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UNITED STATES
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
APRIL 4, 2000
Date of Report (Date of Earliest Event Reported)
BILLING CONCEPTS CORP
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(Exact name of registrant as specified in its charter)
DELAWARE 0-28536 74-2781950
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(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
7411 JOHN SMITH DRIVE, SUITE 200
SAN ANTONIO, TEXAS 78229
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(Address of principal executive offices) (Zip Code)
(210)949-7000
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(Registrant's Telephone Number, Including Area Code)
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ITEM 5. OTHER EVENTS.
On March 21, 2000 Billing Concepts Corp. (the "Company") and its wholly
owned subsidiary, Lubbock Acquisition Corp., a Delaware corporation
("LAC"), entered into a Plan of Reorganization, Merger and Acquisition
Agreement (the "Agreement") with Operator Service Company, a Texas
corporation ("OSC"), and the stockholders of OSC. OSC, headquartered in
Lubbock, Texas, is a privately held provider of inbound, directory assistance
and interactive voice response and customer relationship management services
to the telecommunications, car rental and consumer products industries.
Under the terms of the Agreement, the Company agreed to acquire all of the
issued and outstanding shares of capital stock of OSC ("OSC Common Stock") in
exchange for 3.846,154 shares of common stock, $.01 par value, of the Company
("Billing Common Stock").
The acquisition was consummated on April 4, 2000, pursuant to the terms
of the Agreement, as amended on April 4, 2000, upon (1) filing of Articles of
Merger and a Certificate of Merger with the Secretary of State of the States
of Texas and Delaware, respectively, pursuant to which LAC merged with and
into OSC and became a wholly owned subsidiary of the Company, and (ii)
issuance by the Company of an aggregate of 3.846,154 shares of Billing Common
Stock to the stockholders of OSC. This amount of consideration paid by the
Company for the OSC Common Stock was arrived at through negotiations between
the Company, OSC and the principal stockholders of OSC and was based on a
variety of factors, including, but not limited to, earnings and revenue, the
value of the goodwill and the nature of the directory assistance and
teleservices industries. Of the 3,846,154 shares issued, 769,000 shares were
deposited in an escrow account to satisfy certain earnings obligations, and
461,573 shares were deposited in an escrow account to satisfy certain
indemnification obligations. The acquisition will be accounted for under the
purchase method of accounting. The Company has granted certain registration
rights for 20% of the shares issued in connection with the acquisition.
Billing Concepts, Inc., a wholly owned subsidiary of the Company, entered
into a employment agreement with a principal of OSC and Operator Service
Company, the surviving corporation in the merger and a wholly owned
subsidiary of the Company, entered into employment agreements with a
principal of OSC and eight other management and technical employees of OSC in
connection with this acquisition.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibit Index.
Exhibit 2.1 Plan of Reorganization, Merger and Acquisition
Agreement dated effective March 21, 2000, by and
among Billing Concepts Corp., Lubbock Acquisition
Corp., Operator Service Company and the stockholders
of Operator Service Company, as amended by Amendment
No. 1 to Plan of Reorganization, Merger and
Acquisition Agreement; dated April 4, 2000 (filed
herewith)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned hereunto duly authorized.
BILLING CONCEPTS CORP.
(Registrant)
Date: April 6, 2000 By: /a/David P. Tusa
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David P. Tusa
Senior Vice President and
Chief Financial Officer
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Exhibit 2.1
PLAN OF REORGANIZATION, MERGER AND ACQUISITION AGREEMENT
DATED EFFECTIVE MARCH 21, 2000
BY AND AMONG
BILLING CONCEPTS CORP.,
LUBBOCK ACQUISITION CORP.,
OPERATOR SERVICE COMPANY
AND
ITS STOCKHOLDERS
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TABLE OF CONTENTS
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1. GENERAL DEFINITIONS....................................................1
1.1 "Accounts Receivable".........................................1
1.2 "Affiliate"...................................................2
1.3 "Article".....................................................2
1.4 "Assets"......................................................2
1.5 "Associate"...................................................2
1.6 "Authorization"...............................................2
1.7 "Balance Sheet Date"..........................................2
1.8 "Best Knowledge"..............................................2
1.9 "Bcc Stock"...................................................2
1.10 "Business"....................................................2
1.11 "Business Combination"........................................2
1.12 "Business Day"................................................2
1.13 "CERCLA"......................................................3
1.14 "Certificate".................................................3
1.15 "Code"........................................................3
1.16 "Contracts"...................................................3
1.17 "Control".....................................................3
1.18 "Damages".....................................................3
1.19 "Deposits"....................................................3
1.20 "Disclosure Schedule".........................................3
1.21 "Earnout Holdback Shares".....................................3
1.22 "Earnout Escrow Agreement"....................................3
1.23 "Effective Time"..............................................3
1.24 "Encumbrance".................................................3
1.25 "Environmental Laws"..........................................4
1.26 "Environmental Liabilities"...................................4
1.27 "ERISA".......................................................4
1.28 "Escrow Agent"................................................4
1.29 "Escrow Stockholders".........................................4
1.30 "Exchange Act"................................................4
1.31 "Financial Statements"........................................4
1.32 "Former Seller Stockholder"...................................4
1.33 "Governmental Authority"......................................4
1.34 "Governmental Requirement"....................................5
1.36 "Indemnitee"..................................................5
1.37 "Indemnitor"..................................................5
1.38 "Indemnity Escrow Agreement"..................................5
1.39 "Indemnity Holdback Shares"...................................5
1.40 "Intellectual Property".......................................5
1.41 "IRS".........................................................6
1.42 "Losses"......................................................6
1.43 "Material Adverse Effect".....................................6
1.44 "Merger Consideration"........................................6
1.45 "Ordinary Course Of Business".................................6
1.46 "Other Stockholders"..........................................6
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1.47 "Parties"......................................................7
1.48 "PBGC".........................................................7
1.49 "Permitted Encumbrances".......................................7
1.50 "Person".......................................................7
1.51 "Purchaser Stock"..............................................7
1.52 "RCRA".........................................................7
1.53 "Reference Balance Sheet"......................................7
1.54 "Reorganization"...............................................7
1.55 "Rights Against Seller Stock"..................................7
1.56 "SEC" or "Commission"..........................................7
1.57 "SEC Documents"................................................7
1.58 "Section"......................................................7
1.59 "Securities Act"...............................................7
1.60 "Seller Stock".................................................7
1.61 "Software".....................................................8
1.62 "Software Trade Secret"........................................8
1.63 "Subsidiary"...................................................8
1.64 "Surviving Corporation"........................................8
1.65 "System Documentation".........................................8
1.66 "Taxes"........................................................8
1.67 "Tax Returns"..................................................8
1.68 "Third-party Claims"...........................................8
1.69 "Third-party Software".........................................9
1.70 "Third-party Software Agreements"..............................9
1.71 "User Documentation"...........................................9
1.72 "Waste Materials"..............................................9
1.73 "Working Capital"..............................................9
2. MERGER..................................................................9
2.1 The Merger.....................................................9
2.2 Surviving Corporation..........................................9
2.3 Liabilities....................................................9
2.4 Certificate of Incorporation and Bylaws.......................10
2.5 Directors and Officers........................................10
2.6 Conversion or Cancellation of Stock Upon Merger...............10
2.7 Fractional Shares.............................................10
2.8 Exchange Procedures...........................................11
2.9 Interim Dividends.............................................11
2.10 Further Assurances............................................11
2.11 Payments Into Escrow Funds....................................12
3. CLOSING; CLOSING DATE..................................................12
4. REPRESENTATIONS AND WARRANTIES OF SELLER AND THE ESCROW STOCKHOLDERS...12
4.1 Incorporation.................................................13
4.2 Share Capital.................................................13
4.3 Financial Statements..........................................14
4.4 Events Since the Balance Sheet Date...........................15
4.5 Competing Interests...........................................16
4.6 Taxes.........................................................16
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4.7 Employee Matters.................................................17
4.8 Contracts and Agreements.........................................18
4.9 Effect of Agreement..............................................21
4.10 Properties, Assets and Leasehold Estates.........................21
4.11 Intellectual Property............................................23
4.12 Suits, Actions and Claims........................................25
4.13 Licenses and Permits; Compliance With Governmental Requirements..25
4.14 Authorization....................................................26
4.15 Records..........................................................26
4.16 Environmental Protection Laws....................................26
4.17 Accounts Receivable..............................................27
4.18 Brokers And Finders..............................................28
4.19 Deposits.........................................................28
4.20 Work Orders......................................................28
4.21 Customer List; Supplier List.....................................28
4.22 No Royalties.....................................................28
4.23 Bank Accounts....................................................29
4.24 Insurance........................................................29
4.25 Employee Benefit Matters.........................................29
4.26 Warranties and Product Liability.................................31
4.27 Securities Laws Matters..........................................32
4.28 No Untrue Statements.............................................33
4.A REPRESENTATIONS AND WARRANTIES OF ESCROW STOCKHOLDERS AND OTHER
STOCKHOLDERS..............................................................33
4a.1 Authority........................................................33
4a.2 Consents.........................................................34
4a.3 Litigation.......................................................34
4a.4 Stock Ownership..................................................34
4a.5 Brokers and Finders..............................................34
4a.6 Securities Laws Matters..........................................34
5. REPRESENTATIONS AND WARRANTIES OF THE BCC PARTIES.........................35
5.1 Purchaser Incorporation..........................................35
5.2 BCC Incorporation................................................35
5.3 Authorization....................................................35
5.4 Brokers and Finders..............................................36
5.5 Authorization of Stock Consideration.............................36
5.6 SEC Documents....................................................36
5.7 No Violation.....................................................36
5.8 Consents.........................................................37
5.9 Certain Proceedings..............................................37
6. NATURE OF STATEMENTS AND SURVIVAL OF INDEMNIFICATIONS, GUARANTEES,
REPRESENTATIONS AND WARRANTIES OF SELLER, THE STOCKHOLDERS AND BCC
PARTIES...................................................................37
7. TAX TREATMENT.............................................................38
8. PRE-CLOSING COVENANTS.....................................................38
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8.1 General.............................................................38
8.2 Notices and Consents................................................38
8.3 Operation of Business...............................................38
8.4 Full Access.........................................................40
8.5 Notice of Developments..............................................40
8.6 Exclusivity.........................................................41
8.7 Disclosure Schedule.................................................41
8.8 Voting of Seller Stock..............................................42
8.9 Escrow Agreements...................................................42
8.10 Termination of Contracts............................................42
8.11 Affiliate Letters...................................................42
8.12 Registration Rights Agreement; No Transfers Before Closing..........42
8.13 Release.............................................................43
9. CONDITIONS TO OBLIGATION TO CLOSE............................................43
9.1 Conditions to Obligation of The BCC Parties.........................43
9.2 Conditions to Obligation of Seller And Stockholders.................46
10. SPECIAL CLOSING AND POST-CLOSING COVENANTS...................................47
10.1 General.............................................................47
10.2 Litigation Support..................................................47
10.3 Transition..........................................................48
10.4 Termination of Agreements...........................................48
10.5 Intellectual Property Assignment....................................48
10.6 Use of Name of Seller...............................................48
10.7 Employee Benefits Matter............................................48
10.8 Tax-free Reorganization.............................................49
10.9 S Corporation Earnings; 2000 Income Tax Returns.....................49
10.10 Earnout Escrow......................................................50
10.11 Appointment of Successor Escrow Agent...............................50
10.12 HSR.................................................................50
11. INDEMNITY....................................................................50
11.1 Indemnification by the Escrow Stockholders..........................51
11.2 Environmental Indemnification.......................................51
11.3 Tax Indemnification.................................................51
11.4 Products Liability and Warranty Indemnification.....................52
11.5 Indemnification by the BCC Parties..................................52
11.7 Indemnity Holdback..................................................53
11.8 Indemnity Escrow....................................................53
11.9 Procedure...........................................................53
11.10 Payment.............................................................55
11.11 Adjustment of Liability.............................................55
11.12 Failure to Pay Indemnification......................................55
11.13 Cooperation.........................................................55
11.14 Indemnification If Negligence of Indemnitee.........................55
12. NON-COMPETITION AGREEMENT....................................................55
12.1 Non-Competition.....................................................55
12.2 Judicial Reformation................................................56
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12.3 Customer Lists; Non-solicitation......................................56
12.4 Covenants Independent.................................................56
12.5 Remedies..............................................................57
13. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION.....................................57
14. NOTICES........................................................................58
15. TERMINATION....................................................................59
15.1 Termination of Agreement..............................................59
15.2 Effect of Termination.................................................60
16. GUARANTEE......................................................................60
17. STOCKHOLDER REPRESENTATIVE.....................................................60
18. GENERAL PROVISIONS.............................................................61
18.1 Governing Law; Interpretation; Section Headings.......................61
18.2 Severability..........................................................61
18.3 Entire Agreement......................................................62
18.4 Binding Effect........................................................62
18.5 Assignment............................................................62
18.6 Amendment; Waiver.....................................................62
18.7 Gender; Numbers.......................................................62
18.8 Counterparts..........................................................62
18.9 Telecopy Execution and Delivery.......................................63
18.10 Expenses..............................................................63
18.11 Arbitration...........................................................63
18.12 Damage to Assets......................................................64
18.14 Press Releases and Public Announcements...............................65
18.15 No Third Party Beneficiaries..........................................65
18.16 Construction..........................................................65
18.17 Incorporation of Exhibits, Annexes and Disclosure Schedule............65
18.18 Specific Performance..................................................65
18.19 Remedies Cumulative...................................................65
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EXHIBIT A.1 - FORM OF EARNOUT ESCROW AGREEMENT
EXHIBIT A.2 - FORM OF INDEMNITY ESCROW AGREEMENT
EXHIBIT B - FORM OF INTELLECTUAL PROPERTY ASSIGNMENTS
EXHIBIT C- FORM OF EMPLOYMENT AGREEMENTS
EXHIBIT D - FORM OF REGISTRATION RIGHTS AGREEMENT
EXHIBIT E - FORM OF AFFILIATE LETTER
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PLAN OF REORGANIZATION, MERGER AND ACQUISITION AGREEMENT
THIS PLAN OF REORGANIZATION, MERGER AND ACQUISITION AGREEMENT (this
"Agreement") is this entered effective the 21st day of March, 2000, by and among
Operator Service Company, a Texas corporation ("Seller"), and the Persons
holding shares of Seller Stock and named on Schedule 4.2(a) of the Disclosure
Schedule (collectively, the "Stockholders"), Billing Concepts Corp., a Delaware
corporation ("BCC"), and Lubbock Acquisition Corp., a Delaware corporation
("Purchaser," and, together with BCC, the "BCC Parties").
W I T N E S S E T H :
WHEREAS, BCC is in the business of developing billing systems and
providing software development services; and
WHEREAS, in connection with the transactions contemplated by this
Agreement, BCC previously caused Purchaser to be organized and to issue to BCC
all of the issued and outstanding shares of capital stock of Purchaser; and
WHEREAS, Seller is a provider of customer management, customer care
(including e-care), interactive voice response, telesales, operator services,
directory assistance, billing inquiry, help desk and teleservices (the
"Business"); and
WHEREAS, the Stockholders own, free and clear of any liens or
encumbrances, all of the issued and outstanding shares of capital stock of
Seller; and
WHEREAS, the respective boards of directors of Purchaser and Seller
have voted to approve the merger of Seller with and into Purchaser (the
"Merger") pursuant to the terms and subject to the conditions of this Agreement;
and
WHEREAS, this Agreement is intended to qualify under Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, the parties hereto agree that Seller shall be merged with and into
Purchaser and that the terms and conditions of the Merger, the method of
carrying the Merger into effect and certain other provisions relating thereto
shall be as hereinafter set forth:
10 GENERAL DEFINITIONS. For purposes of this Agreement, the following
terms shall have the respective meanings set forth below:
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1.1 "ACCOUNTS RECEIVABLE" shall have the meaning assigned to it in
SECTION 4.17.
1.2 "AFFILIATE" of any Person shall mean any Person Controlling,
Controlled by or under common Control with such Person.
1.3 "ARTICLE" shall mean an Article of this Agreement unless otherwise
stated.
1.4 "ASSETS" shall mean the assets, properties and rights of Seller of
every nature, kind and description, wherever located, tangible and intangible,
real, personal and mixed, whether or not reflected in the books and records of
Seller, necessary or desirable to permit the Business to be carried on in the
manner as is presently conducted (except for certain art work, decorations and
similar personal property items of James Kirk Smith and Michael R. Smith (which
are not included on the Financial Statements), located at Seller's headquarters
and which have been identified by them to Purchaser).
1.5 "ASSOCIATE" shall have the meaning assigned to it in SECTION 4.5.
1.6 "AUTHORIZATION" shall mean any consent, approval or authorization
of, expiration or termination of any waiting period requirement including
pursuant to the HSR Act by, or filing, registration, qualification, declaration
or designation with, any Governmental Authority.
1.7 "BALANCE SHEET DATE" shall have the meaning assigned to it in
SECTION 4.3.
1.8 "BEST KNOWLEDGE" shall mean both what a Person knew or knows. When
used with respect to a Person other than a natural person, the term "Best
Knowledge" shall include the directors, officers, trustees, administrators and
managers of the Person.
1.9 "BCC STOCK" shall mean the common stock, $.01 par value, of BCC.
1.10 "BUSINESS" shall have the meaning assigned in the recitals of this
Agreement.
1.11 "BUSINESS COMBINATION" shall mean (i) any merger or consolidation
of, or share exchange involving, the Seller with or into any Person, (ii) any
sale, lease, exchange, transfer or other disposition (whether in one transaction
or a series of related transactions) of more than ten percent of the Seller's
consolidated assets, (iii) the adoption of any plan or proposal for the
liquidation or dissolution of the Seller, (iv) any issuance, sale, purchase or
redemption of equity securities, or any security, instrument or obligation that
is or may become convertible into or exchangeable for or into equity securities
(whether or not immediately exercisable) , of the Seller, any reclassification
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of equity securities or recapitalization of the Seller, and (v) any transaction
having an effect similar to those described above.
1.12 "BUSINESS DAY" shall mean any day other than Saturday, Sunday or
other day on which federally chartered commercial banks in San Antonio, Texas
are authorized or required by law to close.
1.13 "CERCLA" shall mean the Comprehensive Environmental, Response,
Compensation, and Liability Act of 1980, as amended.
1.14 "CERTIFICATE" shall mean each stock certificate representing
shares of Seller Stock.
1.15 "CODE" shall mean the Internal Revenue Code of 1986, as amended.
1.16 "CONTRACTS" shall have the meaning assigned to it in SECTION 4.8.
1.17 "CONTROL" and all derivations thereof shall mean the ability to
either (a) vote (or direct the vote of) 50% or more of the voting interests in
any Person or (b) direct the affairs of another, whether through voting power,
contract or otherwise.
1.18 "DAMAGES" shall mean any and all actual liabilities, losses,
damages, demands, assessments, refund obligations (including, without
limitation, interest and penalties thereon), claims of any and every kind
whatsoever, costs and expenses (including interest, awards, judgments,
penalties, settlements, fines, costs of remediation, diminutions in value, costs
and expenses incurred in connection with investigating, prosecuting and
defending any claims or causes of action (including, without limitation,
reasonable attorneys' fees and reasonable expenses and all reasonable fees and
reasonable expenses of consultants and other professionals)).
1.19 "DEPOSITS" shall have the meaning assigned to it in SECTION 4.19.
1.20 "DISCLOSURE SCHEDULE" shall have the meaning assigned to it in
ARTICLE 4.
1.21 "EARNOUT HOLDBACK SHARES" shall have the meaning assigned to it in
SECTION 2.6.
1.22 "EARNOUT ESCROW AGREEMENT" is attached hereto as EXHIBIT A.1.
1.23 "EFFECTIVE TIME" shall mean the time at which a properly executed
certificate of merger in substantially the form attached to this Agreement as
Part 1.23(a) of the Disclosure Schedule (together with other documents required
by law to effect the Merger) shall have been filed with the Secretary of State
of Delaware, properly executed
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articles of merger in substantially the form attached to this Agreement as Part
1.23(b) of the Disclosure Schedule (together with other documents required by
law to effect the Merger) shall have been filed with the Secretary of State of
Texas and such other documents and instruments shall have been filed in any
other jurisdiction where such a certificate or articles of merger is required.
1.24 "ENCUMBRANCE" shall mean any security interest, mortgage, pledge,
trust, claim, lien, charge, option, defect, restriction, encumbrance or other
right or interest of any third Person of any nature whatsoever.
1.25 "ENVIRONMENTAL LAWS" shall mean any and all applicable laws,
statutes, ordinances, rules, regulations, orders, or determinations of any
Governmental Authority pertaining to the environment heretofore or currently in
effect in any and all jurisdictions in which Seller is conducting or at any time
has conducted business, or where any of the Assets are located, or where any
hazardous substances generated by or disposed of by Seller are located.
"Environmental Laws" shall include, but not be limited to, the Clean Air Act, as
amended, CERCLA, the Federal Water Pollution Control Act, as amended, RCRA, the
Safe Drinking Water Act, as amended, the Toxic Substances Control Act, as
amended, and all other applicable laws, statutes, ordinances, rules,
regulations, orders and determinations of any Governmental Authority relating to
(a) the control of any potential pollutant or protection of the air, water or
land, (b) solid, gaseous or liquid waste generation, handling, treatment,
storage, disposal or transportation and (c) exposure to hazardous, toxic or
other substances alleged to be harmful. The terms "hazardous substance,"
"release" and "threatened release" shall have the meanings specified in CERCLA,
and the terms "solid waste" and "disposal" (or "disposed") have the meanings
specified in RCRA.
1.26 "ENVIRONMENTAL LIABILITIES" shall mean any and all liabilities,
responsibilities, claims, suits, losses, costs (including remediation, removal,
response, abatement, clean-up, investigative or monitoring costs and any other
related costs and reasonable expenses), other causes of action recognized now or
at any later time, damages, settlements, reasonable expenses, charges,
assessments, liens, penalties, fines, pre-judgment and post-judgment interest,
reasonable attorneys' fees and other reasonable legal fees (a) pursuant to any
agreement, order, notice of responsibility, or directive embodied in
Environmental Laws or relating to environmental matters, injunction, judgment or
similar documents (including settlements) relating to environmental matters or
(b) pursuant to any claim by a Governmental Authority or other person for
personal injury, property damage, damage to natural resources, remediation or
similar costs or expenses incurred by such Governmental Authority or person
pursuant to common law or statute.
1.27 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
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1.28 "ESCROW AGENT" shall have the meaning assigned to it in SECTION
2.8(C).
1.29 "ESCROW STOCKHOLDERS" shall mean Michael R. Smith and James Kirk
Smith.
1.30 "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
1.31 "FINANCIAL STATEMENTS" shall have the meaning assigned to it in
SECTION 4.3.
1.32 "FORMER SELLER STOCKHOLDER" shall mean each Person who was,
immediately before the Effective Time, a holder of issued and outstanding shares
of Seller Stock.
1.33 "GOVERNMENTAL AUTHORITY" shall mean any and all foreign, federal,
state or local governments, governmental institutions, public authorities and
governmental entities of any nature whatsoever, and any subdivisions or
instrumentalities thereof, including, but not limited to, departments, boards,
bureaus, commissions, agencies, courts, administrations and panels, and any
divisions or instrumentalities thereof, whether permanent or ad hoc and whether
now or hereafter constituted or existing.
1.34 "GOVERNMENTAL REQUIREMENT" shall mean any and all applicable laws
(including, but not limited to, applicable common law principles), statutes,
ordinances, codes, rules, regulations, interpretations, guidelines, directions,
orders, judgments, writs, injunctions, decrees, decisions or similar items or
pronouncements, promulgated, issued, passed or set forth by any Governmental
Authority in effect as of the Effective Time.
1.35 "HSR ACT" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
1.36 "INDEMNITEE" shall mean the BCC Parties and the Surviving
Corporation and each of their respective Associates, Affiliates, officers,
directors, employees, agents, consultants, representatives and controlling
Persons and their respective successors and assigns, on the one hand, and the
Stockholders and their heirs, beneficiaries, successors and assigns, on the
other hand, whether indemnified, or entitled, or claiming to be entitled to be
indemnified or receive property, pursuant to the provisions of ARTICLE11 hereof.
1.37 "INDEMNITOR" shall mean the Person or Persons having the
obligation to indemnify or make payment pursuant to the provisions of ARTICLE 11
hereof.
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1.38 "INDEMNITY ESCROW AGREEMENT" is attached hereto as EXHIBIT A.2.
1.39 "INDEMNITY HOLDBACK SHARES" shall have the meaning assigned to it
in SECTION 2.6.
1.40 "INTELLECTUAL PROPERTY" shall mean:
(a) the Software and the Software Trade Secrets; and
(b) all of Seller's patents and applications therefor, further
including, but not limited to, all divisions, reissues, substitutions,
reexaminations, continuations, continuations-in-part and extensions thereof; and
(c) all of Seller's inventions, whether or not patentable,
further including, but not limited to, all new developments and inventions, as
well as all improvements on prior inventions regardless of prior inventorship;
and
(d) all of Seller's know-how and work product, regardless of
form and whether tangible or intangible, further including, but not limited to,
invention and laboratory notebooks, source code and object code, system design,
system specifications, flow charts, test data, records and journals; blueprints,
drawings and photographs; research and engineering reports, including any models
or other hardware; licensing, marketing or development analysis; and customer or
prospective customer lists; and
(e) all of Seller's copyright interests regardless of actual
or potential registrability, and including moral rights, rights of publication
and rights of attribution and integrity; and
(f) all of Seller's trademark or service mark interests,
together with all of the goodwill of the business associated therewith and
represented thereby; and
(g) all of Seller's trade secrets; and
(h) all other intellectual property and other proprietary
interests (including, without limitation patents, patent applications,
inventions (whether or not patentable), know-how, work product, copyright
interests, trademark or service mark interests, and trade secrets) , whether or
not identifiable as of the date of execution hereof, relating to, or used in
connection with, the Business or Assets now or at any time in the future.
1.41 "IRS" shall mean the Internal Revenue Service.
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1.42 "LOSSES" shall mean General Losses, Environmental Losses, Tax
Losses and Product Losses (each as defined in ARTICLE 11 hereof), as the case
may be.
1.43 "MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on
the Business, Assets, properties, operations, condition (financial or otherwise)
or results of operations of Seller or BCC Parties, taken as a whole, as
applicable. In determining whether any individual event would result in a
Material Adverse Effect, notwithstanding that such event does not of itself have
such effect, a Material Adverse Effect shall be deemed to have occurred if the
cumulative effect of such event and all other then existing events would result
in a Material Adverse Effect.
1.44 "MERGER CONSIDERATION" shall have the meaning assigned to it in
SECTION 2.6.
1.45 "ORDINARY COURSE OF BUSINESS" or "ordinary course of business" of
a Person shall mean action taken by that Person only if (a) such action is
consistent with past practices of such Person and is taken in the ordinary
course of normal day-to-day operations of such Person; (b) such action is not
required to be authorized by the Board of Directors (or group exercising similar
authority) of such Person; and (c) such action is similar in nature and
magnitude to actions customarily taken, without board authorization, in the
ordinary course of the normal day-to-day operations of other Persons that are in
the same line of business as such Person.
1.46 "OTHER STOCKHOLDERS" shall mean all Stockholders of Seller other
than the Escrow Stockholders.
1.47 "PARTIES" or "PARTIES" shall mean collectively the BCC Parties,
the Stockholders and Seller.
1.48 "PBGC" shall have the meaning assigned to it in SECTION 4.25.
1.49 "PERMITTED ENCUMBRANCES" shall mean (a) Encumbrances for current
taxes and assessments not yet past due or which are being contested in good
faith by appropriate proceedings and with respect to which adequate reserves are
reflected in the Financial Statements, (b) mechanics and materialmen
Encumbrances for construction in progress to the extent not perfected by filing,
recording, giving of notice or other appropriate action in the relevant
jurisdiction, (c) workmen, repairmen, warehousemen, carriers, lessors and
operators Encumbrances arising in the Ordinary Course of Business to the extent
not perfected by filing, recording, giving of notice or other appropriate action
in the relevant jurisdiction and (d) easements, including agreements and deeds
of easement, and other minor imperfections of title which would not have a
Material Adverse Effect.
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1.50 "PERSON" shall mean any natural person, any Governmental Authority
and any entity, the separate existence of which is recognized by any
Governmental Authority or Governmental Requirement, including, but not limited
to, corporations, partnerships, joint ventures, joint stock companies, trusts,
estates, companies and associations, whether organized for profit or otherwise.
1.51 "PURCHASER STOCK" shall mean the common stock, $.01 par value, of
Purchaser.
1.52 "RCRA" shall mean the Resource Conservation and Recovery Act of
1976, as amended.
1.53 "REFERENCE BALANCE SHEET" shall have the meaning assigned to it in
SECTION 4.3.
1.54 "REORGANIZATION" shall have the meaning assigned to it in ARTICLE
7.
1.55 "RIGHTS AGAINST SELLER STOCK" shall have the meaning assigned to
it in SECTION 4.2(B).
1.56 "SEC" or "COMMISSION" shall mean the United States Securities and
Exchange Commission.
1.57 "SEC DOCUMENTS" shall have the meaning assigned to it in SECTION
4.27.
1.58 "SECTION" shall mean a Section of this Agreement unless otherwise
stated.
1.59 "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
1.60 "SELLER STOCK" shall mean the common stock, par value $0.001, of
Seller.
1.61 "SOFTWARE" shall mean all of Seller's computer programs owned by
Seller (except off-the-shelf shrinkwrap and mass-market software) as of the date
of Closing, including (without limitation) those itemized on Part 1.61 of the
Disclosure Schedule, whether in source code or object code or other forms, and
regardless of the format or medium in which said code may be stored or embodied.
Software further includes (i) any and all improvements, corrections,
modifications, updates, enhancements or other changes made thereto as of the
Closing Date and owned by Seller, whether or not included in the most recent
version thereof; (ii) any separate media objects or files embedded therein; and
(iii) all System Documentation and User Documentation relating to the Software.
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1.62 "SOFTWARE TRADE SECRET" shall mean any non-public information,
design, process, procedure, formula or improvement included in or related to the
Software that is valuable, not generally known in the industry, and gives the
owner of the Software a competitive advantage over those competitors who do not
know or use such information.
1.63 "SUBSIDIARY" shall mean, with respect to any Person (the
"parent"), (a) any corporation, association, joint venture, partnership or other
business entity of which securities or other ownership interests representing
more than 50% of the ordinary voting power or beneficial interest are, at the
time as of which any determination is being made, owned or controlled by the
parent or one or more subsidiaries of the parent or by the parent and one or
more subsidiaries of the parent and (b) any joint venture or partnership of
which the parent or any Subsidiary of the parent is a general partner or has
responsibility for its management.
1.64 "SURVIVING CORPORATION" shall mean the Purchaser, existing at and
after the Effective Time as a result of the Merger.
1.65 "SYSTEM DOCUMENTATION" shall mean all documentation, whether in
tangible or electronic format, used in the development and updating of the
Software at any time, including, but not limited to, design or development
specifications, error reports, and related correspondence and memoranda.
1.66 "TAXES" shall mean any foreign, federal, state or local tax,
assessment, levy, impost, duty, withholding, estimated payment or other similar
governmental charge, together with any penalties, additions to tax, fines,
interest and similar charges thereon or related thereto.
1.67 "TAX RETURNS" shall mean all Tax returns and reports (including,
without limitation, income, franchise, sales and use, unemployment compensation,
excise, severance, property, gross receipts, profits, payroll and withholding
Tax returns and information returns).
1.68 "THIRD-PARTY CLAIMS" shall have the meaning such term is given in
SECTION 11.9(B) hereof.
1.69 "THIRD-PARTY SOFTWARE" shall mean computer software (except
off-the-shelf shrinkwrap and mass-market software) not owned by Seller but in
which Seller has rights and/or obligations, all of which is reflected on Part
1.69 of the Disclosure Schedule.
1.70 "THIRD-PARTY SOFTWARE AGREEMENTS" shall mean the agreements
itemized on Part 1.70 of the Disclosure Schedule.
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1.71 "USER DOCUMENTATION" shall mean all end-user instruction manuals,
whether in tangible or electronic format, that have accompanied the Software
instructing end users in the use thereof.
1.72 "WASTE MATERIALS" shall mean any toxic or hazardous materials or
substances, or solid wastes, including asbestos, buried contaminants, chemicals,
flammable or explosive materials, radioactive materials, petroleum and petroleum
products, and any other chemical, pollutant, contaminant, substance or waste
that is regulated by any Governmental Authority under any Environmental Law.
1.73 "WORKING CAPITAL" shall mean all current assets less all current
liabilities, including all bank debt, each calculated according to generally
accepted accounting principles consistently applied.
2. MERGER.
2.1 THE MERGER. Subject to the terms and conditions of this Agreement,
Seller shall be merged with and into Purchaser in accordance with all applicable
laws, with Purchaser being the Surviving Corporation. Purchaser and Seller shall
cause a certificate of merger to be filed with the Secretary of State of
Delaware, articles of merger to be filed with the Secretary of State of Texas
and such other documents and instruments to be filed in any other jurisdiction
where such a certificate or articles of merger is required, within two business
days after the Closing Date (as hereinafter defined), unless legally prohibited
from doing so. The Merger shall be effective at the Effective Time.
2.2 SURVIVING CORPORATION. From and after the Effective Time, the
Surviving Corporation shall have the name "Operator Service Company" and shall
possess all assets and property of every description, and every interest in the
assets and property, wherever located, and the rights, privileges, immunities,
powers, franchises and authority, of a public as well as of a private nature, of
each of Seller and Purchaser, and all debts and all other things in action or
belonging or due to each of Seller and Purchaser, all of which shall be vested
in the Surviving Corporation without further act or deed, and title to any real
estate or any interest in the real estate vested in either Seller or Purchaser
shall not revert or in any way be impaired.
2.3 LIABILITIES. The Surviving Corporation shall be liable for all the
debts, liabilities and duties of each of Seller and Purchaser; any action or
proceeding pending, by or against either Seller or Purchaser, may be prosecuted
to judgment, with right of appeal, as if the Merger had not taken place, or the
Surviving Corporation may be substituted in its place, and all the rights of
creditors of each of Seller and
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Purchaser shall be preserved unimpaired, and all liens upon the property of each
of Seller and Purchaser shall be preserved unimpaired, on only the property
affected by the liens immediately prior to the Effective Time.
2.4 CERTIFICATE OF INCORPORATION AND BYLAWS. The certificate of
incorporation and bylaws of Purchaser in effect immediately prior to the
Effective Time shall be the certificate of incorporation and bylaws of the
Surviving Corporation following the Merger until otherwise amended or repealed.
2.5 DIRECTORS AND OFFICERS. The directors and officers of Purchaser
immediately prior to the Effective Time shall be the directors and officers of
the Surviving Corporation until their successors are duly elected or appointed
and qualified in the manner provided in the bylaws of the Surviving Corporation,
or as otherwise provided by law.
2.6 CONVERSION OR CANCELLATION OF STOCK UPON MERGER
(a) In consideration for the Merger, the non-competition
agreements in ARTICLE 12 hereof and the non-disclosure agreement in ARTICLE
13 hereof, as of the Effective Time, by virtue of the Merger and without any
action on the part of the holders of any shares of Seller Stock, or the
holder of the shares of Purchaser Stock, (i) subject to adjustment under
SECTION 2.6(B), Seller Stock outstanding immediately before the Effective
Time shall be converted into the right to receive, subject to the provisions
of SECTION 2.8, 3,846,154 shares of BCC Stock (the "Merger Consideration");
provided, however, that 461,573 shares of the Merger Consideration (the
"Indemnity Holdback Shares") shall be pledged by the Escrow Stockholders to
secure the indemnification obligations of the Stockholders pursuant to
ARTICLE 11 hereof and 769,000 shares of the Merger Consideration (the
"Earnout Holdback Shares") shall be pledged by the Escrow Stockholders to
secure the earnout requirements pursuant to SECTION 10.10 hereof, and (ii)
each share of Purchaser Stock outstanding immediately before the Effective
Time shall be converted into one share of common stock of the Surviving
Corporation. At the Closing, BCC shall deliver to the Stockholders the
certificates representing the Merger Consideration, less the Indemnity
Holdback Shares and less the Earnout Holdback Shares.
(b) The number of shares constituting the Merger Consideration
will be subject to reduction at the Closing to the extent the Seller's Working
Capital is not at least $500,000 as of the Effective Time, but BCC elects to
Close, in an amount equal to the deficit between the actual Working Capital as
of the Effective Time and $500,000, valuing the shares of BCC Stock at $6.50 per
share.
2.7 FRACTIONAL SHARES. Notwithstanding SECTION 2.6, no certificates
or scrip representing fractional shares of BCC Stock shall be issued upon the
surrender for exchange of certificates that prior to the Effective Time
represented shares of Seller Stock, no dividend or
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distribution of BCC shall relate to any fractional share interest and no
fractional share interest shall entitle the owner thereof to vote or to exercise
any rights of a stockholder of BCC. In the event that any Former Seller
Stockholder shall be entitled to any fractional share interest, then any
fractional amount shall be rounded down to the nearest whole share.
2.8 EXCHANGE PROCEDURES.
(a) After the Effective Time, each outstanding Certificate
shall, until duly surrendered to Purchaser as contemplated by this SECTION
2.8, be deemed to represent only the right to receive the applicable pro rata
portion of the Merger Consideration.
(b) After the Effective Time, there shall be no further
transfer on the records of Seller of Certificates, and each share of Seller
Stock presented or surrendered to Purchaser shall be canceled in exchange for
the applicable pro rata portion of the Merger Consideration as contemplated
by SECTION 2.6. Purchaser shall not be obligated to deliver any part of the
Merger Consideration to any holder of a Certificate until such holder
surrenders such Certificate as provided herein.
(c) The stock certificates representing the Indemnity
Holdback Shares shall be held in escrow by U.S. Trust Company of Texas, Inc.,
Dallas, Texas, or another escrow agent selected by BCC (the "Escrow Agent"),
which shall include any successor escrow agent appointed pursuant to the
provisions of SECTION 10.11, and the stock certificates representing the
Earnout Holdback Shares shall be held in escrow by U.S. Trust Company of
Texas, Inc., Dallas, Texas, or another escrow agent selected by BCC, which
shall include any successor escrow agent appointed pursuant to the provisions
of SECTION 10.11.
2.9 INTERIM DIVIDENDS. No dividends or other distributions declared
after the Effective Time on BCC Stock issuable pursuant to the Merger and
payable to the Former Seller Stockholders after the Effective Time shall be paid
to the holder of any unsurrendered certificates formerly representing shares of
Seller Stock until the certificates shall be surrendered as provided herein,
provided, however, that (a) upon surrender there shall be paid to the
Stockholder in whose name the certificates representing the shares of BCC Stock
shall be issued the amount of unpaid dividends with respect to the holder's
shares of BCC Stock and (b) at the appropriate payment date, or as soon as
practicable thereafter, there shall be paid to the Stockholder the amount of
dividends declared with respect to whole shares of BCC Stock with a record date
on or after the Effective Time but before surrender and a payment date
subsequent to surrender, subject in any case to any applicable escheat laws. No
interest shall be payable with respect to the payment of dividends or other
distributions on surrender of outstanding certificates.
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2.10 FURTHER ASSURANCES. If at any time after the Effective Time the
Surviving Corporation shall consider or be advised that any further assignments
or assurances in law or otherwise are necessary or desirable to vest, perfect or
confirm, of record or otherwise, in the Surviving Corporation, all rights, title
and interests in all the Assets and all privileges, powers and franchises of
Seller and Purchaser, the Surviving Corporation and its proper officers and
directors, in the name and on behalf of Seller and Purchaser, shall execute and
deliver all such proper deeds, assignments and assurances in law and do all
things necessary and proper to vest, perfect or confirm title to such property
or rights in the Surviving Corporation and otherwise to carry out the purpose of
this Agreement, and the proper officers and directors of the Surviving
Corporation are fully authorized in the name of Seller or otherwise to take any
and all such action.
2.11 PAYMENTS INTO ESCROW FUNDS. When making the issuances required by
SECTION 2.8 above, and pursuant to the certificates of merger and
notwithstanding any provision therein to the contrary:
(a) the BCC Parties shall withhold from each Escrow
Stockholder on a pro rata basis and Purchaser and Escrow Stockholders shall
deliver to the Escrow Agent under the Earnout Escrow Agreement, the Earnout
Holdback Shares, to be held and distributed by the Escrow Agent pursuant to
the terms of this Agreement and the Earnout Escrow Agreement; and
(b) the BCC Parties shall withhold from each Escrow
Stockholder on a pro rata basis and Purchaser and Escrow Stockholders shall
deliver to the Escrow Agent under the Indemnity Escrow Agreement, the
Indemnity Holdback Shares, to be held and distributed by the Escrow Agent
pursuant to the terms of this Agreement and the Indemnity Escrow Agreement.
3. CLOSING; CLOSING DATE.
As soon as practicable after satisfaction or waiver of all conditions
to the Merger, including the expiration of any waiting period or extension
thereof applicable to the Merger under the HSR Act, but in no event later than
May 31, 2000, the consummation of the transactions referenced above shall take
place (the "Closing") at 10:00 a.m., San Antonio time, at the offices of BCC,
7411 John Smith Drive, Suite 200, San Antonio, Texas , or at such other time,
date and place as BCC and Seller shall in writing designate. The date of the
Closing is referred to herein as the "Closing Date".
4. REPRESENTATIONS AND WARRANTIES OF SELLER AND THE ESCROW
STOCKHOLDERS.
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Seller and each Escrow Stockholder hereby, jointly and severally,
represent and warrant to the BCC Parties that the statements contained in this
Agreement made by Seller and each Escrow Stockholder are correct and complete as
of the date of this Agreement and will be correct and complete as of the Closing
Date (as though made then and as though the Closing Date were substituted for
the date of this Agreement throughout this Agreement), except as set forth in
the disclosure schedule delivered by Seller and each Escrow Stockholder to the
BCC Parties on the date hereof and initialed by the Parties, as the same may be
amended or supplemented from time to time as set forth in SECTION 8.7 hereof
(the "Disclosure Schedule"). The Disclosure Schedule will be arranged in
paragraphs corresponding to the lettered and numbered paragraphs contained in
this Agreement. Seller and each Escrow Stockholder hereby, jointly and
severally, represent and warrant to the BCC Parties as follows:
4.1 INCORPORATION. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Texas, and is duly
authorized, qualified and licensed under all applicable Governmental
Requirements to carry on its business in the places and in the manner as now
conducted and to own, operate and lease the Assets it now owns, operates or
holds under lease. There has not been any claim by any other jurisdiction to the
effect that Seller is required to qualify or otherwise be authorized to do
business as a foreign corporation therein in order to carry on any of its
businesses as now conducted or to own, lease or operate the Assets. Part 4.1 of
the Disclosure Schedule sets forth a complete list of all jurisdictions in which
Seller is qualified as a foreign corporation, and Seller is in good standing in
each of such jurisdictions. There has not been any claim by any other
jurisdiction to the effect that Seller is required to qualify or otherwise be
authorized to do business as a foreign corporation therein in order to carry on
any of its businesses as now conducted or to own, lease or operate the Assets.
Complete and correct copies of the Articles of Incorporation of Seller and all
amendments thereto, certified in each case by the Secretary of State of the
State of Texas, and of the Bylaws of Seller and all amendments thereto,
certified by the Secretary of Seller, heretofore have been made available to the
BCC Parties. Neither Seller nor any Stockholder has taken any action, or failed
to take any action which action or failure will preclude or prevent Seller's
Business from being conducted in substantially the same manner in which Seller
has heretofore conducted the same. Seller has no Subsidiaries. Seller is not
engaged in any business or operations other than the Business. Except as
completely and accurately set forth on Part 4.1 of the Disclosure Schedule,
Seller is not a party to any partnership or joint venture agreement or any
agreement of any nature to acquire, directly or indirectly, any shares in the
capital of, or other equity or proprietary interest in, any person, firm or
corporation, and Seller is not a party to any agreement to acquire or lease any
other business operations.
4.2 SHARE CAPITAL.
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(a) The authorized capital stock of Seller consists of
15,000,000 shares of Seller Stock, of which 8,290,758 shares are outstanding
as of the date hereof and 296,342 shares, representing Rights Against Seller
Stock, are outstanding as of the date hereof. All of the outstanding Seller
Stock is held of record and beneficially by the Stockholders, in the
respective amounts set forth in Part 4.2(a) of the Disclosure Schedule, free
and clear of all Encumbrances and restrictive agreements, other than as
disclosed on Part 4.2(b) of the Disclosure Schedule. All outstanding Seller
Stock is duly authorized and issued in compliance with all federal, state and
foreign securities laws.
(b) Except as completely and accurately set forth on Part
4.2(b) of the Disclosure Schedule, there are outstanding on the date hereof
no rights of first refusal, preemptive rights, conversion rights, options,
convertible securities, warrants or other rights to acquire, directly or
indirectly, capital stock from Seller or from any Stockholder (collectively,
"Rights Against Seller Stock"). With the exception of 274,509 shares of
Seller Stock issued and outstanding under Seller's Stock Compensation Plan
dated effective as of January 1, 1996 as "restricted stock", all Rights
Against Seller Stock will be either extinguished or converted into Seller
Stock on or before Closing. All outstanding shares of capital stock of Seller
are duly authorized, validly issued, fully paid, and nonassessable. Except as
completely and accurately set forth in Part 4.2(b) of the Disclosure
Schedule, there are no outstanding bonds, debentures, notes or other
indebtedness or other securities of Seller having the right to vote (or
convertible into, or exchangeable for, securities having the right to vote)
on any matters on which Stockholders of Seller may vote.
(c) Neither Seller nor any Stockholder is a party or
subject to any agreement or understanding, and there is no agreement or
understanding between any Persons, that affects or relates to the voting or
giving of written consents with respect to any securities of Seller or the
voting by any director of Seller. Except as set forth on Parts 4.8(a)(xiv)
and 4.14(b) of the Disclosure Schedule and as reflected on the Referenced
Balance Sheet, neither any Stockholder nor any Affiliate thereof is indebted
to Seller. Seller is not indebted to any Stockholder or any Affiliate thereof
and Seller is not under any contractual or other obligation to register any
of its presently outstanding securities or any of its securities which may
hereafter be issued. Except as completely and accurately set forth in Part
4.2(c) of the Disclosure Schedule, there are no outstanding contractual
obligations, commitments, understandings or arrangements of Seller to
repurchase, redeem or otherwise acquire or make any payment in respect of any
shares of capital stock of Seller and no payments, dividends or redemption
rights in respect of any shares of capital stock of Seller are accrued, due
or payable. Except as completely and accurately set forth in Part 4.2(c) of
the Disclosure Schedule, there are no agreements or arrangements pursuant to
which Seller is or could be required to register shares of capital stock or
options under the Securities
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Act, or other agreements or arrangements with or among any security holders of
Seller with respect to securities of Seller.
4.3 FINANCIAL STATEMENTS. Seller has made available to the BCC Parties
copies of the following financial statements for Seller, all of which financial
statements are included in Part 4.3(a) of the Disclosure Schedule (collectively,
the "Financial Statements"):
(a) Unaudited Balance Sheet of Seller (the "Reference
Balance Sheet") as of February 29, 2000 (the "Balance Sheet Date") and
Unaudited Income Statement of Seller for the two-month period ended on the
Balance Sheet Date; and
(b) Audited Balance Sheets, Income Statements and
Statements of Cash Flows for each of Seller's three most recent fiscal years.
All financial statements made available to the BCC Parties by Seller, whether or
not included in Part 4.3(a) of the Disclosure Schedule, are true and accurate in
all material respects, have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated (except as may be indicated in the notes thereto), and present fairly,
in all material respects, the financial condition of Seller as of the dates and
for the periods indicated thereon (except for, in the case of interim period
financial information, normal year-end adjustments). The Reference Balance Sheet
reflects, as of the Balance Sheet Date, all liabilities, debts and obligations
of any nature, kind or manner of Seller, whether direct, accrued, absolute,
contingent or otherwise, and whether due, or to become due, whether or not such
items are required to be reflected on such balance sheet under generally
accepted accounting principles consistently applied. The Reference Balance Sheet
reflects a Working Capital no less than $500,000. Except as set forth in Part
4.3(b) of the Disclosure Schedule attached hereto and made a part hereof or on
the Reference Balance Sheet, Seller does not have, and none of the Assets,
properties or Business of Seller is subject to, any liabilities or obligations
(accrued, absolute, contingent or otherwise), whether or not such liabilities
are normally shown or reflected on a balance sheet prepared in a manner
consistent with tax-basis or generally accepted accounting principles, except
for liabilities (i) incurred in the Ordinary Course of Business, or (ii) fully
covered by Seller's insurance policies, none of which have had a Material
Adverse Effect.
4.4 EVENTS SINCE THE BALANCE SHEET DATE. Since the Balance Sheet Date,
there has not been:
(a) any change in the condition (financial or otherwise) or
in the properties, Assets, liabilities, Business or prospects of the
Business, except normal and usual changes in the Ordinary Course of Business,
none of which has been adverse and
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all of which in the aggregate have not been adverse; (b) any labor trouble,
strike or any other occurrence, event or condition affecting the employees of
Seller that adversely affects the condition (financial or otherwise) of the
Assets or the Business; (c) any breach or default by Seller or, to the Best
Knowledge of Seller and each Escrow Stockholder, by any other party, under any
agreement or obligation included in the Assets or by which any of the Assets are
bound; (d) any damage, destruction or loss (whether or not covered by insurance)
adversely affecting the Assets or the Business; (e) any change in the types,
nature, composition or quality of the services of the Business, any adverse
change in the contributions of any of the service lines of the Business to the
revenues or net income of such Business, or any adverse change in the sales,
revenue or net income of the Business; (f) any transaction related to or
affecting the Assets or the Business other than transactions in the Ordinary
Course of Business of Seller; (g) any other occurrence, event or condition that
has adversely affected (or, to the Best Knowledge of the Seller and each Escrow
Stockholder, can reasonably be expected to adversely affect) the Assets or the
Business; (h) any declaration, setting aside or payment of any dividend (whether
in cash, stock or property) with respect to any of Seller's capital stock; (i)
(i0 any granting by Seller to any executive officer of Seller of any increase in
compensation, (ii) any granting by Seller to any executive officer of any
increase in severance or termination pay, or (iii) any entry by Seller into any
employment, severance or termination agreement with any executive officer; (j)
any change in accounting methods, principles or practices by Seller materially
affecting its assets, liabilities or business, except insofar as may have been
required by a change in tax-basis or generally accepted accounting principles,
and except as required by the BCC Parties; (k) to the Best Knowledge of the
Seller and each Escrow Stockholder, any condition, event or occurrence through
the date hereof which, individually or in the aggregate, could reasonably be
expected to prevent, hinder or delay in any material respect the ability of
Seller to consummate the transactions contemplated by this Agreement; (l) any
leases or contracts entered into by Seller, whether written or oral, outside the
Ordinary Course of Business; (m) any strategic relationships or alliances
entered into by Seller, whether written or oral; or (n) any agreement, in
writing or otherwise, by Seller or any corporate action by Seller with respect
to the foregoing.
4.5 COMPETING INTERESTS. Except as set forth on Part 4.5 of the
Disclosure Schedule, neither Seller nor the Escrow Stockholders, nor, to the
Best Knowledge of Seller and each Escrow Stockholder, any director or officer of
Seller or the Escrow Stockholders, and no Associate (as hereinafter defined) of
Seller or the Escrow Stockholders:
(a) owns, directly or indirectly, any equity interests in,
or is a director, officer or employee of, or consultant to, any entity which
is a competitor, supplier or customer of the Business, or, to the Best
Knowledge of Seller and each Escrow Stockholder, a competitor, supplier or
customer of Purchaser or Seller or an Associate of Purchaser or Seller
(except for ownership, if any, of less than three percent of the
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outstanding capital stock of any corporation the capital stock of which is
traded on a nationally recognized securities exchange or which has a class of
securities registered pursuant to the Exchange Act), or
(b) owns, directly or indirectly, in whole or in part, any
property, asset or right which is associated with the Assets or the Business or
which Seller is presently operating or using in connection with or the use of
which is necessary for or material to the operation of the Business.
For purposes of this Agreement, the term "Associate" shall mean:
(y) with respect to an individual:
(i) the spouse of the individual;
(ii) any trust in which the individual or any person
described in (i) above has a pecuniary interest or any trustee of such
a trust, and
(iii) any business entity which is directly or
indirectly Controlled by any of the foregoing; and
(z) with respect to a Person other than a natural person, any
Person Controlling, Controlled by or under common Control with such Person, and
any director, officer, administrator, beneficiary, executor, manager, or
employee of such Person and any Associate of any Person described in this clause
(z).
4.6 TAXES. Except as set forth in Part 4.6 of the
Disclosure Schedule:
(a) all Tax Returns that are required to be filed on or before
the Effective Time, subject to any allowable extension periods, for, by, on
behalf of or with respect to Seller, including, but not limited to, those
relating to the income, business, operations or property of Seller (whether on a
separate, consolidated, affiliated, combined, unitary or any other basis), have
been timely filed with the appropriate foreign, federal, state and local
authorities, all such Tax Returns are true, correct and complete, and all Taxes
shown to be due and payable on such Tax Returns or related to such Tax Returns
have been paid in full on or before the Effective Time, except Taxes which have
not yet accrued or otherwise become due, all of which are reflected on the
Reference Balance Sheet;
(b) all such Tax Returns and the information and data
contained therein have been properly and accurately compiled and completed in
all material respects, fairly present the information purported to be shown
therein, and reflect all
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liabilities for Taxes for the periods covered by such Tax Returns, net of any
applicable reserves;
(c) none of such Tax Returns are under audit or examination
by any foreign, federal, state or local authority and there are no
agreements, waivers or other arrangements providing for an extension of time
with respect to the assessment or collection of any Tax or deficiency of any
nature against Seller or with respect to any such Tax Return, or any suits or
other actions, proceedings, investigations or claims now pending or, to the
Best Knowledge of Seller and each Escrow Stockholder, threatened against
Seller with respect to any Tax, or any matters under discussion with any
foreign, federal, state or local authority relating to any Tax, or any claims
for any additional Tax asserted by any such authority;
(d) all Taxes assessed and due and owing from or against
Seller on or before the Effective Time (including, but not limited to, ad
valorem taxes relating to any property of Seller) have been timely paid in
full on or before the Effective Time;
(e) all withholding Tax, Tax deposit and estimated Tax
payment requirements imposed on Seller for any and all periods ending on or
before the Effective Time, or through and including the Effective Time for
periods that have not ended on or before the Effective Time, have been
satisfied in full on or before the Effective Time or reserves adequate for
the payment of such withholding, deposit and estimated Taxes have been or
will be established in the financial statements of Seller on or before the
Effective Time, a copy of which has been or will be provided to BCC; and
(f) the Financial Statements reflect and include adequate
charges, accruals, reserves and provisions for the payment in full of any and
all Taxes payable with respect to any and all periods ending on or before the
respective dates thereof.
4.7 EMPLOYEE MATTERS. Part 4.7 of the Disclosure Schedule sets forth a
true and complete list of the names of, and current annual compensation paid by
Seller to, each employee of Seller utilized in connection with the operation of
the Business. Seller is not a party to or bound by any collective bargaining or
other union agreements. Seller has not, within the last five years, had or, to
Best Knowledge of Seller and Escrow Stockholders, been threatened with any union
activities, work stoppages or other labor trouble with respect to its employees,
temporary employees or consultants. As of the date hereof, there are no disputes
with employees in general to which Seller is a party. As of the date hereof,
there are no strikes, slowdowns or picketing against Seller pending or, to the
Best Knowledge of Seller and each Escrow Stockholder, threatened. As of the date
hereof, Seller has not received notice from any union, employees, temporary
employees or consultants setting forth demands for representation, elections or
for present or future changes in wages, terms of
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employment or working conditions. Other than wage increases in the Ordinary
Course of Business, since the Balance Sheet Date, Seller has not made any
commitment or agreement to increase the wages or modify the conditions or
terms of employment of any of the employees of Seller used in connection with
the Business.
4.8 CONTRACTS AND AGREEMENTS. (a) Except as set forth in Part 4.8(a) of
the Disclosure Schedule, Seller is not a party to or bound by:
(i) any contract, agreement or commitment in respect of the
sale of products or services (including, without limitation, customer contracts
for services to be provided after the Effective Date) or the purchase of raw
materials, supplies or other products or utilities;
(ii) any offer, tender or the like outstanding and capable of
being converted into an obligation of Seller by the passage of time or by an
acceptance or other act of some other person or entity or both, except for those
incurred in the Ordinary Course of Business, none of which have had a Material
Adverse Effect;
(iii) any sale, agency, distributorship agreement, franchise
agreement or legally enforceable commitment or obligation with respect thereto,
including but not limited to, any contract or agreement that would require
Seller to pay commissions or share profits or sales proceeds with any third
party;
(iv) any collective bargaining agreement, union agreement,
employment agreement, consulting agreement, management service agreement,
agreement providing for the services of an independent contractor or any other
similar type of contract or agreement;
(v) any profit-sharing, pension, stock option, severance pay,
retirement, bonus, deferred compensation, group life and health insurance or
other employee benefit plan, agreement, arrangement or commitment of a similar
nature or any agreement with any present or former officer, director or
Stockholder of Seller, except as indicated in Part 4.25 of the Disclosure
Schedule;
(vi) any loan or credit agreement, indenture, guarantee (other
than endorsements made for collection), mortgage, pledge, conditional sale or
other title retention agreement, any equipment financing obligation, lease and
lease-purchase agreement, except as indicated in Part 4.8(b) of the Disclosure
Schedule;
(vii) any lease related to the Assets or the Business, and any
other contract, agreement or legally enforceable commitment relating to or
affecting the Assets or the Business;
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(viii) any performance bond, bid bond, surety bond and the
like, any contract and bid covered by such bond, and any letter of credit and
guaranty;
(ix) any consent decree and other judgment, decree or order,
settlement agreement and agreement relating to competitive activities, requiring
or prohibiting any future action;
(x) any contract, commitment or agreement of any nature
with any Stockholder, or any Associate (as defined in SECTION 4.5) of a
Stockholder or Affiliate of any Stockholder;
(xi) any contracts, commitments and agreements entered into
outside the ordinary course of the operation of the Business;
(xii) any agreement, indenture or other instrument which
contains restrictions with respect to the payment of dividends or any other
distribution in respect of its capital stock or the purchase, redemption or
other acquisition of capital stock;
(xiii) other than expenditures regularly made in the Ordinary
Course of Business of Seller for items that are not property, plant or
equipment, any agreement, contract or commitment relating to any expenditure or
a series of related expenditures in excess of $10,000;
(xiv) any outstanding loan or advance by Seller to, or
investment by Seller in, any Person, or any agreement, contract, commitment or
understanding relating to the making of any such loan, advance or investment
(excluding trade receivables);
(xv) any contract, agreement, indenture, note or other
instrument relating to (A) the borrowing of money by Seller or the granting of
any Encumbrance or (B) any guarantee or other contingent liability (identifying
the primary contract or agreement to which such guarantee or contingent
liability relates or the agreement pursuant to which such guarantee was
delivered) in respect of any indebtedness, commitment, liability or obligation
of any Person (other than the endorsement of negotiable instruments for deposit
or collection in the Ordinary Course of Business);
(xvi) any agreement, contract or commitment limiting the
freedom of Seller or any Affiliate of Seller to engage in any line of business,
to own, operate, sell, transfer, pledge or otherwise dispose of or encumber any
Asset or to compete with any Person or to engage in any business or activity in
any geographic area;
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(xvii) any agreement, lease, contract or commitment or series
of related agreements, leases, contracts or commitments not entered into in the
Ordinary Course of Business that is not cancelable under the terms of such
agreement, lease, contract or commitment without penalty to Seller within 30
days;
(xviii) any agreement, contract or commitment requiring (A)
the payment for goods or services whether or not such goods or services are
actually provided or (B) the furnishing of goods or services at a price less
than Seller's cost of producing such goods or providing such services;
(xix) any agreement or contract obligating Seller or, that
would materially obligate or require any subsequent owner of the business
currently conducted by Seller or any of the Assets to provide for
indemnification or contribution with respect to any matter (other than customary
indemnification provisions in leases of property leased by Seller);
(xx) any license, royalty or similar agreement; or
(xxi) any agreement, contract or commitment that Seller
expects to have a Material Adverse Effect on Seller, Surviving Corporation
and/or Purchaser subsequent to Closing.
Part 4.8(a) of the Disclosure Schedule sets forth with respect to each mortgage,
security agreement, letter of credit or guaranty, a cross-reference to the
principal agreement, instrument or document referred to in Part 4.8(a) of the
Disclosure Schedule pursuant to which such mortgage, security agreement, letter
of credit or guaranty was executed or to which such mortgage, security
agreement, letter of credit or guaranty relates.
(b) Part 4.8(b) of the Disclosure Schedule sets forth (i)
the aggregate outstanding principal amount as of March 16, 2000, with respect
to each loan, credit or other agreement, instrument or document listed in
Part 4.8(b) of the Disclosure Schedule hereto relating to the borrowing of
money by Seller and (ii) the amount of available borrowings as of March 16,
2000, with respect to each such loan, credit or other agreement, instrument
or document.
(c) All of such contracts, agreements, leases, licenses,
plans, arrangements, commitments and documents listed in Part 4.8(a) of the
Disclosure Schedule (collectively, the "Contracts") are valid, binding and in
full force and effect in accordance with their terms and conditions, other
than as set forth in Part 4.8(a) of the Disclosure Schedule, and there is no
existing default thereunder or breach thereof by Seller, or, to the Best
Knowledge of Seller and each Escrow Stockholder, by any other party to a
Contract, or any conditions which, with the passage of time or the giving of
notice or both, might reasonably constitute such a default by Seller, or, to
the Best
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Knowledge of Seller and each Escrow Stockholder, by any other party to a
Contract, and to the Best Knowledge of each Escrow Stockholder, none of the
Contracts will be breached by or give any other party a right of termination as
a result of the transactions contemplated by this Agreement. There are no
pending or, to the Best Knowledge of Seller and each Escrow Stockholder,
threatened disputes with respect to the Contracts. Seller is not obligated to
pay any liquidated damages under any of the Contracts and to the Best Knowledge
of Seller and each Escrow Stockholder, there are no facts or circumstances that
could reasonably be expected to result in an obligation of Seller to pay any
such liquidated damages. To the Best Knowledge of Seller and Escrow Stockholder,
there is no reason why any of the Contracts (i) will result in a loss to the
Surviving Corporation on completion by performance or (ii) cannot readily be
fulfilled or performed by the Surviving Corporation on time without undue or
unusual expenditure of money or effort. Copies of all of the documents (or in
the case of oral commitments, descriptions of the material terms thereof)
relevant to the Contracts have been made available by Seller to the BCC Parties,
and such copies and/or descriptions are true, substantially complete and
accurate and include all amendments, supplements or modifications thereto. All
of the Contracts will be fully vested in Purchaser as of the Effective Time of
the Merger, without the approval or consent of any Person, or, if such approval
or consent is required, by Seller and Escrow Stockholders will use their best
efforts to obtain such on or before the Closing Date or within a reasonable
period of time after Closing and deliver to the BCC Parties at or prior to the
Closing.
4.9 EFFECT OF AGREEMENT. The execution and delivery of this Agreement
by each of Seller and each Stockholder and the consummation of the transactions
contemplated hereby will not (a violate any provision of the Articles of
Incorporation or other charter documents or bylaws of Seller; (b) result in any
violation of any Governmental Requirement applicable to any Stockholder, Seller,
the Assets or the Business; (c) conflict with, or result in any breach of, or
default or loss of any right under (or an event or circumstance that, with
notice or the lapse of time, or both, would result in a default), or the
creation of an Encumbrance pursuant to, or cause or permit the acceleration
prior to maturity or "put" right with respect to, any obligation under, any
contract, indenture, mortgage, deed of trust, lease, loan agreement or other
agreement or instrument to which Seller or any Stockholder is a party or to
which any of the Assets or Business are subject; (d) relieve any Person of any
obligation (whether contractual or otherwise) or enable any Person to accelerate
or terminate any such obligation or any right or benefit enjoyed by Seller or to
exercise any right under any agreement in respect of the Assets or the Business;
and (e) require notice to or the consent, authorization, approval, clearance,
waiver or order of any Person (except as may be contemplated by the last
sentence of SECTION 4.8). Except as set forth on Part 4.9 of the Disclosure
Schedule hereto, the execution, delivery and performance of this Agreement by
Seller and each Stockholder will not result in the loss of any governmental
license, franchise or permit possessed by Seller.
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4.10 PROPERTIES, ASSETS AND LEASEHOLD ESTATES.
(a) Set forth on Part 4.10(a) of the Disclosure Schedule is
a description of each item of personal property, excluding inventory, owned
by Seller that had a book value as of the Balance Sheet Date greater than
$10,000. For purposes of this SECTION 4.10, "personal property" excludes
Intellectual Property. Seller has good title to all of its personal property
that is material to Seller's business, results of operations, financial
condition or Assets (including, without limitation, those items of personal
property set forth on Part 4.10(a) of the Disclosure Schedule), free and
clear of all Encumbrances, except for Permitted Encumbrances and those
Encumbrances set forth on Part 4.10(a) of the Disclosure Schedule.
(b) Set forth on Part 4.10(b) of the Disclosure Schedule is
a description of each item of personal property leased by Seller for which
the annual rent payable under the applicable lease or contract exceeds
$10,000. Seller has good title to all the leasehold estates pursuant to which
the personal property set forth on Part 4.10(b) of the Disclosure Schedule is
leased, free and clear of all Encumbrances, except for Permitted Encumbrances
and those Encumbrances set forth on Part 4.10(b) of the Disclosure Schedule.
Seller has not breached any provision of and is not in default (and no event
or circumstance exists that with notice, or the lapse of time or both, would
constitute a default by Seller) under the terms of any lease or other
agreement pursuant to which the personal property set forth on Part 4.10(b)
of the Disclosure Schedule is leased. To the Best Knowledge of Seller and
each Escrow Stockholder, all of such leases or other agreements are in full
force and effect. There are no pending or, to the Best Knowledge of Seller
and each Escrow Stockholder, threatened disputes with respect to any lease or
other agreement pursuant to which the personal property set forth on Part
4.10(b) of the Disclosure Schedule is leased, which would have a Material
Adverse Effect and, to the Best Knowledge of Seller and each Escrow
Stockholder, the lessor thereunder has not breached any provision of and is
not in default (and no event or circumstance exists that with notice, or the
lapse or time or both, would constitute a default by the lessor) under the
terms of any such lease or other agreement.
(c) Seller owns no real property.
(d) Set forth on Part 4.10(d) of the Disclosure Schedule is a
list of all leases of Seller with respect to real property leased by Seller for
which the annual rent payable under the applicable lease or contract exceeds
$10,000. Seller has good and marketable title to all the leasehold estates
pursuant to which the real property set forth on Part 4.10(d) of the Disclosure
Schedule is leased, free and clear of all Encumbrances, except for Permitted
Encumbrances. Seller has not breached any provision of and is not in default
(and no event or circumstance exists that with notice, or the lapse of time or
both, would constitute a default by Seller) under the terms of any lease or
other agreement pursuant to which the real property set forth on Part 4.10(d) of
the Disclosure Schedule is leased. To the Best Knowledge of Seller and each
Escrow Stockholder, all of such leases or other agreements are in full force and
effect. There are no pending or, to the Best Knowledge of Seller and each Escrow
Stockholder, threatened disputes with respect to any lease or other agreement
pursuant to which the real property set forth on Part 4.10(d) of the Disclosure
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Schedule is leased and, to the Best Knowledge of Seller and each Escrow
Stockholder, the lessor thereunder has not breached any provision of and is not
in default (and no event or circumstance exists that with notice, or the lapse
of time or both, would constitute a default by the lessor) under the terms of
any such lease or other agreement.
(e) To the Best Knowledge of Seller and each Escrow
Stockholder, there is no (i0 change contemplated in any applicable law, statute,
ordinance, rule, regulation, order or determination of any Governmental
Authority, (ii) applicable law, statute, ordinance, rule, regulation, order or
determination of any Governmental Authority or any restrictive covenant or deed
restriction affecting the real property described in SECTION 4.10(C) and (D)
hereof, including without limitation any zoning ordinances, building codes,
flood disaster laws, wetlands regulations, health laws or environmental laws,
(iii) judicial or administrative action, (iv) action by adjacent landowners, (v)
administrative action, (vi) natural or artificial conditions on or about the
real property identified in SECTION 4.10(C) and (D) or (vii) significant adverse
fact or condition relating to such real property or its use that would, in each
case, have a Material Adverse Effect upon the Business or the operation or
maintenance of such real property compared to the cost as of the date hereof.
(f) Seller has good title to all personal property, including
equipment and other infrastructure, that will be required to execute and
implement Seller's business plan as presented to the BCC Parties.
4.11 INTELLECTUAL PROPERTY.
(a) Parts 1.61 and 1.69 of the Disclosure Schedule are a
complete list of Software in which Seller either has an ownership interest or
rights/obligations pursuant to an agreement with a third party. Part 1.70 of the
Disclosure Schedule is a complete list of agreements under which Seller has
rights/obligations in respect of Third-Party Software. Part 4.11(a) of the
Disclosure Schedule is a complete list of all Intellectual Property, except as
set forth on Parts 1.61 and 1.69 of the Disclosure Schedule, including but not
limited to (i) all trademarks, service marks and trade names owned or claimed or
used (pursuant to an agreement with a third party or otherwise) by Seller,
together with all U.S., state and foreign registrations thereof and/or
applications therefor, (ii) all U.S and foreign copyright registrations owned or
claimed or used
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(pursuant to an agreement with a third party or otherwise) by Seller and/or
applications therefor, and (iii) all U.S. and foreign patents and applications
therefor on inventions, discoveries, improvements, ideas or know-how owned or
claimed or used (pursuant to an agreement with a third party or otherwise) by
Seller. Seller has made available to BCC Parties correct and complete copies of
all patents, registrations, applications, licenses and agreements and has made
available correct and complete copies of all other written documentation
evidencing ownership and prosecution (if applicable) of each item.
(b) All Software performs as intended in System Documentation
and User Documentation (subject to minor imperfections in the Software that are
standard in the software industry) and is free from defects, viruses or any
other impediment to Purchaser's quiet enjoyment in the operation thereof
(subject to minor imperfections in the Software that are standard in the
software industry).
(c) Seller has developed all Intellectual Property through its
own efforts for its own account and except as set forth in agreements itemized
on Part 4.11(c) of the Disclosure Schedule, owns all right, title and interest
in and to such Intellectual Property free and clear of any security interest,
contract obligation, license, lien, encumbrance, alleged infringement, dispute,
potential dispute, claim or other cloud of title concerning such Intellectual
Property whatsoever. Except as set forth on Part 4.11(c) of the Disclosure
Schedule, Seller has not interfered with, infringed upon, misappropriated or
otherwise come into conflict with any intellectual property rights of third
parties and neither Seller or its directors or officers (or employees
responsible for Intellectual Property matters) have ever received any charge,
complaint, claim, demand or notice alleging such interference, infringement,
misappropriation or violation (including any claims Seller must license or
refrain from using any intellectual property rights of any third party). To the
Best Knowledge of Seller and Escrow Stockholders, Seller will not interfere
with, infringe upon or otherwise come into conflict with any intellectual
property rights of third parties as a result of the operation of its Business as
currently conducted and as proposed to be conducted pursuant to the business
plan presented to the BCC Parties. The Intellectual Property neither infringes
nor is being infringed by any third party proprietary interest, including
(without limitation) any third party patent, copyright, trademark, or trade
secret interest. The Intellectual Property is fully eligible for protection
under applicable law and has not been forfeited, abandoned, lapsed or donated in
any way into the public domain. All of Seller's trade secrets, including source
code, system specifications and other Software Trade Secrets embodied in the
Intellectual Property have been maintained in confidence and, except as set
forth in agreements itemized on Part 4.11(c) of the Disclosure Schedule, are not
known to any third party. All personnel, including employees, agents,
consultants and contractors, who have contributed to or participated in the
conception and development of the Intellectual Property either (i) have been a
party to a work-for-hire relationship with Seller that has accorded Seller full,
effective and exclusive original ownership of all tangible and intangible
property arising with respect to the Intellectual Property or (ii) have executed
appropriate instruments of assignment in favor of Seller as assignee that have
conveyed to Seller full, effective and
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exclusive ownership of all tangible and intangible property thereby arising with
respect to the Intellectual Property. Except for agreements itemized on Part
4.11(c) of the Disclosure Schedule, no agreements or arrangements are in effect
with respect to the development, non-disclosure, marketing, distribution,
licensing or promotion of the Intellectual Property by any independent
contractor, salesperson, distributor, sublicensor or other remarketer or sales
organization.
(d) All Third-Party Software Agreements are freely assignable
to and assumable by Purchaser as set forth herein so as to give Purchaser
exactly the same rights and/or obligations thereunder enjoyed by Seller, without
the requirement of obtaining any consent or approval, giving any prior or
subsequent notice, paying any further royalty or fee to any party thereto or to
any other third party, or performing any duty that has not already been fully
performed by Seller. Each Third-Party Software Agreement is in full force and
effect in accordance with its terms without modification or amendment and
without default by either party thereto, and without dispute by any party as to
any term or condition thereof. To the Best Knowledge of the Seller and each
Escrow Stockholder, there are no facts or documents rendering any Third-Party
Software Agreement unenforceable by Seller or otherwise invalid. To the Best
Knowledge of the Seller and each Escrow Stockholder, there are no obligations,
including payment of money, past due by any party to any Third-Party Software
Agreement. To the Best Knowledge of the Seller and each Escrow Stockholder,
there are no disclosed or undisclosed breaches of warranty, whether or not
within a time period to cure, pertaining to any Third-Party Software Agreement.
To the Best Knowledge of the Seller and each Escrow Stockholder, there is no
condition existing that has or will trigger a right to terminate any Third-Party
Software Agreement. To the Best Knowledge of the Seller and each Escrow
Stockholder, there is no requirement in any Third-Party Software Agreement
requiring a third party to be a signatory to this Agreement. The Third-Party
Software neither infringes nor is being infringed by any third party proprietary
interest, including (without limitation) any third party patent, copyright,
trademark or trade secret interest. Any usage by the Seller or in the Business
of off-the-shelf shrinkwrap and mass-market software is in compliance with the
terms thereof.
(e) The Intellectual Property identified in the Disclosure
Schedule constitutes all Intellectual Property used by Seller or necessary to
conduct the Business in the manner it is being conducted and as currently
contemplated being conducted pursuant to Seller's business plan presented to the
BCC Parties. Each item of Intellectual Property owned or used in the Business
immediately prior to the Effective Time will be owned or available for use by
Purchaser as Surviving Corporation on identical terms and conditions immediately
after the Closing. The Intellectual Property has not been licensed to any Person
or pursuant to any agreement which restricts the ability of Seller or any other
Person to use or license such.
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(f) Without limitation of the foregoing, neither Seller nor
any Escrow Stockholder has infringed or is presently infringing either (i)
United States Patent Number 5,414,762, dated May 9, 1995 (the "Q.SYS
INTERNATIONAL PATENT") or (ii) United States Patent Application Serial Number
09/158,399 filed with the United States Patent and Trademark Office on September
22, 1998 (the "NATIONAL TELEMANAGEMENT CORPORATION PATENT APPLICATION").
4.12 SUITS, ACTIONS AND CLAIMS. Except as set forth in Part 4.12 of the
Disclosure Schedule, (a) there are no suits, actions, claims, inquiries or
investigations by any Person, or any legal, administrative or arbitration
proceedings in which Seller is engaged or which are pending or, to the Best
Knowledge of Seller and each Escrow Stockholder, threatened against or affecting
Seller or any of its properties, Assets or Business, or to which Seller is or
might become a party, or which question the validity or legality of the
transactions contemplated hereby, and (b) there is no outstanding order, writ,
injunction or decree of any Governmental Authority against or affecting Seller
or any of its properties, Assets or Business. Without limiting the foregoing, to
the Best Knowledge of Seller and each Escrow Stockholder, there is no state of
facts or the occurrence of any event forming the basis of any present or
potential claim against Seller.
4.13 LICENSES AND PERMITS; COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS.
Except as set forth in Part 4.13 of the Disclosure Schedule, Seller has all
federal, state, local and foreign governmental licenses and permits necessary to
the conduct of the operations of Seller's business as currently conducted, such
licenses and permits are in full force and effect, no material violations
currently exist in respect of any thereof and no proceeding is pending or, to
the Best Knowledge of Seller and each Escrow Stockholder, threatened to revoke
or limit any thereof. Part 4.13 of the Disclosure Schedule contains a true,
complete and accurate list of (a) all such governmental licenses and permits,
(b) all consents, orders, decrees and other compliance agreements under which
Seller is operating or bound, copies of all of which have been made available to
the BCC Parties, and (c) all material governmental licenses and permits applied
for but not yet received by Seller. Seller has not received and is not aware of
any reports of inspections under the United States Occupational Safety and
Health Act, or under any other applicable federal, state or local health and
safety laws and regulations relating to Seller, the Assets or the operation of
Seller's Business. There are no safety, health, anti-competitive or
discrimination claims that have been made or are pending or, to the Best
Knowledge of Seller and each Escrow Stockholder, that are threatened relating to
the Business or employment practices of Seller. Except as set forth on Part 4.20
of the Disclosure Schedule, Seller has complied with all Governmental
Requirements applicable to its business and all Governmental Requirements with
respect to the distribution and sale of products and services by it.
4.14 AUTHORIZATION.
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(a) Seller has full legal right, power and authority to enter
into and deliver this Agreement, to consummate the transactions set forth herein
and to perform all the terms and conditions hereof to be performed by it. The
execution and delivery of this Agreement by Seller and the performance by it of
the transactions contemplated herein have been duly and validly authorized by
all requisite corporate actions of Seller, and this Agreement has been duly and
validly executed and delivered by Seller and is the legal, valid and binding
obligation of Seller, enforceable against Seller in accordance with the terms of
the Agreement, except as limited by applicable bankruptcy, moratorium,
insolvency or other similar laws affecting generally the rights of creditors or
by principles of equity.
(b) Except as set forth in Part 4.14(b) of the Disclosure
Schedule, immediately subsequent to the Effective Time, no Former Seller
Stockholder or its Affiliate will have any indebtedness outstanding that is
payable to the Surviving Corporation, including such amounts as set forth in
Part 4.14(b) of the Disclosure Schedule as of the date of this Agreement.
Immediately subsequent to the Effective Time, except for this Agreement and any
employment agreements contemplated hereunder to be entered into between the
Surviving Corporation and any Stockholder, there will be no agreements,
contracts, leases, arrangements or other understandings (either written or oral)
between such Stockholder and the Surviving Corporation.
4.15 RECORDS. The books, records and minutes kept by Seller with
respect to the Assets and the Business, including, but not limited to, all
customer files, service agreements, correspondence and historic revenue of
Seller, have been kept properly and contain records of substantially all matters
required to be included therein by any Governmental Requirement or by generally
accepted accounting principles, and such books, records and minutes are true,
materially accurate and substantially complete.
4.16 ENVIRONMENTAL PROTECTION LAWS.
(a) Except as set forth in Part 4.16 of the Disclosure
Schedule, Seller has at all times operated in compliance with all applicable
limitations, restrictions, conditions, standards, prohibitions, requirements and
obligations of Environmental Laws and related orders of any court or other
Governmental Authority.
(b) Except as set forth in Part 4.16 of the Disclosure
Schedule, there are no existing, pending or, to the Best Knowledge of Seller and
each Escrow Stockholder, threatened actions, suits, claims, investigations,
inquiries or proceedings by or before any court or any other Governmental
Authority directed against Seller or its Assets or the Business which pertain or
relate to (i) any remedial obligations under any applicable Environmental Law,
(ii) violations of any Environmental Law, (iii) personal injury or property
damage claims relating to the release of chemicals or Waste Materials or (iv)
response, removal or remedial costs under CERCLA or any similar state law.
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(c) Except as set forth in Part 4.16 of the Disclosure
Schedule, all notices, permits, licenses or similar authorizations required to
be obtained or filed by Seller under all applicable Environmental Laws in
connection with its current and previous operation or use of the Assets, any
other assets or properties currently or previously leased or owned by Seller or
the current and previous conduct of its business have been duly obtained or
filed and are in full force and effect.
(d) Neither Seller nor any Escrow Stockholder has received
notice that any permit, license or similar authorization is to be revoked or
suspended by any Governmental Authority.
(e) Seller does not own or operate any underground storage
tanks.
(f) No portion of the Assets or any other assets or properties
currently or previously leased or owned by Seller is part of a Superfund site
under CERCLA or any similar ranking or listing under any similar state law.
(g) All Waste Materials generated by Seller have been
transported, stored, treated and disposed of by carriers, storage, treatment and
disposal facilities authorized and maintaining valid permits under all
applicable Environmental Laws.
(h) No Person has disposed or released any Waste Materials on
or under the Assets or any other asset or property currently or previously
leased or owned by Seller and Seller has not disposed or released Waste
Materials on or under the Assets or any other asset or property currently or
previously leased or owned by Seller, except in compliance with all
Environmental Laws.
(i) No facts or circumstances exist which could reasonably be
expected to result in any liability to any Person with respect to the current or
past business and operations of Seller, the Assets or any other assets or
properties currently or previously leased or owned by Seller in connection with
(i) any release, transportation or disposal of any Waste Materials, hazardous
substance or solid waste or (ii) action taken or omitted that was not in full
compliance with or was in violation of, any applicable Environmental Law.
4.17 ACCOUNTS RECEIVABLE. All notes and accounts receivable of Seller
that are reflected on the Reference Balance Sheet or that have arisen since the
Balance Sheet Date ("Accounts Receivable") have arisen in the Ordinary Course of
Business. All Accounts Receivable either (a) have been collected or (b) unless
otherwise noted on Part 4.17 of the Disclosure Schedule, are collectible on the
respective due dates thereof, or, if no due date is stated with respect thereto
are collectible in the Ordinary Course of Business, in each case in the
aggregate recorded amounts thereof, less the applicable reserves with respect
thereto reflected on the Reference Balance Sheet. Seller has not
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factored or discounted or agreed to factor or discount any Account Receivable.
The values at which the Accounts Receivable are carried on the Reference Balance
Sheet reflect the accounts receivable valuation policy of Seller which is
consistent with Seller's past practice and in accordance with generally accepted
accounting principles consistently applied. Part 4.17 of the Disclosure Schedule
sets forth a true, correct and complete list of all Accounts Receivable written
off by Seller, in whole or in part, as uncollectible during the two years
preceding the date hereof. Part 4.17 of the Disclosure Schedule also sets forth
a true, correct and complete aging of the Accounts Receivable of Seller as of
the most recent practicable date.
4.18 BROKERS AND FINDERS. No broker or finder has acted for Seller in
connection with this Agreement or the transactions contemplated by this
Agreement and no broker or finder is entitled to any brokerage or finder's fee
or to any commission in respect thereof based in any way on agreements,
arrangements or understandings made by or on behalf of Seller.
4.19 DEPOSITS. Except as set forth on Part 4.19 of the Disclosure
Schedule, Seller does not now hold any deposits or prepayments by third parties
with respect to any of the Assets or the Business ("Deposits").
4.20 WORK ORDERS. Except as set forth on Part 4.20 of the Disclosure
Schedule, there are no outstanding work orders or contracts relating to any
portion of the Assets from or required by any policy of insurance, fire
department, sanitation department, health authority or other Governmental
Authority nor is there any matter under discussion with any such parties or
authorities relating to work orders or contracts.
4.21 CUSTOMER LIST; SUPPLIER LIST.
(a) Part 4.21(a) of the Disclosure Schedule sets forth a true, correct
and complete list of all customers of the Business to which Seller has sold or
provided products or services during the two years immediately preceding March
16, 2000. This list provides an accurate statement of the gross revenues
received from each such customer by the Business during the twelve-month period
ended December 31, 1999. This list also indicates by special designation all
customers on the list with respect to which the Business has not sold or
provided products or services during the three-month period immediately
preceding March 1, 2000.
(b) Part 4.21(b) of the Disclosure Schedule sets forth a true, correct
and complete list of all suppliers of the Business from which Seller has
purchased or otherwise received more than $10,000 worth of products or services
during the two years immediately preceding March 16, 2000. This list provides an
accurate statement of the gross payments to each such supplier by the Business
during the twelve-month period ended December 31, 1999. This list also indicates
by special designation all
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suppliers on the list with respect to which the Business has not purchased or
otherwise received products or services during the three-month period
immediately preceding March 1, 2000.
4.22 NO ROYALTIES. No royalty or similar item or amount is being paid
or is owing by Seller, nor is any such item accruing, with respect to the
operation, ownership or use of the Business or the Assets.
4.23 BANK ACCOUNTS. Part 4.23 of the Disclosure Schedule sets forth a
true and complete list of all bank or financial accounts and safe deposit boxes
of Seller and of the credit and debit balances of such bank and financial
accounts as of the most recent practicable date. Except as set forth in Part
4.23 of the Disclosure Schedule, since the date of the balances set forth on
such list, there have been no payments out of or drafts against any of the
accounts included therein other than routine payments and drafts in the Ordinary
Course of Business, and the balances in such accounts as of the date hereof are
not materially different from those reflected in such list. Part 4.23 of the
Disclosure Schedule also lists all persons having signatory authority over or
access to such bank and financial accounts and safe deposit boxes.
4.24 INSURANCE. Part 4.24 of the Disclosure Schedule sets forth all
existing insurance policies held by Seller relating to the Business, Assets,
employees or agents of Seller. Each such policy is in full force and effect and
is with insurance carriers. There is no dispute with respect to such policies,
and all claims arising from events or circumstances occurring prior to the date
hereof have been paid in full or adequate reserves therefor are recorded in the
Reference Balance Sheet. All retroactive premium adjustments for any period
ended on or before February 29, 2000, under any worker's compensation policy or
any other insurance policies of Seller have been recorded in accordance with
generally accepted accounting principles and are reflected in the Reference
Balance Sheet. To Best Knowledge of Seller and Escrow Stockholders, except for
the policies identified as such on Part 4.24 of the Disclosure Schedule, none of
the policies set forth on Part 4.24 of the Disclosure Schedule will terminate as
a result of the transactions contemplated by this Agreement.
4.25 EMPLOYEE BENEFIT MATTERS. As used in this SECTION 4.25, "Seller"
shall include Seller and any member of a controlled group or affiliated service
group as defined in Sections 414(b), (c), (m) and (o) of the Code of which
Seller is a member.
(a) LIST OF ALL BENEFIT PLANS AND COMPENSATION AGREEMENTS.
Part 4.25(a) of the Disclosure Schedule includes a complete and accurate list of
all employee welfare benefit and employee pension benefit plans as defined in
Sections 3(1), 3(2) and 3(3) of ERISA and all other employee benefit agreements
or arrangements, including, but not limited to, deferred compensation plans,
incentive plans, bonus plans or arrangements, stock option plans, stock purchase
plans, golden parachute agreements, severance pay plans, dependent care plans,
cafeteria plans, employee assistance
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programs, scholarship programs, employment contracts and other similar plans,
agreements and arrangements that are currently in effect or were maintained
within three years of the Closing Date, or have been approved before this date
but are not yet effective, for the benefit of directors, officers, employees, or
former employees (or their beneficiaries) of Seller. Seller is not aware of any
commitment to create any new plan, agreement or arrangement or modify any now
existing. Seller has made available to the BCC Parties, as to each plan,
agreement or arrangement listed in Part 4.25(a) of the Disclosure Schedule, as
applicable, a complete and accurate copy of (i) each plan, agreement or
arrangement listed, (ii) the trust, group annuity contract or other document
which provides the funding for the plan, agreement or arrangement, (iii) the
three most recent annual Form 5500, 990 and 1041 reports, (iv) the most recent
actuarial report or valuation statement, (v) the most current summary plan
description, booklet, or other descriptive written materials, and each summary
of material modifications prepared after the last summary plan description, (vi)
the most recent IRS determination letter and all rulings or determinations
requested from the IRS subsequent to the date of that exemption letter and (vii)
all other correspondence from the IRS or the Department of Labor received which
relates to one or more of the plans, agreements or arrangements. There are no
pending or, to the Best Knowledge of Seller and each Escrow Stockholder,
threatened or anticipated claims (other than routine claims for benefits) by, on
behalf of or against any of the plans disclosed on Part 4.25(a) of the
Disclosure Schedule or their related trusts.
(b) REPRESENTATIONS PERTAINING TO ALL EMPLOYEE BENEFIT PLANS.
Each employee welfare benefit plan and every employee pension benefit plan as
defined in Sections 3(1), 3(2) and 3(3) of ERISA which has been or is sponsored
by, participated in by or contributed to by Seller: (i) is in compliance with
the Code and ERISA, including, but not limited to, all reporting and disclosure
requirements of Part 1 of Subtitle B of Title I of ERISA; (ii) has had the
appropriate Form 5500 filed timely for each year of its existence; (iii) has not
engaged in any transaction described in Sections 406 or 407 of ERISA or Section
4975 of the Code unless exempt under Section 408 of ERISA or Section 4975 of the
Code, as applicable; (iv) has at all times complied with the bonding
requirements of Section 412 of ERISA; (v) has no issue pending (other than the
payment of benefits in the normal course) nor any issue resolved adversely to
Seller which may subject Seller to the payment of a penalty, interest, tax or
other amount and (vi) can be unilaterally terminated or amended on no more than
90 days notice, and (vii) all contributions or other amounts payable by Seller
as of the Closing Date with respect to each employee welfare benefit plan and
each employee pension benefit plan, other than an employee pension benefit plan
which is subject to Section 412 of the Code, have either been paid or accrued in
the Reference Balance Sheet, a copy of which has been furnished to the BCC
Parties. No notice has been received by Seller of an increase or proposed
increase in the cost of any employee welfare benefit or employee pension benefit
plan or other employee benefit agreement or arrangement listed in Part 4.25(a)
of the Disclosure Schedule.
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(c) ADDITIONAL REPRESENTATIONS PERTAINING TO CERTAIN EMPLOYEE
WELFARE BENEFIT PLANS. All voluntary employee benefit associations have been
submitted to and approved as exempt from federal income tax under Section
501(c)(9) of the Code by the IRS or the applicable submission period will not
have ended prior to the Closing. No plan, arrangement or agreement with any one
or more employees will cause Seller to have liability for severance pay as a
result of the Merger. Except as listed in Part 4.25(a) of the Disclosure
Schedule, Seller does not provide employee benefits, including without
limitation, death, post-retirement medical or health coverage (whether or not
insured) or contribute to or maintain any employee benefit plan which provides
for benefit coverage following termination of employment, nor has it made any
representations, agreements, covenants or commitments to provide that coverage,
except (i) as is required by Section 4980B(f) of the Code or other applicable
statute, (ii) death benefits or retirement benefits under any employee pension
benefit plan as defined in Section 3(2) of ERISA, (iii) benefits the full cost
of which is borne by the current or former employee (or his beneficiary), or
(iv) deferred compensation benefits which have been accrued as liabilities on
the books of Seller and disclosed on its Financial Statements. All group health
plans maintained by Seller have been operated in compliance with Section
4980B(f) of the Code.
(d) ADDITIONAL REPRESENTATIONS PERTAINING TO CERTAIN EMPLOYEE
PENSION BENEFIT PLANS. All employee pension benefit plans as defined in Section
3(2) of ERISA which are intended to qualify under Section 401(a) of the Code
have been submitted to and approved as qualifying under Section 401(a) of the
Code by the IRS or the applicable remedial amendment period will not have ended
prior to the Closing. No facts have occurred which if known by the IRS could
cause disqualification of those plans. All employee pension benefit plans to
which Section 412 of the Code is applicable have fully complied with the funding
requirements of that Section and there is no accumulated funding deficiency as
defined in Section 302(a)(2) of ERISA (whether or not waived) in any one or more
of those plans. Seller has paid all premiums (any interest, charges and
penalties for late payment, if any applicable) due the Pension Benefit Guaranty
Corporation (the "PBGC") with respect to each employee pension benefit plan for
which premiums are required. No facts are known by Seller which will materially
increase those premiums within three years of the Closing Date. Except as set
forth on Part 4.25(d) of the Disclosure Schedule, no employee pension benefit
plan maintained by Seller has been terminated under circumstances which would
result in liability to the PBGC. There has been no "reportable event" (as
defined in Section 4043(b) of ERISA and the regulations under that Section) with
respect to any employee pension benefit plan subject to Title IV of ERISA.
Seller has not ceased operations at a facility so as to become subject to the
provisions of Section 4062(e) of ERISA, withdrawn as a substantial employer so
as to become subject to the provisions of Section 4063 of ERISA or ceased making
contributions on or before the date of the Closing to any employee pension
benefit plan subject to Section 4064(a) of ERISA to
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which Seller made contributions at any time during the six years prior to the
date of Closing. Seller has not made a complete or partial withdrawal from a
multiemployer plan (as defined in Section 3(37) of ERISA) so as to incur
withdrawal liability as defined in Section 4201 of ERISA. The aggregate
withdrawal liability of Seller, computed as if a complete withdrawal by Seller
had occurred under each multiemployer pension plan as of the date hereof, would
not exceed $10,000.
(e) Except as disclosed in Part 4.25(e) of the Disclosure
Schedule, the transactions contemplated by this Agreement will not accelerate
the time of payment or vesting, or increase the amount, of compensation due any
director, officer or employee, consultant or former director, officer,
consultant or employee (including any beneficiary) from Seller. Except as
disclosed in Part 4.25(e) of the Disclosure Schedule, Seller is not obligated to
any employee, officer, or consultant for any deferred salary, bonus or other
compensation.
4.26 WARRANTIES AND PRODUCT LIABILITY.
(a) Except for (i) warranties implied by law and (ii)
warranties disclosed on Part 4.26 of the Disclosure Schedule, Seller has not
given or made any warranties either express or implied in connection with the
sale or rental of goods or services, including, without limitation, warranties
covering the customer's consequential damages. To the Best Knowledge of Seller
and each Escrow Stockholder, and except as set forth in Part 4.26 of the
Disclosure Schedule, there is no state of facts or occurrence of any event
forming the basis of any present claim against Seller with respect to warranties
relating to products produced, manufactured, marketed, sold, transported or
distributed by Seller or services rendered or allegedly offered by or on behalf
of Seller that could reasonably be expected to materially exceed the reserves
therefor.
4.27 SECURITIES LAWS MATTERS.
(a) The Escrow Stockholders represent and warrant that (i)
such Escrow Stockholder has business knowledge and experience, such experience
being based on actual participation therein, (ii) such Escrow Stockholder is
capable of evaluating the merits and risks of an investment in the Merger
Consideration and the suitability thereof as an investment therefor, (iii) the
Merger Consideration to be acquired by such Escrow Stockholder in connection
with this Agreement will be acquired solely for investment and not with a view
toward resale or redistribution in violation of the securities laws, (iv) in
connection with the transactions contemplated hereby, no assurances have been
made concerning the future results of the BCC Parties or either of them or as to
the value of the Stock Consideration, (v) each Escrow Stockholder is an
"accredited investor," as that term is defined in
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Regulation D promulgated by the SEC pursuant to the Securities Act, as that term
is defined in Regulation D promulgated by the SEC pursuant to the Securities
Act, and (vi) each Escrow Stockholder represents and warrants that such Escrow
Stockholder has such knowledge and experience in financial and business matters
that he is capable of evaluating the merits and risks of the transactions
contemplated and contained herein. Each Escrow Stockholder understands that none
of the BCC Parties is under any obligation to file a registration statement or
to take any other action under the securities laws with respect to the Stock
Consideration except as contemplated by SECTION 8.12.
(b) Each Escrow Stockholder is fully aware (i) of the
circumstances under which such Escrow Stockholder is required to hold the
securities, (ii) of the limitations on the transfer or disposition of the
securities, (iii) that the securities must be held indefinitely unless the
transfer thereof is registered under the securities laws or an exemption from
registration is available and (iv) that no exemption from registration is likely
to become available for at least one year from the date of acquisition of the
securities. Such Escrow Stockholder has been advised as to the provisions of
Rules 144 and 145 as promulgated by the SEC under the Securities Act and has
been advised of the applicable limitations thereof. Such Escrow Stockholder
acknowledges that the BCC Parties are relying upon the truth and accuracy of the
representations and warranties in this SECTION 4.27 by such Escrow Stockholder
in consummating the transactions contemplated by this Agreement without
registering the securities under the securities laws.
(c) Each Escrow Stockholder has been furnished with BCC's
Annual Report on Form 10-K for the year ended September 30, 1999, BCC's
Quarterly Report on Form 10-Q for the quarter ended December 31, 1999, BCC's
proxy statement with respect to the Annual Meeting of Stockholders held on March
22, 2000, BCC's Current Reports on Form 8-K filed February 25, 2000, and BCC's
Registration Statement on Form S-3 dated January 28, 2000 (such documents
collectively referred to herein as the "SEC Documents"). Such Escrow Stockholder
has been furnished with the complete financial statements of BCC for the fiscal
years ended September 30, 1998 and 1999, and the three months ended December 31,
1999. The BCC Parties have made available to such Escrow Stockholder the
opportunity to ask questions and receive answers concerning the terms and
conditions of the transactions contemplated by this Agreement and to obtain any
additional information which they possess or could reasonably acquire for the
purpose of verifying the accuracy of information furnished to such Escrow
Stockholder as set forth herein or for the purpose of considering the
transactions contemplated hereby. BCC has offered to make available to such
Escrow Stockholder upon request at any time all exhibits filed by BCC with the
Commission as part of any of the reports filed therewith.
4.28 NO UNTRUE STATEMENTS. The statements, representations and
warranties of Seller and each Escrow Stockholder set forth in this Agreement and
the Disclosure Schedule and in all other documents and information made
available to the BCC
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Parties, or either of them, and their representatives in connection herewith do
not include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements, representations and warranties
made not misleading. To the Best Knowledge of Seller and each Escrow
Stockholder, there is no fact or matter that is not disclosed to the BCC Parties
in this Agreement or the Disclosure Schedule that would materially and adversely
affect or, so far as Seller or any Escrow Stockholder can now reasonably
foresee, could materially and adversely affect the condition (financial or
otherwise) of any of the Assets or the Business or the ability of Seller or any
Stockholder to perform their respective obligations under this Agreement.
4.A REPRESENTATIONS AND WARRANTIES OF ESCROW STOCKHOLDERS AND OTHER
STOCKHOLDERS. Each Other Stockholder and Escrow Stockholder represents and
warrants to BCC Parties as follows:
4A.1 AUTHORITY. (a) INDIVIDUAL. Each Stockholder that is an individual
(an "Individual Stockholder") has full legal right, power and authority to enter
into and deliver this Agreement, the Affiliate Letter (as defined herein) and
the other agreements contemplated hereby, to perform all the terms and
conditions to be performed by such Individual Stockholder under this Agreement
and each of the other agreements contemplated hereby and to consummate the
transactions contemplated hereby and thereby. This Agreement, the Affiliate
Letter (as defined herein), and the other agreements contemplated hereby have
been duly and validly executed and delivered by such Individual Stockholder and
are the legal, valid and binding obligation of such Individual Stockholder,
enforceable against such Individual Stockholder in accordance with the terms of
this Agreement, the Affiliate Letter (as defined herein) and the other
agreements contemplated hereby, except as limited by applicable bankruptcy,
moratorium, insolvency or similar laws affecting generally the rights of
creditors or by principles of equity.
(b) TRUSTS, ESTATES. The trustee or executor of each Stockholder that
is a trust or estate has full legal right, power and authority to enter into and
deliver this Agreement and other agreements contemplated hereby and to perform
fully its obligations under this Agreement and the other agreements contemplated
hereby. The execution and delivery of this Agreement and the agreements
contemplated hereby and the consummation by the trust or estate, as the case may
be, of the transactions contemplated hereby have been duly authorized by all
necessary action. This Agreement and the other agreements contemplated hereby
are the legal, valid and binding obligation of each such Stockholder enforceable
against each in accordance with its terms, except as limited by applicable
bankruptcy, moratorium, insolvency or similar laws affecting generally the
rights of creditors or by principles of equity.
4A.2 CONSENTS. Except for filings under the HSR Act, no consents,
approvals or authorizations of any Person (other than those which have been
obtained) are
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required on the part of such Stockholder in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby.
4A.3 LITIGATION. There is no legal, judicial, administrative,
governmental, arbitration or other action or proceeding pending or, to the Best
Knowledge of such Stockholder, threatened against such Stockholder that could
affect the ability of such Stockholder to perform such Stockholder's obligations
under this Agreement.
4A.4 STOCK OWNERSHIP. Such Stockholder is the record and beneficial
owner of the shares of Seller Stock as described in Part 4.2(a) of the
Disclosure Schedule hereto, and has full authority to vote all of such shares as
contemplated by this Agreement and the shares of Seller Stock owned by such
Stockholder as set forth in Part 4.2(a) of the Disclosure Schedule hereto are
owned free and clear of all Encumbrances and restrictive agreements, including,
without limitation, voting trust or stockholders agreements. Such Stockholder
has full authority to transfer pursuant to the Merger all of the shares of
Seller Stock owned by such Stockholder free and clear of all Encumbrances and
restrictive agreements, including without limitation, voting trust or
stockholders agreements.
4A.5 BROKERS AND FINDERS. No broker or finder has acted for any
Stockholder in connection with this Agreement or the transactions contemplated
by this Agreement and no broker or finder is entitled to any brokerage or
finder's fee or to any commission in respect thereof based in any way on
agreements, arrangements or understandings made by or on behalf of such
Stockholder.
4A.6 SECURITIES LAWS MATTERS.
(a) Except as contemplated by SECTION 8.12 hereof, each
Stockholder recognizes and understands that the Merger Consideration to be
issued to each Stockholder pursuant to this Agreement (the "securities") will
not be registered under the Securities Act, or under the securities laws of any
state (the "securities laws"). The securities are not being so registered in
reliance upon exemptions from the Securities Act and the securities laws which
are predicated, in part, on the representations, warranties and agreements of
each Stockholder contained herein and in investor questionnaires required
hereunder. Each Stockholders' residence and domicile, in the case of each
natural person, is in the State set forth opposite his or her name on Part 4A.6
of the Disclosure Schedule, and the principal office of each Stockholder that is
not a natural person is in the State set forth opposite its name on Part 4A.6 of
the Disclosure Schedule. Each Stockholder understands that no BCC Party is under
any obligation to file a registration statement or take any other action under
the securities laws with respect to the Merger Consideration except as
contemplated in SECTION 8.12.
(b) Each Stockholder agrees that the stock certificates
representing such Stockholder's Merger Consideration to be acquired pursuant to
this Agreement
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will be imprinted with the following legend, the terms of which are specifically
agreed to:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER ANY
APPLICABLE STATE SECURITIES LAWS AND ARE "RESTRICTED SECURITIES" AS
THAT TERM IS DEFINED IN RULE 144 UNDER THE ACT. NEITHER THE SECURITIES
NOR ANY INTEREST THEREIN MAY BE OFFERED FOR SALE, SOLD, TRANSFERRED,
PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND SUCH STATE SECURITIES LAWS OR
AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH LAWS WHICH, IN
THE OPINION OF COUNSEL FOR THE HOLDER, WHICH COUNSEL AND OPINION ARE
REASONABLY SATISFACTORY TO THE COUNSEL FOR THIS CORPORATION, IS
AVAILABLE.
Each Stockholder understands and agrees that appropriate stop transfer notations
will be placed in the records of BCC and with its transfer agent in respect of
the securities which are to be issued to each Stockholder pursuant to this
Agreement.
5. REPRESENTATIONS AND WARRANTIES OF THE BCC PARTIES. The BCC Parties
jointly and severally represent and warrant to the Stockholders as follows:
5.1 PURCHASER INCORPORATION. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the requisite corporate power to own and operate its assets and to carry
on its business as presently conducted.
5.2 BCC INCORPORATION. BCC is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the requisite corporate power to own and operate its assets and to carry on its
business as presently conducted.
5.3 AUTHORIZATION. The BCC Parties have full legal right, power and
authority, corporate and otherwise, to enter into this Agreement and to
consummate the transactions set forth herein and to perform all the terms and
conditions hereof to be performed by them. The execution and delivery of this
Agreement and the performance by the BCC Parties of the transactions
contemplated herein have been duly authorized by all requisite corporate action
of the BCC Parties and is the legal, valid and binding obligation of each of
them, enforceable against each of them in accordance with its terms, except as
limited by applicable bankruptcy, moratorium, insolvency or similar laws
affecting generally the rights of creditors or by principles of equity.
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5.4 BROKERS AND FINDERS. No broker or finder has acted for the BCC
Parties in connection with this Agreement or the transactions contemplated by
this Agreement and no broker or finder is entitled to any brokerage or finder's
fee or to any commission in respect thereof based in any way on agreements,
arrangements or understandings made by or on behalf of the BCC Parties.
5.5 AUTHORIZATION OF STOCK CONSIDERATION. BCC has taken all necessary
action to permit it to issue the number of shares of Stock Consideration
required to be issued pursuant to the terms of this Agreement. The shares of
Stock Consideration issued pursuant to the terms of this Agreement will, when
issued, be validly issued, fully paid and nonassessable and not subject to
preemptive rights. The Stock Consideration issuable pursuant to this Agreement
will, when issued, be listed on the Nasdaq National Market.
5.6 SEC DOCUMENTS. Since March 1, 1997, BCC has filed all reports,
registration statements and other filings, together with any amendment required
to be made, that it has been required to file with the SEC under the Securities
Act and Exchange Act. BCC has made available to Seller and each Escrow
Stockholder or will make available to each Other Stockholder its SEC Documents.
As of their respective dates, the SEC Documents complied in all material
respects with the requirements of the Exchange Act and the rules and regulations
of the Commission promulgated thereunder applicable to such SEC Documents, and
none of the SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The consolidated financial statements of BCC
included in the SEC Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the Commission with respect thereto, have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except as may be indicated in the notes thereto) and
fairly present the consolidated financial position of BCC and its consolidated
subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (except in the case of
interim period financial information for normal year-end adjustments).
5.7 NO VIOLATION. Neither the execution, delivery or performance of
this Agreement, nor the consummation of the Merger and the other transactions
contemplated hereby:
(a) violates any law, order, writ, judgment, injunction,
award, decree, rule, statute, ordinance or regulation applicable to any BCC
Party;
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(b) conflicts with, results in a breach or termination of any
provision of, causes the acceleration of the maturity of any debt or obligation
pursuant to, constitutes a default (or gives rise to any right of termination,
cancellation or acceleration) under, or results in the creation of any
Encumbrance upon any of the assets of any BCC Party pursuant to, any terms,
conditions or provisions of any note, license, instrument, indenture, mortgage,
deed of trust or other agreement or understanding or any other restriction of
any kind or character to which any BCC Party is a party or by which any of their
respective assets are subject or bound, except, in each case, those that would
not have a Material Adverse Effect on any BCC Party; or
(c) conflicts with or results in any breach of any provision
of the Certificate of Incorporation or Bylaws of any BCC Party.
5.8 CONSENTS. Other than the filing of a certificate of merger with the
Secretary of State of Delaware and of articles of merger with the Secretary of
State of Texas and any filing required under HSR, no consent, approval or
authorization of, or designation, declaration or filing with, any Person on the
part of the BCC Parties is required in connection with the valid execution and
delivery of this Agreement or the Merger, or the consummation of any other
transaction contemplated by this Agreement.
5.9 CERTAIN PROCEEDINGS. There is no pending litigation or other
proceeding that has been commenced against any BCC Party and that challenges, or
may have the effect of preventing, delaying, making illegal or otherwise
interfering with, the Merger or other transactions contemplated hereby.
6. NATURE OF STATEMENTS AND SURVIVAL OF INDEMNIFICATIONS, GUARANTEES,
REPRESENTATIONS AND WARRANTIES OF SELLER, THE STOCKHOLDERS AND BCC PARTIES.
(a) All statements of fact contained in this Agreement or in
any written statement (including financial statements), certificate, schedule or
other document delivered by or on behalf of Seller or any Stockholder pursuant
to this Agreement or in connection with the transactions contemplated hereby
shall be deemed representations and warranties of Seller and the Stockholders
hereunder. All indemnifications, representations and warranties made by Seller
and/or any Stockholder hereunder or pursuant hereto or in connection with the
transactions contemplated hereby shall survive the Effective Time regardless of
any investigation at any time made by or on behalf of the BCC Parties. The
covenants and agreements made by Seller and/or any Stockholder hereunder or
pursuant hereto or in connection with the transactions contemplated hereby shall
continue until all obligations with respect thereto shall have been performed or
satisfied or shall have been terminated in accordance with their terms.
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(b) All statements of fact contained in the Agreement or in
any written statement (including financial statements), certificate, schedule or
other document delivered by or on behalf of the BCC Parties pursuant to this
Agreement or in connection with the transactions contemplated hereby shall be
deemed representations and warranties of the BCC Parties hereunder. All
indemnifications, representations and warranties made by the BCC Parties
hereunder or pursuant hereto or in connection with the transactions contemplated
hereby shall survive the Effective Time regardless of any investigation at any
time made by or on behalf of the Stockholders. The covenants and agreements made
by the BCC Parties hereunder or pursuant hereto or in connection with the
transactions contemplated hereby shall continue until all obligations with
respect thereto shall have been performed or satisfied or shall have been
terminated in accordance with their terms.
7.. TAX TREATMENT.
Seller, the Stockholders and the BCC Parties intend that the
transactions contemplated hereunder constitute a tax-free reorganization (a
"Reorganization") for federal income tax purposes under Section 368 of the Code,
and agree to treat and report for federal income tax purposes the transactions
hereunder as a Reorganization. This Agreement shall be considered by the parties
as a plan of reorganization and shall be construed in a manner to result in
treatment of the transactions hereunder as a Reorganization for federal income
tax purposes.
8.. PRE-CLOSING COVENANTS.
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing:
8.1 GENERAL. Each of the Parties will use his or its best efforts to
take all action and to do all things necessary, proper, or advisable in order to
consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing conditions set forth in
SECTION 9).
8.2 NOTICES AND CONSENTS. Each of the Parties, as promptly as
practicable, (i) will make, or cause to be made, all filings and submissions
required under laws, rules and regulations applicable to it, or to its
Subsidiaries and Affiliates, as may be required for it to consummate the
transactions contemplated hereby; (ii) will use their best efforts to obtain, or
cause to be obtained, all authorizations, approvals, consents and waivers from
all Persons and Governmental Authorities necessary to be obtained by each of
them, or any of their respective Subsidiaries or Affiliates, in order for each
of them, respectively, so to consummate such transactions; and (iii) will use
their respective best efforts to take, or cause to be taken, all other actions
necessary, proper or advisable in order for each of them to fulfill their
respective obligations hereunder.
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8.3 OPERATION OF BUSINESS. Except as contemplated by this Agreement or
as set forth in the Disclosure Schedule, during the period from the date of this
Agreement to the Effective Time, (a) Seller will conduct its operations
according to its Ordinary Course of Business and consistent with past practice,
(b) Seller will not enter into any material transaction other than in the
Ordinary Course of Business and consistent with past practice, and (c) to the
extent consistent with the foregoing, with no less diligence and effort than
would be applied in the absence of this Agreement, Seller will seek to preserve
intact its current business organizations, keep available the services of its
current officers and employees and preserve its relationships with customers,
suppliers and others having business dealings with it with the objective that
their goodwill and ongoing businesses shall be unimpaired at the Effective Time.
Without limiting the generality of the foregoing, and except as otherwise
permitted in this Agreement, prior to the Effective Time, Seller will not,
without the prior written consent of BCC:
(a) Except for the issuance of shares of Seller Stock to these
parties listed and in the amounts listed on the attached Part 8.3(a) of
the Disclosure Schedule upon the exercise of certain Rights Against
Seller Stock, issue, deliver, sell, dispose of, pledge or otherwise
encumber, or authorize or propose the issuance, delivery, sale,
disposition or pledge or other Encumbrance of (i) any additional shares
of its capital stock of any class (including the Seller Stock), or any
securities or rights convertible into, exchangeable for or evidencing
the right to subscribe for any shares of its capital stock, or any
rights, warrants, options, calls, commitments or any other agreements
of any character to purchase or acquire any shares of its capital stock
or any securities or rights convertible into, exchangeable for or
evidencing the right to subscribe for any shares of its capital stock,
or (ii) any other securities in respect of, in lieu of or in
substitution for Seller Stock outstanding on the date hereof;
(b) Except for the extinguishment or conversion of Rights
Against Seller Stock prior to Closing, redeem, purchase or otherwise
acquire, or propose to redeem, purchase or otherwise acquire, any of
its outstanding securities (including the Seller Stock);
(c) split, combine, subdivide or reclassify any shares of its
capital stock or declare, set aside for payment or pay any dividend, or
make any other actual, constructive or deemed distribution in respect
of any shares of its capital stock or otherwise make any payments to
the Seller's Stockholders in their capacity as such;
(d) (i) grant any increases in the compensation of any of its
directors, officers or key employees, (ii) pay or agree to pay any
pension, retirement allowance or other employee benefit not required or
contemplated by any
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employee benefit plan as in effect on the date hereof to any such
director, officer or key employee, whether past or present, (iii) enter
into any new, or amend any existing, employment agreement with any such
director, officer or key employee, (iv) enter into any new, or amend
any existing, severance agreement with any such director, officer or
key employee, or (v) except as may be required to comply with
applicable law, amend any existing, or become obligated under any new,
employee benefit plan;
(e) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or
other reorganization of Seller (other than the Merger);
(f) make any acquisition, by means of merger, consolidation or
otherwise, of (i) any direct or indirect ownership interest in or
assets comprising any business enterprise or operation or (ii) except
in the Ordinary Course of Business and consistent with past practice,
any other assets in excess of $10,000;
(g) adopt any amendments to its charter or Bylaws;
(h) incur any indebtedness for borrowed money or guarantee any
such indebtedness except for drawings not to exceed $100,000 in the
aggregate between execution of this Agreement and the Effective Time
under Seller's existing credit agreements in the Ordinary Course of
Business consistent with past practice or make any loans, advances or
capital contributions to, or investments in, any other Person;
(i) engage in the conduct of any business the nature of which
is different than the business Seller is currently engaged in;
(j) enter into any agreement providing for acceleration of
payment or performance or other consequence as a result of a change of
control of Seller or its Subsidiaries;
(k) enter into any contract, arrangement or understanding
requiring the purchase of equipment, materials, supplies or services
over a period greater than 12 months and for the expenditure of greater
than $10,000 per year which is not cancelable without penalty on 30
days' or less notice; or
(l) authorize or announce an intention to do any of the
foregoing, or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
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8.4 FULL ACCESS. The Seller and the Stockholders will, and each
Stockholder will cause the Seller to, permit representatives of the BCC Parties
and its financing parties to have full access at all reasonable times, and in a
manner so as not to interfere with the normal Business operations of the Seller,
to all premises, properties, personnel, books, records (including Tax records
and the workpapers of the independent accountants for the Seller), contracts and
documents of or pertaining to the Seller.
8.5 NOTICE OF DEVELOPMENTS. At all times prior to the Closing Date,
Seller and each Stockholder shall promptly give written notice to Purchaser of,
to the extent they have Knowledge of such events, (i) any fact or circumstances
or the occurrence of any event or the failure of any event to occur, which will
or may result in, (x) a Material Adverse Effect on the Stockholders', or
Seller's ability to consummate the transactions contemplated hereby or by the
agreements to be entered into in connection therewith or to satisfy its
obligations hereunder, or (y) a breach of any representation or warranty made by
any Stockholder or Seller in this Agreement or in any agreements to be entered
into in connection therewith, if such representation and warranty had been made
as of the time of the occurrence, existence or discovery of such fact,
circumstance or occurrence, or such fact or circumstance had occurred or arisen
or existed on or prior to the date of this Agreement, (ii) any failure by a
Stockholder or Seller to comply with any covenant, condition or agreement
contained in this Agreement, (iii) any complaints, investigations or hearings
(or communications indicating that the same may be contemplated) of any
Governmental Authority with respect to this Agreement, the business of the
Seller or the transactions contemplated hereby or by the agreements to be
entered into in connection therewith, (iv) the institution or the threat of
institution of any litigation or similar action with respect to this Agreement,
the business of the Seller, or the consummation of the transactions contemplated
hereby and (v) the occurrence of any event which will or may result in the
failure to satisfy any condition set forth in ARTICLE 9. During the period from
the date of this Agreement to the Closing Date, the Stockholders and Seller will
cause one or more representative to confer on a regular basis with
representatives of Purchaser to report on the general status of the ongoing
operations of the business of the Seller. No notification given to Purchaser
pursuant to this SECTION 8.5 shall limit or otherwise affect any of the
representations, warranties, covenants or obligations of Stockholders or Seller
contained in this Agreement.
8.6 EXCLUSIVITY.
(a) No Stockholder will, or cause or permit Seller to, (i)
solicit, initiate or encourage the submission, making or announcement of any
proposal or offer from any Person relating to a Business Combination or take any
action that could reasonably be expected to lead to a Business Combination or
(ii) participate in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or facilitate in any
other manner any effort or attempt by any Person to do or seek a
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Business Combination. Each Stockholder will notify BCC immediately if any Person
makes any proposal, offer, inquiry or contact with respect to any of the
foregoing. Each Stockholder and Seller, as applicable, shall immediately cease
and cause to be terminated any existing discussions with any Person that relate
to any Business Combination. Without limiting the generality of the foregoing,
each Stockholder acknowledges and agrees that any violation of any of the
restrictions set forth in the preceding sentence by Seller or any Stockholder,
any Affiliate or representative of Seller or any Stockholder, whether or not
such Affiliate or representative purports to act on behalf of any Stockholder or
the Seller, shall be deemed to constitute a breach of this SECTION 8.6 by the
Stockholders.
(b) The Parties hereto recognize and acknowledge that a breach
by any Stockholder or Seller of this SECTION 8.6 will cause irreparable and
material loss and damage to BCC as to which it will not have an adequate remedy
at law or in damages. Accordingly, each Party acknowledges and agrees that the
issuance of an injunction or other equitable remedy is an appropriate remedy for
any such breach. In addition, in the event of any breach of the foregoing which
results in Business Combination with a Person other than BCC, Seller and the
Stockholders shall promptly reimburse BCC for the reasonable expenses incurred
by BCC in connection with the transactions contemplated by this Agreement.
8.7 DISCLOSURE SCHEDULE. From time to time prior to the Closing, Seller
and the Stockholders will promptly supplement or amend the Disclosure Schedule
hereto with respect to any matter hereafter arising which, if existing or
occurring at the date of this Agreement, would have been required to be set
forth or described in such Disclosure Schedule. No supplement or amendment of
the Disclosure Schedule made pursuant to this Section shall be deemed to cure
any breach of, affect or otherwise diminish any representation or warranty made
in this Agreement unless BCC specifically agrees thereto in writing.
8.8 VOTING OF SELLER STOCK. Until this Agreement has been terminated
under ARTICLE 15, each Stockholder agrees to vote all shares of Seller Stock
held by him or it in favor of the approval of this Agreement and the
transactions contemplated hereby and not to exercise any dissenters' rights he
or it may have under Texas law. Each Escrow Stockholder hereby grants to the BCC
Parties for a period commencing on the date hereof an continuing so long as this
Agreement is in effect, an irrevocable proxy, which is coupled with an interest,
to vote such shares of Seller Stock held by it to approve this Agreement and the
transaction contemplated hereby.
8.9 ESCROW AGREEMENTS. The Escrow Stockholders shall execute and
deliver the Earnout Escrow Agreement (the "Earnout Escrow Agreement") in
substantially the form attached hereto as EXHIBIT A.1 and the Indemnity Escrow
Agreement substantially in the form attached hereto as EXHIBIT A.2.
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8.10 TERMINATION OF CONTRACTS. The contracts, agreements and other
instruments listed on Part 8.10 of the Disclosure Schedule shall have been duly
and validly terminated without any liability on the part of Seller, and Seller
and Escrow Stockholders shall have delivered to the BCC Parties at Closing a
certificate to such effect.
8.11 AFFILIATE LETTERS. Prior to the Closing Date, Seller shall
identify to the BCC Parties all persons who, at the time of the vote of the
Seller's Stockholders on the Merger, may be "affiliates" of the Seller within
the meaning of Rule 145 under the Securities Act. The Seller shall use best
efforts to provide the Purchaser with such information as the BCC Parties shall
reasonably request for purposes of making its own determination of persons who
may be deemed to be affiliates of the Seller. The Seller shall use best efforts
to deliver to the BCC Parties prior to the Closing Date a letter from each of
the affiliates specified by the BCC Parties in substantially the form attached
hereto as EXHIBIT E (an "Affiliate Letter"), and each Person who is identified
as an affiliate by the Seller and the BCC Parties has delivered, or agrees to
deliver to the BCC Parties prior to the Closing Date, an Affiliate Letter.
8.12 REGISTRATION RIGHTS AGREEMENT; NO TRANSFERS BEFORE CLOSING.
(a) At the Closing, BCC and the Stockholders shall execute and
deliver a Registration Rights Agreement in substantially the form attached
hereto as EXHIBIT D pursuant to which BCC agrees to prepare and file a
registration statement on Form S-3 covering 20% of the BCC Stock issued to each
of the Stockholders as of the Effective Time as the Merger Consideration.
(b) Each Stockholder shall execute, acknowledge and deliver
(or cause to be executed, acknowledged and delivered), such agreements and other
instruments (including written consents) and shall take (or cause to be taken)
such other action as may be necessary or appropriate to cause the Seller to
comply with its covenants and agreements set forth in this Agreement and to
implement and carry into effect the transactions contemplated by this Agreement
prior to the earlier of the Effective Time or the termination of this Agreement
as provided for herein. Each of the Stockholders agrees that such Stockholder
will not contract to sell, sell, encumber or otherwise transfer or dispose of
any shares of Seller Stock or any interest therein, or grant any option or other
right in respect thereof, or grant any voting rights with respect thereto,
without the prior written consent of Seller and the BCC Parties.
8.13 RELEASE.
(a) As of the Effective Time, each of the Stockholders does
hereby for itself and its Affiliates and for himself or his heirs, executors,
administrators and legal representatives remise, release, acquit and forever
discharge the Seller and its respective
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Affiliates, partners, officers, directors, controlling Persons or entities,
employees, attorneys and successors and assigns of and from any and all claims
demands, liabilities, responsibilities, disputes, causes of action and
obligations of every nature whatsoever, liquidated or unliquidated, known or
unknown, matured or unmatured, fixed or contingent, which each of such
Stockholders now has, owns or holds or has at any time previously had, owned or
held against the Seller, including without limitation all liabilities created as
a result of the negligence, gross negligence and willful acts of the Seller and
its employees and agents, existing as of the Effective Time or relating to any
matter that occurred on or prior to the Effective Time; provided, however, that
any claims, liabilities, debts or causes of action that may arise in the
connection with the failure of any of the parties hereto to perform any of their
obligations hereunder or under any other agreement relating to the transactions
contemplated hereby or from any breaches by any of them of any representations
or warranties herein or in connection with any of such other agreements shall
not be released or discharged pursuant to this Agreement.
(b) Each of the Stockholders represents and warrants that he
has not previously assigned or transferred, or purported to assign or transfer,
to any Person or entity whatsoever all or any part of the claims, demands,
liabilities, responsibilities, disputes, causes of action or obligations
released herein. Each of the Stockholders covenants and agrees that he will not
assign or transfer to any Person or entity whatsoever all or any part of the
claims, demands, liabilities, responsibilities, disputes, causes of action or
obligations to be released herein. Each of the Stockholders represents and
warrants that Stockholder has read and understands all of the provisions of this
SECTION 8.13.
9. CONDITIONS TO OBLIGATION TO CLOSE.
9.1 CONDITIONS TO OBLIGATION OF THE BCC PARTIES. The obligation of the
BCC Parties to consummate the transactions to be performed by them in connection
with the Closing is subject to satisfaction of the following conditions:
(a) all representations and warranties of the Stockholders and
Seller contained in this Agreement (including the Disclosure Schedule hereto),
and all written information made available to the BCC Parties by the
Stockholders and Seller on or prior to the Closing Date pursuant to this
Agreement, (i) that are qualified as to materiality shall be true in all
respects on and as of the Closing Date and (ii) that are not qualified as to
materiality shall be true in all material respects on and as of the Closing
Date, with the same force and effect as though such representations and
warranties were made, and such written information was delivered, on and as of
the Closing Date;
(b) the Stockholders and Seller shall have performed and
complied with all of its or his covenants hereunder in all material respects
through the Closing;
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(c) there shall have been no material adverse change in the
Seller from February 29, 2000, to the Closing Date not consented to by BCC in
writing;
(d) other than those third-party consents set forth on Party
4.9 of the Disclosure Schedule which may or may not have been obtained on or
before the Closing Date, the Seller and the Stockholders shall have procured all
of the third party consents required in connection with the consummation of the
transactions contemplated hereby;
(e) no action, suit or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of any
federal, state, local or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling or charge would (i)
prevent consummation of any of the transactions contemplated by this Agreement,
(ii) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation, (iii) affect adversely the right of BCC to
control the Surviving Corporation, (iv) affect adversely the right of the Seller
to own its assets and to operate its businesses, (v) require or could reasonably
be expected to require any divestiture by the Seller of a portion of its
business that BCC in its reasonable judgment believes will have a Material
Adverse Effect on the Seller or (vi) imposes any condition upon the Seller that
in BCC's reasonable judgment (x) would be materially burdensome to the Seller or
(y) would materially increase the costs incurred or that will be incurred by BCC
as a result of consummating the Merger and the other transactions contemplated
hereby (and no such injunction, judgment, order, decree, ruling or charge shall
be in effect);
(f) the Working Capital of Seller on the Closing Date shall be
at least $500,000;
(g) Seller shall have delivered to BCC a certificate to the
effect that each of the conditions specified above in SECTION 9.1(a) through (f)
is satisfied in all respects;
(h) all applicable waiting periods (and any extensions
thereof) under the HSR Act shall have expired or otherwise been terminated and
the Parties shall have received all other authorizations, consents, and
approvals of any Governmental Authority required in connection with the
consummation of the transactions contemplated hereby with the exception of those
authorizations, consents and approvals specified on Part 4.9 of the Disclosure
Schedule;
(i) BCC shall have received from counsel to Seller an opinion
in form and substance reasonably acceptable to BCC, addressed to BCC, and dated
as of the Closing Date;
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(j) all actions, proceedings, instruments and documents
required or incidental to carrying out this Agreement and all other related
legal matters shall have been approved by counsel to BCC;
(k) the Boards of Directors of each of the BCC Parties shall
have approved this Agreement and the consummation by the BCC Parties of the
transactions contemplated hereby;
(l) BCC is satisfied with the results of its continuing
business, legal and accounting due diligence regarding Seller;
(m) all actions to be taken by Seller and each Stockholder in
connection with consummation of the transactions contemplated hereby and all
certificates, opinions, instruments and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form and
substance to BCC;
(n) Seller and its employees shall have executed and delivered
to Purchaser the intellectual property assignments (the "Intellectual Property
Assignment") as contemplated by SECTION 10.5;
(o) Michael R. Smith and James Kirk Smith shall have each
entered into an employment agreement substantially in the forms attached hereto
as EXHIBITS C.1 and C.2, respectively;
(p) The Persons indicated by Purchaser on SCHEDULE 9.1(p)
shall have executed employment agreements with Surviving Corporation in form and
substance acceptable to BCC;
(q) BCC shall have received the Affiliate Letters;
(r) all of the employees designated by Purchaser with an
asterisk on Part 4.7 of the Disclosure Schedule hereto shall continue to be
employees of Seller, and none shall have communicated to Seller any intent to
leave Seller's employ before the Effective Time;
(s) as of the Closing Date, no Former Seller Stockholder shall
have demanded or otherwise purported to exercise dissenter's rights, if any,
pursuant to Texas law with respect to all or any portion of the Seller Stock;
(t) BCC shall have received completed securities investor
questionnaires from each Other Stockholder, in form and substance satisfying BCC
and
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its counsel that the Merger Consideration can be issued without registration
under the Securities Act;
(u) All Rights Against Seller Stock shall have been
extinguished or converted to Seller Stock;
(v) Seller shall have terminated any bonus or profit sharing
plans without further liability;
(w) Seller shall have delivered a certificate of termination
of contracts pursuant to SECTION 8.10;
(x) All Intellectual Property created or developed by Seller
or any employee of Seller that has been used by Seller or is currently being
used by Seller shall be 100% owned by Seller as of the Closing Date;
(y) Stockholders shall, and Seller shall have caused all
Seller's Stockholders, officers and directors and their affiliates to, repay all
debts and other obligations owed to Seller;
(z) Seller shall have provided BCC a non-infringement opinion
concerning the Qsys International Patent from outside counsel in form and
substance acceptable to BCC;
(aa) All Stockholders of Seller (including former stockholders
who are not Stockholders as of the Effective Time but are required to file such
consents under Regulation 1.1362-6(a)(5) of the Code) shall have delivered to
Purchaser consents pursuant to Regulation 1.1362-6(a)(5) of the Code, effective
as of the Effective Time; and
(bb) Seller will deliver to Purchaser true and correct copies
of the stock records of Seller showing all issuances and transfers of shares of
capital stock of Seller since inception, certified as true, complete and correct
by Seller and Escrow Stockholders.
BCC may waive any condition specified in this SECTION 9.1 if it
executes a writing so stating at or prior to the Closing.
9.2 CONDITIONS TO OBLIGATION OF SELLER AND STOCKHOLDERS. The obligation
of Seller and the Stockholders to consummate the transactions to be performed by
it and them in connection with the Closing is subject to satisfaction of the
following conditions:
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(a) all representations and warranties of BCC contained in
this Agreement, and all written information delivered to Seller and the
Stockholders by BCC on or prior to the Closing Date pursuant to this Agreement,
(i) that are qualified as to materiality shall be true in all respects on and as
of the Closing Date and (ii) that are not qualified as to materiality shall be
true in all material respects on and as of the Closing Date, with the same force
and effect as though such representations and warranties were made, and such
written information was delivered, on and as of the Closing Date;
(b) BCC shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(c) no action, suit or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of any
federal, state, local or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling or charge would (A)
prevent consummation of any of the transactions contemplated by this Agreement
or (B) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation (and no such injunction, judgment, order,
decree, ruling or charge shall be in effect);
(d) BCC shall have delivered to Seller a certificate to the
effect that each of the conditions specified above in SECTION 9.2(A) through (C)
is satisfied in all respects;
(e) all applicable waiting periods (and any extensions
thereof) under the HSR Act shall have expired or otherwise been terminated and
the Parties shall have received all other authorizations, consents and approvals
of any Governmental Authority required in connection with the consummation of
the transactions contemplated hereby;
(f) all actions to be taken by BCC in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to
Seller; and
(g) Seller and Stockholder Representative shall have received
from W. Audie Long, counsel to BCC Parties, an opinion in form and substance
reasonably acceptable to Stockholder Representative and dated as of the Closing
Date.
Seller may waive any condition specified in this SECTION 9.2 if it
executes a writing so stating at or prior to the Closing.
10. SPECIAL CLOSING AND POST-CLOSING COVENANTS.
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The Parties agree as follows with respect to the period following the
Closing:
10.1 GENERAL. In case at any time after the Closing any further action
is necessary or desirable to carry out the purposes of this Agreement, each of
the Parties will take such further action (including the execution and delivery
of such further instruments and documents) as any other Party reasonably may
request, all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under ARTICLE 11
hereof). Seller and each Stockholder acknowledges and agrees that from and after
the Closing BCC will be entitled to possession of all documents, books, records
(including Tax records), agreements and financial data of any sort relating to
the Seller.
10.2 LITIGATION SUPPORT. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act or transaction on or prior
to the Closing Date involving the Seller, each of the other Parties will
cooperate with him or it and his or its counsel in the contest or defense, make
available their personnel, and provide such testimony and access to their books
and records as shall be necessary in connection with the contest or defense, all
at the sole cost and expense of the contesting or defending Party (unless the
contesting or defending Party is entitled to indemnification therefor under
ARTICLE 11 hereof).
10.3 TRANSITION. Neither Seller nor any Stockholder will take any
action that is designed or intended to have the effect of discouraging any
lessor, licensor, customer, supplier or other business associate of the Seller
from maintaining the same business relationships with the Surviving Corporation
after the Closing as it maintained with the Seller prior to the Closing. Seller
and each Stockholder will refer all customer inquiries relating to the
businesses of the Seller to BCC from and after the Closing.
10.4 TERMINATION OF AGREEMENTS. Seller and each Escrow Stockholder
shall take all necessary efforts to ensure that the Agreements listed on Part
8.10 of the Disclosure Schedule are terminated prior to Closing.
10.5 INTELLECTUAL PROPERTY ASSIGNMENT. Although acknowledged by all
parties as also fully enabled by the Merger memorialized by this Agreement,
Seller shall also execute a separate assignment to Purchaser of all of Seller's
right, title and interest in and to Intellectual Property, including the
Software itemized on Part 1.61 of the Disclosure Schedule. This separate
assignment shall be set forth as EXHIBIT B hereto, and recordation thereof shall
be at the sole discretion of Purchaser. In addition, any employee of the Seller,
including without limitation Michael R. Smith, will execute an
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assignment to Seller and Purchaser of his right, title and interest in and to
Intellectual Property upon request of Purchaser.
10.6 USE OF NAME OF SELLER. Immediately upon the occurrence of the
Closing, Seller and each Stockholder shall cease using the name "Operator
Service Company" and all derivations thereof. Seller and each Stockholder
covenant and agree that after the Closing they will not, directly or indirectly,
use the name "Operator Service Company" or any derivation thereof in connection
with any business enterprise.
10.7 EMPLOYEE BENEFITS MATTER.
(a) Seller and BCC shall cooperate to ensure orderly transfer
of employees of the Seller to employee benefit plans of BCC.
(b) This SECTION 10.7 reflects the agreements of the parties
but does not create any rights or obligations except as among the parties to
this Agreement, and it is specifically agreed that no present or future employee
of the Seller will be treated as a third-party beneficiary of the provisions of
this SECTION 10.7. Nothing in this SECTION 10.7 or elsewhere in this Agreement
will preclude the Seller from terminating the employment of any employee of the
Seller, or preclude the Seller from amending or terminating in its discretion
any employee benefit plan maintained by the Seller.
10.8 TAX-FREE REORGANIZATION. Neither Seller, any Stockholder,
Purchaser or BCC shall take any action which would disqualify the transactions
contemplated by this Agreement from treatment as a tax-free reorganization of
the Seller, to the extent that such treatment is otherwise available to such
Stockholders.
10.9 S CORPORATION EARNINGS; 2000 INCOME TAX RETURNS.
(a) In order to apportion the Seller's 2000 earnings between
the Former Seller Stockholders and the Purchaser, the Actual Earnings (as
defined below) shall be allocated to the Former Seller Stockholders and the
earnings for the period beginning on the Closing Date and ending on the December
31, 2000 shall be allocated to the Purchaser. For tax and accounting purposes,
such apportionment of earnings shall be determined under the closing of the
books method consistent with Code Sections 1362(e)(3) and 1362(e)(6)(D) and the
regulations thereunder. The Former Seller Stockholders, the Seller and the
Purchaser shall take all action necessary to make the election to have the
closing of the books method apply and shall timely file such elections and
reports, including the election required under Regulation Section
1.1362-6(a)(5), to effectuate the use of the closing of the books method. On or
before the Closing Date, Former Seller Stockholders and stockholders of the
Surviving Corporation shall deliver to Purchaser, with a copy to the Stockholder
Representative, consents pursuant to Regulation 1.1362-6(a)(5) of the Code,
effective as of the Effective Time.
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(b) No later than 60 days after the Closing Date, the
Purchaser shall deliver to the Stockholder Representative a written calculation
(the "Calculation") of the Actual Earnings for Seller to but not including the
Closing Date to be reported on its tax return (the "Actual Earnings"). In the
event the Stockholder Representative does not accept the Calculation as
accurate, the Stockholder Representative shall notify the Purchaser of the
non-acceptance of the Calculation in writing within 10 days after receipt of the
Calculation (the failure of which notice within such 10 days shall be deemed of
the acceptance of Calculation), and the Stockholder Representative and the
Purchaser shall promptly attempt to reach agreement on the correct amount of the
Calculation. In the event the Stockholder Representative and the Purchaser
cannot reach an agreement on the calculation, an independent accounting firm to
be mutually agreed upon by the Purchaser and Stockholder Representative shall
determine the correct amount of the Calculation, which determination shall be
binding on the Former Seller Stockholders and the Purchaser.
(c) Based upon the calculation, Purchaser shall pay to Former
Seller Stockholders, within 3 Business Days, the lesser of Actual Earnings or
$100,000, whichever is lower; provided however, any payment required to be made
by Purchaser hereunder shall not be due and payable unless and until Former
Seller Stockholders shall have executed and delivered to Purchaser a release
relating to Purchaser's obligations under this SECTION 10.9 in form and
substance reasonably acceptable to Purchaser.
(d) The Surviving Corporation's accountants shall be
responsible for preparing and filing the Seller's 2000 federal and state income
tax returns, and the BCC Parties shall take any and all action required in order
to file the statement that is part of the election not to apply pro rata
allocation as part of the Surviving Corporation's federal income tax return for
the period beginning on the Closing Date and ending on December 31, 2000, all in
accordance with Regulation 1.1362-6(a)(5) of the Code.
Notwithstanding the foregoing, EBITDA as defined in the Earnout Escrow
Agreement for the entire year 2000 shall be used for purposes of calculations
under the Earnout Escrow Agreement.
10.10 EARNOUT ESCROW. At Closing, Purchaser and Escrow Stockholders
shall deposit the Earnout Holdback Shares with the Escrow Agent pursuant to the
Earnout Escrow Agreement. The Earnout Escrow Agreement shall be executed and
delivered by the Escrow Stockholders and appropriate BCC Party at Closing. Until
such time as the Earnout Holdback Shares shall have been delivered pursuant to
the terms of the Earnout Escrow Agreement, each Escrow Stockholder covenants and
agrees not to sell, transfer, pledge, assign, hypothecate or dispose of or enter
any contract, option or pledge or understanding (written or not) with respect to
the sale, transfer, pledge, assignment, hypothecation or other disposition of
the Earnout Holdback Shares or any
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dividends or distributions that may be declared or paid with respect thereof.
Nothing in this Agreement or the Earnout Escrow Agreement shall require
Purchaser or BCC to take any action after the Effective Time that it determines,
in its sole discretion, is not in the best interests of Purchaser or Surviving
Corporation or to conduct its business or the business of Surviving Corporation
contrary to its business plan or corporate governance.
10.11 APPOINTMENT OF SUCCESSOR ESCROW AGENT. In the event the Escrow
Agent resigns and is discharged from its duties or obligations under the
Indemnity Escrow Agreement or Earnout Escrow Agreement, BCC will designate a
successor Escrow Agent prior to the expiration of the ten-day period following
the notice date of the Escrow Agent's resignation, by giving written notice to
the Indemnity Escrow Agent or Earnout Escrow Agent, as the case may be, and the
Stockholder Representative. BCC may appoint a successor Escrow Agent without the
consent of the Escrow Stockholders so long as such successor is a bank with
assets of at least $500 million, and may appoint any other successor Escrow
Agent with the consent of the Stockholder Representative, which consent shall
not be unreasonably withheld.
10.12 HSR. To the extent required by HSR, BCC and Seller and any
requisite Stockholder shall, within 3 Business Days of the date hereof, file the
notification and report form required for the transactions contemplated
hereunder and promptly provide any supplemental information reasonably requested
in connection therewith pursuant to HSR. The Parties shall deliver to each other
copies of all filings, correspondence and orders to and from all Governmental
Authorities in connection with the transaction contemplated hereunder.
11. INDEMNITY.
11.1 INDEMNIFICATION BY THE ESCROW STOCKHOLDERS. Each Escrow
Stockholder, jointly and severally, agrees to indemnify, defend and hold
harmless the BCC Parties and the Surviving Corporation and each of their
respective Associates, Affiliates, officers, directors, employees,
representatives, and controlling Persons and their respective successors and
assigns from and against and in respect of any and all Damages which may now or
in the future be paid, incurred or suffered by or asserted against such party
(collectively, "General Losses"), arising out of or resulting from or relating
to (a) any inaccuracy in or breach of any representation, warranty, covenant,
commitment or agreement made or undertaken by Seller or any Stockholder in this
Agreement, or any other agreement, certificate, Schedule, Exhibit, or writing
delivered to the BCC Parties pursuant to this Agreement, (b) the legal
proceedings listed in Part 4.12 of the Disclosure Schedule or the pending FCC
U.S.F. review listed on Part 4.9 of the Disclosure Schedule, (c) any action
taken or not taken in connection with the sale contemplated hereby and by the
documents contemplated hereby related to (i) the termination of employment of
any current, former or retired employee by Seller prior to the Effective Time,
or the termination by Seller of any independent contractor or
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consulting agreement prior to the Effective Time; or (ii) the employment or
retirement status with Seller of any current, former or retired employee,
officer, consultant, independent contractor or director of Seller; and (d) any
Damages arising out of or relating to, the funding, operation, administration,
amendment, termination of, or withdrawal or partial withdrawal from, any
employee plan established, maintained or contributed to by the Seller or ERISA
Affiliate as of, or prior to, the Effective Time, whether such liabilities,
obligations or Damages arise out of or relate to, any event or state of facts
occurring or existing before the Effective Time. Any claim for indemnification
under this SECTION 11.1 must be made within one year after the Effective Time
(the "Indemnification Period").
11.2 ENVIRONMENTAL INDEMNIFICATION. Each Escrow Stockholder jointly and
severally agrees to indemnify, defend and hold harmless the BCC Parties and the
Surviving Corporation and each of their respective Associates, Affiliates,
officers, directors, employees, agents, consultants, representatives and
controlling Persons and their respective successors and assigns from and against
and in respect of any and all Environmental Liabilities which may now or in the
future be paid, incurred or suffered by or asserted against such party, arising
out of or resulting from or relating to or in connection with (a) the acts or
omissions of any Person prior to the Effective Time relating to Seller, any
business currently or previously conducted by Seller, the Assets, the operations
currently or previously conducted by Seller or any other assets or properties
currently or previously leased or owned by Seller, or (b) any inaccuracy or
breach by Seller or any Escrow Stockholder of a representation or warranty
contained in SECTION 4.16 hereof (collectively, "Environmental Losses"). Any
claim for indemnification under this SECTION 11.2 must be made within the
Indemnification Period.
11.3 TAX INDEMNIFICATION Each Escrow Stockholder jointly and severally
agrees to indemnify, defend and hold harmless the BCC Parties and the Surviving
Corporation and each of their respective Associates, Affiliates, officers,
directors, employees, representatives, and controlling Persons and their
respective successors and assigns from and against and in respect of any and all
Damages which may now or in the future be paid, incurred or suffered by or
asserted against such party arising out of or resulting from or relating to any
Taxes or Tax Returns of Seller for any period, or portion thereof, up to and
including the Effective Time (collectively, "Tax Losses") including without
limitation any Taxes payable as a result of the pending Texas sales Tax audit
listed on Part ___ of the Disclosure Schedule. Any claim for indemnification
under this SECTION 11.3 must be made prior to the expiration of the applicable
statute of limitations.
11.4 PRODUCTS LIABILITY AND WARRANTY INDEMNIFICATION. Each Escrow
Stockholder jointly and severally agrees to indemnify, defend and hold harmless
the BCC Parties and the Surviving Corporation and each of their respective
Associates, Affiliates, officers, directors, employees, representatives and
controlling Persons and their respective successors and assigns from and against
and in respect of any and all Damages which may now or in the future be paid,
incurred or suffered by or asserted against such party
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arising out of or resulting from or relating to any products manufactured, sold
or distributed or services provided by or on behalf of Seller on or prior to the
Effective Time or with respect to any claims made pursuant to warranties to
third Persons in connection with products manufactured, sold or distributed or
services provided by or on behalf of Seller on or prior to the Effective Time
(collectively, "Product Losses"). Any claim for indemnification under this
SECTION 11.4 must be made within the Indemnification Period.
11.5 INDEMNIFICATION BY THE BCC PARTIES. The BCC Parties, jointly and
severally, agree to indemnify, defend and hold harmless Stockholders and their
respective heirs, successors and assigns from and against and in respect of any
and all Damages which may now or in the future be paid, incurred or suffered by
or asserted against any such party, arising out of or resulting from or relating
to any inaccuracy in or breach of any representation, warranty, covenant,
commitment or agreement made or undertaken by the BCC Parties in this Agreement.
Any claim for indemnification under this SECTION 11.5 must be made within the
Indemnification Period.
11.6 LIMITATION ON INDEMNIFICATION.
(a) The Indemnity Holdback Shares are the source from which
any and all potential claims for indemnification by the BCC Parties and any
other Indemnitee other than the Stockholders under this ARTICLE 11 shall be
satisfied and the Escrow Stockholders shall not have any liability for indemnity
claims hereunder other than the Indemnity Holdback Shares, except (i) to the
extent otherwise provided in SECTION 12.5 and ARTICLE 13 below, (ii) with
respect to claims for indemnification under SECTION 11.5 hereof, for which
Damages shall be paid in cash by the BCC Parties in an amount not to exceed the
Merger Consideration received by each Escrow Stockholder, (iii) any claim for
indemnification based on a breach of a representation, warranty or covenant
contained in SECTION 4.18 or SECTION 4.25 for which Damages shall be paid in
cash by the Escrow Stockholders (without regard to the Indemnity Holdback
Shares) in an amount not to exceed the aggregate Merger Consideration received
by Escrow Stockholders, and (iv) any claim involving the assertion of an
intentional fraud, fraud in the inducement or intentional misrepresentation or
breach, for which Damages shall be paid in cash by the Escrow Stockholders
(without regard to the Indemnity Holdback Shares) in an amount not to exceed the
aggregate Merger Consideration received by Escrow Stockholders. The
indemnification obligations of the Escrow Stockholders pursuant to SECTIONS 11.1
through 11.4 above shall be satisfied through a reduction of the Merger
Consideration effected by cancellation or other disposition by BCC of Indemnity
Holdback Shares pursuant to SECTION 11.7 of this Agreement. For purposes of any
indemnification claim under this ARTICLE 11, the Indemnity Holdback Shares shall
be valued at $6.50 per share.
(b) No claim for indemnification under SECTIONS 11.1, 11.2,
11.3, 11.4 and 11.5 may be brought after the expiration of the Indemnification
Period or the applicable statute of
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limitations with respect to SECTION 11.3, except for claims made in accordance
with SECTION 11.9 prior to such expiration (whether or not any action, demand or
proceeding is instituted with respect to such claims prior to the expiration of
the Indemnification Period), it being understood, without limitation, that any
Damages arising after the expiration of the Indemnification Period shall be
recoverable upon notice properly given prior to the expiration of the
Indemnification Period.
11.7 INDEMNITY HOLDBACK. The Indemnity Holdback Shares (which shall
include for purposes of this SECTION 11.7 any distributions accrued or made
thereon after the date of this Agreement), the net proceeds of any sale of
Indemnity Holdback Shares and any other securities or property which may be
issued after the date hereof in exchange for such shares in any merger or
recapitalization or similar transaction involving BCC) shall be deemed as of the
Effective Time to be deposited by the Escrow Stockholders and Purchaser with the
Escrow Agent, and certificates representing the Indemnity Holdback Shares shall
be held by the Escrow Agent. The Escrow Stockholders shall deliver to the Escrow
Agent at the Closing the Indemnity Escrow Agreement, appropriate stock powers
endorsed in blank and such other documentation as the Escrow Agent may
reasonably prescribe to carry out the purposes of this SECTION 11.7 So long as
any Indemnity Holdback Shares are held by the Escrow Agent hereunder, BCC shall
have, and the Escrow Stockholders by execution and/or approval of this Agreement
hereby grant, effective as of the Effective Time, a perfected, first priority
security interest in such Indemnity Holdback Shares to secure payment of amounts
payable by the Escrow Stockholders in respect of claims under this ARTICLE 11.
In connection therewith, the Escrow Stockholders shall execute and deliver such
instruments as BCC or the Escrow Agent may from time to time reasonably request
for the purpose of evidencing and perfecting such security interest.
11.8 INDEMNITY ESCROW. At Closing, the Purchaser and Escrow
Stockholders shall deposit the Indemnity Holdback Shares with the Indemnity
Escrow Agent pursuant to the Indemnity Escrow Agreement. The Indemnity Escrow
Agreement shall be executed and delivered by the Escrow Stockholders and the
appropriate BCC Parties at Closing. Until such time as the Indemnity Holdback
Shares shall have been delivered to the Escrow Stockholders pursuant to the
terms of the Indemnity Escrow Agreement, each Escrow Stockholder covenants and
agrees with the BCC Parties that no Escrow Stockholder will sell, transfer,
pledge, assign, hypothecate or otherwise dispose of, or enter into any contract,
option or other pledge agreement or understanding (either written or oral) with
respect to the sale, transfer, pledge, assignment, hypothecation or other
disposition of any Indemnity Holdback Shares or any dividends or distributions
that may be declared or paid in respect thereof.
11.9 PROCEDURE. All claims for indemnification or payment under this
ARTICLE 11 shall be asserted and resolved as follows:
(a) An Indemnitee shall promptly give the Indemnitor notice of
any matter which an Indemnitee has determined has given or could give rise to a
right of indemnification under this Agreement stating the amount of the Loss, if
known, and method of computation thereof, all with
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reasonable particularity, and stating with particularity the nature of such
matter. Subject to SECTION 11.6(b) hereof, failure to provide such notice shall
not affect the right of the Indemnitee to indemnification except to the extent
such failure shall have resulted in liability to the Indemnitor that could have
been actually avoided had such notice been provided within such required time
period.
(b) The obligations and liabilities of an Indemnitor under
this ARTICLE 11 with respect to Losses arising from claims of any third party
that are subject to the indemnification provided for in this ARTICLE 11
("Third-Party Claims") shall be governed by and contingent upon the following
additional terms and conditions: if an Indemnitee shall receive notice of any
Third-Party Claim, the Indemnitee shall give the Indemnitor prompt notice of
such Third-Party Claim and the Indemnitor may, at its option, assume and control
the defense of such Third-Party Claim at the Indemnitor's expense and through
counsel of the Indemnitor's choice reasonably acceptable to Indemnitee. Subject
to the condition that notice be delivered prior to the expiration of one year
after the Effective Time, failure to provide such notice shall not affect the
right of the Indemnitee to indemnification except to the extent such failure
shall have resulted in liability to the Indemnitor that could have been actually
avoided had such notice been provided within such required time period. In the
event the Indemnitor assumes the defense against any such Third-Party Claim as
provided above, the Indemnitee shall have the right to participate at its own
expense in the defense of such asserted liability, shall cooperate with the
Indemnitor in such defense and will attempt to make available on a reasonable
basis to the Indemnitor all witnesses, pertinent records, materials and
information in its possession or under its control relating thereto as is
reasonably required by the Indemnitor. In the event the Indemnitor does not
elect to conduct the defense against any such Third-Party Claim, the Indemnitor
shall cooperate with the Indemnitee (and be entitled to participate) in such
defense and attempt to make available to it on a reasonable basis all such
witnesses, records, materials and information in its possession or under its
control relating thereto as is reasonably required by the Indemnitee. The
Indemnitor understands that if such Third-Party Claim results in an obligation
to indemnify hereunder, Damages shall include all reasonable costs and expenses
of such defense. No Third-Party Claim may be settled by Indemnitor without the
written consent of the Indemnitee. So long as the Indemnitor is vigorously
contesting any such Third-Party Claim in good faith, the Indemnitee shall not
pay or settle such claim without the Indemnitor's consent, which consent shall
not be unreasonably withheld. Written notice of any proposed settlement of any
such claim and the material terms thereof shall be delivered by Indemnitor to
Indemnitee at least ten Business Days prior to any settlement of any such claim.
(c) If a claim for indemnity is provided pursuant to this
ARTICLE 11 by an Indemnitee and the Indemnitor does not pay such claim or object
to such claim within 15 Business Days after notice is received by the
Indemnitor, such claim shall be deemed agreed to by the Indemnitor. If the
Indemnitor shall object to such claim, a written notice of such objection
setting forth in reasonable detail the basis for such objection shall be
provided to the Indemnitee and such dispute shall be resolved in accordance with
SECTION 18.11 hereof. In addition, if the claim shall have been determined to
have been a valid claim, Damages shall include interest at the prime rate as
quoted from time to time by Frost National Bank (San Antonio), N.A. (the "Prime
Rate") from the date the claim is first made until fully paid.
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11.10 PAYMENT. Payment of any amounts due pursuant to this ARTICLE 11
shall be made within three Business Days after resolution of the claim.
11.11 ADJUSTMENT OF LIABILITY. The amount which an Indemnitee shall be
entitled to receive from an Indemnitor with respect to a Loss under this ARTICLE
11 shall be net of any insurance recovery by the Indemnitee on account of such
Loss. Any tax benefit actually realized by an Indemnitee on account of a Loss
that is fully indemnified by an Indemnitor shall be paid to the Indemnitor when
and if such benefit is actually recognized and then only to the extent such
benefit is attributable to the indemnified portion of the Loss. The benefit
actually recognized shall be based on the Federal Tax Returns of the Indemnitee
and any benefit shall not be considered actually recognized unless and until the
Tax Return reflecting such benefit is filed. To the extent such benefit is
disallowed or reduced in connection with any audit, the Indemnitor shall
promptly refund the amount of the benefit so disallowed or reduced.
11.12 FAILURE TO PAY INDEMNIFICATION. If Indemnitor fails or refuses to
pay any amount due under this ARTICLE 11, the Indemnitee shall proceed in
accordance with the arbitration provisions of SECTION 18.11 hereof; provided,
however, that in the case of indemnification for a Third-Party Claim, such
matter need not be resolved by arbitration until the underlying Third-Party
Claim is finally resolved.
11.13 COOPERATION. The Indemnitor and the Indemnitee shall cooperate
with each other with regard to any indemnification obligation under this ARTICLE
11 and each shall attempt to make available to the other on a reasonable basis
all personnel records, materials and information in its possession or under its
control as is reasonably requested by the other.
11.14 INDEMNIFICATION IF NEGLIGENCE OF INDEMNITEE. THE INDEMNIFICATION
PROVIDED IN THIS ARTICLE 11 SHALL BE APPLICABLE WHETHER OR NOT THE SOLE OR
CONCURRENT NEGLIGENCE OR GROSS NEGLIGENCE OF THE PARTY SEEKING INDEMNIFICATION,
OR THE SOLE OR CONCURRENT STRICT LIABILITY IMPOSED ON THE PARTY SEEKING
INDEMNIFICATION, OR THE SOLE OR CONCURRENT LIABILITY IMPOSED VICARIOUSLY ON THE
PARTY SEEKING INDEMNIFICATION, IS ALLEGED OR PROVEN.
12. NON-COMPETITION AGREEMENT.
12.1 NON-COMPETITION. In consideration of the benefits of this
Agreement to each Stockholder and as a material inducement to the BCC Parties to
enter into this Agreement and pay to the Stockholders at Closing the Merger
Consideration, each Escrow Stockholder hereby covenants and agrees that,
commencing on the Closing Date and ending (a) one year from the termination of
employment under the Employment Agreement to be executed at Closing, as to James
Kirk Smith, or (b) two years from termination of employment under the Employment
Agreement to be executed at Closing, as to Michael R. Smith, such Escrow
Stockholder shall not, and such Escrow Stockholder shall cause his Associates,
Affiliates and representatives not to, directly or indirectly, as proprietor,
partner, stockholder, director, executive, officer, employee, consultant, joint
venturer,
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investor or in any other capacity, engage in, or own, manage, operate
or control, or participate in the ownership, management, operation or control,
of any entity which engages in any business activity which is similar to or in
competition with the business of Surviving Corporation, BCC Parties and their
Affiliates; provided, however, the foregoing shall not prohibit (a) an Escrow
Stockholder, his Associates, Affiliates and representatives from purchasing and
holding as an investment not more than 3% of any class of publicly traded
securities of any entity which conducts a business in competition with the
business of the BCC Parties, so long as such Escrow Stockholder, his Associates,
Affiliates and representatives do not participate in any way in the management,
operation or control of such entity, or (b) Michael R. Smith from accepting
employment during the period of non-competition as long as he obtains the
written permission and authorization of the Board of Directors of BCC.
12.2 JUDICIAL REFORMATION. Each Escrow Stockholder acknowledges that,
given the nature of the BCC Parties' business, the covenants contained in
SECTION 12.1 establish reasonable limitations as to time, geographic area and
scope of activity to be restrained and do not impose a greater restraint than is
reasonably necessary to protect and preserve the goodwill of the BCC Parties'
business and to protect their legitimate business interests. If, however,
SECTION 12.1 is determined by any court of competent jurisdiction to be
unenforceable by reason of its extending for too long a period of time or over
too large a geographic area or by reason of it being too extensive in any other
respect or for any other reason, it will be interpreted to extend only over the
longest period of time for which it may be enforceable and/or over the largest
geographic area as to which it may be enforceable and/or to the maximum extent
in all other aspects as to which it may be enforceable, all as determined by
such court.
12.3 CUSTOMER LISTS; NON-SOLICITATION. Each Escrow Stockholder further
covenants and agrees that he shall not, and such Escrow Stockholder will cause
his Associates, Affiliates and representatives not to, directly or indirectly,
(a) use or make known to any person or entity the names or addresses of any
clients or customers of Seller or the BCC Parties or any other information
pertaining to them, provided, however, such limitation shall not apply to any
information which (i) is then generally known to the public, (ii) become or
becomes generally known to the public through no fault of such Escrow
Stockholder, his Associates, Affiliates and representatives, and (iii) is
disclosed in accordance with an order of a court of competent jurisdiction or
applicable law, (b) call on, solicit, take away or attempt to call on, solicit
or take away any clients or customers of Seller or the BCC Parties, nor (c)
solicit for employment, recruit, hire or attempt to recruit or hire any
employees of Seller or the BCC Parties.
12.4 COVENANTS INDEPENDENT The covenants of each Escrow Stockholder
contained in SECTIONS 12.1, 12.2 and 12.3 of this Agreement will be construed as
independent of any other provision in this Agreement, and the existence of any
claim or cause of action by any Escrow Stockholder against the BCC Parties will
not constitute a defense to the enforcement by the BCC Parties of said
provisions. Each Escrow Stockholder understands that the provisions contained in
SECTIONS 12.1, 12.2 and 12.3 are essential elements of the transactions
contemplated by this Agreement and, but for the agreement of the Escrow
Stockholders to be bound by the provisions of SECTIONS 12.1, 12.2 and 12.3, the
BCC Parties would not have agreed to enter into this Agreement
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and the transactions contemplated herein. Each Escrow Stockholder has been
advised to consult with, and represents that he has consulted with, counsel in
order to be informed in all respects concerning the reasonableness and propriety
of SECTIONS 12.1, 12.2 and 12.3 with specific regard to the nature of the
business conducted by Seller and the BCC Parties and each Escrow Stockholder
acknowledges that SECTIONS 12.1, 12.2 and 12.3 are reasonable in all respects.
12.5 REMEDIES Each Escrow Stockholder acknowledges that in the event of
a breach or a threatened breach by an Escrow Stockholder of any of the
provisions contained in SECTIONS 12.1, 12.2 or 12.3 of this Agreement, the BCC
Parties will suffer irreparable damage or injury not fully compensable by money
damages, or the exact amount of which may be impossible to ascertain, and
therefore, the BCC Parties will not have an adequate remedy at law. Accordingly,
the BCC Parties shall be entitled to such injunctive relief or other equitable
relief, without the necessity of posting bond therefor, from any court of
competent jurisdiction as may be necessary or appropriate to prevent or curtail
any such actual or threatened breach. The foregoing shall be in addition to and
without prejudice to any other rights that the BCC Parties may have under this
Agreement, at law or in equity, including, without limitation, the right to sue
for and recover money damages.
13. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION. Each Stockholder
recognizes and acknowledges that he has and will have access to certain
confidential information of Seller that is included in the Assets (including,
but not limited to, lists of customers, software designs, system specifications,
trade secrets, Software source code, and costs and financial information) that
after the consummation of the transactions contemplated hereby will be valuable,
special and unique property of Purchaser. Each Stockholder agrees that he will,
and will cause his Associates, Affiliates and representatives, to keep
confidential and not disclose to any other Person or use for his own benefit or
for the benefit of any other Person, and he will use his best efforts to prevent
disclosure by any other Person of, any such confidential information to any
Person for any purpose or reason whatsoever, except to authorized
representatives of Purchaser; provided, however, such limitation shall not apply
to any information which (i) is then generally known to the public; (ii) become
or becomes generally known to the public through no fault of a Stockholder, his
Associates, Affiliates and representatives, and (iii) is disclosed in accordance
with an order of a court of competent jurisdiction or applicable law. Seller or
a Stockholder may have entered into certain confidentiality agreements with
third parties regarding the possible sale of Seller or its Business. Seller
and/or such Stockholder has previously requested that all such third parties
return to Seller all confidential information provided to such parties by or on
behalf of Seller or such Stockholder or that such information be destroyed. At
the Closing, Seller shall assign all of its rights in and to any such
confidentiality agreements to Purchaser. Each Stockholder acknowledges that in
the event of a breach or threatened breach by a Stockholder of any of the
provisions contained in this ARTICLE 13, the BCC Parties will suffer irreparable
damage or injury not fully compensable by money damages, or the exact amount of
which may be impossible to ascertain, and therefore, the BCC Parties will not
have an adequate remedy at law. Accordingly, the BCC Parties shall be entitled
to such injunctive relief or other equitable relief, without the necessity of
posting bond therefor, from any court of competent jurisdiction as may be
necessary or appropriate to prevent or curtail any such actual or threatened
breach. The foregoing shall be in addition to and without prejudice to any other
rights
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that the BCC Parties may have under this Agreement, at law or in equity,
including, without limitation, the right to sue for and recover money damages.
14. NOTICES. All notices, requests, demands and other communications
required or permitted to be given hereunder shall be in writing and shall be
deemed to have been duly given if delivered personally, given by prepaid telex
or telegram or by facsimile or other similar instantaneous electronic
transmission device or mailed first class, postage prepaid, certified United
States mail, return receipt requested, as follows:
(a) If to Purchaser or BCC, at:
Billing Concepts Corp.
7411 John Smith Drive, Suite 200
San Antonio, Texas 78229
Attention: W. Audie Long
Facsimile No.: (210) 949-7024
With a copy to:
Fulbright & Jaworski L.L.P.
300 Convent Street, Suite 2200
San Antonio, Texas 78205
Attention: Phillip M. Renfro
Facsimile No.: (210) 270-7205
(b) If to Seller, at:
Operator Service Corporation
5302 Ave. Q
Lubbock, Texas 79412
Attention: James Kirk Smith
Facsimile No.: (806) 747-0757
With a copy to:
Boswell & Kober, P.C.
750 N. St. Paul Street, Suite 750
Dallas, Texas 75201
Attention: Todd E. Tyler
Facsimile No.: (214) 720-0260
(c) If to the Stockholders, to Stockholder Representative at:
Operator Service Corporation
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5302 Ave. Q
Lubbock, Texas 79412
Attention: James Kirk Smith
Facsimile No.: (806) 747-0757
provided that any party may change its address for notice by giving to the other
party written notice of such change. Any notice given under this ARTICLE 14
shall be effective (x) when delivered, if delivered personally, (y) 24 hours
after sending, if sent by telex or telegram or by facsimile or other similar
instantaneous electronic transmission device with evidence of receipt, and (z) 5
business days after mailing, if mailed.
15. TERMINATION.
15.1 TERMINATION OF AGREEMENT. Certain of the Parties may terminate
this Agreement as provided below:
(a) BCC and Seller may terminate this Agreement by mutual
written consent at any time prior to the Closing;
(b) BCC may terminate this Agreement by giving written notice
to Seller on or before the Closing Date if BCC is not satisfied with the results
of its continuing business, legal and accounting due diligence regarding the
Seller;
(c) BCC may terminate this Agreement by giving written notice
to Seller at any time prior to the Closing (i) in the event the Seller or any
Stockholder has breached any representation, warranty or covenant contained in
this Agreement in any material respect, BCC has notified Seller of the breach,
and the breach has continued without cure for a period of 15 days after the
notice of breach or (ii) if the Closing shall not have occurred on or before May
31, 2000, by reason of the failure of any condition precedent under SECTION 9.1
hereof (unless the failure results primarily from BCC itself breaching any
representation, warranty or covenant contained in this Agreement); and
(d) Seller and the Stockholders may terminate this Agreement
by giving written notice to BCC at any time prior to the Closing (i) in the
event BCC has breached any representation, warranty or covenant contained in
this Agreement in any material respect, Seller has notified BCC of the breach,
and the breach has continued without cure for a period of 15 days after the
notice of breach or (ii) if the Closing shall not have occurred on or before May
31, 2000, by reason of the failure of any condition precedent under SECTION 9.2
hereof (unless the failure results primarily from any Stockholder or Seller
themselves breaching any representation, warranty or covenant contained in this
Agreement).
15.2 EFFECT OF TERMINATION. If any Party terminates this Agreement
pursuant to ARTICLE 15, all rights and obligations of the Parties hereunder
shall terminate without any liability of any Party to any other Party (except
for any liability of any Party then in breach).
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16. GUARANTEE. Each Escrow Stockholder hereby (a) unconditionally
guarantees the prompt performance of the obligations of Seller under this
Agreement, (b) waives any requirements of notice, protest, demand or grace with
respect thereto other than those contained in this Agreement and (c) agrees that
the BCC Parties shall not be required to exhaust their remedies against any
other person or party (including, but not limited to, Seller or any Stockholder)
before enforcing the provisions of this guarantee. Each Escrow Stockholder
recognizes and acknowledges that the BCC Parties are relying on this guarantee
in entering into and consummating the transactions contemplated by this
Agreement, and that but for this guarantee the BCC Parties would not enter into
this Agreement or consummate the transactions contemplated hereby. Any liability
resulting from the foregoing guarantee shall be limited to the Indemnity
Holdback Shares.
17. STOCKHOLDER REPRESENTATIVE.
(a) In order to administer efficiently the implementation of
this Agreement, the waiver of any conditions to the obligations to consummate
the transactions or the settlement of any dispute and notices under this
Agreement or actions, settlement or notices under the Earnout Escrow Agreement
or Indemnity Escrow Agreement, Stockholders hereby appoint James Kirk Smith as
their representative ("Stockholder Representative") and authorize him to take
all action necessary in connection with implementation of the Agreement on
behalf of Stockholders, waive any condition to or obligation to consummate the
transactions, give and receive notices and take any and all action contemplated
to be taken by or on behalf of Stockholders under this Agreement, and of Escrow
Stockholders under the Earnout Escrow Agreement and the Indemnity Escrow
Agreement (collectively, "Escrow Agreements").
(b) In the event Stockholder Representative dies, becomes
legally incapacitated or resigns Michael R. Smith shall fill such vacancy and be
deemed Stockholder Representative for all purposes; however, no change of the
Stockholder Representative shall be effective until Purchaser is given notice of
it by the Stockholders.
(c) By mere execution of this Agreement, Stockholders agree
that:
(i) Purchaser may rely conclusively on the
instructions and decisions of Stockholder Representative as to
any actions required or permitted to be taken by Stockholders
or Stockholder Representative hereunder and under the Escrow
Agreements and no party shall have any cause of action against
Purchaser for action taken by Purchaser in reliance upon
actions, decisions or instructions of Stockholder
Representative.
(ii) all actions, decisions, and
instructions of the Stockholder Representative shall be
conclusive and binding on Stockholders; no Stockholder shall
have a cause of action against Purchaser or Surviving
Corporation for any action taken or omitted,
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decision made or omitted or any instruction as given or
omitted by Stockholder Representative hereunder.
(iii) Stockholder Representative shall be
deemed to fulfill any fiduciary obligation to Stockholders so
long as no Stockholder is adversely affected by any action or
failure to act by Stockholder Representative in a
disproportionate measure compared to any other Stockholder.
(d) Remedies at law for breach of this Section would be
inadequate, therefore Purchaser shall be entitled to injunctive relief, without
the necessity of proving damages in an action to enforce this Section.
(e) The provisions of this Section are independent and
severable to constitute an irrevocable power of attorney, coupled with an
interest and surviving death, granted by each Stockholder to the Stockholder
Representative and bind executors, heirs, successors, and legal representatives.
All reasonable fees and expenses incurred by Stockholder Representative shall be
paid by Stockholders pro rata in proportion to their percentage interest in
Seller immediately before the Effective Time. The provisions hereof shall
survive the Effective Time.
18. GENERAL PROVISIONS.
18.1 GOVERNING LAW; INTERPRETATION; SECTION HEADINGS. This Agreement
shall be governed by and construed and enforced in accordance with the laws of
the State of Texas without regard to conflict-of-laws rules as applied in Texas.
The section headings contained herein are for purposes of convenience only and
shall not be deemed to constitute a part of this Agreement or to affect the
meaning or interpretation of this Agreement in any way.
18.2 SEVERABILITY. Should any provision of this Agreement be held
unenforceable or invalid under the laws of the United States of America or the
State of Texas, or under any other applicable laws of any other jurisdiction,
then the parties hereto agree that such provision shall be deemed modified for
purposes of performance of this Agreement in such jurisdiction to the extent
necessary to render it lawful and enforceable, or if such a modification is not
possible without materially altering the intention of the parties hereto, then
such provision shall be severed herefrom for purposes of performance of this
Agreement in such jurisdiction. The validity of the remaining provisions of this
Agreement shall not be affected by any such modification or severance, except
that if any severance materially alters the intentions of the parties hereto as
expressed herein (a modification being permitted only if there is no material
alteration), then the parties hereto shall use commercially reasonable efforts
to agree to appropriate equitable amendments to this Agreement in light of such
severance, and if
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no such agreement can be reached within a reasonable time, any party hereto may
initiate arbitration pursuant to the provisions of SECTION 18.11 to determine
and effect such appropriate equitable amendments.
18.3 ENTIRE AGREEMENT. This Agreement, the Disclosure Schedule and the
documents and agreements referenced herein set forth the entire agreement and
understanding of the parties hereto with respect to the transactions
contemplated hereby and supersede all prior agreements, arrangements and
understandings related to the subject matter hereof. No representation, promise,
inducement or statement of intention has been made by any party hereto which is
not embodied or referenced in this Agreement, the Disclosure Schedule or the
documents or agreements referenced herein, and no party hereto shall be bound by
or liable for any alleged representation, promise, inducement or statement of
intention not so set forth.
18.4 BINDING EFFECT. All the terms, provisions, covenants and
conditions of this Agreement shall be binding upon and inure to the benefit of
and be enforceable by the parties hereto and their respective heirs, executors,
administrators, representatives, successors and assigns.
18.5 ASSIGNMENT. This Agreement and the rights and obligations of the
parties hereto shall not be assigned or delegated by any party hereto without
the prior written consent of the other parties hereto.
18.6 AMENDMENT; WAIVER. This Agreement may be amended, modified,
superseded or canceled, and subject to the authority of Stockholder
Representative under ARTICLE 17, any of the terms, provisions, representations,
warranties, covenants or conditions hereof may be waived, only by a written
instrument executed by all parties hereto, or, in the case of a waiver, by the
party waiving compliance. The failure of any party at any time or times to
require performance of any provision hereof shall in no manner affect the right
to enforce the same. No waiver by any party of any condition contained in this
Agreement, or of the breach of any term, provision, representation, warranty or
covenant contained in this Agreement, in any one or more instances, shall be
deemed to be or construed as a further or continuing waiver of any such
condition or breach, or as a waiver of any other condition or of the breach of
any other term, provision, representation, warranty or covenant.
18.7 GENDER; NUMBERS. All references in this Agreement to the
masculine, feminine or neuter genders shall, where appropriate, be deemed to
include all other genders. All plurals used in this Agreement shall, where
appropriate, be deemed to be singular, and VICE VERSA.
18.8 COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together
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shall constitute one and the same instrument. This Agreement shall be binding
when one or more counterparts hereof, individually or taken together, shall bear
the signatures of the parties reflected hereon as signatories.
18.9 TELECOPY EXECUTION AND DELIVERY. A facsimile, telecopy or other
reproduction of this Agreement may be executed by one or more parties hereto,
and an executed copy of this Agreement may be delivered by one or more parties
hereto by facsimile or similar instantaneous electronic transmission device
pursuant to which the signature of or on behalf of such party can be seen, and
such execution and delivery shall be considered valid, binding and effective for
all purposes. At the request of any party hereto, all parties hereto agree to
execute an original of this Agreement as well as any facsimile, telecopy or
other reproduction hereof.
18.10 EXPENSES. Whether or not the transactions contemplated hereby are
consummated, each of the parties will pay all costs and expenses of its or his
performance of and compliance with this Agreement.
18.11 ARBITRATION.
(a) EXCEPTION PRIOR TO EFFECTIVE TIME. The parties acknowledge
that money damages are not an adequate remedy for violations of this Agreement
and that, prior to the Effective Time, any party may, in its sole discretion,
apply to a court of competent jurisdiction for specific performance or
injunctive or such other relief as such court may deem just and proper to
enforce this Agreement or to prevent any violation hereof and, to the extent
permitted by applicable law, each party waives any objection to the imposition
of such relief.
(b) EXCEPTIONS TO ENFORCE ARTICLES 12 AND 13. The Parties
expressly reserve the right to petition a court directly for injunctive and
other relief to enforce a breach of the restrictive covenants and non-disclosure
provisions of ARTICLES 12 OR 13 of this Agreement and may seek in conjunction
with such relief, damages caused by breach of ARTICLES 12 OR 13 of this
Agreement.
(c) DISPUTES TO BE ARBITRATED. Any controversy of any nature
whatsoever, including but not limited to tort claims or contract disputes,
between the parties to this Agreement or their respective heirs, executors,
administrators, legal representatives, successors and assigns, as applicable,
arising out of or related to this Agreement after the Effective Time, including
the implementation, applicability and interpretation thereof, shall, upon the
written request of one party served upon the other, be submitted to and settled
by arbitration in accordance with the provisions of the Federal Arbitration Act,
9 U.S.C. Section 1-15, as amended. The terms of the commercial arbitration
rules of the American Arbitration Association (the "AAA") shall apply except to
the extent they conflict with the provisions of this paragraph. If the amount in
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controversy in the arbitration exceeds Two Hundred and Fifty Thousand Dollars
($250,000), exclusive of interest, attorneys' fees and costs, the arbitration
shall be conducted by a panel of three independent arbitrators. Otherwise, the
arbitration shall be conducted by a single independent arbitrator. The parties
shall endeavor to select independent arbitrators by mutual agreement. If such
agreement cannot be reached within 30 calendar days after a dispute has arisen
which is to be decided by arbitration, the selection of the arbitrator(s) shall
be made in accordance with Rule 13 of the Rules as presently in effect. If three
arbitrators are selected, the arbitrators shall elect a chairperson to preside
at all meetings and hearings. If a dispute is to be resolved by a sole
arbitrator in accordance with the terms hereof, or if the dispute is to be
resolved by a panel of three arbitrators as provided hereinabove, then each such
arbitrator shall be a member of a state bar engaged in the practice of law in
the United States or a retired member of a state or the federal judiciary in the
United States. The award of the arbitrator(s) shall require a majority of the
arbitrators in the case of a panel of arbitrators, shall be based on the
evidence admitted and the substantive law of the State of Texas and shall
contain an award for each issue and counterclaim. The award shall be made 30
days following the close of the final hearing and the filing of any post hearing
briefs authorized by the arbitrator(s). The award of the arbitrator(s) shall be
final and binding on the parties hereto. Each party shall be entitled to inspect
and obtain a copy of non-privileged relevant documents in the possession or
control of the other party. All such discovery shall be in accordance with
procedures approved by the arbitrator(s). Unless otherwise provided in the
award, each party shall bear its own costs of discovery.
(d) DISCOVERY. Each party shall be entitled to take one
deposition. Each party shall be entitled to submit one set of interrogatories
which require no more than 30 answers. All discovery shall be expedited,
consistent with the nature and complexity of the claim or dispute and consistent
with fairness and justice. The arbitrator(s) shall have the power to compel any
party to comply with discovery requests of the other parties and to issue
binding orders relating to any discovery dispute which shall be enforceable in
the same manner as awards. The arbitrator(s) also shall have the power to impose
sanctions for abuse or frustration of the arbitration process, including without
limitation, the refusal to comply with orders of the arbitrator(s) relating to
discovery and compliance with subpoenas.
(e) ATTORNEYS' FEES. The arbitrator(s) shall require the
non-prevailing party to pay the prevailing party's attorneys' fees and costs
incurred in connection with the arbitration. It is further agreed that any of
the parties hereto may petition the United States District Court for the Western
District of Texas, San Antonio Division, for a judgment to be entered upon any
award entered through such arbitration proceedings. All arbitration proceedings
shall be conducted in San Antonio, Texas.
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18.12 DAMAGE TO ASSETS. If, on or before the Closing Date, the assets
or properties of the Seller are damaged or destroyed, Seller and the
Stockholders shall notify BCC of such damage or destruction. In the event of any
such damage or destruction, BCC shall have the right, in its sole discretion, to
either (i) reduce the Merger Consideration by an amount equal to the value of
the damaged or destroyed asset or assets, and complete the purchase, or (ii)
terminate this Agreement as provided by SECTION 15.1 hereof and not complete the
purchase.
18.13 EFFECT OF DUE DILIGENCE. No investigation by or on behalf of the
BCC Parties into the business, operations, prospects, assets or condition
(financial or otherwise) of the Seller shall diminish in any way the effect of
any representations or warranties made by Seller or any Stockholder in this
Agreement or shall relieve Seller or any Stockholder of any of its or his
obligations under this Agreement.
18.14 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement prior to the Closing without the prior written approval of BCC
and Seller; provided, however, that any Party may make any public disclosure it
believes in good faith is required by applicable law (in which case the
disclosing Party will use its reasonable best efforts to advise the other
Parties prior to making the disclosure).
18.15 NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
18.16 CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The Parties intend
that each representation, warranty and covenant contained herein shall have
independent significance. If any Party has breached any representation, warranty
or covenant contained herein in any respect, the fact that there exists another
representation, warranty or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the Party has not
breached shall not detract from or mitigate the fact that the Party is in breach
of the first representation, warranty or covenant.
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18.17 INCORPORATION OF EXHIBITS, ANNEXES AND DISCLOSURE SCHEDULE. The
Exhibits, Annexes and Disclosure Schedule identified in this Agreement are
incorporated herein by reference and made a part hereof.
18.18 SPECIFIC PERFORMANCE. Each of the Parties acknowledges and agrees
that the other Parties would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that
the other Parties shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action instituted in any
court of the United States or any state thereof having jurisdiction over the
Parties and the matter, in addition to any other remedy to which they may be
entitled, at law or in equity.
18.19 REMEDIES CUMULATIVE. All rights, powers and remedies provided
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative, and the exercise or beginning of
the exercise of any thereof by any party shall not preclude the simultaneous or
later exercise of any other such right, power or remedy by such party.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, the parties have executed this Plan of
Reorganization, Merger and Acquisition Agreement as of the date first above
written.
PURCHASER:
LUBBOCK ACQUISITION CORP.
By: /s/ PARRIS H. HOLMES, JR.
-------------------------
Its: CHAIRMAN
BCC:
BILLING CONCEPTS CORP.
By: /s/ PARRIS H. HOLMES, JR.
-------------------------
Its: CHAIRMAN
SELLER:
OPERATOR SERVICE COMPANY
By: /s/ MICHAEL R. SMITH
---------------------
Name: MICHAEL R. SMITH
Title: CEO
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STOCKHOLDERS:
/s/ MICHAEL R. SMITH
--------------------------------------
Michael R. Smith
/s/ JAMES KIRK SMITH
--------------------------------------
James Kirk Smith
/s/ VIRGIL B. PETTIGREW
--------------------------------------
Virgil B. Pettigrew
/s/ BARRY D. AUSTIN
--------------------------------------
Barry D. Austin
/s/ HARRIET M. AUSTIN
--------------------------------------
Harriet M. Austin
/s/ MICHAEL D. STARCHER
--------------------------------------
Michael D. Starcher
/s/ JENNY A. STARCHER
--------------------------------------
Jenny A. Starcher
/s/ KARLA J. HATTON
--------------------------------------
Karla J. Hatton
/s/ JOHN J. JELINEK
--------------------------------------
John J. Jelinek
/s/ GEORGE E. LASS
--------------------------------------
George E. Lass
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/s/ CHRIS AUSTIN
--------------------------------------
Chris Austin
/s/ SUZANNE AUSTIN
--------------------------------------
Suzanne Austin
/s/ GREG AUSTIN
--------------------------------------
Greg Austin
/s/ TANGELA KAI LOVERING
--------------------------------------
Tangela Kai Lovering
/s/ KIRK SMITH
--------------------------------------
Kirk Smith, Custodian for Brian Jeffrey Smith
/s/ BRIAN JEFFREY SMITH
--------------------------------------
Brian Jeffrey Smith
/s/ KIRK SMITH
--------------------------------------
Kirk Smith, Custodian for Eric Justin Smith
/s/ CHARLES P. BEALL
--------------------------------------
Charles P. Beall
/s/ GREGORY L. CAMP
--------------------------------------
Gregory L. Camp
/s/ ROBERT C. HAWK
--------------------------------------
Robert C. Hawk
/s/ CARL GLENN HADDOCK
--------------------------------------
Carl Glenn Haddock
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/s/ JOHN M. TURNER
--------------------------------------
John M. Turner
/s/ ANGELITA REY
--------------------------------------
Angelita Rey
/s/ JASON J. PLUMB
--------------------------------------
Jason J. Plumb
/s/ ABBIE J. UPCHURCH
--------------------------------------
Abbie J. Upchurch
/s/ DEBORAH JILL FROMAN
--------------------------------------
Deborah Jill Froman
/s/ PAULA D. WILKINSON
--------------------------------------
Paula D. Wilkinson
/s/ DAVID L. CRAVEN
--------------------------------------
David L. Craven
/s/ MARVIN L. PYLE
--------------------------------------
Marvin L. Pyle
/s/ MARK G. SMITHERMAN
--------------------------------------
Mark G. Smitherman
/s/ VIRGIL B. PETTIGREW, EXECUTOR
--------------------------------------
Virgil B. Pettigrew, Independent Executor
of the Estate of Mary Jane Pettigrew
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AMENDMENT NO. 1
TO PLAN OF REORGANIZATION, MERGER
AND ACQUISITION AGREEMENT
WHEREAS, a Plan of Reorganization, Merger and Acquisition Agreement
(the "Plan") was executed on March 21, 2000 among Billing Concepts Corp.
("BCC"), Lubbock Acquisition Corp. ("Purchaser") and Operator Service Company
("Seller") and its Stockholders.
WHEREAS, capitalized terms not defined herein shall have the meanings
assigned in the Plan.
WHEREAS, the Parties have determined to effectuate the Merger
contemplated under the Plan by having the Seller, rather than the Purchaser, be
the Surviving Corporation.
WHEREAS, the Earnout Escrow is to be funded by all of the Stockholders
proportionally and not only the Escrow Stockholders.
NOW THEREFORE, it is agreed as follows:
1. The fifth recital of the Plan is amended to read:
"WHEREAS, the respective boards of directors of Purchaser and Seller
have voted to approve the merger of Purchaser with and into Seller (the
"Merger") pursuant to the terms and subject to the conditions of this
Agreement; and"
2 . The last paragraph of the recitals is amended to read:
"NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, the parties hereto agree that Purchaser shall be merged with
and into Seller and that the terms and conditions of the Merger, the
method of carrying the Merger into effect and certain other provisions
relating thereto shall be as hereinafter set forth:"
3. Section 1.64 of the Plan is amended to read:
"1.64 "SURVIVING CORPORATION" shall mean the Seller, existing at and
after the Effective Time as a result of the Merger."
4. The first sentence of Section 2.1 of the Plan is amended to read:
<PAGE>
"Subject to the terms and conditions of this Agreement, Purchaser shall
be merged with and into Seller in accordance with all applicable laws,
with Seller being the Surviving Corporation."
5. Section 2.6 (a) is amended to read:
"(a) In consideration for the Merger, the non-competition agreements in
ARTICLE 12 hereof and the non-disclosure agreement in ARTICLE 13
hereof, as of the Effective Time, by virtue of the Merger and without
any action on the part of the holders of any shares of Seller Stock, or
the holder of the shares of Purchaser Stock, (i) subject to adjustment
under SECTION 2.6(B), Seller Stock outstanding immediately before the
Effective Time shall be converted into the right to receive, subject to
the provisions of SECTION 2.8, 3,846,154 shares of BCC Stock (the
"Merger Consideration"); provided, however, that 461,573 shares of the
Merger Consideration (the "Indemnity Holdback Shares") shall be pledged
by the Escrow Stockholders to secure the indemnification obligations of
the Stockholders pursuant to ARTICLE 11 hereof and 769,000 shares of
the Merger Consideration (the "Earnout Holdback Shares") shall be
pledged by the Stockholders to secure the earnout requirements pursuant
to SECTION 10.10 hereof, and (ii) each share of Purchaser Stock
outstanding immediately before the Effective Time shall be converted
into one share of common stock of the Surviving Corporation. At the
Closing, BCC shall deliver to the Stockholders the certificates
representing the Merger Consideration, less the Indemnity Holdback
Shares and less the Earnout Holdback Shares."
6. Section 2.11 (a) is amended to read:
"(a) the BCC Parties shall withhold from each Stockholder on a pro rata
basis and Purchaser and Stockholders shall deliver to the Escrow Agent
under the Earnout Escrow Agreement, the Earnout Holdback Shares, to be
held and distributed by the Escrow Agent pursuant to the terms of this
Agreement and the Earnout Escrow Agreement; and"
7. The last sentence of Section 4.8(c) is amended to read:
"All of the Contracts will be fully vested in Surviving Corporation as
of the Effective Time of the Merger, without the approval or consent of
any Person, or, if such approval or consent is required, Escrow
Stockholders will use their best efforts to obtain such on or before
the Closing Date or within a reasonable period of time after Closing
and deliver such to the BCC Parties."
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8. Section 4.11(b) is amended to read:
"(b) All Software performs as intended in System Documentation and User
Documentation (subject to minor imperfections in the Software that are
standard in the software industry) and is free from defects, viruses or
any other impediment to Surviving Corporation's quiet enjoyment in the
operation thereof (subject to minor imperfections in the Software that
are standard in the software industry)."
9. The first sentence of Section 4.11(d) is amended to read:
"All Third-Party Software Agreements give Surviving Corporation exactly
the same rights and/or obligations thereunder enjoyed by Seller,
without the requirement of obtaining any consent or approval, giving
any prior or subsequent notice, paying any further royalty or fee to
any party thereto or to any other third party, or performing any duty
that has not already been fully performed by Seller."
10 The second to the last sentence of Section 4.11(e) is amended to read:
"Each item of Intellectual Property owned or used in the Business
immediately prior to the Effective Time will be owned or available for
use by Surviving Corporation on identical terms and conditions
immediately after the Closing."
11. Section 8.9 is amended to read:
"8.9 ESCROW AGREEMENTS. The Stockholders shall execute and deliver the
Earnout Escrow Agreement (the "Earnout Escrow Agreement") in
substantially the form attached hereto as EXHIBIT A.1 and the Escrow
Stockholders shall execute and deliver the Indemnity Escrow Agreement
substantially in the form attached hereto as EXHIBIT A.2."
12. Section 10.5 is amended to read:
"10.5 INTELLECTUAL PROPERTY ASSIGNMENT. Any employee of the Seller,
including without limitation Michael R. Smith, will execute an
assignment to Seller and Surviving Corporation of his right, title and
interest in and to Intellectual Property upon request of BCC Parties."
13. Section 10.6 is amended to read:
"10.6 USE OF NAME OF SELLER. Stockholders covenant and agree that
afterthe Closing they will not, directly or indirectly, use the name
"Operator
3
<PAGE>
Service Company" or "OSC" or any derivation thereof in connection with
any business enterprise."
14. In Section 10.9 all references to "Purchaser" shall be deemed to be
"Seller and Surviving Corporation."
15. Section 10.10 is amended to read:
"10.10 EARNOUT ESCROW. At Closing, Purchaser and Stockholders shall
deposit the Earnout Holdback Shares with the Escrow Agent pursuant to
the Earnout Escrow Agreement. The Earnout Escrow Agreement shall be
executed and delivered by the Stockholders and appropriate BCC Party at
Closing. Until such time as the Earnout Holdback Shares shall have been
delivered pursuant to the terms of the Earnout Escrow Agreement, each
Stockholder covenants and agrees not to sell, transfer, pledge, assign,
hypothecate or dispose of or enter any contract, option or pledge or
understanding (written or not) with respect to the sale, transfer,
pledge, assignment, hypothecation or other disposition of the Earnout
Holdback Shares or any dividends or distributions that may be declared
or paid with respect thereof. Nothing in this Agreement or the Earnout
Escrow Agreement shall require Surviving Corporation or BCC to take any
action after the Effective Time that BCC determines, in its sole
discretion, is not in the best interests of Surviving Corporation or to
conduct its business or the business of Surviving Corporation contrary
to the Surviving Corporation's business plan or corporate governance."
16. In Section 13 all references to "Purchaser" shall be changed to
"Surviving Corporation."
17. In Section 17(a) all references to "Escrow Stockholders" shall be
changed to "Stockholders" with relation to the Earnout Escrow.
18. In Section 17(c)(i) all references to "Purchaser" shall be changed to
"Purchaser, Surviving Corporation or BCC Parties."
19. Except as modified above and as otherwise necessary in context to
reflect the fact that Purchaser will be merging with and into Seller as
the Surviving Corporation and all Stockholders will be funding the
Earnout Escrow, all other terms and conditions of the Plan remain in
full force and effect.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
4
<PAGE>
Dated this 4th day of April, 2000.
BILLING CONCEPTS CORP.
By: /s/ AUDIE LONG
-----------------------------------------------
Its: SENIOR VICE PRESIDENT AND GENERAL COUNSEL
-------------------------------------------------
LUBBOCK ACQUISITION CORP.
By: /s/ AUDIE LONG
--------------------------------------------
Its: SENIOR VICE PRESIDENT AND GENERAL COUNSEL
---------------------------------------------
OPERATOR SERVICE COMPANY
By: /s/ KIRK SMITH
-------------------------------------------
Its: PRESIDENT
-------------------------------------------
STOCKHOLDERS:
/s/ MICHAEL R. SMITH
-------------------------------------------
Michael R. Smith
/s/ JAMES KIRK SMITH
-------------------------------------------
James Kirk Smith
/s/ BARRY D. AUSTIN
-------------------------------------------
Barry D. Austin
/s/ HARRIET M. AUSTIN
-------------------------------------------
Harriet M. Austin
5
<PAGE>
/s/ CHRIS AUSTIN
-------------------------------------------
Chris Austin
/s/ SUZANNE AUSTIN
-------------------------------------------
Suzanne Austin
/s/ GREG AUSTIN
-------------------------------------------
Greg Austin
/s/ CHARLES P. BEALL
-------------------------------------------
Charles P. Beall
/s/ GREGORY L. CAMP
-------------------------------------------
Gregory L. Camp
/s/ DAVID L. CRAVEN
-------------------------------------------
David L. Craven
/s/ DEBORAH JILL FROMAN
-------------------------------------------
Deborah Jill Froman
/s/ CARL GLENN HADDOCK
-------------------------------------------
Carl Glenn Haddock
/s/ KARLA J. HATTON
-------------------------------------------
Karla J. Hatton
/s/ ROBERT C. HAWK
-------------------------------------------
Robert C. Hawk
/s/ JOHN J. JELINEK
-------------------------------------------
John J. Jelinek
/s/ GEORGE E. LASS
-------------------------------------------
George E. Lass
/s/ TANGELA KAI LOVERING
------------------------------------------
Tangela Kai Lovering
/s/ TANGELA KAI LOVERING
--------------------------------------------
Tangela Kai Lovering, Custodian for James M.
Lovering
6
<PAGE>
/s/ JAMES B. LOVERING
-------------------------------------------
James B. Lovering
/s/ VIRGIL B. PETTIGREW
-------------------------------------------
Virgil B. Pettigrew
/s/ JASON J. PLUMB
-------------------------------------------
Jason J. Plumb
/s/ MARVIN L. PYLE
-------------------------------------------
Marvin L. Pyle
/s/ ANGELITA REY
-------------------------------------------
Angelita Rey
/s/ KIRK SMITH
------------------------------------------
Kirk Smith, Custodian for Brian Jeffrey Smith
/s/ KIRK SMITH
-----------------------------------------
Kirk Smith, Custodian for Eric Justin Smith
/s/ MARK G. SMITHERMAN
-----------------------------------------
Mark G. Smitherman
/s/ MICHAEL D. STARCHER
------------------------------------------
Michael D. Starcher
/s/ JENNY A. STARCHER
-------------------------------------------
Jenny A. Starcher
/s/ JOHN M. TURNER
-----------------------------------------
John M. Turner
/s/ ABBIE J. UPCHURCH
-------------------------------------------
Abbie J. Upchurch
/s/ PAULA D. WILKINSON
-------------------------------------------
Paula D. Wilkinson
/s/ VIRGIL B. PETTIGREW, EXECUTOR
-------------------------------------------
Virgil B. Pettigrew, Independent Executor
of the Estate of Mary Jane Pettigrew
7
