<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report June 12, 1998
Amending Form 8-K filed on April 17, 1998
LET'S TALK CELLULAR & WIRELESS, INC.
(Exact name of registrant as specified in charter)
FLORIDA 0-23351 65-0292891
- --------------------------------------------------------------------------------
State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation
800 Brickell Avenue, Suite 400, Miami, Florida 33131
- --------------------------------------------------------------------------------
(Address of principal offices) (Zip Code)
Registrant's telephone number including area code (305) 358-8255
(Former name or former address, if changed since last report) Not applicable
--------------
<PAGE> 2
This current report on Form 8-K/A amends the Registrant's current report on
Form 8-K filed on April 17, 1998.
Item 2. ACQUISITION OF ASSETS.
On April 2, 1998, Let's Talk Cellular & Wireless, Inc., a Florida
corporation (the "Registrant"), completed the acquisition of all of the
outstanding capital stock (the "Shares") of Sosebee Enterprises, Inc., a Georgia
corporation doing business as "Cellular Warehouse," and Cellular Warehouse,
Inc., a Georgia corporation (together, the "Companies"). The Shares were
purchased by the Registrant from Messrs. Richard J. Sosebee and Frederick L.
Hill, III (the "Selling Shareholders"), each of whom owned half of the
outstanding common stock of each Company. The Selling Shareholders received as
consideration from the Registrant an aggregate of (i) approximately Nineteen
Million Nine Hundred Thousand Dollars ($19.9 million) in cash, including
acquisition costs of approximately $884,000 and (ii) Five Hundred and Fifty
Thousand (550,000) shares of common stock of the Registrant. The cash portion of
the consideration paid by the Registrant was financed through a Loan and
Security Agreement, dated April 2, 1998, by and among the Registrant and certain
of its subsidiaries, certain Lenders and The Chase Manhattan Bank, as Agent. The
consideration was negotiated at arms-length by the Registrant and the Selling
Shareholders. The Companies are independent specialty retailers of cellular and
wireless products, services and accessories. The Registrant intends to operate
the Companies in substantially the same manner as they operated prior to the
Registrant's acquisition of the Shares.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired.
The following statements of Sosebee Enterprises, Inc. d/b/a
Cellular Warehouse, Inc. are filed herewith on the pages
subsequent hereto:
Report of Independent Certified Public Accountants;
Balance Sheets at December 31, 1996 and December 31,
1997;
Statements of Income for the Years ended December 31,
1995, December 31, 1996 and December 31, 1997;
Statement of Shareholders' Equity for the Years ended
December 31, 1995, December 31, 1996 and December 31,
1997
Statement of Cash Flows for the Years ended
December 31, 1995, December 31, 1996 and December 31,
1997
Notes to Financial Statements for the Years ended
December 31, 1995, 1996 and 1997
(b) Pro Forma Financial Information. The following pro forma financial
information (unaudited) filed herewith on the pages subsequent
hereto gives effect to the acquisition of Sosebee Enterprises, Inc.
and Cellular Warehouse, Inc. on April 1, 1998:
Pro Forma Condensed Consolidated Statements of Income
for the nine months ended April 30, 1998 and the year
ended July 31, 1997 and Notes thereto.
Exbibits:
2.1 Second Amended and Restated Stock Purchase Agreement by and between Let's
Talk Cellular & Wireless, Inc. and certain Selling Shareholders relating to
the acquisition of Sosebee Enterprises, Inc. d/b/a Cellular Warehouse and
Cellular Warehouse, Inc. dated as of March 1, 1998
<PAGE> 3
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.
Let's Talk Cellular & Wireless, Inc.
(Registrant)
Date: June 12, 1998 By: /s/ Daniel Cammarata
-------------------------------
Daniel Cammarata
Chief Financial Officer
Page 3 of 29 Pages
<PAGE> 4
Financial Statements
Sosebee Enterprises, Inc. d/b/a
Cellular Warehouse, Inc.
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
WITH REPORT OF INDEPENDENT AUDITORS
<PAGE> 5
Sosebee Enterprises, Inc. d/b/a
Cellular Warehouse, Inc.
Financial Statements
Years ended December 31, 1995, 1996 and 1997
<TABLE>
<CAPTION>
CONTENTS
<S> <C>
Report of Independent Auditors..........................................................................1
Audited Financial Statements
Balance Sheets..........................................................................................2
Statements of Income....................................................................................3
Statements of Shareholders' Equity......................................................................4
Statements of Cash Flows................................................................................5
Notes to Financial Statements...........................................................................6
</TABLE>
<PAGE> 6
ERNST & YOUNG LLP * Suite 2800 * Phone: 404 874 8300
600 Peachtree Street
Atlanta, Georgia 30308-2215
Report of Independent Auditors
Board of Directors and Shareholders
Sosebee Enterprises, Inc.
d/b/a Cellular Warehouse, Inc.
We have audited the accompanying balance sheets of Sosebee Enterprises, Inc.
d/b/a Cellular Warehouse, Inc. (the Company) as of December 31, 1996 and 1997,
and the related statements of income, shareholders' equity, and cash flows for
each of the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Sosebee Enterprises, Inc. d/b/a
Cellular Warehouse, Inc. at December 31, 1996 and 1997, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
May 8, 1998
1
<PAGE> 7
Sosebee Enterprises, Inc. d/b/a
Cellular Warehouse, Inc.
Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31
1996 1997
--------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,619,860 $ 2,623,735
Accounts receivable, net 7,103,342 4,598,424
Inventories 2,607,373 2,154,900
Prepaid expenses 136,696 158,198
Other current assets 163,013 134,794
--------------------------------------------
Total current assets 12,630,284 9,670,051
Property and equipment, net 770,304 832,226
Intangible assets, net 962,835 964,238
--------------------------------------------
Total assets $14,363,423 $11,466,515
============================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 2,966,523 $ 2,258,447
Accrued expenses 1,542,578 1,238,706
Deferred revenues 256,271 386,532
Customer deposits and rebates 1,058,435 756,962
--------------------------------------------
Total current liabilities 5,823,807 4,640,647
Long-term deferred revenues 402,830 558,334
Shareholders' equity:
Common stock, $1.00 par value, 100,000 shares authorized,
1,000 shares issued and outstanding 1,000 1,000
Additional paid-in capital 29,000 29,000
Retained earnings 8,106,786 6,237,534
--------------------------------------------
Total shareholders' equity 8,136,786 6,267,534
--------------------------------------------
Total liabilities and shareholders' equity $14,363,423 $11,466,515
============================================
</TABLE>
2
<PAGE> 8
Sosebee Enterprises, Inc. d/b/a
Cellular Warehouse, Inc.
Statements of Income
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1995 1996 1997
-------------------------------------------------------------
<S> <C> <C> <C>
Net revenues:
Activation commissions $ 9,354,051 $21,474,658 $20,676,080
Residual income 2,203,949 4,074,014 6,711,300
Product sales and other 3,011,560 7,079,682 11,043,430
-------------------------------------------------------------
Total net revenues 14,569,560 32,628,354 38,430,810
Cost of sales 7,004,966 14,413,008 15,597,981
-------------------------------------------------------------
Gross profit 7,564,594 18,215,346 22,832,829
Operating expenses:
Selling, general and administrative 5,265,495 11,545,809 14,503,176
Depreciation and amortization 34,685 114,044 210,746
Amortization of intangible assets -- 225,165 318,597
-------------------------------------------------------------
Total operating expenses 5,300,180 11,885,018 15,032,519
-------------------------------------------------------------
Net income $ 2,264,414 $ 6,330,328 $ 7,800,310
=============================================================
</TABLE>
3
<PAGE> 9
Sosebee Enterprises, Inc. d/b/a
Cellular Warehouse, Inc.
Statements of Shareholders' Equity
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
----------------------- PAID-IN RETAINED SHAREHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1995 1,000 $1,000 $29,000 $ 1,088,530 $ 1,118,530
Dividends paid -- -- -- (243,563) (243,563)
Net income -- -- -- 2,264,414 2,264,414
--------------------------------------------------------------------------
Balance at December 31, 1995 1,000 1,000 29,000 3,109,381 3,139,381
Dividends paid -- -- -- (1,332,923) (1,332,923)
Net income -- -- -- 6,330,328 6,330,328
--------------------------------------------------------------------------
Balance at December 31, 1996 1,000 1,000 29,000 8,106,786 8,136,786
Dividends paid -- -- -- (9,669,562) (9,669,562)
Net income -- -- -- 7,800,310 7,800,310
--------------------------------------------------------------------------
Balance at December 31, 1997 1,000 $1,000 $29,000 $ 6,237,534 $ 6,267,534
==========================================================================
</TABLE>
4
<PAGE> 10
Sosebee Enterprises, Inc. d/b/a
Cellular Warehouse, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1995 1996 1997
----------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 2,264,414 $ 6,330,328 $ 7,800,310
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 34,685 114,044 210,746
Amortization of intangible assets -- 225,165 318,597
Changes in operating assets and liabilities:
Accounts receivable (1,849,108) (3,603,499) 2,504,918
Inventories 59,421 (1,410,890) 452,473
Prepaid expenses (5,935) (86,933) (21,502)
Other current assets (20,867) (106,661) 28,219
Trade accounts payable 752,921 1,440,864 (708,076)
Accrued expenses (199,971) 1,010,119 (303,872)
Deferred revenues 69,190 589,911 285,765
Customer deposits and rebates 475,778 466,914 (301,473)
----------------------------------------------------
Net cash provided by operating activities 1,580,528 4,969,362 10,266,105
INVESTING ACTIVITIES
Purchases of property and equipment (86,840) (723,036) (272,668)
Acquisitions of customer bases -- (1,188,000) (320,000)
----------------------------------------------------
Net cash used in investing activities (86,840) (1,911,036) (592,668)
FINANCING ACTIVITIES
Decrease in loans from shareholders (727,002) -- --
Dividends paid (243,563) (1,332,923) (9,669,562)
----------------------------------------------------
Net cash used in financing activities (970,565) (1,332,923) (9,669,562)
----------------------------------------------------
Net increase in cash and cash equivalents 523,123 1,725,403 3,875
Cash and cash equivalents at beginning of period 371,334 894,457 2,619,860
----------------------------------------------------
Cash and cash equivalents at end of period $ 894,457 $ 2,619,860 $ 2,623,735
====================================================
</TABLE>
5
<PAGE> 11
Sosebee Enterprises, Inc. d/b/a
Cellular Warehouse, Inc.
Notes to Financial Statements
Years ended December 31, 1995, 1996 and 1997
1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Sosebee Enterprises, Inc. d/b/a Cellular Warehouse, Inc. (the Company) is an
independent specialty retailer and wholesale distributor of cellular and
wireless products, services and accessories.
The Company's stores have historically experienced, and the Company expects its
stores to continue to experience, seasonal fluctuations in revenues with a
larger percentage of revenues typically being realized in the fourth quarter
during the holiday season. As of December 31, 1995, 1996 and 1997, the Company
operated 20, 53 and 57 stores, respectively, located throughout the southeastern
United States.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
ACCOUNTS RECEIVABLE
A substantial portion of the Company's accounts receivable are due from carriers
of wireless communication services. Accounts receivable are net of allowances of
$191,000 and $235,000 as of December 31, 1996 and 1997, respectively, which are
primarily reserves for deactivations. The reserve for deactivations is
calculated based on a historical percentage of deactivations over a rolling five
month period.
INVENTORIES
Inventories, consisting of cellular and wireless products and related
accessories, are valued at the lower of cost, based on the first-in, first-out
method, or market.
6
<PAGE> 12
Sosebee Enterprises, Inc. d/b/a
Cellular Warehouse, Inc.
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the related assets.
Leasehold improvements are amortized over the shorter of their useful life or
the remainder of the noncancelable lease period.
STORE OPENING COSTS
The Company expenses store preopening costs as incurred. In connection with the
opening of stores, the Company receives incentives in the form of build-out
allowances from the certain cellular carriers. These incentives are recorded as
deferred revenue and recognized over the Company's estimate of its customers'
activation periods (seven years). At December 31, 1996 and 1997, the Company had
deferred revenues of $477,600 and $674,928, respectively, relating to these
openings.
CUSTOMER DEPOSITS AND REBATES
Substantially all customer deposits represent payments made to the Company by
individual customers relating to the activation of cellular phones. These
amounts are in addition to deposits that the customer may be required to make
directly with the carrier for monthly service. In the event that a customer
terminates a cellular airtime contract within six months of activation, the
deposit is forfeited to the Company. The Company is not liable for customers'
unpaid monthly service bills.
Certain customers are entitled to rebates from the Company based on the length
of continuous usage. The Company records a liability for the rebates at the time
of issuance. This liability is reduced as amounts are paid or the rebates
expire.
7
<PAGE> 13
Sosebee Enterprises, Inc. d/b/a
Cellular Warehouse, Inc.
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION
ACTIVATION COMMISSIONS
The Company receives activation commissions from cellular carriers for each new
cellular phone subscription sold by the Company. Revenue from such commissions
is recorded upon customer subscription. New subscription activation commissions
are fully refundable if the subscriber cancels service within a certain minimum
period of continuous active service (generally 180 days). Customers generally
sign a service agreement that may require a deposit, which is forfeited in case
of early cancellation. The allowance for accounts receivable includes an amount
for estimated cancellation losses, net of deposit forfeitures.
RESIDUAL INCOME
The Company receives monthly residual income from the cellular service providers
based on a percentage of actual phone usage by its subscribers. Revenue from
residual income is generally recorded as the cellular service is provided.
PRODUCT SALES AND OTHER
Revenue from retail product sales is recorded upon customer purchase. Revenue
from wholesale product sale is recognized upon shipment of goods. Revenue from
prepaid pager service is deferred and recognized over the period service is
provided, usually three to twelve months. Revenue from monthly installment pager
service contracts is recorded as earned. Approximately $12,000, $354,000 and
$772,000 of revenue from prepaid pager service was recognized in the years ended
December 31, 1995, 1996 and 1997, respectively.
8
<PAGE> 14
Sosebee Enterprises, Inc. d/b/a
Cellular Warehouse, Inc.
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ADVERTISING
The Company expenses advertising costs as incurred. Advertising expense, which
is included in selling, general and administrative is recorded net of
cooperative advertising payments received. Net advertising expense amounted to
approximately $494,000, $594,000 and $959,000 for the years ended December 31,
1995, 1996 and 1997, respectively.
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
During 1996, the Company adopted the provisions of Statement of Financial
Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets", which requires impairment losses to be recorded on
long-lived assets when indicators of impairment are present and the undiscounted
cash flows estimated to be generated by those assets are less than the assets'
carrying amount. The adoption of SFAS No. 121 had no effect on the Company's
financial statements.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
INCOME TAXES
The Company has elected to be taxed under the provisions of Subchapter S of the
Internal Revenue Code. Under those provisions, the Company does not pay federal
or state corporate income taxes. Instead, the stockholders are liable for
individual federal and state income taxes on their respective shares of the
Company's taxable income.
9
<PAGE> 15
Sosebee Enterprises, Inc. d/b/a
Cellular Warehouse, Inc.
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES (CONTINUED)
The pro forma provision for federal and state income taxes for the years ended
December 31, 1995, 1996 and 1997 would be approximately $900,000, $2,600,000 and
$2,900,000, respectively and would have recorded deferred tax assets of
approximately $50,000 and $230,000 December 31, 1995 and 1996, respectively, and
a deferred tax liability of approximately $350,000 at December 31, 1997. The pro
forma provision reflects amounts that would have been recorded had the Company's
income been taxed for state and federal purposes as if it were a C Corporation
and accounted for taxes in accordance with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes."
3. ACQUISITIONS OF CUSTOMER BASES
During 1996, the Company acquired the customer residual income rights and
certain inventories and fixed assets of Dekalb Cellular, Inc., Car Phone Center,
Inc., and American Radio Corp. and certain assets and the customer residual
income rights of Commonwealth Distributors, Inc., East Coast Group, Inc. and
Cellular Trading Corp. (each a cellular phone retailer) for a total of
approximately $1.8 million in cash. These acquisitions gave rise to an
intangible asset (acquired customer base) of $1.2 million relating to the value
of rights to the residual income.
In 1997, the customer residual income rights of Southeast Telecom, Inc. (a
cellular phone retailer) was acquired for $320,000.
All of the acquisitions are accounted for as purchases, and, accordingly, the
residual income attributable to each entity is included in the income statement
from the effective dates of purchase. The intangible assets relating to these
acquisitions are being amortized over 7 years, the estimated contract period.
The accumulated amortization was approximately $225,000 and $544,000 at December
31, 1996 and 1997, respectively.
10
<PAGE> 16
Sosebee Enterprises, Inc. d/b/a
Cellular Warehouse, Inc.
Notes to Financial Statements (continued)
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
USEFUL DECEMBER 31
LIVES 1996 1997
--------------------------------------------------------
<S> <C> <C> <C>
Signs 5 $ 4,624 $ 4,624
Vehicles and equipment 5 218,107 218,107
Furniture and fixtures 7 101,848 101,848
Leasehold improvements 5-7 634,072 906,740
---------------------------------------
958,651 1,231,319
Less accumulated depreciation and
amortization (188,347) (399,093)
---------------------------------------
$ 770,304 $ 832,226
=======================================
</TABLE>
5. COMMITMENTS AND CONTINGENCIES
The Company leases retail, office and warehouse space and certain equipment
under operating leases which expire at various dates through 2002 with options
to renew certain of such leases for additional periods. The lease agreements
covering retail space provide for minimum rentals and/or rentals based on a
percentage of sales.
Future minimum payments under operating leases at December 31, 1997 are
approximately as follows:
Years ending December 31:
1998 $1,343,700
1999 921,700
2000 482,600
2001 236,100
Thereafter 71,800
-----------------------
Total $3,055,900
=======================
11
<PAGE> 17
Sosebee Enterprises, Inc. d/b/a
Cellular Warehouse, Inc.
Notes to Financial Statements (continued)
5. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Total rent expense for the years ended December 31, 1995, 1996 and 1997 was
approximately, $438,500, $1,101,000 and $1,557,000, respectively.
6. RELATED PARTY TRANSACTIONS
The Company paid $6,000 per month for rent of a building during the year ended
December 31, 1997 and $5,000 per month during the year ended December 31, 1996
to a shareholder of the Company. Also, a shareholder of the Company is a
shareholder in the bank with which the Company currently maintains its operating
accounts.
7. SIGNIFICANT CUSTOMERS
Two customers accounted for 100% of the Company's activation commissions and
residual income for the years ended December 31, 1995, 1996 and 1997. Accounts
receivable from these customers accounted for 97% and 99% of the total net
accounts receivable at December 31, 1996 and 1997, respectively.
8. EMPLOYEE BENEFIT PLAN
In January 1995, the Company adopted a defined contribution plan (401(k) Plan)
for all eligible employees based on years of service. The basis for determining
contributions is a percentage of the employees' compensation not to exceed 15%.
Contributions made by the Company are at the discretion of the Board of
Directors. The Company made contributions of $23,717 and $24,869 during the
years ended December 31, 1996 and 1997, respectively, and did not make any
contributions during the year ended December 31, 1995.
9. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, accounts receivable, trade
accounts payable and accrued expenses approximate fair value because of their
short duration to maturity.
12
<PAGE> 18
Sosebee Enterprises, Inc. d/b/a
Cellular Warehouse, Inc.
Notes to Financial Statements (continued)
10. SUBSEQUENT EVENT
On April 2, 1998, the shareholders of the Company sold the stock of the Company
to Let's Talk Cellular & Wireless, Inc. (LTCW). In the transaction, LTCW issued
550,000 shares of common stock and paid approximately $17.5 million in cash in
exchange for all of the outstanding stock of Cellular Warehouse. The transaction
represents an equity value of approximately $28 million, based on LTCW's April
2, 1998 closing stock price of $19.00 per share.
11. YEAR 2000 (UNAUDITED)
The Company recognizes the need to ensure its operations will not be adversely
impacted by year 2000 software failures. The Company intends to take the actions
necessary to ensure that systems and applications will recognize and process
information in the year 2000 and beyond. While efforts are underway and no
estimate of the cost of this effort has been determined, management currently
does not expect the cost of year 2000 compliance to be material to its
consolidated financial statements.
13
<PAGE> 19
LET'S TALK CELLULAR & WIRELESS, INC.
PRO FORMA FINANCIAL DATA (unaudited)
The following unaudited pro forma condensed consolidated statements of income
for the nine months ended April 30, 1998 and the year ended July 31, 1997,
reflect the historical statements of income of the Company, adjusted to reflect
the effects of the Cellular Warehouse Acquisition and related transactions, the
Telephone Warehouse Acquisition and related transactions, the sale of Common
Stock completed in an initial public offering and the application of a portion
of the net proceeds therefrom to the repayment of outstanding bank indebtedness
and certain shareholder notes and as if such transactions had occurred as of the
beginning of the periods presented. Share and per share amounts give effect to a
3.289-for-one stock split effected on October 20, 1997.
On April 2, 1998 (effective March 1, 1998), the Company purchased all of the
outstanding shares of Common Stock of Cellular Warehouse, in exchange for $19.9
million in cash, including acquisition costs of approximately $884,000, and
550,000 shares of the Company's Common Stock. The value of the 550,000 shares
was approximately $7.6 million, based on the Company's March 1, 1998 closing
stock price of $13.75 per share. The fair value of net assets acquired,
including approximately $3.6 million allocated to acquired residual income, was
approximately $7.1 million. The purchase price exceeded the fair value of the
net assets acquired by approximately $20.4 million, which amount will be
amortized on a straight line basis over 30 years. The allocated cost of residual
income is being amortized on an accelerated basis. The acquisition was accounted
for using the purchase method of accounting. In connection with the Cellular
Warehouse Acquisition, the Company entered into a term loan with a bank totaling
$21.5 million bearing interest at a variable percentage above the commercial
paper rate.
On June 27, 1997 (effective June 30, 1997), the Company purchased 100% of the
outstanding shares of common stock of Telephone Warehouse from Texas Cellular
Partners, L.P. (TCP), an affiliate of HIG Fund V, Inc. (an affiliate of the
controlling shareholder of the Company), in exchange for 1,817,468 shares of the
Company's Common Stock and assumption of $13.1 million of indebtedness. The fair
value of the shares issued was approximately $2.8 million. The fair value of net
assets acquired, including approximately $1.6 million (net of deferred tax
liability of $942,000) allocated to acquired residual income was approximately
$4.9 million. The purchase price exceeded the fair value of the net assets
acquired by approximately $11.0 million, which amount is being amortized on a
straight line basis over 30 years. The allocated cost of residual income is
being amortized on an accelerated basis. The acquisition was accounted for using
the purchase method of accounting. In connection with the acquisition of
Telephone Warehouse, the Company refinanced its debt and issued warrants to
NationsCredit Commercial Corporation, the Company's bank lender (NationsCredit),
to purchase a total of 106,596 shares of the Company's Common Stock at an
exercise price of $.00003 per share.
In a previous transaction, on January 1, 1997, TCP had purchased from the
President and sole shareholder of Telephone Warehouse, Ronald Koonsman, all of
the outstanding stock of Telephone Warehouse for a purchase price of $15.1
million including acquisition costs of approximately $200,000.
Simultaneous with the acquisition of Telephone Warehouse, the Company induced
the holder of the Company's outstanding Series A Preferred Stock to convert all
outstanding shares of the Series A Preferred Stock to Common Stock by increasing
the conversion ratio of the Series A Preferred Stock from 17.5 to 1 to 21.38 to
1. As a result of such conversion, the holder of the Company's outstanding
Series A Preferred Stock surrendered certain rights to enforce various
restrictive covenants regarding the Company's operations. Upon such conversion,
the holder of the Series A Preferred Stock received 2,137,850 shares of Common
Stock (388,701 shares in addition to the original conversion ratio). The fair
value of the 388,701 shares at the date of issuance was determined to be
approximately $320,000.
<PAGE> 20
The accompanying unaudited pro forma condensed consolidated statements of income
for the nine months ended April 30, 1998 and the year ended July 31, 1997,
reflect the historical statements of income of the Company, adjusted to reflect
the effects of the Cellular Warehouse Acquisition, the Telephone Warehouse
Acquisition, the conversion of Preferred Stock into Common Stock and as if such
transactions had occurred on August 1, 1996.
The unaudited pro forma consolidated financial data and accompanying notes
should be read in conjunction with the Financial Statements and related notes of
Sosebee Enterprises, Inc. d/b/a Cellular Warehouse, Inc. which are included
herein, the Financial Statements and the related notes of the Company and the
Combined Financial Statements and related notes of Telephone Warehouse which are
included in the Company's Registration Statement on Form S-1 filed on November
24, 1997. The Company believes that the assumptions used in the following
statements provide a reasonable basis on which to present the pro forma
financial data. The purchase price allocation is based on preliminary data. The
unaudited pro forma financial data is provided for informational purposes only
and should not be construed to be indicative of the Company's financial
condition or results of operations had the transactions and events above been
consummated on the dates assumed and are not intended to constitute projections
with regards to the Company's financial condition as of any future date or
results of operations for any future period.
<PAGE> 21
Pro Forma Condensed Consolidated Statement of Income
For the nine months ended April 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Cellular
Warehouse
Seven months
The ended Pro Forma
Company April 30, 1998 Adjustments Pro Forma
---------------- --------------------- ----------------- --------------
<S> <C> <C> <C> <C>
Net revenues:
Retail sales $ 27,882,650 $ 5,507,711 $ -- $ 33,390,361
Activation commissions 28,804,420 13,004,318 41,808,738
Residual income 8,966,889 3,343,967 12,310,856
Wholesale sales 21,050,515 -- 21,050,515
------------- ------------- ------------ ------------
Total net revenues 86,704,474 21,855,996 -- 108,560,470
Cost of sales 49,673,915 8,039,546 57,713,461
------------- ------------- ------------ ------------
Gross profit 37,030,559 13,816,450 -- 50,847,009
Operating expenses:
Selling, general and administrative 31,813,342 8,457,058 40,270,400
Depreciation and amortization 985,150 40,949 1,026,099
Amortization of intangibles 1,438,938 -- 809,560 (1) 2,248,498
------------- ------------- ------------ ------------
Total operating expenses 34,237,430 8,498,007 809,560 43,544,997
------------- ------------- ------------ -----------
Income from operations 2,793,129 5,318,443 (809,560) 7,302,012
Interest expense, net (1,052,799) -- (1,114,942)(2) (2,167,741)
Other -- 10,001 10,001
------------- ------------- ------------ ------------
Income before provision for income taxes 1,740,330 5,328,444 (1,924,502) 5,144,272
Income tax provision 819,704 -- 1,240,213 (3) 2,059,917
------------- ------------- ------------ ------------
Income before extraordinary charge 920,626 5,328,444 (3,164,715) 3,084,355
Extraordinary charge on debt retirement, net of taxes 631,584 -- -- 631,584
------------- ------------- ------------ ------------
Net income $ 289,042 $ 5,328,444 $(3,164,715) $ 2,452,771
============= ============= ============ ============
Basic and Diluted:
Income before extraordinary charge $ 0.12 $ 0.35
Extraordinary charge (0.08) (0.07)
------------- ------------
Net income per share $ 0.04 $ 0.28 (4)
============= ============
Weighted average shares outstanding:
Basic 7,381,246 8,749,762 (4)
============= ============
Diluted 7,390,505 8,759,021
============= ============
</TABLE>
<PAGE> 22
Pro Forma Condensed Consolidated Statement of Income
Year ended July 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
Telephone
Warehouse
Eleven Months
The Cellular Ended Pro Forma
Company Warehouse June 30, 1997 Adjustments Pro Forma
---------------- ------------- ----------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net revenues:
Retail sales $ 13,230,085 $ 8,522,600 $ 6,008,790 $ -- $ 27,761,475
Activation commissions 12,574,633 20,122,806 6,618,948 39,316,387
Residual income 1,948,169 5,174,436 8,186,855 15,309,460
Wholesale sales 2,309,082 -- 23,529,042 25,838,124
------------- ------------ ------------- ------------ ------------
Total net revenues 30,061,969 33,819,842 44,343,635 -- 108,225,446
Cost of sales 14,822,617 14,400,590 29,589,564 58,812,771
------------- ------------ ------------- ------------ ------------
Gross profit 15,239,352 19,419,252 14,754,071 -- 49,412,675
Operating expenses:
Selling, general and
administrative 13,993,392 13,017,756 9,588,511 (35,000)(1) 36,564,659
Former shareholder compensation
expense 80,000 -- 1,080,000 (1,060,000)(1) 100,000
Depreciation and amortization 451,108 77,233 189,004 717,345
Amortization of intangibles 417,739 -- 1,120,997 637,642 (2) 3,799,349
1,622,971 (3)
------------- ------------ ------------- ------------ ------------
Total operating expenses 14,942,239 13,094,989 11,978,512 1,165,613 41,181,353
------------- ------------ ------------- ------------ ------------
Income from operations 297,113 6,324,263 2,775,559 (1,165,613) 8,231,322
Interest expense, net (340,102) -- (714,997) (846,477)(4) (1,820,708)
(1,711,158)(5)
1,792,026 (6)
Other -- -- 7,598 7,598
------------- ------------ ------------- ------------ ------------
Income (loss) before provision for
income taxes (42,989) 6,324,263 2,068,160 (1,931,222) 6,418,212
Income tax provision 2,842 680,402 1,792,640 (7) 2,475,884
------------- ------------ ------------- ------------ ------------
Net income (loss) (45,831) 6,324,263 1,387,758 (3,723,862) 3,942,328
Fair value of Common Stock
distributed to preferred shareholder
to induce conversion of Series A
Preferred Stock (320,000) -- 320,000 (8) --
------------- ------------ ------------- ------------ ------------
Net income (loss) applicable to common
shareholders $ (365,831) $ 6,324,263 $ 1,387,758 $(3,403,862) $ 3,942,328
============= ============ ============= ============ ============
Basic and Diluted:
Net income (loss) applicable to common
shareholders per share $ (0.07) $ 0.44 (9)
============= ============
Basic and Diluted:
Weighted average shares outstanding $ 6,199,762 $ 8,749,762 (9)
============= ============
</TABLE>
<PAGE> 23
Notes to Pro Forma Condensed Consolidated Financial Statements (unaudited)
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - NINE MONTHS ENDED APRIL 30, 1998
(1) Reflects increase to amortization of intangible assets for the Cellular
Warehouse Acquisition. Goodwill totaling approximately $20.4 million is
being amortized over 30 years and the allocated cost of acquired residual
income of approximately $3.6 million is being amortized on an accelerated
basis according to the anticipated timing of acquired cash flows,
resulting in incremental amortization as follows:
Incremental amortization of goodwill $ 409,600
Incremental amortization of acquired residual income 399,960
-------------
Pro forma adjustment $ 809,560
(2) Reflects incremental interest expense and incremental amortization of
deferred financing costs on new borrowings to fund the Cellular Warehouse
Acquisition of $21.5 million as if such debt was outstanding as of the
beginning of the period presented, as follows:
Incremental interest expense on new borrowings $ 1,049,170
Incremental amortization of deferred financing
costs on new debt 65,772
-------------
Pro forma adjustment $ 1,114,942
(3) Reflects recognition of income tax expense associated with the following:
Income tax provision as if Cellular Warehouse were a
C-Corporation as of August 1, 1996 $ 1,971,524
Tax effect of pro forma adjustments at statutory rates (731,311)
-------------
Pro forma adjustment $ 1,240,213
(4) Net income per share is calculated by using the weighted average number of
shares of Common Stock outstanding during the period, assuming the
conversion of the Series A Preferred Stock into 2,137,850 shares of Common
Stock, the issuance of the 1,817,468 shares of Common Stock to purchase
Telephone Warehouse, the issuance of 106,596 warrants in connection with the
Company's debt refinancing, the issuance of 550,000 shares of Common Stock
to purchase Cellular Warehouse and the issuance of 2,000,000 shares of
Common Stock in connection with the offering had all occurred as of August
1, 1997, resulting in 8,749,762 weighted average shares outstanding.
<PAGE> 24
Notes to Pro Forma Condensed Consolidated Financial Statements (unaudited)
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - YEAR ENDED JULY 31, 1997
(1) Reflects reduction of compensation expense to $100,000 per year based on a
new employment agreement signed at the time of the Telephone Warehouse
Acquisition by Ronald Koonsman providing for the following: (i) for the six
month period beginning on July 1, 1997, a salary of $50,000 and (ii) for
the 12 month period beginning on January 1, 1998, a salary of $100,000. The
agreement also provided for a non-recurring bonus of $950,000 that was paid
prior to December 31, 1997. As a non-recurring charge, such bonus is not
included herein. Also reflects a new employment arrangement entered into at
the time of the Telephone Warehouse Acquisition with the Vice President of
Telephone Warehouse that provided for a reduction in compensation expense
from 10% to 5% of annual income before interest, taxes, depreciation and
amortization and management fees.
(2) Reflects increase to amortization of intangible assets for the Telephone
Warehouse Acquisition. Goodwill totaling approximately $11.0 million is
being amortized over 30 years and the allocated cost of acquired residual
income of approximately $2.5 million is being amortized on an accelerated
basis according to the anticipated timing of acquired cash flows, resulting
in incremental amortization as follows:
Incremental amortization of goodwill $163,791
Incremental amortization of acquired residual income 473,851
-------------
Pro forma adjustment $637,642
The amortization of the allocated cost of acquired residual income
subsequent to July 31, 1997 is expected to be approximately as follows:
Fiscal 1998 $1,507,000
Fiscal 1999 676,000
Fiscal 2000 189,000
Fiscal 2001 5,000
-------------
$2,377,000
<PAGE> 25
Notes to Pro Forma Condensed Consolidated Financial Statements (unaudited)
(3) Reflects increase to amortization of intangible assets for the Cellular
Warehouse Acquisition. Goodwill totaling approximately $20.4 million is
being amortized over 30 years and the allocated cost of acquired residual
income of approximately $3.6 million is being amortized on an accelerated
basis according to the anticipated timing of acquired cash flows, resulting
in amortization as follows:
Amortization of goodwill $679,467
Amortization of acquired residual income 943,504
----------------
Pro forma adjustment $1,622,971
The amortization of the allocated cost of acquired residual income
subsequent to July 31, 1997 is expected to be approximately as follows:
Fiscal 1998 $740,000
Fiscal 1999 581,000
Fiscal 2000 456,000
Fiscal 2001 358,000
Fiscal 2002 281,000
Fiscal 2003 220,000
---------------
$2,636,000
(4) Reflects incremental interest expense and incremental amortization of
deferred financing costs on assumed debt of Telephone Warehouse, comprised
of $11.1 million in bank indebtedness and $2 million in note payable to
former shareholder, and new borrowings to fund the Telephone Warehouse
Acquisition of $2 million as if such debt was outstanding as of the
beginning of the period presented, as follows:
Incremental interest expense on assumed debt $583,706
Incremental interest expense on new borrowings 51,125
Incremental amortization of deferred financing
costs on assumed debt 137,590
Incremental amortization of deferred financing
costs on new debt 74,056
------------
Pro forma adjustment $846,477
<PAGE> 26
Notes to Pro Forma Condensed Consolidated Financial Statements (unaudited)
(5) Reflects interest expense and amortization of deferred financing costs on
new borrowings to fund the Cellular Warehouse Acquisition of $21.5 million
as if such debt was outstanding as of the beginning of the period
presented, as follows:
Interest expense on new borrowings $1,612,500
Amortization of deferred financing
costs on assumed debt 98,658
---------------
Pro forma adjustment $1,711,158
(6) Reflects a reduction in interest expense assuming the repayment of bank
indebtedness of $14.1 million and certain shareholder notes of $258,100
with a portion of the proceeds from the offering.
(7) Reflects recognition of income tax expense associated with the following:
Income tax provision as if Cellular Warehouse
were a C-Corporation as of August 1, 1996 $2,339,977
Income tax provision as if all Telephone Warehouse
entities were a C-Corporations as of August 1, 1996 145,420
Tax effect of pro forma adjustments at statutory rates (517,432)
Tax benefit associated with the incremental amortization
of the acquired residual income (175,325)
---------------
Pro forma adjustment $1,792,640
(8) Reflects the reversal of a non-recurring distribution resulting from the
issuance of 388,701 shares of Common Stock distributed to induce the
conversion of the Series A Preferred Stock into a total of 2,137,850 shares
of Common Stock. The conversion of the Series A Preferred Stock was a
condition precedent to the Telephone Warehouse Acquisition.
<PAGE> 27
Notes to Pro Forma Condensed Consolidated Financial Statements (unaudited)
(9) Net income per share applicable to common shareholders is calculated by
using the weighted average number of shares of Common Stock outstanding
during the period, assuming the conversion of the Series A Preferred Stock
into 2,137,850 shares of Common Stock, the issuance of the 1,817,468
shares of Common Stock to purchase Telephone Warehouse, the issuance of
106,596 warrants in connection with the Company's debt refinancing, the
issuance of 550,000 shares of Common Stock to purchase Cellular Warehouse
and the issuance of 2,000,000 shares of Common Stock in connection with
the offering had all occurred as of August 1, 1996 resulting in, 8,749,762
weighted average shares outstanding. Accretion to redemption value of the
Series A Preferred Stock of $62,640, has been deducted from net income for
purposes of calculating net income per share applicable to common
shareholders.
<PAGE> 1
Exhibit 2.1
- --------------------------------------------------------------------------------
SECOND AMENDED AND RESTATED
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
LET'S TALK CELLULAR & WIRELESS, INC.
AND
CERTAIN SELLING SHAREHOLDERS
RELATING TO THE ACQUISITION OF
SOSEBEE ENTERPRISES, INC.
d/b/a CELLULAR WAREHOUSE
AND
CELLULAR WAREHOUSE, INC.
DATED AS OF MARCH 1, 1998
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
PURCHASE OF STOCK..................................................................................................1
1.1 Purchase and Sale.....................................................................................1
1.2 Purchase Price........................................................................................1
1.3 Purchase Price Adjustments............................................................................2
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLERS......................................................................5
2.1 Corporate Organization, Etc..........................................................................5
2.2 Subsidiaries.........................................................................................5
2.3 Stock Record Books...................................................................................5
2.4 Corporate Minute Books...............................................................................5
2.5 Title to Stock.......................................................................................5
2.6 Authorization, Etc...................................................................................6
2.7 Options and Rights...................................................................................6
2.8 No Violation.........................................................................................6
2.9 Financial Statements.................................................................................6
2.10 Employees............................................................................................7
2.11 Absence of Certain Changes...........................................................................7
2.12 Contracts............................................................................................8
2.13 True and Complete Copies.............................................................................9
2.14 Title and Related Matters............................................................................9
2.15 Litigation..........................................................................................10
2.16 Tax Matters.........................................................................................10
2.17 Compliance with Law and Applicable Government Regulations...........................................12
2.18 ERISA and Related Matters...........................................................................12
2.19 Intellectual Property...............................................................................15
2.20 Customer Warranties.................................................................................16
2.21 Products Liability..................................................................................16
2.22 Environmental Matters...............................................................................16
2.23 Capital Expenditures and Investments................................................................17
2.24 Dealings with Affiliates............................................................................17
2.25 Insurance...........................................................................................17
2.26 Accounts Receivable; Inventories....................................................................18
2.27 Brokerage...........................................................................................18
2.28 Customers and Suppliers.............................................................................18
2.29 Permits.............................................................................................18
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
2.30 Acquisitions.........................................................................................19
2.31 Improper and Other Payments..........................................................................19
2.32 Disclosure...........................................................................................19
2.33 Indebtedness.........................................................................................19
2.34 Securities Laws Matters..............................................................................19
2.35 Legends..............................................................................................20
2.36 Amendments to Disclosure Schedules...................................................................20
2.37 Pre-Closing Covenants................................................................................20
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER....................................................................20
3.1 Corporate Organization, Etc..........................................................................20
3.2 Authorization, Etc...................................................................................21
3.3 No Violation.........................................................................................21
3.4 Investment Intent....................................................................................21
3.5 Reports and Financial Statements.....................................................................21
3.6 Absence of Certain Changes...........................................................................22
ARTICLE IV
COVENANTS OF THE SELLERS...........................................................................................22
4.1 Regular Course of Business...........................................................................22
4.2 Amendments...........................................................................................22
4.3 Capital Changes; Pledges.............................................................................22
4.4 Dividends............................................................................................23
4.5 Capital and Other Expenditures.......................................................................23
4.6 Leases...............................................................................................23
4.7 Assets...............................................................................................23
4.8 Accounts Payable.....................................................................................23
4.9 Accounting Policies..................................................................................23
4.10 Borrowing............................................................................................23
4.11 Full Access and Disclosure...........................................................................23
4.12 Tax Matters..........................................................................................24
4.13 Certain Operational Matters..........................................................................24
ARTICLE V
COVENANTS OF THE PURCHASER.........................................................................................24
5.1 Confidentiality......................................................................................24
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<S> <C>
5.2 Board Membership.....................................................................................24
5.3 Director Indemnification.............................................................................25
ARTICLE V
OTHER AGREEMENTS...................................................................................................25
6.1 Agreement to Defend..................................................................................25
6.2 Further Assurances...................................................................................25
6.3 No Solicitation or Negotiation.......................................................................25
6.4 No Termination of Sellers' Obligations by Subsequent Incapacity, Dissolution, Etc....................26
6.5 Deliveries After Closing.............................................................................26
6.6 NonCompetition.......................................................................................26
6.7 Public Announcements.................................................................................27
6.8 Hart-Scott-Rodino Act................................................................................27
6.9 Trading in LTC Common Stock..........................................................................27
6.10 Certain Tax Matters..................................................................................28
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER.....................................................................29
7.1 Representations and Warranties; Performance..........................................................29
7.2 Consents and Approvals...............................................................................29
7.3 Opinion of the Sellers' Counsel......................................................................30
7.4 No Material Adverse Change...........................................................................30
7.5 No Proceeding or Litigation..........................................................................30
7.6 Financing............................................................................................30
7.7 Carrier Agreements...................................................................................30
7.8 Accounting Matters...................................................................................30
7.9 Condition of Assets..................................................................................30
7.10 Termination of Affiliate Contracts...................................................................30
7.11 Secretary's Certificate..............................................................................31
7.12 Certificates of Good Standing........................................................................31
7.13 Leases...............................................................................................31
7.14 Employment Agreements................................................................................31
7.15 Resignations.........................................................................................31
7.16 Escrow Agreement.....................................................................................31
7.17 LTC Common Stock.....................................................................................31
</TABLE>
(iii)
<PAGE> 5
<TABLE>
<S> <C>
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF THE SELLERS........................................................................32
8.1 Representations and Warranties; Performance..........................................................32
8.2 Consents and Approvals...............................................................................32
8.3 No Proceeding or Litigation..........................................................................32
8.4 Escrow Agreement.....................................................................................32
8.5 Employment Agreements................................................................................32
8.6 Secretary's Certificate..............................................................................32
8.7 LTC Common Stock.....................................................................................32
ARTICLE IX
REGISTRATION RIGHTS.................................................................................................32
9.1 "Piggy Back" Registrations...........................................................................32
9.2 Expenses of Registration.............................................................................34
9.3 Registration Procedures..............................................................................34
9.4 Participation in Underwritten Registrations..........................................................35
9.5 Further Information..................................................................................35
9.6 Indemnification......................................................................................35
ARTICLE X
CLOSING.............................................................................................................37
10.1 Closing..............................................................................................37
10.2 Intervening Litigation...............................................................................37
ARTICLE XI
TERMINATION AND ABANDONMENT.........................................................................................38
11.1 Methods of Termination...............................................................................38
11.2 Procedure Upon Termination...........................................................................38
ARTICLE XII
SURVIVAL OF TERMS; INDEMNIFICATION..................................................................................39
12.1 Survival.............................................................................................39
12.2 Limitations..........................................................................................39
12.3 Indemnification by Sellers...........................................................................39
</TABLE>
(iv)
<PAGE> 6
<TABLE>
<S> <C>
12.4 Indemnification by the Purchaser.....................................................................40
12.5 Third-Party Claims...................................................................................41
12.6 Security for the Indemnification Obligation..........................................................42
ARTICLE XIII
MISCELLANEOUS PROVISIONS............................................................................................42
13.1 Amendment and Modification...........................................................................42
13.2 Waiver of Compliance; Consents.......................................................................42
13.3 Certain Definitions..................................................................................43
13.4 Notices..............................................................................................49
13.5 Assignment...........................................................................................50
13.6 Governing Law........................................................................................51
13.7 Counterparts.........................................................................................51
13.8 Headings.............................................................................................51
13.9 Entire Agreement.....................................................................................51
13.10 Consent to Jurisdiction; Service of Process..........................................................51
13.11 Binding Effect.......................................................................................51
13.12 Injunctive Relief....................................................................................51
13.13 Delays or Omissions..................................................................................51
13.14 Severability.........................................................................................52
13.15 Expenses.............................................................................................52
13.16 Waiver of Jury Trial.................................................................................52
</TABLE>
(v)
<PAGE> 7
SCHEDULES AND EXHIBITS
<TABLE>
<CAPTION>
SCHEDULE/EXHIBIT RESPONSIBILITY
- ---------------- --------------------------
("SELLERS" OR "PURCHASER")
<S> <C>
1.1 Stock Certificates..................................................................................S
1.2(b) Form of Escrow Agreement............................................................................P
2.1(a) Foreign Qualifications of Corporation...............................................................S
2.1(b) Charter and Bylaws of Corporation...................................................................S
2.3 Stock Record Books, Stockholders - Capital Stock....................................................S
2.4 Minute Books, Officers and Directors................................................................S
2.8 Violations, Notices and Consents....................................................................S
2.9(a) Financial Statements................................................................................S
2.9(b) Audit Adjustments...................................................................................S
2.9(c) Postclosing Indebtedness............................................................................S
2.10 Employees...........................................................................................S
2.11 Permitted Dividends and Distributions...............................................................S
2.12(a) Contracts...........................................................................................S
2.14(a) Title Matters.......................................................................................S
2.14(b) Leases..............................................................................................S
2.14(c) Liens and Other Encumbrances........................................................................S
2.15 Litigation..........................................................................................S
2.16(a) Tax Matters.........................................................................................S
2.16(e) Review of Tax Returns...............................................................................S
2.18 ERISA Matters.......................................................................................S
2.19(a) Material Proprietary Rights.........................................................................S
2.19(b) Proprietary Rights Owned by Others..................................................................S
2.20 Warranties..........................................................................................S
2.21 Products Liability..................................................................................S
2.22 Environmental Matters...............................................................................S
2.23 Capital Expenditures................................................................................S
2.24 Affiliated Transactions.............................................................................S
2.25 Insurance and Claims................................................................................S
2.27 Brokerage...........................................................................................S
2.28 Significant Customers and Suppliers.................................................................S
2.29 Permits.............................................................................................S
2.30 Acquisitions........................................................................................S
2.31 Improper and Other Payments.........................................................................S
7.1 Form of Officer's Certificate - Corporations........................................................P
7.3 Form of Opinion of Shareholders' Counsel............................................................P
7.4 Form of Certificate of Chief Financial Officer of the Corporation...................................P
7.11 Form of Secretary's Certificate - Corporation.......................................................P
7.13 Form of Estoppel Letter.............................................................................P
7.14 Form of Employment Agreements.......................................................................P
8.1 Form of Officer's Certificate - Purchaser...........................................................P
8.6 Form of Secretary's Certificate - Purchaser.........................................................P
</TABLE>
(vi)
<PAGE> 8
SECOND AMENDED AND RESTATED
STOCK PURCHASE AGREEMENT
SECOND AMENDED AND RESTATED STOCK PURCHASE AGREEMENT, dated as of the
1st day of March, 1998, by and between Let's Talk Cellular & Wireless, Inc., a
Florida corporation (the "PURCHASER"), and the shareholders of Sosebee
Enterprises, Inc., a Georgia corporation doing business as "Cellular Warehouse,"
and Cellular Warehouse, Inc., a Georgia corporation (together with Sosebee
Enterprises, Inc., the "CORPORATIONS" and each individually, a "CORPORATION"),
listed on the signature pages hereto (collectively, the "SELLERS"). Terms used
herein and not otherwise defined shall have the meanings set forth in SECTION
13.3 hereof.
WHEREAS, the parties entered into that certain Stock Purchase
Agreement, dated as of February 1, 1998 (the "First Agreement"), and thereafter
amended and restated the First Agreement by entering into that certain Amended
and Restated Stock Purchase Agreement by and between Let's Talk Cellular &
Wireless, Inc. and Certain Selling Shareholders relating to the Acquisition of
Sosebee Enterprises, Inc. d/b/a Cellular Warehouse and Cellular Warehouse, Inc.,
dated as of March 1, 1998 (the "First Amendment");
WHEREAS, it is the intent of the parties that Purchaser control and
manage the Corporations as of March 1, 1998; and
WHEREAS, the parties desire to amend and restate the First Amendment to
more clearly delineate such intent.
NOW, THEREFORE, the parties agree as follows.
ARTICLE I
PURCHASE OF STOCK
1.1 PURCHASE AND SALE. Subject to the terms and conditions of this
Agreement, the Sellers agree to sell, and the Purchaser agrees to purchase from
the Sellers, all of the issued and outstanding shares of capital stock of both
Corporations (collectively, the "SHARES"). The number of Shares which are the
subject of this Agreement and the stock certificates evidencing the Shares are
described in SCHEDULE 1.1 hereto.
1.2 PURCHASE PRICE.
(a) In consideration for the conveyance of the Shares and in
reliance on the representations and warranties, covenants and
agreements of the Sellers contained herein and the documents
contemplated hereby, the Purchaser shall pay to the Sellers the
following consideration (the "Purchase Price"):
(i) Seventeen and One-Half Million Dollars ($17.5
million) in cash plus or minus the Purchase Price adjustments
set forth in SECTION 1.3 (such amount, subject to such
adjustments, being hereinafter referred to as the "CASH
AMOUNT"); and
<PAGE> 9
(ii) 550,000 shares of LTC Common Stock (the "LTC
SHARES"), which shall be issued to each Seller in his
Proportionate Share.
(b) The Purchaser shall deliver the LTC Shares at Closing as
follows: (i) the Purchaser shall deliver stock certificates
representing one third of each Seller's Proportionate Share of the LTC
Shares (the "ESCROW SHARES") to SunTrust Bank, Atlanta, as escrow agent
(the "ESCROW AGENT"), to hold pursuant to the terms and conditions of
the escrow agreement (the "ESCROW AGREEMENT") substantially in the form
of EXHIBIT 1.2(b) hereto, and (ii) the Purchaser shall deliver to each
Seller stock certificates representing the remainder of his
Proportionate Share of LTC Shares. The Cash Amount shall be paid to the
Sellers by means of wire transfer of immediately available federal
funds on the Closing Date.
(c) If, between the date of this Agreement and the Closing
Date, the outstanding shares of LTC Common Stock shall have been
changed into a different number of shares or a different class by
reason of any reclassification, recapitalization, split-up,
combination, exchange of shares or readjustment, or a stock dividend
thereon shall be declared with a record date within such period, or any
similar event made, declared or effected within such period and with a
record date, if applicable, within such period, the number of LTC
Shares shall be correspondingly appropriately adjusted.
(d) The Purchaser shall pay to the Sellers on the Closing Date
interest on the Cash Amount of the Purchase Price including any payment
under Section 1.3(a) at a rate of seven percent (7%) per annum, which
shall accrue from March 1, 1998 to the date of actual payment.
1.3 PURCHASE PRICE ADJUSTMENTS.
(a) PRE CLOSING ADJUSTMENT. At least five (5) days prior to
the Closing Date the Sellers shall prepare and deliver to the Purchaser
a balance sheet and calculation of the Effective Date Net Worth for the
Corporations as of March 1, 1998 (the "EFFECTIVE DATE"), prepared
consistent with each Corporation's past practices in preparing its
December 31, 1996 and 1995 year end financial statements and June 27,
1997 balance sheet (the "EFFECTIVE DATE BALANCE SHEET"). If the
Effective Date Balance Sheet shows a Net Worth Shortfall, the Cash
Amount of the Purchase Price paid at Closing shall be reduced by the
aggregate amount of such Net Worth Shortfall. If the Effective Date
Balance Sheet shows a Net Worth Surplus, an amount equal to the
aggregate amount of such Net Worth Surplus shall be disbursed by the
Corporations on the Closing Date in accordance with the instructions of
the President of Sosebee Enterprises, Inc.
(b) DISPUTE RESOLUTION PROCEDURES. The Purchaser shall have
until thirty (30) days after the Closing to review the Effective Date
Balance Sheet and Effective Date Net Worth calculation and propose any
adjustments thereto. All adjustments proposed by the Purchaser shall be
set forth in detail in a written statement delivered to the Sellers
(the "ADJUSTMENT STATEMENT") and shall be incorporated into the
Effective Date Balance Sheet unless the Sellers shall object in writing
to such proposed adjustments (the proposed
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adjustment or adjustments to which Sellers object are referred to
herein as the "CONTESTED ADJUSTMENTS" and the Sellers' objection notice
is referred to herein as the "CONTESTED ADJUSTMENT NOTICE") within
thirty (30) days of delivery by the Purchaser to the Sellers of the
Adjustment Statement. If the Sellers deliver a Contested Adjustment
Notice to the Purchaser, the Purchaser and the Sellers shall use
reasonable efforts to resolve their dispute regarding the Contested
Adjustments, but if a final resolution thereof is not obtained within
twenty (20) days after the Sellers deliver to the Purchaser said
Contested Adjustment Notice, the Purchaser and the Sellers shall
promptly retain a nationally recognized independent accounting firm
acceptable to both the Sellers and the Purchaser (the "INDEPENDENT
ACCOUNTANT") to resolve any remaining disputes concerning the Contested
Adjustments. Either the Sellers or the Purchaser may retain the
Independent Accountant upon the expiration of such 20-day period. If
the Independent Accountant is retained, then (i) the Sellers and the
Purchaser shall each submit to the Independent Accountant in writing
not later than 15 days after the Independent Accountant is retained
their respective positions with respect to the Contested Adjustments,
together with such supporting documentation as they deem necessary or
as the Independent Accountant requests, and (ii) the Independent
Accountant shall, within 30 days after receiving the positions of both
the Sellers and the Purchaser and all supplementary supporting
documentation requested by the Independent Accountant, render its
decision as to the Contested Adjustments, which decision shall be final
and binding on, and nonappealable by, the Sellers and the Purchaser.
The fees and expenses of the Independent Accountant shall be paid by
the party whose estimate of the Effective Date Net Worth is furthest
from the Independent Accountant's calculation of the Effective Date Net
Worth. The decision of the Independent Accountant shall also include a
certificate of the Independent Accountant setting forth the final
amount of the Net Worth Shortfall or the Net Worth Surplus, as
applicable (the "SETTLEMENT AMOUNT CERTIFICATE"). The Effective Date
Balance Sheet shall be deemed to include all proposed adjustments not
disputed by the Sellers and those adjustments accepted or made by the
decision of the Independent Accountant in resolving the Contested
Adjustments.
(c) There shall be a "SETTLEMENT DATE" after the calculation
of the Effective Date Net Worth which shall mean the following, as
applicable:
(i) If the Purchaser has not timely delivered an
Adjustment Statement to the Sellers, 35 days after the Closing
Date;
(ii) If the Purchaser has timely delivered an
Adjustment Statement and the Sellers have not timely delivered
a Contested Adjustment Notice, 35 days after the date the
Sellers receive the Adjustment Statement;
(iii) If the Sellers and the Purchaser have any
disputes regarding Contested Adjustments and they resolve
those disputes, five business days after such resolution;
(iv) five business days after the Independent
Accountant delivers the Settlement Amount Certificate, if
applicable; or
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(v) Such other date as shall be agreed between the
Sellers and the Purchaser.
(d) POST CLOSING ADJUSTMENTS. As of the Settlement Date, the
following payments to the extent applicable shall be made:
(i) If it is determined there is a Net Worth
Shortfall in excess of the estimated Net Worth Shortfall, the
excess Net Worth Shortfall shall be paid to the Purchaser on
the Settlement Date, irrespective of the Basket Rate; or
(ii) If it is determined there is a Net Worth
Shortfall less than the estimated Net Worth Shortfall, the
difference shall be paid to the Sellers on the Settlement
Date, irrespective of the Basket Rate; or
(iii) If it is determined that there is Net Worth
Shortfall and the Sellers estimated a Net Worth Surplus, the
Net Worth Shortfall plus the amount of the Net Worth Surplus
added to the Purchase Price pursuant to SECTION 1.3(a) shall
be paid to the Purchaser on the Settlement Date, irrespective
of the Basket Rate.
(iv) If it is determined there is a Net Worth Surplus
in excess of the estimated Net Worth Surplus, the excess Net
Worth Surplus shall be paid to the Sellers on the Settlement
Date, irrespective of the Basket Rate; or
(v) If it is determined there is a Net Worth Surplus
less than the estimated Net Worth Surplus, the difference
shall be paid to the Purchaser on the Settlement Date,
irrespective of the Basket Rate; or
(vi) If it is determined that there is a Net Worth
Surplus and the Sellers estimated a Net Worth Shortfall, the
Net Worth Surplus plus the amount of the Net Worth Shortfall
deducted from the Purchase Price pursuant to SECTION 1.3(a)
shall be paid to the Sellers on the Settlement Date,
irrespective of the Basket Rate.
(vii) In the event a Net Worth Shortfall is not paid
to the Purchaser on the Settlement Date (unless due to the
fault of the Purchaser), the Sellers shall also pay to the
Purchaser interest on the amount of the Net Worth Shortfall at
a rate of ten percent (10%) per annum, which shall accrue from
the Settlement Date to the date of actual payment. In the
event a Net Worth Surplus is not paid to the Sellers on the
Settlement Date (unless due to the fault of the Sellers), the
Purchaser shall also pay to the Sellers interest on the amount
of the Net Worth Surplus plus the amount of any Net Worth
Shortfall deducted from the Purchase Price pursuant to SECTION
1.3(A) at a rate of ten percent (10%) per annum, which shall
accrue from the Settlement Date to the date of actual payment.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
The Sellers jointly and severally represent and warrant to the
Purchaser as of the date hereof and, except as otherwise set forth in any
supplement to any schedule hereto delivered by the Sellers to the Purchaser
prior to the Closing Date in accordance with SECTION 2.36, as of the Closing
Date with respect to each Corporation.
2.1 CORPORATE ORGANIZATION, ETC. The Corporation is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation with all requisite corporate power and authority
to carry on its business as it is now being conducted, and to own, operate and
lease its properties and assets. The Corporation is duly qualified to do
business and is in corporate and Tax good standing as a foreign corporation in
every jurisdiction in which the conduct of its business or the ownership or
lease of its properties require it to be so qualified, except where the failure
to be so qualified would not have a Material Adverse Effect. Such jurisdictions
are set forth in SCHEDULE 2.1(a) hereto. True, complete and correct copies of
the Corporation's articles of incorporation and bylaws as presently in effect
are set forth in SCHEDULE 2.1(b) hereto.
2.2 SUBSIDIARIES. The Corporation has no Subsidiaries.
2.3 STOCK RECORD BOOKS. The stock record books of the Corporation which
have been delivered to the Purchaser for inspection prior to the date hereof are
complete and correct in all material respects. The authorized, issued and
outstanding capital stock of the Corporation is as set forth in Schedule 2.3
hereto. There are no shares of capital stock of the Corporation held in the
treasury of the Corporation and no shares of capital stock of the Corporation
are currently reserved for issuance for any purpose or upon the occurrence of
any event or satisfaction of any condition.
2.4 CORPORATE MINUTE BOOKS. The corporate minute books of the
Corporation which have been made available to the Purchaser for inspection are
complete and correct in all material respects and contain a record of all of the
proceedings of the shareholders and directors of the Corporation through the
date hereof. A true and complete list of the incumbent directors and officers of
the Corporation is set forth in SCHEDULE 2.4 hereto.
2.5 TITLE TO STOCK. All of the outstanding shares of the capital stock
of the Corporation are owned by the Sellers, are duly authorized, validly
issued, fully paid and nonassessable, are free of all Liens and Contracts, and
have been issued in compliance with all applicable securities laws. All of the
Shares that were acquired from third parties were acquired in compliance with
all applicable securities laws, free and clear of any rescission rights. There
is no outstanding Contract with the Corporation or any other Person to purchase,
redeem or otherwise acquire any outstanding shares of the capital stock of the
Corporation, or securities or obligations of any kind convertible into any
shares of the capital stock of the Corporation. The Corporation has not redeemed
any securities in violation of any Contract or Regulation (including, without
limitation, any state or federal securities laws). Upon payment of the Purchase
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<PAGE> 13
Price to the Sellers at the Closing, the Sellers will convey good and marketable
title to the Shares, free and clear of all Liens, Contracts or other limitations
whatsoever. The assignments, endorsements, stock powers and other instruments of
transfer delivered by the Sellers to the Purchaser at the Closing will be
sufficient to transfer the Sellers' entire interest, legal and beneficial, in
the Shares to the Purchaser.
2.6 AUTHORIZATION, ETC. Each Seller has full power and authority to
enter into this Agreement and the agreements contemplated hereby and to deliver
the Shares and the certificates evidencing such Shares to the Purchaser as
provided for herein, free and clear of all Liens. This Agreement has been duly
executed and delivered by each Seller. This Agreement and all other agreements
contemplated hereby to be entered into by the Sellers each constitute a legal,
valid and binding obligation of the Seller who is a party thereto enforceable
against such Seller in accordance with its terms except as may be limited by
bankruptcy, insolvency, reorganization, moratoriums or similar laws at the time
in effect affecting the enforceability or rights of creditors generally and by
general equitable principles that may limit the right to obtain equitable
remedies.
2.7 OPTIONS AND RIGHTS. There are no outstanding Options with respect
to the Corporation's outstanding capital stock. As of the Closing Date, there
will be no existing Contracts or Options between the Seller on the one hand, and
any other Person, on the other hand, regarding the Shares.
2.8 NO VIOLATION. Except as set forth in SCHEDULE 2.8 hereto, the
execution, delivery and performance by the Sellers of this Agreement, and all
other agreements contemplated hereby, and the fulfillment of and compliance with
the respective terms hereof and thereof by the Sellers, do not and will not (a)
conflict with or result in a breach of the terms, conditions or provisions of,
(b) constitute a default or event of default under (with due notice, lapse of
time or both), (c) result in the creation of any Lien upon the Corporation's
capital stock or assets pursuant to, (d) give any third party the right to
accelerate any obligation under, (e) result in a violation of, or (f) require
any authorization, consent, approval, exemption or other action by, notice to,
or filing with any Authority pursuant to, the articles of incorporation or
bylaws of the Corporation or any material Regulation (including, without
limitation, approvals pursuant to the Hart-Scott-Rodino Antitrust Improvements
Act of 1976), Order or any material Contract to which the Corporation, the
Sellers, the Shares or any of the Corporation's assets or properties are
subject.
2.9 FINANCIAL STATEMENTS.
(a) Attached as SCHEDULE 2.90(a) hereto are (i) the balance
sheet of the Corporation at June 27, 1997, and (ii) compiled balance
sheets and statements of operations, shareholders' equity and cash flow
of the Corporation as of and for the years ended January 2, 1998 and
December 31, 1996 and 1995. Except as set forth on SCHEDULE 2.9(a)
hereto, such balance sheets and the notes thereto fairly present the
financial position of the Corporation at the respective dates thereof,
and such statements of operations, changes in shareholders' equity and
cash flow and the notes thereto fairly present the results of
operations for the periods therein referred to, and fairly present the
financial condition of the Corporation at the respective date of, and
for the period covered by such statements. The Corporation's compiled
balance sheet and statements of operations,
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<PAGE> 14
shareholders' equity and cash flow as of and for the year ended January
2, 1998 have been prepared on a basis consistent with the Corporation's
past practices, and the Corporation's balance sheet at January 2, 1998
has been prepared on a basis consistent with its balance sheet at June
27, 1997. SCHEDULE 2.9(b) hereto sets forth a complete and accurate
list of the audit adjustments to the foregoing financial statements in
narrative form (but without specific dollar amounts attributable
thereto) that, if made, would make such statements comply with GAAP.
The balance sheet and statements of operations, shareholders' equity
and cash flow as at January 2, 1998 and the notes thereto are herein
collectively referred to as the "FINANCIAL STATEMENTS" and January 2,
1998 is herein referred to as the "FINANCIAL STATEMENT DATE."
(b) Except as set forth in SCHEDULE 2.9(c) hereto, the
Corporation does not have any Indebtedness or liability (whether
accrued, absolute, contingent, unliquidated or otherwise, known or
unknown to the Corporation, whether due or to become due) arising out
of transactions entered into at or prior to the Financial Statement
Date, or facts existing at or prior to the Financial Statement Date,
other than: (i) liabilities set forth in the Financial Statements
(including any notes thereto), (ii) liabilities and obligations
otherwise specifically disclosed as a liability in this Agreement or in
any schedule hereto or (iii) liabilities not in excess of $25,000.
2.10 EMPLOYEES. SCHEDULE 2.10 sets forth a list of all officers,
directors and key employees (meaning those earning more than $100,000 in 1997)
of the Corporation, together with a description of the rate and basis for their
total compensation. The Corporation is in compliance in all material respects
with all Federal, state and local Regulations or Orders affecting employment and
employment practices of the Corporation, including terms and conditions of
employment and wages and hours. The Corporation has no collective bargaining
agreements and, since January 1, 1996, there have been no strikes, work
stoppages nor any demands for collective bargaining by any union or labor
organization. There is no dispute or controversy with any union or other
organization of the Corporation's employees and no arbitration proceedings
pending or to the best knowledge of the Corporation threatened involving a
dispute or controversy affecting the Corporation.
2.11 ABSENCE OF CERTAIN CHANGES. Since the Financial Statement Date,
there has not been (a) any Material Adverse Change; (b) any damage, destruction
or loss, whether covered by insurance or not, having a Material Adverse Effect;
(c) except as set forth on SCHEDULE 2.11, any declaration, setting aside or
payment of any dividend or distribution (whether in cash, stock or property) in
respect of the Corporation's capital stock or any redemption or other
acquisition of such stock by the Corporation, in each case, without the prior
written consent of the Purchaser; (d) any increase in the compensation payable
to or to become payable by the Corporation to its officers or employees or any
adoption of or increase in any bonus, insurance, pension or other employee
benefit plan, payment or arrangement made to, for or with any such officers or
key employees or any Affiliate of the Corporation; (e) any entry into any
material Contract not in the ordinary course of business, including without
limitation, any borrowing or capital expenditure; or (f) any change by the
Corporation in accounting methods or principles.
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<PAGE> 15
2.12 CONTRACTS.
(a) Except as set forth in SCHEDULE 2.12(a) hereto, as of the
date hereof, the Corporation is not a party to any written or oral:
(i) pension, profit sharing, stock option, employee
stock purchase or other plan providing for deferred or other
compensation to employees or any other employee benefit plan
(other than as set forth in SCHEDULE 2.18 hereto), or any
Contract with any labor union;
(ii) Contract relating to loans to officers,
directors, or Affiliates;
(iii)Contract relating to the borrowing of money or
the mortgaging, pledging or otherwise placing a Lien on any
asset of the Corporation;
(iv) Guarantee of any obligation;
(v) Contract under which the Corporation has advanced
or loaned any Person amounts in the aggregate exceeding
$10,000;
(vi) Contract pursuant to which the Corporation is
lessor of or permits any third party to hold or operate any
property, real or personal, owned or controlled by the
Corporation which involves annual compensation in excess of
$25,000;
(vii) Contract or group of related Contracts with the
same party or group of affiliated parties the performance of
which involves annual consideration in excess of $25,000;
(viii) assignment, license, indemnification or
Contract with respect to any intangible property (including,
without limitation, any Proprietary Rights);
(ix) warranty Contract with respect to its services
rendered or its products sold or leased;
(x) Contract under which it has granted any Person
any registration rights (including piggyback rights) with
respect to any securities;
(xi) Contract or non-competition provision in any
Contract prohibiting it from freely engaging in any business
or competing anywhere in the world;
(xii) Contract for the purchase, acquisition or
supply of inventory and other property and assets, whether for
resale or otherwise in excess of $25,000;
(xiii) Contracts with independent agents, brokers,
dealers or distributors which provide for annual payments in
excess of $25,000;
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(xiv) employment, consulting, sales, commissions,
advertising or marketing Contracts which provide for annual
payments in excess of $25,000;
(xv) Contracts providing for "take or pay" or similar
unconditional purchase or payment obligations; or
(xvi) any other Contract which is material to its
operations and business prospects or involves a consideration
in excess of $25,000 annually, excluding any purchase orders
in the ordinary course of business.
(b) The Corporation has performed in all material respects all
obligations required to be performed by it and is not in default in any
respect under or in breach of nor in receipt of any claim of default or
breach under any material Contract to which the Corporation is subject
(including without limitation all performance bonds, warranty
obligations or otherwise); no event has occurred which with the passage
of time or the giving of notice or both would result in a default,
breach or event of non-compliance under any material Contract to which
the Corporation is subject (including without limitation all
performance bonds, warranty obligations or otherwise); the Corporation
does not have any present expectation or intention of not fully
performing all such obligations; the Corporation does not have any
knowledge of any breach or anticipated breach by the other parties to
any material Contract to which it is a party.
2.13 TRUE AND COMPLETE COPIES. The Corporation has delivered to the
Purchaser true and complete copies of all the Contracts and documents listed in
the schedules to this Agreement.
2.14 TITLE AND RELATED MATTERS.
(a) Except as set forth in SCHEDULE 2.14(a) hereto, the
Corporation has good and valid title to all its real and personal
property and other assets reflected in the Financial Statements or
acquired after the Financial Statement Date, free and clear of all
Liens, except Permitted Liens. All properties used in the Corporation's
business operations as of the Financial Statement Date are reflected in
the Financial Statements and are reflected therein in accordance with
and to the extent required by GAAP, except as to those assets which are
leased and except as otherwise noted in SCHEDULE 2.9(a). SCHEDULE
2.14(b) hereto sets forth a complete and accurate list of all such
leased assets which have annual rental payments in excess of $6,000
(including the expiration date of such lease, the name of the lessor,
the annual or monthly rental payment and whether a consent is required
from the lessor to consummate the transactions contemplated hereby).
(i) All the Corporation's leases are in full force
and effect, and valid and enforceable in all material respects
in accordance with their respective terms. The Corporation has
not received any notice of any, and there exists no event of
default or event which constitutes or would constitute (with
notice or lapse of time or both) a default by the Corporation
or any other Person under any lease.
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<PAGE> 17
(ii) All rent and other amounts due and payable with
respect to the Corporation's leases have been paid through the
date of this Agreement and all rent and other amounts due and
payable with respect to the Corporation's leases which are due
and payable on or prior to the Closing Date will have been
paid on or prior to the Closing Date.
(iii) The Corporation has received no written notice
that the landlord with respect to any currently existing real
property lease would refuse to renew such lease upon
expiration of the period thereof upon substantially the same
terms, except for rent increases consistent with past
experience or market rentals.
(b) None of the assets owned by the Corporation is or will be
on the Closing Date subject to any (i) Contracts of sale or lease
(except as disclosed in SCHEDULE 2.14(b)), except Contracts for the
sale of inventory in the ordinary and regular course of business or
(ii) Liens, except for Permitted Liens and the Liens set forth in
SCHEDULE 2.14(c) hereto.
(c) Except as set forth on SCHEDULES 2.11 or 2.14(c), there
has not been since the Financial Statement Date and will not be prior
to the Closing Date, any sale, lease, dividend or any other disposition
or distribution by the Corporation of any of its assets or properties,
now or hereafter owned by it, except transactions in the ordinary and
regular course of business or as otherwise previously consented to in
writing by the Purchaser; provided that transactions in the ordinary
and regular course of business shall not be deemed to include any
dividends or other distributions in respect of a Corporation's capital
stock. Immediately after the Closing, the Corporation will continue to
have the right to use all of its properties and assets as they are
currently used in connection with the Corporation's business.
2.15 LITIGATION. Except as set forth in SCHEDULE 2.15 hereto, there is
no Claim pending or, to the best knowledge of the Corporation, threatened
against the Corporation which, if adversely determined, would have a Material
Adverse Effect on the Corporation, nor is there any Order outstanding against
the Corporation having, or which, insofar as can be reasonably foreseen, in the
future may have, a Material Adverse Effect.
2.16 TAX MATTERS.
(a) The Corporation has elected (with the consent of all of
its shareholders), in compliance with all applicable legal
requirements, to be taxed as an S Corporation pursuant to the Code and
corresponding provisions of any applicable state and local laws, and
such elections are in effect for the Corporation. No action has been
taken by the Corporation or any shareholder of the Corporation that may
result in the revocation or termination of any such election. Except as
set forth in SCHEDULE 2.16(a), the Corporation has no liability,
absolute or contingent, for the payment of any Income Tax under the
Code or under the laws of any state or locality. The Corporation has
filed all Tax Returns required to be filed and has timely paid all
relevant Taxes due or claimed to be due by all Taxing Authorities
(whether or not shown on a Tax Return). The Corporation has not
requested any extension of time within which to file or send any Tax
Return. All Taxes
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<PAGE> 18
applicable for all periods ended on or before the Financial Statement
Date have been paid or fully reserved against on the Financial
Statements in accordance with GAAP, except as provided in SCHEDULE
2.16(a) hereto. All Taxes which are required to be withheld or
collected by the Corporation have been duly withheld or collected and,
to the extent required, have been paid to the proper Taxing Authority
or properly segregated or deposited as required by applicable law.
There are no Liens for Taxes upon any property or assets of the
Corporation, except for Liens for Taxes not yet due and payable. The
Corporation has not executed any waiver of the statute of limitations
on the right of the Internal Revenue Service or any other Taxing
Authority to assess additional Taxes or to contest the income or loss
with respect to any Tax Return. The Corporation has not received notice
from a Taxing Authority in a jurisdiction where the Corporation does
not file Tax Returns that it is or may be subject to taxation by that
jurisdiction. The Corporation has not been a member of an affiliated
group filing consolidated or combined federal, state, local or foreign
income Tax Returns and has no liability for the Taxes of any other
Person under Treasury regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or
successor, by Contract, or otherwise. The basis of any depreciable
assets, and the methods used in determining allowable depreciation
(including cost recovery), of the Corporation, are materially correct
and in compliance with the Code.
(b) No issues have been raised that are currently pending by
any Taxing Authority in connection with any Tax Returns. No material
issues have been raised in any examination by any Taxing Authority with
respect to the Corporation which, by application of similar principles,
reasonably could be expected to result in a proposed deficiency for any
other period not so examined. There are no unresolved issues or unpaid
deficiencies relating to such examinations. The items relating to the
business, properties or operations of the Corporation on the Tax
Returns filed by the Corporation for all taxable years (including the
supporting schedules filed therewith), available copies of which have
been made available to the Purchaser, state accurately, in all material
respects, the information requested with respect to the Corporation and
such information was derived from the Corporation's books and records.
(c) The Corporation is not a participant in any joint venture,
partnership, or other arrangement or Contract which is treated as a
partnership for federal income tax purposes. The Corporation is not
party to any tax sharing agreement.
(d) The Corporation has not filed a consent under Section
341(f) of the Code or any comparable provision of any state or local
statute.
(e) SCHEDULE 2.16(e) hereto lists all federal, state, local
and foreign income Tax Returns and all other Tax Returns for which the
annual tax liability is at least $25,000 for taxable periods ending on
or after December 31, 1986 and indicates those Tax Returns that have
been audited and those that are the subject of audit.
(f) None of the assets of the Corporation constitutes
tax-exempt bond financed property or tax exempt use property within the
meaning of Section 168 of the
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Code, and none of the assets owned by the Corporation is subject to a
lease, safe harbor lease, or other arrangement as a result of which the
Corporation is not treated as the owner for federal income tax
purposes.
(g) The Corporation has not made any payments, is not
obligated to make any payments and is not a party to any agreement that
under any circumstances could obligate it to make any payment that will
not be deductible under section 280G of the Code.
(h) No power of attorney has been granted by the Corporation
with respect to any matter relating to Taxes which is currently in
force.
2.17 COMPLIANCE WITH LAW AND APPLICABLE GOVERNMENT REGULATIONS. The
Corporation is presently in material compliance with regard to its operations,
practices, real property, structures, equipment and other property, and all
other aspects of its business, with all applicable Regulations and Orders,
including, but not limited to, all Regulations relating to the safe conduct of
business, environmental protection, quality and labeling, antitrust, Taxes,
consumer protection, equal opportunity, discrimination, health, sanitation,
fire, zoning, building and occupational safety. There are no Claims pending, or,
to the Knowledge of the Corporation, threatened, nor has the Corporation
received any written notice, regarding any violations of any Regulations and
Orders enforced by any Authority claiming jurisdiction over the Corporation
including any requirement of OSHA or any pollution and environmental control
agency (including air and water).
2.18 ERISA AND RELATED MATTERS.
(a) BENEFIT PLANS; OBLIGATIONS TO EMPLOYEES. Except as set
forth in SCHEDULE 2.18 hereto, neither the Sellers, nor any ERISA
Affiliate of the Sellers, is a party to or participates in or has any
material liability or contingent liability with respect to:
(i) any "employee welfare benefit plan" or "employee
pension benefit plan" or "multiemployer plan" (as those terms
are respectively defined in Sections 3(1), 3(2) and 3(37) of
the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"));
(ii) any retirement or deferred compensation plan,
incentive compensation plan, stock plan, unemployment
compensation plan, vacation pay, severance pay, bonus or
benefit arrangement, insurance or hospitalization program or
any other material fringe benefit arrangements for any
employee, director, consultant or agent, whether pursuant to
contract, arrangement, custom or informal understanding, which
does not constitute an "employee benefit plan" (as defined in
Section 3(3) of ERISA); or
(iii) any employment agreement not terminable on 30
days' or less written notice, without further liability.
Any plan, arrangement or agreement required to be listed on
SCHEDULE 2.18 for which the Sellers or any ERISA Affiliate of the
Sellers may have any material liability or contingent liability is
sometimes hereinafter referred to as a "BENEFIT PLAN". For purposes
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of this Section, the term "ERISA AFFILIATE" shall mean any trade or
business, whether or not incorporated, that together with the Sellers
would be deemed a "single employer" within the meaning of Section
4001(b)(i) of ERISA.
(b) PLAN DOCUMENTS AND REPORTS. A true and correct copy of
each of the Benefit Plans listed on SCHEDULE 2.18, and all contracts
relating thereto, or to the funding thereof, including, without
limitation, all trust agreements, insurance contracts, investment
management agreements, subscription and participation agreements and
recordkeeping agreements, each as in effect on the date hereof, has
been supplied or made available to the Purchaser. In the case of any
Benefit Plan that is not in written form, the Purchaser has been
supplied with an accurate description of such Benefit Plan as in effect
on the date hereof. A true and correct copy of the most recent annual
reports and accompanying schedules, the most recent actuarial reports,
and the most recent summary plan description and Internal Revenue
Service determination letter with respect to each such Benefit Plan, to
the extent applicable, and a schedule of assets (and the fair market
value thereof assuming liquidation of any asset which is not readily
tradeable) held with respect to any funded Benefit Plan as of the most
recent valuation date for each Plan has been supplied to the Purchaser
by the Sellers, and subject to market volatility there have been no
material adverse changes in the financial condition in the respective
Plans from that stated in the annual reports and actuarial reports
supplied.
(c) COMPLIANCE WITH LAWS; LIABILITIES. As to all Benefit
Plans, except as otherwise specified on SCHEDULE 2.18:
(i) All Benefit Plans comply, and have been
administered in form and in operation in all material
respects, with all requirements of law and regulation
applicable thereto, including without limitation the timely
filing of all annual reports required with respect to such
Benefit Plans, and neither of the Corporations nor any ERISA
Affiliate of the Corporations has received any notice from any
governmental agency questioning or challenging such
compliance.
(ii) All Benefit Plans that are intended to be
qualified under Section 401(a) of the Internal Revenue Code of
1986, as amended (the "CODE") materially comply in form and in
operation with all applicable requirements of Sections 401(a)
and 501(a) of the Code; there have been no amendments to such
Benefit Plans which are not the subject of a determination
letter issued with respect thereto by the Internal Revenue
Service; and no event has occurred that will or could give
rise to disqualification of any such Benefit Plan under such
sections or to any tax under Section 511 of the Code; except
that no representation is made as to the satisfaction of any
formal plan document qualification requirement with respect to
which the remedial amendment period set forth in Section
401(b) of the Code, and any regulations, writings or other IRS
releases thereunder, has not expired.
(iii) None of the assets of any Benefit Plan are
invested in employer securities or employer real property, as
those terms are defined in Section 407(d) of ERISA.
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(iv) There have been no non-exempt "prohibited
transactions" (as described in Section 406 of ERISA or Section
4975 of the Code) with respect to any Benefit Plan and neither
of the Corporations nor any ERISA Affiliate of the
Corporations has otherwise engaged in any such non-exempt
prohibited transaction.
(v) There have been no acts or omissions by the
Corporations or any ERISA Affiliate of the Corporations that
have given rise to or may give rise to any material fines,
penalties, taxes or related charges under Sections 502(c),
502(i) or 4071 of ERISA or Chapter 43 of the Code for which
the Corporations or any ERISA Affiliate of the Corporations
may be liable.
(vi) None of the payments contemplated by the Benefit
Plans would, in the aggregate, constitute excess parachute
payments as defined in Section 280G of the Code.
(vii) There are no actions, suits or claims (other
than routine claims for benefits) pending or to the knowledge
of the Corporation threatened involving any Benefit Plans or
the assets of such Plans, and to the Knowledge of the
Corporations, no facts exist which could give rise to any such
actions, suits or claims (other than routine claims for
benefits).
(viii) As to any Benefit Plan that is subject to
Title IV of ERISA, there have been no "reportable events" (as
described in Section 4043 of ERISA), and no steps have been
taken to terminate any such Plan.
(ix) All Benefit Plans that are group health plans
have been operated in material compliance with the group
health plan continuation coverage requirements of Section
4980B of the Code and Section 601 of ERISA to the extent such
requirements are applicable, and no such group health plan is
a self-insured plan.
(x) Actuarially adequate accruals for all obligations
or contingent obligations under the Benefit Plans are
reflected in the Financial Statements provided to the
Purchaser and such obligations include a pro rata amount of
the contributions which would otherwise have been made in
accordance with past practices for the plan years which
include the closing date.
(xi) There are no unfunded benefit liabilities,
within the meaning of Section 4001(a)(16) of ERISA, with
respect to any Benefit Plan subject to Title IV of ERISA.
(xii) No Benefit Plan subject to the requirements of
Section 412 of the Code or Section 402 of ERISA has incurred
an "accumulated funding deficiency" (as defined in such
applicable section and any regulations thereunder), and none
of
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the assets of the Corporations or their ERISA Affiliates is
subject to any lien arising under Section 302(f) of ERISA or
Section 412(n) of the Code.
(xiii) Except as specifically set forth in any
schedule to this Agreement, the execution of and performance
of the transactions contemplated by, this Agreement, will not
(either alone or upon the occurrence of any additional or
subsequent events) result in any payment (whether of severance
pay or otherwise), acceleration, vesting, or increase in
benefits under any Benefit Plan.
(d) MULTIEMPLOYER PLANS. Each Benefit Plan that is a
"multiemployer plan" (within the meaning of Section 3(37) of ERISA)
with respect to which the Corporations or any ERISA Affiliate may have
any liability, including any liability attributable to a current or
former ERISA Affiliate of the Corporations, and the maximum amount of
such liability (determined in the case as if the Corporations or ERISA
Affiliate of the Corporations incurred complete withdrawal immediately
after the Closing) is listed on SCHEDULE 2.18. With respect to such
Benefit Plans:
(i) Neither the Corporations nor any ERISA Affiliate
of the Corporations has withdrawn, partially withdrawn, or
received any notice of any claim or demand for withdrawal
liability or partial withdrawal liability against any of them;
and
(ii) Neither the Corporations nor any ERISA Affiliate
of the Corporations has received any notice that any such
Benefit Plan is in reorganization, that increased
contributions may be required to avoid a reduction in benefits
under the Benefit Plan or the imposition of any excise tax, or
that any such Benefit Plan is or may become insolvent.
2.19 INTELLECTUAL PROPERTY.
(a) SCHEDULE 2.19(a) hereto sets forth a complete and accurate
list of all of the Corporation's material Proprietary Rights. The
Corporation has delivered to the Purchaser correct and complete copies
of all such Proprietary Rights (that are in written form) as amended to
date and has made available to the Purchaser correct and complete
copies of all other written documentation evidencing ownership of, and
any Claims relating to, each such item. The Corporation has taken all
reasonable measures to protect the proprietary nature of each such
Proprietary Right, and to maintain in confidence all trade secrets and
confidential information that it owns or uses.
(b) To the knowledge of the Corporation, (i) no Person other
than a Corporation has any rights to any of the Proprietary Rights
owned or used by the Corporation identified on SCHEDULE 2.19(a) except
pursuant to agreements or licenses specified in SCHEDULE 2.19(b)
hereto, (ii) no other Person is infringing, violating or
misappropriating any such Proprietary Right that the Corporation owns
or uses, and (iii) no such Proprietary Right is subject to any
Outstanding Order or Claim.
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<PAGE> 23
2.20 CUSTOMER WARRANTIES. There are no pending, nor to the knowledge of
the Corporation, threatened, any material Claim or group of Claims under or
pursuant to any warranty, whether expressed or implied, on products or services
sold prior to the Closing Date by the Corporation which are not disclosed or
referred to in the Financial Statements and which are not fully reserved
against. Set forth hereto on SCHEDULE 2.20 are the standard terms and conditions
of sale or lease and the aggregate amount of warranty Claims incurred by the
Corporation in fulfillment of its obligation under any Guarantee.
2.21 PRODUCTS LIABILITY. Except as set forth in SCHEDULE 2.21 hereto,
(i) there is no Claim by or before any Authority against or involving the
Corporation or concerning any product manufactured, shipped, sold or delivered
by or on behalf of the Corporation which is pending or, to the best knowledge of
the Corporation, threatened, relating to or resulting from an alleged defect in
design, manufacture, materials or workmanship of any product manufactured,
shipped, sold or delivered by or on behalf of the Corporation or any alleged
failure to warn, or any alleged breach of implied warranties or representations
which would have a Material Adverse Effect, nor is there any valid basis for any
such Claim, (ii) to the knowledge of the Corporation, there has not been any
Occurrence, (iii) there has not been any Recalls conducted with respect to any
product manufactured (or to be manufactured), shipped, sold or delivered by or
on behalf of the Corporation, or to the Knowledge of the Corporation any
investigation or consideration of or decision made by any person or entity
concerning whether to undertake or not undertake, any Recalls and (iv) to the
knowledge of the Corporation, there are no material defects in design,
manufacturing, materials or workmanship including, without limitation, any
failure to warn, or any breach of express or implied warranties or
representations, which involve any product manufactured, shipped, sold or
delivered by or on behalf of the Corporation which would have a Material Adverse
Effect.
2.22 ENVIRONMENTAL MATTERS. Except as disclosed in SCHEDULE 2.22:
(a) neither the Corporation's business nor the operation thereof violates any
applicable Environmental Law in effect as of the date hereof in any material
respect and no condition or Occurrence which, with notice or the passage of time
or both, would constitute a violation of any Environmental Law which would have
a Material Adverse Effect; (b) the Corporation is in possession of all material
Environmental Permits required under any applicable Environmental Law for the
conduct or operation of the Corporation's business (or any part thereof), and
the Corporation is in material compliance with all of the requirements and
limitations included in such Environmental Permits; (c) the Corporation has not
stored or used any pollutants, contaminants or hazardous or toxic wastes,
substances or materials on or at any of its property or facilities except for
inventories of chemicals which are used or to be used in the ordinary course of
the Corporation's business (which inventories have been sorted or used in
material compliance with all applicable Environmental Permits and all
Environmental Laws, including all so-called "Right to Know" laws); (d) the
Corporation has not received any notice from any Authority or any private Person
that the Corporation's business or the operation of any of its facilities is in
violation of any Environmental Law or any Environmental Permit or that it is
responsible (or potentially responsible) for the cleanup of any pollutants,
contaminants, or hazardous or toxic wastes, substances or materials at, on or
beneath any of the Corporation's property, or at, on or beneath any land
adjacent thereto or in connection with any waste or contamination site; (e) the
Corporation is not the subject of any Federal, state, local, or private Claim
involving a demand for damages or
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<PAGE> 24
other potential liability with respect to a violation of Environmental Laws or
under any common law theories relating to operations or the condition of any
facilities or property (including underlying groundwater) owned, leased, or
operated by the Corporation; (f) the Corporation has not buried, dumped,
disposed, spilled or released any pollutants, contaminants or hazardous or
wastes, substances or materials on, beneath or adjacent to any of its property
or any property adjacent thereto which could result in liability of $5,000
individually or $10,000 in the aggregate; (g) to Sellers' Knowledge, no property
now or previously owned, leased or operated by the Corporation, is listed or
proposed for listing on the National Priorities List pursuant to CERCLA, on the
CERCLIS or on any other federal or state list of sites requiring investigation
or clean-up; (h) to Sellers' Knowledge, there are no underground storage tanks,
active or abandoned, including petroleum storage tanks, on or under any property
now or previously owned, leased or operated by the Corporation; (i) the
Corporation has not directly transported or directly arranged for the
transportation of any Hazardous Material to any location which is listed or
proposed for listing on the National Priorities List pursuant to CERCLA, on the
CERCLIS or on any federal or state list or which is the subject of federal,
state or local enforcement actions or other investigations which may lead to
material Claims against the Corporation for any remedial work, damage to natural
resources or personal injury, including claims under CERCLA; and (j) to the
knowledge of the Corporation there are no polychlorinated biphenyls, radioactive
materials or friable asbestos present at any property now or previously owned or
leased by the Corporation. The Corporation has timely filed all reports required
to be filed with respect to all of its property and facilities and has generated
and maintained all required data, documentation and records under all applicable
Environmental Laws.
2.23 CAPITAL EXPENDITURES AND INVESTMENTS. The Corporation has
outstanding Contracts for capital expenditures and investments as set forth in
SCHEDULE 2.23 hereto which includes a schedule of all monies disbursed on
account of capital expenditures and investments made by the Corporation since
the Financial Statement Date.
2.24 DEALINGS WITH AFFILIATES. SCHEDULE 2.24 hereto sets forth a
complete and accurate list, including the parties, of all material oral or
written Contracts to which the Corporation is, will be or has been a party, at
any time from December 31, 1995 to the Closing Date, and to which any one or
more Affiliates or Sellers is also a party. Except as set forth in SCHEDULE
2.24, since December 31, 1995, the Corporation has not made any material
payments, loaned any funds or property or made any credit arrangement with any
Seller, Affiliate or employee of the Corporation except for the payment of
employee salaries and director compensation in the ordinary course of business.
2.25 INSURANCE. All of the Policies are in full force and effect, all
premiums with respect thereto covering all periods up to and including the
Closing Date have been paid or accrued therefor, and no notice of cancellation
or termination has been received with respect to any Policy currently in effect.
SCHEDULE 2.25 hereto sets forth a complete and accurate list of all Policies,
including name of insurer and the type and amount of coverage. To the Knowledge
of the Corporation, the Corporation has not breached or otherwise failed to
perform in any material respect its obligations under any of the Policies nor
has the Corporation received any adverse notice or communication from any of the
insurers party to the Policies with respect to any such alleged breach or
failure in connection with any of the Policies. All Policies are sufficient for
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<PAGE> 25
compliance with all Regulations and all Contracts to which the Corporation is
subject; are to the Corporation's knowledge valid, outstanding, collectible and
enforceable policies; and will not in any way be affected by, or terminate or
lapse by reason of, the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby. Except as set forth in
SCHEDULE 2.25, all of the Policies are scheduled to remain in full force and
effect through 30 days after the Closing Date.
2.26 ACCOUNTS RECEIVABLE; INVENTORIES. The accounts receivable of the
Corporation reflected in the Financial Statements and such additional accounts
receivable as are reflected on the books of the Corporation on the date hereof
are good and to the knowledge of the Corporation collectible except to the
extent reserved against thereon (which reserves have been determined based upon
actual prior experience and are consistent with prior practices). All such
accounts receivable (except to the extent so reserved against) are valid,
genuine and subsisting, arise out of bona fide sales and deliveries of goods,
performance of services or other business transactions and are not subject to
defenses, set-offs or counterclaims. The inventories reflected on the Financial
Statements (net of reserves) and held by the Corporation on the date hereof do
not include any material amount of items which are not usable or saleable in the
ordinary course of business of the Corporation or are obsolete or discounted
items. Such inventories have been reflected on such balance sheets at the lower
of cost or market value (taking into account the usability or salability
thereof). All such inventories are owned free and clear and are not subject to
any Lien except to the extent reserved against or reflected in the Financial
Statements. Since the Financial Statement Date, inventories have been purchased
by the Corporation consistent with historical seasonal requirements, and the
volumes of purchases thereof and orders therefor have not been materially
reduced or otherwise changed in anticipation of the transactions contemplated by
this Agreement.
2.27 BROKERAGE. Except as set forth in SCHEDULE 2.27 hereto, there are
no claims for brokerage commissions, finders' fees or similar compensation in
connection with the transactions contemplated by this Agreement based on any
arrangement or agreement binding upon the Corporation.
2.28 CUSTOMERS AND SUPPLIERS. No purchase order or commitment of the
Corporation is in excess of past practice, nor are prices provided therein in
excess of past practice for the products or services to be provided thereunder.
No material supplier of the Corporation has advised the Corporation in writing
since January 1, 1997, that it will stop, or materially decrease the rate of,
supplying materials, products, or services to the Corporation and no material
customer of the Corporation has advised the Corporation in writing within the
past year that it will stop, or materially decrease the rate of, buying
materials, products or services from the Corporation. SCHEDULE 2.28 sets forth a
list of each supplier that is the sole supplier of any material product or
component to the Corporation.
2.29 PERMITS. The Permits listed on SCHEDULE 2.29 are the only Permits
that are required for the Corporation to conduct its business as presently
conducted, except for those the absence of which would not have any Material
Adverse Effect. Each such Permit is in full force and effect and, to the best of
the knowledge of the Corporation, no suspension or cancellation of
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any such Permit is threatened and there is no basis for believing that such
Permit will not be renewable upon expiration.
2.30 ACQUISITIONS. Set forth on SCHEDULE 2.30 is a list of all
acquisitions of other entities that the Corporation has effected, whether
through a business combination, the purchase of stock or assets, or any other
means. Except as set forth in SCHEDULE 2.30, the Corporation does not have any
Indebtedness, obligation or liability (whether accrued, absolute, contingent,
unliquidated or otherwise, known or unknown to the Corporation, whether due or
to become due) arising out of any such acquisition subsequent to January 1,
1993.
2.31 IMPROPER AND OTHER PAYMENTS. Except as set forth on SCHEDULE 2.31
hereto, to the Corporation's knowledge, (a) neither the Corporation, any
director, officer, employee thereof, nor any agent or representative of the
Corporation nor any Person acting on behalf of any of them, has made, paid or
received any unlawful bribes, kickbacks or other similar payments to or from any
Person or Authority, (b) no contributions have been made, directly or
indirectly, to a domestic for foreign political party or candidate, (c) no
improper foreign payment (as defined in the Foreign Corrupt Practices Act) has
been made, and (d) the internal accounting controls of the Corporation are
believed by the Corporation's management to be adequate to detect any of the
foregoing under current circumstances.
2.32 DISCLOSURE. Neither this Article II nor any of the schedules
attached hereto and prepared by or on behalf of the Corporation or the Sellers
with respect to the transactions contemplated hereby contains any untrue
statement of a material fact or omits a material fact necessary to make each
statement contained herein or therein not misleading.
2.33 INDEBTEDNESS. The Corporation has no outstanding Indebtedness.
2.34 SECURITIES LAWS MATTERS. Each Seller is acquiring LTC Shares
hereunder for his own account for investment and not with a view to, or for the
sale in connection with, any "distribution" of the LTC Shares, as such term is
used in Section 2(11) of the Securities Act. Each Seller has had the opportunity
to discuss the transactions contemplated hereby with the Purchaser and has been
afforded, prior to execution of this Agreement, the opportunity to ask questions
of, and receive answers from the Purchaser and to obtain any additional
information relating to the transactions contemplated hereby as such Seller has
requested. Each Seller acknowledges receiving and reviewing the Purchaser's
prospectus, dated November 24, 1997 (the "Prospectus"). Each Seller is an
"ACCREDITED INVESTOR" within the meaning of Regulation D promulgated under the
Securities Act and has such knowledge and experience in business or financial
matters that he is capable of evaluating the merits and risks of an investment
in the LTC Shares. Each Seller can bear the economic risk of losing his
investment in the LTC Shares and has adequate means for providing for his
current financial needs and contingencies. Each Seller acknowledges and agrees
that the LTC Shares will be restricted securities within the meaning of Rule 144
and will not be sold or otherwise disposed of, except (a) pursuant to an
exemption from the registration requirements under applicable state securities
laws and the Securities Act, (b) in accordance with Rule 144 or (c) pursuant to
an effective registration statement filed by the Purchaser with the Securities
and Exchange Commission under applicable state securities laws and the
Securities Act. Each Seller is a resident of Georgia. The Sellers acknowledge
and agree
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<PAGE> 27
that the Purchaser may, unless a registration statement is in effect covering
such LTC Shares or unless the holders thereof comply with Rule 144, place stop
transfer orders with its transfer agent with respect to such certificates in
accordance with federal securities laws.
2.35 LEGENDS. The certificates representing LTC Shares issued pursuant
to this Agreement shall bear a legend substantially as follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR ANY APPLICABLE STATE LAW. THEY MAY
NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE
DISPOSED OF WITHOUT (1) REGISTRATION UNDER THE SECURITIES ACT OF 1933
AND ANY APPLICABLE STATE LAW, (2) COMPLIANCE WITH RULE 144 UNDER THE
SECURITIES ACT OF 1933 OR (3) AT HOLDER'S EXPENSE, AN OPINION
(SATISFACTORY TO THE CORPORATION) OF COUNSEL (SATISFACTORY TO THE
CORPORATION) THAT REGISTRATION IS NOT REQUIRED.
2.36 AMENDMENTS TO DISCLOSURE SCHEDULES. From the date hereof through
four (4) business days prior to the Closing Date, the Sellers, acting reasonably
and in good faith, may amend or supplement SCHEDULES 2.1(a) through 2.31 hereto
by providing the Purchaser a copy of the amendments by Federal Express or hand
delivery; provided, however, if such amendments (a) relate to any fact or
circumstance that occurred prior to the date hereof, then the Sellers shall
remain liable to the Purchaser for any Purchaser Losses that may result from
such facts or circumstances pursuant to Article XII hereof, (b) relate to any
fact or circumstance that occurs after the date hereof, the Purchaser shall have
the right to accept or reject such amendments. If such amendments (i) are NOT
accepted by the Purchaser, the Purchaser may terminate this Agreement pursuant
to SECTION 11.1(d) hereof, or (ii) are accepted by the Purchaser in writing,
such amendments shall thereafter be deemed to be disclosed as of the date of
this Agreement.
2.37 PRE-CLOSING COVENANTS. Since January 2, 1998, the Sellers have
complied with the covenants set forth in ARTICLE IV.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Sellers as follows as of
the date hereof and as of the Closing Date:
3.1 CORPORATE ORGANIZATION, ETC. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation with full corporate power and authority to carry
on its business as it is now being conducted and to own, operate and lease its
properties and assets. The Purchaser is duly qualified or licensed to do
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business and is in corporate and tax good standing in every jurisdiction in
which the conduct of its business, the ownership or lease of its properties, or
the execution of, and performance of the transactions contemplated by, this
Agreement, require it to be so qualified or licensed.
3.2 AUTHORIZATION, ETC. The Purchaser has full corporate power and
authority to enter into this Agreement and to carry out the transactions
contemplated hereby and thereby. The Board of Directors of the Purchaser has
duly authorized the execution, delivery and performance of this Agreement and to
consummate the transactions contemplated hereby, and no other corporate action
by the Purchaser is necessary to authorize the execution and delivery of this
Agreement by the Purchaser and the performance by the Purchaser of its
obligations hereunder. This Agreement has been duly executed and delivered by
the Purchaser and constitutes the legal, valid and binding obligation of the
Purchaser enforceable against the Purchaser in accordance with its terms.
3.3 NO VIOLATION. Except for filing under the Hart-Scott-Rodino Act,
the execution, delivery and performance by the Purchaser of this Agreement, and
all other agreements contemplated hereby, and the fulfillment of and compliance
with the respective terms hereof and thereof by the Purchaser, do not and will
not (a) conflict with or result in a breach of the terms, conditions or
provisions of, (b) result in a violation of, or (c) require any authorization,
consent, approval, exemption or other action by, or notice to, or filing with
any court or Authority pursuant to, the charter or bylaws of the Purchaser or,
to the best knowledge of the Purchaser, any applicable Regulation (including,
without limitation, approvals pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976), or Order to which the Purchaser, or its properties
are subject. The Purchaser will comply in all material respects with all
applicable Regulations and Orders in connection with its execution, delivery and
performance of this Agreement and the transactions contemplated hereby.
3.4 INVESTMENT INTENT. The Purchaser represents and warrants to the
Sellers that it is purchasing the Shares for investment purposes and not with a
view to distribution thereof and agrees that it shall not make any sale,
transfer or other disposition of the Shares in violation of any applicable
securities law.
3.5 REPORTS AND FINANCIAL STATEMENTS. Except where failure to have done
so did not and would not have a Material Adverse Effect on the Purchaser, the
Purchaser has filed all reports, registrations and statements, together with any
required amendments thereto, that it was required to file with the SEC under the
Securities Act and the Exchange Act, including, but not limited to Forms 10-K,
Forms 10-Q, Forms 8-K and proxy statements (collectively, the "LTC Reports"). As
of their respective dates (but taking into account any amendments filed prior to
Closing Date), (i) the LTC Reports complied in all material respects with the
Securities Act, the Exchange Act and all the rules and regulations promulgated
by the SEC and (ii) none of the LTC Reports contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The financial statements of the Purchaser
included in the LTC Reports comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with GAAP
consistently applied during the periods presented
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(except, as noted therein, or, in the case of the unaudited statements, as
permitted by Form 10-Q of the SEC) and fairly present (subject, in the case of
the unaudited statements, to normal audit adjustments) the financial position of
the Purchaser and its consolidated subsidiaries as of the dates thereof and the
results of their operations and their cash flows for the periods then ended.
3.6 ABSENCE OF CERTAIN CHANGES. Since July 31, 1997, there have not
been any circumstances, state of facts or matters which might reasonably be
expected to have a Material Adverse Effect in respect of the Purchaser's
business, operations, properties, assets or financial condition taken as a
whole.
ARTICLE IV
COVENANTS OF THE SELLERS
During the period from March 1, 1998 until the Closing Date, the
Corporations shall be operated at the direction of the Purchaser. Except as
otherwise consented to or approved by the Purchaser in writing, the Sellers
agree that they shall act, or refrain from acting, as applicable, and shall
cause each Corporation to act or refrain from acting, as applicable, in
compliance with the following:
4.1 REGULAR COURSE OF BUSINESS. The Corporation shall operate its
business in good faith, consistent with past management practices; shall
maintain all of its properties in customary repair, order and condition,
reasonable wear and tear excepted; shall maintain (except for expiration due to
lapse of time) all leases and material Contracts in effect without change except
as expressly provided herein; shall comply in all material respects with the
provisions of all Regulations and Orders applicable to the Corporation and the
conduct of its business; shall not cancel, release, waive or compromise any
debt, Claim or right in its favor having a value in excess of $5,000 other than
in connection with returns for credit or replacement in the ordinary course of
business; shall not alter the rate or basis of compensation of any of its
officers, directors or employees other than in the ordinary course of business;
and shall maintain insurance coverage through the Closing Date with the coverage
and in the amounts set forth in SCHEDULE 2.25 hereto.
4.2 AMENDMENTS. Except as required for the transactions contemplated in
this Agreement, no change or amendment shall be made in the charter or Bylaws of
the Corporation. The Corporation shall not merge into or consolidate with any
other Person or change the character of its business. The Corporation shall not
acquire (including, without limitation, for cash or shares of stock, by merger,
consolidation or acquisition of stock or assets) any interest in any
corporation, partnership or other business organization or division thereof or
any assets, or make any investment either by purchase of shares or securities,
contributions of capital or property transfer, or, except in the ordinary course
of business, consistent with past practice, purchase any property or assets of
any other Person.
4.3 CAPITAL CHANGES; PLEDGES. The Corporation shall not issue or sell
any shares of its capital stock of any class or issue or sell any securities
convertible into, or Options to subscribe for any shares of its capital stock
and the Corporation shall not pledge or otherwise encumber any shares of its
capital stock or authorize any of the foregoing. In addition, the Corporation
shall not
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allow the transfer of any Shares of its Capital Stock on the stock transfer
ledger or other books and records.
4.4 DIVIDENDS. The Corporation shall not (i) declare, pay or set aside
for payment any dividend or other distribution in respect of its capital stock
other than as set forth on SCHEDULE 2.11 or as contemplated in SECTION 6.10
hereof, (ii) directly or indirectly, reclassify, combine, split, subdivide,
redeem, purchase or otherwise acquire any shares of its capital stock, or (iii)
pay any bonus to any Seller, in each case, without the prior written consent of
the Purchaser.
4.5 CAPITAL AND OTHER EXPENDITURES. The Corporation shall not make any
capital expenditures, or commitments with respect thereto in excess of $25,000
in the aggregate. The Corporation shall not make any loan or advance to, or
enter into any other transaction with, any Affiliate and shall collect in full
on or prior to the Closing Date any amounts outstanding now due from any
Affiliate.
4.6 LEASES. The Corporation shall pay all rent and other amounts due
and payable with respect to each of its real and personal property leases which
are due and payable on or prior to the Closing Date.
4.7 ASSETS. The Corporation shall not, effect any sale, lease, or any
other disposition or distribution of any of its assets or properties, now or
hereafter owned by it, except transactions in the ordinary and regular course of
business or as otherwise consented to by the Purchaser.
4.8 ACCOUNTS PAYABLE. The Corporation shall pay, in the ordinary course
of business and consistent with past practice, all accounts payable, other
current liabilities and capitalized lease obligations as they become due and
payable.
4.9 ACCOUNTING POLICIES. The Corporation shall not take any action with
respect to accounting policies or procedures other than in the ordinary course
of business and in a manner consistent with past practices.
4.10 BORROWING. The Corporation shall not incur, assume or Guarantee
any Indebtedness not reflected on the Financial Statements.
4.11 FULL ACCESS AND DISCLOSURE.
(a) Subject to the provisions of the Confidentiality
Agreement, the Corporation shall afford to the Purchaser and its
counsel, accountants, agents and other authorized representatives and
to financial institutions specified by the Purchaser reasonable access
upon reasonable notice during business hours to the Corporation's
properties, books and records in order that the Purchaser may have full
opportunity to make such reasonable investigations as it shall desire
to make of the affairs of the Corporation; and the Corporation shall
cause its officers, employees and auditors to furnish such additional
financial and operating data and other information as the Purchaser
shall from time to time reasonably request including, without
limitation, any internal control recommendations made by its
independent auditors in connection with any audit of the Corporation.
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(b) From time to time prior to the Closing Date, the Sellers
shall promptly supplement or amend information previously delivered to
the Purchaser 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 disclosed; provided, however, that such
supplemental information shall not be deemed to be an amendment to any
schedule or exhibit hereto for purposes of SECTION 7.1.
4.12 TAX MATTERS. The Sellers shall make all payments of their tax
liability and file all Tax Returns required to be filed in respect of the
Corporation's earnings pursuant to, and shall otherwise comply and cause the
Corporation to comply with all other applicable requirements of, Subchapter S of
the Code and corresponding provisions under applicable state and local laws.
4.13 CERTAIN OPERATIONAL MATTERS. The Corporation shall not take any of
the following actions without the consent of the Purchaser: (i) open any store,
(ii) terminate the employment of any officer, director or key employee set forth
on SCHEDULE 2.10, or (iii) amend the terms of either of the Corporations'
agreements with BellSouth Mobility, Bell Atlantic Nynex and Cell Star.
ARTICLE V
COVENANTS OF THE PURCHASER
The Purchaser hereby covenants and agrees with the Sellers that:
5.1 CONFIDENTIALITY. Except as required by law or by the rules of the
National Association of Securities Dealers or the United States Securities and
Exchange Commission (in which case, so far as possible, the Purchaser shall
consult with the Sellers prior to any disclosure), the Purchaser agrees that
unless and until the transactions contemplated hereby have been consummated, the
Purchaser and its representatives and its Affiliates and their representatives
and advisors will hold in strict confidence all data and information obtained
from the Sellers, the Corporations or any of their Affiliates in connection with
the transactions contemplated hereby, except any of the same which (i) was, is
now, or becomes generally available to the public (but not as a result of a
breach of any duty of confidentiality by which the Purchaser and its
representatives and its Affiliates and their representatives and advisors is
bound); (ii) was known to the Purchaser prior to its disclosure to the Purchaser
as demonstrated by Purchaser's written records; or (iii) is disclosed to the
Purchaser by a third party not subject to any duty of confidentiality to the
Sellers, the Corporations or any of their Affiliates prior to its disclosure to
the Purchaser by the Sellers, the Corporations or any of their Affiliates. The
Purchaser will use such data and information solely for the specific purpose of
evaluating the transactions contemplated hereby. If this Agreement is
terminated, the Purchaser and its Affiliates and their representatives and
advisors will promptly return to the Sellers all such data, information and
other written material (including all copies thereof) which has been obtained by
the Purchaser, and the Purchaser will make no further use whatsoever of any of
such or the information and knowledge contained therein or derived therefrom.
5.2 BOARD MEMBERSHIP. The Purchaser agrees to use its best efforts to
cause the appointment of Mr. Sosebee to the Purchaser's Board of Directors
within 30 days of the Closing
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Date and to nominate Mr. Sosebee for election to the Purchaser's Board of
Directors at the first annual meeting of the Purchaser's Shareholders following
the Closing Date.
5.3 DIRECTOR INDEMNIFICATION. Mr. Sosebee shall be entitled to the same
rights to indemnification and advancement of expenses existing in favor of the
existing directors of the Purchaser under the Purchaser's articles of
incorporation, bylaws and indemnification agreements in effect from time to
time.
ARTICLE VI
OTHER AGREEMENTS
The parties further agree as follows (and the Sellers agree to cause
the Corporations to comply with the following):
6.1 AGREEMENT TO DEFEND. In the event any action, suit, proceeding or
investigation of the nature specified in SECTION 7.5 or SECTION 8.3 hereof is
commenced, whether before or after the Closing Date, all the parties hereto
agree to cooperate and use their best efforts to defend against and respond
thereto.
6.2 FURTHER ASSURANCES. Subject to the terms and conditions of this
Agreement, the parties hereto shall (and the Sellers shall cause the
Corporations to) use their best efforts to take, or cause to be taken, all
action, and to do, or cause to be done, all things necessary, proper or
advisable under applicable Regulations to consummate and make effective as
promptly as possible the transactions contemplated by this Agreement, and to
cooperate with each other in connection with the foregoing, including without
limitation using all reasonable efforts (a) to obtain all necessary waivers,
consents, and approvals from other parties to loan agreements, leases, mortgages
and other material Contracts, (b) to obtain all necessary Permits, consents,
approvals and authorizations as are required to be obtained under any federal,
state or foreign Regulations, (c) to lift or rescind any injunction or
restraining order or other order adversely affecting the ability of the parties
to consummate the transactions contemplated hereby, (d) to effect all necessary
registrations and filings including, but not limited to, filings under the
Hart-Scott-Rodino Act and submissions of information requested by Authorities,
and (e) to fulfill all conditions to the obligations of the parties under this
Agreement. Each of the Purchaser and the Sellers further covenants and agrees
that it shall (and the Sellers shall cause the Corporations to) use its
respective best efforts to prevent, with respect to a threatened or pending
preliminary or permanent injunction or other Regulation or Order the entry,
enactment or promulgation thereof, as the case may be.
6.3 NO SOLICITATION OR NEGOTIATION. Unless and until this Agreement is
terminated, neither the Sellers nor the Corporations shall, and shall use its
best efforts to cause its directors, officers, employees, representatives,
agents, advisors, accountants and attorneys not to, initiate or solicit,
directly or indirectly, any inquiries or the making of any proposal with respect
to, or engage in negotiations concerning, or provide any confidential
information or data to any Person with respect to, or have any discussions with
any Person relating to, any acquisition, business combination or purchase of all
or any significant asset of, or any equity interest in, directly or
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indirectly, either Corporation or otherwise facilitate any effort or attempt to
do or seek any of the foregoing, and shall immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any of the foregoing.
6.4 NO TERMINATION OF SELLERS' OBLIGATIONS BY SUBSEQUENT INCAPACITY,
DISSOLUTION, ETC. Each Seller specifically agrees that the obligations of such
Seller hereunder, including, without limitation, obligations pursuant to Article
XII shall not be terminated by operation of law or by the death or incapacity of
any individual Seller.
6.5 DELIVERIES AFTER CLOSING. From time to time after the Closing, at
the Purchaser's request and without expense to the Corporations and without
further consideration from the Purchaser or the Corporations, the Sellers shall
execute and deliver such other instruments of conveyance and transfer and take
such other action as the Purchaser reasonably may require to convey, transfer to
and vest in the Purchaser and to put the Purchaser in possession of any rights
or property to be sold, conveyed, transferred and delivered hereunder.
6.6 NON-COMPETITION. During the "RESTRICTED PERIOD" (as hereinafter
defined), each Seller agrees not to, directly or indirectly, alone or as a
partner, officer, director, employee, consultant, agent, independent contractor,
member or stockholder of any company or Person, engage in any business activity,
including but not limited to any business activity related to the business of
selling cellular or wireless communications services or products, including,
without limitation, paging, PCS, ESMR and any other form of personal
communications services, in the "RESTRICTED AREA" (as hereinafter defined) which
is directly or indirectly in competition with the products or services being
developed, marketed, sold or otherwise provided by the Corporations or the
Purchaser or which is directly or indirectly detrimental to the business of the
Corporations, the Purchaser or any Subsidiary; provided, however, that the
record or beneficial ownership by a Seller of two percent (2%) or less of the
outstanding publicly traded capital stock of any such company or Person shall
not be deemed to be in violation of this SECTION 6.6 so long as a Seller is not
an officer, director, employee or consultant of such company or Person. The
Sellers further agree that, during the Restricted Period, the Sellers shall not
in any capacity, either separately, jointly or in association with others,
directly or indirectly do any of the following: (a) recruit, solicit, induce or
otherwise influence any of the Corporations', the Purchaser's or any
Subsidiary's employees, consultants, agents, sub-agents, suppliers, customers or
prospects, proprietors, partners, lenders, directors, joint venturers,
investors, lessors, sub-contractors, independent contractors or any other Person
which has a business relationship with either Corporation, the Purchaser or any
Subsidiary, to discontinue, reduce or modify such relationship with either
Corporation, the Purchaser or any Subsidiary; and (b) employ or seek to employ
any Person or agent who is then employed or retained by either Corporation, the
Purchaser or any Subsidiary (or who was so employed or retained at any time
within the two (2) years prior to the date the Seller employs or seeks to employ
such person). The "RESTRICTED PERIOD" shall mean the period beginning on the
Closing Date and ending on the fifth anniversary of the Closing Date. The
"RESTRICTED AREA" shall mean the continental United States. The Sellers
acknowledge and agree that the covenants provided for in this SECTION 6.6 are
reasonable and necessary in terms of time, area and line of business to protect
the Purchaser's legitimate business interests as a buyer of the Shares in
protecting its trade secrets. The Sellers further acknowledge and agree that
such
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covenants are reasonable and necessary in terms of time, area and line of
business to protect the Purchaser's and the Purchaser's other legitimate
business interests, which include interests in protecting (x) valuable
confidential business information, (y) substantial relationships with specific
customers throughout the United States and (z) customer goodwill associated with
ongoing business by way of marketing throughout the United States using the
trademark "Cellular Warehouse." The Sellers hereby expressly authorize the
enforcement of the covenants provided for in this SECTION 6.6 by the Purchaser,
the Corporations after the Closing, the Purchaser's, either Corporation's or any
of the Purchaser's permitted assigns and any successors to the business of the
Purchaser, the Corporations or the Purchaser. To the extent that the covenant
provided for in this SECTION 6.6 may later be deemed by a court to be too broad
to be enforced with respect to its duration or with respect to any particular
activity or geographic area, the court making such determination shall have the
power to reduce the duration or scope of the provision, and to add or delete
specific words or phrases to or from the provision. The provision as modified
shall then be enforced.
6.7 PUBLIC ANNOUNCEMENTS. The form, content and timing of all press
releases, public announcements or publicity statements with respect to this
Agreement and transactions contemplated hereby shall be subject to the prior
approval of both the Sellers and the Purchaser, which approval shall not be
unreasonably withheld. No press releases, public announcements or publicity
statements shall be released by either party without such prior mutual
agreement.
6.8 HART-SCOTT-RODINO ACT. Each of the Parties shall promptly file any
Notification and Report Forms and related material that it may be required to
file with the Federal Trade Commission and the Antitrust Division of the United
States Department of Justice under the Hart-Scott-Rodino Act, shall use its best
efforts to obtain an early termination of the applicable waiting period, and
shall make any further filings or information submissions pursuant thereto that
may be necessary, proper or advisable.
6.9 TRADING IN LTC COMMON STOCK. Except as otherwise provided herein or
expressly consented to in writing by the Purchaser, from the date of this
Agreement until the Closing Date, neither the Sellers nor any of their
Affiliates will:
(a) acquire, sell (including short sales), offer to acquire or
sell directly or indirectly, by purchase or otherwise, any voting
securities or direct or indirect rights to acquire any voting
securities of the Purchaser or any subsidiary thereof, or of any
successor to the Purchaser or any assets of the Purchaser or any
subsidiary or division thereof or of any such successor;
(b) make, or in any way participate, directly or indirectly,
in any "solicitation" of "proxies" to vote (as such terms are used in
the rules of the SEC), or seek to advise or influence any person or
entity with respect to the voting of any voting securities of the
Purchaser;
(c) make any public announcement with respect to, or submit a
proposal for, or offer of (with or without conditions) any
extraordinary transaction involving the Purchaser or any of its
securities or assets;
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(d) form, join or in any way participate in a "group" as
defined in Section 13(d)(3) of the Exchange Act in connection with any
of the foregoing; or
(e) request the Purchaser or any of their representatives,
directly or indirectly, to amend or waive any provision of this SECTION
6.9.
6.10 CERTAIN TAX MATTERS.
(a) S CORPORATION TAX RETURNS. After the Closing, the
Purchaser shall cause the Corporations to have all federal and state
income Tax Returns not yet due to be filed for all taxable periods
ending on or before the Closing Date (the "S CORPORATION TAX RETURNS")
prepared by Johnson & Associates at the Corporations' expense in a
manner consistent with such Tax Returns as previously filed by the
Corporations; and the Purchaser shall cause the Corporations to file
such Tax Returns not later than the due dates (taking into account
extensions) thereof. The parties shall cooperate with one another and
provide access to all information, books and records as may be
reasonably required for the preparation of these Tax Returns, any
amendments thereto and any audits or examinations thereof. Prior to the
Closing, each Corporation shall declare a dividend to the Sellers, as
the then record holders of the shares in the Corporations, in an
aggregate amount equal to 45% of the taxable income of the Corporation
for the period commencing January 1, 1998 and ending on the Closing
Date. The Purchaser shall cause the Corporations to pay such dividend
to the Sellers within 30 days after the Closing Date. In the event that
the Corporations do not pay in full such dividend to the Sellers within
such 30 day period, then the Purchaser shall cause the Corporations to
pay to the Sellers interest on the unpaid portion of such amount at a
rate of ten percent (10%) per annum which shall accrue from the 31st
day after the Closing Date to the date of actual payment. If such
dividend distribution received by a Seller exceeds such actual personal
tax liability of that Seller, then that Seller shall, within 30 days
after the filing of the Seller's federal and Georgia state income tax
returns, pay to the Purchaser such excess. In the event that the Seller
does not pay such excess within such 30 day period, then the Seller
shall pay to the Purchaser interest at a rate of ten percent (10%) per
annum which shall accrue from the 31st day after filing to the date of
actual payment. If such dividend distribution is less than such actual
personal tax liability, then the Purchaser shall pay to the Seller such
shortfall within 30 days of the filing of the Seller's federal and
Georgia state income tax returns. In the event that the Purchaser does
not pay such shortfall within such 30 day period, then the Purchaser
shall pay to the Seller interest at a rate of ten percent (10%) per
annum which shall accrue from the 31st day after filing to the date of
actual payment.
(b) SECTION 338(h)(10) ELECTION. Notwithstanding SECTION
6.10(A) hereof, at the option of the Purchaser (the exercise of which
option shall be effective upon delivery of written notice to the
Sellers not more than six months after the Closing Date), the Sellers
shall join the Purchaser in making elections under Section 338(h)(10)
of the Code and Treasury Regulations Section 1.338(h)(10)-1(d) (and any
corresponding elections under any applicable state and local Laws)
(collectively, the "338(h)(10) ELECTIONS") with respect to the purchase
and sale of the Shares from the Sellers hereunder. Within 30 days after
the Purchaser's notice to the Sellers of its decision to make such
338(h)(10)
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Elections, the Sellers and the Purchaser shall exchange completed and
executed copies of IRS Form 8023 and/or Form 8023-A (or other
applicable form), required schedules thereto, and any similar forms
required by any state or local Taxing Authority. The Sellers and the
Purchaser shall in good faith use commercially reasonable efforts to
promptly agree on such forms and the allocation of the "Modified
Adjusted Deemed Sales Price," as defined in Treasury Regulations
ss.1.338(h)(10)-(f), among the assets of the Corporations (the
"ALLOCATION SCHEDULE"). The Sellers and the Purchaser each agree to
file all Tax Returns in accordance with the Allocation Schedule. The
Purchaser may, in its sole discretion, retain a nationally recognized
independent appraiser acceptable to both the Sellers and the Purchaser
to determine the fair market value of the assets of the Corporations.
The fees and expenses of such appraiser shall be paid by the Purchaser.
The Purchaser shall, promptly upon the filing of the Sellers' federal
and Georgia state income tax returns, reimburse the Sellers for the
additional Taxes payable by the Sellers by reason of the 338(h)(10)
Elections, which, in the case of each Seller, shall be equal to the
excess of (i) Taxes payable by the Seller computed taking the
338(h)(10) Elections into account (including, without limitation, any
incremental Taxes payable by the Sellers as a result of any payment
made to the Sellers pursuant to the provisions of this sentence) OVER
(ii) the Taxes payable by the Seller computed as if the 338(h)(10)
Elections had not been made. In the event that the Purchaser does not
fully reimburse the Sellers for such amounts within 30 days of such
filing, then the Purchaser shall also pay to the Sellers interest on
the unpaid portion of such amounts at a rate of ten percent (10%) per
annum which shall accrue from the 31st day after filing to the date of
actual payment. The parties acknowledge that the Financial Statements
do not include any provision for Taxes which may be or become payable
as a result of the 338(h)(10) Elections.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER
Each and every obligation of the Purchaser under this Agreement shall
be subject to the satisfaction, on or before the Closing Date, of each of the
following conditions unless waived in writing by the Purchaser:
7.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE. The representations
and warranties of the Sellers contained in Article II and elsewhere in this
Agreement and all information contained in any exhibit or schedule hereto
delivered by, or on behalf of, the Sellers, to the Purchaser, shall be true and
correct when made and on the Closing Date as though then made, except as
expressly provided herein. The Corporations and the Sellers shall have performed
and complied with all agreements, covenants and conditions required by this
Agreement to be performed and complied with by them on or prior to the Closing
Date. The president of each Corporation shall have delivered to the Purchaser a
certificate (which shall be addressed to the Purchaser and its lenders), dated
the Closing Date, in the form designated EXHIBIT 7.1 hereto, certifying to the
foregoing.
7.2 CONSENTS AND APPROVALS. The Purchaser, the Sellers and each
Corporation shall have obtained any and all consents, approvals, Orders,
qualifications, licenses, Permits or other
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authorizations, including compliance with the Hart-Scott-Rodino Act, required by
all applicable Regulations, Orders and Contracts of such Corporation or binding
on its properties and assets, with respect to the execution, delivery and
performance of the Agreement and the conduct of the business of such Corporation
in the same manner after the Closing Date as before the Closing Date the failure
to obtain which would have a Material Adverse Effect.
7.3 OPINION OF THE SELLERS' COUNSEL. The Purchaser shall have received
an opinion of King & Spalding (which will be addressed to the Purchaser and its
lenders), dated the Closing Date, substantially in the form of EXHIBIT 7.3
hereto.
7.4 NO MATERIAL ADVERSE CHANGE. There shall have been no Material
Adverse Change since the Financial Statement Date. The Purchaser shall have
received certificates (which shall be addressed to the Purchaser and its
lenders), dated the Closing Date, of the president and chief financial officer
of each Corporation, in the form of EXHIBIT 7.4 hereto, certifying to the
foregoing.
7.5 NO PROCEEDING OR LITIGATION. No preliminary or permanent injunction
or other Order, decree or ruling issued by a court of competent jurisdiction or
by any governmental, regulatory or administrative agency or commission, or any
statute, rule, Regulation or executive order promulgated or enacted by any
governmental authority shall be in effect, which would prevent the consummation
of the transactions contemplated hereby.
7.6 FINANCING. The Purchaser shall have obtained such financing on
terms and in amounts as shall be satisfactory to the Purchaser to consummate the
transactions provided for herein.
7.7 CARRIER AGREEMENTS. The Corporations shall have entered into a new
agreement with BellSouth Mobility, which agreement shall be in form and
substance acceptable to Purchaser in its sole discretion.
7.8 ACCOUNTING MATTERS. The Purchaser shall have received a
certificate, dated the date hereof, of each Corporation's Chief Financial
Officer in form and substance satisfactory to the Purchaser, as to the accuracy
of all of such Corporation's financial statements for the fiscal years ending
January 2, 1998 and December 31, 1996 and 1995.
7.9 CONDITION OF ASSETS. Neither Corporation's assets and properties
shall have been damaged or destroyed, prior to the Closing Date, by fire or
other casualty, whether or not fully covered by insurance (except for reasonable
deductibles) in an aggregate amount exceeding $100,000.
7.10 TERMINATION OF AFFILIATE CONTRACTS. The Sellers shall have caused
any Contracts between the Sellers and their Affiliates and either Corporation to
terminate at Closing without any further liability to either Corporation, (i)
including, without limitation, the Shareholders Agreement dated March 27, 1997
among the Sellers and Sosebee Enterprises, Inc., and (ii) excluding the real
estate lease for the Corporations' headquarters located at 8611 Roswell Road,
Atlanta, Georgia 30350.
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7.11 SECRETARY'S CERTIFICATE. The Purchaser shall have received a
certificate, by the secretary of each Corporation, as to the charter and bylaws
of such Corporation, the resolutions adopted by the directors and stockholders
of such Corporation in connection with this Agreement, the incumbency of certain
officers of such Corporation and the jurisdictions in which such Corporation is
qualified to conduct business in the form of EXHIBIT 7.11 hereto.
7.12 CERTIFICATES OF GOOD STANDING. At the Closing, each Corporation
shall have delivered to the Purchaser certificates issued by the appropriate
governmental authorities evidencing the good standing, with respect to both the
conduct of business and the payment of all franchise taxes, of such Corporation
as of a date not more than fifteen (15) days prior to the Closing Date as a
corporation organized under the laws of the state and as a foreign corporation
authorized to do business under the laws of the jurisdictions listed in SCHEDULE
2.1(a) hereto.
7.13 LEASES. All lessors under each Corporation's real property leases
shall have consented (where such consent is necessary) to the consummation of
the transactions contemplated by this Agreement without requiring material
modification in the rights or obligations thereunder. Subject to the foregoing,
neither Corporation's real property leases shall terminate, be subject to
renegotiation or be limited or restricted in any way as a result of the
transactions contemplated by this Agreement. The Corporations shall have
delivered to the Purchaser estoppel letters from each third-party lessor of real
estate from whom either Corporation leases real estate, substantially in the
form of EXHIBIT 7.13 hereto.
7.14 EMPLOYMENT AGREEMENTS. Messrs. Sosebee and Hill shall have each
executed and delivered an employment agreement substantially in the form of
EXHIBIT 7.14 hereto providing for the continued employment of such persons with
the Corporations and containing certain noncompetition provisions.
7.15 RESIGNATIONS. The Sellers shall have caused each Corporation's
directors to have resigned from the Board of Directors.
7.16 ESCROW AGREEMENT. The Sellers shall have executed the Escrow
Agreement substantially in the form of EXHIBIT 1.2(b).
7.17 LTC COMMON STOCK. The average daily closing price of the LTC
Common Stock on the Nasdaq National Market for the ten days preceding the fifth
day prior to the Closing Date (the "CLOSING Price") shall not be greater than
$20.00 per share.
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ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF THE SELLERS
Each and every obligation of the Sellers under this Agreement shall be
subject to the satisfaction, on or before the Closing Date, of each of the
following conditions unless waived in writing by the Sellers:
8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE. The representations
and warranties of the Purchaser contained in Article III and elsewhere in this
Agreement and all information contained in any schedule hereto delivered by, or
on behalf of, the Purchaser to the Sellers, shall be true and correct when made
and on the Closing Date as though then made, except as expressly provided
herein. The Purchaser shall have performed and complied with all agreements,
covenants and conditions required by this Agreement to be performed and complied
with by it on or prior to the Closing Date. The president of the Purchaser shall
have delivered to the Sellers a certificate, dated the Closing Date, in the form
designated EXHIBIT 8.1 hereto, certifying to the foregoing.
8.2 CONSENTS AND APPROVALS. The Sellers and the Corporations shall have
obtained any and all material consents, approvals, orders, qualifications,
licenses, permits or other authorizations, including compliance with the
Hart-Scott-Rodino Act, required by all applicable Regulations, Orders or
material Contracts of the Corporations or binding on its properties and assets,
with respect to the execution, delivery and performance of the Agreement.
8.3 NO PROCEEDING OR LITIGATION. No preliminary or permanent injunction
or other Order, decree or ruling issued by a court of competent jurisdiction or
by any governmental, regulatory or administrative agency or commission, or any
statute, rule, Regulation or executive order promulgated or enacted by any
governmental authority shall be in effect, which would prevent the consummation
of the transactions contemplated hereby.
8.4 ESCROW AGREEMENT. The Purchaser shall have executed the Escrow
Agreement in substantially the form of EXHIBIT 1.2(b) hereto.
8.5 EMPLOYMENT AGREEMENTS. Each Corporation shall have executed and
delivered an employment agreement with each of Messrs. Sosebee and Hill
substantially in the form of EXHIBIT 7.11 hereto.
8.6 SECRETARY'S CERTIFICATE. The Sellers shall have received a
certificate, by the secretary of the Purchaser, dated the Closing Date, as to
the charter and bylaws of the Purchaser, the resolutions adopted by the
directors of the Purchaser in connection with this Agreement, the incumbency of
certain officers of the Purchaser and the jurisdictions in which the Purchaser
is qualified to conduct business in the form of EXHIBIT 7.11 hereto.
8.7 LTC COMMON STOCK. The Closing Price shall not be less than $7.00
per share.
ARTICLE IX
REGISTRATION RIGHTS
9.1 "PIGGY BACK" REGISTRATIONS.
(a) If at any time prior to the earlier of (i) the second
anniversary of the Closing Date and (ii) the date on which each Seller
may sell all 450,000 Shares then held by him pursuant to Rule 144 in a
single transaction, the Purchaser shall determine to register the sale
of any LTC Common Stock, either for its own account or the account of
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a security holder or holders exercising their registration rights under
the Securities Act (other than pursuant to (x) an acquisition of or
merger with another entity including, without limitation, a purchase of
stock or assets or a transaction described under Rule 145 of the
Securities Act, (y) a transaction registering securities convertible
into LTC Common Stock, (z) Form S-8 or its successor forms) on any
registration form which permits secondary sales and includes
substantially the same information as would be required to be included
in a registration statement covering the sale of LTC Shares, the
Purchaser shall:
(i) Promptly give to each Seller written notice
thereof (which shall include the number of shares the
Purchaser or other security holder proposes to register and,
if known, the name of the proposed underwriter); and
(ii) Use its reasonable best efforts to include in
such registration all the LTC Shares specified in a written
request or requests made by the Sellers within ten (10) days
after the date of receipt of the written notice from the
Purchaser described in clause (i) above; provided, however,
that prior to the first anniversary of the Closing Date, not
more than an aggregate of 450,000 LTC Shares shall be
requested by the Sellers to be included in all such
registrations pursuant to this Article IX. If the underwriter
advises the Purchaser (A) that marketing considerations
require a limitation on the number of shares offered pursuant
to any registration statement, then the Purchaser may offer
all of the securities it proposes to register for its own
account or the maximum amount that the underwriter considers
saleable and such limitation on any remaining securities that
may, in the opinion of the underwriter, be sold will be
imposed pro rata among all shareholders who are entitled to
include shares in such Registration Statement according to the
number of shares of LTC Common Stock each such shareholder
requested to be included in such registration statement, or
(B) that marketing considerations require a limitation on the
number of shares offered by the management of the Purchaser
pursuant to any registration statement, then such limitation
on any shares that may, in the opinion of the underwriter, be
sold by the management of the Purchaser will be imposed pro
rata among all management shareholders who are entitled to
include such shares in such registration statement according
to the number of shares of LTC Common Stock each such
management shareholder requested to be included in such
registration statement.
(b) Each Seller agrees not to effect any public sale or
distribution (including sales pursuant to Rule 144) of equity
securities of the Purchaser, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days
prior to and the 180-day period (or such shorter period as shall be
agreed to by the executive officers of the Purchasers) beginning on the
effective date of any underwritten registration in which LTC Shares are
included pursuant hereto (except as part of such underwritten
registration) unless the underwriters managing the registered public
offering and the Purchaser otherwise agree.
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(c) Notwithstanding anything to the contrary in this
Agreement, the Purchaser shall be entitled to delay or withdraw any
such filing and the Sellers' use of the related prospectus for any
reason, including if the Purchaser determines that such filing would
impede, delay, or interfere with any significant financing,
acquisition, or other transaction involving the Purchaser or any
Affiliate, or require disclosure of material information which the
Purchaser has a bona fide business purpose for preserving as
confidential.
9.2 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
SECTION 9.1 shall be paid by the Purchaser. All Selling Expenses incurred in
connection with any such registration, qualification or compliance shall be
borne by the Sellers registered, pro rata on the basis of the number of their
shares so registered.
9.3 REGISTRATION PROCEDURES. In the case of each registration effected
by the Purchaser pursuant to SECTION 9.1, the Purchaser shall keep each Seller
advised in writing as to the initiation of each registration with respect to LTC
Shares held by him and as to the completion thereof. At its expense, the
Purchaser shall do the following for the benefit of such Sellers:
(a) use its reasonable best efforts to keep such registration
effective for a period of one hundred twenty (120) days or until the
Sellers have completed the distribution described in the registration
statement relating thereto, whichever first occurs, and amend or
supplement such registration statement and the prospectus contained
therein from time to time to the extent necessary to comply with the
Securities Act and applicable state securities laws;
(b) use its reasonable best efforts to register or qualify the
LTC Shares covered by such registration under the applicable securities
or "blue sky" laws of such jurisdictions as the Sellers may reasonably
request; provided, that the Purchaser shall not be obligated to qualify
to do business in any jurisdiction where it is not then so qualified or
otherwise required to be so qualified, to take any action which would
subject it to the service of process in suits other than those arising
out of such registration or to subject itself to taxation in any such
jurisdiction;
(c) furnish to each seller of securities such number of copies
of such registration statement, each amendment and supplement thereto,
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may
reasonably request in order to facilitate the disposition of the
securities owned by such seller;
(d) notify each Seller, at any time when a prospectus relating
to LTC Shares is required to be delivered under the Securities Act, of
the happening of any event as a result of which the prospectus included
in such registration statement contains an untrue statement of a
material fact or omits any fact necessary to make the statements
therein not misleading;
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(e) cause all such LTC Shares to be listed on each securities
exchange on which the LTC Common Stock is then listed and, if not so
listed, to be listed on the NASD automated quotation system and, if
listed on the NASD automated quotation system, use its best efforts to
secure designation of all such securities covered by such registration
statement as a Nasdaq national market security within the meaning of
Rule 11Aa2-1 of the SEC or, failing that, to secure NASDAQ
authorization for such securities and, without limiting the generality
of the foregoing, to arrange for at least two market makers to register
as such with respect to such securities with the NASD;
(f) provide a transfer agent and registrar for all such
securities not later than the effective date of such registration
statement;
(g) enter into such customary agreements (including
underwriting agreements in customary form) and take all such other
actions as the underwriters, if any, reasonably request in order to
expedite or facilitate the disposition of such securities (including,
without limitation, effecting a stock split or a combination of
shares);
(h) otherwise use its reasonable best efforts to comply with
all applicable rules and regulations of the SEC, and make available to
its security holders, as soon as reasonably practicable, an earnings
statement covering the period of at least twelve months beginning with
the first day of the Purchaser's first full calendar quarter after the
effective date of the registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act and
Rule 158 thereunder; and
(i) in the event of the issuance of any stop order suspending
the effectiveness of a registration statement, or of any order
suspending or preventing the use of any related prospectus or
suspending the qualification of any LTC Common Stock included in such
registration statement for sale in any jurisdiction, the Purchaser
shall use its reasonable best efforts promptly to obtain the withdrawal
of such order.
9.4 PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Seller may
participate in any registration hereunder which is underwritten unless such
Seller (i) agrees to sell such Seller's LTC Shares on the basis provided in any
underwriting arrangements approved by the Purchaser (ii) completes and executes
all questionnaires, powers of attorney, custody agreements, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements.
9.5 FURTHER INFORMATION. If LTC Shares owned by a Seller are included
in any registration, then such Seller shall furnish the Purchaser with such
information regarding itself as the Purchaser may reasonably request or as
required by applicable law in connection with any registration qualification or
compliance referred to in this Agreement.
9.6 INDEMNIFICATION.
(a) The Purchaser shall, and hereby does, indemnify each
Seller, with respect to which registration, qualification or compliance
has been effected pursuant to this Article IX,
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and each underwriter, if any, and each Person who controls such
underwriter within the meaning of the Securities Act, against all
claims, losses, damages and liabilities (or actions in respect thereof)
arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any prospectus, offering
circular or other document (including any related registration
statement, notification or the like) incident to any such registration,
qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or
any violation by the Purchaser of the Securities Act or the Exchange
Act or the securities act of any state or any Regulation thereunder
applicable to the Purchaser and relating to action or inaction required
of the Purchaser in connection with any such registration,
qualification or compliance, and shall reimburse each such Seller, each
such underwriter and each Person who controls any such underwriter, for
any legal and any other expenses reasonably incurred in connection with
investigating and defending any such claim, loss, damage, liability or
action, whether or not resulting in any liability, provided that the
Purchaser will not be liable in any such case to the extent that any
such claim, loss, damage, liability or expense arises out of or is
based solely on any untrue statement (or alleged untrue statement) or
omission (or alleged omission) based upon written information furnished
to the Purchaser by such Seller or underwriter and stated to be
specifically for use therein.
(b) Each Seller shall, if LTC Shares held by him are included
in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Purchaser, each of its
directors and officers and each underwriter, if any, of the Purchaser's
securities covered by such a registration statement, each person who
controls the Purchaser or such underwriter within the meaning of the
Securities Act and the rules and regulations thereunder, and the other
Seller against all claims, losses, damages and liabilities (or actions
in respect thereof) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any such
registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Purchaser's
directors, officers, partners, persons, underwriters or control persons
for any legal or any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability
or action, whether or not resulting in liability, in each case to the
extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular or other document
solely in reliance upon and in conformity with written information
furnished to the Purchaser by such Seller and stated to be specifically
for use therein; provided, however, that the obligations of each Seller
hereunder shall be limited to an amount equal to the net proceeds
received by such Seller upon sale of his securities.
(c) Each party entitled to indemnification under this SECTION
9.6 (the "INDEMNIFIED PARTY") shall give notice to the party required
to provide indemnification (the "INDEMNIFYING PARTY") promptly after
such Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, but the failure of any Indemnifying Party to
give such notice shall not relieve the Indemnifying Party of its
obligations under this
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SECTION 9.6 (except and to the extent the Indemnifying Party has been
prejudiced as a consequence thereof). The Indemnifying Party shall be
entitled to participate in, and to the extent that it may elect by
written notice delivered to the Indemnified Party promptly after
receiving the aforesaid notice from such Indemnified Party, at its
expense to assume, the defense of any such claim or any litigation
resulting therefrom, with counsel reasonably satisfactory to such
Indemnified Party, provided that the Indemnified Party may participate
in such defense at its expense, notwithstanding the assumption of such
defense by the Indemnifying Party, and provided, further, that if the
defendants in any such action shall include both the Indemnified Party
and the Indemnifying Party and the Indemnified Party shall have
reasonably concluded that there may be legal defenses available to it
and/or other Indemnified parties which are different from or additional
to those available to the Indemnifying Party, the Indemnified Party or
parties shall have the right to select separate counsel to assert such
legal defenses and to otherwise participate in the defense of such
action on behalf of such Indemnified Party or parties and the fees and
expenses of such counsel shall be paid by the Indemnifying Party. No
Indemnifying Party, in the defense of any such claim or litigation,
shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in
respect to such claim or litigation. Each Indemnified Party shall (i)
furnish such information regarding itself or the claim in question as
an Indemnifying Party may reasonably request in writing and as shall be
reasonably required in connection with defense of such claim and
litigation resulting therefrom and (ii) shall reasonably assist the
Indemnifying Party in any such defense, provided that the Indemnified
Party shall not be required to expend its funds in connection with such
assistance.
ARTICLE X
CLOSING
10.1 CLOSING. Unless this Agreement shall have been terminated or
abandoned pursuant to the provisions of Article XI hereof, a closing of the
transactions contemplated by this Agreement (the "CLOSING") shall be held on or
prior to April 2, 1998, or on such other date (the "CLOSING DATE") designated by
the Purchaser upon five days notice to the Corporations in the offices of the
Purchaser's lenders' counsel, provided that the Closing shall not occur, in any
event, after April 15, 1998.
10.2 INTERVENING LITIGATION. If prior to the Closing Date any
preliminary or permanent injunction or other Order issued by a court of
competent jurisdiction or by any other Authority shall restrain or prohibit this
Agreement or the consummation of the transactions contemplated herein for a
period of fifteen days or longer, the Closing shall be adjourned at the option
of either party for a period of not more than thirty days. If at the end of such
thirty day period such injunction or Order shall not have been favorably
resolved, either party may, by written notice thereof to the other, terminate
this Agreement, without liability or further obligation hereunder.
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ARTICLE XI
TERMINATION AND ABANDONMENT
11.1 METHODS OF TERMINATION. This Agreement may be terminated and the
transactions herein contemplated may be abandoned at any time:
(a) by mutual consent of the Purchaser and the Sellers;
(b) by the Purchaser or the Sellers if this Agreement is not
consummated on or before April 15, 1998; provided that if any party has
breached or defaulted with respect to its respective obligations under
this Agreement on or before such date, such party may not terminate
this Agreement pursuant to this SECTION 11.1(b), and each other party
to this Agreement shall at its option enforce its rights against such
breaching or defaulting party and seek any remedies against such party,
in either case as provided hereunder and by applicable law; or
(c) by the Purchaser if as of the Closing Date any of the
conditions specified in Article VII hereof have not been satisfied in
any material respect or if the Sellers are otherwise in default in any
material respect under this Agreement;
(d) by the Purchaser if the Purchaser has refused in writing
to accept an amendment to the Sellers' schedules pursuant to SECTION
2.36; or
(e) by the Sellers if as of the Closing Date any of the
conditions specified in Article VIII hereof have not been satisfied in
any material respect or if the Purchaser is otherwise in default in any
material respect under this Agreement.
11.2 PROCEDURE UPON TERMINATION. In the event of termination and
abandonment pursuant to SECTION 11.1 hereof, and subject to the proviso
contained in SECTION 11.1(b) this Agreement shall terminate and shall be
abandoned, without further action by any of the parties hereto. If this
Agreement is terminated as provided herein:
(a) each party shall redeliver all documents and other
material of any other party relating to the transactions contemplated
hereby, whether obtained before or after the execution hereof, to the
party furnishing the same;
(b) all information received by any party
hereto with respect to the business of any other party or the
Corporations (other than information which is a matter of public
knowledge or which has heretofore been or is hereafter published in any
publication for public distribution or filed as public information with
any governmental authority) shall not at any time be used for the
advantage of, or disclosed to third parties by, such party to the
detriment of the party furnishing such information; and
(c) other than as provided in SECTION 13.15 no non-breaching
party hereto shall have any liability or further obligation to any
other party to this Agreement.
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ARTICLE XII
SURVIVAL OF TERMS; INDEMNIFICATION
12.1 SURVIVAL. All of the terms and conditions of this Agreement,
together with the representations, warranties and covenants contained herein or
in any instrument or document delivered or to be delivered pursuant to this
Agreement, shall survive the execution of this Agreement and the Closing Date
notwithstanding any investigation heretofore or hereafter made by or on behalf
of any party hereto; provided, however, that (a) the agreements and covenants
(including the indemnification provisions set forth in this Article XII) set
forth in this Agreement shall survive and continue until all obligations set
forth therein shall have been performed and satisfied; and (b) all
representations and warranties, shall survive and continue for, and all claims
with respect thereto shall be made prior to October 31, 1999, except for (i) the
representations and warranties set forth in SECTIONS 2.5, 2.16 and 2.18 which
shall survive until, and all claims with respect thereto shall be made within,
sixty days after the expiration of the applicable statute of limitations, and
(ii) representations and warranties for which an indemnification claim shall be
pending as of the end of the applicable period referred to above, in which event
such indemnities shall survive with respect to such claim until the final
disposition thereof.
12.2 LIMITATIONS.
(a) Notwithstanding any other provision hereof, in the absence
of fraud, the aggregate amount of indemnifiable damages for which the
Sellers shall be liable under this Article XII shall not exceed $12
million, other than with respect to (i) SECTION 12.3(b) and (ii)
breaches of representations and warranties made by the Sellers in
SECTIONS 2.5, 2.16 and 2.18.
(b) Neither party shall be required to indemnify the other
party under SECTIONS 12.3(a), 12.3(e), 12.4(a) and 12.4(b) until the
indemnifiable damages, individually or in the aggregate exceed $100,000
(the "BASKET RATE"), at which point such indemnifying party shall be
responsible for all indemnifiable damages that may arise in excess of
the Basket Rate; and provided that indemnifiable damages shall
accumulate until such time as they exceed the Basket Rate, whereupon
the party to be indemnified shall be entitled to seek indemnification
for the amount of such damages in excess of the Basket Rate.
(c) The Sellers shall be entitled to a credit against any
liability under Article XII to the extent and in the amount of
insurance proceeds actually received by the Corporations pursuant to
the terms of any insurance policy maintained by the Corporations as of
the Closing Date. The Purchaser agrees it will not terminate any such
insurance policy before the end of any period for which such policy has
been fully paid for by the Corporations prior to the Closing Date.
12.3 INDEMNIFICATION BY SELLERS. The Sellers jointly and severally
agree to, and shall, indemnify the Purchaser and its subsidiaries and the
Corporations after the Closing and their respective officers, directors,
employees, shareholders, representatives and agents and hold each of them
harmless at all times after the date of this Agreement, against and in respect
of any and all
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damage, loss, deficiency, liability, obligation, commitment, cost
or expense (including the fees and expenses of counsel) resulting from, or in
respect of, any of the following ("PURCHASER LOSSES"):
(a) Any misrepresentation, breach of warranty, or
non-fulfillment of any obligation on the part of the Corporations prior
to Closing, or the Sellers in this Agreement or the Escrow Agreement.
(b) Any liability of the Corporation for any Tax accruing on
or prior to January 2, 1998, but excluding any Taxes for which (and to
the extent) there is an adequate accrual and reserve on the Financial
Statements of the Corporation (and excluding any Taxes payable by
reason of the 338(h)(10) Elections pursuant to SECTION 6.10).
(c) Any failure of any Seller to have good, valid and
marketable title to the issued and outstanding Shares held by such
Seller, free and clear of all Liens.
(d) Any Claim by a stockholder or former stockholder of the
Corporation or any other Person seeking to assert: (i) ownership or
rights to ownership of any shares of capital stock of the Corporation;
(ii) any rights of a stockholder including any Option, preemptive
rights or rights to receive notice or to vote; (iii) any rights under
the Corporation's charter, bylaws or other constituent documents; or
(iv) any Claim that his shares of capital stock were improperly
repurchased by the Corporation.
(e) All demands, assessments, judgments, costs and reasonable
legal and other expenses arising from, or in connection with, any
action, suit, proceeding or Claim incident to any of the foregoing.
The amount of each payment pursuant to this SECTION 12.3 shall be
computed so as to protect the indemnitee from any loss on an after tax basis,
taking into account the deductibility of any payment or loss of the indemnitee
in respect of which payment is made and the deductibility of any payment
pursuant to this SECTION 12.3.
12.4 INDEMNIFICATION BY THE PURCHASER. The Purchaser agrees to, and
shall, indemnify the Sellers and hold each of them harmless at all times after
the date of this Agreement, against and in respect of any and all damage, loss,
deficiency, liability, obligation, commitment, cost or expense (including the
fees and expenses of counsel) resulting from, or in respect of, any of the
following:
(a) Any misrepresentation, breach of warranty or
non-fulfillment of any obligation on the part of the Purchaser in this
Agreement or the Escrow Agreement.
(b) All demands, assessments, judgments, costs and reasonable
legal and other expenses arising from, or in connection with, any
action, suit, proceeding or Claim incident to any of the foregoing.
(c) any amounts payable by the Purchaser or any Corporation to
the Sellers pursuant to SECTION 1.3, SECTION 5.3, SECTION 6.10 or
SECTION 9.6(a) hereof.
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12.5 THIRD-PARTY CLAIMS.
(a) Except as otherwise provided in this Agreement, the
following procedures shall be applicable with respect to
indemnification for third-party Claims. Promptly after receipt by the
party seeking indemnification hereunder (hereinafter referred to as the
"INDEMNITEE") of notice of the commencement of any (a) Tax audit or
proceeding for the assessment of Tax by any Taxing Authority or any
other proceeding likely to result in the imposition of a Tax liability
or obligation or (b) any action or the assertion of any Claim,
liability or obligation by a third party (whether by legal process or
otherwise), against which Claim, liability or obligation the other
party to this Agreement (hereinafter the "INDEMNITOR") is, or may be,
required under this Agreement to indemnify such Indemnitee, the
Indemnitee will, if a Claim thereon is to be, or may be, made against
the Indemnitor, notify the Indemnitor in writing of the commencement or
assertion thereof and give the Indemnitor a copy of such Claim, process
and all legal pleadings. The Indemnitor shall have the right to
participate in the defense of such action with counsel of reputable
standing. The Indemnitor shall have the right to assume the defense of
such action unless such action (i) may result in injunctions or other
equitable remedies in respect of the Indemnitee or its business; (ii)
may result in liabilities which, taken with other then existing Claims
under this Article XII, would not be fully indemnified hereunder; or
(iii) may have an adverse impact on the business or financial condition
of the Indemnitee after the Closing Date (including an effect on the
tax liabilities, earnings or ongoing business relationships of the
Indemnitee) or (vi) is for an alleged amount of less than $25,000. The
Indemnitor and the Indemnitee shall cooperate in the defense of such
Claims. In the case that the Indemnitor shall assume or participate in
the defense of such audit, assessment or other proceeding as provided
herein, the Indemnitee shall make available to the Indemnitor all
relevant records and take such other action and sign such documents as
are reasonable necessary to defend such audit, assessment or other
proceeding in a timely manner. If the Indemnitee shall be required by
judgment or a settlement agreement to pay any amount in respect of any
obligation or liability against which the Indemnitor has agreed to
indemnify the Indemnitee under this Agreement, the Indemnitor shall
promptly reimburse the Indemnitee in an amount equal to the amount of
such payment plus all reasonable expenses (including legal fees and
expenses) incurred by such Indemnitee in connection with such
obligation or liability subject to this Article XII. No Indemnitor, in
the defense of any such Claim, shall, except with the consent of the
Indemnitee, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnitee of a release
from all liability with respect to such Claim. In the event that the
Indemnitor does not assume the defense of any matter for which it is
entitled to assume such defense as above provided, the Indemnitee shall
have the full right to defend against any such Claim, and shall be
entitled to settle or agree to pay in full such claim or demand, in its
sole discretion. With respect to any matter as to which the Indemnitor
is not entitled to assume the defense pursuant to the terms of this
paragraph, the Indemnitee shall not enter into any settlement for which
an indemnification claim will be made hereunder without the approval of
the Indemnitor, which will not be unreasonably withheld.
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(b) Prior to paying or settling any Claim against which an
Indemnitor is, or may be, obligated under this Agreement to indemnify
an Indemnitee, the Indemnitee must first supply the Indemnitor with a
copy of a final court judgment or decree holding the Indemnitee liable
on such Claim or failing such judgment or decree, must first receive
the written approval of the terms and conditions of such settlement
from the Indemnitor. An Indemnitor or Indemnitee shall have the right
to settle any Claim against it, subject to the prior written approval
of the other, which approval shall not be unreasonably withheld.
(c) An Indemnitee shall have the right to employ its own
counsel in any case, but the fees and expenses of such counsel shall be
at the expense of the Indemnitee unless (a) the employment of such
counsel shall have been authorized in writing by the Indemnitor in
connection with the defense of such action or claim, (b) the Indemnitor
shall not have employed counsel in the defense of such action or claim,
or (c) such Indemnitee shall have reasonably concluded based upon the
advice of counsel that there may be defenses available to it which are
contrary to, or inconsistent with, those available to the Indemnitor,
in any of which events such fees and expenses of not more than one
additional counsel for the indemnified parties shall be borne by the
Indemnitor; provided that no Indemnitor shall be liable to pay for more
than one separate counsel for all Indemnitees in any single
jurisdiction.
12.6 SECURITY FOR THE INDEMNIFICATION OBLIGATION. Each Seller hereby
agrees that, subject to the following provisions of this SECTION 12.6, any
claims for indemnification by the Purchaser against the Sellers (or any of them)
hereunder may be satisfied by the Purchaser by recourse against the Escrow
Shares pursuant to the terms of the Escrow Agreement. All payments for
indemnifiable damages made pursuant to this Article XII (including the
cancellation of any Escrow Shares) shall be treated as adjustments to the
Purchase Price. If the Escrow Shares are insufficient to set off any claim for
indemnifiable damages made hereunder (or have been delivered to the holders
prior to the making or resolution of such claim), then the Purchaser may take
any action or exercise any remedy available to it against the Sellers by
appropriate legal proceedings to collect such indemnifiable damages. To the
extent the Escrow Shares are sufficient in value to cover all of the Purchaser's
indemnification claims, then the Purchaser agrees to first seek indemnification
against the Escrow Shares prior to seeking redress against any of the Seller's
other assets.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
13.1 AMENDMENT AND MODIFICATION. Subject to applicable law, this
Agreement may be amended, modified and supplemented only by written agreement of
the parties hereto.
13.2 WAIVER OF COMPLIANCE; CONSENTS. Any failure of any party hereto to
comply with any obligation, covenant, agreement or condition herein may be
waived in writing by the other parties hereto, but such waiver or failure to
insist upon strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
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subsequent or other failure. Whenever this Agreement requires or permits consent
by or on behalf of any party hereto, such consent shall be given in writing.
13.3 CERTAIN DEFINITIONS.
"338(h)(10) ELECTION" shall have the meaning set forth in
SECTION 6.10(b).
"ACCREDITED INVESTOR" shall have the meaning set forth in
SECTION 2.34.
"AFFILIATE" means, with regard to any Person, (a) any Person,
directly or indirectly, controlled by, under common control of, or
controlling such Person, (b) any Person, directly or indirectly, in
which such Person holds, of record or beneficially, five percent or
more of the equity or voting securities, (c) any Person that holds, of
record or beneficially, five percent or more of the equity or voting
securities of such Person, (d) any Person that, through Contract,
relationship or otherwise, exerts a substantial influence on the
management of such person's affairs, (e) any Person that, through
Contract, relationship or otherwise, is influenced substantially in the
management of their affairs by such Person, or (f) any director,
officer, partner or individual holding a similar position in respect of
such Person.
"ALLOCATION SCHEDULE" shall have the meaning set forth in
SECTION 6.10(b).
"AUTHORITY" means any governmental, regulatory or
administrative body, agency, commission, board, arbitrator or
authority, any court or judicial authority, any public, private or
industry regulatory authority, whether international, national,
federal, state or local.
"BASKET RATE" shall have the meaning set forth in SECTION
12.2(b).
"CERCLA": means Comprehensive Environmental Response
Compensation and Liability Act of 1980.
"CERCLIS" means Comprehensive Environmental Response,
Compensation, and Liability Information System.
"CLAIM" means any action, claim, lawsuit, demand, suit,
inquiry, hearing, investigation, notice of a violation, litigation,
proceeding, arbitration, appeals or other dispute, whether civil,
criminal, administrative or otherwise.
"CLOSING" shall have the meaning set forth in SECTION 10.1.
"CLOSING DATE" shall have the meaning set forth in SECTION
10.1.
"CLOSING PRICE" shall have the meaning set forth in SECTION
7.17.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended, and the Regulations thereunder.
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"CONFIDENTIALITY AGREEMENT" shall mean that certain
Confidentiality Agreement dated as of July 8, 1997 among HIG Capital
Management, Inc. and The Breckenridge Group, Inc., for itself and as
representative of the Corporations.
"CONTESTED ADJUSTMENTS" shall have the meaning set forth in
SECTION 1.3(b).
"CONTESTED ADJUSTMENT NOTICE" shall have the meaning set forth
in SECTION 1.3(b).
"CONTRACT" means any agreement, contract, commitment,
instrument or other binding arrangement or understanding, whether
written or oral.
"EFFECTIVE DATE" shall have the meaning set forth in SECTION
1.3(a).
"EFFECTIVE DATE BALANCE SHEET" shall have the meaning set
forth in SECTION 1.3(a).
"EFFECTIVE DATE NET WORTH" of the Corporations shall mean the
Net Worth of the Corporations calculated in a manner consistent with
the calculation of the Corporations' December 31, 1996 and 1995 year
end financial statements and June 27, 1997 balance sheet and based on
the Effective Date Balance Sheet.
"ENVIRONMENTAL LAW" shall mean any Regulation, Order, consent
decree, settlement agreement or governmental requirement, which relates
to or otherwise imposes liability or standards of conduct concerning
mining or reclamation of mined land, discharges, emissions, releases or
threatened releases of noises, odors or any pollutants, contaminants or
hazardous or toxic wastes, substances or materials, whether as matter
or energy, into ambient air, water, or land, or otherwise relating to
the manufacture, processing, generation, distribution, use, treatment,
storage, disposal, cleanup, transport or handling of pollutants,
contaminants, or hazardous wastes, substances or materials, including
(but not limited to) the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, as amended, the Resource Conservation and
Recovery Act of 1976, as amended, the Toxic Substances Control Act of
1976, as amended, the Federal Water Pollution Control Act Amendments of
1972, the Clean Water Act of 1977, as amended, any so-called
"Superlien" law, and any other similar Federal, state or local
statutes.
"ENVIRONMENTAL PERMIT" shall mean Permits, certificates,
approvals, licenses and other authorizations relating to or required by
Environmental Law and necessary or desirable for the Corporation's
business.
"ESCROW AGENT" shall have the meaning set forth in SECTION
1.2(b).
"ESCROW AGREEMENT" shall have the meaning set forth in SECTION
1.2(b).
"ESCROW SHARES" shall have the meaning set forth in SECTION
13.6(a).
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"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FINANCIAL STATEMENTS" shall have the meaning as set forth in
SECTION 2.9.
"FINANCIAL STATEMENTS DATE" shall have the meaning as set
forth in SECTION 2.9
"FRINGE BENEFIT ARRANGEMENTS" shall have the meaning as set
forth in SECTION 2.18.
"GAAP" means generally accepted accounting principles,
consistently applied, as in existence at the date hereof.
"GROUP" means two or more Persons or entities (or a
combination thereof) acting as a partnership, limited partnership,
syndicate or other form for any of the purposes contemplated in such
section.
"GUARANTEE" means any guarantee or other contingent liability
(other than any endorsement for collection or deposit in the ordinary
course of business), direct or indirect with respect to any obligations
of another Person, through an agreement or otherwise, including,
without limitation, (a) any endorsement or discount with recourse or
undertaking substantially equivalent to or having economic effect
similar to a guarantee in respect of any such obligations and (b) any
Contract (i) to purchase, or to advance or supply funds for the payment
or purchase of, any such obligations, (ii) to purchase, sell or lease
property, products, materials or supplies, or transportation or
services, in respect of enabling such other Person to pay any such
obligation or to assure the owner thereof against loss regardless of
the delivery or nondelivery of the property, products, materials or
supplies or transportation or services or (iii) to make any loan,
advance or capital contribution to or other investment in, or to
otherwise provide funds to or for, such other Person in respect of
enabling such Person to satisfy an obligation (including any liability
for a dividend, stock liquidation payment or expense) or to assure a
minimum equity, working capital or other balance sheet condition in
respect of any such obligation.
"HART-SCOTT-RODINO ACT" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, and the Regulations promulgated thereunder,
as amended from time to time.
"INCOME TAX" means any Tax on or measured by income.
"INDEBTEDNESS" with respect to any Person means any obligation
of such Person for borrowed money, but in any event shall include (a)
any obligation or liabilities incurred for all or any part of the
purchase price of property or other assets or for the cost of property
or other assets constructed or of improvements thereto, other than
accounts payable included in current liabilities and incurred in
respect of property purchased in the ordinary course of business,
(whether or not such Person has assumed or become liable for the
payment of such obligation) (whether accrued, absolute, contingent,
unliquidated or otherwise, known or unknown, whether due or to become
due), (b) the face amount of all letters of credit issued for the
account of such Person and all drafts drawn thereunder, (c) obligations
incurred for all or any part of the purchase price of property or other
assets or for the cost of property or other assets constructed or of
improvements thereto, other than accounts payable included in current
liabilities and incurred in respect of property
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purchased in the ordinary course of business (whether or not such
Person has assumed or become liable for the payment of such obligation)
secured by Liens, (d) capitalized lease obligations, and (e) all
Guarantees of such Person.
"INDEMNITEE" shall have the meaning set forth in SECTION 12.5.
"INDEMNITOR" shall have the meaning set forth in SECTION 12.5.
"KNOWLEDGE" means, with respect to each Corporation, the
actual knowledge, after reasonable investigation, of either of Mr.
Sosebee or Mr. Hill.
"LIABILITY POLICIES" means insurance contracts or policies
applicable to the Corporation and the Subsidiaries including workers'
compensation, general liability, property or other insurance policy
that relate to liability or excess liability insurance including the
name of the insurer, the types, dates and amounts of coverages, and any
material coverage exclusions.
"LIEN" means any security interest, lien, mortgage, pledge,
hypothecation, encumbrance, Claim, easement, restriction on transfer or
otherwise, or interest of another Person of any kind or nature.
"LTC COMMON STOCK" means the common stock, par value $.01 per
share, of the Purchaser.
"LTC SHARES" shall have the meaning set forth in SECTION 1.2.
"MATERIAL ADVERSE CHANGE" means any developments or changes
which would have a Material Adverse Effect.
"MATERIAL ADVERSE EFFECT" means any circumstances, state of
facts or matters which might reasonably be expected to have a material
adverse effect in respect of the Corporations' or Purchaser's (as the
case may be) business, operations, properties, assets or financial
condition taken as a whole.
"NET WORTH" means the amount by which the Corporations' assets
exceed their total liabilities.
"NET WORTH SHORTFALL" means the amount by which the
Corporations' Effective Date Net Worth is less than the Target Net
Worth.
"NET WORTH SURPLUS" means the amount by which the
Corporations' Effective Date Net Worth exceeds the Target Net Worth.
"OCCURRENCE" means any accident, happening or event which
occurs or has occurred at any time prior to the Closing Date which is
caused or allegedly caused by any hazard or defect in manufacture,
design, materials or workmanship including, without limitation, any
failure or alleged failure to warn or any breach or alleged breach of
express
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or implied warranties or representations with respect to a product
manufactured, shipped, sold or delivered by or on behalf of the
Corporation which results or is alleged to have resulted in injury or
death to any person or damage to or destruction of property (including
damage to or destruction of the product itself) or other consequential
damages, at any time.
"OPTION" means any subscription, option, warrant, right,
security, Contract, commitment, understanding, outstanding or stock
appreciation, phantom stock option, profit participation or arrangement
by which (i) with respect the Corporation, the Corporation is bound to
issue any additional shares of its capital stock or rights pursuant to
which any Person has a right to purchase shares of the Corporation's
capital stock or (ii) with respect to a Seller, the Seller is bound to
sell or allow another Person to vote, encumber or control the
disposition of any shares of the Corporation's capital stock or rights
pursuant to which any Person has a right to purchase, vote, encumber or
control the disposition of shares of the Corporation's capital stock
from the Seller.
"ORDER" means any decree, order, judgment, injunction, rule,
lien, voting right, consent of or by an Authority.
"PERMITS" means all permits, licenses, registrations,
certificates, orders or approvals from any Authority or other Person
(including without limitation those relating to the occupancy or use of
owned or leased real property) issued to or held by the Corporation.
"PERMITTED LIENS" means (i) statutory Liens not yet
delinquent, (ii) such imperfections or irregularities of title, Liens,
easements, charges or encumbrances as do not materially detract from or
interfere with the present use of the properties or assets subject
thereto or affected thereby, otherwise impair present business
operations at such properties, or do not detract from the value of such
properties and assets, taken as a whole, (iii) Liens reflected in the
Financial Statements or the notes thereto, (iv) the rights of customers
of the Corporation with respect to inventory or work in progress under
orders or contracts entered into by the Corporation in the ordinary
course of business, (v) mechanics', carriers', workers', repairmen's,
warehousemen's, or other similar Liens arising in the ordinary course
of business in respect of obligations not overdue or which are being
contested in good faith and covered by a bond in an amount at least
equal to the amount of the Lien, and (vi) deposits or pledges to secure
workmen's compensation, unemployment insurance, old age benefits or
other social security obligations in connection with, or to secure the
performance of, bids, tenders, trade contracts not for the payment of
money or leases, or to secure statutory obligations or surety or appeal
bonds or other pledges or deposits for purposes of like nature in the
ordinary course of business.
"PERSON" means any corporation, partnership, joint venture,
organization, entity, Authority or natural person.
"POLICIES" means all Contracts that insure (i) the
Corporation's or any of its Subsidiaries properties, plant and
equipment for loss or damage, and (ii) the Corporation
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or any of its Subsidiaries or their officers, directors, employees or
agents against any liabilities, losses or damages (or lost profits) for
any reason or purpose.
"POST-CLOSING DATE PERIOD" means any taxable period ending
after the Closing Date.
"PRE-CLOSING DATE PERIOD" means any taxable period ending on
or before the Closing Date.
"PROPORTIONATE SHARE" means, with respect to each Seller, 50%.
"PROPRIETARY RIGHTS" means all (i) patents, patent
applications, patent disclosures and all related continuation,
continuation-in-part, divisional, reissue, reexamination, utility,
model, certificate of invention and design patents, patent
applications, registrations and applications for registrations, (ii)
trademarks, service marks, trade dress, logos, trade names and
corporate names and registrations and applications for registration
thereof, (iii) copyrights and registrations and applications for
registration thereof, (iv) mask works and registrations and
applications for registration thereof, (v) computer software, data and
documentation, (vi) trade secrets and confidential business
information, whether patentable or unpatentable and whether or not
reduced to practice, know-how, manufacturing and production processes
and techniques, research and development information, copyrightable
works, financial, marketing and business data, pricing and cost
information, business and marketing plans and customer and supplier
lists and information, (vii) other proprietary rights relating to any
of the foregoing and (viii) copies and tangible embodiments thereof.
"PROSPECTUS" shall have the meaning set forth in SECTION 2.34.
"PURCHASE PRICE" shall have the meaning set forth in SECTION
1.2.
"PURCHASER LOSSES" shall have the meaning set forth in SECTION
12.3.
"RECALLS" means manufacturer's product recall, rework or
post-sale warning.
"REGISTER" means to register under the Securities Act and
applicable state securities laws for the purpose of effecting a public
sale of securities.
"REGISTRATION EXPENSES" means all expenses incurred by the
Purchaser in compliance with SECTION 9.1 hereof, including, without
limitation, all registration and filing fees, printing expenses,
transfer taxes, fees and disbursements of counsel for the Purchaser,
blue sky fees and expenses, reasonable fees and disbursements of its
counsel who may act on behalf of the Sellers and other security
holders, and the expense of any special audits incident to or required
by any such registration.
"REGISTRATION STATEMENT" means the Purchaser's registration
statement on Form S-1 (Registration No. 333-34595) in connection with
its initial public offering of LTC Common Stock.
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"REGULATION" means any rule, law, code, statute, regulation,
ordinance, requirement, announcement or other binding action of or by
an Authority.
"RESTRICTED AREA" shall have the meaning set forth in SECTION
6.6.
"RESTRICTED PERIOD" shall have the meaning set forth in
SECTION 6.6.
"RULE 144" means Rule 144 under the Securities Act.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SELLING EXPENSES" means all underwriting discounts and
selling commissions applicable to the sale of LTC Shares by the Seller
pursuant to SECTION 9.1.
"SETTLEMENT AMOUNT CERTIFICATE" shall have the meaning set
forth in SECTION 1.3(b).
"SETTLEMENT DATE" shall have the meaning set forth in SECTION
1.3(c).
"SHARES" shall have the meaning set forth in SECTION 1.1.
"SUBSIDIARY" any Person in which the Corporation has (i) an
ownership interest, (ii) advanced funds or provided financial
accommodations to which, in each case, is secured by an ownership
interest in or has an Option to acquire an ownership interest in such
Person.
"TARGET NET WORTH" means Four Million Seventy Seven Thousand
and Twenty Five Dollars ($4,077,025.00).
"TAX RETURNS" means federal, state, foreign and local tax
reports, returns, information returns and other documents.
"TAX" and "TAXES" means including without limitation income,
gross receipts, net proceeds, alternative or add-on minimum, ad
valorem, value added, turnover, sales, use, property, personal property
(tangible and intangible), stamp, leasing, lease, user, excise, duty,
franchise, transfer, license, withholding, payroll, employment,
foreign, fuel, excess profits, occupational and interest equalization,
windfall profits, severance, and other charges (including interest and
penalties).
"TAXING AUTHORITIES" means Internal Revenue Service and any
other Federal, state, or local authority which has the right to impose
Taxes on the Corporation or the Sellers.
"TRANSACTION EXPENSE" shall have the meaning set forth in
SECTION 13.15.
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13.4 NOTICES. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given when delivered by hand or mailed, first class certified mail
with postage paid or by overnight receipted courier service:
(a) If to the Sellers, to: Richard Sosebee
Cellular Warehouse, Inc.
8611 Roswell Road
Atlanta, Georgia 30350
Frederick Hill
Cellular Warehouse, Inc.
8611 Roswell Road
Atlanta, Georgia 30350
with a copy to: Bivens, Hoffman & Fowler
5040 Roswell Rd.
Atlanta, Georgia 30342
Attn: L. Brown Bivens
or to such other person or address as the Corporation shall furnish by notice to
the Purchaser in writing.
(b) If to the Purchaser, to: Let's Talk Cellular & Wireless, Inc.
800 Brickell Avenue, Suite 400
Miami, Florida 33131
Attn: Nicolas Molina and
Brett Beveridge
HIG Capital Management, Inc.
1001 South Bayshore Drive, Suite 2708
Miami, Florida 33131
Attn: Douglas Berman
with a copy to: White & Case LLP
200 South Biscayne Boulevard
First Union Financial Center
Miami, Florida 33131
Attn: Jorge L. Freeland, Esq.
or to such other person or address as the Purchaser shall furnish by notice to
the Corporation in writing.
13.5 ASSIGNMENT. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of the other parties,
except that the Purchaser may assign its rights, interests and obligations
hereunder to any Affiliate, and may grant Liens or security interests in respect
of its rights and interests hereunder without the prior approval of the Sellers
or the Corporation.
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13.6 GOVERNING LAW. The Agreement shall be governed by the law of the
State of Georgia as to all matters, including but not limited to matters of
validity, construction, effect and performance.
13.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
13.8 HEADINGS. The article and section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
13.9 ENTIRE AGREEMENT. This Agreement, including the schedules and
exhibits hereto and the documents, certificates and instruments referred to
herein, embodies the entire agreement and understanding of the parties hereto in
respect of the transactions contemplated by this Agreement and supersedes all
prior agreements, representations, warranties, promises, covenants,
arrangements, communications and understandings, oral or written, express or
implied, between the parties with respect to such transactions. Except for the
Confidentiality Agreement, there are no agreements, representations, warranties,
promises, covenants, arrangements or understandings between the parties with
respect to such transactions, other than those expressly set forth or referred
to herein.
13.10 CONSENT TO JURISDICTION; SERVICE OF PROCESS. The Corporation, the
Purchaser, each Subsidiary and each of the Sellers hereby irrevocably submit to
the jurisdiction of the state or federal courts located in Fulton County,
Georgia in connection with any suit, action or other proceeding arising out of
or relating to this Agreement and the transactions contemplated hereby, and
hereby agree not to assert, by way of motion, as a defense, or otherwise in any
such suit, action or proceeding that the suit, action or proceeding is brought
in an inconvenient forum, that the venue of the suit, action or proceeding is
improper or that this Agreement or the subject matter hereof may not be enforced
by such courts.
13.11 BINDING EFFECT. This Agreement shall not be construed so as to
confer any right or benefit upon any Person other than the signatories to this
Agreement and each of their respective successors and permitted assigns.
13.12 INJUNCTIVE RELIEF. The parties hereto agree that in the event of
a breach of any provision of this Agreement, the aggrieved party or parties may
be without an adequate remedy at law. The parties therefore agree that in the
event of a breach of any provision of this Agreement, the aggrieved party or
parties may elect to institute and prosecute proceedings in any court of
competent jurisdiction to enforce specific performance or to enjoin the
continuing breach of such provision, as well as to obtain damages for breach of
this Agreement. By seeking or obtaining any such relief, the aggrieved party
shall not be precluded from seeking or obtaining any other relief to which it
may be entitled.
13.13 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to any party hereto, upon any breach or default of any
other party under this
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Agreement, shall impair any such right, power or remedy of such party nor shall
it be construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any party hereto of
any breach or default under this Agreement, or any waiver on the part of any
party of any provisions or conditions of this Agreement must be made in writing
and shall be effective only to the extent specifically set forth in such
writing. All remedies, provided under this Agreement shall be cumulative and not
alternative.
13.14 SEVERABILITY. Unless otherwise provided herein, if any provision
of this Agreement shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
13.15 EXPENSES. The Purchaser shall bear its own expenses, including
without limitation, legal fees and expenses, with respect to this Agreement and
the transactions contemplated hereby. The Sellers shall each bear their own and
the Corporation's expenses, including without limitation, brokerage or finders
fees and legal fees and expenses, with respect to this Agreement and the
transactions contemplated hereby.
13.16 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS AGREEMENT OR ANY EXHIBIT HERETO, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING OR STATEMENTS (WHETHER VERBAL OR WRITTEN) RELATING TO THE
FOREGOING. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES HERETO TO
ENTER INTO THIS AGREEMENT.
* * *
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IN WITNESS WHEREOF, the parties hereto have made and entered into this
Amended and Restated Stock Purchase Agreement the date first hereinabove set
forth.
LET'S TALK CELLULAR & WIRELESS, INC.
By: /s/ NICOLAS MOLINA
-------------------------------
Title: Chief Executive Officer
THE SELLERS
Number Names and Addresses
of Shares of Sellers
Cellular Warehouse, Inc. - 500 shares By: /s/ RICHARD J. SOSEBEE
Sosebee Enterprises, Inc. - 500 shares --------------------------------
Richard J. Sosebee
Address: 445 HEARDS FERRY ROAD
ATLANTA, GA 30328
---------------------------
Cellular Warehouse, Inc. - 500 shares By: /s/ FREDERICK L. HILL, III
Sosebee Enterprises, Inc. - 500 shares --------------------------------
FREDERICK L. HILL, III
Address: 1085 Carroustie Lane
Alpharetta, GA 30005
---------------------------
