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Exhibit 10.4
STOCK PURCHASE AGREEMENT
Among
GOLDEN SKY SYSTEMS, INC.,
ARGOS SUPPORT SERVICES COMPANY
and
THE SEVERAL SHAREHOLDERS LISTED ON SCHEDULE I HERETO
Dated as of July 11, 1997
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TABLE OF CONTENTS
Page
ARTICLE I. SALE AND TRANSFER OF THE SHARES;
CLOSING; PURCHASE PRICE
SECTION 1.01 Sale and Transfer of the Shares......................
SECTION 1.02 Purchase Price.......................................
SECTION 1.03 Delivery of Certificates and Payment.................
of Purchase Price..................................
SECTION 1.04 Deposit..............................................
SECTION 1.05 Closing..............................................
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF
THE SELLING SHAREHOLDERS
SECTION 2.01 Organization, Qualifications and
Corporate Power; Subsidiaries......................
SECTION 2.02 Authorization of Agreements, Etc.....................
SECTION 2.03 Validity.............................................
SECTION 2.04 Capitalization.......................................
SECTION 2.05 Title to Shares......................................
SECTION 2.06 Financial Statements.................................
SECTION 2.07 Absence of Undisclosed Liabilities...................
SECTION 2.08 Absence of Certain Changes or Events.................
SECTION 2.09 Governmental Approvals...............................
SECTION 2.10 Title to Properties, Absence of......................
Liens and Encumbrances.............................
SECTION 2.11 List of Properties, Contracts and....................
Other Data.........................................
SECTION 2.12 Intangible Rights....................................
SECTION 2.13 Software.............................................
SECTION 2.14 Litigation, Etc......................................
SECTION 2.15 Taxes................................................
SECTION 2.16 Governmental Authorizations and......................
Regulations........................................
SECTION 2.17 Labor Matters........................................
SECTION 2.18 Insurance............................................
SECTION 2.19 Use of Real Property.................................
SECTION 2.20 Condition of Assets..................................
SECTION 2.21 Accounts Receivable..................................
SECTION 2.22 Books and Records....................................
SECTION 2.23 Employee Benefit Plans...............................
SECTION 2.24 Transactions with Affiliates.........................
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SECTION 2.25 Environmental Matters................................
SECTION 2.26 System Data..........................................
SECTION 2.27 Distribution Agreements..............................
SECTION 2.28 Offering of the Shares...............................
SECTION 2.29 Qualification of Representations and.................
Warranties of Certain Selling
Shareholders.......................................
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF
THE PURCHASER
SECTION 3.01 Organization, Power, Etc.............................
SECTION 3.02 Authorization of Agreements, Etc. ...................
SECTION 3.03 Validity.............................................
SECTION 3.04 Governmental Approvals...............................
SECTION 3.05 Litigation Relating to Transaction...................
SECTION 3.06 Investment Representation............................
ARTICLE IV. COVENANTS
SECTION 4.01 Certain Covenants of the Selling
Shareholders.......................................
SECTION 4.02 Certain Tax Matters..................................
SECTION 4.03 Consents.............................................
SECTION 4.04 Books and Records....................................
SECTION 4.05 License and Other Fees...............................
SECTION 4.06 Employment Matters...................................
SECTION 4.07 Termination of Distribution Agreements...............
ARTICLE V. CONDITIONS PRECEDENT
SECTION 5.01 Conditions Precedent to
the Obligations of the Purchaser...................
SECTION 5.02 Conditions Precedent to the
Obligations of the Selling
Shareholders.......................................
ARTICLE VI. INDEMNIFICATION
SECTION 6.01 Survival of Representations and
Warranties.........................................
SECTION 6.02 General Indemnity....................................
SECTION 6.03 Conditions of Indemnification........................
SECTION 6.04 Remedies Cumulative..................................
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ARTICLE VII. TERMINATION AND ABANDONMENT
SECTION 7.01 Termination..........................................
SECTION 7.02 Procedure and Effect of Termination..................
ARTICLE VIII. MISCELLANEOUS
SECTION 8.01 Expenses, Etc........................................
SECTION 8.02 Publicity............................................
SECTION 8.03 Execution in Counterparts............................
SECTION 8.04 Notices..............................................
SECTION 8.05 Waivers..............................................
SECTION 8.06 Amendments, Supplements, Etc.........................
SECTION 8.07 Entire Agreement.....................................
SECTION 8.08 Applicable Law.......................................
SECTION 8.09 Binding Effect; Benefits.............................
SECTION 8.10 Assignability........................................
TESTIMONIUM..............................................................
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INDEX TO EXHIBITS AND SCHEDULES
Exhibit Description
A Form of Employment Agreement
B Form of Opinion of Decker, Jones, McMackin,
McClane, Hall & ▇▇▇▇▇, P.C.
Schedule Description
I Selling Shareholders
2.04 Capitalization
2.07 Liabilities
2.08 Changes Since December 31, 1996
2.09 Governmental Approvals
2.10 Liens
2.11 List of Properties, Contracts, Etc.
2.12 Intangible Property Infringements
2.14 Litigation
2.15 Tax Matters
2.18 Insurance
2.21 Accounts Receivable
2.23 Employee Benefit Plans
2.24 Transactions with Affiliates
2.25 Environmental Matters
2.26 System Data
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STOCK PURCHASE AGREEMENT, dated as of July 11, 1997, among GOLDEN SKY
SYSTEMS, INC., a Delaware corporation (the "Purchaser"), ARGOS SUPPORT SERVICES
COMPANY, a Texas corporation (the "Company") and the several shareholders listed
on Schedule I hereto (each a "Selling Shareholder" and collectively the "Selling
Shareholders").
WHEREAS, the Selling Shareholders own an aggregate 4,625 shares (the
"Shares") of Common Stock, $1.00 par value ("Common Stock"), of the Company,
being all the issued and outstanding shares of capital stock of the Company not
currently owned of record and beneficially by the Purchaser;
WHEREAS, the Selling Shareholders severally desire to sell to the
Purchaser, and the Purchaser desires to purchase from the Selling Shareholders,
the Shares, all on the terms and subject to the conditions hereinafter set
forth, so that immediately after, and as a result of, the consummation of the
transactions contemplated by this Agreement, the Purchaser will own all of the
then issued and outstanding shares of capital stock of the Company;
WHEREAS, the Selling Shareholders and the Purchaser acknowledge that
the benefits and burdens of ownership of the Shares shall remain with the
Selling Shareholders until the closing occurs and that the benefits and burdens
of ownership of the Shares shall pass to Purchaser only on the "Closing Date"
(as defined herein), upon satisfaction of the terms and conditions hereinafter
set forth; and
WHEREAS, on the date hereof, certain of the Selling Shareholders have
entered into Subscription Agreements with the Purchaser (the "Subscription
Agreements), providing for the purchase by such Selling Shareholders of up to an
aggregate 10,000 shares (less the number of shares subject to the options
described in Section 4.06(b) hereof) of Series A Convertible Participating
Preferred Stock, $.01 par value, of the Purchaser ("Preferred Stock") at a price
of $100 per share, such purchase to occur within 45 days after, and expressly
conditioned upon, the closing of the transactions contemplated hereby;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereby agree as follows:
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I.
SALE AND TRANSFER OF THE SHARES;
CLOSING; PURCHASE PRICE
SECTION 1.01. Sale and Transfer of the Shares. Subject to the terms
and conditions set forth herein, on the Closing Date (as defined herein) each
Selling Shareholder shall severally sell to the Purchaser, and the Purchaser
shall purchase from each Selling Shareholder, the Shares owned by such Selling
Shareholder as set forth on Schedule I hereto.
SECTION 1.02. Purchase Price. The aggregate purchase price for the
Shares hereunder shall be $15,023,750 (the "Purchase Price").
SECTION 1.03. Delivery of Certificates and Payment of Purchase Price.
(a) On the Closing Date, each of the Selling Shareholders shall deliver to the
Purchaser certificates in definitive form, registered in the names of such
Selling Shareholders, evidencing the Shares being sold by such Selling
Shareholder hereunder, duly endorsed for transfer or accompanied by stock
transfer powers duly endorsed in blank.
(b) As payment in full of the Purchase Price for the Shares and
against delivery of the certificates evidencing the Shares as aforesaid, on the
Closing Date the Purchaser shall pay to each Selling Shareholder, by wire
transfer of immediately available funds to an account designated by such Selling
Shareholder, the sum set forth opposite the name of such Selling Shareholder on
Schedule I hereto under the heading "Payment by Purchaser at Closing."
SECTION 1.04. Deposit. Simultaneously with the execution of this
Agreement, the Purchaser has delivered to the Company the sum of $750,000 (the
"Deposit"), representing a portion of the Purchase Price. The Company, on behalf
of the Selling Shareholders, acknowledges receipt of the Deposit and agrees to
hold the Deposit in a separate account (the "Deposit Account") from all other
Company funds. Upon the closing of the transactions contemplated hereby, the
Company shall pay to each Selling Shareholder, from the Deposit Account, the sum
set forth opposite the name of such Selling Shareholder on Schedule I hereto
under the heading "Deposit Account Payment at Closing." If (i) the closing of
the transactions contemplated hereby has not occurred by August 31, 1997 or (ii)
this Agreement is terminated pursuant to Section 7.01 hereof, then the Company
shall promptly return the Deposit to the Purchaser, without offset or reduction.
SECTION 1.05. Closing. The closing of the transactions contemplated by
this Agreement shall take place at the offices of the Company at 10:00 a.m.
local time, on August 15, 1997, or at such other place or at such other date and
time as the parties hereto may mutually agree (such date and time of the closing
is herein referred to as the "Closing Date").
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II.
REPRESENTATIONS AND WARRANTIES OF
THE SELLING SHAREHOLDERS
Each Selling Shareholder, severally and not jointly (to the extent of
their respective percentage interests in the Company), represents and warrants
to the Purchaser as follows:
SECTION 2.01. Organization, Qualifications and Corporate Power;
Subsidiaries. (a) The Company is a corporation duly incorporated and validly
existing under the laws of the State of Texas and is duly licensed or qualified
as a foreign corporation and is in good standing in each other jurisdiction in
which it owns or leases any real property or in which the nature of the business
transacted by it makes such licensing or qualification necessary. The Company
has the corporate power and authority, and the legal right, to own and operate
its properties and to carry on its business as currently conducted.
(b) The Company does not own of record or beneficially or equitably,
directly or indirectly, (i) any shares of capital stock, or securities
convertible into or exchangeable for the capital stock, of any other corporation
or (ii) any participating interest in any association, partnership, joint
venture or other non-corporate business enterprise.
SECTION 2.02. Authorization of Agreements, Etc. (a) Such Selling
Shareholder has full legal capacity and unrestricted power to execute and
deliver this Agreement and to perform his or her obligations hereunder.
(b) The execution and delivery by such Selling Shareholder of this
Agreement, and the performance by such Selling Shareholder of his or her
obligations hereunder, will not (w) violate any provision of law, any order of
any court or other agency of government, the Articles of Incorporation or
By-laws of the Company, any judgment, award or decree or any provision of any
indenture, agreement or other instrument to which a Selling Shareholder or the
Company is a party, or by which a Selling Shareholder or the Company or any of
his, her or its assets is bound or affected; (x) conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a default
under any such indenture, agreement or other instrument; (y) result in the
creation or imposition of any lien, charge or encumbrance of any nature
whatsoever (collectively, "Liens") upon any of the properties or assets of such
Selling Shareholder or the Company; or (z) result in any suspension, revocation,
impairment, forfeiture or nonrenewal of any Governmental Permit (as hereinafter
defined).
SECTION 2.03. Validity. This Agreement has been duly executed and
delivered by such Selling Shareholder and constitutes the legal, valid and
binding obligation of such Selling Shareholder, enforceable against such Selling
Shareholder in accordance with its terms.
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SECTION 2.04. Capitalization. (a) The authorized capital stock of the
Company consists of 10,000 shares of Common Stock, of which 5,800 shares of
Common Stock (consisting solely of the Shares and 1,175 shares held of record by
Purchaser) are validly issued and outstanding, fully paid and nonassessable, and
no other shares of capital stock have ever been issued by the Company. None of
the Shares are subject to, nor were any of them issued in violation of, any
preemptive rights of shareholders of the Company or to any right of first
refusal or other similar right in favor of any person.
(b) Except for the obligations of the Selling Shareholders to the
Purchaser under this Agreement, (i) no subscription, warrant, option,
convertible security or other right (contingent or other) to purchase or acquire
any shares of any class of capital stock of the Company is authorized or
outstanding; (ii) there is not any commitment of the Company to issue any
shares, warrants, options or other such rights or to distribute to holders of
any class of its capital stock any evidences of indebtedness or assets; and
(iii) the Company has no obligation (contingent or other) to purchase, redeem or
otherwise acquire any shares of its capital stock or any interest therein or to
pay any dividend or make any other distribution in respect thereof.
SECTION 2.05. Title to Shares. Such Selling Shareholder is the lawful
holder of record and beneficial owner of the Shares listed opposite his or her
name on Schedule I hereto, free and clear of any and all Liens. The delivery by
the Selling Shareholders of certificates evidencing the Shares, duly endorsed
for transfer or accompanied by stock transfer powers duly endorsed in blank, to
the Purchaser pursuant to Section 1.03(a) above, against payment therefor
pursuant to Section 1.03(b) above, will transfer valid title to the Shares to
the Purchaser, free and clear of any and all Liens.
SECTION 2.06. Financial Statements. The Company has previously
delivered to the Purchaser (i) the unaudited balance sheet of the Company as of
December 31, 1996, and the related audited statements of operations,
stockholders' equity and cash flows for the year then ended, and (ii) the
unaudited balance sheet of the Company as of March 31, 1997 and the related
unaudited statements of operations, stockholders' equity and cash flows for the
three months then ended (collectively, the "Financial Statements"). The
Financial Statements were prepared from the books and records of the Company
and present fairly the financial position of the Company as of the respective
dates specified therein and results of operations of the Company for the
respective periods then ended, and were prepared in conformity with generally
accepted accounting principles applied on a consistent basis ("GAAP"), except
(a) as specified on Schedule 2.06 hereto and (b) that the Financial Statements
do not contain certain footnote disclosures and are subject to year-end audit
adjustments, which consist of normal recurring accruals.
SECTION 2.07. Absence of Undisclosed Liabilities. Except as and to the
extent (i) reflected in the Financial Statements, (ii) incurred since December
31, 1996 in the ordinary course of business and consistent with past practice,
or (iii) set forth on Schedule 2.07 hereto, the Company has no liabilities or
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obligations of any kind or nature, whether secured or unsecured (whether
absolute, accrued, contingent or otherwise, and whether due or to become due),
including without limitation any tax liabilities due or to become due.
SECTION 2.08. Absence of Certain Changes or Events. (a) Since December
31, 1996, except (x) as otherwise set forth on Schedule 2.08 hereto or (y) as
otherwise expressly referred to in this Agreement, the Company has not: (i)
changed or amended its Articles of Incorporation or By-laws; (ii) incurred any
obligation or liability (fixed or contingent), except normal trade or business
obligations incurred in the ordinary course of business and consistent with past
practice; (iii) mortgaged, pledged or subjected to any Lien any of its assets or
properties (other than Permitted Liens, as defined in Section 2.10 below); (iv)
transferred, leased or otherwise disposed of any of its material assets or
properties, except for fair consideration in the ordinary course of business and
consistent with past practice; (v) acquired any material assets or properties,
except in the ordinary course of business and consistent with past practice;
(vi) made any investment of a capital nature, whether by purchase of stock or
securities, contributions to capital, property transfers or otherwise, in any
other partnership, corporation or other entity; (vii) canceled or compromised
any debt or claim other than in the ordinary course of business consistent with
past practice; (viii) waived or released any rights of material value,
including, without limitation, any Intangible Rights (as defined in Section
2.11(b) below); (ix) transferred or granted any rights under or with respect to
any Intangible Rights, or permitted any license, permit or other form of
authorization relating to an Intangible Right to lapse; (x) suffered any
casualty loss or damage (whether or not such loss or damage shall have been
covered by insurance) which affects in any material respect its ability to
conduct its business; (xi) declared, set aside or paid any distribution (whether
in cash, stock or property or any combination thereof) in respect of its capital
stock, redeemed or otherwise acquired any of its capital stock, split, combined
or otherwise similarly changed its capital stock, or authorized the creation or
issuance of or issued or sold any capital stock or any securities or obligations
convertible into or exchangeable therefor, or gave any person any right to
acquire any of its capital stock; (xii) made or granted any wage or salary
increase or adopted or modified any severance arrangements applicable to any
group or classification of employees generally, entered into any employment
contract with, or made any loan to, or granted any severance benefits to, or
entered into any material transaction of any other nature with, any officer or
employee of the Company; or (xiii) entered into any agreement, contract or
commitment to take any of the actions set forth in clauses (i) through (xii)
above.
(b) Since December 31, 1996, there has been no material adverse change
in the business, operations, properties, prospects or condition (financial or
otherwise) of the Company.
SECTION 2.09. Governmental Approvals. No order, authorization,
approval or consent from, or filing with, any federal or state governmental or
public body or other authority having jurisdiction over any of the Selling
Shareholders or the Company is required for the execution, delivery and
performance of this Agreement by any of the Selling Shareholders, is necessary
in order to ensure the legality, validity, binding effect or enforceability of
this Agreement, or is necessary in order that the business of the Company can be
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conducted by the Purchaser immediately following the Closing Date substantially
in the same manner as heretofore conducted.
SECTION 2.10. Title to Properties, Absence of Liens and Encumbrances.
The Company has good and valid title to all its assets and properties, in each
case free and clear of all Liens, other than (w) the Liens described on Schedule
2.10 hereto, (x) liens for taxes not yet due, or (y) mechanic's, materialman's,
landlord's and similar statutory liens arising in the ordinary course of
business and which, in the aggregate, are not material in nature or amount and
could not materially detract from the value of or materially impair the use of
the property subject thereto or impair the operations or proposed operations of
the Company, or (z) security interests securing indebtedness not in default for
the purchase price of or lease rental payments on property purchased or leased
under capital lease arrangements in the ordinary course of business (the Liens
described in clauses (w), (x), (y) and (z) above being referred to herein as
"Permitted Liens").
SECTION 2.11. List of Properties, Contracts and Other Data. Annexed
hereto as Schedule 2.11 is a list setting forth the following:
(a) a description of all real property owned by the Company;
(b) a description of all leases of real or personal property to which
the Company is a party, either as lessee or lessor, including a description
of the parties to each such lease, the property to which each such lease
relates, the rental term and, in the case of real property leases, the
monthly (or other) rents payable under each such lease;
(c) (i) all patents, trademarks and trade names, trademark and trade
name registrations, logos, servicemark registrations, copyright and
copyright registrations, all applications pending on the date hereof for
patent or for trademark, trade name, service ▇▇▇▇ or copyright
registrations, and all other material proprietary rights (collectively, "In
tangible Rights") owned by the Company, and (ii) all licenses granted by or
to the Company and all other agreements to which the Company is a party
that relate, in whole or in part, to any such Intangible Rights or to other
proprietary rights reasonably necessary to the Company, whether owned by
any Selling Shareholder, the Company or otherwise;
(d) all collective bargaining agreements, employment and consulting
agreements, independent contractor agreements, executive compensation
plans, bonus plans, deferred compensation agreements, employee pension
plans or retirement plans, employee profit sharing plans, employee stock
purchase and stock option plans, group life insurance, hospitalization
insurance or other similar plans or arrangements maintained for or
providing benefits to employees of, or independent contractors or other
agents of the Company; and
(e) all contracts, including, without limitation, guarantees,
mortgages, indentures and loan agreements, to which the Company is a party,
or to which the
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Company or any of its assets or properties is subject and which are not
specifically referred to in clauses (b), (c), or (d) above; provided,
however, that there need not be listed on said Schedule 2.11 pursuant to
this clause (e) any sales contracts, contracts with suppliers and other
such contracts incurred in the ordinary course of business and consistent
with past practice, other than any such contract which (i) is a contract or
group of related contracts that exceeds $10,000 in amount, (ii) contains
warranties by the Company in excess of those customary in its business or
(iii) cannot be performed in the normal course within 12 months after the
Closing Date without breach or penalty.
True and complete copies of all documents and complete descriptions of
all binding oral commitments (if any) referred to in said Schedule 2.11 have
been provided to the Purchaser and its counsel. All material provisions of the
written contracts referred to in such Schedule are valid and enforceable
obligations of the Company and, to the best knowledge of such Selling
Shareholder, of the other parties thereto. Neither such Selling Shareholder nor
the Company has been notified of any claim that any written contract referred to
in such Schedule is not valid and enforceable in accordance with its terms for
the periods stated therein, or that there is under any such contract any
existing default or event of default or event which (with notice or lapse of
time or both) would constitute such a default. Except as set forth on Schedule
2.11, the consummation of the transactions contemplated hereby shall not (i)
constitute a default or an event which (with notice or lapse of time or both)
would constitute a default under any such written contract, (ii) give rise to a
right of termination thereunder, (iii) constitute a prohibited assignment
thereof or (iv) otherwise alter any of the Company's rights or obligations
thereunder.
SECTION 2.12. Intangible Rights. (a) The Intangible Rights constitute
all such proprietary rights that are necessary to the conduct of the Company's
business. The Company owns or has valid rights to use all the Intangible Rights
without conflict with the rights of others. Except as set forth on Schedule 2.12
hereto, no person has made or, to the best knowl edge of such Selling
Shareholder, threatened to make, any claims that the use by the Company of the
Intangible Rights or the operations of the Company's business are in violation
of or infringe upon any intellectual property rights or any other proprietary or
trade rights of any third party.
(b) The consummation of the transactions contemplated hereby will not
alter or impair any Intangible Rights.
(c) The Company has taken and is taking reasonable precautions to
protect any material trade secrets and other confidential information included
in the Intangible Rights. To the Selling Shareholders' best knowledge and
belief, no person is infringing on or violating the Intangible Rights, trade
secrets or know-how used by the Company.
SECTION 2.13. Software. (a) The Company holds valid licenses to all
copies of the operating and applications computer software programs and
databases (collectively, the "Software") used by it, other than any portion
thereof that was developed by or under contract with the Company (collectively,
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the "Proprietary Software"). The Company either owns outright, or has a
perpetual, royalty-free license to, the Proprietary Software used by it, and
such Company has not sold, licensed, leased or otherwise transferred or granted
any interest or rights to any thereof. To the Selling Shareholders' best
knowledge and belief, neither the Proprietary Software nor the use by the
Company of the Software infringes upon or violates any patent, copy right, trade
secret or other proprietary right of any other person and, to the best knowledge
of such Selling Shareholder, no claim with respect to any such infringement or
violation is threatened. The Company has taken all steps necessary to protect
its right, title and interest in and to the Software owned by it.
(b) Upon consummation of the transactions contemplated by this
Agreement, the Company will continue to own all the Proprietary Software, free
and clear of all Liens, and, with respect to all agreements for the lease or
license of Software that require consents or other actions as a result of the
consummation of the transactions contemplated hereby in order for the Company to
continue to use and operate such Software after the Closing Date, the Company
will have obtained such consents or taken such other actions so required.
SECTION 2.14. Litigation, Etc. (a) Schedule 2.14 hereto sets forth a
complete list and an accurate description of all claims, actions, suits,
proceedings and investigations pending or, to the best knowledge of such Selling
Shareholder, threatened, by or against the Company or any of its properties,
assets, rights or businesses. No such pending or threatened claims, actions,
suits, proceedings or investigations, if adversely determined, would,
individually or in the aggregate, have a material adverse effect on the
business, properties or condition (financial or other) of the Company. Such
Selling Shareholder knows of no basis for any other such claim, action, suit,
proceeding or investigation which, if adversely decided, would have such a
material adverse effect.
(b) There are no actions, suits, proceedings or claims pending before
or by any court, arbitrator, regulatory authority or government agency against
or affecting such Selling Shareholder or the Company that might enjoin or
prevent the consummation of the transactions contemplated by this Agreement.
SECTION 2.15. Taxes. (a) Except as set forth on Schedule 2.15 hereto,
the Company has duly and timely filed all returns, declarations, reports,
estimates, information returns and statements ("Returns") required to be filed
by it in respect of any Taxes (as hereinafter defined) for all years and periods
for which such Returns have become due, and all such Returns (including all
informational Returns) were correct and complete as filed and correctly reflect
the facts regarding the income, business, assets, operations, activities and
status of the Company as well as all Taxes required to be paid or collected by
the Company.
(b) The Company has paid all Taxes, or where payment is not yet due,
has established, or will establish, consistent with past practice, an adequate
reserve on its books and records for the payment of all Taxes with respect to
any taxable period ending on or prior to the Closing Date (or otherwise relating
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or attributable to periods up to and including the Closing Date). The Company
has complied with all applicable laws, rules and regulations relating to the
payment and withholding of Taxes and has timely withheld from employee wages and
paid over to the proper governmental authorities when due all amounts required
to be so withheld and paid over (including, without limitation, federal income
taxes, Federal Insurance Contribution Act ("FICA") taxes, state and local income
and wage taxes, payroll taxes, workers' compensation and unemployment
compensation taxes).
(c) Except as set forth on Schedule 2.15 hereto, to the best knowledge
and belief of the Selling Shareholders, the Company is not delinquent in the
payment of any Taxes and has not requested any extension of time within which to
file any Return, which Return has not since been filed on a timely basis. There
is no deficiency, claim, audit, action, suit, proceeding or investigation now
pending or, to the best knowledge and belief of the Selling Shareholders,
threatened against or with respect to the Company in respect of any Taxes. There
are no requests for rulings or determinations in respect of any Taxes pending
between the Company and any taxing authority, and no such rulings or
determinations have been received by the Company.
(d) Except as set forth on Schedule 2.15 hereto, the Company has not
executed or entered into (and will not enter into on or prior to the Closing
Date) with the Internal Revenue Service or any other taxing authority (i) any
agreement or other document extending or having the effect of extending the
period for assessment or collection of any Taxes for which the Company would be
liable or (ii) a closing agreement pursuant to Section 7121 of the Internal
Revenue Code of 1986, as amended (the "Code"), or any predecessor or successor
provision thereof or any similar provision of state, local or foreign Tax law
that relates to the assets or operations of the Company.
(e) The Company is not party to any agreement, contract or arrangement
that would result, by reason of the consummation of any of the transactions
contemplated hereby, separately or in the aggregate, in the payment of any
"excess parachute payment" within the meaning of Section 280G of the Code.
(f) For purposes of this Agreement, "Tax" (and with correlative
meaning, "Taxes") shall mean (i) any net income, gross income, gross receipts,
franchise, profits, license, sales, use, ad valorem, value added, property,
payroll, withholding, FICA, unemployment, excise, severance, transfer,
employment, alternative or add-on minimum, stamp, occupation, premium,
environmental or windfall profits taxes, customs duties or other taxes,
governmental fees or other like assessments or charges of any kind whatsoever,
together with any interest or any penalty, addition to tax or additional amount
imposed by any governmental authority responsible for the imposition of any such
taxes (domestic or foreign) or (ii) any liability of the Company for the payment
of any amounts of the type described in (i).
SECTION 2.16. Governmental Authorizations and Regulations. The Company
has all governmental licenses, franchises, permits and other governmental
authorizations ("Governmental Permits") necessary for the conduct of its
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business. To the Selling Shareholders' best knowledge and belief, the business
of the Company is being conducted in compliance in all material respects with
all applicable laws, ordinances, rules and regulations of all governmental
authorities relating to its properties or applicable to its business. Neither
the Company nor such Selling Shareholder has received any notice of any alleged
violation of any of the foregoing. Neither the Company nor any of the Company's
properties, operations or businesses is subject to any order, judgment,
injunction or decree.
SECTION 2.17. Labor Matters. Neither the Company nor such Selling
Shareholder has received notice of any claim that the Company has failed to
comply with any laws relating to employment, including any provisions thereof
relating to wages, hours, collective bargaining, the payment of social security
and other payroll or similar taxes, equal employment opportunity, employment
discrimination or harassment and employment safety, or that the Company is
liable for any arrears of wages or any taxes or penalties for failure to comply
with any of the foregoing.
SECTION 2.18. Insurance. All policies of fire, liability, workers'
compensation and other forms of insurance providing insurance coverage to or
for the Company are listed on Schedule 2.18 hereto. The Company is a named
insured under such policies, all premiums with respect thereto covering all
periods up to and including the Closing Date have been paid, and no notice of
cancellation or termination has been received with respect to any such policy.
All such policies are in full force and effect and will remain in full force and
effect to and including the Closing Date, and coverage will continue to be in
effect immediately after the Closing Date, without limit as to time, for
occurrences prior to the Closing Date. Neither such Selling Shareholder nor any
such insurer has any right of payment, whether by way of set-off, indemnity or
otherwise, of any nature whatsoever against the Company in respect of any
recovery by the Company under any such policy.
SECTION 2.19. Use of Real Property. The leased real properties listed
on Schedule 2.11 hereto are used and operated by the Company in material
compliance and conformity with all applicable leases. Neither the Company nor
such Selling Shareholder has received notice of any violation of any applicable
zoning or building regulation, ordinance or other law, order, regulation or
requirement relating to the real estate operations or assets of the Company
and, to the best knowledge of such Selling Shareholder, there are no such
violations.
SECTION 2.20. Condition of Assets. All tangible personal property,
fixtures and equipment comprising the assets of the Company are in a good state
of repair (ordinary wear and tear excepted) and operating condition and are
sufficient and adequate to conduct its business on the date hereof.
SECTION 2.21. Accounts Receivable. Except as set forth on Schedule
2.21 hereto, the accounts receivable reflected on the balance sheet of the
Company as of December 31, 1996, and all accounts receivable arising between
December 31, 1996 and the date hereof, arose from bona fide transactions in the
16
ordinary course of business with unaffiliated third parties, and the goods and
services involved have been sold, delivered and performed to the account
obligors, and no further goods are required to be provided and no further
services are required to be rendered in order to complete the sales and fully
render the services and to entitle the Company to collect its accounts
receivable in full. To the best knowledge of such Selling Shareholder, there is
not any dispute as to the validity or collectibility of such accounts receivable
and, except as set forth on Schedule 2.21, neither any such account receivable
nor any note receivable has been assigned or pledged to any other person, firm
or corporation or is subject to any right of set-off in respect of any
obligations of the such Selling Shareholder or otherwise.
SECTION 2.22. Books and Records. The corporate minute books and stock
record books of the Company completely and accurately reflect in all material
respects the corporate proceedings of the Company and properly and accurately
record the issuance and transfer of all shares of capital stock of the Company.
SECTION 2.23. Employee Benefit Plans. (a) Schedule 2.23 attached
hereto lists each employee benefit plan within the meaning of Section 3(3) of
the Employee Retirement Income Security Act of 1974 ("ERISA") maintained by the
Company or to which the Company contributes or is required to contribute or in
which any employee of the Company participates (a "Plan"). The Company has
complied and currently is in compliance, both as to form and operation, with the
applicable provisions of ERISA and the Code applicable to each Plan.
(b) Each Plan that is intended to qualify under Section 401(a) of the
Code does so qualify and is exempt from taxation pursuant to Section 501(a) of
the Code.
(c) The Company has not maintained, contributed to or been required to
contribute to, nor do any of its employees participate in, a "multiemployer
plan" (as defined in Section 3(37) of ERISA) or a "defined benefit plan" (as
defined in Section 3(35) of ERISA). No amount is due or owing from the Company
on account of a multiemployer plan or on account of any withdrawal therefrom.
(d) The Company has not incurred any liability with respect to any
Plan under ERISA (including, without limitation, Title I or Title IV of ERISA),
the Code or other applicable law that has not been satisfied in full, and no
event has occurred, and there exists no condition or set of circumstances that
could result in the imposition of any liability under ERISA (including, without
limitation, Title I or Title IV of ERISA), the Code or other applicable law with
respect to any of the Plans.
(e) No Plan, other than a Plan that is an employee pension benefit
plan (within the meaning of Section 3(2)(A) of ERISA), provides benefits,
including, without limitation, death, health or medical benefits (whether or
not insured), with respect to current or former employees of the Company beyond
their retirement or other termination of service with the Company (other than
(i) coverage mandated by applicable law, (ii) deferred compensation benefits
17
accrued as liabilities on the books of the Company or (iii) benefits the full
cost of which is borne by the current or former employee (or his beneficiary)).
(f) Except as set forth on Schedule 2.23 or as otherwise contemplated
by this Agreement, the consummation of the transactions contemplated by this
Agreement will not (i) entitle any current or former employee or officer of the
Company to severance pay, unemployment compensation or any other payment, or
(ii) accelerate the time of payment or vesting, or increase the amount, of
compensation due any such employee or officer.
(g) The Company has provided to the Purchaser for each Plan true and
complete copies of the following: (i) each Plan document and summary plan
descriptions; (ii) each trust agreement, insurance policy or other instrument
relating to the funding of such Plan; (iii) the most recent Annual Report (Form
5500 series) and accompanying schedule filed with the Internal Revenue Service
or United States Department of Labor; (iv) the most recent audited financial
statements; (v) the most recent actuarial report; and (vi) each policy of
fiduciary liability insurance (and agreements related thereto) maintained in
connection therewith.
SECTION 2.24. Transactions with Affiliates. Except for the contracts
set forth on Schedule 2.24 hereto, there are no agreements for the provision of
goods, properties or services to the Company by such Selling Shareholder or any
"affiliate" or "associate" (as defined in Rule 12b-2 under the Securities
Exchange Act of 1934, as amended) of such Selling Share holder.
SECTION 2.25. Environmental Matters. (a) For the purposes of this
Section 2.25, the following terms shall have the following meanings:
"Environmental Law" shall mean any federal, state, provincial or local
statute, law, ordinance, rule or regulation and any order to which the
Company is a party or is otherwise bound relating to pollution or
protection of the environment, including natural resources, or exposure of
persons, including employees, to Hazardous Substances;
"Hazardous Substances" shall mean any substance, whether liquid, solid
or gas, listed, identified or designated as hazardous or toxic under any
Environmental Law, which, applying criteria specified in any Environmental
Law, is hazardous or toxic, or the use or disposal of which is regulated
under any Environmental Law.
(b) No Hazardous Substances have been, or have been threatened to be,
discharged, released or emitted into the air, water, surface water, ground
water, land surface or subsurface strata or transported to or from the property
of the Company by the Company or, to the knowledge of such Selling Shareholder,
by any other person, except in accordance with all applicable Environmental Laws
and except for incidental releases of Hazardous Substances in amounts or
concentrations that would not reasonably be expected to give rise to any claims
or liabilities against the Company under any Environmental Law.
18
(c) Neither such Selling Shareholder nor the Company has received any
notification from a governmental agency that there is any violation of any
Environmental Law with respect to the business and properties of the Company or
have received any notification from a governmental agency pursuant to Section
104, 106 or 107 of the Comprehensive Environmental Response Compensation and
Liability Act, as amended.
SECTION 2.26. System Data. The Company purchased from the National
Rural Television Cooperative ("NRTC") the right to provide DirecTV programming
services to approximately 53,438 Homes passed by cable television services and
approximately 18,218 Homes unpassed by cable television services as of 1992. As
used herein, "Homes" means single family residences and individual dwelling
units within any building containing multiple dwelling units. Schedule 2.26 sets
forth the Company's rates for satellite services, a breakdown of the channel
packages sold and a general description of marketing promotions and discounts
offered to subscribers since December 31, 1996 and those which may affect the
Company's business after the Closing Date.
SECTION 2.27. Distribution Agreements. The Company is party to three
"Agreements for Purchase of Direct Broadcast Satellite Services Area"
("Distribution Agreements"), with ▇. ▇. ▇▇▇▇▇▇, III, DBS Tele-Venture, Inc., and
Meridian, Inc. (collectively, the "Distributors"). The Company is not party to
any other Distribution Agreements or similar agreements, arrangements or
commitments. The Company has established a separate account of restricted cash
(the "Reserve Account") in the amount of $1,215,000, which shall be applied
solely to make payments to the Distributors in consideration of the cancellation
or renegotiation of the Distribution Agreements.
SECTION 2.28. Offering of the Shares. Neither such Selling Shareholder
nor any person authorized by the Company or such Selling Shareholder as agent,
broker, dealer or otherwise in connection with the offering or sale of the
Shares, or any similar securities of the Company, has taken or will take any
action (including without limitation any offer or sale of any securities under
circumstances which would require the integration under the Securities Act of
1933 (the "Securities Act"), or the rules and regulations of the Securities and
Exchange Commission thereunder, of such securities with the Shares being sold
by such Selling Shareholder hereunder) which would subject the transactions
contemplated hereby to the registration provisions of the Securities Act.
SECTION 2.29. Qualification of Representations and Warranties of
Certain Selling Shareholders. Solely with respect to ▇. ▇. ▇▇▇▇▇▇, ▇▇., the ▇▇▇▇
▇. ▇'▇▇▇▇▇▇ Trust for ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇. ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, the
representations and warranties set forth in Sections 2.01, 2.04, 2.06 through
2.23 inclusive and 2.25 through 2.27 inclusive are made by such Selling
Shareholders to the best of their knowledge and belief.
19
III.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Selling Shareholders as
follows:
SECTION 3.01. Organization, Power, Etc. The Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Purchaser has full corporate power and authority to
execute and deliver this Agreement and to perform its obligations hereunder.
SECTION 3.02. Authorization of Agreements, Etc. The execution and
delivery by the Purchaser of this Agreement, and the performance by the
Purchaser of its obligations hereunder, have been duly authorized by all
requisite corporate action and will not (x) violate any provision of law, any
order of any court or other agency of government, the Certificate of
Incorporation or By-laws of the Purchaser, any judgment, award or decree or any
indenture, agreement or other instrument to which the Purchaser is a party, or
by which it or any of its properties or assets is bound or affected; (y)
conflict with, result in a breach of or constitute (with due notice or lapse of
time or both) a default under any such indenture, agreement or other instrument;
or (z) result in the creation or imposition of any lien, charge or encumbrance
of any nature whatsoever upon any of the properties or assets of the Purchaser.
SECTION 3.03. Validity. This Agreement has been duly executed and
delivered by the Purchaser and constitutes the legal, valid and binding
obligation of the Purchaser, enforceable against the Purchaser in accordance
with its terms.
SECTION 3.04. Governmental Approvals. Except for filings with the
Department of Justice and the Federal Trade Commission pursuant to the HSR Act,
no order, authorization, approval or consent from, or filing with, any federal
or state governmental or public body or other authority having jurisdiction over
the Purchaser is required for the execution, delivery and performance by the
Purchaser of this Agreement, or is necessary in order to ensure, with respect to
the Purchaser, the legality, validity, binding effect or enforceability of this
Agreement.
SECTION 3.05. Litigation Relating to Transaction. There are no
actions, suits, proceedings or claims pending before any court, arbitrator or
government agency against or affecting the Purchaser that might enjoin or
prevent the consummation of the transactions contemplated by this Agreement or
the Ancillary Agreements.
SECTION 3.06. Investment Representation. The Purchaser is acquiring
the Shares for its own account for the purpose of investment and not with a view
to or for sale in connection with any distribution thereof, and the Purchaser
has no present commitment or agreement providing for the distribution thereof.
20
IV.
COVENANTS
SECTION 4.01. Certain Covenants of the Selling Shareholders. (a)
During the period from the date of this Agreement to the Closing Date, the
Selling Shareholders shall, to the extent they are legally entitled to do so,
cause the Company to conduct its business and operations according to its
ordinary course of business consistent with past practice and to use its best
efforts (i) to preserve its relationships with suppliers, customers, employees
and independent contractors, (ii) to maintain the contracts with its customers
in full force and effect in accordance with their terms and (iii) to ensure that
the Company will continue to provide its services to its customers. Without
limiting the generality of the foregoing, prior to the Closing Date, without the
prior written consent of the Purchaser, the Selling Shareholders shall, to the
extent they are legally entitled to do so, not permit the Company to (x) change
the rates charged for services from those listed on Schedule 2.26 unless
nationally advertised by DirecTV or unless the Company experiences a wholesale
cost increase greater than 10%, or (y) do any of the things listed in clauses
(i) through (xiii) of Section 2.08(a) above; provided, however, that the Company
may make the cash payments contemplated by Sections 4.06(b) and 4.07 hereof.
(b) Between the date hereof and the Closing Date, the Selling
Shareholders shall, and shall cause the Company to, provide access to the
Purchaser's representatives to the premises, key employees and financial,
accounting and legal records of the Company. Such activities shall be performed,
so far as is reasonably possible, in such a manner as to minimize disruption of
normal operations.
(c) Between the date hereof and the Closing Date, the Selling
Shareholders shall, to the extent they are entitled to do so, not permit the
Company, except as required by GAAP, (i) to use accounting principles different
from those used in the preparation of the Financial Statements, (ii) change in
any manner its method of maintaining its books of account and records from such
methods as in effect on December 31, 1996, or (iii) accelerate booking of
revenues or the deferral of expenses, other than as shall be consistent with
past practice and in the ordinary course of business.
(d) Between the date hereof and the Closing Date, the Selling
Shareholders (together with their affiliates and associates) shall not, and
shall, to the extent they are entitled to do so, cause the Company not to, enter
into any transaction, make any agreement or commitment, or take any action, that
would result in any of the representations, warranties or covenants of the
Selling Shareholders contained in this Agreement not being true and correct at
and as of the time immediately after the occurrence of such transaction, event
or action.
SECTION 4.02. Certain Tax Matters. (a) The Company shall (with the
reasonable cooperation of the Selling Shareholders) prepare and timely file (or
cause to be prepared and timely filed), at its expense, for all taxable periods
21
ending on or before the Closing Date, all federal, state, local and foreign Tax
Returns required to be filed after the Closing Date with respect to which the
Company or the assets of the Company are liable or otherwise in any way subject.
SECTION 4.03. Consents. Each of the parties hereto shall use its best
efforts to obtain the written consents of all persons and governmental
authorities required to be obtained by each such party and necessary to the
consummation of the transactions contemplated by this Agreement, including,
without limitation, the consent of each person holding a Lien, restriction,
right, mortgage or charge of any kind on any real or personal property owned or
leased by the Company.
SECTION 4.04. Books and Records. The Selling Shareholders shall
deliver to the Purchaser or shall cause to be delivered to the principal office
or other office of the Company, all books and records used in the operation of
the business of the Company, and all files, documents, papers, agreements, books
of account, mailing lists, registration systems and other records pertaining to
the business of the Company, to the extent that such books, records, files and
other materials are not theretofore located at the office of the Company.
SECTION 4.05. License and Other Fees. The Selling Shareholders shall
pay all regulatory, license, assignment, transfer and other fees and costs
required to be paid to any regulatory authority (other than the filing fees
payable by the Purchaser under the HSR Act) or to any third-party supplier,
lessor, licensor or other entity in order to obtain any licenses, rights or
consents required to be obtained from such person or entity in connection with
the transactions contemplated hereby; provided, however, that the Purchaser
shall be responsible for and shall pay all NRTC fees associated with assignment
and transfer (or deemed transfer) of the Member Agreement for Marketing and
Distribution of DBS Services.
SECTION 4.06. Employment Matters. (a) Within forty-five days after the
Closing Date, the Purchaser shall cause the Company to pay the sum of $830,250
for the following purposes: (i) to pay to ▇▇▇▇▇▇ ▇'▇▇▇ the Non-Competition
Payment contemplated by the Employment Agreement (as defined herein), and (ii)
to establish a bonus pool for the employees of the Company. Prior to the Closing
Date, the directors of the Company shall allocate the bonus pool referred to in
clause (ii) above among the employees of the Company, and all payments from such
bonus pool shall be made within 45 days after the Closing Date.
(b) Prior to the Closing, the Purchaser shall establish an equity
compensation plan for employees of the Company, pursuant to which options to
purchase up to an aggregate 10,000 shares (less the aggregate number of shares
issuable pursuant to the Subscription Agreements) of Preferred Stock shall be
granted at the Closing to employees as set forth on Schedule 4.06 hereto (which
schedule may be modified from time to time up to the Closing Date as determined
by the Board of Directors of the Company). Such plan shall provide that such
options shall have an exercise price of $100 per share and shall be immediately
22
exercisable upon grant, but shall lapse and terminate if not exercised within 10
days following payment of the bonus pool described in paragraph (a).
SECTION 4.07. Termination of Distribution Agreements. The Selling
Shareholders (to the extent they are legally entitled to do so) and the Company
shall use their respective best efforts to effect the termination of the
Distribution Agreements with each of the Distributors. To the extent that any
amounts in excess of the Reserve Account are expended to effect the termination
or renegotiation (on terms satisfactory to the Purchaser) of the Distribution
Agreements, any such amounts in excess of the Reserve Account shall be paid:
(i) One-half by the Purchaser and one-half by the shareholders of the
Company as of the date hereof other than ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ (including, without
limitation, the Purchaser), to the extent any such expenditures occur
prior to the Closing Date; or
(ii) One-half by the Company and one-half by the shareholders of the
Company as of the date hereof other than ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ (including, without
limitation, the Purchaser), to the extent any such expenditures occur on or
after the Closing Date;
provided, that the aggregate payment due from the shareholders of the Company as
of the date hereof (excluding the Purchaser) shall not exceed $920,000.
SECTION 4.08. Other Discussions. The Selling Shareholders shall, and
shall (to the extent they are legally entitled to do so) cause the Company to,
abide by the obligations set forth in Section 8 of the letter, dated as of April
3, 1997, between the Purchaser and the Selling Shareholders (without giving
effect to the time limitations set forth therein). Without limiting such
obligations, the Selling Shareholders shall promptly inform the Purchaser of any
inquiry, offer or proposal made by any party other than the Purchaser with
respect to any acquisition of the Shares or any acquisition, business
combination or purchase of all or any portion of the assets or partnership
interests of the Company.
V.
CONDITIONS PRECEDENT
SECTION 5.01. Conditions Precedent to the Obligations of the
Purchaser. The obligation of the Purchaser to consummate the transactions
contemplated by this Agreement is subject, at the option of the Purchaser, to
the satisfaction at or prior to the Closing Date of each of the following
conditions:
(a) Accuracy of Representations and Warranties. The representations
and warranties of the Selling Shareholders contained in this Agreement or in any
certificate delivered
23
to the Purchaser pursuant hereto shall be true and correct on and as of the
Closing Date as though made at and as of that date, and the Selling Shareholders
shall have so certified to the Purchaser in writing; provided that such
certification may be made to the best of the Selling Shareholders' knowledge and
belief, to the extent contemplated by Section 2.29 hereof.
(b) Compliance with Covenants. Each Selling Shareholder shall have
performed and complied with all terms, agreements, covenants and conditions of
this Agreement to be performed or complied with by him or her at or prior to the
Closing Date, and the Selling Shareholders shall have so certified to the
Purchaser in writing.
(c) All Proceedings To Be Satisfactory. All proceedings to be taken by
the Selling Shareholders and the Company in connection with transactions
contemplated hereby and all documents incident thereto shall be reasonably
satisfactory in form and substance to the Purchaser and its counsel, and the
Purchaser and said counsel shall have received all such counterpart originals
or certified or other copies of such documents as they may reasonably request.
(d) Legal Actions or Proceedings. No legal action or proceeding shall
have been instituted by any party or threatened by any governmental department,
agency or authority, in either case seeking to restrain, prohibit, invalidate or
otherwise affect the consummation of the transactions contemplated hereby or
which would, if adversely decided, materially adversely affect the operation by
the Purchaser of the business of the Company.
(e) Employment Agreement. On or prior to the Closing Date, the Company
and ▇▇▇▇▇▇ ▇'▇▇▇ shall have executed and delivered an Employment Agreement and
Covenant Not to Compete in substantially the form attached hereto as Exhibit A
(the "Employment Agreement"), and the same shall be in full force and effect.
(f) Opinion of Counsel for the Selling Shareholders. The Purchaser
shall have received the opinion of Decker, Jones, McMackin, McClane, Hall &
▇▇▇▇▇, P.C., special counsel for the Selling Shareholders, addressed to the
Purchaser and dated the Closing Date, satisfactory in form and substance to the
Purchaser and its counsel, to the effect set forth in Exhibit B hereto.
(g) Consents and Approvals. Any waiting period applicable to the
transactions contemplated hereby under the HSR Act shall have terminated or
expired, and all other authorizations, consents, waivers and approvals required
in connection with the execution, delivery and performance of this Agreement
(including without limitation any required consents from DirecTV and the NRTC)
shall have been duly obtained and shall be in form and substance satisfactory to
counsel for the Purchaser.
(h) No Material Adverse Change. Between the date of this Agreement and
the Closing Date, there shall have been no material adverse change in the
business, operations, properties, prospects or condition (financial or
otherwise) of the Company.
24
(i) Revenues; Liabilities. The Company shall provide financial
statements, certified to be true and correct by the President of the Company,
which financial statements shall demonstrate that (i) between the date of this
Agreement and the Closing Date, the revenues of the Company (calculated in
accordance with GAAP) for any calendar month do not decrease by more than 15%
from the revenues for the prior month; and (ii) as of June 30, 1997, the total
liabilities of the Company (calculated in accordance with GAAP) do not exceed
$3,080,000.
(j) Cancellation of Options. The Company shall have repurchased and
canceled all outstanding warrants and options to acquire capital stock of the
Company, as more fully set forth on Schedule 2.04 hereto.
(k) Certain Resignations. All officers and members of the Board of
Directors of the Company shall have resigned from their respective offices or
from the Board of Directors, as the case may be, in writing and effective
immediately upon the Closing Date.
(l) Supporting Documents. On or prior to the Closing Date, the
Purchaser and its counsel shall have received copies of the following supporting
documents:
(i) (1) the charter documents of the Company, certified as of a
recent date by the Secretary of State of the State of Texas; and (2) a
certificate of the Secretary of State or other appropriate official of
the State of Texas as to the due incorporation and good standing of
the Company and listing all documents on file with said official;
(ii) a certificate of the Secretary or an Assistant Secretary of
the Company, dated the Closing Date and certifying (1) that attached
thereto is a true and complete copy of the By-laws of the Company as
in effect on the date of such certification; and (2) that the Articles
of Incorporation of such Company have not been amended since the date
of the last amendment referred to in the certificate delivered
pursuant to clause (i)(1) above; and
(iii) such additional supporting documents and other information
with respect to the operations and affairs of the Company as the
Purchaser or its counsel may reasonably request.
All such documents shall be satisfactory in form and substance to the
Purchaser and its counsel.
SECTION 5.02. Conditions Precedent to the Obligations of the Selling
Shareholders. The obligations of the Selling Shareholders under this Agreement
are subject, at the option of the Selling Shareholders, to the satisfaction at
or prior to the Closing Date of each of the following conditions:
(a) Accuracy of Representations and Warranties. The representations
and warranties of the Purchaser contained in this Agreement or in any agreement
25
or other document delivered to the Selling Shareholders pursuant hereto shall
have been true and correct when made, and the Purchaser shall so certified to
the Selling Shareholders in writing.
(b) Compliance with Covenants. The Purchaser shall have performed and
complied with all terms, agreements, covenants and conditions of this Agreement
to be performed or complied with by it at or prior to the Closing Date, and the
Purchaser shall have so certified to the Selling Shareholders in writing.
(c) Legal Actions or Proceedings. No legal action or proceeding shall
have been instituted by any party or threatened by any governmental department,
agency or authority, in either case seeking to restrain, prohibit, invalidate or
otherwise affect the consummation of the transactions contemplated hereby.
(d) Payment of Purchase Price. The Purchase Price shall have been paid
to the Selling Shareholders in accordance with Section 1.03(b) hereof.
(e) Subscription Agreements. The Purchaser shall have issued shares of
Preferred Stock in accordance with the Subscription Agreements to the extent
payment has been received therefor. To the extent that (i) the aggregate number
of shares of Preferred Stock subject to the Subscription Agreements, plus (ii)
the aggregate number of shares of Preferred Stock issuable pursuant to options
granted as contemplated by Section 4.06(b), shall be less than 10,000, the
Purchaser shall have offered ▇▇▇▇ ▇'▇▇▇ the right, pursuant to an additional
Subscription Agreement, to purchase an additional number of shares of Preferred
Stock equal to the excess of 10,000 over the sum of clauses (i) and (ii) above.
VI.
INDEMNIFICATION
SECTION 6.01. Survival of Representations and Warranties. All
representations and warranties made by any party hereto in this Agreement or
pursuant hereto shall survive the Closing Date and shall terminate at the close
of business on the second anniversary of the Closing Date, except for the
representations and warranties contained in Sections 2.04 and 2.05 (which shall
survive indefinitely) and in Section 2.15 (which shall survive for the
applicable statute of limitation periods, including any extensions or waivers
thereof).
SECTION 6.02. General Indemnity. (a) Subject to the terms and
conditions of this Article VI, each of the Selling Shareholders, severally and
not jointly, agrees to and shall indemnify, defend and hold the Purchaser, the
Company and their respective affiliates harmless from and against such Selling
Shareholder's percentage interest or share of all demands, claims, actions or
causes of action, assessments, Taxes, losses, damages, liabilities, costs and
26
expenses, including without limitation interest, penalties and reasonable
attorneys' fees and expenses (hereinafter collectively called "Damages"),
asserted against, resulting to, imposed upon or incurred by the Purchaser, the
Company or their respective affiliates, by reason of, resulting from or arising
out of:
(i) a breach of any representation, warranty or covenant of such
Selling Shareholder contained in or made pursuant to this Agreement;
(ii) any liabilities or obligations of the Company (whether
absolute, accrued, contingent or otherwise) in respect of any action,
suit or proceeding relating to the conduct of the Company's business
and based upon an event occurring or a claim arising on or prior to
the Closing Date;
(iii) any liability in respect of any failure by the Company to
conduct its business in compliance with any Governmental Permit, law,
regulation or order prior to the Closing Date; and
(iv) any and all Taxes imposed on or incurred by the Company
(including, without limitation, any and all Taxes arising out of the
consummation of the transactions contemplated hereby, but excluding
any Taxes attributable to an election under Section 338 or to the
deduction by the Company of any amounts paid in connection with this
transaction, such as the amounts described in Section 4.06) for all
taxable years (or portions thereof) ending on or prior to the Closing
Date, except to the extent such Taxes have been paid or reserves have
been established for such Taxes on the Financial Statements.
(b) Notwithstanding anything in this Agreement to the contrary:
(i) the Selling Shareholders shall not be obligated to indemnify,
defend and hold harmless the Purchaser and/or the Company pursuant to
paragraph (a) above unless the aggregate amount of Damages claimed
thereunder exceeds $25,000; and
(ii) the Selling Shareholders' liability and obligation to
indemnify, defend and hold harmless the Purchaser and/or the Company
pursuant to paragraph (a) above shall in no event exceed the Purchase
Price in the aggregate for all claims.
(c) Subject to the terms and conditions of this Article VI, the
Purchaser agrees to and shall indemnify, defend and hold the Selling
Shareholders harmless from and against all Damages asserted against, resulting
to, imposed upon or incurred by them by reason of or resulting from or arising
out of:
(i) a breach of any representation, warranty or covenant of the
Purchaser contained in or made pursuant to this Agreement; and
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(ii) any liabilities or obligations of the Company (whether
absolute, accrued, contingent or otherwise) in respect of any action,
suit or proceeding relating to the conduct of the Company's business
and based upon an event occurring or a claim arising after the Closing
Date; and
(iii) any and all Taxes imposed on or incurred by the Company for
all taxable years and periods ending after the Closing Date (including
any short periods ending after the Closing Date).
SECTION 6.03. Conditions of Indemnification. The respective
obligations and liabilities of the Selling Shareholders, on the one hand, and
the Purchaser, on the other hand (herein sometimes called the "indemnifying
party"), to the other (herein sometimes called the "party to be indemnified")
under Section 6.02 hereof with respect to claims resulting from the assertion of
liability by third parties shall be subject to the following terms and
conditions:
(a) Within 20 days after receipt of notice of commencement of any
action or the assertion of any claim by a third party, the party to be
indemnified shall give the indemnifying party written notice thereof together
with a copy of such claim, process or other legal pleading (provided that
failure so to notify the indemnifying party of the assertion of a claim within
such period shall not affect its indemnity obligation hereunder except as and to
the extent that such failure shall adversely affect the defense of such claim),
and the indemnifying party shall have the right to undertake the defense thereof
by representatives of its own choosing.
(b) In the event that the indemnifying party, by the 30th day after
receipt of notice of any such claim (or, if earlier, by the tenth day preceding
the day on which an answer or other pleading must be served in order to prevent
judgment by default in favor of the person asserting such claim), does not elect
to defend against such claim, the party to be indemnified will (upon further
notice to the indemnifying party) have the right to undertake the defense,
compromise or settlement of such claim on behalf of and for the account and risk
of the indemnifying party, subject to the right of the indemnifying party to
assume the defense of such claim at any time prior to settlement, compromise or
final determination thereof.
(c) Except with the prior written consent of the indemnified party, no
indemnifying party, in the defense of such claim or litigation, shall consent to
entry of any judgment or order, interim or otherwise, or enter into any
settlement that provides for injunctive or other nonmonetary relief affecting
the indemnified party or that does not include as an unconditional term thereof
the giving by each claimant or plaintiff to such indemnified party of a release
from all liability with respect to such claim or litigation. In the event that
the indemnified party shall in good faith determine that the indemnified party
may have available to it one or more defenses or counterclaims that are
inconsistent with one or more of those that may be available to the indemnifying
party in respect of such claim or any litigation relating thereto, the
indemnified party shall have the right at all times to take over and assume
control over the defense, settlement, negotiations or litigation relating to
such claim at the sole cost of the indemnifying party;
28
provided, however, that if the indemnified party does so take over and assume
control, the indemnified party shall not settle such claim or litigation without
the written consent of the indemnifying party, such consent not to be
unreasonably withheld.
(d) In connection with any such indemnification, the indemnified party
shall cooperate in all reasonable requests of the indemnifying party.
SECTION 6.04. Remedies Cumulative. Except as otherwise expressly
provided in this Article VI, the remedies provided herein shall be cumulative
and shall not preclude assertion by any party hereto of any other rights or the
seeking of any other remedies against any other party hereto.
VII.
TERMINATION AND ABANDONMENT
SECTION 7.01. Termination. This Agreement may be terminated at any
time prior to the Closing Date:
(a) by the mutual consent of the Selling Shareholders, on the one
hand, and the Purchaser, on the other hand; or
(b) by the Purchaser, on the one hand, or the Selling
Shareholders, on the other hand, if the closing shall not have
occurred on or before October 1, 1997 or such later date as may be
agreed upon in writing by the parties hereto; provided, however, that
the right to terminate this Agreement under this clause (b) shall not
be available to any party whose failure to fulfill any obligation
under this Agreement has been the cause of or resulted in the failure
of the closing to occur on or before such date.
SECTION 7.02 Procedure and Effect of Termination. In the event of
termination of this Agreement and abandonment of the transactions contemplated
hereby by any or all of the parties pursuant to Section 7.01 above, written
notice thereof shall forthwith be given to the other parties to this Agreement
and this Agreement shall terminate and the transactions contemplated hereby
shall be abandoned, without further action by any of the parties hereto. If this
Agreement is terminated as provided in Section 7.01 above, (i) each party hereto
shall promptly redeliver all documents, work papers and other material of any
other party relating to the transactions contemplated hereby, whether obtained
before or after the execution hereof, to the party furnishing the same; (ii) the
Selling Shareholders shall cause the Company to return the Deposit to the
Purchaser pursuant to Section 1.04 hereof; and (iii) no party shall have any
liability or further obligation to any other party to this Agreement pursuant to
this Agreement; provided, that nothing herein shall relieve any party from
liability for any breach hereof.
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VIII.
MISCELLANEOUS
SECTION 8.01. Expenses, Etc. Whether or not the transactions
contemplated by this Agreement are consummated, none of the parties hereto shall
have any obligation to pay any of the fees and expenses of any other party
incident to the negotiation, preparation and execution of this Agreement,
including the fees and expenses of counsel, accountants, investment bankers and
other experts. The Selling Shareholders, on the one hand, and the Purchaser, on
the other hand, shall indemnify the other and hold it harmless from and against
any claims for finders' fees or brokerage commissions in relation to or in
connection with such transactions as a result of any agreement or understanding
between such indemnifying party and any third party.
SECTION 8.02. Publicity. The parties hereto agree that no press
release or other public announcement concerning this Agreement or the
transactions contemplated hereby shall be issued prior to the Closing Date
without the prior written consent of each of the parties hereto. Each party
shall furnish to the other drafts of all press releases or announcements prior
to their release. Nothing contained herein shall prevent any party from at any
time furnishing any information required by any governmental authority or
required by any person whose consent or authorization is necessary to consummate
the transactions contemplated herein.
SECTION 8.03. Execution in Counterparts. For the convenience of the
parties, this Agreement may be executed in one or more counterparts, or by the
parties hereto on separate counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
SECTION 8.04. Notices. All notices which are required or may be given
pursuant to the terms of this Agreement shall be in writing and shall be
sufficient in all respects if (i) delivered personally, (ii) mailed by
registered or certified mail, return receipt requested and postage prepaid,
(iii) sent via a nationally recognized overnight courier service or (iv) sent
via facsimile confirmed in writing to the recipient, in each case as follows:
If to the Selling Shareholders, to them at:
c/o Argos Support Services Company
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Decker, Jones, McMackin, McClane, Hall & ▇▇▇▇▇, P.C.
2400 City Center II
30
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, III, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Purchaser, at:
Golden Sky Systems, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
with a copy to:
Reboul, MacMurray, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & Kristol
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
or such other address or addresses as the Selling Shareholders, on the one hand,
or the Purchaser, on the other hand, shall have designated by notice in writing
to the other.
SECTION 8.05 Waivers. Either the Selling Shareholders, on the one
hand, or the Purchaser, on the other hand, may, by written notice to the other,
(i) extend the time for the performance of any of the obligations or other
actions of the other under this Agreement, (ii) waive any inaccuracies in the
representations or warranties of the other contained in this Agreement or in any
document delivered pursuant to this Agreement, (iii) waive compliance with any
of the conditions or covenants of the other contained in this Agreement, or (iv)
waive performance of any of the obligations of the other under this Agreement.
Except as provided in the preceding sentence, no action taken pursuant to this
Agreement, including without limitation any investigation by or on behalf of any
party, shall be deemed to constitute a waiver by the party taking such action of
compliance with any representations, warranties, covenants or agreements
contained in this Agreement. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach.
SECTION 8.06 Amendments, Supplements, Etc. At any time this Agreement
may be amended or supplemented by such additional agreements, articles or
certificates, as may be determined by the parties hereto to be necessary,
desirable or expedient to further the purposes of this Agreement, or to clarify
the intention of the parties hereto, or to add to or modify the covenants, terms
31
or conditions hereof or to effect or facilitate any governmental approval or
acceptance of this Agreement or to effect or facilitate the filing or recording
of this Agreement or the consummation of any of the transactions contemplated
hereby. Any such instrument must be in writing and signed by all parties hereto.
SECTION 8.07 Entire Agreement. This Agreement, its Exhibits and
Schedules, the other documents executed on the Closing Date in connection
herewith, constitute the entire agreement between the parties hereto with
respect to the subject matter hereof and supersede all prior agreements and
understandings, oral and written, between the parties hereto with respect to the
subject matter hereof.
SECTION 8.08 Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas, exclusive of the
conflicts of laws provisions thereof.
SECTION 8.09 Binding Effect; Benefits. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Not withstanding anything contained in this
Agreement to the contrary, nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto or their respec
tive successors and assigns, any rights, remedies, obligations or liabilities
under or by reason of this Agreement.
SECTION 8.10 Assignability. Neither this Agreement nor any of the
parties' rights hereunder shall be assignable by any party hereto without the
prior written consent of the other parties hereto.
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IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the parties hereto as of the day and year first above written.
GOLDEN SKY SYSTEMS, INC.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------
Title: Chief Executive Officer
ARGOS SUPPORT SERVICES COMPANY
By /s/ ▇▇▇▇▇▇ ▇. ▇'▇▇▇
----------------------
Title: President
SELLING SHAREHOLDERS:
/s/ ▇.▇. ▇▇▇▇▇▇, ▇▇.
-------------------------
▇. ▇. ▇▇▇▇▇▇, ▇▇.
▇▇▇▇ ▇. ▇'▇▇▇▇▇▇ TRUST FOR ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
By /s/ ▇.▇. ▇▇▇▇▇▇, ▇▇..
------------------------
Title: Trustee
/s/ ▇.▇. ▇▇▇▇▇▇
---------------------------
▇.▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇'▇▇▇
----------------------------
▇▇▇▇▇▇ ▇'▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇