EXECUTION COPY
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AGREEMENT AND PLAN OF EXCHANGE
dated as of the 6th day of October, 1997
by and among
ADVANCED COMMUNICATIONS GROUP, INC.
(Parent)
and
ADVANCED COMMUNICATIONS CORP.
(Old ACG)
and
ACG ACQUISITION II CORP.
(Newco)
and
TELE-SYSTEMS, INC.
(Company)
and
XXXXX XXXXXXXX, XXXX XXXXX, XXXXX XXXXXXXX,
XXX XXXX AND XXXX XXXX
(Stockholders of Tele-Systems, Inc.)
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TABLE OF CONTENTS
1. DEFINITIONS...............................................................2
2. PURCHASE, SALE AND EXCHANGE...............................................7
4. CLOSING...................................................................8
5. SECTION 351 EXCHANGE PLAN.................................................8
6. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF
COMPANY AND STOCKHOLDERS..................................................8
6.1 Due Organization....................................................8
6.2 Authorization.......................................................9
6.3 Capital Stock of the Company........................................9
6.4 Transactions in Capital Stock.......................................9
6.5 No Bonus Shares.....................................................9
6.6 Subsidiaries........................................................9
6.7 Predecessor Status; etc............................................10
6.8 Spinoff by Company.................................................10
6.9 Financial Statements...............................................10
6.10 Liabilities and Obligations........................................10
6.11 Accounts and Notes Receivable......................................11
6.12 Permits and Intangibles............................................11
6.13 Environmental Matters..............................................12
6.14 Personal Property..................................................12
6.15 Significant Customers; Material Contracts and Commitments..........13
6.16 Real Property......................................................14
6.17 Insurance..........................................................14
6.18 Compensation; Organized Labor Matters..............................15
6.19 Employee Plans.....................................................15
6.20 Compliance with ERISA..............................................16
6.21 Conformity with Law; Litigation....................................17
6.22 Tax Matters........................................................18
6.23 No Violations......................................................19
6.24 Absence of Changes................................................19
6.26 Relations with Governments.........................................21
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6.27 Disclosure.........................................................21
6.28 Prohibited Activities..............................................22
6.29 Draft Registration Statement.......................................22
7. ADDITIONAL REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS OF STOCKHOLDERS...............................................22
7.1 Authority..........................................................22
7.2 Preemptive Rights..................................................22
7.3 Tax Matters........................................................23
7.4 No Plan of Distribution............................................23
7.5 No Retained Rights.................................................23
8. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF
PARENT AND OLD ACG.......................................................23
8.1 Due Organization...................................................23
8.2 Authorization......................................................23
8.3 Capital stock......................................................24
8.4 Transactions in Capital Stock, Organization Accounting.............24
8.5 Subsidiaries.......................................................24
8.6 Financial Statements...............................................24
8.7 Liabilities and Obligations........................................25
8.8 Conformity with Law; Litigation....................................25
8.9 No Violations......................................................25
8.10 Validity of Obligations............................................26
8.11 Parent Securities..................................................26
8.12 Business; Real Property; Material Agreement........................26
8.13 Tax Matters........................................................27
8.14 Draft Registration Statement.......................................27
9. OTHER COVENANTS PRIOR TO CLOSING.........................................27
9.1 Access and Cooperation; Due Diligence; Audits......................27
9.2 Conduct of Business Pending Closing................................28
9.3 Prohibited Activities..............................................29
9.4 Exclusivity........................................................30
9.6 Notification of Certain Matters....................................31
9.7 Amendment of Schedules.............................................31
9.8 Compliance with the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976 (the "Xxxx-Xxxxx Act").................................32
9.9 Further Assurance..................................................32
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10. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS......................32
10.1 Representations and Warranties Performance of Obligations..........32
10.2 Satisfaction.......................................................33
10.3 No Litigation......................................................33
10.4 Opinion of Counsel.................................................33
10.5 Consents and Approvals.............................................33
10.6 Good Standing Certificates.........................................33
10.7 No Material Adverse Change.........................................33
10.8 Secretary's Certificates...........................................33
10.9 Employment Agreement...............................................34
10.10 Closing of IPO.....................................................34
11. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT............................34
11.1 Representations and Warranties; Performance of Obligations.........34
11.2 No Litigation......................................................34
11.3 Secretary's Certificate............................................35
11.4 No Material Adverse Effect.........................................35
11.5 Stockholders' Release..............................................35
11.6 Satisfaction.......................................................35
11.7 Termination of Related Party Agreements............................35
11.8 Opinion of Counsel.................................................35
11.9 Consents and Approvals.............................................35
11.10 Good Standing Certificates.........................................36
11.11 FIRPTA Certificate.................................................36
11.12 Closing of IPO.....................................................36
11.13 Noncompetition Covenants of Key Employees..........................36
11.14 Employment Agreement...............................................36
12. COVENANTS OF PARENT WITH STOCKHOLDERS AFTER CLOSING......................36
12.1 Release From Guarantees............................................36
12.2 Preparation and Filing of Tax Returns..............................36
12.3 Preservation of Employee Benefit Plans.............................37
12.4 Rule 144 Filing....................................................37
13. TERMINATION OF AGREEMENT.................................................37
13.1 Termination........................................................37
13.2 Liabilities in Event of Termination................................38
14. NONCOMPETITION...........................................................38
14.1 Prohibited Activities..............................................38
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14.2 Damages............................................................39
14.3 Reasonable Restraint...............................................40
14.4 Severability, Reformation..........................................40
14.5 Independent Covenant...............................................40
14.6 Materiality........................................................40
15. NONDISCLOSURE OF CONFIDENTIAL INFORMATION................................40
15.1 Stockholders.......................................................40
15.2 Parent.............................................................41
15.3 Damages............................................................42
15.4 Survival...........................................................42
16. TRANSFER RESTRICTIONS....................................................42
16.1 Parent Stock.......................................................42
16.2 Warrants and Warrant Stock.........................................42
16.3 Legend.............................................................43
17. INVESTMENT REPRESENTATIONS...............................................43
17.1 Parent Stock.......................................................43
17.2 Warrant Stock......................................................44
18. REGISTRATION RIGHTS......................................................45
18.1 PiggyBack Registration Rights......................................45
18.2 Demand Registration Rights.........................................46
18.3 Registration Procedures............................................47
18.4 Other Registration Matters.........................................49
18.5 Indemnification....................................................50
18.6 Contribution.......................................................53
18.7 Underwriting Agreement.............................................54
18.8 Availability of Rule 144...........................................54
19. GENERAL..................................................................54
19.1 Cooperation........................................................54
19.2 Successors and Assigns.............................................54
19.3 Entire Agreement...................................................54
19.4 Counterparts.......................................................55
19.5 Brokers and Agents.................................................55
19.6 Expenses...........................................................55
19.7 Notices............................................................55
19.8 Governing Law......................................................56
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19.9 Survival of Representations and Warranties.........................57
19.10 Exercise of Rights and Remedies....................................57
19.11 Time...............................................................57
19.12 Reformation and Severability.......................................57
19.13 Remedies Cumulative................................................57
19.14 Captions...........................................................57
19.15 Public Statements..................................................57
19.16 Amendments and Waivers.............................................57
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AGREEMENT AND PLAN OF EXCHANGE
THIS AGREEMENT AND PLAN OF EXCHANGE (this "Agreement") is dated as of
October 6, 1997 by and among ADVANCED COMMUNICATIONS GROUP, INC., a Delaware
corporation organized in September 1997 ("Parent"), ADVANCED COMMUNICATIONS
CORP. (formerly named Advanced Communications Group, Inc.), a Delaware
corporation organized in June 1996 ("Old ACG"), ACG ACQUISITION II CORP., a
Delaware corporation ("Newco"), TELE-SYSTEMS, INC., a Kansas corporation (the
"Company"), and XXXXX XXXXXXXX, XXXX XXXXX, XXXXX XXXXXXXX, XXX XXXX and XXXX
XXXX, the only stockholders of the Company (collectively, the "Stockholders"),
and the owners of 395,834 shares of common stock, no par value, of Company
("Company Stock"), representing all the issued and outstanding capital stock of
the Company on the date of this Agreement ("Shares").
RECITALS
WHEREAS, Old ACG has entered into agreements for, or negotiated the terms
of, the acquisition by merger, asset purchase or stock purchase of ten
companies (or interests therein) engaged in various aspects of the
telecommunications industry ("Founding Companies") for voting capital stock and
other consideration, including cash, one of such agreements being the Agreement
and Plan of Merger dated as of June 2, 1997 among Old ACG, Newco, Company and
the Stockholders (the "Original Agreement"); and
WHEREAS, Old ACG intended to close the acquisition of the Founding
Companies substantially contemporaneously with the consummation of an initial
underwritten public offering of its common stock; and
WHEREAS, the executive officers of Old ACG have determined that it is
desirable for licensing and other regulatory purposes to restructure the
acquisitions of the Founding Companies; and
WHEREAS, as the initial step in the implementation of the restructured
proposal, Old ACG formed Parent as a new Delaware corporation in September 1997
to serve as the vehicle for the acquisition of the Founding Companies
substantially contemporaneously with the consummation of an initial
underwritten public offering ("IPO") of Common Stock, $.0001 par value, of
Parent ("Parent Stock") at the price to the public reflected in the final
prospectus of Parent relating to the IPO ("IPO Price"); and
WHEREAS, under the restructured proposal, contemporaneously with the
consummation of the IPO and as part of a single transaction, the stockholders
of the Founding Companies, including
Stockholders and Old ACG, will transfer, by stock or asset purchase or reverse
triangular merger, the stock or substantially all the assets of certain
companies and other assets in which they own an interest to Parent in exchange
for voting capital stock of Parent and other consideration, including cash,
voting stock, options, warrants, notes, convertible notes and other property of
Parent, under circumstances that will constitute a tax-free transfer of
property under Section 351 of the Internal Revenue Code of 1986, as amended,
and the rules and regulations thereunder ("Code"), to the extent of their
receipt of voting capital stock of Parent; and
WHEREAS, substantially contemporaneously with the execution of this
Agreement and in order to document the integrated Section 351 exchange plan
contemplated herein, (a) Old ACG, the other Founding Companies, their
stockholders and others are amending and restating their respective acquisition
agreements; and (b) Parent and Old ACG are entering into a merger agreement
pursuant to which Old ACG will become a wholly-owned subsidiary of Parent
substantially contemporaneously with the consummation of the IPO; and
WHEREAS, it is contemplated that prior to the consummation of the IPO, Old
ACG will effect an approximately one-for-two reverse stock split, the exact
magnitude of which will be dependent upon the ultimate post IPO valuation of
Parent by the managing underwriters in the IPO and the anticipated IPO Price;
and
WHEREAS, the IPO, the acquisitions of the Founding Companies and Old ACG
are described in the Registration Statement on Form S-1 of Parent (draft of
October 2, 1997), a copy of which is attached to this Agreement as Annex I
("Draft Registration Statement"); and
WHEREAS, Parent, Old ACG, Newco, Company and the Stockholders desire to
amend and restate the Original Agreement in its entirety and transform it into
this Agreement; and
WHEREAS, Parent desires to acquire all the Company Stock directly from
Stockholders for the consideration set forth in Section 2 of this Agreement,
and Stockholders have agreed to sell the Company Stock to Parent on the terms
and subject to the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties, covenants, and agreements herein contained, the
parties hereto hereby agree as follows:
1. DEFINITIONS
Unless the context otherwise requires, capitalized terms used in this
Agreement or in any schedule, or annex attached hereto and not otherwise
defined shall have the following meanings for all purposes of this
Agreement.
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"Affiliates" has the meaning set forth in Section 6.8.
"Agreement" has the meaning set forth in the first paragraph of this
Agreement.
"Annex" means each Annex attached hereto that represents a document
relevant to the transactions contemplated in this Agreement.
"A/R Aging Reports" has the meaning set forth in Section 6.11.
"Balance Sheet Date" has the meaning set forth in Section 6.9.
"Charter Documents" means the Certificate of Incorporation, Articles of
Incorporation or other instrument pursuant to which any corporation,
partnership or other business entity that is a signatory to this Agreement
was formed or organized in accordance with applicable law.
"Closing" has the meaning set forth in Section 4.
"Closing Date" has the meaning set forth in Section 4.
"Code" has the meaning set forth in the fifth recital of this Agreement.
"Company" has the meaning set forth in the first paragraph of this
Agreement.
"Company Financial Statements" has the meaning set forth in Section 6.9.
"Company Stock" has the meaning set forth in first paragraph of this
Agreement.
"Controlled Group" has the meaning set forth in Section 6.20(Z).
"Demand Registration" has the meaning set forth in Section 18.2.
"Draft Registration Statement" is defined in the eighth recital of this
Agreement.
"Environmental Laws" has the meaning set forth in Section 6.13.
"ERISA" has the meaning set forth in Section 6.19.
"Founding Companies" has the meaning set forth in the first recital of this
Agreement.
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"Founding Stockholders" has the meaning set forth in Section 18.2.
"Hazardous Wastes" and "Hazardous Substances" have the meanings set forth
in Section 6.13.
"Xxxx-Xxxxx Act" has the meaning set forth in Section 9.8.
"IPO" has the meaning set forth in the fourth recital of this Agreement.
"IPO Price" has the meaning set forth in the fourth recital of this
Agreement.
"IRS" or "Internal Revenue Service" means the Internal Revenue Service of
the Department of the Treasury.
"Initial Disclosure Date" means March 31, 1997.
"June Balance Sheet" has the meaning set forth in Section 6.9.
"Leases" means all real and personal property leased by Company and used,
useful or held for use in connection with Company's business.
"Liens" has the meaning set forth in Section 6.3.
"Material Adverse Effect" has the meaning set forth in Section 6.1.
"Material Documents" has the meaning set forth in Section 6.23.
"Newco" is defined in the first paragraph of this Agreement.
"Old ACG" is defined in the first paragraph of this Agreement.
"Old ACG Financial Statements" has the meaning set forth in Section 8.6.
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"Original Agreement" has the meaning set forth in the first recital of this
Agreement.
"Parent" has the meaning set forth in the first paragraph of this
Agreement.
"Parent Charter Documents" has the meaning set forth in Section 8.1.
"Parent Documents" has the meaning set forth in Section 8.9.
"Parent Stock" has the meaning set forth in the fourth recital of this
Agreement.
"Person" means an individual, a corporation, a partnership, an association,
a limited liability company, a joint stock company, a trust, or other
unincorporated organization.
"Prohibited Activities" has the meaning set forth in Paragraph 6.28.
"Prospectus" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, as amended or supplemented
by any prospectus supplement, with respect to the terms of the offering of
any portion of the Registerable Securities covered by such Registration
Statement, and by all other amendments and supplements to such prospectus,
including post-effective amendments, and in each case including all
material incorporated by reference therein.
"Qualified Plans" has the meaning set forth in Section 6.20.
"Registerable Securities" means the shares of Parent Stock acquired by
Stockholders pursuant to this Agreement.
"Registration Statement" shall mean any registration statement of the
Parent and any other entity required to be a registrant with respect to
such registration statement pursuant to the requirements of the 1933 Act
which covers any of the Registerable Securities, and all amendments and
supplements to such registration statement, including post-effective
amendments in each case including the Prospectus contained therein, all
exhibits thereto and all materials incorporated by reference therein.
"Restricted Securities" has the meaning set forth in Section 17.1(i).
"Returns" means any returns, reports or statements (including any
information returns) required to be filed for purposes of a particular Tax.
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"Schedule" means each Schedule attached hereto, which shall reference the
relevant sections of this Agreement, on which parties hereto disclose
information as part of their respective representations, warranties,
covenants and agreements.
"SEC" means the United States Securities and Exchange Commission.
"Section 351 Exchange Plan" means a Section 351 Exchange Plan in the form
of Annex II.
"Series E Warrants" means the 18,000 non-transferrable Warrants,
substantially in the form of Annex V, to purchase a like number of shares
of Parent Stock after the first anniversary of the Closing Date and on or
before the tenth anniversary of the Closing Date at an initial exercise
price per share equal to the IPO Price.
"Series F Warrants" means the 18,000 non-transferrable Warrants,
substantially in the form of Annex VI, to purchase a like number of shares
of Parent Stock after the second anniversary of the Closing Date and on or
before the tenth anniversary of the Closing Date at an initial exercise
price per share equal to the IPO Price.
"Stockholders" has the meaning set forth in the first paragraph of this
Agreement.
"Subsidiaries" means, with respect to any Person, any corporation or other
organization, whether incorporated or unincorporated, of which (i) such
Person or any other Subsidiary of such Person is a general partner
(excluding partnerships, the general partnership interests of which held by
such Person or any Subsidiary of such Person do not have a majority of the
voting interest in such partnership) or (ii) at least a majority of the
securities or other interests having by their terms ordinary voting power
to elect a majority of the Board of Directors or others performing similar
functions with respect to such corporation or other organization is
directly or indirectly owned or controlled by such Person, by any one or
more of its Subsidiaries, or by such Person and one or more of its
Subsidiaries.
"Tax" or "Taxes" means all Federal, state, local or foreign net or gross
income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, bank shares, withholding, payroll, employment, excise, property,
deed, stamp, alternative or add on minimum, environmental or other taxes or
assessments, whether disputed or not, together with any interest,
penalties, additions to tax or additional amounts with respect thereto.
"Territory" has the meaning set forth in Section 14.1(i).
"Transfer Taxes" has the meaning set forth in Section 19.6.
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"Warrant Holders" means Messrs. Xxxxx Xxxxxxxx and Xxx Xxxx as the initial
registered holders of the Warrants.
"Warrant Stock" means the shares of Parent Stock issued upon the exercise
of Warrants.
"Warrants" means the Series E Warrants and the Series F Warrants.
"1933 Act" means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
2. PURCHASE, SALE AND EXCHANGE
Pursuant to the terms of this Agreement, at the Closing, (a) Stockholders
will transfer, convey, assign and deliver to Parent the Company Stock, together
with stock powers duly endorsed by Stockholders so that the Company Stock may
be duly registered in Parent's name, and (b) Parent will acquire the Company
Stock from Stockholders for an aggregate consideration of such number of shares
of Parent Stock (rounded to the nearest whole share) as shall be equal to $1.2
million divided by the IPO Price ("Total Shares"). The number of shares to be
exchanged by each Stockholder and the number of shares of Parent Stock
deliverable to each Stockholder are set forth below opposite the name of such
Stockholder:
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NUMBER OF
NAME OF STOCKHOLDER NUMBER OF SHARES TOTAL SHARES (1)
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Xxxxx Xxxxxxxx 71,250 18
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Xxxx Xxxxx 79,167 20
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Xxxxx XxXxxxxx 95,000 24
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Xxx Xxxx 71,250 18
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Xxxx Xxxx 79,167 20
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TOTAL 395,834 100.00%
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(1) Expressed as a percentage of Total Shares.
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3. [INTENTIONALLY OMITTED]
4. CLOSING
The Closing of the transactions contemplated by this Agreement ("Closing")
shall take place on the date on which the closing of the sale of shares of
Parent Stock in the IPO, or such other date as the parties hereto may designate
(the "Closing Date"), at such place in New York City as the parties may
mutually agree. Parent shall take all steps that are reasonably necessary to
assure that the Closing Date occurs within the first fifteen days of a calendar
month.
5. SECTION 351 EXCHANGE PLAN
By executing this Agreement, each Stockholder is deemed to have approved
and adopted the Section 351 Exchange Plan to the same extent as if he or she
had subscribed his or her signature thereon.
6. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF COMPANY AND
STOCKHOLDERS
Company and each Stockholder, severally and not jointly, represent,
warrant, covenant and agree (i) that all of the following representations and
warranties in this Section 6 are true at the date of the Original Agreement
(except as otherwise expressly noted) and, subject to Section 9.7, shall be
true at the Closing Date and (ii) that all of the covenants and agreements in
this Section 6 shall be materially complied with or performed at and as of the
Closing Date. None of the representations and warranties set forth in this
Section 6 shall survive the Closing Date. For purposes of this Section 6, the
term "Company" shall mean and refer to Company and all of its Subsidiaries, if
any.
6.1 Due Organization. Company is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation,
and is duly authorized and qualified to do business and is in good standing
under the laws of each jurisdiction where such qualification is required except
(i) as set forth on Schedule 6.1 or (ii) where the failure to be so authorized
or qualified would not have a material adverse effect on the business,
operations, affairs, prospects, properties, assets or condition (financial or
otherwise) of Company taken as a whole (as used herein with respect to Company,
or with respect to any other Person, a "Material Adverse Effect"). Schedule 6.1
sets forth the jurisdiction in which Company is incorporated and contains a
list of all such jurisdictions in which Company is authorized or qualified to
do business. True, complete and correct copies of the Charter Documents and
bylaws, each as amended, of Company are all attached hereto as Schedule 6.1.
The stock records of Company, as heretofore made available to Parent, are
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correct and complete in all material respects. To the knowledge of Company and
Stockholders, there are no minutes in the possession of Company or Stockholders
which have not been made available to Parent, and all of such minutes are
correct and complete in all material respects.
6.2 Authorization. Company has all requisite corporate power and authority
to enter into this Agreement and to perform its obligations hereunder. The
execution and delivery by Company of this Agreement and its consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action of Company. This Agreement has been duly executed and
delivered by Company, and approved by all the stockholders of Company, and is a
valid and binding obligation of Company, enforceable against Company in
accordance with its terms.
6.3 Capital Stock of the Company. The authorized capital stock of Company
is as set forth in Section 2. All of the issued and outstanding shares of the
capital stock of Company are owned of record by Stockholders in the amounts set
forth in Section 2 and further, except as set forth on Schedule 6.3, are owned
free and clear of all mortgages, liens, security interests, pledges, voting
trusts, restrictions, encumbrances and claims of every kind (collectively, the
"Liens"). All of the issued and outstanding shares of the capital stock of
Company (i) have been duly authorized and validly issued and (ii) are fully
paid and nonassessable. Further, none of such shares was issued in violation of
the preemptive rights of any past or present stockholder.
6.4 Transactions in Capital Stock. Except as set forth on Schedule 6.4,
Company has not acquired any Company Stock since January 1, 1994. Except as set
forth on Schedule 6.4, (i) no option, warrant, call, conversion right or
commitment of any kind exists which obligates Company to issue any of its
authorized but unissued capital stock; (ii) Company has no obligation
(contingent or otherwise) to purchase, redeem or otherwise acquire any of its
equity securities or any interests therein or to pay any dividend or make any
distribution in respect thereof; and (iii) neither the voting stock structure
of Company nor the relative ownership of shares among any of its respective
stockholders has been altered or changed in contemplation of the transactions
contemplated by this Agreement. Schedule 6.4 also includes complete and
accurate copies of all stock option or stock purchase plans, including a list
of all outstanding options, warrants or other rights to acquire shares of
Company Stock.
6.5 No Bonus Shares. Except as set forth on Schedule 6.5, none of the
shares of Company Stock was issued pursuant to awards, grants or bonuses.
6.6 Subsidiaries. Except as set forth in Schedule 6.6, (i) Company has no
Subsidiaries, (ii) Company does not presently own, of record or beneficially,
or control, directly or indirectly, any capital stock, securities convertible
into capital stock or any other equity interest in any Person, and
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(iii) Company is not directly or indirectly, a participant in any joint
venture, partnership or other non-corporate entity.
6.7 Predecessor Status; etc. Set forth in Schedule 6.7 is a listing of all
names of all predecessor companies of Company, including the names of any
entities acquired by Company (by stock purchase, merger or otherwise) or owned
by Company or from whom the Company previously acquired material assets in
excess of $25,000, in any case, since January 1, 1990. Except as disclosed on
Schedule 6.7, Company has not been, within such period of time, a Subsidiary or
division of another corporation or a part of an acquisition which was later
rescinded.
6.8 Spinoff by Company. Except as set forth on Schedule 6.8, there has not
been any sale, spin-off or split-up of material assets in excess of $25,000 of
either Company or any other Person, which indirectly or through one or more
intermediaries, controls, or is controlled by, or is under common control with,
Company ("Affiliates") since January 1, 1994.
6.9 Financial Statements. Attached hereto as Schedule 6.9 are copies of the
following financial statements of the Company (the "Company Financial
Statements"): the Company's audited balance sheets as of December 31, 1996 and
1995, its unaudited balance sheet as of June 30, 1997 ("June Balance Sheet"),
its audited statements of income, retained earnings and cash flows and any
related notes thereto for each of the years in the two-year period ended
December 31, 1996 and its unaudited statements of income, retained earnings and
cash flows and any related notes thereto for the six months ended June 30, 1997
and 1996 (June 30, 1997 being hereinafter referred to as the "Balance Sheet
Date"). The unaudited Company Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods indicated (except as noted thereon or
on Schedule 6.9). Except as set forth on Schedule 6.9, the balance sheets
referred to in this Section 6.9 present fairly the financial position of
Company as of the dates indicated thereon, and the statements of income,
retained earnings and cash flows referred to in this Section 6.9 present fairly
the results of operations for the periods indicated thereon in accordance with
generally accepted accounting principles.
6.10 Liabilities and Obligations. Company has no material liabilities of
any kind, character or description, whether accrued, absolute, secured or
unsecured, contingent or otherwise, that are not reflected on the June Balance
Sheet or otherwise reflected in the Company Financial Statements at the Balance
Sheet Date, all loan agreements, indemnity or guaranty agreements, bonds,
mortgages, liens, pledges or other security agreements. Except as set forth on
Schedule 6.10, since the Initial Disclosure Date Company has not incurred any
material liabilities of any kind, character and description, whether accrued,
absolute, secured or unsecured, contingent or otherwise, other than liabilities
incurred in the ordinary course of business. Company has also disclosed to
Parent on
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Schedule 6.10, in the case of those contingent liabilities related to pending
or threatened litigation or other liabilities which are not fixed or otherwise
accrued or reserved, the following information:
(i) a summary description of the liability together with the
following:
(x) copies of all relevant documentation relating thereto;
(y) amounts claimed and any other action or relief sought; and
(z) name of claimant and all other parties to the claim, suit
or proceeding;
(ii) the name of each court or agency before which such claim, suit
or proceeding is pending; and
(iii) the date such claim, suit or proceeding was instituted.
6.11 Accounts and Notes Receivable. Company has delivered to Parent an
accurate list (which is set forth on Schedule 6.11) of the accounts and notes
receivable of Company, as of the Initial Disclosure Date, including receivables
from and advances to employees and Stockholders. The Company shall also provide
Parent (x) an accurate list of all receivables generated subsequent to the
Initial Disclosure Date and (y) an aging of all accounts and notes receivable
showing amounts due in 30 day aging categories, and each such list and aging
report (the "A/R Aging Reports") shall be current as of a date reasonably
requested by Parent. Except to the extent reflected on Schedule 6.11 or as
disclosed by Company to Parent in a writing accompanying the A/R Aging Reports,
such accounts, notes and other receivables either are collectible in the
amounts shown on Schedule 6.11, and shall be collectible in the amounts shown
on the A/R Aging Reports, net of reserves reflected in the June Balance Sheet
and as of the date of the A/R Aging Reports, respectively.
6.12 Permits and Intangibles. Company holds all licenses, franchises,
permits and other governmental authorizations the absence of any of which could
have a Material Adverse Effect on its business, and Company has delivered to
Parent an accurate list and summary description (which is set forth on Schedule
6.12) of all such licenses, franchises, permits and other governmental
authorizations, including titles, certificates, trademarks, trade names,
patents, patent applications and copyrights owned or held by Company (including
interests in software or other technology systems, programs and intellectual
property) (it being understood and agreed that a list of all environmental
permits and other environmental approvals is set forth on Schedule 6.13). To
the knowledge of Company, the licenses, franchises, permits and other
governmental authorizations listed on Schedules 6.12 and 6.13 are valid in all
material respects, and Company has not received any notice
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that any governmental authority intends to cancel, terminate or not renew any
such license, franchise, permit or other governmental authorization. Company
has conducted and is conducting its business in substantial compliance with the
requirements, standards, criteria and conditions set forth in the licenses,
franchises, permits and other governmental authorizations listed on Schedules
6.12 and 6.13 and is not in violation of any of the foregoing except where such
non-compliance or violation would not have a Material Adverse Effect on
Company. Except as specifically provided in Schedule 6.12, the transactions
contemplated by this Agreement will not result in a material default under or a
material breach or violation of, or materially adversely affect the rights and
benefits afforded to Company by, any such license, franchise, permit or
government authorization.
6.13 Environmental Matters. Except as set forth on Schedule 6.13, (i)
Company has substantially complied with and is in compliance with all Federal,
state, local and foreign statutes (civil and criminal), laws, ordinances,
regulations, rules, notices, permits, judgments, orders and decrees applicable
to it or any of its properties, assets, operations and businesses relating to
environmental protection (collectively "Environmental Laws") including, without
limitation, Environmental Laws relating to air, water, land and the generation,
storage, use, handling, transportation, treatment or disposal of Hazardous
Wastes and Hazardous Substances including petroleum and petroleum products (as
such terms are defined in any applicable Environmental Law); (ii) Company has
obtained and substantially adhered to all necessary permits and other approvals
necessary to treat, transport, store, dispose of and otherwise handle Hazardous
Wastes and Hazardous Substances, a list of all of which permits and approvals
is set forth on Schedule 6.13, and has reported to the appropriate authorities,
to the extent required by all Environmental Laws, all past and present sites
owned and operated by Company where Hazardous Wastes or Hazardous Substances
have been treated, stored, disposed of or otherwise handled; (iii) there have
been no releases or threats of releases (as defined in Environmental Laws) at,
from, in or on any property owned or operated by Company except as permitted by
Environmental Laws; (iv) to the knowledge of Company, no on-site or off-site
location to which Company has transported or disposed of Hazardous Wastes and
Hazardous Substances or arranged for the transportation of Hazardous Wastes and
Hazardous Substances, which site is the subject of any Federal, state, local or
foreign enforcement action or any other investigation which could lead to any
material claim against Company or Parent for any clean-up cost, remedial work,
damage to natural resources, property damage or personal injury, including, but
not limited to, any claim under the comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended; and (v) Company has no
contingent liability in connection with any release of any Hazardous Waste or
Hazardous Substance into the environment.
6.14 Personal Property. Company has delivered to Parent an accurate list
(which is set forth on Schedule 6.14) of (i) all personal property included in
(or that will be included in)
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"depreciable plant, property and equipment" on the balance sheet of Company,
(ii) all other personal property owned by Company with a value in excess of
$10,000 (x) as of the Initial Disclosure Date and (y) acquired since the
Initial Disclosure Date and (iii) all written Leases in respect of personal
property, including, in the case of each of (i), (ii) and (iii), (1) true,
complete and correct copies of all such Leases and (2) an indication as to
which assets are currently owned, or were formerly owned, by Stockholders,
relatives of Stockholders, or Affiliates of Company. Except as set forth on
Schedule 6.14, (a) all personal property used by Company in its business is
either owned by Company or leased by Company pursuant to a Lease included on
Schedule 6.14, (b) all of the personal property listed on Schedule 6.14 is in
good working order and condition, ordinary wear and tear excepted and (c) all
leases and agreements included on Schedule 6.14 are in full force and effect in
all material respects and to the knowledge of Company constitute valid and
binding agreements of the parties (and their successors) thereto in accordance
with their respective terms.
6.15 Significant Customers; Material Contracts and Commitments. Company has
delivered to Parent an accurate list (which is set forth on Schedule 6.15) of
all significant customers, or persons or entities that are sources of a
significant number of customers, it being understood and agreed that a
"significant customer," for purposes of this sentence, means a customer (or
person or entity) (i) representing 2% or more of Company's annual revenues as
of the Initial Disclosure Date or (ii) reasonably expected to represent 2% or
more of Company's revenues during the twelve-month period ending June 30, 1998.
Except to the extent set forth on Schedule 6.15, none of the Company's
significant customers (or persons or entities that are sources of a significant
number of customers) have canceled or substantially reduced or, to the
knowledge of Company, are currently attempting or threatening to cancel a
contract or substantially reduce utilization of the services provided by
Company.
Company has listed on Schedule 6.15 all material contracts, commitments and
similar agreements to which the Company is a party or by which it or any of its
properties are bound (including, but not limited to, contracts with significant
customers, joint venture or partnership agreements, contracts with any labor
organizations, strategic alliances and options to purchase land), other than
agreements listed on Schedule 6.10, 6.14 or 6.16, (x) in existence as of the
Initial Disclosure Date and (y) entered into since the Initial Disclosure Date,
and in each case has delivered true, complete and correct copies of such
agreements to Parent. Company has complied with all material commitments and
obligations pertaining to it, and is not in material default under any contract
or agreement listed on Schedule 6.15 and no notice of default under any such
contract or agreement has been received. Company has also indicated on Schedule
6.15 a summary description of all plans or projects involving the acquisition
of any personal property, business or assets requiring, in any event, the
payment of more than $10,000 by Company.
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6.16 Real Property. Schedule 6.16 includes a list of all real property
owned or leased by Company (i) as of the Initial Disclosure Date and (ii)
acquired since the Initial Disclosure Date, and all other real property, if
any, used by Company in the conduct of its business. Company has good and
insurable title to the real property owned by it, including those reflected on
Schedule 6.16, subject to no Lien except for:
(w) Liens reflected on Schedules 6.10 or 6.15 as securing
specified liabilities (with respect to which no material default
exists);
(x) Liens for current taxes not yet payable and assessments not
in default;
(y) easements for utilities serving the property only; and
(z) easements, covenants and restrictions and other exceptions to
title shown of record in the office of the County Clerks in which the
properties, assets and leasehold estates are located which do not adversely
affect in any material respect the current use of the property.
Schedule 6.16 contains, without limitation, (1) true, complete and correct
copies of all title reports and title insurance policies currently in
possession of Company with respect to real property owned by Company, (2) true,
complete and correct copies of all Leases and agreements in respect of such
real property leased by Company (which copies are attached to Schedule 6.16),
and (3) an indication as to which such properties, if any, are currently owned,
or were formerly owned, by Stockholders or business or personal Affiliates of
Company or Stockholders.
Except as set forth on Schedule 6.16, all of such Leases included on Schedule
6.16 are in full force and effect in all material respects and to the knowledge
of Company constitute valid and binding agreements of the parties (and their
successors) thereto in accordance with their respective terms.
6.17 Insurance. Company has delivered to Parent, as set forth on and
attached to Schedule 6.17, (i) an accurate list as of the Initial Disclosure
Date of all insurance policies carried by Company, (ii) an accurate list of all
insurance loss runs on workers compensation claims received for the past three
policy years and (iii) true, complete and correct copies of all insurance
policies currently in effect. Such insurance policies evidence all of the
insurance that Company is required to carry pursuant to all of its contracts
and other agreements and pursuant to all applicable laws or that management of
Company otherwise believes is prudent and appropriate to insure against the
risks inherent in Company's business in accordance with industry practice. All
of such insurance policies are currently in full force and effect in all
material respects and shall remain in full force and
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effect in all material respect through the Closing Date. No insurance carried
by Company has been canceled by the insurer and the Company has never been
denied coverage.
6.18 Compensation; Organized Labor Matters. Company has delivered to Parent
an accurate list (which is set forth on Schedule 6.18) showing all officers,
directors and other key employees of Company and the rate of compensation (and
the portions thereof attributable to salary, bonus and other compensation,
respectively) of each of such persons as of (i) the Initial Disclosure Date and
(ii) the date of the Original Agreement. Since the Initial Disclosure Date,
there have been no increases in the compensation payable or any special bonuses
to any officer, director, key employee or other employee, except ordinary
salary increases implemented on a basis consistent with past practices.
Except as set forth on Schedule 6.18, (w) Company is not bound by or
subject to (and none of its respective assets or properties is bound by or
subject to) any arrangement with any labor union, (x) no employees of Company
are represented by any labor union or covered by any collective bargaining
agreement, (y) to the knowledge of Company, no campaign to establish such
representation is in progress and (z) there is no pending or, to the best of
Company's knowledge, threatened labor dispute involving Company and any group
of its employees nor has Company experienced any labor interruption over the
past three years.
6.19 Employee Plans. The Stockholders have delivered to Parent an accurate
list (which is set forth on Schedule 6.19) showing all employee benefit plans
of Company, including all employment agreements and other agreements or
arrangements containing "golden parachute" or other similar provisions, and
deferred compensation agreements, together with true, complete and correct
copies of such plans, agreements and any trusts related thereto, and
classifications of employees covered thereby as of the Initial Disclosure Date.
Except for the employee benefit plans, if any, described on Schedule 6.19, the
Company does not sponsor, maintain or contribute to any plan program, fund or
arrangement that constitutes an "employee pension benefit plan," and Company
does not have any obligation to contribute to or accrue or pay any benefits
under any deferred compensation or retirement funding arrangement on behalf of
any employee or employees (such as, for example, and without limitation, any
individual retirement account or annuity, any "excess benefit plan" (within the
meaning of Section 3(36) of the Employee Retirement Income Security Act of
1974, as amended "ERISA") or any non-qualified deferred compensation
arrangement). For the purposes of this Agreement, the term "employee pension
benefit plan" shall have the same meaning as is given that term in Section 3(2)
of ERISA. Company has not sponsored, maintained or contributed to any employee
pension benefit plan other than the plans set forth on Schedule 6.19, nor is
Company required to contribute to any retirement plan pursuant to the
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provisions of any collective bargaining agreement establishing the terms and
conditions or employment of any of Company's employees.
Company is not now, nor as a result of its past activities can it
reasonably be expected to become, liable to the Pension Benefit Guaranty
Corporation (other than for premium payments) or to any multiemployer employee
pension benefit plan under the provisions of Title IV of ERISA.
All employee benefit plans listed on Schedule 6.19 and the administration
thereof are in substantial compliance with their terms and all applicable
provisions of ERISA and the regulations issued thereunder, as well as with all
other applicable Federal, state and local statutes, ordinances and regulations.
All accrued contribution obligations of Company or any Subsidiary with
respect to any plan listed on Schedule 6.19 have either been fulfilled in their
entirety or are fully reflected on the June Balance Sheet.
6.20 Compliance with ERISA. All employee benefit plans listed on Schedule
6.19 that are intended to qualify (the "Qualified Plans") under Section 401(a)
of the Code are, and have been so qualified and have been determined by the
Internal Revenue Service to be so qualified, and copies of such determination
letters are included as part of Schedule 6.19. Except as disclosed on Schedule
6.19, all reports and other documents required to be filed with any
governmental agency or distributed to plan participants or beneficiaries
(including, but not limited to, actuarial reports, audits or Returns) have been
timely filed or distributed, and copies thereof are included as part of
Schedule 6.19. Neither Stockholders, any such plan listed in Schedule 6.19, nor
Company has engaged in any transaction prohibited under the provisions of
Section 4975 of the Code or Section 406 of ERISA. No employee benefit plan
listed on Schedule 6.19 has incurred an accumulated funding deficiency, as
defined in Section 412(a) of the Code and Section 302(1) of ERISA; and Company
has not incurred (i) any liability for excise tax or penalty payable to the
Internal Revenue Service or (ii) any liability to the Pension Benefit Guaranty
Corporation (other than for premium payments). The Stockholders further
represent that:
(v) there have been no terminations or discontinuance of
contributions to any Qualified Plan intended to qualify under Section
401(a) of the Code without notice to and approval by the Internal
Revenue Service;
(w) no plan listed on Schedule 6.19 that is subject to the
provisions of Title IV of ERISA has been terminated;
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(x) there have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to employee benefit
plans listed in Schedule 6.19;
(y) Company has not incurred liability under Section 4062 of
ERISA; and
(z) no circumstances exist pursuant to which Company could
reasonably be expected to have any direct or indirect liability
whatsoever (including, but not limited to, any liability to any
multiemployer plan or the Pension Benefit Guaranty Corporation under
Title IV of ERISA or to the Internal Revenue Service for any excise
tax or penalty, or being subject to any statutory Lien to secure
payment of any such liability) with respect to any plan now or
heretofore maintained or contributed to by any entity other than
Company that is, or at any time was, a member of a "controlled group"
(as defined in Section 412(n)(6)(B) of the Code) that includes Company
("Controlled Group").
The transactions contemplated by this Agreement together with any amounts paid
or payable by Company or any member of the Controlled Group has not resulted in
and will not result in payments to "disqualified individuals" (as defined in
Section 280G(c) of the Code) of Company or any member of the Controlled Group
which, individually or in the aggregate will constitute "excess parachute
payments" (as defined in Section 280G(b) of the Code) resulting in the
imposition of the excise tax under Section 4999 of the Code or the disallowance
of deductions under Section 280G of the Code.
6.21 Conformity with Law; Litigation. Except to the extent set forth on
Schedule 6.21 or 6.13, Company is not in violation of any law or regulation or
any order of any court or Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over Company which would have a Material Adverse Effect; and
except to the extent set forth on Schedule 6.10 or 6.13, there are no material
claims, actions, suits or proceedings, commenced or, to the knowledge of
Company, threatened, against or affecting Company, at law or in equity, or
before or by any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction over
Company and no notice of any claim, action, suit or proceeding, whether pending
or threatened, has been received by Company or any Stockholder. Company has
conducted and is conducting its business in substantial compliance with the
requirements, standards, criteria and conditions set forth in applicable
Federal, state and local statutes, ordinances, permits, licenses, orders,
approvals, variances, rules and regulations, including all such permits,
licenses, orders and other governmental approvals set forth on Schedules 6.12
and 6.13, and is not in violation of any of the foregoing which might have a
Material Adverse Effect.
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6.22 Tax Matters.
(i) Company is currently taxed under Subchapter S of the Code.
Stockholders have filed all income Tax Returns that they were required to
file with respect to Company, and Company has filed all Tax Returns that it
was required to file. All such Tax Returns filed by Company were correct
and complete in all material respects. All Taxes owed by Company (whether
or not shown on any Tax Return) have been paid or reserved for on its
books. Except as set forth on Schedule 6.22, Company is not currently the
beneficiary of any extension of time within which to file any Tax Return.
Since January 1, 1994, no claim with respect to Company has been made by an
authority in a jurisdiction where Company does not file Tax Returns that it
is or may be subject to taxation by that jurisdiction. There is no Lien
affecting any of Company's assets that arose in connection with any failure
or alleged failure to pay any Tax.
(ii) Company has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, shareholder or other party.
(iii) Company does not expect any authority to assess any material
amount of additional Taxes for any period for which Tax Returns have been
filed. There is no material dispute or claim concerning any Tax liability
of Company either claimed or raised by any authority in writing or as to
which Company has knowledge based upon direct inquiry by any agent of such
authority. Schedule 6.22(iii) lists all income Tax Returns relating to
income Tax of Company for taxable periods ended on or after January 1,
1993, indicates those Returns of which Company is aware that have been
audited and indicates those Returns that currently are the subject of
audit. Company has delivered to Parent correct and complete copies of all
Tax Returns, examination reports and statements of deficiencies assessed
against or agreed to by Company for any taxable period ended on or after
January 1, 1993.
(iv) Except as set forth on Schedule 6.22(iv), neither Stockholders
nor Company has waived any statute of limitations in respect of Taxes or
agreed to any extension of time with respect to a Tax assessment or
deficiency.
(v) Company has not filed a consent under Section 341(f) of the Code
concerning collapsible corporations. Company has not made any material
payments, is not obligated to make any material payments and is not a party
to any agreement that under certain
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circumstances could obligate it to make any material payments that
will not be fully deductible under Section 280G of the Code.
(vi) Company has not received a ruling from any taxing authority or
entered into any agreement regarding Taxes with any taxing authority that
would, individually or in the aggregate, apply to the Company after the
Closing Date.
6.23 No Violations. Company is not in violation of its Charter Documents.
Neither Company nor, to the knowledge of Company, any other party thereto, is
in material default under any Lease, instrument, agreement, license, or permit
set forth on Schedule 6.12, 6.13, 6.14, 6.15 or 6.16, or any other material
agreement to which it is a party or by which its properties are bound (the
"Material Documents"); and, except as set forth in Schedule 6.23, (i) the
rights and benefits of Company under the Material Documents will not be
materially adversely affected by the transactions contemplated hereby and (ii)
the execution of this Agreement and the performance of the obligations
hereunder and the consummation of the transactions contemplated hereby will not
result in any material violation or breach or constitute a material default
under, any of the terms or provisions of the Material Documents or the Charter
Documents. Except as set forth on Schedule 6.23, none of the Material Documents
requires notice to, or the consent or approval of, any governmental agency or
other third party with respect to any of the transactions contemplated hereby
in order to remain in full force and effect in all material respect, and
consummation of the transactions contemplated hereby will not give rise to any
right to termination, cancellation or acceleration or loss of any material
right or benefit. Except as set forth on Schedule 6.23, to the knowledge of
Company none of the Material Documents prohibits the use or publication by
Company or Parent of the name of any other party to such Material Document, and
none of the Material Documents prohibits or restricts Company from freely
providing services to any other customer or potential customer of Company,
Parent, or any other Founding Company.
6.24 Absence of Changes. Since the Initial Disclosure Date, except as set
forth on Schedule 6.24 or disclosed in the Draft Registration Statement, there
has not been:
(i) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of Company taken
as a whole;
(ii) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of
Company;
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(iii) any change in the authorized capital of Company or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
(iv) any declaration or payment of any dividend or distribution in
respect of the capital stock or any direct or indirect redemption, purchase
or other acquisition of any of the capital stock of Company;
(v) any increase in the compensation, bonus, sales commissions or fee
arrangement payable or to become payable by Company to any of its officers,
directors, stockholders, employees, consultants or agents, except for
ordinary and customary bonuses and salary increases for employees in
accordance with past practice;
(vi) any work interruptions, labor grievances or labor claims filed,
or any other similar labor event or condition of any character, materially
adversely affecting the business of Company;
(vii) any sale or transfer, or any agreement to sell or transfer, any
material assets, property or rights of Company to any person, including,
without limitation, Stockholders and their Affiliates outside the ordinary
course of business of Company;
(viii) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to Company, including without limitation any
indebtedness or obligation of any Stockholders or any Affiliate thereof
outside the ordinary course of business of Company;
(ix) any plan, agreement or arrangement granting any preferential
right to purchase or acquire any interest in any of the assets, property or
rights of Company or requiring consent of any party to the transfer and
assignment of any such assets, property or rights;
(x) any purchase or acquisition of, or agreement, plan or arrangement
to purchase or acquire, any property, right or asset outside of the
ordinary course of Company's business;
(xi) any waiver of any material rights or claims of Company;
(xii) any material breach, amendment or termination of any contract,
agreement, license, permit or other right to which Company is a party:
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(xiii) any transaction by Company outside the ordinary course of its
business;
(xiv) any cancellation or termination of a material contract with a
customer or client prior to the scheduled termination date; or
(xv) any other distribution of property or assets by Company outside
the ordinary course of Company's business.
6.25 Deposit Accounts; Powers of Attorney. Company has delivered to Parent
an accurate list (which is set forth on Schedule 6.25) as of the date of the
Original Agreement setting forth:
(i) the name of each financial institution in which Company has
accounts or safe deposit boxes;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or have access
thereto.
Schedule 6.25 also sets forth the name of each person, corporation, firm or
other entity holding a general or special power of attorney from Company and a
description of the terms of such power. Upon Parent's request, Company shall
update Schedule 6.25 to the date of this Agreement.
6.26 Relations with Governments. Except for political contributions made in
a lawful manner which, in the aggregate, do not exceed $10,000 per year for
each year in which any Stockholder has been a stockholder of Company, Company
has not made, offered or agreed to offer anything of value to any governmental
official, political party or candidate for government office nor has it
otherwise taken any action which would cause Company to be in violation of the
Foreign Corrupt Practices Act of 1977, as amended, or any law of similar
effect. If political contributions made by Company have exceeded $10,000 per
year for each year in which any Stockholder has been a stockholder of Company,
each contribution in the amount of $5,000 or more shall be described on
Schedule 6.26.
6.27 Disclosure. This Agreement, including the Schedules and Annexes
hereto, together with all other documents and information made available to
Parent and its representatives in writing pursuant hereto, present fairly the
business and operations of Company for the time periods with respect to which
such information was requested. Company's rights under the documents delivered
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pursuant hereto would not be materially adversely affected by, and no statement
made herein would be rendered untrue in any material respect by, any other
document to which Company is a party, or to which its properties are subject,
or by any other fact or circumstance regarding Company (which fact or
circumstance was, or should reasonably, after due inquiry, have been known to
Company) that is not disclosed pursuant hereto or thereto.
6.28 Prohibited Activities. Except as set forth on Schedule 9.3 or
disclosed in the Draft Registration Statement, Company has not, between the
Initial Disclosure Date and the date of this Agreement, taken any of the
actions set forth in Section 9.3 ("Prohibited Activities").
6.29 Draft Registration Statement. The text, of and the financial
statements and other financial information contained in, the Draft Registration
Statement, insofar as they were provided by the Company expressly for inclusion
therein but not otherwise, are true, accurate and complete in all material
respects and do not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading.
7. ADDITIONAL REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF
STOCKHOLDERS
Each Stockholder severally represents, warrants, covenants and agrees (i)
that the representations and warranties set forth below are true as of the date
of the Original Agreement and, subject to Section 9.7, shall be true at the
Closing Date, (ii) that all of the covenants and agreements in this Section 7
shall be materially complied with or performed at and as of the Closing Date
and (iii) that by executing this Agreement each Stockholder shall be deemed to
have approved the terms of the transaction. The representations, warranties,
covenants and agreements set forth in this Section 7 shall not survive the
Closing Date.
7.1 Authority. Each Stockholder has the full legal right, power and
authority to enter into and perform this Agreement. This Agreement has been
executed and delivered by each Stockholder and constitutes a legal, valid and
binding obligation of such Stockholder in accordance with its terms.
7.2 Preemptive Rights. Each Stockholder does not have, or hereby waives,
any preemptive or other right to acquire shares of Company Stock or Parent
Stock that such Stockholder has or may have had, other than rights of any
Stockholder to acquire Parent Stock pursuant to (i) this Agreement or (ii) any
option granted by Parent or Old ACG.
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7.3 Tax Matters. The Stockholders have been advised by their counsel and
are satisfied, as of the date hereof, that certain aspects of the transactions
contemplated by this Agreement qualify for the deferral of gain pursuant to
Section 351 of the Code.
7.4 No Plan of Distribution. No Stockholder has any intention or
arrangement to sell or otherwise dispose of any Parent Stock to be received
pursuant to this Agreement and the Section 351 Exchange Plan.
7.5 No Retained Rights. No Stockholder will retain any right after the
Closing in any Company Stock to be transferred by him at the Closing but, to
the extent that such right may exist upon the consummation of the Closing, such
right shall be deemed to have been released and extinguished.
8. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF PARENT AND OLD ACG
Parent and Old ACG, jointly and severally, represent, warrant, covenant and
agree: (i) that, except as disclosed in the Draft Registration Statement, which
qualifies the following representations and warranties, all of the following
representations and warranties in this Section 8 are true as of the date of
this Agreement and, subject to Section 9.7, shall be true at the Closing Date
and (ii) that all of the covenants and agreements in this Section 8 shall be
complied with or performed at and as of the Closing Date. The representations,
warranties, covenants and agreements set forth in this Section 8 shall not
survive the Closing Date.
8.1 Due Organization. Parent and Old ACG are corporations duly organized,
validly existing and in good standing under the laws of the state of Delaware
and are duly authorized and qualified to do business under all applicable laws,
regulations, ordinances and orders of public authorities to carry on their
respective businesses in the places and in the manner as now conducted, except
where the failure to be so authorized or qualified would not have a Material
Adverse Effect. True, complete and correct copies of the Charter Documents and
by-laws of Parent and Old ACG (collectively, the "Parent Charter Documents")
are all attached hereto as Schedule 8.1.
8.2 Authorization. Each of Parent and Old ACG has all requisite corporate
power and authority to enter into this Agreement and to perform its obligations
hereunder. The execution and delivery of this Agreement by each of Parent and
Old ACG and their consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action of Parent and Old ACG.
This Agreement has been duly executed and delivered by each of Parent and
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Old ACG and is a valid and binding obligation of each of Parent and Old ACG,
enforceable against each of them in accordance with its terms.
8.3 Capital stock. The authorized capital stock of Old ACG is as set forth
in Schedule 8.3. All of the issued and outstanding shares of the capital stock
of Old ACG (i) have been duly authorized and validly issued, (ii) are fully
paid and nonassessable, (iii) are owned of record and beneficially by the
persons set forth on Schedule 8.3 and (iv) were offered, issued, sold and
delivered by Old ACG in compliance with all applicable state and Federal laws
concerning the offer, issuance, sale and delivery of securities. Further, none
of such shares was issued in violation of the preemptive rights of any past or
present stockholder of Old ACG. Subject to the consummation of the reverse
stock split referred to in the seventh recital of this Agreement and the
consummation of Parent's acquisition of Old ACG in the reverse triangular
merger, the capitalization of Parent will be identical to the capitalization of
Old ACG immediately prior to the consummation of the IPO.
8.4 Transactions in Capital Stock, Organization Accounting. Except as set
forth on Schedule 8.3 or contemplated to be issued in connection with the
acquisition of the Founding Companies, (i) no option, warrant, call, conversion
right or commitment of any kind exists which obligates Old ACG to issue any of
its authorized but unissued capital stock and (ii) Old ACG has no obligation
(contingent or otherwise) to purchase, redeem or otherwise acquire any of its
equity securities or any interests therein or to pay any dividend or make any
distribution in respect thereof. Schedule 8.3 also includes complete and
accurate copies of all stock option or stock purchase plans, including a list,
accurate as of the date hereof, of all outstanding options, warrants or other
rights to acquire shares of capital stock of Old ACG.
8.5 Subsidiaries. Neither Parent nor ACG has any Subsidiaries, except for
the companies identified on Schedule 8.5. Except as set forth in the preceding
sentence, neither Parent nor Old ACG presently owns, of record or beneficially,
or controls, directly or indirectly, any capital stock, securities convertible
into capital stock or any other equity interest in any Person and neither
Parent nor Old ACG is, directly or indirectly, a participant in any joint
venture, partnership or other non-corporation entity.
8.6 Financial Statements. Included within the Draft Registration Statement
attached hereto are copies of the following financial statements of Old ACG,
which reflect the results of its operations from inception in June 1996 (the
"Old ACG Financial Statements"): Old ACG's audited balance sheet as of December
31, 1996, its unaudited balance sheet as of June 30, 1997, its audited
statement of income, cash flows and retained earnings and any related notes
thereto for the period from June 10, 1996 through December 31, 1996 and its
unaudited statement of income, cash flows and retained earnings and any related
notes thereto for the six months ended June 30, 1997. Such
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Old ACG Financial Statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
period indicated (except as noted thereon or on Schedule 8.6). Such balance
sheets present fairly the financial position of Old ACG as of such dates, and
such statements of income, cash flows and retained earnings present fairly the
results of its operations for the periods indicated. The Old ACG Financial
Statements at December 31, 1996 and for the fiscal period ended December 31,
1996 have been examined by KPMG Peat Marwick LLP, independent public
accountants.
8.7 Liabilities and Obligations. Except as set forth on Schedule 8.7,
neither Parent nor Old ACG has any material liabilities, contingent or
otherwise, except as set forth in or contemplated by this Agreement or the
Draft Registration Statement and except for fees incurred in connection with
the transactions contemplated hereby and thereby.
8.8 Conformity with Law; Litigation. Except to the extent set forth on
Schedule 8.8 or in the Draft Registration Statement, neither Parent nor Old ACG
is in violation of any law or regulation or any order of any court or Federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality having jurisdiction over either of them which would
have a Material Adverse Effect; and except to the extent set forth in Schedule
8.8 or in the Draft Registration Statement, there are no material claims,
actions, suits or proceedings, pending or, to the knowledge of either Parent or
Old ACG, threatened, against or affecting either Parent or Old ACG, at law or
in equity, or before or by any Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over either of them and no notice of any claim, action, suit or
proceeding, whether pending or threatened, has been received. Each of Parent
and Old ACG has conducted and is conducting its respective business in
substantial compliance with the requirements, standards, criteria and
conditions set forth in applicable Federal, state and local statutes,
ordinances, permits, licenses, orders, approvals, variances, rules and
regulations and is not in violation of any of the foregoing which might have a
Material Adverse Effect.
8.9 No Violations. Neither Parent nor Old ACG is in violation of any Parent
Charter Document. Neither Parent nor Old ACG nor, to the knowledge of Parent or
Old ACG, or any other party thereto, is in default under any lease, instrument,
agreement, license, or permit to which Parent or Old ACG is a party, or by
which Parent or Old ACG, or any of their properties, is bound (collectively,
the "Parent Documents"); and (i) the rights and benefits of Parent and Old ACG
under the Parent Documents will not be adversely affected by the transactions
contemplated hereby and (ii) the execution of this Agreement and the
performance of the obligations hereunder and the consummation of the
transactions contemplated hereby will not result in any material violation or
breach or constitute a default under, any of the terms or provisions of the
Parent Documents or the
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Parent Charter Documents. Except as set forth on Schedule 8.9, none of the
Parent Documents requires notice to, or the consent or approval of, any
governmental agency or other third party with respect to any of the
transactions contemplated hereby in order to remain in full force and effect,
and consummation of the transactions contemplated hereby will not give rise to
any right to termination, cancellation or acceleration or loss of any right or
benefit.
8.10 Validity of Obligations. Parent and Old ACG have all requisite
corporate power and authority to enter into this Agreement and to perform their
respective obligations hereunder. The execution and delivery of this Agreement
by Parent and Old ACG and their consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action of Parent
and Old ACG and is a legal, valid and binding obligation of Parent and Old ACG,
enforceable against each of them in accordance with its terms.
8.11 Parent Securities.
(i) Parent Stock. The shares of Parent Stock deliverable to the
Stockholders pursuant to this Agreement will have been duly authorized
prior to the Closing by all necessary corporate action of Parent. Upon the
execution and delivery of the Parent Stock deliverable pursuant to this
Agreement and the transfer of the Company Stock in consideration thereof,
all in accordance with this Agreement, the Parent Stock will be validly
issued, fully paid and nonassessable.
(ii) Warrant Stock. The execution and delivery by Parent of the Series
E Warrants and Series F Warrants (collectively, the "Warrants") have been
duly authorized by all necessary corporate action of Parent. Upon the
execution and delivery of the Warrants at the Closing in accordance with
the terms of this Agreement, the Warrants will be valid and binding
obligations of Parent, enforceable against Parent in accordance with their
terms. The shares of Parent Stock issuable upon exercise of the Warrants
have been duly authorized and reserved for issuance and such shares, when
issued upon the consummation of the transaction contemplated by this
Agreement and upon the exercise of the Warrants in accordance with the
terms thereof, respectively, will be validly issued, fully paid and
nonassessable.
8.12 Business; Real Property; Material Agreement Old ACG was formed in June
1997, and Parent was formed in September 1997. Nether Parent nor Old ACG has
not conducted any material business since the date of its inception, except
raising capital and in connection with this Agreement and the Original
Agreement and similar agreements with the Founding Companies. Except as
disclosed on Schedule 8.12, neither Parent nor Old ACG owns, and has not at any
time
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owned, any real property or any material personal property and neither is a
party to any other material agreement.
8.13 Tax Matters.
(i) Old ACG has filed all Tax Returns that it was required to file.
All such Tax Returns filed by Old ACG were correct and complete in all
material respects. All Taxes owed by Old ACG (whether or not shown on any
Tax Return) have been paid. Old ACG is not currently the beneficiary of any
extension of time within which to file any Tax Return. Since Old ACG's
formation in June 1996 , no claim with respect to Old ACG has been made by
an authority in a jurisdiction where Old ACG does not file Tax Returns that
it is or may be subject to taxation by that jurisdiction. There is no Lien
affecting any of Old ACG's assets that arose in connection with any failure
or alleged failure to pay any Tax.
(ii) Old ACG has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder or other party.
(iii) Old ACG does not expect any authority to assess any material
amount of additional Taxes against it for any period for which Tax Returns
have been filed. There is no material dispute or claim concerning any Tax
liability of Old ACG either claimed or raised by any authority in writing
or as to which Old ACG has knowledge based upon direct inquiry by any agent
of such authority.
8.14 Draft Registration Statement. The text of, and the financial
statements and other financial information contained in, the Draft Registration
Statement, insofar as they relate to Parent or Old ACG but not otherwise, are
true, accurate and complete in all material respects and do not include an
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading.
9. OTHER COVENANTS PRIOR TO CLOSING
9.1 Access and Cooperation; Due Diligence; Audits.
(i) Between the date of this Agreement and the Closing Date, Company
will afford to the officers and authorized representatives of Parent and
Old ACG access to all of Company's sites, properties, books and records and
will furnish Parent and Old ACG with such additional financial and
operating data and other information as to the business and
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properties of Company as Parent and Old ACG may from time to time
reasonably request. Company will cooperate with Parent and Old ACG and
their respective representatives, auditors and counsel in the preparation
of any documents or other material that may be required in connection with
any documents or materials required by this Agreement. Parent and Old ACG
will treat all information obtained in connection with the negotiation and
performance of this Agreement as confidential in accordance with the
provisions of Section 15.
(ii) Between the date of this Agreement and the Closing, Parent and
Old ACG will afford to the officers and authorized representatives of
Company and Stockholders access to each of Parent's, Old ACG's and the
other Founding Companies' sites, properties, books and records and will
furnish Company and Stockholders with such additional financial and
operating data and other information as to the business and properties of
Parent, Old ACG and the Founding Companies as Company and Stockholders may
from time to time reasonably request. Parent and Old ACG will cooperate
with Company and Stockholders' representatives, auditors and counsel in the
preparation of any documents or other material which may be required in
connection with any documents or materials required by this Agreement.
Company and Stockholders will cause all information obtained in connection
with the negotiation and performance of this Agreement to be treated as
confidential in accordance with the provisions of Section 15.
(iii) Company agrees to permit an independent accounting firm selected
by Parent to audit and render a report on the Company Financial Statements,
provided that all the costs and expenses of such audits are paid by Parent.
9.2 Conduct of Business Pending Closing. Unless otherwise approved in
writing by Parent, between the date of this Agreement and the Closing Date,
Company will:
(i) carry on its business in substantially the same manner as it has
heretofore and not introduce any material new method of management,
operation or accounting;
(ii) maintain its properties and facilities, including those held
under lease, in as good working order and condition as at present, ordinary
wear and tear excepted;
(iii) perform in all material respects all of its obligations under
agreements relating to or affecting its respective assets, properties or
rights;
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(iv) keep in full force and effect in all material respects the
present insurance policies or other comparable insurance coverage;
(v) use its reasonable best efforts to maintain and preserve its
business organization intact, retain its respective present key employees
and maintain its respective relationships with suppliers, customers and
others having business relations with it;
(vi) maintain material compliance with all material permits, laws,
rules and regulations, consent orders, and all other orders of applicable
courts, regulatory agencies and similar governmental authorities;
(vii) maintain present debt instruments and Leases and not enter into
new or amended debt instruments or Leases; and
(viii) maintain or reduce present salaries and commission levels for
all officers, directors, employees and agents except for ordinary and
customary bonus and salary increases for employees in accordance with past
practices.
9.3 Prohibited Activities. Between the date of this Agreement and the
Closing Date, Company will not, without prior written consent of Parent:
(i) make any change in its Charter Documents or by-laws;
(ii) issue any securities, options, warrants, calls, conversion rights
or commitments relating to its securities of any kind other than in
connection with the exercise of options or warrants listed in Schedule 6.4;
(iii) declare or pay any dividend, or make any distribution in respect
of Company Stock whether now or hereafter outstanding, or purchase, redeem
or otherwise acquire or retire for value any shares of Company Stock;
(iv) enter into any contract or commitment or incur or agree to incur
any liability or make any capital expenditures, except if it is in the
normal course of business (consistent with past practice) or involves an
amount not in excess of $10,000;
(v) create, assume or permit to exist any Lien upon any asset or
property whether now owned or hereafter acquired, except (x) with respect
to purchase money Liens incurred in connection with the acquisition of
equipment with an aggregate cost not in excess of
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$10,000 as necessary or desirable for the conduct of its businesses, (y)
(1) Liens for Taxes either not yet due or being contested in good faith and
by appropriate proceedings (and for which contested Taxes adequate reserves
have been established and are being maintained) or (2) materialmen's,
mechanics', workers', repairmen's, employees' or other like Liens arising
in the ordinary course of business, or (3) Liens set forth on Schedule 6.10
or 6.15;
(vi) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business;
(vii) negotiate for the acquisition of any business or the start-up of
any new business;
(viii) merge or consolidate or agree to merge or consolidate with or
into any other corporation;
(ix) waive any material right or claim; provided that it may negotiate
and adjust bills in the course of good faith disputes with customers in a
manner consistent with past practice, provided, further, that such
adjustments shall not be deemed to be included in Schedule 6.11 unless
specifically listed thereon;
(x) commit a material breach or amend or terminate any material
agreement, permit, license or other right; or
(xi) enter into any other transaction outside the ordinary course of
its business or prohibited hereunder.
9.4 Exclusivity. Neither any Stockholder, nor Company, nor any agent,
officer, director, trustee or any representative of any of the foregoing will,
during the period commencing on the date of this Agreement and ending with, the
earlier to occur of the Closing Date or the termination of this Agreement in
accordance with its terms, directly/or indirectly:
(i) solicit or initiate the submission of proposals or offers from any
person for,
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person other than Parent or its
authorized agents relating to any acquisition or purchase of all or a
material amount of the assets of, or
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any equity interest in, Company or merger, consolidation or business
combination of Company.
Stockholders represent and warrant that neither any Stockholder nor the Company
has, during the period commencing on the date of the Original Agreement and
ending on the date of this Agreement, performed any such action described in
this Section 9.4.
9.5 Agreements. Stockholders and Company shall terminate (i) any
stockholders agreements, voting agreements, voting trusts, options, warrants
and employment agreements between the Company and any employee listed on
Schedule 6.18 and (ii) any existing agreement between Company and any
Stockholder, on or prior to the Closing Date. Copies of such termination
agreements are listed on Schedule 9.5 and copies thereof are attached thereto.
9.6 Notification of Certain Matters. Stockholders and Company shall give
prompt notice to Parent of (i) the occurrence or non-occurrence of any event
the occurrence or non-occurrence of which would likely cause any representation
or warranty of Company or Stockholders contained herein to be untrue or
inaccurate in any material respect at or prior to the Closing Date and (ii) any
material failure of any Stockholder or Company to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by such
Person hereunder as of such date. Parent shall give prompt notice to Company of
(i) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would likely cause any representation or warranty of
Parent or Old ACG contained herein to be untrue or inaccurate in any material
respect at or prior to the Closing Date and (ii) any material failure of Parent
or Old ACG to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder as of such date. The delivery of any
notice pursuant to this Section 9.6 shall not be deemed to (i) modify the
representations or warranties hereunder of the party delivering such notice,
which modification may only be made pursuant to Section 9.7, (ii) modify the
conditions set forth in Sections 10 and 11, or (iii) limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
9.7 Amendment of Schedules. Each party hereto agrees that, with respect to
the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until the Closing to supplement
or amend promptly the Schedules with respect to any matter hereafter arising or
discovered which, if existing or known at the date of this Agreement, would
have been required to be set forth or described in the Schedules.
Notwithstanding the foregoing sentence, no amendment or supplement to a
Schedule prepared by Company, Old ACG or Parent that constitutes or reflects an
event or occurrence that would have a Material Adverse Effect may be made
unless Parent and Old ACG or Company, as the case may be, consents to such
amendment or supplement. For all purposes of this Agreement, including without
limitation for
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purposes of determining whether the conditions set forth in Sections 10.1 and
11.1 have been fulfilled, the Schedules shall be deemed to be the Schedules as
amended or supplemented pursuant to this Section 9.7. No party to this
Agreement shall be liable to any other party if this Agreement shall be
terminated pursuant to the provisions of Section 13(v). Neither the entry by
Parent into any other agreement, such as this Agreement, after the date hereof
for the acquisition of one or more companies involved in or assets associated
with the telephone business and related activities nor the performance by
Parent of its obligations thereunder shall be deemed to require the amendment
to or a supplementation of any Schedule hereto.
9.8 Compliance with the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976 (the "Xxxx-Xxxxx Act"). All parties to this Agreement hereby recognize
that compliance with the Xxxx-Xxxxx Act may be required in connection with the
transactions contemplated herein. If it is determined by the parties to this
Agreement that compliance with the Xxxx-Xxxxx Act is required, then: (i) each
of the parties hereto agrees to cooperate and use its best efforts to comply
with the Xxxx-Xxxxx Act, (ii) such compliance by Stockholders and the Company
shall be deemed a condition precedent in addition to the conditions precedent
set forth in Section 11 of this Agreement, and such compliance by Parent and
Old ACG shall be deemed a condition precedent in addition to the conditions
precedent set forth in Section 10 of this Agreement, (iii) the parties agree to
cooperate and use their best efforts to cause all filings required under the
Xxxx-Xxxxx Act to be made, and (iv) Parent shall be responsible for all filing
fees under the Xxxx-Xxxxx Act.
9.9 Further Assurance. The parties hereto agree to execute and deliver, or
cause to be executed and delivered, such further instruments or documents or
take such other action as may be reasonably necessary or convenient to carry
out the transactions contemplated by this Agreement.
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS
The obligations of Stockholders with respect to actions to be taken on the
Closing Date are subject to the satisfaction or waiver on or prior to the
Closing Date of all of the following conditions. Upon Closing, all conditions
not satisfied shall be deemed to have been waived:
10.1 Representations and Warranties Performance of Obligations. All
representations and warranties of Parent and Old ACG contained in this
Agreement shall be true and correct in all material respects as of the Closing
Date with the same effect as though such representations and warranties had
been made on and as of such date; all of the terms, covenants and conditions of
this Agreement to be complied with or performed by Parent or Old ACG on or
before the Closing Date shall have been duly complied with or performed in all
material respects; and a certificate to the
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foregoing effect dated the Closing Date, and signed by the President or any
Vice President of each of Parent and Old ACG shall have been delivered to the
Stockholders.
10.2 Satisfaction. All actions, proceedings, instruments and documents
required to carry out this Agreement or incidental hereto and all other related
legal matters shall be reasonably satisfactory to the Stockholders and their
counsel.
10.3 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to
restrain or prohibit the transactions contemplated herein and no governmental
agency or body shall have taken any other action or made any request of Company
as a result of which the management of Company deems it inadvisable to proceed
with the transactions hereunder.
10.4 Opinion of Counsel. The Stockholders shall have received an opinion
from counsel for Parent and Old ACG, dated the Closing Date, in the form and
substance reasonably acceptable to Company and the Stockholders, relating to,
insofar as Parent and Old ACG is concerned, as the case may be, the
authorization, execution, delivery, performance and enforceability of this
Agreement and such other legal matters as Company and the Stockholders may
reasonably request.
10.5 Consents and Approvals. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made.
10.6 Good Standing Certificates. Parent shall have delivered to the
Stockholders a certificate, dated as of a date no later than ten days prior to
the Closing Date, duly issued by the Delaware Secretary of State and, unless
waived by the Company, in each state in which Parent is authorized to do
business, showing that Parent is in good standing and authorized to do business
and that all state franchise and/or income tax returns and taxes for Parent for
all periods prior to the Closing Date have been filed and paid to the extent
required.
10.7 No Material Adverse Change. No event or circumstance shall have
occurred with respect to Parent that would constitute a Material Adverse
Effect.
10.8 Secretary's Certificates. Stockholders shall have received a
certificate or certificates, dated the Closing Date and signed by the Secretary
of each of Parent and Old ACG, certifying the completeness and accuracy of the
attached copies of Parent's and Old ACG's respective Charter Documents
(including amendments thereto), by-laws (including amendments thereto), and
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resolutions of the boards of directors and approving Parent's and Old ACG's
entering into this Agreement and the consummation of the transactions
contemplated hereby.
10.9 Employment Agreement. Xxxx Xxxxx shall have been afforded an
opportunity to enter into an employment agreement substantially in the form of
Annex IV.
10.10 Closing of IPO. The sale by Parent of shares of Parent Stock in the
IPO shall have closed prior to or substantially contemporaneously with the
consummation of the transactions contemplated herein.
10.11 Warrants. Parent shall have issued to each of Xxxxx Xxxxxxxx and Xxx
Xxxx, in consideration of the relinquishment as of the Closing of his annual
salary as a member of Company's Executive Committee, the Warrants set forth in
the table below:
Name Number of Warrants
---- --------------------------
Series E Series F
-------- --------
Xxxxx Xxxxxxxx 9,000 9,000
Xxx Xxxx 9,000 9,000
------ ------
18,000 18,000
11. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT.
The obligations of Parent with respect to actions to be taken on the
Closing Date are subject to the satisfaction or waiver on or prior to the
Closing Date of all of the following conditions. Upon Closing, all conditions
not satisfied shall be deemed to have been waived.
11.1 Representations and Warranties; Performance of Obligations. All the
representations and warranties of Stockholders and Company contained in this
Agreement shall be true and correct in all material respects as of the Closing
Date with the same effect as though such representations and warranties had
been made on and as of such date; all of the terms, covenants and conditions of
this Agreement to be complied with or performed by Stockholders and Company on
or before the Closing Date shall have been duly performed or complied with in
all material respects; and Stockholders and Company shall have delivered to
Parent a certificate dated the Closing Date and signed by them to such effect.
11.2 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to
restrain or prohibit the transactions contemplated herein and no governmental
agency or body shall have taken any other action or made
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any request of Parent as a result of which the management of Parent deems it
inadvisable to proceed with the transactions hereunder.
11.3 Secretary's Certificate. Parent shall have received a certificate,
dated the Closing Date and signed by the Secretary of Company, certifying the
completeness and accuracy of the attached copies of Company's Charter Documents
(including amendments thereto), by-laws (including amendments thereto), and
resolutions of the board of directors approving Company's entering into this
Agreement and the consummation of the transactions contemplated hereby.
11.4 No Material Adverse Effect. No event or circumstance shall have
occurred with respect to Company which would constitute a Material Adverse
Effect, and Company shall not have suffered any material loss or damages to any
of its properties or assets, whether or not covered by insurance, which change,
loss or damage materially affects or impairs the ability of Company to conduct
its business.
11.5 Stockholders' Release. Stockholders shall have delivered to Parent an
instrument dated the Closing Date releasing Company from (i) any and all claims
of Stockholders against Company and Parent and (ii) any and all obligations of
Company, Parent or Old ACG to Stockholders, except for (x) items specifically
identified on Schedules 6.10 and 6.15 as being claims of or obligations to
Stockholders and (y) obligations arising under this Agreement or the
transactions contemplated hereby.
11.6 Satisfaction. All actions, proceedings, instruments and documents
required to carry out the transactions contemplated by this Agreement or
incidental hereto and all other related legal matters shall have been
reasonably satisfactory to Parent and its counsel.
11.7 Termination of Related Party Agreements. Except as set forth on
Schedule 11.7, all existing agreements between Company and Stockholders shall
have been canceled effective prior to or as of the Closing Date.
11.8 Opinion of Counsel. Parent shall have received an opinion from counsel
to Stockholders, dated the Closing Date, in the form and substance reasonably
acceptable to the Parent, relating to, insofar as Company and Stockholders are
concerned, the authorization, execution, delivery, performance and
enforceability of the Agreement and such other matters as Parent shall
reasonably request.
11.9 Consents and Approvals. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the
transactions contemplated
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herein shall have been obtained and made; and all consents and approvals of
third parties listed on Schedule 6.23 shall have been obtained.
11.10 Good Standing Certificates. The Stockholders shall have delivered to
Parent a certificate, dated as of a date no earlier than ten days prior to the
Closing Date, duly issued by the appropriate governmental authority in
Company's state of incorporation and, unless waived by Parent, in each state in
which Company is authorized to do business, showing Company is in good standing
and authorized to do business and that all state franchise and/or income Tax
returns and Taxes for Company for all periods prior to the Closing have been
filed and paid.
11.11 FIRPTA Certificate Each Stockholder shall have delivered to Parent a
certificate to the effect that he or she is not a foreign person under Section
1.1445-2(b) of the Treasury regulations.
11.12 Closing of IPO. The sale by Parent of shares of Parent Stock in the
IPO shall have closed prior to or substantially contemporaneously with the
consummation of the transactions contemplated herein.
11.13 Noncompetition Covenants of Key Employees. Each of the Persons
designated on Schedule 6.18 as a key employee shall have executed and delivered
to Parent a noncompetition agreement that contains all the substantive
provisions of Section 14.
11.14 Employment Agreement. Xxxx Xxxxx shall have executed an employment
agreement with Company substantially in the form of Annex IV.
12. COVENANTS OF PARENT WITH STOCKHOLDERS AFTER CLOSING
12.1 Release From Guarantees. Parent shall, within 90 days after the
Closing Date, secure the full release of Stockholders from any and all
guarantees on any indebtedness that they personally guaranteed and from any and
all pledges of assets that they pledged to secure such indebtedness for the
benefit of Company.
12.2 Preparation and Filing of Tax Returns.
(i) Stockholders shall file or cause to be filed all separate Federal
income Tax Returns (and any state and local Tax Returns filed on the basis
similar to that of S corporations under Federal income Tax rules) of
Company for all taxable periods that end on or before the Closing Date.
Each Stockholder shall pay or cause to be paid all Tax
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liabilities (in excess of all amounts already paid with respect
thereto or properly accrued or reserved with respect thereto on the Company
Financial Statements) shown by such Returns to be due.
(ii) Parent shall file or cause to be filed all separate Returns of,
or that include, Company for all taxable periods ending after the Closing
Date.
(iii) Each party hereto shall, and shall cause its Subsidiaries and
Affiliates to, provide to each of the other parties hereto such cooperation
and information as any of them reasonably may request in filing any Return,
amended Return or claim for refund, determining a liability for Taxes or a
right to refund of Taxes or in conducting any audit or other proceeding in
respect of Taxes. Such cooperation and information shall include providing
copies of all relevant portions of relevant Returns, together with relevant
accompanying schedules and work papers, relevant documents relating to
rulings or other determinations by Taxing Authorities and relevant records
concerning the ownership and Tax basis of property, which such party may
possess. Each party shall make its employees reasonably available on a
mutually convenient basis at its cost to provide explanation of any
documents or information so provided. Subject to the preceding sentence,
each party required to file Returns pursuant to this Agreement shall bear
all costs of filing such Returns.
12.3 Preservation of Employee Benefit Plans. Following the Closing Date,
Parent shall not cause the Company to terminate any health insurance, life
insurance or 401(k) plan in effect at Company until such time as Parent is able
to replace such plan with a plan that is applicable to Parent and all of its
then existing Subsidiaries; provided that Parent shall have no obligation to
provide replacement plans that have the same terms and provisions as the
existing plans; provided, further, that any new health insurance plan shall
provide for coverage for preexisting conditions.
12.4 Rule 144 Filing. Parent, from and after the IPO, shall use its efforts
to assure that Rule 144 under the Securities Act will be available for sales of
shares by Stockholders after the first anniversary of the Closing Date.
13. TERMINATION OF AGREEMENT
13.1 Termination. This Agreement may be terminated at any time prior to the
Closing Date solely:
(i) by mutual consent of the boards of directors of Parent and
Company;
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(ii) by Company (acting through its board of directors), on the one
hand, or by Parent (acting through its board of directors), on the other
hand, if the transactions contemplated by the Agreement to take place at
the Closing shall not have been consummated by January 31, 1998, unless the
failure of such transactions to be consummated is due to the willful
failure of the party seeking to terminate this Agreement to perform any of
its obligations under the Agreement to the extent required to be performed
by its prior to or on the Closing Date; or
(iii) by Stockholders, on the one hand, or by Parent (acting through
its board of directors), on the other hand, if, prior to October 16, 1997,
a Registration Statement on Form S-1 relating to the IPO has not been filed
by Parent with the SEC pursuant to the 1933 Act;
(iv) by Stockholders, on the one hand, or by Parent, on the other
hand, if a material breach or default shall be made by the other party in
the observance or in the due and timely performance of any of the material
covenants, agreements or conditions contained herein, and the curing of
such default shall not have been made on or before the Closing Date; or
(v) by Stockholders, on the one hand, or by Parent, on the other hand,
if either such party or parties declines to consent to an amendment or
supplement to a Schedule proposed by the other party or parties pursuant to
Section 9.7 because such proposed amendment constitutes or reflects an
event or occurrence that would have a Material Adverse Effect on the party
or parties proposing the same.
13.2 Liabilities in Event of Termination. Except as provided in Section
9.7, the termination of this Agreement will in no way limit any obligation or
liability of any party based on or arising from a breach or default by such
party with respect to any of its representations, warranties, covenants or
agreements contained in this Agreement including, but not limited to, legal and
audit costs and out of pocket expenses.
14. NONCOMPETITION
14.1 Prohibited Activities. Each Stockholder will not, for a period of
three years following the Closing Date, for any reason whatsoever, directly or
indirectly, for himself or on behalf of or in conjunction with any other
Person:
(i) engage, as an officer, director, stockholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or
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advisor, or as a sales representative, in the sale or marketing of
yellow page publishing, telecommunication services, interconnect services
and natural gas or electrical goods and services within the states of
Arkansas, California, Kansas, Missouri, Oklahoma and Texas (the
"Territory");
(ii) call upon any person within the Territory who is an employee of
Parent (including the Subsidiaries thereof) in a sales representative or
managerial capacity for the purpose or with the intent of enticing such
employee away from or out of the employ of Parent (including the
Subsidiaries thereof); provided that each Stockholder shall be permitted to
call upon and hire any member of his immediate family;
(iii) call upon any Person which is or which has been, within one year
prior to the Closing Date, a customer of Parent (including the Subsidiaries
thereof) within the Territory for the purpose of soliciting or selling
products or services in direct competition with Parent within the
Territory;
(iv) call upon any prospective acquisition candidate, on any
Stockholder's own behalf or on behalf of any competitor of Parent in the
long-distance telephone business, which candidate, to the knowledge of such
Stockholder after due inquiry, was called upon by Parent (including the
Subsidiaries thereof) or for which, to the knowledge of such Stockholder
after due inquiry, Parent (or any Subsidiary thereof) made an acquisition
analysis, for the purpose of acquiring such entity; or
(v) disclose existing or prospective customers of Company to any
Person for any reason or purpose whatsoever except to the extent that the
Company has in the past disclosed such information to the public for valid
business reasons.
Notwithstanding the above, the foregoing covenants shall not be deemed to
prohibit any Stockholder from acquiring as an investment not more than one
percent of the capital stock of a competing business whose stock is traded on a
national securities exchange.
14.2 Damages. Because of the difficulty of measuring economic losses to
Parent as a result of a breach of the foregoing covenants, and because of the
immediate and irreparable damage that could be caused to Parent for which it
would have no other adequate remedy, each Stockholder agrees that the foregoing
covenants may be enforced by Parent in the event of breach by such Stockholder,
by injunction and restraining order.
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14.3 Reasonable Restraint. It is agreed by the parties hereto that the
foregoing covenants in this Section 14 impose a reasonable restraint on the
Stockholders in light of the activities and business of Parent (including the
Subsidiaries thereof) on the date of the execution of this Agreement and the
reasonably foreseeable plans of Parent.
14.4 Severability, Reformation. The covenants in this Section 14 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention
of the parties that such restrictions be enforced to the fullest extent the
court deems reasonable, and the Agreement shall thereupon be automatically
reformed.
14.5 Independent Covenant. All of the covenants in this Section 14 shall be
construed as an agreement independent of any other provision in this Agreement,
and the existence of any claim or cause of action of any Stockholder against
Parent (including the Subsidiaries thereof), whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by
Parent of such covenants. It is specifically agreed that the period of three
years stated at the beginning of this Section 14, during which the agreements
and covenants of each Stockholder made in this Section 14 shall be effective,
shall be computed by excluding from such computation any time during which such
Stockholder is in violation of any provision of this Section 14. The covenants
contained in Section 14 shall not be affected by any breach of any other
provision hereof by any party hereto and shall be of no force and effect if the
transactions contemplated by this Agreement are not consummated.
14.6 Materiality. Stockholders hereby agree that the covenants set forth in
this Section 14 are a material and substantial part of the transactions
contemplated by this Agreement.
15. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
15.1 Stockholders. Stockholders recognize and acknowledge that they had in
the past, currently have, and in the future may have, access to certain
confidential information of Company and/or Parent and Old ACG, such as
operational policies, and pricing and cost policies that are valuable, special
and unique assets of Company and/or Parent and Old ACG. Stockholders agree that
they will not disclose such confidential information to any Person for any
purpose or reason whatsoever, except (i) to authorized representatives of
Parent; (ii) following the Closing, such information may be disclosed by
Stockholders as is required in the course of performing their duties for Parent
or the Company; and (iii) to counsel and other advisers; provided that such
advisers (other than counsel) agree to the confidentiality provisions of this
Section 15.1, unless (x) such information
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becomes known to the public generally through no fault of Stockholders, (y)
disclosure is required by law or the order of any governmental authority under
color of law; provided, that prior to disclosing any information pursuant to
this clause (y), Stockholders, if possible, shall give immediate prior written
notice thereof to Parent and provide Parent with the opportunity to contest
such disclosure, or (z) the disclosing party reasonably believes that such
disclosure is required in connection with the defense of a lawsuit against the
disclosing party. In the event of a breach or threatened breach by any
Stockholder of the provisions of this Section 15.1, Parent shall be entitled to
an injunction (without the posting of bond or proof of actual damages)
restraining such Stockholders from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting
Parent from pursuing any other available remedy for such breach or threatened
breach, including the recovery of damages. In the event the transactions
contemplated by this Agreement are not consummated, (1) the abovementioned
restrictions on each Stockholder's ability to disseminate confidential
information with respect to Company shall be of no force and effect and (2)
each Stockholder (including his representatives, advisors and legal counsel)
shall within ten business days of the Parent's request, deliver all copies of
the confidential information of Parent in his possession in any form whatsoever
(including, but not limited to, any reports, memoranda, or other material
prepared by such Stockholder or his representatives, advisors or legal
counsel).
15.2 Parent. Each of Parent and Old ACG recognizes and acknowledges that it
had in the past and currently has and in the future may have, prior to the
Closing, access to certain confidential information of Company, such as
operational policies, and pricing and cost policies that are valuable, special
and unique assets of Company. Each of Parent and Old ACG agrees that, prior to
the Closing, or if the transactions contemplated by this Agreement are not
consummated, it will not disclose such confidential information to any person
for any purpose or reason whatsoever, except (i) to authorized representatives
of Company; and (ii) to counsel and other advisers; provided that such advisers
(other than counsel) agree to the confidentiality provisions of this Section
15.2, unless (x) such information becomes known to the public generally through
no fault of Parent or Old ACG, (y) disclosure is required by law or the order
of any governmental authority under color of law; provided, that prior to
disclosing any information pursuant to this clause (y), Parent shall, if
possible, give immediate prior written notice thereof to Company and
Stockholders and provide Company and Stockholders with the opportunity to
contest such disclosure, or (z) the disclosing party reasonably believes that
such disclosure is required in connection with the defense of a lawsuit against
the disclosing party. In the event of a breach or threatened breach by Parent
or Old ACG of the provisions of this Section 15.2, Company and Stockholders
shall be entitled to an injunction (without the posting of bond or proof of
actual damages) restraining Parent or Old ACG from disclosing, in whole or in
part, such confidential information. Nothing herein shall be construed as
prohibiting Company and Stockholders from pursuing any other available remedy
for such breach or threatened
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breach, including the recovery of damages. In the event the transactions
contemplated by this Agreement are not consummated, Parent and Old ACG
(including their respective representatives, advisors and legal counsel) shall
within ten business days after Company's request, deliver all copies of the
confidential information of Company in either of their possession in any form
whatsoever (including, but not limited to, any reports, memoranda, or other
materials prepared by either Parent or Old ACG or either of their
representatives, advisors or legal counsel at the direction of Parent).
15.3 Damages. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 15.1 and 15.2 and
because of the immediate and irreparable damage that would be caused for which
no other adequate remedy exists, the parties hereto agree that, in the event of
a breach by any of them of the foregoing covenants, the covenant may be
enforced against the other parties by injunction and restraining order.
15.4 Survival. The obligations of the parties under this Section 15 shall
survive the termination of this Agreement for a period of three years from the
Closing Date or the termination of this Agreement pursuant to Section 13.
16. TRANSFER RESTRICTIONS
16.1 Parent Stock. Except for transfers to immediate family members who
agree to be bound by the restrictions set forth in this Section 16.1 (or trusts
for the benefit of Stockholders or family members, the trustees of which so
agree), for a period of one year from the Closing, except pursuant to Section
18, no Stockholder shall sell, assign, exchange, transfer, encumber, pledge,
distribute, appoint, or otherwise dispose of any Parent Stock received by such
Stockholder in this the transactions contemplated herein. The Parent Stock
delivered to the Stockholders pursuant to Section 2 of this Agreement will bear
a legend substantially in the form set forth in Section 16.3 and containing
such other information as Parent may deem necessary or appropriate.
16.2 Warrants and Warrant Stock. WARRANT HOLDERS ACKNOWLEDGE THAT THE
WARRANTS ARE NON-TRANSFERRABLE AND HENCE CANNOT BE SOLD, ASSIGNED, EXCHANGED,
TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED
OF BY ANY WARRANT HOLDER EXCEPT PURSUANT TO THE LAWS OF DESCENT AND
DISTRIBUTION OR IN CONNECTION WITH A TENDER OFFER OR EXCHANGE OFFER FOR ALL THE
PARENT STOCK. In addition, Warrant Holders further acknowledge that for a
period of one year from the date of the original issuance of any Warrant Stock
upon the exercise of a Warrant, except pursuant to Section 18, no Warrant
Holder may sell, assign, exchange, transfer, encumber, pledge, distribute,
appoint, or otherwise dispose of any Warrant Stock. The Warrant Stock delivered
to the
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Warrant Holders upon exercise of the Warrants will bear a legend substantially
in the form set forth in Section 16.3 and containing such other information as
Parent may deem necessary or appropriate.
16.3 Legend. The legend referred to in Sections 16.1 and 16.2 is as set
forth below:
THIS SECURITY MAY NOT BE SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED,
PLEDGED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL
NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE,
TRANSFER, ENCUMBRANCE, PLEDGE, DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION
PRIOR TO [FIRST ANNIVERSARY OF DATE OF ORIGINAL ISSUANCE]. UPON THE WRITTEN
REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS
RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER
THE DATE SPECIFIED ABOVE.
17. INVESTMENT REPRESENTATIONS
17.1 Parent Stock.
(i) Stockholders acknowledge that the Parent Stock to be delivered to
Stockholders pursuant to this Agreement (the "Restricted Securities") have
not been and will not be registered under the 1933 Act and therefore may
not be resold without compliance with the requirements of the 1933 Act and
applicable state securities laws. All of the Restricted Securities are
being acquired by Stockholders solely for their own respective accounts,
for investment purposes only, and not with a view to the distribution
thereof.
(ii) Stockholders represent, warrant, covenant and agree that none of
the Restricted Securities will be offered, sold, assigned, exchanged,
transferred, encumbered, distributed, appointed or otherwise disposed of
except after full compliance with all of the applicable provisions of the
1933 Act and the rules and regulations of the SEC thereunder and the
provisions of applicable state securities laws and regulations. All the
Restricted Securities shall bear the following legend in addition to the
legend required under Section 16.1 of this Agreement:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS
(COLLECTIVELY, THE "ACTS") AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED
UNLESS AND UNTIL (A) THESE SECURITIES SHALL
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HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
APPLICABLE STATE SECURITIES LAWS (COLLECTIVELY, THE "ACTS") OR (B) THE
HOLDER OF THESE SECURITIES PROVIDES THE ISSUER WITH (X) AN UNQUALIFIED
WRITTEN OPINION OF LEGAL COUNSEL, WHICH COUNSEL AND OPINION (IN FORM AND
SUBSTANCE) SHALL BE REASONABLY SATISFACTORY TO THE ISSUER, TO THE EFFECT
THAT THE PROPOSED DISPOSITION OF THESE SECURITIES MAY BE EFFECTED WITHOUT
REGISTRATION UNDER THE ACTS OR (Y) SUCH OTHER EVIDENCE AS MAY BE REASONABLY
SATISFACTORY TO THE ISSUER THAT THE PROPOSED DISPOSITION MAY BE EFFECTED
WITHOUT REGISTRATION UNDER THE ACTS.
(iii) Each Stockholder represents that he or she has received, has
read and understands the Draft Registration Statement, and in particular,
the risk factors described therein. Each of the Stockholders further
represent that he is able to bear the economic risk of an investment in the
Restricted Securities and can afford to sustain a total loss of such
investment and that each of the Stockholders either (i) has such knowledge
and experience in financial and business matters that he is capable of
evaluating the merits and risks of the proposed investment in Parent or
(ii) together with the senior executives of the Company, with whom he has
consulted, has such knowledge and experience in financial and business
matters that he is capable of evaluating the merits and risks of the
proposed investment in Parent. Stockholders have had an adequate
opportunity to ask questions and receive answers from the officers of
Parent and the Company concerning any and all matters relating to the
transactions described herein including, without limitation, the background
and experience of the current and proposed officers and directors of
Parent, the plans for the operations of the business of Parent and any
plans for additional acquisitions and the like. Stockholders have asked any
and all questions in the nature described in the preceding sentence and all
questions have been answered to their satisfaction.
17.2 Warrant Stock.
(i) Warrant Holders acknowledge that the Warrant Stock will not be
registered under the 1933 Act and therefore may not be resold without
compliance with the requirements of the 1933 Act and applicable state
securities laws. All of the Warrant Stock will be acquired by Warrant
Holders solely for their own respective accounts, for investment purposes
only, and with no present intention of distributing, selling or otherwise
disposing of such securities in connection with a distribution.
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(ii) Warrant Holders represent, warrant, covenant and agree that none
of the Warrant Stock will be offered, sold, assigned, exchanged,
transferred, encumbered, distributed, appointed or otherwise disposed of
except after full compliance with all of the applicable provisions of the
1933 Act and the rules and regulations of the SEC thereunder and the
provisions of applicable state securities laws and regulations. All the
Restricted Securities shall bear the legend set forth in Section 17.1(ii)
in addition to the legend required under Section 16.3 of this Agreement:
(iii) Each Warrant Holder represents that he or she has received, has
read and understands the Draft Registration Statement, and in particular,
the risk factors described therein. The Warrant Holders further represent
that they are each able to bear the economic risk of an investment in the
Warrant Stock and can afford to sustain a total loss of such investment and
that each of the Warrant Holders either (i) has such knowledge and
experience in financial and business matters that it is capable of
evaluating the merits and risks of the proposed investment in Parent or
(ii) together with the senior executives of the Company, with whom he or
she has consulted, has such knowledge and experience in financial and
business matters that he or she is capable of evaluating the merits and
risks of the proposed investment in Parent. Warrant Holders have had an
adequate opportunity to ask questions and receive answers from the officers
of Parent and the Company concerning any and all matters relating to the
transactions described herein including, without limitation, the background
and experience of the current and proposed officers and directors of
Parent, the plans for the operations of the business of Parent and any
plans for additional acquisitions and the like. Warrant Holders have asked
any and all questions in the nature described in the preceding sentence and
all questions have been answered to their satisfaction. Parent agrees to
afford Warrant Holders another opportunity to ask similar questions
regarding Parent prior to any exercise of their Warrants. At the time of
any such exercise, Parent may, as a condition to the issuance of any
Warrant Stock upon the exercise of Warrants, require the reaffirmation of
the statements contained in this Section 17.2(iii) by the Warrant Holder
seeking to exercise Warrants.
18. REGISTRATION RIGHTS
18.1 PiggyBack Registration Rights. At any time following the Closing Date,
whenever Parent proposes to register any Parent Stock for its own or the
account of others under the 1933 Act for a public offering, other than (i) any
registration of shares to be used as consideration for acquisitions of
additional businesses by Parent and (ii) registrations relating to employee
benefit plans, Parent shall give each Stockholder prompt written notice of its
intent to do so. Upon the written request of any Stockholder given within 15
business days after receipt of such notice, Parent
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shall cause to be included in such registration all Registrable Securities
(including any shares of Parent Stock issued as a dividend or other
distribution with respect to, or in exchange for, or in replacement of such
Registerable Securities) which any Stockholder requests; provided, however, if
Parent is advised in writing in good faith by any managing underwriter of an
underwritten offering of the securities being offered pursuant to any
Registration Statement under this Section 18.1 that the number of shares to be
sold by Persons other than Parent is greater than the number of such shares
which can be offered without adversely affecting the offering, Parent may
reduce pro rata the number of shares offered for the accounts of such Persons
(based upon the number of shares held by such Person) to a number deemed
satisfactory by such managing underwriter.
18.2 Demand Registration Rights. At any time after the first anniversary of
the Closing Date, the holders of a majority of the shares of Parent Stock (i)
representing Registerable Securities owned by the Stockholders or their
permitted transferees or (ii) representing Registrable Securities (as defined
in the agreements similar to this Agreement mentioned below) acquired by other
Stockholders of Parent on or prior to the closing of the IPO in connection with
the acquisition of their companies by Parent pursuant to an agreement, similar
to this Agreement (or upon exercise or conversion of securities of Parent
received pursuant to such agreement) (the persons referred to in clauses (i)
and (ii) being collectively referred to as the "Founding Stockholders"), which
shares have not been previously registered or sold and which shares are not
entitled to be sold under Rule 144(k) (or any similar or successor provision)
promulgated under the 1933 Act, may request in writing that Parent file a
Registration Statement under the 1933 Act covering the registration of such
shares of Parent Stock issued to and held by the Founding Stockholders or their
permitted transferees (including any stock issued as a dividend or other
distribution with respect to, or in exchange for, or in replacement of such
Parent Stock) (a "Demand Registration"). Within ten days of the receipt of such
request, Parent shall give written notice of such request to all other Founding
Stockholders and shall, as soon as practicable but in no event later than 45
days after notice from the Founding Stockholders requesting such registration,
file and use its best efforts to cause to become effective a Registration
Statement covering all such shares. Parent shall be obligated to effect only
one Demand Registration for all Founding Stockholders and will keep such Demand
Registration current and effective for not less than 90 days (or such shorter
period as is required to complete the distribution and sale of all shares
registered thereunder).
Notwithstanding the foregoing paragraph, following such a demand a majority
of the disinterested directors of Parent (i.e. directors who have not demanded
or elected to sell shares in any such public offering) may defer the filing of
the Registration Statement for a 30 day period.
If at the time of any request for a Demand Registration Parent has
formulated plans to file within 60 days after such request a Registration
Statement covering the sale of any of its securities
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in a public offering under the 1933 Act, no registration of the Parent Stock
shall be initiated under this Section 18.2 until 90 days after the effective
date of such Registration Statement unless Parent is no longer proceeding
diligently to secure the effectiveness of such Registration Statement; provided
that Parent shall provide the Founding Stockholders the right to participate in
such public offering pursuant to, and subject to, Section 18.1.
18.3 Registration Procedures. All expenses incurred in connection with the
registrations under this Section 18.3 (including all registration, filing,
qualification, legal, printing and accounting fees, but excluding underwriting
commissions and discounts), shall be borne by Parent. In connection with
registrations under Sections 18.1 and 18.2, Parent will, as expeditiously as
practicable:
(i) Prepare and file with the SEC a Registration Statement with
respect to Registerable Securities and use its best efforts to cause such
Registration Statement to become and remain effective; provided that Parent
may discontinue any registration of its securities that is being effected
pursuant to Section 18.2 at any time prior to the effective date of the
Registration Statement relating thereto.
(ii) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to such Registration Statement
and the prospectus used in connection therewith as may be necessary to keep
such Registration Statement effective for a period as may be requested by
the stockholders of Parent holding a majority of the Registerable
Securities covered thereby not exceeding 90 days and to comply with the
provisions of the 1933 Act with respect to the disposition of all
securities covered by such Registration Statement during such period in
accordance with the intended methods of disposition by the seller or
sellers thereof set forth in such Registration Statement; provided, that
before filing a Registration Statement or prospectus relating to the sale
of such Registerable Securities, or any amendments or supplements thereto,
Parent will furnish to counsel to each holder of Registerable Securities
covered by such Registration Statement or prospectus, copies of all
documents proposed to be filed, which documents will be subject to the
review of such counsel, and Parent will give reasonable consideration in
good faith to any comments of such counsel.
(iii) Furnish to each holder of Registerable Securities covered by the
Registration Statement and to each underwriter, if any, of such
Registerable Securities, such number of copies of a preliminary prospectus
and prospectus for delivery in conformity with the requirements of the 1933
Act, and such other documents, as such Person may reasonably
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request, in order to facilitate the public sale or other disposition
of such Registerable Securies.
(iv) Use its best efforts to register or qualify the Registerable
Securies covered by such Registration Statement under such other securities
or blue sky laws of such jurisdictions as each seller shall reasonably
request, and do any and all other acts and things which may be reasonably
necessary or advisable to enable such seller to consummate the disposition
of the Registerable Securies owned by such seller, in such jurisdictions,
except that Parent shall not for any such purpose be required (x) to
qualify to do business as a foreign corporation in any jurisdiction where,
but for the requirements of this Section 18.3(iv), it is not then so
qualified, or (y) to subject itself to taxation in any such jurisdiction,
or (z) to take any action which would subject it to general or unlimited
service of process in any such jurisdiction where it is not then so
subject.
(v) Use its best efforts to cause the Registerable Securies covered by
such Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the
seller or sellers thereof to consummate the disposition of such
Registerable Securies.
(vi) Immediately notify each seller of Registerable Securies covered
by such Registration Statement, at any time when a prospectus relating
thereto is required to be delivered under the 1933 Act within the
appropriate period mentioned in Section 18.3(ii), if Parent becomes aware
that the prospectus included in such Registration Statement, as then in
effect, includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing, and, at the request of any such seller, deliver a reasonable
number of copies of an amended or supplemental prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such
Registerable Securies, each prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing.
(vii) Otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC and make generally available to its
security holders, in each case as soon as practicable, but not later than
45 calendar days after the close of the period covered thereby (90 calendar
days in case the period covered corresponds to a fiscal year of the
Parent), an earnings statement of Parent which will satisfy the provisions
of Section 11 (a) of the 1933 Act.
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(viii) Use its best efforts in cooperation with the underwriters to
list such Registerable Securies on each securities exchange as they may
reasonably designate.
(ix) In the event the offering is an underwritten offering, use its
best efforts to obtain a "cold comfort" letter from the independent public
accountants for Parent in customary form and covering such matters of the
type customarily covered by such letters.
(x) Execute and deliver all instruments and documents (including in an
underwritten offering an underwriting agreement in customary form) and take
such other actions and obtain such certificates and opinions as the
stockholders of Parent holding a majority of the shares of Registerable
Securies covered by the Registration Statement may reasonably request in
order to effect an underwritten public offering of such Registerable
Securities.
(xi) Make available for inspection by the seller of such Registerable
Securities covered by such Registration Statement, by any underwriter
participating in any disposition to be effected pursuant to such
Registration Statement and by any attorney, accountant or other agent
retained by any such seller or any such underwriter, all pertinent
financial and other records, pertinent corporate documents and properties
of Parent, and cause all of Parent's officers, directors and employees to
supply all information reasonably requested by any such seller,
underwriter, attorney, accountant or agent in connection with such
Registration Statement.
(xii) Obtain for delivery to the underwriter or agent an opinion or
opinions from counsel for Parent in customary form and in form and scope
reasonably satisfactory to such underwriter or agent and its counsel.
18.4 Other Registration Matters.
(i) Each Stockholder holding shares of Registerable Securities covered
by a Registration Statement referred to in this Section 18 will, upon
receipt of any notice from Parent of the happening of any event of the kind
described in Section 18.3(vi), forthwith discontinue disposition of the
Registerable Securities pursuant to the Registration Statement covering
such Registerable Securities until such holder's receipt of the copies of
the supplemented or amended prospectus contemplated by Section 18.3(vi).
(ii) If a registration pursuant to Section 18.1 or 18.2 involves an
underwritten offering, each of the Stockholders agrees, whether or not his
shares of Registerable Securities
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are included in such registration, not to effect any public sale or
distribution, including any sale pursuant to Rule 144 under the 1933 Act,
of any Registerable Securities, or of any security convertible into or
exchangeable or exercisable for any Registerable Securities (other than as
part of such underwritten offering), without the consent of the managing
underwriter, during a period commencing seven calendar days before and
ending 180 calendar days (or such lesser number as the managing underwriter
shall designate) after the effective date of such registration. Similarly,
each of the Stockholders agrees not to effect any sale or distribution,
including any sale pursuant to the registration rights provided in Section
16.1 of any Registrable Securities, without the consent of the managing
underwriter of the IPO during a period commencing on the effective date of
the Draft Registration Statement and ending 365 calendar days (or such
lesser number as such managing underwriter shall designate) after such
Effective Date.
18.5 Indemnification.
(i) In the event of any registration of any securities of Parent under
the 1933 Act pursuant to Section 18.1 or 18.2, Parent will, and it hereby
agrees to, indemnify and hold harmless, to the extent permitted by law,
each seller of any Registrable Securities covered by such registration
statement, each Affiliate of such seller and their respective directors,
officers, employees and agents or general and limited partners (and
directors, officers, employees and agents thereof) and, if such seller is a
portfolio or investment fund, its investment advisors or agents, each other
person who participates as an underwriter in the offering or sale of such
securities and each other person, if any, who controls such seller or any
such underwriter within the meaning of the 1933 Act, as follows:
(x) against any and all loss, liability, claim, damage or expense
whatsoever arising out of or based upon an untrue statement or alleged
untrue statement of a material fact contained in any registration
statement (or any amendment or supplement thereto), including all
documents incorporated therein by reference, or the omission or
alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading, or
arising out of an untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus or prospectus
(or any amendment or supplement thereto) or the omission or alleged
omission therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading;
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(y) against any and all loss, liability, claim, damage and
expense whatsoever to the extent of the aggregate amount paid in
settlement of any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, if such settlement is
effected with the written consent of Parent; and
(z) against any and all expense reasonably incurred by them in
connection with investigating, preparing or defending against any
litigation, or investigation or proceeding by any governmental agency
or body, commenced or threatened, or any claim whatsoever based upon
any such untrue statement or omission, or any such alleged untrue
statement or mission to the extent that any such expense is not paid
under subsection (x) or (y) above;
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such seller or any such director,
officer, employee, agent, general or limited partner, investment advisor or
agent, underwriter or controlling person and shall survive the transfer of
such securities by such seller.
(ii) Parent may require, as a condition to including any Registrable
Securities in any registration statement filed in accordance with Section
18.1 or 18.2, that Parent shall have received an undertaking reasonably
satisfactory to it from the prospective seller of such Registrable
Securities or any underwriter, to indemnify and hold harmless (in the same
manner and to the same extent as set forth in Section 18.5(i)) Parent with
respect to any statement or alleged statement in or omission or alleged
omission from such registration statement, any preliminary, final or
summary prospectus contained therein, or any amendment or supplement, if
such statement or alleged statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished
to Parent by or on behalf of such seller or underwriter specifically
stating that it is for use in the preparation of such registration
statement, preliminary, final or summary prospectus or amendment or
supplement. Such indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of Parent or any such director,
officer or controlling person and shall survive the transfer of such
securities by such seller. In that event, the obligations of the Parent and
such sellers pursuant to this Section 18.5 are to be several and not joint;
provided, however, that, with respect to each claim pursuant to this
Section 18.5, Parent shall be liable for the full amount of such claim, and
each such seller's liability under this Section 18.5 shall be limited to an
amount equal to the net proceeds (after
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deducting the underwriting discount and expenses) received by such
seller from the sale of Registrable Securities held by such seller pursuant
to this Agreement.
(iii) Promptly after receipt by an indemnified party hereunder of
written notice of the commencement of any action or proceeding involving a
claim referred to in this Section 18.5, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party, give
written notice to such indemnifying party of the commencement of such
action; provided, however, that the failure of any indemnified party to
give notice as provided herein shall not relieve the indemnifying party of
its obligations under this Section 18.5, except to the extent (not
including any such notice of an underwriter) that the indemnifying party is
materially prejudiced by such failure to give notice. In case any such
action is brought against an indemnified party, unless in such indemnified
party's reasonable judgment a conflict of interest between such indemnified
and indemnifying parties may exist in respect of such claim (in which case
the indemnifying party shall not be liable for the fees and expenses of
more than one firm of counsel selected by holders of a majority of the
shares of Registrable Securities included in the offering or more than one
firm of counsel for the underwriters in connection with any one action or
separate but similar or related actions), the indemnifying party will be
entitled to participate in and to assume the defense thereof, jointly with
any other indemnifying party similarly notified, to the extent that it may
wish with counsel reasonably satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not
be liable to such indemnified party for any legal or other expenses
subsequently incurred by such indemnifying party in connection with the
defense thereof, provided that the indemnifying party will not agree to any
settlement without the prior consent of the indemnified party (which
consent shall not be unreasonably withheld) unless such settlement requires
no more than a monetary payment for which the indemnifying party agrees to
indemnify the indemnified party and includes a full, unconditional and
complete release of the indemnified party; provided, however, that the
indemnified party shall be entitled to take control of the defense of any
claim as to which, in the reasonable judgment of the indemnifying party's
counsel, representation of both the indemnifying party and the indemnified
party would be inappropriate under the applicable standards of professional
conduct due to actual or potential differing interests between them. In the
event that the indemnifying party does not assume the defense of a claim
pursuant to this Section 18.5(iii), the indemnified party will have the
right to defend such claim by all appropriate proceedings, and will have
control of such defense and proceedings, and the indemnified party shall
have the right to agree to any settlement without the prior consent of the
indemnifying party. Each indemnified party shall, and shall cause its legal
counsel to, provide reasonable cooperation to the indemnifying party and
its legal counsel in connection
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with its assuming the defense of any claim, including the furnishing
of the indemnifying party with all papers served in such proceeding. In the
event that an indemnifying party assumes the defense of an action under
this Section 18.5(iii), then such indemnifying party shall, subject to the
provisions of this Section 18.5, indemnify and hold harmless the
indemnified party from any and all losses, claims, damages or liabilities
by reason of such settlement or judgment.
(iv) Parent and each seller of Registrable Securities shall provide
for the foregoing indemnity (with appropriate modifications) in any
underwriting agreement with respect to any required registration or other
qualification of securities under any federal or state law or regulation of
any governmental authority.
18.6 Contribution. In order to provide for just and equitable contribution
in circumstances under which the indemnity contemplated by Section 18.5 is for
any reason not available or insufficient for any reason to hold harmless an
indemnified party in respect of any losses, claims, damages or liabilities
referred to therein, the parties required to indemnify by the terms thereof
shall contribute to the aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by such indemnity agreement incurred by
Parent, any seller of Registrable Securities and one or more of the
underwriters, except to the extent that contribution is not permitted under
Section 11 (f) of the 1933 Act. In determining the amounts which the respective
parties shall contribute, there shall be considered the relative benefits
received by each party from the offering of the Registrable Securities by
taking into account the portion of the proceeds of the offering realized by
each, and the relative fault of each party by taking into account the parties'
relative knowledge and access to information concerning the matter with respect
to which the claim was asserted, the opportunity to correct and prevent any
statement or omission and any other equitable considerations appropriate under
the circumstances. Parent and each person selling securities agree with each
other that no seller of Registrable Securities shall be required to contribute
any amount in excess of the amount such seller would have been required to pay
to an indemnified party if the indemnity under Section 18.5(ii) were available.
Parent and each such seller agree with each other and the underwriters of the
Registrable Securities, if requested by such underwriters, that it would not be
equitable if the amount of such contribution were determined by pro rata or per
capita allocation (even if the underwriters were treated as one entity for such
purpose) or for the underwriters' portion of such contribution to exceed the
percentage that the underwriting discount bears to the initial public offering
price of the Registrable Securities. For purposes of this Section 19.6, each
person, if any, who controls an underwriter within the meaning of Section 15 of
the 1933 Act shall have the same rights to contribution as such underwriter,
and each director and each officer of Parent who signed the registration
statement, and each person, if any, who controls Parent or a
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seller of Registrable Securities within the meaning of Section 15 of the 1933
Act shall have the same rights to contribution as Parent or a seller of
Registrable Securities, as the case may be.
18.7 Underwriting Agreement. In connection with each registration pursuant
to Section 18.1 or 18.2 covering an underwritten public offering, Parent and
each participating holder agree to enter into a written agreement with the
managing underwriter or underwriters in such form and containing such
provisions as are customary in the securities business for such an arrangement
between such managing underwriter or underwriters and companies of Parent's
size and investment stature, including appropriate indemnity, contributions and
stock lock-up provisions.
18.8 Availability of Rule 144. Parent shall not be obligated to register
shares of Registerable Securities held by any Stockholder at any time when the
resale provisions of Rule 144(k) (or any similar or successor provision)
promulgated under the 1933 Act are available to such Stockholder.
19. GENERAL
19.1 Cooperation. Company, each Stockholder, Old ACG and Parent shall
deliver or cause to be delivered to the other on the Closing Date and at such
other times and places as shall be reasonably agreed to, such additional
instruments as the any of the others may reasonably request for the purpose of
carrying out this Agreement. Stockholders will cooperate and use their
reasonable efforts to have the present officers, directors and employees of
Company cooperate with Parent on and after the Closing Date in furnishing
information, evidence, testimony and other assistance in connection with any
Tax Return filing obligations, actions, proceedings, arrangements or disputes
of any nature with respect to matters pertaining to all periods prior to the
Closing Date.
19.2 Successors and Assigns. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law), but if assigned by
operation of law, this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto, the successors of Parent, Old ACG and Company,
and the heirs and legal representatives of Stockholders. Notwithstanding the
foregoing, any Stockholder may assign his shares of Parent Stock and rights
thereunder, to a family or children's trust; provided that the assignee agrees
to be bound by the terms of this Agreement to the same extent as his or its
assignor.
19.3 Entire Agreement. This Agreement (including the Schedules and Annexes)
and the documents delivered pursuant hereto constitute the entire agreement and
understanding among Stockholders, Company, Newco, Old ACG and Parent and
supersede any prior agreement and understanding relating to the subject matter
of this Agreement. This Agreement, upon execution and
-54-
delivery, constitutes a valid and binding agreement of the parties hereto
enforceable in accordance with its terms and may be modified or amended only by
a written instrument executed by Stockholders, by Company, Parent, Newco and
Old ACG acting through their respective officers or representatives, duly
authorized by their respective Boards of Directors in the cases of Company, Old
ACG, Parent, and Newco. Any disclosure made on any Schedule delivered pursuant
hereto shall be deemed to have been disclosed for purposes of any other
Schedule required hereby; provided that Company shall make a good faith effort
to cross reference disclosures, as necessary or advisable, between related
Schedules.
19.4 Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
19.5 Brokers and Agents. Except as disclosed on Schedule 19.5, each party
represents and warrants that it employed no broker or agent in connection with
the transactions contemplated by this agreement and agrees to indemnify the
other parties hereto against all loss, cost, damage or expense arising out of
claims for fees or commission of brokers employed or alleged to have been
employed by such indemnifying party.
19.6 Expenses. Whether or not the transactions herein contemplated shall be
consummated, Parent will pay the fees, expenses and disbursements of Parent,
Company and their respective agents, representatives, accountants and counsel
incurred in connection with the subject matter of this Agreement and any
amendments thereto, including all costs and expenses incurred in the
performance and compliance with all conditions to be performed by Parent and
Company under this Agreement. Each Stockholder shall pay all sales, use,
transfer, real property transfer, gains, stock transfer and other similar taxes
("Transfer Taxes") imposed in connection with this transaction, the fees and
expenses of Stockholders' legal counsel and all other costs and expenses
incurred by Stockholders in their performance and compliance with all
conditions to be performed by them under this Agreement. Each Stockholder shall
file all necessary documentation and Returns with respect to such Transfer
Taxes. In addition, each Stockholder acknowledges that he, and not Company or
Parent, will pay any Taxes due upon receipt of the consideration payable
pursuant to Section 2, and will assume all Tax risks and liabilities of the
Company in connection with the transactions contemplated hereby.
19.7 Notices. All notices of communication required or permitted hereunder
shall be in writing, addressed to the party to be notified, and may be given by
(i) depositing the same in United States mail, postage prepaid and registered
or certified with return receipt requested, (ii) by
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telecopying the same if receipt thereof is confirmed or (iii) by delivering the
same in person to an officer or agent of such party.
(x) If to Parent, Old ACG, or Newco addressed to Parent at:
Advanced Communications Group, Inc.
0000 Xxxx Xxxxxxx
Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attn: Xxx X. Xxxxxxxxx
Telecopy No.: 000-000-0000
with a copy to:
Bracewell & Xxxxxxxxx, L.L.P.
South Tower Pennzoil Place
000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000-0000
Attn: Xxxxx X. Xxxxxxx III
Telecopy No.: 000-000-0000
(y) If to Stockholders, addressed to them at their addresses set forth
on Schedule 6.3, with copies to such counsel as is set forth with respect to
each Stockholder on such Schedule 6.3;
(z) If to the Company, addressed to it at:
TELE-SYSTEMS, Inc.
000 X. Xxxxx
Xxxxxxx, Xxxxxx 00000
Attn: Xxxx Xxxxx
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 19.7 from time to time.
19.8 Governing Law. This Agreement Shall be construed in accordance with
the laws of the State of Delaware.
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19.9 Survival of Representations and Warranties. The representations,
warranties, covenants and agreements of the parties made herein and at the
Closing Date or in writing delivered pursuant to the provisions of this
Agreement shall survive the consummation of the transactions contemplated
hereby and any examination on behalf of the parties until the Expiration Date.
19.10 Exercise of Rights and Remedies. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy accruing
to any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
19.11 Time. Time is of the essence with respect to this Agreement.
19.12 Reformation and Severability. In case any provision of this Agreement
shall be invalid, illegal or unenforceable, it shall, to the extent
practicable, be modified in such manner as to be valid, legal and enforceable
but so as to most nearly retain the intent of the parties, and if such
modification is not possible, such provision shall be severed from this
Agreement; and in either case the validity, legality and enforceability of the
remaining provisions of this Agreement shall not in any way be affected or
impaired thereby.
19.13 Remedies Cumulative. Except as otherwise provided in Section ?, no
right, remedy or election given by any term of this Agreement shall be deemed
exclusive but each shall be cumulative with all other rights, remedies and
elections available at law or in equity.
19.14 Captions. The headings of this Agreement are inserted for convenience
only, shall not constitute a part of this Agreement or be used to construe or
interpret any provision hereof.
19.15 Public Statements. The parties hereto shall consult with each other
and no party shall issue any public announcement or statement with respect to
the transactions contemplated hereby without the consent of the other parties,
unless the party desiring to make such announcement or statement, after seeking
such consent from the other parties, obtains advice from legal counsel that a
public announcement or statement is required by applicable law.
19.16 Amendments and Waivers. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived only with the
written consent of Parent, Company, Old ACG, Newco and Stockholders. Any
amendment or waiver effected in accordance with this Section 19.16 be binding
upon each of the parties hereto.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
ADVANCED COMMUNICATIONS GROUP, INC.
BY:
-------------------------------------
NAME: XXX X. XXXXXXXXX
TITLE: CHAIRMAN AND CHIEF EXECUTIVE
OFFICER
TELE-SYSTEMS, INC.
BY:
-------------------------------------
NAME: XXXX XXXXX
TITLE: PRESIDENT AND CHIEF EXECUTIVE
OFFICER
STOCKHOLDERS:
----------------------------------------
XXXXX XXXXXXXX
----------------------------------------
XXXX XXXXX
----------------------------------------
XXXXX XXXXXXXX
----------------------------------------
XXX XXXX
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----------------------------------------
XXXX XXXX
ADVANCED COMMUNICATIONS CORP.
BY:
-------------------------------------
NAME: XXX X. XXXXXXXXX
TITLE: CHAIRMAN AND CHIEF EXECUTIVE
OFFICER
ACG ACQUISITION II CORP.
BY:
-------------------------------------
NAME: XXX X. XXXXXXXXX
TITLE: PRESIDENT
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ANNEX I
DRAFT REGISTRATION STATEMENT
(separately provided)
ANNEX II
ADVANCED COMMUNICATIONS GROUP, INC.
SECTION 351 EXCHANGE PLAN
The Board of Directors of Advanced Communications Group, Inc., a
Delaware corporation organized in September 1997 ("Company"), has adopted this
Section 351 Exchange Plan effective as of October 3, 1997 ("Exchange Plan") in
order to comply with the requirements of Section 351 of the Internal Revenue
Code of 1986, as amended, and the rules and regulations promulgated thereunder
("Code"), and for purposes of defining the rights of various persons who may
make future transfers of voting capital stock and other consideration,
including cash and other assets (the items transferred being collectively
referred to herein as the "Assets") to the Company, all as more particularly
set forth below:
WHEREAS, the Company intends to acquire outstanding shares of capital
stock of certain corporations and other assets and acquire the outstanding
capital stock of ACG, Inc., a Delaware corporation, in a reverse triangular
merger, all as part of an integrated transaction as more particularly described
in the Company's Registration Statement in Form S-1 (draft of October 2, 1997)
("Draft Registration Statement") relating to its initial underwritten public
offering ("IPO"), the foregoing acquisitions being hereinafter collectively
referred to as the "Acquisitions"; and
WHEREAS, the various transactions comprising the Acquisitions will
occur substantially concurrently upon the consummation of the IPO;
NOW THEREFORE, in order to obtain the Assets, the Company may elect to
exchange, as a part of a single plan, shares of its voting capital stock and
other consideration, including cash, warrants, options and promissory notes,
for such Assets as shall be transferred to the Company by one or more of the
following individuals and entities: (i) the existing shareholders of the
predecessor to the Company in a reverse triangular merger; (ii) certain holders
of capital stock of other corporations or other assets that shall be acquired
by the Company pursuant to the Acquisitions; (iii) certain other persons or
entities who may assist the Company in the Acquisitions or in the manufacture
and or marketing of its products, (iv) purchasers of the Company's capital
stock in the IPO; and (v) certain other financial investors; and
FURTHERMORE, it is the expectation of the Company (without making any
representation with respect thereto) that the parties contributing such Assets
to the Company as part of the
Acquisitions and the IPO will possess immediately after the completion of the
Acquisitions, at least 80% of the total combined voting power of all classes of
capital stock of the Company entitled to vote and at least 80% of the total
number of shares of all other classes of capital stock of the Company; and
FURTHERMORE, it is also the intention of the Company (without making
any representation with respect thereto) that the foregoing transfers of Assets
to the Company shall qualify as tax free within the provisions of Section 351
of the Code; provided, however, that the Company does not assume any liability
or responsibility to any holder of capital stock of the Company or any other
person or entity in the event Section 351 of the Code does not apply to such
transfers of Assets; and
FURTHERMORE, it is the expectation of the Company that the parties to
the Acquisitions and the IPO will contribute Assets to the Company in the
approximate amounts contemplated by the Draft Registration Statement in
exchange for the voting capital stock, and other consideration, including cash,
options, warrants and promissory notes of the Company, in the approximate
amounts contemplated by the Draft Registration Statement.
The shares of voting capital stock and other consideration, including
cash, options, warrants and promissory notes of the Company, deliverable in the
Acquisitions may be subject to adjustment in accordance with the various
acquisition agreements between the Company and the contributing parties. This
Exchange Plan shall not obligate any party to any Acquisition to consummate
such Acquisition other than upon the terms of the definitive acquisition
agreement executed by such party with respect to such Acquisition.
By the execution of the acquisition agreement to which this Exchange
Plan is attached as Annex II, each of the contributing parties thereto
evidences such party's agreement with and adoption of this Exchange Plan.
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