to the Buyer, and the
change of name and liquidation and dissolution of the Seller
hereinafter provided for. Seller shall use its best efforts to
cause its shareholders to adopt this Agreement, the transfer of
its assets, changing its name, and its liquidation and
distribution. Immediately after the Closing, Seller shall take
all action required to change its name to one which will not be
confused with the present name of the Seller and Seller will
initiate proceedings to dissolve its corporate existence and
liquidate its affairs as soon as practical. Seller will promptly
liquidate and distribute to its stockholders, in liquidation of
the assets as contemplated herein and in accordance with a plan
of liquidation and distribution to be adopted by the Board of
Directors of Seller prior to the Closing Date (a copy of which
will be supplied prior to the Closing Date to the Buyer's
counsel), the shares of Arguss Stock (and right to receive Arguss
Stock) delivered by the Parent to Seller.
ARTICLE II
PURCHASE PRICE: METHOD OF PAYMENT
2.1 Purchase Price. The total purchase price to be paid by
Buyer to the Seller shall be an amount equal to the Agreed Value
of the Assets, as that term is defined in this Agreement.
The Purchase Price shall be paid as follows:
(a) At Closing, the Initial Stock, of which 662,717
shares shall be issued to Seller or as Seller may direct at a
value per share of Six and 40/100 Dollars ($6.40), and the rest
issued to Seller or as Seller may direct shall be Registered
Arguss Stock, equal in value until sold by the Seller or
Securityholder, after allowance for all commissions and fees, if
any, for their sale, to at least $5,241,386, shall be issued to
Seller or Securityholder as set forth in Exhibit 2.1(a) and
deposited with the Escrow Agent to be held and released pursuant
to the terms and conditions of the Escrow Agreement attached as
Exhibit 7.5(a). Seller and Securityholder shall have the right
to sell the Registered Arguss Stock received at Closing after
November 1, 1997, and if such right is exercised, the Escrow
Agent shall within five (5) days thereafter return to Parent all
Registered Arguss Stock or its value in cash not necessary to
equal in value when sold, after commissions and fees, the sum of
$5,241,386, plus interest on that sum of Six Percent (6%) from
the date of Closing to the date of their sale; provided, however,
Parent and Buyer agree that in the event Seller and
Securityholder exercise their right to sell, but are not able to
sell the Registered Arguss Stock for the sum of at least
$5,241,386, after allowance for all commissions and fees, if any,
for their sale, by November 7, 1997, Seller shall thereafter be
entitled to receive from Parent and the Escrow Agent Registered
Arguss Stock equal in value until sold, after allowance for all
commissions and fees, if any, of at least $5,241,386, plus
interest on that sum at the rate of fifteen percent (15%) per
annum, compounded annually, from November 1, 1997, until all such
Registered Arguss Stock is sold.
(b) At Closing, Buyer shall also deposit the Escrowed
Stock with the Escrow Agent to be held and released pursuant to
the terms and conditions of the Escrow Agreement attached as
Exhibit 7.5(b). Of the Escrowed Stock 220,906 shares shall be in
the form of an irrevocable commitment of Parent to issue those
shares to Seller or Securityholder at a price per share of Six
and 40/100 Dollars ($6.40), and the rest shall be in the form of
an irrevocable commitment of Parent to issue to Seller or
Securityholder immediately saleable Registered Arguss Stock,
equal in value when released from the escrow, after allowance for
commissions and fees, if any, for their sale, to at least
$1,413,795. The shares from escrow shall be issued to Seller or
Securityholder as set forth in Exhibit 2.1(b). The forms of the
irrevocable commitments are attached as Exhibits 2.1(b)(1) and
2.1(b)(2). The Escrow Agreement shall provide for a release of
all or part of the Escrow Stock on December 1, 1998 in accordance
with paragraph 2.2(c).
(c) On December 1, 1998, the Seller shall receive from
the Parent as instructed by the Escrow Agent Arguss Stock, one-
half of which shall be at a price per share of Six and 40/100
Dollars ($6.40), and one-half shall be Registered Arguss Stock,
the value of all of which Arguss Stock shall equal the
difference, if any, between the (a) Agreed Value of the Assets
and (b) sum of $9,482,772. Such difference shall not require
Seller to return any Arguss Stock received at Closing, but may
exceed the value of the Escrowed Stock, in which event such
difference shall be paid to Seller or Securityholder by Parent
issuing to Seller or Securityholder on December 1, 1998, one-half
of such difference in Arguss Stock at a price of $6.40 per share,
and the remaining one-half in Registered Arguss Stock. Each share
of Arguss Stock so issued to Seller or Securityholder from escrow
or otherwise shall be deemed to have been fully paid for as of
August 31, 1998. To enable all parties to determine the Agreed
Value of the Assets, Securityholder shall cause the August 1998
Audit to be completed and delivered to Buyer, at Buyer's expense
on or before December 1, 1998.
(d) The Net Worth of Seller on the Closing Date shall
be determined within ten (10) days of Closing by the accounting
firm of Xxxxxx & Xxxx, P.A., and acceptable to the accounting
firm of KPMG Peat Marwick. In the event the Net Worth of Seller
exceeds $3,600,000 on the Closing Date, the amount that exceeds
shall be paid to Seller by Buyer or Parent in cash on or before
November 14, 1997. In the event the Net Worth of Seller is less
than $3,600,000 on the Closing Date, the amount that is less
shall be paid to Buyer or Parent in cash by Seller from the
proceeds of the first sale of their Registered Arguss Stock.
2.2 Allocation of Purchase Price. The allocation of
the Purchase Price by Seller, if desired, is set forth in Exhibit
2.2.
ARTICLE III
NO ASSUMPTION OF LIABILITY
3.1 No Assumption of Liability. Except as set forth
on Exhibit 3.2 or otherwise set forth herein, Seller and Buyer
hereby agree that Buyer does not hereby assume or agree to assume
any liability or obligation of any kind or nature of the Seller,
either direct or contingent. Seller and Securityholder do hereby
further warrant that they will indemnify and save Buyer harmless
from any and all claims other than Assumed Liabilities asserted
by any creditor against Buyer and that such indemnification shall
include, but shall not be limited to attorney's fees, court costs
and any other amounts or sums which may be incurred by Buyer in
defending any such claim or collecting any sums due hereunder
from Seller or Securityholder. In the event of any claim made
against Buyer under this Section, Buyer agrees to notify Seller
and Securityholder to enable them to defend against the claim.
Provided Seller or Securityholder provide written assurance
within fifteen (15) days after such notice of their intention to
defend the claim, Buyer agrees not to incur any costs for
attorney's fees.
3.2 Assumed Liabilities. At closing, Buyer shall
assume and agrees to be responsible for the Assumed Liabilities
as specifically listed on Exhibit 3.2.
3.2.1 It is not intended that any of the Assumed
Liabilities shall be expanded, increased, broadened or enlarged
as to the rights or remedies of third parties against Buyer or
Seller, as compared to the rights and remedies which such parties
would have against Seller had the transactions contemplated by
this Agreement not taken place.
3.2.2 Buyer shall not assume or be obligated to
pay, perform, or discharge any debts, liabilities, leases or
other obligations of Seller of any kind which are not
specifically identified on Exhibit 3.2.
3.3 Tax Liabilities. Buyer will not assume any tax
liabilities of the Seller except as specifically listed on
Exhibit 3.2. The cumulative adjustment required to convert the
Seller from a cash to an accrual basis taxpayer shall also be
presented on the Seller's final tax return and any tax liability
attributable to any such cumulative adjustment shall be a
liability of the Securityholders as the shareholders of the
Seller for the period covered by the final return. The
cumulative adjustment shall be the excess of the income which the
Seller would have reported under the accrual method of accounting
through and including the Closing Date over the income reported
by the Seller through its use of the cash basis of accounting as
represented by the accrual basis assets and liabilities of the
Seller on its Closing Date financial statement.
ARTICLE IV
CLOSING
The Closing of the acquisition shall occur by telephone,
facsimile, and overnight courier between the offices of Parent
and Seller beginning at 10:30 a.m on the 19th day of September,
1997, (the "Closing Date"). At the Closing:
4.1 Obligations of Seller. At Closing, Seller shall deliver
to Buyer the following:
4.1.1 A xxxx of sale and such other assignments and
other instruments of transfer as shall be reasonably necessary in
the opinion of Buyer or its counsel to vest in Buyer title to the
Assets pursuant to this Agreement. Seller will also cause to be
executed appropriate corporate resolutions pursuant to Article
5.10 of the Texas Business Corporation Act evidencing that the
transfer of all or substantially all of Seller's Assets to Buyer
as contemplated hereby has been duly approved by Seller's
Directors and Shareholders in the manner and by the vote required
by TGCL or any other applicable law.
4.1.2 The assignments and assumptions of all contracts,
leases, loan documents, or agreements to which the Seller is a
party.
4.1.3 Seller shall deliver the certification of its
chief executive and chief financial officer that the
representations and warranties made in Article 5 hereof are true
and correct to the best of their knowledge as of this date and
will deliver a similar certification on the Closing Date, which
certifications will include that such representations and
warranties and covenants herein do not contain any untrue
statement of material fact or omit to state a material fact
necessary in order to make the representations and warranties
made, in the light of the circumstances under which they are
made, not misleading, and attaching and certifying to the
completeness and accuracy of each Exhibit supplied by Seller and
Securityholder to this Agreement.
4.1.4 Appropriate certificates of incumbency from the
officers of the Seller and such other documents reasonably
requested by Buyer's counsel in order to demonstrate that all
necessary corporate and shareholder actions have been duly taken,
provided such other documents have been requested from Seller by
Buyer's counsel in writing at least seven (7) days prior to the
Closing Date.
4.1.5 The Seller and Securityholder agree that they
will, at any time and from time to time after the Closing Date,
upon request of the Parent or Buyer, do, execute, acknowledge,
and deliver or will cause to be done, executed, acknowledged, and
delivered, all such further acts, deeds, assignments, transfers,
conveyances, powers of attorney, and assurances as may in the
Parent or Buyer's reasonable opinion be necessary or advisable to
confirm the Buyer's title to and interest in or to enable it to
deal with and dispose of, any of the business, assets, and
property to be conveyed, transferred, and delivered by the Seller
to the Buyer under this Agreement.
4.2 Obligations of Parent and Buyer. At Closing, Parent
and Buyer shall deliver to the Seller or Escrow Agent, as
appropriate, the following:
4.2.1 The Initial Stock as set forth on Exhibit
2.1(a), and the Escrowed Stock, and the irrevocable commitments
described in paragraph 2.1(b).
4.2.2 The certification of their chief executive and
chief financial officers that the representations and warranties
made in Article 6 hereof are true and correct to the best of
their knowledge as of this date, and they will deliver a similar
certification on the Closing Date, which certifications will
include that such representations and warranties and covenants
herein do not contain any untrue statement of material fact or
omit to state a material fact necessary in order to make the
representations and warranties made, in the light of the
circumstances under which they are made, not misleading, and
attaching and certifying to the completeness and accuracy of each
Exhibit supplied by Parent and Buyer to this Agreement.
ARTICLE V
REPRESENTATIONS, WARRANTIES AND CERTAIN
COVENANTS OF SECURITYHOLDER AND THE SELLER
As a material inducement to induce Parent and Buyer to
consummate the acquisition under this Agreement, Securityholder
and Seller represent and warrant that each of the matters set
forth in this Article 5 are true and correct as of the date
hereof, and acknowledge that Parent and Buyer's entry into this
Agreement and the performance of their obligations hereunder are
made in reliance upon the completeness and accuracy of each of
the matters set forth herein. The representations and warranties
being made by the Seller and the Securityholders shall survive as
set forth in paragraph 15.12, herein.
5.1 Organization, Qualifications and Corporate Power.
(a) The Seller is a corporation duly
incorporated, validly existing and in good standing under the
laws of the State of Texas. Attached as Exhibit 5.1(a) is a list
of all states in which the Seller is qualified to do business.
The Seller is duly qualified as foreign corporation in each other
jurisdiction in which the failure to be qualified would have a
material adverse effect upon the Seller. The Seller has the
corporate power and authority to own and hold its properties and
to conduct its business as currently conducted and as proposed to
be conducted, and to execute, deliver and perform this Agreement
to which it is signatory.
(b) Except as listed on Exhibit 5.1(b), the
Seller does not own of record or beneficially, directly or
indirectly, (i) any shares of outstanding capital stock or
securities convertible into capital stock of any other
corporation or (ii) any participating interest in any
partnership, joint venture or other non-corporate business
enterprise.
5.2 Authorization of Agreement.
(a) The execution, delivery and performance by
the Seller of this Agreement to which it is a signatory hereunder
have been duly authorized by all requisite corporate action and
will not (i) violate any applicable provision of law, any order
of any court or other agency of government, the Articles or
Certificate of Incorporation or Bylaws of the Seller, or any
provision of any indenture, agreement or other instrument by
which the Seller, or any of its properties or assets is bound or
affected, or (ii) conflict with, result in a material breach of
or constitute (with due notice or lapse of time or both) a
default under any such indenture, agreement or other instrument,
or results in being declared void, voidable or without further
binding effect any license, governmental permit or certification,
employee plan, note, bond, mortgage, indenture, deed of trust,
franchise, lease, contract, agreement, or other instrument or
commitment or obligation to which Seller is a party, or by which
Seller, or any of its assets, may be bound, subject or affected,
(iii) violate any order, writ, injunction, decree, judgment, or
ruling of any court or governmental authority applicable to
Seller or any of its assets, or (iv) except as otherwise provided
in this Agreement, result in the creation or imposition of any
lien, charge or encumbrance of any nature whatsoever not arising
in the ordinary course of business upon any of the properties or
assets of the Seller.
5.3 Capital Stock. The authorized capital stock of the
Seller and the holders of the issued and outstanding shares of
such capital stock are set forth in Exhibit 5.3 hereto. Except as
disclosed in Exhibit 5.3, there is no (i) subscription, warrant,
option, convertible security or other right (continent or
otherwise) to purchase or acquire any shares of any class of
capital stock of the Seller which is authorized or outstanding,
(ii) the Seller has no commitments to issue any shares, warrants,
options or other such rights or to distribute to holders of any
class of its capital stock any evidence of indebtedness or
assets, (iii) the Seller has no obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any shares of
its capital stock or any interest therein or to pay any dividend
or make any other distribution in respect thereof, and (iv) the
Seller has no obligation or commitment to register under the Act
any securities issued or to be issued by it. All of the issued
and outstanding shares of the capital stock of the Seller have
been validly issued in compliance with all federal and state
securities laws and are fully paid and non-assessable.
5.4 Financial Statements. The Seller has delivered
to Parent the Financial Statements, exclusive of the August 1998
Audit which will be delivered to Parent prior to December 1,
1998. Such preliminary Financial Statements are complete and
correct, have been prepared in accordance with GAAP and fairly
present the financial position of the Seller as of such
respective dates, and the results of its operations for the
respective periods then ended. Except as set forth in such
Financial Statements, the Seller has no material obligation or
liability, absolute, accrued or contingent. The Seller has also
presented the Financial Statements to Parent after making all
appropriate adjustments required to present them on an accrual
basis for a subchapter C corporation, which statements the Parent
and Buyer have reviewed.
5.5 Absence of Changes. Except as listed in Exhibit
5.5 and since the time period covered by the June 30, 1997
Compilation Report prepared by Seller's accountant and reviewed
by Buyer, the Seller has not:
(a) Transferred, assigned, conveyed or liquidated any
of its assets or entered into any transaction or incurred any
liability or obligation which affects the assets or the conduct
of its business, other than in the ordinary course of the
Seller's business;
(b) Incurred any change in its business, operations,
or financial condition which may have a material adverse effect
on its assets or its business, or become aware of any event,
outside of general knowledge in the industry equally available to
Buyer and Parent, which may result in any such adverse change;
(c) Suffered any material destruction, damage or loss
relating to its assets or the conduct of its business whether or
not covered by insurance;
(d) Suffered, permitted or incurred other than in the
ordinary course of business the imposition of an lien, charge,
encumbrance (which as used herein includes, without limitation,
any mortgage, deed of trust, conveyance to secure debt or
security interest) whether or not contingent in nature, or claim
upon any of its assets, except for any current year lien with
respect to personal or real property taxes not yet due and
payable;
(e) Committed, suffered, permitted or incurred any
default in any liability or obligation which, in the aggregate,
have had or will have a material adverse effect upon its assets
or the conduct of its business;
(f) Made or agreed to any change in the terms of any
contract or instrument to which it is a party which has a
material adverse effect on its assets or the conduct of its
business;
(g) Knowingly waived, canceled, sold or otherwise
disposed of other than in the ordinary course of business, for
less than the face amount thereof, any claim or right relating to
its assets or the conduct of its business, which it has against
others;
(h) Declared, promised or made any distribution from
its assets or other payment from the assets to its shareholders
(other than reasonable compensation for services actually
rendered) or issued any additional shares or rights, options or
calls with respect to its shares of capital stock, or redeemed,
purchased or otherwise acquired any of its shares, or made any
change whatsoever in its capital structure;
(i) Paid, agreed to pay or incurred any obligation for
any payment for, any contribution or other amount to, or with
respect to, any employee benefit plan, or paid or agreed to pay
any bonus or salary increase to its executive officers or
directors, or made any increase in the pension, retirement or
other benefits of its directors or executive officers other than
in the ordinary course of business;
(j) Committed, suffered, permitted, incurred or
entered into any transaction or event other than in the normal
course of business which would increase its liability for any
prior taxable year;
(k) Incurred any other liability or obligation or
entered into any transaction other than in the ordinary course
of business which would have a material adverse effect on its
condition (financial or otherwise); or
(l) Received any notices that any of its customers or
clients have taken or intend to take any steps which will disrupt
its business relationship with them or could result in the
diminution in the value of the assets or business of the Seller.
5.6 Actions Pending. Except as listed on Exhibit
5.6, there is no action, suit, investigation, or proceeding
pending or, to the knowledge of the Seller or Securityholder
threatened against or affecting the Seller or any of its
properties or rights, before any court or by or before any
governmental body or arbitration board or tribunal and no valid
basis exists for any such action, suit, investigation or
proceeding which will result in any material liability or
affirmative or negative injunction being imposed on the Seller or
its assets. The foregoing includes, without limiting its
generality, actions pending or threatened (or any valid basis
therefor known to the Seller or Securityholder) involving the
prior employment of any employees or prospective employees of the
Seller or its use, in connection with its business, of any
information or techniques which might be alleged to be
proprietary to its former employees.
5.7 Business Property Rights. To the best of the
Seller's or each Securityholders' knowledge, no person or entity
has made or threatened to make (or has any valid reason to
threaten) any claims that the operation of the business of the
Seller is or will be in violation of or infringe on any
technology, patents, copyrights, trademarks, trade names, service
marks (and any application for any of the foregoing) licenses,
proprietary information, know-how or trade secrets (the "Business
Property Rights"). To the best of the Seller's or each
Securityholders' knowledge no third party is infringing upon or
violating any of the Seller's Business Property Rights and the
Seller has the exclusive right to use the same. None of the
Seller's employees, directors, or stockholders has any valid
claim whatsoever (whether direct, indirect or contingent) of
right, title or interest in or to any of the Seller's Business
Property Rights.
5.8 Liabilities. Except as listed in Exhibit 5.8,
the Seller has no liabilities or obligations, whether accrued,
absolute, contingent or otherwise (individually or in the
aggregate), which are of a nature required to be reflected in
financial statements prepared in accordance with GAAP, including
without limitation, any liability which might result from an
audit of its tax returns by any appropriate authority except (i)
the liabilities and obligations set forth in the "Financial
Statements") delivered in accordance with paragraph 5.4 and (ii)
liabilities and obligations incurred for the purpose of enabling
the Seller to conduct its normal business (in each case in normal
amounts and incurred only in the ordinary course of business).
Except as disclosed in the Financial Statements, the Seller is
not in default with respect to any liabilities or obligations and
all such liabilities or obligations shown and reflected in the
Financial Statements, and such liabilities incurred or accrued
subsequent to the Companies incorporation, have been, or are
being, paid or discharged as they become due, and all such
liabilities and obligations were incurred in the ordinary course
of business.
5.9 Ownership of Assets and Leases. Attached hereto
as Exhibit 5.9(a) is a complete and correct list and brief
description, as of the date of this Agreement, of all real
property and material items of personal property owned by the
Seller and all of the leases and other agreements relating to any
real, personal or intangible property owned, used, licensed or
leased by the Seller. The Seller has good and marketable title to
all of its assets, including those listed on Exhibit 5.9(a), and
any income or revenue generated therefrom, in each case free and
clear of any liens, security interest, chattel mortgages, claims,
charges, options, rights of tenants or other encumbrances other
than in the ordinary course of business, except (i) as disclosed
and reserved against in the Financial Statements (to the extent
and in the amounts so disclosed and reserved against), (ii) for
liens arising from current taxes not yet due and payable or (iii)
as set forth on Exhibit 5.9(b). Each of the Seller's leases and
agreements is in full force and effect and constitutes a legal,
valid and binding obligation of the Seller and the other
respective parties thereto, enforceable in accordance with its
terms, except as enforceability may be limited by applicable
equitable principles or by bankruptcy, insolvency,
reorganization, moratorium, or similar laws from time to time in
effect affecting the enforcement of creditors' rights generally,
and, there is not under any of such leases or agreements existing
any default of the Seller, or to the best of the Seller's or each
Securityholders' knowledge of any other parties thereto (or event
or condition which, with notice or lapse of time, or both, would
constitute a default). The Seller has not received any notice of
violation of any applicable regulation, ordinance or other law
with respect to its operations or assets, and, to the best of the
Seller's knowledge there is not any such violation or grounds
therefor which could adversely affect their assets or the conduct
of its business. The Seller is not a party to any contract or
obligation whereby an absolute or contingent right to purchase,
obtain or acquire any rights in any of the assets has been
granted to anyone. There does not exist and will not exist by
virtue of the transactions contemplated by this Agreement any
claim or right of third persons which may be legally asserted
against any of the Seller's assets.
5.10 Taxes. The Seller has paid all taxes due,
assessed and owed by it as reflected on its tax returns and has
timely filed all federal, state, local and other tax returns
which were required to be filed and which were due prior to the
Closing Date, except for those taxes set forth on Exhibit
5.10(a). All federal, state, local, and other taxes of the Seller
accruable since the filing of such returns have been properly
accrued. No federal income tax returns of the Seller have ever
been audited by the Internal Revenue Service or any state or
local taxing authority, except as described in Exhibit 5.10(b).
Except as described in Exhibit 5.10(b), no other proceedings or
other actions which are still pending or open have been taken for
the assessment or collection of additional taxes of any kind from
the Seller for any period for which returns have been filed, and
to the Seller's knowledge, no other examination by the Internal
Revenue Service or any other taxing authority affecting the
seller is now pending. Except for those taxes set forth on
Exhibit 5.10(a), taxes which the Seller were required by law to
withhold or collect subsequent to the Seller's incorporation,
have been withheld or collected and have been paid over to the
proper governmental authorities or are properly held by the
Seller for such payment and are so withheld, collected and paid
over as of the date hereof. No waivers of statutes of limitations
with respect to any tax returns of the Seller nor extensions of
time for the assessment of any tax have been given by any current
employees of the Seller. Except for those taxes set forth on
Exhibit 5.10(a), or as may be determined as set forth in Exhibit
5.10(b), there is not and there will not be any liabilities for
(i) federal, state and local income, sales, use, excise or other
taxes arising out of, or attributable to, or affecting the Assets
or the conduct of Seller's business before the Closing Date, or
(ii) attributable to the conduct of the operations of the Seller
at any time for which Parent or the Buyer will have any liability
for payment or otherwise, including, but not limited to, any tax
assessed or imposed as a result of any conversion of the Seller
from a Subchapter S to a Subchapter C corporation. After the
Closing, there does not and will not exist as a result of the
transactions of the Seller prior to Closing any liability of
Seller for taxes which may validly be asserted by any taxing
authority against the Seller's assets or the operation of
Seller's business and no lien or other encumbrance for taxes will
attach to such assets or the operation of the business. Seller
and Securityholder make no warranties or representations that the
Acquisition does or will qualify as a tax free reorganization
under the Code.
Except as otherwise provided in paragraph 15.2, all
applicable sales, transfer, documentary, use, filing, and other
taxes and fees that may be due or payable as a result of the
conveyance, assignment, transfer, or delivery of the property,
assets, or business to be conveyed and transferred as provided
herein whether levied on the Seller or the Buyer or Parent shall
be borne by Seller; Buyer and Parent shall not pay any such tax
except as provided in paragraph 15.2; all such taxes paid by
Seller, Buyer, or Parent shall be subject to their right in good
faith to contest the validity or amount thereof by proper
proceedings at the contesting party's expense. If any such tax
must be paid by Seller before the sale of Seller's or
Securityholder's Registered Arguss Stock, Parent and Buyer agree
to advance Seller an amount sufficient to pay those taxes when
due, not to exceed $2,000,000, and Seller and Securityholder
agree to repay Parent or Buyer all such amounts from the proceeds
of the first sale of their Registered Arguss Stock, when it is
sold.
The Seller has properly elected to be an S corporation for
federal (and, where permitted, for State and local) tax purposes
and has continued to qualify as an S corporation at all times
from the date of the S corporation election. The Seller will
continue to qualify as an S corporation through and including the
Closing Date.
5.11 Contracts, Other Agreements. Attached hereto as
Exhibit 5.11 is a true and complete list of each material
contract, agreement and other instrument to which the Seller is a
party, including, but not limited to, all bank and financing
documents. At Parent's request, the Seller shall deliver to
Parent a true and complete copy of any such contract, agreement
or instrument. All of the contracts, agreements, and instruments
described in Exhibit 5.11 hereto are valid and binding upon the
Seller and the other parties thereto and are in full force and
effect, and, neither the Seller, nor to the best of the Seller's
or each Securityholders' knowledge any other party to any such
contact, commitment or arrangement has breached any provision of,
or is in default in any respect under, the material terms
thereof. No contract, agreement or other instrument to which the
Seller is a party will be materially breached, violated or result
in a default as a result of the transaction contemplated
hereunder.
5.12 Governmental Approvals. No registration or filing
with, or consent or approval of, or other action by, any federal,
state or other governmental agency or instrumentality is or will
be necessary for the valid execution, delivery and performance of
this Agreement by the Seller, including, but not limited to, any
approval of the United States Small Business Administration
required to assign any obligation of the Seller to the Buyer.
5.13 Lack of Defaults. The Seller and Securityholder
know of no default in performance of any obligation, covenant or
condition contained in any note, debenture, mortgage or other
contract or agreement of any nature or kind to which either is a
party, nor of any default with respect to any order, writ,
injunction or decree of any court, governmental authority or
arbitration board or tribunal to which either is a party, which
would have a material adverse effect on the assets or business of
the Seller. The Seller and Securityholder know of no violation of
any law, ordinance, governmental rule or regulation to which
either is subject, nor has either failed to obtain any licenses,
permits, franchises or other governmental authorizations
necessary for the ownership of their properties or to the conduct
of their business where any such violation or failure would
likely result in a material adverse effect upon the business of
the Seller. The Seller has conducted and will conduct its
businesses and operations in substantial compliance with all
federal, state, county and municipal laws, statutes, ordinances
and regulations and are in substantial compliance with all
applicable requirements of all federal, state, county and
municipal regulatory authorities.
5.14 Employees and Employee Benefit Plans.
(a) Attached hereto as Exhibit 5.14(a) is a list
of each pension retirement, profit-sharing, deferred
compensation, bonus or other incentive plan, or program
arrangement, agreement or other understanding, or medical,
vision, dental or other health plan, or life insurance or
disability plan, or any other employee benefit plan, including,
without limitation, any "employee benefit plan" as defined in
Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), to which the Seller contributes or is
a party or is bound or under which it may have liability and
under which employees or former employees of he Seller (or their
beneficiaries) are eligible to participate or derive a benefit
(the foregoing herein referred to as the "Employee Benefit
Plans"). The Seller has delivered to Parent true, correct and
complete copies of all Employee Benefit Plans, and the Seller has
complied in all material aspects with any and all obligations
required of it under the terms of any plan listed on Exhibit
5.14(a).
(b) Attached hereto as Exhibit 5.14(b) are the
names, social security numbers and current rate of compensation
of all salaried and hourly paid employees employed by the Seller
as of the date hereof, with all key employees being so
designated, and at Closing the Seller will provide an updated
list of all such employees as of the date of closing, such
updated list to be initialed by both parties at Closing.
5.15 Insurance. Attached hereto as Exhibit 5.15 is
a complete and correct list and description of all of the
policies of liability, property, workers' compensation and other
forms of insurance or bonds carried by the Seller for the benefit
of or in connection with its assets and businesses. All of such
policies are in full force and effect and there are no overdue
premiums or other payments on such policies and the Seller has
not received any notice of cancellation or termination of any of
these policies. Neither the Securityholders nor the Seller have
knowledge of any change or proposed change to any of the rates
set forth in the policies listed on Exhibit 5.15 other than as
set out in the Policies.
5.16 Labor Matters. None of the Seller's employees are
covered by a collective bargaining agreement, and no collective
bargaining efforts with respect to any of the Seller's employees
are pending or, to the knowledge of the Seller threatened. No
labor dispute, strike, work stoppage, employee collective action
or labor relations problem of any kind which has materially
adversely affected or may so affect the Seller or any of its
businesses or operations, is pending or, to the knowledge of the
Seller is threatened. The Seller has complied in all material
respects with the reporting and withholding provisions of the
Code and the Federal Insurance Contribution Act and all similar
state and local laws, and with the federal, state, and local
laws, ordinances, rules and regulations with respect to
employment and employment practices, terms and conditions of
employment and of the workplace, wages and hours and equal
employment opportunity.
5.17 Brokers and Finders. Neither the
Securityholder or the Seller has incurred or become liable for
any commission, fee or other similar payment to any broker,
finder, agent or other intermediary in connection with the
negotiation or execution of this Agreement or the consummation of
the transactions contemplated hereby.
5.18 Accounts Receivable.
(a) All accounts receivable of the Seller shown
on the audited balance sheets of the Seller as of December 31,
1996, and all notes and accounts receivable acquired by the
Seller subsequent to December 31, 1996, reflect actual
transactions, have arisen in the ordinary course of business and
have been collected or are now in the process of collection
without recourse to any judicial proceedings in the ordinary
course of business in the aggregate recorded amounts thereof,
less the applicable allowances reflected on such balance sheets
with respect to the accounts receivable shown thereon or set up
on the respective books of the Seller with respect to the notes
and accounts receivable acquired subsequent to December 31, 1996.
(b) Except as set forth on Exhibit 5.18(b), the Seller
has no knowledge as to any of the Seller's accounts receivable
being subject to any lien or claim of offset, set off or
counterclaim not provided for by the Seller's allowance for
doubtful accounts as of the date of execution hereof.
5.19 Conflicts of Interests. Except as described in
Exhibit 5.19(a), no officer, director or stockholder of the
Seller was or is, directly or indirectly, a joint investor or co-
venturer with, or owner, lessor, lessee, licensor or licensee of
any real or personal property, tangible or intangible, owned or
used by, or a lender to or debtor of, the Seller and the Seller
has no commitments or obligations as a result of any such
transactions prior to the date hereof. Except as described in
Exhibit 5.19(b), and except for directly or indirectly holding
less than five percent (5%) of the outstanding shares of stock in
a company which is publicly traded, none of such officers,
stockholders, or directors own or have owned, directly or
indirectly, individually or collectively, an interest in any
entity which is a competitor, customer or supplier of (or has any
existing contractual relationship with) the Seller.
5.20 Environmental Compliance. Exhibit 5.20(a) sets
forth all government agencies which substantially regulate the
Seller's business. Except as listed on Exhibit 5.20(b), the
Seller has complied in all material respects with all applicable
federal, state and local laws, ordinances, rules and regulations
with respect to its premises and its operations and hazardous
materials, including, but not limited to, all rules and
regulations promulgated by the Occupational Safety and Health
Administration and the Federal Communications Commission and have
kept its premises free and clear of any liens and charges imposed
pursuant to such laws, ordinances, rules and regulations. The
Seller has not received any notice that any facts or conditions
exist which would give rise to any violation, claim, charge,
penalty or liability relating to any applicable environmental
laws, rules or regulations of any governmental body or agency
having jurisdiction over the premises. For purposes of this
section, "Hazardous Materials" shall include, without limitation,
any pollutants or other toxic or hazardous substances or any
solid, liquid, gaseous or thermal irritant or contaminant,
including smoke, vapor, soot, fumes, acids, alkalis, chemicals
and waste (including materials to be recycled, reconditioned or
reclaimed), flammable materials, explosives, radioactive
materials, hazardous waste, hazardous or toxic substances, or
related materials, asbestos requiring treatment as a matter of
law, or any other substance or materials defined as hazardous or
harmful, or requiring special treatment or special handling by
any federal, state or local environmental law, ordinance, rule or
regulation including, without limitation, the Comprehensive
Environmental Response, Compensation and Lability Act of 1980, as
amended (33 U.S.C. Sections 1251, et seq.), the Hazardous
Materials Transportation Act, as amended (49 U.S.C. Section 1801,
et seq.), the Resource Conservation and Recovery Act, as amended
(42 U.S.C. Sections 6901 et seq.), the Occupational Safety and
Health Act of 1970 and the regulations adopted and publications
promulgated pursuant thereto.
5.21 Absence of Sensitive Payments. Neither the
Securityholder nor, to the knowledge of the Securityholder and
Seller, any of the Seller's directors, officers, or stockholders:
(a) has made or has agreed to make any contributions,
payments or gifts of funds or property to any governmental
official, employee or agent where either the payment or the
purpose of such contribution, payment or gift was or is illegal
under the laws of the United States, any state thereof, or any
other jurisdiction (foreign or domestic);
(b) has established or maintained any unrecorded fund
or asset for any purpose, or has made any false or artificial
entries on any of its books or records for any reason; or
(c) has made or has agreed to make any contribution or
expenditure, or has reimbursed any political gift or contribution
or expenditure made by any other person to candidates for public
office, whether federal, state or local (foreign or domestic)
where such contributions were or would be a violation of
applicable law.
5.22 Approval of Acquisition; Related Matters. Each of
the Securityholders represents and warrants that such
Securityholder, in his or her capacity as a shareholder of the
Seller (i) approves of and consents to the acquisition as set
forth in this Agreement, (ii) waives any notice of a
shareholder's meeting or similar corporate formality in
connection with the approval of the transactions described
herein, including, without limitation, the Acquisition, (iii)
waives any rights to protest or object to the Acquisition or to
the exercise of any statutory remedy owned by such Securityholder
as provided in the TGCL, (iv) has received a copy of resolutions
approving the Acquisition in accordance with the TGCL, and (v),
to the extent such Securityholder owes any amounts to the Seller
pursuant to any Promissory Note issued by such Securityholder to
the Seller, consents to the use of a portion of the Purchase
Price payable to such Securityholder to pay off each such
Promissory Note.
5.23 Cessation of Seller's Business. From and after the
Closing Date, Seller (i) will refrain from using its present
corporate name or any variations thereof, and from authorizing
the use of such name and any variations thereof by others in
connection with any transactions of a business nature; (ii) will
not engage in any activity except as required to complete its
liquidation and dissolution as provided for in this Agreement;
and (iii) until given written permission by Parent or Buyer,
Seller will not finally dissolve but will retain its corporate
existence in order to prosecute any action, claim for refund, or
to obtain for Buyer or Parent, the benefit of any assets
transferred or intended to be transferred by this Agreement.
ARTICLE VI
REPRESENTATIONS, WARRANTIES AND CERTAIN
COVENANTS OF PARENT AND BUYER
As a material inducement to induce Seller to consummate the
Acquisition under this Agreement, Parent and Buyer represent and
warrant that each of the matters set forth in this Article 6 are
true and correct as of the date hereof, and acknowledge that
Seller's entry into this Agreement and the performance of their
obligations hereunder are made in reliance upon the completeness
and accuracy of each of the matters set forth herein. The
representations and warranties being made by the Parent and Buyer
shall survive as set forth in paragraph 15.12 herein.
6.1 Organization, Standing, etc. Parent and Buyer are
duly organized, validly existing and in good standing under the
laws of its jurisdiction of their organization.
6.2 Authorization, etc. The execution and delivery of
this Agreement and any other instruments or documents required to
be executed and delivered hereby, and the purchase of the assets
contemplated hereby, have been authorized by such authorities or
by such court of competent jurisdiction, if any, as may be
required by applicable law and constitute a valid and binding
obligations of Parent and of Buyer, enforceable against them in
accordance with the terms of this Agreement.
6.3 No Breach or Defaults Caused by Agreement. The
making and execution, delivery, and performance by Parent and
Buyer of this Agreement does and will not breach or constitute
(with due notice or lapse of time or both) any default in any
articles, by-laws, agreements, or instruments of any kind or
character to which Parent or Buyer are a signatory or a party, or
by which they may be bound, subject to, or affected, now or in
the future.
6.4 Governmental Approvals. No registration or filing
with, or consent or approval of, or other action by, any federal,
state, or other governmental agency or instrumentality, which has
not been made or obtained prior to the execution of this
Agreement by Parent or Buyer, is or will be necessary for the
valid execution, delivery, and performance of this Agreement by
Parent and Buyer.
6.5 Survival and Control of Seller's Business. The
Seller's assets, operations, and business shall remain separate
from Parent and Buyer, and any of their Subsidiaries or
Affiliates, and under the separate and autonomous control of
Securityholder after the Closing, as a separate and distinct
division of Buyer, until Seller or Securityholder has received
all the Purchase Price, including Escrowed Stock.
6.6 Support of TCS Division. Parent and Buyer shall,
after the Closing, use their best efforts to accommodate the TCS
Division of Buyer in the ordinary course of business, including
but not limited to, the provision of marketing, financial
(including lines of credit and operating capital) and other
support as may be reasonably requested by Securityholder from
time to time to enable the TCS Division to acquire and complete
all contracts and business transactions necessary for that
Division of Buyer to gross at least $25 million in gross contract
revenues each year.
6.7 Covenants Not to Compete. All officers and key
employees of Buyer, and their respective Subsidiaries and
Affiliates, when acquired, owe a fiduciary duty to their
employers, and have executed covenants not to compete
substantially identical to those required of Securityholders in
this Agreement and their Employment Agreements, or will at the
time they are acquired, and all such covenants not to compete
are, or will be when executed, valid legal obligations of all of
those officers and key employees, which obligations will be
enforced by Parent and Buyer.
6.8 Employment Agreements. Steven's and Xxxxx'x
employment agreements shall be executed by both Parent and Buyer
and shall contain provisions including their rights and duties of
autonomous control of the TCS Division as set out above, and
their right to be and remain Directors of Buyer at all times
during their employment.
6.9 Brokers Fees. Parent and Buyer represent there
are no brokers involved in this transaction on their behalf.
6.10 Authorized Shares of Stock. There exists
sufficient authorized, but unissued, shares of Arguss Stock
necessary to enable Parent to satisfy any obligation of it to
issue shares of Arguss Stock pursuant to this Agreement.
6.11 Directors and Officers. The directors of Buyer
immediately prior to the consummation of the Acquisition, with
the addition of Xxxxxxx and Xxxxx, shall be the initial directors
of the Buyer, each to hold office in accordance with the
Certificate of Incorporation and By-Laws of the Buyer, and the
officers of Buyer immediately prior to the consummation of the
Acquisition shall be the initial officers of the Buyer, in each
case until their respective successors are duly elected or
appointed and qualified.
6.12 Use of Assets. Parent and Buyer, including their
subsidiaries and affiliates, shall not be entitled to utilize,
control, or direct personnel or any other assets of the TCS
Division without compensation to the TCS Division as may be
agreed upon in writing in advance between the parties affected,
until Seller or Securityholder has received all the Purchase
Price, including Escrowed Stock.
ARTICLE VII
CONDITIONS TO CLOSING
A. Parent's and Buyer's Conditions.
Parent's and Buyer's obligation to consummate the
Acquisition under this Agreement shall be subject to fulfillment
of all of the following conditions on or prior to the Closing,
any of which may be waived in writing by Parent or Buyer.
7.1 Performance of Agreements. The Seller shall
have performed all agreements contained herein and required to be
performed by it prior to or at the Closing and all of the
representations and warranties made by it and Securityholders in
this Agreement shall be true and correct as of the Closing Date.
7.2 Lack of Material Liabilities. The Seller shall
have not incurred any material liability, direct or contingent
(as that term is ordinarily used), other than in the ordinary
course of its business, since December 31, 1996; including, but
not limited to, any tax liability resulting from the transaction
contemplated hereby, or by the Seller's compliance with any of
the terms and conditions hereof.
7.3 Financial Statements. Parent shall have
received an audited balance sheet and profit and loss statement
for the Seller as of December 31, 1996.
7.4 Lack of Defaults. No Event of Default (as
defined in Article 14 hereof) and no event or condition which,
with notice or the lapse of time, or both, would constitute an
Event of Default, shall exist.
7.5 Escrow Agreement. Seller, Securityholder, Parent
and Buyer shall have executed the Escrow Agreements, copies of
which are attached hereto as Exhibit 7.5(a) and 7.5(b).
7.6 -This paragraph has been intentionally deleted.
7.7 Employment Agreements. Stevens, Payne, and those
employees designated as key employees on Exhibit 5.14(b) and the
Seller shall have executed the Employment Agreements, copies of
which are attached hereto as Exhibits 7.7(a) - 7.7(e).
7.8 Opinion of Counsel. Parent shall have received an
opinion of counsel from the attorneys for the Seller, dated as of
the Closing Date, in form and substance substantially similar to
that attached hereto as Exhibit 7.8.
7.9 Compliance Certificate. The Seller shall have
delivered to Parent a certificate executed by its President,
dated the Closing Date, certifying the fulfillment of the
conditions specified in this Article 7 and the accuracy of the
representations and warranties contained in Article 5 hereof.
7.10 Key-Person Term Life Insurance. The Seller
shall have applied for an insurance policy on the lives of
Xxxxxxx and Xxxxx, such policies (a) to name the Parent as sole
beneficiary, (b) to be in form and substance satisfactory to the
Parent, and (c) to be in the amount of Two Million Dollars
($2,000,000) each.
7.11 Registration Rights Agreement. The Seller,
Securityholders and Parent shall have executed the Registration
Rights Agreement, a copy of which is attached hereto as Exhibit
7.11.
7.12 Employee Stock Options. Parent shall have taken
any and all actions necessary, including soliciting the approval
of its shareholders, to grant unqualified stock options to the
employees pursuant to the plan and in the amounts designated in
Exhibit 7.12.
7.13 Release from Xxxxxxx and Xxxxx. Xxxxxxx and
Xxxxx shall execute and deliver to the Parent, in a form
satisfactory to Parent's counsel, a release of any claim that
either of them may have against the Seller which may impair the
Assets for the repayment of any loan, claim for unpaid
compensation, claim for indemnification or otherwise except for
the notes set forth in Exhibit 7.13 which will be paid according
to their terms.
7.14 Corporate Documents. Parent shall have
received copies of the following documents:
(a) a certificate of the President of the Seller dated
the Closing Date and certifying (i) that attached thereto is a
true and complete copy of the Articles or Certificate of
Incorporation and Bylaws of the Seller as in effect on the date
of such certification; and (ii) that attached thereto are true
and complete copies of resolutions adopted by the Board of
Directors of the Seller authorizing the execution, delivery and
performance of this Agreement, and that all such resolutions are
still in full force and effect and are all the resolutions
adopted in connection with the transactions contemplated by this
Agreement; and
(b) such additional supporting documents and other
information with respect to the assets, operations, and affairs
of the Seller as Parent may reasonably request, provided such
additional documents and information has been requested from
Seller by Parent in writing at least seven (7) days prior to the
Closing Date.
All such documents described in (a) and (b) shall be
satisfactory in form and substance to Parent and its counsel.
7.15 Corporate Filings. All relevant incorporation and
Acquisition documents shall be filed with the appropriate
governmental agencies and shall be attached hereto as Exhibit
7.15.
7.16 Trustee of Profit Sharing Plan. The Buyer shall
at Closing cause a successor trustee, if necessary, for the
Seller's profit sharing plans to be appointed.
7.17-Intentionally Deleted.
7.18 Net Worth. The Seller shall have, as of the
Closing Date, a Net Worth equal to $3.6 million, plus or minus
Five Percent (5%).
7.19 Release from Key Employees. The Employees
designated as Key Employees on Exhibit 5.14(b) shall execute and
deliver to the Parent, in a form satisfactory to Parent's
counsel, a release of any claim or right that any of them may
have to purchase stock of the Seller arising from their
respective employment agreements or otherwise.
7.20 Securityholder's Guaranty of Seller's Debt.
Parent and Buyer shall obtain the release of all of
Securityholder's personal guaranties of the Seller's debt before
the Closing Date, and provide Securityholder with written
confirmation of such release from the Seller's creditors holding
Securityholder's guaranties at the Closing.
B. Seller's and Securityholder's Conditions.
Seller's and Securityholder's obligation to consummate the
sale under this Agreement shall be subject to fulfillment of
Buyer's and Parent's obligation to sign in paragraphs 7.5 and
7.11 above, and the conditions in paragraphs 7.4, 7.7, 7.12,
7.20, 7.21, and 7.22 above, and all of the following conditions
on or prior to the Closing, any of which may be waived in writing
by Seller or Securityholder.
7.21 Settlement of Claims. Seller's insurer at the time,
Royal Insurance, shall have settled all of the claims arising out
of an accident that occurred on November 27, 1995, in Titusville,
Florida, within the Seller's insurance policy limits.
7.22 Buyer's and Parent's Performance. The Parent and Buyer
shall have performed all agreements contained herein and required
to be performed by them prior to or at the Closing and all of the
representations and warranties made by them in this Agreement
shall be true and correct as of the Closing Date, and Parent
shall have delivered to Securityholders a certificate executed by
its President dated the Closing Date, certifying the accuracy of
the representations and warranties contained in Article 6 hereof.
ARTICLE VIII
BULK SALE PROVISIONS
8.1 Bulk Sale Provisions. Buyer and Seller agree to
comply with Title 6 of the Uniform Commercial Code as the same
applies under TGCL; however, Seller's counsel has determined it
is inapplicable to the transaction set out in this Agreement.
ARTICLE IX
TRANSACTIONS PRIOR TO CLOSING
Between the date of this Agreement and the Closing, the
executive officers and Board of Directors of the Seller shall
retain full control of the management and business of the Seller.
To enable Parent to prepare for settlement at the Closing,
Parent, Securityholder and the Seller agree that between the date
hereof and Closing:
9.1 Taxes. The Seller will promptly pay and
discharge, or cause to be paid and discharged, their federal,
state and other governmental taxes, assessments, fees and charges
imposed upon it or any of its property or assets and timely file
any returns and reports in connection with the foregoing;
provided, however, nothing herein shall require Seller to pay or
cause to be paid any tax, assessment, fee or charge so long as
the validity thereof shall be contested in good faith by
appropriate procedures and the Seller has set aside on its books
and maintains adequate reserves with respect thereto or for which
disclosure to Parent has been made pursuant to Exhibits 5.10(a),
and (b).
9.2 Books of Record and Account; Inspection. The
Seller will maintain at all times proper books of record and
account in accordance with GAAP, and will permit any of Parent's
officers or any of its authorized representatives or accountants
to visit and inspect the offices and properties of the Seller,
examine the Seller's books of account and other records, and
discuss the Seller's affairs, finances and accounts with Parent's
appropriate officers and managers, legal counsel, accountants and
auditors, all at normal business hours and as often as Parent may
request provided any such discussions with accountants will not
cause the Seller to incur any material cost with respect to such
accountants and legal counsel.
9.3 Financial Reports. The Seller shall furnish to
Parent, within 20 days after the end of each month (and within 45
days after the end of the last month of the Seller's fiscal
year), an unaudited financial report of the Seller, which report
shall include profit and loss statement, a consolidated balance
sheet, a cash flow analysis, and such other financial information
that Parent may reasonably request.
9.4 Insurance.
(a) The Seller will maintain in effect liability
insurance, property insurance, worker's compensation insurance,
the life insurance policies referenced in paragraph 7.10 and
extended coverage insurance on its personal property referenced
in paragraph 5.15 above, with responsible insurance companies,
against such risks as are customarily insured against by similar
businesses operating in the same vicinity, and in amounts not
less than those (i) recommended by major insurance companies for
similar businesses or (ii) required by governmental authorities
having jurisdiction over all or part of the Seller's operations.
9.5 Notification. The Seller will, within two (2)
business days, advise Parent in writing of the following:
(a) The occurrence of an Event of Default;
(b) The filing of any suit, action, other
proceeding against the Seller or any investigation which the
Seller learns is pending or threatened against it, if the amount
involved or at risk by nature of such suit, action, other
proceeding or investigation exceeds Seventy-Five Thousand Dollars
($75,000);
(c) The filing, recording or assessment of a
federal, state or local tax lien against the Seller or any of its
assets other than in the ordinary course of business;
(d) The occurrence of any reportable event with
respect to any employee benefit plan of the Seller or which is
subject to the provisions of ERISA, including a statement setting
forth details as to the reportable event and the action proposed
to be taken with respect thereto, together with a copy, if
available, of the notice of such reportable event given to the
Pension Benefit Guaranty Corporation; and
(e) Any other condition, act or event which the
Seller in its good faith judgment believes will adversely affect
Parent's or Buyer's rights under this Agreement.
9.6 Corporate Existence. The Seller shall at all
times cause to be done every act necessary to maintain and
preserve its existence, rights, franchises, and certifications in
the jurisdictions of their incorporation and to remain qualified
as foreign corporations in every jurisdiction in which
qualification is required.
9.7 Maintenance of Properties. The Seller shall
maintain or cause to be maintained in good repair, working order
and condition all tangible properties required for its business
and from time to time make or cause to be made all appropriate
repairs and replacements thereof.
9.8 Trade Secrets. The Seller will use its best
efforts to maintain the confidentiality of any Business Property
Rights of the Seller and will seek to restrict the ability of any
employee having knowledge of such proprietary information or
trade secrets from competing with the Seller through employment
and non-competition agreements and similar agreements.
9.9 Acquisitions and Other Transfers. The Seller will
not (i) merge or consolidate with any person, firm, association
or corporation, (ii) transfer, sell, assign, lease or otherwise
abandon or dispose of (whether in one transaction or a series of
transactions) any material part of its assets except in the
normal course of business if such transaction would reduce the
net worth of the Seller substantially below $3.6 million, (iii)
change the nature of its business, (iv) create any subsidiaries,
or (v) liquidate, dissolve or cease active business operations.
9.10 Certificate of Incorporation and Bylaws. The
Seller will not amend its Articles or Certificate of
Incorporation or Bylaws if the result of any such amendment will
have an adverse effect on Parent's rights under this Agreement.
9.11 Judgments and Liens. The Securityholders or the
Seller shall not create, incur, assume or permit to exist any
mortgage, lien, security interest, charge or encumbrance on any
property or assets now owned or hereafter acquired by the Seller
except:
(a) Liens arising out of judgments or awards (i)
which have been in force less than the applicable appeal period
so long as execution is not levied thereunder, or (ii) in respect
of which the Seller shall in good faith be prosecuting an appeal
or proceedings for review and in respect of which the Seller
shall have secured a subsisting stay of execution pending such
appeal or proceedings for review;
(b) Liens for taxes, assessments or governmental
charges or levies, provided payment thereof shall not at the time
be required;
(c) Deposits, liens, bonds or pledges to secure
payment of worker's compensation, unemployment insurance,
pensions or other social obligations, surety, stay or appeal
bonds, or other similar obligations arising in the ordinary
course of business;
(d) Mechanic's, worker's, repairmen's,
warehousemen's, vendor's, or carrier's liens, or other similar
liens arising in the ordinary course of business and securing
sums which are not past due, or deposits or pledges to obtain the
release of any such liens;
(e) Liens arising by operation of law under lease
agreements made in the ordinary course of business and confined
to the property rented;
(f) Liens on property securing the purchase price
of property acquired after the date hereof provided that each of
such lien (i) is given solely to secure indebtedness not
exceeding one hundred percent (100%) of the lesser of the cost or
fair market value of such property, (ii) does not extend to any
other property and (iii) is given at the time of acquisition of
the property;
(g) Presently outstanding liens, including lines
of credit and accounts receivable financing presently utilized by
the Seller;
(h) liens and encumbrances securing indebtedness
to Senior Creditors; and
(i) Extension, renewal or refunding of
indebtedness secured by liens permitted by this paragraph 9.11,
provided that the then outstanding amount of such indebtedness is
not increased and such liens do not extend to property not then
encumbered thereby.
9.12 Issuance of Capital Stock. The Seller will not
issue any of its capital stock to any person or entity or grant
any person or entity an option, warrant, convertible security or
any other right or agreement to acquire any shares of its capital
stock, without the prior written consent of Parent.
9.13 Purchase of Securities or Assets. The Seller will
not purchase the outstanding equity securities of any other
person, firm, association or corporation, except obligations
issued or guaranteed by the United States government or any state
or political subdivision thereof or other short-term instruments
normally marketed by banks and nationally recognized brokerage
firms, provided nothing herein shall restrict the Seller from
maintaining accounts with federally insured banking institutions
or money market funds.
9.14 Declaration of Dividends, etc. The Seller will
not (i) make, pay or declare any distributions or dividends of
cash or property with respect to its issued shares of Common
Stock; (ii) directly or indirectly redeem, repurchase or
otherwise reacquire any shares of its Common Stock; (iii)
increase the salary or pay any bonuses or other form of
additional compensation to any management employees, officers or
directors of the Seller, if such action decreases the net worth
of the Seller substantially below $3.6 million.
9.15 Payments to Officers. Except as described on
Exhibit 9.16, the Seller shall not loan or advance any amount to,
or sell, transfer or lease any properties or assets (real,
personal or mixed, tangible or intangible), to, or enter into any
agreement or arrangement with, any of the Seller's officers or
directors, except for compensation to officers pursuant to
existing agreements, copies of which have been delivered to
Parent, and reimbursement of expenses incurred by employees of
the Seller in connection with their employment.
9.16 Indebtedness. The Seller shall not incur any
indebtedness for borrowed money, including pension fund loans, or
purchase money indebtedness or guarantee any such indebtedness or
issue or sell any debt securities of the Seller or guarantee in
any manner (including, without limitation, by agreeing to
maintain the financial condition of another person) any debt
securities of others, provided, however, that the Seller shall
have the right to incur indebtedness in the ordinary course of
business for office furniture, equipment, trade payables,
machinery and vehicles, including through existing lines of
credit and accounts receivable financing of Seller.
9.17 Expenditures. The Seller shall not make any
capital investments or capital expenditures in excess of an
aggregate of Seventy-Five Thousand Dollars ($75,000) which are
outside of the ordinary course of the Seller's business, without
the consent of Parent.
9.18 Employee Benefit Plans. The Seller shall not
adopt any new Employee Benefit Plans but may expand existing
benefits subject to the approval of the Board of Directors.
9.19 Material Contracts. Except as described on
Exhibit 9.20, the Seller shall not enter into, assume, renew or
permit to be renewed (including by not giving a permitted notice
of termination) any contract, lease or obligation outside the
ordinary course of business. Except as expressly set forth
therein, the Seller shall not modify, amend, terminate, waive or
release any benefit or right under any employment agreement, or
any other material agreement to which the Seller is a party,
without the prior written consent of Parent.
9.20 Non-business Assets. The Seller shall not apply
any corporate funds toward the payment of any principal or
interest due or owing for the purchase of any non-corporate
assets.
ARTICLE X
COVENANTS NOT TO COMPETE
10.1 Covenant Not to Compete. Except as authorized by
Buyer and Parent or by the terms of this Agreement, no
Securityholder shall, directly or indirectly, alone or with
others, enter into any business related to the construction,
reconstruction, maintenance, repair and expansion of CATV, SMATV
systems and any other related systems in the telecommunications
industry within the United States for a period of three (3) years
from the date of Closing. Further, no Securityholder shall,
during such period, disclose, divulge, communicate, use to the
detriment of the Buyer or Parent or for the benefit of any other
person or persons, or use in any way, any confidential
information or trade secrets of the Seller, including customer
list, personnel information, and other similar data. In
addition, no Securityholder shall, during such period, (i) hire
or attempt to hire any employee of the Seller, or Buyer, or (ii)
interfere with any contract or other relationship of the Seller,
or Buyer, and any of their customers or suppliers. Each
Securityholder agrees that if they violate the covenants set
forth in this paragraph, Parent and Buyer shall be entitled to
injunctive relief,together with reasonable attorney's fees and
damages, from the Securityholder breaching this provision.
ARTICLE XI
INDEMNIFICATION BY SECURITYHOLDER AND THE SELLER
Each Securityholder and the Seller, to the extent set forth
in this Article, shall indemnify and hold harmless Parent and
Buyer in respect to the following:
11.1 Indemnification by the Securityholders and the Seller.
(a) Breach. Subject to the provisions of this
paragraph 11.1 and except as otherwise more specifically set
forth herein, each of the Securityholders and the Seller (each in
his or her capacity as an indemnifying party, an "Indemnifying
party") covenants and agrees to jointly and severally indemnify,
defend, protect, and hold harmless each of Parent and Buyer and
each of their respective Subsidiaries and Affiliates (each in its
capacity as an indemnified party, an "Indemnitee") at all times
from and after the date of this Agreement as set out in paragraph
11.1(h) below, from and against all Adverse Consequences incurred
by such Indemnitee as a result of or incident to (i) any material
breach of any representation or warranty of the Seller or the
Securityholders set forth in Article 5 of this Agreement, (ii)
any material breach or nonfulfillment by the Seller or the
Securityholders of, or any material noncompliance by the Seller
or the Securityholders with, any covenants, agreement, or
obligation contained herein or in any certificate or other
document delivered in connection herewith, (iii) all damage or
deficiency resulting directly from the material inaccuracy of any
list, certificate or other instrument delivered by or on behalf
of Securityholder or the Seller in connection herewith, whether
made as of the date hereof, or as of the Closing Date hereunder
or otherwise, or resulting from the non-fulfillment of any
agreement on the part of Securityholder or the Seller contained
in this Agreement or made in connection with the transactions
contemplated hereby, except all losses, liabilities, damages,
costs and expenses (including reasonable attorney's fees),
incurred by Parent or Buyer if this Agreement is terminated
pursuant to Article 13 hereof, which shall not exceed Fifteen
Thousand Dollars ($15,000).
(b) Environmental Indemnification. The Seller, and
Securityholder shall jointly and severally, hereby indemnify each
Indemnitee and hold each Indemnitee harmless from and against any
and all damages, losses, liabilities, costs and expenses of
removal, relocation, elimination, remediation or encapsulation of
any Hazardous Materials (as defined in paragraph 5.20),
obligations, penalties, fines, impositions, fees, levies, lien
removal or bonding costs, claims, actions, causes of action,
injuries, administrative orders, consent agreements and orders,
litigation, demands, defenses, judgments, suits, proceedings,
disbursements or expenses (including without limitation,
attorney's and experts' reasonable fees and disbursements) of any
kind and nature whatsoever resulting from the operation of the
Seller's business prior to the Closing Date: (i) which (x) is
imposed upon, or incurred by, Parent by reason of, relating to or
arising out of the violation by the Seller prior to the Closing
of any environmental laws, rules or regulations of any
governmental body or agency having jurisdiction over the
premises, or (y) arises out of the discharge, dispersal, release,
storage, treatment, generation, disposal or escape of any
Hazardous Materials, on or form the premises prior to the Closing
Date, or (z) arises out of the Seller's use, specification, or
inclusion of any product, material or process containing
Hazardous Materials, or the Seller's failure to detect the
existence or proportion of Hazardous Materials in the soil, air,
surface water or groundwater, or the Seller's performance or
failure to perform the abatement of any Hazardous Materials
source prior to the Closing Date or the Seller's replacement or
removal of any soil, water, surface water, or groundwater
containing Hazardous Material prior to the Closing Date; and/or
(ii) is imposed upon, or incurred by, Parent by reason of or
relating to any material breach, act, omission or
misrepresentation of the Seller contained in paragraph 5.20.
(c) Tax Matters. Seller and each Securityholder
shall jointly and severally indemnify each Indemnitee from and
against all Adverse Consequences incurred by any Indemnitee as a
result of any taxes imposed on or levied against Buyer, Parent,
or any of their subsidiaries, or the Assets, as a result of any
material breach of the representations and warranties of Seller
or Securityholder made in paragraph 5.10 hereof, including any
taxes imposed on the Assets prior to the Closing Date, or imposed
upon Seller or the Assets for any taxable year or period that
ends on or before the Closing Date, or due to any conversion of
the Seller from a cash basis to an accrual basis taxpayer,
including the failure of the Securityholder to report as taxable
income the cumulative adjustment to an accrual basis as provided
in paragraph 3.3 herein. This indemnity specifically excludes
any taxes that may be imposed upon Parent or Buyer as a result of
the disqualification of this transaction as a tax free
reorganization under the Code.
(i) The Seller shall furnish to Parent copies of
the federal, state, and local tax returns of the Seller for the
period ending on the Closing Date at least seven (7) days before
filing such returns.
(ii) Except as otherwise provided in this
Agreement, Parent shall have the sole right to represent the
interests of any Indemnitee in any tax audit or administrative or
court proceeding relating to any taxable period, including
without limitation taxable periods ending on or before Closing,
and to, on behalf of any such Indemnitee, agree to compromise,
settle, or contest any tax claims in connection therewith in its
sole discretion. Nothing contained in this paragraph shall be
construed as giving Parent or any other party the right to
represent the interests of any Indemnifying Party in any
proceeding or audit.
(d) Broker Fee. Each Indemnifying Party jointly and
severally indemnifies each Indemnitee from any claim made by a
broker, finder, agent or other intermediary against the Seller
after Closing in connection with the negotiation or execution of
this Agreement or the consummation of the transactions
contemplated hereby.
(e) Set-Off. Parent shall not be entitled to set-off
the Securityholder's or the Seller's liability to Parent for
indemnification under this Article 11, until after any dispute
regarding such liability has been resolved by the parties or
otherwise by final judgment of a court of competent jurisdiction,
at which time the amount of liability may be credited against the
Arguss Stock being held in escrow pursuant to Section 2.2(b),
first by reducing the amount of Registered Arguss Stock. In the
event that Parent desires to exercise its rights pursuant to this
paragraph, the amount of any liability alleged by the Parent in
writing which is disputed in writing by the Seller or
Securityholders shall remain in escrow until such dispute has
been finally resolved. If any such dispute is resolved against
Parent in whole or in part, Securityholder shall be entitled to
interest at the maximum legal rate on all amounts of liability
alleged by Parent but not finally awarded Parent during the time
such amounts remain in escrow, in addition to any other sums
Securityholder may be awarded.
(f) Costs and Expenses. Except as otherwise provided
in this Agreement, all amounts indemnified pursuant to this
Article 11 shall include all costs and expenses of the
Indemnitee, including, but not limited to, the costs of any
actions, reasonable attorneys fees, and other expenses necessary
to enforce the rights granted hereunder.
(g) Termination of Seller's Obligation. Seller's
obligation to indemnify Parent, or to contribute to any party
indemnifying Parent, pursuant to this Article 11 shall expire as
of the date Seller is dissolved pursuant to paragraphs 1.3 and
5.23 of this Agreement.
(h) Termination of Securityholder's Obligation.
Securityholders' obligation to indemnify any Indemnitee, or to
contribute to any party indemnifying any Indemnitee, pursuant to
this Article 11, shall, except in the event of actual fraud or
intentional non-disclosure, as to the tax matters in paragraph
11.1(c) above expire six (6) years from the Closing Date, and as
to all other matters expire three (3) years from the Closing
Date.
11.2 No Circular Recovery. Each Securityholder
hereby agrees that he or she will not make any claim for
indemnification against either Parent or Buyer by reason of the
fact that he or she was a director, officer, employee, agent or
other representative of the Seller or any of its Subsidiaries
(whether such claim is for Adverse Consequences of any kind or
otherwise and whether such claim is pursuant to any statute,
charter, by-law, contractual obligation or otherwise) with
respect to any claim for indemnification brought by Parent, the
Buyer, and their respective Subsidiaries and Affiliates against
the Securityholders.
ARTICLE XII
INDEMNIFICATION BY PARENT AND THE BUYER
The Parent and the Buyer, to the extent set forth in this
Article, shall indemnify and hold harmless Seller and each
Securityholder in respect to the following:
12.1 Indemnification by the Parent and the Buyer.
(a) Breach. Subject to the provisions of this
Section 12.1 and except as otherwise more specifically set forth
herein, the Parent and the Buyer (each as an indemnifying party,
an "Indemnifying party") covenants and agrees to jointly and
severally indemnify, defend, protect, and hold harmless Seller
and each Securityholder and each of their respective heirs (each
in its capacity as an indemnified party, an "Indemnitee") at all
times from and after the date of this Agreement as set out in
paragraph 12.1(e) below, from and against all Adverse
Consequences incurred by such Indemnitee as a result of or
incident to (i) any material breach of any representation or
warranty of the Parent or the Buyer set forth in Article 6 of
this Agreement, (ii) any material breach or nonfulfillment by the
Parent or the Buyer of, or any noncompliance by the Parent or the
Buyer with, any covenants, agreement, or obligation contained
herein or in any certificate or other document delivered in
connection herewith, (iii) all damage or deficiency resulting
directly from the material inaccuracy of any list, certificate or
other instrument delivered by or on behalf of Parent or the Buyer
in connection herewith, whether made as of the date hereof, or as
of the Closing Date hereunder or otherwise, or resulting from the
non-fulfillment of any agreement on the part of Parent or the
Buyer contained in this Agreement or made in connection with the
transactions contemplated hereby.
(b) Tax Matters. Parent and Buyer shall jointly and
severally indemnify each Indemnitee from and against all Adverse
Consequences incurred by any Indemnitee as a result any taxes
imposed upon or levied against Seller or Securityholder as a
result of Parent's or Buyer's operations prior to the Closing
Date, including any taxable year or period that ends on or before
the Closing Date. This indemnity specifically excludes any taxes
that may be imposed upon Seller or any Securityholder as a result
of the disqualification of the transaction as a tax free
reorganization under the Code.
(c) Broker Fee. Each Indemnifying Party jointly and
severally indemnifies each Indemnitee from any claim made by a
broker, finder, agent or other intermediary against the Seller
after Closing in connection with the negotiation or execution of
this Agreement or the consummation of the transactions
contemplated thereby.
(d) Costs and Expenses. Except as otherwise provided
in this Agreement, all amounts indemnified pursuant to this
Article 12 shall include all costs and expenses of the
Indemnitee, including, but not limited to, the costs of any
actions, reasonable attorneys fees, and other expenses necessary
to enforce the rights granted hereunder.
(e) Termination of Parent's and Buyer's Obligation.
Parent's and Buyer's obligation to indemnify any Indemnitee, or
to contribute to any party indemnifying any Indemnitee, pursuant
to this Article 12, shall, except in the event of actual fraud or
intentional non-disclosure, as to the tax matters in paragraph
12.1(b) above expire six (6) years from the Closing Date, and as
to all other matters expire three (3) years from the Closing
Date.
ARTICLE XIII
TERMINATION
13.1 Termination by Parent or Buyer. This Agreement
may be terminated by Parent, on or before the Closing Date, upon
the occurrence of the following:
(a) If any of the conditions specified in Article 7,
paragraph 7.1 through 7.20 shall not have been met prior to the
Closing Date.
(b) If an event of default, as defined in Article
14.1, has occurred, and has not been cured during any applicable
cure period.
If Parent or Buyer terminates this Agreement because of a
failure of any one or more of the conditions set forth above, the
Parent or Buyer shall be indemnified pursuant to the terms and
conditions of Article 11 for any damage, cost or expense,
including reasonable attorneys' fees, incurred as a result of the
preparation of this Agreement, or otherwise, not to exceed
Fifteen Thousand Dollars ($15,000).
13.2 Termination by Securityholder or Seller. This
Agreement may be terminated by Securityholder or Seller, without
liability to Buyer or Parent, on or before the Closing Date if
any of the conditions specified in Article 6 or Article 7,
paragraphs 7.4, 7.5 (failure of Buyer or Parent to sign), 7.7,
7.11 (failure of Buyer or Parent to sign), 7.12, 7.20, 7.21, or
7.22 shall not have been met prior to Closing, or an event of
default, as defined in Article 14.3 has occurred, and has not
been cured during any applicable cure period.
ARTICLE XIV
DEFAULT
14.1 Events of Seller's Default. It shall be
considered an Event of Default of Seller if any one or more of
the following events shall occur:
(a) If any statement, certificate, report,
representation or warranty of a material nature made or furnished
by the Seller or Securityholder under this Agreement shall prove
to have been false or erroneous in any material respect.
(b) The occurrence of any event of material default
under any other financing agreement, note, lease, mortgage,
security agreement, factoring agreement or any other obligation
of the Seller the result of which will have a material adverse
effect on the Assets unless any such event of default shall be
timely cured under any applicable cure provision or waived by the
person to whom or to which the Seller is obligated or indebted.
14.2 Waiver by Parent or Buyer. Any failure by
Parent or Buyer to insist upon strict performance by the
Securityholder or the Seller of any of the terms and provisions
of this Agreement, shall not be deemed to be a waiver of any of
the terms and conditions hereof and Parent shall have the right
thereafter to insist upon strict performance thereof by the
Securityholder or the Seller.
14.3 Events of Parent's Default. It shall be
considered an Event of Default of Parent if any statement,
certificate, report, representation or warranty of a material
nature made or furnished by the Parent or Buyer under this
Agreement shall prove to have been false or erroneous in any
material respect.
14.4 Waiver by Seller or Securityholder. Any
failure by Seller or Securityholder to insist upon strict
performance by the Parent or Buyer of any of the terms and
provisions of this Agreement, shall not be deemed to be a waiver
of any of the terms and conditions hereof and Seller and
Securityholder shall have the right thereafter to insist upon
strict performance thereof by the Parent or the Buyer.
ARTICLE XV
MISCELLANEOUS
15.1 Costs. Except for expenses relating to the
preparation of the Audit, each party shall pay its own expenses
incident to the transaction contemplated hereby, including fees
and expenses of their attorneys, accountants, appraisers or
consultants, whether or not those transactions are consummated at
Closing, subject to the indemnification and termination
provisions hereof.
15.2 Sales Taxes. All state sales taxes incident to
the transfer of tangible personal property from Seller to Buyer
shall be divided between the parties and remitted as required by
law.
15.3-This paragraph has been intentionally deleted.
15.4 Relationships to Other Agreements. In the event of
a conflict between any of the provisions of this Agreement and
any other agreement relating to this transaction between the
Securityholder, Seller, Buyer, and Parent, the provisions of this
Agreement shall control.
15.5 Titles and Captions. All article or paragraph
titles or captions in this Agreement are for convenience of
reference and are not part of this Agreement and shall in no way
define, limit, extend or describe the scope or intent of
provisions herein.
15.6 Exhibits. The Exhibits and Schedules referred to
herein are hereby made a part hereof.
15.7 Applicable Law. This Agreement is to be
governed by, and construed, interpreted, and enforced in
accordance with the laws of Delaware.
15.8 Binding Effect and Assignment. This Agreement
shall be binding upon and inure to the benefit of the heirs,
successors and assigns of the parties. Notwithstanding the
foregoing, no party shall have any right to assign any of its
rights or obligations under this Agreement without the prior
written consent of the other parties hereto.
15.9 Notices. All notices, requests, instructions, or
other documents required hereunder shall be deemed to have been
give or made when delivered by registered or certified mail,
return receipt requested, postage prepaid or by messenger or
overnight delivery service to:
If Securityholder Xxxxxxx then: Xxxxx Xxxxxxx
TCS Communications, Inc.
00000 X.X. Xxxxxxx 00
Xxxxx
Xxxxx 000
Xxxx Xxxxxx, XX 00000
Counsel for Xxxxxxx: Xxxxx X. Black
000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000-0000
If Securityholder Xxxxx then: Xxxxx X. Xxxxx
TCS Communications, Inc.
00000 X.X. Xxxxxxx 00
Xxxxx
Xxxxx 000
Xxxx Xxxxxx, XX 00000
Counsel for Xxxxx: Xxxxx X. Black
000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000-0000
If Securityholder Hutcheison: Xxxxxx Xxxxxxxxxx
TCS Communications, Inc
00000 X.X. Xxxxxxx 00
Xxxxx
Xxxxx 000
Xxxx Xxxxxx, XX 00000
Counsel For Hutcheison: Xxxxx X. Black
000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000-0000
If Parent then: Arguss Holdings, Inc.
Xxx Xxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx Xxxxxx
Counsel for Parent: Bleecker & Bleecker
00 Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxx
If Buyer then: White Mountain Cable
Construction Corp.
Xxxxx 0
Xxxxx, X.X. 00000
Counsel for Buyer: Bleecker & Bleecker
00 Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxx
Any party may from time to time give the others written
notice of a change in the address to which notices are to be sent
and of any successors in interest.
15.10 Severability. Inapplicability or
unenforceability of any provision of this Agreement shall not
impair the operation or validity of any other provision hereof.
15.11 Acceptance or approval. By accepting all or
approving anything required to be observed, performed, or
fulfilled, or to be given to any party pursuant to this
Agreement, including, but not limited to, any certificate,
balance sheet, statement of profit or loss or other financial
statement, or insurance policy, that party shall not be deemed to
have accepted or approved the sufficiency, legality,
effectiveness or legal effect of the same, or of any term,
provision, or condition thereof as to third parties.
15.12 Survival. All covenants, representations, and
warranties made by the Securityholder, Seller, Parent and Buyer
in this Agreement shall survive the Closing hereunder for a
period of three (3) years, except those as to tax matters, which
shall survive the Closing for a period of six (6) years.
15.13 Entire Agreement. This Agreement, including
all Exhibits, constitutes the entire agreement among the parties
hereto pertaining to the subject matter hereof, and supersedes
all prior agreements and understanding pertaining thereto. No
covenant, representation, or condition not expressed in this
Agreement shall affect or be deemed to interpret, change or
restrict the express provisions hereof and no amendments hereto
shall be valid unless made in writing and signed by all parties
hereto.
15.14 Counterparts. This Agreement may be executed
in any number of counterparts, all of which together shall
constitute one instrument.
15.15 Security Matters. The shares of Arguss
Stock being issued pursuant to this Agreement are not registered
under the Securities act of 1933, as amended (the "1933 Act"),
and are being issued without registration on the grounds that the
sale of Arguss Stock hereunder is exempt from registration under
the 1933 Act pursuant to Section 4(2) thereof and Parent's
reliance on such exemption is predicated on Securityholder's
representations set forth herein.
This Agreement is made in reliance upon Securityholder's
representations to Parent that the shares of Arguss Stock will be
acquired for investment and not with a view to the sale or
distribution of any part thereof, and that Securityholders have
no present intention of selling, granting participation in or
otherwise distributing the same.
Securityholder hereby represent that they are experienced in
evaluating and investing in companies such as the Parent, have
such knowledge and experience in financial and business matters
as to be capable of evaluating the merits and risks of this
investment, and have the ability to bear the economic risks of
this investment. Securityholders further represent that during
the course of the transaction they have had the opportunity to
ask questions of, and receive answers from, representatives of
Parent concerning the Parent.
Securityholders hereby agree that the Arguss Stock may not
be transferred without registration under the 1933 Act or an
exemption therefrom, and that in the absence of an effective
Registration Statement covering that Arguss Stock, or an
available exemption from registration under the 1933 Act, that
Arguss Stock must be held indefinitely. In particular, and
without limiting the foregoing, Securityholders are aware that
Arguss Stock may be not sold pursuant to Rule 144 promulgated
under the 1933 Act unless all conditions of that Rule are met.
Securityholders hereby agree that in no event will they
transfer any of that Arguss Stock other than pursuant to an
effective Registration Statement under the 1933 Act, or pursuant
to the conditions of any legend appearing on said Arguss Stock.
15.16 Preparation and Filing of SEC Documents. If
and whenever, as a result of the transaction contemplated
hereunder, the Parent is under an obligation to provide financial
information to, or prepare a filing of any kind with, the United
States Securities and Exchange Commission ("SEC"),
Securityholder shall assist the Parent in preparing any audited
financial statements required by the SEC for this purpose. The
cost of preparing any such financial statements shall be borne by
the Parent.
15.17 Attorney's Fees. If any action at law or in
equity, including an action for declaratory relief, is brought to
enforce or interpret the provisions of this Agreement, the
prevailing party shall be entitled to recover reasonable
attorney's fees from the other party, which fees may be set by
the court in the trial of such action or may be enforced in a
separate action brought for that purpose, and which fees shall be
in addition to any other relief which may be awarded.
15.18 Mediation. If either party considers bringing
an action against the other party for a breach of this Agreement,
to enforce any term of this Agreement, or resolve any dispute
arising out of or concerning any provision of this Agreement,
then the party contemplating that action shall first notify the
other party in writing, and the parties shall thereafter, within
five (5) days, enter into mediation to settle the matter. If the
parties, through their counsel, cannot agree upon a mediator,
their counsel shall agree on a third party, who may be a Judge,
whose selection of a mediator shall be binding on the parties.
Neither party shall be liable to the other for attorneys fees or
costs incurred in any such mediation, regardless of the outcome,
and the cost of the mediator shall be paid one-half by each
party. The parties agree that no action of any kind, at law or
in equity, shall be filed in any court for a breach of this
Agreement, to enforce any term of this Agreement, or to resolve
any dispute arising out of or concerning any provision of this
Agreement, without first entering into mediation to settle the
matter, as set out in this paragraph.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year first written.
ATTEST: ARGUSS HOLDINGS, INC.
By:
Title:
ATTEST: TCS COMMUNICATIONS, INC.
By:
Title:
WITNESS:
XXXXX X. XXXXXXX
XXXXX X. XXXXX
XXXXXX XXXXXXXXXX
ATTEST: WHITE MOUNTAIN CABLE
CONSTRUCTION CORP.
By:
Title:
