AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") dated as of this
20th day of November, 1996, is entered into by and among Hi, Tiger, Inc., a
Utah corporation (the "Company" or "HTI"), Silicon Beach Communications, Inc.,
a California corporation ("SBC") and Xxxxx Xxxxxx, an individual and the sole
shareholder of SBC ("Shareholder").
RECITALS
A.The respective boards of directors of HTI and of SBC, and the Shareholder,
as the holder of one hundred percent (100%) of the issued and outstanding
common stock of SBC, have approved the acquisition by the Company from the
Shareholder of all of the issued and outstanding capital stock of SBC upon the
terms and subject to the conditions set forth in this Agreement; and
B.Based upon the representations, warranties, covenants and agreements
contained herein, the parties have agreed that SBC will be acquired by HTI and
SBC will become a wholly owned subsidiary of the Company in a stock for stock
transaction intended to qualify as a tax-free reorganization under Section
368(a)(1)(C) of the Internal Revenue Code.
NOW, THEREFORE, in consideration of the agreements, representations,
warranties and covenants herein contained, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1Defined Terms. Capitalized terms not otherwise defined herein shall have
the following meanings.
Affiliate - with respect to any Person, any other Person ("Controlling
Person") that, directly or indirectly, controls such Person and any other
Person that is directly or indirectly controlled by such Controlling Person.
For purposes hereof, the term "control" shall mean the possession of voting
power in the form of ownership of stock or other participation interests,
other than upon events of default, sufficient to change or replace fifty
percent (50%) or more of the board of directors or other management authority
of such Person.
AvTel - AvTel Communications, Inc., a Utah Corporation and the sole
shareholder of the Company.
AvTel Credit Line - the credit agreement between AvTel and SBC set forth
in Exhibit A attached hereto
AvTel Shares - 105,000 shares of the $.001 common stock of AvTel
Balance Sheet Date - the meaning set forth in Section 3.3 hereof
Boardroom - Boardroom Consultants, a California general partnership
with principal offices at 000 X. Xxxxxxxx Xxxxxx, Xxxxx Xxxxxxx,
Xxxxxxxxxx 00000
Boardroom Agreement - the Release and Waiver Agreement in substantially
the form of Exhibit B
Boardroom Shares - 10,000 shares of the $.001 common stock of AvTel
Closing - the meaning set forth in Section 2.3
Closing Balance Sheet - the meaning set forth in Section 8.5
Closing Date - the meaning set forth in Section 2.3
Commission - the Securities and Exchange Commission of the United
States
Employment Agreement - the employment agreement between AvTel and the
Shareholder, in substantially the form of Exhibit C
Financial Statements - the meaning given to such a term in Section 3.2
Intellectual Property - the meaning given such term in Section 3.19
Knowledge - with respect to SBC, the actual present knowledge of the
Shareholder and any of the officers and directors of SBC and shall include
SBC's or any of such director's or officer's (a) possession or review of a
written document or material or (b) awareness or knowledge of oral or written
information at the time of the execution of this Agreement and at the Closing
License Agreement - the License Agreement in substantially the form of
Exhibit D
Liens - any liens, charges, security interests, pledges, rights or claims
of others, restraints on transfer or other encumbrances
Material Adverse Effect - with respect to any Person, a material adverse
effect on the business, prospects, results of operations, financial condition
or assets of such Person and its Subsidiaries, if any, taken as a whole
Non-Competition Agreement - the non-competition agreement in
substantially the form of that attached as Exhibit E
Partner Xxxxxx Debt - the debt in the original principal amount of
$68,000 owed by SBC to Xxxxxxxxx Xxxxxx, an individual, as described in that
certain Note secured by Security Agreement executed contemporaneously with
this Note dated May 16, 1996.
Xxxxxx Pledge - that certain Pledge Agreement dated May 16, 1996 made by
Shareholder as Pledgor and Xxxxxxxxx Xxxxxx as Pledgee
Person - an individual, corporation, partnership, joint venture, trust,
governmental agency or other similar legal entity
SBC Disclosure Schedule - the meaning given such term in Article III
SBC Employees - the employees of SBC listed in the SBC Disclosure
Schedule
Securities Act - the Securities Act of 1933, as amended, and the rules
and regulations thereunder
Shareholder Obligations - the direct or indirect debt and repayment
obligations of SBC, as to which Shareholder has, prior to the date hereof,
personally guaranteed the full payment and performance, as listed in the SBC
Disclosure Schedule
Shares - the meaning given such term in Section 2.1
Subsidiary - with respect to any entity, any corporation of which
securities or other ownership interests having ordinary voting power to elect
a majority of the board of directors or other Persons performing similar
functions are directly or indirectly owned by such entity
Tax and Taxes - the meaning given such terms in Section 3.20
ARTICLE II
THE ACQUISITION
2.1The Acquisition. On the Closing Date and subject to and upon the terms of
this Agreement, in exchange for a certificate representing the AvTel Shares
registered in the name of and to be delivered to the Shareholder, the Company
shall acquire and purchase from the Shareholder and the Shareholder shall
sell, transfer and convey to the Company 1,000 shares of the issued and
outstanding SBC Stock (the "Shares"), constituting, after giving effect to the
transactions contemplated by this Agreement, one hundred percent (100%) of the
issued and outstanding capital stock of SBC. Following the acquisition, SBC
shall continue as a surviving corporation and as a wholly owned Subsidiary of
HTI.
2.2Closing. The Closing of the acquisition shall take place at 10:00 a.m.,
California time, at the offices of Price, Xxxxxx & Parma, LLP, 000 Xxxx
Xxxxxxxx Xxxxxx, Xxxxx 000, Xxxxx Xxxxxxx, Xxxxxxxxxx, 00000, on November 20,
1996 (the "Closing Date") unless another time, date or place is agreed to by
the parties hereto, provided that in no event shall the Closing be delayed
beyond November 30, 1996 without HTI's written consent.
2.3[Intentionally Omitted]
2.4Other Approvals. As a condition to this Agreement and to the consummation
of the transactions contemplated herein, prior to the Closing: (a) the board
of directors and shareholders of SBC shall have adopted and approved this
Agreement and the transactions contemplated hereunder; and (b) the Company
shall have received all consents, waivers and releases from such Persons and
on such terms as it, in its sole discretion, considers advisable.
2.5Closing Events.
(a)Deliveries by SBC and Shareholder. SBC and Shareholder shall deliver
or cause to be delivered to HTI at Closing all the following:
(i)Certificates of good standing from the appropriate authorities,
issued as of a date within five days prior to the Closing Date, certifying
that SBC is in good standing as a corporation in the state of California;
(ii)Incumbency and specimen signature certificates dated the Closing
Date with respect to the respective officers of SBC executing this Agreement
and any other document delivered pursuant hereto on behalf of SBC;
(iii)Copies of the resolutions of SBC's board of directors and
shareholders authorizing the execution and performance of this Agreement and
the contemplated transactions, certified by the secretary or an assistant
secretary (or other comparable officer) of SBC as of the Closing Date;
(iv)The certificates contemplated by Sections 6.1 and 6.2, duly
executed by the chief executive officer and principal accounting and financial
officer of SBC;
(v)Stock certificate(s) representing the Shares, endorsed in blank
or accompanied by duly executed assignment documents, and irrevocable
instructions directing the cancellation hereof and issuance of new stock
certificates reflecting 1,000 shares of SBC's common stock registered in the
name of the Company; and
(vi)Resignations, in writing, of all officers and directors of SBC.
In addition to the above deliveries, SBC and Shareholder shall take all steps
and actions and execute and deliver such other Certifications and documents
as HTI may reasonably request or as may otherwise be necessary to consummate
the transactions contemplated hereby.
(b)Deliveries by HTI. Subject to fulfillment or waiver of the conditions
set forth in Article V and VI, HTI shall deliver or cause to be delivered at
Closing all the following:
(i)Certificates of good standing from the appropriate authorities,
issued as of a date within five days prior to the Closing Date certifying that
HTI is in good standing as a corporation in the state of Utah;
(ii)Incumbency and specimen signature certificates dated the Closing
Date with respect to the officers of HTI executing this Agreement and any
other document delivered pursuant hereto on behalf of HTI;
(iii)Copies of resolutions of the board of directors of HTI
authorizing the execution and performance of this Agreement and the
contemplated transactions, contemplated hereunder, certified by the secretary
or an assistant secretary of HTI as of the Closing Date; and
(iv)Stock certificates representing the Boardroom Shares and the
AvTel Shares.
In addition to the above deliveries, HTI shall take all steps and actions as
SBC or Shareholder may reasonably request or as may otherwise be necessary to
consummate the transactions contemplated hereby.
2.6Termination. This Agreement may be terminated by HTI at any time prior to
the Closing if:
(a)Legal Proceeding. There shall be any actual or threatened action or
proceeding to restrain, prohibit, or invalidate the transactions contemplated
by this Agreement and which, in the judgment of such board of directors, makes
it inadvisable to proceed with the transaction contemplated by this Agreement;
(b)Regulatory Disapproval. Any of the transactions contemplated hereby
are disapproved by the Commission, the California Commissioner of Corporations
or any other regulatory authority whose approval is required or advisable to
consummate such transactions or in the judgment of such board of directors,
made in good faith and based on the advice of counsel, there is substantial
likelihood that any such approval will not be obtained or will be obtained
only on a condition or conditions which would be unduly burdensome, making it
inadvisable to proceed with the Acquisition;
(c)Delay of Closing. The Closing shall not have occurred prior to
November 30, 1996, or such later date as shall have been approved by the board
of directors of HTI; or
(d)Non-Compliance. If either SBC or Shareholder shall fail to comply in
any material respect with any of their covenants or agreements contained in
this Agreement or if any of the representations or warranties of SBC or
Shareholder contained herein shall be inaccurate.
In the event of termination pursuant to paragraphs (a) through (c), above, no
obligation, right, or liability shall arise hereunder, and each party shall
bear all of the expenses incurred by it in connection with the negotiation,
preparation, and execution of this Agreement and the transactions contemplated
hereby. In the event of termination pursuant to paragraph (d) of this Section
2.6, HTI shall have no obligation or liability but shall be entitled to
recover from SBC and Shareholder all expenses, fees and costs incurred in
connection with the negotiation, preparation, and execution of this Agreement
and the transactions contemplated hereby.
ARTICLE III
REPRESENTATIONS, COVENANTS AND WARRANTIES OF
SBC AND THE SHAREHOLDER
In this Agreement, any reference to any event, change, condition or
effect being "material" with respect to any entity or group of entities means
any material event, change, condition or effect related to the condition
(financial or otherwise), properties, assets (including intangible assets),
liabilities, business operations, results of operations or prospects of such
entity or group of entities. In this Agreement, any reference to a "Material
Adverse Effect" or "Material Adverse Change" with respect to any entity or
group of entities means any event, change or effect that is materially adverse
to the condition (financial or otherwise), properties, assets, liabilities,
business, operations, results of operations or prospects of such entity and
its subsidiaries, taken as a whole. As an inducement to, and to obtain the
reliance of HTI, except as set forth in a disclosure schedule dated as of the
date hereof and delivered by SBC and Shareholder to HTI (the "SBC Disclosure
Schedule") SBC and Shareholder jointly and severally represent and warrant as
of the date hereof and as of the Closing Date, as follows:
3.1Organization. SBC is, and will be on the Closing Date, a corporation duly
organized, validly existing, and in good standing under the laws of the state
of California and has the corporate power and is and will be duly authorized,
qualified, franchised, and licensed under all applicable laws, regulations,
ordinances, and orders of public authorities to own all of its properties and
assets and to carry on its business in all material respects as it is now
being conducted, and there are no other jurisdictions in which it is not so
qualified in which the character and location of the assets owned by it or the
nature of the material business transacted by it requires qualification,
except where failure to do so would not have a Material Adverse Effect.
3.2Capitalization. The authorized capitalization of SBC consists of 1,000,000
shares of Common Stock, no par value (the "SBC Stock"), of which 1,000 shares
are issued and outstanding, consisting of 1,000 shares registered in the name
of Shareholder. All issued and outstanding shares of SBC Stock are duly
authorized, legally issued, fully paid, and nonassessable, are not subject to
any preemptive or other right of any Person created by statute, the Articles
of Incorporation or Bylaws of SBC and, except for the Xxxxxx Pledge, are free
of any Liens. There are no dividends or other amounts due or payable with
respect to any of the shares of SBC Stock. SBC has no Subsidiaries.
3.3Financial Statements.
(a)The financial statements of SBC, including the notes thereto and
consisting of the unaudited balance sheets of SBC (the "SBC Balance Sheets"),
as of October 31, 1996 (the "Balance Sheet Date"), and the related unaudited
consolidated statements of operations, changes in stockholders' equity and
cash flows for the ten month period then ended (the "Financial Statements")
contain all adjustments (all of which are normal recurring adjustments)
necessary to present fairly the results of operations and financial position
for the periods and as of the dates indicated. True and correct copies of
such Financial Statements have been furnished to HTI. Such Financial
Statements are complete and accurate in all material respects as of their
respective dates, fairly present the financial condition and results of
operations as of the date thereof, and have been prepared in accordance with
generally accepted accounting principles consistently applied on a consistent
basis throughout the periods involved.
(b)SBC did not have, as of the Balance Sheet Date except as and to the
extent reflected or reserved against therein, any liabilities or obligations
(absolute, contingent or otherwise) which should be reflected in a balance
sheet or the notes thereto prepared in accordance with generally accepted
accounting principles under which they were prepared, and all assets reflected
therein present fairly the assets of SBC in accordance with generally
accepted accounting principles under which they were prepared. The accounts
receivables reflected in the SBC Balance Sheets arose in the ordinary course,
are fully collectible and not subject to any claims of setoff or reduction.
The statements of operations, shareholders' equity and cash flows present
fairly the consolidated financial position and results of operations of HTI as
of their respective dates and for the respective periods covered thereby. HTI
maintains and will continue to maintain a standard system of accounting
established and maintained in a manner permitting the preparation of financial
statements in accordance with generally accepted accounting principles under
which they were prepared.
(c)The Financial Statements have been presented or will be amended to be
presented in accordance with the requirements of Regulation S-X promulgated by
the Commission regarding the form and content of and requirements for
financial statements to be filed with the Commission
(d)The books and records, financial and otherwise, of HTI and its
subsidiaries are in all material respects complete and correct and have been
maintained in accordance with sound business and bookkeeping practices so as
to accurately and fairly reflect the transactions and dispositions of the
assets and liabilities, actual, contingent or otherwise, of SBC.
3.4Information. The information concerning SBC and Shareholder set forth or
otherwise provided or furnished in connection with this Agreement; including
the SBC Disclosure Schedule, is complete and accurate in all material respects
and did not and does not contain any untrue statement of a material fact or
omit to state a material fact required to make the statements made, in light
of the circumstances under which they were made, not misleading. True and
correct copies of the Xxxxxx Debt, the Xxxxxx Pledge, the Xxxxxx Security
Agreement and each of the written contracts, agreements and leases listed in
the SBC Disclosure Schedule have been delivered to the Company on or prior to
the Closing Date and there are no amendments, revisions or changes, oral or in
writing, to any of the foregoing.
3.5Options; Equity Interests. Except as set forth in the SBC Disclosure
Schedule, there are no existing options, warrants, calls, rights, agreements
or commitments of any character relating to the authorized and unissued
capital stock of or equity participation in SBC ("Equity Interest") and no
Person has such an Equity Interest . Neither SBC nor Shareholder is a party
to or obligated under any agreement, contract, understanding, commitment or
arrangement, expressed or implied, oral or in writing obligating them, jointly
or severally, to either (a) issue, deliver, sell, repurchase or redeem, or
cause to be issued, delivered, sold, repurchased or redeemed, any shares of
SBC Stock obligating or (b) grant, extend, accelerate the vesting of, change
the price of, or otherwise amend or enter into any such Equity Interest.
3.6Absence of Certain Changes or Events. Since the Balance Sheet Date:
(a)SBC has conducted its business in the ordinary course and there has
not been (i) any change, event or condition in the business, operations,
properties, level of inventory, assets, or condition of SBC or (ii) any
damage, destruction, or loss that has resulted in or might reasonably expect
to result in a Material Adverse Affect;
(b)SBC has not (i) amended its articles of incorporation or bylaws;
(ii) declared, set, made, or agreed to declare, or make any dividends or
distributions of any assets of any kind whatsoever or purchased or redeemed,
or agreed to purchase or redeem, any of its capital stock; (iii) waived any
rights; (iv) made any material change of management, operations, or
accounting; (v) entered into any other material transactions; (vi) made any
accrual or arrangement for or payment of kind or any severance or termination
pay to any present or former officer, director or employee; (vii) increased
the rate of compensation payable or to become payable by it to any of their
respective officers or directors or employees; (viii) made any increase in any
profit-sharing, bonus, or other employee benefit plan; or employees; or (ix)
made any representations, agree to merit, promise or commitment of any nature
whatsoever, expressed or implied, on behalf of the Company or AvTel, with
respect to any of the matters referred in the preceding clauses (i) through
(viii).
(c)Neither SBC nor Shareholder has (i) granted or agreed to grant any
options, warrants, calls, commitments or other rights for the Shares, the SBC
Stock or any of the capital stock of either the Company or AvTel; (ii)
borrowed or agreed to borrow any funds or incurred, or become subject to, any
debt, obligation or liability (absolute or contingent) except liabilities
incurred in the ordinary course of business; (iii) loaned or advanced funds or
granted extensions of credit (or agreed to do any of the foregoing) to any
Person or guaranteed, directly or indirectly, in any manner whatsoever, the
payment or performance obligations, in whole or in part, of any other Person;
(iv) paid or prepaid any material obligation or liability (absolute or
contingent) other than current liabilities reflected on or shown on the SBC
Balance Sheets included in the Financial Statements; (v) sold or transferred,
or agreed to sell or transfer, any assets, properties, or rights or canceled,
or agreed to cancel, any debts or claims; (vi) made or permitted any amendment
or termination of any material contract, agreement, or license to which it is
a party; (vii) issued, delivered, or agreed to issue or deliver any stock,
bonds, or other corporate securities including debentures (whether authorized
and unissued or held as treasury stock); (viii) entered into, amended,
modified or changed any Affiliate Transaction (as defined herein) or paid,
discharged, released, waived, transferred, assigned, canceled or terminated
any rights, duties liabilities or obligations under any Affiliate Transaction;
or (ix) made any representations, agreements, promises or commitments of any
nature whatsoever, expressed or implied, on behalf of the Company or AvTel,
with respect to any of the matters referred in the preceding clauses (i)
through (viii).
(d)Neither SBC nor Shareholder has become subject to any law or
regulation which materially and adversely affects, or in the future may
adversely affect, the business, operations, properties, assets, or condition
of SBC.
3.7Title. SBC has good and marketable title to all of its properties,
inventory, interests in properties, Intellectual Property and assets in each
case, free and clear of all mortgages, security interests, royalties, liens,
pledges, charges, or encumbrances. Shareholder has good and marketable title
to the Shares free and clear of all mortgages, security interests, royalties,
Liens, pledges, charges or encumbrances.
3.8Litigation. There are no actions, suits, or administrative or other
proceedings pending or threatened by or against SBC or Shareholder or
affecting either of them or their respective properties, at law or in equity,
before any court or other governmental agency or instrumentality, domestic or
foreign, or before any arbitrator of any kind. There is no judgment, decree
or order that could prevent, enjoin, alter or materially delay any of the
transactions contemplated by this Agreement, or that could reasonably be
expected to have a Material Adverse Affect on SBC.
3.9Contracts. There are no material contracts, agreements, franchises,
leases, license agreements, or other commitments to which SBC is a party by
which any of its properties are bound. All contracts, agreements,
franchises, license agreements, and other commitments to which SBC is a party
or by which it is bound and which are material to its operations or financial
condition are valid and enforceable. Neither SBC nor Shareholder is a party
to or bound by any material contract, agreement, lease, other commitment or
instrument or any judgment, order, injunction, decree, or award which
materially and adversely affects, or in the future may materially and
adversely affect, the business, operations, properties, assets, or condition
of SBC. Neither SBC nor Shareholder is a party to any contract, agreement,
understanding, arrangement or commitment, oral or in writing, expressed or
implied (a) regarding or relating to the employment of any officer, director,
or employee which is not terminable on 30 days (or less) notice; (b) except
for the Xxxxxx Debt, relating to the borrowing of money; or (c) except for the
Shareholder Obligations, any guarantee of any obligation for the borrowing of
money or otherwise.
3.10Material Contract Defaults. Neither SBC nor Shareholder is in default
under the terms of any of the Shareholder Obligations or any other contract,
agreement, lease, or other commitment which is material to the business,
operations, properties, assets, or condition of SBC, and there is no event of
default or other event which, with notice or lapse of time or both, would
constitute a default under the Shareholder Obligations or any other contract,
agreement, lease, or other commitment.
3.11No Conflict With Other Instruments. The execution of this Agreement and
the consummation of the transactions contemplated by this Agreement will not
violate any provision of SBC's Articles of Incorporation or Bylaws and will
not result in the breach of any term or provision of, or constitute an event
of default under, any indenture, mortgage, deed of trust, or other contract,
agreement, or instrument, expressed or implied, oral or in writing, to which
SBC or Shareholder is a party or to which either of their properties, assets
or operations are subject.
3.12Governmental Authorizations. SBC has obtained all licenses, franchises,
permits, and other governmental authorizations that are legally required to
enable it to conduct its businesses as conducted on the date of this Agreement
and as of the Closing Date.
3.13Compliance With Laws and Regulations. SBC has complied with and is not in
violation of and has not received any notices of violation with respect to all
applicable statutes and regulations of any federal, state, or other
governmental entity, including, with respect to the Shares, all applicable
securities statutes and regulations.
3.14Insurance. SBC has policies of insurance and bonds of the type and in the
amounts customarily carried by persons conducting businesses or owning assets
similar to those of SBC. All of the insurable properties of SBC are insured
for full replacement value (subject to reasonable deductibles) against losses
due to fire and other casualty, with extended coverage, and other risks
customarily insured against, by persons operating similar properties. Such
policies will be outstanding and in full force at the Closing Date. There is
no material claim pending under any of these policies or bonds and all
premiums due and payable under all such policies and bonds have been paid.
3.15Employee Relations. SBC has complied with all applicable laws, rules, and
regulations that relate to prices, wages, hours, harassment, disabled access,
and discrimination in employment and collective bargaining and to the
operation of its business and has duly paid or accrued and is not liable for
any arrears of wages or any payroll and other taxes or penalties for failure
to comply with any of the foregoing. There are no written employment
agreements in place or currently in effect for any of SBC's employees and all
such employees have been and are engaged as "at will" employees. No
representations, warranties, commitments or understandings of any nature
whatsoever, oral or in writing, expressed or implied, have been made, offered
or entered into by SBC or Shareholder to or with any person on behalf of the
Company or AvTel, or that might reasonably be expected to be on behalf of or
attributable to the Company or AvTel, with respect to the terms or conditions
of any employment relationship between such person and either the Company or
AvTel and any of their affiliates, including but not limited to duration,
wages, salaries, bonuses, stock options, benefits or other matters relating to
any such employment relationship.
3.16Interested Party Transactions. SBC is not indebted to Shareholder or to
any director, officer, Affiliate, employee or agent of SBC or any of its
Subsidiaries (except for amounts due as normal salaries and bonuses and in
reimbursement of ordinary expenses), and no such Person is indebted to SBC or
any of its subsidiaries, and there have been no other transactions of the
type required to be disclosed pursuant to items 402 and 404 of Regulation S-B
under the Securities Act and the Exchange Act.
3.17Brokers' and Finders' Fees. Neither SBC nor Shareholder has incurred, nor
will it incur, directly or indirectly, any liability for brokerage or finders'
fees or agents' commissions or investment bankers' fees or any similar charges
in connection with this Agreement or any transaction contemplated hereby.
3.18Board Approval. The Board of Directors of SBC has unanimously approved
this Agreement and determined that the Agreement is in the best interests of
SBC.
3.19Intellectual Property. SBC owns or has valid and enforceable, royalty
free, world-wide, transferable, unrestricted rights and licenses to use, in
the conduct of its business as presently conducted and as expected to be
conducted following the consummation of the transactions contemplated by this
Agreement, all (a) patents, patent applications and invention disclosures; (b)
copyrights and registrations and applications for registration thereof; (c)
masks, mask designs and mask works, and registrations and applications for
registration thereof; (d) computer software, passwords, codes and other data,
and documentation; (e) trade secrets (including ideas, formulas, compositions,
inventions, whether patentable or unpatentable and whether or not reduced to
practice), know-how, manufacturing and production processes and techniques,
research and development information, drawings, specifications, designs,
plans, proposals, technical data and copyrightable works; and (f) registered
and common law trademarks, service marks, tradenames, trademark and service
xxxx applications and copies thereof and tangible embodiments thereof (in
whatever form or medium) (collectively, "Intellectual Property"). Shareholder
has transferred, conveyed and sold to SBC all of his right, title and interest
in and to all of such Intellectual Property free and clear of any liens. The
Intellectual Property constitute all of the intellectual property, whether or
not owned by SBC, used by it to any material extent in the conduct of the
business as presently conducted by SBC and as expected to be conducted
following the acquisition. None of such Intellectual Property has been
assigned, transferred or licensed to or from any third party and the validity
or enforceability as used in the conduct of the business as presently
conducted by SBC and as expected to be conducted following the consummation of
the transactions contemplated by this Agreement has not been challenged by
others in any proceeding or dispute about which SBC or Shareholder has
received notice in writing, nor is there any pending or, to the knowledge of
SBC or Shareholder, threatened litigation or proceeding challenging SBC's
right to use any of such Intellectual Property. SBC's use of the Intellectual
Property does not conflict with or constitute an infringement of the rights of
any other person. The consummation of the transactions contemplated by this
Agreement will not adversely affect SBC's rights to Intellectual Property.
3.20Taxes. The Financial Statements properly and accurately reflect all
accruals for all taxes, assessments or charges of a governmental nature,
whether state, federal, local or otherwise, and whether in the nature of
income, payroll, sales, value-added, ad-valorem, property or otherwise
("Taxes"). Neither SBC nor Shareholder has any Tax deficiency or claim
outstanding or assessed against it/him, or, to SBC's Knowledge, proposed
against it, and there is no basis for any such deficiency or claim, which is
reasonably likely to result in the imposition of any Lien, claim or
encumbrance on the business assets or properties of SBC. All Tax and
information returns and reports required to be filed by SBC have been duly and
timely filed and all Taxes which were required to be paid have been paid. The
SBC Disclosure Schedule constitutes a complete list of all real property and
personal property tax bills of SBC for the current and prior property tax
years, indicating whether or not SBC or Shareholder has Knowledge of any
proposal by any such taxing authority to change the assessed values or
assessment rate reflected in such bills.
3.21Representations Complete. None of the representations or warranties made
by SBC or Shareholder herein or the Disclosure Schedule or any certificate or
statement furnished pursuant to this Agreement or the transactions
contemplated hereunder contains or will contain at the Closing Date any untrue
statement of a material fact, or omits or will omit to state any material fact
necessary in order to make the statements contained herein or therein, in the
light of the circumstances under which made, not misleading.
ARTICLE IV
REPRESENTATIONS, COVENANTS AND WARRANTIES
OF THE COMPANY
As an inducement to, and to obtain the reliance of, SBC and Shareholder,
HTI represents and warrants as follows:
4.1Organization. HTI is and will be on the Closing Date a corporation duly
organized, validly existing, and in good standing under the laws of the State
of Utah and has the corporate power to own all of its properties and assets
and to carry on its business in all material respects as it is now being
conducted, and there are no other jurisdictions in which it is not so
qualified in which the character and location of the assets owned by it or
the nature of the material business transacted by it requires qualification,
except where failure to do so would not have a Material Adverse Affect on the
business, operations, properties, assets, or condition of HTI. The AvTel
shares, when, if and as issued pursuant to this Agreement will be duly
authorized, fully paid and nonassessable.
4.2Approval of Agreements. HTI has all requisite corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions herein contemplated. The execution, delivery, and performance of
this Agreement by HTI has been duly authorized by all necessary corporate
action on the part of HTI. This Agreement has been duly authorized, executed,
and delivered by HTI and is the legal, valid, and binding obligation of AvTel
enforceable in accordance with its terms except as such enforcement may be
limited by bankruptcy, insolvency, or other laws affecting enforcement of
creditor's rights generally and by general principles of equity.
4.3DISCLAIMER. THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS ARTICLE
IV ARE THE ONLY REPRESENTATIONS AND WARRANTIES MADE BY OR ON BEHALF OF HTI AND
NO OTHER REPRESENTATIONS OR WARRANTIES, EXPRESSED, IMPLIED OR STATUTORY HAVE
BEEN MADE BY OR ON BEHALF OF HTI, ITS OFFICERS, DIRECTORS, AGENTS,
REPRESENTATIVES OR SHAREHOLDERS WITH RESPECT TO THIS AGREEMENT, OR THE OTHER
AGREEMENTS AND TRANSACTIONS CONTEMPLATED HEREIN AND THEREIN OR WITH RESPECT TO
HTI OR ITS BUSINESS, FINANCIAL CONDITION, PROSPECTS, TECHNOLOGY OR OTHERWISE.
ARTICLE V
SPECIAL COVENANTS TO BE SATISFIED PRIOR TO CLOSING
5.1Activities of SBC and Shareholder
(a)From and after the date of this Agreement until the Closing Date SBC and
Shareholder will each:
(i)Carry on the business of SBC in substantially the same manner as
it has heretofore;
(ii)Maintain in full force and effect insurance comparable in
amount and in scope of coverage to that now maintained by SBC;
(iii)Perform in all material respects all obligations under SBC's
contracts, leases, and instruments relating to or affecting its assets,
properties, and business;
(iv)Maintain and preserve SBC's business organization
intact, retain its key employees, and to maintain its relationships with
material suppliers and customers;
(v)duly and timely file for all taxable periods ending on
or prior to the Closing Date all tax returns required to be filed by and pay,
or cause to pay, all Taxes required to be shown as due and payable on such
returns, as well as all installments of tax due and payable during the period
commencing on the date of this Agreement and ending on the Closing Date;
(vi)withhold from each payment made on or prior to the
Closing Date to each employee or consultant the amount of all Taxes required
to be withheld and pay the same, before becoming delinquent, to the proper tax
receiving officers; and
(vii)fully comply with and perform in all material
respects all obligations and duties imposed on it by all federal, state,
county and local laws and all rules, regulations, and orders imposed by
federal, state, county and local governmental authorities.
(b)From and after the date of this Agreement until the Closing Date, SBC
and Shareholder will not:
(i)make any change in SBC's Articles of Incorporation or
bylaws;
(ii)enter into or amend any contract, agreement, or other
instrument, except in the ordinary course of business; and
(iii)enter into any agreement, waiver, or other arrangement
providing for an extension of time with respect to payment by, or assessment
against, such entity or any of its subsidiaries of any tax due and payable
with respect to the period commencing on the date of this Agreement and ending
on the Closing Date.
5.2Access to Properties and Records. SBC and Shareholder will afford to HTI's
officers and authorized representatives full access to the properties, books,
and records of SBC in order that the other may have full opportunity to make
such reasonable investigation as it shall desire to make of the affairs of the
other and will furnish the other with such additional financial and operating
data and other information as to the business and properties of as from time
to time be reasonably requested.
5.3Securities Laws Matters - AvTel Shares. The consummation of this
Agreement and the transactions contemplated herein, including the issuance of
the AvTel Shares, constitutes the offer and sale of securities under the
Securities Act and applicable state statutes. Such transactions shall be
consummated in reliance on exemptions from the registration and prospectus
delivery requirements of such statutes which depend, among other items, on the
circumstances under which such securities are acquired.
(a)In order to provide documentation for reliance upon exemptions from
the registration and prospectus delivery requirements for such transactions,
SBC and the Shareholder acknowledge and concur in, the following
representations and warranties:
(i)SBC and Shareholder acknowledge that neither the
Commission nor the securities commission of any state or other federal agency
has made any determination as to the merits of acquiring the AvTel Shares and
that this transaction involves certain risks.
(ii)SBC and Shareholder each has such knowledge and experience in
business and financial matters that they are capable of evaluating SBC, HTI
and AvTel and their business operations as the case may be.
(iii)All information which SBC and Shareholder have provided to HTI
or its agents or representatives concerning their suitability and intent to
hold the AvTel Shares following the transactions contemplated hereby is
complete, accurate, and correct.
(iv)Neither SBC nor Shareholder has offered or sold any AvTel Shares
or other securities of AvTel or interest in this Agreement and have no present
intention of dividing the AvTel Shares to be received or the rights under this
Agreement with others or of reselling or otherwise disposing of any portion of
such stock or rights, either currently or after the passage of a fixed or
determinable period of time or on the occurrence or nonoccurrence of any
predetermined event or circumstance.
(v)Shareholder understands that the AvTel Shares have not been
registered, but are being acquired by reason of a specific exemption under the
Securities Act as well as under certain state statutes for transactions by an
issuer not involving any public offering and that any disposition of the
subject AvTel Shares may, under certain circumstances, be inconsistent with
this exemption and may make the undersigned an "underwriter" within the
meaning of the Securities Act. It is understood that the definition of
"underwriter" focuses upon the concept of "distribution" and that any
subsequent disposition of the subject AvTel Shares can only be effected in
transactions which are not considered distributions. Generally, the term
"distribution" is considered synonymous with "public offering" or any other
offer or sale involving general solicitation or general advertising. Under
present law, in determining whether a distribution occurs when securities are
sold into the public market, under certain circumstances one must consider the
availability of public information regarding the issuer, a holding period for
the securities sufficient to assure that the persons desiring to sell the
securities without registration first bear the economic risk of their
investment, and a limitation on the number of securities which the stockholder
is permitted to sell and on the manner of sale, thereby reducing the potential
impact of the sale on the trading markets. These criteria are set forth
specifically in Rule 144 promulgated under the Securities Act, which allows
sales of securities in reliance upon Rule 144 only in limited amounts in
accordance with the terms and conditions of that rule, after two years after
the date the AvTel Shares are acquired, as calculated in accordance with Rule
144(d). After three years from the date the AvTel Shares acquired are fully
paid for, as calculated in accordance with Rule 144(d), they can generally be
sold without meeting those conditions, provided the holder is not (and has
not been for the preceding three months) an affiliate of the issuer.
(vi)Shareholder acknowledges that the AvTel Shares must be held and
may not be sold, transferred, or otherwise disposed of for value unless they
are subsequently registered under the Securities Act or an exemption from such
registration is available. Neither HTI nor AvTel is under any obligation to
register the AvTel Shares under the Securities Act, except as may be expressly
agreed to by it in writing. If Rule 144 is available (and no assurance is
given that it will be except as expressly set forth in this Agreement), after
two years and prior to three years following the date the shares are fully
paid for, only routine sales of AvTel Shares in limited amounts can be made in
reliance upon Rule 144 in accordance with the terms and conditions of that
rule. Neither HTI nor AvTel is under any obligation to make Rule 144
available, and in the event Rule 144 is not available, compliance with
regulation A or some other disclosure exemption may be required before
Shareholder can sell, transfer, or otherwise dispose of such AvTel Shares
without registration under the Securities Act. AvTel's registrar and transfer
agent will maintain a stop transfer order against the registration or transfer
of the AvTel Shares and the certificate representing the AvTel Shares will
bear a legend in substantially the following form so restricting the sale of
such securities:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND ARE
"RESTRICTED SECURITIES" WITHIN THE MEANING OF RULE 144 PROMULGATED UNDER THE
SECURITIES ACT. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT, FOR THE
ACCOUNT OF THE REGISTERED HOLDER, AND MAY NOT BE SOLD OR TRANSFERRED WITHOUT
COMPLYING WITH RULE 144 IN THE ABSENCE OF AN EFFECTIVE REGISTRATION OR OTHER
COMPLIANCE UNDER THE SECURITIES ACT.
(vii)AvTel may refuse to register further transfers, or resales of
the AvTel Shares in the absence of compliance with Rule 144 unless
Shareholder furnishes the issuer with a "no-action" or interpretive letter
from the Commission or an opinion of counsel reasonably acceptable to AvTel
stating that the transfer is proper. Further, unless such letter or opinion
states that the shares of AvTel are free of any restrictions under the
Securities Act, AvTel may refuse to transfer the AvTel Shares to any
transferee who does not furnish in writing to it the same representations and
agree to the same conditions with respect to such AvTel Shares as set forth
herein. AvTel may also refuse to transfer the AvTel Shares if any
circumstances are present reasonably indicating that the transferee's
representations are not accurate.
(b)In connection with the transactions contemplated by this Agreement,
AvTel, HTI SBC and Shareholder shall each file, with the assistance of the
other and their respective legal counsel, such notices, applications, reports,
or other instruments as may be deemed by them to be necessary or appropriate
in an effort to document reliance on such exemptions, including a notice on
Form D to be filed with the Commission, and the appropriate regulatory
authority in California unless an exemption requiring no filing is available
in such jurisdiction, all to the extent and in the manner as may be deemed by
such parties to be appropriate.
(c)In order to more fully document reliance on the exemptions as provided
herein, SBC and Shareholder shall execute and deliver to HTI and AvTel, at or
prior to the Closing, such further letters of representation, acknowledgment,
suitability, or the like, as AvTel and its counsel may reasonably request in
connection with reliance on exemptions from registration under such securities
laws.
(d)SBC and Shareholder acknowledge that the basis for relying on
exemptions from registration or qualifications are factual, depending on the
conduct of the various parties, and that no legal opinion or other assurance
will be required or given to the effect that the transactions contemplated
hereby are in fact exempt from registration or qualification.
(e)SBC AND SHAREHOLDER ACKNOWLEDGE THAT THE AVTEL SHARES INVOLVES A
NUMBER OF RISKS AND THAT, PRIOR TO THE CLOSING THEY HAVE RECEIVED AND
CONSIDERED ALL THE INFORMATION CONTAINED IN THE FOLLOWING MATERIALS: (i)
AVTEL COMMUNICATIONS, INC. RISK FACTORS DATED NOVEMBER 18, 1996; (ii) FORM 8-K
DATED NOVEMBER 7, 1996; (iii) AVTEL'S INFORMATION STATEMENT DATED OCTOBER 4,
1996 RELATING TO A SPECIAL MEETING OF AVTEL'S SHAREHOLDERS ON OCTOBER 23,
1996; (iv) AVTEL'S REPORT IN FORM 10-SB FOR THE FISCAL YEAR ENDED SEPTEMBER
30, 1995 (AS AMENDED); AND (v) AVTEL'S REPORT ON FORM 10-Q FOR THE QUARTER
ENDED JUNE 30, 1996.
5.4Standstill Agreement. The Shareholder agrees that he will not (a) either
separately or in combination with others and without the prior written consent
of HTI offer or propose to sell all or any part of the Shares or solicit, from
others, or seek to change or influence the management of SBC and (b) offer to
sell, negotiate, or solicit from others, offers to purchase all or
substantially all of the business and assets of SBC or any capital stock of
SBC.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF HTI
The obligations of HTI under this Agreement are subject to the
satisfaction, at or before the Closing Date, of the following conditions:
6.1Accuracy of Representations. The representations and warranties made by
SBC and Shareholder in this Agreement were true when made and shall be true at
the Closing Date with the same force and affect as if such representations and
warranties were made at and as of the Closing Date and SBC and Shareholder
shall have performed or complied with all covenants and conditions required by
this Agreement to be performed or complied with by SBC and Shareholder prior
to or at the Closing. HTI shall be furnished with certificates, signed by
Shareholder and by officers of SBC and dated the Closing Date, to the
foregoing effect.
6.2No Material Adverse Change. Prior to the Closing Date, there shall not
have occurred any material adverse change in the financial condition,
business, or operations of SBC, nor shall any event have occurred which, with
the lapse of time or the giving of notice, may cause or create any Material
Adverse Change in the financial condition, business, or operations of SBC.
HTI shall be furnished with certificates, signed by Shareholder and by
officers of SBC and dated the Closing Date, to the foregoing effect.
6.3Good Standings. HTI shall have received certificates of good standing from
the appropriate authorities, dated as of a date within five days prior to the
Closing Date, certifying that SBC is in good standing as a corporation in the
state of California.
6.4Other Agreements. HTI or AvTel shall have entered into on or before the
Closing, the following agreements, between or among the persons indicated, in
such form and on such terms and conditions as are acceptable to HTI or AvTel,
as the case may be:
(a)Employment and Non-Competition Agreements. The Shareholder shall have
entered into the Non-Competition and Employment Agreements.
(b)License Agreement. SBC, Shareholder and AvTel will have entered into
a License Agreement, pursuant to which AvTel will be granted a nonexclusive,
transferable, royalty-free, worldwide right and license to use SBC's
Intellectual Property.
(c)Employee Agreements. HTI, or its designee, shall have entered into
agreements regarding confidentiality, ownership of Intellectual Property and
other matters with each employee of SBC on such terms as are acceptable to
HTI.
(d)Boardroom Agreement. In connection with the issuance of the Boardroom
Shares, HTI, SBC and AvTel shall have entered into the Boardroom Agreement.
(e)Xxxxxx and Xxxxxx Obligations. HTI shall have received such
assurances as are satisfactory to it and its counsel to the effect that, as to
that certain promissory note obligation (the "Marked Obligation"), in the
original principal amount of $50,000 required by Shareholder and payable to
Xx. Xxxx X. Xxxxxx. The Xxxxxx Obligation has been (i) fully discharged and
paid; (ii) the payer has released all claims for payments there against SBC;
or (iii) Shareholder has agreed to fully and completely indemnify, defend and
hold SBC harmless from and against any claim for payment thereof (and such
indemnity is adequately served); and (iv) the Xxxxxx Debt shall have been
completely and fully discharged and satisfied all liens securing the repayment
and performance thereof shall have been released and discharged and the
Company shall have received releases and waiver from Xxxxxx, all to the
satisfaction of the Company as determined by it in its sole discretion.
ARTICLE VII
MISCELLANEOUS
7.1No Representation Regarding Tax Treatment; Legal Representation. No
representation or warranty is being made by any party to any other regarding
the treatment of this transaction for federal or state income taxation. Each
party has relied exclusively on its own accounting, tax and other advisors
regarding the treatment of this transaction for federal and state income taxes
and no representation, warranty, or assurance from any other party or such
other party's legal, accounting, or other advisor. SBC and Shareholder have
utilized the services of Boardroom for business, financial, legal and other
professional advice in connection with this Agreement and the transactions
contemplated hereunder, and has otherwise had the opportunity to consult with
and has been represented by separate legal counsel in connection with this
Agreement and the transactions contemplated herein. HTI has been represented
by the law firm of Price, Xxxxxx & Parma LLP as its separate counsel in
connection with this Agreement and the transactions contemplated herein.
7.2Governing Law. This Agreement shall be governed by, enforced and construed
under and in accordance with the laws of the United States of America and,
with respect to matters of state law, with the laws of the state of
California.
7.3Notices. All notices, demands, requests, or other communications required
or authorized hereunder shall be deemed given sufficiently if in writing and
if personally delivered; if sent by facsimile transmission, confirmed with a
written copy thereof sent by overnight express delivery; if sent by registered
mail or certified mail, return receipt requested and postage prepaid; or if
sent by overnight express delivery:
If to HTI or AvTel: AVTEL COMMUNICATIONS, INC.
Attn.: Xxxxx X. Xxxxxx
000 Xxxxxxx Xxxxx
Xxxxxx, XX 00000
Telecopier No. 805\685-9685
With a copy to: Xxxxxxx X. Xx Xxxxx, Esq.
Price, Xxxxxx & Parma, LLP
000 Xxxx Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxxxxx, XX 00000
Telecopier No.: (000) 000-0000
If to SBC or Shareholder: Xx. Xxxxx Xxxxxx
253 Daytona
Xxxxxx, XX 00000
or such other addresses and facsimile numbers as shall be furnished by any
party in the manner for giving notices hereunder, and any such notice, demand,
request, or other communication shall be deemed to have been given as of the
date so delivered or sent by facsimile transmission, three days after the date
so mailed, or one day after the date so sent by overnight delivery.
7.4Attorneys' Fees. In the event that any party institutes any action or suit
to enforce this Agreement or to secure relief from any default hereunder or
breach hereof, the breaching party or parties shall reimburse the
non-breaching party or parties for all costs, including reasonable attorneys'
fees, incurred in connection therewith and in enforcing or collecting any
judgment rendered therein.
7.5Third-Party Beneficiaries. This contract is solely among HTI, Shareholder
and SBC, and, except as to AvTel and as otherwise specifically provided, no
director, officer, stockholder, employee, agent, independent contractor, or
any other person or entity shall be deemed to be a third party beneficiary of
this Agreement.
7.6Entire Agreement. This Agreement represents the entire agreement between
the parties relating to the subject matter hereof. All previous agreements
between the parties, whether written or oral, have been merged into this
Agreement. This Agreement alone fully and completely expresses the agreement
of the parties relating to the subject matter hereof. There are no other
courses of dealing, understandings, agreements, representations, or
warranties, written or oral, except as set forth herein.
7.7Counterparts. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original and all of which taken together
shall be but a single instrument.
7.8Amendment or Waiver. Every right and remedy provided herein shall be
cumulative with every other right and remedy, whether conferred herein, at
law, or in equity, and such remedies may be enforced concurrently, and no
waiver by any party of the performance of any obligation by the other shall be
construed as a waiver of the same or any other default then, theretofore, or
thereafter occurring or existing. At any time prior to the Closing Date, this
Agreement may be amended by a writing signed by all parties hereto, with
respect to any of the terms contained herein, and any term or condition of
this Agreement may be waived or the time for performance thereof may be
extended by a writing signed by the party or parties for whose benefit the
provision is intended.
7.9Press Releases and Announcements. No party hereto shall issue any press
release or announcement relating to the subject matter of this Agreement prior
to the Closing without the prior written approval of the other party;
provided, however, that any party may make any public disclosure it believes
in good faith, after receiving the advice of counsel, is required by law or
regulation (in which case the disclosing party will advise the other parties
prior to making the disclosure).
7.10Spousal Consent. The undersigned, being the spouse of the Shareholder has
read the foregoing Agreement in its entirety. Being fully convinced of the
wisdom and equity of the provisions of the Agreement, and in consideration of
the premises, hereby express my acceptance of the same and agree to abide by
its provisions. I clearly understand and agree to be bound by the provisions
of the foregoing Agreement. This instrument is not a transfer or release of
any rights which I may have in any of the community property of my marriage.
The signing of this Agreement by me is for the purpose of showing my consent
and approval of the foregoing Agreement and all of the terms and provisions
thereof, and my agreement to be bound hereby.
ARTICLE VIII
INDEMNIFICATION
8.1Survival. The representations, warranties, covenants and agreements of SBC
and Shareholder and of HTI shall survive the Closing without regard to any
investigations made by the SBC and Shareholder or HTI, as the case may be, or
any knowledge by either of any breach of any such representations, warranties,
covenants or agreements.
8.2Indemnification Provisions for Benefit of HTI. SBC and Shareholder hereby
agree, jointly and severally, to indemnify and to hold HTI and AvTel harmless
from and against any and all causes of action, demands, suits, claims, actual
or threatened (individually a "Claim" and together "Claims") (whether such
Claims are brought by HTI or AvTel or by any third party against HTI or AvTel)
for damages, assessments, losses, liabilities, costs and expenses (including
legal and accounting fees and costs and costs of defense or in enforcing any
of its rights hereunder and interest and penalties), together with interest
from the date on which a Claim hereunder shall be made (collectively,
"Damages"), which arise out of either (a) breaches of any representations,
warranties, covenants or agreements of SBC or Shareholder in this Agreement,
any other agreement contemplated hereunder to which SBC or Shareholder is a
party, or in any Exhibit, Schedule, certificate, list or other instrument
delivered pursuant hereto, or (b) the Xxxxxx Obligations (collectively, the
"Indemnification Events")
8.3Setoff Rights. Either AvTel or HTI may obtain, recover from and for any
and all Damages resulting from or arising out of any Indemnification Event
(collectively, "Claim Events") by setting off and withholding any amounts
payable under or pursuant to the Non-Competition and Employment Agreements.
The foregoing indemnification provisions are in addition to, and not in
derogation of, any statutory or common law remedy of HTI or AvTel for breach
of representation, warranty or covenant and shall in no way be deemed to limit
the indemnification rights of AvTel or HTI hereunder.
8.4Indemnification Provisions - Shareholder Obligations. Provided the
Shareholder is not in breach under any of the representations, warranties,
terms and conditions of this Agreement or any other agreement to which the
Shareholder is a party as contemplated herein, HTI hereby agrees to indemnify
and hold the Shareholder harmless from and against any claims threatened or
asserted against Shareholder as a result of or in connection with any breach
or default by SBC in the full and faithful performance of any of the
obligations which constitute Shareholder Obligations. Notwithstanding the
foregoing, in no event shall HTI have any obligations under the provisions of
this Section 8.4 to the extent that the aggregate amount of damages
(including, but not limited to, all claims for contract or lease payments,
special charges or assessments, penalties and costs and attorneys' fees)
claimed by any third parties under the Shareholder Obligations exceed $50,000
or to the extent that any claims or threatened claims with respect to any such
Shareholder Obligations are asserted or alleged after the second anniversary
of the Closing. In the event any such claims are threatened or asserted
against Shareholder, Shareholder shall promptly notify HTI thereof and shall
fully cooperate, at his expense, with HTI in the defense and settlement
thereof provided however that HTI shall have the sole and exclusive authority
to defend, settle and compromise any such claims on such terms and conditions
as it is in its sole discretion deems appropriate; provided, however, that,
unless otherwise agreed in writing by Shareholder, any settlement and
compromise of any such Claim shall include provisions for a full and complete
discharge and release of Shareholder as to the Shareholder Obligations in
question.
8.5Closing Balance Sheet. Within forty-five (45) days following the Closing
Date, the Company shall prepare, or cause SBC to prepare, a balance sheet of
SBC as of the Closing Date (the "Closing Balance Sheet") and shall furnish a
copy thereof to Shareholder. The Closing Balance Sheet shall be prepared in
accordance with generally accepted accounting principles consistently
applied. If the Closing Balance Sheet reflects total liabilities in excess of
$182,000, Shareholder shall pay to HTI, and HTI shall be entitled to receive,
the difference not later than thirty (30) days after receipt of the Closing
Balance Sheet from HTI. In no event shall Shareholder's maximum liability
under this Section 8.5 exceed the total aggregate amount of all cash payments
due or to become due to Shareholder under the Non-Competition and Employment
Agreements. The Company's rights and remedies hereunder are cumulative and in
addition to its other rights and remedies under this Agreement and the
transactions contemplated hereunder, including the setoff rights described
herein.
IN WITNESS WHEREOF, the corporate parties hereto have caused this
Agreement to be executed by their respective officers, hereunto duly
authorized, as of the date first above written.
HI, TIGER INC.
a Utah corporation
By:
Its Duly Authorized Officer
SILICON BEACH COMMUNICATIONS, INC.
A California Corporation
By:
Its Duly Authorized Officer
SHAREHOLDER
Xxxxx Xxxxxx
SHAREHOLDER'S SPOUSE
By:
Xxxx Xxxxxx
TABLE OF CONTENTS
ARTICLE I DEFINITIONS 1
1.1Defined Terms 1
ARTICLE II THE ACQUISITION 3
2.1The Acquisition 3
2.2Closing 4
2.3Intentionally Omitted
2.4Other Approvals 4
2.5Closing Events 4
2.6Termination 5
ARTICLE III REPRESENTATIONS, COVENANTS AND WARRANTIES OF
SBC AND THE SHAREHOLDER 6
3.1Organization. 7
3.2Capitalization 7
3.3Financial Statements. 7
3.4Information 8
3.5Options; Equity Interests 8
3.6Absence of Certain Changes or Events 9
3.7Title 10
3.8Litigation 10
3.9Contracts 10
3.10Material Contract Defaults 10
3.11No Conflict With Other Instruments 10
3.12Governmental Authorizations 11
3.13Compliance With Laws and Regulations 11
3.14Insurance 11
3.15Employee Relations 11
3.16Interested Party Transactions 11
3.17Brokers' and Finders' Fees 11
3.18Board Approval 11
3.19Intellectual Property 12
3.20Taxes 12
3.21Representations Complete 13
ARTICLE IV REPRESENTATIONS, COVENANTS AND WARRANTIES
OF THE COMPANY 13
4.1Organization 13
4.2Approval of Agreements 13
4.3Disclaimer 13
ARTICLE V SPECIAL COVENANTS TO BE SATISFIED PRIOR
TO CLOSING 14
5.1Activities of SBC and Shareholder 14
5.2Access to Properties and Records 15
5.3Securities Laws Matters - AvTel Shares 15
5.4Standstill Agreement 18
ARTICLE VI CONDITIONS PRECEDENT TO OBLIGATIONS OF HTI 18
6.1Accuracy of Representations 18
6.2No Material Adverse Change 19
6.3Good Standings 19
6.4Other Agreements 19
ARTICLE VII MISCELLANEOUS 20
7.1No Representation Regarding Tax Treatment; Legal Representation 20
7.2Governing Law 20
7.3Notices. 20
7.4Attorneys' Fees 21
7.5Third-Party Beneficiaries 21
7.6Entire Agreement 21
7.7Counterparts 21
7.8Amendment or Waiver 21
7.9Press Releases and Announcements 21
7.10Spousal Consent 21
ARTICLE VIII INDEMNIFICATION 22
8.1Survival 22
8.2Indemnification Provisions for Benefit of HTI 22
8.3Cash Escrow 22
8.4Indemnification Provisions - Shareholder Obligations 22
8.5Closing Balance Sheet 23
SBC DISCLOSURE SCHEDULE
EXHIBITS
Credit Agreement A
Boardroom Agreement B
Employment Agreement C
License Agreement D
Non-Competition Agreement E
SBC DISCLOSURE SCHEDULE
This SBC DISCLOSURE SCHEDULE, dated November , 1996 (the "Disclosure
Schedule") is made in connection with that certain Agreement and Plan of
Reorganization and dated November , 1996 ("Agreement"), by and among Hi,
tiger Inc., a Utah corporation ("Hi, Tiger"), Silicon Beach Communications,
Inc., a California corporation ("SBC") and Xxxxx Xxxxxx ("Shareholder").
Unless otherwise provided, capitalized terms used herein shall have the same
meanings as are ascribed to them in the Acquisition Agreement. The section
references contained in this Disclosure Schedule correspond to the sections
under Article II of the Acquisition Agreement.
[Shareholder Obligations, Employees, Other Information to be provided by
SBC/Shareholder]
AGREEMENT AND PLAN OF REORGANIZATION
by and among
Hi, Tiger Inc., a Utah corporation,
Silicon Beach Communications, Inc., a California corporation
and Xxxxx Xxxxxx
November 20, 1996
