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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF
1934
FOR THE TRANSITION PERIOD FROM_____ TO_____
Commission file number 0-27709
PentaStar Communications, Inc.
(Exact name of small business issuer as specified in its charter)
DELAWARE 84-1502003
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1522 BLAKE STREET, DENVER, COLORADO 80202
(Address of principal executive offices)
(303) 825-4400
(Issuer's telephone number)
NONE
(Former name, former address and former fiscal year,
if changed since last report)
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Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [_]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [_] No [_]
APPLICABLE ONLY TO CORPORATE ISSUERS
As of May 8, 2000, the number of shares outstanding of the issuers common stock,
par value $.0001 per share, were 4,915,132.
- --------------------------------------------------------------------------------
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
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TABLE OF CONTENTS
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PART I
Item 1. Financial Statements................................................... F-1
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations ................................................. 2
PART II
Item 1. Legal Proceedings ..................................................... 6
Item 2. Changes in Securities ................................................. 6
Item 3. Defaults Upon Senior Securities ....................................... 6
Item 4. Submission of Matters to a Vote of Security Holders ................... 6
Item 5. Other Information ..................................................... 6
Item 6. Exhibits and Reports on Form 8-K ...................................... 6
</TABLE>
1
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PART I
ITEM 1. FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
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PENTASTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets as of March 31, 2000 and December 31, 1999........................... F-2
Consolidated Statement of Operations for the Three Months Ended March 31, 2000................... F-3
Consolidated Statement of Cash Flows for the Three Months Ended March 31, 2000................... F-4
Notes to Consolidated Financial Statements....................................................... F-5
</TABLE>
F-1
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PENTASTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2000 AND DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
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March 31, December 31,
ASSETS 2000 1999
-------- --------
(Unaudited) (Audited)
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Current assets:
Cash and cash equivalents .................................... $ 4,907 $ 8,137
Accounts receivable, net ..................................... 2,583 1,092
Inventory .................................................... 149 --
Prepaid expenses and other ................................... 510 203
Related party note receivable ................................ -- 601
-------- --------
Total current assets ................................. 8,149 10,033
Property and equipment, net .................................... 1,608 555
Deferred income taxes .......................................... 562 323
Related party note receivable .................................. 502 --
Other assets ................................................... 84 45
Goodwill, net .................................................. 8,109 4,459
-------- --------
Total assets ......................................... $ 19,014 $ 15,415
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ............................................. $ 1,523 $ 170
Other accrued liabilities .................................... 337 65
Related party acquisition payables ........................... 120 326
Accrued compensation ......................................... 975 541
Deferred revenue ............................................. 898 393
Current portion of capital leases ............................ 28 --
Deferred income taxes ........................................ 97 97
-------- --------
Total current liabilities ............................ 3,978 1,592
Long term portion of capital leases ............................ 156 --
-------- --------
Total liabilities .................................... 4,134 1,592
-------- --------
Commitments and contingencies
Shareholders' equity:
Series A preferred stock, $1,000 stated value; 1,000,000
shares authorized; 86 shares issued and outstanding ....... 87 86
Common stock, $.0001 par value; 20,000,000 shares
authorized; shares issued and outstanding - 4,915,132 as of
March 31, 2000 and 4,797,842 as of December 31, 1999 ...... 1 1
Additional paid-in capital ................................... 15,727 14,169
Retained deficit ............................................. (935) (433)
-------- --------
Total shareholders' equity ........................... 14,880 13,823
-------- --------
Total liabilities and shareholders' equity ........... $ 19,014 $ 15,415
======== ========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated balance sheets.
F-2
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PENTASTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2000
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
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Revenue:
Advanced communications services ............... $ 2,418
Basic dial tone services ....................... 1,715
Product sales .................................. 307
-----------
4,440
-----------
Costs and expenses:
Salaries and commissions ....................... 3,875
Cost of product sales .......................... 131
Other general and administrative expenses ...... 977
Depreciation and amortization .................. 295
-----------
5,278
-----------
Loss from operations ................... (838)
-----------
Other (income) expense:
Interest income ................................ (103)
Interest expense ............................... 5
-----------
Other (income) expense, net ............ (98)
-----------
Loss before benefit for income taxes ............. (740)
Benefit for income taxes ......................... 239
-----------
Net loss ......................................... $ (501)
===========
Preferred dividends .............................. (1)
-----------
Net loss - common shareholders ................... $ (502)
===========
Basic and diluted net loss per common share ...... $ (0.10)
Weighted-average common shares outstanding ....... 4,806,557
===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of this consolidated statement.
F-3
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PENTASTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000
(IN THOUSANDS)
(UNAUDITED)
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Cash flows from operating activities:
Net loss ...................................................... $ (501)
Adjustments to reconcile net loss to net cash
used in operating activities-- .............................
Depreciation and amortization .............................. 295
Deferred income tax benefit ................................ (239)
Changes in operating assets and liabilities--
Accounts receivable, net ................................. 6
Inventory ................................................ 28
Prepaid expenses and other ............................... 19
Accounts payable and accrued liabilities ................. (549)
Deferred revenue ......................................... 81
-------
Net cash used in operating activities ................. (860)
-------
Cash flows from investing activities:
Purchase of property and equipment ............................ (101)
Amounts advanced against contingent purchase consideration .... (500)
Payment of related party acquisition payables ................. (206)
Acquisitions, net of cash acquired ............................ (1,536)
Other ......................................................... (8)
-------
Net cash used in investing activities ................. (2,351)
-------
Cash flows from financing activities:
Payments on capital lease obligations ......................... (19)
-------
Net cash used in financing activities ................. (19)
-------
Net decrease in cash and cash equivalents ....................... (3,230)
Cash and cash equivalents, beginning of period .................. 8,137
-------
Cash and cash equivalents, end of period ........................ $ 4,907
=======
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of this consolidated statement.
F-4
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PENTASTAR COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BUSINESS AND ORGANIZATION
PentaStar Communications, Inc., a Delaware corporation ("PentaStar" or the
"Company"), was founded on March 15, 1999, to become a multi-regional company
that designs, sells and facilitates the installation and usage of communications
services for small and medium-size business customers. On October 26, 1999
PentaStar, through its wholly-owned subsidiaries, acquired the outstanding
capital stock and other equity interests of DMA Ventures, Inc., dba Access
Communications ("Access") and ICM Communications Integration, Inc. ("ICM") and
completed an initial public offering of its common stock (the "Offering").
Upon closing of the acquisitions of Access, ICM and the Offering, PentaStar
commenced its business operations as a sales agent for communications services
including local access, long distance, wireless and internet services for voice
and data communications. PentaStar designs, procures and facilitates the
installation and use of communications services to best meet its customers'
specific needs. In the first quarter of fiscal 2000 the Company acquired four
communications services agents to expand its operations (see Note 5).
The financial statements as of and for the three months ended March 31,
2000, are unaudited and prepared by the Company pursuant to the interim
reporting rules and regulations of the Securities and Exchange Commission;
however, the financial statements include all adjustments (consisting of normal
recurring adjustments) considered necessary by management for a fair
presentation of the financial position and results of operations for the period.
The results of operations for interim periods are not necessarily indicative of
the results that may be expected for the entire year. The accompanying
statements of operations and cash flows do not include a comparative period for
1999 as the Company had no operations in that period.
2. NEW ACCOUNTING STANDARDS
In December 1999, the staff of the Securities and Exchange Commission
released Staff Accounting Bulletin ("SAB") No. 101 "Revenue Recognition". SAB
No. 101 provides interpretive guidance on the recognition, presentation and
disclosure of revenue in financial statements. The Company's accounting policies
are consistent with the guidance provided in SAB No. 101 and its implementation
in the second quarter of fiscal 2000 is not expected to have a significant
effect on the results of operations or financial position of the Company.
3. INVENTORIES
Inventories consist of finished goods and refurbished and used equipment
held for resale in the ordinary course of business. Inventories are carried at
the lower of cost or market. Cost is determined on a FIFO (first-in, first-out)
basis.
4. EARNINGS PER SHARE
The Company applies SFAS No. 128, "Earnings Per Share". SFAS No. 128
provides for the calculation of "Basic" and "Diluted" earnings or net income per
share. Basic net income per share includes no dilution and is computed by
dividing earnings available to common shareholders by the weighted average
number of common shares outstanding for the period. Diluted net income per share
reflects the potential dilution of stock options and warrants using the treasury
stock method. Outstanding options and warrants exercisable into 113,750 shares
of common stock have been excluded from the calculation of diluted loss per
share as they are antidilutive.
F-5
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5. BUSINESS COMBINATIONS
In the first quarter of fiscal 2000, PentaStar completed the acquisition of
four communications services agents. Following is a summary of the acquisitions.
PentaStar, through a wholly-owned subsidiary, acquired the assets of
USTeleCenters, Inc. and Vermont Network Services Corporation (collectively
referred to as "UST"). UST, founded in 1986 and headquartered in Boston,
Massachusetts, is a full-service communications agent focusing on small business
customers located throughout Bell Atlantic's 13 state Northeast and Mid-Atlantic
region. UST has agency agreements with service providers including Bell
Atlantic, Bell South, Southwestern Bell and Sprint. The purchase consideration
consisted of $277 in cash including acquisition costs, the issuance of 5,980
shares of the Company's common stock with a fair market value of $100 and the
assumption of liabilities.
PentaStar, through a wholly-owned subsidiary, acquired the assets of NCI
Communications, Inc. ("NCI"). NCI is primarily a long distance communications
services agent located in Seattle, Washington. NCI has agency agreements with
Qwest, AT&T and GST Telecom. NCI was owned by certain of the previous
shareholders of ICM, who, upon the Company's acquisition of ICM, became
shareholders of the Company. The purchase consideration consisted of $18 in cash
including acquisition costs and the cancellation of a $601 note receivable from
NCI to PentaStar.
PentaStar acquired ParTel, Inc. ("ParTel") by merger. ParTel, founded in
1982, is a full-service communications agent based in Phoenix, Arizona primarily
servicing customers in the Phoenix and Tucson metropolitan markets. ParTel is an
agent of U S WEST and sells primarily high-end, data-oriented products. The
initial purchase consideration consisted of $606 in cash including acquisition
costs and the issuance of 30,310 shares of the Company's common stock with a
fair market value of $539. In addition, the agreement provides for additional
consideration in the form of cash and the Company's common stock if certain
operating performance criteria are met by ParTel for the year ending December
31, 2000.
PentaStar, through a wholly-owned subsidiary, acquired Resource
Communications, Inc. ("Resource") by merger. Resource, based in Dublin,
California, is a full-service communications agent, which furnishes
communication solutions to customers in Northern California. Resource is one of
the largest Cable & Wireless long distance master agents and a significant
Pacific Bell authorized sales representative. The initial purchase consideration
consisted of $1,037 of cash including acquisition costs and the issuance of
81,250 shares of the Company's common stock. Of the 81,250 of issued shares,
50,000 shares with a fair market value of $919 were placed in an indemnification
escrow until March 31, 2001. The remaining 31,250 shares were placed in escrow
until March 15, 2001 to be released upon Resource attaining certain performance
criteria for the year ending December 31, 2000. As a result, the fair market
value of the 31,250 shares has not been reflected in the initial purchase
consideration. At the time the performance criteria is met, the additional
consideration will be treated as goodwill and recorded on the balance sheet. In
addition, the agreement provides for additional consideration in the form of
cash and the Company's common stock if certain operating performance criteria
are met by Resource for the period from January 1, 2000 to June 30, 2001.
The acquisitions discussed above were recorded using the purchase method of
accounting by which the purchase consideration was allocated to the identifiable
assets and liabilities of the acquired companies and the excess of the purchase
consideration over the fair value of the net assets acquired was recorded as
goodwill. The allocation of the purchase consideration was as follows:
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Purchase Consideration:
Cash ......................... $1,681
PentaStar common stock ....... 1,558
Acquisition costs ............ 257
------
$3,496
======
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Of the total purchase consideration of $3,496, $1,132 was allocated to
property and equipment, ($1,223) to net working
F-6
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capital, ($166) to noncurrent liabilities and $3,753 to goodwill. The financial
statements reflect a preliminary allocation of the purchase price, to be
finalized upon evaluation of certain assets and liabilities acquired. Goodwill
will be amortized over a twenty year period. The difference between the results
of operations subsequent to the closing of each transaction and the results of
operations assuming each transaction was closed on January 1, 2000, is not
significant.
In addition to the above acquisition terms, certain shareholders of the
acquired companies have entered into escrow and contingent stock agreements with
PentaStar upon closing of the acquisitions. These agreements adjust the final
consideration paid to those shareholders in return for their interest in their
acquired companies. Under these agreements, shares of PentaStar common stock
were placed into escrow. Based upon the earnings performance of an acquired
company relative to that of all other acquired companies for the 12-month period
prior to the earlier of a sale of substantially all of the assets or stock of
PentaStar or five years, the shareholder associated with that company will
receive back from escrow all, some or none of the shares placed in escrow. In
addition, based again upon the relative earnings performance of the acquired
company, that shareholder may receive additional shares of common stock from
PentaStar. The agreements are designed, however, so that there will be no net
change to the total number of shares of PentaStar common stock outstanding after
the combined adjustments are made for all of the acquired companies.
In connection with the acquisition of ParTel, the Company advanced $500 to
Par.com, Inc. ("Par.com"). Par.com is a corporation controlled by the former
shareholders of ParTel. The promissory note bears interest at the prime rate
plus 1%. The principal and accrued interest is due on December 31, 2001, unless
the Company becomes obligated to make payment under the earnout provisions of
the ParTel acquisition agreement, at which time the required obligation would be
applied to payment on the promissory note. The promissory note is secured by a
security and pledge agreement whereby the assets of Par.com and the Company's
common stock issued in the acquisition are collateral to secure payment under
the promissory note. Certain former shareholders of ParTel have also personally
guaranteed payment.
6. SUBSEQUENT EVENTS
In the first quarter of fiscal 2000, the Company signed a definitive
agreement to acquire the assets of Eastern Telecom, Inc. ("ETI"). ETI, founded
in 1992, is a full-service communications agent based in Warwick, Rhode Island
primarily servicing customers in Boston, New York, Albany, Providence and
Warwick. ETI is an authorized agent for Bell Atlantic and Bell South. The
acquisition of the assets of ETI is contingent upon receipt of the approval of
the shareholders of VSI Enterprises, Inc., which is the parent company of ETI.
Terms of the definitive agreement provide for a purchase price for the assets to
consist of approximately $2,100 in cash, the issuance of the Company's common
stock with a fair market value of $950 and the assumption of certain liabilities
at closing. In addition, there is a potential earnout payment based upon the
combined earnings of ETI and UST for the year ending December 31, 2000. The
acquisition is expected to close in May 2000.
In the second quarter of fiscal 2000, PentaStar signed a definitive
agreement to acquire the Network Services Group of Telecomm Industries Corp.
("TCMM"). TCMM's Network Services Group is Ameritech's largest distributor of
voice and data services. TCMM is also an authorized distributor for BellSouth.
Under the terms of the purchase agreement, the consideration for the transaction
is approximately $7.1 million in the Company's common stock and cash, the
assumption of $6.2 million in debt and the assumption of certain operating
liabilities. Approximately $4.5 million of the debt assumed is secured by $6.2
million of the future commissions, due to PentaStar from the existing Ameritech
contracts, which will be realized over the next several years. In addition,
there are potential earnout payments to TCMM based upon certain operating
performance criteria during the period from April 1, 2000 through March 31,
2001.
F-7
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain matters discussed in this Quarterly Report on Form 10-QSB are
"forward-looking statements," intended to qualify for the safe harbors from
liability established by the Private Securities Litigation Reform Act of 1995.
These forward-looking statements can generally be identified as such because the
context of the statement includes words such as "anticipates," "expects,"
"estimates," "plans," "believes" and "intends" or other similar words.
Similarly, statements that describe the Company's future plans, objectives or
goals are also forward-looking statements. All forward-looking statements are
subject to certain risks and uncertainties that could cause actual results or
outcomes to differ materially from those currently anticipated. Factors that
could affect actual results or outcomes are described in detail in Item 1 of the
Company's Annual Report on Form 10-KSB for the period from inception (March 15,
1999) through December 31, 1999 and the Company's Registration Statement on Form
SB-2 (Registration No. 333-85281) under the heading "Risk Factors" and include:
o The Company's lack of combined operating history and its untested
business model.
o The Company's success in carrying out its acquisition strategy.
o The Company's reliance on regional bell operating companies and other
service providers for communications services.
o The Company's ability to increase revenues from service providers
other than local access service providers.
Shareholders, potential investors and other readers are urged to
consider these factors in evaluating the forward-looking statements and are
cautioned not to place undue reliance on such forward-looking statements. The
forward-looking statements included herein are only made as of the date hereof
and the Company undertakes no obligations to publicly update such
forward-looking statements to reflect subsequent events or circumstances.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis of financial condition and results of
operations should be read in conjunction with the consolidated financial
statements and related notes as of and for the three months ended March 31,
2000. The statements of operations and cash flows for the three months ended
March 31, 2000 included in the financial statements do not include a comparative
period for 1999 as a result of PentaStar having no operations during the three
months ended March 31, 1999. Accordingly, the following discussion does not
include a comparison to a prior year period.
OVERVIEW
PentaStar was incorporated on March 15, 1999 under Delaware law. Through
the acquisitions of existing communications services agents in major
metropolitan areas, we have become a leading communications services agent for
communications services including local access, long distance, wireless and
Internet services for voice and data communications. We design, procure and
facilitate the installation and use of communications services to best meet our
customers' needs. We currently act as a sales agent for Bell Atlantic, US WEST
Communications, Cable & Wireless, Pacific Bell, BellSouth, Southwestern Bell,
Sprint, Qwest, Epoch Internet and other communications services providers. We
plan to continue to acquire other communications services agents and to enter
into agency agreements with other communications services providers.
Substantially all of our revenues are generated from the commissions we
receive from selling communications services as agents for communications
service providers. We are paid a commission by each service provider. Currently
we primarily sell advanced communications services and basic dial tone services
for the local access market to facilitate data, voice and video communications.
We expect that, over time, the percentage of advanced communications services
revenues will increase as a percentage of revenues because of increased demand
for, and availability of, these services. Basic dial tone services in general
are telephone connections, voice messaging and call management services.
Advanced communications services are all other voice and data communications
services, including:
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o data transmission oriented services;
o dedicated high-capacity transmission services;
o high speed real time communications access, including digital
subscriber line, or DSL;
o packet-based transmission for wide area networks, including frame
relay service; and
o an advanced digital network for data, video, voice and Internet
traffic, including ISDN.
In addition to acting as a sales agent for local access, long distance,
wireless and Internet, we also offer, to a limited extent, products such as
telephone equipment and the related hardware installation.
Salaries and commissions expenses consist principally of salary and
incentive compensation that our operating companies pay their sales and
marketing, operations and engineering support and administrative staff.
Cost of product sales consists of the cost of the product sold and any
subcontract labor incurred in installing the equipment.
Other general and administrative expenses include communications expenses,
office rent and utilities, travel and marketing for the operating companies.
These expenses also include the operations and staffing related to our corporate
office.
We experience some seasonal variations in our businesses. Orders for
communications services tend to slow in the last quarter of the calendar year
due to customers' budgetary constraints. Generally, orders increase in the first
quarter of the following year. Because of the time lag between order and
installation, revenues in the first four months of each calendar year are
typically below the average of revenues for the remaining portion of the year.
Recent Acquisitions.
In the first quarter of fiscal 2000, we completed the acquisition of or
signed definitive agreements to acquire six communications services agents.
Following is a summary of our acquisition activity.
PentaStar, through a wholly-owned subsidiary, acquired the assets of
USTeleCenters, Inc. and Vermont Network Services Corporation (collectively
referred to as "UST"). UST, founded in 1986 and headquartered in Boston,
Massachusetts, is a full-service communications agent focusing on small business
customers located throughout Bell Atlantic's 13 state Northeast and Mid-Atlantic
region. UST has agency agreements with service providers including Bell
Atlantic, Bell South, Southwestern Bell and Sprint. The purchase consideration
consisted of $277,000 in cash including acquisition costs, the issuance of 5,980
shares of the Company's common stock with a fair market value of $100,000 and
the assumption of liabilities.
PentaStar, through a wholly-owned subsidiary, acquired the assets of NCI
Communications, Inc. ("NCI"). NCI is primarily a long distance communications
services agent located in Seattle, Washington. NCI has agency agreements with
Qwest, AT&T and GST Telecom. NCI was owned by certain of the previous
shareholders of ICM, who, upon the Company's acquisition of ICM, became
shareholders of the Company. The purchase consideration consisted of $18,000 in
cash including acquisition costs and the cancellation of a $601,000 note
receivable from NCI to PentaStar.
PentaStar acquired ParTel, Inc. ("ParTel") by merger. ParTel, founded in
1982, is a full-service communications agent based in Phoenix, Arizona primarily
servicing customers in the Phoenix and Tucson metropolitan markets. ParTel is an
agent of U S WEST and sells primarily high-end, data-oriented products. The
initial purchase consideration consisted of $606,000 in cash including
acquisition costs and the issuance of 30,310 shares of the Company's common
stock with a fair market value of $539,000. In addition, the agreement provides
for additional consideration in the form of cash and the Company's
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common stock if certain operating performance criteria are met by ParTel for the
year ending December 31, 2000.
PentaStar, through a wholly-owned subsidiary, acquired Resource
Communications, Inc. ("Resource") by merger. Resource, based in Dublin,
California, is a full-service communications agent, which furnishes
communication solutions to customers in Northern California. Resource is one of
the largest Cable & Wireless long distance master agents and a significant
Pacific Bell authorized sales representative. The initial purchase consideration
consisted of $1,037,000 of cash including acquisition costs and the issuance of
81,250 shares of the Company's common stock. Of the 81,250 of issued shares,
50,000 shares with a fair market value of $919,000 were placed in an
indemnification escrow until March 31, 2001. The remaining 31,250 shares were
placed in escrow until March 15, 2001 to be released upon Resource attaining
certain performance criteria for the year ending December 31, 2000. In addition,
the agreement provides for additional consideration in the form of cash and the
Company's common stock if certain operating performance criteria are met by
Resource for the period from January 1, 2000 to June 30, 2001.
In the first quarter of fiscal 2000, PentaStar signed a definitive
agreement to acquire the assets of Eastern Telecom, Inc. ("ETI"). ETI, founded
in 1992, is a full-service communications agent based in Warwick, Rhode Island
primarily servicing customers in Boston, New York, Albany, Providence and
Warwick. ETI is an authorized agent for Bell Atlantic and Bell South. The
acquisition of the assets of ETI is contingent upon receipt of the approval of
the shareholders of VSI Enterprises, Inc., which is the parent company of ETI.
Terms of the definitive agreement provide for a purchase price for the assets to
consist of approximately $2,100,000 in cash, the issuance of the Company's
common stock with a fair market value of $950,000 and the assumption of certain
liabilities at closing. In addition, there is a potential earnout payment based
upon the combined earnings of ETI and UST for the year ending December 31, 2000.
The acquisition is expected to close in May 2000.
In the second quarter of fiscal 2000, PentaStar signed a definitive
agreement to acquire the Network Services Group of Telecomm Industries Corp
("TCMM"). TCMM's Network Services Group is Ameritech's largest agent and a
distributor of voice and data services. TCMM is also an authorized distributor
for BellSouth. Under the terms of the purchase agreement, the consideration for
the transaction is approximately $7.1 million in the Company's common stock and
cash, the assumption of $6.2 million in debt and the assumption of certain
operating liabilities. Approximately $4.5 million of the debt assumed is secured
by $6.2 million of future commissions, due to PentaStar from the existing
Ameritech contracts, which will be realized over the next several years. In
addition, there are potential earnout payments to TCMM based upon certain
operating performance criteria during the period from April 1, 2000 through
March 31, 2001.
RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2000
Revenues. Revenues consist principally of commissions from sales of
communications services as an agent for communications services providers. We
recorded revenue of $2,418,000 resulting from sales of advanced communications
services, $1,715,000 from sales of basic dial tone services and $307,000 from
product sales. The acquisitions of UST, NCI, ParTel and Resource contributed
significantly to the overall revenue levels. The acquisition of UST provided us
with a telemarketing sales division. The telemarketing group focuses on high
volume, lower revenue services, which accounts for the significant amount of
basic dial tone services revenues recorded in the three months ended March 31,
2000.
Costs and expenses. Salaries and commissions expense of $3,875,000 consists
principally of costs of operations, sales, management and administrative
personnel at the operating companies. Cost of product sales of $131,000 consists
of the cost of the equipment and subcontract labor attributable to the product
sales. Other general and administrative expenses of $977,000 consists
principally of the overhead expenses of the operating companies such as rent,
telephone and supplies and the expenses applicable to our corporate office such
as personnel costs, travel, insurance and professional fees. Depreciation and
amortization expense of $295,000 consists of depreciation expense on the
property and equipment and the amortization of goodwill associated with the
acquisitions of the operating companies in fiscal 1999 and in the first quarter
of fiscal 2000.
4
<PAGE> 14
Loss from operations. A loss from operations of $838,000 was recognized for
the three months ended March 31, 2000.
Other (income) expense, net. Other income, net, of $98,000 consists of
$103,000 of interest income earned on our invested cash. As we utilize
additional cash resources for operating needs and future acquisitions, we expect
interest income to decrease. Interest expense includes interest expense on
capital lease obligations assumed in the acquisition of UST.
Income taxes. A benefit of $239,000 was recorded for the period
representing an effective tax rate of 32.3%. The difference between the federal
statutory rate of 34% and the effective rate is due to state income taxes offset
by nondeductible goodwill amortization.
Net loss. A net loss of $501,000 was recognized for the three months ended
March 31, 2000.
LIQUIDITY AND CAPITAL RESOURCES
Our operations used net cash of $860,000 for the three months ended March
31, 2000 which was primarily attributable to the net loss recognized during the
period and the payment of accounts payable and accrued liabilities. The
acquisition of UST included the assumption of approximately $2,441,000 in
current liabilities. This use of cash primarily represents the payment of these
assumed liabilities.
We used cash of $2,351,000 in investing activities for the three months
ended March 31, 2000 as a result primarily of our acquisition activity, the
issuance of a promissory note and the purchase of property and equipment. We
used cash of $1,742,000 to fund the cash consideration used to acquire UST, NCI,
ParTel and Resource in the first quarter of fiscal 2000 and to also pay the
remaining amounts due to the shareholders of our 1999 acquisitions of DMA
Ventures, Inc. dba Access Communications and ICM Communications Integration,
Inc. In connection with the acquisition of ParTel, we issued a promissory note
in the amount of $500,000 to a corporation controlled by the former shareholders
of ParTel. The principal and accrued interest is due no later than December 31,
2001. Property and equipment of $101,000 was purchased for the three months
ended March 31, 2000.
Our financing activities for the three months ended March 31, 2000 used
cash of $19,000 for payments on capital lease obligations.
We intend to fund future acquisitions through the remaining proceeds of our
initial public offering, the issuance of common stock, internally generated cash
flow and future borrowings.
As of March 31, 2000, we had no outstanding debt. We believe we will be
able to obtain a working capital line of credit or other debt financing,
however, we may not be able to obtain this financing, or, if available, the
terms of the financing may not be favorable to us or the shareholders without
substantial dilution of ownership rights.
We believe that the net proceeds from the initial public offering, cash
flow from operations and future debt financing will be sufficient to satisfy our
anticipated cash requirements for the next twelve months. We will likely require
additional equity or debt financing beyond that period, and possibly sooner,
dependent upon the scope of the acquisition activity. We have not yet identified
any sources of long-term financing.
YEAR 2000 RISKS
Many software applications and computer hardware and related equipment and
systems that use embedded technology, such as microprocessors, rely on two
digits rather than four to represent years in performing computations and
decision-making functions. These programs, hardware items and systems may fail
beginning on January 1, 2000, or earlier, because they misinterpret "00" as the
year 1900 rather than 2000. This problem is generally referred to as the "Year
2000" issue.
5
<PAGE> 15
As of May 8, 2000, there were no material Year 2000 issues noted with any
of our computer systems, or to our knowledge, to any third party that we do
business with. No costs are expected to be incurred or accrued relating to the
Year 2000 issue.
RECENT ACCOUNTING PRONOUNCEMENTS
In December 1999, the staff of the Securities and Exchange Commission
released Staff Accounting Bulletin ("SAB") No. 101 "Revenue Recognition". SAB
No. 101 provides interpretive guidance on the recognition, presentation and
disclosure of revenue in financial statements. The Company's accounting policies
are consistent with the guidance provided in SAB No. 101 and its implementation
in the second quarter of fiscal 2000 is not expected to have a significant
effect on the results of operations or financial position of the Company.
PART II
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
(c.) During the period from January 1, 2000 through March 31, 2000,
PentaStar sold unregistered securities as follows:
o On February 18, 2000, PentaStar issued 5,980 shares of
common stock to View Tech, Inc. as partial consideration for
the acquisition of the assets of USTeleCenters, Inc. and
Vermont Network Services Corporation.
o On March 17, 2000, PentaStar issued 30,310 shares of common
stock to the shareholders of ParTel, Inc. as partial
consideration for the acquisition of ParTel, Inc. by merger.
o On March 31, 2000, PentaStar issued 81,250 shares of common
stock to the shareholders of Resource Communications, Inc.
as partial consideration for the acquisition of Resource
Communications, Inc. by merger.
The sales and issuance of securities in the transactions
described in paragraphs 1 through 3 above were deemed to be
exempt from registration under the Securities Act by virtue of
Rule 506. The persons or entities to whom the shares were issued
are accredited investors.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
6
<PAGE> 16
(a) The following exhibits are attached or incorporated by reference to the
documents indicated which have previously been filed with the Securities and
Exchange Commission.
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
2.6 Purchase Agreement dated January 7, 2000 among PentaStar
Communications, Inc., OC Mergerco 3, Inc., Network
Communications Integration, Inc. and the Shareholders of
Network Communications Integration, Inc.
2.7* Asset Purchase Agreement dated as of December 31, 1999
among OC Mergerco 4, Inc., USTeleCenters, Inc., Vermont
Network Services Corporation and View Tech, Inc.
2.8 Purchase Agreement dated February 18, 2000 among PentaStar
Communications, Inc., OC Mergerco 4, Inc., VSI Network
Solutions, Inc. and the Shareholder of VSI Network
Solutions, Inc.
2.9 Agreement and Plan of Merger dated January 1, 2000 among
PentaStar Communications, Inc., Partel, Inc and the
Shareholders of Partel, Inc.
2.10** Agreement and Plan of Merger among PentaStar
Communications, Inc. PentaStar Acquisition Corp. VI,
Resource Communications, Inc. and the Shareholders of
Resource Communications, Inc.
10.15*** Bell Atlantic Authorized Agent Network Services
Marketing Agreement By and Between Bell Atlantic Network
Services, Inc. and USTeleCenters
Effective Date: January 1, 1999.
27.1 Financial Data Schedule
- ----------
* Incorporated by reference from the Company's Current Report on Form 8-K
dated February 18, 2000.
** Incorporated by reference from the Company's Current Report on Form 8-K
dated March 31, 2000.
*** Filed herewith. The Company has applied for confidential treatment for
portions of this Exhibit.
(b) The issuer filed the following reports on Form 8-K during the fiscal
quarter ended March 31, 2000:
o Current Report on Form 8-K dated February 18, 2000
o Current Report on Form 8-K dated February 18, 2000
o Current Report on Form 8-K dated February 23, 2000
o Current Report on Form 8-K dated March 17, 2000
o Current Report on Form 8-K dated March 31, 2000
o Current Report on Form 8-K dated March 31, 2000
7
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized on May 15, 2000.
PENTASTAR COMMUNICATIONS, INC.
By: /s/ DAVID L. DUNHAM
----------------------------
David L. Dunham
Chief Financial Officer
<PAGE> 18
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
--------- ------------------------------------------------------------------
<S> <C>
2.6 Purchase Agreement dated January 7, 2000 among PentaStar
Communications, Inc., OC Mergerco 3, Inc. , Network Communications
Integration, Inc. and the Shareholders of Network Communications
Integration, Inc.
2.7* Asset Purchase Agreement dated as of December 31, 1999 among OC
Mergerco 4, Inc., USTeleCenters, Inc., Vermont Network Services
Corporation and View Tech, Inc.
2.8 Purchase Agreement dated February 18, 2000 among PentaStar
Communications, Inc., OC Mergerco 4, Inc. , VSI Network Solutions,
Inc. and the Shareholder of VSI Network Solutions, Inc.
2.9 Agreement and Plan of Merger dated January 1, 2000 among PentaStar
Communications, Inc., Partel, Inc and the Shareholders of Partel,
Inc.
2.10** Agreement and Plan of Merger among PentaStar Communications, Inc.
PentaStar Acquisition Corp. VI, Resource Communications, Inc. and
the Shareholders of Resource Communications, Inc.
10.15*** Bell Atlantic Authorized Agent Network Services Marketing
Agreement By and Between Bell Atlantic Network Services, Inc. and
USTeleCenters
Effective Date: January 1, 1999.
27.1 Financial Data Schedule
</TABLE>
- ----------
* Incorporated by reference from the Company's Current Report on Form 8-K
dated February 18, 2000.
** Incorporated by reference from the Company's Current Report on Form 8-K
dated March 31, 2000.
*** The Company has requested confidential treatment of certain portions of
this Exhibit.
<PAGE> 1
EXHIBIT 2.6
================================================================================
PURCHASE AGREEMENT
AMONG
PENTASTAR COMMUNICATIONS, INC.,
OC MERGERCO 3, INC.,
NETWORK COMMUNICATIONS INTEGRATION, INC.
AND THE
SHAREHOLDERS
OF
NETWORK COMMUNICATIONS INTEGRATION, INC.
AS OF JANUARY 7, 2000
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Definitions...........................................................................................................1
2. Purchase and Sale.....................................................................................................1
2.1. Basic Transaction............................................................................................1
2.2. Assumption of Certain Liabilities............................................................................1
2.3. Purchase Price; Payment......................................................................................1
2.4. Sales Taxes, Etc.............................................................................................2
3. Representations and Warranties........................................................................................2
3.1. Representations and Warranties of the Company and the Shareholders...........................................2
3.2. Representations and Warranties of PentaStar.................................................................12
3.3. Survival of Representations.................................................................................13
3.4. Representations as to Knowledge.............................................................................13
4. Pre-Closing Covenants................................................................................................13
4.1. General.....................................................................................................13
4.2. Operation and Preservation of Business......................................................................14
4.3. Full Access.................................................................................................14
4.4. Notice of Developments......................................................................................14
4.5. Exclusivity.................................................................................................14
4.6. Announcements; Securities Law Restrictions..................................................................14
4.7. Bulk Sales Laws.............................................................................................14
5. Post-Closing Covenants...............................................................................................15
5.1. Further Assurances..........................................................................................15
5.2. Transition..................................................................................................15
5.3. Cooperation.................................................................................................15
5.4. Confidentiality.............................................................................................15
5.5. Post-Closing Announcements..................................................................................15
5.6. Financial Statements........................................................................................15
5.7. Satisfaction of Liabilities.................................................................................15
5.8. Repurchase of Unpaid Receivables............................................................................16
5.9. Termination of Obligations..................................................................................16
6. Conditions to Closing................................................................................................16
6.1. Conditions to Obligation of PentaStar.......................................................................16
6.2. Conditions to Obligation of the Company and the Shareholders................................................18
7. Remedies for Breaches of This Agreement..............................................................................18
7.1. Indemnification Provisions for Benefit of PentaStar. ......................................................18
7.2. Indemnification Provisions for Benefit of the Company and the Shareholders..................................19
7.3. Matters Involving Third Parties.............................................................................19
7.4. Other Remedies..............................................................................................20
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C> <C>
7.5. Basket......................................................................................................20
8. Termination..........................................................................................................21
8.1. Termination of Agreement....................................................................................21
8.2. Effect of Termination.......................................................................................21
8.3. Confidentiality.............................................................................................21
9. Miscellaneous........................................................................................................22
9.1. No Third-Party Beneficiaries................................................................................22
9.2. Entire Agreement............................................................................................22
9.3. Succession and Assignment...................................................................................22
9.4. Counterparts................................................................................................22
9.5. Headings and Terms..........................................................................................22
9.6. Notices.....................................................................................................22
9.7. Governing Law...............................................................................................23
9.8. Amendments and Waivers......................................................................................23
9.9. Severability................................................................................................23
9.10. Expenses....................................................................................................23
9.11. Arbitration.................................................................................................23
9.12. Construction................................................................................................24
9.13. Incorporation of Exhibits...................................................................................24
9.14. Shareholders' Agent.........................................................................................24
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<CAPTION>
Exhibits:
<S> <C>
Exhibit 1.1(a) Exhibit 3.1(f)(iii)
Exhibit 1.1(b) Exhibit 3.1(f)(v)
Exhibit 1.1(c)(i) Exhibit 3.1(f)(vi)
Exhibit 1.1(c)(ii) Exhibit 3.1(h)
Exhibit 1.1(d) Exhibit 3.1(i)(i)
Exhibit 3.1(b)(ii) Exhibit 3.1(i)(ii)
Exhibit 3.1(c) Exhibit 3.1(k)
Exhibit 3.1(d)(i) Exhibit 3.1(l)
Exhibit 3.1(d)(ii) Exhibit 3.1(m)
Exhibit 3.1(e)(i) Exhibit 3.1(n)
Exhibit 3.1(e)(iv) Exhibit 3.1(s)
Exhibit 3.1(e)(vi) Exhibit 3.1(t)
Exhibit 3.1(e)(vii) Exhibit 5.8
</TABLE>
(iii)
<PAGE> 5
This Purchase Agreement is entered into as of January 7, 2000 among
PentaStar Communications, Inc., a Delaware corporation ("PentaStar"), OC
Mergerco 3, Inc., a Delaware corporation (the "Acquiror"), Network
Communications Integration, Inc., a Washington corporation (the "Company"), and
the Persons identified on the signature page hereto as Shareholders
(individually, a "Shareholder" and collectively, the "Shareholders").
Recitals
A. The Shareholders own all of the issued and outstanding capital
stock of the Company.
B. The Acquiror is a newly-formed, wholly-owned subsidiary of
PentaStar. The Acquiror desires to acquire from the Company, and the Company
desires to sell to the Acquiror, substantially all of the Company's assets as
provided in this Agreement.
C. PentaStar, the Acquiror, the Company and the Shareholders desire
to make certain representations, warranties and agreements in connection with
such transaction and also desire to set forth various conditions precedent
thereto.
Agreement
NOW, THEREFORE, in consideration of the premises, the mutual
representations, warranties and covenants set forth herein and other good and
valuable consideration, the receipt and sufficiency of which are acknowledged,
the parties agree as follows:
1. Definitions. The terms defined in Exhibit 1.1(a) shall have the meanings
designated therein.
2. Purchase and Sale.
2.1. Basic Transaction. Subject to the terms and conditions set forth in
this Agreement, the Acquiror agrees to purchase from the Company, and the
Company agrees to sell to the Acquiror, all the Acquired Assets free and clear
of any Encumbrance or Tax, for the consideration specified in Section 2.3. The
Acquiror will have no obligation under this Agreement to purchase less than all
of the Acquired Assets.
2.2. Assumption of Certain Liabilities. Subject to the terms and conditions
set forth in this Agreement, the Acquiror agrees to assume and become
responsible at the Closing for all of the Assumed Liabilities. The Acquiror will
not assume or have any responsibility with respect to any other Liability not
expressly included within the definition of Assumed Liabilities.
2.3. Purchase Price; Payment.
(a) The consideration payable by the Acquiror to the Company for the
Acquired Assets will be (i) cash in an amount of $10,000, (ii) the termination
as of the Closing Date (pursuant to Section 5.9) of the NCI Liabilities and
(iii) the assumption of the Assumed Liabilities (collectively the "Purchase
Price"). On the Closing the Acquiror will pay to the Company by wire transfer to
an account designated by the Company in cash the amount of the cash portion of
the Purchase Price.
<PAGE> 6
(b) The allocation of the total consideration for the Acquired Assets
for Tax reporting purposes shall be as follows: (i) to cash and cash
equivalents, the amount thereof; (ii) to Closing Accounts Receivable, the amount
determined by the Acquiror from the Company's records, adjusted by the Acquiror
to conform to GAAP; (iii) to inventory, the amount determined by the Acquiror
from the Company's records, adjusted by the Acquiror to conform to GAAP; (iv) to
leasehold improvements, the greater of fair market value (determined by the
Acquiror from its historical experience, or in the Acquiror's sole discretion,
by independent appraisal) or the current book value thereof as reflected in the
Company's records, adjusted by the Acquiror to conform to GAAP; and (v) the
entire remaining balance of the consideration shall be allocated to the goodwill
of the Company's business or, at the Acquiror's sole discretion, to the other
intangible assets which are included in the Acquired Assets. The parties
acknowledge that such allocations for Tax reporting purposes were determined
pursuant to arm's length bargaining regarding the fair market values of the
Acquired Assets in accordance with the provisions of Code Section 1060. The
parties agree to be bound by these allocations for all federal, state and local
Tax reporting purposes, including for purposes of determining any income, gain,
loss, depreciation or other deductions in respect of such assets. The parties
further agree to prepare and file all Tax Returns (including Form 8594 under the
Code) in a manner consistent with such allocations. If the Acquiror makes
adjustments to conform to GAAP pursuant to clauses (ii), (iii) or (iv) above,
the Acquiror will bear any out-of-pocket expense of making such adjustments.
2.4. Sales Taxes, Etc. The Company will pay all sales, use, transfer,
licensing and other Taxes, fees and charges payable in respect of or as a result
of the sale and transfer of the Acquired Assets to the Acquiror pursuant to this
Agreement.
2.5. The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Sherman & Howard
L.L.C. at 10:00 a.m. Denver, Colorado time on January 7, 2000 or as soon
thereafter as possible. PentaStar may, at any time, waive any unsatisfied
closing conditions specified in Section 6.1 and, upon payment by the Acquiror of
the $10,000 cash portion of the Purchase Price and execution by the Acquiror of
the Assignment and Assumption Agreement, the Closing shall be deemed to have
occurred, and all of the Company's right, title and interest to the Acquired
Assets shall be deemed conveyed to the Acquiror. All transactions contemplated
by this Agreement will be effective at 12:00 a.m. local time in Seattle,
Washington on the day of the Closing (such effective time being the "Closing
Date").
2.6. Deliveries at the Closing. At the Closing, (a) the Company will
deliver to PentaStar the various certificates, instruments and documents, and
take the actions, referred to in Section 6.1 and (b) PentaStar will deliver to
the Company the various certificates, instruments and documents, and take the
actions, referred to in Section 6.2.
3. Representations and Warranties.
3.1. Representations and Warranties of the Company and the Shareholders.
The Company and the Shareholders each represent and warrant to PentaStar that
the statements contained in this Section 3.1 are correct and complete as of the
date of this Agreement and will be correct and complete as of the Closing Date
(as though made then and as though the Closing Date were then substituted for
the date of this Agreement throughout this Section 3.1).
-2-
<PAGE> 7
(a) Organization, Good Standing, Etc. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Washington, and is qualified and authorized to do business as a foreign
corporation and is in good standing in Oregon, which is the only jurisdiction in
which the nature of the business conducted by it or the properties owned, leased
or operated by it make such qualification necessary. The Company has all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as now being conducted.
(b) Ownership and Capitalization.
(i) The authorized capital stock of the Company consists of
1,000,000 shares of common stock, no par value. Each Shareholder owns,
beneficially and of record, free and clear of any Encumbrance or Tax, the number
of shares of the common stock, no par value, of the Company (the "Company
Shares") set forth opposite such Shareholder's name on Exhibit 3.1(b)(i) and the
Company Shares reflected on Exhibit 3.1(b)(i) constitute all of the issued and
outstanding capital stock of the Company.
(ii) Except as set forth on Exhibit 3.1(b)(ii), the Company has
no Subsidiaries and no capital stock, securities convertible into capital stock,
or any other equity interest in any other corporation, partnership, limited
partnership, limited liability company, association, joint venture or other
Person. Each of the entities listed on Exhibit 3.1(b)(ii) is wholly-owned,
directly or indirectly, by the Company, is a corporation duly organized, validly
existing and in good standing under the laws of its state of incorporation, as
set forth on Exhibit 3.1(b)(ii), and is qualified to do business as a foreign
corporation and is in good standing in the states set forth on Exhibit
3.1(b)(ii), which are the only jurisdictions in which the nature of the business
conducted by it or the properties owned, leased or operated by it make such
qualification necessary. No Person has any right to acquire any interest in any
Subsidiary and there are no authorized or outstanding stock appreciation,
phantom stock, profit participation or similar rights with respect to any
Subsidiary. Each such Subsidiary has all requisite corporate power and authority
to own, lease and operate its properties and to carry on its business as now
being conducted.
(c) Authority; No Violation. This Agreement and the Other Seller
Agreements and the consummation of the transactions contemplated hereby and
thereby have been duly and unanimously approved by the board of directors and
shareholders of the Company in accordance with the articles of incorporation and
bylaws of the Company and applicable Legal Requirements, and this Agreement and
the Other Seller Agreement to which the Company is a party have been duly
executed and delivered by the Company. The Company has full corporate power and
authority to execute, deliver and perform this Agreement and the Other Seller
Agreement to which the Company is a party, each Shareholder and each relative or
affiliate of the Company or of a Shareholder who is a party to any Other Seller
Agreement has full and absolute right, power, authority and legal capacity to
execute, deliver and perform this Agreement and all Other Seller Agreements to
which such Shareholder, relative or affiliate is a party, and this Agreement
constitutes, and the Other Seller Agreements will when executed and delivered
constitute, the legal, valid and binding obligations of, and shall be
enforceable in accordance with their respective terms against, the Company and
each such Shareholder, relative or affiliate who is a party thereto. The
execution, delivery and performance of this Agreement and the Other Seller
Agreements and the consummation of the transactions contemplated hereby and
thereby will not (i) violate any Legal Requirement to which the Company, any
Shareholder, or any relative or affiliate of the Company or of any Shareholder
who is a party to any Other Seller Agreement is subject or any provision of the
articles of incorporation or bylaws of the Company or of any such affiliate, or
(ii) violate, with or without the giving of notice or the lapse of time or both,
or conflict with or result in the breach or termination of any provision of, or
constitute a default under, or give any
-3-
<PAGE> 8
Person the right to accelerate any obligation under, or result in the creation
of any Encumbrance upon any properties, assets or business of the Company, of
any Shareholder, or of any such relative or affiliate pursuant to, any
indenture, mortgage, deed of trust, lien, lease, license, Permit, agreement,
instrument or other arrangement to which the Company, any Shareholder or any
such relative or affiliate is a party or by which the Company, any Shareholder,
or any such relative or affiliate or any of their respective assets and
properties is bound or subject. Except for notices that will be given and
consents that will be obtained by the Company and the Shareholders prior to the
Closing (each of which is set forth in Exhibit 3.1(c)), neither the Company, any
Shareholder, nor any such relative or affiliate need give any notice to, make
any filing with or obtain any authorization, consent or approval of any
Governmental Authority or other Person in order for the parties to consummate
the transactions contemplated by this Agreement and the Other Seller Agreements.
(d) Financial Statements
(i) The unaudited balance sheet of the Company as of December
31, 1998, the related statements of income, shareholders' equity and cash flows
for the fiscal year then ended, the unaudited balance sheet of the Company as of
November 30, 1999 (the latter being referred to as the "Latest Balance Sheet"),
and the related statements of income, shareholders' equity and cash flows for
the eleven-month period then ended have been prepared on a consistent basis
(except that the Latest Balance Sheet and the related statements of income,
shareholders' equity and cash flows for the eleven-month period ended November
30, 1999 may be subject to customary year-end adjustments, none of which will be
material in amount), are in accordance with the books and records of the Company
(which books and records are complete and correct in all material respects),
and, to the best knowledge of the Company and the Shareholders, fairly present
the financial position and results of operations of the Company in all material
respects as of such dates and for each of the periods indicated. As of the date
of each of such balance sheet, to the best knowledge of the Company and the
Shareholders, the Company had no Liability other than those set forth on each
such balance sheet. Copies of the financial statements described in the first
sentence in this Section 3.1(d) are attached as Exhibit 3.1(d)(i). The expenses
itemized on Exhibit 3.1(d)(ii) and reflected in the Company's financial
performance for the 12-month period ended December 31, 1998 will not be realized
on an on-going basis after the Closing Date.
(ii) As of the Closing, the Company will, after giving effect to
the assumption of the Assumed Liabilities and the termination of the NCI
Liabilities, have no Liability (and there is no known basis for the assertion of
any Liability).
(e) Absence of Certain Agreements, Changes or Events. The Company is
not, except as set forth on Exhibit 3.1(e)(i), a party to or otherwise bound by
any material contract or agreement (i) pursuant to which the Company is
obligated to furnish any services, product or equipment and (ii) that has been
prepaid with respect to any period after the Closing Date. Since November 30,
1999, the Company has not (i) incurred any debt, indebtedness or other
Liability, except current Liabilities incurred in the ordinary course of
business; (ii) delayed or postponed the payment of accounts payable or other
Liabilities or accelerated the collection of any receivable beyond stated,
normal terms; (iii) sold or otherwise transferred any of its assets or
properties; (iv) except as disclosed in Exhibit 3.1(e)(iv), cancelled,
compromised, settled, released, waived, written-off or expensed any account or
note receivable, right, debt or claim involving more than $5,000 in the
aggregate; (v) changed in any significant manner the way in which it conducts
its business; (vi) except as disclosed in Exhibit 3.1(e)(vi), made or granted
any individual wage or salary increase in excess of 10% or $1.00 per hour, as
applicable, any general wage or salary increase, or any additional benefits of
any kind or nature; (vii) except as disclosed in 3.1(e)(vii), (A) entered into
any contracts or agreements, or made any
-4-
<PAGE> 9
commitments, involving more than $5,000 individually or in the aggregate or (B)
accelerated, terminated, delayed, modified or cancelled any agreement, contract,
lease or license (or series of related agreements, contracts, leases and
licenses) involving more than $5,000 individually or in the aggregate; (viii) to
the best knowledge of the Company and the Shareholders, suffered any material
adverse fact or change, including, without limitation, to or in its business,
assets or financial condition or customer or service provider relationships;
(ix) made any payment or transfer to or for the benefit of any shareholder,
officer or director or any relative or affiliate thereof or permitted any
Person, including, without limitation, any Shareholder, officer, director or
employee or any relative or affiliate thereof, to withdraw assets from the
Company (other than payment to the Shareholders of the proportionate monthly
amount of their respective normal annualized salaries due and payable during
such period); or (x) agreed to incur, take, enter into, make or permit any of
the matters described in clauses (i) through (ix).
(f) Tax Matters.
(i) The Company has filed all Tax Returns that it was required
to file. All such Tax Returns were correct and complete in all material
respects. To the best knowledge of the Company and the Shareholders, all
material Taxes due and owing by the Company (whether or not shown on any Tax
Return) have been paid. The Company is not currently the beneficiary of any
extension of time within which to file any Tax Return. No claim has ever been
made by an authority in a jurisdiction where the Company does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction. There are
no Encumbrances on any of the assets of the Company that arose in connection
with any failure (or alleged failure) to pay any Tax.
(ii) To the best knowledge of the Company and the Shareholders,
the Company has withheld and paid all Taxes required to have been withheld and
paid in connection with amounts paid or owing to any employee, independent
contractor, creditor, shareholder or other third party.
(iii) To the best knowledge of the Company and the Shareholders,
there is no basis for any authority to assess any additional Taxes for any
period for which Tax Returns have been filed. There is no pending or threatened
dispute or claim concerning any Tax Liability of the Company. Exhibit
3.1(f)(iii) lists all federal, state, local and foreign income Tax Returns
(except federal payroll Tax Returns) filed with respect to the Company for
taxable periods ended on or after December 31, 1992, indicates those Tax Returns
that have been audited and indicates those Tax Returns that currently are the
subject of audit. To the best knowledge of the Company and the Shareholders, the
Shareholders have delivered to PentaStar correct and complete copies of all
federal income Tax Returns, examination reports, and statements of deficiencies
filed or assessed against or agreed to by the Company since December 31, 1992.
(iv) The Company has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(v) Neither the Company nor any of its shareholders has ever
filed (A) an election pursuant to Section 1362 of the Code that the Company be
taxed as an "S" corporation, except as set forth on Exhibit 3.1(f)(v), or (B) a
consent pursuant to Section 341(f) of the Code relating to collapsible
corporations. The Company has not made any payments, is not obligated to make
any payments and is not a party to any agreement that under certain
circumstances could obligate it to make any payments that will not be deductible
under Code Section 280G. The Company has not been a United States real property
holding corporation within the meaning of Code Section 897(c)(2) during the
applicable period specified in
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Code Section 897(c)(1)(A)(ii). The Company has disclosed on its federal income
Tax Returns all positions taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of Code Section 6662.
The Company is not a party to any Tax allocation or sharing agreement. The
Company has not been a member of an Affiliated Group filing a consolidated
federal income Tax Return (other than a group the common parent of which was the
Company) and has no Liability for the Taxes of any Person (other than the
Company) under Treasury Regulation Section 1.1502-6 (or any similar provision of
state, local, or foreign law), as a transferee or successor, by contract or
otherwise.
(vi) Exhibit 3.1(f)(vi) sets forth the following information with
respect to the Company as of the most recent practicable date: (A) the basis of
the Company in its assets; and (B) the amount of any net operating loss, net
capital loss, unused investment or other credit, unused foreign tax credit or
excess charitable contribution allocable to the Company.
(g) Assets and Properties.
(i) The Company has good and marketable title to, or a valid
leasehold interest or interest as a licensee in, the properties and assets used
or held for use by it, located on its Premises, or shown on the Latest Balance
Sheet or acquired after the date thereof. As of the Closing, all of the Acquired
Assets will be owned by the Company, free and clear of all Encumbrances except
for the Assumed Liabilities; provided, however, that PentaStar and the Acquiror
hereby acknowledge and agree that the Company has not trademarked its name or
"NCI" and has not performed or requested a trademark search. Accordingly, it is
possible some other Person has trademarked the Company name or "NCI" or some
form thereof and the Company does not warrant that there are no other Persons
using its name, except that the Company does represent and warrant that it has
not granted any Person the right to use the Company's name or "NCI" or any
deviation thereof. Since November 30, 1999, the Company has not entered into any
contract or made any commitment to sell all or any part of its assets. The
Acquired Assets constitute all of the real, personal and mixed assets and
property, both tangible and intangible, including Intellectual Property, which
are being used or held for use by the Company in the conduct of the business and
operations of the Company, consistent with historical and current practices. The
Company owns or leases all equipment and other tangible assets necessary for the
conduct of its business as presently conducted. Each such tangible asset
material to the Company's operations has been maintained in accordance with
normal industry practice and is in good operating condition and repair (subject
to normal wear and tear). All leases of real property between the Company and
any Shareholder, officer or director or any relative or affiliate thereof are on
fair market terms (including rent at fair market value). None of the
Shareholders, nor any relative or affiliate thereof, own any asset, tangible or
intangible, which is used in the business of the Company, other than real
property leased to the Company at fair market value, which leases are set forth
on Exhibit 3.1(h).
(ii) The Company does not lease the Premises, but employees of
the Company occupy space in the premises of OC Mergerco 2, Inc. in Seattle,
Washington.
(h) Lists of Contracts and Other Matters. Attached as Exhibit 3.1(h)
is a correct and complete list setting forth the following items, to the extent
such items relate to the Acquired Assets, the Assumed Liabilities or the
business represented by the Acquired Assets:
(i) the following contracts and other agreements in effect as of
the Closing Date to which the Company is a party:
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<PAGE> 11
(A) any agreement (or group of related agreements) for the
lease of personal property to or from any Person providing for lease payments in
excess of $5,000 per year;
(B) any agreement pursuant to which the Company, or any of
the Shareholders on behalf of the Company, has made a deposit in an amount
greater than $5,000;
(C) any agreement (or group of related agreements) for the
purchase or sale of supplies, products or other personal property, or for the
furnishing or receipt of services, the performance of which will extend over a
period of more than one year, result in a material loss to the Company or its
business or involve consideration in excess of $10,000;
(D) any agreement in which the Company participates in a
partnership or joint venture;
(E) any agreement (or group of related agreements) under
which the Company has created, incurred, assumed or guaranteed any indebtedness
for borrowed money, or any capitalized lease obligation, in excess of $10,000 or
under which it has granted any Encumbrances on any of its assets, tangible or
intangible;
(F) any agreement concerning confidentiality or
noncompetition;
(G) any agreement with any of the Shareholders or any
relative or affiliate thereof (other than the Company);
(H) any profit sharing, stock option, stock purchase,
phantom stock, stock appreciation, profit participation, deferred compensation,
severance or other plan or arrangement;
(I) any collective bargaining agreement;
(J) any agreement for the employment of any individual on a
full-time, part-time, consulting or other basis or any agreement providing
severance benefits;
(K) any agreement under which the Company has advanced or
loaned any amount to any of its directors, officers and employees outside the
ordinary course of business;
(L) any agreement obligating the Company to meet another
party's unspecified requirements for goods or services or obligating it to
purchase an unspecified amount of goods or services based on another party's
ability to supply them;
(M) any agreement under which the consequences of a default
or termination could have a material adverse effect on the business, financial
condition, operations, results of operations or future prospects of the Company;
or
(N) any other agreement (or group of related agreements)
the performance of which involves consideration in excess of $10,000 in any one
year.
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(ii) All material claims, deposits, causes of action, choses in
action, rights of recovery, rights of setoff and rights of recoupment of the
Company.
(iii) All material franchises, approvals, Permits, licenses,
Orders, registrations, certificates, variances and similar rights of the Company
(all of which are in full force and effect to the best knowledge of the Company
and the Shareholders).
(iv) Each item of Intellectual Property owned by the Company or
which is used by the Company in its business and, in each case where the Company
is not the owner, the owner of the Intellectual Property.
(v) The name of each bank or other financial institution or
entity in which the Company has an account or safe deposit box (with the
identifying account number or symbol) and the names of all persons authorized to
draw thereon or to have access thereto.
The Shareholders have delivered to PentaStar a correct and complete copy of
each written agreement and a written summary setting forth the terms and
conditions of each oral agreement referred to in Section 3.1(h)(i). With respect
to each such agreement, and except to the extent that such enforcement may be
limited by applicable bankruptcy, reorganization, insolvency and other laws of
general application affecting enforcement of creditors' rights generally: (A)
the agreement is legal, valid, binding, enforceable and in full force and
effect; (B) the agreement will continue to be legal, valid, binding, enforceable
and in full force and effect on identical terms following the consummation of
the transactions contemplated hereby; (C) neither the Company nor, to the best
knowledge of the Shareholders, any other party is in breach or default, and, to
the best knowledge of the Shareholders, no event has occurred which, with notice
or lapse of time, would constitute a breach or default, or permit termination,
modification or acceleration, under the agreement; and (D) no party has
repudiated any provision of the agreement.
(i) Litigation; Compliance with Applicable Laws and Rights.
(i) There is no outstanding Order against, nor, except as set
forth on Exhibit 3.1(i)(i), is there any litigation, proceeding, arbitration or
investigation by any Governmental Authority or other Person pending or, to the
best knowledge of the Company and the Shareholders, threatened against, the
Company, its assets or its business or relating to the transactions contemplated
by this Agreement, nor, to the best knowledge of the Company and the
Shareholders, is there any basis for any such action.
(ii) To the best knowledge of the Company and the Shareholders,
except as set forth on Exhibit 3.1(i)(ii), neither the Company nor the Company's
assets are in violation of any applicable Legal Requirement or Right. The
Company has not received notice from any Governmental Authority or other Person
of any violation or alleged violation of any Legal Requirement or Right, and no
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand or notice has been filed or commenced or is pending or, to the best
knowledge of the Company and the Shareholders, threatened against the Company
alleging any such violation.
(j) Notes and Accounts Receivable. The notes and accounts receivable
of the Company reflected on its Latest Balance Sheet, and all notes and accounts
receivable arising on or prior to the Closing
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<PAGE> 13
Date, arose and will arise from bona fide transactions by the Company in the
ordinary course of business and will be paid to the Acquiror as set forth in
Section 5.8.
(k) Product Quality, Warranty and Liability. To the best knowledge of
the Company and the Shareholders, all services and products sold, leased,
provided or delivered by the Company to customers on or prior to the Closing
Date conform to applicable contractual commitments, express and implied
warranties, product and service specifications and quality standards, and there
is no basis for any Liability for replacement or repair thereof or other damages
in connection therewith. Except as disclosed in Exhibit 3.1(k), no service or
product sold, leased, provided or delivered by the Company to customers on or
prior to the Closing is subject to any guaranty, warranty or other indemnity
beyond the applicable standard terms and conditions of sale or lease. The
Company has no Liability and, to the best knowledge of the Company and the
Shareholders, there is no basis for any Liability arising out of any injury to a
Person or property as a result of the ownership, possession, provision or use of
any service or product sold, leased, provided or delivered by the Company on or
prior to the Closing Date. All product or service liability claims that have
been asserted against the Company since January 1, 1996, whether covered by
insurance or not and whether litigation has resulted or not, other than those
listed and summarized on Exhibit 3.1(i)(i), are listed and summarized on Exhibit
3.1(k).
(l) Insurance. The Company has policies of insurance (i) covering
risk of loss on the Acquired Assets and (ii) covering products and services
liability and liability for fire, property damage, personal injury and workers'
compensation coverage, all, to the best knowledge of the Company and the
Shareholders, with responsible and financially sound insurance carriers in
adequate amounts and in compliance with governmental requirements and in
accordance with good industry practice. All such insurance policies are valid,
in full force and effect and enforceable in accordance with their respective
terms and no party has repudiated any provision thereof. All such policies will
remain in full force and effect until the Closing Date. Neither the Company nor,
to the best knowledge of the Company and the Shareholders, any other party to
any such policy is in breach or default (including with respect to the payment
of premiums or the giving of notices) in the performance of any of their
respective obligations thereunder, and no event exists which, with the giving of
notice or the lapse of time or both, would constitute a breach, default or event
of default, or permit termination, modification or acceleration under any such
policy. There are no claims, actions, proceedings or suits arising out of or
based upon any of such policies nor, to the best knowledge of the Company and
the Shareholders, does any basis for any such claim, action, suit or proceeding
exist. All premiums have been paid on such policies as of the date of this
Agreement and will be paid on such policies through the Closing Date. The
Company has been covered since the inception of the Company by insurance in
scope and amount customary and reasonable for the businesses in which it has
engaged during the aforementioned period. All claims made during such period
with respect to any insurance coverage of the Company, other than those
described on Exhibit 3.1(k), are set forth on Exhibit 3.1(l).
(m) Pension and Employee Benefit Matters. Neither the Acquiror nor
PentaStar will suffer any Liability or Adverse Consequence from the Company's
administration or termination of any of its Employee Benefit Plans or from any
failure of any pre-Closing or post-Closing distribution of benefits to employees
of the Company to be made by the Company in compliance with all applicable Legal
Requirements. Neither the Acquiror nor PentaStar will have any obligation to
employ any employee of the Company or to continue any Employee Benefit Plan, and
will have no Liability under any plan or arrangement maintained by the Company
for the benefit of any employee. The Company will remain liable for all costs of
employee compensation, including benefits and Taxes relating to employment and
employees attributable to periods through the Closing Date, whether reported by
the Closing Date or thereafter, and all
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<PAGE> 14
group health plan continuation coverage to which any employee, former employee
or dependent is entitled because of a qualifying event (as defined in Section
4980B(f)(3) of the Code) occurring through the Closing Date or as a result of
termination of employment with the Company because of the transactions
contemplated by this Agreement and any benefit or excise tax liability or
penalty or other costs arising from any failure by the Company to provide group
health plan continuation coverage. Except as set forth on Exhibit 3.1(m),
neither the Company nor any Affiliated Group which includes the Company (if any)
maintains, administers or contributes to, has maintained, administered or
contributed to, or has any Liability to contribute to, any Employee Benefit
Plan. Exhibit 3.1(m) lists each Employee Benefit Plan that is, or at any time
during the past six years was, maintained, administered, contributed to or
required to be contributed to by the Company or any Affiliated Group (if any)
which includes or has included the Company, and the date of termination of each
such Employee Benefit Plan (if any) which has been terminated. The Company has
no Liability (and there is no basis for the assertion of any Liability) as a
result of the Company's or any such Affiliated Group's maintenance,
administration or termination of, or contribution to, any Employee Benefit Plan.
Neither the Company nor any member of any Affiliated Group (if any) which
includes or has included the Company has ever been required to contribute to any
Multiemployer Plan (as defined in ERISA Section 3(37)) nor has incurred any
Liability under Title IV of ERISA.
(n) Employees and Labor. Except as set forth on Exhibit 3.1(n), the
Company has not received any notice, nor, to the best knowledge of the Company
and the Shareholders, is there any reason to believe that any executive or Key
Employee of the Company or any material group of employees of the Company has
any plans to terminate his, her or its employment with the Company. To the best
knowledge of the Company and the Shareholders, no executive or Key Employee is
subject to any agreement, obligation, Order or other legal hindrance that
impedes or might impede such executive or Key Employee from devoting his or her
full business time to the affairs of the Company prior to the Closing Date and,
if such person becomes an employee of the Acquiror or PentaStar, to the affairs
of the Acquiror or PentaStar after the Closing Date. The Company will not be
required to give any notice under the Worker Adjustment and Retraining
Notification Act, as amended (29 U.S.C.A. Section 2101, et. seq.), or any
similar Legal Requirement as a result of this Agreement, the Other Seller
Agreements or the transactions contemplated hereby or thereby. To the best
knowledge of the Company and the Shareholders, the Company does not have any
labor relations problems or disputes, nor has the Company experienced any
strikes, grievances, claims of unfair labor practices or other collective
bargaining disputes. The Company is not a party to or bound by any collective
bargaining agreement, there is no union or collective bargaining unit at the
Company's facilities, and, to the best knowledge of the Company and the
Shareholders, no union organization effort has been threatened, initiated or is
in progress with respect to any employees of the Company.
(o) Customer and Service Provider Relationships. Each customer that
individually or with its affiliates was, based on the Company's revenues during
the fiscal year ended December 31, 1998 or the eleven-month period ended
November 30, 1999, one of the Company's ten largest customers during such fiscal
year or period or accounted for 2% or more of the Company's revenues during such
fiscal year or period is referred to as a "Principal Customer." Each Person who
is a service provider to the Company as of the date of this Agreement is
referred to as a "Principal Provider." To the best knowledge of the Company and
the Shareholders, the Company has good commercial working relationships with its
Principal Customers and Principal Providers and since December 31, 1998, no
Principal Customer or Principal Provider has cancelled or otherwise terminated
its relationship with the Company, materially decreased its purchases from or
services supplied to the Company, or threatened to take any such action. The
Company and the Shareholders have no reasonable basis to anticipate any problems
with the Company's customer or service provider relationships. To the best
knowledge of the Company and the Shareholders, no Principal Customer or
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<PAGE> 15
Principal Provider has any plans to terminate their relationship with the
Company and the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby will not adversely affect the relationship
of the Company with any Principal Customer or Principal Provider prior to the
Closing Date or of the Acquiror or PentaStar with any Principal Customer or
Principal Provider after the Closing Date.
(p) Environmental Matters. To the best knowledge of the Company and
the Shareholders, the Company is conducting and at all times has conducted its
business and operations, and has occupied, used and operated the Premises and
all other real property and facilities presently or previously owned, occupied,
used or operated by the Company, in compliance with all Environmental
Obligations and so as not to give rise to Liability under any Environmental
Obligations or to any impact on the Company's business or activities. To the
best knowledge of the Company and the Shareholders, the Company has no Liability
under any Environmental Obligation, nor is there any basis for any such
Liability.
(q) Intellectual Property. To the best knowledge of the Company and
the Shareholders and with the proviso as to the Company name and tradename set
forth in Section 3.1(g)(i), the Company owns or has the legal right to use each
item of Intellectual Property required to be identified on Exhibit 3.1(h).
Except as provided on Exhibit 3.1(h) and with the proviso as to the Company name
and tradename set forth in Section 3.1(g)(i), to the best knowledge of the
Company and the Shareholders, the continued operation of the business of the
Company as currently conducted will not interfere with, infringe upon,
misappropriate or conflict with any Intellectual Property rights of another
Person. To the best knowledge of the Company and the Shareholders, no other
Person has interfered with, infringed upon, misappropriated or otherwise come
into conflict with any Intellectual Property rights of the Company or any
Intellectual Property included in the Acquired Assets. The Company has not
granted any license, sublicense or permission with respect to any Intellectual
Property owned or used in the Company's business. No claims are pending or, to
the knowledge of the Company and the Shareholders, threatened, that the Company
is infringing or otherwise adversely affecting the rights of any Person with
regard to any Intellectual Property. To the best knowledge of the Company and
the Shareholders and with the proviso as to the Company name and tradename set
forth in Section 3.1(g)(i), all of the Intellectual Property that is owned by
the Company is owned free and clear of all Encumbrances and was not
misappropriated from any Person, and all portions of the Intellectual Property
that are licensed by the Company are licensed pursuant to valid and existing
license agreements. To the best knowledge of the Company and the Shareholders,
the consummation of the transactions contemplated by this Agreement will not
result in the loss or material diminution of any Intellectual Property or rights
in Intellectual Property.
(r) Year 2000 Warranty. To the best knowledge of the Company and the
Shareholders, the computer software owned by the Company and all other
Intellectual Property used or held for use by the Company in its business
accurately processes date/time data (including calculating, comparing, and
sequencing) from, into, and between the twentieth and twenty-first centuries,
and the years 1999 and 2000 and leap year calculations and the date September 9,
1999 when either (i) used as a standalone application, or (ii) integrated into
or otherwise used in conjunction with the third party hardware, software,
firmware and data over which the Shareholders and the Company have no control
("Third Party Products") with which such Company software or other Intellectual
Property was designated or intended to operate at the time such Company software
was (i) developed or (ii) first provided to the Company's customers, or tested
by the Company for such customers, whichever is later. Notwithstanding the
foregoing, the Company shall not be considered to be in breach of the
representation and warranty in the immediately preceding sentence if the failure
of such Company software to comply with such representation and warranty is
attributable solely to
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<PAGE> 16
(x) a failure by any Third Party Product to accurately process date/time data
(including but not limited to, calculating, comparing, and sequencing) from,
into, and between the twentieth and twenty-first centuries, and the years 1999
and 2000 and leap year calculations and the date September 9, 1999; or (y) any
modification of the Company software by any party other than the Company (unless
such modification was made at the direction of the Company).
(s) Brokers' Fees. Except as set forth on Exhibit 3.1(s), neither the
Company nor any Shareholder has, and will not have as a result of the
consummation of this Agreement, any Liability to pay any fees or commissions to
any broker, finder or agent with respect to the transactions contemplated by
this Agreement.
(t) Guaranties. The Company is not a guarantor or otherwise liable
for any Liability (including indebtedness for borrowed money) of any other
Person. Except as set forth on Exhibit 3.1(t), no Person is a guarantor or
otherwise liable for any Liability (including indebtedness for borrowed money)
of the Company.
(u) Disclosure. To the best knowledge of the Company and the
Shareholders, one of the documents or information provided to PentaStar by the
Company, any Shareholder or any agent or employee thereof in the course of
PentaStar's due diligence investigation and the negotiation of this Agreement
and Section 3.1 of this Agreement and the disclosure Exhibits referred to
therein, including the financial statements referred to above in Section 3.1,
contains any untrue statement of any material fact or omit to state a material
fact necessary in order to make the statements contained herein or therein not
misleading. To the best knowledge of the Company and the Shareholders, there is
no fact which materially adversely affects the business, condition, affairs or
operations of the Company or any of its properties or assets which has not been
set forth in this Agreement or such Exhibits, including such financial
statements.
Nothing in the disclosure Exhibits referred to in Section 3.1 shall be
deemed adequate to disclose an exception to a representation or warranty made
herein unless the applicable disclosure Exhibit identifies the exception with
particularity and describes the relevant facts in reasonable detail. Without
limiting the generality of the foregoing, the mere listing (or inclusion of a
copy) of a document or other item shall not be deemed adequate to disclose an
exception to a representation or warranty made herein (unless the representation
or warranty has to do with the existence of the document or other item itself).
Each of the Company and the Shareholders acknowledge and agree that the fact
that they have made disclosures pursuant to Section 3.1 or otherwise of matters,
or did not have knowledge of matters, which result in Adverse Consequences to
PentaStar or the Acquiror shall not relieve the Company and the Shareholders of
their obligation pursuant to Section 7 of this Agreement to indemnify and hold
PentaStar and the Acquiror harmless from all Adverse Consequences, to the extent
provided in this Agreement.
3.2. Representations and Warranties of PentaStar. PentaStar represents and
warrants to the Company and the Shareholders that the statements contained in
this Section 3.2 are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 3.2).
(a) Organization, Good Standing, Power, Etc. PentaStar and the
Acquiror are each corporations duly organized, validly existing and in good
standing under the laws of the State of Delaware. This Agreement and the Other
PentaStar Agreements and the transactions contemplated hereby and thereby have
been duly approved by all requisite corporate action. Each of PentaStar and the
Acquiror have full
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<PAGE> 17
corporate power and authority to execute, deliver and perform this Agreement and
the Other PentaStar Agreements to which it is a party, and this Agreement
constitutes, and the Other PentaStar Agreements will when executed and delivered
constitute, the legal, valid and binding obligations of PentaStar or the
Acquiror, as the case may be, and shall be enforceable in accordance with their
respective terms against PentaStar or the Acquiror, as the case may be.
(b) Capitalization. All of the issued and outstanding capital stock
of the Acquiror is owned by PentaStar.
(c) No Violation of Agreements, Etc. The execution, delivery and
performance of this Agreement and the Other PentaStar Agreements, and the
consummation of the transactions contemplated hereby and thereby will not (i)
violate any Legal Requirement to which PentaStar or the Acquiror is subject or
any provision of the certificate of incorporation or bylaws of PentaStar or the
Acquiror or (ii) violate, with or without the giving of notice or the lapse of
time or both, or conflict with or result in the breach or termination of any
provision of, or constitute a default under, or give any Person the right to
accelerate any obligation under, or result in the creation of any Encumbrance
upon any properties, assets or business of PentaStar or of the Acquiror pursuant
to, any indenture, mortgage, deed of trust, lien, lease, license, agreement,
instrument or other arrangement to which PentaStar or the Acquiror is a party or
by which PentaStar or the Acquiror or any of their respective assets and
properties is bound or subject. Except for notices and consents that will be
given or obtained by PentaStar prior to the Closing, neither PentaStar nor the
Acquiror need to give any notice to, make any filing with or obtain any
authorization, consent or approval of any Governmental Authority or other Person
in order for the parties to consummate the transactions contemplated by this
Agreement.
3.3. Survival of Representations. The representations and warranties
contained in Sections 3.1 and 3.2 and the Liabilities of the parties with
respect thereto shall survive any investigation thereof by the parties and shall
survive the Closing for 30 months, except that the Liabilities of the
Shareholders with respect to the representations and warranties set forth in
Sections 3.1(a), 3.1(b), 3.1(c), 3.1(f), 3.1(m) and 3.1(p) and the Liabilities
of PentaStar with respect to the representations and warranties set forth in
Sections 3.2(a) and 3.2(b), shall survive without termination.
3.4. Representations as to Knowledge. The representations and warranties
contained in Article 3 hereof will in each and every case where an exercise of
discretion or a statement to the "best knowledge," "best of knowledge" or
"knowledge" is required on behalf of any party to this Agreement be deemed to
require that such exercise of discretion or statement be in good faith after
reasonable investigation (including, in the case of the Company and the
Shareholders, inquiry of the applicable employees of the Company), with due
diligence, to the best efforts of such party and be exercised always in a
reasonable manner and within reasonable times.
4. Pre-Closing Covenants. The parties agree as follows with respect to the
period between the execution of this Agreement and the Closing.
4.1. General. Each of the parties will use its reasonable best efforts to
take all actions necessary, proper or advisable in order to consummate and make
effective the transactions contemplated by this Agreement (including the
satisfaction, but not the waiver, of the closing conditions set forth in Section
6) and the other agreements contemplated hereby. Without limiting the foregoing,
the Shareholders will, and will
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<PAGE> 18
cause the Company to, give any notices, make any filings and obtain any
consents, authorizations or approvals needed to consummate the transactions
contemplated by this Agreement.
4.2. Operation and Preservation of Business. The Company will not, and the
Shareholders will not cause or permit the Company to, engage in any practice,
take any action or enter into any transaction outside its ordinary course of
business; provided, however, that in no event will any action be taken or fail
to be taken or any transaction be entered into which would result in a breach of
any representation, warranty or covenant of the Company or any Shareholder. The
Company will, and the Shareholders will cause the Company to, keep its business
and properties, including its current operations, physical facilities, working
conditions and relationships with customers, service providers, lessors,
licensors and employees, intact.
4.3. Full Access. The Company will, and the Shareholders will cause the
Company to, permit PentaStar and its agents to have full access at all
reasonable times, and in a manner so as not to interfere with the normal
business operations of the Company, to all premises, properties, personnel,
books, records (including Tax records), contracts and documents of or pertaining
to the Company.
4.4. Notice of Developments. The Company and the Shareholders will give
prompt written notice to PentaStar of any material development which occurs
after the date of this Agreement and before the Closing and affects the
business, assets, Liabilities, financial condition, operations, results of
operations, future prospects, representations, warranties, covenants or
disclosure Exhibits of the Company. No such written notice, however, will be
deemed to amend or supplement any disclosure Exhibit or to prevent or cure any
misrepresentation, breach of warranty or breach of covenant.
4.5. Exclusivity. Neither the Company nor any Shareholder will, and the
Shareholders will not cause or permit the Company to, (a) solicit, initiate or
encourage the submission of any proposal or offer from any Person relating to
the acquisition of any capital stock or other voting securities, or any portion
of the assets of, the Company (including any acquisition structured as a merger,
consolidation or share exchange) or (b) participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in or facilitate in any other manner any effort or attempt by any
Person to do or seek any of the foregoing. No Shareholder will vote shares of
the Company's stock in favor of any such transaction. The Company and the
Shareholders will notify PentaStar immediately if any Person makes any proposal,
offer, inquiry or contact with respect to any of the foregoing.
4.6. Announcements; Securities Law Restrictions. Prior to the Closing,
neither any Shareholder nor the Company shall disclose to any Person, nor issue
any press release or make any public announcement concerning, the existence,
terms or subject matter of this Agreement without the prior written approval of
PentaStar, except (and only to the extent) previously publicly announced by
PentaStar. Further, neither any Shareholder nor the Company shall violate the
United States securities laws which restrict each Shareholder and the Company,
as Persons with material non-public information concerning PentaStar obtained
directly or indirectly from PentaStar, from purchasing or selling securities of
PentaStar or from communicating such information to any other Person under any
circumstances in which it is reasonably foreseeable that such Person is likely
to purchase or sell such securities.
4.7. Bulk Sales Laws. In reliance upon its indemnification rights set forth
in Section 7, the Acquiror waives compliance by the Company with the bulk
transfer law and any other similar law of any applicable jurisdiction in respect
to the transactions contemplated by this Agreement. The parties acknowledge that
the States of Washington and Colorado have repealed their bulk sales laws in
toto.
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<PAGE> 19
5. Post-Closing Covenants. The parties agree as follows with respect to the
period following the Closing.
5.1. Further Assurances. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other party
reasonably may request, all at the sole cost and expense of the requesting party
(unless the requesting party is entitled to indemnification therefor under
Section 7).
5.2. Transition. No Shareholder will knowingly take any action at any time
that is designed or intended to have the effect of discouraging any customer,
supplier, lessor, licensor or other business associate of the Company from
establishing or continuing a business relationship with PentaStar after the
Closing, except where such action is approved in writing by PentaStar.
5.3. Cooperation. In the event and for so long as any party actively is
contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand in connection with (a) any
transaction contemplated by this Agreement or (b) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act or transaction on or prior to the Closing Date
involving any of the Acquired Assets or the Company's business, each of the
other parties will cooperate with such party and its counsel in the contest or
defense, make available their personnel, and provide such testimony as shall be
reasonably necessary in connection with the contest or defense, all at the sole
cost and expense of the contesting or defending party (unless the contesting or
defending party is entitled to indemnification therefor under Section 7).
5.4. Confidentiality. The Company and the Shareholders will treat and hold
as confidential all Confidential Information concerning PentaStar, the Company's
business or the Acquired Assets, refrain from using any such Confidential
Information and deliver promptly to PentaStar or destroy, at the request and
option of PentaStar, all of such Confidential Information in its or their
possession.
5.5. Post-Closing Announcements. Following the Closing, no Shareholder will
issue any press release or make any public announcement relating to the subject
matter of this Agreement without the prior written approval of PentaStar.
5.6. Financial Statements. The Company and the Shareholders will, upon
request of PentaStar, cooperate with PentaStar and render such assistance to
PentaStar and its accountants as may be required to produce such historical and
on-going financial statements and audits as PentaStar may request, all at the
sole cost and expense of PentaStar, but without additional consideration to the
Shareholders. The Shareholders acknowledge that PentaStar may be required by
applicable law to include audited financial statements with respect to the
business of the Company in reports filed with governmental agencies and that the
inability to audit the financial statements as of the Closing Date promptly
after the Closing could have a material adverse effect on PentaStar.
5.7. Satisfaction of Liabilities.
(a) The Company and the Shareholders will pay and perform, as and
when due, all Liabilities (other than the Assumed Liabilities) relating to the
Company, the business of the Company and
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<PAGE> 20
the Acquired Assets, including without limitation, all Taxes attributable to the
transactions contemplated by this Agreement.
(b) The Company and the Shareholders, at their expense, promptly will
take or cause to be taken any action necessary to remedy any failure of the
Premises or the acquired business to comply at the Closing Date with any Legal
Requirement, upon receipt of notice from PentaStar at any time.
(c) The Acquiror will pay and perform, as and when due (except to the
extent the validity thereof or the Liability therefor is being contested by the
Acquiror), the Assumed Liabilities.
5.8. Repurchase of Unpaid Receivables. The Company and the Shareholders
guarantee that the Closing Accounts Receivable in the amount set forth in the
footnote to the balance sheet attached as Exhibit 5.8 will be fully paid to the
Acquiror in accordance with their terms at their recorded amounts not later than
180 days from the Closing Date. Upon demand by PentaStar at any time after 180
days from the Closing Date, the Company and the Shareholders shall pay to the
Acquiror the full amount of any unpaid Closing Accounts Receivable which is the
subject of such demand; provided, however, that no Shareholder shall be required
to pay more than 150% of the Shareholder's Pro Rata Amount. Upon such payment to
PentaStar, the Closing Accounts Receivable which are so paid for by the
Shareholders shall, without further action of any party, become the property of
the Shareholders. From the Closing until 180 days after the Closing Date,
PentaStar (through the Acquiror) will apply its standard accounts receivable
collection procedures to the Closing Accounts Receivable; provided, however,
neither the Acquiror nor PentaStar will not be required to institute suit,
utilize third-party collection agencies or other agents or take other
extraordinary collection actions with respect to the Closing Accounts
Receivable; and, provided further, that any failure of any collection activities
of the Acquiror, PentaStar or any such collection agency or other agent will not
relieve the Shareholders from their guarantee of the Closing Accounts Receivable
as described in this Section 5.8. With respect to the foregoing, all collections
for Closing Accounts Receivable shall be applied to the invoice to which such
collection relates; provided that if such invoice cannot be reasonably
identified by the Acquiror, such collections will be applied on a "first in,
first out" or FIFO basis, with the specific exception that a payment made by a
customer will not be applied against the oldest outstanding invoice for such
customer if such invoice has been disputed by the customer.
5.9. Termination of Obligations. Effective as of the Closing Date, but only
if the Closing occurs, (a) the Mutual Acknowledgement and Agreement, the
Commissions Agreement and the sublease described in the definition of "NCI
Liabilities" and (b) any instruments, contracts or agreements (other than this
Agreement) pursuant to which PentaStar or OC Mergerco 2, Inc. may have Liability
to the Company are terminated.
6. Conditions to Closing.
6.1. Conditions to Obligation of PentaStar. The obligation of PentaStar to
consummate the transactions contemplated by this Agreement is subject to
satisfaction of the following conditions:
(a) the Company's and each Shareholder's representations and
warranties shall be correct and complete at and as of the Closing Date and the
Closing and any written notices delivered to PentaStar pursuant to Section 4.5
and the subject matter thereof shall be satisfactory to PentaStar;
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<PAGE> 21
(b) the Company and the Shareholders shall have performed and
complied with all of their covenants hereunder through the Closing;
(c) the Company and the Shareholders shall have given all notices and
procured all of the third-party consents, authorizations and approvals required
to consummate the transactions contemplated by this Agreement, all in form and
substance reasonably satisfactory to PentaStar;
(d) no action, suit or proceeding shall be pending or threatened
before any Governmental Authority or any other Person wherein an unfavorable
Order would (i) prevent consummation of any of the transactions contemplated by
this Agreement, (ii) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation or (iii) affect adversely the
right of the Acquiror to own the Acquired Assets and conduct the acquired
business, and no such Order shall be in effect;
(e) there shall have been no material adverse change in the Company,
the Acquired Assets or the Company's business between the date of execution of
this Agreement and the Closing;
(f) the Company and the Shareholders shall have delivered to
PentaStar (i) a certificate to the effect that each of the conditions specified
above in Sections 6.1(a) through (e) is satisfied in all respects, (ii) a
certificate as to the adoption of resolutions by the board of directors and
shareholders of the Company authorizing the execution, delivery and performance
of this Agreement and the Other Seller Agreements and the consummation of the
transactions contemplated hereby and thereby, (iii) a certificate of existence,
dated within 10 days of the Closing, from the Secretary of State of the State of
the Company's jurisdiction of incorporation and each other state in which the
Company is qualified or authorized to do business as a foreign corporation and
(iv) Exhibit 1.1(d), and the NCI Liabilities Amount set forth on thereon shall
have been agreed upon by the Company and PentaStar.
(g) the Other Seller Agreements shall have been executed and
delivered by the Shareholders, as applicable;
(h) PentaStar shall have received from the Company evidence of the
termination of all Encumbrances filed against the Acquired Assets;
(i) the Shareholders shall have delivered to PentaStar possession and
control of the Acquired Assets;
(j) the Company and the Shareholders shall have executed and
delivered to PentaStar an amendment to the Company's articles of incorporation
for the purpose of changing its name to a name that does not include the term
"Network Communications" or any derivation thereof; and
(k) the Company and the Shareholders shall have delivered to
PentaStar such other instruments, certificates and documents as are reasonably
requested by PentaStar in order to consummate the transactions contemplated by
this Agreement, all in form and substance reasonably satisfactory to PentaStar.
PentaStar may waive any condition specified in this Section 6.1 at or prior
to the Closing.
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<PAGE> 22
6.2. Conditions to Obligation of the Company and the Shareholders. The
obligation of the Company and the Shareholders to consummate the transactions
contemplated by this Agreement is subject to satisfaction of the following
conditions:
(a) PentaStar's representations and warranties shall be correct and
complete at and as of the Closing Date and the Closing;
(b) PentaStar shall have performed and complied with all of its
covenants hereunder through the Closing Date;
(c) PentaStar shall have delivered to the Company a certificate to
the effect that each of the conditions specified above in Sections 6.2(a) and
(b) is satisfied in all respects; provided, however, that if PentaStar exercises
its right to close pursuant to the second sentence of Section 2.5, the exercise
of such right shall constitute PentaStar's certification that the conditions
specified in Sections 6.2(a) and (b) are satisfied in all respects and no
certificate need be delivered;
(d) the Other PentaStar Agreements shall have been executed and
delivered by PentaStar; and
(e) PentaStar shall have paid the Purchase Price pursuant to Section
2.3.
The Shareholders' Agent may waive any condition specified in this Section 6.2 at
or prior to the Closing.
7. Remedies for Breaches of This Agreement.
7.1. Indemnification Provisions for Benefit of PentaStar. If the Company or
any Shareholder breaches any of the representations or warranties of the Company
or any Shareholder contained herein and PentaStar gives notice thereof to the
Shareholders' Agent within the Survival Period, or if the Company or any
Shareholder breaches any covenants of the Company or any Shareholder contained
herein or any representations, warranties or covenants of the Company or any
Shareholder contained in any Other Seller Agreement and PentaStar gives notice
thereof to the Shareholders' Agent, then, subject to Section 7.6, the Company
and each Shareholder agree to indemnify and hold harmless PentaStar and the
Acquiror from and against any Adverse Consequences PentaStar or the Acquiror may
suffer resulting from, arising out of, relating to or caused by any of the
foregoing regardless of whether the Adverse Consequences are suffered during or
after the Survival Period, up to, but in no event to exceed, 150% of the sum of
all Shareholder's Pro Rata Amounts. In determining for all purposes under this
Agreement (including this Section 7 and Section 8) whether there has been a
breach of any representation or warranty contained in Section 3.1 and in
determining for purposes of the preceding sentence the amount of Adverse
Consequences suffered by PentaStar or the Acquiror, such representations and
warranties shall not be qualified (other than by (A) the reference to
"knowledge" set forth in the last sentence of Section 3.1(o) and (B) the
references to "material" set forth in Section 3.1(u)) by "material,"
"materiality," "in all material respects," "best knowledge," "best of knowledge"
or "knowledge" or words of similar import, or by any phrase using any such terms
or words. Each Majority Shareholder also agrees to indemnify and hold harmless
PentaStar and the Acquiror from and against any Adverse Consequences PentaStar
or the Acquiror may suffer, up to, but in no event to exceed, 150% of the
Shareholder's Pro Rata Amount of such Majority Shareholder, and each Minority
Shareholder agrees to indemnify and hold harmless PentaStar and the Acquiror
from and against any Adverse Consequences PentaStar or the Acquiror may suffer,
but in no event to exceed 100% of the Shareholder's Pro
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<PAGE> 23
Rata Amount of such Minority Shareholder, which result from, arise out of,
relate to or are caused by (i) any Liability of the Company or any Shareholder
not included in the Assumed Liabilities or (ii) any condition, circumstance or
activity existing prior to the Closing Date which relates to any Legal
Requirement or any act or omission of the Company or any Shareholder or any
predecessor with respect to, or any event or circumstance related to, the
Company's, any Shareholder's or any predecessor's ownership, use or operation of
any of the Acquired Assets, the Premises or any other assets or properties or
the conduct of its or their business, regardless, in the case of (i) or (ii), of
(A) whether or not such Liability, act, omission, event, circumstance or matter
was known or disclosed to PentaStar, was disclosed on any Exhibit hereto or is a
matter with respect to which the Company or any Shareholder did or did not have
knowledge, (B) when such Liability, act, omission, event, circumstance or matter
occurred, existed, occurs or exists and (C) whether a claim with respect thereto
was asserted before or is asserted after the Closing Date and (iii) any
Liability resulting from any failure of the parties to comply with any
applicable bulk sales or transfer Legal Requirement in connection with the
transactions contemplated by this Agreement. If any dispute arises concerning
whether any indemnification is owing which cannot be resolved by negotiation
among the parties within 30 days of notice of claim for indemnification from the
party claiming indemnification to the party against whom such claim is asserted,
the dispute will be resolved by arbitration pursuant to this Agreement.
Notwithstanding the foregoing, the Liability of the Shareholders to indemnify
PentaStar and the Acquiror in the aggregate under this Section 7.1 shall not
exceed the sum of all Shareholder's Pro Rata Amounts. The date of any notice of
any claim for indemnification given by PentaStar to the Shareholders' Agent
shall be referred to as a "Notice Date."
7.2. Indemnification Provisions for Benefit of the Company and the
Shareholders. If PentaStar breaches (or if any Person other than the Company or
a Shareholder alleges facts that, if true, would mean PentaStar has breached)
any of its representations or warranties contained herein and the Shareholders'
Agent gives notice of a claim for indemnification against PentaStar within the
Survival Period, or if PentaStar breaches any of its covenants contained herein
or any of its representations, warranties or covenants contained in any Other
PentaStar Agreement and the Shareholders' Agent gives notice thereof to
PentaStar, then PentaStar agrees to indemnify and hold harmless the Company and
the Shareholders from and against any Adverse Consequences the Company and the
Shareholders may suffer which result from, arise out of, relate to, or are
caused by the breach or alleged breach, regardless of whether the Adverse
Consequences are suffered during or after the Survival Period. In determining
whether there has been a breach of any representation or warranty contained in
Section 3.3 and in determining the amount of Adverse Consequences suffered by
the Company and the Shareholders for purposes of this Section 7.2, such
representations and warranties shall not be qualified by "material,"
"materiality," "in all material respects," "best knowledge," "best of knowledge"
or "knowledge" or words of similar import, or by any phrase using any such terms
or words. If any dispute arises concerning whether any indemnification is owing
which cannot be resolved by negotiation among the parties within 30 days of
notice of claim for indemnification from the party claiming indemnification to
the party against whom such claim is asserted, the dispute will be resolved by
arbitration pursuant to this Agreement.
7.3. Matters Involving Third Parties.
(a) If any Person not a party to this Agreement (including, without
limitation, any Governmental Authority) notifies any party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may give rise
to a claim for indemnification against any other party (the "Indemnifying
Party"), then the Indemnified Party will notify each Indemnifying Party thereof
in writing within 15 days after receiving such notice. No delay on the part of
the Indemnified Party in notifying any Indemnifying Party will
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<PAGE> 24
relieve the Indemnifying Party from any obligation hereunder unless (and then
solely to the extent) the Indemnifying Party thereby is prejudiced.
(b) Any Indemnifying Party will have the right, at its sole cost and
expense, to defend the Indemnified Party against the Third Party Claim with
counsel of its choice satisfactory to the Indemnified Party so long as (i) the
Indemnifying Party notifies the Indemnified Party in writing within 10 days
after the Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to or caused by the Third Party Claim, (ii) the
Indemnifying Party provides the Indemnified Party with evidence reasonably
acceptable to the Indemnified Party that the Indemnifying Party will have the
financial resources to defend against the Third Party Claim and fulfill its
indemnification obligations hereunder, (iii) the Third Party Claim involves only
money damages and does not seek an injunction or other equitable relief, (iv)
settlement of, or an adverse judgment with respect to, the Third Party Claim is
not, in the good faith judgment of the Indemnified Party, likely to establish a
precedential custom or practice materially adverse to the continuing business
interests of the Indemnified Party, and (v) the Indemnifying Party conducts the
defense of the Third Party Claim actively and diligently. If the Indemnifying
Party does not assume control of the defense or settlement of any Third Party
Claim in the manner described above, it will be bound by the results obtained by
the Indemnified Party with respect to the Third Party Claim.
(c) So long as the Indemnifying Party is conducting the defense of
the Third Party Claim in accordance with Section 7.3(b) above, (i) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
and participate in the defense of the Third Party Claim, (ii) the Indemnified
Party will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent of the
Indemnifying Party (not to be withheld unreasonably), and (iii) the Indemnifying
Party will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent of the
Indemnified Party (not to be withheld unreasonably).
(d) In the event any of the conditions in Section 7.3(b) above is or
becomes unsatisfied, however, (i) the Indemnified Party may defend against, and
consent to the entry of any judgment or enter into any settlement with respect
to, the Third Party Claim in any manner it reasonably may deem appropriate (and
the Indemnified Party need not consult with, or obtain any consent from, any
Indemnifying Party in connection therewith), (ii) the Indemnifying Parties will
reimburse the Indemnified Party promptly and periodically for the costs of
defending against the Third Party Claim (including reasonable attorneys' fees
and expenses), and (iii) the Indemnifying Parties will remain responsible for
any Adverse Consequences the Indemnified Party may suffer resulting from,
arising out of, relating to or caused by the Third Party Claim to the fullest
extent provided in this Section 7.
7.4. Other Remedies. The foregoing indemnification provisions are in
addition to, and not in derogation of, any statutory, equitable or common law
remedy any party may have.
7.5. Basket. Notwithstanding anything to the contrary in this Section 7,
the Company and the Shareholders will not have any obligation to indemnify
PentaStar or the Acquiror from and against any Adverse Consequences resulting
from, arising out of, relating to, in the nature of, or caused by the breach of
any representation or warranty of the Company or the Shareholders set forth in
Section 3.1 until PentaStar and the Acquiror have suffered Adverse Consequences
by reason of any or of all such breaches in excess of
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<PAGE> 25
Ten Thousand Dollars ($10,000) in the aggregate, after which point the Company
and the Shareholders will be obligated to indemnify PentaStar and the Acquiror
from and against the entirety of any such Adverse Consequences exceeding Ten
Thousand Dollars ($10,000).
8. Termination.
8.1. Termination of Agreement. The parties may terminate this Agreement as
provided below:
(a) PentaStar and the Shareholders' Agent may terminate this
Agreement by mutual written consent at any time prior to the Closing;
(b) PentaStar may terminate this Agreement by giving written notice
to the Shareholders' Agent at any time prior to the Closing (i) in the event the
Company or any Shareholder has breached any representation, warranty or covenant
contained in this Agreement in any material way, PentaStar has notified the
Shareholders' Agent of the breach, and the breach has not been cured within 10
days after the notice of breach or (ii) if the Closing has not occurred on or
before January 15, 2000 because of the failure of any condition precedent to
PentaStar's obligations to consummate the Closing (unless the failure results
primarily from PentaStar breaching any representation, warranty or covenant
contained in this Agreement in any material way); or
(c) the Shareholders' Agent may terminate this Agreement by giving
written notice to PentaStar at any time prior to the Closing (i) if PentaStar
has breached any representation, warranty or covenant contained in this
Agreement in any material way, the Shareholders' Agent has notified PentaStar of
the breach, and the breach has not been cured within 10 days after the notice of
breach or (ii) if the Closing has not occurred on or before January 15, 2000
because of the failure of any condition precedent to the Company's and the
Shareholders' obligations to consummate the Closing (unless the failure results
primarily from the Company or any Shareholder breaching any representation,
warranty or covenant contained in this Agreement in any material way).
8.2. Effect of Termination. Neither the Company and the Shareholders, on
the one hand, nor PentaStar and the Acquiror, on the other hand, will have any
liability or obligation to the other upon termination of this Agreement for any
reason whatsoever, unless the termination is directly based on or arising from a
material breach of any representations, warranties or covenants contained in
this Agreement of the Company and the Shareholders, on the one hand, or
PentaStar and the Acquiror, on the other hand, and such breach results in,
relates to or concerns an item, fact or circumstance that is materially adverse
to the Company, on the one hand, or PentaStar or the Acquiror, on the other
hand, as applicable. In the case of such a breach, the Company and the
Shareholders, on the one hand, or PentaStar and the Acquiror, on the other hand,
shall be entitled to seek all relief to which it or they are entitled under
applicable law from PentaStar and the Acquiror, on the one hand, and the
Company, on the other hand, as applicable, but not from any Shareholder.
Notwithstanding anything herein in this Agreement to the contrary, no
Shareholders shall have any liability to PentaStar or the Acquiror upon the
termination of this Agreement for any reason whatsoever.
8.3. Confidentiality. If this Agreement is terminated, each party will
treat and hold as confidential all Confidential Information concerning the other
parties which it acquired from such other parties in connection with this
Agreement and the transactions contemplated hereby.
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<PAGE> 26
9. Miscellaneous.
9.1. No Third-Party Beneficiaries. This Agreement will not confer any
rights or remedies upon any Person other than the parties and their respective
successors and permitted assigns.
9.2. Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the parties and supersedes any
prior understandings, agreements or representations by or among the parties,
written or oral, to the extent they relate in any way to the subject matter
hereof.
9.3. Succession and Assignment. This Agreement will be binding upon and
inure to the benefit of the parties and their respective successors and
permitted assigns. Neither the Company nor any Shareholder may assign this
Agreement or any of its, his or her rights, interests or obligations hereunder
without the prior written approval of PentaStar. PentaStar may assign its rights
and obligations hereunder as permitted by law, including, without limitation, to
any debt or equity financing source.
9.4. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
together shall be deemed to be one and the same instrument. The execution of a
counterpart of the signature page to this Agreement will be deemed the execution
of a counterpart of this Agreement. This Agreement may be delivered by facsimile
and facsimile signatures will be treated as original signatures for all
applicable purposes.
9.5. Headings and Terms. The section headings contained in this Agreement
are inserted for convenience only and will not affect in any way the meaning or
interpretation of this Agreement. Terms used with initial capital letters will
have the meanings specified, applicable to both singular and plural forms, for
all purposes of this Agreement. The singular or plural includes the other, as
the context requires or permits. The word "include" (and any variation) is used
in an illustrative sense rather than a limiting sense.
9.6. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if it is sent by
registered or certified mail, return receipt requested, postage prepaid, or by
courier, telecopy or facsimile, and addressed to the intended recipient as set
forth below:
If to the Company or any
Shareholder: Copy to:
Addressed to the
Shareholders' Agent at:
870 Skyline Tower Schneider Law Firm
Network Communications 520 Kirkland Way, Suite 400
Integration, Inc. Post Office Box 786
4122 128th Avenue, S.E., Suite 300 Kirkland, Washington 98083-0786
Bellevue, Washington 98006 Attn: Jaye Lynn Schneider
Attn: Dennis Schillinger Telecopy: (425) 822-1486
Telecopy: (425) 456-1301
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If to PentaStar: Copy to:
PentaStar Communications, Inc. Sherman & Howard L.L.C.
1522 Blake Street 633 Seventeenth Street, Suite 3000
Denver, Colorado 80202 Denver, Colorado 80202
Attn: Chief Executive Officer Attn: B. Scott Pullara
Telecopy: (303) 825-4402 Telecopy: (303) 298-0940
Notices will be deemed given three days after mailing if sent by certified mail,
when delivered if sent by courier, and upon receipt of confirmation by person or
machine if sent by telecopy or facsimile transmission. Any party may change the
address to which notices, requests, demands, claims and other communications
hereunder are to be delivered by giving the other parties notice in the manner
herein set forth.
9.7. Governing Law. This Agreement will be governed by and construed in
accordance with the domestic laws of the State of Colorado (with the exception
of the bulk sales laws, which shall be governed by and construed in accordance
with the domestic laws of the State of Washington) without giving effect to any
choice or conflict of law provision or rule (whether of the State of Colorado or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Colorado.
9.8. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same is in writing and signed by PentaStar
and the Shareholders' Agent. No waiver by any party of any default,
misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, will be deemed to extend to any prior or subsequent default,
misrepresentation or breach of warranty or covenant hereunder or affect in any
way any rights arising by virtue of any prior or subsequent such occurrence, and
no waiver will be effective unless set forth in writing and signed by the party
against whom such waiver is asserted.
9.9. Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
9.10. Expenses. Except as otherwise provided in Section 8.2, (a) PentaStar
shall bear its own costs and expenses (including, without limitation, legal fees
and expenses) incurred either before or after the date of this Agreement in
connection with this Agreement or the transactions contemplated hereby and (b)
the Company and the Shareholders will bear all costs and expenses (including,
without limitation, all legal, accounting and tax related fees and expenses, all
fees, commissions, expenses and other amounts payable to any broker, finder or
agent) incurred by the Company or by any Shareholder either before or after the
date of this Agreement in connection with this Agreement or the transactions
contemplated hereby.
9.11. Arbitration. Any disputes arising under or in connection with this
Agreement, including, without limitation, those involving claims for specific
performance or other equitable relief, will be submitted to binding arbitration
in Denver, Colorado before the Judicial Arbiter Group, but under the Commercial
Arbitration Rules of the American Arbitration Association under the authority of
federal and state arbitration statutes, and shall not be the subject of
litigation in any forum. If the Judicial Arbiter Group is unavailable to conduct
the arbitration, then it shall be before another arbitral body in Denver,
Colorado selected by PentaStar and the Shareholders' Agent or, if they cannot
agree on another arbitral body, the American
-23-
<PAGE> 28
Arbitration Association. EACH PARTY, BY SIGNING THIS AGREEMENT, VOLUNTARILY,
KNOWINGLY AND INTELLIGENTLY WAIVES ANY RIGHTS SUCH PARTY MAY OTHERWISE HAVE TO
SEEK REMEDIES IN COURT OR OTHER FORUMS, INCLUDING THE RIGHT TO JURY TRIAL. The
arbitrator shall have full authority to order specific performance and other
equitable relief and award damages and other relief available under this
Agreement or applicable law, but shall have no authority to add to, detract
from, change or amend the terms of this Agreement or existing law. All
arbitration proceedings, including settlements and awards, shall be
confidential. The decision of the arbitrators will be final and binding, and
judgment on the award by the arbitrators may be entered in any court of
competent jurisdiction. THIS SUBMISSION AND AGREEMENT TO ARBITRATE WILL BE
SPECIFICALLY ENFORCEABLE. The prevailing party or parties in any such
arbitration or in any action to enforce this Agreement will be entitled to
recover, in addition to any other relief awarded by the arbitrator, all
reasonable costs and expenses, including fees and expenses of the arbitrators
and attorneys, incurred in connection therewith. If each party prevails on
specific issues in the arbitration, the arbitrator may allocate the costs
incurred by all parties on a basis the arbitrator deems appropriate.
9.12. Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement will be construed as
if drafted jointly by the parties and no presumption or burden of proof will
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. The word "including" will mean including
without limitation. The parties intend that each representation, warranty and
covenant contained herein will have independent significance. If any party
breaches any representation, warranty or covenant contained herein in any
respect, the fact that there exists another representation, warranty or covenant
relating to the same subject matter (regardless of the relative levels of
specificity) which the party has not breached will not detract from or mitigate
the fact that the party is in breach of the first representation, warranty or
covenant.
9.13. Incorporation of Exhibits. The Exhibits identified in this Agreement
are incorporated herein by reference and made a part hereof.
9.14. Shareholders' Agent. The Company and each Shareholder hereby
authorize and appoint the Shareholders' Agent as its, his or her exclusive agent
and attorney-in-fact to act on behalf of each of them with respect to all
matters which are the subject of this Agreement, including, without limitation,
(a) receiving or giving all notices, instructions, other communications,
consents or agreements that may be necessary, required or given hereunder and
(b) asserting, settling, compromising, or defending, or determining not to
assert, settle, compromise or defend, (i) any claims which the Company or any
Shareholder may assert, or have the right to assert, against PentaStar, or (ii)
any claims which PentaStar or the Acquiror may assert, or have the right to
assert, against the Company or any Shareholder. The Shareholders' Agent hereby
accepts such authorization and appointment. Upon the receipt of written evidence
satisfactory to PentaStar to the effect that the Shareholders' Agent has been
substituted as agent of the Company and the Shareholders by reason of his death,
disability or resignation, PentaStar shall be entitled to rely on such
substituted agent to the same extent as they were theretofore entitled to rely
upon the Shareholders' Agent with respect to the matters covered by this Section
9.14. Neither the Company nor any Shareholder shall act with respect to any of
the matters which are the subject of this Agreement except through the
Shareholders' Agent. The Company and the Shareholders acknowledge and agree that
PentaStar may deal exclusively with the Shareholders' Agent in respect of such
matters, that the enforceability of this Section 9.14 is material to PentaStar,
and that PentaStar has relied upon the enforceability of this Section 9.14 in
entering into this Agreement.
-24-
<PAGE> 29
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
PENTASTAR:
PENTASTAR COMMUNICATIONS, INC.
By: /s/ Robert Lazzeri
-----------------------------------
Name: Robert S. Lazzeri
---------------------------------
Title: CEO
--------------------------------
ACQUIROR:
OC MERGERCO 3, INC.
By: /s/ Robert Lazzeri
-----------------------------------
Name: Robert S. Lazzeri
---------------------------------
Title: CEO
--------------------------------
COMPANY:
NETWORK COMMUNICATIONS
INTEGRATION, INC.
By: /s/ Nicolas van Gelder
-----------------------------------
Name: Nicolas van Gelder
---------------------------------
Title: President
--------------------------------
SHAREHOLDERS:
/s/ Dennis W. Schillinger
--------------------------------------
Dennis W. Schillinger
/s/ Nicolas van Gelder
--------------------------------------
Nicolas van Gelder
-25-
<PAGE> 30
/s/ Norma A. Douthit
--------------------------------------
Norma Douthit
/s/ John R. Hall
--------------------------------------
John Hall
/s/ Charles E. Gibson
--------------------------------------
Charles Gibson
-26-
<PAGE> 31
Spouses of Shareholders (not Shareholders)
/s/ Monica Schillinger
- -------------------------
Monica Schillinger
/s/ Kirstin van Gelder
- -------------------------
Kirstin van Gelder
/s/ David T. Douthit
- -------------------------
David T. Douthit
/s/ Judy Gibson
- -------------------------
Judy Gibson
/s/ Glenda F. Blackburn
- -------------------------
Glenda Blackburn
[SIGNATURE PAGE TO PURCHASE AGREEMENT]
-27-
<PAGE> 32
Exhibit 1.1(a)
DEFINED TERMS
Acquiror has the meaning given it in the preamble to this Agreement.
Acquired Assets means all right, title and interest of the Company in
and to all of the tangible and intangible assets, including cash and cash
equivalents, of the Company.
Adverse Consequences means all actions, suits, proceedings,
investigations, complaints, claims, demands, Orders, Liabilities, liens, losses,
damages, penalties, fines, settlements, costs, remediation costs, expenses and
fees (including court costs and reasonable fees and expenses of counsel and
other experts), plus interest at a rate equal to two percentage points above the
prime rate quoted by PentaStar's principal lender from time to time accrued from
the date of such Adverse Consequence.
Affiliated Group means any affiliated group within the meaning of Code
Section 1504 or any similar group defined under a similar provision of state,
local or foreign law.
Assignment and Assumption Agreement means the Assignment and
Assumption Agreement between the Company and the Acquiror in the form of Exhibit
1.1(b) pursuant to which the Acquiror will assume the Assumed Liabilities.
Assumed Liabilities means (a) the obligations of the Company arising
after the Closing Date under those contracts which are identified by PentaStar
on Exhibit 1.1(c)(i) with respect to the period after the Closing Date, and (b)
the obligations of the Company in the amounts expressly set forth on Exhibit
1.1(c)(ii). Assumed Liabilities will not include any other Liability.
Business Day means any day on which commercial banks are open for
business in Denver, Colorado.
Closing Accounts Receivable means all accounts (including late fees
and interest charges thereon) and notes receivable of the Company which are in
existence as of the Closing Date.
Closing and Closing Date have the meanings given in Section 2.5.
Code means the Internal Revenue Code of 1986, as amended.
Company has the meaning given it in the preamble to the Agreement,
except that for purposes of Section 3.1 the term the "Company" shall mean the
Company and all of its Subsidiaries.
Confidential Information means any information concerning the subject
Person or the subject Person's business, products, financial condition,
prospects and affairs that is not already generally available to the public.
Employee Benefit Plan means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan
Exhibit 1.1(a)-1
<PAGE> 33
or arrangement which is an Employee Pension Benefit Plan, (c) qualified defined
benefit retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan, as defined in ERISA Section 3(37)) or (d)
Employee Welfare Benefit Plan.
Employee Pension Benefit Plan has the meaning set forth in ERISA
Section 3(2).
Employee Welfare Benefit Plan has the meaning set forth in ERISA
Section 3(1).
Encumbrance means any mortgage, pledge, conditional sale agreement,
charge, claim, interest of another Person, lien, security interest, title defect
or other encumbrance.
Environmental Obligations means all present and future Legal
Requirements and Permits concerning land use, public health, safety, welfare or
the environment, including, without limitation, the Resource Conservation and
Recovery Act (42 U.S.C. Section 6901 et seq.), as amended, and the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C. Section 9601
et seq.), as amended.
ERISA means the Employee Retirement Income Security Act of 1974, as
amended, and any regulations, rules or orders promulgated thereunder.
GAAP means generally accepted accounting principles as in effect from
time to time in the United States.
Governmental Authority means the United States of America, any state,
commonwealth, territory or possession of the United States of America, any
political subdivision thereof (including counties, municipalities, home-rule
cities and the like), and any agency, authority or instrumentality of any of the
foregoing, including, without limitation, any court, tribunal, department,
bureau, commission or board.
Hazardous Materials means any material, chemical, compound, mixture,
hazardous substance, hazardous waste, pollutant or contaminant defined, listed,
classified or regulated under any Environmental Obligation.
Indemnified Party has the meaning given it in Section 7.3(a).
Indemnifying Party has the meaning given it in Section 7.3(a).
Intellectual Property means all trade, corporate, business and product
names, trademarks, trademark rights, service marks, copyrights, patents, patent
rights, trade secrets, business, customer and technical information, and
computer software, all registrations, licenses and applications pertaining
thereto, and all related documentation and goodwill.
Key Employee means an employee, other than an executive, whose
responsibilities are integral or material to the sustained operations of the
business or implementation of the business plan.
Latest Balance Sheet has the meaning given it in Section 3.1(d).
Legal Requirement means any constitution, statute, ordinance, code, or
other law (including common law), rule, regulation, Order, notice, standard,
procedure or other requirement enacted, adopted,
Exhibit 1.1(a)-2
<PAGE> 34
applied or issued by any Governmental Authority, including, without limitation,
judicial decisions applying or interpreting any such Legal Requirement.
Liability means any liability or obligation (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due).
Majority Shareholder means a Shareholder owning more than three
percent (3%) of the issued and outstanding shares of the Company, as determined
from Exhibit 3.1(b)(i).
Minority Shareholder means a Shareholder other than a Majority
Shareholder.
NCI Liabilities means (i) the principal and accrued interest through
the Closing Date under that certain Secured Promissory Note dated August 12,
1999 from the Company to ICM Communications Integration, Inc. ("ICM"), in the
original principal amount of $540,000, (ii) all amounts due and owing through
the Closing Date by the Company to OC Mergerco 2, Inc. under that certain Mutual
Acknowledgement and Agreement dated July 31, 1999 between ICM and the Company,
(iii) all amounts due and owing through the Closing Date by the Company to OC
Mergerco 2, Inc. under that certain Commissions Agreement dated October 26, 1999
between ICM and the Company and (iv) all amounts due and owing through the
Closing Date by the Company under the sublease for Suite 400, 4122 128th Avenue,
S.E., Bellevue, Washington, between ICM, as lessor, and the Company, as lessee.
The Company and the Shareholders acknowledge that OC Mergerco 2, Inc., a
wholly-owned subsidiary of PentaStar, has succeeded to the rights of ICM under
the above-referenced instruments, contracts and agreements as a result of the
October 29, 1999 merger of ICM into OC Mergerco 2, Inc.
NCI Liabilities Amount means the aggregate amount of the NCI
Liabilities as of the Closing Date, as set forth on Exhibit 1.1(d) as of the
Closing. Exhibit 1.1(d) shall be prepared by the Company and delivered to
PentaStar three Business Days prior to the Closing. If PentaStar accepts such
Exhibit, it shall be attached to this Agreement. If PentaStar rejects such
Exhibit, the Company and PentaStar shall attempt in good faith to agree upon
such Exhibit, and if so agreed to it shall be attached to this Agreement as
Exhibit 1.1(d).
Notice Date has the meaning given it in Section 7.1.
Orders means all judgments, injunctions, orders, rulings, decrees,
directives, notices of violation or other requirements of any Governmental
Authority or arbitrator having jurisdiction in the matter, including a
bankruptcy court or trustee.
Other PentaStar Agreements means the Assignment and Assumption
Agreement, the Bill of Sale and the other documents and instruments to be
executed and delivered by PentaStar or the Acquiror pursuant to this Agreement.
Other Seller Agreements means the Assignment and Assumption Agreement,
the Bill of Sale and the other documents and instruments to be executed and
delivered by the Company, any Shareholder or any relative or affiliate of the
Company or of any Shareholder pursuant to this Agreement.
PentaStar has the meaning given it in the preamble to this Agreement.
Exhibit 1.1(a)-3
<PAGE> 35
Permits means all permits, licenses, consents, franchises,
authorizations, approvals, privileges, waivers, exemptions, variances,
exclusionary or inclusionary Orders and other concessions, whether governmental
or private, including, without limitation, those relating to environmental,
public health, welfare or safety matters.
Person means an individual, partnership, corporation, association,
joint stock company, trust, joint venture, limited liability company,
unincorporated organization or Governmental Authority.
Premises means the real property, buildings and improvements thereon
constituting the business premises of the Company located at 4122 128th Avenue,
S.E., Suite 400, Bellevue, Washington.
Principal Customer has the meaning given it in Section 3.1(o).
Principal Provider has the meaning given it in Section 3.1(o).
Purchase Price has the meaning given it in Section 2.3.
Right means any right, property interest, concession, patent,
trademark, trade name, copyright, know-how or other proprietary right of another
Person.
Shareholder's Pro Rata Amount means, with respect to a particular
Shareholder, the dollar amount determined by multiplying (a) that Shareholder's
percentage ownership of the Company determined based upon Exhibit 3.1(b)(i), by
(b) the sum of (i) the cash portion of the Purchase Price, (ii) the NCI
Liabilities Amount and (iii) the amount of the obligations set forth on Exhibit
1.1(c)(ii).
Shareholders has the meaning given it in the preamble to this
Agreement.
Shareholders' Agent means Dennis Schillinger (or the substituted agent
described in Section 9.14) acting as agent for the Company and the Shareholders
pursuant to Section 9.14.
Shares means all of the issued and outstanding capital stock of the
Company.
Subsidiary means, with respect to the Company, any corporation,
partnership, limited liability company or entity in which the Company has an
equity interest.
Survival Period means, with respect to a representation or warranty,
the applicable period after the Closing Date during which such representation or
warranty survives pursuant to Section 3.3.
Tax means any federal, state, local or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Section 59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, documentary, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated or other tax of any kind whatsoever, including any interest,
penalty or addition thereto, whether disputed or not.
Exhibit 1.1(a)-4
<PAGE> 36
Tax Return means any return, declaration, report, claim for refund or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
Third Party Claim has the meaning given it in Section 7.3(a).
Third Party Product has the meaning given it in Section 3.1(r).
Exhibit 3.1(h)(i)-5
<PAGE> 37
Exhibit 3.1(b)(i)
<TABLE>
<CAPTION>
SHAREHOLDER NUMBER OF COMPANY SHARES OWNED
----------- ------------------------------
<S> <C>
Dennis W. Schillinger
Nicolas van Gelder
Norma Douthit
John Hall
Charles Gibson
</TABLE>
Exhibit 3.1(b)(i)-1
<PAGE> 1
EXHIBIT 2.8
================================================================================
PURCHASE AGREEMENT
AMONG
PENTASTAR COMMUNICATIONS, INC.,
OC MERGERCO 4, INC.,
VSI NETWORK SOLUTIONS, INC.
AND
THE SHAREHOLDER
OF
VSI NETWORK SOLUTIONS, INC.
AS OF FEBRUARY 18, 2000
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
1. Definitions...........................................................................................................1
2. Purchase and Sale.....................................................................................................1
2.1. Basic Transaction............................................................................................1
2.2. Assumption of Certain Liabilities............................................................................1
2.3. Purchase Price; Payment......................................................................................2
2.4. Sales Taxes, Etc.............................................................................................4
2.5. The Closing..................................................................................................4
2.6. Deliveries at the Closing....................................................................................4
3. Representations and Warranties........................................................................................4
3.1. Representations and Warranties of the Company and the Shareholder............................................4
3.2. Representations and Warranties of PentaStar.................................................................16
3.3. Survival of Representations.................................................................................17
3.4. Representations as to Knowledge.............................................................................17
4. Pre-Closing Covenants................................................................................................18
4.1. General.....................................................................................................18
4.2. Operation and Preservation of Business......................................................................18
4.3. Full Access.................................................................................................18
4.4. Notice of Developments......................................................................................18
4.5. Exclusivity.................................................................................................18
4.6. Announcements; Securities Law Restrictions..................................................................18
4.7. Bulk Sales Laws.............................................................................................19
4.8 Shareholders' Meeting.......................................................................................19
4.9 Specified Consents..........................................................................................19
4.10 Termination Expenses........................................................................................20
5. Post-Closing Covenants...............................................................................................20
5.1. Further Assurances..........................................................................................20
5.2. Transition..................................................................................................20
5.3. Cooperation.................................................................................................20
5.4. Confidentiality.............................................................................................20
5.5. Financial Statements........................................................................................20
5.6. Satisfaction of Liabilities.................................................................................21
5.7. Repurchase of Unpaid Receivables............................................................................21
5.8. Transfer Restrictions.......................................................................................22
6. Conditions to Closing................................................................................................23
6.1. Conditions to Obligation of PentaStar.......................................................................23
6.2. Conditions to Obligation of the Company and the Shareholder.................................................24
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
7. Remedies for Breaches of This Agreement..............................................................................25
7.1. Indemnification Provisions for Benefit of PentaStar.........................................................25
7.2. Indemnification Provisions for Benefit of the Company and the Shareholder...................................27
7.3. Matters Involving Third Parties.............................................................................28
7.4. Right of Offset.............................................................................................29
7.5. Other Remedies..............................................................................................29
8. Termination..........................................................................................................29
8.1. Termination of Agreement....................................................................................29
8.2. Effect of Termination.......................................................................................29
8.3. Confidentiality.............................................................................................29
9. Miscellaneous........................................................................................................29
9.1. No Third-Party Beneficiaries................................................................................29
9.2. Entire Agreement............................................................................................29
9.3. Succession and Assignment...................................................................................29
9.4. Counterparts................................................................................................30
9.5. Headings....................................................................................................30
9.6. Notices.....................................................................................................30
9.7. Governing Law...............................................................................................30
9.8. Amendments and Waivers......................................................................................30
9.9. Severability................................................................................................31
9.10. Expenses....................................................................................................31
9.11. Arbitration.................................................................................................31
9.13. Incorporation of Exhibits...................................................................................32
9.14. Shareholder's Agent.........................................................................................32
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
Exhibits:
Exhibit 1.1(a) Exhibit 3.1(h)(i)
Exhibit 1.1(b) Exhibit 3.1(h)(ii)
[Exhibit 1.1(c) is intentionally Exhibit 3.1(i)(i)
omitted.] Exhibit 3.1(i)(ii)
Exhibit 1.1(d)(i) Exhibit 3.1(k)
Exhibit 1.1.(d)(ii) Exhibit 3.1(l)(i)
Exhibit 1.1(e) Exhibit 3.1(l)(ii)
Exhibit 1.1(f) Exhibit 3.1(m)
Exhibit 1.1(g) Exhibit 3.1(n)(ii)
Exhibit 1.1(h) Exhibit 3.1(o)(i)
Exhibit 1.1(i) Exhibit 3.1(o)(ii)
Exhibit 1.1(j) Exhibit 3.1(o)(iii)
Exhibit 2.3(b)(i) Exhibit 3.1(r)
Exhibit 2.3(b)(iii) Exhibit 3.1(s)
Exhibit 3.1(b)(ii) Exhibit 3.1(t)
Exhibit 3.1(c) Exhibit 3.1(u)(ii)
Exhibit 3.1(d)(i)(A) Exhibit 3.2(a)(ii)
Exhibit 3.1(d)(i)(B) Exhibit 3.2(b)(i)
Exhibit 3.1(d)(ii)(A) Exhibit 4.9(a)
Exhibit 3.1(d)(ii)(B) Exhibit 4.9(b)
Exhibit 3.1(e)(i) Exhibit 6.1(h)
Exhibit 3.1(e)(ii)(F) Exhibit 6.2(c)
Exhibit 3.1(e)(iii)
</TABLE>
-iii-
<PAGE> 5
This Purchase Agreement is entered into as of February 18, 2000 among
PentaStar Communications, Inc., a Delaware corporation ("PentaStar"), OC
Mergerco 4, Inc., a Delaware corporation (the "Acquiror"), VSI Network
Solutions, Inc., a Delaware corporation (the "Company"), and the Person
identified as the Shareholder on the signature page hereto (the "Shareholder").
Recitals
A. The Shareholder presently owns approximately 67%, and upon the Closing
will own all, of the issued and outstanding capital stock of the Company.
B. The Acquiror is a newly-formed, wholly-owned subsidiary of PentaStar.
The Acquiror desires to acquire from the Company, and the Company desires to
sell to the Acquiror, substantially all of the Company's assets as provided in
this Agreement.
C. PentaStar, the Acquiror, the Company and the Shareholder desire to make
certain representations, warranties and agreements in connection with such
transaction and also desire to set forth various conditions precedent thereto.
Agreement
NOW, THEREFORE, in consideration of the premises, the mutual
representations, warranties and covenants set forth herein and other good and
valuable consideration, the receipt and sufficiency of which are acknowledged,
the parties agree as follows:
1. Definitions. The terms defined in Exhibit 1.1(a) shall have the meanings
designated therein.
2. Purchase and Sale.
2.1. Basic Transaction.
(a) Subject to the terms and conditions set forth in this Agreement,
the Acquiror agrees to purchase from the Company, and the Company agrees to sell
to the Acquiror, all the Acquired Assets free and clear of any Tax or
Encumbrance (other than the Permitted Encumbrances in the event that, subject to
Section 4.10, the Acquiror has not paid off the debt to RFC Capital Corporation
as of the Closing), for the consideration specified in Section 2.3. The Acquiror
will have no obligation under this Agreement to purchase less than all of the
Acquired Assets.
(b) The following documents have been executed and delivered by the
parties thereto concurrently with the execution of this Agreement: (i) the
Assignment and Assumption Agreement; (ii) the Bill of Sale; (iii) the Employment
Agreement; (iv) the Escrow Agreement; (v) the Noncompetition Agreement; (vi) the
Rowley Payment Agreement; (vii) the Voting Agreement; and (viii) the documents
specified in Sections 6.1(f)(ii) (other than with respect to the Required Vote)
and 6.1(o).
2.2. Assumption of Certain Liabilities. Subject to the terms and conditions
set forth in this Agreement, the Acquiror agrees to assume and become
responsible at the Closing for all of the Assumed Liabilities. The Acquiror will
not assume or have any responsibility with respect to any other Liability not
expressly included within the definition of Assumed Liabilities.
<PAGE> 6
2.3. Purchase Price; Payment.
(a) The consideration payable by the Acquiror to the Company for the
Acquired Assets will consist of (i) cash in an amount of $2,100,000; (ii) such
number of PentaStar Shares (rounded to the nearest whole share) as have an
aggregate Fair Market Value as of the date of this Agreement of $950,000 (such
number of shares being referred to as the "Closing Shares"); (iii) the
assumption of the Assumed Liabilities; and (iv) the Earn-Out Amount payable
pursuant to Section 2.3(b) (collectively the "Purchase Price"). At the Closing,
the Acquiror will (i) pay to the Company by wire transfer to an account
designated by the Company $1,600,000 of the cash portion of the Purchase Price,
(ii) deposit the remaining $500,000 of the cash portion of the Purchase Price
(such $500,000 is referred to as the "Accounts Receivable Escrow Fund") and the
stock certificates representing the Closing Shares into the Escrow Account with
the Escrow Agent (which Closing Shares shall be issued by PentaStar in the name
of the Company and contributed by PentaStar to the Acquiror immediately prior to
the Closing) and (iii) assume the Assumed Liabilities. The Accounts Receivable
Escrow Fund, the Closing Shares and the other property held in the Escrow
Account shall be held and disbursed according to this Agreement and the Escrow
Agreement.
(b) In addition to the cash portion of the Purchase Price and the
Closing Shares payable and issuable at the Closing pursuant to Section 2.3(a),
the Company shall be entitled to receive the Earn-Out Amount determined and
payable as provided in this Section 2.3(b).
(i) PentaStar agrees that, during the Earn-Out Period, the Acquiror
will conduct the operations represented by the Acquired Assets in the ETI Region
as a separate subsidiary of PentaStar with no other operations. PentaStar agrees
that, during the Earn-Out Period, it will not allocate any corporate expense or
otherwise cause the ETI Region to incur any corporate or other expense not
specifically related to the business of the ETI Region.
(ii) As soon as reasonably practicable after the end of the
Earn-Out Period, and in any event by March 31, 2001, PentaStar will cause the
independent auditors who audit its financial statements for the year 2000 to
prepare an audited income statement of the Acquiror for the Earn-Out Period and
a written calculation of the Earn-Out Amount (collectively, the "Earn-Out
Financial Statements"). PentaStar will promptly provide a copy of the Earn-Out
Financial Statements to the Company. Within 20 days after receipt of the
Earn-Out Financial Statements, each of PentaStar and the Company will, in a
written notice to the other, either accept the Earn-Out Financial Statements or
object to them by describing in reasonably specific detail any proposed
adjustments to the Earn-Out Financial Statements and the estimated amounts of
and reasons for such proposed adjustments. The failure by PentaStar or the
Company to object to the Earn-Out Financial Statements within such 20-day period
will be deemed to be an acceptance by such Person of the Earn-Out Financial
Statements. If any adjustments to the Earn-Out Financial Statements are proposed
by PentaStar or the Company within such 20-day period, the dispute shall be
resolved as provided in Section 2.3(b)(v). The reasonable fees and expenses of
the independent auditors for the preparation of the Earn-Out Financial
Statements, other than those associated with the normal year-end audit of
PentaStar or the Acquiror, shall be paid 50% by PentaStar and 50% by the
Company.
(iii) Within 10 Business Days after the later of the acceptance of
the Earn-Out Financial Statements by PentaStar and the Company or the resolution
of any disputes under Section 2.3(b)(v), as the case may be, the Acquiror shall
pay the Earn-Out Amount, if any, to the Company. The Earn-Out Amount shall be
paid, in PentaStar's sole discretion, in cash or PentaStar Common Stock, or any
combination thereof. If any portion of the Earn-Out Amount is paid in PentaStar
Common Stock, the number of shares
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of PentaStar Common Stock to be issued (which shall be rounded to the nearest
whole share) will be determined by dividing (A) the Earn-Out Amount that is
being paid in PentaStar Common Stock by (B) a per share value of PentaStar
Common Stock that is equal to 90% of the Fair Market Value as of the date such
Earn-Out Amount is paid, and such shares shall be issued by PentaStar in the
name of the Company or Brian S. Rowley, as the case may be, in the amounts
determined as set forth below, and contributed by PentaStar to the Acquiror
immediately prior to the delivery of such shares by the Acquiror. If any shares
of PentaStar Common Stock are issued in the name of the Company pursuant to this
Section 2.3(b)(iii), the Acquiror shall deposit the stock certificates
representing such shares into the Escrow Account with the Escrow Agent. If the
Earn-Out Amount becomes payable by the Acquiror, the Company shall pay to Mr.
Rowley (however delivery may be delayed if such shares are in escrow) the amount
determined pursuant to Exhibit 2.3(b)(iii) (and if the Earn-Out Amount is
comprised of a combination of cash and PentaStar Common Stock, then Mr. Rowley
shall receive cash and PentaStar Common Stock from the Company in the same
proportions as the cash and PentaStar Common Stock comprising the Earn-Out
Amount (the shares of PentaStar Common Stock, if any, issued in the name of Mr.
Rowley are referred to as the "Rowley Shares")). The cash portion of the
Earn-Out Amount shall be paid by wire transfer to an account designated by the
Company.
(iv) In the event that PentaStar sells the operations conducted by
the Acquiror prior to the end of the Earn-Out Period, PentaStar shall require
the purchaser to continue to account for such operations separately and agree to
assume the obligation of the Acquiror to pay the Earn-Out Amount as provided in
this Section 2.3(b), including the obligation to comply with the provisions of
Section 2.3(b)(i).
(v) If any adjustments to the Earn-Out Financial Statements are
proposed by PentaStar or the Company pursuant to Section 2.3(b)(ii), PentaStar
and the Company will negotiate in good faith to resolve any dispute, provided
that if the dispute is not resolved within 10 days following the receipt of the
proposed adjustments then PentaStar and the Company will retain the Boston,
Massachusetts office of (or office most geographically proximate to Boston,
Massachusetts) BDO Seidman LLC to resolve such dispute, which resolution will be
final and binding. The fees and expenses of BDO Seidman LLC will be paid 50% by
PentaStar and 50% by the Company, and BDO Seidman LLC will be retained under a
retention letter executed by the parties that specifies that the determination
by said firm of any such disputes will be resolved in accordance with this
Agreement (including the definitions of "Earn-Out Amount," "Earn-Out Period,"
"Earn-Out Period EBITA" and "EBITA" set forth in this Agreement), by choosing
the position of Arthur Andersen L.L.P. or the objecting party under Section
2.3(b)(ii), without change, within 30 days of the expiration of the 20-day
period described in Section 2.3(b)(ii).
(c) The allocation of the total consideration for the Acquired Assets
for Tax reporting purposes shall be as follows: (i) to cash and cash
equivalents, the amount thereof; (ii) to Closing Accounts Receivable, the amount
determined by the Acquiror from the Company's, records, adjusted by the Acquiror
to conform to GAAP; (iii) to inventory, the amount determined by the Acquiror
from the Company's records, adjusted by the Acquiror to conform to GAAP; (iv) to
leasehold improvements, the greater of fair market value (determined by the
Acquiror from its historical experience, or in the Acquiror's sole discretion,
by independent appraisal) or the current book value thereof as reflected in the
Company's records, adjusted by the Acquiror to conform to GAAP; and (v) the
entire remaining balance of the consideration shall be allocated to the goodwill
of the Company's business or, at the Acquiror's sole discretion, to the other
intangible assets which are included in the Acquired Assets. The parties
acknowledge that such allocations for Tax reporting purposes were determined
pursuant to arm's length bargaining regarding the fair market values of the
Acquired Assets in accordance with the provisions of Code Section 1060. The
parties agree to be bound by these allocations for all federal, state and local
Tax reporting purposes, including for purposes
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of determining any income, gain, loss, depreciation or other deductions in
respect of such assets. The parties further agree to prepare and file all Tax
Returns (including Form 8594 under the Code) in a manner consistent with such
allocations.
2.4. Sales Taxes, Etc. The Company will pay all sales, use, transfer,
licensing and other Taxes, fees and charges payable in respect of or as a result
of the sale and transfer of the Acquired Assets to the Acquiror pursuant to this
Agreement.
2.5. The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Sherman & Howard
L.L.C. at 10:00 a.m. Denver, Colorado time on the date on which the Required
Vote is obtained. The date upon which the Closing occurs is the "Closing Date."
All transactions contemplated by this Agreement will be effective at 12:01 a.m.
Eastern Standard Time on such date between January 1, 2000 and May 1, 2000 as
the Acquiror shall determine (such effective time being the "Effective Date").
2.6. Deliveries at the Closing. At the Closing, (a) the Company will
deliver to PentaStar the various certificates, instruments and documents, and
take the actions, referred to in Section 6.1 and (b) PentaStar will deliver to
the Company the various certificates, instruments and documents, and take the
actions, referred to in Section 6.2.
3. Representations and Warranties.
3.1. Representations and Warranties of the Company and the Shareholder. The
Company and the Shareholder jointly and severally represent and warrant to
PentaStar and the Acquiror that the statements contained in this Section 3.1 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Effective Date and as of the date of the Closing (as though
made then and as though the Effective Date and the date of the Closing were then
substituted for the date of this Agreement throughout this Section 3.1). For
purposes of this Section 3.1, (a) with respect to the representations given as
of the date of this Agreement, the VSN/UST Acquisition shall be deemed not to
have occurred as of the date of this Agreement and (b) the Company and the
Shareholder are not making any representations or warranties with respect to
UST, VNS or the UST/VNS Assets or business as of any date after the date of this
Agreement, as the UST/VNS Assets will be owned by the Acquiror after the date of
this Agreement.
(a) Organization, Good Standing, Etc. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and is qualified and authorized to do business as a foreign
corporation and is in good standing in Rhode Island, Massachusetts, New York and
New Jersey, which are the only jurisdictions in which the nature of the business
conducted by it or the properties owned, leased or operated by it make such
qualification necessary. The Company has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted.
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(b) Ownership and Capitalization.
(i) The authorized capital stock of the Company consists of
1,000,000 shares of common stock, $.01 par value. The Shareholder owns,
beneficially and of record, free and clear of any Encumbrance or Tax, 1,000,000
shares of the common stock, $.01 par value, of the Company (the "Company
Shares"), and the Company Shares constitute all of the issued and outstanding
capital stock of the Company.
(ii) Except as set forth on Exhibit 3.1(b)(ii), the Company has no
Subsidiaries and no capital stock, securities convertible into capital stock, or
any other equity interest in any other corporation, partnership, limited
partnership, limited liability company, association, joint venture or other
Person. Each of the entities listed on Exhibit 3.1(b)(ii) is wholly-owned,
directly or indirectly, by the Company, is a corporation duly organized, validly
existing and in good standing under the laws of its state of incorporation, as
set forth on Exhibit 3.1(b)(ii), and is qualified to do business as a foreign
corporation and is in good standing in the states set forth on Exhibit
3.1(b)(ii), which are the only jurisdictions in which the nature of the business
conducted by it or the properties owned, leased or operated by it make such
qualification necessary. No Person has any right to acquire any interest in any
Subsidiary and there are no authorized or outstanding stock appreciation,
phantom stock, profit participation or similar rights with respect to any
Subsidiary. Each such Subsidiary has all requisite corporate power and authority
to own, lease and operate its properties and to carry on its business as now
being conducted.
(c) Authority; No Violation. This Agreement and the Other Seller
Agreements and the consummation of the transactions contemplated hereby and
thereby have been duly and unanimously approved by the board of directors and
shareholders of the Company, and this Agreement and the Other Seller Agreements
to which the Company is a party have been duly executed and delivered by the
Company. The Company has full corporate power and authority to execute, deliver
and perform this Agreement and the Other Seller Agreements to which the Company
is a party, each Person (other than PentaStar or the Acquiror) who is a party to
any Other Seller Agreement has full and absolute right, power, authority and
legal capacity to execute, deliver and perform this Agreement and all Other
Seller Agreements to which such Person is a party, and this Agreement
constitutes, and the Other Seller Agreements will when executed and delivered
constitute, the legal, valid and binding obligations of, and shall be
enforceable in accordance with their respective terms against, the Company and
each such Person who is a party thereto. The execution, delivery and performance
of this Agreement and the Other Seller Agreements and the consummation of the
transactions contemplated hereby and thereby will not (i) violate any Legal
Requirement to which the Company or any Person (other than PentaStar or the
Acquiror) who is a party to any Other Seller Agreement is subject or any
provision of the articles of incorporation or bylaws of the Company or of any
such Person, or (ii) violate, with or without the giving of notice or the lapse
of time or both, or conflict with or result in the breach or termination of any
provision of, or constitute a default under, or give any Person the right to
accelerate any obligation under, or result in the creation of any Encumbrance
upon any properties, assets or business of the Company or of any such Person
pursuant to, any indenture, mortgage, deed of trust, lien, lease, license,
Permit, agreement, instrument or other arrangement to which the Company or any
such Person is a party or by which the Company or any such Person or any of
their respective assets and properties is bound or subject. Except for the
Required Vote, the consents listed on Exhibit 4.9(a) and the Specified Consents,
neither the Company, nor any Person (excluding PentaStar or the Acquiror) need
give any notice to, make any filing with or obtain any authorization, consent or
approval of any Governmental Authority or other Person in order for the parties
to consummate the transactions contemplated by this Agreement and the Other
Seller Agreements. Except for the Required Vote, no approval of the shareholders
of VSI Enterprises, Inc. is required for the execution, delivery or performance
by the Company or VSI Enterprises, Inc.
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of this Agreement or any Other Seller Agreement.
(d) Financial Statements
(i) The unaudited balance sheets of each of the Company, UST and
VNS as of December 31, 1998, the related statements of income for each of the
Company, UST and VNS for the fiscal year then ended, the unaudited balance
sheets of each of the Company, UST and VNS as of December 31, 1999 (the latter
being referred to as the "Latest Balance Sheets"), and the related statements of
income for each of the Company, UST and VNS for the twelve-month periods then
ended (which December 31, 1999 financial statements are final and not subject to
adjustment) have been prepared in accordance with GAAP on a consistent basis,
are in accordance with the books and records of the Company, UST and VNS (which
books and records are complete and correct in all material respects), and fairly
present the respective financial position and results of operations of each of
the Company, UST and VNS in all material respects as of such dates and for each
of the periods indicated. As of the date of each such balance sheet, each of the
Company, UST and VNS had no Liability other than those set forth on each such
balance sheet. Copies of the financial statements described in the first
sentence in this Section 3.1(d) are attached as Exhibit 3.1(d)(i)(A). Attached
as Exhibit 3.1 (d)(i)(B) is a list of all employees of the Company, UST or VNS
(broken down with respect to each of the three companies) whose employment with
the Company, UST or VNS (A) has terminated since December 31, 1999 or (B) will
be terminated in connection with the Closing. To the best knowledge of the
Company and the Shareholder, the Financial Projections for the Year Ending 2000
have been prepared by the Company in good faith and in a manner consistent with
the Company's normal budgeting process, with no intent to misrepresent the
future financial performance of the business represented by the Acquired Assets,
and reflects the Company's best estimate of the financial performance of such
business in the year ending December 31, 2000.
(ii) Attached as Exhibit 3.1(d)(ii)(A) are the combining balance
sheets, and corresponding combining income statements, of each of the Company,
UST and VNS as of December 31, 1999, restated to reflect the accounting
methodology set forth on Exhibit 3.1(d)(ii)(B) in all material respects. The
balance sheets and income statements attached as Exhibit 3.1(d)(ii)(A)
accurately and completely restate the Latest Balance Sheets, and corresponding
income statements, of each of the Company, UST and VNS to reflect the accounting
methodology set forth on Exhibit 3.1(d)(ii)(B).
(e) Absence of Certain Agreements, Changes or Events.
(i) The Company is not, except as set forth on Exhibit 3.1(e)(i), a
party to or otherwise bound by any material contract or agreement (A) pursuant
to which the Company is obligated to furnish any services, product or equipment
and (B) that has been prepaid with respect to any period after December 31,
1999.
(ii) Since December 31, 1999, neither the Company, UST nor VNS has
(A) incurred any debt, indebtedness or other Liability, except current
Liabilities incurred in the ordinary course of business consistent with past
practice; (B) delayed or postponed the payment of accounts payable or other
Liabilities or accelerated the collection of any receivable beyond stated,
normal terms; (C) sold or otherwise transferred any of its assets or properties,
except for the sale of the UST/VNS Assets pursuant to the UST/VNS Acquisition
Agreement; (D) canceled, compromised, settled, released, waived, written-off or
expensed any account or note receivable, right, debt or claim involving more
than $10,000 in the aggregate or accelerated the collection of any account or
note receivable; (E) changed in any significant manner the way
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in which it conducts its business; (F) made or granted any individual or general
wage or salary increase, or any additional benefits of any kind or nature, or
entered into any employment agreements with salaried employees, officers or
directors (except for the employment agreements identified on Exhibit
3.1(e)(ii)(F) entered into with UST or VNS employees as part of the operational
integration of UST, VNS and the Company after and only after obtaining
PentaStar's consent thereto); (G) except as otherwise expressly permitted by
this Section 3.1(e)(ii), (1) entered into any contracts or agreements, or made
any commitments, involving more than $10,000 individually or in the aggregate,
except for contracts or agreements for capital expenditures not involving more
than $25,000 individually or in the aggregate, or (2) accelerated, terminated,
delayed, modified or canceled any agreement, contract, lease or license (or
series of related agreements, contracts, leases and licenses) involving more
than $10,000 individually or in the aggregate; (H) suffered any material adverse
fact or change, including, without limitation, to or in its business, assets or
financial condition or customer or service provider relationships; (I) made any
payment or transfer to or for the benefit of any shareholder, officer or
director or any relative or affiliate thereof or permitted any Person,
including, without limitation, any shareholder, officer, director or employee or
any relative or affiliate thereof, to withdraw assets from the Company, UST or
VNS; or (J) agreed to incur, take, enter into, make or permit any of the matters
described in clauses (A) through (I).
(iii) Exhibit 3.1(e)(iii) lists, for each of the Company, UST and
VNS, all orders booked, by month, during the seven-month period from July 1,
1999 through January 31, 2000, and the current status of each such order, as
reported through databases of each company which do not reconcile to any of such
companies' general ledgers.
(f) Tax Matters.
(i) Each of the Company, UST and VNS has filed, or has had filed on
its behalf, all Tax Returns that it was required to file. All such Tax Returns
were correct and complete in all respects. All Taxes owed by the Company, UST or
VNS (whether or not shown on any Tax Return) have been paid. Neither the
Company, UST nor VNS is currently the beneficiary of any extension of time
within which to file any Tax Return. No claim has ever been made by an authority
in a jurisdiction where the Company, UST or VNS does not file Tax Returns that
it is or may be subject to taxation by that jurisdiction. There are no
Encumbrances (other than Encumbrances for Taxes not yet due and payable, which
shall be paid by the Company) on any of the assets of the Company, UST or VNS
that arose in connection with any failure (or alleged failure) to pay any Tax.
(ii) Each of the Company, UST and VNS has withheld, or has had
withheld on its behalf, and paid, or has had paid on its behalf, all Taxes
required to have been withheld and paid in connection with amounts paid or owing
to any employee, independent contractor, creditor, shareholder or other third
party.
(iii) To the best knowledge of the Company and the Shareholder,
there is no basis for any authority to assess any additional Taxes with respect
to the Company, UST or VNS for any period for which Tax Returns have been filed.
There is no pending or threatened dispute or claim concerning any Tax Liability
of the Company, UST or VNS. None of the Company, UST or VNS have any Liability
for any unpaid Taxes.
(iv) Neither the Company, UST nor VNS has waived, or had waived on
its behalf, any statute of limitations in respect of Taxes or agreed to any
extension of time with respect to a Tax assessment or deficiency.
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(v) Neither the Company, UST nor VNS has made any payments, is not
obligated to make any payments and is not a party to any agreement that under
certain circumstances could obligate it to make any payments that will not be
deductible under Code Section 280G. None of the Company, UST or VNS is a party
to any Tax allocation or sharing agreement. None of the Company, UST or VNS has
Liability for the Taxes of any Person under Treasury Regulation Section 1.1502-6
(or any similar provision of state, local, or foreign law), as a transferee or
successor, by contract or otherwise.
(g) Assets and Properties.
(i) Each of the Company, UST and VNS has good and marketable title
to, or a valid leasehold interest or interest as a licensee in, the properties
and assets used or held for use by it, located on its Premises, or shown on its
Latest Balance Sheet or acquired after the date thereof. As of the Closing, all
of the Acquired Assets will be owned by the Company, free and clear of all
Encumbrances (other than the Permitted Encumbrances in the event that, subject
to Section 4.10, the Acquiror has not paid off the debt to RFC Capital
Corporation as of the Closing). Neither the Company, UST nor VNS has entered
into any contract or made any commitment to sell all or any part of its assets,
except to the extent that the Permitted Encumbrances could be deemed a contract
or commitment to sell assets. The Company Acquired Assets constitute all of the
real, personal and mixed assets and property, both tangible and intangible,
including Intellectual Property, which are being used or held for use by the
Company in the conduct of the business and operations of the Company, consistent
with historical and current practices. The UST/VNS Assets constitute all of the
real, personal and mixed assets and property, both tangible and intangible,
including Intellectual Property, which are being used or held for use by UST or
VNS in the conduct of their respective business and operations, consistent with
historical and current practices. Each of the Company, UST and VNS owns or
leases all equipment and other tangible assets necessary for the conduct of its
business as presently conducted and as presently proposed to be conducted. Each
such tangible asset material to the Company's, UST's or VNS's operations is in
good operating condition and repair. There are no leases of real property
between the Company, UST or VNS and any shareholder, officer or director or any
relative or affiliate thereof. None of the current or former shareholders, nor
any relative or affiliate thereof, of the Company, UST or VNS, owns any asset,
tangible or intangible, which is used in the business of the Company, UST or
VNS, as the case may be, other than assets which will be included in the
Acquired Assets.
(ii) The Premises constitute all of the real property, buildings
and improvements used by the Company, UST or VNS, as the case may be, in its
business. To the best knowledge of the Shareholder, the Premises have been
occupied, operated and maintained in accordance with applicable Legal
Requirements. None of the Company, UST or VNS has received notice of violation
of any Legal Requirement or Permit relating to its operations or its owned or
leased properties.
(iii) No party to any lease with respect to any Premises has
repudiated any provision thereof, and there are no disputes, oral agreements or
forbearance programs in effect as to any such lease.
(h) Lists of Contracts and Other Matters. Attached as Exhibit 3.1(h)(i)
is a correct and complete list setting forth the following items, to the extent
such items relate to the Acquired Assets, the Assumed Liabilities or the
business represented by the Acquired Assets:
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(i) the following contracts and other agreements in effect as of
January 1, 2000 or the Closing to which the Company, UST or VNS is, or following
the closing under the UST/VNS Acquisition Agreement to which the Acquiror will
be, a party:
(A) any agreement (or group of related agreements) for the lease of
personal property to or from any Person providing for lease payments in excess
of $5,000 per year;
(B) any agreement involving a deposit in an amount greater than
$5,000;
(C) any agreement (or group of related agreements) for the purchase
or sale of supplies, products or other personal property, or for the furnishing
or receipt of services, the performance of which will extend over a period of
more than one year, result in a material loss to the Company, UST or VNS or
their respective businesses or involve consideration in excess of $10,000;
(D) any agreement concerning a partnership or joint venture;
(E) any agreement (or group of related agreements) under which the
Company, UST or VNS has created, incurred, assumed or guaranteed any
indebtedness for borrowed money, or any capitalized lease obligation, in excess
of $10,000 or under which any of them has granted any Encumbrances on any of its
respective assets, tangible or intangible;
(F) any agreement concerning confidentiality or noncompetition;
(G) any agreement with any of its current or former shareholders or
any relative or affiliate thereof;
(H) any profit sharing, stock option, stock purchase, phantom
stock, stock appreciation, profit participation, deferred compensation,
severance or other plan or arrangement;
(I) any collective bargaining agreement;
(J) any agreement for the employment of any individual on a
full-time, part-time, consulting or other basis or any agreement providing
severance benefits;
(K) any agreement under which the Company, UST or VNS has advanced
or loaned any amount to any of its directors, officers and employees outside the
ordinary course of business;
(L) any agreement obligating the Company, UST or VNS to meet
another party's unspecified requirements for goods or services or obligating any
of them to purchase an unspecified amount of goods or services based on another
party's ability to supply them;
(M) any agreement under which the consequences of a default or
termination could have a material adverse effect on the business, financial
condition, operations, results of operations or future prospects of the Company,
UST or VNS; or
(N) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $10,000.
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(ii) All material claims, deposits, causes of action, choses in
action, rights of recovery, rights of set off and rights of recoupment of the
Company, UST or VNS.
(iii) All material franchises, approvals, Permits, licenses,
Orders, registrations, certificates, variances and similar rights of the
Company, UST or VNS (all of which are in full force and effect).
(iv) Each item of Intellectual Property owned by the Company, UST
or VNS or which is used by the Company, UST or VNS in its business and, in each
case where the Company, UST or VNS is not the owner, the owner of the
Intellectual Property.
(v) The name of each bank or other financial institution or entity
in which the Company, UST or VNS has an account or safe deposit box (with the
identifying account number or symbol) and the names of all persons authorized to
draw thereon or to have access thereto.
The Shareholder has delivered to PentaStar a correct and complete copy of
each written agreement and a written summary setting forth the terms and
conditions of each oral agreement referred to in Section 3.1(h)(i). With respect
to each such agreement, (A) the agreement is legal, valid, binding, enforceable
and in full force and effect; (B) the agreement will continue to be legal,
valid, binding, enforceable and in full force and effect on identical terms
immediately following the consummation of the transactions contemplated hereby
(except for those franchises, approvals, Permits, Licenses, Orders,
registrations, certificates or variances of the Company, UST or VNS set forth on
Exhibit 3.1(h)(ii) which have been granted, issued or given by Governmental
Authorities and which are not, by their terms, transferable to the Acquiror);
(C) neither the Company, UST or VNS nor, to the best knowledge of the
Shareholder, any other party is in breach or default, and, to the best knowledge
of the Shareholder, no event has occurred which, with notice or lapse of time,
would constitute a breach or default, or permit termination, modification or
acceleration, under the agreement; and (D) no party has repudiated any provision
of the agreement.
(i) Litigation; Compliance with Applicable Laws and Rights.
(i) There is no outstanding Order against, nor, except as set forth
on Exhibit 3.1(i)(i), is there any litigation, proceeding, arbitration or
investigation by any Governmental Authority or other Person pending or, to the
best knowledge of the Company and the Shareholder, threatened against, the
Company, UST or VNS or their respective assets or business or relating to the
transactions contemplated by this Agreement, nor is there any basis for any such
action.
(ii) To the best knowledge of the Company and the Shareholder,
except as set forth on Exhibit 3.1(i)(ii), neither the Company, UST or VNS nor
the Company's, UST's or VNS's assets are in violation of any applicable Legal
Requirement or Right. None of the Company, UST or VNS has received notice from
any Governmental Authority or other Person of any violation or alleged violation
of any Legal Requirement or Right, and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand or notice has been filed or
commenced or is pending or, to the best knowledge of the Company and the
Shareholder, threatened against the Company, UST or VNS alleging any such
violation.
(j) Notes and Accounts Receivable. The notes and accounts receivable of
the Company, UST and VNS reflected on its Latest Balance Sheet, and all notes
and accounts receivable arising on or prior to the Closing, arose from bona fide
transactions by the Company, UST and VNS in the ordinary course of
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business, are valid receivables with trade customers and have been recorded
using the Company's historic revenue recognition policies.
(k) Product Quality, Warranty and Liability. All services and products
sold, leased, provided or delivered by the Company, UST or VNS to customers on
or prior to January 1, 2000 or the Closing conform to applicable contractual
commitments, express and implied warranties, product and service specifications
and quality standards, and there is no basis for any Liability for replacement
or repair thereof except as provided for in services contracts entered into by
the Company, UST or VNS with customers or other damages in connection therewith.
No service or product sold, leased, provided or delivered by the Company, UST or
VNS to customers on or prior to January 1, 2000 or the Closing is subject to any
guaranty, warranty or other indemnity beyond the applicable standard terms and
conditions of sale or lease. None of the Company, UST or VNS has any Liability
and there is no basis for any Liability arising out of any injury to a Person or
property as a result of the ownership, possession, provision or use of any
service or product sold, leased, provided or delivered by the Company, UST or
VNS on or prior to the Closing Date or the Closing. All product or service
liability claims that have been asserted against the Company, UST or VNS since
January 1, 1996, whether covered by insurance or not and whether litigation has
resulted or not, other than those listed and summarized on Exhibit 3.1(i)(i),
are listed and summarized on Exhibit 3.1(k).
(l) Insurance. Each of the Company, UST and VNS has policies of
insurance (i) covering risk of loss on the Acquired Assets and the Company
Acquired Assets (in the case of the Company) and the UST/VNS Assets (in the case
of UST and VNS), (ii) covering products and services liability and liability for
fire, property damage, personal injury and workers' compensation coverage and
(iii) for business interruption, all, to the best knowledge of the Company and
the Shareholder, with responsible and financially sound insurance carriers in
adequate amounts and in compliance with governmental requirements and in
accordance with good industry practice. All such insurance policies are valid,
in full force and effect and enforceable in accordance with their respective
terms and no party has repudiated any provision thereof. All such policies will
remain in full force and effect until the Closing. Neither the Company nor any
other party to any such policy is in breach or default (including with respect
to the payment of premiums or the giving of notices) in the performance of any
of their respective obligations thereunder, and no event exists which, with the
giving of notice or the lapse of time or both, would constitute a breach,
default or event of default, or permit termination, modification or acceleration
under any such policy. There are no claims, actions, proceedings or suits
arising out of or based upon any of such policies nor, to the best knowledge of
the Company and the Shareholder, does any basis for any such claim, action, suit
or proceeding exist. All premiums have been paid on such policies as of the date
of this Agreement and will be paid on such policies through the Closing. Each of
the Company, UST and VNS has been covered during the three years prior to the
date of this Agreement by the insurance policies set forth on Exhibit 3.1(l)(i).
All claims made during such five-year period with respect to any insurance
coverage of the Company, UST or VNS, other than those described on Exhibit
3.1(k), are set forth on Exhibit 3.1(l)(ii).
(m) Pension and Employee Benefit Matters. Neither the Acquiror nor
PentaStar will suffer any Liability or Adverse Consequence from the Company's,
UST's or VNS's administration or termination of any of its Employee Benefit
Plans or from any failure of any pre-Closing or post-Closing distribution of
benefits to employees of the Company, UST or VNS to be made by the Company, UST
or VNS in compliance with all applicable Legal Requirements. Neither the
Acquiror nor PentaStar will have any obligation to employ any employee of the
Company, UST or VNS or to continue any Employee Benefit Plan, and will have no
Liability under any plan or arrangement maintained by the Company, UST or VNS
for the benefit of any employee. The Company, UST or VNS, as the case may be,
will remain liable for all costs
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of employee compensation, including benefits and Taxes relating to employment
and employees attributable to periods up to January 1, 2000, whether reported by
the Closing or thereafter, and all group health plan continuation coverage to
which any employee, former employee or dependent is entitled because of a
qualifying event (as defined in Section 4980B(f)(3) of the Code) occurring
through the Closing or as a result of termination of employment with the
Company, UST or VNS because of the transactions contemplated by this Agreement
and any benefit or excise tax liability or penalty or other costs arising from
any failure by the Company, UST or VNS to provide group health plan continuation
coverage. Except as set forth on Exhibit 3.1(m), neither the Company, UST or VNS
nor any Affiliated Group which includes the Company, UST or VNS (if any)
maintains, administers or contributes to, has maintained, administered or
contributed to, or has any Liability to contribute to, any Employee Benefit
Plan. Exhibit 3.1(m) lists each Employee Benefit Plan that is, or at any time
during the past three years was, maintained, administered, contributed to or
required to be contributed to by the Company, UST or VNS or any Affiliated Group
(if any) which includes or has included the Company, UST or VNS, and the date of
termination of each such Employee Benefit Plan (if any) which has been
terminated. None of the Company, UST or VNS has any Liability (and there is no
basis for the assertion of any Liability) as a result of the Company's, UST's or
VNS's or any such Affiliated Group's maintenance, administration or termination
of, or contribution to, any Employee Benefit Plan. Neither the Company nor any
member of any Affiliated Group (if any) which includes or has included the
Company, UST or VNS has ever been required to contribute to any Multiemployer
Plan (as defined in ERISA Section 3(37)) nor has incurred any Liability under
Title IV of ERISA.
(n) Employees and Labor.
(i) None of the Company, UST or VNS has received any notice, nor,
to the best knowledge of the Company and the Shareholder, is there any reason to
believe that any Key Employee of the Company, UST or VNS or any group of
employees of the Company, UST or VNS has made plans to terminate his, her or its
employment with the Company, UST or VNS, as the case may be. To the best
knowledge of the Company and the Shareholder, no Key Employee is subject to any
agreement, obligation, Order or other legal hindrance that impedes or might
impede such Key Employee from devoting his or her full business time to the
affairs of the Company, UST or VNS, as the case may be, prior to the Closing
and, if such person becomes an employee of the Acquiror or PentaStar, to the
affairs of the Acquiror or PentaStar after the Closing. None of the Company, UST
or VNS will be required to give any notice under the Worker Adjustment and
Retraining Notification Act, as amended, or any similar Legal Requirement as a
result of this Agreement, the Other Seller Agreements or the transactions
contemplated hereby or thereby. None of the Company, UST or VNS has any labor
relations problems or disputes, nor has any of the Company, UST or VNS
experienced any strikes, grievances, claims of unfair labor practices or other
collective bargaining disputes. None of the Company, UST or VNS is a party to or
bound by any collective bargaining agreement, there is no union or collective
bargaining unit at the Company's, UST's or VNS's facilities, and no union
organization effort has been threatened, initiated or is in progress with
respect to any employees of the Company, UST or VNS.
(ii) Exhibit 3.1(n)(ii) lists (A) the name of each salesperson
(whether such salesperson was an employee or independent contractor) of the
Company, UST or VNS, other than UST Telemarketers, who has left the employment
of the Company, UST or VNS in the twelve-month period ending January 31, 2000,
(B) the date such salesperson left the employment of the Company, UST or VNS and
(C) the dollar amount of orders booked by the Company, UST or VNS during the
twelve-month period prior to the date such salesperson left the employment of
the Company, UST or VNS which were attributable to such salesperson or for which
such salesperson was responsible, as reported through databases of each company
which do not reconcile to any of such companies' general ledgers.
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<PAGE> 17
(o) Customer and Service Provider Relationships. The customers listed
on Exhibit 3.1(o)(i) (the "Large Customers"), individually or with their
respective affiliates, accounted for the respective revenues of the Company, UST
and VNS during the fiscal year ended December 31, 1998 or the fiscal year ended
December 31, 1999, the revenues of the Company, UST or VNS set forth opposite
such Large Customer's name on Exhibit 3.1(o)(i), as reported through databases
of each company which did not reconcile to any of such companies' general
ledgers. Exhibit 3.1(o)(ii) lists each Person who was a service provider to the
customers of the Company, UST or VNS as of December 31, 1999 or as of the date
of this Agreement (the "Principal Providers"). Each of the Company, UST and VNS
has good commercial working relationships with its Large Customers (except as
set forth on Exhibit 3.1(o)(iii)) and Principal Providers and since December 31,
1999 no Large Customer (except as set forth on Exhibit 3.1(o)(iii)) or Principal
Provider has canceled or otherwise terminated its relationship with the Company,
UST or VNS, as the case may be, materially decreased its services supplied to
the Company, UST or VNS, as the case may be, or threatened to take any such
action. The Company and the Shareholder have no basis to anticipate any problems
with the Company's, UST's or VNS's customer or service provider relationships.
To the best knowledge of the Company and the Shareholder (and the Company and
the Shareholder have no obligation in making this representation to make inquiry
of any Large Customer or Principal Provider as to such Large Customer's or
Principal Provider's plans), no Large Customer (except as set forth on Exhibit
3.1(o)(iii)) or Principal Provider has any plans to terminate its relationship
with the Company, UST or VNS and the execution and delivery of this Agreement
and of the UST/VNS Acquisition Agreement and the consummation of the
transactions contemplated hereby and thereby will not adversely affect the
relationship of the Company, UST or VNS with any Large Customer or Principal
Provider prior to the Closing (or in the case of the UST/VNS Acquisition
Agreement, the closing thereunder)or of the Acquiror or PentaStar with any Large
Customer or Principal Provider after the Closing (or in the case of the UST/VNS
Acquisition Agreement, the closing thereunder).
(p) Environmental Matters. Each of the Company, UST or VNS is
conducting and at all times has conducted its business and operations, and has
occupied, used and operated its Premises and all other real property and
facilities presently or previously owned, occupied, used or operated by it, in
compliance with all Environmental Obligations and so as not to give rise to
Liability under any Environmental Obligations or to any impact on the Company's,
UST's or VNS's business or activities. None of the Company, UST or VNS has any
Liability under any Environmental Obligation, nor is there any basis for any
such Liability.
(q) Intellectual Property. The Company owns or has, or will upon the
closing under the UST/VNS Acquisition Agreement own or have, the legal right to
use each item of Intellectual Property required to be identified on Exhibit
3.1(h)(i), except for the software deficiency set forth on Exhibit 3.1(i)(ii).
The continued operation of the business of the Company, UST or VNS as currently
conducted will not interfere with, infringe upon, misappropriate or conflict
with any Intellectual Property rights of another Person. To the best knowledge
of the Company and the Shareholder, no other Person has interfered with,
infringed upon, misappropriated or otherwise come into conflict with any
Intellectual Property rights of the Company, UST or VNS or any Intellectual
Property included in the Acquired Assets. Neither the Company, UST or VNS nor
any owner of any Intellectual Property included in the Acquired Assets has
granted any license, sublicense or permission with respect to any Intellectual
Property owned or used in the Company's, UST's or VNS's business. No claims are
pending or, to the knowledge of the Company and the Shareholder, threatened,
that the Company, UST or VNS is infringing or otherwise adversely affecting the
rights of any
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<PAGE> 18
Person with regard to any Intellectual Property. To the best knowledge of the
Company and the Shareholder, all of the Intellectual Property that is owned by
the Company, UST or VNS is owned free and clear of all Encumbrances and was not
misappropriated from any Person, and all portions of the Intellectual Property
that are licensed by the Company, UST or VNS are licensed pursuant to valid and
existing license agreements. The consummation of the transactions contemplated
by this Agreement will not result in the loss or material diminution of any
Intellectual Property or rights in Intellectual Property.
(r) Year 2000 Warranty. To the best knowledge of the Company and the
Shareholder, the computer software owned by the Company, UST or VNS and all
other Intellectual Property used or held for use by the Company, UST or VNS in
its business accurately processes date/time data (including calculating,
comparing, and sequencing) from, into, and between the twentieth and
twenty-first centuries, and the years 1999 and 2000 and leap year calculations
and the date September 9, 1999 when either (i) used as a standalone application,
or (ii) integrated into or otherwise used in conjunction with the third party
hardware, software, firmware and data over which the Shareholder, the Company,
UST or VNS have no control ("Third Party Products") with which such Company, UST
or VNS software or other Intellectual Property was designated or intended to
operate at the time such Company, UST or VNS software was (A) developed or (B)
first provided to the Company's, UST's or VNS's customers, or tested by the
Company, UST or VNS for such customers, whichever is later. Notwithstanding the
foregoing, the Company, UST or VNS shall not be considered to be in breach of
the representation and warranty in the immediately preceding sentence if the
failure of such Company, UST or VNS software to comply with such representation
and warranty is attributable solely to (x) a failure by any Third Party Product
to accurately process date/time data (including but not limited to, calculating,
comparing, and sequencing) from, into, and between the twentieth and
twenty-first centuries, and the years 1999 and 2000 and leap year calculations
and the date September 9, 1999; or (y) any modification of the Company, UST or
VNS software by any party other than the Company, UST or VNS (unless such
modification was made at the direction of the Company, UST or VNS). The personal
computers used by UST in its telecenter business do not meet the representation
set forth in clause (i) of the first sentence of this Section 3.1(r); provided,
however, that such computers have been networked together to allow the Company
to operate the telecenter business in a manner consistent with past practice
without loss of material data.
(s) Brokers' Fees. Except as set forth on Exhibit 3.1(s), neither the
Company nor the Shareholder has, and will not have as a result of the
consummation of this Agreement, any Liability to pay any fees or commissions to
any broker, finder or agent with respect to the transactions contemplated by
this Agreement.
(t) Guaranties. The Company is not a guarantor or otherwise liable for
any Liability (including indebtedness for borrowed money) of any other Person.
Except as set forth on Exhibit 3.1(t), no Person is a guarantor or otherwise
liable for any Liability (including indebtedness for borrowed money) of the
Company.
(u) Investment Representations. (i) The Company is acquiring the shares
of PentaStar Common Stock to be issued pursuant to this Agreement (the
"PentaStar Shares") for the Company's own account and not on behalf of any other
Person, except that the Rowley Shares, if issued, will be issued in the name of
Brian S. Rowley pursuant to Section 2.3(b)(iii); the Company is aware and
acknowledges that the PentaStar Shares have not been registered under the
Securities Act, or applicable state securities laws, and may not be offered,
sold, assigned, exchanged, transferred, pledged or otherwise disposed of unless
so registered under the Securities Act and applicable state securities laws or
an exemption from the registration
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<PAGE> 19
requirements thereof is available; (ii) the Company has been furnished all
information that the Company deems necessary to enable it to evaluate the merits
and risks of an investment in PentaStar, including, without limitation, the
information described on Exhibit 3.1(u)(ii); the Company has had a reasonable
opportunity to ask questions of and receive answers from PentaStar concerning
PentaStar, the PentaStar Shares and any and all matters relating to the
transactions described herein or in the information described on Exhibit
3.1(u)(ii), and all such questions, if any, have been answered to the full
satisfaction of the Company; (iii) no Person other than the Company and Brian S.
Rowley pursuant to Section 2.3(b)(iii) has (A) any rights in and to the
PentaStar Shares, which rights were obtained through or from the Company; or (B)
any rights to acquire the PentaStar Shares, which rights were obtained through
or from the Company; (iv) the Company has such knowledge and expertise in
financial and business matters (including knowledge and expertise in the
business and proposed business of PentaStar) that the Company is capable of
evaluating the merits and risks involved in an investment in the PentaStar
Shares; and the Company is financially able to bear the economic risk of the
investment in the PentaStar Shares, including a total loss of such investment;
(v) the Company has adequate means of providing for its current needs and has no
need for liquidity in its investment in the PentaStar Shares; the Company has no
reason to anticipate any material change in its financial condition for the
foreseeable future; (vi) the Company is aware that the acquisition of the
PentaStar Shares is an investment involving a risk of loss and that there is no
guarantee that the Company will realize any gain from this investment, and that
the Company could lose the total amount of its investment; (vii) the Company
understands that no United States federal or state agency has made any finding
of determination regarding the fairness of the offering of the PentaStar Shares
for investment, or any recommendation or endorsement of the offering of the
PentaStar Shares; (viii) the Company is acquiring the PentaStar Shares for
investment, with no present intention of dividing or allowing others to
participate in such investment or of reselling, or otherwise participating,
directly or indirectly, in a distribution of PentaStar Shares, except for the
issuance of the Rowley Shares in the name of Brian S. Rowley pursuant to Section
2.3(b)(iii), and shall not make any sale, transfer or pledge thereof without
registration under the Securities Act and any applicable securities laws of any
state, unless an exemption from registration is available, as established to the
reasonable satisfaction of PentaStar, by opinion of counsel or otherwise; (ix)
except as set forth herein, no representations or warranties have been made to
the Company by PentaStar or any agent, employee or affiliate of PentaStar, and
in entering into this transaction the Company is not relying upon any
information, other than from the results of independent investigation by the
Company; and (x) the Company understands that the PentaStar Shares are being
offered to the Company in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that
PentaStar is relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgments and understandings of the Company set
forth herein in order to determine the applicability of such exemptions and the
suitability of the Company to acquire the PentaStar Shares; and (xi) the Company
is an "accredited investor" as defined in Rule 501(a) of Regulation D
promulgated under the Securities Act.
All the certificates representing PentaStar Shares shall bear the following
legend, in addition to the legend required by Section 5.8:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") NOR UNDER ANY STATE SECURITIES LAWS AND CAN
NOT BE TRANSFERRED, SOLD, ASSIGNED OR HYPOTHECATED UNTIL EITHER (I) A
REGISTRATION STATEMENT WITH RESPECT THERETO IS DECLARED EFFECTIVE UNDER THE ACT
AND APPLICABLE STATE SECURITIES LAWS OR (II) THE ISSUER RECEIVES AN OPINION OF
COUNSEL TO THE ISSUER OR OTHER COUNSEL TO THE HOLDER OF SUCH SHARES, WHICH
OPINION IS SATISFACTORY TO THE ISSUER AND ITS COUNSEL, THAT SUCH
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<PAGE> 20
SECURITIES MAY BE TRANSFERRED, SOLD, ASSIGNED OR HYPOTHECATED WITHOUT
REGISTRATION UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS.
(v) UST/VNS Acquisition Agreement. The representations and warranties
of UST, VNS and/or View Tech set forth in the UST/VNS Acquisition Agreement are
true and correct.
(w) Disclosure. None of the documents or information provided to
PentaStar by the Company, the Shareholder or any agent or employee thereof in
the course of PentaStar's due diligence investigation and the negotiation of
this Agreement and Section 3.1 of this Agreement and the disclosure Exhibits
referred to therein, including the financial statements referred to above in
Section 3.1, contains any untrue statement of any material fact or omit to state
a material fact necessary in order to make the statements contained herein or
therein not misleading. Except as set forth in this Agreement and the Exhibits,
including the financial statements, there is no other fact specific to the
Company, UST or VNS which materially adversely affects the business, condition,
affairs or operations of the Company, UST or VNS or any of their respective
properties or assets.
Nothing in the disclosure Exhibits referred to in Section 3.1 shall be
deemed adequate to disclose an exception to a representation or warranty made
herein unless the applicable disclosure Exhibit identifies the exception with
particularity and describes the relevant facts in reasonable detail. Without
limiting the generality of the foregoing, the mere listing (or inclusion of a
copy) of a document or other item shall not be deemed adequate to disclose an
exception to a representation or warranty made herein (unless the representation
or warranty has to do with the existence of the document or other item itself).
3.2. Representations and Warranties of PentaStar. PentaStar represents and
warrants to the Company and the Shareholder that the statements contained in
this Section 3.2 are correct and complete as of the date of this Agreement and
will be correct and complete as of the date of the Closing (as though made then
and as though the date of the Closing were substituted for the date of this
Agreement throughout this Section 3.2).
(a) Organization, Good Standing, Power, Etc. PentaStar and the Acquiror
are each corporations duly organized, validly existing and in good standing
under the laws of the State of Delaware and are qualified to do business as
foreign corporations and are in good standing in all jurisdictions in which the
nature of the respective businesses conducted by each of them or the respective
properties owned, leased or operated by each of them make such qualification
necessary. This Agreement and the Other PentaStar Agreements and the
transactions contemplated hereby and thereby have been duly approved by all
requisite corporate action. Each of PentaStar and the Acquiror have full
corporate power and authority to execute, deliver and perform this Agreement and
the Other PentaStar Agreements to which it is a party, and this Agreement
constitutes, and the Other PentaStar Agreements will when executed and delivered
constitute, the legal, valid and binding obligations of PentaStar or the
Acquiror, as the case may be, and shall be enforceable in accordance with their
respective terms against PentaStar or the Acquiror, as the case may be.
(b) Capitalization.
(i) The authorized, issued and outstanding shares of the capital
stock of PentaStar are as set forth on Exhibit 3.2(b)(i).
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<PAGE> 21
(ii) At the time of issuance thereof and delivery, the PentaStar
Shares to be delivered pursuant to this Agreement will be duly authorized and
validly issued shares of PentaStar's Common Stock, and will be fully paid and
nonassessable. Such PentaStar Shares shall at the time of such issuance and
delivery be free and clear of any Encumbrances of any kind or character, other
than those arising under applicable federal and state securities laws, under
this Agreement or under any Other Seller Agreement.
(iii) All of the issued and outstanding capital stock of the
Acquiror is owned by PentaStar.
(c) No Violation of Agreements, Etc. The execution, delivery and
performance of this Agreement and the Other PentaStar Agreements, and the
consummation of the transactions contemplated hereby and thereby will not (i)
violate any Legal Requirement to which PentaStar or the Acquiror is subject or
any provision of the certificate of incorporation or bylaws of PentaStar or the
Acquiror or (ii) violate, with or without the giving of notice or the lapse of
time or both, or conflict with or result in the breach or termination of any
provision of, or constitute a default under, or give any Person the right to
accelerate any obligation under, or result in the creation of any Encumbrance
upon any properties, assets or business of PentaStar or of the Acquiror pursuant
to, any indenture, mortgage, deed of trust, lien, lease, license, agreement,
instrument or other arrangement to which PentaStar or the Acquiror is a party or
by which PentaStar or the Acquiror or any of their respective assets and
properties is bound or subject. Except for notices and consents that will be
given or obtained by PentaStar prior to the Closing, neither PentaStar nor the
Acquiror need to give any notice to, make any filing with or obtain any
authorization, consent or approval of any Governmental Authority or other Person
in order for the parties to consummate the transactions contemplated by this
Agreement.
3.3. Survival of Representations. The representations and warranties
contained in Sections 3.1 and 3.2 and the Liabilities of the parties with
respect thereto shall survive any investigation thereof by the parties and shall
survive the Closing for two years, except that the Liabilities of the Company
and the Shareholder with respect to the representations and warranties set forth
in Sections 3.1(f), 3.1(m), 3.1(p) and 3.1(q) shall survive until the expiration
of the applicable statute of limitations and except that the Liabilities of the
Company and the Shareholder with respect to the representations and warranties
set forth in Sections 3.1(a), 3.1(b), 3.1(c) and 3.1(u) and the Liabilities of
PentaStar with respect to the representations and warranties set forth in
Sections 3.2(a) and 3.2(b) shall survive without termination.
3.4. Representations as to Knowledge. The representations and warranties
contained in Article 3 hereof will in each and every case where an exercise of
discretion or a statement to the "best knowledge," "best of knowledge" or
"knowledge" is required on behalf of any party to this Agreement be deemed to
require that such exercise of discretion or statement be in good faith after
reasonable investigation (including, in the case of the Company and the
Shareholder, inquiry of the applicable employees of the Company), with due
diligence, to the best efforts of such party and be exercised always in a
reasonable manner and within reasonable times.
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<PAGE> 22
4. Pre-Closing Covenants. The parties agree as follows with respect to the
period between the execution of this Agreement and the Closing.
4.1. General. Each of the parties will use its reasonable best efforts to
take all actions necessary, proper or advisable in order to consummate and make
effective the transactions contemplated by this Agreement (including the
satisfaction, but not the waiver, of the closing conditions set forth in Section
6) and the other agreements contemplated hereby. Without limiting the foregoing,
the Shareholder will, and will cause the Company to, give any notices, make any
filings and obtain any consents, authorizations or approvals needed to
consummate the transactions contemplated by this Agreement.
4.2. Operation and Preservation of Business. The Company will not, and the
Shareholder will not cause or permit the Company to, engage in any practice,
take any action or enter into any transaction outside the ordinary course of its
business; provided, however, that in no event will any action be taken or fail
to be taken by the Company or the Shareholder or any transaction be entered into
by the Company or the Shareholder which would result in a breach of any
representation, warranty or covenant of the Company or the Shareholder contained
herein or in the Agreement dated December 22, 1999 between PentaStar and the
Company. The Company will, and the Shareholder will cause the Company to, keep
its business and properties, including its current operations, physical
facilities, working conditions and relationships with customers, service
providers, lessors, licensors and employees, intact.
4.3. Full Access. The Company will, and the Shareholder will cause the
Company to, permit PentaStar and its agents to have full access at all
reasonable times, and in a manner so as not to interfere with the normal
business operations of the Company, to all premises, properties, personnel,
books, records (including Tax records), contracts and documents of or pertaining
to the Company, UST or VNS.
4.4. Notice of Developments. The Company and the Shareholder will give
prompt written notice to PentaStar of any material development which occurs
after the date of this Agreement and before the Closing and affects the
business, assets, Liabilities, financial condition, operations, results of
operations, future prospects, representations, warranties, covenants or
disclosure Exhibits of the Company, UST or VNS. No such written notice, however,
will be deemed to amend or supplement any disclosure Exhibit or to prevent or
cure any misrepresentation, breach of warranty or breach of covenant.
4.5. Exclusivity. Neither the Company nor the Shareholder will, and the
Shareholder will not cause or permit the Company to, (a) solicit, initiate or
encourage the submission of any proposal or offer from any Person relating to
the acquisition of any capital stock or other voting securities, or any portion
of the assets of, the Company (including any acquisition structured as a merger,
consolidation or share exchange) or (b) participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in or facilitate in any other manner any effort or attempt by any
Person to do or seek any of the foregoing. The Shareholder will not vote shares
of the Company's stock in favor of any such transaction. The Company and the
Shareholder will notify PentaStar immediately if any Person makes any proposal,
offer, inquiry or contact with respect to any of the foregoing.
4.6. Announcements; Securities Law Restrictions. Prior to the Closing,
neither the Shareholder nor the Company shall disclose to any Person, nor issue
any press release or make any public announcement concerning, the existence,
terms or subject matter of this Agreement without the prior written approval of
PentaStar, except (and only to the extent) previously publicly announced by
PentaStar and the Shareholder shall coordinate its initial release with respect
to this Agreement with PentaStar. Further, neither the
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<PAGE> 23
Shareholder nor the Company shall violate the United States securities laws
which restrict the Shareholder and the Company, as Persons with material
non-public information concerning PentaStar obtained directly or indirectly from
PentaStar, from purchasing or selling securities of PentaStar or from
communicating such information to any other Person under any circumstances in
which it is reasonably foreseeable that such Person is likely to purchase or
sell such securities.
4.7. Bulk Sales Laws. In reliance upon its indemnification rights set forth
in Section 7, the Acquiror waives compliance by the Company with the bulk
transfer law and any other similar law of any applicable jurisdiction in respect
to the transactions contemplated by this Agreement.
4.8 Shareholders' Meeting.
(a) The Shareholder, acting through its board of directors, shall, in
accordance with applicable Legal Requirements and the Shareholder's articles or
certificate of incorporation and bylaws, duly call, give notice of, convene and
hold a meeting (including any adjournment or postponement thereof, the
"Meeting") of its shareholders as soon as practicable following the date of this
Agreement, but in any event no later than 20 days after the mailing of the Proxy
Statement for the purpose of considering and taking action upon the approval of
the sale of the Acquired Assets to the Acquiror pursuant to this Agreement (the
"Transaction"). The Shareholder shall cause the Meeting to be held, and such
vote shall be taken not, later than May 31, 2000. The board of directors shall
recommend such approval by the shareholders and shall take all reasonable,
lawful action to solicit such approval by the shareholders of the Shareholder.
(b) The Shareholder shall (i) as promptly as practicable following the
date of this Agreement, prepare and file with the SEC and use its best efforts
to have cleared by the SEC and thereafter mail to its shareholders as promptly
as practicable, a proxy statement and a form of proxy in connection with the
vote at the Meeting of its shareholders with respect to the Transaction (such
proxy statement, together with any amendments thereof or supplements thereto, in
each case in the form or forms mailed to the shareholders, is the "Proxy
Statement") and (ii) otherwise comply with all Legal Requirements applicable to
the Meeting. PentaStar shall be permitted to review drafts of such Proxy
Statement. The Shareholder will include in the Proxy Statement the
recommendation of its board of directors that shareholders of the Shareholder
vote in favor of the approval of the Transaction. The Shareholder shall notify
PentaStar promptly of the receipt of any comments of the SEC or its staff and of
any request by the SEC or its staff or any other governmental officials for
amendments or supplements to the Proxy Statement or for additional information,
and will supply PentaStar with copies of all correspondence between the
Shareholder and any of its representatives, on the one hand, and the SEC or its
staff or any other governmental officials, on the other hand, with respect to
the Proxy Statement. The Proxy Statement shall comply with all applicable Legal
Requirements.
(c) The Shareholder shall cause each of its affiliates to vote at the
Meeting all shares of the capital stock of the Shareholder that each owns in
favor of the Transaction.
4.9 Specified Consents. As of the date of this Agreement, the Company have
delivered to the Acquiror the third-party consents set forth on Exhibit 4.9(a)
which are satisfactory to the Acquiror. As of the date of this Agreement, all
other third-party consents delivered to the Acquiror are not satisfactory to the
Acquiror. Prior to the date the Required Vote is obtained, the Company and the
Shareholder shall obtain and deliver to the Acquiror the material third-party
consents set forth on Exhibit 4.9(b), any additional material third-party
consents required under agreements entered into by the Company after the date
hereof (the
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"Specified Consents"). The documents described in Section 6.1(l) shall be for
the benefit of the Acquiror on forms previously provided to the Company by the
Acquiror, and the other Specified Consents shall be in the name of the Acquiror
as assignee, be effective upon the Closing and comply in wording with the
concept set forth in clause (a) of the definition of Assumed Liabilities on a
form to be provided by the Acquiror.
4.10 Termination Expenses. The Company shall pay any "early termination
fee" required to terminate the Receivables Sales Agreement dated as of October
8, 1998 between the Company and RFC Capital Corporation, and all other fees,
expenses, costs and amounts necessary to deliver the Acquired Assets at the
Closing as set forth in Section 2.1 and this Agreement.
5. Post-Closing Covenants. The parties agree as follows with respect to the
period following the Closing.
5.1. Further Assurances. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other party
reasonably may request, all at the sole cost and expense of the requesting party
(unless the requesting party is entitled to indemnification therefor under
Section 7).
5.2. Transition. Neither the Company nor the Shareholder will take any
action at any time that is designed or intended to have the effect of
discouraging any customer, supplier, lessor, licensor or other business
associate of the Company, UST or VNS from establishing or continuing a business
relationship with the Acquiror or PentaStar after the Closing.
5.3. Cooperation. In the event and for so long as any party actively is
contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand in connection with (a) any
transaction contemplated by this Agreement or (b) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act or transaction on or prior to the Closing
involving any of the Acquired Assets or the Company's business, each of the
other parties will cooperate with such party and its counsel in the contest or
defense, make available their personnel, and provide such testimony and access
to their books and records as shall be reasonably necessary in connection with
the contest or defense, all at the sole cost and expense of the contesting or
defending party (unless the contesting or defending party is entitled to
indemnification therefor under Section 7).
5.4. Confidentiality. The Company and the Shareholder will treat and hold
as confidential all Confidential Information concerning PentaStar, the Company's
business, the business represented by the UST Assets and the VNS Assets or the
Acquired Assets, refrain from using any such Confidential Information and
deliver promptly to PentaStar or destroy, at the request and option of
PentaStar, all of such Confidential Information in its or their possession.
5.5. Financial Statements. Upon request of PentaStar, the Company and the
Shareholder will, and will use commercially reasonable efforts to cause UST and
VNS to, cooperate with PentaStar and render such assistance to PentaStar and its
accountants as may be required to produce such historical and on-going financial
statements and audits as PentaStar may request, including, without limitation,
signing (or in the case of UST and VNS using commercially reasonable efforts to
cause to be signed) management representation letters reasonably requested by
PentaStar's auditors, all at the sole cost and expense of PentaStar, but without
additional consideration to the Company, UST, VNS or the Shareholder. The
Company and the Shareholder
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acknowledge that PentaStar may be required by applicable law to include audited
financial statements with respect to the business of the Company, UST and VNS in
reports filed with governmental agencies and that the inability to audit the
financial statements as of the Effective Date promptly after the Closing could
have a material adverse effect on PentaStar.
5.6. Satisfaction of Liabilities. The Company and the Shareholder will pay
and perform, as and when due, all Liabilities (other than the Assumed
Liabilities) relating to the Company, the business of the Company and the
Acquired Assets, including without limitation, all Taxes attributable to the
transactions contemplated by this Agreement and all accrued vacation and other
accrued employee benefits. Further, the Company and the Shareholder, at their
expense, promptly will take or cause to be taken any action necessary to remedy
any failure of the Premises or the acquired business to comply at the Closing
with any Legal Requirement, upon receipt of notice from PentaStar at any time.
The Acquiror will pay and perform, as and when due (except to the extent the
validity thereof or the liability therefor is being contested by the Acquiror),
the Assumed Liabilities.
5.7. Repurchase of Unpaid Receivables. The Company and the Shareholder
jointly and severally guarantee that Closing Accounts Receivable in at least the
aggregate net amount set forth on Exhibit 1.1(e) (the "Aggregate Net Amount")
will be paid to the Acquiror not later than 180 days from the Closing Date. Upon
demand (the "Payment Demand") by PentaStar at any time after 180 days from the
Closing Date, the Company and the Shareholder shall jointly and severally pay to
the Acquiror the amount of any shortfall (a "Shortfall Payment") between the
Aggregate Net Amount and the aggregate payments received by the Acquiror from
account obligors in respect of the Closing Accounts Receivable. Payments
received by the Acquiror from such account obligors will be applied to the
Closing Accounts Receivable specified by the account obligors in connection with
such payment. If the Acquiror receives a Shortfall Payment from the Company or
the Shareholder and the Acquiror thereafter receives payment from an account
obligor in respect of a Closing Account Receivable (a "Post-Indemnification
Payment") in respect of which such Shortfall Payment was made, the Acquiror will
promptly deliver the amount of such Post-Indemnification Payment to the Company;
provided, however, that the aggregate amount of all Post-Indemnification
Payments made by the Acquiror to the Company will not exceed the amount of the
Shortfall Payment. Upon delivery of the Shortfall Payment to the Acquiror, the
Closing Accounts Receivable identified by PentaStar in the Payment Demand (and
PentaStar shall so identify the oldest Closing Accounts Receivable first) shall,
without further action of any party, become the property of the Company and the
Shareholder, who may pursue collection thereof; provided, however, that the
Shareholder and the Company shall notify the account obligor that such
collection efforts are not being undertaken on behalf of the Acquiror. From the
Closing until 180 days after the Closing Date, PentaStar (through the Acquiror)
will apply the Company's standard accounts receivable collection procedures to
the Closing Accounts Receivable; provided, however, neither the Acquiror nor
PentaStar will not be required to institute suit, utilize third-party collection
agencies or other agents or take other extraordinary collection actions with
respect to the Closing Accounts Receivable; and, provided further, that any
failure of any collection activities of the Acquiror, PentaStar or any such
collection agency or other agent will not relieve the Company or the Shareholder
from their guarantee of the Closing Accounts Receivable as described in this
Section 5.7. The Acquiror will make available to the Company and the
Shareholder, during normal business hours as reasonably requested by the
Company, such of the Acquiror's books and records as are necessary to allow the
Company and the Shareholder, at their expense, to confirm the amount of the
Shortfall Payment demanded by PentaStar and the existence of any
Post-Indemnification Payment received by the Acquiror from an account obligor in
respect of such account obligor's Closing Account Receivable.
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5.8. Transfer Restrictions. Unless otherwise agreed by PentaStar, except
for the transfer of the Rowley Shares to Brian S. Rowley pursuant to Section
2.3(b)(iii), the Company will not sell, assign, exchange, transfer, pledge or
otherwise dispose of at any time prior to the date which is 18 months after the
Closing any of the PentaStar Shares received by the Company as part of the
Purchase Price, whether such shares are Closing Shares or are issued pursuant to
Section 2.3(b)(iii). Thereafter, up to 33.33% of the Total VSIN Shares may be
resold at any time, and an additional 33.33% of the Total VSIN Shares may be
resold beginning 24 months after the Closing. Any remaining Total VSIN Shares
may not be sold until the earlier to occur of (x) sale of all or substantially
all of the assets or outstanding shares of PentaStar or (y) 30 months after the
Closing. Certificates for the PentaStar Shares issued to the Company pursuant to
the Agreement will bear a legend substantially in the form set forth below as
long as applicable:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THAT CERTAIN PURCHASE
AGREEMENT DATED AS OF FEBRUARY __, 2000 (THE "AGREEMENT"), BY AND AMONG THE
ISSUER, OC MERGERCO 4, INC., VSI NETWORK SOLUTIONS, INC. AND SHAREHOLDER OF VSI
NETWORK SOLUTIONS, INC. PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD SET FORTH
IN THE AGREEMENT, SUCH SHARES MAY NOT BE SOLD, ASSIGNED, EXCHANGED, TRANSFERRED,
PLEDGED OR OTHERWISE DISPOSED OF WITHOUT THE WRITTEN CONSENT OF THE ISSUER, AND
THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE,
ASSIGNMENT, EXCHANGE, TRANSFER, PLEDGE OR OTHER DISPOSITION WHICH VIOLATES THE
AGREEMENT. UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE
ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER RELATING TO
THIS RESTRICTIVE LEGEND PLACED WITH THE TRANSFER AGENT) WHEN THE APPLICABLE
HOLDING PERIOD HAS EXPIRED.
PentaStar shall issue separate certificates to the Company representing the
shares of PentaStar Shares subject to each of the three periods of restriction
contemplated by this Section 5.8.
The restrictions set forth along in this Section 5.8 shall be in addition
to any restrictions on transfer imposed by the Securities Act and applicable
state securities laws. The Company also agrees to comply with such restrictions.
5.9 Certain Provider Matters. Notwithstanding any other provision of this
Agreement, if during the period ending on June 30, 2000, any Person who is a
service provider to the Acquiror at any time during the period ending June 30,
2000 (who was also a service provider to the Company, UST or VNS prior to the
Closing) changes or terminates its relationship with the Acquiror, and such
change or termination results in Adverse Consequences to the Acquiror or
PentaStar, then the Company and the Shareholder agree to jointly and severally
indemnify the Acquiror and PentaStar from such Adverse Consequences. The
Shareholder's Agent shall be entitled to participate in PentaStar's strategy
sessions and PentaStar's negotiating sessions with such service provider in an
effort to minimize or eliminate the Adverse Consequence, subject to PentaStar's
ultimate control with respect to such strategy sessions and negotiating
sessions.
5.10 Claims Against UST/VNS/View Tech. If PentaStar or the Acquiror asserts
a claim for indemnification against the Company or the Shareholder with respect
to a matter concerning UST, VNS or the UST/VNS Assets, then the Company and the
Shareholder (through the Shareholder's Representative) shall be entitled,
subject to PentaStar's control, to participate in any efforts PentaStar or the
Acquiror may undertake to pursue indemnification from UST, VNS or View Tech;
provided, however, that nothing in this Section 5.10 shall be deemed to
supersede or modify in any way the obligations of the Company and the
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<PAGE> 27
Shareholder under Section 7 or to condition their obligations under Section 7 on
PentaStar or the Acquiror pursuing indemnification from UST, VNS or View Tech.
6. Conditions to Closing.
6.1. Conditions to Obligation of PentaStar. The obligation of PentaStar to
consummate the transactions contemplated by this Agreement is subject to
satisfaction of the following conditions:
(a) the Company's and the Shareholder's representations and warranties
shall be correct and complete at and as of the Effective Date and the Closing
and any written notices delivered to PentaStar pursuant to Section 4.4 and the
subject matter thereof shall be satisfactory to PentaStar;
(b) the Company and the Shareholder shall have performed and complied
with all of their covenants hereunder through the Closing;
(c) the Required Vote shall have been obtained and the Company and the
Shareholder shall have delivered the Specified Consents;
(d) no action, suit or proceeding shall be pending or threatened before
any Governmental Authority or any other Person wherein an unfavorable Order
would (i) prevent consummation of any of the transactions contemplated by this
Agreement, (ii) cause any of the transactions contemplated by this Agreement to
be rescinded following consummation or (iii) affect adversely the right of the
Acquiror to own the Acquired Assets and conduct the acquired business, and no
such Order shall be in effect;
(e) there shall have been no adverse change in the Company, the
Acquired Assets (excluding the UST/VNS Assets) or the Company's business between
the date of execution of this Agreement and the Closing;
(f) the Company and the Shareholder shall have delivered to PentaStar
(i) a certificate to the effect that each of the conditions specified above in
Sections 6.1(a) through (e) is satisfied in all respects, (ii) a certificate as
to the adoption of resolutions by the board of directors and shareholders of the
Company, and the board of directors and, to the extent required by applicable
Legal Requirement and the Shareholder's articles or certificate of incorporation
and bylaws, the shareholders of VSI Enterprises, Inc., authorizing the
execution, delivery and performance of this Agreement and the Other Seller
Agreements and the consummation of the transactions contemplated hereby and
thereby and (iii) a good standing certificate, dated within 10 days of the
Closing, from the Secretary of State of the State of the Company's and VSI
Enterprises, Inc.'s jurisdictions of incorporation and each other state in which
the Company is qualified or authorized to do business as a foreign corporation.
(g) the Company and the Shareholder shall have caused the Other Seller
Agreements to have been executed and delivered by the parties thereto other than
PentaStar and the Acquiror;
(h) PentaStar shall have received from counsel to the Company and the
Shareholder an opinion in form and substance as set forth in Exhibit 6.1(h)
addressed to PentaStar and the Acquiror dated as of the Closing;
(i) [INTENTIONALLY OMITTED.];
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(j) [INTENTIONALLY OMITTED.];
(k) [INTENTIONALLY OMITTED.];
(l) [INTENTIONALLY OMITTED.]
(m) PentaStar shall have received from the Company UCC, lien, judgment
and litigation searches with respect to the Company and the Company Acquired
Assets and evidence of the termination of all Encumbrances, other than Permitted
Encumbrances, against the Company Acquired Assets;
(n) the Company shall have delivered to PentaStar possession and
control of the Company Acquired Assets;
(o) the Company and the Shareholder shall have executed and delivered
to PentaStar appropriate documentation to transfer to the Acquiror, to the
extent not transferred to the Acquiror in connection with the UST/VNS
Acquisition, record ownership of the trade names "Eastern Telecom,"
"USTeleCenters," "USTele.com," "USTeleNet" and "Vermont Network Services"
(PentaStar acknowledges that the trade names "Eastern Telecom" and "Vermont
Network Services" is not registered with any Governmental Authority) and all
other registered Intellectual Property and applications therefor, in form
appropriate for filing with the U.S. Patent and Trademark Office or other
applicable Governmental Authority; and
(p) the Company and the Shareholder shall have delivered to PentaStar
such other instruments, certificates and documents as are reasonably requested
by PentaStar in order to consummate the transactions contemplated by this
Agreement, all in form and substance reasonably satisfactory to PentaStar.
Once the Required Vote has been obtained, if the Company fails to deliver any
item, or take any action, specified in Sections 6.1(a) through (c), 6.1(f)
through (h) or 6.1(l) through (p), then PentaStar and the Acquiror may cause the
Closing to occur by delivering to the Company the items, and taking the actions,
specified in Sections 6.2(a) through (d), and upon such delivery and the taking
of such actions the Closing shall be deemed to have been completed. Such Closing
shall not relieve the Company or the Shareholder from any Liability to PentaStar
and the Acquiror for the Company's or the Shareholder's breach of any
representation, warranty or covenant or for the failure to make any such
delivery or take any such action.
6.2. Conditions to Obligation of the Company and the Shareholder. The
obligation of the Company and the Shareholder to consummate the transactions
contemplated by this Agreement is subject to satisfaction of the following
conditions:
(a) the Required Vote shall have been obtained;
(b) PentaStar shall have delivered to the Company a certificate to the
effect that PentaStar's representations and warranties are correct and complete
at and as of the Effective Date and the Closing and that PentaStar has performed
and complied with all of its covenants hereunder through the Closing Date;
(c) the Company shall have received from counsel to PentaStar an
opinion in form and substance as set forth in Exhibit 6.2(c), addressed to the
Company and dated as of the Closing; and
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(d) PentaStar shall have paid the Purchase Price pursuant to Section
2.3 that is to be paid at the Closing.
The Shareholder's Agent may waive any condition specified in this Section 6.2 at
or prior to the Closing.
7. Remedies for Breaches of This Agreement.
7.1. Indemnification Provisions for Benefit of PentaStar.
(a) If the Company or the Shareholder breaches (or if any Person other
than PentaStar or the Acquiror alleges facts that, if true, would mean the
Company or the Shareholder has breached) any of the representations or
warranties of the Company or the Shareholder contained herein and PentaStar
gives notice thereof to the Shareholder's Agent within the Survival Period, or
if the Company or the Shareholder breaches (or if any Person other than
PentaStar or the Acquiror alleges facts that, if true, would mean the Company or
the Shareholder has breached) any covenants of the Company or the Shareholder
contained herein or any representations, warranties or covenants of the Company
or the Shareholder contained in any Other Seller Agreement and PentaStar gives
notice thereof to the Shareholder's Agent, or if UST, VNS or View Tech breaches
any of their covenants (including, without limitation, covenants regarding
indemnification) set forth in the UST/VNS Acquisition Agreement and PentaStar
gives notice thereof to the Shareholder's Agent, then the Company and the
Shareholder agree to jointly and severally indemnify and hold harmless PentaStar
and the Acquiror from and against any Adverse Consequences PentaStar or the
Acquiror may suffer resulting from, arising out of, relating to or caused by any
of the foregoing regardless of whether the Adverse Consequences are suffered
during or after the Survival Period. In determining whether there has been a
breach of any representation or warranty contained in Section 3.1 and in
determining for purposes of the preceding sentence the amount of Adverse
Consequences suffered by PentaStar or the Acquiror, such representations and
warranties shall not be qualified (other than by the reference to "knowledge"
set forth in the last sentence of Section 3.1(o)) by "material," "materiality,"
"in all material respects," "best knowledge," "best of knowledge" or "knowledge"
or words of similar import, or by any phrase using any such terms or words. The
Company and the Shareholder also agree to jointly and severally indemnify and
hold harmless PentaStar and the Acquiror from and against any Adverse
Consequences PentaStar or the Acquiror may suffer which result from, arise out
of, relate to or are caused by (i) any Liability of the Company, UST, VNS or the
Shareholder not included in the Assumed Liabilities, or (ii) any condition,
circumstance or activity existing prior to the Closing which relates to any
Legal Requirement or any act or omission of the Company, UST, VNS, or any
current or former shareholder of the Company or any predecessor with respect to,
or any event or circumstance related to, the Company's, UST's, VNS's, any
current or former shareholder's or any predecessor's ownership, use or operation
of any of the Acquired Assets, the Premises or any other assets or properties or
the conduct of its or their business, regardless, in the case of (i) or (ii), of
(A) whether or not such Liability, act, omission, event, circumstance or matter
was known or disclosed to PentaStar, was disclosed on any Exhibit hereto or is a
matter with respect to which the Company or the Shareholder did or did not have
knowledge, (B) when such Liability, act, omission, event, circumstance or matter
occurred, existed, occurs or exists and (C) whether a claim with respect thereto
was asserted before or is asserted after the Closing and (iii) any Liability
resulting from any failure of the parties to comply with any applicable bulk
sales or transfer Legal Requirement in connection with the transactions
contemplated by this Agreement. The Company and the Shareholder acknowledge and
agree that the fact that they have made disclosures pursuant to Section 3.1 or
otherwise of matters, or did not have knowledge of matters, which result in
Adverse Consequences to PentaStar or the Acquiror shall not relieve the Company
and the Shareholder of their obligation pursuant to this Section 7 to indemnify
and hold PentaStar and the Acquiror harmless from
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all Adverse Consequences. Matters disclosed on an Exhibit referenced in Section
3.1 are deemed to be part of the corresponding representation for purposes of
determining the breach or non-breach of such representation, but such disclosure
shall not relieve the Company and the Shareholder from their obligation to
indemnify PentaStar and the Acquiror pursuant to the preceding provisions of
Section 7.1(a) from the matter disclosed except to the extent such matter
constitutes an Assumed Liability. If any dispute arises concerning whether any
indemnification is owing which cannot be resolved by negotiation among the
parties within 30 days of notice of claim for indemnification from the party
claiming indemnification to the party against whom such claim is asserted, the
dispute will be resolved by arbitration pursuant to this Agreement.
(b) (i) Amounts needed to satisfy the obligations of the Company and
the Shareholder under Section 5.7 during the Escrow Period shall be paid to the
Acquiror first out of the Accounts Receivable Escrow Fund, then by the Company
and the Shareholder. The Company and the Shareholder shall have joint and
several Liability for any additional amounts needed to cover such obligations,
which amounts shall be paid directly to the Acquiror. At the end of the Escrow
Period, amounts of the Accounts Receivable Escrow Fund which may be needed to
cover pending indemnification claims with respect to Section 5.7 made by
PentaStar (such amounts to be determined by PentaStar in accordance with Section
5.7) shall be retained in the Accounts Receivable Escrow Fund until such claims
are resolved, and any excess of the Accounts Receivable Escrow Fund shall be
paid to the Company.
(ii) Except as provided in Section 7.1(b)(i), amounts needed to
cover any indemnification claims resolved in favor of PentaStar or the Acquiror
against the Company or the Shareholder during the Escrow Period shall be paid to
PentaStar first out of the cash portion of the Purchase Price from the Company
and the Shareholder and then out of the Escrow Deposit, along with interest from
the date the party seeking indemnification gives notice thereof to the
indemnifying party at the rate equal to two percentage points above the prime
rate quoted by PentaStar's principal lender from time to time if such interest
rate amount is not already included in the indemnification claim pursuant to the
definition of Adverse Consequences. The Company and the Shareholder shall have
joint and several Liability for any amounts of cash needed to cover such claims,
which amounts shall be paid directly to PentaStar. At the end of the Escrow
Period, amounts of the Escrow Deposit which may be needed to cover pending
indemnification claims made by PentaStar (such amounts to be determined by
PentaStar based upon the reasonable exercise of its business judgment) shall be
retained in the Escrow Account until such claims are resolved, and any excess of
the Escrow Deposit shall be paid to the Company. For purposes of indemnification
claims, each of the Total VSIN Shares shall be valued at the per share price at
which it was issued pursuant to Section 2.3(a) or 2.3(b)(iii), as applicable,
and the Closing Shares shall be deemed to be the first shares subject to such
claims for purposes of such calculation. Subject to Section 7.1(b)(i), the
Escrow Deposit shall also be available to satisfy the obligations of the Company
and the Shareholder under Section 5.7.
(iii) Nothing in this Section 7.1(b) shall be construed to limit
PentaStar's or the Acquiror's right to indemnification to amounts on deposit in
the Accounts Receivable Escrow Fund or the Escrow Account. PentaStar and the
Shareholder's Agent shall jointly give instructions to the Escrow Agent to carry
out the intent of this Section 7.1(b). Any disputes concerning the escrowed
property shall be settled by arbitration as provided in this Agreement.
PentaStar, on the one hand, and the Company and the Shareholder jointly and
severally, on the other hand, shall each be responsible for one-half of the
fees, charges and expenses payable to the Escrow Agent pursuant to paragraph a.
of Article 2 of the Escrow Agreement and, except as otherwise determined
pursuant to Section 9.11 of this Agreement, one-half of any amounts payable
pursuant to paragraph b. of such Article 2.
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(c) PentaStar and the Acquiror shall not assert a claim for
indemnification against the Company or the Shareholder until the aggregate
amount of all Adverse Consequences previously suffered by PentaStar or the
Acquiror in respect of all matters indemnifiable under Section 7.1(a) exceeds
$25,000, at which point PentaStar and the Acquiror shall be entitled to be
indemnified in full, including for all matters comprising the initial $25,000 of
Adverse Consequences not previously asserted. The aggregate indemnification
obligation of the Company and the Shareholder pursuant to Section 7.1(a) shall
be limited to the Purchase Price.
7.2. Indemnification Provisions for Benefit of the Company and the
Shareholder.
(a) If PentaStar breaches (or if any Person other than the Company or
the Shareholder alleges facts that, if true, would mean PentaStar has breached)
any of its representations or warranties contained herein and the Shareholder's
Agent gives notice of a claim for indemnification against PentaStar within the
Survival Period, or if PentaStar breaches (or if any Person other than the
Company or the Shareholder alleges facts that, if true, would mean PentaStar has
breached) any of its covenants contained herein or any of its representations,
warranties or covenants contained in any Other PentaStar Agreement and the
Shareholder's Agent gives notice thereof to PentaStar, then PentaStar agrees to
indemnify and hold harmless the Company and the Shareholder from and against any
Adverse Consequences the Company and the Shareholder may suffer which result
from, arise out of, relate to, or are caused by the breach or alleged breach,
regardless of whether the Adverse Consequences are suffered during or after the
Survival Period. In determining whether there has been a breach of any
representation or warranty contained in Section 3.2 and in determining the
amount of Adverse Consequences suffered by the Company and the Shareholder for
purposes of this Section 7.2, such representations and warranties shall not be
qualified by "material," "materiality," "in all material respects," "best
knowledge," "best of knowledge" or "knowledge" or words of similar import, or by
any phrase using any such terms or words. Matters disclosed on an Exhibit
referenced in Section 3.2 are deemed to be part of the corresponding
representation for purposes of determining the breach or non-breach of such
representation. If any dispute arises concerning whether any indemnification is
owing which cannot be resolved by negotiation among the parties within 30 days
of notice of claim for indemnification from the party claiming indemnification
to the party against whom such claim is asserted, the dispute will be resolved
by arbitration pursuant to this Agreement.
(b) The Company and the Shareholder shall not assert a claim for
indemnification against PentaStar until the aggregate amount of all Adverse
Consequences previously suffered by the Company and the Shareholder in respect
of all matters indemnifiable under Section 7.2(a) exceeds $25,000 (exclusive of
amounts which are part of the Purchase Price), at which point the Company and
the Shareholder shall be entitled to be indemnified in full, including for all
matters comprising the initial $25,000 of Adverse Consequences not previously
asserted. The aggregate indemnification obligation of PentaStar pursuant to
Section 7.1(a) shall be limited to the Purchase Price.
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<PAGE> 32
7.3. Matters Involving Third Parties.
(a) If any Person not a party to this Agreement (including, without
limitation, any Governmental Authority) notifies any party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may give rise
to a claim for indemnification against any other party (the "Indemnifying
Party"), then the Indemnified Party will notify each Indemnifying Party thereof
in writing within 15 days after receiving such notice. No delay on the part of
the Indemnified Party in notifying any Indemnifying Party will relieve the
Indemnifying Party from any obligation hereunder unless (and then solely to the
extent) the Indemnifying Party thereby is prejudiced.
(b) Any Indemnifying Party will have the right, at its sole cost and
expense, to defend the Indemnified Party against the Third Party Claim with
counsel of its choice satisfactory to the Indemnified Party so long as (i) the
Indemnifying Party notifies the Indemnified Party in writing within 10 days
after the Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to or caused by the Third Party Claim, (ii) the
Indemnifying Party provides the Indemnified Party with evidence reasonably
acceptable to the Indemnified Party that the Indemnifying Party will have the
financial resources to defend against the Third Party Claim and fulfill its
indemnification obligations hereunder (subject to the limitations set forth in
Section 7.1(c) and 7.2(b)), (iii) the Third Party Claim involves only money
damages and does not seek an injunction or other equitable relief, (iv)
settlement of, or an adverse judgment with respect to, the Third Party Claim is
not, in the good faith judgment of the Indemnified Party, likely to establish a
precedential custom or practice materially adverse to the continuing business
interests of the Indemnified Party, and (v) the Indemnifying Party conducts the
defense of the Third Party Claim actively and diligently. If the Indemnifying
Party does not assume control of the defense or settlement of any Third Party
Claim in the manner described above, it will be bound by the results obtained by
the Indemnified Party with respect to the Third Party Claim.
(c) So long as the Indemnifying Party is conducting the defense of the
Third Party Claim in accordance with Section 7.3(b) above, (i) the Indemnified
Party may retain separate co-counsel at its sole cost and expense and
participate in the defense of the Third Party Claim, (ii) the Indemnified Party
will not consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written consent of the
Indemnifying Party (not to be withheld unreasonably), and (iii) the Indemnifying
Party will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent of the
Indemnified Party (not to be withheld unreasonably).
(d) In the event any of the conditions in Section 7.3(b) above is or
becomes unsatisfied, however, (i) the Indemnified Party may defend against, and
consent to the entry of any judgment or enter into any settlement with respect
to, the Third Party Claim in any manner it reasonably may deem appropriate (and
the Indemnified Party need not consult with, or obtain any consent from, any
Indemnifying Party in connection therewith), (ii) the Indemnifying Parties will
reimburse the Indemnified Party promptly and periodically for the costs of
defending against the Third Party Claim (including reasonable attorneys' fees
and expenses), and (iii) the Indemnifying Parties will remain responsible for
any Adverse Consequences the Indemnified Party may suffer resulting from,
arising out of, relating to or caused by the Third Party Claim to the fullest
extent provided in this Section 7.
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<PAGE> 33
7.4. Right of Offset. PentaStar and the Acquiror will have the right to
offset any Adverse Consequences either of them may suffer against any amounts
payable (including amounts payable in the form of PentaStar Common Stock)
pursuant to this Agreement or any Other Seller Agreement to the Company, the
Shareholder or any relative or affiliate of the Company or the Shareholder at or
after the Closing.
7.5. Other Remedies. The foregoing indemnification provisions are in
addition to, and not in derogation of, any statutory, equitable or common law
remedy any party may have.
8. Termination.
8.1. Termination of Agreement. The parties may terminate this Agreement as
provided below:
(a) PentaStar and the Shareholder's Agent may terminate this Agreement
by mutual written consent at any time prior to the Closing; or
(b) PentaStar may terminate this Agreement by giving written notice to
the Shareholder's Agent at any time prior to the Closing (i) in the event the
Company or the Shareholder has breached any representation (given as of the date
of this Agreement), warranty or covenant contained in this Agreement in any
material way, PentaStar has notified the Shareholder's Agent of the breach, and
the breach has not been cured within 10 days after the notice of breach or (ii)
if the Closing has not occurred on or before May 31, 2000 because of the failure
of any condition precedent to PentaStar's obligations to consummate the Closing
(unless the failure results primarily from PentaStar breaching any
representation, warranty or covenant contained in this Agreement in any material
way).
8.2. Effect of Termination. The termination of this Agreement by a party
pursuant to Section 8.1 will in no way limit any obligation or liability of any
other party based on or arising from a breach or default by such other party
with respect to any of its representations, warranties, covenants or agreements
contained in this Agreement, and the terminating party will be entitled to seek
all relief to which it is entitled under applicable law.
8.3. Confidentiality. If this Agreement is terminated, each party will
treat and hold as confidential all Confidential Information concerning the other
parties which it acquired from such other parties in connection with this
Agreement and the transactions contemplated hereby.
9. Miscellaneous.
9.1. No Third-Party Beneficiaries. This Agreement will not confer any
rights or remedies upon any Person other than the parties and their respective
successors and permitted assigns.
9.2. Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the parties and supersedes any
prior understandings, agreements or representations by or among the parties,
written or oral, to the extent they relate in any way to the subject matter
hereof.
9.3. Succession and Assignment. This Agreement will be binding upon and
inure to the benefit of the parties and their respective successors and
permitted assigns. Neither the Company nor the Shareholder may assign this
Agreement or any of its, his or her rights, interests or obligations hereunder
without the prior written approval of PentaStar. PentaStar and the Acquiror may
assign their respective rights and obligations hereunder as permitted by law,
including, without limitation, to any debt or equity financing source.
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<PAGE> 34
9.4. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
together shall be deemed to be one and the same instrument. The execution of a
counterpart of the signature page to this Agreement will be deemed the execution
of a counterpart of this Agreement. This Agreement may be delivered by facsimile
and facsimile signatures will be treated as original signatures for all
purposes.
9.5. Headings. The section headings contained in this Agreement are
inserted for convenience only and will not affect in any way the meaning or
interpretation of this Agreement.
9.6. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if it is sent by
registered or certified mail, return receipt requested, postage prepaid, or by
courier, telecopy or facsimile, and addressed to the intended recipient as set
forth below:
<TABLE>
<S> <C>
If to the Company or the
Shareholder: Copy to:
Addressed to the Jackson Walker L.L.P.
Shareholder's Agent at: 901 Main Street, Suite 6000
5430 LBJ Freeway, Suite 1135 Dallas, Texas 75202
Dallas, Texas 75240 Attn: Bradley L. Whitlock
Telecopy: (214) 369-9509 Telecopy: (214) 953-5822
If to PentaStar: Copy to:
PentaStar Communications, Inc. Sherman & Howard L.L.C.
1522 Blake Street 633 Seventeenth Street, Suite 3000
Denver, Colorado 80202 Denver, Colorado 80202
Attn: Chief Executive Officer Attn: B. Scott Pullara
Telecopy: (303) 825-4402 Telecopy: (303) 298-0940
</TABLE>
Notices will be deemed given three days after mailing if sent by certified mail,
when delivered if sent by courier, and upon receipt of confirmation by person or
machine if sent by telecopy or facsimile transmission. Any party may change the
address to which notices, requests, demands, claims and other communications
hereunder are to be delivered by giving the other parties notice in the manner
herein set forth.
9.7. Governing Law. This Agreement will be governed by and construed in
accordance with the domestic laws of the State of Colorado without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Colorado or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Colorado.
9.8. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same is in writing and signed by PentaStar
and the Shareholder's Agent. No waiver by any party of any default,
misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not,
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<PAGE> 35
will be deemed to extend to any prior or subsequent default, misrepresentation
or breach of warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent such occurrence, and no waiver will
be effective unless set forth in writing and signed by the party against whom
such waiver is asserted.
9.9. Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
9.10. Expenses. Except as otherwise provided in Section 8.2, (a) PentaStar
shall bear its own costs and expenses (including, without limitation, legal fees
and expenses) incurred either before or after the date of this Agreement in
connection with this Agreement or the transactions contemplated hereby and (b)
the Shareholder will bear all costs and expenses (including, without limitation,
all legal, accounting and tax related fees and expenses, all fees, commissions,
expenses and other amounts payable to any broker, finder or agent) incurred by
the Company or by the Shareholder either before or after the date of this
Agreement in connection with this Agreement or the transactions contemplated
hereby.
9.11. Arbitration. Any disputes arising under or in connection with this
Agreement, including, without limitation, those involving claims for specific
performance or other equitable relief, will be submitted to binding arbitration
in Denver, Colorado before the Judicial Arbiter Group, but under the Commercial
Arbitration Rules of the American Arbitration Association under the authority of
federal and state arbitration statutes, and shall not be the subject of
litigation in any forum. If the Judicial Arbiter Group is unavailable to conduct
the arbitration or is unsatisfactory to a party in its good faith judgment, then
it shall be before another arbitral body in Denver, Colorado selected by
PentaStar and the Shareholder's Agent or, if they cannot agree on another
arbitral body, the American Arbitration Association. EACH PARTY, BY SIGNING THIS
AGREEMENT, VOLUNTARILY, KNOWINGLY AND INTELLIGENTLY WAIVES ANY RIGHTS SUCH PARTY
MAY OTHERWISE HAVE TO SEEK REMEDIES IN COURT OR OTHER FORUMS, INCLUDING THE
RIGHT TO JURY TRIAL. The arbitrator shall have full authority to order specific
performance and other equitable relief and award damages and other relief
available under this Agreement or applicable law, but shall have no authority to
add to, detract from, change or amend the terms of this Agreement or existing
law. All arbitration proceedings, including settlements and awards, shall be
confidential, except as may otherwise be required by applicable Legal
Requirement. The decision of the arbitrators will be final and binding, and
judgment on the award by the arbitrators may be entered in any court of
competent jurisdiction. THIS SUBMISSION AND AGREEMENT TO ARBITRATE WILL BE
SPECIFICALLY ENFORCEABLE. The prevailing party or parties in any such
arbitration or in any action to enforce this Agreement will be entitled to
recover, in addition to any other relief awarded by the arbitrator, all
reasonable costs and expenses, including fees and expenses of the arbitrators
and attorneys, incurred in connection therewith. If each party prevails on
specific issues in the arbitration, the arbitrator may allocate the costs
incurred by all parties on a basis the arbitrator deems appropriate.
9.12. Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement will be construed as
if drafted jointly by the parties and no presumption or burden of proof will
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. The word "including" will mean including
without limitation. The parties intend that each representation, warranty and
covenant contained herein will have independent significance. If any party
breaches any representation,
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<PAGE> 36
warranty or covenant contained herein in any respect, the fact that there exists
another representation, warranty or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the party has not
breached will not detract from or mitigate the fact that the party is in breach
of the first representation, warranty or covenant.
9.13. Incorporation of Exhibits. The Exhibits identified in this Agreement
are incorporated herein by reference and made a part hereof.
9.14. Shareholder's Agent. The Company and the Shareholder hereby authorize
and appoint the Shareholder's Agent as its exclusive agent and attorney-in-fact
to act on behalf of each of them with respect to all matters which are the
subject of this Agreement or any Other Seller Agreement, including, without
limitation, (a) receiving or giving all notices, instructions, other
communications, consents or agreements that may be necessary, required or given
hereunder and (b) asserting, settling, compromising, or defending, or
determining not to assert, settle, compromise or defend, (i) any claims which
the Company or the Shareholder may assert, or have the right to assert, against
PentaStar or the Acquiror, or (ii) any claims which PentaStar or the Acquiror
may assert, or have the right to assert, against the Company or the Shareholder.
The Shareholder's Agent hereby accepts such authorization and appointment. Upon
the receipt of written evidence satisfactory to PentaStar to the effect that the
Shareholder's Agent has been substituted as agent of the Company and the
Shareholder by reason of his death, disability or resignation, PentaStar shall
be entitled to rely on such substituted agent to the same extent as they were
theretofore entitled to rely upon the Shareholder's Agent with respect to the
matters covered by this Section 9.14. Neither the Company nor the Shareholder
shall act with respect to any of the matters which are the subject of this
Agreement or any Other Seller Agreement except through the Shareholder's Agent.
The Company and the Shareholder acknowledge and agree that PentaStar and the
Acquiror may deal exclusively with the Shareholder's Agent in respect of such
matters, that the enforceability of this Section 9.14 is material to PentaStar
and the Acquiror, and that PentaStar and the Acquiror have relied upon the
enforceability of this Section 9.14 in entering into this Agreement.
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<PAGE> 37
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
PENTASTAR:
PENTASTAR COMMUNICATIONS, INC.
By:/s/ Robert Lazzeri
--------------------------------
Name: Robert S. Lazzeri
Title: CEO
ACQUIROR:
OC MERGERCO 4, INC.
By:/s/ Robert Lazzeri
---------------------------------
Name: Robert S. Lazzeri
Title: CEO
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<PAGE> 38
COMPANY:
VSI NETWORK SOLUTIONS, INC.
By:/s/ Richard E. Harrison
----------------------------------
Name: Richard E. Harrison
Title: CEO
SHAREHOLDER:
VSI ENTERPRISES, INC.
By:/s/ Richard E. Harrison
----------------------------------
Name: Richard E. Harrison
Title: CEO
[SIGNATURE PAGE TO PURCHASE AGREEMENT]
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<PAGE> 39
EXHIBIT 1.1(a)
DEFINED TERMS
Accounts Receivable Escrow Fund has the meaning given it in Section 2.3(a).
Acquiror has the meaning given it in the preamble to this Agreement.
Acquired Assets means all right, title and interest of the Company in and
to all of the tangible and intangible assets of the Company, including, without
limitation, the Company Acquired Assets; provided, however, that for all
purposes of this Agreement the UST/VNS Assets shall be deemed to be Acquired
Assets.
Adverse Consequences means all actions, suits, proceedings, investigations,
complaints, claims, demands, Orders, Liabilities, liens, losses, damages,
penalties, fines, settlements, costs, remediation costs, expenses and fees
(including court costs and reasonable fees and expenses of counsel and other
experts), plus interest at a rate equal to two percentage points above the prime
rate quoted by PentaStar's principal lender from time to time accrued from the
date the party seeking indemnification for an Adverse Consequence gives notice
thereof to the indemnifying party.
Affiliated Group means any affiliated group within the meaning of Code
Section 1504 or any similar group defined under a similar provision of state,
local or foreign law.
Assignment Agreement (UST/VNS Acquisition Agreement) means the Assignment
Agreement among the Company, the Acquiror, PentaStar, UST, VNS and View Tech in
the form of Exhibit 1.1(b).
Assignment and Assumption Agreement means the Assignment and Assumption
Agreement between the Company and the Acquiror in the form of Exhibit 1.1(c)
pursuant to which the Acquiror will assume the Assumed Liabilities.
Assumed Liabilities means (a) the obligations of the Company arising after
the Closing Date under those contracts which are identified by PentaStar on
Exhibit 1.1(d)(i) with respect to the period after the Closing Date provided,
however, that such assumed obligations shall not include any Liability of the
type described in clause (ii) of the third sentence of Section 7.1(a) which
results from, arises out of or relates to the period on or before January 1,
2000, (b) the Liabilities expressly set forth on Exhibit 1.1(d)(ii) in the
amounts expressly set forth on Exhibit 1.1(d)(ii), and (c) additions to the
Liabilities set forth on Exhibit 1.1(d)(ii) which have been incurred by the
Company in the ordinary course of business, consistent with past practice,
between January 1, 2000 and the Closing and not in breach of any representation,
warranty or covenant contained in this Agreement; provided, however, that
Assumed Liabilities will not include any Liabilities for Taxes, bonuses or
profit sharing, any Liabilities past their due dates or any Liabilities for
commissions associated with receivables that have been collected prior to
January 1, 2000, except for such Liabilities, in such amounts, as are expressly
set forth on Exhibit 1.1(d)(ii) pursuant to (b) above; and, provided further,
that Assumed Liabilities will not include any interest bearing debt, other than
the debt to
Exhibit 1.1(a)--1-
<PAGE> 40
RFC Capital Corporation in the amount expressly set forth on Exhibit 1.1(d)(ii)
pursuant to (b) above. Assumed Liabilities will not include any other Liability.
Business Day means any day on which commercial banks are open for business
in Denver, Colorado.
Closing Accounts Receivable means the accounts (including late fees and
interest charges thereon) and notes receivable of the Company in the aggregate
net amount set forth on Exhibit 1.1(e).
Closing and Closing Date have the meanings given in Section 2.5.
Code means the Internal Revenue Code of 1986, as amended.
Company has the meaning given it in Recital A, except that for purposes of
Section 3.1 the term the "Company" shall mean the Company and all of its
Subsidiaries.
Company Acquired Assets means all right, title and interest of the Company
in and to all of the tangible and intangible assets of the Company, including,
without limitation, cash and cash equivalents, and rights to receive cash from
RFC Capital Corporation, but excluding the Company's charter documents, bylaws,
minute books, stock books and other corporate records having exclusively to do
with the corporate organization and capitalization of the Company. To the extent
any current or former shareholder of the Company, or relative or affiliate
thereof, owns any tangible or intangible assets used in the business of the
Company, the Company shall arrange to have such assets transferred to the
Company, at no cost, immediately prior to the Closing and such assets shall be
included in the Company Acquired Assets.
Company Shares has the meaning given it in Section 3.1(b)(i).
Confidential Information means any information concerning the subject
Person or the subject Person's business, products, financial condition,
prospects and affairs that is not already generally available to the public.
Earn-Out Amount means the remainder of (i) four times Earn-Out Period EBITA
minus (ii) $4,381,000; provided, however, that in no event will the Earn-Out
Amount exceed $7,807,000.
Earn-Out Period means the calendar year 2000.
Earn-Out Period EBITA means the EBITA of the Acquiror from the ETI Region
for the Earn-Out Period including, for this purpose, the EBITA of the Company,
UST and VNS from the ETI Region from January 1, 2000 until the acquisition of
their respective assets and business by the Acquiror.
EBITA means earnings before interest, taxes and amortization, determined in
accordance with GAAP, but in a manner consistent with the accounting
measurements used by Arthur Andersen L.L.P. to perform the audit of the income
statement of PentaStar for the calendar year ending December 31, 2000 (the
Exhibit 1.1(a)--2-
<PAGE> 41
"PentaStar Method"); provided, however, that revenues and expenses recognized by
the Company, UST or VNS for the calendar year ended December 31, 1999 that are
or would be recognized during the Earn-Out Period utilizing the PentaStar Method
will be included in Earn-Out Period EBITA; and provided further, that payments
made or expenses incurred or accrued by UST, VNS or the Acquiror to or in
respect of Franklin A. Reece during the period from January 1 through December
31, 2000 shall be included as expenses in determining Earn-Out Period EBITA.
Effective Date has the meaning given it in Section 2.5.
Employee Benefit Plan means any (a) nonqualified deferred compensation or
retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan, as defined in ERISA Section 3(37)) or (d) Employee Welfare
Benefit Plan.
Employee Pension Benefit Plan has the meaning set forth in ERISA Section
3(2).
Employee Welfare Benefit Plan has the meaning set forth in ERISA Section
3(1).
Employment Agreement means the Employment and Noncompetition Agreement
between the Acquiror and Brian S. Rowley in the form of Exhibit 1.1(f).
Encumbrance means any mortgage, pledge, conditional sale agreement, charge,
claim, interest of another Person, lien, security interest, title defect or
other encumbrance.
Environmental Obligations means all present and future Legal Requirements
and Permits concerning land use, public health, safety, welfare or the
environment, including, without limitation, the Resource Conservation and
Recovery Act (42 U.S.C. Section 6901 et seq.), as amended, and the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C. Section 9601
et seq.), as amended.
ERISA means the Employee Retirement Income Security Act of 1974, as
amended, and any regulations, rules or orders promulgated thereunder.
Escrow Account means the account established pursuant to the Escrow
Agreement.
Escrow Agreement means the Escrow Agreement among PentaStar, the Acquiror,
the Company, the Shareholder's Agent and Escrow Agent in the form of Exhibit
1.1(g).
Escrow Agent means Norwest Bank Colorado, N.A.
Escrow Deposit means the Closing Shares (other than the View Tech Shares)
and any shares of PentaStar Common Stock issued in the name of the Company
pursuant to Section 2.3(b)(iii), and if any stock, cash or other assets of
PentaStar or any other Person are issued or delivered in respect of the property
in the Escrow Deposit, such stock, cash or other assets shall be immediately
delivered to the Escrow Agent and be part of the Escrow Deposit.
Exhibit 1.1(a)--3-
<PAGE> 42
Escrow Period means (a) with respect to the Accounts Receivable Escrow
Fund, the period commencing on the Closing and ending on the date which is the
earlier of (i) the date on which the Acquiror has received payment of Closing
Accounts Receivable in the Aggregate Net Amount (as defined in Section 5.7) or
(ii) 180 days after the Closing Date, and (b) with respect to the Escrow
Deposit, the period commencing on the date of the Closing and ending on the date
which is 18 months after the date of the Closing.
ETI Region means the State of Vermont, the Borough of Manhattan, New York
and the metropolitan areas of each of Albany, New York, Boston, Massachusetts
and Providence, Rhode Island.
Fair Market Value of the PentaStar Common Stock means, as of any date, the
average of the closing prices of the PentaStar Common Stock for the 5 trading
days ending two trading days prior to such date, as quoted by Nasdaq. If closing
prices are not quoted for the PentaStar Common Stock, the closing price for each
such day shall be deemed to be the average of the last bid and last asked prices
for the PentaStar Common Stock for that day, as quoted by Nasdaq. If the
PentaStar Common Stock is not quoted on Nasdaq, the closing price for each such
day shall be deemed to be the average of the high and low sales prices for the
PentaStar Common Stock on that day (or if no sales prices are reported, the
average of the high and low asked prices) as reported by the principal regional
stock exchange, or if not so reported, as reported by Nasdaq or a quotation
system of general circulation to brokers and dealers. If the Fair Market Value
of the PentaStar Common Stock cannot be determined pursuant to the preceding
sentence, Fair Market Value shall be determined by the board of directors of
PentaStar by any reasonable method chosen by it.
GAAP means generally accepted accounting principles as in effect from time
to time in the United States.
Governmental Authority means the United States of America, any state,
commonwealth, territory or possession of the United States of America, any
political subdivision thereof (including counties, municipalities, home-rule
cities and the like), and any agency, authority or instrumentality of any of the
foregoing, including, without limitation, any court, tribunal, department,
bureau, commission or board.
Hazardous Materials means any material, chemical, compound, mixture,
hazardous substance, hazardous waste, pollutant or contaminant defined, listed,
classified or regulated under any Environmental Obligation.
Intellectual Property means all trade, corporate, business and product
names, trademarks, trademark rights, service marks, copyrights, patents, patent
rights, trade secrets, business, customer and technical information, and
computer software, all registrations, licenses and applications pertaining
thereto, and all related documentation and goodwill.
Exhibit 1.1(a)--4-
<PAGE> 43
Key Employee means (a) each employee of the Company other than clerical
employees and (b), if any salesperson is an independent contractor rather than
an employee, each such salesperson. Key Employees include, without limitation,
executives and salespersons.
Latest Balance Sheet has the meaning given it in Section 3.1(d).
Legal Requirement means any constitution, statute, ordinance, code, or
other law (including common law), rule, regulation, Order, notice, standard,
procedure or other requirement enacted, adopted, applied or issued by any
Governmental Authority, including, without limitation, judicial decisions
applying or interpreting any such Legal Requirement.
Liability means any liability or obligation (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due).
Meeting has the meaning given it in Section 4.8.
Noncompetition Agreement means the Noncompetition Agreement in the form of
Exhibit 1.1(h) among PentaStar, the Acquiror, the Company, the Shareholder and
Richard E. Harrison.
Orders means all judgments, injunctions, orders, rulings, decrees,
directives, notices of violation or other requirements of any Governmental
Authority or arbitrator having jurisdiction in the matter, including a
bankruptcy court or trustee.
Other PentaStar Agreements means the Assignment Agreement (UST/VNS
Acquisition Agreement), the Assignment and Assumption Agreement, the Employment
Agreement, the Escrow Agreement, the Noncompetition Agreement, the Rowley
Payment Agreement, the Voting Agreement and the other documents and instruments
to be executed and delivered by PentaStar or the Acquiror pursuant to this
Agreement.
Other Seller Agreements means the Assignment Agreement (UST/VNS Acquisition
Agreement), the Assignment and Assumption Agreement, the Employment Agreement,
the Escrow Agreement, the Noncompetition Agreement, the Reece Agreements, the
Rowley Payment Agreement, the View Tech Lock- Up Agreement, the Voting Agreement
and other documents and instruments to be executed and delivered by the Company,
the Shareholder or any relative or affiliate of the Company or of the
Shareholder pursuant to this Agreement.
PentaStar Common Stock means the common stock, par value $.0001 per share,
of PentaStar.
PentaStar Shares has the meaning set forth in Section 3.1(u).
Permits means all permits, licenses, consents, franchises, authorizations,
approvals, privileges, waivers, exemptions, variances, exclusionary or
inclusionary Orders and other concessions, whether governmental or private,
including, without limitation, those relating to environmental, public health,
welfare or safety matters.
Exhibit 1.1(a)--5-
<PAGE> 44
Permitted Encumbrances means the liens and security interests of RFC
Capital Corporation in the Company assets existing under the Receivables Sale
Agreement dated October 8, 1998 between the Company and RFC Capital Corporation
and evidenced by the UCC-1 financing statements set forth on Exhibit 1.1(i).
Person means an individual, partnership, corporation, association, joint
stock company, trust, joint venture, limited liability company, unincorporated
organization or Governmental Authority.
Premises means the real property, buildings and improvements thereon
constituting the business premises of (a) the Company located at 300 Metro
Center Boulevard Warwick, RI 02886; 19 West 44th Street, Suite 415 New York, NY
10036; 270 Bridge Street, Suite 304, Dedham, MA 02026; 460 Totten Pond Road,
Waltham, MA; 230 Washington Extension, Albany, NY 12203; and 8 Fairfield
Boulevard, Wallingford, CT, (b) UST located at 250 West 50th Street, Manhattan,
NY; 745 Atlantic Avenue, Boston, MA; 745 Atlantic Avenue, 4th Floor, Boston, MA;
711 Atlantic Avenue, Boston, MA; 60 K Street South Boston, MA; 803 Summer
Street, South Boston, MA; 233 Stevens Street, Hyannis, MA; and One Richmond
Square, Providence, RI, and (c) VNS located at 13 Kilburn Street, Burlington,
VT; One Scaled Avenue, Rutland, VT; Hotel Coolidge, White River, VT; 142 Boynton
Avenue, Plattsburgh, NY; and 425 Union Street, West Springfield, MA.
Proxy Statement has the meaning given it in Section 4.8.
Purchase Price has the meaning given it in Section 2.3(a).
Reece Agreements means the following, each dated as of approximately the
date hereof: (a) Noncompetition Agreement among PentaStar, the Acquiror and
Franklin A. Reece; and (b) Consulting Agreement between the Company and Franklin
A. Reece.
Required Vote meaning the affirmative vote of such of the shareholders of
the Shareholder as is required by applicable Legal Requirement and the
Shareholder's articles or certificate of incorporation and bylaws to approve the
Transaction.
Right means any right, property interest, concession, patent, trademark,
trade name, copyright, know-how or other proprietary right of another Person.
Rowley Payment Agreement means the Rowley Payment Agreement among the
Acquiror, PentaStar, Brian S. Rowley, the Company and the Shareholder in the
form of Exhibit 1.1(j).
Rowley Shares has the meaning given it in Section 2.3(b)(iii).
SEC means the Securities and Exchange Commission.
Securities Act means the Securities Act of 1933, as amended.
Exhibit 1.1(a)--6-
<PAGE> 45
Shareholder has the meaning given it in the preamble to this Agreement.
Shareholder's Agent means Richard Harrison (or the substituted agent
described in Section 9.14) acting as agent for the Company and the Shareholder
pursuant to Section 9.14.
Shares means all of the issued and outstanding capital stock of the
Company.
Specified Consents has the meaning given it in Section 4.9.
Subsidiary means, with respect to a Person, any Person controlled (meaning
possession of the direct or indirect power to direct or cause the direction of
the management and policies, whether through the ownership of voting securities,
by contract or otherwise) by such first Person directly or through one or more
intermediaries.
Survival Period means, with respect to a representation or warranty, the
applicable period after the Closing Date during which such representation or
warranty survives pursuant to Section 3.4.
Tax means any federal, state, local or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Section 59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, documentary, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated or other tax of any kind whatsoever, including any interest,
penalty or addition thereto, whether disputed or not.
Tax Return means any return, declaration, report, claim for refund or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
Total VSIN Shares means the Closing Shares and the shares (other than the
Rowley Shares) of PentaStar Common Stock, if any, issued to the Company pursuant
to Section 2.3(b)(iii).
Transaction has the meaning given it in Section 4.8.
UST means USTeleCenters, Inc., a Delaware corporation.
UST/VSN Assets means the "Assets" as defined in the UST/VNS Acquisition
Agreement, including, without limitation, cash and cash equivalents of UST and
VNS.
UST/VNS Acquisition means the acquisition of assets of UST and VNS by the
Acquiror contemplated by the UST/VNS Acquisition Agreement.
Exhibit 1.1(a)--7-
<PAGE> 46
UST/VNS Acquisition Agreement means the Asset Purchase Agreement dated as
of December 31, 1999 among the Acquiror, UST, VNS and View Tech pursuant to
which the Acquiror will acquire the UST/VNS Assets, and the bill of sale, the
assignment and assumption agreement and the other agreements, instruments and
closing documents to be delivered by UST, VNS or View Tech in connection with
the closing thereunder.
VNS means Vermont Network Services Corporation, a Delaware corporation.
View Tech means View Tech, Inc., a Delaware corporation and the owner,
directly or indirectly, of all of the outstanding capital stock of each of UST
and VNS.
View Tech Lock-Up Agreement means the View Tech Lock-Up Agreement dated
February 18, 2000 between PentaStar and View Tech.
Voting Agreement means the Voting Agreement dated the date of this
Agreement among PentaStar, Edward S. Redstone and Larry M. Carr.
Exhibit 3.1(h)(i)--8-
<PAGE> 1
EXHIBIT 2.9
AGREEMENT AND PLAN OF MERGER
AMONG
PENTASTAR COMMUNICATIONS, INC.,
PARTEL, INC.
AND THE
SHAREHOLDERS
OF
PARTEL, INC.
AS OF JANUARY 1, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
1. Definitions...........................................................................................................1
2. Merger................................................................................................................1
2.1. Basic Transaction............................................................................................1
2.2. The Closing..................................................................................................8
3. Representations and Warranties........................................................................................8
3.1. Representations and Warranties of the Shareholders...........................................................8
3.2. Representations, Warranties and Agreements of Each Shareholder..............................................19
3.3. Representations and Warranties of PentaStar.................................................................21
3.4. Survival of Representations.................................................................................22
3.5. Representations as to Knowledge.............................................................................22
4. Pre-Closing Covenants................................................................................................22
4.1. General.....................................................................................................22
4.2. Operation and Preservation of Business......................................................................22
4.3. Full Access.................................................................................................23
4.4. Notice of Developments......................................................................................23
4.5. Exclusivity.................................................................................................23
4.6. Announcements; Securities Law Restrictions..................................................................23
4.7. Excluded Liabilities. .....................................................................................23
4.8. Distribution of Excluded Assets.............................................................................23
4.9. Taxes On Distribution.......................................................................................24
5. Post-Closing Covenants...............................................................................................24
5.1. Further Assurances..........................................................................................24
5.2. Transition..................................................................................................24
5.3. Cooperation.................................................................................................24
5.4. Confidentiality.............................................................................................24
5.5. Post-Closing Announcements..................................................................................24
5.6. Financial Statements........................................................................................24
5.7. Satisfaction of Liabilities.................................................................................25
5.8. Termination of Obligations..................................................................................25
5.9. Transfer Restrictions.......................................................................................25
5.10. Collection of Excluded Receivables..........................................................................26
5.11. Tax Returns.................................................................................................26
5.12. Defense of Litigation.......................................................................................27
6. Conditions to Closing................................................................................................27
6.1. Conditions to Obligation of PentaStar.......................................................................27
6.2. Conditions to Obligation of the Shareholders................................................................28
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
7. Remedies for Breaches of This Agreement..............................................................................30
7.1. Indemnification Provisions for Benefit of PentaStar.........................................................30
7.2. Indemnification Provisions for Benefit of the Shareholders..................................................32
7.3. Matters Involving Third Parties.............................................................................32
7.4. Right of Offset.............................................................................................32
7.5. Other Remedies..............................................................................................32
8. Termination..........................................................................................................33
8.1. Termination of Agreement....................................................................................33
8.2. Effect of Termination.......................................................................................34
8.3. Confidentiality.............................................................................................34
9. Miscellaneous........................................................................................................34
9.1. No Third-Party Beneficiaries................................................................................34
9.2. Entire Agreement............................................................................................34
9.3. Succession and Assignment...................................................................................34
9.4. Counterparts................................................................................................35
9.5. Headings....................................................................................................35
9.6. Notices.....................................................................................................35
9.7. Governing Law...............................................................................................35
9.8. Amendments and Waivers......................................................................................35
9.9. Severability................................................................................................36
9.10. Expenses....................................................................................................36
9.11. Arbitration.................................................................................................36
9.12. Construction................................................................................................36
9.13. Incorporation of Exhibits...................................................................................37
9.14. Shareholders' Agent.........................................................................................37
</TABLE>
(ii)
<PAGE> 4
Exhibits:
Exhibit 1.1(a)
Exhibit 1.1(b)(A)
Exhibit 1.1(b)(B)
Exhibit 1.1(d)
Exhibit 1.1(e)
Exhibit 1.1(f)
Exhibit 1.1(g)
Exhibit 2.1(j)
Exhibit 2.1(n)
Exhibit 2.1(q)
Exhibit 3.1(a)(i)
Exhibit 3.1(a)(ii)
Exhibit 3.1(b)(i)
Exhibit 3.1(b)(ii)
Exhibit 3.1(c)
Exhibit 3.1(d)(i)(A)
Exhibit 3.1(d)(i)(B)
Exhibit 3.1(e)(i)
Exhibit 3.1(e)(ii)
Exhibit 3.1(e)(iii)
Exhibit 3.1(f)(iii)
Exhibit 3.1(f)(v)
Exhibit 3.1(f)(vi)
(iii)
<PAGE> 5
Exhibit 3.1(g)(i)(A)
Exhibit 3.1(g)(i)(B)
Exhibit 3.1(h)
Exhibit 3.1(i)(i)
Exhibit 3.1(i)(ii)
Exhibit 3.1(k)
Exhibit 3.1(l)
Exhibit 3.1(m)(i)
Exhibit 3.1(m)(iii)
Exhibit 3.1(n)(i)
Exhibit 3.1(n)(ii)
Exhibit 3.1(o)(i)(A)
Exhibit 3.1(o)(i)(B)
Exhibit 3.1(s)
Exhibit 3.1(t)
Exhibit 3.2(a)(ii)
Exhibit 3.2(a)(xi)
Exhibit 3.3(b)(i)
Exhibit 6.1(h)
Exhibit 6.2(e)
(iv)
<PAGE> 6
This Agreement and Plan of Merger is entered into as of January 1, 2000,
among PentaStar Communications, Inc., a Delaware corporation ("PentaStar"),
Partel, Inc., an Arizona corporation (the "Company"), and Salvatore Parisi,
Antoinette Parisi, Paul Parisi, Catherine Parisi, Kathy Kidd, Clayton Kidd and
Linda M. Patterson (individually, a "Shareholder" and collectively, the
"Shareholders").
Recitals
A. The Shareholders own all of the issued and outstanding
capital stock of the Company.
B. PentaStar desires to acquire certain business operations of
the Company through a statutory merger of the Company with and into PentaStar,
with PentaStar as the surviving entity (the "Transaction").
C. The Boards of Directors of each of PentaStar and the
Company has determined that the Transaction is in the best interests of their
respective corporations and shareholders.
D. It is intended that the Transaction will qualify as a
reorganization under the provisions of Section 368(a)(1)(A) of the Code.
E. PentaStar and the Shareholders desire to make certain
representations, warranties and agreements in connection with the Transaction
and also desire to set forth various conditions precedent thereto.
Agreement
NOW, THEREFORE, in consideration of the premises, the mutual
representations, warranties and covenants set forth herein and other good and
valuable consideration, the receipt and sufficiency of which are acknowledged,
the parties agree as follows:
1. Definitions. The terms defined in Exhibit 1.1(a) shall have the meanings
designated therein.
2. Merger.
2.1. Basic Transaction. Subject to the terms and conditions of this
Agreement and the corporation laws of the states of Delaware and Arizona, at the
Closing, but effective for economic and accounting purposes as of January 1,
2000 (the "Effective Date"), the Company will be merged with and into PentaStar
(the "Merger") and the separate existence of the Company will cease and
PentaStar will continue as the surviving corporation in the Merger (the
"Surviving Corporation"). The Merger will have all the effects provided by
applicable law, including Sections 251 and 252 of the Delaware General
Corporation Law and Arizona Revised Statutes Section 10-1101 et. seq. The terms
of the Merger shall be as follows:
(a) General. At the Closing, the Shareholders will receive the
consideration described in Section 2.1(k), and the Company Shares owned by the
Shareholders will be canceled and will cease to represent any interest in the
Company. As of the Closing Date, the stock transfer books of the Company will be
closed and no transfer or issuance of shares of capital stock of the Company
will be permitted.
<PAGE> 7
(b) Certificate of Incorporation. At the Closing Date, the
Certificate of Incorporation of PentaStar, as in effect immediately prior to the
Closing Date, will continue to be the Certificate of Incorporation of the
Surviving Corporation, and such Certificate of Incorporation may thereafter be
amended as provided therein and by the Delaware General Corporation Law.
(c) Bylaws. At the Closing Date, the Bylaws of PentaStar, as
in effect immediately prior to the Closing Date, will continue to be the Bylaws
of the Surviving Corporation, and such Bylaws may thereafter be amended or
repealed in accordance with their terms and the Certificate of Incorporation of
the Surviving Corporation and as provided by the Delaware General Corporation
Law.
(d) Directors. At the Closing Date, the directors of PentaStar
immediately prior to the Closing Date will continue to be the directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation and the Delaware General
Corporation Law until the earlier of his or her resignation or removal or until
his or her successor is duly elected and qualified, as the case may be.
(e) Officers. At the Closing Date, the officers of PentaStar
immediately prior to the Closing Date will continue to be the officers of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation and the Delaware General
Corporation Law until the earlier of his or her resignation or removal or until
his or her successor is duly appointed and qualified, as the case may be.
(f) Properties and Liabilities. At the Closing Date, and after
giving effect to the distribution of the Excluded Assets and the assumption of
the Excluded Liabilities pursuant to Sections 4.7 and 4.8, all the properties,
rights, privileges, powers, and franchises of the Company as of that date will
vest in the Surviving Corporation, and all debts, liabilities, and duties of the
Company will become the debts, liabilities, and duties of the Surviving
Corporation.
(g) Documents. Subject to the terms and conditions in this
Agreement, the parties shall prepare, sign, and acknowledge, in accordance with
the Delaware General Corporation Law and the corporate laws of the State of
Arizona, a certificate of merger (the "Certificate of Merger") and the plan and
articles of merger (the "Plan and Articles of Merger") and deliver the
Certificate of Merger to the Secretary of State of the State of Delaware for
filing pursuant to the Delaware General Corporation Law on the Closing Date and
the Plan and Articles of Merger to the Corporation Commission of the State of
Arizona for filing pursuant to the Arizona Revised Statutes on the Closing Date,
with subsequent publication and filing of an affidavit of publication in
accordance with the terms of Arizona Revised Statutes Section 10-1105. The
Merger shall be completed upon the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware and of the Articles of Merger with
the Corporation Commission of the State of Arizona, subject to publication and
filing of an affidavit of publication, but shall be effective for economic and
accounting purposes as of January 1, 2000. PentaStar agrees to file such
documents with the Secretary of State of the State of Delaware and the Arizona
Corporation Commission and thereafter to publish notice of the Merger and file
an affidavit of publication with the Arizona Corporation Commission as required
by Arizona law.
(h) Share Conversion. At the Closing Date, by virtue of the
Merger and without any action on the part of the holder of any shares of capital
stock of any corporation, each issued and outstanding share of capital stock of
the Company will be converted into the right to receive a portion of the
consideration
- 2 -
<PAGE> 8
payable pursuant to Section 2.1(k) determined by dividing the aggregate
consideration so payable by the number of shares of capital stock of the Company
outstanding at the Closing Date; provided, however, that each issued and
outstanding share of the capital stock of the Company owned directly or
indirectly by the Company as treasury stock, if any, will be cancelled and
retired, and no cash, PentaStar Shares or other consideration shall be delivered
or payable in exchange therefor. Each share of the capital stock of PentaStar
issued and outstanding immediately prior to the Closing Date will remain issued
and outstanding.
(i) No Fractional Shares. No certificates or scrip
representing fractional shares of any class of PentaStar Shares will be issued
pursuant to the Merger. Such fractional share interests shall not entitle the
owner thereof to any rights as a security holder of PentaStar. In lieu of any
such fractional shares of any class of PentaStar Shares each Shareholder
entitled to receive PentaStar Shares in the Merger pursuant to this Agreement
will be entitled to receive an amount in cash (without interest), rounded to the
nearest cent, determined by multiplying the value of a PentaStar Share issuable
pursuant to this Agreement (as set forth in Section 2.1(k) or, in the case of
PentaStar Shares issued as part of the Earn-Out Amount, as determined pursuant
to Section 2.1(n)) by the fractional interest in such PentaStar Shares to which
such Person would otherwise be entitled.
(j) Certain Information. Attached as Exhibit 2.1(j) is a
schedule of (A) expenses incurred by the Company (determined in accordance with
GAAP) in connection with the Retained Operations during the period from the
Effective Date to the Closing Date that have actually been paid prior to the
Closing Date (estimated to the extent necessary), (B) sales commissions paid by
the Company during such period in respect of cash received by the Company during
such period relating to the Retained Operations, (C) cash receipts of the
Company during such period relating to the Retained Operations (estimated to the
extent necessary) and (D) a calculation of the estimated Net Cash Adjustment
based on the information described in (A) through (C) above.
(k) Consideration. Subject to adjustment as provided in
Section 2.1(m), the aggregate consideration payable to the Shareholders pursuant
to the Merger will be as follows: (a) cash in the amount of (1) $500,000, plus
or minus (2) 50% of the estimated Net Cash Adjustment set forth on Exhibit
2.1(j) (the amount described in this clause (a) being referred to as the "Cash
Portion" of the Purchase Price); plus (b) a number of shares of PentaStar Common
Stock (rounded to the nearest whole share) determined by dividing (1) the sum of
$500,000 plus or minus 50% of the estimated Net Cash Adjustment set forth on
Exhibit 2.1(j) by (2) the Fair Market Value of the PentaStar Common Stock as of
the Closing Date (the "Closing Shares"); plus (c) the Earn-Out Amount payable
pursuant to Section 2.1(n) (collectively the "Purchase Price"). The Purchase
Price will be adjusted in accordance with Section 2.1(m), and will be payable
and issuable to the Shareholders in accordance with the following percentages:
<TABLE>
<CAPTION>
Number of
Company Percentage of
Shareholder Shares Owned Purchase Price
----------- ------------ --------------
<S> <C> <C>
Salvatore and Antoinette Parisi 500 41
Paul and Catherine Parisi 500 41
Kathy Kidd and Clayton Kidd 109 9
Linda M. Patterson 109 9
</TABLE>
- 3 -
<PAGE> 9
On the Closing Date PentaStar will (i) pay to the Shareholders by wire transfer
to an account or accounts designated by the Shareholders (in accordance with the
percentages set forth above) the Cash Portion of the Purchase Price; and (ii)
issue the Closing Shares to the Shareholders (in the percentages set forth
above). On the Closing Date, the Shareholders will deposit the Closing Shares
with the Escrow Agent pursuant to the Escrow Agreement. In addition, on the
Closing Date, each Shareholder shall designate a number of Closing Shares, not
less than 25% nor more than 50% of the total Closing Shares received by such
Shareholder, to be subject to the Principal Shareholder's Escrow Agreement. The
Principal Shareholder's Escrow Agreement provides that upon the occurrence of
certain conditions, a Shareholder may receive a greater or lesser number of
shares of PentaStar Common Stock than the number initially deposited with
PentaStar pursuant to the Principal Shareholder's Escrow Agreement. The parties
agree that any adjustment in the number of such shares will be treated as an
adjustment to the Purchase Price. Because the Closing Shares will be held by the
Escrow Agent pursuant to the Escrow Agreement, they will initially not be
available for delivery to PentaStar as contemplated by the Principal
Shareholder's Escrow Agreement. However, as soon as any such Closing Shares are
released from the Escrow Agreement for delivery to any Shareholder, they shall
be delivered to PentaStar until the number of Closing Shares so delivered for
each Shareholder equals the number of Closing Shares designated by that
Shareholder to be subject to the Principal Shareholder's Escrow Agreement. In
the event that any such Closing Shares are delivered to PentaStar in
satisfaction of the indemnification obligations of the Shareholders under this
Agreement, or in satisfaction of any other obligation to PentaStar secured by
such shares, the number of shares subject to the Principal Shareholder's Escrow
Agreement for each Shareholder shall be proportionately reduced. The number of
shares subject to the Principal Shareholder's Escrow Agreement for each
Shareholder following such reduction shall be determined by multiplying the
number of Closing Shares originally designated by such Shareholder to be subject
to the Principal Shareholder's Escrow Agreement by a fraction, the numerator of
which is the total number of Closing Shares owned by such Shareholder that
remain in the Escrow Deposit after such delivery (plus any Closing Shares
previously released from the Escrow Deposit for delivery to such Shareholder)
and the denominator of which is the total number of Closing Shares issued to
such Shareholder.
(l) Adjustment Financial Statements. Within 60 days after the
Closing Date an audited balance sheet for the Company will be prepared as of
December 31, 1999 (the "Audited Effective Date Balance Sheet") and delivered to
PentaStar and the Shareholders. The Audited Effective Date Balance Sheet will be
prepared by Arthur Andersen LLP in accordance with GAAP on a basis consistent
with the historical accounting practices of PentaStar. The Audited Effective
Date Balance Sheet will set forth, in addition to other items required by GAAP,
a detailed listing of the liabilities of the Company as of the Effective Date.
Within 60 days after the Closing Date, PentaStar shall also prepare (or cause
Arthur Andersen LLP to prepare) and deliver to the Shareholders a schedule of
expenses incurred by the Company (determined in accordance with GAAP) in
connection with the Retained Operations during the period from the Effective
Date to the Closing Date that were actually paid prior to the Closing Date,
sales commissions paid by the Company during such period in respect of cash
received by the Company during such period relating to the Retained Operations,
and cash receipts of the Company during such period relating to the Retained
Operations, together with a calculation of the Net Cash Adjustment. The Audited
Effective Date Balance Sheet and such schedule are referred to collectively as
the "Adjustment Financial Statements." PentaStar will pay the fees and expenses
of Arthur Andersen LLP incurred in connection with the preparation of the
Adjustment Financial Statements. Within 20 days after receipt of the Adjustment
Financial Statements, each of PentaStar and the Shareholders will, in a written
notice to the other either accept the Adjustment Financial Statements or object
to them by describing in reasonably specific detail any proposed adjustments to
the Adjustment Financial Statements and the estimated amounts of and reasons for
such proposed adjustments.
- 4 -
<PAGE> 10
PentaStar shall make the books of the Company available to the Shareholders'
Agent for purposes of reviewing and verifying the Adjustment Financial
Statements. The failure by PentaStar or the Shareholders to object to the
Adjustment Financial Statements within such 20-day period will be deemed to be
an acceptance by such Person of the Adjustment Financial Statements. If any
adjustments to the Adjustment Financial Statements are proposed by PentaStar or
the Shareholders within such 20-day period, the dispute shall be resolved as
provided in Section 2.1(p).
(m) Post-Closing Adjustments to the Purchase Price.
(i) Within 10 Business Days after the later of the
acceptance of the Adjustment Financial Statements by PentaStar and the
Shareholders or the resolution of any disputes under Section 2.1(p), as the case
may be, the Purchase Price will be redetermined as provided in Section 2.1(k)
based on the Net Cash Adjustment reflected in the Adjustment Financial
Statements. An appropriate adjusting payment shall be made by PentaStar to the
Shareholders or by the Shareholders to PentaStar, as the case may be, so that
the Purchase Price actually paid by PentaStar equals the Purchase Price as so
redetermined. Any such adjusting payment shall be made 50% in cash and 50% in
PentaStar Common Stock, and for that purpose the PentaStar Common Stock shall be
valued at its Fair Market Value as of the Closing Date. If an adjusting payment
is due from PentaStar, the shares of PentaStar Common Stock included in the
payment shall be delivered to the Shareholders and by the Shareholders to the
Escrow Agent for addition to the Escrow Deposit. If an adjusting payment is due
from the Shareholders, PentaStar and the Shareholders' Agent shall execute joint
written instructions to the Escrow Agent to deliver the shares of PentaStar
Common Stock included in such payment to PentaStar from the Escrow Deposit. If
the Audited Effective Date Balance Sheet reflects Excluded Liabilities that
existed as of the Effective Date (other than rent not then due and payable under
the Premises Lease) that have not previously been paid by the Shareholders, such
Excluded Liabilities shall be paid at the time the adjusting payment is made
under this Section 2.1(m)(i), either by PentaStar out of the cash portion of any
adjusting payment due from it hereunder or, if no such payment is due or if the
cash portion of such payment is less than the unpaid Excluded Liabilities, by
the Shareholders. If PentaStar has previously paid any such Excluded Liability,
it shall be reimbursed for such payment at the time the adjusting payment is
made under this Section 2.1(m)(i), either by offset against the cash portion of
any adjusting payment due hereunder or, if no such payment is due or if the cash
portion of such payment is less than the reimbursement amount, by the
Shareholders.
(ii) As among themselves, the Shareholders will be
liable for all amounts payable by the Shareholders under this Section 2.1(m) in
proportion to their ownership of Company Shares prior to the Closing. As between
the Shareholders and PentaStar, the Shareholders will be jointly and severally
liable for any amounts payable by the Shareholders under this Section 2.1(m).
Any adjustment in the Purchase Price made under this Section 2.1(m) will be
allocated as an adjustment to the consideration paid for the Company Shares.
(n) Earn-Out. In addition to the Cash Portion of the Purchase
Price and the Closing Shares payable and issuable at the Closing pursuant to
this Section 2.1, the Shareholders shall be entitled to receive the Earn-Out
Amount determined and payable as provided in this Section 2.1(n).
(i) PentaStar agrees that, during the Earn-Out
Period, it will conduct the Retained Operations in the Phoenix and Tucson,
Arizona metropolitan area as a separate division of PentaStar with
- 5 -
<PAGE> 11
no other operations (the "Partel Division"). The operations of the Partel
Division will be conducted in accordance with the cost structure set forth in
Exhibit 2.1(n) to this Agreement.
(ii) As soon as reasonably practicable after the end
of the Earn-Out Period, and in any event by April 30, 2001, PentaStar will cause
the independent auditors who audit its financial statements for the year 2000 to
prepare a separate income statement of the Partel Division for the Earn-Out
Period (which need not be audited) in accordance with GAAP on a basis consistent
with the historical accounting practices of PentaStar, and a written calculation
of the Earn-Out Amount (collectively, the "Earn-Out Financial Statements").
PentaStar will promptly provide a copy of the Earn-Out Financial Statements to
the Shareholders. Within 20 days after receipt of the Earn-Out Financial
Statements, each of PentaStar and the Shareholders will, in a written notice to
the other, either accept the Earn-Out Financial Statements or object to them by
describing in reasonably specific detail any proposed adjustments to the
Earn-Out Financial Statements and the estimated amounts of and reasons for such
proposed adjustments. PentaStar shall make the books of the Partel Division
(and, to the extent relevant, the books of PentaStar) available to the
Shareholders' Agent for purposes of reviewing and verifying the Earn-Out
Financial Statements. The failure by PentaStar or the Shareholders to object to
the Earn-Out Financial Statements within such 20-day period will be deemed to be
an acceptance by such Person of the Earn-Out Financial Statements. If any
adjustments to the Earn-Out Financial Statements are proposed by PentaStar or
the Shareholders within such 20-day period, the dispute shall be resolved as
provided in Section 2.1(p). The fees and expenses of the independent auditors
for the preparation of the Earn-Out Financial Statements will be paid 50% by
PentaStar and 50% by the Shareholders. Such fees and expenses shall not include
any portion of the work done by PentaStar's auditors in connection with its
annual audit.
(iii) Within 10 Business Days after the later of the
acceptance of the Earn-Out Financial Statements by PentaStar and the
Shareholders or the resolution of any disputes under Section 2.1(p), as the case
may be, PentaStar will pay the Earn-Out Amount, if any, to the Shareholders. The
Earn-Out Amount shall be payable in PentaStar's sole discretion, in cash or
PentaStar Common Stock, or any combination thereof; provided, however, that (A)
at least 50% of the first $1,000,000 of the Earn-Out Amount shall be paid in
cash and (B) the total amount of cash included in the payment of the Earn-Out
Amount shall not be such as to cause the Purchase Price, taken as a whole, not
to comply with the continuity of interest test for a tax-free reorganization
under Section 368 of the Code, as determined in good faith by PentaStar based on
the advice of counsel. The per share value of the PentaStar Common Stock for
that purpose shall be the remainder of (A) the Fair Market Value of the
PentaStar Common Stock as of the date that the Earn-Out Amount is paid minus (B)
the Company Increase. The cash portion of the Earn-Out Amount shall be paid by
wire transfer to an account or accounts designated by the Shareholders. The
certificates representing the shares of PentaStar Common Stock issued in payment
of the Earn-Out Amount will be mailed to the Shareholders at their addresses for
notice purposes under this Agreement.
(iv) In the event that PentaStar sells the operations
conducted by the Partel Division (whether separately or as part of the sale of
all of the assets or operations of PentaStar, and whether in a sale of assets,
by merger or otherwise) prior to the end of the Earn-Out Period, PentaStar shall
require the purchaser to continue to account for such operations separately and
agree to assume the obligations of PentaStar to pay the Earn-Out Amount as
provided in this Section 2.1(n). In that event, the purchaser may pay the
Earn-Out Amount in a combination of cash and such purchaser's common equity
securities based on the fair market value of such securities on the relevant
date as provided in this Section 2.1(n).
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<PAGE> 12
(o) Post-March Revenues. If PentaStar recognizes revenues
(based on installation) after March 31, 2001 and prior to a PentaStar "valuation
event" (as defined below) in respect of contracts entered into on or after
November 1, 1999 and on or before October 31, 2000, PentaStar will pay to the
Shareholders, as additional consideration for the Company Shares, an amount
equal to four times the remainder of (i) the revenues so recognized minus (ii)
all variable expenses (such as sales commissions) associated with such revenues.
Amounts payable under this Section 2.1(o) shall be paid within 60 days after the
end of the calendar quarter in which the related revenues are recognized by
PentaStar. Each such payment shall be made, in PentaStar's sole discretion, in
cash or PentaStar Common Stock, or any combination thereof; provided, however,
that the amount of cash included in such payments shall not be such as to cause
the Purchase Price, taken as a whole, not to comply with the continuity of
interest test for a tax-free reorganization under Section 368 of the Code, as
determined in good faith by PentaStar based on the advice of counsel. The per
share value of the PentaStar Common Stock for that purpose shall be determined
as provided in Section 2.1(n)(iii), calculated as of the date that the Earn-Out
Amount was paid (or if no Earn-Out Amount was paid, as of April 30, 2001) rather
than the date that such payment is made under this Section 2.1(o). For purposes
of this Section 2.1(o), a PentaStar "valuation event" means the first to occur
of (i) the sale of all or substantially all of the assets or of all of the
outstanding stock of PentaStar, either by way of merger, acquisition or other
method, or (ii) October 26, 2004. In no event shall the total amounts payable
under Section 2.1(n) and this Section 2.1(o) exceed the amount that would have
been payable under Section 2.1(n) if the revenues and expenses described in this
Section 2.1(o) had been included in Earn-Out Period EBITA. If PentaStar sells
all or substantially all of the assets and operations of the Partel Division
prior to a PentaStar valuation event, PentaStar shall require the purchaser to
agree to assume the obligations of PentaStar to pay any amounts that may become
due under this Section 2.1(o). In that event, the purchaser may pay such amount
in a combination of cash and such purchaser's common equity securities based on
the fair market value of such securities on the relevant dates as provided in
this Section 2.1(o).
(p) Resolution of Disputes. If any adjustments to the
Adjustment Financial Statements or the Earn-Out Financial Statements are
proposed by PentaStar or the Shareholders pursuant to Section 2.1(l) or 2.1(n),
PentaStar and the Shareholders will negotiate in good faith to resolve any
dispute, provided that if the dispute is not resolved within 10 days following
the receipt of the proposed adjustments then PentaStar and the Shareholders will
retain the Denver, Colorado office of BDO Seidman LLC to resolve such dispute,
which resolution will be final and binding. The fees and expenses of BDO Seidman
LLC will be paid 50% by PentaStar and 50% jointly and severally by the
Shareholders, and BDO Seidman LLC will be retained under a retention letter
executed by the parties that specifies that the determination by said firm of
any such disputes will be resolved in accordance with GAAP on a basis consistent
with the historical accounting practices of PentaStar, by choosing the position
taken in the Adjustment Financial Statements or the Earn-Out Financial
Statements, as the case may be, on the one hand, or the position of the
objecting party under Section 2.1(l) or 2.1(n), on the other hand, without
change, within 30 days of the expiration of the 20-day period described in
Section 2.1(l) or 2.1(n)(ii), as the case may be.
(q) Sublease. At the Closing, PentaStar, as sublessee, and
Par.com, Inc., as sublessor, shall enter into the Sublease Agreement attached
hereto as Exhibit 2.1(q) (the "Sublease"), whereunder PentaStar will sublease
from Par.com, Inc. 25% of the Premises for a period of one year after the
Closing Date. The Shareholders shall cause Par.com, Inc. to enter into the
sublease at the Closing and shall make all necessary arrangements with the owner
of the Premises to have the Premises Lease assigned to Par.com, Inc.
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<PAGE> 13
(r) Limitation on Shares. In no event shall the number of
Shares of PentaStar Common Stock issued as part of the Purchase Price exceed 20%
of the number of shares outstanding immediately prior to the Closing Date.
2.2. The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Sherman & Howard
L.L.C. at 9:00 a.m. Denver, Colorado time on March 17, 2000, or as soon
thereafter as the conditions to closing set forth in Section 6 are satisfied
(the date upon which the Closing actually occurs being referred to as the
"Closing Date"). At the Closing, (i) the Shareholders will deliver to PentaStar
the various certificates, instruments and documents referred to in Section 6.1
and (ii) PentaStar will deliver to the Shareholders the various certificates,
instruments and documents referred to in Section 6.2.
3. Representations and Warranties.
3.1. Representations and Warranties of the Shareholders. The
Shareholders jointly and severally represent and warrant to PentaStar that the
statements contained in this Section 3.1 are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were then substituted for the
date of this Agreement throughout this Section 3.1).
(a) Organization, Good Standing, Etc. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Arizona, and is not required to be qualified to do business as a
foreign corporation in any jurisdiction. The Company has all requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted. The copies of the articles of incorporation
(certified by the Corporation Commission of the State of Arizona) and the bylaws
of the Company, both as amended to date, which have been delivered to PentaStar
by the Shareholders and are attached as Exhibits 3.1(a)(i) and 3.1(a)(ii),
respectively, are complete and correct, and the Company is not in default under
or in violation of any provision of its articles of incorporation or bylaws. The
minute books (which contain the records of all meetings of or actions by the
shareholders, the board of directors, and any committees of the board of
directors) and the stock certificate books and the stock record books of the
Company, copies of which have been delivered to PentaStar by the Shareholders,
are correct and complete.
(b) Ownership and Capitalization.
(i) The authorized capital stock of the Company
consists of 1,000,000 shares of common stock, no par value, divided into two
classes as follows: 700,000 shares of voting common stock and 300,000 shares of
nonvoting common stock. No shares of nonvoting common stock have been issued.
Each Shareholder owns, beneficially and of record, free and clear of any
Encumbrance or Tax, the number of shares of voting common stock of the Company
(the "Company Shares") set forth opposite such Shareholder's name in Section
2.1(k), and the Company Shares reflected in Section 2.1(k) constitute all of the
issued and outstanding capital stock of the Company. All of the issued and
outstanding shares of the Company's capital stock have been duly authorized and
validly issued, and are fully paid and nonassessable, with no personal Liability
attaching to the ownership thereof. There is no authorized or outstanding stock
or security convertible into or exchangeable for, or any authorized or
outstanding option, warrant or other right to subscribe for or to purchase, or
convert any obligation into, any unissued shares of the Company's
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<PAGE> 14
capital stock or any treasury stock, and the Company has not agreed to issue any
security so convertible or exchangeable or any such option, warrant or other
right. There are no authorized or outstanding stock appreciation, phantom stock,
profit participation or similar rights with respect to the Company. There are no
voting trusts, voting agreements, proxies or other agreements or understandings
with respect to any capital stock of the Company. Except as set forth on Exhibit
3.1(b)(i), all of which the Shareholders shall cause to be terminated prior to
the Closing, there are no existing rights of first refusal, buy-sell
arrangements, options, warrants, rights, calls, or other commitments or
restrictions of any character relating to any of the Shares, except those
restrictions on transfer imposed by the Securities Act and applicable state
securities laws.
(ii) Except as set forth on Exhibit 3.1(b)(ii), the
Company has no Subsidiaries and no capital stock, securities convertible into
capital stock, or any other equity interest in any other corporation,
partnership, limited partnership, limited liability company, association, joint
venture or other Person. Each of the entities listed on Exhibit 3.1(b)(ii) is
wholly-owned, directly or indirectly, by the Company, is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation as set forth on Exhibit 3.1(b)(ii), and is qualified to do
business as a foreign corporation and is in good standing in the states set
forth on Exhibit 3.1(b)(ii), which are the only jurisdictions in which the
nature of the business conducted by it or the properties owned, leased or
operated by it make such qualification necessary. No Person has any right to
acquire any interest in any Subsidiary and there are no authorized or
outstanding stock appreciation, phantom stock, profit participation or similar
rights with respect to any Subsidiary. Each such Subsidiary has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as now being conducted.
(c) Authority; No Violation. Each Shareholder and each
relative or affiliate of the Company or of a Shareholder who is a party to any
Other Seller Agreement has full and absolute right, power, authority and legal
capacity to execute, deliver and perform this Agreement and all Other Seller
Agreements to which such Shareholder, relative or affiliate is a party, and this
Agreement constitutes, and the Other Seller Agreements will when executed and
delivered constitute, the legal, valid and binding obligations of, and shall be
enforceable in accordance with their respective terms against, each such
Shareholder, relative or affiliate who is a party thereto. Except as set forth
on Exhibit 3.1(c), the execution, delivery and performance of this Agreement and
the Other Seller Agreements and the consummation of the transactions
contemplated hereby and thereby will not (i) violate any Legal Requirement to
which the Company, any Shareholder, or any relative or affiliate of the Company
or of any Shareholder who is a party to any Other Seller Agreement is subject or
any provision of the articles of incorporation or bylaws of the Company or of
any such affiliate, or (ii) violate, with or without the giving of notice or the
lapse of time or both, or conflict with or result in the breach or termination
of any provision of, or constitute a default under, or give any Person the right
to accelerate any obligation under, or result in the creation of any Encumbrance
upon any properties, assets or business of the Company, of any Shareholder, or
of any such relative or affiliate pursuant to, any indenture, mortgage, deed of
trust, lien, lease, license, Permit, agreement, instrument or other arrangement
to which the Company, any Shareholder or any such relative or affiliate is a
party or by which the Company, any Shareholder, or any such relative or
affiliate or any of their respective assets and properties is bound or subject.
Except for notices that will be given and consents that will be obtained by the
Shareholders prior to the Closing (each of which is set forth in Exhibit
3.1(c)), neither the Company, any Shareholder, nor any such relative or
affiliate need give any notice to, make any filing with or obtain any
authorization, consent or approval of any Governmental Authority or other Person
in order for the parties to consummate the transactions contemplated by this
Agreement and the Other Seller Agreements.
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<PAGE> 15
(d) Financial Statements; Absence of Liabilities. (i) Exhibit
3.1(d)(i)(A) consists of: (A) an unaudited statement of income for the Retained
Operations for the fiscal year ended December 31, 1999, which has been prepared
in accordance with GAAP with revenues based on installation dates, is in
accordance with the books and records of the Company (which books and records
are complete and correct in all material respects), and fairly presents the
results of operations of the Company in all material respects for such fiscal
year; (B) an unaudited statement of income for the Retained Operations for the
fiscal year ended December 31, 1998, which has not been prepared in accordance
with GAAP, but is in accordance with the books and records of the Company (which
books and records are complete and correct in all material respects), and fairly
presents the results of operations of the Retained Operations in all material
respects for such fiscal year; (C) a detailed listing of all liabilities of the
Company as of December 31, 1999, indicating separately the liabilities
associated with the Excluded Operations and those associated with the Retained
Operations, which has been prepared in accordance with GAAP on a basis
consistent with the historical accounting principles of PentaStar and is
complete and correct; (D) a list of all customer orders relating to the Retained
Operations that had been received by the Company as of the Effective Date and on
which any amount remained owing as of the Effective Date, whether or not such
amount had been earned by performance or was otherwise then due ("Effective Date
Orders"), which is correct and complete; and (E) a list, as of December 31,
1999, of all current assets (other than cash) used in, arising from or relating
to the Retained Operations, which has been prepared in accordance with GAAP on a
basis consistent with the historical accounting principles of PentaStar and is
complete and accurate. As of December 31, 1999, the Company had no Liability
other than those set forth on Exhibit 3.1(d)(i)(A). The expenses itemized on
Exhibit 3.1(d)(i)(B) and reflected in the income statements of the Retained
Operations for the 12-month periods ended December 31, 1998 and 1999 will not be
realized on an on-going basis after the Closing Date.
(ii) Since December 31, 1999, the Company has not
incurred or become subject to any Liability other than Liabilities incurred in
the ordinary course of business consistent with past practices. As of the
Closing, the Company will have no Liability (and there will be no basis for the
assertion of any Liability), except for the Retained Liabilities.
(e) Absence of Certain Agreements, Changes or Events.
(i) The Company is not, except as set forth on
Exhibit 3.1(e)(i), a party to or otherwise bound by any material contract or
agreement (A) pursuant to which the Company is obligated to furnish any
services, product or equipment and (B) that has been prepaid with respect to any
period after the Closing Date.
(ii) Except for loans from the Shareholders that are
included in the Excluded Liabilities, since December 31, 1999, the Company has
not (A) incurred any debt, indebtedness or other Liability, except current
Liabilities incurred in the ordinary course of business consistent with past
practices; (B) delayed or postponed the payment of accounts payable or other
Liabilities beyond stated, normal terms; (C) sold or otherwise transferred any
of its assets or properties (other than the Excluded Assets); (D) cancelled,
compromised, settled, released, waived, written-off or expensed any account or
note receivable, right, debt or claim involving more than $5,000 in the
aggregate or accelerated the collection of any account or note receivable; (E)
changed in any significant manner the way in which it conducts its business; (F)
made or granted any individual wage or salary increase in excess of 10% or $1.00
per hour, any general wage or salary increase, or any additional benefits of any
kind or nature; (G) except as otherwise expressly permitted by this Section
3.1(e)(ii), (1) entered into any contracts or agreements, or made any
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<PAGE> 16
commitments, involving more than $5,000 individually or in the aggregate or (2)
accelerated, terminated, delayed, modified or cancelled any agreement, contract,
lease or license (or series of related agreements, contracts, leases and
licenses) involving more than $5,000 individually or in the aggregate; (H)
suffered any material adverse fact or change, including, without limitation, to
or in its business, assets or financial condition or customer or service
provider relationships; (I) made any payment or transfer to or for the benefit
of any shareholder, officer or director or any relative or affiliate thereof or
permitted any Person, including, without limitation, any shareholder, officer,
director or employee or any relative or affiliate thereof, to withdraw assets
from the Company (other than Excluded Assets distributed to the Shareholders as
set forth on Exhibit 3.1(e)(ii) and other than payment to the Shareholders of
the proportionate monthly amount of (1) their respective normal annualized
salaries due and payable during such period or (2) rent due under pre-existing
real property leases between the Company and a Shareholder which are disclosed
on Exhibit 3.1(g)(i)(B)); or (J) agreed to incur, take, enter into, make or
permit any of the matters described in clauses (A) through (I).
(iii) Exhibit 3.1(e)(iii) lists all customer
contracts entered into by the Company, by month, during the six-month period
from September, 1999 through February, 2000 and the current status of each such
contract.
(f) Tax Matters.
(i) The Company has filed all Tax Returns that are
required to have been filed prior to the Closing Date. All such Tax Returns were
correct and complete in all respects. All Taxes owed by the Company (whether or
not shown on any Tax Return) have been paid. The Company is not currently the
beneficiary of any extension of time within which to file any Tax Return. No
claim has ever been made by an authority in a jurisdiction where the Company
does not file Tax Returns that it is or may be subject to taxation by that
jurisdiction. There are no Encumbrances on any of the assets of the Company that
arose in connection with any failure (or alleged failure) to pay any Tax.
(ii) The Company has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or owing
to any employee, independent contractor, creditor, shareholder or other third
party.
(iii) To the best knowledge of the Shareholders,
there is no basis for any authority to assess any additional Taxes for any
period for which Tax Returns have been filed. There is no pending or threatened
dispute or claim concerning any Tax Liability of the Company. Exhibit
3.1(f)(iii) lists all federal, state, local and foreign income Tax Returns filed
with respect to the Company for taxable periods ended on or after December 31,
1993, indicates those Tax Returns that have been audited and indicates those Tax
Returns that currently are the subject of audit. The Shareholders have delivered
to PentaStar correct and complete copies of all federal income Tax Returns,
examination reports, and statements of deficiencies filed or assessed against or
agreed to by the Company since December 31, 1993.
(iv) The Company has not waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to a Tax assessment or deficiency.
(v) Neither the Company nor any of its shareholders
has ever filed (A) an election pursuant to Section 1362 of the Code that the
Company be taxed as an "S" corporation, except as set forth
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<PAGE> 17
on Exhibit 3.1(f)(v), or (B) a consent pursuant to Section 341(f) of the Code
relating to collapsible corporations. The Company has not made any payments, is
not obligated to make any payments and is not a party to any agreement that
under certain circumstances could obligate it to make any payments that will not
be deductible under Code Section 280G. The Company has not been a United States
real property holding corporation within the meaning of Code Section 897(c)(2)
during the applicable period specified in Code Section 897(c)(1)(A)(ii). The
Company has disclosed on its federal income Tax Returns all positions taken
therein that could give rise to a substantial understatement of federal income
Tax within the meaning of Code Section 6662. The Company is not a party to any
Tax allocation or sharing agreement. The Company has not been a member of an
Affiliated Group filing a consolidated federal income Tax Return (other than a
group the common parent of which was the Company) and has no Liability for the
Taxes of any Person (other than the Company) under Treasury Regulation Section
1.1502-6 (or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract or otherwise.
(vi) Exhibit 3.1(f)(vi) sets forth to the extent
practicable the following information with respect to the Company as of the most
recent practicable date (as well as on an estimated pro forma basis as of the
Closing giving effect to the consummation of the transactions contemplated
hereby): (A) the basis of the Company in the Acquired Assets; and (B) the amount
of any net operating loss, net capital loss, unused investment or other credit,
unused foreign tax credit or excess charitable contribution allocable to the
Company.
(vii) The amount of the Excluded Liabilities exceeds
the fair market value of the Excluded Assets.
(g) Assets and Properties.
(i) The Company has good and marketable title to, or
a valid leasehold interest or interest as a licensee in, the properties and
assets used or held for use by it in the Retained Operations. Exhibit
3.1(g)(i)(A) is a list of the fixed assets used in the Retained Operations,
which is correct and complete as of the date set forth therein. As of the
Closing, all of the Acquired Assets will be owned by the Company, free and clear
of all Encumbrances except for the Retained Liabilities. The Company has not
entered into any contract or made any commitment to sell all or any part of the
Acquired Assets. The Acquired Assets constitute all of the real, personal and
mixed assets and property, both tangible and intangible, including Intellectual
Property, which are being used or held for use by the Company in the conduct of
the business and operations of the Company, consistent with historical and
current practices, other than the Excluded Assets. The Company owns or leases
all equipment and other tangible assets necessary for the conduct of its
business as presently conducted and as presently proposed to be conducted. Each
such tangible asset material to the Company's operations has been maintained in
accordance with normal industry practice and is in good operating condition and
repair (subject to normal wear and tear). All leases of real property between
the Company and any shareholder, officer or director or any relative or
affiliate thereof are on fair market terms (including rent at fair market
value). None of the Shareholders, nor any relative or affiliate thereof, own any
asset, tangible or intangible, which is used in the business of the Company,
other than real property leased to the Company at fair market value pursuant to
leases set forth on Exhibit 3.1(g)(i)(B).
(ii) The Premises constitute all of the real
property, buildings and improvements used by the Company in its business. To the
best knowledge of the Shareholders, the Premises have been
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<PAGE> 18
occupied, operated and maintained in accordance with applicable Legal
Requirements. The Company has not received notice of violation of any Legal
Requirement or Permit relating to its operations or its owned or leased
properties.
(iii) No party to any lease with respect to any
Premises has repudiated any provision thereof, and there are no disputes, oral
agreements or forbearance programs in effect as to any such lease.
(h) Lists of Contracts and Other Matters. Attached as Exhibit
3.1(h) is a correct and complete list setting forth the following items:
(i) the following contracts and other agreements in
effect as of the Closing Date to which the Company is a party:
(A) any agreement (or group of related
agreements) for the lease of personal property to or from any Person providing
for lease payments in excess of $5,000 per year;
(B) any agreement pursuant to which the
Company, or any of the Shareholders on behalf of the Company, has made a deposit
in an amount greater than $5,000;
(C) any agreement (or group of related
agreements) for the purchase or sale of supplies, products or other personal
property, or for the furnishing or receipt of services, the performance of which
will extend over a period of more than one year, result in a material loss to
the Company or involve consideration in excess of $10,000;
(D) any agreement concerning a partnership
or joint venture;
(E) any agreement (or group of related
agreements) under which the Company has created, incurred, assumed or guaranteed
any indebtedness for borrowed money, or any capitalized lease obligation, in
excess of $10,000 or under which it has granted any Encumbrances on any of its
assets, tangible or intangible;
(F) any agreement concerning confidentiality
or noncompetition;
(G) any agreement with any of its
shareholders or any relative or affiliate thereof (other than the Company);
(H) any profit sharing, stock option, stock
purchase, phantom stock, stock appreciation, profit participation, deferred
compensation, severance or other plan or arrangement;
(I) any collective bargaining agreement;
(J) any agreement for the employment of any
individual on a full-time, part-time, consulting or other basis or any agreement
providing severance benefits;
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<PAGE> 19
(K) any agreement under which the Company
has advanced or loaned any amount to any of its directors, officers and
employees outside the ordinary course of business;
(L) any agreement obligating the Company to
meet another party's unspecified requirements for goods or services or
obligating it to purchase an unspecified amount of goods or services based on
another party's ability to supply them;
(M) any agreement under which the
consequences of a default or termination could have a material adverse effect on
the business, financial condition, operations, results of operations or future
prospects of the Company; or
(N) any other agreement (or group of related
agreements) the performance of which involves consideration in excess of
$10,000.
(ii) All material claims, deposits, causes of action,
choses in action, rights of recovery, rights of setoff and rights of recoupment
of the Company.
(iii) All material franchises, approvals, Permits,
licenses, Orders, registrations, certificates, variances and similar rights of
the Company (all of which are in full force and effect).
(iv) Each item of Intellectual Property owned by the
Company or which is used by the Company in its business and, in each case where
the Company is not the owner, the owner of the Intellectual Property.
(v) The name of each bank or other financial
institution or entity in which the Company has an account or safe deposit box
(with the identifying account number or symbol) and the names of all persons
authorized to draw thereon or to have access thereto.
Except for agreements relating to the Excluded Assets and the Excluded
Liabilities, the Shareholders have delivered to PentaStar a correct and complete
copy of each written agreement and, to the best of the Shareholders' knowledge,
a written summary setting forth the terms and conditions of each oral agreement
referred to in Section 3.1(h)(i). With respect to each such agreement: (A) the
agreement is legal, valid, binding, enforceable and in full force and effect;
(B) the agreement will continue to be legal, valid, binding, enforceable and in
full force and effect on identical terms following the consummation of the
transactions contemplated hereby; (C) neither the Company nor, to the best
knowledge of the Shareholders, any other party is in breach or default, and, to
the best knowledge of the Shareholders, no event has occurred which, with notice
or lapse of time, would constitute a breach or default, or permit termination,
modification or acceleration, under the agreement; and (D) no party has
repudiated any provision of the agreement.
(i) Litigation; Compliance with Applicable Laws and Rights.
(i) There is no outstanding Order against, nor,
except as set forth on Exhibit 3.1(i)(i), is there any litigation, proceeding,
arbitration or investigation by any Governmental Authority or other Person
pending or, to the best knowledge of the Shareholders, threatened against, the
Company, its assets or its business or relating to the transactions contemplated
by this Agreement, nor is there any basis for any such action.
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<PAGE> 20
(ii) To the best knowledge of the Shareholders,
except as set forth on Exhibit 3.1(i)(ii), neither the Company nor the Company's
assets are in violation of any applicable Legal Requirement or Right. The
Company has not received notice from any Governmental Authority or other Person
of any violation or alleged violation of any Legal Requirement or Right, and no
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand or notice has been filed or commenced or is pending or, to the best
knowledge of the Shareholders, threatened against the Company alleging any such
violation.
(j) Notes and Accounts Receivable. The notes and accounts
receivable of the Company arose and will arise from bona fide transactions by
the Company in the ordinary course of business and are valid receivables with
trade customers subject to no setoffs or counterclaims (other than the rights of
U.S. West under applicable contracts to charge back to the Company amounts
previously paid or accrued upon cancellation of service within specified
periods).
(k) Product Quality, Warranty and Liability. All services and
products sold, leased, provided or delivered by the Company to customers on or
prior to the Closing Date conform to applicable contractual commitments, express
and implied warranties, product and service specifications and quality
standards, and there is no basis for any Liability for replacement or repair
thereof or other damages in connection therewith. No service or product sold,
leased, provided or delivered in connection with the Retained Operations by the
Company to customers on or prior to the Closing is subject to any guaranty,
warranty or other indemnity beyond the applicable standard terms and conditions
of sale or lease. The Company has no Liability and there is no basis for any
Liability arising out of any injury to a Person or property as a result of the
ownership, possession, provision or use of any service or product sold, leased,
provided or delivered by the Company on or prior to the Closing Date. All
product or service liability claims that have been asserted against the Company
since December 31, 1995, whether covered by insurance or not and whether
litigation has resulted or not, other than those listed and summarized on
Exhibit 3.1(i)(i), are listed and summarized on Exhibit 3.1(k).
(l) Insurance. The Company has policies of insurance (i)
covering risk of loss on the Acquired Assets and (ii) covering products
liability and liability for fire, property damage, personal injury and workers'
compensation coverage all, to the best knowledge of the Shareholders, with
responsible and financially sound insurance carriers in adequate amounts and in
compliance with governmental requirements and in accordance with good industry
practice. All such insurance policies are valid, in full force and effect and
enforceable in accordance with their respective terms and no party has
repudiated any provision thereof. All such policies will remain in full force
and effect until the Closing Date. Neither the Company nor any other party to
any such policy is in breach or default (including with respect to the payment
of premiums or the giving of notices) in the performance of any of their
respective obligations thereunder, and no event exists which, with the giving of
notice or the lapse of time or both, would constitute a breach, default or event
of default, or permit termination, modification or acceleration under any such
policy. There are no claims, actions, proceedings or suits arising out of or
based upon any of such policies nor, to the best knowledge of the Shareholders,
does any basis for any such claim, action, suit or proceeding exist. All
premiums have been paid on such policies as of the date of this Agreement and
will be paid on such policies through the Closing Date. The Company has been
covered during the five years prior to the date of this Agreement by insurance
in scope and amount customary and reasonable for the businesses in which it has
engaged during the aforementioned period. All claims made during such five-year
period with respect to any insurance coverage of the Company, other than those
described on Exhibit 3.1(k), are set forth on Exhibit 3.1(l).
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<PAGE> 21
(m) Pension and Employee Benefit Matters.
(i) Exhibit 3.1(m)(i) lists each Employee Benefit
Plan that is an Employee Welfare Benefit Plan (the "Company Welfare Plans"). As
of the Closing Date and for the preceding three years, neither the Company nor
any ERISA Affiliate has sponsored, maintained, contributed to, or has had any
obligation under any Employee Benefit Plan, other than the Company Welfare
Plans. Correct and complete copies of each Company Welfare Plan have been
delivered to PentaStar by the Shareholders.
(ii) Each Company Welfare Plan has been maintained
and administered in substantial compliance with its terms and with all
applicable Legal Requirements.
(iii) Exhibit 3.1(m)(iii) lists each employment,
severance or other similar contract, arrangement or policy and each plan or
arrangement (written or oral) providing for insurance coverage (including any
self-insured arrangements), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits, retirement benefits,
deferred compensation, profit sharing, bonuses, stock options, stock
appreciation rights or other forms of incentive compensation, reduced interest
or interest free loans, mortgages, relocation assistance or post-retirement
insurance, compensation or other benefits that: (A) is not an Employee Benefit
Plan; (B) is entered into, maintained or contributed to, by the Company; and (C)
covers any employee or former employee of the Company or any relative thereof.
Such contracts, plans and arrangements as are described in this Section
3.1(m)(iii), are hereinafter referred to collectively as the "Benefit
Arrangements." Copies and descriptions (including descriptions of the number and
employment classifications of employees covered by each such Benefit
Arrangement) have been delivered by the Shareholders to PentaStar and attached
hereto as part of Exhibit 3.1(m)(iii). Each Benefit Arrangement has been
maintained and administered in substantial compliance with its terms and with
the requirements prescribed by any and all Legal Requirements that are
applicable to each such Benefit Arrangement.
(iv) No Company Welfare Plan is maintained in
connection with any trust described in Section 501(c)(9) of the Code.
(v) There have been no prohibited transactions with
respect to any Company Welfare Plan. No "Fiduciary" (as defined in Section 3(21)
of ERISA) has any Liability for breach of fiduciary duty or any other failure to
act or comply in connection with the administration or investment of the assets
of any such Company Welfare Plan. No action, suit, proceeding, hearing or
investigation with respect to the administration or the investment of the assets
of any Company Welfare Plan (other than routine claims for benefits) is pending
or, to the best knowledge of the Shareholders is threatened. None of the
Shareholders has any knowledge of any basis for any such action, suit,
proceeding, hearing or investigation.
(vi) The Company does not maintain and has never
maintained nor contributes, or ever has contributed, or ever has been required
to contribute, to any Company Welfare Plan providing health or medical benefits
for current or future retired or terminated employees, their spouses or their
dependents (other than in accordance with Code Section 4980B). No condition
exists that would prevent the Company from amending or terminating any Company
Welfare Plan or Benefit Arrangement providing health or medical benefits in
respect of any active or retired employees of the Company.
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<PAGE> 22
(vii) Any Company Welfare Plan that is a "group
health plan" (as defined in Code Section 5000(b)(l)) has been administered in
accordance with the requirements of Part 6 of Subtitle B of Title I of ERISA and
Code Section 4980B and nothing done or omitted to be done in connection with the
maintenance or administration of any Company Welfare Plan that is a "group
health plan" has made or will make the Company subject to any liability under
Title I of ERISA, excise Tax Liability under Code Section 4980B or has resulted
or will result in any loss of income exclusion for a participant under Code
Sections 105(h) or 106.
(viii) There is no contract, agreement, plan or
arrangement covering any employee or former employee of the Company that,
individually or collectively, could give rise to the payment of any amount that
would not be deductible pursuant to the terms of Section 280G or 162(a)(l) of
the Code.
(ix) The Company has made, before the date of this
Agreement, all required contributions and premium payments under each Company
Welfare Plan and Benefit Arrangement for all completed fiscal years including
contributions that may not by law have otherwise been required to be made until
the due date for filing the Tax Return for any completed fiscal year.
(n) Employees and Labor.
(i) The Company has not received any notice, nor, to
the best knowledge of the Shareholders, is there any reason to believe that any
Key Employee of the Company or any group of employees of the Company has any
plans to terminate his, her or its employment with the Company. To the best
knowledge of the Shareholders, no Key Employee is subject to any agreement,
obligation, Order or other legal hindrance that impedes or might impede such
executive or key employee from devoting his or her full business time to the
affairs of the Company prior to the Closing Date and, if such person becomes an
employee of PentaStar, to the affairs of PentaStar after the Closing Date. The
Company will not be required to give any notice under the Worker Adjustment and
Retraining Notification Act, as amended, or any similar Legal Requirement as a
result of this Agreement, the Other Seller Agreements or the transactions
contemplated hereby or thereby. Except as described on Exhibit 3.1(n)(i), the
Company does not have any labor relations problems or disputes, nor has the
Company experienced any strikes, grievances, claims of unfair labor practices or
other collective bargaining disputes. The Company is not a party to or bound by
any collective bargaining agreement, there is no union or collective bargaining
unit at the Company's facilities, and no union organization effort has been
threatened, initiated or is in progress with respect to any employees of the
Company.
(ii) Exhibit 3.1(n)(ii) lists (A) the name of each
salesperson (whether such salesperson was an employee or independent contractor)
of the Company who has left the employment of the Company in the twelve-month
period prior to the date of this Agreement, (B) the date such salesperson left
the employment of the Company and (C) the dollar amount of orders booked by the
Company during the twelve-month period prior to the date such salesperson left
the employment of the Company which were attributable to such salesperson or for
which such salesperson was responsible.
(o) Customer and Service Provider Relationships. Exhibit
3.1(o)(i)(A) lists each customer that individually or with its affiliates was,
based on the Company's revenues during the fiscal year ended December 31, 1999,
one of the Company's ten largest customers during such fiscal year or accounted
for 2% or more of the Company's revenues during such fiscal year (the "Principal
Customers").
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<PAGE> 23
Exhibit 3.1(o)(i)(B) lists each Person who is a service provider to the
Company's customers as of the date of this Agreement (the "Principal
Providers"). The Company has good commercial working relationships with its
Principal Customers and Principal Providers and since December 31, 1999, no
Principal Customer or Principal Provider has cancelled or otherwise terminated
its relationship with the Company, materially decreased its purchases from or
services supplied to the Company's customers, or, to the knowledge of the
Shareholders, threatened to take any such action. The Shareholders have no basis
to anticipate any problems with the Company's relationships with its Principal
Customers or Principal Service Providers. To the best knowledge of the
Shareholders, no Principal Customer or Principal Provider has any plans to
terminate their relationship with the Company and the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby will
not adversely affect the relationship of the Company with any Principal Customer
or Principal Provider prior to the Closing Date or of PentaStar with any
Principal Customer or Principal Provider after the Closing Date.
(p) Environmental Matters. The Company is conducting and at
all times has conducted its business and operations, and has occupied, used and
operated the Premises and all other real property and facilities presently or
previously owned, occupied, used or operated by the Company, in compliance with
all Environmental Obligations and so as not to give rise to Liability under any
Environmental Obligations or to any impact on the Company's business or
activities. To the best knowledge of the Shareholders, the Company has no
Liability under any Environmental Obligation, nor is there any basis for any
such Liability.
(q) Intellectual Property. The Company owns or has the legal
right to use each item of Intellectual Property required to be identified on
Exhibit 3.1(h). To the best knowledge of the Shareholders, (i) the continued
operation of the business of the Company as currently conducted will not
interfere with, infringe upon, misappropriate or conflict with any Intellectual
Property rights of another Person and (ii) no other Person has interfered with,
infringed upon, misappropriated or otherwise come into conflict with any
Intellectual Property rights of the Company or any Intellectual Property
included in the Acquired Assets. Neither the Company nor, to the best knowledge
of the Shareholders, any owner of any Intellectual Property included in the
Acquired Assets has granted any license, sublicense or permission with respect
to any Intellectual Property owned or used in the Company's business. No claims
are pending or, to the knowledge of the Shareholders, threatened, that the
Company is infringing or otherwise adversely affecting the rights of any Person
with regard to any Intellectual Property. To the best knowledge of the
Shareholders, all of the Intellectual Property that is owned by the Company and
is included in the Acquired Assets is owned free and clear of all Encumbrances
and was not misappropriated from any Person, and all portions of the
Intellectual Property that are licensed by the Company are licensed pursuant to
valid and existing license agreements. The consummation of the transactions
contemplated by this Agreement will not result in the loss or material
diminution of any Intellectual Property or rights in Intellectual Property.
(r) Year 2000 Warranty. To the best knowledge of the
Shareholders, the computer software owned by the Company and all other
Intellectual Property used or held for use by the Company in its business
accurately processes date/time data (including calculating, comparing, and
sequencing) from, into, and between the twentieth and twenty-first centuries,
and the years 1999 and 2000 and leap year calculations and the date September 9,
1999 when either (i) used as a standalone application, or (ii) integrated into
or otherwise used in conjunction with the third party hardware, software,
firmware and data over which the Shareholders and the Company have no control
("Third Party Products") with which such Company software or other Intellectual
Property was designated or intended to operate at the time such Company software
was (i) developed or (ii) first provided to the Company's customers, or tested
by the Company for
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<PAGE> 24
such customers, whichever is later. Notwithstanding the foregoing, the Company
shall not be considered to be in breach of the representation and warranty in
the immediately preceding sentence if the failure of such Company software to
comply with such representation and warranty is attributable solely to (x) a
failure by any Third Party Product to accurately process date/time data
(including but not limited to, calculating, comparing, and sequencing) from,
into, and between the twentieth and twenty-first centuries, and the years 1999
and 2000 and leap year calculations and the date September 9, 1999; or (y) any
modification of the Company software by any party other than the Company (unless
such modification was made at the direction of the Company).
(s) Brokers' Fees. Except as set forth on Exhibit 3.1(s), the
Company does not have, and will not have as a result of the consummation of this
Agreement, any Liability to pay any fees or commissions to any broker, finder or
agent with respect to the transactions contemplated by this Agreement.
(t) Guaranties. The Company is not a guarantor or otherwise
liable for any Liability (including indebtedness for borrowed money) of any
other Person. Except as set forth on Exhibit 3.1(t), no Person is a guarantor or
otherwise liable for any Liability (including indebtedness for borrowed money)
of the Company.
(u) Disclosure. None of the documents or information provided
to PentaStar by the Company, any Shareholder or any agent or employee thereof in
the course of PentaStar's due diligence investigation and the negotiation of
this Agreement and Sections 3.1 and 3.2 of this Agreement and the disclosure
Exhibits referred to therein, including the financial statements referred to
above in Section 3.1, contains any untrue statement of any material fact or omit
to state a material fact necessary in order to make the statements contained
herein or therein not misleading. There is no fact which materially adversely
affects the business, condition, affairs or operations of the Company or any of
its properties or assets which has not been set forth in this Agreement or such
Exhibits, including such financial statements.
Nothing in the disclosure Exhibits referred to in Section 3.1
shall be deemed adequate to disclose an exception to a representation or
warranty made herein unless the applicable disclosure Exhibit identifies the
exception with particularity and describes the relevant facts in reasonable
detail. Without limiting the generality of the foregoing, the mere listing (or
inclusion of a copy) of a document or other item shall not be deemed adequate to
disclose an exception to a representation or warranty made herein (unless the
representation or warranty has to do with the existence of the document or other
item itself). The Shareholders acknowledge and agree that the fact that they
have made disclosures pursuant to Section 3.1 or 3.2 or otherwise of matters, or
did not have knowledge of matters, which result in Adverse Consequences to
PentaStar shall not relieve the Shareholders of their obligation pursuant to
Section 7 of this Agreement to indemnify and hold PentaStar harmless from all
Adverse Consequences.
3.2. Representations, Warranties and Agreements of Each Shareholder.
(a) Investment Representations. Each Shareholder, severally
but not jointly, represents and warrants to PentaStar that the following
statements are correct and complete as of the date of this Agreement and will be
correct and complete as of the Closing Date (as though made then and as though
the Closing Date were substituted for the date of this Agreement throughout this
Section 3.2(a)): (i) such Shareholder is acquiring the shares of PentaStar
Common Stock to be issued to such Shareholder pursuant to the Transaction (the
"PentaStar Shares") for such Shareholder's own account and not on behalf of any
other
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<PAGE> 25
Person; (ii) such Shareholder is aware and acknowledges that the PentaStar
Shares have not been registered under the Securities Act, or applicable state
securities laws, and may not be offered, sold, assigned, exchanged, transferred,
pledged or otherwise disposed of unless so registered under the Securities Act
and applicable state securities laws or an exemption from the registration
requirements thereof is available; (iii) such Shareholder has been furnished all
information that such Shareholder deems necessary to enable such Shareholder to
evaluate the merits and risks of an investment in PentaStar, including, without
limitation, the information described on Exhibit 3.2(a)(ii); (iv) such
Shareholder has had a reasonable opportunity to ask questions of and receive
truthful answers from PentaStar concerning PentaStar, the PentaStar Shares and
any and all matters relating to the transactions described herein or in the
information described on Exhibit 3.2(a)(ii), and all such questions, if any,
have been answered to the full satisfaction of such Shareholder; (v) no Person
other than such Shareholder has (A) any rights in and to the PentaStar Shares,
which rights were obtained through or from such Shareholder; or (B) any rights
to acquire the PentaStar Shares, which rights were obtained through or from such
Shareholder; (vi) such Shareholder has such knowledge and experience in
financial and business matters (including knowledge and experience in the
business and proposed business of PentaStar) that such Shareholder is capable of
evaluating the merits and risks involved in an investment in the PentaStar Share
and such Shareholder is financially able to bear the economic risk of the
investment in the PentaStar Shares, including a total loss of such investment;
(vii) such Shareholder has adequate means of providing for such Shareholder's
current needs, has no need for liquidity in the PentaStar Shares and has no
reason to anticipate any material change in such Shareholder's financial
condition for the foreseeable future; (viii) such Shareholder is aware that the
acquisition of the PentaStar Shares is an investment involving a risk of loss
and that there is no guarantee that such Shareholder will realize any gain from
this investment, and that such Shareholder could lose the total amount of its
investment; (ix) such Shareholder understands that no United States federal or
state agency has made any finding of determination regarding the fairness of the
offering of the PentaStar Shares for investment, or any recommendation or
endorsement of the offering of the PentaStar Shares; (x) such Shareholder is
acquiring the PentaStar Shares for investment, with no present intention of
dividing or allowing others to participate in such investment or of reselling,
or otherwise participating, directly or indirectly, in a distribution of
PentaStar Shares, and shall not make any sale, transfer or pledge thereof
without registration under the Securities Act and any applicable securities laws
of any state, unless an exemption from registration is available, as established
to the reasonable satisfaction of PentaStar, by opinion of counsel or otherwise;
(xi) except as set forth herein, no representations or warranties have been made
to such Shareholder by PentaStar or any agent, employee or affiliate of
PentaStar, and in entering into this transaction such Shareholder is not relying
upon any information, other than from the results of independent investigation
by such Shareholder; (xii) such Shareholder understands that the PentaStar
Shares are being offered to such Shareholder in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that PentaStar is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and understandings of
such Shareholder set forth herein in order to determine the applicability of
such exemptions; and (xiii) such Shareholder is an "accredited investor" as
defined in Rule 501(a) of Regulation D promulgated under the Securities Act.
Exhibit 3.2(a)(xi) sets forth each Shareholder's state of residency.
All the certificates representing PentaStar Shares shall bear the
following legend, in addition to the legend required by Section 5.9:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") NOR UNDER ANY STATE SECURITIES LAWS AND CAN
NOT BE TRANSFERRED, SOLD, ASSIGNED OR HYPOTHECATED UNTIL EITHER (I) A
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<PAGE> 26
REGISTRATION STATEMENT WITH RESPECT THERETO IS DECLARED EFFECTIVE UNDER THE ACT
AND APPLICABLE STATE SECURITIES LAWS OR (II) THE COMPANY RECEIVES AN OPINION OF
COUNSEL TO THE COMPANY OR OTHER COUNSEL TO THE HOLDER OF SUCH SHARES, WHICH
OPINION IS SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH SECURITIES MAY
BE TRANSFERRED, SOLD, ASSIGNED OR HYPOTHECATED WITHOUT REGISTRATION UNDER THE
ACT OR APPLICABLE STATE SECURITIES LAWS.
(b) In the event that any Shareholder wishes to transfer any
PentaStar Shares pursuant to exemptions from the registration requirements of
federal and state securities laws, the Company agrees, at its expense, to cause
its counsel to review the proposed transaction and, if such counsel believes
that exemptions are available for the transaction, to render the opinion
necessary to satisfy the opinion requirement of Section 3.2(a).
(c) Each Shareholder hereby approves the Merger in his
capacity as a shareholder of the Company and this Agreement shall be deemed a
unanimous written consent of the Shareholders approving the Merger pursuant to
Sections 10-704 and 10-1103 of the Arizona Revised Statutes. Each Shareholder
hereby acknowledges receipt of a copy of Sections 10-1301 through 10-1331 of the
Arizona Revised Statutes and waives any right such Shareholder may have to
dissent from the Merger pursuant to Section 10-1302 of the Arizona Revised
Statutes.
3.3. Representations and Warranties of PentaStar. PentaStar represents
and warrants to the Shareholders that the statements contained in this Section
3.3 are correct and complete as of the date of this Agreement and will be
correct and complete as of the Closing Date (as though made then and as though
the Closing Date were substituted for the date of this Agreement throughout this
Section 3.3).
(a) Organization, Good Standing, Power, Etc. PentaStar is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and is qualified to do business as a foreign
corporation and is in good standing in all jurisdictions in which the nature of
the businesses conducted by it or the properties owned, leased or operated by it
make such qualification necessary. This Agreement and the Other PentaStar
Agreements and the transactions contemplated hereby and thereby have been duly
approved by all requisite corporate action of PentaStar. PentaStar has full
corporate power and authority to execute, deliver and perform this Agreement and
the Other PentaStar Agreements and this Agreement constitutes, and the Other
PentaStar Agreements will when executed and delivered constitute, the legal,
valid and binding obligations of PentaStar and shall be lawful and enforceable
in accordance with their respective terms against PentaStar.
(b) Capitalization.
(i) The authorized, issued and outstanding shares of
the capital stock of PentaStar are as set forth on Exhibit 3.3(b)(i).
(ii) At the time of issuance thereof and delivery to
the Shareholders, the PentaStar Shares to be delivered to the Shareholders
pursuant to this Agreement will be duly authorized and validly issued shares of
PentaStar's Common Stock, and will be fully paid and nonassessable. Such
PentaStar Shares shall at the time of such issuance and delivery be free and
clear of any Encumbrances of any kind or
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<PAGE> 27
character, other than those restrictions and obligations arising under
applicable federal and state securities laws, under this Agreement or under any
Other Seller Agreement to which such Shareholder is a party.
(c) No Violation of Agreements, Etc. The execution, delivery
and performance of this Agreement and the Other PentaStar Agreements, and the
consummation of the transactions contemplated hereby and thereby will not (i)
violate any Legal Requirement to which PentaStar is subject, including any
applicable state or federal securities laws, or any provision of the certificate
of incorporation or bylaws of PentaStar or (ii) violate, with or without the
giving of notice or the lapse of time or both, or conflict with or result in the
breach or termination of any provision of, or constitute a default under, or
give any Person the right to accelerate any obligation under, or result in the
creation of any Encumbrance upon any properties, assets or business of PentaStar
pursuant to, any indenture, mortgage, deed of trust, lien, lease, license,
agreement, instrument or other arrangement to which PentaStar is a party or by
which PentaStar or any of its assets and properties is bound or subject. Except
for notices and consents that will be given or obtained by PentaStar prior to
the Closing, PentaStar need not give any notice to, make any filing with or
obtain any authorization, consent or approval of any Governmental Authority or
other Person in order for the parties to consummate the transactions
contemplated by this Agreement.
3.4. Survival of Representations. The representations and warranties
contained in Sections 3.1, 3.2 and 3.3 and the Liabilities of the parties with
respect thereto shall survive any investigation thereof by the parties and shall
survive the Closing for four years, except that the Liabilities of the
Shareholders with respect to the representations and warranties set forth in
Sections 3.1(a), 3.1(b), 3.1(c), 3.1(f), 3.1(m), 3.1(p), 3.1(q) and 3.1(u) and
3.2 and the Liabilities of PentaStar with respect to the representations and
warranties set forth in Sections 3.3(a), 3.3(b) and 3.3(c), shall survive
without termination.
3.5. Representations as to Knowledge. The representations and
warranties contained in Article 3 hereof will in each and every case where an
exercise of discretion or a statement to the "best knowledge," "best of
knowledge" or "knowledge" is required on behalf of any party to this Agreement
be deemed to require that such exercise of discretion or statement be in good
faith after reasonable investigation (including, in the case of the
Shareholders, inquiry of the applicable employees of the Company), with due
diligence, to the best efforts of such party and be exercised always in a
reasonable manner and within reasonable times.
4.0 Pre-Closing Covenants. The parties agree as follows with respect to the
period between the execution of this Agreement and the Closing.
4.1. General. Each of the parties will use its reasonable best efforts
to take all actions necessary, proper or advisable in order to consummate and
make effective the transactions contemplated by this Agreement (including the
satisfaction, but not the waiver, of the closing conditions set forth in Section
6) and the other agreements contemplated hereby. Without limiting the foregoing,
the Shareholders will, and will cause the Company to, give any notices, make any
filings and obtain any consents, authorizations or approvals needed to
consummate the transactions contemplated by this Agreement.
4.2. Operation and Preservation of Business. The Shareholders will not
cause or permit the Company to engage in any practice, take any action or enter
into any transaction outside the ordinary course of its business; provided,
however, that in no event will any action be taken or fail to be taken or any
transaction be entered into which would result in a breach of any
representation, warranty or covenant of any Shareholder. The Shareholders will
cause the Company to keep its business and properties, including its
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<PAGE> 28
current operations, physical facilities, working conditions and relationships
with customers, service providers, lessors, licensors and employees, intact.
4.3. Full Access. The Shareholders will cause the Company to permit
PentaStar and its agents to have full access at all reasonable times, and in a
manner so as not to interfere with the normal business operations of the
Company, to all premises, properties, personnel, books, records (including Tax
records), contracts and documents of or pertaining to the Company.
4.4. Notice of Developments. The Shareholders will give prompt written
notice to PentaStar of any material development which occurs after the date of
this Agreement and before the Closing and affects the business, assets,
Liabilities, financial condition, operations, results of operations, future
prospects, representations, warranties, covenants or disclosure Exhibits of the
Company. No such written notice, however, will be deemed to amend or supplement
any disclosure Exhibit or to prevent or cure any misrepresentation, breach of
warranty or breach of covenant.
4.5. Exclusivity. No Shareholder will, and the Shareholders will not
cause or permit the Company to, (a) solicit, initiate or encourage the
submission of any proposal or offer from any Person relating to the acquisition
of any capital stock or other voting securities, or any portion of the assets
(other than the Excluded Assets) of, the Company (including any acquisition
structured as a merger, consolidation or share exchange) or (b) participate in
any discussions or negotiations regarding, furnish any information with respect
to, assist or participate in or facilitate in any other manner any effort or
attempt by any Person to do or seek any of the foregoing. No Shareholder will
vote shares of the Company's stock in favor of any such transaction. The
Shareholders will notify PentaStar immediately if any Person makes any proposal,
offer, inquiry or contact with respect to any of the foregoing.
4.6. Announcements; Securities Law Restrictions. Prior to the Closing,
neither any Shareholder nor the Company shall disclose to any Person, nor issue
any press release or make any public announcement concerning, the existence,
terms or subject matter of this Agreement without the prior written approval of
PentaStar, except (and only to the extent) previously publicly announced by
PentaStar or to obtain consents required by this Agreement or as required in
connection with any litigation in which the Company is involved. Further,
neither any Shareholder nor the Company shall violate the United States
securities laws which restrict each Shareholder and the Company, as Persons with
material non-public information concerning PentaStar obtained directly or
indirectly from PentaStar, from purchasing or selling securities of PentaStar or
from communicating such information to any other Person under any circumstances
in which it is reasonably foreseeable that such Person is likely to purchase or
sell such securities.
4.7. Excluded Liabilities. On or prior to the Closing Date, the
Shareholders shall pay or shall cause the Company to pay in full all Excluded
Liabilities (other than rent not yet due and payable under the Premises Lease)
that existed as of the Effective Date. Effective as of immediately prior to the
Closing Date, the Shareholders hereby jointly and severally assume and agree to
pay and perform all Excluded Liabilities, without further action by the
Shareholders, the Company or any other Person.
4.8. Distribution of Excluded Assets. Prior to the Closing Date, the
Shareholders shall cause the Company to distribute to the Shareholders the
Excluded Assets.
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<PAGE> 29
4.9. Taxes On Distribution. Any and all Taxes attributable to the
assumption of the Excluded Liabilities under Section 4.7 or to the distribution
of the Excluded Assets under Section 4.8, and to any prior distribution or
dividend of assets, including, without limitation, any recognition by the
Company of taxable income or gain with respect to the distribution or dividend
of the Excluded Assets or any prior distribution or dividend of assets, shall be
paid in full by the Shareholders and neither the Company nor PentaStar shall
have any Liability with respect thereto.
5.0 Post-Closing Covenants. The parties agree as follows with respect to the
period following the Closing.
5.1. Further Assurances. In case at any time after the Closing any
further action is necessary or desirable to carry out the purposes of this
Agreement, each of the parties will take such further action (including the
execution and delivery of such further instruments and documents) as any other
party reasonably may request, all at the sole cost and expense of the requesting
party (unless the requesting party is entitled to indemnification therefor under
Section 7).
5.2. Transition. No Shareholder will take any action at any time that
is designed or intended to have the effect of discouraging any customer,
supplier, lessor, licensor or other business associate of the Company in the
Retained Operations from establishing or continuing a business relationship with
PentaStar after the Closing.
5.3. Cooperation. In the event and for so long as any party actively is
contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand in connection with (a) any
transaction contemplated by this Agreement or (b) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act or transaction on or prior to the Closing
involving any of the Acquired Assets or the Company's business, each of the
other parties will cooperate with such party and its counsel in the contest or
defense, make available their personnel, and provide such testimony as shall be
reasonably necessary in connection with the contest or defense, all at the sole
cost and expense of the contesting or defending party (unless the contesting or
defending party is entitled to indemnification therefor under Section 7).
5.4. Confidentiality. The Shareholders will treat and hold as
confidential all Confidential Information concerning PentaStar, the Company's
business or the Acquired Assets, refrain from using any such Confidential
Information and deliver promptly to PentaStar or destroy, at the request and
option of PentaStar, all of such Confidential Information in its or their
possession. PentaStar will treat and hold as confidential all Confidential
Information concerning the Excluded Operations, refrain from using any such
Confidential Information and deliver promptly to the Shareholders or destroy, at
the request and option of the Shareholders, all of such Confidential Information
in its or their possession.
5.5. Post-Closing Announcements. Following the Closing, no Shareholder
will issue any press release or make any public announcement relating to the
subject matter of this Agreement without the prior written approval of
PentaStar.
5.6. Financial Statements. The Shareholders will, upon request of
PentaStar, cooperate with PentaStar and render such assistance to PentaStar and
its accountants as may be required to produce such historical and on-going
financial statements and audits as PentaStar may request, including, without
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limitation, signing management representation letters reasonably requested by
PentaStar's auditors, all at the sole cost and expense of PentaStar, but without
additional consideration to the Shareholders. The Shareholders acknowledge that
PentaStar may be required by applicable law to include audited financial
statements with respect to the business of the Company in reports filed with
governmental agencies and that the inability to audit the financial statements
as of the Closing Date promptly after the Closing could have a material adverse
effect on PentaStar.
5.7. Satisfaction of Liabilities.
(a) Following the Closing, the Shareholders will pay promptly
when due any Excluded Liabilities not previously paid and any Taxes attributable
to the transactions contemplated by this Agreement.
(b) The Shareholders, at their expense, promptly will take or
cause to be taken any action necessary to remedy any failure of the Premises or
the acquired business to comply at the Closing Date with any Legal Requirement,
upon receipt of notice from PentaStar at any time.
(c) PentaStar will pay and perform, as and when due (except to
the extent the validity thereof or the liability therefor is being contested by
PentaStar), the Retained Liabilities.
5.8. Termination of Obligations. Effective as of the Closing Date,
PentaStar shall not have any Liability to any Shareholder or any relative or
affiliate thereof or of the Company, except as otherwise provided in this
Agreement or in an Other Seller Agreement or in any other written agreement
entered into on or after the Closing Date. Effective as of the Closing Date, the
Shareholders shall not have any Liability to PentaStar, except as otherwise
provided in this Agreement, in an Other Seller Agreement or in any other written
agreement entered into on or after the Closing Date.
5.9. Transfer Restrictions. Unless otherwise agreed by PentaStar,
except for transfers by a Shareholder to (a) immediate family members of such
Shareholder who agree to be bound by the restrictions set forth in this Section
5.9 (and a copy of such agreement is furnished to PentaStar prior to the
transfer), (b) trusts, limited partnerships or other estate planning entities
for the benefit of such Shareholder or family members of such Shareholder, the
trustees, partners or other persons having authority to bind the trust, limited
partnership or other estate planning entity of which agree to be bound by such
restrictions (and a copy of such agreement is furnished to PentaStar prior to
the transfer), or (c) any charitable organization that qualifies for receipt of
charitable contributions under Section 170(c) of the Code and such organization
agrees to be bound by such restrictions (and a copy of such agreement is
furnished to PentaStar prior to the transfer), each Shareholder agrees that such
Shareholder will not sell, assign, exchange, transfer, pledge or otherwise
dispose of at any time prior to the date which is 18 months after the Closing
any of the PentaStar Shares received by such Shareholder as part of the Purchase
Price. Thereafter, up to 33.33% of the PentaStar Shares received as part of the
Purchase Price by such Shareholder may be resold at any time, and an additional
16.67% of the PentaStar Shares received as part of the Purchase Price by the
Shareholder may be resold by the Shareholder beginning 24 months after the
Closing. Any remaining PentaStar Shares may not be sold until the earlier to
occur of (x) sale of all or substantially all of the assets or outstanding
shares of PentaStar, whether by way of merger, acquisition or other method
(except a merger or consolidation immediately after which the Persons who were
shareholders of PentaStar before the transaction own a majority of the
outstanding equity securities of the surviving or resulting entity) or (y)
October 26, 2004. Certificates for the PentaStar Shares delivered to the
Shareholder pursuant to the Agreement will bear a legend substantially in the
form set forth below as long as applicable:
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THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THAT CERTAIN AGREEMENT
AND PLAN OF MERGER DATED AS OF JANUARY 1, 2000 (THE "AGREEMENT"), BY AND AMONG
THE ISSUER, THE SHAREHOLDERS OF PARTEL, INC. AND PARTEL, INC. PRIOR TO THE
EXPIRATION OF THE HOLDING PERIOD SET FORTH IN THE AGREEMENT, SUCH SHARES MAY NOT
BE SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF
WITHOUT THE WRITTEN CONSENT OF THE ISSUER, AND THE ISSUER SHALL NOT BE REQUIRED
TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE, TRANSFER, PLEDGE OR
OTHER DISPOSITION WHICH VIOLATES THE AGREEMENT. UPON THE WRITTEN REQUEST OF THE
HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND
(AND ANY STOP ORDER RELATING TO THIS RESTRICTIVE LEGEND PLACED WITH THE TRANSFER
AGENT) WHEN THE APPLICABLE HOLDING PERIOD HAS EXPIRED.
PentaStar shall issue separate certificates to the Shareholder
representing the shares of PentaStar Shares subject to each of the three periods
of restriction contemplated by this Section 5.9.
The restrictions set forth along in this Section 5.9 shall be in
addition to any restrictions on transfer imposed by the Securities Act and
applicable state securities laws set forth in Section 3.2 and otherwise required
by law. Each Shareholder also agrees to comply with such restrictions.
5.10. Collection of Excluded Receivables. The Excluded Assets include
all payments received by the Company or PentaStar on or after the Effective Date
in respect of Effective Date Orders, to the extent and only to the extent that
the total amount of such payments received by the Company or PentaStar on or
after the Effective Date exceeds $750,000 (such excess, the "Excluded
Receivables"). From and after the Closing Date, PentaStar shall continue to bill
and collect the Excluded Receivables on behalf of the Shareholders in accordance
with its normal billing and collection practices, but shall not be required to
institute any suit or other proceeding to collect any Excluded Receivables.
PentaStar shall have no liability to the Shareholders if any Excluded Receivable
is not collected. Upon receipt of any payment in respect of an Excluded
Receivable, PentaStar shall pay, on behalf of the Shareholders, any commission
due from such payment and shall remit to the Shareholders' Agent 80% of the
amount remaining after such commission is paid. The other 20% shall be retained
by PentaStar as a fee for the billing and collection services provided under
this Section 5.10. Payments to the Shareholders hereunder shall be made within
60 days after the end of each calendar quarter in respect of payments received
during the quarter and shall be accompanied by a written calculation of the
amount due to the Shareholders. PentaStar shall be entitled to be reimbursed for
any costs it incurs in collecting any Excluded Receivables or in fulfilling any
condition to the right to receive payment of any Excluded Receivable and may
offset such costs against any amount owing to the Shareholders.
5.11. Tax Returns. The Shareholders shall be responsible for the timely
filing of the Company's tax returns for the 1999 tax year and the short tax year
from the Effective Date through the Closing Date and for the timely payment of
all income or other taxes relating to those periods. PentaStar will make the
books and records of the Company available to the Shareholders as required for
the preparation of such returns or for any subsequent audit or examination of
any tax return of the Company for any period ending with or prior to the Closing
Date. PentaStar shall notify the Shareholders' Agent of any inquiry, audit or
examination of which PentaStar receives notice relating to the Company's tax
returns for any period ending with or prior to the Closing Date and the
Shareholders' Agent shall have the right to control the defense and settlement
of
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any such inquiry, audit or examination. PentaStar shall not file any amended
return for the Company for any period ending with or prior to the Closing Date
without the consent of the Shareholders' Agent, unless required to do so by
applicable law. The Shareholders shall afford PentaStar a reasonable opportunity
to review any new or amended tax return for the Company filed by them hereunder
and shall not make any election or take any other action on any such return that
would increase the tax liability of the Company for periods after the Closing
Date.
5.12. Defense of Litigation. The pending litigation disclosed on
Exhibit 3.1(i)(i) is included in the Excluded Liabilities. In addition to paying
any liability that may be incurred in those suits, the Shareholders shall
conduct the defense of those suits and pay all of the costs of the defense.
PentaStar shall cooperate with the Shareholders in defending those suits in such
reasonable respects as the Shareholders may request, but the Shareholders shall
reimburse PentaStar for all expenses incurred in connection therewith.
6. Conditions to Closing.
6.1. Conditions to Obligation of PentaStar. The obligation of PentaStar
to consummate the transactions contemplated by this Agreement is subject to
satisfaction of the following conditions:
(a each Shareholder's representations and warranties shall be
correct and complete as set forth in Section 3.1 and 3.2 at and as of the
Closing Date and the Closing and any written notices delivered to PentaStar
pursuant to Section 4.4 and the subject matter thereof shall be satisfactory to
PentaStar, which satisfaction shall not be unreasonably withheld by PentaStar;
(b the Shareholders shall have performed and complied with all
of their covenants hereunder through the Closing;
(c the Shareholders shall have given, or caused the Company to
give, all notices and shall have procured, or caused the Company to procure, all
of the third-party consents, authorizations and approvals required to consummate
the transactions contemplated by this Agreement, including the Transaction, all
in form and substance satisfactory to PentaStar, which satisfaction shall not be
unreasonably withheld by PentaStar;
(d no action, suit or proceeding shall be pending before any
Governmental Authority or any other Person wherein an Order has been sought that
would (i) prevent consummation of any of the transactions contemplated by this
Agreement, (ii) cause any of the transactions contemplated by this Agreement to
be rescinded following consummation or (iii) affect adversely the right of
PentaStar to own the Acquired Assets and conduct the Company's business, and no
such Order shall be in effect;
(e there shall have been no material adverse change in the
Company, the Acquired Assets or the Company's business between the date of
execution of this Agreement and the Closing;
(f the Shareholders shall have delivered to PentaStar (i) a
certificate to the effect that each of the conditions specified above in
Sections 6.1(a) through (f) is satisfied in all respects and (ii) a good
standing certificate, dated within 10 days of the Closing, from the Corporation
Commission of the State of Arizona.
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<PAGE> 33
(g the Other Seller Agreements shall have been executed and
delivered by the Shareholders, as applicable;
(h PentaStar shall have received from counsel to the
Shareholders an opinion in form and substance as set forth in Exhibit 6.1(h)
addressed to PentaStar dated as of the Closing;
(i PentaStar shall have completed its due diligence with
respect to the Company with results satisfactory to PentaStar;
(j PentaStar shall have received from the Shareholders
evidence of the termination of all Encumbrances filed against the Acquired
Assets;
(k PentaStar shall have received the resignations, effective
as of the Closing, of each director and officer of the Company;
(l stock certificates representing the Shares duly endorsed in
blank or accompanied by stock powers duly executed in blank, shall have been
delivered by the Shareholders to PentaStar;
(m the Shareholders shall have delivered to PentaStar
possession and control of the Company and the Acquired Assets, including,
without limitation, all stock certificate books, minute books, corporate seals,
and all other corporate and financial records of the Company (except for records
relating to the Excluded Operations); and
(n the Shareholders shall have delivered, or caused the
Company to deliver, to PentaStar such other instruments, certificates and
documents as are reasonably requested by PentaStar in order to consummate the
transactions contemplated by this Agreement, all in form and substance
reasonably satisfactory to PentaStar, which satisfaction shall not be
unreasonably withheld.
PentaStar may waive any condition specified in this Section 6.1 at or prior to
the Closing.
6.2. Conditions to Obligation of the Shareholders. The obligation of
the Shareholders to consummate the transactions contemplated by this Agreement
is subject to satisfaction of the following conditions:
(a PentaStar's representations and warranties shall be correct
and complete at and as of the Closing Date and the Closing;
(b PentaStar shall have performed and complied with all of its
covenants hereunder through the Closing Date;
(c PentaStar shall have delivered to the Shareholders a
certificate to the effect that each of the conditions specified above in
Sections 6.2(a) and (b) is satisfied in all respects;
(d the Other PentaStar Agreements shall have been executed
and delivered by PentaStar;
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<PAGE> 34
(e the Shareholders shall have received from counsel to
PentaStar an opinion in form and substance as set forth in Exhibit 6.2(e),
addressed to the Shareholders and dated as of the Closing; and
(f PentaStar shall have paid and issued the portion of the
Purchase Price due at the Closing pursuant to Section 2.1.
The Shareholders' Agent may waive any condition specified in this Section 6.2 at
or prior to the Closing.
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<PAGE> 35
7. Remedies for Breaches of This Agreement.
7.1. Indemnification Provisions for Benefit of PentaStar.
(a If any Shareholder breaches (or if any Person other than
PentaStar alleges facts that, if true, would mean any Shareholder has breached)
any of the representations or warranties of any Shareholder contained herein and
PentaStar gives notice thereof to the Shareholders' Agent within the Survival
Period, or if any Shareholder breaches (or if any Person other than PentaStar
alleges facts that, if true, would mean any Shareholder has breached) any
covenants of any Shareholder contained herein or any representations, warranties
or covenants of any Shareholder contained in any Other Seller Agreement and
PentaStar gives notice thereof to the Shareholders' Agent, then the Shareholders
agree to jointly and severally (except that each Shareholder's Liability with
respect to Section 3.2 only shall be several and not joint) indemnify and hold
harmless PentaStar from and against any Adverse Consequences PentaStar may
suffer resulting from, arising out of, relating to or caused by any of the
foregoing regardless of whether the Adverse Consequences are suffered during or
after the Survival Period. In determining whether there has been a breach of any
representation or warranty contained in Section 3.1 or 3.2 and in determining
for purposes of the preceding sentence the amount of Adverse Consequences
suffered by PentaStar, such representations and warranties shall not be
qualified (other than by the reference to "knowledge" set forth in the last
sentence of Section 3.1(o)) by "material," "materiality," "in all material
respects," "best knowledge," "best of knowledge" or "knowledge" or words of
similar import, or by any phrase using any such terms or words. The Shareholders
also agree to jointly and severally indemnify and hold harmless PentaStar from
and against any Adverse Consequences PentaStar may suffer which result from,
arise out of, relate to or are caused by (i) any Liability of the Company or any
Shareholder not included in the Retained Liabilities or (ii) any condition,
circumstance or activity existing prior to the Closing Date which relates to any
Legal Requirement or any act or omission of the Company or any Shareholder or
any predecessor with respect to, or any event or circumstance related to, the
Company's, any Shareholder's or any predecessor's ownership, use or operation of
any of the Acquired Assets, the Excluded Assets, the Premises or any other
assets or properties or the conduct of its or their business, regardless, in the
case of (i) or (ii), of (A) whether or not such Liability, act, omission, event,
circumstance or matter was known or disclosed to PentaStar, was disclosed on any
Exhibit hereto or is a matter with respect to which any Shareholder did or did
not have knowledge, (B) when such Liability, act, omission, event, circumstance
or matter occurred, existed, occurs or exists (provided that the obligation of
the Shareholders to indemnify against Adverse Consequences arising from the
ownership, use or operation of the Excluded Assets shall apply only to such
ownership, use or operation prior to the Closing Date, including any failure
after the Closing Date to perform any obligation or commitment entered into
prior to the Closing Date) and (C) whether a claim with respect thereto was
asserted before or is asserted after the Closing Date. If any dispute arises
concerning whether any indemnification is owing which cannot be resolved by
negotiation among the parties within 30 days of notice of claim for
indemnification from the party claiming indemnification to the party against
whom such claim is asserted, the dispute will be resolved by arbitration
pursuant to this Agreement; provided, however, that if PentaStar is sued in an
action relating in whole or in part to a claim against which it is or may be
entitled to indemnification hereunder, it may, at its option, join the
Shareholders in that action and have its right to indemnification adjudicated by
the court.
(b Amounts needed to cover any indemnification claims by
PentaStar against any Shareholder during the Escrow Period may be taken by
PentaStar out of the Escrow Deposit. At the end of the Escrow Period, amounts of
the Escrow Deposit which may reasonably be needed to cover pending
indemnification claims made by PentaStar (such amounts to be determined by
PentaStar based upon the good
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<PAGE> 36
faith exercise of its business judgment) shall be retained in the Escrow Account
until such claims are resolved, and any excess amount of the Escrow Deposit
shall be paid to the Shareholders. For purposes of indemnification claims, each
of the shares of PentaStar Common Stock shall be valued at its Fair Market Value
as of the date that it is delivered from the Escrow Account. PentaStar and the
Shareholders' Agent shall jointly give instructions to the Escrow Agent to carry
out the intent of this Section 7.1(b). Any disputes concerning the escrowed
property shall be settled by arbitration as provided in this Agreement.
PentaStar, on the one hand, and the Shareholders jointly and severally, on the
other hand, shall each be responsible for one-half of the fees, charges and
expenses payable to the Escrow Agent pursuant to the Escrow Agreement. Nothing
in this Section 7.1(b) shall be construed to limit PentaStar's right to
indemnification to amounts on deposit in the Escrow Account or to require that
the Escrow Account first be exhausted before PentaStar may resort to any other
remedy available under this Agreement or otherwise. The Shareholders shall have
joint and several Liability for all amounts needed to cover indemnification
claims, which amounts shall be paid directly to PentaStar.
(c During the time that any PentaStar Shares are held in the
Escrow Deposit, the Shareholder who deposited such shares shall have the right
to vote such shares and shall have the economic benefit of any dividends paid on
such shares. All such dividends shall be retained in the Escrow Deposit and
shall be available for the payment of indemnification claims under Section
7.1(b). In the event that PentaStar proposes to take any shares from the Escrow
Deposit to satisfy an indemnification claim, the Shareholders shall have the
right, in their sole discretion, to pay to the Escrow Agent an amount of cash
equal to the Fair Market Value of the shares proposed to be taken, determined as
of the date such payment is made, and receive from the Escrow Agent certificates
representing such shares. If the Shareholders exercise that right, PentaStar and
the Shareholders' Agent shall execute joint written instructions to the Escrow
Agent to deliver the cash so paid to PentaStar and to transfer the appropriate
number of shares of PentaStar Common Stock to the Shareholders. If the
Shareholders do not exercise that right, PentaStar may nonetheless require the
Shareholders to substitute cash for the shares to be taken from the Escrow
Deposit if, in the good faith opinion of PentaStar, based on advice of counsel,
the taking of shares from the Escrow Deposit would cause the Purchase Price,
taken as a whole, not to comply with the continuity of interest test for a
tax-free reorganization under Section 368 of the Code. For that purpose, the
parties agree that, under current law, such continuity of interest test would
not require that the PentaStar Shares constitute more than half of the total
Purchase Price, after all adjustments, and taking into account the distribution
of the Excluded Assets, the assumption of the Excluded Liabilities and any
re-acquisition by PentaStar of any of the PentaStar Shares.
(d Notwithstanding any other provision of this Agreement, the
Shareholders shall not be liable for any tax assessed as a result of PentaStar
transactions occurring on or after the Closing Date or for any failure by
PentaStar to publish notice of the Merger or file an affidavit of such
publication as required by Arizona law.
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<PAGE> 37
7.2. Indemnification Provisions for Benefit of the Shareholders. If
PentaStar breaches (or if any Person other than a Shareholder alleges facts
that, if true, would mean PentaStar has breached) any of its representations or
warranties contained herein and the Shareholders' Agent gives notice of a claim
for indemnification against PentaStar within the Survival Period, or if
PentaStar breaches (or if any Person other than a Shareholder alleges facts
that, if true, would mean PentaStar has breached) any of its covenants contained
herein or any of its representations, warranties or covenants contained in any
Other PentaStar Agreement and the Shareholders' Agent gives notice thereof to
PentaStar, then PentaStar agrees to indemnify and hold harmless the Shareholders
from and against any Adverse Consequences the Shareholders may suffer which
result from, arise out of, relate to, or are caused by the breach or alleged
breach, regardless of whether the Adverse Consequences are suffered during or
after the Survival Period. In determining whether there has been a breach of any
representation or warranty contained in Section 3.3 and in determining the
amount of Adverse Consequences suffered by the Shareholders for purposes of this
Section 7.2, such representations and warranties shall not be qualified by
"material," "materiality," "in all material respects," "best knowledge," "best
of knowledge" or "knowledge" or words of similar import, or by any phrase using
any such terms or words. PentaStar also agrees to indemnify and hold harmless
the Shareholders from and against any Adverse Consequences they may suffer which
result from, arise out of, relate to or are caused by (i) any of the Retained
Liabilities or (ii) any act or omission of PentaStar with respect to, or any
event or circumstance related to, PentaStar's ownership, use or operation of the
Acquired Assets or the conduct of the Retained Operations after the Closing
Date; provided, however, that such Adverse Consequences shall not include any
decline in value of the PentaStar Shares, any failure to achieve all or any
portion of an Earn-Out Amount that the Shareholders may anticipate at the time
this Agreement is entered into or any failure by any Shareholder to earn any
bonus or other compensation under any employment arrangement with PentaStar. If
any dispute arises concerning whether any indemnification is owing which cannot
be resolved by negotiation among the parties within 30 days of notice of claim
for indemnification from the party claiming indemnification to the party against
whom such claim is asserted, the dispute will be resolved by arbitration
pursuant to this Agreement; provided, however, that any Shareholder is sued in
an action relating in whole or in part to a claim against which he or she is or
may be entitled to indemnification hereunder, he or she may, at its option, join
PentaStar in that action and have his or her right to indemnification
adjudicated by the court.
7.3. Matters Involving Third Parties.
(a If any Person not a party to this Agreement (including,
without limitation, any Governmental Authority) notifies any party (the
"Indemnified Party") with respect to any matter (a "Third Party Claim") which
may give rise to a claim for indemnification against any other party (the
"Indemnifying Party"), then the Indemnified Party will notify each Indemnifying
Party thereof in writing within 15 days after receiving such notice. No delay on
the part of the Indemnified Party in notifying any Indemnifying Party will
relieve the Indemnifying Party from any obligation hereunder unless (and then
solely to the extent) the Indemnifying Party thereby is prejudiced.
(b Any Indemnifying Party will have the right, at its sole
cost and expense, to defend the Indemnified Party against the Third Party Claim
with counsel of its choice satisfactory to the Indemnified Party so long as (i)
the Indemnifying Party notifies the Indemnified Party in writing within 10 days
after the Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to or caused by the Third Party Claim, (ii) the
Indemnifying Party provides the Indemnified Party with evidence reasonably
acceptable to the Indemnified Party that the
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<PAGE> 38
Indemnifying Party will have the financial resources to defend against the Third
Party Claim and fulfill its indemnification obligations hereunder, (iii) the
Third Party Claim involves only money damages and does not seek an injunction or
other equitable relief, (iv) settlement of, or an adverse judgment with respect
to, the Third Party Claim is not, in the good faith judgment of the Indemnified
Party, likely to establish a precedential custom or practice materially adverse
to the continuing business interests of the Indemnified Party, and (v) the
Indemnifying Party conducts the defense of the Third Party Claim actively and
diligently. If the Indemnifying Party does not assume control of the defense or
settlement of any Third Party Claim in the manner described above, it will be
bound by the results obtained by the Indemnified Party with respect to the Third
Party Claim.
(c So long as the Indemnifying Party is conducting the defense
of the Third Party Claim in accordance with Section 7.3(b) above, (i) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
and participate in the defense of the Third Party Claim, (ii) the Indemnified
Party will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent of the
Indemnifying Party (not to be withheld unreasonably), and (iii) the Indemnifying
Party will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent of the
Indemnified Party (not to be withheld unreasonably).
(d In the event any of the conditions in Section 7.3(b) above
is or becomes unsatisfied, however, (i) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any settlement
with respect to, the Third Party Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not consult with, or obtain any
consent from, any Indemnifying Party in connection therewith), (ii) the
Indemnifying Parties will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third Party Claim (including
reasonable attorneys' fees and expenses), and (iii) the Indemnifying Parties
will remain responsible for any Adverse Consequences the Indemnified Party may
suffer resulting from, arising out of, relating to or caused by the Third Party
Claim to the fullest extent provided in this Section 7.
7.4. Right of Offset. PentaStar will have the right to offset any
Adverse Consequences it may suffer or any other amounts due to it hereunder
against any amounts payable or shares of PentaStar Common Stock issued or to be
issued pursuant to this Agreement or any Other Seller Agreement to any
Shareholder or any relative or affiliate of any Shareholder at or after the
Closing. For purposes of effecting any offset against shares of PentaStar Common
Stock, such shares shall be valued at their Fair Market Value as of the date
that the set-off is effected by PentaStar.
7.5. Other Remedies. The foregoing indemnification provisions are in
addition to, and not in derogation of, any statutory, equitable or common law
remedy any party may have.
8. Termination.
8.1. Termination of Agreement. The parties may terminate this Agreement
as provided below:
(a PentaStar and the Shareholders' Agent may terminate this
Agreement by mutual written consent at any time prior to the Closing;
- 33 -
<PAGE> 39
(b PentaStar may terminate this Agreement by giving written
notice to the Shareholders' Agent at any time prior to the Closing (i) in the
event any Shareholder has breached any representation, warranty or covenant
contained in this Agreement in any material way, PentaStar has notified the
Shareholders' Agent of the breach, and the breach has not been cured within 10
days after the notice of breach or (ii) if the Closing has not occurred on or
before April 15, 2000 because of the failure of any condition precedent to
PentaStar's obligations to consummate the Closing (unless the failure results
primarily from PentaStar breaching any representation, warranty or covenant
contained in this Agreement in any material way); or
(c the Shareholders' Agent may terminate this Agreement by
giving written notice to PentaStar at any time prior to the Closing (i) if
PentaStar has breached any representation, warranty or covenant contained in
this Agreement in any material way, the Shareholders' Agent has notified
PentaStar of the breach, and the breach has not been cured within 10 days after
the notice of breach or (ii) if the Closing has not occurred on or before April
15, 2000 because of the failure of any condition precedent to the Shareholders'
obligations to consummate the Closing (unless the failure results primarily from
any Shareholder breaching any representation, warranty or covenant contained in
this Agreement in any material way).
8.2. Effect of Termination. The termination of this Agreement by a
party pursuant to Section 8.1 will in no way limit any obligation or liability
of any other party based on or arising from a breach or default by such other
party with respect to any of its representations, warranties, covenants or
agreements contained in this Agreement, and the terminating party will be
entitled to seek all relief to which it is entitled under applicable law.
8.3. Confidentiality. If this Agreement is terminated, each party will
treat and hold as confidential all Confidential Information concerning the other
parties which it acquired from such other parties in connection with this
Agreement and the transactions contemplated hereby, except to the extent that
disclosure is required by applicable law.
9. Miscellaneous.
9.1. No Third-Party Beneficiaries. This Agreement will not confer any
rights or remedies upon any Person other than the parties and their respective
successors and permitted assigns.
9.2. Entire Agreement. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the parties and supersedes any
prior understandings, agreements or representations by or among the parties,
written or oral, to the extent they relate in any way to the subject matter
hereof.
9.3. Succession and Assignment. This Agreement will be binding upon and
inure to the benefit of the parties and their respective successors and
permitted assigns. No Shareholder may assign this Agreement or any of his or her
rights, interests or obligations hereunder without the prior written approval of
PentaStar. PentaStar may assign its rights and obligations hereunder as
permitted by law, including, without limitation, to any debt or equity financing
source.
- 34 -
<PAGE> 40
9.4. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
together shall be deemed to be one and the same instrument. The execution of a
counterpart of the signature page to this Agreement will be deemed the execution
of a counterpart of this Agreement. This Agreement may be delivered by facsimile
and facsimile signatures will be treated as original signatures for all
purposes.
9.5. Headings. The section headings contained in this Agreement are
inserted for convenience only and will not affect in any way the meaning or
interpretation of this Agreement.
9.6. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if it is sent by
registered or certified mail, return receipt requested, postage prepaid, or by
courier, telecopy or facsimile, and addressed to the intended recipient as set
forth below:
If to any
Shareholder: Copy to:
Addressed to the John H. Messing, P.C.
Shareholders' Agent at: 1661 N. Swan Road, Suite 312
Tucson, Arizona 85712
Par.com, Inc. Telecopy: (520) 325-1087
1141 West Grant Road, Suite 100
Tucson, Arizona 85705
Telecopy: (520) 623-6010
If to PentaStar: Copy to:
PentaStar Communications, Inc. Sherman & Howard L.L.C.
1522 Blake Street 633 Seventeenth Street, Suite 3000
Denver, Colorado 80202 Denver, Colorado 80202
Attn: Chief Executive Officer Attn: B. Scott Pullara
Telecopy: (303) 825-4402 Telecopy: (303) 298-0940
Notices will be deemed given three days after mailing if sent by certified mail,
when delivered if sent by courier, and upon receipt of confirmation by person or
machine if sent by telecopy or facsimile transmission. Any party may change the
address to which notices, requests, demands, claims and other communications
hereunder are to be delivered by giving the other parties notice in the manner
herein set forth.
9.7. Governing Law. This Agreement will be governed by and construed in
accordance with the domestic laws of the State of Colorado without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Colorado or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Colorado.
9.8. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same is in writing and signed by PentaStar
and the Shareholders' Agent. No waiver by any party of any default,
misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not,
- 35 -
<PAGE> 41
will be deemed to extend to any prior or subsequent default, misrepresentation
or breach of warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent such occurrence, and no waiver will
be effective unless set forth in writing and signed by the party against whom
such waiver is asserted.
9.9. Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
9.10. Expenses. Except as otherwise provided in Section 8.2 (a)
PentaStar shall bear its own costs and expenses (including, without limitation,
legal fees and expenses) incurred either before or after the date of this
Agreement in connection with this Agreement or the transactions contemplated
hereby and (b) the Shareholders will bear all costs and expenses (including,
without limitation, all legal, accounting and tax related fees and expenses, all
fees, commissions, expenses and other amounts payable to any broker, finder or
agent) incurred by the Company prior to the Closing or by any Shareholder either
before or after the date of this Agreement in connection with this Agreement or
the transactions contemplated hereby (collectively, "Seller Transaction
Expenses"); provided, however, that prior to the Closing Date the Company may
use any cash to pay Seller Transaction Expenses.
9.11. Arbitration. Except as provided in Sections 7.1(a) and 7.2(a),
any disputes arising under or in connection with this Agreement, including,
without limitation, those involving claims for specific performance or other
equitable relief, will be submitted to binding arbitration in Denver, Colorado
before the Judicial Arbiter Group, but under the Commercial Arbitration Rules of
the American Arbitration Association under the authority of federal and state
arbitration statutes, and shall not be the subject of litigation in any forum.
If the Judicial Arbiter Group is unavailable to conduct the arbitration, then it
shall be before another arbitral body in Denver, Colorado selected by PentaStar
and the Shareholders' Agent or, if they cannot agree on another arbitral body,
the American Arbitration Association. EACH PARTY, BY SIGNING THIS AGREEMENT,
VOLUNTARILY, KNOWINGLY AND INTELLIGENTLY WAIVES ANY RIGHTS SUCH PARTY MAY
OTHERWISE HAVE TO SEEK REMEDIES IN COURT OR OTHER FORUMS, INCLUDING THE RIGHT TO
JURY TRIAL. The arbitrator shall have full authority to order specific
performance and other equitable relief and award damages and other relief
available under this Agreement or applicable law, but shall have no authority to
add to, detract from, change or amend the terms of this Agreement or existing
law. All arbitration proceedings, including settlements and awards, shall be
confidential. The decision of the arbitrators will be final and binding, and
judgment on the award by the arbitrators may be entered in any court of
competent jurisdiction. THIS SUBMISSION AND AGREEMENT TO ARBITRATE WILL BE
SPECIFICALLY ENFORCEABLE. The prevailing party or parties in any such
arbitration or in any action to enforce this Agreement will be entitled to
recover, in addition to any other relief awarded by the arbitrator, all
reasonable costs and expenses, including fees and expenses of the arbitrators
and attorneys, incurred in connection therewith. If each party prevails on
specific issues in the arbitration or action, the arbitrator or court may
allocate the costs incurred by all parties on a basis it deems appropriate.
9.12. Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement will be construed as
if drafted jointly by the parties and no presumption or burden of proof will
arise favoring or
- 36 -
<PAGE> 42
disfavoring any party by virtue of the authorship of any of the provisions of
this Agreement. The word "including" will mean including without limitation. The
parties intend that each representation, warranty and covenant contained herein
will have independent significance. If any party breaches any representation,
warranty or covenant contained herein in any respect, the fact that there exists
another representation, warranty or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the party has not
breached will not detract from or mitigate the fact that the party is in breach
of the first representation, warranty or covenant.
9.13. Incorporation of Exhibits. The Exhibits identified in this
Agreement are incorporated herein by reference and made a part hereof.
9.14. Shareholders' Agent. Each Shareholder hereby authorizes and
appoints the Shareholders' Agent as its, his or her exclusive agent and
attorney-in-fact to act on behalf of each of them with respect to all matters
which are the subject of this Agreement, including, without limitation, (a)
receiving or giving all notices, instructions, other communications, consents or
agreements that may be necessary, required or given hereunder and (b) asserting,
settling, compromising, or defending, or determining not to assert, settle,
compromise or defend, (i) any claims which any Shareholder may assert, or have
the right to assert, against PentaStar, or (ii) any claims which PentaStar may
assert, or have the right to assert, against any Shareholder. The Shareholders'
Agent hereby accepts such authorization and appointment. Upon the receipt of
written evidence satisfactory to PentaStar to the effect that the Shareholders'
Agent has been substituted as agent of the Shareholders by reason of his death,
disability or resignation, PentaStar shall be entitled to rely on such
substituted agent to the same extent as they were theretofore entitled to rely
upon the Shareholders' Agent with respect to the matters covered by this Section
9.14. No Shareholder shall act with respect to any of the matters which are the
subject of this Agreement except through the Shareholders' Agent. The
Shareholders acknowledge and agree that PentaStar may deal exclusively with the
Shareholders' Agent in respect of such matters, that the enforceability of this
Section 9.14 is material to PentaStar, and that PentaStar has relied upon the
enforceability of this Section 9.14 in entering into this Agreement.
[SIGNATURE PAGE FOLLOWS]
- 37 -
<PAGE> 43
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
PENTASTAR:
PENTASTAR COMMUNICATIONS, INC.
By: /s/ Craig J. Zoellner
-----------------------------------------
Name: Craig J. Zoellner
---------------------------------------
Title: Vice President
--------------------------------------
COMPANY:
PARTEL, INC.
By: /s/ S. Parisi
-----------------------------------------
Salvatore Parisi, Secretary Treasurer
SHAREHOLDERS:
/s/ S. Parisi
---------------------------------------------
Salvatore Parisi
/s/ Antoinette Parisi
---------------------------------------------
Antoinette Parisi
/s/ Paul Parisi
---------------------------------------------
Paul Parisi
/s/ Catherine Parisi
---------------------------------------------
Catherine Parisi
/s/ Kathy Kidd
---------------------------------------------
Kathy Kidd
/s/ Clayton Kidd
---------------------------------------------
Clayton Kidd
/s/ Linda M. Patterson
---------------------------------------------
Linda M. Patterson
Exhibit 1.1(a) - 1
<PAGE> 44
DEFINED TERMS
Acquired Assets means all right, title and interest of the Company
in and to all of the tangible and intangible assets of the Company, including
cash and cash equivalents, but excluding the Excluded Assets.
Adjustment Financial Statements has the meaning set forth in
Section 2.1(l).
Adverse Consequences means all actions, suits, proceedings,
investigations, complaints, claims, demands, Orders, Liabilities, liens, losses,
damages, penalties, fines, settlements, costs, remediation costs, expenses and
fees (including court costs and reasonable fees and expenses of counsel and
other experts), plus interest at a rate equal to two percentage points above the
prime rate quoted by PentaStar's principal lender from time to time accrued from
the date of such Adverse Consequence. The amount of Adverse Consequences shall
be reduced by any state or federal income tax savings actually realized by the
Person suffering the Adverse Consequences as a result thereof.
Affiliated Group means any affiliated group within the meaning of
Code Section 1504 or any similar group defined under a similar provision of
state, local or foreign law.
Audited Effective Date Balance Sheet has the meaning set forth in
Section 2.1(l).
Benefit Arrangement has the meaning set forth in Section 3.1(m).
Business Day means any day on which commercial banks are open for
business in Denver, Colorado.
Cash Portion of the Purchase Price has the meaning set forth in
Section 2.1(k).
Closing and Closing Date have the meanings given in Section 2.2.
Closing Shares has the meaning given in Section 2.1(k).
Code means the Internal Revenue Code of 1986, as amended.
Company has the meaning given it in Recital A, except that for
purposes of Sections 3.1 and 3.2, the term the "Company" shall mean the Company
and all of its Subsidiaries.
Company Increase means the product of (i) the excess, if any, of
the Fair Market Value of the PentaStar Common Stock as of the date that the
Earn-Out Amount is paid over the Fair Market Value of the PentaStar Common Stock
on the Closing Date, multiplied by (ii) the quotient of the Earn-Out Period
EBITA divided by the combined pro forma EBITA for the year 2000 of all companies
and businesses acquired by PentaStar on or before December 31, 2000. Combined
proforma EBITA for the year 2000 shall include a full 12 months of operations
for each company and business acquired during 2000, regardless of the time
during the year that it was owned by PentaStar. For that purpose, the earnings
of any acquired company or business during the portion of the year prior to its
acquisition by PentaStar will be adjusted to reflect the elimination of expenses
that did not continue after the acquisition (e.g., owners' compensation). If
there has
Exhibit 1.1(a) - 2
<PAGE> 45
been no increase in the Fair Market Value of the PentaStar Common
Stock between the Closing Date and the date that the Earn-Out Amount is paid,
the Company Increase shall be zero.
Company Shares has the meaning given it in Section 3.1(b)(i).
Company Welfare Plan has the meaning given it in Section 3.1(m).
Confidential Information means any information concerning the
subject Person or the subject Person's business, products, financial condition,
prospects and affairs that is not already generally available to the public.
Earn-Out Amount means the remainder of (i) four times Earn-Out
Period EBITA minus (ii) the amount of the total consideration paid by PentaStar
at the Closing, as adjusted pursuant to Section 2.1(m), including amounts paid
by PentaStar in respect of Excluded Liabilities and including $500,000 as the
Fair Market Value of the PentaStar Shares issued at the Closing.
Earn-Out Financial Statements has the meaning set forth in Section
2(n)(ii).
Earn-Out Period means the calendar year 2000.
Earn-Out Period EBITA means the EBITA of the Partel Division for
the Earn-Out Period, adjusted as follows:
(i) If, during the Earn-Out Period the Partel Division recognizes
revenues from contracts entered into by the Company or PentaStar prior to
November 1, 1999 or after October 31,2000, such revenue shall be excluded from
Earn-Out Period EBITA.
(ii) All revenues recognized on or before March 31, 2001 (based on
installation) in respect of contracts entered into by the Company or PentaStar
on or after November 1, 1999 and on or before October 31, 2000 shall be included
in Earn-Out Period EBITA.
(iii) Expenses that vary with revenues (such as sales commissions)
shall be recognized in the same period as the related revenues are recognized.
(iv) The compensation paid to Paul Parisi and Linda M. Patterson
during the Earn-Out Period shall be adjusted to equal the compensation they
would have been paid if the Employment Agreements had been in effect throughout
the Earn-Out Period.
EBITA means earnings before interest, taxes and amortization,
determined in accordance with GAAP on a basis consistent with PentaStar's
historical practice.
Effective Date has the meaning given it in Section 2.1.
Effective Date Orders has the meaning given it in Section 3.1(d).
Exhibit 1.1(a) - 3
<PAGE> 46
Employee Benefit Plan means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan, as defined in ERISA Section 3(37)) or (d)
Employee Welfare Benefit Plan.
Employee Pension Benefit Plan has the meaning set forth in ERISA
Section 3(2).
Employee Welfare Benefit Plan has the meaning set forth in ERISA
Section 3(1).
Employment Agreements means the Employment and Noncompetition
Agreement between PentaStar and Paul Parisi and the Employment and
Noncompetition Agreement between PentaStar and Linda M. Patterson in the forms
of Exhibits 1.1(b)(A) and 1.1(b)(B), respectively.
Encumbrance means any mortgage, pledge, conditional sale
agreement, charge, claim, interest of another Person, lien, security interest,
title defect or other encumbrance.
Environmental Obligations means all present and future Legal
Requirements and Permits concerning land use, public health, safety, welfare or
the environment, including, without limitation, the Resource Conservation and
Recovery Act (42 U.S.C. Section 6901 et seq.), as amended, and the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C. Section 9601
et seq.), as amended.
ERISA means the Employee Retirement Income Security Act of 1974,
as amended, and any regulations, rules or orders promulgated thereunder.
ERISA Affiliate means any entity which is controlled by, or is
under common control with, the Company, as determined under ERISA Section
4001(a)(14).
Escrow Agent means Norwest Bank Colorado, National Association.
Escrow Agreement means the Escrow Agreement among PentaStar, the
Company, the Shareholders and the Escrow Agent in form of Exhibit 1.1(g).
Escrow Deposit means the Closing Shares deposited with the Escrow
Agent, all cash, securities or other property received by any Shareholder or the
Escrow Agent in respect of or in exchange for such Closing Shares and all
earnings thereon.
Excluded Assets means the assets of the Company used directly and
exclusively in the Excluded Operations and all cash of the Company as of the
Closing Date.
Excluded Liabilities means all Liabilities of the Company other
than the Retained Liabilities.
Excluded Operations means the Company's business of selling and
installing telecommunications hardware.
Excluded Receivables has the meaning set forth in Section 5.10.
Exhibit 1.1(a) - 4
<PAGE> 47
Fair Market Value of the PentaStar Common Stock means, as of any
date, the average of the closing prices of the PentaStar Common Stock for the 10
trading days ending two trading days prior to such date, as quoted by Nasdaq. If
closing prices are not quoted for the PentaStar Common Stock, the closing price
for each such day shall be deemed to be the average of the low bid and high
asked prices for the PentaStar Common Stock for that day, as quoted by Nasdaq.
If the PentaStar Common Stock is not quoted on Nasdaq, the closing price for
each such day shall be deemed to be the average of the high and low sales prices
for the PentaStar Common Stock on that day (or if no sales prices are reported,
the average of the high and low asked prices) as reported by the principal
regional stock exchange, or if not so reported, as reported by Nasdaq or a
quotation system of general circulation to brokers and dealers. If the Fair
Market Value of the PentaStar Common Stock cannot be determined as provided
above, Fair Market Value shall be determined by the board of directors of
PentaStar by any reasonable method chosen by it on a consistent basis.
GAAP means generally accepted accounting principles as in effect
from time to time in the United States.
Governmental Authority means the United States of America, any
state, commonwealth, territory or possession of the United States of America,
any political subdivision thereof (including counties, municipalities, home-rule
cities and the like), and any agency, authority or instrumentality of any of the
foregoing, including, without limitation, any court, tribunal, department,
bureau, commission or board.
Hazardous Materials means any material, chemical, compound,
mixture, hazardous substance, hazardous waste, pollutant or contaminant defined,
listed, classified or regulated under any Environmental Obligation.
Indemnified Party has the meaning set forth in Section 7.3(a).
Intellectual Property means all trade, corporate, business and
product names, trademarks, trademark rights, service marks, copyrights, patents,
patent rights, trade secrets, business, customer and technical information, and
computer software, all registrations, licenses and applications pertaining
thereto, and all related documentation and goodwill.
Key Employee means (a) each employee of the Company other than
clerical employees and (b) if any salesperson is an independent contractor
rather than an employee, each such salesperson. Key Employees include, without
limitation, executives and salespersons.
Legal Requirement means any constitution, statute, ordinance,
code, or other law (including common law), rule, regulation, Order, notice,
standard, procedure or other requirement enacted, adopted, applied or issued by
any Governmental Authority, including, without limitation, judicial decisions
applying or interpreting any such Legal Requirement.
Liability means any liability or obligation (whether known or
unknown, whether asserted or unasserted, whether absolute or contingent, whether
accrued or unaccrued, whether liquidated or unliquidated, and whether due or to
become due).
Exhibit 1.1(a) - 5
<PAGE> 48
Merger has the meaning given it in Section 2.1.
Net Cash Adjustment shall be determined by (1) crediting to the
Shareholders (a) the aggregate amount of expenses incurred by the Company
(determined in accordance with GAAP) in connection with the Retained Operations
during the period from the Effective Date to the Closing Date to the extent and
only to the extent that such accrued expenses were actually paid during such
period and (b) without duplication, the aggregate amount of sales commissions
actually paid during such period in respect of cash received by the Company
during such period relating to the Retained Operations and (2) debiting to the
Shareholders the cash receipts of the Company during such period relating to the
Retained Operations. If the total credits exceed the total debits, the Net Cash
Adjustment shall be positive and 50% of the Net Cash Adjustment shall be added
to the $500,000 figures given in the first sentence of Section 2.1(k). If the
total debits exceed the total credits, the Net Cash Adjustment shall be negative
and 50% of the Net Cash Adjustment shall be subtracted from the $500,000 figures
given in the first sentence of Section 2.1(k). For purposes of determining the
cash receipts of the Company relating to the Retained Operations, the proceeds
of borrowings or investments shall not be counted as cash receipts.
Noncompetition Agreement means the Noncompetition Agreement among
PentaStar and the Shareholders in the form of Exhibit 1.1(d).
Orders means all judgments, injunctions, orders, rulings, decrees,
directives, notices of violation or other requirements of any Governmental
Authority or arbitrator having jurisdiction in the matter, including a
bankruptcy court or trustee.
Other PentaStar Agreements means the Employment Agreements, the
Escrow Agreement, the Noncompetition Agreement, the Principal Shareholder's
Escrow Agreements and the other documents and instruments to be executed and
delivered by PentaStar pursuant to this Agreement.
Other Seller Agreements means the Employment Agreements, the
Escrow Agreement, the Noncompetition Agreement, the Principal Shareholder's
Escrow Agreements and other documents and instruments to be executed and
delivered by any Shareholder or any relative or affiliate of the Company or of
any Shareholder pursuant to this Agreement.
Partel Division has the meaning set forth in Section 2.1(n)(i).
PentaStar Common Stock means the common stock, par value $.0001
per share, of PentaStar.
PentaStar Shares has the meaning set forth in Section 3.2(a).
Permits means all permits, licenses, consents, franchises,
authorizations, approvals, privileges, waivers, exemptions, variances,
exclusionary or inclusionary Orders and other concessions, whether governmental
or private, including, without limitation, those relating to environmental,
public health, welfare or safety matters.
Person means an individual, partnership, corporation, association,
joint stock company, trust, joint venture, limited liability company,
unincorporated organization or Governmental Authority.
Exhibit 3.1(h)(i) - 6
<PAGE> 49
Premises means the real property, buildings and improvements
thereon constituting the business premises of the Company located at 1640 East
Elwood Street, #16-18, Phoenix, Arizona 85040.
Premises Lease means the Lease dated February 24, 1998 between
Bedford Property Investors, Inc., as lessor, and the Company, as lessee,
pursuant to which the Company leases the Premises.
Principal Customers has the meaning set forth in Section 3.1(o).
Principal Providers has the meaning set forth in Section 3.1(o).
Principal Shareholder's Escrow Agreement means a Principal
Shareholder's Escrow and Contingent Stock Agreement between PentaStar and each
Shareholder in the form of Exhibit 1.1(e).
Purchase Price has the meaning given it in Section 2.1(k).
Retained Liabilities means (a) the obligations of the Company
arising after the Effective Date under those contracts which are identified by
PentaStar on Exhibit 1.1(f) with respect to the period after the Effective Date,
(b) Liabilities incurred by the Company on or after the Effective Date in the
ordinary course of business in connection with the Retained Operations and (c)
Liabilities consisting of the obligation to pay sales commissions on the first
$750,000 in payments received by the Company or PentaStar on or after the
Effective Date in respect of Effective Date Orders, determined, in each case, as
of the Closing Date. Retained Liabilities will not include any other Liability.
The commissions described in clause (c) of this definition shall be the only
commissions in respect of Effective Date Orders that are included in the
Retained Liabilities, even though the wording of clause (a) or (b) might
otherwise be broad enough to include commissions.
Retained Operations means all operations of the Company other than
the Excluded Operations.
Right means any right, property interest, concession, patent,
trademark, trade name, copyright, know-how or other proprietary right of another
Person.
Securities Act means the Securities Act of 1933, as amended.
Seller Transaction Expenses has the meaning set forth in Section
9.10.
Shareholders has the meaning given it in the preamble to this
Agreement.
Shareholders' Agent means Par.com, Inc., an Arizona corporation
(or the substituted agent described in Section 9.14), acting as agent for the
Shareholders pursuant to Section 9.14.
Shares means all of the issued and outstanding capital stock of
the Company.
Sublease has the meaning set forth in Section 2.1(q).
Exhibit 3.1(h)(i) - 7
<PAGE> 50
Subsidiary means, with respect to a Person, any Person controlled
(meaning possession of the direct or indirect power to direct or cause the
direction of the management and policies, whether through the ownership of
voting securities, by contract or otherwise) by such first Person directly or
through one or more intermediaries.
Survival Period means, with respect to a representation or
warranty, the applicable period after the Closing Date during which such
representation or warranty survives pursuant to Section 3.4.
Surviving Corporation has the meaning given it in Section 2.1.
Tax means any federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, documentary,
personal property, sales, use, transfer, registration, value added, alternative
or add-on minimum, estimated or other tax of any kind whatsoever, including any
interest, penalty or addition thereto, whether disputed or not.
Tax Return means any return, declaration, report, claim for refund
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
Third Party Claim has the meaning set forth in Section 7.3(a).
Third Party Products has the meaning set forth in Section 3.1(r).
Transaction has the meaning given it in Paragraph B of the
preamble to this Agreement.
Exhibit 3.1(h)(i) - 8
<PAGE> 1
EXHIBIT 10.15
Page 1
Contract #BJ16212
Pentastar Communications Inc. has applied for Confidential treatment for
portions of this exhibit 10.15. An asterisk (*) indicates those portions
that have been omitted pursuant to the request for confidential treatment.
A complete copy of this exhibit has been filed separately with the Securities
and Exchange Commission.
BELL ATLANTIC
AUTHORIZED AGENT NETWORK SERVICES MARKETING AGREEMENT
BY AND BETWEEN
BELL ATLANTIC NETWORK SERVICES, INC.
AND
USTeleCenters
EFFECTIVE DATE: JANUARY 1, 1999
1/1/99 Confidential and Proprietary
<PAGE> 2
Page 2
Contract #BJ16212
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
GLOSSARY OF TERMS 3
ARTICLE I - PREAMBLE 4
ARTICLE II - TERMS OF AGREEMENT 4
ARTICLE III - RELATIONSHIP OF THE PARTIES 4
ARTICLE IV - AGENT RESPONSIBILITIES 6
ARTICLE V - BANSI RESPONSIBILITIES 9
ARTICLE VI - COMPENSATION AND PAYMENT 9
ARTICLE VII - SERVICE APPLICATION PROCEDURE 12
ARTICLE VIII - LICENSE TO USE TRADE NAMES AND TRADEMARKS 13
ARTICLE IX - CONTRACT MODIFICATIONS AND AMENDMENTS 15
ARTICLE X - TERMINATION 15
ARTICLE XI - GENERAL PROVISIONS 17
ARTICLE XII - EXECUTION 25
APPENDICES
A. COMMISSIONED SERVICES & SCHEDULES
B. GLOSSARY OF MARKETING AREAS
C. TRANSACTIONAL SALES REQUIREMENTS
D. MARKET PLAN & FORECAST
E. SUBCONTRACTOR FORM
F. RESERVED LIST OF STRATEGIC BUSINESS ACCOUNTS
G. GOVERNMENT REQUIREMENTS
H. PA CONFIDENTIALITY
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GLOSSARY OF SELECTED TERMS
1. AFFILIATE - any person or entity that owns or controls, is owned or
controlled by or is under the common ownership or control of an entity.
Affiliates of Bell Atlantic Network Services Inc. include Bell Atlantic
Internet Solutions, Bell Atlantic Long Distance and Bell Atlantic
Mobile.
2. BELL ATLANTIC - NORTH - New England Telephone and Telegraph Company
(doing business as Bell Atlantic - Maine, Inc., Bell Atlantic -
Massachusetts, Inc., Bell Atlantic - New Hampshire, Inc., Bell Atlantic
- Rhode Island, Inc., and Bell Atlantic - Vermont, Inc.) and New York
Telephone Company (doing business as Bell Atlantic - New York, Inc.),
collectively.
3. BELL ATLANTIC - SOUTH - Bell Atlantic - Delaware, Inc., Bell Atlantic -
Washington, D. C., Inc., , Bell Atlantic - Maryland, Inc., Bell
Atlantic - New Jersey, Inc., Bell Atlantic - Pennsylvania, Inc., Bell
Atlantic - Virginia, Inc., and Bell Atlantic - West Virginia, Inc.,
collectively.
4. BUSINESS CUSTOMER - any customer who is designated by BANSI under a
business classification for purposes of service provision.
5. CERTIFICATION - the successful completion by agent's salespersons of a
series of training courses prescribed by BANSI.
6. DESIGNATED SALES AREA - the geographic area, specified in Appendix D,
within which agent is authorized to sell the Telephone Company retail
services listed in Appendix A.
7. INCIDENTAL SALES AREA - the geographic area specified Appendix D, which
is outside the agent's Designated Sales Area, within which Agent may
make up to 10% of its total sales to companies whose headquarters are
in Agent's Designated Sales Area. Agent is not authorized to
proactively market Business Customers in the Incidental Sales Area to
companies that do not have headquarters in Agent's Designated Sales
Area.
8. INSTALLATION - the completion of the placement of the equipment and
facilities necessary to support Telephone Company Services or, where
the placement of equipment and facilities is not necessary, the
completion of the BANSI service order processes necessary for the
Customer to use the Service.
9. SERVICES - when capitalized, means those Telephone Company retail
services which are listed in Appendix A.
10. STRATEGIC BUSINESS ACCOUNTS - the accounts (along with the accounts of
their affiliates, subsidiaries and divisions) which BANSI designates as
managed exclusively by BANSI's internal marketing and sales force.
11. SUBCONTRACTOR - third party firms, partnerships, organizations, or 1099
employees that Agent employs for the purpose of selling Services under
this Agreement.
12. TELEMARKET - the proactive cold call telephone canvassing of
prospective and existing customers for the purpose of closing sales of
Services.
13. TELEPHONE COMPANY - Bell Atlantic - Washington, D.C., Inc., Bell
Atlantic - Maryland, Inc., Bell Atlantic - Virginia, Inc., Bell
Atlantic - West Virginia, Inc., Bell Atlantic - Delaware, Inc., Bell
Atlantic - Pennsylvania, Inc., Bell Atlantic - New Jersey, Inc., New
York Telephone Company, and New England Telephone and Telegraph
Company.
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BELL ATLANTIC
AUTHORIZED AGENT NETWORK SERVICES MARKETING AGREEMENT
I. PREAMBLE
This Agreement is made by and between USTeleCenters
a _________________________ corporation / partnership / sole proprietorship,
(State)
with principal offices located at 745 Atlantic Avenue, Boston, MA 02111-2626
(hereinafter referred to as "Agent"), and Bell Atlantic Network Services, Inc.,
a Delaware corporation with principal offices located at 1310 North Court House
Road, Arlington, Virginia 22201 (hereinafter referred to as "BANSI").
Bell Atlantic - Washington, D.C., Inc., Bell Atlantic- Maryland, Inc., Bell
Atlantic - Virginia, Inc., Bell Atlantic - West Virginia, Inc., Bell Atlantic -
Delaware, Inc., Bell Atlantic - Pennsylvania, Inc., Bell Atlantic - New Jersey,
Inc., New York Telephone Co. (doing business as Bell Atlantic - New York), and
New England Telephone and Telegraph Co. (doing business as Bell Atlantic -
Maine, Inc., Bell Atlantic - Massachusetts, Inc., Bell Atlantic - New Hampshire,
Inc., Bell Atlantic - Rhode Island, Inc., and Bell Atlantic - Vermont, Inc.)
(each of which is hereinafter referred to individually as "Telephone Company")
are third party beneficiaries of this Agreement. Each Telephone Company shall
have all of the rights and remedies available to BANSI under this Agreement,
including, but not limited to, any rights and remedies that BANSI may have as a
result of a breach of this Agreement by Agent.
No Telephone Company shall have any liability to Agent under this Agreement. No
Telephone Company shall have any liability for the obligations of BANSI under
this Agreement.
II. TERM OF AGREEMENT
The term of this Agreement shall commence on January 1, 1999, and shall, except
as otherwise provided herein, continue in effect until December 31, 2001.
III. RELATIONSHIP OF THE PARTIES
1. Subject to the conditions set forth below, BANSI hereby grants to Agent the
limited right to act as its non-exclusive agent for the marketing of the
Telephone Company retail services listed in Appendix A ("Services"), to business
customers ("Customers") in the Telephone Company utility service territory in
the marketing areas (designated and incidental) specified in Appendix D. Agent
shall use good faith efforts to market the Services, including, without
limitation, developing and implementing marketing plans, designing Service
proposals, making Service proposals to Customers, taking applications, and
performing any additional functions necessary for the marketing of the Services.
2. It is expressly understood and agreed that the relationship created between
the parties herein is a limited one and that Agent shall have only those rights
specifically
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described in this Agreement. This Agreement does not create or grant to Agent a
franchise. Agent shall acquire no franchise or dealership rights by operation of
law. Agent shall acquire no right to sell or deal with any customer or class of
customers in a particular territory, except as is specifically set forth in this
Agreement.
3. During the term of this Agreement and thereafter, BANSI and each Telephone
Company shall have the right, without obligation or liability to Agent, to
market the Services and all other Telephone Company services and products in the
marketing areas served by Agent or in any other geographic area, whether through
other agents, through BANSI, BANSI's parent and affiliates or Telephone Company
employees, agents or representatives, or through any other means.
4. BANSI and each Telephone Company shall have the right to deal directly with
Customers in all matters related to Services marketed by Agent hereunder,
including, but not limited to, ordering, installation, maintenance, provisioning
and billing of Services. In addition, BANSI and each Telephone Company may
contact or survey the Customers from time to time to assess Agent's performance
hereunder. In no event shall Agent seek to interfere with, undermine or
negatively influence in any way BANSI's or a Telephone Company's relationship
with Customers of the Services.
5. It is expressly understood and agreed: (a) that Agent will perform under this
Agreement as an agent of BANSI with the limited rights prescribed herein to
market the Services; (b) that Agent may not accept a Customer Service
application on behalf of a Telephone Company, enter into a contract with a
Customer on behalf of a Telephone Company, or otherwise legally bind or commit
BANSI or a Telephone Company in any way; (c) that Agent has and shall retain the
right to exercise full control over the employment, direction, compensation and
discharge of all its employees, agents, servants, representatives and
subcontractors assisting in the performance of this Agreement; (d) that Agent
will be solely responsible for all matters relating to payment of its employees,
agents, servants, representatives and subcontractors and for compliance with all
laws and regulations related to them, including, but not limited to, Social
Security, income and other tax withholding; (e) that Agent shall be solely
responsible for Agent's own acts and those of Agent's employees, agents,
servants, representatives and subcontractors during the performance of this
Agreement; (f) that Agent shall require all of its employees, agents, servants,
representatives and subcontractors to comply with this Agreement; and (g) that
the acts and omissions of Agent's employees, agents, servants, representatives
and subcontractors shall be deemed to be the acts and omissions of Agent and any
breach of, or failure to comply with this Agreement by an employee, agent,
servant, representative or subcontractor of Agent shall be deemed to be a breach
of and a failure to comply with this Agreement by Agent and entitle BANSI to
exercise against Agent any rights and remedies provided hereunder or at law or
equity or otherwise.
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IV. AGENT RESPONSIBILITIES
1. Agent shall perform the duties specified in this Agreement only in relation
to the Services listed in Appendix A and only in the marketing areas specified
in Appendix D.
2. Agent shall be capable of performing all of its obligations under this
Agreement without assistance from BANSI or a Telephone Company other than the
support BANSI is specifically required to provide under Article V and Appendix C
of this Agreement.
3. BANSI and the Telephone Companies may, at their discretion, prescribe
policies, standards and practices for the marketing of the Services and the
conduct of Agent in marketing Services. Agent shall at all times act and market
the Services in accordance with these policies, standards and practices.
4. Agent shall market the Services in accordance with the rates, terms and
conditions set forth in applicable tariffs. In the event Services are offered
pursuant to tariffs that permit flexible pricing, Agent shall obtain from BANSI
a statement of the prices under which the Services will be provided. In the
event Services are not subject to tariffs under applicable law or have been
deregulated or detariffed, Agent shall obtain from BANSI a statement of the
prices, terms and conditions under which the Services will be provided. Any
action of the Telephone Company in providing Services under erroneous rates,
prices, terms or conditions quoted by Agent to a Customer shall not be deemed a
ratification of Agent's acts.
5. During the term of this Agreement and within the marketing area set forth in
Appendix D, Agent shall not market or sell or assist in any manner in the
marketing or sale of any service offered by any carrier (including Agent or any
reseller) that competes directly or indirectly with any Service provided by the
Telephone Company (including without limitation the Services, local toll
services and related toll plans). During the term of this Agreement, Agent may
not resell Telephone Company services purchased at wholesale rates in any
territory where a Telephone Company is the incumbent local exchange carrier,
regardless of Agent's currently authorized designated and incidental sales
areas.
6. Subject to the terms set forth in Article IV, Section 5, Agent may market and
sell its own products and services and those of vendors other than the Telephone
Companies. Nothing in this Agreement shall bar or restrict Agent's ability to
engage in the marketing and/or sale of customer premises equipment. Agent shall
advise Customers that: (i) Telephone Company Services are furnished by the
Telephone Company; (ii) these Services may be purchased separately from the
products or services of any other person; and (iii) BANSI and the Telephone
Company do not endorse the products or services of any other person. BANSI and
the Telephone Company shall have no responsibility for or liability in
connection with any non-Telephone Company services or products marketed or sold
by Agent.
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7. Agent shall use commercially reasonable efforts at all times to give prompt,
courteous and efficient service to Customers, shall be governed in all dealings
with Customers by the highest standards of honesty, integrity and fair dealing,
including compliance with all applicable laws, ordinances and regulations, and
shall do nothing that would tend to discredit, dishonor, reflect adversely upon,
or in any manner injure the reputation of BANSI or a Telephone Company or any of
their affiliates or the Services or the quality image associated with BANSI or a
Telephone Company or any of their affiliates or the Services. Agent shall be
responsible for obtaining correct information from the Customer regarding the
Customer's telecommunications requirements, shall accurately advise the Customer
of Services that meet the Customer's requirements, and shall accurately inform
the Customer of all rates and prices and all material features, restrictions and
limitations, and terms and conditions pertaining to such Services. Agent shall
obtain appropriate credit information as specified by BANSI and the Telephone
Company. BANSI and the Telephone Company reserve the right to verify
independently the credit worthiness of any Customer.
8. Under no circumstances shall agent pay or offer or promise to pay a rebate or
remuneration of any kind to an existing or potential customer for the Services
marketed pursuant to this agreement.
9. Agent shall, in accordance with BANSI's policies, standards and practices
explain and demonstrate the Services, including options, and shall advise
Customers on the use of the Services and the compatibility of the Services with
other products and services. Agent shall provide Customers with any appropriate
instructional materials furnished by BANSI.
10. Agent may, at its own expense, engage in advertising to promote the Services
covered by this Agreement. In addition, at Agent's option, Agent may participate
in such cooperative advertising and promotional sales ventures as may be
proposed by either party. Agent shall abide by the policies, standards and
practices regarding advertising that BANSI may establish from time to time,
irrespective of the format or medium that is used, whether in writing,
electronic means or via the Internet.
11. Agent shall establish and maintain, in accordance with BANSI's policies,
standards and practices, a competent salesforce that is able to market the
Services in accordance with this Agreement. Agent shall provide its salesforce
(including Agent's employees, agents, servants, representatives and
subcontractors), with all training needed to enable them to market the Services
in accordance with the requirements of this Agreement and any other directives
that BANSI may issue from time to time. Agent shall also provide any training
needed on the specifications, features, advantages, restrictions on and
limitations of the Services and the rates, prices, terms, and conditions under
which the Services are offered. Agent shall also provide its salesforce with
instruction on procedures on completing and submitting Service application and
contract forms. Salesforce training shall also include instruction on the
compatibility of Services with customer premises equipment. Agent agrees to meet
all training, quality, and certification standards that may be established by
BANSI.
If Agent fails to meet training requirements or quality and certification
standards established by BANSI, upon written notice to Agent of such failure:
(1) BANSI may
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terminate this Agreement in whole or in part; and (2) BANSI will not be
obligated to pay Agent compensation for any Services sold until such failure is
corrected.
12. Agent shall maintain and provide BANSI with a list of all Agent personnel,
including employees, agents, servants, representatives and subcontractors who,
directly or indirectly, market or sell the Services under this Agreement.
13. For each year during the term of this Agreement, Agent shall submit to BANSI
a marketing plan and forecast. Both the marketing plan and forecast are set
forth in Appendix D. Agent shall comply with its marketing plan and meet its
forecast. The forecast is the objective measure against which Agent's sales
performance will be measured. Agent must make at least ninety (90) percent of
its revenue from sales in its designated sales area.
14. Agent agrees to meet with BANSI representatives at mutually agreed upon
times (at least quarterly) to discuss its marketing activities and performance.
These meetings shall address, at a minimum, present and projected Customer
contact information, sales to date resulting from Agent's marketing efforts and
pending marketing activities, projected marketing activities and likely sales
resulting therefrom for the following three (3) months. In addition, Agent
agrees to notify BANSI promptly of any problems that might affect Agent's
ability to meet agreed upon forecasts.
15. At least sixty (60) days prior to the annual anniversary of the starting
date of the Agreement, Agent shall submit a revised marketing plan and forecast
updating its business activities and sales projections for the upcoming year.
16. Unless otherwise agreed to in writing by BANSI and Agent, Agent shall not,
in marketing the Services or performing any of its obligations under this
Agreement, proactively contact Customers over the telephone for purposes of
closing a sale over the phone. Agent hereby acknowledges and agrees that it
shall not engage in any telemarketing activities with respect to the Services
and this Agreement, and that it shall rely on visits to Customer premises to
market the Services hereunder and complete sales thereof. Agent further agrees
that, in the event BANSI deems, in its sole and absolute discretion, that Agent
is engaging in telemarketing activities hereunder, Agent shall immediately cease
all such activities. Otherwise, BANSI reserves the right to terminate this
Agreement effective immediately.
17. Agent shall obtain from each Customer appropriate letters of authorization
(LOA) and follow any guidelines or policies issued by BANSI relating to LOAs.
18. Agent shall promptly report to BANSI all Customer complaints regarding the
Services or Agent's marketing of the Services.
19. Agent shall promptly report to BANSI if it learns that a Customer is
cancelling an order for Services placed by Agent.
20. Agent shall not cancel a sales order placed by another BANSI agent.
21. Agent shall at all times comply with the Transactional Sales Requirements
set forth in Appendix C.
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V. BANSI RESPONSIBILITIES
BANSI shall provide the following to Agent:
1. Initial training, as BANSI in its discretion shall deem appropriate, on the
Services and BANSI and Telephone Company policies, standards, practices and
procedures specified in this Agreement, for a mutually agreed upon number of
Agent's employees. Agent shall pay a fee of $350 per day per employee of Agent
who fails to attend scheduled training or fails to participate in or complete
such training to BANSI's satisfaction. Agent must provide BANSI notice of
cancellation at least ten (10) business days prior to the start of a course.
Late cancellation fees may be deducted from Agent's monthly compensation
payments.
2. Sales brochures and other promotional materials as BANSI in its discretion
shall deem appropriate.
3. Support documentation and materials on Services as BANSI in its discretion
shall deem appropriate.
4. Technical, pricing, and marketing support as described in Appendix C.
5. Network facilities necessary for the demonstration of the Services. Agent
must pay the monthly rates associated with such facilities.
VI. COMPENSATION AND PAYMENT
1. Agent shall submit all requests for compensation in accordance with the
procedures set forth by BANSI and the Telephone Company. Agent shall be
responsible for acquiring and having all equipment and software necessary to
ensure compatibility and interoperability with the BANSI specified compensation
system.
2. BANSI shall pay Agent compensation in accordance with Appendix A for each
unit of Service installed by a Telephone Company which was marketed to a
Customer by Agent pursuant to this Agreement and applied for by the Customer
through Agent pursuant to this Agreement.
3. BANSI shall pay compensation for sales of Services provided by Bell Atlantic
- - Washington, D.C., Inc., Bell Atlantic - Maryland, Inc., Bell Atlantic -
Virginia, Inc., Bell Atlantic - West Virginia, Inc., Bell Atlantic - Delaware,
Inc., Bell Atlantic - Pennsylvania, Inc., or Bell Atlantic - New Jersey, Inc.
(collectively, Bell Atlantic - South) within sixty (60) days after the Service
is installed. BANSI shall pay Agent commissions for sales of Services provided
by New York Telephone Company and New England Telephone and Telegraph Company
(collectively, Bell Atlantic - North) within thirty (30) days after the end of
the month in which the order is issued (i.e., an order number is generated by
Bell Atlantic's Service Order Processing [SOP] System). The commission paid
shall be at the rate in effect at the time the order is (1) installed in Bell
Atlantic - South and (2) issued in Bell Atlantic - North. Payment will be made
by wire transfer and no commission payments will be issued for less than Two
Hundred and Fifty Dollars ($250.00).
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4. BANSI, in its sole discretion, may pay compensation for the sale of an
individually priced Special Assembly Service offered by a Telephone Company. The
compensation will be calculated by BANSI on an individual case basis.
5. From time to time, BANSI may offer awards to eligible employees of Agent in
connection with promotional sales programs. In addition, BANSI may offer to
Agent bonus compensation for Agent's sales performance during such promotional
sales programs. BANSI shall notify Agent in writing of the terms and conditions
of such promotional programs and the compensation and award amounts for which
Agent and its employees may be eligible under such programs. Such compensation
and award amounts shall be in effect for only as long as each promotional
program is in effect. No compensation or award shall be paid under the
promotional sales program unless Agent has submitted to BANSI, prior to the
commencement of the promotional sales program, a detailed plan as to how it
intends to stimulate sales of Services during the promotional period. Payment of
awards to Agent's employees shall not make an employee of the Agent an employee
of BANSI. Any sale credited for cash awards or other compensation must be
reported by Agent against the sales person responsible for the sale.
6. (a) [*]
(b) [*]
7. Agent shall, upon request by BANSI, reimburse BANSI and/or a Telephone
Company for any costs, expenses, losses or damages (including, but not limited
to, uncollectible charges) incurred by BANSI and/or the Telephone Company in
processing
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an application (including a contract) for installing or providing a Service if:
(a) Agent submits an application (including a contract) for the Service to the
Telephone Company, but the Customer did not apply for the Service; or (b) the
Customer cancels its application (including a contract) for the Service or
disconnects the Service because of Agent's breach of or failure to comply with
this Agreement or the policies, standards, practices or procedures of BANSI or
the Telephone Company.
8. [*]
9. BANSI may withhold compensation and other monies due to Agent if Agent owes
any amounts to BANSI, a Telephone Company or any of their affiliates.
10. If, for any reason whatsoever (including by reason of termination of this
Agreement), any amount is due from Agent to BANSI, BANSI, at its option, may
demand that such amount be paid immediately.
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11. Any Agent disputes relating to compensation must be documented in writing
and submitted to BANSI within 120 days after Agent's request for compensation
was denied in whole or in part. BANSI shall have no obligation to consider
disputes relating to compensation which are submitted more than 120 days after
Agent's request for compensation was denied in whole or in part.
12. In the case of a dispute between two or more agents regarding compensation,
BANSI shall resolve the dispute. BANSI's decision on the matter will be final
and binding.
13. In the event that this Agreement: (i) expires and BANSI and Agent have not
entered into another "Network Services Marketing Agreement" or (ii) terminates,
BANSI shall not be obligated to pay Agent for any order placed after the
expiration or termination of this Agreement. BANSI shall, however, pay on orders
for the services of BA-South companies that were placed prior to contract
termination or expiration and installed within thirty (30) days of contract
termination or expiration.
14. BANSI may withhold Agent's final monthly compensation payment and any other
monies due to Agent for a period of up to twelve (12) months from the expiration
or termination date of this Agreement in anticipation of amounts that may become
due to BANSI, a Telephone Company or any of their affiliates, for reasons such
as Service disconnections warranting a return of previously paid compensation.
If the withheld amounts are insufficient for BANSI to recover compensation owed
due to disconnections or other amounts due, BANSI reserves the right to recover
from Agent additional amounts. If any of the withheld amounts are remaining
after twelve (12) months, BANSI will return to Agent the remaining amount with
5.35% compounded annual interest.
VII. SERVICE APPLICATION PROCEDURE
1. In marketing the Services under this Agreement, Agent shall use only
Telephone Company Service application and contract forms provided by BANSI.
Agent may not modify these forms in any way. Agent may not offer any terms or
conditions for Services that differ from or conflict with those that appear in
the tariffs or on Telephone Company Service application or contract forms.
2. The Telephone Company providing the Service shall have the right to require a
deposit from any Customer and to request that Agent secure credit information
from the Customer.
3. All applications (including contracts) for Services shall be subject to
approval and acceptance by the Telephone Company providing the Services. All
applications (including contracts) for Services and due dates shall be subject
to the availability of suitable facilities which shall be determined by the
Telephone Company in its sole discretion.
4. All orders shall be submitted (in accordance with the procedures set forth by
BANSI and the Telephone Company) over the BANSI specified electronic interface.
Agent
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shall be responsible for acquiring and having all equipment and software
necessary to ensure compatibility and interoperability with the BANSI specified
ordering system.
VIII. LICENSE TO USE TRADE NAMES AND TRADEMARKS
1. Subject to the terms and conditions specified in this Agreement, BANSI hereby
grants to Agent, for the term of this Agreement, a non-exclusive, non-assignable
license to use the trade names, trademarks and service marks listed in the "Bell
Atlantic Agent Program Identity Standards" (hereinafter "Licensed Marks")
exactly as depicted in the graphic configuration shown in the "Bell Atlantic
Agent Program Identity Standards", but only in conjunction with the marketing of
Services by Agent hereunder and solely in Agent's marketing areas as defined in
Appendix D. BANSI may, in its sole discretion, at any time modify the "Bell
Atlantic Agent Program Identity Standards", including, but not limited to,
adding or deleting Licensed Marks and changing the graphic configuration of the
Licensed Marks. The "Bell Atlantic Agent Program Identity Standards" are
incorporated herein by reference.
2. Agent shall not use the Licensed Marks in any format other than the most
recent graphic configuration set forth in the "Bell Atlantic Agent Program
Identity Standards". Agent shall not use any of the Licensed Marks as part of
its corporate name, trade name or business name. Agent further agrees to abide
by such policies, standards and practices regarding the use of the Licensed
Marks as BANSI may establish from time to time.
3. Agent shall submit to BANSI for prior review and approval, all advertising,
including, without limitation, sales brochures, promotional materials, business
cards, letterhead, press releases, Internet Homepage/Websites and other
electronic listings, and other items or materials in which the Licensed Marks
are used. Agent shall not publish, distribute or use any such advertising
without the prior written approval of BANSI.
4. In order to comply and continue in compliance with applicable trademark law,
including the U.S. Trademark Act of 1946, 15 U.S.C. Section 1051, et seq., with
respect to control by BANSI of the nature and quality of the marketing of
Services by Agent in connection with the Licensed Marks:
(a) Agent shall ensure that all marketing of Services performed by Agent in
connection with the Licensed Marks complies with all applicable Federal, state
and local laws and regulations.
(b) Agent shall comply with all guidelines outlined by BANSI in the "Bell
Atlantic Agent Program Identity Standards" and such other quality control
policies, standards and practices related to the Licensed Marks as BANSI may
adopt from time to time.
(c) BANSI shall have the right, at all reasonable times, to conduct an
examination of the facilities and equipment of Agent utilized in marketing
Services hereunder in conjunction with any Licensed Marks and to interview
Agent's personnel to determine whether such marketing of Services by Agent
complies with this Agreement and the BANSI policies, standards and practices for
the marketing of such Services.
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(d) If at any time, the marketing of Services by Agent fails to comply with this
Agreement or with BANSI policies, standards and practices for the marketing of
Services, or Agent's use of the Licensed Marks fails to comply with this
Agreement or with BANSI's policies, standards and practices, BANSI may suspend
or terminate Agent's license to use the Licensed Marks.
5. Agent acknowledges the value of the Licensed Marks and the goodwill
associated therewith and acknowledges that such goodwill is a property right
belonging to BANSI or to BANSI's parent or affiliated companies and that BANSI
or BANSI's parent or affiliated companies are the owners of all trademarks,
service marks, trade names, and other rights in the Licensed Marks. Agent
acknowledges that nothing contained in this Agreement is intended as an
assignment or grant to Agent of any right, title or interest in or to the
Licensed Marks and that this Agreement does not confer any right or license to
grant sublicenses to third parties, including but not limited to Agent's
representatives, agents, or subcontractors, to use any Licensed Mark. Agent
shall not challenge the title or any right of BANSI or BANSI's parent or
affiliated companies in and to the Licensed Marks or benefit therefrom, or make
any claim or take any action adverse to BANSI's or BANSI's parent or affiliated
companies' ownership of the Licensed Marks. All rights, if any, that may be
acquired by use of the Licensed Marks by Agent shall inure to the benefit of and
be on behalf of BANSI and BANSI's parent and affiliated companies. Agent shall
not adopt, use (other than as authorized herein), register or seek to register
any trade name, trademark or service mark anywhere in the world which is
identical to any Licensed Mark or which is so similar thereto as to constitute a
deceptive colorable imitation thereof or to suggest or imply some association,
sponsorship or endorsement by BANSI or BANSI's parent or affiliated companies.
BANSI makes no warranties regarding its ownership of any rights in or the
validity of any Licensed Mark.
6. Agent agrees to notify BANSI promptly of any unauthorized use of the Licensed
Marks by others. BANSI and its parent and affiliated companies shall have the
sole right to engage in infringement or unfair competition proceedings involving
the Licensed Marks.
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7. Upon termination or expiration of this Agreement, the license to use the
Licensed Marks granted hereunder shall cease to exist and Agent shall
immediately cease any use of such Licensed Marks. Agent shall also promptly
destroy or return to BANSI all materials displaying the Licensed Marks that are
in Agent's possession or control.
8. Agent agrees to the use by BANSI and the Telephone Companies of Agent's trade
names in any announcement, advertisement or promotional material related to the
Services, this Agreement or Agent's performance under this Agreement.
IX. CONTRACT MODIFICATIONS AND AMENDMENTS
1. Except as otherwise specified in this Article, BANSI may make any changes to
this Agreement upon one hundred twenty (120) days written notice.
2. BANSI shall amend Appendix A only on a yearly basis.
3. The parties shall negotiate and agree to a new Appendix D on a yearly basis.
4. With ninety (90) days advance notice, BANSI may designate an account as a
Strategic Business Account. If an account that Agent is serving is designated a
Strategic Business Account, BANSI may, at its discretion, continue to compensate
sales of Services to that account for a designated period.
5. If, in BANSI's judgment, an immediate modification to any part of this
Agreement is necessary in order for BANSI or a Telephone Company to comply with
applicable law, the orders or decisions of a court, regulatory agency or other
governmental entity, or changes in tariffs, BANSI shall provide Agent with
written notification of such change to the Agreement which will be effective
immediately.
X. TERMINATION
1. Either BANSI or Agent may, without cause, at any time, terminate this
Agreement, in whole or in part, with ninety days (90) days advance written
notice to the other party.
2. In addition to any other remedies provided for by law, either BANSI or Agent
may terminate this Agreement immediately, in whole or in part, by written notice
if the other party breaches any non-payment provision of this Agreement.
3. Either BANSI or Agent may terminate this Agreement immediately, in whole or
in part, by written notice if the other party: (a) makes (or is discovered to
have made) any material false representations, reports or claims in connection
with the creation of this Agreement or during the business relationship of the
parties under this Agreement; (b) engages in fraudulent, criminal or negligent
conduct in connection with the business relationship of the parties; or (c)
becomes insolvent or involved in any liquidation or termination of business, is
adjudicated a bankrupt, makes an assignment for the benefit of creditors,
invokes the provisions of any law for the relief of debtors, or has filed
against the party any similar proceedings.
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Contract #BJ16212
4. Notwithstanding any other provision of this Agreement, if Agent fails to meet
its forecast, BANSI may declare a material breach of this Agreement and
immediately terminate the Agreement, in whole or in part.
5. In addition to any right which BANSI may have to terminate this Agreement, if
at any time, in the sole opinion of BANSI, Agent has failed to comply with this
Agreement or with BANSI or Telephone Company policies, standards, practices or
procedures, BANSI shall notify Agent of the failure to comply and demand that
Agent cure its breach of Agreement. If Agent fails to comply within the time
frame set by BANSI, BANSI shall be entitled to order Agent to cease performing
under the Agreement as proscribed by BANSI. Agent shall not thereafter market
Services or perform any other activities under this Agreement until expressly
authorized to do so in writing by BANSI.
6. Upon termination or expiration of this Agreement, Agent shall immediately:
(a) Cease representing itself, in any manner, as an Agent authorized to market
the Services;
(b) Return to BANSI all technical and training manuals of BANSI and the
Telephone Company and all confidential or proprietary information and materials
of BANSI and the Telephone Company;
(c) Return to BANSI any and all signs, stationery, sales brochures, promotional
and support materials, Service application and contract forms, and other
materials supplied by BANSI or the Telephone Company;
(d) Notify and arrange for all publishers and others who may identify, list or
publish Agent's name as an Agent for marketing of the Services (including but
not limited to publishers of Internet listings, home pages, Web sites, and
telephone directories, Yellow Pages, and other business directories) to
discontinue such listings;
(e) Complete all applications for Services in process, including the transmittal
of application and contract forms;
(f) Delete all references to BANSI, the Services or a Telephone Company from any
and all written and/or electronic media (including Internet sites);
(g) Cease using any language identifying the Services, and/or the Agent as an
Agent of BANSI; and
(h) Cease using any Licensed Marks.
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Contract #BJ16212
XI. GENERAL PROVISIONS
1. ARBITRATION AND CHOICE OF FORUM
Any controversy or claim arising out of or relating to this contract, or the
breach thereof, shall be settled by arbitration administered by the American
Arbitration Association under its Commercial Arbitration Rules in the City of
New York, and judgment on the award rendered by the arbitrator(s) may be entered
in any court having jurisdiction thereof.
The parties acknowledge that any breach of this Agreement to arbitrate may cause
irreparable injury, and accordingly consent to the jurisdiction of the State and
Federal Courts located in the City of New York for any application to compel
specific performance of this Agreement to arbitrate.
In the event that any claim is found not to be arbitrable due to, inter alia, a
statutory policy precluding the arbitration of such claim, the parties consent
to the exclusive jurisdiction of the State and Federal Courts in the City of New
York for the adjudication of such claim.
2. ASSIGNMENT
Agent shall not assign any right or interest under this Agreement (except for
monies due or to become due) nor delegate any activity or other obligation to be
performed or owed by Agent under this Agreement without the prior written
consent of BANSI. Agent shall advise BANSI as soon as possible if a change of
ownership of Agent is contemplated during the term of this Agreement. In the
event of an ownership change, BANSI reserves the right to terminate the existing
Agreement and at BANSI's sole discretion enter into a new Agreement with the new
ownership. Any attempted assignment or delegation in contravention of the above
shall be void and ineffective. Any assignment of monies shall be void and
ineffective to the extent that: (a) Agent shall not have given BANSI at least
thirty (30) days prior written notice of such assignment; or (b) such assignment
attempts to impose upon BANSI obligations to the assignee additional to payments
of such monies or to preclude BANSI from dealing solely and directly with Agent
in all matters pertaining to the Agreement. This Agreement may be assigned by
BANSI at any time without Agent's consent to any parent, subsidiary or affiliate
of BANSI.
3. CHOICE OF LAW
The construction, interpretation and performance of this Agreement shall be
governed by and construed in accordance with the domestic laws of the State of
New York without reference to principles of conflict of laws.
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Contract #BJ16212
4. COMPLIANCE WITH LAWS
Agent shall comply with all applicable federal, state, county and local laws,
ordinances, regulations and codes (including procurement of required permits or
certificates) in Agent's performance hereunder.
5. CONDITIONS PREVENTING PERFORMANCE
Agent shall give written notice to BANSI of any conditions which arise at any
time during the term of this Agreement which could prevent the proper
performance of this Agreement within forty-eight (48) hours of encountering the
conditions.
6. CONFIDENTIAL INFORMATION
(a) All technical, business and Customer information of BANSI or a Telephone
Company disclosed to Agent in the course of this Agreement in written or other
tangible or electromagnetic form shall be the confidential information of BANSI
or the Telephone Company and shall remain the property of BANSI or the Telephone
Company. In addition, if in the course of Agent's performance of this Agreement
a Customer has applied for a Service through Agent, the fact that the Customer
has applied for the Service and the identity, nature and scope of the Service
("Application Information") shall be the confidential information and property
of BANSI and/or the Telephone Company providing the Service. If in the course of
Agent's performance of this Agreement a contact or communication between Agent
and a Customer relates to the Services, all Customer information obtained by
Agent in that contact or communication ("Customer Supplied Information") shall
be the confidential information of BANSI and the Telephone Company providing the
Services and shall be the property of BANSI and the Telephone Company. Any
information produced, prepared, created, originated, developed, or acquired by
Agent under, or in connection with, the performance of this Agreement shall be
the property of BANSI.
Upon request by BANSI, Agent shall disclose to BANSI any Application Information
and Customer Supplied Information, including, but not limited to, information
concerning the telecommunications products and services presently used by the
Customer and the Customer's present and anticipated telecommunications product
and service needs.
(b) Agent shall: (i) hold the confidential information of BANSI and the
Telephone Company in confidence; (ii) not disclose such confidential information
to anyone other than its employees with a need to know; and (iii) use such
confidential information solely in connection with the performance of this
Agreement. Upon termination or expiration of this Agreement or upon written
request of BANSI or a Telephone Company, whichever occurs earlier, Agent shall
return or destroy (and certify such destruction in writing to BANSI or the
Telephone Company) all confidential information of BANSI and the Telephone
Company.
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(c) Notwithstanding the foregoing, the obligations imposed by Article XI,
Section 6, "CONFIDENTIAL INFORMATION", shall not apply to information which: (i)
was known to the receiving party prior to disclosure in the course of this
Agreement; (ii) except for Customer Supplied Information, is rightfully received
by the receiving party from a third party without restriction; (iii) is
independently developed by the receiving party; or (iv) is or becomes publicly
available through no fault of the receiving party. The obligations imposed by
Article XI, Section 6, "CONFIDENTIAL INFORMATION," shall not apply to any
confidential information to the extent such information is required to be
disclosed by the receiving party pursuant to an order of a court or other
governmental body (provided that the receiving party shall give the other party
prompt notice of any such order).
7. DELAYS
Neither BANSI nor a Telephone Company shall be liable to Agent for additional
expense or damages, direct, indirect, special, incidental, consequential or
otherwise, caused by or arising out of delays or Agent's inability to proceed
with the performance of this Agreement, however caused.
8. FORCE MAJEURE
Neither BANSI nor Agent shall be held responsible for any delay or failure in
performance hereunder caused by fires, strikes, embargoes, requirements imposed
by government regulation, civil or military authorities, acts of God or by the
public enemy, or other similar causes beyond such party's reasonable control. If
such contingency occurs, the party injured by the other's inability to perform
may elect to terminate this Agreement as to any part which is affected by the
delay or failure in performance.
9. GOVERNMENT REQUIREMENTS
Agent shall comply with the applicable provisions contained in Appendix G,
entitled "GOVERNMENT REQUIREMENTS."
10. INDEMNITY
Agent agrees to indemnify, defend and hold harmless BANSI, BANSI's parent and
affiliated companies, including but not limited to the Telephone Companies, and
the directors, officers and employees of BANSI and BANSI's parent and affiliated
companies, from any claims, demands, suits, actions, judgments or liabilities
(including reasonable costs, expenses and attorney's fees on account thereof)
arising out of or resulting from: (a) the negligent or otherwise tortious acts
or omissions of Agent or Agent's directors, officers, employees, agents,
servants, representatives or subcontractors; (b) Agent's breach of or failure to
comply with this Agreement or any BANSI or Telephone Company policy, standard,
practice or procedure prescribed under this Agreement; (c) any violation of any
law, ordinance, regulation or code by Agent or Agent's directors, officers,
employees, agents, servants, representatives or subcontractors; (d) Agent's
marketing, sale or provision of non-Telephone Company products or services in
association or for use with the Services; or (e) claims under Worker's
Compensation, or similar employer-employee liability acts, against BANSI or its
parent or affiliated companies, including but not limited to the Telephone
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Companies, by Agent or a director, officer, employee, agent, servant,
representative or subcontractor of Agent. BANSI agrees to notify Agent promptly
of any written claims or demands for which Agent is responsible hereunder.
11. INFRINGEMENT
The following terms apply to any infringement or claim of infringement of any
patent, copyright, trade name, trademark, service mark, trade secret or other
proprietary interest based on Agent's performance hereunder or in contemplation
hereof. Agent shall indemnify, defend and hold harmless BANSI, BANSI's parent
and affiliated companies, including but not limited to the Telephone Companies,
and the directors, officers and employees of BANSI and BANSI's affiliated
companies, from any claims, demands, suits, actions, judgments or liabilities
(including reasonable costs, expenses and attorney's fees on account thereof)
that may arise out of or result from any such infringement or claim. BANSI
agrees to notify Agent promptly of any written claims or demands for which Agent
is responsible hereunder.
12. INSURANCE
Agent shall maintain, during the term hereof, the following insurance and all
other insurance and/or bonds required by law, including, without limitation:
(a) Workers' Compensation Insurance as required by the jurisdiction(s) in which
the Agreement is to be performed.
(b) Employer's Liability Insurance with limits of not less than $100,000 per
occurrence.
(c) Comprehensive or Commercial General Liability Insurance, on an Occurrence
Basis, including but not limited to, personal injury, broad form property
damage, contractual liability, independent contractors, premises-operations,
explosion and collapse, underground hazard and products/completed operations
coverages, with limits of at least $2,000,000 combined single limit for each
occurrence.
(d) Motor Vehicle Liability Insurance, Comprehensive Form, for all Agent-owned
or leased vehicles, with limits of: (1) at least $1,000,000 combined single
limit for each occurrence or (2) at least $500,000 combined single limit for
each occurrence plus Excess Liability Insurance in the umbrella form with a
limit of at least $1,000,000 combined single limit for each occurrence.
To the extent that any Agent employee, subcontractor, agent, or
otherwise, employs a personal vehicle in performance of Agent's obligations
hereunder, the operator of the vehicle must provide proof to BANSI of insurance
coverage as required by state law for the vehicle, which coverage must include
the operator. Agent agrees that Agent, Agent's insurer(s) and anyone claiming
by, through, under or on behalf of Agent shall have no claim, right of action or
right of subrogation against BANSI or the other persons indemnified hereunder
based on any loss or liability insurable under the foregoing insurance.
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Contract #BJ16212
Agent shall, prior to commencing performance hereunder, furnish certificates or
adequate proof of the foregoing insurance. Agent shall also require its
subcontractors, if any, to maintain similar insurance and to furnish BANSI, if
requested, certificates or adequate proof of such insurance. Certificates
furnished by Agent or its subcontractors shall contain a clause stating: "Bell
Atlantic Network Services, Inc. shall be notified in writing at least thirty
(30) days prior to cancellation of, or any material change in, the policy."
13. LIMITATION OF LIABILITY
BANSI SHALL NOT BE LIABLE FOR ANY LOSS OF PROFITS, LOSS OF BUSINESS, LOSS OF USE
OR OF DATA, LOSS OF PRODUCTION, LOSS OF GOODWILL, INTERRUPTION OF BUSINESS, NOR
FOR INDIRECT, SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES OF ANY KIND WHETHER
ARISING UNDER THIS AGREEMENT, ANY STATUTE, LAW, COMMERCIAL USAGE, COURSE OF
DEALING, CUSTOM OF TRADE, OR OTHERWISE, EVEN IF ADVISED OF THE POSSIBILITY OF
SUCH LOSS, EXCEPT WHERE OTHERWISE PRESCRIBED BY STATUTE. IN NO CASE WILL BANSI
BE LIABLE FOR ANY REPRESENTATION OR WARRANTY MADE BY AGENT OR ANY EMPLOYEE,
REPRESENTATIVE, AGENT OR SUBCONTRACTOR OF AGENT. SHOULD THE FOREGOING
DISCLAIMERS BE HELD INVALID, IN WHOLE OR IN PART, FOR ANY REASON, IN NO EVENT
SHALL BANSI'S LIABILITY EXCEED THE AMOUNT OF COMPENSATION THAT WAS PAID OR WOULD
OTHERWISE BE PAYABLE BY BANSI UNDER THIS AGREEMENT FOR A UNIT OF THE SERVICE
UNDERLYING AGENT'S CLAIM FOR DAMAGES.
14. NON-WAIVER
The failure by either BANSI or Agent, at any time, to enforce any of the
provisions of this Agreement or any right or remedy available hereunder or at
law or equity, or to exercise any option herein provided, shall in no way be
construed to be a waiver of such provisions, rights, remedies or options or in
any way affect the validity of this Agreement. The exercise by either BANSI or
Agent of any rights, remedies or options provided hereunder or at law or equity
shall not preclude or prejudice the exercising thereafter of the same or any
other rights, remedies or options.
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15. NOTICES
Any notices or demands which under the terms of this Agreement must be in
writing shall be given or made by facsimile with confirmatory copy, overnight
delivery, or by certified or registered mail, return receipt requested,
addressed to the respective parties as follows:
To BANSI: Bell Atlantic Network Services, Inc.
Manager, Agent Sales Program
1717 Arch Street - 18th Floor
Philadelphia, PA 19103
Facsimile No. (215) 665-9044
To Agent: USTeleCenters
ATTN.: Franklin A. Reece
745 Atlantic Avenue
Boston, MA 02111-2626
or as such addressee or address is changed by written notice to the other party.
16. PLANT AND WORK RULES
Agent and its employees, agents, servants, representatives and subcontractors,
shall, while on BANSI or Telephone Company premises, comply with all security
and plant rules and regulations, including, where required by Government
Regulations, submission of satisfactory clearance from the U.S. Department of
Defense and other federal authorities concerned.
17. RECORDS AND AUDIT
Agent shall maintain complete and accurate records of all amounts billable to
and payments made by BANSI hereunder in accordance with Generally Accepted
Accounting Practices (GAAP). Agent shall retain such records for a period of
three (3) years after expiration or termination of this Agreement. Agent agrees
to provide reasonable supporting documentation concerning any disputed amount to
BANSI within 120 days after BANSI provides written notification of the dispute
to Agent. Agent shall permit BANSI's representatives to examine and audit such
records and all supporting documentation and to reproduce the records and
documentation at reasonable times and places as mutually agreed to by the
parties. BANSI's right to audit shall not be limited by the three year period
set forth above if BANSI learns that Agent may have engaged in fraud.
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Contract #BJ16212
Agent shall permit BANSI's representatives to observe and audit Agent's
performance of this Agreement and Agent's compliance with this Agreement and
BANSI and Telephone Company policies, standards, practices and procedures.
This audit may include, but shall not be limited to, interviewing Agent's
employees, observing contacts between Agent's employees and Customers, and
examining Agent's marketing practices, correspondence and records.
18. REGISTRATION
If under applicable law: (a) BANSI must provide Agent with a disclosure
statement or prospectus relative to their proposed relationship or make
specified disclosures of information to Agent or (b) this Agreement must be
registered or filed with, or approved by a governmental entity, including but
not limited to a state public utility commission, this Agreement shall not
become effective until such statement, prospectus and disclosure have been
provided and such registration, filing and approval have occurred. If BANSI, in
its sole judgment, at any time determines that under applicable law: (x) BANSI
must provide Agent with a disclosure statement or prospectus relative to their
proposed relationship or make specified disclosures of information to Agent or
(y) this Agreement must be registered or filed with, or approved by a
governmental entity, including but not limited to a state public utility
commission, and that such statement, prospectus and disclosure have not been
provided or such registration, filing and approval have not occurred, BANSI may,
in its discretion, without liability or obligation to Agent, either terminate
the Agreement, in whole or in part, or suspend the Agreement, in whole or in
part, until the required statement, prospectus and disclosure have been provided
and the required registration, filing and approval have occurred.
19. REGULATORY
If requested by BANSI, Agent shall, to the best of its ability, provide
information and assistance to BANSI and/or a Telephone Company in connection
with regulatory matters and proceedings related to Agent's performance under
this Agreement, including but not limited to the collection, compilation and
maintenance of data required to be reported by BANSI pursuant to any federal or
state statute, regulation or order.
20. RELEASES VOID
Neither party shall require a waiver or release of any personal rights from
representatives or Customers of the other in connection with visits to its
premises and both parties agree that no such release or waiver shall be pleaded
by them in any action or proceeding.
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21. RIGHT OF ACCESS
Each party shall normally permit the other access to its facilities in
connection with activities performed hereunder. No charge shall be made for such
access. It is agreed that prior notification will be given when access is
required.
22. SEVERABILITY
In the event that any one or more of the provisions contained herein shall, for
any reason, be held to be unenforceable in any respect, such unenforceability
shall not affect any other provision of this Agreement, but this Agreement shall
then be construed as if such unenforceable provision or provisions never had
been contained herein.
23. SUBCONTRACTING
Agent shall not, without BANSI's prior written approval, subcontract any portion
of Agent's performance under this Agreement. In order to apply for such
approval, Agent shall complete and submit to BANSI the Request for Bell Atlantic
Approval of Subcontractor form and Consent to Subcontract letter attached hereto
as Appendix E for each subcontractor Agent proposes to retain. Nothing herein
shall obligate, bar or limit BANSI's discretion in its consideration and
approval of any such application, which approval BANSI may withhold in its sole
and absolute discretion. Notwithstanding anything to the contrary contained
herein, BANSI's approval of any subcontractor proposed by Agent shall not
relieve Agent of responsibility or liability for the acts or omissions of such
subcontractor in performing Agent's obligations hereunder.
24. SURVIVAL
All obligations hereunder incurred by Agent prior to the termination or
expiration of this Agreement shall survive such termination or expiration.
25. TAXES
BANSI shall be liable only for the following tax payments with respect to
Agent's performance of this Agreement: State and Local Sales and Use taxes, as
applicable.
26. CONSTRUCTION
This Agreement and the Appendices hereto shall be construed whenever possible to
avoid conflict. In the event of an unavoidable conflict between the Agreement
and any Appendix, however, the Agreement shall prevail.
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27. ENTIRE AGREEMENT
This Agreement and the Appendices constitute the entire agreement between the
parties pertaining to the subject matter hereof, supersede all prior agreements,
understandings, negotiations and representations pertaining to the subject
matter hereof, and, except as otherwise set forth in this Agreement, may not be
modified or rescinded except in writing signed by the duly authorized
representatives of both parties.
XII. EXECUTION
Authorized representatives of Bell Atlantic Network Services, Inc. and Agent,
intending to be legally bound, hereby execute this Agreement, including any
Appendices attached hereto and referenced herein.
BELL ATLANTIC USTELECENTERS
NETWORK SERVICES, INC
Name: Linda Waddell Name: Franklin A. Reece III
By: /s/ Linda Waddell By: /s/ Franklin A. Reece III
Title: Director Title: President
Channel Strategies
Date: 1/26/99 Date: 12/28/98
Confidential and Proprietary
<PAGE> 26
APPENDIX A - 2000 AUTHORIZED SALES AGENT NETWORK SERVICES PRODUCT LIST (NORTH)
<TABLE>
<S> <C>
Messaging Products & Services............................................Page 1
Centrex Products & Services..............................................Page 2
Digital Data Services....................................................Page 5
Superpath Digital Data Services..........................................Page 7
Flexpath Digital PBX Service.............................................Page 9
Network Reconfiguration Services.........................................Page 10
Frame Relay Products & Services..........................................Page 12
Other Data Products & Services...........................................Page 14
ISDN Products & Services.................................................Page 15
FDDI/Transparent LAN Service (TLS).......................................Page 17
ATM......................................................................Page 18
XDSL Services............................................................Page 19
Enterprise Products......................................................Page 20
Local & Toll Products & Services.........................................Page 27
</TABLE>
1/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 27
PAGE 1
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (NORTH)
<TABLE>
<CAPTION>
MESSAGING PRODUCTS & SERVICES
- ------------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
VMS - LARGE BOX MAILBOX VMS Large is for Service Level IV.
- - 36M TO 59M 3000 (*) (*)
- - 60M TO 120M 3002 (*) (*)
- - PORTS 3001 (*) (*)
- ------------------------------------------------------------------------------------------------------------------------------------
VMS - MEDIUM BOX MAILBOX VMS Medium is for Service Level I, II,
- - MONTH-MONTH 3005 (*) (*) and III
- - 12M TO 59M 3006 (*) (*)
- - 60M TO 120M 3008 (*) (*)
- - PORTS 3007 (*) (*)
- ------------------------------------------------------------------------------------------------------------------------------------
FAX SERVICES PER SYSTEM
ATTNF (*) (*)
- ------------------------------------------------------------------------------------------------------------------------------------
CALL ANSWERING MAILBOX
TBD (*) (*)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 28
PAGE 2
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (NORTH)
<TABLE>
<CAPTION>
CENTREX PRODUCTS & SERVICES
- ------------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
NOVA PER LINE Product is now grandfathered. Add lines
- - ADD LINES (13M-35M) 1012 (*) (*) only
- ------------------------------------------------------------------------------------------------------------------------------------
INTELLIPATH II/ PER LINE No commission is paid for any Centrex/
- - ADD LINES 1012 (*) (*) Intellipath line sold with "Assume dial
9" and/or Ground Start. Grandfathered
service. Additional lines with less than
12 months remaining on the existing
contract are not compensable.
- ------------------------------------------------------------------------------------------------------------------------------------
INTELLIPATH I (VT/ME) PER LINE Only available in Vermont and Maine.
NEW 1004 (*) (*) Commissions for Extensions are paid ONLY
EXTENSION when contract is within nine months of
- - 12M TO 35M 1005 (*) (*) expiration
- - 36M TO 59M 1006 (*) (*)
- - 60M OR GREATER 1007 (*) (*)
- ------------------------------------------------------------------------------------------------------------------------------------
INTELLIPATH I (VT/NH/ME) PER LINE Only available in Vermont,New Hampshire
- - ADD LINES 1015 (*) (*) and Maine.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 29
PAGE 3
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (NORTH)
<TABLE>
<CAPTION>
CENTREX PRODUCTS & SERVICES
- ------------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
CENTREX PLUS PER LINE Conversion of 1MB to Digital Centrex Plus
NEW is compensable as new when it meets one
- - 12M TO 35M 1100 (*) (*) the following conditions: Expired Centrex
- - 36M TO 59M 1101 (*) (*) Contracts that are resigned or converted
- - 60M TO PLUS 1102 (*) (*) are considered to be recast not a new
EXTENSIONS contract. Minimum compensable number of
- - 12M TO 35M 1022 (*) (*) lines sold under a CentrexPlus service is
- - 36M TO 59M 1023 (*) (*) 2. No commission is paid for any Digital
- - 60M TO PLUS 1024 (*) (*) Centrex/Intellipath line sold with
ADDITIONS "Assume dial 9" and/or Ground Start.
- - 12M TO 35M 1012 (*) (*) Additional lines with less than 12 months
- - 36M TO 59M 1013 (*) (*) remaining on the existing contract are
- - 60M TO PLUS 1014 (*) (*) not compensable. Commissions for
Extensions are paid ONLY when contract is
within nine months of expiration
- ------------------------------------------------------------------------------------------------------------------------------------
CUSTOPAK PER LINE These are the only lines where "Assume
(FORMERLY CENTREX PLUS 5010 (*) (*) dial 9" is allowed. Minimum number of
MONTH-MONTH) lines is 2. Conversions from Centrex
Plus to CustoPak are not eligible for
compensation.
- ------------------------------------------------------------------------------------------------------------------------------------
CENTREX FPO PER LINE No commission is paid for any Digital
NEW/EXTENSIONS Centrex/ Intellipath line sold with
- - 12M TO 35M 1210 (*) (*) "Assume dial 9" and/or Ground Start
- - 36M TO 59M 1200 (*) (*) Additional lines with less than 12 months
- - 60M TO PLUS 1201 (*) (*) remaining on the existing contract are
ADDITIONS not compensable.
- - 12M TO 35M 1203 (*) (*) Commissions for Extensions are paid ONLY
- - 36M TO 59M 1204 (*) (*) when contract is within nine months of
- - 60M TO PLUS 1205 (*) (*) expiration
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 30
PAGE 4
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (NORTH)
<TABLE>
<CAPTION>
CENTREX PRODUCTS & SERVICES - CONVERSIONS
- ------------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
INTELLIPATH II/ PER LINE Paid when contract is within nine months
TO CENTREX PLUS of expiration No commission is paid for
- - 13M TO 35M 1026 (*) (*) any Centrex/ Intellipath line sold with
- - 36 M TO 59M 1027 (*) (*) "Assume dial 9" and/or Ground Start. ALL
- - 60M TO PLUS 1028 (*) (*) PREVIOUSLY LISTED INSTALLATION
RESTRICTIONS APPLY.
- ------------------------------------------------------------------------------------------------------------------------------------
CENTREX FPO ALL-CONVERSIONS PER LINE Paid when month to month is converted to
- - 12M TO 35M contract or when contract is within nine
- - 36M TO 59M 1207 (*) (*) months of expiration.
- - 60M TO PLUS 1208 (*) (*) No commission is paid for any Digital
1209 (*) (*) Centrex/Intellipath line sold with
"Assume dial 9" and/or Ground Start.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 31
PAGE 5
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (NORTH)
<TABLE>
<CAPTION>
DIGITAL DATA SERVICES - SUB RATE
- ------------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
DDS-II SUB PER A conversion of Analog Private Line to
NEW CHANNEL TERM DDS will be compensated as new, provided
- - MONTH -MONTH 2010 (*) (*) the DDS is sold for a contracted term
- - 36M TO 59M 2011 (*) (*)
- - 60M OR GREATER 2012 (*) (*) Commissions will be paid ONLY when
EXTENSIONS contract is within nine months of
- - MONTH -MONTH 2018 (*) (*) expiration
- - 12M TO 35M 2013 (*) (*)
- - 36M TO 59M 2014 (*) (*)
- - 60M OR GREATER 2017 (*) (*)
- ------------------------------------------------------------------------------------------------------------------------------------
DDS-II SUB CONV PER A compensable conversion for this service
- - MONTH-MONTH CHANNEL TERM 2018 (*) (*) is considered to be: DDS I to DDS II
- - 12M TO 35M 2013 (*) (*) Commissions paid when new or when month
- - 36M TO 59M 2014 (*) (*) to month is converted to contract.
- - 60M OR GREATER 2017 (*) (*)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 32
PAGE 6
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (NORTH)
<TABLE>
<CAPTION>
DIGITAL DATA SERVICES - 56K
- ------------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
DDS-II 56K PER A conversion of Analog Private Line to
NEW CHANNEL DDS will be compensated as new, provided
- - MONTH - MONTH TERM 2020 (*) (*) the DDS is sold for a contracted term
- - 36M TO 59M 2021 (*) (*)
60 M OR GREATER 2022 (*) (*) Commissions will be paid ONLY when
EXTENSION contract is within nine months of
- - MONTH - MONTH 2025 (*) (*) expiration
- - 12M TO 35M 2029 (*) (*)
- - 36M TO 59M 2023 (*) (*)
- - 60 M OR GREATER 2024 (*) (*)
- ------------------------------------------------------------------------------------------------------------------------------------
DDS-II 56K CONV PER A compensable conversion for this service
- - MONTH-MONTH CHANNEL 2025 (*) (*) is considered to be:
- - 12M TO 35M TERM 2029 (*) (*) A) DDS I to DDS II
- - 36M TO 59M 2023 (*) (*) B) Subrate DDS II to 56 KBPS DDS II (NE
- - 60M OR GREATER 2024 (*) (*) only)
Commissions paid when new or when month to
month is converted to contract.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 33
PAGE 7
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (NORTH)
<TABLE>
<CAPTION>
SUPERPATH DIGITAL DATA SERVICES - 1.5
- ------------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
PER Channel terminations sold between a
CHANNEL FIRST SECOND customer's location and an Interexchange
SUPERPATH 1.5 NEW TERM CHANNEL CHANNEL Carrier's POP are compensated only when
- - MONTH - MONTH 2050 (*) (*) (*) the channel terminations are billed to
- -12M TO 35M 2051 (*) (*) (*) the customer and not the Interexchange
- -36M TO 59M 2052 (*) (*) (*) Carrier.
- -60M OR GREATER 2053 (*) (*) (*)
For new sales of Superpath to an
Interexchange Carrier's POP, Carrier
Facility Assignment (CFA) is the normal
network configuration design. This results
in only one compensable channel
termination per circuit.
Where individual private Lines are
upgraded to new Superpath 1.544
multiplexed service, commissions are paid
on the new Superpath 1.544 channel term(s)
but not on the existing private line
channel terminations.
EXTENSIONS Commissions will be paid ONLY when
- - MONTH - MONTH 2054 (*) (*) contract is within nine months of
- - 12M TO 35M 2055 (*) (*) expiration
- - 36M TO 59M 2056 (*) (*)
- - 60M OR GREATER 2057 (*) (*)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 34
PAGE 8
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (NORTH)
<TABLE>
<CAPTION>
SUPERPATH DIGITAL DATA SERVICES - 45
- ------------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
SUPERPATH -45 PER Channel terminations sold between a
- - MONTH-MONTH CHANNEL 2150 (*) (*) customer's location and an Interexchange
- - 12M TO 35M TERM 2159 (*) (*) Carrier's POP are compensated only when
- - 36M TO 59M 2151 (*) (*) the channel terminations are billed to
- - 60M OR GREATER 2152 (*) (*) the customer and not the Interexchange
Carrier.
A compensable conversion for this service
is considered to be: SuperPath 1.5 to
SuperPath 45.
EXTENSION Commissions will be paid ONLY when
- - MONTH-MONTH 2157 (*) (*) contract is within nine months of
- - 12M TO 35M 2158 (*) (*) expiration
- - 36M TO 59M 2154 (*) (*)
- - 60M OR GREATER 2155 (*) (*)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 35
PAGE 9
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (NORTH)
<TABLE>
<CAPTION>
FLEXPATH DIGITAL PBX SERVICE
- ------------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- ------------------------------------------
<S> <C> <C> <C> <C> <C>
FLEXPATH PER 2090 (*) (*) This rate applies only in Maine, Rhode
MONTH-MONTH CIRCUIT Island, New Hampshire, Massachusetts and
Vermont until tariff filings allow multi
year service agreements. A minimum Service
Period of 12 months is required.
RESTRICTIONS LISTED BELOW APPLY.
- ------------------------------------------------------------------------------------------------------------------------------------
FLEXPATH PER
NEW CIRCUIT No commission is paid unless both port and
- - 13 to 35 M 209A (*) (*) facility are coincidentally sold.
- - 36M TO 50 M 209B (*) (*) No commission is paid where Flexpath
- - 60M OR GREATER 209D (*) (*) replaces any Centrex-like service (e.g.,
Intellipath, Nova, Intellipath II,
Centrex, Centrex III, Centrex Plus).
EXTENSIONS Commissions paid when month to month is
- - 12M TO 35M 209J (*) (*) converted to contract or when contract is
- - 36M TO 50 M 209K (*) (*) within nine months of expiration.
- - 60M OR GREATER 209L (*) (*)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 36
PAGE 10
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (NORTH)
<TABLE>
<CAPTION>
NETWORK RECONFIGURATION SERVICES
- ------------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
NRS - DDS PER
NEW PORT
- - MONTH-MONTH 2130 (*) (*)
- - 36M TO 59M 2131 (*) (*)
- - 60M OR GREATER 2132 (*) (*)
EXTENSIONS Commissions on Extensions will be paid
- - MONTH-MONTH 2135 (*) (*) ONLY when contract is within nine months
- - 36M TO 59M 2133 (*) (*) of expiration
- - 60M OR GREATER 2134 (*) (*)
- ------------------------------------------------------------------------------------------------------------------------------------
NRS - 1.5 PER
NEW PORT
- - MONTH-MONTH 2140 (*) (*)
- - 36M TO 59M 2141 (*) (*)
- - 60M OR GREATER 2142 (*) (*)
EXTENSIONS Commissions on Extensions will be paid
- - MONTH-MONTH 2145 (*) (*) ONLY when contract is within nine months
- - 36M TO 59M 2143 (*) (*) of expiration
- - 60M OR GREATER 2144 (*) (*)
- ------------------------------------------------------------------------------------------------------------------------------------
NRS - 45 PER
NEW PORT
- -MONTH-MONTH 2210 (*) (*)
- - 36M TO 59M 2211 (*) (*)
- - 60M OR GREATER 2212 (*) (*)
EXTENSIONS Commissions on Extensions will be paid
- - MONTH-MONTH 2213 (*) (*) ONLY when contract is within nine months
- - 36M TO 59M 2214 (*) (*) of expiration
- - 60M OR GREATER 2215 (*) (*)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 37
PAGE 11
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (NORTH)
<TABLE>
<CAPTION>
NETWORK RECONFIGURATION SERVICES - CONVERSIONS
- ------------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
NRS - DDS CONV PER Commissions paid when month to month is
- - MONTH-MONTH PORT 2135 (*) (*) converted to contract or when contract is
- - 3 YEAR 2133 (*) (*) within nine months of expiration.
- - >= 5 YEAR 2134 (*) (*) ALL PREVIOUS INSTALLATION RESTRICTIONS
APPLY.
- ------------------------------------------------------------------------------------------------------------------------------------
NRS - 1.5 CONV PER Commissions paid when month to month is
- - MONTH-MONTH PORT 2145 (*) (*) converted to contract or when contract is
- - 3 YEAR 2143 (*) (*) within nine months of expiration
- - >= 5 YEAR 2144 (*) (*) ALL PREVIOUS INSTALLATION RESTRICTIONS
APPLY.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 38
PAGE 12
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (NORTH)
<TABLE>
<CAPTION>
FRAME RELAY PRODUCTS/SERVICES
- ------------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- ------------------------------------------
<S> <C> <C> <C> <C> <C>
FRAME RELAY DDSII-56K PER PORT No Compensation paid on logical Channels.
NEW
- - MONTH-MONTH 2170 (*) (*)
- - 36M TO 59M 2171 (*) (*)
- - 60M GREATER 2172 (*) (*)
Commissions on extensions will be paid
EXTENSIONS ONLY when contract is within nine months
- - MONTH-MONTH 2173 (*) (*) of expiration
- - 36M TO 59M 2174 (*) (*)
- - 60M GREATER 2175 (*) (*)
- ------------------------------------------------------------------------------------------------------------------------------------
FRAME RELAY 384K PER PORT No Compensation paid on logical Channels
NEW
- - MONTH-MONTH 2180 (*) (*)
- - 36M TO 59M 2181 (*) (*)
- - 6OM OR GREATER 2182 (*) (*)
Commissions on extensions will be paid
EXTENSIONS ONLY when contract is within nine months
- - MONTH-MONTH 2183 (*) (*) of expiration
- - 36M TO 59M 2184 (*) (*)
- - 6OM OR GREATER 2185 (*) (*)
- ------------------------------------------------------------------------------------------------------------------------------------
FRAME RELAY 1.5 PER PORT No Compensation paid on logical Channels
NEW
- - MONTH-MONTH 2160 (*) (*)
- - 36 TO 59M 2161 (*) (*)
- - 60M OR GREATER 2162 (*) (*)
Commissions on extensions will be paid
EXTENSIONS ONLY when contract is within nine months
- - MONTH-MONTH 2165 (*) (*) of expiration
- - 36 TO 59M 2163 (*) (*)
- - 60M OR GREATER 2164 (*) (*)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 39
PAGE 13
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (NORTH)
<TABLE>
<CAPTION>
FRAME RELAY PRODUCTS/SERVICES
- ------------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- ------------------------------------------
<S> <C> <C> <C> <C> <C>
FRAME RELAY DS3 PER PORT No Compensation paid on logical Channels
- - 36 TO 59M TBD (*) (*)
- - 60M OR GREATER TBD (*) (*)
Commissions on extensions will be paid
EXTENSION ONLY when contract is within nine months
- - 36 TO 59M TBD (*) (*) of expiration
- - 60M OR GREATER TBD (*) (*)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 40
PAGE 14
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (NORTH)
<TABLE>
<CAPTION>
OTHER DATA PRODUCTS & SERVICES - VIDEO AND CUSTOM
- ------------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- ------------------------------------------
<S> <C> <C> <C> <C> <C>
TV-1 / 140 MBPS PER CHANNEL Service Discount Plans are only available
- MONTH-MONTH TERMINATION 2510 (*) (*) in NE.
- - 36M TO 59M 2511 (*) (*) Compensation for only full-time (not
- - 60M OR GREATER 2512 (*) (*) part-time) circuits.
- ------------------------------------------------------------------------------------------------------------------------------------
AUDVS PER CHANNEL Compensation for new as well as added
- - MONTH-MONTH TERMINATION 2513 (*) (*) channel terminations
- - 36M TO 59M 2514 (*) (*)
- - 60M OR GREATER 2515 (*) (*)
- ------------------------------------------------------------------------------------------------------------------------------------
SERIAL COMPONENT SERVICE PER CHANNEL One year minimum contract Service
- - 1 YEAR TERMINATION 2650 (*) (*) Discount Plan Available
- - 3 YEAR
- - 5 YEAR
- ------------------------------------------------------------------------------------------------------------------------------------
CUSTOM Must be approved by Comp. staff prior to
5050 (*) (*) installation. Refer to Comp. Plan.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 41
PAGE 15
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (NORTH)
<TABLE>
<CAPTION>
ISDN PRODUCTS & SERVICES
- ------------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
ISDN BRI PER LINE 2110 (*) (*) There is no commission for Residential
ISDN services associated with Individual
Message Residence Service (IMR).
- ------------------------------------------------------------------------------------------------------------------------------------
ISDN PRI - WITHOUT CLID PER PORT CLID - Calling Line Identification
NEW
- - MONTH - MONTH 2230 (*) (*)
- - 36M TO 59M 2231 (*) (*)
- - 60M OR GREATER 2232 (*) (*)
EXTENSIONS
- - MONTH - MONTH 2235 (*) (*)
- - 36M TO 59M 2233 (*) (*)
- - 60M OR GREATER 2234 (*) (*)
ISDN PRI - WITH CLID
NEW
- - MONTH - MONTH 2240 (*) (*)
- - 36M TO 59M 2241 (*) (*)
- - 60M OR GREATER 2242 (*) (*)
EXTENSIONS Commissions for Extensions are paid ONLY
- - MONTH - MONTH 2245 (*) (*) when contract is within nine months of
- - 36M TO 59M 2243 (*) (*) expiration
- - 60M OR GREATER 2244 (*) (*)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 42
PAGE 16
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (NORTH)
<TABLE>
<CAPTION>
ISDN PRODUCTS & SERVICES ISDN/IPRS
- ------------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
ISDN PRI CONV PER PORT A compensable conversion for this service
WITHOUT CLID is considered to be:
- - MONTH-MONTH 2235 (*) (*) A) Flexpath to any ISDN PRI.
- - 3 YEAR 2233 (*) (*) B) Superpath to any ISDN PRI.
- - 5 YEAR 2234 (*) (*)
WITH CLID Commission paid when new or when month to
- - MONTH - MONTH 2245 (*) (*) month is connected to contract or when
- - 3 YEAR 2243 (*) (*) contract is within nine months of
- - 5 YEAR 2244 (*) (*) expiration
- ------------------------------------------------------------------------------------------------------------------------------------
ISDN-PRI HUBBING PER PORT
- - MONTH-MONTH 2250 (*) (*)
- - 3 YEAR 2251 (*) (*)
- - 5 YEAR 2252 (*) (*)
- ------------------------------------------------------------------------------------------------------------------------------------
IPRS - 64K PER PORT
- - 3 YEAR TBD (*) (*)
- - 5 YEAR TBD (*) (*)
- ------------------------------------------------------------------------------------------------------------------------------------
IPRS - DS1 PER PORT
- - 3 YEAR TBD (*) (*)
- - 5 YEAR TBD (*) (*)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 43
PAGE 17
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (NORTH)
<TABLE>
<CAPTION>
FDDI SERVICE/TRANSPARENT LAN SERVICE (TLS)
- ------------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
FDDI - FULL PER SYSTEM
- - 3 YEAR TBD (*) (*)
- - 5 YEAR OR GREATER TBD (*) (*)
)----------------------------------------------------------------------------------------------------------------------------------
FDDI WIRE SPEED LAN PER SYSTEM
- - 4 MB TBD (*) (*)
- - 10 MB TBD (*) (*)
- - 16 MB TBD (*) (*)
- ------------------------------------------------------------------------------------------------------------------------------------
TRANSPARENT LAN (TLS) - 10MB PER SYSTEM
- - 3 YEAR
- - 5 YEAR TBD (*) (*)
TBD (*) (*)
- ------------------------------------------------------------------------------------------------------------------------------------
TRANSPARENT LAN (TLS) PER SYSTEM
100MB TBD (*) (*)
TBD (*) (*)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 44
PAGE 18
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (NORTH)
<TABLE>
<CAPTION>
ATM
- ------------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
ATM - DS1 PER Channel terminations sold between a
- - 3 YEAR USER NETWORK 2600 (*) (*) customer's location and an
- - 5 YEAR INTERFACE 2601 (*) (*) Interexchange Carrier's POP are
compensated only when the channel
terminations are billed to the customer
and not the Interexchange Carrier
- ------------------------------------------------------------------------------------------------------------------------------------
ATM - DS3 PER Channel terminations sold between a
- - 3 YEAR USER NETWORK 2610 (*) (*) customer's location and an
- - 5 YEAR INTERFACE 2611 (*) (*) Interexchange Carrier's POP are
compensated only when the channel
terminations are billed to the customer
and not the Interexchange Carrier
- ------------------------------------------------------------------------------------------------------------------------------------
SONET - OC3 PER NODE Channel terminations sold between a
- - 3 YEAR 2501 (*) (*) customer's location and an
- - 5 YEAR 2502 (*) (*) Interexchange Carrier's POP are
compensated only when the channel
terminations are billed to the customer
and not the Interexchange Carrier
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 45
PAGE 19
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (NORTH)
<TABLE>
<CAPTION>
XDSL SERVICES
- ------------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
ADSL PER LINE
- - 640/90 2260 (*) (*)
- - 1.6/90 2261 (*) (*)
- - 7.1/680 2262 (*) (*)
- ------------------------------------------------------------------------------------------------------------------------------------
SDSL PER LINE
- - 128 TBD (*) (*) Not available until given notice by
- - 256 TBD (*) (*) Bell Atlantic
- - 384 TBD (*) (*)
- - 512 TBD (*) (*)
- - 768 TBD (*) (*)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NEW BAIS PRODUCTS & SERVICES - DSL SERVICES
- ------------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
Infospeed DSL Plus PER LINE A2710 (*) (*)
- - 640K
- - 1.6M
- - 7.1M
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 46
PAGE 20
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (NORTH)
<TABLE>
<CAPTION>
ENTERPRISE DS0 PRODUCTS & SERVICES (NEW YORK ONLY)
- ------------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
ENTERPRISE -DS0 PER CHANNEL New Enterprise sales which require
NEW TERM "Coppernet" tails on a portion of the
- - MONTH-MONTH 2301 (*) (*) network are compensable based on the
- - 12M TO 35M 2302 (*) (*) commission rates applicable to the
- - 36M TO 59M 2303 (*) (*) "Coppernet" services (e.g., DDS II,
- - 60M OR GREATER 2305 (*) (*) Superpath) and Enterprise rates for the
Enterprise (fiber) portion of the network.
Conversion of existing standard tariff
services (DDS II, Superpath) to
"Coppernet" tails under Enterprise will
not be compensated
EXTENSIONS
- - MONTH-MONTH 2310 (*) (*) Commissions for Extensions are paid ONLY
- - 12M TO 35M 2311 (*) (*) when contract is within nine months of
- - 36M TO 59M 2312 (*) (*) expiration
- - 60M OR GREATER 2314 (*) (*)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ENTERPRISE DS0 PRODUCTS & SERVICES - CONVERSIONS (NEW YORK ONLY)
- ------------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
ENTERPRISE -DS0 PER CHANNEL A compensable conversion for this service
- - MONTH-MONTH TERM 2310 (*) (*) is considered to be:
- - 2 YEAR 2311 (*) (*) A) Analog Private line to Enterprise DSO
- - 3 YEAR 2312 (*) (*) (56kbps)
- - >= 5 YEAR 2314 (*) (*) B) DDS I or DDS II to Enterprise DSO
(56kbps)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 47
PAGE 21
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (NORTH)
<TABLE>
<CAPTION>
ENTERPRISE DS-1 PRODUCTS AND SERVICES (NEW YORK ONLY)
- ------------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
ENTERPRISE - DS1 - NEW PER CHANNEL Channel terminations sold between a
- - MONTH-MONTH TERM 2320 (*) (*) customer's location and an Interexchange
- - 12M TO 35M 2321 (*) (*) Carrier's POP are compensated only when
- - 36M TO 59M 2322 (*) (*) the channel termination is billed to the
- - 60M OR GREATER 2324 (*) (*) customer and not the Interexchange
Carrier. No compensation is paid for sales
of Superpath to an Interexchange Carrier's
POP where an existing service is in
place, regardless of the current
provider. Where individual private lines
are upgraded to a new Enterprise DS 1
multiplexed service, commissions are
paid on the new Enterprise DS 1 channel
term(s) but not on the existing private
line channel terminations. Flexpath
Enterprise and ISDN PRI Enterprise are
compensable only if approved by CAN and
have billable vertical features. New
Enterprise sales which require
"Coppernet" tails on a portion of the
network are compensable based on the
commission rates applicable to the
"Coppernet" services (e.g., DDS II,
Superpath) and Enterprise rates for the
Enterprise (fiber) portion of the
network. Conversion of existing standard
tariff services (e.g., DDS II,
Superpath) to "Coppernet" tails under
Enterprise will not be compensated.
EXTENSIONS
- - MONTH-MONTH 2325 (*) (*) Commissions on extensions will be paid
- - 12M TO 35M 2326 (*) (*) ONLY when contract is within nine months
- - 36M TO 59M 2327 (*) (*) of expiration
- - 60M OR GREATER 2328 (*) (*)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 48
PAGE 22
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (NORTH)
<TABLE>
<CAPTION>
ENTERPRISE DS-1 PRODUCTS AND SERVICES - CONVERSIONS (NEW YORK ONLY)
- ------------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
ENTERPRISE - DS1 PER CHANNEL A compensable conversion for this
- - MONTH-MONTH TERM 2325 (*) (*) service is considered to be:
- - 12M TO 35M 2326 (*) (*) Superpath to Enterprise DS1
- - 36M TO 59M 2327 (*) (*) ALL PREVIOUS INSTALLATION RESTRICTIONS
- - 60M OR GREATER 2328 (*) (*) APPLY.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 49
PAGE 23
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (NORTH)
<TABLE>
<CAPTION>
ENTERPRISE DS-3 PRODUCTS AND SERVICES (NEW YORK ONLY)
- ------------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
ENTERPRISE - DS3 - NEW PER CHANNEL Channel terminations sold between a
- - MONTH-MONTH TERM 2330 (*) (*) customer's location and an
- - 12M TO 35M 2331 (*) (*) Interexchange Carrier's POP are
- - 36M TO 59M 2332 (*) (*) compensated only when the channel
- - 60M OR GREATER 2334 (*) (*) termination is billed to the customer
and not the Interexchange Carrier.
Changing the channel termination billing
from an Interexchange Carrier to a
customer is compensated when the new
customer's service discount period is
increased by 24 months or longer. The
commission is paid using the extensions
schedule. Commissions are paid for an
upgrade from Enterprise DS 1 service to
Enterprise DS 3 service only if the
displaced Enterprise DS 1 service has
been in service for a minimum of twelve
(12) months. New Enterprise sales which
require "Coppernet" tails on a portion
of the network are compensable based on
the commission rates applicable to the
"Coppernet" services (e.g., DDS II,
Superpath) and Enterprise rates for the
Enterprise (fiber) portion of the
network. Conversion of existing standard
tariff services (e.g., DDS II,
Superpath) to "Coppernet" tails under
EXTENSIONS Enterprise will not be compensated.
- - MONTH-MONTH 2335 (*) (*)
- - 12M TO 35M 2336 (*) (*) Commissions on extensions will be paid
- - 36M TO 59M 2337 (*) (*) ONLY when contract is within nine
- - 60M OR GREATER 2339 (*) (*) months of expiration
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 50
PAGE 24
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (NORTH)
<TABLE>
<CAPTION>
ENTERPRISE DS-3 PRODUCTS AND SERVICES - CONVERSIONS (NEW YORK ONLY)
- ------------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
ENTERPRISE - DS3 PER CHANNEL A compensable conversion for this
- - MONTH-MONTH TERM 2335 (*) (*) service is considered to be:
- - 12M TO 35M 2336 (*) (*) Superpath DS3 to Enterprise DS3
- - 36M TO 59M 2337 (*) (*)
- - 60M OR GREATER 2339 (*) (*) Commissions paid when month to month
is converted to contract or when
contract is within nine months of
expiration.
ALL PREVIOUSLY LISTED INSTALLATION
RESTRICTIONS APPLY.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 51
PAGE 25
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (NORTH)
<TABLE>
<CAPTION>
ENTERPRISE FDDI DATA SERVICES (NEW YORK ONLY)
- ------------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
ENTERPRISE FDDI DUAL PER CHANNEL A conversion from a DS3 type service to
NEW TERM FDDI is not compensable.
- - 36M TO 59M 2341 (*) (*)
- - 60M OR GREATER 2342 (*) (*)
- ------------------------------------------------------------------------------------------------------------------------------------
ENTERPRISE FDDI SINGLE PER CHANNEL A conversion from a DS3 type service to
- - 36M TO 59M TERM 2346 (*) (*) FDDI is not compensable.
- - 60M OR GREATER 2347 (*) (*)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 52
PAGE 26
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (NORTH)
<TABLE>
<CAPTION>
ENTERPRISE FRACTIONAL DS1 SERVICE (NEW YORK ONLY)
- ------------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
ENTERPRISE FRACTIONAL DS1 PER CHANNEL New Enterprise sales which require
NEW TERM "Coppernet" tails on a portion of the
- - MONTH-MONTH 2350 (*) (*) network are compensable based on the
- - 12M TO 35M 2351 (*) (*) commission rates applicable to the
- - 36M TO 59M 2352 (*) (*) "Coppernet" services (e.g., DDS II,
- - 60M OR GREATER 2354 (*) (*) Superpath) and Enterprise rates for the
Enterprise (fiber) portion of the
network. Conversion of existing standard
tariff services (DDS II, Superpath) to
"Coppernet" tails under Enterprise will
not be compensated
EXTENSIONS
Commissions on extensions will be paid
- - MONTH-MONTH 2355 (*) (*) ONLY when contract is within nine
- - 12M TO 35M 2356 (*) (*) months of expiration
- - 36M TO 59M 2357 (*) (*)
- - 60M OR GREATER 2359 (*) (*)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 53
PAGE 27
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (NORTH)
<TABLE>
<CAPTION>
LOCAL & TOLL PRODUCTS & SERVICES
- ------------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
TOLLFREE GENERAL PER LINE 3030 (*) (*) Term plan available New York only.
(formerly VALUFLEX)
- ------------------------------------------------------------------------------------------------------------------------------------
BUSINESS LINK CONTRACT (MA) PER CONTRACT Tariff restrictions and requirements
apply
- - 3 year contracts only 3200 (*) (*)
- ------------------------------------------------------------------------------------------------------------------------------------
BUSINESS LINK (ME) PER BTN Only BTNs billing a minimum of $50 per
MONTH - MONTH 3201 (*) (*) month per BTN are eligible for Month to
Month compensation. If this strategy is
not being met, BELL ATLANTIC can adjust
the commission rate for this service
with 60 days notice. Tariff restrictions
and requirements apply.
- ------------------------------------------------------------------------------------------------------------------------------------
BUSINESS LINK PREMIUM (ME) A contract is defined as the customer's
- - 3 YEAR CONTRACTS ONLY PER CONTRACT 3226 (*) (*) first enrollment in Business Link.
- ------------------------------------------------------------------------------------------------------------------------------------
BUSINESS LINK (NH) A contract is defined as the customer's
MONTH - MONTH PER BTN 3220 (*) (*) first enrollment in Business Link..
- - 3 YEAR CONTRACT PER CONTRACT TBD (*) (*)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 54
PAGE 28
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (NORTH)
<TABLE>
<CAPTION>
LOCAL & TOLL PRODUCTS & SERVICES
- ------------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
BUSINESS LINK (RI) Only BTNs billing a minimum of $50 per
MONTH - MONTH PER BTN 3202 (*) (*) month per BTN are eligible for Month to
Month compensation.
- - 3 YEAR CONTRACT PER CONTRACT TBD (*) (*) The BELL ATLANTIC strategy is to
concentrate the sale of Business Link
in Rhode Island on BTNs billing a
minimum of $150 per month, and the $50
per BTN rate is predicated on this
strategy.
- ------------------------------------------------------------------------------------------------------------------------------------
BUSINESS LINK (VT) PER BTN When available, approximately 2Q99.
MONTH - MONTH TBD (*) (*)
- - 3 YEAR CONTRACT PER CONTRACT TBD (*) (*)
- ------------------------------------------------------------------------------------------------------------------------------------
BUSINESS LINK PER BTN The Bell Atlantic strategy is to
MONTH - MONTH (NY) 3203 (*) (*) concentrate the sale of Business Link
in NY on BTNs billing a minimum of $1000
monthly Total Billed Revenue, and a
minimum of $100 monthly regional (toll)
calling. The customers' BTNs must be
PIC'd to Bell Atlantic.
BUSINESS LINK (NY) PER CONTRACT Conversions from Econopath or Virtual
- - 2 YR CONTRACT 3204 (*) (*) WATS will be treated as new sales.
Conversions form LVD will be compensated
at half the annual usage rate.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 55
PAGE 29
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (NORTH)
<TABLE>
<CAPTION>
LOCAL & TOLL PRODUCTS & SERVICES
- ------------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
WINBACKS Winbacks will be paid at 100% of the new
value for the products that come back to
Bell Atlantic. All regular restrictions
will apply, including the 6 month
disconnect rule.
- ------------------------------------------------------------------------------------------------------------------------------------
PIC FREEZE (DO NOT TOUCH PER LINE Compensable products are
BELL ATLANTIC) 5007 (*) (*) NEW POTS LINES and new and existing
CENTREX Product family. Not Compensable
are ALL TRUNKS and station numbers, ISDN
spids. Not available in certain
geographic areas.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 56
PAGE 30
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (NORTH)
<TABLE>
<CAPTION>
LOCAL & TOLL PRODUCTS & SERVICES
- ------------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
DIALTONE LINES PER LINE New sales only (new business line is a
TBD (*) (*) line that does not replace any existing
Telephone Company Business service Dial
tone lines (e.g., individual message,
auxiliary, Centrex, Intellipath/Centrex,
Foreign Exchange and Trunks). CONVERSION
OF RESIDENTIAL TO BUSINESS SERVICE WILL
NOT BE COMPENSATED.
- ------------------------------------------------------------------------------------------------------------------------------------
WORKSMART PER LINE To receive the associated 10-30%
- - 1 YEAR 4011 (*) (*) monthly discounts and a 50% discount
- - 2 YEAR 4012 (*) (*) off the service order charge, the
- - 3 YEAR 4013 (*) (*) customer must commit to a verbal
contract, commit their local and
intraLATA toll usage to Bell Atlantic
and their basic local service must be
provided over Bell Atlantic access
lines. Failure to meet any of these
conditions of subscribership will result
in the application of a $50 termination
fee.
- ------------------------------------------------------------------------------------------------------------------------------------
REMOTE CALL FORWARDING PER PATH NONE
3080 (*) (*)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 57
APPENDIX A - 2000 AUTHORIZED SALES AGENT NETWORK SERVICES PRODUCT LIST (SOUTH)
<TABLE>
<S> <C>
Messaging Products & Services...................................................Page 1
Centrex Products & Services.....................................................Page 2
CO Features.....................................................................Page 5
Basic Data Products & Services - DDS............................................Page 6
Basic Data Products & Services - DS1............................................Page 7
Basic Data Products & Services - DS3............................................Page 8
Fast Packet Products & Services - FDDI/TLS......................................Page 9
Fast Packet Products & Services - FRAME RELAY 4MBPS/6MBPS/22MBPS/24MBPS.........Page 10
Fast Packet Products & Services - FRAME Relay 56K/384K..........................Page 11
Fast Packet Products & Services - 1MBPS.........................................Page 12
Fast Packet Products & Services - DS3...........................................Page 13
Fast Packet Products & Services - SMDS..........................................Page 14
ATM.............................................................................Page 18
ISDN Products & Services........................................................Page 19
New Network Products & Services - XDSL..........................................Page 20
Other Data Products & Services - TV Services....................................Page 21
Local & Toll Products & Services................................................Page 22
</TABLE>
1/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 58
Page 1
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (SOUTH)
<TABLE>
<CAPTION>
MESSAGING PRODUCTS & SERVICES
- -----------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
ANSWER CALL MAILBOX A3011 (*) (*) NONE
- ------------------------------------------------------------------------------------------------------------------------------------
CO BASED VOICE MAIL MAILBOX A3012 (*) (*) NONE
- ------------------------------------------------------------------------------------------------------------------------------------
VOICE MAIL PAGER NOTIFICATION PAGER S3013 (*) (*) NONE
- ------------------------------------------------------------------------------------------------------------------------------------
AUTO ATTENDANT BASIC PER SYSTEM S3014 (*) (*) NONE
AUTO ATTENDANT STANDARD PER SYSTEM S3015 (*) (*)
AUTO ATTENDANT PREMIUM PER SYSTEM S3016 (*) (*)
- ------------------------------------------------------------------------------------------------------------------------------------
UPGRADE FROM BASIC OR PER SYSTEM S3017 (*) (*) NONE
STANDARD TO PREMIUM
- ------------------------------------------------------------------------------------------------------------------------------------
FAX SERVICES PER SYSTEM S3018 (*) (*)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 59
Page 2
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (SOUTH)
<TABLE>
<CAPTION>
CENTREX PRODUCTS & SERVICES
- -----------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
CENTREX SYSTEMS - NEW Engineered Centrex Systems
- NO CONTRACT PER LINE S1102 (*) (*) under 75 lines are not
- 1 YEAR CONTRACT S1103 (*) (*) eligible for compensation.
- 2 YEAR CONTRACT S1104 (*) (*) Conversions of CustoPAK or
- 3 YEAR CONTRACT S1105 (*) (*) CustoFLEX 2100 to Centrex
- 4 YEAR CONTRACT S1106 (*) (*) are not eligible for
- > = 5 YEAR CONTRACT S1107 (*) (*) compensation except
- ADDITIONAL LINES A1012 (*) (*) Engineered Centrex Systems
over 75 lines.
- ------------------------------------------------------------------------------------------------------------------------------------
CENTREX CONTRACT RENEWALS Only contracts within nine
- 3 YEAR CONTRACT PER LINE S1030 (*) (*) months of expiration are
- 4 YEAR CONTRACT S1031 (*) (*) eligible for renewal.
- > OR = TO 5 YEAR CONTRACT S1032 (*) (*) Resigns available only on
systems over 75 lines.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 60
Page 3
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (SOUTH)
<TABLE>
<CAPTION>
CENTREX PRODUCTS & SERVICES
- -----------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
CUSTOFLEX 2100-NEW
- NO CONTRACT PER LINE S1400 (*) (*)
- 1 YEAR CONTRACT S1401 (*) (*)
- 2 YEAR CONTRACT S1402 (*) (*)
- 3 YEAR CONTRACT S1403 (*) (*)
- 4 YEAR CONTRACT S1404 (*) (*)
- > = 5 YEAR CONTRACT S1405 (*) (*)
- ADDITIONAL LINES S1406 (*) (*)
- ------------------------------------------------------------------------------------------------------------------------------------
CUSTOFLEX 2100 CONTRACT
RENEWALS
- 2 YEAR CONTRACT Only contracts within nine
- 3 YEAR CONTRACT PER LINE S1407 (*) (*) months of expiration are
- 4 YEAR CONTRACT S1408 (*) (*) eligible for renewal.
- > = 5 YEAR CONTRACT S1409 (*) (*)
S1410 (*) (*)
- ------------------------------------------------------------------------------------------------------------------------------------
CUSTOPAK - NEW Conversions of Engineered
- NEW SYSTEM PER LINE S1300 (*) (*) Centrex or CustoFLEX 2100 to
- ADD LINES S1300 (*) (*) CustoPAK are not eligible
for Comp.
- ------------------------------------------------------------------------------------------------------------------------------------
OPTIONAL WIRE MAINTENANCE PER LINE S6003 (*) (*) Not available on Key/PBX or
SENTRY 1 S6000 (*) (*) RCF.
- ------------------------------------------------------------------------------------------------------------------------------------
SENTRY 2 PER LINE S6001 (*) (*) Not available on RCF.
SENTRY 3 S6002 (*) (*)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 61
Page 4
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (SOUTH)
<TABLE>
<CAPTION>
CENTREX PRODUCTS & SERVICES - CONVERSIONS
- -----------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
NON-ENGINEERED CENTREX Conversions of Engineered
(ESP - PA, BVP - NJ, PER LINE Centrex not compensable.
BUS PAK - C&P)
TO CUSTOPAK
- INCREMENTAL LINES S1301 (*) (*)
- EXISTING LINES S1302 (*) (*)
- ------------------------------------------------------------------------------------------------------------------------------------
CENTREX (Eng or Non-Eng)/ PER LINE Paid when converting
CUSTOPAK TO CUSTOFLEX 2100 Engineered Centrex,
- NO CONTRACT S1411 (*) (*) Non-Engineered Centrex (ESP,
- 1 YEAR CONTRACT S1412 (*) (*) BVP & BusPak), or CustoPAK
- 2 YEAR CONTRACT S1413 (*) (*) to CustoFLEX 2100.
- 3 YEAR CONTRACT S1414 (*) (*)
- 4 YEAR CONTRACT S1415 (*) (*)
- > OR = 5 YEAR CONTRACT S1416 (*) (*)
- ------------------------------------------------------------------------------------------------------------------------------------
CUSTOPAK/CUSTOFLEX 2100 PER LINE Paid when converting
TO CENTREX CustoFLEX 2100 or CustoPAK
- NO CONTRACT S1308 (*) (*) to Centrex over 75 lines.
- 1 YEAR CONTRACT S1303 (*) (*)
- 2 YEAR CONTRACT S1304 (*) (*)
- 3 YEAR CONTRACT S1305 (*) (*)
- 4 YEAR CONTRACT S1306 (*) (*)
- > OR = 5 YEAR CONTRACT S1307 (*) (*)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 62
Page 5
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (SOUTH)
<TABLE>
<CAPTION>
CO FEATURES
- -----------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
LINE FEATURES PER LINE Features that are part of
the Centrex, CustoPAK, or
CATEGORY I CustoFLEX 2100 monthly rate
CALL BLOCK S4020 (*) (*) are not compensable.
CALL WAITING S4021 (*) (*)
FIXED CALL FORWARDING S4022 (*) (*)
REPEAT CALL S4023 (*) (*)
RETURN CALL S4024 (*) (*)
THREE WAY CALLING S4025 (*) (*)
CALL FORWARD S4026 (*) (*)
CATEGORY II
CALLER ID S4040 (*) (*)
CALLER ID DELUXE S4041 (*) (*)
CALLER ID UPGRADE S4042 (*) (*)
IDENTA RING S4043 (*) (*)
ULTRA FORWARD S4044 (*) (*)
ULTRA FORWARD UPGRADE S4045 (*) (*)
CENTREX ULTRA FORWARD S4046 (*) (*)
CALL WAITING DELUXE S4047 (*) (*)
CALL WAITING DELUXE UPGRADE S4048 (*) (*)
CENTREX CALLER ID S4049 (*) (*)
CENTREX CALLER ID DELUXE S4050 (*) (*)
CENTREX CALLER ID UPGRADE S4051 (*) (*)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 63
Page 6
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (SOUTH)
<TABLE>
<CAPTION>
BASIC DATA PRODUCTS & SERVICES - DDS
- -----------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
DDS/DCS PER CHANNEL Channel terminations sold
- MONTH - MONTH TERM S2034 (*) (*) between a customer's
- 2 YEAR CONTRACT S2035 (*) (*) location and an
- 3 YEAR CONTRACT S2036 (*) (*) Interexchange Carrier's POP
- > OR = 5 YEAR CONTRACT S2037 (*) (*) are compensated only when
the channel terminations are
billed to the customer and
not the Interexchange
Carrier.
- -----------------------------------------------------------------------------------------------------------------------------------
DDS/DSC - TERM CONVERSION OF PER CHANNEL Must remain End User Billed.
EXISTING CIRCUITS TERM Paid when month to month is
- 2 YEAR CONTRACT S2038 (*) (*) converted to contract or
- 3 YEAR CONTRACT S2039 (*) (*) when contract is within nine
- > = OR 5 YEAR CONTRACT S2040 (*) (*) months of expiration.
- -----------------------------------------------------------------------------------------------------------------------------------
DDS/DSC - MOVE OF EXISTING PER CHANNEL Must remain End User Billed.
CIRCUITS WITHIN ONE YEAR OF TERM Paid when moving a circuit
INSTALL within one year of installation.
- 2 YEAR CONTRACT S2041 (*) (*)
- 3 YEAR CONTRACT S2042 (*) (*)
- > = OR 5 YEAR CONTRACT S2043 (*) (*)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 64
Page 7
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (SOUTH)
<TABLE>
<CAPTION>
BASIC DATA PRODUCTS & SERVICES - DS1
- -----------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------------- ------------------ ------- ----------------------------------
<S> <C> <C> <C> <C> <C>
DS1 - NEW PER CHANNEL 1ST CHAN 2ND CHAN Channel terminations sold
- MONTH - MONTH TERM S2060 S2060B (*) (*) (*) between a customer's
- 2 YEAR CONTRACT S2061 S2061B (*) (*) (*) location and an
- 3 YEAR CONTRACT S2062 S2062B (*) (*) (*) Inter-exchange Carrier's POP
- > OR = 5 YEAR CONTRACT S2063 S2063B (*) (*) (*) are compensated only when
the channel terminations are
billed to the customer and
not the Interexchange
Carrier.
- -----------------------------------------------------------------------------------------------------------------------------------
DS1 - TERM CONVERSIONS/ PER CHANNEL Must remain End User Billed
EXTENSIONS TERM Paid when month to month is
- 2 YEAR CONTRACT S2064 (*) (*) converted to contract or
- 3 YEAR CONTRACT S2065 (*) (*) when contract is within nine
- > OR = 5 YEAR CONTRACT S2066 (*) (*) months of expiration.
- -----------------------------------------------------------------------------------------------------------------------------------
DS1 - MOVES WITHIN ONE YEAR PER CHANNEL Must remain End User Billed
- 2 YEAR CONTRACT TERM S2067 (*) (*) Paid when moving a circuit
- 3 YEAR CONTRACT S2068 (*) (*) within one year of
- > OR = 5 YEAR CONTRACT S2069 (*) (*) installation.
- -----------------------------------------------------------------------------------------------------------------------------------
DUAL WIRE CENTER - DS1 PER CHANNEL DS1 application is rarely
- MONTH TO MONTH TERM S2077 (*) (*) approved.
- 2 OR 3 YEAR CONTRACT S2078 (*) (*)
- 5 YEAR CONTRACT S2079 (*) (*)
- -----------------------------------------------------------------------------------------------------------------------------------
ALTERNATE WIRE CENTER PER CHANNEL
- DS1 TERM S2080 (*) (*)
- -----------------------------------------------------------------------------------------------------------------------------------
DIGITAL HAND-OFF PER CIRCUIT S2009 (*) (*)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 65
Page 8
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (SOUTH)
<TABLE>
<CAPTION>
BASIC DATA PRODUCTS & SERVICES - DS3
- -----------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
DS3 - NEW PER CHANNEL Channel terminations sold
- MONTH - MONTH TERM S2410 (*) (*) between a customer's
- 3 YEAR CONTRACT S2411 (*) (*) location and an
- > OR = 5 YEAR CONTRACT S2412 (*) (*) Interexchange Carrier's POP
are compensated only when
the channel terminations are
billed to the customer and
not the Interexchange
Carrier.
- -----------------------------------------------------------------------------------------------------------------------------------
DS3 - TERM CONVERSION/ PER CHANNEL Must remain End User
EXTENSION TERM Billed. Paid when month to
- 3 YEAR CONTRACT S2413 (*) (*) month is converted to
- 5 YEAR CONTRACT S2414 (*) (*) contract or when contract is
(*) within nine months of
expiration.
- -----------------------------------------------------------------------------------------------------------------------------------
DS3 - MOVES WITHIN ONE YEAR OF PER CHANNEL Must remain End User
INSTALL TERM Billed. Paid when moving a
- 3 YEAR CONTRACT S2415 (*) (*) circuit within one year of
- > OR = 5 YEAR CONTRACT S2416 (*) (*) installation.
- -----------------------------------------------------------------------------------------------------------------------------------
DUAL WIRE CENTER - DS3 PER CHANNEL
- MONTH TO MONTH TERM S2417 (*) (*)
- 2 OR 3 YEAR CONTRACT S2418 (*) (*)
- 5 YEAR CONTRACT S2419 (*) (*)
- -----------------------------------------------------------------------------------------------------------------------------------
ALTERNATE WIRE CENTER PER CHANNEL
TERM
- DS3 S2420 (*) (*)
- -----------------------------------------------------------------------------------------------------------------------------------
CUSTOM SEE COMP. CUST (*) (*) Must be approved by Comp.
PLAN staff prior to installation.
Refer to Comp. Plan.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 66
Page 9
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (SOUTH)
<TABLE>
<CAPTION>
FAST PACKET PRODUCTS & SERVICES - FDDI/TRANSPARENT LAN SERVICE (TLS)
- -----------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
FDDI/FNS - NEW PER PORT Channel terminations sold
- 4 MBPS S2224 (*) (*) between a customer's
- 10 MBPS S2225 (*) (*) location and an
- 16 MBPS S2226 (*) (*) Interexchange Carrier's POP
are compensated only when
the channel terminations are
billed to the customer and
not the Interexchange
Carrier.
- -----------------------------------------------------------------------------------------------------------------------------------
FDDI WIRE SPEED LAN PER SYSTEM
- 4 MBPS S2228 (*) (*)
- 10 MBPS S2229 (*) (*)
- 16 MBPS S2230 (*) (*)
- -----------------------------------------------------------------------------------------------------------------------------------
TRANSPARENT LAN SERVICE - 10M PER SYSTEM
- 3 YEAR A2750 (*) (*)
- 5 YEAR (*) (*)
- -----------------------------------------------------------------------------------------------------------------------------------
TRANSPARENT LAN SERVICE-100M PER SYSTEM
- 3 YEAR A2751 (*) (*)
- 5 YEAR (*) (*)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 67
Page 10
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (SOUTH)
<TABLE>
<CAPTION>
FAST PACKET PRODUCTS & SERVICES - FRAME RELAY 56K/384K
- -----------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
FRAME RELAY - 56 K PER CIRCUIT Channel terminations sold
- MONTH - MONTH S2189 (*) (*) between a customer's
- 3 YEAR CONTRACT S2190 (*) (*) location and an
- > OR = 5 YEAR CONTRACT S2191 (*) (*) Interexchange Carrier's POP
are compensated only when
the channel terminations are
billed to the customer and
not the Interexchange
Carrier.
- -----------------------------------------------------------------------------------------------------------------------------------
FRAME RELAY - TERM PER CIRCUIT Must remain End User
CONVERSION - 56K Billed. Paid when month to
- 3 YEAR CONTRACT S2192 (*) (*) month is converted to
- > OR = 5 YEAR CONTRACT S2193 (*) (*) contract or when contract is
within nine months of
expiration.
- -----------------------------------------------------------------------------------------------------------------------------------
FRAME RELAY - MOVES - 56K PER CIRCUIT Must remain End User
WITHIN ONE YEAR OF INSTALL Billed. Paid when moving a
- 3 YEAR CONTRACT S2194 (*) (*) circuit within one year of
- > OR = 5 YEAR CONTRACT S2195 (*) (*) installation.
- -----------------------------------------------------------------------------------------------------------------------------------
FRAME RELAY - 384K PER CIRCUIT Channel terminations sold
- MONTH - MONTH S2196 (*) (*) between a customer's
- 3 YEAR CONTRACT S2197 (*) (*) location and an
- > OR = 5 YEAR CONTRACT S2198 (*) (*) Interexchange Carrier's POP
are compensated only when
the channel terminations are
billed to the customer and
not the Interexchange Carrier
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 68
Page 11
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (SOUTH)
<TABLE>
<CAPTION>
FAST PACKET PRODUCTS & SERVICES - 1MBPS
- -----------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
FRAME RELAY - 1 MBPS PER CIRCUIT Channel terminations sold
- MONTH - MONTH S2201 (*) (*) between a customer's
- 3 YEAR CONTRACT S2202 (*) (*) location and an
- > OR = 5 YEAR CONTRACT S2203 (*) (*) Interexchange Carrier's POP
are compensated only when
the channel terminations are
billed to the customer and
not the Interexchange Carrier
- -----------------------------------------------------------------------------------------------------------------------------------
FRAME RELAY - TERM PER CIRCUIT Must remain End User
CONVERSION - 1 MBPS Billed. Paid when month to
- 3 YEAR CONTRACT S2204 (*) (*) month is converted to
- > OR = 5 YEAR CONTRACT S2205 (*) (*) contract or when contract is
within nine months of
expiration.
- -----------------------------------------------------------------------------------------------------------------------------------
FRAME RELAY - MOVES - 1MBPS PER CIRCUIT Must remain End User
WITHIN ONE YEAR OF INSTALL Billed. Paid when moving a
- 3 YEAR CONTRACT S2206 (*) (*) circuit within one year of
- > OR = 5 YEAR CONTRACT S2207 (*) (*) installation.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 69
Page 12
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (SOUTH)
<TABLE>
<CAPTION>
FAST PACKET PRODUCTS & SERVICES - FRAME RELAY 4MBPS/6MBPS/22MBPS/24MBPS
- -----------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
FRAME RELAY - 4MBPS PER CIRCUIT Channel terminations sold
-- 3 YEAR CONTRACT S2208 (*) (*) between a customer's
-- 5 YEAR CONTRACT S2209 (*) (*) location and an
Interexchange Carrier's POP are
compensated only when the channel
terminations are billed to the
customer and not Interexchange
Carrier.
- -----------------------------------------------------------------------------------------------------------------------------------
FRAME RELAY - 6 MBPS PER CIRCUIT
- 3 YEAR CONTRACT S2212 (*) (*) See above
- 5 YEAR CONTRACT S2213 (*) (*)
- -----------------------------------------------------------------------------------------------------------------------------------
FRAME RELAY - 22 MBPS PER CIRCUIT
- 3 YEAR CONTRACT S2216 (*) (*) See above
- 5 YEAR CONTRACT S2217 (*) (*)
- -----------------------------------------------------------------------------------------------------------------------------------
FRAME RELAY - 24 MBPS PER CIRCUIT
- 3 YEAR CONTRACT S2220 (*) (*) See above
- 5 YEAR CONTRACT S2221 (*) (*)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 70
Page 13
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (SOUTH)
<TABLE>
<CAPTION>
FAST PACKET PRODUCTS & SERVICES - DS3
- -----------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
FRAME RELAY - DS3 PER CIRCUIT Channel terminations sold
- 3 YEAR CONTRACT S2222 (*) (*) between a customer's
- > OR = 5 YEAR CONTRACT S2223 (*) (*) location and an Interexchange Carrier's
POP are compensated only when the
channel terminations are billed to the
customer and not the Interexchange
Carrier
- -----------------------------------------------------------------------------------------------------------------------------------
FRAME RELAY - TERM PER CIRCUIT Must remain End User
CONVERSION - DS3 Billed. Paid when month to
- 3 YEAR CONTRACT S2267 (*) (*) month is converted to
- > OR = 5 YEAR CONTRACT S2268 (*) (*) contract or when contract is
within nine months of
expiration.
- -----------------------------------------------------------------------------------------------------------------------------------
FRAME RELAY - MOVES - DS3 PER CIRCUIT Must remain End User
WITHIN ONE YEAR OF INSTALL Billed. Paid when moving a
- 3 YEAR CONTRACT S2269 (*) (*) circuit within one year of
- > OR = 5 YEAR CONTRACT S2270 (*) (*) installation.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 71
Page 14
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (SOUTH)
<TABLE>
<CAPTION>
FAST PACKET PRODUCTS & SERVICES - SMDS
- -----------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
SMDS - MONTH - MONTH PER CIRCUIT Channel terminations sold
- 56 KBS A2804 (*) (*) between a customer's
- 1 MBPS A2812 (*) (*) location and an
- HIGH SPEED A2820 (*) (*) Interexchange Carrier's POP
are compensated only when the channel
terminations are billed to the customer
and not the Interexchange Carrier.
Compensation covers bundled port and
access. No compensation for individual
components. The DS3 associated with SMDS
56KBPS, 1MBPS and High Speed FCC Tariff
is not eligible for separate
compensation.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 72
Page 15
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (SOUTH)
<TABLE>
<CAPTION>
FAST PACKET PRODUCTS & SERVICES - SMDS
- -----------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
SMDS - TWO YEAR PER CIRCUIT Channel terminations sold
- 56 KBS A2805 (*) (*) between a customer's
- 1 MBPS A2813 (*) (*) location and an
- HIGH SPEED A2821 (*) (*) Inter-exchange Carrier's POP
are compensated only when the channel
terminations are billed to the customer
and not the Interexchange Carrier.
Compensation covers bundled port and
access. No compensation for individual
components. The DS3 associated with SMDS
56KBPS, 1MBPS and High Speed FCC Tariff
is not eligible for separate
compensation.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 73
Page 16
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (SOUTH)
<TABLE>
<CAPTION>
FAST PACKET PRODUCTS & SERVICES - SMDS
- -----------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
SMDS - THREE YEAR PER CIRCUIT Channel terminations sold
- 56 KBS A2806 (*) (*) between a customer's
- 1 MBPS A2814 (*) (*) location and an
- HIGH SPEED A2822 (*) (*) Interexchange Carrier's POP
are compensated only when the channel
terminations are billed to the customer
and not the Interexchange Carrier.
Compensation covers bundled port and
access. No compensation for individual
components. The DS3 associated with SMDS
56KBPS, 1MBPS and High Speed FCC Tariff
is not eligible for separate
compensation.
- -----------------------------------------------------------------------------------------------------------------------------------
SMDS - > OR= TO FIVE YEAR PER CIRCUIT Channel terminations sold
- 56 KBS A2807 (*) (*) between a customer's
- 1 MBPS A2815 (*) (*) location and an
- HIGH SPEED A1823 (*) (*) Interexchange Carrier's POP
are compensated only when the channel
terminations are billed to the customer
and not the Interexchange Carrier.
Compensation covers bundled port and
access. No compensation for individual
components. The DS3 associated with SMDS
56KBPS, 1MBPS and High Speed FCC Tariff
is not eligible for separate
compensation.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 74
Page 17
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (SOUTH)
<TABLE>
<CAPTION>
FAST PACKET PRODUCTS & SERVICES - SMDS CONVERSIONS/MOVES
- -----------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
SMDS -PRODUCT CONVERSION PER CIRCUIT Must remain End User
- 1 MBPS A2826 (*) (*) Billed. Paid when upgrading
- HIGH SPEED A2827 (*) (*) speeds. Minimum of
remaining contract length of
initial product.
- -----------------------------------------------------------------------------------------------------------------------------------
SMDS -TERM CONVERSION PER CIRCUIT Must remain End User Billed.
-56 KBS A2831 (*) (*) Paid when month to month is
- 1 MBPS A2832 (*) (*) converted to contract or
- HIGH SPEED A2833 (*) (*) when contract is within nine
months of expiration.
- -----------------------------------------------------------------------------------------------------------------------------------
SMDS - MOVES WITHIN ONE YEAR PER CIRCUIT Must remain End User
OF INSTALL - 1 MBPS Billed. Paid when moving a
- 2 YEAR CONTRACT A2840 (*) (*) circuit within one year of
- 3 YEAR CONTRACT A2841 (*) (*) installation.
- > OR = 5 YEAR CONTRACT A2842 (*) (*)
- -----------------------------------------------------------------------------------------------------------------------------------
SMDS - MOVES WITHIN ONE YEAR PER CIRCUIT Must remain End User
OF INSTALL - HIGH SPEED Billed. Paid when moving a
- 2 YEAR CONTRACT A2843 (*) (*) circuit within one year of
- 3 YEAR CONTRACT A2844 (*) (*) installation.
- > OR = 5 YEAR CONTRACT A2845 (*) (*)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 75
Page 18
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (SOUTH)
<TABLE>
<CAPTION>
ATM
- -----------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
ATM - DS1 Channel terminations sold
3 YEAR PER S2622 (*) (*) between a customer's
5 YEAR USER NETWORK S2623 (*) (*) location and an Interexchange Carrier's
INTERFACE POP are compensated only when the
channel terminations are billed to the
customer and not the Interexchange
Carrier.
- -----------------------------------------------------------------------------------------------------------------------------------
ATM - DS3 Channel terminations sold
3 YEAR PER S2626 (*) (*) between a customer's
5 YEAR USER NETWORK S2627 (*) (*) location and an Interexchange Carrier's
INTERFACE POP are compensated only when the
channel terminations are billed to the
customer and not the Interexchange
Carrier.
- -----------------------------------------------------------------------------------------------------------------------------------
SONET - OC3 PER NODE Channel terminations sold
3 YEAR S2630 (*) (*) between a customer's
5 YEAR S2631 (*) (*) location and an Interexchange Carrier's
POP are compensated only when the
channel terminations are billed to the
customer and not the Interexchange
Carrier.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 76
Page 19
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (SOUTH)
<TABLE>
<CAPTION>
ISDN PRODUCTS & SERVICES
- -----------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
ISDN BRI PER LINE A2110 (*) (*)
- -----------------------------------------------------------------------------------------------------------------------------------
ISDN PRI PER LINE CLID - Calling Line
WITHOUT CLID Identification
- MONTH - MONTH S2250 (*) (*)
- 2 YEAR S2251 (*) (*)
- 3 YEAR S2252 (*) (*)
- 5 YEAR S2253 (*) (*)
WITH CLID
- MONTH - MONTH S2257 (*) (*)
- 2 YEAR S2258 (*) (*)
- 3 YEAR S2259 (*) (*)
- 5 YEAR S2260 (*) (*)
- -----------------------------------------------------------------------------------------------------------------------------------
ISDN PRI CONVERSION PER LINE CLID - Calling Line
WITHOUT CLID Identification
- 2 YEAR S2254 (*) (*)
- 3 YEAR S2255 (*) (*) Paid when month to month is
- 5 YEAR S2256 (*) (*) converted to contract or
WITH CLID when contract is within nine
- 2 YEAR S2261 (*) (*) months of expiration
- 3 YEAR S2262 (*) (*)
- 5 YEAR S2263 (*) (*)
- -----------------------------------------------------------------------------------------------------------------------------------
ISDN-PRI HUBBING PER PORT
- MONTH-MONTH S2264 (*) (*)
- 3 YEAR S2265 (*) (*)
- 5 YEAR S2266 (*) (*)
- -----------------------------------------------------------------------------------------------------------------------------------
IPRS - 64K PER PORT
- 3 YEAR A2732 (*) (*)
- 5 YEAR A2733 (*) (*)
- -----------------------------------------------------------------------------------------------------------------------------------
IPRS - DS1 PER PORT
- 3 YEAR A2735 (*) (*)
- 5 YEAR A2736 (*) (*)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 77
Page 20
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (SOUTH)
<TABLE>
<CAPTION>
NEW NETWORK PRODUCTS & SERVICES - XDSL SERVICES
- -----------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
ADSL PER LINE
- 640/90 A2700 (*) (*)
- 1.6/90 A2701 (*) (*)
- 7.1/680 A2702 (*) (*)
- -----------------------------------------------------------------------------------------------------------------------------------
SDSL PER LINE
- 128 A2711 (*) (*) Not available until given
- 256 A2712 (*) (*) notice by Bell Atlantic
- 384 A2713 (*) (*)
- 512 A2714 (*) (*)
- 768 A2715 (*) (*)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NEW BAIS PRODUCTS & SERVICES - DSL SERVICES
- -----------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
Infospeed DSL Plus PER LINE A2170 (*) (*)
- 640K
- 1.6M
- 7.1M
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 78
Page 21
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (SOUTH)
<TABLE>
<CAPTION>
OTHER DATA PRODUCTS & SERVICES - TV SERVICES
- -----------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
TV-1 MULTI-CHANNEL VIDEO PER CHANNEL
1.2 GBPS TERMINATION
- 5 YEAR S2503 (*) (*)
- 10 YEAR S2504 (*) (*)
- -----------------------------------------------------------------------------------------------------------------------------------
TV-1 SINGLE CHANNEL VIDEO PER CHANNEL
140 MBPS TERMINATION Compensation paid only for
- MONTH TO MONTH S2505 (*) (*) full time circuits, not part
time.
- -----------------------------------------------------------------------------------------------------------------------------------
SERIAL COMPONENT SERVICE PER CHANNEL One year minimum contract
1 YEAR TERMINATION A2500 (*) (*) Service Discount Plan
3 YEAR A2501 (*) (*) Available
5 YEAR A2502 (*) (*)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 79
Page 22
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (SOUTH)
<TABLE>
<CAPTION>
LOCAL & TOLL PRODUCTS & SERVICES
- -----------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
DIALTONE LINES PER LINE A3070 (*) (*) New POTS sales only (new
business line is a line that
does not replace any
existing Telephone Company
Business service Dial tone
lines.)
- -----------------------------------------------------------------------------------------------------------------------------------
REMOTE CALL FORWARDING EACH PATH A3080 (*) (*)
- -----------------------------------------------------------------------------------------------------------------------------------
KEY CONNECTIONS PER BTN S3060 (*) (*) Not available DC. Not
available with MVP/MVP PLUS
At least one line must be L
PIC'd to Bell Atlantic for
compensation. All other
tariff rules and regulations
apply.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Revised 4/1/2000
Proprietary Information
Not for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 80
Page 23
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (SOUTH)
<TABLE>
<CAPTION>
LOCAL & TOLL PRODUCTS & SERVICES
- -----------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
REWARDING CONNECTIONS: PER ACCOUNT S3050 (*) (*) Target customers will have
- NEW OR EXISTING at least $125 per month in
- POTS local and toll usage billing
- PBX TRUNKS per account. The primary
- ISDN CUSTOMER focus of Rewarding
Connections is on local and toll
retention. Not available in the District
of Columbia. Requires all lines to be L
PIC'd to Bell Atlantic. All tariff rules
and regulations apply.
CUSTOPAK
- NEW OR EXISTING S3051 (*) (*) Requires all customer's
lines be PIC'd to Bell Atlantic.
CUSTOFLEX 2100
- EXISTING S3052 (*) (*)
CUSTOFLEX 2100 - NEW
- MONTH - MONTH S3053 (*) (*)
- 1 YEAR CONTRACT S3054 (*) (*)
- 2 -3 YEAR CONTRACT S3055 (*) (*)
- = OR > 4 YEAR CONTRACT S3056 (*) (*)
Compensable products are NEW
PIC FREEZE (DO NOT TOUCH BELL PER LINE POTS LINES and new and
ATLANTIC) S5000 (*) (*) existing CENTREX Product
family.
Not Compensable are ALL
TRUNKS, station numbers, and
ISDN spids.
Not available in certain
geographic areas.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 81
Page 1
Contract #BJ16212
AMENDMENT NO. 2 TO
THE BELL ATLANTIC AUTHORIZED AGENT
NETWORK SERVICES MARKETING AGREEMENT
This Amendment No. 2 to the Bell Atlantic Authorized Agent Network
Services Marketing Agreement ("Agreement") is made this first day of January,
1999, by and between USTeleCenters, a Delaware corporation with principal
offices located at 745 Atlantic Avenue, Boston, MA 02111-2626 (hereinafter
referred to as "Agent"), and Bell Atlantic Network Services, Inc., a Delaware
corporation with principal offices located at 1310 North Court House Road,
Arlington, Virginia 2220l (hereinafter referred to as "BANSI").
WHEREAS, BANSI and Agent are parties to the Agreement which authorizes
Agent to act as BANSI's non-exclusive agent for the marketing of Telephone
Company Services; and
WHEREAS, BANSI and Agent intend for Agent to serve as both a
telemarketing agent as well as a premises agent for the states of Delaware, New
Jersey, Maryland, Pennsylvania, Virginia, Washington DC, West Virginia, New
York, New Hampshire, Massachusetts, Maine, Rhode Island and Vermont
("Telemarketing Area");
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. In the Telemarketing Area, Agent is authorized to make sales both
through telemarketing and customer premises visits. Unless otherwise
authorized in writing, Agent may not telemarket outside of the
Telemarketing Area.
2. When Agent is acting as a telemarketer, Agent shall proactively
contact Customers over the telephone for purposes of closing a sale
over the phone.
3. When Agent is acting as a telemarketer, Agent shall comply with all
guidelines, rules and principles established by BANSI, including,
without limitation, the following:
(a) Agent shall have the capability and all necessary equipment to
provide, and shall provide, in-house and remote telephone monitoring
(as specified by BANSI) of sales and marketing calls handled by Agent.
BANSI shall have the right to monitor any calls remotely or otherwise
without prior written notice to Agent.
(b) Agent shall have the necessary technology to block, and shall
block within forty-eight (48) hours of receiving a Do Not Contact List
from BANSI, all telephone numbers included on that list which shall
set forth the names and/or numbers of Customers who are not to be
contacted by Agent for the marketing and sale of Services.
1/1/99
Confidential and Proprietary
<PAGE> 82
Page 2
Contract #BJ16212
(c) As prescribed by BANSI, Agent shall tape record and verify each
sale or, in the alternative at BANSI's discretion, Agent shall provide
a letter of authorization from a Customer authorizing Agent to place
an order for purchase of Services on behalf of that Customer.
(d) Agent shall submit to BANSI, for BANSI's prior approval, all call
scripts and guides to be used by Agent in marketing or selling the
Services.
(e) Agent shall limit and manage the number of contacts with potential
or actual Customers per year or quarter as instructed by BANSI, and
shall report detailed calling activity hereunder to BANSI upon BANSI's
request.
IN WITNESS WHEREOF, each party has caused this Amendment No. 2 to the
Agreement to be executed by its duly authorized representative as of the date
above written.
BELL ATLANTIC USTELECENTERS
NETWORK SERVICES, INC
Name: Linda Waddell Name: Franklin A. Reece III
By: /s/ Linda Waddell By: /s/ Franklin A. Reece III
Title: Director Title: President
Channel Strategies
Date: Date:
5/1/98
Confidential and Proprietary
<PAGE> 83
Page 1
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (TELESALES ONLY)
<TABLE>
<CAPTION>
CENTREX PRODUCTS & SERVICES
- -----------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
CUSTOPAK - NEW Conversions of Engineered
- NEW SYSTEM/ADD LINES PER LINE S1300T (*) (*) Centrex or CustoFLEX 2100
to CustoPAK are not
eligible for Comp.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Proprietary Information
Nor for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 84
Page 2
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (TELESALES ONLY)
<TABLE>
<CAPTION>
CO FEATURES
- -----------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
LINE FEATURES PER LINE
Features that are part of
CATEGORY I the Centrex, CustoPAK, or
CALL BLOCK A4020T (*) (*) CustoFLEX 2100 monthly rate
CALL WAITING A4021T (*) (*) are not compensable.
FIXED CALL FORWARDING A4022T (*) (*)
REPEAT CALL A4023T (*) (*)
RETURN CALL A4024T (*) (*)
THREE WAY CALLING A4025T (*) (*)
CALL FORWARD A4026T (*) (*)
CATEGORY II
CALLER ID N4100 (N) (*) (*)
CALLER ID (POTS) A4040T (S) (*) (*)
CALLER ID DELUXE N4101 (N) (*) (*)
CALLER ID DELUXE (POTS) S4041TD (S)(*) (*)
CALLER ID UPGRADE (POTS) A4042T (*) (*)
IDENTA RING A4043T (*) (*)
ULTRA FORWARD A4044T (*) (*)
ULTRA FORWARD UPGRADE A4045T (*) (*)
CENTREX ULTRA FORWARD A4046T (*) (*)
CALL WAITING DELUXE N4104 (N) (*) (*)
A4047T (S) (*) (*)
CALL WAITING DELUXE UPGRADE A4048T (*) (*)
CENTREX CALLER ID N4102 (N) (*) (*)
A4049T (S) (*) (*)
CENTREX CALLER ID DELUXE N4103 (N) (*) (*)
A4050T (S) (*) (*)
CENTREX CALLER ID UPGRADE A4051T (*) (*)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Proprietary Information
Nor for Use or Disclosure Outside Bell Atlantic Without Written Permission
<PAGE> 85
Page 3
APPENDIX A
2000 AGENT PLAN NETWORK SERVICES PRODUCT LIST (TELESALES ONLY)
<TABLE>
<CAPTION>
OTHER PRODUCTS & SERVICES
- -----------------------------------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION PRODUCT COMPENSATION REVENUE
UNIT CODE VALUE VALUE RESTRICTIONS
- ------------------------------ ----------- ------- ------------ ------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
REMOTE CALL FORWARDING EACH PATH 3080 (N) (*) (*)
YELLOW PAGES A4017T(S)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1/1/2000
Proprietary Information
Nor for Use or Disclosure Outside Bell Atlantic Without Written Permission
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 4,907
<SECURITIES> 0
<RECEIVABLES> 2,583
<ALLOWANCES> 0
<INVENTORY> 149
<CURRENT-ASSETS> 8,149
<PP&E> 1,608
<DEPRECIATION> 0
<TOTAL-ASSETS> 19,014
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0
87
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<INCOME-TAX> (239)
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<EPS-BASIC> (.10)
<EPS-DILUTED> (.10)
</TABLE>
