STOCK PURCHASE AGREEMENT
Dated as of June 20, 2006
by and among
AYIN HOLDING COMPANY INC.,
COMPLETE TOWER SOURCES, INC.
and
THE SHAREHOLDER OF COMPLETE TOWER SOURCES, INC.
TABLE OF CONTENTS
PAGE
ARTICLE I PURCHASE AND SALE OF CTSI SHARES . . . . . . . . . . . . . . 1
ARTICLE II PURCHASE PRICE; CLOSING. . . . . . . . . . . . . . . . . . . 1
2.01 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . 1
2.02 Payment of Purchase Price. . . . . . . . . . . . . . . . . . . 1
2.03 Working Capital Procedure. . . . . . . . . . . . . . . . . . . 2
2.04 Noncompetition Payment . . . . . . . . . . . . . . . . . . . . 4
2.05 Accrued Bonus Payment Adjustment . . . . . . . . . . . . . . . 4
2.06 Post-Closing Purchase Price Adjustment . . . . . . . . . . . . 5
2.07 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.08 Transactions and Documents at Closing. . . . . . . . . . . . . 5
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . 6
3.01 Power, Authority and Organization of the Seller. . . . . . . . 6
3.02 No Conflict. . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.03 Ownership of the CTSI Shares . . . . . . . . . . . . . . . . . 6
3.04 Absence of Other Claims. . . . . . . . . . . . . . . . . . . . 6
3.05 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act. . . . . . . . . . . . . . . . . . . . . 7
3.06 Investment Representations . . . . . . . . . . . . . . . . . . 7
ARTICLE IV REPRESENTATIONS AND WARRANTIES REGARDING CTSI . . . . . . . 9
4.01 Organization and Authorization . . . . . . . . . . . . . . . . 9
4.02 Authorized and Outstanding Stock . . . . . . . . . . . . . . . 9
4.03 Absence of Other Claims. . . . . . . . . . . . . . . . . . . . 9
4.04 No Conflict. . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.05 Required Consents and Approvals. . . . . . . . . . . . . . . . 10
4.06 No Violation of Law. . . . . . . . . . . . . . . . . . . . . . 10
4.07 Financial Statements . . . . . . . . . . . . . . . . . . . . . 10
4.08 No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . 11
4.09 Real Property. . . . . . . . . . . . . . . . . . . . . . . . . 11
4.10 Personal Property. . . . . . . . . . . . . . . . . . . . . . . 12
4.11 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.12 Intellectual Property. . . . . . . . . . . . . . . . . . . . . 13
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TABLE OF CONTENTS
(continued)
PAGE
4.13 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.14 Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.15 Employee Benefits. . . . . . . . . . . . . . . . . . . . . . . 15
4.16 Collective Bargaining. . . . . . . . . . . . . . . . . . . . . 18
4.17 Labor Disputes . . . . . . . . . . . . . . . . . . . . . . . . 18
4.18 Bank Accounts. . . . . . . . . . . . . . . . . . . . . . . . . 18
4.19 Environmental Matters. . . . . . . . . . . . . . . . . . . . . 18
4.20 Required Licenses and Permits. . . . . . . . . . . . . . . . . 20
4.21 Insurance Policies . . . . . . . . . . . . . . . . . . . . . . 20
4.22 Major Suppliers and Customers. . . . . . . . . . . . . . . . . 21
4.23 Contracts and Commitments. . . . . . . . . . . . . . . . . . . 21
4.24 Agreements in Full Force and Effect. . . . . . . . . . . . . . 22
4.25 Absence of Certain Changes and Events. . . . . . . . . . . . . 22
4.26 Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . 24
4.27 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.28 Brokerage. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.29 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PURCHASER. . . . . . . . . 26
5.01 Organization . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.02 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . 27
5.03 No Conflict. . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.04 Brokerage. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.05 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE VI COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.01 Pre-Closing Operations of CTSI . . . . . . . . . . . . . . . . 27
6.02 Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.03 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.04 Preparation of Supporting Documents. . . . . . . . . . . . . . 33
6.05 Notices of Certain Events. . . . . . . . . . . . . . . . . . . 34
6.06 Supplements to Schedules . . . . . . . . . . . . . . . . . . . 34
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TABLE OF CONTENTS
(continued)
PAGE
6.07 No Solicitation of Transactions. . . . . . . . . . . . . . . . 35
6.08 Filings; Other Actions; Notification . . . . . . . . . . . . . 35
6.09 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . 36
6.10 Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.11 Non-Operating Expenses . . . . . . . . . . . . . . . . . . . . 36
6.12 Registration Rights. . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE VII CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT
THE TRANSACTION. . . . . . . . . . . . . . . . . . . . . . . 39
7.01 Regulatory Consents. . . . . . . . . . . . . . . . . . . . . . 39
7.02 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE VIII CONDITIONS TO OBLIGATIONS OF THE SELLER. . . . . . . . . . . 40
8.01 Representations and Warranties True and Correct at Closing Date 40
8.02 Performance of Obligations . . . . . . . . . . . . . . . . . . 40
8.03 Documents Satisfactory in Form and Substance . . . . . . . . . 40
8.04 Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE IX CONDITIONS TO OBLIGATIONS OF PURCHASER . . . . . . . . . . . 41
9.01 Representations and Warranties True and Correct at Closing Date 41
9.02 Performance Obligations. . . . . . . . . . . . . . . . . . . . 41
9.03 No Material Change . . . . . . . . . . . . . . . . . . . . . . 41
9.04 Other Necessary Consents . . . . . . . . . . . . . . . . . . . 41
9.05 Opinion of Counsel to the Seller . . . . . . . . . . . . . . . 41
9.06 Documents Satisfactory in Form and Substance . . . . . . . . . 41
9.07 Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.08 Employment Agreements. . . . . . . . . . . . . . . . . . . . . 42
9.09 Release of Liens . . . . . . . . . . . . . . . . . . . . . . . 42
9.10 Payment of Indebtedness. . . . . . . . . . . . . . . . . . . . 42
9.11 Financing. . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.12 Section 338 Forms. . . . . . . . . . . . . . . . . . . . . . . 42
9.13 Cash Requirement . . . . . . . . . . . . . . . . . . . . . . . 42
9.14 Non-Competition Agreements . . . . . . . . . . . . . . . . . . 42
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TABLE OF CONTENTS
(continued)
PAGE
ARTICLE X INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . 42
10.01 Indemnification Obligations of the Seller . . . . . . . . . . 42
10.02 Indemnification Obligations of Purchaser. . . . . . . . . . . 43
10.03 Indemnification Procedure . . . . . . . . . . . . . . . . . . 44
10.04 Survival Period . . . . . . . . . . . . . . . . . . . . . . . 45
10.05 Liability Limits. . . . . . . . . . . . . . . . . . . . . . . 46
10.06 Investigations. . . . . . . . . . . . . . . . . . . . . . . . 46
10.07 Set-Off . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE XI TERMINATION PRIOR TO CLOSING . . . . . . . . . . . . . . . . 47
11.01 Termination of Agreement. . . . . . . . . . . . . . . . . . . 47
11.02 Termination of Obligations. . . . . . . . . . . . . . . . . . 47
ARTICLE XII MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . 48
12.01 Entire Agreement; Survival. . . . . . . . . . . . . . . . . . 48
12.02 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . 48
12.03 Parties Bound by Agreement; Successors and Assigns. . . . . . 48
12.04 Counterparts; Facsimile . . . . . . . . . . . . . . . . . . . 48
12.05 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . 48
12.06 Modification and Waiver . . . . . . . . . . . . . . . . . . . 48
12.07 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . 48
12.08 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
12.09 Governing Law; Dispute Resolution . . . . . . . . . . . . . . 49
12.10 Public Announcements. . . . . . . . . . . . . . . . . . . . . 50
12.11 CTSI's and the Seller's Knowledge . . . . . . . . . . . . . . 50
12.12 No Third-Party Beneficiaries. . . . . . . . . . . . . . . . . 50
12.13 "Including" . . . . . . . . . . . . . . . . . . . . . . . . . 50
12.14 Gender and Number . . . . . . . . . . . . . . . . . . . . . . 50
12.15 References. . . . . . . . . . . . . . . . . . . . . . . . . . 50
12.16 Severability. . . . . . . . . . . . . . . . . . . . . . . . . 50
12.17 Further Assurances. . . . . . . . . . . . . . . . . . . . . . 51
12.18 Currency. . . . . . . . . . . . . . . . . . . . . . . . . . . 51
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TABLE OF CONTENTS
(continued)
PAGE
12.19 Ordinary Course of Business . . . . . . . . . . . . . . . . . 51
12.20 Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . 51
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LIST OF SCHEDULES AND EXHIBITS
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SCHEDULES
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EXHIBITS
--------
Exhibit A Form of Promissory Note
Exhibit B Form of Employment Agreement
Exhibit C Form of Noncompetition Agreement
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (hereinafter referred to as this
"Agreement"), is made and entered into as of June 20, 2006, by and among AYIN
---------
HOLDING COMPANY INC., a Delaware corporation (hereinafter referred to as
"Purchaser"). COMPLETE TOWER SOURCES, INC., a Louisiana corporation (hereinafter
---------
referred to as "CTSI" or the "Company"), and the shareholder of CTSI that is
---- -------
signatory hereto (hereinafter referred to as the "Seller").
------
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Seller owns one hundred (100) shares of CTSI (the "CTSI
----
Shares"), which constitute all of the issued and outstanding capital stock of
------
CTSI; and
WHEREAS, CTSI is in the business of tower construction for wireless
communications (the "CTSI Business"); and
--------------
WHEREAS, in reliance on and subject to the terms, conditions,
representations, warranties, covenants and agreements contained herein,
Purchaser desires to purchase the CTSI Shares from the Seller, and the Seller
desires to sell the CTSI Shares to Purchaser;
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements herein contained, and upon and subject to the terms and
the conditions hereinafter set forth, the parties do hereby agree as follows:
ARTICLE I
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PURCHASE AND SALE OF CTSI SHARES
--------------------------------
Upon the terms and subject to the conditions of this Agreement, at the
Closing, the Seller shall sell, assign, transfer and convey unto Purchaser, and
Purchaser shall purchase and acquire from the Seller, all (but not less than
all) of the CTSI Shares, free and clear of any and all claims, liens, charges
and encumbrances.
ARTICLE II
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PURCHASE PRICE; CLOSING
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2.01 PURCHASE PRICE. Subject to adjustment pursuant to Sections 2.03
--------------
and 2.05, the aggregate amount to be paid for the CTSI Shares (the "Purchase
--------
Price") shall be $71,000,000.
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2.02 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be paid to the
-------------------------
Seller as follows: (i) at Closing, an amount equal to $42,600,000 (the "Purchase
--------
Price Cash Component") shall be paid to the Seller, in immediately available
----------------------
funds; (ii) at Closing, a promissory note (the "Promissory Note") in a principal
---------------
amount equal to $28,400,000 (the "Purchase Price Note Component") and bearing
-----------------------------
simple interest at a rate equal to nine percent (9%) per annum, in the form
attached hereto as EXHIBIT A, shall be delivered to the Seller; and (iii) any
---------
adjustment calculated pursuant to Section 2.03 below shall be paid in accordance
with the terms thereof.
2.03 WORKING CAPITAL PROCEDURE.
-------------------------
(a) Not less than five (5) calendar days prior to the Closing Date,
Seller shall prepare and deliver to Purchaser a statement estimated in good
Faith (the "Estimated Working Capital Schedule"), of certain current assets and
----------------------------------
certain liabilities of Seller as of the close of business on the Closing Date
(the "Balance Sheet Items"). Each of the Balance Sheet Items constituting assets
-------------------
of the Seller (the "Asset Line Items") shall have a target amount (each, an
----------------
"Asset Target"), as set forth in the table below:
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------------------------------------------------------------------------
Cash plus Contract receivables plus costs and estimated $13,075,000
earnings in excess of ▇▇▇▇▇▇▇▇ on uncompleted contracts,
less ▇▇▇▇▇▇▇▇ in excess of costs on uncompleted contracts
------------------------------------------------------------------------
Inventory plus Prepaid expenses $ 370,000
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Each of the Balance Sheet Items constituting liabilities (the "Liability Line
--------------
Items") of the Seller shall have a target amount (each, a "Liability Target"),
----- ----------------
as set forth in the table below:
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Accounts payable $2,500,000
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Accrued wages plus deductions payable plus federal and $ 150,000
state payroll taxes payable plus SUTA payable plus
employee benefits payable plus other employee
witholdings
-------------------------------------------------------------------
Outstanding line of credit balance with Whitney Bank $2,400,000
-------------------------------------------------------------------
Seller shall provide Purchaser with a reasonable opportunity to review and
comment upon Seller's calculation of the Estimated Working Capital, and shall
provide Purchaser and its representatives access to all books, records, and
employees of the Company for purposes consistent therewith.
(b) At the Closing, if any Asset Line Item, as reflected on the
Estimated Working Capital Schedule is less than the Asset Target (an "Asset
-----
Deficit"), then the Purchase Price Cash Component shall be reduced by an amount
-------
equal to the Asset Deficit. If any Liability Line Item, as reflected on the
Estimated Working Capital Schedule is greater than the Liability Target (an
"Excess Liability"), then the Purchase Price Cash Component shall be reduced by
-----------------
an amount equal to the Excess Liability. Any reduction contemplated hereby
shall constitute an adjustment to the Purchase Price.
(c) Within five (5) Business Days following the determination
of the Final Working Capital Schedule (as defined below), the Final Working
Capital Schedule shall be compared against the Balance Sheet Line Items in the
same manner as prescribed in subsection (b) above. To the extent there is a
deviation between the Final Working Capital Schedule and the Estimated Working
Capital Schedule as to any such item, then, to the extent the Purchase Price was
not adjusted at Closing pursuant to subsection (b) above, Seller shall pay the
unpaid portion of such adjusted amount to the Purchaser.
2
prior to the determination of the disputed amount in accordance with subsection
(e) below. Any amount subject to good faith dispute may be withheld pending
determination of the Final Working Capital Schedule in accordance with
subsection (e) below. Any payment made pursuant to this Section 2.03 shall
include simple interest at the rate of nine percent (9%) per annum from the
Closing Date through the date of such payment.
(e) Within ninety (90) days following the Closing, the Purchaser
shall prepare and deliver to the Seller a statement (the "Closing Working
---------------
Capital Schedule") of the Balance Sheet Items, calculated as of the close of
-----------------
business on the Closing Date. The Estimated Working Capital Schedule and the
Closing Working Capital Schedule shall be prepared (and the Balance Sheet Items
determined) in accordance with generally accepted accounting principles ("GAAP")
----
and, to the extent consistent therewith, the prior practices of the Seller. The
Seller shall have thirty (30) days following receipt of the Closing Working
Capital Schedule delivered pursuant hereto during which to notify the Purchaser
of any dispute of any item contained therein, which notice shall set forth in
detail the basis for such dispute. The Purchaser and the Seller shall
cooperate in good faith to resolve any such dispute as promptly as possible, and
upon such resolution, the Closing Working Capital Schedule shall be prepared in
accordance with the agreement of the Purchaser and the Seller. In the event the
Seller does not notify the Purchaser of any such dispute within such thirty
(30)-day period or notifies the Purchaser within such period that it does not
dispute any item contained therein, the Closing Working Capital Schedule
delivered pursuant hereto and the Purchaser's calculation of amounts payable
pursuant to subsection (b) above, if any, shall be final and binding upon the
Parties. In the event the Purchaser and the Seller are unable to resolve any
dispute regarding the Closing Working Capital Schedule within fifteen (15) days
following the Purchaser's receipt of notice of such dispute, such dispute shall
be submitted to, and all issues having a bearing on such dispute shall be
resolved by, a nationally recognized accounting firm selected by the Purchaser
and satisfactory to the Seller, which shall include, without limitation, any
"Big Four" accounting firm (the "Accounting Referee"). In resolving any such
------------------
dispute, the Accounting Referee shall consider only those items or amounts in
the Closing Working Capital Schedule as to which the Seller has disagreed. The
Accounting Referee's determination of the Closing Working Capital Schedule and
the Balance Sheet Items based thereon shall be final and binding on the Parties.
The Accounting Referee shall use commercially reasonable efforts to complete its
work within thirty (30) days following its engagement. The expenses of the
Accounting Referee shall be shared equally by the Seller and the Purchaser.
The Closing Working Capital Schedule finally determined pursuant to this
subsection shall be referred to as the "Final Working Capital Schedule".
-------------------------------
2.04 NONCOMPETITION PAYMENT. (a) In addition to the foregoing, in
-----------------------
consideration for Seller entering into a Noncompetition Agreement in the form of
EXHIBIT C, Purchaser shall at Closing deliver to Seller that number of shares of
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the common stock of Charys Holding Company, Inc. (the "Parent"), par value
------
$0.001 per share (the "Parent Common Stock") as is equal to Four Million
---------------------
(4,000,000) divided by the average closing trading price per share of the Parent
Common Stock for the ten trading days ending on the Closing Date.
3
(b) The number of shares of Parent Common Stock to be issued to
Seller pursuant hereto shall be subject to adjustment for a period of time as
prescribed by this Section 2.04. At the conclusion of the Adjustment Period (as
defined below), 4,000,000 shall be divided by the average closing trading price
of the Parent Common Stock during the Adjustment Period (the "Stock Quotient").
--------------
If the Stock Quotient is greater than the number of shares of Parent Common
Stock that were issued pursuant to subsection (a) above, then the Parent shall,
on a one- time basis, issue a number of shares of Parent Common Stock to Seller
equal to such difference (the "Extra Shares"); provided, however: (i) the
-------------
maximum number of Extra Shares that Parent shall be required to issue hereunder
shall in no event exceed the number of shares that is equal to two percent (2%)
percent of the total issued and outstanding shares of Parent Common Stock as of
the last day of the Adjustment Period, and (ii) if the average closing trading
price of the Parent Common Stock for any fifteen (15) days during the Adjustment
Period exceeds the Closing Price (as defined below), the adjustment contemplated
by this Section shall automatically terminate and be of no further force and
effect. Seller shall not, at any time, sell more than 45,000 shares per day of
Parent Common Stock, issued pursuant to this Section 2.04, and the fulfillment
of such covenant shall be a condition to the issuance of any Extra Shares
hereunder.
(c) For purposes hereof, the "Adjustment Period" shall mean the 90
-----------------
calendar days following the effectiveness of the first filed registration
statement providing for the registration of any Registrable Securities,
including any registration statement that provides for "piggy-back" registration
of Registrable Securities pursuant to Section 6.12 below. Notwithstanding the
foregoing, if no registration statement has been declared effective providing
for the resale of the Registrable Securities on or before the one year
anniversary of the Closing Date, the Adjustment Period shall end on such
anniversary and the adjustment described in subsection (b) above shall be
calculated based on the average closing trading price per share of the Parent
Common Stock for the last ten trading days immediately preceding such
anniversary.
(d) For purposes hereof, "Closing Price" means the average closing
-------------
trading price per share of the Parent Common Stock for the last ten trading days
ending on the Closing Date.
2.05 ACCRUED BONUS PAYMENT ADJUSTMENT. Notwithstanding anything
-----------------------------------
herein to the contrary, the Purchase Price Cash Component (and the Purchase
Price) shall be reduced by the amount payable to the individuals set forth on
SCHEDULE 2.05 (the "CTSI Employees") to be paid by the Company five (5) days
-------------- ---------------
after the Closing (such exhibit to set forth the amount to be received by each
CTSI Employee); provided, however, that any payments due under this Section 2.05
-------- -------
shall be contingent upon the CTSI Employees remaining employed by the Company
for a period of not less than five (5) days after the Closing. Any amounts
payable to the CTSI Employees shall be paid directly to the CTSI Employees by
the Company. Any and all such payments, whenever made, shall be made in
accordance with, and subject to, the terms and conditions of this Agreement, and
shall be subject to all applicable employment and withholding taxes. The parties
agree and acknowledge that any deductions or losses associated with such
payments shall be allocated to the post-Closing tax period of the Company.
2.06 POST-CLOSING PURCHASE PRICE ADJUSTMENT. The Purchase Price Note
-----------------------------------------
Component shall be subject to (a) reduction in an amount equal to any Purchaser
Losses for which the Seller is obligated to indemnify the Purchaser in
accordance with the provisions of Article X, (b)
----------
4
adjustment in accordance with the provisions of Section IV of the Promissory
Note based upon the projected-to-actual performance of CTSI for each fiscal year
beginning May 1, 2006, and (c) reduction for any amount not properly paid to
Purchaser pursuant to Section 2.03 above.
2.07 CLOSING. The closing of the transactions contemplated in this
-------
Agreement (the "Closing") shall take place at a location Purchaser and Seller
-------
may mutually agree upon, or by counterpart as may be agreed by the Parties, at
10:00 a.m. local time on the second Business Day after the date on which all
conditions to closing contained in Articles VII, VIII and IX have been satisfied
------------ ---- --
(the "Closing Date"). The effective time of the Closing on the Closing Date
-------------
shall be as of 12:01 a.m. on such date.
2.08 TRANSACTIONS AND DOCUMENTS AT CLOSING.
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(a) At the Closing, the Seller shall deliver to Purchaser
certificates evidencing the CTSI Shares, duly endorsed in blank or accompanied
by duly executed stock transfer powers, and upon such delivery Purchaser shall:
(i) pay to the Seller the Purchase Price Cash Component; (ii) deliver to the
Seller the Promissory Note; and (iii) deliver to the Seller the Parent Common
Stock contemplated by Section 2.04, All deliveries, payments and other
transactions and documents relating to the Closing shall be interdependent and
none shall be effective unless and until all are effective (except for any of
the same as to which the party entitled to the benefit thereof has waived in
writing satisfaction or performance thereof as a condition precedent to
Closing).
(b) From time to time and at any time, at either Party's
reasonable request, whether on or after the Closing Date, and without further
consideration, the Parties shall execute and deliver such further documents and
instruments of conveyance and transfer and shall take such further reasonable
actions as may be necessary or convenient to transfer and convey to Purchaser
all of the Seller's right, title and interest in and to the CTSI Shares, free
and clear of any and all liens, claims, charges and encumbrances, or as may
otherwise be necessary or convenient to carry out the intent of this Agreement.
ARTICLE III
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REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
The Seller represents and warrants to Purchaser as follows:
3.01 POWER, AUTHORITY AND ORGANIZATION OF THE SELLER. The Seller
-----------------------------------------------------
has the right, power and capacity to execute, deliver and perform this Agreement
and to consummate the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by the Seller and constitutes the
Seller's legal, valid and binding obligation, enforceable in accordance with its
terms. Upon execution of this Agreement, Seller who is acting in a fiduciary,
representative or corporate capacity shall furnish to Purchaser a true and
correct copy of each and every will, trust agreement or other document that
establishes or relates to the right, power, capacity or authority of Seller to
execute, deliver and perform this Agreement and to consummate the transactions
contemplated hereby.
5
3.02 NO CONFLICT. The execution and delivery of this Agreement by the
------------
Seller, the consummation of the transactions contemplated herein by the Seller,
and the performance of the covenants and agreements of the Seller, subject to
fulfillment of the conditions set forth in Sections 8.04 and 9.04 hereof, will
not, with or without the giving of notice or the lapse of time, or both, (a)
violate, conflict with or result in a breach or default under or cause
termination of any term or condition of any mortgage, indenture, contract,
license, permit, instrument, trust document, or other agreement, document or
instrument to which the Seller is a party or by which the Seller or any of
Seller's properties may be bound; or (b) violate any provision of law, statute,
rule, regulation, court order, judgment or decree, or ruling of any governmental
authority, to which the Seller is a party or by which the Seller or Seller's
properties may be bound.
3.03 OWNERSHIP OF THE CTSI SHARES. The Seller owns, of record and
--------------------------------
beneficially, good and valid title to the CTSI Shares, and such CTSI Shares (a)
are validly issued, fully paid and nonassessable, (b) are free and clear of any
Hens, restrictions, claims, equities, charges, options, rights of first refusal
or encumbrances, with no defects of title whatsoever, and (c) constitute all of
the issued and outstanding shares of capital stock of CTSI, Other than the CTSI
Shares, the Seller owns no shares of capital stock of CTSI or any other equity
security of CTSI and no right of any kind to have any such equity security
issued. Upon the Closing, Purchaser shall have obtained good and valid title to
the CTSI Shares, free and clear of any liens, restrictions, claims, equities,
options, charges, rights of first refusal, or encumbrances or other
restrictions, and with no defects of title whatsoever. The Seller has full and
exclusive power, right and authority to vote the CTSI Shares. The Seller is not
a party to or bound by any agreement affecting or relating to its right to
transfer or vote the CTSI Shares.
3.04 ABSENCE OF OTHER CLAIMS. No prior offer, issue, redemption, call,
------------------------
purchase, sale, merger, transfer, involvement in any transfer, negotiation or
other transaction of any nature or kind with respect to any capital stock
(including shares, offers, options, warrants, or debt convertible into shares,
options or warrants) of CTSI or any parent company or related company
(collectively, the "Related Companies"), or any corporation which has been
------------------
merged into any of the Related Companies, has given or may give rise to (a) any
valid claim or action by any person (including, without limitation, any former
or present holder of any CTSI Shares or any other capital stock of any of the
Related Companies) which is enforceable against the Seller or CTSI; or (b) any
valid interest in CTSI, and no fact or circumstance exists which could give rise
to any such right, claim, action or interest on behalf of any person.
3.05 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ ACT. The Seller represents and warrants to
---------------------
Purchaser that Seller, as a natural person and in conjunction with his or her
spouse: (a) does not have total worldwide assets, which include Seller's and
Seller's spouse's investment assets, voting securities, and other
income-producing property, together with the total assets of any entity Seller
or Seller's spouse controls of an amount equal to or exceeding $113,400,000; or
(b) does not have annual worldwide net sales, which includes the net sales of
any and all entities Seller and Seller's spouse control, proprietorships, and
income derived from investments, of an amount equal to or exceeding
$113,400,000. The terms not defined in this Agreement used in this Section 3.05
shall have the meaning ascribed to them in the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976.
3.06 INVESTMENT REPRESENTATIONS.
--------------------------
6
(a) Seller has sufficient knowledge and experience in financial
and business matters to be able to evaluate the risks and merits of the
investment represented by the issuance of the Parent Common Stock pursuant to
Section 2.04 (the "Issued Securities").
------------------
(b) Seller is aware that the business of the Parent involves
significant and material economic variables and risks that could adversely
affect Seller's investment in the Issued Securities.
(c) Seller is able to bear the economic risks of an investment in
the Issued Securities, including the risk of losing all of such investment, and
Seller has no need for liquidity with respect to such investment.
(d) Seller acknowledges that no prospectus, offering circular or
other offering statement containing information with respect to the Issued
Securities was delivered in connection with the Seller's investment. Seller has
made his or her own inquiry and analysis with respect to the Parent and its
business, and further represents that Seller has had access, for a reasonable
time prior to the issuance of the Issued Securities, to information concerning
the Parent and has had the opportunity to ask questions of, and receive answers
from, officers of the Parent concerning an investment in the Issued Securities
and the business, management and financial affairs of the Parent, and to obtain
additional information (to the extent the Parent possessed such information or
could acquire it without unreasonable effort or expense) necessary to verify the
accuracy of any information furnished to Seller or to which Seller had access.
(e) The Issued Securities were not offered to the Seller by means
of publicly disseminated advertisements or sales literature, or as part of a
general solicitation, nor is Seller aware of any offers made to other persons by
such means.
(f) Seller acknowledges that he or she has either been supplied
with or has had access to information to which a reasonable investor would
attach significance in making investment decisions. In determining to proceed
with this investment, Seller has relied solely upon the results of his or her
own independent investigation with respect to the Issued Securities.
(g) Seller is an "accredited investor" as defined in Rule 501 (a)
of Regulation D, promulgated under the Securities Act, which requires individual
investors to either (i) have had individual income (exclusive of any income
attributable to a spouse) of more than $200,000, or joint individual income with
a spouse of more than $300,000, in each of the two most recent years and a
reasonable expectation of reaching that level of income in the current year or
(ii) have an individual net worth (or combined net worth with a spouse), in
excess of $1,000,000.
(h) Seller is acquiring the Issued Securities for Seller's own
account and not with a view to resale or other distribution thereof inconsistent
with or in violation of the federal securities laws or the securities or Blue
Sky laws of any state. No other person or entity will have any interest,
beneficial or otherwise, in the Issued Securities that Seller is acquiring
hereunder. Seller is not obligated to transfer the Issued Securities or any
portion thereof to any other person or entity, nor does any Seller have any
agreement or understanding to do so.
(i) Seller acknowledges and agrees that Seller may not, directly
or indirectly, sell, assign, pledge, give, subject to lien or security interest
or otherwise dispose of or encumber
7
(collectively, "Transfer") all or any part of the Issued Securities except as
--------
expressly permitted by this Agreement and applicable law. Seller understands
that the Parent may, as a condition of any Transfer of any Issued Securities
which are not registered for sale pursuant to an effective registration
statement of the Parent, require that Seller deliver an opinion of counsel
reasonably acceptable to the Parent to the effect that neither the sale nor the
proposed Transfer will result in any violation of applicable state securities
laws, the Securities Act or the securities law of any other jurisdiction.
(j) Seller acknowledges that, to the extent Seller deems
necessary, he or she has relied on his or her own professional accounting, tax,
legal and financial advisors with respect to an investment in the Parent and the
acquisition of the Issued Securities, and obtained, to the extent Seller deems
necessary, such professional advice with respect to the risks inherent in such
investment and the suitability of an investment in the Issued Securities in
light of Seller's financial condition and investment needs.
(k) The information about the Parent that has been disclosed
to the Seller in connection with the acquisition of the Issued Securities is
deemed to be confidential information of the Parent, and Seller represents and
warrants to, and hereby agrees that, unless the Parent has consented in writing
to the contrary, Seller shall treat such information as Confidential Information
under this Agreement.
(l) The agreements, representations and warranties made herein
extend to and apply to all portions of the Issued Securities. The acceptance by
Seller of the Issued Securities shall constitute Seller's confirmation that all
agreements and representations made herein shall be true and correct at such
time.
(m) The Seller was provided with access to the Parent's filings
with the SEC, including the following:
(i) The Parent's annual report to stockholders for the most
recent fiscal year, the definitive proxy statement filed in connection with that
annual report, and, if requested by the Seller in writing, a copy of the
Parent's most recent Form 10-KSB under the Securities Exchange Act of 1934, as
amended (the "Exchange Act");
-------------
(ii) The information contained in an annual report on Form
10-KSB under the Exchange Act;
(iii) The information contained in any reports or documents
required to be filed by the Parent under Sections 13(a), 14(a), 14(c), and 15(d)
of the Exchange Act since the distribution or filing of the reports specified
above; and
(iv) A brief description of the securities being offered, the
use of the proceeds from the offering, and any material changes in the Parent's
affairs that are not disclosed in the documents furnished.
8
ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES REGARDING CTSI
---------------------------------------------
CTSI and Seller hereby jointly and severally represent and warrant to
Purchaser as follows:
4.01 ORGANIZATION AND AUTHORIZATION.
------------------------------
(a) CTSI is a corporation duly organized, validly existing
and in good standing under the laws of the State of Louisiana and has all
requisite power and authority, corporate or otherwise, to carry on and conduct
its business as it is now being conducted and to own or lease its properties and
assets, and is duly qualified and in good standing in the jurisdictions set
forth on SCHEDULE 4.01(a), which are the only jurisdictions in which the
-----------------
ownership of properties or assets by CTSI or the conduct of the CTSI Business
requires such qualification.
(b) CTSI has no any interest, direct or indirect, and has no
commitment to purchase or otherwise acquire any interest, direct or indirect, in
any other corporation, partnership, joint venture or other business enterprise.
(c) The current officers and directors of CTSI are listed on
SCHEDULE 4.01(c).
-----------------
(d) The copies of the corporate records of CTSI that have
previously been delivered to Purchaser, are the complete, true and correct
corporate records of CTSI in effect as of the date hereof. The minutes of
directors' and shareholders' meetings and the stock books of CTSI that have been
delivered previously to Purchaser are the complete, true and correct records of
directors' and shareholders' meetings and stock issuances through and including
the date hereof and, reflect all transactions and other matters required to be
reflected in such records, as well as such other matters customarily contained
in records of such type.
(e) SCHEDULE 4.01(e) sets forth a list of corporate organizational
----------------
documents received by Purchaser.
4.02 AUTHORIZED AND OUTSTANDING STOCK. All of the CTSI Shares are
-----------------------------------
validly issued, fully paid and nonassessable. All issuances, transfers or
purchases of the capital stock of CTSI have been in compliance with all
applicable agreements and all applicable laws, including federal and state
securities laws, and all taxes thereon have been paid. There are no shares of
capital stock held in the treasury of CTSI.
4.03 ABSENCE OF OTHER CLAIMS. There is not outstanding, nor is CTSI
--------------------------
bound by, any subscriptions, options, preemptive rights, warrants, calls,
commitments or agreements or rights of any character requiring CTSI to issue or
entitling any person or entity to acquire any additional shares of capital stock
or any other equity security of CTSI, including any right of conversion or
exchange under any outstanding security or other instrument, and CTSI is not
obligated to issue or transfer any shares of its capital stock for any purpose.
There are no outstanding obligations of CTSI to repurchase, redeem or otherwise
acquire any outstanding shares of capital stock of CTSI.
9
4.04 NO CONFLICT. The execution and delivery of this Agreement by the
-----------
Seller and CTSI, the consummation of the transactions contemplated herein by the
Seller and CTSI, and the performance of the covenants and agreements of the
Seller and CTSI, subject to fulfillment of the conditions set forth in Section
9.04 hereof, will not, with or without the giving of notice or the lapse of
time, or both, (a) violate or conflict with any of the provisions of any charter
document or bylaw of CTSI; or (b) except as set forth on SCHEDULE 4.04, violate,
-------------
conflict with or result in a breach or default under or cause termination of any
term or condition of any mortgage, indenture, contract, license, permit,
instrument, trust document, will, or other agreement, document or instrument to
which CTSI is a party or by which CTSI or its properties may be bound; or (c)
violate any provision of law, statute, regulation, court order or ruling of any
governmental authority, to which CTSI is a party or by which it or its
properties may be bound; or (d) result in the creation or imposition of any Hen,
claim, charge, restriction, security interest or encumbrance of any kind
whatsoever upon any asset of CTSI.
4.05 REQUIRED CONSENTS AND APPROVALS. Except as set forth on SCHEDULE
------------------------------- --------
4.05, no consent or approval is required by virtue of the execution hereof by
----
the Seller or CTSI or the consummation of any of the transactions contemplated
herein by the Seller or CTSI to avoid the violation or breach of, or the default
under, or the creation of a lien on assets of CTSI pursuant to the terms of, any
regulation, order, decree or award of any court or governmental agency or any
lease, agreement, contract, mortgage, note, license, or any other instrument to
which CTSI is a party or to which it or any of its property or assets or any of
the CTSI Shares is subject.
4.06 NO VIOLATION OF LAW. CTSI is not and has not been and will
----------------------
not be (by virtue of any past or present action, omission to act, contract to
which it is a party or any occurrence or state of facts whatsoever) in violation
of any applicable local, state or federal law, ordinance, regulation, order,
injunction or decree, or any other requirement of any governmental body, agency
or authority or court binding on it, or relating to its property or business or
its advertising, sales or pricing practices (including, without limitation, any
antitrust laws and regulations), and CTSI will not hereafter suffer or incur any
loss, liability, penalty or expense (including, without limitation, attorneys'
fees) by virtue of any such violation.
4.07 FINANCIAL STATEMENTS. SCHEDULE 4.07 contains the Audited Balance
-------------------- -------------
Sheet of CTSI as of most recent and two prior years if available, and the
related audited statements of income, retained earnings, and cash flows for the
years then ended, and the related notes thereto; and the unaudited balance sheet
of CTSI as of April 30, 2006, and the related unaudited statements of income,
retained earnings, and cash flows, or in each instance, equivalent statements as
commonly prepared, for the 24-month period then ended (the "Audited
--------
Financial Statements" and the "Interim Financial Statements" respectively, and
--------------------- ----------------------------
collectively, the "Current Financial Statements"). The Audited Financial
------------------------------
Statements are true, correct and complete and present fairly the financial
position of CTSI as of the dates thereof, and the related results of its
operations for the years then ended. The Interim Financial Statements are
true, correct and complete and present fairly the financial position of CTSI as
of the date thereof, and the related results of its operations for the periods
then ended. The Audited Financial Statements have been prepared in accordance
with GAAP, and the Interim Financial Statements have been prepared in accordance
with GAAP for interim statements on a basis consistent with prior periods. All
adjustments, consisting of normal, recurring accruals necessary for a fair
presentation, have been made in the Interim Financial Statements. The audited
balance sheet as of December 31, 2005
10
(the "Audited Balance Sheet Date") included in the Audited Financial Statements
--------------------------
is referred to herein as the "Audited Balance Sheet" and the unaudited balance
---------------------
sheet as of the most recent month end (the "Interim Balance Sheet Date")
--------------------------
included in the Interim Financial Statements is referred to herein as the
"Interim Balance Sheet."
-----------------------
4.08 NO UNDISCLOSED LIABILITIES. Except as set forth on SCHEDULE 4.08,
-------------------------- -------------
there are no liabilities of CTSI of any kind whatsoever, whether accrued,
contingent, absolute or otherwise, except for:
(a) liabilities and obligations fully reflected or provided for in
the Interim Balance Sheet;
(b) liabilities and obligations incurred in the ordinary course of
business, consistent with past practice, since the Interim Balance
Sheet Date and of a type reflected on the Interim Balance Sheet, which
individually or in the aggregate are not in excess of $50,000.00; and
(c) liabilities and obligations under Contracts not (i)
attributable to any failure by CTSI to comply with the terms thereof
or any express or implied warranty, or (ii) entered into in violation of
this Agreement or arising out of any such breach by CTSI.
4.09 REAL PROPERTY.
--------------
(a) SCHEDULE 4.09(a) sets forth a complete and accurate list
----------------
and description of all the real property that CTSI owns or leases, has agreed
(or has an option) to purchase, sell or lease, or may be obligated to purchase,
sell or lease (the "Real Property"). With respect to each parcel of Real
--------------
Property required to be listed and described on SCHEDULE 4.09(a), the Seller and
----------------
CTSI have made available to Purchaser, true, correct and complete copies of the
deed evidencing CTSI's ownership of such parcel, each mortgage or other
encumbrance thereon reflected in a written instrument, each instrument (if any)
evidencing a grant by or to CTSI of an option to purchase or lease such parcel,
each lease and leasehold mortgage (if any) with respect to such parcel, and any
title policies or commitments and surveys with respect to such parcel.
(b) Subject to Section 4.09(c) hereof, CTSI (i) has good and
marketable fee simple title to all the Real Property held by CTSI; and (ii)
except for Permitted Liens (as hereinafter defined), owns such Real Property
free and clear of all title defects or objections, liens, restrictions, claims,
charges, security interests, easements or other encumbrances of any nature
whatsoever, including any mortgages, leases, chattel mortgages, conditional
sales contracts, collateral security arrangements and other title or interest
retention arrangements. "Permitted Liens" shall mean (y) the security interests,
---------------
easements or other encumbrances described on SCHEDULE 4.09(b); and (z) liens for
----------------
taxes not yet due and payable.
(c) Except for Permitted Liens and other matters set forth
on SCHEDULE 4.09(c), no Real Property is subject to (i) any governmental
-----------------
decree or order (or threatened or proposed order known to CTSI or the Seller) to
be sold or taken by public authority; or (ii) any rights of way, building use
restrictions, exceptions, variances, reservations or limitations of any nature
whatsoever, not of record
11
(d) SCHEDULE 4.09(d) sets forth a list of Real Property documents
-----------------
received by Purchaser.
4.10 PERSONAL PROPERTY.
------------------
(a) SCHEDULE 4.10(a) sets forth a complete and accurate list
-----------------
and description of all the personal property that CTSI owns or leases, has
agreed (or has an option) to purchase, sell or lease, or may be obligated to
purchase, sell or lease, the net book value of which, as properly reflected in
the books and records of CTSI, on an individual, item-by-item basis, exceeds
$5,000.00.
(b) CTSI (i) has good and valid title to all the personal and
mixed, tangible and intangible properties and assets which it purports to own or
which it uses in the conduct of its business, including, without limitation,
Intellectual Property, Software and Licensed Software (as defined in Section
4.12), and all the personal properties and assets reflected, but not shown as
leased or encumbered, on the Audited Balance Sheet and the Interim Balance Sheet
(except for inventory and assets sold in the Ordinary Course of Business and
supplies consumed in the Ordinary Course of Business); and (ii) except for
Permitted Liens, owns such personal property free and clear of all title defects
or objections, liens, restrictions, claims, charges, security interests,
easements, or other encumbrances of any nature whatsoever, including any
mortgages, leases, chattel mortgages, conditional sales contracts, collateral,
security arrangements and other title or interest retention arrangements. All
properties and assets of CTSI are in the possession of CTSI. SCHEDULE 4.10(b)
----------------
sets forth a general description and the location of any personal property
(including all improvements on any Real Property) and leasehold improvements
that are not located at the principal location of the CTSI Businesses.
(c) The towers, structures and equipment owned or leased by CTSI
are structurally sound with no known material defects, are in good and safe
operating condition and repair and are adequate for the uses to which they are
being put.
(d) The rights, properties and other assets presently owned,
leased or licensed by CTSI and described in SCHEDULE 4.09(a), SCHEDULE 4.10(a)
---------------- ----------------
and SCHEDULE 4.12(b) include all rights, properties and other assets necessary
-----------------
to permit each CTSI to conduct the CTSI Business, respectively in the same
manner as such businesses has been conducted since the Interim Balance Sheet
Date, without any need for replacement, refurbishment or extraordinary repair.
(e) All of the inventories of CTSI included on the Interim Balance
Sheet or subsequently acquired are merchantable and of a quality and quantity
usable and saleable in the Ordinary Course of Business, and the quantities of
each type of inventory (whether raw materials, work-in-process, or finished
goods) are not excessive, but are reasonable, adequate and appropriate in the
present circumstances of CTSI. All of the inventories of CTSI included on the
Interim Balance Sheet are valued for the purposes thereof at the lower of cost
or market.
(f) CTSI is not a party to any leases (other than Real Property
leases).
4.11 INDEBTEDNESS. SCHEDULE 4.11 sets forth a complete and accurate
------------ --------------
list and description of all instruments or other documents relating to any
direct or indirect indebtedness for borrowed money of CTSI, as well as
indebtedness by way of lease-purchase arrangements,
12
guarantees, undertakings on which others rely in extending credit and all
conditional sales contracts, chattel mortgages and other security arrangements
with respect to personal property used or owned by CTSI (other than those set
forth on SCHEDULE 4.10(f)). CTSI and the Seller have made available to Purchaser
-----------------
a true, correct and complete copy of each of the items required to be listed on
SCHEDULE 4.11.
--------------
4.12 INTELLECTUAL PROPERTY.
----------------------
(a) For purposes of this Agreement, the term "Intellectual
------------
Property" shall mean all patents, patent rights, patent applications, registered
--------
trademarks and service marks, trademark rights, trademark applications, service
▇▇▇▇ rights, service ▇▇▇▇ applications, trade names, registered copyrights,
copyright rights, domain names and all intellectual, industrial software or
proprietary rights and trade secrets, technology and know-how, owned or used by
CTSI, which are related to or used in connection with the CTSI Business, in each
case together with any amendments, modifications and supplements thereto and in
each case all goodwill associated therewith in connection with the business in
which any such intellectual property is used.
(b) Identification of Intellectual Property. SCHEDULE 4.12(b) sets
--------------------------------------- ----------------
forth a complete and accurate list and full description of all Intellectual
Property. With respect to any registrations of the Intellectual Property,
SCHEDULE 4.12(b). also sets forth, as to each such item of the Intellectual
-----------------
Property, the (i) relevant application or registration number, (ii) relevant
filing, registration, issue or application date, (iii) record owner, (iv)
country, (v) title or description and (vi) remaining life thereof. In
addition, SCHEDULE 4.12(b) identifies whether each item of the Intellectual
-----------------
Property is owned by CTSI or is possessed and used by CTSI under any license,
contract, agreement or other commitment and, if under any such commitment, the
identity of the parties thereto, the term thereof and all amounts payable
thereunder together with the payment terms therefor.
(c) Ownership and Protection. With respect to each item of
--------------------------
Intellectual Property identified as being owned by CTSI, CTSI owns all right,
title and interest in and to such Intellectual Property, and has not encumbered
or impaired any rights in same. CTSI has obtained an enforceable written
assignment of all right, title and interest in and to each item of the
Intellectual Property owned by CTSI from each person or entity participating in
the discovery, development or creation of such item or Intellectual Property and
CTSI and the Seller have provided to Purchaser true and correct copies of each
such assignment. CTSI has no obligation to compensate, or to obtain the
consent of, any third party for the use of any item of the Intellectual
Property. All employees, independent contractors, or other persons who have had
access to or participated in the development in any of the Intellectual Property
owned by CTSI have signed appropriate confidentiality and non-disclosure
agreements and, in the case of independent contractors, appropriate work for
hire agreements and assignments, sufficient to protect CTSI's ownership rights
in the Intellectual Property and the unauthorized use or disclosure of same. All
registrations and applications to register the Intellectual Property in each of
the countries in which any of the same is registered are valid and subsisting in
all respects and have been properly maintained. No party has any claim to any
moral rights with respect to the Intellectual Property owned by CTSI,
13
(d) Litigation and Claims. Except as disclosed on SCHEDULE
----------------------- --------
4.12(d), there is neither pending nor, to the knowledge of CTSI or the Seller,
-------
threatened any suit, action, claim, arbitration, grievance, litigation,
administrative or legal or other proceeding, or investigation, against CTSI or
its licensors contesting the validity of, or CTSI's right to use, any of the
Intellectual Property,
(e) Licenses. CTSI has not granted any license or other right to
--------
use, in any manner, any item of Intellectual Property, whether or not requiring
the payment of royalties, and no third party has any right to use any of the
Intellectual Property owned by CTSI. CTSI has not licensed, leased, sold or
otherwise transferred or disclosed the source code for any of the Intellectual
Property to any person or entity other than to CTSI's employees and independent
contractors pursuant to an agreement with such employees and independent
contractors protecting the intellectual property rights therein and the
nondisclosure thereof.
(f) Protection. CTSI has reasonably protected the Intellectual
----------
Property as the proprietary property and trade secrets of CTSI. There has not
been any default under any confidentiality agreement regarding the use and
disclosure of the Intellectual Property.
(g) Infringement.
------------
(i) To the knowledge of CTSI or the Seller, no third
party is (i) infringing upon all or any portion of the Intellectual Property, or
(ii) using all or any portion of the Intellectual Property in derogation of any
rights acquired by Purchaser under this Agreement.
(ii) There is no interference action or other litigation
pending or, to the knowledge of CTSI or the Seller, threatened before any
governmental entity (including, without limitation, the United States Patent and
Trademark Office or corresponding governmental entities in foreign
jurisdictions) in regard to any of the Intellectual Property.
(iii) None of the Intellectual Property infringes any
copyright, trademark, patent, trade secret, or other right of any third party.
CTSI has not received notice of infringement upon, misappropriation of or
conflict with any asserted right of any third party, and there is no basis for
any such notice.
(iv) The inception, development and reduction to practice
of the Intellectual Property have not constituted or involved, and do not
constitute or involve, the misappropriation of trade secrets or other rights of
any other person or entity (including, without limitation, any governmental
entity).
4.13 LITIGATION. SCHEDULE 4.13 sets forth all litigation, claims,
---------- -------------
suits, actions, investigations, indictments or informations, proceedings or
arbitrations, grievances or other procedures (including grand jury
investigations, actions or proceedings, and product liability and workers'
compensation suits, actions or proceedings) pending, or to the knowledge of CTSI
or the Seller, threatened, before any court, commission, arbitration tribunal,
or judicial, governmental or administrative department, body, agency,
administrator or official, grand jury, or any other forum for the resolution of
grievances, against CTSI or involving any of its property or business, and,
except as set forth on SCHEDULE 4.13, each of such matters are being defended
-------------
14
by an insurance carrier, and which of the matters being so defended are being
defended under a reservation of rights. Further, except as set forth on SCHEDULE
--------
4.13, there are no judgments, orders, writs, injunctions, decrees, indictments
----
or informations, grand jury subpoenas or civil investigative demands, plea
agreements, stipulations or awards (whether rendered by a court, commission,
arbitration tribunal, or judicial, governmental or administrative department,
body, agency, administrator or official, grand jury or any other forum for the
resolution of grievances) against or relating to CTSI or involving CTSI's
property or business. CTS1 and the Seller have made available to Purchaser true,
correct and complete copies of pleadings, briefs and other documents filed in
each pending litigation, claim, suit, action, investigation, indictment or
information, proceeding, arbitration, grievance or other procedure required to
be listed on SCHEDULE 4.13, and the judgments, orders, writs, injunctions,
--------------
decrees, indictments and informations, grand jury subpoenas and civil
investigative demands, plea agreements, stipulations and awards required to be
listed on said Schedule. SCHEDULE 4.13A sets forth a list of litigation
---------------
documents received by Purchaser.
4.14 Employees.
---------
(a) SCHEDULE 4.14(a) sets forth the names and current compensation
----------------
(broken down by category, e.g., salary, bonus, commission) of all employees of
CTSI, together with the date and amount of the last increase in compensation for
each such person. To the knowledge of CTSI and the Seller, no employee intends
to terminate his or her employment relationship with CTSI as a result of the
transactions contemplated herein or otherwise.
(b) CTSI has conducted a thorough review of its employee records
and has verified that each foreign national employee of CTSI is authorized to be
present and employed in the United States. Additionally, except as disclosed
on SCHEDULE 4.14(b), CTSI is in full compliance with all applicable laws,
-----------------
regulations, judgments and other requirements relating to the regulation of
foreign nationals in the United States including, without limitation, those
items relating to the employment and compensation of foreign nationals in the
United States. Moreover, there are no unresolved past, pending or threatened
administrative, regulatory or judicial actions, proceedings, investigations,
obligations, liabilities, losses, decrees, judgments, penalties, fines, fees,
demands, demand letters, orders, directives, claims, or notices of
noncompliance or violation relating in any way to CTSI or its operations in
connection with CTSI's employment of foreign nationals. As used herein, the
term "foreign national" means a person who is not a citizen of the United States
of America.
4.15 EMPLOYEE BENEFITS.
------------------
(a) All Employee Benefit Plans and Arrangements.
------------------------------------------------
(i) List and Description of Plans and Arrangements.
--------------------------------------------------
SCHEDULE 4.15(a)(i) sets forth a complete and accurate list and description of
-------------------
all agreements, arrangements, commitments, policies or understandings of any
kind (whether written or oral) (A) which relate to employee benefits; (B) which
pertain to present or former employees, retirees, directors or independent
contractors (or their beneficiaries, dependents or spouses) of CTSI or their
predecessors in interest; and (C) which are currently or expected to be adopted,
maintained by, sponsored by, or contributed to by CTSI, any of its predecessors
in interest or any
15
employer which, under Section 414 of the Internal Revenue Code (the "Code"),
----
would constitute a single employer with CTSI or as to which CTSI, any of its
predecessors in interest or any affiliate has any ongoing liability or
obligation whatsoever (collectively, "Employee Benefit Plans"), including, but
----------------------
not limited to, all: (1) employee benefit plans as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"); (2)
-----
all other deferred compensation, early retirement, incentive, profit-sharing,
thrift, stock ownership, stock appreciation rights, bonus, stock option, stock
purchase, welfare or vacation, or other nonqualified benefit plans or
arrangements; and (3) trusts, group annuity contracts, insurance policies or
other funding media for the plans and arrangements described hereinabove,
(ii) Compliance with ERISA and the Code. Except as set forth
-----------------------------------
on SCHEDULE 4.15(a)(ii), CTSI, its predecessors in interest and all affiliates
---------------------
have complied with all of their respective obligations with respect to all
Employee Benefit Plans (including, but not limited to, (A) filing or
distributing all reports or notices required by ERISA or the Code and (B)
complying with all requirements of Part 6 of ERISA and Code Section 4980B) and
have maintained the Employee Benefit Plans in compliance with all applicable
laws and regulations (including but not limited to ERISA and the Code). Each
eligible Employee Benefit Plan has received a favorable determination letter
from the Internal Revenue Service, and the Internal Revenue Service has not
threatened or taken any action to revoke any favorable determination letter
issued with respect to any such Employee Benefit Plan, No amendment to any
Employee Benefit Plan or related trust has been adopted since receipt of the
most recent determination letter issued with respect to the Employee Benefit
Plan or related trust which would cause disqualification of the Employee Benefit
Plan or related trust.
(iii) Copies of Documents Provided to Purchaser. CTSI and
---------------------------------------------
the Seller have made available to Purchaser true, correct and complete copies of
all documents relating to the Employee Benefit Plans that Purchaser has
requested, including: (A) all plan texts, amendments, trust instruments and
other agreements adopted or entered into in connection with each of the Employee
Benefit Plans; (B) all insurance and annuity contracts related to any Employee
Benefit Plan; (C) the notices and election forms used to notify employees and
their dependents of their continuation coverage rights under CTSI's group health
plans (under Code Section 4980B(f) and ERISA Section 606), if applicable; and
(D) the most recently available Form 5500 annual reports, certified financial
statements, actuarial reports, summary plan descriptions and favorable
determination letters, if applicable, for Employee Benefit Plans. Since the date
such documents were supplied to Purchaser, no plan amendments have been adopted,
no changes to the documents have been made, and no such amendments or changes
shall be adopted or made prior to the Closing Date. SCHEDULE 4.15(a)(iii) sets
---------------------
forth a list of Employee Benefit Plan documents received by Purchaser.
(iv) Agreements to Create, Continue or Terminate Plans.
-------------------------------------------------------
Neither CTSI, nor its predecessors in interest nor any affiliate has any
agreement, arrangement, commitment or understanding, whether legally binding or
not, to create any additional Employee Benefit Plan or to continue, modify,
change in any material respect, or terminate any existing Employee Benefit Plan.
(v) Agency Review, Taxes and Fiduciary Liability. None
--------------------------------------------
of the Employee Benefit Plans is currently under investigation, audit or review
by the Department of
16
Labor, the Internal Revenue Service or any other federal or state agency or is
liable for any federal, state, local or foreign taxes. There is no transaction
in connection with which CTSI, any affiliate or any fiduciary of any of the
Employee Benefit Plans could be subject to either a civil penalty assessed
pursuant to ERISA Section 502, a tax imposed by Code Section 4975 or liability
for a breach of fiduciary responsibility under ERISA.
(vi) Claims Against Plans and Fiduciaries. Other than
---------------------------------------
routine claims for benefits payable to participants or beneficiaries in
accordance with the terms of the Employee Benefit Plans, there are no claims,
pending or threatened, by any participant or beneficiary against any of the
Employee Benefit Plans or any fiduciary of any of the Employee Benefit Plans,
and no basis for any such claim or claims exists,
(vii) Insurance Reserves. The levels of insurance
-------------------
reserves and accrued liabilities with regard to all Employee Benefit Plans (to
which such reserves or liabilities do or should apply) are set forth on SCHEDULE
--------
4.15(a)(vii), and such levels are reasonable and sufficient to provide for all
------------
incurred but unreported claims and any retroactive or prospective premium
adjustments,
(viii) Retiree Welfare Benefits. Neither CTSI, its
--------------------------
predecessors in interest nor any affiliate has maintained an Employee Benefit
Plan providing group health, dental, vision, life insurance or other welfare
benefits to employees following retirement or other separation from service,
except to the extent required under Part 6 of Title I of ERISA and Code Section
4980B.
(b) Defined Benefit Plan Matters.
-------------------------------
(i) List of Defined Benefit Plans. SCHEDULE 4.15(b)(i)
--------------------------------- --------------------
identifies by name all of the Employee Benefit Plans that are pension plans
within the meaning of ERISA Section 3(2) which are subject to Title IV of ERISA
(the "Defined Benefit Plans"), and specifically identifies each of such Defined
---------------------
Benefit Plans that are multiemployer plans within the meaning of ERISA Section
3(37)(A) as multiemployer plans. There is no Defined Benefit Plan or
multiemployer plan maintained by any affiliate under which CTSI currently has or
potentially may have any obligation or liability whatsoever, including, but not
limited to any liability which would be identified by or arise from the issues
detailed in this subsection (b).
(ii) PBGC Premiums and Termination Liability. No liability
-----------------------------------------
to the Pension Benefit Guaranty Corporation ("PBGC") has been incurred with
----
respect to the Defined Benefit Plans. All premiums due and payable to the PBGC
with respect to the Defined Benefit Plans have been paid in a timely manner. The
PBGC has not instituted proceedings to terminate any of the Defined Benefit
Plans. No event has occurred, and there exists no condition or set of
circumstances, which could result in the involuntary termination of any of the
Defined Benefit Plans by the PBGC pursuant to ERISA Section 4042. Moreover, even
if a Defined Benefit Plan were terminated voluntarily pursuant to ERISA Section
4041, neither CTSI, its predecessors in interest nor any affiliate would have
any liability to the PBGC as a result of the termination.
(iii) Reportable Events. No notice of a reportable event
------------------
within the meaning of ERISA Section 4043(b) has been filed with the PBGC by the
plan administrator of
17
any of the Defined Benefit Plans, nor has any such reportable event occurred for
which a notice to the PBGC is required,
(iv) Full Funding on a Termination Basis. The current
----------------------------------------
present value of all projected benefit obligations under each of the Defined
Benefit Plans did not, as of the latest valuation date, exceed the then current
value of the assets allocable to such benefit liabilities, based on reasonable
actuarial assumptions currently used for such Defined Benefit Plan. In addition,
each of the Defined Benefit Plans is fully funded on a termination basis, such
that the net fair market value of the assets equals or exceeds the present value
of the accrued benefits under such Defined Benefit Plan, based upon the
actuarial assumptions required by the PBGC for determining benefits on a
termination basis.
(v) No Accumulated Funding Deficiency. No accumulated
------------------------------------
funding deficiency as defined in ERISA Section 302(a)(2), whether or not waived
and regardless of the reason arising, exists with respect to any Defined Benefit
Plan.
(vi) Termination. None of the Defined Benefit Plans has
-----------
been terminated or partially terminated nor have there been any events which
might constitute grounds for such a termination or partial termination.
4.16 COLLECTIVE BARGAINING
----------------------
.. Except as set forth on SCHEDULE 4.16, there are no labor contracts, collective
-------------
bargaining agreements, letters of understanding or other arrangements, formal or
informal, with any union or labor organization covering any of employees of CTSI
and none of said employees are represented by any union or labor organization.
CTSI and the Seller have made available to Purchaser a true, correct and
complete copy of each agreement listed on SCHEDULE 4.16.
--------------
4.17 LABOR DISPUTES
---------------
.. CTSI is in compliance with all federal and state laws respecting employment
and employment practices, terms and conditions of employment, wages and hours.
CTSI is not and has not been engaged in any unfair labor practice, and no unfair
labor practice complaint against CTSI is pending before the National Labor
Relations Board. Neither CTSI nor Seller knows or has reason to know of any
labor strike or other labor trouble actually pending, being threatened against,
or affecting CTSI. Relations between management and labor are amicable and there
have not been, nor are there presently, any attempts to organize non-union
employees, nor are there plans for any such attempts.
4.18 BANK ACCOUNTS. SCHEDULE 4.18 sets forth a complete and accurate
-------------- -------------
list of each bank or financial institution in which CTSI has an account or safe
deposit box (giving the address and account numbers) and the names of the
persons authorized to draw thereon or to have access thereto.
4.19 ENVIRONMENTAL MATTERS.
----------------------
(a) For purposes of this Agreement, the following terms shall have
the following meanings:
18
(i) "Environmental Claims" shall mean any and all
---------------------
administrative, regulatory or judicial actions, causes of action, suits,
investigations, obligations, liabilities, losses, proceedings, decrees,
judgments, penalties, fines, fees, demands, demand letters, orders, directives,
claims (including any claims involving liability in tort, strict, absolute or
otherwise), liens, notices of noncompliance or violation, and legal and
consultant fees and costs of investigations or proceedings, relating in any way
to any Environmental Law or the presence or Release (or alleged presence or
Release) into the environment of any Hazardous Material on, at or from the Real
Property (hereinafter "Claims") including, without limitation, and regardless of
------
the merit of such Claim, any and all Claims by any governmental or regulatory
authority or by any third party or other person for enforcement, mitigation,
cleanup, removal, response, remediation or other actions or damages,
contribution, indemnification, cost recovery, compensation or injunctive or
declaratory relief pursuant to any Environmental Law or any alleged injury or
threat of injury to human health, safety, natural resources or the environment.
(ii) "Environmental Laws" shall mean all present and future
-------------------
federal, state and local laws, statutes, ordinances, regulations, codes,
policies, rules, directives, orders, decrees, permits, licenses, approvals,
authorizations, criteria, guidelines, covenants, deed restrictions, treaties,
conventions, and rules of common law now or hereafter in effect, and in each
case as amended, and any judicial or administrative judgment, opinion or
interpretation thereof, relating to the regulation or protection of human
health, safety, natural resources or the environment, including, without
limitation, laws and regulations (and all other items recited above) relating to
the use, treatment, storage, management, handling, manufacture, generation,
processing, recycling, distribution, transport, Release or threatened Release of
or exposure to any Hazardous Material.
(iii) "Hazardous Materials" shall mean, collectively, any
--------------------
substance, material, product, derivative, compound, mixture, mineral, chemical,
waste, medical waste or gas, in each case whether naturally occurring,
human-made or the by-product of any process, including but not limited to
petroleum or petroleum products (A) that is now defined or included within the
definition of a "hazardous substance," "hazardous waste," "hazardous material,"
"toxic chemical," "toxic substance," "hazardous chemical," "extremely hazardous
substance," "pollutant," "contaminant," or any other words of similar meaning
under any Environmental Law, (B) exposure to which or the presence, use,
generation, treatment, Release, transport or storage of which is now prohibited,
limited, restricted or regulated under any Environmental Law or by any
governmental or regulatory authority, or (C) that could require investigation,
response or remediation, or could support the assertion of any Environmental
Claim.
(iv) "Release" shall mean the release, deposit, disposal
-------
or leakage of any Hazardous Material at, into, upon or under any land, water or
air, or otherwise into the environment, including, without limitation, by means
of burial, disposal, discharge, emission, injection, spillage, leakage, seepage,
leaching, dumping, pumping, pouring, escaping, emptying, placement and the like.
(b) Except as disclosed on SCHEDULE4.19(b):
---------------
(i) To the knowledge of CTSI and Seller, CTSI is in full
compliance with all applicable Environmental Laws;
19
(ii) To the knowledge of CTSI and Seller, CTSI has all
permits, licenses and other approvals required under the Environmental Laws with
respect to the Real Property and CTSI's operations thereon;
(iii) To the knowledge of CTSI and Seller, there are no
past, pending or threatened Environmental Claims relating to CTSI's operations
or the Real Property;
(iv) To the knowledge of CTSI and Seller, Hazardous
Materials have not at any time been present, generated, used, treated, managed,
recycled, stored or Released at, on, in or under, or transported to or from the
Real Property;
(v) To the knowledge of CTSI and Seller, Hazardous
Materials have not at any time been Released at, on, in or under any other
property in the vicinity or area of the Real Property;
(vi) To the knowledge of CTSI and Seller, there are not
now and never have been any underground storage tanks located at, on or under
the Real Property; there is no asbestos contained in, forming part of, or
contaminating any part of the Real Property; and no polychlorinated biphenyls
(PCBs) are used, stored, located at or contaminate any part of the Real
Property;
(vii) To the knowledge of CTSI and Seller, there are no
pending or threatened Environmental Claims at any treatment, storage or disposal
facility that has received Hazardous Materials from or generated at the Real
Property; and
(viii) To the knowledge of CTSI and Seller, there are no
past or present facts, actions, activities, circumstances, conditions,
occurrences, events or incidents, including the Release or presence of Hazardous
Materials, that could (A) form the basis of an Environmental Claim against or
involving CTSI or the Real Property, (B) cause the Real Property to be subject
to any restrictions on or affect its ownership, occupancy, use or
transferability under any applicable Environmental Law, (C) require the filing
or recording of any notice or restriction relating to the presence of Hazardous
Materials in the real estate records in the county or municipality in which the
Real Property is located, other than any customary disclosure requirements in
connection with the transfer of the Real Property, or (D) prevent or interfere
with the construction, operation or maintenance of the Real Property.
4.20 REQUIRED LICENSES AND PERMITS. CTS has all licenses, permits
-------------------------------
or other authorizations of governmental authorities necessary for the conduct of
its business and all other licenses, permits or other authorizations of
governmental authorities necessary for the conduct of its business. A correct
and complete list of all such licenses, permits and other authorizations,
including FCC authorizations, (collectively, the "CTSI Authorizations") is set
-------------------
forth on SCHEDULE 4.20. CTSI and the Seller have made available to Purchaser
-------------
true, correct and complete copies of all written CTSI Authorizations required to
be listed on SCHEDULE 4.20.
-------------
4.21 INSURANCE POLICIES. SCHEDULE 4.21 sets forth a complete and
------------------- --------------
accurate list and description of all insurance policies in force naming CTSI, or
any employees thereof in their capacity as such, as an insured or beneficiary or
as a loss payable payee, or for which CTSI has paid or is obligated to pay all
or part of the premiums. Neither CTSI nor Seller has received
20
notice of any pending or threatened termination or premium increase (retroactive
or otherwise) with respect thereto, and CTSI is in compliance with all
conditions contained therein. There have been no lapses (whether cured or not)
in the coverage provided under the insurance policies, referenced herein and as
set forth on SCHEDULE 4.21, during the term of such policies, as extended or
-------------
renewed. CTSI and the Seller have made available to Purchaser true, correct and
complete copies of each of the policies required to be listed on SCHEDULE 4.21.
-------------
4.22 MAJOR SUPPLIERS AND CUSTOMERS. SCHEDULE 4.22 sets forth a list
-------------------------------- -------------
of each supplier of goods or services to, and each customer of, CTSI to whom
CTSI paid or billed in the aggregate more than $30,000.00 during the 12-month
period ended December 31, 2005 together, in each case, with the amount paid or
billed during such period. CTSI is not engaged in any dispute with any of such
suppliers or customers. CTSI does not know or have any reason to believe that
the consummation of the transactions contemplated hereunder will have any
adverse effect on the business relationship of CTSI with any such supplier or
customer.
4.23 CONTRACTS AND COMMITMENTS. Except as set forth on SCHEDULES
--------------------------- ---------
4.10(f) (Leases), 4.11 (Indebtedness), 4.12(b), (c) AND (d) (Intellectual
------- ---- -----------------------
Property), 4.15(a)(i) (Employee Benefits), 4.16 (Collective Bargaining), 4.21
---------- ---- ----
(Insurance Policies), and 4.23 (Contracts and Commitments):
----
(a) CTSI does not have any agreement or contract that is material
to its business, operations or prospects;
(b) No contracts or commitments of CTSI continue for a period of
more than six (6) months from the date hereof or require payments, in the
aggregate, in excess of $10,000.00;
(c) CTSI does not have any outstanding contract, written or oral,
with any officer, employee, agent, consultant, advisor, salesman,
manufacturer's representative, distributor, dealer, subcontractor, or broker
that is not cancelable by CTSI, on notice of not longer than thirty (30) days
and without liability, penalty or premium of any kind, except liabilities which
arise as a matter of law upon termination of employment, or any agreement or
arrangement providing for the payment of any bonus or commission based on sales
or earnings;
(d) CTSI is not under any liability or obligation under any
agreement pursuant to which third parties have been provided with products that
can be returned to CTSI in the event they are not sold and which could involve a
liability of CTSI;
(e) CTSI has no (i) any outstanding loan or loan commitment
(excluding credit extended in the Ordinary Course of Business to purchasers of
inventory) to any person, or (ii) any factoring, credit line or subordination
agreement;
(f) Except as noted on SCHEDULE 4.11 (Indebtedness) and except
--------------
except for negotiable instruments in the process of collection, CTSI does not
have any power of attorney outstanding or any contract, commitment or liability
(whether absolute, accrued, contingent or otherwise), as guarantor, surety,
co-signer, endorser, co-maker, indemnitor in respect of the contract or
commitment of any other person, corporation, partnership, joint venture,
association, organization or other entity;
21
(g) Except for the arrangement set forth on SCHEDULE 4.23(g),
-----------------
there are no contracts or agreements with any director, officer or shareholder
of CTSI, or with any person related to any such person or with any company or
other organization in which any director, officer, or shareholder of CTSI, or
anyone related to any such person, has a direct or indirect financial interest;
(h) CTSI is not subject to any contract or agreement
containing covenants limiting the freedom of CTSI to compete in any line of
business in any geographic area or requiring CTSI to share any profits;
(i) There is no contract, agreement or other arrangement
entitling any person or other entity to any profits, revenues or cash flows of
CTSI or requiring any payments or other distributions based on such profits,
revenues or cash flows;
(j) Except for the arrangement set forth on SCHEDULE 4.23(g), to
----------------
the knowledge of CTSI and the Seller, CTSI is not party to or bound by any
presently or previously existing contract, agreement or other arrangement that
has had or may in the future have a material adverse effect upon the business,
earnings or financial condition of CTSI.
CTSI and Seller have made available to Purchaser true, correct and complete
copies of all contracts, agreements, plans, leases, policies and licenses
referred to, or required to be referred to or listed on, any Schedule delivered
hereunder. SCHEDULE 4.23A sets forth a list of contracts and agreements received
--------------
by Purchaser.
4.24 AGREEMENTS IN FULL FORCE AND EFFECT. Except as expressly set
-------------------------------------
forth on SCHEDULE 4.24, all contracts, agreements, plans, leases, policies
-------------
and licenses referred to, or required to be referred to, on any Schedule
delivered hereunder are valid and binding, and are in full force and effect and
are enforceable in accordance with their terms, except to the extent that the
validity or enforceability thereof may be limited by bankruptcy, insolvency,
reorganization and other similar laws affecting creditors' rights generally.
Neither CTSI nor Seller has any knowledge of any pending or threatened
bankruptcy, insolvency or similar proceeding with respect to any party to such
agreements, and no event has occurred which (whether with or without notice,
lapse of time or the happening or occurrence of any other event) would
constitute a breach or default, or permit termination, modification or
acceleration thereunder by CTSI or to the knowledge of CTSI or Seller any other
party thereto.
4.25 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth in
------------------------------------------
SCHEDULE 4.25, since the Interim Balance Sheet Date, CTSI has operated only in
--------------
the Ordinary Course of Business, and has not:
(a) suffered any damage or destruction adversely affecting
the properties or business of CTSI;
(b) made any declaration, setting aside or payment of any dividend
or other distribution of assets (whether in cash, stock or property) with
respect to the capital stock of CTSI, except in accordance with the arrangement
on SCHEDULE 4.23(g), or any direct or indirect redemption, purchase or other
-----------------
acquisition of such stock, or otherwise made any payment of cash or any transfer
of other assets, to Seller or CTSI; or transferred any assets from any
subsidiary to
22
CTSI, any other subsidiary or any Related Company; or transferred any assets
from any Related Company to CTSI;
(c) suffered any material adverse change in its working capital,
assets, liabilities, financial condition, business prospects, or relationships
with any suppliers or customers listed on SCHEDULE 4.22;
--------------
(d) except for customary increases based on term of service or
regular promotion of non-officer employees, increased (or announced any increase
in) the compensation payable or to become payable to any employee, or increased
(or announced any increase in) any bonus, insurance, pension or other employee
benefit plan, payment or arrangement for such employees, or entered into or
amended any employment, consulting, severance or similar agreement;
(e) incurred, assumed or guaranteed any liability or obligation
(absolute, accrued, contingent or otherwise) other than in the Ordinary Course
of Business;
(f) paid, discharged, satisfied or renewed any claim, liability or
obligation other than payment in the Ordinary Course of Business;
(g) permitted any of its assets to be subjected to any mortgage,
lien, security interest, restriction, charge or other encumbrance of any kind
except for Permitted Liens;
(h) cancelled or forgiven any indebtedness or otherwise waived
any material claims or rights;
(i) sold, transferred or otherwise disposed of any of its
assets, except in the Ordinary Course of Business;
(j) made any single capital expenditure or investment in excess of
$5,000.00;
(k) made any change in any method, practice or principle of
financial or tax accounting;
(l) managed working capital components, including cash,
receivables, other current assets, trade payables and other current liabilities
in a fashion inconsistent with past practice, including failing to sell
inventory and other property in an orderly and prudent manner or failing to make
all budgeted and other normal capital expenditures, repairs, improvements and
dispositions;
(m) paid, loaned, advanced, sold, transferred or leased any
asset to any employee, except for normal compensation involving salary and
benefits;
(n) issued or sold any of its capital stock or issued any
warrant, option or other right to purchase shares of its capital stock, or any
security convertible into its capital stock;
23
(o) entered into any material commitment or transaction, other
than in the Ordinary Course of Business, affecting the Business; or
(p) agreed in writing, or otherwise, to take any action
described in this Section.
4.26 ACCOUNTS RECEIVABLE.
--------------------
(a) All accounts receivable owed to CTSI by any director,
officer, shareholder or employee of CTSI or any relative of any such person
(including those accounts receivable reflected on the Interim Balance Sheet and
incurred since the Interim Balance Sheet Date) have been paid in full prior to
the date hereof or shall have been paid in full prior to the Closing Date.
(b) All accounts receivable of CTSI (i) are valid, existing and
fully collectible without resort to legal proceedings or collection agencies,
(ii) represent monies due for goods sold or services rendered in the Ordinary
Course of Business; and (iii) are not subject to any defenses, rights of
set-off, assignment, restrictions, security interests or other encumbrances.
Except as shown on SCHEDULE 4.26(b), as of the date of such Schedule, all such
----------------
accounts receivable were current, and neither CTSI nor Seller is aware of any
dispute regarding the collectibility of any such accounts receivable. All
reserves shown on the Financial Statements were adequate as of such dates
calculated consistent with past practice.
4.27 TAX MATTERS.
------------
(a) Definitions. For purposes of this Agreement, the following
-----------
definitions shall apply:
(i) The term "Taxes" shall mean all Taxes, however
-----
denominated, including any interest, penalties or other additions to Tax that
may become payable in respect thereof, imposed by any federal, territorial,
state, local or foreign government or any agency or political subdivision of any
such government, which Taxes shall include, without limiting the generality of
the foregoing, all income or profits Taxes (including, but not limited to,
federal income Taxes and state income Taxes), payroll and employee withholding
Taxes, unemployment insurance, social security Taxes, sales and use Taxes, ad
valorem Taxes, excise Taxes, franchise Taxes, gross receipts Taxes, business
license Taxes, occupation Taxes, real and personal property Taxes, stamp Taxes,
environmental Taxes, transfer Taxes, workers' compensation, Pension Benefit
Guaranty Corporation premiums and other governmental charges, and other
obligations of the same or of a similar nature to any of the foregoing, which
the Company is required to pay, withhold or collect.
(ii) The term "Returns" shall mean all reports, estimates,
-------
declarations of estimated Tax, information statements and returns relating to,
or required to be filed in connection with, any Taxes, including information
returns or reports with respect to backup withholding and other payments to
third parties.
(b) Returns Filed and Taxes Paid. Except as otherwise
--------------------------------
disclosed in SCHEDULE 4.27(b): (i) all Returns required to be filed by or on
-----------------
behalf of CTSI have been duly filed on a timely basis and such Returns are true,
complete and correct; (ii) all Taxes shown to be
24
payable on the Returns or on subsequent assessments with respect thereto have
been paid in full on a timely basis, and no other Taxes are payable by CTSI with
respect to items or periods covered by such Returns (whether or not shown on or
reportable on such Returns) or with respect to any period prior to the date of
this Agreement; (iii) CTSI has withheld and paid over all Taxes required to have
been withheld and paid over, and complied with all information reporting and
backup withholding requirements, including maintenance of required records with
respect thereto, in connection with amounts paid or owing to any employee,
creditor, independent contractor, or other third party; (iv) the charges,
accruals and reserves for Taxes as reflected on the books of CTSI are adequate
in accordance with GAAP to cover Tax liabilities accruing through the Closing
Date; and (v) there are no Hens on any of the assets of CTSI with respect to
Taxes, other than liens for Taxes not yet due and payable or for Taxes that CTSI
is contesting in good faith through appropriate proceedings and for which
appropriate reserves have been established, which contested Taxes are disclosed
in SCHEDULE 4.27(b).
----------------
(c) Tax Deficiencies; Audits; Statutes of Limitations. Except
------------------------------------------------------
as otherwise disclosed in SCHEDULE 4.27(c): (i) the Returns of CTSI have never
---------------
been audited by a government or Taxing authority, nor is any such audit in
process, pending or threatened (either in writing or verbally, formally or
informally); (ii) no deficiencies exist or have been asserted (either in writing
or verbally, formally or informally) or are expected to be asserted with respect
to Taxes of CTSI, and CTSI has not received notice (either in writing or
verbally, formally or informally) or expects to receive notice that it has not
filed a Return or paid Taxes required to be filed or paid by it; (iii) CTSI is
neither a party to any action or proceeding for assessment or collection of
Taxes, nor has such event been asserted or threatened (either in writing or
verbally, formally or informally) against CTSI or any of its assets; (iv) no
waiver or extension of any statute of limitations is in effect with respect to
Taxes or Returns of CTSI; and (v) CTSI has disclosed on its federal income Tax
Returns all positions taken therein that could give rise to a substantial
understatement penalty within the meaning of Code Section 6662.
(d) Tax Sharing Agreements. Except as otherwise disclosed in
------------------------
SCHEDULE 4.27(d), CTSI is not (nor has it ever been) a party to any Tax sharing
----------------
agreement.
(e) Tax Elections and Special Tax Status. CTSI has not filed any
-------------------------------------
consent pursuant to the collapsible corporation provisions of Code Section 341
(f). CTSI is not a party to any safe harbor lease within the meaning of Code
Section 168(f)(8), as in effect prior to amendment by the Tax Equity and Fiscal
Responsibility Act of 1982. CTSI is not and has not been a United States real
property holding corporation within the meaning of Code Section 897(c)(l)(A)(ii)
during the applicable period specified in Code Section 897(c)(l)(A)(ii). CTSI
has not entered into any compensatory agreements with respect to the performance
of services which payment thereunder would be a nondeductible expense pursuant
to Code Section 162(m) or 280G or an excise Tax to the recipient pursuant to
Code Section 4999. CTSI has not been a "distributing corporation" (within the
meaning of code Section 355(a)(l)(A)) within the 3-year period ending as of the
date of this Agreement. CTSI has not participated in an international boycott as
defined in Code Section 999. CTSI has not agreed and is not required to make,
any adjustment under Code Sections 263 A or 481 (a) by reason of a change in
accounting method or otherwise). CTSI does not have any permanent establishment
in any foreign country, as defined in any applicable Tax treaty or convention
between the United States and such foreign country. CTSI is in compliance with
the terms and conditions of any applicable Tax exemptions, Tax
25
agreements or Tax orders of any government to which it may be subject or which
it may have claimed, and the transactions contemplated by this Agreement will
not have any adverse effect on such compliance. CTSI is not a party to any
transaction, understanding or arrangement treated as a Tax shelter under Code
Section 611 l(e) or 6662(d)(2)(C)(iii).
(f) S-Corporation Status. Since its incorporation, CTSI has
---------------------
been and is currently a valid "S" corporation for all federal and state Tax
purposes (and will be up to the Closing Date), and neither the Internal Revenue
Service nor any Taxing authority has challenged, or is challenging, the S
election of CTSI.
(g) Tax Claims. No claim has been made by any Taxing authority
-----------
in a jurisdiction where CTSI does not file Returns that is or may be subject to
taxation by, or required to file any Return in, that jurisdiction.
4.28 BROKERAGE. Except as set forth on SCHEDULE 4.28, no broker,
--------- --------------
agent, or finder has rendered services to CTSI or the Seller in connection with
the transactions contemplated under this Agreement. Except as set forth on
SCHEDULE 4.28, CTSI has not incurred any obligation or liability, contingent or
--------------
otherwise, for brokers' or finders' fees or agents commissions or other similar
payments in connection with this Agreement or the transactions contemplated
hereby.
4.29 DISCLOSURE. No representations, warranties, assurances or
----------
statements by CTSI or Seller in this Agreement and no statement contained in any
document (including the Financial Statements and the Schedules), certificates or
other writings furnished or to be furnished by CTSI or Seller (or caused to be
furnished by CTSI or Seller) to Purchaser or any of its representatives pursuant
to the provisions hereof contains or will contain any untrue statement of
material fact, or omits or will omit to state any fact necessary, in light of
the circumstances under which it was made, in order to make the statements
herein or therein not misleading.
ARTICLE V
----------
REPRESENTATIONS AND WARRANTIES OF PURCHASER
-------------------------------------------
Purchaser hereby represents and warrants to the Seller as follows:
5.01 ORGANIZATION. Purchaser is a corporation duly organized, validly
------------
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to carry on and conduct its business
as it is now being conducted and to own or lease its properties and assets, and
to effect the transactions contemplated hereunder and is duly qualified and in
good standing in each jurisdiction in which the conduct of the business of
Purchaser or the ownership of its properties and assets requires it to be so
qualified, except where the failure to be so qualified or in such good standing,
or to have such power or authority when taken together with all other such
failures, is not reasonably likely to have a Purchaser Material Adverse Effect.
As used in this Agreement, the term "Purchaser Material Adverse Effect"
-----------------------------------
means a material adverse effect on the financial condition, properties, business
or results of operation of Purchaser and its subsidiaries taken as a whole;
provided, however, that any such effect resulting from any change (i) in law,
-------- -------
rule or regulation or GAAP or interpretations thereof that applies to both
Purchaser and CTSI or (ii) in economic or business conditions generally or in
the cell tower
26
management and environmental services industry specifically shall not be
considered when determining if a Purchaser Material Adverse Effect has occurred.
5.02 AUTHORIZATION. Purchaser has the right, power and capacity to
-------------
execute, deliver and perform this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement,
and the consummation of the transactions contemplated hereby, have been duly and
validly authorized by all necessary corporate action on the part of Purchaser.
This Agreement has been duly and validly executed and delivered by Purchaser and
constitutes Purchaser's legal, valid and binding obligation, enforceable in
accordance with its terms.
5.03 NO CONFLICT. The execution and delivery of this Agreement by
------------
Purchaser, the consummation of the transactions contemplated herein, and the
performance of the covenants and agreements of Purchaser will not, with or
without the giving of notice or the lapse of time, or both, (a) violate or
conflict with any of the provisions of any charter document or bylaw of
Purchaser; (b) violate, conflict with or result in breach or default under,
result in the acceleration of any obligations or the creation of a lien, pledge,
security interest or other encumbrance on the assets of Purchaser pursuant to,
or cause termination of any term or condition of any mortgage, lease, indenture,
notes, contract, license, permit, instrument, trust document, or other
agreement, arrangement, obligation, document or instrument to which Purchaser is
a party or by which Purchaser or any of its properties may be bound; or (c)
violate any provision of law, statute, rule, regulation, court order, judgment
or decree, or ruling of any governmental authority, to which Purchaser is a
party or by which Purchaser or its properties may be bound.
5.04 BROKERAGE. Except as set forth on SCHEDULE 5.04, no broker, agent
--------- -------------
or finder has rendered services to Purchaser in connection with the transactions
contemplated under this Agreement.
5.05 DISCLOSURE. No representations, warranties, assurances or
-----------
statements by Purchaser in this Agreement and no statement contained in any
document, certificates or other writings furnished or to be furnished by
Purchaser (or caused to be furnished by Purchaser) to the Seller or any of their
representatives pursuant to the provisions hereof contains or will contain any
untrue statement of material fact, or omits or will omit to state any fact
necessary, in light of the circumstances under which it was made, in order to
make the statements herein or therein not misleading.
ARTICLE VI
----------
COVENANTS
---------
6.01 PRE-CLOSING OPERATIONS OF CTSI. CTSI and Seller hereby covenant
------------------------------
and agree that, except as consented to in writing by Purchaser, after the date
hereof and prior to the Closing, CTSI shall, and the Seller shall cause CTSI to,
operate and conduct itself only in the Ordinary Course of Business. Pursuant
thereto and not in limitation of the foregoing, except as otherwise expressly
contemplated by this Agreement, or specifically disclosed in the Schedules
hereto, after the date hereof and prior to the Closing, CTSI shall:
27
(a) use its commercially reasonable efforts to preserve intact the
goodwill and business organization of CTSI, keep the officers and employees of
CTSI available to Purchaser and preserve the relationships and goodwill of CTSI
with customers, distributors, suppliers, employees and other persons or entities
having business relations with CTSI;
(b) maintain its existence and good standing in its jurisdiction
of organization and in each jurisdiction listed on Schedule 4.01(a);
-----------------
(c) duly and timely file or cause to be filed all reports and
returns required to be filed with any Governmental Entity and promptly pay or
cause to be paid when due all taxes, assessments and governmental charges,
including interest and penalties levied or assessed, unless contested in good
faith by appropriate proceedings;
(d) maintain in existing condition and repair (ordinary wear
and tear excepted), consistent with past practices, all buildings, offices,
shops and other structures located on the Real Property, and all equipment,
fixtures and other tangible personal property located on the Real Property;
(e) not authorize for issuance or issue and deliver any additional
shares of its capital stock or securities convertible into or exchangeable for
shares of its capital stock, or issue or grant any right, option or other
commitment for the issuance of shares of its capital stock or of such
securities, or split, combine or reclassify any shares of its capital stock;
(f) not amend or modify its charter documents or bylaws;
(g) not declare any dividend, pay or set aside for payment any
dividend or other distribution or make any payment to Seller, any officer or
director or any person or entity with whom Seller or any officer or director has
any direct or indirect relation, other than the payment of salaries in the
Ordinary Course of Business, except in accordance with the arrangement set forth
on SCHEDULE 4.23(g);
----------------
(h) not create any subsidiary, acquire any capital stock or other
equity securities of any corporation or acquire any equity or ownership interest
in any business or entity;
(i) not dispose of or permit to lapse any ownership and/or right
to the use of any patent, trademark, trade name, service ▇▇▇▇, license or
copyright of CTSI (including any of the Intellectual Property), or dispose of or
disclose to any person or entity, any trade secret, formula, process, technology
or know-how of CTSI not heretofore a matter of public knowledge;
(j) protect, defend and maintain the ownership, validity and
registration of the Intellectual Property, and not allow any of the registered
Intellectual Property to be abandoned, forfeited, cancelled, expunged and/or
dedicated to the public;
(k) not (i) sell any asset of CTSI, other than in the
Ordinary Course of Business, (ii) create, incur or assume any indebtedness
secured by the assets of CTSI, (iii) grant, create, incur or suffer to exist any
lien or encumbrance on the assets of CTSI that did not exist on the date hereof,
(iv) incur any liability or obligation (absolute, accrued or contingent), except
in
28
the Ordinary Course of Business, (v) write-off any guaranteed check, note or
account receivable, except in the Ordinary Course of Business, (vi) write-down
the value of any asset or investment (including any asset of CTSI) on the books
or records of CTSI, except for depreciation and amortization in the Ordinary
Course of Business, (vii) cancel any debt or waive any claim or right, (viii)
make any commitment for any capital expenditure to be made on or following the
date hereof in excess of $5,000.00 in the case of any single expenditure or
$50,000.00 in the case of all capital expenditures, (ix) enter into any contract
or commitment which cannot be cancelled by CTSI on notice of not longer than
thirty (30) days and without liability or penalty of any kind, or (x) enter into
any contract or commitment which imposes, or purports to impose, any obligations
or restrictions on any affiliate of CTSI;
(l) not increase in any manner the compensation of, or enter
into any new bonus or incentive agreement or arrangement with, any of its
employees, officers, directors or consultants, except in the Ordinary Course of
Business; provided, however, that CTSI shall not take any action described in
-------- --------
this Section 6.01(1) with respect to (i) any manager, officer or director of
CTSI or (ii) any person whose annualized compensation is $35,000.00 or more or
whose annual compensation for the twelve (12)-month period following the Closing
Date is expected to be $35,000.00 or more;
(m) not pay or agree to pay any additional pension, retirement
allowance or other employee benefit under any Employee Benefit Plans to any of
its employees or consultants, whether past or present, except in the Ordinary
Course of Business; provided, however, that CTSI shall not take any
-------- -------
action described in this Section 6.0l(m) with respect to (i) any manager,
officer or director of CTSI or (ii) any person whose annualized compensation is
$35,000.00 or more or whose annual compensation for the twelve (12) month period
following the Closing is expected to be $35,000.00 or more;
(n) except as required by applicable laws, not adopt, amend
or terminate any Employee Benefit Plan or increase the benefits provided under
any Employee Benefit Plan, or promise or commit to undertake any of the
foregoing in the future;
(o) not enter into a collective bargaining agreement;
(p) not enter into any employment agreement (except for the
employment agreements contemplated by this Agreement, in a mutually agreeable
form);
(q) not settle or compromise any legal proceedings related to or
in connection with CTSI or the CTSI Business;
(r) maintain supplies and inventory at levels that are in the
Ordinary Course of Business;
(s) continue to extend customers credit, collect accounts
receivable and pay accounts payable and similar obligations in the Ordinary
Course of Business;
(t) perform in all material respects all of its obligations
under all contracts and commitments, and not default or suffer to exist any
event or condition that with notice or lapse of time or both could constitute a
default under any such contracts or commitments (except
29
those being contested in good faith) and not enter into, assume or amend any
contract or commitment other than in the Ordinary Course of Business;
(u) except as contemplated under Section 6.11 hereunder, not pay,
discharge or satisfy any claim, liability or obligation (absolute, contingent or
otherwise) other than the payment, discharge or satisfaction in the Ordinary
Course of Business of claims, liabilities and obligations reflected or reserved
against in the Interim Balance Sheet or incurred in the Ordinary Course of
Business;
(v) not increase any reserves for contingent liabilities
(excluding any adjustment to bad debt reserves in the Ordinary Course of
Business);
(w) maintain in full force and effect and in the same amounts
policies of insurance comparable in amount and scope of coverage to that
maintained as of the date hereof by or on behalf of CTSI;
(x) continue to maintain its books and records in accordance with
GAAP consistently applied and on a basis consistent with past practice;
(y) continue its cash management practices in the Ordinary Course
of Business; and
(z) not authorize, or commit or agree to take, any of the
foregoing actions, which CTSI is required not to take without Purchaser's prior
written consent.
Purchaser shall in good faith communicate with Seller regarding any questions or
concerns that may arise concerning any of Seller's representations or warranties
required by this Agreement and relating to information transferred between the
parties; provided, that any failure to so communicate shall not affect any of
---------
the Parties' rights hereunder. In connection with the continued operation of
CTSI during the period commencing on the date hereof and ending on the Closing
Date, CTSI and the Seller shall confer in good faith on a regular and frequent
basis with Purchaser regarding operational matters and the general status of
on-going operations of CTSI; provided, that, Purchaser does not and shall not
waive any right it may have hereunder solely as a result of such consultations.
Neither CTSI nor the Seller shall take any action that would, or that could
reasonably be expected to, result in any representation or warranty of CTSI or
the Seller set forth herein to become untrue.
6.02 ACCESS. From the date of this Agreement through the Closing
------
Date, CTSI shall, and the Seller shall cause CTSI to (a) provide Purchaser and
its designees (e.g., officers, counsel, accountants, actuaries, and other
authorized representatives) with such information as Purchaser or its designees
may from time to time reasonably request with respect to CTSI and the
transactions contemplated by this Agreement; (b) provide Purchaser and its
designees, access during regular business hours and upon reasonable notice to
the books, records, offices, personnel, counsel, accountants and actuaries of
CTSI, as Purchaser or its designees may from time to time reasonably request;
and (c) permit Purchaser and its designees to make such inspections thereof as
Purchaser may reasonably request. Any investigation shall be conducted in such a
manner so as not to interfere unreasonably with the operation of the CTSI
Business. No such investigation shall limit or modify in any way the Seller's or
CTSI's obligations with
30
respect to any breach of their representations, warranties, covenants or
agreements contained herein.
6.03 TAX MATTERS.
------------
(a) Cooperation on Tax Matters. The Seller and Purchaser shall
-----------------------------
provide each other with such cooperation and information as either of them
reasonably may request of the other in filing any tax return, amended tax
return, determining a liability for taxes, participating in or conducting any
audit or other proceeding in respect of taxes. Such cooperation and information
shall include providing copies of relevant tax returns or portions thereof,
together with accompanying schedules, related work papers and documents relating
to rulings or other determinations by tax authorities. The Seller and Purchaser
shall make their respective employees available on a basis mutually convenient
to both parties to provide explanations of any documents or information provided
hereunder. Each of the Seller and Purchaser shall retain all tax returns,
schedules and work papers, records and other documents in its possession
relating to tax matters of the Company and the business and assets of the
Company for each taxable period first ending after the Closing Date and for all
prior taxable periods until the later of (i) the expiration of the statute of
limitations of the taxable periods to which such tax returns and other documents
relate, without regard to extensions except to the extent notified by the other
party in writing of such extensions for the respective tax periods, or (ii) six
years following the due date (without extension) for such tax returns. Any
information obtained under this Section 6.03 shall be kept confidential in
accordance with the provisions of this Agreement except as may be otherwise
necessary in connection with the filing of tax returns or claims for refund or
in conducting an audit or other proceeding.
(b) Tax Returns and Payment of Taxes.
-------------------------------------
(i) Seller or Seller's designee shall prepare and timely file
or shall cause to be prepared and timely filed all Returns of CTSI for tax
periods ending on or before the Closing Date ("Seller Returns"), and shall pay
--------------
or shall cause to be paid any and all Taxes due with respect to such Returns.
Seller shall have the exclusive authority and obligation to prepare or cause to
be prepared all Seller Returns. Such authority shall include the determination
of the manner in which any items of income, gain, deduction, loss or credit
arising out of the income, properties and operations of CTSI shall be reported
or disclosed in such Seller Returns; provided, however, that such Returns shall
be prepared by treating items on such Returns in a manner consistent with past
practice with respect to such items, unless otherwise required by law. If any
such Seller Returns are due after the Closing and Seller is not authorized by
law to file such Seller Returns, Seller shall submit drafts of such Seller
Returns to Purchaser for its review at least 30 days prior to the due date of
any such Return. Such drafts of any Seller Returns shall be subject to
Purchaser's review and approval, which approval shall not be unreasonably
withheld, and Purchaser shall timely file, or cause to be timely filed, such
Seller Returns with the appropriate taxing authority.
(ii) Purchaser shall prepare (or cause to be prepared),
execute, and timely file all Returns of CTSI that are not Seller Returns, and
shall pay (or cause to be paid) all Taxes to which such Returns relate for all
periods covered by such Returns; provided, however, that Seller shall reimburse
Purchaser for all portions of such Taxes that are applicable to Pre-
31
Closing Tax Periods and that exceed the amounts accrued in connection with such
Pre-Closing Tax Periods pursuant to Section 4.27(b). All such Returns shall be
---------------
prepared in accordance with the past practice of the Company, unless otherwise
required by applicable law. "Pre-Closing Tax Period" shall mean any tax period
----------------------
ending on or before the Closing Date; and, with respect to a Tax period that
begins on or before the Closing Date and ends thereafter, the portion of such
tax period ending on the Closing Date.
(iii) For purposes of calculating Taxes applicable to the
Pre-Closing Tax Periods, the amount of any Tax (except Taxes based on CTSI's
income or gross-receipts) owed shall be apportioned to Pre-Closing Tax Periods
based on the number of days for the portion of the ending on and including the
Closing Date. Any allocation of income or deductions required to determine any
Taxes based on CTSI's income or gross-receipts applicable to a Pre-Closing Tax
Period shall be made by means of a closing of the books and records of CTSI as
of the close of business on the Closing Date.
(c) Transfer Taxes. All sales or transfer taxes, including but
---------------
not limited to, stock transfer taxes, real property transfer taxes, and excise
taxes, arising out of or in connection with the consummation of the transactions
contemplated hereby shall be paid by the Seller. The parties shall cooperate in
the preparation, execution and filing of all returns, questionnaires,
applications and other documents regarding any of such taxes and all transfer,
recording, registration and other fees that become payable in connection with
the transactions contemplated hereby that are required or permitted to be filed
at or prior to the Closing.
(d) Section 338(h)(10) Election.
-----------------------------
(i) Purchaser and Seller shall take all steps necessary to
make a timely, effective and irrevocable election pursuant to Section 338(h)(10)
of the Code (and, if permissible, under any applicable state or local Tax laws)
with respect to the acquisition by Purchaser of the CTSI Shares hereunder to
treat such purchase and sale as a deemed sale of assets for federal income Tax
and state income purposes (collectively, the "Section 338(h)(10) Election"). The
---------------------------
Purchaser and Seller and their respective affiliates shall report the
transactions consistent with such Section 338(h)(10) Election and shall take no
position contrary thereto unless and to the extent required to do so pursuant to
a final determination by the IRS or other applicable taxing authority.
(ii) The Seller and Purchaser shall execute at the Closing
any and all forms necessary to effectuate the Section 338(h)(10) Election
(including, without limitation, Internal Revenue Service Form 8023 and any
similar forms under applicable state or local income Tax laws) (collectively,
the "Section 338 Forms). In the event, however, any Section 338 Forms are not
-------------------
executed at the Closing, the Seller and Purchaser shall prepare and complete
each such Section 338 Form no later than fifteen (15) days prior to the date
each such Section 338 Form is required to be filed.
(iii) Purchaser shall prepare and provide to the Seller
within sixty (60) days after the Closing, a schedule allocating the Purchase
Price among the assets of CTSI. Such schedule shall be prepared in good faith
and in accordance with applicable provisions of the Code. Unless Seller object
to the Purchaser's allocation schedule within ten (10) days after
32
receipt thereof, such schedule shall become final and, absent a final
determination by a governmental authority to the contrary, shall be binding upon
the Seller and Purchaser for all federal, state and local Tax purposes. If
Seller object to the Purchaser's allocation within ten (10) days of receipt,
then the parties agree to meet and resolve the dispute in good faith. If the
parties fail to reach an agreement on the allocation, final allocation shall be
determined in accordance with the dispute resolution procedures set forth in
Section 12.09 of this Agreement. Any objection by the Seller to the Purchaser's
allocation schedule shall be made in good faith and based on the applicable
provisions of the Code.
(iv) The Seller and Purchaser agree that neither party shall
take any action to modify or revoke the Section 338(h)(10) Election following
the filing of the Section 338 Forms, without the written consent of the other,
unless required to do so by any governmental authority. The Seller and Purchaser
shall cause their respective subsidiaries to file all Tax Returns in a manner
consistent with the information contained in the Section 338 Forms, and neither
shall take any position for tax or financial purposes that is inconsistent with
such information without the prior written consent of the other, which shall not
be unreasonably withheld.
(v) Seller shall be responsible for and shall pay any Taxes
imposed on Seller or CTSI arising from the sale of the CTSI Shares, In the
event, however, that any incremental additional Taxes or Tax liability is
imposed on Seller as a result of the Section 338(h)(10) Election made pursuant
to this Section 6.03, as compared with the proforma Tax liability that would
have been incurred by Seller if such election was not made, then Purchaser shall
be responsible for reimbursing Seller in the amount of such differential;
provided that the Purchase Price is allocated according to Purchaser's proposed
allocation schedule identified in Section 6.03(d)(iii).
(vi) Notwithstanding anything in this Agreement to the
contrary, the provisions of this Section 6.03 shall survive through the
expiration of the applicable statute of limitations as the same may be extended.
(e) Section 1362(e)(3) Election. Purchaser and Seller shall take
----------------------------
shall take all steps necessary to make a timely, effective and irrevocable
election pursuant to Section 1362(e)(3) of the Code (and, if permissible, under
any applicable state or local Tax laws) to have the rules provided under Section
1362(e)(2) not apply, and to allocate the Seller's income, losses, deductions
and credits on the basis of its permanent records and books of account.
6.04 PREPARATION OF SUPPORTING DOCUMENTS. In addition to such actions
------------------------------------
as CTSI may otherwise be required to take under this Agreement or applicable law
to consummate this Agreement and the transactions contemplated hereby, the
Seller and CTSI shall take such action, shall furnish such information, and
shall prepare, or cooperate in preparing, and execute and deliver such
certificates, agreements and other instruments as Purchaser may reasonably
request from time to time, before, at or after the Closing, with respect to
compliance with obligations of Purchaser, the Seller or CTSI in connection with
Purchaser's purchase of the CTSI Shares from the Seller. Any information so
furnished by the Seller or CTSI shall be true, correct and complete in all
material respects and shall not contain any untrue statement of a material fact
or
33
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading.
6.05 NOTICES OF CERTAIN EVENTS. The Seller shall promptly notify
----------------------------
Purchaser of:
(a) any fact, condition, change or event that, individually or in
the aggregate, results in any representation or warranty of CTSI or the Seller
hereunder being inaccurate in any respect as of the date of such fact,
condition, change or event had such representation or warranty been made as of
such date;
(b) any fact, condition, change or event that causes or
constitutes a breach of any of the representations or warranties of CTSI or the
Seller hereunder made as of the date hereof;
(c) any notice or other communication from any person or entity
alleging that the consent of such person or entity is or may be required in
connection with the transactions contemplated hereby;
(d) any notice or other communication from or to any Governmental
Entity in connection with the transactions contemplated hereby;
(e) any action, suit, claim, investigation or proceeding commenced
or, to its knowledge, threatened against, relating to or involving or otherwise
affecting CTSI or its business that, if pending on the date hereof, would have
been required to have been disclosed pursuant to Section 4.13 or that relate to
the consummation of the transactions contemplated hereby; and
(f) (i) the damage or destruction by fire or other casualty of any
asset of CTSI or part thereof or (ii) any asset of CTSI or part thereof becoming
the subject of any proceeding (or, to the knowledge of CTSI or the Seller,
threatened proceeding) for the taking thereof or of any right relating thereto
by condemnation, eminent domain or other similar governmental action.
Purchaser shall in good faith communicate with Seller regarding any concerns
raised by any notifications given pursuant to this Section 6.05; provided, that
---------
any failure to so communicate shall not affect any of the Parties' rights
hereunder. The Seller hereby acknowledge that Purchaser does not and shall not
waive any right it may have hereunder solely as a result of such notifications
and any notification given pursuant to this Section 6.05 shall (x) not have any
effect for purposes of determining satisfaction of the conditions set forth in
Article IX of this Agreement, (y) be disregarded for purposes of determining the
obligations of the Seller under Article X hereof, and (z) not in any way limit
Purchaser's exercise of its rights hereunder.
6.06 SUPPLEMENTS TO SCHEDULES. From time to time up to the Closing
------------------------
Date, CTSI and the Seller shall promptly supplement or amend the Schedules to
this Agreement with respect to any matter (i) first existing or occurring after
the date hereof which, if existing or occurring at or prior to such date, would
have been required to be set forth in any of the Schedules to this Agreement, or
(ii) that is necessary to correct any information in such Schedules that is
inaccurate on account thereof. No supplement or amendment to the Schedules
shall have any
34
effect for purposes of determining satisfaction of the conditions set forth in
Article IX of this Agreement unless such supplement is accepted by Purchaser in
writing in its sole discretion, Any information contained in any such supplement
or amendment shall be disregarded for purposes of determining the obligations of
CTSI and the Seller under Article X hereof.
6.07 NO SOLICITATION OF TRANSACTIONS. Neither CTSI nor the Seller
----------------------------------
shall, directly or indirectly, through any officer, director, manager or agent
of any of them or otherwise, initiate, solicit or encourage (including by way of
furnishing non-public information or assistance), or enter into negotiations of
any type, directly or indirectly, or enter into a confidentiality agreement,
letter of intent or other similar contract or commitment with any person or
entity other than Purchaser with respect to a sale of all or any substantial
portion of the assets of CTSI, or a merger, consolidation, business combination,
sale of all or any substantial portion of the capital stock of CTSI, or the
liquidation or similar extraordinary transaction with respect to CTSI. CTSI and
the Seller shall notify Purchaser orally (within two (2) business days) and in
writing (as promptly as practicable) of all relevant terms of any inquiry or
proposal by a third party to do any of the foregoing that CTSI or the Seller or
any of their respective officers, directors, partners, managers, employees,
investment bankers, financial advisors, attorneys, accountants or other
representatives may receive relating to any of such matters. In the event such
inquiry or proposal is in writing, the Seller and CTSI shall deliver to
Purchaser a copy of such inquiry or proposal together with such written notice.
6.08 FILINGS; OTHER ACTIONS; NOTIFICATION.
---------------------------------------
(a) The Seller and Purchaser shall cooperate with each other and
use their respective best efforts to take or cause to be taken all actions, and
do or cause to be done all things, necessary, proper or advisable on its part
under this Agreement and applicable laws to consummate and make effective the
transactions contemplated by this Agreement as soon as practicable, including
preparing and filing as promptly as practicable all documentation to effect all
necessary notices, reports and other filings and to obtain as promptly as
practicable all consents, registrations, approvals, permits and authorizations
necessary or advisable to be obtained from any third party and/or any
Governmental Entity in order to consummate the transactions contemplated by this
Agreement. Subject to applicable laws relating to the exchange of information,
Purchaser and Seller shall have the right to review in advance, and to the
extent practicable each will consult the other on, all the information relating
to Purchaser or CTSI, as the case may be, that appear in any filing made with,
or written materials submitted to, any third party and/or any Governmental
Entity in connection with the transactions contemplated by this Agreement. In
exercising the foregoing right, each of the Seller and Purchaser shall act
reasonably and as promptly as practicable.
(b) The Seller and Purchaser each shall keep the other apprised of
the status of matters relating to completion of the transactions contemplated
hereby, including promptly furnishing the other with copies of notice or other
communications received by Purchaser, CTSI or the Seller, as the case may be,
from any third party and/or any Governmental Entity with respect to the
transactions contemplated by this Agreement. Purchaser shall give prompt notice
to the other of any change that is reasonably likely to result in a Purchaser
Material Adverse Effect.
35
6.09 CONFIDENTIALITY. CTSI and Seller shall hold in confidence at all
---------------
times following the date hereof all Confidential Information and shall not
disclose, publish or make use of Confidential Information at any time following
the date hereof without the prior written consent of Purchaser. For purposes
hereunder, "Confidential Information" shall mean any data or information of CTSI
------------------------
(including trade secrets) that is not generally known to the public or
competitors regarding (for example and including, but not limited to) (a)
business process models; (b) proprietary software; (c) research, development,
products, services, marketing, selling, business plans, budgets, unpublished
financial statements, licenses, prices, costs, contracts, suppliers, customers,
and customer lists; (d) the identity, skills and compensation of employees,
contractors, and consultants; (e) specialized training; (f) discoveries,
developments, trade secrets, processes, formulas, data, lists, and all other
works of authorship, mask works, ideas, concepts, know-how, designs, and
techniques, whether or not any of the foregoing is or are patentable,
copyrightable, or registrable under any intellectual property laws or industrial
property laws in the United States or elsewhere; and (g) such other information
that may give CTSI a competitive business advantage or the disclosure of which
could be detrimental to the interests of CTSI and from all of the relevant
circumstances could reasonably be assumed by any person or entity to be
confidential and proprietary to CTSI, Notwithstanding the foregoing, no data or
information constitutes "Confidential Information" if such data or information
------------------------
is publicly known and in the public domain through means that do not involve a
breach by CTSI or Seller of any covenant or obligation set forth in this
Agreement.
6.10 PUBLICITY. The initial press release shall be a joint press
---------
release and thereafter the Seller and Purchaser each shall consult with each
other prior to issuing any press releases or otherwise making public
announcements with respect to the transactions contemplated by this Agreement
and prior to making any filings with any third party and/or any Governmental
Entity (including any national securities exchange or interdealer quotation
service) with respect thereto, except as may be required by law or by
obligations pursuant to any listing agreement with or rules of any national
securities exchange or interdealer quotation service.
6.11 NON-OPERATING EXPENSES. The Seller shall cause CTSI to cause all
-----------------------
liabilities of CTSI, other than Liability Line Items contemplated by Section
-------
2.03 and long-term liabilities set forth on SCHEDULE 6.11, to be paid in full
---- -------------
prior to the Closing, including but not limited to any such items reflected on
the Interim Balance Sheet or set forth on SCHEDULE 4.08.
--------------
6.12 REGISTRATION RIGHTS.
--------------------
(a) Registration. On or prior to the ninetieth (90th) calendar
------------
day after the Closing, Parent shall use its commercially reasonable efforts to
prepare and file with the Securities and Exchange Commission (the "Commission")
----------
a registration statement on Form SB-2, amend its existing registration statement
on Form SB-2 presently on file with the Commission if not yet declared
effective, or file such other appropriate form for which Parent is then eligible
in accordance herewith (the "Registration Statement") covering the resale of
----------------------
the Parent Common Stock to be issued pursuant to this Agreement at the Closing
(the "Registrable Securities") to the extent then registrable pursuant to the
-----------------------
rules and regulations of the Commission for an offering to be made on a
continuous basis pursuant to Rule 415. Only one Registration Statement shall be
required hereunder. To the extent any of the Registrable Securities may not be
included on the Registration Statement pursuant to the rules and regulations of
the Commission, as determined in
36
the good faith judgment of Parent's counsel, then such Registrable Securities
shall not be included on such Registration Statement and shall be entitled to
the registration rights described as "piggyback rights" in Section 6.12(c)
below. Parent Common Stock issued pursuant to this Agreement shall cease to be
Registrable Securities if sold or transferred by the Seller to any other person
and, in any event, on and after such date when such Parent Common Stock may be
sold without volume restrictions pursuant to Rule 144(k) under the Securities
Act as determined by counsel to Parent pursuant to a written opinion letter to
such effect, addressed and acceptable to Parent's transfer agent and the Seller.
Parent shall use its commercially reasonable efforts to cause the Registration
Statement to be declared effective under the Securities Act as soon as
practicable after the filing thereof. Further, Parent shall use its commercially
reasonable efforts to keep the Registration Statement continuously effective
under the Securities Act, subject to Section 6.12(b) below, for a period of one
(1) year following the Closing Date.
(b) Suspension Rights. Notwithstanding anything herein to the
------------------
contrary, Parent shall have the right to suspend the use of the Registration
Statement for a period not greater than forty-five (45) consecutive days and for
not more than ninety (90) days in any twelve (12) month period (the "Suspension
----------
Period"), if, in the good faith opinion of the Board of Directors of Parent,
------
after consultation with counsel, material, nonpublic information exists,
including, the proposed acquisition or divestiture of assets by Parent or the
existence of pending material corporate developments, the public disclosure of
which would be necessary to cause the Registration Statement to be materially
true and to contain no material misstatements or omissions, and in each such
case, where, in the good faith opinion of the Board of Directors of Parent, such
disclosure would be reasonably likely to have a material adverse effect on
Parent or on the proposed transaction or Parent requires time to prepare a
post-effective amendment to the Registration Statement in order to disclose such
material information. Parent shall give Seller notice promptly upon knowledge
that a Suspension Period (without indicating the nature of such Suspension
Period) may occur and prompt written notice if a Suspension Period will occur
and such notices must be acknowledged in writing by the Seller. During the
pendency of any Suspension Period, no holder of Parent Common Stock registered
for resale on such Registration Statement shall attempt any public resale of
such securities by the Registration Statement. Upon the conclusion of a
Suspension Period, Parent shall provide Seller written notice that the
Registration Statement is again available for use.
(c) Piggyback Rights. In addition, for a period of twenty-four
-----------------
(24) months following the Closing, each time Parent shall determine to file a
registration statement under the Securities Act (excluding a registration on
Form S-4 or S-8, or successor forms thereto, or a registration statement on Form
S-l or SB-2 covering solely an employee benefit plan) in connection with the
proposed offer and sale for money of any of its securities either for its own
account or on behalf of any other security holder, Parent shall, if Seller
continues to own any Parent Common Stock at such time, give prompt written
notice of such determination to the Seller. The Seller shall provide a written
request to Parent if they desire to participate in such registration (the
"Seller Notice"), stating the number of shares of Parent Common Stock then
--------------
constituting Registrable Securities to be registered, which Seller Notice must
be given within ten (10) days after the receipt by the Seller of Parent's
notice. Upon receipt of the Seller Notice, except as expressly provided
otherwise in this Section 6.12(c), Parent shall cause all shares of Parent
Common Stock constituting Registrable Securities with respect to which the
Seller has requested registration to be included in such registration statement
and registered under the
37
Securities Act, all to the extent requisite to permit the sale or other
disposition by the Seller of the Parent Common Stock to be so registered. Parent
shall have the right to withdraw and discontinue registration pursuant to this
Section 6.12(c) of the shares of Parent Common Stock if at any time prior to the
effective date of the registration statement, the registration of the securities
to be registered on behalf of Parent or any other participating security holders
is withdrawn or discontinued. If the registration for which Parent gives written
notice pursuant to this Section 6.12(c) is for a public offering involving an
underwriting, Parent shall so advise the Seller as a part of its written notice.
In such event, the right of the Seller to registration pursuant to this Section
6.12(c) shall be conditioned upon the Seller's participation in such
underwriting as selling stockholders (including the execution and delivery of
the applicable underwriting agreement) and the inclusion of such Seller's shares
of Parent Common Stock in the underwriting to the extent provided herein. Parent
shall not be required to include any of the shares of Parent Common Stock
constituting Registrable Securities in any registration statement to the extent
the public offering involves an underwriting and the managing underwriter
thereof advises Parent in writing that in their opinion the number of shares of
Parent Common Stock requested to be included exceeds the number that can be sold
in such offering, at a price reasonably related to fair market value. To the
extent the managing underwriter provides such advice, the shares of Parent
Common Stock to be included pursuant to this Section 6.12(c) shall be reduced as
required by such underwriter. Notwithstanding anything herein to the contrary,
Parent shall not be required to register Registrable Securities pursuant to this
Section 6.12(c) on any registration statement prepared for the resale of
securities where the right of another security holder to require such
registration statement was contractually entered into prior to the date of this
Agreement, to the extent that such other security holder has the right to
exclude other holders of securities from such registration statement.
(d) Procedure. If and whenever Parent is required by the
---------
provisions of this Section to effect the registration of shares of Registrable
Securities under the Securities Act, Parent, at its expense and as expeditiously
as possible shall, in accordance with the Securities Act and all applicable
rules and regulations, prepare and file with the Commission a registration
statement with respect to such securities and shall use its commercially
reasonable efforts to cause such registration statement to become and remain
effective to the extent required hereby, and, during such period, prepare and
file with the Commission such amendments and supplements to such registration
statement and the prospectus contained therein as may be necessary to keep such
registration statement effective and such registration statement and prospectus
accurate and complete, subject to any Suspension Period pursuant to Section
6.12(b) hereof. Parent shall furnish to the Seller and to the underwriters of
securities being registered such number of copies of the registration statement
and each amendment and supplement thereto, preliminary prospectus, final
prospectus and such other documents as such underwriters and holders may
reasonably request in order to facilitate the public offering of such
securities. In addition, Parent shall otherwise take such other actions as are
necessary and appropriate to effect any such registration in compliance with all
provisions of the Securities Act and all applicable state securities laws,
including, using its commercially reasonable efforts to register or qualify the
securities covered by such registration statement under such state securities or
Blue Sky laws of such jurisdictions as reasonably necessary to effect the sale
thereof and such other actions as the Seller shall reasonably request (provided
that Parent shall not be required thereby to qualify to do business in such
jurisdiction or consent, generally, to the service of process therein).
38
(e) Compliance. The Seller covenants and agrees that Seller will
----------
comply with the prospectus delivery requirements of the Securities Act as
applicable to it in connection with sales of Registrable Securities pursuant to
a registration statement of Parent
(f) Seller Information. As a condition to the registration of
-------------------
any Registrable Securities under this Section, Parent may require Seller to
furnish to Parent (i) a certified statement as to the number of shares of Parent
Common Stock then beneficially owned, and if requested by the Commission, the
controlling person thereof, (ii) a description of any material relationship
between Seller and Parent, its predecessors or affiliates, within the past three
years and (iii) such other information regarding Seller as is required for such
registration by the rules and regulations of the Commission.
(g) Inside Information. Seller acknowledges that Seller's
-------------------
relationship with Purchaser and Parent may give Seller access to certain
non-public material information of Parent (i.e. information that is likely to
have a significant impact on the decision of a person to buy, sell or hold
Parent stock), which information will only be considered to be publicly
available when it has been released to the public through a Parent press release
or Securities and Exchange Commission filing and the investing public has had
sufficient time to absorb and evaluate its impact. Seller acknowledges that
federal securities laws prohibit Seller and members of Seller's family from
buying or selling stock of Parent while having knowledge of material nonpublic
information about Parent or the market for Parent's stock (so-called "inside
information"), and, notwithstanding any other rights of Seller set forth herein,
Seller covenants not to buy or sell any Parent stock based on inside
information, nor to communicate any inside information to a third party.
ARTICLE VII
-----------
CONDITIONS TO EACH PARTY'S OBLIGATION
-------------------------------------
TO EFFECT THE TRANSACTION
-------------------------
The respective obligation of each party to effect the transactions
contemplated by this Agreement is subject to the satisfaction (or waiver) at or
prior to the Closing of each of the following conditions:
7.01 REGULATORY CONSENTS. All notices, reports and other filings
--------------------
required to be made prior to the Closing by the Seller, CTSI or Purchaser with,
and all consents, registrations, approvals, permits and authorizations required
to be obtained prior to the Closing by the Seller, CTSI or Purchaser from, any
Governmental Entity (collectively, "Governmental Consents") in connection with
---------------------
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby by the Seller and Purchaser shall have been
made or obtained (as the case may be), except those that the failure to make or
to obtain are not individually or in the aggregate, reasonably likely to have a
Purchaser Material Adverse Effect or to provide a reasonable basis to conclude
that the parties hereto or any of their affiliates or respective directors,
officers, agents, advisors or other representatives would be subject to the risk
of criminal or material financial liability.
39
7.02 LITIGATION. No court or Governmental Entity of competent
----------
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, law, ordinance, rule, regulation, judgment, decree, injunction or other
order (whether temporary, preliminary or permanent) that is in effect and
restrains, enjoins or otherwise prohibits consummation of the transactions
contemplated by this Agreement (collectively, an "Order").
-----
ARTICLE VIII
------------
CONDITIONS TO OBLIGATIONS OF THE SELLER
---------------------------------------
The obligation of the Seller to effect the transactions contemplated by
this Agreement is subject to the satisfaction (or waiver by the Seller) at or
prior to the Closing of each of the following conditions:
8.01 REPRESENTATIONS AND WARRANTIES TRUE AND CORRECT AT CLOSING
-----------------------------------------------------------------
DATE. Each of Purchaser's representations and warranties contained in this
----
Agreement that are qualified by materiality shall be true and correct in all
respects and each of Purchaser's representations and warranties contained in
this Agreement that are not so qualified shall be true and correct in all
material respects, in each case as of the date of this Agreement and on and as
of the Closing Date with the same force and effect as though made on and as of
such date (except to the extent any such representation or warranty expressly
speaks as of an earlier date), and Purchaser shall have delivered to the Seller
a certificate dated the Closing Date and signed on behalf of Purchaser by its
President to such effect.
8.02 PERFORMANCE OFOBLIGATIONS. Purchaser shall have performed and
-------------------------
complied in all material respects with the respective covenants and agreements
set forth herein to be performed or complied with by each of them on or before
the Closing Date; and Purchaser shall have delivered to CTSI a certificate dated
the Closing Date and signed on behalf of Purchaser by its President to all such
effects and confirming such other matters as may be reasonably requested by
CTSI.
8.03 DOCUMENTS SATISFACTORY IN FORM AND SUBSTANCE. All agreements,
------------------------------------------------
certificates and other documents delivered by Purchaser to the Seller hereunder
or in connection herewith and which are not exhibits hereto shall be in form and
substance satisfactory to the Seller and their counsel, in the exercise of their
reasonable judgment.
8.04 CERTIFICATES. Purchaser shall have delivered to the Seller
------------
certificates of the Secretary or Assistant Secretary of Purchaser (i) attaching
and certifying copies of the resolutions of its board of directors and
shareholders, authorizing the execution, delivery and performance of this
Agreement and the other documents, instruments and certifications required or
contemplated hereby, (ii) certifying the name, title and true signature of each
officer of Purchaser executing or authorized to execute this Agreement and the
other documents, instruments and certifications required or contemplated hereby,
and (iii) attaching and certifying a true, correct and complete copy of the
bylaws of Purchaser.
40
ARTICLE IX
----------
CONDITIONS TO OBLIGATIONS OF PURCHASER
--------------------------------------
The obligations of Purchaser to effect the transactions contemplated by
this Agreement are subject to the satisfaction (or waiver by Purchaser) at or
prior to the Closing of each of the following conditions:
9.01 REPRESENTATIONS AND WARRANTIES TRUE AND CORRECT AT CLOSING DATE.
-----------------------------------------------------------------
Each of the representations and warranties of CTSI and the Seller contained in
this Agreement that are qualified by materiality shall be true and correct in
all respects and each of the representations and warranties of CTSI and the
Seller contained in this Agreement that are not so qualified shall be true and
correct in all material respects, in each case as of the date of this Agreement
and on and as of the Closing Date with the same force and effect as though made
on and as of such date (except to the extent any such representation or warranty
expressly speaks as of an earlier date), and the Seller shall have delivered to
Purchaser a certificate dated the Closing Date and signed on behalf of CTSI by
its President to such effect.
9.02 PERFORMANCE OBLIGATIONS. CTSI and the Seller shall have
------------------------
performed and complied in all material respects with the covenants and
agreements set forth herein to be performed or complied with by it on or before
the Closing Date; and the Seller shall have delivered to Purchaser a certificate
dated the Closing Date and signed on behalf of CTSI by its President to all such
effects, and confirming such other matters as may be reasonably requested by
Purchaser.
9.03 NOMATERIAL CHANGE. Except as disclosed on SCHEDULE 9.03, CTSI
------------------ -------------
shall not have suffered any material adverse change since the Interim Financial
Statements Date (whether or not such change is referred to or described in any
Schedule) in its business, prospects, financial condition, working capital,
assets, liabilities (absolute, accrued, contingent or otherwise), reserves
or operations.
9.04 OTHER NECESSARY CONSENTS. The Seller shall have obtained all
--------------------------
consents and approvals required to be listed on SCHEDULE 4.05. With respect to
-------------
each such consent or approval, Purchaser shall have received written evidence,
satisfactory to it, that such consent or approval has been duly and lawfully
filed, given, obtained or taken and is effective, valid and subsisting.
9.05 OPINION OF COUNSEL TO THE SELLER. Purchaser shall have received
-----------------------------------
from counsel to the Seller and CTSI an opinion, dated the Closing Date, in form
and substance satisfactory to Purchaser.
9.06 DOCUMENTS SATISFACTORY IN FORM AND SUBSTANCE. All agreements,
------------------------------------------------
certificates, opinions and other documents delivered by the Seller to Purchaser
hereunder and which are not exhibits hereto shall be in form and substance
satisfactory to Purchaser and its counsel, in the exercise of their reasonable
judgment.
9.07 CERTIFICATES. The Seller shall have delivered to Purchaser:
------------
41
(a) Certificates of the Secretary or Assistant Secretary of CTSI
(i) attaching and certifying copies of the resolutions of its board of directors
and shareholders, authorizing the execution, delivery and performance of this
Agreement and the other documents, instruments and certifications required or
contemplated hereby, (ii) certifying the name, title and true signature of each
officer of CTSI executing or authorized to execute this Agreement and the other
documents, instruments and certifications required or contemplated hereby, and
(iii) attaching and certifying a true, correct and complete copy of the bylaws
of CTSI; and
(b) Copies of the articles of incorporation CTSI certified by the
Secretary of State of the State of Louisiana and by its Secretary or Assistant
Secretary, together with a certificates of good standing or existence as may be
available from the Secretaries of State of its jurisdiction of incorporation or
organization and every other state of the United States in which the conduct of
its business or the ownership of its properties and assets requires it to be so
qualified.
9.08 EMPLOYMENT AGREEMENTS. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ shall have executed and
----------------------
delivered an employment agreement in the form of EXHIBIT B, and ▇▇▇▇ ▇▇▇▇▇▇▇,
---------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
shall have executed and delivered employment agreements in form and substance
satisfactory to Purchaser.
9.09 RELEASE OF LIENS. Purchaser shall have received evidence
------------------
reasonably satisfactory to it that all Hens or encumbrances affecting any asset
of CTSI have been released.
9.10 PAYMENT OF INDEBTEDNESS. Except as contemplated by SECTION 6.11,
------------------------ ------------
Purchaser shall have received evidence reasonably satisfactory to it that all
indebtedness (including all non- operating liabilities) of CTSI has been paid in
full.
9.11 FINANCING. Purchaser shall have available to it financing
---------
sufficient to consummate the transactions contemplated herein and pay all
related fees.
9.12 SECTION 338 FORMS. Purchaser shall have received the Section
-------------------
338 Forms executed by Seller to effect the Section 338(h)(10) Election.
9.13 CASH REQUIREMENT. The Company shall have, and the Estimated
-----------------
Working Capital Schedule shall reflect, that the Company will have not less than
$1,200,000 in cash at Closing.
9.14 NON-COMPETITION AGREEMENTS. Seller shall have executed and
---------------------------
delivered a non- competition agreement in the form OF EXHIBIT C.
----------
ARTICLE X
---------
INDEMNIFICATION
---------------
10.01 INDEMNIFICATION OBLIGATIONS OF THE SELLER. The Seller (and
---------------------------------------------
CTSI prior to the Closing) shall, jointly and severally, indemnify, defend and
hold harmless Purchaser and its affiliates, officers, directors, employees,
agents and representatives and the heirs, executors, successors and assigns of
any of the foregoing (the "Purchaser Indemnified Parties") from,
-------------------------------
42
against, and in respect of, any and ail claims, liabilities, obligations,
damages, losses, costs, expenses, penalties, fines and judgments (at equity or
at law, including statutory and common) and damages whenever arising or incurred
(including amounts paid in settlement, costs of investigation and reasonable
attorneys' fees and expenses) arising out of or relating to:
(a) any liability or obligation of the Seller of any nature
whatsoever;
(b) any obligation of CTSI under a contract or commitment to be
performed prior to the Closing Date or any breach by CTSI (prior to Closing
Date) of a contract or commitment;
(c) any events or circumstances occurring or existing with respect
to the ownership, operation and maintenance of CTSI, the CTSI Business and their
assets on or prior to the Closing Date, except for liabilities of a type set
forth on the Interim Balance Sheet;
(d) any breach or inaccuracy of any representation or warranty
made by CTSI or the Seller in this Agreement or any documents or agreements
executed and delivered by CTSI or Seller in connection with the transactions
contemplated by this Agreement whether such representation and warranty is made
as of the date hereof or as of the Closing Date;
(e) any breach of any covenant, agreement or undertaking made by
CTSI or the Seller in this Agreement or in any documents or agreements executed
and delivered by CTSI or Seller in connection with the transactions contemplated
by this Agreement; or
(f) (A) any provision of any Environmental Law and arising out of,
or relating to, (i) any act or omission of CTSI or its employees, agents or
representatives on or prior to the Closing Date or (ii) the ownership, use,
control or operation on or prior to the Closing Date of any real property,
plant, facility, site, area or property used in the CTSI Business (whether
currently or previously owned or leased by CTSI), including arising from any
Release of any Hazardous Material or off-site shipment of any Hazardous Material
at or from such real property, plant, facility, site, area or property or (B)
mold or any other environmental matter or condition, to the extent caused by
CTSI, arising on or prior to the Closing Date.
The claims, liabilities, obligations, losses, damages, costs, expenses,
penalties, fines and judgments of the Purchaser Indemnified Parties described in
this Section 10,01 as to which the Purchaser Indemnified Parties are entitled to
indemnification are collectively referred to as
"Purchaser Losses".
-----------------
10.02 INDEMNIFICATION OBLIGATIONS OF PURCHASER. Purchaser shall
-------------------------------------------
indemnify and hold harmless the Seller and their heirs, executors, successors
and assigns (the "Seller Indemnified Parties") from, against and in respect of
--------------------------
any and all claims, liabilities, obligations, losses, damages, costs, expenses,
penalties, fines and judgments (at equity or at law, including statutory and
common) and damages whenever arising or incurred (including amounts paid in
settlement, costs of investigation and reasonable attorneys' fees and expenses)
arising out of or relating to:
(a) any breach or inaccuracy of any representation or
warranty made by Purchaser in this Agreement or in any document or agreement
executed and delivered by
43
Purchaser in connection with the transactions contemplated by this Agreement,
whether such representation and warranty is made as of the date hereof or as of
the Closing Date; or
(b) any breach of any covenant, agreement or undertaking made
by Purchaser in this Agreement or in any document or agreement executed and
delivered by Purchaser in connection with the transactions contemplated by this
Agreement; or
(c) any events or circumstances occurring or existing with respect
to the ownership, operation and maintenance of CTSI, the CTSI Business and its
assets on or after the Closing Date; or
(d) any incremental additional Taxes or Tax liability imposed on
Seller arising as a direct result from the Section 338(h)(10) Election Purchaser
will make pursuant to Section 6,03, as compared with the proforma Tax liability
that would have been incurred by Seller if the Section 338(h)(10) Election were
not made, provided that the Purchase Price is allocated according to Purchaser's
allocation schedule in accordance with Section 6.03(d)(iii).
The claims, liabilities, obligations, losses, damages, costs, expenses,
penalties, fines and judgments of the Seller Indemnified Parties described in
this Section 10.02 as to which the Seller Indemnified Parties are entitled to
indemnification are collectively referred to as "Seller Losses".
--------------
10.03 INDEMNIFICATION PROCEDURE.
--------------------------
(a) Promptly following receipt by a Purchaser Indemnified
Party or a Seller Indemnified Party, as applicable (an "Indemnified Party") of
-----------------
notice by a third party (including any Governmental Entity) of any complaint,
dispute or claim or the commencement of any audit, investigation, action or
proceeding with respect to which such Indemnified Party may be entitled to
receive payment from the other party for any Purchaser Losses or any Seller
Losses (as the case may be), such Indemnified Party shall notify Purchaser or
the Seller, as the case may be (the "Indemnifying Party"), provided, however,
------------------ -------- --------
that the failure to so notify the Indemnifying Party shall relieve the
Indemnifying Party from liability hereunder with respect to such claim only if,
and only to the extent that, such failure to so notify the Indemnifying Party
results in the forfeiture by the Indemnifying Party of rights and defenses
otherwise available to the Indemnifying Party with respect to such claim. The
Indemnifying Party shall have the right, upon written notice delivered to the
Indemnified Party within twenty (20) days thereafter assuming full
responsibility for any Purchaser Losses or Seller Losses (as the case may be)
resulting from such audit, investigation, action or proceeding, to assume the
defense of such audit, investigation, action or proceeding, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of the fees and disbursements of such counsel. In the event, however,
that the Indemnifying Party declines or fails to assume the defense of the
audit, investigation, action or proceeding on the terms provided above or to
employ counsel reasonably satisfactory to the Indemnified Party, in either case
within such 20-day period, then any Purchaser Losses or any Seller Losses (as
the case may be), shall include the reasonable fees and disbursements of counsel
for the Indemnified Party as incurred. In any audit, investigation, action or
proceeding for which indemnification is being sought hereunder the Indemnified
Party or the Indemnifying Party, whichever is not assuming the defense of such
action, shall have the right to participate in such matter and to retain its own
counsel at such
44
party's own expense. The Indemnifying Party or the Indemnified Party (as the
case may be) shall at all times use reasonable efforts to keep the Indemnifying
Party or Indemnified Party (as the case may be) reasonably apprised of the
status of the defense of any matter the defense of which it is maintaining and
to cooperate in good faith with each other with respect to the defense of any
such matter,
(b) No Indemnified Party may settle or compromise any claim
or consent to the entry of any judgment with respect to which indemnification is
being sought hereunder without the prior written consent of the Indemnifying
Party, unless (i) the Indemnifying Party fails to assume and maintain the
defense of such claim pursuant to Section 10.03 (a) or (ii) such settlement,
compromise or consent includes an unconditional release of the Indemnifying
Party and its officers, directors, employees and affiliates from all liability
arising out of such claim. An Indemnifying Party may not, without the prior
written consent of the Indemnified Party, settle or compromise any claim or
consent to the entry of any judgment with respect to which indemnification is
being sought hereunder unless (x) such settlement, compromise or consent
includes an unconditional release of the Indemnified Party and its officers,
directors, employees and affiliates from all liability arising out of such
claim, (y) does not contain any admission or statement suggesting any wrongdoing
or liability on behalf of the Indemnified Party and (z) does not contain any
equitable order, judgment or term that in any manner affects, restrains or
interferes with the business of the Indemnified Party or any of the Indemnified
Party's affiliates.
(c) In the event an Indemnified Party claims a right to payment
pursuant hereto, such Indemnified Party shall send written notice of such claim
to the appropriate Indemnifying Party (a "Notice of Claim"). Such Notice of
---------------
Claim shall specify the basis for such claim. The failure by any Indemnified
Party so to notify the Indemnifying party shall not relieve the Indemnifying
Party from any liability that it may have to such Indemnified Party with respect
to any claim made pursuant to this Section 10.03(c), it being understood that
notices for claims in respect of a breach of a representation or warranty must
be delivered prior to the expiration of the survival period for such
representation or warranty under Section 10.04. In the event the Indemnifying
Party does not notify the Indemnified Party within thirty (30) days following
its receipt of such notice that the Indemnifying Party disputes its liability to
the Indemnified Party under this Article or the amount thereof, the claim
specified by the Indemnified Party in such Notice of Claim shall be conclusively
deemed a liability of the Indemnifying Party under this Section 10.03(c), and
the Indemnifying Party shall pay the amount of such liability to the Indemnified
Party on demand or, in the case of any notice in which the amount of the claim
(or any portion of the claim) is estimated, on such later date when the amount
of such claim (or such portion of such claim) becomes finally determined. In
the event the Indemnifying Party has timely disputed its liability with respect
to such claim as provided above, as promptly as possible, such Indemnified Party
and the appropriate Indemnifying Party shall establish the merits and amount of
such claim (by mutual agreement, litigation, arbitration or otherwise) and,
within five (5) Business Days following the final determination of the merits
and amount of such claim, the Indemnifying Party shall pay to the Indemnified
Party immediately available funds in an amount equal to such claim as determined
hereunder.
10.04 SURVIVAL PERIOD. The representations and warranties of the
----------------
parties contained herein shall not be extinguished by the Closing, but shall
survive the Closing for, and all claims for indemnification in connection
therewith shall be asserted not later than, eighteen (18) months
45
following the Closing Date; provided, however, that the representations and
-------- -------
warranties contained in Section 3,01 (Power, Authority and Organization of the
Seller), Section 3,03 (Ownership of the CTSI Shares), Section 3.05
(▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act), Section 4.01 (Organization and Authorization), Section
4,02 (Authorized and Outstanding Stock), and 4,28 (Brokerage) shall survive
without limitation as to time, and the period during which a claim for
indemnification may be asserted in connection therewith shall continue
indefinitely; and provided, further, that the representations and warranties
-------- -------
contained in Section 4.09 (Real Property), Section 4.10 (Personal Property),
Section 4.15 (Employee Benefits), Section 4.16 (Collective Bargaining), Section
4.17 (Labor Disputes), Section 4.19 (Environmental Matters), and Section 4.27
(Tax Matters), shall survive until the expiration of the applicable statute of
limitations, and the period during which a claim for indemnification may be
asserted in connection therewith shall continue until such expiration of the
applicable statute of limitations. (all of the foregoing representations and
warranties specifically identified in this section 10.04 are collectively,
referred to as the "Surviving Representations"). Notwithstanding the foregoing,
-------------------------
if, prior to the close of business on the last day a claim for indemnification
may be asserted hereunder, an Indemnifying Party shall have been properly
notified of a claim for indemnity hereunder and such claim shall not have been
finally resolved or disposed of at such date, such claim shall continue to
survive and shall remain a basis for indemnity hereunder until such claim is
finally resolved or disposed of in accordance with the terms hereof.
10.05 LIABILITY LIMITS. Notwithstanding anything to the contrary
-----------------
set forth herein, the Purchaser Indemnified Parties shall not make a claim
against CTSI or the Seller for indemnification under Section 10.01 (d) for
Purchaser Losses unless and until the aggregate amount of such Purchaser Losses
exceeds Four-Hundred Thousand Dollars ($400,000.00) (the "Purchaser Basket"),
----------------
in which event the Purchaser Indemnified Parties may claim
indemnification for all Purchaser Losses, including the initial $400,000.00;
provided, however, that (i) the Surviving Representations shall not be subject
-------- -------
to the Purchaser Basket, and (ii) for purposes of calculating the Purchaser
Basket, the dollar value of any breaches of any representation or warranty shall
be calculated without reference to any materiality or adverse effect qualifier
or exception set forth in such representation or warranty. The total aggregate
amount of the liability of the Company and the Seller for Purchaser Losses with
respect any claims made pursuant to Section 10.01(d) shall be limited to an
amount equal to fifteen percent (15%) of the Purchase Price (the "Purchaser
---------
Cap"); provided, however, that the total aggregate amount of the liability of
--- -------- -------
the Company and the Seller for Purchaser Losses arising out of fraud, willful
misconduct, or a violation of applicable securities or other laws shall not be
subject to any limits. In addition, the aggregate liability of Purchaser and
Parent to all Seller Indemnified Parties for any Seller Losses associated with
any breach or failure by Purchaser or Parent to perform under Section 6.12 of
this Agreement, or arising from any inability of Seller to sell the Issued
Securities in the public market, shall not exceed $4,000,000.
10.06 INVESTIGATIONS. The respective representations and warranties
--------------
of the Parties contained in this Agreement or any certificate or other document
delivered by any party at or prior to the Closing and the rights to
indemnification set forth in this Article X shall not be deemed waived or
otherwise affected by any investigation made, or knowledge acquired, by a party,
or any failure to notify in accordance with the next sentence. The Parties agree
to use their respective reasonable best efforts to notify the other Parties of
any indemnification claim of which they have knowledge.
46
10.07 SET-OFF. Purchaser shall be entitled to set-off any amount or
-------
right it may be entitled to pursuant to this Agreement against any amount, right
or obligations owed to the Seller under this Agreement or any agreement or
documents executed and delivered by Seller
ARTICLE XI
----------
TERMINATION PRIOR TO CLOSING
----------------------------
11.01 TERMINATION OF AGREEMENT. This Agreement may be terminated at
--------------------------
any time prior to the Closing:
(a) By the mutual written consent of Purchaser and the Seller;
(b) By the Seller in writing, without liability, if Purchaser
shall (i) fail to perform in any material respect its agreements contained
herein required to be performed by it on or prior to the Closing Date, or (ii)
materially breach any of its representations, warranties or covenants contained
herein, which failure or breach is not cured within ten (10) days after the
Seller has notified Purchaser of Seller's intent to terminate this Agreement
pursuant to this subparagraph (b);
(c) By Purchaser in writing, without liability, if either CTSI or
the Seller shall (i) fail to perform in any material respect their agreements
contained herein required to be performed by them on or prior to the Closing
Date, or (ii) materially breach any of their representations, warranties or
covenants contained herein, which failure or breach is not cured within ten (10)
days after Purchaser has notified the Seller of its intent to terminate this
Agreement pursuant to this subparagraph (c);
(d) By either the Seller or Purchaser in writing, without
liability, if there shall be any order, writ, injunction or decree of any court
or governmental or regulatory agency binding on Purchaser, the Seller or CTSI,
which prohibits or restrains Purchaser, the Seller or CTSI from consummating the
transactions contemplated hereby, provided that Purchaser, the Seller and CTSI
shall have used their reasonable, good faith efforts to have any such order,
writ, injunction or decree lifted and the same shall not have been lifted within
30 days after entry, by any such court or governmental or regulatory agency; or
(e) By either the Seller or Purchaser, in writing, without
liability, if for any reason the Closing has not occurred by July 21, 2006 other
than as a result of the breach of this Agreement by the party attempting to
terminate the Agreement.
11.02 TERMINATION OF OBLIGATIONS. Termination of this Agreement
----------------------------
pursuant to this Article XI shall terminate all obligations of the parties
hereunder, except for the obligations under Sections 11.02, 12.07 and 12.10
hereof; provided, however, that termination pursuant to subparagraphs (b), (c)
-------- -------
or (e) of Section 11.01 hereof shall not relieve a defaulting or breaching party
from any liability to the other party hereto.
47
ARTICLE XII
-----------
MISCELLANEOUS
-------------
12.01 ENTIRE AGREEMENT; SURVIVAL.
----------------------------
(a) This Agreement (including the Schedules and Exhibits which
are incorporated herein) constitutes the sole understanding of the parties with
respect to the subject matter hereof; provided, however, that this provision is
-------- -------
not intended to abrogate any other written agreement between the parties
executed with or after this Agreement.
12.02 AMENDMENT. No amendment, modification or alteration of the terms
---------
or provisions of this Agreement shall be binding unless the same shall be in
writing and duly executed by the parties hereto.
12.03 PARTIES BOUND BY AGREEMENT; SUCCESSORS AND ASSIGNS. The terms,
-----------------------------------------------------
conditions, and obligations of this Agreement shall inure to the benefit of and
be binding upon the parties hereto and the respective successors and assigns
thereof. This Agreement shall not be assignable by operation of law or
otherwise.
12.04 COUNTERPARTS; FACSIMILE. This Agreement may be executed in
------------------------
multiple counterparts, each of which shall for all purposes be deemed to be an
original and all of which, when taken together, shall constitute one and the
same instrument. This Agreement may be executed and delivered by facsimile.
12.05 HEADINGS. The headings of the Sections and paragraphs of this
--------
Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction thereof.
12.06 MODIFICATION AND WAIVER. Any of the terms or conditions of this
------------------------
Agreement may be waived in writing at any time by the party which is entitled to
the benefits thereof. No waiver of any of the provisions of this Agreement shall
be deemed to or shall constitute a waiver of any other provision hereof (whether
or not similar).
12.07 EXPENSES. Except as otherwise provided herein, the Seller and
--------
Purchaser shall each pay all costs and expenses incurred by each of them, or on
their behalf respectively, in connection with this Agreement and the
transactions contemplated hereby, including fees and expenses of their own
financial consultants, accountants and counsel; provided, however, that
-------- -------
Purchaser will pay the reasonable legal and accounting fees (excluding, without
limitation, any broker or investment banker fees) incurred by either CTSI or
Seller prior to Closing in the event this Agreement is terminated other than for
a breach by Seller or CTSI. All such expenses incurred by CTSI in connection
with this Agreement and the transactions contemplated hereby shall be paid
within 15 days of termination of the Agreement.
12.08 NOTICES. Any notice, request, instruction or other document to be
-------
given hereunder by any party hereto to any other party hereto shall be in
writing and delivered personally or sent by registered or certified mail
(including by overnight courier such as FedEx or express mail service), postage
or fees prepaid,
48
if to the Seller or Complete Tower Sources, Inc.
prior to the Closing Date, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
CTSI, to: ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇
with a copy to: ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
and an additional copy to: G. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Attorney at Law
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: G. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
if to Purchaser to: Charys Holding Company, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇, ▇▇., Chief
Executive Officer
with a copy to: Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
or at such other address for a party as shall be specified by like notice Any
notice which is delivered personally in the manner provided herein shall be
deemed to have been duly given to the party to whom it is directed upon actual
receipt by such party or the office of such party. Any notice which is addressed
and mailed in the manner herein provided shall be conclusively presumed to have
been duly given to the party to which it is addressed at the close of business,
local time of the recipient, on the fourth business day after the day it is so
placed in the mail or, if earlier, the time of actual receipt.
12.09 GOVERNING LAW; DISPUTE RESOLUTION. This Agreement shall be
------------------------------------
construed in accordance with and governed by the laws of the State of Delaware,
without giving effect to the principles of conflicts of law thereof. Each of the
parties hereto irrevocably agrees that any legal action or proceeding with
respect to this Agreement or the transactions contemplated hereby, or for
recognition and enforcement of any judgment in respect hereof, brought by the
other party hereto or its successors or assigns shall be brought and determined
in federal court sitting in
49
Bexar County, San Antonio, State of Texas, and each party hereby irrevocably
submits with regard to any such action or proceeding for itself and in respect
of its property, generally and unconditionally, to the exclusive jurisdiction of
the aforesaid courts. Each party hereto hereby irrevocably waives, and agrees
not to assert, by way of a motion, or as a defense, counterclaim, or otherwise,
in any action or proceeding with respect to this Agreement: (a) any claim that
it is not personally subject to the jurisdiction of the above-named courts for
any reason other than the failure to lawfully serve process; (b) that it or its
property is exempt or immune from the jurisdiction of any such court or from any
legal process commenced in such courts (whether through service of notice,
attachment prior to judgment, attachment in aid of execution of judgment,
execution of judgment, or otherwise); and (c) to the fullest extent permitted by
applicable law, that (i) the suit, action, or proceeding in any such court is
brought in an inconvenient forum, (ii) the venue of such suit, action, or
proceeding is improper, and (iii) this Agreement, or the subject matter hereof,
may not be enforced in or by such courts.
12.10 PUBLIC ANNOUNCEMENTS. No public announcement shall be made
---------------------
by any person with regard to the transactions contemplated by this Agreement
without the prior consent of the Seller and Purchaser; provided that either
--------
party may make such disclosure if advised by counsel that it is legally required
to do so. The Seller, CTSI and Purchaser will discuss any public announcements
or disclosures concerning the transactions contemplated by this Agreement with
the other parties prior to making such announcements or disclosures.
12.11 CTSI'S AND THE SELLER'S KNOWLEDGE. As used herein, the terms
-----------------------------------
"CTSI's knowledge" and "to the knowledge of CTSI" shall mean the constructive
knowledge of any director or officer of CTSI, and the terms "Seller's knowledge"
and to "to the knowledge of the Seller" with respect to Seller shall mean the
constructive knowledge of Seller.
12.12 NOTHIRD-PARTY BENEFICIARIES. With the exception of the parties
---------------------------
to this Agreement, there shall exist no right of any person to claim a
beneficial interest in this Agreement or any rights occurring by virtue of this
Agreement.
12.13 "INCLUDING". Words of inclusion shall not be construed as terms
-----------
of limitation herein, so that references to "included" matters shall be regarded
as non-exclusive, non- characterizing illustrations.
12.14 GENDER AND NUMBER. Where the context requires, the use of a
-------------------
pronoun of one gender or the neuter is to be deemed to include a pronoun of the
appropriate gender, singular words are to be deemed to include the plural, and
vice versa.
12.15 REFERENCES. Whenever reference is made in this Agreement to
----------
any Article, Section, Schedule or Exhibit, such reference shall be deemed to
apply to the specified Article or Section of this Agreement or the specified
Schedule or Exhibit to this Agreement. The Schedules and Exhibits
referenced in this Agreement are attached hereto, are hereby incorporated
into this Agreement and are hereby made a part hereof as if set forth in full in
this Agreement,
12.16 SEVERABILITY. In case any one or more of the provisions
------------
contained in this Agreement should be found by a court of competent jurisdiction
to be invalid, illegal or
50
unenforceable in any respect against any party hereto, such invalidity,
illegality, or unenforceability shall only apply to such party in the specific
jurisdiction where such judgment shall be made, and the validity, legality, and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby, except that this Agreement shall not be
reformed in any way that will deny to any party the essential benefits of this
Agreement, unless such party waives in writing its rights to such benefits,
12.17 FURTHER ASSURANCES. Each of the parties hereto will use its
-------------------
reasonably good faith efforts to take all actions and to do all things
necessary, proper or advisable following the Closing to consummate and
effectuate the transactions contemplated by this Agreement,
12.18 CURRENCY. All payments hereunder or contemplated by this
--------
Agreement shall be paid in U.S. currency.
12.19 ORDINARY COURSE OF BUSINESS. "Ordinary Course of Business"
------------------------------ ------------------------------
means, with respect to actions and operations conducted by CTSI, actions and
operations that are (a) consistent with the past practices of CTSI, (b) taken in
the ordinary course of the normal, day-to-day operations of CTSI, (c) not
required to be authorized by the Board of Directors or other governing body of
CTSI, and (d) similar in nature and magnitude to actions and operations
customarily taken, without any authorization by the Board of Directors or other
governing body, in the ordinary course of the normal, day-to-day operation of
other companies that are in the same line of business as CTSI.
12.20 ENFORCEMENT. The parties agree that irreparable damage would
-----------
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specified terms. It is accordingly agreed
that the parties shall be entitled to specific performance of the terms hereof,
this being in addition to any other remedy to which they are entitled at law or
in equity,
**********
51
IN WITNESS WHEREOF, each of the parties hereto has duly executed and
delivered this Agreement as of the date first above written.
PURCHASER:
----------
AYIN HOLDING COMPANY INC.
By:
---------------------------
Name:
-----------------
Title:
-----------------
CTSI
----
COMPLETE TOWER SOURCES, INC.
By:
---------------------------
Name:
-----------------
Title:
-----------------
SELLER:
-------
------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
[SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT]