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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-14198
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DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) FEBRUARY 5, 1999
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DIGITAL TRANSMISSION SYSTEMS, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 58-2037949
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
3000 NORTHWOODS PARKWAY, SUITE 330, NORCROSS, GEORGIA 30071
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) (770) 798-1300
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NOT APPLICABLE
----------------------------------------------------
(FORMER NAME, FORMER ADDRESS AND FORMAL FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Pursuant to an Amended and Restated Stock Purchase Agreement,
effective February 5, 1999, Digital Transmission Systems, Inc. (the "Company")
sold all of the issued and outstanding stock of its wholly-owned subsidiary,
SouthTech, Inc., a Georgia corporation ("SouthTech"), to Chapala
Communications, Inc., a Georgia corporation and an affiliate of Mixbaal, S.A.
de C.V. ("Chapala") in exchange for 1,000,000 shares of Chapala's Series A
Preferred Stock (the "Sale"). The Company's international business was operated
by SouthTech prior to the Sale. As a result of the Sale of SouthTech, the
Company will own 19.5% of Chapala.
In connection with the Sale, the Company's $4 Million Principal Amount
Senior Subordinated Debentures (the "Debentures") issued to Sirrom Capital
Corporation were restructured (the "Restructuring"). The Restructuring
included: (i) the transfer of $1 Million principal amount of the Debentures to
Chapala; (ii) the cancellation of $1 Million principal amount of Debentures in
exchange for 1,314,333 shares of the Company's Series A Convertible Preferred
Stock and the issuance of a warrant to purchase 10% of Common Stock of the
Company on a fully-diluted basis; (iii) the extension of the term of the
Debentures until February 5, 2004; and (iv) the deferral of interest payments
due under the Debentures until February 5, 2000.
The press release announcing the sale of SouthTech is incorporated herein by
reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(a) and (b) Not Applicable.
(c) Exhibits.
2.1 Stock Purchase Agreement.
99.1 Press Release of Digital Transmission Systems, Inc.
dated February 22, 1999. *
* To be filed by amendment.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: February 22, 1999 By: /s/ Andres C. Salazar
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Andres C. Salazar
President
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EXHIBIT 2.1
AMENDED AND RESTATED
STOCK PURCHASE AGREEMENT
THIS IS AN AMENDED AND RESTATED STOCK PURCHASE AGREEMENT (this
"Agreement"), dated as of February 5, 1999 by and among DIGITAL TRANSMISSION
SYSTEMS, INC., a Delaware corporation, ("Seller"), SOUTHTECH, INC., a Georgia
corporation ("Target") and wholly-owned subsidiary of Seller, CHAPALA
COMMUNICATIONS, INC., a Georgia corporation ("Buyer") and an affiliate of
Mixbaal, S.A. de C.V., a Mexican corporation ("Mixbaal") and MIXBAAL (solely
for the limited purpose set forth in Section 5A hereof). This Agreement
supercedes in all respects the Stock Purchase Agreement dated January 22, 1999
by and among Seller, Target, Buyer and Mixbaal.
BACKGROUND STATEMENT
Seller is engaged in the business of design, manufacture, sales and
marketing of telecommunications products and Target is in the same business
primarily targeting international markets. Seller wishes to sell, and the Buyer
wishes to purchase, all of the issued and outstanding shares of capital stock
of Target (the "Target Shares") effective as of the Closing Date (as defined
herein) on the terms and subject to the conditions set forth in this Agreement.
STATEMENT OF AGREEMENT
In consideration of the mutual representations, warranties, covenants
and agreements contained herein, the parties hereto agree as follows:
1. SALE AND PURCHASE OF STOCK.
1.1 Sale and Purchase of Stock.
(a) Subject to the terms and conditions of this Agreement, at the
closing referred to in Section 3 (the "Closing"), (i) Seller shall sell and
transfer the Target Shares to Buyer; (ii) the Buyer shall purchase the Target
Shares and (iii) each of the parties to this Agreement shall also take the
other actions that this Agreement contemplates that it will take.
(b) For purposes of this Agreement, the "Business" means the
manufacture, distribution and sale of SKYPLEX I and SKYPLEX II and DIV
products.
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2. PURCHASE PRICE AND PAYMENTS
2.1 Purchase Price.
(a) The purchase price (the "Purchase Price") for the Target
Shares shall be 1,000,000 shares of Buyer's Series A Preferred Stock, $.001 par
value (the "Buyer Shares") adjusted by prorations and other deductions,
payments and withholdings to be paid or otherwise borne by Seller or Buyer
pursuant to this Agreement, and subject to adjustment following the Closing as
provided in Section 2.2. The Buyer Shares shall represent a 19.5% equity
interest in Buyer as of the Closing Date.
2.2 Post Closing Adjustment.
(a) Closing Date Balance Sheet. As soon as practicable after the
Closing, but in no event later than sixty (60) days following the Closing Date,
Seller shall prepare a balance sheet for the Business as of the Closing Date
(the "Closing Date Balance Sheet") in accordance with the books and records of
the Business and the accounting principles applied by Seller in preparing the
most recent Business Financial Statements as defined in Section 4.4. The Seller
shall calculate the amount, if any, by which the working capital of the
Business (the total of accounts receivable and inventory, net of allowances,
plus prepaid expenses, less accounts payable and accrued expenses) as of the
Closing Date Balance Sheet is less than (-$1,063,296) (the "Balance Sheet
Shortfall") or the amount, if any, by which such working capital as of the
Closing Date is greater than (-$1,063,296) (the "Balance Sheet Excess").
(b) Verification of Calculations. The Buyer shall have 30 days
after the delivery by Seller of the calculation of the Closing Date Balance
Sheet to verify the calculations, and Seller shall cooperate with Buyer to
support and document such calculation and lists. In the event Buyer does not
object to any such calculation or list within such 30 day period, then it shall
become final and binding on the parties hereto. If Buyer objects to any portion
of such calculation or list, it shall notify the Seller within such 30 day
period, and the Seller and the Buyer will attempt to resolve such dispute, but
if they are unable to do so within 10 days after delivery of any such objection
and any unresolved aspects represent an amount in excess of $5,000, the parties
will submit the unresolved aspects to the Atlanta office of KPMG Peat Marwick
or another mutually satisfactory "Big Six" accounting firm to resolve the
dispute and make a determination binding on the parties hereto. If any such
unresolved aspect represents an amount equal to or less than $5,000, Seller's
calculation shall be binding on the parties hereto. The fees and expenses
charged by the accounting firm used to resolve any dispute pursuant to this
subsection shall be shared one-half by Seller and one-half by Buyer.
(c) Post Closing Adjustment. Within 10 business days following
the final determination of the Balance Sheet Shortfall, Seller shall pay to
Buyer, any Balance Sheet
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Shortfall or within 45 days following the final determination of the Balance
Sheet Excess, Buyer shall pay to Seller, any Balance Sheet Excess.
(d) Allocation. The allocation of the Purchase Price is set forth
on Schedule 2.2(d), and Buyer and Seller will take positions consistent
therewith on all tax returns filed by them or including them.
3. CLOSING
3.1 Closing Date.
The Closing of the transactions contemplated herein to occur on the
Closing Date (as defined hereafter) shall take place at 999 Peachtree St.,
Atlanta, GA on February 5, 1999 or on a date and at a time agreed upon by the
parties, but in no event later than 10:00 A.M. on the fifth day after all the
conditions specified in Sections 7.1 and 7.2 have been satisfied or waived in
writing, (the "Closing Date"). At the Closing, the parties shall execute and
deliver the documents referred to in Section 8 of this Agreement.
3.2 Termination.
This Agreement may be terminated and abandoned at any time prior to
the Closing:
(a) by mutual consent in writing by Buyer and Seller;
(b) by Buyer or Seller if the Closing has not occurred by
February 5, 1999;
(c) by Buyer if any condition set forth in Section 7.1 shall not
have been complied with or performed and such noncompliance or nonperformance
shall not have been cured or eliminated (or by its nature cannot be cured or
eliminated) by Seller on or before February 5, 1999 and Buyer has not waived
such condition on or before the Closing Date;
(d) by Seller if any condition set forth in Section 7.2 shall not
have been complied with or performed and such noncompliance or nonperformance
shall not have been cured or eliminated (or by its nature cannot be cured or
eliminated) by Buyer on or before February 5, 1999 and Seller has not waived
such condition on or before the Closing Date; and
(e) in the event that the commitment letter attached to Schedule
5.5 fails to remain in effect through the Closing Date and Buyer does not
secure written commitments for alternate sources of financing reasonably
acceptable to Seller, Seller shall have the right to terminate the Agreement.
3.3 EFFECT OF TERMINATION.
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In the event of a termination and abandonment of this Agreement
pursuant to Section 3.2, this Agreement shall forthwith become void and of no
further effect, without any liability or obligation on the part of any party
hereto, other than the provisions of Sections 6.1, 6.5, 6.6 and 10.1, it being
understood that the parties' liabilities and obligations under Sections 6.1,
6.5, 6.6 and 10.1 shall survive the termination and abandonment of this
Agreement in the absence of a written agreement between the parties after the
date hereof expressly to the contrary. Notwithstanding the foregoing, in the
event of a termination and abandonment of this Agreement pursuant to Section
3.2(b), 3.2(c ), or 3.2(d) nothing contained in this Section 3.3 shall relieve
any party from liability for any breach of any covenant or agreement in this
Agreement or for any intentional misrepresentation or intentional breach of
warranty, and any such termination and abandonment shall be without prejudice
to the rights of any other party hereto arising out of such breach or
intentional misrepresentation or breach.
4. REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller represents and warrants to and agrees with Buyer as follows:
4.1 Organization, Standing and Authority.
Each of Target and Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Georgia and
Delaware, respectively. Each of Target and Seller is duly qualified to do
business and is in good standing in all jurisdictions (whether federal, sate,
local, or foreign) where its ownership or leasing of property or the conduct of
its business requires it to be so qualified, except for any failures which
would not have a material adverse effect on the Business taken as a whole.
Target has all requisite corporate power and authority to carry on the Business
as now conducted. The execution, delivery and performance of this Agreement and
the other documents and agreements contemplated hereby by Seller or Target have
been duly authorized by all necessary corporate action and each of this
Agreement and the other documents an agreements contemplated hereby constitutes
the valid and binding obligation of Seller or Target enforceable against it in
accordance with its terms.
4.2 Non-Contravention.
Except as set forth on Schedule 4.2, the execution and delivery of
this Agreement and the other documents and agreements contemplated hereby by
Seller or Target do not and the consummation by Seller or Target of the
transactions contemplated hereby will not violate or conflict with any
provision of the Articles of Incorporation or Bylaws of Seller or Target, or
violate, or result (whether or not with the giving of notice or the lapse of
time or both) in a violation of any provision of, or result in the acceleration
of or entitle any party to accelerate (whether or not with the giving of notice
or lapse of time or both), an obligation under, or result in the creation or
imposition of any lien upon any of the property of Target pursuant to any
provision of any lien, mortgage, lease, agreement, license or instrument, or
any statute, law, ordinance, code, rule, regulation, policy or guideline of any
federal, state, local or other governmental authority (collectively, "Laws"),
or any order, arbitration, award, injunction, judgment or decree (collectively
"Orders") to which Target is a party or by which it is bound and
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the same does not and will not constitute an event permitting termination of
any lien, mortgage, lease, agreement, license or instrument to which Target is
a party.
4.3 Capitalization.
The authorized equity securities of Target consists of 1,000 shares of
common stock no par value, of which 100 shares are issued and outstanding and
constitute the Target Shares. Seller is and will be on the Closing Date the
record and beneficial owner and holder of the Target Shares free and clear of
all encumbrances. All of the outstanding equity securities of Target have been
duly authorized and validly issued and are fully paid and non-assessable. There
are no contracts relating to the issuance, sale or transfer of any of the
Target Shares. There are no outstanding or authorized options, warrants,
rights, contracts, calls, puts, right to subscribe, conversion rights or other
agreements to which Seller is a party or which are binding on Seller providing
for the issuance, disposition or acquisition of any of its capital stock (other
than this Agreement).
4.4 Consents, Etc.
Except as set forth on Schedule 4.4 or 4.2, no consent, authorization,
order or approval of, or filing or registration with, any governmental
department, commission, board, agency, court or other regulatory body
(collectively "Governmental Authority") or other person is required for or in
connection with the execution and delivery of this Agreement and the other
documents and agreements contemplated hereby by Seller and the consummation by
the Seller or Target of the transactions contemplated hereby.
4.5 Financial Statements.
(a) Seller has previously furnished Buyer with a copy of the
unaudited balance sheets of the Business of Target dated October 31, 1998 and
November 30, 1998 and with a copy of the unaudited income statements of the
Business as of September 30, 1998 for the quarter then ended, which income
statements have been prepared by the financial staff of Seller and reviewed by
KPMG Peat Marwick (all of which are referred to herein as the "Business
Financial Statements"). The Business Financial Statements have been prepared
from the books and records of the Business and the income statements have been
prepared in the manner described on Schedule 4.5. The Seller has provided the
Buyer all available interim financial statements since the Business Financial
Statements.
(b) Since the respective dates of the Business Financial
Statements, there has not been any material adverse change in the condition,
financial position, results of operation, business or prospects of the
Business.
4.6 Title to Properties.
Schedule 4.6(a) is a complete list of all of the assets owned by
Target. Target owns all of the assets shown on Schedule 4.6(a) subject to no
liens except (i) liens for taxes not yet due and payable; and (ii) liens
imposed by Law and incurred in the ordinary course of business for obligations
not yet due and payable to landlords, material and service suppliers and the
like.
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Seller or Target does not own any real property used in connection with the
operation of the Business, and has valid leasehold interests in all real
properties reflected in Schedule 4.6(b) as leased by it, free and clear of all
liens, except for: (i) those disclosed in Schedule 4.6(b) (ii) liens for taxes
not yet delinquent; (iii) liens of landlords, carriers, warehousemen,
mechanics, material and service suppliers and repairmen incurred in the
ordinary course of business for sums not yet delinquent; and (iv) other liens
which do not impair the use of the subject property (collectively "Permitted
Liens"). Except as set forth in Schedule 4.6(b), (a) Seller or Target is not in
default under any lease and there is no outstanding notice of termination or
cancellation in connection with any lease; and (b) there is no pending, or to
the Seller's knowledge, contemplated eminent domain or condemnation
proceedings, or proceedings under any environmental Law concerning the disposal
of any hazardous substance, affecting any of the real properties.
4.7 Adequacy; Condition.
Except as set forth on Schedule 4.7, the real properties and the
personal and mixed properties owned or leased by Target and used in the
operation of the Business (collectively the "Properties") are in good operating
condition in all material respects for the conduct of the Business as presently
conducted. No person other than Target is entitled to possess or use any of the
Properties. Target owns or leases all Properties which are necessary to conduct
the Business as it is currently conducted.
4.8 Books and Records.
The books of account, minute books, stock record books, and other
records of Target are complete and correct and have been maintained in
accordance with sound business practices. The minute book of Target contains
accurate and complete records of all meetings held of, and corporate action
taken by, the stockholders and the Board of Directors of Target. At the
Closing, all books and records of Target will be in the possession of Target.
4.9 Material Contracts.
Schedule 4.9 sets forth each contract relating to the Business to
which Target is a party and pursuant to which any party thereto is obligated to
make payments after the date of this Agreement aggregating for each such
contract more than $25,000 (collectively "Material Contracts"). Except as set
forth on Schedule 4.9, Target is not a party to, or bound by, any Material
Contract of any kind to be performed in whole or part after the Closing with
respect to the Business. As to the Material Contracts, except as set forth on
Schedule 4.9, (a) all such Material Contracts are in full force and effect and
constitute valid and binding obligations of Seller or Target and , to the
knowledge of Seller, any other parties thereto; (b) there has not been and
there currently is no default thereunder by Target or, to the knowledge of
Seller, any other party thereto; and no event has occurred which (whether with
or without notice, lapse of time or the happening of any other event) would
constitute a default by Target thereunder entitling any other party thereto to
terminate the Material Contract. Except as disclosed on Schedule 4.9, no
consent of any party to any Material Contract is required in connection with
the consummation by Seller or Target of the transactions contemplated by this
Agreement.
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4.10 Litigation.
Except as disclosed on Schedule 4.10, (a) there is no claim, action,
suit, proceeding or investigation pending or, to the knowledge of Seller,
contemplated or threatened against Target or any of Target's Properties; and
(b) Target is not a party to or bound by any Order of any Governmental
Authority, arbitrator or any other person outstanding against Target which,
when considered individually or in the aggregate with all such other Orders,
would have a material adverse effect on the Business.
4.11 Intellectual Property.
Schedule 4.11 sets forth all registered patents, trademarks, service
marks, trade names, brand names, copyrights or applications for the foregoing
(collectively the "Intellectual Property") owned or used by Target in the
Business together with a list of all licenses related thereto. Except as set
forth on Schedule 4.11, Target owns all of the Intellectual Property, free and
clear of all Liens, and except as set forth on Schedule 4.11 owns or has
adequate rights to use all computer programs, firmware and documentation
relating thereto, trade secrets and other intellectual properties which are
used in or necessary for the conduct of the Business.
To the best of Seller's knowledge, Target, in connection with the
Business, does not infringe upon or unlawfully or wrongfully use any patent,
trademark, trade name, service mark, copyright or trade secret owned or claimed
by another. Target, in connection with the Business, is not in default under,
and has not received, any notice of any claim of infringement or any other
claim or proceeding relating to any such patent trademark, trade name, service
mark, copyright or trade secret.
4.12 Liabilities.
Except as set forth on Schedule 4.12, Target has no liabilities or
obligations of any nature (whether known or unknown and whether absolute,
accrued, contingent or otherwise).
4.13 Employees.
Attached as Schedule 4.13 is a list of each employee of the Business
setting forth such employee's compensation and date of hire. Seller has not
received notice of the resignation of any employee and has no knowledge of any
actual or threatened strike of any kind with respect to the Business.
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4.14 Licenses and Permits; Compliance with Law.
Target holds all licenses, certificates, permits, franchise and rights
from all appropriate federal, state or other public authorities necessary for
the conduct of the Business. Except as noted in Schedule 4.14, Target is
presently conducting the Business in compliance in all material respects with
all Laws. Target neither is presently charged with nor is under governmental
investigation with respect to any actual or alleged violation of any Law.
4.15 Employee Benefit Plans.
Schedule 4.15 lists every pension, retirement, profit sharing,
deferred compensation, stock option, employee stock ownership, severance,
vacation, bonus, commission or other incentive plan, arrangement or agreement,
any medical, vision, dental or other health plan, any life insurance plan or
any other employee benefit plan currently maintained by Seller or Target for
the employees or agents or former employees or agents or retirees of the
Business.
4.16 Insurance.
Set forth in Schedule 4.16 is a complete list of all insurance
policies which Seller or Target has maintained with respect to the Business
within the preceding two (2) years. Except as set forth in Schedule 4.16, such
policies are in full force and effect and no event has occurred which would
give an insurance carrier the right to terminate any such policy.
4.17 Affiliate Transactions.
Except as set forth in Schedule 4.17, no officer or director of Seller
or Target possesses, directly or indirectly, any beneficial interest in, or is
a director, officer or employee of, any corporation, partnership, firm,
association or business organization which is a client, supplier, customer,
lessor, lessee, lender, creditor, borrower, debtor or contracting party with or
of Seller or Target with respect to the Business (except as a stockholder
holding less than a five (5%) percent interest in a corporation whose shares
are traded on a national or regional securities exchange or any over the
counter market).
4.18 Accounts Receivable.
The accounts receivable of Target arising from the Business as set
forth on the January 1, 1999 balance sheet or arising since the date thereof
have arisen out of bona fide sales and deliveries of goods, performance of
services and other business transactions in the ordinary course of business
consistent with past practice. The allowance for doubtful accounts is
consistent with the experience of the Business during the past year.
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4.19 Inventory.
Except as set forth on Schedule 4.19, all inventory of Target used in
the Business, including without limitation, raw materials, work in process and
finished goods, reflected on the Closing Date Balance Sheet was acquired and
has been maintained in the ordinary course of the Business and has been
consistently valued at the lower of cost or market. Target is not under any
liability or obligation with respect to the return of inventory in the
possession of wholesalers, retailers or other customers.
4.20 Assessments or Hazards.
Seller or Target has received no notices, oral or written, from any
governmental body, that the assessed value of the real property used in the
Business has been determined to be greater than that upon which county,
township or school tax was paid for the 1997 tax year applicable to each such
tax, or from any insurance carrier of seller or target of fire hazards with
respect to the real property used in the Business.
4.21 Documents.
All copies of documents provided to Buyer by Seller are true and
complete and include all amendments, supplements and modifications thereto or
waivers currently in effect thereunder.
4.22 Environmental Matters.
(a) To the best of Seller's knowledge, Seller or Target has
delivered to Buyer all reports and other material documentation with respect to
violations of environmental Laws at the facilities used in connection with the
Business. To the best of Seller's knowledge and except as disclosed on Schedule
4.22, Seller has not violated any Law governing the pollution or protection of
the environment, and no such violation exists with respect to any facility used
in connection with the Business.
(b) Except as set forth on Schedule 4.22, Seller or Target has
obtained all material permits, licenses and other authorizations which are
required to be held by Target in connection with the conduct of the Business
under Regulations relating to pollution or protection of the environment,
including Regulations relating to emissions, discharges, releases or threatened
releases of pollutants, contaminants, chemicals, or industrial, toxic or
hazardous substances or wastes into the environment (including without
limitation ambient air, surface water, groundwater, or land) or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, chemicals, or
industrial, toxic or hazardous substances.
(c) Except as set forth in Schedule 4.22, to the best of Seller's
knowledge, Target is in full compliance in the conduct of the Business with all
terms and conditions of the required
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permits, licenses and authorizations except to the extent such noncompliance
would not result in a material adverse effect on the Business.
(d) Seller and Target agree to cooperate with Buyer in connection
with Buyer's application for the transfer, renewal or issuance of any permits,
licenses, approvals or other authorizations or to satisfy any regulatory
requirements involving the Business including, but not limited to, ISO 9001
certification.
5. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer represents and warrants to Seller as follows:
5.1 Existence, Power and Authorization.
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of Georgia and has the corporate power and authority to
execute, deliver and perform this Agreement. The execution, delivery and
performance by Buyer of this Agreement and the other documents and agreements
contemplated hereby have been duly authorized by all necessary corporate action
of Buyer and each of this Agreement and the other documents and agreements
contemplated hereby constitutes the valid and binding obligation of Buyer
enforceable against it in accordance with its terms.
5.2 Non-Contravention.
Except as set forth on Schedule 5.2, the execution and delivery of
this Agreement and the other documents and agreements contemplated hereby do
not, and the consummation by Buyer of the transactions contemplated hereby will
not, violate or conflict with any provision of the Charter or Bylaws of Buyer,
or require any consent or authorization of, or filing or registration with, any
Governmental Authority, or any consent or approval under, or constitute a
violation of any Laws or Orders applicable to Buyer including, without
limitation, the registration or broker-dealer requirements of any federal or
state securities laws.
5.3 Capitalization.
The authorized equity securities of Buyer consist of 49,000,000 shares
of Common Stock, par value $.001 per share, of which 4,128,205 shares are
issued and outstanding and upon the consummation of the transactions
contemplated by this Agreement, 1,000,000 shares of Series A Preferred Stock,
$.001 par value. Mixbaal and Juan Milton Garduno own all of the issued and
outstanding shares of Buyer Common Stock and upon the Closing, Seller shall own
all of the issued and outstanding shares of the Series A Preferred Stock. Upon
issuance, all of the Buyer Shares will be validly issued, fully paid and
nonassessable, will be free from, and will not be issued in violation of any,
preemptive rights.
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5.4 Litigation.
There is no claim, action, suit, proceeding or investigation pending,
or to the knowledge of Buyer, contemplated or threatened against Buyer.
5.5 Financing Arrangements.
Buyer has received the commitment letter attached as Schedule 5.5 from
Sirrom Capital Corporation and such commitment is still in effect.
5A. REPRESENTATIONS AND WARRANTY OF MIXBAAL. Mixbaal represents and
warrants to Seller as follows:
5A.1 Assets and Liabilities. Upon consummation of the transactions
contemplated by this Agreement, Buyer will own no assets other than the capital
stock of Target.
6. FURTHER AGREEMENTS OF THE PARTIES
6.1 Investigation.
Prior to the Closing, Buyer may make or cause to be made such
investigation of the Business as Buyer deems necessary or advisable, provided
that such investigation shall not unreasonably interfere with normal operations
of Seller or Target. Seller or Target shall permit Buyer and its authorized
representatives to have or cause them to be permitted to have, after the date
hereof and until the Closing, access to the premises, books and records of the
Business at reasonable hours, and the officers of Seller or Target will furnish
Buyer with such financial and operating data and other information with respect
to the Business as the Buyer shall from time to time reasonably request.
6.2 Conduct of the Business Pending the Closing.
From the date of this Agreement through the Closing, Seller or Target
shall operate the Business in the ordinary course in accordance with past
practices, and shall a) continue to maintain and service the physical assets
used in the conduct of the Business in the same manner as has been its
consistent past practice, and b) use commercially reasonable efforts to keep
available the services of the present employees and agents of the Business and
to maintain the relations and goodwill with the suppliers, customers,
distributors and any others having business relations with the Business.
6.3 Regulatory Filings.
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As promptly as practicable after the execution of this Agreement each
party shall, in cooperation with the other, make all required filings, if any,
in connection with the transactions contemplated by this Agreement with
Governmental Authorities and take such further action as may be required in
connection therewith. Each party shall furnish the others all information in
its possession necessary for compliance with the provisions of this Section
6.3.
6.4 Cooperation.
Upon the execution of this Agreement and thereafter, each party shall
take such actions and execute and deliver such documents as may be reasonably
requested by the other party hereto in order effectively to consummate the
transactions contemplated by this Agreement.
6.5 Expenses.
Except as otherwise specifically provided in this Agreement, each
party shall bear its own expenses in connection with this Agreement and in
connection with all obligations required to be performed by it under this
Agreement.
6.6 Publicity.
Each party shall consult with and obtain the consent of the other
before issuing any press release or other public announcement or communication
regarding the transactions contemplated by this Agreement, unless any such
release is required to discharge its legal obligations (in which case it shall
consult with the other party before issuing the release).
6.7 Post-Closing Assistance.
(a) From time to time after the Closing, each party shall provide
the others with information reasonably requested by such party which is
necessary to prepare all financial, accounting and other reports and tax
returns with respect to periods up to the Closing that are required by such
party in connection with the preparation or filing of financial, accounting and
other reports and tax returns, and each party shall preserve all records and
information necessary to meet the foregoing obligations for a reasonable period
of time.
(b) From time to time after the Closing, each party shall provide
the other with information or data reasonably requested in connection with any
third-party claims or litigation with respect to which Seller or Buyer may be
required to indemnify the other under this Agreement.
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6.8 Employee Matters.
The following subsections set forth the parties' agreement with
respect to the treatment of Target's employees (the "Business Employees").
Except as otherwise specifically set forth in this Section 6.8 (and only for
the limited purposes described herein), effective as of the end of the day
immediately preceding the Closing Date, all Business Employees shall cease to
be participants in or otherwise covered by Seller's pension and welfare benefit
plans, including plans, programs, policies and arrangements which provide
retirement benefits, medical and dental coverage, accident and life insurance,
disability coverage, vacation and severance pay ("Employee Benefit Plans").
Seller acknowledges that Target sponsors no such plans; instead, Target's
employees are permitted to participate in such plans sponsored by Seller.
(a) Termination Rehire. Effective as of the end of the day
immediately preceding the Closing Date, Target shall terminate the employment of
all Business Employees. Effective as of the Closing Date, Buyer shall make
offers of employment (which shall include Buyer's agreement set forth below with
respect to participation in Buyer's employee benefit plans) to all Business
Employees. Buyer shall pay Business Employees who are hired by Buyer ("Hired
Business Employees") the same salary or hourly rate of pay as was paid to such
Hired Business Employees by Target immediately prior to the Closing Date. Hired
Business Employees shall be given credit by Buyer for the service such employees
had with Seller or Target immediately prior to the Closing Date for purposes of
participation and vesting under Buyer's Employee Benefit Plans, but only as and
to the extent such plans are provided. Effective as of the Closing Date, Buyer
shall include Hired Business Employees in its Employee Benefit Plans, but only
as and to the extent such plans are provided.
(b) Pension Plans. Effective as of the end of the day immediately
preceding the Closing Date, Business Employees shall cease to accrue benefits,
but will continue to be participants under Seller's or Target's employee
benefit pension plans ("Seller's Pension Plans"), as that term is defined in
the Employee Retirement Income Security Act of 1974 ("ERISA") as amended.
Business Employees shall cease being participants under Seller's Pension Plans
upon final payment of all vested benefits payable thereunder in accordance with
the terms of the Seller's Pension Plans. Effective as of the Closing Date,
Buyer shall include Hired Business Employees in its applicable employee benefit
pension plans, if any. Buyer shall assume no liability with respect to Seller's
Pension Plans as a result of the transactions contemplated in this Agreement.
(c) Health Coverage. Effective as of the end of the day
immediately preceding the Closing Date, Business Employees shall no longer be
covered by Seller's health plans. Seller shall be responsible for providing
Business Employees who terminate or otherwise become subject to a "qualifying
event" (as defined in Section 4980B of the Internal Revenue Code of 1986, as
amended (the "Code") prior to the Closing Date the election of group health
continuation coverage required by Section 4980B of the Code ("Continuation
Coverage"), under the terms of the health plans maintained by Seller.
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Effective as of the Closing Date, Hired Business Employees will be
eligible for coverage under Buyer's medical and dental plans as and to the
extent such plans are provided, and Buyer's medical and dental plans shall
provide for waiver of preexisting conditions. Buyer shall perform the duties
required of a successor employer with respect to Continuation Coverage, only as
applicable to Hired Business Employees, including, but not limited to, making
such coverage available to Hired Business Employees upon their termination of
employment with Buyer on or after the Closing Date to the extent required by
law.
(d) Vacation. Buyer shall recognize all earned but unused
vacation of the Hired Business Employees under Seller's or Target's existing
vacation policy and shall permit the Hired Business Employees to use such
earned, but unused vacation during a reasonable period of time in accordance
with buyer's vacation policy in effect on the Closing Date or as adopted
thereafter. A schedule of all vacation accruals is attached hereto as Schedule
6.8(d).
(e) Worker's Compensation. Seller shall remain responsible for
all worker's compensation claims made by Business Employees based on
occurrences prior to the Closing Date, and Buyer shall be responsible for all
worker's compensation claims made by Hired Business Employees based on
occurrences on and after the Closing Date.
(f) Severance. Buyer shall maintain, for six months following the
Closing Date, a severance plan for Hired Business Employees who are
involuntarily terminated by Buyer because of job elimination or workforce
reduction that provides severance benefits that are substantially similar to
the severance benefits provided by Seller set forth in Schedule 6.8, if any, to
similarly situated employees whose jobs are eliminated immediately prior to the
Closing Date. In the event Seller offers no such benefits, Buyer shall have no
duty to provide them.
(g) Health Plans. In the case of Hired Business Employees who are
eligible for health benefits under both Seller's and Buyer's health plans, to
the extent provided, Buyer's health plan shall have primary responsibility for
such Hired Business Employee's health claims and Seller's retiree health plan
shall have secondary responsibility with respect to claims arising after the
Closing Date.
(h) Stock Options. As of the Closing Date, each Target employee
holding options to acquire stock in Seller (the "Employee Stock Options") shall
be entitled to exercise such options in accordance with Seller's 1992 Stock
Options Plan or 1996 Stock Option Plan and Seller's qualified employee stock
purchase plan. Prior to the Closing Date, Seller shall provide notice to Target
employees who hold such options of the opportunity to exercise their options.
(i) Other Employment-Related Liabilities. The parties agree that,
except as explicitly set forth above, Seller shall be liable for all
employment-related liabilities of the Business Employees which occur (whether
reported or unreported) through the end of the day immediately preceding the
Closing Date, and Buyer shall be and become liable for all employment-related
liabilities of the Hired Business Employees from and after the Closing Date.
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(j) Limitation of Enforcement. This Section 6.8 is an agreement
solely among Target, Seller and Buyer. Nothing in this Section 6.8, whether
express or implied, confers upon any employee of Target, Buyer or Seller
(including the Business Employees and the Hired Business Employees) or any
other person, any rights or remedies, including, but not limited to (i) any
right to employment or recall, (ii) any right to continued employment for any
specified period, or (iii) any right to claim any particular compensation,
benefit or aggregation of benefits, of any kind or nature whatsoever, as a
result of this Section 6.8.
6.9 Insurance; Risk of Loss.
Effective as of the Closing Date: (a) Seller will cause the
termination of all coverage relating to the Properties under the policies of
insurance or cancelable surety bonds referred to in Section 4.16; and (b) Buyer
shall become solely responsible for all insurance coverage and related risk of
loss based on events occurring on and after the Closing date with respect to
the Properties and the Business. To the extent that after the Closing any party
hereto requires any information regarding claim data, payroll or other
information in order to make filings with insurance carriers or self insurance
regulators from another party hereto, the other party will promptly supply such
information.
6.10 Noncompetition; Nondisclosure - Seller.
(a) Scope and Reasonableness of Restrictions. Seller acknowledges
that Buyer presently sells products throughout North America, Latin America,
Europe, Middle East, Africa and the Asia Pacific region (the "Territory").
Seller further acknowledges that Buyer would not enter into any of the
transactions contemplated by this Agreement without the assurance that Seller
will not engage in the activities prohibited by this Section 6.10 without the
consent of Buyer as and for the periods set forth, and, in order to induce
Buyer to consummate the transactions contemplated by this Agreement, Seller
agrees to restrict its actions throughout the Territory or otherwise as
provided in this Section 6.10. Seller acknowledges that such restrictions are
reasonable in light of the businesses of Buyer and the benefits of the
transactions contemplated by this Agreement to Seller.
(b) Noncompetition. Seller agrees that for a period of two years
("Noncompete Period") it will not, directly or indirectly, have any interest
in, except for ownership of no more than five (5) percent of the equity
securities of any publicly held corporation, enter the employment of, act as
agent, broker or distributor for or advisor or consultant to, or in any way
assist (whether by solicitation of customers or employees or otherwise) any
person, firm, corporation or entity which is engaged, or with respect to which
it has actual knowledge such entity is undertaking to become engaged, in any
business involving the following product categories:
Spread spectrum radios
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Microwave Modems
provided, however, Seller shall not be in breach of this Section 6.10 to the
extent it engages in the resale of such products on Buyer's behalf pursuant to
a written agreement with Buyer.
(c) Remedies. Seller acknowledges that any violation of this
Section 6.10 may cause irreparable harm to Buyer and other damages are not an
adequate remedy. Seller therefore agrees that Buyer shall be entitled to an
injunction by an appropriate court in the appropriate jurisdiction, enjoining
Seller from the continuance of any such violation, in addition to any monetary
damages which might occur by reason of the violation of the prohibitions of
this Section 6.10. Nothing in this Agreement shall restrict any rights that
Buyer may have at law or in equity with respect to matters covered by this
Section 6.10.
(d) Modification. It is understood and agreed by the parties
hereto that should any portion, provision or clause of this Section 6.10 be
deemed too broad to permit enforcement to its full extent, then it shall be
enforced to the maximum extent permitted by Law, and Seller hereby consents and
agrees that such scope may be judicially modified accordingly in any proceeding
brought to enforce such restriction.
(e) Covenants Independent. The covenants set forth in this
Section 6.10 shall be deemed and shall construed as separate and independent
covenants, and should any part or provision of such covenants be held invalid,
void or unenforceable by any court of competent jurisdiction, such invalidity,
voidness, or unenforceability shall in no way render invalid, void or
unenforceable any other part or provision thereof or any separate covenant not
declared invalid, void, or unenforceable; and this Agreement and this Section
6.10 shall in that case be construed as if the void, invalid or unenforceable
provisions were omitted.
6.11 Noncompetition; Nondisclosure - Buyer.
(a) Scope and Reasonableness of Restrictions. Buyer acknowledges
that Seller presently sells products throughout North America, Latin America,
Europe, Middle East, Africa and the Asia Pacific region (the "Territory").
Buyer further acknowledges that Seller would not enter into any of the
transactions contemplated by this Agreement without the assurance that Buyer
will not engage in the activities prohibited by this Section 6.11 without the
consent of Seller as and for the periods set forth, and, in order to induce
Seller to consummate the transactions contemplated by this Agreement, Buyer
agrees to restrict its actions throughout the Territory or otherwise as
provided in this Section 6.11. Buyer acknowledges that such restrictions are
reasonable in light of the businesses of Seller and the benefits of the
transactions contemplated by this Agreement to Buyer.
(b) Noncompetition. Buyer agrees that for a period of two years
("Noncompete Period") it will not, directly or indirectly, have any interest
in, except for ownership of no more than five (5) percent of the equity
securities of any publicly held corporation, enter the
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employment of, act as agent, broker or distributor for or advisor or consultant
to, or in any way assist (whether by solicitation of customers or employees or
otherwise) any person, firm, corporation or entity which is engaged, or with
respect to which it has actual knowledge such entity is undertaking to become
engaged, in any business involving the following product categories:
Multiplexers
Cross Connect Switches
provided, however, Buyer shall not be in breach of this Section 6.11 to the
extent it engages in the resale of such products on Seller's behalf pursuant to
a written agreement.
(c) Remedies. Buyer acknowledges that any violation of this
Section 6.11 may cause irreparable harm to Seller and other damages are not an
adequate remedy. Buyer therefore agrees that Seller shall be entitled to an
injunction by an appropriate court in the appropriate jurisdiction, enjoining
Buyer from the continuance of any such violation, in addition to any monetary
damages which might occur by reason of the violation of the prohibitions of
this Section 6.11. Nothing in this Agreement shall restrict any rights that
Seller may have at law or in equity with respect to matters covered by this
Section 6.11.
(d) Modification. It is understood and agreed by the parties
hereto that should any portion, provision or clause of this Section 6.11 be
deemed too broad to permit enforcement to its full extent, then it shall be
enforced to the maximum extent permitted by Law, and Buyer hereby consents and
agrees that such scope may be judicially modified accordingly in any proceeding
brought to enforce such restriction.
(e) Covenants Independent. The covenants set forth in this
Section 6.11 shall be deemed and shall construed as separate and independent
covenants, and should any part or provision of such covenants be held invalid,
void or unenforceable by any court of competent jurisdiction, such invalidity,
voidness, or unenforceability shall in no way render invalid, void or
unenforceable any other part or provision thereof or any separate covenant not
declared invalid, void, or unenforceable; and this Agreement and this Section
6.11 shall in that case be construed as if the void, invalid or unenforceable
provisions were omitted.
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6.12 Delivery of Schedules.
The parties acknowledge that the schedules to this Agreement (the
"Schedules") have not been delivered as of the date hereof, and agree that
Buyer shall deliver the Schedules within five days following the date of this
Agreement. Prior to the Closing, Seller shall prepare as necessary revised
schedules (the "Revised Schedules") to its representations and warranties in
Article 4. If the Schedules or the Revised Schedules disclose a material
adverse change in the Business from that represented on the date of this
Agreement, Buyer may terminate this Agreement with no further liabilities or
obligations. If Buyer elects not to terminate the Agreement and proceeds to
close the transactions contemplated herein, or if the changes do not constitute
a material adverse change in the Business, the Revised Schedules will be deemed
the schedules to this Agreement for indemnification and all other purposes.
6.13 Restriction on Transfer. Seller acknowledges that the Buyer
Shares being paid to Seller as the Purchase Price have not been registered
under the Securities Act. Seller will not sell or otherwise transfer all or any
part of the Buyer Shares acquired by it unless and until it shall first have
given notice to Buyer describing such sale or transfer and furnished to Buyer
either (i) an opinion, reasonably satisfactory to counsel for Buyer, to the
effect that the proposed sale or transfer may be made without registration
under the Securities Act, or (ii) a no-action letter from the Securities and
Exchange Commission to the effect that no enforcement action will be
recommended if the proposed sale or transfer is made without registration under
the Securities Act, in either case accompanied by evidence that such transfer
will be in compliance with applicable state securities ("blue sky") laws;
provided, however, that the foregoing shall not apply with respect to any
transfer pursuant to an effective registration statement under the Securities
Act. Buyer may place an appropriate legend on the Buyer Shares concerning the
restrictions set forth in this Agreement, and Buyer may refuse to transfer the
Buyer Shares on its books should the holder thereof attempt to transfer any of
the Buyer Shares otherwise than in compliance therewith.
6.13 Transition Services Agreement.
Buyer and Seller hereby agree to execute a Transition Services
Agreement attached as Exhibit A hereto as of the date of this Agreement to
provide for the operation of the Business until the Closing. Upon the Closing,
Buyer and Seller will execute a Revised Transition Securities Agreement to
provide for the operation of the Business immediately following the Closing.
6.14 Stockholders Agreement.
Buyer and Seller hereby agree to execute a Stockholders Agreement,
attached hereto as Exhibit B, to be effective as of the Closing Date.
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6.15 Reciprocal Product Resale Agreements.
Buyer and Seller hereby agree to enter into Reciprocal Product Resale
Agreements attached as Exhibit C hereto, to be effective as of the Closing
Date.
6.16 Nomination of Director.
Buyer hereby agrees that effective upon the Closing, Seller or its
designee shall have the right to nominate and elect one director to Buyer's
Board of Directors subject to such nominee's approval by Buyer.
6.17 Merger. Buyer hereby agrees to take all necessary action to
merge Target into Buyer promptly after the Closing.
7. CONDITIONS TO CLOSING.
7.1 Conditions to Obligation of Buyer.
The obligation of Buyer to consummate the transactions contemplated to
occur on the Closing Date and thereafter under this Agreement is subject to the
fulfillment, prior to or at the Closing, of each of the following conditions
(any or all of which may be waived by Buyer):
(a) All consents, Authorizations, Orders and approvals of, and
filings and registrations with any Governmental Authority which are required
for or in connection with the execution and delivery by Seller or Target of
this Agreement and the other documents and agreements contemplated hereby and
the consummation by Seller or Target of the transactions contemplated hereby
shall have been obtained or made.
(b) All consents, authorizations and approvals of
non-governmental third parties which are required for the consummation of the
transactions contemplated by this Agreement shall have been obtained, or waived
by Buyer unless the failure to obtain any such consent, authorization or
approval shall not have a material adverse effect upon Buyer's use of the
Company and its assets.
(c) The representations and warranties of Seller to Buyer
contained in this Agreement or in any certificate, schedule, exhibit or other
agreement delivered pursuant to one or more provisions of this Agreement were
true and correct in all material respects on the date of this Agreement and
shall be true and correct in all material respects at and as of the time of the
Closing with the same effect as though made again at and as of that time.
(d) The covenants and agreements required by this Agreement to be
performed or complied with by Seller prior to or at the Closing shall have been
performed and complied with in all material respects by Seller.
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(e) There shall not be threatened, pending or in effect any
injunction or restraining order sought by any Governmental Authority issued or
sought to be issued by a court of competent jurisdiction against the
consummation of the transactions contemplated by this Agreement.
(f) Buyer shall have received the documents and agreements
described in Section 8.1.
7.2 Conditions to Obligation of Seller.
The obligation of Seller to consummate the transactions contemplated
to occur on the Closing Date and thereafter under this Agreement is subject to
the fulfillment, prior to or at the Closing, of each of the following
conditions (any or all of which may be waived by Seller):
(a) All consents, Authorizations, Orders and approvals of, and
filings and registrations with any Governmental Authority which are required
for or in connection with the execution and delivery by Buyer of this Agreement
and the other documents and agreements contemplated hereby and the consummation
by Buyer of the transactions contemplated hereby shall have been obtained or
made.
(b) The representations and warranties of Buyer contained in this
Agreement or in any certificate, schedule, exhibit or other agreement delivered
pursuant to one or more provisions of this Agreement were true and correct in
all material respects on the date of this Agreement and shall be true and
correct in all material respects at and as of the time of Closing with the same
effect as though made again at and as of that time.
(c) The covenants and agreements required by this Agreement to be
performed or complied with by Buyer prior to or at the Closing shall have been
performed and complied with in all material respects by Buyer.
(d) There shall not be threatened, pending or in effect any
injunction or restraining order sought by any Governmental Authority issued or
sought to be issued by a court of competent jurisdiction against the
consummation of the sale and purchase of the Company and its assets pursuant to
this Agreement.
(e) Seller shall have received the documents and agreements
described in Section 8.2.
8. DOCUMENTS TO BE DELIVERED AT THE CLOSING.
8.1 Document to be Delivered by Seller.
At the Closing, Seller shall deliver, or cause to be delivered, to
Buyer the following:
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(a) Certificates representing the Target Shares, duly endorsed
(or accompanied by duly executed stock powers) for transfer to Buyer.
(b) A copy of appropriate corporate resolutions, if any, of
Seller authorizing the execution, delivery and performance of this Agreement by
Seller and a certificate of the Secretary or Assistant Secretary, dated the
Closing Date, that such resolutions were duly adopted and are in full force and
effect or evidence that such authorization is not required.
(c) All third party or governmental consents obtained prior to
the Closing.
(d) An opinion of counsel to Seller, reasonably satisfactory to
the Buyer and the Seller.
(e) A Revised Transition Services Agreement reasonably
satisfactory to Buyer and Seller (the "Revised Transition Services Agreement").
(f) a certificate from Seller, dated the Closing Date, certifying
that the conditions specified in Sections 7.1(c) and (d) above have been
fulfilled.
(g) a Stockholders Agreement in the form of Exhibit B attached
hereto (the "Stockholders Agreement").
(h) the Reciprocal Product Resale Agreements in the form of
Exhibit C attached hereto (the "Product Resale Agreements").
8.2 Documents to be Delivered by Buyer.
At the Closing, Buyer shall deliver to Seller the following:
(a) Delivery of the Buyer Shares.
(b) A copy of the resolutions of the Board of Directors of Buyer
authorizing the execution, delivery and performance of this Agreement by Buyer,
and a certificate of the Secretary or Assistant Secretary of Buyer, dated the
Closing Date, that such resolutions were duly adopted and are in full force and
effect.
(c) An opinion of counsel to Buyer reasonably satisfactory to the
Buyer and the Seller.
(d) The Revised Transition Services Agreement.
(e) A certificate from an officer of Buyer, dated the Closing
Date, certifying that the conditions specified in Sections 7.2(b) and (c)
above have been fulfilled.
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(f) The Product Resale Agreements.
(g) The Stockholders Agreement.
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES: INDEMNIFICATION.
All representations and warranties and all covenants and agreements in
this Agreement shall survive the Closing Date for the period set forth in
Section 9.5 of this Agreement.
9.1 Indemnification by Seller.
(a) Breaches, Etc. Subject to the provisions of this Section 9,
Seller shall defend, indemnify, reimburse and hold Buyer harmless against any
and all damages, losses, deficiencies, costs, liabilities and expenses
(including, without limitation, expenses of investigation and attorneys' fees
and expenses in connection with any action, suit or proceeding) with respect to
any such damages, losses, liabilities and expenses (collectively "Damages")
actually incurred or suffered by Buyer on or after the Closing Date arising out
of any misrepresentation or breach of any representation, warranty, covenant or
agreement made by Seller in this Agreement or in any certificate, schedule,
exhibit or other document delivered pursuant to this Agreement or in connection
therewith.
(b) Special Indemnification. In addition to the indemnification
set forth in subclause (a) immediately above, Seller shall indemnify Buyer for
all Damages arising out of or relating to:
(i) any litigation against Target or Target's Properties
arising prior to the Closing Date;
(ii) title to or claims of infringement against the
Intellectual Property of Target;
(iii) any liabilities of Seller other than those
contributed to Target as set forth in Schedule 4.12; and
(iv) any claim against Target or Target's Properties
which relates to applicable bulk sales transfer statutes.
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9.2 Indemnification by Buyer.
Subject to the provisions of this Section 9, Buyer shall defend,
indemnify and hold Seller harmless against any and all Damages actually
incurred or suffered by Seller on or after the Closing Date arising out of any
misrepresentation or breach of any representation, warranty, covenant or
agreement made by Buyer in the Agreement or in any certificate, schedule,
exhibit or other document delivered pursuant to this Agreement or in connection
therewith.
9.3 General Indemnification Procedures.
The party seeking indemnification (the "Indemnified Party") shall give
written notice to the party or parties from whom such indemnification is sought
(the "Indemnifying Party") of any claim or the commencement of any action, suit
or proceeding in respect of which indemnity may be sought hereunder and will
give the Indemnifying Party such information with respect thereto as the
Indemnifying Party may reasonably request. Such notice shall be given within
thirty (30) days of the time at which the Indemnified Party received notice of
such claim, action, suit or proceeding. The Indemnifying Party shall have the
right to undertake, by counsel of its own choosing, at its expense, the defense
of any such action, suit or proceeding involving a third party. The Indemnified
Party shall have the right to employ its own counsel in any such action, but
the fees and expenses of such counsel shall be at the sole expense of the
Indemnified Party unless (i) the employment of counsel by the Indemnified Party
has been authorized by the prior written consent of the Indemnifying Party,
(ii) the Indemnified Party and its counsel have reasonably concluded that there
may be legal defenses available to the Indemnified Party that are different
from or in addition to those available to the Indemnifying Party (in which
case the Indemnifying Party shall not have the right to direct the defense of
such action on behalf of the Indemnified Party) or (iii) the Indemnifying Party
has not in fact employed counsel to assume the defense of such action within a
reasonable time after receiving notice of the commencement of the action, in
each of which cases the reasonable fees and expenses of counsel will be at the
expense of the Indemnifying Party, and the Indemnifying Party shall reimburse
or pay such fees and expenses as they are incurred; provided , however, that
with respect to Clause (ii) of this Section 9.3(a), the Indemnifying Party
shall not be responsible for such fees and expenses of Indemnified Party's
counsel with respect to defenses already being asserted by the Indemnifying
Party. Whether or not the Indemnifying Party chooses to defend or prosecute any
claim involving a third party, all the parties hereto shall cooperate in the
defense or prosecution thereof and shall furnish such records, information and
testimony, and attend such conferences, discovery proceedings, hearing, trials
and appeals, as may be reasonably requested in connection therewith.
9.4 Arbitration.
After the Closing, any controversy or claim arising out of or relating
to this Agreement (including, without limitation, the indemnification
provisions of this Section 9) shall be settled by arbitration in accordance
with the prevailing Commercial Arbitration Rules of the American Arbitration
Association. Such arbitration shall be held in Atlanta, Georgia before a panel
of three
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(3) arbitrators, one selected by Seller, one selected by Buyer and the third
selected by mutual agreement of the first two arbitrators. Any controversy or
claim regarding liability of a party to this Agreement for any action, suit or
proceeding by a third party shall not be finally resolved until the action,
suit or proceeding is finally resolved. Judgement upon any award rendered by
the arbitrators may be entered in any court of competent jurisdiction.
9.5 Certain Limitations.
(a) Dollar Limits. Seller shall not have liability for Damages
under this Section 9 unless (and then only to the extent that) such Damages in
the aggregate exceed $5,000 and the aggregate liability of Seller for Damages
under this Section shall not exceed $500,000 (the "Liability Cap"); provided,
however, that Seller shall be liable for one half of any Damages under this
Section 9 that in the aggregate exceed $100,000 up to the Liability Cap. The
foregoing limitations shall not apply to any intentional misrepresentations or
breaches.
(b) Time Limits. Seller shall have no liability for damages under
this Section 9 unless Buyer notifies Seller of a claim therefore on or before
August 5, 2000.
9.6 Payment.
Upon the determination of the liability under Section 9.1 or 9.2
hereof, the appropriate party shall pay to the other, as the case may be,
within ten days after such determination, the amount of any claim for
indemnification made hereunder. In the event that the indemnified party is not
paid in full for any such claim pursuant to the foregoing promptly after the
other party's obligation to indemnify has been determined in accordance
herewith, it shall have the right, notwithstanding any other rights that it may
have against any other person, firm or corporation, to setoff the unpaid amount
of any such claim against any amounts owed by it under any agreements entered
into pursuant to this Agreement or the related transaction documents. Upon the
payment in full of any claim, either by setoff or otherwise, the entity making
payment shall be subrogated to the rights of the indemnified party against any
person, firm or corporation with respect to the subject matter of such claim.
10. MISCELLANEOUS.
10.1 Finders, Etc.
Each party covenants and agrees with the other that it has not
employed or utilized the services of any broker or finder in connection with
this Agreement or the transactions contemplated by it.
10.2 Governing Law.
This Agreement shall be governed by and construed in accordance with
the law of the State of Georgia, without giving effect to the conflicts of law
principles thereof.
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10.3 Headings.
The hearings of this Agreement and titles given to Schedules to this
Agreement are for reference purposes only and are to be given no effect in the
construction or interpretation of this Agreement.
10.4 Notices.
All notices and other communications under this Agreement shall be in
writing and may be given by any of the following methods: (a) personal
delivery;(b) facsimile transmission;(c) registered or certified mail, postage
prepaid, return receipt requested; or (d) overnight delivery service. Notices
shall be sent to the appropriate party at its address or facsimile number given
below (or at such other address or facsimile number for such party as shall be
specified by notice given hereunder):
<TABLE>
<S> <C>
If to Buyer, to: Attention: Juan Milton Garduno
President, Chapala Communications
3000 Northwoods Parkway, Bldg. 330
Norcross, Georgia 30071
Fax: 770-798-1325 (temporary)
If to Seller: Attention: Andres C. Salazar, President
Digital Transmission Systems, Inc.
3000 Northwoods Parkway, Bldg. 330
Norcross, Georgia 30071
Fax: 770-798-1325
with copy to: Mark Wasserman
Sutherland Asbill and Brennan LLP
999 Peachtree Street, NE
Atlanta, Georgia 30309
Fax: 404.853.8806
</TABLE>
All such notices and communications shall be deemed received upon (i) actual
receipt thereof by the addressee, (ii) actual delivery thereof to the
appropriate address, or (iii) in the case of a facsimile transmission, upon
transmission thereof by the sender and telephonic confirmation of receipt. In
the case of notices sent by facsimile transmission, the sender shall
contemporaneously mail a copy of the notice to the addressee at the address
provided for above. However, such mailing shall in no way alter the time at
which the facsimile notice is deemed received.
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10.5 Separability.
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.
10.6 Waiver.
The failure of either party hereto at any time or times to require
performance of any provisions hereof shall in no manner affect the right to
enforce the same. The waiver by either party of any condition, or the breach of
any term, provision, warranty, representation, agreement or covenant contained
in this Agreement or the other agreements contemplated hereby, whether by
conduct or otherwise, in any one or more instances shall be deemed or construed
as a further or continuing waiver of any such condition or breach or a waiver
of any other condition or of the breach of any other term, provision, warranty,
representation, agreement or covenant herein or therein contained.
10.7 No Third Party Beneficiaries; Assignment.
This Agreement shall inure to the benefit of the parties and their
respective successors and permitted assignees. Nothing in this Agreement shall
create or be deemed to create any third party beneficiary rights in any person
or entity, including, without limitation, employees not a party to this
Agreement. No assignment of this Agreement or of nay rights or obligations
under this Agreement may be made by either party without the prior written
consent of the other party and any attempted assignment without that required
consent shall be void. No assignment by a party of its rights under this
Agreement shall relieve it of any of its obligations to the other party under
this Agreement.
10.8 Maintenance of Books and Records.
Each of Target, Seller and Buyer shall preserve until the tenth
anniversary of the Closing Date all records possessed or to be possessed by
such party relating to any of the assets, liabilities or business of the
Business prior to the Closing Date. After the Closing Date, where there is a
legitimate purpose, such party shall provide the other parties with access,
upon prior reasonable written request specifying the need therefor, during
regular business hours, to (i) the officers and employees of such party and
(ii) the books of account and records of such party, but, in each case, only to
the extent relating to the assets, liabilities or business of the Business
prior to the Closing Date, and the other parties and their representatives
shall have the right to make copies of such books and records; provided,
however, that the foregoing right of access shall not be exercisable in such a
manner as to interfere unreasonably with the normal operations and business of
such party; and further, provided, that, as to so much of such information as
constitutes trade secrets or confidential business information of such party,
the requesting party and its officers, directors and representatives will use
due care to not disclose such information except (i) as required by law, (ii)
with the prior written consent of such party, which consent shall not be
unreasonably withheld, or (iii) where such information becomes available to the
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public generally, or becomes generally known to competitors of such party, its
officers, directors or representatives. Such records may nevertheless be
destroyed by a party if such party sends to the other parties written notice of
its intent to destroy records, specifying with particularity the contents of
the records to be destroyed. Such records may then be destroyed after the 30th
day after such notice is given, unless another party objects to the
destruction, in which case the party seeking to destroy the records shall
deliver such records to the objecting party.
10.9 Payments Received.
Seller and Buyer each agree that after the Closing they will hold and
will promptly transfer and deliver to the other, from time to time as and when
received by them, any cash, checks with appropriate endorsements (using their
best efforts not to convert such checks into cash), or other property that they
may have received on or after the Closing that properly belongs to the other
party, including without limitation any insurance proceeds, and will account to
the other for all such receipts.
10.10 Time of the Essence; Computation of Time.
Time is of the essence of each and every provision of this Agreement.
Whenever the last day for the exercise of any privilege or the discharge of any
duty under this Agreement shall fall upon Saturday, Sunday or a public or legal
holiday, the party having such privilege or duty shall have until 5:00 P.M.,
Atlanta, GA time on the next succeeding regular business day to exercise such
privilege or to discharge such duty.
10.11 Definitions Regarding Knowledge.
As used in this Agreement, the term "to the knowledge" of a party and
terms of similar import mean the actual knowledge of an executive officer of
such party.
10.12 Counterparts.
This Agreement may be executed by each party upon a separate copy, and
in such case, one counterpart of this Agreement shall consist of enough of such
copies to reflect the signatures of all of the parties. This Agreement may be
executed in two or more counterparts, each of which shall be an original, and
each of which shall constitute one and the same agreement. Either party may
deliver an executed copy of this Agreement and of any documents contemplated
hereby by facsimile transmission to the other party and such delivery shall
have the same force and effect as any other delivery of a manually signed copy
of this Agreement or of such other documents.
10.13 Entire Agreement.
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This Agreement (with its Schedules and Exhibits) contains, and is
intended as, a complete statement of all the terms of the arrangements between
the parties with respect to the matters provided for, supersedes any previous
agreements and understandings between the parties with respect to those matters
and cannot be changed or terminated orally.
SIGNATURES ON THE FOLLOWING PAGE
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
BUYER:
CHAPALA COMMUNICATIONS, INC.
By:
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Title:
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SELLER:
DIGITAL TRANSMISSION SYSTEMS, INC.
By:
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Title:
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SOUTHTECH, INC.
By:
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Title:
----------------------------------------------
MIXBAAL, S.A. de C.V.
for the limited purposes set forth in Section 5A of
this Agreement.
By:
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Title:
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