--------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
dated as of the 10th day of March, 1999
by and among
THE ALLIANCE GROUP, INC.
(Parent)
and
ALLIANCE ACQUISITION I CORP.
(Newco)
and
TERRA TELECOM, INC.
(Company)
and
▇▇▇▇▇ ▇▇▇▇▇▇
AND
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
AND
▇▇▇ ▇▇▇▇▇▇▇▇▇
AND
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
(Stockholders of the Company)
--------------------------------------------------------------------------------
TABLE OF CONTENTS
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
2. THE MERGER AND OTHER MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . .5
2.1 Delivery and Filing of Articles of Merger . . . . . . . . . . . . . . . .5
2.2 Effective Time of the Merger. . . . . . . . . . . . . . . . . . . . . . .5
2.3 Certificate of Incorporation, Bylaws and Board of
Directors of the Surviving Corporation. . . . . . . . . . . . . . . . . .5
2.4 Certain Information With Respect to the Capital Stock
of Company, Parent and Newco. . . . . . . . . . . . . . . . . . . . . . .6
2.5 Effect of Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.6 Release of Personal Guarantees. . . . . . . . . . . . . . . . . . . . . .6
3. CONVERSION OF STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
4. DELIVERY OF MERGER CONSIDERATION. . . . . . . . . . . . . . . . . . . . . . . .7
4.1 Effective Time. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
4.2 Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
5. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
6. REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS OF COMPANY AND STOCKHOLDERS. . . . . . . . . . . . . . . . . . . . .8
6.1 Due Organization. . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
6.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
6.3 Capital Stock of the Company. . . . . . . . . . . . . . . . . . . . . . .9
6.4 Transactions in Capital Stock . . . . . . . . . . . . . . . . . . . . . .9
6.5 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
6.6 Predecessor Status; etc.. . . . . . . . . . . . . . . . . . . . . . . . .9
6.7 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . .9
6.8 Liabilities and Obligations . . . . . . . . . . . . . . . . . . . . . . 10
6.9 Accounts and Notes Receivable . . . . . . . . . . . . . . . . . . . . . 10
6.10 Permits and Intangibles . . . . . . . . . . . . . . . . . . . . . . . . 11
6.11 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.12 Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.13 Significant Customers; Material Contracts and Commitments . . . . . . . 12
6.14 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.15 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.16 Compensation; Organized Labor Matters . . . . . . . . . . . . . . . . . 13
6.17 Employee Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.18 Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.19 Conformity with Law; Litigation . . . . . . . . . . . . . . . . . . . . 16
6.20 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
-i-
6.21 No Violations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.22 Absence of Changes . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.23 Deposit Accounts; Powers of Attorney. . . . . . . . . . . . . . . . . . 19
6.24 Relations with Governments. . . . . . . . . . . . . . . . . . . . . . . 19
6.25 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.26 Prohibited Activities . . . . . . . . . . . . . . . . . . . . . . . . . 20
7. ADDITIONAL REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS OF STOCKHOLDERS. . . . . . . . . . . . . . . . . . . 20
7.1 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.2 Preemptive Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.3 Election to Put Stock . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.4 Election to Call Stock. . . . . . . . . . . . . . . . . . . . . . . . . 20
8. REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS OF PARENT AND NEWCO. . . . . . . . . . . . . . . . . . . . . . . . 21
8.1 Due Organization. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.3 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.4 Transactions in Capital Stock . . . . . . . . . . . . . . . . . . . . . 21
8.5 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.6 Liabilities and Obligations . . . . . . . . . . . . . . . . . . . . . . 22
8.7 Conformity with Law; Litigation . . . . . . . . . . . . . . . . . . . . 22
8.8 No Violations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.9 Parent Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.10 Business; Real Property; Agreements . . . . . . . . . . . . . . . . . . 23
9. OTHER COVENANTS PRIOR TO CLOSING. . . . . . . . . . . . . . . . . . . . . . . 23
9.1 Access and Cooperation; Due Diligence; Audits . . . . . . . . . . . . . 23
9.2 Conduct of Business Pending Closing . . . . . . . . . . . . . . . . . . 24
9.3 Prohibited Activities by the Company. . . . . . . . . . . . . . . . . . 24
9.4 Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.5 Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.6 Notification of Certain Matters . . . . . . . . . . . . . . . . . . . . 26
9.7 Amendment of Schedules. . . . . . . . . . . . . . . . . . . . . . . . . 26
9.8 Further Assurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF
STOCKHOLDERS AND COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.1 Representations and Warranties; Performance of Obligations. . . . . . . 27
10.2 No Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.3 Consents and Approvals. . . . . . . . . . . . . . . . . . . . . . . . . 27
10.4 Good Standing Certificates. . . . . . . . . . . . . . . . . . . . . . . 27
10.5 No Material Adverse Effect. . . . . . . . . . . . . . . . . . . . . . . 27
10.6 Secretary's Certificates. . . . . . . . . . . . . . . . . . . . . . . . 28
-ii-
10.7 Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . 28
10.8 Closing of the IPO or the Private Placement . . . . . . . . . . . . . . 28
11. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT
AND NEWCO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
11.1 Representations and Warranties; Performance of Obligations. . . . . . . 28
11.2 No Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
11.3 Secretary's Certificate . . . . . . . . . . . . . . . . . . . . . . . . 28
11.4 No Material Adverse Effect. . . . . . . . . . . . . . . . . . . . . . . 29
11.5 Stockholders' Release . . . . . . . . . . . . . . . . . . . . . . . . . 29
11.6 Termination of Related Party Agreements . . . . . . . . . . . . . . . . 29
11.7 Consents and Approvals. . . . . . . . . . . . . . . . . . . . . . . . . 29
11.8 Good Standing Certificates. . . . . . . . . . . . . . . . . . . . . . . 29
11.9 FIRPTA Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . 29
11.10 Closing of the IPO or Private Placement . . . . . . . . . . . . . . . . 29
11.11 Employment Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . 29
11.12 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . 29
12. ADDITIONAL COVENANTS OF PARENT AND STOCKHOLDERS . . . . . . . . . . . . . . . 30
12.1 Preparation and Filing of Tax Returns . . . . . . . . . . . . . . . . . 30
12.2 Preservation of Employee Benefit Plans. . . . . . . . . . . . . . . . . 30
13. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
13.1 General Indemnification by the Stockholders . . . . . . . . . . . . . . 31
13.2 Indemnification by Parent . . . . . . . . . . . . . . . . . . . . . . . 31
13.3 Third Person Claims . . . . . . . . . . . . . . . . . . . . . . . . . . 31
13.4 Exclusive Remedy. . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
13.5 Limitations on Indemnification. . . . . . . . . . . . . . . . . . . . . 32
14. TERMINATION OF AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . 32
14.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
14.2 Liabilities in Event of Termination . . . . . . . . . . . . . . . . . . 33
15. NONCOMPETITION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
15.1 Prohibited Activities . . . . . . . . . . . . . . . . . . . . . . . . . 33
15.2 Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
15.3 Reasonable Restraint. . . . . . . . . . . . . . . . . . . . . . . . . . 34
15.4 Severability, Reformation . . . . . . . . . . . . . . . . . . . . . . . 34
15.5 Independent Covenant. . . . . . . . . . . . . . . . . . . . . . . . . . 35
15.6 Materiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
16. NONDISCLOSURE OF CONFIDENTIAL INFORMATION . . . . . . . . . . . . . . . . . . 35
16.1 Company and Stockholders. . . . . . . . . . . . . . . . . . . . . . . . 35
16.2 Parent and Newco. . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
16.3 Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
-iii-
16.4 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
17. TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
18. INVESTMENT REPRESENTATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 37
18.1 Compliance With Law . . . . . . . . . . . . . . . . . . . . . . . . . . 37
18.2 Economic Risk, Sophistication . . . . . . . . . . . . . . . . . . . . . 38
19. REGISTRATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
19.1 PiggyBack Registration Rights . . . . . . . . . . . . . . . . . . . . . 38
19.2 Demand Registration Rights. . . . . . . . . . . . . . . . . . . . . . . 38
19.3 Registration Procedures . . . . . . . . . . . . . . . . . . . . . . . . 39
19.4 Other Registration Matters. . . . . . . . . . . . . . . . . . . . . . . 42
19.5 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
19.6 Contribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
19.7 Undertaking to File Reports and Cooperate in Rule 144
Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
20. GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
20.1 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
20.2 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . . . 46
20.3 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
20.4 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
20.5 Brokers and Agents. . . . . . . . . . . . . . . . . . . . . . . . . . . 47
20.6 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
20.7 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
20.8 Exercise of Rights and Remedies . . . . . . . . . . . . . . . . . . . . 48
20.9 Time. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
20.10 Reformation and Severability. . . . . . . . . . . . . . . . . . . . . . 48
20.11 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . 48
20.12 Captions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
20.13 Public Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
20.14 Amendments and Waivers. . . . . . . . . . . . . . . . . . . . . . . . . 49
20.15 Arbitration.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
20.16 338 Election. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
-iv-
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made as of the 10th
day of March, 1999, by and among THE ALLIANCE GROUP, INC., an Oklahoma
corporation ("Parent"), ALLIANCE ACQUISITION I CORP., an Oklahoma corporation
("Newco"), TERRA TELECOM, INC., an Oklahoma corporation (the "Company"), and
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, AND ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, the only
stockholders of the Company (collectively, the "Stockholders").
RECITALS
WHEREAS, Newco is a corporation duly organized and existing under the
laws of the State of Oklahoma, having been incorporated on March 9, 1999,
solely for the purpose of completing the transaction set forth herein, and
Newco is a wholly-owned subsidiary of Parent, a corporation organized and
existing under the laws of the State of Oklahoma; and
WHEREAS, the respective Boards of Directors of Newco and of Company
(which together are hereinafter collectively referred to as "Constituent
Corporations") deem it advisable and in the best interests of the
Constituent Corporations and their respective stockholders that Newco merge
with and into Company, as set forth in Annex I, pursuant to this Agreement
and the applicable provisions of the laws of the State of Oklahoma
("Merger"); and
WHEREAS, this Merger is being effectuated pursuant to Section
368(a)(1)(A) of the Code; and
WHEREAS, Stockholders are the owners of 2,000 shares of Common Stock,
$1.00 par value, of Company ("Company Stock"), representing all the issued
and outstanding capital stock of Company outstanding on the date of this
Agreement;
WHEREAS, in the Merger the issued and outstanding shares of Company
Stock will be converted into aggregate consideration of $1,500,000,
comprised of $1,050,000 in cash and -- shares of Common Stock $.01 par
value, of Parent ("Parent Stock"); and
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties, covenants, and agreements herein contained,
the parties hereto hereby agree as follows:
1. DEFINITIONS
Unless the context otherwise requires, capitalized terms used in this
Agreement or in any schedule, or annex attached hereto and not otherwise defined
shall have the following meanings for all purposes of this Agreement.
"Adverse Effect" has the meaning set forth in Section 6.1.
"Affiliates" means a Person who directly or indirectly through one or more
intermediaries controls, is controlled by or is under common control with, the
Company.
"Agreement" has the meaning set forth in the first paragraph of this
Agreement.
"Annex" means each Annex attached hereto that represents a document
relevant to the transactions contemplated in this Agreement.
"A/R Aging Reports" has the meaning set forth in Section 6.9.
"Balance Sheet Date" has the meaning set forth in Section 6.7.
"Certificate of Merger" means the Certificate of Merger with respect to the
Merger substantially in the form attached as Annex I, with such other changes
therein as may be required by applicable state law.
"Charter Documents" means the Certificate of Incorporation, Articles of
Incorporation or other instrument pursuant to which any corporation, partnership
or other business entity that is a signatory to this Agreement was formed or
organized in accordance with applicable law.
"Closing" has the meaning set forth in Section 5.
"Closing Date" has the meaning set forth in Section 5.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the first paragraph of this
Agreement.
"Company Financial Statements" has the meaning set forth in Section 6.7.
"Company Stock" has the meaning set forth in the third recital of this
Agreement.
"Constituent Corporations" has the meaning set forth in the second recital
of this Agreement.
"Controlled Group" has the meaning set forth in Section 6.18.
"Demand Registration" has the meaning set forth in Section 19.2.
"Documents" has the meaning set forth in Section 6.21.
"Effective Time" means the time as of which the Merger becomes effective,
which shall, in any case, occur on the Closing Date.
-2-
"Environmental Laws" has the meaning set forth in Section 6.11.
"ERISA" has the meaning set forth in Section 6.17.
"Expiration Date" means (i) except as set forth in (iii) below, the 24th
monthly anniversary of the Closing Date when used in connection with a breach of
any representation, warranty, covenant or agreement set forth in Sections 6, 7
and 8 of this Agreement, (ii) the 36th monthly anniversary of the Closing Date
when used in connection with the failure to observe the terms of Section 15 and
(iii) the date on which suit for the enforcement of any claims for Taxes, claims
under Environmental Laws, or claims under any other covenant or agreement set
forth in this Agreement and not specified in (i) or (ii) above becomes barred by
the applicable statute of limitation.
"Founding Companies" has the meaning set forth in Section 9.1(ii).
"Founding Stockholders" has the meaning set forth in Section 19.2.
"Hazardous Wastes" and "Hazardous Substances" have the meanings set forth
in Section 6.13.
"Indemnification Threshold" has the meaning set forth in Section 13.5.
"Indemnified Party" has the meaning set forth in Section 13.3.
"Indemnifying Party" has the meaning set forth in Section 13.3.
"IPO" means the Parent's initial public offering of Parent Stock.
"IRS" or "Internal Revenue Service" means the Internal Revenue Service of
the Department of the Treasury.
"Leases" means all real and personal property leased by Company and used,
useful or held for use in connection with Company's business.
"Liens" has the meaning set forth in Section 6.3.
"Merger" has the meaning set forth in the second recital of this Agreement.
"Newco" has the meaning set forth in the first paragraph of this Agreement.
"Newco Stock" means the common stock, par value $.01 per share of Newco.
"OGCA" means the Oklahoma General Corporation Act.
-3-
"Other Stockholders" means the persons and entities that receive shares of
Parent Stock and/or cash upon the acquisition by Parent of assets or businesses
in which such persons and entities owned an interest on or prior to the closing
date of the IPO or Private Placement.
"Parent" has the meaning set forth in the first paragraph of this
Agreement.
"Parent Charter Documents" has the meaning set forth in Section 8.1.
"Parent Documents" has the meaning set forth in Section 8.8.
"Parent Stock" has the meaning set forth in the fourth recital of this
Agreement.
"Person" means an individual, a corporation, a partnership, an association,
a limited liability company, a joint stock company, a trust, or other
unincorporated organization.
"Private Placement" means the Parent's private placement of Parent Stock.
"Prohibited Activities" has the meaning set forth in Paragraph 6.26.
"Qualified Plans" has the meaning set forth in Section 6.18.
"Registerable Securities" means the shares of Parent Stock registerable
pursuant to Section 19.
"Restricted Securities" has the meaning set forth in introductory paragraph
to Section 18.
"Returns" means any returns, reports or statements (including any
information returns) required to be filed for purposes of a particular Tax.
"Schedule" means each Schedule attached hereto, which shall reference the
relevant sections of this Agreement, on which parties hereto disclose
information as part of their respective representations, warranties, covenants
and agreements.
"SEC" means the United States Securities and Exchange Commission.
"December Balance Sheet" has the meaning set forth in Section 6.7.
"Stockholders" has the meaning set forth in the first paragraph of this
Agreement.
"Subsidiaries" means, with respect to any Person, any corporation or other
organization, whether incorporated or unincorporated, of which (i) such Person
or any other Subsidiary of such Person is a general partner (excluding
partnerships, the general partnership interests of which held by such Person or
any Subsidiary of such Person do not have a majority of the voting interest in
such partnership) or (ii) at least a majority of the securities or other
interests having by their terms ordinary voting power to elect a majority of the
Board of Directors or others performing similar
-4-
functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by such Person, by any one or more of its
Subsidiaries, or by such Person and one or more of its Subsidiaries.
"Surviving Corporation" shall mean Company as the surviving party in the
Merger.
"Tax" or "Taxes" means all Federal, state, local or foreign net or gross
income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, bank shares, withholding, payroll, employment, excise, property,
deed, stamp, alternative or add on minimum, environmental or other taxes or
assessments, whether disputed or not, together with any interest, penalties,
additions to tax or additional amounts with respect thereto.
"Territory" has the meaning set forth in Section 15.1(i).
"Third Person" has the meaning set forth in Section 13.3.
"1933 Act" means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
2. THE MERGER AND OTHER MATTERS
2.1 DELIVERY AND FILING OF ARTICLES OF MERGER. The Constituent
Corporations will cause (i) the Certificate of Merger to be signed, verified and
filed with the Secretary of State of the State of Oklahoma and (ii) photocopies
of stamped receipt copies of such filing to be delivered to Parent on the
Closing Date.
2.2 EFFECTIVE TIME OF THE MERGER. At the Effective Time of the Merger,
Newco shall be merged with and into Company, in accordance with the Certificate
of Merger, the separate existence of Newco shall cease, and Company shall be the
surviving party in the Merger. Company is sometimes hereinafter referred to as
the Surviving Corporation.
2.3 CERTIFICATE OF INCORPORATION, BYLAWS AND BOARD OF DIRECTORS OF THE
SURVIVING CORPORATION. At the Effective Time:
(i) the Charter Documents of Newco then in effect shall be the
Charter Documents of the Surviving Corporation until changed as
provided by law;
(ii) the Bylaws of Newco then in effect shall be the Bylaws of the
Surviving Corporation until they shall thereafter be further
amended;
(iii) ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, the only member of the Board of Directors of
Newco, shall be the only member of the Board of Directors of the
Surviving Corporation after the Effective Time until his
successor shall have been elected and qualified; and
-5-
(iv) ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Chief Executive Officer; ▇▇▇▇▇ ▇▇▇▇▇▇,
President, ▇▇▇ ▇▇▇▇▇, Chief Financial Officer and Secretary; and
▇▇▇▇ ▇▇▇▇▇▇▇, Vice President of Operations of Newco immediately
prior to the Effective Time shall continue as the officers of the
Surviving Corporation after the Effective Time in the same
capacity or capacities, until their successors are duly elected
and qualified.
2.4 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF COMPANY,
PARENT AND NEWCO. The respective designations and numbers of outstanding shares
and voting rights of each class of outstanding capital stock of Company, Parent
and Newco as of the date of this Agreement are as follows:
(i) the authorized, issued and outstanding capital stock of Company
is as set forth on Schedule 2.4(i);
(ii) the authorized, issued and outstanding capital stock of Parent is
as set forth in Schedule 2.4(ii); and
(iii) the authorized capital stock of Newco consists of 1,000 shares of
common stock, par value $.01, of which 1,000 shares are issued
and outstanding and entitled to one vote per share on all matters
submitted to stockholders.
2.5 EFFECT OF MERGER. Company shall be the Surviving Corporation of the
Merger and shall continue in existence under the laws of the State of Oklahoma.
The Merger will have the effects set forth in the OGCA. Without limiting the
generality of the foregoing, at the Effective Time, all the properties, rights,
privileges, powers and franchises of Company and Newco will vest in the
Surviving Corporation, and all debts, liabilities and duties of Company and
Newco shall become the debts, liabilities and duties of the Surviving
Corporation.
2.6 RELEASE OF PERSONAL GUARANTEES. Company and Parent will ensure that
each of the Stockholders will be released from any personal guarantees of the
indebtedness of Company, and that Company will assume all obligations under
(i) those certain promissory notes dated March 7, 1997 issued by ▇▇▇▇▇ and
▇▇▇▇▇ ▇▇▇▇▇▇ in favor of ▇▇▇▇▇ and ▇.▇. ▇▇▇▇▇ in the original principal
amount of $10,000 and $30,303.62, and (ii) that certain promissory note dated
March 24, 1997 issued by ▇▇▇ ▇▇▇▇▇▇▇▇▇ in favor of Tulsa National Bank in the
original principal amount of $39,610.50.
3. CONVERSION OF STOCK
The manner of converting the shares of (i) outstanding Company Stock and
(ii) the Newco Stock issued and outstanding immediately prior to the Effective
Time into (x) shares of Parent Stock and (y) shares of common stock of the
Surviving Corporation, shall be as follows:
-6-
As of the Effective Time:
(i) all shares of Company Stock issued and outstanding immediately
prior to the Effective Time, by virtue of the Merger and without
any action on the part of the holders thereof, automatically
shall be deemed to represent the right to receive, in aggregate,
(i) -- shares of Parent Stock and (ii) $1,050,000 in cash, all as
more particularly set forth in Section 4.1;
(ii) all shares of Company Stock that are held by Company as treasury
stock shall be canceled and retired and no Parent Stock, cash or
other consideration shall be delivered or paid in exchange
therefor; and
(iii) each share of Newco Stock issued and outstanding immediately
prior to the Effective Time, by virtue of the Merger and without
any action on the part of the holder thereof, automatically shall
be deemed to represent the right to receive one fully paid and
non-assessable share of common stock of the Surviving
Corporation, which shall constitute all of the issued and
outstanding shares of common stock of the Surviving Corporation
immediately after the Effective Time.
4. DELIVERY OF MERGER CONSIDERATION
4.1 EFFECTIVE TIME. At the Effective Time, Stockholders shall, upon
surrender of their certificates representing the shares of Company Stock set
forth below, receive the number of shares of Parent Stock and cash set forth
opposite their names below:
Number of Shares Number of Shares
Name of Stockholder of Company Stock of Parent Stock Cash
------------------- ---------------- --------------- ----
▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 1,000 -- $ 450,000
▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ 1,000 -- $ 600,000
---------------- --------------- ----------
2,000 -- $1,050,000
---------------- --------------- ----------
4.2 CERTIFICATES. Stockholders shall present to Parent at the Closing
all certificates representing any and all shares of Company Stock, duly endorsed
in blank by Stockholders, or accompanied by blank stock powers, and with all
necessary transfer tax and other revenue stamps, acquired at Stockholders'
expense, affixed and canceled.
-7-
5. CLOSING
Prior to the taking of the actions described in clauses (i) and (ii) below
(the "Closing"), the parties to this Agreement shall take all actions necessary
to prepare to (i) effect the Merger (including the filing with the appropriate
state authorities of the Certificate of Merger which shall become effective at
the Effective Time) and (ii) effect the conversion of the shares and the
delivery of the Parent Stock referred to in Sections 3 and 4; provided, that
such actions shall not include the actual completion of the Merger or the
conversion of the shares and the delivery of the Parent Stock referred to in
Sections 3 and 4, each of which actions shall only be taken upon the Closing
Date as herein provided. The Closing shall take place on May 31, 1999, or such
other date as the parties hereto may designate (the "Closing Date"), at the
offices of McAfee & ▇▇▇▇ A Professional Corporation or at such place in Oklahoma
City, Oklahoma, as the parties may mutually agree. On the Closing Date (x) the
Certificate of Merger shall be or shall have been filed with the appropriate
state authorities so that they shall be or, as of 10:00 a.m. Central Standard
Time on the Closing Date, become effective and the Merger shall thereby be
effected and (y) all transactions contemplated by this Agreement, including the
conversion of the shares and delivery of the Parent Stock which the Stockholders
shall be entitled to receive pursuant to the Merger shall occur and be deemed to
be completed.
6. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF COMPANY AND
STOCKHOLDERS
Company and each Stockholder, jointly and severally represent, warrant,
covenant and agree (i) that all of the following representations and warranties
in this Section 6 are materially true at the date of this Agreement and, subject
to Section 9.7, shall be materially true at the Closing Date and (ii) that all
of the covenants and agreements in this Section 6 shall be materially complied
with or performed at and as of the Closing Date. For purposes of this Section
6, the term "Company" shall mean and refer to Company and all of its
Subsidiaries, if any.
6.1 DUE ORGANIZATION. Company is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation,
and is duly authorized and qualified to do business and is in good standing
under the laws of each jurisdiction where such qualification is required except
(i) as set forth on Schedule 6.1 or (ii) where the failure to be so authorized
or qualified would not have an adverse effect on the business, operations,
affairs, prospects, properties, assets or condition (financial or otherwise), of
Company taken as a whole (as used herein with respect to Company, or with
respect to any other Person, an "Adverse Effect"). Schedule 6.1 sets forth the
jurisdiction in which Company is incorporated and contains a list of all such
jurisdictions in which Company is authorized or qualified to do business. True,
complete and correct copies of the Charter Documents and Bylaws, each as
amended, of Company are all attached hereto as Schedule 6.1. The stock records
of Company, as heretofore made available to Parent, are correct and complete.
To the knowledge of Company and Stockholders, there are no minutes in the
possession of Company or Stockholders which have not been made available to
Parent, and all of such minutes are correct and complete.
-8-
6.2 AUTHORIZATION. Company has all requisite corporate power and
authority to enter into this Agreement and to perform its obligations hereunder.
The execution and delivery by Company of this Agreement and its consummation of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action of Company. This Agreement has been duly executed and
delivered by Company, and approved by all the stockholders of Company, and is a
valid and binding obligation of Company, enforceable against Company in
accordance with its terms.
6.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of
Company is as set forth in Schedule 2.4(i). All of the issued and outstanding
shares of the capital stock of Company are owned of record by Stockholders in
the amounts set forth in Section 4.1 and further, except as set forth on
Schedule 6.3, are owned free and clear of all mortgages, liens, security
interests, pledges, voting trusts, restrictions, encumbrances and claims of
every kind (collectively, the "Liens"). All of the issued and outstanding
shares of the capital stock of Company (i) have been duly authorized and validly
issued and (ii) are fully paid and nonassessable. Further, none of such shares
was issued in violation of the preemptive rights of any past or present
stockholder.
6.4 TRANSACTIONS IN CAPITAL STOCK. Except as set forth on Schedule 6.4,
Company has not acquired any Company Stock since January 1, 1995. Except as set
forth on Schedule 6.4, (i) no option, warrant, call, conversion right or
commitment of any kind exists which obligates Company to issue any of its
authorized but unissued capital stock; and (ii) Company has no obligation
(contingent or otherwise) to purchase, redeem or otherwise acquire any of its
equity securities or any interests therein or to pay any dividend or make any
distribution in respect thereof. Schedule 6.4 also includes complete and
accurate copies of all stock option or stock purchase plans, including a list of
all outstanding options, warrants or other rights to acquire shares of Company
Stock.
6.5 SUBSIDIARIES. Except as set forth in Schedule 6.5, (i) Company has
no Subsidiaries, (ii) Company does not presently own, of record or beneficially,
or control, directly or indirectly, any capital stock, securities convertible
into capital stock or any other equity interest in any Person, and (iii) Company
is not directly or indirectly, a participant in any joint venture, partnership
or other non-corporate entity.
6.6 PREDECESSOR STATUS; ETC. Set forth in Schedule 6.6 is a listing of
all names of all predecessor companies of Company, including the names of any
entities acquired by Company (by stock purchase, merger or otherwise) or owned
by Company or from whom the Company previously acquired assets in excess of
$25,000, in any case, since January 1, 1995.
6.7 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.7 are copies of
the following financial statements of Company (the "Company Financial
Statements"): Company's audited Balance Sheet as of December 31, 1997 and its
audited Balance Sheet as of December 31, 1998 ("December Balance Sheet"), and
audited Statements of Income, Retained Earnings and Cash Flows and any related
notes thereto for the years ended December 31, 1997 and 1998 (December 31, 1998
being hereinafter referred to as the "Balance Sheet Date"). The audited Company
Financial Statements have been prepared in accordance with generally accepted
-9-
accounting principles applied on a consistent basis throughout the periods
indicated (except as noted thereon or on Schedule 6.7). Except as set forth on
Schedule 6.7, the Balance Sheets referred to in this Section 6.7 present fairly
the financial position of Company as of the dates indicated thereon, and the
Statements of Income, Retained Earnings and Cash Flows referred to in this
Section 6.7 present fairly the results of operations for the periods indicated
thereon in accordance with generally accepted accounting principles. Company
Financial Statements at and for the years ended December 31, 1997 and 1998 have
been examined and reported on by Deloitte & Touche LLP.
6.8 LIABILITIES AND OBLIGATIONS. Company has delivered to Parent a list
(which is set forth on Schedule 6.8) as of the Balance Sheet Date of (i) all
liabilities of Company of any kind, character or description, whether accrued,
absolute, secured or unsecured, contingent or otherwise, that are not reflected
on the December Balance Sheet or otherwise reflected in the Company Financial
Statements at the Balance Sheet Date, and (ii) all loan agreements, indemnity or
guaranty agreements, bonds, mortgages, liens, pledges or other security
agreements. Except as set forth on Schedule 6.8, since the Balance Sheet Date
Company has not incurred any liabilities of any kind, character and description,
whether accrued, absolute, secured or unsecured, contingent or otherwise, other
than liabilities incurred in the ordinary course of business. Company has also
disclosed to Parent on Schedule 6.8, in the case of those contingent liabilities
related to pending or threatened litigation or other liabilities which are not
fixed or otherwise accrued or reserved, the following information:
(i) a summary description of the liability together with the
following:
(x) copies of all relevant documentation relating thereto;
(y) amounts claimed and any other action or relief sought; and
(z) name of claimant and all other parties to the claim, suit or
proceeding;
(ii) the name of each court or agency before which such claim, suit or
proceeding is pending; and
(iii) the date such claim, suit or proceeding was instituted.
6.9 ACCOUNTS AND NOTES RECEIVABLE. Company has delivered to Parent an
accurate list (which is set forth on Schedule 6.9) of the accounts and notes
receivable of Company, as of the most practicable date, including any such
amounts which are not reflected in the December Balance Sheet, and including
receivables from and advances to employees and Stockholders. Company shall also
provide Parent an aging of all accounts and notes receivable showing amounts due
in 30 day aging categories, and such list and such aging report (the "A/R Aging
Report") as of the most practicable date. Except to the extent reflected on
Schedule 6.9 or as disclosed by Company to Parent in a writing accompanying the
A/R Aging Report, such accounts, notes and other receivables are collectible in
the amounts shown on Schedule 6.9, and shall be collectible in the
-10-
amounts shown on the A/R Aging Report, net of reserves reflected in the December
Balance Sheet and as of the date of the A/R Aging Report, respectively.
6.10 PERMITS AND INTANGIBLES. Company holds all licenses, franchises,
permits and other governmental authorizations the absence of any of which could
have an Adverse Effect on its business, and Company has delivered to Parent an
accurate list and summary description (which is set forth on Schedule 6.10) of
all such licenses, franchises, permits and other governmental authorizations,
including titles, certificates, trademarks, trade names, patents, patent
applications and copyrights owned or held by Company (including interests in
software or other technology systems, programs and intellectual property) (it
being understood and agreed that a list of all environmental permits and other
environmental approvals is set forth on Schedule 6.11). To the knowledge of
Company, the licenses, franchises, permits and other governmental authorizations
listed on Schedules 6.10 and 6.11 are valid in all respects, and Company has not
received any notice that any governmental authority intends to cancel, terminate
or not renew any such license, franchise, permit or other governmental
authorization. Company has conducted and is conducting its business in
compliance with the requirements, standards, criteria and conditions set forth
in the licenses, franchises, permits and other governmental authorizations
listed on Schedules 6.10 and 6.11 and is not in violation of any of the
foregoing except where such non-compliance or violation would not have an
Adverse Effect on Company. Except as specifically provided in Schedule 6.10, the
transactions contemplated by this Agreement will not result in a default under
or a breach or violation of, or adversely affect the rights and benefits
afforded to Company (and to the Surviving Corporation after the Effective Time
of the Merger) by, any such license, franchise, permit or government
authorization.
6.11 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 6.11,
(i) Company has substantially complied with and is in compliance with all
Federal, state, local and foreign statutes (civil and criminal), laws,
ordinances, regulations, rules, notices, permits, judgments, orders and decrees
applicable to it or any of its properties, assets, operations and businesses
relating to environmental protection (collectively "Environmental Laws")
including, without limitation, Environmental Laws relating to air, water, land
and the generation, storage, use, handling, transportation, treatment or
disposal of Hazardous Wastes and Hazardous Substances including petroleum and
petroleum products (as such terms are defined in any applicable Environmental
Law); (ii) Company has obtained and substantially adhered to all necessary
permits and other approvals necessary to treat, transport, store, dispose of and
otherwise handle Hazardous Wastes and Hazardous Substances, a list of all of
which permits and approvals is set forth on Schedule 6.11, and has reported to
the appropriate authorities, to the extent required by all Environmental Laws,
all past and present sites owned and operated by Company where Hazardous Wastes
or Hazardous Substances have been treated, stored, disposed of or otherwise
handled; (iii) there have been no releases or threats of releases (as defined in
Environmental Laws) at, from, in or on any property owned or operated by Company
except as permitted by Environmental Laws; (iv) to the knowledge of Company, no
on-site or off-site location to which Company has transported or disposed of
Hazardous Wastes and Hazardous Substances or arranged for the transportation of
Hazardous Wastes and Hazardous Substances, which site is the subject of any
Federal, state, local or foreign enforcement action or any other investigation
which could lead to any claim against
-11-
Company, Parent or Newco for any clean-up cost, remedial work, damage to natural
resources, property damage or personal injury, including, but not limited to,
any claim under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended; and (v) Company has no contingent liability
in connection with any release of any Hazardous Waste or Hazardous Substance
into the environment.
6.12 PERSONAL PROPERTY. Company has delivered to Parent an accurate list
(which is set forth on Schedule 6.12) of (i) all personal property included (or
that will be included) in "depreciable plant, property and equipment" on the
balance sheet of Company, (ii) all other personal property owned by Company with
a value in excess of $5,000 (x) as of the Balance Sheet Date and (y) acquired
since the Balance Sheet Date and (iii) all written Leases in respect of personal
property, including, in the case of each of (i), (ii) and (iii), true, complete
and correct copies of all such Leases. Except as set forth on Schedule 6.12,
(a) all personal property used by Company in its business is either owned by
Company or leased by Company pursuant to a Lease included on Schedule 6.12,
(b) all of the personal property listed on Schedule 6.12 is in good working
order and condition, ordinary wear and tear excepted and (c) all leases and
agreements included on Schedule 6.12 are in full force and effect in all
respects and to the knowledge of Company constitute valid and binding agreements
of the parties (and their successors) thereto in accordance with their
respective terms.
6.13 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS. Company
has delivered to Parent an accurate list (which is set forth on Schedule 6.13)
of all significant customers, or persons or entities that are sources of a
significant number of customers, it being understood and agreed that a
"significant customer," for purposes of this Section 6.13, means a customer (or
person or entity) (i) representing 5% or more of Company's annual revenues as of
the Balance Sheet Date or (ii) reasonably expected to represent 5% or more of
Company's revenues during the twelve-month period ending December 31, 1998.
Except to the extent set forth on Schedule 6.13, none of Company's significant
customers (or persons or entities that are sources of a significant number of
customers) have canceled or substantially reduced or, to the knowledge of
Company, are currently attempting or threatening to cancel a contract or
substantially reduce utilization of the services provided by Company.
Company has listed on Schedule 6.13 all material contracts, commitments and
similar agreements to which the Company is a party or by which it or any of its
properties are bound (including, but not limited to, contracts with significant
customers, joint venture or partnership agreements, contracts with any labor
organizations, strategic alliances and options to purchase land), other than
agreements listed on Schedule 6.8, 6.12 or 6.14, (x) in existence as of the
Balance Sheet Date and (y) entered into since the Balance Sheet Date, and in
each case has delivered true, complete and correct copies of such agreements to
Parent. Company has complied with all commitments and obligations pertaining to
it, and is not in default under any contract or agreement listed on Schedule
6.13 and no notice of default under any such contract or agreement has been
received. Company has also indicated on Schedule 6.13 a summary description of
all plans or projects involving the acquisition of any personal property,
business or assets requiring, in any event, the payment of more than $5,000 by
Company.
-12-
6.14 REAL PROPERTY. Schedule 6.14 includes a list of all real property
owned or leased by Company (i) as of the Balance Sheet Date and (ii) acquired
since the Balance Sheet Date, and all other real property, if any, used by
Company in the conduct of its business. Company has good and insurable title to
the real property owned by it, including those reflected on Schedule 6.14,
subject to no Liens except for:
(w) Liens reflected on Schedules 6.8 or 6.13 as securing specified
liabilities (with respect to which no default exists);
(x) Liens for current taxes not yet payable and assessments not in
default;
(y) easements for utilities serving the property only; and
(z) easements, covenants and restrictions and other exceptions to
title shown of record in the office of the County Clerks in which
the properties, assets and leasehold estates are located which do
not adversely affect in any respect the current use of the
property.
Schedule 6.14 contains, without limitation, (1) true, complete and correct
copies of all title reports and title insurance policies currently in possession
of Company with respect to real property owned by Company, and (2) true,
complete and correct copies of all Leases and agreements in respect of such real
property leased by Company (which copies are attached to Schedule 6.14).
Except as set forth on Schedule 6.14, all of such Leases included on
Schedule 6.14 are in full force and effect in all respects and to the knowledge
of Company constitute valid and binding agreements of the parties (and their
successors) thereto in accordance with their respective terms.
6.15 INSURANCE. Company has delivered to Parent, as set forth on and
attached to Schedule 6.15, (i) an accurate list as of the Balance Sheet Date of
all insurance policies carried by Company, (ii) an accurate list of all
insurance loss runs on workers compensation claims received for the past three
policy years and (iii) true, complete and correct copies of all insurance
policies currently in effect. Such insurance policies evidence all of the
insurance that Company is required to carry pursuant to all of its contracts and
other agreements and pursuant to all applicable laws or that management of
Company otherwise believes is prudent and appropriate to insure against the
risks inherent in Company's business in accordance with industry practice. All
of such insurance policies are currently in full force and effect in all
respects and shall remain in full force and effect in all respects through the
Closing Date. Except as otherwise specified in Schedule 6.15, no insurance
carried by Company has been canceled by the insurer and the Company has never
been denied coverage.
6.16 COMPENSATION; ORGANIZED LABOR MATTERS. Company has delivered to
Parent an accurate list (which is set forth on Schedule 6.16) showing all
officers, directors and other key employees of Company and the rate of
compensation (and the portions thereof attributable to
-13-
salary, bonus and other compensation, respectively) of each of such persons as
of (i) the Balance Sheet Date and (ii) the date of this Agreement. Since the
Balance Sheet Date, there have been no increases in the compensation payable or
any special bonuses to any officer, director, key employee or other employee,
except ordinary salary increases implemented on a basis consistent with past
practices.
Except as set forth on Schedule 6.16, (w) Company is not bound by or
subject to (and none of its respective assets or properties is bound by or
subject to) any arrangement with any labor union, (x) no employees of Company
are represented by any labor union or covered by any collective bargaining
agreement, (y) to the knowledge of Company, no campaign to establish such
representation is in progress and (z) there is no pending or, to the best of
Company's knowledge, threatened labor dispute involving Company and any group of
its employees nor has Company experienced any labor interruption over the past
three years.
6.17 EMPLOYEE PLANS. The Stockholders have delivered to Parent an
accurate list (which is set forth on Schedule 6.17) showing all employee benefit
plans of Company, including all employment agreements and other agreements or
arrangements containing "golden parachute" or other similar provisions, and
deferred compensation agreements, together with true, complete and correct
copies of such plans, agreements and any trusts related thereto, and
classifications of employees covered thereby as of the Balance Sheet Date.
Except for the employee benefit plans, if any, described on Schedule 6.17, the
Company does not sponsor, maintain or contribute to any plan program, fund or
arrangement that constitutes an "employee pension benefit plan," and Company
does not have any obligation to contribute to or accrue or pay any benefits
under any deferred compensation or retirement funding arrangement on behalf of
any employee or employees (such as, for example, and without limitation, any
individual retirement account or annuity, any "excess benefit plan" (within the
meaning of Section 3(36) of the Employee Retirement Income Security Act of 1974,
as amended "ERISA") or any non-qualified deferred compensation arrangement).
For the purposes of this Agreement, the term "employee pension benefit plan"
shall have the same meaning as is given that term in Section 3(2) of ERISA.
Company has not sponsored, maintained or contributed to any employee pension
benefit plan other than the plans set forth on Schedule 6.17, nor is the Company
required to contribute to any retirement plan pursuant to the provisions of any
collective bargaining agreement establishing the terms and conditions or
employment of any of Company's employees.
Company is not now, nor as a result of its past activities can it
reasonably be expected to become, liable to the Pension Benefit Guaranty
Corporation (other than for premium payments) or to any multiemployer employee
pension benefit plan under the provisions of Title IV of ERISA.
All employee benefit plans listed on Schedule 6.17 and the administration
thereof are in substantial compliance with their terms and all applicable
provisions of ERISA and the regulations issued thereunder, as well as with all
other applicable Federal, state and local statutes, ordinances and regulations.
All accrued contribution obligations of Company or any Subsidiary with
respect to any plan
-14-
listed on Schedule 6.17 have either been fulfilled in their entirety or are
fully reflected on the balance sheet of Company as of the Balance Sheet Date.
6.18 COMPLIANCE WITH ERISA. All employee benefit plans listed on Schedule
6.17 that are intended to qualify (the "Qualified Plans") under Section 401(a)
of the Code are, and have been so qualified and have been determined by the
Internal Revenue Service to be so qualified, and copies of such determination
letters are included as part of Schedule 6.17. Except as disclosed on Schedule
6.17, all reports and other documents required to be filed with any governmental
agency or distributed to plan participants or beneficiaries (including, but not
limited to, actuarial reports, audits or Returns) have been timely filed or
distributed, and copies thereof are included as part of Schedule 6.17. Neither
Stockholders, any such plan listed in Schedule 6.17, nor Company has engaged in
any transaction prohibited under the provisions of Section 4975 of the Code or
Section 406 of ERISA. No employee benefit plan listed on Schedule 6.17 has
incurred an accumulated funding deficiency, as defined in Section 412(a) of the
Code and Section 302(1) of ERISA; and Company has not incurred (i) any liability
for excise tax or penalty payable to the Internal Revenue Service or (ii) any
liability to the Pension Benefit Guaranty Corporation (other than for premium
payments). In addition:
(v) there have been no terminations or discontinuance of
contributions to any Qualified Plan intended to qualify under
Section 401(a) of the Code without notice to and approval by the
Internal Revenue Service;
(w) no plan listed on Schedule 6.17 that is subject to the provisions
of Title IV of ERISA has been terminated;
(x) there have been no "reportable events" (as that phrase is defined
in Section 4043 of ERISA) with respect to employee benefit plans
listed in Schedule 6.17;
(y) Company has not incurred liability under Section 4062 of ERISA;
and
(z) except as set forth in Schedule 6.17, no circumstances exist
pursuant to which Company could reasonably be expected to have
any direct or indirect liability whatsoever (including, but not
limited to, any liability to any multiemployer plan or the
Pension Benefit Guaranty Corporation under Title IV of ERISA or
to the Internal Revenue Service for any excise tax or penalty, or
being subject to any statutory Lien to secure payment of any such
liability) with respect to any plan now or heretofore maintained
or contributed to by any entity other than Company that is, or at
any time was, a member of a "controlled group" (as defined in
Section 412(n)(6)(B) of the Code) that includes Company
("Controlled Group").
The transactions contemplated by this Agreement together with any amounts paid
or payable by
-15-
Company or any member of the Controlled Group have not resulted in and will not
result in payments to "disqualified individuals" (as defined in Section 280G(c)
of the Code) of Company or any member of the Controlled Group which,
individually or in the aggregate will constitute "excess parachute payments" (as
defined in Section 280G(b) of the Code) resulting in the imposition of the
excise tax under Section 4999 of the Code or the disallowance of deductions
under Section 280G of the Code.
6.19 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedule 6.19 or 6.11, Company is not in violation of any law or regulation or
any order of any court or Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over Company which would have an Adverse Effect; and except to the
extent set forth on Schedule 6.8 or 6.11, there are no claims, actions, suits or
proceedings, commenced or, to the knowledge of Company, threatened, against or
affecting Company, at law or in equity, or before or by any Federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over Company and no notice of any claim,
action, suit or proceeding, whether pending or threatened, has been received by
Company or any Stockholder. Company has conducted and is conducting its business
in substantial compliance with the requirements, standards, criteria and
conditions set forth in applicable Federal, state and local statutes,
ordinances, permits, licenses, orders, approvals, variances, rules and
regulations, including all such permits, licenses, orders and other governmental
approvals set forth on Schedules 6.10 and 6.11, and is not in violation of any
of the foregoing which might have an Adverse Effect.
6.20 TAX MATTERS.
(i) Company is currently taxed under Subchapter C of the Code, and
Company has filed all Tax Returns that it was required to file.
All such Tax Returns filed by Company were correct and complete
in all respects. All Taxes owed by Company (whether or not shown
on any Tax Return) have been paid or reserved for on its books.
Except as set forth on Schedule 6.20, Company is not currently
the beneficiary of any extension of time within which to file any
Tax Return. Since January 1, 1995, no claim with respect to
Company has been made by an authority in a jurisdiction where
Company does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction. There is no Lien affecting any of
Company's assets that arose in connection with any failure or
alleged failure to pay any Tax.
(ii) Company has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, shareholder or other
party.
(iii) Except as set forth in Schedule 6.8, Company does not expect any
authority to assess any amount of additional Taxes for any period
for which Tax
-16-
Returns have been filed. There is no dispute or claim concerning
any Tax liability of Company either claimed or raised by any
authority in writing or as to which Company has knowledge based
upon direct inquiry by any agent of such authority. Schedule
6.20(iii) lists all Tax Returns relating to income Tax of Company
for taxable periods ended on or after January 1, 1994, indicates
those Returns of which Company is aware that have been audited
and indicates those Returns that currently are the subject of
audit. Company has provided Parent access to correct and
complete copies of all Tax Returns, examination reports and
statements of deficiencies assessed against or agreed to by
Company for any taxable period ended on or after January 1, 1994.
(iv) Except as set forth on Schedule 6.20(iv), Company has not waived
any statute of limitations in respect of Taxes or agreed to any
extension of time with respect to a Tax assessment or deficiency.
(v) Company has not filed a consent under Section 341(f) of the Code
concerning collapsible corporations. Company has not made any
payments, is not obligated to make any payments and is not a
party to any agreement that under certain circumstances could
obligate it to make any payments that will not be fully
deductible under Section 280G of the Code.
(vi) Company has not received a ruling from any taxing authority or
entered into any agreement regarding Taxes with any taxing
authority that would, individually or in the aggregate, apply to
the Surviving Corporation after the Closing Date.
6.21 NO VIOLATIONS. Company is not in violation of its Charter Documents.
Neither Company nor, to the knowledge of the Company, any other party thereto,
is in default under any (i) Lease, instrument, agreement, license, or permit set
forth on Schedule 6.10, 6.11, 6.12, 6.13 or 6.14, or (ii) any other agreement to
which it is a party or by which its properties are bound (collectively, the
"Documents"); and, except as set forth in Schedule 6.21, (i) the rights and
benefits of Company under the Documents will not be adversely affected by the
transactions contemplated hereby and (ii) the execution of this Agreement and
the performance of the obligations hereunder and the consummation of the
transactions contemplated hereby will not result in any violation or breach or
constitute a default under, any of the terms or provisions of the Documents or
the Charter Documents. Except as set forth on Schedule 6.21, none of the
Documents requires notice to, or the consent or approval of, any governmental
agency or other third party with respect to any of the transactions contemplated
hereby in order to remain in full force and effect in all respects, and
consummation of the transactions contemplated hereby will not give rise to any
right to termination, cancellation or acceleration or loss of any right or
benefit. Except as set forth on Schedule 6.21, to the knowledge of Company none
of the Documents prohibits the use or publication by Company, Parent or Newco of
the name of any other party to such Document, and none of the Documents
prohibits or restricts Company from freely providing services to any other
-17-
customer or potential customer of Company, Parent, Newco or any other Founding
Company.
6.22 ABSENCE OF CHANGES. Since the Balance Sheet Date, except as set
forth on Schedule 6.22, there has not been:
(i) any adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of
Company taken as a whole;
(ii) any damage, destruction or loss (whether or not covered by
insurance) adversely affecting the properties or business of
Company;
(iii) any change in the authorized capital of Company or its
outstanding securities or any change in its ownership interests
or any grant of any options, warrants, calls, conversion rights
or commitments;
(iv) any declaration or payment of any dividend or distribution in
respect of the capital stock or any direct or indirect
redemption, purchase or other acquisition of any of the capital
stock of Company;
(v) any increase in the compensation, bonus, sales commissions or fee
arrangement payable or to become payable by Company to any of its
officers, directors, stockholders, employees, consultants or
agents, except for ordinary and customary bonuses and salary
increases for employees in accordance with past practice;
(vi) any work interruptions, labor grievances or labor claims filed,
or any other similar labor event or condition of any character,
adversely affecting the business of Company;
(vii) any sale or transfer, or any agreement to sell or transfer, any
assets, property or rights of Company to any person, including,
without limitation, Stockholders and their Affiliates outside the
ordinary course of business of Company;
(viii) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to Company, including without limitation
any indebtedness or obligation of any Stockholders or any
Affiliate thereof outside the ordinary course of business of
Company;
(ix) any plan, agreement or arrangement granting any preferential
right to purchase or acquire any interest in any of the assets,
property or rights of Company or requiring consent of any party
to the transfer and assignment of any such assets, property or
rights;
-18-
(x) any purchase or acquisition of, or agreement, plan or arrangement
to purchase or acquire, any property, right or asset outside of
the ordinary course of Company's business;
(xi) any waiver of any rights or claims of Company;
(xii) any breach, amendment or termination of any contract, agreement,
license, permit or other right to which Company is a party;
(xiii) any transaction by Company outside the ordinary course of its
business;
(xiv) any cancellation or termination of a contract with a customer or
client prior to the scheduled termination date; or
(xv) any other distribution of property or assets by Company outside
the ordinary course of Company's business.
6.23 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. Company has delivered to
Parent an accurate list (which is set forth on Schedule 6.23) as of the date of
the Agreement setting forth:
(i) the name of each financial institution in which Company has
accounts or safe deposit boxes;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or have access
thereto.
Schedule 6.23 also sets forth the name of each person, corporation, firm or
other entity holding a general or special power of attorney from Company and a
description of the terms of such power.
6.24 RELATIONS WITH GOVERNMENTS. Except for political contributions made
in a lawful manner which, in the aggregate, do not exceed $5,000 per year for
each year in which any Stockholder has been a stockholder of Company, Company
has not made, offered or agreed to offer anything of value to any governmental
official, political party or candidate for government office nor has it
otherwise taken any action which would cause Company to be in violation of the
Foreign Corrupt Practices Act of 1977, as amended, or any law of similar effect.
If political contributions made by Company have exceeded $5,000 per year for
each year in which any Stockholder has been a stockholder of Company, each
contribution shall be described on Schedule 6.24.
6.25 DISCLOSURE. This Agreement, including the Schedules and Annexes
hereto, together with all other documents and information made available to
Parent and its representatives in writing
-19-
pursuant hereto, present fairly the business and operations of Company for the
time periods with respect to which such information was requested. Company's
rights under the documents delivered pursuant hereto would not be adversely
affected by, and no statement made herein would be rendered untrue in any
respect by, any other document to which Company is a party, or to which its
properties are subject, or by any other fact or circumstance regarding Company
(which fact or circumstance was, or should reasonably, after due inquiry, have
been known to Company) that is not disclosed pursuant hereto or thereto.
6.26 PROHIBITED ACTIVITIES. Except as set forth on Schedule 6.26, Company
has not, between the Balance Sheet Date and the date of this Agreement, taken
any of the actions set forth in Section 9.3 ("Prohibited Activities").
7. ADDITIONAL REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF
STOCKHOLDERS
Each Stockholder further, severally and not jointly, represents, warrants,
covenants and agrees (i) that the representations and warranties set forth below
are true as of the date of this Agreement and, subject to Section 9.7, shall be
true at the Closing Date, (ii) that all of the covenants and agreements in this
Section 7 shall be complied with or performed at and as of the Closing Date and
(iii) that by executing this Agreement each Stockholder shall be deemed to have
approved the terms of the Merger as required by the OGCA.
7.1 AUTHORITY. Each Stockholder has the full legal right, power and
authority to enter into this Agreement. This Agreement has been executed and
delivered by each Stockholder and constitutes a legal, valid and binding
obligation of such Stockholder enforceable in accordance with its terms.
7.2 PREEMPTIVE RIGHTS. Each Stockholder does not have, or hereby waives,
any preemptive or other right to acquire shares of Company Stock or Parent Stock
that such Stockholder has or may have had, other than rights of any Stockholder
to acquire Parent Stock pursuant to (i) this Agreement or (ii) any option
granted by Parent.
7.3 ELECTION TO PUT STOCK. Stockholders may elect to sell all of their
Parent Stock to Parent, and Parent shall purchase all of the Parent Stock, at
the IPO price if Parent has not completed the IPO on or before the later of (i)
the 18-month anniversary of the Closing Date, or (ii) if Parent is in
registration for its IPO on the 18-month anniversary of the Closing Date, the
cancellation of Parent's registration efforts (the "Put Date"). Stockholders
must provide written notice of their intent to sell their Parent Stock to Parent
within 30 days after the Put Date. Any sales of Parent Stock by Stockholders to
Parent will be subject to the corporate laws of the State of Oklahoma with
regard to the ability of Parent to repurchase its own stock. The purchase price
for the sale of any Parent Stock to Parent by the Stockholders shall be paid, at
the election of Parent, either (i) within 90 days after the Put Date, or (ii) by
issuance of a promissory note payable over 7 years at an interest rate equal to
the Prime Rate listed in the Wall Street Journal on the date of issuance, which
issuance shall be no later than 90 days after the Put Date.
-20-
7.4 ELECTION TO CALL STOCK. Parent may elect to purchase all of the
Stockholders' Parent Stock, and Stockholders shall sell all of their Parent
Stock to Parent, at the IPO price if Parent has not completed the IPO on or
before the Put Date. Parent must provide written notice of its intent to
purchase the Stockholders' Parent Stock within 30 days after the Put Date. Any
purchase of Parent Stock by Parent will be subject to the corporate laws of the
State of Oklahoma with regard to the ability of Parent to repurchase its own
stock. The purchase price for the purchase of any Parent Stock by Parent shall
be paid, at the election of Parent, either (i) within 90 days after the Put
Date, or (ii) by issuance of a promissory note payable over 7 years at an
interest rate equal to the Prime Rate listed in the Wall Street Journal on the
date of issuance, which issuance shall be no later than 90 days after the Put
Date.
8. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF PARENT AND NEWCO
Parent and Newco, jointly and severally, represent, warrant, covenant and
agree (i) that all of the following representations and warranties in this
Section 8 are materially true at the date of this Agreement and, subject to
Section 9.7, shall be materially true at the Closing Date and (ii) that all of
the covenants and agreements in this Section 8 shall be materially complied with
or performed at and as of the Closing Date.
8.1 DUE ORGANIZATION. Parent and Newco are each corporations duly
organized, validly existing and in good standing under the laws of the State of
Oklahoma, and are duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities to
carry on their respective business in the places and in the manner as now
conducted, except where the failure to be so authorized or qualified would not
have an Adverse Effect. True, complete and correct copies of the Charter
Documents and Bylaws, each as amended, of Parent and Newco (the "Parent Charter
Documents") are all attached hereto as Schedule 8.1.
8.2 AUTHORIZATION. Parent and Newco each has all requisite corporate
power and authority to enter into this Agreement and to perform its obligations
hereunder. The execution and delivery of this Agreement by Parent and Newco and
their consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action of Parent and Newco. This
Agreement has been duly executed and delivered by Parent and Newco and is a
valid and binding obligation of Parent and Newco, enforceable against each of
them in accordance with its terms.
8.3 CAPITAL STOCK. The authorized capital stock of Parent and Newco is
as set forth in Schedule 2.4(ii) and Section 2.4(iii), respectively. All of the
issued and outstanding shares of the capital stock of Parent and Newco (i) have
been duly authorized and validly issued, (ii) are fully paid and nonassessable,
(iii) are owned of record and beneficially by the persons set forth on Schedule
2.4(ii) and Parent, respectively, and (iv) were offered, issued, sold and
delivered by Parent and Newco in compliance with all applicable state and
Federal laws concerning the offer, issuance, sale and delivery of securities.
Further, none of such shares was issued in violation of the
-21-
preemptive rights of any past or present stockholder of Parent or Newco.
8.4 TRANSACTIONS IN CAPITAL STOCK. Except as set forth on Schedule
2.4(ii), (i) no option, warrant, call, conversion right or commitment of any
kind exists which obligates Parent or Newco to issue any of its authorized but
unissued capital stock and (ii) neither Parent nor Newco has any obligation
(contingent or otherwise) to purchase, redeem or otherwise acquire any of its
equity securities or any interests therein or to pay any dividend or make any
distribution in respect thereof. Schedule 2.4(ii) also includes complete and
accurate copies of all stock option or stock purchase plans, including a list,
accurate as of the date hereof, of all outstanding options, warrants or other
rights to acquire shares of capital stock of Parent.
8.5 SUBSIDIARIES. Newco has no Subsidiaries. Parent has no Subsidiaries
except for Newco and each of the other companies identified on Schedule 8.5.
Except as set forth in the preceding sentence, neither Parent nor Newco
presently owns, of record or beneficially, or controls, directly or indirectly,
any capital stock, securities convertible into capital stock or any other equity
interest in a Person nor is Parent or Newco, directly or indirectly, a
participant in any joint venture, partnership or other non-corporation entity.
8.6 LIABILITIES AND OBLIGATIONS. Parent and Newco have no liabilities,
contingent or otherwise, except as set forth in or contemplated by this
Agreement or agreements similar to this Agreement with the Founding Companies
and except for fees incurred in connection with the transactions contemplated
hereby and thereby.
8.7 CONFORMITY WITH LAW; LITIGATION. Neither Parent nor Newco is in
violation of any law or regulation or any order of any court or Federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over either of them which would have a
Adverse Effect; and there are no claims, actions, suits or proceedings, pending
or, to the knowledge of Parent or Newco, threatened, against or affecting Parent
or Newco, at law or in equity, or before or by any Federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over either of them and no notice of any
claim, action, suit or proceeding, whether pending or threatened, has been
received. Parent and Newco have no operations.
8.8 NO VIOLATIONS. Neither Parent nor Newco is in violation of any
Parent Charter Document. None of Parent, Newco, or, to the knowledge of Parent
and Newco, any other party thereto, is in default under any lease, instrument,
agreement, license, or permit to which Parent or Newco is a party, or by which
Parent or Newco, or any of their respective properties, are bound (collectively,
the "Parent Documents"); and (i) the rights and benefits of Parent and Newco
under the Parent Documents will not be adversely affected by the transactions
contemplated hereby and (ii) the execution of this Agreement and the performance
of the obligations hereunder and the consummation of the transactions
contemplated hereby will not result in any violation or breach or constitute a
default under, any of the terms or provisions of the Parent Documents or the
Parent Charter Documents. Except as set forth on Schedule 8.8, none of the
Parent Documents requires notice to, or the consent or approval of, any
governmental agency or other third party with respect
-22-
to any of the transactions contemplated hereby in order to remain in full force
and effect, and consummation of the transactions contemplated hereby will not
give rise to any right to termination, cancellation or acceleration or loss of
any right or benefit.
8.9 PARENT SECURITIES. The shares of Parent Stock deliverable to the
Stockholders pursuant to this Agreement will have been duly authorized prior to
the Closing, and upon consummation of the Merger in accordance with this
Agreement, will be validly issued, fully paid and nonassessable.
8.10 BUSINESS; REAL PROPERTY; AGREEMENTS. Parent was formed in September
1998. Neither Parent nor Newco has conducted any business since the date of its
inception, except raising capital and in connection with this Agreement and
similar agreements with the Founding Companies. Except as disclosed on Schedule
8.10, neither Parent nor Newco owns or has at any time owned any real property
or any personal property or is a party to any other agreement.
9. OTHER COVENANTS PRIOR TO CLOSING
9.1 ACCESS AND COOPERATION; DUE DILIGENCE; AUDITS.
(i) Between the date of this Agreement and the Closing Date, Company
will afford to the officers and authorized representatives of
Parent access to all of Company's sites, properties, books and
records and will furnish Parent with such additional financial
and operating data and other information as to the business and
properties of Company as Parent may from time to time reasonably
request. Company will cooperate with Parent, its representatives,
auditors and counsel in the preparation of any documents or other
material that may be required in connection with any documents or
materials required by this Agreement. Parent and Newco will
treat all information obtained in connection with the negotiation
and performance of this Agreement as confidential in accordance
with the provisions of Section 16.
(ii) Between the date of this Agreement and the Closing, Parent will
afford to the officers and authorized representatives of Company
and Stockholders access to all of the sites, properties, books
and records of Parent, Newco and the other companies listed on
Schedule 9.1(ii) ("Founding Companies") and will furnish Company
and Stockholders with such additional financial and operating
data and other information as to the business and properties of
Parent, Newco and the Founding Companies as Company and
Stockholders may from time to time reasonably request. Parent
and Newco will cooperate with Company and Stockholders'
representatives, auditors and counsel in the preparation of any
documents or other material which may be required in connection
with any documents or materials required by this Agreement.
Company and Stockholders will cause all information obtained in
connection with the negotiation and performance of this Agreement
to be
-23-
treated as confidential in accordance with the provisions of
Section 16.
9.2 CONDUCT OF BUSINESS PENDING CLOSING. Unless otherwise approved in
writing by Parent, between the date of this Agreement and the Closing Date,
Company will:
(i) carry on its business in substantially the same manner as it has
heretofore and not introduce any material new method of
management, operation or accounting;
(ii) maintain its properties and facilities, including those held
under lease, in as good working order and condition as at
present, ordinary wear and tear excepted;
(iii) perform in all material respects all of its obligations under
agreements relating to or affecting its respective assets,
properties or rights;
(iv) keep in full force and effect in all material respects the
present insurance policies or other comparable insurance
coverage;
(v) use its reasonable best efforts to maintain and preserve its
business organization intact, retain its respective present key
employees and maintain its respective relationships with
suppliers, customers and others having business relations with
it;
(vi) maintain material compliance with all material permits, laws,
rules and regulations, consent orders, and all other orders of
applicable courts, regulatory agencies and similar governmental
authorities;
(vii) maintain present debt instruments and Leases and not enter into
new or amended debt instruments or Leases; and
(viii) maintain or reduce present salaries and commission levels for all
officers, directors, employees and agents except for ordinary and
customary bonus and salary increases for employees in accordance
with past practices.
9.3 PROHIBITED ACTIVITIES BY THE COMPANY. Between the date of this
Agreement and the Closing Date, Company will not, without prior written consent
of Parent:
(i) make any change in its Charter Documents or Bylaws;
(ii) issue any securities, options, warrants, calls, conversion rights
or commitments relating to its securities of any kind other than
in connection with the exercise of options or warrants listed in
Schedule 6.4;
-24-
(iii) declare or pay any dividend, or make any distribution in respect
of Company Stock whether now or hereafter outstanding, or
purchase, redeem or otherwise acquire or retire for value any
shares of Company Stock;
(iv) enter into any contract or commitment or incur or agree to incur
any liability or make any capital expenditures, except if it is
in the normal course of business (consistent with past practice),
in connection with the transactions contemplated by this
Agreement, or involves an amount not in excess of $5,000;
(v) create, assume or permit to exist any Lien upon any asset or
property whether now owned or hereafter acquired, except (x) with
respect to purchase money Liens incurred in connection with the
acquisition of equipment with an aggregate cost not in excess of
$5,000 as necessary or desirable for the conduct of its business,
(y) (1) Liens for Taxes either not yet due or being contested in
good faith and by appropriate proceedings (and for which
contested Taxes adequate reserves have been established and are
being maintained) or (2) materialmen's, mechanic's, worker's,
repairmen's, employee's or other like Liens arising in the
ordinary course of business, or (3) Liens set forth on Schedule
6.8 or 6.13;
(vi) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business;
(vii) negotiate for the acquisition of any business or the start-up of
any new business;
(viii) merge or consolidate or agree to merge or consolidate with or
into any other corporation;
(ix) waive any material right or claim; provided that it may negotiate
and adjust bills in the course of good faith disputes with
customers in a manner consistent with past practice, provided,
further, that such adjustments shall not be deemed to be included
in Schedule 6.9 unless specifically listed thereon;
(x) commit a material breach or amend or terminate any material
agreement, permit, license or other right; or
(xi) enter into any other transaction outside the ordinary course of
its business or prohibited hereunder.
9.4 EXCLUSIVITY. Neither any Stockholder, nor Company, nor any agent,
officer, director, trustee or any representative of any of the foregoing will,
during the period commencing
-25-
on the date of this Agreement and ending with the earlier to occur of the
Closing Date or the termination of this Agreement in accordance with its terms,
directly/or indirectly:
(i) solicit or initiate the submission of proposals or offers from
any person for,
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person other than Parent or its
authorized agents relating to any acquisition or purchase of all
or a material amount of the assets of, or any equity interest in,
Company, or merger, consolidation or business combination of
Company.
9.5 AGREEMENTS. Stockholders and Company shall terminate (i) any
stockholders agreements, voting agreements, voting trusts, options, warrants and
employment agreements between the Company and any employee listed on Schedule
6.16 and (ii) any existing agreement between Company and any Stockholder, on or
prior to the Closing Date, except as otherwise set forth on Schedule 9.5.
Copies of such termination agreements are listed on Schedule 9.5 and copies
thereof are attached thereto.
9.6 NOTIFICATION OF CERTAIN MATTERS. Stockholders and Company shall give
prompt notice to Parent of (i) the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which would likely cause any representation or
warranty of Company or Stockholders contained herein to be untrue or inaccurate
in any respect at or prior to the Closing Date and (ii) any failure of any
Stockholder or Company to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by such Person hereunder as of such
date. Parent and Newco shall give prompt notice to the Company of (i) the
occurrence or non-occurrence of any event the occurrence or non-occurrence of
which would likely cause any representation or warranty of Parent or Newco
contained herein to be untrue or inaccurate in any respect at or prior to the
Closing Date and (ii) any failure of Parent or Newco to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
hereunder as of such date. The delivery of any notice pursuant to this Section
9.6 shall not be deemed to (i) modify the representations or warranties
hereunder of the party delivering such notice, which modification may only be
made pursuant to Section 9.7, (ii) modify the conditions set forth in Sections
10 and 11, or (iii) limit or otherwise affect the remedies available hereunder
to the party receiving such notice.
9.7 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with
respect to the representations and warranties of such party contained in this
Agreement, such party shall have the continuing obligation until 11:59 p.m.
March 31, 1999 to supplement or amend promptly the Schedules with respect to
any matter hereafter arising or discovered which, if existing or known at the
date of this Agreement, would have been required to be set forth or described
in the Schedules. Notwithstanding the foregoing sentence, no amendment or
supplement to a Schedule prepared by Company or Parent that constitutes or
reflects an event or occurrence that would have a Adverse Effect may be made
unless the parties not making the amendment or supplement consent to such
amendment or supplement. For all purposes of this Agreement, including
without limitation for
-26-
purposes of determining whether the conditions set forth in Sections 10.1 and
11.1 have been fulfilled, the Schedules shall be deemed to be the Schedules as
amended or supplemented pursuant to this Section 9.7. Except as otherwise
specified in Section 16.3, no party to this Agreement shall be liable to any
other party if this Agreement shall be terminated pursuant to the provisions of
Section 14.1(iv). Neither the entry by Parent into any other agreement, such as
this Agreement, after the date hereof for the acquisition of one or more
companies nor the performance by Parent of its obligations thereunder shall be
deemed to require the amendment to or a supplementation of any Schedule hereto.
9.8 FURTHER ASSURANCE. The parties hereto agree to execute and deliver,
or cause to be executed and delivered, such further instruments or documents or
take such other action as may be reasonably necessary or convenient to carry out
the transactions contemplated by this Agreement.
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY
The obligations of Stockholders and Company with respect to actions to be
taken on the Closing Date are subject to the satisfaction or waiver on or prior
to the Closing Date of all of the following conditions.
10.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All
representations and warranties of Parent and Newco contained in this Agreement
shall be true and correct as of the Closing Date with the same effect as though
such representations and warranties had been made on and as of such date; all of
the terms, covenants and conditions of this Agreement to be complied with or
performed by Parent and Newco on or before the Closing Date shall have been duly
complied with or performed; and a certificate to the foregoing effect dated the
Closing Date, and signed by the President or any Vice President of Parent and of
Newco shall have been delivered to Company.
10.2 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger and no governmental agency or body shall have taken any
other action or made any request of Company as a result of which the management
of Company deems it inadvisable to proceed with the transactions hereunder.
10.3 CONSENTS AND APPROVALS. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made.
10.4 GOOD STANDING CERTIFICATES. Parent and Newco each shall have
delivered to Company a certificate, dated as of a date no later than ten days
prior to the Closing Date, duly issued by the Oklahoma Secretary of State,
showing that each of Parent and Newco is in good standing and authorized to do
business and that all state franchise and/or income tax returns and taxes for
Parent and Newco, respectively, for all periods prior to the Closing Date have
been filed
-27-
and paid to the extent required.
10.5 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have
occurred with respect to Parent or Newco that would constitute a material
Adverse Effect.
10.6 SECRETARY'S CERTIFICATES. Company shall have received a certificate
or certificates, dated the Closing Date and signed by the Secretary of Parent
and of Newco, certifying the completeness and accuracy of the attached copies of
Parent's and Newco's respective Charter Documents (including amendments
thereto), Bylaws (including amendments thereto), and resolutions of the boards
of directors and, if required, the stockholders of Parent and Newco approving
Parent's and Newco's entering into this Agreement and the consummation of the
transactions contemplated hereby.
10.7 EMPLOYMENT AGREEMENTS. Each of the persons listed in Schedule 10.8
shall have been afforded an opportunity to enter into an employment agreement,
or nonexclusive interconnect acquisition representation agreement, as applicable
reasonably acceptable to both parties and substantially in the form of Annex II
or III.
10.8 CLOSING OF THE IPO OR THE PRIVATE PLACEMENT. Parent shall have
received at least $15,000,000 in gross proceeds from Parent's IPO or Private
Placement.
11. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND NEWCO
The obligations of Parent and Newco with respect to actions to be taken on
the Closing Date are subject to the satisfaction or waiver on or prior to the
Closing Date of all of the following conditions.
11.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All the
representations and warranties of Stockholders and Company contained in this
Agreement shall be true and correct as of the Closing Date with the same effect
as though such representations and warranties had been made on and as of such
date; all of the terms, covenants and conditions of this Agreement to be
complied with or performed by Stockholders and Company on or before the Closing
Date shall have been duly complied with or performed; and Stockholders and
Company each shall have delivered to Parent a certificate dated the Closing Date
and signed by them to such effect.
11.2 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger and no governmental agency or body shall have taken any
other action or made any request of Parent as a result of which the management
of Parent deems it inadvisable to proceed with the transactions hereunder.
11.3 SECRETARY'S CERTIFICATE. Parent shall have received a certificate,
dated the Closing Date and signed by the Secretary of the Company, certifying
the completeness and accuracy of the
-28-
attached copies of Company's Charter Documents (including amendments thereto),
Bylaws (including amendments thereto), and resolutions of the board of directors
and Stockholders approving Company's entering into this Agreement and the
consummation of the transactions contemplated hereby.
11.4 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have
occurred with respect to Company which would constitute a material Adverse
Effect, and Company shall not have suffered any material loss or damages to any
of its properties or assets, whether or not covered by insurance, which change,
loss or damage materially affects or impairs the ability of Company to conduct
its business.
11.5 STOCKHOLDERS' RELEASE. Stockholders shall have delivered to Parent
an instrument dated the Closing Date releasing Company from (i) any and all
claims of Stockholders against Company and Parent and (ii) obligations of
Company and Parent to Stockholders, except for (x) items specifically identified
on Schedules 6.8 and 6.13 as being claims of or obligations to Stockholders and
(y) obligations arising under this Agreement or the transactions contemplated
hereby.
11.6 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on
Schedule 11.6, all existing agreements between Company and Stockholders shall
have been canceled effective prior to or as of the Closing Date.
11.7 CONSENTS AND APPROVALS. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; and all
consents and approvals of third parties listed on Schedule 6.21 shall have been
obtained.
11.8 GOOD STANDING CERTIFICATES. The Company shall have delivered to
Parent a certificate, dated as of a date no earlier than ten days prior to the
Closing Date, duly issued by the appropriate governmental authority in Company's
state of incorporation and, unless waived by Parent, in each state in which
Company is authorized to do business, showing Company is in good standing and
authorized to do business.
11.9 FIRPTA CERTIFICATE. Each Stockholder shall have delivered to Parent
a certificate to the effect that he or she is not a foreign person under Section
111445-2(b) of the Treasury regulations.
11.10 CLOSING OF THE IPO OR PRIVATE PLACEMENT. Parent shall have received
at least $15,000,000 in gross proceeds from Parent's IPO or Private Placement.
11.11 EMPLOYMENT AGREEMENT. Each of the persons listed in Schedule 10.8
shall have been afforded an opportunity to enter into an employment agreement,
or nonexclusive interconnect acquisition representation agreement, as
applicable, reasonably acceptable to both parties and
-29-
substantially in the form of Annex II or III.
11.12 FINANCIAL STATEMENTS. Company shall have provided Parent audited
Balance Sheets as of December 31, 1997 and 1998 and audited Statements of
Income, Retained Earnings and Cash Flows for each of the years in the two-year
period ended December 31, 1998.
12. ADDITIONAL COVENANTS OF PARENT AND STOCKHOLDERS
12.1 PREPARATION AND FILING OF TAX RETURNS.
(i) Company shall file or cause to be filed all Federal, state and
local income Tax Returns of Company for all taxable periods that
end on or before the Closing Date.
(ii) Parent shall file or cause to be filed all separate Returns of,
or that include, Company for all taxable periods ending after the
Closing Date.
(iii) Each party hereto shall, and shall cause its Subsidiaries and
Affiliates to, provide to each of the other parties hereto such
cooperation and information as any of them reasonably may request
in filing any Return, amended Return or claim for refund,
determining a liability for Taxes or a right to refund of Taxes
or in conducting any audit or other proceeding in respect of
Taxes. Such cooperation and information shall include providing
copies of all relevant portions of relevant Returns, together
with relevant accompanying schedules and work papers, relevant
documents relating to rulings or other determinations by Taxing
Authorities and relevant records concerning the ownership and Tax
basis of property, which such party may possess. Each party shall
make its employees reasonably available on a mutually convenient
basis at its cost to provide explanation of any documents or
information so provided.
12.2 PRESERVATION OF EMPLOYEE BENEFIT PLANS. Following the Closing Date,
Parent shall not terminate any health insurance, life insurance or 401(k) plan
in effect at Company until such time as Parent is able to replace such plan with
a plan that is applicable to Parent and all of its then existing Subsidiaries;
provided that Parent shall have no obligation to provide replacement plans that
have the same terms and provisions as the existing plans; provided, further,
that any new health insurance plan shall provide for coverage for preexisting
conditions. On the Closing Date, the employees of Company will be the employees
of the Surviving Corporation (provided that this provision is for purposes of
clarifying that the Merger, in and of itself, will not have any impact on the
employment status of any employee; and provided further that this provision
shall not in any way limit the management rights of the Surviving Corporation or
Parent to assess workforce needs and make appropriate adjustments as necessary
or desirable within its discretion subject to applicable laws and collective
bargaining agreements).
-30-
13. INDEMNIFICATION
Stockholders, Parent and Newco each make the following covenants that are
applicable to them, respectively:
13.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. Stockholders covenant
and agree that they, severally and not jointly in the case of representations,
warranties, covenants and agreements set forth in Section 7, and jointly and
severally in all other cases, will indemnify, defend, protect and hold harmless
Parent, Newco, Company and the Surviving Corporation at all times, from and
after the Closing Date until the Expiration Date, from and against all claims,
damages, actions, suits, proceedings, demands, assessments, adjustments, costs
and expenses (including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation) incurred by Parent, Newco,
Company or the Surviving Corporation as a result of or arising from any breach
of any representation, warranty, covenant or agreement on the part of
Stockholders or Company under this Agreement. Stockholders' obligation under
this Section 13.1 shall not exceed the dollar value, determined as of the
Effective Time, of the Parent Stock and Cash received by Stockholders pursuant
to this Agreement.
13.2 INDEMNIFICATION BY PARENT. Parent covenants and agrees that it will
indemnify, defend, protect and hold harmless Stockholders at all times from and
after the Closing Date until the Expiration Date, from and against all claims,
damages, actions, suits, proceedings, demands, assessments, adjustments, costs
and expenses (including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation) incurred by Stockholders as a
result of or arising from any breach of any representation, warranty, covenant
or agreement on the part of Parent or Newco under this Agreement.
13.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter
the "Indemnified Party") has received notice of or has knowledge of any claim by
a person not a party to this Agreement ("Third Person"), or the commencement of
any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect thereto being made against any party
obligated to provide indemnification pursuant to Section 13.1 or 13.2
(hereinafter the "Indemnifying Party"), give the Indemnifying Party written
notice of such claim or the commencement of such action or proceeding. Such
notice shall state the nature and the basis of such claim and a reasonable
estimate of the amount thereof. The Indemnifying Party shall have the right to
defend and settle, at its own expense and by its own counsel, any such matter so
long as the Indemnifying Party pursues the same diligently and in good faith;
provided that the Indemnifying Party shall not settle any criminal proceeding
without the written consent of the Indemnified Party. If the Indemnifying Party
undertakes to defend or settle, it shall promptly notify the Indemnified Party
of its intention to do so, and the Indemnified Party shall cooperate with the
Indemnifying Party and its counsel in the defense thereof and in any settlement
thereof. Such cooperation shall include, but shall not be limited to,
furnishing the Indemnifying Party with any books, records or information
reasonably requested by the Indemnifying Party that are in the Indemnified
Party's possession or control. All Indemnified Parties shall use the same
counsel, which shall be the counsel selected by Indemnifying Party; provided
that if counsel to the Indemnifying Party shall
-31-
have a conflict of interest that prevents counsel for the Indemnifying Party
from representing the Indemnified Party, the Indemnified Party shall have the
right to participate in such matter through counsel of its own choosing and the
Indemnifying Party shall be responsible for the reasonable expenses of such
counsel. After the Indemnifying Party has notified the Indemnified Party of its
intention to undertake to defend or settle any such asserted liability, and for
so long as the Indemnifying Party diligently pursues such defense, the
Indemnifying Party shall not be liable for any additional legal expenses
incurred by the Indemnified Party in connection with any defense or settlement
of such asserted liability, except to the extent such participation is requested
by the Indemnifying Party, in which event the Indemnified Party shall be
reimbursed by the Indemnifying Party for reasonable additional legal expenses
and out-of-pocket expenses. If the Indemnifying Party desires to accept a final
and complete settlement of any such Third Person claim and the Indemnified Party
refuses to consent to such settlement, then the Indemnifying Party's liability
under this Section 13.3 with respect to such Third Person claim shall be limited
to the amount so offered in settlement by such Third Person. Upon agreement as
to such settlement between such Third Person and the Indemnifying Party, the
Indemnifying Party shall, in exchange for a complete release from the
Indemnified Party, promptly pay to the Indemnified Party the amount agreed to in
such settlement and the Indemnified Party shall, from that moment on, bear full
responsibility for any additional costs of defense which it subsequently incurs
with respect to such claim and all additional costs of settlement or judgment.
If the Indemnifying Party does not undertake to defend such matter to which the
Indemnified Party is entitled to indemnification hereunder or fails diligently
to pursue such defense, the Indemnified Party may undertake such defense through
counsel of its choice, at the cost and expense of the Indemnifying Party, and
the Indemnified Party may settle such matter upon consent of the Indemnifying
Party, which consent will not be unreasonably withheld, and the Indemnifying
Party shall reimburse the Indemnified Party for the amount paid in such
settlement and any other liabilities or expenses incurred by the Indemnified
Party in connection therewith. All settlements hereunder shall effect a
complete release of the Indemnified Party, unless the Indemnified Party
otherwise agrees in writing. Anything in this Agreement to the contrary
notwithstanding, any amounts owing from an Indemnifying Party to an Indemnified
Party under the provisions of this Section 13 shall be reduced to the extent to
which the Indemnified Party, or any other claimant, actually receives any
proceeds of any insurance policy that are paid with respect to the matter or
occurrence that gave rise to the Third Person claim. Submission to insurance of
any insurable claim otherwise giving rise to indemnification under this Section
13 shall be a condition precedent to seeking indemnification under this Section.
13.4 EXCLUSIVE REMEDY. The indemnification provided for in this Section
13 shall be the exclusive remedy in any action seeking damages or any other form
of monetary relief brought by any party to this Agreement against another party;
provided that nothing herein shall be construed to limit the right of a party,
in a proper case, to seek injunctive relief for a breach of this Agreement.
13.5 LIMITATIONS ON INDEMNIFICATION. No person shall be entitled to
indemnification under this Section 13 if and to the extent that such person's
claim for indemnification is directly or indirectly related to a breach by such
person of any representation, warranty, covenant or agreement set forth in this
Agreement.
-32-
14. TERMINATION OF AGREEMENT
14.1 TERMINATION. This Agreement may be terminated at any time prior to
the Closing Date solely:
(i) by mutual consent of the boards of directors of Parent and
Company;
(ii) by Company (acting through its board of directors), on the one
hand, or by Parent (acting through its board of directors), on
the other hand, if the transactions contemplated by this
Agreement to take place at the Closing shall not have been
consummated by May 31, 1999 unless the failure of such
transactions to be consummated is due to the willful failure of
the party seeking to terminate this Agreement to perform any of
its obligations under this Agreement to the extent required to be
performed by it prior to or on the Closing Date;
(iii) by Stockholders or Company, on the one hand, or by Parent, on the
other hand, if a material breach or default shall be made by the
other party in the observance or in the due and timely
performance of any of the material covenants, agreements or
conditions contained herein, and the curing of such default shall
not have been made on or before the Closing Date; or
(iv) by Company and Stockholders, on the one hand, or by Parent, on
the other hand, if either such party or parties declines to
consent to an amendment or supplement to a Schedule proposed by
the other party or parties pursuant to Section 9.7 because such
proposed amendment constitutes or reflects an event or occurrence
that would have a material Adverse Effect on the party or parties
proposing the same.
14.2 LIABILITIES IN EVENT OF TERMINATION. Except as provided in Section
9.7, the termination of this Agreement will in no way limit any obligation or
liability of any party based on or arising from a breach or default by such
party with respect to any of its representations, warranties, covenants or
agreements contained in this Agreement.
15. NONCOMPETITION
15.1 PROHIBITED ACTIVITIES. Each Stockholder (other than any Stockholder
subject to an employment agreement listed in Schedule 10.7, each of which is
expressly excepted from the obligations imposed by this Section 15) will not,
for a period of two years following the Closing Date, for any reason whatsoever,
directly or indirectly, for himself or on behalf of or in conjunction with any
other Person:
(i) engage, as an officer, director, stockholder, owner, partner,
joint venturer, or
-33-
in a managerial capacity, whether as an employee, independent
contractor, consultant or advisor, or as a sales representative,
in the sale or marketing of telecommunication services or
interconnect services within the city of Tulsa, Oklahoma or 150
miles radius thereof (the "Territory");
(ii) call upon any person within the Territory who is an employee of
Parent (including the Subsidiaries thereof) in a sales
representative or managerial capacity for the purpose or with the
intent of enticing such employee away from or out of the employ
of Parent (including the Subsidiaries thereof);
(iii) call upon any Person which is or which has been, within one year
prior to the Closing Date, a customer of Parent (including the
Subsidiaries thereof) for the purpose of soliciting or selling
products or services in direct competition with Parent (or its
Subsidiaries);
(iv) call upon any prospective acquisition candidate, on any
Stockholder's own behalf or on behalf of any competitor of Parent
(including the Subsidiaries thereof) in the long-distance
telephone or interconnect business, which candidate, to the
knowledge of such Stockholder after due inquiry, was called upon
by Parent (including the Subsidiaries thereof) or for which, to
the knowledge of such Stockholder after due inquiry, Parent (or
any Subsidiary thereof) made an acquisition analysis, for the
purpose of acquiring such entity; or
(v) disclose existing or prospective customers of Company to any
Person for any reason or purpose whatsoever except to the extent
that the Company has in the past disclosed such information to
the public for valid business reasons.
Notwithstanding the above, the foregoing covenants shall not be deemed to
prohibit any Stockholder from acquiring as an investment after the date of this
Agreement not more than five percent of the capital stock of a competing
business whose stock is traded on a national securities exchange or the National
Association of Securities Dealers' Automated Quotation System.
15.2 DAMAGES. Because of the difficulty of measuring economic losses to
Parent as a result of a breach of the foregoing covenants, and because of the
immediate and irreparable damage that could be caused to Parent for which it
would have no other adequate remedy, each Stockholder agrees that the foregoing
covenants may be enforced by Parent in the event of breach by such Stockholder,
by injunction and restraining order.
15.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section 15 impose a reasonable restraint on the
Stockholders in light of the activities and business of Parent (including the
Subsidiaries thereof) on the date of the execution of this Agreement and the
reasonably foreseeable plans of Parent.
-34-
15.4 SEVERABILITY, REFORMATION. The covenants in this Section 15 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent the court
deems reasonable, and the Agreement shall thereupon be automatically reformed.
15.5 INDEPENDENT COVENANT. All of the covenants in this Section 15 shall
be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any Stockholder
against Parent (including the Subsidiaries thereof), whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by
Parent of such covenants. It is specifically agreed that the period of three
years stated at the beginning of this Section 15, during which the agreements
and covenants of each Stockholder made in this Section 15 shall be effective,
shall be computed by excluding from such computation any time during which such
Stockholder is in violation of any provision of this Section 15. The covenants
contained in Section 15 shall not be affected by any breach of any other
provision hereof by any party hereto and shall become nugatory if the
transactions contemplated by this Agreement are not consummated.
15.6 MATERIALITY. Stockholders hereby agree that the covenants set forth
in this Section 15 are a material and substantial part of the transactions
contemplated by this Agreement.
16. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
16.1 COMPANY AND STOCKHOLDERS. Company and Stockholders recognize and
acknowledge that they had in the past, currently have, and in the future may
have, access to certain confidential information of Company, the Founding
Companies and/or Parent, such as operational policies, and pricing and cost
policies that are valuable, special and unique assets of Company, the Founding
Companies and/or Parent. Company and Stockholders agree that they will not
disclose such confidential information to any Person for any purpose or reason
whatsoever, except (i) to authorized representatives of Parent; (ii) following
the Closing, such information may be disclosed by Company and Stockholders as is
required in the course of performing their duties for Parent or the Surviving
Corporation; and (iii) to counsel and other advisers; provided that such
advisers (other than counsel) agree to the confidentiality provisions of this
Section 16.1, unless (x) such information becomes known to the public generally
through no fault of Stockholders, (y) disclosure is required by law or the order
of any governmental authority under color of law; provided, that prior to
disclosing any information pursuant to this clause (y), Stockholders, if
possible, shall give immediate prior written notice thereof to Parent and
provide Parent with the opportunity to contest such disclosure, or (z) the
disclosing party reasonably believes that such disclosure is required in
connection with the defense of a lawsuit against the disclosing party. In the
event of a breach or threatened breach by any Stockholder of the provisions of
this Section 16.1, Parent shall be entitled to an injunction (without the
posting of bond or proof of actual damages) restraining such Stockholders from
disclosing, in whole or in part, such confidential information. Nothing herein
-35-
shall be construed as prohibiting Parent from pursuing any other available
remedy for such breach or threatened breach, including the recovery of damages.
In the event the transactions contemplated by this Agreement are not
consummated, (1) the above mentioned restrictions on each Stockholder's ability
to disseminate confidential information with respect to Company shall become
nugatory and (2) each Stockholder (including his representatives, advisors and
legal counsel) shall within ten business days of the Parent's request, deliver
all copies of the confidential information of Parent in his possession in any
form whatsoever (including, but not limited to, any reports, memoranda, or other
material prepared by such Stockholder or his representatives, advisors or legal
counsel).
16.2 PARENT AND NEWCO. Parent and Newco recognize and acknowledge that
they had in the past and currently have and in the future may have, prior to the
Closing, access to certain confidential information of Company, such as
operational policies, and pricing and cost policies that are valuable, special
and unique assets of Company. Parent and Newco agree that, prior to the
Closing, or if the transactions contemplated by this Agreement are not
consummated, they will not disclose such confidential information to any person
for any purpose or reason whatsoever, except (i) to authorized representatives
of Company; and (ii) to counsel and other advisers; provided that such advisers
(other than counsel) agree to the confidentiality provisions of this Section
16.2, unless (x) such information becomes known to the public generally through
no fault of Parent or Newco, (y) disclosure is required by law or the order of
any governmental authority under color of law; provided, that prior to
disclosing any information pursuant to this clause (y), Parent and Newco shall,
if possible, give immediate prior written notice thereof to Company and
Stockholders and provide Company and Stockholders with the opportunity to
contest such disclosure, or (z) the disclosing party reasonably believes that
such disclosure is required in connection with the defense of a lawsuit against
the disclosing party. In the event of a breach or threatened breach by Parent
or Newco of the provisions of this Section 16.2, Company and Stockholders shall
be entitled to an injunction (without the posting of bond or proof of actual
damages) restraining Parent and Newco from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting
Company and Stockholders from pursuing any other available remedy for such
breach or threatened breach, including the recovery of damages. In the event
the transactions contemplated by this Agreement are not consummated, Parent and
Newco (including their representatives, advisors and legal counsel) shall within
ten business days after Company's request, deliver all copies of the
confidential information of Company in their possession in any form whatsoever
(including, but not limited to, any reports, memoranda, or other materials
prepared by Parent or Newco or their representatives, advisors or legal counsel
at the direction of Parent or Newco).
16.3 DAMAGES. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 16.1 and 16.2 and
because of the immediate and irreparable damage that would be caused for which
no other adequate remedy exists, the parties hereto agree that, in the event of
a breach by any of them of the foregoing covenants, the covenant may be enforced
against the other parties by injunction and restraining order.
16.4 SURVIVAL. The obligations of the parties under this Section 16 shall
survive the
-36-
termination of this Agreement for a period of three years from the Closing Date
or the termination of this Agreement pursuant to Section 14.
17. TRANSFER RESTRICTIONS
Except for transfers to immediate family members who agree to be bound by
the restrictions set forth in this Section 17 (or trusts for the benefit of
Stockholders or family members, the trustees of which so agree), for a period of
one year from the consummation of the IPO (unless the IPO shall not be
consummated by May 31, 1999), except pursuant to Section 19, no Stockholder
shall sell, assign, exchange, transfer, encumber, pledge, distribute, appoint,
or otherwise dispose of any Parent Stock received by such Stockholder in the
Merger. The Parent Stock delivered to the Stockholders pursuant to Section 4 of
this Agreement will bear a legend substantially in the form set forth below and
containing such other information as Parent may deem necessary or appropriate:
EXCEPT AS OTHERWISE PERMITTED BY THE ISSUER, THIS SECURITY MAY NOT BE SOLD,
ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED, APPOINTED OR
OTHERWISE DISPOSED OF, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO
ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE, PLEDGE,
DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION PRIOR TO THE FIRST ANNIVERSARY OF
THE CONSUMMATION OF ISSUER'S INITIAL UNDERWRITTEN PUBLIC OFFERING ("IPO"). UPON
THE WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO
REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER
AGENT) AFTER THE DATE SPECIFIED ABOVE OR AFTER --, IF THE IPO HAS NOT BEEN
CONSUMMATED BY THAT DATE.
18. INVESTMENT REPRESENTATIONS
Stockholders acknowledge that the Parent Stock to be delivered to
Stockholders pursuant to this Agreement (the "Restricted Securities") have not
been and will not be registered under the 1933 Act and therefore may not be
resold without compliance with the requirements of the 1933 Act and applicable
state securities laws. All of the Restricted Securities are being acquired by
Stockholders solely for their own respective accounts, for investment purposes
only, and not with a view to or in connection with a distribution thereof.
18.1 COMPLIANCE WITH LAW. Stockholders represent, warrant, covenant and
agree that none of the Restricted Securities will be offered, sold, assigned,
exchanged, transferred, encumbered, distributed, appointed or otherwise disposed
of except after full compliance with all of the applicable provisions of the
1933 Act and the rules and regulations of the SEC thereunder and the provisions
of applicable state securities laws and regulations. All the Restricted
Securities shall bear the following legend in addition to the legend required
under Section 17 of this Agreement:
-37-
THE SHARES REPRESENTED BY THIS SECURITY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY APPLICABLE STATE
SECURITIES LAWS (COLLECTIVELY, THE "ACTS") AND MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED UNLESS AND UNTIL (A) THE SHARES REPRESENTED BY THIS SECURITY SHALL
HAVE BEEN REGISTERED UNDER THE ACTS OR (B) THE HOLDER OF THE SHARES REPRESENTED
BY THIS SECURITY PROVIDES THE ISSUER WITH (X) AN UNQUALIFIED WRITTEN OPINION OF
LEGAL COUNSEL, WHICH COUNSEL AND OPINION (IN FORM AND SUBSTANCE) SHALL BE
REASONABLY SATISFACTORY TO THE ISSUER, TO THE EFFECT THAT THE PROPOSED
DISPOSITION OF THE SHARES REPRESENTED BY THIS SECURITY MAY BE EFFECTED WITHOUT
REGISTRATION UNDER THE ACTS OR (Y) SUCH OTHER EVIDENCE AS MAY BE REASONABLY
SATISFACTORY TO THE ISSUER THAT THE PROPOSED DISPOSITION MAY BE EFFECTED WITHOUT
REGISTRATION UNDER THE ACTS.
18.2 ECONOMIC RISK, SOPHISTICATION. Stockholders are able to bear the
economic risk of an investment in the Restricted Securities and can afford to
sustain a total loss of such investment and have such knowledge and experience
in financial and business matters that they are capable of evaluating the merits
and risks of the proposed investment in Parent. Stockholders have had an
adequate opportunity to ask questions and receive answers from the officers of
Parent concerning any and all matters relating to the transactions described
herein including, without limitation, the background and experience of the
current and proposed officers and directors of Parent, the plans for the
operations of the business of Parent and any plans for additional acquisitions
and the like. Stockholders have asked any and all questions in the nature
described in the preceding sentence and all questions have been answered to
their satisfaction.
19. REGISTRATION RIGHTS
19.1 PIGGYBACK REGISTRATION RIGHTS. At any time following the date of
consummation of the IPO, whenever Parent proposes to register any Parent Stock
for its own or the account of others under the 1933 Act for a public offering,
other than (i) any shelf registration of shares to be used as consideration for
acquisitions of additional businesses by Parent and (ii) registrations relating
to employee benefit plans, Parent shall give each Stockholder prompt written
notice of its intent to do so. Upon the written request of any Stockholder given
within 15 business days after receipt of such notice, Parent shall cause to be
included in such registration all Registerable Securities (including any shares
of Parent Stock issued as a dividend or other distribution with respect to, or
in exchange for, or in replacement of such Registerable Securities) which any
Stockholder requests; provided, however, if Parent is advised in writing in good
faith by any managing underwriter of an underwritten offering of the securities
being offered pursuant to any registration statement under this Section 19.1
that the number of shares to be sold by Persons other than Parent is greater
than the number of such shares which can be offered without adversely affecting
the offering, Parent may reduce pro rata the number of shares offered for the
accounts of such Persons (based upon the number of shares held by such Person)
to a number deemed satisfactory by such managing underwriter.
-38-
19.2 DEMAND REGISTRATION RIGHTS. At any time after the date of
consummation of the IPO, the holders ("Founding Stockholders") of a majority of
the shares of Parent Stock (i) representing Registerable Securities owned by
Stockholders or their permitted transferees or (ii) acquired by other
stockholders of Parent on or prior to the closing of the IPO in connection with
the acquisition of their companies by Parent pursuant to an agreement, similar
to this Agreement, which shares have not been previously registered or sold and
which shares are not entitled to be sold under Rule 144(k) (or any similar or
successor provision) promulgated under the 1933 Act, may request in writing that
Parent file a registration statement under the 1933 Act covering the
registration of the shares of Parent Stock issued to and held by the Founding
Stockholders or their permitted transferees (including any stock issued as a
dividend or other distribution with respect to, or in exchange for, or in
replacement of such Parent Stock) (a "Demand Registration"). Within ten days of
the receipt of such request, Parent shall give written notice of such request to
all other Founding Stockholders and shall, as soon as practicable but in no
event later than 45 days after notice from the Founding Stockholders requesting
such registration, file and use its best efforts to cause to become effective a
registration statement covering all such shares. Parent shall be obligated to
effect only one Demand Registration for all Founding Stockholders; provided,
however, that Parent shall not be deemed to have satisfied its obligation under
this Section 19.2 unless and until a Demand Registration covering all shares of
Parent Stock requested to be registered has been filed and becomes effective
under the 1933 Act and has remained current and effective for not less than 90
days (or such shorter period as is required to complete the distribution and
sale of all shares registered thereunder).
Notwithstanding the foregoing paragraph, following such a demand a majority
of the disinterested directors of Parent (i.e. directors who have not demanded
or elected to sell shares in any such public offering) may defer the filing of
the registration statement for a 30 day period.
If at the time of any request for a Demand Registration Parent has
formulated plans to file within 60 days after such request a registration
statement covering the sale of any of its securities in a public offering under
the 1933 Act, no registration of the Parent Stock shall be initiated under this
Section 19.2 until 90 days after the effective date of such registration
statement unless Parent is no longer proceeding diligently to secure the
effectiveness of such registration statement; provided that Parent shall provide
the Founding Stockholders the right to participate in such public offering
pursuant to, and subject to, Section 19.1.
19.3 REGISTRATION PROCEDURES. All expenses incurred in connection with
the registrations under this Section 19 (including all registration, filing,
qualification, legal, printing and accounting fees, but excluding underwriting
commissions and discounts), shall be borne by Parent. In connection with
registrations under Sections 19.1 and 19.2, Parent will, as expeditiously as
practicable:
(i) Prepare and file with the SEC a registration statement with
respect to such Parent Stock and use its best efforts to cause
such registration statement to become and remain effective;
provided that Parent may discontinue any
-39-
registration of its securities that is being effected pursuant to
Section 19.1 at any time prior to the effective date of the
registration statement relating thereto.
(ii) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to such registration
statement and the prospectus used in connection therewith as may
be necessary to keep such registration statement effective for a
period as may be requested by the stockholders holding a majority
of the Parent Stock covered thereby not exceeding 90 days and to
comply with the provisions of the 1933 Act with respect to the
disposition of all securities covered by such registration
statement during such period in accordance with the intended
methods of disposition by the seller or sellers thereof set forth
in such registration statement; provided, that before filing a
registration statement or prospectus relating to the sale of
Parent Stock, or any amendments or supplements thereto, Parent
will furnish to counsel to each holder of Parent Stock covered by
such registration statement or prospectus, copies of all
documents proposed to be filed, which documents will be subject
to the review of such counsel, and Parent will give reasonable
consideration in good faith to any comments of such counsel.
(iii) Furnish to each holder of Parent Stock covered by the
registration statement and to each underwriter, if any, of such
Parent Stock, such number of copies of a preliminary prospectus
and prospectus for delivery in conformity with the requirements
of the 1933 Act, and such other documents, as such Person may
reasonably request, in order to facilitate the public sale or
other disposition of the Parent Stock.
(iv) Use its best efforts to register or qualify the Parent Stock
covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as each seller
shall reasonably request, and do any and all other acts and
things which may be reasonably necessary or advisable to enable
such seller to consummate the disposition of the Parent Stock
owned by such seller, in such jurisdictions, except that Parent
shall not for any such purpose be required (x) to qualify to do
business as a foreign corporation in any jurisdiction where, but
for the requirements of this Section 19.3(iv), it is not then so
qualified, or (y) to subject itself to taxation in any such
jurisdiction, or (z) to take any action which would subject it to
general or unlimited service of process in any such jurisdiction
where it is not then so subject.
(v) Use its best efforts to cause the Parent Stock covered by such
registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to
enable the seller or sellers
-40-
thereof to consummate the disposition of such Parent Stock.
(vi) Immediately notify each seller of Parent Stock covered by such
registration statement, at any time when a prospectus relating
thereto is required to be delivered under the 1933 Act within the
appropriate period mentioned in Section 19.3(ii), if Parent
becomes aware that the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing, and,
at the request of any such seller, deliver a reasonable number of
copies of an amended or supplemental prospectus as may be
necessary so that, as thereafter delivered to the Parents of such
Parent Stock, each prospectus shall not include an untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then
existing.
(vii) Otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC and make generally available to
its security holders, in each case as soon as practicable, but
not later than 45 calendar days after the close of the period
covered thereby (90 calendar days in case the period covered
corresponds to a fiscal year of the Parent), an earnings
statement of Parent which will satisfy the provisions of Section
11 (a) of the 1933 Act.
(viii) Use its best efforts in cooperation with the underwriters to list
such Parent Stock on each securities exchange as they may
reasonably designate.
(ix) In the event the offering is an underwritten offering, use its
best efforts to obtain a "cold comfort" letter from the
independent public accountants for Parent in customary form and
covering such matters of the type customarily covered by such
letters.
(x) Execute and deliver all instruments and documents (including in
an underwritten offering an underwriting agreement in customary
form) and take such other actions and obtain such certificates
and opinions as the stockholders holding a majority of the shares
of Parent Stock covered by the Registration Statement may
reasonably request in order to effect an underwritten public
offering of such Parent Stock.
(xi) Make available for inspection by the seller of such Parent Stock
covered by such registration statement, by any underwriter
participating in any disposition to be effected pursuant to such
registration statement and by any attorney, accountant or other
agent retained by any such seller or any such underwriter, all
pertinent financial and other records, pertinent corporate
-41-
documents and properties of Parent, and cause all of Parent's
officers, directors and employees to supply all information
reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration
statement.
(xii) Obtain for delivery to the underwriter or agent an opinion or
opinions from counsel for Parent in customary form and in form
and scope reasonably satisfactory to such underwriter or agent
and its counsel.
19.4 OTHER REGISTRATION MATTERS.
(i) Each Stockholder holding shares of Parent Stock covered by a
registration statement referred to in this Section 19 will, upon
receipt of any notice from Parent of the happening of any event
of the kind described in Section 19.3(vi), forthwith discontinue
disposition of the Parent Stock pursuant to the registration
statement covering such Parent Stock until such holder's receipt
of the copies of the supplemented or amended prospectus
contemplated by Section 19.3(vi).
(ii) If a registration pursuant to Section 19.1 or 19.2 involves an
underwritten offering, each of the Stockholders agrees, whether
or not his shares of Parent Stock are included in such
registration, not to effect any public sale or distribution,
including any sale pursuant to Rule 144 under the 1933 Act, of
any Parent Stock, or of any security convertible into or
exchangeable or exercisable for any Parent Stock (other than as
part of such underwritten offering), without the consent of the
managing underwriter, during a period commencing eight calendar
days before and ending 180 calendar days (or such lesser number
as the managing underwriter shall designate) after the effective
date of such registration.
19.5 INDEMNIFICATION.
(i) In the event of any registration of any securities of Parent
under the 1933 Act pursuant to Section 19.1 or 19.2, Parent will,
and it hereby agrees to, indemnify and hold harmless, to the
extent permitted by law, each seller of any Parent Stock covered
by such registration statement, each Affiliate of such seller and
their respective directors, officers, employees and agents or
general and limited partners (and directors, officers, employees
and agents thereof) each other Person who participates as an
underwriter in the offering or sale of such securities and each
other Person, if any, who controls such seller or any such
underwriter within the meaning of the 1933 Act, as follows:
(x) against any and all loss, liability, claim, damage or expense
whatsoever
-42-
arising out of or based upon an untrue statement or alleged
untrue statement of a material fact contained in any registration
statement (or any amendment or supplement thereto), including all
documents incorporated therein by reference, or the omission or
alleged omission therefrom of a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or arising out of an untrue statement or alleged
untrue statement of a material fact contained in any preliminary
prospectus or prospectus (or any amendment or supplement thereto)
or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein not misleading;
(y) against any and all loss, liability, claim, damage and expense
whatsoever to the extent of the aggregate amount paid in
settlement of any litigation, or investigation or proceeding by
any governmental agency or body, commenced or threatened, or of
any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, if
such settlement is effected with the written consent of Parent;
and
(z) against any and all expense reasonably incurred by them in
connection with investigating, preparing or defending against any
litigation, or investigation or proceeding by any governmental
agency or body, commenced or threatened, or any claim whatsoever
based upon any such untrue statement or omission, or any such
alleged untrue statement or mission to the extent that any such
expense is not paid under subsection (x) or (y) above;
Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such seller or any such
director, officer, employee, agent, general or limited partner,
investment advisor or agent, underwriter or controlling Person and
shall survive the transfer of such securities by such seller.
(ii) Parent may require, as a condition to including any Parent Stock
in any registration statement filed in accordance with Section
19.1 or 19.2, that Parent shall have received an undertaking
reasonably satisfactory to it from the prospective seller of such
Parent Stock or any underwriter, to indemnify and hold harmless
(in the same manner and to the same extent as set forth in
Section 19.5(i)) Parent with respect to any statement or alleged
statement in or omission or alleged omission from such
registration statement, any preliminary, final or summary
prospectus contained therein, or any amendment or supplement, if
such statement or alleged statement or omission or alleged
omission was made in reliance upon and in conformity with written
information furnished to Parent by or on behalf of such seller or
underwriter specifically stating that it is for use in the
preparation of such registration statement, preliminary, final or
summary prospectus or
-43-
amendment or supplement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on
behalf of Parent or any such director, officer or controlling
Person and shall survive the transfer of such securities by such
seller. In that event, the obligations of the Parent and such
sellers pursuant to this Section 19.5 are to be several and not
joint; provided, however, that, with respect to each claim
pursuant to this Section 19.5, Parent shall be liable for the
full amount of such claim, and each such seller's liability under
this Section 19.5 shall be limited to an amount equal to the net
proceeds (after deducting the underwriting discount and expenses)
received by such seller from the sale of Parent Stock held by
such seller pursuant to this Agreement.
(iii) Promptly after receipt by an indemnified party hereunder of
written notice of the commencement of any action or proceeding
involving a claim referred to in this Section 19.5, such
indemnified party will, if a claim in respect thereof is to be
made against an indemnifying party, give written notice to such
indemnifying party of the commencement of such action; provided,
however, that the failure of any indemnified party to give notice
as provided herein shall not relieve the indemnifying party of
its obligations under this Section 19.5, except to the extent
(not including any such notice of an underwriter) that the
indemnifying party is materially prejudiced by such failure to
give notice. In case any such action is brought against an
indemnified party, unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim (in which
case the indemnifying party shall not be liable for the fees and
expenses of more than one firm of counsel selected by holders of
a majority of the shares of Parent Stock included in the offering
or more than one firm of counsel for the underwriters in
connection with any one action or separate but similar or related
actions), the indemnifying party will be entitled to participate
in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified, to the extent that it may
wish with counsel reasonably satisfactory to such indemnified
party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such
indemnified party for any legal or other expenses subsequently
incurred by such indemnifying party in connection with the
defense thereof, provided that the indemnifying party will not
agree to any settlement without the prior consent of the
indemnified party (which consent shall not be unreasonably
withheld) unless such settlement requires no more than a monetary
payment for which the indemnifying party agrees to indemnify the
indemnified party and includes a full, unconditional and complete
release of the indemnified party; provided, however, that the
indemnified party shall be entitled to take control of the
defense of any claim as to which, in the reasonable judgment of
the
-44-
indemnifying party's counsel, representation of both the
indemnifying party and the indemnified party would be
inappropriate under the applicable standards of professional
conduct due to actual or potential differing interests between
them. In the event that the indemnifying party does not assume
the defense of a claim pursuant to this Section 19.5(iii), the
indemnified party will have the right to defend such claim by all
appropriate proceedings, and will have control of such defense
and proceedings, and the indemnified party shall have the right
to agree to any settlement without the prior consent of the
indemnifying party. Each indemnified party shall, and shall cause
its legal counsel to, provide reasonable cooperation to the
indemnifying party and its legal counsel in connection with its
assuming the defense of any claim, including the furnishing of
the indemnifying party with all papers served in such proceeding.
In the event that an indemnifying party assumes the defense of an
action under this Section 19.5(iii), then such indemnifying party
shall, subject to the provisions of this Section 19.5, indemnify
and hold harmless the indemnified party from any and all losses,
claims, damages or liabilities by reason of such settlement or
judgment.
(iv) Parent and each seller of Parent Stock shall provide for the
foregoing indemnity (with appropriate modifications) in any
underwriting agreement with respect to any required registration
or other qualification of securities under any federal or state
law or regulation of any governmental authority.
19.6 CONTRIBUTION. In order to provide for just and equitable
contribution in circumstances under which the indemnity contemplated by Section
19.5 is for any reason not available or insufficient for any reason to hold
harmless an indemnified party in respect of any losses, claims, damages or
liabilities referred to therein, the parties required to indemnify by the terms
thereof shall contribute to the aggregate losses, liabilities, claims, damages
and expenses of the nature contemplated by such indemnity agreement incurred by
Parent, any seller of Parent Stock and one or more of the underwriters, except
to the extent that contribution is not permitted under Section 11 (f) of the
1933 Act. In determining the amounts which the respective parties shall
contribute, there shall be considered the relative benefits received by each
party from the offering of the Parent Stock by taking into account the portion
of the proceeds of the offering realized by each, and the relative fault of each
party by taking into account the parties' relative knowledge and access to
information concerning the matter with respect to which the claim was asserted,
the opportunity to correct and prevent any statement or omission and any other
equitable considerations appropriate under the circumstances. Parent and each
Person selling securities agree with each other that no seller of Parent Stock
shall be required to contribute any amount in excess of the amount such seller
would have been required to pay to an indemnified party if the indemnity under
Section 19.5(ii) were available. Parent and each such seller agree with each
other and the underwriters of the Parent Stock, if requested by such
underwriters, that it would not be equitable if the amount of such contribution
were determined by pro rata or per capita allocation (even if the underwriters
were treated as one entity for such purpose) or for the underwriters' portion of
such contribution to exceed the percentage that the underwriting discount bears
to the initial public offering price of the
-45-
Parent Stock. For purposes of this Section 19.6, each Person, if any, who
controls an underwriter within the meaning of Section 15 of the 1933 Act shall
have the same rights to contribution as such underwriter, and each director and
each officer of Parent who signed the registration statement, and each Person,
if any, who controls Parent or a seller of Parent Stock within the meaning of
Section 15 of the 1933 Act shall have the same rights to contribution as Parent
or a seller of Parent Stock, as the case may be.
19.7 UNDERTAKING TO FILE REPORTS AND COOPERATE IN RULE 144 TRANSACTIONS.
After Parent completes its initial underwritten public offering and for as long
thereafter as any Stockholder shall continue to hold any Restricted Securities,
Parent shall use reasonable efforts to file, on a timely basis, all annual,
quarterly and other reports required to be filed by it under Sections 13 and
15(d) of the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the SEC thereunder, as amended from time to time.
20. GENERAL
20.1 COOPERATION. Company, each Stockholder, Parent and Newco shall
deliver or cause to be delivered to the other on the Closing Date and at such
other times and places as shall be reasonably agreed to, such additional
instruments as any of the others may reasonably request for the purpose of
carrying out this Agreement. Stockholders will cooperate and use their
reasonable efforts to have the present officers, directors and employees of
Company cooperate with Parent on and after the Closing Date in furnishing
information, evidence, testimony and other assistance in connection with any Tax
Return filing obligations, actions, proceedings, arrangements or disputes of any
nature with respect to matters pertaining to all periods prior to the Closing
Date.
20.2 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law or as permitted by
Section 17), but if assigned by operation of law, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto, the
successors of Parent, Newco and Company, and the heirs and legal representatives
of Stockholders. Notwithstanding the foregoing, any Stockholder may assign his
shares of Parent Stock and rights thereunder, to a family or children's trust;
provided that the assignee agrees to be bound by the terms of this Agreement to
the same extent as his or its assignor.
20.3 ENTIRE AGREEMENT. This Agreement (including the Schedules and
Annexes) and the documents delivered pursuant hereto constitute the entire
agreement and understanding among Stockholders, Company, Newco and Parent and
supersede any prior agreement and understanding relating to the subject matter
of this Agreement. This Agreement, upon execution and delivery, constitutes a
valid and binding agreement of the parties hereto enforceable in accordance with
its terms and may be modified or amended only by a written instrument executed
by Stockholders and by Company, Newco and Parent, acting through their
respective officers or representatives, duly authorized by their respective
Boards of Directors. Any disclosure made on any Schedule delivered pursuant
hereto shall be deemed to have been disclosed for purposes of any other Schedule
required hereby; provided that Company shall make a good faith effort to cross
reference disclosures, as necessary or advisable, between related Schedules.
-46-
20.4 COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
20.5 BROKERS AND AGENTS. Except as disclosed on Schedule 20.5, each party
represents and warrants that it employed no broker or agent in connection with
this transaction and agrees to indemnify the other parties hereto against all
loss, cost, damage or expense arising out of claims for fees or commission of
brokers employed or alleged to have been employed by such indemnifying party.
20.6 NOTICES. All notices of communication required or permitted
hereunder shall be in writing, addressed to the party to be notified, and may be
given by (i) depositing the same in United States mail, postage prepaid and
registered or certified with return receipt requested, (ii) by telecopying the
same if receipt thereof is confirmed or (iii) by delivering the same in person
to an officer or agent of such party.
(x) If to Parent or Newco, addressed to them at:
The Alliance Group, Inc.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
McAfee & ▇▇▇▇ A Professional Corporation
▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
(y) If to Stockholders, addressed to them at their addresses set
forth on Schedule 6.3, with copies to such counsel as is set
forth with respect to each Stockholder on such Schedule 6.3;
-47-
(z) If to the Company, addressed to it at:
Terra Telecom, Inc.
▇▇▇▇-▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Attn:
Telecopy No.:
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 20.6 from time to time.
20.7 GOVERNING LAW. This Agreement Shall be construed in accordance with
the laws of the State of Oklahoma.
20.8 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
20.9 TIME. Time is of the essence with respect to this Agreement.
20.10 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
practicable, be modified in such manner as to be valid, legal and enforceable
but so as to most nearly retain the intent of the parties, and if such
modification is not possible, such provision shall be severed from this
Agreement; and in either case the validity, legality and enforceability of the
remaining provisions of this Agreement shall not in any way be affected or
impaired thereby.
20.11 REMEDIES CUMULATIVE. Except as otherwise provided in Section 13.4,
no right, remedy or election given by any term of this Agreement shall be deemed
exclusive but each shall be cumulative with all other rights, remedies and
elections available at law or in equity.
20.12 CAPTIONS. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
-48-
20.13 PUBLIC STATEMENTS. The parties hereto shall consult with each other
and no party shall issue any public announcement or statement with respect to
the transactions contemplated hereby without the consent of the other parties,
unless the party desiring to make such announcement or statement, after seeking
such consent from the other parties, obtains advice from legal counsel that a
public announcement or statement is required by applicable law.
20.14 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived only with the
written consent of Parent, Newco, Company and Stockholders. Any amendment or
waiver effected in accordance with this Section 20.14 be binding upon each of
the parties hereto.
20.15 ARBITRATION. Any claim, controversy or dispute arising out of or
relating to this Agreement, except as set forth herein, shall be settled by
arbitration in Oklahoma City, Oklahoma, in accordance with the rules for
arbitration of the American Arbitration Association. Any arbitration shall be
undertaken pursuant to the Federal Arbitration Act, where possible, and the
decision of the arbitrators shall be final, binding, and enforceable in any
court of competent jurisdiction. In any dispute in which a party seeks in
excess of $50,000 in damages, three arbitrators shall be employed. Otherwise, a
single arbitrator shall be employed. All costs relating to the arbitration
shall be borne equally by the parties, other than their own attorneys' and
experts' fees. The parties will bear their own attorneys' and experts' fees.
The arbitrators will not award punitive, consequential or indirect damages.
Each party hereby waives the right to such damages and agrees to receive only
those actual damages directly resulting from the claim asserted. In resolving
all disputes between the parties, the arbitrators will apply the laws of the
State of Oklahoma. Except as needed for presentation in lieu of a live
appearance, depositions will not be taken. The parties will be entitled to
conduct document discovery by requesting production of documents. The
arbitrators will resolve any discovery disputes by such prehearing conferences
as may be needed. Either party may be entitled to pursue such remedies for
emergency or preliminary injunctive relief in any court of competent
jurisdiction, provided that each party agrees that it will consent to the stay
of such judicial proceedings on the merits of both this Agreement and the
related transactions pending arbitration of all underlying claims between the
parties immediately following the issuance of any such emergency or injunctive
relief.
20.16 338 ELECTION. Each of the Stockholders agree, if so directed by
Parent, to join with Parent and Newco in making an election under Section 338(h)
of the Code (and any corresponding elections under state, local, or foreign tax
law) with respect to a purchase and sale of the Company Stock; PROVIDED HOWEVER,
that no election shall be made if, as a result of the election, the Stockholders
would incur any adverse tax or other consequences not otherwise reimbursed by
Parent or Newco to the Stockholders.
-49-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
THE ALLIANCE GROUP, INC.
BY: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------------
NAME: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
TITLE: President/Chief Executive Officer
ALLIANCE ACQUISITION IV CORP.
BY: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------------
NAME: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
TITLE: Chief Executive Officer
TERRA TELECOM, INC.
BY: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------------
NAME: ▇▇▇▇▇ ▇▇▇▇▇▇
TITLE: President
BY: ▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------------------------
NAME: ▇▇▇ ▇▇▇▇▇▇▇▇▇
TITLE: Vice President
-50-
STOCKHOLDERS:
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇ ▇▇▇▇▇▇▇▇▇
---------------------------------------------
▇▇▇ ▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-51-
ANNEX I
CERTIFICATE OF MERGER
MERGING
ALLIANCE ACQUISITION I CORP.
INTO
TERRA TELECOM, INC.
Terra Telecom, Inc., an Oklahoma corporation, pursuant to Section 81 of the
Oklahoma General Corporation Act, DOES HEREBY CERTIFY:
FIRST. That the name of each of the constituent corporations, which are
Oklahoma corporations, is Terra Telecom, Inc. and Alliance Acquisition I Corp.
SECOND. That an agreement and plan of merger has been approved, adopted,
certified, executed and acknowledged by each of the constituent corporations in
accordance with the provisions of Section 81 of the Oklahoma General Corporation
Act.
THIRD. That the name of the surviving corporation is Terra Telecom, Inc.
FOURTH. That the certificate of incorporation of Alliance Acquisition I
Corp. shall be the certificate of incorporation of the surviving corporation.
FIFTH. That the executed agreement and plan of merger is on file at the
principal place of business of the surviving corporation, which is located at
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
SIXTH. That a copy of the agreement and plan of merger will be furnished
by the surviving corporation, on request and without cost, to any shareholder of
any constituent corporation.
SEVENTH. This merger shall be effective at - , Central Standard Time, on
the date this Certificate is filed with the Secretary of State of the State of
Oklahoma.
IN WITNESS WHEREOF, Terra Telecom, Inc. has caused this certificate to be
signed by its President and attested by its Secretary, this - day of - 1999.
TERRA TELECOM, INC.
---------------------------------------------
President
ATTEST:
---------------------------
Secretary
-52-