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) November 19, 1996
WINNEBAGO INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Iowa 1-6403 42-0802678
(State or other jurisdiction (Commission File (I.R.S. Employer
of incorporation) Number) Identification No.)
P.O. Box 152, Forest City, Iowa 50436
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (515) 582-3535
Item 2. Acquisition or Disposition of Assets.
On November 19, 1996 the registrant entered into an agreement
(the "Purchase and Sale Agreement") with its subsidiary,
Cycle-Sat, Inc. ("Cycle-Sat") and Vyvx, Inc., a subsidiary of
The Williams Companies, Inc. ("Vyvx"), providing for the sale by
the registrant and the purchase by Vyvx of Cycle-Sat. Under the
terms of the Purchase and Sale Agreement, Cycle-Sat transferred
substantially all of its assets to a newly-formed corporate
subsidiary of Cycle-Sat ("Newco"). Such assets included all
real, personal and mixed assets (except for certain excluded
assets), both tangible and intangible that were owned by
Cycle-Sat that were used or useful in connection with
Cycle-Sat's business and operations, consisting of a
point-to-multi-point communications network delivering video,
audio and data transmissions using a patented satellite
distribution network, a fiber opic network linking Cycle-Sat's
facilities, and multiple-format video and audio tape duplication
facilities combined with air and ground courier services. After
such transfer, Vyvx purchased all of the issued and outstanding
shares of common stock of Newco.
The purchase price for the assets was approximately $57,000,000
in cash. The purchase price under the Purchase and Sale
Agreement was determined by arm's length negotiations between
the parties based on the market value of the assets purchased
and sold. The purchase price is subject to post-closing
adjustments to reflect increases or decreases in net working
capital, uncollected accounts receivable, increases or decreases
in capital expenditures and certain other adjustment items.
The description above of the Purchase and Sale Agreement is a
summary and does not purport to be complete. Reference should be
made to the copy of such agreement filed as an exhibit to this
report for a complete description of its terms
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
EXHIBIT
NO. DOCUMENT DESCRIPTION
2.1 Purchase and Sale Agreement dated as of November 11, 1996 by
and among Cycle-Sat, the registrant and Vyvx.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
WINNEBAGO INDUSTRIES, INC.
(Registrant)
Dated: December 3, 1996 By: /s/ Fred G. Dohrmann
Chairman of the Board and Chief
Executive Officer
PURCHASE AND SALE AGREEMENT
By and Among
Cycle-Sat, Inc.
Winnebago Industries, Inc.
and
Vyvx, Inc.
Dated as of
November 11, 1996
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TABLE OF CONTENTS
PAGE
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1. Definitions and References ............................................................ 1
2. Transfer of Assets; Assumption of Liabilities; Purchase of Stock ...................... 8
2.01 Transfer of Assets ........................................................... 8
2.02 Liabilities .................................................................. 8
2.03 Purchase and Sale of Newco Stock ............................................. 9
2.04 Purchase Price ............................................................... 9
2.05 Payment of Purchase Price .................................................... 9
3. Representation and Warranties by Seller and Parent .................................... 10
3.01 Organization and Standing .................................................... 10
3.02 Authorization ................................................................ 10
3.03 Litigation; Compliance with Law .............................................. 10
3.04 Financial Statements and Condition; Liabilities .............................. 11
3.05 Assets; Stock; Consents ...................................................... 12
3.06 Condition of Tangible Assets ................................................. 14
3.07 Intellectual Property; Licenses .............................................. 14
3.08 Licenses ..................................................................... 14
3.09 Reports and Records .......................................................... 14
3.10 Contracts .................................................................... 15
3.11 Conflicts .................................................................... 15
3.12 Tax Matters .................................................................. 15
3.13 Employee Benefit Plans ....................................................... 21
3.14 Environmental Matters ........................................................ 22
3.15 Labor Relations .............................................................. 24
3.16 Insurance .................................................................... 25
3.17 Disclosure .................................................................... 25
4. Representations and Warranties by Buyer ............................................... 25
4.01 Organization and Standing .................................................... 25
4.02 Authorization ................................................................ 25
4.03 Qualifications as Licensee ................................................... 26
4.04 Disclosure ................................................................... 26
4.05 Litigation ................................................................... 26
4.06 Conflicts .................................................................... 26
4.07 Investment in Stock .......................................................... 26
5. Application for Commission Consent ..................................................... 26
6. Hart-Scott-Rodino ..................................................................... 27
7. Covenants and Agreements of Seller ..................................................... 27
7.01 Negative Covenants ........................................................... 27
7.02 Affirmative Covenants ........................................................ 28
7.03 Confidentiality .............................................................. 30
7.04 Employees .................................................................... 30
7.05 Transfers Into Seller ........................................................ 33
7.06 Leased Assets ................................................................ 33
7.07 Amended Forest City Lease .................................................... 33
7.08 Diggan Software .............................................................. 34
7.09 Winnebago .................................................................... 34
7.10 Cooperation .................................................................. 34
8. Covenants and Agreements of Buyer ..................................................... 34
8.01 Confidentiality .............................................................. 34
8.02 Corporate Action ............................................................. 35
8.03 Employee Issues .............................................................. 35
8.04 Cooperation .................................................................. 35
8.05 Transfer Tax ................................................................. 35
9. Conditions Precedent to Buyer's Obligation to Close ................................... 35
9.01 Representations and Covenants ................................................ 35
9.02 Consents ..................................................................... 35
9.03 Delivery of Documents ........................................................ 36
9.04 FCC Order .................................................................... 36
9.05 Financial Statements ......................................................... 36
9.06 Legal Proceedings ............................................................ 36
9.07 Hart-Scott-Rodino ............................................................ 36
9.08 Absence of Material Change ................................................... 36
9.09 Administrative Services Agreement ............................................ 36
10. Conditions Precedent to Seller's Obligation to Close .................................. 36
10.01 Representation and Covenants ................................................. 36
10.02 Delivery by Buyer ............................................................ 36
10.03 FCC Order .................................................................... 37
10.04 Legal Proceedings ............................................................ 37
10.05 Hart-Scott-Rodino ............................................................ 37
10.06 Administrative Services Agreement ............................................ 37
10.07 Guaranty ..................................................................... 37
11. The Closing ............................................................................ 37
11.01 Closing ...................................................................... 37
11.02 Delivery by Seller ........................................................... 37
11.03 Delivery by Buyer ............................................................ 39
12. Adjustments ........................................................................... 40
12.01 Increase or Decrease in Net Working Capital .................................. 40
12.02 Uncollected Accounts Receivable .............................................. 40
12.03 Minimum Capital Expenditures ................................................. 40
12.04 Continuing Capital Leases .................................................... 40
12.05 Ahto Noncompetition Agreement ................................................ 41
12.06 Firstar Leases ............................................................... 41
12.07 Adjustment Closing ........................................................... 41
13. Possession and Control ................................................................ 41
14. Risk of Loss .......................................................................... 41
15. Survival; Indemnification ............................................................. 42
15.01 Survival of Seller's Representations ......................................... 42
15.02 Indemnification by Seller .................................................... 42
15.03 Survival of Buyer's Representations .......................................... 42
15.04 Indemnification by Buyer ..................................................... 43
15.05 Conditions of Indemnification for Third Party Claims ........................ 43
16. Termination ........................................................................... 44
17. Additional Actions and Documents; Amendments to Schedules ............................. 44
18. Brokers ............................................................................... 44
19. Expenses .............................................................................. 45
20. Notices ............................................................................... 45
21. Waiver ............................................................................... 46
22. Benefit and Assignment ................................................................ 46
23. Remedies Cumulative ................................................................... 47
24. Entire Agreement; Amendment ........................................................... 47
25. Severability .......................................................................... 47
26. Headings .............................................................................. 47
27. Governing Law ......................................................................... 47
28. Signature in Counterpart .............................................................. 47
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LIST OF SCHEDULES:
Schedule 1(a) Property
Schedule 1(b) Improvements
Schedule 1(c) Leases of Property and Improvements
Schedule 1(e) Fixtures and Personal Property
Schedule 1(f) Licenses
Schedule 1(i) Deposits and Prepaid Expenses
Schedule 1(j) Vehicles
Schedule 1(1) Computer Software and Customer Information
Schedule 2.01 Excluded Assets
Schedule 2.02(b) Contracts, Agreements, Leases
Schedule 2.02(d) Unassumed Debt
Schedule 3.03 Litigation, Orders, Judgments and Decrees
Schedule 3.04(a) Financial and Operating Data
Schedule 3.05(b) Encumbrances
Schedule 3.05(e)(iii) Agreements Requiring Consent
Schedule 3.07 Intellectual Property
Schedule 3.11 Conflicts With Agreements and Laws
Schedule 3.12 Tax Disclosure Schedule
Schedule 3.13(a) Pension Plans, Welfare Plans and Other Plans
Schedule 3.14(c)(iv) Underground Storage Tanks or Piping
Schedule 3.14(c)(v) Environmental Permits and Licenses
Schedule 3.15 Employment Contracts and Union Agreements
Schedule 3.16 Insurance Policies
Schedule 7.02(b)(iv) Actual Capital Expenditures Toward Satellite Network
Schedule 7.06A Unassumed Capital Leases
Schedule 7.06B Continuing Capital Leases
Schedule 7.06C Continuing Office Equipment Leases
LIST OF EXHIBITS
Exhibit A Administrative Services Agreement
Exhibit B Cash Flow Quarterly Forecast
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (the "Agreement") is entered into as
of this 11th day of November, 1996, by and among CYCLE-SAT, INC., an Iowa
corporation ("Seller"), WINNEBAGO INDUSTRIES, INC., an Iowa corporation
("Parent"), and VYVX, INC., a Delaware corporation ("Buyer") .
RECITALS:
WHEREAS, Seller, either directly or by and through its affiliates,
owns and operates a pointto-multi-point communications network delivering video,
audio and data transmissions using a patented satellite distribution network, a
fiber optic network linking Seller's facilities, and multipleformat video and
audio tape duplication facilities combined with air and ground courier services;
WHEREAS, the parties desire to have Seller transfer or cause to be
transferred the assets used in connection with its business and operations to a
newly-formed corporate subsidiary of Seller ("Newco"); and
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to
purchase from Seller, what will be all of the issued and outstanding shares of
common stock of Newco.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements hereinafter set forth, the parties hereto hereby agree
as follows:
1. Definitions and References. As used herein, the following terms
shall have the meanings set forth below, unless the context otherwise requires:
"Accounts Receivable" means all accounts receivable owing to Seller
with respect to the Assets or to Seller's business and operations, whether under
a contract or otherwise, which are outstanding as of the end of the business day
immediately preceding the Closing Date.
"Additional Contracts" shall have the meaning set forth in Section
7.01(c).
"Administrative Services Agreement" shall mean the Administrative
Services Agreement between Seller or Buyer in substantially the form of Exhibit
A hereto.
"Affiliate" shall, for the purpose of Section 3.13, have the meaning
set forth in Section 3.13(a), and for all other purposes mean with respect to
any Person, any (i) officer, director, or holder of more than 10% of the
outstanding shares or equity interests of such Person, (ii) any Affiliate of
such Person, or (iii) any other Person which directly or indirectly controls, is
controlled by, or is under common control with such Person. A Person shall be
deemed to control another Person if such Person possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies of the "controlled" Person, whether through ownership of voting
securities, by contract, or otherwise.
"Agreement" shall have the meaning set forth in the initial
paragraph.
"AGUB" shall have the meaning set forth in Section 3.12(1)(iii).
"Ahto Employment Agreement" means the Employment Agreement dated
April 1, 1995, between Charles A. Ahto and Seller.
"Ahto Noncompetition Agreement" means the Nondisclosure and
Noncompetition Agreement dated April 1, 1995, between Charles A. Ahto and
Seller.
"Allocations" shall have the meaning set forth in Section
3.12(1)(iii).
"Amended Forest City Lease" shall have the meaning set forth in
Section 7.07.
"Amended Schedules" shall have the meaning set forth in Section
7.02(h).
"Arbitrator" shall have the meaning set forth in Section 12.07.
"Assets" means, except for the Excluded Assets, all real, personal
and mixed assets, both tangible and intangible, wherever located in the world,
that are owned or held by Seller and/or its Affiliates and that are used or
useful in connection with, or which otherwise comprise, the business and
operations of Seller, which business and operations include, without limitation,
(i) the distribution of broadcast quality advertising and other video, audio and
data transmissions to television stations, cable television systems and radio
stations nationwide by means of a patented satellite distribution network and a
fiber optic network linking Seller's facilities, (ii) multiple-format video and
audio tape duplication, (iii) air and ground courier/shuttle services, (iv)
in-house postproduction services, including final editing, closed-captioning and
tagging for local market customization, (v) video and audio master archiving and
warehousing, and (vi) the distribution of advertising promotional materials.
Subject to the provisions of Section 7, without limiting the foregoing, the
Assets shall include all such assets existing on the date of this Agreement and
all such assets acquired between that date and the Closing Date, and shall
include, without limitation, all of Seller's right, title and interest in and to
the following:
(a) In certain real property set forth and described in Schedule l(a!
(collectively, the "Property").
(b) All buildings, structures, fixtures and other improvements that
are actually or constructively attached to the Property, and all modifications,
additions, restorations or replacements of the whole or any part thereof,
including, without limitation, those described in Schedule l(b) (the
"Improvements");
(c) As lessor or as lessee (whether named as such therein or by
assignment or otherwise) in all leases and subleases, if any, of the Property
and the Improvements, including, without limitation, those described in Schedule
l(c), and any and all amendments, modifications, supplements, renewals and
extensions thereof, together with all rents, royalties, security deposits,
revenues, issues, earnings, profits, income and other benefits of the Property
or the Improvements due with respect to the Property or the Improvements or any
part thereof;
(d) All streets, roads and public places, opened or proposed, and
all easements and rights of way, public and private, tenements, hereditaments,
rights and appurtenances used in connection with, or belonging, incident or
appertaining to, the Property or the Improvements;
(e) All of the teleports (including earth stations, and fixed or
mobile uplink/downlink facilities and antennas), machinery, equipment,
inventory, fixtures, furnishings, supplies and other property maintained, owned
or held by Seller and/or its Affiliates and that are used or useful in
connection with, or which otherwise comprise, the business and operations of
Seller, including, without limitation, those set forth and described in Schedule
l(e);
(f) All of the licenses, permits and other authorizations which have
been issued by the Commission, or applications therefor which are pending before
the Commission, that are used in connection with, or which otherwise comprise,
Seller's business and operations ("Licenses"), including without limitation
those Licenses set forth in Schedule l(f).;
(g) All of the patents, service marks, copyrights, franchises,
licenses (other than the Licenses), trademarks, trade names, logos and designs
maintained, which are used in connection with, or which otherwise comprise, the
business and operations of the Seller (including any and all applications,
registrations, extensions and renewals relating thereto) (the "Intellectual
Property"), and all of the rights associated therewith including, without
limitation, those set forth and described in Schedule 3.07;
(h) All of the contracts, agreements (written or verbal), leases
(including satellite transponder leases), Accounts Receivable and other
intangible assets owned or held by Seller and used in connection with, or which
otherwise comprise, the business and operations of the Seller, including,
without limitation, those contracts, agreements and leases set forth and
described in Schedule 2.02(b), but excluding (i) any credit agreements,
promissory notes, guaranties, security agreements and other instruments which
evidence or relate to Seller's funded indebtedness to third parties (including
without limitation indebtedness to Parent or to Firstar Bank Iowa, N.A.), (ii)
the Unassumed Capital Leases, and (iii) any Pension Plan, Welfare Plan, Other
Plan or related insurance contract, and any employment agreement or other
agreement set forth in Schedule 3.15 (except the Ahto Employment Agreement and
the Ahto Noncompetition Agreement), labor or union contract, any professional
service contract not terminable at will, or any bonus, pension, insurance,
profit sharing, incentive, deferred compensation, salary, severance pay,
retirement, hospitalization, employee benefit or other similar plan, or any
compensation payable or which may become payable to any employee of Seller, and
(iv) any insurance policies set forth in Schedule 3.16;
(i) All deposits and prepaid expenses, cash and cash equivalents,
including, without limitation, those set forth and described in Schedule l(i);
(j) All automotive equipment and motor vehicles maintained, owned or
held by Seller or an Affiliate and used in connection with the business and
operations of the Seller, including, without limitation. those set forth and
described in Schedule l(j);
(k) All engineering, business and other books, papers, files and
records pertaining to the business and operations of the Seller, including
without limitation the articles of incorporation, bylaws, minute books, stock
transfer records or other corporate records of Newco; and
(l) All computer software (including object code and source code),
trade secrets, customer lists, supplier lists, customer account information and
all logs and business records used in the ordinary course of business, relating
to the Assets and the business and operations thereof, including without
limitation, those described in Schedule 1(1).
"Arbitrator" shall have the meaning set forth in Section 12.07.
"Assumed Liabilities" shall have the meaning set forth in Section
2.02.
"Buyer" shall have the meaning set forth in the initial paragraph of
this Agreement.
"Buyer Indemnitees" means Newco and Buyer, and their respective
officers, directors, shareholders, partners, employees, representatives and
Affiliates, and each of such partners' and Affiliates' officers, directors,
shareholders, partners, employees, representatives and Affiliates.
"Buyer's Contested Taxes" shall have the meaning set forth in Section
3.12(1)(iv)(B).
"Claims" shall have the meaning set forth in Section 15.05.
"Closing" means the closing of the contribution and transfer of the
Assets and the sale of the Stock contemplated hereunder.
"Closing Agreement" shall have the meaning set forth in Section
3.12(a)(v).
"Closing Balance Sheet" shall have the meaning set forth in Section
12.01.
"Closing Date" means the time and date on which the Closing takes
place, as established by Section 11.01.
"COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act
of 1985.
"Code" shall have the meaning set forth in Section 3.12(a)(iii).
"Commission" means the Federal Communications Commission.
"Continuing Capital Lease Equipment" shall have the meaning set forth
in Section 7.06.
"Continuing Capital Leases" shall have the meaning set forth in
Section 7.06.
"Continuing Office Lease Equipment" shall have the meaning set forth
in Section 7.06.
"Continuing Office Leases" shall have the meaning set forth in
Section 7.06.
"Designated Employees" shall have the meaning set forth in Section
7.04(b).
"Designated Manager" shall have the meaning set forth in Section
7.04(c)(iii).
"Diggan Software" shall have the meaning set forth in Section 7.08.
"Election Liability Amount" shall have the meaning set forth in
Section 3.12(1)(iv)(B).
"Election Taxes" shall have the meaning set forth in Section
3.12(1)(iv)(B).
"Elections" shall have the meaning set forth in Section 3.12(1)(i).
"Encumbrance" means any mortgage, pledge, lien, claim, security
interest, agreement, restriction, defect in title, easement, encumbrance or
charge.
"Environmental Laws" shall have the meaning set forth in Section
3.14(a).
"ERISA" shall have the meaning set forth in Section 3.13(a).
"Estoppel Certificates" means, collectively, the certificates in form
and substance reasonably acceptable to Buyer that are executed by the respective
lessors of office space, warehouse facilities or other real estate under leases
that are to be assigned to Buyer under this Agreement, by which the respective
lessors acknowledge, at a minimum, that the lessee thereunder is not in default
under the terms of the lease.
"Excluded Assets" shall have the meaning set forth in Section 2.01.
"FCC Order" means, collectively, the orders of the Commission, or of
the Chief, International Bureau, acting under delegated authority, consenting to
the assignment to Buyer of the Licenses, as proposed in the application
therefor.
"Final Determination" shall have the meaning set forth in Section
3.12(a)(v).
"Final Order" means an FCC Order as to which the time for filing a
request for administrative or judicial review, or for instituting administrative
review sua sponte, shall have expired without any such filing having been made
or notice of such review having been issued; or, in the event of such filing or
review sua sponte, as to which such filing or review shall have been disposed of
favorably to the grant and the time for seeking further relief with respect
thereto shall have expired without any request for such further relief having
been filed.
"Financial and Operating Data" shall have the meaning set forth in
Section 3.04(a).
"Forms" shall have the meaning set forth in Section 3.12(1)(i).
"Governmental Authority" means the Unites States, any state or
municipality, the government of any foreign country, any subdivision of any of
the foregoing, or any authority, department, commission, board, bureau, agency,
court, or instrumentality or any of the foregoing.
"Hazardous Materials" shall have the meaning set forth in Section
3.14(a).
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations thereunder.
"Improvements" shall have the meaning set forth in subsection (b) of
the definition of " Assets . "
"Indemnified Party" shall have the meaning set forth in Section
15.05(a).
"Indemnifying Party" shall have the meaning set forth in Section
15.05(a).
"Intellectual Property" shall have the meaning set forth in
subsection (g) of the definition of "Assets. "
"IRS" shall have the meaning set forth in Section 3.12(a)(vi).
"Licenses" shall have the meaning set forth in subsection (f) of the
definition of "Assets."
"MADSP" shall have the meaning set forth in Section 3.12(1)(iii).
"Minimum Capital Expenditures" shall have the meaning set forth in
Section 7.02(b).
"Newco" shall have the meaning set forth in the second paragraph of
the Recitals to this Agreement.
"Nondisclosure Agreement" means that agreement entitled Joint
Nondisclosure Agreement, dated August 30, 1996, entered into between Seller and
Buyer.
"Original Target" shall have the meaning set forth in Section
3.12(1)(i).
"Other Plan" shall have the meaning set forth in Section 3.13(a).
"Parent" shall have the meaning set forth in the initial paragraph of
this Agreement.
"Pension Plan" shall have the meaning set forth in Section 3.13(a).
"Period" shall have the meaning set forth in Section 3.12(a)(iv).
"Person" shall mean an individual, corporation, partnership, limited
liability company, limited liability partnership, joint venture, trust,
unincorporated organization, or Governmental Authority.
"Property" shall have the meaning set forth in subsection (a) of the
definition of "Assets."
"Purchase Price" shall have the meaning set forth in Section 2.04.
"Release" shall have the meaning set forth in Section 3.14(b).
"Required Consents" shall have the meaning set forth in Section 9.02.
"Returns" shall have the meaning set forth in Section 3.12(a)(ii).
"Restricted Employees" shall have the meaning set forth in Section
7.04(e).
"Restricted Employers" shall have the meaning set forth in Section
7.04(e).
"Section 338(h)(10) Target shall" have the meaning set forth in
Section 3.12(1)(i).
"Seller" shall have the meaning set forth in the initial paragraph of
this Agreement.
"Seller Contracts" shall have the meaning set forth in Section 3.10.
"Seller Indemnitees" means Seller, and its officers, directors,
shareholders, partners, employees, representatives and Affiliates, and each of
such partners' and Affiliates' officers, directors, shareholders, partners,
employees, representatives and Affiliates.
"Seller's Liability Amount" shall have the meaning set forth in
Section 3.12(1)(iv)(B).
"Settlement" shall have the meaning set forth in Section 3.12(a)(v).
"STA" means the Special Temporary Authority issued by the FCC that,
pending the issuance of the FCC Order, allows Buyer to operate the Assets whose
operation by Buyer would otherwise require the issuance of the FCC Order.
"Stock" shall have the meaning set forth in Section 2.03.
"Tax" and "Taxes" shall have the meaning set forth in Section
3.12(a)(i).
"Tax Disclosure Schedule" shall have the meaning set forth in Section
3.12.
"Tax Notice" shall have the meaning set forth in Section
3.12(1)(iv)(B).
"Tender" shall have the meaning set forth in Section 3.12(a)(v)
"Unassumed Capital Lease Equipment" shall have the meaning set forth
in Section 7.06.
"Unassumed Capital Leases" shall have the meaning set forth in
Section 7.06.
"Unassumed Liabilities" shall have the meaning set forth in Section
2.02(e).
"WARN Act" shall mean the Federal Worker Adjustment and Retraining
Notification Act of 1988.
"Welfare Plan" shall have the meaning set forth in Section 3.13(a).
"Winnebago" shall have the meaning set forth in Section 7.09.
"Withheld Releases" shall have the meaning set forth in Section
3.05(b).
All references to clauses, Sections, Exhibits and Schedules are to
Sections of and Exhibits and Schedules to this Agreement.
2. Transfer of Assets: Assumption of Liabilities; Purchase of Stock.
2.01 Transfer of Assets. On the basis of the
representations, warranties and agreements contained herein and subject to the
terms and conditions hereof, Seller shall, at or prior to the Closing, transfer
or cause to be transferred to Newco all of the Assets, free and clear of any
Encumbrances, as tax-free contributions of capital under Section 351 of the
Code. Seller shall retain and not transfer to Newco the assets set forth on
Schedule 2.01 (the "Excluded Assets"). Notwithstanding anything to the contrary
contained in this Agreement, the Licenses shall not be transferred to Newco but
shall instead be transferred directly to Vyvx under a separate assignment
agreement dated no earlier than the date upon which (i) the FCC has issued the
STA or the FCC Order, and (ii) Newco has been merged into Vyvx.
2.02 Liabilities. At the Closing, Newco shall assume,
discharge and perform only the liabilities and obligations set forth in Sections
2.02(a), 2.02(b) and 2.02(c) below (collectively, the "Assumed Liabilities"):
2.02(a) The liabilities and obligations that
comprise the current liabilities set forth on the Closing Balance Sheet
(including liability for accrued vacation pay).
2.02(b) The liabilities and obligations of
Seller or, if applicable, its Affiliates, to be performed after the Closing Date
under the contracts, agreements and leases set forth and described in Schedule
2.02(b) (which contracts shall include the Ahto Employment Agreement and the
Ahto Noncompetition Agreement).
2.02(c) The liabilities and obligations of
Seller or, if applicable, its Affiliates, to be performed after the Closing Date
under any Additional Contracts entered into after the date hereof in compliance
with Section 7.01 and which are identified in the certificate referred to in
Section 11.02(d).
2.02(d) Notwithstanding anything to the
contrary contained in this Agreement, neither Newco nor Buyer shall assume or be
deemed to assume any debts, liabilities or obligations of Seller or its
Affiliates except as specified in Sections 2.02(a), 2.02(b) (and set forth in
Schedule 2.02(b)), or 2.02(c). Without limiting the foregoing, it is understood
and agreed that Seller shall retain all obligations and liabilities, and neither
Newco nor Buyer shall assume or have any obligation or liability, with respect
to or relating to the following (collectively, the "Unassumed Liabilities"): (i)
credit agreements, promissory notes, guaranties, security agreements and other
instruments which evidence or relate to Seller's indebtedness to third parties
described on Schedule 2.02(d), which Schedule shall describe, at a minimum, all
indebtedness to the Parent, to Firstar Bank Iowa, N.A. (including Seller's term
note and its line of credit Note), and to MPO Videotronics (including the
promissory notes relating to the acquisition purchase price and the
noncompetition agreement), (ii) the Unassumed Capital Leases, (iii) any
obligations to any individual (or beneficiary of any individual) in connection
with his or her employment by Seller or its Affiliates prior to Closing (except
liability for accrued vacation pay as described in Section 2.02(a)), including,
but not limited to, obligations arising in connection with Seller's termination
of such individual's employment with Seller, including, without limitation, any
and all benefits under or related to any Pension Plan, any Welfare Plan, Other
Plan or any related insurance contract, and workers compensation claims (iv) any
unfair labor complaint, employee benefit related complaint or employment
discrimination complaint, regardless of when made, or automobile liability and
general liability claim, which relates to events occurring prior to Closing, (v)
any employment, labor or union contract (other than the Ahto Employment
Agreement and Ahto Noncompetition Agreement), any professional service contract
not terminable at will, or any bonus, pension, insurance, profit sharing,
incentive, deferred compensation, salary, severance pay (except as otherwise
provided in the Administrative Services Agreement), retirement, hospitalization,
employee benefit or other similar plan, or any compensation payable or which may
become payable to any employee of Seller, (vi) any litigation, judgment or other
matter described in the first sentence of Section 3.03, including without
limitation any such matter listed in Schedule 3.03, or (vii) rebates due to
television stations under the terms of Cyclecypher leases relating to time
periods prior to Closing.
2.03 Purchase and Sale of Newco Stock. At the Closing, Seller shall
sell, transfer and assign to Buyer good and marketable title to all of the
issued and outstanding shares of capital stock of Newco, including any nonvoting
shares (the "Stock"), which Stock shall be fully paid, nonassessable and free
and clear of all Encumbrances.
2.04 Purchase Price. In consideration of the sale, transfer and
assignment of the Stock to Buyer, Buyer agrees to pay to Seller, and Seller
agrees to accept from Buyer, a purchase price (the "Purchase Price") equal to
Fifty-Seven Million Dollars ($57,000,000), as adjusted by the net amount of the
adjustments provided in Section 12. The Purchase Price shall be payable as
described in Section 2.05.
2.05 Payment of Purchase Price. At Closing, subject to the
adjustments described in Section 12, Buyer shall deliver the amount of
Fifty-Seven Million Dollars ($57,000,000) by wire transfer of federal funds to
an account or accounts which will be identified by Seller not less than
twenty-four (24) hours prior to the Closing Date.
3. Representations and Warranties by Seller and Parent. Buyer
acknowledges that with respect to the representations and warranties of the
Seller and the Parent, any information which appears in reasonable detail on any
Schedule referenced herein shall be deemed to be included and be a part of
another Schedule upon which the terms of the Agreement would have otherwise
required a reference to such information, but only to the extent that Buyer's
review of such information within the context of the Schedule in which it
appears could be reasonably deemed to have placed Buyer on notice of the matter
for which the omitted reference in the omitted Schedule was intended. Seller and
Parent, jointly and severally, represent and warrant to Buyer as follows:
3.01 Organization and Standing. Seller is a corporation
duly organized, validly existing, duly qualified to do business and in good
standing under the laws of the State of Iowa and is duly qualified to do
business as a foreign corporation and is in good standing under the laws of the
States of California, Delaware, Illinois, Michigan, New Jersey, New York and
Tennessee. Neither the nature of the business conducted by Seller nor the
character of the properties owned, leased or otherwise held by Seller makes any
such qualification necessary in any other state, country, territory or
jurisdiction where the failure to so qualify would have a material adverse
effect on the business and operations of Seller or on the Assets. Seller has all
the requisite corporate power and corporate authority to own, lease and
otherwise to hold and operate the Assets, to carry on its business as now
conducted and to enter into and perform the terms of this Agreement, the
agreements and instruments referred to herein and the transactions contemplated
hereby and thereby.
3.02 Authorization. The execution, delivery and
performance of this Agreement and of the other agreements and instruments to be
executed by Seller hereunder and/or to be delivered by Seller at Closing
(including the agreements and instruments effecting the transfer of Assets into
Newco), and the consummation of the transactions contemplated hereby and
thereby, have been duly and validly authorized by all necessary corporate
actions of Seller and necessary shareholder approval and, where applicable, the
necessary corporate actions of Newco and the necessary shareholder approval of
Newco (none of which actions has been modified or rescinded and all of which
actions are in full force and effect). This Agreement constitutes, and upon
execution and delivery of each of the agreements and instruments to be executed
or delivered as provided herein (including the agreements and instruments
effecting the transfer of Assets into Newco), will constitute, valid and binding
agreements and obligations of Seller enforceable in accordance with their
respective terms, except as enforceability may be limited by (i) applicable
bankruptcy, reorganization, insolvency, moratorium and similar laws affecting
the enforcement of creditor's rights and (ii) general equitable principles
(regardless of whether enforceability is considered in a proceeding in equity or
at law). Except as specified in Section 3.05 and the requirements of the HSR
Act, if applicable, the execution, delivery and performance by Seller of this
Agreement and by Seller and Newco of the agreements and instruments referred to
herein will not require the consent, approval or authorization of any Person,
entity or governmental authority where the failure to obtain such consent would
have material adverse effect on the Assets.
3.03 Litigation; Compliance with Law. There is no material
action, suit, investigation, claim, investigation or notice by any governmental
agency, or any arbitration or litigation, pending or, so far as Seller
reasonably knows, threatened against or involving the Assets, the Seller's
business and operations, or the execution of or consummation of the transactions
contemplated by this Agreement or any of the agreements and instruments referred
to herein, at law or in equity, or before or by any court, arbitrator or
governmental authority, and neither the Assets nor the Seller's business or
operations are operating under or subject to any order, judgment, decree or
injunction of any court, arbitrator or governmental authority, except for those
listed in Schedule 3.03. So far as Seller reasonably knows, no governmental
agency or authority has at any time challenged, questioned or commenced or given
notice of intention to commence any investigation relating to the legal right of
Seller to conduct Seller's business and operations as now or heretofore
conducted by Seller. So far as Seller reasonably knows, Seller has complied and
is in compliance in all material respects with all laws, ordinances,
regulations, awards, orders, judgments, decrees and injunctions applicable to
the Assets or the Seller's business and operations, including all federal, state
and local laws, ordinances, regulations and orders pertaining to employment or
labor, safety, health, environmental protection, zoning and other matters.
Seller has obtained and holds all material permits, licenses and approvals (none
of which has been modified or rescinded and all of which are in full force and
effect) from all governmental authorities necessary to conduct the operations of
the Seller as presently conducted.
3.04 Financial Statements and Condition; Liabilities.
3.04(a) The financial and operating data and
other information with respect to the financial statements, business and
properties of Seller previously delivered to Buyer, including those relating to
the period ending September 30, 1996 (collectively, the "Financial and Operating
Data"), as specified on Schedule 3.04(a), have been prepared, in all material
respects, in accordance with the books and records of Seller and with generally
accepted accounting principles applied on a consistent basis throughout the
periods involved, and present fairly the financial positions, incomes, expenses,
assets, operating liabilities and results of operations relating to the Assets
and the business and operations of Seller as of the dates and for the periods
indicated; and each and every update of the Financial and Operating Data (to be
delivered to Buyer pursuant to Section 7.02(k)) will be prepared by Seller in
accordance with its books and records and with generally accepted accounting
principles applied on a consistent basis throughout the periods involved and as
compared with prior periods and, subject to year-end adjustments where
applicable, will present fairly in all material respects the financial position,
income, expenses, assets, operating liabilities and results of operations
relating to the Assets and Seller's business and operations as of the dates and
for the periods indicated.
3.04(b) Except as reflected in the Financial
and Operating Data on Schedule 3.04(a), there exist no liabilities of Seller
relating to the Assets or Seller's business and operations, contingent or
absolute, matured or unmatured, known or unknown, required to be stated therein
in accordance with generally accepted accounting principals applied on a
consistent basis throughout the periods involved. Since September 30, 1996,
Seller has not made any contract, agreement or commitment or incurred any
obligation or liability (contingent or otherwise) relating to the Assets or
Seller's business and operations, nor has there been any discharge or
satisfaction of any obligation or liability owed by or to Seller, which is not
in the ordinary course of business or which is inconsistent with past business
practices (other than such matters as would not have a material adverse effect
on the business of Seller or the Assets), nor has there occurred any material
loss or material injury to the Assets as the result of any fire, accident, act
of God or the public enemy, or other casualty, or any material adverse change in
the Assets or in the condition (financial or otherwise) of Seller's business and
operations.
3.05 Assets; Stock; Consents.
3.05(a) The Assets that are listed in the
Schedules hereto constitute all of the real, and material personal and mixed
assets, both tangible and intangible, wherever located in the world, that are
owned or held by Seller and/or its Affiliates and that are used in connection
with, or which otherwise comprise, the business and operations of Seller.
3.05(b) Seller is the sole and exclusive
legal and equitable owner of, and has good, marketable and insurable title to
the Assets free and clear of any Encumbrances, except for those Encumbrances set
forth in Schedule 3.05(b), which, except with respect to liens in favor of the
lessors under the Continuing Capital Leases and Continuing Operating Leases,
shall be removed prior to or contemporaneously with the Closing or, at Buyer's
option, may be removed by the filing or recording (at Seller's expense) of
certain instruments to be delivered to Buyer at Closing, or promptly following
Closing (such releases that are delivered after Closing being referred to herein
as the "Withheld Releases"), provided that, for each of the Withheld Releases,
Seller shall provide at Closing (i) a letter from the applicable lienholder
stating that such lienholder will deliver the appropriate releases upon its
receipt of the required payment from Seller and (ii) photocopies or faxed copies
of the fully-executed releases, and provided that Seller pays such required
amount to the appropriate lienholder(s) on the Closing Date.
3.05(c) On or before the Closing Date, Newco
(i) shall acquire good, marketable and insurable title to, and all right, title
and interest in, the Assets (including the Unassumed Capital Lease Equipment,
but excluding the Licenses, Continuing Capital Lease Equipment, the Continuing
Office Lease Equipment and any other Assets that are not owned by Seller but are
leased to Seller) free and clear of any Encumbrances, except for those
Encumbrances set forth in Schedule 3.05(b), which, except with respect to liens
in favor of the lessors under the Continuing Capital Leases, shall be removed
prior to or contemporaneously with the Closing or, at Buyer's option, may be
removed by the filing or recording (at Seller's expense) of certain instruments
to be delivered to Buyer at Closing, or promptly following Closing (such
releases that are delivered after Closing being Withheld Releases, and for which
the lienholder letters, copies of releases and payments to lienholders as
described in Section 3.05(b) shall be required), and (ii) shall acquire good,
marketable and insurable leasehold interests in the Continuing Capital Lease
Equipment, the Continuing Office Lease Equipment and any other Assets that are
not owned by Seller but are leased to Seller, free and clear of all
Encumbrances, except for liens set forth in Schedule 3.05(b) in favor of the
lessors under the Continuing Capital Leases and the Continuing Office Leases.
3.05(d) The Property and the Improvements
relating thereto, have direct and unobstructed access suitable for use in
connection with the business and operations of Seller (i) to all public
utilities necessary for the uses to which the Property and all of the
Improvements are presently devoted by Seller, and (ii) to a public street. All
Improvements lie entirely within the boundaries of the Property, and no
structure of any kind encroaches on the Property. No portion of the Property or
the Improvement relating thereto is the subject of, or affected by, any
condemnation or eminent domain proceedings currently instituted or pending, and
so far as Seller reasonably knows, no such proceedings are threatened. Neither
the Property nor the Improvements relating to the Property are subject to any
covenant or other restriction preventing or limiting Seller's right to convey
its right, title, and interest therein (including the leasing thereof to Newco
or the assignment of leases pertaining thereto), other than such covenants or
restrictions that have either been complied with or waived in writing so as to
allow such a conveyance to. Neither the Property nor the Improvements relating
thereto are subject to any covenant or other restriction preventing or limiting
Seller's right to use such Property or Improvements for the various purposes for
which they are currently being used.
3.05(e) All of the Assets to be transferred
hereunder are transferable by Seller or by Seller's sole act and deed, and no
consent on the part of any other Person is necessary to validate the transfer to
Newco, and the Stock shall be transferable by Seller's sole act and deed, and no
consent on the part of any other Person will be necessary to validate the
transfer of the Stock to Buyer, except where the failure to obtain a consent
would not have a material adverse effect upon the Assets, and except as follows:
(i) the Licenses are not assignable, either to Seller or to
Newco, without the consent of the Commission as provided by law;
(ii) the sale of the Stock to Buyer constitutes a change of
control of the Licenses, which change of control requires the consent of the
Commission as provided by law;
(iii) Certain of the agreements described in the Schedules
hereto may be assigned only with the consent of third parties, or prohibit a
change of control of Newco without the consent of third parties. Such agreements
are specified in Schedule 3.05(e)(iii).
3.05(f) The Accounts Receivable shown on the
Financial and Operating Data, or thereafter generated, created or acquired by
Seller with respect to Seller's business and operations have been collected or
are collectible in amounts not less than the amounts thereof carried on the
books of Seller, without right of recourse, defense, deduction, counterclaim,
offset, or setoff on the part of the obligor, and reasonably can be expected to
be collected within a reasonable time from the date incurred, except to the
extent of the allowance for doubtful accounts shown on such Financial and
Operating Data. Seller previously has delivered to Buyer a complete and accurate
list of all Accounts Receivable (whether billed or unbilled) with respect to
Seller's business and operations as of date of such list.
3.05(g) As of the Closing Date, Seller shall
own, beneficially and of record, all of the issued and outstanding shares of the
Stock, fully paid, non-assessable, free and clear of any and all liens, pledges,
claims, options, restrictions, agreements, conditions, and other Encumbrances or
adverse claims of any nature whatsoever. The sale provided for herein will vest
in Buyer directly good and marketable title to all of the issued and outstanding
shares of the Stock, fully paid, nonassessable, free and clear of any and all
liens, pledges, claims, options, restrictions, agreements, conditions, and other
Encumbrances or adverse claims of any nature whatsoever.
3.06 Condition of Tangible Assets. The Improvements and
all other tangible Assets are in good operating condition and repair, taking
into account their age and normal wear and tear, free of defects, and are
suitable and adequate for the uses for which they are currently being used; and
the present use of such Assets does not violate in any material respect any
applicable licenses, statutes, or building, fire, zoning, health and safety or
any other laws or regulations.
3.07 Intellectual Property; Licenses. Contained in
Schedule 3.07 is a true, correct and complete listing of all Intellectual
Property owned or licensed by or registered in the name of Seller and/or used or
held for use in the business and operations of Seller, other than the Licenses,
all of which are transferable to by the sole act and deed of Seller; and no
consent on the part of any other Person is necessary to validate the transfer to
Newco of such Intellectual Property, or to allow the transfer of control of
Newco insofar as such transfer relates to the Intellectual Property. Seller does
not pay, and is not liable for, a royalty to anyone with respect to the
Intellectual Property, and Seller has the right to bring action for the
infringement thereof. Seller owns or possesses all rights to use all such
Intellectual Property necessary to or useful for the conduct of Seller's
business and operations. Seller has no knowledge and has not received any notice
to the effect that any service rendered by Seller relating to Seller's business
and operations may infringe on any Intellectual Property right or other legally
protectable right of another. Seller has not granted a license or other right to
use the Intellectual Property to any other Person.
3.08 Licenses. The Licenses are valid on the date hereof
and will be valid on the Closing Date and there are no orders, complaints,
proceedings or investigations, pending or, so far as Seller reasonably knows,
threatened, which would affect the validity of the Licenses. There is no
material violation relating to the Licenses of any rules and regulations of the
Commission. If notice of any such violation is received or if Seller hereafter
becomes aware of any such violation, Seller shall notify Buyer and, pursuant to
Section 7.02(1), Seller at Seller's own expense shall use reasonable efforts to
cure all such violations prior to the Closing.
3.09 Reports and Records. All returns, reports and
statements relating to Seller's business and operations currently required to be
filed by Seller with the Commission or any other governmental instrumentality
have been filed (except where failure to do so would not have a material adverse
effect on the Assets or Seller's business and operations) and complied with
(except where failure to do so would not have a material adverse effect on the
Assets or Seller's business and operations) and are true, correct and complete
in all material respects. All such reports, returns and statements shall
continue to be filed on a current basis until the Closing Date, and will be
true, correct, and complete in all material respects. All documents required by
the Commission's rules to be placed in the public files relating to Seller's
business and operations have been placed and are being held in such files. All
logs and business records of every type and nature relating to Seller's business
and operations, including but not limited to political and public record files,
program, operating and maintenance logs, equipment performance measurements,
policies or evidence of insurance, licenses, payroll, social security and
withholding tax returns, operator agreements and other records pertaining to
Seller's business and operations have been maintained in all material respects
in accordance with the rules of the Commission, and (except where the failure to
do would not have a material adverse effect upon the Assets or the business and
operations of the Seller) as otherwise required by applicable laws, rules and
regulations, with Buyer to be allowed reasonable access thereto during Seller's
normal business hours.
3.10 Contracts. The contracts, agreements, leases and
commitments set forth and described in Schedules 2.02(b), 3.15 and 3.16 (the
"Seller Contracts") are all of the material contracts, agreements, leases and
commitments relating to the Assets or to Seller's business and operations.
Seller has not entered into any agreement or understanding, whether written or
oral, which was intended by them to waive any of their respective rights under
any such Seller Contracts. Seller has delivered true and complete copies of all
such Seller Contracts (and all amendments and modifications thereto) to Buyer
prior to the execution of this Agreement. The unperformed obligations
ascertainable from the terms on the face of such Seller Contracts (and such
amendments or modifications thereto), are the only existing unperformed
obligations thereunder. Each Seller Contract is in full force and effect, and
constitutes a valid and binding obligation of, and is legally enforceable in
accordance with its terms against, the Seller, and to the best of Seller's
knowledge, against the other parties to such Seller Contracts. Seller has
complied with all of the material provisions of such Seller Contracts and are
not in default thereunder, and there has not occurred any event which (whether
with or without notice, lapse of time, or the happening or occurrence of any
other event) would constitute such a default. So far as Seller reasonably knows,
there has not been (i) any failure of any party to any such Seller Contract to
comply with all material provisions thereof, (ii) any material default by any
party thereunder, (iii) any threatened cancellation thereof, (iv) any
outstanding dispute thereunder, or (v) any basis for any claim of material
breach or default thereunder.
3.11 Conflicts. Except as set forth in Schedule 3.11, the
execution and delivery of this Agreement and the agreements and instruments
referred to herein, the fulfillment of and the compliance with the respective
terms and provisions of each, and the consummation of the transactions described
in each, do not and will not conflict with or violate any law, ordinance,
regulation, order, award, judgment, injunction, restrictive covenant or decree
applicable to Seller or Newco, or applicable to the Assets or to Seller's
business and operations, or conflict with or result in a breach of or constitute
a default under any of the terms, conditions or provisions of the articles of
incorporation or bylaws of Seller, Newco or any other of such parties, or any
contract, agreement, lease, commitment, or written understanding to which
Seller, Newco or any of such other parties is a party or by which Seller, Newco
or any of such other parties are bound or to which any of the Assets or Seller's
business and operations are subject, or result in the acceleration of any
indebtedness or in the creation of any Encumbrance upon the Assets (whether by
virtue of a written or verbal agreement) which, in either case, would have a
material adverse effect upon the Assets or Seller's business and operations.
3 .12 Tax Matters
Except as otherwise set forth in the Schedule 3.12 attached hereto and
made a part hereof (the "Tax Disclosure Schedule"), Seller and Parent hereby
jointly and severally represent and warrant the following (and to the extent
that any of the following provisions consist of covenants or agreements, such
provisions shall be considered to be covenants or agreements as if set forth in
Section 7 of this Agreement):
3.12(a) Definitions
(i) The term "Taxes" means all federal, state, local,
foreign and other net income, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise-,
profits, license, lease, service, service use,
withholding, payroll, employment, excise, severance,
stamp, occupation, premium, property, windfall profits,
customs, duties or other taxes, fees, assessments or
charges of any kind whatever, together with any
interest and any penalties, additions to tax or
additional amounts with respect thereto, and the term
"Tax" means any one of the foregoing Taxes.
(ii) The term "Returns" means all returns, declarations,
reports, statements and other documents required to be
filed in respect of Taxes, and the term "Return" means
any one of the foregoing Returns.
(iii) The term "Code" means the Internal Revenue Code of
1986, as amended. All citations to the Code, or to the
Treasury Regulations promulgated thereunder, shall
include any amendments or any substitute or successor
provisions thereto.
(iv) The term "Period" shall mean any taxable year or any
other time interval or part thereof which is treated as
a taxable year for purposes of the Code, and for any
taxable year which has not ended prior to the Closing
Date, it shall mean the portion of such taxable year
beginning on the first day of the taxable year and
ending on and including the Closing Date. When used in
the context of any other Taxes, "Period" shall mean any
other taxable year or time interval or part thereof
with respect to which any such Tax may be imposed under
any applicable statute, rule, or regulation, up to and
including the Closing Date.
(v) The term "Final Determination" shall mean, in the
context of Taxes, with respect to any issue or item for
any Period (a) a final, non-appealable decision by a
court of competent jurisdiction; (b) the expiration of
the time for filing a claim for refund or, if a refund
claim has been timely filed, the expiration of the time
for instituting suit in respect of such refund claim,
if no further adjustment to the items of income, gain,
deduction, loss, or credit for such Period may
thereafter be made; (c) the execution by or on behalf
of the taxpayer and the IRS of a closing agreement
under Section 7121 of the Code or a similar agreement
with the state taxing authority (a "Closing
Agreement"); (d) the acceptance by the IRS or its
counsel or by a state taxing authority or its counsel
of a tender pursuant to an offer in compromise pursuant
to, respectively, Section 7122 of the Code or a similar
state law or regulation (a "Tender") (Closing Agreement
and Tender being referred to herein collectively as a
"Settlement"); (e) the execution of a Form 870AD; or
(f) any other final and irrevocable determination of
the tax liability of a party to this Agreement (or any
Affiliate of a party which is binding on such party)
for any Period. In the context of any other Taxes,
"Final Determination" shall mean, with respect to any
issue or item for any Period, any final, non-appealable
and irrevocable determination of the Tax liability of a
party to this Agreement (or an Affiliate of a party
which is binding on such party) for any Period.
(vi) The term "IRS" means the Internal Revenue Service.
3.12(b) Filing of Returns. Seller and Newco have or will cause
to be properly completed and filed on a timely basis and in correct form all
Returns required to be filed on or prior to the Closing Date and will provide
notice to Buyer of any and all returns with filing dates occurring during the
month of Closing. As of the time of filing, the foregoing Returns correctly
reflected or reflect the facts regarding the income, business, assets,
operations, activities, status or other matters of Seller or Newco or any other
information required to be shown thereon. In particular, and without in any
manner limiting the foregoing, none of the foregoing Returns contains any
position which is or would be subject to penalties under Section 6662 of the
Code (or any corresponding provision of state, local or foreign Tax law). An
extension of time within which to file any Return which has not been filed has
not been requested or granted.
3.12(c) Payment of Taxes. With respect to all amounts in
respect of Taxes imposed upon Newco, or for which Newco is or could be liable,
whether to taxing authorities (as, for example, under law) or to other Persons
or entities (as, for example, under tax allocation agreements), with respect to
all taxable periods or portions of period ending on or before the Closing Date,
all applicable tax laws and agreements have been fully complied with, and all
such amounts required to be paid by Newco to taxing authorities or others on or
before the Closing Date have been paid.
3.12(d) Liens. There are no liens for Taxes upon the Assets.
3.12(e) Prior Affiliated Groups. Except for the group of which
Seller is presently a member, Newco has never been a member of an affiliated
group of corporations, within the meaning of Section 1504 of the Code.
3.12(f) Tax Elections. All material elections with respect to
Taxes affecting Newco as of the Closing Date are set forth in the Tax Disclosure
Schedule.
3.12(g) Safe Harbor Lease Property. None of the Assets is
property which Newco is required to treat as being owned by any other Person
pursuant to the so-called "safe harbor lease" provisions of former Section
168(f)(8) of the Code.
3.12(h) Security for Tax Exempt Obligations. None of the
Assets directly or indirectly secures any debt the interest on which is tax
exempt under Section 103(a) of the Code.
3.12(i) Tax Exempt Use Property. None of the Assets is
"tax-exempt use property" within the meaning of Section 168(h) of the Code.
3.12(j) No Withholding. The transactions contemplated herein
are not subject to tax withholding pursuant to Code Section 3406, or of
subchapter A of Chapter 3 of the Code or of any other similar provision of law.
3.12(k) Existing Partnerships. Except as set forth in the Tax
Disclosure Schedule, Newco is not a party to any joint venture, partnership, or
other arrangement or contract which could be treated as a partnership for
federal income tax purposes.
3.12(1) Tax Elections.
(i) Section 338(h)(10) Elections. At Closing, Seller or
Parent, as appropriate, and Buyer shall make effective elections under
Sections 338(g) and 338(h)(10) of the Code (and any comparable elections
under state and local law). Such Section 338(h)(10) election shall be
executed with respect to Newco pursuant to the procedures specified in
Treas. Reg. Sec. 1.338(h)(10)-1 or in regulations promulgated in lieu
thereof. (Said Section 338(g) election and Section 338(h)(10) election
hereinafter referred to collectively as the "Elections".) Seller and Buyer
will cause their appropriate Affiliates to enter into the Elections to the
extent required by Section 338 of the Code and regulations thereunder.
Prior to the Closing, Seller shall deliver to Buyer a duly executed IRS
Form 8023 (but without the required schedules thereto) and all requisite
state forms, without schedules (the "Forms") which names Newco as the
"Original Target" in Section B of the Forms. Buyer and its representatives
may review and comment on the Forms prior to the Closing. Seller and Buyer
shall complete and execute the Forms no later than the Closing Date. As
soon as practical following the Closing Date, Seller and Buyer shall timely
and properly file the Forms, together with all exhibits, schedules,
attachments, corrective statements and additional filings required by
Treas. Reg. Sec. 1.338-l(e) and 1.338(h)(10)-l(d), reflecting the Purchase
Price Allocation (as defined in subsection (iii) below, and as determined
and provided for in subsections (ii) and (iii) below), with the appropriate
IRS office or offices and each party shall furnish the other party with a
true and correct copy of the Forms as and when filed.
(ii) Purchase Price Allocation. As provided in subsection
(iii) below, and in accordance with the guidelines set forth in Internal
Revenue Service regulations and revenue rulings, Seller and Buyer shall
mutually agree upon the Allocations; provided, however, that if Seller and
Buyer cannot agree, Seller and Buyer will mutually select an independent
appraiser to resolve such dispute (or, if Seller and Buyer cannot agree on
an independent appraiser, Seller and Buyer will each select an independent
appraiser which appraisers will select a third independent appraiser to
resolve the dispute). In any event, Seller and Buyer shall, with or without
the use of an appraiser or appraisers, agree upon the Allocations within
six (6) months after the Closing Date.
(iii) Adjusted Grossed-Up Basis; Allocations. Promptly after
receipt of the appraisal described in Section 3.12(1)(ii) hereof, Seller
and Buyer shall act together in good faith to (i) determine and agree upon
the amount of the modified adjusted deemed selling price ("MADSP") of Newco
Assets (within the meaning of Treasury Regulation Section
1.338(h)(10)-l(f)(2)), and (ii) agree upon the allocation of the MADSP
among the Assets in accordance with Section 338(b)(5) of the Code and the
regulations promulgated thereunder (the "Allocations"). Seller shall
calculate gain or loss, if any, resulting from the Elections in a manner
consistent with such Allocations and shall not take any position
inconsistent with the Allocations in any Return or otherwise; provided,
that Buyer shall determine the adjusted grossed-up basis ("AGUB") of Newco
Assets pursuant to Treasury Regulation Section 1.338(h)-1 and allocate that
amount in a manner consistent with the Allocations and shall not take any
position inconsistent with the Allocations in any Return or otherwise;
provided, that Buyer shall be entitled to include its transaction costs in
the AGUB for purposes of allocating among the Assets.
(iv) Tax Indemnification Matters.
A. Indemnification. Buyer shall indemnify and hold Seller harmless from
any adverse effect against Seller from a federal, state, local or other tax
perspective (including penalties related thereto) resulting solely from the
Elections; provided, however, that Buyer may offset against any amount due
to Seller under this subsection (iv) an amount equal to any benefit to
Seller resulting from a federal, state, local or other tax perspective
resulting solely from the Elections.
B. Procedural Rules. In the event that Buyer would be liable to Seller
for the payment of Taxes under subsection (iv)(A) above (the "Election
Taxes") and such Taxes, if asserted, assessed or imposed, are asserted,
assessed or imposed on Seller, the Buyer, in its sole and absolute
discretion, may elect to participate in any audit or post-audit proceeding
involving any such Taxes and/or to contest or to require the Seller to
contest any assertion that any such Taxes are payable in any proceedings
allowed by law and available to the Seller or Buyer. In the event that the
Seller receives any notice, inquiry or other communication of any nature
from the IRS or other Tax authority relating to a matter described in
Section 3.12(1) or to the effect that an audit is to be conducted of, or an
assessment may be made against, the Seller for any Taxes for which the
Buyer may be liable under this subsection (iv) (a "Tax Notice"), the Seller
will notify the Buyer not less than ten (10) business days prior to the
expiration of the time period specified in the Tax Notice to respond
(unless such time to respond is less than ten (10) business days, in which
case Seller will notify Buyer as promptly as possible), whereupon the Buyer
will notify Seller within ten (10) business days after receipt of such
Notice from the Seller (or within such shorter time period if the time to
respond is less than ten (10) days) whether it desires to contest or
require the Seller to contest such Taxes, or in the case of any audit, to
participate therein. Except as otherwise provided below, (i) the Buyer will
have no obligation to make any payment of the Taxes being contested to the
Seller under subsection (iv)(A) above until there is a Final Determination
with respect to such Taxes, and (ii) the Seller will not settle any such
contest before the conclusion of such contest or enter into any agreement
with respect to the conduct of such contest without the written consent of
the Buyer (which consent will not be unreasonably withheld). The Seller and
the Buyer will cooperate to the extent necessary to permit the Buyer or the
Seller to contest such Taxes in accordance with this subsection (iv)(B).
The Buyer shall be obligated to pay Seller all reasonable costs and
expenses relating to contesting any Taxes for which Buyer may be liable or
to participating in any audit with respect to any Taxes for which Buyer may
be liable.
Where the Buyer elects to contest or require the Seller to contest any
Taxes hereunder or to participate in any audit thereof, the Buyer will have
the right to: (i) control all proceedings in connection with such contest
or audit to the extent they relate solely to Election Taxes ("Buyer's
Contested Taxes"), (ii) to the extent allowed by law, at Buyer's sole
option, (a) pursue or forego any and all administrative appeals,
proceedings, hearing and conferences in respect of any proposed adjustment,
and (b) either pay the Buyer's Contested Taxes required by any proposed
adjustment or action and sue for a refund where applicable law permits such
refund suits, or not pay the Buyer's Contested Taxes and contest the
proposed adjustment or action in any permissible forum, and (iii)
determine, in its sole discretion, the timing and amount of any payment or
deposit of Buyer's Contested Taxes, the submission and content of
documentation, returns or other tax forms, protests, memoranda of fact or
law and briefs, the conduct of witnesses and the negotiation of
stipulations of fact relating to any Buyer's Contested Taxes; provided,
however, if the Buyer's Contested Taxes represent less than fifty percent
(50%) of the amount of the taxes that are the subject of any contest or
audit to which the Seller is subject, the Buyer shall be entitled to
consult with the Seller to the extent such contest or audit relates to the
Buyer's Contested Taxes and Seller shall have the sole right to control all
proceedings in connection with such contest or audit.
In the event that a judgment of the United States Tax Court or other
court of competent jurisdiction results in an adverse determination to
Seller with respect to any Buyer's Contested Taxes, then the Buyer will
have the right to cause the Seller to appeal to a court of competent
jurisdiction from such adverse determination at Buyer's sole cost and
expense.
The parties will cooperate with each other and with their respective
Affiliates in the negotiation and settlement of any proceedings described
in this subsection (iv)(B). The Buyer and Seller will each provide to the
other, or cause to be provided to the other, necessary authorizations,
including powers of attorney, to control any proceedings which the Buyer or
Seller may control pursuant to this subsection (iv)(B).
Notwithstanding anything to the contrary in this subsection (iv)(B),
the Seller may, with written permission from the Buyer (which permission
will not be unreasonably withheld) pay any Buyer's Contested Taxes and
terminate any audit, contest or proceeding with respect to such Buyer's
Contested Taxes so paid, provided, however, (i) Buyer and Seller shall have
agreed as to the amount so relating to the Election for which Buyer may be
liable to Seller under this subsection (iv)(B) (the "Election Liability
Amount") and (ii) Buyer shall have deposited such Election Liability Amount
in an account designated by Seller pursuant to Seller's right to
indemnification under Section 3.12(1)(iv)(A). If Buyer does not give such
consent and Seller elects to continue with the audit, contest or
proceeding, then Buyer will pay all penalties and interest on that portion
of the Taxes other than the Election Liability Amount (the "Sellers
Liability Amount"), unless Seller is entitled by applicable law or
otherwise to deposit all or a portion of the Seller's Liability Amount with
a state taxing authority so as to stop the accrual of interest and
penalties on such amounts, in which case Seller shall deposit any such
amount with the appropriate taxing authority and Buyer shall not be liable
for any penalty or interest relating to the amount that is so deposited and
Seller shall be entitled to be indemnified pursuant to Section
3.12(1)(iv)(A).
3.12(m) Notices. Buyer and Seller shall each promptly give
written notice to the other of any examination, audit, inquiry, or proposed or
actual assessment by a federal, state, or local taxing authority covering any
potential liability for Taxes where a right may exist of one party to demand
payment for such Tax from, or be indemnified by, the other party.
3.12(n) Termination of Existing Tax-Sharing Agreements. All
tax-sharing agreements or similar arrangements with respect to or involving
Newco shall be terminated prior to the Closing Date, and, after the Closing
Date, Newco shall not be bound thereby or have any liability thereunder for
amounts due in respect of periods prior to the Closing Date.
3.12(o) Tax Elections. No material elections with respect to
Taxes affecting Newco shall be made after the date of this Agreement without the
prior written consent of Buyer, other than the Elections (and then only in
accordance with Section 3.12(1).
3.12(p) Cooperation and Records Retention. Seller and Buyer
shall (i) each provide the other, and Buyer shall cause Newco to provide Seller,
with such assistance as may reasonably be requested by any of them in connection
with the preparation of any Return, audit or other examination by any taxing
authority or judicial or administrative proceedings relating to liability for
Taxes, (ii) each retain and provide the other, and Buyer shall cause Newco to
retain and provide Seller, with any records of other information which may be
relevant to such Return, audit or examination, proceeding or determination, and
(iii) each provide the other with any final determination of any such audit or
examination, proceeding or determination that affects any amount required to be
shown on any Return of the other for any period.
Without limiting the generality of the foregoing, Buyer shall retain,
and shall cause Newco to retain, and Seller shall retain, for seven (7) years,
copies of all Returns, supporting work schedules and other records or
information which may be relevant to such returns for all tax periods or
portions thereof ending before or including the Closing Date and shall not
destroy or otherwise dispose of any such records without first providing the
other party with one hundred twenty (120) days notice for a reasonable
opportunity to review and copy the same.
3.13 Employee Benefit Plans.
3.13(a) Except as described in Schedule 3.13(a), neither
Seller nor any Affiliates (as defined below) including but not limited to Newco,
have at any time established, sponsored, maintained, or made any contributions
to, or been parties to any contract or other arrangement or been subject to any
statute or rule requiring it to establish, maintain, sponsor, or make any
contribution to, (i) any "employee pension benefit plan" (as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974, as amended, and
regulations thereunder ("ERISA")) ("Pension Plan"); (ii) any "employee welfare
benefit plan" (as defined in Section 3(1) of ERISA) ("Welfare Plan"); or (iii)
any deferred compensation agreement, plan or arrangement; bonus plan or
arrangement; stock option or stock purchase plan; incentive award plan or
arrangement; personnel policy; vacation policy; severance pay plan, policy,
program or agreement; retiree benefit plan or arrangement; fringe benefit
program or practice (whether or not taxable); employee loan; consulting
agreement; employment agreement; and each other employee benefit plan,
agreement, arrangement, program, practice or understanding which is not
described above as a Pension Plan or Welfare Plan, and any insurance contracts
relating thereto ("Other Plan"). Seller and the Affiliates have no obligations
or liabilities (whether accrued, absolute, contingent, or unliquidated, whether
or not known, and whether due or to become due) with respect to any "employee
benefit plan" (as defined in Section 3(3) of ERISA) or Other Plan that is not
listed in Schedule 3.13(a). For purposes of this Section 3.13, the term
"Affiliate" shall include all Persons under common control with Seller within
the meaning of Sections 4001(a)(14) or (b)(1) of ERISA or any regulations
promulgated thereunder, or Sections 414(b), (c), (m) or (o) of the Code).
3.13(b) Each plan or arrangement listed in Schedule 3.13(a)
(and any related trust, insurance contract, or other vehicle pursuant to which
benefits under such plans or arrangements are funded or paid) has been
administered in all respects in full compliance with its terms and in both form
and operation is in full compliance with applicable provisions of ERISA, the
Code, the Consolidated Omnibus Budget Reconciliation Act of 1986 and regulations
thereunder, and other applicable law. Each Pension Plan listed in Schedule
3.13(a) has been determined by the Internal Revenue Service to be qualified
under Section 401(a) and, if applicable, Section 401(k) of the Code, and nothing
has occurred or been omitted since the date of the last such determination that
resulted or will result in the revocation of such determination. Seller and the
Affiliates have made all required contributions or payments to or under each
plan or arrangement listed in Schedule 3.13(a) on a timely basis and have made
adequate provision for reserves to meet contributions and payments under such
plans or arrangements that have not been made because they are not yet due.
3.13(c) Except with respect to the Administrative Services
Agreement, the liability assumed under Section 2.02(a) relating to accrued
vacation pay, and the obligations to be performed after the Closing Date under
the Ahto Employment Agreement and the Ahto Noncompetition Agreement, neither
Newco nor Buyer will have any obligations or liabilities to, or related to, any
individual (or beneficiary of any individual) in connection with such
individual's employment by Seller or Parent including, but not limited to,
obligations arising in connection with Seller's or Parent's termination of his
or her employment with Seller or Parent at or prior to Closing, including,
without limitation, any and all benefits under or related to any Pension Plan,
any Welfare Plan, any Other Plan or any other benefit or obligation of
whatsoever nature, arising out of the employment relationship between Seller or
Parent and such individual.
3.14 Environmental Matters.
3.14(a) Hazardous Materials. For purposes of this section,
"Hazardous Materials" means any wastes, substances, or materials, whether
solids, liquids or gases, that are deemed hazardous, toxic, pollutants, or
contaminants, including but not limited to substances defined as "hazardous
wastes," "hazardous substances," "toxic substances," "radioactive materials," or
other similar designations in, or otherwise subject to regulation under, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C.
9601 et seq.; the Toxic Substance Control Act, 15 U.S.C. 2601 et seq.; the
Hazardous Materials Transportation Act, 49 U.S.C. 1802 et seq.; the Resource
Conservation and Recovery Act, 42 U.S.C. 9601 et seq.; the Clean Water Act, 33
U.S.C. 1251 et seq.; the Safe Drinking Water Act, 42 U.S.C. 300f ~.; the Clean
Air Act, 42 U.S.C. 7401 et seq.; or other applicable federal, state, or local
laws, including any plans, rules, regulations, orders, or ordinances adopted, or
other criteria and guidelines promulgated pursuant to the preceding laws or
other similar laws, regulations, rules, orders, or ordinances in effect as of
the date of this Agreement relating to the protection of human health and the
environment (collectively "Environmental Laws"). "Hazardous Materials" includes
but is not limited to polychlorinated biphenyls (PCBs), petroleum and petroleum
products (including, without limitation, crude oil or any fraction thereof),
asbestos, mercury and lead-based paints.
3.14(b) Release. For purposes of this section, "Release" means
any emission, spill, seepage, leak, escape, leaching, discharge, injection,
pumping, pouring, emptying, dumping, disposing, or release of Hazardous
Materials from any source (including, without limitation, the Property and
property adjacent thereto) into or upon the environment, including the air,
soil, improvements, surface water, groundwater, the sewer,-septic system, or
waste treatment, storage, or disposal systems at, on, above, or under the
Property, which occurred at any time prior to the Closing Date.
3.14(c) Environmental Representations and Warranties.
(i) There are no pending or, to the knowledge of Seller,
threatened actions, suits, claims, legal proceedings or any other proceedings
based on Hazardous Materials or the Environmental Laws relating to the Property,
or any part thereof, or otherwise arising from Seller's activities at the
Property involving Hazardous Materials;
(ii) There are no conditions, facilities, procedures or any
other facts or circumstances involving Hazardous Materials (a) present at the
Property or related Improvements, or disposed of by Seller upon or from the
Property or related Improvements, or (b) that, to Seller's knowledge, could give
rise to claims, expenses, losses, liabilities, or governmental action against
Buyer, including without limitation the following conditions arising out of or
attributable to the Assets or Seller's business and operations: (A) the presence
of any Hazardous Materials on the Property or the Release of any Hazardous
Materials by Seller or its Affiliates into the environment from the Property;
(B) the off-site disposal of Hazardous Materials originating on or from the
Property from Seller's or its Affiliate's business and operations; (C) the
Release of any Hazardous Materials by Seller or its Affiliates into any storm
drain, sewer, septic system or publicly owned treatment works; (D) any
noncompliance with federal, state or local requirements governing occupational
safety and health, or the presence or Release in or into the air, soil or water
supply systems of the Property of any Hazardous Materials; or (E) any facility
operations, procedures or designs, which do not conform to the statutory or
regulatory requirements of any Environmental Laws.
(iii) Neither polychlorinated biphenyls, mercury, nor
asbestos-containing materials are present on or in the Assets, the Property or
the Improvements relating thereto.
(iv) Except as set forth on Schedule 3.14(c)(iv) attached
hereto and made a part hereof, the Property contains no underground storage
tanks, or underground piping associated with tanks, used currently or in the
past for the management of Hazardous Materials.
(v) Seller has been duly issued, and currently has and will
maintain through the Closing Date, all permits, licenses, certificates and
approvals required under any Environmental Laws, which permits, licenses,
certificates and approvals are described on Schedule 3.14(c)(v) attached hereto.
3.14(d) Buyer Investigation. Seller hereby grants to Buyer, or
if appropriate, Seller shall cause its Affiliate to grant to Buyer, a license
(to the extent that Seller or such Affiliate itself has such a license) to enter
and inspect the Property. Such inspections, if any, shall be completed prior to
Closing. In order to complete such investigation, Buyer or its designated
consultant shall have the right but not the obligation: (1) to conduct tests of
the soil, surface or subsurface waters, and air quality at, in, on, beneath or
about the Property, in a manner consistent with good engineering practice; (2)
to inspect all records, reports, permits, applications, monitoring results,
studies, correspondence, data and any other information or documents relevant to
Hazardous Materials or other environmental conditions; and (3) to inspect all
buildings and equipment at the Property for asbestos-containing materials or
other Hazardous Materials. Buyer agrees to conduct such investigations in a
manner that minimizes the disruption to Seller's business activities, and Seller
agrees to permit Buyer reasonable access to all portions of the Property during
business hours. Buyer shall have the unilateral right, in its sole discretion,
to terminate its obligations under this Agreement without penalty on or before
the completion of the investigation if the investigation reveals any condition,
contamination or pollution existing or resulting from the operation or
possession of the Property or the conduct of any business or operations thereon
that have given or are likely to give rise to a material unsatisfied on-site or
off-site response, removal, closure or remedial obligations under any of the
Environmental Laws or have had or are likely to have a material adverse effect
upon Buyer's intended use of the Property or the Assets. Buyer agrees to keep
and hold confidential any and all reports, summaries, studies or results that
are the product of such investigations, and not to disclose such reports without
the written consent of Seller or unless required to do so by applicable law.
3.15 Labor Relations. There are no strikes, work stoppages,
grievance proceedings, union organization efforts, or other controversies
pending or threatened between Seller and any of its employees or agents or any
union or collective bargaining unit. Seller has complied and is in compliance in
all material respects with all laws and regulations relating to the employment
of labor, including, without limitation, provisions relating to wages, hours,
collective bargaining, occupational safety and health, equal employment
opportunity, and the withholding of income taxes and social security
contributions, insofar as they relate to the Assets or to Seller's business and
operations. Except as set forth in Schedule 3.15 hereto, there are no collective
bargaining agreements, employment agreements between Seller and any of its
employees or professional service contracts not terminable at will relating to
the Assets or Seller's business and operations. The consummation of the
transactions contemplated hereby will not cause Newco or Buyer to incur or
suffer any liability relating to, or obligation to pay, severance, termination,
or other payments to any Person or entity. Seller has previously delivered to
Buyer an accurate and complete list of all employees whose employment relates to
the Assets or to Seller's business and operations, and the positions and the
rate of compensation (including salary, bonuses and commissions) of each such
employee.
3.16 Insurance. Schedule 3.16 contains a list of all policies
of title, property, fire, casualty, liability and other forms of insurance of
any kind relating to the Assets or Seller's business and operations, including
policy numbers, policy periods, policy limits, and retention or deductible
amounts, and any pending claims thereunder. All such policies: (i) are in full
force and effect; (ii) are sufficient for compliance in all material respects by
Seller with all requirements of law and of all agreements to which Seller is a
party; (iii) are valid and enforceable policies; and (iv) insure against risks
of the kind customarily insured against and in amounts customarily carried by
corporations similarly situated and provide customary insurance coverage for the
Assets.
3.17 Disclosure. No representation or warranty by Seller in,
and no document, statement, certificate, opinion letter, schedule or exhibit to
be furnished or delivered to Buyer pursuant to, this Agreement contains or will
contain any material untrue or misleading statement of fact or omits or will
omit any fact necessary to make the statements contained herein or therein not
materially misleading.
4. Representations and Warranties by Buyer. Buyer represents,
warrants and covenants to Seller as follows:
4.01 Organization and Standing. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Buyer has all the requisite corporate power and corporate authority to
enter into and perform the terms of this Agreement and the agreements and
instruments to be executed by Buyer and to carry out the transactions
contemplated hereby and thereby.
4.02 Authorization. The execution, delivery and performance of
this Agreement and of the other agreements and instruments to be executed by
Buyer hereunder, and the consummation of the transactions contemplated hereby
and thereby, have been duly and validly authorized by all necessary corporate
actions of Buyer (none of which actions has been modified or rescinded and all
of which actions are in full force and effect). This Agreement constitutes, and
upon execution and delivery each other agreement and instrument to be executed
by Buyer hereunder will constitute, a valid and binding agreement and obligation
of Buyer, enforceable in accordance with its terms, except as enforceability may
be limited by (i) applicable bankruptcy, reorganization, insolvency, moratorium
and similar laws affecting the enforcement of creditor's rights and (ii) general
equitable principles (regardless of whether enforceability is considered in a
proceeding in equity or at law). Except for the consent of the Commission to the
assignment to Newco of the Licenses, the consent of the Commission to the change
of control of such Licenses that will occur upon Buyer's purchase of the Stock,
and the requirements of the HSR Act, the execution, delivery and performance by
Buyer of this Agreement and the other agreements and instruments to be executed
by Buyer hereunder will not require the consent, approval or authorization of
any Person, entity or governmental authority.
4.03 Qualification as Licensee. Buyer does not reasonably know
of a reason why it should not be found by the Commission to be qualified under
the Communications Act of 1934, as amended, and the Commission's rules and
regulations to obtain control of the Licenses by virtue of its purchase of the
Stock.
4.04 Disclosure. No representation or warranty by Buyer in,
and no document, statement, certificate, opinion letter, schedule or exhibit to
be furnished or delivered to Seller pursuant to, this Agreement contains or will
contain any material untrue or misleading statement of fact or omits or will
omit any fact necessary to make the statements contained herein or therein not
materially misleading.
4.05 Litigation. There is no suit, claim, action, proceeding
or investigation pending or, to the knowledge of Buyer, threatened, against or
affecting the Buyer which would, or would be reasonably likely to, materially
impair the consummation of the transactions contemplated by this Agreement.
4.06 Conflicts. The execution, delivery and performance of
this Agreement will not violate or result in a breach of any term of Buyer's
certificate of incorporation or bylaws or result in a breach of or constitute a
default under any term in any agreement or other instrument to which Buyer is a
party.
4.07 Investment in Stock. The Stock shall be acquired by Buyer
for investment for Buyer's account, not as nominee or agent for any Person, and
not with a view to the sale or distribution of all or any part thereof, and
Buyer has no present intention of selling, granting participation in or
otherwise distributing the same. Buyer does not have any contract, undertaking,
agreement or arrangement with any Person to sell, transfer or grant
participation to such Person with respect to the Stock. Buyer understands that
the transfer of the Stock is not registered under the Securities Act on the
ground that the sale of such Stock is made in reliance upon applicable
exemptions from the registration requirements of the Securities Act of 1933 and
is similarly exempt under any other applicable securities laws.
5. Application for Commission Consent. As promptly as practicable and
no later than ten (10) days following the execution of this Agreement, Seller
and Buyer shall participate in the filing of an application with the Commission
requesting its written consent to the assignment of the Licenses (and any
extensions and renewals thereof) from Seller to Vyvx, and to file an application
with the Commission for an STA. Seller and Buyer will diligently take, or fully
cooperate in the taking of, all necessary, desirable and proper steps, and
provide any additional information reasonably requested, and otherwise use their
reasonable efforts to obtain promptly the requested consent and approval of the
applications by the Commission; provided that none of the parties hereto shall
have any obligation to take any unreasonable steps to satisfy complainants, if
any. Seller and Buyer shall have the right to refuse to complete the Closing,
and to terminate this Agreement, in the event that the consents and approvals
described in this Section are conditional or are inadequate, and the
satisfaction of such condition or the rectification of such inadequacy would
have a material adverse effect on the value of this transaction. Each party
shall bear its own internal costs and expenses with regard to this Section;
however, Buyer shall bear the expense of the application filing fees and other
administrative costs imposed by the Commission.
6. Hart-Scott-Rodino. As promptly as practicable and no later than ten
(10) days following the execution of this Agreement, Seller and Buyer (or their
respective parent companies, as appropriate) shall complete any filing that may
be required pursuant to the HSR Act, or shall mutually agree that no such filing
is required. Seller and Buyer shall diligently take, or fully cooperate in the
taking of, all necessary and proper steps, and provide any additional
information reasonably requested in order to comply with, the requirements of
the HSR Act. Each party shall bear its own internal expenses with regard to this
Section; however, Buyer shall bear the expenses of the application filing fee
and the associated administrative costs.
7. Covenants and Agreements of Seller. Seller covenants and agrees with
Buyer as follows:
7.01 Negative Covenants. Pending and prior to the Closing,
Seller will not, and will not permit any Affiliates to, without the prior
written approval of Buyer, do or agree to do any of the following:
7.01(a) Dispositions: Mergers. Sell, assign, lease or
otherwise transfer or dispose of any of the Assets; or merge or consolidate with
or into any other entity or enter into any agreements relating thereto if such
merger or consolidation would effect a change of control of the Assets;
provided, however, that Seller and the other parties described above may sell,
assign, lease or otherwise transfer or dispose of any Asset described in
Schedule l(e) if such Asset is expended in the ordinary course of business,
consistent with such party's past business practices and with customary
practices in the satellite broadcast industry.
7.01(b) Accounting Principles and Practices. Change or
modify any of Seller's accounting principles or practices or any method of
applying such principles or practices if such principles, practices or method
relate to or affect the Assets or Seller's business and operations.
7.01(c) Additional Contracts. Materially modify or
amend any Seller Contract or enter into any other contracts, leases,
commitments, understandings, licenses, or other agreements relating to or
affecting the Assets or Seller's business and operations (collectively,
"Additional Contracts") or incur any obligation or liability (contingent or
absolute) relating to or affecting the Assets or Seller's business and
operations; provided, however, that Seller may enter into such Additional
Contracts in the ordinary course of business consistent with such party's past
business practices and with customary practices in the satellite broadcast
industry, so long as (i) such Additional Contracts do not, without Buyers prior
written consent, involve payments or obligations in excess of Twenty Thousand
Dollars ($20,000.00) for each such Additional Contract in any month, or One
Hundred Thousand Dollars ($100,000.00) for all such Additional Contracts in any
month in the aggregate, and (ii) each such Additional Contract is terminable by
such party on not more than thirty (30) days' prior written notice, unless Buyer
provides its prior written consent otherwise.
7.01(d) Breaches. Do or omit to do any act (or permit
such action or omission) which will cause a material breach of any Seller
Contract, employment contract, or any other contract, understanding, commitment,
obligation, lease, license or other agreement to which Seller is a party or by
which Seller is bound and which relates to or affects the Assets or Seller's
business and operations.
7.01(e) Actions Affecting Licenses or Contracts. Do or
omit to do any act which may jeopardize the validity or enforceability of or
rights under the Licenses, or any material lease or other contract, or which
materially diminishes the value thereof.
7.01(f) Accounts. Accelerate the collection of Accounts
Receivable, or decelerate the payment of accounts payable, except to conform
with Seller's past business practices.
7.01(g) Offers to Employees. Offer employment to any
employees that are involved regularly as consultants or otherwise in Seller's
business and operations as currently conducted, other than for employment
relating to Seller's business and operations, or take any action at any time to
prevent or to discourage any such employee from remaining employed in connection
with Seller's business and operations.
7.01(h) Solicitation. Take any action, either directly
or indirectly, through its Affiliates, any agent or otherwise, to solicit or
accept from, or discuss or explore with, any other Person or entity any offer or
pursue any expression of interest in or with respect to an acquisition,
combination or similar transaction involving the Assets or Seller's business and
operations.
7.01(i) Compensation. Increase in any manner the
compensation of any of the officers or other employees of Seller, except such
increases as are granted in the ordinary course of business in accordance with
Seller's customary practices (which will include normal periodic performance
reviews and related compensation and benefit increases).
7.02 Affirmative Covenants. Pending and prior to the Closing
Date, Seller (and Parent if applicable) will:
7.02(a) Preserve Existence. Preserve its corporate
existence and business organization intact, maintain its existing franchises and
licenses, use its commercially reasonable efforts to preserve for Newco and
Buyer its relationships with suppliers, customers, employees and others having
business relations with Seller, and keep all Assets in their present condition,
ordinary wear and tear excepted.
7.02(b) Normal Operations. Subject to the terms and
conditions of this Agreement (including, without limitation, Section 7.01), (i)
carry on Seller's business and operations, including without limitation, the
sale of services to customers, entering into other agreements, leases,
commitments or understandings in the usual and ordinary course of business
consistent with Seller's past business practices and with customary practices in
the satellite broadcast industry; (ii) pay or otherwise satisfy all obligations
relating to the Assets and Seller's business and operations as they come due and
payable; (iii) maintain all of the Assets in customary repair, order and
condition; (iv) maintain its books of account, records, and files in
substantially the same manner as heretofore; (v) pay the salary of and any and
all other compensation due to each Required Employee through the Closing Date,
(vi) expend the capital required to continue and maintain normal operations
consistent with the projection model assumptions contained in Seller's cash flow
quarterly forecast previously provided to Buyer by Christenberry Collet &
Company, Inc., a copy of which is attached hereto as Exhibit B, including
capital expenditures from and after September 1, 1996, through the Closing Date
in an amount not less than $1,500,000 for the deployment and operation of a
digital satellite network (the "Minimum Capital Expenditures") (which actual
capital expenditures as of the date of this Agreement are set forth on Schedule
7.02(b)(iv), which schedule shall be updated as of the Closing Date), and (vii)
notify Buyer immediately of any material adverse change in or to the Assets or
to Seller's business and operations, including but not limited to physical
damage to or destruction of any of the Assets, the termination of a Seller
Contract other than as a result of the ending of its term, or the voluntary or
involuntary termination of any member of management or economic harm to Seller's
business and operations.
7.02(c) Maintain Licenses. Maintain the validity of the
Licenses, and comply in all material respects with all rules and regulations of
the Commission.
7.02(d) Taxes. Pay or discharge when due and payable
all tax liabilities and obligations, including without limitation those Taxes
which relate to the Assets or Seller's business and operations, unless being
contested in good faith. Nothing in this Section shall limit the obligations of
Seller set forth in Section 3.12.
7.02(e) Corporate Action. Take all corporate action
under the law of any state having jurisdiction over such parties necessary to
effectuate the transactions contemplated by this Agreement and by the agreements
and instruments called for hereunder.
7.02(f) Bulk Sales. Take all necessary action to comply
with all applicable bulk transfer and similar laws in connection with the
transactions contemplated by this Agreement and the agreements and instruments
called for hereunder.
7.02(g) Access. Give to Buyer and Buyer's authorized
representatives full and complete access upon reasonable notice during normal
business hours to Seller's properties, books, records, contracts, commitments,
facilities, premises, and equipment and to Seller's officers and employees, all
of the foregoing to the extent that they relate to or affect the Assets or
Seller's business and operations.
7.02(h) Other Information; Supplements to Schedules.
Provide to Buyer all such other information (including information regarding
Seller's customers and suppliers) and copies of documents, as Buyer may
reasonably request, provided that they relate to or affect the Assets or
Seller's business and operations. Seller shall make reasonable efforts to, from
time to time prior to the Closing, and shall in any event no later than two (2)
business days prior to the Closing, supplement or amend the Schedules attached
hereto with respect to any matter hereafter arising or discovered by Seller,
which, if existing or occurring at the date of this Agreement, would have been
required to be set forth or described in such Schedules (collectively, the
"Amended Schedules").
7.02(i) Engineering Inspections. Prior to the Closing,
permit Buyer and Buyer's consulting engineers and other representatives, agents,
employees and independent contractors, at Buyer's expense, to conduct
engineering and other inspections of the Assets and the Seller's facilities in a
manner so as not to disrupt the operations of the Seller.
7.02(j) Insurance. Maintain in full force and effect
through the Closing Date all of Seller's existing casualty, liability, and other
insurance relating to or affecting the Assets or Seller's business and
operations in amounts not less than those in effect on the date hereof..
7.02(k) Financial and Operating Data. Provide Buyer
with Financial and Operating Data that has been updated as of a date for which
the Seller would have prepared financial statements in accordance with past
practices, together with a verification thereof by the Chief Financial Officer
of Seller. All of such updated Financial and Operating Data shall comply with
the requirements concerning Financial and Operating Data set forth in Section
3.04.
7.02(1) Violations. Upon receiving notice or otherwise
becoming aware of any violation relating to the Licenses, or relating to the
Assets or Seller's business and operations, of any rules and regulations of the
Commission, or any material violations under any other applicable statutes,
rules, regulations, or laws, promptly notify Buyer and, at Seller's expense,
take reasonable actions to cure all such violations prior to the Closing Date.
7.02(m) Consents. Use reasonable efforts to obtain
third party consents required to assign to Newco those agreements on Schedule
3.05(e)(iii). Seller shall not be required to pay any premiums or similar
amounts to obtain any consent unless expressly required by the terms of the
subject agreement.
7.03 Confidentiality. The fact and existence of this Agreement and
other agreements contemplated hereunder, the terms and conditions contained
herein, as well as the substance of any negotiations between the parties with
respect to the matters contemplated herein will be deemed confidential and
subject to the provisions of the Nondisclosure Agreement, and will not be
disclosed to third parties, including without limitation, by means of a press
release, without the prior consent of Buyer or Seller, as the case may be,
unless otherwise required by law.
7.04 Employees.
7.04(a) Offers of Employment. Buyer shall not be
obligated to hire or continue to employ any particular employee or employees of
Seller or Parent. Buyer shall have the option, but not the obligation, to
interview and extend, in its sole discretion, offers of employment (subject to
Closing) to the management and other employees of Seller and to such employees
of Seller's Affiliates (including the Parent) whose daily activities are
primarily related to Seller's business and operations, and to such additional
employees of Seller or its Affiliates as the parties may agree in writing, on
terms and conditions satisfactory to Buyer.
7.04(b) Designated Employees. Seller shall enter into
the Administrative Services Agreement as of the Closing Date. Seller agrees, and
the Administrative Services Agreement shall provide, that those employees of
Seller and its Affiliates whose daily activities are primarily related to
Seller's business and operations who (i) are not hired by Buyer at Closing and
(ii) are retained by Seller under the terms of the Administrative Services
Agreement (collectively, the "Designated Employees") shall be retained as
employees of Seller, with Buyer reimbursing Seller for the associated salaries,
benefits, insurance premiums and other items described in the Administrative
Services Agreement. Seller's obligation under the Administrative Services
Agreement to provide the services described therein shall not limit Seller's
right to terminate certain Designated Employees (for cause or otherwise) or
otherwise exercise its rights as the employer of the Designated Employees.
7.04(c) Severance Pavements: Bonus. Seller agrees, and
the Administrative Services Agreement shall provide, that Seller and Buyer shall
be responsible for severance payments as follows:
(i) As to Designated Employees in Forest City, Iowa (the "Forest City Designated
Employees"):
A. Buyer shall be responsible for severance payments (based on
Buyer's severance policies) for all Designated Forest City Employees who are
hired by Buyer at any time.
B. If a Designated Forest City Employee is not hired by Buyer:
(I) If that employee remains at his or her position in Forest
City, Iowa, until such position is eliminated, and such
employee is terminated by Seller during the term (or upon
the end of the term) of the Administrative Services
Agreement, Seller shall be responsible for that employee's
severance payment based on Seller's severance policy (the
"Base Seller Severance") and Seller shall pay an
additional severance to such employee in an amount equal
to fifty percent (50%) of the Base Seller Severance (the
"Added Severance"). Buyer shall reimburse Seller for the
amount of the Added Severance.
(II) If that employee does not remain at his or her position in
Forest City until such position is eliminated, Seller
shall be responsible for that employee's Base Seller
Severance, if any, but such employee shall not be entitled
to an Added Severance.
(ii) Buyer shall be responsible for severance payments for all Designated
Employees not located in Forest City, Iowa (the "Non-Forest City Designated
Employees"), which severance shall be paid as follows:
(a) If the Designated Non-Forest City Employee is terminated
by Seller and hired by Buyer, then Buyer shall, upon its
termination of such employee, be responsible for such
employee's severance payment, if any, based on Buyer's
severance policy.
(b) If the Designated Non-Forest City Employee remains at his
or her position until such position is eliminated, and
such employee is terminated by Seller during the term (or
upon the end of the term) of the Administrative Services
Agreement, then Seller shall be responsible for that
employee's Base Seller Severance and Added Severance
(based on Seller's severance policy), both of which Buyer
shall reimburse to Seller.
(c) If the Designated Non-Forest City Employee does not remain
at his or her position until such position is eliminated,
then Seller shall be responsible for that employee's Base
Seller Severance (based on Seller's severance policy), if
any, for which Buyer shall reimburse Seller, and such
employee shall not be entitled to an Added Severance
(iii) Seller shall pay to each of Theodore L. Henry, Richard H. Leet, II, and
Tom O. Mikkelsen (each being a "Designated Manager") a bonus based upon the
following terms and conditions:
A. The Designated Manager will remain employed by Seller or Vyvx for
a period of at least six (6) months following the Closing Date, unless
terminated for gross negligence or willful misconduct
B. During the six (6) month time period, the Designated Manager will
receive equivalent benefits to those he is currently receiving (subject to the
terms of Section 8.03 below if employed by Buyer) and will be paid at his
current salary level.
C. During the six (6) month time period, the Designated Manager will
not be required to transfer to another geographic location in order to maintain
his employment.
D. If the Designated Employee remains with Seller (or is hired by Buyer
and remains with Buyer) for a period of six (6) months after the Closing Date,
he will receive a bonus in an amount equal to one year's pay at his current
salary. This bonus is in lieu of any other severance pay to which such
Designated Manager may have been entitled.
E. If the Designated Manager voluntarily leaves employment prior to the
six (6) month time period or if he is terminated for gross negligence or willful
misconduct, he will not receive the above-mentioned bonus.
7.04(d) WARN Act Compliance. Seller, acknowledges, and
the Administrative Services Agreement shall provide, that Seller, as employer of
Designated Employees, is the appropriate party to issue any notice required to
be given at any time under the WARN Act with respect to Designated Employees in
Forest City, Iowa. Seller agrees that it shall provide, (i) to such Designated
Employees who are still employed by Seller in Forest City, Iowa, and providing
services to Buyer pursuant to the Administrative Services Agreement and, (ii) to
the appropriate governmental entity, such written notices as are required by the
WARN Act. Seller shall fulfill such obligations within the time periods
prescribed by the WARN Act in the event Buyer notifies Seller of its intention
to terminate utilization of the services of Designated Employees under the
Administrative Services Agreement, close the Forest City, Iowa, facilities, or
take other actions that, in the opinion of Seller's counsel, would require
Seller to provide notice under the WARN Act; provided, however, that Buyer shall
notify Seller of the foregoing matters no later than such date as will
reasonably allow Seller to prepare and deliver the required notices no later
than the number of days prior to the actions described as is required by the
WARN Act.
7.04(e) Employee Restrictions For a period of six (6)
months following the Closing Date, neither Seller nor its Affiliates, nor any
shareholders thereof nor any business enterprise in which Seller, its Affiliates
or the respective shareholders thereof hold a controlling interest as of the
Closing Date (collectively, the "Restricted Employers") will hire, without
Buyer's prior consent, any individuals who are employees of Buyer or Newco (or
their respective Affiliates) as of the date of determination and were employees
of Seller (or any Affiliate of Seller that is acquired or whose assets are
acquired by Buyer pursuant to this Agreement) as of the Closing Date
(collectively, the "Restricted Employees"); provided, however, that if Newco or
Buyer terminates such employees, Seller shall have the option to offer
employment to such employees. For a period of two (2) years following the
Closing Date, the Restricted Employers shall not solicit for employment any
Restricted Employees without the prior written consent of Buyer.
7.05 Transfers Into Seller. All Assets that are to be
transferred into Seller prior to being transferred or assigned from Seller to
Newco shall be transferred or assigned in such a manner and upon such terms as
are necessary to transfer to Seller title to the Assets of not less than the
same quality of title that Newco is to obtain under the terms of this Agreement.
Seller shall deliver to Buyer at Closing (i) true and correct copies of all
agreements, assignments and other instruments of transfer that were executed,
delivered and, where applicable, recorded in the appropriate public records by
Seller in form sufficient to transfer to Seller title as described above and in
form reasonably satisfactory to Buyer's counsel, and (ii) true and correct
copies of such agreements or instruments as Buyer may reasonably request to
confirm the authority of the parties to the agreements, assignments and
instruments described above to enter into and perform the terms thereof and to
bind the parties thereto.
7.06 Leased Assets. Seller shall exercise any applicable
option to purchase or take other actions, at Seller's cost and expense, to
obtain ownership of and transfer to Newco at Closing any Assets which are held
by Seller under a capital lease, including without limitation Assets comprised
of equipment on the Property, equipment in transit or equipment in storage, and
including without limitation equipment leased under the capital leases on
Schedule 7.06A (the leases therefor being referred to collectively as the
"Unassumed Capital Leases" and such leased equipment being referred to as the
"Unassumed Capital Lease Equipment"), but excluding (i) equipment that Seller is
unable to purchase prior to the end of the term of the subject capital lease due
to an expressed prohibition in the terms of the capital lease and despite
Seller's reasonable efforts to negotiate for the purchase of such equipment
despite such prohibiting terms (such capital leases being referred to as the
"Continuing Capital Leases" and such equipment being referred to as the
"Continuing Capital Lease Equipment") which Continuing Capital Leases are
described on Schedule 7.06B, and (ii) any office equipment used in the ordinary
course of Seller's business such as photocopy machines, fax machines and postage
meters (the leases for such office equipment being referred to as the
"Continuing Office Equipment Leases" and such office equipment being referred to
as the "Continuing Office Lease Equipment"), which Continuing Office Equipment
Leases are described on Schedule 7.06C.
7.07 Amended Forest City Lease. Seller and Parent shall amend
the Lease Agreement dated August 15, 1995, relating to the Property and
Improvements in Forest City, Iowa (such lease, as amended, shall be referred to
herein as the "Amended Forest City Lease"), so as to (i) terminate the lease
term as of December 31, 1996, with any continuation thereof being on a
month-to-month basis at Buyer's sole discretion through June 30, 1997, (ii)
remove any security interest provided therein relating to any Assets located on
the leased premises, and (iii) remove any provision providing for the leasing of
equipment or other personal property to the lessee thereunder (any such personal
property that constitutes Assets shall be purchased by Seller at or prior to
Closing and transferred to Buyer free and clear of any Encumbrances).
7.08 Diggan Software. Parent and Seller shall, in addition to
fulfilling their indemnification obligations in Section 15, take such actions as
are necessary, at Parent's and Seller's sole expense, to allow Newco and/or
Buyer (or their respective successors or assigns) to utilize in perpetuity, only
to the same extent utilized by Seller as of the Closing Date or anticipated by
Seller as of the Closing Date, without payment of royalties, license fees,
damages or any other fees or costs, the software that is or was utilized by
Seller and which was is or was the subject of either Diggan v. Cycle Sat, Inc.,
Law No. 14954-0295, In the Iowa District Court for Winnebago County, and any
appeals thereof, or Diggan v. Cycle-Sat. Inc., et al, Civil Action No. C90-3020,
United States District Court for Northern District of Iowa, and any appeals
thereof (collectively, the "Diggan Software"), or procure for Newco and/or Buyer
(or their respective successors or assigns), at Parent's and Seller's sole
expense, the equivalent of the Diggan Software that may be utilized to the same
extent as described above, in perpetuity, and without payment of royalties,
license fees, damages or any other fees or costs. This covenant shall survive
the Closing without limitation.
7.09 Winnebago. Seller shall obtain and transfer (or shall
cause Parent to transfer) to Buyer at Closing, Buyer's choice of Parent's latest
model of a Winnebago recreational vehicle with a minimum retail value of
$80,000, with a full factory warranty (the "Winnebago"). If the actual retail
value of the chosen Winnebago (with a retail value of not less than $80,000) is
$90,000 or more, Buyer shall pay to Seller at Closing the difference between
$90,000 and the retail value of such Winnebago. For the purpose of this
Agreement, the Winnebago shall be deemed to be an "Asset" and shall be subject
to all terms and conditions in this Agreement relating to Assets.
7.10 Cooperation. From the date hereof through the Closing
Date, Seller will take all reasonable actions required of it in order to for
Buyer to satisfy the conditions to Closing set forth in Section 10 of this
Agreement, including cooperating with Buyer to obtain the FCC Order and the STA,
and to obtain early termination of the HSR Act waiting period.
8. Covenants and Agreements of Buyer. Buyer covenants and agrees with
Seller as follows:
8.01 Confidentiality. The fact and existence of this Agreement
and other agreements contemplated hereunder, the terms and conditions contained
herein, as well as the substance of any negotiations between the parties with
respect to the matters contemplated herein will be deemed confidential and
subject to the provisions of the Nondisclosure Agreement, and will not be
disclosed to third parties, including without limitation, by means of a press
release, without the prior consent of Buyer or Seller, as the case may be,
unless otherwise required by law.
8.02 Corporate Action. Prior to the Closing, Buyer shall take
all corporate action under the law of the State of Delaware necessary to
effectuate the transactions contemplated by this Agreement and the agreements or
instruments called for hereunder.
8.03 Employee Issues. Buyer shall enter into the
Administrative Services Agreement as of the Closing Date. In addition to the
obligations under the Administrative Services Agreement, Newco shall assume the
liabilities and obligations of Seller to be performed after the Closing Date
under the Ahto Employment Agreement employment and the Ahto Noncompetition
Agreement. Buyer agrees, and the Administrative Services Agreement shall
provide, that if Buyer hires any employees of Seller or any Affiliate of Seller
either upon the Closing Date, during the term of the Administrative Services
Agreement or upon the termination thereof, Buyer shall give each of such
employees credit for his or her prior service with Seller or its Affiliates with
respect to those of Buyer's employee benefits which are substantially similar to
the employee benefits offered to such employee by Seller (including, without
limitation, vacation and severance benefits). Buyer shall not be obligated to
give any employee credit for his or her prior service with Seller or its
Affiliates with respect to those types of employee benefits which were not
offered to such employee by Seller.
8.04 Cooperation. From the date hereof through the Closing
Date, Buyer will take all reasonable actions required of it in order for Seller
to satisfy the conditions to Closing set forth in Section 9 this Agreement,
including cooperating with Seller to obtain the necessary consents, including
the FCC Order and the STA, and to obtain early termination of the HSR Act
waiting period.
8.05 Transfer Tax. Buyer will take all necessary action to
provide for the payment of all applicable state sales, transfer and use taxes
arising out of the transaction contemplated by this Agreement.
9. Conditions Precedent to Buyer's Obligation to Close. The
obligations of Buyer to purchase the Stock and to proceed with the Closing are
subject to the satisfaction (or waiver by Buyer) at or prior to the Closing of
each of the following conditions:
9.01 Representations and Covenants. (i) The representations
and warranties of Seller and Parent made in this Agreement or in any agreement
or instrument called for hereunder shall have been true and correct when made,
and shall be true and correct on the Closing Date as though such representations
and warranties were made on and as of the Closing Date; and (ii) Seller and
Parent, as applicable, shall have performed and complied with all covenants and
agreements required by this Agreement or any agreement or instrument called for
hereunder to be performed or complied with by Seller or Parent prior to the
Closing.
9.02 Consents. Seller shall have obtained prior to Closing (i)
consents to the assignment to Newco of the contracts that are listed in Schedule
3.05(e)(iii) and consents to the change of control effected by Buyer's purchase
of the Stock, and (ii) all other consents necessary to consummate the
transactions contemplated hereby (except the FCC Order and STA, which shall be
governed by Section 9.04, and consents under the HSR Act, which shall be
governed by Section 9.07), with none of the foregoing being conditioned upon
Buyer's payment of any amount to the consenting party unless previously agreed
to by Buyer (collectively, the "Required Consents"). If one or more of the
Required Consents are not received and delivered to Buyer at or prior to
Closing, Buyer shall have the option not to close.
9.03 Delivery of Documents. Seller shall have delivered to
Buyer all agreements, instruments and documents required to be delivered by
Seller to Buyer pursuant to Section 11.02.
9.04 FCC Order. The FCC Order or the STA shall have been
issued.
9.05 Financial Statements. Seller shall have provided Buyer
with the updated Financial and Operating Data referred to in Section 7.02(k)
hereof.
9.06 Legal Proceedings. No action or proceeding by or before
any governmental authority shall have been instituted or threatened (and not
subsequently dismissed, settled or otherwise terminated) which might restrain,
prohibit or invalidate the transactions contemplated by this Agreement or any
agreement or instrument called for hereunder, other than an action or proceeding
instituted or threatened by Buyer.
9.07 Hart-Scott-Rodino. All applicable waiting periods under
the HSR Act shall have expired or terminated.
9.08 Absence of Material Change. The Assets shall not have
suffered a material adverse change since the date of the most recent balance
sheet previously delivered by Seller to Buyer as part of the Financial and
Operating Data, and there shall have been no material changes since such date in
the business, operations, prospects, condition (financial or otherwise),
properties, assets or liabilities relating to the Assets or Seller's business
and operations, except changes contemplated by this Agreement and changes in the
ordinary course of business which are not (either individually or in the
aggregate) materially adverse.
9.09 Administrative Services Agreement. The parties shall have
entered into the Administrative Services Agreement.
10. Conditions Precedent to Seller's Obligation to Close. The
obligations of Seller to sell, transfer, convey and deliver the Assets, sell the
Stock, and to proceed with the Closing are subject to the satisfaction (or
waiver by Seller) at or prior to the Closing of each of the following
conditions:
10.01 Representations and Covenants. The representations and
warranties of Buyer made in this Agreement or in any agreement or instrument
called for hereunder shall have been true and correct when made, and shall be
true and correct on the Closing Date as though such representations and
warranties were made on and as of the Closing Date; and Buyer shall have
performed and complied with all covenants and agreements required to be
performed or complied with by Buyer prior to the Closing.
10.02 Delivery by Buyer. Buyer shall have delivered to Seller
the Purchase Price (as adjusted pursuant to Section 12), and all agreements,
instruments and documents required to be delivered by Buyer to Seller pursuant
to Section 11.03.
10.03 FCC Order. The FCC Order or the STA shall have been
issued.
10.04 Legal Proceedings. No action or proceeding by or before
any governmental authority shall have been instituted or threatened (and not
subsequently dismissed, settled, or otherwise terminated) that might restrain,
prohibit, or invalidate the transactions contemplated by this Agreement or any
agreement or instrument called for hereunder, other than an action or proceeding
instituted or threatened by Seller.
10.05 Hart-Scott-Rodino. All applicable waiting periods under
the HSR Act shall have expired or been terminated.
10.06 Administrative Services Agreement. The parties shall
have entered into the Administrative Services Agreement.
10.07 Guaranty. The Parent shall have been released from all
guaranty obligations with respect to any Seller Contracts assumed by Newco and
Buyer.
11. The Closing.
11.01 Closing. The Closing hereunder shall be held on a date
agreed to by Buyer and Seller (the "Closing Date"), and in any event not later
than ten (10) business days following the date after which both the FCC Order
has been issued and the parties have received HSR Act clearance (or early
termination of the applicable waiting period). The Closing shall be held at
10:00 A.M. local time at the offices of Seller in Iowa or at such other time and
place as the parties may agree.
11.02 Delivery by Seller. At or before the Closing, Seller
shall deliver to Buyer:
11.02(a) Transfer Instruments; Newco Items.
(i) All original agreements, assignments and other instruments
of transfer, dated prior to or as of the Closing Date, that were executed,
delivered and, where applicable, recorded in the appropriate public records by
Seller in form sufficient to transfer to Newco title to the Assets of the
quality required under the terms of this Agreement and reasonably satisfactory
to counsel to Buyer;
(ii) certificates representing all of the Stock, duly endorsed
in blank or together with executed stock powers duly endorsed in blank;
(iii) all minute books, stock transfer books and corporate
seals of Newco that are in the possession of Seller or Parent; and
(iv) the resignations of the members of the Board of Directors
and officers of Newco.
11.02(b) Additional Items.
(i) Updated Financial and Operating Data in
accordance with Section 3.04;
(ii) verification of Updated Financial and Operating
Data in accordance with Section 3 .04;
(iii) the Estoppel Certificates;
(iv) the Amended Forest City Lease;
(v) all other documents, instruments and writings
required to be delivered to Buyer at Closing
under the terms of this Agreement; and
(vi) such other certificates, opinions, instruments
or documents as Buyer may reasonably request in
order to effectuate and document the
transactions contemplated hereby.
11.02(c) Consents. The Required Consents.
11.02(d) Certificate Concerning Amendments and Additional
Contracts. A certificate of Seller describing all amendments or modifications to
any Seller Contract and all Additional Contracts made or entered into between
the date hereof and the Closing Date, and certifying that each amendment or
modification and/or each such Additional Contract, as the case may be, was
entered into in accordance with Section 7.01.
11.02(e) Termination Statements. If Seller was unable
after making reasonable efforts to obtain and file the appropriate termination
statements and other releases relating to the Encumbrances prior to Closing,
except for the Withheld Releases, Seller shall deliver at Closing such
termination statements and releases (fully and properly executed) as are
necessary to terminate any filings relating to Encumbrances required to be
released by this Agreement, which Buyer may file in the appropriate
jurisdictions at Seller's expense.
11.02(f) Certified Resolutions; Corporate Documents.
(i) A copy of the resolutions of directors (and
shareholders if required by applicable law or
governing instruments) of Seller and Newco,
certified as being correct and complete and
then in full force and effect, authorizing the
execution, delivery and performance of this
Agreement, and of the agreements or instruments
called for hereunder, and the consummation of
the transactions contemplated hereby and
thereby;
(ii) copies of the by-laws of Seller and Newco and
copies of the certificates of incorporation of
Seller and Newco, all certified by the
respective Secretaries thereof as being true,
correct and complete as of the Closing Date.
11.02(g) Officers' Certificates.
(i) Certificates of Seller and Parent signed by the
respective authorized officers thereof
certifying that the representations and
warranties of such parties made herein were
true and correct as of the date of this
Agreement and are true and correct as of the
Closing Date, and that such parties have
performed and complied with all covenants and
agreements required to be performed or complied
with by such parties on or prior to the
Closing; and
(ii) Certificates signed by the respective
authorized officers of Parent and Seller as to
the incumbency of the appropriate officers
thereof.
11.02(h) Opinion of Counsel. An opinion of counsel to
Seller, dated the Closing Date and addressed to Buyer, in form and substance
reasonably acceptable to Seller and Buyer.
11.03 Delivery by Buyer. At or before the Closing, Buyer shall
deliver to Seller:
11.03(a) Payments. The Purchase Price in the amount (as
adjusted as provided in this Agreement) and in the manner set forth in Section
2.
11.03(b) Additional Items.
(i) all other documents, instruments and writings
required to be delivered to Seller at Closing
under the terms of this Agreement; and
(ii) such other certificates, opinions, instruments
or documents as Seller may reasonably request
in order to effectuate and document the
transactions contemplated hereby.
11.03(c) Certified Resolutions; Corporate Documents.
(i) A copy of the resolutions of directors (and
shareholders if required by applicable law or
governing instruments) of Buyer, certified as
being correct and complete and then in full
force and effect, authorizing the execution,
delivery and performance of this Agreement, and
of the agreements or instruments called for
hereunder, and the consummation of the
transactions contemplated hereby and thereby;
(ii) a copy of the by-laws of Buyer and a copy of
the certificate of incorporation of Buyer, both
certified by the Secretary of Buyer as being
true, correct and complete as of the Closing
Date.
11.03(d) Officers' Certificates.
(i) A certificate of Buyer signed by an authorized
officer certifying that the representations and
warranties of Buyer made herein were true and
correct as of the date of this Agreement and
are true and correct as of the Closing Date,
and that Buyer has performed and complied with
all covenants and agreements required to be
performed or complied with by Buyer prior to
the Closing; and
(ii) a certificate signed by an authorized officer
of Buyer as to the incumbency of the
appropriate officers of Buyer.
11.03(e) Opinion of Counsel. An opinion of counsel to
Buyer, dated the Closing Date and addressed to Seller, in form and substance
reasonably acceptable to Buyer and Seller.
12. Adjustments.
12.01 Increase or Decrease in Net Working Capital. The
Purchase Price shall be decreased or increased, respectively, by the amount by
which, as of the Closing Date, Seller's net working capital (current assets,
excluding any amounts relating to capital expenditures for deployment and
operation of the digital satellite network, less current liabilities, excluding
any funded debt therein ) is less than $3,700,000 or greater than $3,800,000, as
reflected on the balance sheet to be prepared by Seller relating to the period
ending as of the Closing Date (the "Closing Balance Sheet") and provided to
Buyer within forty-five (45) days of the Closing Date. Such adjustment, if any,
shall be made pursuant to the provisions of Section 12.07.
12.02. Uncollected Accounts Receivable. In the event that
the net amount of Accounts Receivable (Accounts Receivable less corresponding
bad debt reserves) reflected on the Closing Balance Sheet exceeds the actual
aggregate amount of such Accounts Receivable collected by Buyer within six (6)
months after the Closing Date, Buyer may, at its option, make written demand to
Seller for the payment of the amount of such difference, in which event Seller
or Parent shall pay such amount within five (5) business days of receipt of such
demand therefor. Buyer shall employ substantially the same time, effort or
methods toward collecting such Accounts Receivable as Buyer devotes to
collecting its own accounts receivable in the ordinary course of its business.
If Seller and Buyer do not, after a good faith attempt, reach agreement with
regard to the amount due and owing from Parent or Seller under this Section, the
dispute shall be resolved be means of the arbitration procedure described in
Section 12.07. Upon Seller's payment as described above, Buyer shall assign its
right, title and interest in and to the corresponding Accounts Receivable to
Seller.
12.03 Minimum Capital Expenditures. The Purchase Price
shall be increased or decreased, respectively, by the amount by which the
Minimum Capital Expenditures are greater or less than $1,500,000 as of the
Closing Date, as set forth on Schedule 7.02(b)(iv).
12.04 Continuing Capital Leases. The Purchase Price shall
be decreased by the amount of Seller's obligations under the Continuing Capital
Leases, including any amounts that are to be paid at the end of the respective
terms thereof in order for the lessee to acquire the Continuing Capital Lease
Equipment, as set forth on Schedule 7.06B hereto.
12.05 Ahto Noncompetition Agreement. The Purchase Price
shall be decreased by $808,500, being the amount owed as of the Closing Date
under the Ahto Noncompetition Agreement.
12.06 Firstar Leases. The Purchase Price shall be
increased by $20,000, being the amount that Buyer has agreed to pay toward
Seller's buy-out of the Firstar Master Lease Agreement with Firstar Leasing
Services Corporation dated April 27, 1994, and the individual Lease Schedules
thereunder numbered 9001, 9002, 9003, 9004 and 9005.
12.07 Adjustment Closing. Any additional amount required
to be paid under this Section (other than the uncollected Accounts Receivables,
which shall be governed by Section 12.02) shall be paid within five (5) business
days of Buyer's receipt of the Closing Balance Sheet. If Seller and Buyer do
not, after a good faith attempt, reach agreement with regard to the amounts to
be paid in this Section, Seller and Buyer will submit the dispute for resolution
to a nationally recognized certified public accountant which is mutually
acceptable to both parties (the "Arbitrator"). Promptly, but not less than
twenty (20) days after its acceptance as Arbitrator, the Arbitrator will
determine, based solely on presentation by the parties, and not by independent
review, only those issues in dispute. The Arbitrator will be instructed to
resolve such issues in a manner consistent with generally accepted accounting
principles, consistently applied, and the purposes and intent of the Agreement.
The Arbitrator's determination will be conclusive and binding on the parties.
Each party will bear its own costs and the costs of the Arbitrator will be
shared equally by the parties.
13. Possession and Control. Between the date hereof and the Closing
Date, Buyer shall not directly or indirectly control, supervise or direct, or
attempt to control, supervise or direct, Seller's business and operations, and
such operation, including complete control and supervision of all programs,
shall be the sole responsibility of Seller; provided, however, that Buyer shall
be entitled to inspect the Assets as provided in Section 7.02 so that an
uninterrupted and efficient transfer of ownership may be effected, and Buyer be
entitled to exercise its rights to require its consent to certain Additional
Contracts as provided in Section 7.01(d). On and after the Closing Date, neither
Seller nor any other Transferor shall have any control over, or right to
intervene or participate in, what is, prior to the Closing, Seller's business
and operations (including the Assets).
14. Risk of Loss. The risk of loss or damage by fire or other casualty
or cause to the Assets until the Closing Date shall be upon Seller. In the event
such loss or damage shall not be restored, replaced, or repaired as of the
Closing Date, Buyer shall, at its option, either:
(a) proceed with the Closing and receive all insurance proceeds to
which Seller would be entitled as a result of such loss or damage; provided,
however, that if such proceeds do not equal the loss and the loss is less than
$500,000 in the aggregate, the Purchase Price shall be reduced at Closing by an
amount equal to such deficiency, or
(b) terminate this Agreement, in which event no party hereunder
shall have any further liability to any other party hereunder (except for
Sections 7.03, 8.01, 19, 20 and 28, which shall survive such termination).
15. Survival: Indemnification.
15.01 Survival of Seller's Representations. Except as
otherwise specified, the representations and warranties made by Seller and
Parent in this Agreement or pursuant hereto shall survive the Closing Date for a
period of one (1) year (except for the representations and warranties in (a)
Section 3.12, which shall survive the Closing for a period of three (3) years
and (b) Section 3.14, which shall survive the Closing Date for a period of five
(5) years) and shall also survive and shall be unaffected by (and shall not be
deemed waived by) any investigation, audit, appraisal, or inspection at any time
made by or on behalf of Buyer.
15.02 Indemnification by Seller. Subject to the conditions
and provisions of Section 15.05, Seller and Parent, jointly and severally, agree
to indemnify, defend and hold harmless the Buyer Indemnitees from and against
any and all demands, claims, complaints, actions or causes of action, suits,
proceedings, investigations, arbitrations, assessments, losses, damages,
liabilities, costs and expenses, including, but not limited to, interest,
penalties and reasonable attorneys' fees and disbursements, asserted against,
imposed upon or incurred by the Buyer Indemnitees, directly or indirectly, by
reason of or resulting from (a) any liability or obligation of or claim against
a Buyer Indemnitee (whether absolute, accrued, contingent or otherwise and
whether a contractual, tax or any other type of liability or obligation or
claim) not expressly assumed by Newco pursuant to Section 2, arising out of,
relating to or resulting from the businesses and operations of Seller, or
relating to or resulting from the Assets, during the period prior to the Closing
Date; (b) any misrepresentation or breach of the representations and warranties
of Seller or Parent contained in or made pursuant to this Agreement; (c) any
noncompliance by Seller or Parent with any covenants, agreements or undertakings
of Seller or Parent contained in or made pursuant to this Agreement, or (d)
without limiting any of the foregoing, each of the matters described or which
were required to have been described on Schedule 3.03. Without limiting any of
the foregoing, such indemnification with respect to a breach of the
environmental representations and warranties set forth in Section 3.14(c) shall
include, without limitation, any indemnification against claims, expenses,
losses or liabilities resulting from the alleged exposure of any Person to
Hazardous Materials, regardless of whether such exposure resulted from
activities of Seller or its Affiliates, or of the predecessors in interest of
thereof, or resulting from any on-site or off-site response, removal, closure or
remedial actions arising out of or relating to environmental matters, including
without limitation any on-site or off-site response, removal, closure or
remedial actions that Seller or its Affiliates commenced prior to Closing on the
Property (which Seller shall complete at its own expense). In the event of any
indemnification of Buyer pursuant to this Section 15.02, Buyer shall be
entitled, in addition to its rights and remedies at law or in equity, to deduct
the amount of such indemnification from any payment due or otherwise made or to
be made to Seller in connection with this Agreement or the transactions
contemplated hereby.
15.03 Survival of Buyer's Representations. The
representations and warranties made by Buyer in this Agreement or pursuant
hereto shall survive the Closing Date for a period of one (1) year, and shall
also survive and shall be unaffected by (and shall not be deemed waived by) any
investigation, audit, appraisal or inspection at any time made by or on behalf
of Seller.
15.04 Indemnification by Buyer. Subject to the conditions
and provisions of Section 15.05, Buyer hereby agrees to indemnify, defend and
hold harmless the Seller Indemnitees from and against all demands, claims,
complaints, actions, suits, proceedings, investigations, arbitrations, or causes
of action, assessments, losses, damages, liabilities, costs and expenses,
including, but not limited to, interest, penalties and reasonable attorneys'
fees and disbursements, asserted against, imposed upon or incurred by a Seller
Indemnitee, directly or indirectly, by reason of or resulting from (a) any
liability or obligation of or claims against a Seller Indemnitee (whether
absolute, accrued, contingent or otherwise and whether contractual, tax or any
other type of liability or obligation or claim) expressly assumed by Buyer
hereunder; (b) any misrepresentation or breach of the representations and
warranties of Buyer contained in or made pursuant to this Agreement; (c) any
noncompliance by Buyer with any covenants, agreements or undertakings of Buyer
contained in or made pursuant to this Agreement; or (d) any liability or
obligation with respect to the Assets or the business and operations of Newco
arising after the Closing Date other than those relating to the Unassumed
Liabilities.
15.05 Conditions of Indemnification for Third Party
Claims. The obligations and liabilities of Seller, Parent and of Buyer hereunder
with respect to their respective indemnities pursuant to this Section 15
resulting from any claim or other assertion of liability by third parties
(hereinafter called collectively, "Claims"), shall be subject to the following
terms and conditions:
15.05(a) The party seeking indemnification
(the "Indemnified Party") must give the other party or parties, as the case may
be (the "Indemnifying Party"), notice of any such Claim promptly after the
Indemnified Party receives notice thereof; provided, however, that any failure
to give such notice will not be deemed a waiver of any rights of the Indemnified
Party except to the extent the rights of the Indemnifying Party are actually and
materially prejudiced by such failure.
15.05(b) The Indemnifying Party shall have
the right to undertake (and with respect to the matters described in Schedule
3.03, shall undertake to the extent requested by Buyer), by counsel or other
representatives of its own choosing, the defense of such Claim.
15.05(c) If the Indemnifying Party shall
elect not to undertake such defense (except with respect to the matters
described in Schedule 3.03), or within a reasonable time after notice of any
SUCH Claim from the Indemnified Party shall fail to defend, the Indemnified
Party (upon further written notice to the Indemnifying Party) shall have the
right to undertake the defense, compromise or settlement of such Claim, by
counsel or other representatives of its own choosing, on behalf of and for the
account and risk of the Indemnifying Party (subject to the right of the
Indemnifying Party to assume defense of such Claim at any time prior to
settlement, compromise or final determination thereof).
15.05(d) Anything in this Section 15.05 to
the contrary notwithstanding, if there is a reasonable probability that a Claim
may materially and adversely affect the Indemnified Party other than as a result
of money damages or other money payments, (i) the Indemnified Party shall have
the right, at its own cost and expense, to participate in the defense,
compromise or settlement of the Claim, (ii) the Indemnifying Party shall not,
without the Indemnified Party's written consent, settle or compromise any Claim
or consent to entry of any judgment which does not include as an unconditional
term thereof the giving by the claimant or the plaintiff to the Indemnified
Party of a release from all liability in respect of such Claim, and (iii) in the
event that the Indemnifying Party undertakes defense of any Claim, the
Indemnified Party, by counsel or other representative of its own choosing and at
its sole cost and expense, shall have the right to consult with the Indemnifying
Party and its counsel or other representatives concerning such Claim and the
Indemnifying Party and the Indemnified Party and their respective counsel or
other representatives shall cooperate with respect to such Claim.
15.05(e) Limitation on Indemnification. No
party hereunder shall be responsible with respect to any damages, claims,
losses, liabilities or expenses as to which another party is otherwise entitled
to indemnity under this Section or under the Administrative Services Agreement
unless and until the aggregate amount of such damages, claims, losses,
liabilities and expenses exceed $250,000 and then only to the extent such
damages, claims, losses, liabilities and expenses exceed $100,000, and such
amount over $ 100,000 shall be paid in accordance with the terms of this
Section. Neither the $250,000 limitation nor the $100,000 limitation shall
apply, however, to any Buyer claim under this Section related to a breach of
Sections 3.05(f), 3.12 or 19 hereof.
16. Termination. This Agreement may be terminated prior to the
Closing as follows: (i) at any time by the mutual consent of Parent, Seller and
Buyer; (ii) by Buyer, upon a material breach of any representation, warranty,
covenant or agreement on the part of Parent or Seller set forth in this
Agreement; (iii) by Parent or Seller, upon a material breach of any
representation, warranty, covenant or agreement on the part of Buyer set forth
in this Agreement; or (iv) by either Parent, Seller or Buyer if the Closing
shall not have occurred before December 31, 1996, other than as a result of the
parties' failure to receive HSR Act clearance or early termination of the HSR
Act waiting period.
In the event of the termination of this Agreement as provided in this
Section, this Agreement shall become null and void and there shall be no
liability on the part of Parent, Seller or Buyer, except that the provisions of
Section 7.03, 8.01, 18, 19 and 20 shall survive such termination.
17. Additional Actions and Documents: Amendments to Schedules. Each of
the parties hereto agrees that it will, at any time, prior to, at or after the
Closing Date, take or cause to be taken such further actions, and execute,
deliver and file or cause to be executed, delivered and filed such further
documents and instruments, and obtain such consents, as may be necessary or
reasonably requested in connection with the consummation of the purchase and
sale contemplated by this Agreement or in order to fully effectuate the
purposes, terms and conditions of this Agreement. The Schedules or Exhibits
attached to this Agreement may be amended or supplemented prior to Closing by
mutual agreement of the parties.
18. Brokers. Seller and Parent represent to Buyer that neither of them
has engaged, or incurred any unpaid liability (for any brokerage fees, finders'
fees, commissions or otherwise) to, any broker, finder or agent in connection
with the transactions contemplated by this Agreement, except for such liability
Seller or Parent has to Christenberry Collet & Company, Inc. and to Alex Brown,
or any of their members or representatives, which liability shall be satisfied
by Seller or Parent, and not by Buyer or Newco; Buyer represents to Seller that
Buyer has not engaged, or incurred any unpaid liability (for any brokerage fees,
finders' fees, commissions or otherwise) to, any broker, finder or agent in
connection with the transactions contemplated by this Agreement; and Seller and
Parent, jointly and severally, agree to indemnify Buyer, and Buyer agrees to
indemnify Seller, against any claims asserted against the other parties for any
such fees or commissions by any Person purporting to act or to have acted for or
on behalf of the indemnifying party. Notwithstanding any other provision of this
Agreement, this representation and warranty shall survive the Closing without
limitation.
19. Expenses. Except as otherwise provided herein, each party hereto
shall pay its own expenses incurred in connection with this Agreement and in the
preparation for and consummation of the transactions provided for herein.
Notwithstanding the foregoing, Seller shall pay all costs of conveyances, all
notary fees, all filing and application fees to any federal, state or local
agency, all sales, stamp, documentary, transfer, and recording taxes and fees
applicable to the transactions contemplated by this Agreement and the
instruments and documents called for hereunder, and Buyer shall pay the filing
fee due in connection with the HSR Act, the incorporation of Newco under the
laws of the State of Delaware and the qualification of Newco to do business as a
foreign corporation under such states as Buyer deems to be necessary or
advisable.
20. Notices. All notices, demands, requests, or other communications
which may be or are required to be given or made by any party to any other party
pursuant to this Agreement shall be in writing and shall be hand delivered,
mailed by first-class registered or certified mail, return receipt requested,
postage prepaid, delivered by overnight air courier, or transmitted by telegram,
telex, or facsimile transmission addressed as follows:
(i) If to Buyer:
Vyvx, Inc.
The Tulsa Union Depot
111 East First Street
Tulsa, Oklahoma 74103-2808
Attn: Del Bothof, President
with a copy (which shall not constitute notice) to:
David P. Batow, General Counsel
Vyvx, Inc.
One Williams Center, Suite 4100
Tulsa, Oklahoma 74172
(ii) If to Seller, Parent or any other Transferor that is a party to
this Agreement:
Winnebago Industries, Inc.
605 West Crystal Lake Road
Box 152
Forest City, IA 50436
Attn: Raymond M. Beebe
with a copy (which shall not constitute notice) to:
James M. Ash, Esq.
Blackwell, Sanders, Matheny, Weary & Lombardi L.C.
2300 Main Street, Suite 1100
Kansas City, MO 64108
or such other address as the addressee may indicate by written notice to the
other parties.
Each notice, demand, request, or communication which shall be given or
made in the manner described above shall be deemed sufficiently given or made
for all purposes at such time as it is delivered to the addressee (with the
return receipt, the delivery receipt, the affidavit of messenger or (with
respect to a telex) the answer back being deemed conclusive but not exclusive
evidence of such delivery) or at such time as delivery is refused by the
addressee upon presentation.
21. Waiver. No delay or failure on the part of any party hereto in
exercising any right, power or privilege under this Agreement or under any other
instrument or document given in connection with or pursuant to this Agreement
shall impair any such right, power or privilege or be construed as a waiver of
any default or any acquiescence therein. No single or partial exercise of any
such right, power or privilege shall preclude the further exercise of such
right, power or privilege, or the exercise of any other right, power or
privilege. No waiver shall be valid against any party hereto unless made in
writing and signed by the party against whom enforcement of such waiver is
sought and then only to the extent expressly specified therein.
22. Benefit and Assignment. Except as hereinafter specifically provided
in this Section, no party hereto shall assign this Agreement, in whole or in
part, whether by operation of law or otherwise, without the prior written
consent of Seller (if the assignor is Buyer) or Buyer (if the assignor is
Seller); and any purported assignment contrary to the terms hereof shall be
null, void and of no force and effect. In no event shall any assignment by
Seller of its rights and obligations under this Agreement, whether before or
after the Closing, release Seller from its liabilities hereunder.
Notwithstanding the foregoing, Buyer or any permitted assignee of Buyer may
assign this Agreement and any and all rights hereunder, in whole or in part, to
any Affiliate of Buyer, to the parent company of Buyer, or to any entity in
which the controlling shareholders of Buyer maintain control; provided, however,
that Buyer shall be solely responsible for all costs and expenses relating to
such assignment.
This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns as
permitted hereunder. No Person other than the parties hereto is or shall be
entitled to bring any action to enforce any provision of this Agreement against
any of the parties hereto, and the covenants and agreements set forth in this
Agreement shall be solely for the benefit of, and shall be enforceable only by,
the parties hereto or their respective successors and assigns as permitted
hereunder.
23. Remedies Cumulative. Except as specifically provided herein, the
remedies provided herein shall be cumulative and shall not preclude the
assertion by Seller or by Buyer (or by any other party hereto) of any other
rights or the seeking of any other remedies against the other, or its successors
or assigns. Nothing contained herein shall preclude a party from seeking
equitable relief, where appropriate.
24. Entire Agreement; Amendment. This Agreement, including the
Schedules and Exhibits hereto and the other instruments and documents referred
to herein or delivered pursuant hereto, contains the entire agreement among the
parties with respect to the subject matter hereof and supersedes all prior oral
or written agreements, commitments or understandings with respect to such
matters. No amendment, modification or discharge of this Agreement shall be
valid or binding unless set forth in writing and duly executed by the party
against whom enforcement of the amendment, modification or discharge is sought.
25. Severability. If any part of any provision of this Agreement or any
other agreement, document or writing given pursuant to or in connection with
this Agreement shall be invalid or unenforceable under applicable law, such part
shall be ineffective to the extent of such invalidity or unenforceability only,
without in any way affecting the remaining parts of such provisions or the
remaining provisions of said agreement.
26. Headings. The headings of the sections and subsections contained
in this Agreement are inserted for convenience only and do not form a part or
affect the meaning, construction or scope thereof.
27. Governing Law. This Agreement, the rights and obligations of the
parties hereto, and any claims or disputes relating thereto, shall be governed
by and construed under and in accordance with the laws of the State of Oklahoma,
excluding the choice of law rules thereof.
28. Signature in Counterparts. This Agreement may be executed in
separate counterparts, none of which need contain the signatures of all parties,
each of which shall be deemed to be an original, and all of which taken together
constitute one and the same instrument. It shall not be necessary in making
proof of this Agreement to produce or account for more than the number of
counterparts containing the respective signatures of, or on behalf of, all of
the parties hereto.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the day and year first above written.
WINNEBAGO INDUSTRIES, INC. VYVX, INC.
By: By: /s/ Delwin L. Bothof
-------------------------------
Name: Name: Delwin L. Bothof
---------------------------
Title: Title: President
----------------------------
CYCLE-SAT, INC.
By:
-------------------------------
Name:
---------------------------
Title:
----------------------------
IN WITNESS, each of the parties hereto has executed this Agreement as
of the day and year first above written.
WINNEBAGO INDUSTRIES, INC. VYVX, INC.
By: /s/ Fred G. Dohrmann By:
------------------------------- -------------------------------
Name: Fred G. Dohrmann Name:
------------------------------- -------------------------------
Title: Chairman of the Board and Title:
Chief Executive Officer
------------------------------- -------------------------------
CYCLE-SAT, INC.
By: /s/ Fred G. Dohrmann
-------------------------------
Name: Fred G. Dohrmann
------------------------------
Title: Chairman of the Board
-----------------------------
EXHIBIT A
ADMINISTRATIVE SERVICES AGREEMENT
This Administrative Services Agreement ("Agreement") is entered into as
of this day of , 1996, by and among WINNEBAGO INDUSTRIES, INC. ("Parent"),
CYCLE-SAT, INC. (hereinafter "Seller") and VYVX, INC. (hereinafter "Buyer").
Seller and Buyer hereby agree as follows:
1. DEFINITIONS
Capitalized terms not otherwise defined herein shall have the
respective meanings attributed to them in the Purchase and Sale Agreement dated
________________________, 1996, among Winnebago Industries, Inc., Seller and
Buyer (the "Purchase Agreement"). As used herein, the following terms shall have
the meanings set forth below:
"Designated Employees" means the individuals employed by Seller and
utilized by Seller from time to time in providing the Services. As of the date
of this Agreement, the Designated Employees are those employees designated on
Schedule 1 attached hereto. The parties shall amend Schedule 1 as needed from
time to time so as to reflect only those employees who continue to be utilized
by Seller in providing the Services. Seller acknowledges that all Designated
Employees are solely employees of Seller during the term of this Agreement.
"Designated Manager" shall have the meaning set forth in Section 7(B)
of this Agreement.
"Required Policies" means the insurance policies described on Schedule
2 attached hereto.
"Services" means the services requested by Buyer at any time and from
time to time during the term of this Agreement that, in Buyer's opinion, are
necessary or desirable in connection with the continuation and expansion of the
business and operations that were conducted by Seller prior to the Closing Date.
2. PROVISION OF SERVICES
Seller agrees to provide the Services in accordance with the terms and
subject to the conditions set forth in this Agreement. Buyer shall be entitled
to terminate the Services or any portions thereof at its option and in its
discretion, at any time and from time to time during the term hereof upon giving
not less than fifteen (15) days' prior written notice, subject to the provisions
of Section 8 regarding WARN Act notices and the time periods relating thereto.
3. COMPENSATION
In consideration of the performance of the Services, Buyer shall pay
Seller an amount equal to the expenses incurred by Seller in providing or paying
the following items to the Designated Employees who are utilized to provide the
Services, or incurred by Seller in providing or paying to third parties the
following items in relation to such Designated Employees: salaries, employee
benefits and allowances for vacation, sick leave, holiday, travel and related
expenses, and the company portion of employee insurance and retirement benefits,
all payroll taxes, insurance premiums measured by payroll costs, all other
contributions and benefits provided by Seller or imposed by any applicable law
or regulation, and statutory workers' compensation insurance coverage, and all
premiums and deductibles required by the Required Policies relating to the
Designated Employees or the Services. The compensation rate of each Designated
Employee shall be as set forth in Schedule 1. All Assets that are, in Buyer's
opinion, necessary for Seller's provision of the requested Services shall be
provided by Buyer at its expense.
4. INDEPENDENT CONTRACTOR.
In performing the Services hereunder, Seller will operate as and have
the status of an independent contractor, subject only to the general direction
of Buyer regarding the Services to be rendered as opposed to the method of
performance of the Services. This Agreement shall not be construed as authority
for Seller to act for or on behalf of Buyer in any agency or other capacity or
to make commitments of any kind for the account of or on behalf of Buyer for any
purpose, and nothing contained in this Agreement shall be deemed to constitute a
partnership or agency agreement between Seller and Buyer. Seller shall
communicate to the Designated Employees that, despite the Closing of the subject
transaction, such individuals have remained as employees of Seller for all
purposes and shall so remain until otherwise notified.
5. MANNER AND TIME OF PERFORMANCE.
The Seller will perform or cause to be performed the Services hereunder
with not less than the degree of care, skill and diligence with which such
Services were performed for and on behalf of Seller (including, without
limitation, with respect to the type, quantity, quality and timeliness of such
services).
6. INVOICES AND PAYMENTS
A. Seller shall submit invoices to Buyer on a bi-weekly basis for the
preceding two-week period, detailing charges and related expenses for which
compensation is due in accordance with this Agreement.
B. Buyer shall within ten (10) days of Buyer's receipt of the invoice
pay the amount due thereunder by wire transfer of immediately available funds to
a bank account designated by Seller on the invoice delivered to Buyer.
7. BENEFITS
A. Severance Payments. Seller and Buyer shall be responsible for severance
payments as follows:
(i) As to Designated Employees in Forest City, Iowa (the "Forest City
Designated Employees"):
(a) Buyer shall be responsible for severance payments
(based on Buyer's severance policies) for all Designated Forest City Employees
who are hired by Buyer at any time.
(b) If a Designated Forest City Employee is not hired by
Buyer:
(I) If that employee remains at his or her position
in Forest City, Iowa, until such position is
eliminated, and such employee is terminated by
Seller during the term (or upon the end of the
term) of this Agreement, Seller shall be
responsible for that employee's severance
payment based on Seller's severance policy (the
"Base Seller Severance") and Seller shall pay
an additional severance to such employee in an
amount equal to fifty percent (50%) of the Base
Seller Severance (the "Added Severance"). Buyer
shall reimburse Seller for the amount of the
Added Severance.
(II) If that employee does not remain at his or her
position in Forest City until such position is
eliminated, Seller shall be responsible for
that employee's Base Seller Severance, if any,
but such employee shall not be entitled to an
Added Severance.
(ii) Buyer shall be responsible for severance payments for all
Designated Employees not located in Forest City, Iowa (the "Non-Forest City
Designated Employees"), which severance shall be paid as follows:
(a) If the Designated Non-Forest City Employee is
terminated by Seller and hired by Buyer, then Buyer shall, upon its termination
of such employee, be responsible for such employee's severance payment, if any,
based on Buyer's severance policy.
(b) If the Designated Non-Forest City Employee remains at
his or her position until such position is eliminated, and such employee is
terminated by Seller during the term (or upon the end of the term) of this
Agreement, then Seller shall be responsible for that employee's Base Seller
Severance and Added Severance (based on Seller's severance policy), for both of
which Buyer shall reimburse Seller.
(c) If the Designated Non-Forest City Employee does not
remain at his or her position until such position is eliminated, then Seller
shall be responsible for that employee's Base Seller Severance (based on
Seller's severance policy), if any, for which Buyer shall reimburse Seller, and
such employee shall not be entitled to an Added Severance.
B. Managers' Bonus. Seller shall pay to each of Theodore L. Henry, Richard H.
Leet, II, and Tom O. Mikkelsen (each being a "Designated Manager") a bonus based
upon the following terms and conditions:
(i) The Designated Manager will remain employed by Seller or Vyvx for
a period of at least six (6) months following the Closing Date, unless
terminated for gross negligence or willful misconduct.
(ii) During the six (6) month time period, the Designated Manager will
receive equivalent benefits to those he is currently receiving (subject to the
terms of Section C below if employed by Buyer) and will be paid at his current
salary level.
(iii) During the six (6) month time period, the Designated Manager will
not be required to transfer to another geographic location in order to maintain
his employment.
(iv) If the Designated Employee remains with Seller (or is hired by
Buyer and remains with Buyer) for a period of six (6) months after the Closing
Date, he will receive a bonus in an amount equal to one year's pay at his
current salary. This bonus is in lieu of any other severance pay to which such
Designated Manager may have been entitled.
(v) If the Designated Manager voluntarily leaves employment prior to
the six (6) month time period or if he is terminated for gross negligence or
willful misconduct, he will not receive the above-mentioned bonus.
C. Credit for Prior Service. Buyer shall give each of such employees credit for
his or her prior service with Seller or its Affiliates with respect to those of
Buyer's employee benefits which are substantially similar to the employee
benefits offered to such employee by Seller (including, without limitation,
vacation and severance benefits). Buyer shall not be obligated to give any
employee credit for his or her prior service with Seller or its Affiliates with
respect to those types of employee benefits which were not offered to such
employee by Seller.
8. WARN ACT NOTICES
Seller acknowledges that, as employer of Designated Employees, Seller
is the appropriate party to issue any notice required to be given at any time
under the WARN Act with respect to Designated Employees in Forest City, Iowa.
Seller agrees that it shall provide, (i) to such Designated Employees who are
still employed by Seller in Forest City, Iowa, and providing services to Buyer
pursuant to this Agreement and, (ii) to the appropriate governmental entity,
such written notices as are required by the WARN Act. Seller shall fulfill such
obligations within the time periods prescribed by the WARN Act in the event
Buyer notifies Seller of its intention to terminate utilization of the Services
provided by Designated Employees under the this Agreement, close the Forest
City, Iowa, facilities, or take other actions that, in the opinion of Seller's
counsel, would require Seller to provide notice under the WARN Act; provided,
however, that Buyer shall notify Seller of the foregoing matters no later than
such date as will reasonably allow Seller to prepare and deliver the required
notices no later than the number of days prior to the actions described as is
required by the WARN Act.
9. TERM
This Agreement shall be effective for a period of six (6) months from
the Closing Date, except that the provisions of Articles 7, 8, 14 and 15 hereof
shall survive any such termination, and the provisions of Article 11 hereof
shall survive any such termination for a period of one (1) year (except that
Seller's indemnification obligation in Section 11 regarding WARN Act notices
shall survive such termination for a period of three (3) years).
10. CONSEQUENTIAL DAMAGES
NEITHER PARTY HERETO OR ITS AFFILIATES SHALL BE LIABLE TO THE OTHER OR
ITS AFFILIATES HEREUNDER IN ANY ACTION OR CLAIM FOR INDIRECT, CONSEQUENTIAL OR
SPECIAL DAMAGES ARISING OUT OF THIS AGREEMENT, EVEN IF ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.
11. INDEMNIFICATION
Subject to the conditions and provisions of Section 15.05 of the
Purchase Agreement, Seller and Parent, jointly and severally, agree to
indemnify, defend and hold harmless the Buyer Indemnitees from and against any
and all demands, claims, complaints, actions or causes of action, suits,
proceedings, investigations, arbitrations, assessments, losses, damages,
liabilities, costs and expenses, including, but not limited to, interest,
penalties and reasonable attorneys' fees and disbursements (collectively, "Costs
or Claims"), asserted against, imposed upon or incurred by the Buyer
Indemnitees, directly or indirectly, by reason of or resulting from Seller's
performance under, or its failure to perform under, the terms of this Agreement
to the extent such Costs or Claims result from or arise out of the gross
negligence or willful misconduct of Seller, and by reason of or resulting from
Seller's failure to comply with its obligations under Section 8 regarding WARN
Act notices, except to the extent such failure results from Buyer's failure to
comply with its obligations under this Agreement, the Purchase Agreement, the
WARN Act or other applicable laws. Subject to the conditions and provisions of
Section 15.05 of the Purchase Agreement, Buyer agrees to indemnify, defend and
hold harmless the Seller Indemnitees from and against any and all Costs or
Claims asserted against, imposed upon or incurred by the Seller Indemnitees,
directly or indirectly, by reason of or resulting from Buyer's business and
operations for which the Support Services are to be provided, except to the
extent such Costs or Claims result from or arise out of the gross negligence or
willful misconduct of Seller.
12. THIRD PARTY BENEFICIARIES
Except as expressly provided in this Agreement, there are no
third-party beneficiaries of this Agreement. Except as otherwise provided in
this Agreement, this Agreement does not create or confer any legal claim or
cause of action in favor of any party not a signatory to this Agreement and the
obligations and legal duties imposed on any party by this Agreement are owed
exclusively to the other party or parties and are not owed to any party not a
signatory to this Agreement.
13. OWNERSHIP OF WORK PRODUCT
All drawings, specifications, documents and other work product prepared
by any Designated Employee pursuant to this Agreement shall be the property of
Buyer.
14. CONFIDENTIALITY
The fact and existence of this Agreement and the terms and conditions
contained herein will be deemed confidential and subject to the provisions of
the Nondisclosure Agreement, and will not be disclosed to third parties,
including without limitation, by means of a press release, without the prior
consent of Buyer or Seller, as the case may be, unless otherwise required by
law.
15. AUDIT
Upon reasonable notice and for a period of six (6) months after final
payment for any Services performed under this Agreement, Buyer shall have, at
Buyer's expense, the right to audit or to have audited and to copy the books and
records of Seller which relate directly to the Services performed under this
Agreement.
16. INSURANCE
Seller agrees to maintain the insurance requirements as specified on
Schedule 2 to this Agreement.
17. MISCELLANEOUS
A. This Agreement shall be binding upon and inure solely to the benefit
of the parties hereto and their permitted assigns, and no other person shall
acquire or have any rights hereunder. This Agreement may not be assigned by
either party in whole or in part without the prior consent of the other, and any
such purported assignment shall be null and void.
B. This Agreement contains the entire understanding of the parties in
relation to the subject matter hereof and supersedes all other statements,
representations or writings prior to the date of execution in relation to the
subject matter thereof, except to the extent that the terms of Section 15.05 of
the Purchase Agreement apply to the indemnification provisions of this
Agreement.
C. No change, modification, discharge, termination or waiver of any of
the provisions of this Agreement, or any obligations hereunder, shall be valid
unless in writing and signed by the parties hereto.
D. This Agreement shall be construed in accordance with the laws of the
State of Oklahoma, excluding its choice of law provisions.
E. All notices, demands, requests and other communications required or
permitted to be sent hereunder shall be in writing and shall be delivered in
accordance with the notice provisions of the Purchase Agreement.
F. The paragraph headings of this Agreement are for identification
purposes only and have no other meaning.
G. No delay on the part of either party in exercising its rights
hereunder shall represent a waiver of such right and all such rights shall be
cumulative.
H. Should any one provision of this Agreement be adjudicated
unenforceable as written, it shall be modified to make it legally enforceable as
close to the original intent of the parties as possible without having further
effect on the Agreement.
IN WITNESS WHEREOF, Seller and Buyer, by their respective authorized
agents, have executed this Agreement as of the day and year first above written.
VYVX, INC.
By:___________________________________
Name:_________________________________
Title:________________________________
CYCLE-SAT, INC.
By:___________________________________
Name:_________________________________
Title:________________________________
WINNEBAGO INDUSTRIES, INC.
By:___________________________________
Name:_________________________________
Title:________________________________
SCHEDULE I
EMPLOYEE LIST
CYCLE SAT, INC.
Date: 11/11/96 Page 1
EMP LOC HRLY RATE
NAME
Arcineda, Enrique CA 7.00
Bell, Scott E. CA 19.68
Berganza, Segrid I. CA 14.88
Bridges, Cynthia A. CA 25.03
Chin, Stanley CA 13.78
Churchill, Travis G. CA 7.00
Contreras, Milton A. CA 13.40
Craven, Christopher B. CA 20.67
Cupp, Pamela L. CA 24.15
Davison, Steven CA 15.00
Fraunces, David A. CA 23.58
Henry, Theodore L. CA 67.38
Ismiyanto, Samual CA 12.56
Istijono, Anderson CA 12.01
Jarquin, Angel A. CA 7.00
Levine, Russell N. CA 26.68
McCue, Kelly S. CA 15.14
Melendez, Luis A. CA 8.19
Merlos,Armando E. CA 15.90
Merrill, Gregory W. CA 20.67
Montano, Rafael E. CA 8.74
Montefusco, Richard C. CA 19.29
Moseman, Michael L. CA 16.00
Nunez, Jesus CA 12.81
Pastina, Ann-Marie CA 20.06
Riyas, Juan M. CA 7.00
Roberts, Tammy J. CA 17.33
Robinson, Tanea D. CA 8.50
Romero, Jose E. CA 12.69
Stolp, Chris M. CA 16.54
Taylor, Carol F. CA 14.30
Warhola, Nancy L. CA 15.07
West, Nicholas A. CA 29.30
Yaseen, Adam I. CA 16.00
Zeledon, Alvaro M. CA 20.77
- -------------------------------- ------------ -----------------
Subtotals: LCCODE - CA
Occurs:
35 35 35
Sum:
604.10
- -------------------------------- ------------ -----------------
EMPLOYEE LIST
CYCLE SAT, INC.
Date: 11/11/96 Page 2
EMP LOC HRLY RATE
NAME
Gonzalez, Joaquin DE 14.04
Kharr, William M. DE 10.00
Nelson, Anthony T. DE 7.35
Reynolds, Linda L. DE 7.50
- -------------------------------- ------------ -----------------
Subtotals: LCCODE - DE
Occurs:
4 4 4
Sum:
38.89
- -------------------------------- ------------ -----------------
Alne, Helen J. IA 8.98
Armstrong, Natalie L. IA 9.33
Baier, Brian J. IA 15.00
Baker, Joy A. IA 22.13
Bebb, Michael C. IA 33.86
Bollinger, Jon G. IA 14.30
Caylor, Clayton G. IA 11.75
Celindro, Melinda D. IA 7.50
Clark, Maureen A. IA 13.93
Farland, Karla M. IA 15.00
Fjetland, Roxann L. IA 11.32
Flowers, Thomas D. IA 11.08
Hall, Janet S. IA 12.49
Hanna, Margaret J. IA 12.75
Henson, Tammy L. IA 9.03
Hillesland, Kent A. IA 9.69
Hintz, Dorene IA 8.83
Jahncke, Kenneth N. IA 16.76
Jenkins, Sandra M. IA 17.67
Jessen, Kevin A. IA 18.90
Johnson, Baier, Amy J. IA 8.82
Johnson, Dirk L. IA 10.42
Johnson, Jacqulyn M. IA 13.90
Kayser, Teri L. IA 13.23
Kelley, Patrick J. IA 13.33
Kolden, Brian J. IA 10.32
Kunkel, Mary R. IA 10.11
Laate, Jake M. IA 22.02
Lewison, Denna M. IA 11.22
Litel, Harriet O. IA 10.31
Luppen, Jane A. IA 11.35
EMPLOYEE LIST
CYCLE SAT, INC.
Date: 11/11/96 Page 3
EMP LOC HRLY RATE
NAME
Melby, David J. IA 16.34
Miller, Linda R. IA 11.87
Miller, Randy R. IA 10.89
Miller, Robert A. IA 17.80
Miller, Shirley M. IA 8.73
Negus, Suzanne C. IA 9.26
Nelson, Ione R. IA 11.49
Newton, Rebecca J. IA 11.35
Niemeyer, John C. IA 14.33
O'Brien, Phillip S. IA 25.08
Pannhoff, Terry W. IA 15.73
Peterson, Tim J. IA 11.90
Putney, Linda N. IA 11.72
Ralls, John M. IA 12.03
Rauk, Lori A. IA 11.22
Reding, Darla R. IA 15.37
Rollefson, Donna IA 9.28
Savoy, Steven J. IA 16.38
Schaefer, L. Darlene IA 8.92
Scherb, Rita L. IA 9.70
Schmit, Kevin J. IA 20.12
Shadden, Gene G. IA 17.70
Sheimo, Jill R. IA 16.06
Shores, Maryln K. IA 24.92
Smidt, Lisa K. IA 18.55
Sowers, Brian L. IA 9.00
Stanton, Mark C. IA 37.50
Turner, Janice M. IA 13.24
Wilson, Brian T. IA 20.27
Wright, Dean G. IA 24.95
- -------------------------------- ------------ -----------------
Subtotals: LCCODE - IA
Occurs:
62 62 62
Sum:
958.23
- -------------------------------- ------------ -----------------
Anderson, Lori D. IL 9.00
Cassidy, Michael P. IL 10.60
Coppage, Marty L. IL 17.79
D'Andrea, Anthony IL 20.77
EMPLOYEE LIST
CYCLE SAT, INC.
Date: 11/11/96 Page 4
EMP LOC HRLY RATE
NAME
Frye, Steven E. IL 8.33
Garvey, Thomas IL 30.21
Harsch Jr., Gary D. IL 9.25
Hoffman, Judith M. IL 17.33
Jarrett, William T. IL 8.00
Messerly, Marlene L. IL 15.75
Mitchell, William R. IL 14.33
Smith, Sandra R. IL 10.50
Sons, John M. IL 8.66
Steil, Joycelyn R. IL 41.90
Szanto, Keith E. IL 30.21
Zaworski, Dawn M. IL 12.69
- -------------------------------- ------------ -----------------
Subtotals: LCCODE - IL
Occurs:
16 16 16
Sum:
265.32
- -------------------------------- ------------ -----------------
Bell, Dennis M. NJ 13.26
Breidt, Donald F. NJ 39.75
McVicker, Donald P. NJ 13.25
Shamy Jr., Norman G. NJ 12.03
Thorn, Carolyn R. NJ 13.09
- -------------------------------- ------------ -----------------
Subtotals: LCCODE - NJ
Occurs:
5 5 5
Sum:
91.38
- -------------------------------- ------------ -----------------
Ahto, Charles A. NY 192.31
Albanese, Michael G. NY 30.50
Alford, Essic NY 11.60
Barna, Joan NY 16.54
EMPLOYEE LIST
CYCLE SAT, INC.
Date: 11/11/96 Page 5
EMP LOC HRLY RATE
NAME
Berger, Gary L. NY 25.15
Bisnauth, Ramcharan T. NY 10.00
Blatz, Raymond D. NY 15.38
Brazong, Barbara NY 23.65
Burns, Peter F. NY 15.90
Chazen, Jonathan A. NY 21.97
Evans, Rodrick G. NY 13.00
Flores, Louise C. NY 15.68
Grant, Waldo A. NY 16.20
Howe, Conrad E. NY 11.12
James, Marvin T. NY 15.60
Jenkins, Eunice NY 17.92
Keenan, Debby NY 11.03
King, Phillip S. NY 17.66
Klein, Arthur NY 25.94
Knettel, Kathleen F. NY 23.67
Lorenzo, Robert NY 30.68
McElroy, Jennifer M. NY 12.00
Musuneci, Alexann NY 19.05
Potash, Melvyn H. NY 24.70
Putmoky, Eva NY 16.81
Ralph, Bossie L. NY 14.88
Rodriquez, Robert NY 15.63
Ruiz, John NY 11.52
Safran, Jack NY 21.22
Sharak, Jeffrey M. NY 15.14
Sharpe, William F. NY 17.34
Simpson, Luegen J. NY 12.00
Smith, Michael J. NY 14.70
Thompson, Derrick NY 15.31
Walsh, William L. NY 33.68
Whitfield, Kim E. NY 8.75
Williams, Marvin W. NY 17.64
- -------------------------------- ------------ -----------------
Subtotals: LCCODE - NY
Occurs:
37 37 37
Sum:
831.84
- -------------------------------- ------------ -----------------
Adair Jr., Charles R. TN 10.70
Allen Sandra J. TN 7.00
EMPLOYEE LIST
CYCLE SAT, INC.
Date: 11/11/96 Page 6
EMP LOC HRLY RATE
NAME
Bailey, Warren L. TN 10.48
Bennett, Denise K. TN 7.00
Boddie, Sharon A. TN 7.69
Boyd, Khari O. TN 7.00
Boyd Jr., Larry O. TN 8.25
Boyd, Taranda R. TN 7.00
Brown, Joyce F. TN 14.18
Brown, Steven W. TN 9.73
Burton, David A. TN 7.00
Caffrey, Diane E. TN 9.77
Caldwell, John D. TN 7.00
Caldwell, Kesha M. TN 7.00
Cohen, Danielle M. TN 9.66
Cook, Allen B. TN 7.00
Craig, Derrick C. TN 7.50
Crawford, Glenn W. TN 14.07
Crook, Maurice C. TN 7.00
Denton, Eric G. TN 8.25
Dobbins, Wesley M. TN 7.00
Dumair Jr., Robert L. TN 7.87
Edwards, Marcus M. TN 7.50
Elion, Darryl K. TN 9.01
Evans, Laquetta G. TN 8.25
Fleming, Lori M. TN 8.75
Fraley, Angela G. TN 7.00
Gamble, Al T. TN 14.33
Goad, Tim W. TN 8.84
Grant, Marvin L. TN 9.19
Greer, Louise C. TN 10.90
Griffith, Ike C. TN 7.52
Guthridge, Lois E. TN 10.71
Hamer, Willie D. TN 8.83
Hanson, Kathlene TN 12.24
Harris, Joseph L. TN 9.50
Heard, Decedric K. TN 7.00
Helms, Bryon TN 7.88
Hill Jr., Eddie TN 11.85
Hoston, Lisa L. TN 8.25
Jackson, Njeri A. TN 7.00
Jackson, Norma J. TN 7.50
Johnson, Clarence A. TN 14.39
Jones, Mary A. TN 13.23
Jones, Tracy R. TN 7.73
Kenne, Peter M. TN 27.84
King, Cheryl TN 17.50
Lamon, Paula M. TN 10.49
Lane, Tina M. TN 7.00
Leet II, Richard N. TN 67.39
Malowe, James G. TN 16.53
EMPLOYEE LIST
CYCLE SAT, INC.
Date: 11/11/96 Page 7
EMP LOC HRLY RATE
NAME
McCoy, Robert A. TN 9.72
Mikkelsen, Christin A TN 7.25
Mikkelsen, Tom O. TN 48.73
Miller, James M. TN 9.66
Miller, Marcia E. TN 7.00
Moore, Joshua TN 7.00
Muth III, Jack D. TN 10.10
Oliver, Bertram L. TN 7.00
Perry, Ethel TN 10.53
Porter, Terry L. TN 10.36
Potter, Jason L. TN 8.00
Price, Steven A. TN 9.83
Rawls, Melissa D. TN 11.62
Read, Mark T. TN 9.55
Reid, Gerald R. TN 7.50
Roberts, Heidi M. TN 7.00
Rodgers, Yvonne T. TN 9.50
Roemer, Michael R. TN 16.95
Shotwell, Brenda L. TN 7.25
Smith, Laura L. TN 9.76
Smith, Russell A. TN 12.00
Stevens, Kimberly D. TN 7.00
Stuck Jr., Thomas TN 7.96
Suhler, Delreco TN 8.25
Swenson, Chris E. TN 8.75
Thomas, Milnetrice C. TN 7.00
Tibodeau, Dawn M. TN 7.00
Waldrip, Kevin A. TN 9.28
Warman III, John W. TN 11.50
Watkins, Louis E. TN 7.00
Woods, Beverly A. TN 9.81
- -------------------------------- ------------ -----------------
Subtotals: LCCODE - TN
Occurs:
82 82 82
Sum:
872.16
- -------------------------------- ------------ -----------------
EMPLOYEE LIST
CYCLE SAT, INC.
Date: 11/11/96 Page 8
EMP LOC HRLY RATE
NAME
- -------------------------------- ------------ -----------------
- -------------------------------- ------------ -----------------
Grand Totals
Occurs:
241 241 241
Sum:
3,661.92
- -------------------------------- ------------ -----------------
SCHEDULE II
INSURANCE REQUIREMENTS
The Seller will carry or cause to be carried and maintained in
force throughout the entire term of this contract all insurance policies and
insurance coverages presently in force relating to workers compensation, general
liability and automobile liability (the "Required Policies"). The foregoing
requirement will not be construed to limit Seller's liability.
In each of the Required Policies, Seller agrees to waive and will
require its insurers to waive any rights of subrogation or recovery they may
have against Buyer its parent, subsidiary, or affiliated companies.
Under the general liability and automobile liability policies,
Buyer, its parent, subsidiary and affiliated companies will be named as
additional insureds as respects Seller's operations and as respects any work
performed under this Agreement. Any costs associated with naming these
additional insureds is included in the contract cost.
The general liability and automobile liability policies will
include the following "other insurance" amendment: "This insurance is primary
insurance with respect to Buyer its parent, subsidiary and affiliated companies,
and any other insurance maintained by Buyer its parent, subsidiary or affiliated
companies is excess and not contributory with this insurance."
Non-renewal or cancellation of Required Policies will be effective
only after written notice is received by Buyer from the insurance company thirty
(30) days in advance of any such non-renewal or cancellation. Prior to
commencing the Services hereunder, Seller will deliver to Buyer certificates of
insurance on an Acord 25 or 25S form evidencing the existence of the insurance
coverages required above.
In the event of a loss or claim arising out of or in connection
with the work performed under this Agreement, Seller agrees, upon request of
Buyer, to submit the original or a certified copy of its insurance policies for
inspection by Buyer.
Buyer will not insure nor be responsible for any loss or damage,
regardless of cause, to property of any kind, including loss of use thereof,
owned, leased or borrowed by the Seller, or their employees, servants or agents,
other than property which becomes a part of the contract works.
<TABLE>
<CAPTION>
CHRISTENBERRY COLLET & COMPANY, INC.
INVESTMENT BANKERS CONFIDENTIAL
CYCLE-SAT, INC.
INCOME STATEMENT
($000)
ACTUAL PROJECTED PROJECTED PROJECTED PROJECTED PROJECTED
FY 1995 FY 1996 FY 1997 FY 1998 FY 1999 FY 2000
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues
Network Services $ 21,479 $ 26,265 $ 29,423 $ 33,836 $ 39,250 $ 46,119
Production Services 1,474 2,578 3,292 4,150 4,774 5,493
Whse. & Distribution 1,206 2,878 3,111 3,741 4,302 4,951
Other 469 348 359 359 359 359
-------- -------- -------- -------- -------- --------
Total Revenues 24,628 32,069 36,185 42,086 48,685 56,992
Cost of Services
Variable Direct Expense 11,747 15,988 16,358 18,051 19,932 22,797
Fixed Direct Expense 1,904 1,749 1,940 2,150 2,463 2,818
-------- -------- -------- -------- -------- --------
Total Cost of Services 13,651 17,736 18,298 20,201 22,395 25,615
COST OF SERVICES % 55.4% 55.3% 50.6% 48.0% 46.0% 45.0%
Operating Expenses
Selling & Promotion 1,611 1,732 2,050 2,315 2,678 3,131
General & Admin 5,841 7,100 7,822 8,417 9,007 9,961
Research & Develop 144 0 0 0 0 0
-------- -------- -------- -------- -------- --------
Total Operating Expense 7,596 8,832 9,872 10,732 11,685 13,092
EBITDA 3,381 5,500 8,015 11,153 14,605 18,215
Deprec. & Amort. Expense 2,161 2,977 3,760 4,305 4,396 4,440
-------- -------- -------- -------- -------- --------
Operating Income 1,220 2,523 4,255 6,848 10,209 13,775
Other Income (Expense)
Gain (Loss) on Assets 0 95 0 0 0 0
Abandon Flat Antenna (673) 0 0 0 0 0
Interest Expense, Net (816) (1,300) (1,534) (1,091) (365) 0
Other Income (Exp.) 56 (15) 0 0 0 0
-------- -------- -------- -------- -------- --------
Total Other Income (Expense) (1,433) (1,220) (1,534) (1,092) (365) 0
Pre-Tax Net Income (213) 1,303 2,720 5,757 9,844 13,775
Income Tax Expense 0 0 0 0 0 0
-------- -------- -------- -------- -------- --------
Net Income ($ 213) $ 1,303 $ 2,720 $ 5,757 $ 9,844 $ 13,775
======== ======== ======== ======== ======== ========
CYCLE-SAT, INC.
INCOME STATEMENT
($000)
ACTUAL PROJECTED PROJECTED PROJECTED PROJECTED PROJECTED
FY 1995 FY 1996 FY 1997 FY 1998 FY 1999 FY 2000
-------- -------- -------- -------- -------- --------
Network Services
Existing Products 21,479 26,265 29,423 31,836 34,250 36,119
New Products 0 0 0 2,000 5,000 10,000
-------- -------- -------- -------- -------- --------
Total Network Services 21,479 26,265 29,423 33,836 39,250 46,119
% GROWTH 22.28% 12.03% 15.00% 16.00% 17.50%
Production Services 1,474 2,578 3,292 4,150 4,774 5,493
% GROWTH 74.93% 27.69% 26.06% 15.04% 15.06%
Whse. Distribution 1,206 2,878 3,111 3,741 4,302 4,951
% GROWTH 138.70% 8.09% 20.25% 15.00% 15.09%
Other 469 438 359 359 259 359
-------- -------- -------- -------- -------- --------
Total Revenues 24,628 32,069 36,185 42,086 48,685 56,922
% GROWTH 30.21% 12.84% 16.31% 15.68% 16.92%
</TABLE>
<TABLE>
<CAPTION>
CYCLE-SAT, INC.
BALANCE SHEET
($000)
ACTUAL PROJECTED PROJECTED PROJECTED PROJECTED PROJECTED
FY 1995 FY 1996 FY 1997 FY 1998 FY 1999 FY 2000
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash $ 373 $ 95 $ 96 $ 99 $ 3,726 $ 18,983
Accounts Receivable 6,059 6,901 7,436 9,093 10,143 11,859
Deposits 124 100 200 300 400 500
Inventory 81 84 110 97 124 142
Prepaid Expenses 64 85 150 250 350 450
Receivable from Affiliate 0 0 0 0 0 0
-------- -------- -------- -------- -------- --------
Total Current Assets 6,701 7,265 7,992 9,840 14,744 31,935
Property & Equipment 12,653 16,632 21,132 23,132 24,632 26,132
(Less Acc. Deprec.) (8,869) (10,917) (13,597) (16,822) (20,138) (23,498)
-------- -------- -------- -------- -------- --------
Net Fixed Assets 3,784 5,715 7,535 6,310 4,494 2,634
Intangible Assets - Net 10,287 9,062 7,982 6,902 5,822 4,742
Total Assets $ 20,772 $ 22,042 $ 23,509 $ 23,052 $ 25,060 $ 39,312
======== ======== ======== ======== ======== ========
LIABILITIES
Revolving Line of Credit $ 4,000 $ 5,796 $ 8,696 $ 5,548 ($ 0) ($ 0)
Accounts Payable 2,289 2,399 2,457 2,840 2,799 3,202
Curr. Capital Leases 1,260 827 364 180 0 0
Curr. L-T Debt 1,788 3,597 3,154 1,800 0 0
Accrued Payroll 515 150 158 165 174 182
Other Acc. Expenses 150 400 420 441 463 486
-------- -------- -------- -------- -------- --------
Total Current Liabilities 10,002 13,168 15,249 10,972 3,436 3,870
Long-Term Debt
Cap. Lease & Acc. Rent 1,019 401 180 0 0 0
L-T Debt - Bank/Seller 7,893 5,296 2,142 342 0 0
Deferred Compensation 130 145 187 229 271 313
-------- -------- -------- -------- -------- --------
Total L-T Debt 9,042 5,842 2,509 571 271 313
Stockholder Equity
Common Stock 70 70 70 70 70 70
Additional Pd. in Capital 34,912 34,912 34,912 34,912 34,912 34,912
Retained Earnings (33,254) (31,950) (29,230) (23,473) (13,629) 146
-------- -------- -------- -------- -------- --------
Total Stockholder Equity 1,728 3,032 5,572 11,509 21,353 35,128
Total Liabilities & Equity $ 20,772 $ 22,042 $ 23,509 $ 23,052 $ 25,060 $ 39,312
======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
CYCLE-SAT, INC.
STATEMENT OF CASH FLOWS
($000)
ACTUAL PROJECTED PROJECTED PROJECTED PROJECTED PROJECTED
FY 1995 FY 1996 FY 1997 FY 1998 FY 1999 FY 2000
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
CASH OPERATING ACTIVITIES:
Net Income (Loss) (213) 1,303 2,720 5,757 9,844 13,775
Deprec. & Amortization 2,161 2,978 3,760 4,305 4,396 4,440
Chg. Acc. Satellite Lease (233) 0 0 0 0 0
Chg. Deferred Comp 53 15 42 42 42 42
(Gain) Loss of Disposal 62 (103) 0 0 0 0
Chg. Receivable - Affiliate 601 0 0 0 0 0
Chg. Accts. Receivable (1,765) (842) (535) (1,657) (1,050) (1,716)
Chg. in Deposits (16) 24 (100) (100) (100) (100)
Chg. in Inventory (21) (3) (27) 14 (27) (18)
Chg. in Prepaid Exp 292 (21) (65) (101) (100) (100)
Chg. in Accts. Payable 1,022 110 59 383 (41) 403
Chg. in Acc. Expenses 156 (115) 28 29 30 32
-------- -------- -------- -------- -------- --------
Net Cash Operations 2,099 3,346 5,882 8,671 12,995 16,757
INVESTING ACTIVITIES:
Capital Expenditures (845) (3,630) (4,500) (2,000) (1,500) (1,500)
Proceeds Sale of Prop 64 226 0 0 0 0
Payments of Acquisition (4,934) 0 0 0 0 0
-------- -------- -------- -------- -------- --------
Net Cash Used Investing (5,715) (3,404) (4,500) (2,000) (1,500) (1,500)
FINANCING ACTIVITIES:
Net Chg. - Line of Credit 1,700 1,796 2,900 (3,150) (5,546) 0
Net Chg. - L-T Debt 3,981 (788) (3,597) (3,154) (2,142) 0
Payment Capital Lease (1,757) (1,227) (684) (364) (180) 0
-------- -------- -------- -------- -------- --------
Net Cash - Financing 3,924 (220) (1,381) (6,668) (7,868) 0
Net Cash Flows $ 308 ($ 278) $ 1 $ 3 $ 3,627 $ 15,257
Beginning Cash $ 65 $ 373 $ 95 $ 96 $ 99 $ 3,726
Ending Cash $ 373 $ 95 $ 96 $ 99 $ 3,726 $ 18,983
</TABLE>
<TABLE>
<CAPTION>
CYCLE-SAT, INC.
INCOME STATEMENT
9 MONTH ACTUAL ($000)
ACT. 9 MONTHS ACT. 9 MONTHS %
FY 1995 FY 1996 CHANGE
-------- -------- --------
<S> <C> <C> <C>
REVENUES
Network Services $ 15,015 $ 18,624 24.0%
Production Services 649 1,850 185.1%
Whse. & Distribution 454 2,147 372.7%
Other 324 280 -13.7%
-------- -------- --------
Total Revenues 16,443 22,901 39.3%
COST OF SERVICES
Variable Direct Expense 7,531 11,456 52.1%
Fixed Direct Expense 1,403 1,377 -1.9%
-------- -------- --------
Total Cost of Services 8,934 12,833 43.6%
COST OF SERVICES % 54.3% 56.0%
OPERATING EXPENSES
Selling & Promotion 1,294 1,149 -11.2%
General & Admin 4,199 5,250 25.0%
Research & Develop 0 0 0.0%
-------- -------- --------
Total Operating Expense 5,493 6,399 16.5%
EBITDA 2,016 3,669 82.0%
Deprec. & Amort. Expense 1,304 2,227 70.8%
-------- -------- --------
Operating Income 712 1,443 102.6%
OTHER INCOME (EXPENSE)
Gain (Loss) on Assets 0 95 --
Abandon Flat Antenna 0 0 --
Interest Expense, Net (479) (935) 95.2%
Other Income (Exp.) 0 (15) --
-------- -------- --------
Total Other Income (Expense) (479) (855) 78.5%
Pre-Tax Net Income 233 588 152.2%
Income Tax Expense 0 0 0.0%
-------- -------- --------
NET INCOME $ 233 $ 588 152.2%
======== ========
</TABLE>
<TABLE>
<CAPTION>
CYCLE-SAT, INC.
INCOME STATEMENT
1996 BY QUARTER ($000)
ACTUAL ACTUAL ACTUAL PROJECTED PROJECTED
1QFY 1996 2QFY 1996 3QFY 1996 4QFY 1996 FY 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
REVENUES
Network Services $ 6,847 $ 6,036 $ 5,741 $ 7,641 $ 26,265
Production Services 585 612 654 727 2,578
Whse. & Distribution 708 738 701 731 2,878
Other 141 83 55 68 348
-------- -------- -------- -------- --------
Total Revenues 8,281 7,469 7,151 9,167 32,069
COST OF SERVICES
Variable Direct Expense 4,136 3,840 3,480 4,531 15,988
Fixed Direct Expense 453 439 485 372 1,749
-------- -------- -------- -------- --------
Total Cost of Services 4,589 4,280 3,965 4,903 17,736
COST OF SERVICES % 55.4% 57.3% 55.4% 53.5% 55.3%
OPERATING EXPENSES
Selling & Promotion 354 379 416 583 1,732
General & Admin 1,834 1,721 1,696 1,850 7,100
Research & Develop 0 0 0 0 0
-------- -------- -------- -------- --------
Total Operating Expense 2,188 2,099 2,112 2,433 8,832
EBITDA 1,504 1,090 1,075 1,831 5,500
Deprec. & Amort. Expense 774 714 738 750 2,977
-------- -------- -------- -------- --------
Operating Income 730 376 336 1,081 2,523
OTHER INCOME (EXPENSE)
Gain (Loss) on Assets 99 (1) (3) 0 95
Abandon Flat Antenna 0 0 0 0 0
Interest Expense, Net (309) (318) (308) (365) (1,300)
Other Income (Exp.) (15) 0 0 0 (15)
-------- -------- -------- -------- --------
Total Other Income (Expense) (225) (319) (311) (365) (1,220)
Pre-Tax Net Income 505 57 25 716 1,303
Income Tax Expense 0 0 0 0 0
-------- -------- -------- -------- --------
NET INCOME $ 505 $ 57 $ 25 $ 716 $ 1,303
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
CYCLE-SAT, INC.
BALANCE SHEET
1996 BY QUARTER ($000)
ACTUAL ACTUAL ACTUAL PROJECTED
1QFY 1996 2QFY 1996 3QFY 1996 4QFY 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
ASSETS
Cash $ 188 $ 0 ($ 122) $ 95
Accounts Receivable 6,108 6,187 5,444 6,901
Deposits 267 148 98 100
Inventory 87 79 88 84
Prepaid Expenses 349 144 239 85
Receivable from Affiliate 17 0 0 0
-------- -------- -------- --------
Total Current Assets 7,016 6,558 5,747 7,265
Property & Equipment 13,154 15,042 15,396 16,632
(Less Acc. Deprec.) (9,752) (10,377) $ 10,437) (10,917)
-------- -------- -------- --------
Net Fixed Assets 3,402 4,665 4,959 5,715
Intangible Assets - Net 10,108 9,663 9,332 9,062
Total Assets $ 20,526 $ 20,886 $ 20,038 $ 22,042
======== ======== ======== ========
LIABILITIES
Revolving Line of Credit $ 4,300 $ 4,500 $ 4,546 $ 5,796
Accounts Payable 2,172 1,789 1,553 2,399
Curr. Capital Lease & Rent 700 969 884 827
Curr. L-T Bank/Seller 1,823 2,710 3,186 3,597
Accrued Payroll 113 501 0 150
Other Acc. Expenses 547 144 657 400
-------- -------- -------- --------
Total Current Liabilities 9,655 10,612 10,825 13,168
Long-Term Debt
Cap. Lease & Acc. Rent 1,067 726 578 401
L-T Debt - Bank/Seller 7,430 7,107 6,161 5,296
Deferred Compensation 141 151 159 145
-------- -------- -------- --------
Total L-T Debt 8,638 7,983 6,898 5,842
Stockholder Equity
Common Stock 70 70 70 70
Additional Pd. in Capital 34,912 34,912 34,912 34,912
Retained Earnings (32,749) (32,691) (32,666) (31,950)
-------- -------- -------- --------
Total Stockholder Equity 2,233 2,291 2,316 3,032
Total Liabilities & Equity $ 20,526 $ 20,886 $ 20,038 $ 22,042
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
CYCLE-SAT, INC.
STATEMENT OF CASH FLOWS
1996 BY QUARTER
($000)
ACTUAL ACTUAL ACTUAL PROJECTED PROJECTED
1QFY 1996 2QFY 1996 3QFY 1996 4QFY 1996 FY 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
CASH OPERATING ACTIVITIES:
Net Income (Loss) 505 57 25 716 1,303
Deprec. & Amortization 774 716 738 750 2,978
Chg. Acc. Satellite Lease 0 0 0 0 0
Chg. Deferred Comp 11 10 8 (14) 15
(Gain) Loss of Disposal (99) (1) (3) 0 (103)
Chg. Receivable - Affiliate (17) 17 0 0 0
Chg. Accts. Receivable (49) (79) 743 (1,457) (842)
Chg. in Deposits (143) 119 49 (2) 24
Chg. in Inventory (6) 8 (9) 4 (3)
Chg. in Prepaid Exp (285) 205 (95) 154 (21)
Chg. in Accts. Payable (117) (383) (236) 846 110
Chg. in Acc. Expenses (5) (15) 12 (107) (115)
------- ------- ------- ------- -------
Net Cash Operations 569 653 1,233 891 3,346
INVESTING ACTIVITIES:
Capital Expenditures (500) (1,196) (698) (1,236) (3,630)
Proceeds Sale of Prop 226 0 0 0 226
Payments of Acquisition 0 0 0 0 0
------- ------- ------- ------- -------
Net Cash Used Investing (274) (1,196) (698) (1,236) (3,404)
FINANCING ACTIVITIES:
Net Chg. - Line of Credit 300 200 46 1,250 1,796
Net Chg. - L-T Debt (428) 564 (470) (454) (788)
Net Chg. - Capital Lease (352) (409) (232) (234) (1,227)
------- ------- ------- ------- -------
Net Cash - Financing (480) 355 (657) 562 (220)
Net Cash Flows ($ 185) ($ 188) ($ 121) $ 217 ($ 278)
Beginning Cash $ 373 $ 188 ($ 0) ($ 122) $ 373
Ending Cash $ 188 ($ 0) ($ 122) $ 95 $ 95
</TABLE>
<TABLE>
<CAPTION>
CYCLE-SAT, INC.
INCOME STATEMENT
1997 BY QUARTER ($000)
PROJECTED PROJECTED PROJECTED PROJECTED PROJECTED
1QFY 1997 1QFY 1997 3QFY 1997 4QFY 1997 FY 1997
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
REVENUES
Network Services $ 7,703 $ 6,519 $ 7,036 $ 8,165 $ 29,423
Production Services 760 710 867 955 3,292
Whse. & Distribution 780 790 791 750 3,111
Other 118 118 64 59 359
-------- -------- -------- -------- --------
Total Revenues 9,361 8,137 8,758 9,929 36,185
COST OF SERVICES
Variable Direct Expense 4,190 3,746 3,938 4,485 16,358
Fixed Direct Expense 485 485 485 485 1,940
-------- -------- -------- -------- --------
Cost of Services 4,676 4,231 4,423 4,970 18,298
COST OF SERVICES % 49.9% 52.0% 50.5% 50.1% 50.6%
OPERATING EXPENSES
Selling & Promotion 497 485 482 586 2,050
General & Admin 2,057 1,751 1,927 2,087 7,822
Research & Develop 0 0 0 0 0
-------- -------- -------- -------- --------
Total Operating Expense 2,554 2,236 2,409 2,673 9,872
EBITDA 2,132 1,670 1,926 2,286 8,015
Deprec. & Amort. Expense 905 907 961 987 3,760
-------- -------- -------- -------- --------
Operating Income 1,227 763 965 1,299 4,255
OTHER INCOME (EXPENSE)
Gain (Loss) on Assets 0 0 0 0 0
Abandon Flat Antenna 0 0 0 0 0
Interest Expense, Net (395) (407) (381) (351) (1,534)
Other Income (Exp.) 0 0 0 0 0
-------- -------- -------- -------- --------
Total Other Income (Exp.) (395) (407) (381) (351) (1,534)
Pre-Tax Net Income 833 356 584 948 2,720
Income Tax Expense 0 0 0 0 0
-------- -------- -------- -------- --------
Net Income $ 833 $ 356 $ 584 $ 948 $ 2,720
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
CYCLE-SAT, INC.
BALANCE SHEET
1997 BY QUARTER ($000)
PROJECTED PROJECTED PROJECTED PROJECTED
1QFY 1997 2QFY 1997 3QFY 1997 4QFY 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
ASSETS
Cash $ 85 $ 95 $ 127 $ 96
Accounts Receivable 7,801 6,781 7,036 7,436
Deposits 282 213 119 200
Inventory 104 94 98 110
Prepaid Expenses 368 137 92 150
Receivable from Affiliate 18 30 0 0
-------- -------- -------- --------
Total Current Assets 8,657 7,350 7,471 7,992
Property & Equipment 18,632 20,132 20,632 21,132
(Less Acc. Deprec.) (11,552) (12,189) (12,880) (13,597)
-------- -------- -------- --------
Net Fixed Assets 7,080 7,943 7,752 7,535
Intangible Assets - Net 8,792 8,522 8,252 7,982
Total Assets $ 24,529 $ 23,815 $ 23,475 $ 23,509
======== ======== ======== ========
LIABILITIES
Revolving Line of Credit $ 8,996 $ 9,246 $ 8,896 $ 8,696
Accounts Payable 1,818 1,645 2,187 2,457
Curr. Capital Lease & Rent 524 364 364 364
Curr. L-T Bank/Seller 3,597 3,597 3,597 3,154
Accrued Payroll 119 125 158 158
Other Acc. Expenses 574 552 420 420
-------- -------- -------- --------
Total Current Liabilities 15,628 15,529 15,621 15,249
Long-Term Debt
Cap. Lease & Acc. Rent 453 362 271 180
L-T Debt - Bank/Seller 4,403 3,510 2,592 2,142
Deferred Compensation 182 195 187 187
-------- -------- -------- --------
Total L-T Debt 5,038 4,066 3,050 2,509
Stockholder Equity
Common Stock 70 70 70 70
Additional Pd. in Capital 34,912 34,912 34,912 34,912
Retained Earnings (31,118) (30,762) (30,178) (29,230)
-------- -------- -------- --------
Total Stockholder Equity 3,864 4,220 4,804 5,752
Total Liabilities & Equity $ 24,529 $ 23,815 $ 23,475 $ 23,509
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
CYCLE-SAT, INC.
STATEMENT OF CASH FLOWS
1997 BY QUARTER
($000)
PROJECTED PROJECTED PROJECTED PROJECTED PROJECTED
1QFY 1997 2QFY 1997 3QFY 1997 4QFY 1997 FY 1997
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
CASH OPERATING ACTIVITIES:
Net Income (Loss) 833 356 584 948 2,720
Deprec. & Amortization 905 907 961 987 3,760
Chg. Acc. Satellite Lease 0 0 0 0 0
Chg. Deferred Comp 37 13 (8) 0 42
(Gain) Loss of Disposal 0 0 0 0 0
Chg. Receivable - Affiliate (18) (12) 30 0 0
Chg. Accts. Receivable (900) 1,020 (255) (400) (535)
Chg. in Deposits (182) 68 95 (82) (100)
Chg. in Inventory (20) 10 (4) (12) (27)
Chg. in Prepaid Exp (283) 231 45 (58) (65)
Chg. in Accts. Payable (581) (173) 542 270 59
Chg. in Acc. Expenses 143 (16) (99) 0 28
------- ------- ------- ------- -------
Net Cash Operations (66) 2,404 1,891 1,653 5,882
INVESTING ACTIVITIES:
Capital Expenditures (2,000) (1,500) (500) (500) (4,500)
Proceeds Sale of Prop 0 0 0 0 0
Payments of Acquisition 0 0 0 0 0
------- ------- ------- ------- -------
Net Cash Used Investing (2,000) (1,500) (500) (500) (4,500)
FINANCING ACTIVITIES:
Net Chg. - Line of Credit 3,200 250 (350) (200) 2,900
Net Chg. - L-T Debt (893) (893) (918) (893) (3,597)
Payment Capital Lease (251) (251) (91) (91) (684)
------- ------- ------- ------- -------
Net Cash - Financing 2,058 (894) (1,359) (1,184) (1,381)
Net Cash Flows ($ 10) $ 10 $ 32 ($ 31) $ 1
Beginning Cash $ 95 $ 85 $ 95 $ 127 $ 95
Ending Cash $ 85 $ 95 $ 127 $ 96 $ 96
</TABLE>
