SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): September 17, 1998
URSUS TELECOM CORPORATION
(Exact name of registrant as specified in its charter)
Florida 333-46197 65-0398306
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation or Organization) File Number) Identification No.)
440 Sawgrass Corporate Parkway, Suite 112, Sunrise, Florida 33325
(Address of Principal Executive Offices)
Registrant's telephone number, including area code (954-846-7887)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On September 17, 1998, pursuant to a Stock Purchase Agreement (the "Agreement')
dated as of September 15, 1998, Ursus Telecom Corporation (the "Company")
purchased all the issued and outstanding common stock of Access Authority, Inc.
("Access"). Pursuant to the Agreement, the shareholders of Access received
aggregate consideration of $8 million in cash. The terms of the Agreement,
including the purchase price, were negotiated by the parties on an arms' length
basis.
Access is a provider of international long distance telecommunication services,
including call reorigination, domestic toll-free access and various value-added
features to small and medium sized business and individuals in over 38 countries
throughout the world. Access markets its services through independent and a
geographically dispersed sales force consisting of agents and wholesalers.
Access operates a switching facility in Clearwater, Florida.
The Company utilized certain net proceeds of the Company's initial public
offering to pay for the acquisition. After deducting the total expenses of such
offering and the purchase price of $8 million, approximately $3.6 million of the
net proceeds of such offering remain.
ITEM 7. FINANCIAL STATEMENTS; PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Businesses Acquired.
It is impracticable to provide the financial statements required relative to the
acquired businesses described in Item 2 at the time this Report on Form 8-K is
filed. The Registrant will file the required financial statements within 60 days
of the filing of this Form 8-K.
(b) Pro Forma Financial Information.
It is impracticable to provide the pro forma information required relative to
the acquired businesses described in Item 2 at the time this Report on Form 8-K
is filed. The Registrant will file the required financial statements within 60
days of the filing of this Form 8-K.
(c) Exhibits
5.1 Press release dated September 18, 1998.
5.2 Stock Purchase Agreement by and among Access Authority Inc. ("Access" ),
the shareholders of Access and Ursus Telecom Corporation dated as of
September 15, 1998.
The exhibits to the Agreement are omitted pursuant to Rule 601(b)(2) of
Regulation S-K. The following Schedule contains summary information extracted
from the exhibits of the Agreement and is qualified in its entirety by reference
to such exhibits.
SCHEDULE
Exhibit A - Lists all shareholders of Access.
Exhibit B - Lists facilities of Access.
Exhibit C - Lists required consents.
Exhibit D - Lists monthly financial results
Exhibit E - Sets forth form of Escrow Agreement.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
URSUS TELECOM
CORPORATION
By: /S/ JOHANNES SEEFRIED
Johannes S. Seefried
Chief Financial Officer
and authorized officer of registrant
Dated: October 2, 1998
Exhibit 5.1 - Press Release dated September 18, 1998
Ursus Telecom Corporation Announces Acquisition of Access Authority, Inc.
SUNRISE, Fla., Sept. 18 /PRNewswire/ -- Taking a major step in the
implementation of its growth strategy, Ursus Telecom Corp. (Nasdaq: UTCC), an
international long-distance company, announced today the acquisition of Access
Authority Inc., a telecommunications company based in Clearwater, Fla. The
agreement is structured as a purchase transaction under which terms Ursus
purchased all capital stock of privately held Access Authority Inc. for $8
million in cash.
Commenting on the Access Authority acquisition, Luca Guissani, Ursus's Chief
Executive Officer, said "The Access Authority acquisition will bolster our
competitive position worldwide, providing entry into new markets, including
Germany, New Zealand and Japan. It also extends our market penetration in
emerging market countries, particularly in Latin America."
According to Jeffrey Chaskin, Ursus's Chief Operating Officer, Access
Authority's customer base, network facilities, geographic presence, marketing
programs and customer support facilities are extremely complementary to Ursus.
"The combination of these two telecommunications companies creates one of the
largest players in international call- reorigination," said Chaskin. "This is
our first strategic move towards our stated objective of capitalizing on a
industry- and sector-wide consolidation trend. We intend to continue to expand
our global sales and marketing reach and diversify our customer base and
geographic presence."
For the first six months of calendar 1998, Access Authority Inc. recorded
revenues of $18.2 million, including $7.9 million for the quarter ended June 30,
1998. Ursus Telecom Corp. recorded revenues of $6.5 million for the quarter
ended June 30, 1998.
According to Johannes S. Seefried, Chief Financial Officer of Ursus, the
combination of both companies will provide substantial economies of scale. "This
single acquisition will provide Ursus with a significant jump in customer
traffic," said Seefried, "with call minute traffic nearly quadrupling upon
consolidation. We also anticipate the combination to result in $1 million in
SG&A savings in corporate executive overhead at Access Authority over the next
six months, as compared to historical results for the six-month period ending
June 30, 1998.
Access Authority Inc. currently provides telecommunications services to
approximately 59,427 customers in 38 countries through a network of 172
independent agents and offers a broad array of competitively priced
telecommunications services, including international call-reorigination and
prepaid travel cards.
Ursus Telecom Corp. currently provides telecommunications services to
approximately 36,000 customers in 14 emerging market countries through a network
of exclusive agents. The Company exploits favorable market niches providing
competitive and technologically advanced telecommunications services, in
particular, call-reorigination, direct access and travel and prepaid calling
cards. Call-reorigination is a system that provides foreign customers with the
convenience and rate economies of a U.S. dialtone, while direct access requires
local switching facilities.
Forward looking statements in this release are based on current expectations
which may differ materially from actual results. Forward looking statements
include, without limitation, those regarding management's plans, objectives and
strategy for future operations, product plans and performance, management's
assessment of market factors, and future financial performance. Among factors
that could cause actual results to differ materially are changes in business
conditions, changes in the telecommunications industry and the general economy;
competition; changes in service offerings; risks associated with Ursus's limited
operating history, entry into developing markets, and managing rapid growth; and
risks associated with international operations,, dependence on effective
information systems, and development of the Ursus network. These factors are
discussed more fully in Ursus's filings, including its Annual Statement on Form
10-K for the fiscal year ended March 31, 1998, and on Form 10-Q for the quarter
ended June 30, 1998, with the Securities and Exchange Commission.
Exhibit 5.2--Stock Purchase Agreement by and among Access Authority, Inc.
("Access"), the shareholders of Access and Ursus Telecom Corporation dated
September 15, 1998.
STOCK PURCHASE AGREEMENT
by and among
ACCESS AUTHORITY, INC.,
The Shareholders listed on Exhibit A hereto
and
URSUS TELECOM CORPORATION
Dated as of September __, 1998
<PAGE>
STOCK PURCHASE AGREEMENT
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
1.1 DEFINED TERMS........................................................1
1.2 OTHER DEFINED TERMS..................................................4
ARTICLE II
PURCHASE AND SALE OF STOCK
2.1 SALE OF STOCK........................................................4
2.2 PURCHASE PRICE.......................................................5
2.3 CLOSING COSTS; TRANSFER TAXES..........................................5
ARTICLE III
CLOSING
3.1 CLOSING..............................................................5
3.2 OTHER DELIVERIES AT CLOSING..........................................5
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLERS
4.1 POWER................................................................5
4.2 DUE EXECUTION........................................................6
4.3 TITLE................................................................6
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLERS
5.1 ORGANIZATION OF THE COMPANY AND ITS SUBSIDIARY.......................6
5.2 CERTIFICATE OF INCORPORATION, BY-LAWS, ETC...........................6
5.3 AUTHORIZATION........................................................7
5.4 ABSENCE OF CERTAIN CHANGES OR EVENTS.................................7
5.5 CAPITAL STOCK........................................................9
5.6 TITLE TO ASSETS......................................................9
5.7 CONDITION OF TANGIBLE ASSETS........................................10
5.8 CONTRACTS AND COMMITMENTS...........................................10
5.9 NO CONFLICT OR VIOLATION............................................11
5.10 RESTRICTIVE DOCUMENTS...............................................11
5.12 FINANCIAL STATEMENTS................................................11
5.13 LITIGATION..........................................................12
5.14 LABOR MATTERS.......................................................12
5.15 LIABILITIES.........................................................12
5.16 COMPLIANCE WITH LAW.................................................13
5.17 NO BROKERS..........................................................13
5.18 PROPRIETARY RIGHTS..................................................13
5.19 EMPLOYEE BENEFIT PLANS..............................................14
5.20 TRANSACTIONS WITH CERTAIN PERSONS...................................14
5.21 TAX MATTERS.........................................................15
5.21 ACCOUNTS RECEIVABLE.................................................16
5.22 PAYMENTS............................................................16
5.23 VACATION TIME, BONUSES, ETC.........................................16
5.24 COMPENSATION........................................................17
5.25 BANK ACCOUNTS; POWERS OF ATTORNEY...................................17
5.26 COMMISSIONS EARNED..................................................17
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
6.1 ORGANIZATION OF BUYER................................................17
6.2 AUTHORIZATION........................................................17
6.3 NO CONFLICT OR VIOLATION.............................................18
6.4 NO BROKERS...........................................................18
6.5 CONSENTS AND APPROVALS...............................................18
ARTICLE VII
COVENANTS OF SELLERS AND BUYER
7.1 MAINTENANCE OF BUSINESS PRIOR TO CLOSING.............................18
7.2 INVESTIGATION BY BUYER...............................................18
7.3 CONSENTS AND BEST EFFORTS............................................19
7.4 CERTAIN PROHIBITED TRANSACTIONS......................................19
7.5 NOTIFICATION OF CERTAIN MATTERS......................................20
7.6 NO MERGERS, CONSOLIDATIONS, SALE OF STOCK, ETC.......................20
7.7 FINANCIAL CERTIFICATIONS.............................................21
ARTICLE VIII
CONDITIONS TO SELLERS' OBLIGATIONS
8.1 REPRESENTATIONS, WARRANTIES AND COVENANTS............................21
8.2 CONSENTS.............................................................21
8.3 NO GOVERNMENTAL PROCEEDINGS OR LITIGATION............................21
8.4 CERTIFICATES.........................................................21
8.5 ESCROW...............................................................21
ARTICLE IX
CONDITIONS TO BUYER'S OBLIGATIONS
9.1 REPRESENTATIONS, WARRANTIES AND COVENANTS............................22
9.2 CONSENTS.............................................................22
9.3 NO GOVERNMENTAL PROCEEDINGS OR LITIGATION............................22
9.4 RESIGNATIONS.........................................................22
9.5 OPINION OF COMPANY COUNSEL...........................................22
9.6 OPINION OF CERTAIN SELLERS' COUNSEL..................................23
9.7 CERTIFICATES.........................................................24
9.8 1997 TAX RETURNS.....................................................24
9.9 TAMPA LEASE..........................................................24
9.10 PHILADELPHIA LEASE...................................................24
9.11 MATERIAL CHANGES.....................................................24
9.12 ESCROW...............................................................24
ARTICLE X
ACTIONS BY SELLERS AND BUYER AFTER THE CLOSING
10.1 BOOKS AND RECORDS....................................................24
10.2 SURVIVAL OF REPRESENTATIONS, ETC.....................................25
10.3 INDEMNIFICATIONS.....................................................25
10.4 FURTHER ASSURANCES...................................................26
10.5 Limitation of Damages................................................26
10.6 CONFIDENTIALITY......................................................27
10.7. NON-COMPETITION......................................................27
ARTICLE XI
SELLERS' DELIVERIES
11.1 DELIVERY OF STOCK CERTIFICATES AND STOCK POWERS......................28
11.2 ClOSING DATE EXTENSION...............................................28
ARTICLE XII
MISCELLANEOUS
12.1 ASSIGNMENT...........................................................28
12.2 NOTICES..............................................................28
12.3 GOVERNING LAW........................................................29
12.4 SUBMISSION TO JURISDICTION...........................................29
12.5 ENTIRE AGREEMENT; MODIFICATIONS AND WAIVERS..........................30
12.6 COUNTERPARTS.........................................................30
12.7 EXPENSES.............................................................30
12.8 INVALIDITY...........................................................30
12.9 TITLES...............................................................30
12.10 PUBLICITY............................................................31
12.11 AUGUST 31, 1998 FINANCIAL STATEMENTS.................................31
EXHIBIT A
LIST OF SELLERS, ADDRESSES, NUMBER OF SHARES, AND THEIR PERCENTAGE
INTERESTS..............................................................34
EXHIBIT B
FACILITIES............................................................35
EXHIBIT C
CONSENTS..............................................................36
EXHIBIT D
JULY FINANCIAL STATEMENTS.............................................37
EXHIBIT E
ESCROW AGREEMENT......................................................38
<PAGE>
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of September
__, 1998, is by and among ACCESS AUTHORITY, INC., a Delaware corporation (the
"Company"), the shareholders of the Company listed on EXHIBIT A hereto (each, a
"Seller" and collectively, the "Sellers") and URSUS TELECOM CORPORATION, a
Florida corporation ("Buyer").
RECITALS
WHEREAS, each Seller owns the number of issued and outstanding shares
of common stock of the Company, $.01 par value per share (the "Common Stock"),
as are set forth opposite such Sellers' name on EXHIBIT A hereto.
WHEREAS, Buyer desires to purchase from each Seller, and each Seller
desires to sell to Buyer, the shares of Common Stock owned by the respective
Sellers, subject to the terms and conditions of this Agreement.
AGREEMENT
NOW THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINED TERMS. As used herein, the terms below shall have the
following meanings:
"BOOKS AND RECORDS" shall mean all records pertaining to the assets,
properties, business, operations, accounts, financial condition, customers or
suppliers of the Company and its Subsidiary.
"CLOSING DATE" shall mean 10:00 A.M. on the first business day
following receipt of the STA, but not later than ten (10) days following the
date of this Agreement, or such other time and date as Buyer and Mr. Alex Pearl
(pursuant to Section 11.2 hereof) shall mutually agree.
"CODE" shall mean the Internal Revenue Code of 1986, as such may be
amended from time to time.
"CONTRACT" shall mean any of the agreements, contracts leases or
commitments described in the Disclosure Schedule.
"DISCLOSURE SCHEDULE" shall mean a schedule which sets forth the
exceptions to the representations and warranties contained in Article V hereof
and certain other information called for by Article V hereof and other
provisions of this Agreement; provided, however, that any exception or
disclosure set forth in such Disclosure Schedule shall be deemed to modify and
constitute an exception to and be deemed disclosure for each of the
representations and warranties contained in Article V hereof.
"ENCUMBRANCE" shall mean any lien, pledge, option, charge, easement,
security interest, right-of-way or encumbrance.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ESCROW AMOUNT" shall mean the sum of $400,000.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"FACILITIES" shall mean the offices, storage facilities and all real
property and related facilities, including existing commitments for Leases, of
the Company or its Subsidiary which are identified or listed on EXHIBIT B
attached hereto, identifying whether each Facility is owned or leased.
"FCC" shall mean the United States Federal Communications Commission.
"FIXTURES AND EQUIPMENT" shall mean all of the furniture, fixtures,
furnishings, machinery and equipment owned or used by the Company or its
Subsidiary and located in, at or upon the Facilities as of the July Balance
Sheet Date, plus all additions and replacements, less deletions, since the July
Balance Sheet Date in the ordinary course of the Company's or its Subsidiary's
business.
"GOVERNMENTAL ENTITY" shall mean any governmental entity, department,
commission, board, agency or instrumentality, whether federal, state or local,
and whether domestic or foreign.
"JULY ACCOUNTS PAYABLE LEDGER" shall mean a true and correct copy of
the ledger of the Company and its Subsidiary reflecting accounts payable as of
July 31, 1998 which is attached to the Disclosure Schedule and deemed a part
thereof and sets forth a true and correct list of amounts due and owing to third
parties as of such date.
"JULY BALANCE SHEET" shall mean the unaudited consolidated balance
sheets of the Company and its Subsidiary as of July 31, 1998.
"JULY BALANCE SHEET DATE" shall mean July 31, 1998.
"JULY FINANCIAL STATEMENTS" shall mean the July Balance Sheet and the
consolidated statements of income and retained earnings of the Company and its
Subsidiary for the period from December 31, 1997 through July 31, 1998, together
with the notes thereon.
"LEASES" shall mean all of the leases, including commitments for
leases, listed on the Disclosure Schedule.
"1995 FINANCIAL STATEMENTS" shall mean the audited consolidated
balance sheets and the audited combined consolidated statements of operations,
stockholders' deficit and cash flows of the Company and its Subsidiary for the
fiscal year ended December 31, 1995, together with the notes thereon and the
related unqualified report of Ernst & Young LLP, the Company's independent
certified public accountants, previously delivered to Buyer.
"1996 FINANCIAL STATEMENTS" shall mean the audited consolidated
balance sheets and the audited combined consolidated statements of operations,
stockholders' deficit and cash flows of the Company and its Subsidiary as of the
fiscal year ended December 31, 1996, together with the notes thereon and the
related unqualified report of Ernst & Young LLP, the Company's independent
certified public accountants, previously delivered to Buyer.
"1997 BALANCE SHEET" shall mean the audited balance sheets of the
Company and its Subsidiary as of the fiscal year ended December 31, 1997,
together with the notes thereon and the related unqualified report of Ernst &
Young LLP, the Company's independent certified public accountants, previously
delivered to Buyer.
"1997 FINANCIAL STATEMENTS" shall mean the 1997 Balance Sheets and the
audited combined consolidated statements of operations, stockholders' deficit
and cash flows of the Company and its Subsidiary for the fiscal year ended
December 31, 1997, together with the notes thereon and the related unqualified
report of Ernst & Young LLP, the Company's independent certified public
accountants, previously delivered to Buyer.
"PHILADELPHIA LEASE" shall mean the lease dated January 1, 1997
between the Company and UMS Partners, Ltd. with respect to the Company's
premises located at 27 N. 3rd Street in Philadelphia, Pennsylvania.
"REPRESENTATIVE" shall mean any officer, director, principal,
attorney, agent, employee or other representative.
"SEC" shall mean the United States Securities and Exchange Commission.
"STA" shall mean the Special Temporary Authority issued by the FCC in
order to transfer control of a company holding a Section 214 authorization from
the FCC.
"SUBSIDIARY" shall mean National Business Telephone Services, Inc., a
Florida corporation.
"TAMPA LEASE" shall mean the lease dated January 1, 1998 between the
Company and Ulmerton Enterprises, Inc. with respect to the Company's Facility
located at 2325 Ulmerton Road, Suite 27, Clearwater, Florida 34622.
"TAXES" shall mean all taxes, charges, levies or other assessments,
including, without limitation, income, gross receipts, excise, real and personal
property, sales, use, transfer, capital gains, transfer gains, license, payroll,
privilege, and franchise taxes, imposed by (i) the U.S. federal government, (ii)
the State of Florida, (iii) the State of Pennsylvania and (iv) any governmental
entity, department, commission, board, agency or instrumentality within the
federal government or the States of Florida and Pennsylvania, whether state or
local, and shall include any interest, penalties or additions to tax
attributable to any of the foregoing; PROVIDED, HOWEVER, that Taxes shall not
include the Universal Service Fund imposed by the U.S. federal government or
similar assessments imposed by the States of Florida or Pennsylvania.
1.2 OTHER DEFINED TERMS. The following terms shall have the meaning
defined for such terms in the Sections set forth below:
TERM SECTION
Actions 5.13
Buyer Recitals
Closing 3.1
Company Recitals
Common Stock Recitals
Damages 10.3(a)
Escrow Agent 10.3
Escrow Agreement 10.3
Escrow Amount 2.2
Financial Statements 5.12
Indemnification Threshold 10.3(e)
Personnel 5.4(b)
Proprietary Rights 5.18
Purchase Price 2.1
Sellers Recitals
Tax Returns 5.21
ARTICLE II
PURCHASE AND SALE OF STOCK
2.1 SALE OF STOCK. Each Seller hereby agrees to sell, transfer,
assign, convey and deliver to Buyer, and Buyer hereby agrees to purchase and
acquire from such Seller, on the Closing Date, all right, title and interest of
such Seller, legal or equitable, in and to all of the issued and outstanding
shares of Common Stock set forth opposite such Seller's name on EXHIBIT A hereto
for an aggregate purchase price of $8,000,000 (the "Purchase Price").
2.2 PURCHASE PRICE. On the Closing Date, in consideration for the
sale, transfer, assignment, conveyance and delivery of the Common Stock (i)
Buyer shall pay to Sellers (in accordance with their respective Percentage
Interests set forth on EXHIBIT A hereto), an amount equal to the aggregate sum
of $7,600,000 to be paid by wire transfer of immediately available funds to an
account designated by each Seller not less than one (1) business day prior to
the Closing Date and (ii) Buyer shall deposit the sum of $400,000 (the "Escrow
Amount") with the Escrow Agent pursuant to the Escrow Agreement (as such terms
are hereinafter defined).
2.3 CLOSING COSTS; TRANSFER TAXES. Each of the Sellers shall pay for
any documentary transfer taxes and any sales, use or other taxes, if any,
imposed by reason of the transfer of the Common Stock provided hereunder.
ARTICLE III
CLOSING
3.1 CLOSING. The closing of the transactions contemplated herein (the
"Closing") shall be held at 10:00 a.m. local time on the Closing Date at the
offices of Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, New York,
unless Buyer and Mr. Alex Pearl (on behalf of the Sellers pursuant to Section
11.2 hereof) otherwise agree.
3.2 OTHER DELIVERIES AT CLOSING. At the Closing:
(a) Buyer shall pay the Purchase Price as provided for in Section 2.2
hereof;
(b) Buyer and Sellers shall deliver the certificates, opinions of
counsel and other matters described in Articles VIII and IX; and
(c) the certificates representing the shares of Common Stock to be
delivered pursuant to Section 2.1 shall be duly endorsed in blank, or
accompanied by stock powers duly executed in blank by Sellers, transferring
same, with all necessary transfer tax and other revenue stamps affixed and
canceled.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLERS
Each Seller represents and warrants to Buyer severally and not jointly
that:
4.1 POWER. Such Seller has full power and capacity to execute and
deliver this Agreement.
4.2 DUE EXECUTION. The Agreement has been duly executed and delivered
by such Seller and the Agreement is a valid and binding obligation of such
Seller, enforceable in accordance with its terms, except as enforcement may be
limited by bankruptcy, insolvency, moratorium or other similar laws affecting
creditors' rights generally or by the principles governing the availability of
equitable remedies.
4.3 TITLE. On the date hereof, such Seller has, and at the Closing
Date such Seller will have, and Buyer will acquire, full record and beneficial
ownership of, and good valid and marketable title to, the shares of Common Stock
set forth on EXHIBIT A with respect to such Seller, free and clear of all
Encumbrances, rights, claims or equities of any nature whatsoever (including
without limitation any voting rights granted to any third party with respect to
such shares of Common Stock).
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLERS
Except as set forth on the Disclosure Schedule, the Company and the
Sellers hereby, severally and not jointly, represent and warrant to Buyer as
follows:
5.1 ORGANIZATION OF THE COMPANY AND ITS SUBSIDIARY. The Company is
duly organized, validly existing and in good standing under the laws of the
State of Delaware, and its Subsidiary is duly organized, validly existing and in
good standing under the laws of the State of Florida. Each has full corporate
power and authority to conduct its business as it is presently being conducted
and to own, lease and operate its properties and assets. Each of the Company and
its Subsidiary is duly qualified to do business as a foreign corporation and is
in good standing in each U.S. jurisdiction where the Company or its Subsidiary
owns or leases real property. Each jurisdiction in which the Company and its
Subsidiary is qualified to do business as a foreign corporation is listed on the
Disclosure Schedule. The Subsidiary is the only direct or indirect subsidiary of
the Company.
5.2 CERTIFICATE OF INCORPORATION, BY-LAWS, ETC. True and complete
copies of the Certificate of Incorporation, By-Laws, minute books and all stock
books and stock transfer records of the Company and of the Subsidiary, each of
the foregoing as amended to the date hereof, have been furnished or made
available to Buyer and its Representatives and there will be no amendments or
changes to the Company's and the Subsidiary's Certificate of Incorporation or
By-Laws prior to the Closing Date. On the Closing Date, such minute books will
contain the true and complete minutes and records of any meetings, proceedings
and other actions of the shareholders, all committees of the Board of Directors
and the Board of Directors of the Company and its Subsidiary from the date
hereof to and including the Closing Date.
5.3 AUTHORIZATION. [INTENTIONALLY OMITTED].
5.4 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth on the
July Accounts Payable Ledger, since the July Balance Sheet Date there has not
been any:
(a) change in the Company's or its Subsidiary's financial condition,
assets, liabilities, working capital, reserves, earnings or business, except for
changes in the ordinary course of business which changes, individually or in the
aggregate, have not had a material adverse effect on the Company or its
Subsidiary;
(b) (i) increase in the compensation payable or to become payable by
the Company or its Subsidiary to any of its officers, directors or employees,
whose total compensation for services rendered to the Company or its Subsidiary
is currently at an annual rate of $30,000 or more (collectively, "Personnel")
(ii) bonus, incentive compensation, service award or other like benefit granted,
made or accrued, contingently or otherwise, for or to the credit of any of the
Personnel, none of which to any one person exceeds $1,000, (iii) employee
welfare, pension, retirement, profit-sharing or similar payment or arrangement
made or agreed to by the Company or its Subsidiary for any Personnel or (iv) new
employment agreement to which the Company or its Subsidiary is a party;
(c) sale, assignment or transfer of any of the assets of the Company
or its Subsidiary, other than in the ordinary course of business;
(d) cancellation of any indebtedness or waiver of any rights of
substantial value to the Company or its Subsidiary;
(e) amendment, cancellation or termination of any Contract, license or
other instrument material to the Company or its Subsidiary;
(f) capital expenditure or the execution of any lease or any incurring
of liability therefor by the Company or its Subsidiary, involving payments, in
the aggregate, or at an annualized rate, of $15,000 or more;
(g) failure to pay any obligation of the Company or its Subsidiary,
except in the ordinary course of business or where contested in good faith, or
where such failure would not have a material adverse effect on the financial
condition, assets, liabilities or business of the Company or its Subsidiary;
(h) failure to operate the business of the Company or its Subsidiary
in the ordinary course of business;
(i) change in accounting methods or practices by the Company or its
Subsidiary affecting its assets, liabilities or business (whether for accounting
or tax purposes) including any material increase or change in any assumptions
underlying or methods of calculating bad debt, contingency or other reserves;
(j) revaluation by the Company or its Subsidiary of any of its assets,
including without limitation, writing off notes or accounts receivable except in
the ordinary course of business;
(k) damage, destruction or loss (whether or not covered by insurance)
adversely affecting the properties, assets or business of the Company or its
Subsidiary;
(l) mortgage, pledge, grant or creation of any Encumbrance on any
assets of the Company or its Subsidiary, except for minor Encumbrances which in
the aggregate are not substantial in amount, do not materially detract from the
value of the property or assets subject thereto or interfere with the present
use and have not arisen other than in the ordinary course of the Company's or
its Subsidiary's business.;
(m) declaration, setting aside or payment of dividends or
distributions in respect of any capital stock of the Company or its Subsidiary,
or any redemption, purchase or other acquisition of any of the Company's or its
Subsidiary's equity securities;
(n) issuance by the Company or its Subsidiary of, or commitment of the
Company or its Subsidiary to issue, any shares of stock or other equity
securities or obligations or securities convertible into or exchangeable for
shares of stock or other equity securities;
(o) indebtedness incurred by the Company or its Subsidiary for
borrowed money or any commitment to borrow money entered into by the Company or
its Subsidiary, or any loans made or agreed to be made by the Company or its
Subsidiary;
(p) liabilities incurred or assumed by the Company or its Subsidiary
except in the ordinary course of business and consistent with past practice;
(q) payment, discharge or satisfaction of any liabilities of the
Company or its Subsidiary other than the payment, discharge or satisfaction in
the ordinary course of business and consistent with past practice of liabilities
reflected or reserved against in the 1997 Balance Sheet;
(r) agreement or commitment by the Company or its Subsidiary to do any
of the foregoing;
(s) personnel changes of the Company or its Subsidiary; or
(t) payments, directly or indirectly, of cash or property, to UMS
Partners, Ltd. ("UMS Partners"), its stockholders, employees or affiliates
(collectively, "UMS") or any accruals with respect to any commitments to make
such payments on the books and record on the books of the Company or its
Subsidiary, regardless of whether such payments or accruals were in the ordinary
course of business or consistent with past practices other than payments in an
amount not to exceed $65,000 consisting of (i) payments with respect to an
aggregate of $33,000 in accounts payable appearing on the July Accounts Payable
Ledger and (ii) additional payments not to exceed $32,000 in the aggregate,
which in each case are in reimbursement of (x) expenses incurred by UMS on
behalf of the Company and its Subsidiary in the ordinary course of business of
the Company and its Subsidiary or (y) expenses incurred by UMS in connection
with the negotiation and consummation of the transactions contemplated by this
Agreement (collectively, the "Permitted Reimbursements"). All of the
shareholders of UMS Partners, who are each Sellers, acknowledge and agree that
from and after the Closing Date neither UMS Partners nor any of UMS shall assert
any right to payment from the Company or its Subsidiary.
5.5 CAPITAL STOCK. The authorized capital stock of the Company
consists of (a) 5,000 shares of Common Stock of which 980.35714 shares are
issued and outstanding and are owned of record and beneficially by Sellers, as
set forth on EXHIBIT A hereto, free and clear of all Encumbrances. All such
outstanding shares of Common Stock are, and from the date hereof through the
Closing Date, will be, validly issued and outstanding, fully paid and
non-assessable. The authorized capital stock of the Subsidiary consists of 7,500
shares of common stock, $1.00 par value per share, of which 7,500 shares are
issued and outstanding and are owned of record and beneficially by the Company,
free and clear of all Encumbrances. All such outstanding shares of the
Subsidiary are, and from the date hereof through the Closing Date, will be,
validly issued and outstanding, fully paid and non-assessable. There are no
outstanding options, warrants, rights, calls, commitments, conversion rights,
rights of exchange, plans or other agreements of any character providing for the
purchase, issuance or sale of any shares of the capital stock of the Company or
its Subsidiary, other than as contemplated by this Agreement.
5.6 TITLE TO ASSETS. The Company and its Subsidiary have good title
to, or valid leasehold interests in, the assets and properties set forth on
Schedule 5.6 hereof, free and clear of all Encumbrances, except for minor
Encumbrances which in the aggregate are not substantial in amount, do not
materially detract from the value of the property or assets subject thereto or
interfere with the present use and have not arisen other than in the ordinary
course of the Company's or its Subsidiary's business. Each of the Company and
its Subsidiary have performed all the obligations required to be performed by it
with respect to all assets leased by it through the date hereof. The Facilities
include all real property and related facilities used in the conduct of the
Company's or its Subsidiary's business as presently conducted. The Company and
its Subsidiary enjoy peaceful and undisturbed possession of all Facilities. The
real property improvements (including leasehold improvements), equipment and
other tangible assets owned or used by the Company or its Subsidiary are insured
as set forth on Schedule 5.6 hereof and have no known material defects, normal
wear and tear excepted. None of such improvements, equipment and other assets is
subject to any commitment or other arrangement for its sale or use by any
affiliate of the Company or third parties. The assets reflected on the July
Balance Sheet or acquired after the July Balance Sheet Date are valued on the
Company's and its Subsidiary's books at or below the Company's or its
Subsidiary's actual cost less an adequate and proper depreciation charge. The
Company and its Subsidiary have not depreciated any of their assets on an
accelerated basis (or in any other manner) inconsistent with applicable Internal
Revenue Service guidelines, if any.
5.7 CONDITION OF TANGIBLE ASSETS. The Facilities and Fixtures and
Equipment set forth on Schedule 5.6 are in good operating condition and repair
(except for ordinary wear and tear), except where a failure to be in such
condition and repair would have a material adverse effect on the financial
condition, assets, liabilities or business of the Company or its Subsidiary.
5.8 CONTRACTS AND COMMITMENTS. Except as set forth on Schedule 5.8
hereof, neither the Company nor its Subsidiary is a party to (or, in the case of
clause (e) below, the holder of) any written or oral:
(a) commitment, contract, note, loan, evidence of indebtedness,
purchase order or letter of credit involving any obligation or liability on the
part of the Company or its Subsidiary of more than $50,000 (and not more than
$100,000 in the aggregate for related instruments) and not cancelable (without
further liability) on not more than 30 days' notice.
(b) lease of real property (the Disclosure Schedule indicates with
respect to each Lease listed on the Disclosure Schedule the term, annual rent,
renewal options and number of square feet leased);
(c) lease of personal property involving any annual expense in excess
of $5,000 and not cancelable without further liability within 30 days (the
Disclosure Schedule indicates with respect to each Lease listed on the
Disclosure Schedule a general description of the leased items, term, annual rent
and renewal options);
(d) contracts and commitments not otherwise described above or listed
in the Disclosure Schedule (including purchase orders, franchise agreements and
undertakings or commitments to any Governmental Entity) relating to the business
of the Company or its Subsidiary, and which materially affect the Company's or
its Subsidiary's business and which are not entered into in the ordinary course
of business;
(e) material governmental or regulatory licenses or permits required
to conduct the business of the Company or its Subsidiary as presently conducted;
(f) contracts or agreements containing covenants limiting the freedom
of the Company or its Subsidiary to engage in any line of business or compete
with any person;
(g) contracts, commitments, licenses or permits containing any "change
in control" or "parachute payment" provision, as those terms are commonly
understood, which would be triggered by the execution, delivery or consummation
of the transactions contemplated by this Agreement, including without
limitation, any right of termination, right of payment or acceleration of any
other right under such contracts, commitments, licenses or permits;
(h) employment contracts, including without limitation, contracts to
employ executive officers and other contracts with officers or directors of the
Company or its Subsidiary; or
(i) Tax sharing or similar agreements.
Except with respect to accounts payable set forth on the July Accounts
Payable Ledger, the Company and its Subsidiary are not, in any material respect,
(and, to the best knowledge of Sellers, no other party is, in any material
respect) in breach or violation of, or default under, any of the Contracts or
other instruments, obligations, evidences of indebtedness or commitments
described in (a)-(h) above.
5.9 NO CONFLICT OR VIOLATION. Neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby will
result in (a) a violation of or a conflict with any provision of the Certificate
of Incorporation or By-laws of the Company or its Subsidiary, (b) a breach of,
or a default under, any term or provision of any material contract, agreement,
indebtedness, lease, Encumbrance, commitment, license, franchise, permit,
authorization or concession to which the Company, its Subsidiary or any Seller
is a party or by which the Company, its Subsidiary or any Seller or any of their
assets are bound, or affected, (c) to the best knowledge of Sellers, a violation
by the Company, its Subsidiary or any Seller of any statute, rule, regulation,
ordinance, code, order, judgment, writ, injunction, decree or award applicable
to the Company, its Subsidiary or any Seller or (d) to the best knowledge of
Sellers, an imposition of any Encumbrance, restriction or charge on the business
of the Company or its Subsidiary, or on any of its assets which, in any case,
would have a material adverse effect on the financial condition, assets,
liabilities or business of the Company or its Subsidiary.
5.10 RESTRICTIVE DOCUMENTS. Neither the Company nor its
Subsidiary nor Sellers are subject to, or a party to, any charter, by-law,
mortgage, lien, lease, license, permit, agreement, contract or instrument, or to
any order, judgment or decree in which such entity is named, (A) which,
materially adversely affects the business, operations or financial condition of
the Company or its Subsidiary or any of their assets or property, or which, when
taken as whole, would have a materially adverse effect on (i) the execution,
delivery and performance of this Agreement and consummation of the transactions
contemplated hereby or (ii) the continued operation of the Company's and its
Subsidiary's business after the date hereof or the Closing Date on substantially
the same basis as heretofore operated or (B) which materially restricts the
ability of the Company or its Subsidiary to acquire any property or conduct
business in any area.
5.11 FINANCIAL STATEMENTS. The Company and its Subsidiary have
heretofore delivered to Buyer or its Representatives the 1995 Financial
Statements, the 1996 Financial Statements and the 1997 Financial Statements and
the July Financial Statements, which July Financial Statements are attached as
EXHIBIT D hereto, and will deliver to Buyer any interim unaudited financial
statements of the Company and its Subsidiary prepared prior to the Closing Date.
The 1995 Financial Statements, the 1996 Financial Statements, the 1997 Financial
Statements and the July Financial Statements are referred to herein collectively
as the "Financial Statements." The Financial Statements are complete, are in
accordance with the Books and Records and present fairly the assets, liabilities
and financial condition, results of operations and cash flows indicated thereby
as of each date and for the period covered thereby in conformity with generally
accepted accounting principles consistently applied subject in the case of any
such interim statements to the absence of footnotes and to normal year end
adjustments which in the aggregate are not material.
5.12 LITIGATION. There is no action, order, writ, injunction, judgment
or decree outstanding or claim, suit, litigation, proceeding, labor dispute,
arbitral action or investigation (collectively, "Actions") pending or, to the
best knowledge of Sellers, threatened Action against, relating to or affecting
(i) the Company and its Subsidiary, or each of their business, activities,
properties or assets, (ii) any benefit plan for personnel or any fiduciary or
administrator thereof or (iii) the transactions contemplated by this Agreement.
Neither the Company nor its Subsidiary are in default with respect to any
judgment, order, writ, injunction or decree of any court located in the United
States or the FCC, and there are no unsatisfied judgments against the Company or
its Subsidiary, or their business, activities, properties or assets. To the best
knowledge of Sellers, neither the ownership nor operation of equipment by the
Company in Germany violates any Actions.
5.13 LABOR MATTERS. Neither the Company nor its Subsidiary are a party
to any labor agreement with respect to their employees with any labor
organization, group or association. Within the last five years, the Company and
its Subsidiary have not experienced any attempt by organized labor or its
representatives to make the Company and its Subsidiary conform to demands of
organized labor relating to its employees or to enter into a binding agreement
with organized labor that would cover the employees of the Company or its
Subsidiary. The Company and its Subsidiary are in material compliance with all
applicable laws respecting employment practices, terms and conditions of
employment and wages and hours and are not engaged in any unfair labor practice.
There is no unfair labor practice charge or complaint against the Company or its
Subsidiary pending before the National Labor Relations Board or any other
Governmental Entity arising out of the Company's or its Subsidiary's activities,
and Sellers have no knowledge of any facts or information which would give rise
thereto; there is no labor strike or labor disturbance pending or, to the best
knowledge of Sellers, threatened against the Company or its Subsidiary, nor is
any grievance currently being asserted; and the Company and its Subsidiary have
not experienced a work stoppage or other labor difficulty.
5.14 LIABILITIES. To the best knowledge of Sellers, the Company and
its Subsidiary have no liabilities or obligations (absolute, accrued,
contingent, direct or indirect, matured or unmatured, or otherwise) except (i)
liabilities which are reflected or reserved for or are disclosed on the July
Balance Sheet and (ii) liabilities incurred in the ordinary course of business
and consistent with past practice since the July Balance Sheet Date.
5.15 COMPLIANCE WITH LAW. To the best knowledge of Sellers, the
Company and its Subsidiary, and the conduct of each of their businesses are in
compliance in all material respects with all applicable laws, statutes,
ordinances and regulations, whether federal, state or local and whether foreign
or domestic. The Company and its Subsidiary have not received any written notice
to the effect that, or otherwise been advised that, it is not in compliance with
any of such statutes, regulations, orders, ordinances or other laws.
5.16 NO BROKERS. None of the Company, its Subsidiary, any affiliate of
the Company or its Subsidiary or Sellers have entered into or will enter into
any Contract, agreement, arrangement or understanding with any person or firm
which will result in the obligation of Buyer to pay any finder's fee, brokerage
commission or similar payment in connection with the transactions contemplated
hereby.
5.17 PROPRIETARY RIGHTS. All of the Company's and its Subsidiary's (i)
registrations of trademarks and of other marks, trade names or other trade
rights, (ii) pending applications for any such registrations, (iii) rights in or
to patents and copyrights and all pending applications therefor, (iv) rights to
all other trademarks and other marks, trade names and other trade rights and (v)
all other trade secrets, designs, plans, specifications, technology, know-how,
methods, designs, concepts and other proprietary rights, whether or not
registered (all of the items in the preceding clauses (i) through (v)
collectively, "Proprietary Rights"), used in and material to the conduct of the
Company's and its Subsidiary's business are listed in the Disclosure Schedule
except with respect to the preceding clause (v). The Company and its Subsidiary
are the sole owner of, and have the exclusive right to use, the Proprietary
Rights held by each of them, without any Encumbrances, and no person or entity
has a right to receive a royalty or similar payment in respect of any
Proprietary Rights, whether pursuant to any contractual arrangements entered
into by the Company, its Subsidiary or otherwise. The Company and its Subsidiary
have no licenses granted by or to it and no other agreements to which it is a
party, relating in whole or in part to any of the Proprietary Rights. To the
best knowledge of Sellers, none of such Proprietary Rights, nor the Company's or
its Subsidiary's use thereof, infringe or otherwise violate the rights of any
third party. No proceedings have been instituted against or notices received by
the Company or its Subsidiary that are presently outstanding alleging that the
Company's or its Subsidiary's use of the Proprietary Rights infringes or
otherwise violates any rights of a third party. The Company and its Subsidiary
are not aware of any infringement or violation of the Company's or its
Subsidiary's rights in or to the Proprietary Rights by any third party. No claim
has been asserted that is presently outstanding, nor, to the best knowledge of
Sellers, has any claim been threatened, by any person or entity with respect to
the ownership, validity, license or use of, or any infringement resulting from,
any of the Proprietary Rights used by the Company or its Subsidiary or the
production, provision or sale of any services or products by the Company and its
Subsidiary and, to the best knowledge of Sellers, there is no basis for any such
claim. The Company and its Subsidiary have the right to produce, provide and
sell the services and products produced, provided and sold by each of them and
to conduct each of their business as heretofore conducted, and the consummation
of the transactions contemplated hereby will not alter or impair any such
rights. No shareholder, officer, director or employee of the Company or its
Subsidiary owns or has any interest in any Proprietary Rights or any trade
secret, invention or process, if any, used by the Company or its Subsidiary in
connection with its business.
5.18 EMPLOYEE BENEFIT PLANS. All "employee benefit plans" as defined
in Section 3(3) of the ERISA, and all fringe benefit plans, bonus plans, stock
option or other stock plans, severance plans or any other deferred compensation
agreement, plan or funding arrangement currently, or at any time, maintained by
the Company or its Subsidiary, or to which the Company or its Subsidiary is or
at any time has been obligated to contribute, whether or not such plan has been
terminated, are listed on the Disclosure Schedule (the plans listed or described
on such Schedule are referred to herein as the "Plans"), and all benefits
thereunder are and have been payable solely on the terms described in such
Plans. True and complete copies of all of the documents embodying the Plans,
including, without limitation, insurance and other contracts, agreements and
arrangements pertaining thereto and Annual Reports (Forms 5500) for the last
three plan years for each Plan, have been furnished to Buyer or will be
furnished prior to the Closing Date. Each of the Company and its Subsidiary has
maintained and administered each Plan applicable to it in compliance with its
terms and in compliance with all provisions of the laws, rules and regulations
applicable to such Plan, including, without limitation, the applicable
provisions of ERISA and the Code, and no event has occurred nor does any
condition exist which would subject Buyer, the Company or its Subsidiary to any
penalty or excise tax or liability (other than liability for contributions,
premiums and benefits in the ordinary course). Any Plan intended to be qualified
under Section 401(a) of the Code has been determined by the Internal Revenue
Service to be so qualified. All contributions or other payments required to be
made with respect to each Plan prior to or on the Closing Date have been, or
shall be, made on a timely basis. Each Plan can be terminated by the Company or
its Subsidiary, as applicable, at any time and without the incurrence of any
material liability. Neither the Company, nor its Subsidiary, nor any member of a
"controlled group" (as such term is defined in Section 4971(e)(2)(B) of the
Code) of which the Company or its Subsidiary is or has been a member, has ever
maintained or contributed to any plan (i) subject to Section 412 of the Code and
Section 302 of ERISA or Title IV of ERISA (including, without limitation, any
"multiemployer plan" as defined in Section 3(37) of ERISA) or (ii) which
provides post-employment health or other welfare benefits (other than benefits
required to be provided pursuant to Section 4980B of the Code and Part 6 of
Title I of ERISA).
5.19 TRANSACTIONS WITH CERTAIN PERSONS. None of Sellers or any officer
or director of the Company or its Subsidiary or, to the best of Sellers'
knowledge, any Personnel or any member of any such person's immediate family, is
a party to any transaction with the Company or its Subsidiary relating to the
Company's or its Subsidiary's business, including, without limitation, any
contract, agreement or other arrangement (i) providing for the furnishing of
services by, (ii) providing for the rental of real or personal property from, or
(iii) otherwise requiring payments to any such person or any corporation,
partnership, trust or other entity in which any such person has a substantial
interest as a stockholder, officer, director, trustee or partner.
5.20 TAX MATTERS.
(a) The Company and its Subsidiary, including any predecessor of the
Company or its Subsidiary, have duly and timely filed all tax reports and
returns required to be filed by them with the Internal Revenue Service and with
the taxing authorities of the states of Florida and Pennsylvania and any local
taxing authorities within such states ("Tax Returns"). All such Tax Returns were
correct and complete in all material respects. The Company and its Subsidiary
have paid in full all Taxes (whether or not shown on a Tax Return) required to
be paid by the Company or its Subsidiary before such payment became delinquent.
The Company and its Subsidiary have made adequate provision in conformity with
generally accepted accounting principles consistently applied, for the payment
of all accrued Taxes not yet payable. All Taxes which the Company or its
Subsidiary has been required to collect or withhold have been duly collected or
withheld and, to the extent required when due, have been or will be duly and
timely paid to the proper taxing authority.
(b) The federal income tax returns of the Company and its Subsidiary
have not been examined by the Internal Revenue Service for any period in the
last five (5) years. The Sellers have received no notice that any issue has been
raised by the Internal Revenue Service in respect of any such returns. To the
best of Sellers' knowledge, there are no ongoing audits, inquiries,
investigations or examinations relating to the Company's or its Subsidiary's Tax
Returns pending or, to the best of Sellers' knowledge, threatened by any
Governmental Entity, and there are no claims which have been asserted relating
to any of the Company's or its Subsidiary's Tax Returns filed for any year which
if determined adversely would result in the assertion by any U.S. Governmental
Entity of any Tax deficiency against the Company or its Subsidiary. There have
been no waivers or extensions of statutes of limitations executed by the Company
or its Subsidiary or by Sellers affecting any liability for Taxes owed by the
Company or its Subsidiary.
(c) Neither the Company nor its Subsidiary has filed a statement under
Section 341(f) of the Code (or any comparable state income tax provision)
consenting to have the provisions of Section 341(f)(2) (collapsible corporations
provisions) of the Code (or any comparable state income tax provision) apply to
any disposition of any of the Company's or its Subsidiary's assets or property
and no property of the Company or its Subsidiary is property which Buyer, the
Company or its Subsidiary is or will be required to treat as owned by another
person pursuant to the provisions of Section 168(f) (safe harbor leasing
provisions) of the Code. Neither the Company nor its Subsidiary has 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). Neither the Company nor its Subsidiary has made a disclosure
on a Tax Return pursuant to Code Section 6662(d)(2)(B)(ii) and the Regulations
thereunder. Neither the Company nor its Subsidiary has ever been a member of an
affiliated, consolidated, combined or unitary group of corporations for tax
purposes, other than with such other entity.
(d) Neither the Company nor its Subsidiary has ever filed a
consolidated tax return pursuant to Sections 1501, 1502 and 1504 of the Code,
other than with such other entity. No power of attorney has been granted by the
Company or its Subsidiary with respect to any matter relating to any Taxes or
Tax Returns of the Company or its Subsidiary which is currently in force.
Neither the Company nor its Subsidiary has participated in or cooperated with an
international boycott within the meaning of Code Section 999. Neither the
Company nor its Subsidiary are required to include in income any adjustment
pursuant to Code Section 481(a) by reason of a change in accounting method. The
Company and its Subsidiary have not made any payments, nor are they obligated to
make any payments or are a party to any agreement that could obligate them to
make any payments that will not be deductible under Section 280G of the Code (or
any corresponding provision of any state, or local Income Tax law).
(e) All Taxes, interest and penalties imposed on the Company or its
Subsidiary relating to taxable periods ending on or before the date of the July
Balance Sheet Date were reserved for on the July Balance Sheet.
(f) The Company and its Subsidiary have complied, in all material
respects, with all applicable withholding and payroll tax provisions imposed by
the laws and regulations of the U.S. federal government, the State of
Pennsylvania, the State of Florida and local laws or regulations within the
States of Pennsylvania and Florida.
5.21 ACCOUNTS RECEIVABLE. All of the accounts receivable of the
Company and its Subsidiary are actual and bona fide receivables representing
obligations for the total dollar amount thereof shown on its books. No accounts
have been written off since the July Balance Sheet Date other than write-downs
or write-offs in the ordinary course of business.
5.22 PAYMENTS. Neither the Company, its Subsidiary nor Sellers have,
directly or indirectly, paid or delivered any fee, commission or other sum of
money or item or property, however characterized, to any finder, agent,
government official or other party, in the United States or any other country,
which is in any manner related to the business or operations of the Company or
its Subsidiary, which Sellers know or have reason to believe to have been
illegal under any federal, state or local laws of the United States or any other
country having jurisdiction; and the Company or its Subsidiary has not
participated, directly or indirectly, in any boycotts or other similar practices
affecting any of its actual or potential customers.
5.23 VACATION TIME, BONUSES, ETC. The Disclosure Schedule sets forth
the method for accruing vacation pay used by the Company and its Subsidiary on
each of their Books and Records. Except as set forth on the Disclosure Schedule,
at the July Balance Sheet Date there were, at the date hereof there are and on
the Closing Date there will be, no bonuses, profit sharing, incentives,
commissions or other compensation of any kind with respect to work done prior to
the July Balance Sheet Date, the date hereof or the Closing Date, respectively,
due to present or former employees of the Company or its Subsidiary not fully
paid prior to such applicable date. Total bonuses, profit sharing and incentives
paid or to be paid by the Company for the Company's past fiscal year are
$97,166.80 in the aggregate for the employees and in the amounts set forth on
the Disclosure Schedule. No bonuses, profit sharing or incentives were paid or
are to be paid by the Subsidiary for the Subsidiary's past fiscal year.
5.24 COMPENSATION. The Disclosure Schedule lists the names, title or
job description, and total annual compensation (including, as separately set
forth figures, any bonuses paid, accrued, or granted through the July Balance
Sheet Date, any bonuses paid, accrued or granted, or to be paid, accrued,
granted or earned, from the July Balance Sheet Date to the date hereof, and any
bonuses attributable to the period of time prior to the date hereof but to be
paid, accrued or granted thereafter) of all employees, officers and directors of
the Company and its Subsidiary who, as of the date hereof, are or will be
entitled to receive compensation from the Company or its Subsidiary.
5.25 BANK ACCOUNTS; POWERS OF ATTORNEY. Set forth on the Disclosure
Schedule is a list of each bank in which the Company or its Subsidiary maintains
an account or safe deposit box, the corresponding number of each such account or
safe deposit box and the names of all persons holding check-signing or
withdrawal powers or other authority with respect thereto. Also set forth on the
Disclosure Schedule are the names of any persons holding powers of attorney from
the Company or its Subsidiary and a summary statement of the terms thereof.
5.26 COMMISSIONS EARNED. The Disclosure Schedule sets forth a report
which is true and correct in all material respects setting forth the commissions
earned by Agents (as hereinafter defined) of the Company and its Subsidiary
during the month of June 1998 which commissions were paid in the month of August
1998.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Sellers as follows:
6.1 ORGANIZATION OF BUYER. Buyer is duly organized, validly existing
and in good standing under the laws of the State of Florida, and has full
corporate power and authority to conduct its business as it is presently being
conducted and to own, lease and operate its properties and assets. Buyer is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where the ownership of property or nature of its business
requires such qualification and where failure to be so qualified would have a
material adverse effect on Buyer.
6.2 AUTHORIZATION. Buyer has all necessary corporate power and
authority and has taken all corporate action necessary to enter into this
Agreement to consummate the transactions contemplated hereby and to perform its
obligations hereunder. This Agreement has been duly executed and delivered by
Buyer and is a legal, valid and binding obligation of Buyer enforceable against
Buyer in accordance with its terms (except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to
creditors' rights generally).
6.3 NO CONFLICT OR VIOLATION. Neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby will
result in (a) a violation of or a conflict with any provision of the Certificate
of Incorporation or By-laws of Buyer, (b) a breach of, or a default under, any
term or provision of any contract, agreement, indebtedness, lease, Encumbrance,
commitment, license, franchise, permit, authorization or concession to which
Buyer is a party or by which Buyer or any of its assets are bound, or affected,
(c) a violation by Buyer of any statute, rule, regulation, ordinance, code,
order, judgment, writ, injunction, decree or award applicable to Buyer or (d) an
imposition of any Encumbrance, restriction or charge on the business of Buyer or
on any of its assets.
6.4 NO BROKERS. Buyer has not entered into and will not enter into any
Contract, agreement, arrangement or understanding with any person or firm which
will result in the obligation of Sellers to pay any finder's fee, brokerage
commission or similar payment in connection with the transactions contemplated
hereby.
6.5 CONSENTS AND APPROVALS Other than the FCC, no consent, approval or
authorization of, or declaration, filing or registration with, any Governmental
Entity, or any other person or entity, is required to be made or obtained by
Buyer in connection with the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby.
ARTICLE VII
COVENANTS OF SELLERS AND BUYER
Sellers, on the one hand, and Buyer, on the other hand, covenant with
each other as follows:
7.1 MAINTENANCE OF BUSINESS PRIOR TO CLOSING. During the period from
the date hereof through the Closing Date, Sellers shall cause the Company and
its Subsidiary to continue to carry on its business in the ordinary course and
in accordance with past practice and not to take any action inconsistent
therewith or with the consummation of the transactions contemplated by this
Agreement.
7.2 INVESTIGATION BY BUYER. During the period from the date hereof
through the Closing Date, Sellers shall cause the Company and its Subsidiary to
allow Buyer at its own expense during regular business hours and upon reasonable
notice, through Buyer's employees, agents and Representatives, to make such
inspection of the Company's and its Subsidiary's business, properties, plants,
books and records (including Tax Returns, elections and records), and to conduct
such examination (including an examination of the work papers of any independent
public accountant) of the condition (financial or otherwise) of the Company and
its Subsidiary as Buyer, in its sole discretion, deems necessary or advisable to
familiarize itself with such business, properties, plants, books, records,
condition and other matters and to verify the representations of Sellers
hereunder. Sellers shall cause the Company and its Subsidiary to allow Buyer to
have full access to each of the officers, employees and agents of the Company
and its Subsidiary and customers and other third parties having business
dealings with the Company or its Subsidiary.
7.3 CONSENTS AND BEST EFFORTS. As soon as practicable, Buyer, the
Company and Sellers will commence all reasonable action required hereunder to
obtain all applicable consents, approvals and agreements of, and to give all
notices and make all filings with, any third parties set forth on EXHIBIT C
hereto, including without limitation, the consent of the FCC, as may be
necessary to authorize, approve or permit the full and complete sale,
conveyance, assignment or transfer of the Common Stock by a date early enough to
allow the sale hereunder to be consummated by the Closing Date. In addition,
subject to the terms and conditions herein provided, each of the parties hereto
covenants and agrees to use its reasonable best efforts to take or cause to be
taken all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated
hereby.
7.4 CERTAIN PROHIBITED TRANSACTIONS. During the period from the date
hereof through the Closing Date, Sellers shall not permit the Company or its
Subsidiary to, without the prior written approval of Buyer:
(a) incur any indebtedness for borrowed money, assume, guarantee,
endorse or otherwise become responsible for obligations of any other individual,
partnership, firm or corporation, or make any loans or advances to any
individual, partnership, firm or corporation, except in the ordinary course of
business and consistent with past practice;
(b) issue any shares of its capital stock or any other securities or
any securities convertible into shares of its capital stock or any other
securities;
(c) pay or incur any obligation to pay any dividend on its capital
stock or make or incur any obligation to make any distribution or redemption
with respect to capital stock;
(d) make any change to its Certificate of Incorporation or By-laws;
(e) mortgage, pledge or otherwise encumber any of its properties or
assets, sell, transfer or otherwise dispose of any of its properties or assets
or cancel, release or assign any indebtedness owed to it or any claims held by
it, except in the ordinary course of business and consistent with past practice;
(f) make any investment of a capital nature either by purchase of
stock or securities, contributions to capital, property transfer or otherwise,
or by the purchase of any property or assets of any other individual,
partnership, firm or corporation (including entering into any capitalized
leases), except in the ordinary course of business and consistent with past
practice;
(g) except as set forth in the Disclosure Schedule, enter into or
terminate any material contract or agreement, or make any material change in any
of its Leases and Contracts, other than in the ordinary course of business and
consistent with past practice;
(h) do any other act which would cause any representation or warranty
of the Company or Sellers in this Agreement to be or become untrue in any
material respect; or
(i) enter into any leases or commitments in respect of leases for cars
or other vehicles;
(j) settle any pending Action for an amount in excess of $100,000;
(k) pay or incur any obligations to pay, directly or indirectly, any
cash or property of the Company or its Subsidiary to UMS or accrue any amounts
on the books and records of the Company or its Subsidiary with respect to such
payments or obligations, other than the Permitted Reimbursements; or
(l) enter into any "take or pay" contracts or commitments.
7.5 NOTIFICATION OF CERTAIN MATTERS. During the period from the date
hereof through the Closing Date, Sellers shall give prompt notice to Buyer, and
Buyer shall give prompt notice to Sellers, of (i) the occurrence, or failure to
occur, of any event which occurrence or failure would be likely to cause any of
its representations or warranties made in or pursuant to this Agreement to be
untrue or inaccurate in any material respect any time from the date hereof to
the Closing Date and (ii) any material failure of Sellers or Buyer, as the case
may be, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder. Each party shall use all reasonable
efforts to remedy any material failure on its part to satisfy any covenant,
condition or agreement to be complied with or satisfied by it.
7.6 NO MERGERS, CONSOLIDATIONS, SALE OF STOCK, ETC. During the period
from the date hereof through the Closing Date, Sellers shall not, directly or
indirectly, solicit any inquiries or proposals or enter into or continue any
discussions, negotiations or agreements relating to the sale or exchange of
Common Stock or the merger of the Company or its Subsidiary with, or any direct
or indirect disposition of a significant amount of the Company's or its
Subsidiary's assets or business to, any person or entity other than Buyer or its
affiliates or provide any assistance or any information to or otherwise
cooperate with any person or entity in connection with any such inquiry,
proposal or transaction. In the event that Sellers receive an unsolicited offer
for such a transaction or obtain information that such an offer is likely to be
made, Sellers will provide Buyer with notice thereof as soon as practicable
after receipt, including the identity of the prospective purchaser or soliciting
party.
7.7 FINANCIAL CERTIFICATIONS. Sellers agree to provide, promptly and
from time to time, such certifications regarding the Company's and its
Subsidiary's financial information for any period prior to the Closing Date as
Buyer or its independent public accountants may reasonably request in connection
with any filings or reports Buyer is required to file with the NASDAQ, SEC, FCC
or any other governmental authority, whether as a result of the transactions
contemplated hereby or as required under Buyer's periodic reporting obligations
under the Exchange Act.
ARTICLE VIII
CONDITIONS TO SELLERS' OBLIGATIONS
The obligations of Sellers to consummate the transactions provided for
hereby are subject, to the satisfaction, on or prior to the Closing Date, of
each of the following conditions:
8.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. All representations and
warranties of Buyer contained in this Agreement shall be true and correct in all
material respects at and as of the Closing Date (and such representations and
warranties shall be deemed to be repeated by Buyer at and as of the Closing
Date), and Buyer shall have performed in all material respects all agreements
and covenants required hereby to be performed by it prior to or at the Closing
Date.
8.2 CONSENTS. The STA shall have been obtained.
8.3 NO GOVERNMENTAL PROCEEDINGS OR LITIGATION. No injunction,
restraining order or other order of any Governmental Entity shall be in effect
on the Closing Date which restrains, prohibits or invalidates the transactions
contemplated by this Agreement.
8.4 CERTIFICATES. Buyer shall have furnished Sellers with such
certificates of Buyer's officers and others to evidence compliance with the
conditions set forth in this Article VIII as may be reasonably requested by
Sellers.
8.5 ESCROW. Buyer and Escrow Agent shall have executed and delivered
the Escrow Agreement to Sellers.
ARTICLE IX
CONDITIONS TO BUYER'S OBLIGATIONS
The obligations of Buyer to consummate the transactions provided for
hereby are subject, in the discretion of Buyer, to the satisfaction, on or prior
to the Closing Date, of each of the following conditions:
9.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. All representations and
warranties of the Company and Sellers contained in or made pursuant to this
Agreement shall be true and correct in all material respects at and as of the
Closing Date (and such representations and warranties shall be deemed to be
repeated by the Company and Sellers at and as of the Closing Date), and the
Company and Sellers shall have performed in all material respects all agreements
and covenants required hereby to be performed by them prior to or at the Closing
Date.
9.2 CONSENTS. The STA shall have been obtained and copies thereof
shall have been delivered by the Closing Date to Buyer or its Representatives.
9.3 NO GOVERNMENTAL PROCEEDINGS OR LITIGATION. No injunction,
restraining order or other order of any Governmental Entity shall be in effect
on the Closing Date which restrains, prohibits or invalidates the transactions
contemplated by this Agreement.
9.4 RESIGNATIONS. Each of the officers and directors of the Company
and its Subsidiary (except for Messrs. Laessig and Biava) shall have executed
and delivered resignations effective as of the Closing Date.
9.5 OPINION OF COMPANY COUNSEL. Sellers shall have delivered to Buyer
an opinion of Saul, Ewing, Remick & Saul LLP, counsel to the Company, dated as
of the Closing Date, in form and substance reasonably satisfactory to Buyer, to
the effect that:
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, and its Subsidiary is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Florida, and the Company is duly qualified to do business
as a foreign corporation and is in good standing in Florida and Pennsylvania.
(b) This Agreement has been duly executed and delivered by the Company
and is a legal, valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, except as limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to
creditors' rights generally or by equitable principles (whether considered in an
action at law or in equity) or other customary limitations reasonably
satisfactory to Buyer's counsel.
(c) The authorized capital stock of the Company consists of 5,000
shares of Common Stock. Based solely on our review of the Company's stock
ledger, 980.35714 shares of Common Stock are issued and outstanding and are
owned of record. All such shares are validly issued and outstanding, fully paid
and non-assessable. To such counsel's knowledge there are no outstanding
options, warrants, rights, calls, commitments, conversion rights, rights of
exchange, plans or other agreements of any character providing for the purchase,
issuance or sale of any shares of the capital stock of the Company. The
authorized capital stock of the Subsidiary consists of 7,500 shares of common
stock, $1.00 par value per share. Based solely on our review of the Subsidiary's
stock ledger, 7,500 shares are issued and outstanding and are owned of record by
the Company. All such shares are validly issued and outstanding, fully paid and
non-assessable. To such counsel's knowledge there are no outstanding options,
warrants, rights, calls, commitments, conversion rights, rights of exchange,
plans or other agreements of any character providing for the purchase, issuance
or sale of any shares of the capital stock of the Subsidiary.
(d) Neither the execution and delivery of this Agreement by the
Company nor the consummation of the transactions contemplated hereby will (i)
violate the Certificate of Incorporation or By-laws of the Company or its
Subsidiary, (ii) except as set forth on the Disclosure Schedule, breach, or
cause a default under, any term or provision of any material contract or
agreement set forth on Schedule 5.8 of the Agreement, or (iii) violate any
judgment, decree, injunction, writ or order applicable to the Company or its
Subsidiary, known to counsel.
(e) To such counsel's knowledge, the execution, delivery and
performance of this Agreement will not violate or result in a failure to comply
in any material respect with any statute, law, ordinance, regulation, rule or
order of any federal, state or local government or any other Governmental
Entity, or any judgment, decree or order of any court, applicable to the
business or operations of the Company or its Subsidiary.
In rendering such opinion, such counsel may rely on, including but not
limited to, the following: (i) as to matters governed by the laws of
jurisdictions other than states in which such counsel is admitted to practice,
opinions of local counsel satisfactory to such counsel, and (ii) as to factual
matters, certificates and assurances of public officials and officers of the
Company and its Subsidiary.
9.6 OPINION OF CERTAIN SELLERS' COUNSEL. An opinion of Rogers & Wells
with respect to the Healy Trust, an opinion of Florida counsel reasonably
satisfactory to Buyer with respect to the Sentry Profit Sharing Trust and an
opinion of Saul, Ewing, Remick & Saul LLP with respect to the Trust Under Deed
of Mark A. Turnbull (which opinion may be included in the opinion delivered by
such firm pursuant to Section 9.5 hereof) shall have been delivered to Buyer,
each such opinion to the effect that the Agreement is a legal, valid and binding
obligation of such Seller, enforceable against such Seller in accordance with
its terms, except as limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to creditors' rights generally or by
equitable principles (whether considered in an action at law or in equity).
9.7 CERTIFICATES. The Company shall have furnished Buyer with such
certificates of the Company's and its Subsidiary's officers and others to
evidence compliance with the conditions set forth in this Article IX as may be
reasonably requested by Buyer.
9.8 1997 TAX RETURNS. The Company shall have duly and timely filed all
Tax Returns, including without limitation its Tax Return with respect to the
fiscal year ended December 31, 1997 with the Internal Revenue Service.
9.9 TAMPA LEASE. The landlord of the Tampa Lease shall have delivered
a letter to the Company expressing its willingness to extend the term of the
Tampa Lease for 24 months until August 31, 2000 on terms substantially similar
to the terms of the Tampa Lease.
9.10 PHILADELPHIA LEASE. The Philadelphia Lease shall have been
terminated effective as of the Closing Date without any liability to the Company
or its Subsidiary and all assets of the Company and its Subsidiary, including
with limitation, books and records, shall have been transferred to the Facility
located in Tampa, Florida.
9.11 MATERIAL CHANGES. Except as set forth on the Disclosure Schedule
or as permitted hereby, since the July Balance Sheet Date, there shall not have
been any material adverse change in the condition (financial or otherwise),
assets, liabilities, reserves, business, properties, operations, employee
relations, or customer, supplier or distributor relations of the Company or its
Subsidiary or any event or occurrence, including, without limitation, any
development or discovery of any material contingent or other liability not
disclosed in the Disclosure Schedule, which would reasonably be expected to
materially adversely affect the business, properties, assets, operations, or
relations with customers, suppliers, distributors or employees of the Company or
its Subsidiary.
9.12 ESCROW. Sellers and Escrow Agent shall have executed and
delivered the Escrow Agreement to Buyer.
ARTICLE X
ACTIONS BY SELLERS AND BUYER AFTER THE CLOSING
10.1 BOOKS AND RECORDS. Each party agrees that it will cooperate with
and make available to the other party, during normal business hours, all Books
and Records and information retained and remaining in existence after the
Closing Date which are necessary or useful in connection with any Tax inquiry,
audit, investigation or dispute, any litigation or investigation or any other
matter requiring any such Books and Records, information or employees for any
reasonable business purpose. The party requesting any such Books and Records or
information shall bear all of the out-of-pocket costs and expenses (including,
without limitation, attorneys' fees, but excluding reimbursement for salaries
and employee benefits) reasonably incurred in connection with providing such
Books and Records, information or employees. Sellers may require certain
financial information relating to the Company for periods prior to the Closing
Date for the purpose of filing federal, state, local and foreign Tax Returns and
other governmental reports, and Buyer agrees to furnish such information to
Sellers at Sellers' request and expense.
10.2 SURVIVAL OF REPRESENTATIONS, ETC. All representations and
warranties contained herein or in any certification or instrument delivered
pursuant to this Agreement or the transactions contemplated hereby shall survive
the execution and delivery hereof, the consummation of the transactions
contemplated hereby and any investigation or audit made by any party hereto
until March 31, 1999; provided, however, that the representations and warranties
contained in Article IV hereof shall survive forever. All statements contained
in the Disclosure Schedule (subject to any exceptions set forth in the
Disclosure Schedule with respect to any representations or warranties contained
herein) or in any certificate delivered pursuant to the transactions
contemplated hereby shall be deemed to be representations and warranties of the
Company and Sellers or Buyer contained herein.
10.3 INDEMNIFICATIONS.
(a) BY SELLERS. The Sellers severally and not jointly agree to
indemnify, save and hold harmless Buyer, its affiliates and subsidiaries, and
its and their respective Representatives, and the Company and its Subsidiary
from and against any and all costs, losses, liabilities, damages, lawsuits,
deficiencies, claims, Taxes and expenses ("Damages"), incurred in connection
with or arising out of or resulting from any breach of any covenant or warranty,
or the inaccuracy of any representation, made by the Company or its Subsidiary
or the Sellers in or pursuant to this Agreement. The term "Damages" as used in
this Section 10.3 is not limited to matters asserted by third parties against
the Company or its Subsidiary or against Buyer, its affiliates, subsidiaries and
their respective Representatives or against the Sellers, but includes Damages
incurred or sustained by Sellers or by Buyer, its affiliates, subsidiaries and
their respective Representatives or the Company or its Subsidiary in the absence
of third party claims.
(b) ESCROW. The performance by Sellers of their covenants, agreements,
indemnities and obligations under this Agreement with respect to Damages arising
from a breach of any provision of Article V shall be secured by the Escrow
Amount to be held and disposed of by Marine Midland Bank (the "Escrow Agent")
pursuant to an Escrow Agreement in the form set forth as EXHIBIT E hereto (the
"Escrow Agreement") which shall be executed and delivered by Sellers, Buyer and
the Escrow Agent at the Closing. Except in cases of breaches arising from
fraudulent or intentional wrongdoing, claims for Damages arising from breaches
of any provision of Article V shall be limited to the Escrow Amount; provided,
however, that notwithstanding that the representations and warranties of Sellers
contained in Article V are made severally and not jointly, the entire Escrow
Amount shall be available, subject to the terms of the Escrow Agreement, to
satisfy claims made by Buyer with respect to Damages arising from one or more
breaches of any provision of Article V .
(c) BY BUYER. Buyer shall indemnify, save and hold harmless Sellers
and their Representatives from and against any and all Damages incurred in
connection with or arising out of or resulting from any breach of any covenant
or warranty, or the inaccuracy of any representation, made by Buyer in or
pursuant to this Agreement.
(d) DEFENSE OF CLAIMS. If a claim for Damages is to be made by a party
entitled to indemnification hereunder against the indemnifying party, the party
entitled to such indemnification shall give written notice to the indemnifying
party as soon as practicable after the party entitled to indemnification becomes
aware of any fact, condition or event which may give rise to Damages for which
indemnification may be sought under this Section 10.3. If any lawsuit or
enforcement action is filed against any party entitled to the benefit of
indemnity hereunder, written notice thereof shall be given to the indemnifying
party as promptly as practicable (and in any event within fifteen days after the
service of the citation or summons); PROVIDED, that the failure of any
indemnified party to give timely notice shall not affect rights to
indemnification hereunder except to the extent that the indemnifying party
demonstrates actual damage caused by such failure. After such notice, the
indemnifying party shall be entitled, if it so elects, to take control of the
defense and investigation of such lawsuit or action and to employ and engage
attorneys of its own choice to handle and defend the same, at the indemnifying
party's cost, risk and expense provided that the indemnifying party and its
counsel shall proceed with diligence and in good faith with respect thereto. The
indemnified party shall cooperate in all reasonable respects with the
indemnifying party and such attorneys in the investigation, trial and defense of
such lawsuit or action and any appeal arising therefrom; PROVIDED, HOWEVER, that
the indemnified party may, at its own cost, participate in the investigation,
trial and defense of such lawsuit or action and any appeal arising therefrom. If
a tax audit is commenced or any tax is claimed for any period of the Company or
its Subsidiary prior to the Closing Date, such tax audit or claim shall be
treated as a lawsuit or enforcement action for purposes of this Section 10.3(d).
(e) BROKERS AND FINDERS. Pursuant to the provisions of this Section
10.3, each of Buyer and Sellers shall indemnify, hold harmless and defend the
other party from the payment of any and all broker's and finder's expenses,
commissions, fees or other forms of compensation which may be due or payable
from or by the indemnifying party, or may have been earned by any third party
acting on behalf of the indemnifying party in connection with the negotiation
and execution hereof and the consummation of the transactions contemplated
hereby.
10.4 FURTHER ASSURANCES. Both before and after the Closing Date, each
party will cooperate in good faith with the other and will take all appropriate
action and execute any documents, instruments or conveyances of any kind which
may be reasonably necessary or advisable to carry out any of the transactions
contemplated hereunder.
10.5 LIMITATION OF DAMAGES Notwithstanding any provisions contained
herein to the contrary, Buyer acknowledges and agrees that the maximum amount of
Damages it may recover from the Sellers under this Agreement, whether pursuant
to Section 10.3 or otherwise (other than Damages as a result of breaches of
Article IV or arising from fraudulent or intentional wrongdoing by Sellers), is
limited to $400,000 in the aggregate.
10.6 CONFIDENTIALITY. Sellers agree not to, directly or indirectly,
without the prior written consent of Buyer, use or disclose to any person, firm
or corporation, any information, trade secrets, confidential customer
information, technical data or know-how relating to the products, processes,
methods, equipment or business practices of the Company or its Subsidiary
(collectively, the "Confidential Information"), unless required by Law;
provided, however that Confidential Information does not include any information
(i) that generally becomes available to the public other than as a result of
disclosure by the Sellers or (ii) was or becomes available on a non-confidential
basis to Buyer.
10.7. NON-COMPETITION. Each Seller agrees that, for a period of
eighteen (18) months after the Closing Date, such Seller will not, directly or
indirectly, (i) engage in any business that is substantially comparable to the
business of the Company or its Subsidiary as of the date of this Agreement or
(ii) render services to or have any interest, as a shareholder, owner, agent,
consultant, lender or guarantor or any other interest, in any other person or
entity engaged in any business that is substantially comparable to the business
of the Company or its Subsidiary as of the date of this Agreement.
(a) For purposes of this Section 10.7 ownership of 15% or less of any
class of outstanding securities of a company the securities of which are listed
on a national securities exchange or which has 1,000 or more shareholders, shall
not be deemed to constitute ownership or participation in the ownership of the
business of such company.
(b) None of the Sellers for a period of three years from and after the
Closing Date, shall, directly or indirectly, (i) offer to hire, entice away, or
solicit or attempt to solicit (either for himself or as agent for another) for
employment or for retention as an independent sales agent, contractor or
wholesaler (collectively, an "Agent") or induce, persuade or encourage any
person to leave the Company's or its Subsidiary's employ or to interfere with
the Company's or its Subsidiary's relationship with any of its Agents who, prior
to the Closing Date was, or during such three year period will be, employed or
retained by the Company or its Subsidiary as an employee, agent, consultant,
Agent or otherwise or (ii) divert or attempt to divert from the Company or its
Subsidiary any business whatsoever by influencing or attempting to influence any
customer or supplier of Buyer.
(c) Sellers acknowledge and agree that any breach of this Section 10.7
is likely to result in irreparable injury to Buyer, that monetary damages will
be an inadequate remedy of such breach and that, accordingly, in addition to any
other remedy that Buyer may have, Buyer shall be entitled to enforce the
specific performance of this Section 10.7 and to seek both permanent and
temporary relief in the event of any breach hereof.
(d) The parties acknowledge that the time, scope, geographic area and
other provisions of this Section 10.7 have been specifically negotiated by
sophisticated commercial parties and agree that all such provisions are
reasonable under the circumstances of the transactions contemplated by this
Agreement. If any portion of this Section 10.7 shall be determined to be invalid
and unenforceable as written, each such portion shall be enforced to the extent
reasonable under the circumstances and such determination shall not affect the
validity or enforceability of the balance hereof, and such balance shall remain
in full force and effect. It is understood that Sellers are agreeing to this
Section 10.7 in order to induce Buyer to enter into this Agreement.
ARTICLE XI
SELLERS' DELIVERIES
11.1 DELIVERY OF STOCK CERTIFICATES AND STOCK POWERS. Each Seller
concurrently with the execution and delivery of this Agreement has delivered to
the law firm of Saul, Ewing, Remick & Saul LLP to hold, as custodian for each
Seller, certificates representing the shares of Common Stock (the "Stock
Certificates") or duly executed lost stock affidavits (the "Affidavits). The
Stock Certificates (duly endorsed in blank and/or accompanied by duly executed
stock powers, representing the shares of Common Stock set forth on EXHIBIT A
hereto) and/or Affidavits shall be delivered to Buyer on the Closing Date
against receipt on behalf of each Seller of the portion of the Purchase Price
due to be paid to such Seller pursuant to Section 2.2 of this Agreement.
11.2 CLOSING DATE EXTENSION. In the event that the closing of the
transactions contemplated by this Agreement does not occur by the Closing Date,
each of the Sellers hereby authorizes Mr. Alex Pearl to agree to amend this
Agreement to provide for an extension of the Closing Date as Mr. Pearl deems
appropriate in his sole discretion.
ARTICLE XII
MISCELLANEOUS
12.1 ASSIGNMENT. Sellers and Buyer shall not assign or delegate any of
their rights or obligations hereunder to any person or persons or entity or
entities without the express prior written consent of the other party hereto,
which consent shall not be unreasonably withheld, other than assignments or
delegations made by Buyer to an affiliate of Buyer provided that Buyer remains
liable with respect to any obligation of Buyer hereunder. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, and in the case of
each Seller his heirs, beneficiaries, trusts for his benefit and personal
representatives, and no other person or entity shall have any right, benefit or
obligation hereunder.
12.2 NOTICES. Unless otherwise provided herein, any notice, request,
instruction or other document to be given hereunder by any party to any other
party shall be in writing and shall be deemed to have been given (a) if mailed,
at the time when mailed in any general or branch office of the United States
Postal Service, enclosed in a registered or certified postage-paid envelope, (b)
if sent by facsimile transmission, when so sent and receipt acknowledged by an
appropriate telephone or facsimile receipt or (c) if sent by other means, when
actually received by the party to which such notice has been directed, in each
case at the respective addresses or numbers set forth below or such other
address or number as such party may have fixed by notice:
If to Sellers, addressed to:
As Set Forth on EXHIBIT A hereto
With a copy to:
Saul, Ewing, Remick & Saul LLP
3800 Center Square West
Philadelphia, Pennsylvania 19102
Attention: Richard T. Frazier, Esq.
Fax: (215) 972-7725
If to Buyer, addressed to:
Ursus Telecom Corporation
440 Sawgrass Corporate Parkway
Suite 112
Sunrise, Florida 33325
Attention: Luca Giussani, President
Fax: (954) 846-7889
With a copy to:
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038
Attention: James R. Tanenbaum, Esq.
Fax: (212) 806-6006
12.3 GOVERNING LAW. This Agreement shall be construed, interpreted and
the rights of the parties determined in accordance with the laws of the State of
Delaware (without reference to the choice of law provisions of Delaware law).
12.4 SUBMISSION TO JURISDICTION. Each of the Company, its Subsidiary,
Sellers and Buyer hereby irrevocably submit to the jurisdiction of any state
court of the State of Delaware or the United States Federal Court in Delaware,
and they hereby irrevocably agree that any action may be heard and determined in
such Delaware State court or in such Federal Court. Each of the Company, its
Subsidiary, Sellers and Buyer hereby irrevocably waive, to the fullest extent
they may effectively do so, the defense of an inconvenient forum to the
maintenance of any action in any jurisdiction. Each of the Company, its
Subsidiary, Sellers and Buyer irrevocably agree that the summons and complaint
or any other process of law in any action in any jurisdiction may be served by
mailing in accordance with the provisions set forth in Section 12.2 hereof. Each
of the Company, its Subsidiary, Sellers and Buyer may also be served in any
other manner permitted by law, in which event their time to respond shall be the
time provided by law.
12.5 ENTIRE AGREEMENT; MODIFICATIONS AND WAIVERS. This Agreement,
together with all exhibits and schedules hereto, constitutes the entire
agreement among the parties pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the parties. Except as set forth in Section 112
hereof, no supplement, modification or waiver of this Agreement shall be binding
unless executed in writing by Buyer and Sellers. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
12.6 COUNTERPARTS. 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 instrument.
12.7 EXPENSES. Except for fees for legal services provided by Saul,
Ewing, Remick & Saul LLP in an amount not to exceed $45,000 and fees for legal
services provided by Swidler & Berlin, in each case in connection with the
negotiation and consummation of the transactions contemplated by this Agreement,
and FCC filing fees with respect to the application for approval of the
transactions contemplated by this Agreement, all of which will be borne by the
Company, each party hereto shall pay its own legal, accounting, out-of-pocket
and other expenses incident to this Agreement and to any action taken by such
party in preparation for carrying this Agreement into effect, it being the
intent of the parties that, except as set forth above, neither the Company nor
its Subsidiary shall bear any of such expenses and that Sellers bear their own
fees.
12.8 INVALIDITY. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
12.9 TITLES. The titles, captions or headings of the Articles and
Sections herein are for convenience of reference only and are not intended to be
a part of or to affect the meaning or interpretation of this Agreement.
12.10 PUBLICITY. No party shall issue any press release or make any
public statement regarding the transactions contemplated hereby, without the
prior approval of Buyer and the Sellers except, if such party, in the opinion of
such party's counsel, is required under any applicable law or regulation to make
a public statement or announcement, such party shall be permitted to issue the
legally required statement or announcement.
12.11 AUGUST 31, 1998 FINANCIAL STATEMENTS. In the event Sellers cause
an unaudited consolidated balance sheet (the "August Balance Sheet") and
consolidated statements of income and retained earnings of the Company and its
Subsidiary for the period from December 31, 1997 through August 31, 1998 (the
"August Balance Sheet Date") (collectively, the "August Financial Statements")
to be delivered to Buyer at least one (1) business day prior to the Closing Date
and the transactions contemplated by this Agreement are consummated on the
Closing Date, all references in this Agreement to the July Financial Statements,
July Balance Sheet and July Balance Sheet Date shall be deemed to refer to the
August Financial Statements, August Balance Sheet and August Balance Sheet Date,
respectively. In addition, in the event Sellers cause a ledger of the Company
and its Subsidiary reflecting accounts payable as of August 31, 1998 (the
"August Accounts Payable Ledger") to be delivered to Buyer at least one (1)
business day prior to the Closing Date and the transactions contemplated by this
Agreement are consummated, all references in this Agreement to the July Accounts
Payable Ledger shall be deemed to refer to the August Accounts Payable Ledger.
12.12 KNOWLEDGE. Whenever the phrase "to the best of Sellers'
knowledge" or "to the best knowledge of Sellers" is used in this Agreement, such
phrase means the actual knowledge of any of the Sellers after having made due
inquiry of the officers and directors of the Company and its Subsidiary.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
URSUS TELECOM CORPORATION
By: /s/ Luca Giussani
-----------------------
Name: Luca Giussani
Title: President, C.E.O.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
URSUS TELECOM CORPORATION
By: /s/ Paul E. Biava
----------------------
Name: Paul E. Biava
Title: Executive Vice President
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
URSUS TELECOM CORPORATION
/s/ Mark A. Turnbull
------------------------
Name: Mark A. Turnbull
/s/ Alex Pearl
------------------------
Name: Alex Pearl
/s/ Richard R. Syrek
-------------------------
Name: Richard R. Syrek
/s/ Suhail R. Rizvi
--------------------------
Name: Suhail R. Rizvi
/s/ Richard E. Kermode
----------------------------
Name: Richard E. Kermode
/s/ David Greenberg
-----------------------------
Name: David Greenberg
/s/ Richard W. Hevner
-----------------------------
Name: Richard W. Hevner
/s/ William J. Klingensmith
------------------------------
Name: William Jay Klingensmith
/s/ Ronald Laessig
-------------------------------
Name: Ronald Laessig
/s/ Paul E. Biava
-------------------------------
Name: Paul E. Biava
Sentry Profit Sharing Trust
/s/ Miller M. Cooper
-----------------------------
Name: Miller M. Cooper
Title: Trustee
/s/ Bradford M. Gibbs
-----------------------------
Name: Bradford M. Gibbs
/s/ Richard T. Frazier
-----------------------------
Name: Richard T. Frazier
Title: Trustee Under Deed Of Trust
F/B/O Augustus Turnbull
