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AGREEMENT AND PLAN OF MERGER
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Dated as of April 24, 2006
by and among
CHARYS HOLDING COMPANY, INC.,
LFC ACQUISITION COMPANY, INC.,
LFC, INC.,
▇. ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, and ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
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TABLE OF CONTENTS
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ARTICLE I THE MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.01 The Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02 Closing Date. . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.03 Certificates of Merger. . . . . . . . . . . . . . . . . . . . . 2
1.04 Effect of the Merger. . . . . . . . . . . . . . . . . . . . . . 2
1.05 Certificate of Incorporation and Bylaws . . . . . . . . . . . . 2
1.06 Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.07 Officers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.08 Name. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II MERGER CONSIDERATION. . . . . . . . . . . . . . . . . . . . . 2
2.01 Consideration . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.02 Payment of Aggregate Merger Consideration . . . . . . . . . . . 3
2.03 Existing Business Price Component Adjustment. . . . . . . . . . 6
2.04 Contingent Performance Installment. . . . . . . . . . . . . . . 6
2.05 Payment of Tower Debt and Cancellation of Other Indebtedness. . 7
2.06 Excluded Assets and Associated Liabilities. . . . . . . . . . . 7
2.07 Adjustment of Aggregate Merger Consideration. . . . . . . . . . 7
2.08 Phantom Stock Incentive Plan. . . . . . . . . . . . . . . . . . 8
2.09 Compliance with Section 368 of the Code . . . . . . . . . . . . 8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLERS . . . . . . . . . . 8
3.01 Power, Authority, and Organization of Sellers . . . . . . . . . 8
3.02 No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.03 Ownership of Company Shares . . . . . . . . . . . . . . . . . . 9
3.04 Absence of Other Claims . . . . . . . . . . . . . . . . . . . . 9
3.05 Investment Representations. . . . . . . . . . . . . . . . . . . 9
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF CERTAIN
SELLERS AND COMPANY REGARDING COMPANY . . . . . . . . . . . . 11
4.01 Organization and Authorization. . . . . . . . . . . . . . . . . 11
4.02 Authorized and Outstanding Stock. . . . . . . . . . . . . . . . 12
4.03 Absence of Other Claims . . . . . . . . . . . . . . . . . . . . 13
4.04 No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . 13
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4.05 Required Consents and Approvals . . . . . . . . . . . . . . . . 13
4.06 No Violation of Law . . . . . . . . . . . . . . . . . . . . . . 13
4.07 Financial Statements. . . . . . . . . . . . . . . . . . . . . . 14
4.08 No Undisclosed Liabilities. . . . . . . . . . . . . . . . . . . 14
4.09 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.10 Personal Property . . . . . . . . . . . . . . . . . . . . . . . 15
4.11 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.12 Intellectual Property . . . . . . . . . . . . . . . . . . . . . 16
4.13 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.14 Employees and Independent Contractors . . . . . . . . . . . . . 19
4.15 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . 20
4.16 Collective Bargaining . . . . . . . . . . . . . . . . . . . . . 24
4.17 Labor Disputes. . . . . . . . . . . . . . . . . . . . . . . . . 24
4.18 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.19 Environmental Matters . . . . . . . . . . . . . . . . . . . . . 24
4.20 Required Licenses and Permits . . . . . . . . . . . . . . . . . 26
4.21 Insurance Policies. . . . . . . . . . . . . . . . . . . . . . . 26
4.22 Major Suppliers and Customers . . . . . . . . . . . . . . . . . 26
4.23 Contracts and Commitments . . . . . . . . . . . . . . . . . . . 27
4.24 Agreements in Full Force and Effect . . . . . . . . . . . . . . 28
4.25 Absence of Certain Changes and Events . . . . . . . . . . . . . 28
4.26 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . 29
4.27 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.28 Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.29 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.30 Transfer of LFC Environmental, Inc. Assets to Company . . . . . 32
4.31 Merger Tax Representations. . . . . . . . . . . . . . . . . . . 32
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND
MERGER SUB. . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.01 Organization. . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.02 Capitalization of Merger Sub. . . . . . . . . . . . . . . . . . 34
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5.03 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.04 No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.05 Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.06 Parent Shares . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.07 Merger Tax Representations. . . . . . . . . . . . . . . . . . . 35
ARTICLE VI COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.01 Pre-Closing Operations of Company . . . . . . . . . . . . . . . 36
6.02 Access. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.03 Interim Financials. . . . . . . . . . . . . . . . . . . . . . . 39
6.04 Transfer Taxes. . . . . . . . . . . . . . . . . . . . . . . . . 39
6.05 Preparation of Supporting Documents . . . . . . . . . . . . . . 39
6.06 Notices of Certain Events . . . . . . . . . . . . . . . . . . . 40
6.07 Supplements to Schedules. . . . . . . . . . . . . . . . . . . . 41
6.08 No Solicitation of Transactions . . . . . . . . . . . . . . . . 41
6.09 Filings, Other Actions, and Notification. . . . . . . . . . . . 41
6.10 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . 42
6.11 Taxation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.12 Affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.13 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
6.14 Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
6.15 Registration Rights . . . . . . . . . . . . . . . . . . . . . . 43
6.16 Rule 144 Exemptions . . . . . . . . . . . . . . . . . . . . . . 46
6.17 Dissolution of LFC Environmental, Inc . . . . . . . . . . . . . 46
6.18 Business Operation. . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE VII CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT
THE MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . 47
7.01 Regulatory Consents . . . . . . . . . . . . . . . . . . . . . . 47
7.02 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . 47
7.03 Stockholder Approval. . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE VIII CONDITIONS TO OBLIGATIONS OF COMPANY AND SELLERS. . . . . . . 47
8.01 Representations and Warranties True and Correct at Closing Date 48
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8.02 Performance of Obligations. . . . . . . . . . . . . . . . . . . 48
8.03 Certificate of Merger . . . . . . . . . . . . . . . . . . . . . 48
8.04 Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . 48
8.05 All Other Documents . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE IX CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER
SUB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.01 Representations and Warranties True and Correct at Closing Date 48
9.02 Performance Obligations . . . . . . . . . . . . . . . . . . . . 49
9.03 No Material Change. . . . . . . . . . . . . . . . . . . . . . . 49
9.04 Other Necessary Consents. . . . . . . . . . . . . . . . . . . . 49
9.05 Certificate of Merger . . . . . . . . . . . . . . . . . . . . . 49
9.06 Noncompetition Agreement. . . . . . . . . . . . . . . . . . . . 49
9.07 Employment Agreements . . . . . . . . . . . . . . . . . . . . . 49
9.08 Release of Certain Liens. . . . . . . . . . . . . . . . . . . . 49
9.09 Payment of Indebtedness . . . . . . . . . . . . . . . . . . . . 49
9.10 Request to Transfer Radioactive License . . . . . . . . . . . . 49
9.11 FCC Application Password. . . . . . . . . . . . . . . . . . . . 49
9.12 Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.13 Officer and Director Resignations . . . . . . . . . . . . . . . 50
9.14 Affiliate Letters . . . . . . . . . . . . . . . . . . . . . . . 50
9.15 Cash at Closing . . . . . . . . . . . . . . . . . . . . . . . . 50
9.16 AH Other Documents. . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE X INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . 50
10.01 Indemnification Obligations of Sellers. . . . . . . . . . . . . 50
10.02 Indemnification Obligations of Parent . . . . . . . . . . . . . 51
10.03 Indemnification Procedure . . . . . . . . . . . . . . . . . . . 52
10.04 Survival Period . . . . . . . . . . . . . . . . . . . . . . . . 53
10.05 Liability Limits. . . . . . . . . . . . . . . . . . . . . . . . 54
10.06 Investigations. . . . . . . . . . . . . . . . . . . . . . . . . 54
10.07 Setoff. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE XI TERMINATION PRIOR TO CLOSING. . . . . . . . . . . . . . . . . 55
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11.01 Termination of Agreement . . . . . . . . . . . . . . . . . . . 55
11.02 Termination of Obligations . . . . . . . . . . . . . . . . . . 55
ARTICLE XII MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . 56
12.01 Entire Agreement and Survival. . . . . . . . . . . . . . . . . 56
12.02 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . 56
12.03 Parties Bound by Agreement . . . . . . . . . . . . . . . . . . 56
12.04 Counterparts and Facsimile . . . . . . . . . . . . . . . . . . 56
12.05 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
12.06 Modification and Waiver. . . . . . . . . . . . . . . . . . . . 56
12.07 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
12.08 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
12.09 Governing Law and Jurisdiction . . . . . . . . . . . . . . . . 58
12.10 Company's and Sellers' Knowledge . . . . . . . . . . . . . . . 58
12.11 No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . 58
12.12 "Including." . . . . . . . . . . . . . . . . . . . . . . . . . 59
12.13 Gender and Number. . . . . . . . . . . . . . . . . . . . . . . 59
12.14 References . . . . . . . . . . . . . . . . . . . . . . . . . . 59
12.15 Severability . . . . . . . . . . . . . . . . . . . . . . . . . 59
12.16 Further Assurances . . . . . . . . . . . . . . . . . . . . . . 59
12.17 Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
12.18 Ordinary Course of Business. . . . . . . . . . . . . . . . . . 59
12.19 Enforcement. . . . . . . . . . . . . . . . . . . . . . . . . . 59
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LIST OF SCHEDULES AND EXHIBITS
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SCHEDULES
[COMPANY INFORMATION]
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SCHEDULE 2.01(a) Tower Debt
SCHEDULE 2.01(a)(i) Prepaid Rent
SCHEDULE 2.01 (C) Accounting Methodology
SCHEDULE 2.02(b) EBITDA Targets: Six 6-Month Anniversary Dates During Calculation
Period
SCHEDULE 2.03 Examples of Calculation of Consideration, Aggregate Merger
Consideration, and Existing Business Price Component Adjustment
SCHEDULE 2.04 EBITDA Targets: Fourth and Fifth 12-Month Periods Following
Closing
SCHEDULE 2.06 Excluded Assets
SCHEDULE 3.03 Ownership of Company Shares
SCHEDULE 4.01(a) Jurisdictions in Which Company is Duly Qualified and in Good
Standing
SCHEDULE 4.01(b) Subsidiaries
SCHEDULE 4.01(c) Stock, Securities, and Investments
SCHEDULE 4.01(d) Officers, Directors, and Shareholders
SCHEDULE 4.02 Authorized Capital Stock
SCHEDULE 4.03 Agreements and Instruments for Additional Shares of Capital Stock or
Equity Security
SCHEDULE 4.04 Agreements and Instruments Affected by Merger
SCHEDULE 4.05 Required Consents and Approvals
SCHEDULE 4.07 Financial Statements
SCHEDULE 4.09(a) Real Property
SCHEDULE 4.09(b) Permitted Liens on Real Property
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LIST OF SCHEDULES AND EXHIBITS
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SCHEDULE 4.09(c) Orders and Restrictions Affecting Real Property
SCHEDULE 4.10(a) Personal Property
SCHEDULE 4.10(B) Personal Property and Leasehold Improvements Not at Principal
Location of Business
SCHEDULE 4.10(e) Leases
SCHEDULE 4.11 Indebtedness
SCHEDULE 4.12(b) Intellectual Property
SCHEDULE 4.12(c) Intellectual Property Not Owned by or Assigned to Company
SCHEDULE 4.12(d) Litigation and Claims Against Company Regarding Intellectual Property
SCHEDULE 4.13 Litigation and Claims Against Company Regarding Business
SCHEDULE 4.14(a) Compensation of Employees and Independent Contractors
SCHEDULE 4.14(b) Litigation and Claims Against Company Regarding Foreign Nationals
SCHEDULE 4.15(a)(i) Employee Benefit Plans
SCHEDULE 4,15(a)(ii) Litigation and Claims Against Company Regarding Employee Benefit
Plans
SCHEDULE 4.15(a)(vii) Insurance Reserves and Accrued Liabilities of Employee Benefit Plans
SCHEDULE 4.15(b)(i) Defined Benefit Plans
SCHEDULE 4.16 Collective Bargaining Agreements
SCHEDULE 4.18 Bank Accounts
SCHEDULE 4.19(B) Litigation and Claims Against Company Regarding Environmental
Matters
SCHEDULE 4.20 Authorizations
SCHEDULE 4.21 Insurance Policies
SCHEDULE 4.22 Suppliers and Customers
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LIST OF SCHEDULES AND EXHIBITS
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SCHEDULE 4.23 Contracts and Commitments
SCHEDULE 4.24 Contracts Not in Full Force or Enforceable
SCHEDULE 4.25 Changes or Events
SCHEDULE 4.26(B) Accounts Receivable
SCHEDULE 4.27(b) Tax Returns
SCHEDULE 4.27(c) Tax Deficiencies and Audits
SCHEDULE 4,27(d) Tax-Sharing Agreements
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EXHIBITS
[FORMS]
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EXHIBIT 2.02 Promissory Note
EXHIBIT 2.08 Key Employees
EXHIBIT 6.12 Affiliate Letter
EXHIBIT 8.06 Non-competition Agreement
EXHIBIT 8.07 Employment Agreement
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AGREEMENT AND PLAN OF MERGER
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This AGREEMENT AND PLAN OF MERGER (this "Agreement"), is made and entered
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into, and is effective as of 12:01 AM on April 24, 2006 (the "Effective Time"),
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among CHARYS HOLDING COMPANY, INC., a Delaware corporation ("Parent"). LFC
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ACQUISITION COMPANY, INC., a Delaware corporation and an indirect wholly owned
subsidiary of Parent ("Merger Sub"). LFC, INC., a Texas corporation ("Company"),
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and ▇. ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, and ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., each an individual
resident of the State of Texas (each individually a "Seller" and collectively
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"Sellers").
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W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Sellers own all of the issued and outstanding capital stock of
Company (the "Company Shares"), which is in the business of (a) building,
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owning, and managing shared wireless telecommunication facilities ("Cell
----
Towers"), and (b) performing professional consulting services, including site
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acquisition, construction, and project management services, geotechnical
services, material testing services, A&E design and structural design services,
land surveying services, environmental services, and petroleum land management
services (the "Business"); and
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WHEREAS, the respective Boards of Directors of each of Parent, Merger Sub,
and Company have determined that it is advisable and in the best interests of
their respective corporations and their shareholders that Company be merged with
and into Merger Sub in accordance with the Delaware General Corporation Law (the
"DGCL"). the Texas Business Corporation Act (the "TBCA") and the terms of this
---- ----
Agreement, pursuant to which Merger Sub will be the surviving corporation and
will remain a wholly owned indirect subsidiary of Parent (the "Merger"); and
------
WHEREAS, the parties intend for the Merger to satisfy the requirements of
Section 368(a)(2)(D) of the Internal Revenue Code of 1986, as amended (the
"Code"); and
----
WHEREAS, the parties desire to make certain representations, warranties,
covenants, and agreements in connection with the Merger;
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants, and agreements herein contained, and upon and subject to the terms
and the , conditions hereinafter set forth, the parties do hereby agree as
follows.
ARTICLE I
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THE MERGER
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1.01 THE MERGER. Subject to the terms and conditions of this Agreement, and
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in accordance with the DGCL and TBCA, Company shall be merged with and into
Merger Sub, and the separate corporate existence of Company shall thereupon
cease. Merger Sub shall
1
continue as the surviving corporation following the Merger (sometimes
hereinafter referred to as the "Surviving Corporation") and shall be a wholly
---------------------
owned indirect subsidiary of Parent.
1.02 CLOSING DATE. Subject to the satisfaction or waiver of the
--------------
conditions set forth herein, the closing of the Merger (the "Closing") shall
-------
take place simultaneously with the execution hereof by the parties hereto, in
the offices of Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇.▇., ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other place upon which the
parties shall agree (the "Closing Date"),
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1.03 CERTIFICATES OF MERGER. On or within a reasonable number of days
-------------------------
following the Closing Date, the parties hereto shall file (a) the Certificate of
Merger with the Texas Secretary of State in such form as required by, and
executed in accordance with, the relevant provisions of the TBCA and acceptable
to the parties hereto (the "Texas Certificate of Merger"), and (b) the
------------------------------
Certificate of Merger with the Secretary of State of the State of Delaware in
such form as required by, and executed in accordance with, the relevant
provisions of the DGCL and acceptable to the parties hereto (the "Delaware
---------
Certificate of Merger"). For purposes hereof, the Merger shall be deemed to be
-----------------------
effective at the Effective Time.
1.04 EFFECT OF THE MERGER. From and after the Effective Time, the
------------------------
Merger shall have the effect set forth in the DGCL and TBCA. Without limiting
the generality of the foregoing, at the Effective Time of the Merger, (a) all
the property, rights, privileges, immunities, powers, licenses, authorizations,
and franchises of each of Merger Sub and Company shall vest in the Surviving
Corporation without further act or deed, and (b) all the debts, liabilities,
duties, and obligations of Merger Sub and Company shall become the debts,
liabilities, duties, and obligations of the Surviving Corporation.
1.05 CERTIFICATE OF INCORPORATION AND BYLAWS. At the Effective Time,
-------------------------------------------
the Certificate of Incorporation and the Bylaws of Merger Sub shall become the
Certificate of Incorporation and the Bylaws of the Surviving Corporation.
1.06 DIRECTORS. The director of Merger Sub, ▇▇▇▇▇ ▇. ▇▇▇, ▇▇., shall
----------
be a director of the Surviving Corporation until his earlier death, resignation,
or removal in accordance with the Certificate of Incorporation and Bylaws of the
Surviving Corporation. Promptly after Closing, Parent shall also cause ▇. ▇▇▇▇
▇▇▇▇▇ to be elected a director of the Surviving Corporation.
1.07 OFFICERS. The officers of Merger Sub shall be the officers of the
---------
Surviving Corporation until their earlier death, resignation, or removal in
accordance with the Certificate of Incorporation and Bylaws of the Surviving
Corporation.
1.08 NAME. The name of the Surviving Corporation shall be LFC, Inc.
-----
ARTICLE II
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MERGER CONSIDERATION
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2.01 CONSIDERATION. At the Effective Time, by virtue of the Merger and
--------------
without any further action on the part of Parent, Merger Sub, Company, or
Sellers, all issued and outstanding
2
shares of Company's common stock and any other equity security of Company
(including preferred stock, options, warrants, or debt convertible into stock,
options, or warrants) shall be cancelled and retired and shall cease to exist,
and shall be converted into the right to receive, in the aggregate and subject
to the provisions of Sections 2.03, 2.07, and 2.08 (the "Aggregate Merger
----------------
Consideration"):
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(a) An amount in cash equal to sixty percent (60%) of the Cell
Tower Price Component, minus prepaid rent in the amount shown on SCHEDULE
----- --------
2.01(a)(i) (such amount to be subtracted from the cash portion of the Cell Tower
----------
Price Component). For purposes hereof, the "Cell Tower Price Component" shall
--------------------------
mean (i) $4,699,156, minus (ii) the unpaid principal balance, as of the Closing
-----
Date, of all indebtedness specifically secured by the assets described on
SCHEDULE 2.01(a) ("Tower Debt"), together with all interest accrued thereon
----------------- -----------
through and including the Effective Time;
(b) Plus the number of shares of common stock of Parent, par value
----
$0.001 per share (the "Parent Common Stock"), determined by dividing forty
---------------------
percent (40%) of the Cell Tower Price Component by the average closing trading
price per share of the Parent Common Stock for the ten trading days ending on
APRIL 21, 2006 (the "Closing Share Price") (the parties acknowledge and agree
-------------------
that the Closing Share Price is $2.64);
(c) Plus an amount in cash equal to thirty-five percent (35%) of
----
the Existing Business Price Component. For purposes hereof, the "Existing
---------
Business Price Component" shall mean (i) Company's average annual EBITDA for the
------------------------
three 12-month periods commencing on MAY 1, 2006, and ending on APRIL 30, 2009
(the "Calculation Period"), determined in accordance with generally accepted
-------------------
accounting principles ("GAAP") and the methodology set forth on SCHEDULE
--------
2.01(c), multiplied by (ii) the Applicable Factor. (The cash amount shall
------- --------------
hereinafter be referred to as the "Cash Portion of the Existing Business Price
-------------------------------------------
Component.") The "Applicable Factor" shall mean 4.5 unless Company's average
---------- ------------------
annual EBITDA for the Calculation Period exceeds one hundred fifteen percent
(115%) of the Estimated Existing Business Price Component (as defined in Section
2.02(a)(ii) below), in which case the Applicable Factor shall mean 5;
(d) Plus the number of shares of Parent Common Stock determined by
----
dividing sixty-five percent (65%) of the Existing Business Price Component by
the Closing Share Price (the "Common Stock Portion of the Existing Business
----------------------------------------------
Price Component");
----------------
(e) Minus the amount, if any, by which Closing Net Receivables (as
-----
finally determined pursuant to Section 2.07) is less than Target Net
Receivables, or plus the amount, if any, by which Closing Net Receivables (as
----
finally determined pursuant to Section 2.07) is greater than Target Net
Receivables. For purposes hereof, (i) "Target Net Receivables" shall be an
-------------------------
amount equal to $700,000, and (ii) "Closing Net Receivables" shall mean the
-------------------------
ordinary course trade accounts receivable of the Company as of the Closing Date,
minus the ordinary course trade accounts payable of the Company as of the
-----
Closing Date.
2.02 PAYMENT OF AGGREGATE MERGER CONSIDERATION. The Aggregate
----------------------------------------------
Merger Consideration shall be paid or delivered as follows:
3
(a) Closing Date Merger Consideration. At the Closing, each
-------------------------------------
Seller shall receive her or his pro rata share, based on the percentage of
shares of outstanding common stock held by such Seller in Company as of the
Closing (the "Pro Rata Share") of:
----------------
(i) One hundred percent (100%) of the Cell Tower Price
Component consideration determined pursuant to Sections 2.01 (a) and (b) above;
(ii) $2,251,538 in cash and such number of Parent Common
Stock as is equal to $550,000 divided by the Closing Share Price (which
represents twenty-five percent (25%) of the Estimated Existing Business Price
Component), The "Estimated Existing Business Price Component" shall mean an
---------------------------------------------
amount equal to $11,206,152; and
(iii) The number of shares of Parent Common Stock determined
by dividing 7,283,999 (which represents sixty-five percent (65%) of the
Estimated Existing Business Price Component) by the Closing Share Price (the
"Estimated Existing Business Price Share Component"), minus the number of shares
------------------------------------------------- -----
of Parent Common Stock to be held in escrow pursuant to Section 2.02(b) below.
The parties acknowledge and agree that, notwithstanding anything herein to the
contrary, any cash to be paid to a Seller at the Closing shall be payable by the
issuance to such Seller of a promissory note in the form attached hereto as
EXHIBIT 2.02 (the "Promissory Note").
------------- ----------------
(b) Merger Consideration Held in Escrow. Within a reasonable
----------------------------------------
number of days following the Closing, the number of shares of Parent Common
Stock (the "Escrow Shares") determined by multiplying 75% by the Estimated
------------
Existing Business Price Share Component shall, from the Aggregate Merger
Consideration, be placed in escrow by Parent with SunTrust Bank as escrow agent
("Escrow Agent"), pursuant to an escrow agreement reasonably satisfactory in
-------------
form and substance to Parent and the Sellers (the "Escrow Agreement"). Up to a
----------------
maximum of sixty percent (60%) of such Escrow Shares shall be subject to
distributions to Sellers on a semi-annual basis as follows (the "Annual Escrow
-------------
Share Distributions"): On the six-month anniversary of the Closing, and on
--------------------
each of the five succeeding six-month anniversary dates during the Calculation
Period, Sellers shall have the right to receive ten percent (10%) of the Escrow
Shares, provided that certain EBITDA targets have been achieved, as set forth on
SCHEDULE 2.02(b). The balance of the Escrow Shares shall be delivered only
-----------------
after the Existing Business Price Component is finally determined pursuant to
Section 2.03, and the Aggregate Merger Consideration is adjusted pursuant to
Section 2.07,
(c) Holdback of Merger Consideration. $1,120,615 of the Aggregate
----------------------------------
Merger Consideration (the "Holdback Amount") (such amount representing 10% of
---------------
the Estimated Existing Business Price Component) shall be retained by Parent as
partial security for the obligations of the Sellers under this Agreement. In the
event a Parent-Indemnified Party desires to make a claim against the Holdback
Amount on account of, or with respect to, the obligations of the Sellers under
this Agreement (a "Holdback Claim"), the parties shall comply with the
---------------
following procedures:
(i) The Parent-Indemnified Party shall notify the Sellers in
writing (a "Notice of Holdback Claim"), which notice shall set forth a
---------------------------
description of the Holdback Claim
4
and the amount owed with respect to such Holdback Claim (if known). In the event
that the Sellers dispute that the Parent-Indemnified Party is entitled to be
paid the amounts set forth in such Holdback Claim, the Sellers shall notify the
Parent-Indemnified Party of such dispute in writing within thirty (30) days
following the Sellers' receipt of the Notice of Holdback Claim. If no notice of
dispute is received by the Parent-Indemnified Party within thirty (30) days
after the Sellers have been provided a Notice of Holdback Claim, such amount
specified therein shall be retained by Parent for its own account and the
Holdback Amount shall be reduced by such amount.
(ii) In the event that the Sellers dispute the Holdback Claim
and provide Parent written notice of such dispute within thirty (30) days
following receipt by the Sellers of the Notice of Holdback Claim, the amount set
forth in such Holdback Claim shall not be retained by Parent for its own account
unless and until, and in the amount, (x) agreed by the Sellers in writing, or
(y) directed or permitted by a final decision of a court in accordance with the
provisions under Section 12,09.
(iii) At the later to occur of (x) the date of the final
determination of the Existing Business Price Component pursuant to Section 2.03,
and (y) the date the Aggregate Merger Consideration is adjusted pursuant to
Section 2.07, Parent shall cause to be paid to each Seller its Pro Rata Share of
the Holdback Amount minus the sum of (A) the amount of any Holdback Claims
-----
retained by Parent for its own account as of such date in accordance with the
terms hereof, plus (B) the amounts set forth in any Notices of Holdback Claim
----
pending as of such date. Upon final resolution of all claims set forth in all
Notices of Holdback Claim that have been disputed as set forth herein (which
final resolution shall be evidenced by the written agreement of Parent and the
Sellers, or the direction by a final decision of a court in accordance with the
provisions under Section 12.09), Parent shall cause to be paid to each Seller
its Pro Rata Share of the remaining balance of the Holdback Amount.
(iv) The Sellers shall be entitled to any interest earned on
any portion of the Holdback Amount disbursed to the Sellers pursuant hereto. The
Holdback Amount shall bear simple interest at the rate of 6% per annum.
(v) To ensure compliance with the "continuity of
interest" requirements under Section 368 of the Code, and in accordance with
Section 2.09 hereunder, the parties agree that the Holdback Amount, subject to
the adjustments under Section 2,02(c)(iii), shall be payable to Sellers by (i)
issuing to each Seller the Pro Rata Share of the number of shares of Parent
Common Stock determined by multiplying the Holdback Amount by sixty-five (65%)
and dividing the resulting product by the average closing trading price per
share of the Parent Common Stock for the ten trading days immediately preceding
the later to occur of (x) the date of the final determination of the Existing
Business Price Component pursuant to Section 2,03 and (y) the date the Aggregate
Merger Consideration is adjusted pursuant to Section 2.07; and (ii) paying each
Seller the Pro Rata Share of an amount in cash equal to the Holdback Amount
multiplied by thirty-five percent (35%), but only if such cash payment is
permitted under the loan agreements to which Parent and the Surviving
Corporation are parties. If such agreements do not permit a cash payment under
this Section 2,02(c), then the parties agree that the consideration required to
be paid under this Section 2.02(c) shall be paid in Parent Common Stock, at the
price per share equal to the average closing trading price per share of the
Parent
5
Common Stock for the ten trading days immediately preceding the later to occur
of (x) the date of the final determination of the Existing Business Price
Component pursuant to Section 2.03 and (y) the date the Aggregate Merger
Consideration is adjusted pursuant to Section 2.07.
2.03 EXISTING BUSINESS PRICE COMPONENT ADJUSTMENT. At the end of the
------------------------------------------------
Calculation Period, Parent shall calculate the Existing Business Price
Component, and the Aggregate Merger Consideration shall be adjusted as follows:
(a) If the Existing Business Price Component is greater than the
Estimated Existing Business Price Component (such difference being referred to
as the "Surplus Amount"), Parent shall pay to Sellers the difference by: (i)
---------------
issuing to each Seller the Pro Rata Share of the number of shares determined by
multiplying the Surplus Amount by sixty-five percent (65%) and dividing the
resulting product by the Closing Share Price; and (ii) paying each Seller the
Pro Rata Share of an amount in cash equal to the Surplus Amount multiplied by
thirty-five percent (35%), but only if such cash payment is permitted under the
loan agreements to which Parent and the Surviving Corporation are parties. If
such agreements do not permit a cash payment under this Section 2.03(a), then
the parties agree that the consideration required to be paid under the preceding
Section 2.03(a)(ii) shall be paid in Parent Common Stock, at the price per share
equal to the average closing trading price of the Parent Common Stock for the
ten trading days immediately preceding MAY 1, 2009.
(b) If the Existing Business Price Component is less than the
Estimated Existing Business Price Component (the "Deficit Amount"), Sellers
--------------
shall pay to Parent the difference by forfeiting to Parent each Seller's Pro
Rata Share of the number of shares determined by dividing the Deficit Amount by
the Applicable Share Price (the "Forfeited Amount"). If the value of the
----------------
Forfeited Amount is greater than the value of the Common Stock Portion of the
Existing Business Price Component, Sellers shall forfeit their right to receive
all or a portion of the Holdback Amount (depending on the amount of the
Forfeited Amount), and such forfeited amount shall be paid to Parent. For
purposes of this Section 2,03, the "Applicable Share Price" shall mean the
------------------------
greater of: (i) the Closing Share Price; and (ii) the sum of (A) the average
closing trading price per share of the Parent Common Stock for the ten trading
days immediately preceding MAY 1, 2007, multiplied by twenty percent (20%), (B)
-------------
the average closing trading price per share of the Parent Common Stock for the
ten trading days immediately preceding MAY 1, 2008, multiplied by twenty percent
-------------
(20%), and (C) the average closing trading price per share of the Parent Common
Stock for the ten trading days immediately preceding MAY 1, 2009, multiplied by
-------------
sixty percent (60%).
(c) For purposes of clarity, examples of the agreed-upon
application of Sections 2.02 and 2.03 are set forth on SCHEDULE 2.03.
--------------
2.04 CONTINGENT PERFORMANCE INSTALLMENT. Sellers shall have the right
-----------------------------------
to receive contingent performance payments, based on the Surviving Corporation's
EBITDA and revenue during the fourth and fifth 12-month periods following
Closing. Such payments, if earned, shall be due and payable within 120 days
following the end of each such 12-month period. The EBITDA and revenue targets
and method of determining whether such targets have been achieved are set forth
on SCHEDULE 2.04. Any consideration due under this Section 2.04 shall be payable
-------------
to Sellers in accordance with their Pro Rata Shares and, at their option in cash
or stock,
6
provided that, in the event Sellers opt for cash, such cash payment shall be
subject to the terms of the loan agreements to which Parent and the Surviving
Corporation are parties. If such agreements do not permit payment of such
consideration in cash, then the parties agree that the consideration shall be
paid in Parent Common Stock, at the price per share equal to the average closing
trading price of the Parent Common Stock for the ten trading days immediately
preceding MAY 1, 2010 for the fourth 12-month period following Closing, and at
the price per share equal to the average closing trading price of the Parent
Common Stock for the ten trading days immediately preceding MAY 1, 2011 for the
fifth 12-month period following Closing.
2.05 PAYMENT OF TOWER DEBT AND CANCELLATION OF OTHER INDEBTEDNESS. Upon
-----------------------------------------------------------
payment of the Promissory Note, (i) Parent or Merger Sub shall repay or cause to
be repaid in full all Tower Debt, and (ii) Sellers shall cause all other
indebtedness of Company, other than accounts payable incurred in the Ordinary
Course of Business, to be cancelled or paid in full.
2.06 EXCLUDED ASSETS AND ASSOCIATED LIABILITIES. The parties agree that
-------------------------------------------
immediately prior to the Closing, Company may transfer the assets listed on
SCHEDULE 2.06 to the persons listed on such Schedule. In connection with such
--------------
transfer, those persons shall assume in writing all liabilities associated with
such assets.
2.07 ADJUSTMENT OF AGGREGATE MERGER CONSIDERATION. As promptly as
-------------------------------------------------
practicable following the Closing Date (but in any event within 60 days
thereafter), the Parent shall prepare and deliver to the Sellers (i) a statement
of the ordinary course accounts receivable as of the Closing Date and the
ordinary course accounts payable as of the Closing Date (the "Closing
--------
Net Receivables Schedule"), and (ii) its calculation of the Closing Net
------------------------
Receivables, if any, based thereon. The Closing Net Receivables Schedule shall
be prepared in accordance with GAAP. The Sellers shall have ten (10) days
following the receipt of the Closing Net Receivables Schedule delivered pursuant
to this Section 2,07 during which to notify the Parent of any dispute of any
item contained therein, which notice shall set forth in detail the basis for
such dispute. The Parent and the Sellers shall cooperate in good faith to
resolve any such dispute as promptly as possible, and upon such resolution, the
Closing Net Receivables Schedule shall be prepared in accordance with the
agreement of the Parent and Sellers. In the event Sellers do not notify the
Parent of any such dispute within such thirty (30) day period or notifies the
Parent within such period that Sellers does not dispute any item contained
therein, the Closing Net Receivables Schedule delivered pursuant to this Section
2.07 and the Parent's calculation of the Closing Net Receivables shall be final
and binding the Parties. In the event the Parent and Sellers are unable to
resolve any dispute regarding the Closing Net Receivables Schedule within 15
days following the Parent's receipt of notice of such dispute, Parent and
Sellers shall mutually select an independent certified public accounting firm of
recognized national standing which does not perform services for Parent or
Sellers (the "Independent Accountants") to resolve any remaining disagreements.
-----------------------
The Independent Accounts shall, as promptly as practicable, but in any event
within 30 days of the date on which such dispute is referred to the Independent
Accounts: (i) make a determination as to the Closing Net Receivables Schedule in
accordance with the principles set forth herein; and (ii) shall deliver a
written notice of such determination to Parent and Sellers, In resolving such
dispute, the Independent Accounts shall consider only those items or amounts in
the Closing Net Receivables Schedule as to which Sellers have disagreed. The
fees and expenses of the Independent Accountants shall be paid one-half by
Parent and one-half by Sellers. The determination of the Independent Accounts
shall be final, conclusive and
7
binding on the parties. Any amounts owed pursuant to Section 2.01 (e) shall be
paid within ten (10) days by the applicable party following the final
determination of the Closing Net Receivables pursuant to this Section 2,07. The
parties acknowledge and agree that, notwithstanding anything herein to the
contrary, any amounts to be paid to the Sellers pursuant to Section 2.0 l(e)
shall payable (in the sole determination of the Sellers) by (x) the issuance to
each Seller of its Pro Rata Share of such number of shares of Parent Common
Stock as is equal to the amount so owed pursuant to Section 2.01(e), divided by
----------
the Closing Share Price, or (y) the assignment by the Surviving Corporation to
the Sellers of such accounts receivable as are agreed to by Parent and the
Sellers, pursuant to an agreement or other instrument reasonably satisfactory in
form and substance to Parent and the Sellers.
2.08 PHANTOM STOCK INCENTIVE PLAN. Notwithstanding anything herein
------------------------------
to the contrary, the Aggregate Merger Consideration shall be reduced by the
amount payable to the individuals set forth on EXHIBIT 2.08 (the "Key
------------- ---
Employees") (such exhibit to set forth the percentage of Aggregate Merger
---------
Consideration to be received by each Seller and each Key Employee) pursuant to
the terms and conditions of that certain LFC, Inc. 2006 Phantom Stock Plan,
dated January 10, 2006, as amended (the "Incentive Plan"), as a result of the
--------------
consummation of the Merger. Any amounts payable to the Key Employees pursuant to
the Incentive Plan as a result of the consummation of the Merger shall be paid
directly to the Key Employees by the Parent or the Surviving Corporation. Any
and all such payments, whenever made, shall be made in accordance with, and
subject to, the terms and conditions of this Agreement and the Incentive Plan,
and shall be subject to all applicable employment and withholding taxes. The
parties agree that any deductions or losses associated with such payments shall
accrue to the benefit of the Parent or Surviving Corporation. Parent shall use
commercially reasonable efforts to cause any Parent Common Stock or other
securities to be issued through the Incentive Plan to the Key Employees and, to
the extent required by Federal securities laws, interests in the Incentive Plan,
to be registered under the Securities Act of 1933, as amended, on Form S-8, or
such other then applicable and comparable form,
2.09 COMPLIANCE WITH SECTION 368 OF THE CODE. The parties intend for
-----------------------------------------
the Merger to qualify as a reorganization under Section 368 of the Code. In
connection therewith, the parties hereto agree that, notwithstanding anything
herein to the contrary, the amount of Parent Common Stock actually paid to
Sellers pursuant to this Article II shall at all times exceed forty percent
(40%) of the total consideration actually paid.
ARTICLE III
-----------
REPRESENTATIONS AND WARRANTIES OFSELLERS
-----------------------------------------
Each Seller represents and warrants to Parent and Merger Sub, as to
themselves only and not as to any other Seller, as follows:
3.01 POWER, AUTHORITY, AND ORGANIZATION OF SELLERS. Sellers have the
-------------------------------------------------
right, power, and capacity to execute, deliver, and perform this Agreement and
to consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Sellers and constitutes Sellers' legal,
valid, and binding obligation, enforceable in accordance with its terms. Upon
execution of this Agreement, each Seller who is, acting in a fiduciary,
8
representative, or corporate capacity, shall furnish to Parent a true and
correct copy of each and every will, trust agreement, or other document that
establishes or relates to the right, power, capacity, or authority of such
Seller to execute, deliver, and perform this Agreement and to consummate the
transactions contemplated hereby.
3.02 NO CONFLICT. The execution and delivery of this Agreement by
------------
Sellers, the consummation of the transactions contemplated herein by Sellers,
and the performance of the covenants and agreements of Sellers will not, with or
without the giving of notice or the lapse of time, or both, (a) violate,
conflict with, or result in a breach or default under or cause termination of
any term or condition of any mortgage, indenture, contract, license, permit,
instrument, trust document, or other agreement, document, or instrument to which
Sellers are a party or by which Sellers or any of Sellers' properties may be
bound, or (b) violate any provision of law, statute, rule, regulation, court
order, judgment, decree, or ruling of any governmental authority to which
Sellers are a party or by which Sellers or Sellers' properties may be bound.
3.03 OWNERSHIP OF COMPANY SHARES. Sellers own, of record and
-------------------------------
beneficially, good and valid title to the Company Shares in the amounts set
forth next to each Seller's name on SCHEDULE 3.03, and, except as set forth on
-------------
SCHEDULE 3.03, such Company Shares (a) are validly issued, fully paid, and
--------------
nonassessable, (b) are free and clear of any liens, restrictions, claims,
equities, charges, options, rights of first refusal, or encumbrances, with no
defects of title whatsoever, and (c) constitute all of the issued and
outstanding shares of the capital stock of Company. Other than the Company
Shares, Sellers own no shares of capital stock of Company or any other equity
security of Company or any Subsidiary (as defined in Section 4,01(b) hereof) and
no right of any kind to have any such equity security issued. Upon the Closing,
Parent shall have obtained good and valid title to the Company Shares, free and
clear of any Hens, restrictions, claims, equities, options, charges, rights of
first refusal, encumbrances, or other restrictions, and with no defects of title
whatsoever. Sellers have full and exclusive power, right, and authority to vote
the Company Shares. Sellers are not a party to or bound by any agreement
affecting or relating to their right to transfer or vote the Company Shares.
3.04 ABSENCE OF OTHER CLAIMS. No prior offer, issue, redemption, call,
-------------------------
purchase, sale, merger, transfer, or involvement in any transfer, negotiation,
or other transaction of any nature or kind with respect to any capital stock
(including shares, offers, options, warrants, or debt convertible into shares,
options, or warrants) of Sellers, Company, or any Subsidiary, parent company, or
related company (collectively, the "Related Companies"), or any corporation
------------------
which has been merged into any of the Related Companies, has given or may give
rise to (a) any valid claim or action by any person (including, without
limitation, any former or present holder of any of the Company Shares or any
other capital stock of any of the Related Companies) which is enforceable
against Company or any Subsidiary, or Parent, or (b) any valid interest in
Company or any Subsidiary, and no fact or circumstance exists which could give
rise to any such right, claim, action, or interest on behalf of any person.
3.05 INVESTMENT REPRESENTATIONS.
----------------------------
(a) Each Seller has sufficient knowledge and experience in financial
and business matters to be able to evaluate the risks and merits of the
investment represented by the issuance of the Parent Common Stock pursuant to
Section 2.01 (the "Issued Securities").
------------------
9
(b) Each Seller is aware that the business of Parent involves
significant and material economic variables and risks that could adversely
affect such Seller's investment in the Issued Securities.
(c) Each Seller is able to bear the economic risks of an
investment in the Issued Securities, including the risk of losing all of such
investment, and no Seller has any need for liquidity with respect to such
investment.
(d) Each Seller acknowledges that no prospectus, offering
circular, or other offering statement containing information with respect to the
Issued Securities was delivered in connection with Sellers' investment. Each
Seller has made her or his own inquiry and analysis with respect to Parent and
Parent's business, and further represents that such Seller has had access, for a
reasonable time prior to the issuance of the Issued Securities, to information
concerning Parent and has had the opportunity to ask questions of, and receive
answers from, officers of Parent concerning an investment in the Issued
Securities and the business, management, and financial affairs of Parent, and to
obtain additional information (to the extent Parent possessed such information
or could acquire it without unreasonable effort or expense) necessary to verify
the accuracy of any information furnished to such Seller or to which such Seller
had access.
(e) The Issued Securities were not offered to Sellers by means of
publicly disseminated advertisements or sales literature, or as part of a
general solicitation, nor is any Seller aware of any offers made to other
persons by such means,
(f) Each Seller acknowledges that he or she either has been
supplied with or has had access to information to which a reasonable investor
would attach significance in making investment decisions. In determining to
proceed with this investment, each Seller has relied solely upon the results of
her or his own independent investigation with respect to the Issued Securities.
(g) Each Seller is an "accredited investor" as defined in Rule 501
(a) of Regulation D, promulgated under the Securities Act, which requires
individual investors to either (i) have had individual income (exclusive of any
income attributable to a spouse) of more than $200,000, or joint individual
income with a spouse of more than $300,000, in each of the two most recent
years, and a reasonable expectation of reaching that level of income in the
current year, or (ii) have an individual net worth (or combined net worth with a
spouse) in excess OF $1,000,000.
(h) Each Seller is acquiring the Issued Securities for such
Seller's own account and not with a view to, or for sale in connection with, any
distribution thereof. No other person or entity will have any interest,
beneficial or otherwise, in the Issued Securities that each Seller is acquiring
hereunder. No Seller is obligated to transfer the Issued Securities or any
portion thereof to any other person or entity, nor does any Seller have any
agreement or understanding to do so.
(i) Each Seller acknowledges and agrees that such Seller may not,
directly or indirectly, sell, assign, pledge, give, subject to lien or security
interest or otherwise dispose of or encumber (collectively, "Transfer") all or
any part of the Issued Securities except in a manner
10
consistent and in compliance with applicable securities laws. Each Seller
understands that the Parent may, as a condition of any such Transfer, require
that such Seller deliver an opinion of counsel reasonably acceptable to the
Parent to the effect that neither the sale nor the proposed Transfer will result
in any violation of applicable state securities laws, the Securities Act or the
securities law of any other jurisdiction.
(j) The information about Parent that has been disclosed to
Sellers in connection with the acquisition of the Issued Securities is deemed to
be "Confidential Information" of Parent, and each Seller represents, warrants,
------------------------
and hereby agrees that, unless Parent has consented in writing to the contrary,
such Seller shall not disclose such Confidential Information to others or use
any part of such Confidential Information that has been disclosed to such
Seller, except any part thereof (i) which may be in the public domain other than
through improper disclosure by such Seller, (ii) which may be independently
disclosed to such Seller by any third party not itself in a confidential
relationship with Parent, (iii) which may already be in such Seller's possession
(other than through disclosure by Parent or by any third party that is in a
confidential relationship with Parent), or (iv) which such Seller may be
required to disclose by order of a court or administrative agency having
competent jurisdiction; provided, however, that this paragraph shall be
terminated and be of no force or effect with respect to any such Confidential
Information becoming a part of the public domain through action, directly or
indirectly, by anyone other than such Seller.
(k) The agreements, representations, and warranties made herein
extend to and apply to all portions of the Issued Securities. The acceptance by
each Seller of the Issued Securities shall constitute such Seller's confirmation
that all agreements and representations made in this Section 3.05 are true and
correct at such time.
ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES OF CERTAIN SELLERS
-------------------------------------------------
AND COMPANY REGARDING COMPANY
-----------------------------
Each Seller (other than ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.) and the Company hereby,
jointly and severally, represents and warrants to Parent and Merger Sub as
follows (for purposes of the following representations and warranties, the
defined term Company shall be deemed to include any Subsidiary of the Company
and any matters set forth on any Schedule relating to any Subsidiary shall
specifically refer to such Subsidiary):
4.01 ORGANIZATION AND AUTHORIZATION.
---------------------------------
(a) Company is a corporation duly organized, validly existing, and
in good standing under the laws of the state of its incorporation and has all
requisite power and authority, corporate or otherwise, to carry on and conduct
its Business as it is now being conducted and to own or lease its properties and
assets. Company is duly qualified and in good standing in the jurisdictions set
forth on SCHEDULE 4.01(A). Company is duly qualified and in good standing in
------------------
every state of the United States in which the conduct of the Business of Company
or the ownership of its properties and assets requires it to be so qualified.
11
(b) SCHEDULE 4.01(b) sets forth every entity in which Company
-----------------
owns, or will own prior to the Closing, fifty (50%) percent or more of the
outstanding equity, directly or indirectly (each a "Subsidiary" and collectively
----------
the "Subsidiaries"), and the equity interest in such entity that is owned by
------------
Company. Except as noted on SCHEDULE 4.01(b), all outstanding shares of capital
----------------
stock of the Subsidiaries (the "Subsidiary Shares") are owned by Company,
------------------
directly or indirectly, free and clear of all liens, restrictions, claims,
equities, charges, options, rights of first refusal, or encumbrances, with no
defects of title whatsoever. Company has full power, right, and authority to
vote all of the outstanding shares of capital stock of each Subsidiary, Company
is not a party to or bound by any agreement affecting or relating to its right
to transfer or vote the outstanding shares of capital stock of any Subsidiary.
(c) Except for the Subsidiary Shares and as disclosed on SCHEDULE
--------
4.01(c), Company does not own any capital stock or other securities or have any
-------
other investment in any person or other entity.
(d) The current officers, directors, and shareholders of Company
are listed on SCHEDULE 4.01(d).
-----------------
(e) The copies of the charter documents and bylaws of Company that
have previously been delivered to Parent are the complete, true, and correct
charter documents and bylaws of Company in effect as of the date hereof. The
minutes of directors' and shareholders' meetings and the stock books of Company
that have been delivered previously to Parent are the complete, true, and
correct records of directors' and shareholders' meetings and stock issuances
through and including the date hereof, and reflect all transactions and other
matters required to be reflected in such records, as well as such other matters
customarily contained in records of such type.
(f) Company has the right, power, and capacity to execute,
deliver, and perform this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery, and performance of this Agreement
by Company, and the consummation of the transactions contemplated hereby, have
been duly authorized by all necessary corporate action on the part of Company.
This Agreement has been duly and validly executed and delivered by Company and
constitutes Company's legal, valid, and binding obligation, enforceable in
accordance with its terms.
(g) The Board of Directors of Company has unanimously approved
this Agreement and the transactions contemplated hereby.
4.02 AUTHORIZED AND OUTSTANDING STOCK. The authorized capital stock of
----------------------------------
Company and the number of issued and outstanding shares thereof are set forth on
SCHEDULE 4.02. All of such issued and outstanding shares of capital stock of
--------------
Company are validly issued, fully paid, and nonassessable. All issuances,
transfers, or purchases of the capital stock of Company have been in compliance
with all applicable agreements and all applicable laws, including federal and
state securities laws, and all taxes thereon have been paid. There are no shares
of capital stock held in the treasury of Company.
12
4.03 ABSENCE OF OTHER CLAIMS. Except as set forth on SCHEDULE 4.03,
--------------------------- --------------
there are not outstanding, nor is Company bound by, any subscriptions, options,
preemptive rights, warrants, calls, commitments, agreements, or rights of any
character requiring Company to issue, or entitling any person or entity to
acquire, any additional shares of capital stock or any other equity security of
Company, including any right of conversion or exchange under any outstanding
security or other instrument. Company is not obligated to issue or transfer any
shares of its capital stock for any purpose. There are no outstanding
obligations of Company to repurchase, redeem, or otherwise acquire any
outstanding shares of the capital stock of Company.
4.04 NO CONFLICT. The execution and delivery of this Agreement by
------------
Company, the consummation of the transactions contemplated herein by Company,
and the performance of the covenants and agreements of Company, subject to
fulfillment of the conditions set forth in Section 9.04 hereof, will not, with
or without the giving of notice or the lapse of time, or both: (a) violate or
conflict with any of the provisions of any charter document or bylaw of Company;
(b) except as set forth on SCHEDULE 4.04, violate, conflict with, or result in a
--------------
breach or default under or cause termination of any term or condition of any
mortgage, indenture, contract, license, permit, instrument, trust document,
will, or other agreement, document, or instrument to which Company is a party or
by which Company or its properties may be bound; (c) violate any provision of
law, statute, regulation, court order, or ruling of any governmental authority
to which Company is a party or by which Company or its properties may be bound;
or (d) result in the creation or imposition of any lien, claim, charge,
restriction, security interest, or encumbrance of any kind whatsoever upon any
asset of Company.
4.05 REQUIRED CONSENTS AND APPROVALS. Except as set forth on SCHEDULE
---------------------------------- --------
4.05, no consent or approval is required by virtue of the execution hereof by
-----
Company or the consummation of any of the transactions contemplated herein by
Company to avoid the violation or breach of, or the default under, or the
creation of a Hen on assets of Company pursuant to the terms of, any regulation,
order, decree, or award of any court or governmental agency, or any lease,
agreement, contract, mortgage, note, license, or other instrument to which
Company is a party or to which Company, Company's property or assets, or the
Company Shares are subject.
4.06 NO VIOLATION OF LAW. Company is not, has not been, and will not be
--------------------
(by virtue of any past or present action, omission to act, contract to which it
is a party, occurrence, or state of facts whatsoever) in violation of any
applicable local, state, or federal law, ordinance, regulation, order,
injunction, decree, or other requirement of any governmental body, agency,
authority, or court binding on it, or relating to its property, Business,
advertising, sales, or pricing practices (including, without limitation, any
antitrust laws and regulations). Company will not hereafter suffer or incur any
loss, liability, penalty, or expense (including, without limitation, attorneys'
fees) by virtue of any such violation. Specifically, and without limitation,
Company and the Business are in material compliance with all local, state, and
federal requirements pertaining to: (a) tower siting; (b) the construction,
marking, painting, and lighting of antenna structures in accordance with Section
303(q) of the Communications Act of 1934, as amended, 47 C.F.R. Part 17, and
other governmental laws pertaining to air navigation safety; (c) tower fencing,
signage, posting, and security requirements; (d) Section 106 of the National
Historic Preservation Act; (e) procedures implementing the National
Environmental Policy Act of 1969, including those set forth in 47 C.F.R. Subpart
I; (f) radio frequency (rf) radiation exposure limits as set forth in 47 C.F.R.
Sec. 1.1310; and (g) compliance with regulations governing facilities that may
13
affect property listed in the National Register of Historic Places pursuant to
16 U.S.C. Sec. 470w(5) and 36 C.F.R. Part 60, including the procedures set forth
in the rules of the Advisory Council on Historic Preservation, 36 C.F.R. Part
800, as supplemented by the Nationwide Programmatic Agreement for Collocation of
Wireless Antennas (47 C.F.R. Part 1, Appendix B), the Nationwide Programmatic
Agreement Regarding the Section 106 National Historic Preservation Act Review
Process (47 C.F.R. Part 1, Appendix C), and the Interagency
Cooperation-Endangered Species Act of 1973, as amended, 50 C.F.R. Part 402.
4.7 FINANCIAL STATEMENTS. SCHEDULE 4.07 contains the audited balance
--------------------- --------------
sheets of Company as of the most recent year and the two prior years, if
available, and the related audited statements of income, retained earnings, and
cash flows for the years then ended, along with the related notes thereto, as
well as the unaudited balance sheet of Company as OF MARCH 31, 2006 and the
related unaudited statements of income, retained earnings, and cash flows, or in
each instance equivalent statements as commonly prepared, for the 24-month
period then ended (the "Audited Financial Statements" and the "Interim Financial
---------------------------- -----------------
Statements," respectively, and collectively the "Financial Statements"). The
----------- --------------------
Audited Financial Statements are true, correct, and complete and present fairly
the financial position of Company as of the dates thereof, and the related
results of Company's operations for the years then ended. The Interim Financial
Statements are true, correct, and complete and present fairly the financial
position of Company as of the date thereof, and the related results of Company's
operations for the periods then ended, The Audited Financial Statements have
been prepared in accordance with GAAP, and the Interim Financial Statements have
been prepared in accordance with modified GAAP (accrual basis financial
statements with depreciation recorded on a tax basis), except for the absence of
footnotes and customary year-end adjustments (which will not be material in
amount), on a basis consistent with prior periods. All adjustments, consisting
of normal, material, recurring accruals necessary for a fair presentation, have
been made in the Interim Financial Statements. The audited balance sheet as of
DECEMBER 31, 2005, (the "Audited Balance Sheet Date") included in the Audited
--------------------------
Financial Statements is referred to herein as the "Audited Balance Sheet." and
---------------------
the unaudited balance sheet as of MARCH 31, 2006 (the "Interim Balance Sheet
---------------------
Date") included in the Interim Financial Statements is referred to herein as the
----
"Interim Balance Sheet."
-----------------------
4.8 NO UNDISCLOSED LIABILITIES. There are no liabilities of Company of
---------------------------
any kind whatsoever, whether accrued, contingent, absolute, or otherwise, except
for:
(a) Liabilities and obligations fully reflected or provided for in
the Interim Balance Sheet;
(b) Liabilities and obligations incurred in the Ordinary Course of
Business since the Interim Balance Sheet Date and of a type reflected on the
Interim Balance Sheet, which individually or in the aggregate are not in excess
of $50,000; and
(c) Liabilities and obligations under contracts or commitments not
(i) attributable to any failure by Company to comply with the terms thereof or
any express or implied warranty, or (ii) entered into in violation of this
Agreement or arising out of any such breach by Company.
4.09 REAL PROPERTY.
---------------
14
(a) SCHEDULE 4.09(A) sets forth a complete and accurate list and
-----------------
description of all the real property that Company owns or leases, has agreed (or
has an option) to purchase, sell, or lease, or may be obligated to purchase,
sell, or lease (the "Real Property"). With respect to each parcel of Real
--------------
Property required to be listed and described on SCHEDULE 4.09(a), Company has
----------------
made available to Parent true, correct, and complete copies of the deed
evidencing Company's ownership of such parcel, each mortgage or other
encumbrance thereon reflected in a written instrument, each instrument (if any)
evidencing a grant by or to Company of an option to purchase or lease such
parcel, each lease and leasehold mortgage (if any) with respect to such parcel,
and any title policies or commitments and surveys with respect to such parcel.
(b) Subject to Section 4.09(c) hereof, Company (i) has good and
marketable fee-simple title to all the Real Property, and (ii) except for
Permitted Liens (as hereinafter defined), owns such Real Property free and clear
of all title defects or objections, liens, restrictions, claims, charges,
security interests, easements, or other encumbrances of any nature whatsoever,
including any mortgages, leases, chattel mortgages, conditional sales contracts,
collateral security arrangements, and other title or interest retention
arrangements. "Permitted Liens" shall mean (A) the security interests,
----------------
easements, or other encumbrances described on SCHEDULE 4.09(b), and (B) liens
----------------
for taxes not yet due and payable.
(c) Except for Permitted Liens and other matters set forth on
SCHEDULE 4.09(c), no Real Property is subject to (i) any governmental decree or
------------------
order (or threatened or proposed order known to Company) to be sold or taken by
public authority, or (ii) any rights of way, building use restrictions,
exceptions, variances, reservations, or limitations of any nature whatsoever,
not of record.
4.10 PERSONAL PROPERTY.
------------------
(a) SCHEDULE 4.10(a) sets forth a complete and accurate list and
-----------------
description of all the personal property that Company owns or leases, has agreed
(or has an option) to purchase, sell, or lease, or may be obligated to purchase,
sell, or lease, the net book value of which, as properly reflected in the books
and records of Company, on an individual, item-by-item basis, exceeds $1,000.
(b) Company (i) has good and valid title to all the personal and
mixed, tangible, and intangible properties and assets which it purports to own
or which it uses in the conduct of its Business, including, without limitation,
the Intellectual Property, software and licensed software (as defined in Section
4.12), and all the personal properties and assets reflected, but not shown as
leased or encumbered, on the Audited Balance Sheet and the Interim Balance Sheet
(except for inventory and assets sold in the Ordinary Course of Business and
supplies consumed in the Ordinary Course of Business), and (ii) except for
Permitted Liens, owns such personal property free and clear of all title defects
or objections, liens, restrictions, claims, charges, security interests,
easements, or other encumbrances of any nature whatsoever, including any
mortgages, leases, chattel mortgages, conditional sales contracts, collateral,
security arrangements, and other title or interest retention arrangements. Ail
properties and assets of Company are in the possession of Company. SCHEDULE
--------
4.10(b) sets forth a general description and the location of any personal
-------
property (including all improvements on any Real
15
Property) and leasehold improvements that are not located at the principal
location of the Business,
(c) The towers, structures, and equipment owned or leased by
Company are structurally sound with no known material defects, are in good and
safe operating condition and repair, and are adequate for the uses to which they
are being put,
(d) The rights, properties, and other assets presently owned,
leased, or licensed by Company and described in SCHEDULE 4.09(a), SCHEDULE
---------------- --------
4.10(a), and SCHEDULE 4.12(b) include all rights, properties, and other assets
------- ----------------
necessary to permit Company to conduct the Business in the same manner as the
Business has been conducted since the Interim Balance Sheet Date, without any
need for replacement, refurbishment, or extraordinary repair.
(e) SCHEDULE 4.10(e) contains a complete and accurate list of all
-----------------
leases (including any capital leases) and lease-purchase arrangements (other
than Real Property leases) pursuant to which Company leases personal property
from others and which (i) require Company to pay, for rent and any obligatory
improvements, more than $10,000 in any single year or $15,000 during the entire
term of such lease or lease-purchase arrangement (including any renewal term
that Company may not avoid by refusing to renew in its sole discretion), or (ii)
provide for a purchase option for a price of more than $5,000. SCHEDULE 4.10(e)
----------------
specifies which of such leases, if any, are capital leases. All leases that are
required to be capitalized by GAAP have been so accounted for in the Financial
Statements. Company has made available to Parent a true, correct, and complete
copy of each of the items required to be listed on SCHEDULE 4.10(e).
----------------
4.11 INDEBTEDNESS. SCHEDULE 4.11 sets forth a complete and accurate
------------ --------------
list and description of all instruments or other documents relating to any
direct or indirect indebtedness for borrowed money of Company, as well as
indebtedness by way of lease-purchase arrangements, guarantees, undertakings on
which others rely in extending credit, and all conditional sales contracts,
chattel mortgages, and other security arrangements with respect to personal
property used or owned by Company (other than those set forth on SCHEDULE
--------
4.10(e)). Company has made available to Parent a true, correct, and complete
--------
copy of each of the items required to be listed on SCHEDULE 4.11.
--------------
4.12 INTELLECTUAL PROPERTY.
-----------------------
(a) Definition. For purposes of this Agreement, the term
-----------
"Intellectual Property" shall mean all patents, patent rights, patent
----------------------
applications, registered trademarks and service marks, trademark rights,
trademark applications, service ▇▇▇▇ rights, service ▇▇▇▇ applications, trade
names, registered copyrights, copyright rights, and domain names, and all
intellectual, industrial software, or proprietary rights and trade secrets,
technology, and know-how, owned or used by Company, which are related to or used
in connection with the Business of Company, in each case together with any
amendments, modifications, and supplements thereto, and in each case all
goodwill associated therewith in connection with the Business in which any such
intellectual property is used.
16
(b) Identification of Intellectual Property. SCHEDULE 4.12(b)
--------------------------------------- ----------------
sets forth a complete and accurate list and full description of all Intellectual
Property. With respect to any registrations of the Intellectual Property,
SCHEDULE 4.12(b) also sets forth, as to each such item of the Intellectual
-----------------
Property, the (i) relevant application or registration number, (ii) relevant
filing, registration, issue, or application date, (iii) record owner, (iv)
country, (v) title or description, and (vi) remaining life thereof. In addition,
SCHEDULE 4.12(b) identifies whether each item of the Intellectual Property is
-----------------
owned by Company or is possessed and used by Company under any license,
contract, agreement, or other commitment and, if under any such commitment, the
identity of the parties thereto, the term thereof, and all amounts payable
thereunder, together with the payment terms therefor.
(c) Ownership and Protection. With respect to each item of
---------------------------
Intellectual Property identified as being owned by Company, Company owns all
right, title, and interest in and to such Intellectual Property and has not
encumbered or impaired any rights in same. Except as set forth in
SCHEDULE 4.12(c), Company has obtained an enforceable written assignment of all
---------------
right, title, and interest in and to each item of the Intellectual Property
owned by Company from each person or entity participating in the discovery,
development, or creation of such item of Intellectual Property and has provided
to Parent true and correct copies of each such assignment. Except as otherwise
provided in SCHEDULE 4.12(c), Company has no obligation to compensate, or to
----------------
obtain the consent of, any third party for the use of any item of the
Intellectual Property, All employees, independent contractors, or other persons
who have had access to or participated in the development of any of the
Intellectual Property owned by Company have signed appropriate confidentiality
and nondisclosure agreements and, in the case of independent contractors,
appropriate work-for-hire agreements and assignments, sufficient to protect
Company's ownership rights in the Intellectual Property and to prohibit the
unauthorized use or disclosure of same. All registrations and applications to
register the Intellectual Property in each of the countries in which any of the
same is registered are valid and subsisting in all respects and have been
properly maintained. No party has any claim to any moral rights with respect to
the Intellectual Property owned by Company.
(d) Litigation and Claims. Except as disclosed on SCHEDULE
------------------------ --------
4.12(d), there is no pending, or, to the knowledge of Company and Sellers,
-------
threatened suit, action, claim, arbitration, grievance, litigation, or
administrative, legal, or other proceeding or investigation against Company or
its licensors contesting the validity of, or Company's right to use, any of the
Intellectual Property,
(e) Licenses. Company has not granted any license or other right
---------
to use, in any manner, any item of Intellectual Property, whether or not
requiring the payment of royalties, and no third party has any right to use any
of the Intellectual Property owned by Company. Company has not licensed, leased,
sold, or otherwise transferred or disclosed the source code for any of the
Intellectual Property to any person or entity other than to Company's employees
and independent contractors pursuant to an agreement with such employees and
independent contractors protecting the intellectual property rights therein and
the nondisclosure thereof.
(f) Protection. Company has reasonably protected the Intellectual
-----------
Property as the proprietary property and trade secrets of Company. There has not
been any default under any confidentiality agreement regarding the use and
disclosure of the Intellectual Property.
17
(g) Infringement.
------------
(i) To Company's and Sellers' knowledge, no third party is
(A) infringing upon all or any portion of the Intellectual Property, or (B)
using all or any portion of the Intellectual Property in derogation of any
rights acquired by Parent under this Agreement.
(ii) There is no interference action or other litigation
pending or, to Company's or Sellers' knowledge, threatened before any
Governmental Entity (including, without limitation, the United States Patent and
Trademark Office or corresponding governmental entities in foreign
jurisdictions) in regard to any of the Intellectual Property. For purposes of
this Agreement, "Governmental Entity" means (A) any nation, state, commonwealth,
-------------------
county, city, town, village, district, or other jurisdiction of any nature, (B)
any federal, state, local, municipal, foreign, or other government, (C) any
federal, state, local, or foreign governmental or quasi-governmental authority
of any nature (including any agency, branch, department, board, commission,
court, or tribunal), (D) any multinational or supranational organization or
body, (E) any body exercising, or entitled or purporting to exercise, any
administrative, executive, judicial, legislative, police, regulatory, or taxing
authority or power, including any court or arbitrator, (F) any self-regulatory
organization, or (G) any official of any of the foregoing.
(iii) None of the Intellectual Property infringes any
copyright, trademark, patent, trade secret, or other right of any third party.
Company has not received notice of infringement upon, misappropriation of, or
conflict with any asserted right of any third party.
(iv) The inception, development, and reduction to practice of
the Intellectual Property have not constituted or involved, and do not
constitute or involve, the misappropriation of trade secrets or other rights of
any other person or entity (including, without limitation, any Governmental
Entity).
4.13 LITIGATION. SCHEDULE 4.13 (a) sets forth all litigation, claims,
----------- --------------
suits, actions, investigations, indictments, informations, proceedings,
arbitrations, grievances, or other procedures (including grand jury
investigations, actions, or proceedings, and product liability and workers'
compensation suits, actions, or proceedings) pending or, to the knowledge of
Company or Sellers, threatened, before any court, commission, arbitration
tribunal, or judicial, governmental, or administrative department, body, agency,
administrator, official, grand jury, or other forum for the resolution of
grievances, against Company or involving any of Company's property or Business,
and (b) indicates which of such matters are being defended by an insurance
carrier and which of the matters being so defended are being defended under a
reservation of rights. Further, except as set forth on SCHEDULE 4.13, there are
-------------
no judgments, orders, writs, injunctions, decrees, indictments, informations,
grand jury subpoenas, civil investigative demands, plea agreements,
stipulations, or awards (whether rendered by a court, commission, arbitration
tribunal, judicial, governmental, or administrative department, body, agency,
administrator, or official, grand jury, or other forum for the resolution of
grievances) against or relating to Company or involving any of Company's
property or Business. To Company's knowledge, there is no claim by any person or
any governmental or administrative authority that the operations of Company or
tenants of Company with respect to the Business are causing
18
harmful interference or otherwise are disrupting the operations of any
authorized user of the radio spectrum. Company has made available to Parent
true, correct, and complete copies of pleadings, briefs, and other documents
filed in each pending litigation, claim, suit, action, investigation,
indictment, information, proceeding, arbitration, grievance, or other procedure
required to be listed on SCHEDULE 4.13, and the judgments, orders, writs,
--------------
injunctions, decrees, indictments, informations, grand jury subpoenas, civil
investigative demands, plea agreements, stipulations, and awards required to be
listed on said Schedule.
4.14 EMPLOYEES AND INDEPENDENT CONTRACTORS.
----------------------------------------
(A) SCHEDULE 4.14(a) sets forth the names and current compensation
----------------
(specifying salary, fees, bonuses, and commissions, as applicable) of all
employees and independent contractors of Company, together with the date and
amount of the last increase in compensation for each such person. The employment
of each of Company's employees and independent contractors is terminable at
will. Company has provided Parent with accurate and complete copies of all
employee manuals and handbooks, disclosure materials, policy statements,
independent contractor agreements, and other materials relating to the
employment of the current and former employees and independent contractors of
Company. To the knowledge of Company and Sellers, no employee or independent
contractor of Company or any affiliate (i) intends to terminate her or his
employment relationship with Company as a result of the transactions
contemplated herein or otherwise, (ii) is considering or has received an offer
to establish or to join a business that may be competitive with Company's
Business, or (iii) is a party to or is bound by any confidentiality agreement,
noncompetition agreement, or other contract (with any person) that may have an
adverse effect on (A) the performance by such employee of any of her or his
duties or responsibilities to Company, or (B) Company's Business or operations.
(b) Company has conducted a thorough review of its
employment-related records and has verified that each Foreign National employee
of Company is authorized to be present and employed in the United States. In
addition, except as disclosed on SCHEDULE 4.14(B), Company is in full compliance
----------------
with all applicable laws, regulations, judgments, and other requirements
relating to the regulation of Foreign Nationals in the United States, including,
without limitation, those items relating to the employment and compensation of
Foreign Nationals in the United States. Moreover, there are no unresolved past,
pending, or threatened administrative, regulatory, or judicial actions,
proceedings, investigations, obligations, liabilities, losses, decrees,
judgments, penalties, fines, fees, demands, demand letters, orders, directives,
claims, or notices of noncompliance or violation relating in any way to Company
or Company's operations in connection with Company's employment of Foreign
Nationals. As used herein, the term "Foreign National" means a person who is not
----------------
a citizen of the United States of America.
(c) All persons who have at any time been classified as
consultants, independent contractors, or service providers, other than employees
of Company, including those consultants designated as "senior consultants"
(collectively, the "Independent Contractors") have been properly so classified
-----------------------
and excluded from classification as employees in accordance with all applicable
laws, including the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and the Code, and in accordance with the terms of each Employee
-----
Benefit Plan. Company has complied with all applicable laws with respect to
employment, taxes, and tax reports associated with the Independent Contractors.
None of the current or former Independent
19
Contractors of Company could be reclassified as an employee of Company. No
Independent Contractor is eligible to participate in or to receive benefits
under any Employee Benefit Plan (within the meaning of the Section 4.15 of this
Agreement),
4.15 EMPLOYEE BENEFITS.
-------------------
(a) All Employee Benefit Plans and Arrangements.
-------------------------------------------------
(i) List and Description of Plans and Arrangements.
----------------------------------------------------
SCHEDULE 4.15(a)(i) sets forth a complete and accurate list and description of
-------------------
all agreements, arrangements, commitments, policies, or understandings of any
kind (whether written or oral) (A) which relate to employee benefits, (B) which
pertain to any foreign or domestic present or former employees, retirees,
officers, directors, consultants, or independent contractors (or their
beneficiaries, dependents, or spouses) of Company or its predecessors in
interest (whether or not incorporated), and (C) which are currently or expected
to be adopted, maintained by, sponsored by, or contributed to by Company, any of
Company's predecessors in interest, or any employer which, under Section 414 of
the Code or Section 4001(a)(14) or (b) of ERISA, would constitute a single
employer with Company (a "Company Affiliate") or as to which Company, any of
-----------------
Company's predecessors in interest, or any Company Affiliate has any ongoing
liability or obligation whatsoever or could incur liability (collectively,
"Employee Benefit Plans"), including, but not limited to, all: (1) employee
------------------------
benefit plans as defined in Section 3(3) of ERISA, with specific disclosure of
-----
any plan that has ever involved, or could reasonably be expected to involve,
such liability under Title IV of ERISA or Section 412 of the Code; (2) other
deferred compensation, early retirement, incentive, profit-sharing, thrift,
stock ownership, stock appreciation rights, bonus, stock option, stock purchase,
welfare or vacation, or other nonqualified benefit plans or arrangements; and
(3) trusts, group annuity contracts, insurance policies, or other funding media
for the plans and arrangements described hereinabove.
(ii) Compliance With ERISA and the Code. Except as set forth
------------------------------------
on SCHEDULE 4.15(a)(ii), Company, its predecessors in interest, and all Company
---------------------
Affiliates have complied with all of their respective obligations with respect
to all Employee Benefit Plans (including, but not limited to, (A) filing or
distributing all reports or notices required by ERISA or the Code, and (B)
complying with all requirements of Part 6 of ERISA and Code Section 4980B) and
have maintained the Employee Benefit Plans in compliance with all applicable
laws and regulations (including, but not limited to, ERISA and the Code), No
party in interest or disqualified person (as defined in Section 3(14) of ERISA
and Section 4975 of the Code) has engaged in a transaction with respect to any
Employee Benefit Plan which could subject Company or any Company Affiliate,
directly or indirectly, to a material tax, penalty, or other material liability
for prohibited transactions under ERISA or Section 4975 of the Code. No
fiduciary of any Employee Benefit Plan has breached in any material respect, any
of the responsibilities or obligations imposed upon fiduciaries under Title I of
ERISA. All Employee Benefit Plans have been established and maintained
substantially in accordance with their terms and have been operated in
compliance in all material respects with all applicable legal requirements, and
may by their terms be amended and/or terminated at any time without the consent
of any other person, subject to applicable legal requirements and the terms of
each Employee Benefit Plan. Company and each Company Affiliate have performed
all material obligations required to be performed by them under, and not in any
material respect in default
20
under or in violation of, any Employee Benefit Plan, and Company and each
Company Affiliate have no knowledge of any default or violation by any other
person with respect to any Employee Benefit Plan. Each Employee Benefit Plan
which is intended to be qualified under Section 401(a) of the Code is the
subject of a favorable determination letter from the Internal Revenue Service as
to such plan's qualified status under Section 401(a) of the Code (or comparable
letter, such as an opinion or notification letter as to the form of plan adopted
by Company or Company Affiliate), and, to Company's knowledge, nothing has
occurred since the issuance of such letter which may reasonably be expected to
impair such favorable determination or otherwise impair the qualified status of
such plan. All contributions required to be made with respect to any Employee
Benefit Plan pursuant to Section 412 of the Code, or the terms of the Employee
Benefit Plan or any collective bargaining agreement, have been made on or before
their due dates (including any extensions thereof). No amendment to any Employee
Benefit Plan or related trust has been adopted since receipt of the most recent
determination letter issued with respect to the Employee Benefit Plan or related
trust which would cause disqualification of the Employee Benefit Plan or related
trust Neither Company nor any Company Affiliate sponsors, maintains, or has
direct or indirect liability under any "multiple employer welfare associate"
("MEWA") within the meaning of Section 3(40) of ERISA, or any plan of the type
----
described in Sections 4063 and 4064 of ERISA or in Section 413 of the Code (and
the regulations promulgated thereunder).
(iii) Copies of Documents Provided to Parent. Company has
-------------------------------------------
made available to Parent true, correct, and complete copies of all documents
relating to the Employee Benefit Plans that Parent has requested, including, but
not limited to: (A) each such written Employee Benefit Plan, including all
amendments thereto and all related trust instruments, and other agreements
adopted or entered into in connection with each of the Employee Benefit Plans;
(B) all insurance and annuity contracts related to any Employee Benefit Plan and
policies pertaining to liability insurance covering the fiduciaries for each
Employee Benefit Plan; (C) summary plan descriptions, summaries of material
modifications, registration statements (including all attachments), prospectuses
and communications distributed to plan participants, and the notices and
election forms used to notify employees and their dependents of their
continuation coverage rights under Company's group health plans (under Code
Section 4980B(f) and ERISA Section 606), if applicable; and (D) the three most
recently available Form 5500 annual reports, with accompanying schedules and
attachments, filed with respect to each Employee Benefit Plan required to make
such a filing, the most recent actuarial valuation for each Employee Benefit
Plan subject to Title IV of ERISA, the latest reports which have been filed with
the United States Department of Labor with respect to each Employee Benefit Plan
required to make such a filing, the most recent favorable determination letters
issued for each Employee Benefit Plan and related trust which is intended to be
qualified under Section 401(a) of the Code (and, if an application for such
determination is pending, a copy of the application for such determination),
financial and other information regarding current and projected liabilities with
respect to each Employee Benefit Plan for which the filings described in this
subsection (D) are not required under ERISA, and all correspondence between the
Internal Revenue Service and/or the Department of Labor and Company. Since the
date such documents were supplied to Parent, no plan amendments have been
adopted, no changes to the documents have been made, and no such amendments or
changes shall be adopted or made prior to the Closing Date.
21
(iv) Agreements To Create, Continue, or Terminate Plans.
--------------------------------------------------------
Neither the Company, its predecessors in interest nor any Company Affiliate has
any agreement, arrangement, commitment or understanding, whether legally binding
or not, to create any additional Employee Benefit Plan or to continue, modify,
change in any material respect, or terminate any existing Employee Benefit Plan.
(v) Agency Review, Taxes, and Fiduciary Liability. None of
-------------------------------------------------
the Employee Benefit Plans is currently under investigation, audit, or review by
the Department of Labor, the Internal Revenue Service, or any other federal or
state agency or is liable for any federal, state, local, or foreign taxes. There
is no transaction in connection with which Company, any Company Affiliate, or
any fiduciary of any of the Employee Benefit Plans could be subject to either a
civil penalty assessed pursuant to ERISA Section 502, a tax imposed by Code
Section 4975, or liability for a breach of fiduciary responsibility under ERISA.
(vi) Claims Against Plans and Fiduciaries. Other than routine
-------------------------------------
claims for benefits payable to participants or beneficiaries in accordance with
the terms of the Employee Benefit Plans, there are no claims, pending or
threatened, by any participant or beneficiary against any of the Employee
Benefit Plans or any fiduciary of any of the Employee Benefit Plan.
(vii) Insurance Reserves. The levels of insurance reserves
--------------------
and accrued liabilities with regard to all Employee Benefit Plans (to which such
reserves or liabilities do or should apply) are set forth on SCHEDULE
--------
4.15(a)(vii), and such levels are reasonable and sufficient to provide for all
------------
incurred but unreported claims and any retroactive or prospective premium
adjustments.
(viii) Retiree Welfare Benefits. Company, its predecessors in
-------------------------
interest, and Company Affiliates have not maintained an Employee Benefit Plan
providing group health, dental, vision, life insurance, or other welfare
benefits to employees following retirement or other separation from service
(other than continuation coverage to the extent required by law, whether
pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985 or
otherwise).
(b) Defined Benefit Plan Matters.
--------------------------------
(i) List of Defined Benefit Plans. SCHEDULE 4.15(b)(i)
--------------------------------- -------------------
identifies by name all of the Employee Benefit Plans that are pension plans
within the meaning of ERISA Section 3(2) which are subject to Title IV of ERISA
(the "Defined Benefit Plans"), and specifically identifies each of such Defined
---------------------
Benefit Plans that are multiemployer plans within the meaning of ERISA Section
3(37)(A) as multiemployer plans. There is no Defined Benefit Plan or
multiemployer plan maintained by any Company Affiliate under which Company
currently has or potentially may have any obligation or liability whatsoever,
including, but not limited to, any liability which would be identified by or
arise from the issues detailed in this subsection (b).
(ii) PBGC Premiums and Termination Liability. No liability to
----------------------------------------
the Pension Benefit Guaranty Corporation ("PBGC") has been incurred with respect
to the Defined Benefit Plans. All premiums due and payable to the PBGC with
respect to the Defined Benefit Plans have been paid in a timely manner. The PBGC
has not instituted proceedings to terminate any of the Defined Benefit Plans. No
event has occurred, and there exists no condition or set of
22
circumstances, which could result in the involuntary termination of any of the
Defined Benefit Plans by the PBGC pursuant to ERISA Section 4042. Moreover, even
if a Defined Benefit Plan were terminated voluntarily pursuant to ERISA Section
4041, neither the Company, its predecessors in interest nor any Company
Affiliate would have any liability to the PBGC as a result of the termination.
(iii) Reportable Events. With respect to each Employee
-------------------
Benefit Plan, no "reportable event" within the meaning of Section 4043 of ERISA
(excluding any such event for which the 30-day notice requirement has been
waived under the regulations to Section 4043 of ERISA) has occurred for which
there is any material outstanding liability to Company, nor would the
consummation of the transactions contemplated hereby (including the execution of
this Agreement) constitute a reportable event for which the 30-day notice
requirement has not been waived. Company has not incurred nor does it reasonably
expect to incur any material liability under Title IV of ERISA, including,
without limitation, any material liability arising out of or resulting from an
event described in Section 4041, 4062, or 4063 of ERISA (other than liability
for premium payments to the PBGC arising in the Ordinary Course of Business).
(iv) Full Funding on a Termination Basis. The current present
------------------------------------
value of all projected benefit obligations under each of the Defined Benefit
Plans did not, as of the latest valuation date, exceed the then-current value of
the assets allocable to such benefit liabilities, based on reasonable actuarial
assumptions currently used for such Defined Benefit Plan. In addition, each of
the Defined Benefit Plans is fully funded on a termination basis, such that the
net fair market value of the assets equals or exceeds the present value of the
accrued benefits under such Defined Benefit Plan, based upon the actuarial
assumptions required by the PBGC for determining benefits on a termination
basis. Nothing has occurred since the end of the most recently completed fiscal
year that would adversely affect the funding status of the Defined Benefit
Plans, and neither Company nor any Company Affiliate has knowledge or reason to
know of any such occurrence.
(v) No Accumulated Funding Deficiency. No accumulated funding
----------------------------------
deficiency as defined in Section 302(a)(2) of ERISA or Section 412 of the Code,
whether or not waived and regardless of the reason arising, exists with respect
to any Defined Benefit Plan, nor have any extensions of any amortization period
within the meaning of Section 302 of ERISA or Section 412 of the Code been
applied for with respect thereto,
(vi) Termination. None of the Defined Benefit Plans has been
------------
terminated or partially terminated, nor have there been any events which might
constitute grounds for such a termination or partial termination.
(vii) Effect of Transaction. Neither the consideration nor
------------------------
the implementation of the transactions contemplated under this Agreement will
increase or create (A) the liability of Company or any Company Affiliate, or
their obligation to make contributions or any other payments to fund benefits
accrued under the Employee Benefit Plans, or (B) the benefits accrued or payable
with respect to any participant under the Employee Benefit Plans. Each of the
Employee Benefit Plans may be amended or terminated at any time by action of the
plan sponsor's board of directors, a committee of such board of directors, or a
duly authorized
23
officer, in each case subject to the terms of the Employee Benefit Plan and
compliance with applicable legal requirements.
4.16 COLLECTIVE BARGAINING. Except as set forth on SCHEDULE 4.16, there
---------------------- --------------
are no labor contracts, collective bargaining agreements, letters of
understanding, or other arrangements, formal or informal, with any union or
labor organization covering any of Company's employees, and none of said
employees are represented by any union or labor organization. Company has made
available to Parent a true, correct, and complete copy of each agreement listed
on SCHEDULE 4.16. Except as set forth on SCHEDULE 4.16, Company is not the
--------------- --------------
subject of any collective bargaining or union organizing activity.
4.17 LABOR DISPUTES. Company is in compliance with all federal and
----------------
state laws respecting employment and employment practices and the terms and
conditions of employment, including wages and hours, labor relations, employment
discrimination, disability rights or benefits, equal opportunity, plan closure
or mass layoff issues, affirmative action, leaves of absence, occupational
health and safety, workers* compensation, and unemployment insurance. Company is
not and has not been engaged in any unfair labor practice, and no unfair labor
practice complaint against Company is pending before the National Labor
Relations Board. Neither Company nor any Seller knows or has reason to know of
any labor strike, slowdown, work stoppage, charges of discrimination, or other
labor trouble actually pending, being threatened against Company, or affecting
Company. Relations between management and labor are amicable, and there have not
been, nor are there presently, any attempts to organize non- union employees or
plans for any such attempts.
4.18 BANK ACCOUNTS. SCHEDULE 4.18 sets forth a complete and accurate
-------------- --------------
list of each bank or financial institution in which Company has an account or
safe deposit box (giving the address and account numbers) and the names of the
persons authorized to draw thereon or to have access thereto.
4.19 ENVIRONMENTAL MATTERS.
-----------------------
(a) For purposes of this Agreement, the following terms shall have
the following meanings:
(i) "Environmental Claims" shall mean any and all
---------------------
administrative, regulatory, or judicial actions, causes of action, suits,
investigations, obligations, liabilities, losses, proceedings, decrees,
judgments, penalties, fines, fees, demands, demand letters, orders, directives,
claims (including any claims involving liability in tort, strict, absolute, or
otherwise), liens, notices of noncompliance or violation, and legal and
consultant fees and costs of investigations or proceedings, relating in any way
to any Environmental Laws or the presence or Release (or alleged presence or
Release) into the environment of any Hazardous Material on, at, or from the Real
Property (hereinafter "Claims"), including, without limitation, and regardless
------
of the merit of such Claim, any and all Claims by any governmental or regulatory
authority or by any third party or other person for enforcement, mitigation,
cleanup, removal, response, remediation, or other actions or damages,
contribution, indemnification, cost recovery, compensation, or injunctive or
declaratory relief pursuant to any Environmental Laws or any alleged injury or
threat of injury to human health, safety, natural resources, or the environment.
24
(ii) "Environmental Laws" shall mean all present and future
-------------------
federal, state, and local laws, statutes, ordinances, regulations, codes,
policies, rules, directives, orders, decrees, permits, licenses, approvals,
authorizations, criteria, guidelines, covenants, deed restrictions, treaties,
conventions, and rules of common law now or hereafter in effect, and in each
case as amended, and any judicial or administrative judgment, opinion, or
interpretation thereof, relating to the regulation or protection of human
health, safety, natural resources, or the environment, including, without
limitation, laws and regulations (and all other items recited above) relating to
the use, treatment, storage, management, handling, manufacture, generation,
processing, recycling, distribution, transport, Release, or threatened Release
of or exposure to any Hazardous Material.
(iii) "Hazardous Materials" shall mean, collectively, any
--------------------
substance, material, product, derivative, compound, mixture, mineral, chemical
waste, medical waste, or gas, in each case whether naturally occurring,
human-made, or the by-product of any process, including, but not limited to,
petroleum or petroleum products (A) that is now or hereafter becomes defined or
included within the definition of a "hazardous substance," "hazardous waste,"
"hazardous material," "toxic chemical," "toxic substance," "hazardous chemical,"
"extremely hazardous substance," "pollutant," "contaminant," or any other words
of similar meaning under any Environmental Laws, (B) exposure to which or the
presence, use, generation, treatment, Release, transport, or storage of which is
now or hereafter prohibited, limited, restricted, or regulated under any
Environmental Laws or by any governmental or regulatory authority, or (C) that
could require investigation, response, or remediation, or could support the
assertion of any Environmental Claim.
(iv) "Release" shall mean the release, deposit, disposal, or
-------
leakage of any Hazardous Material at, into, upon, or under any land, water, or
air, or otherwise into the environment, including, without limitation, by means
of burial, disposal, discharge, emission, injection, spillage, leakage, seepage,
leaching, dumping, pumping, pouring, escaping, emptying, placement, and the
like.
(b) Except as disclosed on SCHEDULE 4.19(b):
------------------
(i) Company is in full compliance with all applicable
Environmental Laws.
(ii) Company has all permits, licenses, and other approvals
required under the Environmental Laws with respect to the Real Property and
Company's operations thereon.
(iii) There are no past, pending, or threatened Environmental
Claims relating to Company's operations or the Real Property.
(iv) Hazardous Materials have not at any time been present,
generated, used, treated, managed, recycled, stored, or Released at, on, in, or
under, or transported to or from, the Real Property.
25
(v) Hazardous Materials have not at any time been Released
at, on, in, or under any other property in the vicinity or area of the Real
Property.
(vi) There are not now and never have been any underground
storage tanks located at, on, or under the Real Property; there is no asbestos
contained in, forming part of, or contaminating any part of the Real Property;
and no polychlorinated biphenyls (PCBs) are used, stored, located at, or
contaminating any part of the Real Property.
(vii) There are no pending or threatened Environmental Claims
at any treatment, storage, or disposal facility that has received Hazardous
Materials from or generated at the Real Property.
(viii) There are no past or present facts, actions,
activities, circumstances, conditions, occurrences, events, or incidents,
including the Release or presence of Hazardous Materials, that could (A) form
the basis of an Environmental Claim against or involving Company or the Real
Property, (B) cause the Real Property to be subject to any restrictions or
affect its ownership, occupancy, use, or transferability under any applicable
Environmental Laws, (C) require the filing or recording of any notice or
restriction relating to the presence of Hazardous Materials in the real estate
records in the county or municipality in which the Real Property is located,
other than any customary disclosure requirements in connection with the transfer
of the Real Property, or (D) prevent or interfere with the construction,
operation, or maintenance of the Real Property.
4.20 REQUIRED LICENSES AND PERMITS. Company has all licenses, permits,
-------------------------------
or other authorizations of governmental authorities necessary for the conduct of
its Business. A correct and complete list of all such licenses, permits, and
other authorizations, including Federal Communications Commission authorizations
(collectively, the "Company Authorizations") is set forth on SCHEDULE 4.20.
----------------------- --------------
Company has made available to Parent true, correct, and complete copies of all
written Company Authorizations required to be listed on SCHEDULE 4.20.
---------------
4.21 INSURANCE POLICIES. SCHEDULE 4.21 sets forth a complete and
------------------- --------------
accurate list and description of all insurance policies in force naming Company,
or any employees thereof in their capacity as such, as an insured or beneficiary
or as a loss payable payee, or for which Company has paid or is obligated to pay
all or part of the premiums. Company has not received notice of any pending or
threatened termination or premium increase (retroactive or otherwise) with
respect thereto, and Company is in compliance with all conditions contained
therein. There have been no lapses (whether cured or not) in the coverage
provided under the insurance policies referenced herein and as set forth on
SCHEDULE 4.21 during the term of such policies, as extended or renewed. Company
--------------
has made available to Parent true, correct, and complete copies of each of the
policies required to be listed on SCHEDULE 4.21.
---------------
4.22 MAJOR SUPPLIERS AND CUSTOMERS. SCHEDULE 4.22 sets forth a list of
------------------------------ -------------
each supplier of goods or services to, and each customer of, Company to whom
Company paid or billed in the aggregate more than $1,000 during the 12-month
period ended DECEMBER 31, 2005, together, in each case, with the amount paid or
billed during such period. Company is not engaged in any dispute with any of
such suppliers or customers. Company does not know or have any reason to believe
that the consummation of the transactions contemplated hereunder
26
will have any adverse effect on the business relationship of Company with any
such supplier or customer.
4.23 CONTRACTS AND COMMITMENTS. Except as set forth on SCHEDULES
---------------------------- ---------
4.10(e) (Leases), 4.11 (Indebtedness), 4.12(b), (c), and (d) (Intellectual
------- ---- ------------------------
Property), 4.15(a)(i) (Employee Benefit Plans), 4.16 (Collective Bargaining
---------- ----
Agreements), 4.21 (Insurance Policies), and 4.23 (Contracts and Commitments):
---- ----
(a) Company does not have any agreement or contract that is
material to its Business, operations or prospects.
(b) No contracts or commitments of Company continue for a period
of more than six months from the date hereof or require payments, in the
aggregate, in excess of $5,000.
(c) Company does not have any outstanding contract, written or
oral, with any officer, employee, agent, consultant, advisor, salesperson,
manufacturer's representative, distributor, dealer, subcontractor, or broker
that is not cancelable by Company, on notice of not longer than 30 days and
without liability, penalty, or premium of any kind, except liabilities which
arise as a matter of law upon termination of employment, or any agreement or
arrangement providing for the payment of any bonus or commission based on sales
or earnings.
(d) Company is not under any liability or obligation under any
agreement pursuant to which third parties have been provided with products that
can be returned to Company or a Subsidiary in the event they are not sold and
which could involve a liability to Company of $1,000 or more in the aggregate.
(e) Company does not have (i) any outstanding loan or loan
commitment (excluding credit extended in the Ordinary Course of Business to
purchasers of inventory) to any person, or (ii) any factoring, credit line, or
subordination agreement.
(f) Except as noted on SCHEDULE 4.11 (Indebtedness) and except for
-------------
negotiable instruments in the process of collection, Company does not have any
power of attorney outstanding or any contract, commitment, or liability (whether
absolute, accrued, contingent, or otherwise), as guarantor, surety, co-signer,
endorser, co-maker, or indemnitor in respect of the contract or commitment of
any other person, corporation, partnership, joint venture, association,
organization, or entity.
(g) There are no contracts or agreements with any director,
officer, or shareholder of Company, or with any person related to any such
person, or with any company or other organization in which any director,
officer, or shareholder of Company, or anyone related to any such person, has a
direct or indirect financial interest.
(h) Company is not subject to any contract or agreement containing
covenants limiting the freedom of Company to compete in any line of business in
any geographic area or requiring Company to share any profits.
27
(i) There is no contract, agreement, or other arrangement
entitling any person or other entity to any profits, revenues, or cash flows of
Company or requiring any payments or other distributions based on such profits,
revenues, or cash flows.
(j) To the knowledge of Company and Sellers, Company is not a
party to or bound by any presently existing contract, agreement, or other
arrangement that has had or may in the future have a material adverse effect
upon the Business, earnings, or financial condition of Company.
Company has made available to Parent true, correct, and complete copies of all
contracts, agreements, plans, leases, policies, and licenses referred to, or
required to be referred to or listed on, any Schedule delivered hereunder.
4.24 AGREEMENTS IN FULL FORCE AND EFFECT. Except as expressly set forth
------------------------------------
on SCHEDULE 4.24, all contracts, agreements, plans, leases, policies, and
---------------
licenses referred to, or required to be referred to, on any Schedule delivered
hereunder are valid and binding, are in full force and effect, and are
enforceable in accordance with their terms, except to the extent that the
validity or enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, and other similar laws affecting creditors' rights generally.
Neither Company nor any Seller has any knowledge of any pending or threatened
bankruptcy, insolvency, or similar proceeding with respect to any party to such
agreements, and no event has occurred which (whether with or without notice,
lapse of time, or the happening or occurrence of any other event) would
constitute a default thereunder by Company or, to the knowledge of Company or
any Seller, any other party thereto.
4.25 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth in
-------------------------------------------
SCHEDULE 4.25, since the Interim Balance Sheet Date, Company has operated only
--------------
in the Ordinary Course of Business, and has not:
(a) Suffered any damage or destruction adversely affecting the
properties or Business of Company;
(b) Made any declaration, setting aside, or payment of any
dividend or other distribution of assets (whether in cash, stock, or property)
with respect to the capital stock of Company, or any direct or indirect
redemption, purchase, or other acquisition of such stock, or otherwise made any
payment of cash or any transfer of other assets, to any Seller or any Related
Company; or transferred any assets from any Subsidiary to Company, any other
Subsidiary, or any Related Company; or transferred any assets from any Related
Company to Company;
(c) Suffered any material adverse change in its working capital,
assets, liabilities, financial condition, Business prospects, or relationships
with any suppliers or customers listed on SCHEDULE 4.22;
---------------
(d) Except for customary increases based on term of service or
regular promotion of non-officer employees, increased (or announced any increase
in) the compensation payable or to become payable to any employee, or increased
(or announced any increase in) any bonus, insurance, pension, or other Employee
Benefit Plan, payment, or arrangement for such
28
employees, or entered into or amended any employment, consulting, severance, or
similar agreement;
(e) Incurred, assumed, or guaranteed any liability or obligation
(absolute, accrued, contingent, or otherwise) other than in the Ordinary Course
of Business;
(f) Paid, discharged, satisfied, or renewed any claim, liability,
or obligation other than payment in the Ordinary Course of Business;
(g) Permitted any of its assets to be subjected to any mortgage,
lien, security interest, restriction, charge, or other encumbrance of any kind
except for Permitted Liens;
(h) Cancelled or forgiven any indebtedness or otherwise waived any
material claims or rights;
(i) Sold, transferred, or otherwise disposed of any of its assets,
except in the Ordinary Course of Business;
(j) Made any single capital expenditure or investment in excess of
$1,000;
(k) Made any material change in any method, practice, or principle
of financial or tax accounting;
(1) Managed working capital components, including cash,
receivables, other current assets, trade payables, and other current liabilities
in a fashion inconsistent with past practice, including failing to sell
inventory and other property in an orderly and prudent manner or failing to make
all budgeted and other normal capital expenditures, repairs, improvements, and
dispositions;
(m) Paid, loaned, advanced, sold, transferred, or leased any asset
to any employee, except for normal compensation involving salary and benefits;
(n) Issued or sold any of its capital stock or issued any warrant,
option, or other right to purchase shares of its capital stock, or any security
convertible into its capital stock;
(o) Entered into any material commitment or transaction, other
than in the Ordinary Course of Business, affecting the Business; or
(p) Agreed in writing, or otherwise, to take any action described
in this Section.
4.26 ACCOUNTS RECEIVABLE.
---------------------
(a) All accounts receivable owed to Company by any director,
officer, shareholder, or employee of Company or any relative of any such person
(including those accounts receivable reflected on the Interim Balance Sheets and
incurred since the Interim
29
Balance Sheet Date) have been paid in full prior to the date hereof or shall
have been paid in full prior to the Closing Date.
(b) All accounts receivable of Company (i) are valid, existing,
and fully collectible (subject to an allowance for doubtful accounts in the
amount of $5,000) without resort to legal proceedings or collection agencies,
(ii) represent monies due for goods sold or services rendered in the Ordinary
Course of Business, and (iii) are not subject to any defenses, rights of setoff,
assignment, restrictions, security interests, or other encumbrances. Except as
shown on SCHEDULE 4.26(b), as of the date of such Schedule, all such accounts
----------------
receivable were current, and Company is not aware of any dispute regarding the
collectibility of any such accounts receivable. All reserves shown on the
Financial Statements were adequate as of such dates calculated consistent with
past practice.
4.27 TAX MATTERS.
-------------
(a) Definitions. For purposes of this Agreement, the following
-----------
definitions shall apply:
(i) The term "Taxes" shall mean all taxes, however
-----
denominated, including any interest, penalties, or other additions to tax that
may become payable in respect thereof, imposed by any federal, territorial,
state, local, or foreign government or any agency or political subdivision of
any such government, which taxes shall include, without limiting the generality
of the foregoing, all income or profits taxes (including, but not limited to,
federal income taxes and state income taxes), payroll and employee withholding
taxes, unemployment insurance, Social Security taxes, sales and use taxes, ad
valorem taxes, excise taxes, franchise taxes, gross receipts taxes, business
license taxes, occupation taxes, real and personal property taxes, stamp taxes,
environmental taxes, transfer taxes, workers' compensation charges, PBGC
premiums, and other governmental charges, and other obligations of the same or
of a similar nature to any of the foregoing, which Company is required to pay,
withhold, or collect.
(ii) The term "Returns" shall mean all reports, estimates,
-------
declarations of estimated Taxes, information statements, and returns relating
to, or required to be filed in connection with, any Taxes, including information
returns or reports with respect to backup withholding and other payments to
third parties.
(b) Returns Filed and Taxes Paid. Except as otherwise disclosed in
-----------------------------
SCHEDULE 4.27(b): (i) all Returns required to be filed by or on behalf of
-----------------
Company have been duly filed on a timely basis, and such Returns are true,
complete, and correct in all material respects; (ii) all Taxes shown to be
payable on the Returns or on subsequent assessments with respect thereto and all
other Taxes, whether or not shown as due on such Returns, have been paid in full
on a timely basis, and Company has made provision, in accordance with GAAP, for
all material Taxes accrued through the date of this Agreement; (iii) Company has
withheld and paid over all Taxes required to have been withheld and paid over,
and complied with all information reporting and backup withholding requirements,
including maintenance of required records with respect thereto, in connection
with amounts paid or owing to any employee, creditor, independent contractor, or
other third party; and (iv) there are no liens on any of the assets of Company
with respect to Taxes, other than liens for Taxes not yet due and payable or for
Taxes
30
that Company is contesting in good faith through appropriate proceedings and for
which appropriate reserves have been established, which contested Taxes are
disclosed in SCHEDULE 4.27(b).
-----------------
(c) Tax Deficiencies, Audits, and Statutes of Limitations. Except
-------------------------------------------------------
as otherwise disclosed in SCHEDULE 4.27(c): (i) the Returns of Company have
-----------------
never been audited by a government or taxing authority, nor is any such audit in
process, pending, or threatened (either in writing or verbally, formally or
informally); (ii) no deficiencies exist or have been asserted (either in writing
or verbally, formally or informally) or are expected to be asserted with respect
to the Taxes of Company, and Company has not received notice (either in writing
or verbally, formally or informally) and does not expect to receive notice that
it has not filed a Return or paid Taxes required to be filed or paid by Company;
(iii) Company is not a party to any action or proceeding for the assessment or
collection of Taxes, nor has such event been asserted or threatened (either in
writing or verbally, formally or informally) against Company or any of its
assets; (iv) no waiver or extension of any statute of limitations is in effect
with respect to the Taxes or Returns of Company; (v) Company has disclosed on
its federal income Tax Returns all positions taken therein that could give rise
to a substantial understatement penalty within the meaning of Code Section 6662;
and (vi) no claim has been made by any government or taxing authority in a
jurisdiction where Company does not file any Returns that it is or may be
subject to taxation in such jurisdiction.
(d) Tax-Sharing Agreements. Except as otherwise disclosed in
------------------------
SCHEDULE 4.27(d), Company is not (nor has it ever been) a party to any
-----------------
Tax-sharing agreement.
(e) Tax Elections and Special Tax Status. Company has not filed a
--------------------------------------
consent pursuant to the collapsible corporation provisions of Code Section
341(f). Company is not a party to any safe-harbor lease within the meaning of
Code Section 168(f)(8), as in effect prior to amendment by the Tax Equity and
Fiscal Responsibility Act of 1982. Company is not and has not been a United
States real property holding corporation within the meaning of Code Section
897(c)(l)(A)(ii) during the applicable period specified in Code Section
897(c)(l)(A)(ii), Company has not entered into any compensatory agreements with
respect to the performance of services for which payment thereunder would be a
nondeductible expense pursuant to Code Section 162(m) or 280G. Company is not a
party to any contract (written or oral), agreement, or other commitment under
which Company has an obligation (current or contingent) to compensate any person
for excise taxes paid pursuant to Section 4999 of the Code. Company has not been
a "distributing corporation" (within the meaning of Code Section 355(a)(l)(A))
within the three-year period ending as of the date of this Agreement. Company
has not participated in an international boycott as defined in Code Section 999.
Company has not agreed, nor is Company required, to make any adjustment under
Code Section 263A or 481(a) by reason of a change in accounting method or
otherwise. Company does not have a permanent establishment in any foreign
country, as defined in any applicable Tax treaty or convention between the
United States and such foreign country. Company is in compliance with the terms
and conditions of any applicable Tax exemptions, Tax agreements, or Tax orders
of any government to which it may be subject or which it may have claimed, and
the transactions contemplated by this Agreement will not have any adverse effect
on such compliance. Company is not a party to any transaction, understanding, or
arrangement treated as a Tax shelter under Code Section 611l(e) or
6662(d)(2)(C)(iii).
31
(f) S Corporation Status. Company has been a validly electing S
-----------------------
corporation within the meaning of Code Sections 1361 and 1362 at all times
during its existence, and Company will be an S corporation up to the
consummation of the Merger. Sellers make no representation or warranty
concerning the tax effects of the loss of S corporation status as a result of
the Merger.
4.28 BROKERAGE. No broker, agent, or finder has rendered services to
----------
Company or Sellers in connection with the transactions contemplated under this
Agreement. Company has not incurred any obligation or liability, contingent or
otherwise, for brokers' or finders' fees, agents' commissions, or other similar
payments in connection with this Agreement or the transactions contemplated
hereby.
4.29 DISCLOSURE. No representations, warranties, assurances, or
-----------
statements by any Seller or Company in this Agreement, and no statement
contained in any document (including the Financial Statements and the
Schedules), certificates, or other writings furnished or to be furnished by any
Seller or Company (or caused to be furnished by any Seller or Company) to Parent
or any of its representatives pursuant to the provisions hereof, contains or
will contain any untrue statement of material fact, or omits or will omit to
state any fact necessary, in light of the circumstances under which it was made,
in order to make the statements herein or therein not misleading in any material
respect.
4.30 TRANSFER OF LFC ENVIRONMENTAL, INC. ASSETS TO COMPANY. All
---------------------------------------------------------
assets, agreements and other arrangements formerly held or owned by LFC
Environmental, Inc. used for purposes of operating the Business have been
transferred to Company.
4.31 MERGER TAX REPRESENTATIONS.
-----------------------------
(a) The Merger will qualify as a statutory merger under the
applicable corporate laws of the state of Delaware;
(b) Company will pay its respective expenses, if any, incurred in
connection with the Merger.
(c) There is no intercorporate indebtedness existing between
Parent and Company or between Merger Sub and Company that was issued, was
acquired, or will be settled at a discount.
(d) Company is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
(e) The fair market value of the assets of Company will equal or
exceed the sum of the liabilities assumed by Merger Sub, plus the amount of
liabilities, if any, to which such assets of Company are subject.
(f) Company is not under the jurisdiction of a court in a Title 11
or similar case within the meaning of Section 368(a)(3)(A) of the Code,
32
(g) Except as otherwise set forth herein, no Seller is subject to
any obligation to sell, exchange, transfer, or dispose of all or any of the
shares of Parent Common Stock to be received in the Merger, and no Seller has
entered into any discussions or negotiations with regard to the possible sale,
exchange, transfer, or disposition of all or any of such shares,
(h) Neither Company nor any Seller intends to take a position on
any Return that is inconsistent with the treatment of the Merger as a
reorganization within the meaning of Section 368(a) of the Code.
ARTICLE V
----------
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
-------------------------------------------------------
Parent and Merger Sub hereby represent and warrant, jointly and severally,
to Company and Sellers as follows.
5.01 ORGANIZATION.
-------------
(a) Parent is a corporation duly organized, validly existing, and
in good standing under the laws of the state of its incorporation and has all
requisite corporate power and authority to carry on and conduct its business as
it is now being conducted, to own or lease its properties and assets, and to
effect the transactions contemplated hereunder. Parent is duly qualified and
in good standing in each jurisdiction in which the conduct of the Business of
Company or the ownership of its properties and assets requires it to be so
qualified, except where the failure to be so qualified or in such good standing,
or to have such power or authority when taken together with all other such
failures, is not reasonably likely to have a Parent Material Adverse Effect, As
used in this Agreement, the term "Parent Material Adverse Effect" means a
---------------------------------
material adverse effect on the financial condition, properties, business, or
results of operation of Parent and its subsidiaries taken as a whole; provided,
---------
however, that, when determining if a Parent Material Adverse Effect has
--------
occurred, the parties shall not consider any such effect resulting from any
change (i) in law, rule, or regulation, GAAP, or interpretations thereof that
applies to both Parent and Company, or (ii) in economic or business conditions
generally or in the cell tower management and environmental services industry
specifically.
(b) Merger Sub is a corporation duly organized, validly existing,
and in good standing under the laws of the state of its incorporation and has
all requisite corporate power and authority to effect the transactions
contemplated hereunder. Merger Sub is duly qualified and in good standing in
each jurisdiction where the ownership or operation of its assets or properties
or the conduct of its business requires such qualification.
(c) Parent has filed all forms, reports and documents required to
be filed by it with the SEC pursuant to the reporting requirements of the
Exchange Act during the twelve (12) months preceding the date of this Agreement
(the "SEC Reports"). As of their respective filing dates, Parent's SEC Reports
(a) were prepared in accordance with either the requirements of the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, as
the case may be, and the rules and regulations of the SEC promulgated
thereunder, and (b) did not, to the knowledge of the officers responsible for
such filings, at the time they were filed, or, if
33
amended, as of the date of such amendment, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading in any material
respect.
5.02 CAPITALIZATION OF MERGER SUB. The authorized capital stock of
--------------------------------
Merger Sub consists of 100 shares of common stock, par value $.01 per share, all
of which are validly issued and outstanding. All of the issued and outstanding
capital stock of Merger Sub is, and at the Effective Time will be, owned by
Parent. There are (a) no other shares of capital stock or voting securities of
Merger Sub, (b) no securities of Merger Sub convertible into or exchangeable for
shares of capital stock or voting securities of Merger Sub, and (c) no options
or other rights to acquire from Merger Sub, and no obligations of Merger Sub to
issue, any capital stock, voting securities, or securities convertible into or
exchangeable for capital stock or voting securities of Merger Sub, Merger Sub
has not conducted any business prior to the date hereof and has no, and prior to
the Effective Time will have no, assets, liabilities, or obligations of any
nature other than those incident to its formation and pursuant to this
Agreement, the Merger, and the other transactions contemplated by this
Agreement.
5.03 AUTHORIZATION.
--------------
(a) Each of Parent and Merger Sub has the right, power, and
capacity to execute, deliver, and perform this Agreement and to consummate, the
transactions contemplated hereby. The execution, delivery, and performance of
this Agreement, and the consummation of the transactions contemplated hereby,
have been duly and validly authorized by all necessary corporate action on the
part of Parent and Merger Sub. This Agreement has been duly and validly
executed and delivered by Parent and Merger Sub and constitutes each of Parent's
and Merger Sub's legal, valid, and binding obligation, enforceable in accordance
with its terms.
(b) Prior to the Effective Time, Parent will have taken all
necessary action to permit it to issue the number of shares of Parent Common
Stock required to be issued pursuant to Article II, The stock portion of the
Aggregate Merger Consideration, when issued, will be validly issued, fully paid,
and nonassessable, and no stockholder of Parent will have any preemptive right
of subscription or purchase in respect thereof.
5.04 NO CONFLICT. The execution and delivery of this Agreement by Parent
-----------
and Merger Sub, the consummation of the transactions contemplated herein, and
the performance of the covenants and agreements of Parent and Merger Sub will
not, with or without the giving of notice or the lapse of time, or both: (a)
violate or conflict with any of the provisions of any charter document or bylaw
of Parent or Merger Sub; (b) violate, conflict with, or result in breach or
default under, result in the acceleration of any obligations or the creation of
a lien, pledge, security interest, or other encumbrance on the assets of Parent
or Merger Sub pursuant to, or cause termination of any term or condition of any
mortgage, lease, indenture, note, contract, license, permit, instrument, trust
document, or other agreement, arrangement, obligation, document, or instrument
to which Parent or Merger Sub is a party or by which Parent or Merger Sub or any
of their respective properties may be bound; or (c) violate any provision of
law, statute, rule, regulation, court order, judgment, decree, or ruling of any
governmental authority,
34
to which Parent or Merger Sub is a party or by which Parent or Merger Sub or
their respective properties may be bound.
5.05 BROKERAGE. No broker, agent, or finder has rendered services to
----------
Parent or Merger Sub in connection with the transactions contemplated under this
Agreement.
5.06 PARENT SHARES. The shares of Parent Common Stock issuable to
---------------
Sellers hereunder will, upon issuance, (a) be fully paid and nonassessable, and
(b) be free and clear of any and all liens, claims, charges, encumbrances,
options, rights of refusal, voting proxies, or other voting agreements
whatsoever.
5.07 MERGER TAX REPRESENTATIONS.
-----------------------------
(a) Parent has no plan or intention to redeem, repurchase, or
otherwise reacquire any of the Parent Common Stock to be issued as part of the
Merger.
(b) Prior to the Closing, Parent or Merger Sub has not owned,
either directly or indirectly, any capital stock of Company.
(c) Merger Sub will acquire at least ninety percent (90%) of the
fair market value of the net assets and at least seventy percent (70%) of the
fair market value of the gross assets held by Company immediately prior to the
Merger,
(d) After the Closing, Merger Sub will either (i) continue
Company's historic Business, or (ii) use a significant portion of Company's
assets in a business.
(e) As a result of the Merger, Parent will be in control of Merger
Sub within the meaning of Section 368(c) of the Code.
(f) Following the Merger, Merger Sub will not issue additional
shares of its capital stock that would result in Parent losing control of Merger
Sub within the meaning of Section 368(c) of the Code.
(g) Parent has no plan or intention to liquidate Merger Sub; to
merge Merger Sub with and into another corporation; to sell or otherwise dispose
of any of the capital stock of Merger Sub; or to cause Merger Sub to sell or
otherwise dispose of any of the assets of Company acquired in the Merger, except
for dispositions made in the Ordinary Course of Business or transfers described
in Section 368(a)(2)(C) of the Code.
(h) Parent and Merger Sub will pay their respective expenses, if
any, incurred in connection with the Merger.
(i) There is no intercorporate indebtedness existing between
Parent and Company or between Merger Sub and Company that was issued, acquired,
or will be settled at a discount.
(j) Neither Parent nor Merger Sub is an investment company as
defined in Section 368(a)(2)(F)(iii) and (iv) of the Code.
35
(k) No stock of Merger Sub will be issued in the Merger.
ARTICLE VI
-----------
COVENANTS
---------
6.01 PRE-CLOSING OPERATIONS OF COMPANY. Company and Sellers hereby
-------------------------------------
covenant and agree that, except as consented to in writing by Parent, after the
date hereof and prior to the Effective Time, Company will operate and conduct
itself and any Subsidiary, and Sellers shall cause Company and any Subsidiary to
operate and conduct itself, only in the Ordinary Course of Business. Pursuant
thereto and not in limitation of the foregoing (for purposes of the following,
the word "Company" shall be deemed to include any Subsidiary), except as
otherwise expressly contemplated by this Agreement, after the date hereof and
prior to the Effective Time, Company shall:
(a) Use its commercially reasonable efforts to preserve intact the
goodwill and business organization of Company, keep the officers and employees
of Company available to Parent, and preserve the relationships and goodwill of
Company with customers, distributors, suppliers, employees, and other persons or
entities having Business relations with Company;
(b) Maintain its existence and good standing in its jurisdiction
of organization and in each jurisdiction listed on SCHEDULE 4.01(A);
------------------
(c) Duly and timely file or cause to be filed all reports and
Returns required to be filed with any Governmental Entity and promptly pay or
cause to be paid when due all Taxes, assessments, and governmental charges,
including interest and penalties levied or assessed, unless contested in good
faith by appropriate proceedings;
(d) Maintain in existing condition and repair (ordinary wear and
tear excepted), consistent with past practices, all buildings, offices, shops,
and other structures located on the Real Property, and all equipment, fixtures,
and other tangible personal property located on the Real Property;
(e) Not sell, issue, deliver, grant, or authorize the issuance,
delivery, or grant of any additional shares of its capital stock or securities
convertible into or exchangeable for shares of its capital stock, or issue or
grant any right, option, or other commitment for the issuance of shares of its
capital stock or of such securities, or split, combine or reclassify any shares
of its capital stock;
(f) Not amend or modify its charter documents or bylaws;
(g) Not declare any dividend, pay or set aside for payment any
dividend or other distribution, or make any payment to any Seller, officer, or
director, or any person or entity with whom any such Seller, officer, or
director has any direct or indirect relation, other than the payment of salaries
in the Ordinary Course of Business;
36
(h) Not create any subsidiary, acquire any capital stock or other
equity securities of any corporation, or acquire any equity or ownership
interest in any business or entity;
(i) Not dispose of or permit to lapse any ownership and/or right
to the use of any patent, trademark, trade name, service ▇▇▇▇, license, or
copyright of Company (including any of the Intellectual Property), or dispose of
or disclose to any person or entity any trade secret, formula, process,
technology, or know-how of Company not heretofore a matter of public knowledge;
(j) Protect, defend, and maintain the ownership, validity, and
registration of the Intellectual Property, and not allow any of the registered
Intellectual Property to be abandoned, forfeited, cancelled, expunged, and/or
dedicated to the public;
(k) Not (i) sell any asset of Company, other than in the Ordinary
Course of Business, (ii) create, incur or assume any indebtedness secured by the
assets of Company, (iii) grant, create, incur, or suffer to exist any lien or
encumbrance on the assets of Company that did not exist on the date hereof, (iv)
incur any liability or obligation (absolute, accrued, or contingent), except in
the Ordinary Course of Business, (v) write off any guaranteed check, note, or
account receivable, except in the Ordinary Course of Business, (vi) write down
the value of any asset or investment (including any asset of Company) on the
books or records of Company, except for depreciation and amortization in the
Ordinary Course of Business, (vii) cancel any debt or waive any claim or right,
(viii) make any commitment for any capital expenditure to be made on or
following the date hereof in excess of $1,000 in the case of any single
expenditure or $5,000 in the case of all capital expenditures, (ix) enter into
any contract or commitment which cannot be cancelled by Company on notice of not
longer than 30 days and without liability or penalty of any kind, or (x) enter
into any contract or commitment which imposes, or purports to impose, any
obligations or restrictions on any affiliate of Company;
(l) Not increase in any manner the compensation or fringe benefits
of, or enter into any new bonus or incentive agreement or arrangement with, any
of its employees, officers, directors, or consultants, except in the Ordinary
Course of Business, or hire any new employee or independent contractor having an
annual income in excess of $5,000; provided, however, that Company shall not
take any action described in this Section 6.01(1) with respect to (i) any
manager, officer, or director of Company, or (ii) any person whose annualized
compensation is $50,000 or more or whose annual compensation for the 12-month
period following the Closing Date is expected to be $50,000 or more;
(m) Not pay or agree to pay any additional pension, retirement
allowance, or other employee benefit under any Employee Benefit Plan to any of
its employees or consultants, whether past or present, except in the Ordinary
Course of Business; provided, however, that Company shall not take any action
described in this Section 6.0l(m) with respect to (i) any manager, officer, or
director of Company, or (ii) any person whose annualized compensation is $50,000
or more or whose annual compensation for the 12-month period following the
Closing Date is expected to be $50,000 or more;
37
(n) Except as required by applicable laws, not establish, adopt,
amend, or terminate any Employee Benefit Plan, or increase the benefits provided
under any Employee Benefit Plan, or promise or commit to undertake any of the
foregoing in the future, or pay any bonus or make any profit-sharing or similar
payment to, or increase the amount of the wages, salary, commissions, fringe
benefits, or other compensation or remuneration payable to, any of its executive
officers;
(o) Not enter into, adopt, or amend any collective bargaining
agreement;
(p) Not enter into any employment agreement (except for those
contemplated under this Agreement);
(q) Not settle or compromise any legal proceedings related to or
in connection with Company or its Business;
(r) Maintain supplies and inventory at levels that are in the
Ordinary Course of Business;
(s) Continue to extend customers credit, collect accounts
receivable, and pay accounts payable and similar obligations in the Ordinary
Course of Business;
(t) Perform in all material respects all of its obligations under
all contracts and commitments, and not default or suffer to exist any event or
condition that, with notice or lapse of time or both, could constitute a default
under any such contracts or commitments (except those being contested in good
faith), and not enter into, assume, or amend any contract or commitment other
than in the Ordinary Course of Business;
(u) Not pay, discharge, or satisfy any claim, liability, or
obligation (absolute, contingent, or otherwise) other than the payment,
discharge, or satisfaction in the Ordinary Course of Business of claims,
liabilities, and obligations reflected or reserved against in the Interim
Balance Sheet or incurred in the Ordinary Course of Business;
(v) Not increase any reserves for contingent liabilities
(excluding any adjustment to bad debt reserves in the Ordinary Course of
Business);
(w) Maintain in full force and effect and in the same amounts
policies of insurance comparable in amount and scope of coverage to those
maintained as of the date hereof by or on behalf of Company;
(x) Continue to maintain its books and records in accordance with
GAAP consistently applied and on a basis consistent with past practice;
(y) Continue its cash management practices in the Ordinary Course
of Business; or
(z) Not authorize, or commit or agree to take, any of the
foregoing actions, which Company is required not to take without Parent's prior
written consent.
38
In connection with the continued operation of Company during the period
commencing on the date hereof and ending on the Closing Date, Company and
Sellers shall confer in good faith on a regular and frequent basis with Parent
regarding operational matters and the general status of the ongoing operations
of Company. Company and Sellers hereby acknowledge that Parent does not and
shall not waive any right it may have hereunder solely as a result of such
consultations. Neither Company nor Sellers shall take any action that would, or
that could reasonably be expected to, result in any representation or warranty
of Company or Sellers set forth herein becoming untrue.
6.02 ACCESS. From the date of this Agreement through the Closing
-------
Date: Company shall (a) provide Parent and its designees (e.g., officers,
counsel, accountants, actuaries, and other authorized representatives) with such
information as Parent or its designees may from time to time reasonably request
with respect to Company and the transactions contemplated by this Agreement; (b)
provide Parent and its designees access during regular business hours and upon
reasonable notice to the books, records, offices, personnel, counsel,
accountants, and actuaries of Company, as Parent or its designees may from time
to time reasonably request; and (c) permit Parent and its designees to make such
inspections thereof as Parent may reasonably request. Any investigation shall be
conducted in such a manner so as not to interfere unreasonably with the
operation of the Business of Company. No such investigation shall limit or
modify in any way Company's or Sellers' obligations with respect to any breach
of their representations, warranties, covenants, or agreements contained herein.
6.03 INTERIM FINANCIALS. As promptly as practicable following each
--------------------
calendar month prior to the Closing Date, Company shall deliver to Parent
periodic financial reports in the form that it customarily prepares for its
internal purposes concerning Company and, if available, unaudited statements of
the financial position of Company as of the last day of such calendar month,
along with statements of income and changes in the financial position of Company
for the calendar month then ended. Company and Sellers covenant that such
interim statements (a)shall present fairly the financial condition of Company as
of their respective dates and the related results of Company's operations for
the respective calendar month then ended, and (b) shall be prepared on a basis
consistent with prior interim periods.
6.04 TRANSFER TAXES. All sales or transfer taxes, including but not
----------------
limited to, stock transfer taxes, document recording fees, real property
transfer taxes, and excise taxes, arising out of or in connection with the
consummation of the transactions contemplated hereby shall be paid by Sellers.
The parties shall cooperate in the preparation, execution and filing of all
returns, questionnaires, applications, and other documents regarding any of such
taxes and all transfer, recording, registration, and other fees that become
payable in connection with the transactions contemplated hereby that are
required or permitted to be filed at or prior to the Closing.
6.05 PREPARATION OF SUPPORTING DOCUMENTS. In addition to such actions
--------------------------------------
as Company may otherwise be required to take under this Agreement or applicable
law to consummate this Agreement and the transactions contemplated hereby,
Company and Sellers shall take such action, shall furnish such information, and
shall prepare, or cooperate in preparing, and execute and deliver such
certificates, agreements, and other instruments as Parent may reasonably request
from time to time, before, at, or, after the Closing, with respect to compliance
with the obligations of Parent, Company, and Sellers in connection with the
transactions contemplated
39
hereunder. To the extent any action requested by Parent after the Closing is not
contemplated under the terms of this Agreement or its corresponding exhibits,
schedules, or other attachments, Parent shall pay the Company's or Sellers*
reasonable expenses in connection therewith. Any information so furnished by
Company or Sellers shall be true, correct, and complete in all material respects
and shall not contain any 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.
6.06 NOTICES OF CERTAIN EVENTS. Company and Sellers shall promptly
-----------------------------
notify Parent of:
(a) Any fact, condition, change, or event that, individually or in
the aggregate, results in any representation or warranty of Company or Sellers
hereunder being inaccurate in any respect as of the date of such fact,
condition, change, or event, had such representation or warranty been made as of
such date;
(b) Any fact, condition, change, or event that causes or
constitutes a breach of any of the representations or warranties of Company or
Sellers hereunder made as of the date hereof;
(c) Any notice or other communication from any person or entity
alleging that the consent of such person or entity is or may be required in
connection with the transactions contemplated hereby;
(d) Any notice or other communication from or to any Governmental
Entity in connection with the transactions contemplated hereby;
(e) Any action, suit, claim, investigation, or proceeding
commenced or, to Company's knowledge, threatened against, relating to,
involving, or otherwise affecting Company or its Business that, if pending on
the date hereof, would have been required to have been disclosed pursuant to
Section 4.13 or that relates to the consummation of the transactions
contemplated hereby; or
(f) (i) The damage or destruction by fire or other casualty of any
asset of Company or any part thereof, or (ii) any asset of Company or any part
thereof becoming the subject of any proceeding (or, to the knowledge of Company
or Sellers, threatened proceeding) for the taking thereof or of any right
relating thereto by condemnation, eminent domain, or other similar governmental
action.
Company and Sellers hereby acknowledge that Parent does not and shall not waive
any right it may have hereunder solely as a result of such notifications, and
any notification given pursuant to this Section 6.06 shall (A) not have any
effect for purposes of determining satisfaction of the conditions set forth in
Article IX of this Agreement, (B) be disregarded for purposes of determining the
obligations of Sellers under Article X hereof, and (C) not in any way limit
Parent's exercise of its rights hereunder.
40
6.07 SUPPLEMENTS TO SCHEDULES. From time to time up to the Closing
------------------------
Date, Company and Sellers shall promptly supplement or amend the Schedules to
this Agreement with respect to any matter (a) first existing or occurring after
the date hereof which, if existing or occurring at or prior to such date, would
have been required to be set forth in any of the Schedules to this Agreement, or
(b) that is necessary to correct any information in such Schedules that is
inaccurate on account thereof. No supplement or amendment to the Schedules shall
have any effect for purposes of determining satisfaction of the conditions set
forth in Article IX of this Agreement unless such supplement is accepted by
Parent in writing in its sole discretion. Any information contained in any such
supplement or amendment shall be disregarded for purposes of determining the
obligations of Company and Sellers under Article X hereof.
6.08 NOSOLICITATION OF TRANSACTIONS. Neither Company nor any of
---------------------------------
Sellers shall, directly or indirectly, through any officer, director, manager,
or agent of any of them or otherwise, initiate, solicit or encourage (including
by way of furnishing nonpublic information or assistance), or enter into
negotiations of any type for, directly or indirectly, or enter into a
confidentiality agreement, letter of intent, or other similar contract or
commitment with any person or entity other than Parent with respect to a sale,
of all or any substantial portion of the assets of Company, or a merger,
consolidation, business combination, sale of all or any substantial portion of
the capital stock of Company, or liquidation or similar extraordinary
transaction with respect to Company. Company and Sellers shall notify Parent
orally (within two business days) and in writing (as promptly as practicable) of
all relevant terms of any inquiry or proposal by a third party to do any of the
foregoing that Company, any of Sellers, or any of their respective officers,
directors, partners, managers, employees, investment bankers, financial
advisors, attorneys, accountants, or other representatives may receive relating
to any of such matters. In the event such inquiry or proposal is in writing,
Company and Sellers shall deliver to Parent a copy of such inquiry or proposal
together with such written notice.
6.09 FILINGS, OTHER ACTIONS, AND NOTIFICATION.
---------------------------------------------
(a) Parent and Merger Sub and Company and its Subsidiaries shall
cooperate with each other and use their respective best efforts to take or cause
to be taken all actions, and do or cause to be done all things, necessary,
proper, or advisable on their respective parts under this Agreement and
applicable laws to consummate and make effective the Merger and the other
transactions contemplated by this Agreement as soon as practicable, including
preparing and filing as promptly as practicable all documentation to effect all
necessary notices, reports, and other filings and to obtain as promptly as
practicable all consents, registrations, approvals, permits, and authorizations
necessary or advisable to be obtained from any third party and/or any
Governmental Entity in order to consummate the Merger or any of the other
transactions contemplated by this Agreement. Subject to applicable laws relating
to the exchange of information, Parent and Company shall have the right to
review in advance, and to the extent practicable each will consult the other on,
all the information relating to Parent and Merger Sub or Company and its
Subsidiaries, as the case may be, that appear in any filing made with, or
written materials submitted to, any third party and/or any Governmental Entity
in connection with the Merger and the other transactions contemplated by this
Agreement. In exercising the foregoing right, each of Parent and Company shall
act reasonably and as promptly as practicable.
41
(b) Parent and Company each shall keep the other apprised of the
status of matters relating to completion of the transactions contemplated
hereby, including promptly furnishing the other with copies of notices or other
communications received by Parent and Merger Sub or Company and its
Subsidiaries, as the case may be, from any third party and/or any Governmental
Entity with respect to the Merger and the other transactions contemplated by
this Agreement.
6.10 CONFIDENTIALITY. Company and each Seller shall hold in confidence
----------------
at all times following the date hereof all Confidential Information and shall
not disclose, publish, or make use of the Confidential Information at any time
following the date hereof without the prior written consent of Parent, except as
required by law or court order. In the event that Company or Sellers shall be
required (by deposition, interrogatory, request for documents, subpoena, civil
investigate demand, or similar process) to disclose any of the Confidential
Information, Company and Sellers shall provide the Parent with prompt prior
written notice of such requirement, and agree to furnish only that portion of
the Confidential Information which Company or Sellers are advised by written
opinion of counsel is legally required, and Company and Sellers shall use their
best efforts to obtain reliable assurance that confidential treatment will be
accorded such Confidential Information. For purposes hereunder, "Confidential
------------
Information" shall mean any data or information of Company (including trade
-----------
secrets) that is not generally known to the public or competitors regarding (for
example and including, but not limited to): (a) Business process models; (b)
proprietary software; (c) research, development, products, services, marketing,
selling, Business plans, budgets, unpublished financial statements, licenses,
prices, costs, contracts, suppliers, customers, and customer lists; (d) the
identity, skills, and compensation of employees, contractors, and consultants;
(e) specialized training; (f) discoveries, developments, trade secrets,
processes, formulas, data, lists, and all other works of authorship, mask works,
ideas, concepts, know-how, designs, and techniques, whether or not any of the
foregoing is or are patentable, copyrightable, or registrable under any
intellectual property laws or industrial property laws in the United States or
elsewhere; and (g) such other information that may give Company a competitive
business advantage or the disclosure of which could be detrimental to the
interests of Company and from all of the relevant circumstances could reasonably
be assumed by any person or entity to be confidential and proprietary to
Company. Notwithstanding the foregoing, no data or information constitutes
Confidential Information if such data or information is publicly known and in
the public domain through means that do not involve a breach by Company or any
Seller of any covenant or obligation set forth in this Agreement.
6.11 TAXATION. Subject to Section 6.07, neither Parent nor Company
---------
shall take or cause to be taken any action, whether before or after the
Effective Time, that would disqualify the Merger as a "reorganization" within
the meaning of Section 368(a) of the Code,
6.12 AFFILIATES. On or prior to the Closing Date, Company shall deliver
-----------
to Parent a list of the names and addresses of those persons and entities who
are, in the opinion of Company, "affiliates" of Company within the meaning of
Rule 145 under the Securities Act. Company shall provide to Parent such
information and documents as Parent shall reasonably request for purposes of
preparing such list. There shall be added to such list the name and address of
any other person or entity subsequently identified by either Parent or Company
as a person or entity who may be deemed to be such an affiliate of Company;
provided, however, that no such person
42
or entity identified by Parent shall be added to the list of affiliates of
Company if Parent shall receive from Company an opinion of counsel reasonably
satisfactory to Parent to the effect that such person or entity is not such an
affiliate. Company shall exercise its best efforts to deliver or cause to be
delivered to Parent, from each affiliate of Company identified in the foregoing
list (as the same may be supplemented as aforesaid), a letter dated as of the
Closing Date substantially in the form attached as EXHIBIT 6.12 (the "Affiliate
------------ ---------
Letter"). The certificates representing Parent Common Stock received by such
------
affiliates shall bear a customary legend regarding applicable Securities Act
restrictions and the provisions of this Section 6.12,
6.13 PUBLICITY. The initial press release shall be a joint press
----------
release, and thereafter Parent and Sellers shall consult with each other prior
to issuing any press releases or otherwise making public announcements with
respect to the Merger and the other transactions contemplated by this
Agreement and prior to making any filings with any third party and/or any
Governmental Entity (including any national securities exchange or interdealer
quotation service) with respect thereto, except as may be required by law or by
obligations pursuant to any listing agreement with or rules of any national
securities exchange or interdealer quotation service.
6.14 BENEFITS. Parent agrees that during the period commencing on the
---------
Closing Date and ending on the first anniversary thereof, the employees of
Company will continue to be provided with benefits under employee benefit plans
(other than plans involving the issuance of Company Shares) that are not
substantially less favorable in the aggregate than those currently provided by
Company to such employees. To the extent disclosed in the Disclosure Schedules,
Parent shall, and shall cause the Surviving Corporation to, honor all employee
benefit obligations to current and former employees under the Employee Benefit
Plans and all employee severance plans (or policies) in existence on the date
hereof and all employment or severance agreements entered into by Company,
6.15 REGISTRATION RIGHTS.
---------------------
(a) Registration. On or prior to the 75th day after the Closing,
-------------
Parent shall prepare and file with the SEC a registration statement on Form
SB-2, or such other appropriate form for which Parent is then eligible in
accordance herewith (the "Registration Statement"), covering the resale of the
----------------------
Parent Common Stock to be issued pursuant to this Agreement at the Closing (the
"Registrable Securities") to the extent then registrable pursuant to the rules
-----------------------
and regulations of the SEC for an offering to be made on a continuous basis
pursuant to Rule 415. Only one Registration Statement shall be required
hereunder. To the extent any of the Registrable Securities may not be included
on the Registration Statement pursuant to the rules and regulations of the SEC,
as determined in the good faith judgment of Parent's counsel, then such
Registrable Securities shall not be included on such Registration Statement and
shall be entitled to the registration rights described as "Piggyback Rights" in
Section 6.15(c) below. Parent Common Stock issued pursuant to this Agreement
shall cease to be Registrable Securities if sold or transferred by Sellers to
any other person and, in any event, on and after such date when such Parent
Common Stock may be sold without volume restrictions pursuant to Rule 144(k)
under the Securities Act as determined by counsel to Parent pursuant to a
written opinion letter to such effect, addressed and acceptable to Parent's
transfer agent and the affected Sellers, Parent shall use its commercially
reasonable efforts to cause the Registration Statement
43
to be declared effective under the Securities Act as soon as practicable after
the 01ing thereof, but in any event on or prior to the 180th day after the
Closing Date. Further, Parent shall use its commercially reasonable efforts to
keep the Registration Statement continuously effective under the Securities Act,
subject to Section 6.15(b) below, for a period of one year following the Closing
Date.
(b) Suspension Rights. Notwithstanding anything herein to the
-------------------
contrary, Parent shall have the right to suspend the use of the Registration
Statement for a period not greater than 45 consecutive days and for not more
than 90 days in any 12-month period (the "Suspension Period"), if, in the good
-----------------
faith opinion of the Board of Directors of Parent, after consultation with
counsel, material, nonpublic information exists, including, without limitation,
the proposed acquisition or divestiture of assets by Parent or the existence of
pending material corporate developments, the public disclosure of which would be
necessary to cause the Registration Statement to be materially true and to
contain no material misstatements or omissions, and in each such case, where, in
the good-faith opinion of the Board of Directors of Parent, such disclosure
would be reasonably likely to have a material adverse effect on Parent or on the
proposed transaction or Parent requires time to prepare a post-effective
amendment to the Registration Statement in order to disclose such material
information, Parent shall give Sellers notice promptly upon knowledge that a
Suspension Period (without indicating the nature of such Suspension Period) may
occur and prompt written notice if a Suspension Period will occur, and such
notices must be acknowledged in writing by Sellers. During the pendency of
any Suspension Period, no holder of Parent Common Stock registered for resale on
such Registration Statement shall attempt any public resale of such securities
by the Registration Statement. Upon the conclusion of a Suspension Period,
Parent shall provide Sellers written notice that the Registration Statement is
again available for use.
(c) Piggyback Rights. In addition, each time Parent shall
------------------
determine to file a registration statement under the Securities Act (excluding a
registration on Form S-4 or S-8, or successor forms thereto, or a registration
statement on Form S-l or SB-2 covering solely an employee benefit plan) in
connection with the proposed offer and sale for money of any of its securities,
either for its own account or on behalf of any other security holder, Parent
shall give prompt written notice of such determination to Sellers. Sellers shall
provide a written request to Parent if they desire to participate in such
registration (the "Sellers Notice"), stating the number of shares of Parent
---------------
Common Stock then constituting Registrable Securities to be registered, and the
Sellers Notice must be given within ten days after the receipt by Sellers of
Parent's notice. Upon receipt of the Sellers Notice, except as expressly
provided otherwise in this Section 6.15(c), Parent shall cause all shares of
Parent Common Stock constituting Registrable Securities with respect to which
Sellers have requested registration to be included in such registration
statement and registered under the Securities Act, all to the extent requisite
to permit the sale or other disposition by Sellers of the Parent Common Stock to
be so registered. Parent shall have the right to withdraw and discontinue
registration pursuant to this Section 6.15(c) of the shares of Parent Common
Stock if at any time prior to the Closing Date of the registration statement,
the registration of the securities to be registered on behalf of Parent or any
other participating security holder is withdrawn or discontinued. If the
registration for which Parent gives written notice pursuant to this Section
6.15(c) is for a public offering involving an underwriting, Parent shall so
advise Sellers as a part of its written notice. In such event, the right
44
of Sellers to registration pursuant to this Section 6.15(c) shall be conditioned
upon Sellers' participation in such underwriting as selling stockholders
(including the execution and delivery of the applicable underwriting agreement)
and the inclusion of such Sellers' shares of Parent Common Stock in the
underwriting to the extent provided herein. Parent shall not be required to
include any of the shares of Parent Common Stock constituting Registrable
Securities in any registration statement to the extent the public offering
involves an underwriting and the managing underwriter thereof advises Parent in
writing that in their opinion the number of shares of Parent Common Stock
requested to be included exceeds the number that can be sold in such offering,
at a price reasonably related to fair market value. To the extent the managing
underwriter provides such advice and all securities other than securities to be
registered pursuant to this Section 6.15(c) are to be registered on behalf of
Parent, the shares of Parent Common Stock to be included pursuant to this
Section 6.15(c) shall be reduced pro rata, taking into account the number of
shares requested to be registered by each Seller in relation to the total number
of shares to be registered. To the extent the managing underwriter provides such
advice and shares of Parent Common Stock are to be included in such registration
statement on behalf of other participating stockholders as well as pursuant to
this Section 6.15(c), the shares to be included in such registration statement
shall be reduced, first, by reducing pro rata among such other selling
stockholders the number of shares to be registered on their behalf, taking into
account the number of shares requested to be registered by such other selling
stockholders in relation to the total number of shares to be registered and,
second, reducing pro rata the number of shares to be registered on behalf of
Seller pursuant to this Section 6.15(c), unless the agreement giving such other
selling stockholders the right to participate in such registration was entered
into prior to the date of this Agreement and provides for a different priority
of exclusion, in which event such other priority shall apply. Notwithstanding
anything herein to the contrary, Parent shall not be required to register
Registrable Securities pursuant to this Section 6.15(c) on any registration
statement prepared for the resale of securities where the right of the other
security holder to require such registration statement was contractually entered
into prior to the date of this Agreement, to the extent that such other security
holder has the right to exclude other holders of securities from such
registration statement.
(d) Procedure. If and whenever Parent is required by the
----------
provisions of this Section 6.15 to effect the registration of shares of
Registrable Securities under the Securities Act, Parent, at its expense and as
expeditiously as possible, shall, in accordance with the Securities Act and all
applicable rules and regulations, prepare and file with the SEC a registration
statement with respect to such securities. Parent shall use commercially
reasonable efforts to cause such registration statement to become and remain
effective to the extent required hereby and, during such period, shall prepare
and file with the SEC such amendments and supplements to such registration
statement and the prospectus contained therein as may be necessary to keep such
registration statement effective and such registration statement and prospectus
accurate and complete, subject to any Suspension Period pursuant to Section
6.15(b) hereof. Parent shall furnish to Sellers participating in such
registration and to the underwriters of securities being registered such number
of copies of the registration statement and each amendment and supplement
thereto, the preliminary prospectus, the final prospectus, and such other
documents as such underwriters and holders may reasonably request in order to
facilitate the public offering of such securities. In addition, Parent shall
otherwise take such other actions as are necessary and appropriate to effect any
such registration in compliance with all provisions of the Securities
45
Act and all applicable state securities laws, including, without limitation,
using its best efforts to register or qualify the securities covered by such
registration statement under such state securities or Blue Sky laws of such
jurisdictions as reasonably necessary to effect the sale thereof, and such other
actions as Sellers shall reasonably request (provided that Parent shall not be
required thereby to qualify to do business in such jurisdiction or consent,
generally, to the service of process therein). Parent shall promptly inform
Sellers of any and all correspondence between Parent and the SEC with respect to
such registration. Parent shall pay all expenses of any registration pursuant to
this Section 6.15; provided, however, that if the offering in connection with
which the securities are registered is an underwritten public offering, each
Seller shall pay any commissions or brokerage fees applicable to the shares of
Parent Common Stock registered on her or his behalf and in all events shall pay
the fees and costs of her or his counsel.
(e) Compliance. Sellers covenant and agree that they will comply
-----------
with the prospectus delivery requirements of the Securities Act as applicable to
them in connection with sales of Registrable Securities pursuant to a
registration statement under this Section 6.15.
(f) Seller Information. As a condition to the registration of any
-------------------
Registrable Securities under this Section 6.15, Parent may require each Seller
to furnish to Parent (i) a certified statement as to the number of shares of
Parent Common Stock then beneficially owned by such Seller and, if requested by
the SEC, the controlling person thereof, (ii) a description of any material
relationship between such Seller and Parent, its predecessors, or its affiliates
within the past three years, and (iii) such other information regarding Seller
as is required for such registration by the rules and regulations of the SEC.
6.16 RULE 144 EXEMPTIONS. Parent will use commercially reasonable
----------------------
efforts to file in a timely manner all reports required under the Exchange Act
in order to afford Sellers the benefits of Rule 144. Parent will cooperate with
Sellers, to the extent required from time to time, to enable Sellers to sell
their shares of Parent Common Stock without registration, within the limitations
of the exemptions provided by Rule 144.
6.17 DISSOLUTION OF LFC ENVIRONMENTAL, INC. Parent shall receive
--------------------------------------
evidence satisfactory to Parent that Sellers have used their best efforts to
cause LFC Environmental, Inc. to be dissolved as soon as practicably possible
following Closing.
6.18 BUSINESS OPERATION. During the period following the Closing
--------------------
through April 30, 2011, Parent will (i) in connection with the management of the
Business, employ management practices substantially consistent with the
management practices Parent employs with respect to its other businesses, (ii)
operate the Business in a commercially reasonable manner consistent with the
objective of maximizing the long term return of the Business, and (iii) refrain
from taking any action designed solely to prevent Sellers from having the right
to receive payments under Sections 2.03 and 2.04 of this Agreement.
46
ARTICLE VII
------------
CONDITIONS TO EACH PARTY'S OBLIGATION
-----------------------------------------
TO EFFECT THE MERGER
--------------------
The respective obligation of each party to effect the Merger is subject to
the satisfaction (or waiver) at or prior to the Effective Time of each of the
following conditions:
7.01 REGULATORY CONSENTS. Other than the filings provided for in
---------------------
Section 1.03, all notices, reports, and other filings required to be made prior
to the Effective Time by Parent and Merger Sub or Company and its Subsidiaries
with, and all consents, registrations, approvals, permits, and authorizations
required to be obtained prior to the Effective Time by Parent and Merger Sub or
Company and its Subsidiaries from, any Governmental Entity in connection with
the execution and delivery of this Agreement and the consummation of the Merger
and the other transactions contemplated hereby by Parent, Merger Sub, and
Company shall have been made or obtained (as the case may be), except where the
failure to make or to obtain them is not, individually or in the aggregate,
reasonably likely to have a Parent Material Adverse Effect or to provide a
reasonable basis to conclude that the parties hereto or any of their affiliates
or respective directors, officers, agents, advisors, or other representatives
would be subject to the risk of criminal or material financial liability.
7.02 LITIGATION. No court or Governmental Entity of competent
-----------
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, law, ordinance, rule, regulation, judgment, decree, injunction or other
order (whether temporary, preliminary or permanent) that is in effect and
restrains, enjoins or otherwise prohibits consummation of the Merger or the
other transactions contemplated by this Agreement.
7.03 STOCKHOLDER APPROVAL. This Agreement shall have been duly
----------------------
approved by the holders of the Company Shares and shall have been duly approved
by the sole stockholder of Merger Sub in accordance with applicable law and the
certificate of incorporation and bylaws of each such corporation,
ARTICLE VIII
-------------
CONDITIONS TO OBLIGATIONS OF COMPANY AND SELLERS
------------------------------------------------
The obligation of Company and Sellers to effect the Merger is subject to
the satisfaction (or waiver by Company and Sellers) at or prior to the Effective
Time of each of the following conditions.
47
8.01 REPRESENTATIONS AND WARRANTIES TRUE AND CORRECT AT CLOSING DATE.
------------------------------------------------------------------
Each of Parent's and Merger Sub's representations and warranties contained in
this Agreement that are qualified by materiality shall be true and correct in
all respects, and each of Parent's and Merger Sub's representations and
warranties contained in this Agreement that are not so qualified shall be true
and correct in all material respects, in each case as of the date of this
Agreement and on and as of the Closing Date, with the same force and effect as
though made on and as of such date (except to the extent any such representation
or warranty expressly speaks as of an earlier date).
8.02 PERFORMANCE OF OBLIGATIONS. Each of Parent and Merger Sub shall
---------------------------
have performed and complied in all material respects with the respective
covenants and agreements set forth herein to be performed or complied with by
each of them on or before the Closing Date.
8.03 CERTIFICATE OF MERGER. Merger Sub shall have executed and
------------------------
delivered the Texas Certificate of Merger and the Delaware Certificate of Merger
in accordance with Section 1.03 hereof.
8.04 CERTIFICATES. Parent shall have delivered to Sellers:
-------------
(a) Certificates of the Secretary or Assistant Secretary of Parent
(i) attaching and certifying copies of the resolutions of Parent's Board of
Directors authorizing the execution, delivery, and performance of this Agreement
and the other documents, instruments, and certifications required or
contemplated hereby, (ii) certifying the name, title, and true signature of each
officer of Parent executing or authorized to execute this Agreement and the
other documents, instruments, and certifications required or contemplated
hereby, and (iii) attaching and certifying a true, correct, and complete copy of
the bylaws of Parent.
(b) Copies of the certificate of incorporation of Parent certified
by the Secretary of State of the jurisdiction of its incorporation and by
Parent's Secretary or Assistant Secretary, together with a certificate of good
standing or existence as may be available from the Secretary of State of its
jurisdiction of incorporation.
8.05 ALL OTHER DOCUMENTS. Parent shall have delivered to Company and
----------------------
Sellers all other documents to be entered into by Parent pursuant to this
Agreement at or prior to Closing.
ARTICLE IX
-----------
CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUB
--------------------------------------------------
The obligations of Parent and Merger Sub to effect the Merger are subject
to the satisfaction (or waiver by Parent) at or prior to the Effective Time of
each of the following conditions.
9.01 REPRESENTATIONS AND WARRANTIES TRUE AND CORRECT AT CLOSING DATE.
------------------------------------------------------------------
Each of the representations and warranties of Company and Sellers contained in
this Agreement that are qualified by materiality shall be true and correct in
all respects, and each of Company's and Sellers' representations and warranties
contained in this Agreement that are not so qualified shall be true and correct
in all material respects, in each case as of the date of this Agreement and on
48
and as of the Closing Date, with the same force and effect as though made on and
as of such date (except to the extent any such representation or warranty
expressly speaks as of an earlier date),
9.02 PERFORMANCE OBLIGATIONS. Company and Sellers shall have
-------------------------
performed and complied in all material respects with the covenants and
agreements set forth herein to be performed or complied with by them on or
before the Closing Date.
9.03 NO MATERIAL CHANGE. Between the date hereof and the Closing Date,
-------------------
Company shall not have suffered any material adverse change, or any occurrence
reasonably likely to result in a material adverse change (whether or not such
change is referred to or described in any Schedule), in its Business, prospects,
financial condition, working capital, assets, liabilities (absolute, accrued,
contingent, or otherwise), reserves, or operations.
9.04 OTHER NECESSARY CONSENTS. Company shall have obtained all
-------------------------
consents and approvals required to be listed on SCHEDULE 4.05. With respect to
--------------
each such consent or approval, Parent shall have received written evidence,
satisfactory to Parent, that such consent or approval has been duly and lawfully
filed, given, obtained, or taken and is effective, valid, and subsisting.
9.05 CERTIFICATE OF MERGER. Company shall have executed and delivered
----------------------
the Texas Certificate of Merger and the Delaware Certificate of Merger in
accordance with Section 1.03 hereof.
9.06 NONCOMPETITION AGREEMENT. Each Seller and Company shall have
--------------------------
executed and delivered to Parent a noncompetition agreement substantially in the
form of EXHIBIT 8.06.
--------------
9.07 EMPLOYMENT AGREEMENTS. Each employee of Company listed on SCHEDULE
---------------------- --------
8.07 shall have entered into an employment agreement with Parent substantially
----
in the form of EXHIBIT 8.07.
--------------
9.08 RELEASE OF CERTAIN LIENS. Parent shall have received evidence
---------------------------
reasonably satisfactory to Parent that all liens or encumbrances affecting any
asset of Company have been released.
9.09 PAYMENT OF INDEBTEDNESS. Parent shall have received evidence
--------------------------
reasonably satisfactory to Parent that all indebtedness of Company has been paid
in full, as otherwise provided for herein.
9.10 REQUEST TO TRANSFER RADIOACTIVE LICENSE. Company and Sellers
--------------------------------------------
shall have delivered to Parent the Company's executed request to transfer Texas
Radioactive Material License No. L05970 to the Surviving Corporation.
9.11 FCC APPLICATION PASSWORD. Company and Sellers shall have
---------------------------
delivered to Parent the Company's FCC application password for purposes of
filing FCC form 603 to transfer control of private radio license WQDE746 to
Surviving Corporation.
9.12 CERTIFICATES. Company and Sellers shall have delivered to Parent:
-------------
49
(a) Certificates of the Secretary or Assistant Secretary
of Company (i) attaching and certifying copies of the resolutions of Company's
Board of Directors and shareholders, authorizing the execution, delivery, and
performance of this Agreement and the other documents, instruments, and
certifications required or contemplated hereby, (ii) certifying the name, title,
and true signature of each officer of Company executing or authorized to execute
this Agreement and the other documents, instruments, and certifications required
or contemplated hereby, and (iii) attaching and certifying a true, correct, and
complete copy of the bylaws of Company.
(b) Copies of the articles of incorporation of Company certified
by the Secretary of State of the jurisdiction of its incorporation and by
Company's Secretary or Assistant Secretary, together with a certificates of good
standing or existence as may be available from the Secretaries of State of
Company's jurisdiction of incorporation or organization and every other state of
the United States in which the conduct of Company's Business or the ownership of
Company's properties and assets requires it to be so qualified.
9.13 OFFICER AND DIRECTOR RESIGNATIONS. Company shall have delivered
-----------------------------------
to Parent duly executed resignations, dated the Closing Date, of all members of
the Boards of Directors and officers of Company and its Subsidiaries, effective
as of the Closing Date.
9.14 AFFILIATE LETTERS. Parent shall have received an Affiliate Letter
-------------------
from each person identified as an affiliate of Company pursuant to Section 6,12.
9.15 CASH AT CLOSING. Parent shall have received evidence satisfactory
----------------
to Parent that immediately prior to the Closing, the Company has immediately
available cash in an amount equal to or exceeding $75,000.
9.16 ALL OTHER DOCUMENTS. Parent shall have received all other
----------------------
documents to be entered into by Company or Sellers pursuant to this Agreement at
or prior to Closing.
ARTICLE X
----------
INDEMNIFICATION
---------------
10.01 INDEMNIFICATION OBLIGATIONS OF SELLERS. The Sellers (other than
-----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.) shall, jointly and severally, indemnify, defend, and hold
harmless Parent and the Surviving Corporation, and their respective affiliates,
officers, directors, employees, agents, and representatives, and the heirs,
executors, successors, and assigns of any of the foregoing (the
"Parent-Indemnified Parties"), from, against, and in respect of any and all
claims, liabilities, obligations, damages, losses, costs, expenses, penalties,
fines, and judgments (at equity or at law, including statutory and common),
whenever arising or incurred (including amounts paid in settlement, costs of
investigation, and reasonable attorneys' fees and expenses), to the extent they
arise out of or relate to:
(a) Any obligation of Company under a contract or commitment which
is to be performed prior to the Closing Date, or any breach by Company of a
contract or commitment occurring prior to the Closing Date;
50
(b) Any third-party claims or actions relating to events or
circumstances occurring or existing with respect to the ownership, operation,
and maintenance of Company and its Subsidiaries, its Business, and its assets on
or prior to the Closing Date, except for liabilities of a type set forth on the
Interim Balance Sheet;
(c) Any breach or inaccuracy of any representation or warranty
made by Company or Sellers in this Agreement or any documents or agreements
executed and delivered by Company or any Seller in connection with the
transactions contemplated by this Agreement (without regard to any qualification
or exception contained in such representation or warranty relating to
materiality or material adverse effect), whether such representation or warranty
is made as of the date hereof or as of the Closing Date; or
(d) Any breach of any covenant, agreement, or undertaking made
by Company or Sellers in this Agreement or in any documents or agreements
executed and delivered by Company or any Seller in connection with the
transactions contemplated by this Agreement,
The claims, liabilities, obligations, losses, damages, costs, expenses,
penalties, fines, and judgments of the Parent-Indemnified Parties described in
this 10.01 as to which the Parent-Indemnified Parties are entitled to
indemnification are collectively referred to as "Parent Losses."
10.02 INDEMNIFICATION OBLIGATIONS OF PARENT. Parent shall indemnify and
--------------------------------------
hold harmless Sellers, and their respective officers, directors, employees,
agents, and representatives, and the heirs, executors, successors, and assigns
of any of the foregoing (the "Seller-Indemnified Parties"), from, against, and
--------------------------
in respect of any and all claims, liabilities, obligations, losses, damages,
costs, expenses, penalties, fines, and judgments (at equity or at law, including
statutory and common), whenever arising or incurred (including amounts paid in
settlement, costs of investigation, and reasonable attorneys* fees and
expenses), arising out of or relating to:
(a) Any obligation of Parent or Surviving Corporation under a
contract or commitment which is to be performed after the Closing Date, or any
breach by Parent or Surviving Corporation of a contract or commitment occurring
after the Closing Date;
(b) Any third-party claims or actions relating to events or
circumstances occurring or existing with respect to the ownership, operation,
and maintenance of Surviving Corporation after the Closing Date, including any
breach of a contract in effect prior to the Closing, where such breach occurs
after the Closing;
(c) Any breach or inaccuracy of any representation or warranty
made by Parent or Merger Sub in this Agreement or in any document or agreement
executed and delivered by Parent or Merger Sub in connection with the
transactions contemplated by this Agreement, whether such representation or
warranty is made as of the date hereof or as of the Closing Date; or
51
(d) Any breach of any covenant, agreement, or undertaking made by
Parent or Merger Sub in this Agreement or in any document or agreement executed
and delivered by Parent or Merger Sub in connection with the transactions
contemplated by this Agreement.
The claims, liabilities, obligations, losses, damages, costs, expenses,
penalties, fines and judgments of the Seller-Indemnified Parties described in
this 10.02 as to which the Seller-Indemnified Parties are entitled to
indemnification are collectively referred to as "Seller Losses."
10.03 INDEMNIFICATION PROCEDURE.
---------------------------
(a) Promptly following receipt by a Parent-Indemnified Party or a
Seller- Indemnified Party, as applicable (an "Indemnified Party") of notice by a
-----------------
third party (including any Governmental Entity) of any complaint, dispute, or
claim or the commencement of any audit, investigation, action, or proceeding
with respect to which such Indemnified Party may be entitled to receive payment
from the other party for any Parent Losses or any Seller Losses (as the case may
be), such Indemnified Party shall notify Parent or Sellers, as the case may be
(the "Indemnifying Party"); provided, however, that the failure to so notify the
------------------ ------------------
Indemnifying Party shall relieve the Indemnifying Party from liability hereunder
with respect to such claim only if, and only to the extent that, such failure to
so notify the Indemnifying Party results in the forfeiture by the Indemnifying
Party of rights and defenses otherwise available to the Indemnifying Party with
respect to such claim. The Indemnifying Party shall have the right, upon
written notice delivered to the Indemnified Party within 20 days thereafter
assuming full responsibility for any Parent Losses or Seller Losses (as the case
may be) resulting from such audit, investigation, action, or proceeding, to
assume the defense of such audit, investigation, action, or proceeding,
including the employment of counsel reasonably satisfactory to the Indemnified
Party and the payment of the fees and disbursements of such counsel. In the
event, however, that the Indemnifying Party declines or fails to assume the
defense of the audit, investigation, action, or proceeding on the terms provided
above or to employ counsel reasonably satisfactory to the Indemnified Party, in
either case within such 20-day period, then any Parent Losses or any Seller
Losses (as the case may be) shall include the reasonable fees and disbursements
of counsel for the Indemnified Party as incurred. In any audit, investigation,
action, or proceeding for which indemnification is being sought hereunder, the
Indemnified Party or the Indemnifying Party, whichever is not assuming the
defense of such action, shall have the right to participate in such matter and
to retain its own counsel at such party's own expense. The Indemnifying Party or
the Indemnified Party (as the case may be) shall at all times use reasonable
efforts to keep the Indemnifying Party or Indemnified Party (as the case may be)
reasonably apprised of the status of any matter in which it is maintaining a
defense and to cooperate in good faith with the other party with respect to the
defense of any such matter.
(b) No Indemnified Party may settle or compromise any claim or
consent to the entry of any judgment with respect to which indemnification is
being sought hereunder without the prior written consent of the Indemnifying
Party, unless (i) the Indemnifying Party fails to assume and maintain the
defense of such claim pursuant to Section 10,03(a), or (ii) such settlement,
compromise, or consent includes an unconditional release of the Indemnifying
Party and its officers, directors, employees, and affiliates from all liability
arising out of such claim. An Indemnifying Party may not, without the prior
written consent of the Indemnified Party, settle or compromise any claim or
consent to the entry of any judgment with respect to which
52
indemnification is being sought hereunder unless (A) such settlement,
compromise, or consent includes an unconditional release of the Indemnified
Party and its officers, directors, employees, and affiliates from all liability
arising out of such claim, (B) does not contain any admission or statement
suggesting any wrongdoing or liability on behalf of the Indemnified Party, and
(C) does not contain any equitable order, judgment, or term that in any manner
affects, restrains, or interferes with the business of the Indemnified Party or
any of the Indemnified Party's affiliates.
(c) In the event an Indemnified Party claims a right to payment
pursuant hereto, such Indemnified Party shall send written notice of such claim
to the appropriate Indemnifying Party (a "Notice of Claim"). Such Notice of
---------------
Claim shall specify the basis for such claim. The failure by any Indemnified
Party so to notify the Indemnifying party shall not relieve the Indemnifying
Party from any liability that it may have to such Indemnified Party with respect
to any claim made pursuant to this Section 10.03(c), it being understood that
notices for claims in respect of a breach of a representation or warranty must
be delivered prior to the expiration of the survival period for such
representation or warranty under 10.04. In the event the Indemnifying Party does
not notify the Indemnified Party within 30 days following its receipt of such
notice that the Indemnifying Party disputes its liability to the Indemnified
Party under this Article X or the amount thereof, the claim specified by the
Indemnified Party in such Notice of Claim shall be conclusively deemed a
liability of the Indemnifying Party under this Article X, and the Indemnifying
Party shall pay the amount of such liability to the Indemnified Party on demand
or, in the case of any notice in which the amount of the claim (or any portion
of the claim) is estimated, on such later date when the amount of such claim (or
such portion of such claim) becomes finally determined. In the event the
Indemnifying Party has timely disputed its liability with respect to such claim
as provided above, as promptly as possible, such Indemnified Party and the
appropriate Indemnifying Party shall establish the merits and amount of such
claim (by mutual agreement, litigation, arbitration, or otherwise), and, within
five business days following the final determination of the merits and amount of
such claim, the Indemnifying Party shall pay to the Indemnified Party
immediately available funds in an amount equal to such claim as determined
hereunder.
10.04 SURVIVAL PERIOD. The representations and warranties of the
-----------------
parties contained herein shall not be extinguished by the Closing, but shall
survive the Closing for, and all claims for indemnification in connection
therewith shall be asserted not later than, eighteen (18) months following the
Closing Date; provided, however, that the representations and warranties
-------------------
contained in Section 3.01 (Power, Authority and Organization of the Sellers),
Section 3.03 (Ownership of the Company Shares), Section 4.02 (Organization and
Authorization), Section 4.03 (Authorized and Outstanding Stock), Section 4.15
(Employee Benefits), Section 4.19 (Environmental Matters), and Section 4.27 (Tax
Matters) (collectively, the "Surviving Representations") shall survive until
-----------------------------
sixty (60) days following the expiration of the applicable statute of
limitations, and the period during which a claim for indemnification may be
asserted in connection therewith shall continue for a period of sixty (60) days
following the expiration of the applicable statute of limitations. The covenants
and agreements of the parties hereunder shall survive without limitation as to
time, and the period during which a claim for indemnification may be asserted in
connection therewith shall continue indefinitely. Notwithstanding the foregoing,
if, prior to the close of business on the last day a claim for indemnification
may be asserted hereunder, an
53
Indemnifying Party shall have been properly notified of a claim for indemnity
hereunder and such claim shall not have been finally resolved or disposed of at
such date, such claim shall continue to survive and shall remain a basis for
indemnity hereunder until such claim is finally resolved or disposed of in
accordance with the terms hereof.
10.05 LIABILITY LIMITS. Notwithstanding anything to the contrary set
------------------
forth herein, the Parent-Indemnified Parties shall not make a claim
against Company and Sellers for indemnification under Section 10.01(c) for
Parent Losses unless and until the aggregate amount of such Parent Losses
exceeds $100,000 (the "Parent Basket"), in which event the Parent- Indemnified
-------------
Parties may claim indemnification only to the extent the Parent Losses exceed
the Parent Basket; provided, however, that the representations and warranties
--------- --------
contained in Sections 3.03 (Ownership of Company Shares) and 4.27 (Tax Matters)
shall not be subject to the Parent Basket. The total aggregate amount of the
liability of Company and Sellers for Parent Losses with respect any claims made
pursuant to Section 10.01(c) shall be limited to $5,000,000 (the "Parent Cap");
------ ---
provided, however, that the total aggregate amount of the liability of Company
--------- --------
and Sellers for Parent Losses arising out of fraud or willful misconduct shall
not be subject to any limits.
10.06 INVESTIGATIONS. The respective representations and warranties
---------------
of the parties contained in this Agreement or any certificate or other document
delivered by any party at or prior to the Closing and the rights to
indemnification set forth in Article X shall not be deemed waived or otherwise
affected by any investigation made by a party. Notwithstanding the foregoing,
Parent shall use its reasonable best efforts to promptly notify Sellers of any
questions or concerns that may arise regarding any representations or warranties
required by this Agreement from Company or Sellers from information transferred
between the Parties during such consultations; provided, however, that any
failure to provide such notice shall not affect any of Parent's or Merger Sub's
rights hereunder.
10.07 SETOFF. Parent shall be entitled to set off any amount or right to
-------
which Parent may be entitled pursuant to this Agreement against any amount,
right, or obligation (including the obligation to deliver shares of Parent
Common Stock) owed to Sellers under this Agreement or any agreement or documents
executed and delivered by a Seller in connection with the transactions
contemplated by this Agreement. However, if any setoff is determined to be
inappropriate, Parent shall repay such sums to Sellers, with interest at a rate
equal to six percent (6%).
10.08 EXCLUSIVE REMEDY. The indemnification provisions of this Article X
-----------------
are the sole and exclusive remedy for Parent and Merger Sub with respect to any
claimed breach of this Agreement by Company or Sellers; provided, however, that
-------- -------
this exclusive remedy for damages does not preclude a party from bringing an
action for specific performance or other equitable remedy to require a party to
perform its obligations under this Agreement. Notwithstanding anything to the
contrary in this Section 10.08, in the event of a fraudulent or willful breach
of the representations, warranties, covenants or agreements contained herein by
the Parent or Sellers, any Indemnified Party shall have all remedies available
at law or in equity (including for tort) with respect thereto.
54
ARTICLE XI
-----------
TERMINATION PRIOR TO CLOSING
----------------------------
11.01 TERMINATION OF AGREEMENT. This Agreement may be terminated at
---------------------------
any time prior to the Closing:
(a) By the mutual written consent of Parent and Sellers.
(b) By Sellers in writing, without liability, if Parent shall (i)
fail to perform in any material respect its agreements contained herein required
to be performed by Parent on or prior to the Closing Date, or (ii) materially
breach any of Parent's representations, warranties, or covenants contained
herein, which failure or breach is not cured within ten days after Sellers have
notified Parent of their intent to terminate this Agreement pursuant to this
subparagraph (b).
(c) By Parent in writing, without liability, if either Company or
any of Sellers shall (i) fail to perform in any material respect their
agreements contained herein required to be performed by them on or prior to the
Closing Date, or (ii) materially breach any of their representations,
warranties, or covenants contained herein, which failure or breach is not cured
within ten days after Parent has notified Sellers of its intent to terminate
this Agreement pursuant to this subparagraph (c).
(d) By either Parent or Sellers in writing, without liability, if
there shall be any order, writ, injunction, or decree of any court or
governmental or regulatory agency binding on Parent, Merger Sub, Company, or any
Seller which prohibits or restrains Parent, Merger Sub, Company, or any Seller
from consummating the transactions contemplated hereby, provided that Parent,
Merger Sub, Company, and Sellers shall have used their reasonable, good-faith
efforts to have any such order, writ, injunction, or decree lifted and the same
shall not have been lifted within 30 days after entry by any such court or
governmental or regulatory agency.
(e) By either Parent or Sellers, in writing, without liability, if
for any reason the Closing has not occurred by May 31, 2006, other than as a
result of the breach of this Agreement by the party attempting to terminate the
Agreement; provided, however, that the Parties shall have the right to extend
such date thirty (30) additional days if Parent's lenders request Parent to do
so,
11.02 TERMINATION OF OBLIGATIONS. Termination of this Agreement
-----------------------------
pursuant to this Article XI shall terminate all obligations of the parties
hereunder, except for the obligations under Sections 6.13 (Publicity), 12,01
(Entire Agreement and Survival), 12,02 (Amendment), 12,03 (Parties Bound by
Agreement), 12.05 (Headings), 12.06 (Modification and Waiver), 12.07 (Expenses),
12.08 (Notices), 12.09 (Governing Law and Jurisdiction), 12.11 (No Third-Party
Beneficiaries), 12.12 ("Including"), 12.13 (Gender and Number), 12.14
(References), 12.15 (Severability), and 12.19 (Enforcement), and Article X
(Indemnification); provided, however, that termination pursuant to subparagraphs
-------- -------
(b), (c), or (e) of Section 11.01 hereof shall not relieve a defaulting or
breaching party from any liability to the other party hereto.
55
ARTICLE XII
------------
MISCELLANEOUS
-------------
12.01 ENTIRE AGREEMENT AND SURVIVAL. This Agreement (including the
---------------------------------
Schedules and Exhibits which are incorporated herein) constitutes the sole
understanding of the parties with respect to the subject matter hereof;
provided, however, that this provision is not intended to abrogate any other
written agreement between the parties executed with or after this Agreement,
12.02 AMENDMENT. No amendment, modification or alteration of the
----------
terms or provisions of this Agreement shall be binding unless the same shall be
in writing and duly executed by the parties hereto.
12.03 PARTIES BOUND BY AGREEMENT. The terms, conditions, and
------------------------------
obligations of this Agreement shall inure to the benefit of and be binding upon
the parties hereto and the respective successors and assigns thereof. This
Agreement shall not be assignable by operation of law or otherwise; provided,
however, that Parent may designate, by written notice to Company, another wholly
owned direct subsidiary to be a Surviving Corporation in lieu of Merger Sub, in
which event all references herein to Merger Sub shall be deemed references to
such other subsidiary, except that all representations and warranties made
herein with respect to Merger Sub as of the date of this Agreement shall be
deemed representations and warranties made with respect to such other subsidiary
as of the date of such designation.
12.04 COUNTERPARTS AND FACSIMILE. This Agreement may be executed in
-----------------------------
multiple counterparts, each of which shall for all purposes be deemed to be an
original and all of which, when taken together, shall constitute one and the
same instrument. This Agreement may be executed and delivered by facsimile.
12.05 HEADINGS. The headings of the Sections and paragraphs of this
---------
Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction thereof.
12.06 MODIFICATION AND WAIVER. Any of the terms or conditions of this
-------------------------
Agreement may be waived in writing at any time by the party which is entitled to
the benefits thereof. No waiver of any of the provisions of this Agreement shall
be deemed to or shall constitute a waiver of any other provision hereof (whether
or not similar).
12.07 EXPENSES. Except as otherwise provided herein, the Sellers and
---------
Parent shall each pay all costs and expenses incurred by each of them, or on
their behalf respectively, in connection with this Agreement and the
transactions contemplated hereby, including fees and expenses of their own
financial consultants, accountants and counsel. All such expenses incurred by
the Company in connection with this Agreement and the transactions contemplated
hereby shall be paid by the Sellers on or before the Closing Date.
Notwithstanding the foregoing or anything contrary in this Agreement, Parent
shall pay Sellers' expenses in connection with the transactions contemplated
herein up to a maximum amount equal to $25,000.
56
12.08 NOTICES. Any notice, request, instruction, or other document to
--------
be given hereunder by any party hereto to any other party hereto shall be in
writing and delivered personally, or sent by registered or certified mail, or
sent by overnight courier such as Federal Express or United States Express Mail,
postage or fees prepaid, to the party as set forth below, or at such other
address for a party as shall be specified by like notice:
If to Sellers or, prior to the ▇. ▇▇▇▇ ▇▇▇▇▇
Closing Date, to Company, to: ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇)▇▇▇-▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇)▇▇▇-▇▇▇▇
LFC, INC.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇. ▇▇▇▇ ▇▇▇▇▇, CEO
With a copy to: Fritz, Byrne, Head & ▇▇▇▇▇▇▇▇, LLP
▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
If to Parent or Merger Sub, to: CHARYS HOLDING COMPANY, INC.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇, ▇▇., CEO
57
With a copy to: Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇)▇▇▇-▇▇▇▇
Telecopier: (▇▇▇)▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Any notice which is delivered personally in the manner provided herein shall be
deemed to have been duly given to the party to whom it is directed upon actual
receipt by such party or the office of such party. Any notice which is addressed
and transmitted in the manner herein provided shall be conclusively presumed to
have been duly given to the party to which it is addressed at the close of
business, local time of the recipient, on the fourth business day after the day
it is placed in the mail or delivered to an overnight courier service, or, if
earlier, the time of actual receipt.
12.09 GOVERNING LAW AND JURISDICTION. This Agreement shall be
----------------------------------
construed in accordance with and governed by the laws of the State of Delaware,
without giving effect to the principles of conflicts of law thereof. Each of the
parties hereto irrevocably agrees that any legal action or proceeding with
respect to this Agreement or the transactions contemplated hereby, or for
recognition and enforcement of any judgment in respect hereof, brought by the
other party hereto or its successors or assigns shall be brought and determined
in state or federal courts sitting in ▇▇▇▇▇▇ County, State of Georgia, and each
party hereby irrevocably submits with regard to any such action or proceeding
for itself and in respect of its property, generally and unconditionally, to the
nonexclusive jurisdiction of the aforesaid courts. Each party hereto hereby
irrevocably waives, and agrees not to assert, by way of a motion, or as a
defense, counterclaim, or otherwise, in any action or proceeding with respect to
this Agreement: (a) any claim that it is not personally subject to the
jurisdiction of the above-named courts for any reason other than the failure to
lawfully serve process; (b) that it or its property is exempt or immune from the
jurisdiction of any such court or from any legal process commenced in such
courts (whether through service of notice, attachment prior to judgment,
attachment in aid of execution of judgment, execution of judgment, or
otherwise); and (c) to the fullest extent permitted by applicable law, that (i)
the suit, action, or proceeding in any such court is brought in an inconvenient
forum, (ii) the venue of such suit, action, or proceeding is improper, and (iii)
this Agreement, or the subject matter hereof, may not be enforced in or by such
courts,
12.10 COMPANY'S AND SELLERS' KNOWLEDGE. As used herein, the terms
------------------------------------
"Company's knowledge" and "to the knowledge of Company" with respect to Company
shall mean the actual knowledge of any director, officer, or shareholder of
Company or any of the individuals set forth on SCHEDULE 4.01 (D), and the terms
------------------
"Sellers' knowledge" and to "to the knowledge of the Seller" with respect to a
Seller shall mean the actual knowledge of any individual Seller.
12.11 NO THIRD-PARTY BENEFICIARIES. With the exception of the parties
----------------------------
to this Agreement, there shall exist no right of any person to claim a
beneficial interest in this Agreement or any rights occurring by virtue of this
Agreement.
58
12.12 "INCLUDING." Words of inclusion shall not be construed as terms
----------
of limitation herein, so that references to "included" matters shall be regarded
as non-exclusive, non- characterizing illustrations.
12.13 GENDER AND NUMBER. Where the context requires, the use of a
--------------------
pronoun of one gender or the neuter is to be deemed to include a pronoun of the
appropriate gender. Singular words are to be deemed to include the plural, and
vice versa.
12.14 REFERENCES. Whenever reference is made in this Agreement to
-----------
any Article, Section, Schedule, or Exhibit, such reference shall be deemed to
apply to the specified Article or Section of this Agreement or the specified
Schedule or Exhibit to this Agreement. The Schedules and Exhibits
referenced in this Agreement are attached hereto, are hereby incorporated
into this Agreement, and are hereby made a part hereof as if set forth in full
in this Agreement.
12.15 SEVERABILITY. In case any one or more of the provisions
-------------
contained in this Agreement should be found by a court of competent jurisdiction
to be invalid, illegal, or unenforceable in any respect against any party
hereto, such invalidity, illegality, or unenforceability shall only
apply to such party in the specific jurisdiction where such judgment shall be
made, and the validity, legality, and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby, except
that this Agreement shall not be reformed in any way that will deny to any party
the essential benefits of this Agreement, unless such party waives in writing
its rights to such benefits.
12.16 FURTHER ASSURANCES. Each of the parties hereto will use
--------------------
reasonably good-faith efforts to take all actions and to do all things
necessary, proper, or advisable following the Closing to consummate and
effectuate the transactions contemplated by this Agreement.
12.17 CURRENCY. All payments hereunder or contemplated by this
---------
Agreement shall be paid in United States currency.
12.18 ORDINARY COURSE OF BUSINESS. "Ordinary Course of Business" means,
---------------------------- ---------------------------
with respect to actions and operations conducted by Company, actions and
operations that are (a) consistent with the past practices of Company, (b) taken
in the ordinary course of the normal, day-to-day operations of Company, and (c)
not required to be authorized by the Board of Directors or other governing body
of Company.
12.19 ENFORCEMENT. The parties agree that irreparable damage would
------------
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specified terms. It is accordingly agreed
that the parties shall be entitled to specific performance of the terms hereof,
this being in addition to any other remedy to which they are entitled at law or
in equity.
59
IN WITNESS WHEREOF, each of the parties hereto has duly executed and
delivered this Agreement as of the date first above written.
PARENT;
CHARYS HOLDING COMPANY, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇ ▇▇.
----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇ ▇▇.
-----------------
Title: CEO
----------------
MERGER SUB:
LFC ACQUISITION COMPANY, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇ ▇▇.
----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇ ▇▇.
-----------------
Title: CEO
----------------
COMPANY:
LFC, INC.
By: /s/ ▇. ▇▇▇▇ ▇▇▇▇▇
----------------------------
Name: ▇. ▇▇▇▇ ▇▇▇▇▇
-----------------
Title: CEO
----------------
SELLERS:
/s/ ▇. ▇▇▇▇ ▇▇▇▇▇
-------------------------------
▇. ▇▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
-------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
***
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