STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is made on September 7,
2001 by and between AM BROADBAND SERVICES, INC., a Delaware corporation, with an
address at 000 Xxxxxxxx Xxxxxxxxx, Xxxxxxxxxx, Xxxxxxxxxxxx 00000-0000 (the
"Buyer"), AM COMMUNICATIONS, INC., a Delaware corporation, with an address at
000 Xxxxxxxx Xxxxxxxxx, Xxxxxxxxxx, Xxxxxxxxxxxx 00000-0000 (the "Parent") and
all of the shareholders of SRS COMMUNICATIONS CORPORATION, a Connecticut
corporation, ("SRS") and EDJ COMMUNICATIONS, INC., a Connecticut corporation,
("EDJ") (each a "Seller" and, collectively, the "Sellers"), all of whose names,
addresses and shareholdings, along with the consideration to be received by each
such Seller, are set forth on Exhibit A hereto. SRS and EDJ are also sometimes
referred to, individually, as a "Company" and, collectively, as the "Companies."
WHEREAS, the Sellers own all of the issued and outstanding capital
stock of the Companies; and
WHEREAS, the Sellers desire to sell to the Buyer, and the Buyer desires
to purchase from the Sellers, all such capital stock in the manner and for the
consideration set forth below;
NOW, THEREFORE, in consideration of the respective representations,
warranties, covenants and agreements hereinafter set forth, and for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Sellers and the Buyer represent, warrant, covenant and agree
as follows:
1. Sale and Purchase of Stock. In reliance on the representations,
warranties and covenants contained herein and subject to the terms and
conditions hereof, at the Closing hereinafter referred to, the Sellers shall
sell, convey, transfer and deliver to the Buyer, and the Buyer shall purchase
from the Sellers, 1,200 shares of the common stock, no par value, of SRS and
11,400 shares of the common stock, no par value, of EDJ (collectively, the
"Stock"), constituting in the aggregate all of the issued and outstanding
capital stock of the Companies.
2. Purchase Price. Subject to the adjustment as provided in Section 3
below, the Purchase Price payable hereunder for the sale and purchase of the
Stock shall be payable by the Buyer to the Sellers as follows:
(a) $1,150,000.00 in cash, to be paid by the Buyer to the
Sellers in weekly installments following the Closing, each
in an amount equal to that portion of the Companies'
accounts receivable existing as of the Closing which are
actually collected by the Companies during the applicable
week, and continuing until the total of such installments
equals $1,150,000.00;
1
(b) $3,000,000.00 in the form of a subordinated promissory note
in the form attached hereto as Exhibit B (the "Note"), to
be delivered by the Buyer to the Sellers at the Closing;
and
(c) 9,000,000 restricted shares of common stock of AM
Communications, Inc., par value $.10 per share (the "AM
Shares"), to be delivered by the Buyer to the Sellers at
the Closing.
3. Adjustment of the Purchase Price. The Purchase Price shall be
adjusted down if and to the extent that the aggregate Net Book Value of the
Companies, as reflected on the Closing Balance Sheets, is less than
$1,650,000.00. Such adjustment (if applicable) shall be made in the amount of
the Note referred to in Section 2(b). For purposes of this Agreement, "Net Book
Value" means the book value of the assets minus the book value of the
liabilities.
4. Closing Balance Sheets. After the Closing, the parties shall agree
to balance sheets for the Companies as of the Closing (the "Closing Balance
Sheets") pursuant to the following procedure:
(a) Within sixty (60) days after the Closing, the Buyer shall
prepare and submit to the Sellers the Closing Balance Sheets, which balance
sheets shall be prepared in accordance with generally accepted accounting
principles and using, to the extent consistent with generally accepted
accounting principles, the same accounting methods, policies, principles,
practices and procedures, with consistent classification, judgments and
estimation methodology as used in the preparation of the Financial Statements
referred to in Section 6(d) (the "Policies").
(b) The Sellers may, for a period of thirty (30) days following
receipt of the Closing Balance Sheets, review them. The Buyer shall cooperate
with the Sellers to permit the Sellers and their representatives to conduct such
review, including but not limited to providing the Sellers with reasonable
access to the Companies' personnel, books, records, accounting records and the
accounting work papers used in the preparation of the Closing Balance Sheets.
(c) Within thirty (30) days after Sellers' receipt of the Closing
Balance Sheets, the Sellers shall notify Buyer in writing of their acceptance of
the Closing Balance Sheets or their disagreement with respect thereto. To the
extent that the Sellers disagree with the Closing Balance Sheets, the Sellers
shall notify the Buyer of such disagreement in writing within such thirty (30)
day period specifying in reasonable detail all disputed items and the basis
therefor. The Sellers may dispute only those items reflected on the Closing
Balance Sheets on the basis that such amounts were not arrived at in accordance
with generally accepted accounting principles and the Policies. The Buyer and
the Sellers shall use their best efforts to resolve such disagreement. In the
event that the Buyer and the Sellers resolve such disagreement within fifteen
(15) days after the Buyer's receipt of such notice of disagreement by the
Sellers, then the Closing Balance Sheets shall be modified accordingly. In the
event that the Buyer and the Sellers are unable to resolve such disagreement
during such fifteen (15) day period, then the Buyer and the Sellers shall
2
jointly select a firm of certified public accountants of recognized national
standing other than their respective auditors (the "Arbitrator") to review the
Closing Balance Sheets and the work papers used in connection with the
preparation of the Closing Balance Sheets and to determine those items in
dispute using generally accepted accounting principles and the Policies, and not
by independent review. The decision of the Arbitrator as to any modifications to
those items in dispute, if any, that should be made to the Closing Balance
Sheets shall be final and binding upon the parties and all of such modifications
shall be made to the Closing Balance Sheets. Judgment upon the decision of the
Arbitrator may be entered by the Buyer or the Sellers in any court of competent
jurisdiction. The fees and expenses of the Arbitrator shall be paid one-half by
the Buyer and one-half by the Sellers.
5. Closing. (a) The closing of the sale and purchase of the Stock (the
"Closing") shall take place at the offices of the Buyer in Quakertown,
Pennsylvania, or at such other place as the Sellers and the Buyer shall mutually
agree, on such date and at such time as shall be mutually agreed to by the
Sellers and the Buyer, but in any event on or before September 28, 2001. The
date of the Closing is referred to in this Agreement as the Closing Date.
(b) The Closing shall be effectuated as follows:
(i) The Sellers shall deliver to the Buyer
certificates representing the Stock, duly endorsed (or accompanied by duly
executed stock powers) for transfer to the Buyer on the Closing Date, with all
requisite documentary or stock transfer tax stamps affixed. The Sellers will pay
all federal, state, county and local taxes (including all requisite transfer
taxes) which may be due or payable by reason of a consummation of such sale and
purchase.
(ii) The Buyer shall deliver to the Sellers
certificates representing the AM Shares as required in Section 2(c)(i).
(iii) The Buyer shall deliver to the Sellers the Note.
(iv) The parties shall deliver the other items as
required in Sections 9 and 10.
6. Representations, Warranties and Covenants of the Sellers. The
Sellers hereby, jointly and severally, represent, warrant and covenant to the
Buyer as of the date hereof and the time of the Closing as follows:
(a) Company Organization, Etc. Each Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Connecticut, is duly qualified as a foreign corporation in all jurisdictions
wherein the character of the property owned or leased or the nature of the
business transacted by it makes qualification as a foreign corporation necessary
(except where the failure to be so qualified would not have a material adverse
effect upon the assets, business, or financial condition of the Company (a
"Material Adverse Effect")), and has the corporate power to own its properties
3
and carry on its business. Neither Company owns any capital stock or other
equity interest in any other corporation or other organization. True, complete
and correct copies of the Articles of Incorporation, By-Laws and other
constituent documents of each Company have been provided to the Buyer.
(b) Capitalization; Stock Ownership; Authority. (i) SRS's authorized
capital stock consists of 20,000 shares of common stock, no par value, of which
1,200 shares are issued and outstanding. EDJ's authorized capital stock consists
of 20,000 shares of common stock, no par value per share, of which 11,400 shares
are issued and outstanding. There are no existing options, calls, or commitments
of any character whatsoever, or agreements to grant the same, relating to
authorized or issued shares of either Company, and neither Company has
outstanding securities convertible into or exercisable for any such shares, or
any options, calls or commitments of any character whatsoever with respect to
the issuance or sale of any such convertible securities.
(ii) The Sellers are the owners, beneficially and of record,
of all of the issued and outstanding shares of common stock of the Companies, in
the amounts as indicated on Exhibit A, free and clear of any claim, lien,
option, charge, restriction or encumbrance of any nature whatsoever
(collectively, "Encumbrances"). All of the issued and outstanding shares of the
Stock have been duly authorized and validly issued, and are fully paid and
nonassessable. The Sellers have full requisite power and authority to sell the
Stock to the Buyer according to the terms and the provisions of this Agreement
so as to vest in the Buyer (and at Closing the Sellers shall vest in Buyer) good
and marketable title to the Stock free and clear of any and all Encumbrances,
other than those restrictions on transfer imposed by the federal securities
laws. The Sellers have all requisite power and authority to execute, deliver and
perform this Agreement and to consummate the transactions contemplated hereby.
This Agreement has been duly and validly authorized, executed and delivered by
the Sellers and constitutes the legal, valid, and binding obligation of the
Sellers, enforceable in accordance with its terms, subject to limitations
relating to bankruptcy, insolvency, receivership, other laws limiting creditors'
rights generally or principles of equity.
(iii) All of the issued shares of capital stock of the
Companies have been offered, sold and issued in compliance with all applicable
securities laws.
(iv) The execution, delivery and performance by each of the
Sellers of this Agreement will not result in a breach or violation of, or
constitute a default under, any of the Companies' Articles of Incorporation,
bylaws, or agreements, or any Law, or any judgment, decree, order, rule or
regulation of any federal, state, local or foreign court or governmental or
regulatory agency or authority (each, a "Governmental Authority" and,
collectively, "Governmental Authorities") applicable to the Companies, or any
agreement or instrument to which either Company is a party or by which either
Company is bound.
(c) Filings; Consents. Except as set forth on Schedule 6(c), no
filing is required to be made with any Governmental Authority and no consent or
approval is required to be obtained from any Governmental Authority or from any
third party in order for the Sellers to enter into this Agreement and to
consummate the transactions contemplated hereby.
4
(d) Financial and Other Data. The Companies have delivered to the
Buyer copies of the following financial statements of the Companies (the
"Financial Statements"):
Year ended 12/31/99
Year ended 12/31/00
6 months ended 6/30/01
The Financial Statements have been audited by Xxxxx Xxxxxxxx, L.L.P. The
Financial Statements have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods indicated
(other than, with respect to any interim financial statement, normal year-end
accruals and adjustments), the balance sheets included in the Financial
Statements present fairly in all material respects the financial position of the
applicable Company as of their respective dates, and the statements of income
included in the Financial Statements present fairly in all material respects the
results of operations of the applicable Company for the periods covered thereby.
(e) Accounts. The accounts receivable of the Companies as of the
date hereof and on the Closing Date (i) represent and will represent
transactions for good and valuable consideration resulting from bona fide sales
or services to third parties in the ordinary course of business, (ii) are not
and shall not be subject to any known defenses, set-offs or counterclaims, and
(iii) are and shall be legally enforceable (except as such enforceability may be
limited by bankruptcy, insolvency or other legal or equitable principles
affecting the enforcement of creditor's rights generally). The accounts
receivable of the Companies as of the Closing will be collectible in the
ordinary course of business within 60 days after their respective due dates, at
the aggregate gross recorded amount thereof. Since June 30, 2001, there has been
no change in either Company's accounts receivable which would have a Material
Adverse Effect.
(f) Litigation, Etc. Except for matters set forth on Schedule 6(f)
hereto, there is no litigation, proceeding or governmental investigation pending
or, to the best knowledge of the Sellers, threatened against or relating to
either Company, its properties or business, or the transactions contemplated by
this Agreement. There are no decrees, injunctions or orders of any Governmental
Authority regarding either Company, or its properties or business.
(g) Compliance with Laws. Each Company has complied in all respects
with all federal, state, county, local and foreign laws, statutes, ordinances,
rules, regulations, and orders (each, a "Law" and, collectively, the "Laws")
relating to the Company or its assets, except for violations which do not, alone
or in the aggregate, have a Material Adverse Effect. The operation of each
Company's business at its current location is in conformity in all material
respects with all applicable zoning ordinances and regulations. Each Company has
all licenses, franchises, permits, certificates, authorizations, consents,
licenses and approvals required by Law or any Governmental Authority
(collectively, "Permits") for (i) the conduct of the Company's business as
presently conducted, and (ii) the execution, delivery or performance of this
Agreement or any instrument hereunder. Neither Company is in default or in
noncompliance in any material respect under any of such Permits. No Permits
shall be affected by the Closing. The consummation of the transactions herein
5
contemplated including, but not limited to, the execution, delivery, and
performance of this Agreement, does not, and will not, constitute a violation of
or default under, conflict with, or result in a breach of any judgment, order,
award, decree, of any Governmental Authority or Law applicable to the Companies.
(h) Assets; Absence of Liens and Encumbrances, Etc. Except as set
forth on Schedule 6(h), each Company has good and marketable title to all its
properties and assets, personal, tangible and intangible, including the assets
included on the Financial Statements, free and clear of all Encumbrances other
than Permitted Liens (as hereinafter defined). Neither Company owns any real
estate. The term "Permitted Lien" means (i) any liens for current taxes not yet
due, and (ii) those immaterial statutory liens of the type that arise out of
taxes or general or special assessments not in default and payable without
penalty or interest. Such assets are in good repair and operating condition and
include all assets that have been used by the Companies to conduct the business
of the Companies as it has been conducted during the three years prior to the
date hereof. There is no existing claim which would provide a right of set-off
under any of the Companies' contracts, agreements and leases, each is in full
force and effect, and there is no default or event, but for notice or lapse of
time or both, would constitute an event of default under any such contract,
agreement or lease.
(i) Liabilities. Other than liabilities specifically set forth on
the balance sheet included in the latest Financial Statement of each Company and
trade payables incurred by the Companies in the ordinary course of business
after the date of the latest Financial Statement of each Company, the Companies
have no liabilities or obligations (whether accrued, absolute, contingent or
otherwise) of any nature whatsoever.
(j) Absence of Certain Changes or Events. Since the date of the
latest Financial Statement of the Companies, there has not been:
(i) Any change in the financial condition, assets, liabilities,
or business of the Companies other than changes which do not, individually or in
the aggregate, have a Material Adverse Effect;
(ii) Any declaration, setting aside or payment of any dividend
or other distribution in respect of either Company's capital stock, or any
redemption of either Company's capital stock, or any change in the authorized,
issued or outstanding capital stock of either Company, or agreement or
commitment with respect to any thereof;
(iii) Any increase in the compensation payable or to become
payable by either Company to any of its directors, officers, employees or
agents, whose total compensation for services rendered is currently at an annual
rate of more than $25,000, or any bonus, incentive compensation, service award
or other like benefit, granted, made or accrued, contingently or otherwise, to
or to the credit of any of the directors, officers, employees or agents thereof,
6
or any employee welfare, pension, retirement or similar payment or arrangement
made or agreed to by either Company, except as set forth on Schedule 6(j)
attached;
(iv) Any labor trouble, or any controversies or unsettled
grievances pending or threatened, between either Company and any of its
employees or a collective bargaining organization representing or seeking to
represent such employees;
(v) Any conducting of business by either Company other than in
the ordinary course;
(vi) Any material adverse change in relationship with any
substantial customer;
(vii) The entry into, termination of, receipt of notice of
termination of, or amendment of or modification to (x) any license,
distributorship, dealer, supplier, sales representative, joint venture, credit
or similar agreement, or (y) any contract or commitment (other than for the sale
of products by a Company in the ordinary course of business) involving a total
remaining commitment by or to either Company in excess of $5,000;
(viii) Any borrowing or lending of money by either Company;
(ix) Capital expenditures, or the incurring of liability
therefor, in an aggregate amount exceeding $150,000; or
(x) Any loans to or guaranty of the indebtedness of the Sellers,
any employee of the Companies or any of his or her family members.
(k) Independent Contractors. (i) All persons who have served as
independent contractors for either Company have signed an agreement, whereby
each such person has, among other things, acknowledged that he or she is an
independent contractor responsible for his or her own payroll taxes and workers'
compensation insurance. All independent contractors have been covered by
workers' compensation insurance provided either by the Company or the
contractor.
(ii) Except for current compensation and premiums for workers'
compensation insurance described in clause (i) above, in each case which is not
yet due and payable, neither Company has liabilities or obligations (whether
accrued, absolute, contingent or otherwise) with respect to persons engaged by
the Company as independent contractors prior to the date hereof, including
without limitation liabilities for payment of payroll or withholding taxes,
workers' compensation premium payments, or relating to injuries sustained by any
such independent contractors.
(l) Schedules. The following Schedules which are attached hereto
contain complete and accurate lists and summary descriptions of the following:
7
SCHEDULE 6(l)(i): (A) A complete list of all real
estate leased by each Company and (B) a complete list of each Company's
vehicles, machinery, equipment, tools, replacement parts, molds and furniture
and fixtures.
SCHEDULE 6(l)(ii): All of each Company's intellectual
property, including but not limited to patents, copyrights, trade names and
trademarks, and applications therefor, and registrations thereof, and all other
inventions, discoveries, improvements, designs, processes, formuli, trade
secrets, ideas and other know-how, whether or not patentable.
SCHEDULE 6(l)(iii): All contracts, leases, agreements
and other documents and commitments of each Company, including without
limitation agreements with suppliers, distributors and employees.
SCHEDULE 6(l)(iv): All policies of insurance in force
with respect to each Company or its assets.
SCHEDULE 6(l)(v): All mortgages, promissory notes,
bonds and other evidences of indebtedness upon which either Company is
obligated.
SCHEDULE 6(l)(vi): All of the suppliers of each
Company accounting for purchases in excess of $5,000 by the Company during 1999,
2000 or 2001.
SCHEDULE 6(l)(vii): All Permits necessary to operate
each Company's business as presently conducted.
SCHEDULE 6(l)(viii): All of each Company's labor
contracts and collective bargaining agreements, and all employee profit-sharing,
incentive, deferred compensation, welfare, pension, retirement, group insurance
and other employee benefit plans, arrangements and practices (including all
trust agreements and the most recent determination letters of the United States
Internal Revenue Service relating to such plans), relating to each Company or
its employees ("Employee Benefit Plans").
SCHEDULE 6(l)(ix): The names and current annual rates
of compensation of all the officers, employees and agents of each Company,
together with a summary (containing estimates to the extent necessary) of (i)
existing bonuses, additional compensation (whether current or deferred) and
other like benefits, if any paid to such persons in the two prior fiscal years
or subsequent thereto, and (ii) any other payments made by or on behalf of each
Company to any labor organization or representative, employee, or agent of any
labor organization in the two prior fiscal years or subsequent thereto.
SCHEDULE 6(l)(x): The name of each institution in
which either Company has a bank account or safety deposit box, the number of any
such account or box and the names of all persons authorized to draw thereon or
to have access thereto.
8
SCHEDULE 6(l)(xi): All marketable securities, and all
other notes or other obligations evidenced by written instruments, owned by each
Company.
Accurate and complete copies of the leases, agreements,
contracts, commitments, plans, policies, arrangements and other documents
referred to in the foregoing Schedules have been delivered by the Companies to
Buyer.
(m) Tax Matters. Each Company has duly and timely filed with
the appropriate Governmental Authority (federal, state, foreign and local) all
tax and other returns required to be filed by it, all of which have been
accurately prepared. All federal, state, local and foreign taxes, assessments,
interest, and penalties, and all other sums owed to any other Governmental
Authority, whether federal, foreign, state or local (collectively, "Taxes"),
due, owing and payable, or which may be due, owing and payable, have been fully
paid or duly provided for in the Financial Statements. The accrual for taxes
reflected in the Financial Statements shall be sufficient for the payment of all
accrued and unpaid Taxes for the period ending on the Closing Date and for all
periods prior thereto. Except as set forth on Schedule 6(m) hereto, neither
Company's income tax returns have been audited by the United States Internal
Revenue Service ("IRS") or any other state, local or foreign taxing authority.
There are no agreements by either Company for the extension of time for the
assessment of any Taxes. No claim for Taxes due is being contested by either
Company. Neither Company has received notice from the IRS or any other taxing
authority of any deficiency or other adjustment which has not been satisfied,
and the Sellers have no knowledge that such a notice may be sent. The Companies
have delivered to the Buyer true and complete copies of the federal income tax
and foreign and state income and franchise tax returns relative to the
operations of the Companies from inception through the date hereof, together
with true and complete copies of all reports of federal and state tax
authorities relating to examinations of such returns.
(n) Books and Records. The books of account, minute books,
stock record books, and other records of each Company, all of which have been
made available to Buyer, are complete and correct and have been maintained in
accordance with sound business practices, including the maintenance of an
adequate system of internal controls. The minute books of each Company contain
accurate and complete records of all meetings held of, and corporate action
taken by, the stockholders, the Board of Directors, and committees of the Boards
of Directors of the Company, and no meeting of any such stockholders, Board of
Directors, or committee has been held for which minutes have not been prepared
and are not contained in such minute books. At the Closing, all of those books
and records will be in the possession of the Companies.
(o) Employee Benefit Plans and Agreements. (i) Neither Company
has any employment agreements, arrangements, contracts, or understandings,
whether enforceable or unenforceable, or written or oral with any employee,
labor organization, or representative of any labor organization relating to its
employees, except those set forth on Schedule 6(o) attached. Neither Company has
violated any laws, regulations, orders or contract terms, affecting the
collective bargaining rights of employees, equal opportunity in employment, or
employee's health, safety, wages and hours.
9
(ii) There are no labor disputes existing, or to the best
of the Sellers' knowledge, threatened, involving strikes, slowdowns, work
stoppages, job actions or lockouts of any employees of either Company. There are
no unfair labor practices or petitions for election pending before the National
Labor Relations Board or any other federal or state labor commission relating to
the employees of either Company. No demand for recognition heretofore made by
any labor organization is pending with respect to either Company.
(p) Pension Plans. Except as set forth on Schedule 6(p)
hereto, neither Company is or has ever been a party to any multi-employer
retirement plan. No Employee Benefit Plan is in material violation of any of the
provisions of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and no prohibited transaction within the meaning of Title I or Title
II of ERISA has occurred and is continuing with respect to any such plan. With
respect to each Employee Benefit Plan: (i) the minimum funding standards have
been met for each year in which Section 302 of ERISA or Section 412 of the
Internal Revenue Code of 1986, as amended (the "Code"), were applicable, and no
waiver of the minimum funding standards has been requested for any such year,
(ii) no events have occurred which are required to be reported to the Pension
Benefit Guaranty Corporation ("PBGC") under Section 4043(b) of ERISA, (iii) all
premiums required to be paid to the PBGC have been paid, (iv) there is no
unfunded liability, (v) such plans as are intended to be qualified under Section
401(a) of the Code have received, subsequent to January 1, 1989, favorable
determination letters from the Internal Revenue Service with respect to such
qualified status and at all times have been operated in a manner consistent
therewith, and (vi) all report forms or other information required to be filed
with any government agency or to be delivered to any plan participant or
beneficiary have been filed, distributed or made available.
(q) Patents, Licenses, and Trademarks. Each Company owns or
has sufficient right to use all patents, trademarks, trade names, copyrights and
other intellectual property rights necessary or desirable to conduct the
business of the Company as it is currently being conducted and consistent with
past practice (collectively, "Intellectual Property"), including those set forth
on Schedule 6(l)(ii), without any obligation or liability for royalties, fees,
or other compensation to any owner, licensor, or other claim to any of the
foregoing. All Intellectual Property of the Companies is valid, enforceable and
unexpired, is free of Encumbrances, has not been abandoned, does not infringe or
otherwise impair the intellectual property of any third party, and is not being
infringed or impaired by any third party. No Governmental Order has been
rendered or, to the best of the Sellers' knowledge, is threatened by any
Governmental Entity which would limit, cancel or question the validity of any
Intellectual Property of the Companies. No action is pending or, to the best of
the Sellers' knowledge threatened, that seeks to limit, cancel or question the
validity of any of the Intellectual Property of the Companies. The Companies
have taken all reasonable steps to protect, maintain and safeguard their
Intellectual Property, and have made all filings and executed all agreements
necessary or desirable in connection therewith. No party to any license for
Intellectual Property is, or is alleged to be, in breach or default thereunder.
The transactions contemplated by this Agreement do not require the consent of
any third party, and will not cause any payments to be due, under any license
for Intellectual Property.
10
(r) Environmental Matters. (i) Each Company holds, and its
business has been conducted in compliance with, all environmental Permits
required under all applicable environmental laws, rules and regulations, and all
of such Permits are in full force and effect. All such Permits are listed on
Schedule 6(l)(vii) hereto and, except as set forth on such schedule, all such
Permits shall not be affected by the Closing. Each Company's business has been
conducted in compliance with all, and the conduct thereof is not in violation of
any, applicable environmental statutes, rules, regulations, ordinances and
orders of any Governmental Authority, including those relating to Hazardous
Substances (as defined below).
(ii) No notice, citation, summons or order has been
issued, no complaint has been filed, no penalty has been assessed and no
investigation or review is pending or threatened by any Governmental Authority
with respect to (A) any alleged violation in the conduct of either Company's
business or with respect to its assets of any environmental statute, ordinance,
rule, regulation or order of any Governmental Authority; or (B) any alleged
failure to have any environmental Permit required in connection with the conduct
of either Company's business; or (C) any generation, treatment, storage,
recycling, transportation or disposal of any Hazardous Substance in connection
with the conduct of either Company's business or with respect to any of its
assets. "Hazardous Substances" shall mean and include any hazardous substances
defined in the United States Comprehensive Environmental Response, Compensation
and Liability Act, as amended ("CERCLA"), any hazardous materials defined in the
United States Hazardous Materials Transportation Act, any hazardous wastes
defined in the United States Resources Conservation and Recovery Act ("RCRA"),
any toxic substance as defined in the Toxic Substances and Control Act, any
pollutant or contaminant as defined in the United States Clean Water Act and as
the terms hazardous substance, hazardous waste, hazardous materials, toxic
substance or pollutants or contaminants are defined in corresponding state and
local laws, ordinances and regulations and including petroleum products and
radioactive materials.
(iii) Neither Company has received any request for
information, notice of claim, demand or other notification that it is or may be
potentially responsible with respect to any investigation or cleanup of any
threatened or actual release of any Hazardous Substances in connection with the
conduct of its business.
(iv) Except as set forth on Schedule 6(r) hereto, neither
Company has used, generated, treated, stored, recycled or disposed of any
Hazardous Substances on any property now or previously owned, operated or leased
by the Company, and no other person has treated, stored, recycled or disposed of
any Hazardous Substances on any property now or previously owned, operated or
leased by either Company in connection with the conduct of the Company's
business that might have a Material Adverse Effect.
(v) The Sellers know of no facts or circumstances related
to environmental matters concerning the conduct of either Company's business or
with respect to its assets that could lead to any future environmental claims,
liabilities or responsibilities under any presently existing environmental
statute, ordinance, rule, regulation or order of any Authority which,
individually or
11
in the aggregate, could reasonably be expected to have a Material Adverse Effect
upon the value of either Company's assets or business to Buyer, or the
possession, use, occupancy or operation by Buyer, of any portion of either
Company's business or its assets.
(s) Insurance. Each Company and its properties, businesses and
assets, are covered by such fire, casualty, product liability and other
insurance policies issued by reputable companies as are customarily obtained to
cover comparable business and assets in the regions in which such business and
assets are located, in amounts, scope and coverage which are reasonable in light
of existing conditions, and which are adequate to insure fully against risks to
which the Company and its properties, business and assets, are normally subject
in the operations of the Company's businesses.
(t) Contracts. Each contract of the Companies, including those
set forth on Schedule 6(l)(iii), is valid and binding, is in full force and
effect, and is being complied with and has not been breached by any other party
thereto in any material respect.
(u) Inventory. The inventory of each Company is fit and
sufficient for the purpose for which it was procured or manufactured and is not
excessive in kind or amount in light of the business of the Company as presently
conducted. All excess and obsolete items in the inventory have been either (i)
written down, (ii) written off, (iii) reserved for, or (iv) otherwise provided
for in accordance with generally accepted accounting principals. Schedule 6(u)
includes a description of the excess and obsolete inventory policies of the
Companies. Such policies have been in effect, without change, for at least three
(3) years. The inventory is carried on the books of the Companies at the lower
of cost (in accordance with the first-in or first-out method) or market. All
items of the inventory have been purchased in the ordinary course of business
and consistent with the anticipated requirements of the Companies. Section 6(u)
includes a description of the product return policies and product repair
policies of the Companies. Such policies have been in effect, without change,
for at least three (3) years.
(v) Product Issues. Except as set forth on Schedule 6(v),
there is no alleged or actual defect or hazard in the manufacture, design,
materials or workmanship, or alleged or actual failure to warn of any of the
foregoing, in any product (or component thereof) which has been manufactured,
shipped or sold by the Companies. Except as set forth on Schedule 6(v), there
has not been any occurrence involving any product recall, rework or retrofit
relating to any product which has been manufactured, shipped or sold by the
Companies.
(w) No Brokers. All negotiations relative to this Agreement
and the transactions contemplated hereby have been carried on by the Sellers
directly with the Buyer without the intervention of any other person as a result
of the act of the Sellers or the Companies, in such manner as to give rise to
any valid claim against any of the parties hereto for a brokers commission,
finder's fee or other like payment.
12
(x) Disclosure. No representation or warranty made in this
Agreement or as provided herein contains any untrue statement of a material fact
or omits to state a material fact necessary to make the statements contained
herein or therein not misleading.
7. Investment Representations. Each Seller understands,
represents and warrants to, and agrees with, the Buyer (all such representations
and warranties being made to and for the benefit of the Buyer and any transfer
agent of the Buyer employed for that purpose) as follows:
(a) Each Seller understands that no federal or state agency
has passed on or made any recommendation or endorsement of the AM Shares;
(b) Each Seller acknowledges that, in making a decision to
acquire the AM Shares hereunder, he has relied solely upon independent
investigations made by him and not upon any representations made by the Buyer
with respect to the Buyer or the AM Shares;
(c) Each Seller understands that the AM Shares are being sold
to him hereunder in reliance on specific exemptions from the registration
requirements of federal and state securities laws and that the Buyer is relying
upon the truth and accuracy of the representations, warranties, agreements,
acknowledgments, and understandings of the Sellers set forth herein in order to
determine the applicability of such exemptions and the suitability of the
Sellers to acquire the AM Shares;
(d) Each Seller is not an affiliate of the Buyer;
(e) Each Seller is aware that (i) the AM Shares have not been
registered under the Securities Act of 1933, as amended, (the "Securities Act"),
(ii) upon the execution by the Sellers and AM Communications, Inc. of a
registration rights agreement in the form attached as Exhibit C (the
"Registration Rights Agreement"), the Sellers will have certain piggyback
registration rights with respect to the AM Shares, subject to the terms and
provisions of the Registration Rights Agreement, (iii) except as otherwise
provided by the Registration Rights Agreement, the Buyer is under no obligation
to register or cause to be registered the AM Shares pursuant to the Securities
Act, and (iv) the AM Shares may only be offered or sold by him pursuant to
registration under the Securities Act or an available exemption therefrom; and
(f) Each Seller will offer, sell, pledge or otherwise transfer
the AM Shares only pursuant to registration under the Securities Act or an
available exemption therefrom and, in any case, in accordance with all
applicable federal, state and foreign securities laws.
8. Representations and Warranties by the Buyer. The Buyer and the
Parent hereby represent and warrant to the Sellers as of the date hereof and the
time of the Closing as follows:
(a) Organization. The Buyer and the Parent are a corporations
duly organized, validly existing and in good standing under the laws of the
State of Delaware.
13
(b) Corporate Authority, Etc. All requisite corporate action
has been taken to authorize the execution, delivery and performance of this
Agreement by the Buyer and the Parent. The Agreement has been or at Closing will
be duly executed and delivered by the Buyer and the Parent and constitutes or
will constitute the legal, valid and binding obligations of the Buyer and the
Parent, enforceable in accordance with its respective terms, subject to
limitations relating to bankruptcy, insolvency, receivership, other laws
limiting creditors' rights generally or principles of equity.
(c) Consents, Etc. The consummation of the transactions
contemplated by the Agreement will not (i) require the Buyer or the Parent to
obtain the consent, approval, authorization or order of any Governmental
Authority, or (ii) constitute a violation of or default under, conflict with, or
result in a breach of (A) any judgment, order, award, decree, of any
Governmental Authority or Laws to which the Buyer is subject, or (B) any
agreement or instrument to which the Buyer or the Parent is a party or by which
it is bound.
(d) No Brokers. All negotiations relative to this Agreement
and the transactions contemplated hereby have been carried on by the Buyer and
the Parent directly with the Sellers without the intervention of any other
person as a result of any act of the Buyer or the Parent in such manner as to
give rise to any valid claim against any of the parties hereto for a brokers
commission, finder's fee or other like payment.
9. Conditions Precedent to the Sellers' Obligations. The
obligations of the Sellers at the Closing shall be subject to the satisfaction
of the following conditions precedent at Closing (each of which may be waived by
the Sellers):
(a) Representations. All representations and warranties of the
Buyer contained herein shall be true and correct on the Closing Date in all
material respects as if made on such date; all agreements of the Buyer contained
herein shall have been complied with; and the Sellers shall have received a
certification of the Buyer, dated the Closing Date and executed by the Buyer's
President or Vice President, to each such effect.
(b) Stock Certificates. The Sellers shall receive the AM
Shares specified in Section 2(c)(i).
(c) Governmental Consents. All necessary governmental consents
and approvals to the transactions contemplated hereby shall have been obtained.
(d) Actions or Proceedings. No preliminary or permanent
injunction or other order by any federal or state court of competent
jurisdiction that makes it illegal or otherwise prevents the consummation of the
transactions contemplated hereby shall have been issued and shall remain in
effect.
14
(e) Officer Employment Agreements. The Buyer shall have
executed and delivered employment agreements in the forms attached as Exhibit D
(the "Officer Employment Agreements") to Xxxxx X. Xxxxxxxxx, Xxxxxxxx X.
Xxxxxxxxx and Xxxxxx X. Xxxxxxxx.
(f) Note. The Buyer shall have executed and delivered to the
Sellers the Note.
(g) Registration Rights Agreement. AM Communications, Inc.
shall have executed and delivered the Registration Rights Agreement.
10. Conditions Precedent to the Buyer's Obligations. The
obligations of the Buyer at the Closing shall be subject to the satisfaction of
the following conditions precedent at the Closing (each of which may be waived
by the Buyer):
(a) Representations. All representations and warranties of the
Sellers contained herein shall be true and correct in all material respects on
the Closing Date as if made on such date; all agreements of the Sellers
contained herein shall have been complied with; and the Buyer shall receive a
certification, dated the Closing Date, of the Sellers, to each such effect.
(b) Approval. All action required by law to be taken by the
Sellers with respect to the execution, delivery and performance of the Agreement
shall have been taken and shall continue to be in full force and effect.
(c) Stock Certificates. The Sellers shall have delivered to
the Buyer the certificate or certificates representing the Stock to be purchased
hereunder, duly endorsed in blank for transfer or accompanied by stock powers
executed in blank, with signature guaranteed and with all requisite documentary
or stock transfer tax stamps affixed.
(d) Opinion of Counsel. There shall have been delivered to the
Buyer the opinion, dated the Closing Date, of the Sellers' counsel, to the
effect that:
(i) Each Company is a corporation duly incorporated,
validly existing and in good standing under the laws of Connecticut and has the
corporate power to carry on its business as it is then being conducted and to
enter into and carry out its obligations under this Agreement.
(ii) The Agreement has been duly authorized, executed
and delivered by the Sellers, and constitutes the valid and binding obligation
of each such person, enforceable in accordance with its terms.
(iii) The authorized capital stock of SRS consists of
20,000 shares of common stock, no par value, of which 1,200 shares are issued
and outstanding. The authorized capital stock of EDJ consists of 20,000 common
stock, no par value, of which 11,400 shares are issued and outstanding. All of
such outstanding shares are validly issued, fully paid and nonassessable. Such
counsel is not aware of any existing options, calls or commitments of any
15
character whatsoever, or agreements to grant the same, relating to authorized or
issued shares of either Company's capital stock, or any outstanding securities
convertible into or exercisable for such shares, or any options, calls or
commitments of any character whatsoever, with respect to the issuance or sale of
any such convertible securities.
(iv) The Sellers have the full requisite power and
authority to transfer and deliver the Stock to the Buyer. The Sellers are the
record owners, and to the best knowledge of such counsel based on a diligent
inquiry, the beneficial owners, of the Stock, have duly endorsed certificates or
stock powers relating to such shares of Stock and following receipt of payment
for such Stock as provided herein, valid title to such Stock shall pass to the
Buyer, free and clear of any adverse claim within the meaning of the Uniform
Commercial Code.
(v) The execution, delivery and performance of this
Agreement by the Sellers will not result in a breach or violation of any of the
terms or provisions of, or constitute a default under either Company's Articles
of Incorporation, by-laws, any agreement or other instrument listed in Schedule
6(l) hereto, or any Law or any judgment, decree, order, rule or regulations
known to such counsel of any Governmental Authority applicable to the Company or
its assets.
(vi) To such counsel's knowledge, there is not pending
or threatened any action, suit, proceeding, inquiry or investigation to which
either Company is a party or to which the property of either Company is subject,
before or brought by a court or governmental agency or body which, if determined
adversely, would have a Material Adverse Effect upon the assets, business or
affairs of the Company.
(e) Judgment, Tax Lien and Uniform Commercial Code Searches.
The Sellers shall have delivered to the Buyer (i) Federal and State judgment and
tax lien searches, and (ii) certified copies of Requests for Information or
Copies (Form UCC-11) or equivalent report, in each case from all appropriate
jurisdictions listing all effective financing statements which name the Company
(under its present or any previous name or any trade names) as debtor, together
with copies of such financing statements. Such searches shall indicate the
existence of no liens or encumbrances.
(f) Resignations. All members of the Board of Directors and
each officer of each Company shall have resigned.
(g) Third Party and Governmental Consents. All necessary third
party and governmental consents and approvals to the transactions contemplated
hereby shall have been obtained.
(h) No Options, Etc. There shall be no outstanding options,
calls or commitments of any character whatsoever, or agreements to grant the
same, relating to the authorized or issued shares of either Company, and neither
Company shall have outstanding any securities convertible into or exercisable
16
for any such shares, or any options, calls or commitments of any character
whatsoever with respect to the issuance or sale of any such convertible
securities.
(i) Injunction; Litigation. No preliminary or permanent
injunction or other order by any federal or state court of competent
jurisdiction that makes illegal or otherwise prevents the consummation of the
transactions contemplated hereby shall have been issued and remain in effect.
There shall not be pending or threatened any litigation, suit, action or
proceeding by any person which could reasonably be expected to have a Material
Adverse Effect on either Company's assets or business or which seeks damages
from the Buyer or either Company as a result of the transactions contemplated by
this Agreement.
(k) Due Diligence Investigations. The results of the due
diligence investigations referred to in Section 11(d) below shall have been
satisfactory to the Buyer in its sole and absolute discretion.
(l) Officer Employment Agreements. Xxxxx X. Xxxxxxxxx,
Xxxxxxxx X. Xxxxxxxxx and Xxxxxx X. Xxxxxxxx shall have executed and delivered
to the Buyer the Officer Employment Agreements.
(m) Employment Agreement with Selected Employee. Xxxxxx
Xxxxxxxxx shall have executed and delivered to the Buyer an employment agreement
substantially in the form attached as Exhibit E (the "Employment Agreement").
(n) No Legal Action. No action, suit, investigation or other
proceeding relating to the transactions contemplated hereby shall have been
instituted or threatened before any court or by any governmental body which
presents a substantial risk of the restraint or prohibition of the transactions
contemplated hereby or the obtaining of material damages or other material
relief in connection therewith.
(o) Discharge of Loans. The Companies shall have discharged
all loans owed by either Company to the Sellers or to any employees of the
Companies.
(p) Schedules. All schedules to this Agreement shall have been
completed by the Sellers and shall be satisfactory to the Buyer.
(q) Subordination Agreement. Each of the Sellers shall have
executed a subordination agreement with respect to the Note in a form acceptable
to the Buyer.
(r) Registration Rights Agreement. Each of the Sellers shall
have executed and delivered the Registration Rights Agreement.
11. Further Agreements. The parties further agree as follows:
17
(a) Further Assurances. Each party agrees that it or he will,
upon request of the other at any time after the Closing Date and without further
consideration, execute and deliver such other documents and instruments and take
such other action as may reasonably be requested to carry out more effectively
the purpose and intent of this Agreement.
(b) Conduct of the Company's Business. Pending the Closing,
the Sellers shall not permit and shall cause the Companies not to permit:
(i) any conduct of either Company's business other
than in the ordinary course;
(ii) any increase in the compensation payable or to
become payable to any of either Company's employees or agents or any bonus,
incentive compensation, service award or other like benefit, granted, made or
accrued, contingently or otherwise, to or to the credit of any thereof, or any
employee welfare, pension, retirement, profit-sharing or similar payment or
arrangement or union or collective bargaining agreement made or agreed to by
either Company pertaining to the Company's employees;
(iii) any borrowing or lending of money by either
Company;
(iv) except as set forth on Schedule 11(b) hereto, any
declaration, payment or accrual of any dividend or other distribution to the
Sellers, any redemption or issuance of any of the Sellers' respective capital
stock or securities convertible into capital stock or commitment to grant the
same, or any retirement of any debt or obligation owed to the Sellers;
(v) any forgiveness of any liabilities or obligations
owed to either Company by any affiliated person;
(vi) any individual capital expenditure in excess of
$5,000, or incurring of liability therefor, by either Company without the prior
consent of the Buyer, which consent shall not be unreasonably withheld;
(vii) capital expenditures, or the incurring of
liability therefor, in an aggregate amount exceeding $150,000;
(viii) any failure on the part of either Company to use
its best efforts to preserve its business organization intact, to keep available
the services of its present officers and employees, and to preserve each
Company's assets (including intellectual property) and the business and the
goodwill of its suppliers, customers, referring sources and others having
business relations with it; or
(viii) any act or omission which would cause either
Company to be unable to restate, as of the Closing, the representations set
forth in Section 6(j) above.
18
(c) Transition. The Sellers agree to take any reasonable
action requested by the Buyer in order to promote the smooth transition of the
Companies' business to the Buyer.
(d) Investigations. The Buyer may prior to the Closing Date,
through its employees, agents and representatives, make or cause to be made such
investigations during normal and reasonable business hours as it deems necessary
or advisable of the properties, assets, businesses, books and records of each
Company, including without limitation conducting a pre- Closing audit, at the
Buyer's expense, of each Company's revenue statements and historical reports and
the contracts related revenues. In such regard, Sellers shall cause each Company
to permit the Buyer and its employees, agents and representatives to have full
access to the premises of the Company and all such books and records of the
Company, and to furnish to the Buyer such financial, operating and technical
data and other information as the Buyer shall from time to time reasonably
request.
(e) Non-Solicitation. The Sellers shall not, and shall cause
the Companies and each officer, director, employee and agent of the Companies
not to, directly or indirectly (i) take any action to solicit, initiate,
encourage or pursue any Acquisition Proposal (as herein defined), or (ii)
continue, pursue, initiate or engage in negotiation with, or disclose any
non-public information relating to the Companies, or afford access to the
parties, books or records of the Companies to, any person (except the Buyer)
that may be considering or has made an Acquisition Proposal. The term
"Acquisition Proposal" as used herein means any offer or proposal for or any
indication of interest in (a) a merger, consolidation or other business
combination involving any equity interest in either Company, (b) all or any
portion of the assets of either Company, or (c) any acquisition of all or any
portion of the capital stock of either Company.
(f) Provision of Information. From and after the Closing Date,
the Sellers shall, and shall cause their representatives to, provide on a timely
basis such financial and other reporting information relating to the Companies
for periods prior to the Closing as may be reasonably requested by Buyer for the
purpose of preparing financial and reporting information required by applicable
law.
(g) Transfer of Monies Received by Sellers after Closing. As
of and from the Closing, the Sellers shall remit to Buyer all amounts received
by the Sellers with respect to the operation of the Companies.
(h) Covenant Not to Compete. For a period of five (5) years
after the Closing Date, none of the Sellers shall, directly or indirectly, own,
manage, operate, control, or be engaged as an officer, director, proprietor,
employee, partner, consultant, adviser, agent, representative or otherwise by
any business, firm, sole proprietorship, corporation, partnership, joint venture
or other entity, enterprise or association that is engaged anywhere in the world
in telecommunications services.
19
For a period of five (5) years after the Closing Date, none of the
Sellers shall, directly nor indirectly, through an affiliate or otherwise,
except with the prior written consent of the Buyer, seek to employ any employee
or consultant of any of the Companies or do any act or thing to cause, bring
about, or induce any interference with, disturbance to or interruption of any
existing relationship of any of the Companies with any employee, consultant,
customer or supplier.
If any provision of this Section 11(h) is held to be unenforceable
because of the scope, duration or area of its applicability, the court making
such determination shall have the power to modify such scope, duration or area
or all of them, and such provision shall then be applicable in such modified
form.
Since a violation of this Section 11(h) will result in irreparable harm
to the Companies and the Buyer, for which money damages alone would not
adequately compensate, if either a Seller or an affiliate of a Seller violates
any of the provisions of this Section 11(h), the Buyer shall be entitled to an
injunction restraining the commission or continuation of any violation of this
Section 11(h) by such person or entity, or any other appropriate decree of
specific performance. Such remedies shall not be exclusive and shall be in
addition to any other remedy which the Buyer may have.
(i) Certain Events with Respect to Note. In the event that the
Buyer fails to make three consecutive quarterly payments under the Note within
ten (10) days of the date such quarterly payments are due, then the Sellers
shall have the right, but not the obligation, to reacquire all the Stock;
provided that: (i) any decision by the Sellers to reacquire the Stock under the
terms of this subsection must be unanimous, and (ii) in the event that the
Sellers exercise the option created by this subsection, the Sellers must (x)
return the AM Shares delivered to the Sellers pursuant to Section 2(c) hereof,
and (y) forgive any and all amounts due under the Note.
(j) Guarantees by Sellers. The Buyer will use reasonable efforts to
arrange for the release of the Sellers' liability under the personal guarantees
listed on Schedule 11(j) hereto made by any of the Sellers to induce any party
to enter into a lease, contract or other agreement with the Companies.
(k) Exhibits. The parties hereto acknowledge that this Agreement is
being executed without any of the exhibits being finalized and attached hereto.
If all the exhibits required to be attached to this Agreement are not delivered
and approved by all of the parties to this Agreement, in their respective sole
discretions, by the close of business on the day before the Closing Date, or in
the event that the Closing Date is a Monday, by the close of business on the
Friday preceding the Closing Date, this Agreement shall automatically terminate
and be of no further force and effect and no party shall have any further
liability hereunder with respect to such termination.
12. Indemnification by the Sellers. The Sellers, jointly and severally,
shall indemnify, defend and hold harmless Buyer and its affiliates from and
against any and all losses, costs, damages, and expenses (including reasonable
attorneys' fees) arising from or relating to:
20
(a) (i) Any breach or alleged breach of any representation or
warranty, or any misrepresentation or alleged misrepresentation, by the Sellers
under this Agreement, (ii) any breach or alleged breach of any covenant or
agreement of the Sellers under this Agreement, or (iii) any liabilities of the
Companies relating to the period prior to the Closing (except for liabilities
specifically reflected on the Closing Balance Sheets); and
(b) Any and all actions, suits, proceedings, demands, assessments,
judgments, costs and expenses, including reasonable attorneys' fees, incident to
any of the foregoing.
13. Indemnification by the Buyer. The Buyer and the Parent shall
indemnify, defend and hold harmless the Sellers from and against any and all
losses, costs, damages and expenses (including reasonable attorney's fees)
arising from or relating to:
(a) (i) Any breach or alleged breach of any representation or
warranty, or any misrepresentation or alleged misrepresentation, by the Buyer
under this Agreement, (ii) any breach or alleged breach of any covenant or
agreement of the Buyers under this Agreement, or (iii) any liabilities of the
Sellers relating to any of the personal guarantees listed on Schedule 11(j)
hereto made by any of the Sellers to induce any party to enter into a lease,
contract or other agreement with the Companies; and
(b) Any and all actions, suits, proceedings, demands, assessments,
judgments, costs and expenses, including reasonable attorneys' fees, incident to
any of the foregoing.
14. Notice of Claims and Potential Claims. (a) Any claim for indemnity
under Sections 12 and 13 hereof shall be made by written notice to the
indemnifying party specifying in reasonable detail the basis of the claim. The
indemnified party agrees to give prompt written notice to the indemnifying party
of any claim by a third party against the indemnified party which might give
rise to a claim against the indemnifying party under Sections 12 and 13 hereof,
stating the nature and basis of such claim and, if ascertainable, the amount
thereof, but the failure to so notify the indemnifying party will not relieve
the indemnifying party of any liability that it may have to the indemnified
party, except to the extent that the indemnifying party demonstrates that the
defense of such action is prejudiced by the failure to give such notice. In
connection with any such third party claim, the indemnifying party may, at its
election and expense, assume the defense of such third party claim, provided
that the indemnifying party shall have acknowledged in writing its obligation to
indemnify in respect of such third party claim, and provided further that the
indemnified party has not determined in good faith that joint representation is
not possible under ethical guidelines. If the indemnifying party assumes the
defense of the third party claim, no compromise or settlement of such claim may
be effected by the indemnifying party without the indemnified party's consent,
which will not be unreasonably withheld. If the indemnifying party shall not
have elected to so assume the defense of such third party claim, no such third
party claim shall be settled without the consent of the indemnifying party,
provided that the indemnifying party shall have acknowledged in writing its
obligation to indemnify in respect of such third party claim and provided
further that such consent will not be unreasonably withheld.
21
(b) Each party hereto agrees to use its best efforts,
consistent with reasonable business practices, to mitigate any liability that is
the subject of an indemnity claim.
15. Termination. (a) This Agreement may be terminated at any time
prior to the consummation of the Closing hereunder, in accordance with the
following provisions:
(i) By mutual agreement of the Buyer and the Sellers;
or
(ii) By the Sellers if any of the conditions set forth
in Section 9 shall not have been met or waived in writing by the Sellers by the
Closing Date; or
(iii) By the Buyer if any of the conditions provided
for in Section 10 of this Agreement shall not have been met or waived in writing
by the Buyer by the Closing Date; or
(iv) By either Buyer or the Sellers in the event that
the Closing shall not have occurred on or prior to October 31, 2001.
(b) Nothing in this Section 15 shall be deemed to excuse
either party for a breach of any of its obligations or agreements undertaken or
made in this Agreement.
16. Miscellaneous. (a) Expenses. (i) Except as otherwise provided
by Section 16(a)(ii) below, the Buyer and the Sellers each agrees to pay its or
his own costs and expenses in connection with the transactions contemplated by
this Agreement. The Sellers agree to pay all costs and expenses incurred by the
Companies in connection with the transactions contemplated by this Agreement.
(ii) The Sellers shall be permitted to cause the
Companies to pay an aggregate amount of up to $25,000 for legal and accounting
expenses actually incurred by the Sellers in connection with this transaction.
(b) Survival. Notwithstanding any presumption to the
contrary, all representations, covenants, warranties and agreements contained in
this Agreement shall survive the Closing.
(c) Governing Law. The provisions of this Agreement shall be
construed in accordance with the laws of the Commonwealth of Pennsylvania.
(d) Notices. Any notice, request, demand, consent, approval,
or other communication required or permitted under this Agreement will be
written and will be deemed to have been given (i) when personally delivered or
sent by telecopy with receipt confirmed, or (ii) on the next day after delivery
to a nationally-recognized express delivery service with instructions for
overnight delivery; or (iii) on the third day after it is deposited in any
depository regularly maintained by the United States postal service, postage
prepaid, certified or registered mail, return receipt requested, addressed to
22
the following address or to such other address as the party to be notified shall
have specified to the other party in accordance with this paragraph:
If to Buyer:
AM Broadband Services, Inc.
000 Xxxxxxxx Xxxxxxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Attention: President
With a copy to:
Xxxxx X. Xxxxx, Esq.
Xxxxxx & Xxxxxxx
A Professional Corporation
Xxx Xxxxxxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
If to Parent:
AM Communications, Inc.
000 Xxxxxxxx Xxxxxxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Attention: President
With a copy to:
Xxxxx X. Xxxxx, Esq.
Xxxxxx & Xxxxxxx
A Professional Corporation
Xxx Xxxxxxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
If to the Sellers:
To the addresses set forth on Exhibit A attached
hereto.
with a copy to:
Xxxxx X. Xxxxxx, Esquire
O'Brien, Shafner, Stuart, Kelly, & Xxxxxx, P.C.
000 Xxxxxx Xxxxxx
Xxxxxx, XX 00000
23
(e) Entire Agreement; Etc. This Agreement sets forth the
entire agreement between the parties with respect to the subject matter hereof
and supersedes all prior agreements or understandings of the parties with
respect thereto. This Agreement may be amended or supplemented solely by a
writing executed by the parties hereto.
(f) Public Announcement. Any public announcement made by
either party prior to Closing pertaining to the transactions contemplated under
this Agreement shall be subject to the prior approval of the other party, except
as required by applicable laws or stock exchange requirements.
(g) Execution in Counterparts. This Agreement may be executed
in any number of counterparts, each of which when so executed shall be deemed to
be an original and all of which taken together shall constitute but one and the
same agreement.
(h) Headings. The headings preceding the text of this
Agreement are inserted solely for convenience of reference and shall not
constitute a part of this Agreement nor affect its meaning, construction or
effect.
(i) Attorney's Fees; Choice of Forum. In the event of
litigation between the parties arising out of or related to this Agreement: (i)
the prevailing party shall be entitled to recover reasonable attorneys' fees,
trial and appellate court costs, and all other costs or expenses associated with
such litigation, and (ii) venue of such litigation shall be in Bucks County,
Pennsylvania. The parties irrevocably consent and submit to the non-exclusive
jurisdiction of the courts of the Commonwealth of Pennsylvania and the United
States District Courts sitting therein and waive any objection based on venue or
forum non conveniens with respect to any action instituted therein arising out
of or related to this Agreement.
(j) Non-Waiver of Rights. No failure or delay in exercising
any right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any right, power or privilege hereunder.
(k) Invalidity. The invalidity or partial invalidity of any
provision of this Agreement shall affect only such provision or part thereof and
the balance of this Agreement shall remain in effect.
(l) Headings; Definitions. The Section and other headings
contained in this Agreement are for reference purposes only and shall not in any
way affect the meaning or interpretation of this Agreement. Wherever in this
Agreement words indicating the plural number appear, such words shall be
considered as words indicating the singular number and vice versa where the
context indicates the propriety of such use.
(m) Assignment; Third-Party Rights. This Agreement shall inure
to the benefit of the parties hereto and their respective permitted successors
and assigns. This Agreement and the rights of the Sellers hereunder shall not be
assignable by the Sellers without the prior written consent of the Buyer. This
Agreement and the rights of the Buyer hereunder may be assigned by the Buyer
24
without the consent of the Sellers so long as the Buyer guarantees the
assignee's performance of all obligations of the Buyer hereunder. Any attempted
assignment of this Agreement in breach of this provision shall be void and of no
effect. In the event that any assignment is validly made, this Agreement shall
be binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns. Nothing in this Agreement, express or
implied, shall be deemed to confer upon any other person, including without
limitation employees of the Companies, any rights or remedies under, or by
reason of, this Agreement.
(n) Set-Off Rights. Notwithstanding anything to the contrary
contained herein or in any document executed and delivered by the Buyer
hereunder, including without limitation the Note and the Officer Employment
Agreements, the Buyer shall have the right and is hereby authorized, to the
fullest extent permitted by law, at any time, and from time to time, to set-off
and apply any and all amounts owed by the Sellers to the Buyer hereunder or
under any other document executed and delivered by the Sellers hereunder against
any obligation of the Buyer to the Sellers hereunder or under any document
executed and delivered by the Buyer hereunder, including without limitation the
Note and the Officer Employment Agreements. The Buyer agrees promptly to notify
the Sellers after any such setoff and application, provided that the failure to
give such notice shall not affect the validity of such set-off and application.
The rights of the Buyer under this provision are in addition to other rights and
remedies (including without limitation other rights of set-off) which the Buyer
may have.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the day and year first above written.
AM BROADBAND SERVICES, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Group Vice President &
General Manager
AM COMMUNICATIONS, INC.
By: /s/ Xxxxx X. Xxxxxx
----------------------------------
Name: Xxxxx X. Xxxxxx
Title: Chairman
/s/ Xxxxx X. Xxxxxxxxx
--------------------------------------------
Xxxxx X. Xxxxxxxxx
/s/ Xxxxxxxx X. Xxxxxxxxx
--------------------------------------------
Xxxxxxxx X. Xxxxxxxxx
/s/ Xxxxxx X. Xxxxxxxx
--------------------------------------------
Xxxxxx X. Xxxxxxxx
/s/ Xxxxxx Xxxxxxxxx
--------------------------------------------
Xxxxxx Xxxxxxxxx
/s/ Xxxxx X. Xxxxxxxxx
--------------------------------------------
Xxxxx X. Xxxxxxxxx
/s/ Xxxxxxxxx X. Xxxxxxxx
--------------------------------------------
Xxxxxxxxx X. Xxxxxxxx
25
Exhibit A
SHAREHOLDERS
Shares of SRS Shares of EDJ Total
------------- ------------- -----
Name/Address Communications Communications Consideration
------------ --------------- -------------- -------------
Xxxxx X. Xxxxxxxxx 400 1,800 1,500,000 shares of
000 Xxxxxxx Xxxx Parent; $750,000
Xxxxxxxxxx, XX 00000 Cash; 1/6 Interest in
Note
Xxxxxxxx X. Xxxxxxxxx 400 1,800 1,500,000 shares of
000 Xxxxxxx Xxxx Parent; $750,000
Xxxxxxxxxx, XX 00000 Cash; 1/6 Interest in
Note
Xxxxxx X. Xxxxxxxx 400 1,800 1,500,000 shares of
000 Xxxxxxx Xxxxxxx Xxxxxx; $750,000
Xxxxx, XX 00000 Cash;1/6 Interest in
Note
Xxxxxx Xxxxxxxxx 0 2,000 1,500,000 shares of
000 Xxxxxxx Xxxx Parent; $750,000
Xxxxxxxxxx, XX 00000 Cash;1/6 Interest in
Note
Xxxxx X. Xxxxxxxxx 0 2,000 1,500,000 shares of
000 Xxxxxxx Xxxx Parent; $750,000
Xxxxxxxxxx, XX 00000 Cash; 1/6 Interest in
Note
Xxxxxxxxx X. Xxxxxxxx 0 2,000 1,500,000 shares of
000 Xxxxxxx Xxxxxxx Xxxxxx; $750,000
Xxxxx, XX 00000 Cash; 1/6 Interest in
Note
26
Exhibit B
FORM OF NOTE
------------
See attached.
[Attachment intentionally omitted from Form 8-K filing]
27
Exhibit C
FORM OF REGISTRATION RIGHTS AGREEMENT
-------------------------------------
See attached.
[Attachment intentionally omitted from Form 8-K filing]
28
Exhibit D
FORM OF OFFICER EMPLOYMENT AGREEMENT
------------------------------------
See attached.
[Attachment intentionally omitted from Form 8-K filing]
29
Exhibit E
FORM OF EMPLOYMENT AGREEMENT
----------------------------
See attached.
[Intentionally omitted from Form 8-K filing]
30
Schedule 6(c)
FILINGS AND CONSENTS REQUIRED
-----------------------------
[Intentionally omitted from Form 8-K filing]
31
Schedule 6(f)
LITIGATION PENDING
------------------
[Intentionally omitted from Form 8-K filing]
32
Schedule 6(h)
ASSETS SUBJECT TO LIENS OR ENCUMBRANCES
---------------------------------------
[Attachment intentionally omitted from Form 8-K filing]
33
Schedule 6(j)
INCREASES IN OFFICER/EMPLOYEE COMPENSATION
------------------------------------------
[Attachment intentionally omitted from Form 8-K filing]
34
Schedule 6(l)(i)
LEASED REAL ESTATE
------------------
AND
---
CAPITAL ASSETS
--------------
[Intentionally omitted from Form 8-K filing]
35
Schedule 6(l)(ii)
INTELLECTUAL PROPERTY
---------------------
[Intentionally omitted from Form 8-K filing]
36
Schedule 6(l)(iii)
CONTRACTS, LEASES AND AGREEMENTS
--------------------------------
[Intentionally omitted from Form 8-K filing]
37
Schedule 6(l)(iv)
INSURANCE POLICIES
------------------
[Intentionally omitted from Form 8-K filing]
38
Schedule 6(l)(v)
INDEBTEDNESS
------------
[Intentionally omitted from Form 8-K filing]
39
Schedule 6(l)(vi)
SUPPLIERS
---------
[Intentionally omitted from Form 8-K filing]
40
Schedule 6(l)(vii)
PERMITS
-------
[Intentionally omitted from Form 8-K filing]
41
Schedule 6(l)(viii)
LABOR AGREEMENTS
----------------
[Intentionally omitted from Form 8-K filing]
42
Schedule 6(l)(ix)
OFFICER COMPENSATION
--------------------
[Intentionally omitted from Form 8-K filing]
43
Schedule 6(l)(x)
BANK ACCOUNTS
-------------
[Intentionally omitted from Form 8-K filing]
44
Schedule 6(l)(xi)
SECURITIES
----------
[Intentionally omitted from Form 8-K filing]
45
Schedule 6(m)
TAX MATTERS
-----------
[Intentionally omitted from Form 8-K filing]
46
Schedule 6(o)
EMPLOYMENT AGREEMENTS
---------------------
[Intentionally omitted from Form 8-K filing]
47
Schedule 6(p)
PENSION PLANS
-------------
[Intentionally omitted from Form 8-K filing]
48
Schedule 6(r)
HAZARDOUS SUBSTANCES
--------------------
[Intentionally omitted from Form 8-K filing]
49
Schedule 6(u)
POLICIES REGARDING EXCESS/OBSOLETE INVENTORY
--------------------------------------------
[Intentionally omitted from Form 8-K filing]
50
Schedule 6(v)
PRODUCT ISSUES
--------------
[Intentionally omitted from Form 8-K filing]
51
Schedule 11(b)
PAYMENTS TO SELLERS
-------------------
[Intentionally omitted from Form 8-K filing]
52
Schedule 11(j)
GUARANTEES MADE BY SELLERS
--------------------------
[Intentionally omitted from Form 8-K filing]
53
