<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Precision Systems, Inc.
-----------------------
(Name of Issuer)
Common Stock (par value $0.01 per share)
----------------------------------------
(Title of Class of Securities)
740329-10-7
-----------
(CUSIP Number)
<TABLE>
<CAPTION>
<S> <C>
Craig D. Slater with copies to:
Vice President Steven A. Cohen, Esq.
Anschutz Digital Media, Inc. Hogan & Hartson L.L.P.
555 17th Street, Suite 2400 1200 17th Street, Suite 1500
Denver, Colorado 80202 Denver, Colorado 80202
(303) 298-8881 (303) 899-7300
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</TABLE>
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
March 15, 1999
--------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [_].
Check the following box if a fee is being paid with the statement [_]. (A fee is
not required only if the reporting person: (1) has a previous statement on file
reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>
CUSIP No. 740329-10-7 Page 2 of 6 Pages
---------------- -------------------
SCHEDULE 13D
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Anschutz Digital Media, Inc. ID# 84-1493257
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [_]
(b) [_]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
PF
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [_]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Colorado
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
2,415,945
NUMBER OF --------------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 0
OWNED BY
EACH --------------------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON 2,415,945
WITH
--------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
Anschutz Digital Media, Inc. -- 2,415,945
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[_]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13.57%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
CUSIP No. 740329-10-7 Page 3 of 6 Pages
---------------- -------------------
Item 1. Security and Issuer.
-------------------
This Schedule 13D relates to shares of common stock, par value $0.01 per
share of Precision Systems, Inc. ("PSI Common Stock"), a Delaware corporation
("PSI") whose principal business and executive office is located at 11800 30th
Court North, St. Petersburg, Florida, 33716.
Item 2. Identity and Background.
-----------------------
Anschutz Digital Media, Inc., a Colorado corporation ("ADM"), is engaged
in the business of providing advanced digital production, post-production and
transmission facility, digital media storage and distribution services,
telephony-based data storage and enhanced services, access and routing services
and prepaid telecommunications services. ADM's principal business and executive
office is located at 555 17th Street, Suite 2400, Denver, Colorado 80202.
The directors and executive officers of ADM are set forth on Schedule I
hereto. Schedule I sets forth the following information with respect to each
such person:
(a) Name;
(b) Business address; and
(c) Present principal occupation or employment and name of employer.
All of the directors and executive officers of ADM are citizens of the United
States. During the last five years neither ADM nor any person named in Schedule
I hereto has been: (i) convicted in a criminal proceeding (excluding traffic
violations and similar misdemeanors) or (ii) a party to a civil proceeding of
judicial or administrative body of competent jurisdiction and as a result of
such proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to, federal
or state securities laws or finding any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
-------------------------------------------------
ADM purchased the 2,415,945 shares of PSI Common Stock for $2,500,000 in
cash paid from ADM's capital.
Item 4. Purpose of the Transaction.
--------------------------
On February 16, 1999, ADM entered into an asset purchase agreement and
amended such agreement on March 16, 1999 (as amended, the "Asset Purchase
Agreement") by and among Speer Communications Holdings Limited Partnership,
Speer Communications Holdings I Limited Partnership, Speer Virtual Media Limited
Partnership, Speer World Wide Digital Limited Partnership, Speer Productions
Limited Partnership, Professional Video Services Corporation, Enhanced Services
of Nevada, Inc., Speer Communications Virtual Media and RMS Limited Partnership
(collectively referred to as the "Speer Entities"). Pursuant to the Asset
Purchase Agreement, a copy of which (together with the First Amendment thereto)
is attached hereto as Exhibit 99.1, ADM agreed to purchase from the Speer
------------
Entities (subject to the satisfaction of certain conditions for consummating
such purchase) substantially all of the assets of the Speer Entities (the
"Assets"). In addition, ADM agreed, subject to certain limitations, to purchase
the following:
(a) 2,415,945 shares of PSI Common Stock held by RMS Limited
Partnership ("RMS");
(b) 10,000 shares of Series A Preferred Stock of PSI ("Series A
Preferred Stock") held by RMS;
(c) 1,500 shares of Series B Preferred Stock of PSI ("Series B
Preferred Stock") held by RMS;
(d) warrants held by RMS representing the right to purchase up to
425,000 shares of PSI Common Stock in the aggregate;
<PAGE>
CUSIP No. 740329-10-7 Page 4 of 6 Pages
---------------- -------------------
(e) a promissory note held by RMS and issued by PSI in the aggregate
principal amount of $2,000,000 plus all accrued and unpaid interest
thereon; and
(f) a line of credit extended to PSI by Speer Communications Holdings
Limited Partnership for up to $5,000,000.
(The securities referred to in paragraphs (a) through (f) are collectively
described as the "PSI Interests".)
On March 15, 1999, ADM, PS Acquisitions, Inc., a Delaware corporation
and wholly-owned subsidiary of ADM ("Subsidiary"), and PSI entered into an
Agreement and Plan of Merger (the "Merger Agreement"), a copy of which is
attached hereto as Exhibit 99.2. Subject to the approval of the Merger by the
------------
PSI shareholders, the Merger Agreement provides that ADM will merge with and
into Subsidiary. Subject to certain adjustments and the rights of dissenting
shareholders, each outstanding share of PSI Common Stock will be converted into
the right to receive $1.00 per share without interest. Each outstanding share of
Series A Preferred Stock will be converted into the right to receive $580.00 per
share plus all accumulated but unpaid dividends up to (but not beyond) the
effective time of the Merger (the "Effective Time"). Each outstanding share of
Series B Preferred Stock will be converted into the right to receive $1,000.00
per share plus all accumulated but unpaid dividends up to (but not beyond) the
effective time of the Merger (the "Effective Time"). Any outstanding warrants
and options to acquire PSI Common Stock granted to directors or employees of PSI
shall be canceled prior to the Effective Time and, in lieu thereof, the holders
of such warrants or options shall receive a cash payment from ADM equal to the
product of : (i) the total number of shares of PSI Common Stock previously
subject to such warrant or option, and (ii) the excess of $1.00 over the
exercise price per share of PSI Common Stock subject to such warrant or option.
Upon consummation of the Merger, PSI will merge with and into
Subsidiary. The surviving entity will be governed by Subsidiaries' certificate
of incorporation and bylaws and by the Subsidiaries' board of directors. The
surviving entity's operations will be similar to that of ADM. In addition,
following the Merger, the PSI Common Stock will cease to be quoted on the Nasdaq
SmallCap Market and will be eligible for termination of registration pursuant to
Section 12(g)(4) of the Securities Exchange Act of 1934, as amended.
Following the consummation of the Merger and by operation of law: (i)
PSI's present capitalization, charter, bylaws and other instruments
corresponding thereto will change materially, (ii) the PSI Common Stock will be
canceled and will not be authorized to be quoted in an inter-dealer quotation
system of a registered national securities association, (iii) the Series A
Preferred Stock will be canceled and will not be authorized, (iv) the Series B
Preferred Stock will be canceled and will not be authorized and (v) ADM may make
any other material change in PSI's business or corporate structure or to take
any action similar to those listed above.
On March 16, 1999, ADM and the Speer Entities consummated the
transactions contemplated by the Asset Purchase Agreement. The PSI Interests
were transferred to ADM at the closing of the transactions contemplated by the
Asset Purchase Agreement.
Except as described above, ADM has no present plans or proposals which
relate to or would result in any transactions specified in paragraphs (a)
through (j) of Item 4. In the future, however, ADM reserves the right to adopt
such plans or proposals, subject to applicable regulatory requirements if any.
Item 5. Interest in Securities of the Issuer.
------------------------------------
(a) Based upon information received from PSI, ADM believes that the
17,807,507 shares of PSI Common Stock were issued and outstanding as of the date
of this Schedule 13D. In such case, the 2,415,945 shares of PSI Common Stock
held by ADM represents 13.57% of the total outstanding shares of PSI Common
Stock. Additionally, ADM owns the PSI Interests.
(b) ADM has sole power to vote the shares identified in paragraph (a)
above. ADM does not have the power to direct the voting of any other PSI
shareholder.
(c) As described above, on March 15, 1999, ADM, Subsidiary and PSI
entered into the Merger Agreement. On March 16, 1999, ADM acquired the PSI
Interests from RMS under the Asset Purchase Agreement.
(d) Not applicable.
<PAGE>
CUSIP No. 740329-10-7 Page 5 of 6 Pages
---------------- -------------------
(e) Not applicable.
Item 6. Contracts, Arrangements, Understanding or Relationships With Respect to
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Securities of the Issuer.
------------------------
Except for the Merger Agreement, none of the persons named in Item 2
have, with respect to the securities of PSI, any contracts, arrangements,
understandings or relationships (legal or otherwise) with any person with
respect to any securities, finders fees, joint ventures, loan or option
arrangements, puts or calls, guarantees of profits, division of profits or loss,
or the giving or withholding of proxies.
Item 7. Material to be Filed as Exhibits.
--------------------------------
Exhibit 99.1 Asset Purchase Agreement (together with the First
Amendment thereto) as described above.
Exhibit 99.2 Agreement and Plan of Merger as described above.
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
March 24, 1999 /s/ Craig D. Slater
_______________________ ____________________________________________
Date Craig D. Slater
Vice President, Anschutz Digital Media, Inc.
Signature Page
<PAGE>
SCHEDULE I
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The following persons are employed by Anschutz Digital Media, Inc. in
the capacities indicated next to their names:
<TABLE>
<CAPTION>
<S> <C>
Philip F. Anschutz Director, Chairman of the Board and Chief Executive Officer
Cannon Y. Harvey Director, President and Chief Operating Officer
Craig D. Slater Director, Vice President
Scott Carpenter Vice President
Douglas L. Polson Vice President
Thomas Kundert Treasurer
Lynn T. Wood Secretary
</TABLE>
The business address for each person listed on this Schedule I is 555
----------
17th Street, Suite 2400, Denver, Colorado 80202.
<PAGE>
EXHIBIT 99.1
ASSET PURCHASE AGREEMENT
by and among
ANSCHUTZ DIGITAL MEDIA, INC.
as Purchaser,
Speer Communications Holdings Limited Partnership
Speer Virtual Media Limited Partnership
Speer World Wide Digital Limited Partnership
Speer Productions Limited Partnership
Professional Video Services CORPORATION
and
ENHANCED SERVICES OF NEVADA, INC.
as Sellers
and
RMS Limited Partnership
and
Roy M. Speer
(as to Articles IX and XI only)
Dated as of February 16, 1999
<PAGE>
TABLE OF CONTENTS
-----------------
Title Page
- ----- ----
ARTICLE I DEFINITIONS AND TERMS......................................... 1
Section 1.1 Certain Definitions...................................... 1
-------------------
Section 1.2 Terms Generally.......................................... 10
---------------
ARTICLE II ACQUISITION AND DISPOSITION OF ASSETS........................ 10
Section 2.1 Purchase and Sale of Assets.............................. 10
---------------------------
Section 2.2 Excluded Assets.......................................... 12
---------------
Section 2.3 Nondelivered Assets...................................... 12
-------------------
Section 2.4 No Assignment if Breach.................................. 13
-----------------------
ARTICLE III PAYMENT AND DELIVERY........................................ 13
Section 3.1 Purchase Price and Payment............................... 13
--------------------------
Section 3.2 Allocation of Consideration.............................. 13
---------------------------
Section 3.3 Closing................................................. 13
-------
Section 3.4 Deliveries by the Sellers................................ 14
------------------
Section 3.5 Deliveries by RMS........................................ 14
-----------------
Section 3.6 Deliveries by Purchaser.................................. 14
----------------------
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE SELLERS................ 15
Section 4.1 Authorization and Validity............................... 15
--------------------------
Section 4.2 Equity; Good Title....................................... 15
------------------
Section 4.3 Capitalization........................................... 16
--------------
Section 4.4 Organization............................................. 17
------------
Section 4.5 No Conflict.............................................. 17
-----------
Section 4.6 Governmental Consents.................................... 18
---------------------
Section 4.7 Balance Sheet Information................................ 18
-------------------------
Section 4.8 Absence of Certain Changes or Events..................... 19
------------------------------------
Section 4.9 Property, Assets......................................... 21
----------------
Section 4.10 Litigation and Claims, Compliance with Laws............. 23
-------------------------------------------
Section 4.11 Taxes................................................... 24
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Section 4.12 Insurance............................................... 24
---------
Section 4.13 Environmental Matters................................... 24
---------------------
Section 4.14 Material Contracts...................................... 26
------------------
Section 4.15 Intellectual Property................................... 28
---------------------
Section 4.16 Employee Benefits; ERISA................................ 29
------------------------
Section 4.17 Labor Matters........................................... 29
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Section 4.18 Records................................................. 30
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Section 4.19 Affiliate Transactions.................................. 30
----------------------
Section 4.20 Brokers, Finders, Etc................................... 31
----------------------
Section 4.21 Questionable Payments................................... 31
---------------------
Section 4.22 Competing Business...................................... 31
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- i -
<PAGE>
Section 4.23 Compliance With Bulk Sales Act; Uniform Commercial Code. 31
-------------------------------------------------------
Section 4.24 Other Information....................................... 31
-----------------
Section 4.25 Customer and Supplier Relationships; Warranty Claims.... 32
----------------------------------------------------------------
Section 4.26 Termination of the Speer/PSI Agreements................. 32
---------------------------------------
Section 4.27 Year 2000 Program....................................... 32
-----------------
ARTICLE V REPRESENTATIONS AND WARRANTIES OF RMS......................... 32
Section 5.1 Authorization and Validity............................... 32
--------------------------
Section 5.2 Equity; Good Title....................................... 33
------------------
Section 5.3 Organization............................................. 33
------------
Section 5.4 No Conflict.............................................. 33
-----------
Section 5.5 Governmental Consents.................................... 34
---------------------
Section 5.6 Owned Real Property; PSI Securities...................... 34
-----------------------------------
Section 5.7 Litigation and Claims; Compliance with Laws.............. 34
-------------------------------------------
Section 5.8 Taxes.................................................... 35
-----
Section 5.9 Environmental Matters.................................... 35
---------------------
Section 5.10 Competing Business...................................... 37
------------------
Section 5.11 Other Information....................................... 37
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ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PURCHASER.................. 37
Section 6.1 Authorization and Validity............................... 37
--------------------------
Section 6.2 Organization............................................. 38
------------
Section 6.3 No Conflict.............................................. 38
-----------
Section 6.4 Governmental Consents.................................... 38
---------------------
Section 6.5 Brokers, Finders, Etc.................................... 38
----------------------
Section 6.6 Other Information........................................ 38
-----------------
Section 6.7 Purchase for Investment.................................. 39
-----------------------
Section 6.8 Limitation on Representations............................ 39
-----------------------------
ARTICLE VII COVENANTS................................................... 39
Section 7.1 Commercially Reasonable Efforts.......................... 39
-------------------------------
Section 7.2 Filings and Consents..................................... 39
--------------------
Section 7.3 Publicity................................................ 39
---------
Section 7.4 Notification of Certain Matters.......................... 40
-------------------------------
Section 7.5 Expenses................................................. 40
--------
Section 7.6 Conduct of Business of the Sellers...................... 40
---------------------------------
Section 7.7 Access and Environmental Inspection...................... 41
-----------------------------------
Section 7.8 Management Agreement..................................... 42
--------------------
Section 7.9 Consents................................................. 42
--------
Section 7.10 No Solicitation......................................... 42
---------------
Section 7.11 Supplements to the Schedules Hereto..................... 43
-----------------------------------
Section 7.12 Delivery of Closing Balance Sheet....................... 43
---------------------------------
Section 7.13 Further Assurances...................................... 43
------------------
Section 7.14 IHC Interests........................................... 44
-------------
Section 7.15 Interim Funding......................................... 44
---------------
<PAGE>
Section 7.16 Reporting............................................... 44
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Section 7.17 Corporate Name.......................................... 44
--------------
Section 7.18 Anschutz/PSI Transaction................................ 45
------------------------
Section 7.19 Employees............................................... 45
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ARTICLE VIII CONDITIONS TO CLOSING...................................... 45
Section 8.1 Conditions to the Obligations of Purchaser, the Sellers
--------------------------------------------------------
and RMS.................................................. 45
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Section 8.2 Conditions to the Obligations of Purchaser............... 45
------------------------------------------
Section 8.3 Conditions to the Obligations of the Sellers and RMS.... 46
------------------------------------
ARTICLE IX SURVIVAL AND INDEMNIFICATION................................. 47
Section 9.1 Survival of Representations and Warranties............... 47
------------------------------------------
Section 9.2 Indemnification by Roy M. Speer and RMS.................. 47
---------------------------------------
Section 9.3 Indemnification by Purchaser............................. 48
----------------------------
Section 9.4 Notice and Resolution of Claim........................... 48
------------------------------
ARTICLE X TERMINATION................................................... 49
Section 10.1 Termination............................................. 49
-----------
Section 10.2 Effect of Termination................................... 50
---------------------
ARTICLE XI MISCELLANEOUS................................................ 50
Section 11.1 Notices................................................. 50
-------
Section 11.2 Amendment, Waiver....................................... 51
-----------------
Section 11.3 Assignment.............................................. 51
----------
Section 11.4 Entire Agreement........................................ 52
----------------
Section 11.5 Parties in Interest..................................... 52
-------------------
Section 11.6 Expense................................................. 52
-------
Section 11.7 Governing Law; Jurisdiction; Service of Process......... 52
-----------------------------------------------
Section 11.8 Specific Performance.................................... 52
--------------------
Section 11.9 Transfer and Similar Taxes.............................. 52
--------------------------
Section 11.10 Headings............................................... 53
--------
<PAGE>
EXHIBITS
A-1. Form of Employment Agreement
A-2. Form of Agreement to Protect Confidential Information, Assign Inventions
and Prevent Unfair Competition and Unfair Solicitation
B. Form of Management Agreement
C. Purchase Price Allocation
D. Form of Opinion of Baker & McKenzie
E. Form of Opinion of Hogan & Hartson L.L.P.
<PAGE>
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT, dated as of February 16, 1999 (this
"Agreement"), by and among Anschutz Digital Media, Inc., a Colorado corporation
("Purchaser"), Speer Communications Holdings Limited Partnership, a Nevada
limited partnership, Speer Virtual Media Limited Partnership, a Nevada limited
partnership, Speer World Wide Digital Limited Partnership, a Nevada limited
partnership, Speer Productions Limited Partnership, a Nevada limited
partnership, Professional Video Services Corporation, a Delaware corporation,
and Enhanced Services of Nevada, Inc., a Nevada corporation (each a "Seller" and
collectively the "Sellers"), RMS Limited Partnership, a Nevada limited
partnership, and Roy M. Speer (as to Articles IX and XI only).
RECITALS
A. The Sellers are engaged in the business of providing advanced digital
production, post-production and transmission facility, digital media storage and
distribution services, telephony-based data storage and enhanced services,
access and routing services and prepaid telecommunications services (the
"Business");
B. Subject to the terms and conditions contained in this Agreement, the
Sellers intend to sell, transfer and assign to Purchaser, and Purchaser intends
to purchase and acquire from the Sellers, certain assets of the Sellers relating
to the operation of the Business all on the terms set forth herein; and
C. RMS intends to sell, transfer and assign to Purchaser the Owned Real
Property and the PSI Securities, and Purchaser intends to purchase and acquire
from RMS the Owned Real Property and the PSI Securities on the terms set forth
herein; and
D. The partners or shareholders, as the case may be, of each Seller and
RMS, as applicable, who collectively own all of the outstanding ownership
interests in the Sellers and RMS, have determined that it is in their collective
best interests that the Sellers and RMS sell, transfer and assign to Purchaser
and Purchaser purchases and acquires, those certain assets and liabilities of
the Sellers and RMS as contemplated herein.
AGREEMENT
NOW THEREFORE, in consideration of the foregoing premises and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND TERMS
Section 1.1 Certain Definitions. As used in this Agreement, the
-------------------
following terms shall have the meanings set forth or as referenced below:
<PAGE>
"Affiliate" shall mean, as to any Person (i) any other Person which,
directly or indirectly, is in control of, is controlled by, or is under common
control with, such Person, (ii) any corporation or organization (other than a
Subsidiary of such Person) of which such Person is an officer or partner or is,
directly or indirectly, the beneficial owner of 10% or more of any class of
equity securities (other than PSI in the case of RMS), (iii) any trust or other
estate in which such Person has a substantial beneficial interest or as to which
such Person serves as trustee or in a similar fiduciary capacity, and (iv) any
relative or spouse of such Person, or any relative of such spouse, who has the
same home as such Person or who is a director or officer of such Person or any
of its parents or Subsidiaries. The term "control" (including, with correlative
meanings, the terms "controlled by" and "under common control with") as applied
to any Person means the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of such Person, whether
through the ownership of voting securities or other ownership interest, by
contract or otherwise.
"Agreement" shall have the meaning set forth in the introductory paragraph
to this Agreement.
"Assets" shall have the meaning set forth in Section 2.1(a) hereof.
"Assumed Liabilities" shall have the meaning set forth in Section 2.1(c)
hereof.
"Balance Sheet Date" shall mean December 31, 1998.
"Bill of Sale, Assignment and Assumption Agreement" shall mean such bills
of sale, assignment and assumption agreements to be entered into by and between
Purchaser and the Sellers on the date of this Agreement pursuant to which the
Sellers will transfer the Assets held by them to Purchaser and Purchaser will
assume the Assumed Liabilities of the Sellers, as contemplated by Section 2.1 of
this Agreement, in form and substance reasonably satisfactory in each case to
Purchaser and the Sellers.
"Business" shall have the meaning set forth in the preamble hereto.
"Business Day" shall mean any day other than a Saturday, a Sunday or a day
on which banks in New York City are authorized or obligated by law or executive
order to close.
"Cleanup" shall mean all actions, whether voluntary or compelled by
Environmental Laws, required to: (i) clean-up, remove, treat or remediate
Hazardous Materials in the indoor or outdoor environment; (ii) prevent the
Release of Hazardous Materials so that they do not migrate, endanger or threaten
to endanger public health or welfare or the indoor or outdoor environment; (iii)
perform pre-remedial studies and investigations and post-remedial monitoring and
care, or (iv) respond to any government or third-party requests for information
or documents in any way relating to clean-up, removal, treatment or remediation
or potential clean-up, removal, treatment or remediation of Hazardous Materials
in the indoor or outdoor environment.
"Closing" shall have the meaning set forth in Section 3.3 hereof.
2
<PAGE>
"Closing Date" shall have the meaning set forth in Section 3.3 hereof.
"Confidentiality Agreement" shall mean the Confidentiality Agreement
between the Sellers and Purchaser dated January 8, 1999.
"Contribution Agreement" shall mean that certain Contribution and Share
Exchange Agreement between Precision Systems, Inc., Speer Communications, SVM,
Speer World Wide and Speer Productions dated April 22, 1998, as amended by the
First Amendment thereto dated August 31, 1998 and the Second Amendment thereto
dated October 27, 1998.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Computer Programs" shall mean (i) any and all computer software programs
and software development tools, including all source and object code, (ii)
databases and compilations, including any and all data and collections of data,
whether machine readable or otherwise, (iii) all descriptions, flow-charts and
other work product used to design, plan, organize and develop any of the
foregoing, (iv) all domain names and the content contained on each Seller's
respective Internet site(s); provided such intangibles shall not include any
right or license to use the name "Speer" in any manner whatsoever, including
without limitation any registered trademark, domain names and other rights
containing or incorporating the name "Speer", and (v) all documentation,
including user manuals and training materials, relating to any of the foregoing;
provided that the foregoing shall not include any shrink-wrapped or similar off-
the-shelf products.
"Damages" shall have the meaning set forth in Section 9.2 hereof.
"Employment, Confidentiality and Unfair Competition Agreements" shall mean
the Employment Agreement between Purchaser and O.G. Greene, and the Agreement to
Protect Confidential Information, Assign Inventions and Prevent Unfair
Competition and Unfair Solicitation between the Purchaser and O.G. Greene, forms
of which shall be agreed upon by the parties hereto prior to Closing and
attached hereto as Exhibits A-1 and A-2, respectively.
"Environmental Claim" shall mean any claim, action, cause of action, notice
of potential responsibility, information request, notice of violation, notice of
potential violation, complaint, order, directive, investigation or notice by any
Person arising out of, based on or attributable to (i) with respect to the
Sellers, the current or past presence, threatened Release, or Release, of any
Hazardous Material at, on, under or from, any location, whether or not owned,
leased or operated by the Sellers, including any location at which Hazardous
materials originating on or from Sellers' business were sent for disposal or
treatment, (ii) with respect to RMS, the current or past presence, threatened
Release, or Release, of any Hazardous Material at, on, under or from, the Owned
Real Property, including any location at which Hazardous materials originating
on or from the Owned Real Property were sent for disposal or treatment or (iii)
circumstances forming the basis of any violation, or alleged violation, of any
Environmental Law.
"Environmental Laws" shall mean all applicable federal, state, local and
common laws and regulations relating to pollution or protection of the
environment, including laws and
3
<PAGE>
regulations, now or hereafter in effect, relating to Releases or threatened
Releases of Hazardous Materials, or otherwise relating to the manufacture,
processing, distribution, use, installation, generation, treatment, storage,
disposal, transport or handling of Hazardous Materials, and all laws and
regulations with regard to record keeping, notification, disclosure and
reporting requirements respecting Hazardous Materials.
"Environmental Liability" shall mean any liability resulting from an
actual, threatened or potential Environmental Claim; from failure to comply with
any Environmental Law; from failure to obtain or comply with any Environmental
Permit; from a Remedial Action; or from harm or injury to any person, to public
health, or to the environment as a result of actual, threatened or potential
exposure to Hazardous Materials.
"Environmental Permits" shall mean all permits, approvals, identification
numbers, licenses, certificates, executions, approvals and any other
authorizations under any Environmental Law.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" shall have the meaning set forth in Section 4.16 hereof.
"Equipment" shall have the meaning set forth in Section 4.9(f) hereof.
"ESI" shall mean Enhanced Services of Nevada, Inc., a Nevada corporation.
"Excluded Liabilities" shall have the meaning set forth in Section 2.1(d)
hereof.
"Excluded Assets" shall have the meaning set forth in Section 2.2 hereof.
"FCC" shall mean the Federal Communications Commission.
"GAAP" shall mean United Sates generally accepted accounting principles and
practices.
"Governmental Authority" shall mean any national, federal, state or local
judicial, legislative, executive or governmental regulatory authority.
"Hazardous Materials" shall mean any wastes, substances, radiation, or
materials (whether solids, liquids or gases) (i) which are hazardous, toxic,
infectious, explosive, radioactive, carcinogenic, or mutagenic; (ii) which are
or become defined or listed as a "pollutants," "contaminants," "hazardous
materials," "hazardous wastes," "hazardous substances," "toxic substances,"
"radioactive materials," "solid wastes," or other similar designations in, or
otherwise subject to regulation under, any Environmental Laws; (iii) without
limitation, which contain polychlorinated bi-phenyls (PCBs), asbestos and
asbestos-containing materials, lead-based paints, urea-formaldehyde foam
insulation, and petroleum or petroleum products (including, without limitation,
crude oil or any fraction thereof) or (iv) which pose a hazard to human or
worker health or safety, natural resources, industrial hygiene, or the
environment, or an impediment to working conditions.
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"Holdco" shall have the meaning set forth in Section 7.14(a) hereof.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"IHC" shall mean Innovative Holding Corporation, a Delaware corporation.
"IHC Shareholders' Agreement" shall have the meaning set forth in Section
7.14(a) hereof.
"IHC Shares" shall mean the 665,421 shares of Series B Preferred Stock of
IHC owned by SVM plus any additional shares, whether common or preferred, of
capital stock of IHC hereafter issued in respect of such shares in connection
with any dividend, stock split, reorganization or restructuring to any Seller or
RMS.
"Indebtedness" of any Person at any date shall include (i) all indebtedness
of such Person for borrowed money or for the deferred purchase price of property
or services (other than current trade liabilities incurred in the ordinary
course of business and payable in accordance with customary practices) and
including earn-out or similar contingent purchase amounts, (ii) any other
indebtedness of such Person which is evidenced by a note, bond, debenture or
similar instrument, (iii) all obligations of such Person under capitalized lease
obligations, (iv) all obligations of such Person in respect of acceptances
issued or created for the account of such Person, (v) all liabilities secured by
any Lien on any property owned by such Person even though such Person has not
assumed or otherwise become liable for the payment thereof, and (vi) all
guarantees by such Person of obligations of others.
"Inspection" shall have the meaning set forth in Section 7.7(b) hereof.
"Instruments of Transfer" shall have the meaning set forth in Section
2.1(b) hereof.
"Intellectual Property" shall mean all intellectual property rights used in
or reasonably necessary for the business of the Sellers as currently conducted
or as presently contemplated by the Sellers to be conducted, including all
patents and patent applications, trademarks, trademark registrations and
applications; service marks, service mark registrations and applications, logos,
designs, proprietary rights, slogans and general intangibles of like nature,
together with all goodwill related to the foregoing; trade names, copyrights,
copyright registrations and applications; Computer Programs; product plans,
technology, process engineering, drawings, schematic drawings, secret processes;
proprietary knowledge, including without limitation, trade secrets, know-how,
confidential confirmation, proprietary processes and formulae; provided such
intangibles shall not include any right or license to use the name "Speer" in
any manner whatsoever, including without limitation any registered trademark,
domain names and other rights containing or incorporating the name "Speer";
provided further, that the foregoing shall not include any shrink-wrapped or
similar off-the-shelf products.
"Interim Balance Sheet" shall have the meaning set forth in Section 4.7(b)
hereof.
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"IRS" shall mean the Internal Revenue Service of the United States.
"Knowledge" with respect to any particular representation or warranty
contained in this Agreement, when used to apply to the "Knowledge" of Sellers,
shall be deemed to be followed by the phrase "after due inquiry" and shall mean
the actual knowledge or conscious awareness after due inquiry of the senior
officers of the Sellers.
"Laws" shall mean any applicable federal, state or local law, statute,
ordinance, rule, regulation, order, judgment or decree, administrative order,
decree, administrative and judicial decision.
"Liabilities" shall mean debts, liabilities, commitments, obligations,
duties and responsibilities of any kind and description, whether absolute,
accrued, contingent, monetary or nonmonetary, direct or indirect, known or
unknown or matured or unmatured or of any other nature, including, but not
limited to, liabilities on account of taxes, other governmental charges or
lawsuits brought, whether or not of a kind required by generally accepted
accounting principles to be set forth on a financial statement, which are not
set forth on or disclosed in the Audited Balance Sheet, the Closing Balance
Sheet or the Interim Balance Sheet.
"Licenses" shall have the meaning set forth in Section 4.15(d) hereof.
"Liens" shall mean any lien, pledge, mortgage, security interest, lease,
charge, option, right of first refusal, easement, servitude, transfer
restriction under any shareholder or similar agreement, or any other encumbrance
of any nature whatsoever.
"Litigation" shall mean any litigation, legal action, arbitration,
proceeding, material demand, material claim or investigation pending, or, to the
Knowledge of the Sellers or RMS as the case may be, threatened, planned or
reasonably probable, against, affecting or brought by or against the Sellers or
RMS, the Sellers' or RMS' present or former employees or agents affiliated at
any time with the Sellers or RMS relating to the business of the Sellers or RMS
or any of the Assets or Assumed Liabilities.
"Managed" shall have the meaning set forth in Section 4.13(e).
"Management Agreement" shall mean the management agreement between
Purchaser and the Sellers, a form of which shall be agreed upon by the parties
hereto prior to Closing and attached hereto as Exhibit B.
"Marks" shall mean all trade names, trademarks, service marks, brand names,
brand marks, fictitious names or other Intellectual Property relating thereto;
provided such trade names, trademarks, service marks, brand names, brand marks,
fictitious names or other Intellectual Property shall not include any right or
license to use the name "Speer" in any manner whatsoever, including without
limitation any registered trademark, domain names and other rights containing or
incorporating the name "Speer"
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"Material Adverse Change" shall mean, with respect to the same or any
similar events, acts, conditions or occurrences, whether individually or in the
aggregate resulting in, a material adverse effect on or a material adverse
change in (i) the Assets or the Assumed Liabilities, (ii) any of the Business,
condition (financial or otherwise), operations, assets or liabilities of the
Sellers. For purposes of this definition and without limiting the generality of
the foregoing, an effect or change with respect to the same or any similar
event(s), act(s), condition(s) or occurrence(s) individually or in the aggregate
with respect to which the Sellers would reasonably be expected to have
$2,000,000 in the aggregate or more in Damages being asserted against, imposed
upon or sustained by the Assets taken as a whole or a corresponding increase in
the Assumed Liabilities shall constitute a "material adverse" change.
"Material Adverse Effect" shall mean, with respect to the same or any
similar events, acts, conditions or occurrences, whether individually or in the
aggregate resulting in, a material adverse effect on or a material adverse
change in (i) the Assets or the Assumed Liabilities, (ii) any of the Business,
condition (financial or otherwise), operations, assets or liabilities of the
Sellers, (iii) the legality or enforceability against the Sellers of this
Agreement or (iv) the ability of the Sellers to perform its obligations and to
consummate the transactions under this Agreement. For purposes of clauses (i)
and (ii) of this definition and without limiting the generality of the
foregoing, an effect or change with respect to the same or any similar event(s),
act(s), condition(s) or occurrence(s) individually or in the aggregate with
respect to which the Sellers would reasonably be expected to have $100,000 in
the aggregate or more in Damages being asserted against, imposed upon or
sustained by the Assets taken as a whole or a corresponding increase in the
Assumed Liabilities shall constitute a "material adverse" effect.
"Material Contracts" shall have the meaning set forth in Section 4.14(a)
hereof.
"Nondelivered Assets" shall have the meaning set forth in Section 2.3
hereof.
"Other Entity" shall have the meaning set forth in Section 4.2(c) hereof.
"Owned Real Property" shall have the meaning set forth in Section 5.6(a)
hereof.
"Ownership Interests" shall have the meaning set forth in Section 4.2(a)
hereof.
"Permits" shall mean as to any Person, all licenses, permits, franchises,
orders, approvals, concessions, registrations, authorizations and qualifications
under any federal, state or local laws with any and all Governmental Authorities
or with any and all industry or other non-governmental self-regulatory
organizations that are issued to such Person.
"Person" shall mean an individual, a corporation, a partnership, limited
liability company, an association, a trust or other entity or organization.
"Plan of Recapitalization" shall mean that certain Plan of Recapitalization
dated April 22, 1998 by and between RMS and PSI.
"PSI" shall mean Precision Systems, Inc., a Delaware corporation.
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"PSI Board" shall mean the board of directors of PSI.
"PSI Common Stock" shall mean the common stock, par value $.01 per share,
of PSI.
"PSI Interests" shall have the meaning set forth in Section 5.6(b) hereof.
"PSI Securities" shall have the meaning set forth in Section 5.6(b) hereof.
"Purchase Price" shall have the meaning set forth in Section 3.1 hereof.
"Purchaser" shall have the meaning set forth in the introductory paragraph
to this Agreement.
"Purchaser Indemnified Parties" shall mean Purchaser and its successors,
assigns, Affiliates, agents and employees.
"PVS" shall mean Professional Video Services Corporation, a District of
Columbia corporation.
"Real Estate Transfer Agreement" shall mean that certain Real Estate
Transfer Agreement dated April 22, 1998 by and between RMS and PSI.
"Real Property" shall have the meaning set forth in Section 4.9(b) hereof.
The parties agree that such term shall not encompass Owned Real Property.
"Regulatory Licenses" shall mean all of the licenses, permits, and other
authorizations issued by (i) the FCC with respect to the business of reselling
long distance telecommunications services and the operation of satellite earth
stations, and (ii) the public service commissions of the various states with
respect to the business of reselling long distance telecommunications services.
"Release" shall mean any release, spill, emission, leaking, pumping,
dumping, injection, deposit, disposal, discharge, dispersal, leaching or
migration into the indoor or outdoor environment (including ambient air, surface
water, groundwater and surface or subsurface strata, sewers, storm drains, or a
publicly owned treatment works), or into or out of any property, including the
movement of Hazardous Materials through or in the air, soil, surface water,
groundwater or property.
"Remedial Action" shall mean any action or proceeding to (i) cause the
removal, abatement or containment of any Hazardous Materials, or (ii) to correct
or prevent a Release, or to recover the cost of either of the foregoing by a
Government Authority or third party.
"Requirement of Law" shall mean as to any Persons, the Partnership
Agreement, Certificate of Incorporation, Bylaws or other organizational or
governing documents of such Person, and any law, treaty, rule or regulation or
order of an arbitrator or Governmental Authority, in each case applicable to or
binding upon such Person or any of its properties or assets or to which such
Person or any of its properties or assets is subject.
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"RMS" shall mean RMS Limited Partnership, a Nevada limited partnership.
"Schedules" and any references to specific items therein shall mean the
disclosure schedules hereto.
"Seller Indemnified Parties" shall mean the Sellers and their successors,
assigns, Affiliates, agents and employees.
"Sellers" shall have the meaning set forth in the introductory paragraph to
this Agreement.
"Speer Communications" shall mean Speer Communications Holdings Limited
Partnership, a Nevada limited partnership.
"Speer Productions" shall mean Speer Productions Limited Partnership, a
Nevada limited partnership.
"Speer/PSI Agreements" shall mean, collectively, the Contribution
Agreement, the Real Estate Transfer Agreement and the Plan of Recapitalization.
"Speer World Wide" shall mean Speer World Wide Digital Limited Partnership,
a Nevada limited partnership.
"Subsidiary" shall mean, with respect to any Person, any corporation,
partnership or other organization, whether incorporated or unincorporated, of
which such Person or any other subsidiary of such person beneficially owns a
majority of the voting or equity interests.
"SVM" shall mean Speer Virtual Media Limited Partnership, a Nevada limited
partnership.
"Systems" shall have the meaning set forth in Section 4.27 hereof.
"Tax Law" shall mean any Law relating to Taxes.
"Tax Return" shall mean any return, report, information return or other
document (including any related or supporting information) with respect to
Taxes.
"Taxes" shall mean all taxes, charges, fees, duties, levies, penalties or
other assessments imposed by any Governmental Authority, including income, gross
receipts, excise, property, sales, gain, use, license, capital stock, transfer,
franchise, payroll, withholding, social security or other taxes, including any
interest, penalties or additions attributable thereto.
"Third Party Software" shall have the meaning set forth in Section 4.9(f)
hereof.
"Year 2000 Compliant" shall have the meaning set forth in Section 4.27
hereof.
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Section 1.2 Terms Generally. The definitions in Sections 1.1 shall
---------------
apply equally to both the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include," "includes" and
"including" shall be deemed to be followed by the phrase "without limitation"
even if not followed actually by such phrase unless the context expressly
provides otherwise. Unless otherwise expressly defined, terms defined in the
Agreement shall have the same meanings when used in any Exhibit or Schedule and
terms defined in any Exhibit or Schedule shall have the same meanings when used
in the Agreement or in any other Exhibit or Schedule. The words "herein,"
"hereof," "hereto" and "hereunder" and other words of similar import refer to
this Agreement as a whole and not to any particular provision of this Agreement.
The phrase "made available" in this Agreement shall mean that the information
referred to has been made available by the party in question. The phrases "the
date of this Agreement," "the date hereof" and terms of similar import, unless
the context otherwise requires, shall be deemed to refer to the date set forth
in the introductory paragraph of this Agreement. References to "dollars" or "$"
in this Agreement shall mean United States dollars unless the context provides
otherwise.
ARTICLE II
ACQUISITION AND DISPOSITION OF ASSETS
Section 2.1 Purchase and Sale of Assets.
---------------------------
(a) At the Closing, upon the terms and subject to the conditions set
forth in this Agreement, the Sellers shall transfer, assign, convey and deliver
to Purchaser and Purchaser shall receive from the Sellers all right, title and
interest in and to all of the Assets (as defined below) free and clear of all
Liens, encumbrances and security interests except for Assumed Liabilities. It
is the intent of the parties hereto that the "Assets" shall mean (x) the Owned
Real Property and the PSI Securities owned by RMS, and (y) all right, title and
interest in all of the assets, tangible or intangible, along with all
contractual and leasehold rights the Sellers hold (subject to the limitations
set forth in Section 2.2), and, including without limitation, to all of the
following assets of Sellers as of the Closing Date:
(i) all Intellectual Property used in or useful to the conduct
of the Business, including without limitation, those items listed but not
exhaustively described on Schedule 2.1(a)(i);
(ii) all contracts, agreements (including employment
agreements), contract rights, license agreements, purchase and sales
orders, quotations and other executory commitments of the Sellers entered
into by the Sellers listed on Schedule 2.1(a)(ii) (the "Contracts");
(iii) all accounts receivable and all cash, notes or other
securities and accounts attributable to the Sellers for operations of the
Sellers on or after the Closing Date;
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(iv) all computer equipment and related software and software
licenses, office equipment and other personal property of Sellers listed on
Schedule 2.1(a)(iv);
(v) all books of account, customer and supplier lists
including addresses, drawings, files, papers and records of the Sellers;
(vi) all deposits, advance payments, prepaid items and
expenses, deferred charges, rights of offset and credits and claims for
refund relating to the Sellers;
(vii) all claims, rights and causes in action against third
parties and all rights to insurance proceeds relating to any damage,
destruction or impairment of the assets of the Sellers;
(viii) all licenses, permits, consents and certificates of any
Governmental Authority issued to or held by the Sellers necessary or
incidental to the conduct of the Business, including without limitation the
Regulatory Licenses (to the extent the same are transferable);
(ix) all goodwill, if any, associated with the Assets, in
particular, or the Sellers, in general;
(x) all shares of capital stock of Holdco ("Holdco Shares")
pursuant to the provisions contained in Section 7.14;
(xi) all Real Property; and
(xii) all other miscellaneous items set forth on Schedule
2.1(a)(xii).
(b) The sale, conveyance, assignment, transfer and delivery of the
Assets will be effected by delivery by the Sellers or RMS, as applicable, to
Purchaser of (i) a Bill of Sale, Assignment and Assumption Agreement from each
Seller, (ii) executed copies of the filings, consents, approvals, notices or
waivers, and copies of the instruments transferring, registering or issuing the
consents, approvals, permits, licenses, permissions, registrations or other
authorizations referred to in Section 7.2 hereof, (iii) with respect to the
Owned Real Property, a warranty deed (the "Warranty Deed") with respect to the
Owned Real Property from RMS, (iv) with respect to the PSI Securities and
subject to the provisions of Section 7.18, the PSI Securities accompanied by
duly executed stock powers, and (v) such other good and sufficient instruments
of conveyance, transfer and assignment (together with the Bill of Sale,
Assignment and Assumption Agreement, the "Instruments of Transfer") as shall be
necessary to vest in Purchaser full right, title and interest in and to the
Assets, free and clear of all claims and Liens whether absolute, accrued,
contingent or otherwise except the Assumed Liabilities.
(c) Upon the terms and subject to the conditions of this Agreement,
including but not limited to the exceptions set forth in Section 2.1(d), at the
Closing Purchaser will assume and agree to pay, perform and discharge as and
when due the liabilities and obligations of the Sellers listed in Schedule
2.1(c) (the "Assumed Liabilities"); provided, however, that the amount
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of Assumed Liabilities as of the Closing Date shall not exceed either (i) the
amount of liabilities as set forth on the Closing Balance Sheet (as defined in
Section 7.12) or (ii) the amount of current assets as set forth on the Interim
Balance Sheet (as defined in Section 4.7(b)); further provided, however, that
(x) as set forth on each of the Interim Balance Sheet and the Closing Balance
Sheet, current liabilities of the Sellers shall not exceed current assets of the
Sellers by more than $500,000, and (y) net working capital of the Sellers as
calculated at Closing shall not be less than $0. The assumption of the Assumed
Liabilities by Purchaser will be effected by delivery by Purchaser to the
Sellers of the duly executed Bill of Sale, Assignment and Assumption Agreement.
(d) Except as may be expressly provided for in this Agreement,
Purchaser shall not assume and the Sellers shall not assign to Purchaser and
shall remain liable for, any liability or obligation, direct or indirect,
absolute or contingent, of the Sellers or any Subsidiary, division, associate or
Affiliate of the Sellers, or of any Person, relating to (i) Taxes with respect
to or attributable to the Assets for all taxable periods through the Closing
Date, Taxes with respect to or attributable to the properties, business or
operations of the Sellers or any Subsidiary, division, associate or Affiliate of
the Sellers and Taxes of the Sellers with respect to or attributable to the
transactions contemplated hereby or otherwise, (ii) any Liabilities associated
with the Excluded Assets, (iii) any Liabilities associated with the Assumed
Liabilities that arise or relate to events that occur prior to the Closing Date,
(iv) any employee benefit plan of any Seller or any benefits or other amounts
payable and provided under any Seller's employee benefit plan or any contract
relating to employment or termination of employment between any of the Sellers
or any of their Affiliates and any of their respective employees or former
employees and (v) any other Liabilities of the Sellers not disclosed in Schedule
2.1(c) (collectively, the "Excluded Liabilities").
Section 2.2 Excluded Assets. It is the intention of the parties that
---------------
no assets other than the Assets identified in Section 2.1 be sold, transferred
or conveyed to Purchaser pursuant to this Agreement and, as a point of
clarification, the parties agree that the Assets shall specifically not include
any assets of the Sellers set forth on Schedule 2.2 (collectively, the "Excluded
Assets"), all of the Sellers' right, title and interest in and to which, as the
same exist as of the date hereof or as of the Closing Date, shall be retained by
RMS and the Sellers, as the case may be. As a further point of clarification
and not in limitation of the foregoing, the parties agree that Purchaser is
purchasing only assets and not capital stock, partnership interests or other
equity or ownership interests or intercompany notes receivable or payable held
by any party hereto other than the membership interests in Holdco the PSI
Securities; provided that the PSI Securities shall be deemed Excluded Assets if
the PSI Board does not approve the Anschutz/PSI Transaction in accordance with
the provisions of Section 7.18.
Section 2.3 Nondelivered Assets. Notwithstanding anything else
-------------------
contained in this Agreement, in the event that an Asset is not delivered by the
Sellers to Purchaser at Closing (a "Nondelivered Asset"), the Sellers shall
deliver such Asset to Purchaser as soon as the Sellers have actual knowledge of
the existence of such Nondelivered Asset.
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Section 2.4 No Assignment if Breach. Notwithstanding anything
-----------------------
contained in this Agreement to the contrary, this Agreement shall not constitute
an agreement to assign any of the Assets, or to assume any Assumed Liabilities,
if the attempted assignment or assumption of the same, as a result of the
absence of the consent or authorization of a third party, would constitute a
breach or default under any lease, agreement, encumbrance or commitment or would
in any way adversely affect the rights, or increase the obligations, of any
party or any subsidiary with respect thereto or would otherwise affect the
ability of Purchaser to receive the benefit of the Assets. If any such consent
or authorization is not obtained, or if an attempted assignment or assumption
would be ineffective or would adversely affect the rights or benefits or
increase the obligations of Purchaser with respect to any such Assets, or
Assumed Liabilities, as appropriate, then the parties shall enter into such
reasonable cooperative arrangements (including without limitation, sublease,
agency, partial closing, management, indemnity or payment arrangements and
enforcement at the cost and for the benefit of Purchaser of any and all rights
of the Sellers against an involved third party) to provide for Purchaser the
benefit of such Assets or such Assumed Liabilities, any transfer or assignment
to Purchaser by the Sellers or a subsidiary of the Sellers, of any such Assets,
or any assumption by Purchaser of any such Assumed Liabilities, which shall
require such consent or authorization or a third party that is not obtained,
shall be made subject to such consent or authorization being obtained.
ARTICLE III
PAYMENT AND DELIVERY
Section 3.1 Purchase Price and Payment. The total purchase price
--------------------------
under this Agreement shall be the sum of ONE HUNDRED SIX MILLION DOLLARS
($106,000,000.00) (the "Purchase Price"); provided, that if the PSI Board does
not approve the Anschutz/PSI Transaction in accordance with Section 7.18, the
Purchase Price will be reduced by $18,250,000. On the Closing Date, Purchaser
will deliver to the Sellers the Purchase Price payable to the Sellers in
immediately available United States funds in accordance with the terms and
provisions set forth herein.
Section 3.2 Allocation of Consideration. The aggregate consideration
---------------------------
paid by Purchaser to the Sellers pursuant to Section 3.1 hereof, shall be
allocated among the Assets as set forth on Exhibit C attached hereto. The
allocation of the Purchase Price was bargained and negotiated for and each party
hereto shall file all Tax Returns (including Form 8594 which has been agreed
upon by both Purchaser and the Sellers) in a manner consistent with Exhibit C.
Purchaser will propose a preliminary Form 8594 once the Closing Balance Sheet
becomes available and submit such Form 8594 for the Sellers' review and
concurrence.
Section 3.3 Closing. Subject to the terms of Article IX, the sale,
-------
conveyance, assignment, transfer and delivery of the Assets by the Sellers and
payment of the Purchase Price and assumption of the Assumed Liabilities by
Purchaser (hereinafter called the "Closing") shall take place at 9:00 A.M.
(Denver time) at the offices of Hogan & Hartson L.L.P., 1200 Seventeenth Street,
Suite 1500, Denver, Colorado 80202 on the first business day following the day
on which all conditions set forth in Article VII shall have been satisfied or
waived, or on such other date, time and place as may be mutually agreed upon by
the parties hereto. The date
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on which the Closing occurs is referred to herein as the "Closing Date."
Notwithstanding the foregoing or any other provision of this Agreement to the
contrary, the parties hereto agree that the closing of the transactions
contemplated herein shall be deemed to take effect at 12:01 A.M. (Denver time)
on the Closing Date.
Section 3.4 Deliveries by the Sellers. At the Closing, the Sellers
-------------------------
shall deliver to Purchaser:
(a) A duly executed Bill of Sale, Assignment and Assumption relating
to the Assets and Assumed Liabilities referred to in Section 2.1(a) hereof;
(b) Such other good and sufficient Instruments of Transfer as shall be
necessary to vest in Purchaser all of the Sellers' title to the Assets, free and
clear of all Liens;
(c) The certificates referred to in Section 8.2(d) hereof;
(d) Copies of all consents, approvals, authorizations, agreements and
other documentation required pursuant to Section 7.2 hereof;
(e) The Employment, Confidentiality and Unfair Competition Agreements;
(f) The Management Agreement; and
(g) Such other documents, instruments and writings reasonably
requested by Purchaser at or prior to the Closing.
Purchaser will thereupon take actual possession of the Assets and
assume the Assumed Liabilities.
Section 3.5 Deliveries by RMS. At the Closing, RMS shall deliver to
-----------------
Purchaser:
(a) the Warranty Deed; and
(b) subject to the provisions of Section 7.18, the PSI Securities free
and clear of all Liens accompanied by duly executed stock powers.
Purchaser will thereupon take actual possession of the Owned Real
Property and, subject to the provisions of Section 7.18, the PSI Securities.
Section 3.6 Deliveries by Purchaser. At the Closing, Purchaser shall
-----------------------
deliver to the Sellers:
(a) The Purchase Price payable in immediately available United States
funds;
(b) A duly executed Bill of Sale, Assignment and Assumption relating
to the Assets and Assumed Liabilities, referred to in Section 2.1(a) hereof;
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(c) The certificate referred to in Section 8.3(c) hereof;
(d) The Employment, Confidentiality and Unfair Competition Agreements;
(e) The Management Agreement; and
(f) Such other documents, instruments and writing reasonably requested
by the Sellers at or prior to the Closing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
The Sellers jointly and severally represent and warrant to Purchaser as
follows:
Section 4.1 Authorization and Validity. Each of the Sellers has full
--------------------------
partnership or corporate power and authority, as the case may be, to enter into
this Agreement and the other documents and instruments to be executed and
delivered by the Sellers pursuant hereto (to the extent that such Person is a
party hereto or thereto) and to carry out its obligations hereunder and
thereunder. The execution, delivery and performance by the Sellers of this
Agreement and the other documents and instruments to be executed and delivered
by the Sellers pursuant hereto, and the consummation by the Sellers of the
transactions contemplated hereby and thereby, have been duly and validly
authorized by the management committee or similar governing body, as applicable,
of the Sellers and no other partnership or corporate act or proceeding on the
part of the Sellers is necessary to authorize the execution and delivery by the
Sellers of this Agreement or the other documents or instruments to be executed
and delivered by the Sellers pursuant hereto, or the consummation by the Sellers
of the transactions contemplated hereby or thereby. This Agreement and the
other documents and instruments to be executed and delivered by the Sellers
pursuant hereto (to the extent that such Person is a party hereto or thereto)
have been duly and validly executed and delivered by the Sellers (to the extent
that such Person is a party hereto or thereto) and, assuming this Agreement and
the other documents and instruments to be executed and delivered by the Sellers
pursuant hereto (to the extent that such Person is a party hereto or thereto)
are the valid and binding obligations of such other Persons a party hereto or
thereto, constitutes a valid and binding obligation of the Sellers (to the
extent that such Person is a party hereto or thereto) enforceable against the
Sellers (to the extent that such Person is a party hereto or thereto) in
accordance with its terms, except that (i) such enforcement may be subject to
applicable bankruptcy, insolvency or other similar laws, now or hereafter in
effect, affecting creditors' rights generally, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
Section 4.2 Equity; Good Title.
------------------
(a) Schedule 4.2(a) sets forth, as of the date hereof, the names of
the holders of partnership or other equity interests of each Seller and the
percentage and nature of ownership of such holder therein (such partnership and
other equity interests are referred to collectively as the "Ownership
Interests"). All of the outstanding Ownership Interests of the Sellers are
validly
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issued, fully paid and nonassessable, and have not been issued in violation of
any preemptive or similar rights.
(b) All of the outstanding Ownership Interests of the Sellers are
owned beneficially and of record by the respective owners thereof identified on
Schedule 4.2(a), free and clear of all Liens.
(c) Schedule 4.2(c)(i) sets forth the name, form of organization,
jurisdiction of organization and percentage ownership of any Person in which the
Sellers directly or indirectly own any equity or other ownership interest (an
"Other Entity"). Except as set forth on Schedule 4.2(c)(ii), the Sellers have
no Subsidiaries. All outstanding shares of capital stock, partnership interests
and other ownership interests of each Other Entity are owned beneficially and of
record by the Sellers free and clear of any Liens, preemptive rights and similar
rights. Except as set forth on Schedule 4.2(c)(iii), there are no outstanding
options, warrants, calls, rights or commitments, or any other agreements of any
character relating to the sale, issuance or voting of, or the granting of rights
to acquire, any shares of capital stock of or other debt or equity interest in
such Other Entity, or any securities or other instruments convertible into,
exchangeable for or evidencing the right to purchase any shares of capital stock
of or other debt or equity interest in any such Other Entity. Except for the
Other Entities, the Sellers do not own any equity or other ownership interests
in any other Person.
Section 4.3 Capitalization. As of the date hereof, SVM holds 665,421
--------------
shares of Series B Preferred Stock of IHC. To the Knowledge of Sellers, the
authorized capital stock of IHC consists of:
(a) 6,000,000 shares of common stock, of which:
(i) 1,803,820 shares are issued and outstanding;
(ii) 621,302 shares are reserved for issuance upon conversion of
IHC's Series A Preferred Shares;
(iii) 665,421 shares are reserved for issuance upon conversion
of IHC's Series B Preferred Shares;
(iv) 1,338,750 shares (the "Option Shares") are reserved for
issuance pursuant to IHC's 1994 Stock Option Plan, 1995 Stock Option Plan
and 1996 Stock Option Plan; and
(v) 1,110,560 shares shall are reserved for issuance upon the
exercise of the certain warrants.
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(b) 1,286,723 shares of Preferred Stock, of which:
(i) 621,302 shares are designated Series A Preferred Stock,
591,716 of which are issued and outstanding; and
(ii) 665,421 shares are designated Series B Preferred Stock, all
of which are issued and outstanding.
To the Knowledge of Sellers, all of the issued and outstanding shares of capital
stock of IHC and PSI held by the Sellers have been duly authorized and validly
issued, are fully paid and nonassessable and were issued in compliance with all
applicable state and federal securities laws. Except as set forth herein or on
Schedule 4.3 or as contemplated by this Agreement and to the Knowledge of
Sellers, (x) no subscription, warrant, option, convertible security or other
right (contingent or otherwise) to purchase or acquire any shares of capital
stock of IHC is authorized or outstanding, (y) IHC does not have any obligation
(contingent or otherwise) to issue any subscription, warrant, option,
convertible security or other such right or to issue or distribute to holders of
any shares of its capital stock any evidence of indebtedness or assets of IHC,
and (z) IHC does not have any obligation (contingent or otherwise) to purchase,
redeem or otherwise acquire any shares of its capital stock or any interest
therein or to pay any dividend or make any other distribution in respect
thereof.
Section 4.4 Organization. Each of the Sellers that is a partnership
------------
(a) is a duly organized and validly existing partnership under the laws of the
State of Nevada, and (b) has full power and authority to own all of its
properties and assets, including the Assets, and to carry on its business as it
is now being conducted. PVS is a corporation duly organized, validly existing
and in good standing under the laws of the District of Columbia. ESI is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada. Each of PVS and ESI has the corporate power and
authority to own, lease and operate its respective properties and assets,
including the Assets, and to carry on its business as now being conducted and is
duly qualified or licensed to do business as a foreign corporation in good
standing in the jurisdictions in which the ownership, lease or operation of its
property or the conduct of its business requires such qualification, except
jurisdictions in which the failure to be so qualified or licensed would not
reasonably be expected to have a Material Adverse Effect. The Sellers have
delivered to Purchaser a complete and correct copy of the partnership agreements
or other organizational documents of each of the Sellers, each as amended to
date. Such organizational documents are in full force and effect and the
Sellers are not in material violation of any provision of such organizational
documents. None of the Persons listed on Schedule 4.4 hereto owns any assets of
or related to the Business, other than Excluded Assets.
Section 4.5 No Conflict. Except as set forth in Schedule 4.5, neither
-----------
the execution, delivery or performance of this Agreement or the other documents
and instruments to be executed and delivered by the Sellers pursuant hereto, nor
the consummation by the Sellers of the transactions contemplated hereby or
thereby, nor compliance by the Sellers with any of the provisions hereof or
thereof will (a) conflict with or result in any breach of any provision of any
of the partnership agreements or similar organizational documents of the
Sellers, (b) constitute a
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change in control under or require the consent from or the giving of notice to a
third party, result in a violation or breach of, or constitute (with or without
due notice or lapse of time or both) a default (or give rise to any right of
termination, amendment, cancellation or acceleration) under, or result in the
creation of any Lien upon or affecting any of the Assets pursuant to, any of the
terms, conditions or provisions of any contractual obligation of the Sellers,
(c) violate any order, writ, injunction, decree, statute, rule or regulation of
any Governmental Authority applicable to the Sellers or to which any of their
properties or assets (including the Assets) may be bound, or (d) result in
triggering of any right of first refusal or other right under any partnership or
joint venture agreement to which the Sellers are a party, except in the case of
clauses (b), (c) or (d) for such violations, breaches or defaults which would
not, individually or in the aggregate, have a Material Adverse Effect.
Section 4.6 Governmental Consents. Except (a) under the HSR Act, (b)
---------------------
with respect to the business of reselling long distance telecommunications
services, the consent of the FCC and the public service commissions of the
various states and (c) with respect to licenses to operate satellite earth
stations, the consent of the FCC, no consent, order or authorization of, or
registration, declaration or filing with, any Governmental Authority is required
in connection with the execution, delivery and performance of this Agreement or
the consummation of the transactions contemplated hereby by Sellers.
Section 4.7 Balance Sheet Information.
-------------------------
(a) Sellers have delivered to Purchaser a copy of the audited balance
sheet of Sellers (the "Audited Balance Sheet") as of December 31, 1997 (the
"Audited Balance Sheet Date"), together with the notes thereto, accompanied by
the reports thereon of Deloitte & Touche LLP, independent public accountants.
The Audited Balance Sheet, together with the notes thereto, was prepared in
accordance with GAAP applied on a consistent basis throughout the year covered
thereby (except to the extent disclosed therein or required by changes in GAAP),
and presents accurately (x) the information purported to be presented therein
and (y) the financial position of Sellers as of the Audited Balance Sheet Date
and for the year then ended. Reserves are reflected on the Audited Balance
Sheet against assets in amounts that have been established on a basis consistent
with past practice and in accordance with GAAP. There have been no changes in
reserves of the Sellers since the Audited Balance Sheet Date other than changes
in such reserves consistent with past practice in such amounts as would not in
the aggregate have a Material Adverse Effect.
(b) Sellers have delivered to Purchaser a copy of the unaudited
balance sheet of Sellers as of December 31, 1998 (the "Interim Balance Sheet").
The Interim Balance Sheet was prepared in accordance with GAAP applied on a
consistent basis throughout the year covered thereby (except to the extent
disclosed therein or required by changes in GAAP), and presents accurately (x)
the information purported to be presented therein and (y) the financial position
of Sellers as of December 31, 1998 and for the year then ended. Reserves are
reflected on the Interim Balance Sheet against assets in amounts that have been
established on a basis consistent with past practice and in accordance with
GAAP. There have been no changes in
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reserves of the Sellers since December 31, 1998 other than changes in such
reserves consistent with past practice in such amounts as would not in the
aggregate have a Material Adverse Effect.
(c) Except as disclosed in Schedule 4.7(c), there are no Liabilities
that are not reflected or reserved against in the Interim Balance Sheet other
than such Liabilities as (i) were incurred in the ordinary course of business in
a manner consistent with past practice since December 31, 1998, or (ii) would
not be required to be presented in financial statements or the notes thereto
prepared in conformity with GAAP, applied in a manner consistent with past
practice, in the preparation of the Interim Balance Sheet.
Section 4.8 Absence of Certain Changes or Events. Except as set forth
------------------------------------
on Schedule 4.8, since September 30, 1998, (a) the Sellers have conducted their
business only in the ordinary course and consistent with past practice, (b)
there has not been any development or event that has or could reasonably be
expected to have, individually or in the aggregate with any other development or
event, a Material Adverse Effect and (c) except as contemplated in this
Agreement, none of the Sellers has:
(i) adopted any amendment to its partnership agreement or similar
organization documents other than such amendments which have been
previously provided to Purchaser;
(ii) (A) sold, leased, transferred or disposed of any assets or
rights, other than assets or rights that individually or in the aggregate
would not be material, in either case, in the ordinary course of business
consistent with past practice, (B) incurred any Lien thereupon, except for
Liens incurred in the ordinary course of business consistent with past
practice which Liens would not in the aggregate be material, (C) acquired
or leased any assets or rights other than assets or rights that
individually or in the aggregate would not be material in the ordinary
course of business consistent with past practice, or (D) entered into any
commitment or transaction with respect to (A), (B) or (C) above;
(iii) (A) incurred, assumed or refinanced any Indebtedness or
(B) made any loans, advances or capital contributions to, or investments
in, any Person;
(iv) paid, discharged or satisfied any liability, obligation, or
Lien other than payment, discharge or satisfaction of (A) Indebtedness as
it matures and become due and payable or (B) liabilities, obligations or
Liens in the ordinary course of business consistent with past practice;
(v) (A) changed any of the accounting or tax principles,
practices or methods used by the Sellers, except as required by changes in
applicable Tax Laws, or (B) changed reserve amounts or policies;
(vi) made any change in the compensation payable or to become
payable to any of its officers, employees, agents, consultants or Persons
acting in a similar capacity (other than general increases in wages to
employees who are not officers
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or Persons acting in a similar capacity or Affiliates in the ordinary
course consistent with past practice), or to Persons providing management
services, entered into or amended any employment, severance, consulting,
termination or other agreement or employee benefit plan or made any loans
to any of its Affiliates, officers, employees, agents or consultants or
Persons acting in a similar capacity or made any change in its existing
borrowing or lending arrangements for or on behalf of any of such Persons
pursuant to an employee benefit plan or otherwise;
(vii) paid or made any accrual or arrangement for payment of any
pension, retirement allowance or other employee benefit pursuant to any
existing plan, agreement or arrangement to any Affiliate, officer, employee
or Person acting in a similar capacity; or paid or agreed to pay or made
any accrual or arrangement for payment to any Affiliate, officers,
employees or Persons acting in a similar capacity of any amount relating to
unused vacation days, except payments and accruals made in the ordinary
course consistent with past practice; grant, issue, accelerate or accrue
salary or other payments or benefits pursuant to any pension, profit-
sharing, bonus, extra compensation, incentive, deferred compensation, stock
purchase, stock option, stock appreciation right, group insurance,
severance pay, retirement or other employee benefit plan, agreement or
arrangement, or any employment or consulting agreement with or for the
benefit of any Affiliate, officer, employee, agent or consultant or Person
acting in a similar capacity, whether past or present; or amend in any
material respect any such existing plan, agreement or arrangement in a
manner consistent with the foregoing;
(viii) entered into any collective bargaining agreement;
(ix) made any payments (other than regular compensation payable
to officers and employees or Persons acting in a similar capacity of such
Seller in the ordinary course consistent with past practice), loans,
advances or other distributions to, or enter into any transaction,
agreement or arrangement with, such Seller's Affiliates, officers,
employees, agents, consultants or Persons acting in a similar capacity,
stockholders of their Affiliates, associates or family members;
(x) made or authorized any capital expenditures, except in the
ordinary course consistent with past practice not in excess of $10,000
individually or $25,000 in the aggregate;
(xi) incurred any Taxes, except in the ordinary course of
business consistent with past practice;
(xii) settled or compromised any Tax liability or agreed to any
adjustment of any Tax attribute or made any election with respect to Taxes;
(xiii) failed to duly and timely file any Tax Return with the
appropriate Governmental Authorities required to be filed by it in a true
and complete and correct form or to timely pay all Taxes shown to be due
thereon;
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(xiv) (A) entered into, amended, renewed or permitted the
automatic renewal of, terminated or waived any right under, any Material
Contract, or, except in the ordinary course of business consistent with
past practice, any other agreement, or (B) took any action or failed to
take any action that, with or without either notice or lapse of time, would
constitute a default under any Material Contract;
(xv) (A) made any change in its working capital practices
generally, including accelerating any collections of cash or accounts
receivable or deferring payments or (B) failed to make timely accruals,
including with respect to accounts payable and liabilities incurred in the
ordinary course of business;
(xvi) failed to renew (at levels consistent with presently
existing levels), terminated or amended or failed to perform any of its
obligations or permitted any material default to exist or caused any
material breach under, or entered into (except for renewals in the ordinary
course of business consistent with past practice), any material policy of
insurance;
(xvii) disposed of or permitted to lapse any material
Intellectual Property;
(xviii) except in the ordinary course of business consistent
with past practice pursuant to appropriate confidentiality agreements, and
except as required by any Law, any existing agreements set forth on
Schedule 4.14 or as may be reasonably necessary to secure or protect
intellectual or other property rights of such Seller, provided any
confidential information regarding the Business to any Person other than
Purchaser;
(xix) waived, or agreed to waive, any right of material value to
the Assets; or
(xx) materially changed, or agreed to materially change, any of
the Sellers' business policies or practices relating to or affecting the
Assets including, without limitation, production, advertising, marketing,
pricing, purchasing, accounting, sales, returns, budget or product
acquisition policies or practices.
Section 4.9 Property; Assets.
----------------
(a) Except as set forth on Schedule 4.9(a), the Sellers own, or
otherwise have a valid leasehold interest or licenses providing sufficient and
legally enforceable rights to use, all of the property and assets necessary or
otherwise material to the conduct of the Business. The Sellers have good and
marketable (other than with respect to personal property) title to all assets
reflected on the Interim Balance Sheet or acquired since the date of the Interim
Balance Sheet, free and clear of all Liens, other than immaterial assets
disposed of since the Balance Sheet Date in the ordinary course of business
consistent with past practice. As of the Closing Date, the Sellers shall have
good and marketable (other than with respect to personal property) title to all
assets reflected on the Closing Balance Sheet or acquired since the date of the
Closing Balance Sheet, free and clear of all Liens, other than immaterial assets
disposed of since the Balance Sheet Date in the ordinary course of business
consistent with past practice. Such assets are
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generally in good operating condition and repair (ordinary wear and tear
excepted), have been reasonably maintained consistent with standards generally
followed in the industry, are suitable for their present uses and, in the case
of owned structures, are structurally sound.
(b) Schedule 4.9(b) contains a list of all real property owned or
leased by the Sellers (the "Real Property"), indicating whether such property is
owned or leased. The current use of the Real Property by the Sellers does not
violate the certificate of occupancy thereof or any local zoning or similar land
use or other Laws and none of the structures on the Real Property encroaches
upon real property of another Person, and no structure of any other Person
encroaches upon any Real Property. The Sellers have not received notice of any
pending or threatened condemnation proceeding, or of any sale or other
disposition in lieu of condemnation, affecting any of the Real Property. Each
parcel of Real Property abuts on or has direct vehicular access to a public
road.
(c) Schedules 2.1(a)(i), 2.1(a)(ii), 2.1(a)(iv) and 2.1(a)(xii) set
forth as of December 31, 1998, a complete and accurate list of all furniture,
equipment, automobiles and all other tangible personal property owned by, in the
possession of, or used by the Sellers in connection with their Business which
have a book value in excess of $5,000 per item. Such personal property is not
held under any lease, security agreement, conditional sales contract, or other
title retention or security arrangement or subject to any liens or encumbrances,
or is located other than in the possession of the Sellers.
(d) All receivables of the Sellers reflected on the Interim Balance
Sheet or created after the Balance Sheet Date arose from valid transactions in
the ordinary course of business. All receivables of the Sellers which shall
have been reflected on the Closing Balance Sheet or created after the Balance
Sheet Date shall have arisen from valid transactions in the ordinary course of
business.
(e) Except as set forth on Schedule 4.9(e), by completing the
transactions contemplated herein Purchaser will obtain at Closing all such
assets, tangible or intangible and contractual, license and leasehold rights
necessary for Purchaser (i) to operate the Business as operated on the date
hereof, and (ii) to utilize the Assets and contractual, license and leasehold
rights in the same manner as they were used on the date of this Agreement. With
the exception of those assets used in the Business pursuant to license and
leasehold rights in favor of the Sellers, as of the date hereof all of the
assets used in the Businesses are owned by the Sellers and none are owned by any
other party.
(f) The Assets as identified on Schedule 2.1(a) include (i) all
machinery or equipment, including without limitation, computer hardware, with an
original market value in excess of $25,000 used to conduct the Business (the
"Equipment"), together with the date of acquisition of each piece of Equipment
and the location of each piece of Equipment and (ii) all material software and
computer programs used in the Business, including any Computer Programs not
wholly owned by the Sellers ("Third Party Software") imbedded therein, in
machine readable source code forms and in machine executable object code forms
and all related specifications (including, without limitation, all logic
architectures, algorithms and logic flows
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and all physical, functional, operating and design parameters, operation systems
and procedures (including developmental methodology), designs, design revisions,
related application software in any language, concepts, ideas, processes,
techniques, software design and test tools, Third Party Software interfaces,
methods of implementation and packaging, all associated know-how and show-how
and all related programmer and user manuals, which are used by the Sellers to
install, operate, maintain, correct, test, repair, enhance, extend, modify,
prepare derivative works based upon design and develop software and computer
programs.
(g) Schedule 4.9(g) contains a true and correct list of all securities
of PSI held by Speer Communications (the "PSI Notes"). Speer Communications
owns the PSI Notes free and clear of all Liens.
Section 4.10 Litigation and Claims; Compliance with Laws.
-------------------------------------------
(a) Schedule 4.10(a)(i) sets forth all Litigation as of the date
hereof, including the name of the claimant, the date of the alleged act or
omission, a detailed narrative as to the nature of the alleged act or omission,
the date the matter was referred to an insurance carrier of the Sellers (if
referred), the estimated amount of exposure, the amount the Sellers have
reserved, or the amount of the Sellers' claim and estimated expenses of the
Sellers in connection with such matters. Except as set forth in Schedule
4.10(a)(ii), there is no Litigation which is not fully covered by the insurance
policies referenced in Section 4.12. Neither the Sellers, nor the Assets, are
subject to any order, consent decree, settlement or similar agreement with any
Governmental Authority. There is no judgment, injunction, decree, order or
other determination of an arbitrator or Governmental Authority specifically
applicable to the Sellers or any of their properties or assets. There is no
Litigation relating to alleged unlawful discrimination or sexual harassment. As
of the date hereof, there is no Litigation which seeks to prevent consummation
of the transactions contemplated hereby or which seeks material damages in
connection with the transactions contemplated hereby.
(b) Except as set forth in Schedule 4.10(b), the Sellers have complied
and are in compliance with all Laws applicable to the Sellers and the Business
except where the failure to be in compliance would not reasonably be expected to
have a Material Adverse Effect. Except as set forth in Schedule 4.10(b), the
Sellers hold all material licenses, permits and other authorizations of
Governmental Authorities necessary to conduct their business as now being
conducted or, under currently applicable Laws, to continue to conduct their
business as now being conducted. Except as set forth in Schedule 4.10(b), to
the Knowledge of the Sellers, there is no intent on the part of the Sellers to
make any changes in the conduct of the Business that will result in or cause the
Sellers to be in noncompliance with applicable Laws or that will require changes
in or a loss of any such licenses, permits or other authorizations or an
increase in any expenses related thereto except where such noncompliance,
change, loss or increase would not reasonably be expected to have a Material
Adverse Effect. Such licenses, permits and other authorizations as aforesaid
held by the Sellers are valid and in full force and effect, and there are no (a)
Actions pending, or to the Knowledge of the Sellers, threatened or (b)
Investigations to the Knowledge of the Sellers pending or threatened that could
result in the termination, impairment or nonrenewal thereof.
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Section 4.11 Taxes. The Sellers have timely filed or caused to be filed
------
with the appropriate federal, state and local Governmental Authority all Tax
Returns required to be filed and each such Tax Return is true, complete and
correct in all material respects. All Taxes shown to be due on such Tax Returns,
all Taxes arising from or attributable to the Assets required to be paid, and
all Taxes arising from or attributable to the Assets required to be withheld by
or with respect to the Sellers have been timely paid or, if applicable, withheld
and paid to the appropriate Governmental Authority. There are no deficiencies or
assessment of Taxes from any taxing authority with respect to or attributable to
the Assets in such amounts as would in the aggregate have a Material Adverse
Effect. There are no ongoing audits or examinations of any of the Tax Returns
relating to or attributable to the Assets. The Sellers have not granted any
requests, agreements, consents or waiver to extend the statutory period of
limitations applicable to the assessment of any Taxes with respect to or
attributable to the Assets, and the Sellers are not aware of any material issue
with respect to or attributable to the Assets that could be raised by any
Governmental Authority.
Section 4.12 Insurance. Schedule 4.12 sets forth a complete and
---------
accurate list as of the date hereof of all primary, excess and umbrella
policies, bonds and other forms of insurance owned or held by or on behalf of or
providing insurance coverage to the Sellers and their business, properties and
Assets (or their officers, salespersons, agents or employees or Persons acting
in a similar capacity) and the extent, if any, to which the limits of liability
under such policies have been exhausted. Each of the Sellers has in effect, and
since commencement of their operations, has maintained in effect, motor vehicle
and comprehensive general liability insurance and workers' compensation
insurance covering the Business and fire and extended coverage insurance with
respect to the properties and assets of the Sellers. True and complete copies
of such policies have been previously provided to Purchaser. All such policies
are in full force and effect and all such policies in such amounts will be
outstanding and in full force and effect without interruption until the Closing.
The Sellers have not received notice of default under any such policy, nor have
they received written notice of any pending or threatened termination or
cancellation, coverage limitation or reduction, or material premium increase
with respect to any such policy. Schedule 4.12 sets forth a complete and
accurate summary of all of the self-insurance coverage provided by the Sellers.
Except as set forth on Schedule 4.12, no letters of credit have been posted and
no cash has been restricted to support any reserves for insurance on the Interim
Balance Sheet. No letters of credit shall have been posted and no cash shall
have been restricted to support any reserves for insurance on the Closing
Balance Sheet.
Section 4.13 Environmental Matters.
---------------------
(a) The Sellers have been and are in compliance with and have no
liability under the Environmental Laws (which compliance includes the possession
by the Sellers of all Environmental Permits and other governmental
authorizations required under applicable Environmental Laws, and compliance with
the terms and conditions thereof), except for such non-compliance and liability
which could not reasonably be expected to have a Material Adverse Effect. The
Sellers have not received any communication from any Person or Governmental
Authority alleging that the Sellers are not in such compliance, and there are no
past or present (or, to the Knowledge of Sellers, anticipated) actions,
activities, circumstances, conditions,
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events or incidents that may prevent or interfere with such compliance in the
future. All Environmental Permits maintained by Sellers are identified on
Schedule 4.13(a). The execution and delivery by the Sellers of this Agreement
does not, and the consummation of the transactions contemplated hereby will not,
violate, or result in the violation of, or default (with or without notice or
lapse of time, or both) under, any provision of, or result in the termination or
acceleration of, or give rise to a right of termination or acceleration of or
the loss of any benefit under, any material Environmental Permit applicable to
the Sellers or any of the Assets, other than those violations, defaults,
terminations, accelerations or rights which would not individually or in the
aggregate have a Material Adverse Effect.
(b) No transfers of Environmental Permits, no additional Environmental
Permits, and no notifications to, filings with or approval of any Governmental
Authority, will be required to permit the conduct of the business of the Sellers
in compliance with all applicable Environmental Laws immediately following the
Closing Date as conducted by the Sellers immediately prior to the Closing Date.
(c) There are no Environmental Claims (other than investigations)
pending or, to the Knowledge of the Sellers, threatened against the Sellers or
against any Person or entity whose liability for any Environmental Claim the
Sellers have or may have retained or assumed either contractually or by
operation of law. To the Knowledge of the Sellers, there are no Environmental
Claims (including investigations) pending or threatened against the Sellers or
against any Person or entity whose liability for any Environmental Claim the
Sellers have or may have retained or assumed either contractually or by
operation of law.
(d) There are no past or present actions, activities, circumstances,
conditions, events or incidents, including the Release or presence of any
Hazardous Materials, which could reasonably be expected to form the basis of any
Environmental Claim against the Sellers, or to the Knowledge of the Sellers,
against any Person or entity whose liability for any Environmental Claim the
Sellers have or may have retained or assumed either contractually or by
operation of law.
(e) The Sellers have not, and to the Knowledge of the Sellers no other
Person has, placed, stored, deposited, discharged, buried, dumped, generated or
disposed or caused the Release of (collectively, "Managed") any Hazardous
Materials at, on, beneath or adjacent to any Real Property or other property
formerly owned, operated or leased by the Sellers or any predecessor of the
Sellers, except for such Hazardous Materials Managed in the ordinary course of
business of the Sellers (which Hazardous Materials, if any, were and are Managed
in accordance with applicable Environmental Laws).
(f) The Sellers have delivered true, complete and correct copies and
results of any reports, studies, analyses, tests or monitoring possessed or
initiated by or for the Sellers pertaining to Hazardous Materials in, on,
beneath or adjacent to any Real Property and any other properties formerly
owned, operated or leased by the Sellers or any predecessor of the Sellers or
regarding the Sellers' or any predecessor of the Sellers' compliance with
applicable
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Environmental Laws or regarding a Cleanup, an Environmental Claim or an
Environmental Liability. A list of all such documents is set forth on Schedule
4.13(f).
(g) Without in any way limiting the generality of the foregoing, no
properties owned, operated or leased by the Sellers or any predecessor of the
Sellers contain any underground improvements, including but not limited to
treatment or storage tanks, or underground piping associated with such tanks,
polychlorinated bi-phenyls, asbestos or asbestos-containing materials, wetlands,
filled in land, landfills, underground injection wells, radioactive materials,
or septic tanks, or waste disposal pits in which process wastewater or any
Hazardous Materials have been discharged, stored, treated or disposed of.
(h) No Real Property, and no property to which Hazardous Materials
originating on or from such properties or the Assets has been sent for
treatment, storage, or disposal, is listed or proposed to be listed on the
National Priorities List or CERCLIS or on any other governmental database or
list of properties that may or do require investigation or cleanup under
Environmental Laws. All locations at which the Sellers have themselves disposed
of any Hazardous Substances, or of which the Sellers have written notice of the
disposal of any Hazardous Substances by any third party on the Sellers' behalf
are listed in Schedule 4.13(h).
Section 4.14 Material Contracts.
------------------
(a) Schedule 2.1(a)(ii) lists (without duplication) each of the
following contracts and other agreements (or, in the case of oral contracts,
summaries thereof) to which the Sellers are a party or by or to which the
Sellers or any of their assets or properties is bound or subject (such contracts
and agreements being "Material Contracts"):
(i) any advertising, market research and other marketing
agreements that require a payment of in excess of $10,000 per year;
(ii) any employment, severance, non-competition, consulting or
other agreements of any nature with any current or former stockholder,
partner, officer or employee of the Sellers or any Affiliate of any of such
Persons;
(iii) any agreements relating to the making of any loan or
advance by the Sellers that require a payment of in excess of $10,000 per
year or concern assets valued in excess of $10,000;
(iv) any agreements providing for the indemnification by the
Sellers of any Person that require a payment of in excess of $10,000 per
year or concern assets valued in excess of $10,000;
(v) any agreements with any Governmental Authority except
those entered into in the ordinary course of business which are not
material to the Sellers;
(vi) all customer and supplier contracts and any other
contracts, agreements and other arrangements for the sale of assets or for
the furnishing of services,
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goods or products by the Sellers (A) with firm commitments having a value
in excess of $25,000 or (B) having a term which is greater than six months
and which is not terminable by the Sellers on less than 90 days' notice
without the payment of any termination fee or similar payment;
(vii) any broker, distributor, dealer, representative or agency
agreements that require a payment of or generate revenues in excess of
$10,000 per year or concern assets valued in excess of $10,000;
(viii) any agreements (including settlement agreements)
currently in effect pursuant to which the Sellers license the right to use
any Intellectual Property to any Person or from any Person, and research
and development agreements;
(ix) any confidentiality agreements entered into by the Sellers
during the period commencing three years prior to the date hereof pursuant
to which confidential information has been provided to a third party or by
which the Sellers were restricted from providing information to third
parties, other than those entered into the ordinary course of business
relating to the Sellers' operations;
(x) any voting trust or similar agreements relating to any of
the Ownership Interests to which any Seller is a party;
(xi) any leases of Real Property that require a payment of or
generate revenues in excess of $10,000 per year or concern assets valued in
excess of $10,000;
(xii) any joint venture, partnership or similar documents or
agreements;
(xiii) any agreements that limit or purport to limit the ability
of the Sellers to own, operate, sell, transfer, pledge or otherwise dispose
of any assets valued in excess of $10,000; and
(xiv) all other agreements, contracts or commitments not made in
the ordinary course of business which are material to the Sellers.
(b) Each Material Contract is legal, valid and binding on and
enforceable against the Sellers, and, to the Knowledge of the Sellers, the other
parties thereto, and is in full force and effect. Upon consummation of the
transactions contemplated by this Agreement, each Material Contract shall remain
in full force and effect without any loss of benefits thereunder and without the
need to obtain the consent of any party thereto to the transactions contemplated
by this Agreement, other than those contracts and agreements specified on
Schedule 7.8 and notice to, and consent of, landlords under certain leases of
Real Property. The Sellers are not (and with the giving of notice or lapse of
time would not be) in material breach of, or material default under, any
Material Contract and, to the Knowledge of the Sellers, no other party thereto
is in material breach of, or material default under, any Material Contract. The
Sellers have not received any written notice that any Material Contract is not
enforceable against any party thereto, that any Material Contract has been
terminated before the expiration of its term or that
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any party to a Material Contract intends to terminate such Material Contract
prior to the termination date specified therein, or that any other party is in
breach of, or default under, any Material Contract. True and complete copies of
all Material Contracts or, in the case of oral agreements, if any, written
summaries thereof have been delivered to Purchaser.
Section 4.15 Intellectual Property.
---------------------
(a) The Sellers are the sole and exclusive owner of, or have the valid
right to use the Intellectual Property free and clear of all Liens. Schedule
2.1(a)(i) sets forth a complete and accurate list (including which the Sellers
are the owner or licensee thereof) of all (i) patents and patent applications,
(ii) trademark or service mark registrations and applications, (iii) copyright
registrations and applications, and (iv) material unregistered copyrights,
service marks, trademarks and trade names, each as owned or licensed by the
Sellers. The Sellers currently are listed in the records of the appropriate
United States or state agency as the sole owner of record for each owned
application and registration listed on Schedule 2.1(a)(i).
(b) The Intellectual Property registrations listed on Schedule
2.1(a)(i) are valid and subsisting, in full force and effect in all material
respects, and have not been canceled, expired or abandoned. Except as set forth
on Schedule 4.15(b), there is no pending, existing, or to the Knowledge of the
Sellers, threatened, opposition, interference, cancellation proceeding or other
legal or governmental proceeding before any court or registration authority in
any jurisdiction against the Intellectual Property registrations listed on
Schedule 2.1(a)(i). To the Knowledge of the Sellers, there is no pending,
existing or threatened opposition, interference, cancellation proceeding or
other legal or governmental proceeding before any court or registration
authority in any jurisdiction against any of the Intellectual Property.
(c) Schedule 2.1(a)(i) lists all of the Computer Programs other than
off-the-shelf applications which are owned, licensed, leased or otherwise used
by the Sellers in connection with the operation of its businesses as currently
conducted, and identifies which is owned, licensed, leased, or otherwise used,
as the case may be. Each Computer Program listed on Schedule 2.1(a)(i) is
either (i) owned by the Sellers, (ii) currently in the public domain or
otherwise available to Sellers without the license, lease or consent of any
third party, or (iii) used under rights granted to Sellers pursuant to a written
agreement, license or lease from a third party, which written agreement, license
or lease is identified on Schedule 2.1(a)(i). The Sellers use the Computer
Programs set forth on Schedule 2.1(a)(i) in connection with the operation of
their business as conducted on the date hereof and such use does not to the
Knowledge of the Sellers violate the rights of any third party. Except for
Third Party Software, all Computer Programs set forth in Schedule 2.1(a)(i) were
either developed by (x) employees of the Sellers within the scope of their
employment, (y) third parties as "work-made-for-hire", as that term is defined
under Section 101 of the United States copyright laws, pursuant to written
agreements or (z) independent contractors who have assigned their rights to the
Sellers pursuant to written agreements.
(d) Schedule 2.1(a)(i) sets forth a complete and accurate list of all
material agreements pertaining to the use of or granting any right to use or
practice any rights under any
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Intellectual Property, whether the Sellers are the licensee or licensor
thereunder (the "Licenses") and any written settlements or assignments relating
to any Intellectual Property. The Licenses are valid and binding obligations of
each party thereto, enforceable against each such party in accordance with their
terms, and there are no breaches or defaults by Sellers under any Licenses.
(e) To the Knowledge of the Sellers, no trade secret or confidential
know-how material to the business of the Sellers as currently operated has been
disclosed or authorized to be disclosed to any third party, other than pursuant
to a non-disclosure agreement that protects the Sellers' proprietary interests
in and to such trade secrets and confidential know-how.
(f) To the Knowledge of the Sellers, the conduct of the Business does
not infringe upon any intellectual property right owned or controlled by any
third party and no third party is infringing upon any Intellectual Property
owned by the Sellers and no such claims have been made against a third party by
the Sellers. Except as set forth on Schedule 4.15(b), there are no claims or
suits pending or, to the Knowledge of the Sellers, threatened, and the Sellers
have not received any written notice of a third party claim or suit (x) alleging
that the Sellers' activities or the conduct of their businesses infringes upon
or constitutes the unauthorized use of the proprietary rights of any third
party, or (y) challenging the ownership, use, validity or enforceability of the
Intellectual Property.
(g) There are no settlements, consents, judgments or orders or other
agreements which restrict the rights of the Sellers to use any Intellectual
Property, or other agreements which restrict the Sellers' rights to use any
Intellectual Property owned by the Sellers.
(h) The consummation of the transactions contemplated hereby will not
result in the loss or impairment of the right of Purchaser or its successors to
own or use any of the Intellectual Property currently owned or used by the
Sellers nor will it require the consent of any Governmental Authority or third
party in respect of any such Intellectual Property and no present or former
employee, or officer of the Sellers have any right, title, or interest, directly
or indirectly, in whole or in part, in any Intellectual Property.
Section 4.16 Employee Benefits; ERISA. Except as set forth on Schedule
------------------------
4.16, none of the Sellers nor any trade or business, whether or not incorporated
(an "ERISA Affiliate"), that together with the Sellers would be deemed a "single
employer" within the meaning of Section 4001(b)(1) of ERISA sponsors or
contributes to, have ever sponsored or contributed to, or have been required to
contribute to, any "employee benefit plan," as defined by Section 3(3) of ERISA,
or any other plan, program or arrangement, including without limitation any
"multiemployer plan," as such term is defined in Section 3(37) of ERISA, for the
benefit of, relating to or with any employee of any Person.
Section 4.17 Labor Matters. Except as set forth on Schedule 4.17, (i)
--------------
there is no labor strike, dispute, slowdown, stoppage or lockout actually
pending, or to the Knowledge of the Sellers, threatened against or affecting the
Sellers and during the past five years there has not been any such action, (ii)
the Sellers are not a party to or bound by any collective bargaining or similar
agreement with any labor organization, or work rules or practices agreed to with
any
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labor organization or employee association applicable to employees of the
Sellers, (iii) none of the employees of the Sellers is represented by any labor
organization and the Sellers have no Knowledge of any union organizing
activities among the employees of the Sellers within the past five years, nor
does any question concerning representation exist concerning such employees,
(iv) there are no written personnel policies, rules or procedures applicable to
employees of the Sellers, other than those set forth on Schedule 4.17, true and
correct copies of which have been delivered to Purchaser at least ten days prior
to the Closing Date, (v) the Sellers are, and have at all times been, in
compliance, in all material respects, with all applicable Laws respecting
employment and employment practices, terms and conditions of employment, wages,
hours of work and occupational safety and health, and are not engaged in any
unfair labor practices as defined in the National Labor Relations Act or other
applicable Laws, (vi) there is no unfair labor practice charge or complaint
against the Sellers pending or, to the Knowledge of the Sellers, threatened
before the National Labor Relations Board or any similar state or foreign
agency, (vii) there is no grievance arising out of any collective bargaining
agreement or other grievance procedure, (viii) to the Knowledge of the Sellers,
no charges with respect to or relating to the Sellers are pending before the
Equal Employment Opportunity Commission or any other agency responsible for the
prevention of unlawful employment practices, (ix) the Sellers have not received
a notice of the intent of any federal, state, local or foreign agency
responsible for the enforcement of labor or employment Laws to conduct an
investigation with respect to or relating to the Sellers and no such
investigation is in progress, and (x) there are no complaints, lawsuits or other
proceedings pending or, to the Knowledge of the Sellers, threatened in any forum
by or on behalf of any present or former employee of the Sellers, any applicant
for employment or classes of the foregoing alleging breach of any express or
implied contract or employment, any Laws governing employment or the termination
thereof or other discriminatory, wrongful or tortious conduct in connection with
the employment relationship.
Section 4.18 Records.
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(a) The record books of the Sellers contain complete and accurate
records of all actions taken by the partners, the management committee (or
similar governing body) of the Sellers. Complete and accurate copies of all
such minute books have been made available by the Sellers to Purchaser. All
officers of the Sellers have been properly elected.
(b) The accounting books and records of the Sellers are complete and
correct, have been maintained in accordance with applicable Laws and good
business practices and accurately reflect the basis for the financial condition
and results of operations of the Sellers set forth in the consolidated financial
statements of the Sellers.
Section 4.19 Affiliate Transactions. Schedule 4.19 lists all
----------------------
agreements, arrangements and currently proposed agreements and arrangements, by
or between the Sellers, on the one hand, with or for the benefit of any current
or former shareholder, partner, officer or other Affiliate of the Sellers or any
of such Person's Affiliates, or any entity in which any such Person has a direct
or indirect material interest. Schedule 4.19 lists all payments of any kind in
excess of $25,000 since June 30, 1998 from the Sellers to or for the benefit of
any current or former partner, officer or other Affiliate of the Sellers or any
of such Persons' Affiliates, or any entity in which any such
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Person has a direct or indirect material equity interest. All outstanding debts
and other obligations of the Sellers to any of its respective partners or owners
were incurred in return for fair and adequate consideration paid or delivered by
them in cash or other property. All debts of the Sellers' officers, partners or
the respective Affiliates of the Sellers to the Sellers (excluding obligations
of MOR Music TV, Inc. written off as uncollectible) are reflected on the Interim
Balance Sheet. All debts of the Sellers' officers, partners or the respective
Affiliates of the Sellers to the Sellers (excluding obligations of MOR Music TV,
Inc. written off as uncollectible) shall have been reflected on the Closing
Balance Sheet.
Section 4.20 Brokers, Finders, Etc. The Sellers have not employed and
---------------------
are not subject to the valid claim of, nor has any Seller incurred any Liability
that would be payable by the Sellers, for any brokerage, finder's or other fees
or commissions of any broker, finder or other financial intermediary in
connection with the transactions contemplated by this Agreement.
Section 4.21 Questionable Payments. Neither the Sellers nor any
---------------------
officer (or Person of similar capacity) thereof used any funds of the Sellers
for unlawful contributions, gifts, entertainment or other unlawful expenses
relating to political activity, made any direct or indirect unlawful payments to
government officials or employees from corporate funds, established or
maintained any unlawful or unrecorded fund or corporate moneys or other assets;
made any false or fictitious entries on the books or records of any such
corporations, made any bribe, payoff, kickback or other unlawful payment.
Section 4.22 Competing Business. The Sellers have no direct or
------------------
indirect interest of any nature whatever in any Person which conducts or has any
arrangement or agreement with any Person to conduct on its behalf the business
of providing advanced digital production, post-production and transmission
facility and digital media storage and distribution services.
Section 4.23 Compliance With Bulk Sales Act; Uniform Commercial Code.
-------------------------------------------------------
The Sellers are not, on the effective date of Closing, indebted to or a debtor
of any Person except for the Assumed Liabilities (excluding obligations owed to
other Sellers or their Affiliates). There are not, and will not be, any
creditors who can object to the transfer of the assets under any applicable Bulk
Sales Act or the Uniform Commercial Code, or statutes of similar import, if
applicable.
Section 4.24 Other Information. No representation or warranty of the
-----------------
Sellers in this Agreement, nor any statement, certificate or other document
furnished or to be furnished by the Sellers to Purchaser pursuant to this
Agreement, nor the Exhibits and Schedules hereto, contains any untrue statement
of a material fact, or omits to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Notwithstanding the
foregoing, Purchaser acknowledges certain general risks inherent to acquiring
and investing in the Assets and the Business and has reviewed the risk factors
described by the Sellers as set forth on Schedule 4.24. The F.A.S. Note
referenced in Schedule 2.1(a)(ii) has been excluded from all financial
statements previously furnished to Purchaser by the Sellers.
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Section 4.25 Customer and Supplier Relationships; Warranty Claims.
----------------------------------------------------
Except as set forth in Schedule 4.25, the Sellers have not received any notice
that any customer or supplier intends to discontinue or alter the prices or
terms of, or substantially diminish its relationship with the Sellers. Other
than as set forth in Schedule 4.25, there are no outstanding warranty claims
against the Sellers by any of their customers with respect to products sold or
services rendered by the Sellers.
Section 4.26 Termination of the Speer/PSI Agreements. Prior to the
---------------------------------------
execution of this Agreement the Sellers and RMS have terminated each of the
Speer/PSI Agreements and none of the Sellers or RMS have any further
obligations, nor does PSI have any rights, thereunder relating to the Assets.
Section 4.27 Year 2000 Program. Except as set forth in Schedule 4.27:
-----------------
(a) To the Knowledge of the Sellers, all devices, systems, machinery,
information technology, computer software and hardware and other date sensitive
technology (collectively, the "Systems") necessary for the Sellers to carry on
the Business are Year 2000 Compliant to the extent necessary to ensure no
material disruption of the operations of Purchaser. As used herein, "Year 2000
Compliant" means that the Systems are designed to be used prior to, during and
after the Gregorian calendar year 2000 A.D. and will operate during each such
time period without error relating to date or date sensitive data, specifically
including any error relating to, or the product of, date data which represents
or references difference centuries or more than one century.
(b) The Sellers have undertaken an adequately detailed inventory,
review and assessment of all areas within its business operations that could be
adversely affected by the failure of the Sellers to be Year 2000 Compliant on a
timely basis, developed an adequately detailed plan and timeline for becoming
Year 2000 Compliant on a timely basis and to date, implemented the plan in
accordance with that timetable in all material respects.
(c) The Sellers have made written inquiry of each of their key
suppliers, vendors and customers, and have obtained in writing confirmation from
all such persons, as to whether such persons have initiated programs to become
Year 2000 Compliant and on the basis of such confirmations, the Sellers
reasonably believe that all such persons will be or will become so compliant.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF RMS
RMS represents and warrants to Purchaser as follows:
Section 5.1 Authorization and Validity . RMS has full partnership power
--------------------------
and authority to enter into this Agreement and the other documents and
instruments to be executed and delivered by RMS pursuant hereto (to the extent
that such Person is a party hereto or thereto) and to carry out its obligations
hereunder and thereunder. The execution, delivery and performance by RMS of this
Agreement and the other documents and instruments to be executed and
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delivered by RMS pursuant hereto, and the consummation by RMS of the
transactions contemplated hereby and thereby, have been duly and validly
authorized by the management committee or similar governing body of RMS and no
other partnership act or proceeding on the part of RMS is necessary to authorize
the execution and delivery by RMS of this Agreement or the other documents or
instruments to be executed and delivered by RMS pursuant hereto, or the
consummation by RMS of the transactions contemplated hereby or thereby. This
Agreement and the other documents and instruments to be executed and delivered
by RMS pursuant hereto (to the extent that RMS is a party hereto or thereto)
have been duly and validly executed and delivered by RMS (to the extent that RMS
is a party hereto or thereto) and, assuming this Agreement and the other
documents and instruments to be executed and delivered by RMS pursuant hereto
(to the extent that RMS is a party hereto or thereto) are the valid and binding
obligations of such other Persons a party hereto or thereto, constitutes a valid
and binding obligation of RMS (to the extent that RMS is a party hereto or
thereto) enforceable against RMS (to the extent that RMS is a party hereto or
thereto) in accordance with its terms, except that (i) such enforcement may be
subject to applicable bankruptcy, insolvency or other similar laws, now or
hereafter in effect, affecting creditors' rights generally, and (ii) the remedy
of specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
Section 5.2 Equity; Good Title.
------------------
(a) Schedule 5.2(a) sets forth, as of the date hereof, the names of
the holders of partnership interests in RMS and the percentage and nature of
ownership of such holder therein (such partnership interests are referred to
collectively as the "RMS Ownership Interests").
(b) All of the outstanding RMS Ownership Interests are owned
beneficially and of record by the respective owners thereof identified on
Schedule 5.2(a), free and clear of all Liens.
Section 5.3 Organization. RMS is duly organized and validly existing
------------
partnership under the laws of the State of Nevada, and has full power and
authority to own all of its properties and assets, including the Owned Real
Estate, and to carry on its business as it is now being conducted. RMS has
delivered to Purchaser a complete and correct copy of the partnership agreement
as amended to date. Such organizational document is in full force and effect and
RMS is not in material violation of any provision of such organizational
document.
Section 5.4 No Conflict. Except as set forth in Schedule 5.4, neither
-----------
the execution, delivery or performance of this Agreement or the other documents
and instruments to be executed and delivered by RMS pursuant hereto, nor the
consummation by RMS of the transactions contemplated hereby or thereby, nor
compliance by RMS with any of the provisions hereof or thereof will (a) conflict
with or result in any breach of any provision of the partnership agreement of
RMS, (b) constitute a change in control under or require the consent from or the
giving of notice to a third party, result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, amendment, cancellation or acceleration)
under, or result in the creation of any Lien upon or
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affecting the Owned Real Property or the PSI Securities, any of the terms,
conditions or provisions of any contractual obligation of RMS, (c) violate any
order, writ, injunction, decree, statute, rule or regulation of any Governmental
Authority applicable to RMS or to which its properties or assets (including the
Owned Real Property) may be bound, or (d) result in triggering of any right of
first refusal or other right under any partnership or joint venture agreement to
which RMS is a party, except in the case of clauses (b), (c) or (d) for such
violations, breaches or defaults which would not, individually or in the
aggregate, have a Material Adverse Effect.
Section 5.5 Governmental Consents. Except under the HSR Act and filings
---------------------
with federal and state securities regulators relating to the transfer of the PSI
Securities or the IHC Shares and as otherwise set forth on Schedule 5.5, no
consent, order or authorization of, or registration, declaration or filing with,
any Governmental Authority is required in connection with the execution,
delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby by RMS.
Section 5.6 Owned Real Property; PSI Securities.
-----------------------------------
(a) Schedule 5.6(a) contains a list of the real property owned by RMS
to be transferred to Purchaser at Closing in accordance with the terms hereof
(the "Owned Real Property"). Except as set forth on Schedule 5.6(a), the
current use of the Owned Real Property by RMS does not violate any local zoning
or similar land use or other Laws and none of the structures on the Owned Real
Property encroaches upon real property of another Person, and no structure of
any other Person encroaches upon any Real Property. RMS has not received notice
of any pending or threatened condemnation proceeding, or of any sale or other
disposition in lieu of condemnation, affecting any of the Owned Real Property.
Each parcel of Owned Real Property abuts on or has direct vehicular access to a
public road.
(b) Schedule 5.6(b) contains a true and correct list of all securities
of PSI held by RMS (the "PSI Securities" and, together with the PSI Notes, the
"PSI Interests"). RMS owns the PSI Securities free and clear of all Liens.
Section 5.7 Litigation and Claims; Compliance with Laws.
-------------------------------------------
(a) Schedule 5.7(a)(i) sets forth all Litigation with respect to the
Owned Real Property or RMS' ownership in the PSI Securities as of the date
hereof, including the name of the claimant, the date of the alleged act or
omission, a detailed narrative as to the nature of the alleged act or omission,
the date the matter was referred to an insurance carrier of RMS (if referred),
the estimated amount of exposure, the amount RMS has reserved, or the amount of
RMS' claim and estimated expenses of RMS in connection with such matters.
Except as set forth in Schedule 5.7(a)(ii), there is no Litigation with respect
to the Owned Real Property or RMS' ownership in the PSI Securities which is not
fully covered by the insurance policies referenced in Section 5.7(a)(ii).
Neither the Owned Real Property nor RMS' ownership in the PSI Securities is
subject to any order, consent decree, settlement or similar agreement with any
Governmental Authority. There is no judgment, injunction, decree, order or other
determination of an arbitrator or Governmental Authority specifically applicable
to the Owned Real Property or
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RMS' ownership in the PSI Securities. As of the date hereof, there is no
Litigation which seeks to prevent consummation of the transactions contemplated
hereby or which seeks material damages in connection with the transactions
contemplated hereby.
(b) Except as set forth in Schedule 5.7(b), RMS has complied and is in
compliance with all Laws applicable to the Owned Real Property. Except as set
forth in Schedule 5.7(b), the Sellers hold all material licenses, permits and
other authorizations of Governmental Authorities with respect to its ownership
and operations on the Owned Real Property. Except as set forth in Schedule
5.7(b), to the Knowledge of RMS, there is no intent to make any changes in the
use or operation of the Owned Real Property that will result in or cause RMS to
be in noncompliance with applicable Laws or that will require changes in or a
loss of any such licenses, permits or other authorizations or an increase in any
expenses related thereto except where such noncompliance, change, loss or
increase would not reasonably be expected to have a Material Adverse Effect.
Such licenses, permits and other authorizations as aforesaid held by RMS are
valid and in full force and effect, and there are no (a) Actions pending, or to
the Knowledge of RMS, threatened or (b) Investigations to the Knowledge of the
Sellers pending or threatened that could result in the termination, impairment
or nonrenewal thereof.
Section 5.8 Taxes. RMS has timely filed or caused to be filed with the
-----
appropriate federal, state and local Governmental Authority all Tax Returns
required to be filed with respect to the Owned Real Property and each such Tax
Return is true, complete and correct in all material respects. All Taxes shown
to be due on such Tax Returns, all Taxes arising from or attributable to the
Owned Real Property required to be paid, and all Taxes arising from or
attributable to the Owned Real Property required to be withheld by or with
respect to RMS have been timely paid or, if applicable, withheld and paid to the
appropriate Governmental Authority. There are no deficiencies or assessment of
Taxes from any taxing authority with respect to or attributable to the Owned
Real Property in such amounts as would in the aggregate have a Material Adverse
Effect. There are no ongoing audits or examinations of any of the Tax Returns
relating to or attributable to the Owned Real Property. RMS has not granted any
requests, agreements, consents or waiver to extend the statutory period of
limitations applicable to the assessment of any Taxes with respect to or
attributable to the Owned Real Property, and RMS is not aware of any material
issue with respect to or attributable to the Owned Real Property that could be
raised by any Governmental Authority.
Section 5.9 Environmental Matters.
---------------------
(a) RMS has been and is in compliance with and has no liability under
the Environmental Laws with respect to the Owned Real Property (which compliance
includes the possession by RMS of all Environmental Permits and other
governmental authorizations required under applicable Environmental Laws, and
compliance with the terms and conditions thereof), except for such non-
compliance and liability which could not reasonably be expected to have a
Material Adverse Effect. With respect to the Owned Real Property, RMS has not
received any communication from any Person or Governmental Authority alleging
that RMS is not in such compliance, and there are no past or present (or, to the
Knowledge of RMS anticipated) actions, activities, circumstances, conditions,
events or incidents that may prevent or interfere with such
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compliance in the future. All Environmental Permits maintained by RMS with
respect to the Owned Real Property are identified on Schedule Section 5.9(a).
The execution and delivery by RMS of this Agreement does not, and the
consummation of the transactions contemplated hereby will not, violate, or
result in the violation of, or default (with or without notice or lapse of time,
or both) under, any provision of, or result in the termination or acceleration
of, or give rise to a right of termination or acceleration of or the loss of any
benefit under, any material Environmental Permit applicable to RMS or the Owned
Real Property, other than those violations, defaults, terminations,
accelerations or rights which would not individually or in the aggregate have a
Material Adverse Effect.
(b) No transfers of Environmental Permits, no additional Environmental
Permits, and no notifications to, filings with or approval of any Governmental
Authority, will be required to permit the conduct of the business of RMS on the
Owned Real Property in compliance with all applicable Environmental Laws
immediately following the Closing Date as conducted by RMS immediately prior to
the Closing Date.
(c) There are no Environmental Claims pending or, to the Knowledge of
RMS, threatened against RMS with respect to the Owned Real Property or against
any Person or entity whose liability for any Environmental Claim with respect to
the Owned Real Property RMS has or may have retained or assumed either
contractually or by operation of law. To the Knowledge of RMS, there are no
Environmental Claims pending or threatened against RMS with respect to the Owned
Real Property or against any Person or entity whose liability for any
Environmental Claim RMS has or may have retained or assumed either contractually
or by operation of law.
(d) There are no past or present actions, activities, circumstances,
conditions, events or incidents, including the Release or presence of any
Hazardous Materials with respect to the Owned Real Property which could
reasonably be expected to form the basis of any Environmental Claim against RMS,
or to the Knowledge of RMS, against any Person or entity whose liability for any
Environmental Claim with respect to the Owned Real Property RMS has or may have
retained or assumed either contractually or by operation of law.
(e) RMS has not, and to the Knowledge of RMS no other Person has,
Managed any Hazardous Materials at, on, beneath or adjacent to the Owned Real
Property, except for such Hazardous Materials Managed in the ordinary course of
business of RMS (which Hazardous Materials, if any, were and are Managed in
accordance with applicable Environmental Laws).
(f) RMS has delivered true, complete and correct copies and results of
any reports, studies, analyses, tests or monitoring possessed or initiated by or
for RMS pertaining to Hazardous Materials in, on, beneath or adjacent to the
Owned Real Property or regarding RMS' or, to the extent in the possession of RMS
or its advisors or Affiliates, any predecessor of RMS' compliance with
applicable Environmental Laws or regarding a Cleanup, an Environmental Claim or
an Environmental Liability with respect to the Owned Real Property. A list of
all such documents is set forth on Schedule 5.9(f).
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(g) Without in any way limiting the generality of the foregoing, the
Owned Real Property does not contain any underground improvements, including but
not limited to treatment or storage tanks, or underground piping associated with
such tanks, polychlorinated bi-phenyls, asbestos or asbestos-containing
materials, wetlands, filled in land, landfills, underground injection wells,
radioactive materials, or septic tanks, or waste disposal pits in which process
wastewater or any Hazardous Materials have been discharged, stored, treated or
disposed of.
(h) The Owned Real Property, and to the Knowledge of RMS the property
to which Hazardous Materials originating on or from such Owned Real Property has
been sent for treatment, storage or disposal, are not listed or proposed to be
listed on the National Priorities List or CERCLIS or on any other governmental
database or list of properties that may or do require investigation or Cleanup
under Environmental Laws. All locations at which RMS has themselves disposed of
any Hazardous Substances, or of which RMS has written notice of the disposal of
any Hazardous Substances by any third party on the Sellers' behalf are listed in
Schedule 5.9(h).
Section 5.10 Competing Business. RMS has no direct or indirect
------------------
interest of any nature whatever in any Person other than the Sellers which
conducts or has any arrangement or agreement with any Person to conduct on its
behalf the business of providing advanced digital production, post-production
and transmission facility and digital media storage and distribution services.
Section 5.11 Other Information. No representation or warranty of RMS
-----------------
in this Agreement, nor any statement, certificate or other document furnished or
to be furnished by RMS to Purchaser pursuant to this Agreement, nor Schedules
5.2(a), 5.4, 5.5., 5.6(a), 5.6(b), 5.7(a)(i), 5.7(a)(ii), 5.7(b), 5.9(f) and
5.9(h) hereto, contain any untrue statement of a material fact, or omits to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represent and warrant to the Sellers as follows:
Section 6.1 Authorization and Validity. Purchaser has full corporate
--------------------------
power and authority to enter into this Agreement and the other documents and
instruments to be executed and delivered by it pursuant hereto and to carry out
its obligations hereunder and thereunder. The execution, delivery and
performance by Purchaser of this Agreement and the other documents and
instruments to be executed and delivered by Purchaser pursuant hereto, and the
consummation by Purchaser of the transactions contemplated hereby and thereby,
have been duly authorized by all necessary corporate action and no other
corporate act or proceeding on the part of Purchaser is necessary to authorize
the execution and delivery by Purchaser of this Agreement or the other documents
or instruments to be executed and delivered by Purchaser pursuant hereto,
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or the consummation by Purchaser of the transactions contemplated hereby or
thereby. This Agreement and the other documents and instruments to be executed
and delivered by Purchaser pursuant hereto have been duly and validly executed
and delivered by Purchaser and, assuming this Agreement and the other documents
and instruments to be executed and delivered by Purchasers pursuant hereto are
the valid and binding obligations of such other Persons a party hereto or
thereto, constitutes a valid and binding obligation of Purchaser enforceable
against Purchaser in accordance with its terms, except that (i) such enforcement
may be subject to applicable bankruptcy, insolvency or other similar laws, now
or hereafter in effect, affecting creditors' rights generally, and (ii) the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
Section 6.2 Organization. Purchaser is a corporation organized under
------------
the laws of the State of Colorado. Purchaser is duly organized, validly
existing and in good standing and has full power and authority to carry on its
business as presently conducted. Purchaser has delivered to the Sellers a
complete and correct copy of its articles of incorporation and bylaws, each as
amended to date. Such organizational documents are in full force and effect.
Section 6.3 No Conflict. Neither the execution, delivery or
-----------
performance by Purchaser of this Agreement nor the consummation of the
transactions contemplated hereby and compliance by Purchaser with any of the
provisions hereof or thereof will (a) conflict with or result in any breach of
any provision of the articles of incorporation or bylaws of Purchaser, (b)
require any consent, approval or notice under, violate or result in the
violation of, conflict with or result in a breach of any provisions of,
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, result in the termination of, accelerate the
performance required by or result in a right of termination or acceleration,
result in the loss of a material benefit under or result in the creation of any
Lien upon any of the properties or assets of Purchaser under any of the terms,
conditions or provisions of any material contractual obligation of Purchaser or
(c) violate any order, writ, injunction, decree, statute, rule or regulation of
any Governmental Authority applicable to Purchaser or to which any of its
properties or assets may be bound, except in such case as would not materially
impair or delay Purchaser in the consummation of the transactions contemplated
hereby.
Section 6.4 Governmental Consents. Except under the HSR Act, no
---------------------
consent, order or authorization of, or registration, declaration or filing with,
any Governmental Authority is required in connection with the execution,
delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby by Purchaser.
Section 6.5 Brokers, Finders, Etc. Purchaser has not employed, and is
---------------------
not subject to the valid claim of, nor has Purchaser incurred any liability that
would be payable by Purchaser, for any brokerage, finder's or other fees or
commissions of any broker, finder or other financial intermediary in connection
with the transactions contemplated by this Agreement.
Section 6.6 Other Information. No representations or warranty of
-----------------
Purchaser in this Agreement, nor any statement, certificate or other document
furnished or to be furnished by
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Purchaser to the Sellers pursuant to this Agreement, contains any untrue
statements or a material fact, or omits to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
Section 6.7 Purchase for Investment. Any securities to be acquired by
-----------------------
Purchaser pursuant to the terms of this Agreement shall be purchased for
investment purposes and not with a view toward any resale or distribution
thereof. Purchaser acknowledges that the securities to be acquired in
accordance herewith have not been registered for the purpose of the transactions
contemplated by this Agreement or otherwise under the Securities Act of 1933, as
amended, or under any state securities laws. Purchaser will not sell or
otherwise distribute all or any portion of the securities acquired hereunder
except in compliance with applicable laws relating to the sale or other
distribution of securities.
Section 6.8 Limitation on Representations. Purchaser acknowledges and
-----------------------------
agrees that neither the Sellers nor RMS has made any representation or warranty
regarding the business or operations of PSI or IHC and Purchaser is acquiring
the PSI Securities (subject, however, to the provisions of Sections 2.2 and
7.18) and the IHC Shares on the basis or its own investigation and evaluation of
the risks associated with the ownership of the PSI Securities and the IHC Shares
based on information provided to Purchaser by PSI or IHC or which is otherwise
publicly available and Purchaser is not relying on any information regarding the
business or operations of PSI or IHC provided by the Sellers or RMS other than
the representation set forth in Sections 4.3 and 5.6(b) hereof.
ARTICLE VII
COVENANTS
Section 7.1 Commercially Reasonable Efforts.
-------------------------------
(a) Upon the terms and subject to the conditions hereof, each of the
parties hereto agrees to use commercially reasonable efforts to take, or cause
to be taken, all actions and to do, or cause to be done, all things necessary,
proper or advisable to consummate and make effective the transactions
contemplated by this Agreement.
(b) In case at any time after the Closing Date any further action is
necessary or desirable to carry out the purposes of this Agreement, the parties
shall use their commercially reasonable efforts to take, or cause to be taken,
all such necessary actions.
Section 7.2 Filings and Consents. The parties hereto shall use all
--------------------
commercially reasonable efforts to obtain and to cooperate in obtaining any
consent, approval, authorization or order of, and in making any registration or
filing with, any Governmental Authority or other third party required in
connection with the execution, delivery or performance of this Agreement and the
other documents and instruments to be executed pursuant hereto.
Section 7.3 Publicity. So long as this Agreement is in effect, without
---------
the prior consent of the other parties hereto, which consent shall not be
unreasonably withheld or delayed, none of
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the parties hereto shall, nor shall any of them permit Affiliates which any of
them control to, issue or cause the publication of any press release or other
public statement or announcement with respect to this Agreement or the
transactions contemplated hereby except as may be required by law or by
obligations pursuant to any listing agreement with a national securities
exchange. A party making any statement or announcement pursuant to the
requirements of applicable law or the listing agreement of a national securities
exchange shall provide a copy thereof to the other parties hereto to the extent
possible prior to issuing such statement or announcement.
Section 7.4 Notification of Certain Matters. The Sellers shall give
-------------------------------
prompt notice to Purchaser upon becoming aware of, and Purchaser shall give
prompt notice to the Sellers upon becoming aware of, (a) the occurrence or non-
occurrence of any event, the occurrence or non-occurrence of which would cause
any representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at or prior to the Closing Date and (b) any
material failure of the Sellers or Purchaser, as the case may be, to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 7.4 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
Section 7.5 Expenses. Whether or not the transactions contemplated
--------
hereby are consummated, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby will be paid by the party
incurring such costs and expenses.
Section 7.6 Conduct of Business of the Sellers. The Sellers covenant
----------------------------------
and agree that, except for actions taken to implement this Agreement and the
transactions contemplated hereby or as disclosed in Schedules hereto or as
consented to by Purchaser, from and after the date of this Agreement and until
the Closing Date the Sellers will not take any action or elect to omit to take
any action the result of which in either case will be to:
(a) Issue, grant or make any commitment to grant, any Ownership
Interests or other rights relating to the Sellers' Ownership Interests, debt
instruments or other securities;
(b) Redeem, repurchase or otherwise reacquire any Ownership Interests
or make any commitment with respect thereto, or declare or pay any distribution
to the partners or owners of the Sellers or their Affiliates other than as
contemplated by the terms of this Agreement;
(c) Cause the Sellers to suffer any adverse change that is material in
its working capital, financial condition, assets, Liabilities, reserves,
business, operations or business relationships with existing suppliers,
contractors, licensors or customers;
(d) Incur any Liabilities except Liabilities (x) incurred in the
ordinary course of business and consistent with past practice or (y) in an
aggregate amount of no greater than $25,000 (including Liabilities arising from
one transaction or a series of similar transactions, and
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all periodic installments or payments under any lease or other agreement
providing for periodic installments or payments, as a single Liability);
(e) Pay, discharge or satisfy any claim or Liabilities other than the
payment, discharge or satisfaction in the ordinary course of business and
consistent with past practice of Liabilities reflected or reserved against in
the Interim Balance Sheet or the Closing Balance Sheet or incurred in the
ordinary course of business and consistent with past practice since the Balance
Sheet Date;
(f) Permit or allow any of its properties or assets (real, personal or
mixed, tangible or intangible) to become subject to any Lien except in the
ordinary course of business consistent with good financial practices;
(g) Write off as uncollectible any notes or accounts receivable,
except for immaterial write-offs in the ordinary course of business and
consistent with past practice;
(h) Cancel any debts or waive any claims or rights that, individually
or in the aggregate, would have a Material Adverse Effect;
(i) Sell, transfer, or otherwise dispose of any of its properties or
assets (real, personal or mixed, tangible or intangible), except (i) in the
ordinary course of business and consistent with past practice, or (ii) in an
aggregate amount not exceeding $10,000 with respect to all other assets and
properties;
(j) Capitalize any work, project or other form of services performed
or to be performed, except in accordance with generally accepted accounting
principles;
(k) Introduce any new, or significantly change any, management
operation or accounting policy, including tax accounting methods and procedures,
or operate its properties or assets other than substantially as previously
operated and in the ordinary course;
(l) Suffer any damage, destruction or loss to its properties or assets
(whether or not covered by insurance) which could have been prevented by
reasonably prudent action on the part of the Sellers; or
(m) Make or commit to make any capital expenditures not in the
ordinary course of business for any single item in excess of $25,000 other than
as required by any contract listed on Schedule 4.14
Section 7.7 Access and Environmental Inspection.
-----------------------------------
(a) Access. The Sellers shall afford to the officers, employees,
------
accountants, counsel and other representatives of Purchaser, access, upon
reasonable prior request or notice, during normal business hours from the date
hereof until the Closing Date, to all of the Sellers' offices, properties,
books, contracts, commitments and records and, during such period, the
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Sellers shall furnish promptly to Purchaser all other information concerning its
business, properties and personnel as Purchaser may reasonably request.
Purchaser will hold any such information which is nonpublic in confidence in
accordance with the provisions of the Confidentiality Agreement.
(b) Environmental Inspection. Sellers and RMS hereby grant to
------------------------
Purchaser a license to enter and inspect the Real Property and the Owned Real
Property ("Inspection"), such Inspection to be completed prior to Closing. In
order to complete such Investigation, Purchaser or its designated consultant
shall have the right but not the obligation: (i) to conduct tests of the soil,
surface or subsurface waters, and air quality at, in, on, beneath or about the
Real Property, in a manner consistent with good engineering practice; (ii) to
inspect all records, reports, permits, applications, monitoring results,
studies, correspondence, data and any other information or documents relevant to
Hazardous Materials, compliance with Environmental Laws, or environmental
conditions at the Real Property and the Owned Real Property; and (iii) to
inspect and test all buildings and equipment at the Real Property and the Owned
Real Property for asbestos-containing materials or other Hazardous Materials.
Purchaser agrees to conduct such investigations in a manner that minimizes the
disruption to the Sellers' or RMS' business activities, and the Sellers and RMS
agree to permit Purchaser reasonable access to all portions of the Real Property
and Owned Real Property, both during business hours and after business hours.
Purchaser agrees to keep and hold confidential any and all reports, summaries,
studies or results that are the product of its Inspection, and not to disclose
such reports without the written consent of Sellers or RMS or unless required to
do so by applicable law. All costs and expenses of performing the Inspection
shall be borne by Purchaser.
Section 7.8 Management Agreement. Notwithstanding the provisions of
--------------------
Section 7.2 or Section 7.9, to the extent that the Sellers are unable to obtain
the consent, approval, authorization or order of any Governmental Authority for
the transfer of any Regulatory Licenses or such other consents or approvals as
set forth on Schedule 7.8, the parties shall execute the Management Agreement at
Closing.
Section 7.9 Consents. Prior to the Closing, the Sellers shall use all
--------
commercially reasonable efforts to obtain all consents necessary to the
consummation of the transactions contemplated hereby. All such consents will be
in writing and executed counterparts thereof will be delivered to Purchaser at
or prior to the Closing. Notwithstanding any other provision of this Agreement,
the parties hereto agree that the Sellers may seek to obtain any consents or
waivers from any Persons necessary to consummate the transactions contemplated
hereby; provided that the Sellers and their representatives shall use their best
efforts to restrict access to any information concerning this Agreement and the
transactions contemplated hereby to those Persons that "need to know"; provided
further, that the Sellers and their representatives will request and encourage
those Persons who are informed of this Agreement or the transactions
contemplated hereby to treat any such information so provided in accordance with
the terms of the Confidentiality Agreement as if such Persons were a party
thereto.
Section 7.10 No Solicitation. The Sellers shall not, and shall use
---------------
their best efforts to ensure that none of their respective officers, managers,
employees, investment bankers,
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attorneys, accountants and other agents, shall, directly or indirectly: (i)
initiate, solicit or encourage, or take any action to facilitate the making of,
any offer or proposal which constitutes or is reasonably likely to lead to a
business combination involving the Sellers, or (ii) in the event of an
unsolicited offer by another Person for any of the assets, engage in
negotiations or discussions with, or provide any information or data to, any
Person relating to any such offer.
Section 7.11 Supplements to Schedules. From time to time prior to the
------------------------
Closing, the Sellers shall promptly supplement or amend any Schedule hereto with
respect to any matter, condition or occurrence hereafter arising which, if
existing or occurring at the date of this Agreement, would have been required to
be set forth or described in such Schedule. Except with respect to a supplement
or amendment not objected to in writing by Purchaser within five business days
after receipt thereof, no supplement or amendment shall be deemed to cure any
breach of any representation or warranty made in this Agreement or have any
effect for the purpose of determining the compliance by the Sellers with the
covenants set forth in Section 7.1. The parties hereto recognize and
acknowledge that certain assets will be acquired and disposed of and that
certain liabilities will be incurred and discharged in the ordinary course of
business; provided, however, that the parties do not intend for this sentence to
alter or modify the conditions or prohibitions of taking such actions contained
elsewhere in this Agreement.
Section 7.12 Delivery of Closing Balance Sheet.
---------------------------------
(a) No later than ten Business Days prior to the Closing Date, Sellers
shall deliver to Purchaser a copy of the audited balance sheet of Sellers (the
"Closing Balance Sheet") as of the Balance Sheet Date, together with the notes
thereto, accompanied by the reports thereon of Deloitte & Touche LLP,
independent public accountants, or another "Big Five" independent accounting
firm. The Closing Balance Sheet, together with the notes thereto, shall be
prepared in accordance with GAAP applied on a consistent basis throughout the
year covered thereby (except to the extent disclosed therein or required by
changes in GAAP), and shall present accurately (x) the information purported to
be presented therein and (y) the financial position of Sellers as of the Closing
Balance Sheet Date and for the year then ended. Reserves shall be reflected on
the Closing Balance Sheet against assets in amounts that have been established
on a basis consistent with past practice and in accordance with GAAP. There
shall be no changes in reserves of the Sellers since the Closing Balance Sheet
Date other than changes in such reserves consistent with past practice in
amounts not in the aggregate material.
(b) There shall be no Liabilities that are not reflected or reserved
against in the Closing Balance Sheet other than such Liabilities as (i) were
incurred in the ordinary course of business in a manner consistent with past
practice since the Balance Sheet Date, or (ii) would not be required to be
presented in financial statements or the notes thereto prepared in conformity
with GAAP, applied in a manner consistent with past practice, in the preparation
of the Interim Balance Sheet.
Section 7.13 Further Assurances. From and after the Closing Date, the
------------------
Sellers shall promptly execute, acknowledge and deliver any other assurances or
documents reasonably
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requested by Purchaser to permit Purchaser to satisfy its obligations hereunder
or to evidence title, or to provide Purchaser with the benefits enumerated in
this Agreement.
Section 7.14 IHC Interests.
-------------
(a) Subject to Section 7.14(b), prior to Closing, SVM shall transfer
to a newly-formed wholly owned limited liability company ("Holdco") (i) the IHC
Shares, and (ii) all rights and obligations of SVM under that certain
Shareholders' Agreement dated as of May 13, 1998 by and among IHC, Innovative
Telecom Corporation, SVM and certain other shareholders of IHC a party thereto
(the "IHC Shareholders' Agreement"). At Closing all of the outstanding
interests in Holdco shall be transferred to Purchaser as part of the Assets.
(b) If SVM is unable to obtain the consent of IHC and the other IHC
shareholders party thereto to transfer the rights and obligations of SVM under
the IHC Shareholders' Agreement, in lieu of Section 7.14(a)(ii), SVM covenants
and agrees that it shall sell any shares purchased from the shareholders of IHC
at SVM's cost and Purchaser covenants and agrees to loan such funds to SVM as
are necessary to purchase such shares of IHC; provided, however, that upon SVM
concluding any purchase of securities of IHC in accordance with this Section
7.14(b), SVM shall immediately transfer such shares so acquired to Purchaser and
Purchaser shall forgive and release any loans made in connection with such
purchase.
Section 7.15 Interim Funding. From the date hereof until the Closing
---------------
Date, Purchaser undertakes to negotiate on commercially reasonable terms
(including with respect to rates of return, restrictive provisions and security
interests) and, upon mutual agreement of the parties, loan such funds to the
Sellers as are necessary to operate the Business in the ordinary course and to
facilitate the pursuit of such commercial opportunities as the Sellers and
Purchaser collectively deem reasonable. Upon consummation of the transactions
contemplated hereby (other than a consummation pursuant to the Share Purchase
Option), Purchaser shall assume all liabilities under such financing.
Section 7.16 Reporting. The parties hereto hereby disclaim any "group"
---------
or other similar status under the Securities Exchange Act of 1934, as amended.
Section 7.17 Corporate Name.
--------------
(a) As of the Closing and thereafter, none of the Sellers, RMS or Roy
M. Speer shall directly or indirectly use the name "Speer" (i) in connection
with any business or operation directly or indirectly related to the Business as
of the date hereof or (ii) in conjunction with any name or names that are
similar to or that may be confused with the current names of the Sellers or
their Subsidiaries with any businesses or operations in the Business or that in
any way suggest the business or operations of any such entity are similar to the
businesses or operations of the Business. The Sellers, RMS and Roy M. Speer
agree that the legal names (and any associated domain names) of each of the
Sellers and their respective Subsidiaries with businesses or operations in the
Business shall be changed to comply with the terms of this Section 7.18 within
30 days of the Closing.
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(b) Purchaser covenants and agrees that it shall not use the name
"Speer" in any aspect of its businesses after six months following the Closing
Date, and any use of such name subsequent to the Closing shall be strictly to
facilitate the transition of ownership and limited to the use of such names as
employed in the ordinary course of business prior to Closing. The Sellers, RMS
and Roy M. Speer covenant and agree that as of the Closing and for a period of
10 years thereafter they shall not use the name "Speer" or any derivation
thereof in any businesses or operations in the Business.
Section 7.18 Anschutz/PSI Transaction. Prior to Closing, Purchaser
------------------------
shall make an offer to enter into an agreement with PSI on substantially similar
terms as are contemplated under the Contribution Agreement, the Real Estate
Transfer Agreement and the Plan of Recapitalization (any transaction
contemplated by such agreement, the "Anschutz/PSI Transaction"). If the PSI
Board approves of the Anschutz/PSI Transaction prior to the satisfaction of the
conditions to Closing set forth in Article VIII, (a) the PSI Interests shall be
deemed to be Assets, and (b) the Purchase Price shall not be affected hereby.
If the PSI Board does not approve of the Anschutz/PSI transaction, (a) the PSI
Interests shall be deemed to be Excluded Assets, (b) the Purchase Price shall be
reduced by $18,250,000, (c) RMS will not be deemed to make any representations
or warranties with respect to the PSI Securities and (d) Speer Communications
will not be deemed to make any representations or warranties with respect to the
PSI Notes.
Section 7.19 Employees. Purchaser hereby covenants and agrees that at
---------
Closing it shall make offers of employment to all employees of the Sellers on
terms and conditions substantially equivalent to those provided as of the
Closing Date. For purposes of calculating an employee's right or ability to
participate in a benefit or other plan offered by Purchaser, credit shall be
given to such employee for the term of such employee's employment with the
Sellers.
ARTICLE VIII
CONDITIONS TO CLOSING
Section 8.1 Conditions to the Obligations of Purchaser, the Sellers and
-----------------------------------------------------------
RMS. The obligations of each party hereto effect the Closing are subject to
- ---
the satisfaction (or waiver) at or prior to the Closing of the condition that no
temporary restraining order, preliminary or permanent injunction or other order
or decree which prevents the consummation of the transactions contemplated
hereby shall have been issued and remain in effect, and no statute, rule or
regulation shall have been enacted by any Governmental Authority which makes the
consummation of the transactions contemplated hereby illegal and the waiting
period under the HSR Act shall have expired or been earlier terminated.
Section 8.2 Conditions to the Obligations of Purchaser. The obligation
------------------------------------------
of Purchaser to effect the Closing is subject to the satisfaction (or waiver by
Purchaser) at or prior to the Closing, of the following conditions:
(a) Representation and Warranties. The representations and warranties
-----------------------------
of the Sellers and RMS contained herein shall have been true and correct in all
material respects when
45
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made and shall be true and correct in all material respects as of the Closing,
as if made as of the Closing.
(b) Covenants. The Sellers and RMS shall have performed in all
---------
respects the covenants and obligations required to be performed by them on or
prior to the Closing.
(c) No Material Adverse Change. There shall not have been, or no
--------------------------
event shall have occurred, which could reasonably be expected to result in, a
Material Adverse Change.
(d) The Sellers' and RMS' Certificate. Each Seller and RMS shall have
---------------------------------
furnished Purchaser with a certificate, dated the Closing Date, to the effect
that the conditions set forth in Sections 8.2(a), (b) and (c) have been
satisfied.
(e) Litigation. No litigation shall have been commenced and be
----------
continuing which seeks to prevent consummation of the transactions contemplated
hereby or which seeks material damages from Purchaser, any of their Affiliates,
the Sellers or RMS in connection with the transactions contemplated hereby.
(f) Consents. All consents, approvals, permits or authorizations
--------
required to be obtained, declarations or filings required to be made and waiting
periods or terminations required to have occurred prior to the Closing from or
with any Governmental Authority or third party in connection with the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby, shall have been obtained, made or occurred, except as
described in Schedule 7.8.
(g) Employment, Confidentiality and Unfair Competition Agreements.
-------------------------------------------------------------
The Employment, Confidentiality and Unfair Competition Agreements shall have
been executed and delivered by the parties thereto.
(h) Management Agreement. The Management Agreement in the form of
--------------------
Exhibit B attached hereto shall have executed and delivered by the parties
thereto.
(i) Legal Opinion of Sellers' and RMS' Counsel. The Sellers and RMS
------------------------------------------
shall have furnished an opinion of Baker & McKenzie, counsel to the Sellers and
RMS, in a form to be mutually agreed upon by the parties hereto prior to Closing
and attached as Exhibit D hereto.
(j) Transfer of IHC Shares. SVM shall have transferred to Holdco (i)
----------------------
the IHC Shares and (ii) all rights and obligations under the IHC Shareholders'
Agreement (except to the extent not required pursuant to Section 7.14(b)).
Section 8.3 Conditions to the Obligations of the Sellers and RMS. The
----------------------------------------------------
obligations of the Sellers and RMS to effect the Closing is subject to the
satisfaction (or waiver by the Sellers and RMS) on or prior to the Closing, of
the following conditions:
(a) Representations and Warranties. The representations and
------------------------------
warranties of Purchaser contained herein shall have been true and correct in all
material respects when made
46
<PAGE>
and shall be true and correct in all material respects as of the Closing, as if
made as of the Closing.
(b) Covenants. Purchaser shall have performed in all respects the
---------
covenants and obligations required to be performed by it at or prior to the
Closing.
(c) Certificate. Purchaser shall have furnished Sellers and RMS with
-----------
a certificate dated the Closing Date, signed on its behalf by an authorized
signatory of Purchaser, to the effect that the conditions set forth in Sections
8.3(a) and (b) have been satisfied.
(d) Employment, Confidentiality and Unfair Competition Agreements.
-------------------------------------------------------------
The Employment, Confidentiality and Unfair Competition Agreements shall have
been executed and delivered by the parties thereto.
(e) Legal Opinion of Purchaser's Counsel. Purchaser shall have
------------------------------------
furnished an opinion of Hogan & Hartson L.L.P., counsel to Purchasers, in a form
to be mutually agreed upon by the parties hereto prior to Closing and attached
as Exhibit E hereto.
ARTICLE IX
SURVIVAL AND INDEMNIFICATION
Section 9.1 Survival of Representations and Warranties. Each of the
------------------------------------------
representations and warranties made by Purchaser in this Agreement shall
terminate on the date which is 18 months from the Closing Date. Each of the
representations and warranties made by the Sellers and RMS in this Agreement
shall terminate on the date which is 18 months from the Closing Date; provided,
however, that (i) the representations and warranties contained in Sections 4.11,
4.12, 4.16 and 5.8 shall survive the Closing until 90 days following the
expiration of the applicable statute of limitations and (ii) the representations
and warranties contained in Sections 4.13 and 5.9 shall survive the Closing
until the sixth anniversary of the Closing Date. In the event notice of any
claim for indemnification under Section 9.2(a) hereof shall have been given
within the applicable survival period, the representations and warranties that
are the subject of such indemnification claim shall survive until such time as
such claim is finally resolved. The covenants and agreements of the parties set
forth in this Agreement and the indemnification obligations of the parties
hereunder shall survive indefinitely except as expressly provided herein.
Section 9.2 Indemnification by Roy M Speer and RMS.
--------------------------------------
(a) Subject to the other provisions of this Article IX, Roy M. Speer
and RMS shall jointly and severally indemnify, defend and hold harmless
Purchaser Indemnified Parties from and against any and all costs, expenses,
losses, damages and liabilities (including reasonable attorneys' fees and
expenses) ("Damages") suffered by any of Purchaser Indemnified Parties to the
extent resulting from, arising out of, or incurred with respect to, or (in the
case of claims asserted against any of Purchaser Indemnified Parties by a third
party) alleged to result from, arise out of or have been incurred with respect
to, (i) any breach of or inaccuracy in any representation or warranty as of the
date made or as of the Closing Date of any of the Sellers or
47
<PAGE>
RMS contained in this Agreement, (ii) any breach of any covenant of any of the
Sellers or RMS contained in this Agreement, (iii) all Litigation relating to the
Assets and the operations of the Business prior to the Closing and (iv) any and
all Damages resulting directly or indirectly from any of the Speer/PSI
Agreements.
(b) In no event shall Roy M. Speer or RMS be liable to the Purchaser
Indemnified Parties with respect to any breaches of representations and
warranties unless the aggregate Damages therefrom exceed $350,000, and then only
to the extent the Damages exceed $350,000. In no event shall the aggregate
liability of the Roy M. Speer and RMS for Damages resulting from breaches of the
representations and warranties set forth in Articles IV or V exceed $50,000,000.
Section 9.3 Indemnification by Purchaser.
----------------------------
(a) Subject to the other provisions of this Article VIII, Purchaser
shall indemnify, defend and hold harmless the Seller Indemnified Parties from
and against any and all Damages suffered by any of the Seller Indemnified
Parties to the extent resulting from, arising out of, or incurred with respect
to, or (in the case of claims asserted against any of the Seller Indemnified
Parties by a third party) alleged to result from, arise out of or have been
incurred with respect to, (i) any breach of or inaccuracy in any representation
or warranty as of the date made or as of the Closing Date of Purchaser contained
in this Agreement, (ii) any breach of any covenant of any of Purchaser contained
in this Agreement, (iii) all litigation relating to the operation of the Assets
and the Business subsequent to Closing, and (iv) all Damages relating to any
transaction between PSI and Purchaser.
(b) In no event shall Purchaser be liable to the Seller Indemnified
Parties with respect to any breaches of representations and warranties unless
the aggregate Damages therefrom exceed $350,000, and then only to the extent the
Damages exceed $350,000. In no event shall the aggregate liability of Purchaser
for Damages resulting from breaches of the representations and warranties set
forth in Article VI exceed $50,000,000.
Section 9.4 Notice and Resolution of Claim.
------------------------------
(a) An indemnified party under this Agreement shall promptly give
written notice to the indemnifying party after obtaining knowledge of any third
party claim or litigation against the indemnified party as to which recovery may
be sought against the indemnifying party because of the indemnity set forth in
Sections 9.2 and 9.3, specifying in reasonable detail the claim or litigation
and the basis for indemnification; provided, however, that the failure of the
indemnified party promptly to notify the indemnifying party of any such matter
shall not release the indemnifying party, in whole or in part, from its
obligations under this Article VIII except to the extent the indemnified party's
failure to so notify in breach of this Section 9.4(a) materially prejudices the
indemnifying party's ability to defend against such third party claim or
litigation. The indemnified party shall permit the indemnifying party to assume
the defense of any such claim, litigation or any litigation resulting from such
third party claim.
48
<PAGE>
(b) If the indemnifying party assumes the defense of any such third
party claim or litigation, the obligations of the indemnifying party under this
Agreement shall include taking all steps necessary in the investigation, defense
or settlement of such claim or litigation (including the retention of legal
counsel) and holding the indemnified party harmless from and against any and all
losses caused by or arising out of any settlement approved by the indemnifying
party or any judgment in connection with such claim or litigation. The
indemnifying party shall not, in the defense of such claim or litigation,
consent to entry of any judgment (except with the written consent of the
indemnified party) or enter into any settlement (except with the written consent
of the indemnified party): (i) that does not include as an unconditional term
thereof the giving by the claimant or the plaintiff to the indemnified party a
complete release from, all liability in respect of such claim or litigation, or
(ii) the effect of which is to permit any injunction, declaratory judgment,
other order or other equitable relief to be entered, directly or indirectly,
against any indemnified party. The indemnifying party shall permit the
indemnified party to participate in such defense or settlement through counsel
chosen by the indemnified party, with the fees and expenses of such counsel
borne by the indemnified party.
(c) Failure by the indemnifying party to notify the indemnified party
of its election to assume the defense of any such claim or litigation by a third
party within 30 days after notice thereof has been given to the indemnifying
party shall be deemed a waiver by the indemnifying party of its right to assume
the defense of such claim or litigation. If the indemnifying party does not
assume the defense of such claim or litigation by a third party, the indemnified
party may defend or settle such clam or litigation in such matter as the
indemnified party may deem appropriate and may settle such claim or litigation
on such terms as it may deem appropriate.
ARTICLE X
TERMINATION
Section 10.1 Termination. This Agreement may be terminated at any time
-----------
prior to Closing:
(i) by written agreement of Purchaser and each of the Sellers;
(ii) by the Sellers or Purchaser, by giving written notice of such
termination to the other party, if the Closing shall not have occurred on
or prior to March 15, 1999; provided, however, that the right to terminate
this Agreement under this Section 10.1 shall not be available to any party
whose failure to perform any material covenant or obligation under this
Agreement has been the cause of or resulted in the failure of the Closing
to occur on or before such date;
(iii) by Purchaser at any time prior to Closing if the value of all
assets net of liabilities ("Net Assets") as reflected on the Closing
Balance Sheet is at least $1,000,000 lower than Net Assets as reflected on
the Interim Balance Sheet;
49
<PAGE>
(iv) by either Purchaser or the Sellers by giving written notice of
termination to the other party, if there shall have been a material breach
of any of the covenants or agreements or any of the representations or
warranties set forth in this Agreement on the part of the other party,
which breach is not cured within ten days following written notice given by
the terminating party to the party committing such breach, or which breach,
by its nature, cannot be cured prior to the Closing; provided, however,
that the right to terminate this Agreement under this Section 10.1 shall
not be available if at the time the terminating party is in material breach
of any representation, warranty, covenant or other agreement contained
herein; or
(v) by either Purchaser or the Sellers by written notice of
termination to the other party if any Governmental Authority of competent
jurisdiction shall have issued any statute, rule, regulation, order, decree
or injunction or taken any other action permanently restraining, enjoining
or otherwise prohibiting the transactions contemplated by this Agreement,
and such statute, rule, regulation, order, decree or injunction or other
action shall have become final.
Section 10.2 Effect of Termination. In the event of the termination of
---------------------
this Agreement in accordance with Section 10.1 hereof, this Agreement shall
thereafter become void and have no effect, and no party thereto shall have any
liability to any other party hereto or any of its respective Affiliates,
officers or employees, except for the obligations of the parties hereto
contained in this Section 10.2 and in Sections 11.1, 11.5, 11.6 and 11.8 hereof,
and provided that nothing contained in this Section 10.2 shall relieve any party
from liability for a breach of any provision of this Agreement.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Notices. All notices or other communications hereunder
-------
shall be deemed to have been duly given and made if in writing and if served by
personal delivery upon the party for whom it is intended, if delivered by
registered or certified mail, return receipt requested, or by a national courier
service, or if sent by facsimile, provided, however, that the facsimile is
promptly followed by telephone confirmation thereof to the appropriate person at
the address set forth below, or at such other address as may be designated in
writing hereafter, in the same manner, by such person.
To the Sellers:
Speer Communications Holdings Limited Partnership
3201 Dickerson Pike
Nashville, Tennessee 37207
Telephone: (615) 650-6000
Facsimile: (615) 650-6292
Attention: Roy M. Speer
50
<PAGE>
with a copy to:
Baker & McKenzie
815 Connecticut Avenue, N.W.
Washington, D.C. 20006-4078
Telephone: (202) 452-7000
Facsimile: (202) 452-7074
Attention: Thomas J. Egan, Jr.
To Purchaser:
Anschutz Digital Media, Inc.
555 17th Street, Suite 2400
Denver, Colorado 80202
Telephone: (303) 298-1000
Facsimile: (303) 298-8881
Attention: Craig Slater
with a copy to:
Hogan & Hartson L.L.P.
One Tabor Center
1200 17th Street, Suite 1500
Denver, Colorado 80202
Telephone: (303) 899-7300
Facsimile: (303) 899-7333
Attention: Steven A. Cohen
Any such notice shall be deemed delivered (a) on the date delivered if by
personal delivery, (b) on the date upon which the return receipt is signed or
delivery is refused or the notice is designed by the postal authorities as a not
deliverable, as the case may be, if mailed by registered or certified mail, (c)
on the next succeeding business day if sent by national courier service, or (d)
on the date telecommunicated if by telecopier if confirmed by telephone
confirmation.
Section 11.2 Amendment, Waiver. Any provision of this Agreement may be
-----------------
amended or waived if, and only if such amendment or waiver is in writing and
signed, in the case of an amendment, by Purchaser and each Seller, or in the
case of a waiver, by the party against whom the waiver is to be effective. No
failure or delay by any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege.
Section 11.3 Assignment. No party to this Agreement may assign any of
----------
its rights or obligations under this Agreement without the prior written consent
of the other parties hereto;
51
<PAGE>
provided that Purchaser may assign any of its rights and obligations hereunder
in whole or in part to any of its respective Affiliates without obtaining the
consent of the other parties hereto.
Section 11.4 Entire Agreement. This Agreement (including all Exhibits
----------------
and Schedules hereto) contains the entire agreement between the parties hereto
with respect to the subject matter hereof and supersedes all prior agreements
and understandings, oral or written, with respect to such matters (including
without limitation the letter agreement dated January 29, 1999 among Purchaser
and the Sellers).
Section 11.5 Parties in Interest. This Agreement shall inure to the
-------------------
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Nothing in this Agreement, express or
implied, is intended to confer upon any Person other than Purchaser, the Sellers
or their successors or permitted assigns, any rights or remedies under or by
reason of this Agreement.
Section 11.6 Expense. All costs and expenses incurred by Purchaser in
-------
connection with this Agreement and the transactions contemplated hereby,
including costs associated with a confidential filing under the HSR Act, shall
be borne by Purchaser, and all costs and expenses incurred by the Sellers in
connection with this Agreement and the transactions contemplated hereby shall be
borne by the Sellers.
Section 11.7 Governing Law; Jurisdiction; Service of Process. This
-----------------------------------------------
Agreement shall be governed by the laws of the State of Colorado, its rules of
conflict of laws notwithstanding. Purchaser, the Sellers hereby agree and
consent to be subject to the non-exclusive jurisdiction of the federal and state
courts of the State of Colorado in any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in connection
with, this Agreement or the transactions contemplated hereby. Each party hereby
irrevocably consents to the service of any and all process in any such suit,
action or proceeding by the delivery of such process to such party at the
address and in the manner provided in Section 11.1
Section 11.8 Specific Performance. The parties hereto agree that if
--------------------
any of the provisions of this Agreement are not performed in accordance with
their specific terms or are otherwise breached, irreparable damage would occur,
no adequate remedy at law would exist and damages would be difficult to
determine, and that the parties shall be entitled to specific performance of the
terms hereof, in addition to any other remedy at law or equity.
Section 11.9 Transfer and Similar Taxes. Notwithstanding any other
--------------------------
provision of this Agreement to the contrary, (a) the Sellers shall assume and
promptly pay when due all sales, property, use, privilege, transfer,
documentary, gains, stamp, duties, recording and similar Taxes and fees
(including any penalties, interest or additions) imposed upon any party incurred
in connection with the transactions contemplated by this Agreement, (b) RMS and
Purchaser shall pay on a pro rata basis (based on the transfer of ownership at
Closing) the property taxes, utilities and insurance premiums owed or owing with
respect to the Owned Real Property, (c) Purchaser shall pay the costs of
recording the Warranty Deed and the transfer taxes assessed thereon pursuant to
T.C.A. Section 67-4-409 and (d) Purchaser shall pay any transfer or sales tax
and related costs associated with the transfer and title renewal of any motor
vehicles.
52
<PAGE>
Section 11.10 Headings. The heading references herein and in the table
--------
of contents hereto are for convenience purposes only, do not constitute a part
of this Agreement, and shall not be deemed to limit or affect any of the
provisions hereof.
[SIGNATURE PAGES FOLLOW]
53
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties have executed or caused this Agreement to
be executed as of the date first written above.
ANSCHUTZ DIGITAL MEDIA, INC.
By: /s/ Craig D. Slater
-----------------------------------------------
Name: Craig D. Slater
---------------------------------------------
Title: Vice President
--------------------------------------------
SPEER COMMUNICATIONS HOLDINGS
LIMITED PARTNERSHIP
By: Holdings Investments, Inc.
General Partner
By: /s/ Roy M. Speer
-----------------------------------------
Roy M. Speer
President
SPEER VIRTUAL MEDIA
LIMITED PARTNERSHIP
By: Magnatone Entertainment Group, Inc.
General Partner
By: /s/ Roy M. Speer
-----------------------------------------
Roy M. Speer
President
SPEER WORLD WIDE DIGITAL
TRANSMISSION & VAULTING
LIMITED PARTNERSHIP
By: Speer World Wide, Inc.
General Partner
By: /s/ Roy M. Speer
-----------------------------------------
Roy M. Speer
President
Signature Page 1 of 2
<PAGE>
SPEER PRODUCTIONS
LIMITED PARTNERSHIP
By: Dickerson Communications, Inc.
General Partner
By: /s/ Roy M. Speer
-----------------------------------------
Roy M. Speer
President
PROFESSIONAL VIDEO
SERVICES CORPORATION
By: /s/ Roy M. Speer
-----------------------------------------------
Name: Roy M. Speer
---------------------------------------------
Title: President
--------------------------------------------
ENHANCED SERVICES OF NEVADA, INC.
By: /s/ Roy M. Speer
-----------------------------------------------
Roy M. Speer
President
RMS LIMITED PARTNERSHIP
By: Crystal Diamond, Inc.
General Partner
By: /s/ C. Thomas Burton, Jr.
-----------------------------------------
C. Thomas Burton, Jr.
President
/s/ Roy M. Speer
--------------------------------------------------
Roy M. Speer
(as to Articles IX and XI only)
Signature Page 2 of 2
<PAGE>
FIRST AMENDMENT TO
ASSET PURCHASE AGREEMENT
by and among
ANSCHUTZ DIGITAL MEDIA, INC.
as Purchaser,
Speer Communications Holdings Limited Partnership
Speer Communications Holdings i Limited Partnership
Speer Virtual Media Limited Partnership
Speer World Wide Digital Limited Partnership
Speer Productions Limited Partnership
Professional Video Services CORPORATION
ENHANCED SERVICES OF NEVADA, INC.
and
SPEER COMMUNICATIONS VIRTUAL MEDIA, INC.
as Sellers
and
RMS Limited Partnership
and
Roy M. Speer
Dated as of March 16, 1999
<PAGE>
FIRST AMENDMENT TO
ASSET PURCHASE AGREEMENT
This FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT, dated as of March 16,
1999 (this "Amendment"), by and among Anschutz Digital Media, Inc., a Colorado
corporation ("Purchaser"), Speer Communications Holdings Limited Partnership, a
Nevada limited partnership, Speer Communications Holdings I Limited Partnership,
a Nevada limited partnership, Speer Virtual Media Limited Partnership, a Nevada
limited partnership, Speer World Wide Digital Limited Partnership, a Nevada
limited partnership, Speer Productions Limited Partnership, a Nevada limited
partnership, Professional Video Services Corporation, a District of Columbia
corporation, Enhanced Services of Nevada, Inc., a Nevada corporation, and Speer
Communications Virtual Media, Inc., a Delaware corporation (each a "Seller" and
collectively the "Sellers"), RMS Limited Partnership, a Nevada limited
partnership, and Roy M. Speer (as to Articles IX and XI only).
RECITALS
A. The Purchaser, the Sellers (other than Speer Communications
Holdings I Limited Partnership ("Speer I LP") and Speer Communications Virtual
Media, Inc. ("SCVM")), RMS Limited Partnership and Roy M. Speer entered into an
Asset Purchase Agreement dated as of February 16, 1999 (the "Purchase
Agreement").
B. The parties thereto wish to amend the Purchase Agreement in
accordance with Section 11.2 thereof in order to: (i) include Speer I LP and
SCVM as Sellers thereunder; (ii) include the Satellite Uplinks (as defined) as
Assets thereunder; (iii) to amend certain schedules thereto; and (iv) to modify
certain closing conditions and deliverables.
C. Capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in the Purchase Agreement.
AGREEMENT
NOW THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto amend the Purchase Agreement as follows:
1. Speer I LP holds licenses to use and uses certain satellite uplink
facilities, such licenses being more specifically identified on Exhibit A hereto
(the "Satellite Uplink Licenses"), in the operation of the Business. The
parties hereby agree that the Satellite Uplink Licenses shall be and hereby are
deemed "Assets" under the Purchase Agreement. The parties further agree that
Speer I LP shall be and hereby is deemed a "Seller" under the Purchase Agreement
with respect to the Satellite Uplink Licenses, but that the remainder of the
assets of Speer I LP shall be deemed "Excluded Assets" thereunder. As such,
Speer I LP will be deemed to make and hereby makes the representations and
warranties as a Seller contained in the Purchase Agreement, and
<PAGE>
will be deemed to make and hereby makes such other covenants and agreements of
the Sellers thereunder.
2. SCVM holds, has applied for or is in the process of applying for
those certain Regulatory Licenses being more specifically identified on Exhibit
B hereto (the "SCVM Licenses") in the operation of the Business. To the extent
that SCVM does not hold the SCVM Licenses, the Sellers hereby represent and
warrant that such licenses are held by SVM. The parties hereby agree that the
SCVM Licenses shall be and hereby are deemed "Assets" under the Purchase
Agreement. The parties further agree that SCVM shall be and hereby is deemed a
"Seller" under the Purchase Agreement with respect to the SCVM Licenses, but
that the remainder of the assets of SCVM shall be deemed "Excluded Assets"
thereunder. As such, SCVM will be deemed to make and hereby makes the
representations and warranties as a Seller contained in the Purchase Agreement,
and will be deemed to make and hereby makes such other covenants and agreements
of the Sellers thereunder.
3. The following Schedules are attached hereto and each Schedule
replaces in its entirety the Schedule with the same number attached to the
Purchase Agreement:
(a) Schedule 2.1(a)(ii);
(b) Schedule 2.1(a)(ii)(A);
(c) Schedule 2.1(a)(iv);
(d) Schedule 2.1(c);
(e) Schedule 2.2;
(f) Schedule 4.2(a)(i);
(g) Schedule 4.8;
(h) Schedule 4.9(b);
(i) Schedule 4.9(e);
(j) Schedule 4.9(g);
(k) Schedule 4.10(b);
(l) Schedule 4.19;
(m) Schedule 4.25; and
(n) Schedule 7.8.
4. The parties hereby agree to waive the requirements contained in
Sections 3.1(e), 3.6(d), 8.2(g) and 8.3(d) that the Employment, Confidentiality
and Unfair Competition Agreements be executed and delivered at or prior to
Closing.
5. Section 4.3 of the Purchase Agreement is amended and restated in
its entirety to reflect the correct capitalization of IHC as follows:
"Section 4.3 Capitalization. As of the date hereof, SVM holds
--------------
665,421 shares of Series B Preferred Stock of IHC. To the Knowledge of Sellers,
the authorized capital stock of IHC consists of:
(a) 6,000,000 shares of common stock, of which:
2
<PAGE>
(i) 1,722,838 shares are issued and outstanding;
(ii) 591,716 shares are reserved for issuance upon conversion of
IHC's Series A Preferred Shares;
(iii) 665,421 shares are reserved for issuance upon conversion
of IHC's Series B Preferred Shares;
(iv) 1,338,650 shares (the "Option Shares") are reserved for
issuance pursuant to IHC's 1994 Stock Option Plan, 1995 Stock Option Plan
and 1996 Stock Option Plan; and
(v) 1,168,449 shares shall are reserved for issuance upon the
exercise of the certain warrants.
(b) 1,257,137 shares of Preferred Stock, of which:
(i) 591,716 shares are designated Series A Preferred Stock, all
of which are issued and outstanding; and
(ii) 665,421 shares are designated Series B Preferred Stock, all
of which are issued and outstanding.
To the Knowledge of Sellers, all of the issued and outstanding shares of capital
stock of IHC and PSI held by the Sellers have been duly authorized and validly
issued, are fully paid and nonassessable and were issued in compliance with all
applicable state and federal securities laws. Except as set forth herein or on
Schedule 4.3 or as contemplated by this Agreement and to the Knowledge of
Sellers, (x) no subscription, warrant, option, convertible security or other
right (contingent or otherwise) to purchase or acquire any shares of capital
stock of IHC is authorized or outstanding, (y) IHC does not have any obligation
(contingent or otherwise) to issue any subscription, warrant, option,
convertible security or other such right or to issue or distribute to holders of
any shares of its capital stock any evidence of indebtedness or assets of IHC,
and (z) IHC does not have any obligation (contingent or otherwise) to purchase,
redeem or otherwise acquire any shares of its capital stock or any interest
therein or to pay any dividend or make any other distribution in respect
thereof."
6. Other than the amendments and modifications specifically contained
herein, the Purchase Agreement remains in full force and effect.
[SIGNATURE PAGES FOLLOW]
3
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties have executed or caused this Amendment to
be executed as of the date first written above.
ANSCHUTZ DIGITAL MEDIA, INC.
By: /s/ Craig D. Slater
-----------------------------------------------
Name: Craig D. Slater
---------------------------------------------
Title: Vice President
--------------------------------------------
SPEER COMMUNICATIONS HOLDINGS
LIMITED PARTNERSHIP
By: Holdings Investments, Inc.
General Partner
By: /s/ Roy M. Speer
------------------------------------------
Roy M. Speer
President
SPEER COMMUNICATIONS HOLDINGS I
LIMITED PARTNERSHIP
By: Holdings Investments, Inc.
General Partner
By: /s/ Roy M. Speer
------------------------------------------
Roy M. Speer
President
SPEER VIRTUAL MEDIA
LIMITED PARTNERSHIP
By: Magnatone Entertainment Group, Inc.
General Partner
By: /s/ Roy M. Speer
-----------------------------------------
Roy M. Speer
President
4
<PAGE>
SPEER WORLD WIDE DIGITAL
TRANSMISSION & VAULTING
LIMITED PARTNERSHIP
By: Speer World Wide, Inc.
General Partner
By: /s/ Roy M. Speer
-----------------------------------------
Roy M. Speer
President
SPEER PRODUCTIONS
LIMITED PARTNERSHIP
By: Dickerson Communications, Inc.
General Partner
By: /s/ Roy M. Speer
-----------------------------------------
Roy M. Speer
President
PROFESSIONAL VIDEO
SERVICES CORPORATION
By: /s/ Roy M. Speer
-----------------------------------------------
Name: Roy M. Speer
---------------------------------------------
Title: President
--------------------------------------------
ENHANCED SERVICES OF NEVADA, INC.
By: /s/ Roy M. Speer
-----------------------------------------------
Roy M. Speer
President
SPEER COMMUNICATIONS
VIRTUAL MEDIA, INC.
By: /s/ Roy M. Speer
-----------------------------------------------
Name: Roy M. Speer
---------------------------------------------
Title: President
--------------------------------------------
5
<PAGE>
RMS LIMITED PARTNERSHIP
By: Crystal Diamond, Inc.
General Partner
By: /s/ C. Thomas Burton, Jr.
------------------------------------------
C. Thomas Burton, Jr.
President
/s/ Roy M. Speer
--------------------------------------------------
Roy M. Speer
6
<PAGE>
EXHIBIT 99.2
AGREEMENT AND PLAN OF MERGER
among
ANSCHUTZ DIGITAL MEDIA, INC.,
PS ACQUISITIONS, INC.
and
PRECISION SYSTEMS, INC.
Dated as of March 15, 1999
1
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I THE MERGER................................................... 1
Section 1.1 The Merger.............................................. 1
----------
Section 1.2 Closing................................................. 1
-------
Section 1.3 Effective Time.......................................... 1
--------------
Section 1.4 Effects of the Merger................................... 2
---------------------
Section 1.5 Certificate of Incorporation and Bylaws................. 2
---------------------------------------
Section 1.6 Directors; Officers..................................... 2
-------------------
ARTICLE II EFFECT OF THE MERGER ON THE STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES.............................. 2
Section 2.1 Conversion of Securities................................ 2
------------------------
Section 2.2 Exchange of Certificates................................ 4
------------------------
Section 2.3 Stock Transfer Books.................................... 6
--------------------
Section 2.4 Appraisal Rights........................................ 6
----------------
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............. 6
Section 3.1 Organization, Qualification, Etc........................ 6
---------------------------------
Section 3.2 Capital Stock........................................... 7
--------------
Section 3.3 Corporate Authority; No Violation....................... 8
---------------------------------
Section 3.4 Reports and Financial Statements....................... 9
--------------------------------
Section 3.5 No Undisclosed Liabilities.............................. 9
--------------------------
Section 3.6 Compliance with Laws.................................... 9
--------------------
Section 3.7 Environmental Laws......................................10
------------------
Section 3.8 Employee Benefit Plans..................................12
----------------------
Section 3.9 Absence of Certain Changes or Events....................14
------------------------------------
Section 3.10 Litigation.............................................14
----------
Section 3.11 Contracts..............................................14
---------
Section 3.12 Labor Matters..........................................14
-------------
Section 3.13 Tax Matters............................................15
-----------
Section 3.14 Opinion of Financial Advisor...........................16
----------------------------
Section 3.15 Takeover Laws..........................................16
-------------
Section 3.16 Required Vote of the Company Shareholders..............16
-----------------------------------------
Section 3.17 Finders or Brokers.....................................17
------------------
Section 3.18 Related Party Transactions.............................17
--------------------------
Section 3.19 Year 2000..............................................17
---------
Section 3.20 Telecom Licenses; Operations of Licensed Facilities....17
---------------------------------------------------
Section 3.21 Information Supplied...................................17
--------------------
Section 3.22 Property...............................................17
--------
i
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGERSUB......18
Section 4.1 Organization, Qualification, Etc........................18
---------------------------------
Section 4.2 Corporate Authority; No Violation.......................19
---------------------------------
Section 4.3 Finders or Brokers......................................19
------------------
Section 4.4 Financing...............................................20
---------
ARTICLE V COVENANTS AND AGREEMENTS.....................................20
Section 5.1 Conduct of Business by the Company......................20
----------------------------------
Section 5.2 Investigation...........................................22
-------------
Section 5.3 Stockholder Approval; Filings...........................22
-----------------------------
Section 5.4 Additional Reports......................................23
------------------
Section 5.5 Reasonable Best Efforts.................................23
-----------------------
Section 5.6 Takeover Statutes.......................................24
-----------------
Section 5.7 No Solicitation.........................................24
---------------
Section 5.8 Public Announcements....................................25
--------------------
Section 5.9 Indemnification and Insurance...........................26
-----------------------------
Section 5.10 Notification of Certain Matters........................26
-------------------------------
Section 5.11 Employee Plans and Benefit Arrangements................27
---------------------------------------
Section 5.12 Speer Financing........................................27
---------------
Section 5.13 Delivery of Final Audited Financials...................28
Section 5.14 Modification of Merger Structure.......................28
ARTICLE VI CONDITIONS TO THE MERGER....................................28
Section 6.1 Conditions to Each Party's Obligation to Effect
-----------------------------------------------
the Merger..............................................28
-----------
Section 6.2 Conditions to Obligations of the Company to Effect
---------------------------------------------------
the Merger..............................................29
----------
Section 6.3 Conditions to Obligations of Parent to Effect
----------------------------------------------
the Merger..............................................29
----------
ARTICLE VII TERMINATION, WAIVER, AMENDMENT AND CLOSING.................30
Section 7.1 Termination or Abandonment..............................30
--------------------------
Section 7.2 Effect of Termination...................................31
---------------------
Section 7.3 Termination Payments....................................31
--------------------
ARTICLE VIII MISCELLANEOUS.............................................33
Section 8.1 No Survival of Representations and Warranties...........33
---------------------------------------------
Section 8.2 Expenses................................................33
--------
Section 8.3 Counterparts; Effectiveness.............................33
---------------------------
Section 8.4 Governing Law...........................................34
-------------
Section 8.5 Notices.................................................34
-------
Section 8.6 Assignment; Binding Effect..............................35
--------------------------
Section 8.7 Severability............................................35
------------
Section 8.8 Enforcement of Agreement................................35
------------------------
Section 8.9 Miscellaneous...........................................35
-------------
Section 8.10 Headings...............................................36
--------
Section 8.11 Certain Definitions....................................36
-------------------
ii
<PAGE>
Section 8.12 Knowledge..............................................36
---------
iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of March 15, 1999 (this
"Agreement"), is among Anschutz Digital Media, Inc., a Colorado corporation
("Parent"), PS Acquisitions, Inc., a Delaware corporation ("MergerSub"), and
Precision Systems, Inc., a Delaware corporation (the "Company").
WHEREAS, the respective Boards of Directors of Parent, MergerSub and the
Company have approved and have declared advisable the merger of the Company with
and into MergerSub (the "Merger"), upon the terms and subject to the conditions
set forth herein, and have determined that the Merger and the other transactions
contemplated hereby are in the best interests of their respective companies and
shareholders; and
WHEREAS, the parties desire to make certain representations, warranties,
covenants and agreements in connection with the Merger and also to prescribe
various conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained in this Agreement, the parties hereby agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions
----------
set forth in this Agreement, and in accordance with the Delaware General
Corporation Law (the "DGCL"), the Company shall be merged with and into
MergerSub at the Effective Time (as defined in Section 1.3). Following the
Effective Time, the separate corporate existence of the Company shall cease and
MergerSub shall be the surviving corporation (the "Surviving Corporation") and
shall succeed to and assume all the rights and obligations of the Company in
accordance with the DGCL.
Section 1.2 Closing. The closing of the Merger (the "Closing") will
-------
take place at 10:00 a.m., local time, at the offices of Hogan & Hartson L.L.P.,
1200 Seventeenth Street, Suite 1500, Denver, Colorado on a date to be specified
by the parties (the "Closing Date"), which shall be no later than the third
business day after the first date that all of the conditions set forth in
Sections 6.1(a) through (d) have been satisfied or waived, unless another place,
time or date is agreed to by the parties hereto.
Section 1.3 Effective Time. Subject to the provisions of this
--------------
Agreement, as soon as practicable on or after the Closing Date, the parties (i)
shall file with the Secretary of State for the State of Delaware (the "Delaware
Secretary of State") a certificate of merger or other appropriate documents (in
any such case, the "Certificate of Merger") executed in accordance with the
relevant provisions of the DGCL and (ii) shall make all other filings or
recordings required under the DGCL to effect the Merger. The Merger shall
become effective at the time of the filing of the Certificate of Merger with the
Delaware Secretary of State in accordance with the DGCL, or at such subsequent
date or time as Parent and the Company shall agree and specify in the
1
<PAGE>
Delaware Certificate of Merger (the time the Merger becomes effective being
hereinafter referred to as the "Effective Time").
Section 1.4 Effects of the Merger. The Merger shall have the effects
---------------------
set forth in Section 259 of the DGCL.
Section 1.5 Certificate of Incorporation and Bylaws.
---------------------------------------
(a) The certificate of incorporation of MergerSub, in the form
attached hereto as Exhibit A, shall be the certificate of incorporation of the
Surviving Corporation until thereafter changed or amended.
(b) The bylaws of MergerSub, as in effect immediately prior to the
Effective Time, which shall contain indemnification provisions no less favorable
to directors and officers of the Company than the corresponding provisions in
the Company's bylaws as of the date hereof, until thereafter changed or amended,
shall be the bylaws of the Surviving Corporation.
Section 1.6 Directors; Officers. The directors and officers of
-------------------
MergerSub at the Effective Time shall be the directors and officers,
respectively, of the Surviving Corporation until their respective successors are
duly elected and qualified.
ARTICLE II
EFFECT OF THE MERGER ON THE STOCK
OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
Section 2.1 Conversion of Securities. At the Effective Time, by virtue
------------------------
of the Merger and without any action on the part of MergerSub, the Company or
the holders of any of the following securities:
(a) Each share of common stock of the Company, par value $0.01 per
share (each a "Common Share"), each share of Series A Preferred Stock of the
Company, par value $0.01 per share (each a "Series A Preferred Share"), and each
share of Series B Preferred Stock of the Company, par value $0.01 per share
(each "Series B Preferred Share" and, together with the Series A Preferred
Shares, the "Preferred Shares"), held in the treasury of the Company and each
such share or any warrant to obtain Common Shares of Company (the "Warrants")
owned by Parent or any direct or indirect wholly owned Subsidiary (as defined in
Section 8.11) of Parent or of the Company immediately prior to the Effective
Time shall be canceled and extinguished without any conversion thereof and no
payment shall be made with respect thereto.
(b) Each issued and outstanding share of common stock, par value $.01
per share, of MergerSub immediately prior to the Effective Time shall be
converted into one validly issued, fully paid and non-assessable share of common
stock of the Surviving Corporation, and the Surviving Corporation shall be a
wholly owned subsidiary of Parent.
2
<PAGE>
(c) Each Series A Preferred Share issued and outstanding immediately
prior to the Effective Time (other than those canceled pursuant to Section
2.1(a)) shall be converted into the right to receive $580.00 per share plus all
accumulated but unpaid dividends and any accrued interest on such unpaid
dividends up to (but not beyond) the Effective Time (the "Series A
Consideration"). All such Series A Preferred Shares shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each stock certificate previously evidencing Series A Preferred
Shares ("Series A Stock Certificates") immediately prior to the Effective Time
shall thereafter represent the right to receive the Series A Consideration in
accordance with this Article II. The holders of Series A Stock Certificates
shall cease to have any rights with respect to the Series A Preferred Shares
evidenced thereby except as otherwise provided herein or by Law (as defined in
Section 3.6).
(d) Each Series B Preferred Share issued and outstanding immediately
prior to the Effective Time (other than those canceled pursuant to Section
2.1(a)) shall be converted into the right to receive $1,000.00 per share plus
all accumulated but unpaid dividends and any accrued interest on such unpaid
dividends up to (but not beyond) the Effective Time (the "Series B
Consideration"). All such Series B Preferred Shares shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each stock certificate previously evidencing Series B Preferred
Shares ("Series B Stock Certificates") immediately prior to the Effective Time
shall thereafter represent the right to receive the Series B Consideration in
accordance with this Article II. The holders of Series B Stock Certificates
shall cease to have any rights with respect to Series B Preferred Shares
evidenced thereby except as otherwise provided herein or by Law.
(e) Subject to the other provisions of this Section 2.1, each Common
Share that is issued and outstanding immediately prior to the Effective Time
(excluding any Common Shares canceled pursuant to Section 2.1(a)) shall be
converted into the right to receive $1.00 per share without interest (the "Per
Share Consideration"). All such Common Shares shall no longer be outstanding
and shall automatically be canceled and retired and shall cease to exist, and
each stock certificate previously evidencing Common Shares ("Common Stock
Certificates" and, together with Series A Certificates and Series B
Certificates, "Stock Certificates") immediately prior to the Effective Time
shall thereafter represent the right to receive the Per Share Consideration in
accordance with this Article II. The holders of Common Stock Certificates shall
cease to have any rights with respect to the Common Shares evidenced thereby
except as otherwise provided herein or by Law.
(f) Any outstanding Warrants and any outstanding options to acquire
Common Shares granted to directors or employees of the Company under the Company
Compensation and Benefit Plans (the "Options") shall be canceled prior to the
Effective Time and, in lieu thereof, as soon as reasonably practicable as of or
after the Effective Time, the holders of such Warrants or Options shall receive
a cash payment from Parent equal to the product of (i) the total number of
Common Shares previously subject to such Warrant or Option (ii) the excess of
the Per Share Consideration over the exercise price per Common Share subject to
such Warrants or Options.
3
<PAGE>
(g) A Letter of Transmittal (as defined in Section 2.2(b)) shall be
included with each copy of the Proxy Statement (as defined in Section 5.3(b))
mailed to shareholders of the Company in connection with the Company Meeting (as
defined in Section 5.3(a)). Parent and the Company shall each use its
reasonable best efforts to mail or otherwise make available a Letter of
Transmittal to all persons who become holders of Common Shares or Preferred
Shares (collectively, the "Shares") during the period between the record date
for the Company Meeting and the Company Meeting.
Section 2.2 Exchange of Certificates.
------------------------
(a) At or prior to the Effective Time, Parent shall deposit, or shall
cause to be deposited into an account (the "Exchange Fund") with the Norwest
Bank, N.A., or such other bank or trust company designated by Parent and which
is reasonably satisfactory to the Company (the "Exchange Agent") for the benefit
of the holders of Shares, through the Exchange Agent, cash in an amount equal to
the sum of (i) the number of Common Shares outstanding and not otherwise subject
to cancellation pursuant to Section 2.1(a) multiplied by the Per Share
Consideration, (ii) the number of Series A Preferred Shares outstanding and not
otherwise subject to cancellation pursuant to Section 2.1(a) multiplied by the
Series A Consideration and (iii) the number of Series B Preferred Shares
outstanding and not otherwise subject to cancellation pursuant to Section 2.1(a)
multiplied by the Series B Consideration (collectively, the "Merger
Consideration"). The Exchange Agent shall, pursuant to irrevocable instructions
in accordance with this Article II, deliver the cash contemplated to be
distributed out of the Exchange Fund pursuant to Section 2.1. The Exchange Fund
shall not be used for any other purpose. The Exchange Agent shall invest any
cash in the Exchange Fund, as directed by Parent, on a daily basis. Any
interest and other income resulting from such investments shall be paid to
Parent.
(b) Parent will instruct the Exchange Agent to mail to each holder of
record of Stock Certificates who has not previously surrendered his or her Stock
Certificates with a validly executed Letter of Transmittal as soon as reasonably
practicable after the Effective Time:
(i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to such holder's Stock
Certificates shall pass, only upon proper delivery of the Stock Certificates to
the Exchange Agent and shall be in such form and have such other provisions as
Parent may reasonably specify); and
(ii) instructions for use in effecting the surrender of the Stock
Certificates in exchange for cash (collectively, the "Letter of Transmittal").
(c) Upon the later of the Effective Time and the surrender of a Stock
Certificate for cancellation (or the affidavits and indemnification regarding
the loss or destruction of such certificates in accordance with Section 2.2(h))
to the Exchange Agent together with the Letter of Transmittal, duly executed,
and such other customary documents as may be required pursuant thereto, the
holder of such Stock Certificate shall be entitled to receive in exchange
therefor, and the Exchange Agent shall deliver in accordance with the Letter of
Transmittal that portion of the Merger Consideration related to such Stock
Certificate that such holder has the
4
<PAGE>
right to receive in respect of the Shares formerly evidenced by such Stock
Certificate in accordance with Section 2.1.
In the event of a transfer of ownership of Shares that is not
registered in the transfer records of the Company, a certificate evidencing cash
paid in accordance with this Article II to a transferee shall be issued if the
Stock Certificate evidencing such Shares is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer and
by evidence that any applicable stock transfer taxes have been paid.
(d) Until surrendered as contemplated by this Section 2.2, each Stock
Certificate shall be deemed at any time after the Effective Time to evidence
only the right to receive upon such surrender that portion of the Merger
Consideration related to such Stock Certificate.
(e) Any portion of the Exchange Fund which remains undistributed to
the holders of the Stock Certificates for six months after the Effective Time
shall be delivered to Parent, upon demand, and any holders of Stock Certificates
who have not theretofore complied with this Article II shall thereafter look
only to Parent for payment of their claim for the Merger Consideration.
(f) None of Parent, the Company, MergerSub or the Exchange Agent shall
be liable to any person in respect of any cash from the Exchange Fund in each
case delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law. If any Stock Certificate shall not have been
surrendered prior to seven years after the Effective Time (or immediately prior
to such earlier date on which any cash payable to the holder of such Stock
Certificate would otherwise escheat to or become the property of any
governmental body or authority), any Merger Consideration related to such Stock
Certificate shall, to the extent permitted by applicable Law, become the
property of the Surviving Corporation, free and clear of all claims or interest
of any person previously entitled thereto.
(g) Parent and MergerSub shall be entitled to deduct and withhold from
the consideration otherwise payable pursuant to this Agreement to any holder of
Shares such amounts as Parent or MergerSub is required to deduct and withhold
with respect to the making of such payment under the Code (as defined in Section
3.13) or any provision of state, local or foreign tax law. To the extent that
amounts are so withheld by Parent or MergerSub, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder of
the Shares in respect of which such deduction and withholding was made by Parent
or MergerSub.
(h) If any Stock Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Stock Certificate to be lost, stolen or destroyed and, if required by the
Parent, the posting by such person of a bond in such reasonable amount as the
Parent may direct as indemnity against any claim that may be made against it
with respect to such Stock Certificate, the Exchange Agent will issue in
exchange for such lost, stolen or destroyed Stock Certificate the applicable
portion of the Merger Consideration, pursuant to this Article II.
5
<PAGE>
(i) In the event this Agreement is terminated without the occurrence
of the Effective Time, Parent shall, or shall cause the Exchange Agent to,
return promptly any Stock Certificates theretofore submitted or delivered to
Parent or the Exchange Agent without charge to the person who submitted such
Stock Certificates.
Section 2.3 Stock Transfer Books. There shall be no further
--------------------
registration of transfers on the stock transfer books of the Surviving
Corporation of the Shares that were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Stock Certificates are presented
to the Surviving Corporation or the Exchange Agent for any reason, they shall be
canceled and exchanged as provided in this Article II, except as otherwise
provided by Law.
Section 2.4 Appraisal Rights. Notwithstanding Section 2.1, Shares which
----------------
are issued and outstanding immediately prior to the Effective Time and which are
held by a holder who has not voted such Shares in favor of the Merger, who shall
have delivered a written demand for relief as a dissenting shareholder in the
manner provided under Section 262 of the DGCL, and who, as of the Effective
Time, shall not have lost such right to relief as a dissenting shareholder shall
not be converted into a right to receive Merger Consideration. The holders
thereof shall be entitled only to such rights as are granted by Section 262 of
the DGCL.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and MergerSub that except as
set forth in the corresponding sections or subsections of the Disclosure
Schedule delivered to Parent by the Company concurrently with entering into this
Agreement (the "Company Disclosure Schedule"):
Section 3.1 Organization, Qualification, Etc.
--------------------------------
(a) The Company is a corporation duly organized, validly existing and
in good standing under the Laws (as defined in Section 3.6) of Delaware and has
the corporate power and authority to own its assets and to carry on its business
as it is now being conducted, and is duly qualified to do business and is in
good standing in each jurisdiction in which the ownership of its assets or the
conduct of its business requires such qualification, except for jurisdictions in
which such failure to be so qualified or to be in good standing does not,
individually or in the aggregate, have a Material Adverse Effect (as defined in
Section 3.1(b)) on the Company.
Copies of the Company's articles of organization and bylaws filed or
incorporated by reference in the Company's Annual Report on Form 10-K for the
year ended December 31, 1997 are complete and correct and in full force and
effect on the date hereof.
(b) Each of the Company's Subsidiaries is an entity duly organized,
validly existing and in good standing (where applicable) under the Laws of its
jurisdiction of incorporation or organization, has the corporate power and
authority to own its assets and to carry on its business as it is now being
conducted, and is duly qualified to do business and is in
6
<PAGE>
good standing in each jurisdiction in which the ownership of its assets or the
conduct of its business requires such qualification, except where the failure to
be so organized, existing, qualified or in good standing does not, individually
or in the aggregate, have a Material Adverse Effect on the Company. All the
outstanding shares of capital stock of, or other ownership interests in, the
Company's Subsidiaries are validly issued, fully paid and non-assessable and are
owned by the Company, directly or indirectly, free and clear of all liens,
claims, charges or encumbrances ("Encumbrances"), except for Encumbrances which
individually or in the aggregate do not have a Material Adverse Effect on the
Company. There are no existing options, rights of first refusal, conversion
rights, preemptive rights, calls, commitments, arrangements or obligations of
any character ("Share Arrangements") relating to the issued or unissued capital
stock or other securities of, or other ownership interests in, any Subsidiary of
the Company. None of the certificates of incorporation or bylaws or other
organizational documents of any of the Company's Subsidiaries purport to grant
rights to any person other than (1) customary rights given to all shareholders
pro rata in accordance with their holdings and (2) customary rights with respect
to corporate governance (including rights to notices) and rights of
indemnification of directors and officers. The Company has delivered to Parent
complete and correct copies of the certificate of incorporation and bylaws or
other organizational documents of each of the Company's Subsidiaries that is not
wholly owned by the Company and/or another of its wholly owned Subsidiaries.
A complete listing of the Company's Subsidiaries is set forth in
Section 3.1(b) of the Company Disclosure Schedule. Except for the Company's
Subsidiaries listed in Section 3.1(b) of the Company Disclosure Schedule, the
Company does not directly or indirectly own any equity or similar interest in,
or any interest convertible into or exchangeable or exercisable for any equity
or similar interest in, any corporation, partnership, joint venture or other
business association or entity.
As used in this Agreement, any reference to any state of facts, event,
change or effect having a "Material Adverse Effect" on or with respect to the
"Company" or "Parent," as the case may be, means such state of facts, event,
change or effect that
(i) has had, or would reasonably be expected to have, a material
adverse effect on the business, results of operations or financial condition of
the Company and its Subsidiaries, taken as a whole, or Parent and its
Subsidiaries, taken as a whole, as the case may be, or
(ii) would reasonably be expected to prevent or substantially delay
consummation of the transactions contemplated by this Agreement.
Section 3.2 Capital Stock. The authorized stock of the Company
-------------
consists of 30,000,000 Common Shares and 50,000 shares of non-redeemable
convertible preferred stock. As of March 15, 1999, 17,807,507 Common Shares
were issued and outstanding, 10,000 Series A Preferred Shares were issued and
outstanding and 4,500 Series B Preferred Shares were issued and outstanding.
All of the outstanding Shares have been validly issued and are fully paid and
non-assessable. Except as set forth in Section 3.2(a) of the Company Disclosure
Schedule,
7
<PAGE>
as of March 15, 1999 there were no outstanding Share Arrangements to which the
Company is a party relating to the issued or unissued capital stock or other
securities of, or other ownership interests in, the Company, other than Options
or Warrants to purchase 3,024,717 Common Shares granted on or prior to the date
hereof pursuant to the Company's stock option plans, or equity incentive plans
as set forth in Section 3.2(a) of the Company Disclosure Schedule (such plans
being referred to collectively as the "Company Plans").
Section 3.3 Corporate Authority; No Violation.
---------------------------------
(a) The Company has the corporate power and authority to enter into
this Agreement and to carry out its obligations hereunder. The execution and
delivery of this Agreement and the performance by the Company of its obligations
hereunder have been duly and validly authorized by the Board of Directors of the
Company and, except for the approval of its shareholders of this Agreement, no
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or the transactions contemplated hereby. The Board of
Directors of the Company, at a meeting duly called and held at which a quorum
was present throughout, has unanimously determined that the transactions
contemplated by this Agreement are in the best interest of the Company and its
shareholders and to recommend to such shareholders that they vote in favor of
this Agreement and the Merger (the "Company Board Recommendation"). This
Agreement has been duly and validly executed and delivered by the Company and,
assuming this Agreement constitutes a valid and binding agreement of the other
parties hereto, constitutes a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms (except insofar as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar Laws affecting creditors' rights
generally, or by principles governing the availability of equitable remedies).
(b) The execution, delivery and performance of this Agreement by the
Company do not, and the consummation by the Company of the Merger and the other
transactions contemplated hereby will not, constitute or result in (i) a breach
or violation of, or a default under, or the creation of any rights in favor of
any party under, the certificate of incorporation or bylaws of the Company or
the comparable governing instruments of any of its Subsidiaries, (ii) a breach
or violation of or a default in any material respect under, or an acceleration
of any obligations under, or the creation of a lien, pledge, security interest
or other encumbrance on the assets of the Company or any of its Subsidiaries
(with or without notice, lapse of time or both) pursuant to, any agreement,
lease, contract, note, mortgage, indenture, arrangement, nongovernmental permit
or license, order, decree, or other obligation ("Contracts") binding upon the
Company or any of its Subsidiaries ("Company Contracts") or (provided, as to
consummation, the filings and notices are made, and approvals are obtained, as
referred to in Section 3.3(c)) any applicable Law or Decree (as defined in
Section 3.6) or governmental permit or license to which the Company or any of
its Subsidiaries is subject, or (iii) any material change in the rights or
obligations of any party under any of the Company Contracts.
(c) Other than in connection with or in compliance with the provisions
of the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder (the "Securities Act"), the Securities Exchange Act of
1934, as amended, and the rules and
8
<PAGE>
regulations promulgated thereunder (the "Exchange Act"), the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder (the "HSR Act"), and the securities or blue sky Laws of
the various states and other than the filing of the Certificate of Merger with
the Delaware Secretary of State, no authorization, consent or approval of, or
filing with, any governmental, administrative or regulatory body or authority
("Governmental Entity") is necessary for the consummation by the Company of the
transactions contemplated by this Agreement the failure to obtain which could be
reasonably be expected to have a Material Adverse Effect on the Company.
Section 3.4 Reports and Financial Statements. Since January 1, 1996,
--------------------------------
the Company has timely filed with the SEC all forms, reports, schedules,
statements and other documents required to be filed by it under the Securities
Act or the Exchange Act (such documents, as supplemented or amended since the
time of filing, the "Company SEC Reports"). As of their respective dates, the
Company SEC Reports, including without limitation, any financial statements or
schedules included or incorporated by reference therein, at the time filed (and,
in the case of registration statements and proxy statements, on the dates of
effectiveness and the dates of mailing, respectively) (a) complied in all
material respects with the applicable requirements of the Securities Act and the
Exchange Act, and (b) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The audited consolidated financial statements and
unaudited consolidated interim financial statements included or incorporated by
reference in the Company SEC Reports (including any related notes and schedules)
fairly present, in all material respects, the financial position of the Company
and its consolidated Subsidiaries as of the dates thereof and the results of
their operations and their cash flows for the periods set forth therein, in each
case in accordance with past practice and generally accepted accounting
principles in the United States ("GAAP") consistently applied during the periods
involved (except as otherwise disclosed in the notes thereto and subject, where
appropriate, to normal year-end adjustments that would not be material in amount
or effect).
Section 3.5 No Undisclosed Liabilities. Except as disclosed in Section
--------------------------
3.5 of the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries has any liabilities or obligations of any nature, whether or not
accrued, contingent or otherwise, other than:
(a) liabilities or obligations disclosed in the footnotes to the draft
audited consolidated financial statements of the Company (including the
footnotes thereto) as of and for the fiscal year ended December 31, 1998
submitted to Parent by Company prior to the date hereof (the "Draft Audited
Financials"); and
(b) liabilities or obligations which do not, individually or in the
aggregate, have a Material Adverse Effect on the Company.
Section 3.6. Compliance with Laws. The Company and each of its
--------------------
Subsidiaries each:
9
<PAGE>
(a) in the conduct of its businesses, is in compliance in all material
respects with all federal, state, local and foreign statutes and laws, and all
regulations, ordinances and rules promulgated thereunder (collectively, "Laws"),
and all judgments, orders, rulings, injunctions or decrees of Governmental
Entities (collectively, "Decrees"), applicable thereto or to the employees
conducting such businesses;
(b) has all permits, licenses, authorizations, orders and approvals
of, and have made all filings, applications and registrations with, all
Governmental Entities that are required in order to permit it to conduct its
businesses substantially as presently conducted, except where the failure to
have such permit, license, authorization, order or approval, or to make such
filing, application or registration, could not be reasonably expected to have a
Material Adverse Effect on the Company; all such permits, licenses,
authorizations, orders and approvals are in full force and effect and, to the
best of the Company's knowledge, no suspension or cancellation of any of them is
threatened; and
(c) has received, since December 31, 1993, no notification or
communication from any Governmental Entity other than those received in the
ordinary course of business or as disclosed in Section 3.6 of the Company
Disclosure Schedule:
(i) asserting that it is not in compliance with any of the Laws
or Decrees which such Governmental Entity enforces; or
(ii) threatening to revoke any permit, license, authorization,
order or approval.
Section 3.7. Environmental Laws.
------------------
(a) Neither the Company nor any of its Subsidiaries is the subject of
any pending, or to the knowledge of the Company threatened, actions, causes of
action, claims, orders, investigations, or proceedings ("Litigation") (whether
civil, criminal, administrative or arbitral) by any Governmental Entity or other
person alleging liability or damages under or non-compliance with any
Environmental Law (as defined below).
(b) Neither the conduct nor the operation of the Company or its
Subsidiaries violates or has in the past violated in any material respect any
applicable Environmental Law.
(c) Except as set forth in Section 3.7 of the Company Disclosure
Schedule, there is not now on, in or under any property owned, leased or
operated by the Company or any of its Subsidiaries any of the following:
(i) underground improvements, including but not limited to
treatment or storage tanks or underground piping associated with such tanks,
used currently or in the past for the management of Hazardous Substances (as
defined below);
(ii) asbestos-containing materials;
10
<PAGE>
(iii) polychlorinated biphenyls;
(iv) other Hazardous Substances, in each case which would
reasonably be expected to form the basis of liability or other obligation of the
Company or any of its Subsidiaries under any applicable Environmental Laws; or
(v) a dump, landfill, filled in land or wetlands.
(d) There has been no written report of any environmental
investigation, study, audit, test, review or other analysis conducted of which
the Company has knowledge and has in its possession or control in relation to
the current or prior business of the Company or any property or facility now or
previously owned, operated, or leased by the Company or any of its Subsidiaries
which has not been made available to Parent at least ten days prior to the date
hereof.
(e) No property currently or formerly owned, operated or leased by the
Company or any of its Subsidiaries, and no property to which Hazardous
Substances originating on or from such properties or the businesses or assets of
the Company or any of its Subsidiaries has been sent for treatment or disposal,
is listed or proposed to be listed on the National Priorities List or CERCLIS or
on any other governmental database or list of properties that may or do require
investigation or cleanup under Environmental Laws.
(f) No Encumbrance in favor of any person relating to or in
connection with any claim under any Environmental Law has been filed or has
attached to the property currently owned, operated or leased by the Company or
any of its Subsidiaries.
(g) No authorization, notification, recording, filing, consent,
waiting period, remediation, investigation, or approval is required under any
Environmental Law in order to consummate the transaction contemplated hereby,
and there are no permits, licenses, certificates or approvals required under
Environmental Laws require consent, notification, or other action to remain in
full force and effect following consummation of the transaction contemplated
hereby.
(h) The Company has supplied Parent with a true and complete list of
all permits, licenses, certificates and approvals required under Environmental
Laws in order for the Company and each Subsidiary to conduct their businesses
substantially as presently conducted.
(i) "Environmental Laws" means any Laws (including, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act) and Decrees, including any plans, other criteria, or guidelines
promulgated pursuant to such Laws and Decrees, relating to the generation,
production, installation, use, storage, treatment, transportation, release (as
defined below), threatened release, or disposal of Hazardous Substances, noise
control, or the protection of human health or safety, natural resources, or the
environment.
(j) "Hazardous Substances" means any wastes, substances, radiation, or
materials (whether solids, liquids or gases) (i) which are hazardous, toxic,
infectious, explosive,
11
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radioactive, carcinogenic, or mutagenic; (ii) which are or become defined as a
"pollutants," "contaminants," "hazardous materials," "hazardous wastes,"
"hazardous substances," "toxic substances," "radioactive materials," "solid
wastes," or other similar designations in, or otherwise subject to regulation
under, any Environmental Laws; (iii) without limitation, which contain
polychlorinated biphenyls (PCBs), asbestos and asbestos-containing materials,
lead-based paints, urea-formaldehyde foam insulation, and petroleum or petroleum
products (including, without limitation, crude oil or any fraction thereof) or
(iv) which pose a hazard to human health, safety, natural resources, industrial
hygiene, or the environment, or an impediment to working conditions.
Section 3.8. Employee Benefit Plans.
----------------------
(a) Section 3.8 of the Company Disclosure Schedule contains a complete
list of all material written bonus, vacation, deferred compensation, pension,
retirement, profit-sharing, thrift, savings, employee stock ownership, stock
bonus, stock purchase, restricted stock and stock option plans, employment or
severance contracts, medical, dental, disability, health and life insurance
plans, and other employee benefit and fringe benefit plans or other Contracts
maintained or contributed to by the Company or any of its Subsidiaries for the
benefit of officers, former officers, employees, former employees, directors,
former directors, or the beneficiaries of any of the foregoing, or pursuant to
which the Company or any of its Subsidiaries may have any liability that are
Contracts with, or plans maintained primarily for the benefit of, individuals
employed or rendering services in the United States and are not multiemployer
plans within the meaning of Section 4001(a)(3) of ERISA (as defined in Section
3.8(c)) (collectively (whether or not material), the "Company Compensation and
Benefit Plans").
(b) The Company has delivered to Parent copies of all Company
Compensation and Benefit Plans listed on Section 3.8 of the Company Disclosure
Schedule, including, but not limited to, all amendments thereto, and all of such
copies that have been delivered are true and correct.
(c) Each of the Company Compensation and Benefit Plans has been and is
being administered in accordance with the terms thereof and all applicable Laws.
Each "employee pension benefit plan" within the meaning of Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") (each such
plan, a "Pension Plan") included in the Company Compensation and Benefit Plans
(a "Company Pension Plan") which is intended to be qualified under Section
401(a) of the Code has received a favorable determination letter from the
Internal Revenue Service, and the Company is not aware of any circumstances
which could result in the revocation or denial of any such favorable
determination letter. No material "prohibited transaction," within the meaning
of Section 4975 of the Code or Section 406 of ERISA, has occurred with respect
to any Company Compensation and Benefit Plan. There is no pending or, to the
Company's knowledge, threatened Litigation relating to any of the Company
Compensation and Benefit Plans.
(d) No material liability under Title IV of ERISA has been or is
reasonably expected to be incurred by the Company or any of its Subsidiaries or
any entity which is
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considered one employer with the Company under Section 4001(a)(15) of ERISA or
Section 414 of the Code (any such entity, a "Company ERISA Affiliate"), other
than such liabilities that have previously been satisfied. No notice of a
"reportable event," within the meaning of Section 4043 of ERISA, for which the
30-day reporting requirement has not been waived, has been required to be filed
for any Company Pension Plan or by any Company ERISA Affiliate within the past
12 months.
(e) All contributions, premiums and payments required to be made under
the terms of any Company Compensation and Benefit Plan have been made, except
where the failure to do so does not, individually or in the aggregate, have a
Material Adverse Effect on the Company. Neither any Company Pension Plan nor
any single-employer plan of a Company ERISA Affiliate has an "accumulated
funding deficiency" (whether or not waived) within the meaning of Section 412 of
the Code or Section 302 of ERISA. Neither the Company nor any of its
Subsidiaries has provided, or is required to provide, security to any Company
Pension Plan or to any single-employer plan of a Company ERISA Affiliate
pursuant to Section 401(a)(29) of the Code.
(f) Under each Company Pension Plan which is a defined benefit plan,
as of the last day of the most recent plan year ended prior to the date hereof,
the actuarially determined present value of all "benefit liabilities", within
the meaning of Section 4001(a)(16) of ERISA (as determined on the basis of the
actuarial assumptions contained in such Company Pension Plan's most recent
actuarial valuation) did not exceed the then current value of the assets of such
Company Pension Plan, and there has been no adverse change in the financial
condition of such Company Pension Plan (with respect to either assets or
benefits) since the last day of the most recent plan year.
(g) Neither the Company nor any of its Subsidiaries contributes to or
is required to contribute to any multiemployer plan within the meaning of
Section 4001(c)(3) of ERISA ("Multiemployer Plan"). Neither the Company nor any
of its Subsidiaries has incurred any material withdrawal liability (within the
meaning of Section 4201 of ERISA) under any Multiemployer Plan within the past 5
years that has not been satisfied, nor could any such material withdrawal
liability reasonably be expected to be incurred.
(h) Except as set forth in the Company Compensation and Benefit Plans
listed in Section 3.8 of the Company Disclosure Schedule, the execution of, and
performance of the transactions contemplated in, this Agreement will not (either
alone or upon the occurrence of any additional or subsequent events):
(i) constitute an event under any Company Compensation and
Benefit Plan, trust or loan that will or may result in any payment (whether of
severance pay or otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits with respect
to any officers and directors of the Company;
(ii) result in any payment or benefit that will or may be made by
the Company, any of its Subsidiaries, Parent or any of their respective
affiliates that will be
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characterized as an "excess parachute payment," within the meaning of Section
280G(b)(1) of the Code; or
(iii) provide for any payment to any employee or independent
contractor that is not deductible under Section 162(a)(1) or 404 of the Code.
(i) The contributions of the Company and any of its Subsidiaries to
any trust described in Section 501(c)(9) of the Code have complied with Section
419A of the Code.
(j) Neither the Company nor its Subsidiaries have any obligations for
retiree health and life benefits under any Company Compensation and Benefit
Plan, except as set forth in the Company Disclosure Schedules. The Company or
its Subsidiaries may amend or terminate any such plan under the terms of such
plan at any time without incurring any material liability thereunder.
Section 3.9. Absence of Certain Changes or Events. Except as set
------------------------------------
forth in Section 3.9 of the Company Disclosure Schedule, since December 31,
1998, the businesses of the Company and its Subsidiaries have been conducted in
the ordinary course consistent with past practice, the Company and its
Subsidiaries have not engaged in any transaction or series of related
transactions material to the Company and its Subsidiaries taken as a whole other
than in the ordinary course consistent with past practice, and there has not
been any event, occurrence or development, alone or taken together with all
other existing facts, that, individually or in the aggregate, has a Material
Adverse Effect on the Company.
Section 3.10. Litigation. Except as disclosed in Section 3.10 of the
----------
Company Disclosure Schedule, there is no Litigation pending or, to the Company's
knowledge, threatened against the Company or any of its Subsidiaries or any of
their respective properties. The Company is not subject to any Decree that,
individually or in the aggregate, has a Material Adverse Effect on the Company.
Section 3.11. Material Contracts.
------------------
(a) All of the Company Contracts that are required to be described in
the Company SEC Reports or to be filed as exhibits thereto are described in the
Company SEC Reports or filed as exhibits thereto. Neither the Company nor any
of its Subsidiaries nor any other party is in breach of or in default in any
material respect under any Company Contract.
(b) Except as disclosed in Section 3.11 of the Company Disclosure
Schedule, there are no material Company Contracts with any Governmental Entity
that will not continue to be binding and in full force and effect in accordance
with its terms as a result of the consummation of the transactions contemplated
herein.
Section 3.12. Labor Matters. As of the date of this Agreement, the
-------------
Company and its Subsidiaries do not have any collective bargaining agreements
with any persons employed by the Company or any of its Subsidiaries or any
persons otherwise performing services primarily for the Company or any of its
Subsidiaries, nor is the Company or any of its Subsidiaries in the
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<PAGE>
process of negotiating any such agreement. There is no labor strike, dispute or
stoppage pending or, to the knowledge of the Company, threatened against the
Company or any of its Subsidiaries. None of the Company or its Subsidiaries is
the subject of a proceeding asserting that it has committed an unfair labor
practice (within the meaning of the National Labor Relations Act) or seeking to
compel it to bargain with any labor organization as to wages and conditions of
employment. As of the date of this Agreement there are, to the knowledge of the
Company, no organizational efforts currently being made involving any of the
employees of the Company or any of its Subsidiaries.
Section 3.13. Tax Matters.
-----------
(a) The Company and each of its Subsidiaries have:
(i) filed all federal, state, local and foreign Tax Returns (as
defined below) required to be filed by them (taking into account extensions);
(ii) paid or accrued all Taxes (as defined below) shown to be due
on such Tax Returns or which are otherwise due and payable; and
(iii) paid or accrued all Taxes for which a notice of assessment
or collection has been received.
For purposes of this Agreement,
"Code" means the Internal Revenue Code of 1986, as amended.
"Taxes" means any and all federal, state, local, foreign or other
taxes of any kind (together with any and all interest, penalties, additions to
tax and additional amounts imposed with respect thereto) imposed by any taxing
authority, including, without limitation, taxes or other charges on or with
respect to income, franchises, windfall or other profits, gross receipts,
property, sales, use, capital stock, payroll, employment, social security,
workers' compensation, unemployment compensation, or net worth, and taxes or
other charges in the nature of excise, withholding, ad valorem or value added,
and includes, without limitation, any liability for Taxes of another person, as
a transferee or successor, under Treas. Reg. Section 1.1502-6 or analogous
provision of Law or otherwise; and
"Tax Return" means any return, report or similar statement (including
the attached schedules) required to be filed with respect to any Tax, including,
without limitation, any information return, claim for refund, amended return or
declaration of estimated Tax.
(b) Neither the Internal Revenue Service nor any other taxing
authority has asserted in writing any claim for Taxes, or to the knowledge of
the Company, is threatening to assert any claims for Taxes, against the Company
or any of its Subsidiaries. The Company and each of its Subsidiaries have
withheld or collected and paid over to the appropriate Governmental Entities (or
are properly holding for such payment) all Taxes required by Law to be withheld
or collected. There are no outstanding agreements or waivers extending the
statutory period
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<PAGE>
of limitation applicable to any material Tax Return of the Company or any of its
Subsidiaries. Neither the Company nor any of its Subsidiaries has made an
election under Section 341(f) of the Code. There are no liens for Taxes upon the
assets of the Company or any of its Subsidiaries (other than liens for Taxes
that are not yet due).
(c) Neither the Company nor any of its Subsidiaries:
(i) has any liability under Treasury Regulation Section 1.1502-6
or analogous state, local or foreign law provision, or
(ii) is a party to a Tax sharing or Tax indemnity agreement or any
other agreement of a similar nature with any entity other than the Company or
any of its Subsidiaries that remains in effect and under which the Company or
any such Subsidiary could have any material liability for Taxes.
No claim has been made in writing by a taxing authority in a
jurisdiction where the Company or any of its Subsidiaries does not file Tax
Returns that the Company or any of its Subsidiaries is or may be subject to
taxation by that jurisdiction. Neither the Company nor any of its Subsidiaries
is the subject of any currently ongoing audit or examination with respect to
Taxes, nor, to the knowledge of the Company, has any such audit been threatened
or proposed, by any taxing authority.
Section 3.14. Opinion of Financial Advisor. The Board of Directors of
----------------------------
the Company has received written opinion of William Blair & Company ("Blair"),
to the effect that, as of such date, the aggregate Merger Consideration to be
received by the holders of the Common Shares (other than Parent or its
affiliates) in the Merger is fair to such shareholders of the Company from a
financial point of view. A copy of the written opinion of Blair has been
delivered to Parent.
Section 3.15. Takeover Laws. The Company has taken all action
-------------
required to be taken by it in order to exempt Parent, MergerSub and this
Agreement and the transactions contemplated hereby from, and Parent, MergerSub
and this Agreement are exempt from, the requirements of all anti-takeover Laws
and regulations (collectively, "Takeover Laws") of the State of Delaware,
including without limitation Section 203 of the DGCL.
Section 3.16. Required Vote of the Company Shareholders. The
-----------------------------------------
affirmative vote of the holders of a majority of the Shares outstanding and
entitled to vote at the Company Meeting (the "Company Shareholder Approval") is
required to approve this Agreement and the Merger. No other vote of the
shareholders of the Company is required by Law, the certificate of incorporation
or bylaws of the Company or otherwise in order for the Company to consummate the
Merger and the other transactions contemplated hereby.
Section 3.17. Finders or Brokers. Neither the Company nor any of its
------------------
Subsidiaries has employed any investment banker, broker, finder or intermediary
who might be entitled to any fee or any commission in connection with or upon
consummation of the Merger, except for such fees and expenses payable by the
Company to Blair pursuant to those certain letter agreements dated
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March 13, 1998, August 27, 1998 and February 17, 1999 in an aggregate amount not
to exceed $635,000, of which $325,000 plus certain out-of-pocket expenses had
been paid prior to March 15, 1999.
Section 3.18. Related Party Transactions. Since December 31, 1995,
--------------------------
none of the Company and the Company's Subsidiaries or any officer, director,
affiliate or "associate" (as that term is defined in Rule 12b-2 under the
Exchange Act) of the Company has engaged in any transactions required to be
disclosed by the Company in the Company SEC Reports, except as have been
publicly disclosed by the Company or disclosed herein.
Section 3.19. Year 2000. The Company has no knowledge or reason to
---------
believe that any computer software utilized in and material to the business of
the Company or any of the Subsidiaries has or will develop problems relating to
the proper processing or utilization of dates that span multiple centuries. The
Company and the Subsidiaries have taken reasonable and practicable steps,
including, without limitation, (i) evaluating all computer software utilized in
the business of the Company and (ii) obtaining certifications and other
information concerning the date-handling capabilities of any third party
computer software included in Company's or the Subsidiaries' computer software
products to identify, address, and remediate problems relating to the proper
processing or utilization of dates that span multiple centuries. The Company
has fully disclosed and made available to Parent any and all information and
materials relating to problems with the proper processing or utilization of
dates that span multiple centuries for any computer software utilized in the
business of the Company or any of the Subsidiaries.
Section 3.20. Telecom Licenses; Operations of Licensed Facilities.
---------------------------------------------------
The Company and its Subsidiaries do not operate any assets or conduct any
businesses for which the Company or any of its Subsidiaries is required to hold
licenses from the FCC or any state communications regulatory authority.
Section 3.21. Information Supplied. None of the information supplied
--------------------
or to be supplied by the Company for inclusion or incorporation by reference
into the Proxy Statement will, at the date the Proxy Statement is first mailed
to the Company's stockholders or at the time of the Company Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they are made, not misleading.
Section 3.22. Property.
--------
(a) Section 3.22(a) of the Company Disclosure Schedule sets forth all
of the real property owned or leased by the Company and its Subsidiaries that
are material to the conduct of business of the Company and its Subsidiaries
taken as a whole. Each of the Company and its Subsidiaries owns fee title to
each parcel of real property owned by it free and clear of all Liens, except for
Permitted Liens (as defined in this Section 3.22).
(b) With respect to the tangible properties and assets of the Company
and its Subsidiaries (excluding real property) that are material to the conduct
of the business of the
17
<PAGE>
Company and its Subsidiaries, the Company and its Subsidiaries have good title
to, or hold pursuant to valid and enforceable leases, all such properties and
assets, with only such exceptions as, individually or in the aggregate, would
not have a Material Adverse Effect on the Company and subject to the Permitted
Liens. All of the assets of the Company and its Subsidiaries have been
maintained and repaired for their continued operation and are in good operating
condition, reasonable wear and tear excepted, and usable in the ordinary course
of business, except where the failure to be in such repair or condition or so
usable would not individually or in the aggregate have a Material Adverse Effect
on the Company.
(c) Neither the Company nor any of its Subsidiaries has received
notice that any party thereto is in default in any material respect under any
material lease, sublease, license, sublicense or use or occupancy agreement to
which it is a party.
(d) As used in this Agreement, "Permitted Liens" shall mean: (i)
statutory liens securing payments not yet delinquent or the validity of which
are being contested in good faith by appropriate actions; (ii) purchase money
liens arising in the ordinary course; (iii) liens for Taxes not yet due and
payable or delinquent; (iv) liens reflected or reserved against in the balance
sheet of the Company included in the Draft Audited Financials (which have not
been discharged); (v) liens which in the aggregate do not materially detract
from the value of or materially impair the present and continued use of the
properties or assets subject thereto in the usual and normal conduct of the
business of the Company; (vi) liens on leases, subleases, sub-subleases,
easements, licenses, rights of use, rights to access and rights of way arising
from the provisions of such agreements or benefiting or created by any superior
estate, right or interest which is prior in right or prior in lien to that of
the subject lease, sublease, sub-sublease, easement, license, right of use,
right to access or right of way; (vii) any liens set forth in the title
policies, endorsements, title commitments, title certificates and title reports
relating to the Company's interests in real property, copies of which have been
provided to Parent and MergerSub; and (viii) Liens described in the Company SEC
Reports. For the purposes hereof "Company's real property" and "Company's
interests in real property" shall include the real property and interests
therein owned or held respectively by the Company or any of its Subsidiaries.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGERSUB
Parent and MergerSub represent and warrant to the Company that:
Section 4.1 Organization, Qualification, Etc. Parent is an entity
--------------------------------
duly organized, validly existing and in good standing (where applicable) under
the Laws of Colorado and MergerSub is an entity duly organized, validly existing
and in good standing (where applicable) under the Laws of Delaware. Each of
Parent and MergerSub has the corporate power and authority to own its assets and
to carry on its business as it is now being conducted, and is duly qualified to
do business and is in good standing in each jurisdiction in which the ownership
of its assets or the conduct of its business requires such qualification. All
the outstanding shares of capital stock of MergerSub are validly issued, fully
paid and non-assessable and are owned by
18
<PAGE>
Parent, directly or indirectly, free and clear of all Encumbrances, except for
Encumbrances which individually or in the aggregate do not have a Material
Adverse Effect on Parent.
Section 4.2 Corporate Authority; No Violation.
---------------------------------
(a) Each of Parent and MergerSub has the corporate power and authority
to enter into this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement and the performance by each of Parent
and MergerSub of its obligations hereunder have been duly and validly authorized
by the Board of Directors of Parent and MergerSub and no other corporate
proceedings on the part of either Parent or MergerSub are necessary to authorize
this Agreement or the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by each of Parent and MergerSub and,
assuming this Agreement constitutes a valid and binding agreement of the other
parties hereto, constitutes a valid and binding agreement of each of Parent and
MergerSub, enforceable against Parent or MergerSub, as the case may be, in
accordance with its terms (except insofar as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws
affecting creditors' rights generally, or by principles governing the
availability of equitable remedies).
(b) Except for any breach, violation, default, acceleration, creation
or change that does not, individually or in the aggregate, have a Material
Adverse Effect on Parent or MergerSub, the execution, delivery and performance
of this Agreement by Parent and MergerSub does not, and the consummation by
Parent and MergerSub of the Merger and the other transactions contemplated
hereby will not, constitute or result in (i) a breach or violation of, the
certificate of incorporation or bylaws of Parent or MergerSub, as the case may
be, or (ii) a breach or violation of, or a default under, or an acceleration of
any obligations under, or the creation of a lien, pledge, security interest or
other encumbrance on the assets of either of Parent or MergerSub (with or
without notice, lapse of time or both) pursuant to, any Contract binding upon
Parent or any of its Subsidiaries or MergerSub or (provided, as to consummation,
the filings and notices are made, and approvals are obtained, as referred to in
Section 4.3(c)) any applicable Law or Decree or governmental permit or license
to which Parent or any of its Subsidiaries or MergerSub is subject.
(c) Other than in connection with or in compliance with the provisions
of the Securities Act, the Exchange Act, the HSR Act, and the securities or blue
sky Laws of the various states and other than the filing of the Delaware
Certificate of Merger with the Delaware Secretary of State, no authorization,
consent or approval of, or filing with, any Governmental Entity is necessary for
the consummation by Parent or MergerSub of the transactions contemplated by this
Agreement, except for such authorizations, consents, approvals or filings that,
if not obtained or made, would not, individually or in the aggregate, have a
Material Adverse Effect on either Parent or MergerSub.
Section 4.3 Finders or Brokers. Neither Parent nor MergerSub has
------------------
employed any investment banker, broker, finder or intermediary who might be
entitled to any fee or any commission in connection with or upon consummation of
the Merger.
19
<PAGE>
Section 4.4 Financing. Parent has or has available to it cash or cash
---------
equivalents or lines of credit for use in connection with the acquisition of the
Company in an aggregate amount necessary to consummate the Merger.
ARTICLE V
COVENANTS AND AGREEMENTS
Parent, MergerSub and the Company hereby covenant and agree with one
another as follows:
Section 5.1 Conduct of Business by the Company. During the period
----------------------------------
between the date hereof and the Effective Time, except as may otherwise be
consented to in writing by the other parties hereto (which consent shall not be
unreasonably withheld) or as may be expressly permitted pursuant to this
Agreement or as set forth in Section 5.1 of the Company Disclosure Schedule, as
applicable, the Company shall, and shall cause each of its Subsidiaries to,
conduct its operations in the ordinary and usual course of business as
heretofore conducted and preserve intact its business organization and goodwill
in all material respects, keep available the services of its officers and
employees as a group, subject to changes in the ordinary course, and maintain
satisfactory relationships with suppliers, distributors, customers and others
having business relationships with it. Without limiting the generality of the
foregoing, unless in each case in receipt of a consent as set forth above the
Company shall not, and shall cause its Subsidiaries not to:
(a) authorize, declare, set aside or pay any dividends on or make any
distribution with respect to its outstanding shares of stock, except that wholly
owned Subsidiaries of the Company may pay dividends on or make distributions of
cash to the Company or another wholly owned Subsidiary of the Company;
(b) except in the ordinary course of business consistent with past
practice, enter into or amend any employment, severance or similar agreements or
arrangements with, or grant any bonus or salary increases or otherwise increase
the compensation or benefits provided to, any of their respective employees;
(c) except as expressly permitted by Section 5.8, authorize or
publicly announce an intention to authorize, or enter into an agreement with
respect to, or take any action to consummate any agreement or arrangement with
respect to:
(i) any merger, consolidation or business combination (other than
the Merger),
(ii) any liquidation, dissolution, restructuring,
recapitalization or other reorganization or
20
<PAGE>
(iii) any acquisition or disposition of a material amount of
assets (other than purchases and sales of raw materials, supplies, inventory,
products or services in the ordinary course of business consistent with past
practice) or securities, or any release or relinquishment of any material rights
under any material Contracts;
(d) propose or adopt any amendments to its certificate of
incorporation or bylaws;
(e) issue, sell, pledge or otherwise dispose of or encumber any
capital stock owned by it in any of its Subsidiaries;
(f) except, in the case of the Company, upon exercise of Options
outstanding on the date hereof as set forth in Section 3.2, issue, sell or
otherwise permit to become outstanding any shares of its capital stock, or
effect any stock split or reverse stock split or otherwise change its equity
capitalization as it existed on March 15, 1999, or redeem, repurchase or
otherwise acquire any shares of its capital stock;
(g) grant or award any options (other than in the ordinary course of
business), warrants, conversion rights or other rights to acquire any shares of
capital stock of the Company or its Subsidiaries, or enter into any other Share
Arrangement relating to its capital stock;
(h) except as required by applicable Law or an existing Contract
disclosed to Parent, amend the terms of any Company Compensation or Benefit
Plan, including the Company Plans or adopt any new employee benefit or
compensation plan;
(i) except pursuant to existing credit agreements or other agreements
of the type disclosed in Section 5.1 of the Company Disclosure Schedule and
entered into in the ordinary course consistent with past practice, incur,
create, assume or otherwise become liable for any indebtedness for borrowed
money;
(j) except in the ordinary course of business, consistent with past
practice, transfer, lease, license, mortgage, pledge or encumber any material
asset or material amount of assets;
(k) incur or commit to any capital expenditure in excess of $50,000
individually or $250,000 in the aggregate;
(l) implement or adopt any change in its accounting principles,
practices or methods, other than as may be required by GAAP or Regulation S-X
promulgated under the Exchange Act;
(m) settle any Litigation to which it is a party or the indemnifying
party or indemnifying any third party with respect to such Litigation; or
(n) agree or commit to do anything prohibited by this Section 5.1.
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Section 5.2 Investigation. During the period between the date hereof
-------------
and the Effective Time, the Company shall afford Parent and Parent's officers,
employees, accountants, counsel and other authorized representatives reasonable
access, during normal business hours, to its and its Subsidiaries':
(a) properties, contracts, books and records (including but not
limited to (i) tax returns, (ii) audits, assessments, reports, studies,
monitoring results and any other information or documents relevant to the
environment or occupational health and safety and (iii) accountants work
papers);
(b) any report, schedule or other document filed or received by it
pursuant to the requirements of federal or state securities Laws;
(c) any other information concerning its business, properties and
personnel as the other may reasonably request; and
(d) to (i) conduct tests of the soil, surface or subsurface waters,
and air quality at, in, on, beneath or about any of its properties, in a manner
consistent with good engineering practice; (ii) inspect all records, reports,
permits, applications, monitoring results, studies, correspondence, data and any
other information or documents relevant to Hazardous Substances or other
environmental conditions, and (iii) to inspect all buildings and equipment at
any of its properties for asbestos-containing materials or other Hazardous
Substances; provided, however, that no investigation pursuant to this Section
5.2 shall affect or be deemed to modify any representation or warranty made by
the Company, Parent or MergerSub.
Parent, MergerSub and the Company hereby agree that each of them will
treat any such information in accordance with the Confidential Disclosure
Agreement dated February 25, 1999 between the Company and Parent (the
"Confidentiality Agreement"). Notwithstanding any provision of this Agreement
to the contrary, no party shall be obligated to make any disclosure in violation
of applicable Laws or if disclosure would cause a forfeiture of attorney-client
privilege. The Company and Parent will make appropriate substitute disclosure
arrangements if the circumstances of the preceding sentence apply.
Section 5.3 Stockholder Approval; Filings.
-----------------------------
(a) Subject to the terms and conditions contained herein, the Company
shall submit this Agreement and the Merger for approval to the holders of Shares
at a meeting to be duly held for this purpose by the Company (the "Company
Meeting"). The Company shall take all action in accordance with the federal
securities Laws, the DGCL and its articles of organization, certificate of
incorporation, and bylaws necessary to duly convene the Company Meeting. In the
absence of a Company Competing Transaction (as defined in Section 5.7(a)) or a
Company Business Combination (as defined in Section 7.3(d)) that the Board of
Directors of the Company believes to be a Superior Transaction (as defined in
Section 5.7(d)), the Board of Directors of the Company shall recommend that the
Company's stockholders approve such matters, which recommendation shall be
contained in the Proxy Statement (as defined below),
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and use its reasonable best efforts to take all lawful action to solicit such
approval by such stockholders.
(b) Each of the Company and Parent agrees, as to itself and its
Subsidiaries, that none of the information supplied or to be supplied by it for
inclusion or incorporation by reference in the proxy statement to be filed with
the SEC in connection with the Merger (the "Proxy Statement") and any amendment
or supplement thereto will, at the date of mailing to stockholders and at the
time of the Company Meeting, contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made
therein, in light of the circumstances under which such statements are made, not
misleading. Each of the Company and Parent further agrees that if it shall
become aware prior to the time of the Company Meeting of any information that
would cause any of the statements in the Proxy Statement to be false or
misleading with respect to any material fact, or to omit to state any material
fact necessary in order to make the statements made therein not false or
misleading, to promptly inform the other party thereof and to take the necessary
steps to correct the Proxy Statement.
Section 5.4 Additional Reports. The Company shall furnish copies of any
------------------
Company SEC Reports that it files with the SEC on or after the date hereof, and
the Company represents and warrants that as of the respective dates thereof,
such reports will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Any unaudited consolidated interim financial statements included
in such reports (including any related notes and schedules) will fairly present,
in all material respects, the financial position of the Company and its
consolidated Subsidiaries as of the dates thereof and the results of operations
and changes in financial position or other information included therein for the
periods or as of the dates then ended, in each case in accordance with past
practice and GAAP consistently applied during the periods involved (except as
otherwise disclosed in the notes thereto and subject, where appropriate, to
normal year-end adjustments).
Section 5.5 Reasonable Best Efforts. Each of the parties shall use its
-----------------------
reasonable best efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Merger and the other
transactions contemplated by this Agreement, including (a) the obtaining of (and
cooperating with the other parties to obtain) waivers, consents, exemptions,
licenses, permits, authorizations, orders and approvals from, and the making of
all other necessary registrations and filings with, Governmental Entities
(including, without limitation, filings required to be made pursuant to the HSR
Act), (b) the obtaining of (and cooperating with the other parties to obtain)
all waivers, consents, exemptions, licenses, authorizations and approvals from
third parties which may be necessary or desirable to be obtained by reason of
the Merger or in order to consummate the transactions contemplated by, and to
fully carry out the purposes of and realize the benefits of, this Agreement, and
(c) the execution and delivery of any additional instruments necessary to
consummate the transaction contemplated by, and to fully carry out the purposes
of and realize the benefits of, this Agreement.
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Section 5.6 Takeover Statutes. None of the parties shall take any action
-----------------
that would cause the transactions contemplated by this Agreement to be subject
to the requirements of any Takeover Law. If any Takeover Law shall become
applicable to the transactions contemplated by this Agreement, each of the
Company and Parent and the members of their respective Boards of Directors shall
grant such approvals and take such actions as are necessary so that the
transactions contemplated hereby may be consummated as promptly as practicable
on the terms contemplated hereby, and otherwise act to eliminate or minimize the
effects of such Takeover Law on the transactions contemplated hereby.
Section 5.7 No Solicitation.
---------------
(a) During the term of this Agreement, the Company shall not, and
shall not authorize or permit any of its Subsidiaries or any of its or its
Subsidiaries' directors, officers, employees, agents or representatives,
directly or indirectly, to solicit or initiate, or furnish or disclose non-
public information in furtherance of, any inquiries or the making of any
proposal with respect to any recapitalization, merger, consolidation or other
business combination involving the Company, or the acquisition of 10% or more of
the outstanding capital stock of the Company (other than upon exercise of
Options and Warrants which are outstanding as of the date hereof) or any
Subsidiary of the Company or, the acquisition of 10% or more of the assets of
the Company and its Subsidiaries, taken as a whole, in a single transaction or a
series of related transactions, or any combination of the foregoing (a "Company
Competing Transaction"), or negotiate or otherwise engage in discussions with
any person (other than Parent, MergerSub or their respective directors,
officers, employees, agents or representatives) with respect to any Company
Competing Transaction or enter into any agreement, arrangement or understanding
requiring it to abandon, terminate or fail to consummate the Merger or any other
transactions contemplated by this Agreement, and will immediately cease all
existing activities, discussions and negotiations with any parties conducted
heretofore with respect to any proposal for a Company Competing Transaction;
provided that, at any time prior to the approval of the Merger by the
shareholders of the Company, the Company may furnish information to, and
negotiate or otherwise engage in discussions with, any party (a "Company Third
Party") who (x) delivers a bona fide written proposal for a Company Competing
Transaction which was not solicited or initiated by the Company, directly or
indirectly, after the date of this Agreement and (y) enters into an appropriate
confidentiality agreement with the Company (which agreement shall be no less
favorable to the Company than the Confidentiality Agreement, and a copy of which
will be delivered to Parent promptly after the execution thereof), if, but only
if, the Board of Directors of the Company determines in good faith by a majority
vote after consultation with the Company's independent financial advisors, that
such proposal could reasonably be expected to lead to a Superior Transaction;
provided further, that nothing in this Agreement shall prevent the Company from
complying with the provisions of Rule 14e-2 promulgated under the Exchange Act
with respect to a Company Competing Transaction.
(b) From and after the execution of this Agreement, the Company shall
promptly advise Parent in writing of the receipt, directly or indirectly, of any
inquiries or proposals relating to a Company Competing Transaction (including
the specific terms thereof and the identity of the third party), shall keep
Parent reasonably informed of the status of any
24
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such inquiries or proposals, of the furnishing of information to the Company
Third Party, and of any negotiations or discussions relating thereto (including
any changes or adjustments to the material terms of such Company Competing
Transaction as a result of negotiations or otherwise).
(c) If, prior to the approval of the Merger by the shareholders of the
Company, the Board of Directors of the Company determines in good faith by a
majority vote, with respect to any written proposal from a Company Third Party
for a Company Competing Transaction received after the date hereof that was not
solicited or initiated by the Company, directly or indirectly, after the date of
this Agreement, that such Company Competing Transaction is a Superior
Transaction and is in the best interest of the Company and its shareholders, and
the Board of Directors of the Company has received a written opinion (a copy of
which shall have been delivered to Parent) from the Company's independent
financial advisors that the Company Competing Transaction is a Superior
Transaction, then the Company may terminate this Agreement and enter into an
acquisition agreement for the Superior Transaction; provided that, prior to any
such termination, and in order for such termination to be effective, (i) the
Company shall provide Parent two business days' written notice that it intends
to terminate this Agreement pursuant to this Section 5.7(c), identifying the
Superior Transaction and the parties thereto and delivering an accurate
description of all material terms of the Superior Transaction to be entered into
and (ii) on the date of termination (provided that the opinion from the
Company's financial advisor referred to above shall continue in effect without
revocation, revision or modification), the Company shall deliver to Parent (A) a
written notice of termination of this Agreement pursuant to this Section 5.7(c),
(B) a wire transfer of immediately available funds in the amount of the Company
Termination Fee and the Commitment Expenses (each as defined in Section 7.3),
and (C) a written acknowledgment from the Company and each other party to the
Superior Transaction that it will not contest the payment of the Company
Termination Fee and Commitment Expenses, and Parent shall deliver to Company a
full release.
(d) "Superior Transaction" shall mean a Company Competing Transaction
which the Board of Directors of the Company reasonably determines is more
favorable to the Company and its shareholders than the Merger and which is not
subject to any financing condition. Reference in the foregoing definition to
the "Merger" shall include any proposed alteration of the terms of this
Agreement committed to in writing by Parent in response to such Company
Competing Transaction.
Section 5.8 Public Announcements. Each of the parties agrees that it
--------------------
shall not, nor shall any of their respective affiliates, issue or cause the
publication of any press release or other public announcement with respect to
the Merger, this Agreement or the transactions contemplated hereby without the
prior approval of the other party, except such disclosure as may be required by
Law, any listing agreement with a national securities exchange or any of the
rules of the NASDAQ Stock Market; provided, if such disclosure is required by
Law, any such listing agreement or any such rules, such disclosure shall not be
made without prior consultation of the other parties.
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<PAGE>
Section 5.9 Indemnification and Insurance.
-----------------------------
(a) Parent and MergerSub agree that all rights to exculpation and
indemnification for acts or omissions occurring at or prior to the Effective
Time now existing in favor of the current or former directors or officers of the
Company or any of its Subsidiaries (the "Indemnified Parties") as provided in
its articles of organization or bylaws or in any agreement (collectively, the
"Company Indemnity Provisions") shall survive the Merger and shall continue in
full force and effect in accordance with their terms.
(b) For two years from the Effective Time, Parent shall indemnify,
defend and hold harmless each of the Indemnified Parties for acts or omissions
occurring at or prior to the Effective Time (including any such act or omission
as to which Parent or the Surviving Corporation has received a claim during such
two year period but as to which no final judicial determination or settlement
has been made) for which the Indemnified Parties would have been entitled to
indemnification under the Company Indemnity Provisions to the fullest extent
permitted by applicable Law, including with respect to taking all actions
necessary to advance expenses to the extent permitted by applicable Law and, in
any such case, to the extent contemplated by the Company Indemnity Provisions.
(c) Parent shall use its reasonable best efforts to obtain and
maintain in effect, or cause the Surviving Corporation to obtain and maintain in
effect, for three years from the Effective Time, the Company's current
directors' and officers' liability insurance covering those persons who are
currently covered by the Company's directors' and officers' liability insurance
policy (a copy of which has been heretofore delivered to Parent); provided,
however, that in no event shall Parent or the Surviving Corporation be required
to expend in any year an amount in excess of 150% of the annual premiums
currently paid by the Company for such insurance, and, provided, further, that
if the annual premiums of such insurance coverage exceed such amount, Parent
shall or shall cause the Surviving Corporation to obtain a policy with the
greatest coverage available for a cost not exceeding such amount.
(d) The provisions of this Section 5.9 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party and his or her
heirs and representatives and may not be amended or altered so as to materially
and adversely affect the rights of any Indemnified Party described in this
Section 5.9 without the written consent of such affected Indemnified Party.
Section 5.10 Notification of Certain Matters. Each of the Company and
-------------------------------
Parent shall give prompt notice to the other of any fact, event or circumstance
known to it that (i) is reasonably likely, individually or taken together with
all other existing facts, events and circumstances known to it, to result in any
Material Adverse Effect with respect to it, or (ii) would cause or constitute a
material breach of any of its representations, warranties, covenants or
agreements contained herein.
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Section 5.11 Employee Plans and Benefit Arrangements.
---------------------------------------
(a) From and after the Effective Time, subject to applicable Law,
Parent shall cause the Surviving Corporation and its Subsidiaries to honor the
obligations of the Company and its Subsidiaries under all existing Company
Compensation and Benefit Plans.
(b) Parent agrees that, for at least one year from the Effective Time,
subject to applicable Law, the Surviving Corporation and its Subsidiaries shall
provide benefits to the individuals who, as of the Effective Time, were
employees of the Company or any of its Subsidiaries which will, in the
aggregate, be on the same terms and conditions as similarly situated employees
of Parent. Nothing herein shall be construed to prevent the termination of
employment of any employee or any amendment or termination of any Company
Compensation and Benefit Plan to the extent permitted by the terms and
conditions thereof as in effect on the date hereof.
(c) After the Effective Time, Parent shall grant (if applicable), and
shall cause the Surviving Corporation and its Subsidiaries to grant, to all
individuals who are, as of the Effective Time, employees of the Company or any
of its Subsidiaries credit for all service with the Company, any of its present
and former Subsidiaries, any other affiliate of the Company and their respective
predecessors (collectively, the "Company Affiliated Group") prior to the
Effective Time for purposes of eligibility and vesting (but not benefit accrual)
to the extent that prior service with Parent or its Subsidiaries is recognized
in respect of employees other than the employees of the Company Affiliated Group
and to the extent such service was recognized under the corresponding plan of
the Company and its Subsidiaries prior to the Effective Time. Any employee
benefit plan which provides medical, dental or life insurance benefits after the
Effective Time to any individual who is a current or former employee of the
Company Affiliated Group as of the Effective Time or a dependent thereof shall,
with respect to such individuals, waive any waiting periods and any pre-existing
conditions and actively-at-work exclusions to the extent so waived under present
policy of the Company Affiliated Group and shall provide that any expenses
incurred on or before the Effective Time by such individuals shall be taken into
account under such plans for purposes of satisfying applicable deductible or
coinsurance provisions to the extent taken into account under present policy of
the Company Affiliated Group.
(d) The Company shall amend all trusts and other funding arrangements
to the extent necessary to provide that no event which occurs in connection with
the transactions contemplated by this Agreement shall require the Company, the
Surviving Corporation, or any of their affiliates to make any payment of cash or
other property to any such trust or funding arrangement.
Section 5.12 Speer Financing. Upon the closing of the transactions
---------------
contemplated under that certain Asset Purchase Agreement dated as of February
16, 1999 by and among Parent, Speer Communications Holdings Limited Partnership,
a Nevada limited partnership, Speer Virtual Media Limited Partnership, a Nevada
limited partnership, Speer World Wide Digital Limited Partnership, a Nevada
limited partnership, Speer Productions Limited Partnership, a
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<PAGE>
Nevada limited partnership, Professional Video Services Corporation, a Delaware
corporation, and Enhanced Services of Nevada, Inc., a Nevada corporation, RMS
Limited Partnership, a Nevada limited partnership, and Roy M. Speer, Parent
shall assume the promissory notes and loan agreements in effect between Speer
Communications Holdings Limited Partnership and the Company in an aggregate
amount not to exceed $5,000,000 of which $3,750,000 has been loaned to the
Company as of the date hereof (the "Line of Credit"). In the event such closing
occurs, none of Parent, MergerSub nor any affiliate shall accelerate or demand
the payment under the Line of Credit so assumed of any amounts outstanding
thereunder prior to the termination of this Agreement in accordance with its
terms, and Parent agrees to extend additional credit under the Line of Credit in
accordance with and subject to the terms and provisions thereof.
Section 5.13 Delivery of Final Audited Financials. Not later than the
------------------------------------
earlier of (a) ten days from the date hereof and (b) two business days prior to
the filing of the Proxy Statement with the SEC, the Company shall deliver to
Parent final audited consolidated financial statements of the Company as of and
for the fiscal year ended December 31, 1998 (the "Final Audited Financials").
Section 5.14 Modification of Merger Structure. The parties hereto
--------------------------------
acknowledge that Parent has had limited opportunity to examine the financial and
tax condition of the Company. Accordingly, the Company agrees that Parent shall
have the right, within 10 business days from the date hereof, to alter the
structure of the Merger to provide that the Company be the surviving corporation
in the Merger and in the event Parent elects to make such alteration the Company
agrees to enter into an amendment to this Agreement to effect such election
accordingly; provided, however, that the Company shall have no obligation and
Parent shall have no right to cause any other change to the terms or conditions
of this Agreement.
ARTICLE VI
CONDITIONS TO THE MERGER
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger.
----------------------------------------------------------
The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Closing Date (or waiver by the
party for whose benefit the applicable condition exists) of the following
conditions:
(a) The holders of the issued and outstanding Shares shall have duly
approved this Agreement and the Merger all in accordance with applicable Law,
the certificate of incorporation and bylaws of the Company, and the rules of the
NASDAQ Stock Market Smallcap Market.
(b) All regulatory approvals required to consummate the transactions
contemplated hereby shall have been obtained and shall be in full force and
effect and all statutory waiting periods in respect thereof shall have expired
or been terminated, other than any such regulatory approvals the failure to
obtain which is not reasonably likely, individually, in the aggregate or
together with all other existing facts, events and circumstances, to result in
any
28
<PAGE>
Material Adverse Effect on the Company (in the case of Parent's obligation to
close) or on Parent (in the case of the Company's obligation to close).
(c) No Law or Decree shall have been enacted, entered, promulgated, or
enforced by any court or other tribunal or Governmental Entity which prohibits
or makes illegal the consummation of any of the transactions contemplated
hereby. In the event any such Decree shall have been issued, each party shall
use its reasonable efforts to remove any such Decree.
(d) Prior to April 1, 1999, the Company shall have received from each
of Mr. Didier Primat (the beneficial owner of the Shares held by Alta
Investissements SA) and Vulcan Ventures Incorporated ("Vulcan") or their
respective successors extensions for payment of those certain loans each of
which is up to $2,000,000 (the "Preferred Shareholder Loans") in aggregate
principal amount from Mr. Primat and Vulcan to the Company from April 1, 1999 to
August 1, 1999.
Section 6.2 Conditions to Obligations of the Company to Effect the Merger.
-------------------------------------------------------------
The obligation of the Company to effect the Merger is further subject to the
conditions that:
(a) The representations and warranties of Parent and MergerSub
contained herein (which for purposes of this clause (a) shall be read as though
none of them contained any Material Adverse Effect or materiality qualification)
shall be true and correct in all respects as of the Closing Date with the same
effect as though made as of the Closing Date (provided that any representations
and warranties made as of a specified date shall be required only to continue on
the Closing Date to be true and correct as of such specified date) except (i)
for changes specifically permitted by the terms of this Agreement and (ii) where
the failure of the representations and warranties to be true and correct in all
respects would not in the aggregate have a Material Adverse Effect on either
Parent or MergerSub.
(b) Each of Parent and MergerSub shall have in all material respects
performed all obligations and complied with all covenants required by this
Agreement to be performed or complied with by it at or prior to the Closing
Date.
(c) Each of Parent and MergerSub shall have delivered to the Company a
certificate, dated the Closing Date and signed by its President or a Vice
President, certifying the satisfaction of the conditions set forth in the
foregoing clauses (a) and (b).
(d) Parent shall have undertaken to cause the Surviving Corporation to
pay off the Preferred Shareholder Loans no later than one business day
subsequent to the Closing Date.
Section 6.3 Conditions to Obligations of Parent to Effect the Merger.
--------------------------------------------------------
The obligation of Parent to effect the Merger is further subject to the
conditions that:
(a) The representations and warranties of the Company contained herein
(which for purposes of this clause (a) shall be read as though none of them
contained any Material Adverse Effect or materiality qualification) shall be
true and correct in all respects as of the Closing Date with the same effect as
though made as of the Closing Date (provided that any
29
<PAGE>
representations and warranties made as of a specified date shall be required
only to continue on the Closing Date to be true and correct as of such specified
date) except (i) for changes specifically permitted by the terms of this
Agreement and (ii) where the failure of the representations and warranties to be
true and correct in all respects would not in the aggregate have a Material
Adverse Effect on the Company.
(b) The Company shall have in all material respects performed all
obligations and complied with all covenants required by this Agreement to be
performed or complied with by it at or prior to the Closing Date.
(c) The Company shall have delivered to Parent a certificate, dated
the Closing Date and signed by its President or a Vice President, certifying the
satisfaction of the conditions set forth in the foregoing clauses (a) and (b).
ARTICLE VII
TERMINATION, WAIVER, AMENDMENT AND CLOSING
Section 7.1 Termination or Abandonment. This Agreement may be
--------------------------
terminated and the Merger may be abandoned at any time prior to the Effective
Time (notwithstanding any approval of this Agreement by the shareholders of the
Company):
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if the Merger shall not have been
consummated before July 15, 1999; provided, however, that the right to terminate
this Agreement under this Section 7.1(b) shall not be available to any party
whose failure to perform any covenant or obligation under this Agreement has
been the cause of or resulted in the failure of the Merger to occur on or before
such date;
(c) by Parent if (i) the Board of Directors of the Company shall or
shall resolve to (A) withdraw the Company Board Recommendation, (B) modify such
recommendation in a manner adverse to Parent or MergerSub or refuse to affirm
the Company Board Recommendation as promptly as practicable (but in any case
within 10 business days) after receipt of any written request from Parent which
request was made on a reasonable basis, or (C) approve or recommend any proposed
Company Business Combination (as defined in Section 7.3(d)), or (ii) the Company
has failed to call the Company Meeting or to mail the Proxy Statement to its
shareholders on or before June 7, 1999, or has failed to include in such
statement mailed by the Company the Company Board Recommendation;
(d) by Parent or the Company if at the Company Meeting (including any
adjournment or postponement thereof) the requisite vote of the shareholders of
the Company to approve this Agreement and the Merger shall not have been
obtained;
(e) by either the Company or Parent, if there shall be any Law or
Decree that prohibits or makes illegal consummation of the Merger or if any
Decree enjoining Parent or the
30
<PAGE>
Company from consummating the Merger is entered and such Decree shall become
final and nonappealable;
(f) by Parent or the Company if there shall have been a material
breach by the other of any of its representations, warranties, covenants or
agreements contained in this Agreement, which breach would result in the failure
to satisfy one or more of the conditions set forth in Section 6.2 (in the case
of a breach by the Company) or Section 6.3 (in the case of a breach by Parent),
and such breach shall be incapable of being cured or, if capable of being cured,
shall not have been cured within 30 days after written notice thereof shall have
been received by the party alleged to be in breach;
(g) by Parent if (i) the Company has filed a petition in bankruptcy,
is insolvent or has sought relief under any law related to the Company's
financial condition or its ability to meet its payment obligations or (ii) any
involuntary petition in bankruptcy has been filed against Company, or any relief
under any such law has been sought by any creditor(s) of Company, unless such
involuntary petition is dismissed, or such relief is denied, within 30 days
after it has been filed or sought; or
(h) by Parent if (i) either (x) the aggregate liabilities of the
Company and its Subsidiaries taken as a whole or (y) the consolidated net
working capital of the Company and its Subsidiaries, each as set forth on the
Final Audited Financials, is subject to an adverse change in excess of 3% of
such aggregate liabilities or consolidated net working capital, respectively, as
set forth in the Draft Audited Financials or (ii) the Company fails to deliver
the Final Audited Financials in accordance with the time parameters set forth in
Section 5.13.
Section 7.2 Effect of Termination. In the event of the termination of
---------------------
this Agreement pursuant to Section 7.1, this Agreement, except for the
provisions of this Section 7.2 and Sections 7.3, 8.2 and 8.4 shall become void
and have no effect, without any liability on the part of any party or any of its
affiliates. Notwithstanding the foregoing, nothing in this Section 7.2 shall
relieve any party to this Agreement of liability for any willful breach of any
provision of this Agreement.
Section 7.3 Termination Payments.
--------------------
(a) Upon the happening of a Company Triggering Event (as defined
below), the Company shall pay to Parent (or to any Subsidiary of Parent
designated in writing by Parent to the Company) the amount of $750,000 (the
"Company Termination Fee") (plus any Expense Fee that may be payable in the same
circumstances), by wire transfer of immediately available funds
(i) on the second business day after such termination in the case
of clause (a) of the definition of Company Triggering Event,
(ii) on or prior to the date of such termination, in the case of
clause (c) of the definition of Company Triggering Event, or
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(iii) on the earlier of the date an agreement is entered into with
respect to a Company Business Combination (as defined in Section 7.3(d)) or a
Company Business Combination is consummated, in the case of clauses (b) or (d)
of the definition of Company Triggering Event. In no event shall more than one
Company Termination Fee be payable under this Agreement.
"Company Triggering Event" means any one of the following:
a) a termination of this Agreement by Parent pursuant to
Section 7.1(c);
b) a termination of this Agreement by Parent or the
Company pursuant to Section 7.1(d), if (1) any Company
Business Combination is publicly proposed or announced
on or after the date hereof and prior to the Company
Meeting and (2) any Company Business Combination is
entered into, agreed to or consummated by the Company
or any of its subsidiaries with the other party or
parties to such publicly proposed or announced Company
Business Combination within 12 months of such
termination of this Agreement;
c) a termination of this Agreement by Parent pursuant to
Section 7.1(f) (but only if the breach of warranty,
representation, covenant or agreement that gives rise
to such termination arises out of bad faith or willful
misconduct of the Company), if any Company Business
Combination is entered into, agreed to or consummated
by the Company within 6 months of such termination of
this Agreement with a party with which the Company had
contact prior to such termination.
(b) Notwithstanding Section 8.2, if this Agreement is terminated by
Parent or the Company pursuant to Sections 7.1(d) or 7.1(h), then the Company
shall pay to Parent, on the second business day after such termination, by wire
transfer of immediately available funds, a cash amount necessary to compensate
the Parent for all reasonable fees and expenses incurred at any time prior to
such termination by it or on its behalf in connection with the Merger, the
preparation of this Agreement and the transactions contemplated by this
Agreement; provided that Parent shall provide reasonable records relating to
such fees and expenses upon request, and further providing that such fees and
expenses shall not exceed $250,000 in the aggregate.
(c) The parties acknowledge that the agreements contained in
paragraphs (a) through (c) of this Section 7.3 are an integral part of the
transactions contemplated by this Agreement, and that, without these agreements,
Parent would not enter into this Agreement; accordingly, if the Company fails to
pay promptly any fee payable by it pursuant to this Section 7.3, then the
Company shall pay to the Parent its costs and expenses (including attorneys'
fees) in connection with such suit, together with interest on the amount of the
fee at the prime or base
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rate of Norwest Bank, N.A. from the date such payment was due under this
Agreement until the date of payment.
(d) "Company Business Combination" shall mean:
(i) any merger, consolidation or other business combination as a
result of which the shareholders of the Company would hold less than 50% of the
voting securities outstanding following that transaction;
(ii) the acquisition of 50% or more of the outstanding capital
stock of the Company; or
(iii) the acquisition of 50% or more of the assets of the Company
and its Subsidiaries taken as a whole (including capital stock of any
Subsidiary);
provided that solely for purposes of clause (b)(1) of the definition of Company
Triggering Event, the percentage in clause (i) of this definition shall be
deemed to be 75% and the percentage in clauses (ii) and (iii) of this definition
shall be deemed to be 25%.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 No Survival of Representations and Warranties. None of the
---------------------------------------------
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Merger, except
for the agreements set forth in Article II, the provisions of Section 5.9,
Section 5.11 and this Section 8.1.
Section 8.2 Expenses. Subject to the provisions of Section 7.3, (a)
--------
whether or not the Merger is consummated, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby and
thereby shall be paid by the party incurring such expenses, except that the
expenses incurred in connection with (i) the preparation, filing, printing and
mailing the Proxy Statement (including registration and filing fees relating
thereto) shall be paid by the Company and (ii) the fee related to the filing of
a premerger notification notice to be submitted in accordance with the
requirements of the HSR Act shall be paid 50% by Parent and 50% by the Company
and (b) if the Merger is consummated, all transfer taxes shall be paid by the
Company.
Section 8.3 Counterparts; Effectiveness. This Agreement may be
---------------------------
executed in two or more consecutive counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were upon
the same instrument, and shall become effective when one or more counterparts
have been signed by each of the parties and delivered (by telecopy or otherwise)
to the other parties.
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Section 8.4 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the Laws of the State of Delaware, without regard
to the principles of conflicts of Laws thereof.
Section 8.5 Notices. All notices and other communications hereunder
-------
shall be in writing (including telecopy or similar writing) and shall be
effective (a) if given by telecopy, when such telecopy is transmitted to the
telecopy number specified in this Section 8.5 and the appropriate telecopy
confirmation is received or (b) if given by any other means, when delivered at
the address specified in this Section 8.5 (or at such other address as may be
provided in accordance with this section):
To the Company:
Precision Systems, Inc.
11800 30th Court North
St. Petersburg, Florida 33716
Attn: Kenneth M. Clinebell
Telephone: (727) 572-9300
Facsimile: (727) 573-9193
copy to:
Foley & Lardner
100 North Tampa Street
Suite 2700
Tampa, Florida 33602
Attn: David L. Robbins
Telephone: (813) 225-4134
Facsimile: (813) 221-4210
and
Troutman Sanders LLP
600 Peachtree Street N.E.
Suite 5200
Atlanta, Georgia 30308
Attn: James L. Smith III, Esq.
Telephone: (404) 885-3111
Facsimile: (404) 962-6687
To Parent or MergerSub:
Anschutz Digital Media, Inc.
555 Seventeenth Street, Suite 2400
Denver, Colorado 80202
Attention: Craig Slater
Telephone: (303) 298-1000
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Facsimile: (303) 298-8881
copy to:
Hogan & Hartson L.L.P.
One Tabor Center, Suite 1500
1200 Seventeenth Street
Denver, Colorado 80202
Attention: Steven A. Cohen
Telephone: (303) 899-7300
Facsimile: (303) 899-7333
Section 8.6 Assignment; Binding Effect . Neither this Agreement nor any
--------------------------
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto (whether by operation of Law or otherwise) without the prior
written consent of the other parties; provided however, that MergerSub may
assign all of its rights and obligations under this Agreement and the
transactions contemplated hereby to any other Subsidiary of Parent. Subject to
the preceding sentence, this Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and assigns.
Section 8.7 Severability. Any term or provision of this Agreement which
------------
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement in any other jurisdiction. If any provision of this Agreement is so
broad as to be unenforceable, such provision shall be interpreted to be only so
broad as is enforceable.
Section 8.8 Enforcement of Agreement. The parties hereto agree that
------------------------
money damages or other remedy at Law would not be sufficient or adequate remedy
for any breach or violation of, or a default under, this Agreement by them and
that in addition to all other remedies available to them, each of them shall be
entitled to the fullest extent permitted by Law to an injunction restraining
such breach, violation or default or threatened breach, violation or default and
to any other equitable relief, including, without limitation, specific
performance, without bond or other security being required.
Section 8.9 Miscellaneous. This Agreement:
-------------
(a) along with the Confidentiality Agreement, Exhibits and Disclosure
Schedules hereto, constitutes the entire agreement, and supersedes all other
prior agreements and understandings, both written and oral, between the parties,
or any of them, with respect to the subject matter hereof and thereof; and
(b) except for the provisions of Section 5.9, is not intended to and
shall not confer upon any person other than the parties hereto any rights or
remedies hereunder.
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Section 8.10 Headings. Headings of the Articles and Sections of this
--------
Agreement are for convenience of the parties only, and shall be given no
substantive or interpretive effect whatsoever.
Section 8.11 Certain Definitions. References in this Agreement to
-------------------
"Subsidiaries" of the Company or Parent shall mean any corporation or other form
of legal entity of which more than 50% of the outstanding voting securities are
on the date hereof directly or indirectly owned by the Company or Parent, as the
case may be. References in this Agreement (except as specifically otherwise
defined) to "affiliates" shall mean, as to any person, any other person which,
directly or indirectly, controls, or is controlled by, or is under common
control with, such person. As used in this definition, "control" (including,
with its correlative meanings, "controlled by" and "under common control with")
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of management or policies of a person, whether through the
ownership of securities or partnership of other ownership interests, by contract
or otherwise. References in the Agreement to "person" shall mean an individual,
a corporation, a partnership, an association, a trust or any other entity or
organization, including, without limitation, a governmental body or authority.
Section 8.12 Knowledge. Reference to the "knowledge" of any person that
---------
is not an individual shall be to the knowledge of the executive officers of such
person and, with respect to representations and warranties made or deemed to be
made as of the Closing Date, unless expressly limited to a specified date of
this Agreement, shall include knowledge obtained at any time after the date
hereof and prior to the Closing Date.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.
ANSCHUTZ DIGITAL MEDIA, INC.
By: /s/ Craig D. Slater
------------------------------------
Name: Craig D. Slater
--------------------------------
Title: Vice President
-------------------------------
PS ACQUISITIONS, INC.
By: /s/ Craig D. Slater
------------------------------------
Name: Craig D. Slater
--------------------------------
Title: Vice President
-------------------------------
PRECISION SYSTEMS, INC.
By: /s/ Kenneth M. Clinebell
------------------------------------
Name: Kenneth M. Clinebell
--------------------------------
Title: Chief Financial Officer
-------------------------------
37
