EXECUTION COPY
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RESTATED ASSET PURCHASE AGREEMENT
dated as of the 6th day of October, 1997
by and between
ACG ACQUISITION II CORP.
(PURCHASER)
and
ADVANCED COMMUNICATIONS GROUP, INC.
(PARENT)
ADVANCED COMMUNICATIONS CORP.
(OLD ACG)
and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
(SELLERS)
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TABLE OF CONTENTS
1. DEFINITIONS...............................................................2
2. PURCHASE AND SALE; CLOSING; SECTION 351 EXCHANGE PLAN.....................9
2.1 Purchase and Sale of Purchased Assets...............................9
2.2 Assumption of Liabilities..........................................10
2.3 Purchase Price.....................................................10
2.4 Allocation of Purchase Price.......................................10
2.5 Closing............................................................10
3. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF
THE SELLERS..............................................................10
3.1 Authority..........................................................10
3.2 Financial Statements...............................................10
3.3 Liabilities and Obligations........................................11
3.4 Permits and Intangibles............................................12
3.5 Environmental Matters..............................................12
3.6 Personal Property..................................................13
3.7 Significant Customers; Material Contracts and Commitments..........13
3.8 Real Property......................................................14
3.9 Insurance..........................................................14
3.10 Intellectual Property..............................................15
3.11 Labor Relations....................................................15
3.12 Employee Benefits..................................................15
3.13 Tax Matters........................................................16
3.14 Prior or Preferential Rights.......................................17
3.15 Sufficiency of Assets..............................................18
3.16 Conformity with Law; Litigation....................................18
3.17 No Violations......................................................18
3.18 Government Contracts...............................................19
3.19 Absence of Changes.................................................19
3.20 Disclosure.........................................................20
3.21 Prohibited Activities..............................................20
3.22 Draft Registration Statement.......................................20
4. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF
THE PURCHASER, PARENT AND OLD ACG........................................20
4.1 Due Organization...................................................21
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4.2 Authorization......................................................21
4.3 Capital Stock......................................................21
4.4 Transactions in Capital Stock, Organization Accounting.............21
4.5 Subsidiaries.......................................................22
4.6 Financial Statements...............................................22
4.7 Liabilities and Obligations........................................22
4.8 Conformity with Law; Litigation....................................22
4.9 No Violations......................................................23
4.10 Business; Real Property; Material Agreement........................23
4.11 Taxes..............................................................23
4.12 Draft Registration Statement.......................................24
5. OTHER COVENANTS PRIOR TO CLOSING.........................................24
5.1 Access and Cooperation; Due Diligence; Audits......................24
5.2 Conduct of Business Pending Closing................................25
5.3 Prohibited Activities..............................................26
5.4 Exclusivity........................................................27
5.5 Notice to Bargaining Agents........................................27
5.6 Notification of Certain Matters....................................27
5.7 Amendment of Schedules.............................................28
5.8 Bulk Sales Laws....................................................28
5.9 Transfer Taxes and Recording Fees..................................28
5.10 Certain Provisions Relating to Consents............................29
5.11 Further Assurance..................................................30
5.12 Survival...........................................................30
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS.......................30
6.1 Representations and Warranties Performance of Obligations..........30
6.2 Satisfaction.......................................................30
6.3 No Litigation......................................................30
6.4 Opinion of Counsel.................................................30
6.5 Consents and Approvals.............................................31
6.6 No Material Adverse Change.........................................31
6.7 Secretary's Certificates...........................................31
6.8 Closing of IPO.....................................................31
6.9 Employment Agreements..............................................31
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PURCHASER AND
PARENT...................................................................31
7.1 Representations and Warranties; Performance of Obligations.........31
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7.2 No Litigation......................................................31
7.3 No Material Adverse Effect.........................................32
7.4 Sellers' Release...................................................32
7.5 Satisfaction.......................................................32
7.6 Opinion of Counsel.................................................32
7.7 Consents and Approvals.............................................32
7.8 FIRPTA Certificate.................................................32
7.9 Closing of IPO.....................................................32
7.10 Employment Agreements..............................................32
8. COVENANTS OF THE PURCHASER AND PARENT WITH THE SELLERS AFTER
CLOSING..................................................................33
8.1 Release From Guarantees............................................33
8.2 Employment.........................................................33
8.3 Health and Welfare Benefits........................................34
8.4 Use of Name........................................................35
8.5 Compliance with the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976 (the "▇▇▇▇-▇▇▇▇▇ Act").................................35
9. TERMINATION OF AGREEMENT.................................................35
9.1 Termination........................................................35
9.2 Liabilities in Event of Termination................................36
10. NONDISCLOSURE OF CONFIDENTIAL INFORMATION................................36
10.1 The Sellers........................................................36
10.2 The Purchaser, Parent and Old ACG..................................37
10.3 Damages............................................................37
10.4 Survival...........................................................38
11. NONCOMPETITION...........................................................38
11.1 Prohibited Activities..............................................38
11.2 Damages............................................................39
11.3 Reasonable Restraint...............................................39
11.4 Severability, Reformation..........................................39
11.5 Independent Covenant...............................................39
11.6 Materiality........................................................40
12. TRANSFER PROHIBITIONS AND RESTRICTIONS ON WARRANTS AND
WARRANT STOCK............................................................40
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13. OTHER TRANSFER RESTRICTIONS..............................................40
14. INVESTMENT REPRESENTATIONS...............................................41
14.1 Compliance With Law................................................41
14.2 Economic Risk, Sophistication......................................42
15. REGISTRATION RIGHTS......................................................42
15.1 PiggyBack Registration Rights......................................42
15.2 Demand Registration Rights.........................................42
15.3 Registration Procedures............................................43
15.4 Other Registration Matters.........................................46
15.5 Indemnification....................................................46
15.6 Contribution.......................................................49
15.7 Availability of Rule 144...........................................50
16. GENERAL..................................................................50
16.1 Cooperation........................................................50
16.2 Successors and Assigns.............................................50
16.3 Entire Agreement...................................................50
16.4 Counterparts.......................................................51
16.5 Brokers and Agents.................................................51
16.6 Expenses...........................................................51
16.7 Notices............................................................51
16.8 Governing Law......................................................52
16.9 Exercise of Rights and Remedies....................................52
16.10 Time...............................................................53
16.11 Reformation and Severability.......................................53
16.12 Remedies Cumulative................................................53
16.13 Captions...........................................................53
16.14 Public Statement...................................................53
16.15 Form of Payment....................................................53
16.16 Receivables........................................................53
16.17 Amendments and Waivers.............................................54
16.18 Public Statements..................................................54
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RESTATED ASSET PURCHASE AGREEMENT
THIS RESTATED ASSET PURCHASE AGREEMENT (the "Agreement") is made as of the
6th day of October, 1997, by and between ACG ACQUISITION II CORP. a Delaware
corporation ("Purchaser"), ADVANCED COMMUNICATIONS GROUP, INC., a Delaware
corporation organized in September 1997 ("Parent"), ADVANCED COMMUNICATIONS
CORP. (formerly named Advanced Communications Group, Inc.), a Delaware
corporation organized in June 1996 ("Old ACG"), ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and wife
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, individuals residing in Kansas ("Sellers") , who are engaged
in the business of selling, servicing and installing telephone equipment, or
"interconnect" services and equipment, as a proprietorship under the name
National Telecom ("Business") and owning certain assets associated with the
Business.
WHEREAS, Old ACG has entered into agreements for, or negotiated the
terms of, the acquisition by merger, asset purchase or stock purchase of
ten companies (or interests therein) engaged in various aspects of the
telecommunications industry ("Founding Companies") for voting capital stock
and other consideration, including cash, one of such agreements being the
Asset Purchase Agreement dated as of July 18, 1997 among Old ACG, Parent,
Purchaser, and the Sellers ("Original Agreement"); and
WHEREAS, Old ACG intended to close the acquisition of the Founding
Companies substantially contemporaneously with the consummation of an
initial underwritten public offering of its common stock; and
WHEREAS, the executive officers of Old ACG have determined that it is
desirable for licensing and other regulatory purposes to restructure the
acquisitions of the Founding Companies; and
WHEREAS, as the initial step in the implementation of the restructured
proposal, Old ACG formed Parent as a new Delaware corporation in September
1997 to serve as the vehicle for the acquisition of the Founding Companies
substantially contemporaneously with the consummation of an initial
underwritten public offering ("IPO") of Common Stock, $.0001 par value, of
Parent ("Parent Stock") at the price to the public reflected in the final
prospectus of Parent relating to the IPO ("IPO Price"); and
WHEREAS, under the restructured proposal, contemporaneously with the
consummation of the IPO and as part of a single transaction, the
stockholders of the Founding Companies, including Sellers and Old ACG, will
transfer, by stock or asset purchase or reverse triangular merger, the
stock or substantially all the assets of certain companies and other assets
in which they own an interest to Parent in exchange for voting
capital stock of Parent and other consideration, including cash,
voting stock, options, warrants, notes, convertible notes and other
property of Parent, under circumstances that will constitute a tax-free
transfer of property under Section 351 of the Internal Revenue Code of
1986, as amended, and the rules and regulations thereunder ("Code"), to the
extent of their receipt of voting capital stock of Parent; and
WHEREAS, substantially contemporaneously with the execution of this
Agreement and in order to document the integrated Section 351 exchange plan
contemplated herein, (a) Old ACG, the other Founding Companies, their
stockholders and others are amending and restating their respective
acquisition agreements; and (b) Parent and Old ACG are entering into a
merger agreement pursuant to which Old ACG will become a wholly-owned
subsidiary of Parent substantially contemporaneously with the consummation
of the IPO; and
WHEREAS, it is contemplated that prior to the consummation of the IPO,
Old ACG will effect an approximately one-for-two reverse stock split, the
exact magnitude of which will be dependent upon the ultimate post IPO
valuation of Parent by the managing underwriters in the IPO and the
anticipated IPO Price; and
WHEREAS, the IPO, the acquisitions of the Founding Companies and Old
ACG are described in the Registration Statement on Form S-1 of Parent
(draft of October 2, 1997), a copy of which is attached to this Agreement
as Annex I ("Draft Registration Statement"); and
WHEREAS, Parent, Old ACG, Purchaser, and the Sellers desire to amend
and restate the Original Agreement in its entirety and transform it into
this Agreement; and
WHEREAS, the Purchaser desires to purchase from the Sellers, and the
Sellers desire to sell to the Purchaser, substantially all the assets
comprising the Business, all on the terms and subject to the conditions
hereinafter set forth; and
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties, covenants and agreements herein contained, the
parties hereby agree as follows:
1. DEFINITIONS
Unless the context otherwise requires, capitalized terms used in this
Agreement or in any schedule, or annex attached hereto and not otherwise
defined shall have the following meanings for all purposes of this Agreement:
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"Affiliate" means, with respect to any specific Person, any other Person
that directly, or indirectly through one or more intermediaries, controls,
or is controlled by, or is under common control with, such Person. The term
"control" (including, with correlative meaning, the terms "controlled by"
and "under common control with"), as used with respect to any Person, means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through
the ownership of voting securities, by contract or otherwise.
"Agreement" has the meaning set forth in the first paragraph of this
Agreement
"Assumed Liabilities" refers to, collectively, all liabilities and
obligations of the Sellers (i) arising after the Closing Date with respect
to the performance of the terms of and the payment of all amounts due under
the Contracts and the Lease, excluding any liability or obligation
resulting from any breach, violation, failure to comply, act, omission,
condition or circumstance with respect thereto prior to the Closing Date
and (ii) relating to Employees and employee benefits to the extent
specifically provided in Section 8.2.
"Assumption Agreement" refers to the Assumption Agreement to be executed at
Closing by the Purchaser.
"Balance Sheet Date" has the meaning set forth in Section 3.2.
"▇▇▇▇ of Sale" refers to the ▇▇▇▇ of Sale to be executed at the Closing by
the Sellers.
"Business" has the meaning set forth in the first paragraph to this
Agreement.
"Business Day" means any day, other than a Saturday or a Sunday, on which
commercial banks are not required or authorized to close in New York City.
"Business Financial Statements" has the meaning set forth in Section 3.2.
"Charter Documents" means the Certificate of Incorporation, Articles of
Incorporation or other instrument pursuant to which any corporation,
limited liability company, partnership or other business entity that is a
signatory to, or the subject of, this Agreement was formed or organized in
accordance with applicable law.
"Closing" has the meaning set forth in Section 2.5.
"Closing Date" has the meaning set forth in Section 2.5.
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"Code" has the meaning set forth in the fifth recital of this Agreement.
"Contracts" means, collectively, the documents and other matters listed on
Schedule 3.3 in response to Section 3.3(ii) and on Schedule 3.7.
"Controlled Group Member" has the meaning set forth in Section 3.12(ii).
"Draft Registration Statement" has the meaning set forth in the eighth
recital of this agreement.
"Effective Time" means 12:01 a.m. on the Closing Date.
"Employees" has the meaning set forth in Section 8.2(i).
"Employee Benefit Plan" means an Employee Pension Benefit Plan, Employee
Welfare Benefit Plan (where no distinction is required by the context in
which the term is used), or any compensation plan, incentive plan (whether
or not stock related), bonus plan or fringe benefit plan.
"Employee Pension Benefit Plan" has the meaning set forth in Section 3(2)
of ERISA.
"Employee Welfare Benefit Plan" has the meaning set forth in Section 3(1)
of ERISA.
"Environmental Laws" has the meaning set forth in Section 3.5.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excluded Assets" means, collectively (i) any cash or cash equivalents of
Sellers, (ii) any rights of the Sellers to any Tax refund associated with
the Business with respect to periods prior to the Closing Date, (iii) any
assets of any Employee Benefit Plan maintained by the Sellers, (iv) any
property, casualty, workers' compensation or other insurance policy or
related insurance services contract relating to the Sellers and any rights
of Sellers under such insurance policy or contract, other than rights or
proceeds under such insurance policies or contracts with respect to any
Assumed Liability or any casualty affecting any of the Purchased Assets,
(v) any rights of the Sellers under this Agreement or under any other
agreement between the Sellers and the Purchaser and (vi) any assets,
properties or rights of the Sellers listed on Schedule A.
"Excluded Liabilities" refers to, collectively, all obligations and
liabilities of the Sellers contingent or direct, known or unknown, other
than the Assumed Liabilities. Without
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limiting the generality of the foregoing, the Excluded Liabilities include
(i) any liability or obligation arising prior to, on or after the Closing
Date in connection with any Excluded Asset, (ii) any liability or
obligation arising prior to the Closing Date with respect to the Purchased
Assets, (iii) any liability or obligation arising under any Environmental
Law in connection with the ownership, use, maintenance or operation of any
of the present or former facilities or properties of the Sellers or
otherwise in connection with the operation of the Business, (iv) any
liability or obligation (whether assessed or unassessed) of the Sellers
with respect to Taxes for any period prior to the Closing Date, (v) any
liability or obligation with respect to any checks issued by the Sellers
prior to the Closing Date which are outstanding as of the Closing Date,
(vi) any liability or obligation of the Sellers with respect to employees
or employee benefits not specifically assumed by the Purchaser pursuant to
Section 8.2 and (vii) any liabilities listed on Schedule B.
"Founding Companies" has the meaning set forth in the first recital of this
Agreement.
"▇▇▇▇-▇▇▇▇▇ Act" has the meaning set forth in Section 8.5.
"Hazardous Wastes" and "Hazardous Substances" have the meanings set forth
in Section 3.5.
"IPO" has the meaning set forth in the fourth recital of this Agreement.
"IPO Price" has the meaning set forth in the fourth recital of this
Agreement.
"Intellectual Property" means all patents, trademarks, service marks,
copyrights and applications therefor, all trade names, brand names, logos,
inventions, discoveries, improvements, processes, technologies, know-how,
formulae, drawings, specifications, trade secrets, plans, computer software
(including source codes and other documentation thereof), files, programs,
notebooks and records, all other proprietary, technical and other
information, data and intellectual property, and all licenses, permits and
other rights to use the foregoing, whether patentable or unpatentable, used
or held for use in or associated with the ownership of the Purchased
Assets, or the conduct of the Business (or, if the Sellers do not own any
such proprietary, technical or other information, data and intellectual
property, a paid-up or royalty-free, irrevocable license, permit or other
right to use the same), including, without limitation, the Intellectual
Property described in Schedule 3.10.
"IRS" or "Internal Revenue Service" means the Internal Revenue Service of
the Department of the Treasury.
"June Balance Sheet" has the meaning set forth in Section 3.2.
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"Lease" means that certain Lease, attached to Schedule 3.8, associated with
the main facility of the Business.
"Liens" means all mortgages, liens, security interests, pledges, charges,
voting trusts, restrictions, encumbrances and claims of every kind.
"Material Adverse Effect" means a material adverse effect on the business,
operations, affairs, prospects, properties, assets or condition (financial
or otherwise) of a Person.
"Material Documents" has the meaning set forth in Section 3.17.
"Multiemployer Plan" has the meaning set forth in Section 3(37) of ERISA.
"Note" means Parent's 7% Installment Note due [Closing Date], 2000 in the
original principal amount of $350,000 and substantially in the form of
Annex III.
"Old ACG" has the meaning set forth in the first paragraph of this
Agreement.
"Old ACG Financial Statements" has the meaning set forth in Section 4.6.
"Parent Documents" has the meaning set forth in Section 4.9.
"Parent Stock" has the meaning set forth in the fourth recital of this
Agreement.
"Permit" means any permit, approval, authorization, license, franchise,
variance, certificate of occupancy or permission required by a governmental
authority under any applicable law.
"Person" means an individual, a corporation, a limited liability company, a
partnership, an association, a joint stock company, a trust, any
incorporated organization or a government or political subdivision thereof.
"Prohibited Activities" has the meaning set forth in Section 3.21.
"Proscribed Business" has the meaning set forth in Section 11.1(i).
"Purchased Assets" means all the Sellers' assets associated with the
Business or used, useful or held for use in connection with the operations
historically conducted by Sellers at or in conjunction therewith, all as
the same may exist on the Closing Date, including, without limitation, the
following:
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(i) all real property listed on Schedule 3.8 that is owned by the
Sellers, in each case together with all improvements, fixtures,
construction in process and all other easements, rights and
privileges appurtenant thereto and rights in respect thereof;
(ii) all inventories of supplies and spare parts, all equipment,
machinery, test equipment, computers, telephone systems,
expendables, vehicles, furniture, file cabinets, office materials
and other tangible personal property, including the items listed on
Schedule 3.6;
(iii) all of the Intellectual Property;
(iv) all right, title and interest in, to and under all Contracts and the
Lease (including all options to renew or extend the term of the
Lease or purchase all or any part of the leased property), subject
in each case to the terms of such Contracts and the Lease;
(v) all books and records of the Business (including such books and
records as are contained in computerized storage media), including
books and records related to inventories, purchasing, accounting,
sales, research, engineering, maintenance, repairs, marketing,
banking, Intellectual Property, shipping records, personnel files
for Transferred Employees and all files, records, literature and
correspondence;
(vi) to the extent legally assignable, all Permits;
(vii) to the extent any of the following relate to any Assumed Liability
or any of the Purchased Assets: claims, deposits, prepayments,
prepaid assets, refunds (excluding Tax refunds with respect to
periods prior to the Closing Date), causes of action, rights of
recovery, rights of set off and rights of recoupment of the Sellers
as of the Closing Date, including all rights of the Sellers under
any property, casualty, workers' compensation or other insurance
policy or related insurance services contract;
(viii) any other tangible assets of the Sellers which are used primarily in
the Business and which are of a nature not customarily reflected in
the books and records of a business, such as assets which have been
written off for accounting purposes but which are still used by or
of value to the Business;
(ix) all goodwill associated with the Business;
(x) all supplier lists, files, records and data relating to the
Business;
(xi) all customer lists, files, records and data relating to the
Business;
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(xii) all capital expenditure plans and studies, engineering studies,
accounting, real property, environmental, Tax, employment, health
and safety, and other books, records, files, ledgers, documents and
correspondence used or held for use in or associated with the
operation of the Purchased Assets, the ownership of the Purchased
Assets, or the conduct of the Business, other than Excluded Assets;
(xiii) all rights to the use of the name National Telecom;
(xiv) all rights under express or implied warranties from the providers of
goods and services in connection with the operation of the Purchased
Assets, the ownership of the Purchased Assets, or the conduct of the
Business; and
excluding in every instance all Excluded Assets.
"Purchase Price" means the aggregate amount of cash payable to the Seller
by the Purchaser pursuant to Section 2.3.
"Purchaser" has the meaning set forth in the first paragraph of this
Agreement.
"Registerable Securities" means the shares of Warrant Stock issuable upon
the Sellers' exercise of the Warrants.
"Restricted Securities" has the meaning set forth in the introductory
paragraph to Section 14.
"Return" means any return, report or statement (including any information
return) required to be filed for purposes of a particular Tax.
"Schedule" means each Schedule attached hereto, which shall reference the
relevant sections of this Agreement, on which parties hereto disclose
information as part of their respective representations, warranties,
covenants and agreements.
"SEC" means the United States Securities and Exchange Commission.
"Sellers" has the meaning set forth in the first paragraph of this
Agreement.
"Series H Warrants" means the 6,250 non-transferable warrants,
substantially in the form of Annex IV, to purchase a like number of shares
of Parent Stock at an initial exercise price equal to the IPO Price.
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"Series I Warrants" means the 6,250 non-transferable warrants,
substantially in the form of Annex V, to purchase a like number of shares
of Parent Stock at an initial exercise price equal to the IPO Price.
"Section 351 Exchange Plan" means the Section 351 Exchange Plan in the form
of Annex II
"Subsidiary" means, with respect to any Person, any corporation or other
organization, whether incorporated or unincorporated, of which (i) such
Person or any other Subsidiary of such Person is a general partner
(excluding partnerships, the general partnership interests of which held by
such Person or any Subsidiary of such Person do not have a majority of the
voting interest in such partnership) or (ii) at least a majority of the
securities or other interests having by their terms ordinary voting power
to elect a majority of the Board of Directors or others performing similar
functions with respect to such corporation or other organization is
directly or indirectly owned or controlled by such Person, by any one or
more of its Subsidiaries, or by such Person and one or more of its
Subsidiaries.
"Tax" or "Taxes" means all Federal, state, local or foreign net or gross
income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, bank shares, withholding, payroll, employment, excise, property,
deed, stamp, alternative or add on minimum, environmental or other taxes,
assessments, duties, fees, levies or other governmental charges of any
nature whatever, whether disputed or not, together with any interest,
penalties, additions to tax or additional amounts with respect thereto.
"Territory" has the meaning set forth in Section 11.1(i).
"Transferred Employee" has the meaning set forth in Section 8.2(ii).
"Warrants" means the Series H Warrants and the Series I Warrants.
"Warrant Stock" means the shares of Parent Stock issuable upon exercise of
the Warrants.
"1933 Act" means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
2. PURCHASE AND SALE; CLOSING; SECTION 351 EXCHANGE PLAN
2.1 Purchase and Sale of Purchased Assets. On the terms and subject to the
conditions set forth in this Agreement, at the Closing, the Purchaser will
purchase from the Sellers, and the Sellers will sell, transfer, assign, convey
and deliver to the Purchaser the Purchased Assets pursuant to the ▇▇▇▇ of Sale.
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2.2 Assumption of Liabilities. On the terms and subject to the conditions
set forth in this Agreement, at the Closing, the Purchaser will assume and
become responsible for all of the Assumed Liabilities pursuant to the
Assumption Agreement.
2.3 Purchase Price. The total consideration to be provided by the Purchaser
to the Sellers for the Purchased Assets shall be the sum of the following items
delivered at Closing: (i) immediately available funds in the amount of
$130,000.00, (ii) the assumption of the Assumed Liabilities, (iii) the Note,
(iv) the Series H Warrants and (v) the Series I Warrants.
2.4 Allocation of Purchase Price. The Sellers and the Purchaser agree to
allocate the Purchase Price and the Assumed Liabilities among the Purchased
Assets and the Sellers' covenant not to compete in accordance with Schedule
2.4. The parties agree to file all Tax reports, Returns and claims and other
statements consistent with the allocation set forth on Schedule 2.4 (and in
particular to report the information required by Section 1060(b) of the Code)
in a manner consistent with such allocation and shall not make any inconsistent
written statement or take any inconsistent position on any Returns, in any
refund claim, during the course of any IRS or other Tax audit, for any
financial or regulatory purpose, in any litigation or investigation or
otherwise, so long as there exists a reasonable basis in law to maintain such
position. Each party shall notify the other party if it receives notice that
the IRS proposes any allocation different from Schedule 2.4.
2.5 Closing. The closing of the transactions contemplated by this Agreement
("Closing") shall take place on the date of the closing of the sale of shares
of the Purchaser Stock in the IPO, or such other date as the parties hereto may
designate (the "Closing Date"), at such place as the parties may mutually
agree.
3. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF THE SELLERS
Each of the Sellers jointly and severally, represent, warrant, covenant and
agree (i) that all of the following representations and warranties in this
Section 3 are true at the date of this Agreement and, subject to Section 5.7,
shall be true at the Closing Date and (ii) that all of the covenants and
agreements in this Section 3 shall be complied with or performed at and as of
the Closing Date and (iii) that none of the following representations and
warranties shall survive the Closing Date.
3.1 Authority. The Sellers have full authority to execute and deliver this
Agreement and this Agreement constitutes the legal, valid and binding
obligation of the Sellers.
3.2 Financial Statements. Attached hereto as Schedule 3.2 are copies of the
following accrual basis financial statements of the Business beginning with the
year ended December 31, 1994
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(the "Business Financial Statements"): the Business' unaudited Balance Sheets
as of December 31, 1996, 1995, and 1994 and its unaudited Statements of Income
and Retained Earnings and any related notes thereto for each of the years in
the three-year period ended December 31, 1996; the unaudited Balance Sheet of
the Business as of June 30, 1997 ("June Balance Sheet") (such June 30, 1997
Balance Sheet being hereinafter referred to as the "Balance Sheet Date"). The
Business Financial Statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods indicated (except as noted thereon or on Schedule 3.2). Except as set
forth on Schedule 3.2, the foregoing Balance Sheets present fairly the
financial position of the Business as of the dates indicated thereon, and the
foregoing Statements of Income and Retained Earnings present fairly the results
of operations for the periods indicated thereon in accordance with generally
accepted accounting principles and in conformity with generally recognized
industry standards.
3.3 Liabilities and Obligations. The Sellers have delivered to the
Purchaser an accurate list (which is set forth on Schedule 3.3) as of the
Balance Sheet Date of (i) all liabilities of the Sellers and the Business that
are not reflected on the June Balance Sheet or otherwise reflected in the
Business Financial Statements at the Balance Sheet Date and (ii) all loan
agreements, indemnity or guaranty agreements, bonds, mortgages, Liens, pledges
or other security agreements. Except as set forth on Schedule 3.3, since the
Balance Sheet Date neither of the Sellers nor the Business has incurred any
material liabilities of any kind, character and description, whether accrued,
absolute, secured or unsecured, contingent or otherwise, other than liabilities
incurred in the ordinary course of business. The Sellers have also disclosed to
the Purchaser on Schedule 3.3, in the case of those contingent liabilities of
either Sellers or the Business related to pending or threatened litigation or
other liabilities which are not fixed or otherwise accrued or reserved, the
following information:
(w) a summary description of the liability together with the
following:
(1) copies of all relevant documentation relating thereto;
(2) amounts claimed and any other action or relief sought; and
(3) name of claimant and all other parties to the claim, suit or
proceeding;
(x) the name of each court or agency before which such claim, suit or
proceeding is pending;
(y) the date such claim, suit or proceeding was instituted; and
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(z) a good faith and reasonable estimate of the maximum amount, if
any, which is likely to become payable with respect to each such liability.
If no estimate is provided, the estimate shall for purposes of this
Agreement be deemed to be zero.
3.4 Permits and Intangibles. The Sellers hold all Permits the absence of
any of which could have a Material Adverse Effect on the Business, and the
Sellers have delivered to the Purchaser an accurate list and summary
description (which is set forth on Schedule 3.4) of all Permits owned or held
by the Sellers associated with the Business (it being understood and agreed
that a list of all environmental Permits and other environmental approvals is
set forth on Schedule 3.5). To the knowledge of the Sellers, (i) the Permits
listed on Schedules 3.4 and 3.5 are valid, and (ii) the Sellers have not
received any notice that any governmental authority intends to cancel,
terminate or not renew any such Permit. The Sellers have conducted and are
conducting the Business in compliance with the requirements, standards,
criteria and conditions set forth in the Permits listed on Schedules 3.4 and
3.5 and are not in violation of any of the foregoing except where such
non-compliance or violation would not have a Material Adverse Effect on the
Sellers. Except as specifically provided in Schedule 3.4, the transactions
contemplated by this Agreement will not result in a default under or a breach
or violation of, or adversely affect the rights and benefits afforded to the
Sellers by, any such Permit.
3.5 Environmental Matters. Except as set forth on Schedule 3.5, (i) the
Sellers have complied with and are in compliance with all Federal, state, local
and foreign statutes (civil and criminal), laws, ordinances, regulations,
rules, notices, Permits, judgments, orders and decrees applicable to the
Business or any of Sellers properties, assets, operations and businesses
relating to environmental protection (collectively "Environmental Laws")
including, without limitation, Environmental Laws relating to air, water, land
and the generation, storage, use, handling, transportation, treatment or
disposal of Hazardous Wastes and Hazardous Substances including petroleum and
petroleum products (as such terms are defined in any applicable Environmental
Law); (ii) the Sellers have obtained and adhered to all Permits necessary to
treat, transport, store, dispose of and otherwise handle Hazardous Wastes and
Hazardous Substances, a list of all of which Permits is set forth on Schedule
3.5, and have reported to the appropriate authorities, to the extent required
by all Environmental Laws, all past and present sites owned and operated by the
Sellers where Hazardous Wastes or Hazardous Substances have been treated,
stored, disposed of or otherwise handled; (iii) there have been no releases or
threats of releases (as defined in Environmental Laws) at, from, in or on any
property owned or operated by the Sellers except as permitted by Environmental
Laws; (iv) the Sellers know of no on-site or off-site location to which the
Sellers have transported or disposed of Hazardous Wastes and Hazardous
Substances or arranged for the transportation of Hazardous Wastes and Hazardous
Substances, which site is the subject of any Federal, state, local or foreign
enforcement action or any other investigation which could lead to any claim
against the Sellers or the Purchaser, for any clean-up cost, remedial work,
damage to natural resources, property damage or personal injury, including, but
not limited to, any claim under the
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Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended; and (v) the Sellers have no contingent liability in connection with
any release of any Hazardous Waste or Hazardous Substance into the environment.
3.6 Personal Property. The Sellers have delivered to the Purchaser an
accurate list (which is set forth on Schedule 3.6) of (i) all personal property
included (or that will be included) in "depreciable plant, property and
equipment" on the balance sheet of the Business, (ii) all personal property
owned or currently leased by the Sellers utilized in connection with the
Business with a value in excess of $2,500 (x) as of the Balance Sheet Date and
(y) acquired since the Balance Sheet Date and (iii) all leases and agreements
in respect of personal property, including, in the case of each of (i), (ii)
and (iii), (1) true, complete and correct copies of all such leases and (2) an
indication as to which assets are currently owned, or were formerly owned,
solely for the personal use of the Sellers. Except as set forth on Schedule
3.6, (a) all personal property used by the Sellers in the Business is either
owned by the Sellers or will be owned by the Sellers upon payment on or before
the Closing Date of the required amount to own such property pursuant to each
lease included on Schedule 3.6, (b) all of the personal property listed on
Schedule 3.6 is in good working order and condition, ordinary wear and tear
excepted.
3.7 Significant Customers; Material Contracts and Commitments. The Sellers
have delivered to the Purchaser an accurate list (which is set forth on
Schedule 3.7) of all significant customers, or Persons that are sources of a
significant number of customers, it being understood and agreed that a
"significant customer," for purposes of this Section 3.7, means a customer (or
Person) (i) representing 2% or more of the Sellers' annual revenues as of the
Balance Sheet Date or (ii) reasonably expected to represent 2% or more of the
Business' revenues during the twelve-month period ending June 30, 1998. Except
to the extent set forth on Schedule 3.7, none of the Business' significant
customers (or Persons that are sources of a significant number of customers)
has canceled or substantially reduced or, to the knowledge of the Sellers, is
currently attempting or threatening to cancel a contract or substantially
reduce utilization of the services provided by the Business.
The Sellers have listed on Schedule 3.7 all material contracts, commitments
and similar agreements to which the Sellers are a party in connection with the
Business or by which the Sellers or any of the properties associated with the
Business are bound (including, but not limited to, any contracts with
significant customers, joint venture or partnership agreements, contracts with
any labor organizations, strategic alliances and options to purchase land),
other than agreements listed on Schedule 3.3, 3.6 or 3.8, (x) in existence as
of the Balance Sheet Date and (y) entered into since the Balance Street Date,
and in each case have delivered true, complete and correct copies of such
agreements to the Purchaser. The Sellers have complied with all material
commitments and obligations pertaining to each of them, and are not in default
under any contract or agreement listed on Schedule 3.7 and no notice of default
or termination under any such contract or agreement has been received. The
Sellers have also indicated on Schedule 3.7 a summary description of all plans
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or projects, in connection with the Business, involving the acquisition of any
personal property, business or assets requiring, in any event, the payment of
more than $2,500 by the Sellers.
Except as set forth on Schedule 3.7, all of the contracts, commitments and
similar agreements listed on Schedule 3.7 are in full force and effect and
constitute valid and binding agreements of the parties (and their successors)
thereto in accordance with their respective terms.
3.8 Real Property. Schedule 3.8 includes a list of all real property owned
or held pursuant to leases by the Sellers in connection with the Business (i)
as of the Balance Sheet Date and (ii) acquired since the Balance Sheet Date,
and all other property, if any, used by the Sellers in the conduct of the
Business. The Sellers have good and insurable title to such real property owned
by them, and will have good and insurable title in fee simple to any real
property currently leased by them in the conduct of the Business upon Closing,
except for the Lease, including those real properties reflected on Schedule
3.8, subject to no Lien except for:
(w) Liens reflected on Schedules 3.3 or 3.7 as securing specified
liabilities (with respect to which no material default exists);
(x) Liens for current Taxes not yet payable and assessments not in
default;
(y) easements for utilities serving the property only; and
(z) easements, covenants and restrictions and other exceptions to
title shown of record in the office of the County Clerks in which the
properties, assets and leasehold estates are located which do not adversely
affect in any material respect the current use of the property.
Schedule 3.8 contains, without limitation, (1) true, complete and correct
copies of all title reports and title insurance policies currently in
possession of the Sellers with respect to real property owned by the Sellers
used in the conduct of the Business, (2) true, complete and correct copies of
all leases and agreements in respect of such real property leased by the
Sellers (which copies are attached to Schedule 3.8), and (3) an indication as
to which such properties, if any, are currently owned, or were formerly owned,
solely for the personal use of the Sellers.
The Lease included on Schedule 3.8 is in full force and effect and constitutes
the valid and binding agreement of the parties (and their successors) thereto
in accordance with its terms.
3.9 Insurance. The Sellers have delivered to the Purchaser, as set forth on
and attached to Schedule 3.9, (i) an accurate list as of the Balance Sheet Date
of all insurance policies carried by the Sellers, (ii) an accurate list of all
insurance loss runs on workers compensation claims received
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for the past three policy years and (iii) true, complete and correct copies of
all insurance policies currently in effect. Such insurance policies evidence
all of the insurance that the Sellers are required to carry pursuant to all of
its contracts and other agreements and pursuant to all applicable laws. All of
such insurance policies are currently in full force and effect and shall remain
in full force and effect through the Closing Date. No insurance carried by the
Sellers has ever been canceled by the insurer and the Sellers have never been
denied coverage.
3.10 Intellectual Property. Except as set forth in Schedule 3.10, the
Sellers either own or have the right to use by license, sublicense, agreement,
or permission all of the Sellers' inventions, improvements, domestic and
foreign patents and applications therefor, customer lists, copyrights,
copyright registrations and applications therefor, trademarks, trade names,
service marks, trade dress, logos, rights in computer software, and all rights
granted or retained in licenses under any of the foregoing which are used in
connection with the conduct of the Business as presently conducted. Except as
set forth on Schedule 3.10, none of the Intellectual Property which is used in
connection with the conduct of the Business is, or has been in the past five
years involved in, or the subject of, any pending or, to the knowledge of the
Sellers, threatened infringement, interference, opposition or similar action,
suit or proceeding or, to the knowledge of Sellers, has otherwise been
challenged in any way. Except as set forth on Schedule 3.10, the Intellectual
Property will afford the Purchaser the right to use all technology, know-how,
technical and other information, data and other intellectual property, whether
patentable or unpatentable, and whether owned by the Sellers, any other Person
or others, necessary for the conduct of the Business in a manner consistent
with the Sellers' prior practice. The license fees, royalties and other amounts
payable by the Sellers in connection with the use of the Intellectual Property,
together with the terms and conditions on which and periods for which such
amounts are payable, are described in Schedule 3.10. Any licenses, fees,
royalties or other amounts payable as a result of the transfer of any item of
Intellectual Property by the Sellers to the Purchaser pursuant to this
Agreement shall be paid by the Purchaser.
3.11 Labor Relations. Except as set forth on Schedule 3.11, the Sellers are
not a party to any collective bargaining agreement; and there are no
controversies pending or, to the Sellers' knowledge, threatened between the
Sellers and any of its current or former employees or any labor or other
collective bargaining unit representing any current or former employee of the
Sellers that could reasonably be expected to result in a labor strike, dispute,
slow-down or work stoppage or otherwise have a Material Adverse Effect. Sellers
are not aware of any organizational effort presently being made or threatened
by or on behalf of any labor union with respect to employees of the Sellers. To
the Sellers' knowledge, no executive, key employee or group of employees of the
Sellers have any plan to terminate employment with the Sellers.
3.12 Employee Benefits.
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(i) Schedule 3.12 lists all Employee Benefit Plans that the Sellers
maintain or to which the Sellers contribute for the benefit of any current
or former employee of the Sellers.
(ii) Neither the Sellers nor any other organization that is a member
of a controlled group of organizations within the meaning of Code Sections
414(b), (c), (m) or (o) of which the Sellers are a member ("Controlled
Group Member") contributes, or has contributed in the past, to any Employee
Pension Benefit Plan subject to Title IV of ERISA or any Multiemployer Plan
for the benefit of any current or former employee of the Sellers or any
Controlled Group Member.
(iii) The Sellers have delivered to the Purchaser complete and
accurate copies of all plans or summary plan descriptions for each Employee
Benefit Plan listed on Schedule 3.12. For each Employee Pension Benefit
Plan listed on Schedule 3.12 intended to qualify under Section 401(a) of
the Code, the Sellers have delivered to the Purchaser (w) the three most
recent annual reports, (x) the three most recent annual and periodic
accountings of plan assets, (y) the most recent determination letter
received from the IRS and (z) where applicable, the three most recent
actuarial valuations.
(iv) There are no liabilities, breaches, violations or defaults under
any Employee Benefit Plan sponsored or maintained by the Sellers or any
Controlled Group Member that would subject the Purchaser to any Taxes or
other liabilities.
(v) With respect to each Employee Welfare Benefit Plan listed on
Schedule 3.12, the Sellers or an Affiliate has complied with the
requirements of Code Section 4980B.
3.13 Tax Matters.
(i) The Sellers, with respect to the Business, are currently taxed as
a proprietorship. The Sellers have filed all Tax Returns that they were
required to file. All such Tax Returns filed by the Sellers were correct
and complete in all material respects or reserved for on its books. All
Taxes owed by the Sellers (whether or not shown on any Tax Return) have
been paid. Except as set forth on Schedule 3.13, the Sellers are not
currently the beneficiaries of any extension of time within which to file
any Tax Return. Since January 1, 1994, no claim with respect to the Sellers
have been made by an authority in a jurisdiction where the Sellers do not
file Tax Returns that they are or may be subject to taxation by that
jurisdiction. There is no Lien affecting any of the Purchased Assets that
arose in connection with any failure or alleged failure to pay any Tax.
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(ii) The Sellers have withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor or other party.
(iii) The Sellers do not expect any authority to assess any material
amount of additional Taxes for any period for which Tax Returns have been
filed. There is no material dispute or claim concerning any Tax liability
of the Sellers either claimed or raised by any authority in writing or as
to which Sellers have knowledge based upon direct inquiry by any agent of
such authority. Schedule 3.13(iii) lists all income Tax Returns of the
Sellers for taxable periods ended on or after January 1, 1992, indicates
those Tax Returns of which the Sellers are aware that have been audited and
indicates those Tax Returns that currently are the subject of audit. The
Sellers have delivered to the Purchaser correct and complete copies of all
Tax Returns, examination reports and statements of deficiencies assessed
against or agreed to by the Sellers for any taxable period ended on or
after January 1, 1993.
(iv) Except as set forth on Schedule 3.13(iv), the Sellers have not
waived any statute of limitations in respect of Taxes or agreed to any
extension of time with respect to a Tax assessment or deficiency.
(v) The Sellers have not made any payments, are not obligated to make
any payments and are not a party to any agreement that under certain
circumstances could obligate it to make any payments that will not be fully
deductible under Section 280G of the Code.
(vi) Except as set forth on Schedule 3.13(vi), none of the Purchased
Assets secures any debt, the interest on which is tax-exempt under Section
103(a) of the Code. None of the Purchased Assets are "tax-exempt use
property" within the meaning of Section 168(h) of the Code. The
transactions contemplated by this Agreement are not subject to Tax
withholding pursuant to the provisions of Section 3406 or Subchapter A of
Chapter 3 of the Code or any other provision of applicable law.
(vii) The Sellers have not received a ruling from any taxing authority
or entered into any agreement regarding Taxes with any taxing authority
that would, individually or in the aggregate, apply to the Business, or the
Purchased Assets or the Purchaser after the Closing Date.
3.14 Prior or Preferential Rights. There are no prior or preferential
rights, rights of first refusal, or other similar rights in any party (other
than the Purchaser) to purchase or otherwise acquire the Business or any
Purchased Assets.
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3.15 Sufficiency of Assets. The Purchased Assets are all of the assets,
properties and rights of the Sellers (other than the Excluded Assets and
Excluded Liabilities) whether tangible or intangible, real, personal or mixed,
and known or unknown, and wherever located, used or held for use in or
associated with the conduct of the Business. The Purchased Assets are
sufficient to conduct the Business on a basis consistent with the Sellers'
prior practice, provided Purchaser supplies working capital to the Business in
an amount comparable to that maintained by the Sellers prior to the Closing.
3.16 Conformity with Law; Litigation. Except to the extent set forth on
Schedule 3.5 or 3.16, the Sellers are not in violation of any law or regulation
or any order of any court or Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over the Sellers which would have a Material Adverse Effect; and
except to the extent set forth on Schedule 3.3 or 3.5, there are no material
claims, actions, suits or proceedings, commenced or, to the knowledge of the
Sellers, threatened, against or affecting the Sellers, at law or in equity, or
before or by any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction over
the Sellers and no notice of any claim, action, suit or proceeding, whether
pending or threatened, has been received by the Sellers. The Sellers have
conducted and are conducting the Business in substantial compliance with the
requirements, standards, criteria and conditions set forth in applicable
Federal, state and local statutes, ordinances and Permits, including all such
Permits set forth on Schedules 3.4 and 3.5, and are not in violation of any of
the foregoing which might have a Material Adverse Effect.
3.17 No Violations. Neither the Sellers nor, to the knowledge of the
Sellers, any other party thereto, are in default under any Contract, Permit,
the Lease or other instrument set forth on Schedule 3.4, 3.5, 3.6, 3.7 or 3.8,
or any other material agreement to which it is a party or by which its
properties are bound (the "Material Documents"); and, except as set forth in
Schedule 3.17, (i) the rights and benefits of the Sellers under the Material
Documents will not be materially adversely affected by the transactions
contemplated hereby and (ii) the execution of this Agreement and the
performance of the obligations hereunder and the consummation of the
transactions contemplated hereby will not result in any material violation or
breach or constitute a default under, any of the terms or provisions of the
Material Documents. Except as set forth on Schedule 3.17, none of the Material
Documents requires notice to, or the consent or approval of, any governmental
agency or other third party with respect to any of the transactions
contemplated hereby in order to remain in full force and effect, and
consummation of the transactions contemplated hereby will not give rise to any
right to termination, cancellation or acceleration or loss of any right or
benefit. Except as set forth on Schedule 3.17, none of the Material Documents
prohibits the use or publication by the Sellers or the Purchaser of the name of
any other party to such Material Document, and none of the Material Documents
prohibits or restricts the Sellers in the conduct of the Business from freely
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providing services to any other customer or potential customer of the Business,
the Purchaser or any affiliate of the Purchaser.
3.18 Government Contracts. Except as set forth on Schedule 3.18, the
Sellers, in connection with the Business, are not a party to any governmental
contract subject to price determination or renegotiation.
3.19 Absence of Changes. Since the Balance Sheet Date, except as set forth
on Schedule 3.7 or 3.19, there has not been:
(i) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income of the Business or the
Sellers;
(ii) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties used in connection
with the Business;
(iii) any increase in the compensation, bonus, sales commissions or
fee arrangement payable or to become payable by the Sellers in the conduct
of the Business to any employees, consultants or agents, except for
ordinary and customary bonuses and salary increases for employees in
accordance with past practice;
(iv) any work interruptions, labor grievances or claims filed, or any
event or condition of any character, materially adversely affecting the
Business of the Sellers;
(v) any sale or transfer, or any agreement to sell or transfer, any
material assets, property or rights used in connection with the conduct of
the Business of the Sellers to any Person;
(vi) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to the Sellers in connection with the Business;
(vii) any plan, agreement or arrangement granting any preferential
right to purchase or acquire any interest in any of the assets, property or
rights of the Sellers used in connection with the Business or requiring
consent of any party to the transfer and assignment of any such assets,
property or rights;
(viii) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, right or asset outside of
the ordinary course of the Business;
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(ix) any waiver of any material rights or claims of the Sellers in
connection with the Business;
(x) any material breach, amendment or termination of any contract,
agreement, license, permit or other right to which the Sellers are a party;
(xi) any transaction by the Sellers outside the ordinary course of the
Business which could have a Material Adverse Effect;
(xii) any cancellation or termination of a material contract with a
customer or client prior to the scheduled termination date; or
(xiii) any other distribution of property or assets, associated with
the Business, by the Sellers.
3.20 Disclosure. This Agreement, including the Schedules hereto, together
with all other documents and information made available to the Purchaser or
Parent and their representatives in writing pursuant hereto, present fairly the
Business and operations associated therewith by the Sellers for the time
periods with respect to which such information was requested. The Sellers'
rights under the documents delivered pursuant hereto would not be materially
adversely affected by, and no statement made herein would be rendered untrue in
any material respect by, any other document to which the Sellers is a party, or
to which its properties are subject, or by any other fact or circumstance
regarding the Sellers (which fact or circumstance was, or should reasonably,
after due inquiry, have been known to the Sellers) that is not disclosed
pursuant hereto or thereto.
3.21 Prohibited Activities. Except as set forth on Schedule 3.21, the
Sellers have not, between the Balance Sheet Date and the date of this
Agreement, taken any of the actions set forth in Section 5.3 ("Prohibited
Activities").
3.22 Draft Registration Statement. The text of, and the financial
statements and other financial information contained in, the Draft Registration
Statement, insofar as they were provided by the Sellers expressly for inclusion
therein but not otherwise, are true, accurate and complete in all material
respects and do not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading.
4. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF THE PURCHASER,
PARENT AND OLD ACG
The Purchaser, Parent and Old ACG, jointly and severally represent,
warrant, covenant and agree (i) that all of the following representations and
warranties in this Section 4 are true at the date
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of this Agreement and, subject to Section 5.7, shall be true at the Closing
Date and (ii) that all of the covenants and agreements in this Section 4 shall
be complied with or performed at and as of the Closing Date. None of the
representations and warranties of the Purchaser, Parent and Old ACG in this
Agreement shall survive the Closing.
4.1 Due Organization. The Purchaser, Parent and Old ACG are corporations
duly organized, validly existing and in good standing under the laws of the
state of Delaware, and are duly authorized and qualified to do business under
all applicable laws, regulations, ordinances and orders of public authorities
to carry on its business in the places and in the manner as now conducted,
except where the failure to be so authorized or qualified would not have a
Material Adverse Effect. True, complete and correct copies of the Charter
Documents and By-laws, each as amended, of the Purchaser, Parent and Old ACG
(the "Charter Documents") are attached hereto as Schedule 4.1.
4.2 Authorization. Each of the Purchaser, Parent and Old ACG has all
requisite corporate power and authority to enter into the Agreement and to
perform its obligations thereunder. The execution and delivery of the Agreement
by each of the Purchaser, Parent and Old ACG and its consummation of the
transactions contemplated thereby have been duly authorized by all necessary
corporate action of the Purchaser, Parent and Old ACG, respectively. The
Agreement has been duly executed and delivered by the Purchaser, Parent and Old
ACG, and is a valid and binding obligation of the Purchaser, Parent and Old ACG
enforceable against the Purchaser, Parent and Old ACG in accordance with its
terms.
4.3 Capital Stock. The authorized capital stock of Old ACG is as set forth
on Schedule 4.3. All of the issued and outstanding shares of the capital stock
of Old ACG (i) have been duly authorized and validly issued, (ii) are fully
paid and nonassessable, (iii) are owned of record and beneficially by the
persons set forth on Schedule 4.3, and (iv) were offered, issued, sold and
delivered by Old ACG in compliance with all applicable state and Federal laws
concerning the offer, issuance, sale and delivery of securities. Further, none
of such shares was issued in violation of the preemptive rights of any past or
present stockholder of Old ACG. Subject to the consummation of the reverse
stock split referred to in the eight recital of this Agreement and the
consummation of Parent's acquisition of Old ACG in the reverse triangular
merger, the capitalization of Parent will be identical to the capitalization of
Old ACG immediately prior to the consummation of the IPO.
4.4 Transactions in Capital Stock, Organization Accounting. Except as set
forth on Schedule 4.3 or contemplated to be issued in connection with the
acquisition of the Founding Companies, (i) no option, warrant, call, conversion
right or commitment of any kind exists which obligates Old ACG to issue any of
its authorized but unissued capital stock and (ii) Old ACG has no obligation
(contingent or otherwise) to purchase, redeem or otherwise acquire any of its
equity securities or any interests therein or to pay any dividend or make any
distribution in respect thereof. Schedule 4.3 also includes complete and
accurate copies of all stock option or stock purchase plans,
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including a list, accurate as of the date hereof, of all outstanding options,
warrants or other rights to acquire shares of capital stock of Old ACG.
4.5 Subsidiaries. Neither Parent nor Old ACG has any Subsidiaries, except
for each of the companies identified on Schedule 4.5. Except as set forth in
the preceding sentence, neither Parent nor Old ACG presently owns, of record or
beneficially, or controls, directly or indirectly, any capital stock,
securities convertible into capital stock or any other equity interest in any
corporation, association or business entity, and neither Parent, nor Old ACG,
directly or indirectly, is a participant in any joint venture, partnership or
other non-corporation entity.
4.6 Financial Statements. The Draft Registration Statement contains copies
of the following financial statements of Old ACG, which reflect the results of
its operations from inception in June 1996 (the "Old ACG Financial
Statements"): Old ACG's audited Balance Sheet as of December 31, 1996 and its
unaudited Balance Sheet as of June 30, 1997, and audited Statements of
Operations, Stockholder's Equity and Cash Flows and related notes thereto for
the period from June 10, 1996 through December 31, 1996 and unaudited
Statements of Operations, Stockholder's Equity and Cash Flows for the six
months ended June 30, 1997. The audited Old ACG Financial Statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the period indicated (except as noted thereon or
on Schedule 6.6). The unaudited Old ACG Financial Statements were prepared in
accordance with the books and records of Old ACG in accordance with accounting
principles consistently applied. Old ACG's Balance Sheets present fairly the
financial position of Old ACG as of the dates indicated thereon, and Old ACG's
Statements of Operations, Stockholder's Equity and Cash Flows included in the
Old ACG Financial Statements present fairly the results of operations for the
periods indicated thereon in accordance with generally accepted accounting
principles. Old ACG's Financial Statements at and for the period ended December
31, 1996 have been examined by KPMG Peat Marwick LLP, independent public
accountants.
4.7 Liabilities and Obligations. Except as set forth on Schedule 4.7,
neither the Parent nor Purchaser nor Old ACG has any material liabilities,
contingent or otherwise, except as set forth in or contemplated by this
Agreement and except for fees incurred in connection with the transactions
contemplated hereby and transactions related to the acquisition of other
companies in preparation for the IPO.
4.8 Conformity with Law; Litigation. Except to the extent set forth on
Schedule 4.8, neither the Parent nor Purchaser nor Old ACG is in violation of
any law or regulation or any order of any court or Federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over it which would have a Material Adverse
Effect; and except to the extent set forth in Schedule 4.8, there are no
material claims, actions, suits or proceedings, pending or, to the knowledge of
the Parent or Purchaser or Old ACG, threatened,
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against or affecting the Parent or Purchaser or Old ACG, at law or in equity,
or before or by any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction over
it and no notice of any claim, action, suit or proceeding, whether pending or
threatened, has been received. Old ACG has conducted and is conducting its
business in substantial compliance with the requirements, standards, criteria
and conditions set forth in applicable Federal, state and local statutes,
ordinances, Permits, licenses, orders, approvals, variances, rules and
regulations and is not in violation of any of the foregoing which might have a
Material Adverse Effect.
4.9 No Violations. Neither the Parent nor Purchaser nor Old ACG is in
violation of any Charter Document. Neither the Parent, Purchaser or Old ACG
nor, to the knowledge of the Parent, Purchaser or Old ACG, any other party
thereto, is in default under any lease, instrument, agreement, license, or
permit to which the Parent or Purchaser or Old ACG is a party, or by which the
Parent or Purchaser or Old ACG, or any of its respective properties, are bound
(collectively, the "Parent Documents"); and (i) the rights and benefits of the
Parent or Purchaser or Old ACG under the Parent Documents will not be adversely
affected by the transactions contemplated hereby and (ii) the execution of this
Agreement and the performance of the obligations hereunder and the consummation
of the transactions contemplated hereby will not result in any material
violation or breach or constitute a default under, any of the terms or
provisions of the Parent Documents or the Charter Documents. Except as set
forth on Schedule 4.9, none of the Parent Documents requires notice to, or the
consent or approval of, any governmental agency or other third party with
respect to any of the transactions contemplated hereby in order to remain in
full force and effect, and consummation of the transactions contemplated hereby
will not give rise to any right to termination, cancellation or acceleration or
loss of any right or benefit.
4.10 Business; Real Property; Material Agreement. For the reasons set forth
in the Old ACG Financial Statements and except as disclosed therein or on
Schedule 4.10, neither Parent, Purchaser or Old ACG has conducted any material
business since the date of its inception, neither the Purchaser, Parent nor Old
ACG owns, nor have either at any time owned, any real property or any material
personal property, and neither the Purchaser nor the Parent nor ACG is a party
to any material agreement.
4.11 Taxes.
(i) Neither the Purchaser nor the Parent has been required to file any
Federal, state and other Tax Returns for any fiscal period ended on or
before the Balance Sheet Date.
(ii) Old ACG has filed all Tax Returns that it was required to file.
All such Tax Returns filed by Old ACG were correct and complete in all
material respects. All Taxes owed by Old ACG (whether or not shown on any
Tax Return) have been paid. Old ACG is
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not currently the beneficiary of any extension of time within which to
file any Tax Return. Since Old ACG's formation in June 1996 , no claim with
respect to Old ACG has been made by an authority in a jurisdiction where
Old ACG does not file Tax Returns that it is or may be subject to taxation
by that jurisdiction. There is no Lien affecting any of Old ACG's assets
that arose in connection with any failure or alleged failure to pay any
Tax.
(iii) Old ACG has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder or other party.
(iv) Old ACG does not expect any authority to assess any material
amount of additional Taxes against it for any period for which Tax Returns
have been filed. There is no material dispute or claim concerning any Tax
liability of Old ACG either claimed or raised by any authority in writing
or as to which Old ACG has knowledge based upon direct inquiry by any agent
of such authority.
4.12 Draft Registration Statement. The text of and the financial statements
and other financial information contained in the Draft Registration Statement,
insofar as they relate to Parent or Old ACG but not otherwise, are true,
accurate and complete in all material respects and do not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading.
5. OTHER COVENANTS PRIOR TO CLOSING
5.1 Access and Cooperation; Due Diligence; Audits.
(i) Between the date of this Agreement and the Closing Date, the
Sellers will afford to the officers and authorized representatives of the
Purchaser, Parent or Old ACG access to all of the Business' sites,
properties, books and records and furnish the Purchaser, Parent or Old ACG
with such additional financial and operating data and other information as
to the business and properties of the Sellers as the Purchaser, Parent or
Old ACG may from time to time reasonably request. The Sellers will
cooperate with the Purchaser, Parent, or Old ACG, its representatives,
auditors and counsel in the preparation of any documents or other material
that may be required in connection with any documents or materials required
by this Agreement, including the preparation for and consummation of the
IPO. The Purchaser, Parent or Old ACG will treat all information obtained
in connection with the negotiation and performance of this Agreement as
confidential in accordance with the provisions of Section 10.
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(ii) Between the date of this Agreement and the Closing, the
Purchaser, Parent or Old ACG will afford to the Sellers and to the
authorized representatives of the Sellers access to all of the sites,
properties, books and records of Purchaser, Parent or Old ACG and will
furnish the Sellers with such additional financial and operating data and
other information as to the business and properties of Purchaser, Parent or
Old ACG as the Sellers may from time to time reasonably request. The
Purchaser, Parent or Old ACG will cooperate with the Sellers, their
representatives, auditors and counsel in the preparation of any documents
or other material which may be required in connection with (x) any
documents or materials required by this Agreement or (y) the preparation
for and consummation of the IPO. The Sellers and their respective
authorized representatives will treat all information obtained in
connection with the negotiation and performance of this Agreement as
confidential in accordance with the provisions of Section 10.
(iii) The Sellers agree to permit an independent accounting firm
selected by the Purchaser, Parent or Old ACG to audit and render a report
on the Business Financial Statements and the comparable financial
statements at and for the year ending December 31, 1996, and any other
period selected by the Purchaser, Parent or Old ACG, provided that all the
costs and expenses of such audits are paid by the Purchaser, Parent or Old
ACG.
5.2 Conduct of Business Pending Closing. Unless otherwise approved in
writing by the Parent or Old ACG, between the date of this Agreement and the
Closing Date, the Sellers will:
(i) carry on the Business in substantially the same manner as it has
heretofore and not introduce any material new method of management,
operation or accounting;
(ii) maintain the properties and facilities used in the conduct of the
Business, including those held under lease, in as good working order and
condition as at present, ordinary wear and tear excepted;
(iii) perform in all material respects all of its respective
obligations under agreements relating to or affecting the assets,
properties or rights associated with the Business;
(iv) keep in full force and effect present insurance policies or other
comparable insurance coverage;
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(v) use its reasonable best efforts to maintain and preserve the
Business, retain the present key employees used in the conduct of the
Business and maintain its respective relationships with suppliers,
customers and others having business relations with the Sellers in
connection with the Business;
(vi) maintain compliance with all material Permits, laws, rules and
regulations, consent orders, and all other orders of applicable courts,
regulatory agencies and similar governmental authorities;
(vii) maintain present debt instruments and the Lease and not enter
into new or amended debt or lease instruments; and
(viii) maintain or reduce present salaries and commission levels for
all employees and agents except for ordinary and customary bonus and salary
increases for employees in accordance with past practices.
5.3 Prohibited Activities. Between the date of this Agreement and the
Closing Date, the Sellers will not, without prior written consent of the
Parent:
(i) enter into any contract or commitment or incur or agree to incur
any liability or make any capital expenditures, except if it is in the
normal course of business (consistent with past practice), or involves the
purchase of any real or personal property pursuant to a lease attached to a
Schedule hereto, or involves an amount not in excess of $2,500;
(ii) create, assume or permit to exist any Lien upon any asset or
property whether now owned or hereafter acquired, except (x) with respect
to purchase money Liens incurred in connection with the acquisition of
equipment with an aggregate cost not in excess of $2,500 necessary or
desirable for the conduct of its businesses, (y) (1) Liens for Taxes either
not yet due or being contested in good faith and by appropriate proceedings
(and for which contested Taxes adequate reserves have been established and
are being maintained) or (2) materialmen's, mechanics', workers',
repairmen's, employees' or other like Liens arising in the ordinary course
of business, or (3) Liens set forth on Schedule 3.3 or 3.7;
(iii) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business;
(iv) negotiate for the acquisition of any business or the start-up of
any new business;
(v) waive any material right or claim;
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(vi) commit a material breach or amend or terminate any material
agreement, Permit, license or other right; or
(vii) enter into any other transaction outside the ordinary course of
its business or prohibited hereunder.
5.4 Exclusivity. Neither the Sellers, nor any agent, officer, director,
trustee or any representative of the Sellers, during the period commencing on
the date of this Agreement and ending with, the earlier to occur of the Closing
Date or the termination of this Agreement in accordance with its terms,
directly/or indirectly:
(i) solicit or initiate the submission of proposals or offers from any
Person for,
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any Person other than the Purchaser
or Parent or their authorized agents relating to
any acquisition or purchase of all or a material amount of the assets of, or
any equity interest in, the assets used in connection with the Business of
Sellers.
5.5 Notice to Bargaining Agents. Prior to the Closing Date, the Sellers
shall satisfy any requirement for notice of the transactions contemplated by
this Agreement under applicable collective bargaining agreements, and shall
provide Parent with proof that any required notice has been sent.
5.6 Notification of Certain Matters. The Sellers shall give prompt notice
to the Parent of (i) the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which would likely cause any representation or
warranty of the Sellers contained herein to be untrue or inaccurate in any
material respect at or prior to the Closing Date and (ii) any material failure
of the Sellers to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it hereunder as of such date. The Parent
shall give prompt notice to the Sellers of (i) the occurrence or non-occurrence
of any event the occurrence or non-occurrence of which would likely cause any
representation or warranty of the Purchaser, Parent or Old ACG contained herein
to be untrue or inaccurate in any material respect at or prior to the Closing
Date and (ii) any material failure of the Purchaser, Parent or Old ACG to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder as of such date. The delivery of any notice
pursuant to this Section 5.6 shall not be deemed to (i) modify the
representations or warranties hereunder of the party delivering such notice,
which modification may only be made pursuant to
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Section 5.7, (ii) modify the conditions set forth in Sections 6 and 7, or (iii)
limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
5.7 Amendment of Schedules. Each party hereto agrees that, with respect to
the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until the Closing to supplement
or amend promptly the Schedules with respect to any matter hereafter arising or
discovered which, if existing or known at the date of this Agreement, would
have been required to be set forth or described in the Schedules.
Notwithstanding the foregoing sentence, no amendment or supplement to a
Schedule prepared by the Sellers or the Purchaser, Parent or Old ACG that
constitutes or reflects an event or occurrence that would have a Material
Adverse Effect may be made unless the Purchaser, Parent or Old ACG or the
Sellers, as the case may be, consent to such amendment or supplement. For all
purposes of this Agreement, including without limitation for purposes of
determining whether the conditions set forth in Sections 6.1 and 7.1 have been
fulfilled, the Schedules shall be deemed to be the Schedules as amended or
supplemented pursuant to this Section 5.7. No party to this Agreement shall be
liable to any other party if this Agreement shall be terminated pursuant to the
provisions of Section 9.1(vi). Neither the entry by the Purchaser, Parent or
Old ACG into any other agreement, such as this Agreement, after the date hereof
for the acquisition of one or more companies involved in or assets associated
with the telephone business and related activities nor the performance by the
Purchaser, Parent or Old ACG of its obligations thereunder shall be deemed to
require the amendment to or the supplementation of any Schedule hereto.
5.8 Bulk Sales Laws. The Purchaser, Parent and Old ACG hereby waive
compliance with the provisions of any bulk transfer laws applicable to the
transactions contemplated by this Agreement including, without limitation, bulk
sales laws under the Uniform Commercial Code or relating to the right or
obligation of the Purchaser, Parent or Old ACG to withhold any portion of the
Purchase Price pending determination by any governmental entities of the
Sellers' liability for any Tax obligations to any such governmental entities.
5.9 Transfer Taxes and Recording Fees. Any sales, transfer, use or other
similar Taxes imposed as a result of the sale of the Purchased Assets to the
Purchaser pursuant to this Agreement shall be paid by the Purchaser. At the
Closing, the Purchaser shall remit to the Sellers such properly completed
resale exemption certificates and other similar certificates or instruments as
are necessary to claim available exemptions from the payment of sales,
transfer, use or other similar Taxes under applicable law. All recording,
transfer and other similar Taxes and fees payable as a result of the public
recordation of the instruments of conveyance or transfer of the Purchased
Assets executed and delivered to Purchaser pursuant to this Agreement shall be
paid by the Sellers.
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5.10 Certain Provisions Relating to Consents.
(i) The Sellers will obtain, at their expense, and the Parent will use
its reasonable cooperative efforts (including furnishing financial
information on a confidential basis, where required) prior to and after the
Closing Date to assist the Sellers in obtaining all third party consents
that are required in connection with the transactions contemplated by this
Agreement. The Sellers will use reasonable efforts to obtain, and the
Parent will use its reasonable cooperative efforts prior to and after the
Closing Date to assist the Sellers in obtaining from the landlord of the
Lease, an estoppel agreement in form and substance reasonably acceptable to
the Parent containing to the extent necessary consent from such landlord to
the assignment of the Lease to the Purchaser. All expenses incurred in
connection with obtaining such consent and estoppel agreement shall be paid
by the party incurring the same. To the extent such consent and/or estoppel
agreement is not obtained by Closing, the Sellers shall continue to assist
the Purchaser in obtaining such consent and/or estoppel agreement after
Closing and shall pay the costs thereof.
(ii) To the extent that any Contract, Permit or the Lease is not
capable of being transferred by the Sellers to the Purchaser pursuant to
this Agreement without the consent of a third party (including a
governmental entity) and such consent is not obtained prior to Closing, or
if such transfer or attempted transfer would constitute a breach or a
violation of any law, nothing in this Agreement will constitute a transfer
or an attempted transfer thereof.
(iii) In the event that any such consent is not obtained on or prior
to the Closing Date, the Sellers will (x) provide to the Purchaser the
benefits of the applicable Contract, Permit or the Lease if reasonably
possible, (y) cooperate in any reasonable and lawful arrangement designed
to provide such benefits to the Purchaser and (iii) enforce at the request
and expense of the Purchaser and for the account of the Purchaser, any
rights of the Sellers arising from any such Contract or the Lease
(including the right to elect to terminate such Contract or the Lease in
accordance with the terms thereof upon the request of the Purchaser). If
any Permit required for the operation of the Business or the ownership or
use of the Purchased Assets is not transferred to the Purchaser at Closing,
the Sellers authorize (to the extent permitted by law) the Purchaser to
operate under any such Permit until the necessary consent to transfer or a
new Permit is obtained.
(iv) The Purchaser will perform the obligations arising under all
Contracts, Permits and the Lease referred to in Section 5.10(ii) for the
benefit of the Sellers and the other party or parties thereto, except for
any obligation under such Contract, Permit or the Lease that constitutes an
Excluded Liability.
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5.11 Further Assurance. The parties hereto agree to execute and deliver, or
cause to be executed and delivered, such further instruments or documents or
take such other action as may be reasonably necessary or convenient to carry
out the transactions contemplated by this Agreement or the IPO.
5.12 Survival. None of the covenants and agreements set forth in Sections
5.1 through 5.9 shall survive the Closing.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS
The obligations of the Sellers with respect to actions to be taken on the
Closing Date are subject to the satisfaction or waiver on or prior to the
Closing Date of all of the following conditions. All conditions not satisfied
shall be deemed to have been waived.
6.1 Representations and Warranties Performance of Obligations. All
representations and warranties of the Purchaser, Parent and Old ACG contained
in this Agreement shall be true and correct in all material respects as of the
Closing Date with the same effect as though such representations and warranties
had been made on and as of such date; all of the terms, covenants and
conditions of this Agreement to be complied with or performed by the Purchaser,
Parent or Old ACG on or before the Closing Date shall have been duly complied
with or performed in all material respects; and a certificate to the foregoing
effect, dated the Closing Date and signed by the President or any Vice
President of the Purchaser, Parent and Old ACG shall have been delivered to the
Sellers.
6.2 Satisfaction. All actions, proceedings, instruments and documents
required to carry out this Agreement or incidental hereto and all other related
legal matters shall be reasonably satisfactory to the Sellers and its counsel.
6.3 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to
restrain or prohibit consummation of the transactions contemplated in this
Agreement and no governmental agency or body shall have taken any other action
or made any request of the Sellers or the Parent as a result of which the
Sellers deem it inadvisable to proceed with the transactions hereunder.
6.4 Opinion of Counsel. The Sellers shall have received an opinion from
counsel for the Purchaser, Parent and Old ACG, dated the Closing Date, in form
and substance reasonably acceptable to the Sellers, relating to, insofar as the
Purchaser, Parent and Old ACG are concerned, (a) the authorization, execution,
delivery, performance and enforceability of the Agreement, (b) the receipt of
all required consents and approvals, and (c) such other legal matters as the
Sellers may reasonably request.
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6.5 Consents and Approvals. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made.
6.6 No Material Adverse Change. No event or circumstance shall have
occurred with respect to the Purchaser, Parent or Old ACG that would constitute
a Material Adverse Effect.
6.7 Secretary's Certificates. The Sellers shall have received a certificate
or certificates, dated the Closing Date and signed by the Secretary of the
Purchaser, Parent and Old ACG, certifying the completeness and accuracy of the
attached copies of the Charter Documents (including amendments thereto),
By-Laws (including amendments thereto), and resolutions of the respective board
of directors approving the Purchaser's, Old ACG's and Parent's entering into
this Agreement and the consummation of the transactions contemplated hereby.
6.8 Closing of IPO. The sale by the Parent of shares of Parent Stock in the
IPO shall have closed prior to or substantially contemporaneously with the
consummation of the transactions contemplated herein.
6.9 Employment Agreements. Each of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
shall be afforded an opportunity to enter into an employment agreement
substantially in the form of Annex VI and Annex VII, respectively, effective as
of the Closing Date.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PURCHASER AND PARENT
The obligations of the Purchaser and Parent with respect to actions to be
taken on the Closing Date are subject to the satisfaction or waiver on or prior
to the Closing Date of all of the following conditions. All conditions not
satisfied shall be deemed to have been waived.
7.1 Representations and Warranties; Performance of Obligations. All the
representations and warranties of the Sellers contained in this Agreement shall
be true and correct in all material respects as of the Closing Date with the
same effect as though such representations and warranties had been made on and
as of such date; all of the terms, covenants and conditions of this Agreement
to be complied with or performed by the Sellers on or before the Closing Date
shall have been duly performed or complied with in all material respects; and
the Sellers shall have delivered to the Parent a certificate dated the Closing
Date and signed by them to such effect.
7.2 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to
restrain or prohibit the consummation of the transactions contemplated herein
and no governmental agency or body shall have taken any
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other action or made any request of the Purchaser, Parent, Old ACG or the
Sellers as a result of which the management of the Parent deems it inadvisable
to proceed with the transactions hereunder.
7.3 No Material Adverse Effect. No event or circumstance shall have ccurred
with respect to the Sellers which would constitute a Material Adverse Effect,
and the Sellers shall not have suffered any material loss or damage to any of
its properties or assets, whether or not covered by insurance, which change,
loss or damage materially affects or impairs the ability of the Sellers to
conduct its business.
7.4 Sellers' Release. The Sellers shall have delivered to the Purchaser an
instrument dated the Closing Date releasing (i) the Purchased Assets from any
and all claims of the Sellers and (ii) the obligations of the Purchaser to the
Sellers, except for obligations arising under this Agreement, or the
transactions contemplated hereby.
7.5 Satisfaction. All actions, proceedings, instruments and documents
required to carry out the transactions contemplated by this Agreement or
incidental hereto and all other related legal matters shall have been
reasonably satisfactory to the Parent and its counsel.
7.6 Opinion of Counsel. The Purchaser and Parent shall have received an
opinion from counsel to the Sellers, dated the Closing Date, in form and
substance reasonably acceptable to the Parent, relating to, insofar as the
Sellers are concerned, (a) the receipt of all required consents and approvals,
(b) the consummation of the transactions contemplated herein and (c) such other
legal matters as the Purchaser or Parent may reasonably request.
7.7 Consents and Approvals. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; and all
consents and approvals of third parties listed on Schedule 3.17 shall have been
obtained.
7.8 FIRPTA Certificate. The Sellers shall have delivered to the Purchaser a
certificate to the effect that it is not a foreign Person under Section
1.1445-2(b) of the Treasury regulations promulgated pursuant to the Code.
7.9 Closing of IPO. The sale by the Parent of shares of Parent Stock in the
IPO shall have closed prior to or substantially contemporaneously with the
consummation of the transactions contemplated herein.
7.10 Employment Agreements. Each of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇
shall have executed their respective employment agreements substantially in the
forms of Annex VI and VII, respectively.
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8. COVENANTS OF THE PURCHASER AND PARENT WITH THE SELLERS AFTER CLOSING
8.1 Release From Guarantees. The Purchaser and Parent shall use its best
efforts to have the Sellers released from any and all guarantees on any
indebtedness relating to the Purchased Assets that they personally guaranteed
and from any and all pledges of assets that they pledged to secure such
indebtedness for the benefit of the Business, with all such guarantees on
indebtedness being assumed by the Purchaser.
8.2 Employment.
(i) The Purchaser shall offer to hire, effective as of the Closing
Date, the employees listed on Schedule 8.2(i) ("Employees") of the Sellers
on the day immediately prior to the Closing Date. The Sellers shall use its
reasonable efforts to cause such employees to accept the Purchaser's offers
of employment.
(ii) The Employees who accept and commence employment with the
Purchaser shall be referred to herein as the "Transferred Employees".
(iii) Except as expressly provided otherwise in this Section 8.2 and
in Section 8.3, the terms of the Transferred Employees' employment shall be
upon such terms and conditions as the Purchaser in its sole discretion
shall determine. Upon request of the Purchaser, the Sellers shall provide
the Purchaser reasonable access to data (including computer data) regarding
the ages, dates of hire, compensation and job description of Employees. The
Sellers hereby authorize the Purchaser to enter into discussions with and
to advise any of the Employees concerning the terms of any future
employment of such individuals by the Purchaser and will permit the
Purchaser reasonable access to Employees for such purpose.
(iv) In the event that an individual (x) retires from the employ by
Sellers, relating to the Business, after the date of this Agreement and
prior to the Closing Date and (y) subsequently commences employment with
the Purchaser, such individual will cease receiving post-retirement medical
benefits from the Sellers. The Sellers will advise such individuals of this
condition before retirement. The Purchaser shall not assume any liability
for providing post-retirement medical benefits upon such individual's
termination of employment with the Purchaser.
(v) (x) Except for liabilities and claims to be assumed by the
Purchaser under Section 8.2(v)(y), the Sellers shall discharge all
liabilities to and claims of Transferred Employees or Employees of the
Sellers arising out of their employment with the Sellers,
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including but not limited to, claims arising out of any Employee
Benefit Plan maintained by the Sellers or for retiree medical benefits
promised, provided or subsidized by the Sellers after the Closing Date.
(y) The Purchaser shall discharge all liabilities and claims based on
occurrences or conditions first occurring or commencing on or after the
Closing Date of Transferred Employees or employees of the Purchaser arising
out of their employment with the Purchaser after the Closing Date,
including but not limited to, any claims arising out of any employee
benefit plan maintained by the Purchaser.
(vi) The Sellers and the Purchaser shall comply with Section 4 of the
Revenue Procedure 84-77, 1984-2 C.B. 753. The Sellers shall furnish (or
cause to be furnished) to each Transferred Employee in accordance with
Section 4 of the Revenue Procedure a Treasury Form W-2 for 1997 for the
wages paid by the Sellers, no later than January 31, 1998. The Purchaser
shall furnish (or cause to be furnished) to each Transferred Employee in
accordance with Section 4 of the Revenue Procedure a Treasury Form W-2 for
1997 for the wages paid by the Purchaser. The Purchaser shall file (or
cause to be filed) appropriate Treasury Forms W-2 and W-3 covering the
Transferred Employee with the Social Security Administration for wages paid
and amounts withheld by the Purchaser during 1997.
(vii) Nothing contained in this Agreement (x) shall confer upon any
former, current or future employee of the Sellers or the Purchaser or any
legal representative or beneficiary thereof any rights or remedies,
including, without limitation, any right to employment or continued
employment of any nature, for any specified period, or (y) shall cause the
employment status of any former, present or future employee of the
Purchaser to be other than terminable at will.
8.3 Health and Welfare Benefits.
(i) The Sellers shall provide all notices and fulfill all of its
obligations, if any, under Section 4980B(f) of the Code with respect to the
Transferred Employees. The Sellers shall deliver to the Purchaser's present
or proposed insurance carriers or third-party administrators, on a census
basis, at least 20 days prior to the Closing Date, information with respect
to all health, accident, workers' compensation, disability and related
claims filed by the Transferred Employees (including, without limitation,
information regarding the total number of claims filed by, the total amount
of benefits claimed by, and the total amount of benefits paid to such
persons) since January 1, 1993, to the extent requested by any such
carriers. The Sellers shall deliver to the Purchaser's health insurance
carriers or third-party administrators, on a census basis, to the extent
requested by any such carriers or administrators, an update of such
information through the Closing Date as soon as
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practicable but no later than 15 days after the Closing Date. Such
information, which may be provided directly from the Sellers' computer
database, shall be satisfactory in form and substance to such carriers and
administrators.
(ii) Effective on the Closing Date, the Transferred Employees shall be
eligible for health and welfare benefits substantially equivalent to those
the Purchaser provides to similarly situated new employees hired by the
Purchaser after the Closing Date; provided, however, that the Purchaser
reserves the right to modify or terminate such benefits from time to time
after the Closing Date. Such Transferred Employees shall be eligible to
participate under the Purchaser's health and welfare benefit plans as of
the Closing Date, and the Purchaser shall not be responsible for any
hospitalization, medical, survivor benefits, life insurance, or disability
claims based upon occurrences or conditions commencing, occurring or
existing before the Closing Date, regardless of whether such occurrences or
conditions continue after the Closing Date, and regardless of whether such
claims are made before or after the Closing Date. In no event shall the
Purchaser be required to provide post-retirement medical benefits to
Transferred Employees.
8.4 Use of Name. Promptly after the Closing, the Sellers shall not use the
trade name National Telecom.
8.5 Compliance with the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976 (the "▇▇▇▇-▇▇▇▇▇ Act"). All parties to this Agreement hereby recognize
that compliance with the ▇▇▇▇-▇▇▇▇▇ Act may be required in connection with the
transactions contemplated herein. If it is determined by the parties to this
Agreement that compliance with the ▇▇▇▇-▇▇▇▇▇ Act is required, then: (i) all of
the parties hereto agrees to cooperate and use its best efforts to comply with
the ▇▇▇▇-▇▇▇▇▇ Act, (ii) such compliance by the Sellers shall be deemed a
condition precedent in addition to the conditions precedent set forth in
Section 7 of this Agreement, and such compliance by the Purchaser or Parent
shall be deemed a condition precedent in addition to the conditions precedent
set forth in Section 6 of this Agreement, and (iii) the parties agree to
cooperate and use their best efforts to cause all filings required under the
▇▇▇▇-▇▇▇▇▇ Act to be made.
9. TERMINATION OF AGREEMENT
9.1 Termination. This Agreement may be terminated at any time prior to the
Closing Date solely:
(i) by mutual consent of the board of directors of Parent and the
Sellers;
(ii) by the Sellers, on the one hand, or by the Parent, on the other
hand, if the transactions contemplated by this Agreement to take place at
the Closing shall not have been
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consummated by January 31, 1998, unless the failure of such transactions
to be consummated is due to the willful failure of the party seeking to
terminate this Agreement to perform any of its obligations under this
Agreement to the extent required to be performed by it prior to or on the
Closing Date;
(iii) by the Sellers, on the one hand, or by Parent, on the other
hand, if, prior to October 16, 1997, a registration statement on Form S-1
relating to the IPO has not been filed by Parent with the SEC pursuant to
the 1933 Act;
(iv) by the Sellers, if a material breach or default shall be made by
the Purchaser, Parent or Old ACG in the observance or in the due and timely
performance of any of the covenants, agreements or conditions contained
herein, and the curing of such default shall not have been made on or
before the Closing Date;
(v) by the Parent, if a material breach or default shall be made by
the Sellers in the observance or in the due and timely performance of any
of the covenants, agreements or conditions contained herein, and the curing
of such default shall not have been made on or before the Closing Date;
(vi) by the Stockholders, on the one hand, or by Parent, on the other
hand, if either such party declines to consent to an amendment or
supplement to a Schedule proposed by the other party or parties pursuant to
Section 5.7 because such proposed amendment constitutes or reflects an
event or occurrence that would have a Material Adverse Effect on the party
or parties proposing the same.
9.2 Liabilities in Event of Termination. No party to this Agreement, whose
breach or default with respect to any of its representations, warranties,
covenants or agreements in this Agreement occasions a termination of this
Agreement by the other party hereto, shall have any obligation or liability
arising therefrom to any other party to this Agreement, unless such breach or
default is due to a willful failure to perform.
10. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
10.1 The Sellers. The Sellers recognize and acknowledge that they had in
the past, currently have, and in the future may have, access to certain
confidential information relating to the Business and/or the Purchaser, Parent
or Old ACG, such as operational policies, and pricing and cost policies that
are valuable, special and unique assets related to the Business and/or the
Purchaser, Parent or Old ACG. The Sellers agree that they will not disclose
such confidential information to any Person for any purpose or reason
whatsoever, except (i) to authorized representatives of the Purchaser, Parent
or Old ACG; (ii) following the Closing, such information may be disclosed by
the
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Sellers as is required in the course of performing their duties for the
Purchaser, Parent or Old ACG; and (iii) to counsel and other advisers; provided
that such advisers (other than counsel) agree to the confidentiality provisions
of this Section 10.1, unless (w) such information becomes known to the public
generally through no fault of the Sellers, (x) disclosure is required by law or
the order of any governmental authority under color of law; provided, that
prior to disclosing any information pursuant to this clause (y), the Sellers
shall give prior written notice thereof to the Parent and provide the Parent
with the opportunity to contest such disclosure, or (z) the disclosing party
reasonably believes that such disclosure is required in connection with the
defense of a lawsuit against the disclosing party. In the event of a breach or
threatened breach by the Sellers of the provisions of this Section 10.1, the
Purchaser or Parent shall be entitled to an injunction restraining the Sellers
from disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting (1) the Sellers from using information
acquired in connection with activities permitted under Section 11 or (2) the
Purchaser or Parent from pursuing any other available remedy for such breach or
threatened breach, including the recovery of damages. In the event the
transactions contemplated by this Agreement are not consummated, the above
mentioned restrictions on the Sellers' ability to disseminate confidential
information with respect to the Business and/or Purchaser, Parent or Old ACG
shall become void.
10.2 The Purchaser, Parent and Old ACG. Each of the Purchaser, Parent and
Old ACG recognize and acknowledge that it has in the past and currently has
access to certain confidential information relating to the Business, such as
operational policies, and pricing and cost policies that are valuable, special
and unique assets of the Sellers. The Purchaser, Parent and Old ACG agree that,
prior to the Closing, or if the transactions contemplated by this Agreement are
not consummated, it will not disclose such confidential information to any
Person for any purpose or reason whatsoever, except (i) to authorized
representatives of the Sellers; and (ii) to counsel and other advisers;
provided that such advisers (other than counsel) agree to the confidentiality
provisions of this Section 10.2, unless (x) such information becomes known to
the public generally through no fault of the Purchaser, Parent or Old ACG, (y)
disclosure is required by law or the order of any governmental authority under
color of law; provided, that prior to disclosing any information pursuant to
this clause (y), the Parent shall, if possible, give prior written notice
thereof to the Sellers and provide the Sellers with the opportunity to contest
such disclosure, or (z) the disclosing party reasonably believes that such
disclosure is required in connection with the defense of a lawsuit against the
disclosing party. In the event of a breach or threatened breach by the
Purchaser, Parent or Old ACG of the provisions of this Section 10.2, the
Sellers shall be entitled to an injunction restraining the Purchaser, Parent or
Old ACG from disclosing, in whole or in part, such confidential information.
Nothing herein shall be construed as prohibiting the Sellers from pursuing any
other available remedy for such breach or threatened breach, including the
recovery of damages.
10.3 Damages. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 10.1 and 10.2 and
because of the immediate and
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irreparable damage that would be caused for which no other adequate remedy
exists, the parties hereto agree that, in the event of a breach by any of them
of the foregoing covenants, the covenant may be enforced against the other
parties by injunction and restraining order.
10.4 Survival. The obligations of the parties under this Article 10 shall
survive the termination of this Agreement for a period of 36 calendar months
thereafter.
11. NONCOMPETITION
11.1 Prohibited Activities. Each of the Sellers will not, for a period of
36 calendar months following the later of (a) the termination of their
employment with the Purchaser or (b) the Closing Date, for any reason
whatsoever, directly or indirectly, for himself or herself or on behalf of or
in conjunction with any other Person:
(i) engage, as an officer, director, shareholder, owner, partner, joint
venturer, or in a managerial capacity, whether as an employee, independent
contractor, consultant or advisor, or as a sales representative, in the sale or
marketing of any communications, natural gas or electrical goods and services
(collectively, the "Proscribed Business"), within the State of Kansas (the
"Territory");
(ii) call upon any Person within the Territory who is an employee of the
Purchaser, Parent or Old ACG (including the Subsidiaries thereof) in a sales
representative or managerial capacity for the purpose or with the intent of
enticing such employee away from or out of the employ of the Purchaser, Parent
or Old ACG (including the Subsidiaries thereof); provided that Sellers shall be
permitted to call upon and hire immediate family members;
(iii) call upon any Person which is or which has been, within one year
prior to the later of (a) the termination of a Seller's respective employment
with the Purchaser or (b) the Closing Date, a customer of the Purchaser, Parent
or Old ACG (including the Subsidiaries thereof), or of the Sellers within the
Territory, for the purpose of soliciting or selling products or services in
direct competition with the Purchaser, Parent or Old ACG (including the
Subsidiaries thereof) within the Territory;
(iv) call upon any prospective acquisition candidate, on any Seller's own
behalf or on behalf of any competitor of the Purchaser, Parent and Old ACG
(including the Subsidiaries thereof) engaged in a Proscribed Business, which
candidate was called upon by the Purchaser, Parent or Old ACG (including the
Subsidiaries thereof) or for which, to the actual knowledge of such Seller
after due inquiry, the Purchaser, Parent or Old ACG (or any Subsidiary thereof)
made an acquisition analysis, for the purpose of acquiring such entity; or
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(v) disclose existing or prospective customers of the Purchaser, Parent or
Old ACG to any Person for any reason or purpose whatsoever except to the extent
that either of the Sellers in the past disclosed such information to the public
for valid business reasons.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit either Sellers from acquiring and holding as a passive investment not
more than five percent of the capital stock of a competing business whose stock
is traded on a national securities exchange.
11.2 Damages. Because of the difficulty of measuring economic losses to the
Purchaser, Parent or Old ACG as a result of a breach of the foregoing covenant,
and because of the immediate and irreparable damage that could be caused to the
Purchaser, Parent or Old ACG for which it would have no other adequate remedy,
each Seller agrees that the foregoing covenant may be enforced by the
Purchaser, Parent or Old ACG in the event of breach by such Seller, by
injunction and restraining order.
11.3 Reasonable Restraint. It is agreed by the parties hereto that the
foregoing covenants in this Section 11 impose a reasonable restraint on the
Sellers in light of the activities and business of the Purchaser, Parent or Old
ACG (including the Subsidiaries thereof) on the date of the execution of this
Agreement and the reasonably foreseeable plans of the Purchaser, Parent or Old
ACG.
11.4 Severability, Reformation. The covenants in this Section 11 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention
of the parties that such restrictions be enforced to the fullest extent the
court deems reasonable, and the Agreement shall thereupon be automatically
reformed.
11.5 Independent Covenant. All of the covenants in this Section 11 shall be
construed as an agreement independent of any other provision in this Agreement,
and the existence of any claim or cause of action of any Seller against the
Purchaser, Parent or Old ACG (including the Subsidiaries thereof), whether
predicated on this Agreement or otherwise, shall not constitute a defense to
the enforcement by the Purchaser, Parent or Old ACG of such covenants. It is
specifically agreed that the period of 36 calendar months stated at the
beginning of this Section 11, during which the agreements and covenants of each
Seller made in this Section 11 shall be effective, shall be computed by
excluding from such computation any time during which such Seller is in
violation of any provision of this Section 11. The covenants contained in
Section 11 shall not be affected by any breach of any other provision hereof by
any party hereto and shall become void if the transactions contemplated by this
Agreement are not consummated.
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11.6 Materiality. The Sellers hereby agree that the covenants set forth in
this Section 11 are a material and substantial part of the transactions
contemplated by this Agreement.
12. TRANSFER PROHIBITIONS AND RESTRICTIONS ON WARRANTS AND WARRANT STOCK
SELLERS ACKNOWLEDGE THAT THE WARRANTS ARE NON-TRANSFERRABLE AND HENCE
CANNOT BE SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED,
DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF BY THE SELLERS EXCEPT (I)
PURSUANT TO THE LAWS OF DESCENT AND DISTRIBUTION, (II) IN CONNECTION WITH A
TENDER OFFER OR EXCHANGE OFFER FOR ALL THE PARENT STOCK OR (III) TO THE
SELLERS' LINEAL DESCENDANTS, OR TRUSTS CREATED FOR THEIR BENEFIT, IN EACH CASE
ONLY IF THE TRANSFEREE AGREES TO BE BOUND BY THE TERMS OF THIS SECTION 12. In
addition, Sellers further acknowledge that for a period of one year from the
date of the original issuance of any Warrant Stock upon the exercise of a
Warrant, except pursuant to Section 14, the Sellers may not sell, assign,
exchange, transfer, encumber, pledge, distribute, appoint, or otherwise dispose
of any Warrant Stock. The Warrant Stock delivered to the Sellers upon exercise
of the Warrants will bear a legend substantially in the form set forth below
and containing such other information as Parent may deem necessary or
appropriate:
THIS SECURITY MAY NOT BE SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED,
PLEDGED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL
NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE,
TRANSFER, ENCUMBRANCE, PLEDGE, DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION
PRIOR TO [FIRST ANNIVERSARY OF DATE OF ORIGINAL ISSUANCE]. UPON THE WRITTEN
REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS
RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER
THE DATE SPECIFIED ABOVE.
13. OTHER TRANSFER RESTRICTIONS
Except for transfers to immediate family members who agree to be bound by
the restrictions set forth in this Section 13 (or trusts for the benefit of the
Sellers or family members, the trustees of which so agree), for a period of one
year from the Closing, except pursuant to Section 15, the Sellers may not shall
sell, assign, exchange, transfer, encumber, pledge, distribute, appoint, or
otherwise dispose of the Note received by the Sellers in the transaction
contemplated herein. The Note delivered to the Sellers pursuant to Section 2.3
of this Agreement will bear a legend substantially in the form set forth below
and containing such other information as Parent may deem necessary or
appropriate:
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THIS SECURITY MAY NOT BE SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED,
PLEDGED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL
NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE,
TRANSFER, ENCUMBRANCE, PLEDGE, DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION
PRIOR TO [FIRST ANNIVERSARY OF CLOSING DATE]. UPON THE WRITTEN REQUEST OF THE
HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND
(AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED
ABOVE.
14. INVESTMENT REPRESENTATIONS
Sellers acknowledge that the Notes and the Warrant Stock (collectively, the
"Restricted Securities") have not been and will not be registered under the
1933 Act and therefore may not be resold without compliance with the
requirements of the 1933 Act and applicable state securities laws. All of the
Restricted Securities are being acquired by Sellers solely for their own
account, for investment purposes only, and not with a view to the distribution
thereof.
14.1 Compliance With Law. Sellers represent, warrant, covenant and agree
that none of the Restricted Securities will be offered, sold, assigned,
exchanged, transferred, encumbered, distributed, appointed or otherwise
disposed of except after full compliance with all of the applicable provisions
of the 1933 Act and the rules and regulations of the SEC thereunder and the
provisions of applicable state securities laws and regulations. All the
Restricted Securities shall bear the following legend in addition to the legend
required under Section 13 or Section 14 of this Agreement:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS
(COLLECTIVELY, THE "ACTS") AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED
UNLESS AND UNTIL (A) THE SECURITIES SHALL HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS
(COLLECTIVELY, THE "ACTS") OR (B) THE HOLDER OF THESE SECURITIES PROVIDES
THE ISSUER WITH (X) AN UNQUALIFIED WRITTEN OPINION OF LEGAL COUNSEL, WHICH
COUNSEL AND OPINION (IN FORM AND SUBSTANCE) SHALL BE REASONABLY
SATISFACTORY TO THE ISSUER, TO THE EFFECT THAT THE PROPOSED DISPOSITION OF
THESE SECURITIES MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE ACTS OR (Y)
SUCH OTHER EVIDENCE AS MAY BE REASONABLY SATISFACTORY TO THE ISSUER
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THAT THE PROPOSED DISPOSITION MAY BE EFFECTED WITHOUT REGISTRATION UNDER
THE ACTS.
14.2 Economic Risk, Sophistication. The Sellers represent that they have
received, have read and understand the Draft Registration Statement, and in
particular, the risk factors described therein. The Sellers further represent
that they are able to bear the economic risk of an investment in the Restricted
Securities and can afford to sustain a total loss of such investment and have
such knowledge and experience in financial and business matters that they are
capable of evaluating the merits and risks of the proposed investment in
Parent. Sellers have had an adequate opportunity to ask questions and receive
answers from the officers of Parent concerning any and all matters relating to
the transactions described herein including, without limitation, the background
and experience of the current and proposed officers and directors of Parent,
the plans for the operations of the business of Parent and any plans for
additional acquisitions and the like. Sellers have asked any and all questions
in the nature described in the preceding sentence and all questions have been
answered to their satisfaction.
15. REGISTRATION RIGHTS
15.1 PiggyBack Registration Rights. At any time following the Closing Date,
whenever Parent proposes to register any Parent Stock for its own or the
account of others under the 1933 Act for a public offering, other than (i) any
registration of shares to be used as consideration for acquisitions of
additional businesses by Parent and (ii) registrations relating to employee
benefit plans, Parent shall give Sellers prompt written notice of its intent to
do so. Upon the written request of any of Sellers given within 15 business days
after receipt of such notice, Parent shall cause to be included in such
registration all Registrable Securities (including any shares of Parent Stock
issued as a dividend or other distribution with respect to, or in exchange for,
or in replacement of such Registerable Securities) which Sellers request;
provided, however, if Parent is advised in writing in good faith by any
managing underwriter of an underwritten offering of the securities being
offered pursuant to any registration statement under this Section 15.1 that the
number of shares to be sold by persons other than Parent is greater than the
number of such shares which can be offered without adversely affecting the
offering, Parent may reduce pro rata the number of shares offered for the
accounts of such persons (based upon the number of shares held by such person)
to a number deemed satisfactory by such managing underwriter.
15.2 Demand Registration Rights. At any time after the first anniversary of
the Closing Date, the holders of a majority of the shares of Parent Stock (i)
representing Registerable Securities owned by the Sellers or their permitted
transferees or (ii) representing Registrable Securities (as defined in the
agreements similar to this Agreement mentioned below) acquired by other
stockholders of Parent on or prior to the closing of the IPO in connection with
the acquisition of their companies by Parent pursuant to an agreement, similar
to this Agreement (or upon exercise or
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conversion of securities of Parent received pursuant to such agreement) (the
persons referred to in clauses (i) and (ii) being collectively referred to as
the "Founding Stockholders"), which shares have not been previously registered
or sold and which shares are not entitled to be sold under Rule 144(k) (or any
similar or successor provision) promulgated under the 1933 Act, may request in
writing that Parent file a registration statement under the 1933 Act covering
the registration of such shares of Parent Stock issued to and held by the
Founding Stockholders or their permitted transferees (including any stock
issued as a dividend or other distribution with respect to, or in exchange for,
or in replacement of such Parent Stock) (a "Demand Registration"). Within ten
days of the receipt of such request, Parent shall give written notice of such
request to all other Founding Stockholders and shall, as soon as practicable
but in no event later than 45 days after notice from the Founding Stockholders
requesting such registration, file and use its best efforts to cause to become
effective a registration statement covering all such shares. Parent shall be
obligated to effect only one Demand Registration for all Founding Stockholders
and will keep such Demand Registration current and effective for not less than
90 days (or such shorter period as is required to complete the distribution and
sale of all shares registered thereunder).
Notwithstanding the foregoing paragraph, following such a demand a majority
of the disinterested directors of Parent (i.e. directors who have not demanded
or elected to sell shares in any such public offering) may defer the filing of
the registration statement for a 30 day period.
If at the time of any request for a Demand Registration Parent has
formulated plans to file within 60 days after such request a registration
statement covering the sale of any of its securities in a public offering under
the 1933 Act, no registration of the Parent Stock shall be initiated under this
Section 15.2 until 90 days after the effective date of such registration
statement unless Parent is no longer proceeding diligently to secure the
effectiveness of such registration statement; provided that Parent shall
provide the Founding Stockholders the right to participate in such public
offering pursuant to, and subject to, Section 15.1.
15.3 Registration Procedures. All expenses incurred in connection with the
registrations under this Section 15 (including all registration, filing,
qualification, legal, printing and accounting fees, but excluding underwriting
commissions and discounts), shall be borne by Parent. In connection with
registrations under Sections 15.1 and 15.2 Parent will, as expeditiously as
practicable:
(i) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause
such registration statement to become and remain effective; provided that
Parent may discontinue any registration of its securities that is being
effected pursuant to Section 15.2 at any time prior to the effective date
of the registration statement relating thereto.
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(ii) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to such registration statement
and the prospectus used in connection therewith as may be necessary to keep
such registration statement effective for a period as may be requested by
the stockholders of Parent holding a majority of the Registrable Securities
covered thereby not exceeding 90 days and to comply with the provisions of
the 1933 Act with respect to the disposition of all securities covered by
such registration statement during such period in accordance with the
intended methods of disposition by the seller or sellers thereof set forth
in such registration statement; provided, that before filing a registration
statement or prospectus relating to the sale of Registrable Securities, or
any amendments or supplements thereto, Parent will furnish to counsel to
each holder of Registrable Securities covered by such registration
statement or prospectus, copies of all documents proposed to be filed,
which documents will be subject to the review of such counsel, and Parent
will give reasonable consideration in good faith to any comments of such
counsel.
(iii) Furnish to each holder of Registrable Securities covered by the
registration statement and to each underwriter, if any, of such Registrable
Securities, such number of copies of a preliminary prospectus and
prospectus for delivery in conformity with the requirements of the 1933
Act, and such other documents, as such Person may reasonably request, in
order to facilitate the public sale or other disposition of the Registrable
Securities.
(iv) Use its best efforts to register or qualify the Registrable
Securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as each seller shall
reasonably request, and do any and all other acts and things which may be
reasonably necessary or advisable to enable such seller to consummate the
disposition of the Registrable Securities owned by such seller, in such
jurisdictions, except that Parent shall not for any such purpose be
required (x) to qualify to do business as a foreign corporation in any
jurisdiction where, but for the requirements of this Section 15.3(iv), it
is not then so qualified, or (y) to subject itself to taxation in any such
jurisdiction, or (z) to take any action which would subject it to general
or unlimited service of process in any such jurisdiction where it is not
then so subject.
(v) Use its best efforts to cause the Registrable Securities covered
by such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable
the seller or sellers thereof to consummate the disposition of such
Registrable Securities.
(vi) Immediately notify each seller of Registrable Securities covered
by such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the 1933 Act within the
appropriate period mentioned in Section 15.3(ii), if
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Parent becomes aware that the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing, and, at the request of any such seller,
deliver a reasonable number of copies of an amended or supplemental
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Securities, each prospectus shall not
include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
(vii) Otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC and make generally available to its
security holders, in each case as soon as practicable, but not later than
45 calendar days after the close of the period covered thereby (90 calendar
days in case the period covered corresponds to a fiscal year of the
Parent), an earnings statement of Parent which will satisfy the provisions
of Section 11 (a) of the 1933 Act.
(viii) Use its best efforts in cooperation with the underwriters to
list such Registrable Securities on each securities exchange as they may
reasonably designate.
(ix) In the event the offering is an underwritten offering, use its
best efforts to obtain a "cold comfort" letter from the independent public
accountants for Parent in customary form and covering such matters of the
type customarily covered by such letters.
(x) Execute and deliver all instruments and documents (including in an
underwritten offering an underwriting agreement in customary form) and take
such other actions and obtain such certificates and opinions as the
stockholders of Parent holding a majority of the shares of Registrable
Securities covered by the Registration Statement may reasonably request in
order to effect an underwritten public offering of such Registrable
Securities.
(xi) Make available for inspection by the seller of such Registrable
Securities covered by such registration statement, by any underwriter
participating in any disposition to be effected pursuant to such
registration statement and by any attorney, accountant or other agent
retained by any such seller or any such underwriter, all pertinent
financial and other records, pertinent corporate documents and properties
of Parent, and cause all of Parent's officers, directors and employees to
supply all information reasonably requested by any such seller,
underwriter, attorney, accountant or agent in connection with such
registration statement.
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(xii) Obtain for delivery to the underwriter or agent an opinion or
opinions from counsel for Parent in customary form and in form and scope
reasonably satisfactory to such underwriter or agent and its counsel.
15.4 Other Registration Matters.
(i) If Sellers have shares of Registrable Securities covered by a
Registration Statement referred to in this Section 15 will, upon receipt of
any notice from Parent of the happening of any event of the kind described
in Section 15.3(vi), forthwith discontinue disposition of the Registrable
Securities pursuant to the registration statement covering such Registrable
Securities until they receive the copies of the supplemented or amended
prospectus contemplated by Section 15.3(vi).
(ii) If a registration pursuant to Section 15.1 or 15.2 involves an
underwritten offering, Sellers (including their permitted assigns) agree,
if their shares of Registrable Securities are included in such
registration, not to effect any public sale or distribution, including any
sale pursuant to Rule 144 under the 1933 Act, of any Registrable
Securities, or of any security convertible into or exchangeable or
exercisable for any Registrable Securities (other than as part of such
underwritten offering), without the consent of the managing underwriter,
during a period commencing seven calendar days before and ending 180
calendar days (or such lesser number as the managing underwriter shall
designate) after the effective date of such registration. Similarly, the
Sellers agree not to effect any sale or distribution, including any sale
pursuant to the registration rights provided in Section 15.1, of any
Registrable Securities, or of any security convertible into or exchangeable
or exercisable for any Registrable Securities, without the consent of the
managing underwriter of the IPO during a period commencing on the effective
date of the Draft Registration Statement and ending 365 calendar days (or
such lesser number as such managing underwriter shall designate) after such
effective date.
15.5 Indemnification.
(i) In the event of any registration of any securities of Parent under
the 1933 Act pursuant to Section 15.1 or 15.2, Parent will, and it hereby
agrees to, indemnify and hold harmless, to the extent permitted by law,
each seller of any Registrable Securities covered by such registration
statement, each Affiliate of such seller and their respective directors,
officers, employees and agents or general and limited partners (and
directors, officers, employees and agents thereof) and, if such seller is a
portfolio or investment fund, its investment advisors or agents, each other
person who participates as an underwriter in the offering or sale of such
securities and each other person, if any, who controls such seller or any
such underwriter within the meaning of the 1933 Act, as follows:
-46-
(x) against any and all loss, liability, claim, damage or expense
whatsoever arising out of or based upon an untrue statement or alleged
untrue statement of a material fact contained in any registration
statement (or any amendment or supplement thereto), including all
documents incorporated therein by reference, or the omission or
alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading, or
arising out of an untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus or prospectus
(or any amendment or supplement thereto) or the omission or alleged
omission therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading;
(y) against any and all loss, liability, claim, damage and
expense whatsoever to the extent of the aggregate amount paid in
settlement of any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, if such settlement is
effected with the written consent of Parent; and
(z) against any and all expense reasonably incurred by them in
connection with investigating, preparing or defending against any
litigation, or investigation or proceeding by any governmental agency
or body, commenced or threatened, or any claim whatsoever based upon
any such untrue statement or omission, or any such alleged untrue
statement or mission to the extent that any such expense is not paid
under subsection (x) or (y) above;
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such seller or any such director,
officer, employee, agent, general or limited partner, investment advisor or
agent, underwriter or controlling person and shall survive the transfer of
such securities by such seller.
(ii) Parent may require, as a condition to including any Registrable
Securities in any registration statement filed in accordance with Section
15.1 or 15.2, that Parent shall have received an undertaking reasonably
satisfactory to it from the prospective seller of such Registrable
Securities or any underwriter, to indemnify and hold harmless (in the same
manner and to the same extent as set forth in Section 15.5(i)) Parent with
respect to any statement or alleged statement in or omission or alleged
omission from such registration statement, any preliminary, final or
summary prospectus contained therein, or any
-47-
amendment or supplement, if such statement or alleged statement or
omission or alleged omission was made in reliance upon and in conformity
with written information furnished to Parent by or on behalf of such seller
or underwriter specifically stating that it is for use in the preparation
of such registration statement, preliminary, final or summary prospectus or
amendment or supplement. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of Parent or
any such director, officer or controlling person and shall survive the
transfer of such securities by such seller. In that event, the obligations
of the Parent and such sellers pursuant to this Section 15.5 are to be
several and not joint; provided, however, that, with respect to each claim
pursuant to this Section 15.5, Parent shall be liable for the full amount
of such claim, and each such seller's liability under this Section 15.5
shall be limited to an amount equal to the net proceeds (after deducting
the underwriting discount and expenses) received by such seller from the
sale of Registrable Securities held by such seller pursuant to this
Agreement.
(iii) Promptly after receipt by an indemnified party hereunder of
written notice of the commencement of any action or proceeding involving a
claim referred to in this Section 15.5, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party, give
written notice to such indemnifying party of the commencement of such
action; provided, however, that the failure of any indemnified party to
give notice as provided herein shall not relieve the indemnifying party of
its obligations under this Section 15.5, except to the extent (not
including any such notice of an underwriter) that the indemnifying party is
materially prejudiced by such failure to give notice. In case any such
action is brought against an indemnified party, unless in such indemnified
party's reasonable judgment a conflict of interest between such indemnified
and indemnifying parties may exist in respect of such claim (in which case
the indemnifying party shall not be liable for the fees and expenses of
more than one firm of counsel selected by holders of a majority of the
shares of Registrable Securities included in the offering or more than one
firm of counsel for the underwriters in connection with any one action or
separate but similar or related actions), the indemnifying party will be
entitled to participate in and to assume the defense thereof, jointly with
any other indemnifying party similarly notified, to the extent that it may
wish with counsel reasonably satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not
be liable to such indemnified party for any legal or other expenses
subsequently incurred by such indemnifying party in connection with the
defense thereof, provided that the indemnifying party will not agree to any
settlement without the prior consent of the indemnified party (which
consent shall not be unreasonably withheld) unless such settlement requires
no more than a monetary payment for which the indemnifying party agrees to
indemnify the indemnified party and includes a full, unconditional and
complete release of the indemnified party; provided, however, that the
-48-
indemnified party shall be entitled to take control of the defense of
any claim as to which, in the reasonable judgment of the indemnifying
party's counsel, representation of both the indemnifying party and the
indemnified party would be inappropriate under the applicable standards of
professional conduct due to actual or potential differing interests between
them. In the event that the indemnifying party does not assume the defense
of a claim pursuant to this Section 15.5(iii), the indemnified party will
have the right to defend such claim by all appropriate proceedings, and
will have control of such defense and proceedings, and the indemnified
party shall have the right to agree to any settlement without the prior
consent of the indemnifying party. Each indemnified party shall, and shall
cause its legal counsel to, provide reasonable cooperation to the
indemnifying party and its legal counsel in connection with its assuming
the defense of any claim, including the furnishing of the indemnifying
party with all papers served in such proceeding. In the event that an
indemnifying party assumes the defense of an action under this Section
15.5(iii), then such indemnifying party shall, subject to the provisions of
this Section 15.5, indemnify and hold harmless the indemnified party from
any and all losses, claims, damages or liabilities by reason of such
settlement or judgment.
(iv) Parent and each seller of Registrable Securities shall provide
for the foregoing indemnity (with appropriate modifications) in any
underwriting agreement with respect to any required registration or other
qualification of securities under any federal or state law or regulation of
any governmental authority.
15.6 Contribution. In order to provide for just and equitable contribution
in circumstances under which the indemnity contemplated by Section 15.5 is for
any reason not available or insufficient for any reason to hold harmless an
indemnified party in respect of any losses, claims, damages or liabilities
referred to therein, the parties required to indemnify by the terms thereof
shall contribute to the aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by such indemnity agreement incurred by
Parent, any seller of Registrable Securities and one or more of the
underwriters, except to the extent that contribution is not permitted under
Section 11 (f) of the 1933 Act. In determining the amounts which the respective
parties shall contribute, there shall be considered the relative benefits
received by each party from the offering of the Registrable Securities by
taking into account the portion of the proceeds of the offering realized by
each, and the relative fault of each party by taking into account the parties'
relative knowledge and access to information concerning the matter with respect
to which the claim was asserted, the opportunity to correct and prevent any
statement or omission and any other equitable considerations appropriate under
the circumstances. Parent and each person selling securities agree with each
other that no seller of Registrable Securities shall be required to contribute
any amount in excess of the amount such seller would have been required to pay
to an indemnified party if the indemnity under Section 15.5(ii) were available.
Parent and each such seller agree with each other
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and the underwriters of the Registrable Securities, if requested by such
underwriters, that it would not be equitable if the amount of such contribution
were determined by pro rata or per capita allocation (even if the underwriters
were treated as one entity for such purpose) or for the underwriters' portion
of such contribution to exceed the percentage that the underwriting discount
bears to the initial public offering price of the Registrable Securities. For
purposes of this Section 15.6, each person, if any, who controls an underwriter
within the meaning of Section 15 of the 1933 Act shall have the same rights to
contribution as such underwriter, and each director and each officer of Parent
who signed the registration statement, and each person, if any, who controls
Parent or a seller of Registrable Securities within the meaning of Section 15
of the 1933 Act shall have the same rights to contribution as Parent or a
seller of Registrable Securities, as the case may be.
15.7 Availability of Rule 144. Parent shall not be obligated to register
shares of Registrable Securities held by Sellers at any time when the resale
provisions of Rule 144(k) (or any similar or successor provision) promulgated
under the 1933 Act are available to Sellers.
16. GENERAL
16.1 Cooperation. The Sellers, the Purchaser, Parent and Old ACG shall
deliver or cause to be delivered to the other on the Closing Date and at such
other times and places as shall be reasonably agreed to, such additional
instruments as the any of the others may reasonably request for the purpose of
carrying out this Agreement. The Sellers will cooperate and use its reasonable
efforts to have the present employees of the Sellers cooperate with the
Purchaser, Parent or Old ACG on and after the Closing Date in furnishing
information, evidence, testimony and other assistance in connection with any
actions, proceedings, arrangements or disputes of any nature with respect to
matters pertaining to all periods prior to the Closing Date.
16.2 Successors and Assigns. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law), but if assigned by
operation of law, this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto, the successors of the Purchaser, Parent, Old ACG
or the Sellers and their heirs and legal representatives. Notwithstanding the
foregoing, the Purchaser or Parent may assign, convey, transfer or otherwise
dispose of all or any portion of its interest in, or its rights and obligations
under, this Agreement and such other documents and instruments to any Affiliate
of the Purchaser or Parent.
16.3 Entire Agreement. This Agreement (including the Schedules) and the
documents delivered pursuant hereto constitute the entire agreement and
understanding among the Sellers, the Purchaser, Parent and Old ACG and
supersede any prior agreement and understanding relating to the subject matter
of this Agreement. This Agreement, upon execution and delivery, constitutes a
valid and binding agreement of the parties hereto enforceable in accordance
with its terms and may
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be modified or amended only by a written instrument executed by the Sellers,
Purchaser, Parent and Old ACG, acting through their duly authorized officers or
representatives. Any disclosure made on any Schedule delivered pursuant hereto
shall be deemed to have been disclosed for purposes of any other Schedule
required hereby; provided that the Sellers shall make a good faith effort to
cross reference disclosures, as necessary or advisable, between related
Schedules.
16.4 Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
16.5 Brokers and Agents. Except as disclosed on Schedule 16.5, each party
represents and warrants that it employed no broker or agent in connection with
this transaction and agrees to indemnify the other parties hereto against all
loss, cost, damage or expense arising out of claims for fees or commission of
brokers employed or alleged to have been employed by such indemnifying party.
16.6 Expenses. Whether or not the transactions herein contemplated shall be
consummated, the Purchaser, Parent or ACG will pay the fees, expenses and
disbursements of the Purchaser, Parent, Old ACG, the Sellers and their
respective agents, representatives, accountants and counsel incurred in
connection with the subject matter of this Agreement and any amendments
thereto, including all costs and expenses incurred in the performance and
compliance with all conditions to be performed by the Purchaser, Parent or Old
ACG. The Sellers shall pay the fees and expenses of its legal counsel, and all
other costs and expenses incurred by it in its performance and compliance with
all conditions to be performed by it under this Agreement. In addition, the
Sellers will pay all Taxes due upon receipt of the consideration payable
pursuant to Section 2, and will assume all Tax risks and liabilities of the
Sellers in connection with the transactions contemplated hereby.
16.7 Notices. All notices of communication required or permitted hereunder
shall be in writing, addressed to the party to be notified, and may be given by
(i) depositing the same in United States mail, postage prepaid and registered
or certified with return receipt requested, (ii) by telecopying the same if
receipt thereof is confirmed or (iii) by delivering the same in person to an
officer or agent of such party.
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(x) If to the Parent, Purchaser or Old ACG, addressed to Parent at:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
Bracewell & ▇▇▇▇▇▇▇▇▇, L.L.P.
South Tower Pennzoil Place
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ III
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
(y) If to the Sellers, addressed to them at:
▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
with a copy to:
▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 16.7 from time to time.
16.8 Governing Law. This Agreement shall be construed in accordance with
the laws of the State of Delaware.
16.9 Exercise of Rights and Remedies. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy accruing
to any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or
-52-
remedy, nor shall it be construed as a waiver of or acquiescence in any such
breach or default, or of any similar breach or default occurring later; nor
shall any waiver of any single breach or default be deemed a waiver of any
other breach or default occurring before or after that waiver.
16.10 Time. Time is of the essence with respect to this Agreement.
16.11 Reformation and Severability. In case any provision of this Agreement
shall be invalid, illegal or unenforceable, it shall, to the extent
practicable, be modified in such manner as to be valid, legal and enforceable
but so as to most nearly retain the intent of the parties, and if such
modification is not possible, such provision shall be severed from this
Agreement; and in either case the validity, legality and enforceability of the
remaining provisions of this Agreement shall not in any way be affected or
impaired thereby.
16.12 Remedies Cumulative. No right, remedy or election given by any term
of this Agreement shall be deemed exclusive but each shall be cumulative with
all other rights, remedies and elections available at law or in equity.
16.13 Captions. The headings of this Agreement are inserted for convenience
only, shall not constitute a part of this Agreement or be used to construe or
interpret any provision hereof.
16.14 Public Statement. The parties hereto shall consult with each other
and no party shall issue any public announcement or statement with respect to
the transactions contemplated hereby without the consent of the other parties,
unless the party desiring to make such announcement or statement, after seeking
such consent from the other parties, obtains advice from legal counsel that a
public announcement or statement is required by applicable law.
16.15 Form of Payment. All payments hereunder shall be made in United
States dollars and, unless the parties making and receiving such payments shall
agree otherwise or the provisions hereof provide otherwise, shall be made by
wire or interbank transfer of immediately available funds by 12:00 Noon,
Eastern Standard Time, on the date such payment is due to such account as the
party receiving payment may designate at least three business days prior to the
proposed date of payment.
16.16 Receivables. If any monies or other assets are received by the
Purchaser to which the Sellers are entitled and that are not included in the
Purchased Assets, the Purchaser shall hold such monies and assets in trust for
the Sellers and shall account for and pay the same to the Sellers within 15
days after receipt. If any monies or other assets are received by the Sellers
to which the Purchaser is entitled and that are included in the Purchased
Assets, the Sellers shall hold such monies and assets received by the Sellers
in trust for the Purchaser and shall account for and pay the same to the
Purchaser within 15 days after receipt.
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16.17 Amendments and Waivers. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived only with the
written consent of the Purchaser, Parent, Old ACG and the Sellers.
16.18 Public Statements. The parties hereto shall consult with each other
and no party shall issue any public announcement or statement with respect to
the transactions contemplated hereby without the consent of the other parties,
unless the party desiring to make such announcement or statement, after seeking
such consent from the other parties, obtains advice from legal counsel that a
public announcement or statement is required by applicable law.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
PURCHASER:
ACG ACQUISITION II CORP.
By:
-------------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President
PARENT:
ADVANCED COMMUNICATIONS GROUP, INC.
By:
-------------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chairman and Chief Executive
Officer
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OLD ACG:
ADVANCED ACQUISITION CORP.
By:
-------------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chairman and Chief Executive
Officer
SELLERS:
----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-55-
ANNEX I
DRAFT REGISTRATION STATEMENT
(separately provided)
ANNEX II
ADVANCED COMMUNICATIONS GROUP, INC.
SECTION 351 EXCHANGE PLAN
The Board of Directors of Advanced Communications Group, Inc., a
Delaware corporation organized in September 1997 ("Company"), has adopted this
Section 351 Exchange Plan effective as of October 3, 1997 ("Exchange Plan") in
order to comply with the requirements of Section 351 of the Internal Revenue
Code of 1986, as amended, and the rules and regulations promulgated thereunder
("Code"), and for purposes of defining the rights of various persons who may
make future transfers of voting capital stock and other consideration,
including cash and other assets (the items transferred being collectively
referred to herein as the "Assets") to the Company, all as more particularly
set forth below:
WHEREAS, the Company intends to acquire outstanding shares of capital
stock of certain corporations and other assets and acquire the outstanding
capital stock of ACG, Inc., a Delaware corporation, in a reverse triangular
merger, all as part of an integrated transaction as more particularly described
in the Company's Registration Statement in Form S-1 (draft of October 2, 1997)
("Draft Registration Statement") relating to its initial underwritten public
offering ("IPO"), the foregoing acquisitions being hereinafter collectively
referred to as the "Acquisitions"; and
WHEREAS, the various transactions comprising the Acquisitions will
occur substantially concurrently upon the consummation of the IPO;
NOW THEREFORE, in order to obtain the Assets, the Company may elect to
exchange, as a part of a single plan, shares of its voting capital stock and
other consideration, including cash, warrants, options and promissory notes,
for such Assets as shall be transferred to the Company by one or more of the
following individuals and entities: (i) the existing shareholders of the
predecessor to the Company in a reverse triangular merger; (ii) certain holders
of capital stock of other corporations or other assets that shall be acquired
by the Company pursuant to the Acquisitions; (iii) certain other persons or
entities who may assist the Company in the Acquisitions or in the manufacture
and or marketing of its products, (iv) purchasers of the Company's capital
stock in the IPO; and (v) certain other financial investors; and
FURTHERMORE, it is the expectation of the Company (without making any
representation with respect thereto) that the parties contributing such Assets
to the Company as part of the Acquisitions and the IPO will possess immediately
after the completion of the Acquisitions, at least 80% of the total combined
voting power of all classes of capital stock of the Company entitled to
vote and at least 80% of the total number of shares of all other classes of
capital stock of the Company; and
FURTHERMORE, it is also the intention of the Company (without making
any representation with respect thereto) that the foregoing transfers of Assets
to the Company shall qualify as tax free within the provisions of Section 351
of the Code; provided, however, that the Company does not assume any liability
or responsibility to any holder of capital stock of the Company or any other
person or entity in the event Section 351 of the Code does not apply to such
transfers of Assets; and
FURTHERMORE, it is the expectation of the Company that the parties to
the Acquisitions and the IPO will contribute Assets to the Company in the
approximate amounts contemplated by the Draft Registration Statement in
exchange for the voting capital stock, and other consideration, including cash,
options, warrants and promissory notes of the Company, in the approximate
amounts contemplated by the Draft Registration Statement.
The shares of voting capital stock and other consideration, including
cash, options, warrants and promissory notes of the Company, deliverable in the
Acquisitions may be subject to adjustment in accordance with the various
acquisition agreements between the Company and the contributing parties. This
Exchange Plan shall not obligate any party to any Acquisition to consummate
such Acquisition other than upon the terms of the definitive acquisition
agreement executed by such party with respect to such Acquisition.
By the execution of the acquisition agreement to which this Exchange
Plan is attached as Annex II, each of the contributing parties thereto
evidences such party's agreement with and adoption of this Exchange Plan.
-2-
ANNEX III
Advanced Communications Group, Inc.
$___________________
7% INSTALLMENT NOTE DUE [ANNIVERSARY DATE OF CLOSING], 2000
DATED: ___________, 1997
------------------
THE SECURITIES REPRESENTED HEREBY WERE NOT ISSUED IN A TRANSACTION
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS.
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED
FOR INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED UNLESS
SUCH SALE OR TRANSFER IS COVERED BY AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS OR, IN THE OPINION OF COUNSEL TO THE
ISSUER, IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT
AND SUCH LAWS.
--------------------
Advanced Communications Group, Inc., a Delaware corporation organized
in September 1997 (the "Company"), for value received, hereby promises to pay
to ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇, or their registered assigns, the principal sum of
Three Hundred Fifty Thousand Dollars ($350,000) in installments of $116,666.66,
$116,666.67, and $116,666.67, payable respectively on the first, second and
third anniversaries of the original date of issue of this Note, in such coin or
currency of the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts, and to pay to the
registered holder hereof interest from the date hereof on the then-outstanding
principal balance, annually on the first, second and third anniversaries of the
original date of issue of this Note, on said principal sum, in like coin and
currency, at a rate per annum of seven percent (7%), to Noteholder until
payment of said principal sum and accrued interest has been made or duly
provided for; provided, however, that payment of principal and accrued interest
may
be made at the option of the Company by wire transfer of funds to such bank
account in the United States as shall be designated in writing to the Company
by the registered holder hereof or by check mailed to the address of the
registered holder hereof as such address shall appear in the Note Register
maintained by the Company. Interest shall be calculated on the basis of a
360-day year of twelve 30-day months.
ARTICLE I.
Defined Terms
SECTION 1.01 Defined Terms. Unless the context otherwise requires,
capitalized terms used herein shall have the meanings ascribed to them in
Article VIII.
ARTICLE II.
General Provisions
SECTION 2.01 Mutilated Destroyed, Lost or Stolen Note. In case this
Note shall become mutilated or be destroyed, lost or stolen, the Company in its
discretion may execute and deliver a new Note, in exchange and substitution for
the mutilated Note or in lieu of and in substitution for the Note destroyed,
lost or stolen. In every case the Noteholder shall furnish to the Company such
security or indemnity as may be required by it to save the Company harmless,
and, in every case of destruction, loss or theft the Noteholder shall also
furnish to the Company evidence to its satisfaction of the destruction, loss or
theft of this Note and of the ownership thereof. Upon issuance of any
substituted Note, the Company may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and other expenses connected therewith.
SECTION 2.02 Transfer and Registration of Notes. This Note may be
presented for transfer by surrender hereof at the office of the Company
maintained for that purpose in accordance with the provisions of Section 4.02,
duly endorsed or accompanied by a written instruction of transfer in form
satisfactory to the Company, duly executed by the holder hereof or his attorney
duly authorized in writing. This Note may be transferred in whole, but not in
part. The Company will have no obligation to transfer this Note unless its
requirements are met and such transfer complies with the legend on the first
page of this Note. By its acceptance of this Note, the holder hereof
acknowledges the restrictions on transfer of this Note set forth herein, and
agrees that it will transfer this Note only as provided herein.
-2-
The Company shall not be required to register the transfer of this
Note (i) during a period beginning at the opening of business on a day which is
15 days before the mailing of a notice of redemption of this Note and ending on
the close of business on the day of such mailing, or (ii) if this Note has been
selected for redemption in whole or in part pursuant to Article III, except the
unredeemed portion of this Note if being redeemed in part.
The Company shall keep or cause to be maintained at the office of the
Company maintained in accordance with the provisions of Section 4.02 a register
(herein sometimes referred to as the "Note Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall register the
Notes (as defined below).
ARTICLE III.
Redemption of Note
SECTION 3.01 Redemption Price. The Company may, at its option, redeem
all or from time to time any part of this Note, upon notice as set forth in
Section 3.02 at a redemption price equal to the principal amount to be
redeemed, together with accrued and unpaid interest on the principal amount to
be redeemed to the date fixed for redemption.
SECTION 3.02 Notice of Redemption. If the Company shall desire to
exercise the right to redeem all or any part of this Note pursuant to Section
3.01, it shall fix a date for redemption and shall mail a notice of such
redemption at least 10 days prior to the date fixed for redemption to the
holder of this Note at the last address of such holder as the same appears on
the Note Register. Such mailing shall be by first class mail. The notice if
mailed in the manner herein provided shall be conclusively presumed to have
been duly given, whether or not the holder receives such notice. In any case,
failure to give such notice by mail or any defect in the notice to the holder
of this Note shall not affect the validity of the proceedings for the
redemption of this Note.
Each such notice of redemption shall be given in the name of the
Company and shall specify the date fixed for redemption, the principal amount
to be redeemed, the redemption price at which this Note or portion hereof is to
be redeemed, the place of payment, that payment will be made upon presentation
and surrender of this Note and that interest accrued to the date fixed for
redemption will be paid as specified in such notice, and that on and after said
date fixed for redemption interest hereon or on the portions hereof to be
redeemed will cease to accrue. If this Note is to be redeemed in part only, the
notice of redemption shall also state that on and after the date fixed for
redemption, upon surrender of this Note, a new Note in aggregate principal
amount equal to the unredeemed portion hereof will be issued without charge to
the holder.
-3-
SECTION 3.03 Payment of Note Called for Redemption. If notice of
redemption has been given as above provided, this Note or the portion of this
Note with respect to which such notice has been given shall become due and
payable on the date and at the place stated in such notice at the applicable
redemption price, together with interest accrued and unpaid to the date fixed
for redemption, and on and after such date (unless the Company shall default in
the payment of this Note or portion hereof to be redeemed at such redemption
price, together with interest accrued to such date) interest on this Note or
portion hereof so called for redemption shall cease to accrue, and this Note or
portion hereof so called for redemption shall be deemed not to be outstanding
and shall not be entitled to any benefit under this Note except to receive
payment of such redemption price, together with accrued interest to the date
fixed for redemption. On presentation and surrender of this Note on or after
the date fixed for redemption at the place of payment in such notice specified,
this Note or the specified portion hereof to be redeemed shall be paid and
redeemed by the Company at the applicable redemption price, together with
interest accrued thereon to the date fixed for redemption.
ARTICLE IV.
Particular Covenants of the Company
SECTION 4.01 Payment of Principal and Interest on Note. The Company
covenants and agrees that it will duly and punctually pay or cause to be paid
the principal of and the interest on this Note at the place, at the respective
times and in the manner provided herein.
SECTION 4.02 Office for Notices and Payments etc. So long as this Note
remains outstanding, the Company will maintain in the City of Houston, Texas,
an office or agency where this Note may be presented for payment, an office or
agency where this Note may be presented for registration of transfer or
exchange as herein provided, and an office or agency where notices and demands
to or upon the Company in respect of this Note may be served. Until otherwise
designated by the Company in a written notice such offices or agencies shall be
the executive offices of the Company.
ARTICLE V.
Immunity of Incorporators, Stockholders,
Officers and Directors
SECTION 5.01 Note Solely Corporate Obligations. No recourse for the
payment of the principal of or interest on this Note, or for any claim based
hereon or otherwise in respect hereof, and no recourse under or upon any
obligation, covenant or agreement of the Company in this Note, or because of
the creation of any indebtedness represented hereby, shall be had against any
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incorporator, stockholder, officer or director, as such, past, present or
future, of the Company or of any successor corporation, either directly or
through the Company or any successor corporation, whether by virtue of any
constitution, statute, or rule of law, or by the enforcement of any assessment
or penalty or otherwise; it being expressly understood that all such liability
is hereby expressly waived and released as a condition of, and as a
consideration for, the execution of this Note.
ARTICLE VI.
Remedies in Event of Default
SECTION 6.01 Event of Default. In case one or more of the following
Events of Default shall have occurred and be continuing:
(a) default in the payment of any installment of interest
upon this Note as and when the same shall become due and payable, and
continuance of such default for a period of 30 days; or
(b) default in the payment of the principal of this Note as
and when the same shall become due and payable either at maturity,
upon redemption, by declaration or otherwise; or
(c) failure on the part of the Company duly to observe or
perform any covenants or agreements (other than a covenant or
agreement the breach or a default in the performance of which is
elsewhere in this Section 6.01 specifically dealt with) on the part of
the Company that continues for a period of 30 days after the date on
which written notice (such written notice to state it is a "Notice of
Default" hereunder) of such failure, requiring the Company to remedy
the same, shall have been given to the Company by the holder hereof;
or
(d) without the consent of the Company, a court having
jurisdiction shall enter an order for relief with respect to the
Company under the Bankruptcy Code or without the consent of the
Company a court having jurisdiction shall enter a judgment, order or
decree adjudging the Company a bankrupt or insolvent, or enter an
order for relief for reorganiza tion, arrangement, adjustment or
composition of or in respect of the Company under the Bankruptcy Code
or applicable state insolvency law and the continuance of any such
judgment, order or decree unstayed and in effect for a period of 90
consecutive days; or
(e) the Company shall institute proceedings for entry of an
order for relief with respect to the Company under the Bankruptcy Code
or for an adjudication of insolvency, or shall consent to the
institution of bankruptcy or insolvency proceedings against it, or
shall
-5-
file a petition seeking, or seek or consent to reorganization,
arrangement, composition or relief under the Bankruptcy Code or any
applicable state law, or shall consent to the filing of such petition
or to the appointment of a receiver, custodian, liquidator, assignee,
trustee, sequestrator or similar official (other than a custodian
pursuant to 8 Delaware Code ss.226 or any similar statute under other
state laws) of the Company or of substantially all of its property, or
the Company shall make a general assignment for the benefit of
creditors as recognized under the Bankruptcy Code; or
(f) default in the payment of any principal of or interest
on any Pari Passu Debt as and when the same shall become due and
payable and such failure is not cured within the applicable grace
period, if any, or any Pari Passu Debt having an outstanding principal
balance of at least $500,000 shall be declared to be due and payable
prior to the stated maturity thereof;
then and in each and every such case, unless the principal of this Note shall
have already become due and payable, the holder of this Note by notice in
writing to the Company, may declare the principal of this Note and any accrued
interest to the date of declaration to be due and payable immediately, and upon
any such declaration the same shall become and shall be immediately due and
payable.
SECTION 6.02 Remedies Cumulative and Continuing. All powers and
remedies given by this Article VI to the holder of this Note shall, to the
extent permitted by law, be deemed cumulative and not exclusive of any other
thereof or of any other powers and remedies available to such holders, by
judicial proceedings or otherwise, to enforce the performance or observance of
the covenants and agreements contained in this Note and no delay or omission of
any holder to exercise any right or power accruing upon any default occurring
and continuing as aforesaid, shall impair any such right or power, or shall be
construed to be a waiver of any such default or an acquiescence therein; and
every power and remedy given by this Article VI or by law to the holder of the
Note may be exercised from time to time, and as often as shall be deemed
expedient, by such holder.
SECTION 6.03 Waiver of Presentment, Demand, Etc. Except as provided
herein, the Company hereby waives presentment and demand for payment, protest,
notice of protest and nonpayment, notice of the intention to accelerate, notice
of acceleration, and agrees that its liability on this Note shall not be
affected by any renewal or extension in the time of payment hereof, by any
indulgences, and hereby consents to any and all renewals, extensions,
indulgences, releases, or changes, regardless of the number of such renewals,
extensions, indulgences, releases, or changes.
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ARTICLE VII.
Miscellaneous Provisions
SECTION 7.01 Successors and Assigns of Company Bound. All the
covenants, stipulations, promises and agreements in this Note contained by or
in behalf of the Company shall bind its successors and assigns, whether so
expressed or not.
SECTION 7.02 Notice to Noteholder. When this Note provides for notice
to the holder of any event, such notice shall be sufficiently given (unless
otherwise expressly herein provided) if in writing and mailed, first class,
postage prepaid, to the holder at his address as it appears on the Note
Register, not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice. Any notice which is mailed to
the holder in the manner herein provided shall be conclusively presumed to have
been duly given. Where this Note provides for notice in any manner, such notice
may be waived in writing by the person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice.
SECTION 7.03 TEXAS CONTRACT. THIS NOTE SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER THE LAWS OF THE STATE OF TEXAS, AND FOR ALL PURPOSES SHALL
BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF SAID STATE.
SECTION 7.04 Legal Holidays. In any case where the date of maturity of
interest on or principal of this Note or the date fixed for redemption of this
Note shall not be a Business Day, then payment of interest on or principal of
this Note need not be made on such date, but may be made on the next succeeding
Business Day with the same force and effect as if made on the date of maturity
or the date fixed for redemption, and no interest shall accrue for the period
after such prior date.
SECTION 7.05 Severability. In case any provision of this Note shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
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ARTICLE VIII.
Definitions
SECTION 8.01 Definitions. The terms defined in this Section 8.01
(except as herein otherwise expressly provided or unless the context otherwise
requires) for all purposes of this Note shall have the respective meanings
specified in this Section 8.01.
"Bankruptcy Code" shall mean the United States Bankruptcy Code, 11
United States Code ss. 101 et seq. or any successor statute thereto.
"Business Day" shall mean any day except a Saturday, a Sunday or a day
on which banking institutions in the City of Houston, Texas are authorized or
required by law to close.
"Indebtedness" shall mean the following, whether outstanding on the
date hereof or hereafter created, incurred, assumed or guaranteed, (a) the
principal of, premium if any, and interest on (i) indebtedness of the Company
for money borrowed, (ii) indebtedness of the Company evidenced by bonds, notes,
debentures or similar obligations, (iii) capitalized lease obligations, (iv)
indebtedness or obligations incurred, assumed or guaranteed by the Company in
connection with the acquisition or improvement of any property or asset or the
acquisition by it or by a Subsidiary of any business, (v) indebtedness of
others of the kinds described in the preceding clauses (i), (ii), (iii), and
(iv), assumed or guaranteed by the Company or in effect guaranteed by the
Company through an agreement to purchase or otherwise, (vi) obligations which
would be classified as liabilities on the balance sheet of the Company in
accordance with generally accepted accounting principles, evidencing the
purchase price for the acquisition of assets of any kind, tangible or
intangible, by the Company or a Subsidiary, except in the ordinary course of
business, and (b) any increases, refundings, renewals, rearrangements or
extensions of and amendments, modifications and supplements to any
indebtedness, liability or obligation described in clause (a) above.
"Junior Indebtedness" shall mean Indebtedness which, by the terms of
the instrument by which such Indebtedness is created or evidenced, ranks junior
and subordinate in right of payment to this Note.
"Note" shall mean this Note and any Note issued on exchange or
transfer hereof.
"Noteholder," "holder of this Note" or other similar terms mean any
person in whose name at the time this Note shall be registered in the Note
Register kept for that purpose in accordance with the terms hereof.
"Pari Passu Debt" shall mean any Indebtedness other than Junior
Indebtedness.
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"Subsidiary" shall mean any corporation of which the Company, or the
Company and one or more Subsidiaries, or any one or more Subsidiaries, directly
or indirectly own voting securities entitling the holders thereof to elect a
majority of the directors, either at all times or so long as there is no
default or contingency which permits the holders of any other class or classes
of securities to vote for the election of one or more directors.
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed by a duly authorized officer and has caused a facsimile or its
corporate seal to be imprinted hereon.
ADVANCED COMMUNICATIONS GROUP, INC.
[SEAL]
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
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ANNEX IV
ADVANCED COMMUNICATIONS GROUP, INC.
NON-TRANSFERRABLE SERIES H WARRANT
Total Number of Series H Warrants: 6,250 Warrant No. H-
Number of Series H Warrants represented
by this Warrant Certificate:
This Warrant Certificate certifies that, for value received,
▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇
is the registered holder of the number of Warrants set forth above. Each
Warrant entitles the holder thereof, at any time or from time to time after the
closing and (b) on or before the Expiration Date, to purchase from the Company
one fully paid and nonassessable share of Common Stock at the Exercise Price,
subject to adjustment as provided herein.
"Acts" means the Securities Act of 1933, as amended, and applicable
state securities laws.
"Agreement" means the Restated Asset Purchase Agreement dated as of
October 6, 1997 by and among Company, ACG Acquisition II Corp., Advanced
Communications Corp. and the initial registered holders of this Warrant
Certificate.
"Board of Directors" means the board of directors of the Company (or
any authorized committee thereof).
"Closing" means the consummation of the purchase and sale of the
business contemplated by the Agreement.
"Closing Date" means the date upon which the Closing occurs.
"Common Stock" means the Common Stock, $.0001 par value per share, of
the Company, or such other class of securities as shall then represent the
common equity of the Company.
"Common Stock Equivalent" means any Convertible Security or any
warrant, option or other right to subscribe for or purchase Common Stock or any
Convertible Security, other than pursuant to Employee Benefit Plans.
"Company" means Advanced Communications Group, Inc., a Delaware
corporation organized in September 1997.
"Conversion Securities" means the Common Stock or other securities or
property purchasable on the exercise of the Warrants.
"Convertible Security" means any security or evidence of indebtedness
that is convertible into or exchangeable for Common Stock.
"Employee Benefit Plans" means all thrift plans, stock purchase plans,
stock bonus plans, stock option plans, employee stock ownership plans and other
incentive or profit sharing arrangements for the benefit of employees.
"Exercise Price," subject in all circumstances to adjustment in
accordance with Section 3, means $_____ [IPO Price].
"Expiration Date" means 5:00 p.m., Houston Time on the tenth
anniversary of the Closing Date.
"Market Price" means the average Price per share of Common Stock for
the 20 Trading Days immediately preceding the date of authorization of the
issuance of any shares of Common Stock by the Board of Directors.
"Price" on any day means the reported last sale price per share of
Common Stock regular way on such day or, in case no such sale takes place on
such day, the average of the reported closing bid and asked prices regular way,
in each case on the New York Stock Exchange, or, if the Common Stock is not
listed or admitted to trading on such Exchange, on the American Stock Exchange,
or, if the Common Stock is not listed or admitted to trading on such Exchange,
on the principal national securities exchange on which the Common Stock is
listed or admitted to trading, or, if the Common Stock is not listed or
admitted to trading on any national securities exchange, the average of the
closing bid and asked prices in the over-the-counter market as reported by the
National Association of Securities Dealers' Automated Quotation System, or, if
not so reported, as reported by the National Quotation Bureau, Incorporated, or
any successor thereof, or, if not so reported, the average of the closing bid
and asked prices as furnished by any member of the National Association of
Securities Dealers, Inc. selected from time to time by the Company for that
purpose; or, in all other cases, the value established by the Board of
Directors in good faith; and the "average" Price per share
-2-
for any period shall be determined by dividing the sum of the Prices determined
for each Trading Day in such period by the number of Trading Days in such
period.
"Trading Day" means a day on which the principal national securities
exchange on which the Common Stock is listed or admitted to trading is open for
the transaction of business or, if the Common Stock is not listed or admitted
to trading on any national securities exchange, a Monday, Tuesday, Wednesday,
Thursday or Friday on which banking institutions in New York City are not
authorized or obligated by law or executive order to close.
"Warrants" means the Series H Warrants represented by this Warrant
Certificate.
"Warrant Shares" means the shares of Common Stock and other
securities, property or cash receivable upon the exercise of the Warrants.
1. EXERCISE OF WARRANTS. (a) The Warrants evidenced by this Warrant
Certificate may be exercised in whole or in part, after the first anniversary
of the Closing Date, by presentation and surrender at the office of the Company
specified herein of (i) this Warrant Certificate with the Election To Exercise
duly completed and executed, and (ii) payment of the Exercise Price as then in
effect, by bank draft or cashier's check, for the number of Warrants being
exercised. If the holder of this Warrant Certificate at any time exercises less
than all the Warrants evidenced by this Warrant Certificate, the Company shall
issue to such holder a Warrant Certificate identical in form to this Warrant
Certificate, but evidencing a number of Warrants equal to the number of
Warrants originally represented by this Warrant Certificate less the number of
Warrants previously exercised.
(b) To the extent that the Warrants evidenced by this Warrant
Certificate have not been exercised at or prior to the Expiration Date, such
Warrants shall expire and the rights of the holder shall become void and of no
effect.
2. RESTRICTIONS ON TRANSFER. THE WARRANTS EVIDENCED BY THIS WARRANT
CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED,
PLEDGED, DISTRIBUTED OR OTHERWISE DISPOSED OF EXCEPT IN THE LIMITED INSTANCES
PROVIDED IN SECTION 12 OF THE AGREEMENT. ACCORDINGLY, SUCH WARRANTS HAVE NOT
BEEN REGISTERED UNDER THE ACTS IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION
PROVISIONS THEREOF. The holder hereof acknowledges that the Conversion
Securities may not be directly or indirectly sold, transferred or otherwise
disposed of in violation of the provisions of the Acts. Any purported sale,
transfer or other disposition of this Warrant Certificate, the Warrants
evidenced hereby or the Conversion Securities in violation of this provision
shall be void and the Company shall not be required to recognize the same.
Compliance with this provision is the responsibility of the holder. Each
certificate representing Conversion Securities shall bear a legend
substantially similar to the bold-faced legend appearing in Section 14 of the
Agreement. Reference is made to Sections 12, 13, 14, and 15 of the Agreement
that relate to the non-transferability of the Warrants, the type of legend that
shall be imprinted on Conversion Securities and the rights of the
-3-
holders of Conversion Securities to secure registration of their securities
under the Acts under certain circumstances. Such sections are incorporated by
reference herein. The Company shall deem and treat the registered holder of
this Warrant Certificate as the true and lawful owner of the Warrants evidenced
hereby for all purposes, any claims of another person to the contrary
notwithstanding.
3. ANTIDILUTION ADJUSTMENTS. The shares of Common Stock purchasable on
exercise of the Warrants evidenced by this Warrant Certificate are shares of
Common Stock as constituted as of the Closing Date. The number and kind of
securities purchasable on the exercise of the Warrants evidenced by this
Warrant Certificate, and the Exercise Price, shall be subject to adjustment
from time to time upon the happening of certain events, as follows:
(a) Mergers, Consolidations and Reclassifications. In case of
any reclassification or change of outstanding securities issuable upon exercise
of the Warrants evidenced by this Warrant Certificate at any time after the
Closing Date (other than a change in par value, or from par value to no par
value, or from no par value to par value or as a result of a subdivision or
combination to which paragraph (b) of this Section 3 applies), or in case of
any consolidation or merger of the Company with or into another corporation
(other than a merger with another corporation in which the Company is the
surviving corporation and which does not result in any reclassification or
change [other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of a subdivision or combination
to which paragraph (b) of this Section 3 applies] in the securities issuable
upon exercise of this Warrant), the holder of the Warrants evidenced by this
Warrant Certificate shall have, and the Company, or such successor corporation
or other entity, shall covenant in the constituent documents effecting any of
the foregoing transactions that such holder does have, the right to obtain upon
the exercise of the Warrants evidenced by this Warrant Certificate, in lieu of
each share of Common Stock, other securities, money or other property
theretofore issuable upon exercise of a Warrant, the kind and amount of shares
of stock, other securities, money or other property receivable upon such
reclassification, change, consolidation or merger by a holder of the shares of
Common Stock, other securities, money or other property issuable upon exercise
of a Warrant if the Warrants evidenced by this Warrant Certificate had been
exercised immediately prior to such reclassification, change, consolidation or
merger. The constituent documents effecting any such reclassification, change,
consolidation or merger shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided in paragraph (a)
of this Section 3. The provisions of paragraph (a) of this Section 3 shall
similarly apply to successive reclassifications, changes, consolidations or
mergers.
(b) Subdivisions and Combinations. If the Company, at any
time after the Closing Date, shall subdivide its shares of Common Stock into a
greater number of shares (or pay to any holders of securities of the Company a
dividend payable in, or make any other distribution of, Common Stock), the
Exercise Price in effect immediately prior to such subdivision shall be
proportionately reduced, and the number of shares of Common Stock purchasable
upon exercise of the Warrants evidenced by this Warrant Certificate shall be
proportionately increased, as at the
-4-
effective date of such subdivision, dividend or distribution or if the Company
shall take a record of holders of its Common Stock for such purpose, as at such
record date, whichever is earlier. If the Company, at any time after the
Closing Date, shall combine its shares of Common Stock into a smaller number of
shares, the Exercise Price in effect immediately prior to such combination
shall be proportionately increased, and the number of shares of Common Stock
purchasable upon exercise of the Warrants evidenced by this Warrant Certificate
shall be proportionately reduced, as at the effective date of such combination,
or if the Company shall take a record of holders of its Common Stock for
purposes of such combination, as at such record date, whichever is earlier.
(c) Certain Issuances of Securities. If the Company at any
time after the Closing Date shall issue any additional shares of Common Stock
(otherwise than as provided in paragraphs (a) through (b) of this Section 3) at
a price per share less than the Market Price, then the Exercise Price upon each
such issuance shall be adjusted to that price determined by multiplying the
Exercise Price by a fraction:
i. the numerator of which shall be the sum of (1) the number
of shares of Common Stock outstanding immediately prior to the
issuance of such additional shares of Common Stock multiplied by the
Market Price, and (2) the consideration, if any, received and deemed
received by the Company upon the issuance of such additional shares of
Common Stock, and
ii. the denominator of which shall be the Market Price
multiplied by the total number of shares of Common Stock outstanding
immediately after the issuance of such additional shares of Common
Stock.
No adjustments of the Exercise Price shall be made under paragraph (c)
of this Section 3 upon the issuance of any additional shares of Common Stock
that (v) are issued pursuant to Employee Benefit Plans that otherwise would
cause an adjustment under paragraph (c) of this Section 3; provided that the
aggregate number of shares of Common Stock so issued (including the shares
issued pursuant to any options, rights or warrants or convertible or
exchangeable securities issued under such Employee Benefit Plans containing the
right to purchase shares of Common Stock) pursuant to Employee Benefit Plans
shall not exceed 10% of the Company's outstanding Common Stock (on a fully
diluted basis using the treasury stock method) at the time of such issuance;
(w) are issued pursuant to any Other Warrant or Common Stock Equivalent (i)
which was outstanding on the Closing Date or (ii) if upon the issuance of any
such Common Stock Equivalent, any such adjustments shall previously have been
made pursuant to paragraph (d) of this Section 3 or (iii) if no adjustment was
required pursuant to paragraph (d) of this Section 3.
(d) Common Stock Equivalents. If the Company shall, after the
Closing Date, issue any Common Stock Equivalent, or if, after any such
issuance, the price per share for which additional shares of Common Stock may
be issuable thereunder is amended, then the Exercise Price
-5-
upon each such issuance or amendment shall be adjusted as provided in paragraph
(c) of this Section 3 on the basis that (i) the maximum number of additional
shares of Common Stock issuable pursuant to all such Common Stock Equivalents
shall be deemed to have been issued as of the earlier of (a) the date on which
the Company shall enter into a firm contract for the issuance of such Common
Stock Equivalent, or (b) the date of actual issuance of such Common Stock
Equivalent; and (ii) the aggregate consideration for such maximum number of
additional shares of Common Stock shall be deemed to be the minimum
consideration received and receivable by the Company for the issuance of such
additional shares of Common Stock pursuant to such Common Stock Equivalent;
provided, however, that no adjustment shall be made pursuant to paragraph (d)
of this Section 3 unless the consideration received and receivable by the
Company per share of Common Stock for the issuance of such additional shares of
Common Stock pursuant to such Common Stock Equivalent is less than the Market
Price. No adjustment of the Exercise Price shall be made under paragraph (d) of
this Section 3 upon the issuance of any Convertible Security which is issued
pursuant to the exercise of any warrants or other subscription or purchase
rights therefor, if any adjustment shall previously have been made in the
Exercise Price then in effect upon the issuance of such warrants or other
rights pursuant to paragraph (d) of this Section 3.
(e) Miscellaneous. The following provisions shall be
applicable to the making of adjustments in the Exercise Price hereinbefore
provided in this Section 3:
i. The consideration received by the Company shall
be deemed to be the following: (I) to the extent that any additional
shares of Common Stock or any Common Stock Equivalent shall be issued
for cash consideration, the consideration received by the Company
therefor, or, if such additional shares of Common Stock or Common
Stock Equivalent are offered by the Company for subscription, the
subscription price, or, if such additional shares of Common Stock or
Common Stock Equivalent are sold to underwriters or dealers for public
offering without a subscription offering, the initial public offering
price, in any such case excluding any amounts paid or receivable for
accrued interest or accrued dividends and without deduction of any
compensation, discounts, commissions or expenses paid or incurred by
the Company for and in the underwriting of, or otherwise in connection
with, the issue thereof; (II) to the extent that such issuance shall
be for a consideration other than cash, then, except as herein
otherwise expressly provided, the fair value of such consideration at
the time of such issuance as determined in good faith by the Board of
Directors, as evidenced by a certified resolution of such Board of
Directors delivered to the holder of this Warrant Certificate setting
forth such determination. The consideration for any additional shares
of Common Stock issuable pursuant to any Common Stock Equivalent shall
be the consideration received by the Company for issuing such Common
Stock Equivalent, plus the additional consideration payable to the
Company upon the exercise, conversion or exchange of such Common Stock
Equivalent. In case of the issuance at any time of any additional
shares of Common Stock or Common Stock Equivalent in payment or
satisfaction of any dividend upon any class of stock other than Common
Stock, the
-6-
Company shall be deemed to have received for such additional shares of
Common Stock or Common Stock Equivalent (which shall not be deemed to
be a dividend payable in, or other distribution of, Common Stock under
paragraph (b) of this Section 3) consideration equal to the amount of
such dividend so paid or satisfied.
ii. Upon the expiration of the right to convert,
exchange or exercise any Common Stock Equivalent the issuance of which
effected an adjustment in the Exercise Price, if any such Common Stock
Equivalent shall not have been converted, exercised or exchanged, the
number of shares of Common Stock deemed to be issued and outstanding
because they were issuable upon conversion, exchange or exercise of
any such Common Stock Equivalent shall no longer be computed as set
forth above, and the Exercise Price shall forthwith be readjusted and
thereafter be the price which it would have been (but reflecting any
other adjustments in the Exercise Price made pursuant to the
provisions of paragraph (c) of this Section 3 after the issuance of
such Common Stock Equivalent) had the adjustment of the Exercise Price
made upon the issuance or sale of such Common Stock Equivalent been
made on the basis of the issuance only of the number of additional
shares of Common Stock actually issued upon exercise, conversion or
exchange of such Common Stock Equivalent and thereupon only the number
of additional shares of Common Stock actually so issued shall be
deemed to have been issued and only the consideration actually
received by the Company (computed as in subparagraph (i) of paragraph
(e) of this Section 3) shall be deemed to have been received by the
Company.
iii. The number of shares of Common Stock at any
time outstanding shall not include any shares thereof then directly or
indirectly owned or held by or for the account of the Company or its
Subsidiaries (as defined in the Agreement).
iv. For the purposes of this Section 3, the term
"shares of Common Stock" shall mean shares of (i) the class of stock
designated as the Common Stock of the Company at the Closing Date or
(ii) any other class of stock resulting from successive changes or
reclassifications of such shares consisting solely of changes in par
value, or from par value to no par value, or from no par value to par
value. If at any time, because of an adjustment pursuant to paragraph
(a) of this Section 3, the Warrants shall entitle the holders to
purchase any securities other than shares of Common Stock, thereafter
the number of such other securities so purchasable upon exercise of
each Warrant and the Exercise Price of such securities shall be
subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to the
Warrant Shares contained in this Section 3.
(f) Calculation of Exercise Price. The Exercise Price in
effect from time to time shall be calculated to four decimal places
and rounded to the nearest thousandth.
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4. NOTICE OF ADJUSTMENT TO EXERCISE PRICE. Whenever the Exercise Price
is required to be adjusted as provided in Section 3, the Company shall
forthwith compute the adjusted Exercise Price and shall prepare and mail to the
holder hereof a certificate setting forth such adjusted Exercise Price and
showing in reasonable detail the facts upon which such adjustment is based.
5. VOLUNTARY REDUCTION. The Company may make such decreases in the
Exercise Price as shall be determined by it, as evidenced by a certified
resolution of the Board of Directors delivered to the holders, to be advisable
to avoid or diminish any income tax to the holder resulting from any dividend
or distribution of stock or issuance of rights or warrants to purchase or
subscribe for stock or from any event treated as such for income tax purposes.
Whenever the Exercise Price is reduced, the Company shall mail to the holder a
notice of the reduction at least 15 days before the date the reduced Exercise
Price takes effect, stating the reduced Exercise Price and the period for which
such reduced Exercise Price will be in effect.
6. NOTICES TO WARRANT HOLDER. In the event:
(a) of any consolidation or merger to which the Company is a party
and for which approval of any stockholders of the Company is required, or of
the conveyance or sale of all or substantially all of the assets of the
Company, or of any reclassification or change of the Common Stock or other
securities issuable upon exercise of the Warrants (other than a change in par
value, or from par value to no par value, or from no par value to par value or
as a result of a subdivision or combination), or a tender offer or exchange
offer for all shares of Common Stock (or other securities issuable upon the
exercise of the Warrants); or
(b) the Company shall declare any dividend (or any other
distribution) on the Common Stock, other than regular cash dividends; or
(c) the Company shall authorize the granting to the holders of
Common Stock of rights or warrants to subscribe for or purchase any shares of
any class or series of capital stock; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then the Company shall cause to be sent to the holder hereof, at least
30 days prior to the applicable record date hereinafter specified, or promptly
in the case of events for which there is no record date, a written notice
stating (x) the date for the determination of the holders of record of shares
of Common Stock (or other securities issuable upon the exercise of the
Warrants) entitled to receive any such dividends or other distribution, (y) the
initial expiration date set forth in any tender offer or exchange offer for
shares of Common Stock (or other securities issuable upon the exercise of the
Warrants), or (z) the date on which any such consolidation, merger, conveyance,
transfer,
-8-
dissolution, liquidation or winding up is expected to become effective or
consummated, and the date as of which it is expected that holders of record of
shares of Common Stock (or other securities issuable upon the exercise of the
Warrants) shall be entitled to exchange such shares for securities or other
property, if any, deliverable upon such reclassification, consolidation,
merger, conveyance, transfer, dissolution, liquidation or winding up. Failure
to give such notice or any defect therein shall not affect the legality or
validity of any distribution, right, option, warrant, issuance, consolidation,
merger, conveyance, transfer, dissolution, liquidation or winding up, or the
vote upon any action.
7. REPORTS TO HOLDERS. The Company will cause to be delivered, by
first-class mail, postage prepaid, to the holder at such holder's address
appearing hereon, or such other address as the holder shall specify, a copy of
any reports delivered by the Company to the holders of Common Stock.
8. COVENANTS OF THE COMPANY. The Company covenants and agrees that:
(a) Until the Expiration Date, the Company shall at all times
reserve and keep available, free from preemptive rights, out of the aggregate
of its authorized but unissued Common Stock (and other securities), for the
purpose of enabling it to satisfy any obligation to issue shares of Common
Stock (and other securities) upon the exercise of the Warrants evidenced by
this Warrant Certificate, the number of shares of Common Stock (and other
securities) issuable upon the exercise of such Warrants.
(b) All Common Stock (and other securities) which may be issued
upon exercise of the Warrants evidenced by this Warrant Certificate shall upon
issuance be validly issued, fully paid, non-assessable and free from all taxes,
liens and charges with respect to the issuance thereof.
9. NO RIGHTS AS STOCKHOLDER. The holder of the Warrants evidenced by
this Warrant Certificate shall not, by virtue of holding such Warrants, be
entitled to any rights of a stockholder of the Company either at law or in
equity, and the rights of the holder of the Warrants evidenced by this Warrant
Certificate are limited to those expressed herein.
10. NOTICES. All notices provided for hereunder shall be in writing
and may be given by registered or certified mail, return receipt requested,
telex, telegram, telecopier, air courier guaranteeing overnight delivery of
personal delivery, if to the holder at the following address:
▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
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and, if to the Company:
Advanced Communications Group, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Chairman and Chief Executive Officer
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
11. GOVERNING LAW. This Warrant Certificate shall be governed by and
construed in accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be executed this _____ day of __________, 1997 by its Chairman and Chief
Executive Officer, thereunto duly authorized.
ADVANCED COMMUNICATIONS GROUP, INC.
By:
------------------------------------
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Chairman and Chief Executive Officer
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ELECTION TO EXERCISE
[To be executed on exercise of the Warrants evidenced
by this Warrant Certificate]
TO: Advanced Communications Group, Inc.
The undersigned, the holder of the Warrants evidenced by the attached
Warrant Certificate, hereby irrevocably elects to exercise Warrants, and
herewith makes payment of ($ ) representing the aggregate Exercise Price
thereof, and requests that the certificate representing the securities issuable
hereunder be issued in the name of _____________________ and delivered to ,
whose address is____________________________. _________________________.
Dated:__________________ ____________________________________
_____________________________________
Signature(s) of Registered Holder(s)
Note: The above signature(s) must
correspond with the name as written
on the face of this Warrant
Certificate in every particular,
without alteration or enlargement
or any change whatsoever.
-11-
ANNEX V
ADVANCED COMMUNICATIONS GROUP, INC.
NON-TRANSFERRABLE SERIES I WARRANT
Total Number of Series I Warrants: 6,250 Warrant No. I
Number of Series I Warrants represented by this Warrant Certificate:
This Warrant Certificate certifies that, for value received,
▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇
is the registered holder of the number of Warrants set forth above. Each
Warrant entitles the holder thereof, at any time or from time to time after the
closing and (b) on or before the Expiration Date, to purchase from the Company
one fully paid and nonassessable share of Common Stock at the Exercise Price,
subject to adjustment as provided herein.
"Acts" means the Securities Act of 1933, as amended, and applicable
state securities laws.
"Agreement" means the Restated Asset Purchase Agreement dated as of
October 6, 1997 by and among Company, ACG Acquisition II Corp., Advanced
Communications Corp. and the initial registered holders of this Warrant
Certificate.
"Board of Directors" means the board of directors of the Company (or
any authorized committee thereof).
"Closing" means the consummation of the purchase and sale of the
business contemplated by the Agreement.
"Closing Date" means the date upon which the Closing occurs.
"Common Stock" means the Common Stock, $.0001 par value per share, of
the Company, or such other class of securities as shall then represent the
common equity of the Company.
"Common Stock Equivalent" means any Convertible Security or any
warrant, option or other right to subscribe for or purchase Common Stock or any
Convertible Security, other than pursuant to Employee Benefit Plans.
"Company" means Advanced Communications Group, Inc., a Delaware
corporation organized in September 1997.
"Conversion Securities" means the Common Stock or other securities or
property purchasable on the exercise of the Warrants.
"Convertible Security" means any security or evidence of indebtedness
that is convertible into or exchangeable for Common Stock.
"Employee Benefit Plans" means all thrift plans, stock purchase plans,
stock bonus plans, stock option plans, employee stock ownership plans and other
incentive or profit sharing arrangements for the benefit of employees.
"Exercise Price," subject in all circumstances to adjustment in
accordance with Section 3, means $_____ [IPO Price].
"Expiration Date" means 5:00 p.m., Houston Time on the tenth
anniversary of the Closing Date.
"Market Price" means the average Price per share of Common Stock for
the 20 Trading Days immediately preceding the date of authorization of the
issuance of any shares of Common Stock by the Board of Directors.
"Price" on any day means the reported last sale price per share of
Common Stock regular way on such day or, in case no such sale takes place on
such day, the average of the reported closing bid and asked prices regular way,
in each case on the New York Stock Exchange, or, if the Common Stock is not
listed or admitted to trading on such Exchange, on the American Stock Exchange,
or, if the Common Stock is not listed or admitted to trading on such Exchange,
on the principal national securities exchange on which the Common Stock is
listed or admitted to trading, or, if the Common Stock is not listed or
admitted to trading on any national securities exchange, the average of the
closing bid and asked prices in the over-the-counter market as reported by the
National Association of Securities Dealers' Automated Quotation System, or, if
not so reported, as reported by the National Quotation Bureau, Incorporated, or
any successor thereof, or, if not so reported, the average of the closing bid
and asked prices as furnished by any member of the National Association of
Securities Dealers, Inc. selected from time to time by the Company for that
purpose; or, in all other cases, the value established by the Board of
Directors in good faith; and the "average" Price per share
-2-
for any period shall be determined by dividing the sum of the Prices determined
for each Trading Day in such period by the number of Trading Days in such
period.
"Trading Day" means a day on which the principal national securities
exchange on which the Common Stock is listed or admitted to trading is open for
the transaction of business or, if the Common Stock is not listed or admitted
to trading on any national securities exchange, a Monday, Tuesday, Wednesday,
Thursday or Friday on which banking institutions in New York City are not
authorized or obligated by law or executive order to close.
"Warrants" means the Series I Warrants represented by this Warrant
Certificate.
"Warrant Shares" means the shares of Common Stock and other
securities, property or cash receivable upon the exercise of the Warrants.
1. EXERCISE OF WARRANTS. (a) The Warrants evidenced by this Warrant
Certificate may be exercised in whole or in part, after the second anniversary
of the Closing Date, by presentation and surrender at the office of the Company
specified herein of (i) this Warrant Certificate with the Election To Exercise
duly completed and executed, and (ii) payment of the Exercise Price as then in
effect, by bank draft or cashier's check, for the number of Warrants being
exercised. If the holder of this Warrant Certificate at any time exercises less
than all the Warrants evidenced by this Warrant Certificate, the Company shall
issue to such holder a Warrant Certificate identical in form to this Warrant
Certificate, but evidencing a number of Warrants equal to the number of
Warrants originally represented by this Warrant Certificate less the number of
Warrants previously exercised.
(b) To the extent that the Warrants evidenced by this Warrant
Certificate have not been exercised at or prior to the Expiration Date, such
Warrants shall expire and the rights of the holder shall become void and of no
effect.
2. RESTRICTIONS ON TRANSFER. THE WARRANTS EVIDENCED BY THIS WARRANT
CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED,
PLEDGED, DISTRIBUTED OR OTHERWISE DISPOSED OF EXCEPT IN THE LIMITED INSTANCES
PROVIDED IN SECTION 12 OF THE AGREEMENT. ACCORDINGLY, SUCH WARRANTS HAVE NOT
BEEN REGISTERED UNDER THE ACTS IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION
PROVISIONS THEREOF. The holder hereof acknowledges that the Conversion
Securities may not be directly or indirectly sold, transferred or otherwise
disposed of in violation of the provisions of the Acts. Any purported sale,
transfer or other disposition of this Warrant Certificate, the Warrants
evidenced hereby or the Conversion Securities in violation of this provision
shall be void and the Company shall not be required to recognize the same.
Compliance with this provision is the responsibility of the holder. Each
certificate representing Conversion Securities shall bear a legend
substantially similar to the bold-faced legend appearing in Section 14 of the
Agreement. Reference is made to Sections 12, 13, 14, and 15 of the Agreement
that relate to the non-transferability of the Warrants, the type of legend that
shall be imprinted on Conversion Securities and the rights of the
-3-
holders of Conversion Securities to secure registration of their securities
under the Acts under certain circumstances. Such sections are incorporated by
reference herein. The Company shall deem and treat the registered holder of
this Warrant Certificate as the true and lawful owner of the Warrants evidenced
hereby for all purposes, any claims of another person to the contrary
notwithstanding.
3. ANTIDILUTION ADJUSTMENTS. The shares of Common Stock purchasable on
exercise of the Warrants evidenced by this Warrant Certificate are shares of
Common Stock as constituted as of the Closing Date. The number and kind of
securities purchasable on the exercise of the Warrants evidenced by this
Warrant Certificate, and the Exercise Price, shall be subject to adjustment
from time to time upon the happening of certain events, as follows:
(a) Mergers, Consolidations and Reclassifications. In case of any
reclassification or change of outstanding securities issuable upon exercise of
the Warrants evidenced by this Warrant Certificate at any time after the
Closing Date (other than a change in par value, or from par value to no par
value, or from no par value to par value or as a result of a subdivision or
combination to which paragraph (b) of this Section 3 applies), or in case of
any consolidation or merger of the Company with or into another corporation
(other than a merger with another corporation in which the Company is the
surviving corporation and which does not result in any reclassification or
change [other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of a subdivision or combination
to which paragraph (b) of this Section 3 applies] in the securities issuable
upon exercise of this Warrant), the holder of the Warrants evidenced by this
Warrant Certificate shall have, and the Company, or such successor corporation
or other entity, shall covenant in the constituent documents effecting any of
the foregoing transactions that such holder does have, the right to obtain upon
the exercise of the Warrants evidenced by this Warrant Certificate, in lieu of
each share of Common Stock, other securities, money or other property
theretofore issuable upon exercise of a Warrant, the kind and amount of shares
of stock, other securities, money or other property receivable upon such
reclassification, change, consolidation or merger by a holder of the shares of
Common Stock, other securities, money or other property issuable upon exercise
of a Warrant if the Warrants evidenced by this Warrant Certificate had been
exercised immediately prior to such reclassification, change, consolidation or
merger. The constituent documents effecting any such reclassification, change,
consolidation or merger shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided in paragraph (a)
of this Section 3. The provisions of paragraph (a) of this Section 3 shall
similarly apply to successive reclassifications, changes, consolidations or
mergers.
(b) Subdivisions and Combinations. If the Company, at any time
after the Closing Date, shall subdivide its shares of Common Stock into a
greater number of shares (or pay to any holders of securities of the Company a
dividend payable in, or make any other distribution of, Common Stock), the
Exercise Price in effect immediately prior to such subdivision shall be
proportionately reduced, and the number of shares of Common Stock purchasable
upon exercise of the Warrants evidenced by this Warrant Certificate shall be
proportionately increased, as at the
-4-
effective date of such subdivision, dividend or distribution or if the Company
shall take a record of holders of its Common Stock for such purpose, as at such
record date, whichever is earlier. If the Company, at any time after the
Closing Date, shall combine its shares of Common Stock into a smaller number of
shares, the Exercise Price in effect immediately prior to such combination
shall be proportionately increased, and the number of shares of Common Stock
purchasable upon exercise of the Warrants evidenced by this Warrant Certificate
shall be proportionately reduced, as at the effective date of such combination,
or if the Company shall take a record of holders of its Common Stock for
purposes of such combination, as at such record date, whichever is earlier.
(c) Certain Issuances of Securities. If the Company at any time
after the Closing Date shall issue any additional shares of Common Stock
(otherwise than as provided in paragraphs (a) through (b) of this Section 3) at
a price per share less than the Market Price, then the Exercise Price upon each
such issuance shall be adjusted to that price determined by multiplying the
Exercise Price by a fraction:
i. the numerator of which shall be the sum of (1) the number
of shares of Common Stock outstanding immediately prior to the issuance of such
additional shares of Common Stock multiplied by the Market Price, and (2) the
consideration, if any, received and deemed received by the Company upon the
issuance of such additional shares of Common Stock, and
ii. the denominator of which shall be the Market Price
multiplied by the total number of shares of Common Stock outstanding
immediately after the issuance of such additional shares of Common Stock.
No adjustments of the Exercise Price shall be made under paragraph (c)
of this Section 3 upon the issuance of any additional shares of Common Stock
that (v) are issued pursuant to Employee Benefit Plans that otherwise would
cause an adjustment under paragraph (c) of this Section 3; provided that the
aggregate number of shares of Common Stock so issued (including the shares
issued pursuant to any options, rights or warrants or convertible or
exchangeable securities issued under such Employee Benefit Plans containing the
right to purchase shares of Common Stock) pursuant to Employee Benefit Plans
shall not exceed 10% of the Company's outstanding Common Stock (on a fully
diluted basis using the treasury stock method) at the time of such issuance;
(w) are issued pursuant to any Other Warrant or Common Stock Equivalent (i)
which was outstanding on the Closing Date or (ii) if upon the issuance of any
such Common Stock Equivalent, any such adjustments shall previously have been
made pursuant to paragraph (d) of this Section 3 or (iii) if no adjustment was
required pursuant to paragraph (d) of this Section 3.
(d) Common Stock Equivalents. If the Company shall, after the
Closing Date, issue any Common Stock Equivalent, or if, after any such
issuance, the price per share for which additional shares of Common Stock may
be issuable thereunder is amended, then the Exercise Price
-5-
upon each such issuance or amendment shall be adjusted as provided in paragraph
(c) of this Section 3 on the basis that (i) the maximum number of additional
shares of Common Stock issuable pursuant to all such Common Stock Equivalents
shall be deemed to have been issued as of the earlier of (a) the date on which
the Company shall enter into a firm contract for the issuance of such Common
Stock Equivalent, or (b) the date of actual issuance of such Common Stock
Equivalent; and (ii) the aggregate consideration for such maximum number of
additional shares of Common Stock shall be deemed to be the minimum
consideration received and receivable by the Company for the issuance of such
additional shares of Common Stock pursuant to such Common Stock Equivalent;
provided, however, that no adjustment shall be made pursuant to paragraph (d)
of this Section 3 unless the consideration received and receivable by the
Company per share of Common Stock for the issuance of such additional shares of
Common Stock pursuant to such Common Stock Equivalent is less than the Market
Price. No adjustment of the Exercise Price shall be made under paragraph (d) of
this Section 3 upon the issuance of any Convertible Security which is issued
pursuant to the exercise of any warrants or other subscription or purchase
rights therefor, if any adjustment shall previously have been made in the
Exercise Price then in effect upon the issuance of such warrants or other
rights pursuant to paragraph (d) of this Section 3.
(e) Miscellaneous. The following provisions shall be applicable to
the making of adjustments in the Exercise Price hereinbefore provided in this
Section 3:
i. The consideration received by the Company shall
be deemed to be the following: (I) to the extent that any additional
shares of Common Stock or any Common Stock Equivalent shall be issued
for cash consideration, the consideration received by the Company
therefor, or, if such additional shares of Common Stock or Common
Stock Equivalent are offered by the Company for subscription, the
subscription price, or, if such additional shares of Common Stock or
Common Stock Equivalent are sold to underwriters or dealers for public
offering without a subscription offering, the initial public offering
price, in any such case excluding any amounts paid or receivable for
accrued interest or accrued dividends and without deduction of any
compensation, discounts, commissions or expenses paid or incurred by
the Company for and in the underwriting of, or otherwise in connection
with, the issue thereof; (II) to the extent that such issuance shall
be for a consideration other than cash, then, except as herein
otherwise expressly provided, the fair value of such consideration at
the time of such issuance as determined in good faith by the Board of
Directors, as evidenced by a certified resolution of such Board of
Directors delivered to the holder of this Warrant Certificate setting
forth such determination. The consideration for any additional shares
of Common Stock issuable pursuant to any Common Stock Equivalent shall
be the consideration received by the Company for issuing such Common
Stock Equivalent, plus the additional consideration payable to the
Company upon the exercise, conversion or exchange of such Common Stock
Equivalent. In case of the issuance at any time of any additional
shares of Common Stock or Common Stock Equivalent in payment or
satisfaction of any dividend upon any class of stock other than Common
Stock, the
-6-
Company shall be deemed to have received for such additional shares of
Common Stock or Common Stock Equivalent (which shall not be deemed to
be a dividend payable in, or other distribution of, Common Stock under
paragraph (b) of this Section 3) consideration equal to the amount of
such dividend so paid or satisfied.
ii. Upon the expiration of the right to convert,
exchange or exercise any Common Stock Equivalent the issuance of which
effected an adjustment in the Exercise Price, if any such Common Stock
Equivalent shall not have been converted, exercised or exchanged, the
number of shares of Common Stock deemed to be issued and outstanding
because they were issuable upon conversion, exchange or exercise of
any such Common Stock Equivalent shall no longer be computed as set
forth above, and the Exercise Price shall forthwith be readjusted and
thereafter be the price which it would have been (but reflecting any
other adjustments in the Exercise Price made pursuant to the
provisions of paragraph (c) of this Section 3 after the issuance of
such Common Stock Equivalent) had the adjustment of the Exercise Price
made upon the issuance or sale of such Common Stock Equivalent been
made on the basis of the issuance only of the number of additional
shares of Common Stock actually issued upon exercise, conversion or
exchange of such Common Stock Equivalent and thereupon only the number
of additional shares of Common Stock actually so issued shall be
deemed to have been issued and only the consideration actually
received by the Company (computed as in subparagraph (i) of paragraph
(e) of this Section 3) shall be deemed to have been received by the
Company.
iii. The number of shares of Common Stock at any
time outstanding shall not include any shares thereof then directly or
indirectly owned or held by or for the account of the Company or its
Subsidiaries (as defined in the Agreement).
iv. For the purposes of this Section 3, the term
"shares of Common Stock" shall mean shares of (i) the class of stock
designated as the Common Stock of the Company at the Closing Date or
(ii) any other class of stock resulting from successive changes or
reclassifications of such shares consisting solely of changes in par
value, or from par value to no par value, or from no par value to par
value. If at any time, because of an adjustment pursuant to paragraph
(a) of this Section 3, the Warrants shall entitle the holders to
purchase any securities other than shares of Common Stock, thereafter
the number of such other securities so purchasable upon exercise of
each Warrant and the Exercise Price of such securities shall be
subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to the
Warrant Shares contained in this Section 3.
(f) Calculation of Exercise Price. The Exercise Price in effect
from time to time shall be calculated to four decimal places and
rounded to the nearest thousandth.
-7-
4. NOTICE OF ADJUSTMENT TO EXERCISE PRICE. Whenever the Exercise Price
is required to be adjusted as provided in Section 3, the Company shall
forthwith compute the adjusted Exercise Price and shall prepare and mail to the
holder hereof a certificate setting forth such adjusted Exercise Price and
showing in reasonable detail the facts upon which such adjustment is based.
5. VOLUNTARY REDUCTION. The Company may make such decreases in the
Exercise Price as shall be determined by it, as evidenced by a certified
resolution of the Board of Directors delivered to the holders, to be advisable
to avoid or diminish any income tax to the holder resulting from any dividend
or distribution of stock or issuance of rights or warrants to purchase or
subscribe for stock or from any event treated as such for income tax purposes.
Whenever the Exercise Price is reduced, the Company shall mail to the holder a
notice of the reduction at least 15 days before the date the reduced Exercise
Price takes effect, stating the reduced Exercise Price and the period for which
such reduced Exercise Price will be in effect.
6. NOTICES TO WARRANT HOLDER. In the event:
(a) of any consolidation or merger to which the Company is a party
and for which approval of any stockholders of the Company is required, or of
the conveyance or sale of all or substantially all of the assets of the
Company, or of any reclassification or change of the Common Stock or other
securities issuable upon exercise of the Warrants (other than a change in par
value, or from par value to no par value, or from no par value to par value or
as a result of a subdivision or combination), or a tender offer or exchange
offer for all shares of Common Stock (or other securities issuable upon the
exercise of the Warrants); or
(b) the Company shall declare any dividend (or any other
distribution) on the Common Stock, other than regular cash dividends; or
(c) the Company shall authorize the granting to the holders of
Common Stock of rights or warrants to subscribe for or purchase any shares of
any class or series of capital stock; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then the Company shall cause to be sent to the holder hereof, at least
30 days prior to the applicable record date hereinafter specified, or promptly
in the case of events for which there is no record date, a written notice
stating (x) the date for the determination of the holders of record of shares
of Common Stock (or other securities issuable upon the exercise of the
Warrants) entitled to receive any such dividends or other distribution, (y) the
initial expiration date set forth in any tender offer or exchange offer for
shares of Common Stock (or other securities issuable upon the exercise of the
Warrants), or (z) the date on which any such consolidation, merger, conveyance,
transfer,
-8-
dissolution, liquidation or winding up is expected to become effective or
consummated, and the date as of which it is expected that holders of record of
shares of Common Stock (or other securities issuable upon the exercise of the
Warrants) shall be entitled to exchange such shares for securities or other
property, if any, deliverable upon such reclassification, consolidation,
merger, conveyance, transfer, dissolution, liquidation or winding up. Failure
to give such notice or any defect therein shall not affect the legality or
validity of any distribution, right, option, warrant, issuance, consolidation,
merger, conveyance, transfer, dissolution, liquidation or winding up, or the
vote upon any action.
7. REPORTS TO HOLDERS. The Company will cause to be delivered, by
first-class mail, postage prepaid, to the holder at such holder's address
appearing hereon, or such other address as the holder shall specify, a copy of
any reports delivered by the Company to the holders of Common Stock.
8. COVENANTS OF THE COMPANY. The Company covenants and agrees that:
(a) Until the Expiration Date, the Company shall at all times
reserve and keep available, free from preemptive rights, out of the aggregate
of its authorized but unissued Common Stock (and other securities), for the
purpose of enabling it to satisfy any obligation to issue shares of Common
Stock (and other securities) upon the exercise of the Warrants evidenced by
this Warrant Certificate, the number of shares of Common Stock (and other
securities) issuable upon the exercise of such Warrants.
(b) All Common Stock (and other securities) which may be issued
upon exercise of the Warrants evidenced by this Warrant Certificate shall upon
issuance be validly issued, fully paid, non-assessable and free from all taxes,
liens and charges with respect to the issuance thereof.
9. NO RIGHTS AS STOCKHOLDER. The holder of the Warrants evidenced by
this Warrant Certificate shall not, by virtue of holding such Warrants, be
entitled to any rights of a stockholder of the Company either at law or in
equity, and the rights of the holder of the Warrants evidenced by this Warrant
Certificate are limited to those expressed herein.
10. NOTICES. All notices provided for hereunder shall be in writing
and may be given by registered or certified mail, return receipt requested,
telex, telegram, telecopier, air courier guaranteeing overnight delivery of
personal delivery, if to the holder at the following address:
▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
-9-
and, if to the Company:
Advanced Communications Group, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Chairman and Chief Executive Officer
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
11. GOVERNING LAW. This Warrant Certificate shall be governed by and
construed in accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be executed this _____ day of __________, 1997 by its Chairman and Chief
Executive Officer, thereunto duly authorized.
ADVANCED COMMUNICATIONS GROUP, INC.
By:
------------------------------------
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Chairman and Chief Executive Officer
-10-
ELECTION TO EXERCISE
[To be executed on exercise of the Warrants evidenced
by this Warrant Certificate]
TO: Advanced Communications Group, Inc.
The undersigned, the holder of the Warrants evidenced by the attached
Warrant Certificate, hereby irrevocably elects to exercise Warrants, and
herewith makes payment of ($ ) representing the aggregate Exercise Price
thereof, and requests that the certificate representing the securities issuable
hereunder be issued in the name of _____________________ and delivered to ,
whose address is__________________________________. __________________________.
Dated:_______________________ _______________________________________
____________________________________
Signature(s) of Registered Holder(s)
Note: The above signature(s) must
correspond with the name as written
on the face of this Warrant
Certificate in every particular,
without alteration or enlargement
or any change whatsoever.
-11-
ANNEX VI
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into on ________ __,
1997, by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ("Employee") and TELE-SYSTEMS, Inc., a Kansas
corporation ("Company") (collectively referred to as the "Parties"). Company
and Employee agree as follows:
1. Employment.
In consideration of the mutual covenants and agreements contained in this
Agreement and for other good and valuable consideration, the receipt and
sufficiency of which are acknowledged by Employee and Company, Company employs
Employee, and Employee accepts employment subject to the terms and conditions
of this Agreement. The Company is a wholly-owned subsidiary of Advanced
Communications Group, Inc., a Delaware corporation ("ACG"). Unless the context
otherwise clearly requires, all references to ACG in this Agreement shall
include ACG, Company and ACG's other subsidiaries.
2. Term.
This Agreement shall commence and become effective on the date hereof and end
on the second anniversary of the date hereof. Such term of employment may be
renewed for successive periods of one year thereafter upon the mutual agreement
of the Parties.
3. Compensation and Other Benefits.
3.1 As compensation for his services to Company under this Agreement,
Company shall pay to Employee a commission ("Base Commission") equal
to 7% of "interconnect sales" not related to the Company's customer
base as determined by the Compensation Committee of ACG, subject only
to such payroll and withholding deductions as may be required by law
and other deductions applied generally to other employees of Company
for any employee benefit plans.
3.2 Employee will be entitled to two weeks of paid vacation annually
during the term of this Agreement.
3.3 Employee shall receive benefits commensurate with his level of
employment under any health plan of ACG.
3.4 In addition to his Base Commission, Employee shall receive $10.00 per
line commission (together with the Base Commission, the "Total
Commission") for
conversion of dial tone service for the original customer base of that
proprietorship formerly doing business as "National Telecom," as
determined by the Compensation Committee of ACG.
3.5 The Compensation Committee of ACG shall meet annually to grant to
Employee within 10 days of each of the first and second anniversaries
of the date first above written, 10-year options to purchase 1,042
shares of the common stock of ACG for each additional $100,000 of
sales of interconnect products and services for the Company generated
by Employee within the last year; provided however, that Employee may
not receive more than 12,500 shares pursuant to such options within
the term of this Agreement and no fractional shares will be issued.
The exercise price of the options shall be the price to the public
reflected in the prospectus of ACG relating to the initial public
offering of the common stock of ACG. In the event Employee is
terminated for any reason other than with cause, such options shall be
granted pro rata, based upon sales by Employee to date.
4. Duties and Extent of Service.
Employee shall hold the position of ____________ with the Company. Employee
agrees to perform the duties incidental to his position, as determined from
time to time by the Chief Executive Officer of ACG. Employee shall devote such
time, attention, and energy to the business of Company as are required to
perform his duties and responsibilities hereunder and shall not during the term
of this Agreement be engaged, directly or indirectly, in any other business
activity if pursued for gain, profit, or other pecuniary advantage without the
prior written consent of the Chief Executive Officer of ACG. In any event,
however, Employee shall not take any action inconsistent with Employee's
relationship and responsibilities as a Company Employee, or take any action
which is intended, or may be reasonably expected, to harm the reputation,
business, prospects, or operations of ACG.
5. Protection of Confidential Information and Employee Non-Competition.
5.1 Employee recognizes and acknowledges that he will have access to
certain confidential information and trade secrets of ACG
("Confidential Information"). Such Confidential Information includes,
but is not limited to: customer names; contracts; products purchased
by customers; production capabilities and processes; customer account
and credit data; referral sources; computer programs and software;
information relating to confidential or secret designs, processes,
formulae, plans, devices, or materials of ACG; business and marketing
plans, confidential information and trade secrets relating to the
distribution and marketing of ACG's products and services; patents
pending; confidential characteristics of ACG's products and
-2-
services; customer comments; troubleshooting requirements; product and
service development; market development; manuals written by ACG;
management, accounting, and reporting systems, procedures, and
programs; contracts, leases, marketing agreements, sales Employee
compensation information, plans, and programs; marketing and financial
analysis, plans, research, programs, and related information and data;
forms, agreements, and legal documents; regulatory and supervisory
reports; correspondence; statements; corporate books and records; and
other similar information.
5.2 Employee acknowledges and agrees that this Confidential Information
constitutes valuable, special, and unique property of ACG.
5.3 Employee will not, at any time during or after the term of this
Agreement or his employment with Company, disclose any Confidential
Information to any person, firm, partnership, association, company,
corporation or other entity (each, a "Person") for any reason or
purpose.
5.4 The foregoing restrictions shall not apply to: (a) any information in
Employee's possession before its disclosure to Employee by ACG; or (b)
information that is or shall lawfully be published or become part of
the general knowledge through no act or omission of Employee. The
Confidential Information disclosed to Employee under this Agreement is
not within the foregoing exceptions merely because such information is
embraced by more general information in the public domain or in
Employee's possession; or merely because portions thereof are in the
public domain or in Employee's possession.
5.5 To protect the confidentiality of the Confidential Information,
Employee further agrees that while employed by Company and for a
period of 36 calendar months immediately after the termination of this
Agreement or his employment with Company, regardless of whether such
termination of employment is voluntary or involuntary, he will not,
for himself, or on behalf of any other Person (i) generally compete in
any manner whatsoever with ACG or solicit, accept, divert, or take
away from ACG the business of any Person; (ii) directly or indirectly
induce or attempt to influence any Employee, officer, director,
consultant, agent, vendor or other entity related to ACG to terminate
his or her employment or association in any manner whatsoever with
ACG; or (iii) engage in the sale or marketing of yellow page
publishing services, telecommunication services, interconnect services
and natural gas or electrical goods and services in the State of
Kansas ("Proscribed Territory") during the term of this Agreement or
Employee's employment with Company. The
-3-
territory in which Employee shall not compete with ACG as outlined in
this Paragraph 5.5 shall consist of the Proscribed Territory.
5.6 Employee understands and acknowledges that, due to the unique nature
of the products and services provided by ACG and the need for sales
personnel to have a relatively high degree of technical knowledge
concerning these products and services, employment by Company for
sales and management, including the special training, knowledge, and
confidential information that has been or will be acquired in the
course of such employment, will give Employee distinct and substantial
advantages for potential sales and management activities concerning
such products and services. Employee further understands and
acknowledges that: because of the definition of products and services
covered by this Agreement, the highly specialized nature of those
products and services, the limited size and number of business
entities in the business of developing and/or selling those products
and services, and the much more numerous opportunities for Employee to
work in his trade with respect to products and services not covered by
this Agreement, the limitations as to time and geographic area
contained in Paragraph 5.5 are reasonable and are not unduly onerous
on Employee. Employee therefore agrees that the limitations as to
time, geographic area, and scope of activity contained in Paragraph
5.5 do not impose a greater restraint than is necessary to protect the
Confidential Information, goodwill, and other business interests of
ACG. Employee also agrees that in light of the facts acknowledged
above, the substantial investment of ACG in acquiring and developing
its business and providing special training to Employee, and the
certain and substantial harm that ACG would suffer if Employee were to
engage in any of the activities described in Paragraph 5.5, ACG's need
for the protection afforded by Paragraph 5.5 is greater than any
hardship Employee might experience by complying with its terms.
Employee also agrees that, if any provision of the covenant set forth
in Paragraph 5.5 is found to be invalid in part or whole, ACG may
elect, but shall not be required, to have such provision reformed,
whether as to time, geographic area, scope of activity, or otherwise,
as and to the extent required for its validity under applicable law,
and, as so reformed, such provisions shall be enforceable.
5.7 Employee acknowledges that a violation or attempted violation on his
part of any provision in this Paragraph 5 will cause irreparable
damage to ACG. Accordingly, in the event of a breach or threatened
breach by Employee of the provisions of this Paragraph 5, Employee
agrees that ACG shall be entitled as a matter of right to an
injunction, out of any court of competent jurisdiction, restraining
any violation or further violation of such agreements by Employee or
his agents, without showing any evidence of actual monetary loss
resulting from such breach, including, but not
-4-
limited to, restraining Employee from using or disclosing, in whole or
in part, such Confidential Information or trade secrets; rendering any
services to any Person to whom any of such information may have been
disclosed or is threatened to be disclosed; and/or violating the
non-competition provision. Nothing herein shall be construed as
prohibiting ACG from pursuing any other remedies available to it for
such breach or threatened breach, including the recovery of damages
and attorneys' fees from Employee.
6. Termination of Employment.
6.1 Employee's employment under this Agreement shall terminate on the
occurrence of any of the following events:
(a) End of Term: If the term of employment under the Agreement or any
term of renewal ends.
(b) Death or Disability of Employee: If Employee dies or becomes
disabled (i.e., such that he no longer is reasonably able to
perform his duties as contemplated by this Agreement), Company
shall pay to Employee, or to the estate of Employee if he dies,
that part of his Total Commission which would be payable to
Employee, as a result of prior sales by Employee, and grant to
Employee the options described in Section 3.5 on a pro rata
basis, based upon sales by Employee to date. Upon such payment,
as well as applicable insurance benefits, if any, all obligations
of Company to Employee or his estate shall be fully satisfied,
and this Agreement shall terminate.
(c) Resignation of Employee: If Employee resigns prior to the end of
the term of this Agreement, this Agreement shall terminate
immediately, and Company shall pay to Employee that part of his
Total Commission which would otherwise be payable to Employee
through the effective date of his resignation. Upon such payment,
all obligations in any manner whatsoever of Company to Employee
shall be fully satisfied.
(d) Change in Ownership, Management, or Employee's Responsibilities:
If there is a change in the ownership or management of Company,
and either of these changes significantly alters Employee's job
responsibilities or compensation, Employee may resign from his
position within 60 days of such a change. If Employee resigns
pursuant to this paragraph, Company will continue to provide
Employee with his monthly compensation equal to the average
-5-
monthly Total Commission paid to Employee prior to such change in
management or ownership of the Company plus benefits for a period
of one year after the initial date of any such change. Upon
completion of such payments, all obligations in any manner
whatsoever of Company to Employee shall be fully satisfied.
(e) Termination by the Company "With Cause." If Employee (i) violates
any provision of this Agreement; (ii) fails to perform the
services required of him pursuant to this Agreement; (iii)
commits acts of fraud or dishonesty against ACG; (iv) is
convicted of a crime other than a routine traffic violation;
and/or (v) violates any policies of ACG as outlined in any ACG
policy handbook, Company may terminate the employment of Employee
with cause. If Employee is terminated "with cause," Employee
shall not be entitled to receive any further salary or benefits
under this Agreement other than payment for that part of
Employee's compensation that would otherwise be payable to
Employee through the last date of his employment with Company.
Upon such payment, all obligations of Company to Employee shall
be fully satisfied, and this Agreement will terminate.
(f) Termination by the Company Without Cause. In the event Company
terminates Employee's employment for any reason other than
described in (e) above, Employee shall be entitled to that part
of the Total Commission and benefits payable to Employee through
the last date of his employment and Employee shall be paid the
average monthly Total Commission paid to Employee prior to his
termination plus benefits for a period of six months from
termination. Upon completion of such payments, all obligations in
any manner whatsoever of Company to Employee shall be fully
satisfied.
6.2 Termination of this Agreement shall not relieve Employee of any
continuing obligations expressly provided in this Agreement,
including, without limitation, those set forth in Paragraphs 5.1
through 5.6.
7. Return of ACG Property.
7.1 All data, drawings, documents, contracts, computerized data,
information printouts, and tapes, tape recordings, documents, data,
accounting records, personnel files, computer terminals, equipment,
and other records and written material prepared or compiled by
Employee or furnished to Employee while in the employ of Company shall
be the sole and exclusive property of ACG, and none of such data,
drawings or
-6-
other records and written material, or copies thereof, shall be
retained by Employee upon termination of his employment. This ACG
property shall not be removed from Company premises without the
Company's prior written consent.
7.2 Upon termination of this Agreement or whenever requested by Company,
Employee immediately shall deliver to Company all of the ACG property
or any of ACG's documents in Employee's possession or under Employee's
control, including, but not limited to, all documents or data,
Confidential Information, accounting records, computer terminals,
data, discs, printouts and tapes and accounting machines provided by
Company. No copies of any such data shall be retained by Employee.
8. Notices.
Any notice required or permitted to be given under this Agreement shall be in
writing and addressed to Employee at ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ and to
Company, c/o ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇, or to such other address as either party shall designate by written
notice to the other. Notices may be sent by messenger or by registered or
certified mail, postage prepaid, addressed to the party or parties to be
notified, with return receipt requested. Notices sent by messenger shall be
deemed received upon their actual receipt of the party to whom they are
directed. Notices sent by registered or certified mail shall be deemed received
on the third day following their deposit with the United States Postal Service.
9. Arbitration.
Exclusive jurisdiction with respect to any dispute, controversy, or claim
brought by Employee or Company concerning the subject matter contained in this
Agreement (other than action by Company seeking an injunction pursuant to
Paragraph 5.7), including, but not limited to, Employee's employment,
termination from, and/or affiliation with Company, shall be settled by
arbitration in Denver, Colorado in accordance with the Employment Dispute
Resolution Rules of the American Arbitration Association, and judgment upon the
award rendered by the arbitrator may be entered in any court having
jurisdiction. In reaching his or her decision, the arbitrator shall have no
authority to change or modify any provision of this Agreement. Any and all
charges that may be made for the cost of the arbitration and the fees and
expenses of the arbitrator shall be borne equally by the parties; attorneys'
fees and witness expenses shall be borne by the party incurring them.
10. Miscellaneous.
10.1 The rights and obligations of Company under this Agreement shall inure
to the benefit of and shall be binding upon the successors and assigns
of Company. This
-7-
Agreement shall be binding upon the Employee and his agents, heirs,
executors, administrators and legal representatives. The rights and
obligations of Employee hereunder shall not be assignable by Employee.
10.2 This Agreement shall be governed by and construed in accordance with
the laws of the State of Texas.
10.3 This Agreement may be executed in multiple counterparts, each of which
shall be deemed an original and all of which shall constitute one
instrument.
10.4 This Agreement contains the entire agreement of the parties pertaining
to the subject matter hereof and supersedes all prior agreements,
understandings, negotiations and discussions, whether oral or written,
and there are no other warranties, representations, covenants or
agreements among Company, Employee and ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ in connection
with the subject matter hereof.
10.5 The waiver by Company of a breach of any provision of this Agreement
by Employee shall not operate or be construed as a waiver by Company
of any subsequent breach by Employee.
10.6 If a court of competent jurisdiction shall adjudge to be invalid any
clause, sentence, subparagraph, paragraph or section of this
Agreement, such judgment or decree shall not affect, impair,
invalidate, or nullify the remainder of this Agreement, but the effect
thereof shall be confined to the clause, sentence, subparagraph,
paragraph, or section so adjudged to be invalid.
The parties have executed this Agreement to be effective as of the day and
year first above written.
TELE-SYSTEMS, Inc.
By
--------------------------------- ---------------------------------
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: Chairman and Chief Executive
Officer
"COMPANY" "EMPLOYEE"
-8-
ANNEX VII
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into on ________ __,
1997, by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ("Employee") and TELE-SYSTEMS, Inc., a Kansas
corporation ("Company") (collectively referred to as the "Parties"). Company
and Employee agree as follows:
1. Employment.
In consideration of the mutual covenants and agreements contained in this
Agreement and for other good and valuable consideration, the receipt and
sufficiency of which are acknowledged by Employee and Company, Company employs
Employee, and Employee accepts employment subject to the terms and conditions
of this Agreement. The Company is a wholly-owned subsidiary of Advanced
Communications Group, Inc., a Delaware corporation ("ACG"). Unless the context
otherwise clearly requires, all references to ACG in this Agreement shall
include ACG, Company and ACG's other subsidiaries.
2. Term.
This Agreement shall commence and become effective on the date hereof and end
on the second anniversary of the date hereof. Such term of employment may be
renewed for successive periods of one year thereafter upon the mutual agreement
of the Parties.
3. Compensation and other Benefits.
3.1 As compensation for her services to Company under this Agreement,
Company shall pay to Employee during the term of this Agreement a base
salary ("Base Salary") of $25,000 per annum, payable in equal
semi-monthly installments, subject only to such payroll and
withholding deductions as may be required by law and other deductions
applied generally to other employees of Company for any employee
benefit plans.
3.2 Employee will be entitled to two weeks of paid vacation annually
during the term of this Agreement.
3.3 Employee shall receive benefits commensurate with her level of
employment under any health plan of ACG.
3.4 In addition to her Base Salary, Employee shall receive $10.00 per line
commission ("Commission") for conversion of dial tone service for the
original customer base of
that proprietorship formerly doing business as "National Telecom," as
determined by the Compensation Committee of ACG.
4. Duties and Extent of Service.
Employee shall hold the position of ____________ with the Company. Employee
agrees to perform the duties incidental to her position, as determined from
time to time by the Chief Executive Officer of ACG. Employee shall devote such
time, attention, and energy to the business of Company as are required to
perform her duties and responsibilities hereunder and shall not during the term
of this Agreement be engaged, directly or indirectly, in any other business
activity if pursued for gain, profit, or other pecuniary advantage without the
prior written consent of the Chief Executive Officer of ACG. In any event,
however, Employee shall not take any action inconsistent with Employee's
relationship and responsibilities as a Company Employee, or take any action
which is intended, or may be reasonably expected, to harm the reputation,
business, prospects, or operations of ACG.
5. Protection of Confidential Information and Employee Non-Competition.
5.1 Employee recognizes and acknowledges that she will have access to
certain confidential information and trade secrets of ACG
("Confidential Information"). Such Confidential Information includes,
but is not limited to: customer names; contracts; products purchased
by customers; production capabilities and processes; customer account
and credit data; referral sources; computer programs and software;
information relating to confidential or secret designs, processes,
formulae, plans, devices, or materials of ACG; business and marketing
plans, confidential information and trade secrets relating to the
distribution and marketing of ACG's products and services; patents
pending; confidential characteristics of ACG's products and services;
customer comments; troubleshooting requirements; product and service
development; market development; manuals written by ACG; management,
accounting, and reporting systems, procedures, and programs;
contracts, leases, marketing agreements, sales Employee compensation
information, plans, and programs; marketing and financial analysis,
plans, research, programs, and related information and data; forms,
agreements, and legal documents; regulatory and super visory reports;
correspondence; statements; corporate books and records; and other
similar information.
5.2 Employee acknowledges and agrees that this Confidential Information
constitutes valuable, special, and unique property of ACG.
-2-
5.3 Employee will not, at any time during or after the term of this
Agreement or her employment with Company, disclose any Confidential
Information to any person, firm, partnership, association, company,
corporation or other entity (each, a "Person") for any reason or
purpose.
5.4 The foregoing restrictions shall not apply to: (a) any information in
Employee's possession before its disclosure to Employee by ACG; or (b)
information that is or shall lawfully be published or become part of
the general knowledge through no act or omission of Employee. The
Confidential Information disclosed to Employee under this Agreement is
not within the foregoing exceptions merely because such information is
embraced by more general information in the public domain or in
Employee's possession; or merely because portions thereof are in the
public domain or in Employee's possession.
5.5 To protect the confidentiality of the Confidential Information,
Employee further agrees that while employed by Company and for a
period of 36 calendar months immediately after the termination of this
Agreement or her employment with Company, regardless of whether such
termination of employment is voluntary or involuntary, she will not,
for herself, or on behalf of any other Person (i) generally compete in
any manner whatsoever with ACG or solicit, accept, divert, or take
away from ACG the business of any Person; (ii) directly or indirectly
induce or attempt to influence any Employee, officer, director,
consultant, agent, vendor or other entity related to ACG to terminate
his or her employment or association in any manner whatsoever with
ACG; or (iii) engage in the sale or marketing of yellow page
publishing services, telecommunication services, interconnect services
and natural gas or electrical goods and services in the State of
Kansas ("Proscribed Territory") during the term of this Agreement or
Employee's employment with Company. The territory in which Employee
shall not compete with ACG as outlined in this Paragraph 5.5 shall
consist of the Proscribed Territory.
5.6 Employee understands and acknowledges that, due to the unique nature
of the products and services provided by ACG and the need for sales
personnel to have a relatively high degree of technical knowledge
concerning these products and services, employment by Company for
sales and management, including the special training, knowledge, and
confidential information that has been or will be acquired in the
course of such employment, will give Employee distinct and substantial
advantages for potential sales and management activities concerning
such products and services. Employee further understands and
acknowledges that: because of the definition of products and services
covered by this Agreement, the highly specialized
-3-
nature of those products and services, the limited size and number of
business entities in the business of developing and/or selling those
products and services, and the much more numerous opportunities for
Employee to work in her trade with respect to products and services
not covered by this Agreement, the limitations as to time and
geographic area contained in Paragraph 5.5 are reasonable and are not
unduly onerous on Employee. Employee therefore agrees that the
limitations as to time, geographic area, and scope of activity
contained in Paragraph 5.5 do not impose a greater restraint than is
necessary to protect the Confidential Information, goodwill, and other
business interests of ACG. Employee also agrees that in light of the
facts acknowledged above, the substantial investment of ACG in
acquiring and developing its business and providing special training
to Employee, and the certain and substantial harm that ACG would
suffer if Employee were to engage in any of the activities described
in Paragraph 5.5, ACG's need for the protection afforded by Paragraph
5.5 is greater than any hardship Employee might experience by
complying with its terms. Employee also agrees that, if any provision
of the covenant set forth in Paragraph 5.5 is found to be invalid in
part or whole, ACG may elect, but shall not be required, to have such
provision reformed, whether as to time, geographic area, scope of
activity, or otherwise, as and to the extent required for its validity
under applicable law, and, as so reformed, such provisions shall be
enforceable.
5.7 Employee acknowledges that a violation or attempted violation on her
part of any provision in this Paragraph 5 will cause irreparable
damage to ACG. Accordingly, in the event of a breach or threatened
breach by Employee of the provisions of this Paragraph 5, Employee
agrees that ACG shall be entitled as a matter of right to an
injunction, out of any court of competent jurisdiction, restraining
any violation or further violation of such agreements by Employee or
her agents, without showing any evidence of actual monetary loss
resulting from such breach, including, but not limited to, restraining
Employee from using or disclosing, in whole or in part, such
Confidential Information or trade secrets; rendering any services to
any Person to whom any of such information may have been disclosed or
is threatened to be disclosed; and/or violating the non-competition
provision. Nothing herein shall be construed as prohibiting ACG from
pursuing any other remedies available to it for such breach or
threatened breach, including the recovery of damages and attorneys'
fees from Employee.
6. Termination of Employment.
6.1 Employee's employment under this Agreement shall terminate on the
occurrence of any of the following events:
-4-
(a) End of Term: If the term of employment under the Agreement or any
term of renewal ends.
(b) Death or Disability of Employee: If Employee dies or becomes
disabled (i.e., such that she no longer is reasonably able to
perform her duties as contemplated by this Agreement), Company
shall pay to Employee, or to the estate of Employee if she dies,
that part of her Base Salary in addition to her Commission which
would otherwise be payable to Employee through the end of the
month in which her death or disability occurs, after giving
effect to accrued sick leave benefits and accrued vacation time,
if any. Upon such payment, as well as applicable insurance
benefits, if any, all obligations of Company to Employee or her
estate shall be fully satisfied, and this Agreement shall
terminate.
(c) Resignation of Employee: If Employee resigns prior to the end of
the term of this Agreement, this Agreement shall terminate
immediately, and Company shall pay to Employee that part of her
Base Salary in addition to her Commission which would otherwise
be payable to Employee through the effective date of her
resignation. Upon such payment, all obligations in any manner
whatsoever of Company to Employee shall be fully satisfied.
(d) Change in Ownership, Management, or Employee's Responsibilities:
If there is a change in the ownership or management of Company,
and either of these changes significantly alters Employee's job
responsibilities or compensation, Employee may resign from her
position within 60 days of such a change. If Employee resigns
pursuant to this paragraph, Company will continue to provide
Employee with her monthly compensation equal to (i) her Base
Salary plus (ii) the average monthly Commission paid to Employee
prior to such change in management or ownership of the Company
plus (iii) benefits for a period of one year after the initial
date of any such change. Upon completion of such payments, all
obligations in any manner whatsoever of Company to Employee shall
be fully satisfied.
(e) Termination by the Company "With Cause." If Employee (i) violates
any provision of this Agreement; (ii) fails to perform the
services required of her pursuant to this Agreement; (iii)
commits acts of fraud or dishonesty against ACG; (iv) is
convicted of a crime other than a routine traffic violation;
and/or (v) violates any policies of ACG as outlined in any ACG
policy handbook, Company may terminate the employment of Employee
with cause. If
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Employee is terminated "with cause," Employee shall not be
entitled to receive any further salary or benefits under this
Agreement other than payment for that part of Employee's
compensation that would otherwise be payable to Employee through
the last date of her employment with Company. Upon such payment,
all obligations of Company to Employee shall be fully satisfied,
and this Agreement will terminate. Employee shall not be entitled
to receive any accrued vacation pay if her termination is "with
cause."
(f) Termination by the Company Without Cause. In the event Company
terminates Employee's employment for any reason other than
described in (e) above, Employee shall be entitled to that part
of the Base Salary, Commission and benefits payable to Employee
through the last date of her employment and Employee shall be
paid (i) Employee's Base salary plus (ii) Employee's average
monthly Commission paid to Employee prior to termination plus
(iii) benefits for a period of six months from termination. Upon
completion of such payments, all obligations in any manner
whatsoever of Company to Employee shall be fully satisfied.
6.2 Termination of this Agreement shall not relieve Employee of any
continuing obligations expressly provided in this Agreement,
including, without limitation, those set forth in Paragraphs 5.1
through 5.6.
7. Return of ACG Property.
7.1 All data, drawings, documents, contracts, computerized data,
information printouts, and tapes, tape recordings, documents, data,
accounting records, personnel files, computer terminals, equipment,
and other records and written material prepared or compiled by
Employee or furnished to Employee while in the employ of Company shall
be the sole and exclusive property of ACG, and none of such data,
drawings or other records and written material, or copies thereof,
shall be retained by Employee upon termination of her employment. This
ACG property shall not be removed from Company premises without the
Company's prior written consent.
7.2 Upon termination of this Agreement or whenever requested by Company,
Employee immediately shall deliver to Company all of the ACG property
or any of ACG's documents in Employee's possession or under Employee's
control, including, but not limited to, all documents or data,
Confidential Information, accounting records, computer terminals,
data, discs, printouts and tapes and accounting machines provided by
Company. No copies of any such data shall be retained by Employee.
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8. Notices.
Any notice required or permitted to be given under this Agreement shall be in
writing and addressed to Employee at ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ and to
Company, c/o ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇, or to such other address as either party shall designate by written
notice to the other. Notices may be sent by messenger or by registered or
certified mail, postage prepaid, addressed to the party or parties to be
notified, with return receipt requested. Notices sent by messenger shall be
deemed received upon their actual receipt of the party to whom they are
directed. Notices sent by registered or certified mail shall be deemed received
on the third day following their deposit with the United States Postal Service.
9. Arbitration.
Exclusive jurisdiction with respect to any dispute, controversy, or claim
brought by Employee or Company concerning the subject matter contained in this
Agreement (other than action by Company seeking an injunction pursuant to
Paragraph 5.7), including, but not limited to, Employee's employment,
termination from, and/or affiliation with Company, shall be settled by
arbitration in Denver, Colorado in accordance with the Employment Dispute
Resolution Rules of the American Arbitration Association, and judgment upon the
award rendered by the arbitrator may be entered in any court having
jurisdiction. In reaching his or her decision, the arbitrator shall have no
authority to change or modify any provision of this Agreement. Any and all
charges that may be made for the cost of the arbitration and the fees and
expenses of the arbitrator shall be borne equally by the parties; attorneys'
fees and witness expenses shall be borne by the party incurring them.
10. Miscellaneous.
10.1 The rights and obligations of Company under this Agreement shall inure
to the benefit of and shall be binding upon the successors and assigns
of Company. This Agreement shall be binding upon the Employee and her
agents, heirs, executors, administrators and legal representatives.
The rights and obligations of Employee hereunder shall not be
assignable by Employee.
10.2 This Agreement shall be governed by and construed in accordance with
the laws of the State of Texas.
10.3 This Agreement may be executed in multiple counterparts, each of which
shall be deemed an original and all of which shall constitute one
instrument.
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10.4 This Agreement contains the entire agreement of the parties pertaining
to the subject matter hereof and supersedes all prior agreements,
understandings, negotiations and discussions, whether oral or written,
and there are no other warranties, representations, covenants or
agreements among Company, Employee and ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ in connection
with the subject matter hereof.
10.5 The waiver by Company of a breach of any provision of this Agreement
by Employee shall not operate or be construed as a waiver by Company
of any subsequent breach by Employee.
10.6 If a court of competent jurisdiction shall adjudge to be invalid any
clause, sentence, subparagraph, paragraph or section of this
Agreement, such judgment or decree shall not affect, impair,
invalidate, or nullify the remainder of this Agreement, but the effect
thereof shall be confined to the clause, sentence, subparagraph,
paragraph, or section so adjudged to be invalid.
The parties have executed this Agreement to be effective as of the day and
year first above written.
TELE-SYSTEMS, Inc.
By
--------------------------------- ----------------------------------
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: Chairman and Chief Executive
Officer
"COMPANY" "EMPLOYEE"
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