CONTRIBUTION AND SHARE EXCHANGE AGREEMENT
This CONTRIBUTION AND SHARE EXCHANGE AGREEMENT (the "Agreement") is
executed this 22nd day of April, 1998 by and among ▇▇▇▇▇ Communications Holdings
Limited Partnership, a Nevada limited partnership ("▇▇▇▇▇ Communications"),
▇▇▇▇▇ World Wide Digital Transmission & Vaulting Limited Partnership, a Nevada
limited partnership ("▇▇▇▇▇ World Wide"), ▇▇▇▇▇ Productions Limited Partnership,
a Nevada limited partnership ("▇▇▇▇▇ Productions"), ▇▇▇▇▇ Virtual Media Limited
Partnership, a Nevada limited partnership ("SVM") and Precision Systems, Inc., a
Delaware corporation ("PSI").
WHEREAS, ▇▇▇▇▇ Communications, ▇▇▇▇▇ World Wide, SVM and ▇▇▇▇▇
Productions (collectively, "▇▇▇▇▇" or the "▇▇▇▇▇ Entities") intend to contribute
certain of their assets to PSI together with $15 million in cash in exchange for
newly issued shares of common stock of PSI (the "Contribution and Exchange
Transaction") and RMS Limited Partnership, a Nevada limited partnership ("RMS")
intends to transfer certain real property to PSI and to exchange certain
securities and a debt obligation of PSI for newly issued shares of common stock
of PSI (together with the Contribution and Exchange Transaction, the
"Transaction"); and
WHEREAS, the general and limited partners of ▇▇▇▇▇ and the Board of
Directors of PSI have determined that the Transaction or the Alternative
Transaction (as hereinafter defined) is in the best interests of ▇▇▇▇▇, PSI and
the shareholders of PSI; and
WHEREAS, for United States federal income tax purposes, it is intended
that the transfer of the ▇▇▇▇▇ Assets, as defined below, by ▇▇▇▇▇ to PSI
together with the transfer of real property by RMS to PSI qualify as a transfer
subject to Section 351(a) of the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder (the " Internal Revenue Code");
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows.
ARTICLE I
CONTRIBUTION AND SHARE EXCHANGE
1.1. ▇▇▇▇▇ Contribution.
(a) Subject to the terms and conditions of this Agreement, at
the Closing Date, as hereinafter defined, ▇▇▇▇▇ agrees to grant, contribute,
convey, assign, transfer and deliver to PSI (the "Contribution") pursuant to an
Assignment and Assumption Agreement substantially in the form attached as
Exhibit 1.1 hereto (the "Assignment and Assumption Agreement") all right, title
and interest in all of the assets, tangible or intangible, along with all
contractual and leasehold rights ▇▇▇▇▇ holds necessary for PSI to operate the
Businesses (as hereinafter defined) as ▇▇▇▇▇ operates them as of the date hereof
(the "▇▇▇▇▇ Assets") in exchange for the consideration set forth in Section 1.2.
The ▇▇▇▇▇ Assets include, without limitation, those assets set forth in Schedule
1.1(a)(i), together with all of the issued and outstanding capital stock of
Professional Video Services Corporation, a District of Columbia corporation
("PVS") (the "Equity Interests") and $15 million in cash (the "Cash"), but do
not include those assets set forth in Schedule 1.1(a) (the "Excluded Assets").
(b) The ▇▇▇▇▇ Assets, the Equity Interests and the Cash shall
be contributed and transferred to PSI free and clear of all liabilities, liens,
charges, encumbrances and obligations of ▇▇▇▇▇, fixed, contingent or unmatured,
disclosed or undisclosed (the "Excluded Liabilities"), except for the specific
liabilities, licenses, charges, encumbrances and obligations of ▇▇▇▇▇ set forth
on Schedule 1.1(b) which shall be transferred to and assumed by PSI as of the
Closing Date (the "Assumed Liabilities").
1.2. Share Exchange. In consideration for the Contribution specifically
set forth in Section 1.1, at the Closing Date PSI shall issue and deliver
101,508,343 newly issued shares of common stock, par value $0.01, of PSI ("PSI
Common Stock") to ▇▇▇▇▇ (the "Share Exchange Consideration").
1.3. Real Estate Transfer. Pursuant to a Real Estate Transfer Agreement
between PSI and RMS, an executed copy of which is attached as Exhibit 1.3
hereto, at the Closing Date RMS will transfer certain real estate holdings (the
"Real Property") to PSI in exchange for 3,789,393 shares (the "Real Estate
Consideration") of PSI Common Stock (the "Real Estate Transaction").
1.4 Alternative Transaction. Prior to the Closing Date, ▇▇▇▇▇ shall be
entitled in its sole discretion and upon not less than twenty (20) days prior
written notice to elect not to close
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the Contribution and Exchange Transaction and the Real Estate Transaction. In
lieu of such transactions and subject to the terms and conditions of this
Agreement, ▇▇▇▇▇ Communications and SVM would grant, contribute, convey, assign,
transfer and deliver to PSI all of the assets of SVM identified as SVM assets in
Schedule 1.1(a)(i) (subject only to the Assumed Liabilities of SVM identified on
Schedule 1.1(b)) and Sixty Million Dollars ($60,000,000) in cash (the
"Alternative Transaction"). In consideration for the contribution of the assets
of SVM and cash referred to in the preceding sentence, and in lieu of PSI's
obligation to deliver the Share Exchange Consideration and the Real Estate
Consideration, PSI shall issue and deliver 65,000,000 newly issued shares of PSI
Common Stock (the "Alternative Consideration") to ▇▇▇▇▇ Communications and SVM.
▇▇▇▇▇ shall not have any obligation or liability to PSI with respect to the
Contribution and Exchange Transaction or the Real Estate Transaction, and PSI
shall have no right to conclude the Contribution and Exchange Transaction or the
Real Estate Transaction in the event ▇▇▇▇▇ elects to pursue the Alternative
Transaction.
ARTICLE II
RECAPITALIZATION
2.1. Recapitalization. Pursuant to the Plan of Recapitalization between
PSI and RMS, an executed copy of which is attached as Exhibit 2.1 hereto, on the
Closing Date RMS will deliver to PSI for cancellation (i) all of the shares of
PSI Series A Preferred Stock (the "PSI Series A Stock") and documents of
transfer with respect to all of the shares of PSI Series B Preferred Stock (the
"PSI Series B Stock") held by RMS and (ii) that certain promissory note by and
between PSI and RMS dated September 30, 1997 (the "RMS Note") in exchange for
shares of PSI Common Stock to be issued by PSI to RMS at a price of $1.00 per
share (the "Exchange Rate") as more specifically set forth below (the
"Recapitalization"). The shares of PSI Series A Stock and PSI Series B Stock
held by RMS shall be exchanged for a number of shares of PSI Common Stock equal
to the quotient realized by dividing the sum of the aggregate liquidation
preference for the shares of PSI Series A Stock and PSI Series B Stock held by
RMS plus the accumulated and unpaid dividends on such shares as of the Closing
Date by the Exchange Rate and rounding any fraction resulting from such
calculation to the next largest whole number. The Note shall be converted into a
number of shares of PSI Common Stock equal to the quotient realized by dividing
the principal balance and accrued interest on the RMS Note as of the Closing
Date by the Exchange Rate and rounding any fraction resulting from such
calculation to the next largest whole number. Shares of PSI Common Stock
issuable in the Recapitalization shall be referred to as the "Recapitalization
Consideration." The Share Exchange Consideration, the Real Estate Consideration,
and the Recapitalization Consideration, or if the Alternative Transaction is
elected, the Alternative Consideration and the Recapitalization Consideration,
shall be collectively referred to as the "PSI Consideration."
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PSI
Unless otherwise required by the context in which it is used, the term
"PSI" as used in this Article III includes PSI and all corporations,
partnerships and other entities owned by it entirely or in part, all of which
are listed on Schedule 3 attached hereto. PSI represents and warrants the
following as of the date hereof and as of the Closing Date. The representations
and warranties of PSI are qualified in their entirety by the disclosures
included in the Disclosure Letter from PSI to ▇▇▇▇▇ of even date herewith and as
such letter may be supplemented or amended from time to time prior to the
Closing Date with the consent of ▇▇▇▇▇ (the "PSI Disclosure Letter").
3.1. Corporate Standing. PSI is duly organized, validly existing, and
in good standing under the laws of its jurisdiction of incorporation. PSI has
full corporate authority to own, lease and operate its properties and
businesses, and is in good standing and is qualified to transact business as a
foreign corporation in all states in which the nature of its business or the
properties owned by it require it to qualify to transact business.
3.2. Authority. PSI has the full corporate power and authority to enter
into, execute, deliver, and perform this Agreement and all Exhibits to which it
is a party. The execution, delivery and performance of this Agreement and such
Exhibits, and the consummation of all transactions contemplated herein and
therein, have been duly authorized by all necessary corporate and other actions
of PSI, except that the Transaction and the Alternative Transaction are subject
to approval by the stockholders of PSI. This Agreement and such Exhibits, when
executed and delivered by PSI, shall be valid and binding obligations of PSI,
enforceable against PSI in accordance with their terms, subject to bankruptcy,
insolvency and other similar laws affecting the rights of creditors generally
and except that the remedies of specific performance, injunction and other forms
of mandatory equitable relief may not be available. Except for approvals of
governmental authorities described in Section 6.8 and approval of the
stockholders of PSI described in Section 8.9 and except as set forth in Section
3.2 of the PSI Disclosure Letter, neither the execution and delivery of this
Agreement nor the execution and delivery of the certificates and documents set
forth as Exhibits hereto nor the consummation of the transactions contemplated
hereby or thereby will (i) conflict with or violate any provision of the
Articles or Certificate of Incorporation or By-Laws of PSI, (ii) conflict with
or violate in any material respect any law, rule, regulation, ordinance, order,
writ, injunction, judgment or decree applicable to PSI or its businesses or by
which any of its assets is affected, or (iii) conflict with or result in any
breach of or constitute a default (or an event which with notice or lapse of
time or both would become
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a default) in any material respect under, or give to others any rights of
termination or cancellation of, or accelerate the performance required by or
maturity of, or result in the creation of any security interest, lien, charge or
encumbrance on any of PSI's assets pursuant to any of the terms, conditions or
provisions of any material note, bond, mortgage, indenture, permit, license,
franchise, lease, contract, or other instrument or obligation to which PSI is a
party or by which any of its assets is affected. Except as set forth in Section
3.2 of the PSI Disclosure Letter, PSI is not required to submit any notice,
declaration, report or other filing or registration with any governmental or
regulatory authority or instrumentality, and no approvals or non-objections are
required to be obtained or made by PSI in connection with the execution,
delivery or performance by PSI of this Agreement or any Exhibit or the
consummation of the transactions contemplated hereby or thereby.
3.3. Capitalization. PSI is a Delaware corporation having authorized
capital stock consisting of: 30,000,000 shares of common stock, $0.01 par value
per share, of which 17,916,144 are issued and outstanding; 50,000 shares of
preferred stock, $0.01 par value per share, of which 14,500 are issued and
outstanding; and options to acquire 2,264,357 shares of common stock, at
exercise prices ranging from $0.01 to $15.75 per share. Section 3.3(A) of the
PSI Disclosure Letter lists all persons or entities holding options or warrants
to acquire any of PSI's capital stock, as well the amount of stock covered by
each such option or warrant and the exercise price therefor. All of the
outstanding shares of PSI stock are, and all of the shares issued as the PSI
Consideration will be, validly issued, fully paid and nonassessable. Except as
described in Section 3.3(B) of the PSI Disclosure Letter, there are no
agreements, arrangements, warrants, calls, options, convertible rights or other
rights (vested or contingent) to acquire any capital stock of PSI, and no such
agreements, arrangements, warrants, calls, options, convertible rights or other
rights (vested or contingent) to acquire any capital stock of PSI will be
issued, entered into, or granted prior to the Closing Date without the prior
written consent of ▇▇▇▇▇.
3.4. Operation of PSI's Business. Except as disclosed in Section 3.4 of
the PSI Disclosure Letter, PSI owns and retains all such assets, tangible or
intangible, contractual, license and leasehold rights necessary (i) to operate
the business of PSI as PSI operates it on the date hereof, and (ii) to utilize
the assets and contractual, license and leasehold rights in the same manner as
they were used on the date of this Agreement. With the exception of those assets
used in the business of PSI pursuant to license and leasehold rights in favor of
PSI, all of the assets used in the business of PSI are owned by PSI, and none
are owned by any other party.
3.5. No Material Change. Except as set forth in Section 3.5 of the PSI
Disclosure Letter, there has been no material adverse change since the date of
the 1997 Balance Sheet (as hereinafter defined) in the business or condition
(financial or otherwise) of PSI, or in its properties, assets, liabilities
(actual or contingent), operations, or the manner of conducting its business,
other than changes in the ordinary course of business which in the aggregate are
not material and adverse.
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Except as set forth in Section 3.5 of the PSI Disclosure Letter, since December
31, 1997, there has been no event or condition of any character which, either
individually or in the aggregate, might reasonably be expected to affect in a
materially adverse manner the business, operations, properties, assets,
liabilities, earnings or financial condition of PSI. Except as set forth in
Section 3.5 of the Disclosure Letter, since December 31, 1997 PSI has not (i)
declared or, directly or indirectly, paid any dividends or made any other
distributions or payments of any kind to its shareholders or partners, (ii)
incurred any indebtedness for borrowed money, (iii) created or permitted to be
created any liens, encumbrances, or adverse charges of any nature on any of the
assets of PSI, (iv) discharged, satisfied or paid, in whole or in part, or
permitted to be discharged, satisfied or paid, in whole or in part, any
obligation or liability (contingent or absolute) relating to the business or the
properties of PSI, other than in the ordinary course of business, or (v) waived
or permitted to be waived any material right or claim of PSI.
3.6. Assets. PSI has good and marketable title to all of its assets
(except for leased property and Third Party Software, for which PSI has valid
and enforceable leases or licenses as the case may be), free and clear of all
mortgages, options, leases, covenants, conditions, agreements, liens, security
interests, adverse claims, restrictions, charges, encumbrances or rights of
others. There exists no material restriction on the use or transfer of any of
PSI's assets. Section 3.6A of the PSI Disclosure Letter sets forth a list of (i)
all machinery or equipment, including without limitation, computer hardware,
used to conduct the business of PSI with an original market value in excess of
$25,000 (the "Equipment"), together with the date of acquisition of each piece
of Equipment, and the location of each piece of Equipment and (ii) all "Company
Software," which shall include all of PSI's material software and computer
programs used in its business, including any software or computer programs not
wholly-owned by PSI ("Third Party Software") embedded therein, in machine
readable source code forms and in machine executable object code forms and all
related specifications (including, without limitation, all logic architectures,
algorithms and logic flows and all physical, functional, operating and design
parameters), operating systems and procedures (including development
methodology), designs, design revisions, related applications software in any
language, concepts, ideas, processes, techniques, software design and test
tools, third party software interfaces, methods of implementation and packaging,
all associated know-how and show-how and all related programmer and user
manuals, which are used by PSI to install, operate, maintain, correct, test,
repair, enhance, extend, modify, prepare derivative works based upon, design,
develop, reproduce and package such software and computer programs. Except as
set forth in Section 3.6B of the PSI Disclosure Letter, the tangible assets of
PSI are in good operating condition and repair, ordinary wear and tear excepted,
and are satisfactory for the purposes for which such assets are being used in
PSI's business. PSI does not, and has not since the date of its formation, own
or have any interest in real estate except as described in Section 3.6C of the
PSI Disclosure Letter.
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3.7. Compliance with Laws. Except as listed in Section 3.7 of the PSI
Disclosure Letter, the operation of PSI's business and the use of its assets
comply in all material respects with all applicable laws, ordinances, rules and
regulations, including but not limited to Federal, state, local and foreign
environmental, work place safety and employee benefits laws and rules
(collectively the "Laws"). PSI has all requisite licenses, permits and
certificates from federal, state and local governmental authorities as may be
necessary to conduct its business and own and operate its assets, except where
the failure to have such license, permit or certificate would not have a
material adverse effect on PSI, and such permits are valid and in full force and
effect and will not be terminated or adversely affected by the consummation of
the transactions contemplated hereby. Except as disclosed in Section 3.7 of the
PSI Disclosure Letter, PSI has not received any notice alleging any violations
by PSI of any Laws, or of investigations of PSI initiated by administrative
agencies, and, to the knowledge of PSI, no allegations or investigations are
pending or have been threatened.
3.8. Employee Benefit Plans.
(a) Except as set forth in Section 3.8.1(A) of the PSI
Disclosure Letter, with respect to all employees and former employees of PSI,
neither PSI nor any ERISA Affiliate of PSI presently maintains, contributes to
or has any liability under:
(1) any bonus, incentive compensation, profit
sharing, retirement, pension, group insurance, death benefit, group
health, medical expense reimbursement, cafeteria, dependent care, stock
option, stock purchase, stock appreciation rights, savings, deferred
compensation, consulting, severance pay or termination pay, vacation
pay, life insurance, welfare or other employee benefit or fringe
benefit plan, program or arrangement;
(2) any plan, program or arrangement which is an
"employee pension benefit plan" as such term is defined in Section 3(2)
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or an "employee welfare benefit plan" as defined in Section
3(1) of ERISA.
For purposes of this Agreement, "ERISA Affiliate" shall mean each person (as
defined in section 3(9) of ERISA) that, together with PSI (or any person whose
liabilities PSI has assumed or is otherwise subject to), currently or in the
past would be treated as a single employer under Section 4001(b) of ERISA or
that would be deemed to be a member of the same "controlled group" within the
meaning of Section 414(b) and (c) of the Internal Revenue Code. The plans,
programs and arrangements set forth in Section 3.8.1(A) of the PSI Disclosure
Letter are herein referred to as the "Employee Benefit Plans."
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(b) With respect to all employees and former employees of PSI,
neither PSI nor any ERISA Affiliate of PSI presently maintains, contributes to
or has any liability under any funded or unfunded medical, health or life
insurance plan or arrangement for present or future retirees or present or
future terminated employees except as required by the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended ("COBRA"). Neither PSI nor any
ERISA Affiliate of PSI maintains or contributes to a trust, organization or
association described in any of Sections 501(c)(9), 501(c)(17) or 501(c)(20) of
the Internal Revenue Code.
(c) Favorable determination letters have been received from
the Internal Revenue Service with respect to each Employee Benefit Plan which is
intended to comply with the provisions of Section 401(a) of the Internal Revenue
Code, evidencing compliance with the relevant provisions of the Tax Equity and
Fiscal Responsibility Act of 1982, the Tax Reform Act of 1984 and the Retirement
Equity Act of 1984. Each such Employee Benefit Plan complies in form and to the
knowledge of PSI, has been operated, in all materials respects, in compliance
with the requirements of the Internal Revenue Code and meets the requirements of
a "qualified plan" under Section 401(a) of the Internal Revenue Code.
Additionally, amendments have been made to each such Employee Benefit Plan for
the Tax Reform Act of 1986 and subsequent legislation and regulations to the
extent they are required. A proper and timely application for a favorable
determination letter with respect to each such Employee Benefit Plan, as
amended, has been made with the Internal Revenue Service, and no unfavorable
responses have been received with respect to any such application from the
Internal Revenue Service.
(d) To the knowledge of PSI, with respect to each Employee
Benefit Plan which is subject to Title 1 of ERISA, neither PSI nor any ERISA
Affiliate of PSI has failed in any material respect to comply with any of the
applicable reporting, disclosure or other requirements of ERISA and the Internal
Revenue Code, and there has been no "prohibited transaction" as described in
Section 4975 of the Internal Revenue Code or Section 406 of ERISA.
(e) To the knowledge of PSI, neither PSI nor any ERISA
Affiliate of PSI, nor any of their respective directors, officers, employees or
any other "fiduciary," as such term is defined in Section 3(21) of ERISA, has
any material liability for failure to comply with ERISA or the Internal Revenue
Code for any action or failure to act in connection with the administration or
investment of the Employee Benefit Plans.
(f) Neither PSI nor any ERISA Affiliate of PSI presently
maintains, contributes to or has any liability (including current or potential
withdrawal liability) with respect to any "multiemployer plan" as such term is
defined in Section 3(37) of ERISA.
(g) There is no pending or to PSI's knowledge threatened legal
action, proceeding or investigation against or involving any Employee Benefit
Plan maintained by PSI or any
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ERISA Affiliate of PSI (other than routine claims for benefits) and, to PSI's
knowledge, there is no basis for or fact which could give rise to any such legal
action, proceeding or investigation. Any bonding required with respect to the
Employee Benefit Plans in accordance with applicable provisions of ERISA has
been obtained and is in full force and effect.
(h) Except as set forth in Section 3.8.11 of the PSI
Disclosure Letter,
(1) PSI is not a party to any employment agreement,
whether written or oral, or agreement with change in control or similar
provisions, or collective bargaining agreement or contract with any
labor union relating to any employees or former employees of PSI;
(2) PSI does not have outstanding any loan or loans
to any current or former employees of PSI, nor has PSI guaranteed such
loans;
(3) No amount payable to an employee or former
employee of PSI will be an "excess parachute payment" which is
non-deductible under Section 280G of the Internal Revenue Code.
(i) There has been no act or acts with respect to PSI which
would result in a disallowance of a deduction or the imposition of a tax
pursuant to Section 4980B, or with regard to plan years beginning before
December 31, 1988, Section 162(i) of the Internal Revenue Code as in effect
immediately prior to the enactment of the Technical and Miscellaneous Revenue
Act of 1988, or any regulations promulgated thereunder, whether final, temporary
or proposed. No event has occurred with respect to which PSI or any ERISA
Affiliate of PSI could be liable for a tax imposed by any of Sections 4972,
4976, 4977, 4979, or 4980 of the Internal Revenue Code, or for a civil penalty
under Section 502(c) of ERISA.
(j) With respect to each of the Employee Benefit Plans, PSI
has made available to ▇▇▇▇▇ true and complete copies of: (i) the plan documents,
including any related trust agreements, insurance contracts or other funding
arrangements, or a written summary of the terms and conditions of the plan if
there is no written plan document; (ii) the most recent determination letter
received from the Internal Revenue Service; (iii) the most recent IRS Form 5500;
(iv) the most recent actuarial valuation; (v) the most recent financial
statement; (vi) all correspondence with the Internal Revenue Service, the
Department of Labor and the Pension Benefit Guaranty Corporation with respect to
the past three plan years other than IRS Form 5500 filings and PBGC premium
payments; and (vii) the most recent summary plan description.
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3.9. SEC Filings; Financial Statement.
(a) PSI has made available to ▇▇▇▇▇ a correct and complete
copy of each report, schedule, registration statement and definitive proxy
statement filed by PSI with the Securities and Exchange Commission ("SEC") on or
after January 1, 1995 and prior to the date of this Agreement (the "Company SEC
Reports"), which are all the forms, reports and documents required to be filed
by the Company with the SEC since such date. As of their respective dates, the
Company SEC Reports and any forms, reports and other documents filed by PSI with
the SEC after the date of this Agreement (i) complied or will comply in all
material respects with the requirements of the Securities Act of 1933, as
amended (the "Securities Act"), or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as the case may be, and the rules and regulations
of the SEC thereunder applicable thereto, and (ii) did not at the time they were
filed (or if amended or superseded by a filing prior to the date of this
Agreement then on the date of such filing) or will not at the time they are
filed contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading. None of PSI's
subsidiaries is required to file any reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including,
in each case, any related notes thereto) contained in the Company SEC Reports
complied as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, had been prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout the
period involved (except as may be indicated in the notes thereto or, in the case
of the unaudited statement, as permitted by Form 10-Q of the SEC), and each
fairly presented the consolidated financial position of PSI and its consolidated
subsidiaries in all material respects as at the respective dates thereof and the
consolidated results of its operations and cash flows for the periods indicated
(subject, in the case of the unaudited interim financial statements, to normal
audit adjustments which were not and are not expected, individually or in the
aggregate, to be material in amount).
(c) Neither PSI nor any of its subsidiaries has any
liabilities (absolute, accrued, contingent or otherwise) of a nature required to
be disclosed on a balance sheet or in the related notes to the consolidated
financial statements prepared in accordance with GAAP which are, individually or
in the aggregate, material to the business, results of operations or financial
condition of PSI and its subsidiaries taken as a whole, except liabilities (i)
set forth in Section 3.9 of the PSI Disclosure Letter or the Company SEC Reports
filed with the SEC prior to the date of this Agreement or provided for in PSI's
balance sheet (and related notes thereto) as of December 31, 1997 filed in the
Company SEC Reports, or (ii) incurred since December 31, 1997 in the ordinary
course of business, none of which are material to the business, results of
operations or financial condition of PSI and its subsidiaries, taken as a whole.
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3.10. Proxy Statement. None of the information supplied or to be
supplied by PSI for inclusion or incorporation by reference in the proxy
statement to be disseminated to the stockholders of PSI in connection with a
stockholders meeting to vote upon the Transaction or the Alternative
Transaction, as the case may be, ("Proxy Statement") will, at the date the Proxy
Statement is mailed to the stockholders of PSI and at the time of the
stockholders meeting of PSI required pursuant to Section 6.2 hereof, contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made, in light of the circumstances under which
they are made, not misleading. The Proxy Statement will comply as to form in all
material respects with the provisions of the Exchange Act and the rules and
regulations promulgated by the SEC thereunder.
3.11. Litigation. Other than as listed in Section 3.11 of the PSI
Disclosure Letter, there is no claim, counterclaim, suit, order, proceeding,
action, or investigation pending, notice of which has been received, or, to the
knowledge of PSI, threatened against PSI, including but not limited to product
liability claims. PSI is not a plaintiff or petitioner in any litigation or
proceeding other than as listed in Section 3.11 of the PSI Disclosure Letter.
3.12. Environmental and Health and Safety Matters.
(a) Set forth in Section 3.12.1 of the PSI Disclosure Letter
is a true, accurate and complete list of all real property, owned, leased and/or
otherwise used or occupied by PSI (the "Property").
(b) Except as set forth in Section 3.12.2 of the PSI
Disclosure Letter, PSI and the Property have been at all times and are in all
material respects in compliance with the Resource Conservation and Recovery Act,
the Comprehensive Environmental Response, Compensation, and Liability Act, the
Superfund Amendments and Reauthorization Act, the Federal Water Control Act, the
Occupational Safety and Health Act, and all other federal, state and local laws,
regulations and ordinances relating to pollution, safety, health or protection
of the environment, including, without limitation, those relating to
containment, emissions, discharges, releases or threatened releases of
industrial, toxic or hazardous substances, materials or wastes or other
pollutants, contaminates, petroleum products, asbestos, polychlorinated
biphenyls ("PCBs"), or chemicals (collectively, "Hazardous Substances") into the
environment (including without limitation, ambient air, surface water, ground
water, land surface or subsurface strata) or otherwise relating to the
manufacturing, processing, distribution, use, treatment, labeling, storage,
disposal, abatement, transport or handling of Hazardous Substances (the
"Environmental Laws").
(c) PSI has obtained and is in material compliance with all
permits, licenses and other consents or authorizations which are required with
respect to the operation of its
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business under the Environmental Laws, including without limitation those that
are required to (a) operate or install any equipment or facilities and (b)
generate, manufacture, formulate, store, treat, handle, transport, discharge,
emit or dispose of Hazardous Substances generated by its business, a true and
complete list of which is included in Section 3.12.3 of the PSI Disclosure
Letter.
(d) Except as listed in Section 3.12.4(a) of the PSI
Disclosure Letter, PSI has not generated, used, treated, stored, maintained,
disposed of, or otherwise deposited PCBs, TCE, PCE, or asbestos containing
materials and, to the knowledge of PSI, such chemicals are not otherwise
located, at the Property, or any premises at which the business of PSI was or is
located. Additionally, except as described in Section 3.12.4(b) of the PSI
Disclosure Letter, there are and were no underground storage tanks used, stored,
maintained, located on or otherwise related to the Property, the business of
PSI, or any premises at which the business of PSI is located. PSI has removed
and properly disposed of all used or other obsolete materials regulated by
environmental, health and safety laws, including chemical or other hazardous
substances or wastes, that are not used by PSI's business. With respect to
underground storage tanks, Section 3.12.4(b) of the PSI Disclosure Letter sets
forth the size, location, construction, installation date, use and testing
history of all such underground storage tanks (whether or not excluded from
regulation under Environmental Laws), including all underground storage tanks in
use, out of service, closed, abandoned or decommissioned.
(e) To the knowledge of PSI, there has been no "release" as
defined in 42 U.S.C. ss. 9601(22) or, to the knowledge of PSI, threat of a
"release" of any Hazardous Substance on, from or under any premises from which
the operations of PSI have been or are being conducted which would require
removal or remediation under Environmental Laws.
(f) PSI has not received notice that it has any potential
liability with respect to the contamination, investigation, or cleanup of any
site at which Hazardous Substances have been or have alleged to have been
generated, treated, stored, released, discharged, emitted or disposed of, and,
to the knowledge of PSI, there are no past or present events, facts, conditions
or circumstances which may interfere with or prevent compliance by the business
of PSI in accordance with Environmental Laws, or with any order, decree,
judgment, injunction, notice or demand issued, entered, promulgated or approved
thereunder, or which may give rise to any common law or other legal liability,
including, without limitation, liability under any Environmental Laws, or
otherwise form the basis of any claim, action, demand, suit, proceeding,
hearing, notice of violation, study or investigation, based on or related to the
manufacture, process, distribution, use, treatment, storage, disposal, transport
or handling, or the emission, discharge, release or threatened release into the
environment of Hazardous Substances by PSI, as a result of any act or omission
of PSI.
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(g) To the knowledge of PSI, Section 3.12.7 of the PSI
Disclosure Letter contains a true, correct and complete listing of all Hazardous
Substances (other than Hazardous Substances comprising an ingredient or
component of a mixture or product or included in equipment) used by the business
of PSI in the conduct of its operations since January 1, 1990, and a list of the
methods used by PSI (including, but not limited to, a list of past and present
disposal or recycling sites, waste haulers, and manifest numbers) since January
1, 1990 to dispose of or recycle Hazardous Substances (other than Hazardous
Substances comprising an ingredient or component of a mixture or product or
included in equipment) generated by PSI's operations and by the activities of
PSI Entities.
(h) Except as disclosed in Section 3.12.8 of the PSI
Disclosure Letter, all of PSI's disposal and recycling practices relating to
Hazardous Substances have been accomplished in all material respects in
accordance with all applicable Environmental Laws.
3.13. Intellectual Property. Section 3.13 of the PSI Disclosure Letter
lists all material patents, trademarks, service marks, trade names and
copyrights and that are used in the business of PSI (the "Intellectual
Property"), all of which are owned or lawfully used by PSI. None of the
Intellectual Property has been held or stipulated to be invalid in any
litigation or proceeding. Except as disclosed in Section 3.13 of the PSI
Disclosure Letter, the validity of the Intellectual Property, and of PSI's
rights to the Intellectual Property, has not been questioned in any litigation
or proceeding currently pending or which, to the knowledge of PSI, has been
threatened, and there exists no basis for a claim against PSI for infringement
of any third party's intellectual property. PSI has not received any notice to
the effect that any product it makes or sells, or the distribution or use by it
or another of any such product, or any services it performs in the course of its
business, may infringe any trademark, service ▇▇▇▇, trade name, copyright,
patent, trade secret, or similar legally protectable right of another. All
patentable inventions utilized or first reduced to practice in connection with
the business or activities of PSI or the employment by same of individuals, are
the property of PSI and no other party. Except as set forth in Section 3.13 of
the PSI Disclosure Letter or another section of the PSI Disclosure Letter, PSI
has not entered into and is not a party to any material development, work for
hire, license or other agreement pursuant to which PSI has secured the right or
obligation to use, or granted others the right or obligation to use, any
trademarks, service marks, trade names, copyrights, patents or know-how.
3.14. Related Party Transactions. Since January 1, 1997, no officer or
director of PSI or any affiliate thereof has, directly or indirectly, entered
into any transaction with PSI, except for any arrangements which are either (i)
disclosed on the 1997 Balance Sheet or (ii) listed in Section 3.14 of the PSI
Disclosure Letter. For purposes of this Section 3.14 only, the term "affiliate"
of PSI shall mean and include any officer or director or shareholder of PSI or
any person related to any officer, director or shareholder of PSI by blood or by
marriage, or any corporation, partnership, proprietorship, trust or other entity
in which such officer or director or
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shareholder of PSI (or any spouse, ancestor or descendant of the same) has more
than a five percent (5%) legal or beneficial interest, or any corporation,
partnership, proprietorship, trust or other entity which controls, is controlled
by or is under common control with PSI.
3.15. Taxes. As to any tax imposed by the Federal government, or any
state government or any subdivision or municipality thereof, or the government
of any other country or political subdivision thereof, including, without
limitation, (i) taxes imposed on or measured by income, (ii) taxes based on
employment (including amounts withheld from employees' compensation), and (iii)
any property, franchise or sales tax, which, in each case, relates to or could
cause a lien or encumbrance upon any of the assets or the business of PSI, PSI
has timely, properly and lawfully filed all returns and elections necessary to
be filed and has paid in full the applicable taxes shown to be due on such
returns; to the best knowledge of PSI, no taxes are due which were not reported
on such returns; no claims for any unpaid taxes, interest or penalties are being
asserted by any governmental authority, for any period, against PSI or any
assets of PSI. PSI has not paid and is not required to pay any material income
taxes to any country other than those listed in Section 3.15A of the PSI
Disclosure Letter, or to any state other than those listed in Section 3.15B of
the PSI Disclosure Letter. PSI pays personal property and/or franchise taxes
with respect to its business and properties only in those countries, states or
political subdivisions listed in Section 3.15C of to the PSI Disclosure Letter.
PSI has timely filed and paid all material estimated taxes due on or prior to
the Closing Date. PSI has made available to ▇▇▇▇▇ true and complete copies of
each of the Federal, state, local and foreign income and excise tax returns, and
franchise tax returns, and any amendments thereto, as they relate to taxable
periods since January 1, 1995, and PSI has made available to ▇▇▇▇▇ all material
reports of and communications from Internal Revenue Service agents and the
corresponding agents of other state, local and foreign governmental agencies who
have examined the books and records of PSI at any time including and since the
last Internal Revenue Service audit. Except as disclosed in Section 3.15D of the
PSI Disclosure Letter, no audit or examination of PSI by any taxing authority or
agency is now pending or currently in progress, nor has PSI received from any
taxing authority or agency any notice of such an audit or examination. No waiver
of any statute of limitations has been given and is in effect in respect to the
assessment of any taxes against PSI.
3.16. Insurance. PSI maintains in effect, and since January 1, 1993,
has maintained in effect, product liability insurance, motor vehicle and
comprehensive general liability insurance and workers' compensation insurance
covering the business of PSI and fire and extended coverage insurance with
respect to the properties and assets of PSI. Section 3.16 of the PSI Disclosure
Letter is a complete list of all insurance policies (including the amount of
coverage thereunder) in effect at present. All such insurance policies are owned
solely and exclusively by PSI. No event has occurred that may enable an insurer
to rescind any such policies.
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3.17. Customer and Supplier Relationships; Warranty Claims. Except as
set forth in Section 3.17 of the PSI Disclosure Letter, PSI has not received any
notice that any customer or supplier of PSI intends to discontinue or alter the
prices or terms of, or substantially diminish, its relationship with PSI. Other
than as set forth in Section 3.17 of the PSI Disclosure Letter, since December
31, 1997, there are no outstanding warranty claims against PSI by any of its
customers with respect to products sold or services rendered by PSI.
3.18. Bonds; Guarantees. Other than as listed in Section 3.18 of the
PSI Disclosure Letter, there are no bonds, guarantees, notes, sureties, letters
of credit, or other similar credit agreements or debt obligations that exist
with respect to PSI, its business or any of its assets. PSI is not in default on
the payment of any principal or interest on any indebtedness for borrowed money,
nor is PSI otherwise in default under any indemnity, fidelity or contract bond
or letter of credit, note, guarantee or other credit agreement or debt
obligation or instrument.
3.19. Absence of Undisclosed Liabilities. Except as specifically
reserved against or reflected in the 1997 Balance Sheet, or described in Section
3.19 or another Section of the PSI Disclosure Letter, PSI is not subject to any
material liability or financial obligation (known or unknown, direct or
indirect, absolute, contingent, accrued or otherwise), other than liabilities or
financial obligations arising in the ordinary course of business since the date
of the 1997 Balance Sheet. Except as disclosed in Section 3.19 of the PSI
Disclosure Letter, PSI is not in default with respect to any term or condition
of any material indebtedness or liability (including any current or deferred
trade payable). PSI does not know of any facts or circumstances which might
reasonably serve as the basis for any material liabilities or financial
obligations with respect to PSI which are not disclosed in the PSI Disclosure
Letter. For purposes of this Section 3.19, any individual liability, or all such
liabilities in the aggregate, should be deemed to be material if the individual
or aggregate value is greater than $50,000.
3.20. Charter Documents. PSI has delivered or made available to ▇▇▇▇▇
certified copies of its Articles or Certificate of Incorporation as amended to
date (the "Certificate of Incorporation") and By-laws, as amended to date, as
well as copies of its minute books covering the period from January 1, 1995 to
the date hereof. Such Articles or Certificate of Incorporation and By-laws are
complete, correct and current. The minute books of PSI contain a complete,
correct and current record of all meetings and other corporate actions of the
stockholders and Board of Directors of PSI from January 1,1995 through March 31,
1998.
3.21. Subsidiaries and Affiliates. Schedule 3.28 lists all subsidiaries
and Affiliates of PSI. For the purposes of this Agreement (except for Section
3.15), the term "Affiliate" of a person shall mean any person or entity that,
directly or indirectly, controls, is controlled by or is under common control
with such person.
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3.22. No Misrepresentations or Nondisclosures. Neither this Agreement
nor any Exhibit or Schedule attached hereto contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein or therein not misleading.
3.23. Opinion of Financial Advisor. PSI's Board of Directors has
received the written opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company that, as of the date of
this Agreement, the Transaction and the Alternative Transaction are fair to the
stockholders of PSI from a financial point of view, a copy of which opinion will
be delivered to ▇▇▇▇▇, and such opinion has not been withdrawn or modified in
any material respect.
3.24. Board Approval. The Board of Directors of PSI based on the
recommendation of the Special Committee of independent directors (the "Special
Committee") has, prior to this Agreement, (a) approved this Agreement and all
related agreements and exhibits and the transactions contemplated hereby and
thereby (including for purposes of Section 203 of the Delaware General
Corporation Law), (b) determined that the Transaction and the Alternative
Transaction are fair to and in the best interests of the stockholders of PSI and
(c) recommended that the stockholders of PSI approve the Transaction or the
Alternative Transaction and the Share Increase (as hereinafter defined).
3.25 Absence of Questionable Payments. No director, officer, agent,
employee, or other person acting on behalf of PSI has used any of PSI's funds
for improper or unlawful contributions, payment, gifts or entertainment, or made
any improper or unlawful expenditures relating to political activity to
governmental officials or others. Neither PSI nor any director, officer, agent,
employee or other person acting on behalf of PSI has accepted or received any
improper or unlawful contributions, payments, gifts or entertainment
expenditures. PSI has adequate financial controls to prevent the making or
receiving of such improper or unlawful contributions, payments, gifts,
entertainment or expenditures. PSI has not made sales of products, either
directly or indirectly, into embargoed countries in contravention of applicable
law.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇
Unless otherwise required by the context in which it is used, the term
"▇▇▇▇▇" as used in this Article IV and Article VII, includes the ▇▇▇▇▇ Entities
and PVS. All representations and warranties contained herein are qualified in
their entirety by reference to the Disclosure Letter of even date herewith
delivered to PSI by ▇▇▇▇▇ and as such letter may be supplemented or amended
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from time to time prior to the Closing Date with the consent of PSI (the "▇▇▇▇▇
Disclosure Letter"). ▇▇▇▇▇ represents and warrants to PSI as follows:
4.1. Due Organization and Qualification. Each of the ▇▇▇▇▇ Entities
which is a partnership is a partnership duly organized and validly existing
under the laws of the State of Nevada and has the requisite power and lawful
authority to own, lease and operate its assets, properties and business and to
carry on its business as now conducted. PVS is a corporation duly organized,
validly existing and in good standing under the laws of the District of
Columbia. PVS has full corporate authority to own, lease and operate its
properties and businesses, and is in good standing and is qualified to transact
business as a corporation in all states in which the nature of its business or
the properties owned by it require it to qualify to transact business.
4.2. Authority to Execute and Perform Agreements. Each of the ▇▇▇▇▇
Entities which is a partnership has the full legal right and power and all
authority and approval required to enter into, execute and deliver this
Agreement and each agreement contemplated hereby to which it is a party, and
each such agreement has been duly authorized by all general partners and limited
partners of each of the ▇▇▇▇▇ Entities which is a party to such agreement in
accordance with the respective limited partnership agreement of such
partnership, and each of the ▇▇▇▇▇ Entities which is a partnership has full
legal right and power and all authority and approval required to perform fully
the respective obligations of such entity under this Agreement and all
agreements referred to as exhibits hereto to which it is a party. This Agreement
has been duly executed and delivered and is the valid and binding obligation of
each of the ▇▇▇▇▇ Entities which is a partnership enforceable in accordance with
its terms, except as may be limited by bankruptcy, moratorium, reorganization,
insolvency or other similar laws now or hereafter in effect generally affecting
the enforcement of creditors' rights. No approval or consent of any foreign,
federal, state, county, local or other governmental or regulatory body, and
(except as otherwise specified in this Agreement or the ▇▇▇▇▇ Disclosure Letter)
no approval or consent of any other person is required in connection with the
execution and delivery by ▇▇▇▇▇ of this Agreement and the consummation and
performance by any of the partnerships included in ▇▇▇▇▇ of the transactions
contemplated herein. Neither the execution and delivery of this Agreement nor
the execution and delivery of any agreement referred to as an exhibit hereto
will (i) conflict with any provision of any partnership agreement of any
partnership included in ▇▇▇▇▇; or (ii) conflict with or violate in any material
respect any law, rule or regulation, ordinance, order, writ, injunction,
judgment or decree applicable to ▇▇▇▇▇ or to any of its Businesses or by which
any of its assets are affected. Except as set forth in Section 4.2 of the ▇▇▇▇▇
Disclosure Letter, ▇▇▇▇▇ is not required to submit any notice, declaration,
report or other filing or registration with any governmental or regulatory or
instrumentality, and no approval or non-objections are required to be obtained
or made by ▇▇▇▇▇ in connection with the execution, delivery or performance by
▇▇▇▇▇ of this Agreement or any agreement referred to as an exhibit hereto or the
consummation of the transactions contemplated hereby or thereby.
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4.3. Agreements. Section 4.3 of the ▇▇▇▇▇ Disclosure Letter sets forth
all customer and supplier contracts and other agreements relating to the ▇▇▇▇▇
Assets or the business of PVS (whether written or oral) to which ▇▇▇▇▇ or PVS is
a party, or by or to which it or its assets or properties are bound or subject,
which relate to or which do or might affect the ▇▇▇▇▇ Assets. All of the
contracts and agreements set forth in Section 4.3 of the ▇▇▇▇▇ Disclosure Letter
have been made available to PSI and are valid, subsisting agreements, in full
force and effect and binding upon the parties thereto in accordance with their
terms, and ▇▇▇▇▇ is not in default under any of them, nor to the knowledge of
▇▇▇▇▇ is any other party to any such contract or other agreement in default
thereunder, nor does any condition exist which with notice or lapse of time or
both would constitute a material default thereunder. Except as set forth in
Section 4.3 of the ▇▇▇▇▇ Disclosure Letter no approval or consent of any person
is needed in order that the contracts or other agreements set forth in Section
4.3 of the ▇▇▇▇▇ Disclosure Letter continue in full force and effect with PSI
following the consummation of the transactions contemplated by this Agreement.
4.4 Contributed Businesses.
(a) At Closing, by completing the transactions contemplated in
Section 1.1 hereof (provided the Alternative Transaction is not selected by
▇▇▇▇▇), ▇▇▇▇▇ will contribute to PSI (or cause the contribution to PSI of) all
right, title and interest in the following businesses as conducted by ▇▇▇▇▇ as
of the date hereof (the "Businesses"):
(1) resale of long distance telecommunications services;
(2) provision of remotely accessed virtual office information services;
(3) provision of audiovisual production and post-production facilities and
services;
(4) provision of digital information storage services; and
(5) provision of satellite uplink and downlink information transmission services.
In the event the Alternative Transaction is selected by ▇▇▇▇▇, the
Businesses shall include only the businesses of SVM as conducted as of the date
hereof and identified in clauses (1) and (2) above.
(b) Other than the Real Property, ▇▇▇▇▇ owns and retains all
such assets, tangible or intangible and contractual, license and leasehold
rights necessary for ▇▇▇▇▇ (i) to operate the Businesses as each such entity
operates its business on the date hereof, and (ii) to
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utilize the assets and contractual, license and leasehold rights in the same
manner as they were used on the date of this Agreement. With the exception of
the Real Property and those assets used in the Businesses pursuant to license
and leasehold rights in favor of ▇▇▇▇▇, all of the assets used in the Businesses
are owned by ▇▇▇▇▇ and none are owned by any other party.
4.5 Assets. ▇▇▇▇▇ has good and marketable title to all of its assets
(except for any leased property and Third Party Software for which ▇▇▇▇▇ has
valid and enforceable leases or licenses, as the case may be), free and clear of
all mortgages, options, leases, covenants, conditions, agreements, liens,
security interests, adverse claims, restrictions, charges, encumbrances or
rights of others. No material restrictions exist on the use or transfer of the
▇▇▇▇▇ Assets. The ▇▇▇▇▇ Assets, as identified on Schedule 1.1(a)(i) or Section
4.5 of the ▇▇▇▇▇ Disclosure Letter and the assets owned by PVS include (i) all
machinery or equipment, including without limitation, computer hardware, with an
original market value in excess of $25,000 used to conduct the Business (the
"Equipment"), together with the date of acquisition of each piece of Equipment
and the location of each piece of Equipment (other than Equipment owned by PVS)
and (ii) all "▇▇▇▇▇ Software," which shall include all of ▇▇▇▇▇'▇ material
software and computer programs used in the Businesses, including any software
computer programs not wholly owned by ▇▇▇▇▇ ("▇▇▇▇▇ Third Party Software")
imbedded therein, in machine readable source code forms and in machine
executable object code forms and all related specifications (included, without
limitation, all logic architectures, algorithms and logic flows and all
physical, functional, operating and design parameters, operation systems and
procedures (including developmental methodology), designs, design revisions,
related application software in any language, concepts, ideas, processes,
techniques. software design and test tools, Third Party Software interfaces,
methods of implementation and packaging, all associated know-how and show-how
and all related programmer and user manuals, which are used by ▇▇▇▇▇ to install,
operate, maintain, correct, test, repair, enhance, extend, modify, prepare
derivative works based upon design, develop, reproduce and package software and
computer programs. Except as set forth in Section 4.5 of the ▇▇▇▇▇ Disclosure
Letter, the intangible assets included in the ▇▇▇▇▇ Assets and the tangible
assets of PVS are in good operating condition and repair, ordinary wear and tear
excepted, and are satisfactory for the purposes of which such assets are being
used in ▇▇▇▇▇'▇ business. ▇▇▇▇▇ does not and has not owned or have any interest
in real estate except as described in Section 4.5 of the ▇▇▇▇▇ Disclosure
Letter.
4.6 Employees.
(a) Except as set forth in Section 4.6 of the ▇▇▇▇▇ Disclosure
Letter, (i) PVS is not a party to any employment agreement, whether written or
oral, or agreement with change in control or similar provisions, or collective
bargaining agreement or contract with any labor union relating to any employees
or former employees of PVS or SVM, as the case may be; (ii) PVS has no
outstanding loan or loans to any current or former employees of PVS, nor has PVS
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guaranteed any such loans; and (iii) no amount payable to an employee or former
employee of PVS will be an "excess parachute payment" which is nondeductible
under Section 280(g) of the Internal Revenue Code.
(b) Section 4.6 of the ▇▇▇▇▇ Disclosure Letter sets forth (i)
the total amount of compensation paid to all employees of ▇▇▇▇▇ during 1997;
(ii) the names and total 1997 compensation paid to each employee of ▇▇▇▇▇ whose
W-2 earnings in 1997 exceeded $25,000; and (iii) any bonus, incentive
compensation, profit sharing, retirement, pension, group insurance, death
benefit, group health, medical expense reimbursement, cafeteria, dependent care,
stock option, stock purchase, stock appreciation right, savings, deferred
compensation, consulting, severance payment or termination pay, vacation pay,
life insurance, welfare or other employee benefit or fringe benefit plan,
program or arrangement with respect to any employee or former employee of PVS
(the "▇▇▇▇▇ Employee Benefit Plans"). Favorable determination letters have been
received from the Internal Revenue Service with respect to each ▇▇▇▇▇ Employee
Benefit Plan which is intended to comply with the provisions of Section 401(a)
of the Internal Revenue Code, evidencing compliance with the relevant provisions
of the Tax Equity and Fiscal Responsibility Act of 1982, the Tax Reform Act of
1984 and the Retirement Equity Act of 1984. Each ▇▇▇▇▇ Employee Benefit Plan
complies in form and, to the knowledge of ▇▇▇▇▇, operates in compliance in all
material respects with the requirements of the Internal Revenue Code and meets
the requirements of a "qualified plan" under Section 401(a) of the Internal
Revenue Code. Additionally, amendments have been made to each such ▇▇▇▇▇
Employee Benefit Plan of the Tax Reform Act of 1986 and subsequent legislation
and regulations as they are required. With respect to each ▇▇▇▇▇ Employee
Benefit Plan which is the subject to Title I of ERISA, PVS has not failed in any
material respect to comply with any of the applicable reporting, disclosure or
other requirements of ERISA and the Internal Revenue Code, and there has been no
"prohibited transaction" as described in Section 4975 of the Internal Revenue
Code or Section 406 of ERISA. Neither PVS nor any of its directors, officers,
employees, partners or any other "fiduciary" as such term is defined in Section
3(21) of ERISA, has any material liability for failure to comply with ERISA or
the Internal Revenue Code for any action or failure to act in connection with
the administration or investment of the ▇▇▇▇▇ Employee Benefit Plans. PVS does
not presently maintain, contribute to or have any liability (including current
or potential withdrawal liability) with respect to any "defined benefit plan,"
as such term is defined in Section 3(35) of ERISA, or any "multi-employer plan,"
as such term is defined in Section 3(37) of ERISA. There is no pending or, to
▇▇▇▇▇'▇ knowledge, threatened legal action, proceeding or investigation against
or involving any ▇▇▇▇▇ Employee Benefit Plan (other than routine claims for
benefits) and to ▇▇▇▇▇'▇ knowledge, there is no basis for or fact which could
give rise to any such legal action, proceeding or investigation. Any bonding
required with respect to any ▇▇▇▇▇ Employee Benefit Plan in accordance with
applicable provisions of ERISA has been obtained and is in full force and
effect.
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4.7. Intellectual Property. Section 4.7 of the ▇▇▇▇▇ Disclosure Letter
sets forth all patents, copyrights, trademarks, service marks and trade names
relating to the Businesses, all of which are owned or lawfully used by ▇▇▇▇▇,
all applications for any of the foregoing, all data bases and all permits,
grants and licenses of such rights running to or from ▇▇▇▇▇ relating to any of
the foregoing. The rights of ▇▇▇▇▇ in the property set forth in Section 4.7 of
the ▇▇▇▇▇ Disclosure Letter are free and clear of any liens or other
encumbrances. ▇▇▇▇▇ does not have any notice of any adversely held copyright,
trademark, service ▇▇▇▇ or trade name of any other person or notice of any claim
of any other person relating to any of the property set forth in Section 4.7 of
the ▇▇▇▇▇ Disclosure Letter, and ▇▇▇▇▇ does not know of any basis for any such
charge or claim. To the knowledge of ▇▇▇▇▇, no person has possession of any
copies of or use of ▇▇▇▇▇'▇ customer lists and/or data bases.
4.8. Financial Statements. ▇▇▇▇▇ has provided to PSI combined balance
sheets of ▇▇▇▇▇ Communications Holdings Limited Partnership and ▇▇▇▇▇
Communications Holdings I Limited Partnership as of December 31, 1997 (the
"▇▇▇▇▇ Balance Sheet") and 1996, and the related combined statements of
operations and owners' equity and cash flows for the years then ended (the
"▇▇▇▇▇ Financial Statements"). The ▇▇▇▇▇ Financial Statements have been prepared
in accordance with generally accepted accounting principles applied on a
consistent basis throughout the period involved (except as may be indicated in
the notes thereto), and each fairly presents the financial position of ▇▇▇▇▇ in
all material respects as at the respective dates thereof and the results of
operations and cash flows of ▇▇▇▇▇ for the periods indicated (except for the
fact that the ▇▇▇▇▇ Financial Statements include the assets and operations of
▇▇▇▇▇ Communications Holdings I Limited Partnership, MOR Music TV, Inc.,The Ritz
Limited Partnership, PVS ▇▇▇▇▇-Atlanta Limited Partnership, ▇▇▇▇▇ Transmission
Services Limited Partnership and ▇▇▇▇▇ PVS Limited Partnership, which are not
included in ▇▇▇▇▇ as that term is defined for purposes of this Article IV).
4.9. Liabilities. Except as set forth in Section 4.9 of the ▇▇▇▇▇
Disclosure Letter or Schedule 1.1(b) and except for liabilities incurred in the
ordinary course of business since December 31, 1997, none of which is material,
▇▇▇▇▇ does not have any direct or indirect indebtedness, liability, claim, loss,
damage, deficiency, obligation or responsibility, known or unknown, fixed or
unfixed, ▇▇▇▇▇▇ or inchoate, liquidated, secured or unsecured, accrued,
absolute, contingent or otherwise, relating to the Businesses, including, but
not limited to, liabilities on account of taxes, other governmental charges or
law-suits brought, whether or not of a kind required by generally accepted
accounting principles to be set forth on a financial statement ("Liabilities"),
which are not set forth on or disclosed in the ▇▇▇▇▇ Balance Sheet.
4.10. Accounts Receivable. All trade accounts receivable of ▇▇▇▇▇ on
the date of this Agreement have arisen in the ordinary course of business and
represent valid obligations to ▇▇▇▇▇.
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Collection of accounts receivable by ▇▇▇▇▇ through the date hereof has been and
is consistent with past business practices of ▇▇▇▇▇.
4.11. No Material Adverse Change. Since December 31, 1997 there has
been no material adverse change in the assets, properties, business, operations,
liabilities or condition of the ▇▇▇▇▇ Assets and ▇▇▇▇▇ does not know of any such
change which is threatened, nor has there been any damage, destruction or loss
materially affecting the assets, properties, business, operations or condition
of the ▇▇▇▇▇ Assets, whether or not covered by insurance.
4.12. Operations of ▇▇▇▇▇. Except as set forth in Section 4.12 of the
▇▇▇▇▇ Disclosure Letter, from December 31, 1997 through the date hereof, ▇▇▇▇▇
has not:
(a) Waived, or agreed to waive, any right of material value to
the ▇▇▇▇▇ Assets;
(b) Materially changed, or agreed to materially change, any of
its business policies or practices relating to or affecting the ▇▇▇▇▇ Assets
including, without limitation, production, advertising, marketing, pricing,
purchasing, accounting, sales, returns, budget or product acquisition policies
or practices;
(c) Except in the ordinary course of business relating to the
▇▇▇▇▇ Assets, other than for fair market value, sold, abandoned or made, or
agreed to sell, abandon or make, any other disposition of any of its assets or
properties; or granted or suffered, or agreed to grant or suffer, any lien or
other encumbrance on any of its assets or properties;
(d) Except for inventory or equipment acquired in the ordinary
course of business of the ▇▇▇▇▇ Assets, made any acquisition of all or any part
of the assets, properties, capital stock or business of any other persons or
made any commitments to do any of the foregoing relating to the Business;
(e) Suffered or incurred any damage, destruction or loss
(whether or not covered by insurance) materially adversely affecting the assets,
properties, business, operations or conditions relating to the ▇▇▇▇▇ Assets; or
(f) Entered into, or agreed to enter into, any other material
contract or other agreement or other material transaction relating to the ▇▇▇▇▇
Assets.
4.13. Compliance with Laws. ▇▇▇▇▇ has complied in all material respects
with all federal, state, county, local and foreign laws, ordinances,
regulations, orders, judgments, injunctions, awards or decrees applicable to the
▇▇▇▇▇ Assets and has not received any notice of violation of
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any of the foregoing. ▇▇▇▇▇ has all requisite licenses, permits and certificates
from federal, state and local governmental authorities as may be necessary to
conduct the Businesses and to own and operate its assets except to the extent
that the failure to obtain such licenses, permits and certificates would not
have a material adverse effect on the Businesses taken as a whole, and such
permits are valid, in full force and effect and will not be terminated or
adversely affected by the consummation of the transactions contemplated hereby.
Except as disclosed in Section 4.13 of the ▇▇▇▇▇ Disclosure Letter, ▇▇▇▇▇ has
not received any notice alleging any violation by ▇▇▇▇▇ of any laws, or any
investigation by administrative agencies.
4.14. Tax Matters. PSI will not assume or otherwise become liable for
any income, excise, sales, use, gross receipts, franchise, employment, payroll
related, property or any other tax of any sort relating to the assets, business
or property of ▇▇▇▇▇ with respect to any period commenced prior to the Closing
Date or arising out of the transactions contemplated hereby. ▇▇▇▇▇ has filed all
income tax, excise tax, sales tax, use tax, gross receipts tax, franchise tax,
employment and payroll related tax, property tax, and all other tax returns
which ▇▇▇▇▇ is required to file and has paid or provided for all taxes shown on
such returns, and all deficiencies or other assessments of tax, interest or
penalties owed by ▇▇▇▇▇.
4.15. Litigation. Other than as listed in Section 4.15 of the ▇▇▇▇▇
Disclosure Letter, there is no claim, counterclaim, suit, order, proceeding,
action, or investigation pending, notice of which has been received, or, to the
knowledge of ▇▇▇▇▇, threatened against ▇▇▇▇▇, including but not limited to
product liability claims. ▇▇▇▇▇ is not a plaintiff or petitioner in any
litigation or proceeding other than as listed in Section 4.15 of the ▇▇▇▇▇
Disclosure Letter.
4.16. Environmental and Health and Safety Matters.
(a) Set forth in Section 4.16(a) of the ▇▇▇▇▇ Disclosure
Letter is a true, accurate and complete list of all real property leased and/or
otherwise used or occupied by ▇▇▇▇▇ (the "▇▇▇▇▇ Property").
(b) Except as set forth in Section 4.16(b) of the ▇▇▇▇▇
Disclosure Letter, ▇▇▇▇▇ and the ▇▇▇▇▇ Property have been at all times and are
in all material respects in compliance with the Environmental Laws.
(c) ▇▇▇▇▇ has obtained and is in full compliance with all
permits, licenses and other consents or authorizations which are required with
respect to the operation of its business under the Environmental Laws, including
without limitation those that are required to (a) operate or install any
equipment or facilities and (b) generate, manufacture, formulate, store, treat,
handle, transport, discharge, emit or dispose of Hazardous Substances generated
by the
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Businesses, a true and complete list of which is included in Section 4.16(c) of
the ▇▇▇▇▇ Disclosure Letter.
(d) Except as listed in Section 4.16.(d) of the ▇▇▇▇▇
Disclosure Letter, ▇▇▇▇▇ has not generated, used, treated, stored, maintained,
disposed of, or otherwise deposited PCBs, TCE, PCE, or asbestos containing
materials in, on, or related to the ▇▇▇▇▇ Property, the Businesses, or any
premises at which the Businesses were or are located. Additionally, except as
described in Section 4.16(d) of the ▇▇▇▇▇ Disclosure Letter, there are and were
no underground storage tanks used, stored, maintained, located on or otherwise
related to the ▇▇▇▇▇ Property, the Businesses, or any premises at which the
Businesses were or are located. ▇▇▇▇▇ has removed and properly disposed of all
used or other obsolete materials regulated by environmental, health and safety
laws, including chemical or other hazardous substances or wastes, that are not
used by ▇▇▇▇▇'▇ business. With respect to underground storage tanks, Section
4.16(d) of the ▇▇▇▇▇ Disclosure Letter sets forth the size, location,
construction, installation date, use and testing history of all such underground
storage tanks (whether or not excluded from regulation under Environmental
Laws), including all underground storage tanks in use, out of service, closed,
abandoned or decommissioned.
(e) To the knowledge of ▇▇▇▇▇, there has been no "release" as
defined in 42 U.S.C. ss. 9601(22) or threat of a "release" of any Hazardous
Substance in, from or under any premises from which the operations of ▇▇▇▇▇ have
been or are being conducted.
(f) ▇▇▇▇▇ has not received notice that it has any potential
liability with respect to the contamination, investigation, or cleanup of any
site at which Hazardous Substances have been or have alleged to have been
generated, treated, stored, released, discharged, emitted or disposed of, and,
to the knowledge of ▇▇▇▇▇, there are no past or present events, facts,
conditions or circumstances which may interfere with or prevent compliance by
the Businesses in accordance with Environmental Laws, or with any order, decree,
judgment, injunction, notice or demand issue, entered, promulgated or approved
thereunder, or which may give rise to any common law or other legal liability,
including, without limitation, liability under any Environmental Laws, or
otherwise form the basis of any claim, action, demand, suit, proceeding,
hearing, notice of violation, study or investigation, based on or related to the
manufacture, process, distribution, use, treatment, storage, disposal, transport
or handling, or the emission, discharge, release or threatened release into the
environment of Hazardous Substances by ▇▇▇▇▇ as a result of any act or omission
of ▇▇▇▇▇.
(g) To the knowledge of ▇▇▇▇▇, Section 4.16(g) of the ▇▇▇▇▇
Disclosure Letter contains a true, correct and complete listing of all Hazardous
Substances (other than Hazardous Substances comprising an ingredient or
component of a mixture or product or included in equipment) used in the
Businesses in the conduct of its operations since the commencement of its
operations, and a list of the methods used by ▇▇▇▇▇ (including, but not limited
to, a list of past and present disposal or recycling sites, waste haulers, and
manifest numbers) since commencement of its
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operations to dispose of or recycle Hazardous Substances (other than Hazardous
Substances comprising an ingredient or component of a mixture or product or
included in equipment) generated by ▇▇▇▇▇'▇ operations and by the activities of
▇▇▇▇▇.
(h) Except as disclosed in Section 4.16(h) of the ▇▇▇▇▇
Disclosure Letter, all of ▇▇▇▇▇'▇ disposal and recycling practices relating to
Hazardous Substances have been accomplished in all material respects in
accordance with all applicable Environmental Laws.
4.17 Insurance. Except as to PVS which has maintained the referenced
policies in effect since January 1, 1996, ▇▇▇▇▇ maintains in effect, and since
commencement of its operations, has maintained in effect, motor vehicle and
comprehensive general liability insurance and workers' compensation insurance
covering the Businesses and fire and extended coverage insurance with respect to
the properties and assets of ▇▇▇▇▇. Section 4.17 of the ▇▇▇▇▇ Disclosure Letter
contains a complete list of all insurance policies (including the amount of
coverage thereunder) in effect at present. All such insurance policies are owned
solely and exclusively by ▇▇▇▇▇. No event has occurred that may enable an
insurer to rescind any such policies.
4.18. Customer and Supplier Relationships; Warranty Claims. Except as
set forth in Section 4.18 of the ▇▇▇▇▇ Disclosure Letter, ▇▇▇▇▇ has not received
any notice that any customer or supplier of ▇▇▇▇▇ intends to discontinue or
alter the prices or terms of, or substantially diminish its relationship with
▇▇▇▇▇. Other than as set forth in Section 4.18 of the ▇▇▇▇▇ Disclosure Letter,
there are no outstanding warranty claims against ▇▇▇▇▇ by any of its customers
with respect to products sold or services rendered by ▇▇▇▇▇.
4.19 Investment. ▇▇▇▇▇ is acquiring the PSI Common Stock for investment
only and not with a view to the public distribution or resale thereof or any
interest therein in violation of the Securities Act or any other applicable
federal or state securities laws or regulations. ▇▇▇▇▇ is familiar with the
meaning of such representation and fully understands the restrictions and
limitations that are imposed thereby. PSI has disclosed to ▇▇▇▇▇ that ▇▇▇▇▇ must
bear the economic risk of the investment in the PSI Common Stock for an
indefinite period of time because the PSI Common Stock has not been registered
under the Securities Act or any state blue sky law and therefore, the PSI Common
Stock cannot be sold unless it is subsequently registered under the Securities
Act and applicable state blue sky laws or an exemption from such registration is
available. ▇▇▇▇▇ is able and prepared to bear the economic risks of investing in
and holding the PSI Common Stock for an indefinite period of time. At all times
during the Transaction and at the date of this Agreement, ▇▇▇▇▇ has such
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risk of the investment in the PSI Common Stock. ▇▇▇▇▇
has had access to such financial and other information and has been afforded the
opportunity to ask such question of PSI and its representatives and has received
answers thereto, as it deems necessary in connection with its decision to
acquire the PSI Common Stock.
ARTICLE V
COVENANTS OF PSI
Between the date of this Agreement and the Closing Date, PSI shall:
5.1. Management of PSI. Operate the business of PSI in a prudent manner
consistent with past practices, and in the usual and ordinary course, and use
its reasonable best efforts to preserve the goodwill of suppliers, distributors,
sales representatives, customers, creditors and others having business
relationships with PSI, and shall safeguard and preserve the confidentiality of
all books, records and information relating to PSI in a prudent manner
consistent with past practices.
5.2. Accounting Practices. Refrain from making any change in the
accounting practices or procedures governing PSI.
5.3. No Distribution of Dividends. Except as otherwise contemplated by
this Agreement, including the Recapitalizations referred to in Sections 2.1 and
6.3, refrain from paying or declaring any dividend, or making any distribution
on account of, any of the outstanding shares of capital stock of PSI, or
redeeming, purchasing or otherwise acquiring any of the capital stock of PSI, or
issuing any shares of capital stock of PSI, or granting, issuing, selling or
disposing of any option, warrant or right to acquire any shares of capital stock
of PSI.
5.4. No New Stock Rights. Except as otherwise contemplated by this
Agreement, including the Recapitalizations referred to in Sections 2.1 and 6.3,
not enter into, issue, or grant any agreements, arrangements, warrants, calls,
options, convertible rights or other rights (vested or contingent) to acquire
any capital stock of PSI.
5.5. Purchases and Sales. Maintain the fixed assets of PSI in good
condition, repair and working order, normal wear and tear excepted; and refrain
from (a) making or permitting any sales, transfers or dispositions of any asset
of the business of PSI (other than inventory in the ordinary course of
business); (b) entering into any contracts, leases, or commitments, or any
amendments or modifications to contracts, leases or commitments existing at the
date of the execution of this Agreement, involving the business or assets of
PSI, other than those in the ordinary course of business involving consideration
or other expenditure of less than $50,000, and other than those that can be
terminated without obligation or penalty at the Closing; and (c) taking
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or permitting any action or entering into or permitting any contract or
agreement prohibited by Section 3.5.
5.6. Compensation of PSI's Employees. Refrain from making or permitting
any change in the compensation or benefits payable or to become payable to any
of the employees or agents of the business of PSI, or making any new bonus
payment or arrangement or benefit to or with any of them, or hiring any
additional employees, except in accordance with compensation and hiring
practices previously followed by PSI.
5.7. Insurance. Use its reasonable best efforts to have in effect and
maintain at all times all insurance now in force relating to PSI and the
business and assets of PSI.
5.8. Preserve Organization. Preserve the business organization of PSI
intact and keep available the services of the present officers and employees of
PSI.
5.9. Access to the Records of PSI. Allow ▇▇▇▇▇, its representatives,
attorneys and accountants to continue to have reasonable access to the records
and files, audits and properties of PSI relating to PSI, the business and assets
of PSI, as well as all information relating to taxes, commitments, contracts,
titles and financial condition of, or otherwise pertaining to, PSI. PSI agrees
to use its reasonable best efforts to cause its accountants to cooperate with
▇▇▇▇▇ and its accountants in making available all financial information
concerning PSI as is requested, and ▇▇▇▇▇ and its accountants shall have the
right to examine all working papers pertaining to examinations of PSI relating
to PSI and its business and assets, provided that such examinations shall be
designed to cause minimal disruption to PSI and its business and work force, and
in any event, shall be undertaken with reasonable prior notice and during normal
business hours of PSI.
5.10. Consents and Authorizations. Use its reasonable best efforts to
obtain all government authorizations and contractual and leasehold consents and
permits necessary to enable the consummation of all transactions contemplated
hereby without causing the discontinuation or termination of any permits or of
any contractual relationships maintained by PSI.
5.11. Fulfill Closing Conditions. Use its reasonable best efforts to
take, or to cause to be taken, all action reasonably necessary or appropriate to
cause each of the conditions set forth in Article VIII to be fulfilled on or
prior to the Closing Date.
5.12. Taxes. Pay when due all federal, state, local and foreign income,
franchise and other taxes of PSI, other than any taxes on or arising out of the
Transaction.
5.13. Financial Reports. Provide ▇▇▇▇▇ with (i) copies of any financial
statements prepared by PSI in the course of its business, to be provided
promptly after they become
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available, and (ii) cumulative and monthly management reports of PSI's business
(including statements of revenues and expenses), to be provided within 15 days
following the end of each month.
5.14. Certificate of Incorporation and By-Laws. Refrain from amending
the Certificate of Incorporation or By-Laws of PSI other than amending the
Certificate of Incorporation to effect the Share Increase (as hereinafter
defined).
5.15. Damage or Destruction of Assets. Notify ▇▇▇▇▇ immediately in the
event of any material damage to or material destruction of any of the material
assets of PSI.
5.16. No Shop. Refrain, and cause PSI's officers, directors, employees,
agents and Affiliates to refrain, except as required by its or their fiduciary
duties under Delaware law or as contemplated by this Agreement, including the
Recapitalizations referred to in Sections 2.1 and 6.3, from initiating any
negotiations or soliciting or encouraging (including by way of furnishing
non-public information) any offer or proposal regarding the sale, direct or
indirect, of any of the outstanding shares of capital stock of PSI; the sale,
direct or indirect, of any of the assets of PSI (other than inventory in the
ordinary course of business); the issuance of any capital stock of PSI or any
options, warrants, or rights to acquire capital stock of PSI; or any merger,
consolidation or similar transaction involving the Shares or any of the assets
of PSI; with any party other than ▇▇▇▇▇ or an Affiliate of ▇▇▇▇▇. PSI shall
promptly notify ▇▇▇▇▇ of any such proposal or offer, or any inquiry or contact
with any person with respect thereto, and the terms thereof.
5.17. Confidentiality.
(a) Not disclose, and cause PSI's officers, directors,
employees, agents and Affiliates not to disclose, any terms of the Transaction
or the Alternative Transaction, or to make any public statement regarding the
Transaction or the Alternative Transaction prior to the Closing, without the
prior written consent of ▇▇▇▇▇ except as may be required by law; provided,
however, that the parties understand and agree that certain disclosures
regarding the Transaction or the Alternative Transaction may be made to third
parties whose consent or approval may be required in connection with the
Transaction or the Alternative Transaction or as may be required by law, and
that in each case such disclosures may be made by PSI, without ▇▇▇▇▇'▇ prior
written consent, but only to the extent such disclosures are so required.
(b) Continue, and cause PSI's officers, directors, employees,
agents and Affiliates to continue, to observe, perform, and comply with that
certain confidentiality agreement dated March 17, 1998, between PSI and ▇▇▇▇▇.
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5.18. Tax Treatment. Refrain from taking any action which would cause
the Transaction to fail to qualify as transfer pursuant to Section 351(a) of the
Internal Revenue Code.
5.19 NASDAQ Quotation. Use its reasonable best efforts to cause the
shares of PSI Common Stock constituting the PSI Consideration to be eligible for
listing on the NASDAQ Small Cap Market and the Boston Stock Exchange upon
official notification of issuance.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1. Voting Agreement. Concurrently with the execution of this
Agreement, ▇▇▇▇▇ Communications shall have entered into Voting Agreements with
Alta Investissements S.A. ("Alta"), Vulcan Ventures Incorporated ("Vulcan") and
certain other entities and persons (the "Voting Parties"), in the form attached
as Exhibit 6.1 hereto, whereby each of the Voting Parties agrees to (i) not sell
any of the shares of capital stock of PSI owned by such persons between the date
of the Voting Agreement and the Closing Date, and (ii) vote all of the shares of
PSI Common Stock held by such person in favor of approval of the Transaction or
the Alternative Transaction and the amendment of the Certificate of
Incorporation increasing the number of authorized Shares of PSI Common Stock to
not less than 200,000,000 shares or such other number of authorized shares as
the parties may agree upon (the "Share Increase") in connection with the
Stockholders Meeting, as defined below.
6.2. Stockholders Meeting. PSI shall call a meeting of stockholders to
be held as soon as reasonably practicable for the purpose of voting upon the
required stockholder approvals requested in connection with this Agreement (the
"Stockholders Meeting"). Except as otherwise required by the fiduciary duties of
the directors of PSI, the Board of Directors of PSI shall recommend to the
stockholders of PSI a vote in favor of approval of the Transaction or the
Alternative Transaction if selected by ▇▇▇▇▇ and the Share Increase.
6.3. Recapitalization. No later than 20 days from the date hereof, PSI
shall enter into agreement with each of Didier Primat ("Primat"), Primwest
Holding N.V. ("Primwest") and Vulcan to convert (i) the PSI Series A Stock and
PSI Series B Stock and (ii) the promissory notes between each of Primat and
Vulcan with PSI into shares of PSI Common Stock at terms no less favorable to
PSI than that of the Recapitalization set forth in Section 2.1.
6.4. Board of Directors. Prior to the Closing Date, PSI shall adopt a
resolution fixing the number of Board members of its Board of Directors to eight
(8) members.
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6.5. Employees. At the Closing Date all employees of ▇▇▇▇▇ shall become
employees of PSI under the terms of such employees' employment with ▇▇▇▇▇ and
shall be provided with benefits not less favorable than employees of PSI with
similar tenure.
6.6. President and Chief Executive Officer. At the Closing Date, PSI
shall appoint a nominee of ▇▇▇▇▇ to serve as President and Chief Executive
Officer of PSI.
6.7. Interim Loan. Within two (2) days of the date hereof and following
execution and delivery by PSI of a promissory note in the form of Exhibit 6.7
(the "Promissory Note"), ▇▇▇▇▇ shall provide PSI a line of credit of up to
$3,000,000 on the terms and conditions set forth in the Promissory Note. The
principal amount and the accrued interest of such loan shall become due and
payable on the earlier of Closing Date and September 1, 1998; provided, however,
that at ▇▇▇▇▇'▇ sole discretion the repayment of such loan may be forgiven and
the amount of the cash required to be delivered by ▇▇▇▇▇ at Closing shall be
reduced by an amount equal to the principal balance and unpaid interest on the
Promissory Note so forgiven.
6.8. Preparation of Proxy Statement: Other Filings. As promptly as
practicable after the date of this Agreement, PSI shall prepare and file with
the SEC a preliminary Proxy Statement reasonably satisfactory to each of PSI and
▇▇▇▇▇. Each of PSI and ▇▇▇▇▇ shall use its reasonable best efforts to respond to
any comments of the SEC and to cause the Proxy Statement to be mailed to its
respective stockholders at the earliest practicable time. As promptly as
practicable after the date of this Agreement, PSI shall prepare and file any
other filings required under the Exchange Act, the Securities Act or any other
federal or Blue Sky Laws relating to the Transaction and the other transactions
contemplated by this Agreement including, without limitation, under state
takeover laws (the "Other Filings"). PSI and ▇▇▇▇▇ will notify the other parties
promptly of the receipt of any comments from the SEC or its staff and of any
request by the SEC or its staff or any other government officials for amendments
or supplements to the Proxy Statement or any Other Filing or for additional
information and will supply the other with copies of all correspondence between
it or any of its representatives, on the one hand, and the SEC, or its staff or
any other government officials, on the other hand, with respect to the Proxy
Statement or any Other Filing. The Proxy Statement and Other Filings shall
comply in all material respects with all applicable requirements of law.
Whenever any event occurs which is required to be set forth in an amendment or
supplement to the Proxy Statement or any Other Filing, PSI and ▇▇▇▇▇, as the
case may be, shall promptly inform the other parties of such occurrence and
cooperate in filing with the SEC or its staff or any other government officials,
and/or mailing to stockholders of PSI, such amendment or supplement. Except as
otherwise required by the fiduciary duties of the directors of PSI, the Proxy
Statement shall include the recommendations of the Board of Directors of PSI in
favor of the Transaction or the Alternative Transaction, as the case may be. PSI
and ▇▇▇▇▇ each shall promptly provide the other (or its counsel) copies of all
filings made by it with
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any Governmental Entity in connection with this Agreement and the transactions
contemplated hereby. The covenants in this Section shall apply to the filing by
PSI and ▇▇▇▇▇, if applicable, of a pre-merger notification report under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and responding to any further informational requests in connection with
the receipt of termination of expiration of the applicable waiting period under
the HSR Act.
6.9. Defense of Litigation. Each of PSI and ▇▇▇▇▇ agrees to vigorously
defend against all actions, suits or proceedings in which such party is named as
a defendant which seek to enjoin, restrain or prohibit the transactions
contemplated hereby or seek damages with respect to such transactions. Neither
PSI nor ▇▇▇▇▇ shall settle any such action, suit or proceeding or fail to
perfect on a timely basis any right to appeal any judgment rendered or order
entered against such party therein without the consent of the other party (which
consent shall not be withheld unreasonably). Each of PSI and ▇▇▇▇▇ shall notify
the other party of any such initiated actions, suits or proceedings.
ARTICLE VII
COVENANTS OF ▇▇▇▇▇
Between the date of this Agreement and the Closing Date, ▇▇▇▇▇ shall
undertake to do or refrain from doing, as the case may be, the following:
provided, however, that in the event that ▇▇▇▇▇ elects to proceed with the
Alternative Transaction, the following covenants shall apply only to SVM and not
to any other ▇▇▇▇▇ Entity. The following covenants shall not in any way
preclude, restrict or limit ▇▇▇▇▇'▇ ability to enter into an agreement and to
close a transaction relating to the sale of all or substantially all of the
▇▇▇▇▇ Assets (other than SVM) to a party other than PSI provided ▇▇▇▇▇ has given
PSI notice of its election to pursue the Alternative Transaction:
7.1. Management of ▇▇▇▇▇. Operate the Businesses in a prudent manner
consistent with past practices, and in the usual and ordinary course, and use
its reasonable best efforts to preserve the goodwill of suppliers, distributors,
sales representatives, customers, creditors and others having business
relationships with ▇▇▇▇▇, and shall safeguard and preserve the confidentiality
of all books, records and information relating to ▇▇▇▇▇ in a prudent manner
consistent with past practices.
7.2 No Distribution of Dividends. Refrain from paying or declaring any
dividend, or making any distribution on account of shares of capital stock of
PVS, or redeeming, purchasing or otherwise acquiring any of the shares of PVS,
or issuing any shares of capital stock of PVS,
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or granting, issuing, selling or disposing of any option, warrant or right to
acquire any shares of capital stock of PVS.
7.3 No New Stock Rights. Not enter into, issue, or grant any
agreements, arrangements, warrants, calls, options, convertible rights or other
rights (vested or contingent) to acquire any capital stock of PVS.
7.4 Purchases and Sales. Maintain the ▇▇▇▇▇ Assets and the fixed assets
of PVS in good condition, repair and working order, normal wear and tear
excepted; and refrain from (a) making or permitting any sales, transfers or
disposition of any of the ▇▇▇▇▇ Assets; and (b) entering into any contracts,
leases, or commitments, or any amendments or modifications to contracts, leases
or commitments existing at the date of the execution of this Agreement,
involving the Businesses or the ▇▇▇▇▇ Assets, other than those in the ordinary
course of business involving consideration or other expenditure of less than
$50,000, and other than those that can be terminated without obligation or
penalty at the Closing and other than those expected or scheduled expenditures
identified in Section 7.4 of the ▇▇▇▇▇ Disclosure Letter.
7.5 Compensation of ▇▇▇▇▇'▇ Employees. Refrain from making or
permitting any change in the compensation or benefits payable or to become
payable to any of the employees or agents of the Businesses of ▇▇▇▇▇, or making
any new bonus payment or arrangement or benefit to or with any of them.
7.6 Insurance. Use reasonable best efforts to have in effect and
maintain at all times all insurance now in force relating to ▇▇▇▇▇, the
Businesses and the ▇▇▇▇▇ Assets.
7.7 Preserve Organization. Preserve the business organizations of ▇▇▇▇▇
intact and keep available the services of the present officers and employees of
▇▇▇▇▇.
7.8 Access to Records of ▇▇▇▇▇. Allow PSI, its representatives,
attorneys and accountants to continue to have reasonable access to the records
and files, audits and properties of ▇▇▇▇▇ relating to ▇▇▇▇▇, the Businesses and
the ▇▇▇▇▇ Assets, as well as all information relating to taxes, commitments,
contracts, titles and financial condition of, or otherwise pertaining to, ▇▇▇▇▇.
▇▇▇▇▇ agrees to use its reasonable best efforts to cause its accountants to
cooperate with PSI and its accountants in making available all financial
information concerning ▇▇▇▇▇ as is requested, and PSI and its accountants shall
have the right to examine all working papers pertaining to examinations of ▇▇▇▇▇
relating to ▇▇▇▇▇, the Businesses and ▇▇▇▇▇ Assets, provided that such
examinations shall be designed to cause minimal disruption to ▇▇▇▇▇, the
Businesses and the ▇▇▇▇▇ work force, and in any event, shall be undertaken with
reasonable prior notice and during normal business hours of ▇▇▇▇▇.
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7.9 Consents and Authorizations. Use its reasonable best efforts to
obtain all government authorizations and contractual and leasehold consents and
permits necessary to enable the consummation of all transactions contemplated
hereby without causing the discontinuation or termination of any permits or of
any contractual relationships maintained by ▇▇▇▇▇.
7.10. Taxes. Pay when due all federal, state, local and foreign income,
franchise and other taxes of ▇▇▇▇▇, including any taxes on or arising out of the
Transaction.
7.11. Certificate of Incorporation, By-Laws and Limited Partnership
Agreements. Refrain from amending the articles or certificate of incorporation
or By-Laws of PVS and any limited partnership agreements of ▇▇▇▇▇ other than as
may be necessary to complete the Transaction or the Alternative Transaction, as
the case may be.
7.12 Damage or Destruction of Assets. Notify PSI immediately in the
event of any material damage to or material destruction of any of the ▇▇▇▇▇
Assets or assets of the Businesses.
7.13. Fulfill Closing Conditions. Use its best efforts to take, or
cause to be taken, all action reasonably necessary or appropriate to cause each
of the conditions set forth in Article IX to be fulfilled on or prior to the
Closing Date.
7.14. Third Parties and Government Approvals. Use its best efforts to
file and obtain approval of all necessary documentation, and to obtain all
necessary approvals of third parties and of appropriate regulatory authorities,
with respect to the transactions contemplated by this Agreement.
7.15. Confidentiality.
(a) Not disclose, and cause ▇▇▇▇▇'▇ officers, directors,
employees, agents and Affiliates not to disclose, any terms of the Transaction
or the Alternative Transaction), or to make any public statement regarding the
Transaction or the Alternative Transaction prior to the Closing, without the
prior written consent of PSI; provided, however, that the parties understand and
agree that certain disclosures regarding the Transaction or the Alternative
Transaction may be to be made to third parties whose consent or approval may be
required in connection with the Transaction or the Alternative Transaction, and
that in each case such disclosures may be made by ▇▇▇▇▇, without PSI's prior
written consent, but only to the extent such disclosures are so required.
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(b) Continue, and cause ▇▇▇▇▇'▇ officers, directors,
employees, agents and Affiliates to continue, to observe, perform, and comply
with that certain confidentiality agreement dated March 17, 1998, between PSI
and ▇▇▇▇▇.
ARTICLE VIII
CONDITIONS PRECEDENT TO CLOSING BY ▇▇▇▇▇
▇▇▇▇▇ shall not be required to proceed on the Closing Date with the
transactions contemplated by this Agreement unless the following conditions
precedent shall have been fulfilled and satisfied, or shall have been waived in
writing by ▇▇▇▇▇:
8.1. Representations and Warranties. Each of the warranties and
representations of PSI contained herein shall be true and correct as of the date
of this Agreement, and shall also be true and correct as of the Closing Date as
if then originally made.
8.2. Covenants. PSI shall have complied in all material respects with
each of the covenants required of it on or prior to Closing;
8.3. Officers Certificate. PSI shall have delivered to ▇▇▇▇▇ a
certificate of the Chief Executive Officer and Chief Financial Officer of PSI,
dated the Closing Date, certifying to the best of the knowledge and belief of
such officers and in such detail as ▇▇▇▇▇ reasonably requests to the accuracy of
the representations and warranties contained herein, and to the fulfillment of
the covenants and to the conditions precedent to ▇▇▇▇▇'▇ obligations to
consummate the transactions contemplated by this Agreement;
8.4. Good Standing. PSI shall have delivered to ▇▇▇▇▇ certificates of
good standing in the state or country of incorporation for PSI and each of its
Affiliates;
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8.5. Legal Opinion. PSI shall have delivered to ▇▇▇▇▇ a legal opinion,
in form and substance satisfactory to ▇▇▇▇▇, from ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP or ▇▇▇▇▇
& Lardner, counsel to PSI;
8.6. Governmental Approvals. PSI or ▇▇▇▇▇ shall have received all
governmental and regulatory consents, non-objections or permits from all
Federal, state, local and foreign governmental authorities, or shall have made
reasonably satisfactory alternative arrangements pursuant to the last sentence
of Section 12.4, necessary to permit PSI to consummate the transactions
contemplated by this Agreement, and to enable PSI to conduct its business after
the Closing Date in all material respects as PSI conducted such businesses on
the date of this Agreement, and specifically including the following: any
necessary approvals of the Department of Justice, Federal Communications
Commission, or any state communications commissions.
8.7. Material Adverse Change. There shall have been no material adverse
change (or changes which in the aggregate are materially adverse) since the date
hereof in the financial condition, results of operations, properties, business,
or products and services provided by PSI, whether by reason of change in
government regulation or action or otherwise;
8.8. Bankruptcy. PSI shall not be the subject of a petition for
reorganization or liquidation under the Federal bankruptcy laws, or under state
or foreign insolvency laws, nor shall an assignment for the benefit of creditors
or any similar protective proceeding or act or event of bankruptcy have
occurred;
8.9. Corporate and Third Party Authorizations. There shall have been
obtained, by means in conformity with all applicable provisions of federal and
Delaware law approval of the Transaction or the Alternative Transaction if such
is elected by ▇▇▇▇▇ and the Share Increase from the shareholders who hold at
least a majority of the voting capital stock of PSI;
8.10. Employment of ▇▇▇▇▇ Employees. PSI shall have offered employment
to each of the full-time employees of ▇▇▇▇▇ and PVS or, in the case the
Alternative Transaction is elected by ▇▇▇▇▇, the employees of SVM on the same
terms as such individuals are employed by ▇▇▇▇▇, PVS or SVM, as the case may be,
subject only to the Closing of the Transaction;
8.11. Lawsuits. No action, suit or proceeding shall have been
instituted or threatened by the federal or any state government before a court,
arbitration panel or governmental body with respect to the transactions
contemplated hereby, and no regulatory enforcement proceeding shall be pending
before any governmental agency or body with respect to the transactions
contemplated hereby;
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8.12. Recapitalization. PSI shall have completed and closed prior to or
simultaneous with the Closing the Recapitalization pursuant to Section 2.1
hereof and the recapitalization transactions and with respect to Primat,
Primwest and Vulcan pursuant to Section 6.3;
8.13. Tax Opinion. ▇▇▇▇▇ shall have received a tax opinion from ▇▇▇▇▇ &
▇▇▇▇▇▇▇▇ with respect to the tax free nature of the Transaction in form and
substance satisfactory to ▇▇▇▇▇; provided, however that in the event ▇▇▇▇▇
elects the Alternative Transaction, such condition shall be deemed to be waived
by ▇▇▇▇▇;
8.14 Confirmation of Other Transactions. The following transactions
shall have been completed and closed before or simultaneously with the Closing:
(i) the transfer or real estate from RMS to PSI pursuant to the Real Estate
Transfer Agreement referred to in Section 1.3 hereof; and (ii) execution and
delivery of lease and/or service agreements with WNAB and MOR Galleria in form
and substance satisfactory to PSI; provided, however that such conditions shall
be deemed to have been waived or satisfied in the event ▇▇▇▇▇ elects the
Alternative Transaction;
8.15. Listing of PSI Common Stock. The shares of PSI Common Stock
representing the PSI Consideration shall have been accepted for listing on the
NASDAQ Small Cap Market and the Boston Stock Exchange upon official notification
of issuance.
8.16 Election of Directors. Three nominees of ▇▇▇▇▇ shall have been
elected to fill vacancies on the PSI Board of Directors.
8.17. Non-Fulfillment Date. In the event that one or more of the
foregoing conditions in this Article VIII is not fulfilled as of August 31,
1998, ▇▇▇▇▇ may, upon notice to PSI and on or prior to the Closing Date, elect
not to consummate the transactions provided for herein, or may waive the
condition and proceed to Closing, but any breach of condition, warranty,
representation or covenant known to ▇▇▇▇▇ at the Closing Date as to which ▇▇▇▇▇
does not make a claim by the Closing Date shall be deemed to have been waived.
ARTICLE IX
CONDITIONS PRECEDENT TO CLOSING BY PSI
PSI shall not be required to proceed on the Closing Date with the
transactions contemplated by this Agreement unless the following conditions
precedent shall have been fulfilled and satisfied, or shall have been waived in
writing by PSI:
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9.1. Representations and Warranties. Each of the representations and
warranties of ▇▇▇▇▇ contained herein shall be true and correct as of the date of
this Agreement and shall be true and correct as of the Closing Date as if then
originally made; provided, however that in the event that ▇▇▇▇▇ elects the
Alternative Transaction, the representations and warranties set forth in Article
IV hereof shall be deemed to include only the representations and warranties of
SVM set forth in such Article IV and the representations and warranties of ▇▇▇▇▇
Communications in Sections 4.1, 4.2 and 4.19 and only those representations and
warranties shall be true and correct as of the Closing Date;
9.2. Covenants. ▇▇▇▇▇, or in the event of the Alternative Transaction,
SVM and ▇▇▇▇▇ Communications shall have complied with each of the covenants
required of it on or prior to Closing;
9.3. Officers Certificate. ▇▇▇▇▇ shall have delivered to PSI a
certificate of an officer or authorized person of its general partner, and of
the President and Chief Financial Officer of PVS or in the case the Alternative
Transaction is elected, only an officer or authorized person of the general
partner of SVM, dated the Closing Date, certifying to the best of the knowledge
and belief of each such person and in such detail as PSI reasonably requests to
the accuracy of ▇▇▇▇▇'▇ representations and warranties, and to the fulfillment
of ▇▇▇▇▇'▇ covenants and of the conditions precedent to PSI's obligations to
consummate the transactions contemplated by this Agreement;
9.4. Governmental Approvals. ▇▇▇▇▇ and PSI shall have received all
governmental and regulatory consents, non-objections or permits, from all
Federal, state, local and foreign governmental authorities, or shall have made
reasonably satisfactory alternative arrangements pursuant to the last sentence
of Section 12.4, necessary to permit ▇▇▇▇▇ to consummate the transactions
contemplated by this Agreement and to enable PSI to conduct the Businesses after
the Closing Date in all material respects as ▇▇▇▇▇ conducted the Businesses as
of the date of this Agreement including: any necessary approvals of the
Department of Justice, Federal Communications Commission or any state
communications commissions;
9.5. Bankruptcy. ▇▇▇▇▇ shall not be the subject of a petition for
reorganization or liquidation under the Federal bankruptcy laws, or under state
insolvency laws, nor shall an assignment for the benefit of creditors or any
similar protective proceeding or act or event of bankruptcy have occurred;
9.6. Lawsuits. No action, suit or proceeding shall have been instituted
or threatened by the federal or any state government before a court, arbitration
panel or governmental body with respect to the transactions contemplated hereby,
and no regulatory enforcement proceeding shall be pending before any
governmental agency or body with respect to the transactions contemplated
hereby;
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9.7. Legal Opinion. ▇▇▇▇▇ shall have delivered to PSI a legal opinion,
in form and substance satisfactory to PSI, from ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, counsel to
▇▇▇▇▇, except that with respect to matters of Nevada State law such opinion
shall be provided by ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇;
9.8. Corporate Authorizations. There shall have been obtained, by means
in conformity with all applicable provisions of the partnership agreements of
each of the partnerships included in ▇▇▇▇▇, or in the case of the Alternative
Transaction, of SVM and ▇▇▇▇▇ Communications, and of federal and Nevada law, the
approval of such entities' partners to the transactions contemplated by this
Agreement;
9.9 Confirmation of Recapitalizations. The following transactions shall
have been completed and closed before or simultaneously with the Closing: (i)
the recapitalization transaction between PSI and RMS pursuant to Section 2.1
hereof; and (ii) the recapitalization transaction between PSI, Primat, Primwest
and Vulcan pursuant to Section 6.3 hereof;
9.10 Other Transactions. The following transaction shall have been
completed and closed before or simultaneously with the Closing: (i) the transfer
of real estate from RMS to PSI pursuant to the Real Estate Transfer Agreement
referred to in Section 1.3 hereof; and (ii) execution and delivery of lease
and/or service agreements with WNAB and MOR Galleria in form and substance
satisfactory to PSI; provided, however that such conditions shall be deemed to
have been waived or satisfied in the event ▇▇▇▇▇ elects the Alternative
Transaction
9.11. Non-Fulfillment Date. In the event that one or more of the
foregoing conditions in this Article VIII is not fulfilled as of August 31,
1998, PSI may, upon notice to ▇▇▇▇▇ and on or prior to the Closing Date, elect
not to consummate the transactions provided for herein, or may waive the
condition and proceed to Closing, but any breach of condition, warranty,
representation or covenant known to PSI at the Closing Date as to which PSI does
not make a claim by the Closing Date shall be deemed to have been waived.
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ARTICLE X
CLOSING
The actual consummation of the transactions contemplated by this
Agreement (the "Closing") shall take place on the fifth business day following
the last to occur of the conditions set forth in Articles VIII and IX (the
"Closing Date") at the offices of ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ in Washington, D.C. The
Closing Date may be set at such other date or at such other place as shall be
fixed by agreement of the parties hereto.
ARTICLE XI
OBLIGATIONS AT THE CLOSING
11.1. PSI's Obligations. At the Closing, PSI shall deliver to ▇▇▇▇▇ or
▇▇▇▇▇ Communications in the event of the Alternative Transaction:
(a) Certificates signed by the Chief Executive Officer and
Chief Financial Officer of PSI, to the effect that, to the actual knowledge of
such officers, each of the representations and warranties made by PSI hereunder
is true and correct in all material respects as of the Closing Date (or, if any
such representation or warranty is untrue or incorrect in any material respect,
specifying the respect in which it is untrue or incorrect), and that PSI has
fulfilled its covenants hereunder in all material respects as of the Closing
Date (or, if any such covenant is unfulfilled in any material respect,
specifying the respect in which it is unfulfilled), and that PSI has fulfilled
the conditions precedent to ▇▇▇▇▇'▇ obligations to consummate the purchase
contemplated by this Agreement in all material respects (or, if any such
condition is unfulfilled in any material respect, specifying the respect in
which it is unfulfilled);
(b) A copy of resolutions adopted by the Board of Directors
and stockholders of PSI, certified by the Secretary of PSI, approving and
authorizing or ratifying the execution and delivery of this Agreement, and the
performance by PSI of its obligations hereunder and thereunder;
(c) An opinion of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ or ▇▇▇▇▇ & ▇▇▇▇▇▇▇,
counsel for PSI, addressed to ▇▇▇▇▇, in form and substance satisfactory to
▇▇▇▇▇;
(d) [Intentionally Omitted];
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(e) Certificates representing all of the shares of PSI Common
Stock in the PSI Consideration in the amounts and in the names of such ▇▇▇▇▇
Entities as designated prior to the Closing by ▇▇▇▇▇ Communications; and
(f) The Registration Rights Agreement set forth as Exhibit
11.1.5 executed by an authorized officer of PSI.
11.2. ▇▇▇▇▇'▇ Obligations. At the Closing ▇▇▇▇▇ or, in the event of the
Alternative Transaction, ▇▇▇▇▇ Communications shall deliver to PSI:
(a) Certificates signed by the Chief Operating Officer and
Chief Financial Officer of the general partner of each ▇▇▇▇▇ Entity to the
effect that, to the best of the knowledge of such officers, each of the
representations and warranties made by ▇▇▇▇▇ or in the case of the Alternative
Transaction, ▇▇▇▇▇ Communications and SVM hereunder are true and correct in all
material respects as of the Closing Date (or, if any such representation or
warranty is untrue or incorrect in any material respect, specifying the respect
in which it is untrue or incorrect), and that ▇▇▇▇▇ or in the case of the
Alternative Transaction, ▇▇▇▇▇ Communications and SVM has fulfilled its
covenants hereunder in all material respects as of the Closing Date (or, if any
such covenant is unfulfilled in any material respect, specifying the respect in
which it is unfulfilled), and that ▇▇▇▇▇ or in the case of the Alternative
Transaction, ▇▇▇▇▇ Communications and SVM has fulfilled the conditions precedent
to PSI's obligations to consummate the purchase contemplated by this Agreement
(or, if any such condition is unfulfilled in any material respect, specifying
the respect in which it is unfulfilled);
(b) A copy of resolutions adopted by each limited partnership
included in ▇▇▇▇▇ or in the case of the Alternative Transaction, ▇▇▇▇▇
Communications and SVM, certified by an officer or authorized person of, their
respective general partner, authorizing or ratifying the execution and delivery
of this Agreement and the performance by ▇▇▇▇▇ of its respective obligations
hereunder;
(c) An opinion of ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇, counsel for ▇▇▇▇▇, addressed to PSI, in form and substance
satisfactory to PSI; and
(d) Current funds in the amount specified in Article 2
(subject to adjustment pursuant to Section 6.7).
(e) In the event the Alternative Transaction is not elected,
the Assignment and Assumption Agreement referred to in Article I and such bills
of sale, deeds, assignments and other transaction documents as shall be required
to effectuate the transfer of the ▇▇▇▇▇ Assets to PSI.
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(f) In the event the Alternative Transaction is not elected,
documents satisfactory to PSI evidencing transfer and conveyance of title to the
real estate contemplated in the Real Estate Transfer Agreement referred to
Section 1.3.
(g) In the event the Alternative Transaction is not elected,
certificates representing all of the shares of capital stock of PVS to be
transferred to PSI pursuant to Article I, duly endorsed for transfer to or
accompanied by appropriate instruments of transfer to PSI.
(h) Certificates representing all of the outstanding
partnership interests in SVM duly endorsed for transfer to or accompanied by
appropriate instruments transferring to PSI.
ARTICLE XII
FURTHER COVENANTS OF PSI AND ▇▇▇▇▇
PSI and ▇▇▇▇▇ or, in the event of the Alternative Transaction, ▇▇▇▇▇
Communications and SVM shall, as described below, each perform the indicated
tasks designated to be performed by them:
12.1. Joint Notice. After the Closing, PSI and ▇▇▇▇▇ shall cooperate,
to the extent practicable and reasonable, in giving joint notice of the
consummated transactions to each customer, creditor, distributor, sales
representative and supplier of the business of PSI.
12.2. Further Assurances. PSI agrees that, from time to time and
without further consideration, it will execute and deliver such further
documents and take such other action as ▇▇▇▇▇ may require more effectively to
transfer to and vest in ▇▇▇▇▇ and put ▇▇▇▇▇ in possession of the shares included
in the Share Exchange Consideration and all right and interest in the shares
included in the Share Exchange Consideration. ▇▇▇▇▇ agrees that, from time to
time and without further consideration, it will execute and deliver such further
documents and take such other action as PSI may require more effectively to
transfer to and invest in PSI and put PSI in possession of the ▇▇▇▇▇ Assets and
all right, title and interests in the ▇▇▇▇▇ Assets, including, without
limitation, the Equity Interests and the Cash or in the event the Alternative
Transaction is elected, possession of the assets of SVM and the cash to be
contributed in the Alternative Transaction.
12.3. Registration Rights. PSI will grant registration rights to ▇▇▇▇▇
and its Affiliates pursuant to the Registration Rights Agreement set forth as
Exhibit 11.1.5 hereto.
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12.4 Further Arrangements. Work together diligently to have all
appropriate federal, state, local and foreign authorizations, permits and
approvals necessary to the operation of the Businesses (as ▇▇▇▇▇ operates them
as of the date of this Agreement, or as operated by SVM in the case of the
Alternative Transaction), transferred, reassigned or issued to PSI. If PSI and
▇▇▇▇▇ are unable by Closing to secure in PSI's name all government permits
necessary to conduct the Businesses in PSI's name after Closing, then ▇▇▇▇▇
(through the entity which previously conducted the relevant Business) or SVM in
the case of the Alternative Transaction will cooperate with PSI so that PSI can
conduct such Business after Closing in such ▇▇▇▇▇ entity's name (but with PSI
retaining and being solely responsible for all economic benefits and burdens of
such Business) until such time as PSI secures all such government permits.
12.5 Bulk Sales Law. As an inducement to PSI to waive compliance with
the provisions of any applicable bulk sales or transfer laws, ▇▇▇▇▇ hereby
agrees that all of its debts, obligations and liabilities of ▇▇▇▇▇ which are not
expressly assumed by PSI under this Agreement will be paid and discharged by
▇▇▇▇▇ as and when they become due and payable in the ordinary course of
business. In the event the Alternative Transaction is not elected, ▇▇▇▇▇ further
agrees to indemnify and hold PSI harmless from any and all liabilities incurred
by PSI by reason of or arising out of claims made by creditors with respect to
any non-compliance with any applicable bulk sales or transfer laws (except to
the extent such claims constitute Assumed Liabilities).
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ARTICLE XIII
EXPENSES WITH RESPECT TO TRANSACTION
PSI agrees that it will pay all fees, costs and expenses incurred by it
in connection with this transaction, including, without limitation, the fees and
expenses of its attorneys, accountants and other persons, and no portion thereof
shall be paid by ▇▇▇▇▇. ▇▇▇▇▇ agrees that it will pay all fees, costs and
expenses incurred by it in connection with this transaction, including, without
limitation, the fees and expenses of its attorneys, accountants and other
persons, and no portion thereof shall be paid by PSI. Notwithstanding the
foregoing, PSI and ▇▇▇▇▇ shall share equally any fees accompanying filings
required to be made to governmental agencies in connection with the transactions
contemplated by this Agreement.
ARTICLE XIV
BROKERS
Each party hereby agrees to indemnify and save and hold harmless the
other parties, their shareholders, directors and officers from and against any
and all claims, losses, damages, costs or expenses of any kind or character
(including attorneys' fees) arising out of or resulting from any agreement,
arrangement or understanding alleged to have been made by such party with any
broker or finder in connection with this Agreement or the transactions
contemplated hereby, and to supply at Closing a letter releasing the other
parties to this Agreement from the claims of any such broker and finder.
ARTICLE XV
INDEMNIFICATION
15.1. Indemnification by ▇▇▇▇▇.
(a) From and after the Closing of the Transaction and subject
to the limitations set forth in Section 15.2(a) and (c), ▇▇▇▇▇ shall indemnify
and hold harmless PSI and its officers, directors, employees, shareholders,
Affiliates, successors and permitted assigns from all Losses resulting from (i)
a breach by ▇▇▇▇▇ of any representation or warranty under this Agreement (after
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giving effect to any supplement or amendment to the ▇▇▇▇▇ Disclosure Letter
agreed to or accepted in writing by PSI); (ii) a breach by ▇▇▇▇▇ of a covenant
or agreement under this Agreement; (iii) any liabilities arising after the
Closing Date and relating to the ▇▇▇▇▇ Assets or the conduct of the Businesses
prior to the Closing Date other than those assumed by PSI pursuant to the
Assignment and Assumption Agreement referred to in Section 1.1 or disclosed in
Section 4.9 of the ▇▇▇▇▇ Disclosure Letter and other than liabilities of PVS set
forth in Schedule 1.1(b), or (iv) any liabilities resulting from any applicable
bulk sales or transfer laws as set forth in Section 12.5. The foregoing
obligation of ▇▇▇▇▇ shall not arise and will not be enforceable against ▇▇▇▇▇ in
the event the Alternative Transaction is closed.
(b) From and after the Closing of the Alternative Transaction
and subject to the limitations set forth in Section 15.2(b) and (c), ▇▇▇▇▇
Communications shall indemnify and hold harmless PSI and its officers,
directors, employees, shareholders, Affiliates, successors and permitted assigns
from all Losses resulting from (i) a breach by ▇▇▇▇▇ Communications or SVM of
any representation or warranty by such entities under this Agreement (after
giving effect to any supplement or amendment to the ▇▇▇▇▇ Disclosure Letter
agreed to or accepted in writing by PSI) or (ii) a breach of ▇▇▇▇▇
Communications or SVM of a covenant or agreement under this Agreement. The
foregoing obligation of ▇▇▇▇▇ Communications and SVM shall not arise and will
not be enforceable against ▇▇▇▇▇ Communications and SVM in the event the
Transaction is closed and is in lieu of, and not in addition to, the obligations
of ▇▇▇▇▇ set forth in Section 15.1(a).
15.2 Limitations.
(a) Unless and until the Losses incurred by PSI exceed
$500,000, PSI shall not be entitled to indemnification under Section 15.1(a);
provided, however, that once the damages exceed $500,000, PSI shall be entitled
to indemnification for the full amount of such Losses. The maximum liability of
▇▇▇▇▇ pursuant to clause (i) of Section 15.1(a) shall be the amount of
$10,000,000; provided, however there shall be no limitations on Losses resulting
from a breach by ▇▇▇▇▇ of a representation or warranty which is the result of
fraud or willful misrepresentation on the part of ▇▇▇▇▇. Any claim for Losses
under clause (i) of Section 15.1(a) may be satisfied by an exchange of shares of
PSI Common Stock valued at the greater of the fair market value of such stock as
of the Closing Date or as of the date such claim is asserted against ▇▇▇▇▇ or in
cash or a combination of both cash and stock at the sole discretion of ▇▇▇▇▇.
(b) Unless and until the Losses incurred by PSI exceed
$100,000, PSI shall not be entitled to indemnification under Section 15.1(b);
provided, however, that once the damages exceed $100,000. PSI shall be entitled
to indemnification for the full amount of such Losses. The maximum liability of
▇▇▇▇▇ pursuant to clause (i) of Section 15.1)(b) shall be the amount of $1
million; provided, however, there shall be no limitation on Losses resulting
from a breach by
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▇▇▇▇▇ Communications or SVM which is the result of fraud or wilful
misrepresentation on the part of ▇▇▇▇▇ Communications or SVM.
(c) The agreements, representations and warranties and
covenants of ▇▇▇▇▇ or ▇▇▇▇▇ Communications and SVM, as the case may be,
contained in this Agreement shall survive the Closing until the one (1) year
anniversary of the Closing Date. Notwithstanding the preceding sentence, any
covenant, agreement, representation or warranty in respect of which indemnity
may be sought under Section 15.1 shall survive the time at which it would
otherwise terminate pursuant to the preceding sentences, if notice of the
inaccuracy or breach thereof giving rise to such right to indemnity shall have
been given to the party against whom such indemnity may be sought prior to such
time.
15.3. Notice. The Indemnified Party (as hereinafter defined) shall give
prompt written notice to the Indemnifying Party of any claim or event known to
it which does or may give rise to a claim by the Indemnified Party against the
Indemnifying Party based on this Agreement, stating the nature and basis of said
claims or events and the amounts thereof, to the extent known. Such notice shall
be given in accordance with Article XVI hereof. Such notice shall be a condition
precedent to any liability of the Indemnifying Party hereunder. Notwithstanding
the foregoing, the failure to give reasonably prompt written notice by the
Indemnified Party shall not defeat a claim made pursuant hereto except to the
extent that the Indemnifying Party can establish that it has been injured by
such delay.
15.4. Defense of Claims. In the event of any claim, action, suit or
proceeding made or brought by third parties against the Indemnified Party, the
Indemnified Party shall give written notice of such claim, action, suit or
proceeding as described in Section 15.4 above, with a copy of the claim, process
and all legal pleadings with respect thereto. After notification, the
Indemnifying Party shall participate in, and jointly with any other Indemnifying
Party similarly notified, assume the defense thereof, with counsel reasonably
satisfactory to such Indemnified Party at the time of such assumption. The
Indemnified Party shall have the right to employ its own counsel and such
counsel may participate in such action, but the fees and expenses of such
counsel shall be at the expense of the Indemnified Party, when and as incurred,
unless (i) the employment of counsel by such Indemnified Party has been
authorized by the Indemnifying Party, or (ii) the Indemnifying Party shall not
in fact have employed counsel to assume the defense of such action reasonably
satisfactory to the Indemnified Party at the time of the Indemnifying Party's
assumption of the defense. If clause (ii) of the preceding sentence shall be
applicable, then counsel for the Indemnified Party shall have the right to
direct the defense of such claim, action, suit or proceeding on behalf of the
Indemnified Party. The Indemnified Party and the Indemnifying Party, as the case
may be, shall be kept fully informed of such claim, action, suit or proceeding
at all stages thereof whether or not such party is represented by its own
counsel.
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15.5. Definitions.
(i) As used herein, the term "Losses" means any and all claims,
demands, costs, losses, damages and liabilities, net of any insurance proceeds
received. The term "Losses" includes reasonable attorneys' fees and costs
incurred in the investigation and defense of a claim, demand, cost, loss or
liability.
(ii) As used herein, the term "Indemnifying Party" shall mean the
person or persons against whom a party (the "Indemnified Party") makes a claim
for indemnification hereunder.
ARTICLE XVI
NOTICES
16.1. Notice. All notices required to be given under the terms of this
Agreement or which any of the parties may desire to give hereunder shall be in
writing and delivered personally or sent by express delivery, or by facsimile,
or by registered or certified mail, with proof of receipt, postage and expenses
prepaid, return receipt requested, addressed as follows:
(a) As to ▇▇▇▇▇, addressed to:
▇▇▇▇▇ Communications Holdings
Limited Partnership
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇▇
with a copy thereof addressed to:
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇-▇▇▇▇
Facsimile (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇., Esq.
or to such other address or addresses and to the attention of such other person
or persons as ▇▇▇▇▇ may from time to time designate in writing to PSI; and
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(b) As to PSI, addressed to:
Precision Systems, Inc.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
with a copy thereof addressed to:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP
NationsBank Plaza
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, III, Esq.
and
▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
or to such other address or addresses and to the attention of such other person
or persons as PSI may from time to time designate in writing to ▇▇▇▇▇.
16.2. Receipt of Notice. Any notice given in accordance with this
Article XVII shall be deemed to have been given when delivered personally, or
when received if sent via express delivery; facsimile; or registered or
certified mail, postage prepaid and return receipt requested.
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ARTICLE XVII
EFFECTIVENESS AND ASSIGNABILITY OF AGREEMENT
This Agreement shall become effective when executed and delivered by
▇▇▇▇▇ and PSI, and shall be binding in all respects upon the respective
successors and permitted assigns of each of the parties hereto. No party hereto
may assign this Agreement in whole or in part without first obtaining the
written consent of the other parties, except that ▇▇▇▇▇ may assign its rights
and obligations under this Agreement to one or more Affiliates so long as ▇▇▇▇▇
remains responsible for its performance hereunder.
ARTICLE XVIII
ANNOUNCEMENT OF TRANSACTION
Subject to the provisions of Section 12.1, no party hereto shall make a
public announcement of any of the transactions contemplated by this Agreement
without approval of the other parties, unless required by law or by applicable
stock exchange requirements, and in any event such person shall provide notice
accompanied by a copy of all proposed announcements to the other parties.
ARTICLE XIX
COMPLETENESS OF AGREEMENT
This Agreement and the Schedules and Exhibits hereto and Closing
documents represent the entire contract between the parties with respect to the
subject matter hereof and supersede all offers, proposals, statements,
representations and agreements with respect to the subject matter hereof. The
Exhibits and Schedules hereto and Closing documents are incorporated herein by
reference, and shall be deemed to be included in any reference to this
Agreement. This Agreement may not be amended except by action of each of the
parties hereto set forth in an instrument in writing signed on behalf of each of
the parties hereto.
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ARTICLE XX
CAPTIONS
The captions to the Articles and Sections contained in this Agreement
are for reference only, do not form a substantive part of this Agreement and
shall not restrict nor enlarge any substantive provision of this Agreement.
ARTICLE XXI
APPLICABLE LAW
This Agreement, the Schedules and Exhibits, and all other documents
given in connection herewith, shall be construed in accordance with the laws of
the State of Florida, without regard to the principles of conflicts of laws.
ARTICLE XXII
CHOICE OF FORUM; VENUE; SERVICE OF PROCESS
Any suit, action, or proceeding among any or all of ▇▇▇▇▇ and PSI
relating to this Agreement, to any document, instrument, or agreement delivered
pursuant hereto, referred to herein, or contemplated hereby, or in any other
manner arising out of or relating to the transactions contemplated by or
referenced in this Agreement, shall be commenced and maintained exclusively in
the United States District Court for the Middle District of Tampa, Florida
Division, or, if that Court lacks jurisdiction over the subject matter, in a
state court of competent subject-matter jurisdiction sitting in Pinellas County,
Florida. ▇▇▇▇▇ and PSI hereby submit themselves unconditionally and irrevocably
to the personal jurisdiction of such courts. ▇▇▇▇▇ and PSI further agree that
venue shall be in Pinellas County, Florida. ▇▇▇▇▇ and PSI irrevocably waive any
objection to such personal jurisdiction or venue including, but not limited to,
the objection that any suit, action, or proceeding brought in Pinellas County,
Florida, has been brought in an inconvenient forum. ▇▇▇▇▇ and PSI irrevocably
agree that process issuing from such courts may be served on them, either
personally or by certified mail, return receipt requested, at the addresses
given in Article XVII hereof; and ▇▇▇▇▇ and PSI further irrevocably waive any
objection to service of process made in such manner and at such addresses,
including without limitation any objection
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that service in such manner and at such addresses is not authorized by the local
or procedural laws of Florida.
ARTICLE XXIII
COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which shall be considered an original but all of which shall constitute but one
and the same Agreement by and among the parties.
ARTICLE XXIV
NO THIRD PARTY BENEFICIARY
This Agreement is intended to inure to the benefit of ▇▇▇▇▇ and PSI
only; and no third party shall have any rights, express or implied, by reason of
this Agreement.
ARTICLE XXV
UNILATERAL RIGHT TO WAIVE FAILURES OF OTHER PARTIES
25.1. Waiver. Any of the parties may:
(a) Extend in writing the time for the performance of any of
the obligations herein contained to be performed for the benefit of such party;
(b) Waive in writing any inaccuracies in the representations
and warranties made to it contained in this Agreement or any Exhibit or Schedule
hereto or any certificate or certificates delivered by another party to this
Agreement;
(c) Waive in writing the failure in performance of any of the
conditions herein expressed for its benefit; and
-50-
(d) Waive in writing compliance with any of the covenants
herein contained for its benefit.
25.2. Effect of Waiver. No such waiver or extension shall be valid
unless in writing and signed by the party granting the waiver or extension, and
no such waiver or extension shall be construed to excuse or mitigate any
subsequent breach or violation of this Agreement not specifically covered by
such waiver.
ARTICLE XXVI
SEVERABILITY
The invalidity or unenforceability of any provision of this Agreement
shall not affect the other provisions hereof, and the Agreement shall be
construed in all respects as if such invalid or unenforceable provisions were
omitted. Furthermore, upon the request of any party hereto, the parties to this
Agreement shall add, in lieu of such invalid or unenforceable provisions,
provisions as similar in terms to such invalid or unenforceable provisions as
may be possible and legal, valid and enforceable.
ARTICLE XXVII
TERMINATION
27.1. Termination Events. This Agreement may be terminated at any time
prior to the Closing Date as follows:
(a) By mutual written consent of ▇▇▇▇▇ and PSI; or
(b) By PSI, upon written notice to ▇▇▇▇▇:
(1) if the Closing shall not have occurred on or
before August 31, 1998, due to a failure of any of the conditions precedent set
forth in Article IX; or
(2) if ▇▇▇▇▇ fails to perform in any material respect
any of its respective obligations under this Agreement;
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(3) if, after a bona fide proposal is made by a third
party to PSI or its stockholders to engage in an "acquisition transaction", as
hereinafter defined, PSI's Board of Directors shall have determined, upon the
basis of advice of outside counsel, that such action is necessary in order for
the Board of Directors to act in the manner consistent with its fiduciary
obligation under applicable law; or
(4) if the Assets, properties and rights of ▇▇▇▇▇ are
damaged or destroyed by reason of fire or other casualty to such an extent that
the operations of the Businesses are substantially impaired.
(c) By ▇▇▇▇▇, upon written notice to PSI:
(1) if the Closing shall not have occurred on or
before August 31, 1998, due to a failure of any of the conditions precedent set
forth in Article VII; or
(2) if PSI fails to perform in any material respect
any of its obligations under this Agreement; or
(3) if the assets, properties and rights of PSI are
damaged or destroyed by reason of fire or other casualty to such an extent that
the operations of the business of PSI are substantially impaired.
27.2. Effect of Termination. In the event of the termination of this
Agreement as provided in Section 27.1, this Agreement shall forthwith become
void, and there shall be no liability on the part of ▇▇▇▇▇ or PSI, except as set
forth in Section 27.3 or Articles XIII and XIV hereof; provided that the
foregoing shall not relieve any party for liability for damages actually
incurred as a result of any breach of this Agreement.
27.3 Third Party Termination. In recognition of the efforts, expenses
and other opportunities foregone by ▇▇▇▇▇ while structuring the Transaction, the
parties agree that PSI shall pay to ▇▇▇▇▇ the termination fee of One Million
Dollars ($1,000,000) in cash on demand if, during a period of eighteen (18)
months after the date hereof but prior to the earlier of (i) the Closing Date or
(ii) termination of this Agreement in accordance with its terms (other than a
termination by PSI pursuant to Section 27.1(b)(3)) any of the following occurs:
(a) the acquisition by any person other than ▇▇▇▇▇ or an
Affiliate of ▇▇▇▇▇ of beneficial ownership of 20% or more of the then
outstanding voting power of PSI;
(b) PSI, without having received ▇▇▇▇▇'▇ prior written
consent, shall have entered into an agreement to engage in an Acquisition
Transaction (as defined herein) with any
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person (the term "person" for purposes of this Section 27.2 having the meaning
assigned thereto in Sections 3(a)(9) and 3(d)(3) of the Exchange Act and the
rules and regulations thereunder) other than ▇▇▇▇▇ or its Affiliates or the
Board of Directors of PSI shall have recommended that the stockholders of PSI
approve or accept any Acquisition Transaction with any person other than ▇▇▇▇▇
or an Affiliate of ▇▇▇▇▇. For purposes of this Agreement, "Acquisition
Transaction" shall mean (x) a merger or consolidation, or any similar
transaction, involving PSI, (y) a purchase, lease or other acquisition of all or
substantially all of the assets of PSI or (z) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or otherwise) of
securities representing 20% or more of the voting power of PSI; or
(c) after a bona fide proposal is made by a third party to PSI
or its stockholders to engage in an Acquisition Transaction, (i) PSI shall have
willfully breached any covenant or obligation contained in the Agreement and
such breach would entitle ▇▇▇▇▇ to terminate the Agreement or (ii) the holders
of PSI Common Stock shall not have approved the Transaction or the Alternative
Transaction at the Stockholder Meeting, or the Stockholder Meeting shall not
have been held or shall have been canceled prior to termination of the Agreement
or (iii) PSI's board of directors shall have withdrawn or modified in a manner
adverse to ▇▇▇▇▇ the recommendation of PSI's board of directors with respect to
the Agreement or (iv) PSI shall have terminated this Agreement pursuant to
Section 27.1.(b)(3).
[Remainder Of This Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the day and year first above written.
▇▇▇▇▇ Communications Holdings
Limited Partnership,
a Nevada Limited partnership
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇
------------------------------------------
▇▇▇ ▇. ▇▇▇▇▇
President, Holdings Investments, Inc.
General Partner of ▇▇▇▇▇ Communications
Holdings Limited Partnership
▇▇▇▇▇ Virtual Media Limited Partnership,
a Nevada limited partnership
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇
------------------------------------------
▇▇▇ ▇. ▇▇▇▇▇
President, Magnatone Entertainment
Group, Inc.
General Partner of ▇▇▇▇▇ Virtual Media
Limited Partnership
▇▇▇▇▇ World Wide Digital Transmission &
Vaulting Limited Partnership,
a Nevada limited partnership
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇
------------------------------------------
▇▇▇ ▇. ▇▇▇▇▇
President, ▇▇▇▇▇ World Wide, Inc.
General Partner of ▇▇▇▇▇ World Wide Digital
Transmission & Vaulting Limited Partnership
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▇▇▇▇▇ Productions Limited Partnership,
a Nevada limited partnership
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
▇▇▇ ▇. ▇▇▇▇▇
President, ▇▇▇▇▇▇▇▇▇ Communications, Inc.
General Partner of ▇▇▇▇▇ Productions
Limited Partnership
Precision Systems, Inc.,
a Delaware corporation
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
CEO and President
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CONTRIBUTION AND SHARE EXCHANGE AGREEMENT
BY AND AMONG
▇▇▇▇▇ COMMUNICATIONS HOLDINGS LIMITED PARTNERSHIP,
A NEVADA LIMITED PARTNERSHIP
▇▇▇▇▇ WORLD WIDE DIGITAL TRANSMISSION & VAULTING
LIMITED PARTNERSHIP,
A NEVADA LIMITED PARTNERSHIP
▇▇▇▇▇ PRODUCTIONS LIMITED PARTNERSHIP,
A NEVADA LIMITED PARTNERSHIP
▇▇▇▇▇ VIRTUAL MEDIA LIMITED PARTNERSHIP,
A NEVADA LIMITED PARTNERSHIP
AND
PRECISION SYSTEMS, INC.,
A DELAWARE CORPORATION
APRIL 22, 1998
TABLE OF CONTENTS
Page
----
ARTICLE I CONTRIBUTION AND SHARE EXCHANGE............................................................... 2
1.1. ▇▇▇▇▇ Contribution............................................................................ 2
1.2. Share Exchange................................................................................ 2
1.3. Real Estate Transfer.......................................................................... 2
1.4. Alternative Transaction....................................................................... 2
ARTICLE II RECAPITALIZATION.............................................................................. 3
2.1. Recapitalization.............................................................................. 3
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PSI......................................................... 4
3.1. Corporate Standing............................................................................ 4
3.2. Authority..................................................................................... 4
3.3. Capitalization................................................................................ 5
3.4. Operation of PSI's Business................................................................... 5
3.5. No Material Change............................................................................ 5
3.6. Assets........................................................................................ 6
3.7. Compliance with Laws.......................................................................... 7
3.8. Employee Benefit Plans........................................................................ 7
3.9. SEC Filings; Financial Statement............................................................. 10
3.10. Proxy Statement...............................................................................11
3.11. Litigation....................................................................................11
3.12. Environmental and Health and Safety Matters.................................................. 11
3.13. Intellectual Property........................................................................ 13
3.14. Related Party Transactions................................................................... 13
3.15. Taxes........................................................................................ 14
3.16. Insurance.................................................................................... 14
3.17. Customer and Supplier Relationships; Warranty Claims......................................... 14
3.18. Bonds; Guarantees............................................................................ 15
3.19. Absence of Undisclosed Liabilities........................................................... 15
3.20. Charter Documents............................................................................ 15
3.21. Subsidiaries and Affiliates.................................................................. 15
3.22. No Misrepresentations or Nondisclosures...................................................... 16
3.23. Opinion of Financial Advisor................................................................. 16
3.24. Board Approval............................................................................... 16
3.25. Absence of Questionable Payments............................................................. 16
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ARTICLE IV REPRESENTATIONS AND WARRANTIES
OF ▇▇▇▇▇ .................................................................................. 16
4.1. Due Organization and Qualification........................................................... 17
4.2. Authority to Execute and Perform Agreements.................................................. 17
4.3. Agreements................................................................................... 18
4.4. Contributed Business......................................................................... 18
4.5. Assets....................................................................................... 19
4.6. Employees.................................................................................... 19
4.7. Intellectual Property........................................................................ 21
4.8. Financial Statements......................................................................... 21
4.9. Liabilities.................................................................................. 21
4.10. Accounts Receivable.......................................................................... 21
4.11. No Material Adverse Change................................................................... 22
4.12. Operations of ▇▇▇▇▇.......................................................................... 22
4.13. Compliance with Laws......................................................................... 22
4.14. Tax Matters.................................................................................. 23
4.15. Litigation................................................................................... 23
4.16. Environmental and Health and Safety Matters.................................................. 23
4.17. Insurance.................................................................................... 25
4.18. Customer and Supplier Relationships; Warranty Claims......................................... 25
4.19. Investment................................................................................... 25
ARTICLE V COVENANTS OF PSI.............................................................................. 26
5.1. Management of PSI............................................................................. 26
5.2. Accounting Practices.......................................................................... 26
5.3. No Distribution of Dividends.................................................................. 26
5.4. No New Stock Rights........................................................................... 26
5.5. Purchases and Sales........................................................................... 26
5.6. Compensation of PSI's Employees............................................................... 27
5.7. Insurance..................................................................................... 27
5.8. Preserve Organization......................................................................... 27
5.9. Access to the Records of PSI.................................................................. 27
5.10. Consents and Authorizations................................................................... 27
5.11. Fulfill Closing Conditions.................................................................... 27
5.12. Taxes......................................................................................... 27
5.13. Financial Reports............................................................................. 27
5.14. Certificate of Incorporation and By-Laws...................................................... 28
5.15. Damage or Destruction of Assets............................................................... 28
5.16. No Shop....................................................................................... 28
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5.17. Confidentiality............................................................................... 28
5.18 Tax Treatment................................................................................. 28
5.19. NASDAQ Quotation.............................................................................. 29
ARTICLE VI ADDITIONAL AGREEMENTS......................................................................... 29
6.1. Voting Agreement.............................................................................. 29
6.2. Stockholders Meeting.......................................................................... 29
6.3. Recapitalization.............................................................................. 29
6.4. Board of Directors............................................................................ 30
6.5. Employees..................................................................................... 30
6.6. President and Chief Executive Officer......................................................... 30
6.7. Interim Loan.................................................................................. 30
6.8. Preparation of Proxy Statement; Other Filings................................................. 30
6.9. Defense of Litigation......................................................................... 31
ARTICLE VII COVENANTS OF ▇▇▇▇▇........................................................................... 31
7.1. Management of ▇▇▇▇▇.......................................................................... 31
7.2. No Distribution of Dividends................................................................. 32
7.3. No New Stock Rights.......................................................................... 32
7.4. Purchase and Sales........................................................................... 32
7.5. Compensation of ▇▇▇▇▇'▇ Employees............................................................ 32
7.6. Insurance.................................................................................... 32
7.8. Access to Records of ▇▇▇▇▇................................................................... 32
7.9. Consents and Authorization................................................................... 32
7.10. Taxes........................................................................................ 33
7.11. Certificate of Incorporation, By-Laws and Limited
Partnership Agreement...................................................................... 33
7.12. Damage or Destruction of Assets.............................................................. 33
7.13. Fulfill Closing Conditions................................................................... 33
7.14. Third Parties and Government Approvals....................................................... 33
7.15. Confidentiality.............................................................................. 33
ARTICLE VIII CONDITIONS PRECEDENT TO CLOSING BY ▇▇▇▇▇ .................................................... 34
8.1. Representations and Warranties............................................................... 34
8.2. Covenants.................................................................................... 34
8.3. Officers Certificate......................................................................... 34
8.4. Good Standing................................................................................ 34
8.5. Legal Opinion................................................................................ 34
8.6. Governmental Approvals....................................................................... 34
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8.7. Material Adverse Change...................................................................... 34
8.8. Bankruptcy................................................................................... 35
8.9. Corporate and Third Party Authorizations..................................................... 35
8.10. Employment of ▇▇▇▇▇ Employees................................................................ 35
8.11. Lawsuits..................................................................................... 35
8.12. Recapitalization............................................................................. 35
8.13. Tax Opinion.................................................................................. 35
8.14. Confirmation of Other Transactions........................................................... 35
8.15. Listing of PSI Common Stock.................................................................. 36
8.16. Election of Directors........................................................................ 36
8.17. Non-Fulfillment Date......................................................................... 36
ARTICLE IX CONDITIONS PRECEDENT TO CLOSING BY PSI....................................................... 36
9.1. Representations and Warranties............................................................... 36
9.2. Covenants.................................................................................... 36
9.3. Officers Certificate......................................................................... 36
9.4. Governmental Approvals....................................................................... 37
9.5. Bankruptcy................................................................................... 37
9.6. Lawsuits..................................................................................... 37
9.7. Legal Opinion................................................................................ 37
9.8. Corporate Authorizations..................................................................... 37
9.9. Confirmation of Recapitalizations............................................................ 37
9.10. Other Transactions........................................................................... 38
9.11. Non-Fulfillment Date......................................................................... 38
ARTICLE X CLOSING...................................................................................... 38
ARTICLE XI OBLIGATIONS AT THE CLOSING................................................................... 38
11.1. PSI' Obligations............................................................................. 38
11.2. ▇▇▇▇▇'▇ Obligations.......................................................................... 39
ARTICLE XII FURTHER COVENANTS OF PSI AND ▇▇▇▇▇........................................................... 40
12.1. Joint Notice................................................................................. 40
12.2. Further Assurances........................................................................... 41
12.3. Registration Rights.......................................................................... 41
12.4. Further Arrangements......................................................................... 41
12.5. Bulk Sales Law............................................................................... 41
ARTICLE XIII EXPENSES WITH RESPECT TO TRANSACTION......................................................... 42
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ARTICLE XIV BROKERS...................................................................................... 42
ARTICLE XV INDEMNIFICATION.............................................................................. 42
15.1. Indemnification by ▇▇▇▇▇..................................................................... 42
15.2. Limitations.................................................................................. 43
15.3. Notice....................................................................................... 44
15.4. Defense of Claims............................................................................ 44
15.5. Definitions.................................................................................. 45
ARTICLE XVI NOTICES...................................................................................... 45
16.1. Notice....................................................................................... 45
16.2. Receipt of Notice............................................................................ 46
ARTICLE XVII EFFECTIVENESS AND ASSIGNABILITY OF AGREEMENT....................................................... 47
ARTICLE XVIII ANNOUNCEMENT OF TRANSACTION....................................................................... 47
ARTICLE XIX COMPLETENESS OF AGREEMENT.......................................................................... 47
ARTICLE XX CAPTIONS.......................................................................................... 48
ARTICLE XXI APPLICABLE LAW.................................................................................... 48
ARTICLE XXII CHOICE OF FORUM; VENUE; SERVICE OF PROCESS........................................................ 48
ARTICLE XXIII COUNTERPARTS...................................................................................... 49
ARTICLE XXIV NO THIRD PARTY BENEFICIARY........................................................................ 49
ARTICLE XXV UNILATERAL RIGHT TO WAIVE FAILURES OF OTHER PARTIES............................................... 49
25.1. Waiver....................................................................................... 49
25.2. Effect of Waiver............................................................................. 50
ARTICLE XXVI RABILITY..................................................................................... 50
ARTICLE XXVII TERMINATION ................................................................................. 50
27.1. Termination Events........................................................................... 50
27.2. Effect of Termination........................................................................ 51
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27.3. Third Party Termination...................................................................... 51
Schedules
---------
Schedule 1.1(a)(i) ▇▇▇▇▇ Assets
Schedule 1.1(a) Excluded Assets
Schedule 1.1(b) Assumed Liabilities
Schedule 3 Entities Owned by PSI
Exhibits
--------
Exhibit 1.1 Assignment and Assumption Agreement
Exhibit 1.3 Real Estate Transfer Agreement
Exhibit 2.1 Plan of Recapitalization
Exhibit 6.1 Voting Agreement
Exhibit 6.7 Promissory Note
Exhibit 11.1.5 Registration Rights Agreement
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INDEX OF DEFINED TERMS
Term Section
---- -------
"Acquisition Transaction"..............................................................................Section 27.1
"Affiliate"............................................................................................Section 3.21
"Agreement"................................................................................................Preamble
"Alta"..................................................................................................Section 6.1
"Assignment and Assumption Agreement"................................................................Section 1.1(a)
"Alternative Consideration".............................................................................Section 1.4
"Alternative Transaction"...............................................................................Section 1.4
"Assumed Liabilities"................................................................................Section 1.1(b)
"Businesses".........................................................................................Section 4.4(a)
"Cash"...............................................................................................Section 1.1(a)
"Certificate of Incorporation".........................................................................Section 3.20
"Closing".................................................................................................Article X
"Closing Date"............................................................................................Article X
"COBRA".................................................................................................Section 3.8
"Code".....................................................................................................Preamble
"Company SEC Reports"................................................................................Section 3.9(a)
"Contribution".......................................................................................Section 1.1(a)
"Contribution and Share Exchange Transaction"..............................................................Preamble
"Employee Benefit Plans"................................................................................Section 3.8
"Environmental Laws"...................................................................................Section 3.12
"Equipment" (PSI).......................................................................................Section 3.6
"Equipment" (▇▇▇▇▇).....................................................................................Section 4.5
"Equity Interests"...................................................................................Section 1.1(a)
"ERISA".................................................................................................Section 3.8
"ERISA Affiliate".......................................................................................Section 3.8
"Exchange Act".......................................................................................Section 3.9(a)
"Exchange Rate".........................................................................................Section 2.1
"Excluded Assets"....................................................................................Section 1.1(a)
"Excluded Liabilities"...............................................................................Section 1.1(b)
"GAAP"...............................................................................................Section 3.9(b)
"Hazardous Substances".................................................................................Section 3.12
"HSR Act"...............................................................................................Section 6.8
"Indemnifying Party"...................................................................................Section 15.5
"Intellectual Property"................................................................................Section 3.12
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"Internal Revenue Code".................................................................................Section 3.8
"Laws"..................................................................................................Section 3.7
"Liabilities"...........................................................................................Section 4.9
"Losses"............................................................................................Section 15.5(a)
"Other Filings".........................................................................................Section 6.8
"PCBs".................................................................................................Section 3.12
"Person"...............................................................................................Section 27.3
"Primat"................................................................................................Section 6.3
"Primwest"..............................................................................................Section 6.3
"Promissory Note".......................................................................................Section 6.7
"Property".............................................................................................Section 3.12
"Proxy Statement"......................................................................................Section 3.10
"PSI"......................................................................................................Preamble
"PSI Common Stock"......................................................................................Section 1.2
"PSI Consideration".....................................................................................Section 2.1
"PSI Disclosure Letter".................................................................................Article III
"PSI Series A Stock"....................................................................................Section 2.1
"PSI Series B Stock"....................................................................................Section 2.1
"PVS"................................................................................................Section 1.1(a)
"Recapitalization"......................................................................................Section 2.1
"Recapitalization Consideration"........................................................................Section 2.1
"Real Estate Consideration".............................................................................Section 1.3
"Real Estate Transaction"...............................................................................Section 1.3
"Real Property".........................................................................................Section 1.3
"RMS"......................................................................................................Preamble
"RMS Note"..............................................................................................Section 2.1
"SEC"................................................................................................Section 3.9(a)
"Securities Act".....................................................................................Section 3.9(a)
"Share Exchange Consideration"..........................................................................Section 1.2
"Share Increase"........................................................................................Section 6.1
"Shareholders Agreement"...............................................................................Section 6.10
"Special Committee"....................................................................................Section 3.24
"▇▇▇▇▇"....................................................................................................Preamble
"▇▇▇▇▇ Assets".......................................................................................Section 1.1(a)
"▇▇▇▇▇ Balance Sheet"...................................................................................Section 4.8
"▇▇▇▇▇ Communications".....................................................................................Preamble
"▇▇▇▇▇ Disclosure Letter"................................................................................Article IV
"▇▇▇▇▇ Employee Benefit Plans".......................................................................Section 4.6(b)
"▇▇▇▇▇ Entities"...........................................................................................Preamble
"▇▇▇▇▇ Financial Statements"............................................................................Section 4.8
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"▇▇▇▇▇ Productions"........................................................................................Preamble
"▇▇▇▇▇ Property".......................................................................................Section 4.16
"▇▇▇▇▇ PVS"................................................................................................Preamble
"▇▇▇▇▇ Software"........................................................................................Section 4.5
"▇▇▇▇▇ Transmission".......................................................................................Preamble
"▇▇▇▇▇ Third Party Software"............................................................................Section 4.5
"▇▇▇▇▇ World Wide".........................................................................................Preamble
"Stockholders Meeting"..................................................................................Section 6.2
"SVM"......................................................................................................Preamble
"Third Party Software"..................................................................................Section 3.6
"Transaction"..............................................................................................Preamble
"Voting Parties"........................................................................................Section 6.1
"Vulcan"................................................................................................Section 6.1
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