SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO.____)*
Precept Business Services, Inc. IRS Employer ID #75-2487353
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(NAME OF ISSUER)
Class A Common Stock
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(TITLE OF CLASS OF SECURITIES)
PBSI-A-0419 through and including PSBT-A 0434
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(CUSIP NUMBER)
Stephen A. DiMarco, 3019 Gardens Boulevard, Naples, Florida 34105
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(NAME, ADDRESS, AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO
RECEIVE NOTICES AND COMMUNICATIONS)
July 7, 1999
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(DATE OF EVENT WHICH REQUIRES FILING OF THIS STATEMENT)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of SS. 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the
following box.
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See ss. 240-13d-7(b) for other
parties to whom copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
CUSIP Nos. PSBI-A 0419 through and including PSBI-A 0434
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1) Names of Reporting Persons I.R.S. Identification No.s of Above Persons
(entities only)
Stephen A. DiMarco SS # ###-##-####
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2) Check the Appropriate Box if a Member of a Group (See Instructions)
(a) N/A
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(b) N/A
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3) SEC Use Only
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4) Source of Funds (See Instructions)
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5) Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d)
or 2(e)
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6) Citizenship or Place of Organization United States of America
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Number of (7) Sole Voting Power 620,342
Shares Bene- --------------------------------------------------------
ficially (8) Shared Voting Power N/A
Owned by --------------------------------------------------------
Each Report- (9) Sole Dispositive Power 620,342
ing Person --------------------------------------------------------
With (10) Shared Dispositive Power N/A
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11) Aggregate Amount Beneficially Owned by Each Reporting Person 620,342
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12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions) N/A
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13) Percent of Class represented by Amount in Row (11) 7.4%
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14) Type of Reporting Person (See Instructions) IN
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Instructions for Cover Page
(1) Names and I.R.S. Identification Numbers of Reporting Persons-- Furnish the
full legal name of each person for whom the report is filed--i.e., each person
required to sign the schedule itself--including each member of a group. Do not
include the name of a person required to be identified in the report but who is
not a reporting person. Reporting persons that are entities are also requested
to furnish their I.R.S. identification numbers, although disclosure of such
numbers is voluntary, not mandatory (see "SPECIAL INSTRUCTIONS FOR COMPLYING
WITH SCHEDULE 13-D" BELOW).
(2) If any of the shares beneficially owned by a reporting person are held as a
member of a group and the membership is expressly affirmed, please check row
2(a). If the reporting person disclaims membership in a group or describes a
relationship with other person but does not affirm the existence of a group,
please check row 2(b) [unless it is a joint filing pursuant to Rule 13-d-1(k)(l)
in which case it may not be necessary to check row 2(b)].
(3) The 3rd row is for SEC internal use; please leave blank.
(4) Classify the source of funds or other consideration used or to be used in
making the purchases as required to be disclosed pursuant to Item 3 of Schedule
13D and insert the appropriate symbol (or symbols if more than one is necessary
in row (4):
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SCHEDULE 13D
1. SECURITY AND ISSUER
Class A Common Stock
Precept Business Services, Inc.
1909 Woodall Rodgers Freeway, Suite 500
Dallas, TX 75201
2. IDENTITY AND BACKGROUND
(a) Stephen A. DiMarco, SS ####-##-####
(b) 3019 Gardens Boulevard
Naples, Florida 34105
(c) Director, President
Precept Transportation of New England, Inc.
1909 Woodall Rodgers Freeway, Suite 500
Dallas, TC 75201
(d) Not Applicable
(e) Not Applicable
(f) Citizen of the United States of America
3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
Stephen A. DiMarco acquired the securities pursuant to an Agreement and
Plan of Merger by and among Precept Business Services, Inc., Precept
Transportation of New England, Inc., Ambassador Limousine Services,
Inc., Ambassador Transportation Services, Inc. and Stephen A. DiMarco.
Stephen A. DiMarco was the sole shareholder of Ambassador Limousine
Services, Inc. and Ambassador Transportation Services, Inc. For
purposes of the acquisition, the shares were valued at $6.21 per share,
or $3,852,323.82 in the aggregate.
4. PURPOSE OF TRANSACTION
Acquisition of affiliated companies, as described in Item 3.
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Schedule 13D
Precept Business Services, Inc.
Stephen A. DiMarco
November 19, 1999
Page 2 of 5
5. INTEREST IN SECURITIES OF THE ISSUER
(a) (i) 620,342 shares of Class A Common Stock owned by Stephen A.
DiMarco
(ii) 8,400,000 shares of Class A Common Stock outstanding
(iii) DiMarco shares = 7.4%
(iv) Stock Certificates: Cusip Number Number of Shares
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PBSI-A 0419 53,709
PBSI-A 0420 75,000
PBSI-A 0421 75,000
PBSI-A 0422 75,000
PBSI-A 0423 75,000
PBSI-A 0424 50,000
PBSI-A 0425 50,000
PBSI-A 0426 50,000
PBSI-A 0427 50,000
PBSI-A 0428 10,000
PBSI-A 0429 10,000
PBSI-A 0430 10,000
PBSI-A 0431 10,000
PBSI-A 0432 10,000
PBSI-A 0433 10,000
PBSI-A 0434 6,633
TOTAL: 620,342
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(b) Sole power to vote: All Sole power to dispose: All
(c) None
(d) None
(e) Not applicable
6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
SECURITIES OF THE ISSUER
Affiliate Agreement by and among Precept Business Services, Inc., Precept
Transportation of New England, Inc., Ambassador Limousine Services, Inc.,
Ambassador Transportation Services, Inc. and Stephen A. DiMarco.
<PAGE>
Schedule 13D
Precept Business Services, Inc.
Stephen A. DiMarco
November 19, 1999
Page 3 of 5
7. EXHIBITS
(a) Agreement and Plan of Merger by and among Precept Business Services,
Inc., Precept Transportation of New England, Inc., Ambassador
Limousine Services, Inc., Ambassador Transportation Services, Inc. and
Stephen A. DiMarco
(b) Affiliate Agreement by and among Precept Business Services, Inc.,
Precept Transportation of New England, Inc., Ambassador Limousine
Services, Inc., Ambassador Transportation Services, Inc. and Stephen
A. DiMarco.
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Stephen A. DiMarco
President and Director
New England Transportation Services, Inc.
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Date
<PAGE>
FORM TH
SECURITY AND ISSUER
Class A Common Stock
Precept Business Services, Inc.
1909 Woodall Rodgers Freeway, Suite 500
Dallas, TX 75201
IDENTITY AND BACKGROUND OF FILER
Stephen A. DiMarco, SS ####-##-####
3019 Gardens Boulevard
Naples, Florida 34105
Director, President
Precept Transportation of New England, Inc.
1909 Woodall Rodgers Freeway, Suite 500
Dallas, TC 75201
Filed by: Updike, Kelly & Spellacy, P.C.
One State Street, P.O. Box 231277
Hartford, CT 06123-1277
Attn: Jane Harrison, Esq.
PART II TO FORM TH
1. Updike, Kelly & Spellacy does not yet have EDGAR electronic filing
capabilities. The firm is currently in the process of installing and learning
how to use the EDGAR electronic filing software.
2. Neither Updike, Kelly & Spellacy nor Stephen A. DiMarco has filed any
documents electronically with the SEC.
3. Updike, Kelly & Spellacy is currently has located an outside source to
file the Form 13D electronically and will file the form electronically within
six (6) business days of making this paper filing.
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IN ACCORDANCE WITH RULE 201 OF REGULATION S-T, THIS FORM 13D ID BEING FILED
IN PAPER PURSUANT TO A TEMPORARY HARDSHIP EXEMPTION.
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
PRECEPT BUSINESS SERVICES, INC.,
A TEXAS CORPORATION,
AND
PRECEPT TRANSPORTATION OF NEW ENGLAND, INC.,
A TEXAS CORPORATION,
AND
AMBASSADOR LIMOUSINE SERVICES, INC.,
A CONNECTICUT CORPORATION,
AND
AMBASSADOR TRANSPORTATION SERVICES, INC.,
A CONNECTICUT CORPORATION,
AND
STEPHEN A. DIMARCO,
SHAREHOLDER
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TABLE OF CONTENTS
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ARTICLE I. DEFINITIONS...........................................................................................1
ARTICLE II. THE MERGER, EFFECTIVE TIME, EXCHANGE AMOUNT..........................................................6
2.1 The Merger......................................................................................6
2.2 Effect of the Merger............................................................................6
2.3 Consummation of the Merger......................................................................6
2.4 Articles of Incorporation; Bylaws; Directors and Officers.......................................7
2.5 Aggregate Merger Consideration; Conversion of Securities........................................7
2.6 Contingent Merger Consideration.................................................................8
2.7 Certain Changes in Stock Price After Closing...................................................10
2.8 Registration of Precept Common Stock and Limitation on Shareholder Resales.....................11
2.9 Excluded Assets................................................................................12
2.10 Repayment of Shareholder Loans.................................................................13
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANIES AND THE SHAREHOLDER................................13
3.1 Organization...................................................................................13
3.2 Authority......................................................................................13
3.3 Minute Books...................................................................................14
3.4 Capitalization.................................................................................14
3.5 Title to the Shares............................................................................14
3.6 No Violation...................................................................................14
3.7 Governmental Consents..........................................................................15
3.8 Financial Statements...........................................................................15
3.9 Capitalization.................................................................................15
3.10 Absence of Undisclosed Liabilities.............................................................16
3.11 Absence of Material Adverse Change.............................................................16
3.12 Taxes..........................................................................................16
3.13 Litigation.....................................................................................18
3.14 Compliance with Laws and Regulations...........................................................18
3.15 Permits........................................................................................18
3.16 Employee Matters...............................................................................18
3.17 Employee Benefit Plans.........................................................................19
3.18 Title to Assets................................................................................21
3.19 Condition of Properties........................................................................21
3.20 Material Agreements............................................................................22
3.21 Customers......................................................................................22
3.22 Intellectual Property Rights...................................................................23
3.23 Subsidiaries and Investments...................................................................23
3.24 Competing Interests............................................................................23
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3.25 Illegal or Unauthorized Payments; Political Contributions, Antitrust...........................24
3.26 Environmental Matters..........................................................................24
3.27 Brokers........................................................................................24
3.28 Insurance......................................................................................24
3.29 Bank Accounts and Powers of Attorney...........................................................25
3.30 Warranties.....................................................................................25
3.31 Inventory......................................................................................25
3.32 Affiliate Transactions.........................................................................25
3.33 Reorganization Matters.........................................................................26
3.34 Conduct of Business............................................................................26
3.35 No Misrepresentations..........................................................................27
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PRECEPT AND MERGER SUB............................................27
4.1 Organization...................................................................................27
4.2 Authority......................................................................................27
4.3 Capitalization.................................................................................28
4.4 Precept Common Stock...........................................................................28
4.5 No Violation...................................................................................28
4.6 Governmental Consents..........................................................................28
4.7 SEC Documents, Etc.............................................................................28
4.8 Finders' Fees..................................................................................29
4.9 Reorganization Matters.........................................................................29
4.10 Transferability................................................................................29
4.11 Breach of Representations and Warranties.......................................................30
ARTICLE V. ADDITIONAL COVENANTS AND AGREEMENTS..................................................................31
5.1 Information for Filings........................................................................31
5.2 Publicity......................................................................................31
5.3 Release by the Shareholder.....................................................................31
5.4 Covenants Relating to Taxes....................................................................31
5.5 Tax Treatment..................................................................................32
5.6 Employment Contracts...........................................................................32
5.7 Additional Acquisitions in New England.........................................................33
5.8 Bonuses Payable in Stock.......................................................................33
5.9 Commissions on New National Accounts...........................................................34
5.10 Shareholder Guaranties.........................................................................34
5.11 Closing Deliveries from the Companies and the Shareholder......................................34
5.12 Closing Deliveries from Precept and Merger Sub.................................................36
5.13 Closing Cash Balances Reconciliation...........................................................37
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ARTICLE VI. INDEMNIFICATION; ESCROW.............................................................................38
6.1 Indemnification of Merger Sub and Precept......................................................38
6.2 Indemnification of Companies and the Shareholder...............................................39
6.3 Notification of Claim..........................................................................39
6.4 Defense and Settlement of Claims...............................................................40
6.5 Survival.......................................................................................40
6.6 Offset.........................................................................................41
6.7 Escrow.........................................................................................41
6.8 No Claims by the Shareholder Against the Companies.............................................42
ARTICLE VII. MISCELLANEOUS......................................................................................44
7.1 Notices........................................................................................44
7.2 Expenses.......................................................................................45
7.3 Further Assurances. ..........................................................................45
7.4 Assignment.....................................................................................45
7.5 Entire Agreement...............................................................................45
7.6 Severability...................................................................................45
7.7 Governing Law. ...............................................................................46
7.8 Interpretation.................................................................................46
7.9 Counterparts; Facsimile Signatures.............................................................46
7.10 Headings. ....................................................................................46
7.11 Construction. ................................................................................46
7.12 Adjustment of Merger Consideration, Make-Whole Shares, etc.....................................46
7.13 Arbitration ...................................................................................46
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<PAGE>
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") is made and
entered into as of the 13th day of May, 1999, by and among PRECEPT BUSINESS
SERVICES, INC., a Texas corporation ("PRECEPT"), and PRECEPT TRANSPORTATION OF
NEW ENGLAND, INC., a Texas corporation (the "MERGER SUB"), on the one hand, and
AMBASSADOR LIMOUSINE SERVICES, INC., a Connecticut corporation (the "ALS"),
AMBASSADOR TRANSPORTATION SERVICES, INC., a Connecticut corporation ("ATS"), and
STEPHEN A. DIMARCO ("DIMARCO" or the "SHAREHOLDER"), on the other.
RECITALS:
WHEREAS, the respective Boards of Directors of Merger Sub, ALS and ATS
have each approved the merger of ALS and ATS, consecutively, with and into
Merger Sub (the "MERGERS") in accordance with the provisions of Connecticut
statutes (the "CONNECTICUT LAW") and the Texas Business Corporation Act (the
"TEXAS LAW") and the provisions of this Agreement. The Boards of Directors of
Merger Sub, ALS and ATS have directed that the Mergers be submitted for approval
by their respective stockholders;
WHEREAS, it is intended for federal income tax purposes that the
Mergers qualify as reorganizations within the meaning of Sections 368(a)(1)(A)
and 368(a)(2)(D) of the Internal Revenue Code of 1986, as amended (the "CODE").
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants, promises, representations, warranties and agreements contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I.
DEFINITIONS
1.1 DEFINITIONS. As used in this Agreement, the following terms shall
have the meanings set forth below or in the section of this Agreement referenced
below:
"10-K DATE" is defined in Section 4.9.
"ACCOUNTS RECEIVABLE" is defined in Section 3.9.
"ACTUAL SALES PRICE" is defined in Section 2.7.
"AFFILIATE" shall mean any director, officer, employee or shareholder
of any Person, or member of the family of any such Person, or any
corporation, partnership, trust or other entity in which any such
Person, or any member of the family of any such Person, has a
substantial interest or is an officer, director, trustee, partner or
holder of more than five percent (5%) of the outstanding capital stock
thereof.
<PAGE>
"AGREEMENT" shall mean this Agreement and Plan of Reorganization.
"ALS LATEST BALANCE SHEET" is defined in Section 3.8.
"ALS LATEST INCOME STATEMENT" is defined in Section 3.8.
"ATS LATEST BALANCE SHEET" is defined in Section 3.8.
"ATS LATEST INCOME STATEMENT" is defined in Section 3.8.
"CERTIFICATE" is defined in Section 2.5(c).
"CERCLA" is defined in Section 1.1 under "Environmental Laws."
"CLAIM" is defined in Section 7.3
"CLOSING" is defined in Section 2.3.
"CLOSING DATE" is defined in Section 2.3.
"CODE" is defined in the Recitals.
"COMPANIES" shall mean, unless otherwise specifically noted, ALS and
ATS, collectively.
"CONNECTICUT LAW" is defined in the Recitals.
"CONSTITUENT CORPORATIONS" is defined in Section 2.1.
"COVERAGE PERIOD" is defined in Section 2.7.
"COVERED SALE" is defined in Section 2.7.
"DIMARCO" shall mean Stephen A. DiMarco.
"DISCLOSURE SCHEDULE" is defined in the introductory paragraph to
ARTICLE III.
"EARN-OUT PAYMENTS" is defined in Section 2.6.
"EFFECTIVE DATE" is defined in Section 2.3.
"EFFECTIVE TIME" is defined in Section 2.3.
"EMPLOYMENT AGREEMENTS" is defined in Section 5.6.
2
<PAGE>
"EMPLOYEE BENEFIT PLANS" is defined in Section 3.17(c).
"ENVIRONMENTAL LAWS" shall mean any and all laws, statutes, ordinances,
rules, regulations, or orders of any Governmental Body pertaining to health or
the environment currently in effect in any and all jurisdictions in which the
Companies own property or conduct business, including without limitation, the
Clean Air Act, as amended, the Comprehensive Environmental, Response,
Compensation, and Liability Act of 1980 ("CERCLA), as amended, the Federal Water
Pollution Control Act, as amended, the Occupational Safety and Health Act of
1970, as amended, the Resource Conservation and Recovery Act of 1976 ("RCRA"),
as amended, the Safe Drinking Water Act, as amended, the Toxic Substances
Control Act, as amended, the Hazardous & Solid Waste Amendments Act of 1984, as
amended, the Superfund Amendments and Reauthorization Act of 1986, as amended,
the Hazardous Materials Transportation Act, as amended, the Oil Pollution Act of
1990, any state laws implementing the foregoing federal laws, and all other
environmental conservation or protection laws. For purposes of this Agreement,
the terms "hazardous substance" and "release" have the meanings specified in
CERCLA and RCRA, and the term "disposal" has the meaning specified in RCRA;
provided, however, that to the extent the laws of the state in which the
property is located establish a meaning for "hazardous substance," "release," or
"disposal" that is broader than that specified in either CERCLA or RCRA, such
broader meaning will apply.
"ERISA" is defined in Section 3.17(a).
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"FINANCIAL STATEMENTS" is defined in Section 3.8.
"GAAP" shall mean United States generally accepted accounting
principles as may be modified from time to time.
"GOVERNMENTAL BODY" is defined in Section 3.7.
"INDEMNIFIED PARTY" is defined in Section 6.3.
"INDEMNIFYING PARTY" is defined in Section 6.3.
"INTELLECTUAL PROPERTY" is defined in Section 3.22.
"KNOWLEDGE" shall mean, (i) when used with respect to the Companies and
the Shareholder, actual knowledge of the Companies, the Shareholder, officers,
directors and key employees which the Companies, the Shareholder, officers,
directors and key employees shall obtain after each such party has conducted a
reasonable investigation and familiarized itself and themselves with the
representations and warranties contained in this Agreement; provided, that, the
Companies and the Shareholder shall take reasonable efforts to ensure that the
Companies' officers, directors and key employees have conducted such
investigations and familiarized themselves with the representations and
warranties contained in this Agreement, and (ii) when used with respect to
Precept and Merger Sub, "knowledge" shall mean actual knowledge of such company,
its officers and directors which
3
<PAGE>
Precept, Merger Sub, its officers and directors shall obtain after each such
party has conducted a reasonable investigation and familiarized itself and
themselves with the representations and warranties contained in this Agreement;
provided, that, Precept and Merger Sub shall take reasonable efforts to ensure
that the Companies' officers and directors have conducted such investigations
and familiarized themselves with the representations and warranties contained in
this Agreement.
"LATEST BALANCE SHEETS" is defined in Section 3.8.
"LATEST INCOME STATEMENTS" is defined in Section 3.8.
"LIABILITIES" is defined in Section 3.10.
"LIEN" is defined in Section 3.5.
"LOSSES" is defined in Section 6.1.
"MAKE-WHOLE SHARES" is defined in Section 2.7.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on
business, operations and assets of either of the Companies.
"MATERIAL AGREEMENTS" is defined in Section 3.20.
"MERGERS" is defined in the Recitals.
"MERGER CONSIDERATION" is defined in Section 2.5.
"MERGER SUB" shall mean Precept Transportation of New England, Inc., a
Texas corporation.
"PENSION PLANS" is defined in Section 3.17(1).
"PERMITS" is defined in Section 3.15.
"PERSON" is defined in Section 3.13.
"PLANS" is defined in Section 3.17(5).
"PRE-TAX EARNINGS" is defined in Section 2.6.
"PRECEPT" shall mean Precept Business Services, Inc., a Texas
corporation.
"PRECEPT COMMON STOCK" is defined in Section 2.5(a).
"PRECEPT PARTY" is defined in Section 6.1.
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"RCRA" is defined in Section 1.1 under "Environmental Laws."
"REFERENCE PRICE" is defined in Section 2.7.
"REGISTERED INTELLECTUAL PROPERTY" is defined in Section 3.22.
"RIEDEL" shall mean Judy Riedel.
"SAGARINO" shall mean Don Sagarino.
"S-4 REGISTRATION STATEMENT" is defined in Section 4.6.
"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" is defined in Section 2.8.
"SHAREHOLDER" is defined in the introductory paragraph to this
Agreement.
"SHARES" is defined in Section 2.5.
"SURVIVING CORPORATION" is defined in Section 2.1.
"TAXES" means all taxes, fees, assessments, levies, duties and similar
charges imposed by any federal, state, local or foreign governmental authority,
together with all interest, penalties, fines and other additions imposed in
respect thereof; including, without limitation, all income, gains, real property
gains, profits, gross receipts, payroll, employment, social security (and
similar), disability, health, hospitalization, unemployment compensation,
worker's compensation, Pension Benefit Guaranty Corporation, severance, windfall
profits, environmental, license, occupation, customs, imposts, capital stock,
franchise, ad valorem, excise, sales, use, transfer, registration, value added,
alternative minimum, add-on minimum, successor, withholding and estimated taxes
or other charges.
"TAX RETURNS" shall mean all original and amended returns,
declarations, certifications, statements, notices, elections, estimates,
reports, claims for refund and information returns relating to or required to be
filed or maintained in connection with any Tax, together with all schedules and
attachments thereto.
"TEXAS LAW" is defined in the Recitals.
"TRADING DAY" shall mean each day on which there is active trading on
NASDAQ (or other applicable exchange or quotation system) and on which the
Precept Common Stock is so traded.
"TRANSACTION" means the mergers and other transactions contemplated by
this Agreement.
"TRANSACTION DOCUMENTS" is defined in Section 3.2.
5
<PAGE>
"TRIGGER PRICE" is defined in Section 2.7.
"WELFARE BENEFIT PLANS" is defined in Section 3.17(b).
ARTICLE II.
THE MERGERS, EFFECTIVE TIME, EXCHANGE AMOUNT
2.1 THE MERGERS. At the Effective Time, in accordance with this
Agreement, the Connecticut Law and the Texas Law, ALS and ATS shall be merged
with and into Merger Sub, the separate existence of ALS and ATS shall cease, and
Merger Sub shall continue as the surviving corporation. Merger Sub is
hereinafter sometimes referred to as the "Surviving Corporation." Merger Sub and
ALS and ATS are hereinafter collectively referred to as the "Constituent
Corporations," and each individually, a "Constituent Corporation."
2.2 EFFECT OF THE MERGERS. When the Mergers have been effected, the
Surviving Corporation shall thereupon and thereafter possess all of the public
and private rights, privileges, powers and franchises and be subject to all the
restrictions, disabilities and duties of each of the Constituent Corporations;
and all and each of the rights, privileges, powers and franchises of each of the
Constituent Corporations and all property, real, personal and mixed, and all
debts due to either of the Constituent Corporations on whatever account, as well
for stock subscriptions as all other things in action or belonging to each of
such corporations shall be vested in the Surviving Corporation; and all
property, rights, privileges, powers and franchises, and all and every other
interest shall be thereafter as effectually the property of the Surviving
Corporation as they were of the respective Constituent Corporations, and the
title to any real estate vested by deed or otherwise, in any of such Constituent
Corporations, shall not revert or be in any way impaired by reason of the
Mergers; but all rights of creditors and all liens upon any property of any of
the Constituent Corporations shall be preserved unimpaired, and all debts,
liabilities and duties of the respective Constituent Corporations shall
thenceforth attach to the Surviving Corporation, and may be enforced against it
to the same extent as if such debts, liabilities and duties had been incurred or
contracted by it.
2.3 CONSUMMATION OF THE MERGERS. The parties hereto will cause the
Mergers to be consummated by filing with the Secretary of State of Connecticut
articles of merger in such form as required by, and executed in accordance with,
the relevant provisions of the Connecticut Law, and by filing with the Secretary
of State of Texas articles of merger in such form as required by, and executed
in accordance with, the relevant provisions of the Texas Law (the latest of (i)
the later of the time of such filings, (ii) the issuance of a certificate of
merger by the Secretary of State of Texas and (iii) the effective time set forth
in such filings being the "EFFECTIVE TIME" and the date of the Effective Time
being the "EFFECTIVE DATE"). Notwithstanding the foregoing, the closing of the
Mergers contemplated by this Agreement (the "CLOSING") will take place at the
offices of the Companies' legal counsel, on May 13, 1999 (the "CLOSING DATE"),
or at such other place and on such other date as the parties may agree.
6
<PAGE>
2.4 ARTICLES OF INCORPORATION; BYLAWS; DIRECTORS AND OFFICERS. The
Articles of Incorporation and Bylaws of the Surviving Corporation shall be the
Articles of Incorporation and Bylaws of Merger Sub as in effect immediately
prior to the Effective Time. The directors of Merger Sub immediately prior to
the Effective Time shall be the initial directors of the Surviving Corporation
and shall serve until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's Articles of Incorporation and bylaws and the
Texas Law. The officers of Merger Sub immediately prior to the Effective Time
shall be the initial officers of the Surviving Corporation and shall serve until
their successors have been duly elected or appointed and qualified or until
their earlier death, resignation or removal in accordance with the Surviving
Corporation's Articles of Incorporation and bylaws and the Texas Law.
2.5 AGGREGATE MERGER CONSIDERATION; CONVERSION OF SECURITIES. The
aggregate consideration to be received at the Closing by the Shareholder with
respect to the shares (the "SHARES") of common stock, no par value, of ALS and
ATS in connection with the Mergers (upon conversion of the Shares as set forth
below) shall be $5,867,772, payable as follows (collectively, the "MERGER
CONSIDERATION"):
(i) $2,017,772 of the Merger Consideration, payable in the form of
cash; and
(ii) 620,342 shares of validly issued, fully paid and non-assessable
shares of Class A Common Stock, par value $0.01 per share, of
Precept (the "PRECEPT COMMON STOCK").
Of the Merger Consideration, the parties have agreed that $5,754,172 shall be
allocated to the Merger with ALS and $113,600 shall be allocated to the Merger
with ATS.
For purposes of calculating the per share price with respect to the Merger
Consideration, the parties have agreed to split the 10 day average per share
price of $6.20625 based on a closing date of May 13, 1999 (6.325) and a funding
date of May 14, 1999 (6.0875).
At the Effective Time, by virtue of the Mergers and without any action
on the part of Precept, Merger Sub, the Companies or the Shareholder:
(1) Each Share issued and outstanding immediately prior to the
Effective Time (other than Shares held in treasury of ALS or ATS) shall
be canceled and retired and be converted into the right to receive an
equal portion of the total Merger Consideration, payable to the
Shareholder.
(2) Each Share which is issued and outstanding immediately
prior to the Effective Time and which is held in the treasury of ALS or
ATS shall be canceled and retired, and no payment shall be made with
respect thereto.
(3) As a result of the Mergers and without action on the part
of the holder thereof, all Shares shall cease to be outstanding and
shall be canceled and returned and shall cease to exist, and each
holder of a certificate (a "CERTIFICATE") formerly representing any
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Shares shall thereafter cease to have any rights with respect to such
Shares, except the right to receive, without interest, a pro-rata
portion of the Merger Consideration in accordance with Section 2.5 upon
the surrender of such Certificates.
(4) No fractional shares of Precept Common Stock shall be
issued in connection with the Mergers. In lieu thereof, one additional
share of Precept Common Stock will be issued for any fractional share
that would have otherwise been issued.
UNTIL REGISTRATION OF THE PRECEPT COMMON STOCK ISSUED HEREUNDER, PRECEPT COMMON
STOCK ISSUED MAY NOT BE SOLD OR TRANSFERRED BY A PURCHASER IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS
OR, IF REQUIRED BY THE COMPANY OR THE TRANSFER AGENT, AN OPINION OF COUNSEL
ACCEPTABLE TO COMPANY OR TRANSFER AGENT THAT SUCH REGISTRATION IS NOT REQUIRED
AS A RESULT OF AN APPLICABLE EXEMPTION. A LEGEND EVIDENCING THESE RESTRICTIONS
WILL BE PLACED ON THE CERTIFICATES EVIDENCING THE PRECEPT COMMON STOCK, SUCH
LEGEND TO BE REMOVED FROM THE CERTIFICATES TO BE ISSUED HEREUNDER WHEN THE
PRECEPT COMMON STOCK BECOMES REGISTERED HEREUNDER.
2.6 CONTINGENT MERGER CONSIDERATION. In addition to the Merger
Consideration to be delivered to the Shareholder, Precept shall deliver to the
Shareholder post-Closing earn-out payments (the "EARN-OUT PAYMENTS"),
constituting additional consideration for the Mergers and not compensation under
the Shareholder's Employment Agreement, calculated as follows:
(1) Thirty percent (30%) of the amount by which the Pre-Tax Earnings of
the Surviving Corporation for the one-year period from the Closing Date
through May 12, 2000, exceed $1,050,000; and
(2) Thirty percent (30%) of the amount by which the Pre-Tax Earnings of
the Surviving Corporation for the one-year period from May 13, 2000,
through May 12, 2001, exceed $1,155,000; and
(3) Thirty percent (30%) of the amount by which the Pre-Tax Earnings of
the Surviving Corporation for the one-year period from May 13, 2001,
through May 12, 2002, exceed $1,270,500.
As used in this Section 2.6, "PRE-TAX EARNINGS" shall mean the earnings before
federal, state and local income taxes, and before the Earn-Out Payments
calculated in this Section, determined in accordance with GAAP applied
consistently with Precept's and its Affiliates' practices throughout their
respective operations; provided, however, that the determination of Pre-Tax
Earnings shall not include (a) any general corporate overhead charge (as opposed
to specific corporate overhead charges to pay or reimburse Precept or any of
Precept's Affiliates for the actual cost of personnel, travel, accounting,
legal, professional services, computer services, insurance and other similar
charges
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incurred or paid on behalf of the Surviving Corporation) or management or other
fee of Precept or any Affiliate of Precept; or (b) any earnings or expense
attributable to any company or business acquired by or transferred to the
Surviving Corporation (each, an "ACQUIRED ENTITY") other than ALS and ATS,
including any expense of any earn-out payments or other compensation or benefits
payable by the Surviving Corporation to any stockholder, director, officer or
employee of any Acquired Entity. The Earn-Out Payments shall be calculated based
on the existing operations of ALS and ATS treated as an independent profit
center, without considering the effect of concurrent or future acquisitions that
may be transferred to or become part of the Surviving Corporation's operations.
Each Earn-Out Payment shall be made annually within forty-five (45)
days after the end of the period to which such payment relates. Each Earn-Out
Payment shall be accompanied by supporting documentation and financial
statements. The Earn-Out Payments shall be paid in shares of Precept Common
Stock, valued for such purpose at the average closing price of the Precept
Common Stock as reported on NASDAQ (or, in the event that such shares are not
traded on NASDAQ, on such other applicable exchange or market system) for the
last ten (10) consecutive Trading Days of the applicable period. Any Earn-Out
Payment not paid within ten days of its due date shall accrue interest from its
due date to the date paid at the annual rate of twelve percent (12%).
During the three-year earn-out period described above, Precept shall
use all reasonably prudent efforts to maintain the business and operations of
the Companies as in effect on the Closing Date (provided that it is contemplated
by all parties that Precept will effect additional acquisitions of
transportation businesses through the Surviving Corporation) and shall not,
without the consent of the Shareholder, which shall not be unreasonably withheld
or delayed, take any action intended to (i) reduce the Earn-Out Payments in any
material respect or (ii) circumvent, directly or indirectly, its obligations
under this Section 2.6.
In the event the Shareholder disputes Precept's determination of any
Earn-Out Payment, the Shareholder shall notify Precept of such dispute within
thirty (30) days of receipt of notification of the amount thereof. For a period
of thirty (30) days after such notification, Precept shall provide the
Shareholder with reasonable access to its relevant books and records, and the
parties agree to negotiate in good faith to resolve such dispute. In the event
the parties are unable to resolve their dispute within thirty (30) days, Precept
shall provide reasonable access to its relevant books and records to an
independent public accounting firm mutually agreed upon by Precept and the
Shareholder for the purpose of auditing Precept's determination of such Earn-Out
Payment. The determination of such independent accounting firm shall be
conclusive and binding upon all parties hereto. The independent accounting firm
shall be instructed by both parties to give effect, to the extent possible, to
all provisions of this Section 2.6 in auditing and calculating the Earn-Out
Payment. All costs of such audit shall be the responsibility of the Shareholder
unless the independent accounting firm determines that the amount of any
additional Earn-Out Payment due is more than seven and one-half percent (7-1/2%)
of the Earn-Out Payment as calculated by Precept, and in such case Precept shall
bear all expenses associated with said audit and shall reimburse the Shareholder
for any such expenses already paid.
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The maximum aggregate number of shares to be issued for the Earn-Out
Payments shall not exceed 500,000. From and after Closing, the parties shall
take such other actions and do such other things as each shall reasonably
request of the other in writing to cause the Transaction to comply with the
requirements of Revenue Procedure 84-42, 1984-1 C.B. 521. In addition, the
Shareholder's right to receive Earn-Out Payments shall in no event be assignable
by him, in whole or in part.
2.7 CERTAIN CHANGES IN STOCK PRICE AFTER CLOSING. IN the event that
during the period starting at the Effective Time and ending one (1) year
following the later of (i) Effective Time or (ii) the date the appropriate
transfer agent delivers to Shareholder certificates evidencing (by removal of
legends or otherwise) that the shares issued to Shareholder under this Agreement
have been registered with the SEC (the "COVERAGE PERIOD"), the price per share
of Precept Common Stock as traded on the NASDAQ small capitalization market (or,
in the event that such shares are not traded on NASDAQ, the highest closing
price per share on any other applicable exchange or market system) shall close
at a price equal to or less than $4.65468 (the "TRIGGER PRICE")(being
seventy-five percent (75%) of the price used to determine the number of shares
of Precept Common Stock issued in the Merger Consideration), such Trigger Price
adjusted for stock splits and similar transactions as set forth in Section 7.13
below, for a period of ten (10) or more consecutive Trading Days, and if within
sixty (60) business days after any occasion on which such condition has been
satisfied (but in any event within the Coverage Period), the Shareholder shall
sell any of his Precept Common Stock issued to him or her under this Agreement
at a loss (hereinafter called a "COVERED SALE"), then as soon as practical after
receipt of notice of such Covered Sale and the price per share thereof (the
"ACTUAL SALES PRICE"), together with evidence of the terms of such Covered Sale
as Precept shall reasonably request, Precept shall issue and deliver to the
Shareholder a number of additional shares of Precept Common Stock (the
"MAKE-WHOLE SHARES") equal to:
(1) $4.65468 minus Actual Sales Price;
(2) the number of shares so sold by the Shareholder in the Covered Sale,
divided by;
(3) the average closing price for Precept Common Stock as traded on the
NASDAQ small capitalization market (or, in the event that such shares
are not traded on NASDAQ, the highest closing price per share on any
other applicable exchange or market system) over the over the most
recent ten (10) consecutive Trading Days prior to the date of the
Covered Sale (such average closing price hereinafter called the
"REFERENCE PRICE").
Shareholder shall have no right or option to "reload" the Make-Whole Shares;
that is, any Make-Whole Shares shall not themselves be qualified for protection
in Covered Sales under this Section 2.7.
By way of example of the operation of this Section 2.7, if a Covered
Sale takes place during the Coverage Period (and it shall always be a condition
that any Covered Sale take place during the Coverage Period), if the Actual
Sales Price realized in such Covered Sale is $3.00, and if the Reference Price
applicable to such Covered Sale is $4.00, then Precept shall issue to the
Shareholder 2,068 Make-Whole Shares, calculated as follows:
($4.65468 - $3.00) x 5,000]/$4.00 = 2,068.
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2.8 REGISTRATION OF PRECEPT COMMON STOCK; AND LIMITATION ON SHAREHOLDER
RESALES. At the Closing, Precept shall issue to Shareholder unregistered shares
of Precept Class A Common Stock, with appropriate legend restrictions.
Thereafter, Precept shall register all shares of Precept Common Stock issued
hereunder and under Shareholder's Employment Agreement on an appropriate form of
Registration Statement, to be filed initially with the Securities and Exchange
Commission as soon as practicable, but in any event by June 15, 1999. As soon as
practicable after the effectiveness of the applicable Registration Statement,
Precept shall use its best efforts to assist Shareholder in having all
applicable legend certificates removed from his certificates for all shares of
Precept Common Stock issued at Closing. Shareholder hereby covenants and agrees
that he will not unreasonably delay or withhold delivery of his certificates to
transfer agent. From and after Closing and as long as transfer of the Precept
Common Stock is restricted under SEC Rules 144 or 145, Precept shall take all
actions necessary to maintain its status as a reporting company under the
Exchange Act and shall maintain its filings with the SEC (including all filings
under Sections 13 and 15(d) of the Exchange Act) so as to satisfy the public
information requirements of SEC Rule 144.
Precept agrees that until the Shareholder has sold all of his Precept
Common Stock issued under this Agreement or until all such shares may be sold
under SEC Rule 144(k) without restriction, Precept shall:
(a) prepare and file with the SEC such amendments and
supplements to the S-4 Registration Statement and the prospectus used
in connection therewith as may be necessary to keep the S-4
Registration Statement effective and to comply with the provisions of
the Securities Act of 1933, as amended (the "SECURITIES ACT"), with
respect to the sale or other disposition of all Precept Common Stock of
the Shareholder covered by the S-4 Registration Statement; and
(b) furnish to the Shareholder on written request of the
Shareholder such number of copies of a summary prospectus or other
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as the
Shareholder may reasonably request in order to facilitate the public
sale or other disposition of all Precept Common Stock of the
Shareholder.
If at any time after June 12, 1999, Shareholder has not received certificates
for his shares of Precept Common Stock issued to him hereunder evidencing (by
removal of legends or otherwise) that the SEC Registration Statement for the
Precept Common Stock acquired under this Agreement has become effective as to
the Precept Common Stock held by Shareholder, and if at such time the
Shareholder desires to sell certain shares of the Precept Common Stock acquired
under the terms of this Agreement, Precept agrees to repurchase such Precept
Common Stock from Shareholder, up to a maximum of 79,000 shares of Precept's
Common A Stock during any consecutive ninety (90) day period, on the following
terms and conditions:
(a) If Shareholder desires to sell any of such Precept Common Stock,
Shareholder will transmit to Ronald P. Sorci by facsimile (or any
other officer of Precept designated
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by Precept for this purpose), a written demand for immediate
purchase of such shares, the offer price for such shares and the
number of shares that Shareholder desires to sell to Precept. As
a condition to such demand, Shareholder shall confirm that he has
on deposit sufficient shares to close such sale with a nationally
recognized or regional brokerage or other financial institution.
Absent manifest error, the last offer price of such shares at the
time shown by the time stamp of confirmation of receipt of such
facsimile shall control the sales price of such shares, and the
sale of such shares shall be absolute, unconditional, irrevocable
and effective immediately, without condition other than subject
to settlement within three (3) business days as follows:
(b) By the close of the next business day following Precept's receipt
of a demand for sale, Precept shall confirm the number of shares
subject to the sale and the price per share thereof in writing by
facsimile to Shareholder and to the brokerage or financial
institution holding the certificates. Contemporaneously with such
confirmations, Precept shall wire transfer to Shareholder funds
in the amount of the purchase price for such shares. Shareholder
shall cause the agent to deliver the certificate(s) for the
shares so sold to the transfer agent for Precept Common Stock,
endorsed and in proper form for transfer, by a nationally
recognized overnight courier, proof of delivery required, on or
before the next business day following the receipt of such wire
transfer by Shareholder.
It is expressly provided, however, that Precept shall never be required to
repurchase more than $500,000 in total value of Precept Common Stock under these
repurchase and put provisions. The rights of Shareholder to put shares to
Precept hereunder shall not be cumulative, however, and to the extent that any
put right is not exercised, it shall lapse. The rights of Shareholder to require
Precept to repurchase Precept Common Stock under the terms of these provisions
shall lapse on the earlier of (i) May 13, 2000, or (ii) the date that
Shareholder receives certificates for the shares of Precept Common Stock issued
hereunder evidencing (by removal of legends or otherwise) that the SEC
Registration Statement for the Precept Common Stock issued under this Agreement
has become effective. Shareholder shall surrender the certificates evidencing
his shares issued to the transfer agent for the Precept's Common Stock
immediately on receipt of notice that the registration statement for
Shareholder's shares has become effective, and Precept shall not be obligated to
repurchase shares if Shareholder shall delay in surrendering his certificates.
Otherwise, up to the date of lapse, Precept shall repurchase shares not to
exceed 79,000 shares during any consecutive ninety (90) day period.
During the one year period following the Closing, the Shareholder hereby
covenants and agrees that he shall not sell more than 155,000 shares in any
consecutive ninety (90) day period.
2.9 EXCLUDED ASSETS. Notwithstanding the foregoing, the life insurance
policies held by the Companies on the life of DiMarco and his wife, Lisa
DiMarco, if any, shall as soon as practicable after Closing, be transferred to
DiMarco or at his direction without any effect on the Merger Consideration, and
appropriate income tax shall be timely and properly paid on such transfer by the
Shareholder to the Internal Revenue Service and, if applicable, to any state or
local taxing authority.
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2.10 REPAYMENT OF SHAREHOLDER LOANS. At Closing Shareholder shall repay
to the Companies in full the amount of the loan accounts due from Shareholder to
the Companies, such loans in the aggregate amount of $392,772.00. On receipt of
such payments, the Surviving Corporation shall issue to Shareholder such
acknowledgment of repayment as Shareholder shall reasonably request. The
Shareholder, through its legal counsel, Updike, Kelly & Spellacy, P.C., shall
wire such loan repayments directly to Merger Sub within twenty-four hours after
Closing.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
OF THE COMPANIES AND THE SHAREHOLDER
The Companies (until the Closing) and the Shareholder hereby represent
and warrant to Precept and Merger Sub that the statements contained in this
Article III are true, correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Article III), except as set forth in the Disclosure Schedule
attached hereto and delivered by the Shareholder to Precept and Merger Sub on
the date hereof (the "DISCLOSURE SCHEDULE"). The mere listing of a document or
other item in the Disclosure Schedule shall not be deemed adequate to disclose
an exception to a representation or warranty made herein (unless the
representation or warranty has to do with the existence of a document or other
item itself) and all such exceptions shall be reasonably specific and detailed.
In lieu of setting forth details of any matter in the Disclosure Schedule, the
Companies and Shareholder may make effective disclosure by including copies of
documentation specifically setting forth such details in the Disclosure
Schedule. The Disclosure Schedule will be arranged in sections corresponding to
the lettered and numbered sections contained in this Article III.
3.1 ORGANIZATION. Each of ALS and ATS is a corporation duly organized,
validly existing and in good standing under the laws of the State of Connecticut
and has full corporate power to own its properties and to conduct its business
as presently conducted. Each of ALS and ATS is duly authorized, qualified or
licensed to do business and is in good standing as a foreign corporation in each
state or other jurisdiction in which its assets are located or in which its
business or operations as presently conducted make such qualification necessary;
such jurisdictions are listed in SECTION 3.1 OF THE DISCLOSURE SCHEDULE.
3.2 AUTHORITY. The Companies have all requisite corporate power and
authority, and the Shareholder has all requisite power and authority, to
execute, deliver and perform under this Agreement and, where applicable, other
instruments, agreements or documents to be delivered pursuant to this Agreement
(collectively, the "TRANSACTION DOCUMENTS"). The execution, delivery and
performance of the Transaction Documents by the Companies and the Shareholder,
as the case may be, have been duly authorized by all necessary action, corporate
or otherwise, on the part of the Companies and the Shareholder. This Agreement
has been, and the other Transaction Documents at Closing will be, duly executed
and delivered by the Companies and the Shareholder and, where applicable, each
of the Transaction Documents will be legal, valid and binding agreements of the
Companies and the Shareholder, respectively, enforceable against each of them in
accordance with
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their respective terms, except (a) as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors' rights generally and (b) as may be limited
by laws relating to the availability of specific performance, injunctive relief
or other equitable remedies.
3.3 MINUTE BOOKS. The Companies have delivered to Merger Sub true,
correct and complete copies of the Companies' charters, articles of
organization, bylaws, minute books, stock certificate books and stock record
books. The minute books of the Companies contain minutes or consents reflecting
all actions taken by the directors (including any committees) and shareholders
of the Companies.
3.4 CAPITALIZATION. The authorized capital stock of ALS consists solely
of 1,000 shares of Common Stock, $1.00 par value, of which 1,000 shares are
issued and outstanding and all of which are held beneficially and of record by
the Shareholder. The authorized capital stock of ATS consists solely of 20,000
shares of Common Stock, no par value, of which 100 shares are issued and
outstanding and all of which are held beneficially and of record by the
Shareholder. The issued and outstanding shares of ALS and of ATS are hereinafter
collectively referred to as the "Shares." All of the Shares are validly issued,
fully paid and non-assessable and are held by the Shareholder, free and clear of
voting agreements and preemptive or similar rights. The Shares constitute all of
the issued and outstanding capital stock of the Companies. There are no
outstanding options, warrants, convertible securities or other rights,
agreements, arrangements or commitments obligating the Companies, any
shareholders of the Companies (including the Shareholder) or any other person or
entity to issue or sell any securities or ownership interests in the Companies.
Except as set forth in SECTION 3.4 OF THE DISCLOSURE SCHEDULE, there are no
shareholders' agreements, voting agreements, voting trusts or similar agreements
or restrictions binding on either of the Companies or on the Shareholder
applicable in any way to the Shares. All of the outstanding capital stock the
Companies has been offered and sold in compliance with all applicable securities
laws, rules and regulations.
3.5 TITLE TO THE SHARES. Except as set forth in SECTION 3.5 OF THE
DISCLOSURE SCHEDULE, the Shareholder owns the Shares, of record and
beneficially, free and clear of any lien, pledge, security interest, liability,
charge or other encumbrance or claim of any person or entity, voting trusts,
proxies, preemptive rights, rights of first refusal, buy-sell arrangements or
other shareholder agreements (a "Lien"). On the Closing Date, the Shareholder
will own the Shares, of record and beneficially, free and clear of any Lien.
3.6 NO VIOLATION. Except as set forth in SECTION 3.6 OF THE DISCLOSURE
SCHEDULE, neither the execution nor the delivery of the Transaction Documents
nor the consummation of the transactions contemplated thereby, including without
limitation, the transfer of the Shares to Merger Sub, will conflict with,
contravene or result in the material breach of any term or provision of, or
violate, or constitute a material default under, or result in the creation of
any Lien on the Companies' assets pursuant to, or relieve any third party of any
obligation or give any third party the right to terminate or accelerate any
obligation under any charter provision, bylaw, Material Agreement (including
those listed in SECTION 3.20 OF THE DISCLOSURE SCHEDULE or with any customer set
out in such SECTION 3.21 OF THE DISCLOSURE SCHEDULE), Permit, order, law or
regulation to which the
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Shareholder is a party or by which either of the Companies, the Shareholder or
any of their assets is in any way bound or obligated, except where the foregoing
will not have a Material Adverse Effect.
3.7 GOVERNMENTAL CONSENTS. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing with, any
governmental or quasi-governmental agency, authority, commission, board or other
body (collectively, a "Governmental Body") is required on the part of the
Companies or the Shareholder in connection with the transactions contemplated by
this Agreement; provided however, that notification of certain aspects of the
Transaction must be delivered to the Connecticut Department of Transportation
within thirty (30) days of the Closing.
3.8 FINANCIAL STATEMENTS. Attached as SECTION 3.8 OF THE DISCLOSURE
SCHEDULE are true and complete copies of (i) the balance sheet of ALS for ALS's
fiscal years ending December 31, 1996, 1997 and 1998, and the statements of
income, retained earnings and cash flows for ALS's fiscal years ending December
31, 1996, 1997 and 1998, each of which have been reviewed or compiled, as set
forth therein, by Hallisey & D'Agostino; (ii) the unaudited balance sheet (the
"ALS LATEST BALANCE SHEET") and related unaudited statements of income, retained
earnings and cash flows of ALS for the period ending March 31, 1999 (the "ALS
Latest Income Statements"); (iii) the balance sheet of ATS for ATS's fiscal
years ending March 31, 1997, 1998 and 1999, and the statements of income,
retained earnings and cash flows for ATS's fiscal years ending March 31, 1997,
1998 and 1999, each of which have been reviewed or compiled, as set forth
therein, by Hallisey & D'Agostino; (iv) the unaudited balance sheet of ATS (the
"ATS LATEST BALANCE SHEET") and related unaudited statements of income, retained
earnings and cash flows of ATS for the period ending March 31, 1999 (the "ATS
LATEST INCOME STATEMENTS")(collectively, all financial information referred to
in this Section 3.8 is hereinafter referred to as the "FINANCIAL STATEMENTS").
The Financial Statements present fairly the financial condition of the Companies
at the dates specified and the results of its operations for the periods
specified and have been prepared in accordance with GAAP. The Financial
Statements do not contain any items of a special or nonrecurring nature, except
as expressly stated therein. The Financial Statements have been prepared from
the books and records of the Companies, which accurately and fairly reflect all
the material transactions of, acquisitions and dispositions of assets by, and
incurrence of liabilities by the Companies.
3.9 ACCOUNTS RECEIVABLE. SECTION 3.9 OF THE DISCLOSURE SCHEDULE sets
forth the accounts receivable of the Companies (including, without limitation,
all unbilled accounts receivable and miscellaneous receivables) from sales made
as of May 12, 1999 (the "ACCOUNTS RECEIVABLE"), and the payments and rights to
receive payments related thereto. Except as set forth in SECTION 3.9 OF THE
DISCLOSURE SCHEDULE, the amounts of all Accounts Receivable, unbilled invoices
and other debts due or recorded in the records and books of account of the
Companies as being due to the Companies as of the Closing Date will constitute
valid claims against third parties not affiliated with the Shareholder or the
Companies and arise from bona fide transactions in the ordinary course of the
business of the Companies. Except as set forth in SECTION 3.9 OF THE DISCLOSURE
SCHEDULE, the Accounts Receivable arose in the ordinary course of business and,
to the knowledge of the Companies and the Shareholder, are not subject to
counterclaim, set-off or other reduction.
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3.10 ABSENCE OF UNDISCLOSED LIABILITIES. At the Closing, the aggregate
amount of the Companies' indebtedness for borrowed money (which excludes
accounts payable, trade payables, accrued liabilities, and all operating leases
and other expenses arising in the ordinary course of business) will not exceed
$1,737,000. The Companies do not have any direct or indirect debts, obligations
or liabilities of any nature, whether absolute, accrued, contingent, liquidated
or otherwise, and whether due or to become due, asserted or unasserted, known or
unknown (collectively, "LIABILITIES"), except for (a) Liabilities specifically
identified in the Latest Balance Sheet, (b) obligations to be performed in the
ordinary course of business or under the Material Agreements (as defined in
SECTION 3.20 below) and (c) as disclosed in SECTION 3.10 OF THE DISCLOSURE
SCHEDULE. Schedule 3.10 of the Disclosure Schedule also includes substantially
all the accounts payable of the Companies as of May 11, 1999. Except as
disclosed in SECTION 3.10 OF THE DISCLOSURE SCHEDULE, all obligations for
borrowed money of the Companies, all rental and other charges on real estate
leased by the Companies, all rental and other charges with respect to leased or
financed vehicles of the Companies but excluding accounts payable, trade
payables, accrued expenses, and other financial obligations of the Companies)
have been paid current (i.e., within thirty (30) days) through the Closing Date.
3.11 ABSENCE OF MATERIAL ADVERSE CHANGE. Except as set forth on
SCHEDULE 3.11 OF THE DISCLOSURE SCHEDULE, since the date of the ATS Latest
Balance Sheet and the ALS Latest Balance Sheet (hereinafter collectively
referred to as the "Latest Balance Sheets"), there has not been: (a) any
material adverse change in the condition (financial or otherwise), results of
operations, business, assets or Liabilities of the Companies; (b) any payment
(including without limitation any dividend or other distribution or repayment of
indebtedness) to the Shareholder), other than payment of compensation to
employees of the Companies in the ordinary course of business and consistent
with past practices; (c) any material breach or default (or event that with
notice or lapse of time or both would constitute a material breach or default),
termination or threatened termination under any Material Agreement; (d) any
material theft, damage, destruction, casualty loss, condemnation or eminent
domain proceeding affecting any of the Companies' assets, whether or not covered
by insurance; (e) any sale, assignment or transfer of any of the assets of the
Companies, except in the ordinary course of business and consistent with past
practices; (f) any waiver by the Companies of any material rights related to the
Companies' business, operations or assets; (g) any other transaction, agreement
or commitment entered into by the Companies or the Shareholder affecting the
Companies' business, operations or assets, except in the ordinary course of
business and consistent with past practices; or (h) any agreement or
understanding to do or resulting in any of the foregoing.
3.12 TAXES.
(1) All Tax Returns required to have been filed by the
Companies have been timely filed (taking into account duly granted
extensions) and are true, correct and complete in all respects. Except
as disclosed in SCHEDULE 3.12(a) OF THE DISCLOSURE SCHEDULE, (i)
neither of the Companies is currently the beneficiary of any extension
of time within which to file any Tax Return, and (ii) no claim has ever
been made by any governmental authority in a jurisdiction where either
of the Companies do not file Tax Returns that either of the Companies
is or may be subject to taxation by that jurisdiction.
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(2) All Taxes of the Companies which have become due (without
regard to any extension of the time for payment and whether or not
shown on any Tax Return) have been paid. The Companies have withheld
and paid over all Taxes required to have been withheld and paid over
and has complied with all information reporting and back-up withholding
requirements relating to Taxes. There are no liens with respect to
Taxes on any of the assets of the Companies, other than liens for Taxes
not yet due and payable.
(3) The unpaid Taxes of the Companies for all periods ending
on or before the date of the Latest Balance Sheets did not exceed the
amount of the current liability accruals for Taxes (exclusive of
reserves for deferred Taxes established to reflect timing differences)
reflected on the Latest Balance Sheets, and the unpaid Taxes of the
Companies for all periods ending on or before the Closing Date will not
exceed the amount of such current liability accruals as adjusted for
the Companies' operations in the ordinary course of business through
the Closing Date in accordance with GAAP (except as set forth in
SECTION 3.8 OF THE DISCLOSURE SCHEDULE) and, to the extent consistent
therewith, the most recent custom and practices of the Companies.
(4) No deficiencies exist or have been asserted or are
expected to be asserted (verbally or in writing) with respect to Taxes
of the Companies, and the Companies has not received notice nor does it
expect to receive notice (verbally or in writing) that it has not filed
a Tax Return or paid any Taxes required to be filed or paid by it. To
the knowledge of the Companies and the Shareholder, no audit,
examination, investigation, action, suit, claim or proceeding relating
to the determination, assessment or collection of any Tax of the
Companies is currently in process, pending or threatened (verbally or
in writing). No waiver or extension of any statute of limitations
relating to the assessment or collection of any Tax of the Companies is
in effect. There are no outstanding requests for rulings with any Tax
authority relating to Taxes of the Companies.
(5) Neither of the Companies is or has ever been (i) a party
to any Tax sharing agreement or arrangement (formal or informal, verbal
or in writing), or (ii) a member of an affiliated group of corporations
(within the meaning of Code Section 1504) filing a consolidated federal
income Tax Return, or any similar group under analogous provisions of
other law.
(6) The Shareholder is not a "foreign person" as defined in
Code Section 1445(f)(3).
(7) Neither of the Companies (i) has filed a consent under
Code Section 341(f) concerning collapsible corporations; (ii) has made
any payments, obligated itself to make any payments or become a party
to any agreement that under any circumstance could obligate it or any
successor or assignee of it to make any payments that are not or will
not be deductible under Code Section 280G, or that would be subject to
excise Tax under Code Section 4999; (iii) is or has ever been a United
States real property holding corporation within the meaning of Code
Section 897(c)(2) during the applicable period specified in Code
Section 897(c)(1)(A)(ii); (iv) owns or has owned any interest in any
"controlled foreign corporation"
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as defined in Code Section 957 or "passive foreign investment company"
as defined in Code Section 1296; (v) is or has been a party to any
agreement or arrangement for which partnership Tax Returns are
required to be filed; (vi) owns any asset that is subject to a "safe
harbor lease" within the meaning of Code Section 168(f)(8), as in
effect prior to amendment by the Tax Equity and Fiscal Responsibility
Act of 1982; (vii) owns any "tax-exempt use property" within the
meaning of Code Section 168(h) or "exempt bond financed property"
within the meaning of Code Section 168(g)(5); or (viii) has agreed to
or is required to make any adjustment under Code Section 481(a) by
reason of a change in accounting method or otherwise.
3.13 LITIGATION. Except as described in SECTION 3.13 OF THE DISCLOSURE
SCHEDULE, there are currently no pending or, to the knowledge of the Companies
or the Shareholder, threatened claims, actions, lawsuits, administrative
proceedings or reviews, or formal or informal complaints or investigations by
any individual, corporation, partnership, Governmental Body or other entity
(collectively, a "Person") against or relating to the Companies or any of its
directors, employees or agents (in their capacities as such) or to which any
assets of the Companies are subject. Neither of the Companies is subject to or
bound by any currently existing judgment, order, writ, injunction or decree.
3.14 COMPLIANCE WITH LAWS AND REGULATIONS. The Companies are currently
complying with and have at all times complied with, and the use, operation and
maintenance of its assets comply with and have at all times complied with, and
neither of the Companies, their assets or the use, operation or maintenance of
such assets is in violation or contravention of (a) any applicable statute, law,
ordinance, decree, order, rule or regulation, of any Governmental Body, or (b)
any federal, state and local laws relating to occupational health and safety,
employment and labor matters.
3.15 PERMITS To the knowledge of the Companies and the Shareholder, the
Companies own or possess from each appropriate Governmental Body all right,
title and interest in and to all permits, licenses, authorizations, approvals,
quality certifications, franchises or rights (collectively, "PERMITS") issued by
any Governmental Body necessary to conduct their respective businesses, except
where the failure to do so will not have a Material Adverse Effect on either of
the Companies. Each of such Permits is described in SECTION 3.15 OF THE
DISCLOSURE SCHEDULE. No loss or expiration of any such Permit is pending or, to
the knowledge of the Companies or the Shareholder, threatened or reasonably
foreseeable, other than expiration in accordance with the terms thereof of
Permits that may be renewed in the ordinary course of business without lapsing.
3.16 EMPLOYEE MATTERS. Set forth in SECTION 3.16 OF THE DISCLOSURE
SCHEDULE is a complete list of all current employees of the Companies, including
date of employment, current title and compensation, and date and amount of last
increase in compensation. The consummation of the transactions contemplated by
this Agreement will not accelerate the time of payment or vesting or increase
the amount of compensation due to any director, officer or employee (present or
former) of the Companies. The Companies do not have any collective bargaining,
union or labor agreements, contacts or other arrangements with any group of
employees, labor union or employee representative. Neither the Companies nor the
Shareholder knows of any organization effort currently being made or threatened
by or on behalf of any labor union with respect to employees of the Companies.
In
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addition, (a) the Companies are in compliance with all federal, state or other
applicable laws, domestic or foreign, respecting employment and employment
practices, terms and conditions of employment and wages and hours, and has not
and is not engaged in any unfair labor practice, (b) no unfair labor practice
complaint against the Companies are pending before the National Labor Relations
Board or any similar agency; (c) there is no labor strike, dispute, slow down or
stoppage actually pending or, to the Companies'or the Shareholder's knowledge,
threatened against or involving the Companies; (d) no representation question
exists respecting the employees of the Companies; (e) no grievance that might
have a material adverse effect upon the Companies or the conduct of its business
exists, no arbitration proceeding arising out of or under any collective
bargaining agreement is pending, and to the Companies' or the Shareholder's
knowledge, no such claim has been asserted; (f) no collective bargaining
agreement is currently being negotiated by the Companies; (g) the Companies have
not experienced any material labor difficulty or organizing activity during the
last three years; (h) there has not been any material adverse change in
relations with employees of the Companies as a result of any announcement of the
transaction contemplated by this Agreement; and (i) to the Companies' and the
Shareholder's knowledge, and except as set forth in SECTION 3.16 OF THE
DISCLOSURE SCHEDULE, no director, officer or other key employee of the Companies
intends to terminate his employment with the Companies. The Companies have
noncompetition agreements with each of the Companies' employees listed in
SECTION 3.16 OF THE DISCLOSURE SCHEDULE, which, to the Companies' and the
Shareholder's knowledge, are valid and enforceable and no employee has breached
or, to the Companies' and the Shareholder's knowledge threatened to breach, such
employee's respective noncompetition agreement.
3.17 EMPLOYEE BENEFIT PLANS.
(1) SECTION 3.17 OF THE DISCLOSURE SCHEDULE lists all
"employee pension benefit plans," as defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
ever maintained or contributed to (or required to be contributed to) by
the Companies or any Affiliate (the "PENSION PLANS"). As used in this
Section 3.17, "Affiliate" means any corporation, trade or business the
employees of which, together with the employees of the Companies, are
required to be treated as employed by a single employer under the
provisions of ERISA or Section 414 of the Code, as amended from time to
time (the "Code").
(2) SECTION 3.17 OF THE DISCLOSURE SCHEDULE lists each
"employee welfare benefit plan" (as defined in Section 3(l) of ERISA)
that the Companies or any Affiliate maintains, contributes to or is
required to contribute to on behalf of any employee or former employee,
including any multi-employer welfare plan (the "WELFARE BENEFIT
PLANS"), and sets forth the amount of any Liability of the Companies or
any Affiliate for any payment past due with respect to each Welfare
Benefit Plan as of the date of the Closing. No voluntary employees'
beneficiary association or other funding arrangement (other than
insurance contracts) are being used to fund or implement any Welfare
Benefit Plan. The Companies have not made any written or oral
representations to any employee or former employee promising or
guaranteeing any employer payment or funding for the continuation of
benefits or coverage under any Welfare Benefit Plan for any period of
time beyond the end of the current plan year (except to the extent
required under Code Section 4980B).
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(3) SECTION 3.17 OF THE DISCLOSURE SCHEDULE lists each
deferred compensation plan, bonus plan, stock option plan, employee
stock purchase plan, and any other employee benefit plan, arrangement
or commitment (whether written or oral) not required to be listed under
paragraph (a) or (b) above (other than normal policies concerning
holidays, vacations and salary continuation during short absences for
illness or other reasons) maintained by the Companies for employees
(the "EMPLOYEE BENEFIT PLANS").
(4) Neither the Companies nor any Affiliate maintains, or,
within the last five (5) years, has maintained, contributed to, been
required to contribute to or had any employees participating in, any
"defined benefit plan" (as defined in Section 3(35) of ERISA) or any
multi-employer plan (as defined in Section 3(37) of ERISA).
(5) The Pension Plans, the Welfare Benefit Plans and the
Employee Benefit Plans and related trusts and insurance contracts
(collectively, the "PLANS") are legally valid and binding and in full
force and effect. To the knowledge of the Companies and the
Shareholder, all of the Plans comply currently, and have complied in
the past, both as to form and operation, with the provisions of all
laws, rules and regulations governing or applying to such Plans,
including but not limited to ERISA, the Code, the Americans with
Disabilities Act, the Family and Medical Leave Act of 1993 and the Age
Discrimination in Employment Act; all necessary governmental approvals
for the Pension Plans and the Welfare Benefit Plans have been obtained;
and a favorable determination as to the qualification under the Code of
each of the Pension Plans and each amendment thereto has been made by
the Internal Revenue Service, and nothing has occurred since the date
of such determination letters that could adversely affect the
qualification of such Plans or the tax exempt status of the related
trust. All reports and filings required by any Governmental Body
(including without limitation Form 5500 Annual Reports, Summary Annual
Reports and Summary Plan Descriptions) with respect to each Plan have
been timely and completely filed, and have been distributed to
participants as required by applicable law. To the knowledge of the
Companies and the Shareholder, neither the Companies, any Affiliate or
any plan fiduciary of any Plan has engaged in any transaction in
violation of Section 406(a) or (b) of ERISA or any "prohibited
transaction" (as defined in Code Section 4975(c)(1)) that would subject
the Companies to any taxes, penalties or other Liabilities resulting
from such transaction. Neither the Companies nor the Shareholder has
received notice that any of the Plans is being audited or investigated
by any Governmental Body. With respect to such Plans, neither the
Companies nor the Shareholder has received notice that there are
actions, suits or claims (other than routine claims for benefits in the
ordinary course) pending or, to the knowledge of the Companies or the
Shareholder, threatened, and there are no facts that could reasonably
be expected to give rise to any such actions, suits or claims.
(6) The Companies do not have any Liabilities to any Person
with respect to any Plan, except for (i) Liabilities that are fully
funded by assets set aside in trust or irrevocably dedicated for that
purpose, the fair market value of which assets exceed the Liabilities
to which they are set aside or dedicated, and (ii) Liabilities that
have been fully accrued on the Financial Statements. The Companies may
terminate any Welfare Benefit Plan or any
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Employee Benefit Plan immediately following the Closing without any
Liability to employees, former employees, beneficiaries or any other
Person except to the extent such Liabilities have been accrued or
funded as described in the preceding sentence.
(7) True and complete copies of the following documents have
been delivered by the Companies to Precept and Merger Sub: (i) each
Welfare Benefit Plan and each Pension Plan and each related trust
agreement or annuity contract (or other funding instrument); (ii) the
most recent determination letter issued by the Internal Revenue Service
with respect to each Pension Plan; (iii) Annual Reports on Form 5500
Series required to be filed with any Governmental Body for each Welfare
Benefit Plan and each Pension Plan for the two most recent plan years;
and (iv) the most recent actuarial report for each Pension Plan.
3.18 Title to Assets. Set forth in SECTION 3.18 OF THE DISCLOSURE
SCHEDULE is a complete list of (a) all real property owned by the Companies; (b)
all real property leased by the Companies; (c) each vehicle owned or leased by
the Companies; and (d) each asset of the Companies with a book value or fair
market value greater than $5,000.00. The Companies have good and marketable
title to, or a valid leasehold interest in, all of their assets, including
without limitation, the assets listed in SECTION 3.18 OF THE DISCLOSURE
SCHEDULE, the assets reflected on the Latest Balance Sheets and all assets used
by the Companies in the conduct of their business (except for assets disposed of
in the ordinary course of business and consistent with past practices since the
date of the Latest Balance Sheets and except for assets held under leases or
licenses disclosed pursuant to Section 3.20), subject to no Liens, except for
(a) Liens for current taxes not yet due or being contested in good faith; (b)
minor imperfections of title and encumbrances that do not materially detract
from or interfere with the present use or value of such assets; and (c) Liens
disclosed in SECTION 3.18 OF THE DISCLOSURE SCHEDULE.
3.19 CONDITION OF PROPERTIES. All facilities, machinery, equipment,
fixtures, vehicles and other tangible property owned, leased or used by the
Companies are in good operating condition and repair, normal wear and tear
excepted, are reasonably fit and usable for the purposes for which they are
being used, to the knowledge of the Companies and the Shareholder, will not
likely require major overhaul or repair in the foreseeable future, are adequate
and sufficient for the Companies' business and to the knowledge of the Companies
and the Shareholder, substantially conform with all applicable laws, rules and
regulations. The Companies maintain policies of insurance issued by insurers of
recognized responsibility insuring the Companies and their assets and business
against such losses and risks.
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3.20 MATERIAL AGREEMENTS.
(1) SECTION 3.20 OF THE DISCLOSURE SCHEDULE lists each
agreement and arrangement (whether written or oral and including all
amendments thereto) to which the Companies are a party or a beneficiary
or by which the Companies or any of their assets are bound and that is
material to the Companies (collectively, the "Material Agreements"),
including without limitation (i) any real estate leases; (ii) any
contracts for the provision of goods or services by the Companies;
(iii) any agreement evidencing, securing or otherwise relating to any
indebtedness for which the Companies are liable; (iv) any capital or
operating leases, value-added reseller, reseller, or conditional sales
agreements relating to vehicles, equipment or other assets of the
Companies; (v) any supply or manufacturing agreements or arrangements
pursuant to which the Companies are entitled or obligated to acquire
any assets from a third party; (vi) any insurance policies; (vii) any
employment, consulting, noncompetition, separation, collective
bargaining, union or labor agreements or arrangements; (viii) any
agreement with any shareholder of the Companies (including the
Shareholder), director, officer or employee of the Companies, or any
Affiliate or family member thereof; (ix) any joint marketing or similar
agreement or arrangement; and (x) any other agreement or arrangement
pursuant to which, based on historical or projected volume, the
Companies could be required to make, or be entitled to receive,
aggregate payments in excess of $10,000 during any calendar year.
(2) The Companies have performed all obligations required to
be performed by them in connection with the agreements and arrangements
required to be disclosed in SECTION 3.20 OF THE DISCLOSURE SCHEDULE and
are not in receipt of any claim of default under any agreement or
arrangement required to be disclosed in such Schedule by this Section
3.20; the Companies have no present expectation or intention of not
fully performing any material obligation pursuant to any agreement or
arrangement required to be disclosed in SECTION 3.20 OF THE DISCLOSURE
SCHEDULE; and neither the Companies nor the Shareholder has any
knowledge of any breach or anticipated breach by any other party to any
agreement or arrangement required to be disclosed in SECTION 3.20 OF
THE DISCLOSURE SCHEDULE.
(3) The Companies have delivered to Precept and Merger Sub a
copy of the agreements and arrangements (including all amendments and
modifications thereto) required to be disclosed in SECTION 3.20 OF THE
DISCLOSURE SCHEDULE and its standard form of customer agreement, all
training manuals and all other business plans, policies and manuals
developed by the Companies in the ordinary course of their businesses.
3.21 CUSTOMERS. Set forth in SECTION 3.21 OF THE DISCLOSURE SCHEDULE is
a complete list of customers as of April 30, 1999, which also shows for each
such customer (a) revenues, if any, actually received by the Companies during
the ALS's fiscal year ended December 31, 1998 and ATS's fiscal year ended March
31, 1999, and (b) the expiration date of the contract or agreement. Except as
set forth in SECTION 3.21 OF THE DISCLOSURE SCHEDULE, no customer has advised
the Companies of such customer's intent to discontinue doing business with the
Companies or to reduce the volume of goods or services purchased from or
supplied to the Companies. Except as set forth
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in SECTION 3.21 OF THE DISCLOSURE SCHEDULE, the Companies have not received from
any customer either oral or written notice of such customer's intention to
terminate its account with the Companies.
3.22 INTELLECTUAL PROPERTY RIGHTS. Set forth in SECTION 3.22 OF THE
DISCLOSURE SCHEDULE is a complete list of all registered patents, trademarks,
service marks, trade names and copyrights, and applications for and licenses (to
or from the Companies) with respect to any of the foregoing (collectively,
"REGISTERED INTELLECTUAL PROPERTY"), owned by the Companies or with respect to
which the Companies have any rights. To the knowledge of the Companies and the
Shareholder, the Companies have the sole and exclusive right to use all
Registered Intellectual Property and other computer software (both proprietary
and third party) and software licenses, intellectual property, proprietary
information, trade secrets, trademarks, trade names, copyrights, material and
manufacturers specifications, drawings and designs (collectively, "INTELLECTUAL
PROPERTY") used by the Companies or necessary in connection with the operation
of the Companies' business, without infringing on or otherwise acting adversely
to the rights or claimed rights of any Person, and to the knowledge of the
Companies and the Shareholder, neither the Companies nor the Shareholder is
obligated to pay any royalty or other consideration to any Person in connection
with the use of any such Intellectual Property. SECTION 3.22 OF THE DISCLOSURE
SCHEDULE also includes a description of the nature of the Companies' rights in
and to the Intellectual Property. To the knowledge of the Companies and the
Shareholder, no other Person is infringing the rights of the Companies with
respect to any of its Intellectual Property. To the knowledge of the Companies
and the Shareholder, no consent of any third parties will be required for the
transfer of Intellectual Property rights to the Merger Sub or the use thereof by
the Merger Sub upon consummation of the transactions contemplated hereby, and to
the knowledge of the Companies and the Shareholder, the Intellectual Property
rights (other than with respect to required consents of third party licensors
and licensees of software under applicable licenses) are freely transferable.
The Companies are the sole and exclusive owners of all rights in and to the
software described in SECTION 3.22 OF THE DISCLOSURE SCHEDULE, including all
source and object code and documentation related thereto, except the third party
software listed in SECTION 3.22 OF THE DISCLOSURE SCHEDULE, as to which the
Companies have been granted all rights and licenses necessary for the Companies
to sublicense such software to third parties or to provide services to third
parties in the manner in which the Companies have done so through the date
hereof and the date of Closing. The Companies have licensed the software only to
the third parties listed in SECTION 3.22 OF THE DISCLOSURE SCHEDULE. There are
no existing material defaults, events of default or events, occurrences, acts or
omissions that, with the giving of notice or lapse of time or both, would
constitute material defaults by the Companies or, to the Companies' or the
Shareholder's knowledge, the other parties thereto, with respect to the
Companies' licenses of the software to licensees or the Companies' licenses with
third parties with respect to third party software included in the Companies'
software.
3.23 SUBSIDIARIES AND INVESTMENTS. The Companies do not own any direct
or indirect equity or debt interest in any other Person, including without
limitation, any interest in a partnership or joint venture, and are not
obligated or committed to acquire any such interest.
3.24 COMPETING INTERESTS. Except as disclosed in SECTION 3.24 OF
DISCLOSURE SCHEDULE, neither the Companies, the Shareholder nor any director,
officer, relative or Affiliate of any of the
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foregoing owns, directly or indirectly, an interest in any Person that is a
competitor, customer or supplier of the Companies or that otherwise has material
business dealings with the Companies.
3.25 ILLEGAL OR UNAUTHORIZED PAYMENTS; POLITICAL CONTRIBUTIONS;
ANTITRUST. Neither the Companies nor any of their officers or directors, or, to
the knowledge of the Companies or the Shareholder, the Companies' employees,
agents, other representatives or any other business entity or enterprise with
which the Companies are or have been affiliated or associated, has, directly or
indirectly, made or authorized any payment, contribution or gift of money,
property or services, whether or not in contravention of applicable law, (a) as
a kickback or bribe to any Person or (b) to any political organization, or the
holder of or any aspirant to any elective or appointive public office, except
for personal political contributions not involving the direct or indirect use of
funds of the Companies. To the knowledge of the Companies and the Shareholder,
the Companies have not violated any federal or state antitrust statutes, rules
or regulations, including without limitation those relating to unfair
competition, price fixing or collusion.
3.26 ENVIRONMENTAL MATTERS. Except for matters disclosed in SECTION
3.26 OF THE DISCLOSURE SCHEDULE, (a) to the knowledge of the Companies and the
Shareholder, the personal property, operations, and activities of the Companies
are in compliance in all material respects with all applicable Environmental
Laws; (b) the Companies and the personal property and operations of the
Companies are not subject to any existing, pending, or, to the knowledge of the
Companies and the Shareholder, threatened action, suit, claim, investigation,
inquiry or proceeding by or before any governmental entity under any
Environmental Laws (c) to the knowledge of the Companies and the Shareholder,
all notices, permits, licenses or similar authorizations, if any, required to be
obtained or filed by the Companies under any Environmental Laws in connection
with any aspect of the business of the Companies have been duly obtained or
filed and will remain valid and in effect after the Closing, and the Companies
is in compliance with the terms and conditions of all such notices, permits,
licenses, and similar authorizations; (d) there are no physical or environmental
conditions existing on any personal property of the Companies or resulting from
the Companies' operations or activities, past or present, at any location, that
would give rise to any on-site or off-site remedial obligations imposed on the
Companies under any Environmental Laws; (e) to the knowledge of the Companies
and the Shareholder, there has been no material release of hazardous substances
or any pollutant or contaminant into the environment by the Companies; and (f)
the Companies have made available to the Merger Sub all internal and external
environmental audits and studies and all correspondence on substantial
environmental matters in the possession of the Companies relating to any of the
current or former properties or operations of the Companies.
3.27 BROKERS. Except for West Worldwide Industries and to the extent
disclosed in SECTION 3.27 OF THE DISCLOSURE SCHEDULE, no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Companies or the
Shareholder.
3.28 INSURANCE. Set forth in SECTION 3.28 OF THE DISCLOSURE SCHEDULE is
a list of all insurance policies currently in effect under which either of the
Companies is a beneficiary or an insured. Such insurance coverage will remain in
effect (or will be replaced by similar policies) with respect to the Companies
and their properties as to all events occurring on or prior to the Closing.
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As of the date of this Agreement, neither the Companies nor the Shareholder has
received any notice that any of the policies listed in SECTION 3.28 OF THE
DISCLOSURE SCHEDULE has been or will be canceled prior to its scheduled
termination date, or would not be renewed substantially on the same terms now in
effect if the insured party requested renewal or has received notice from any of
its insurance carriers that any insurance premiums will be subject to increase
in an amount materially disproportionate to the amount of the increases with
respect thereto (or with respect to similar insurance) in prior years. Neither
of the Companies is in default under any such policy so as to permit the carrier
to terminate or to deny coverage under such policy, and all premiums due and
payable with respect to such coverage have been paid or accrued on the Latest
Balance Sheets.
3.29 BANK ACCOUNTS AND POWERS OF ATTORNEY. Set forth in SECTION 3.29 OF
THE DISCLOSURE SCHEDULE is a complete list of (a) the name and address of each
bank or other depository institution in which the Companies have an account or
safe deposit box, the number of such account or safe deposit box and the names
of all persons authorized to draw thereon or to have access thereto, and (b) the
names of all persons, if any, holding powers of attorney from the Companies and
a summary statement of the terms thereof.
3.30 WARRANTIES. SECTION 3.30 OF THE DISCLOSURE SCHEDULE summarizes all
claims outstanding, pending or, to the knowledge of the Companies and the
Shareholder, threatened for breach of any warranty relating to any products or
services sold by the Companies prior to the date hereof. The description of the
Companies' product and service warranties set forth in SECTION 3.30 OF THE
DISCLOSURE SCHEDULE is correct and complete.
3.31 INVENTORY. SECTION 3.31 OF THE DISCLOSURE SCHEDULE sets forth, as
of May 11, 1999, all inventory of the Companies that is (a) owned by the
Companies, and (b) owned by customers of the Companies. Except as set forth in
SECTION 3.31 OF THE DISCLOSURE SCHEDULE, all inventory owned by the Companies is
merchantable and fit for the purpose for which it was procured or manufactured,
and none of which is obsolete, damaged or defective in any amount, normal wear
and tear excepted. Such inventory is owned by the Companies and is not subject
to any liens, charges, pledges, security interests or other encumbrances, except
as set forth in SECTION 3.31 OF THE DISCLOSURE SCHEDULE.
3.32 AFFILIATE TRANSACTIONS. Except as set forth in the notes to the
Financial Statements or disclosed in SECTION 3.32 OF THE DISCLOSURE SCHEDULE and
other than pursuant to this Agreement and the Transaction Documents, neither the
Shareholder nor any of his Affiliates has any agreement, undertaking or
understanding with the Companies (other than normal employment arrangements) or
any interest in any property, real, personal or mixed, tangible or intangible
(including, without limitation, intellectual property rights), used in or
pertaining to the business of the Companies (other than ownership of capital
stock of the Companies). Neither the Shareholder nor any of his Affiliates has
any direct or indirect interest in any competitor, supplier or customer of the
Companies or in any person, from or entity from whom or to whom the Companies
leases any property, or in any other person, firm or entity with whom the
Companies or either of them transact business of any nature. For purposes of
this Section 3.32, the members of the immediate family of a director, officer,
employee or shareholder shall consist of the spouse, parents, children,
siblings, mothers-and fathers-in-law, sons-and daughters-in-law, and
brothers-and sisters in-law of such director, officer, employee or shareholder.
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3.33 REORGANIZATION MATTERS.
(1) The fair market value of the Precept Common Stock and
other consideration received by the Shareholder will be approximately
equal to the fair market value of the Shares surrendered by the
Shareholder in the Mergers.
(2) Pursuant to the Mergers, the Surviving Corporation will
acquire at least 90% of the fair market value of the net assets and at
least 70% of the fair market value of the gross assets held by each of
the Companies at the time discussions were initiated which led to
execution of this Agreement. For purposes of this representation,
amounts paid by each Company to dissenters, assets used to pay each
Company's reorganization expenses, and all redemptions and
distributions made by each Company at any time after discussions were
initiated which led to execution of this Agreement will be included as
assets of the respective Company.
(3) The fair market value of the assets of each Company
immediately prior to and immediately following the Mergers will equal
or exceed the sum of the liabilities of each Company, including,
without limitation, any liabilities to which such assets are subject.
(4) There is no intercorporate indebtedness existing between
Precept and either Company or between Merger Sub and either Company
that was issued, acquired, or will be settled at a discount.
(5) None of the Precept Common Stock to be received by the
Shareholder at the Closing will be separate consideration for, or
allocable to, any employment agreement, and the compensation paid by
the Surviving Corporation to the Shareholder will be for services
actually rendered and will be commensurate with the amount which would
be paid to third parties bargaining at arm's length for similar
services.
(6) In contemplation of the Mergers, (i) neither Company and
no party related to either Company within the meaning of Treasury
regulations Section 1.368-1(e)(3) has redeemed or acquired any of the
Shares and (ii) the Company has not made any extraordinary distribution
within the meaning of Treasury regulations Section 1.368-1(e)(1)(ii)(A)
with respect to the Shares.
(7) Neither Company is an investment company as defined in
Section 368(a)(2)(F)(iii) and (iv) of the Code.
(8) Neither Company is under the jurisdiction of a court in a
title 11 or similar case within the meaning of Section 368(a)(3)(A) of
the Code.
3.34 CONDUCT OF BUSINESS. From the date of Last Balance Sheets and
through the Closing, the Companies have (a) operated only in the ordinary course
of business and consistent with past practices and used their reasonable best
efforts, consistent with past practices, to preserve the
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goodwill of the Companies and of their employees, customers, suppliers,
Governmental Bodies and others having business dealings with the Companies; (b)
except as contemplated by this Agreement or as otherwise disclosed in the
Disclosure Schedule, not engaged in any transaction outside the ordinary course
of business, including without limitation by making any material expenditure,
investment or commitment or entering into any material agreement or arrangement
of any kind; (c) maintained all insurance policies and all Permits that are
required for the Companies to carry on their respective business; (d) maintained
books of account and records in the usual, regular and ordinary manner and
consistent with past practices; and (e) not taken any action that would result
in a breach (as of the Closing) of the representations and warranties set forth
in Section 3.11.
3.35 NO SALE COMMITMENTS. There are no commitments by the Companies or
the Shareholder to sell either the assets of the Companies or the stock of the
Companies, to any third party, whether by sale, merger or other form of
reorganization or acquisition.
3.36 NO MISREPRESENTATIONS. Neither the Companies nor the Shareholder
has received any appraisal, report or other information relating to the value or
condition of either Company that indicates a material adverse change in the
value or condition of either Company or any of its material assets from that
indicated in the Financial Statements. The representations, warranties and
statements made by the Companies and the Shareholder in or pursuant to this
Agreement (including the Disclosure Schedule) are true, complete and correct in
all material respects and do not contain any untrue statement of a material fact
or omit to state any material fact necessary to make any such representation,
warranty or statement, under the circumstances in which it is made, not
misleading.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PRECEPT AND MERGER SUB
Precept and Merger Sub, respectively, represent and warrant to the
Companies (until the Closing) and the Shareholder as follows:
4.1 ORGANIZATION. Precept is a corporation, validly existing and in
good standing under the laws of the State of Texas, and Merger Sub is a
corporation, validly existing and in good standing under the laws of the State
of Texas. Each of Precept and Merger Sub is duly authorized, qualified or
licensed to do business and is in good standing as a foreign entity in each
state or other jurisdiction in which its assets are located or in which its
business or operations as presently conducted make such qualification necessary,
except where the failure to be so licensed or qualified would not be expected to
have a material adverse effect on Precept or Merger Sub.
4.2 AUTHORITY. Precept and Merger Sub have all requisite corporate
power and authority to execute, deliver and perform under the Transaction
Documents. The execution, delivery and performance of the Transaction Documents
by Merger Sub and Precept have been duly authorized by all necessary action,
corporate or otherwise, on the part of Merger Sub and Precept. This Agreement
has been, and the Transaction Documents at Closing will be, duly executed and
delivered by Merger Sub and Precept and are legal, valid and binding agreements
of Merger Sub and Precept, enforceable against each of them in accordance with
their respective terms, except (a) as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general
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application affecting enforcement of creditors' rights generally and (b) as may
be limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies.
4.3 CAPITALIZATION. The authorized capital stock of Precept consists of
(a) 110,500,000 shares of Common Stock of which 100,000,000 shares have been
designated Class A Common Stock, $.01 par value per share, of which 7,866,333
shares are issued and outstanding as of December 31, 1998, and 10,500,000 shares
of which have been designated Class B Common Stock, of which 592,142 shares are
issued and outstanding as of January 31, 1999, and (b) 3,000,000 shares of
Preferred Stock, of which no shares are issued and outstanding as of December
31, 1998. All outstanding shares are validly issued, fully paid and
non-assessable and were offered and sold in substantial compliance with all
applicable securities laws and regulations.
4.4 PRECEPT COMMON STOCK. The Precept Common Stock to be issued
pursuant to this Agreement will be duly authorized, validly issued, and upon
receipt of the consideration contemplated hereby, fully paid and nonassessable.
4.5 NO VIOLATION. The execution, delivery and performance of the
Transaction Documents by Merger Sub and Precept will not conflict with or result
in the breach of any term or provision of, or violate or constitute a default
under any charter provision or bylaw or under any material agreement,
instrument, order, law or regulation to which Merger Sub or Precept is a party
or by which Merger Sub or Precept is in any way bound or obligated.
4.6 GOVERNMENTAL CONSENTS. To the knowledge of Merger Sub and Precept,
no consent, approval, order or authorization of, or registration, qualification,
designation, declaration or filing with, any Governmental Body is required on
the part of Merger Sub or Precept in connection with the transactions
contemplated by this Agreement.
4.7 SEC DOCUMENTS, ETC. Precept has furnished or made available to the
Companies or the Shareholder a true and complete copy of its Registration
Statement on Form S-4 filed under the Securities Act of 1933, as filed with the
SEC (the "S-4 REGISTRATION STATEMENT"). The S-4 Registration Statement is not
currently effective, and Precept will be required to amend such S-4 Registration
Statement (such amendment to be filed initially on or before June 15, 1999) in
order for the Precept Common Stock to be delivered to the Shareholder at the
Closing to be registered under the Securities Act pursuant to the S-4
Registration Statement. The S-4 Registration Statement, as amended, shall be
prepared in compliance in all material respects with the applicable requirements
of the Securities Act. The S-4 Registration Statement will (i) comply as to form
in all material respects with the applicable requirements of the Securities Act
and (ii) will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements made therein not misleading. The prospectus relating to the S-4
Registration Statement (i) will comply as to form in all material respects with
the applicable requirements of the Securities Act and (ii) will not contain any
untrue statement of a material fact required to be stated therein or necessary
to make the statements made therein, in light of the circumstances under which
they were made, not misleading. Each of the consolidated balance sheets of
Precept included in the S-4 Registration Statement (including the related notes
and schedules) fairly present the consolidated financial position of Precept as
of the dates set forth therein and each of the consolidated statements
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of income, cash flows and shareholders' equity included in the S-4 Registration
Statement (including any related notes and schedules) fairly presents the
results of income, cash flows and shareholders' equity, as the case may be, of
Precept for the periods set forth therein (subject, in the case of unaudited
statements, to normal year-end audit adjustments that would not be material in
amount or effect), in each case in accordance with GAAP consistently applied
during the periods involved.
4.8 FINDERS' FEES. There is no investment banker, broker, finder or
other intermediary that has been retained by or is authorized to act on behalf
of Precept or Merger Sub who might be entitled to any fee or commission from the
Shareholder or the Companies upon consummation of the transactions contemplated
by this Agreement.
4.9 REORGANIZATION MATTERS.
(1) Merger Sub has been formed solely for the purposes of
effecting the Mergers and, immediately prior to the Mergers, Precept
will "control" Merger Sub within the meaning of Section 368(c) of the
Code.
(2) Neither Precept nor any party related to Precept within
the meaning of Treasury regulations Section 1.368-1(e)(3) has any
present plan or intention to redeem or acquire any of the Precept
Common Stock issued in the Mergers.
(3) Precept has no present plan or intention to sell or
otherwise dispose of any of the assets or stock of the Surviving
Corporation, except for dispositions made in the ordinary course of
business or transfers described in Section 368(a)(2)(C) of the Code.
(4) Following the Mergers, the Surviving Corporation will
continue each Company's historic business or use a significant portion
of each Company's historic business assets in a business.
(5) Precept is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
(6) Precept is not under the jurisdiction of a court in a
title 11 or similar case within the meaning of Section 368(a)(3)(A) of
the Code.
4.10 TRANSFERABILITY. On the effective date of the amendment to
Precept's existing registration statement for the Precept Class A Common Stock,
such shares will be fully registered and freely transferable by Shareholder
under the Securities Act subject to laws and rules of general application
regarding transfers of shares that have been registered under such Act.
4.11 LITIGATION. Except as set forth in Precept's SEC Form 10-K filed
on September 25, 1998 for the fiscal year ending June 30, 1998 (the "10-K
DATE"), and except as disclosed in Precept's SEC Forms 10-Q for the periods
ended September 30, 1998, and December 31, 1998, in Precept's annual proxy
statement and annual report, and in any subsequent filing on Form 8-K thereafter
and through April 28, 1999, there are currently no pending or, to the knowledge
of Precept or Merger
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Sub, threatened material claims, actions, lawsuits, administrative proceeding or
reviews of formal or informal complaints or investigations by any Person against
or relating to Precept or Merger Sub or any of their directors, employees, or
agents (in their capacities as such) or to which any assets of Precept or Merger
Sub are subject. Except as otherwise set forth in the S-4 Registration
Statement, neither Precept nor Merger Sub is bound by, or subject to, any
currently existing judgment, order, writ, injunction or decree that would have a
Material Adverse Effect on Precept or Merger Sub.
4.12 ABSENCE OF MATERIAL ADVERSE CHANGE. Since the 10-K Date and except
as disclosed in Precept's SEC Forms 10-Q for the periods ended September 30,
1998, December 31, 1998, in Precept's annual proxy statement and annual report,
and in any subsequent filing on Form 8-K thereafter and through April 28, 1999,
and in the press release issued May 13, 1999, a copy of which has been delivered
to the Companies and Stockholder, there has not been: (a) any material adverse
change in the condition (financial or otherwise), results of operations,
business, assets or Liabilities of Precept or Merger Sub; (b) any material
payment (including, without limitation, any dividend or other distribution or
repayment of indebtedness) to any shareholder of Precept or Merger Sub other
than payment of compensation to employees and directors of Precept or Merger Sub
in the ordinary course of business and consistent with past practices; (c) any
material breach or default (or event that with notice or lapse of time or both
would constitute a breach or default), termination or, to the knowledge of the
executive officers of Precept or Merger Sub threatened termination, under any
material agreement of Precept or Merger Sub; (d) any material theft, damage,
destruction, casualty loss, condemnation or eminent domain proceeding affecting
any of assets of Precept or Merger Sub, not covered by insurance; (e) any sale,
assignment or transfer of any of the assets of Precept or Merger Sub that is
outside the ordinary course of business and that would have a material adverse
effect on Precept or Merger Sub; (f) any waiver by Precept or Merger Sub of any
material rights related to Precept's or Merger Sub's respective business,
operations or assets; (g) any other material transaction, agreement or
commitment entered into by Precept or Merger Sub or their significant
shareholders affecting Precept's or Merger Sub's respective business, operations
or assets, that is outside the ordinary course of business and would materially
adversely affect Precept's or Merger Sub's respective business, operations or
assets or (h) any agreement or understanding to do or resulting in any of the
foregoing. It is understood, however, that Precept, through a subsidiary, has
acquired a transportation company known as AAA Guaranteed On Time Service, LLC,
in Clinton, New Jersey, and that this transaction has not yet been disclosed in
SEC filings, although a related press release has been issued.
4.13 BREACH OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties and statements made by Precept and Merger Sub in or pursuant to this
Agreement are true, complete and correct in all material respects and do not
contain any untrue statement of a material fact or omit to state any material
fact necessary to make any such representation, warranty or statement, under the
circumstance in which it was made, not misleading.
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ARTICLE V.
ADDITIONAL COVENANTS AND AGREEMENTS
5.1 INFORMATION FOR FILINGS. Prior to and after Closing each Company
and the Shareholder will furnish Precept and Merger Sub with all information
reasonably available to them concerning the Companies and the Shareholder as is
required for inclusion in any application or filing made by Precept or Merger
Sub to any Governmental Body in connection with the transactions contemplated by
this Agreement.
5.2 PUBLICITY. Merger Sub, Precept, the Companies and the Shareholder
will cooperate with each other in the development and distribution of all news
releases and other public disclosures relating to the transactions contemplated
by this Agreement. Neither Merger Sub or Precept, on the one hand, nor the
Companies or the Shareholder, on the other hand, will issue or make, or allow to
have issued or made, any press release or public announcement concerning the
transactions contemplated by this Agreement without the advance approval in
writing of the form and substance thereof by the other parties, unless otherwise
required by applicable legal requirements; provided, however, such approval
shall not be unreasonably withheld.
5.3 RELEASE BY THE SHAREHOLDER. Effective upon the Closing, the
Shareholder for himself and his heirs, executors, administrators, successors and
assigns, hereby fully and unconditionally release and forever discharge and hold
harmless the Companies, Merger Sub, the Surviving Corporation and their
respective employees, officers, directors, successors and assigns from any and
all claims, demands, losses, costs, expenses (including reasonable attorneys'
fees and expenses), obligations, liabilities and/or damages of every kind and
nature whatsoever, whether or not now existing or known, relating in any way,
directly or indirectly, to the Companies or its business (other than with
respect to this Agreement or the transactions contemplated hereby), that the
Shareholder may now have or may hereafter claim to have against the Companies,
Merger Sub, the Surviving Corporation or any of their employees, officers,
directors, successors or assigns.
5.4 COVENANTS RELATING TO TAXES.
(1) Precept shall cause the Surviving Corporation to duly,
accurately and timely (with regard to any duly granted extensions) file
all Tax Returns of the Companies required to be filed after the Closing
Date and pay all Taxes due thereon. The Shareholder shall reimburse the
Surviving Corporation within fifteen (15) days after payment by the
Surviving Corporation or Precept of such Taxes to the extent such Taxes
(i) relate to any taxable period ending on or before the Closing Date
(for any taxable period beginning before and ending after the Closing
Date to the extent allocable to the portion of such period beginning
before and ending on the Closing Date) and (ii) exceed the amount of
the current liability accruals for Taxes (exclusive of reserves for
deferred Taxes established to reflect timing differences) reflected on
the Latest Balance Sheets as adjusted for Companies' operations in the
ordinary course of business through the Closing Date in accordance with
GAAP and, to the extent consistent therewith, the most recent custom
and practices of the Companies; provided that if the Surviving
Corporation is entitled to a Tax refund for the periods described in
(i) above, the Surviving Corporation shall pay the amount of the Tax
refund to the Shareholder on a pro
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rata basis within fifteen (15) days after the Surviving Corporation's
receipt thereof. The amount of the Tax refund shall be payable in
shares of Precept Common Stock valued as of the date the Tax refund is
received by the Surviving Corporation. For purposes of this Section
5.10(b), the portion of any Tax attributable to a taxable year or
period beginning before and ending after the Closing Date shall be
determined by apportioning the Tax for the entire year or period based
upon the number of days in the year or period, except that any such Tax
measured by income or receipts shall be apportioned based upon actual
results of operations through the end of the Closing Date.
Notwithstanding the foregoing, the Shareholder shall not be obligated
to reimburse the Surviving Corporation for excess taxes resulting from
a decision made, action taken or position taken by Precept unless such
decision, action or position was taken to correct a prior decision,
action or position which was not in compliance with applicable Tax
laws.
(2) The Shareholder, the Companies, Precept and the Surviving
Corporation shall reasonably cooperate with each other in connection
with the filing of Tax Returns pursuant to this Section 5.4 and any
audit, litigation, or other proceeding with respect to Taxes of the
Companies. Such cooperation shall include the provision of copies, at
the requesting party's expense, of records and information relevant to
any such Tax Return or proceeding and making employees available on a
mutually convenient basis to provide additional information and
explanation of any material provided hereunder.
5.5 TAX TREATMENT.
(1) From and after the date of this Agreement, none of
Precept, Merger Sub, the Companies, or any Shareholder shall take, or
cause or permit any of their Affiliates to take, any action that would
preclude qualification of the transactions contemplated by this
Agreement as a reorganization within the meaning of Sections
368(a)(1)(A) and 368(a)(2)(D) of the Code.
(2) Each of the Companies and Precept shall comply with the
reporting requirements of Treasury regulations Section 1.368-3 and
shall not take any position on any Tax Return inconsistent with
qualification of the transactions contemplated by this Agreement as a
reorganization with the meaning of the Sections 368(a)(1)(A) and
368(a)(2)(D) of the Code.
5.6 EMPLOYMENT AGREEMENTS. At the Effective Date, DiMarco, Sagarino and
Riedel and the Surviving Corporation shall enter into employment agreements (the
"EMPLOYMENT AGREEMENTS"), pursuant to the terms of which DiMarco shall be
employed as President of the Surviving Corporation, Sagarino shall be employed
as Executive Vice President Sales and Marketing of the Surviving Corporation and
Riedel shall be employed as Controller of the Surviving Corporation. Each of the
Employment Agreements shall provide that the affected employee shall be entitled
to participation in stock option plans adopted from time to time by Precept at a
level commensurate with the position held by each such employee and on terms
generally applicable to those in similar positions throughout Precept's
organization.
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5.7 ADDITIONAL ACQUISITIONS IN NEW ENGLAND. In addition to salary and
any other compensation and payments payable to the Shareholder, the
Shareholder's Employment Agreement shall further provide that with respect to
each transportation company acquired by Precept or its Affiliates in New England
(defined as the states of Maine, New Hampshire, Vermont, Rhode Island,
Massachusetts, Connecticut), regardless of whether the Shareholder was involved
with such acquisition, from and after the date of Closing hereunder and through
and including May 12, 2002 (the "TERMINATION DATE"), the Shareholder shall be
paid as a bonus ten percent (10%) of any increase in the pre-tax profit of the
acquired company over its base year pre-tax profit as calculated and used by
Precept in its acquisition of the acquired company. Any such increase shall be
calculated for the period from the date of each such acquisition for consecutive
twelve-month periods thereafter through (but never beyond) the Termination Date.
For any partial year covered by these provisions, any increase in pre-tax
profits of the acquired company will be compared with the same seasonal period
in the preceding year of the acquired company so as to accurately reflect the
increase in such profits for the period so covered. This bonus shall be due and
payable not later than the forty-fifth (45th) day following the close of the
twelve-month period to which it relates. Pre-tax profits shall meaning the net
earnings before federal, state and local income taxes, and before the payments
provided under this subparagraph, but after payment of any commission otherwise
payable to Employee under Section 5.8 below. A transportation company shall be
deemed to be in New England and therefore subject to these provisions if its
base of operations is located in New England, and a transportation company shall
be any company operating a personal transportation business as a significant
part of its operations or business. It is intended, however, that the bonuses
shall be determined by and with respect to the results of operations of the
transportation line of business of any acquired company and not with respect to
other lines of business that might be so acquired.
5.8 BONUSES PAYABLE IN STOCK. The bonuses described in Sections 5.7
above shall be payable in Precept Class A Common Stock ("Precept Common Stock"),
with the number of such shares to be issued to satisfy such bonuses and
commissions determined by using the average closing price of such common stock
on the NASDAQ small capitalization market (or, in the event that such shares are
not traded on NASDAQ, the highest closing price on any other applicable exchange
or market system) for the period of ten (10) trading days immediately preceding
the date two days before the date such bonuses and commissions are due. Pre-tax
profits of the Companies, the Surviving Corporation and any acquired company
shall be determined in accordance with GAAP, as used by Precept and its
Affiliates throughout their operations. Pre-tax profits of the Companies, the
Surviving Corporation and any acquired company shall be calculated without
reference to any general corporate overhead charges [as opposed to specific
corporate overhead charges to pay or reimburse Precept or any of their
Affiliates (other than Surviving Corporation) for actual costs of personnel,
travel, accounting, legal, professional services, computer services, insurance
and other similar charges incurred on behalf of the Surviving Corporation] or
management fee of Precept or any of its Affiliates. All shares of Precept Common
Stock to be issued under Section 5.7 shall be publicly registered as soon as
practicable and in any event within thirty (30) days after their issuance,
subject to the requirements of SEC Rule 144 and Rule 145 and other applicable
requirements of the Securities and Exchange Commission. From and after Closing
and as long as transfer of the Precept Common Stock is restricted under SEC Rule
144 or Rule 145, Precept shall maintain its status as a reporting company under
the Securities Exchange Act of 1934 (the "Exchange Act") and maintain its
filings with the SEC (including all filings under Sections 13 and 15(d) of the
Exchange Act) so as
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to satisfy the public information requirements of SEC Rule 144. The Shareholder
shall have no right to receive the bonuses in cash. The Shareholder acknowledges
that the Shareholder has received a copy of Precept's existing Registration
Statement on Form S-4, and that the Shareholder, through his counsel, has access
to all public information filings of Precept with the SEC through the date of
this Agreement. Precept hereby covenants and agrees to deliver to Shareholder
all amendments to Form S-4 and all other SEC filings needed to effect
registration of Shareholder's shares issued under this Agreement within thirty
(30) days of Precept's filings of same with the SEC. On the Shareholder's
request, copies of any and all such filings will be provided to Shareholder free
of charge.
5.9 COMMISSIONS ON NEW NATIONAL ACCOUNTS. In addition to salary and any
other compensation and payments payable to the Shareholder, the Shareholder's
Employment Agreement shall further provide that Shareholder will also be
entitled to a commission equal to five percent (5%) of gross revenue (excluding
only gratuities and out-of-pocket expenses) received by the Surviving
Corporation over the period from the date of Closing through May 12, 2004, on
all sales to national accounts secured principally through the efforts of
Employee (and not necessarily solely through the efforts of Employee) after
Closing that are not accounts served by Precept, Ambassador or of their
respective affiliates as of the date of closing under the Merger Agreement and
Asset Purchase Agreement. National accounts otherwise qualifying under this
Section 5.9 shall not be disqualified for the reason that negotiations with such
accounts are or were ongoing at the time of Closing hereunder. Precept and the
Companies acknowledge that as of the time of Closing hereunder, negotiations
were ongoing with Aetna, Asa, Brown Boveri, ESPN and Lego Systems. These
commissions described in this Section 5.9 shall be payable in cash on terms and
conditions generally applicable to commissioned salespersons in the Precept
organization and in any event no later than the date thirty (30) days after the
close of the month in which payment for services rendered to such accounts is
received by the Surviving Corporation.
5.10 SHAREHOLDER GUARANTIES. Precept and the Surviving Corporation
jointly and severally agree that they shall each use their respective best
efforts to cause the Shareholder to be removed within sixty (60) days after the
Closing as a guarantor or obligor of those obligations identified in the
Disclosure Schedule as Material Agreements, as and to the extent such Material
Agreements constitute and create (a) purchase money debt for vehicles or
equipment, (b) indebtedness for borrowed money or contractual lease obligations
or (c) trade credit. Such removal may be by any commercially prudent means in
the discretion of Precept and the Surviving Corporation, whether by execution of
an assumption agreement, payment of the underlying indebtedness or otherwise.
Precept and the Surviving Corporation shall indemnify, defend and hold the
Shareholder harmless from any such guaranties, debts, obligations and
liabilities, including all costs of collection, attorneys' fees and other
expenses paid or incurred by Shareholder with respect to all such assumed
liabilities; provided, that Precept and the Surviving Corporation shall not have
any obligation under this Section with respect to any undisclosed debts,
obligations or liabilities in breach of the representations of the Companies or
the Shareholder contained herein.
5.11 CLOSING DELIVERIES FROM THE COMPANIES AND SHAREHOLDER. At the
Closing the Companies and the Shareholder shall have performed and complied with
all the covenants and agreements and satisfied the conditions required by this
Agreement to be performed, complied with
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or satisfied by them in all material respects at or prior to the Closing Date,
including without limitation the delivery to Merger Sub and Precept of all items
required to be delivered by them as provided below:
a. Employment Agreement substantially in the form of Exhibit A hereto
executed by and between Merger Sub and DiMarco;
b. Employment Agreement substantially in the form of Exhibit B hereto
executed by and between Merger Sub and Sagarino;
c. Employment Agreement substantially in the form of Exhibit C hereto
executed by and between Merger Sub and Riedel;
d. Confidentiality and Noncompetition Agreement substantially in the
form of Exhibit D hereto executed by and among Precept, the
Companies and the Shareholder;
e. Affiliate Agreement substantially in the form of Exhibit E hereto
executed by and between Merger Sub and each Shareholder;
f. Closing Certificate substantially in the form of Exhibit F hereto
executed by and between Shareholder and the Companies;
g. Secretary's Certificate substantially in the form of Exhibit G
hereto executed by the secretary and chief executive officer of
the Companies;
h. Stock power endorsed in blank from each Shareholder with respect
to the Escrowed Shares;
i. If and to the extent requested by Precept or Merger Sub, each
director and officer of the Companies will deliver to Precept or
Merger Sub a written resignation;
j. The Companies and the Shareholder will deliver to Precept and
Merger Sub a legal opinion of their counsel satisfactory in form
and substance to Precept, Merger Sub and its legal counsel.
k. The Companies and the Shareholder will deliver to Precept and
Merger Sub a certificate of the Secretaries of the Companies
certifying that the board and shareholder resolutions of the
Companies approving the transactions contemplated hereby
including, but not limited to, the Mergers, in accordance with the
laws of the State of Connecticut, the certificate of incorporation
and the bylaws of the Companies.
l. The Companies and the Shareholder will deliver to Precept and
Merger Sub a certificate of the Secretaries of the Companies
certifying the incumbency and signatures of the officers of the
Companies signing the Transaction Documents.
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m. The Companies and the Shareholder will deliver to Precept and
Merger Sub a certificate of the Secretaries of the Companies
certifying the completeness and accuracy of the Articles of
Incorporation and Bylaws of the Companies.
n. The Companies and the Shareholder will deliver to Precept and
Merger Sub certificates of appropriate governmental authorities as
to the existence and good standing of the Companies of the
continuing validity of the permits of the Companies.
5.11 CLOSING DELIVERIES FROM PRECEPT AND MERGER SUB. At the Closing
Precept and Merger Sub shall have performed and complied with all the covenants
and agreements and satisfied the conditions required by this Agreement to be
performed, complied with or satisfied by them in all material respects at or
prior to the Closing Date, including without limitation the delivery to the
Companies and Shareholder of all items required to be delivered by them as
provided below:
a. Subject to Section 6.7 below, Precept will deliver (or cause to be
delivered) to each Shareholder a stock certificate representing
the Precept Common Stock to be delivered to the respective
Shareholder at Closing, together with such cash as the respective
Shareholder shall be entitled to receive in the Mergers;
b. Employment Agreement substantially in the form of Exhibit A hereto
executed by and between Merger Sub and DiMarco;
c. Employment Agreement substantially in the form of Exhibit B hereto
executed by and between Merger Sub and Sagarino;
d. Employment Agreement substantially in the form of Exhibit C hereto
executed by and between Merger Sub and Riedel;
e. Confidentiality and Noncompetition Agreement substantially in the
form of Exhibit D hereto executed by and between Merger Sub and
each of the Shareholder;
f. Affiliate Agreement substantially in the form of Exhibit E hereto
executed by and between Merger Sub and each Shareholder;
g. Closing Certificate substantially in the form of Exhibit F hereto
executed by and between Precept and Merger Sub;
h. Secretary's Certificate substantially in the form of Exhibit H
hereto executed by the secretary and president of Merger Sub;
i. Secretary's Certificate substantially in the form of Exhibit I
hereto executed by the secretary and president of Precept; and
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j. Precept and Merger Sub will deliver to the Companies and the
Shareholder a legal opinion of its counsel satisfactory in form
and substance to the Companies and the Shareholder.
5.12 CLOSING RECONCILIATION OF CASH BALANCES. At the Closing the
Companies shall allow Precept and Merger Sub to review the cash balances of the
Companies' accounts and to review all checkbooks and other similar evidences of
cash balances and uses so as to determine the sources and uses of the Companies'
cash since the date of the Latest Balance Sheets, and such review shall be
satisfactory to Precept and Merger Sub.
ARTICLE VI.
INDEMNIFICATION; ESCROW
6.1 INDEMNIFICATION OF MERGER SUB AND PRECEPT. The Companies (until the
Closing) and the Shareholder (from and after the Closing), jointly and
severally, agree to indemnify, defend and hold Precept and Merger Sub, the
Surviving Corporation and their respective officers, directors, shareholders,
managers, employees, agents and attorneys (each a "PRECEPT PARTY" and
collectively, the "PRECEPT PARTIES") harmless from any and all liabilities,
obligations, claims, contingencies, damages, costs and expenses, including all
court costs and reasonable attorneys' fees (collectively "Losses"), that any
Precept Party may suffer or incur as a result of or relating to any and all
damages, losses (which shall include any diminution in value), shortages,
liabilities (joint or several), payments, obligations, penalties, claims,
response costs, litigation, demands, defenses, judgments, suits, proceedings,
costs, disbursements or expenses (including, without limitation, fees,
disbursements and expenses of attorneys, accountants and other professional
advisors and of expert witnesses and costs of investigation and preparation) of
any kind or nature whatsoever (collectively, "DAMAGES"), directly or indirectly
resulting from, relating to or arising out of:
(1) any breach of or inaccuracy in any representation or warranty of
the Companies or the Shareholder contained in this Agreement
(including, without limitation, those representations and
warranties contained in Article III) or in any other agreement,
instrument, certificate or other document executed by or on behalf
of the Companies or the Shareholder at or in contemplation of the
Closing pursuant to or in connection with any Transaction
Document;
(2) any breach or non-performance, partial or total, by the Companies
or the Shareholder of any covenant or agreement of the Companies
or the Shareholder (or any Affiliate thereof or any the Companies
or the Shareholder) contained in this Agreement or in any other
Transaction Document;
(3) any liability or obligation, absolute or contingent, known or
unknown, of the Companies or the Shareholder arising prior to the
Effective Date except as and to the extent set forth and reserved
for in the Latest Balance Sheets and except as otherwise disclosed
in the Disclosure Schedule, except for liabilities and obligations
arising in the ordinary course of business of the Companies after
the date of the Latest Balance Sheet;
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(4) any corporate level Tax liability of ALS arising out of and as a
result of the termination of its S Corporation election (as
distinguished from the Mergers themselves, and as to Tax issues
arising from the Mergers, each of the Companies and Shareholder,
on the one hand, and each of Precept and the Merger Sub, on the
other hand, shall be liable to the other for any breach of their
respective reorganization warranties herein and the resulting
federal and state income tax liabilities incurred as a result
thereof); and
(5) any and all Losses incurred by the Precept Parties in connection
with or arising out of litigation or other proceedings identified
in Section 3.13 of the Disclosure Schedule [and any
indemnification as to Losses described in this subparagraph (6)
shall be made independently of and without regard to the $50,000
deductible "basket" described below, so that first dollar through
last dollar of all Losses indemnified against under this
subparagraph (5) shall be so covered, and any such covered Losses
shall neither add to or subtract from the $50,000 deductible;
further, Losses covered under this subparagraph (5) shall not be
counted against the maximum amount of Losses covered by this
indemnity as set forth below].
THE INDEMNIFICATION PROVIDED IN THIS ARTICLE VI SHALL BE EXPRESSLY APPLICABLE,
WITHOUT LIMITATION, TO CLAIMS INVOLVING NEGLIGENCE OF THE COMPANIES OR OF
SHAREHOLDER ARISING OR ACCRUED ON OR PRIOR TO THE CLOSING DATE.
It is provided however, that the Precept Parties shall be entitled to
indemnification hereunder only to the extent such Losses exceed $50,000
individually or in the aggregate, in which case the Companies and the
Shareholder shall only be responsible for such indemnified damages in excess of
$50,000 in the aggregate; provided, however that any indemnification for Losses
or Damages arising as a result of the breach of the environmental
representations and warranties set forth in Section 3.26 or the no sale
representation and warranties set forth in Section 3.35 shall be made
independently of and without regard to the $50,000 deductible "basket" described
above, so that first dollar through last dollar of all Losses indemnified
against shall be so covered, and any such covered Losses shall neither add to or
subtract from the $50,000 deductible; further, Losses as a result of the breach
of the environmental representations and warranties set forth in Section 3.26 or
the no sale representations and warranties set forth in Section 3.35 shall not
be counted against the maximum amount of Losses covered by this indemnity as set
forth below]. Notwithstanding the foregoing, indemnification for Losses arising
from uncollectability of any account receivable of the Companies shall be
subject to the foregoing floor. It is further provided that in the event that
any matter otherwise covered by indemnification obligations hereunder shall also
be covered by any valid and subsisting policy of insurance issued by a licensed
insurance carrier or carriers, the Precept Parties shall look to such insurance
first as the source of indemnity prior to looking to the Indemnifying Parties
and their obligations hereunder. Notwithstanding such duty to look first to
insurance, the Precept Parties may make a Claim for indemnity and thereby
perfect their rights to indemnity from the Companies and the Shareholder while
the insurance carrier is proceeding with a defense of the related insurance
claim. The Escrow Fund (as hereinafter defined) shall first be used to satisfy
any
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indemnification obligations of the Shareholder under this Section 6.1. The
Shareholder may then, at his option, satisfy or all of its indemnification
obligations required pursuant to this Article VI by returning shares of Precept
Common Stock, if any, issued to him pursuant to the terms of this Agreement to
Precept. For purposes of the foregoing sentence, the shares of Precept Common
Stock so returned shall be valued at the average closing price of the shares of
Precept Common Stock as reported on NASDAQ (or, in the event that such shares
are not traded on NASDAQ, the highest closing price on any other applicable
exchange or market system) for the period of ten (10) trading days immediately
preceding the date such return is made. Notwithstanding anything to the contrary
contained herein, neither any Precept Party nor the Shareholder shall cancel or
surrender any shares of the Precept Common Stock to such an extent so as to
alter the intended tax treatment of the mergers as forward subsidiary mergers
under Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code.
To the extent that any Precept Party recovers indemnifiable damages
pursuant to this Article VI in respect of uncollected receivables of the
Companies, such Precept Party shall assign to the Shareholder its rights to such
uncollected receivables. Notwithstanding anything to the foregoing to the
contrary, Losses to be indemnified pursuant to this Section 6.1 shall be net of
the dollar value of any economic benefit received by any Precept Party as a
result of a condition, event or occurrence indemnified hereunder, including,
without limitation, receipt of insurance proceeds. It is understood that tax
benefits shall not be considered economic benefits hereunder, as recovery of
indemnifiable damages hereunder will negate any such tax benefit. To the extent
the Shareholder has made indemnification payments hereunder, the Shareholder
shall be subrogated to rights of Precept or the Surviving Corporation under any
applicable insurance coverages; provided that the Surviving Corporation and/or
Precept have first right to be made whole under such policies.
The maximum amount of aggregate Losses for which the Precept Parties
shall be entitled to indemnification hereunder shall be $3,025,000; provided,
however, that this maximum aggregate amount of covered Losses shall not apply to
any fraud, intentional misrepresentation or other intentional wrongdoing of the
Companies or of Shareholder.
6.2 INDEMNIFICATION OF THE COMPANIES AND THE SHAREHOLDER. Precept and
the Surviving Corporation hereby agree jointly and severally to indemnify,
defend and hold the Shareholder and his agents and attorneys and their
respective heirs, successors and assigns (each a "SELLER PARTY" and
collectively, the "SELLER PARTIES") harmless from any and all Losses that any
Seller Party may suffer or incur as a result of or relating to a breach of any
agreement, representation, warranty or covenant, made by Precept or by Merger
Sub in this Agreement or pursuant hereto, or in any exhibit, Disclosure Schedule
or certificate delivered hereunder or in any document required to be delivered
pursuant to any Transaction Document by Precept or the Merger Sub.
6.3 NOTIFICATION OF CLAIM. Any Persons seeking indemnification under
this Article VI (collectively, "INDEMNIFIED PARTIES") shall promptly give notice
to the Persons to provide indemnification (collectively, the "INDEMNIFYING
PARTIES") of any Losses or claims as to which they assert a right to
indemnification (a "CLAIM"), and within thirty (30) days thereafter, further
notify the Indemnifying Parties of the details of such Claim and the amount
thereof; provided, however, that the failure to give such notification shall not
relieve the Indemnifying Parties from any liability that they may have pursuant
to the provisions of this Article VI as long as the failure to give such notice
within
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such time is not prejudicial to the Indemnifying Parties. Notice to one of the
Indemnifying Parties for the purpose of this Section 6.3 shall mean the filing
with or the service upon the Indemnifying Parties of any legal action, receipt
of any claim in writing or similar form of actual notice.
6.4 DEFENSE AND SETTLEMENT OF CLAIMS. If any Claim by one of the
Indemnified Parties arises out of a claim by a Person other than one of the
Indemnified Parties, the Indemnified Parties will promptly give notice to the
Indemnifying Party (or the Indemnifying Parties) of any such Claim, and
thereafter the Indemnifying Parties shall, by written notice, undertake to
conduct any proceedings or negotiations in connection therewith and take such
actions as are necessary and appropriate to defend the Indemnified Parties and
take all other steps or proceedings to settle or contest such claim, including,
without limitation, the employment of counsel; provided, however, that the
Shareholder (or the Companies, if applicable) shall not enter into any agreement
in compromise or settlement of any claim that could affect the Taxes
attributable to any taxable period of the Companies beginning on or after the
Closing Date without the prior written consent of Precept or Merger Sub, which
consent shall not be unreasonably withheld or delayed; provided further that the
Indemnifying Parties shall reasonably consider the advice of the Indemnified
Parties as to the defense and settlement of such claim; and provided further
that the Indemnified Parties shall have the right to participate, at their own
expense, in such defense. Except as otherwise provided herein, control of such
litigation and settlement shall remain with the Indemnifying Parties. The
Indemnified Parties shall provide all reasonable cooperation in connection with
any such defense by the Indemnifying Parties. Counsel and auditor fees, filing
fees and court fees of all proceedings, contests or suits with respect to any
such claim shall be borne by the Indemnifying Parties. If any Claim for
indemnification by Precept or Merger Sub arises out of a Claim by Precept or
Merger Sub and not a third party, then Precept or Merger Sub shall be entitled
to immediate indemnification hereunder. The provisions of this Section 6.4 shall
not apply to Claims relating to Losses arising from any breach or alleged breach
of any of the representations and warranties given under Sections 3.26 and 3.35
hereof, and as to any such breach or alleged breach, the Indemnified Party or
Parties affected shall conduct and control the defense and any settlement
negotiations with counsel reasonably satisfactory to the Indemnifying Party at
its or their own expense until such time as there is a final non-appealable
award of an arbitrator or arbitration panel or any final non-appealable judgment
or order from a court of competent jurisdiction for Damages relating to breach,
negligence or other liability of the Indemnifying Party or Parties, at which
time the Indemnifying Party or Parties shall pay all related Damages and shall
reimburse the Indemnified Party or Parties for all costs, legal fees and all
other expenses relating to such Claim incurred up to and through such date of
final determination. Any Indemnifying Party shall have the right to participate
in any such matter at its own expense.
6.5 SURVIVAL. All representations and warranties made in or pursuant to
this Agreement will survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby through the date which is
one (1) year after the Closing Date, and the right to indemnification with
respect thereto shall expire on such date (unless there is a Claim made on or
prior to such date, in which case the indemnification obligations hereunder as
to such Claim shall continue until the final resolution of such Claim). All
statements contained in any Schedule to this Agreement will constitute
representations and warranties under this Agreement. It is provided, however,
that any Claim of any of the Indemnified Parties for fraud, intentional
misrepresentation or other intentional wrongdoing by an Indemnifying Party shall
not expire by operation of this Section
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6.5 or any other provision of this Agreement but shall expire only with the
passing of the bar date under the applicable statute of limitations, as such bar
date may be extended by any discovery, fraudulent concealment or other similar
principle of applicable law.
6.6 OFFSET. Precept and Merger Sub shall be entitled, but not required,
to set off the amount of any Claim or Claims in respect of which Precept Parties
are entitled to indemnification against any payments becoming due to the
Shareholder (or the Companies, if applicable) pursuant to this Agreement, the
Transaction Documents or otherwise. Precept and the Surviving Corporation shall
also be entitled, but not required, to cancel Escrow Shares (as defined in
Section 6.7 hereof).
6.7 ESCROW. At the Closing, $500,000 of the Merger Consideration shall
be placed in escrow to partially secure the indemnification obligations of the
Shareholder under Section 6.1. 53,709 shares of Precept Common Stock to be
issued to the Shareholder at the Closing (the "ESCROW SHARES") shall be issued
in the name of the Shareholder and held by Thomas & Self, a Professional
Corporation (the "ESCROW AGENT"). At the Closing, One Hundred Sixty Six Thousand
Six Hundred Sixty Seven Dollars ($166,667.00) of the cash Merger Consideration,
plus interest accrued thereon (the "ESCROW CASH" and, together with the Escrow
Shares, the "ESCROW FUNDS") shall be held in an interest-bearing account for the
benefit of the Shareholder. Promptly following Closing, the parties shall
execute and deliver to Escrow Agent a mutually acceptable Escrow Agreement in
accordance with the terms hereof. The Shareholder hereby grants to Precept a
security interest in the Escrow Shares to secure Shareholder's obligations to
the Precept Parties under Section 6.1 above and, promptly following Closing,
Shareholder shall deliver to the Escrow Agent such stock powers to give effect
to such grant. Shareholder shall retain his right to vote the Escrow Shares
unless and until the same shall be used to satisfy Shareholder's indemnification
obligations hereunder.
Any withdrawals from the Escrow to satisfy any indemnification claims
shall be drawn pro rata one-third (1/3) in cash and two-thirds (2/3) in stock.
The Escrow Funds shall be retained by Escrow Agent for a period of one
(1) year from the Closing Date (the "ESCROW PERIOD"), subject to the following:
(1) On the six month anniversary of the Closing Date, the
Escrow Agent shall release from escrow and deliver to the Shareholder
an amount of Escrow Funds equal to the difference between Two Hundred
Fifty Thousand Dollars ($250,000) and the amount of the Losses, if any,
as to which any of the Precept Parties has properly made an unresolved
Claim under Section 6.2. The amount, if any, of such Two Hundred Fifty
Thousand Dollars ($250,000) retained by the Escrow Agent shall continue
to be retained until any such Claims have been resolved. Within five
(5) business days following resolution of any such Claims, the Escrow
Agent shall deliver to the Shareholder that portion of the Two Hundred
Fifty Thousand Dollars ($250,000) retained by the Escrow Agent and not
required to satisfy such Claims.
(2) On the last day of the Escrow Period, the Escrow Agent
shall release from escrow and deliver to the Shareholder all of the
Escrow Funds less the amount of the Losses, if any, as to which any of
the Precept Parties has properly made in good faith
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an unresolved Claim under Section 6.2. The amount, if any, of such
Escrow Funds retained by the Escrow Agent shall continue to be retained
until any such Claims have been resolved. Within five (5) business days
following resolution of such Claims, he Escrow Agent shall deliver to
the Shareholder that portion of the Escrow Funds retained by the Escrow
Agent and not required to satisfy such Claims.
(3) Any release of Escrow Funds made pursuant to this Section
shall be made in Escrow Cash and Escrow Shares, in equal pro rata
values. For purposes of such valuation, each share of Precept Common
Stock held in escrow shall be valued at the average closing price of
the Precept Common Stock on NASDAQ (or, if not traded on NASDAQ, such
other market or system where such stock is most frequently traded) for
the last ten (10) Trading Days immediately preceding such release.
The Escrow Agent shall hold and safeguard the Escrow Funds, shall
invest the Escrow Cash in a manner approved in writing by the parties, shall
treat such Escrow Funds as a trust fund in accordance with the terms of this
Agreement and not as the property of Precept, and shall hold and dispose of the
Escrow Funds solely in accordance with the terms hereof.
Any shares of Precept Common Stock or other equity securities issued or
distributed by Precept (including shares issued upon a stock split) (the "NEW
SHARES") in respect of Escrow Shares that have not been released to the
Shareholder shall be added to the Escrow Shares and become a part thereof. New
Shares issued in respect of Escrow Shares that have been released shall not be
added to the Escrow Shares, but shall be distributed to the holders thereof.
When and if cash dividends on Escrow Shares shall be declared and paid, they
shall not be added to the Escrow Shares but shall be paid to the holders
thereof.
The Escrow Agent agrees to serve as Escrow Agent without fee, except
that Precept agrees to reimburse the Escrow Agent for the Escrow Agent's
reasonable fees and other expenses (including reasonable attorney's fees)
incurred by the Escrow Agent in connection with services required hereunder or
on account of disputes between Precept and the Shareholder. Precept and the
Merger Sub, jointly and severally, shall indemnify and hold harmless the Escrow
Agent against and in respect of any and all claims, suits, actions, proceedings
(formal and informal), investigations, judgments, deficiencies, damages,
settlements, liabilities, and legal and other expenses (including reasonable
legal fees and expenses of attorneys chosen by the Escrow Agent) as and when
incurred, arising out of or based upon any act, omission, alleged act, or
alleged omission by the Escrow Agent or any other cause, in any case in
connection with the acceptance of, or the performance or non-performance by the
Escrow Agent of, any of the Escrow Agent's duties under this Agreement, except
as the result of the Escrow Agent's intentional misconduct or gross negligence
as finally determined by a court of competent jurisdiction. Except in cases of
the Escrow Agent's bad faith or gross negligence, the Escrow Agent shall be
fully protected by acting in reliance upon any notice, advice, direction or
other document in accordance with the provisions hereof, in connection with this
Agreement, or in connection with the Escrow Agent's duties under this Agreement,
has been duly authorized so to do, or by acting or failing to act in good faith
on the advice of any counsel retained by the Escrow Agent. The Escrow Agent
shall not be liable for
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any mistake of fact or of law or any error of judgment, or for any act or any
omission, except as a result of the Escrow Agent's intentional misconduct or
gross negligence as finally determined by a court of competent jurisdiction.
The Escrow Agent shall have no duties or responsibilities except those
expressly set forth herein. The Escrow Agent shall not be bound by any waiver,
modification, amendment, termination, cancellation or revision of this
Agreement, unless in writing and signed by the Escrow Agent, Precept and the
Shareholder. The Escrow Agent shall not be bound by any assignment by any party
hereto of its rights hereunder unless the Escrow Agent shall have received
written notice thereof from the assignor. The Escrow Agent shall perform any
acts ordered by a court of competent jurisdiction.
If the Escrow Agent shall be uncertain as to the Escrow Agent's duties
or rights hereunder, or shall receive any notice, advice, direction or other
document from any other party with respect to the Escrow Amount which, in he
Escrow Agent's opinion, is in conflict with any of the provisions of this
Agreement, or shall be advised that a dispute has arisen with respect to the
payment, ownership or right of possession of the Escrow Amount or any part
thereof (or as to the delivery, non-delivery or content of any notice, advice,
direction or other document), the Escrow Agent shall be entitled, without
liability to anyone, to refrain from taking any action other than to use the
Escrow Agent's reasonable efforts to keep safely the Escrow Amount until the
Escrow Agent shall be directed otherwise in writing by all other parties hereto
or by an order, decree or judgment of a court of competent jurisdiction which
has been finally affirmed on appeal or which by lapse of time or otherwise is no
longer subject to appeal, but the Escrow Agent shall be under no duty to
institute or to defend any proceeding, although the Escrow Agent may, in the
Escrow Agent's discretion and at the expense of Precept, institute or defend
such proceedings. The parties hereto authorize the Escrow Agent, if the Escrow
Agent is threatened with litigation or is sued, to interplead all interested
parties in any court of competent jurisdiction and to deposit the Escrow Amount
with the clerk of that court.
If the Escrow Agent shall be unable to act or shall resign as Escrow
Agent hereunder, the successor escrow agent shall be such escrow agent as shall
be mutually agreed upon by the parties. The Escrow Agent may at any time give
written notice of its resignation to the other parties hereto, which resignation
shall be effective upon successor escrow agent selected by the parties becoming
the Escrow Agent hereunder. The Escrow Agent's responsibilities and liabilities
hereunder, except as a result of the Escrow Agent's own intentional misconduct
or gross negligence, will terminate upon the delivery by the Escrow Agent of all
the Escrow Amount under any provision of this Agreement.
6.8 NO CLAIMS BY THE SHAREHOLDER AGAINST THE COMPANIES. The parties
acknowledge that inasmuch as the Companies will be a wholly-owned subsidiary of
Precept after the Closing Date, in the event that Precept and Merger Sub makes a
claim for indemnification against the Shareholder pursuant to this Article VI,
the Shareholder shall have no right to make any claim, cross claim or
counterclaim against the Companies for indemnification, contribution or
otherwise.
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ARTICLE VII.
MISCELLANEOUS
7.1 NOTICES. All notices that are required or may be given pursuant to
this Agreement must be in writing and delivered personally, by a recognized
courier service, by a recognized overnight delivery service, by facsimile or by
registered or certified mail, postage prepaid, to the parties at the following
addresses (or to the attention of such other person or such other address as any
party may provide to the other parties by notice in accordance with this Section
7.1):
If to Precept or Merger Sub: Precept Business Services, Inc.
1909 Woodall Rodgers Freeway, Suite 500
Dallas, Texas 75201
Attention: General Counsel
Facsimile No. 214/220-1082
With a copy to: Thomas & Self, P.C.
5339 Spring Valley Road
Dallas, Texas 75240
Attention: Rudy Beuttenmuller
Facsimile No. 972/991-2121
If to the Companies: Ambassador Limousine Service, Inc.
One Riverside Drive
East Hartford, Connecticut 06118
Attention: Stephen A. DiMarco, President
Facsimile No. 860-895-5467
With a copy to: Robert Martino, Esq.
Updike, Kelly & Spellacy
One State Street
Hartford, Connecticut 06123-1277
Facsimile No. 860-5482680
If to DiMarco: Stephen A. DiMarco
Ambassador Limousine Service, Inc.
One Riverside Drive
Hartford , Connecticut 061118
Facsimile No. 860-895-5467
Any such notice or other communication will be deemed to have been
given and received (whether actually received or not) on the day it is
personally delivered or delivered by courier or nationally recognized overnight
delivery service or by facsimile or, if mailed, when actually received.
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7.2 EXPENSES. Precept, Merger Sub, and each Shareholder will each bear
their own respective costs and expenses in connection with the transactions
contemplated by this Agreement. The fees of West Worldwide Industries in
connection with this transaction will be paid from the cash portion of the
Merger Consideration. The Shareholder shall bear any costs, expenses or fees
payable to any financial advisors, attorneys, accountants or other
representatives retained by the Companies or the Shareholder on their behalf and
on behalf of the Companies with regard to the transactions contemplated by this
Agreement. Precept, Merger Sub and their Affiliates shall bear any costs,
expenses or fees payable to any financial advisors, attorneys, accountants or
other representatives retained by Precept, Merger Sub or their Affiliates with
regard to the transaction contemplated by this Agreement. If attorneys',
accountants' or financial advisors' fees or other fees or costs are incurred to
secure performance of any obligations under this Agreement or any agreement
contemplated hereby, or to establish damages for the breach thereof or to obtain
any other appropriate relief, whether by way of prosecution or defense, the
prevailing party will be entitled to recover reasonable attorneys' fees and
costs incurred in connection therewith.
7.3 FURTHER ASSURANCES. Each party agrees to execute any and all
documents and to perform such other acts as may be necessary or expedient to
further the purposes of this Agreement and the transactions contemplated hereby.
7.4 ASSIGNMENT. Neither this Agreement nor any of the rights, interests
or obligations hereunder will be assigned or delegated by the Companies, the
Shareholder or Merger Sub, without the prior written consent of the other
parties hereto; except that Merger Sub may assign its rights and obligations
under this Agreement to any direct or indirect subsidiary of Precept (provided
that Merger Sub shall remain obligated to perform Merger Sub's obligations
hereunder) and except that the rights of the Shareholder shall inure to the
benefit of his executors, administrators and beneficiaries. This Agreement is
not intended to confer any rights or benefits to any Person (including without
limitation any employees of the Companies) other than the parties hereto.
7.5 ENTIRE AGREEMENT. This Agreement, the other Transaction Documents,
and the documents contained as Exhibits and Disclosure Schedule hereto contain
the entire understanding of the parties relating to the subject matter hereof
and supersede all prior written or oral and all contemporaneous oral agreements
and understandings relating to the subject matter hereof. This Agreement cannot
be modified or amended except in writing signed by the party against whom
enforcement is sought. The Exhibits and the Disclosure Schedule to this
Agreement are hereby incorporated by reference into and made a part of this
Agreement for all purposes.
7.6 SEVERABILITY. If any provision of this Agreement is declared or
found to be illegal, unenforceable or void, in whole or in part, then the
parties will be relieved of all obligations arising under such provision, but
only to the extent it is illegal, unenforceable or void. The intent and
agreement of the parties to this Agreement is that this Agreement will be deemed
amended by modifying any such illegal, unenforceable or void provision to the
extent necessary to make it legal and enforceable while preserving its intent,
or if that is not possible,
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by substituting another provision that is legal and enforceable and achieves the
same objectives as the provisions. Notwithstanding the foregoing, if the
remainder of this Agreement will not be affected by such declaration or finding
and is capable of substantial performance, then each provision not so affected
will be enforced to the extent permitted by law.
7.7 GOVERNING LAW. This Agreement will be governed by and construed
and interpreted in accordance with the substantive laws of the State of Texas,
without giving effect to any conflicts of law rule or principle that might
require the application of the laws of another jurisdiction.
7.8 INTERPRETATION. When used in this Agreement, the masculine,
feminine or neuter gender and the singular or plural number shall each be deemed
to include the others whenever the context so indicates or permits.
7.9 COUNTERPARTS; FACSIMILE SIGNATURES. One or more counterparts of
this Agreement may be delivered by facsimile transmission, with the intention
that they shall have the same effect as an original counterpart hereof. This
Agreement may be executed by the parties on one or more counterparts, all of
which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
7.10 HEADINGS. The section headings contained in this Agreement are
included for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
7.11 CONSTRUCTION. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement.
7.12 ADJUSTMENT OF MERGER CONSIDERATION, MAKE-WHOLE SHARES, ETC.. In
the event that, subsequent to the date of this Agreement, the outstanding shares
of Precept Common Stock shall have been changed into a different number of
shares or a different class as a result of a stock split, reverse stock split,
stock dividend, subdivision, reclassification, split, combination, exchange,
recapitalization or other similar transaction, the number of shares and share
prices described in this Agreement shall be appropriately adjusted.
7.13 ARBITRATION PROCEEDINGS.
(a) Negotiation Period. Any dispute, controversy or claim arising out
of or relating to this Agreement, or any alleged breach hereof, will be subject
to binding arbitration in accordance with this Section 7.14. If such a dispute,
controversy or claim exists, the parties shall attempt for a 30-day period (the
"Negotiation Period") from the date any party gives any one or more of the other
patties notice (a "Dispute Notice") pursuant to this Section, to negotiate in
good faith, a resolution of the dispute. The Dispute Notice shall set forth with
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specificity the basis of the dispute. During the Negotiation Period,
representatives of each party involved in the dispute who have authority to
settle the dispute shall meet at mutually convenient times and places and use
their best efforts to resolve the dispute.
(b) Commencement of Arbitration. If a resolution is not reached by the
parties prior to the end of the Negotiation Period, either party may provide a
written request to the American Arbitration Association within ten (10) days
from the end of such period requesting the selection of three (3) arbitrators
(the "Panel") to arbitrate the parties' respective rights and obligations with
respect to the matter or matters set forth in the Dispute Notice. Each
arbitrator on the Panel shall be experienced in the arbitration of complex
commercial disputes.
(c) Discovery. Each party to an arbitration shall be entitled to such
discovery as the Panel shall determine is appropriate.
(d) Expenses of Arbitrators. The expenses of the Panel shall be paid by
the party that does not substantially prevail on the merits in the arbitration
(as determined by the award of the Panel).
(e) Location of Arbitration. The arbitration shall take place in
Boston, Massachusetts.
(f) AAA Rules. Except as expressly provided in this Section 7.14, the
arbitration shall be conducted in accordance with the Commercial Rules of the
American Arbitration Association as then in effect.
(g) Fees and Expenses. The party that substantially prevails on the
merits of the arbitration (as determined by the Panel) shall be entitled to
reasonable attorneys' fees, costs, expenses and necessary disbursements in
addition to any other relief to which such party may be entitled.
(h) Injunctive and Other Equitable Relief; Relief from Courts to
Enforce Arbitration Award. The provisions of this Section 7.13 shall not be
construed to prohibit or preclude any party from seeking injunctive or equitable
relief from any court having personal and subject matter jurisdiction pending
the outcome of any arbitration proceedings hereunder, nor from seeking such
judgments, injunctions, writs and other relief from any such Court in aid of any
award or decision reached through arbitration hereunder.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
PRECEPT: MERGER SUB:
PRECEPT BUSINESS SERVICES, INC. PRECEPT TRANSPORTATION OF NEW
ENGLAND, INC., a Texas corporation
By: By:
---------------------------------- ---------------------------------
Douglas R. Deason Ronald P. Sorci
Its President Its Chief Executive Officer
ALS: ATS:
AMBASSADOR LIMOUSINE AMBASSADOR TRANSPORTATION
SERVICES, INC. SERVICES, INC., A CONNECTICUT
A Connecticut corporation CORPORATION
By: By:
---------------------------------- ---------------------------------
Stephen A. DiMarco Stephen A. DiMarco
Its President Its President
SHAREHOLDER:
------------------------------------
STEPHEN A. DIMARCO
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EXHIBIT B
AFFILIATE AGREEMENT
THIS AFFILIATE AGREEMENT (this "Agreement"), dated May 12, 1999, is by
and among PRECEPT BUSINESS SERVICES, INC., a Texas corporation ("Parent"),
PRECEPT TRANSPORTATION OF NEW ENGLAND, INC., a Texas corporation ("Acquiror");
AMBASSADOR LIMOUSINE SERVICES, INC., a Connecticut corporation (the "ALS");
AMBASSADOR TRANSPORTATION SERVICES, INC., a Connecticut corporation ("ATS") (ALS
and ATS are hereinafter collectively referred to as the "Company") and STEPHEN
A. DIMARCO, an individual resident of Glastonbury, Connecticut ("Shareholder").
RECITALS
WHEREAS, Parent, Acquiror, the Company and Shareholder propose to enter
into an Agreement and Plan of Merger (the "Merger Agreement") pursuant to which
Acquiror will acquire the business of the Company;
WHEREAS, pursuant to the Merger Agreement, ___________ shares of
Parent's Class A Common Stock, par value $0.01, will be issued to the
Shareholder in exchange for their respective shares of the Company;
WHEREAS, the execution and delivery of this Agreement by Shareholder,
Parent and Acquiror is a material inducement to Parent, Acquiror and Shareholder
to enter into the Merger Agreement; and
WHEREAS, Shareholder has been advised that such Shareholder may be
deemed to be an "affiliate" of Company, as the term "affiliate" is used (i) for
purposes of paragraphs (c) and (d) of Rule 145 of the Rules and Regulations (the
"Rules and Regulations") of the Securities and Exchange Commission (the
"Commission") and (ii) in the Commission's Accounting Series Releases 130 and
135, as amended, although nothing contained herein shall be construed as an
admission by any Shareholder that such Shareholder is in fact an affiliate of
the Company.
AGREEMENT
NOW, THEREFORE, intending to be legally bound, the parties hereby agree
as follows:
1. Acknowledgments by Shareholder. Shareholder acknowledges and agrees
that the representations, warranties and covenants by Shareholder set forth in
the Merger Agreement and herein will be relied upon by Parent, Company, and
their respective counsel and accounting firms, and that substantial losses and
damages may be incurred by these persons if Shareholder's representations,
warranties or covenants are breached. Shareholder has carefully read this
Agreement and the Merger Agreement and has discussed the requirements of this
Agreement with each of his professional advisors, who are qualified to advise
him with regard to such matters.
2. Acknowledgments By Parent and Acquiror. Parent and Acquiror
acknowledge and agree that the representations, warranties and covenants by
Parent and Acquiror set forth in the Merger
<PAGE>
Agreement will be relied upon by the Company and Shareholder and their
respective counsel and accounting firms and that substantial losses and damages
may be incurred by these persons if Parent's and/or Acquiror's representations,
warranties or covenants are breached. Parent and Acquiror have carefully read
this Agreement and the Merger Agreement and have discussed the requirements of
this Agreement with Parent's and Acquiror's professional advisors, who are
qualified to advise Parent and Acquiror with regard to such matters.
3. Compliance with Rule 145 and the Act.
(a) Shareholder has been advised that the issuance of shares of Parent
Common Stock in connection with the Merger Agreement may be subject to the
restrictions set forth in Rule 145 of the Securities Act of 1933, as amended
(the "Act"), unless otherwise transferred pursuant to an effective registration
statement under the Act or an appropriate exemption from registration, and (ii)
Shareholder are, prior to the Closing (as defined in the Merger Agreement),
affiliates of the Company. Shareholder accordingly agrees not to sell, transfer
or otherwise dispose of the shares of Parent Common Stock issued to each
Shareholder pursuant to the Merger Agreement unless (i) such sale, transfer or
other disposition is made in conformity with the requirements of Rule 145
promulgated under the Act, or (ii) Shareholder delivers to Parent a written
opinion of counsel, reasonably acceptable to Parent in form and substance, that
such sale, transfer or other disposition is otherwise exempt from registration
under the Act.
(b) Parent will give stop transfer instructions to its transfer agent
with respect to the Parent Common Stock received by Shareholder pursuant to the
Merger Agreement, and there will be placed on the certificate representing such
Parent Common Stock, or any substitutions therefor, a legend stating in
substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED, SOLD,
PLEDGED, EXCHANGED, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN
ACCORDANCE WITH THE SECURITIES ACT OF 1933, AS AMENDED AND THE OTHER
CONDITIONS SPECIFIED IN THAT CERTAIN AFFILIATE AGREEMENT DATED AS OF
MAY 12, 1999 AMONG PRECEPT BUSINESS SERVICES, INC., PRECEPT
TRANSPORTATION OF NEW ENGLAND, INC., AMBASSADOR LIMOUSINE SERVICES,
INC., AMBASSADOR TRANSPORTATION SERVICES, INC., AND THE SHAREHOLDER, A
COPY OF WHICH AFFILIATE AGREEMENT MAY BE INSPECTED BY THE HOLDER OF
THIS CERTIFICATE AT THE PRINCIPAL OFFICES OF THE ISSUER OF THE SHARES
REPRESENTED BY THIS CERTIFICATE."
The legend set forth above shall be removed (by delivery of a substitute
certificate without such legend) and Parent shall so instruct its transfer
agent, if such Shareholder sells some or all such shares pursuant to an
effective registration statement under the Act or delivers to Parent (i)
satisfactory written evidence that the shares have been sold in compliance with
Rule 145 (in which case, the substitute certificate will be issued in the name
of the transferee), or (ii) an opinion of counsel, in form
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and substance reasonably satisfactory to Parent, to the effect that public sale
of the shares by the holder thereof is no longer subject to Rule 145.
4. Miscellaneous.
(a) For the convenience of the parties hereto, this Agreement may be
executed in one or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same document.
(b) This Agreement shall be enforceable by, and shall inure to the
benefit of and be binding upon, the parties hereto and their respective
successors and assigns. As used herein, the term "successors and assigns" shall
mean, where the context so permits, heirs, executors, administrators, trustees
and successor trustees, and personal and other representatives.
(c) This Agreement shall be governed by and construed, interpreted and
enforced in accordance with the internal laws of the State of Texas, without
resort to the conflict of law principles of such state.
(d) If a court of competent jurisdiction determines that any provision
of this Agreement is not enforceable or enforceable only if limited in time
and/or scope, this Agreement shall continue in full force and effect with such
provision stricken or so limited.
(e) Counsel to and accountants for the parties to the Agreement shall
be entitled to rely upon this Agreement as needed.
(f) This Agreement shall not be modified or amended, or any right
hereunder waived or any obligation excused, except by a written agreement signed
by both parties.
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Executed as of the date shown on the first page of this Agreement.
PARENT:
PRECEPT BUSINESS SERVICES, INC.
By: _____________________________________
Douglas R. Deason, President
ACQUIROR:
PRECEPT TRANSPORTATION OF NEW ENGLAND, INC.
By: ________________________________________
Ronald P. Sorci, Chief Executive Officer
THE COMPANY:
AMBASSADOR LIMOUSINE SERVICES, INC.
By: ________________________________________
Stephen A. DiMarco, President
AMBASSADOR TRANSPORTATIOHN SERVICES, INC.
By:
-----------------------------------------
Stephen A. DiMarco, President
SHAREHOLDER:
------------------------------------
STEPHEN A . DIMARCO
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