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EXHIBIT 2.2
STOCK PURCHASE AGREEMENT
FOR THE PURCHASE AND SALE
OF
ALL ISSUED AND OUTSTANDING
CAPITAL STOCK OF
TWR TELECOM, INC. AND SPECIALTY DRILLING, INC.
DATED AS OF AUGUST 20, 1999
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TABLE OF CONTENTS
ARTICLE/SECTION PAGE
ARTICLE I SALE OF STOCK AND GRANT OF OPTION...............................................................2
1.1 Sale of Stock...................................................................................2
1.2 Grant of Option.................................................................................2
1.3 Treatment of Certain Affiliate Debt, Etc........................................................2
1.4 Time and Place of Closing.......................................................................3
1.5 Closing Payment.................................................................................3
1.6 Purchase Price Adjustment; Allocation...........................................................3
1.7 Deferred Payment................................................................................5
1.8 Earn-Out Payment................................................................................5
1.9 Audit of 1999 Company Financial Statements......................................................6
1.10 Dispute Resolution..............................................................................6
1.11 Form of Deferred and Earn-Out Payments..........................................................6
1.12 Deliveries at Closing...........................................................................7
1.13 Deferred Payment and Earn-Out Payment Closings..................................................8
1.14 Restrictive Legend..............................................................................8
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER...............................................9
2.1 Corporate.......................................................................................9
2.2 Authorization; Validity........................................................................10
2.3 No Violation...................................................................................10
2.4 Financial Statements...........................................................................11
2.5 Absence of Undisclosed Liabilities.............................................................11
2.6 Title to Properties; Encumbrances..............................................................12
2.7 Inventory......................................................................................12
2.8 Compliance with Laws...........................................................................13
2.9 Litigation.....................................................................................15
2.10 Contracts and Commitments......................................................................15
2.11 Real Estate....................................................................................17
2.12 Accounts Receivable............................................................................18
2.13 Trade Rights...................................................................................18
2.14 Broker's or Finder's Fees......................................................................19
2.15 Employee Benefit Plans.........................................................................20
2.16 Employment Compensation........................................................................21
2.17 Labor Matters..................................................................................21
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2.18 Tax Matters....................................................................................22
2.19 Insurance......................................................................................23
2.20 Bonds and Other Surety.........................................................................24
2.21 Liens..........................................................................................25
2.22 Funds Held In Trust............................................................................25
2.23 Current Projects...............................................................................25
2.24 Absence of Certain Changes.....................................................................26
2.25 Major Customers and Suppliers..................................................................27
2.26 Product Warranty and Product Liability.........................................................28
2.27 No Subsidiaries................................................................................28
2.28 Assets Necessary to Business...................................................................28
2.29 Securities Laws Matters........................................................................28
2.30 Power of Attorney..............................................................................29
2.31 Affiliates' Relationships......................................................................29
ARTICLE II REPRESENTATIONS AND WARRANTIES OF BUYER........................................................29
3.1 Due Incorporation and Qualification............................................................29
3.2 Authorization..................................................................................29
3.3 Capitalization.................................................................................30
3.4 Non-Contravention..............................................................................30
3.5 Authority of Buyer.............................................................................30
3.6 Litigation.....................................................................................30
3.7 Financial Statements...........................................................................30
3.8 Broker's or Finder's Fees......................................................................30
3.9 Securities Laws Matters........................................................................31
ARTICLE IV COVENANTS......................................................................................31
4.1. Conduct of Business............................................................................31
4.2 Preservation of Business.......................................................................32
4.3 Notice of Events...............................................................................32
4.4 Examinations and Inspections...................................................................32
4.5 Third Party Consents...........................................................................33
4.6 Properties.....................................................................................33
4.7 Books and Records..............................................................................33
4.8 Material Contracts.............................................................................33
4.9 Vacation Pay and Bonus Accruals................................................................34
4.10 Environmental Audits and Other Investigations..................................................34
4.11 Employment Agreement with Shareholder..........................................................34
4.12 Shareholder Restrictive Covenants Agreements...................................................34
4.13 Securities Law Matters.........................................................................34
4.14 Attainment of Tax Clearance Certificates.......................................................34
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4.15 Employment Agreements with Key Employees.......................................................34
4.16 Tax Matters....................................................................................34
4.17 Release of Shareholder Guarantees..............................................................36
4.18 Communications with Lender and Controlling Shareholder.........................................36
ARTICLE V CONDITIONS PRECEDENT TO OBLIGATION OF BUYER TO CLOSE...........................................36
5.1 Completion of Due Diligence Investigation......................................................36
5.2 Procurement of Financing.......................................................................36
5.3 Consent of DFW Capital Partners, L.P., Wachovia Bank, N.A., Fleet National
Bank and Common Shareholders of Clear Holdings, Inc............................................36
5.4 Representations and Covenants..................................................................36
5.5 Litigation.....................................................................................37
5.6 No Material Adverse Change.....................................................................37
5.7 Good Standing Certificates, Etc................................................................37
5.8 Consents.......................................................................................37
5.9 Employment, Consulting and Restrictive Covenants Agreements....................................37
5.10 Agreements With Key Employees..................................................................37
5.11 Release of Liabilities.........................................................................37
5.12 Resolutions....................................................................................37
5.13 Governmental Permits and Approvals.............................................................37
5.14 Shareholder's Certificate......................................................................38
5.15 Opinion of U.S. Counsel to the Shareholder.....................................................38
5.16 Opinion of Counsel to the Foreign Subsidiaries.................................................38
5.17 Other Documents................................................................................38
ARTICLE VI CONDITIONS PRECEDENT TO OBLIGATION OF THE
SHAREHOLDER TO CLOSE...........................................................................38
6.1 Litigation.....................................................................................38
6.2 Representations and Warranties.................................................................38
6.3 Governmental Permits and Approvals.............................................................39
6.4 Resolutions....................................................................................39
6.5 Good Standing Certificates, Etc................................................................39
6.6 Officer's Certificate..........................................................................39
6.7 Opinion of Counsel to Buyer....................................................................39
6.8 Other Documents................................................................................39
ARTICLE VII INDEMNIFICATION.....................................................................................39
7.1 Survival.......................................................................................39
7.2 Indemnification by the Shareholder.............................................................39
7.3 Indemnification by Buyer.......................................................................40
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7.4 Limitations of Claims..........................................................................40
7.5 Procedures.....................................................................................41
7.6 Adjustment of Liability........................................................................42
ARTICLE VIII TERMINATION OF AGREEMENT..........................................................................43
8.1 Termination....................................................................................43
8.2 Post-Termination Obligations...................................................................43
ARTICLE IX MISCELLANEOUS.......................................................................................43
9.1 Further Action.................................................................................43
9.2 Announcements..................................................................................44
9.3 Assignment; Parties in Interest................................................................44
9.4 Law Governing Agreement........................................................................44
9.5 Amendment and Modification.....................................................................44
9.6 Notice.........................................................................................44
9.7 Expenses.......................................................................................45
9.8 Entire Agreement...............................................................................46
9.9 Counterparts...................................................................................46
9.10 Headings.......................................................................................46
Exhibits
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Exhibit A Form of Stock Option Agreement
Exhibit B Form of Promissory Note
Exhibit C Form of Investment Letter
Exhibit D Form of Employment Agreement with Shareholders
Exhibit E Form of Shareholders Restrictive Covenants Agreement
Exhibit F Form of Employment Agreements with Selected Employees
Exhibit G Form of Employee Restrictive Covenants Agreements
Exhibit H Opinion of Counsel to the Shareholder
Exhibit I Opinion of Counsel to Buyer
Schedules
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Deal Provisions
1.3 TTI Note
1.6(e) Initial Allocation of Purchase Price
1.8 Calculation of 1999 EBITDA
1.8A Description of New Lighting Product in Development
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Seller's Representations
2.1 Companies
2.1(b) Foreign Qualifications
2.1(e) Capital Stock
2.3 Governmental Approvals for Transaction
2.4 Company Statements
2.5 Liabilities not on Company Statements
2.6(a) Title to Properties
2.6(b) Good Operating Condition
2.7 Inventory
2.7(b) Location of Inventory
2.8(a) Compliance with Laws
2.8(b) Permits for Business
2.8(c) Waste on Real Property, etc.
2.9 Litigation
2.10(a) Real Property Leases
2.10(b) Personal Property Leases
2.10(c) Purchase Commitments
2.10(d) Sales Commitments
2.10(e) Long-Term Contracts
2.10(f) Powers of Attorney
2.10(h) Loan Agreements
2.10(i) Guarantees
2.10(j) Government Contracts
2.10(l) Other Material Contracts
2.10(m) No Defaults under Contracts
2.11(a) Real Property used in Business
2.12(a) Accounts Receivable
2.12(b) AR Aged Schedule
2.13 Trade Rights
2.13(d) Protection of Trade Rights
2.15(a) Employee Benefit Plans
2.16 Employment Compensation
2.17 Labor Disputes
2.18(b) Tax Returns Filed
2.18(c) Tax Audits
2.18(d) S-Corporation
2.19(a) List of Insurance Policies
2.19(b)(i) Workers Compensation Claims
2.20(a) Qualification for Bonds
2.20(b) Other Surety
2.20(c) Defaults on Bonds
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2.20(d) Defaults under Construction Agreements
2.20(e) Indemnity of Sureties
2.21 Liens on Projects
2.22 Funds Held in Trust
2.23(a) Current Projects
2.23(b) Projects on Schedule
2.23(c) Projects on Budget
2.23(d) Mechanics Liens
2.24 Absence of Certain Changes
2.24(c) Increase in Compensation
2.24(g) Disposition of Property
2.24(k) Payments/Loans to Third Parties
2.24(m) Payments to Affiliates
2.24(n) Change in Employment Status
2.25(a) Largest Customers
2.25(b) Largest Suppliers
2.26 Product Warranty
2.27 List of Subsidiaries
2.28 Assets Necessary to Business
2.30 Powers of Attorney
2.31(a) Agreements with Affiliates
2.31(c) Obligations to Affiliates
Buyer's Representations
3.3 Capitalization of Buyer
3.5 Governmental Consents
3.6 Litigation against Buyer
3.7 Buyer Financial Statements
Covenants
4.9 Vacation Pay/Bonus Accruals
4.15 Selected Employees
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of the 20th day of August, 1999 (the
"Agreement"), by and among Clear Holdings, Inc., a Georgia corporation (together
with its successors and assigns, "Clear"), Clear Communications Group, Inc., a
Georgia corporation ("Buyer"), ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇., as majority
shareholder of Clear ("▇▇▇▇▇▇▇▇"), ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (the "Shareholder"), being
the sole shareholder of TWR Telecom, Inc., a Texas corporation ("TTI") and of
Specialty Drilling, Inc., a Texas corporation ("SDI"), and TWR Family of
Companies, LLC, a Texas limited liability company ("TFOC").
WITNESSETH:
WHEREAS, TTI owns all of the issued and outstanding shares of the
capital stock or other equity interests in TWR Lighting, Inc., a Texas
corporation ("Lighting") and ▇▇▇▇▇▇ Tower Company, a Tennessee corporation
("▇▇▇▇▇▇");
WHEREAS, the Shareholder owns ninety-nine percent (99%) of the
membership interests in TFOC, and 1% of the equity interests in each of TWR
Brasil, Ltda., a Brazilian entity ("B Sub") and TWR Telecom, S.A. de C.V., a
Mexican entity ("M Sub", and, together with B Sub, the "Foreign Subsidiaries");
WHEREAS, TFOC owns the remaining 99% equity interest in each of the
Foreign Subsidiaries;
WHEREAS, TTI, SDI, Lighting, ▇▇▇▇▇▇, TFOC and the Foreign Subsidiaries
are collectively referred to herein as the "Companies" or the "TWR Group";
WHEREAS, the Companies are engaged in the business of construction and
installation of telecommunication equipment and related telecommunication
support services (the "Business");
WHEREAS, the Shareholder desires to sell, and Buyer desires to
purchase, all of the issued and outstanding shares of the capital stock of TTI
and SDI (collectively, the "Stock") pursuant to this Agreement;
WHEREAS, immediately prior to Buyer's acquisition of the Stock, the
parties intend that TFOC and the Shareholder shall grant to TTI an option to
purchase all of the capital stock or other equity interests in the Foreign
Subsidiaries pursuant to an Option Agreement, in satisfaction of certain
indebtedness of TFOC to TTI (the grant of such option, together with the sale
of the Stock, the "Acquisition"); and
WHEREAS, as an inducement to the Shareholder and TFOC to enter into
this Agreement, Clear desires to guarantee the performance of Buyer's
obligations hereunder;
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NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants and agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto covenant and agree as follows:
ARTICLE I
SALE OF STOCK AND GRANT OF OPTION
1.1 Sale of Stock. Subject to the terms and conditions of this
Agreement, and on the basis of the representations and warranties hereinafter
set forth, at the Closing (as hereinafter defined), the Shareholder shall sell,
assign, transfer and deliver the Stock to Buyer, and Buyer shall purchase the
Stock from the Shareholder.
1.2 Grant of Option. Immediately prior to the Closing (as defined
below), TFOC and the Shareholder shall, pursuant to an Option Agreement
substantially in the form of Exhibit A hereto (the "Option Agreement"), grant
to TTI an irrevocable option (the "Option"), exercisable at any time and from
time to time during the period from the Closing to April 1, 2000 and otherwise
as provided in the Option Agreement, to purchase and acquire from TFOC and the
Shareholder all right, title and interest of TFOC and the Shareholder in and to
the capital stock or other equity interests (collectively, the "Subsidiary
Stock") in the Foreign Subsidiaries. As more particularly set forth in the
Option Agreement, (i) the Option shall be granted in satisfaction, as of the
date of the Option Agreement, of $2,312,000 in amount of the indebtedness of
TFOC to TTI pursuant to the promissory note, dated May 12, 1997, from TFOC to
TTI (the "TFOC Note"), and (ii) in the event that the Option expires without
exercise by TTI, TTI shall cancel the indebtedness of M Sub to TTI in the
amount of $361,879.00 pursuant to the promissory note, dated December 31, 1998,
from M Sub to TTI (the "M Sub Note").
1.3 Treatment of Certain Affiliate Debt, Etc. (a) Immediately
prior to the Closing (as defined below), the Shareholder shall cancel the
indebtedness of each of TTI and SDI to the Shareholder in the aggregate amount
of $1,972,449 pursuant to the promissory notes to the Shareholder identified on
Schedule 1.3 hereto (collectively, the "TTI Note"), the TTI Note shall be
marked "canceled" and returned to the obligor thereunder, and the amount of the
TTI Note (the "TTI Note Amount") shall be treated as a contribution to capital
on the books of such obligor.
(b) Subject to Section 1.2 hereof, subsequent to the
Closing all obligations of TFOC and the Foreign Subsidiaries to TTI and the
other members of the TWR Group (collectively, the "Surviving Intercompany
Obligations") shall remain due and payable in accordance with their respective
terms, provided, however, that, in the event that the Option expires without
exercise by TTI, the Surviving Intercompany Obligations may, at the election of
TTI in its sole discretion, be satisfied by set-off on the Deferred Payment
Date against the amount of the Deferred Payment otherwise due to the
Shareholder pursuant to Section 1.7 hereof, such set-off to be made in the same
proportions of cash and Public Stock or Notes as shall apply to payment of the
Deferred Payment in accordance with Sections 1.7 and 1.11 hereof. For the
avoidance of doubt, the parties hereto agree
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that, in the event that the Option is exercised, the set-off described in the
preceding sentence shall not be made with respect to any Surviving Intercompany
Obligations owed by the Foreign Subsidiaries.
(c) Immediately prior to the Closing, the Shareholder
shall contribute cash in the amount of $250,000 to the equity of SDI.
1.4 Time and Place of Closing. The parties shall use their
respective best efforts to cause the closing of the transactions contemplated by
this Agreement (the "Closing") to take place at 10:00 a.m. on September 30,
1999, or on a date to be agreed upon by the parties, such date to be not later
than the second (2nd) business day after satisfaction or waiver of all of the
conditions set forth in Articles V and VI hereof (the date on which the Closing
actually occurs, the "Closing Date"). The place of the Closing shall be at the
offices of ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP, Promenade II, Suite 3100, 1230
Peachtree Street, N.E., Atlanta, Georgia, or such other location as may be
mutually agreed by the parties.
1.5 Closing Payment. Upon the terms and subject to the conditions
of this Agreement, and in consideration of the sale, assignment, transfer,
conveyance and delivery of the Stock and the grant of the Option, at the
Closing, Buyer will deliver or cause to be delivered to the Shareholder an
amount equal to $9,505,000 in immediately available funds (the "Closing
Payment"), subject to adjustment pursuant to Section 1.6 hereof, by wire
transfer to an account designated by the Shareholder not later than three
business days prior to the Closing.
1.6 Purchase Price Adjustment; Allocation.
(a) Adjustment at Closing. Not later than ten (10)
business days prior to the Closing, the Shareholder shall deliver to Buyer a
statement (the "Debt Statement") setting forth an estimate of (x) the Total
Debt (the "Estimated Total Debt"), (y) the Non-Affiliate Debt (the "Estimated
Non-Affiliate Debt") and (z) the Affiliate Debt (the "Estimated Affiliate
Debt"), all determined in accordance with GAAP (as defined in Section 1.11)
consistent with the Company Statements (as defined in Section 1.9), accompanied
by a certificate of the Shareholder to the effect that such estimates represent
a good faith effort accurately to determine the items set forth therein in
accordance with this Agreement. At the Closing:
(i) if the Estimated Total Debt (but not
including the TTI Note Amount) exceeds an amount equal to $3,900,000.00 (the
"Debt Benchmark"), the Affiliate Debt (to the extent of the amount of such
excess) shall be forgiven, and the remainder of such excess (if any) shall be
deducted from the Closing Payment; and
(ii) if the Estimated Total Debt (but not
including the TTI Note Amount) is less than the Debt Benchmark, the Closing
Payment shall be increased by the amount of such deficit, provided, however,
that the Closing Payment shall not be increased to the extent that such
shortfall results from any payment made by any member of the TWR Group since
December 31, 1998 with respect to a loan from Sterling Bank, other than payments
required to be made pursuant to the documents evidencing such loans.
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For purposes of this Agreement (i) "Total Debt" shall mean all
financial obligations of the TWR Group (other than TFOC and the Foreign
Subsidiaries) as of the Closing Date, other than accounts payable, (ii)
"Non-Affiliate Debt" shall mean Total Debt, other than obligations owed to a
Shareholder or any affiliate of such Shareholder that is not a member of the
TWR Group, and (iii) "Affiliate Debt" shall mean Total Debt less Non-Affiliate
Debt.
(b) Closing Balance Sheet. Not later than thirty (30)
days after the Closing, Buyer shall cause to be prepared and delivered to the
Shareholder (i) the consolidated balance sheet of the TWR Group as of the
Closing Date and the notes thereto (the "Closing Balance Sheet"), (ii) a
statement setting forth in reasonable detail any discrepancies between (A) the
Estimated Total Debt and the Total Debt, (B) the Estimated Non-Affiliate Debt
and the Non-Affiliate Debt, and (C) the Estimated Affiliate Debt and the
Affiliate Debt (each of the Total Debt, the Non-Affiliate Debt and the Affiliate
Debt as determined pursuant to the Closing Balance Sheet) and (iii) a statement
of the Closing Payment as determined pursuant to the Closing Balance Sheet and
the adjustments set forth in subsection (a) hereof.
(c) Cooperation by Buyer. The Shareholder shall have the
right to review the work papers, schedules, memoranda and other documents and
information prepared or reviewed by the Buyer and to communicate with the
persons conducting the preparation or review of the Closing Balance Sheet.
(d) Post-Closing Adjustment.
(i) If the Closing Payment as finally
determined pursuant to Sections 1.6(b) and 1.10 of this Agreement is greater
than the amount thereof actually paid at the Closing pursuant to subsection (a)
hereof, Buyer shall pay to the Shareholder the amount of such excess with
interest from the Closing Date at the prime rate offered by Citibank, N.A. in
effect on the Closing Date.
(ii) If the Closing Payment as finally
determined pursuant to Sections 1.6(b) and 1.10 of this Agreement is less than
the amount thereof actually paid at the Closing pursuant to subsection (a)
hereof, the Shareholder shall pay to Buyer the amount of such deficit with
interest from the Closing Date at the prime rate offered by Citibank, N.A. in
effect on the Closing Date.
(iii) Any sums payable pursuant to this
subsection shall be paid in cash within ten (10) business days after the final
determination of the Closing Balance Sheet pursuant to Sections 1.6(b) and 1.10
hereof.
(e) Allocation of Purchase Price. The aggregate of the
Closing Payment and the Deferred Payment (as defined below) shall initially be
allocated among the shares of TTI and SDI comprising the Stock, and the Option,
as set forth on Schedule 1.6(e) hereto (the "Initial Allocation"). In the event
that the Earn-Out Payment is greater than $0, the Initial Allocation shall
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be adjusted proportionately. Buyer, the Companies and the Shareholder will file
all tax returns (including amended returns and claims for refund) and
information reports in a manner consistent with the Initial Allocation, as
adjusted.
1.7 Deferred Payment. Upon the terms and subject to the
conditions of this Agreement, and in further consideration of the sale,
assignment, transfer, conveyance and delivery of the Stock and the Assets,
Buyer will deliver or cause to be delivered to the Shareholder, on January 1,
2001 (the "Deferred Payment Date"), an amount equal to $2,300,000 (the
"Deferred Payment"). One-third (1/3) of the Deferred Payment shall be delivered
in the form of cash, with the balance of the Deferred Payment delivered in the
form determined pursuant to Section 1.11 hereof.
1.8 Earn-Out Payment. Upon the terms and subject to the
conditions of this Agreement, and in further consideration of the sale,
assignment, transfer, conveyance and delivery of the Stock and the grant of the
Option, Buyer will deliver or cause to be delivered to the Shareholder on May
1, 2000 (the "Earn-Out Payment Date"), an amount (the "Earn-Out Payment")
(which shall not be less than $0 nor greater than $3,300,000), to be determined
based on the excess, if any, of EBITDA of the TWR Group for the fiscal year
ending December 31, 1999 (the "1999 EBITDA"), as reflected in the Audited 1999
Statements (as defined below), over $3,500,000. For purposes of this Agreement,
"EBITDA" shall mean consolidated earnings before deduction for interest, taxes,
depreciation and amortization. For purposes of this Agreement, "1999 EBITDA"
shall be calculated as set forth in Schedule 1.8 hereto. The Earn-Out Payment
shall be delivered in the form determined pursuant to Section 1.11 hereof and
shall be calculated according to the following table:
1999 EBITDA Earn-Out Payment
<=$3,500,000 $ 0
$3,600,000 $ 330,000
$3,700,000 $ 660,000
$3,800,000 $ 990,000
$3,900,000 $1,320,000
$4,000,000 $1,650,000
$4,100,000 $1,980,000
$4,200,000 $2,310,000
$4,300,000 $2,640,000
$4,400,000 $2,970,000
>=$4,500,000 $3,300,000
In the event that 1999 EBITDA falls between any of the figures set
forth above, the Earn-Out Payment shall be interpolated between the respective
levels to reflect the precise calculation.
(The sum of the Closing Payment, the Deferred Payment and the Earn-Out
Payment is sometimes collectively referred to herein as the "Purchase Price".)
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1.9 Audit of 1999 Company Financial Statements. The Shareholder
has previously delivered to Buyer the audited consolidated balance sheet and
the statements of operations, stockholders' equity and cash flows of each of
TTI and SDI, for the fiscal year ending December 31, 1998, and the unaudited
balance sheet and statements of income of each of the Foreign Subsidiaries for
the fiscal year ending December 31, 1998, all as set forth in Schedule 2.4
hereof (collectively, the "Company Statements"). After December 31, 1999, Buyer
shall, at Buyer's expense, cause KPMG Peat Marwick, L.L.P. ("KPMG") to prepare
and deliver to the Buyer and to the Shareholder a consolidated audited balance
sheet and statement of income of the TWR Group for the fiscal year ending
December 31, 1999 (collectively, the "Audited 1999 Statements"), in accordance
with generally accepted accounting principles and applying the "percentage of
completion" method of accounting ("GAAP"). Buyer shall use reasonable efforts
to cause the Audited 1999 Statements to be delivered by KPMG on or prior to
March 31, 2000.
1.10 Dispute Resolution. Within 30 days after the delivery of the
Closing Balance Sheet or the Audited 1999 Statements (as applicable), the
Shareholder shall notify Buyer in writing of any objections of the Shareholder
to such Closing Balance Sheet or Audited 1999 Statements, specifying in
reasonable detail any such objections, and if the Shareholder fails to notify
the Buyer in writing of any objections within such period the Shareholder shall
be deemed to have agreed to the Closing Balance Sheet or Audited 1999
Statements. If the Shareholder does not so object or if the Shareholder and the
Buyer agree on the resolution of all such objections, the Closing Balance Sheet
or Audited 1999 Statements (with any such changes as may have been agreed)
shall be final and binding. The Shareholder and the Buyer shall negotiate in
good faith to attempt to resolve any such objections, provided that the
Shareholder and the Buyer shall each have the right, at any time, to
unilaterally terminate in writing all discussions with respect to such
objections or changes. Not later than ten business days after either the
Shareholder or the Buyer shall have terminated such discussions, all such
disputed items shall be submitted for resolution to a certified public
accounting firm of national standing designated by the Shareholder and the
Buyer (the "Auditor"), which Auditor shall be independent of and have no
ongoing business relationship with any of the Companies, the Shareholder, Buyer
or their respective affiliates. The Shareholder and the Buyer shall each (i)
cooperate fully with the Auditor and furnish to the Auditor such work papers
and other documents and information as the Auditor may request, (ii) bear 50%
of the fees and expenses of the Auditor incurred in connection with the dispute
resolution procedure pursuant to this Section 1.12, and (iii) be afforded an
opportunity to present to the Auditor any material it deems relevant and to
discuss the matters in dispute with the Auditor. The Shareholder and the Buyer
shall use reasonable efforts to cause the report of the Auditor to be rendered
within 15 days of its appointment, and the Auditor's determination as to the
appropriateness and extent of changes (if any) to the Closing Balance Sheet or
Audited 1999 Statements shall be final and binding.
1.11 Form of Deferred and Earn-Out Payments. Each of (y) the
applicable portion of Deferred Payment and (z) the Earn-Out Payment shall be
delivered to the Shareholder in the form determined pursuant to the following:
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(a) in the event that, prior to the Deferred Payment
Date (with respect to the Deferred Payment) or the Earn-Out Payment Date (with
respect to the Earn-Out Payment), Clear shall have (i) listed any of its equity
securities on a national securities exchange or automated quotation and (ii)
become a reporting company pursuant to the Securities Exchange Act of 1934 (a
"Going Public Event"), the applicable portion of the Deferred Payment and the
Earn-Out Payment shall each take the form of such number of the publicly traded
equity securities of Clear (the "Public Stock") as shall be determined by
dividing the dollar amount of the applicable portion of the Deferred Payment
and the Earn-Out Payment, as applicable, by the average, for the 30 consecutive
trading days (or such lesser number of trading days as shall have elapsed
subsequent to the Going Public Event) ending on the fifth trading day prior to
the Deferred Payment Date (with respect to the Deferred Payment) or the
Earn-Out Payment Date (with respect to the Earn-Out Payment), of the closing
asked price for a share of Public Stock, as reported by an authoritative source
designated by Buyer (or, if such information is not available, the closing
sales price therefor), and rounding up to the nearest whole share;
(b) in the event that, prior to the Deferred Payment Date
(with respect to the Deferred Payment) or the Earn-Out Payment Date (with
respect to the Earn-Out Payment), no Going Public Event shall have occurred, the
applicable portion of the Deferred Payment and the Earn-Out Payment shall each
take the form of one or more subordinated convertible promissory notes of Clear
in the form of, and containing the terms set forth in, Exhibit B hereto (the
"Notes"), provided, however, that any Note issued with respect to the Earn-Out
Payment shall bear interest from January 1, 2000, regardless of the actual date
of its issuance.
1.12 Deliveries at Closing. (a) Deliveries by the Shareholder. At
the Closing, the Shareholder shall deliver to Buyer:
(i) stock certificates or other instruments
representing all of the Stock, endorsed in blank or accompanied by stock powers
executed in blank, or such other instruments of transfer as shall be necessary
in order to validly vest in Buyer good legal and beneficial title to the Stock;
(ii) an Investment Letter set forth in Exhibit B
hereto, executed by the Shareholder; and
(iii) such other certificates and documents as
may be required by the terms of this Agreement or as Buyer or its counsel may
reasonably request.
(b) Deliveries by Buyer. At the Closing, the Buyer shall
deliver to the Shareholder:
(i) the Closing Payment; and
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(ii) such other certificates and documents as
may be required by the terms of this Agreement or as the Shareholder or its
counsel may reasonably request.
1.13 Deferred Payment and Earn-Out Payment Closings. On each of
the Deferred Payment Date and the Earn-Out Payment Date, Buyer and the
Shareholder shall hold a closing (each a "Deferred Closing") at the location of
the Closing, or such other place as the parties may mutually agree. At any
Deferred Closing, Buyer shall deliver to the Shareholder, to the extent
required pursuant to the terms of this Agreement, either the Deferred Payment
or the Earn-Out Payment, all in accordance with the terms of this Agreement,
and the Shareholder shall deliver to Buyer an Investment Letter substantially
in the form set forth in Exhibit B hereto, executed by the Shareholder and
dated as of the date of such Deferred Closing.
1.14 Restrictive Legend. The Public Stock and the Notes, if any,
to be issued pursuant to this Agreement shall be "restricted securities", as
defined in Rule 144 under the Securities Act of 1933, as amended (the
"Securities Act") and each certificate representing any such securities shall
bear any legend or legends required by applicable state securities laws or
otherwise, as well as a legend substantially similar to the following:
"THE SECURITIES EVIDENCED HEREBY WERE ISSUED AND SOLD WITHOUT
REGISTRATION UNDER THE FEDERAL SECURITIES ACT OF 1933, AS AMENDED (THE
"1933 ACT"), OR THE SECURITIES LAWS OF ANY STATE, INCLUDING THE
GEORGIA SECURITIES ACT OF 1973, AS AMENDED, IN RELIANCE UPON CERTAIN
EXEMPTIVE PROVISIONS OF SAID ACTS. SAID SECURITIES CANNOT BE SOLD OR
TRANSFERRED UNLESS SUCH SALE OR TRANSFER WOULD BE: (1) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT OR PURSUANT TO AN
EXEMPTION FROM SUCH REGISTRATION; AND (2) IN A TRANSACTION WHICH IS
EXEMPT UNDER APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH LAWS, OR IN A TRANSACTION
WHICH IS OTHERWISE IN COMPLIANCE WITH SUCH LAWS."
1.15 Designation as Director of Clear. In further consideration of
the sale, assignment, transfer, conveyance and delivery of the Stock and the
grant of the Option, subsequent to and conditioned upon consummation of the
Closing, ▇▇▇▇▇▇▇▇ shall appoint the Shareholder as a designee of ▇▇▇▇▇▇▇▇ on the
Board of Directors of Clear, and the Shareholder hereby agrees to serve as a
director of Clear, subject to the conditions of the charter documents and
bylaws of Clear and any shareholder or similar agreements to which ▇▇▇▇▇▇▇▇ is
a party from time to time in effect that govern such designation by ▇▇▇▇▇▇▇▇.
The appointment of the Shareholder as designee of ▇▇▇▇▇▇▇▇ shall take place at
the Clear Board of Directors meeting to be held in December 1999, and the
Shareholder shall take office at the Clear Board of Directors meeting to be
held in January 2000.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER
As an inducement to Buyer to enter into this Agreement and to
consummate the transactions contemplated hereby, and with the knowledge that
Buyer shall rely thereon, the Shareholder hereby represents and warrants to
Buyer, as of the date hereof and as of the Closing Date, as set forth below.
2.1 Corporate.
(a) Organization. Each of the Companies is a corporation
or limited liability company duly organized, validly existing and (where
applicable) in good standing under the laws of its jurisdiction of
organization, each of which is identified on Schedule 2.1. Except as set forth
on Schedule 2.1, each of the Companies has elected to be taxed as an "S -
corporation" or a limited liability company. Except as set forth on Schedule
2.1, no entity has ever merged with or been consolidated into any of the
Companies.
(b) Corporate Power. Each of the Companies has all
requisite corporate power and authority to own, operate and lease its
properties and to carry on its business as and where such is now being
conducted. Except as set forth on Schedule 2.1(b), each of the Companies is
duly qualified or otherwise authorized as a foreign corporation to transact
business and is in good standing in each jurisdiction in which a failure to be
so qualified would have a Material Adverse Effect (as defined in Section 2.24
hereof).
(c) Subsidiaries. Except as set forth on Schedule 2.1,
none of the Companies currently owns, or has ever owned, directly or
indirectly, any capital stock or other equity securities of any corporation or
has any direct or indirect equity or other ownership interest in any entity or
business.
(d) Corporate Documents, Etc. Copies of the certificate
or articles of incorporation or organization and bylaws or regulations of each
of the Companies, including any amendments thereto, which have been delivered
by the Companies to Buyer are true, correct and complete copies of such
instruments as presently in effect. The corporate minute book and stock records
of each of the Companies which have been furnished to Buyer for inspection are
true, correct and complete in all material respects and accurately reflect all
material corporate action taken by each of the Companies, including all
transactions and actions with respect to the equity interests of each of the
Companies.
(e) Capitalization and Title to Stock. The authorized
capital stock or other equity interests of each of the Companies is as set
forth in Schedule 2.1(e). No shares of such capital stock or other equity
interests are issued and outstanding except for shares identified in Schedule
2.1(e). The shares of capital stock or other equity interests of each of the
Companies are owned of record
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or beneficially by the persons and in the amounts set forth in Schedule 2.1(e),
which sets forth the address of each such person. Except as set forth on
Schedule 2.1(e), all shares of capital stock identified on Schedule 2.1(e) are
validly issued, fully paid and nonassessable and each of the persons identified
on such schedule has full power and authority to convey, free and clear of all
liens, encumbrances, equities, restrictions, claims and obligations of every
kind ("Encumbrances"), all such shares of capital stock or other equity
interests, and, upon delivery of such shares of capital stock or other equity
interests, as provided in Section 1.12, Buyer will acquire good and marketable
title to the capital stock of each of the Companies, free and clear of all
Encumbrances. Except as set forth on Schedule 2.1(e), there are no (i)
securities convertible into or exchangeable for any of the capital stock or
other securities of any of the Companies, (ii) options, warrants or other
rights to purchase or subscribe to capital stock or other securities of any of
the Companies, or securities which are convertible into or exchangeable for
capital stock or other securities of any of the Companies or (iii) contracts,
commitments, agreements, understandings or arrangements of any kind relating to
the issuance, sale or transfer of any capital stock or other equity securities
of any of the Companies, any such convertible or exchangeable securities or any
such options, warrants or other rights. Schedule 2.1(e) sets forth, with
respect to each issuance of stock of each of the Companies, the date of
issuance, the purchaser(s), and the consideration received therefor. Except as
set forth on Schedule 2.1(e), no person or entity has, or ever has had, any
ownership interest in the assets, properties or business of any of the
Companies. Except as set forth on Schedule 2.1(e), there are no options,
contracts, commitments, agreements, understandings or arrangements of any kind
to purchase any ownership interest in any of the Companies or any of their
properties, businesses or assets.
2.2 Authorization; Validity. The execution and delivery of this
Agreement and the other agreements, instruments and documents contemplated
hereby (such other agreements, instruments and documents sometimes referred to
herein as the "Ancillary Instruments") and the performance of the obligations
set forth herein and therein, have been duly authorized by the Board of
Directors (and, in the case of TFOC, the members) of each of the Companies and
the Shareholder, and no other or further corporate act on the part of any of
the Companies or the Shareholder is necessary therefor. The Shareholder has
unanimously approved the Acquisition. This Agreement has been duly and validly
executed and delivered by the Shareholder and is, and when executed and
delivered the Ancillary Instruments to be executed and delivered by any of the
Companies or the Shareholder pursuant hereto will be, legal, valid and binding
obligations of each such person or entity, enforceable in accordance with their
respective terms, except as such enforcement may be limited by bankruptcy,
insolvency, reorganization or other laws affecting creditors' rights generally,
and by general equitable principles.
2.3 No Violation. Except as set forth on Schedule 2.3, no
Governmental Approval, or any consent, authorization or approval of any other
third party, is necessary in order to enable the Shareholder or TFOC to enter
into and perform their obligations under this Agreement and to consummate the
transactions contemplated hereby, and neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby
will:
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(a) be in violation of the articles of incorporation or
organization or bylaws or regulations of any of the Companies or constitute a
breach of the terms of any evidence of indebtedness or agreement relating to
any of the Companies' business to which any of the Companies is a party;
(b) cause a default under any mortgage or deed of trust
or other lien, charge or encumbrance to which any asset of any of the Companies
or the Stock is subject or under any contract relating to any of the Companies'
business to which any of the Companies is a party, or permit the termination of
any such contract by another person;
(c) result in the creation or imposition of any security
interest, lien, charge or other encumbrance upon any asset of any of the
Companies or the Stock under any agreement or commitment to which any of the
Companies is bound;
(d) accelerate, or constitute an event entitling, or
which would, upon notice or lapse of time or both, entitle the holder of any
indebtedness of any of the Companies or a Shareholder to accelerate the
maturity of any such indebtedness;
(e) conflict with or result in the breach of any writ,
injunction or decree of any court or governmental instrumentality binding on
any of the Companies or a Shareholder; or
(f) violate any Governmental Approval, statute, law or
regulation of any jurisdiction as such Governmental Approval, statute, law or
regulation relates to the properties or business of any of the Companies.
For purposes of this Agreement, "Governmental Approvals" shall mean
any consent, approval, authorization, waiver, permit, grant, franchise,
concession, agreement, license, exemption or order of, registration,
certificate, declaration or filing with, or report or notice to, any
Governmental Authority. For purposes of this Agreement, "Governmental
Authority" shall mean any nation or government, any state or other political
subdivision thereof, any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government,
including, without limitation, any government authority, agency, department,
board, commission or instrumentality of the United States, any state of the
United States or any political subdivision thereof, and any tribunal or
arbitrator of competent jurisdiction, and any self-regulatory organization.
2.4 Financial Statements. Attached as Schedule 2.4 are copies of
the Company Statements. The Company Statements were prepared from the books and
records of the Companies in a manner conforming to GAAP and fairly present the
financial condition of each of the Companies as of the date thereof.
2.5 Absence of Undisclosed Liabilities. All liabilities,
commitments or obligations of the Companies with respect to the Companies'
businesses (whether secured or unsecured and whether accrued, absolute,
contingent, direct or indirect or otherwise and whether due or to become due)
are set forth or adequately reserved against in the Company Statements, except
for liabilities incurred as a result of the transactions contemplated by this
Agreement and except for commercial
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liabilities and obligations incurred since the date of the Company Statements
in the ordinary course of business and consistent with past practice and which
will not have a Material Adverse Effect. Except as set forth on Schedule 2.5
hereto and to the extent described in the Company Statements, the Shareholder
has no knowledge of any basis for the assertion against any of the Companies of
any liability, and there are no circumstances, conditions, happenings, events
or arrangements, contractual or otherwise, known to the Shareholder which may
likely give rise to liabilities, except commercial liabilities and obligations
incurred in the ordinary course of business and consistent with past practice.
2.6 Title to Properties; Encumbrances.
(a) Good Title. Except as set forth in Schedule 2.6 (a),
each of the Companies has good title to all of its assets, businesses and
properties used or useful in its business and necessary to permit it to carry
on its business as presently conducted, and with respect to real property
leased by each of the Companies for use in its business, good leasehold estates
or lessee's interests, including, without limitation, all such properties
(tangible and intangible) reflected in the Company Statements (except for
inventory disposed of in the ordinary course of business since the date of such
Company Statements) free and clear of all mortgages, liens (statutory or
otherwise), security interests, claims, pledges, licenses, equities, options,
conditional sales contracts, assessments, levies, easements, covenants,
reservations, restrictions, rights-of-way, exceptions, limitations, mineral
rights, charges or Encumbrances of any nature whatsoever (collectively,
"Liens") except, in the case of real property identified on Schedule 2.11(a),
for Liens for taxes not yet due or which are being contested in good faith by
appropriate proceedings (and which have been sufficiently accrued or reserved
against in the Company Statements), municipal and zoning ordinances and
easements for public utilities, none of which interfere with the use of the
property as currently utilized (the "Permitted Liens"). None of the assets,
businesses or properties of any of the Companies used or useful in the
Companies' businesses are subject to any restrictions with respect to the
transferability thereof and title thereto will not be affected in any way by
the transactions contemplated hereby other than as disclosed in Schedule
2.6(a).
(b) Condition. Except as set forth on Schedule 2.6(b),
all property and assets owned or utilized by any of the Companies in the
Companies businesses are in good operating condition and repair (except such
minor defects as do not interfere with the use thereof in the conduct of normal
operations), have been maintained consistent with the standards generally
followed in the industry and were sufficient to carry on the Companies'
businesses as conducted during the preceding twelve (12) months.
2.7 Inventory. (a) All inventory of each of the Companies is
reflected on Schedule 2.7, and all such inventory consists of a quality and
quantity useable and saleable in the ordinary course of business not later than
the first anniversary of the Closing Date (except for immaterial amounts and
except as otherwise indicated on Schedule 2.7) and has a commercial value at
least equal to the value shown on Schedule 2.7, which value has been
established at cost. (b) Except as set forth on
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Schedule 2.7(b), all inventory of each of the Companies with respect to its
business is located on Real Property (as hereinafter defined) of the Companies.
2.8 Compliance with Laws.
(a) Compliance. Except as set forth on Schedule 2.8(a),
each of the Companies (including all of its operations, practices, properties,
real or personal, owned or leased, and assets) is in compliance with all
applicable federal, state, local and foreign laws, ordinances, orders, rules
and regulations (collectively, "Laws") violation of which, if uncured, would
have a Material Adverse Effect, including without limitation, Laws applicable
to the offer or sale of securities, discrimination in employment, the Americans
with Disabilities Act, occupational safety and health, trade practices,
competition and pricing, product warranties, zoning, building and sanitation,
employment, retirement and labor relations, product advertising and the
Environmental Laws (as hereinafter defined). Except as set forth in Schedule
2.8(a), none of the Companies has at any time owned any Real Property (as
hereinafter defined). Any Real Property is unconditionally zoned a
classification that allows its current use, and, to the Knowledge of the
Shareholder, such zoning is not being challenged by legal process, and no
change or modification thereof is being sought by any person or entity,
including, but not limited to, governmental or quasi-governmental authorities.
Except as set forth in Schedule 2.8(a), none of the Companies, nor to the
Knowledge of the Shareholder, any landlord of any of the Companies, has
received notice of any violation or alleged violation of, or is subject to
liability (whether accrued, absolute, contingent, direct or indirect) for past
or continuing violation of, any Laws. To the Knowledge of the Shareholder, all
reports and returns required to be filed by any of the Companies with any
governmental authority have been filed, and were accurate and complete when
filed. For purposes of this Agreement, "Knowledge" shall mean the actual
knowledge of the person indicated, after due inquiry of all of the directors,
officers, employees and agents of any corporate or other entity with which such
person is affiliated who would be reasonably likely to know the information
referred to. Without limiting the generality of the foregoing:
(i) The operation of each of the Companies'
businesses as now conducted does not, nor does any condition existing at any of
the facilities in which the Companies' businesses are conducted (collectively,
the "Facilities"), in any manner constitute a breach or violation of any lease
or other agreement governing the use of such Facilities. None of the Companies
or the Shareholder has received any notice of or otherwise has any Knowledge
about any claim or likely potential claim that the operation of the Companies'
businesses as now conducted or any condition existing at the Facilities
allegedly constitutes a nuisance or other tortious interference with the rights
of any person or persons in such a manner as to give rise to or constitute the
grounds for a suit, action, claim or demand by any such person or persons
seeking compensation or damages or seeking to restrain, enjoin or otherwise
prohibit any aspect of the conduct of such businesses or the manner in which
they are now conducted;
(ii) each of the Companies has made all required
payments to its unemployment compensation reserve accounts with the appropriate
governmental departments of
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the states where it is required to maintain such accounts, and, to the
Knowledge of the Shareholder, each of such accounts has a positive balance;
(iii) none of the Companies, for the past three
(3) years, has been required to file any reports under the federal Occupational
Safety and Health Act of 1970, as amended, or under all other applicable health
and safety laws and regulations, except for reports, the failure to file which
would not, individually or in the aggregate, have a Material Adverse Effect.
(b) Licenses and Permits. Except as set forth on
Schedule 2.8(b), none of the Companies requires any licenses, permits,
approvals, authorizations, or consents from any governmental and regulatory
authorities for the conduct of their respective businesses (as presently
conducted or as proposed to be conducted), or for the operation of the
Facilities. Each of the Companies (including its operations, properties,
whether owned or leased, and assets) is and has been in compliance with all
such permits and licenses, approvals, authorizations and consents applicable to
the conduct of its business in the State of Texas and the other jurisdictions
in which it conducts business.
(c) Environmental Matters. The applicable Laws relating
to pollution or protection of the environment, including Laws relating to
emissions, discharges, generation, storage, release or threatened release of
pollutants, contaminants, asbestos, lead-based paints, chemicals or industrial,
toxic, hazardous or petroleum or petroleum-based substances or wastes ("Waste")
into the environment (including, without limitation, ambient air, surface
water, ground water, land surface or subsurface strata) or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Waste including, without limitation, the
Clean Water Act, the Clean Air Act, the Resource Conservation and Recovery Act,
the Toxic Substances Control Act and the Comprehensive Environmental Response
Compensation Liability Act ("CERCLA"), as amended, and their state and local
counterparts are herein collectively referred to as the "Environmental Laws."
Except as set forth on Schedule 2.8(c), including, if any, the Phase I
environmental reports attached thereto, to the Knowledge of the Shareholder, no
Waste exists on or under the Real Property (as defined in Section 2.11(a)
herein) and none of the Companies, nor, to the Knowledge of the Shareholder,
any of their predecessors in title, or any other person, has ever used the Real
Property for the processing, handling, manufacture, generation, treatment,
storage, or disposal of any Waste, nor has the Real Property been used as a
landfill or as a dump for garbage, refuse or Waste. Without limiting the
generality of the foregoing provisions of this Section 2.8, each of the
Companies is in material compliance with all limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules and
timetables contained in the Environmental Laws or contained in any regulations,
code, plan, order, decree, judgment, injunction, notice or demand letter
issued, entered, promulgated or approved thereunder. Except as specifically
described in Schedule 2.8(c), there is no civil, criminal or administrative
action, suit, demand, notice or demand letter, claim, hearing, notice of
violation, investigation or proceeding pending, or, the Knowledge of the
Shareholder, threatened, against any of the Companies, or to the Knowledge of
the Shareholder, any landlord of any of the Companies, relating in any way to
the Environmental Laws or any regulation, code, plan, order, decree, judgment,
injunction, notice or demand letter
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issued, entered, promulgated or approved thereunder. Except as set forth in
Schedule 2.8(c), there are no past or present (or, to the best of the Knowledge
of the Companies and the Shareholder) future events, conditions, circumstances,
activities, practices, incidents, actions, omissions or plans which may
interfere with or prevent compliance or continued compliance with the
Environmental Laws or with any regulation, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or approved
thereunder, or which may give rise to any liability, including, without
limitation, liability under CERCLA or similar state or local Laws, or otherwise
form the basis of any claim, action, demand, suit, proceeding, hearing, notice
of violation, remediation plan, study or investigation, based on or related to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling, or the emission, discharge, release or threatened
release into the environment, of any Waste.
2.9 Litigation. Except as set forth in Schedule 2.9, there is no
action, suit, arbitration proceeding, investigation or inquiry, pending before
any court, arbitrator or federal, state, foreign, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
or, to the Knowledge of the Shareholder, threatened, against any of the
Companies or their respective officers or directors (in their capacity as
officers or directors of the Company), business or assets, nor does the
Shareholder know, or have grounds to know, of any reasonable basis for any such
proceedings, investigations or inquiries. Schedule 2.9 also identifies all such
actions, suits, proceedings, investigations and inquiries to which any of the
Companies or their officers or directors (in their capacity as officers or
directors of the Company) have ever been parties, wherein either the amount in
controversy exceeded $10,000 or the relief sought or requested required
remedial action other than the payment of money. Except as set forth in
Schedule 2.9, none of the Companies, their businesses or assets is subject to
any judgment, order, writ or injunction of any court, arbitrator or federal,
state, foreign, municipal or other governmental department, commission, board,
bureau, agency or instrumentality.
2.10 Contracts and Commitments.
(a) Real Property Leases. Except as set forth in
Schedule 2.10(a), none of the Companies has any leases of real property which
are used or useful in their respective businesses.
(b) Personal Property Leases. Except as set forth in
Schedule 2.10(b), none of the Companies has any leases of personal property
which are used or useful in their respective businesses involving consideration
or other expenditure in excess of $1,000 or involving performance over a period
of more than six (6) months.
(c) Purchase Commitments. Except as set forth on
Schedule 2.10(c), none of the Companies has any purchase commitments for
inventory items or supplies for use in their respective businesses that,
together with amounts on hand, constitute in excess of three months normal
usage, or which are at an excessive price.
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(d) Sales Commitments. Except as set forth on Schedule
2.10(d), none of the Companies has (i) any sales contracts or commitments to
customers with respect to their respective businesses which aggregate in excess
of $10,000 to any one customer (or group of affiliated customers), or (ii) any
sales contracts or commitments with respect to their respective businesses
except those made in the ordinary course of business, at arm's length.
(e) Contracts With Certain Persons. Except as set forth
on Schedule 2.10(e), none of the Companies has any agreement, understanding,
contract or commitment (written or oral) with any current or former officer,
director, employee, agent, or consultant with respect to their respective
businesses that is not cancelable by the applicable Company on notice of not
longer than thirty (30) days without liability, penalty or premium of any
nature or kind whatsoever.
(f) Power of Attorney. Except as set forth on Schedule
2.10(f), none of the Companies has given any power of attorney with respect to
their respective businesses, which is currently in effect, to any person, firm
or corporation for any purpose whatsoever.
(g) Collective Bargaining Agreements. None of the
Companies is a party to any collective bargaining agreements with any unions,
guilds, shop committees or other collective bargaining groups.
(h) Loan Agreements. Except as set forth in Schedule
2.10(h), none of the Companies is obligated under any loan agreement,
promissory note, letter of credit, or other evidence of indebtedness as a
signatory, guarantor or otherwise.
(i) Guarantees. Except as set forth on Schedule 2.10(i),
none of the Companies has guaranteed the payment or performance of any person,
firm or corporation, agreed to indemnify any person or act as a surety, or
otherwise agreed to be contingently or secondarily liable for the obligations
of any person.
(j) Contracts Subject to Renegotiation. Except as set
forth on Schedule 2.10(j), none of the Companies is a party to any contract
with any governmental body (with respect to its business) which is subject to
renegotiation.
(k) Burdensome or Restrictive Agreements. None of the
Companies is a party to or bound by any agreement, deed, lease or other
instrument with respect to its business which is so burdensome as to materially
affect or impair the operation of the business. Without limiting the generality
of the foregoing, none of the Companies is a party to or bound by any agreement
requiring it to assign any interest in any trade secret or proprietary
information, or with respect to its business, prohibiting or restricting it
from competing in any business or geographical area or soliciting customers or
otherwise restricting it from carrying on its business anywhere in the world.
(l) Other Material Contracts. Except as described in
Schedule 2.10(l) or in any other Schedule, none of the Companies has any lease,
contract or commitment of any nature
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involving consideration or other expenditure in excess of $10,000, or involving
performance over a period of more than six (6) months, or which is otherwise
individually material to the operations of its business.
(m) No Default. Except as set forth on Schedule 2.10(m),
none of the Companies is in default under any lease, contract or commitment,
nor has any event or omission occurred which through the passage of time or the
giving of notice, or both, would constitute a material default thereunder or
cause the acceleration of any obligations of the Company thereunder, result in
the creation of any Lien on any of the assets owned, used or occupied by the
Company in connection with its business or give rise to an automatic
termination, or the right of discretionary termination thereof. No third party
is in default under any lease, contract or commitment to which any of the
Companies is a party, nor has any event or omission occurred which, through the
passage of time or the giving of notice, or both, would constitute a default
thereunder or give rise to an automatic termination, or the right of
discretionary termination, thereof.
2.11 Real Estate.
(a) Real Property. Schedule 2.11(a) sets forth all real
property owned, used or occupied by any of the Companies or their predecessors
in the conduct of their respective businesses (the "Real Property"). Schedule
2.11(a) identifies the leases (oral or written) and all amendments thereto and
extensions thereof, under which any of the Companies now uses any such Real
Property (the "Leases"), as well as any guarantors of tenant's obligations
under such Leases, true and correct copies of which written Leases (or
descriptions of oral Leases or arrangements) have been delivered to Buyer.
Except where the absence thereof would not have a Material Adverse Effect,
there are now in full force and effect duly issued certificates of occupancy
permitting the Real Property and improvements located thereon to be legally
used and occupied as the same are now constituted. Schedule 2.11(a) further
identifies any lease under which any subtenants, tenants, assignees, licensees,
concessionaires or other entities, other than one or more of the Companies,
have a right to occupy all or any portion of the Real Property, and true and
correct copies of all such leases have been delivered to Buyer (or, if an oral
arrangement, such arrangements have been fully described on Schedule 2.11(a)).
Except where the absence thereof would not have a Material Adverse Effect, all
of the Real Property has permanent rights of access to dedicated public
highways. None of the Companies or the Shareholder has notice or Knowledge of
any fact or condition existing on the Real Property which would prohibit or
adversely affect the ordinary rights of access to and from the Real Property,
and there is no pending or threatened restriction or denial, governmental or
otherwise, with respect to such ingress and egress. None of the Companies or
the Shareholder has notice or Knowledge of (i) any claim of adverse possession
or prescriptive rights involving any of the Real Property, (ii) any structure
located on any Real Property which encroaches on or over the boundaries of
neighboring or adjacent properties, or (iii) any structure of any other party
which encroaches on or over the boundaries of any of such Real Property. No
public improvements have been commenced and, to the Knowledge of the
Shareholder, none are planned which in either case may result in special
assessments against or otherwise materially adversely affect any Real Property.
None of the Companies or the Shareholder has notice or Knowledge of any (i)
planned or proposed
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increase in assessed valuations of any Real Property (other than routine
general valuations of all property located in the taxing district or districts
in which the Real Property is located), (ii) governmental agency or court order
requiring repair, alteration, or correction of any existing condition affecting
any Real Property or the systems or improvements thereat, (iii) condition or
defect which could give rise to an order of the sort referred to in subdivision
(ii) above, (iv) underground storage tanks affecting any Real Property, or (v)
work that has been done or labor or materials that has or have been furnished
to any Real Property during the period six (6) months immediately preceding the
date of this Agreement for which Liens could be filed against any of the Real
Property.
(b) No Condemnation or Expropriation. Neither the whole
nor any portion of the property or any other assets of the Companies used or
useful in the Companies' businesses is currently subject to any governmental
decree or order to be sold or is being condemned, expropriated or otherwise
taken by any public authority with or without payment of compensation therefor,
nor to the Knowledge of the Shareholder has any such condemnation,
expropriation or taking been proposed.
(c) Leases. All of the Leases, true and complete copies
of which have been delivered or made available to Buyer, are in effect and none
of the Companies is in default under or with respect to any material term of
the Leases, or has received or sent any notice of any default under or with
respect to any of the same. No other party to any of the Leases is in material
default under or with respect to any of the same.
2.12 Accounts Receivable. All accounts receivable of each of the
Companies reflected on the Company Statements, other than as described in
Schedule 2.12(a), and those arising since the date of the Company Statements,
represent arm's length sales actually made in the ordinary course of business;
are collectible in the ordinary course of business not later than the six-month
anniversary of the Closing Date (without regard to reserves); are subject to no
counterclaim or set off; and are not in dispute. Items contained in Schedule
2.12(a) are collectible no later than the first anniversary of the Closing
Date. Schedule 2.12(b) contains an aged schedule of accounts receivable with
respect to each of the Companies included in the Company Statements and as of a
date not more than thirty (30) days prior to the date hereof. None of the
Companies is owed any receivable by any customer as a result of any retainage
of funds by such customer pursuant to any installation agreement or other
contractual agreement with one of the Companies which has been owed for a
period of time exceeding six months in length (to be calculated as of the
Closing Date).
2.13 Trade Rights.
(a) Schedule 2.13 lists all Trade Rights (as defined
below) of the type described in clauses (i), (ii), (iii) and (iv) and, to the
extent practicable, clause (v) of Section 2.13(e) in which any of the Companies
(with respect to its business) now has any interest, specifying whether such
Trade Rights are owned, controlled, used or held (under license or otherwise)
by it, and also indicating which of such Trade Rights are registered.
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(b) All Trade Rights shown as registered in Schedule
2.13 have been properly registered, all pending registrations and applications
have been properly made and filed and all annuity, maintenance, renewal and
other fees relating to registrations or applications are current.
(c) To conduct each of the Companies' businesses as such
is currently being conducted, none of the Companies requires any Trade Rights
that it does not already have. To the Knowledge of the Shareholder, none of the
Companies is infringing or has infringed any Trade Rights of another in the
operation of its business, nor to the Knowledge of the Shareholder is any other
person infringing the Trade Rights of any of the Companies. Except as set forth
on Schedule 2.13, none of the Companies has granted any license or made any
assignment of any Trade Rights listed on Schedule 2.13, nor does any of the
Companies pay any royalties or other consideration for the right to use any
Trade Rights of others. There are no inquiries, investigations, or claims or
litigation, challenging or threatening to challenge the right, title and
interest of any of the Companies with respect to its continued use and right to
preclude others from using any of its Trade Rights. All Trade Rights of the
Companies are enforceable and in good standing, and there are no equitable or
statutory defenses to enforcement based on any act or omission of the
Companies. The consummation of the transactions contemplated hereby will not
alter or impair any Trade Rights owned or used by any of the Companies.
(d) Except as set forth on Schedule 2.13(d), the
Companies have used commercially prudent efforts to protect the Trade Rights
owned or used by them.
(e) As used herein, the term "Trade Rights" shall mean
and include: (i) all United States, state and foreign trademark rights,
business identifiers, trade dress, service marks, trade names and brand names,
including all claims for infringement, and all registrations thereof and
applications therefor and all goodwill associated with the foregoing accruing
from the dates of first use thereof; (ii) all United States and foreign
copyrights, copyright registrations and copyright applications, including all
claims for infringement, and all other rights associated with the foregoing and
the underlying works of authorship; (iii) all United States and foreign patents
and patent applications, including all claims for infringement and all
international proprietary rights associated therewith; (iv) all contracts or
agreements granting any right, title, license or privilege under the
intellectual property rights of any third party; and (v) all inventions, mask
works and mask work registrations, know-how, discoveries, improvements,
designs, trade secrets, shop and royalty rights, employee and third party
covenants and agreements respecting confidentiality, intellectual property and
non-competition (including without limitation agreements executed by potential
purchasers of the Companies' businesses, or any part thereof) and all other
types of intellectual property.
2.14 Broker's or Finder's Fees. Except for ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ and
Henron Group, Inc. d/b/a "ABA American Business Acquisitions", all of the fees
and expenses of which shall be paid by the Shareholder, no agent, broker,
person or firm acting on behalf of the Companies or the Shareholder is, or will
be, entitled to any commission or broker's or finder's fees from any of the
parties hereto, or from any person controlling, controlled by or under common
control with any of the parties hereto, in connection with any of the
transactions contemplated herein.
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2.15 Employee Benefit Plans.
(a) Disclosure. Schedule 2.15(a) sets forth all pension,
thrift, savings, profit sharing, retirement, incentive bonus or other bonus,
medical, dental, life, accident insurance, benefit, employee welfare,
disability, group insurance, stock purchase, stock option, stock appreciation,
stock bonus, executive or deferred compensation, hospitalization and other
similar fringe or employee benefit plans, programs and arrangements, and any
employment or consulting contracts, "golden parachutes," collective bargaining
agreements, severance agreements or plans, vacation and sick leave plans,
programs, arrangements and policies, including, without limitation, all
"employee benefit plans" (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), all employee manuals and
all written or binding oral statements of policies, practices or understandings
relating to employment, which are provided to, for the benefit of, or relate
to, any persons employed by any of the Companies ("Company Employees"). The
items described in the foregoing sentence are hereinafter sometimes referred to
collectively as "Employee Plans/Agreements," and each individually as an
"Employee Plan/Agreement." True and correct copies of all the Employee
Plans/Agreements, including all amendments thereto, have heretofore been
provided to Buyer. No Employee Plan/Agreement is a "multi-employer plan" (as
defined in Section 401 of ERISA), and none of the Companies has ever
contributed or been obligated to contribute to any such multi-employer plan.
(b) Prohibited Transactions. Except for such items as
would not, individually or in the aggregate, have a Material Adverse Effect,
there have been no "prohibited transactions" within the meaning of Section 406
or 407 of ERISA or Section 4975 of the Internal Revenue Code of 1986 (the
"Code") for which a statutory or administrative exemption does not exist with
respect to any Employee Plan/Agreement, and no event or omission has occurred
in connection with which any of the Companies or any of their respective assets
or any Employee Plan/Agreement, directly or indirectly, could be subject to any
liability under ERISA or the Code.
(c) Payments and Compliance. Except for such items as
would not, individually or in the aggregate, have a Material Adverse Effect,
with respect to each Employee Plan/Agreement, all payments due from any of the
Companies to date have been made and all amounts properly accrued to date as
liabilities of any of the Companies which have not been paid have been properly
recorded on its books and to the extent they relate to employees employed as of
the date thereof, are reflected in the Company Statements.
(d) Post-Retirement Benefits. Except for such items as
would not, individually or in the aggregate, have a Material Adverse Effect,
with respect to each Employee Plan/Agreement which provides welfare benefits of
the type described in Section 3(1) of ERISA: (i) no such Employee
Plan/Agreement provides medical or death benefits with respect to current or
former employees, directors or consultants of any of the Companies beyond their
termination of employment, other than coverage mandated by Sections 601-608 of
ERISA and 4980B(f) of the Code; (ii) each such Employee Plan/Agreement has been
administered in compliance with Sections
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601-608 of ERISA and 4980B(f) of the Code; and (iii) no such Employee Plan /
Agreement has reserves, assets, surpluses or prepaid premiums.
(e) No Triggering of Obligations. The consummation of
the transactions contemplated by this Agreement will not (i) entitle any
current or former employee of any of the Companies to severance pay, any
payment pursuant to any "golden parachute" or other agreement providing for
payment to any employee upon a change in control of any of the Companies,
unemployment compensation or any other payment, except as expressly provided in
this Agreement, (ii) accelerate the time of payment or vesting, or increase the
amount of compensation due to any such employee or former employee or (iii)
result in any prohibited transaction described in Section 406 of ERISA or
Section 4975 of the Code for which an exemption is not available.
(f) Future Commitments. There are no announced plans or
legally binding commitments to create any additional Employee Plans/Agreements
or to amend or modify any existing Employee Plan/Agreement.
2.16 Employment Compensation. Schedule 2.16 contains a true and
correct list of all employees to whom each of the Companies is paying
compensation, including bonuses and incentives for services rendered or
otherwise, the annual salary, average commission, or hourly wage compensation
of each such employee, and any bonus paid to each respective employee relating
to services rendered during the 1998 fiscal year. Buyer has been provided a
copy of all W-2 forms distributed to each employee of the Company in respect of
compensation received in the 1998 tax year.
2.17 Labor Matters. Each of the Companies is currently in
compliance with all applicable laws, rules and regulations relating to the
employment of labor, including those related to wages, hours and
authorizations, except for such matters of non-compliance as would not,
individually or in the aggregate, have a Material Adverse Effect. Each of the
Companies has paid or caused to be paid all compensation, including bonuses and
accrued vacation pay, if any, due and payable to its employees through the date
hereof and will cause such amounts to be paid through the Closing Date. Except
as set forth in Schedule 2.17, within the last five (5) years none of the
Companies has experienced any labor disputes, union organization attempts or
any work stoppage due to labor disagreements. Except to the extent set forth in
Schedule 2.17, (i) there is no unfair labor practice charge or complaint
against any of the Companies pending or threatened; (ii) there is no labor
strike, dispute, request for representation, slowdown or stoppage actually
pending or threatened against or affecting any of the Companies nor any
secondary boycott with respect to products of any of the Companies; (iii) no
question concerning representation has been raised or is threatened respecting
the employees of any of the Companies; and (iv) there is no grievance which
might have a Material Adverse Effect.
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2.18 Tax Matters.
(a) Provision For Taxes. The provision made for taxes on
the Company Statements is sufficient for the payment of all federal, state,
foreign, county, local and other income, ad valorem, excise, profits,
franchise, occupation, property, payroll, sales, use, gross receipts and other
taxes (and any interest and penalties) and assessments, whether or not
disputed, for which each of the Companies may be liable at the date of such
Company Statements and for all years and periods prior thereto. Since the date
of such Company Statements, none of the Companies has incurred any taxes other
than taxes incurred in the ordinary course of business consistent in type and
amount with past practices and taxes incurred as a result of the transactions
contemplated by this Agreement.
(b) Tax Returns Filed. Except as set forth on Schedule
2.18(b), all federal, state, foreign, county, local and other tax returns
required to be filed by or on behalf of each of the Companies as of the date of
this Agreement have been timely filed (or if filed late all applicable
penalties and interest have been paid) and when filed were true and correct in
all material respects, and the taxes shown as due thereon were paid or
adequately accrued. True and complete copies of the tax returns filed by the
Companies for the three (3) most recent fiscal years have been delivered to
Buyer. Each of the Companies has duly withheld and paid all taxes which it is
required to withhold and pay relating to salaries and other compensation
heretofore paid or owing to its respective employees, independent contractors
or other third parties.
(c) Tax Audits. Except as set forth on Schedule 2.18(c),
the federal and state income tax returns of the Companies have not been audited
by the Internal Revenue Service ("IRS") or any state taxing authorities and
none of the Companies has received from the Internal Revenue Service or from
the tax authorities of any state, county, local or other jurisdiction any
notice of underpayment of taxes or other deficiency which has not been paid nor
any objection to any return or report filed. There are outstanding no
agreements or waivers extending the statutory period of limitations applicable
to any tax return or report.
(d) S Corporation Status. Except as set forth on
Schedule 2.18(d), each of the Companies, other than TWR Family of Companies,
LLC and the Foreign Subsidiaries, has been an electing S corporation within the
meaning of the Code at all times since its incorporation, and will remain an S
corporation through the Closing Date.
(e) Other Tax Matters. None of the Companies has filed a
consent under Section 341(f) of the Internal Revenue Code, as amended (the
"Code") concerning collapsible corporations. None of the Companies has made any
payments, is obligated to make any payments, or is a party to any agreement
that could obligate it to make any payments that will not be deductible under
Section 280G of the Code. None of the Companies has been a United States real
property holding corporation within the meaning of Section 897(c)(2) of the
Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code. None of the Companies is a party to any tax allocation or sharing
agreement. None of the Companies (i) has been a member of an affiliated group
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filing a consolidated federal income tax return (other than a group the common
parent of which was the Company) or (ii) has liability for the taxes of any
person or entity under Reg. 1.1502-6 (or any similar provision of state, local,
or foreign law), as a transferee or successor, by contract or otherwise.
2.19 Insurance.
(a) Policies in Effect. Set forth in Schedule 2.19(a) is
a complete and accurate list of all policies of fire, liability, product
liability, workers compensation, health and other forms of insurance presently
in effect with respect to the business and properties of each of the Companies,
true and correct copies of which have been delivered to Buyer. All such
policies are valid, outstanding and enforceable policies and provide insurance
coverage for the properties, assets and operations of each of the Companies as
set forth therein; and no such policy (nor any previous policy) provides for or
is subject to any currently enforceable retroactive rate or premium adjustment,
loss sharing arrangement or other actual or contingent liability arising wholly
or partially out of events arising prior to the date hereof. None of the
Companies has been refused any insurance with respect to any aspect of the
operation of its business nor has its coverage been limited by any insurance
carrier to which it has applied for insurance or with which it has carried
insurance during the last three years. To the Knowledge of the Shareholder,
each of the Companies has duly and timely made all material claims it has been
entitled to make under each policy of insurance. Except as set forth on
Schedule 2.19(a), the Shareholder has no notice or Knowledge of any claim by
any of the Companies pending under any such policies as to which coverage has
been questioned, denied or disputed by the underwriters of such policies, and
the Shareholder knows of no basis for denial of any claim under any such
policy. Except as set forth on Schedule 2.19(a), none of the Companies has
received any written notice from or on behalf of any insurance carrier issuing
any such policy that insurance rates therefor will hereafter be substantially
increased (except to the extent that insurance rates may be increased for all
similarly situated risks) or that there will hereafter be a cancellation or
termination of such policy or an increase in a deductible (or an increase in
premiums in order to maintain an existing deductible) or non-renewal of any
such policy, and the Shareholder has no Knowledge of any act or omission which
could result in cancellation of any such policy prior to its scheduled
expiration date.
(b) Workers Compensation Coverage.
(i) Current Claims. Set forth separately in
Schedule 2.19(b)(i) is (1) a list of all claims made for work-related injuries
or other work-related claims for which any of the Companies or its insurer has
continuing obligations to any current or former employee under any state
workers' compensation law or any policy of workers' compensation insurance,
including without limitation the obligation to pay temporary or total
disability benefits, medical benefits, periods of open medical treatment which
may require payments of medical benefits in the future, or any other
obligations (the "Workers' Compensation Claims"), and (2) a list of all the
current or former employees of each of the Companies who have or had a Workers'
Compensation Claim, including current or former employees of each of the
Companies who have given notice of an injury or work-related claim which has
not yet resulted in a Workers' Compensation Claim, including the
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date of the accident or occurrence giving rise to such claim, the total
payments made to or on behalf of such current or former employee and, if known,
the date on which any obligations to each such employee terminate.
(ii) Increased Risk or Premium. Since January 1,
1989, none of the Companies has ever been denied workers' compensation
insurance or been placed in a high-risk or increased-risk pool or been
categorized under a similar rating system reflecting an above-average incidence
of work-related injuries for purposes of determining the workers' compensation
insurance premium.
2.20 Bonds and Other Surety.
(a) Qualification for Bond. Except as set forth in
Schedule 2.20(a), there have been no occasions upon which any of the Companies
has been unable to qualify for any performance bond, payment bond, fidelity
bond, bid bond, bond to discharge lien, federal ▇▇▇▇▇▇ Act bond, or other state
law bond patterned after the federal ▇▇▇▇▇▇ Act, or other form of surety.
(b) Other Forms of Surety. Except as set forth in
Schedule 2.20(b), none of the Companies has provided surety in the form of an
escrow of cash funds, bank draft, letter of credit, certified check, pledge of
assets, or in any other form as a substitute for or in addition to the surety
provided by any performance bond, payment bond, fidelity bond, bid bond, bond
to discharge lien, federal ▇▇▇▇▇▇ Act bond, or state law bond patterned after
the federal ▇▇▇▇▇▇ Act, or other form of surety issued listing any of the
Companies as principal.
(c) Claims or Notices of Default. Except as set forth in
Schedule 2.20(c), no claims, notices of default or payment on any performance
bond, payment bond, fidelity bond, bid bond, federal ▇▇▇▇▇▇ Act bond, or state
law bond patterned after the federal ▇▇▇▇▇▇ Act, or other form of surety on
which any of the Companies is the principal have been made or given during the
last five (5) years.
(d) No Current Default. Except as set forth in Schedule
2.20(d), none of the Companies is currently in default and the Shareholder has
no knowledge of the occurrence of any event which may cause any of the
Companies to default upon any obligation arising under any construction
agreement, or that would trigger the right of any person or entity to claim
payment under any performance bond, payment bond, fidelity bond, bid bond,
federal ▇▇▇▇▇▇ Act bond or state law bond patterned after the federal ▇▇▇▇▇▇
Act, or other form of surety bond listing any of the Companies as principal.
(e) Indemnity of Sureties. Except as set forth in
Schedule 2.20(e), none of the Companies has entered into any indemnity
agreement with any surety company creating in favor of such surety company any
security interest, including any security interests which have not been filed
or otherwise perfected in accordance with any state law, in cash, accounts
receivable, chattel paper or other property of the Companies and none of the
Companies has paid any claim for indemnity to any surety in respect of any lien
claim losses.
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2.21 Liens. Except as set forth in Schedule 2.21, there have been
no liens filed, including liens released by payment, bond to discharge lien, or
otherwise, against the premises of any project on which any of the Companies
was the general contractor by any subcontractor, materialman, supplier or other
party in the past five (5) years, and none of the Companies or the Shareholder
has been provided any notice or been given any other reason to believe, foresee
or otherwise anticipate the filing of any lien by any subcontractor,
materialman, supplier or other party who might file such lien.
2.22 Funds Held In Trust. Except as set forth in Schedule 2.22,
none of the Companies is holding or in possession of any funds as trustee or in
any other fiduciary capacity for the benefit of any subcontractor, materialman,
supplier or other party pursuant to any state law establishing a trust or
fiduciary relationship between it and any such party.
2.23 Current Projects.
(a) Identity; Completion; Profitability. Schedule
2.23(a) sets forth all installation projects currently being participated in or
overseen by each of the Companies (the "Current Projects"), as well as the
projected revenues from each respective Current Project, and, with respect to
all of the Companies other than Lighting, the percentage completed and amount
remaining to be invoiced for each respective Current Project, and all other
projects completed by each of the Companies within the twelve (12) month period
preceding the date hereof.
(b) On Schedule. Except as set forth in Schedule
2.23(b), each Current Project is proceeding without material deviation from the
schedule provided in the installation agreement or purchase order governing
each respective Current Project.
(c) On Budget. Except as set forth in Schedule 2.23(c),
the draws, progress payments, or other payments received by each of the
Companies pursuant to an arrangement whereby a percentage of the total contract
price is payable upon completion of specified portions or percentages of the
job or similar criteria, taken by each of the Companies on each Current
Project, are in material proportion to the amount of work completed and the
amount of work remaining on each project (e.g., draws taken on a project which
is 40% complete do not exceed 40% of the total budgeted cost of the project)
and none of the Current Projects is reasonably likely to run substantially over
budget.
(d) Evidence of Payment of Subcontractors. Except as set
forth in Schedule 2.23(d), there have not been any mechanics or materialman's
liens filed or asserted against any of the Companies by any subcontractor,
materialman or lower tier subcontractor respecting work which has been
performed for any of the Companies by any subcontractor, materialman or lower
tier subcontractor on any Current Project.
(e) Authority of Subcontractors. To the Knowledge of the
Shareholder, all subcontractors are duly authorized to do business in the state
where the Current Project of each
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respective subcontractor is located and are properly licensed by all necessary
public and quasi-public authorities in such state.
2.24 Absence of Certain Changes. Except as and to the extent set
forth in Schedule 2.24 (or specifically required by the terms of this
Agreement), since the date of the Company Statements there has been no:
(a) Adverse Change. Material adverse change in the
financial condition, assets, liabilities or operations of any of the Companies
and, to the Knowledge of the Shareholder, in the business prospects of any of
the Companies (a "Material Adverse Effect");
(b) Damage. Loss, damage or destruction, whether covered
by insurance or not, affecting the business or properties (owned or leased) of
any of the Companies;
(c) Increase in Compensation. Except as set forth on
Schedule 2.24(c), increase in the compensation, salaries or wages payable or to
become payable to any employee or agent of any of the Companies (including,
without limitation, any increase or change pursuant to any bonus, pension,
profit sharing, retirement or other plan or commitment), other than changes in
the ordinary course of business consistent with past practices, or any bonus or
other employee benefit granted, made or accrued, except those made in the
ordinary course of business consistent with past practices;
(d) Labor Disputes. Labor dispute or disturbance, other
than routine labor union or individual grievances which are not material to the
business, financial condition or results of operations of any of the Companies;
(e) Commitments. Material commitment or transaction by
any of the Companies (including, without limitation, any borrowing or capital
expenditure) other than in the ordinary course of business consistent with past
practice;
(f) Dividends. Declaration, setting aside, or payment of
any dividend or any other distribution in respect of capital stock of any of
the Companies; any redemption, purchase or other acquisition by any of the
Companies of any of its capital stock, or any security relating thereto,
including any options or rights to purchase or acquire capital stock of any of
the Companies;
(g) Disposition of Property. Except as set forth in
Schedule 2.24(g), sale, lease or other transfer or disposition of any
properties or assets of any of the Companies used or useful in their
businesses, except in the ordinary course of business;
(h) Indebtedness. Material indebtedness for borrowed
money incurred, assumed or guaranteed by any of the Companies;
(i) Liens. Mortgage, pledge, Lien or Encumbrance made on
or affecting any of the assets of any of the Companies;
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(j) Amendment of Contracts. Entering into, amendment,
extension or termination by the any of the Companies of any material contract
or lease, or any waiver of material rights thereunder, other than in the
ordinary course of business;
(k) Payments, Loans and Advances. Except as set forth on
Schedule 2.24(k), any payment, loan or advance (other than advances to
employees in the ordinary course of business for travel and entertainment in
accordance with past practice) to any person;
(l) Credit. Any change in the policies or practices of
any of the Companies with respect to their respective businesses and the
granting of credit;
(m) Payments to Affiliates. Except as set forth on
Schedule 2.24(m), payment to any Affiliate of any of the Companies. For
purposes of this Agreement, the term "Affiliate" shall mean: any organization
or entity that directly, or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, any of the
Companies; the Shareholder, officers and directors of any of the Companies; the
spouse of any such person; any person who would be the heir or descendant of
any such person if he or she were not living; and any entity in which any of
the foregoing has a direct or indirect interest, except through ownership of
less than five percent (5%) of the outstanding shares of any entity whose
securities are listed on a national securities exchange or traded in the
national over-the-counter market;
(n) Status of Employees. Except as set forth on Schedule
2.24(n), change in status or continuation of employment of any employee
identified in Section 2.16 of this Agreement, other than changes occurring in
the ordinary course of business; or
(o) Unusual Events. Other events or conditions not in
the ordinary course of business which have had a Material Adverse Effect or
which would be prohibited by the terms of Section 4.1(b) hereof.
2.25 Major Customers and Suppliers.
(a) Major Customers. Schedule 2.25(a) contains a list of
the ten (10) largest customers of each of the Companies for each of the two (2)
most recent fiscal years (determined on the basis of the total dollar amount of
revenues realized by each of the Companies) showing the total revenues realized
by each of the Companies with respect to each such customer during each such
year. None of the Companies or the Shareholder has received notice, and the
Shareholder has no knowledge of any facts, other than ordinary fluctuations in
the business needs of the Companies' customers, reasonably indicating that any
of the customers listed on Schedule 2.25(a) will not continue to be customers
after the Closing at substantially the same level as heretofore.
(b) Major Suppliers. Schedule 2.25(b) contains a list of
the ten (10) largest suppliers to each of the Companies for the fiscal period
ending December 31, 1998 (determined on the basis of the total dollar amount of
purchases) showing the total dollar amount of purchases from each such supplier
during such period. None of the Companies or the Shareholder has received
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notice, and the Shareholder has no Knowledge of any facts reasonably
indicating, or have any reason to believe, other than as a result of changes or
fluctuations occurring in the ordinary course of business, that any of the
suppliers listed on Schedule 2.25(b) will not continue to be suppliers to each
of the Companies after the Closing and will not continue to supply
substantially the same quantity and quality of goods as historically supplied
at competitive prices consistent with past pricing practices.
2.26 Product Warranty and Product Liability. Schedule 2.26
contains a true, correct and complete copy of each of the Companies' standard
warranty or warranties (including standard extended warranties) and implied
warranty or warranties (whether arising under the Uniform Commercial Code or
otherwise) for sales of Products (as defined below) and services and, except as
stated therein, there are no warranties, commitments or obligations with
respect to the return, repair or replacement of Products. Schedule 2.26 sets
forth (a) the estimated aggregate annual cost of performing warranty
obligations for customers for each of the three (3) preceding fiscal years and
(b) a listing of warranty contracts under which any of the Companies is
currently obligated. Except as set forth in Schedule 2.26, none of the
Companies has made any payment, or to the knowledge of the Shareholder,
incurred any liability or obligation to make any payment on any warranty, and
none of the Companies or the Shareholder has been notified, whether orally or
in writing, of any claim or assertion which may reasonably result in any
liability or obligation to make payment and none has become aware of the
reasonable potential for any liability or obligation to make a payment pursuant
to any warranty issued. As used in this Section 2.26, the term "Products" means
any and all products currently or at any time previously manufactured,
distributed or sold by any of the Companies, or by any predecessor under any
brand name or ▇▇▇▇ under which products are or have been manufactured,
distributed or sold by any of the Companies.
2.27 No Subsidiaries. Except as set forth on Schedule 2.27, none
of the Companies has any subsidiaries.
2.28 Assets Necessary to Business. Except as set forth on
Schedule 2.28, each of the Companies presently has, and at the Closing will
have, good and valid title to all property and assets, tangible and intangible,
and all leases, licenses and other agreements necessary to permit it to carry
on its business as presently conducted, regardless of whether such items are
reflected on the Company Statements.
2.29 Securities Laws Matters. The Shareholder who receives common
stock or notes ("Securities") pursuant to this Agreement will acquire such
Securities for investment for his own account, not on behalf of others and not
with a view to resell or otherwise distribute such Securities. The Shareholder
acknowledges that the Securities, at the time of issuance, shall not have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
or under any state securities laws, and may not be sold, transferred or
disposed of by them absent the registration thereof or the availability of an
exemption from registration applicable thereto, and, as a result, the
Shareholder must bear the risk of an investment in the Securities for an
indefinite period of time. The financial condition of the Shareholder is
currently adequate to bear the substantial risk of an investment in the
Securities. The Shareholder, in conjunction with a "purchaser representative,
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within the meaning of Regulation D under the Securities Act, has sufficient
knowledge and experience in investment and business matters to understand the
economic risk of such an investment and the risk involved in a commercial
enterprise such as that of Clear. The Shareholder is a bonafide resident of
Texas, and all communications and information have been directed to him and
have been received in such place of residence. The Shareholder has had the
opportunity to ask questions of, and receive answers from, officers of Clear
concerning Clear and the Securities and to obtain any additional information
which the Shareholder reasonably requested. The Shareholder shall, at or prior
to the Closing, complete and deliver to Buyer an Investment Letter
substantially in the form attached hereto as Exhibit B.
2.30 Power of Attorney. Except as set forth on Schedule 2.30, the
Shareholder has not given any power of attorney with respect to the Stock,
which is currently in effect, to any person, firm or corporation for any
purpose whatsoever.
2.31 Affiliates' Relationships.
(a) Contracts With Affiliates. All leases, contracts,
agreements or other arrangements between any of the Companies and any Affiliate
are summarized on Schedule 2.31(a).
(b) No Adverse Interests. No Affiliate has any direct or
indirect interest in (i) any entity which does business with any of the
Companies or is competitive with any of the Companies' businesses, or (ii) any
property, asset or right which is used by any of the Companies in the conduct
of its business.
(c) Obligations. All obligations of any Affiliate to any
of the Companies, and all obligations of any of the Companies to any Affiliate,
are listed on Schedule 2.31(c).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Shareholder the following, as of
the date hereof and as of the Closing Date:
3.1 Due Incorporation and Qualification. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of its
state of incorporation, and has the corporate power to carry on its business as
now being conducted and to own or lease its properties and assets as now owned,
leased or operated by it. Buyer is duly qualified or otherwise authorized as a
foreign corporation to transact business and is in good standing in each
jurisdiction in which a failure to be so qualified would have a material
adverse effect on the business of Buyer.
3.2 Authorization. Buyer has full corporate power and authority
under its articles of incorporation and bylaws, and the Board of Directors of
Buyer has taken all necessary corporate
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action to authorize Buyer to execute and deliver this Agreement and to
consummate the transactions contemplated hereby, and assuming the due
authorization, execution and delivery of this Agreement by the Company, this
Agreement constitutes the valid and binding obligation of Buyer, enforceable in
accordance with its terms, except that such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and the remedy of
specific performance and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
3.3 Capitalization. The authorized capital stock of Buyer is as
set forth in Schedule 3.3. No shares of capital stock of Buyer are issued and
outstanding except as set forth in Schedule 3.3. All shares of capital stock
identified on Schedule 3.3 are validly issued, fully paid and non-assessable.
3.4 Non-Contravention. Neither the execution and delivery of this
Agreement or the other agreements contemplated hereby nor the consummation of
the transactions contemplated hereby does or will violate, result in a breach
of any provision of, constitute a default under, result in the termination of
or permit any third party to terminate (with or without notice, lapse of time
or pursuant to any legal or equitable principle) or accelerate the performance
required on the part of Buyer by the terms of, or accelerate the maturity of or
require the prepayment of any indebtedness of Buyer under, any judgment, order,
decree, material agreement or instrument to or by which Buyer or any of its
assets is subject or bound.
3.5 Authority of Buyer. Except as set forth in Schedule 3.5, no
consent, authorization or approval of, or declaration, filing or registration
with, any governmental, administrative or regulatory body, is necessary in
connection with the transactions contemplated by this Agreement.
3.6 Litigation. Except as set forth in Schedule 3.6, there are no
material claims, actions, suits, proceedings or investigations pending or, to
the best knowledge of Buyer, threatened by or against Buyer, at law or in
equity or before or by any federal, state, municipal, foreign or other
governmental department, commission, board, agency, instrumentality or
authority.
3.7 Financial Statements. Attached as Schedule 3.7 are copies of
(i) the audited consolidated balance sheet of the Buyer as of December 31,
1997, and the related audited consolidated statements of operations,
stockholders' equity, and cash flows for the period from November 20, 1997
through December 31, 1997, and (ii) the unaudited consolidated balance sheet,
statement of profit/loss and statement of cash flows of the Buyer for the
period beginning January 1, 1998 and ending November 30, 1998 (collectively the
"Buyer Statements"). The Buyer Statements were prepared from the books and
records of Buyer in a manner conforming to GAAP and fairly present the
financial condition of Buyer as of the respective dates thereof.
3.8 Broker's or Finder's Fees. No agent, broker, person or firm
acting on behalf of Buyer is, or will be, entitled to any commission or
broker's or finder's fees from any of the parties hereto,
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or from any person controlling, controlled by or under common control with any
of the parties hereto, in connection with any of the transactions contemplated
herein.
3.9 Securities Laws Matters. The Buyer will acquire the Stock for
investment for its own account, not on behalf of others and not with a view to
resell or otherwise distribute such Stock. The Buyer acknowledges that the
Stock, at the time of the Closing, shall not have been registered under the
Securities Act, or under any state securities laws, and may not be sold,
transferred or disposed of by it absent the registration thereof or the
availability of an exemption from registration applicable thereto.
ARTICLE IV
COVENANTS
4.1. Conduct of Business.
(a) Between the date hereof and the Closing Date, each
party shall use its best efforts to conduct its business in the ordinary course
and in such a manner so that the representations and warranties contained in
Articles II and III hereof shall continue to be true and correct in all
material respects on and as of the Closing Date.
(b) Between the date hereof and the Closing Date, except
(with respect to all items enumerated in this Section 4.1(b) other than item
(ii) below) for such actions as (x) would be undertaken in the ordinary course
of business of the applicable Company, or (y) as to which Buyer shall have
received prior written notice, the Shareholder shall cause each of the
Companies to refrain from:
(i) incurring any liability or obligation of
any nature (whether accrued, absolute, contingent or otherwise);
(ii) paying, repaying, repurchasing, discharging
or satisfying any of its debts, claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise), except for such
items (A) as are required by the terms of the agreements relating thereto or
(B) as to which Buyer shall have given its prior written consent;
(iii) permitting any of its assets to be
subjected to any mortgage, pledge, Lien, security interest, Encumbrance,
restriction or charge of any kind;
(iv) selling, transferring or otherwise
disposing of any assets;
(v) making any capital expenditure or
commitment therefor;
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(vi) increasing its indebtedness for borrowed
money, or making any loan to any person;
(vii) writing off as uncollectible any accounts
receivable, except write-offs in the ordinary course of business charged to
applicable reserves, none of which individually or in the aggregate shall be
material to any one of the Companies;
(viii) granting any increase in the rate of wages,
salaries, bonuses or other remuneration of any executive employee or other
employees;
(ix) canceling or waiving any claims or rights
of substantial value;
(x) making any change in any method of
accounting or auditing practice;
(xi) settling or otherwise disposing of any of
the matters covered by Section 2.9 of this Agreement; and
(xii) agreeing, whether or not in writing, to do
any of the foregoing.
(d) Between the date hereof and the Closing Date, each
of the parties hereto shall have a continuing obligation to notify the other,
in writing, with respect to any matter hereafter arising or discovered which,
if existing or known at the date of this Agreement, would have been required to
be set forth or described in the Schedules or which would render any
representation or warranty inaccurate, but no such disclosure shall cure any
breach of any representation or warranty previously made. For purposes of the
making by the Shareholder of the representations and warranties set forth in
Article II hereof on and as of the Closing Date, Schedules 2.5, 2.7, 2.10(h),
2.23(a) and 2.24(m) shall be deemed to have been updated, on and as of the
Closing Date, in the manner and to the extent set forth in the attached
Schedule J. The delivery of any information pursuant to this Section 4.1(c)
shall not constitute a waiver by Buyer of any of the provisions of Article V,
and any and all adverse changes contained in any such notices shall be
considered in the determination of whether the conditions set forth in Article
V are met.
4.2 Preservation of Business. Each party shall (consistent with
its normal business practices) preserve its business, and maintain its
relationships with its present suppliers and customers.
4.3 Notice of Events. Each party shall promptly notify the other
party of (i) any event, condition or circumstance occurring from the date
hereof through the Closing Date that may reasonably be construed to constitute
a violation or breach of this Agreement, or (ii) any event, occurrence,
transaction or other item which would have been required to have been disclosed
on any Schedule or statement delivered hereunder, had such event, occurrence,
transaction or item existed on the date hereof, other than items arising in the
ordinary course of business which would not render any representation or
warranty of such party materially misleading.
4.4 Examinations and Inspections.
(a) Prior to the Closing Date, Buyer shall be entitled,
through its employees and representatives, including, without limitation,
Buyer's accountants, legal counsel, bankers and advisors, to make such
inspection of the assets, properties, business and operations of the Companies,
and such examination of the books, records and financial condition of the
Companies as Buyer reasonably desires, upon prior notice. During any inspection
of the assets, properties or operations of any of the Companies, Buyer's
representatives shall at all times be accompanied by any of the Shareholder,
▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇. Any such inspections and examinations shall be
conducted during normal business hours and under reasonable circumstances which
do not disrupt the business, properties or assets of the Companies and with
respect to inspections and examinations involving the property and assets of
third parties, subject to the consent of such third parties and consistent with
their policies. For the purpose of facilitating such review, examination
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or inspection, the Companies and the Shareholder shall furnish the
representatives of Buyer with all such information and copies of such documents
concerning the affairs of the Companies as such representatives may reasonably
request and cause their officers, employees, agents, accountants and attorneys
to cooperate with such representatives in connection with such review and
examination.
(b) Buyer agrees that, with respect to any information
or documents obtained from any of the Companies or the Shareholder concerning
the Companies' assets, properties, customers, policies, finances, costs, sales,
revenues, rights, obligations, liabilities, strategies, business and operations
("Confidential Information"), unless and until the transactions contemplated by
this Agreement shall have been consummated: (a) such Confidential Information
is confidential and/or proprietary to the Companies and is entitled to and
shall receive treatment as such by Buyer (except to the extent that any such
information is readily ascertainable from public or published information or
trade sources), and (b) Buyer will, and will cause all of its employees,
representatives, agents and advisors who have access to any Confidential
Information to, hold in confidence and not disclose or use (except in respect
of the transactions contemplated by this Agreement) any such Confidential
Information. Buyer, the Companies and the Shareholder shall also each comply
with the restrictions on publicity set forth in Section 9.2 of this Agreement.
If the transactions contemplated by this Agreement are not closed, all
documents and other materials obtained by Buyer from the Companies or the
Shareholder shall be returned.
4.5 Third Party Consents. The Shareholder agrees to obtain, prior
to the Closing Date, such consents and approvals as may be required from
parties to material contracts or other agreements with the Companies in order
to prevent the Companies from suffering a Material Adverse Effect as a result
of the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby. Buyer agrees to provide to the Shareholder
such assistance and information as may be required to obtain the consents and
approvals referred to above. Notwithstanding anything in this Agreement to the
contrary, this Agreement shall not constitute an agreement by any of the
Companies to assign, or Buyer to assume and agree to pay, perform or otherwise
discharge, any material contracts or other agreements if an attempted
assignment or assumption thereof without the consent of a third person would
constitute a breach thereof, unless and until such consent is obtained.
4.6 Properties. The Shareholder shall cause each of the Companies
to maintain all of its properties used in the operation of its business in
customary repair, order and condition, reasonable wear and tear excepted, and
will maintain insurance upon all such properties, in such amounts and of such
kinds as are comparable to that in effect on the date hereof.
4.7 Books and Records. Until the Closing, the Shareholder shall
cause each of the Companies to maintain its books, accounts and records in the
usual manner on a basis consistent with prior years.
4.8 Material Contracts. Except upon prior written notice to
Buyer, the Shareholder shall cause each of the Companies to refrain from
amending, modifying or consenting to the termination
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of, any material contract or other material agreement or waiving any of its
material rights with respect thereto.
4.9 Vacation Pay and Bonus Accruals. Except as set forth on
Schedule 4.9, no vacation pay or bonus accruals will be payable to employees of
any of the Companies as of the Closing Date.
4.10 Environmental Audits and Other Investigations. The
Shareholder agrees that Buyer may retain, at the sole expense of Buyer, a firm
engaged in the regular business of environmental engineering to conduct such
environmental audits of the Facilities and operations of the Companies, and the
real estate occupied in connection with the Companies' businesses, as Buyer in
its discretion shall consider necessary or appropriate. Between the date hereof
and the Closing Date, Buyer, its agents, employees, contractors, surveyors, and
engineers shall have the right, upon prior notice and during normal business
hours, to enter and go upon the Real Property at any time and from time to time
for the purpose of inspecting the Real Property and any and all improvements
located thereon.
4.11 Employment Agreement with Shareholder. At the Closing, Buyer
shall enter into an employment agreement with ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ in
substantially the form set forth in Exhibit D hereto (the "Employment
Agreement").
4.12 Shareholder Restrictive Covenants Agreements. At the Closing,
the Shareholder shall enter into a restrictive covenants agreement with Buyer
in substantially the form set forth in Exhibit E hereto.
4.13 Securities Law Matters. The Shareholder agrees not to sell,
transfer, convey or otherwise distribute the Securities received pursuant to
this Agreement over which such Shareholder has direct or indirect control
without registration under the Securities Act and applicable federal and state
securities laws, except pursuant to an exemption from registration thereunder
acceptable to and approved by legal counsel to Buyer.
4.14 Attainment of Tax Clearance Certificates. The Shareholder
shall obtain tax clearance certificates for each of the Companies as requested
by Buyer.
4.15 Employment Agreements with Key Employees. At or prior to
Closing, the Shareholder shall use its best efforts to cause the employees of
the Companies identified on Schedule 4.15 ("Selected Employees") to duly
execute and deliver employment and restrictive covenants agreements, in
substantially the form attached hereto as Exhibits F and G, respectively, and
to cause the Companies to terminate, effective as of the Closing Date, any
existing agreement to which such Selected Employees are party respecting
employment with the Companies, provided, however, that such termination shall
not cause the applicable Company to be in breach of such agreement.
4.16 Tax Matters.
(a) S Corporation Status. The Companies and the
Shareholder will not revoke the Companies' elections to be taxed as S
corporations within the meaning of Sections 1361 and
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1362 of the Code. The Companies and the Shareholder will not take or allow any
action that would result in the termination of any of the Companies' status as
a validly electing S corporation within the meaning of Sections 1361 and 1362
of the Code.
(b) Cooperation on Tax Matters. Each of the Buyer, the
Companies and the Shareholder shall cooperate fully, as and to the extent
reasonably requested by the other party, in connection with the filing of tax
returns pursuant to this Section 4.16 and in connection with any audit,
litigation or other proceeding with respect to taxes. Such cooperation shall
include the retention and (upon the request of any other party) the provision
of records and information which are reasonably relevant to any such audit,
litigation or other proceeding and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. The Shareholder agrees (i) to retain all books and
records with respect to tax matters pertinent to the Companies relating to any
taxable period beginning before the Closing Date until the expiration of the
statute of limitations (and, to the extent notified by Buyer or the Companies,
any extensions thereof) of the respective taxable periods, and to abide by all
record retention agreements entered into with any taxing authority, and (ii) to
give the Buyer and the Companies reasonable written notice prior to
transferring, destroying or discarding any such books and records and, if the
Buyer or one of the Companies so requests, the Shareholder shall allow the
Buyer to take possession of such books and records. Buyer and the Shareholder
further agree to use their reasonable best efforts to obtain, upon request, any
certificate or other document from any governmental authority or any other
person or entity as may be necessary to mitigate, reduce or eliminate any tax
that could be imposed (including, without limitation, with respect to the
transactions contemplated hereby). Neither Clear nor Buyer will make any
election under Section 338(h) of the Code with respect to the Acquisition.
(c) Certain Reimbursement Obligations of Clear. In the
event (and subject to the condition) that the Option is exercised pursuant to
the Option Agreement, Clear shall pay to the Shareholder an amount equal to the
amount of United States income tax actually paid by the Shareholder (the
"Pass-Through Amount") with respect to the income of the Foreign Subsidiaries
allocable to the period from the date hereof to the date of exercise of the
Option, as follows:
(A) in the event the Earn-Out Payment, as
determined pursuant to this Agreement, is $0, the payment to be made to the
Shareholder hereunder shall equal the Pass-Through Amount;
(B) in the event the Earn-Out Payment, as
determined pursuant to this Agreement, is equal to the maximum Earn-Out Payment
of $3.3 million, the payment to be made to the Shareholder hereunder shall
equal one-half (1/2) of the Pass-Through Amount; and
(C) in the event the Earn-Out Payment, as
determined pursuant to this Agreement, is between $0 and $3.3 million, the
payment to be made to the Shareholder hereunder shall equal (i) one-half (1/2)
of the Pass-Through Amount, plus (ii) an additional amount determined by
multiplying one-half (1/2) of the Pass-Through Amount by the percentage equal
to (x) one hundred
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percent (100%) minus (y) the percentage which the actual Earn-Out Payment
represents of $3.3 million.
4.17 Release of Shareholder Guarantees. Buyer shall use its best
efforts to (i) cause itself or Clear to be substituted in all respects for the
Shareholder, effective as of the Closing, in respect of all obligations of the
Shareholder under any guaranty (the "Guaranties") given by the Shareholder for
the benefit of any of the Companies (other than TFOC and the Foreign
Subsidiaries) with respect to any Non-Affiliate Debt that is not repaid by the
Buyer immediately after the Closing, and (ii) obtain the release of all
associated collateral owned by the Shareholder. From and after the Closing,
with respect to any of the Guaranties for which no such substitution is
effected, Buyer and Clear shall indemnify the Shareholder against any liability
under any of such Guaranties.
4.18 Communications with Lender and Controlling Shareholder.
Between the date hereof and the Closing Date, Buyer shall permit the
Shareholder, after prior notice to, and upon the introduction of, Buyer, to
hold discussions with the principal bank lender to Clear and the controlling
shareholder of Clear.
ARTICLE V
CONDITIONS PRECEDENT TO
OBLIGATION OF BUYER TO CLOSE
The obligation of Buyer to complete the Closing is subject to the
fulfillment on or prior to the Closing Date of the following conditions, any of
which may be waived by Buyer only in writing:
5.1 Completion of Due Diligence Investigation. In the course of
Buyer's due diligence investigation of the Companies, Buyer shall not have
discovered any fact or development which relates to or involves the Companies'
businesses, ownership or capital stock which would, in the reasonable judgment
of Buyer, have a Material Adverse Effect or challenge the validity or legality
of this Agreement or the consummation of the transactions contemplated by this
Agreement or that, in the reasonable judgment of Buyer, would be materially
adverse to the interests of Buyer.
5.2 Procurement of Financing. Buyer shall have obtained financing
reasonably satisfactory to Buyer for the Closing Payment.
5.3 Consent of DFW Capital Partners, L.P., Wachovia Bank, N.A.,
Fleet National Bank and Common Shareholders of Clear Holdings, Inc. Buyer shall
have received the consent of each of DFW Capital Partners, L.P., Wachovia Bank,
N.A., Fleet National Bank and the holders of a majority in interest of the
Common Stock of Clear Holdings, Inc. to enter into this Agreement and each of
the transactions contemplated by this Agreement.
5.4 Representations and Covenants. The representations and
warranties of the Shareholder contained in this Agreement shall be true and
correct in all material respects on and as
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of the Closing Date (except for any representation or warranty which expressly
speaks only as of a stated date). The Shareholder and TFOC shall have performed
and complied with all covenants and agreements (including, without limitation,
those contained in Article IV) required by this Agreement to be performed or
complied with by them on or prior to the Closing Date.
5.5 Litigation. No action, suit or proceeding shall have been
instituted before any court or governmental or regulatory body, or instituted
or threatened by any governmental or regulatory body, to restrain or prevent
the carrying out of the transactions contemplated by this Agreement or to seek
damages in connection with such transactions, that has or could reasonably be
expected to have, in the opinion of the attorneys of Buyer, a Material Adverse
Effect.
5.6 No Material Adverse Change. Buyer shall be satisfied, in its
reasonable discretion, that since December 31, 1998 there has been no Material
Adverse Effect.
5.7 Good Standing Certificates, Etc. The Shareholder shall have
delivered all such certificates, documents or instruments with respect to the
Companies' corporate existence and authority as Buyer's counsel may have
reasonably requested prior to the Closing Date.
5.8 Consents. The Shareholder shall have obtained and delivered
to Buyer such consents as Buyer may have requested that the Companies obtain in
accordance with Section 4.5 hereof.
5.9 Employment, Consulting and Restrictive Covenants Agreements.
Buyer shall have received the employment and restrictive covenants agreements
specified in Sections 4.11 and 4.12, respectively, in a form satisfactory to
Buyer and executed by the parties to be bound thereby.
5.10 Agreements With Key Employees. Buyer shall have received an
employment agreement and restrictive covenants agreement, in a form
satisfactory to Buyer and executed by the parties to be bound thereby, from the
key employees listed on Schedule 4.15 of this Agreement.
5.11 Release of Liabilities. Except as expressly provided in this
Agreement, all obligations of the Companies and Affiliates to the Shareholder
pursuant to any contract, agreement, understanding or otherwise shall have been
extinguished without any consideration from the Companies, and the Companies
shall have been fully released therefrom with respect to any future liability
thereon.
5.12 Resolutions. There shall have been delivered to Buyer a copy
of the resolutions duly adopted by the board of directors of each of the
Companies and by the Shareholder (if required), and certified as accurate by an
executive officer of each of the Companies, as the case may be, as of the
Closing Date, authorizing and approving certain corporate and organizational
matters relating to each of the Companies.
5.13 Governmental Permits and Approvals. All permits and approvals
from any governmental or regulatory body required for the lawful consummation
of the Closing shall have been obtained.
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5.14 Shareholder's Certificate. There shall have been delivered to
Buyer a certificate from the Shareholder, dated the Closing Date, certifying
that the representations and warranties of the Shareholder contained herein are
true and correct on and as of the Closing Date.
5.15 Opinion of U.S. Counsel to the Shareholder. Buyer shall have
received an opinion of counsel to the Company and the Shareholder, dated the
Closing Date, in form and substance reasonably satisfactory to Buyer,
substantially to the effect set forth in Exhibit H hereto.
5.16 Opinion of Counsel to the Foreign Subsidiaries. Buyer shall
have received an opinion of counsel to each of the Foreign Subsidiaries, dated
the Closing Date, in form and substance reasonably satisfactory to Buyer, with
regard to the matters set forth in Exhibit H hereto as such opinions relate to
the respective Foreign Subsidiary domiciled in the jurisdiction where such
foreign counsel is admitted or otherwise authorized to practice.
5.17 Other Documents. The Shareholder and the Companies shall have
delivered all other documents, instruments or writings required to be delivered
to Buyer at or prior to the Closing pursuant to this Agreement and such other
certificates of authority (including good standing certificates), documents,
instruments or writings as Buyer may reasonably request.
ARTICLE VI
CONDITIONS PRECEDENT TO
OBLIGATION OF THE SHAREHOLDER TO CLOSE
The obligation of the Shareholder to complete the Closing is subject
to the fulfillment, on or prior to the Closing Date, of the following
conditions, any of which may be waived by the Shareholder only in writing:
6.1 Litigation. No action, suit or proceeding shall have been
instituted before any court or governmental or regulatory body, or instituted
or threatened by any governmental or regulatory body, to restrain or prevent
the carrying out of the transactions contemplated by this Agreement or to seek
damages in connection with such transactions, that has or could reasonably be
expected to have, in the opinion of the attorneys of the Shareholder, a
materially adverse effect on the assets, properties, business, operations or
financial condition of Buyer.
6.2 Representations and Warranties. The representations and
warranties of Buyer contained in this Agreement shall be true and correct in
all material respects on and as of the Closing Date (except for any
representation or warranty which expressly speaks only as of a stated date).
Buyer shall have performed and complied with all covenants and agreements
(including, without limitation, those contained in Article IV) required by this
Agreement to be performed or complied with by Buyer on or prior to the Closing
Date.
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6.3 Governmental Permits and Approvals. All permits and approvals
from any governmental or regulatory body required for the lawful consummation
of the Closing shall have been obtained.
6.4 Resolutions. There shall have been delivered to the
Shareholder a copy of the resolutions duly adopted by the board of directors of
each of Clear and Buyer, and certified accurate by an executive officer of
Clear and Buyer, respectively, as of the Closing Date, authorizing and
approving the execution and delivery by Clear and Buyer, respectively, of this
Agreement and the consummation by Clear and Buyer of the transactions
contemplated hereby.
6.5 Good Standing Certificates, Etc. Buyer shall have delivered
all such certified resolutions, certificates, documents or instruments with
respect to Buyer's corporate existence and authority as the Shareholder's
counsel may have reasonably requested prior to the Closing Date.
6.6 Officer's Certificate. There shall have been delivered to the
Shareholder a certificate of an executive officer of Buyer, dated the Closing
Date, certifying that the representations and warranties of Buyer contained
herein are true and correct on and as of the Closing Date.
6.7 Opinion of Counsel to Buyer. The Shareholder shall have
received an opinion of counsel to Buyer, dated the Closing Date, in form and
substance reasonably satisfactory to the Shareholder, substantially to the
effect set forth in Exhibit I hereto.
6.8 Other Documents. Buyer shall have delivered all other
documents, instruments or writings required to be delivered to the Shareholder
at or prior to the Closing pursuant to this Agreement and such other
certificates of authority (including good standing certificates), documents,
instruments or writings as the Shareholder may reasonably request.
ARTICLE VII
INDEMNIFICATION
For purposes of this Article VII, it is agreed and understood that the
Buyer shall not obtain recovery, nor shall the Shareholder be liable, more than
one time or under more than one section of this Agreement for the same
underlying claim or breach.
7.1 Survival. The representations and warranties contained in
this Agreement shall survive the Closing until the expiration of twenty-four
(24) months following the Closing (the "Limitations Period"), provided,
however, that the representations and warranties of the Shareholder with
respect to tax matters set forth in Section 2.18 of this Agreement shall
survive for the period of time equal to the statute of limitations applicable
to such matter or matters.
7.2 Indemnification by the Shareholder. The Shareholder shall
indemnify, defend and hold harmless Buyer (which term shall include, for
purposes of this Article VII, Buyer's successors,
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assigns, directors, officers, employees and agents) against any and all losses,
damages, deficiencies, suits, claims, demands, judgments, costs, expenses or
other liabilities ("Losses") resulting from, arising from, or relating to (i)
any breach of a representation or warranty of the Shareholder contained in
Article II of this Agreement (but only if such indemnity is sought during the
Limitations Period), (ii) any failure by the Shareholder to perform or comply
with any agreement or obligation contained in this Agreement, (iii) the conduct
of the business of the Companies prior to Closing, except to the extent such
Loss was reflected in the Company Statements or disclosed pursuant to this
Agreement, (iv) any of the matters described in Schedules 2.1(b), 2.10(i) and
2.18(b) hereto, and in Section 2.9 hereof (Litigation), and (v) the assertion
by any person or entity that such person has or had any rights with respect to
the Stock purchased pursuant to this Agreement. With respect to clause (iii) of
the immediately preceding sentence, the Shareholder shall have no obligation to
indemnify Buyer as a result of Environmental Laws which were not in effect
prior to the Closing to the extent such damages could not have resulted under
Environmental Laws in effect prior the Closing.
7.3 Indemnification by Buyer. Buyer shall indemnify and hold
harmless the Shareholder against any and all Losses resulting from, arising
from, or relating to (i) any breach of a representation or warranty of Buyer
contained in Article III of this Agreement (but only if such indemnity is
sought during the Limitations Period) and (ii) any failure by Buyer to perform
or comply with any agreement or obligation contained in this Agreement.
7.4 Limitations of Claims. (a) No indemnification pursuant to
this Article VII shall be available to any party until the aggregate of all
Losses exceeds $25,000, provided, however, that thereafter claims may be made
against the indemnifying party for the full aggregate amount of such Losses,
without deduction of any such threshold amount.
(b) The amount of any Loss for which indemnification is
provided under this Article VII shall be net of (i) any amounts recovered or
recoverable by the Indemnified Party pursuant to any indemnification by or
indemnification agreement with any third party, (ii) any insurance proceeds or
other cash receipts or sources of reimbursement available as an offset against
such Loss (and no right of subrogation shall accrue to any third party
indemnitor, insurer or reimburser hereunder), and (iii) an amount equal to any
reduction of income taxes attributable to such Loss. If the amount to be netted
hereunder from any payment required under Sections 7.2 or 7.3 is determined
after payment by the Indemnifying Party of any amount required to be paid to an
Indemnified Party pursuant to this Article VII, the Indemnified Party shall
repay to the Indemnifying Party, promptly after such determination, any amount
that the Indemnifying Party would not have had to pay pursuant to this Article
VII had such determination been made at the time of such payment.
Indemnification payments hereunder shall be treated as adjustments to the
Purchase Price.
(c) Anything to the contrary herein notwithstanding, (i)
any indemnification obligation of the Shareholder pursuant to this Agreement
may be satisfied, at the election of Buyer in its sole discretion, by set-off
of the amount thereof against any future consideration or amount to be paid to
the Shareholder by Buyer, including but not limited to, the Deferred Payment
and the Earn-Out Payment otherwise due to the Shareholder, (ii) the
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indemnification obligation of the Shareholder pursuant to Section 7.2(iv) of
this Agreement with respect to the first Item on Schedule 2.9 (▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇ Tower Company, Inc. and TWR Telecom, Inc., the "▇▇▇▇▇▇ Litigation")
shall not exceed the amount of $1 million, and no indemnification with respect
thereto shall be due from Shareholder in the event such item is settled for a
sum not greater than $125,000, and (iii) the aggregate indemnification
obligation of any party to this Agreement (including all costs, expenses and
attorneys fees paid or incurred in connection therewith or with respect to the
curing of any misrepresentations or breaches under this Agreement) shall not
exceed the amount of the Purchase Price actually received by the Shareholder.
(d) Anything to the contrary herein notwithstanding, any
rights of the parties hereto to indemnification or other remedy based on the
representations, warranties, covenants and agreements set forth in this
Agreement shall not be affected by any investigation conducted with respect to,
or any knowledge acquired (or capable of being acquired) at any time, whether
before or after the execution and delivery of this Agreement or the Closing
Date, with respect to the accuracy or inaccuracy of, or compliance with, any
such representation, warranty, covenant or agreement. The waiver of any
condition based on the accuracy of any representation or warranty, or on the
performance of or compliance with any covenant or obligation, will not affect
the right to indemnification or other remedy based on such representations,
warranties, covenants and agreements.
7.5 Procedures. (a) A party seeking indemnification pursuant to
Sections 7.2 or 7.3 (an "Indemnified Party") shall give prompt notice to the
party from whom such indemnification is sought (the "Indemnifying Party") of
the assertion of any claim or assessment, or the commencement of any action,
suit, audit or proceeding, by a third party in respect of which indemnity may
be sought hereunder (a "Third Party Claim") and will give the Indemnifying
Party such information with respect thereto as the Indemnifying Party may
reasonably request, but no failure to give such notice shall relieve the
Indemnifying Party of any liability hereunder (except to the extent the
Indemnifying Party has suffered actual prejudice thereby). Thereafter, the
Indemnified Party shall deliver to the Indemnifying Party, within five (5)
business days after the Indemnified Party's receipt thereof, copies of all
notices and documents (including court papers) received by the Indemnified
Party relating to the Third Party Claim. The Indemnifying Party shall have the
right, exercisable by written notice (the "Notice") to the Indemnified Party
within thirty (30) days of receipt of notice from the Indemnified Party of the
commencement or assertion of any Third Party Claim, to assume the defense of
such Third Party Claim, using counsel selected by the Indemnifying Party and
reasonably acceptable to the Indemnified Party. Should the Indemnifying Party
so elect to assume the defense of a Third Party Claim, the Indemnifying Party
shall not be liable to the Indemnified Party for legal expenses subsequently
incurred by the Indemnified Party in connection with the defense thereof. If
the Indemnifying Party shall fail to assume the defense of the Third Party
Claim within such thirty (30) day period, the Indemnified Party shall have the
right to undertake the defense of such Third Party Claim on behalf of the
Indemnifying Party. Regardless of whether the Indemnifying Party elects to
assume the defense of any such Third Party Claim, the Indemnified Party shall
not admit any liability with respect to, or settle, compromise or discharge
such Third Party Claim without the Indemnifying Party's prior written consent.
(b) The Indemnifying Party or the Indemnified Party, as
the case may be, shall in any event have the right to participate, at its own
expense, in the defense of any Third Party Claim which the other is defending.
(c) The Indemnifying Party, if it shall have assumed the
defense of any Third Party Claim in accordance with the terms hereof, shall
have the right, upon five (5) days prior written notice to the Indemnified
Party, to consent to the entry of judgment with respect to, or otherwise settle
such Third Party Claim provided the Indemnifying Party agrees that as between
the Indemnifying Party and the Indemnified Party, the Indemnifying Party shall
be solely obligated to satisfy and discharge such judgment or settlement unless
(i) the Third Party Claim involves equitable or other non-monetary damages or
(ii) in the reasonable judgment of the Indemnified Party such
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49
settlement would have a continuing material adverse effect on the Indemnified
Party's business (including any material impairment of its relationships with
customers and suppliers), in which case such settlement only may be made with
the written consent of the Indemnified Party, which consent shall not be
unreasonably withheld.
(d) Whether or not the Indemnifying Party chooses to
defend or prosecute any claim involving a third party, all the parties hereto
shall cooperate in the defense or prosecution thereof and shall furnish
records, information and testimony, and attend such conferences, discovery
proceedings, hearings, trials and appeals as may be reasonably requested in
connection therewith. Such cooperation shall include access during normal
business hours afforded to the Indemnifying Party of records and information
which are reasonably relevant to such Third Party Claim, and making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder, and the Indemnifying Party
shall reimburse the Indemnified Party for all its reasonable out-of-pocket
expenses in connection therewith.
7.6 Adjustment of Liability. In the event an Indemnifying Party
is required to make any payment under this Article VIII in respect of any
damages, liability, obligation, loss, claim, or other amount indemnified
hereunder, such Indemnifying Party shall pay the Indemnified Party an amount
(the "Adjusted Amount") which is equal to the sum of (i) the amount of such
damages, liability, obligation, loss, claim or other amount, minus (ii) the
amount of any insurance proceeds the Indemnified Party actually receives with
respect thereto, minus (iii) any third party payments actually received by the
Indemnified Party with respect to such damages, liability, obligation, loss,
claim or other amount after demand or notice to such third party from the
Indemnifying Party (with the consent of the Indemnified Party which will not be
unreasonably withheld), plus (iv) the amount of the Net Tax Liability. "Net Tax
Liability" shall be equal to the amount, if any, by which, the sum of all
federal, state, and local taxes, if any, required to be paid by such
Indemnified Party in respect of the receipt or accrual of the Adjusted Amount
exceeds the sum of (a) the value of any reduction in taxes of such Indemnified
Party by reason of deductions, credits or allowances in respect of the payment
or accrual of the damages, liability, obligation, loss, claim or other amount
included in clause (i) above recognized by such Indemnified Party in the same
year in which the taxes in respect of the receipt or accrual by such
Indemnified Party of the Adjusted Amount would be payable and (b) the net
present value of any reduction in taxes of such Indemnified Party by reason of
deductions, credits or allowances in respect of the payment or accrual of the
damages, liability, obligation, loss, claim or other amount included in clause
(i) above recognized by such Indemnified Party in years thereafter. The net
present value of any such reduction in taxes shall be determined by discounting
the amount of such reduction in taxes semi-annually from the date such tax
saving is recognized or reasonably expected to be recognized (which shall be
deemed to be the date the applicable tax return on which such tax saving would
be properly reflected is due, without extensions) to the date of payment of the
applicable indemnity by such Indemnifying Party, applying a discount factor
equal to the interest rate on federal income tax deficiencies in effect at the
time of such adjustment. For purposes of determining the amount of any taxes
required to be paid and any tax savings recognized or reasonably expected to be
recognized by such Indemnified Party hereunder, it shall be assumed that such
Indemnified Party is subject to tax in each applicable taxing jurisdiction at
the highest applicable marginal rate then in effect in such jurisdiction.
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ARTICLE VIII
TERMINATION OF AGREEMENT
8.1 Termination. This Agreement may be terminated prior to the
Closing as follows:
(a) at the election of the Shareholder, in the event
that Buyer shall have materially breached any representation, warranty,
covenant or agreement contained in this Agreement or in any document or other
paper delivered pursuant to this Agreement;
(b) at the election of Buyer, in the event that the
Shareholder shall have materially breached any representation, warranty,
covenant or agreement contained in this Agreement or in any document or other
paper delivered pursuant to this Agreement;
(c) at the election of the Shareholder or Buyer, if any
legal proceeding is commenced or threatened by any governmental or regulatory
body or other person seeking to prevent the Closing or consummation of any
transaction contemplated by this Agreement, and either the Shareholder or
Buyer, as the case may be, reasonably and in good ▇▇▇▇▇ ▇▇▇▇▇ it impractical or
inadvisable to proceed in view of such legal proceeding or threat thereof;
(d) at the election of the Shareholder, in the event
that the Closing has not occurred by November 1, 1999, and, as of such date,
all of the conditions to the obligation of Buyer to complete the Closing other
than the conditions set forth in Sections 5.1, 5.2 and 5.3 shall have been
fulfilled;
(e) at the election of the Shareholder or Buyer, in the
event that the Closing has not occurred by November 15, 1999; and
(f) at any time on or prior to the Closing Date, by
mutual written consent of the parties hereto.
8.2 Post-Termination Obligations. Subject to Section 8.2 (b)
hereof, if this Agreement is terminated pursuant to Section 8.1, this Agreement
shall become void and of no further force and effect, except for this Section
8.2 and Sections 4.4(b) (Examinations and Inspections), 9.2 (Announcements),
9.4 (Governing Law), 9.6 (Notice), 9.7 (Expenses), 9.8 (Entire Agreement), and
9.10 (Headings), and none of the parties hereto shall have any liability in
respect of such termination, except that any party shall be liable for any
intentional or willful violation of the representations, warranties, covenants
or agreements of such party contained in this Agreement.
(b) If this Agreement is terminated pursuant to Section
8.1(d), Buyer shall promptly pay to the Shareholder the Break-Up Fee in
immediately available funds, by wire transfer to an account designated by the
Shareholder. For purposes of this Agreement, "Break-Up Fee" shall mean an
amount equal to $500,000, without interest.
ARTICLE IX
MISCELLANEOUS
9.1 Further Action. If, at any time following the Closing, any
further action is determined by Buyer to be necessary or desirable to carry out
the purposes of this Agreement or to vest in Buyer all right, title and
interest in and to the Stock, Shareholder shall take such action.
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9.2 Announcements. Prior to Closing, none of the parties hereto
shall issue any press release, place any advertisement or make any other public
statement relating to or in connection with this Agreement or the matters
contained herein without obtaining the prior approval of all parties hereto as
to the content and manner of presentation and publication thereof, which
approval shall not be unreasonably withheld or delayed.
9.3 Assignment; Parties in Interest. Except as expressly provided
herein, the rights and obligations of a party hereunder may not be assigned,
transferred or encumbered without the prior written consent of the other
parties. Buyer may assign its rights and obligations hereunder, subject to a
guaranty from Buyer of the assignee's performance thereof, to any direct or
indirect subsidiary or other entity controlled by Buyer, or to any parent
corporation of Buyer, for purposes of consummating the transactions
contemplated herein. This Agreement shall be binding upon, inure to the benefit
of, and be enforceable by the respective successors and permitted assigns of
the parties hereto. Nothing contained herein shall be deemed to confer upon any
other person or entity any right or remedy under or by reason of this
Agreement.
9.4 Law Governing Agreement. This Agreement shall be construed
and interpreted according to the internal laws of the State of Georgia,
excluding any choice of law rules that may direct the application of the laws
of another jurisdiction.
9.5 Amendment and Modification. Buyer, Clear and the Shareholder
may amend, modify and supplement this Agreement in such manner as may be agreed
upon in writing among them.
9.6 Notice. All notices, requests, demands and other
communications hereunder shall be given in writing and shall be: (a) personally
delivered; (b) sent by telecopier, facsimile transmission or other electronic
means of transmitting written documents; or (c) sent to the parties at their
respective addresses indicated herein by registered or certified U.S. mail,
return receipt requested and postage prepaid, or by private overnight mail
courier service. The respective addresses to be used for all such notices,
demands or requests are as follows:
(a) If to Buyer, to:
Clear Communications Group, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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with a copy to:
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP
1230 Peachtree Road, ▇.▇.
▇▇▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to the Shareholder:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, P.C.
▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇. ▇. ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If personally delivered, such communication shall be deemed delivered
upon actual receipt; if electronically transmitted pursuant to this paragraph,
such communication shall be deemed delivered the next business day after
transmission (and sender shall bear the burden of proof of delivery); if sent
by overnight courier pursuant to this paragraph, such communication shall be
deemed delivered upon receipt; and if sent by U.S. mail pursuant to this
paragraph, such communication shall be deemed delivered as of the date of
delivery indicated on the receipt issued by the relevant postal service, or, if
the addressee fails or refuses to accept delivery, as of the date of such
failure or refusal. Any party to this Agreement may change its address for the
purposes of this Agreement by giving notice thereof in accordance with this
Section 9.6.
9.7 Expenses. Regardless of whether or not the transactions
contemplated hereby are consummated, each of the parties shall bear its own
legal expenses and the expenses of its agents in connection with the
transactions contemplated hereby; provided, however, that the Shareholder shall
pay the legal expenses and the expenses of the agents of the Companies through
the Closing Date, and the Companies shall pay (i) the fees and expenses of Jain
& Jain, P.C., (ii) an amount, not to exceed $25,000, for services rendered to
the Companies (as specifically set forth in one or more invoices to the
Companies) by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP, and (iii) the fees and expenses of ▇▇▇▇
Frankfort ▇▇▇▇▇ & ▇▇▇▇ (but only for amounts incurred subsequent to the
execution of this Agreement), in each case incurred in connection with services
rendered to TTI, SDI, ▇▇▇▇▇▇ and Lighting.
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9.8 Entire Agreement. This Agreement, including the Exhibits and
Schedules attached hereto (which Exhibits and Schedules are hereby incorporated
herein by reference and made a part hereof), together with the Confidentiality
Agreement dated November 4, 1998, as amended as of January 15, 1999, embodies
the entire agreement among the parties with respect to the transactions
contemplated hereby, and supersedes all prior agreements and understandings
among the parties with respect thereto.
9.9 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.10 Headings. The table of contents and article and section
headings herein are for convenience of reference only, do not constitute a part
of this Agreement, and shall not be deemed to limit or affect any of the
provisions hereof.
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IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized representatives to execute this Agreement as of the date first above
written.
CLEAR HOLDINGS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
--------------------------------------
Title: Chairman and Chief Executive Officer
--------------------------------------
CLEAR COMMUNICATIONS GROUP, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
--------------------------------------
Title: Chairman and Chief Executive Officer
--------------------------------------
▇▇▇▇▇▇▇▇
(as to Section 1.15 of the Agreement only)
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
---------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
SHAREHOLDER
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
TWR FAMILY OF COMPANIES, LLC
By: /s/ ▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
Title: Sole Manager
--------------------------------------
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Schedule 1.3
1. Promissory Note dated April 1, 1998 from SDI to the Shareholder in the
original principal amount of $140,626.00.
2. Promissory Note dated December 31, 1998 from SDI to the Shareholder in
the original principal amount of $191,930.00.
3. Promissory Note dated December 31, 1998 from TTI to the Shareholder in
the original principal amount of $972,450.00.
4. Promissory Note dated December 31, 1998 from TTI to the Shareholder in
the original principal amount of $167,443.99.
5. Promissory Note dated December 31, 1998 from TTI to the Shareholder in
the original principal amount of $500,000.00.
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Schedule 1.8
The calculation of 1999 EBITDA shall be made without regard to:
(i) the effect on the Companies of any (A) acquisition
of assets or (B) assumption of liabilities, in either case, as part of the
acquisition of any business or any entity as a going concern after the Closing;
(ii) the expenses incurred by Buyer or its affiliates
with respect to, or in connection with, the negotiation, authorization,
preparation, execution and performance of this Agreement, including, without
limitation, all fees and expenses of agents, representatives, brokers, counsel
and accountants;
(iii) management fees, allocation of administrative
overhead, legal or accounting services or other similar charges incurred,
charged or allocated by Buyer or any of its affiliates to the Companies;
(iv) any expenses equal to or less than $125,000,
associated with the final settlement of the ▇▇▇▇▇▇ Litigation;
(v) any expenses of Lighting equal to or less than
$400,000, associated with research and development for a high-intensity (L-856)
flashing white lighting system, as more completely described in Schedule 1.8A;
and
(vi) gain or income, if any, recognized in connection
with (A) the grant, exercise or lapse without exercise, of the Option, or (B)
the cancellation of the M Sub Note.
The calculation of 1999 EBITDA shall include:
(i) charges for services rendered or goods delivered by
the Companies to Buyer or any affiliate of Buyer; provided, however, that the
rates deemed to be charged by the Companies for purposes of calculating EBITDA
shall not be less than those that would be charged by the Companies in a
transaction with a non-affiliated third party; and
(ii) charges for services rendered or goods delivered by
Buyer or any affiliate Buyer to the Companies shall be taken into account;
provided, however, that the rates deemed to be charged by the Buyer or any
affiliate of Buyer shall not be more than those that would be charged by Buyer
or affiliates of Buyer in a transaction with a non-affiliated third party.
49
