AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, made this 26th day of May, 2000, by and
between XXXXX XXXXX ("X. Xxxxx")(hereinafter referred to as "X. Xxxxx" or
"Securityholder"), U.S. COMMUNICATIONS, INC., a New Mexico corporation (the
"Company"), ARGUSS HOLDINGS, INC., a Delaware corporation (the "Parent"), and
ARGUSS COMMUNICATIONS GROUP, INC. ("ACG"), a Delaware corporation and a 100%
direct subsidiary of Parent.
INTRODUCTORY STATEMENT
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A. Securityholder owns one thousand (1,000) shares of capital stock of the
Company, which shares constitute all of the issued and outstanding capital stock
("Stock") of the Company, a New Mexico corporation doing business as U.S.
Communications.
B. The Company is engaged in the construction, reconstruction, maintenance,
repair and expansion of CATV, SMATV systems and other related systems in the
telecommunications industry.
C. Parent has agreed with the Securityholder for Parent to acquire the
Company by means of a merger of the Company with and into ACG, a wholly owned
subsidiary of Parent upon the terms and subject to the conditions set forth
herein.
D. In furtherance of such acquisition, the Boards of Directors of Parent,
ACG and the Company have each approved the plan of merger to merge the Company
with and into ACG (the "Merger") in accordance with the applicable provisions of
the Delaware General Corporation Law (the "DGCL"), and the New Mexico Business
Corporation Act ("NMBCA"), and upon the terms and subject to the conditions set
forth herein.
E. Pursuant to the Merger, the record holders of each outstanding share of
the Company's common stock, one dollar ($1.00) par value, shall be entitled to
receive the Merger Consideration (as defined in Section 2.1) so that upon
receipt of the Merger Consideration, such share of the Stock shall be canceled,
all upon the terms and subject to the conditions set forth herein.
F. The parties hereto intend that this transaction to qualify as a tax free
reorganization under Section 368(a)(1)(A) and Section 368(a)(2)(D) of the United
States Federal Internal Revenue Code of 1986, as amended ("Code"). Except as
otherwise required by a determination within the meaning of Section 1313 of the
Code, the parties hereto intend to treat the Merger as a reorganization within
the meaning of Section 368 (a)(1) of the Code for tax purposes (including for
income tax reporting purposes) and no party shall take or fail to take any
action with the knowledge that such action or failure to take such action will
prevent or impede the Merger from qualifying as a tax free reorganization
thereunder.
NOW, THEREFORE, WITNESSETH, for and in consideration of the promises 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
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The following terms when used in this AGREEMENT AND PLAN OF MERGER shall
have the following meanings:
"1999 VALUE OF THE COMPANY" shall mean the value of the Company equal
to the product of Four and One-Half (4-1/2) times the December,1999 12 Month
Adjusted Cash Flow.
"ACCOUNTS RECEIVABLE" means accounts receivable, notes due from all
sources of the Company, and credits for returned or damaged merchandise.
"ACG" has the meaning set forth in the preface above.
"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 material 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.
"AGREEMENT" means this AGREEMENT AND PLAN OF MERGER.
"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 the authorized capital stock of Arguss.
"ASSETS" means all property, rights, things of value and other assets
of the Company described, referred to, or listed, in Section 4.9 of this
Agreement.
"CERTIFICATE OF MERGER" has the meaning set forth in Section 1.2 below.
"CLOSING" means the transfer of the Stock to ACG and the payment of the
Purchase Price to Securityholder pursuant to this Agreement.
"CLOSING BALANCE SHEET" shall mean the internally generated closing
balance sheet and profit and loss statement of the Company for the period ending
the Closing Date, as adjusted to present them on an accrual basis for a "C"
corporation.
"CLOSING DATE" means the date of Closing, established under Section 3
of this Agreement.
"COMPANY" means U.S. Communications, Inc. for all references prior to
the merger and the division or wholly owned subsidiary of ACG that conducts the
business of U.S. Communications Division after the merger.
"DGCL" has the meaning set forth in the introductory statement.
"DECEMBER 1999 AUDIT" shall mean the audit of the Company for the
twelve (12) month period ending December 31, 1999, prepared in accordance with
generally accepted accounting principles consistently applied by the accounting
firm of Rogoff, Erickson, Diamond and Xxxxxx, LLP., and acceptable to the
accounting firm of KPMG Peat Marwick.
"DECEMBER 1999 12 MONTH ADJUSTED CASH FLOW" shall mean that value
determined in accordance with generally accepted accounting principles
consistently applied, and based on the December 1999 Audit, equal to the
difference between (a) that number equal to the twelve (12) month net income of
the Company as of December 31, 1999 , adjusted by EBITDA, as that term is
defined in accordance with generally accepted accounting principles, and more
specifically as adjusted by adding back all deductions taken in determining such
number, if any, for interest, depreciation, income taxes and the amount of total
compensation paid to X. Xxxxx by the Company with respect to services rendered
by him to the Company in 1999 and (b) that number equal to the Base Salary, as
that term is defined in the Employment Agreement, payable to X. Xxxxx pursuant
to the Employment Agreement, as that term is defined herein.
"EMPLOYMENT AGREEMENT" means the Employment Agreement to be executed by
ACG and X. Xxxxx pursuant to Sections 6.5 and 6.17, 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, and judicial decisions thereunder of
federal, state, local, and foreign governments 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 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 Hazardous Materials.
"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 consolidated financial
statement of the Company and its subsidiaries for the Company's fiscal year
ending in 1999, prepared by Rogoff, Erickson, Diamond and Xxxxxx, LLP, the
Company's regular independent certified public accountant, and accepted by the
accounting firm of KPMG Peat Marwick. The Financial Statements shall be
presented after making all appropriate adjustments required to present them on
an accrual basis for a "C" corporation.
"GAAP" shall mean in accordance with generally accepted accounting
principles, consistently applied.
"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), oil or petroleum 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 Liability Act of 1980, as amended (42
U.S.C. Sections 9601, 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.
"X. XXXXX" shall mean Xxxxx Xxxxx, a stockholder, officer and director
of the Company and a signatory to this Agreement.
"KNOWLEDGE" shall mean, when referring to the Knowledge of the Company,
the actual knowledge of the Securityholder, or information the Securityholder
had reason to know or should have known in his capacity as shareholder, officer,
director or employee of the Company.
"MERGER" means the merger of U.S. Communications into ACG.
"MERGER CONSIDERATION" means the aggregate consideration set forth in
Section 2 hereof.
"NET WORTH" shall mean the total assets of the Company, reduced by any
value placed on the intangible assets of the Company, including, but not limited
to, goodwill, less the total liabilities of the Company as those terms are shown
on the Financial Statement and on the Closing Balance Sheet.
"NMBCA" has the meaning set forth in the introductory statement above.
"PREMISES" shall mean the leased premises of the Company, located at
0000 Xxxxx Xxxx., XX, Xxxxxxxxxxx, Xxx Xxxxxx 00000.
"REGISTRATION RIGHTS AGREEMENT" shall mean the Registration Rights
Agreement executed by the Securityholder and Parent pursuant to Sections 6.9 and
6.20, hereof.
"STOCK" shall mean all of the authorized issued and outstanding capital
stock of the Company, including all warrants, options, convertible securities or
right (contingent or otherwise) to purchase or acquire stock of the Company.
"SURVIVING CORPORATION" has the meaning set forth in Section 1.1 below.
"U.S. COMMUNICATIONS DIVISION" shall mean the business and affairs of
the Company, after the Company is merged with and into ACG.
SECTION 1
THE MERGER
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1.1 EFFECTIVE TIME. On the Closing Date (as defined in Section 3), and
subject to and upon the fulfillment or waiver of the terms and conditions of
this Agreement, the DGCL and the NMBCA, Parent shall, effective as of May 1,
2000, acquire the Company by means of the Company being merged with and into
ACG, where by the separate corporate existence of the Company shall cease, and
ACG shall continue as the surviving corporation. ACG as the surviving
corporation after the Merger is hereinafter sometimes referred to as the
"Surviving Corporation."
1.2 CERTIFICATE OF MERGER. On the Closing Date, assuming satisfaction
or waiver of the conditions set forth in Section 6, the parties hereto shall
cause the Merger to be consummated by filing a Certificate of Merger and
Articles of Merger as contemplated by the DGCL and the NMBCA, respectively (the
"Certificates of Merger"), together with any required related certificates, with
the Secretary of State of the State of Delaware and the Secretary of State of
the State of New Mexico, respectively, in such form as required by, and executed
in accordance with the relevant provisions of the DGCL and the NMBCA. The
respective Certificates of Merger shall be filed on the Closing Date and the
date of their actual filing shall be deemed the Filing Date.
1.3 EFFECT OF THE MERGER. Upon the consummation of the Merger, the
effect of the merger shall be as provided in this Agreement, the Certificates of
Merger and the applicable provisions of the DGCL and the NMBCA. Without limiting
the generality of the foregoing, and subject thereto, upon the consummation of
the Merger all the property, rights, privileges, powers and franchises of the
Company and ACG shall vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company and ACG shall become the debts,
liabilities and duties of the Surviving Corporation.
1.4 CERTIFICATE OF INCORPORATION, BY-LAWS.
(i) CERTIFICATE OF INCORPORATION. Unless otherwise determined by
Parent prior to the Closing Date, upon the consummation of the Merger the
Certificate of Incorporation of ACG, as in effect immediately prior to the
consummation of the Merger, shall be the Certificate of Incorporation of the
Surviving Corporation until thereafter amended in accordance with the DGCL and
such Certificate of Incorporation.
(ii) BY-LAWS. Unless otherwise determined by Parent prior to the
consummation of the Merger, the By-Laws of ACG, as in effect immediately prior
to the closing date, shall be the By-Laws of the Surviving Corporation until
thereafter amended in accordance with the DGCL, the Certificate of Incorporation
of the Surviving Corporation and such By-Laws.
1.5 DIRECTORS AND OFFICERS. The directors of ACG immediately prior to
the consummation of the Merger, with the addition of X. Xxxxx, shall be the
initial directors of the Surviving Corporation, each to hold office in
accordance with the Certificate of Incorporation and By-Laws of the Surviving
Corporation, and the officers of ACG immediately prior to the consummation of
the Merger shall be the initial officers of the Surviving Corporation, in each
case until their respective successors are duly elected or appointed and
qualified.
SECTION 2
MERGER CONSIDERATION
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2.1 SHARES OF COMPANY. As of the Filing Date, each share of Stock
issued and outstanding as of the Closing Date, shall by virtue of the merger and
without any action on the part of the holder thereof, be converted into the
right to receive an amount per share in Arguss Stock and in cash ("Merger
Consideration"), without interest, determined in accordance with Section 2.2.
2.2 MERGER CONSIDERATION. The total merger consideration to be paid
collectively by Parent and ACG to the Securityholder shall be an amount equal to
the sum of the 1999 Value of the Company. Each share of Stock shall be entitled
to receive a sum equal to the 1999 Value of the Company divided by the total
number of shares of the Stock.
The Merger Consideration shall be paid to the Securityholder as
follows:
(a) At Closing, the Securityholder shall receive the sum equal to
Fifty Per Cent (50%) of the 1999 Value of the Company through the issuance of
shares of the authorized capital stock of Arguss ("Arguss Stock") as set forth
in Exhibit 2.2(a). For the purposes of determining the number of shares of
Arguss Stock to be issued to the Securityholder pursuant to this Section 2.2(a),
the value of each share of Arguss Stock shall be Fifteen and 75/100 Dollars
($15.75).
(b) At Closing, the Securityholder shall receive the sum equal to
Fifty Per Cent (50%) of the 1999 Value of the Company in cash, wire transfer, or
certified funds as set forth on Exhibit 2.2(b).
(c) The Net Worth of the Company on the Closing Date shall be the
Net Worth of the Company as set forth on the Closing Balance Sheet. In the event
the Net Worth is less than Two Million Dollars ($2,000,000) on the Closing Date,
such deficiency shall be withheld from the Merger Consideration paid to
Securityholder pursuant to Section 2.2(b), hereof. In the event the Net Worth is
greater than Two Million Dollars ($2,000,000) on the Closing Date, such excess
amount shall be paid as additional Merger Consideration to Securityholder
pursuant to Sections 2.2(a) and 2.2(b), hereof. To enable all parties to
determine the Net Worth of the Company on the Closing Date, the Securityholder
shall cause the Closing Balance Sheet to be delivered to the Parent at Closing.
(d) In the event that the market price of Arguss Stock is less
than Fifteen and 75/100 Dollars ($15.75) on the first anniversary of the Closing
Date (the "First Anniversary Date"), additional shares of Arguss Stock shall be
issued to Securityholder. The number of additional shares of Arguss Stock to be
issued pursuant to this Section 2.2 (d) shall be that number of shares, if any,
which, when (1) multiplied by the greater of the market price of Arguss Stock as
of the Closing Date or the market price of Arguss Stock as of the First
Anniversary Date, and (2) added to the value of the number of shares of Arguss
Stock issued on the Closing Date pursuant to Section 2.2(a), above, multiplied
by the greater of the market price of Arguss Stock as of the First Anniversary
Date or the market price as of the Closing Date, causes the total value of the
Arguss Stock to equal Fifty per cent (50%) of the total Merger Consideration..
For the purposes of this Section 2.2 (d), the "market price" shall mean the
closing price of the shares of Arguss Stock on the day preceding the Closing
Date or the First Anniversary Date.
2.3 ALLOCATION OF MERGER CONSIDERATION. The allocation of the Merger
Consideration by Securityholder, if desired, is set forth in Exhibit 2.3.
SECTION 3
CLOSING
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The Closing of the Merger shall occur at the offices of Arguss
Holdings, Inc., Xxx Xxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxx 00000, at 2:00
p.m. on the 30th day of April, 2000, or at such other time, date and place as
Parent and Securityholder may agree (the "Closing Date"). Closing may take place
by telefacsimile. At the Closing:
3.1 CANCELLATION.
(a) Upon filing of the Certificates of Merger, each such share of
the Stock shall be canceled and shall thereafter evidence only the right to
receive a pro rata share of the Merger Consideration.
(b) Upon filing of the Certificates of Merger, each share, if any,
of the Stock held in the treasury of the Company and each share of Stock owned
directly or indirectly by any wholly owned Subsidiary of the Company immediately
prior to the consummation of the Merger shall, by virtue of the Merger and
without any action on the part of the holder thereof, cease to be outstanding,
be canceled and retired without payment of any consideration therefor and cease
to exist.
3.2 DELIVERY OF CASH AND EXCHANGE OF CERTIFICATES.
(a) EXCHANGE PROCEDURES. As of the Closing Date, upon surrender of
the certificates representing shares of the Stock (the "Certificates") for
cancellation to Parent together with such other customary documents as may be
required to transfer the Stock the holder of such Certificates shall be entitled
to receive in exchange therefore their pro rata share of the Merger
Consideration as provided in Section 2.2(a), (b), (c),(e), (f) and (g), above,
and the Certificates so surrendered shall forthwith be canceled. Each
outstanding Certificate that, prior to the Closing Date, represented shares of
the Stock will be deemed from and after the Closing Date, for all corporate
purposes, to evidence the right to receive a pro rata share of the Merger
Consideration into which such shares of the Stock shall have been so converted.
(b) NO LIABILITY. Neither Parent, ACG, nor the Company shall be
liable to any holder of the Stock for any Merger Consideration delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
(c) WITHHOLDING RIGHTS. Parent shall be entitled to deduct and
withhold from the Merger Consideration otherwise payable pursuant to this
Agreement to any holder of the Stock such amounts, if any, as Parent is required
to deduct and withhold with respect to the making of such payment under the
Code, or any provision of state, local or foreign tax law. To the extent that
amounts are so withheld by Parent, such withheld amount shall be treated for all
purposes of this Agreement as having been paid to the holder of the shares in
respect of which such deduction and withholding was made by Parent, and Parent
shall pay all such withheld amounts to the proper authorities within the
ordinary course of business.
SECTION 4
REPRESENTATIONS, WARRANTIES AND CERTAIN
COVENANTS OF SECURITYHOLDER AND THE COMPANY
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As a material inducement to induce Parent and ACG to consummate the
Merger under this Agreement, the Securityholder and Company represent and
warrant that each of the matters set forth in this Section 4 are true and
correct as of the date hereof, and acknowledge that Parent and ACG'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 Company shall
survive up and until the Closing Date. The representations and warranties being
made by the Securityholder shall survive as setforth in Section 12.11, herein.
4.1 ORGANIZATION, QUALIFICATIONS AND CORPORATE POWER.
(a) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of New Mexico.
Attached as Exhibit 4.1(a) is a list of all states in which the Company, and its
subsidiaries, are qualified to do business. The Company, and its subsidiaries,
are duly qualified as a foreign corporation in each other jurisdiction in which
the failure to be qualified would have a material adverse effect upon the
Company, and its subsidiaries. The Company, and its subsidiaries, has the
corporate power and authority to own and hold their properties and to conduct
their businesses as currently conducted and as proposed to be conducted, to
execute, deliver and perform this Agreement to which the Company is a signatory.
(b) Except as listed on Exhibit 4.1(b), the Company, and its
subsidiaries, do 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.
4.2 AUTHORIZATION OF AGREEMENT.
(a) The execution, delivery and performance by the Company 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 Company, or any provision of any
indenture, agreement or other instrument by which the Company, 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 Company is a party, or by which
Company, 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 Company 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 Company except as to conflicts, breaches and violations that will not
have a material adverse effect on the business, property or assets of the
Company.
4.3 CAPITAL STOCK. The authorized capital stock of the Company, and its
subsidiaries, and the holders of the issued and outstanding shares of such
capital stock are set forth in Exhibit 4.3 hereto. Except as disclosed in
Exhibit 4.3, there is no (i) subscription, warrant, option, convertible security
or other right (contingent or otherwise) to purchase or acquire any shares of
any class of capital stock of the Company, or of its subsidiaries, which is
authorized or outstanding, (ii) the Company, and its subsidiaries, have 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 Company, and its subsidiaries, have 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 Company, and its
subsidiaries, have 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 Company, and of its subsidiaries, have been
validly issued in compliance with all federal and state securities laws and are
fully paid and non-assessable.
4.4 FINANCIAL STATEMENTS. The Company has delivered to Parent the
Financial Statement, the Closing Balance Sheet, and the December 1999 Audit. To
the extent that they cover periods ending on or before the Closing Date, such
Financial Statement, Closing Balance Sheet and December 1999 Audit are complete
and correct, have been prepared in accordance with GAAP and fairly present the
consolidated financial position of the Company, and its subsidiaries, as of such
respective dates after making all appropriate adjustments required to present
the Financial Statement, Closing Balance Sheet and December 1999 Audit on an
accrual basis for a "C" corporation, and the results of operations for the
respective periods then ended. Except as set forth in such Financial Statement,
Closing Balance Sheet and December 1999 Audit or incurred in the ordinary course
of business, to the knowledge of Securityholder and the Company neither the
Company nor any of its subsidiaries has any material obligation or liability,
absolute, accrued or contingent except obligations and liabilities which do not
adversely effect the business, property or assets of the Company.
4.5 ABSENCE OF CHANGES. Except as listed in Exhibit 4.5 and since the
time period covered by the Financial Statement, neither the Company nor any of
its subsidiaries, have:
(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 Company'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 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 any 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 of, or has reason to believe, that any of
its customers or clients have taken or contemplate any steps which could disrupt
its business relationship with said customer or client or could result in the
diminution in the value of the business of the Company as a going concern.
4.6 ACTIONS PENDING. Except as listed on Exhibit 4.6, there is no
action, suit, investigation, or proceeding pending or, to the knowledge of the
Company or Securityholder threatened against the Securityholder, the Company, or
its subsidiaries, or any of its properties or rights, before any court or by or
before any governmental body or arbitration board or tribunal and no 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 Company, or its subsidiaries, or Securityholder. The foregoing includes,
without limiting its generality, actions pending or threatened (or any basis
therefor known to the Company or Securityholder) involving the prior employment
of any employees or prospective employees of the Company, or of its
subsidiaries, or the Company's use, in connection with its business, of any
information or techniques which might be alleged to be proprietary to former
employer(s) of its employees.
4.7 BUSINESS PROPERTY RIGHTS. To the best of the Company's or
Securityholder's 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 Company, or of its subsidiaries, 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 Company's or Securityholder's knowledge no third
party is infringing upon or violating any of the Company's Business Property
Rights and the Company has the exclusive right to use the same. None of the
employees, directors, or stockholders of the Company's or its subsidiaries has
any valid claim whatsoever (whether direct, indirect or contingent) of right,
title or interest in or to any of the Company's Business Property Rights.
4.8 LIABILITIES. Except as listed in Exhibit 4.8, to the knowledge of
Securityholder and the Company neither the Company, or its subsidiaries, has any
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 or Closing Balance Sheet") delivered in
accordance with Section 4.4 and (ii) liabilities and obligations incurred for
the purpose of enabling the Company or its subsidiaries to conduct their normal
business (in each case in normal amounts and incurred only in the ordinary
course of business) except such liabilities and obligations that do not have a
material adverse effect on the business, property and assets of the Company.
Except as disclosed in the Financial Statements or Closing Balance Sheet, to the
knowledge of Securityholder and the Company neither the Company, nor its
subsidiaries, is in default with respect to any liabilities or obligations and
all such liabilities or obligations shown and reflected in the Financial
Statements and Closing Balance Sheet, and such liabilities incurred or accrued
subsequent to the Company's and its subsidiaries 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 except with respect
to defaults that do not have a material adverse effect on the business, property
and assets of the Company.
4.9 OWNERSHIP OF ASSETS AND LEASES. Attached hereto as Exhibit 4.9(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 Company, or by its subsidiaries, and all of the leases and other agreements
relating to any real, personal or intangible property owned, used, licensed or
leased by the Company, and its subsidiaries. The Company, and its subsidiaries
have good and marketable title to all of its assets, including those listed on
Exhibit 4.9(a), and any income or revenue generated therefrom, in each case free
and clear of any liens, claims, charges, options, rights of tenants or other
encumbrances 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 and (iii) as
set forth on Exhibit 4.9(b). Each of the leases and agreements of the Company,
and its subsidiaries are in full force and effect and constitute a legal, valid
and binding obligation of the Company, and of its subsidiaries, 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
Company, or of its subsidiaries, or to the best of the Company's or
Securityholder's knowledge of any other parties thereto (or event or condition
which, with notice or lapse of time, or both, would constitute a default).
Neither the Company, nor any of its subsidiaries, has 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 Company's knowledge there is
not any such violation or grounds therefor which could adversely affect their
assets or the conduct of its business. Neither the Company, nor any of its
subsidiaries, is 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 asset of the Company's, or its
subsidiaries.
4.10 TAXES. The Company, and its subsidiaries, have paid all taxes due,
assessed and owed by them as reflected on their tax returns and have 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 4.10(a). All federal, state, local, and other taxes of the
Company, or of its subsidiaries, accruable since the filing of such returns have
been properly accrued. No federal income tax returns for the Company, or for its
subsidiaries, have ever been audited by the Internal Revenue Service or any
state or local taxing authority, except as described in Exhibit 4.10(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
Company, or from its subsidiaries, for any period for which returns have been
filed, and to the Company's knowledge, no other examination by the Internal
Revenue Service or any other taxing authority affecting the Company, or its
subsidiaries, is now pending. Except for those taxes set forth on Exhibit
4.10(a), taxes which the Company, or its subsidiaries, were required by law to
withhold or collect subsequent to the incorporation of the Company or its
subsidiaries, have been withheld or collected and have been paid over to the
proper governmental authorities or are properly held by the Company, or by its
subsidiaries, 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 Company, or of its subsidiaries, nor extensions of time for
the assessment of any tax have been given by any current employees of the
Company, or of its subsidiaries. There is not and there will not be any
liabilities for 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 the business of the Company or its subsidiaries, through the close of
business on the Closing Date, or attributable to the conduct of the operations
of the Company, or its subsidiaries, at any time for which Parent or the
Surviving Corporation will have any liability for payment or otherwise,
including, but not limited to, any tax assessed or imposed as a result of any
conversion by the Company or any of its subsidiaries from a Subchapter S to a
Subchapter C corporation. After the Closing, there does not and will not exist
by virtue of the transactions contemplated by this Agreement any liability for
taxes which may be asserted by any taxing authority against the assets of the
Company or its subsidiaries, or the operation of their businesses, and no lien
or other encumbrance for taxes will attach to such assets or the operation of
their businesses.
4.11 CONTRACTS, OTHER AGREEMENTS. Attached hereto as Exhibit 4.11 is a
true and complete list of each material contract, agreement and other instrument
to which the Company, or its subsidiaries, is a party, including, but not
limited to, all bank and financing documents. At Parent's request, the Company,
and its subsidiaries, 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 4.11 hereto are valid and binding upon the
Company, or its subsidiaries, and the other parties thereto and are in full
force and effect, and, neither the Company, nor to the best of the Company's or
Securityholder's knowledge any other party to any such contract, 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 Company, or its subsidiaries, are a party will be materially breached,
violated or result in a default as a result of the transaction contemplated
hereunder.
4.12 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 Company.
4.13 LACK OF DEFAULTS. The Company 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 Company, its subsidiaries. The Company
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 Company, its subsidiaries. The Company, and its
subsidiaries, have conducted and will conduct their 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.
4.14 EMPLOYEES AND EMPLOYEE BENEFIT PLANS.
(a) Attached hereto as Exhibit 4.14(a) is a list of each pension
retirement, profit-sharing, deferred compensation, bonus or other incentive
plan, program, arrangement, or 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 Company contributes or
is a party or is bound or under which it may have liability and under which
employees or former employees of the Company or of its subsidiaries (or their
beneficiaries) are eligible to participate or derive a benefit (the foregoing
herein referred to as the "Employee Benefit Plans). The Company has delivered to
Parent true, correct and complete copies of all Employee Benefit Plans as
currently in effect, and the Company has complied in all material aspects with
any and all obligations required of it under the terms of any plan listed on
Exhibit 4.14(a).
(b) Attached hereto as Exhibit 4.14(b) are the names, social
security numbers and current rate of compensation of all salaried and hourly
paid employees employed by the Company, or by its subsidiaries, as of the date
hereof, and at Closing the Company will provide an updated list of all such
employees as of the date of closing.
4.15 INSURANCE. Attached hereto as Exhibit 4.15 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
Company, or its subsidiaries, for the benefit of or in connection with their
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 neither the
Company nor any of its subsidiaries, has received any notice of cancellation or
termination of any of these policies. Neither the Securityholder nor the Company
have knowledge of any change or proposed change to any of the rates set forth in
the policies listed on Exhibit 4.15 other than as set out in the Policies.
4.16 LABOR MATTERS. Except as set forth on Exhibit 4.16, none of the
employees of the Company or of its subsidiaries are covered by a collective
bargaining agreement, and no collective bargaining efforts with respect to any
of the employees of the Company, its subsidiaries, are pending or, to the
knowledge of the Company 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 Company, or its subsidiaries,
or any of their businesses or operations, is pending or, to the knowledge of the
Company is threatened. The Company, and its subsidiaries, have 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.
4.17 BROKERS AND FINDERS. Except for the fees listed on Exhibit 4.17,
neither the Securityholder nor the Company or any of its subsidiaries, 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. Securityholder agrees to be responsible for
paying all Broker fees incurred by the Company, and its subsidiaries, as a
result of this transaction.
4.18 ACCOUNTS RECEIVABLE.
(a) All accounts receivable of the Company, and its subsidiaries,
shown on the consolidated audited balance sheet of the Company, and its
subsidiaries, as of December 31, 1999, and all notes and accounts receivable
acquired by the Company and its subsidiaries subsequent to December 31, 1999,
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 Company, and its subsidiaries, with respect to
the notes and accounts receivable acquired subsequent to September 30, 1997.
(b) Except as set forth on Exhibit 4.18(b), the Company has no
knowledge as to any of the accounts receivable of the Company or of its
subsidiaries, being subject to any lien or claim of offset, set off or
counterclaim not provided for by the Company's, its subsidiaries, or affiliates,
allowance for doubtful accounts as of the date of execution hereof.
4.19 CONFLICTS OF INTERESTS. Except as described in Exhibit 4.19 (a),
no officer, director or stockholder of the Company, or of its subsidiaries, was
or is, directly or indirectly, a joint investor or co-venturer with, or owner,
lessor, lessee, licensor or license of any real or personal property, tangible
or intangible, owned or used by, or a lender to or debtor of, the Company, its
subsidiaries, and neither the Company, nor any of its subsidiaries, has any
commitments or obligations as a result of any such transactions prior to the
date hereof. Except as described in Exhibit 4.19 (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
Company, its subsidiaries.
4.20 ENVIRONMENTAL COMPLIANCE. Except as listed on Exhibit 4.20(a), to
the best of the Company's knowledge, the Company has complied in all material
respects with all applicable federal, state and local Environmental Health and
Safety Laws with respect to its Premises and its operations and has kept its
premises free and clear of any liens and charges imposed pursuant to such laws.
Neither the Company, nor any its subsidiaries, has 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 Health and Safety
Laws of any governmental body or agency having jurisdiction over the premises.
4.21 OWNERSHIP OF THE STOCK. Except as provided in Exhibit 4.21, the
Securityholder owns all of the Stock beneficially and of record, free and clear
of all liens, restrictions, encumbrances, charges, and adverse claims and the
Stock to be purchased hereunder constitutes One Hundred Per Cent (100%) of
issued and outstanding stock of the Company.
4.22 ABSENCE OF SENSITIVE PAYMENTS. Neither the Securityholder nor, to
the knowledge of the Securityholder and Company, any of the directors, officers,
or stockholders of the Company, its subsidiaries:
(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.
4.23 APPROVAL OF MERGER; RELATED MATTERS. The Securityholder represents
and warrants that such Securityholder, in his capacity as a shareholder of the
Company (i) approves of and consents to the Merger 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 Merger, (iii) waives any
rights to protest or object to the Merger or to the exercise of any statutory
remedy of appraisal as to the Stock owned by such Securityholder as provided in
the NMBCA, (iv) has received a copy of resolutions approving the Merger in
accordance with the NMBCA, and (v), to the extent such Securityholder owes any
amounts to the Company, or its subsidiaries, pursuant to any Promissory Note
issued by such Securityholder to the Company, or to its subsidiaries, consents
to the use of a portion of the Merger Consideration payable to such
Securityholder to pay off each such Promissory Note.
SECTION 5
REPRESENTATIONS, WARRANTIES AND CERTAIN
COVENANTS OF PARENT AND ACG
---------------------------
As a material inducement to induce Securityholder to consummate the
Merger under this Agreement, Parent and ACG represent and warrant that each of
the matters set forth in this Section 5 are true and correct as of the date
hereof, and acknowledge that Securityholder'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 ACG shall survive as
set forth in Section 12.11 herein.
5.1 ORGANIZATION, STANDING, ETC. Parent and ACG are duly organized,
validly existing and in good standing under the laws of its jurisdiction of
their organization. ACG is a 100% direct subsidiary of Parent, which owns all of
the issued and outstanding shares of the capital stock of ACG.
5.2 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 Stock 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 ACG, enforceable against them in accordance with the terms of this
Agreement.
5.3 NO BREACH OR DEFAULTS CAUSED BY AGREEMENT. The making and
execution, delivery, and performance by Parent and ACG 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 ACG are a signatory or a party, or by which they
may be bound, subject to, or affected, now or in the future.
5.4 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 ACG, is or will be necessary for the
valid execution, delivery, and performance of this Agreement by Parent and ACG.
5.5 BROKERS FEES. Parent and ACG represent there are no brokers, other
than those set forth on Exhibit 5.5, involved in this transaction on their
behalf. Parent and ACG shall pay all broker fees contractually obligated to be
paid to those brokers set forth on said Exhibit.
5.6 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 Merger
Agreement.
5.9 CORPORATE FILINGS. All information contained in any public
disclosure made by Parent pursuant to the Act or otherwise was true and correct
at the time of its disclosure.
SECTION 6
CONDITIONS TO CLOSING
---------------------
A. Parent's obligation to consummate the Merger 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.
6.1 PERFORMANCE OF AGREEMENTS. The Company 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
Securityholder in this Agreement shall be true and correct as of the Closing
Date.
6.2 LACK OF MATERIAL LIABILITIES. Neither the Company, nor any of its
subsidiaries, shall have incurred any material liability, direct or contingent
(as that term is ordinarily used), other than in the ordinary course of its
business, since October 31, 1999; including, but not limited to, any tax
liability resulting from the transaction contemplated hereby, or by the
Company's compliance with any of the terms and conditions hereof.
6.3 FINANCIAL STATEMENT. Parent shall have received a balance sheet and
profit and loss statement for the Company, and its subsidiaries, as of December
31, 1999.
6.4 LACK OF DEFAULTS. No Event of Default (as defined in Section 10
hereof) and no event or condition which, with notice or the lapse of time, or
both, would constitute an Event of Default, shall exist.
6.5 EMPLOYMENT AGREEMENT. X. Xxxxx and ACG shall have executed the
Employment Agreement, a copy of which is attached hereto as Exhibit 6.5(a).
6.6 OPINION OF COUNSEL. Parent shall have received an opinion of
counsel from the attorneys for the Company, and Securityholder dated as of the
Closing Date, in form and substance substantially similar to that attached
hereto as Exhibit 6.6.
6.7 COMPLIANCE CERTIFICATE. The Company shall have delivered to Parent
the certificate, attached hereto as Exhibit 6.7, executed by its President,
dated the Closing Date, certifying the fulfillment of the conditions specified
in this Section 6 and the accuracy of the representations and warranties
contained in Section 4 hereof.
6.8 KEY-PERSON TERM LIFE INSURANCE. The Company shall have applied for
an insurance policy on the life of X. Xxxxx, such policy (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).
6.9 REGISTRATION RIGHTS AGREEMENT. The Securityholder and Parent shall
have executed the Registration Rights Agreement, a copy of which is attached
hereto as Exhibit 6.9.
6.10 RELEASE FROM SECURITYHOLDER. Securityholder shall have executed
and delivered to the Parent, in a form satisfactory to Parent's counsel, a
release of any claim that he may have against the Company, and its subsidiaries,
for the repayment of any loan, claim for unpaid compensation, claim for
indemnification or otherwise except for the notes set forth in Exhibit 6.10.
6.11 LEASE OF PREMISES. Company shall have executed an amendment to the
existing lease or a new lease for the Premises under the same terms and
conditions of the existing lease on the Premises; provided, however, that any
such lease or amendment shall allow for its termination by Company upon the
giving of twelve (12) months prior notice.
6.12 CORPORATE DOCUMENTS. Parent shall have received copies of the
following documents:
(a) a certificate of the President of the Company 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 Company
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 Company 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 operations and affairs of the Company as Parent may
reasonably request.
All such documents described in (a) and (b) shall be satisfactory in
form and substance to Parent and its counsel.
6.13 CORPORATE FILINGS. All relevant incorporation and merger documents
shall be filed with the appropriate governmental agencies in the form attached
hereto as Exhibit 6.13.
6.14 NET WORTH. The Company shall have as of the Closing Date, as shown
on the Closing Balance Sheet, a Net Worth greater than or equal to Two Million
Dollars ($2,000,000) as adjusted for deferred taxes and other adjustments
necessary as a result of delivering the Closing Balance Sheet to Parent on an
accrual basis for a "C" corporation. To enable all parties to determine the Net
Worth of the Company, the Securityholder shall cause the Closing Balance Sheet
to be delivered to the Parent at Closing.
B. The Securityholder's and Company's obligation to consummate the Merger
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
the Company and the Securityholder.
6.15 PERFORMANCE OF AGREEMENTS. Parent and ACG shall have performed all
agreements contained herein and required to be performed by each of them prior
to or at the Closing and all of the representations and warranties made by
Parent and ACG in this Agreement shall be true and correct as of the Closing
Date.
6.16 EMPLOYMENT AGREEMENT. ACG shall have executed the Employment
Agreement, a copy of which is attached hereto as Exhibit 6.5(a).
6.17 REGISTRATION RIGHTS AGREEMENT. Parent shall have executed the
Registration Rights Agreement, a copy of which is attached hereto as Exhibit
6.9.
6.18 EMPLOYEE STOCK OPTIONS. Parent shall have taken any and all
actions necessary, including soliciting the approval of its shareholders, if
necessary, to grant One Hundred Thousand (100,000) stock options to the
employees and in the amounts designated in Exhibit 6.18.
6.19 CORPORATE FILINGS. All relevant incorporation and merger documents
shall be filed with the appropriate governmental agencies in the form attached
hereto as Exhibit 6.19.
6.20 RELEASE OF SECURITYHOLDER'S GUARANTY OF COMPANY DEBT. On or before
the Closing Date, Parent and ACG shall acknowledge their obligation to obtain
the release of all of Securityholder's personal guaranties of the Company's debt
listed on Exhibit 6.20, and shall provide Securityholder with written
confirmation of such release from the Company's creditors holding
Securityholder's guaranty within thirty (30) days of Closing. Parent and ACG
shall use its best efforts to obtain Securityholder's release from any guaranty
existing prior to Closing but inadvertently omitted from inclusion on Exhibit
6.20.
SECTION 7
TRANSACTIONS PRIOR TO CLOSING
-----------------------------
Between the date of this Agreement and the Closing, the executive
officers and Board of Directors of the Company shall retain full control of the
management and business of the Company. To enable Parent to prepare for
settlement at the Closing, Parent, Securityholder and the Company agree that
between the date hereof and Closing:
7.1 TAXES. The Company 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 on any of its property or
assets and timely file any returns and reports in connection with the foregoing;
provided, however, nothing herein shall require the Company 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 Company 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 4.10(a) and (b).
7.2 BOOKS OF RECORD AND ACCOUNT; INSPECTION. The Company 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 Company,
examine the Company's books of account and other records, and discuss the
Company'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 Company to incur any material cost with respect
to such accountants and legal counsel.
7.3 FINANCIAL REPORTS. The Company 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 Company's fiscal year), an unaudited financial report of the
Company, 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.
7.4 INSURANCE.
(a) The Company will maintain in effect liability insurance,
property insurance, worker's compensation insurance, the life insurance policies
referenced in Section 6.8 and extended coverage insurance on its personal
property referenced in Section 4.15 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
Company's operations.
7.5 NOTIFICATION. The Company 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
Company or any investigation which the Company 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 Twenty-Five Thousand Dollars
($25,000);
(c) The filing, recording or assessment of a federal, state or
local tax lien against the Company 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 Company 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 Company in its
good faith judgment believes will adversely affect Parent's rights under this
Agreement.
7.6 CORPORATE EXISTENCE. The Company 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.
7.7 MAINTENANCE OF PROPERTIES. The Company 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.
7.8 TRADE SECRETS. The Company will use its best efforts to maintain
the confidentiality of any Business Property Rights of the Company and will seek
to restrict the ability of any employee having knowledge of such proprietary
information or trade secrets from competing with the Company through employment
and non-competition agreements and similar arrangements.
7.9 MERGERS AND OTHER TRANSFERS. The Company 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 Company below $2,000,000 (iii) change the nature of its business, (iv)
create any subsidiaries, or (v) liquidate, dissolve or cease active business
operations.
7.10 CERTIFICATE OF INCORPORATION AND BYLAWS. The Company 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.
7.11 JUDGMENTS AND LIENS. Neither the Securityholder nor the Company
shall 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 Company 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 Company shall in good faith
be prosecuting an appeal or proceedings for review and in respect of which the
Company 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; and
(h) Extension, renewal or refunding of indebtedness secured by
liens permitted by this Section 7.11, provided that the then outstanding amount
of such indebtedness is not increased and such liens do not extend to property
not then encumbered thereby.
7.12 ISSUANCES OF CAPITAL STOCK. The Company 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.
7.13 PURCHASE OF SECURITIES OR ASSETS. The Company 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 Company from maintaining
accounts with federally insured banking institutions or money market funds.
7.14 DECLARATION OF DIVIDENDS, ETC. The Company 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 to any management employees, officers or directors
of the Company, if such action decreases the Net Worth of the Company below Two
Million Dollars ($2,000,000) as adjusted for deferred taxes and other decreases
due to expenses made in the ordinary course of business.
Except as set forth on Schedule 7.14, the Company is further prohibited
from declaring or distributing, without the prior written approval of Parent in
its sole discretion, any executive bonus or other form of additional
compensation.
7.15 PAYMENTS TO OFFICERS. Except as described on Exhibit 7.15, the
Company 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 Company'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 Company in connection with their employment.
7.16 INDEBTEDNESS. The Company 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
Company 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 Company shall have the right to incur
indebtedness in the ordinary course of business for office furniture, equipment,
trade payables, machinery and vehicles.
7.17 EXPENDITURES. The Company shall not make any capital investments
or capital expenditures in excess of an aggregate of Twenty-Five Thousand
Dollars ($25,000) which are outside of the ordinary course of the Company's
business, without the consent of Parent.
7.18 EMPLOYEE BENEFIT PLANS. The Company shall not adopt any new
Employee Benefit Plans but may expand existing benefits subject to the approval
of the Board of Directors. Notwithstanding the foregoing, the Company may amend
its Employee Benefit Plans to the extent necessary to comply with applicable
law.
7.19 MATERIAL CONTRACTS. Except as described on Exhibit 7.19, the
Company 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 Company shall not modify, amend, terminate, waive or release
any benefit or right under any employment agreement, or any other material
agreement to which the Company is a party, without the prior written consent of
Parent.
7.20 NON-BUSINESS ASSETS. The Company 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.
SECTION 8
COVENANTS NOT TO COMPETE
------------------------
8.1 COVENANT NOT TO COMPETE. Except for owning up to five per cent (5%)
of the shares of a publicly-traded company or as otherwise authorized by ACG and
Parent or by the terms of this Agreement, Securityholder shall not, 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 Southwestern Continental United States, or within Two Hundred (200) miles of
an existing project of the Company, and its subsidiaries, for a period of three
(3) years from the date of Closing. Further, Securityholder shall not, during
such period, disclose, divulge, communicate, use to the detriment of the Company
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 Company, including customer
list, personnel information, and other similar data. In addition, Securityholder
shall not, during such period, (i) hire or attempt to hire any employee of the
Company, and its subsidiaries, or (ii) interfere with any contract or other
relationship of the Company, and its subsidiaries, and any of its customers or
suppliers. Securityholder agrees that Parent shall be entitled to injunctive
relief in the event of any breach of the covenants set forth in this paragraph
together with reasonable attorney's fees and damages. Damages shall only be
collectible from the party breaching this provision.
SECTION 9
INDEMNIFICATION
---------------
A. Securityholder and the Company, to the extent set forth in this
Agreement, shall indemnify and hold harmless Parent, ACG and Surviving
Corporation against and in respect to the following, in addition to any losses
otherwise specifically indemnified against in this Agreement, as follows:
9.1 INDEMNIFICATION BY THE SECURITYHOLDER AND THE COMPANY.
(a) BREACH. Subject to the provision of this Section 9.1 and
except as otherwise more specifically set forth herein, the Securityholder and
the Company (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, ACG, the Surviving
Corporation 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 from and against all Adverse Consequences
incurred by such Indemnitee as a result of or incident to (i) any breach of any
representation or warranty of the Company or the Securityholder set forth in
Section 4 of this Agreement, (ii) any material breach or nonfulfillment by the
Company or the Securityholder of, or any noncompliance by the Company or the
Securityholder with, any covenants, agreement, or obligation contained herein or
in any certificate or other document delivered in connection herewith, or (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 Company 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
Company contained in this Agreement or made in connection with the transactions
contemplated hereby.
(b) ENVIRONMENTAL INDEMNIFICATION. The Company and Securityholder
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, 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 Company's business as of 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 Company 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 from the Premises as of the
Closing Date, or (z) arises out of the failure to detect the existence of
Hazardous Materials in the soil, air, surface water or groundwater, or the
performance or failure to perform the abatement of any Hazardous Materials
source as of the Closing Date or the replacement or removal of any soil, water,
surface water, or groundwater containing Hazardous Materials; and/or (ii) is
imposed upon, or incurred by, Parent by reason of or relating to any material
breach, act, omission or misrepresentation contained in Section 4.20.
(c) TAX MATTERS. Company and Securityholder jointly and severally
indemnify each Indemnitee from and against all Adverse Consequences incurred by
any Indemnitee as a result of or incident to any Income Taxes or other Taxes
imposed on the Surviving Corporation, the Company or any of its subsidiaries or
for which the Surviving Corporation, Company or any of its subsidiaries may
otherwise be liable by law or regulation (including, without limitation, the
provisions of Treasury Regulation Section 1.1502-6) or contract, for any taxable
year or period that ends on or before Closing. This indemnity specifically
excludes any taxes that may be imposed on any indemnitee as a result of the
disqualification of this transaction as a tax free reorganization under the
Code.
(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 Company after Closing in connection with the
negotiation or execution of this Agreement or the consummation of the
transactions contemplated hereby, except for those claims made against Parent or
ACG pursuant to Section 5.5, hereof.
(e) SET-OFF. Except as otherwise provided in this Agreement,
Parent shall be entitled to set-off the Securityholder's or the Company's
liability to Parent for indemnification under this Section 9, or under any other
paragraph of this Agreement, after any dispute regarding such liability has been
resolved by the parties or otherwise, by crediting the amount of liability in
equal parts against the consideration due to be paid pursuant to Section 2.2(d)
of this Agreement by reducing the amount of Arguss Stock issued to
Securityholder pursuant to Sections 2.2(d). In the event that Parent desires to
exercise its rights pursuant to this paragraph, the Parent must notify the
Securityholder and Company in writing of its intent to exercise its rights
pursuant to this Section 9.1(e), setting forth the nature of the claim and the
amount proposed to be set-off and any liability alleged by the Parent which is
disputed in writing by the Securityholder shall remain unpaid until such dispute
has been resolved. If Securityholder does not dispute the liability alleged by
Parent, such amounts will be set-off without further notice.
(f) COSTS AND EXPENSES. Except as otherwise provided in this
Agreement, all amounts indemnified pursuant to this Section 9 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 COMPANY'S OBLIGATION. Company's obligation to
indemnify Parent, or to contribute to any party indemnifying Parent, pursuant to
this Section 9 shall expire as of the Closing Date.
(h) TERMINATION OF SECURITYHOLDER'S OBLIGATION. Securityholder's
obligation to indemnify any Indemnitee, or to contribute to any party
indemnifying any Indemnitee, pursuant to this Section 9, shall, except in the
event of actual fraud or intentional non-disclosure, expire three (3) years
after the Closing Date, except as to those involving tax matters, which
obligation shall expire upon the earlier to occur of six (6) years from the
Closing Date or the expiration of any applicable statute of limitations.
9.2 LIMITS OF INDEMNIFICATION. For the purposes of this Section 9, the
Indemnifying Parties Indemnification shall be limited to those Adverse
Consequences which exceed in the aggregate Twenty Five Thousand Dollars
($25,000).
9.3 NO CIRCULAR RECOVERY. Securityholder hereby agrees that he will not
make any claim for indemnification against either Parent or ACG by reason of the
fact that he was a director, officer, employee agent or other representative of
the Company of 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 Surviving Corporation, and
their respective Subsidiaries and Affiliates against the Securityholder.
SECTION 10
TERMINATION
-----------
10.1 TERMINATION BY PARENT. This Agreement may be terminated by Parent,
on or before the Closing Date, upon the occurrence of the following:
(a) If any of the material conditions specified in Section 6 shall
not have been met prior to the Closing Date.
(b) If an event of default, as defined in Section 11, has
occurred, and has not been cured during any applicable cure period.
10.2 TERMINATION BY SECURITYHOLDER. This Agreement may be terminated by
Securityholder, on or before the Closing Date, upon the occurrence of the
following:
(a) If any of the conditions specified in Section 5 shall not have
been met prior to the Closing Date.
(b) If an event of default, as defined in Section 11(a)(ii), has
occurred and has not been cured during any applicable cure period.
(c) If the Closing has not occurred by December 31, 1999.
SECTION 11
DEFAULT
-------
11.1 EVENTS OF DEFAULT. It shall be considered an Event of Default 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 (i) the Company or
Securityholder to the Parent and ACG or by (ii) Parent and ACG to the Company 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 Company the result of which will have a
material adverse effect on the Company 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 Company is obligated or indebted.
11.2 WAIVER BY PARTIES. Any failure by any Party to insist upon strict
performance by any other Party to the Agreement 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 the parties shall have the right thereafter to
insist upon strict performance thereof by any of the other Parties, unless
otherwise agreed to in writing by the parties hereto.
SECTION 12
MISCELLANEOUS
-------------
12.1 COSTS. Except for expenses relating to the preparation of the
December 1999 Audit, which will be paid by Parent, 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.
12.2 SALES AND TRANSFER TAXES. All state sales taxes and all transfer
taxes and all documentary taxes, if any, payable in connection with the Merger
shall be paid by the party to whom such taxes are customarily attributed under
the laws of the State of New Mexico.
12.3 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, Company and Parent, the
provisions of this Agreement shall control.
12.4 TITLES AND CAPTIONS. All article or section 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.
12.5 EXHIBITS. The Exhibits and Schedules referred to herein are hereby
made a part hereof.
12.6 APPLICABLE LAW. This Agreement is to be governed by, and
construed, interpreted, and enforced in accordance with the laws of New Mexico
applicable to agreements to be performed wholly within such state.
12.7 BINDING EFFECT AND ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the successors and assigns of the parties.
Notwithstanding the foregoing, neither the Company nor Parent 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.
12.8 NOTICES. All notices, requests, instructions, or other documents
required hereunder shall be deemed to have been given or made when delivered by
registered or certified mail, return receipt requested, postage prepaid or by
messenger or overnight delivery service to:
If Company then: U.S. Communications, Inc.
0000 Xxxxx Xxxx., XX
Xxxxxxxxxxx, XX 00000
Counsel for Company: Xxxxxxxx, Grammar, Xxxxxxx & Hammar, P.A.
0000 Xxxxxxxxxxxx, XX
Xxxxxxxxxxx, XX 00000
Attn: Xxxxx Xxxxxx, Esq.
If X. Xxxxx then: Xxxxx Xxxxx
c/o U.S. Communications, Inc.
0000 Xxxxx Xxxx., XX
Xxxxxxxxxxx, XX 00000
Counsel for X. Xxxxx: Xxxxxxxx, Grammar, Xxxxxxx & Hammar, P.A.
0000 Xxxxxxxxxxxx, XX
Xxxxxxxxxxx, XX 00000
Attn: Xxxxx Xxxxxx, Esq.
If Parent then: Arguss Holdings, Inc.
Xxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx Xxxxxx
Counsel for Parent: Bleecker & Associates, P.C.
00 Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
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.
12.9 SEVERABILITY. Inapplicability or unenforceability of any provision
of this Agreement shall not impair the operation or validity of any other
provision hereof. If any provision shall be declared inapplicable or
unenforceable, there shall be added automatically as part of this Agreement a
provision as similar in terms to such inapplicable or unenforceable provision as
may be possible and be legal, valid and enforceable.
12.10 ACCEPTANCE OR APPROVAL. By accepting all or approving anything
required to be observed, performed, or fulfilled, or to be given to Parent
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, Parent 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.
12.11 SURVIVAL. All covenants, representations, and warranties made by
the Securityholder and Parent in this Agreement, except in the case of actual
fraud or intentional non-disclosure, shall survive the Closing hereunder for a
period of three (3) years, except as to those involving tax matters, which shall
survive the closing for the lesser of a period of six (6) years or the
expiration of any applicable statute of limitations.
12.12 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 understandings
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.
12.13 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which together shall constitute one instrument.
12.14 SECURITY MATTERS. (a) By executing this Agreement, Parent
acknowledges that: (i) Parent has been advised that the Stock has not been and
will not have been registered under the Act or the New Mexico or Maryland
securities laws or other applicable securities laws of any state, that the
Securityholder in transferring such shares to the Parent will be relying, if
applicable, upon the exemption from such registration requirements contained in
Section 4(1) or 4(2) of the Act as a transaction by a person other than as
issuer, underwriter or dealer and the applicable state exemption; (ii) the Stock
may be "restricted" as that term is used in Rule 144 under the Act as a
consequence of which Parent may not be able to sell the shares unless such
shares are first registered under the Act and any applicable state securities
laws or unless an exemption from such registration, is, in the opinion of
counsel, available; (iii) the Stock will be acquired by Parent for purposes
other than "distribution" as that term is used in Section 2(11) of the Act, and
(iv) Parent will execute, if Securityholder so requests, an appropriate letter
affirming that its intention with respect to the proposed acquisition of the
Stock is that such acquisition be for investment purposes only and not with a
view toward resale or distribution thereof.
(b) The shares of Arguss Stock are not registered under the Act of
1933, and are being issued without registration on the grounds that the sale of
Arguss Stock hereunder is exempt from registration under the 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 representation
to Parent that the shares of Arguss Stock to be issued will be acquired for
investment and not with a view to the sale or distribution of any part thereof,
and that Securityholder has no present intention of selling, granting
participation in or otherwise distributing the same.
Securityholder hereby represents that he is 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. Securityholder further represents that during the
course of the transaction he has had the opportunity to ask questions of, and
receive answers from, representatives of Parent concerning the Parent.
Securityholder hereby agrees that the Arguss Stock may not be
transferred without registration under the Act or an exemption therefrom, and
that in the absence of an effective Registration Statement covering the Arguss
Stock, or an available exemption from registration under the Act, the Arguss
Stock must be held indefinitely. In particular, and without limiting the
foregoing, Securityholder is aware that the Arguss Stock may be not be sold
pursuant to Rule 144 promulgated under the Act unless all conditions of that
Rule are met.
Securityholder hereby agrees that in no event will he transfer any of
the Arguss Stock other than pursuant to an effective Registration Statement
under the Act, or pursuant to the conditions of any legend appearing on said
Arguss Stock.
12.15 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, to the extent that it relates
to the business and affairs of the Company on and prior to the Closing Date. The
cost of preparing any such financial statements shall be borne by the Parent.
12.16 PREPARATION AND FILING OF INCOME TAX RETURNS. The Securityholder
shall furnish to Parent copies of the federal, state, and local income tax
returns of the Company for the period ending on the Closing Date. Parent shall
prepare and furnish all tax returns of the Company for the periods ending after
the Closing Date and shall furnish copies to the Securityholder. In addition to
the rights set forth in Section 8-220 of the Delaware Corporate Law,
Securityholder shall have the right, in the event of an audit, litigation or
other proceeding, to examine such other documentation of the Company that is
reasonably required by such audit, litigation or other proceeding,
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
ATTEST: ARGUSS HOLDINGS, INC.
____________________ By: ______________________________
Title: ___________________________
ATTEST: U.S. COMMUNICATIONS, INC.
____________________ By: _______________________________
Xxxxx Xxxxx, President
WITNESS:
____________________ ___________________________________
XXXXX XXXXX
ATTEST: ARGUSS COMMUNICATIONS GROUP, INC.
____________________ By: ______________________________
Title: ___________________________
