1
EXHIBIT 10.1
STOCK PURCHASE AND REDEMPTION AGREEMENT
BY AND AMONG
FWT, INC.,
THE COMPANY
FWT ACQUISITION, INC.,
AS PURCHASER
AND
▇.▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ AND ▇▇▇ ▇. ▇▇▇▇▇,
AS SHAREHOLDERS
NOVEMBER 12, 1997
2
TABLE OF CONTENTS
PRELIMINARY STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
STATEMENT OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I SIMULTANEOUS SIGNING AND CLOSING
Section 1.1 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
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Section 1.2 Loan Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
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Section 1.3 Redemption Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
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Section 1.4 Stock Purchase Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
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Section 1.5 Related Transactions and Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
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Section 1.6 [Intentionally deleted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.7 Miscellaneous Purchaser Delivered Closing Documents. . . . . . . . . . . . . . . . . . . . . 3
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Section 1.8 Miscellaneous Shareholder and Company Delivered Documents. . . . . . . . . . . . . . . . . . 4
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Section 1.9 Resignations. Each . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
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ARTICLE II AGGREGATE CONSIDERATION AND ADJUSTMENTS
Section 2.1 Aggregate Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
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Section 2.2 Consolidated Escrow Amount and Procedures. . . . . . . . . . . . . . . . . . . . . . . . . . 6
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Section 2.3 Estimated Closing Balance Sheet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
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Section 2.4 Audited Closing Balance Sheet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
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Section 2.5 Increases to Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
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Section 2.6 Decreases to Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
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Section 2.7 Payment and Allocation of Upward or Downward Adjustments. . . . . . . . . . . . . . . . . . . 7
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Section 2.8 Excluded Asset Adjustment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
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Section 2.9 Allocation of the Final Aggregate Purchase Price. . . . . . . . . . . . . . . . . . . . . . . 8
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Section 2.10 [Intentionally deleted]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2.11 Special Allocation of Certain Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
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ARTICLE III CERTAIN TAX MATTERS
Section 3.1 Section 338 Election. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
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Section 3.2 Apportionment of Taxable Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
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Section 3.3 Preparation and Filing of Income Tax Returns. . . . . . . . . . . . . . . . . . . . . . . . 10
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Section 3.4 Payment of Income and Franchise Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
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Section 3.5 Audit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
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Section 3.6 Cooperation on Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
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Section 3.7 Refunds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
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Section 3.8 Elections. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
Section 4.1 Capacity of Shareholder. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
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Section 4.2 Organization of Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
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Section 4.3 Power and Authority of Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
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Section 4.4 Execution, Delivery, and Enforceability. . . . . . . . . . . . . . . . . . . . . . . . . . 12
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Section 4.5 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
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Section 4.6 Conflicts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
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Section 4.7 No Prohibitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
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Section 4.8 Compliance with Applicable Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
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Section 4.9 Compliance with Organizational Documents. . . . . . . . . . . . . . . . . . . . . . . . . . 13
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Section 4.10 Corporate Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
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Section 4.11 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
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Section 4.12 Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
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Section 4.13 Ownership of the Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
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Section 4.14 No Derivative Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
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Section 4.15 No Subsidiaries or Joint Ventures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
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Section 4.16 Offices of Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
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Section 4.17 Audited Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
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Section 4.18 Interim Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
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Section 4.19 Accounting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
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Section 4.20 Absence of Certain Changes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
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Section 4.21 Management Letters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
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Section 4.22 Bank Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
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Section 4.23 Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
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Section 4.24 Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
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Section 4.25 Condition of Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
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Section 4.26 Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
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Section 4.27 Real Property Exceptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
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Section 4.28 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
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Section 4.29 Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
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Section 4.30 Vehicles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
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Section 4.31 Capital Expenditure Budget. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
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Section 4.32 Material Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
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Section 4.33 Outstanding Offers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
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Section 4.34 Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
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Section 4.35 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
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Section 4.36 Intellectual Property Exceptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
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Section 4.37 Computer Software Licenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
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Section 4.38 Appraisals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
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Section 4.39 Adequacy of Company's Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
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Section 4.40 Permitted Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
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Section 4.41 Related Party Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
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Section 4.42 Litigation and Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
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Section 4.43 Litigation History. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
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Section 4.44 Orders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
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Section 4.45 Audit Letter Responses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
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Section 4.46 Investigations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
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Section 4.47 Insurance Policies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
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Section 4.48 Insurance Policy Exceptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
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Section 4.49 Product Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
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Section 4.50 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
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Section 4.51 Tax Representations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
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Section 4.52 Directors and Officers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
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Section 4.53 Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
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Section 4.54 Collective Bargaining Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
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Section 4.55 Labor Relations Exceptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
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Section 4.56 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
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Section 4.57 Employee Benefit Plan Exceptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
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Section 4.58 Distributors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
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Section 4.59 Suppliers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
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Section 4.60 Customers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
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Section 4.61 Business Relationships. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
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Section 4.62 Predecessors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
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Section 4.63 Absence of Unethical Business Practices. . . . . . . . . . . . . . . . . . . . . . . . . . 27
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Section 4.64 No Broker. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
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Section 4.65 Disclaimer of Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
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Section 4.66 Operation of Company Since Date of Interim Financials. . . . . . . . . . . . . . . . . . . 28
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Section 4.67 Related Party Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
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ARTICLE V REPRESENTATIONS AND WARRANTIES OF PURCHASER
Section 5.1 Organization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
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Section 5.2 Power and Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
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Section 5.3 Execution, Delivery, and Enforceability. . . . . . . . . . . . . . . . . . . . . . . . . . 30
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Section 5.4 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
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Section 5.5 Conflicts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
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Section 5.6 No Prohibitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
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ARTICLE VI COVENANTS
Section 6.1 Non-Compete Covenant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
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Section 6.2 Non-Solicitation Covenant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
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Section 6.3 Non-Disclosure Covenant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
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Section 6.4 Indirect Competition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
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Section 6.5 Reasonableness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
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Section 6.6 Judicial Enforcement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
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Section 6.7 Galaxy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
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Section 6.8 Termination of Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
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ARTICLE VII INDEMNIFICATION AND DAMAGES
Section 7.1 Indemnification of Purchaser. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
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Section 7.2 Indemnification of Shareholders and the Company. . . . . . . . . . . . . . . . . . . . . . 33
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Section 7.3 Indemnification Procedure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
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Section 7.4 Assignment of Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
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Section 7.5 Other Indemnitees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
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Section 7.6 Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
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Section 7.7 Basket. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
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Section 7.8 Maximum Liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
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Section 7.9 Survival of Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
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ARTICLE VIII ARBITRATION AND EQUITABLE REMEDIES
Section 8.1 Settlement Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
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Section 8.2 Arbitration Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
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Section 8.3 Place of Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
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Section 8.4 Discovery. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
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Section 8.5 Equitable Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
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Section 8.6 Exclusive Jurisdiction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
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Section 8.7 Judgments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
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Section 8.8 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
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Section 8.9 Cost of the Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
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Section 8.10 Exclusivity of Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
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ARTICLE IX GENERAL
Section 9.1 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
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Section 9.2 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
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Section 9.3 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
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Section 9.4 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
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Section 9.5 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
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Section 9.6 No Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
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Section 9.7 No Set-Off. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
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Section 9.8 No Third Party Beneficiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
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Section 9.9 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
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Section 9.10 Representation by Legal Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
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Section 9.11 Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
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Section 9.12 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
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Section 9.13 Successors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
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Section 9.14 Time of the Essence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
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Section 9.15 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
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6
SCHEDULES
Schedule I Shareholdings
Schedule 1.2 Funded Indebtedness
Schedule 1.9 Resignations
Schedule 2.8 Excluded Assets
Schedule 4.5 Consents
Schedule 4.11 Capitalization
Schedule 4.15 Subsidiaries / Joint Ventures
Schedule 4.16 Offices
Schedule 4.17 Audited Financial Statements
Schedule 4.18 Interim Financial Statements
Schedule 4.19 Accounting
Schedule 4.20 Absence of Certain Changes
Schedule 4.21 Management Letters
Schedule 4.22 Bank Accounts
Schedule 4.23 Accounts Receivable
Schedule 4.26 Real Property
Schedule 4.28(c) Storage Tanks
Schedule 4.29 Equipment
Schedule 4.30 Vehicles
Schedule 4.31 Capital Expenditures Budget
Schedule 4.32 Material Contracts
Schedule 4.35 Intellectual Property
Schedule 4.36(b) Registrations
Schedule 4.37 Computer Software Licenses
Schedule 4.40 Permitted Liens
Schedule 4.42 Litigation and Claims
Schedule 4.43 Litigation History
Schedule 4.46 Investigations
Schedule 4.47 Insurance Policies
Schedule 4.49 Product Warranties
Schedule 4.50 Taxes
Schedule 4.51 Tax Exceptions
Schedule 4.52 Directors and Officers
Schedule 4.53 Employees
Schedule 4.56 Employee Benefit Plans
Schedule 4.58 Distributors
Schedule 4.59 Suppliers
Schedule 4.60 Customers
Schedule 4.67 Related Party Transactions
1
7
ANNEXES
Annex I Definitions
EXHIBITS
Exhibit A Form of Shareholder's Agreement
Exhibit B Form of Registration Rights Agreement
Exhibit C Form of Escrow Agreement
Exhibit D Form of Purchaser's Legal Opinion
Exhibit E Form of Shareholders Legal Opinion
Exhibit F Form of Company's Legal Opinion
Exhibit G Form of Tax Note
Exhibit H Form of Working Capital Notes
2
8
STOCK PURCHASE AND REDEMPTION AGREEMENT
This Stock Purchase and Redemption Agreement (this "AGREEMENT"), dated
as of November 12, 1997, is by and among FWT Acquisition, Inc., a Delaware
corporation (the "PURCHASER"), FWT, Inc., a Texas corporation (the "COMPANY"),
▇. ▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇. "▇▇▇▇" ▇▇▇▇▇, and ▇▇▇ ▇. ▇▇▇▇▇
(such individuals are sometimes collectively referred to as "SHAREHOLDERS," and
individually referred to as a "SHAREHOLDER"). Unless otherwise provided
herein, capitalized terms used in this Agreement shall have the meanings
ascribed to them as Annex I hereto.
PRELIMINARY STATEMENTS
A. Prior to giving effect to the Closing Transactions (as herein
defined) the Shareholders owned an aggregate of three hundred seventy-two (372)
shares of Company's common stock, par value $10.00 per share ("COMMON STOCK")
as more fully described on Schedule I hereto, which constituted all of the
issued and outstanding shares of the Company's capital stock.
B. Upon the terms and conditions set forth in this Agreement, the
parties have simultaneously executed this Agreement and effected the
transactions described herein.
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
terms and conditions of this Agreement, and other good, valuable and binding
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto, intending to be legally bound hereby, now agree as follows:
ARTICLE I.
SIMULTANEOUS SIGNING AND CLOSING
Section 1.1 Closing. On the date hereof (the "CLOSING DATE"),
the parties hereto have caused each of the documents listed in this Article I
(the "CLOSING DOCUMENTS") to be executed and delivered and have consummated
each of the other transactions described in this Article I (the "CLOSING").
Section 1.2 Loan Transactions. Simultaneously with the execution
hereof and pursuant to the terms of a Senior Secured Credit Agreement with
Bankers Trust Company, as Agent, the Company obtained a loan in the principal
amount of $100,000,000 the proceeds of which were used in part to (a) repay in
full all outstanding Funded Indebtedness of the Company immediately prior to
giving effect to the Closing Transactions which Funded Indebtedness is
described on Schedule 1.2 hereto (the Shareholders hereby severally represent
and warrant that Schedule 1.2 accurately reflects the Funded Indebtedness of
the Company prior to giving effect to the Closing
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Transactions), and (b) redeem the Redeemed Shares (as herein defined). The
aggregate amount of the Funded Indebtedness paid by the Company on the date
hereof was $22,220,073.
Section 1.3 Redemption Transactions. The Company has redeemed an
aggregate of 235.78 shares of Common Stock (the "REDEEMED SHARES") from the
Shareholders for an aggregate consideration of $82,374,900.13 (and subject to
adjustment on a post closing basis as herein provided) (the "AGGREGATE CLOSING
DATE REDEMPTION PRICE"), $75,375,422.68 of the Aggregate Closing Date
Redemption Price was paid to the Shareholders at Closing (and, in the case of
the consideration paid in the form of the Excluded Assets (as herein defined),
paid prior to closing), and $6,998,477.45 of such amount was deposited into the
Escrow Account (as herein defined) for payment to the Shareholders or the
Purchaser upon termination of the Escrow Account as provided in the Escrow
Agreement (as herein defined). The number of shares of Common Stock redeemed
from each Shareholder and the portion of the Aggregate Closing Date Redemption
Price paid to each Shareholder and deposited into the Escrow Account with
respect to each Shareholder is as set forth in the following table:
Portion of Aggregate
Closing Date
Name Shares Redeemed Redemption Price
---- --------------- ----------------
▇.▇. ▇▇▇▇▇ 59.5542 $ 20,645,081.03
▇▇▇▇▇ ▇▇▇▇▇ 59.5542 $ 20,645,081.03
▇▇▇ ▇▇▇▇▇ 38.9166 $ 13,694,912.69
▇▇▇▇ ▇▇▇▇▇ 38.9166 $ 13,694,912.69
▇▇▇▇ ▇▇▇▇▇ 38.9166 $ 13,694,912.69
Each Shareholder has delivered to the Company the certificates representing the
Redeemed Shares held by it, duly endorsed to the Company.
Section 1.4 Stock Purchase Transactions. Purchaser has purchased
an aggregate of 108.98 shares of Common Stock (the "PURCHASED SHARES") from the
Shareholders for an aggregate cash consideration paid at Closing of $36,000,000
(the "AGGREGATE STOCK PURCHASE PRICE"). The number of shares of Common Stock
purchased from each Shareholder and the portion of the Aggregate Stock Purchase
Price paid to each Shareholder is as set forth in the following table:
Portion
Aggregate Stock
Name Shares Purchased Purchase Price
---- ---------------- --------------
▇.▇. ▇▇▇▇▇ 34.3758 $11,362,493.74
▇▇▇▇▇ ▇▇▇▇▇ 34.3758 $11,362,493.74
▇▇▇ ▇▇▇▇▇ 13.3873 $ 4,425,004.17
▇▇▇▇ ▇▇▇▇▇ 13.3873 $ 4,425,004.17
▇▇▇▇ ▇▇▇▇▇ 13.4538 $ 4,425,004.17
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Each Shareholder has delivered to Purchaser the certificates representing the
Purchased Shares held by it duly endorsed to Purchaser. After giving effect to
the redemption of the Redeemed Shares and the purchase of the Purchased Shares,
▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇ each hold 9.0761 shares of Common Stock,
representing, in the aggregate, 19.99995593% of the outstanding Common Stock of
the Company, and Purchaser holds 108.9135 shares of Common Stock representing
80.00004407% of the outstanding Common Stock of the Company.
Section 1.5 Related Transactions and Documents. Simultaneously
with the execution hereof, the parties have executed and delivered each of the
following documents to which they are a party and have delivered and/or
received the other documents and instruments listed below:
(a) Shareholders' Agreement. Each of the Company,
Purchaser, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ and for the limited purposes set
forth therein ▇▇▇▇▇ Communications Fund, L.P. have entered into, executed and
delivered a Shareholders' Agreement in the form of Exhibit A hereto ( the
"SHAREHOLDERS' AGREEMENT").
(b) Registration Rights Agreement. Each of the Company,
Purchaser, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇ have entered into, executed and
delivered a Registration Rights Agreement in the form of Exhibit B hereto (the
"REGISTRATION RIGHTS AGREEMENTS")
(c) Employment Agreements. The Company and each of ▇▇▇
▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇ have entered into, executed and delivered an
Employment Agreement acceptable to each (collectively, the "EMPLOYMENT
AGREEMENTS").
(d) Escrow Agreement. Each of the Company, the
Shareholders, the Purchaser and U.S. Trust Company of Texas, N.A., as Escrow
Agent, have entered into, executed and delivered an Escrow Agreement in the
form of Exhibit C hereto (the "ESCROW AGREEMENT").
Section 1.6 [Intentionally deleted]
Section 1.7 Miscellaneous Purchaser Delivered Closing Documents.
Purchaser has delivered to the Company and to each of the Shareholders the
following:
(a) Legal Opinion. An opinion of the Purchaser's
retained legal counsel (the "PURCHASER'S LEGAL OPINION"), dated as of the
Closing Date in the form of Exhibit D hereto.
(b) Secretary's Certificate. A certificate executed by
the Secretary or an Assistant Secretary of Purchaser (the "PURCHASER'S
SECRETARY CERTIFICATE"), which certificate includes:
(i) Charter. A copy of Purchaser's
Certificate of Incorporation, certified by the Delaware Secretary of State.
(ii) Bylaws. A copy of Purchaser's Bylaws.
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(iii) Certificate of Existence and Good
Standing. A certificate from the Delaware Secretary of State, stating that
Purchaser is in existence under the laws of the State of Delaware and stating
that Purchaser has paid all Taxes owed the State of Delaware and is in good
standing under such state's laws.
(iv) Resolutions. A copy of the resolutions
pursuant to which Purchaser's Board of Directors approved this Agreement.
(v) Incumbency Certificate. An incumbency
certificate setting forth the names, offices, and signatures of Purchaser's
officers who execute any documents on behalf of Purchaser in connection with
this Agreement or the Closing Documents.
Section 1.8 Miscellaneous Shareholder and Company Delivered
Documents. Company and the Shareholders have delivered to Purchaser the
following:
(a) Legal Opinion. Opinions of each of Shareholders' and
Company's retained legal counsel (the "SHAREHOLDERS' AND COMPANY'S LEGAL
OPINIONS"), dated as of the Closing Date in the forms of Exhibits E and F
hereto.
(b) Secretary's Certificate of Company. A certificate
executed by the Secretary or an Assistant Secretary of Company (the "COMPANY'S
SECRETARY CERTIFICATE") which certificate includes,:
(i) Charter. A copy of Company's Articles of
Incorporation certified by the Texas Secretary of State.
(ii) Bylaws. A copy of Company's Bylaws.
(iii) Certificate of Existence. A long-form
certificate from the Texas Secretary of State, stating that Company is in
existence under the laws of the State of Texas and describing each document
comprising Company's Articles of Incorporation.
(iv) Good Standing Certificate. A certificate from
the Comptroller of the State of Texas, stating that Company has paid all Taxes
owed the State of Texas and is in good standing under such state's laws.
(v) Foreign Good Standing Certificates. A
certificate from the appropriate official of each jurisdiction where Company
conducts business or owns or leases property, stating Company has paid all
Taxes owed such jurisdiction and is in good standing as a foreign corporation
under the laws of such jurisdiction.
(vi) Resolutions. A copy of the resolutions in which
Company's Board of Directors approved this Agreement and the Escrow Agreement.
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(vii) Incumbency Certificate. An incumbency
certificate setting forth the names, offices, and signatures of Company's
officers who execute any documents on behalf of Company in connection with this
Agreement.
Section 1.9 Resignations. Each of the Company's employees,
officers and directors listed on Schedule 1.9 hereto has resigned from his or
her positions with the Company pursuant to a written resignation agreement
delivered to the Company (a copy of which is included on Schedule 1.9), and
Company has made all severance and other payments due to such Person in
connection with such resignation all of which payments are described on
Schedule 1.9 hereto and are reflected in the Estimated Closing Balance Sheet.
Section 1.10 Affiliate Contracts. Each Material Contract between
the Company and its Affiliates has been terminated and all payments referenced
in Section 4.67 have been made, which payments are reflected on Schedule 4.67
hereto and in the estimated Closing Balance Sheet.
ARTICLE II.
AGGREGATE CONSIDERATION AND ADJUSTMENTS
Section 2.1 Aggregate Purchase Price. While the redemption
transactions and the stock purchase transactions referenced in Sections 1.3 and
1.4 hereof are separate and distinct transactions, it is the intent of the
parties that the aggregate consideration paid and received in connection with
such transactions equal the remainder of (a) $138,299,924.58, minus (b) the
aggregate amount of the Funded Indebtedness of the Company on the Closing Date
prior to giving effect to the Closing Transactions, subject to adjustment as
provided herein. Such consideration has been and, to the extent of the
Aggregate Escrow Amount (as herein defined) and any Final Upward Adjustment (as
herein defined), will be paid, in the form of (a) cash, (b) transfer to ▇.▇.
▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇ of the Excluded Assets, (c) the execution and delivery by
the Company to the Shareholders of promissory notes in the form of Exhibit G
hereto and in an aggregate principal amount of $1,582,500 (the "TAX NOTES"),
(d) the execution and delivery by the Company to the Shareholders of
promissory notes in the form of Exhibit H hereto (the "WORKING CAPITAL
ADJUSTMENT NOTES" and together with the Tax Notes, the "PROMISSORY NOTES"), and
(e) funding of the Escrow Account. Because it is impossible for the Company's
auditors to prepare and deliver on the Closing Date an audited balance sheet
dated as of the Closing Date, the Aggregate Stock Purchase Price and Aggregate
Closing Date Redemption Price have been determined using the Estimated Closing
Balance Sheet and the adjustment protocols described below and has been paid in
the forms provided below (the "ESTIMATED AGGREGATE PURCHASE PRICE"). As soon
as practicable after the Closing, but in all events within forty-five (45) days
after Closing, the Company's auditors shall deliver to the parties the Audited
Closing Balance Sheet described below and the Estimated Aggregate Purchase
Price shall be adjusted, if required hereunder, using the Audited Closing
Balance Sheet and the adjustment protocols described below. Such adjusted
aggregate purchase and redemption price shall then become the final aggregate
purchase price and shall be paid in the forms provided below (the "FINAL
AGGREGATE PURCHASE PRICE").
Section 2.2 Consolidated Escrow Amount and Procedures. In order
to fund the payment obligations of the Company to the Shareholders, and secure
each and all of the various
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obligations of the Shareholders (or of any of them) and the Company to the
Purchaser, in each case hereunder and under the Closing Documents
(collectively, the "ESCROW OBLIGATIONS"), the Company has, simultaneously with
the execution hereof, deposited into a special third party escrow account (the
"ESCROW ACCOUNT") an aggregate cash amount equal to $6,998,477.45 which is five
percent (5%) of the excess of the sum of the Estimated Aggregate Purchase Price
and the aggregate amount of the Funded Indebtedness of the Company on the
Closing Date over the value of the Excluded Assets (the "AGGREGATE ESCROW
AMOUNT") into the Escrow Account which amount has been withheld from the
Aggregate Closing Date Redemption Price for payment to the Shareholders or the
Purchaser upon termination of the Escrow Account as provided in the Escrow
Agreement.
Section 2.3 Estimated Closing Balance Sheet. Prior to the date
hereof the Company delivered to Purchaser and the Shareholders a balance sheet
prepared to reflect accurately an estimate of the financial position of Company
as of November 10, 1997 (but prior to giving effect to any of the Closing
Transactions) (the "ESTIMATED CLOSING BALANCE SHEET"). The Company represents
and warrants that the Estimated Closing Balance Sheet has been prepared in
accordance with GAAP (other than with respect to such matters necessitated by
Company's estimating its financial position) applied on a basis consistent with
immediate past practice, (ii) reflects accurately Company's good faith estimate
of the financial position of Company as of November 10, 1997 and prior to
giving effect to any of the Closing Transactions, and (iii) is certified by the
Company's chief financial officer (or functional equivalent).
Section 2.4 Audited Closing Balance Sheet. As promptly as
practicable after the Closing, but in all events within forty-five (45) days
after Closing, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP shall audit the Estimated Closing Balance
Sheet (as so audited and adjusted to reflect the results of such audit, the
"AUDITED CLOSING BALANCE SHEET"). The Audited Closing Balance Sheet shall
reflect all adjustments necessary for a fair presentation of Company's
financial position as of November 10, 1997, including the prorated effect of
any contemplated year-end adjustments, but without giving effect to the Closing
Transactions. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP shall not make any adjustments to any of the
accrued items reflected on the Estimated Closing Balance Sheet.
Section 2.5 Increases to Purchase Price. In calculating the
Estimated Aggregate Purchase Price, the parties have applied, and in
calculating the final Aggregate Purchase Price the parties shall apply, the
following criteria:
(a) Estimated Aggregate Purchase Price. If the (i) sum
of (A) the value of the Company's Current Assets, plus (B) $300,000, over (ii)
Current Liabilities ("WORKING CAPITAL") calculated using the Estimated Closing
Balance Sheet (the "ESTIMATED WORKING CAPITAL AMOUNT") exceeded $21,300,000,
then the Estimated Aggregate Purchase Price has been increased by the excess of
the Estimated Working Capital Amount over $21,300,000; up to an absolute
maximum increase of $10,000,000 (such excess, the "CLOSING DATE UPWARD
ADJUSTMENT"). All of such amount was allocated to the Aggregate Closing Date
Redemption Price and has been paid by the Company to the Shareholders as part
of the redemption transactions.
(b) Final Aggregate Purchase Price. In connection with
the determination of the Final Aggregate Purchase Price, the value of the
Working Capital shall be recalculated using
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the Audited Closing Balance Sheet as provided herein and any further upward
adjustments (subject to the same limitations) made (the "FINAL UPWARD
ADJUSTMENT").
Section 2.6 Decreases to Purchase Price. In calculating the
Estimated Aggregate Purchase Price, the parties have applied, and in
calculating the Final Aggregate Purchase Price the parties shall apply, the
following criteria:
(a) Estimated Aggregate Purchase Price. If the
Estimated Working Capital Amount was less than $21,300,000, then the Estimated
Aggregate Purchase Price has been decreased by the amount of such shortfall
(the "CLOSING DATE DOWNWARD ADJUSTMENT").
(b) Final Aggregate Purchase Price. In connection with
the determination of the Final Aggregate Purchase Price, the value of the
Working Capital shall be recalculated using the Audited Closing Balance Sheet
as provided herein and any further downward adjustments made (the "FINAL
DOWNWARD ADJUSTMENT").
Section 2.7 Payment and Allocation of Upward or Downward
Adjustments. To the extent that the calculation of the Estimated Aggregate
Purchase Price has, or in the case of the Final Aggregate Purchase Price shall,
result in a Closing Date Upward Adjustment and/or a Final Upward Adjustment, as
the case may be or a Closing Date Downward Adjustment and/or a Final Downward
Adjustment, as the case may be, such amount shall be paid and allocated as
follows:
(a) Upward Adjustments. Any such upward adjustment to
the Estimated Aggregate Purchase Price has been, or to the Final Aggregate
Purchase Price shall be, paid by the Company to each Shareholder in immediately
available funds to the extent of an amount equal to such Shareholder's
Proportionate Amount of (x) the lesser of: (A) the amount of the required
upward adjustment and (B) the excess of the amount of cash and cash equivalents
shown on the Estimated Closing Balance Sheet or the Final Closing Balance
Sheet, as the case may be, over $10.0 million. The balance of any such upward
adjustment to the Estimated Aggregate Purchase Price has been, or to the Final
Aggregate Purchase Price shall be, paid by delivery of a Working Capital Note
in an amount equal to its Proportionate Share of such balance. Any Closing Date
Upward Adjustment has been allocated solely to the redemption price for the
Redeemed Shares and has been taken into account in the calculation of the
Aggregate Closing Date Redemption Price. Any Final Upward Adjustment shall
also be allocated to the redemption price for the Redeemed Shares. The amount
of any Final Upward Adjustment shall be paid promptly (and in all events within
5 days) following the calculation thereof.
(b) Downward Adjustments. Any such downward adjustment
to the Estimated Aggregate Purchase Price has been, and to the Final Aggregate
Purchase Price shall be, paid to the Company by reduction of the Estimated
Aggregate Purchase Price or Final Aggregate Purchase Price as so calculated,
such reduction in the Final Aggregate Purchase Price to be applied first to
reduce Promissory Notes, then in immediately available funds. Any Final
Downward Adjustment shall be payable by each Shareholder in accordance with
their Proportionate Amount. Any Closing Date Downward Adjustment has been
allocated solely to the redemption price for the Redeemed Shares and has been
taken into account in the calculation of the Aggregate Closing Date
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Redemption Price. Any Final Downward Adjustment shall also be allocated solely
to the redemption price for the Redeemed Shares. The amount of any Final
Downward Adjustment shall be paid promptly (and in all events within 5 days)
following the calculation thereof.
(c) Time Value Factor. Any Final Upward Adjustment or
Final Downward Adjustment shall bear interest at the Prime Rate from the
Closing Date through the date of payment, whether such payment is in cash or
through an adjustment to the principal amount of a Promissory Note.
Section 2.8 Excluded Assets. The Estimated Aggregate Purchase
Price has been determined, and the Final Aggregate Purchase Price shall be
determined, taking into account the value of the assets described on Schedule
2.8 (the "Excluded Assets") which were transferred by the Company to certain of
the Shareholders prior to the Closing Date.
Section 2.9 Allocation of the Final Aggregate Purchase Price.
A. As soon as practicable, and in no event later than sixty days
after the Closing Date, the Company, at its own expense, shall cause ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ LLP to prepare and deliver to the Purchaser and Shareholders an
allocation schedule ("Allocation Schedule") setting forth the allocation of the
"aggregate deemed sales price" (as defined in the applicable United States
Department of Treasury Regulations under the Internal Revenue Code of 1986, as
amended (the "CODE")), to the assets of the Company. The Allocation Schedule
shall be prepared in accordance with the Treasury Regulations under Section 338
of the Code.
B. If the Purchaser or the Shareholders disagree with the
allocations set forth in the Allocation Schedule, they may within ten days
after the delivery of the Allocation Schedule deliver a notice to the Company
and the other party (the "Disagreement Notice"), setting forth the proposed
allocations as to which they disagree and the reasons for such disagreement.
If no Disagreement Notice is delivered within such ten-day period, the
allocations set forth in the Allocation Schedule shall become final, conclusive
and binding on the parties hereto for all purposes. If either party delivers a
Disagreement Notice to the other party, the Purchaser and the Shareholders
shall use their reasonable best efforts to reach agreement on the disputed
items or amounts in order to determine the Allocation Schedule. If the
Purchaser and the Shareholders do not resolve all disputed items or amounts
within fifteen days after delivery of a Disagreement Notice, the disputed
allocations will be submitted to a nationally recognized independent accounting
firm other than ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP ("Independent Accountants") selected by the
Purchaser and the Shareholders for resolution of such disputed items and
amounts. If the Purchaser and the Shareholders cannot agree on an Independent
Accountant, an Independent Accountant shall be selected by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP.
The written report of the Independent Accountant (the "Report") shall be
delivered to each of the Purchaser and the Shareholders promptly, but no event
later than thirty days after such disputed items are submitted to the
Independent Accountant, and shall be final, conclusive, and binding upon each
of the Purchaser and the Shareholders. These procedures for resolution of
disputes concerning the allocation of the aggregate deemed sales price shall be
final and binding on all of the parties hereto, and shall not be subject to
appeal of any kind. The fees and expenses of the Independent Accountant shall
be borne by the Company.
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C. Each of the Company, the Shareholders, and the Purchaser agree
to execute a reasonably acceptable engagement letter, if requested to do so by
the Independent Accountant, and shall provide reasonable access to the books
and records of the Company and its employees who are responsible for financial
matters. The Company, Purchaser, and the Shareholders shall file all Tax
returns and information reports, and otherwise act in accordance with, the
allocations contained in the Allocation Schedule.
Section 2.10 [Intentionally deleted].
Section 2.11 Special Allocation of Certain Expenses. The Parties
acknowledge that (a) the Company shall be solely responsible for and shall pay
(i) the fees and expenses of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP in connection with ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ LLP's audit of the Audited Financial Statements and review of the
Interim Financial Statements and other services rendered by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ in
connection with the Closing Transactions (the Company acknowledges receipt of
the capital contribution from Purchaser (for a portion of such fees referenced
in Section 2.10)), and (ii) the fees and expenses of ▇▇▇▇▇▇ & ▇▇▇▇▇, L.L.P. and
Gardere & ▇▇▇▇▇, L.L.P. to the extent they were incurred in connection with the
debt financing obtained by the Company with respect to the Closing
Transactions, including the anticipated issuance in the future of certain debt
securities by the Company, (b) the Shareholders shall be solely responsible for
and shall pay the fees of Banc One Capital Corporation and the balance of the
fees and expenses of Gardere & ▇▇▇▇▇, L.L.P. and ▇▇▇▇▇▇ & ▇▇▇▇▇, L.L.P., and
(c) all out of pocket fees and expenses of Purchaser shall be paid by the
Company as contemplated by Section 9.4.
ARTICLE III.
CERTAIN TAX MATTERS
Section 3.1 Section 338 Election. The Parties shall elect to
treat the purchase of the Shares as a purchase of assets for federal Income Tax
purposes pursuant to Section 338(h)(10) of the Code and any similar provisions
under state and other Income Tax laws (collectively, the "SECTION 338
ELECTION"). For purposes of the Section 338 Election, the Parties shall
allocate the aggregate of the Purchase Price, and Company's liabilities to
Company's assets and the Non-Compete Covenant as listed in the Purchase Price
Allocation Schedule.
Section 3.2 Apportionment of Taxable Income. The Parties shall
elect to treat the Closing Date as the last day of a taxable period of Company
(a "PRE-CLOSING TAX PERIOD"). For taxable periods that end on the Closing
Date, all items of income, gain, loss, deduction, and credits other than any
such items resulting from the Section 338(h)(10) election or other Closing
Transactions shall be allocated to the periods before and after the Closing
Date by closing the books of the Company as of the Closing Date. In the case
of taxes that are payable with respect to a taxable period that begins before
the Closing Date and ends after the Closing Date, the portion of any such tax
that is allocable to the portion of the period ending on the Closing Date shall
be:
(i) in the case of taxes that are either (x) based
upon or related to income or receipts, or (y) imposed in connection with any
sale or other transfer or assignment of
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property (real or personal, tangible or intangible), deemed equal to the amount
which would be payable if the taxable year ended with the Closing Date; and
(ii) in the case of taxes imposed on a periodic basis
with respect to the assets of the Companies, or otherwise measured by the level
of any item, deemed to be the amount of such taxes for the entire period (or,
in the case of such taxes determined on an arrears basis, the amount of such
taxes for the immediately preceding period) multiplied by a fraction, the
numerator of which is the number of calendar days in the period ending on the
Closing Date and the denominator of which is the number of calendar days in the
entire period.
Shareholders shall be responsible for preparing and filing all Income
Tax reports and returns covering Company for Tax periods beginning before the
Closing Date, even if such reports and returns are not required to be filed
until after the Closing Date.
Section 3.3 Preparation and Filing of Income Tax Returns.
Shareholders shall prepare, or cause to be prepared, and file or cause to be
filed, all Income Tax reports and returns for any Pre-Closing Tax Period. When
preparing the Income Tax reports and returns of the Company for any Pre-Closing
Tax Period, Shareholders shall prepare such reports and returns in a manner
consistent with prior years and determine the income, gain, expenses, losses,
deductions, and credits of Company consistently with prior practices. With
respect to any such Income Tax report or return, Company shall provide to
Shareholders the information necessary to prepare such reports and returns no
later than 60 days after the Closing Date. Shareholders shall submit such
reports and returns to Purchaser a reasonable period before filing them with
the respective Taxing Authorities and Shareholders shall permit Purchaser to
review and comment upon such reports and returns and shall make such revisions
to such returns as are reasonably requested by Purchaser.
Section 3.4 Payment of Income and Franchise Taxes. Any taxable
income or loss of Company for Federal income tax purposes for any Pre-Closing
Tax Period (including income recognized as a result of the Section 338(h)(10)
election) shall be included in all Federal Income Tax reports and returns that
Shareholders file after the Closing Date. Shareholders shall pay the Taxes
owed with respect to such reports and returns when due. Notwithstanding any
provision of this Agreement to the contrary, Shareholders shall indemnify and
hold the Company and the Purchasers harmless for any increase in the Texas
franchise taxes payable by the Company on or before May 15, 1997 for all
privilege periods beginning on or before January 1, 1997; Company shall pay any
Texas franchise taxes payable by the Company on or after May 15, 1998 for all
periods beginning after January 1, 1997.
Section 3.5 Audit. If after the Closing any Party receives a
notice of deficiency or a proposed adjustment in connection with any audit or
other proceeding concerning any Income Tax report or return covering the
operations of company for a Pre-Closing Tax Period, such Party receiving such
item shall notify the other Parties of its receipt. So long as all liability
therefore is born by the Shareholders, the Shareholders shall have the sole and
exclusive right to settle or contest any such notice of deficiency or proposed
adjustment and to represent Company in connection with any audit or other
proceeding relating to any Income Tax reports or returns including the
operations of Company for any Pre- Closing Tax Periods. Shareholders however,
shall not settle any issue
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without the prior consent of Purchaser if such settlement would materially
adversely affect any future Income Taxes of Purchaser or Company. Purchaser
shall have the sole and exclusive right to settle or contest any notice of
deficiency or proposed adjustment, and to represent Company in connection with
any audit or other proceeding relating to any Income Tax report or return
including the operations of Company, for any Tax period ending after the
Closing Date, provided that if such report or return includes the operations of
company for a period before the Closing Date. Shareholders shall have the
right at its expense to participate in and control the conduct of such audit or
proceeding to the extent that such audit or proceeding relates to a potential
adjustment for which Shareholders would have liability; Purchaser also may
participate (but not control), at Purchaser's expense, in any such audit or
proceeding and, if Shareholders do not assume the defense of any such audit or
proceeding, Purchaser may defend the same in such manner as it may deem
appropriate, including, without limitation, settling such audit or proceeding
after giving five day's prior written notice to Shareholders setting forth the
terms and conditions of the settlement.
Section 3.6 Cooperation on Tax Matters. Purchaser, Company and
Shareholders shall cooperate fully, as and to the extent reasonably requested
by the other party, in connection with the filing of Tax returns and reports
relating to a Pre-Closing Tax Period and any audit, litigation or other
proceeding with respect to Taxes. Such cooperation shall include (x) making
employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder, and (y)
providing such powers of attorney as are reasonably requested by the other
party. During the period beginning on the Closing Date and ending on the day
immediately preceding the seventh anniversary of the Closing Date, Shareholders
and Purchaser shall provide each other with reasonable access during normal
business hours to the books and records of Shareholders and Company,
respectively, to the extent that such books and records relate to the condition
or operation of Company prior to the closing and Shareholders or Purchaser
requires such books and records to prepare Income Tax reports or returns or
respond to third party Claims, including any audits or proceedings with respect
to such reports or returns. Shareholders and Purchaser shall have the right to
make copies of such books and records at its own expense. Prior to providing
access to such books and records, Shareholders or Purchaser may redact such
information that it considers appropriate. Company agrees to give Shareholders
reasonable written notice prior to transferring, destroying or discarding any
such books and records and, if Shareholders so request, Company shall allow
Shareholders to take possession of such books and records. Any information
provided to Shareholders shall be subject to Shareholders Non-disclosure
Covenant. Shareholder shall indemnify Purchaser and Company for any Claims
arising in connection with any such access provided to Shareholders and
Purchaser shall indemnify Shareholders for any claims arising in connection
with any such access provided to Purchaser.
Section 3.7 Refunds. After the Closing, Shareholders may require
Company to apply for any Tax refunds applicable to Company for any Pre-Closing
Tax Period, provided that Shareholders reimburse Company for the cost of
applying for any such refund. Company shall immediately forward to Shareholder
any Tax refund received allocable or applicable to Company attributable to any
Pre-Closing Tax Period.
Section 3.8 Elections. From and after the date of this
Agreement, neither Purchaser nor Company shall, without the prior written
consent of Shareholders (which may, in their
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sole and absolute discretion, withhold such consent), make, or cause or permit
to be made, any tax election that would affect the Company for any Pre-Closing
Tax Period.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
Each Shareholder, severally but not jointly both as to the individual
shareholder in question and the Company hereby represents and warrants to
Purchaser that the statements made in this Article IV were true, correct, and
complete, immediately prior to the consummation of the Closing Transactions:
Section 4.1 Capacity of Shareholder. Each Shareholder is an
individual which possesses the requisite legal capacity and the right to
execute, deliver, and perform this Agreement and the Closing Documents to which
such Shareholder is a party, without obtaining any approval or giving any
notice.
Section 4.2 Organization of Company. Company is a corporation
duly incorporated, validly existing, and in good standing under the laws of the
State of Texas, and is qualified to transact business as a foreign corporation
in each jurisdiction where such qualification is required. Company has
previously delivered to Purchaser correct and complete copies of Company's
Articles of Incorporation and Bylaws.
Section 4.3 Power and Authority of Company. Company possesses
the corporate power and authority to execute, deliver, and perform this
Agreement and the Closing Documents to which Company is a party, without
obtaining any approval or giving any notice, other than the approval of its
Board of Directors, shareholder consents and the Consents, which it has
properly obtained. Company possesses the corporate power and authority to own
or lease its assets, carry on its business as presently conducted, and perform
its obligations under the Material Contracts.
Section 4.4 Execution, Delivery, and Enforceability. Each of the
Shareholders and the Company has duly executed and delivered this Agreement and
each of the Closing Documents to which it is a party, and each such agreement
constitutes a valid, legal, and binding obligation of each, enforceable against
it in accordance with its terms, subject to any Law Affecting Creditors'
Rights.
Section 4.5 Consents. Except for the approvals, consents,
filings, and notices listed in Schedule 4.5 (the "CONSENTS"), each
Shareholder's and the Company's execution, delivery, and performance of this
Agreement and the Closing Documents to which it is a party does not require
such Shareholder or Company to obtain any approval or consent from, make any
filing with, or give any notice to any Person.
Section 4.6 Conflicts. Subject to obtaining the Consents, each
Shareholder's and the Company's execution, delivery, and performance of this
Agreement and the Closing Documents to which it is a party does not directly or
indirectly (as applicable):
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(a) Documents. Breach or violate: (i) any provision of
the Articles of Incorporation or the Bylaws of Company, (ii) any resolution of
the Board of Directors, any committee of the Board of Directors, or the
shareholders of Company, (iii) any material contract to which any Shareholder
is a party or any Material Contract of the Company, or (iv) any applicable
Order; or
(b) Lien. Result in a Lien against any of the assets of
Company (or give rise to an event that with notice or lapse of time would
result in such a Lien).
Section 4.7 No Prohibitions. Each Shareholder's and the Company's
execution, delivery, and performance of this Agreement and of each of the
Closing Documents to which it is a party does not violate any material
Applicable Law, and no Lawsuit before any court or other Governmental Authority
is pending or to its knowledge threatened that could prohibit any Shareholder
or Company from consummating any of the transactions contemplated by this
Agreement or the Closing Documents to which it is a party.
Section 4.8 Compliance with Applicable Laws. Company is in
compliance with all Applicable Laws except to the extent a failure to be in
compliance could not reasonably be expected to result in a Material Adverse
Change. Within the last three years no Shareholder nor Company has received
any notice from any Governmental Authority asserting that any Shareholder or
Company has violated any material Applicable Law.
Section 4.9 Compliance with Organizational Documents. Company is
in compliance with all provisions of its Articles of Incorporation and Bylaws.
Section 4.10 Corporate Records. The minute books of Company
accurately reflect all material actions taken by Company's Board of Directors,
committees of its Board of Directors, and shareholders in their capacity as
shareholders of the Company. With respect to all transfers of Company's
capital stock prior to the date hereof, all applicable stock transfer Taxes
payable have been paid and all required stock transfer stamps have been affixed
to the transferred certificates. Company possesses its minute books and stock
transfer books, and has previously delivered to Company correct and complete
copies of them.
Section 4.11 Capitalization. Company is authorized to issue 1,000
shares of Common Stock, of which 372 shares are issued and outstanding.
Schedule 4.11 lists each Person owning (of record and to the Company's and each
Shareholder's knowledge, beneficially) any shares of Common Stock and the
number of shares of Common Stock owned by such Person. Company does not hold
any shares of its capital stock as treasury shares. There are no contractual
redemption rights with respect to any shares of capital stock of Company.
Section 4.12 Shares. All issued and outstanding shares of Common
Stock have been validly authorized and issued, are fully paid and
nonassessable, and were not issued in breach or violation of any Applicable
Law, Contract, or contractual or statutory preemptive rights. No restrictions
exist upon the transfer of the Redeemed Shares and the certificates
representing the
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Redeemed Shares do not contain any legends indicating the existence of any such
restrictions, other than restrictions under applicable securities laws.
Section 4.13 Ownership of the Shares. Company does not have any
outstanding securities (including any options, subscriptions, warrants, calls,
rights, commitments, or other agreements obligating Company to issue or sell
any shares of Common Stock or any securities convertible into or exercisable
for shares of Common Stock), other than as listed on Schedule 4.11. All shares
of Common Stock transferred to the Company or Purchaser pursuant hereto have
been transferred free and clear of any Lien arising by, through or under the
Shareholders other than restrictions on transfer arising under the
Shareholders' Agreement and applicable securities laws.
Section 4.14 No Derivative Securities. Company does not have:
(a) any outstanding Derivative Securities, or (b) any voting trust,
arrangement, or Contract concerning Company's securities to which any
Shareholder or Company is a party or bound. Neither Company nor any
Shareholder is aware of any voting trust, or other Contract concerning
Company's securities to which any other Person is a party or bound.
Section 4.15 No Subsidiaries or Joint Ventures. Other than as set
forth on Schedule 4.15, Company does not own or hold, directly or indirectly,
any interest in any Person, including any equity securities or partnership
interests. Other than as set forth on Schedule 4.15, Company is not under any
obligation to make any advance, contribution, investment, or loan to any
Person.
Section 4.16 Offices of Company. Schedule 4.16 lists the location
of the chief executive office and each other office, place of business, or
facility of Company.
Section 4.17 Audited Financial Statements. Attached as Schedule
4.17 is the balance sheet of Company as of April 30, 1997 (the "MOST RECENT
AUDITED BALANCE SHEET"), the balance sheets of Company as of April 30, 1996,
and April 30, 1995, the related statements of operations, cash flows, and
shareholder's equity for each of the fiscal years ended on such dates and the
notes to such financial statements (collectively with the Most Recent Audited
Balance Sheet, the "AUDITED FINANCIAL STATEMENTS") The Audited Financial
Statements have been audited by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, whose report is attached
to such financial statements. The Audited Financial Statements have been
prepared in accordance with GAAP applied on a consistent basis, except for any
changes disclosed in such financial statements. The balance sheets contained
in the Audited Financial Statements present fairly, in all material respects,
the financial condition of Company as of their dates. The statements of
operations and cash flows contained in the Audited Financial Statements present
fairly, in all material respects, the results of operations and cash flows of
Company for the periods presented.
Section 4.18 Interim Financial Statements. Attached as Schedule
4.18 is the balance sheet of Company as of August 31, 1997 (the "INTERIM
BALANCE SHEET"), the related statements of operations, cash flows, and
shareholder's equity for the 4 month period ended August 31, 1997
(collectively, the "INTERIM FINANCIAL STATEMENTS"). The Interim Financial
Statements have been reviewed by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP. The Interim Financial
Statements have been prepared in accordance with GAAP applied on a consistent
basis, except for any changes
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disclosed in such financial statements and the absence of notes to such
statements. The Interim Balance Sheet presents fairly, in all materials
respects, the financial condition of Company as of its date. The statements of
operations and cash flows contained in the Interim Financial Statements present
fairly, in all material respects, the results of operations and cash flows of
Company for the period presented. The Interim Financial Statements reflect all
adjustments necessary for a fair presentation, which adjustments consist only
of normal recurring adjustments and include estimated provisions for year-end
adjustments, other than the failure to reflect a pension termination liability
of approximately $140,000 which under FASB #87 and FASB #88 is not required to
be recorded at present (the "UNREFLECTED PENSION TERMINATION LIABILITY").
Section 4.19 Accounting. Other than as set forth on Schedule
4.19, Company has not changed any of its accounting or Tax reporting
principles, policies, or procedures during the five fiscal years immediately
preceding the Closing Date. Company has prepared the Audited Financial
Statements and the Interim Financial Statements (collectively, the "FINANCIAL
STATEMENTS") from its books and records.
Section 4.20 Absence of Certain Changes. Other than as set forth
on Schedule 4.20, since the date of the Interim Balance Sheet, Company has not:
(a) engaged in any transaction outside Company's ordinary course of business
consistent with past practices except for the transfer of Excluded Assets, (b)
suffered any Material Adverse Change, or (c) suffered any material damage to
any of its significant assets which will not be covered by insurance.
Section 4.21 Management Letters. Schedule 4.21 lists each
management letter or other report concerning Company that its accountants have
issued during the three fiscal years immediately preceding the date hereof and
any response to any such letter or report from Company or its Representatives.
Section 4.22 Bank Accounts. Schedule 4.22 lists each bank, money
market, mutual fund, or similar account that Company maintains at any financial
institution or otherwise, including any lock box arrangements or safe deposit
boxes. Such schedule also lists all individuals authorized to draw upon such
accounts or have access to such safe deposit boxes.
Section 4.23 Accounts Receivable. With the exception of the
receivables attributable to the AA Fees, the accounts and notes receivable
reflected on Interim Balance Sheet and all accounts and notes receivable of
Company arising after the date of such balance sheet, other than accounts and
notes receivable collected since then in the ordinary course of Company's
business consistent with its past practices, arose from bona fide transactions
in the ordinary course of Company's business consistent with past practices.
Except as disclosed on Schedule 4.23, no debtor with respect to the Company's
accounts or notes receivable has asserted any defense, counter claim or right
of setoff that has not been reflected on the Estimated Closing Balance Sheet.
Section 4.24 Inventory. Company owns all of the inventory
reflected on the Interim Balance Sheet and all inventory that it has acquired
or created after the date of such balance sheet, other than inventory disposed
of since the date of the Interim Balance Sheet in the ordinary course of
Company's business consistent with past practices. Company's inventory
reflected on the Estimated
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Closing Balance Sheet is adequate for the conduct of Company's business and
contains no obsolete, sub-standard, or unsalable items. The inventory level of
Company is not in excess of the normal operating requirements of Company's
business. Company does not hold any other Person's inventory on consignment or
permit any other Person to hold any of Company's inventory on consignment.
Section 4.25 Condition of Assets. All equipment which is
reasonably necessary for the conduct of the Company's business is in good
operating condition subject to personal wear and tear. Company's assets and
facilities are sufficient to operate Company at its historic capacity.
Section 4.26 Real Property. Schedule 4.26 lists each parcel of
real property that Company owns or leases (the "REAL PROPERTY"). Such schedule
also sets forth the legal description of each parcel of Real Property owned by
the Company.
Section 4.27 Real Property Exceptions.
(a) Good and Indefeasible Title. Company has good and
indefeasible title in fee simple to the Real Property reflected as being owned
by it on Schedule 4.26 subject to the covenants, easements, encroachments,
restrictive covenants, rights-of-way, servitudes, or other interests or rights
which burden such Real Property which do not materially effect the current use
of such Real Property.
(b) No Condemnation. No condemnation, eminent domain, or
similar proceeding is pending or to the knowledge of any Shareholder threatened
with respect to any Real Property.
(c) Public Improvements. To each Shareholder's
knowledge, no public improvements are proposed, in progress, or completed for
which Company could be assessed after the date hereof.
(d) Utilities. Each parcel of Real Property other than
the Real Property in Kennedale is connected to electric, gas, sewage, storm
drain, telephone, and water facilities. Such connections are adequate for the
current use of such parcel.
(e) Roads. Each parcel of Real Property has adequate
access to and from public highways, streets, and roads. To each Shareholder's
knowledge, no proceeding is pending or threatened that could limit or terminate
such access.
(f) Parties in Possession. To each Shareholder's
knowledge, there are no Persons in possession of any portion of any Real
Property as lessees, tenants at sufferance, or trespassers. To each
Shareholder's knowledge, no Person claims any right in any portion of any Real
Property by adverse possession.
(g) Surveys. Company has previously delivered to Company
copies of each survey or plat in its possession relating to any of the Real
Property.
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(h) Environmentally Sensitive Areas. To each
Shareholder's knowledge, no Real Property is located within any conservation,
preservation, or similar type area.
(i) No Encroachments. To each Shareholder's knowledge,
no building, fixture, or other improvement on any parcel of Real Property
encroaches on any adjacent property. To each Shareholder's knowledge, no
building, fixture, or other improvement on any adjacent property encroaches on
any parcel of Real Property.
Section 4.28 Environmental Matters.
(a) Compliance with Environmental Laws. Except as
reflected in the Environmental Report, the Company is in compliance in all
material respects with all applicable Environmental Laws. No litigation,
arbitration or other proceeding by or before any Governmental Authority is
pending, or to any Shareholder's knowledge, threatened against the Company,
alleging that the Company is in violation in any material respect of any
applicable Environmental Law, or which seeks to impose any liability or
obligation on the Company for any release or discharge of Hazardous Materials
into the environment including any remediation or redemption obligation.
(b) No Hazardous Materials on the Real Property. Except
as reflected in the Environmental Report, Company has not engaged in or
permitted any activity upon the Real Property involving the discharge,
disposal, dumping, emission, escape, generation, handling, leaching, leaking,
manufacture, refining, release, spilling, treatment of any material quantities
of any Hazardous Materials on, under, in, or about the Real Property or
transported any Hazardous Materials to, from, or across the Real Property
except in material compliance with all applicable environmental laws. No
Hazardous Materials currently are constructed, deposited, produced, stored, or
otherwise located on, under, in, or about the Real Property except in material
compliance with all applicable Environmental Laws.
(c) No Storage Tanks. Except as reflected in the
Environmental Report, and except as disclosed on Schedule 4.28(c) to the
knowledge of each Shareholder, no underground improvement, including any
storage, sump, or treatment tank or any gas, oil, or water well is or ever has
been located on the Real Property.
(d) Previously Owned Real Property. To the knowledge of
Shareholders and the Company, representations and warranties concerning the
Real Property set forth in this section are also correct and complete with
respect to all real property that Company previously owned or leased, through
the time of the Company's ownership or lease.
Section 4.29 Equipment. Schedule 4.29 lists each significant
piece of equipment and machinery that Company owns, leases, or otherwise uses
in its business, other than the Vehicles.
Section 4.30 Vehicles. Schedule 4.30 lists each automobile,
trailer, truck, and other vehicle that Company owns or leases (the "VEHICLES").
Such listing include any applicable vehicle identification numbers. Except as
reflected on Schedule 4.30, Company owns each Vehicle and
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holds the certificate of title to it (with the exception of certain vehicles
that are not subject to the Certificate of Title Act).
Section 4.31 Capital Expenditure Budget. Attached as Schedule
4.31 is Company's proposed capital expenditure budget for the year ending April
30, 1998. Such budget reflects all capital expenditures proposed by the
Shareholders for Company during such year.
Section 4.32 Material Contracts.
(a) Each Material Contract is described on Schedule 4.32.
(b) Descriptions. No Material Contract has been amended
or supplemented in any way except as described on Schedule 4.32.
(c) Valid and Binding. Each Material Contract is valid,
binding obligation of Company, and in full force and effect.
(d) No Assignment. The Company has not assigned its
rights under any Material Contract, and to each Shareholder's knowledge, no
other party to any Material Contract has assigned any of its rights or
delegated any of its duties under such Material Contract.
(e) No Breach. No material breach by Company or to any
Shareholder's knowledge, by any other party exists under any Material Contract
with the exception of breaches giving rise to the Pending Contract Disputes.
As used herein, the Pending Contract Disputes mean the following matters which
have been disclosed to Purchaser:
(i) [Intentionally deleted].
(ii) As more fully discussed in a letter from ▇▇▇▇
▇▇▇▇▇ to ▇▇▇▇▇▇ & ▇▇▇▇▇, L.L.P., dated October 29, 1997, Ronsome Company has
failed to timely fulfill a purchase order for certain equipment to be provided
to the Company, and the Company is withholding certain payments to Ronsome
Company pending resolution of these issues; and
(iii) pursuant to a letter dated October 28, 1997
from ▇▇▇▇ ▇'▇▇▇▇▇▇▇▇, ▇▇. of PrimeCo Personal Communications to ▇▇▇ ▇▇▇▇▇, a
copy of which has been provided to Purchaser, PrimeCo has asserted certain
actual or potential deficiencies related to the Company's products and
services.
No party to any Material Contract has notified any Shareholder that such party
intends to breach or terminate such Contract or believes that Company has
breached such Contract.
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(f) No Renegotiations. Except for (i) the General Supply
Contract dated November 1, 1996 by and between AT&T Wireless Services, Inc. and
the Company (the "AT&T CONTRACT"), and (ii) an Agreement between the Company
and ▇▇▇ Communications PCS, L.P. (the "Cox Contract"), each of which are
currently being renegotiated, no renegotiation of any Material Contract is
pending.
Section 4.33 Outstanding Offers. Except with respect to offers
made in connection with the renegotiation of the AT&T Contract and the Cox
Contract, no outstanding contractual offer by or to Company exists that would
result in a Material Contract that Company or any Shareholder would be required
to disclose in the schedules to this Agreement if accepted on the date hereof.
Section 4.34 Permits. The Company holds all Permits required for
the operation of its business as currently conducted to the extent a failure to
hold such Permits could reasonably be expected to cause a Material Adverse
Change. The Company is in compliance with all material terms of such Permits.
Section 4.35 Intellectual Property. Schedule 4.35 lists each
registered Copyright, Patent, registered Trademark, and any application for
registration with respect to any such item owned or used by Company other than
the Computer Software Licenses (collectively, the "INTELLECTUAL PROPERTY").
With respect to each item of Intellectual Property, such schedule specifies any
Material Contract concerning such item, including any Material Contract which
is a license agreement under which Company is a licensor or licensee.
Section 4.36 Intellectual Property Exceptions.
(a) Intellectual Property Owned. Company owns all right,
title, and interest in and to the Intellectual Property or a valid license to
use such Intellectual Property, free and clear of any Lien. With the exception
of payments owed to PAL Cellular Group, Inc. under that certain Palm Tree
Monopole Antenna Structure Project Letter of Understanding and Agreement for a
Joint Development Marketing Arrangement dated as of February 23/24, 1994, by
and between the Company and PAL Cellular Group, Inc. the Company has no
obligation to make any license, royalty, or other payment with respect to its
ownership, licensing and use of such Intellectual Property.
(b) Registrations. Company has registered the Copyrights
reflected as on Schedule 4.36(b) with the United States Copyright Office and
all of the Patents and Trademarks reflected as being registered or issued on
Schedule 4.36(b) with the United States Patent and Trademark Office or the
appropriate foreign governmental authorities.
(c) Valid and Enforceable. Each item of Intellectual
Property is valid, enforceable, and not subject to any maintenance fees or
other assessments, fees, or Taxes due within one year after the date hereof.
No registration of any item of Intellectual Property is set to expire within
one year after the date hereof other than foreign patents.
(d) No Conflicts. To the knowledge of each Shareholder:
(i) with the exception of patent application 08/202,444 filed February 28, 1994
with respect to "Tree Styled
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Monopole Tower," Company has the exclusive right to use the Intellectual
Property, (ii) such use does not violate or infringe upon the proprietary
rights of any other Person, and (iii) Company has not infringed upon any such
proprietary rights. Company has never been involved in an interference,
opposition, reissue, or reexamination proceeding with respect to any of its
Patents except patent application 08/202,444 filed February 28, 1994 styled
"TREE STYLED MONOPOLE TOWER". The Patent Office Examiner has suggested that an
interference be initiated with respect to Patent No. 5,611,176.
(e) No Claims. To each Shareholder's knowledge, no
litigation or arbitration proceeding is pending or threatened by or before any
Governmental Authority involving any Intellectual Property, including any claim
by Company that another Person's Patent interferes with a Patent of Company
except Patent Application 08/202,444. The Patent Office Examiner has suggested
that an interference be initiated with respect to Patent No. 5,611,176.
(f) Public Domain. To Shareholder's knowledge no part of
any Intellectual Property is in the public domain or has reverted to the public
domain.
(g) Licenses. Any license to use any Intellectual
Property under which Company is the licensee is a perpetual license.
Section 4.37 Computer Software Licenses. Schedule 4.37 lists each
computer software program that Company has licensed other than those that are
generally available on a retail non-exclusive basis (the "COMPUTER SOFTWARE
LICENSES"). Such licenses are perpetual, unrestricted, and not subject to any
future payment or royalty.
Section 4.38 Appraisals. To each Shareholder's knowledge, no
appraisals have been made with respect to any real or personal property of
Company during the three fiscal years immediately preceding the date hereof
other than Tax appraisals.
Section 4.39 Adequacy of Company's Assets. Subject to the
Permitted Liens, Company owns all the real and personal property used in
Company's business or possesses a valid leasehold interest in, or license to
use such property, including the Assets reflected on the Interim Balance Sheet,
except for the Excluded Assets and assets that Company has disposed of since
the date of that balance sheet in the ordinary course of its business
consistent with past practices.
Section 4.40 Permitted Liens. Schedule 4.40 lists each Lien on
Company's assets (the PERMITTED LIENS ").
Section 4.41 Related Party Transactions. Since the date of the
Interim Balance Sheet, Company has not engaged in any transaction with any of
its Affiliates, Representatives, or shareholders, accrued any receivable or
received any payment from any of them, or accrued any payable or made any
payment to any of them, except (a) pursuant to Material Contracts, (b) for the
payment of directors' fees, expense reimbursements, salaries, and wages and
other benefits in the ordinary course of business or consistent with past
practices, and (c) the transfer of the Excluded Assets. None of Company's
Affiliates, or shareholders directly or indirectly compete against Company;
provided, that, Purchaser acknowledges the relationship of ▇▇▇ ▇▇▇▇▇ to Galaxy
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Holdings, L.L.C. Contracts between Company and its Affiliates are designated
as "Related Party Contracts" on Schedule 4.32 hereto.
Section 4.42 Litigation and Claims. Schedule 4.42 lists (a) each
litigation or arbitration proceeding that is pending or to each Shareholder's
knowledge, threatened against the Company, (b) to each Shareholder's
knowledge, each litigation or arbitration proceeding that is pending or
threatened concerning (i) any current or former Representative of Company with
respect to such Representative's service to Company, (ii) any Material
Contract, or (iii) the execution, delivery, or performance of this Agreement
(collectively, the "CURRENT LAWSUITS").
Section 4.43 Litigation History. Schedule 4.43 lists and
describes each litigation or arbitration proceeding actually filed against
Company, or to each Shareholder's knowledge, against any current or former
Representative of Company with respect to such Representative's service to
Company during the three fiscal years immediately preceding the date hereof
other than the Current Lawsuits.
Section 4.44 Orders. Company and, to each Shareholder's
knowledge, each Representative of the Company is in compliance in all material
respects with each Order specifically naming the Company and expressly binding
on the Company or any of its assets.
Section 4.45 Audit Letter Responses. Schedule 4.45 lists each
lawyer response to Company's auditors' request for information concerning legal
proceedings that such auditors received in connection with their audit of the
most recently completed year in the Audited Financial Statements.
Section 4.46 Investigations. Schedule 4.46 lists and describes
each pending or to each Shareholder's knowledge threatened investigation by any
Governmental Authority, including any investigation concerning antitrust,
environmental, securities, and other regulatory matters.
Section 4.47 Insurance Policies. Schedule 4.47 lists each
insurance policy (excluding title insurance policies) held by the Company as a
named insured or loss payee).
Section 4.48 Insurance Policy Exceptions.
(a) Applications. To each Shareholder's knowledge no
material inaccuracy exists in any application with respect to any Insurance
Policy.
(b) Discontinuance of Coverage. During the three fiscal
years immediately preceding the date hereof, Company has not received any
notice from any insurance carrier of any intention to discontinue any insurance
policy, discontinue or decrease the insurance coverage under any insurance
policy, or require any alterations or improvements to any of Company's
facilities or properties.
Section 4.49 Product Warranties. Except with respect to warranty
obligations contained in certain customer agreements disclosed on Schedule 4.32
hereto ("Negotiated Warranties"), the Company has not provided an express
warranty with a term of more than one year.
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Schedule 4.49 sets forth the form of each express warranty (other than
Negotiated Warranties) with respect to the Company's products and any other
products for which Company is responsible issued by the Company during the one
year period ending on the Closing Date.
Section 4.50 Taxes. Schedule 4.50 lists each Federal and material
State Tax report and return in connection with Company's assets, business, and
employees that Company filed during the three fiscal years immediately
preceding the date hereof or such earlier period for which the statute of
limitations has not yet expired. Such schedule lists each Income Tax report or
return that shows a net operating loss ("NOL") that Company may still carry
forward.
Section 4.51 Tax Representations. Except as set forth in Schedule
4.51:
(a) Consolidated Income Tax Returns. Company is not, and
never has been, included in a combined, consolidated, and unitary Income Tax
report and return.
(b) Tax Returns and Payments. Except certain state Tax
returns or reports relating to Taxes which are not material in amount, Company
has timely filed all Tax reports and returns in connection with Company's
assets, business, and employees, and Company has timely paid and discharged all
Tax obligations shown on such reports and returns, including in all material
respects any withholding obligations. Such Tax reports and returns are
accurate and complete in all material respects and correctly compute in all
material respects the Tax obligation to which each such report or return
pertains.
(c) No Notices. Company has not received any
determination letter, revenue agent report, or other notice of any proposed or
outstanding Tax deficiency against or allocable to Company for which the
applicable statute of limitations has not expired. Neither any Shareholder,
the Company, nor any other Person has executed any extension agreement or
waiver of any statute of limitations with respect to the assessment or
collection of any Tax against Company.
(d) No Audits. Neither the Internal Revenue Service
("IRS") nor any other taxing authority (collectively with the IRS, the "TAXING
AUTHORITIES") has contacted Company in writing concerning a future audit or
examination of any Tax reports and returns that include Company except with
respect to the fiscal year ended April 30, 1995. No such audit or examination
is in process or has occurred with respect to any period for which the statute
of limitations has not expired except with respect to the fiscal year ended
April 30, 1995.
(e) No Tax Liens. No Tax liens exist with respect to any
assets of Company, other than statutory Tax liens, including liens for taxes
not yet due and payable.
(f) No Agreements. No Tax ruling specifically applicable
to Company from any Taxing Authority or closing agreement with any Taxing
Authority has a continuing effect upon Company. No such Tax ruling or closing
agreement is pending.
(g) NOL Carry forwards. Company has no NOL carry
forwards.
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(h) No Golden Parachutes. Company does not have any
Contract that could require Company to make any "excess parachute payment" as
defined under Section 280G of the Code.
(i) No Partnerships. Company is not a member of any
joint venture, partnership, or other arrangement or Contract that is treated as
a partnership for Income Tax purposes.
(j) No Property Treated as Owned by Another Person. No
property of Company is property that Company is required to treat as owned by
another Person pursuant to Section 168(f)(8) of the Code or any other
Applicable Law.
(k) No Tax Exempt Use Property. No property of Company
is tax exempt use property" as defined under Section 168(h)(1) of the Code.
(l) No Tax Exempt Bond Financed Property. No property of
Company is "TAX EXEMPT BOND FINANCED PROPERTY" under Section 168(g) of the
Code.
(m) No Foreign Shareholder. No Shareholder is a foreign
person" under Sections 1445 and 7701 of the Code.
(n) Subchapter S Election. The Company timely filed on
December 23, 1986, a valid election to be treated as an S corporation in
accordance with the provisions of Section 1362(a) of the Code as in effect on
such filing date, effective for the Company's taxable year beginning May 1,
1987 and has qualified and continues to qualify as an S corporation for all
years and periods thereafter up to the Closing Date.
(o) Certain Transactions. For purposes of Section
1374(d)(8) of the Code, the Company has not during the ten-year period ending
with the Closing Date, acquired assets in a transaction in which the Company's
Tax basis for the acquired assets was determined, in whole or in part, by
reference to the Tax basis of the acquired assets (or any other property) in
the hands of a corporation taxed as a C corporation under the Code.
Section 4.52 Directors and Officers. Schedule 4.52 lists each
director, officer, and Key Employee of Company on the date hereof. No such
individual other than ▇▇▇▇ Sales, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ De La
▇▇▇▇ and no other employees other than ▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇ have an
employment agreement with Company. Each such officer and Key Employee is an
employee at will other than ▇▇▇▇ Sales, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇
De La ▇▇▇▇.
Section 4.53 Employees. Schedule 4.53 lists for each Key Employee
of Company on the date hereof, such employee's job title, current aggregate
annual compensation along with the components of such compensation, and other
material benefits, including severance benefits payable
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upon termination other than benefits provided to all full time employees of the
Company and benefits provided by Material Contracts.
Section 4.54 Collective Bargaining Agreements. There is no
collective bargaining agreement or other labor union Contract binding on the
Company applicable to any employee of Company (the "COLLECTIVE BARGAINING
AGREEMENTS").
Section 4.55 Labor Relations Exceptions.
(a) No Other Agreements. No collective bargaining
agreement or other labor union Contract has been requested by any employee or
group of employees of Company. No discussions or negotiations with the
principal executive officers of the Company with respect to any such agreement
or Contract have occurred.
(b) Labor Unions. To the knowledge of the Shareholders,
no labor associations, organizations, or unions have been certified to
represent any employee of Company.
(c) No Organizing Activities. To the knowledge of the
Shareholders, there have not been any union organizing activities, petitions,
or proceedings with respect to any labor association, organization, or union
becoming the exclusive bargaining agent for any group of employees of Company.
To the knowledge of the Shareholders, no proceeding is pending or threatened
before the National Labor Relations Board or other Governmental Authority
concerning any labor association, organization, or union seeking to represent
any employees of Company.
(d) No Strikes. No lockouts, pickets, sickouts, strikes,
work slowdowns, or work stoppages are pending or to the knowledge of the
Shareholders threatened with respect to any employees of Company. No such
matters have occurred during the five fiscal years immediately preceding the
date hereof.
(e) WARN Act. Company has not taken any action that has
resulted or may result in a plant closing" or "mass layoff" within the meaning
of the Worker Adjustment and Retraining Notification Act of ▇▇▇▇ (▇▇▇ "▇▇▇▇
▇▇▇").
Section 4.56 Employee Benefit Plans. Schedule 4.56 lists each
Plan of the Company covering employees of the Company or contributed to by the
Company, or with respect to which Company has any liability (the "EMPLOYEE
BENEFIT PLANS"). Except for the Employee Benefit Plans, to the knowledge of
each Shareholder, the employees of Company have no expectation or right with
respect to any Plan under any Applicable Law, arrangement, Contract, past
custom, or otherwise, including any past participation in any Plans of the
Company except under employment contracts.
Section 4.57 Employee Benefit Plan Exceptions.
(a) Delivery of Documents. Company has delivered to
Company correct and complete copies of: (i) each Employee Benefit Plan,
including all amendments to such Plan,
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(ii) each trust agreement, annuity or insurance Contract, or other funding
instrument pertaining to each Employee Benefit Plan, (iii) the most recent
determination and/or opinion letter issued by the IRS with respect to each
Employee Benefit Plan that is intended to be tax-qualified and a copy of any
pending applications for such determination and/or opinion letters, (iv) the
five most recent actuarial valuation reports for each Employee Benefit Plan for
which an actuarial valuation report exists, and (v) the five most recent annual
reports (IRS Form 5500 Series) for each Employee Benefit Plan, including all
schedules to such reports, and plan audits filed with respect to such reports.
(b) Amendments. Company can amend or terminate each
Employee Benefit Plan at any time without the approval of any Person, without
advance notice except as required by Applicable Law, including any notice
required under ERISA Section 204(h), and without any Material liability other
than with respect to the benefits accrued prior to such amendment or
termination or as required by Applicable Law.
(c) Joint and Several Liability. With respect to each
Employee Benefit Plan, no event has occurred and, to the knowledge of each
Shareholder, no condition exists that after the Closing could subject Company
or Purchaser, directly or indirectly, to any Material liability under Code
Sections 412, 4971, 4975, or 4980B or ERISA Sections 409 or 502 or Parts 6 or 7
of Title I of ERISA, including liability under any indemnification agreement or
commitment.
(d) Claims for Benefits. All benefits due under each
Employee Benefit Plan have been timely paid (except for amounts due former
participants whose whereabouts are unknown to the Company) and there is no
Claim or Lawsuit pending or, to the knowledge of each Shareholder threatened
against any Employee Benefit Plan or the fiduciaries of any such Plan, other
than routine uncontested Claims for benefits.
(e) Compliance with Plan and Applicable Law. Each
Employee Benefit Plan has been administered and documented in compliance in all
material respects with such Plan's terms and Applicable Law. Each Employee
Benefit Plan and any related trust agreement, annuity or insurance Contract, or
other funding instrument has complied in both form and substance in all
material respects with such Plan's terms and Applicable Law, including the Code
and ERISA. The FWT, Inc. Defined Benefit Pension Plan and Trust has been
terminated effective April 30, 1997 in a standard termination under ERISA and
all filings and notices required in connection with such termination have been
timely and properly made.
(f) Contributions. All contributions and payments to or
with respect to each Employee Benefit Plan have been timely made and Company
has recorded adequate reserves (other than an amount equal to the Unreflected
Pension Plan Termination Liability) to satisfy contributions and payments that
have not been made because they are not yet due under the terms of such
Employee Benefit Plan and Applicable Law. All contributions made or accrued
with respect to each Employee Benefit Plan are deductible for Income Tax
purposes.
(g) No Funding Deficiency. No ERISA Pension Plan has
incurred any "ACCUMULATED FUNDING DEFICIENCY" or "WAIVED FUNDING DEFICIENCY"
within the meaning of Section 302 of ERISA or Section 412 of the Code and
Company has never sought to obtain any variance
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from the minimum funding standards under Section 412(d) of the Code. The
funding method used in connection with each ERISA Pension Plan meets the
requirements of ERISA and the Code. The actuarial assumptions used in
connection with each ERISA Pension Plan are reasonable given the experience of
such Plan. The FWT, Inc. Defined Benefit Pension Plan and Trust are not
underfunded by more than $140,000 on a plan termination basis for purposes of
Title IV of ERISA. Aside from any such underfunding, the Company has no other
material liability under Title IV of ERISA or under Section 302 of ERISA.
(h) No Change in Control Triggers. No Employee Benefit
Plan provides for any accelerated payments, deemed satisfaction of goals or
conditions, new or increased benefits, or vesting upon a change in control of
Company or any of its Affiliates or any plant closing.
(i) No Benefits Increases. No obligation of Company
exists to increase any benefits under any Employee Benefit Plan or to adopt any
new Plan.
(j) No Multi-Employer. Company does not participate in
any "multiemployer plan" as defined in Section 3(37) of ERISA. Company has not
had any contribution obligation with respect to any such plan during the six
fiscal years immediately preceding the date hereof.
(k) No Audits or Prohibited Transactions. No audit or
investigation by any Governmental Authority is pending or, to Shareholder's
knowledge, threatened regarding any Employee Benefit Plan. To Shareholder's
knowledge, no Person has breached any fiduciary duty or engaged in any
prohibited transaction within the meaning of Section 406 of ERISA or Section
4975 of the Code with respect to any Employee Benefit Plan.
(l) No Unfunded Benefits. No Employee Benefit Plan has
any unfunded benefits that are not fully reflected in the Most Recent Audited
Balance Sheet other than the Unreflected Pension Termination Liability.
(m) No Investment in Company Assets. No assets of any
Employee Benefit Plan have been invested in any securities of Company.
(n) Tax-Qualified Plans. Each Employee Benefit Plan that
is intended to be tax-qualified under Section 401(a) of the Internal Revenue
Code of 1986, as amended, has received one or more up to date IRS determination
letters (covering, inter alia, the amendments required by the Tax Reform Act of
1986) stating that it is a tax-qualified Plan and to the knowledge of each
Shareholder on the date hereof no facts exist that could reasonably be expected
to adversely affect the tax-qualified status of any such plan. To the
knowledge of each Shareholder, no assets or earnings of any such Plan are
subject to Tax on unrelated business taxable income.
Section 4.58 Distributors. Schedule 4.58 lists all of Company's
Distributors on the date hereof and all distributorship agreements between
Company and such distributors as of the date hereof. No such Distributor
accounts for sales of Company's products and services in an amount in excess of
5% of Company's aggregate revenue during the most recently completed year
reflected
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in the Audited Financial Statements. No such Distributor has indicated to
Company that such Distributor intends to terminate its arrangement with Company
or distribute Company's products and services at a level below such
Distributor's past level of distribution.
Section 4.59 Suppliers. Schedule 4.59 lists Company's ten largest
suppliers during the most recently completed year reflected in the Audited
Financial Statements and the estimated percentage of Company's aggregate
product costs during such year that Company purchased from each such supplier.
Section 4.60 Customers. Schedule 4.60 lists Company's ten largest
customers for the most recently completed year reflected in the Audited
Financial Statements. Schedule 4.60 also lists the estimated percentage of
Company's aggregate revenue during such year derived from sales to each such
customer.
Section 4.61 Business Relationships. No Shareholder has any
reason to believe that the transaction contemplated by this Agreement will
adversely affect Company's relationships with its customers, Distributors,
Representatives, suppliers, or other Persons having business relationships with
Company.
Section 4.62 Predecessors. There are no predecessors of Company.
Section 4.63 Absence of Unethical Business Practices. During the
period three (3) years, neither Company nor any of its Affiliates has directly
or indirectly given or agreed to give any thing of value to any government
employee or other Person who was or is in a possible position to help or hinder
Company that could reasonably be expected to subject any Person to damages or
penalties in a civil or criminal proceeding.
Section 4.64 No Broker. Neither any Shareholder nor Company has
any obligation or liability to any broker, finder, or other Person for any
broker or similar services with respect to the transactions contemplated hereby
other than Banc One Capital Corporation.
Section 4.65 Disclaimer of Warranties. Except for the
representation and warranties contained in this Article IV and contained in the
other Closing Documents, neither the Company nor the Shareholders have made,
and each hereby expressly disclaims any representations or warranties, express
or implied, of any type under any of the Closing Documents or in connection
with the Closing Transactions regarding any Shareholder or the Company, its
assets, financial condition, operations, prospects or business.
Section 4.66 Operation of Company Since Date of Interim
Financials. Since the date of the Interim Financials, the Company has:
(i) not taken any action or intentionally failed
to take any action that could reasonably be expected to materially and
adversely affect the Company's business and the goodwill of its customers,
distributors, outside representatives, representatives, subcontractors,
suppliers, and any other person having business relations with it;
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(ii) paid all liabilities and obligations owed by
Company consistent with its prior practices;
(iii) filed all required tax reports and returns
and timely pay all taxes owed with respect to such reports and returns;
(iv) not amended Company's Articles of
Incorporation or Bylaws;
(v) not merged, reorganized, restructured, sold
substantially all of its assets, entered into any Contract involving any other
form of business combination or share exchange, dissolved, liquidated, or wound
up;
(vi) not issued, purchased, redeemed, or otherwise
effected any transactions with respect to any securities of Company, or any
right to acquire any securities of Company except for the transfer of the
Excluded Assets;
(vii) not declared, issued, made, or paid any
dividend or other distribution of assets, or combined, distributed,
reclassified, or split any shares of Company's capital stock except for the
transfer of the Excluded Assets;
(viii) not leased, purchased, sold, transferred, or
otherwise acquired or disposed of any assets, other than in the ordinary course
of business consistent with past practices except for the transfer of the
Excluded Assets;
(ix) not made or obligated Company to make capital
expenditures except in the ordinary course of business;
(x) not compromised, released, or waived any
claims or rights of value of Company except in the ordinary course of business
of the Company consistent with past practice or permit any such claim or right
to expire or lapse;
(xi) not assumed, created, guaranteed, or incurred
any indebtedness, whether absolute or contingent, other than indebtedness
incurred in the ordinary course of Company's business consistent with past
practices;
(xii) not accelerated or delayed the collection of
Company's accounts receivable, the payment of its accounts payable, the
purchase or receipt of its supplies, or the delivery or sale of its products or
services outside the ordinary course of Company's business consistent with past
practices;
(xiii) not increased or decreased the prices that
Company charges for its products and services, grant credit to any customer or
distributor on terms more favorable than the terms on which Company has
previously extended credit to such customer or distributor in the past, or
entered into a distribution or similar arrangement with any new distributor;
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(xiv) not filed any lawsuit or settled any material
lawsuit to which Company is a party;
(xv) not increased the compensation or benefits
payable to any person under any arrangement, contract, employee benefit plan,
or other plan, or pay any bonus except in the ordinary course of business and
consistent with past practices;
(xvi) not taken any action intended to create any
expectation on the part of Company's Representatives with respect to increased
compensation, increased benefits under the employee benefit plans, or new
plans; or
(xvii) not made, changed, or forgiven any loans
between Company and any of its Affiliates, representatives, or shareholders,
except as reflected in Section 4.67.
Section 4.67 Related Party Accounts. Company has paid to each
Shareholder, all amounts that Company owes to such Shareholder except payments
of salary and benefits payable in accordance with ordinary payroll practices of
the Company. Each Shareholder has paid to Company any amounts that such
Shareholder owes to Company. Any such payments made since the date of the
Interim Financial Statements are reflected on Schedule 4.67.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Company and the
Shareholders that the statements made in this Article IV are true, correct, and
complete, as of the date hereof:
Section 5.1 Organization. Purchaser is a corporation duly
incorporated, validly existing, and in good standing under the laws of the
State of Delaware and is qualified to transact business as a foreign
corporation in each jurisdiction where such qualification is required.
Purchaser has previously delivered to Company correct and complete copies of
Purchaser's Certificate of Incorporation and Bylaws.
Section 5.2 Power and Authority. Purchaser possesses the
corporate power and authority to execute, deliver, and perform this Agreement,
without obtaining any approval or giving any notice, other than the approval of
its Board of Directors, which it has properly obtained.
Section 5.3 Execution, Delivery, and Enforceability. Purchaser
has duly authorized, executed, and delivered this Agreement, and this Agreement
constitutes a valid, legal, and binding obligation of Purchaser, enforceable
against Purchaser in accordance with its terms, subject to any Law Affecting
Creditors' Rights.
Section 5.4 Consents. Purchaser's execution, delivery, and
performance of this Agreement does not require Purchaser to obtain any approval
or consent from any person, make any filing with any person, or give any notice
to any person.
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Section 5.5 Conflicts. Purchaser's execution, delivery, and
performance of this Agreement will not directly or indirectly:
(a) Documents. Breach or violate: (i) any provision of
the Certificate of Incorporation or the Bylaws of Purchaser, (ii) any
resolution of the Board of Directors, any committee of the Board of Directors,
or the shareholders of Purchaser, (iii) any material contract of Purchaser, or
(iv) any applicable Order to which Purchaser or any of its assets is subject or
bound; or
(b) Lien. Result in a Lien against any of the assets of
Purchaser (or give rise to an event that with notice or lapse of time would
result in such a Lien), other than any liens or encumbrances granted by
Purchaser in connection with the transactions contemplated hereby.
Section 5.6 No Prohibitions. Purchaser's execution, delivery,
and performance of this Agreement will not violate any material Applicable Law
and no lawsuit before any court or other governmental authority is pending or,
to Purchaser's knowledge, threatened that could prohibit Purchaser from
consummating the transactions contemplated by this Agreement or the Closing
Documents to which it is a party.
ARTICLE VI.
COVENANTS
Section 6.1 Non-Compete Covenant. During the period from the
Closing Date through and including the third anniversary thereof (the
"NON-COMPETE PERIOD"), each Shareholder shall not directly or indirectly
compete in the Business within the United States of America (the "NON-COMPETE
COVENANT"). Within the parameters of the Non-Compete Covenant, such covenant
shall prohibit each Shareholder from making any statement or performing any act
intended to advance an interest of any existing competitor of Company (a
"COMPETITOR"), or encouraging any other person to make any such statement or to
perform any such act, including making any statement or performing any act
intended to cause any existing customer of Company to use the services or
purchase the products of any competitor. The Non-Compete Covenant shall
prohibit each Shareholder from disparaging Company, Purchaser, or any of their
respective Affiliates, or taking any other action intended to harm any
relationship of Company with any customer, distributor, supplier, or other
person.
Section 6.2 Non-Solicitation Covenant. During the Non-Compete
Period, each Shareholder shall not encourage or solicit any Key Employee of
Company to resign or employ or engage any such Key Employee, whether or not
such Shareholder encouraged or solicited such employee to resign (the
"NON-SOLICITATION COVENANT"). Each Shareholder's placement during the
Non-Compete Period of general employment advertisements in trade journals,
newspapers and periodicals of general circulation, and other public media in
which such advertisements are customarily placed shall not constitute a breach
of this section if a Key Employee of Company responds to such advertisement,
provided that such Shareholder does not employ or engage such employee.
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Section 6.3 Non-Disclosure Covenant. Each Shareholder shall not
disclose any confidential information at any time to any Person other than the
Company, the Purchaser, ▇▇▇▇▇ Communications Fund, L.P. and their respective
designated Representatives (the "NON-DISCLOSURE COVENANT"), provided that the
following disclosures and uses (the "CONFIDENTIALITY EXCEPTIONS") by any
Shareholder shall not violate this section:
(a) Advisors. Disclosing information to its accountants,
investment bankers, lawyers, and other professional advisors who have been
advised of its confidentiality and agreed to preserve such confidentiality;
(b) Public Information. Disclosing or using information
generally available to the public other than by breach of this section;
(c) Required by Law. Disclosing information required by
law or court order after promptly notifying the other Party of the requirement
to disclose such information and cooperating with such other Party in
attempting to obtain an injunction preventing such disclosure;
(d) Dispute Resolution. Disclosing information required
to prosecute or defend any Claim for damages or indemnification under this
Agreement or a request for equitable relief in connection with this Agreement
pursuant to an arbitration or judicial proceeding contemplated under Article
VIII, provided that it uses its best efforts to preserve the confidentiality of
such information in such proceeding;
(e) Tax Returns. Disclosing information required in any
Tax report or return.
Section 6.4 Indirect Competition. The Non-Compete Covenant, the
Non-Solicitation Covenant, and the Non- Disclosure Covenant (collectively, the
"RESTRICTIVE COVENANTS") require that each Shareholder not engage in any such
activities indirectly through its Outside Representatives. The Non-Compete
Covenant shall preclude each Shareholder from owning any equity interest in any
Person participating in the Business within the Non-Compete Area, loaning money
to any such Person; provided that this prohibition shall not prohibit the
ownership of up to five percent (5%) of the stock of a publicly traded company
that engages in the Business within the Non-Compete Area.
Section 6.5 Reasonableness. Each Shareholder acknowledges that
the Restrictive Covenants are reasonable in all respects and necessary to
permit Purchaser to realize the benefits of the transactions contemplated by
this Agreement.
Section 6.6 Judicial Enforcement. Monetary damages alone will be
inadequate to remedy any breach of the Restrictive Covenants. Accordingly, any
breach or threatened breach of the Restrictive Covenants shall entitle
Purchaser or Company to an injunction restraining each Shareholder from
breaching such covenants. When seeking such an injunction, Purchaser or
Company shall not be obligated to post any bond or other security. Such right
to an injunction shall
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be in addition to any other remedies to which Purchaser or Company may be
entitled because of such breach. If a court of competent jurisdiction
determines that a Restrictive Covenant is partially or wholly inoperative,
invalid, or unenforceable in a particular case because of its duration,
geographical scope, restricted activity, or any other parameter, such court may
reform such duration, geographical scope, restricted activity, or other
parameter with respect to such case to permit enforcement of such Restrictive
Covenant to the greatest extent allowable.
Section 6.7 Galaxy. Purchaser and the Company acknowledge and
agree that notwithstanding anything to the contrary herein contained ▇▇▇ ▇▇▇▇▇
may continue to hold a minority equity position (consisting of approximately
8%) in Galaxy Holdings, L.L.C. and may serve on the board of directors of
Galaxy Holdings, L.L.C. Galaxy Holdings, L.L.C. is a Georgia limited liability
company which, through its subsidiary, Galaxy Site Services, is engaged in the
tower and monopole erection and installation business; provided, further that
to the extent the Company and Galaxy Holdings, L.L.C.'s businesses are ever
competitive with one another, ▇▇▇ ▇▇▇▇▇ shall resign as a director of Galaxy
Holdings, L.L.C.
Section 6.8 Termination of Covenants. In the event any
Shareholder who is an employee of the Company is terminated for "Cause" or
terminates its employment with the Company for "Good Reason" (as each such term
is defined in the relevant Employment Agreement) and such employee ceases to be
paid Base Salary or Bonus under the relevant Employment Agreement, such
Shareholder shall be released from the restrictions contained in this Article
VI other than the Non Disclosure Covenants and the Non Solicitation Covenants.
ARTICLE VII.
INDEMNIFICATION AND DAMAGES
Section 7.1 Indemnification of Purchaser. Each Shareholder
severally, but not jointly, shall indemnify, defend and hold Purchaser harmless
from any and all Claims related or arising with respect to:
(a) Breaches of Representations and Warranties. Any
inaccuracy in any representation or warranty of Company or any Shareholder
under this Agreement or in any Closing Document;
(b) Breaches of Covenants. Any failure to perform or
observe any covenant or agreement to be performed by any Shareholder set forth
in this Agreement or in any Closing Document or any document delivered to
Purchaser pursuant to this Agreement.
(c) Excluded Assets. Any Excluded Assets or liabilities
related to such assets.
Section 7.2 Indemnification of Shareholders and the Company.
Purchaser shall indemnify, defend, and hold Shareholders and the Company
harmless from any and all Claims related or arising with respect to:
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(a) Breaches of Representations and Warranties. Any
inaccuracy in any representation or warranty of company under this Agreement;
or
(b) Breaches of Covenants. Any failure to perform or
observe any covenant or agreement to be performed by Company or Purchaser set
forth in this Agreement or any document delivered to any Shareholder pursuant
to this Agreement.
Section 7.3 Indemnification Procedure. Except as otherwise
provided in Article III, the indemnification obligations under this Agreement
shall be subject to the following procedures:
(a) Defense of Claim. Within five days after a Party
entitled to indemnification (an "INDEMNITEE")receives a notice of any Claim
that may give rise to an indemnification obligation under this Agreement, the
Indemnitee shall give the Party responsible for providing indemnification with
respect to such Claim (the "INDEMNITOR") notice of such Claim, together with a
copy of all documents relating to such Claim that the Indemnitee possesses.
The Indemnitor shall then immediately undertake the defense of such Claim by
representatives of its own choosing. The Indemnitor shall notify the
Indemnitee of the Indemnitor's undertaking of the defense of a Claim promptly
after receiving the notice of the Claim. Similarly, the Indemnitee shall
notify the Indemnitor of the Indemnitee's election of its right to control such
defense under the circumstances specified above. The failure to give notice of
a Claim within the period specified above shall not affect the Indemnitee's
rights to indemnification under this Agreement unless such delay prejudices the
Indemnitor.
(b) Participation of the Indemnitee. If ten days after
delivering notice of a Claim to the Indemnitor or such shorter period necessary
to prevent judgment by default in favor of the Person asserting the Claim, the
Indemnitor has not begun to defend against such Claim, the Indemnitee shall
have the right to defend or settle such Claim on behalf of the Indemnitor.
Notwithstanding whether the Indemnitor commences at any time to defend against
a Claim, the Indemnitee shall have the right to participate in such defense by
representatives of its own choosing. The Indemnitee shall bear any expense of
such participation if the Indemnitor is defending against the Claim. The
Indemnitor shall reimburse the Indemnitee for the Indemnitee's reasonable
attorneys' fees and expenses incurred during the period after notice was given
to Indemnitor with respect to such Claim when the Indemnitor had not assumed
the defense of such Claim. The Indemnitor shall make such reimbursement
payments to the Indemnitee upon the Indemnitee's submission of periodic
invoices describing such fees and expenses in reasonable detail.
(c) Settlement of Claims. The Indemnitor may settle any
Claim at its own expense, provided that the Indemnitor shall not settle any
Claim or consent to the entry of any judgment without the consent of the
Indemnitee if such settlement or judgment: (i) includes any admission of
wrongdoing by the Indemnitee or any of the Indemnitee's Representatives or
Outside Representatives, (ii) includes any consent to any type of injunctive
relief affecting the Indemnitee or any of the Indemnitee's Representatives or
Outside Representatives, (iii) excludes an unconditional release by the Person
asserting the Claim of the Indemnitee and the Indemnitee's Representatives and
Outside Representatives from all liability with respect to such Claim, or (iv)
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requires the Indemnitee or any of the Indemnitee's Representatives or Outside
Representatives to make any payment.
(d) Reimbursement. If an Indemnitor undertakes the
defense of any Claim or settles any Claim and such Claim was not within the
scope of the Indemnitor's indemnification obligations under this Agreement, the
Indemnitee shall promptly reimburse the Indemnitor for all reasonable expenses
with respect to such defense or settlement, including the Indemnitor's
reasonable attorneys' fees and expenses.
(e) Cooperation. In connection with any indemnity
obligation, the Indemnitee shall cooperate with all reasonable requests of the
Indemnitor.
Section 7.4 Assignment of Claims. If any amounts for which the
Indemnitor is responsible are recoverable from a third party, the Indemnitee
shall assign any rights that it may have to recover such amounts to the
Indemnitor.
Section 7.5 Other Indemnitees. Upon Purchaser's request, each
Shareholder shall severally indemnify any of Purchaser's Representatives or
Outside Representatives to the same extent as Purchaser. Conversely, upon each
Shareholder's request Purchaser shall indemnify each Shareholder's
Representatives or Outside Representatives to the same extent as such
Shareholder. No Representative or Outside Representative of any Party,
however, shall be a third party beneficiary of the indemnification provisions
contained in this Agreement. A Party may release or waive any Claim to which
such Party previously requested the other Party to indemnify such Party's
Representatives or Outside Representatives, and such Representatives or Outside
Representatives shall have no recourse against the Party releasing or waiving
such Claim. To the extent that a Party requests the other Party to indemnify
such Party's Representatives or Outside Representatives, such Party shall cause
its Representatives or Outside Representatives to comply with the
indemnification provisions and abide by the indemnification limitations set
forth in this Agreement, including the arbitration provisions in connection
with disputed Claims. In any such arbitration proceedings, a Party's
Representative or Outside Representative shall possess the rights and
obligations of such Party.
Section 7.6 Payments. The Parties shall make any damage or
indemnification payment as follows:
(a) Tax Treatment. The Parties shall treat any payment
of damages received pursuant to this Article VII as an adjustment to the Final
Aggregate Purchase Price on their Income Tax reports and returns except for the
interest component of any such payment, which the Parties shall treat as
interest income or expense, as the case may be.
(b) Net of Insurance Proceeds. The amount of damages
payable pursuant to this Article VII shall be net of any insurance proceeds
received by the Indemnitee in connection with the circumstances giving rise to
the indemnification right. The calculation of any net insurance proceeds shall
give effect to all costs incurred by the Indemnitee for such insurance
recovery,
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including all costs associated with retrospective premium adjustment,
experience-based premium adjustments, and indemnification obligations.
(c) Payment for Escrow Amount. Any damages payable to
Purchaser pursuant to this Article VII shall be satisfied first, to the extent
available, from the Escrow Amount held pursuant to the terms of the Escrow
Agreement.
(d) Uncontested Damage Payments. With respect to any
uncontested Claim for damages concerning a breach of this Agreement, the Party
owing such damages shall pay them to the Party asserting the Claim for such
damages within 30 days after the claiming Party makes its Claim.
(e) Uncontested Indemnification Payments. With respect
to any uncontested Claim for indemnification concerning an out-of-pocket
expenditure that an Indemnitee has paid or an obligation that an Indemnitee has
incurred, the Indemnitor shall reimburse the Indemnitee for such payment or
satisfy such obligation within 30 days after the Indemnitee presents its Claim
for indemnification to the Indemnitor. With respect to any uncontested Claim
for indemnification concerning a potential obligation that an Indemnitee may
incur, the Indemnitor shall satisfy such obligation within 30 days after the
Indemnitee incurs such obligation.
(f) Contested Claims. With respect to any contested
Claims for damages concerning a breach of this Agreement or indemnification
pursuant to this Agreement that the Party responsible for making such payment
contests, such Party shall make the required damage or indemnification payment
within 30 days after a final decision of the Arbitrators appointed pursuant to
Article VIII hereof, that such Party is responsible for such payment, provided
that the Party shall not be required to make any indemnification payment for
which the Indemnitee has not made an out-of- pocket expenditure or incurred an
obligation until such Indemnitee would be required to make such expenditure or
incur such obligation.
Section 7.7 Basket. No Party shall be liable for any Claim for
damages or indemnification (other than for Claims based on willful misconduct
or fraud) under this Agreement until the aggregate amount of such Claims for
damages and indemnification for which such Party would otherwise be responsible
exceeds $1,000,000 (the "BASKET"). If the aggregate amount of such Claims for
which a Party is responsible exceeds the Basket, such Party shall then only be
responsible for the amount of such excess.
Section 7.8 Maximum Liability. The Shareholders shall not be
liable for any Claim for damages or indemnification under this Agreement to the
extent that the aggregate amount of such Claims exceeds $75,000,000; provided,
however, that with respect to any Claim for damages or indemnification under
this Agreement related to willful misconduct or fraud, or any violation or
breach of any representation or warranty contained in Sections 4.55, 4.56 and
4.57 hereof, the Shareholders shall not be liable for any Claim for damages or
indemnification to the extent that the aggregate amount of Claims together with
all other Claims for which such Shareholders are responsible hereunder exceeds
the Final Aggregate Purchase Price (such amounts with respect to Company and
the Shareholders are referred to as such Party's "MAXIMUM LIABILITY"). If the
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aggregate amount of such Claims for which a Party would otherwise be
responsible exceeds the Maximum Liability, such Party's responsibility for such
Claims shall be applied proportionately against all such Claims. Any Claims
for which a Party is not held responsible because of the application of such
Party's Basket shall not be counted toward determining such Party's Maximum
Liability.
Section 7.9 Survival of Terms. The agreements, covenants,
indemnity obligations, representations and warranties, and other terms of this
Agreement and any other documents contemplated under this Agreement shall
survive the Closing and any investigation or notice by any Party, provided that
the representations and warranties of each Party under this Agreement shall
expire at 5:00 p.m. Dallas time on the day immediately preceding the eighteenth
month anniversary of the Closing Date. Notwithstanding the general expiration
of each Party's representations and warranties specified above: (a) the
Shareholders' representations and warranties contained in Sections 4.11, 4.13,
4.27(a) and 4.39, shall survive forever, subject to all defenses available
under applicable Law, including the expiration of any applicable statute of
limitations, and (b) the Shareholders' representations and warranties contained
in Sections 4.50 and 4.51 shall not expire until 30 days after the expiration
of the applicable statute of limitations, as such statutory period may be
extended from time to time. A Party shall not be responsible with respect to
any Claim for damages or indemnification with respect to any inaccuracy in any
of such Party's representations or warranties unless such Party receives
written notice of the Claim specifying in reasonable detail inaccuracy before
such representation and warranty expires. With respect to any such Claim
received before the expiration of a particular representation or warranty, the
Party responsible for such representation or warranty shall remain responsible,
to the extent provided herein, for any damage or indemnification amounts
claimed notwithstanding the subsequent expiration of such representation or
warranty.
ARTICLE VIII.
ARBITRATION AND EQUITABLE REMEDIES
Section 8.1 Settlement Meeting. The Parties shall attempt in
good faith to resolve promptly through negotiations any Claim or dispute under
this Agreement. If any such Claim or dispute should arise, the Parties shall
meet at least once to attempt to resolve the matter (the "SETTLEMENT MEETING").
Any Party may request the other Parties to attend a Settlement Meeting at a
mutually agreed time and place within ten days after delivery of a notice of a
Claim or dispute. The occurrence of a Settlement Meeting with respect to a
Claim or dispute shall be a condition precedent to seeking any arbitration or
judicial remedy, provided that if a Party refuses to attend a Settlement
Meeting the other Parties may proceed to seek such remedy.
Section 8.2 Arbitration Proceedings. If the Parties have not
resolved a monetary Claim or dispute at the Settlement Meeting any Party may
submit the matter to arbitration. A panel of three arbitrators shall conduct
the arbitration proceedings in accordance with the provisions of the Federal
Arbitration Act (99 U.S.C. Section 1 et seq.) and the Commercial Arbitration
Rules of the American Arbitration Association (the "ARBITRATION RULES"). The
decision of a majority of the panel shall be the decision of the arbitrators.
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(a) Arbitration Notice. To submit a monetary Claim or
dispute to arbitration, a Party shall furnish the other Parties and the
American Arbitration Association with a notice (the "ARBITRATION NOTICE")
containing: (i) the name and address of such Parties, (ii) the nature of the
monetary Claim or dispute in reasonable detail, (iii) the Party's intent to
commence arbitration proceedings under this Agreement, and (iv) the other
information required under the Federal Arbitration Act and the Arbitration
Rules.
(b) Selection of Arbitrators. Within ten days after
delivery of the Arbitration Notice, Purchaser and Shareholders shall each
select one arbitrator from the list of the American Arbitration Association's
National Panel of Commercial Arbitrators. Within ten days after the selection
of the last of those two arbitrators, those two arbitrators shall select the
third arbitrator from such list. If the first two arbitrators cannot select a
third arbitrator within such ten day period, the American Arbitration
Association shall select such third arbitrator from the list. Each arbitrator
shall be an individual not subject to disqualification under Rule No. 19 of
the Arbitration Rules with experience in settling complex litigation involving
mergers and acquisitions.
(c) Arbitration Final. The arbitration of the matters in
controversy and the determination of any amount of damages or indemnification
shall be final and binding upon the Parties to the maximum extent permitted by
Applicable Law, provided that any Party may seek any equitable remedy available
under Applicable Law as provided in this Agreement. This agreement to
arbitrate is irrevocable.
Section 8.3 Place of Arbitration. Any arbitration proceedings
shall be conducted in Fort Worth, Texas or at such other location as the
Parties may agree. The arbitrators shall hold the arbitration proceedings
within 60 days after the selection of the third arbitrator.
Section 8.4 Discovery. During the period beginning with the
selection of the third arbitrator and ending upon the conclusion of the
arbitration proceedings, the arbitrators shall have the authority to permit the
Parties to conduct such discovery as the arbitrators consider appropriate.
Section 8.5 Equitable Remedies. Notwithstanding anything else in
this Agreement to the contrary, after the Settlement Meeting a Party shall be
entitled to seek any equitable remedies available under Applicable Law,
including an injunction prohibiting a breach of the Restrictive Covenants or an
Order requiring any Shareholder to perform this Agreement. Any such equitable
remedies shall be in addition to any damages or indemnification rights that
such Party may assert in an arbitration proceeding.
Section 8.6 Exclusive Jurisdiction. The Parties agree that any
claim for equitable relief relating to this Agreement shall be instituted in a
federal or state court sitting in the Northern District of Texas, which courts
and their respective appellate courts shall be the exclusive venue for any such
claim. Each Party waives any objection that it may have to the laying of such
venue, and irrevocably submits to the jurisdiction of any such court with
respect to any such claim. Any service of process and other notice in any such
case shall be effective against a Party when transmitted in accordance with
Section 9.9, provided that a Party also may serve process in any manner
permitted by Applicable Law.
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Section 8.7 Judgments. Any arbitration award under this
Agreement shall be final and binding. Any court having jurisdiction may enter
judgment on such arbitration award upon application of a Party.
Section 8.8 Expenses. If any Party commences arbitration
proceedings or court proceedings seeking equitable relief with respect to this
Agreement, the prevailing Party in such arbitration proceedings or case may
receive as part of any award or judgment reimbursement of such Party's
reasonable attorneys' fees and expenses to the extent that the arbitrators or
court considers appropriate.
Section 8.9 Cost of the Arbitration. The arbitrators shall
assess the costs of the arbitration proceedings, including their fees, to the
Parties in such proportions as the arbitrators consider reasonable under the
circumstances.
Section 8.10 Exclusivity of Remedies. To the extent permitted by
Applicable Law, the arbitration and judicial remedies contained in this Article
VIII shall be the exclusive remedies available to the Parties with respect to
any dispute under this Agreement or Claim for damages or indemnification under
this Agreement.
ARTICLE IX.
GENERAL
Section 9.1 Amendment. No amendment of this Agreement shall be
effective unless in a writing signed by the Parties.
Section 9.2 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original
agreement, but all of which shall constitute one and the same agreement. Any
Party may execute and deliver this Agreement by an executed signature page
transmitted by a facsimile machine. If a Party transmits its signature page by
a facsimile machine, such Party shall promptly thereafter deliver an originally
executed signature page to the other Parties, provided that any failure to
deliver such an originally executed signature page shall not affect the
validity, legality, or enforceability of this Agreement.
Section 9.3 Entire Agreement. This Agreement together with the
related Closing Documents constitutes the entire agreement and understanding
among the Parties and supersedes all prior agreements and understandings, both
written and oral, with respect to the subject matter of this Agreement.
Section 9.4 Expenses. Shareholders shall bear their own expenses
with respect to the negotiation and preparation of this Agreement and the
Closing, including any fees and expenses of their Outside Representatives. All
reasonable out of pocket expenses incurred by Purchaser in connection with the
Closing Transactions and all amounts to be paid by the Company at Closing
pursuant to the Financial Advisory Services Agreement with ▇▇▇▇▇ Communications
Fund, L.P. shall be paid by the Company at Closing.
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SECTION 9.5 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
THE LAWS OF THE STATE OF TEXAS, REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE
GOVERN UNDER THE CONFLICTS OF LAWS PRINCIPLES OF THE STATE OF TEXAS.
Section 9.6 No Assignment. No Party may assign its benefits or
delegate its duties under this Agreement without the prior consent of the other
Parties. Any attempted assignment or delegation without such prior consent
shall be void. Notwithstanding this prohibition against assignment and
delegation, Purchaser may assign its rights and delegate its duties under this
Agreement to a wholly-owned subsidiary of Purchaser without Shareholders'
consent. Upon Purchaser's assignment of its benefits and delegation of its
duties under this Agreement to such a wholly-owned subsidiary, Purchaser shall
be released from any obligations under this Agreement.
Section 9.7 No Set-Off. A Party may not set-off any amounts that
any other Party owes to it against any amounts that it owes any other Party.
Section 9.8 No Third Party Beneficiaries. This Agreement is
solely for the benefit of the Parties and no other Person shall have any right,
interest, or claim under this Agreement. Nothing in this Agreement shall
require: (a) Company to continue the employment of any of its employees other
than pursuant to the Employment Agreements and the Material Contracts, (b)
Company or Purchaser to continue any Employee Benefit Plan, (c) Purchaser to
request Shareholders to indemnify any of Purchaser's Representatives or Outside
Representatives, or (d) Shareholders to request Purchaser to indemnify any of
Shareholders' Representatives or Outside Representatives.
Section 9.9 Notices. All claims, consents, designations,
notices, waivers, and other communications in connection with this Agreement
shall be in writing. Such claims, consents, designations, notices, waivers,
and other communications shall be considered received only on the day of actual
receipt unless mailed by certified or registered mail, postage prepaid, return
receipt requested, addressed to a Party at its address set forth below (or to
such other address to which such Party has notified the other Parties in
accordance with this section to send such claims, consents, designations,
notices, waivers, and other communications), in which case such claims,
consents, designations, notices, waivers, or other communications shall be
deemed to have been received three Business Days after the date of posting:
Purchaser: ▇▇▇▇▇ Communications Fund, L.P.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
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With copy to: Akin, Gump, Strauss, ▇▇▇▇▇ & ▇▇▇▇, L.L.P.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile No.: 214-969-4343
Shareholders: T. W. and ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone No.: 817-
Facsimile No.: 817-
With copy to: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III
▇▇▇▇▇▇ & ▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
Shareholders: ▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With copy to: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III
▇▇▇▇▇▇ & ▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
Shareholders: ▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone No. (▇▇▇) ▇▇▇-▇▇▇▇
With copy to: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III
▇▇▇▇▇▇ & ▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
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Shareholders: ▇▇▇▇▇▇ ▇. "▇▇▇▇" ▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (817)
With copy to: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III
▇▇▇▇▇▇ & ▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
Section 9.10 Representation by Legal Counsel. Each Party is a
sophisticated Person that was advised by experienced legal counsel and other
advisors in the negotiation and preparation of this Agreement.
Section 9.11 Schedules. All references in this Agreement to
schedules shall mean the schedules identified in this Agreement, which are
incorporated into this Agreement and shall be deemed a part of this Agreement
for all purposes. Each section of this Agreement that refers to a schedule
shall have a separate schedule. Any disclosure under a particular section's
schedule shall be made under the heading of any relevant subsection of such
section. Shareholders and the Company have delivered to Purchaser a correct
and complete copy of each document listed on each schedule to this Agreement.
Section 9.12 Severability. Any provision of this Agreement that
is prohibited or unenforceable in any jurisdiction shall not invalidate the
remaining provisions of this Agreement or affect the validity or enforceability
of such provision in any other jurisdiction. Any such prohibited or
unenforceable provision shall be given effect to the extent possible in the
jurisdiction where such provision is prohibited or unenforceable.
Section 9.13 Successors. This Agreement shall be binding upon and
shall inure to the benefit of each Party and its heirs, legal representatives,
permitted assigns, and successors, provided that this section shall not permit
the assignment or other transfer of this Agreement, whether by operation of law
or otherwise, if such assignment of other transfer is not otherwise permitted
under this Agreement.
Section 9.14 Time of the Essence. Time is of the essence in the
performance of this Agreement and all dates and periods specified in this
Agreement.
Section 9.15 Waiver. No provision of this Agreement shall be
considered waived unless such waiver is in writing and signed by the Party that
benefits from the enforcement of such provision. No waiver of any provision in
this Agreement, however, shall be deemed a waiver of a subsequent breach of
such provision or a waiver of a similar provision. Except as provided in
Section 7.10, a waiver of any breach or a failure to enforce any term or
condition of this Agreement
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shall not in any way affect, limit, or waive a Party's rights under this
Agreement at any time to enforce strict compliance thereafter with every term
and condition of this Agreement.
[SIGNATURES ON THE NEXT PAGE]
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[Signature Page to Stock Purchase and Redemption Agreement]
IN WITNESS WHEREOF, each Party has executed and delivered this
Agreement on the date set forth below its name with the intent that this
Agreement be effective as of the date first written above.
PURCHASER: FWT ACQUISITION, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
SHAREHOLDERS:
------------------------------------
▇. ▇. ▇▇▇▇▇
------------------------------------
▇▇▇▇▇ ▇▇▇▇▇
------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇. "▇▇▇▇" ▇▇▇▇▇
------------------------------------
▇▇▇ ▇. ▇▇▇▇▇
COMPANY: FWT, Inc.
By:
---------------------------------
▇.▇. ▇▇▇▇▇
President
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SCHEDULE I
SHAREHOLDINGS
Name Shares
---- ------
▇. ▇. ▇▇▇▇▇ 93.93
▇▇▇▇▇ ▇▇▇▇▇ 93.93
▇▇▇▇ ▇. ▇▇▇▇▇ 61.38
▇▇▇▇▇▇ ▇. "▇▇▇▇" ▇▇▇▇▇ 61.38
▇▇▇ ▇. ▇▇▇▇▇ 61.38
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ANNEX I
DEFINITIONS
Terms with initial capitalized letters that are not otherwise defined
in this Agreement shall have the meanings set forth below:
Affiliate. The term "AFFILIATE" with respect to a Person means any
other Person that directly or indirectly controls, is controlled by, or is
under common control with such Person. For the purposes of this definition,
control means the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
Contract, or otherwise. Control shall be presumed by an individual that is a
director or executive officer of a Person, or a Person that beneficially owns
more than 10% of any class of securities of such Person having general voting
rights. During the period before the Closing and at the Closing, Company shall
be considered an Affiliate of each Shareholder. During the period after the
Closing, Purchaser and ▇▇▇▇▇ Communications Fund, L.P. shall be considered an
Affiliate of Company for so long as Purchaser controls Company.
Applicable Law. The term "APPLICABLE LAW" means any applicable code,
common law, law, Order, ordinance, regulation, rule, or statute of any
Governmental Authority.
Business. The term "BUSINESS" means the following businesses related
to towers and monopoles for the telecommunications and utility industries:
fabrication, erection, build to suits, site acquisition and zoning.
Business Day. The term "BUSINESS DAY" means a day that is not a
Sunday, Saturday, or holiday when banks in the State of Texas are required or
permitted to be closed.
Claim. The term "CLAIM" means any arbitration award, assessment,
charge, citation, claim, damage, demand, expense, fine, joint or several
liability or penalty, and any reasonable attorneys' fees and expenses.
Closing Transactions. The term "CLOSING TRANSACTIONS" means the
transactions effected on the Closing Date pursuant to the Closing Documents and
the incurrence of fees and expenses related thereto, including, without
limitation, all fees and expenses of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Co. in connection with
its audit of the Audited Financial Statements and its review of the Interim
Financial Statements.
Confidential Information. The term "CONFIDENTIAL INFORMATION" means
any confidential or proprietary information concerning a Company's assets,
business, cash flows, financial condition, liabilities, operations, prospects,
or relationships, including Company's proprietary databases and software
programs and Company's Trade Secrets. Confidential Information may exist in
oral or written form or in any other medium.
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Contract. The term "CONTRACT" with respect to a Person means any oral
or written agreement, commitment, contract, deed of trust, franchise,
indenture, instrument, lease, license, mortgage which such Person is a party,
under which such Person possesses any rights or owes any obligations, or by
which any of such Person's assets are bound, or under which another Person
possesses any rights against such Person. The Contracts of a Person shall
include such Person's Articles of Incorporation, Bylaws, and other
organizational documents.
Copyright. The term "COPYRIGHT" means registered or unregistered
copyrights in published and unpublished works in the United States or any
foreign jurisdiction, and all applications, registrations, and recordings
relating to such works filed in the United States Copyright Office or any other
government agency or office in the United States or any foreign jurisdiction.
Current Assets. The term "CURRENT ASSETS" means current assets which
would be reflected on a balance sheet in accordance with GAAP.
Current Liabilities. The term "CURRENT LIABILITIES" means current
liabilities which would be reflected on a balance sheet in accordance with GAAP
but excluding the current portion of any Funded Indebtedness.
Distributors. The term "DISTRIBUTORS" with respect to a Person means
such Person's dealers and distributors which are not employees.
Environmental Law. The term "ENVIRONMENTAL LAW" means: (a) the Clean
Air Act (42 U.S.C. Section 7401 et seq.), (b) the Clean Water Act (33 U.S.C.
Section 1251 et seq.), (c) the Comprehensive Environmental Response,
Compensation and Liability Act, as amended by the Superfund Amendments and
Reauthorization Act of 1986 (42 U.S.C. Section 9601 et seq.), (d) the
Hazardous Materials Transportation Act (49 U.S.C. Section 5101 et seq.), (e)
the National Environmental Policy Act (42 U.S.C. Section 4321 et seq.), (f) the
Oil Pollution Act of 1990 (33 U.S.C. Section 2701 et seq.), (g) the Resource
Conservation and Recovery Act, as amended by the Hazardous and Solid Waste
Amendments of 1984 (42 U.S.C. Section 6901 et seq.), (i) the Safe Drinking
Water Act (42 U.S.C. Section 300f et seq.), (j) the Toxic Substances Control
Act (15 U.S.C. Section 2601 et seq.), (k) any state, local, or foreign law,
ordinance, regulation, or statute analogous to any of the foregoing statutes,
or (l) any other federal, state, local, or foreign law, ordinance, regulation,
or statute prohibiting, regulating, or restricting the disposal, generation,
handling, placement, recycling, release, storage, or treatment of any
contaminant, liquid, mass, material, matter, pollutant, solid, substance, or
waste classified or considered to be hazardous or toxic to human health or the
environment.
Environmental Report. The term "ENVIRONMENTAL REPORT" means that
certain Environmental Assessment Report prepared for ▇▇▇▇▇ Capital Corporation
by Entrix, Inc. dated October, 1997.
ERISA. The term "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
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ERISA Pension Plan. The term "ERISA PENSION PLAN" means an "employee
pension benefit plan" as defined in Section 3(2) of ERISA.
ERISA Welfare Plan. The term "ERISA WELFARE PLAN" means an "employee
welfare benefit plan" as defined in Section 3(1) of ERISA.
Funded Indebtedness. The term "FUNDED INDEBTEDNESS" means an amount
equal to all amounts owing in respect of borrowed money, other than (i)
short-term trade payables incurred in the ordinary course of business and (ii)
capitalized leases, but including all costs and expenses associated with
retiring such debt, including any prepayment penalties and filing fees
associated with terminating any Liens.
GAAP. The term "GAAP" means generally accepted accounting principles
in effect in the United States.
Governmental Authority. The term "GOVERNMENTAL AUTHORITY" means any
federal, state, local, tribal, or foreign government and any agency, board,
body, branch, bureau, commission, court, department, instrumentality,
subdivision, or tribunal of any such government.
Hazardous Material. The term "HAZARDOUS MATERIAL" means: (a) any
contaminant, liquid, mass, material, matter, pollutant, solid, substance, or
waste for which any Environmental Law limits, prohibits, or regulates its
disposal, generation, handling, placement, recycling, release, storage, or
treatment, (b) any carcinogenic, corrosive, explosive, flammable, infectious,
mutagenic, radioactive, or toxic substance, (c) any diesel fuel, gasoline, or
other petroleum product in an unconfined manner, (d) any substance that
contains polychlorinated biphenyls, (e) any substance that contains asbestos,
(f) any substance that contains urea formaldehyde foam installation, (g) any
substance that constitutes a nuisance upon any property, or (h) any substance
that imposes a hazard to the health or safety of any individual.
Income Tax. The term "INCOME TAX" means any Tax based upon or
measured by net income, including any alternative minimum tax, along with any
interest, penalties, or additions to such Tax.
Key Employee. The term "KEY EMPLOYEE" means any salaried employee of
the Company other than the Shareholders who earned cash compensation and bonus
in the most recent fiscal year included in the Audited Financial Statements
greater than $75,000.
Law Affecting Creditors' Rights. The term "LAW AFFECTING CREDITORS'
RIGHTS" means any bankruptcy, fraudulent conveyance or transfer, insolvency,
moratorium, reorganization, or other law affecting the enforcement of
creditors' rights generally, and any general principles of equity.
Lien. The term "LIEN" means any deed of trust, judgment lien,
mortgage, security interest or similar encumbrances securing payment or
performance of an obligation, monetary or otherwise.
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Material Adverse Change. The term "MATERIAL ADVERSE CHANGE" with
respect to a Person means that an event has occurred or a circumstance has
arisen that has had, or could reasonably be expected to have a material
adverse effect on such Person's assets, business, cash flows, financial
condition, liabilities, operations, or prospects.
Material Contract. The term "MATERIAL CONTRACT" means each contract or
agreement to which the Company is a party and pursuant to which the Company has
any outstanding right, liability or obligation as of the date hereof which
either (a) was entered into outside of the ordinary course of business, (b)
involves the payment by the Company of more than $100,000 annually or the
provision by the Company of goods and services with a value of more than
$100,000 annually, (c) was entered into with an Affiliate of the Company, (d)
relates to the employment or severance of any existing or former Key Employee
(other than Employee Benefit Plans), (e) evidences or governs any of the
Existing Indebtedness, (f) constitutes a lease of real or personal property
which requires annual rental payments or other lease expense in an amount
greater than $25,000 annually, (g) restricts the ability of the Company to
compete or restricts any Person from competing against the Company, (h)
restricts the ability of the Company to employ or engage any Person or
restricts any Person from employing or engaging any Person that the Company has
employed or engaged, or (i) is material to the Company's business, financial
condition, liabilities, operations or prospects. "Material Contracts" shall
not include employment at will arrangements or purchase orders issued or
accepted in the ordinary course of business.
Non-Compete Area. The term "NON-COMPETE AREA" means the geographic
region encompassing the entire United States of America.
Non-Compete Period. The term "NON-COMPETE PERIOD" means the period
beginning on the Closing Date and ending on the day immediately preceding the
third anniversary of the Closing Date.
Order. The term "ORDER" means any consent decree, decree,
determination, injunction, judgment, order, or writ of any arbitrator or
Governmental Authority.
Outside Representatives. The term "OUTSIDE REPRESENTATIVES" with
respect to a Person means such Person's accountants, Affiliates, agents,
consultants, investment bankers, lawyers, lenders, representatives, and
shareholders.
Parties. The term "PARTIES" means Company, Purchaser, and
Shareholders.
Patent. The term "PATENT" means: (a) Letters Patent of the United
States or any similar rights under the laws of any foreign jurisdiction and any
divisions, extensions, or reissues of such Letters Patent, including any design
patent, plant patent, or utility patent, and (b) applications for Letters
Patent of the United States or any similar rights under the laws of any foreign
jurisdiction and all continuations, continuations-in-part, or divisions of such
applications.
Permit. The term "PERMIT" means any approval, authorization,
certificate, certificate of occupancy, exemption, franchise, license, permit,
registration, right, variance, or waiver issuable by any Governmental
Authority.
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Person. The term "PERSON" means any association, bank, business
trust, corporation, estate, general partnership, Governmental Authority,
individual, joint stock company, joint venture, labor union, limited liability
company, limited partnership, non-profit corporation, professional association,
professional corporation, trust, or any other organization or entity.
Plan. The term "PLAN" means any: (a) accident, dental, disability,
health, life, medical, or vision plan or insurance policy, (b) bonus plan, (c)
change in control plan, (d) deferred compensation plan, (e) ERISA Pension Plan,
(f) ERISA Welfare Plan, (g) executive compensation plan, (h) fringe benefits
and perquisites, such as automobile allowances, country club memberships, diner
club memberships, and health club memberships, (i) holiday, sick pay, leave,
vacation, or other similar policy, (j) incentive plan, (k) life insurance plan
or policy, (l) loan agreement with any Representative, (m) moving expense
reimbursement policy, (n) multi-employer or multiple employer plan, (o) pension
plan, (p) phantom stock plan, (q) profit sharing plan, (r) retirement plan, (s)
severance plan, (t) stock appreciation plan, (u) stock purchase plan, (v) stock
option plan, (w) tuition reimbursement policy, or (x) other employee
arrangement, benefit plan, Contract, commitment, compensation plan, custom,
policy, or practice. A Plan may apply to only one individual, such as an
employment or severance agreement.
Prime Rate. The term "PRIME RATE" means the publicly announced prime
commercial lending rate per annum of Bank One, Texas, N.A. in effect from time
to time, provided that such rate shall not exceed the maximum interest rate
permitted under Applicable Law. The Prime Rate shall change as such publicly
announced prime commercial lending rate changes.
Proportionate Amount. The term "PROPORTIONATE AMOUNT," as applied to
a particular Shareholder, means a fraction the numerator of which equals the
number of Redeemed Shares owned by such particular Shareholder and the
denominator of which equals the aggregate number of Redeemed Shares.
Representatives. The term "REPRESENTATIVES" with respect to a Person
means such Person's directors, employees, and officers.
Tax. The term "TAX" means any federal, state, local, tribal, foreign,
or other assessment, charge, duty, fee, impost, levy, tariff, or tax of any
kind whatsoever, including all ad valorem, alternative minimum, capital gains,
customs, documentary, employment, estate, excise, franchise, gift, gross
income, gross receipts, income, lease, license, net income, payroll, premium,
profits, property, occupation, sales, service, service use, stamp, severance,
transaction privilege, transfer, use, valve-added, windfall profit, or
withholding taxes or charges imposed by any Governmental Authority or payable
pursuant to any tax sharing Contract, together with any related interest,
penalties, and additions to tax.
Trademark. The term "TRADEMARK" means registered or unregistered
brand marks, brand names, logos, names, service marks, service names, trade
dress, trademarks, tradenames, trade styles, and other business or source
identifiers, and combinations, contractions, derivatives, expansions,
modifications, and variations of such items, along with all goodwill associated
with them.
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Trade Secret. The term "TRADE SECRET" means concepts, designs,
devices, formulae, ideas, inventions, know-how, plans, processes, proprietary
materials, research and development, technical data, and other information
treated as trade secrets under applicable trade secret law, including customer
and supplier lists.
Working Capital. The term "WORKING CAPITAL" means an amount equal to
the excess of Current Assets over Current Liabilities.
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