EXHIBIT 2.5
STOCK ACQUISITION AGREEMENT
by and among
▇▇▇▇▇▇ Holdings, Inc., a Delaware corporation
and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.,
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
▇▇▇▇▇▇ Telecommunications Corporation,
an Alabama corporation, and
▇▇▇▇▇▇ Telecommunications of Carolina, Inc.,
an Alabama corporation
Dated December 20, 1996
STOCK ACQUISITION AGREEMENT
THIS STOCK ACQUISITION AGREEMENT ("Agreement") is made as of December 20,
1996, by ▇▇▇▇▇▇ HOLDINGS, INC., a Delaware corporation ("Buyer"), ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇ ("▇▇▇▇▇▇"), ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. ("▇▇▇▇▇▇ ▇▇."), ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
("▇▇▇▇▇▇▇"), ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ("▇▇▇▇▇▇"), ▇▇▇▇▇▇ TELECOMMUNICATIONS CORPORATION,
an Alabama corporation ("TTC") and ▇▇▇▇▇▇ TELECOMMUNICATIONS OF CAROLINA, INC.,
an Alabama corporation ("TT-Carolina"). ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇
are sometimes referred to herein individually as a "Seller" and collectively as
"Sellers." Whenever the term "Company" is used herein, it shall refer to and
shall be construed to mean, in each instance, TTC and TT-Carolina, individually,
as well as TTC and TT-Carolina, collectively as a group.
RECITALS
WHEREAS, the Sellers own all the outstanding shares of the capital stock of
TTC (the "Outstanding Shares"), and TTC owns all the shares of the capital stock
of TT-Carolina.
WHEREAS, the Sellers desire to transfer, and Buyer desires to acquire 3,840
of the Outstanding Shares (the "Shares") for the consideration and on the terms
set forth in this Agreement.
NOW, THEREFORE, for and in consideration of the mutual promises contained
herein, and for other good and valuable consideration, the receipt, sufficiency
and adequacy of which are hereby acknowledged, the parties intending to be
legally bound, do hereby agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"BILLING AND COLLECTION AGREEMENT": any billing and collecting agreement,
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local exchange company billing agreement or other Contract relating to the
provision of billing and collection services to the Company.
"BREACH": a "Breach" of a representation, warranty, covenant, obligation,
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or other provision of this Agreement or any instrument delivered pursuant to
this Agreement will be deemed to have occurred if there is or has been any
material inaccuracy in or breach of, or any material failure to perform or
comply with, such representation, warranty, covenant, obligation, or other
provision.
"CASH EFFECTIVE CLOSING DATE": Close of business of Company on December 2,
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1996 (being the first business day after November 30, 1996).
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"CONSENT": any approval, consent, ratification, waiver, or other
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authorization (including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS": all of the transactions contemplated by this
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Agreement, including: (a) the transfer by the Sellers to Buyer and the
acquisition (and payment therefor) by Buyer from the Sellers of the Shares; (b)
the execution, delivery and performance of the Consulting Agreements, and the
Employment Agreement; and (c) the performance by Buyer, the Company and Sellers
of their respective covenants and obligations under this Agreement, including
without limitation their obligations under Section 2 hereof.
"CONTRACT": any agreement, contract, license obligation, promise or
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undertaking presently in effect, (a) under which the Company has or may acquire
any rights, (b) under which the Company has or may become subject to any
obligation or liability, or (c) by which the Company or any of the assets owned
or used by it is or may become bound.
"CONTRIBUTION AGREEMENT": that certain Contribution Agreement of even date
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herewith by and among Buyer and certain of the Sellers pursuant to which Buyer
will acquire certain common shares of the Company.
"ENCUMBRANCE": any charge, claim, community property interest, condition,
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equitable interest, lien, option, pledge, security interest, right of first
refusal, or restriction of any kind, including any restriction on use, voting,
transfer, receipt of income, or exercise of any other attribute of ownership.
"ERISA": the Employee Retirement Income Security Act of 1974 or any successor
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law, and regulations and rules issued pursuant to that Act or any successor law.
"GAAP": generally accepted United States accounting principles, applied on a
----
consistent basis.
"GOVERNMENTAL AUTHORIZATION": any approval, consent, license, permit, waiver,
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tariff, or other written authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"GOVERNMENTAL BODY": any: (a) nation, state, county, city, town, village,
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district, or other properly constituted local government; (b) federal, state,
local, municipal, foreign, or other government; (c) governmental authority of
any nature (including any governmental agency, branch, department, official, or
entity and any court or other tribunal); or (d) any properly constituted and
authorized body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority or
power of any nature in the United States.
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"INSTALLED TELEPHONE": a Telephone that is subject to a Telephone Operating
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and License Agreement, and is installed at the location provided for in its
related Telephone Operating and License Agreement, including, without
limitation, those Installed Telephones Lines identified by installation location
and telephone number in EXHIBIT 3.6(a)(ii)-1 (with any Telephones co-located
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with any pay telephones not owned by the Company being specifically identified
on said EXHIBIT 3.6(a)(ii)-1).
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"INSTALLED TELEPHONE LINE": any telephone lines and related facilities
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providing telephone service to Installed Telephones, including those Telephone
lines identified by installation, location and telephone number in EXHIBIT
3.6(a)(ii)-2.
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"INTELLECTUAL PROPERTY ASSETS": any patents, patent applications, inventions,
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trademarks, tradenames, business names, service marks, copyrights, trade
secrets,know-how, customer lists, software, technical information, plans,
drawings, blue prints or other intellectual property used in the operation of
the Company's business.
"IRC": the Internal Revenue Code of 1986 or any successor law, and
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regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS": the United States Internal Revenue Service or any successor agency,
---
and, to the extent relevant, the United States Department of the Treasury.
"KNOWLEDGE": in the case of Sellers, information known to the Sellers without
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independent investigation beyond the Company's officers and directors; in the
case of the Company, information known by the Company's officers and directors.
"LEGAL REQUIREMENT": any federal, state, local, municipal, foreign,
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international, multinational, or other administrative order, constitution, law,
ordinance, ruling, regulation or statute (as to representations and warranties
set forth in this Agreement, such orders, constitutions, laws, ordinances,
rulings, regulations or statutes in effect as of the date such representation or
warranty is made).
"LONG DISTANCE SERVICE AGREEMENTS": any long distance service provider
--------------------------------
agreement, telecommunications agreement or other Contract relating to provision
of long distance service or other similar services to the Company.
"OPERATOR SERVICE AGREEMENT": any agreement or other Contract relating to the
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provision of operator or other telephone services to the Company.
"ORDER": any award, decision, injunction, judgment, order, ruling, subpoena,
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or verdict entered, issued, made, or rendered
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by any court, administrative agency, or other Governmental Body or by any
arbitrator.
"ORDINARY COURSE OF BUSINESS": an action taken by a Person will be deemed to
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have been taken in the "Ordinary Course of Business" only if: (a) such action
is consistent with the past practices of such Person and is taken in the
ordinary course of the normal day-to-day operations of such Person; and (b) such
action is not required to be authorized by the board of directors of such Person
(or by any Person or group of Persons exercising similar authority).
"ORGANIZATIONAL DOCUMENTS": (a) the articles or certificate of incorporation
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and the bylaws of a corporation; (b) the partnership agreement and any statement
of partnership of a general partnership; (c) the limited partnership agreement
and the certificate of limited partnership of a limited partnership; (d) any
charter, articles of organization, shareholders agreement, operating agreement
or similar document adopted or filed in connection with the creation, formation,
or organization of a Person; and (e) any amendment to any of the foregoing.
"PARTS AND SUPPLIES AGREEMENT": any Contract relating to the provision of
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Telephones, Telephone parts, inventory or equipment, or other parts, equipment
or services to the Company.
"PERSON": any individual, corporation (including any non-profit corporation),
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general or limited partnership, limited liability company, joint venture,
estate, trust, association, organization, labor union, or other entity or
Governmental Body.
"PROCEEDING": any action, arbitration, audit, hearing, investigation,
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litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"REPRESENTATIVE": with respect to a particular Person, any director, officer,
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employee, agent, consultant, advisor, partner or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"SECURITIES ACT": the Securities Act of 1933 or any successor law, and
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regulations and rules issued pursuant to that Act or any successor law.
"SERVICE AGREEMENTS": any Long Distance Service Agreement, Billing and
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Collection Agreement, Parts and Supplies Agreement, Operator Service Agreement
or similar agreement or Contract relating to the provision of parts, equipment
or services to the Company.
"TAX RETURN": any return (including any information return), report,
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statement, schedule, notice, form, or other
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document or information filed with or submitted to, or required to be filed with
or submitted to, any Governmental Body in connection with the determination,
assessment, collection, or payment of any Tax or in connection with the
administration, implementation, or enforcement of or compliance with any Legal
Requirement relating to any Tax.
"TELEPHONE OPERATING AND LICENSE AGREEMENTS": all written lease agreements,
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telephone location agreements, telephone service agreements, license agreements,
royalty agreements or other contracts relating to the Installed Telephones,
which agreements grant the right to the Company to install and operate the
Installed Telephones upon the premises set forth within any such document.
"TELEPHONES": any of the coin, credit card operated or collect call only
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telephones, owned or operated by the Company, including any hardware, enclosure,
pedestal or any other personal property installed with any Telephone.
"THREATENED": a claim, Proceeding, dispute, action, or other matter will be
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deemed to have been "Threatened" if any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in writing), or
if any other event has occurred or any other circumstances exist that would lead
a prudent Person to conclude that such a claim, Proceeding, dispute, action, or
other matter is likely to be asserted, commenced, taken, or otherwise pursued in
the future.
2. TRANSFER OF SHARES, CLOSING AND OTHER AGREEMENTS
2.1 SHARES Upon the terms and subject to the conditions of this Agreement,
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each Seller agrees to sell to Buyer and Buyer agrees to purchase from each
Seller the Shares in the proportions listed on EXHIBIT 2.1.
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2.2 PURCHASE PRICE The aggregate purchase price (the "Purchase Price") for
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the Shares will be $25,175,000 cash, plus Buyer's subordinated note in the
amount of $5,000,000 ("Buyer's Subordinated Note"), payable to each Seller in
the amounts shown on EXHIBIT 2.2.
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The cash portion of the Purchase Price shall be paid to the Sellers as
follows: (a) the sum of $11,450,000 shall be paid on the Closing Date; (b) the
sum of $11,725,000 shall be paid on January 2, 1997, or on the Closing Date,
whichever is later; and (c) the sum of $2,000,000, representing the amount of
the Post-Closing Escrow Fund as set forth in Section 2.3(a) herein, which shall
be payable at Closing to the Escrow Agent and shall be due and payable on the
Termination Date of the Post-Closing Escrow Fund, together with interest
accumulated in the Post-Closing Escrow Fund, less any deductions therefrom as
provided for in the Escrow Agreement. The above sums payable under (b) and (c)
above shall be increased or decreased by any Adjustments to the
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Purchase Price as provided for in Section 2.7. In the event the Closing occurs
before January 2, 1997, the sum of $11,725,000 due to the Sellers under (b)
above, as adjusted, shall not be paid in cash, but rather shall be evidenced by
a promissory note. Such promissory note shall mature on January 2, 1997, shall
bear interest at the rate of five percent (5%) per annum from the Closing Date
until paid, and shall be secured by an irrevocable Stand-by Letter of Credit
from a bank in a form satisfactory to Sellers.
2.3 DEPOSITS; POST-CLOSING ESCROW FUND; REGULATORY SET-OFF
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(a) POST-CLOSING ESCROW FUND At the Closing, Buyer shall, together with any
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amounts required pursuant to Section 2.7(a), deposit Two Million Dollars
($2,000,000) with South Trust Bank of Alabama as escrow agent for deposit in a
fund (the "Post-Closing Escrow Fund") created pursuant to the Post-Closing
Escrow Agreement attached hereto as EXHIBIT 2.3(a).
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(b) REGULATORY SET-OFF At Closing, in the event that regulatory approvals
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have not been obtained from any state such lack of approval will not be deemed
to be a Breach of this Agreement, and the transaction will close, subject to the
Regulatory Set-off Provisions attached as EXHIBIT 2.3(b).
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2.4 CLOSING The closing of the transactions contemplated by this Agreement
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(the "Closing") will take place at the offices of Buyer's counsel in Dallas,
Texas (or such other location within or outside of Dallas, Texas as Buyer shall
designate after giving reasonable advance notice to Sellers; provided, however,
that the Closing will not take place in any jurisdiction which would impose a
stock transfer or similar tax on the Sellers) at 10:00 a.m. (local time) on
December 27, 1996 (or such later date as Buyer and Seller may mutually agree
upon but in no event later than January 31, 1997).
2.5 CLOSING OBLIGATIONS
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At the Closing:
(a) Sellers or the Company, as applicable, will deliver or cause to be
delivered to Buyer:
(i) certificates representing the Shares, duly endorsed (or
accompanied by duly executed stock powers), with signatures of Sellers in
attendance at Closing, notarized at Closing, and signatures of Sellers not in
attendance guaranteed by a commercial bank or by a member firm of the New York
Stock Exchange, for transfer to Buyer;
(ii) the Consulting Agreements executed by ▇▇▇▇▇▇ in the form
attached hereto as EXHIBIT 2.5(a)(ii)-1 (the "▇▇▇▇▇▇ Consulting Agreement") and
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by ▇▇▇▇▇▇▇ in the form attached hereto as EXHIBIT 2.5(a)(ii)-2 (the "▇▇▇▇▇▇▇
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Consulting Agreement");
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(iii) the Employment Agreement for ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. in the
form attached hereto as EXHIBIT 2.5(a)(iii)-1 (the "Employment Agreement");
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(iv) [Intentionally Deleted];
(v) a certificate executed by Sellers and the Company
representing and warranting to Buyer that, except as otherwise stated in such
certificate, each of Sellers' representations and warranties in this Agreement
was accurate in all respects as of the date of this Agreement and is accurate in
all respects as of the Closing Date as if made on the Closing Date subject,
however, to any limitations expressly set forth herein (the "Sellers' Closing
Certificate").
(vi) opinion(s) of counsel, dated the Closing Date, in the form of
EXHIBIT 2.5(a)(vi);
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(vii) such other documents as Buyer may reasonably request for the
purpose of (1) enabling its counsel to provide the opinion referred to in
Section 2.5(b), (2) evidencing the accuracy of any of Sellers' representations
and warranties, (3) evidencing the performance by Sellers of, or the compliance
by Sellers with, any covenant or obligation required to be performed or complied
with by the Sellers at or prior to Closing, or (4) otherwise facilitating the
consummation or performance of any of the Contemplated Transactions in
accordance with this Agreement; and
(viii) a lease in the form of EXHIBIT 2.8 executed by ▇▇▇▇▇▇ ▇.
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▇▇▇▇▇▇, as lessor.
(b) Buyer will deliver to each Seller (or to such other Persons
designated below):
(i) the respective amounts of cash as set forth on EXHIBIT
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2.5(b)(i);
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(ii) Buyer's executed Subordinated Note and all associated
documents in the forms attached hereto as EXHIBIT 2.5(b)(ii) (collectively, the
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"Subordinated Note Documents").
(iii) any consulting fees or other compensation required to be paid
at Closing pursuant to the terms of the Consulting Agreements and/or the
Employment Agreement;
(iv) the Consulting Agreements and the Employment Agreement, all
executed by Buyer;
(v) a certificate executed by Buyer to the effect that, except as
otherwise stated in such certificate, each of Buyer's representations and
warranties in this Agreement was accurate in all respects as of the date of this
Agreement and is
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accurate in all respects as of the Closing Date as if made on the Closing Date
subject, however, to any limitations expressly set forth herein (the "Buyer's
Closing Certificate").
(vi) opinion(s) of counsel, dated the Closing Date, in the form of
EXHIBIT 2.5(b)(vi);
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(vii) such other documents as Sellers may reasonably request for
the purpose of (1) enabling its counsel to provide the opinion referred to in
Section 2.5(a), (2) evidencing the accuracy of any representation or warranty of
Buyer, (3) evidencing the performance by Buyer of, or the compliance by Buyer
with, any covenant or obligation required to be performed or complied with by
Buyer, or (4) otherwise facilitating the consummation of the Contemplated
Transactions; and
(viii) the lease in the form of EXHIBIT 2.8 executed by the named
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lessee therein.
2.6 TREATMENT OF CERTAIN LIABILITIES, REVENUES AND ADJUSTMENTS
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(a) Except as otherwise provided herein, Sellers shall discharge or shall
cause the Company to discharge, on or at Closing, and Buyers will acquire the
Company free of all the Company's loans, lines of credit, and interest bearing
indebtedness, whether secured or unsecured. This obligation shall not include,
however, the prepayment of any lease obligations for vehicles, equipment, or
other properties under lease which are listed on EXHIBIT 2.6(a)-1. A specific
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list of the obligations of the Sellers for the payment of loans, lines of credit
and interest bearing debt since December 31, 1995, the payment of which has or
will occur on or prior to the Closing, is attached as EXHIBIT 2.6(a)-2.
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Notwithstanding any other provisions of this Agreement, the payment of the debts
and obligations listed in EXHIBIT 2.6(a)-2, even if they are outside of the
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Ordinary Course of Business, and even if they constitute a material change in
the operation of the business, shall not constitute a Breach of this Agreement
by the Sellers, nor a Breach of any representations, warranties, or covenants
made by the Sellers herein. To the extent that the obligations of the Sellers
as defined in this paragraph, or otherwise included on EXHIBIT 2.6(a)-2, remain
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outstanding as of the Closing Date, any cash on hand in the Company at the Cash
Effective Closing Date shall be deemed applied to any such obligations, and any
remaining balance of such obligations not so satisfied shall reduce the Purchase
Price as provided in Paragraph 2.7(b).
(b) Sellers shall also discharge or shall cause the Company to fully
discharge, on or at Closing all operating and administrative expenses of the
Company arising or related to the period prior to the Closing Date, including,
without limitation, accounts payable, insurance premiums, fees, lease payments,
tariffs and assessments related to the period up to the Closing
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Date (collectively, "Pre-Closing Payables"), provided, however, Sellers shall
not be required to discharge or caused to be discharged, and Buyer will acquire
the Company subject to, Pre-Closing Payables which were incurred by the Company
in the usual, regular and ordinary manner, on a basis consistent with past
practices (and otherwise in the Ordinary Course of Business) which, except as
otherwise provided in EXHIBIT 2.6(b), are not more than thirty (30) days past
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due. Sellers shall not be responsible for federal and state income taxes for
the Company for calendar year 1996 and accrued employee bonuses.
(c) Sellers shall also discharge or shall cause the Company to fully
discharge, on or at Closing, all severance or other liabilities to employees
which may vest or become payable on the sale of or change of ownership or
control of the Company or of its assets, including without limitation any
liability arising out of or triggered by the Contemplated Transactions.
2.7 ADJUSTMENTS TO PURCHASE PRICE
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(a) Sellers shall be responsible for payments of all past-due sales taxes and
penalties thereon owed by the Company as of the Closing Date, including, without
limitation, the taxes, penalties and interest set forth in EXHIBIT 3.9. Any
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such taxes and any interest and penalties thereon shall reduce the Purchase
Price by that amount. The estimated amount of such taxes, interest and
penalties is $628,060.42, which shall be the Purchase Price Adjustment at
Closing. To the extent that any such taxes, penalties and interest exceed the
estimated amount, such excess shall be reimbursed from the Post-Closing Escrow
Fund, and to the extent that the estimated amount is less than such liabilities,
the Sellers shall be reimbursed by the Buyer. To the extent that the Company
has not paid such past-due sales taxes, interest and penalties prior to Closing,
Buyer agrees to cause the Company to pay such past-due sales taxes, interest and
penalties up to a total of the estimated amount of $628,060.42.
(b) To the extent that the Sellers have not caused the Company to discharge
on or before Closing, the loans and other interest-bearing indebtedness as set
forth in Paragraph 2.6(a), the cash proceeds in the Company as of the Cash
Effective Closing Date shall be applied to reduce such indebtedness. To the
extent that any such indebtedness remains unsatisfied after such application of
the cash balances of the Company, the Purchase Price shall be decreased by the
amount of any such remaining obligation, and the Buyer shall satisfy such
indebtedness on or at the Closing. In the event the cash on hand in the Company
at the Cash Effective Closing Date exceeds the amount of any obligation required
to be discharged under Section 2.6(a), the Purchase Price shall be increased by
the amount of any such excess which excess shall be paid to Sellers at closing
as an adjustment to the Purchase Price.
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(c) In the event the Closing does not occur on or prior to December 2, 1996,
the Purchase Price shall be increased by an amount equal to 5% per annum on
$30,175,000 for the period commencing on December 3, 1996 and continuing until
and including the day of the Closing which additional amount shall be paid in
cash to Sellers at the Closing.
2.8 HEADQUARTERS
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At Closing a lease in the form attached hereto as EXHIBIT 2.8 shall be
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executed and delivered by the parties thereto.
3. REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers and the Company represent and warrant to Buyer as follows:
3.1 ORGANIZATION AND GOOD STANDING
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(a) Each of TTC and TT-Carolina are corporations duly organized, validly
existing, and in good standing under the laws of its jurisdiction of
incorporation, with full corporate power and authority to conduct its business
as it is now being conducted, to own or use the properties and assets that it
purports to own or use, and to perform all its obligations under the Contracts.
TTC is duly qualified to do business as a foreign corporation and is in good
standing under the laws of the states listed in EXHIBIT 3.1(a)-1 hereof, which
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are all of the states which the nature of the activities conducted by it
requires such qualification (unless the failure to so qualify would not have a
material adverse effect on its financial condition or operations or impair its
right to enforce any material agreement to which it is a party). TT-Carolina is
duly qualified to do business as a foreign corporation and is in good standing
under the laws of the states listed in EXHIBIT 3.1(a)-2 hereof, which are all of
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the states which the nature of the activities conducted by it requires such
qualification (unless the failure to so qualify would not have a material
adverse effect on its financial condition or operations or impair its right to
enforce any material agreement to which it is a party). Neither TTC nor TT-
Carolina has been a party to a merger. TTC has no and has never had any
subsidiaries, other than TT-Carolina. TT-Carolina has no and has never had any
subsidiaries.
(b) Sellers have delivered to Buyer copies of the Organizational Documents of
TTC and TT-Carolina. TTC's and TT-Carolina's principal place of business is,
and has been for the last five (5) years or if it has not done business for five
(5) years, for the entire period that it has done business, in Dallas County,
Alabama and neither TTC nor TT-Carolina has had any other offices, other
corporate names or done business in any other names during said five (5) year
period other than as disclosed on EXHIBIT 3.1(b).
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3.2 AUTHORITY; NO CONFLICT
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(a) This Agreement constitutes the legal, valid, and binding obligation of
the Sellers and the Company, enforceable against each of the Sellers and the
Company in accordance with its terms except as such enforcement may be limited
by bankruptcy, insolvency, and other similar laws affecting the rights and
remedies of creditors generally and general principles of equity, whether
applied by a court of law or equity. Upon the execution and delivery of the
Consulting Agreements and the Employment Agreement (collectively, the "Sellers'
Closing Documents"), the Sellers' Closing Documents will constitute the legal,
valid, and binding obligations of the parties (other than Buyer) enforceable
against each of them in accordance with their respective terms except as such
enforcement may be limited by bankruptcy, insolvency, and other similar laws
affecting the rights and remedies of creditors generally and general principles
of equity, whether applied by a court of law or equity. Each of the Sellers and
the Company has the absolute and unrestricted right, power, authority, and
capacity to execute and deliver this Agreement and the Sellers' Closing
Documents to which each is a party and to perform their obligations under this
Agreement and the Sellers' Closing Documents to which each is a party.
(b) Except as set forth in EXHIBIT 3.2.(b), neither the execution, delivery
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or performance of this Agreement nor any other consummation or performance of
any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time):
(i) contravene, conflict with, or result in a violation of (A) any
provision of the Organizational Documents of the Company, (B) any resolution
adopted by the board of directors or the stockholders of the Company, (C) any
duty owed by any of the Sellers or the Company to any Person, or (D) any Legal
Requirement, any Governmental Authorization or any Order to which the Company or
the Sellers, or any of the assets owned or used by the Company or the Sellers,
may be subject;
(ii) contravene, conflict with, or result in a violation or breach of
any provision of, or give any Person the right to declare a default or exercise
any remedy under, or to accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Contract to which the Company is a party, or any
contract or other agreement to which any Seller is a party, where such violation
or breach would have any material adverse effect on the Company.
(c) Except for notices or Consents described on EXHIBIT 3.2.(b) hereof,
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neither any of Sellers nor the Company is or will be required to give any notice
to or obtain any Consent from any Person, in connection with the execution,
delivery or performance of this Agreement or the consummation or other
performance of any of the Contemplated Transactions, the absence of which notice
or
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Consent would cause to occur or result in the occurrence of any of the events
described in Section 3.2(b)(i) and (ii).
3.3 CAPITALIZATION
--------------
(a) The authorized equity securities of TTC consist of 5,000 shares of voting
common stock, par value $1.00 per share, of which 5,000 shares are issued and
outstanding. Sellers are and will be on the Closing Date the record and
beneficial owners and holders of the Shares, free and clear of all Encumbrances.
▇▇▇▇▇▇ owns 2,000 Shares, ▇▇▇▇▇▇▇ owns 1,000 Shares, ▇▇▇▇▇▇ owns 500 Shares, and
▇▇▇▇▇▇ ▇▇. owns 1,500 Shares.
(b) The authorized equity securities of TT-Carolina consist of 5,000 shares
of common stock, par value $1.00 per share, of which 1,000 shares are issued and
outstanding. TTC owns all such shares.
(c) No legend or other reference to any purported Encumbrance appears upon
any certificate representing equity securities of TTC or TT-Carolina other than
customary legends restricting transfers under applicable securities laws. All
of the outstanding equity securities of TTC and TT-Carolina have been duly
authorized and validly issued and are fully paid and nonassessable. There are
no contracts or other agreements relating to the issuance, sale, or transfer of
any equity securities or other securities of TTC or TT-Carolina. None of the
outstanding equity securities or other securities of TTC or TT-Carolina was
issued in violation of the Securities Act or any other Legal Requirement.
Neither TTC or TT-Carolina owns, nor has any Contract to acquire, any equity
securities or other securities of any Person or any direct or indirect equity or
ownership interest in any other business
(d) There are no options, warrants or rights to acquire an interest in the
Company or in its shares.
3.4 FINANCIAL STATEMENTS
--------------------
Sellers have delivered to Buyer: (a) the audited balance sheet of the Company
as at December 31, 1995, and the related audited consolidated statement of
income, changes in stockholders' equity, and cash flow for such fiscal year then
ended, and (b) an unaudited balance sheet of the Company as at October 31, 1996
(the "Interim Balance Sheet") and the related unaudited consolidated statement
of income, changes in stockholders' equity, and cash flow for the 10 months then
ended, including in the case of (a) the notes thereto (EXHIBIT 3.4). Sellers
-----------
shall deliver to Buyer such other balance sheets, statements of income, changes
in stockholders' equity, cash flow and other financial statements of the Company
as Buyer may reasonably request. All such financial statements and notes fairly
present the financial condition and the results of operations, changes in
stockholders' equity, and cash flow of the
-12-
Company as at the respective dates of and for the periods referred to in such
financial statements, all in accordance with GAAP, subject, in the case of
interim financial statements, to normal recurring year-end adjustments (the
effect of which will not, individually or in the aggregate, be materially
adverse) and the absence of notes (that, if presented, would not differ
materially from those included in the December 31, 1995 balance sheet) and
subject to the disclosures set forth in EXHIBIT 3.4. The financial statements
-----------
referred to in this Section 3.4 reflect the consistent application of such
accounting principles throughout the periods involved, except as disclosed in
the notes to such financial statements. No financial statements of any Person
other than TTC and TT-Carolina are required by GAAP to be included in the
consolidated financial statements of the Company.
3.5 BOOKS AND RECORDS
-----------------
The books of account, minute books, stock record books, and other records of
the Company, all of which have been made available to Buyer, are complete and
correct in all material respects and have been maintained in accordance with
sound business practices. The minute books of the Company contain accurate and
complete records of all meetings held of, and corporate action taken by, the
stockholders, and no meeting of the stockholders has been held for which minutes
have not been prepared and are not contained in such minute books. The minute
books of the Company contain accurate records of meetings held by the Board of
Directors, and no meetings by the Board of Directors have been held for which
minutes have not been prepared and contained in such minute books, where actions
taken at any such meetings would be required by law to be formally approved by
the Board of Directors and included in the minutes. At the Closing, all of
those books and records will be in the possession of the Company.
3.6 BALANCE SHEETS ON THE CLOSING DATE
----------------------------------
(a) COMPANY ASSETS. Except as shown on EXHIBIT 3.6(a), on the Closing Date,
-------------- --------------
the Company shall own and have good title, without Encumbrance, to all of the
assets currently owned and used in conjunction with the operation of the
Company's business (which assets are reflected in the Company's Interim Balance
Sheet) (the "Company Assets"), including, without limitation:
(i) all rights and interest of the Company in and under the Telephone
Operating and License Agreements listed on EXHIBIT 3.15(a)(i);
------------------
(ii) all Installed Telephones listed on EXHIBIT 3.6(a)(ii)-1 and all
--------------------
Installed Telephone Lines listed on EXHIBIT 3.6(a)(ii)-2;
--------------------
(iii) all rights and interests of the Company in and under the Service
Agreements listed on EXHIBIT 3.15(a);
---------------
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(iv) all uninstalled Telephones, parts, hardware and equipment listed on
EXHIBIT 3.6(a)(iv) (subject to turn over of inventory in the Ordinary Course of
------------------
Business);
(v) all vehicles listed on EXHIBIT 3.6(a)(v); and
-----------------
(vi) all other furniture, fixtures, equipment, personalty or
intellectual property of any kind used by the Company in the operation of its
business, including without limitation, each of those items having a value in
excess of $1,000 listed on EXHIBIT 3.6(a)(vi).
------------------
(b) LIABILITIES. Other than the liabilities listed on EXHIBIT 3.6(b), (the
----------- --------------
"Continuing Liabilities"), the Company shall have no liabilities as of the
Closing Date.
3.7 ACCOUNTS RECEIVABLE
-------------------
(a) Except as may be otherwise reflected on EXHIBIT 3.7, all accounts
-----------
receivable of the Company that are reflected on the Interim Balance Sheet or on
the accounting records of the Company as of the Closing Date (collectively, the
"Accounts Receivable") represent or will represent valid obligations arising
from sales actually made or services actually performed in the Ordinary Course
of Business. Unless paid prior to the Closing Date, the Accounts Receivable are
or will be as of the Closing Date current and collectible net of the respective
reserves shown on the Interim Balance Sheet or on the accounting records of the
Company as of the Closing Date (which reserves are adequate and calculated
consistent with past practice and, in the case of the reserve as of the Closing
Date, will not represent a greater percentage of the Accounts Receivable as of
the Closing Date than the reserve reflected in the Interim Balance Sheet does of
the Accounts Receivable reflected therein and will not represent a material
adverse change in the composition of such Accounts Receivable in terms of
aging). Subject to such reserves, each of the Accounts Receivable either has
been or will be collected in full, without any set-off, within ninety days after
the day on which it first becomes due and payable. There is no contest or
claim, other than returns in the Ordinary Course of Business, under any Contract
with any obligor of an Accounts Receivable relating to the amount or validity of
such Accounts Receivable. EXHIBIT 3.7 hereof contains a complete and accurate
-----------
list of all Accounts Receivable as of the date of the Interim Balance Sheet,
which list sets forth the aging of such Accounts Receivable.
(b) Sellers represent and warrant that from and after the date of the Interim
Balance Sheet (as defined in Section 3.4) through the Closing Date: (i) the
Company has collected all sums and amounts due the Company, whether evidenced in
writing, on account, designated as a receivable or otherwise (collectively,
"Pre-Closing Receivables"), only in its usual, regular and ordinary manner, on a
basis consistent with past practices (and
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otherwise in the Ordinary Course of Business); and (ii) the Company has not and
will not accelerate collection of the Pre-Closing Receivables.
3.8 NO UNDISCLOSED LIABILITIES
--------------------------
Except as set forth hereinafter in EXHIBIT 3.9 hereof, the Company has no
-----------
material liabilities of any nature (whether absolute, accrued, contingent, or
otherwise) and Sellers know of no basis for assertion against the Company of any
such material liability, except for liabilities reflected or reserved against in
the Interim Balance Sheet and current liabilities incurred in the Ordinary
Course of Business since the date thereof.
3.9 TAXES
-----
(a) Except as set forth in EXHIBIT 3.9, the Company has filed or caused to be
-----------
filed all Tax Returns that are or were required to be filed by or with respect
to any of them, either separately or as a member of a group of corporations,
pursuant to applicable Legal Requirements. Sellers have delivered to Buyer
copies of, and EXHIBIT 3.9 hereof contains a complete and accurate list of, all
-----------
federal and state income tax returns, filed by the Company since 1991. The
Company has paid, or made provision for the payment of, all taxes that have or
may have become due pursuant to those Tax Returns or otherwise, or pursuant to
any assessment received by Sellers or the Company, except such Taxes, if any, as
are listed in EXHIBIT 3.9 hereof and are being contested in good faith and as to
-----------
which adequate reserves (determined in accordance with GAAP) have been provided
in the Interim Balance Sheet. Notwithstanding the foregoing, Sellers shall have
no responsibility for federal and state income taxes for calendar year 1996.
(b) EXHIBIT 3.9 contains a complete and accurate list of all audits of all
-----------
such Tax Returns. All deficiencies proposed as a result of such audits have
been paid, reserved against, settled, or, as described in EXHIBIT 3.9 hereof,
-----------
are being contested in good faith by appropriate proceedings. EXHIBIT 3.9
-----------
hereof describes all adjustments to the United States federal income Tax Returns
filed by the Company or any group of corporations including the Company for all
taxable years since 1991, and the resulting deficiencies proposed by the IRS.
Except as described in EXHIBIT 3.9, no Seller nor the Company has given or been
-----------
requested to give waivers or extensions (or is or would be subject to a waiver
or extension given by any other Person) of any statute of limitations relating
to the payment of Taxes of the Company or for which the Company may be liable.
(c) There exists no proposed tax assessment against the Company except as
disclosed in the Interim Balance Sheet or in EXHIBIT 3.9 hereof. Except as
-----------
shown on EXHIBIT 3.9, all taxes that the Company is or was required by Legal
-----------
Requirements to withhold or collect have been duly withheld or collected and, to
-15-
the extent required, have been paid to the proper Governmental Body or other
Person.
(d) All Tax Returns filed by (or that include on a consolidated basis) the
Company are true, correct, and complete. There is no tax sharing agreement that
will require any payment by the Company after the date of this Agreement. The
Company is not, nor within the five-year period preceding the Closing Date has
been, an "S" corporation.
3.10 NO MATERIAL ADVERSE CHANGE
--------------------------
Since the date of the Company's Interim Balance Sheet, there has not been any
material adverse change in the business, client relations, operations, assets of
the Company, and to the best Knowledge of Sellers and Company, no event has
occurred or circumstance exists that may result in such a material adverse
change. Without in any way limiting the generality of the foregoing, there
exists no actual or threatened terminations, cancellations or limitations of, or
any modification or change in (i) the current business relationship of the
Company with any material customer or group of customers whose business is
material to the operation of the Company's business; or (ii) the current
business relationship of the Company with any supplier, and the Company has no
reason to believe that any such customers or suppliers shall not continue a
business relationship with Buyer subsequent to the Closing on a basis no less
favorable to Buyer than that heretofore conducted; and (iii) to the best
Knowledge of Sellers and Company, there exists no other condition or state of
facts or circumstances which would adversely affect the Company's business or
prevent Buyer from conducting such business after the Closing on a basis no less
favorable to Buyer than that of which it has heretofore been conducted by the
Company.
3.11 EMPLOYEE BENEFITS
-----------------
(a) As used in this Agreement, the term "Employees of the Company" means, (i)
all active or former employees or directors of the Company, (ii) all employees
of the Company who, as of the Closing Date, are on workers' compensation,
military leave, other approved leaves of absences, long-term or short-term
disability, non-occupational disability and employees on layoff with recall
rights, (iii) all individuals who are covered under any "Employee Benefit Plan"
(as such terms is hereinafter defined) as a result of previously being described
in (i) or (ii) above, and (iv) beneficiaries or dependents under any Employee
Benefit Plan of anyone described in (i) through (iii) above.
(b) EXHIBIT 3.11 sets forth a list of each "employee benefit plan" (as
------------
defined by Section 3(3) of ERISA, and any other bonus, profit sharing pension,
compensation, deferred compensation, stock option, stock purchase, fringe
benefit, severance, post-retirement, scholarship, disability, sick leave,
-16-
vacation, individual employment, commission, bonus, payroll practice, retention,
or other plan, agreement, policy, trust fund or arrangement, whether written or
oral (each such plan, agreement, policy, trust fund or arrangement is referred
to herein as an "Employee Benefit Plan", and collectively, the "Employee Benefit
Plans") that is currently in effect, or which has been approved before the date
hereof but is not yet effective, for the benefit of any Employee of the Company
or with respect to which the Company has or has had any obligation, and any
Employee Benefit Plan that was maintained since the organization of the Company
with respect to which the Company has any obligation. Except as disclosed on
EXHIBIT 3.11, there are no other benefits to which any Employee of the Company
------------
is entitled or for which the Company has any obligation.
(c) The Company has delivered to Buyer with respect to each Employee Benefit
Plan, true and complete copies of (i) the documents embodying and relating to
the plan, including, without limitation, the current plan documents and
documents creating any trust maintained pursuant thereto, all amendments,
investment management agreements, administrative service contracts, group
annuity contracts, insurance contracts, collective bargaining agreements, the
most recent summary plan description with each summary of material modification,
if any, and employee handbooks, (ii) annual reports including but not limited to
Forms 5500, 990 and 1041 for the last three (3) years for the plan and any
related trust, (iii) actuarial valuation reports and financial statements for
the last three years, and (iv) each communication involving the plan or any
related trust to or from the IRS, Department of Labor ("DOL"), Pension Benefit
Guaranty Corporation ("PBGC") or any other governmental authority including,
without limitation, the most recent determination letter received from the IRS
pertaining to any Employee Benefit Plan intended to qualify under Sections
401(a) or 501(c)(9) of the Code.
(d) The Company has no obligation to contribute to or provide benefits
pursuant to, nor has it ever maintained or contributed to, and it has no other
liability of any kind with respect to, (i) a "multiple employer welfare
arrangement" (within the meaning of Section 3(40) of ERISA), (ii) a "plan
maintained by more than one employer" (within the meaning of Section 413(c) of
the Code), (iii) a plan intended to be, or represented to be, described in
Section 401(a) of the Code, (iv) a "multiemployer plan" (within the meaning of
Section 4001(a)(3) of ERISA or Section 414(f) of the Code), or (v) a plan
subject to Parts 2, 3 or 4 of Subtitle B of Title I of ERISA. No "ERISA
Affiliate" (as that term is hereinafter defined) has any obligation to
contribute to or provide benefits pursuant to, or has any other liability of any
kind with respect to, a multiemployer plan or a plan subject to Section 412 of
the Code, Part 3 of Subtitle B of Title I of ERISA or Title IV of ERISA. As
used in this Agreement the term "ERISA Affiliate" means any trade or business
(other than the Company) whether or not incorporated, which has employees who
are or have been at any date of determination
-17-
occurring within the preceding six (6) years, treated pursuant to Section
4001(a)(14) of ERISA and/or Section 414 of the Code as employees of a single
employer which includes the Company.
(e) The Company is not liable for, and after the Closing Date, Buyer shall
not be liable for, any contribution, tax, lien, penalty, costs, interest, claim,
loss, action, suit, damage, cost assessment or other similar type of liability
or expense of any ERISA Affiliate (including predecessors thereof) with regard
to any Employee Benefit Plan maintained, sponsored or contributed to by an ERISA
Affiliate (if a like definition of Employee Benefit Plan were applicable to the
ERISA Affiliate in the same manner as it applies to the Company).
(f) EXHIBIT 3.11 lists the name of each Employee of the Company who has
------------
experienced a "Qualifying Event" (as defined in Section 4980B of the Code and
Section 601, et seq. of ERISA) (such statutory provisions and predecessors
thereof are referred to herein collectively as "COBRA") with respect to an
Employee Benefit Plan who is eligible for "Continuation Coverage" (as defined in
COBRA) and whose maximum period for Continuation Coverage required by COBRA has
not expired. Included in such list are the current address for each such
individual, the date and type of each Qualifying Event, whether the individual
who has not yet elected Continuation Coverage, the date on which such individual
was notified of his or her rights to elect Continuation Coverage.
(g) With respect to each Employee Benefit Plan and except as otherwise set
forth on EXHIBIT 3.11:
------------
(i) no claim, lawsuit, arbitration or other action has been asserted or
instituted or threatened in writing against the Employee Benefit Plan, any
trustee or fiduciaries thereof, the Company, any Employee of the Company or any
of the assets of the Employee Benefit Plan or any related trust;
(ii) the Employee Benefit Plan complies with and has been maintained and
operated in accordance with its respective terms and the terms and the
provisions of applicable law, including, without limitation, ERISA and the IRC;
(iii) the Employee Benefit Plan is not under audit or investigation by
the IRS or the DOL or any other governmental authority, and no such completed
audit, if any, has resulted in the imposition of any tax, interest or penalty;
and
(iv) each Employee Benefit Plan may be unilaterally terminated by the
Company on not more than ninety (90) days written notice with no further
liability to the Company.
(h) The consummation of the Contemplated Transactions will not give rise to
any liability for any employee benefits, including, without limitation,
liability for severance pay,
-18-
unemployment compensation, termination pay or withdrawal liability, or
accelerate the time of payment or vesting or increase the amount of compensation
or benefits due to any Employee of the Company. No amounts payable under any
Employee Benefit Plan will fail to be deductible for federal income tax purposes
by virtue of Section 280G of the Code.
(i) Except as set forth on EXHIBIT 3.11, no Employee Benefit Plan in any way
------------
provides for any benefits of any kind whatsoever (other than under COBRA, the
Federal Social Security Act or any Employee Benefit Plan qualified under Section
401(a) of the Code) to any Employee of the Company who, at the time the benefit
is to be provided, is a former director or employee of, or other provider of
services to, the Company or an ERISA Affiliate (or a beneficiary of any such
person), or any other Employee of the Company, nor have any representations,
agreements, covenants or commitments been made to provide such benefits.
3.12 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS AND
-------------------------------------------------------------------
ORDERS
------
(a) Except as set forth in EXHIBIT 3.12 hereof to the best knowledge of
------------
Sellers and Company:
(i) The Company is, and at all times has been, in compliance in all
material respects with each Legal Requirement, Governmental Authorization and
Order that is or was applicable to it or to the conduct or operation of its
business or the ownership or use of any of its assets;
(ii) No event has occurred or circumstance exists that in any material
respect (with or without notice or lapse of time) (A) may constitute or result
in a violation by the Company of, or a failure on the part of the Company to
comply with, any Legal Requirement, Governmental Authorization or Order, or (B)
may give rise to any obligation on the part of the Company to undertake, or to
bear all or any portion of the cost of, any remedial action of any nature; and
(iii) Neither the Sellers or the Company has received, at any time since
1991, any notice or other communication (whether oral or written) from any
Governmental Body or any other Person regarding (A) any actual, alleged,
possible, or potential violation of the Company, or failure by the Company to
comply with, any Legal Requirement, Governmental Authorization or Order, which
violation or failure has not been corrected or complied with, or (B) any actual,
alleged, possible, or potential obligation on the part of the Company to
undertake, or to bear all or any portion of the cost of, any remedial action of
any nature.
(b) EXHIBIT 3.12 to the best knowledge of Sellers and Company (i) contains a
------------
complete and accurate list of each
-19-
Governmental Authorization that relates to the business of, or to any of the
assets used in the operation of the Company; (ii) each Governmental
Authorization of the Company is valid and in full force and effect; and (iii)
the Governmental Authorizations listed in EXHIBIT 3.12 hereof collectively
------------
constitute all of the Governmental Authorizations necessary to permit the
Company to lawfully conduct and operate the business of the Company in the
manner they currently conduct and operate such business and to permit the
Company to own and use the assets used in the operation of the Company in the
manner in which they currently own and use such assets. A true and complete
copy of each Governmental Authorization listed in EXHIBIT 3.12 has been
------------
delivered to Buyer.
3.13 LEGAL PROCEEDINGS
-----------------
(a) Except as set forth in EXHIBIT 3.13(a) hereof, there is no pending
---------------
Proceeding:
(i) that has been commenced by or against the Company; or
(ii) to the best of Sellers' Knowledge, that may materially affect the
business of the Company or any of the assets owned or used by the Company; or
(iii) that challenges, or that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the Contemplated
Transactions or any Contract.
To the best Knowledge of Sellers and Company, no such Proceeding has been
Threatened, and no event has occurred or circumstance exists that may reasonably
be expected to give rise to or serve as a basis for the commencement of any such
Proceeding. The Proceedings listed in EXHIBIT 3.13(a) hereof will not have a
---------------
material adverse effect on the business, operations, assets, condition, or
prospects of the Company.
(b) All material Proceedings in which the Company has been named since 1991
(other than those Proceedings involving only the ordinary course of business of
the Company), and all material Proceedings relating to the Company in which any
Seller has been named since 1991 (other than those Proceedings involving only
the ordinary course of the business of the Company) are listed on EXHIBIT
-------
3.13(b). Sellers have delivered to Buyer true and complete copies of all
-------
material pleadings and other documentation relating to each Proceeding listed on
EXHIBIT 3.13(b) which were requested by Buyer.
---------------
3.14 ABSENCE OF CERTAIN CHANGES AND EVENTS
-------------------------------------
Except as set forth in EXHIBIT 3.14 hereof, since the date of the Interim
------------
Balance Sheet, the Company has conducted its
-20-
business only in the Ordinary Course of Business and there has not been any:
(a) change in the Company's authorized or issued capital stock; grant of any
stock option or right to purchase shares of capital stock; issuance of any
security convertible into such capital stock; grant of any registration rights;
purchase, redemption, retirement, or other acquisition by the Company of any
shares of any such capital stock; or declaration or payment of any dividend or
other distribution or payment in respect of shares of capital stock;
(b) increase of any bonuses, salaries, or other compensation to any
stockholder, director, officer, or (except in the Ordinary Course of Business)
employee or entry into any employment, severance, or similar Contract with any
director, officer, or employee;
(c) adoption of, or increase in the payments to or benefits under, any profit
sharing, bonus, deferred compensation, savings, insurance, pension, retirement,
or other employee benefit plan for or with any employees of the Company;
(d) damage to or destruction or loss of any asset or property of the Company,
whether or not covered by insurance, materially and adversely affecting the
properties, assets, business, financial condition, or prospects of the Company;
(e) entry into, termination of, or receipt of notice of termination of (i)
any license, distributorship, dealer, sales representative, joint venture,
credit, or similar agreement, or (ii) any Contract or transaction having any
material adverse effect on the business, financial condition or prospects of the
Company;
(f) sale (other than sales of inventory and accounts receivable in the
Ordinary Course of Business), lease, or other disposition of any asset or
property of the Company or mortgage, pledge, or imposition of any lien or other
encumbrance on any material asset or property of the Company;
(g) cancellation or waiver of any claims or rights with a value to the
Company in excess of $10,000;
(h) material change in the accounting methods used by the Company; or
(i) material adverse change in the financial condition, assets, liabilities
or business of the Company;
(j) adverse Order delivered or served upon the Company or entered in a
proceeding to which the Company is a party or is otherwise known by Sellers or
Company which has a material adverse effect on the business of the Company;
-21-
(k) except as disclosed in EXHIBIT 3.14(k), change in the method of
---------------
collecting accounts receivable or acceleration in the collection of accounts
receivable;
(l) failure to pay expenses incurred in connection with the operation of the
Company on a timely basis;
(m) agreement, whether oral or written, by the Company to do any of the
foregoing.
3.15 CONTRACTS; NO DEFAULTS
----------------------
(a) Sellers have delivered to Buyer true and complete copies of and EXHIBITS
--------
3.15(a)(i)-(vii) hereof contain a complete and accurate list, of the following:
----------------
(i) each Telephone Operating and License Agreement is described on
EXHIBIT 3.15(a)(i);
------------------
(ii) each Service Agreement is described on EXHIBIT 3.15(a)(ii);
-------------------
(iii) each lease, rental or occupancy agreement, license, installment and
conditional sale agreement, and other Contract affecting the ownership of,
leasing of, title to, use of, or any leasehold or other interest in, any real or
personal property (except personal property leases and installment and
conditional sales agreements having a value per item or aggregate payments of
less than $5,000 and with terms of less than one year) is described on EXHIBIT
-------
3.15(a)(iii);
------------
(iv) each licensing agreement or other Contract with respect to the
Intellectual Property Assets is described in EXHIBIT 3.15(a)(iv);
-------------------
(v) each joint venture, partnership, and other Contract (however named)
involving a sharing of profits, losses, costs, or liabilities by the Company
with any other Person is described on EXHIBIT 3.15(a)(v);
------------------
(vi) each Contract not otherwise listed in EXHIBITS 3.15(a)(i)-(v) above
-----------------------
that (1) provides for payments to or by any Person based on sales, purchases, or
profits, other than direct payments for goods, in excess of $5,000, or (2)
involves performance of services or delivery of goods or materials by the
Company of an amount or value in excess of $5,000 or (3) involves expenditures
or receipts by the Company in excess of $5,000, is described on EXHIBIT
-------
3.15(a)(vi);
-----------
(vii) each power of attorney that is currently effective and outstanding
is described on EXHIBIT 3.15(a)(vii);
--------------------
-22-
EXHIBITS 3.15(a)(i)-(vii) hereof set forth reasonably complete details
-------------------------
concerning such Contracts, including the date of the Contracts, the parties to
the Contracts and the material terms of the Contracts. Additionally, EXHIBIT
-------
3.15(a)(i) separately classifies the Telephone Operating and License Agreement
----------
under the subcategories inmate phones and pay phones, and EXHIBIT 3.15(a)(ii)
-------------------
separately classifies the Service Agreements under the subcategories Long
Distance Service Agreements, Billing and Collection Agreements, Parts and
Supplies Agreements and Operator Service Agreements.
(b) Except as set forth in EXHIBIT 3.15(b) hereof:
---------------
(i) neither the Sellers (nor any Person related or affiliated with the
Sellers) has or may acquire any rights under, and neither the Sellers (nor any
Person related or affiliated with them) has or may become subject to any
obligation or liability under, any Contract that relates to the business of, or
any of the assets used in the operation of the Company; and
(ii) to the best knowledge of Sellers and Company, neither the Company
nor any officer, director, agent, employee, consultant, or contractor of the
Company is bound by any contract or agreement that purports to limit the ability
of the Company or such officer, director, agent, employee, consultant, or
contractor to engage in or continue any conduct, activity, or practice relating
to the business of the Company.
(c) Except as set forth in EXHIBIT 3.15(c) hereof, with respect to each
---------------
Contract identified or required to be identified in EXHIBIT 3.15(a) hereof
---------------
(and/or any other material Contract by which the Company is bound even if not so
identified):
(i) such Contract is in full force and effect and is valid and
enforceable in accordance with its terms;
(ii) the Company is, and at all times since the later of 1991 or the
inception of the Contract, has been, in material compliance with all applicable
terms and requirements of such Contract;
(iii) each other Person that has or had any obligation or liability under
such Contract is, and at all times since the later of 1991 or the inception of
the Contract, has been, in material compliance with all applicable terms and
requirements of such Contract;
(iv) to the best knowledge of Sellers and Company, no event has occurred
or circumstance exists that (with or without notice or lapse of time) may
contravene, conflict with, or result in a violation or breach of, or give the
Company or other Person the right to declare a default or exercise any remedy
under, or to accelerate the maturity or performance of, or to cancel, terminate,
or modify, any such Contract; and
-23-
(v) neither the Company nor Sellers has given to or received from any
other Person, at any time since the later of 1991 or the inception of the
Contract, any notice or other communication (whether oral or written) regarding
any actual, alleged, possible, or potential violation or breach by the Company
of, or default by the Company under, such Contract where such notice or
communication or the Contract involved therein, would have any material adverse
effect on the Company.
(vi) except as set forth in EXHIBIT 3.15(c)(vi), to the best knowledge
-------------------
of Sellers and Company, there are no renegotiations of, attempts to renegotiate,
or outstanding rights to renegotiate any material amounts paid or payable to the
Company under such Contracts with any Person and, no such Person has made
written demand for such renegotiation.
(vii) such Contracts have been entered into in the Ordinary Course of
Business and have been entered into without the commission of any act alone or
in concert with any other Person, or any consideration having been paid or
promised, that is or would be in violation of any Legal Requirement.
(viii) such Contracts constitute the sole and entire agreement among the
parties thereto with respect to the subject matter thereof, and there are no
other agreements or understandings among the parties which in any way pertain to
or otherwise materially affect such Contracts.
3.16 INSURANCE
---------
(a) Sellers have delivered to Buyer true and complete copies of and EXHIBIT
-------
3.16(a) contains a complete and accurate list of all policies of insurance to
-------
which the Company is a party or under which the Company, or any director of the
Company, is covered.
(b) EXHIBIT 3.16(b) hereof sets forth, by year, for the current policy year
---------------
and each of the two preceding policy years (i) a summary of the loss experience
under each policy; (ii) a statement describing each claim under an insurance
policy for an amount in excess of $25,000; and (iii) a statement describing the
loss experience for all claims that were self-insured, including the number and
aggregate cost of such claims.
(c) Except as set forth on EXHIBIT 3.16(c) hereof:
---------------
(i) All policies to which the Company is a party or that provide
coverage to Sellers, the Company, or any director or officer of the Company:
(A) are valid, outstanding, and enforceable;
-24-
(B) are issued by an insurer that is to the best of knowledge of
Sellers financially sound and reputable;
(C) taken together, are deemed by the Company to be adequate
insurance coverage for the assets and the operations of the Company;
(D) are sufficient for compliance with all Legal Requirements and
Contracts to which the Company is a party or by which any of them is bound;
(E) will continue in full force and effect following the
consummation of the Contemplated Transactions with respect to losses or claims
accruing or arising prior to the Closing Date; and
(F) do not provide for any retrospective premium adjustment or
other experienced-based liability on the part of the Company, except with
respect to Workmen's Compensation insurance.
(ii) No Seller nor the Company has received with respect to the Company
(A) any refusal of coverage or any notice that a defense will be afforded with
reservation of rights, or (B) any notice of cancellation or any other indication
that any insurance policy is no longer in full force or effect or will not be
renewed or that the issuer of any policy is not willing or able to perform its
obligations thereunder.
(iii) The Company has paid all premiums due, and have otherwise
performed all of their respective obligations, under each policy to which the
Company is a party or that provides coverage to the Company or a director
thereof.
(iv) The Company has given notice to the insurer of all material claims
that may be insured thereby.
3.17 ENVIRONMENTAL MATTERS
---------------------
Except as set forth in EXHIBIT 3.17:
------------
(a) The Company and the Company Assets are, and at all times have been, in
full compliance with, and have not been and are not in violation of or liable
under, any Environmental Laws.
(b) The Company has not generated, handled, manufactured, processed, treated,
stored, used, transferred, released, disposed of or otherwise conducted any
hazardous process or activity with respect to (collectively, "Hazardous
Activities") any hazardous substances, hazardous wastes, hazardous wastes
constituents and reaction by-products, hazardous materials, pesticides, oil and
other petroleum products, pollutants, and/or toxic substances, including
asbestos and polychlorinated biphenyls as those terms are defined pursuant to
Environmental Laws (collectively,
-25-
"Hazardous Substances"), except in full compliance with Environmental Laws.
(c) Neither Sellers nor the Company has any basis to expect, nor has any of
them or any other Person for whose conduct they are or may be held to be
responsible received, any actual or Threatened Order, notice, or other
communication from any Person that relates to Hazardous Activities, Hazardous
Substances, or any alleged actual or potential violation or failure to comply
with any Environmental Law with respect to any properties or assets (whether
real, personal, or mixed) in which the Company has or had an interest.
(d) Neither Sellers, the Company nor any other Person for whose conduct they
are or may be held to be responsible, has any existing liability, obligations or
other responsibility arising from or under Environmental Laws that would have a
material adverse effect on the Company, and neither Sellers nor the Company have
any basis to expect such liability, obligations or responsibilities to arise or
occur.
(e) For purposes hereof, Environmental Laws shall mean all Legal Requirements
that relate or pertain to environmental matters, pollution and/or public health,
safety or welfare, including without limitation, the Resource Conservation and
Recovery Act (42 U.S.C. 6901 et seq.), as amended, the Comprehensive
------
Environmental Response, Compensation and Liability Act (42 U.S.C. 9601 et seq.),
------
as amended, the Federal Clean Water Act (33 U.S.C. 1251 et seq.), as amended,
------
and state and federal environmental clean up programs.
(f) Except for leasehold interests as lessee, Company owns no interest (and
has never owned any interest) in real property.
3.18 EMPLOYEES
---------
(a) EXHIBIT 3.18(a) hereof contains a complete and accurate list of the
---------------
following information for each employee or director of the Company, including
each employee on leave of absence or layoff status: employer; name; job title;
current compensation paid or payable and any change in compensation since
January 1, 1996; vacation accrued; and service credited for purposes of vesting
and eligibility to participate under the Company's pension, retirement, profit-
sharing, thrift-savings, deferred compensation, stock bonus, stock option, cash
bonus, employee stock ownership (including investment credit or payroll stock
ownership), severance pay, insurance, medical, welfare, or vacation plan, other
Employee Pension Benefit Plan or Employee Welfare Benefit Plan, or any other
employee benefit plan or any Director Plan.
(b) No officer or director of the Company and to the Sellers' best knowledge
no employee of the Company is a party to, or is otherwise bound by, any
agreement or arrangement, including
-26-
any confidentiality, noncompetition, or proprietary rights agreement, between
such officer or director and any other Person ("Proprietary Rights Agreement")
that in any way adversely affects or will affect (i) the performance of his
duties as an employee, officer or director of the Company, or (ii) the ability
of the Company to conduct its business, including any Proprietary Rights
Agreement with Sellers or the Company by any such employee, officer or director.
Neither the Company nor the Sellers has knowledge that any director or officer
involved in the business or operations of the Company intends to terminate
his/her employment with the Company prior to December 31, 1997, except to the
extent that the Consulting Agreement may vary the employment of ▇▇▇▇▇▇.
(c) EXHIBIT 3.18(c) hereof contains a complete and accurate list of all
---------------
employment agreements, employment contracts, compensation arrangements and/or
any other Contract pertaining to employment related matters between the Company
and any of its employees (the "Employment Agreements"). The Sellers have
delivered to Buyer true and complete copies of all Employment Agreements. The
Employment Agreements may be terminated by the Company at any time without fee,
penalty or severance compensation or benefits. All employees of the Company are
employees at will and their employment may be terminated at any time by the
Company without fee, penalty, severance compensation or benefits, subject to any
applicable state or federal laws pertaining to terminations.
(d) EXHIBIT 3.18(d) hereof contains a complete and accurate list of the
---------------
following information for each retired employee or director of the Company, or
their dependents, receiving benefits or scheduled to receive benefits in the
future: name, pension benefit, pension option election, retiree medical
insurance coverage, retiree life insurance coverage, and other benefits.
3.19 LABOR RELATIONS; COMPLIANCE
---------------------------
Since 1991, the Company has not been nor is a party to any collective
bargaining or other labor Contract. Since 1991, there has not been, there is
not presently pending or existing, and there is not Threatened, (a) any strike,
slowdown, picketing, work stoppage, or employee grievance process, (b) any
Proceeding against or affecting the Company relating to the alleged violation of
any Legal Requirement pertaining to labor relations or employment matters,
including any charge or complaint filed by an employee or union with the
National Labor Relations Board, the Equal Employment Opportunity Commission, or
any comparable Governmental Body, organizational activity, or other labor or
employment dispute against or affecting any of the Company or their premises, or
(c) any application for certification of a collective bargaining agent. No
event has occurred or circumstance exists that could provide the basis for any
work stoppage or other labor dispute. There is no lockout of any employees by
the Company, and no such action is contemplated by
-27-
the Company. The Company has complied in all respects with all Legal
Requirements relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
the payment of social security and similar taxes, occupational safety and
health, and plant closing. The Company is not liable for the payment of any
compensation, damages, taxes, fines, penalties, or other amounts, however
designated, for failure to comply with any of the foregoing Legal Requirements.
3.20 INTELLECTUAL PROPERTY
---------------------
(a) Sellers have delivered to Buyer true and complete copies of, and EXHIBIT
-------
3.20 hereof contains a complete and accurate list of, all Contracts relating to
----
the Intellectual Property Assets.
(b) The Intellectual Property Assets are all those necessary for the
operation of the Company's business as it is currently conducted. The Company
is the owner of all right, title, and interest in and to each of the
Intellectual Property Assets, free and clear of all liens, security interests,
charges, encumbrances, equities, and other adverse claims, and has the right to
use, without payment to a third party, all of the Intellectual Property Assets.
(c) The Intellectual Property Assets and the use thereof by the Company does
not nor does the subject matter of any of the Intellectual Property Assets
infringe or is alleged to infringe any rights of any third party or is a
derivative work based on the work of a third party.
3.21 BANK ACCOUNTS
-------------
EXHIBIT 3.21 contains a complete and accurate list of each bank or financial
------------
institution in which the Company has an account or safe deposit box, including
address, account number and the names of persons authorized to draw thereon or
to have access thereto.
3.22 CERTAIN PAYMENTS
----------------
Since 1991, neither the Company nor any director or officer, nor to Sellers'
best knowledge any agent or employee of the Company, nor any Representative, has
directly or indirectly (a) made any illegal contribution, gift, bribe, rebate,
payoff, influence payment, kickback, or other illegal payment to any Person,
private or public, regardless of form, whether in money, property, or services
(i) to obtain favorable treatment in securing business, (ii) to pay for
favorable treatment for business secured, (iii) to obtain special concessions or
for special concessions already obtained, for or in respect of the Company, or
(iv) in violation of any Legal Requirement, and/or
-28-
(b) established or maintained any fund or asset that has not been recorded in
the books and records of the Company.
3.23 COMPANY REVENUES
----------------
The Company revenues, as measured by GAAP on a consolidated basis, from
Telephone and Operating License Agreements during the fiscal year ended 1995 was
not less than $19,000,000. The Company revenues, as measured by GAAP on a
consolidated basis, from Telephone and Operating License Agreements during the
ten month period ended October 31, 1996, was not less than $21,000,000.
3.24 DISCLOSURE
----------
No representation or warranty of Sellers in this Agreement omits to state a
material fact necessary to make the statements herein or therein, in light of
the circumstances in which they were made, not misleading.
3.25 RELATIONSHIPS WITH RELATED PERSONS
----------------------------------
Except as set forth in EXHIBIT 3.25 hereof, neither any of the Sellers nor, to
------------
the best knowledge of Sellers, any Person related or affiliated with any Seller
or the Company is a party to any Contract with, or has any claim or right
against, the Company. Neither any of the Sellers nor, to the best knowledge of
Sellers and Company, any Person related or affiliated with any of the Sellers
owns, directly or indirectly, any interest in any person or entity that is a
competitor, customer or supplier of the Company, that otherwise has any business
dealings with the Company (except as set forth in EXHIBIT 3.25) or that is
------------
engaged in the same or similar business as the Company.
3.26 BROKERS OR FINDERS
------------------
Except as set forth in EXHIBIT 3.26, Sellers and their agents have incurred no
------------
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement.
3.27 AMENDMENTS OF REPRESENTATIONS AND WARRANTIES. Sellers and Company shall
--------------------------------------------
have the right to amend their representations and warranties contained in this
Agreement (and/or to amend the exhibits attached hereto) to the extent
appropriate to reflect changes occurring after the date of this Agreement and/or
events or circumstances becoming known to Sellers or Company after the date of
this Agreement and prior to the Closing. Any such amendment(s) shall not
constitute a Breach of this Agreement by Sellers or Company nor give rise to any
obligations of indemnity on the part of the Seller or Company. In the event any
such amendments are proposed by Sellers and/or Company which amendments are not
approved by Buyer, then Buyer shall have no
-29-
further obligation to close and consummate the transactions contemplated herein.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
4.1 ORGANIZATION AND GOOD STANDING
------------------------------
Buyer is a corporation duly organized, validly existing, and in good standing
under the laws of the state of its incorporation.
4.2 AUTHORITY; NO CONFLICT
----------------------
(a) This Agreement constitutes the legal, valid, and binding obligation of
Buyer, enforceable against Buyer in accordance with its terms. Upon the
execution and delivery by Buyer of the Consulting Agreements, the Employment
Agreement and the Buyer's Closing Certificate (collectively, the "Buyer's
Closing Documents"), the Buyer's Closing Documents will constitute the legal,
valid, and binding obligations of Buyer, enforceable against Buyer in accordance
with their respective terms. Buyer has the absolute and unrestricted right,
power, and authority to execute and deliver this Agreement and the Buyer's
Closing Documents and to perform its obligations under this Agreement and the
Buyer's Closing Documents.
(b) Except as set forth in EXHIBIT 4.2, neither the execution and delivery of
------------
this Agreement by Buyer nor the consummation or performance of any of the
Contemplated Transactions by Buyer will give any Person the right to prevent,
delay, or otherwise interfere with any of the Contemplated Transactions pursuant
to:
(i) any provision of Buyer's Organizational Documents;
(ii) any resolution adopted by the board of directors or the
stockholders of Buyer;
(iii) any Legal Requirement or Order to which Buyer may be subject; or
(iv) any contract to which Buyer is a party or by which Buyer may be
bound.
Except as set forth in EXHIBIT 4.2, Buyer is not and will not be required to
-----------
obtain any Consent from any Person in connection with the execution and delivery
of this Agreement or the consummation or performance of any of the Contemplated
Transactions.
-30-
4.3 INVESTMENT INTENT
-----------------
Buyer is acquiring the Shares for its own account and not with a view to their
distribution within the meaning of Section 2(11) of the Securities Act.
4.4 CERTAIN PROCEEDINGS
-------------------
There is no pending or Threatened Proceeding that has been commenced against
Buyer and that challenges, or may have the effect of preventing, delaying,
making illegal, or otherwise interfering with, any of the Contemplated
Transactions.
4.5 BROKERS OR FINDERS
------------------
Except as set forth in EXHIBIT 4.5, Buyer and its officers and agents have
-----------
incurred no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection with
this Agreement and will indemnify and hold Sellers harmless from any such
payment alleged to be due by or through Buyer as a result of the action of Buyer
or its officers or agents.
4.6 CAPITALIZATION
--------------
(a) Capitalization of the Buyer, including all shares of common stock,
preferred stock, and outstanding warrants, is as shown on EXHIBIT 4.6(a), and a
--------------
general description of such capitalization and securities are as shown on
EXHIBIT 4.6(a). The Buyer shall have on or at Closing paid in capital of not
--------------
less than $15,300,000.
(b) Capitalization at Closing will be in accordance with the certificate
regarding capitalization attached as EXHIBIT 4.6(b).
--------------
4.7 LIABILITY
---------
The liabilities of the Buyer are set forth on EXHIBIT 4.7, and the Buyer shall
-----------
have no other outstanding liabilities at or immediately subsequent to Closing.
4.8 CONTRACTUAL OBLIGATIONS
-----------------------
Buyer has no material contractual obligations, including, without limitation,
any employment, management, or consulting agreements, except as are reflected in
this Agreement, or as otherwise described on EXHIBIT 4.8.
-----------
-31-
5. COVENANTS OF SELLERS AND THE COMPANY PRIOR TO/ON CLOSING DATE
5.1 REQUIRED APPROVALS
------------------
Except as otherwise reflected in EXHIBIT 2.3(b), as promptly as practicable
--------------
after the date of this Agreement, Sellers will, and will cause the Company to,
make all filings required by Legal Requirements to be made by them in order to
consummate the Contemplated Transactions. The foregoing requirement shall not
apply to filings required to be made in the states of Florida, Georgia and
Tennessee. Between the date of this Agreement and the Closing Date, Sellers
will, and will cause the Company to, (a) cooperate with Buyer with respect to
all filings that Buyer elects to make or is required by Legal Requirements to
make in connection with the Contemplated Transactions, and (b) cooperate with
Buyer in obtaining all Consents identified in EXHIBIT 4.2.
-----------
5.2 COMPANY APPROVAL
----------------
This Agreement and the Contemplated Transactions have been voted upon and
approved by the shareholders and board of directors of the Company.
5.3 CURRENT INFORMATION
-------------------
During the period from the date of this Agreement to the Closing Date, the
Company shall cause one or more of its Representatives to confer on a regular
and frequent basis with Representatives of Buyer to report on the general status
of the ongoing operations of the Company. The Company shall promptly notify
Buyer of any material change in the normal course of its business or in the
operation of its properties and of any governmental complaints, investigations,
or hearings (or communications indicating that the same may be contemplated), or
the institution or the threat of material litigation involving such party, and
will keep Buyer fully informed with respect to such events.
5.4 [Intentionally Deleted]
5.5 OPERATIONS PRIOR TO CLOSING DATE
--------------------------------
(a) In addition to any other express obligation under this Agreement, between
the date of this Agreement and the Closing Date, the Company will do, and the
Sellers shall cause the Company to do each of the following, and the Company and
Sellers also represents that from the date of the Interim Balance Sheet to the
date of this Agreement the Company has done the following:
(i) conduct the business of the Company only in the usual, regular and
ordinary manner, on a basis consistent with past practice, maintain the
Company's books, accounts and records in the usual, regular and ordinary
manner, on a basis consistent with past practices, maintain and comply with the
-32-
terms of all licenses, permits and other Legal Requirements, and otherwise
conduct the business of the Company only in the Ordinary Course of Business;
(ii) use their best efforts to preserve intact the current organization
of the Company, keep available the services of the current officers, employees,
and agents of the current organization of the Company, and maintain the
relations and good will with all suppliers, customers, landlords, creditors,
employees, agents, and others having business relationships with the Company;
(iii) conduct the business and affairs of the Company in a manner so that
all representations and warranties herein will be true and correct at Closing;
(iv) maintain all of the Company Assets in good repair, order and
condition, and perform all of the Company's obligations under the Contracts; and
(v) pay all expenses and accounts payable incurred in connection with
the operation of the Company's business in the usual,
regular and ordinary manner on a basis consistent with past practice.
(b) The Company agrees that during the period from the date of this
Agreement to and including the Closing Date, without the prior written consent
of Buyer, it will not do any of the following and the Company and Sellers also
represent that from the date of the Interim Balance Sheet to the date of this
Agreement the Company has not done any of the following:
(i) incur any liability or obligation of any material nature (whether
accrued, absolute, contingent or otherwise), except in the Ordinary Course of
Business;
(ii) permit any of the Company Assets to be subjected to any
Encumbrance;
(iii) sell, transfer or otherwise dispose of any Company Assets except in
the Ordinary Course of Business;
(iv) make any capital expenditure or commitment therefor, except in the
Ordinary Course of Business;
(v) redeem, purchase or otherwise acquire any shares of its capital
stock or any option, warrant or other right to purchase or acquire any such
shares;
(vi) except in the Ordinary Course of Business, borrow money or make any
loan to any Person;
(vii) write off as uncollectible any note or accounts receivable, except
write-offs in the Ordinary Course of Business
-33-
charged to applicable reserves, which individually or in the aggregate are not
material to the Company;
(viii) accelerate the collection of any accounts receivable or other
amounts payable to the Company;
(ix) grant any increase in the rate of wages, salaries, bonuses or
other remuneration of any executive employees or other employees;
(x) cancel or waive any claims or rights of substantial value;
(xi) make any change in any method of accounting or auditing practice;
(xii) agree, whether or not in writing, to do any of the foregoing;
(xiii) cause the Sellers or the Company to, without the prior consent of
Buyer, take any affirmative action, or fail to take any reasonable action within
their or its control, as a result of which any of the changes or events listed
in Section 3.16 is likely to occur.
5.6 ACCESS AND INVESTIGATION
------------------------
Between the date of this Agreement and the Closing Date, Sellers and the
Company will, and will cause their Representatives to, (a) afford Buyer and its
Representatives and advisors (collectively, "Buyer's Advisors") full and free
access to all Company employees and personnel and to all Company Contracts,
books and records, and other documents and data, (b) furnish Buyer and Buyer's
Advisors with copies of all such Contracts, books and records, and other
existing documents and data as Buyer may reasonably request, and (c) furnish
Buyer and Buyer's Advisors with such additional financial, operating, and other
data and information as Buyer may reasonably request.
5.7 NOTIFICATION
------------
Between the date of this Agreement and the Closing Date, the Sellers and the
Company will promptly notify Buyer in writing if a Seller or the Company becomes
aware of any fact or condition that causes or constitutes a Breach of any of
representations and warranties of Sellers or the Company as of the date of this
Agreement and before Closing, or if a Seller or the Company becomes aware of the
occurrence after the date of this Agreement of any fact or condition that would
(except as expressly contemplated by this Agreement) cause or constitute a
Breach of any such representation or warranty had such representation or
warranty been made as of the time of occurrence or discovery of such fact or
condition. During the same period, each Seller will promptly notify Buyer of
the occurrence of any Breach of any
-34-
covenant of Sellers in this Section 5 or of the occurrence of any event that may
make the satisfaction of the conditions in Section 7 impossible or unlikely.
5.8 NO NEGOTIATION
--------------
Until such time, if any, as this Agreement is terminated pursuant to Section
9, Sellers and the Company will not, and will not permit any of their
Representatives to, directly or indirectly solicit, initiate, respond to or
encourage any inquiries or proposals from, discuss or negotiate with, provide
any non-public information to, or consider the merits of any unsolicited
inquiries or proposals from, any Person (other than Buyer) relating to any
transaction involving the sale of the business or assets (other than in the
Ordinary Course of Business) of the Company, or any of the capital stock of the
Company, or any merger, consolidation, business combination, or similar
transaction involving the Company.
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE
6.1 APPROVALS OF GOVERNMENTAL BODIES
--------------------------------
As promptly as practicable after the date of this Agreement, Buyer will make
all filings required by Legal Requirements to be made by them to consummate the
Contemplated Transactions. The Buyer shall use its best efforts to satisfy all
the conditions precedent to its and all other parties' obligations under this
Agreement. Between the date of this Agreement and the Closing Date, Buyer will
cooperate with Sellers with respect to all filings that Sellers are required by
Legal Requirements to make in connection with the Contemplated Transactions, and
cooperate with Sellers in obtaining all consents identified in EXHIBIT 3.2(c)
--------------
hereof.
6.2 COMPANY APPROVAL
----------------
This Agreement and the Contemplated Transactions have been voted upon and
approved by the Board of Directors of Buyer.
6.3 NOTIFICATION
------------
Between the date of this Agreement and the Closing Date, Buyer will promptly
notify the Sellers and the Company in writing if Buyer becomes aware of any fact
or condition that causes or constitutes a Breach of any of representations and
warranties of Buyer as of the date of this Agreement and before Closing, or if
Buyer becomes aware of the occurrence after the date of this Agreement of any
fact or condition that would (except as expressly contemplated by this
Agreement) cause or constitute a Breach of any such representation or warranty
by Buyer had such representation or warranty been made as of the time of
occurrence or discovery of such fact or condition. During the same period,
Buyer will promptly notify the Sellers and the Company of the
-35-
occurrence of any Breach of any covenant of Buyer in this Section 6 or of the
occurrence of any event that may make the satisfaction of the conditions in
Section 8 impossible or unlikely.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to acquire the Shares and to take the other actions
required to be taken by Buyer at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Buyer, in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS
---------------------------
All of the representations and warranties of Sellers and the Company in this
Agreement (considered collectively), and each of these representations and
warranties (considered individually), must have materially been accurate as of
the date of this Agreement, and must be materially accurate as of the Closing
Date as if made on the Closing Date.
7.2 PERFORMANCE
-----------
(a) All of the covenants and obligations that Sellers and the Company are
required to perform or to comply with pursuant to this Agreement at or prior to
the Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been duly performed and
complied with.
(b) Each document required to be delivered pursuant to Section 2.4 must have
been delivered.
(c) All of the agreements, other documents or certificates, or actions
required to be entered into, delivered and/or taken at or prior to the Closing
in accordance with Section 2 hereof, including actions or deliveries of Persons
not a party hereto, shall have been entered into, delivered and or taken, as
applicable.
7.3 CONSENTS
--------
Except as set forth in Section 2.3(b) and EXHIBIT 2.3(b), each of the Consents
--------------
identified in Sections 3.2, and 4.2 must have been obtained and must be in full
force and effect.
7.4 NO PROCEEDINGS
--------------
Since the date of this Agreement, there must not have been commenced or
Threatened against Buyer, or against any Person affiliated with Buyer, any
Proceeding (a) involving any challenge to, or seeking damages or other relief in
connection with, any of the Contemplated Transactions, or (b) that may have the
effect of
-36-
preventing, delaying, making illegal, or otherwise interfering with any of the
Contemplated Transactions.
7.5 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS
---------------------------------------------------
There must not have been made or Threatened by any Person any claim asserting
that such Person (a) is the holder or the beneficial owner of, or has the right
to acquire or to obtain beneficial ownership of, any stock of, or any other
voting, equity, or ownership interest in, the Company, or (b) is entitled to all
or any portion of the Purchase Price payable for the Shares.
7.6 NO PROHIBITION
--------------
Neither the consummation nor the performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time), materially contravene, or conflict with, or result in a material
violation of, or cause Buyer or any Person affiliated with Buyer to suffer any
material adverse consequence under, (a) any applicable Legal Requirement or
Order, or (b) any Legal Requirement or Order that has been published,
introduced, or otherwise formally proposed by or before any Governmental Body.
7.7 MATERIAL ADVERSE CHANGE
-----------------------
There shall not have occurred any change in the Company's financial condition,
business, property or prospects nor shall have there occurred any change in the
business condition of the Company's customers or suppliers nor any change in the
regulatory or competitive environment, which in the judgment of Buyer adversely
affects the Company, the business of the Company or the condition (financial or
otherwise) of the Company. In the event that each and every one of these
conditions precedent to the obligations of Buyer shall not have been satisfied
prior to or at the Closing, then Buyer may (but shall not be obligated to) waive
such unsatisfied condition or extend the Closing Date to allow additional time
for such condition to be satisfied. Any such waiver or extension shall be
without prejudice to any other rights and remedies Buyer may have hereunder or
at law or in equity.
7.8 RELATED CONTRACTS Each of (i) that certain Contribution Agreement (the
-----------------
"Contribution Agreement") of even date herewith among Buyer, the Company and
certain of the Sellers, (ii) that certain Stock Acquisition Agreement of even
date herewith for the acquisition of shares of AmeriTel Pay Phones, Inc. and
(iii) that certain Contribution Agreement of even date herewith pertaining to
the contribution of shares of AmeriTel Pay Phones, Inc. must be consummated in
accordance with their respective terms contemporaneously with the Closing.
-37-
7.9 REGULATORY OPINION
------------------
Buyer shall have received an opinion of counsel acceptable to Buyer to the
effect that all required approvals of the Contemplated Transactions have been
obtained from state regulatory agencies (other than approvals required by the
states of Mississippi, North Carolina, Tennessee, Georgia and Florida).
8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE
Sellers' obligation to transfer the Shares and to take the other actions
required to be taken by Sellers at the Closing is subject to the satisfaction,
at or prior to the Closing, of each of the following conditions (any of which
may be waived by Sellers, in whole or in part):
8.1 ACCURACY OF REPRESENTATIONS
---------------------------
All of Buyer's representations and warranties in this Agreement (considered
collectively), and each of these representations and warranties (considered
individually), must have been materially accurate as of the date of this
Agreement and must be materially accurate as of the Closing Date as if made on
the Closing Date.
8.2 BUYER'S PERFORMANCE
-------------------
(a) All of the covenants and obligations that Buyer is required to perform or
to comply with pursuant to this Agreement at or prior to the Closing (considered
collectively), and each of these covenants and obligations (considered
individually), must have been performed and complied with.
(b) Buyer must have delivered each of the documents required to be delivered
by Buyer pursuant to Section 2.4 and must have made the cash payments required
to be made by Buyer pursuant to Sections 2.4(b)(i) and 2.4(b)(ii).
8.3 NO PROHIBITION
--------------
Neither the consummation nor the performance of any of the Contemplated
Transaction will, directly or indirectly (with or without notice or lapse of
time), materially contravene, or conflict with, or result in a material
violation of, or cause the Sellers, the Company or any Person affiliated with
the Sellers or the Company to suffer any material adverse consequence under any
applicable Legal Requirement or Order. The provisions of this Section 8.3 shall
not apply to and shall not include any consents or other approvals required to
be given by any state regulatory agencies with respect to the Contemplated
Transactions.
-38-
8.4 MATERIAL ADVERSE CHANGE
-----------------------
There shall not have occurred any change in the Buyer's financial condition,
business, property, or prospects which in the judgment of Sellers would
materially adversely affect Buyer's ability to consummate the contemplated
transactions.
In the event that each and every one of these conditions precedent to the
obligations of Sellers shall not have been satisfied prior to or at the Closing,
then Sellers may (but shall not be obligated to) waive such unsatisfied
condition or extend the Closing Date to allow additional time for such condition
to be satisfied. Any such waiver or extension shall be without prejudice to any
other rights and remedies Sellers may have hereunder or at law or in equity.
8.5 TAX OPINION
-----------
Sellers shall have received an opinion satisfactory to Sellers to the effect
that the receipt of stock by certain of the Sellers pursuant to the Contribution
Agreement will not constitute a taxable event for Federal income tax purposes.
Sellers and Sellers' tax counsel shall have received Buyer's certificate
regarding capitalization in the form attached as EXHIBIT 4.6(b).
--------------
9. TERMINATION
9.1 TERMINATION EVENTS
------------------
This Agreement may, by notice given prior to or at the Closing, be terminated:
(a) by either Buyer or Sellers if a material Breach of any provision of this
Agreement has been committed by the other party and such Breach has not been
waived;
(b) by Buyer: if any of the conditions in Section 7 have not been satisfied
as of the Closing Date; or if satisfaction of such a condition is or becomes
impossible (other than through the failure of Buyer to comply with its
obligations under this Agreement) and Buyer has not waived such condition on or
before the Closing Date;
(c) by Sellers: if any of the conditions in Section 8 have not been satisfied
of the Closing Date; or if satisfaction of such a condition is or becomes
impossible (other than through the failure of Sellers to comply with their
obligations under this Agreement) and Sellers have not waived such condition on
or before the Closing Date; or
(d) by mutual consent of Buyer and Sellers; or
-39-
(e) by either Buyer or Sellers if the Closing has not occurred (other than
through the failure of any party seeking to terminate this Agreement to comply
fully with its obligations under this Agreement) on or before January 31, 1997,
or such later date as the parties may agree upon in writing.
9.2 EFFECT OF TERMINATION
---------------------
Each party's right of termination under Section 9.1 is in addition to any
other rights it may have under this Agreement or otherwise, and the exercise of
a right of termination will not be an election of remedies. If this Agreement
is terminated pursuant to Section 9.1, all further obligations of the parties
under this Agreement will terminate, except that the obligations in Sections
11.1 and 11.3 will survive; provided, however, that if this Agreement is
terminated by a party because of the Breach of the Agreement by the other party
or because one or more of the conditions to the terminating party's obligations
under this Agreement is not satisfied as a result of the other party's failure
to comply with its obligations under this Agreement, the terminating party's
right to pursue all legal remedies will survive such termination unimpaired.
10. INDEMNIFICATION; REMEDIES
10.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE
------------------------------------------------------------
Subject to the limitations described herein, all representations, warranties,
covenants, and obligations in this Agreement, the certificates delivered
pursuant to Section 2.4(a) and (b), and any other certificate or document
delivered pursuant to this Agreement will survive the Closing as follows: (i)
all representations, warranties, covenants and obligations, other than any
representation or warranty contained in Section 3.9, 3.13 or any claim based
upon an intentional fraudulent misrepresentation, shall survive the Closing
until May 31, 1998, and shall thereupon expire together with any right to
indemnification (except to the extent a written notice asserting a claim for
breach of any such representation or warranty shall have been given prior to
such date to the party which made such representation and warranty), (ii) all
representations or warranties contained in Section 3.13 shall survive the
Closing until three (3) years from the Closing Date and shall thereupon expire
together with any right to indemnification (except to the extent a written
notice asserting a claim for breach of any such representation or warranty shall
have been given prior to such date to the party which made such representation
and warranty), (iii) all claims based upon an intentional fraudulent
misrepresentations shall survive the Closing until four (4) years from the
Closing Date and shall thereupon expire together with any right to
indemnification (except to the extent a written notice asserting a claim for
breach of any such representation shall have been given prior to such date to
the party which made
-40-
such representation), and (iv) all representations or warranties contained in
Section 3.9 shall survive the Closing indefinitely. The right to
indemnification, payment of Damages or other remedy based on such
representations, warranties, covenants, and obligations shall not be precluded
by any knowledge actually acquired by Buyer before the Closing Date, with
respect to the accuracy or inaccuracy of or compliance with, any such
representation, warranty, covenant, or obligation. The waiver in writing of any
condition based on the accuracy of any representation or warranty, or on the
performance of or compliance with any covenant or obligation, shall preclude any
right to indemnification, payment of Damages, or other remedy based on such
representations, warranties, covenants, and obligations.
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS
-------------------------------------------------
Subject to the limitations described herein, Sellers severally, and not
jointly, will indemnify and hold harmless Buyer, the Company and their
respective Representatives, stockholders, controlling persons, and affiliates
(collectively, the "Indemnified Persons") for, and will pay to the Indemnified
Persons the amount of, any loss, liability, claim, damage (including incidental
and consequential damages), expense (including costs of investigation and
defense and reasonable attorneys' fees) or diminution of value, whether or not
involving a third-party claim (collectively, "Damages"), arising or resulting
from, directly or indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by Sellers in this
Agreement or the Contribution Agreement, or any other certificate or document
delivered by Sellers pursuant to this Agreement or the Contribution Agreement;
(b) any Breach by Sellers of any covenant or obligation of Sellers in this
Agreement or the Contribution Agreement, or any other document delivered by
Sellers pursuant to this Agreement or the Contribution Agreement;
(c) regardless of whether it may also constitute a Breach under Section 10.2
(a) or (b) above, any loss, liability, claim, damage (including incidental and
consequential damages), expense (including costs of investigation and defense
and reasonable attorneys' fees) arising from or relating to the operation,
management or ownership of the Company, arising or related to the period on or
prior to the Closing Date (whether known or unknown on the Closing Date).
provided, however, that (i) except as provided in (ii) below, the aggregate
-------- -------
amount of Damages for which the Sellers shall indemnify Buyer hereunder shall
not exceed each Seller's pro rata share of the amount in the Post-Closing Escrow
Fund (such indemnification to be provided by the Post-Closing Escrow Fund); (ii)
the
-41-
aggregate amount of Damages for which the Sellers shall indemnify Buyer
hereunder for any Breach of a representation or warranty contained in Section
3.9 and 3.13 or for any claim based solely upon an intentional fraudulent
misrepresentation of a material fact shall not exceed each Seller's pro rata
share of the cash Purchase Price plus each Seller's pro rata share of the
principal of the Subordinated Note to the extent the Seller receives payment in
cash of such principal and, to the extent the seller is not so paid, such
Damages shall constitute a set-off against the remaining balance due the Seller
on the Subordinated Note (such indemnification to be provided first by the Post-
Closing Escrow Fund); and (iii) Buyer shall not be entitled to assert any right
to indemnification hereunder against the Sellers until Buyer's good faith
estimate of all Damages for which the Sellers indemnify Buyer hereunder exceeds
$100,000 (the "Indemnification Threshold") at which time Buyer shall be entitled
to indemnification for all Damages which exceed the Indemnification Threshold
(subject to the limitations described above).
10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER
-----------------------------------------------
Buyer will indemnify and hold harmless Sellers and their respective
Representatives, stockholders, controlling persons, and affiliates
(collectively, the "Sellers' Indemnified Persons"), and will pay to Sellers'
Indemnified Persons the amount of any Damages arising, directly or indirectly,
from or in connection with:
(a) any Breach of any representation or warranty made by Buyer in this
Agreement or the Contribution Agreement, or in any certificate delivered by
Buyer pursuant to this Agreement or the Contribution Agreement; or
(b) any Breach by Buyer of any covenant or obligation of Buyer in this
Agreement or the Contribution Agreement or in any certificate or document
delivered by Buyer pursuant to this Agreement or the Contribution Agreement.
10.4 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS
-------------------------------------------------
(a) Promptly after receipt by an indemnified party under Section 10.2 or
10.3, of notice of the commencement of any Proceeding against it or of notice
that such Proceeding has been Threatened against it, such indemnified party
will, if a claim is to be made against an indemnifying party under such Section,
give notice to the indemnifying party of the commencement of such claim or
threatened Proceeding, but the failure to notify the indemnifying party will not
relieve the indemnifying party of any liability that it may have to any
indemnified party, except to the extent that the indemnifying party demonstrates
that the defense of such action or the ability of the indemnifying party to
obtain otherwise available insurance proceeds is materially prejudiced by the
indemnified party's failure to give such notice.
-42-
(b) If any Proceeding referred to in Section 10.4(a) is brought against an
indemnified party and it gives notice to the indemnifying party of the
commencement of such Proceeding, the indemnifying party will, unless the claim
involves Taxes, be entitled to participate in such Proceeding and, to the extent
that it wishes (unless (i) the indemnifying party is also a party to such
Proceeding and the indemnified party determines in good faith that joint
representation would be inappropriate, or (ii) the indemnifying party fails to
provide reasonable assurance to the indemnified party of its financial capacity
to defend such Proceeding and provide indemnification with respect to such
Proceeding), to assume the defense of such Proceeding with counsel satisfactory
to the indemnified party and, after notice from the indemnifying party to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will not, as long as it diligently conducts such defense, be
liable to the indemnified party under this Section 10 for any fees of other
counsel or any other expenses with respect to the defense of such Proceeding, in
each case subsequently incurred by the indemnified party in connection with the
defense of such Proceeding, other than reasonable costs of investigation. If
the indemnifying party assumes the defense of a Proceeding, (i) no compromise or
settlement of such claims may be effected by the indemnifying party without the
indemnified party's consent unless (A) there is no finding or admission of any
violation of Legal Requirements or any violation of the rights of any Person and
no effect on any other claims that may be made against the indemnified party,
and (B) the sole relief provided is monetary damages that are paid in full by
the indemnifying party; and (ii) the indemnified party will have no liability
with respect to any compromise or settlement of such claims effected without its
consent. If notice is given to an indemnifying party of the commencement of any
Proceeding and the indemnifying party does not, within ten days after the
indemnified party's notice is given, give notice to the indemnified party of its
election to assume the defense of such Proceeding, the indemnifying party will
be bound by any determination made in such Proceeding or any compromise or
settlement effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party determines in good
faith that there is a reasonable probability that a Proceeding may materially
adversely affect it or its affiliates other than as a result of monetary damages
for which it would be entitled to indemnification under this Agreement, the
indemnified party may, by notice to the indemnifying party, and following a good
faith attempt to consult with the indemnifying party, assume the exclusive right
to defend, compromise, or settle such Proceeding, but the indemnifying party
will not be bound by any determination of a Proceeding so defended or any
compromise or settlement effected without its consent (which may not be
unreasonably withheld).
-43-
10.5 PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS
-------------------------------------------
A claim for indemnification for any matter not involving a third-party claim
may be asserted by notice to the party from whom indemnification is sought.
11. GENERAL PROVISIONS
11.1 EXPENSES
--------
Except as otherwise expressly provided in this Agreement, each party to this
Agreement will bear its respective expenses incurred in connection with the
preparation, execution, and performance of this Agreement and the Contemplated
Transactions, including all fees and expenses of agents, representatives,
counsel, and accountants. Notwithstanding the foregoing, any obligation to pay
the fees and expenses of Weinstein, Boldt, Racine & Halfhide incurred in
connection with the Contemplated Transactions shall be the obligation of Buyer
and Sellers shall have no liability with respect thereto. In the event of
termination of this Agreement, the obligation of each party to pay its own
expenses will be subject to any rights of such party arising from a breach of
this Agreement by another party.
11.2 SELLERS' OBLIGATIONS AND DECISIONS
----------------------------------
(a) Subject to the limitations contained in Section 10.2, any and all
representations, warranties, covenants, obligations and/or agreements of the
Sellers contained herein are made and given jointly and severally by the
Sellers, and each of the Sellers shall be jointly and severally liable for the
accuracy, performance and/or compliance with all such representations,
warranties, covenants, obligations and agreements.
(b) Whenever any decision, consent, waiver, determination and/or exercise of
any right or remedy (collectively, a "Decision") is required or may be made,
taken or given by the Sellers hereunder, such Decision may only be made, taken
----
or given by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (the "Sellers' Representative"). The Sellers'
Representative may only be changed by a Majority in Interest of the Sellers.
Any Decision made, taken or given by the Sellers' Representatives shall be
binding upon all Sellers. For purposes hereof, Majority in Interest of the
Sellers shall mean Sellers holding a majority of the outstanding Common Shares.
11.3 CONFIDENTIALITY
---------------
Prior to Closing, no party or affiliate of a party hereto will issue or cause
publication of any press release or other announcement or public communications
with respect to the Contemplated Transactions, including without limitation a
general announcement to such party's employees, without the prior consent of the
other parties hereto, which consent will not be unreasonably withheld; provided,
however, that nothing herein
-44-
will prohibit any party (or affiliate) from issuing or causing publication of
any such press release, announcement or public communication to the extent that
such party (or affiliate) reasonably determines such action to be required by
law, any regulatory agency or the rules of any national stock exchange or
association applicable to it, in which case the party (or affiliate) making such
determination will use reasonable efforts to allow the other party reasonable
time to comment on such release or announcement in advance of its issuance or to
make any disclosure necessary to obtain any consents required or deemed
appropriate by Buyer.
11.4 NOTICES
-------
All notices, consents, waivers, and other communications under this Agreement
must be in writing and will be deemed to have been duly given when (a) delivered
by hand (with written confirmation of receipt), (b) sent by facsimile (with
written confirmation of receipt), provided that a copy is mailed by registered
mail, return receipt requested, or (c) when received by the addressee, if sent
by a nationally recognized overnight delivery service (receipt requested), in
each case to the appropriate addresses and facsimile numbers set forth below (or
to such other addresses and facsimile numbers as a party may designate by notice
to the other parties):
If to Buyer:
c/o ▇▇▇▇▇▇ ▇▇▇▇ Capital Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, a Professional Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
If to any Seller and/or the Company:
c/▇ ▇▇▇▇▇▇ Telecommunications Corporation
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-45-
With a copy to:
Gamble, Gamble, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.C.
P. ▇. ▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
With a copy to:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
P. O. Box 1346
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
11.5 WAIVER OF RIGHT TO JURY TRIAL: ATTORNEYS' FEES
-----------------------------------------------
Each of the parties hereto, to the extent legally possible, waives its right
to a trial by jury and the parties agree that in the event of litigation
involving the subject matter hereof the prevailing party(ies) shall be entitled
to recover fees and expenses of counsel and other out-of-pocket litigation
costs.
11.6 FURTHER ASSURANCES
------------------
The parties agree (a) to furnish upon request to each other such further
information, (b) to execute and deliver to each other such other documents, and
(c) to do such other acts and things, all as the other party may reasonably
request for the purpose of carrying out the intent of this Agreement and the
documents referred to in this Agreement.
11.7 WAIVER
------
The rights and remedies of the parties to this Agreement are cumulative and
not alternative. Neither the failure nor any delay by any party in exercising
any right, power, or privilege under this Agreement or the documents referred to
in this Agreement will operate as a waiver of such right, power, or privilege,
and no single or partial exercise of any such right, power, or privilege will
preclude any other or further exercise of such right, power, or privilege or the
exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, (a) no claim or right arising out of this Agreement
or the documents referred to in this Agreement can be discharged by one party,
in whole or in part, by a waiver or
-46-
renunciation of the claim or right unless in writing signed by the other party;
(b) no waiver that may be given by a party will be applicable except in the
specific instance for which it is given; and (c) no notice to or demand on one
party will be deemed to be a waiver of any obligation of such party or of the
right of the party giving such notice or demand to take further action without
notice or demand as provided in this Agreement or the documents referred to in
this Agreement.
11.8 ENTIRE AGREEMENT AND MODIFICATION
---------------------------------
(a) This Agreement supersedes all prior agreements between the parties with
respect to its subject matter (including the Letter of Intent between Buyer and
Sellers dated July 11, 1996, as amended by letter dated October 23, 1996) and
constitutes (along with the Contribution Agreement and the documents referred to
therein and in this Agreement) a complete and exclusive statement of the terms
of the agreement between the parties with respect to its subject matter. This
Agreement may not be amended except by a written agreement executed by the party
to be charged with the amendment.
(b) Neither the Sellers, the Company, nor any Representative of the Sellers
or the Company has made any representation or warranty, express or implied,
regarding the accuracy or completeness of any information regarding the Company
which is not expressly set forth herein. Except as expressly provided herein,
neither the Sellers nor any other person or Representative of Sellers shall have
or be subject to any liability to the Buyer or any other person resulting from
the Buyer's use of or reliance on such information. Without limiting the
foregoing, the Buyer acknowledges and agrees that, except as expressly set forth
herein, the Sellers and their Representatives have not made any representations
or warranties with respect to any financial, business, or other projections or
forecasts provided to the Buyer. The Buyer acknowledges that it has had the
full opportunity to review the books and records of the Company, and has
performed such due diligence as it has deemed necessary or advisable with
respect to the Company and the purchase of shares of the Company on the terms
set forth herein.
11.9 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
--------------------------------------------------
Neither party may assign any of its rights under this Agreement without the
prior consent of the other parties, except that Buyer may assign any of its
rights under this Agreement to any affiliate of Buyer and/or to CIBC Wood Gundy
Securities Corp. and its affiliates. Subject to the preceding sentence, this
Agreement will apply to, be binding in all respects upon, and inure to the
benefit of the successors and permitted assigns of the parties. Nothing
expressed or referred to in this Agreement will be construed to give any Person
other than the parties to this Agreement any legal or equitable right, remedy,
or claim under or with respect to this Agreement or any provision of this
-47-
Agreement. This Agreement and all of its provisions and conditions are for the
sole and exclusive benefit of the parties to this Agreement and their successors
and assigns.
11.10 SEVERABILITY
------------
If any provision of this Agreement is held invalid or unenforceable by any
court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid
or unenforceable only in part or degree will remain in full force and effect to
the extent not held invalid or unenforceable.
11.11 SECTION HEADINGS, CONSTRUCTION
------------------------------
The headings of Sections in this Agreement are provided for convenience only
and will not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Agreement. All words used in this Agreement will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
provided, the word "including" does not limit the preceding words or terms. The
parties, in acknowledgment that all of them have been represented by counsel and
that this Agreement has been carefully negotiated, agree that the construction
and interpretation of this Agreement and other documents entered into in
connection herewith shall not be affected by the identity of the party or
parties under whose direction or at whose expense this Agreement and such
documents were prepared or drafted.
11.12 TIME OF ESSENCE
---------------
With regard to all dates and time periods set forth or referred to in this
Agreement, time is of the essence.
11.13 GOVERNING LAW
-------------
This Agreement will be governed by the laws of the State of Texas without regard
to conflicts of laws principles.
11.14 COUNTERPARTS
------------
This Agreement may be executed in one or more counterparts, each of which will
be deemed to be an original copy of this Agreement and all of which, when taken
together, will be deemed to constitute one and the same agreement.
-48-
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as
of the date first written above.
BUYER: SELLERS:
-----
▇▇▇▇▇▇ HOLDINGS, INC., /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
a Delaware corporation -------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
------------------------ -------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Title: Chief Executive Officer
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
TALTON TELECOMMUNICATIONS
CORPORATION, an Alabama corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------
Name:
Title:
▇▇▇▇▇▇ TELECOMMUNICATIONS OF
CAROLINA, INC., an Alabama
corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------
Name:
Title:
-49-
LIST OF EXHIBITS*
TO
TALTON STOCK ACQUISITION AGREEMENT
Exhibit 2.1 Shares in Proportion
Exhibit 2.2 Aggregate Purchase Price
Exhibit 2.3(a) Post-Closing Escrow Agreement
Exhibit 2.3(b) Regulatory Approval and Set-Off Provisions
Exhibit 2.5(a)(ii)-1 ▇▇▇▇▇▇ Consulting Agreement
Exhibit 2.5(a)(ii)-2 ▇▇▇▇▇▇▇ Consulting Agreement
Exhibit 2.5(a)(iii) Jr. Employment Agreement
Exhibit 2.5(a)(iv) Form of Sellers' Counsel Legal Opinion
Exhibit 2.5(b)(i) Respective Amounts of Cash
Exhibit 2.5(b)(ii) Buyer's Subordinated Note and Assoc Documents
Exhibit 2.5(b)(iv) Form of Buyer's Counsel Legal Opinion
Exhibit 2.6(a)-1 List of Outstanding Leases
Exhibit 2.6(a)-2 List of Long Term Debts
Exhibit 2.6(b) Pre-Closing Payables
Exhibit 2.8 Lease Agreement
Exhibit 3.1(a)-1 TTC States of Operation
Exhibit 3.1(a)-2 TC States of Operation
Exhibit 3.1(b) Corporate Names and Addresses
Exhibit 3.2(b) List of Consents - Seller
Exhibit 3.4 Financial Statements
Exhibit 3.6(a) Company Assets-Encumbrances
Exhibit 3.6(a)(ii)-1 Installed Telephone List
Exhibit 3.6(a)(ii)-2 Installed Telephone Line List
Exhibit 3.6(a)(iv) October 96 Inventory List
Exhibit 3.6(a)(v) List of Vehicles
Exhibit 3.6(a)(vi) Furniture, Fixtures, Equipment, Personalty and
Intellectual Property
Exhibit 3.6(b) Continuing Liabilities
Exhibit 3.7 Accounts Receivable
Exhibit 3.9 Taxes
Exhibit 3.11 Employee Benefit Plans
Exhibit 3.12 Governmental Authorizations
Exhibit 3.13(a) and
Exhibit 3.13(b) Litigation
Exhibit 3.14 Changes and Events
Exhibit 3.14(k) Changes in Collection of Accounts Receivable
Exhibit 3.15(a)(i) Telephone Operating and License Agreement
Description
Exhibit 3.15(a)(ii) Service Agreement Description
Exhibit 3.15(a)(iii) Leases, Rental and Occupancy Agreements over
$5000 and 12 months
Exhibit 3.15(a)(iv) Licensing Agreements and/or Contracts with
respect to Intellectual Property Assets
Page 1 of 2
Exhibit 3.15(a)(v) Joint Venture, Partnership or Contracts
involving Sharing of Profits, Losses, Costs or
Liabilities
Exhibit 3.15(a)(vi) Other Contracts ($5000 or more)
Exhibit 3.15(a)(vii) Power of Attorney List
Exhibit 3.15(b) Rights, Obligations and/or Liabilities of Seller
Exhibit 3.15(c) Contract Compliance
Exhibit 3.15(c)(vi) Renegotiations
Exhibit 3.16(a) Insurance Policies
Exhibit 3.16(b) Insurance Summary
Exhibit 3.16(c) Insurance Statement
Exhibit 3.17 Environmental Statement
Exhibit 3.18(a) Employee Information
Exhibit 3.18(c) Employee, Consultant and Contract Labor
Agreements
Exhibit 3.18(d) Retired Employee, Director, Director's
Dependents List of Benefits
Exhibit 3.20 Intellectual Property Asset Contracts
Exhibit 3.21 List of Bank Accounts
Exhibit 3.25 Relationships with Related Persons
Exhibit 3.26 Brokers or Finders (Sellers)
Exhibit 4.2 List of Consents-Buyer
Exhibit 4.5 Brokers or Finders (Buyer)
Exhibit 4.6(a) Capitalization-Common, Preferred & Warrants
(Securities)
Exhibit 4.6(b) Form of Certificate Regarding Capitalization
Exhibit 4.7 Liabilities-Buyers
Exhibit 4.8 Contractual Obligations of Buyer
__________________
* These items have been omitted. A copy will be provided to the Commission upon
request.
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