SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 12(g) and Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 19, 1998
TECH ELECTRO INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
Texas 0-27210 75-2408297
- --------------------------- ------------------------ ---------------------
State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation Identification No.)
4300 Wiley Post Road, Dallas, Texas 75244-2131
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (972) 239-7151
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Item 2. Acquisition or Disposition of Assets
On March 19, 1998, Tech Electro Industries, Inc. (the "Company")
consummated the acquisition of newly-issued shares of common stock equaling,
after issuance, 51% of the issued and outstanding common stock of US Computer
Group, Inc. US Computer Group is a computer maintenance, systems solution and
information technology partner headquartered in Farmingdale, NY with annual
revenues in excess of $25 million.
The transaction was originally announced on December 19, 1997, at
which time the Company had agreed to purchase a 62% interest in US Computer
Group from Telstar Holdings Ltd. Since the date of that announcement, the
Company, US Computer Group and Telstar Holdings have entered into an Amended and
Restated Stock Purchase Agreement which was executed and consummated on March
19, 1998. The purchase consideration for the interest in US Computer Group was
$1 million, paid in cash. In connection with the acquisition, US Computer Group
issued to Telstar Holdings shares of its newly authorized Series E Preferred
Stock with a stated value of $2,000,000 in consideration for the conversion of
loans made by Telstar Holdings to US Computer Group. The Company obtained the
funds for the acquisition through a private placement of shares pursuant to
Regulation S of the Securities Act of 1933, as amended, which was previously
reported on Form 8-K.
As part of this transaction, the Company has named three of the five
members of the Board of Directors of US Computer Group.
For further information, see the Press Release dated March 20, 1998
filed herewith as Exhibit 10.1.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired
It is currently impracticable to provide financial
statements of US Computer Group, Inc. The Company's
independent auditor is currently completing its
annual audit of the financial statements of US
Computer Group, Inc. and it is anticipated that the
Company will file those audited financial statements
no later than 60 days following the date by which
this Form 8-K must be filed.
(b) Pro Formal Financial Information
It is currently impracticable to provide pro forma
financial statements of US Computer Group, Inc. The
Company's independent auditor is currently completing
its annual audit of the financial statements of US
Computer Group, Inc. and it is anticipated that the
Company will file the pro forma financial statements
no later than 60 days following the date by which
this Form 8-K must be filed.
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(c) Exhibits
10.1 Press Release, March 20, 1998
10.2 Amended and Restated Stock Purchase Agreement among
Tech Electro Industries, Inc., US Computer Group,
Inc. and Telstar Holdings Limited.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TECH ELECTRO INDUSTRIES, INC.
-----------------------------
Date: March 23, 1998 /s/ William Kim Wah Tan
----------------------------
William Kim Wah Tan,
Chairman of the Board
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Exhibit Index
Exhibit
Number Description
- -------
10.1 Press Release, March 20, 1998
10.2 Amended and Restated Stock Purchase Agreement among Tech
Electro Industries, Inc., US Computer Group, Inc. and Telstar
Holdings Limited.
Exhibit 10.1
FOR IMMEDIATE RELEASE
March 20, 1998
Tech Electro Industries, Inc. Announces Consummation of U.S.Computer Group, Inc.
Transaction
Farmingdale, New York
Tech Electro Industries, Inc. (Nasdaq; TELE), announced today that it has
consummated the acquisition of a controlling interest in US Computer Group,
Inc., a complete systems solution and Information Technology partner
headquartered in Farmingdale, New York.
Tech Electro Industries Executive Vice President Steven Scott commented that
"the acquisition of US Computer Group follows our strategy of increasing
shareholder value through non-dilutive acquisitions, and we look forward to
pursuing additional similar opportunities."
US Computer Group was named to the inaugural Long Island Technology Fast 50. The
list, which includes Deloitte & Touche among its major sponsors, recognizes the
fastest growing technology companies on Long Island. Qualifying companies were
ranked by percentage of corporate growth over a five year period from 1992 to
1996. US Computer Group has also been placed on the INC. 500 list of the
nation's fastest-growing privately-held companies for five consecutive years,
and was named on the annual ranking of the 25 fastest-growing privately-held
companies on Long Island for eight consecutive years.
US Computer Group serves businesses throughout the Mid-Atlantic region from its
Long Island headquarters in Farmingdale, New York and offices in New York City,
Carlstadt, New Jersey and Fort Washington, Pennsylvania. The Company recorded
annual sales of $25 MM in fiscal 1997, which ended February 28, 1998.
Tech Electro Industries is a distributor of electronic components and is traded
on the Nasdaq Small Cap Market under the symbol "TELE".
For additional information, contact: [Steven Scott, 781-297-7236]
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Exhibit 10.2
STOCK PURCHASE AGREEMENT
AMONG
TECH ELECTRO INDUSTRIES, INC.
TELSTAR HOLDINGS LIMITED
and
US COMPUTER GROUP INC.
Relating to the Stock of
US COMPUTER GROUP INC.
March 19, 1998
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TABLE OF CONTENTS
Page
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1. DEFINITIONS...........................................................-1-
2. Sale and Transfer of Shares; Closing..................................-7-
------------------------------------
2.1 Shares.....................................................-7-
------
2.2 Purchase Price.............................................-7-
--------------
2.3 Deposit.................... ...............................-8-
-------
2.4 Closing....................................................-8-
-------
2.5 Closing Obligations........................................-8-
-------------------
3. Representations and Warranties of the Company.........................-9-
---------------------------------------------
3.1 Organization and Good Standing.............................-9-
------------------------------
3.2 Authority; No Conflict....................................-10-
----------------------
3.3 Capitalization............................................-11-
--------------
3.4 Validity of Securities....................................-11-
----------------------
3.5 Financial Statements......................................-12-
--------------------
3.6 Books and Records.........................................-12-
-----------------
3.7 Title to Properties; Encumbrances.........................-13-
---------------------------------
3.8 Condition and Sufficiency of Assets.......................-13-
-----------------------------------
3.9 Accounts Receivable.......................................-14-
-------------------
3.11 No Undisclosed Liabilities................................-14-
--------------------------
3.12 Taxes.....................................................-14-
-----
3.13 No Material Adverse Change................................-15-
--------------------------
3.14 Employee Benefit Plans....................................-15-
----------------------
3.15 Compliance with Legal Requirements; Governmental Authorizations
-----------------------------------------------------.....-18-
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Page
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3.16 Legal Proceedings; Orders.................................-19-
-------------------------
3.17 Absence of Certain Changes and Events.....................-20-
-------------------------------------
3.18 Contracts; No Defaults....................................-21-
----------------------
3.19 Insurance.................................................-23-
---------
3.20 Environmental Matters.....................................-23-
---------------------
3.21 Employees.................................................-25-
---------
3.22 Labor Relations; Compliance...................... ........-26-
---------------------------
3.23 Certain Payments..........................................-26-
----------------
3.24 Disclosure................................................-26-
----------
3.25 Brokers or Finders........................................-27-
------------------
3.26 Year 2000 Compliance......................................-27-
--------------------
4. Representations and Warranties of Buyer..............................-27-
---------------------------------------
4.1 Organization and Good Standing............................-27-
------------------------------
4.2 Authority; No Conflict....................................-27-
----------------------
4.3 Certain Proceedings.......................................-28-
-------------------
4.4 Brokers or Finders........................................-28-
------------------
4.5 Investment Purpose........................................-28-
------------------
5. Covenants of the Company Prior to Closing Date.......................-28-
----------------------------------------------
5.1 Delivery of Schedules and Exhibits........................-28-
----------------------------------
5.2 Access and Investigation..................................-28-
------------------------
5.3 Operation of the Businesses of the Acquired Companies.....-28-
-----------------------------------------------------
5.4 Employment Agreement......................................-29-
--------------------
5.5 Letter of Credit..........................................-29-
----------------
5.6 Negative Covenant.........................................-29-
-----------------
5.7 Notification..............................................-29-
------------
5.8 Payment of Indebtedness by Related Persons................-29-
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6. Covenants of Buyer Prior to Closing Date.............................-30-
----------------------------------------
6.1 Best Efforts..............................................-30-
------------
7. Conditions Precedent to Buyer's Obligation to Close..................-30-
---------------------------------------------------
7.1 Accuracy of Representations...............................-30-
---------------------------
7.2 The Company's Performance.................................-30-
-------------------------
7.3 Consents..................................................-30-
--------
7.4 Additional Documents......................................-30-
--------------------
7.5 No Proceedings............................................-30-
--------------
7.6 No Claim Regarding Stock Ownership or Sale Proceeds.......-31-
---------------------------------------------------
7.7 No Injunction.............................................-31-
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7.8 Conversion of Loans.......................................-31-
-------------------
8. Conditions Precedent to the Company's Obligation to Close............-31-
---------------------------------------------------------
8.1 Accuracy of Representations...............................-31-
---------------------------
8.2 Buyer's Performance.......................................-31-
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8.3 Issuance of Preferred Stock...............................-31-
---------------------------
8.4 Consents..................................................-31-
--------
8.5 Additional Documents......................................-32-
--------------------
8.6 No Injunction.............................................-32-
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9. Indemnification; Remedies............................................-32-
-------------------------
9.1 Survival; Right to Indemnification Not Affected by Knowledge
----------------------------------------------------......-32-
9.2 Indemnification and Payment of Damages by the Company.....-32-
-----------------------------------------------------
9.3 Indemnification and Payment of Damages by Buyer...........-33-
-----------------------------------------------
9.4 Procedure for Indemnification--Third Party Claims.........-33-
-------------------------------------------------
9.5 Procedure for Indemnification--Other Claims...............-34-
-------------------------------------------
9.6 Limitation on Indemnification.............................-35-
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10. Post Closing Covenants...............................................-35-
----------------------
10.1 Letter of Credit..........................................-35-
----------------
10.2 No Dilution of Shares.....................................-35-
---------------------
10.3 Election of Directors.....................................-35-
---------------------
10.4 Actions Requiring Director Approval.......................-35-
-----------------------------------
10.5 Actions Requiring Telstar Approval........................-36-
----------------------------------
10.6 Right of First Refusal....................................-36-
----------------------
10.7 No Sale of Shares.........................................-37-
-----------------
10.8 Termination of Provisions.................................-37-
-------------------------
11 General Provisions...................................................-38-
------------------
11.1 Expenses..................................................-38-
--------
11.2 Public Announcements......................................-38-
--------------------
11.3 Confidentiality...........................................-38-
---------------
11.4 Notices...................................................-39-
-------
11.5 Jurisdiction; Service of Process..........................-39-
--------------------------------
11.6 Further Assurances........................................-39-
------------------
11.7 Waiver....................................................-40-
------
11.8 Entire Agreement and Modification.........................-40-
---------------------------------
11.9 Disclosure Letter.........................................-40-
-----------------
11.10 Assignments, Successors, and No Third-party Rights........-40-
--------------------------------------------------
11.11 Severability..............................................-41-
------------
11.12 Section Headings, Construction............................-41-
------------------------------
11.13 Time of Essence...........................................-41-
---------------
11.14 Governing Law.............................................-41-
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11.15 Counterparts..............................................-41-
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Amended and Restated
Stock Purchase Agreement
This Amended and Restated Stock Purchase Agreement (this "Agreement")
is made as of March 19, 1998, by Tech Electro Industries, Inc., a Texas
corporation ("Buyer"), Telstar Holdings Limited, a corporation organized and
existing under the laws of England and Wales ("Telstar") and US Computer Group
Inc., a New York corporation (the "Company").
RECITALS
A. Buyer, Telstar and the Company have previously entered into a Stock
Purchase Agreement providing for the sale by Telstar to Buyer of shares of the
common stock of the Company (the "Original Agreement").
B. Buyer, Telstar and the Company have entered into amendments to the
Original Agreement (each an "Amendment" and collectively, the "Amendments").
C. Buyer, Telstar and the Company now desire to amend and restate in
its entirety the Original Agreement and the Amendments to provide that, among
other things, the Company shall sell newly issued shares of its common stock
directly to Buyer, and incorporating the other terms and conditions contained in
this Agreement.
AGREEMENT
NOW, THEREFORE, the parties, intending to be legally bound, do hereby
amend and restate the Original Agreement and the Amendments in their entirety
and hereby agree as follows:
1. DEFINITIONS
In addition to the definitions set forth in this Agreement the
following terms have the meanings specified or referred to in this Section 1:
"Acquired Companies"--the Company and its Subsidiaries, collectively.
"Applicable Contract"--any Contract (a) under which any Acquired
Company has or may acquire any rights, (b) under which any Acquired Company has
or may become subject to any obligation or liability, or (c) by which any
Acquired Company or any of the assets owned or used by it is or may become
bound.
"Best Efforts"--the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to ensure that such result
is achieved as expeditiously as possible; provided, however, that an obligation
to use Best Efforts under this Agreement does not require the Person subject to
that obligation to take actions that would result in a materially adverse change
in the benefits to such Person under this Agreement and the Contemplated
Transactions.
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"Breach"--a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be deemed to have occurred if there is or has
been (a) any inaccuracy in or breach of, or any failure to perform or comply
with, such representation, warranty, covenant, obligation, or other provision,
or (b) any claim (by any Person) or other occurrence or circumstance that is or
was inconsistent with such representation, warranty, covenant, obligation, or
other provision, and the term "Breach" means any such inaccuracy, breach,
failure, claim, occurrence, or circumstance.
"Consent"--any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"Contemplated Transactions"--all of the transactions contemplated by
this Agreement, including, without limitation:
(a) the issuance of the Shares to Buyer;
(b) the performance by Buyer, Telstar and the Company of
their respective covenants and obligations under this
Agreement; and
(c) Buyer's acquisition and ownership of the Shares and
exercise of control over the Acquired Companies.
"Contract"--any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"Disclosure Letter"--the disclosure letter delivered by the Company to
Buyer concurrently with the execution and delivery of this Agreement.
"Encumbrance"--any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest, right of
first refusal, or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income, or exercise of any other attribute of
ownership.
"Environment"--soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), groundwaters, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life, and any other environmental
medium or natural resource.
"Environmental, Health, and Safety Liabilities"--any cost, damages,
expense, liability, obligation, or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:
(a) any environmental, health, or safety matters or
conditions (including on-site or off-site
contamination, occupational safety and health, and
regulation of chemical substances or products);
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(b) fines, penalties, judgments, awards, settlements,
legal or administrative proceedings, damages, losses,
claims, demands and response, investigative, remedial,
or inspection costs and expenses arising under
Environmental Law or Occupational Safety and Health
Law;
(c) financial responsibility under Environmental Law or
Occupational Safety and Health Law for cleanup costs
or corrective action, including any investigation,
cleanup, removal, containment, or other remediation or
response actions ("Cleanup") required by applicable
Environmental Law or Occupational Safety and Health
Law (whether or not such Cleanup has been required or
requested by any Governmental Body or any other
Person) and for any natural resource damages; or
(d) any other compliance, corrective, investigative, or
remedial measures required under Environmental Law or
Occupational Safety and Health Law.
The terms "removal," "remedial," and "response action," include the types of
activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. ss. 9601 et seq., as amended
("CERCLA").
"Environmental Law"--any Legal Requirement applicable to the Company
that requires the Company to:
(a) advise appropriate authorities, employees, and the
public of intended or actual releases of pollutants or
hazardous substances or materials, violations of
discharge limits, or other prohibitions and of the
commencements of activities, such as resource
extraction or construction, that could have
significant impact on the Environment;
(b) prevent or reduce to acceptable levels the release of
pollutants or Hazardous Materials into the
Environment;
(c) reduce the quantities, preventing the release, or
minimizing the hazardous characteristics of wastes
that are generated;
(d) assure that products are designed, formulated,
packaged, and used so that they do not present
unreasonable risks to human health or the Environment
when used or disposed of;
(e) protect resources, species, or ecological amenities;
(f) reduce to acceptable levels the risks inherent in the
transportation of Hazardous Materials;
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(g) cleaning up Hazardous Materials that have been
Released, prevent the Threat of Release, or pay the
costs of such clean up or prevention; or
(h) make responsible parties pay private parties, or
groups of them, for damages done to their health or
the Environment, or permitting self-appointed
representatives of the public interest to recover for
injuries done to public assets.
"ERISA"--the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"Facilities"--any real property, leaseholds, or other interests
currently or formerly owned or operated by any Acquired Company and any
buildings, plants, structures, or equipment (including motor vehicles, tank
cars, and rolling stock) currently or formerly owned or operated by any Acquired
Company.
"GAAP"--generally accepted United States accounting principles,
applied on a basis consistent with the basis on which the Balance Sheet and the
other financial statements referred to in Section 3.5 were prepared.
"Governmental Authorization"--any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"Governmental Body"--any:
(a) nation, state, county, city, town, village, district,
or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other
government;
(c) governmental or quasi-governmental authority of any
nature (including any governmental agency, branch,
department, official, or entity and any court or other
tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative,
police, regulatory, or taxing authority or power of
any nature.
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"Hazardous Activity"--the distribution, generation, handling,
importing, management, manufacturing, processing, production, refinement,
Release, storage, transfer, transportation, treatment, or use (including any
withdrawal or other use of groundwater) of Hazardous Materials in, on, under,
about, or from the Facilities or any part thereof into the Environment, and any
other act, business, operation, or thing that increases the danger, or risk of
danger, or poses an unreasonable risk of harm to persons or property on or off
the Facilities, or that may affect the value of the Facilities or the Acquired
Companies.
"Hazardous Materials"--any waste or other substance that is listed,
defined, designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, including any admixture or solution thereof, and specifically
including petroleum and all derivatives thereof or synthetic substitutes
therefor and asbestos or asbestos-containing materials.
"IRC"--the Internal Revenue Code of 1986 or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS"--the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
"Legal Requirement"--any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, regulation, statute, or treaty.
"Letter of Credit"--the letter of credit referred to in Section 5.5 of
this Agreement.
"Material Adverse Change"--with respect to any Person or fact, a
circumstance, event or condition which results in a material adverse effect on
the financial condition, results of operations, prospects, business, properties,
assets or liabilities of such Person and its subsidiaries, taken as a whole.
"Occupational Safety and Health Law"--any Legal Requirement designed
to provide safe and healthful working conditions and to reduce occupational
safety and health hazards.
"Order"--any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"Ordinary Course of Business"--an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of
such Person and is taken in the ordinary course of the
normal day-to-day operations of such Person;
(b) such action is not required to be authorized by the
board of directors of such Person (or by any Person or
group of Persons exercising similar authority); and
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(c) such action is similar in nature and magnitude to
actions customarily taken, without any authorization
by the board of directors (or by any Person or group
of Persons exercising similar authority), in the
ordinary course of the normal day-to-day operations of
other Persons that are in the same line of business as
such Person.
"Organizational Documents"--(a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership agreement and
any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) any charter or similar document adopted or filed in connection
with the creation, formation, or organization of a Person; and (e) any amendment
to any of the foregoing.
"Person"--any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"Preferred Shares"--the shares of the Company's preferred stock to be
issued to Telstar in consideration for its forgiveness of debt owed by the
Company.
"Proceeding"--any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"Related Person"--with respect to a particular individual:
(a) any Person that directly or indirectly controls, is
directly or indirectly controlled by, or is directly
or indirectly under common control with such specified
Person;
(b) each Person that serves as a director, officer,
partner, executor, or trustee of such specified Person
(or in a similar capacity);
(c) any Person with respect to which such specified Person
serves as a general partner or a trustee (or in a
similar capacity).
"Release"--any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment, whether
intentional or unintentional.
"Representative"--with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
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"Securities Act"--the Securities Act of 1933, as amended, or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"Shares"-- Six Hundred Seventy-Eight Thousand Nine Hundred
Thirty-Seven (678,937) shares of the common stock of the Company, representing,
after issuance, fifty-one percent (51%) of the then issued and outstanding
shares of common stock of the Company.
"Subsidiary"--with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests having the
power to elect a majority of that corporation's or other Person's board of
directors or similar governing body, or otherwise having the power to direct the
business and policies of that corporation or other Person (other than securities
or other interests having such power only upon the happening of a contingency
that has not occurred) are held by the Owner or one or more of its Subsidiaries;
when used without reference to a particular Person, "Subsidiary" means a
Subsidiary of the Company.
"Taxes"--all taxes, charges, fees, levies, or other assessments,
including, without limitation, income, gross receipts, excise, property, sales,
occupation, use, service, service use, license, payroll, franchise, transfer and
recording taxes, fees and charges, imposed by the United States, or any state,
local or foreign government or subdivision or agency thereof whether computed on
a separate, consolidated, unitary, combined or any other basis; and such term
shall include any interest, liabilities, penalties and additions to tax
attributable to such assessment.
"Tax Return"--any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment of
any Tax or in connection with the administration, implementation, or enforcement
of or compliance with any Legal Requirement relating to any Tax.
"Threat of Release"--a substantial likelihood of a Release that may
require action in order to prevent or mitigate damage to the Environment that
may result from such Release.
"Threatened"--a claim, Proceeding, dispute, action, or other matter
will be deemed to have been "Threatened" if any demand or statement has been
made (orally or in writing) or any notice has been given (orally or in writing).
2. Sale and Transfer of Shares; Closing.
2.1 Shares. Subject to the terms and conditions of this
Agreement, at the Closing, the Company shall issue the Shares to Buyer, and
Buyer will purchase the Shares from the Company.
2.2 Purchase Price. The purchase price (the "Purchase
Price") for the Shares will be One Million Dollars ($1,000,000).
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2.3 Deposit. Buyer has, at the time the Original Agreement
was entered into, deposited with the Company the sum of Five Hundred Thousand
Dollars ($500,000) (the "Deposit"), representing a portion of the Purchase
Price. The Deposit shall be credited against the Purchase Price at Closing;
provided, that if this Agreement is terminated or if the Closing does not take
place for any reason, the Company shall immediately return the Deposit to Buyer
upon Buyer's written request.
2.4 Closing. The purchase and sale (the "Closing") provided
for in this Agreement will take place at the offices of Seller at 10:00 a.m.
(local time) on March 20, 1998, or at such other time and place as the parties
may agree. Failure to consummate the purchase and sale provided for in this
Agreement on the date and time and at the place determined pursuant to this
Section 2.4 will not result in the termination of this Agreement and will not
relieve any party of any obligation under this Agreement; provided, that if the
Closing does not take place on or before March 20, 1998, the Company shall
return the Deposit.
2.5 Closing Obligations. At the Closing:
2.5.1 The Company will deliver to Buyer:
(a) newly issued certificates representing the Shares
issued in the name of Buyer or Buyer's designee;
(b) an employment agreement between the Company and
Stephen Davies (the "Employment Agreement"), which
Employment Agreement shall be in a form satisfactory
to Buyer;
(c) a certificate executed by the Company representing and
warranting to Buyer that the Company's representations
and warranties in this Agreement were accurate in all
respects as of the date of this Agreement and are
accurate in all respects as of the Closing Date as if
made on the Closing Date (giving full effect to any
supplements to the Disclosure Letter that were
delivered by the Company to Buyer prior to the Closing
Date in accordance with Section 5.1);
(d) evidence that all loans and other liabilities of the
Company or any Acquired Company to Telstar, and all
interest, fees and charges thereon, have been forgiven
by Telstar; and
(e) reimbursement for any and all finders' brokers',
audit, legal and other expenses incurred by the Buyer
in connection with the acquisition of the Shares and
the Contemplated Transactions, which reimbursement
shall not exceed Two Hundred Thousand Dollars
($200,000).
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2.5.2 Buyer will deliver to the Company:
(a) the Purchase Price, less the Deposit, net of the
expenses reflected in Section 2.5.1(e), by bank
cashier's or certified check payable to the order of
the Company or by wire transfer to accounts specified
by the Company.
(b) a certificate executed by Buyer to the effect that,
except as otherwise stated in such certificate, each
of Buyer's representations and warranties in this
Agreement was accurate in all respects as of the date
of this Agreement and is accurate in all respects as
of the Closing Date as if made on the Closing Date;
and
2.5.3 The Company will deliver to Telstar a certificate
representing the Preferred Shares.
3. Representations and Warranties of the Company. The Company
represents and warrants to Buyer as follows:
3.1 Organization and Good Standing.
3.1.1 Part 3.1 of the Disclosure Letter contains a
complete and accurate list for each Acquired Company of its name, its
jurisdiction of incorporation, other jurisdictions in which it is authorized to
do business, and its capitalization (including the identity of each stockholder
and the number of shares held by each). Each Acquired Company is a corporation
duly organized, validly existing, and in good standing under the laws of its
jurisdiction of incorporation, with full corporate power and authority to
conduct its business as it is now being conducted, to own or use the properties
and assets that it purports to own or use, and to perform all of its obligations
under Applicable Contracts. Each Acquired Company is duly qualified to do
business as a foreign corporation and is in good standing under the laws of each
state or other jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the activities conducted by it,
requires such qualification, except where the failure to be so qualified would
not have a material adverse effect on the financial condition, results of
operations, prospects, business, properties, assets or liabilities of the
Company.
3.1.2 The Company has delivered to Buyer copies of the
Organizational Documents of each Acquired Company, as currently in effect.
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3.2 Authority; No Conflict.
3.2.1 This Agreement constitutes the legal, valid, and
binding obligation of the Company, enforceable against the Company in accordance
with its terms; subject, however, to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws effecting
creditors' rights generally, and subject as to enforceability to general
principles or equity (regardless of whether enforcement is sought in a
proceeding or law or in equity). The Company has all corporate power, authority,
and capacity to execute and deliver this Agreement and to perform its
obligations under this Agreement.
3.2.2 Except as set forth in Part 3.2 of the Disclosure
Letter, neither the execution and delivery of this Agreement nor the
consummation or performance of any of the Contemplated Transactions will,
directly or indirectly (with or without notice or lapse of time):
(a) contravene, conflict with, or result in a violation of
(A) any provision of the Organizational Documents of
the Acquired Companies, or (B) any resolution adopted
by the board of directors or the stockholders of any
Acquired Company;
(b) to the best of the Company's knowledge, contravene,
conflict with, or result in a material violation of,
or give any Governmental Body or other Person the
right to challenge any of the Contemplated
Transactions or to exercise any remedy or obtain any
relief under, any Legal Requirement or any Order to
which any Acquired Company, or any of the assets owned
or used by any Acquired Company, may be subject;
(c) to the best of the Company's knowledge, contravene,
conflict with, or result in a violation of any of the
material terms or requirements of, or give any
Governmental Body the right to revoke, withdraw,
suspend, cancel, terminate, or modify, any
Governmental Authorization that is held by any
Acquired Company or that otherwise is applicable to
the business of, or any of the assets owned or used
by, any Acquired Company;
(d) cause Buyer or any Acquired Company to become subject
to, or to become liable for the payment of, any Tax;
(e) cause any of the assets owned by any Acquired Company
to be reassessed or revalued by any taxing authority
or other Governmental Body;
(f) contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the
right to declare a default or exercise any remedy
under, or to accelerate the maturity or performance
of, or to cancel, terminate, or modify, any Applicable
Contract; or
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(g) result in the imposition or creation of any
Encumbrance upon or with respect to any of the assets
owned or used by any Acquired Company.
Except as set forth in Part 3.2 of the Disclosure Letter, no Acquired Company is
or will be required to give any notice to or obtain any Consent from any Person
in connection with the execution and delivery of this Agreement or the
consummation or performance of any of the Contemplated Transactions.
3.3 Capitalization. The authorized equity securities of the Company
consist of 1,500,000 shares of common stock, par value $0.00001 per share, of
which 652,312.03 shares are issued and outstanding, excluding the Shares; 1,000
shares of series A Preferred Stock, par value $100 per share, of which no shares
are outstanding; 2,000 shares of series B Preferred Stock, par value $100 per
share, of which no shares are outstanding; 3,500 shares of series C Preferred
Stock, par value $100 per share, of which no shares are outstanding; and 1,000
shares of series D Preferred Stock, par value $1,000 per share, of which
181.348534 shares are outstanding. Telstar owns 538,776.61 of the outstanding
shares of common stock of the Company, Stephen Davies owns 67,416.42 of the
outstanding shares of common stock of the
Company, and the 401(k) benefit plan maintained by the Company is the holder of
46,119 shares of the outstanding common stock of the Company. With the exception
of the Shares and with the exception of the holders of the Company's securities
identified in Part 3.3 of the Disclosure Letter, all of the outstanding equity
securities and other securities of each Acquired Company are owned of record and
beneficially by one or more of the Acquired Companies, free and clear of all
Encumbrances. No legend or other reference to any purported Encumbrance appears
upon any certificate representing the Shares, or, to the best of the Company's
knowledge, any other certificate representing equity securities of any Acquired
Company. To the best of the Company's knowledge, all of the outstanding equity
securities of each Acquired Company have been duly authorized and validly issued
and are fully paid and nonassessable. To the best of the Company's knowledge,
there are no Contracts relating to the issuance, sale, or transfer of any equity
securities or other securities of any Acquired Company. None of the outstanding
equity securities or other securities of any Acquired Company was issued in
violation of the Securities Act or any other Legal Requirement. To the best of
the Company's knowledge, no Acquired Company owns, or has any Contract to
acquire, any equity securities or other securities of any Person (other than
Acquired Companies) or any direct or indirect equity or ownership interest in
any other business.
3.4 Validity of Securities. The Shares, when issued, sold and
delivered in accordance with its terms for the consideration expressed herein,
shall be duly and validly issued.
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3.5 Financial Statements. The Company has delivered to Buyer
unaudited consolidated balance sheets of the Acquired Companies as at September
30, 1997 and October 31, 1997, the related consolidated statements of income and
cash flow for the eight months ended October 31, 1997, and the accompanying
monthly balance sheets and income statements of the Company's Subsidiaries,
copies of which are attached hereto as Exhibit 3.5. To the best of the
Company's knowledge, such financial statements are complete and accurate, and
fairly present the financial condition, the results of operations and cash flow
of the Acquired Companies as at the respective dates of and for the periods
referred to in such financial statements, all in accordance with GAAP, subject,
in the case of interim financial statements, to normal recurring year-end
adjustments (the effect of which will not, individually or in the aggregate, be
materially adverse) and the absence of notes (that, if presented, would not
differ materially from those included in the Balance Sheet); the financial
statements referred to in this Section 3.5 reflect the consistent application of
such accounting principles throughout the periods involved. No financial
statements of any Person other than the Acquired Companies are required by GAAP
to be included in the consolidated financial statements of the Company.
3.6 Books and Records. To the best of the Company's knowledge, the
books of account, minute books, stock record books, and other material records
of the Acquired Companies, all of which have been made available to Buyer, are
complete and correct and have been maintained in accordance with sound business
practices. The minute books of the Acquired Companies contain accurate records
of all meetings held of, and corporate action taken by, the stockholders, the
Boards of Directors, and committees of the Boards of Directors of the Acquired
Companies, and no meeting of any such stockholders, Board of Directors, or
committee has been held for which minutes have not been prepared and are not
contained in such minute books. At the Closing, all of those books and records
will be in the possession of the Acquired Companies or their respective counsel.
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<PAGE>
3.7 Title to Properties; Encumbrances. Part 3.7 of the Disclosure
Letter contains a complete and accurate list of all real property, leaseholds,
or other interests therein owned by any Acquired Company, including all of the
properties and assets reflected in the Balance Sheet and the Interim Balance
Sheet (except for assets held under capitalized leases disclosed or not required
to be disclosed in Part 3.7 of the Disclosure Letter and personal property sold
since the date of the Balance Sheet and the Interim Balance Sheet, as the case
may be, in the Ordinary Course of Business), and all of the properties and
assets purchased or otherwise acquired by the Acquired Companies since the date
of the Balance Sheet (except for personal property acquired and sold since the
date of the Balance Sheet in the Ordinary Course of Business and consistent with
past practice). Except as otherwise set forth in Part 3.6 of the Disclosure
Letter, all material properties and assets reflected in the Balance Sheet and
the Interim Balance Sheet are free and clear of all Encumbrances and are not, in
the case of real property, subject to any rights of way, building use
restrictions, exceptions, variances, reservations, or limitations of any nature
except, with respect to all such properties and assets, (a) mortgages or
security interests shown on the Balance Sheet or the Interim Balance Sheet as
securing specified liabilities or obligations, with respect to which no default
(or event that, with notice or lapse of time or both, would constitute a
default) exists, (b) mortgages or security interests incurred in connection with
the purchase of property or assets after the date of the Interim Balance Sheet
(such mortgages and security interests being limited to the property or assets
so acquired), with respect to which no default (or event that, with notice or
lapse of time or both, would constitute a default) exists, (c) liens for current
taxes not yet due, and (d) with respect to real property, (i) minor
imperfections of title, if any, none of which is substantial in amount,
materially detracts from the value or impairs the use of the property subject
thereto, or impairs the operations of any Acquired Company, and (ii) zoning laws
and other land use restrictions that do not impair the present or anticipated
use of the property subject thereto.
3.8 Condition and Sufficiency of Assets. The buildings, plants,
structures, and equipment of the Acquired Companies are structurally sound, are
in good operating condition and repair, and are adequate for the uses to which
they are being put, and none of such buildings, plants, structures, or equipment
is in need of maintenance or repairs except for ordinary, routine maintenance
and repairs that are not material in nature or cost. The building, plants,
structures, and equipment of the Acquired Companies are sufficient for the
continued conduct of the Acquired Companies' businesses after the Closing in
substantially the same manner as conducted prior to the Closing.
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<PAGE>
3.9 Accounts Receivable. All accounts receivable of the Acquired
Companies that are reflected on the Balance Sheet or the Interim Balance Sheet
or on the accounting records of the Acquired Companies as of the Closing Date
(collectively, the "Accounts Receivable") represent or will represent valid
obligations arising from sales actually made or services actually performed in
the Ordinary Course of Business. Unless paid prior to the Closing Date, the
Accounts Receivable are or will be as of the Closing Date current and
collectible net of the respective reserves shown on the Balance Sheet or the
Interim Balance Sheet or on the accounting records of the Acquired Companies as
of the Closing Date (which reserves are adequate and calculated consistent with
past practice and, in the case of the reserve as of the Closing Date, will not
represent a greater percentage of the Accounts Receivable as of the Closing Date
than the reserve reflected in the Interim Balance Sheet represented of the
Accounts Receivable reflected therein and will not represent a Material Adverse
Change in the composition of such Accounts Receivable in terms of aging). To the
best of the Company's knowledge, there is no contest, claim, or right of
set-off, other than returns in the Ordinary Course of Business, under any
Contract with any obligor of an Accounts Receivable relating to the amount or
validity of such Accounts Receivable. Part 3.9 of the Disclosure Letter contains
a complete and accurate list of all Accounts Receivable as of the date of the
Interim Balance Sheet, which list sets forth the aging of such Accounts
Receivable.
3.10 Intentionally Deleted.
3.11 No Undisclosed Liabilities. Except as set forth in Part 3.11 of
the Disclosure Letter, to the best of the Company's knowledge, the Acquired
Companies have no liabilities or obligations of any nature (whether known or
unknown and whether absolute, accrued, contingent, or otherwise) except for
liabilities or obligations reflected or reserved against in the Balance Sheet or
the Interim Balance Sheet and current liabilities incurred in the Ordinary
Course of Business since the respective dates thereof.
3.12 Taxes.
3.12.1 To the best of the Company's knowledge, the
Acquired Companies have filed or caused to be filed (on a timely basis since
their inception or formation) all Tax Returns that are or were required to be
filed by or with respect to any of them, either separately or as a member of a
group of corporations, pursuant to applicable Legal Requirements. The Company
has made available to Buyer copies of, and Part 3.12 of the Disclosure Letter
contains a complete and accurate list of, all such Tax Returns filed since
January 1, 1993. To the best of the Company's knowledge, the Acquired Companies
have paid, or made provision for the payment of, all Taxes that have or may have
become due pursuant to those Tax Returns or otherwise, or pursuant to any
assessment received by any Acquired Company, except such Taxes, if any, as are
listed in Part 3.12 of the Disclosure Letter and are being contested in good
faith and as to which adequate reserves (determined in accordance with GAAP)
have been provided in the Balance Sheet and the Interim Balance Sheet.
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<PAGE>
3.12.2 The United States federal and state income Tax
Returns of each Acquired Company subject to such Taxes have been audited by the
IRS or relevant state tax authorities or are closed by the applicable statute of
limitations for all taxable years through 1994 and 1993, respectively. Part 3.12
of the Disclosure Letter contains a complete and accurate list of all audits of
all such Tax Returns, including a reasonably detailed description of the nature
and outcome of each audit. To the best of the Company's knowledge, all
deficiencies proposed as a result of such audits have been paid, reserved
against, settled, or, as described in Part 3.12 of the Disclosure Letter, are
being contested in good faith by appropriate proceedings. Part 3.12 of the
Disclosure Letter describes all adjustments to the United States federal income
Tax Returns filed by any Acquired Company or any group of corporations including
any Acquired Company for all taxable years since 1991, and the resulting
deficiencies proposed by the IRS. Except as described in Part 3.12 of the
Disclosure Letter, no Acquired Company has given or been requested to give
waivers or extensions (or is or would be subject to a waiver or extension given
by any other Person) of any statute of limitations relating to the payment of
Taxes of any Acquired Company or for which any Acquired Company may be liable.
3.12.3 To the best of the Company's knowledge, the
charges, accruals, and reserves with respect to Taxes on the respective books of
each Acquired Company are adequate (determined in accordance with GAAP) and are
at least equal to that Acquired Company's liability for Taxes. To the best of
the Company's knowledge, there exists no proposed tax assessment against any
Acquired Company except as disclosed in the Balance Sheet or in Part 3.12 of the
Disclosure Letter. To the best of the Company's knowledge, no consent to the
application of Section 341(f)(2) of the IRC has been filed with respect to any
property or assets held, acquired, or to be acquired by any Acquired Company. To
the best of the Company's knowledge, all Taxes that any Acquired Company is or
was required by Legal Requirements to withhold or collect have been duly
withheld or collected and, to the extent required, have been paid to the proper
Governmental Body or other Person.
3.12.4 All Tax Returns filed by (or that include on a
consolidated basis) any Acquired Company are true, correct, and complete in all
material respects in all material respects. There is no tax sharing agreement
that will require any payment by any Acquired Company after the date of this
Agreement.
3.13 No Material Adverse Change. Since the date of the Balance
Sheet, to the best of the Company's knowledge, there has not been any Material
Adverse Change in the business, operations, properties, prospects, assets, or
Condition of the Acquired Company, taken as a whole, and, to the best of the
Company's knowledge, no event has occurred or circumstance exists that may
result in such a Material Adverse change.
3.14 Employee Benefit Plans.
3.14.1 Part 3.14 of the Disclosure Letter attached hereto
is a true, accurate and complete list of "Employee Plans" consisting of each:
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(a) "employee welfare benefit plan", as defined in Section
3(1) of ERISA, (A) which the Company or any Subsidiary
maintains or administers or to which the Company or
any Subsidiary contributes or is required to
contribute, and (B) which covers any employee or
former employee of the Company or any Subsidiary or
under which the Company or any Subsidiary has any
liability (a "Welfare Plan");
(b) "multiemployer pension plan," as defined in Section
3(37) of ERISA, (A) which the Company or any
Subsidiary maintains or administers or to which the
Company or any Subsidiary contributes or is required
to contribute at any time after September 25, 1980,
and (B) which covers any employee or former employee
of the Company or any Subsidiary or under which the
Company or any Subsidiary has any liability (a
"Multiemployer Plan");
(c) employee plan which is maintained in connection with
any trust described in Section 501(c)(9) of the Code;
(d) "employee pension benefit plan" as defined in Section
3(2) of ERISA (other than a Multiemployer Plan) (A)
which the Company or any Subsidiary maintains or
administers or to which the Company or any Subsidiary
contributes or is required to contribute, and (B)
which covers any employee or former employee of the
Company or any Subsidiary or under which the Company
or any Subsidiary has any liability (a "Pension
Plan"); and
(e) plan or arrangement (written or oral) providing for
insurance coverage (including any self-insured
arrangements), workers' compensation, disability
benefits, supplemental unemployment benefits, vacation
benefits, retirement benefits or for deferred
compensation, profit-sharing, bonuses, stock options,
stock appreciation rights, stock purchases or other
forms of incentive compensation or post-retirement
insurance, compensation or benefits which (A) is not a
Welfare Plan, Pension Plan or Multiemployer Plan, (B)
is entered into, maintained, contributed to or
required to be contributed to, as the case may be, by
the Company or any Subsidiary or under which the
Company or any Subsidiary has any liability, and (C)
covers any employee or former employee of the Company
or any Subsidiary (collectively, "Benefit
Arrangements");
3.14.2 To the best of the Company's knowledge, and except
as otherwise set forth in Part 3.14.2 of the Disclosure Letter;
(a) There is no Pension Plan which is subject to the
minimum funding requirements of ERISA.
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(b) Each Pension Plan and each related trust agreement,
annuity contract or other funding instrument which is
intended to be tax-exempt under the provisions of
Section 401(a) (or 403(a) as appropriate) of the Code
and Section 501(a) of the Code is so qualified and has
been so qualified during the period from its adoption
to date.
(c) Each Pension Plan, each related trust agreement,
annuity contract or other funding instrument and each
Welfare Plan complies in all material respects and has
been maintained in material compliance with its terms
and, both as to form and in operation, with the
requirements prescribed by any and all statutes,
orders, rules and regulations which are applicable to
such plans, including but not limited to ERISA and the
Code.
(d) Neither the Company nor any Subsidiary maintains any
Pension Plan that is subject to Title IV of ERISA.
3.14.3 Each Benefit Arrangement has been maintained in
substantial compliance with its terms and with the material requirements
prescribed by any and all statutes (to the extent non-compliance with any such
statutes does not result in a material adverse effect.
3.14.4 (a) Neither the Company nor any Subsidiary has, at
any time, withdrawn from a Multiemployer Plan in a
"complete withdrawal" or a "partial withdrawal" as
defined in Sections 4203 and 4205 of ERISA
respectively, which has resulted in any liability to
the Company or any Subsidiary.
(b) If, as of the Closing Date, the Company and/or the
Subsidiaries were to withdraw from all Multiemployer
Plans to which the Company or any of its Subsidiaries
has contributed or been obligated to contribute at any
time after September 25, 1980, neither the Company nor
any Subsidiary would incur any liabilities to such
plans under Title IV of ERISA.
3.14.5 Neither the Company, nor any Subsidiary nor, to the
best of the Company's knowledge, any plan fiduciary of any Welfare Plan or
Pension Plan has engaged in any transaction in violation of Section 406(a) or
(b) of ERISA or any "prohibited transaction," as defined in Section 4975(c)(1)
of the Code, for which no exemption exists under Section 4975(c)(2) or 4975(d)
of the Code.
3.14.6 To the best of the Company's knowledge, each
Welfare Plan, Pension Plan, related trust agreement, annuity contract or other
funding instrument and each Benefit Arrangement is a legal, valid and binding
obligation of the Company or the applicable Subsidiary and is in full force and
effect.
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3.14.7 To the best of the Company's knowledge, neither the
Company, nor any Subsidiary nor any Welfare Plan has any obligation to make any
payment to or with respect to any former employee of the Company or any
Subsidiary pursuant to any retiree medical benefit or other Welfare Plan and no
condition exists which would prevent the Company or any Subsidiary from amending
or terminating any such benefit or Welfare Plan.
3.15 Compliance with Legal Requirements; Governmental Authorizations.
3.15.1 To the best of the Company's knowledge, and except
as set forth in Part 3.15 of the Disclosure Letter:
(a) each Acquired Company in full compliance with each
material Legal Requirement that is or was applicable
to it or to the conduct or operation of its business
or the ownership or use of any of its assets (except
to the extent that non-compliance with such Legal
Requirements would not have a material adverse effect
on the Required Companies, their business, prospects
or financial condition, taken as an whole);
(b) no Acquired Company has received, at any time since
January 1, 1997, any notice or other communication
(whether oral or written) from any Governmental Body
or any other Person regarding (A) any actual, alleged,
possible, or potential violation of, or failure to
comply with, any material Legal Requirement, or (B)
any actual, alleged, possible, or potential obligation
on the part of any Acquired Company to undertake, or
to bear all or any portion of the cost of, any
remedial action of any nature.
3.15.2 Part 3.15 of the Disclosure Letter contains a
complete and accurate list of each Governmental Authorization that is held by
any Acquired Company or that otherwise relates to the business of, or to any of
the assets owned or used by, any Acquired Company. Each material Governmental
Authorization listed or required to be listed in Part 3.15 of the Disclosure
Letter is valid and in full force and effect. To the best the Company's
knowledge, and except as set forth in Part 3.15 of the Disclosure Letter:
(a) each Acquired Company is, in full material compliance
with all of the terms and requirements of each
Governmental Authorization identified or required to
be identified in Part 3.15 of the Disclosure Letter;
(b) no Acquired Company has received, at any time since
January 1, 1997, any notice or other communication
(whether oral or written) from any Governmental Body
or any other Person regarding (A) any actual, alleged,
possible, or potential violation of or failure to
comply with any material term or requirement of any
Governmental Authorization, or (B) any actual,
proposed, possible, or potential revocation,
withdrawal, suspension, cancellation, termination of,
or modification to any Governmental Authorization; and
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(c) all applications required to have been filed for the
renewal of the material Governmental Authorizations
listed or required to be listed in Part 3.14 of the
Disclosure Letter have been duly filed on a timely
basis with the appropriate Governmental Bodies, and
all other filings required to have been made with
respect to such Governmental Authorizations have been
duly made on a timely basis with the appropriate
Governmental Bodies.
The Governmental Authorizations listed in Part 3.15 of the Disclosure Letter
collectively constitute all of the Governmental Authorizations necessary to
permit the Acquired Companies to lawfully conduct and operate their businesses
in the manner they currently conduct and operate such businesses and to permit
the Acquired Companies to own and use their assets in the manner in which they
currently own and use such assets.
3.16 Legal Proceedings; Orders.
3.16.1 Except as set forth in Part 3.16 of the Disclosure
Letter, to the best of the Company's knowledge, there is no pending Proceeding:
(a) that has been commenced by or against any Acquired
Company or that otherwise relates to or may affect the
business of, or any of the assets owned or used by,
any Acquired Company; or
(b) that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise
interfering with, any of the Contemplated
Transactions.
(c) (1) To the best of the Company's knowledge, no such
Proceeding has been Threatened, and (2) to the best of
the Company's knowledge, the Company has not been
notified of the occurrence of any event or
circumstance exists that may give rise to or serve as
a basis for the commencement of any such Proceeding.
The Company has delivered to Buyer copies of all
pleadings, correspondence, and other documents
relating to each Proceeding listed in Part 3.16 of the
Disclosure Letter. To the best of the Company's
knowledge, the Proceedings listed in Part 3.16 of the
Disclosure Letter will not have a material adverse
effect on the business, operations, assets, condition,
or prospects of the Acquired Companies, taken as a
whole.
3.16.2 Except as set forth in Part 3.16 of the Disclosure
Letter:
(a) To the best of the Company's knowledge, there is no
Order to which any of the Acquired Companies, or any
of the assets owned or used by any Acquired Company,
is subject;
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(b) The Company Telstar is not subject to any Order that
relates to the business of, or any of the assets owned
or used by, any Acquired Company; and
(c) To the best of the Company's knowledge, no officer,
director, agent, or employee of any Acquired Company
is subject to any Order that prohibits such officer,
director, agent, or employee from engaging in or
continuing any conduct, activity, or practice relating
to the business of any Acquired Company.
3.17 Absence of Certain Changes and Events. Except as set forth in
Part 3.17 of the Disclosure Letter, since the date of the Balance Sheet, the
Acquired Companies have conducted their businesses only in the Ordinary Course
of Business and to the best of the Company's knowledge there has not been any:
3.17.1 change in any Acquired Company's authorized or
issued capital stock; grant of any stock option or right to purchase shares of
capital stock of any Acquired Company; issuance of any security convertible into
such capital stock; grant of any registration rights; purchase, redemption,
retirement, or other acquisition by any Acquired Company of any shares of any
such capital stock; or declaration or payment of any dividend or other
distribution or payment in respect of shares of capital stock;
3.17.2 amendment to the Organizational Documents of any
Acquired Company;
3.17.3 payment or increase by any Acquired Company of any
bonuses, salaries, or other compensation to any stockholder, director, officer,
or (except in the Ordinary Course of Business) employee or entry into any
employment, severance, or similar Contract with any director, officer, or
employee;
3.17.4 adoption of, or increase in the payments to or
benefits under, any profit sharing, bonus, deferred compensation, savings,
insurance, pension, retirement, or other employee benefit plan for or with any
employees of any Acquired Company;
3.17.5 damage to or destruction or loss of any asset or
property of any Acquired Company, whether or not covered by insurance,
materially and adversely affecting the properties, assets, business, financial
condition, or prospects of the Acquired Companies, taken as a whole;
3.17.6 entry into, termination of, or receipt of notice of
termination of (i) any license, distributorship, dealer, sales representative,
joint venture, credit, or similar agreement, or (ii) any Contract or transaction
involving a total remaining commitment by or to any Acquired Company of at least
$50,000;
3.17.7 sale (other than sales of inventory in the Ordinary
Course of Business), lease, or other disposition of any asset or property of any
Acquired Company or mortgage, pledge, or imposition of any lien or other
encumbrance on any material asset or property of any Acquired Company, including
the sale, lease, or other disposition of any of the Intellectual Property
Assets;
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3.17.8 cancellation or waiver of any claims or rights with
a value to any Acquired Company in excess of $50,000;
3.17.9 material change in the accounting methods used by
any Acquired Company; or
3.17.10 agreement, whether oral or written, by any
Acquired Company to do any of the foregoing.
3.18 Contracts; No Defaults.
3.18.1 To the best of the Company's knowledge, Part
3.18(a) of the Disclosure Letter contains a complete and accurate list of:
(a) each Applicable Contract that involves performance of
services or delivery of goods or materials by one or
more Acquired Companies of an amount or value in
excess of $50,000;
(b) each Applicable Contract that involves performance of
services or delivery of goods or materials to one or
more Acquired Companies of an amount or value in
excess of $50,000;
(c) each Applicable Contract that was not entered into in
the Ordinary Course of Business and that involves
expenditures or receipts of one or more Acquired
Companies in excess of $ 50,000;
(d) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other
Applicable Contract affecting the ownership of,
leasing of, title to, use of, or any leasehold or
other interest in, any real or personal property
(except personal property leases and installment and
conditional sales agreements having a value per item
or aggregate payments of less than $50,000 and with
terms of less than one year);
(e) each licensing agreement or other Applicable Contract
with respect to patents, trademarks, copyrights, or
other intellectual property, including agreements with
current or former employees, consultants, or
contractors regarding the appropriation or the
non-disclosure of any of the Intellectual Property
Assets;
(f) each collective bargaining agreement and other
Applicable Contract to or with any labor union or
other employee representative of a group of employees;
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(g) each joint venture, partnership, and other Applicable
Contract (however named) involving a sharing of
profits, losses, costs, or liabilities by any Acquired
Company with any other Person;
(h) each Applicable Contract containing covenants that in
any way purport to restrict the business activity of
any Acquired Company or any Affiliate of an Acquired
Company or limit the freedom of any Acquired Company
or any Affiliate of an Acquired Company to engage in
any line of business or to compete with any Person;
(i) each Applicable Contract providing for payments to or
by any Person based on sales, purchases, or profits,
other than direct payments for goods;
(j) each power of attorney that is currently effective and
outstanding;
(k) each Applicable Contract entered into other than in
the Ordinary Course of Business that contains or
provides for an express undertaking by any Acquired
Company to be responsible for consequential damages;
(l) each Applicable Contract for capital expenditures in
excess of $50,000;
(m) each written warranty, guaranty, and or other similar
undertaking with respect to contractual performance
extended by any Acquired Company other than in the
Ordinary Course of Business; and
(n) each amendment, supplement, and modification (whether
oral or written) in respect of any of the foregoing.
Part 3.18(a) of the Disclosure Letter sets forth reasonably complete details
concerning such Contracts, including the parties to the Contracts, the amount of
the remaining commitment of the Acquired Companies under the Contracts, and the
Acquired Companies' office where details relating to the Contracts are located.
3.18.2 Except as set forth in Part 3.18(b) of the
Disclosure Letter:
(a) To the best of the Company's knowledge, no officer,
director, agent, employee, consultant, or contractor
of any Acquired Company is bound by any Contract that
purports to limit the ability of such officer,
director, agent, employee, consultant, or contractor
to (A) engage in or continue any conduct, activity, or
practice relating to the business of any Acquired
Company, or (B) assign to any Acquired Company or to
any other Person any rights to any invention,
improvement, or discovery.
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3.18.3 To the best of the Company's knowledge, except as
set forth in Part 3.18(c) of the Disclosure Letter, each Contract identified or
required to be identified in Part 3.18(a) of the Disclosure Letter is in full
force and effect and is, with respect to the Company, valid and enforceable in
accordance with its terms.
3.18.4 To the best of the Company's knowledge (a) all
Applicable Contracts are valid and binding and in full force and effect with
respect to the Acquired Companies, and (b) no event has occurred or circumstance
exists (with or without notice or lapse of time) may contravene, conflict with,
or result in a violation or breach of, or give any Acquired Company the right to
declare a default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify any Applicable Contract.
3.18.5 To the best of the Company's knowledge, there are
no renegotiations of, attempts to renegotiate, or outstanding rights to
renegotiate any material amounts paid or payable to any Acquired Company under
current or completed Contracts with any Person and no such Person has made
written demand for such renegotiation.
3.18.6 To the best of the Company's knowledge, the
Contracts relating to the sale, design, manufacture, or provision of products or
services by the Acquired Companies have been entered into in the Ordinary Course
of Business and have been entered into without the commission of any act alone
or in concert with any other Person, or any consideration having been paid or
promised, that is or would be in violation of any Legal Requirement.
3.19 Insurance. Part 3.19 of the Disclosure Letter contains, to the
best of the Company's knowledge, a true, accurate and complete list of all
policies or binders of fire, liability, title, workers' compensation and other
forms of insurance (showing as to each policy or binder the carrier, policy
number, coverage limits, expiration dates, annual premiums and a general
description of the type of coverage provided) maintained by the Acquired
Companies on the business, property or personnel, including Telstar, of the
Acquired Companies. To the best of the Company's knowledge, neither the Company
nor any Subsidiary is in default under any of such policies or binders, and
neither the Company nor any Subsidiary has failed to give any notice or to
present any claim under any such policy or binder in a due and timely fashion
when the effect of such default or such failure would be to render a material
claim uninsured. Neither the Company nor any Subsidiary has received any notice
from any insurer advising of reduced coverage or increased premiums on existing
policies or binders. There are no outstanding unpaid claims under any such
policies or binders. Such policies and binders are in full force and effect,
with respect to the Company or any subsidiary, as the case may be.
3.20 Environmental Matters. Except as set forth in part 3.20 of the
disclosure letter:
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3.20.1 Each Acquired Company is, and at all times has
been, in full compliance with, and has not been and is not in material violation
of or liable under, any material Environmental Law. Neither the Company nor to
the best of the Company's knowledge any Acquired Company has any basis to
expect, nor received, any actual order, notice, or other communication from (i)
any Governmental Body or private citizen acting in the public interest, or (ii)
the current or prior owner or operator of any Facilities, of any actual or
potential violation or failure to comply with any Environmental Law, or of any
actual or Threatened obligation to undertake or bear the cost of any
Environmental, Health, and Safety Liabilities with respect to any of the
Facilities or any other properties or assets (whether real, personal, or mixed)
in which any Acquired Company has had an interest, or with respect to any
property or Facility at or to which Hazardous Materials were generated,
manufactured, refined, transferred, imported, used, or processed by any Acquired
Company, or to their knowledge any other Person for whose conduct they are or
may be held responsible, or from which Hazardous Materials have been
transported, treated, stored, handled, transferred, disposed, recycled, or
received.
3.20.2 There are no pending or, to the best of the
Company's knowledge of and the Acquired Companies' knowledge, Threatened claims,
Encumbrances, or other restrictions of any nature, resulting from any material
Environmental, Health, and Safety Liabilities or arising under or pursuant to
any Environmental Law, with respect to or affecting any of the Facilities or any
other properties and assets (whether real, personal, or mixed) in which any
Acquired Company has an interest.
3.20.3 Neither the Company nor to the best of the
Company's knowledge any Acquired Company, nor to the best of their respective
knowledge, any other Person for whose conduct they are or may be held
responsible, received, any citation, directive, inquiry, notice, Order, summons,
warning, or other communication that relates to Hazardous Activity, Hazardous
Materials, or any alleged, actual, or potential violation or failure to comply
with any Environmental Law, or of any alleged, actual, or potential obligation
to undertake or bear the cost of any Environmental, Health, and Safety
Liabilities with respect to any of the Facilities or any other properties or
assets (whether real, personal, or mixed) in which the Company or any Acquired
Company has an interest, or with respect to any property or facility to which
Hazardous Materials generated, manufactured, refined, transferred, imported,
used, or processed by the Company, any Acquired Company, or to the best of their
respective knowledge, any other Person for whose conduct they are or may be held
responsible, have been transported, treated, stored, handled, transferred,
disposed, recycled, or received.
3.20.4 Neither the Company nor to the best of the
Company's knowledge any Acquired Company, or to the best of their respective
knowledge, any other Person for whose conduct they are or may be held
responsible, has been notified of any Environmental, Health, and Safety
Liabilities with respect to the Facilities or with respect to any other
properties and assets (whether real, personal, or mixed) in which any Acquired
Company, has an interest, or to the best of the Company's knowledge, at any
property geologically or hydrologically adjoining the Facilities or any such
other property or assets.
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3.20.5 There are no Hazardous Materials present on or in
the Environment at the Facilities including any Hazardous Materials contained in
barrels, above or underground storage tanks, landfills, land deposits, dumps,
equipment (whether moveable or fixed) or other containers, either temporary or
permanent, and deposited or located in land, water, sumps, or any other part of
the Facilities or such adjoining property, or incorporated into any structure
therein or thereon. Neither the Company nor to the best of the Company's
knowledge any Acquired Company, nor to the best of their respective knowledge,
any other Person for whose conduct they are or may be held responsible, has
permitted or conducted, any Hazardous Activity conducted with respect to the
Facilities in material violation of any Environmental Law.
3.20.6 To the best of the Company's knowledge, there has
been no material release of any Hazardous Materials at or from the Facilities in
material violation at any Environmental Law.
3.20.7 The Company has delivered to Buyer true and
complete copies and results of any reports, studies, analyses, tests, or
monitoring possessed or initiated by the Company or any Acquired Company
pertaining to Hazardous Materials or Hazardous Activities in, on, or under the
Facilities, or concerning compliance by the Company, any Acquired Company, or
any other Person for whose conduct they are or may be held responsible, with
Environmental Laws.
3.21 Employees.
3.21.1 To the best of the Company's knowledge, no employee
or director of any Acquired Company is a party to, or is otherwise bound by, any
agreement or arrangement, including any confidentiality, noncompetition, or
proprietary rights agreement, between such employee or director and any other
Person ("Proprietary Rights Agreement") that in any way adversely affects or
will affect (i) the performance of his duties as an employee or director of the
Acquired Companies, or (ii) the ability of any Acquired Company to conduct its
business, including any Proprietary Rights Agreement with Telstar or the
Acquired Companies by any such employee or director. To the best of the
Company's knowledge, no director, officer, or other key employee of any Acquired
Company intends to terminate his employment with such Acquired Company.
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3.22 Labor Relations; Compliance. To the best of the Company's
knowledge, no Acquired Company has been or is a party to any collective
bargaining or other labor Contract. To the best of the Company's knowledge,
there has not been, there is not presently pending or existing, and to be best
of the Company's knowledge, there is not Threatened, (a) any strike, slowdown,
picketing, work stoppage, or employee grievance process, (b) any Proceeding
against or affecting any Acquired Company relating to the alleged violation of
any Legal Requirement pertaining to labor relations or employment matters,
including any charge or complaint filed by an employee or union with the
National Labor Relations Board, the Equal Employment Opportunity Commission, or
any comparable Governmental Body, organizational activity, or other labor or
employment dispute against or affecting any of the Acquired Companies or their
premises, or (c) any application for certification of a collective bargaining
agent. To the best of the Company's knowledge, except as otherwise set forth on
Part 3.21 of the Disclosure Letter, no event has occurred or circumstance exists
that could provide the basis for any work stoppage or other labor dispute. There
is no lockout of any employees by any Acquired Company, and no such action is
contemplated by any Acquired Company. To the best of the Company's knowledge,
each Acquired Company has complied in all respects with all Legal Requirements
relating to employment, equal employment opportunity, nondiscrimination,
immigration, wages, hours, benefits, collective bargaining, the payment of
social security and similar taxes, occupational safety and health, and plant
closing. To the best of the Company's knowledge, no Acquired Company is liable
for the payment of any compensation, damages, taxes, fines, penalties, or other
amounts, however designated, for failure to comply with any of the foregoing
Legal Requirements.
3.23 Certain Payments. Since January 1, 1997, no Acquired Company or
director, officer, agent, or employee of any Acquired Company, or any other
Person associated with or acting for or on behalf of any Acquired Company, has
directly or indirectly (a) made any contribution, gift, bribe, rebate, payoff,
influence payment, kickback, or other payment to any Person, private or public,
regardless of form, whether in money, property, or services (i) to obtain
favorable treatment in securing business, (ii) to pay for favorable treatment
for business secured, (iii) to obtain special concessions or for special
concessions already obtained, for or in respect of any Acquired Company or any
Affiliate of an Acquired Company, or (iv) in violation of any Legal Requirement,
(b) established or maintained any fund or asset that has not been recorded in
the books and records of the Acquired Companies; excluding, however, payments
made as commissions in the Ordinary Course of Business relating to business
introductions.
3.24 Disclosure.
3.24.1 Based upon the knowledge of the Company, no
representation or warranty of the Company in this Agreement and no statement in
the Disclosure Letter omits to state a material fact necessary to make the
statements herein or therein, in light of the circumstances in which they were
made, not misleading.
3.24.2 No notice given pursuant to Section 5.8 will
contain any untrue statement or omit to state a material fact necessary to make
the statements therein or in this Agreement, in light of the circumstances in
which they were made, not misleading.
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3.24.3 There is no fact known to the Company that has
specific application to either the Company or any Acquired Company (other than
general economic or industry conditions) and that materially adversely affects
the assets, business, prospects, financial condition, or results of operations
of the Acquired Companies (on a consolidated basis) that has not been set forth
in this Agreement or the Disclosure Letter.
3.25 Brokers or Finders. Except as set forth in Part 3.25
of the Disclosure Letter, the Company and its agents have incurred no obligation
or liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement.
3.26 Year 2000 Compliance. All computer software and
hardware used or sold by the Company or any Acquired Company will function
without error or interruption related to Date Data, specifically including
errors or interruptions from functions which may involve Date Data from more
than one century. When used in this Section 3.26, the term "Date Data" shall
mean any data or input which includes an indication of or reference to date. The
foregoing is in addition to the other representations and warranties set forth
herein.
4. Representations and Warranties of Buyer. Buyer represents and warrants
to Telstar and the Company as follows:
4.1 Organization and Good Standing. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Texas.
4.2 Authority; No Conflict. This Agreement constitutes the legal,
valid, and binding obligation of Buyer, enforceable against Buyer in accordance
with its terms. Buyer has the absolute and unrestricted right, power, and
authority to execute and deliver this Agreement and to perform its obligations
under this Agreement. Except as set forth in Schedule 4.2, neither the execution
and delivery of this Agreement by Buyer nor the consummation or performance of
any of the Contemplated Transactions by Buyer will give any Person the right to
prevent, delay, or otherwise interfere with any of the Contemplated Transactions
pursuant to:
4.2.1 any provision of Buyer's Organizational Documents;
4.2.2 any resolution adopted by the board of directors or
the stockholders of Buyer;
4.2.3 any Legal Requirement or Order to which Buyer may be
subject; or
4.2.4 any Contract to which Buyer is a party or by which
Buyer may be bound.
Except as set forth in Schedule 4.2, Buyer is not and will not be required to
obtain any Consent from any Person in connection with the execution and delivery
of this Agreement or the consummation or performance of any of the Contemplated
Transactions.
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4.3 Certain Proceedings. There is no pending Proceeding that has
been commenced against Buyer and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To Buyer's Knowledge, no such Proceeding has been
Threatened.
4.4 Brokers or Finders. Buyer has incurred obligations for brokerage
or finders' fees or agents' commissions or other similar payment in connection
with this Agreement. At Closing, the Company shall reimburse Buyer for all such
expenses, subject to Section 2.5.1(e).
4.5 Investment Purpose. Buyer is aware that the Shares have not been
registered under the Securities Act or any state securities law and may not be
transferred by Buyer without an effective registration under the Securities Act
or compliance with applicable state securities laws except in a transaction
exempt from the registration provisions of the Securities Act or such state
securities law. Buyer is acquiring the Shares for investment and not with a view
to distribution or resale and agrees that the certificate(s) representing the
Shares will bear the following legend:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended or any state securities
laws, and may not be sold or transferred by the holder without an
effective registration statement under such Securities Act and
compliance with applicable state securities laws except in a
transaction exempt from the provisions thereof."
5. Covenants of the Company Prior to Closing Date.
5.1 Delivery of Schedules and Exhibits. The Company shall, not later
than ten (10) days following the date of this Agreement, deliver the Disclosure
Letter and all other schedules and exhibits required to be delivered hereunder.
5.2 Access and Investigation. Between the date of this Agreement and
the Closing Date, the Company will, and will cause each Acquired Company and its
Representatives to, (a) afford Buyer and its Representatives and prospective
lenders and their Representatives (collectively, "Buyer's Advisors") full and
free access to each Acquired Company's personnel, properties (including
subsurface testing), contracts, books and records, and other documents and data,
(b) furnish Buyer and Buyer's Advisors with copies of all such contracts, books
and records, and other existing documents and data as Buyer may reasonably
request, and (c) furnish Buyer and Buyer's Advisors with such additional
financial, operating, and other data and information as Buyer may reasonably
request.
5.3 Operation of the Businesses of the Acquired Companies. Between
the date of this Agreement and the Closing Date, the Company will, and will
cause each Acquired Company to:
5.3.1 conduct the business of such Acquired Company only
in the Ordinary Course of Business;
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5.3.2 use its Best Efforts to preserve intact the current
business organization of such Acquired Company, keep available the services of
the current officers, employees, and agents of such Acquired Company, and
maintain the relations and good will with suppliers, customers, landlords,
creditors, employees, agents, and others having business relationships with such
Acquired Company;
5.3.3 confer with Buyer concerning operational matters of
a material nature; and
5.3.4 otherwise report periodically to Buyer concerning
the status of the business, operations, and finances of such Acquired Company.
5.4 Employment Agreement. The Company shall have delivered to Buyer
the Employment Agreement, in form and substance acceptable to Buyer.
5.5 Letter of Credit. Telstar shall maintain in full force and
effect the existing letter of credit issued by Barclays Bank PLC in favor of
Coast Business Credit (the "Letter of Credit").
5.6 Negative Covenant. Except as otherwise expressly permitted by
this Agreement, between the date of this Agreement and the Closing Date, the
Company will not, and will use their best efforts to cause each Acquired Company
not to, without the prior consent of Buyer, take any affirmative action, or fail
to take any reasonable action within their or its control, as a result of which
any of the changes or events listed in Section 3.17 is likely to occur.
5.7 Notification. Between the date of this Agreement and the Closing
Date, the Company will promptly notify Buyer in writing if the Company or, to
the best of the Company's knowledge, any Acquired Company becomes aware of any
fact or condition that causes or constitutes a Breach of any of the Company's
representations and warranties as of the date of this Agreement, or if the
Company or any Acquired Company becomes aware of the occurrence after the date
of this Agreement of any fact or condition that would (except as expressly
contemplated by this Agreement) cause or constitute a Breach of any such
representation or warranty had such representation or warranty been made as of
the time of occurrence or discovery of such fact or condition. Should any such
fact or condition require any change in the Disclosure Letter if the Disclosure
Letter were dated the date of the occurrence or discovery of any such fact or
condition, the Company will promptly deliver to Buyer a supplement to the
Disclosure Letter specifying such change. During the same period, the Company
will promptly notify Buyer of the occurrence of any Breach of any covenant of
the Company in this Section 5 or of the occurrence of any event that may make
the satisfaction of the conditions in Section 7 impossible or unlikely. Buyer
shall have ten (10) days from the date of receipt of any disclosure provided
under this Section 5.8 to approve or disapprove any disclosure.
5.8 Payment of Indebtedness by Related Persons. Except as expressly
provided in this Agreement, the Company will cause all indebtedness owed to an
Acquired Company by either the Company or any Related Person of the Company to
be paid in full prior to Closing, provided, however, loans by the Company to
Stephen Davies and Elisabeth Davies shall not become due and payable at Closing,
and provided further, that the amounts owed by Stephen Davies and Elisabeth
Davies shall be repaid in accordance with the terms of that certain letter dated
January 22, 1998 from Stephen Davies and Elisabeth Davies to the Company.
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6. Covenants of Buyer Prior to Closing Date.
6.1 Best Efforts. Except as set forth in the proviso to Section 6.1,
between the date of this Agreement and the Closing Date, Buyer will use its Best
Efforts to cause the conditions in Sections 7 and 8 to be satisfied.
7. Conditions Precedent to Buyer's Obligation to Close. Buyer's
obligation to purchase the Shares and to take the other actions required to be
taken by Buyer at the Closing is subject to the satisfaction, at or prior to the
Closing, of each of the following conditions (any of which may be waived by
Buyer, in whole or in part):
7.1 Accuracy of Representations. All of the Company's
representations and warranties in this Agreement (considered collectively), and
each of these representations and warranties (considered individually), must
have been accurate in all material respects as of the date of this Agreement,
and must be accurate in all material respects as of the Closing Date as if
made on the Closing Date.
7.2 The Company's Performance.
7.2.1 All of the covenants and obligations that the
Company is required to perform or to comply with pursuant to this Agreement at
or prior to the Closing (considered collectively), and each of these covenants
and obligations (considered individually), must have been duly performed and
complied with in all material respects.
7.2.2 Each document required to be delivered pursuant to
Section 2.5 must have been delivered, and each of the other covenants and
obligations in this Agreement must have been performed and complied with in all
respects.
7.3 Consents. Each of the Consents identified in the Disclosure
Letter, and each Consent identified in Schedule 4.2, must have been obtained and
must be in full force and effect.
7.4 Additional Documents. Each of the following documents must have
been delivered to Buyer:
7.4.1 such documents as Buyer may reasonably request for
the purpose of (i) evidencing the accuracy of any of the Company's
representations and warranties, (ii) evidencing the performance by the Company
of, or the compliance by the Company with, any covenant or obligation required
to be performed or complied with by the Company, (iii) evidencing the
satisfaction of any condition referred to in this Section 7, or (iv) otherwise
facilitating the consummation or performance of any of the Contemplated
Transactions.
7.5 No Proceedings. Since the date of this Agreement, there must not
have been commenced or Threatened against Buyer, or against any Person
affiliated with Buyer, any Proceeding (a) involving any challenge to, or seeking
damages or other relief in connection with, any of the Contemplated
Transactions, or (b) that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with any of the Contemplated Transactions.
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7.6 No Claim Regarding Stock Ownership or Sale Proceeds. There must
not have been made or Threatened by any Person any claim asserting that such
Person (a) is the holder or the beneficial owner of, or has the right to acquire
or to obtain beneficial ownership of, any stock of, or any other voting, equity,
or ownership interest in, any of the Acquired Companies, or (b) is entitled to
all or any portion of the Purchase Price payable for the Shares.
7.7 No Injunction. There must not be in effect any Legal Requirement
or any injunction or other Order that (a) prohibits the issuance of the Shares
to Buyer, and (b) has been adopted or issued, or has otherwise become effective,
since the date of this Agreement.
7.8 Conversion of Loans. On or prior to the Closing Date, all of the
loans, liabilities and obligations of the Company (or any Related Party of the
Company) to Telstar or any Related Party of Telstar shall have been converted
into newly issued shares of preferred stock of the Company.
8. Conditions Precedent to the Company's Obligation to Close. The
Company's obligation to issue the Shares and to take the other actions required
to be taken by the Company at the Closing is subject to the satisfaction, at or
prior to the Closing, of each of the following conditions (any of which may be
waived by the Company, in whole or in part):
8.1 Accuracy of Representations. All of Buyer's representations and
warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), must have been
accurate in all material respects as of the date of this Agreement and must be
accurate in all material respects as of the Closing Date as if made on the
Closing Date.
8.2 Buyer's Performance.
8.2.1 All of the covenants and obligations that Buyer is
required to perform or to comply with pursuant to this Agreement at or prior to
the Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been performed and complied
with in all material respects.
8.2.2 Buyer must have delivered each of the documents
required to be delivered by Buyer pursuant to Section 2.5 and must have made the
payments required to be made by Buyer pursuant to Section 2.5.2.
8.3 Issuance of Preferred Stock. The Company shall have issued to
Telstar newly issued shares of its Preferred Stock with a liquidation preference
of Two Million Dollars ($2,000,000) pursuant to an Amendment to the Certificate
of Incorporation of the Company substantially in the form of Exhibit 8.3 hereto.
8.4 Consents. Each of the Consents identified in the Disclosure
Letter must have been obtained and must be in full force and effect, unless
waived in writing by Buyer.
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8.5 Additional Documents. Buyer must have caused the following
documents to be delivered to Telstar or the Company such other documents as
Telstar or the Company may reasonably request for the purpose of (i) evidencing
the accuracy of any representation or warranty of Buyer, (ii) evidencing the
performance by Buyer of, or the compliance by Buyer with, any covenant or
obligation required to be performed or complied with by Buyer, (iii) evidencing
the satisfaction of any condition referred to in this Section 8, or (iv)
otherwise facilitating the consummation of any of the Contemplated Transactions.
8.6 No Injunction. There must not be in effect any Legal Requirement
or any injunction or other Order that (a) prohibits the issuance of the Shares
to Buyer, and (b) has been adopted or issued, or has otherwise become effective,
since the date of this Agreement.
9. Indemnification; Remedies.
9.1 Survival; Right to Indemnification Not Affected by Knowledge.
The representations, warranties, covenants, and obligations in this Agreement as
modified by the Disclosure Letter and, the supplements to the Disclosure Letter,
will not survive the Closing, except that the representations and warranties set
forth in Sections 3.2, 3.11, 3.13, 3.17, 4.2 and 4.5 shall survive the Closing
Date for a period of twelve (12) months, Section 3.4 shall survive the Closing
Date for a period of twenty-four (24) months, and Section 3.12 shall survive for
claims brought within the period of applicable statute of limitations. The right
to indemnification, payment of Damages or other remedy based on such
representations, warranties, covenants, and obligations will not be affected by
any investigation conducted with respect to, or any knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
and delivery of this Agreement or the Closing Date, with respect to the accuracy
or inaccuracy of or compliance with, any such representation, warranty,
covenant, or obligation. The waiver of any condition based on the accuracy of
any representation or warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification, payment of
Damages, or other remedy based on such representations, warranties, covenants,
and obligations.
9.2 Indemnification and Payment of Damages by the Company. On and
after the Closing Date, the Company will indemnify and hold harmless Buyer and
their respective Representatives, stockholders, controlling persons, and
affiliates (collectively, the "Indemnified Persons") for, and will pay to the
Indemnified Persons the amount of, any loss, liability, claim, damage (including
incidental and consequential damages), expense (including costs of investigation
and defense and reasonable attorneys' fees) or diminution of value, actually
incurred, whether or not involving a third-party claim (collectively,
"Damages"), arising, directly or indirectly, from or in connection with:
9.2.1 any material Breach of any representation or
warranty made by the Company in this Agreement, the Disclosure Letter, the
supplements to the Disclosure Letter, or any other certificate or document
delivered by the Company pursuant to this Agreement;
9.2.2 any Breach by the Company of any covenant or
obligation of the Company in this Agreement;
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9.2.3 any claim by any Person for brokerage or finder's
fees or commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person with either the
Company or any Acquired Company (or any Person acting on their behalf) in
connection with any of the Contemplated Transactions.
The remedies provided in this Section 9.2 will not be exclusive of or limit any
other remedies that may be available to Buyer or the other Indemnified Persons.
9.3 Indemnification and Payment of Damages by Buyer. Buyer will
indemnify and hold harmless Telstar, the Company and their respective
Representatives, Stockholders, officers, directors, employees, controlling
persons and affiliates (collectively, the "Company Indemnified Persons") and
will pay to the Company Indemnified Persons the amount of any Damages arising,
directly or indirectly, from or in connection with (a) any Breach of any
representation or warranty made by Buyer in this Agreement or in any certificate
delivered by Buyer pursuant to this Agreement, (b) any Breach by Buyer of any
covenant or obligation of Buyer in this Agreement, or (c) any claim by any
Person for brokerage or finder's fees or commissions or similar payments based
upon any agreement or understanding alleged to have been made by such Person
with Buyer (or any Person acting on its behalf) in connection with any of the
Contemplated Transactions.
9.4 Procedure for Indemnification--Third Party Claims.
9.4.1 Promptly after receipt by an indemnified party under
Section 9.2, 9.4, or (to the extent provided in the last sentence of Section
9.3) Section 9.3 of notice of the commencement of any Proceeding against it,
such indemnified party will, if a claim is to be made against an indemnifying
party under such Section, give notice to the indemnifying party of the
commencement of such claim, but the failure to notify the indemnifying party
will not relieve the indemnifying party of any liability that it may have to any
indemnified party, except to the extent that the indemnifying party demonstrates
that the defense of such action is prejudiced by the indemnifying party's
failure to give such notice.
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9.4.2 If any Proceeding is brought against an indemnified
party and it gives notice to the indemnifying party of the commencement of such
Proceeding, the indemnifying party will, be entitled to participate in such
Proceeding and, to the extent that it wishes (unless (i) the indemnifying party
is also a party to such Proceeding and the indemnified party determines in good
faith that joint representation would be inappropriate, or (ii) the indemnifying
party fails to provide reasonable assurance to the indemnified party of its
financial capacity to defend such Proceeding and provide indemnification with
respect to such Proceeding), to assume the defense of such Proceeding with
counsel satisfactory to the indemnified party and, after notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such Proceeding, the indemnifying party will not, as long as it
diligently conducts such defense, be liable to the indemnified party under this
Section 9 for any fees of other counsel or any other expenses with respect to
the defense of such Proceeding, in each case subsequently incurred by the
indemnified party in connection with the defense of such Proceeding, other than
reasonable costs of investigation. If the indemnifying party assumes the defense
of a Proceeding, (i) it will be conclusively established for purposes of this
Agreement that the claims made in that Proceeding are within the scope of and
subject to indemnification; (ii) no compromise or settlement of such claims may
be effected by the indemnifying party without the indemnified party's consent
unless (A) there is no finding or admission of any violation of Legal
Requirements or any violation of the rights of any Person and no effect on any
other claims that may be made against the indemnified party, and (B) the sole
relief provided is monetary damages that are paid in full by the indemnifying
party; and (iii) the indemnified party will have no liability with respect to
any compromise or settlement of such claims effected without its consent. If
notice is given to an indemnifying party of the commencement of any Proceeding
and the indemnifying party does not, within ten days after the indemnified
party's notice is given, give notice to the indemnified party of its election to
assume the defense of such Proceeding, the indemnifying party will be bound by
any determination made in such Proceeding or any compromise or settlement
effected by the indemnified party.
9.4.3 Notwithstanding the foregoing, if an indemnified
party determines in good faith that there is a reasonable probability that a
Proceeding may adversely affect it or its affiliates other than as a result of
monetary damages for which it would be entitled to indemnification under this
Agreement, the indemnified party may, by notice to the indemnifying party,
assume the exclusive right to defend, compromise, or settle such Proceeding, but
the indemnifying party will not be bound by any determination of a Proceeding so
defended or any compromise or settlement effected without its consent (which may
not be unreasonably withheld).
9.5 Procedure for Indemnification--Other Claims. A claim for
indemnification for any matter not involving a third-party claim may be asserted
by notice to the party from whom indemnification is sought.
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9.6 Limitation on Indemnification. Notwithstanding the provisions of
Section 9.2, the Company shall not have any liability to Buyer in respect to
representations, warranties and covenants hereunder that do not survive the
Closing pursuant to Section 9.1 hereof, and no such liability shall exist unless
Buyer shall have paid an aggregate of $100,000 in respect thereof, with the
Company being responsible for liability in excess of such $100,000, provided,
however, in no event shall the Company's liability to Buyer exceed the Purchase
Price.
10. Post Closing Covenants.
10.1 Letter of Credit. Buyer and the Company shall to use their best
efforts to arrange a release of the Letter of Credit as soon as possible
following the Closing; provided, that Buyer and the Company shall not be
obligated to obtain such a release if it would cause a default under any loans
or other obligations to which the Company is a party as of the Closing, or any
extensions, renewals or modifications thereof. So long as the Letter of Credit
is outstanding, the Company agrees that it shall not pay any dividends or make
any distributions to any of its shareholders. Buyer and the Company further
agree that the Letter of Credit shall be released at or prior to the
consummation of any public sale by the Company of its equity securities under
the Securities Act.
10.2 No Dilution of Shares. The Company and Telstar agree that if
the Company issues, or is obligated to issue, any shares of capital stock (other
than the issuance of shares of common stock to Buyer pursuant to this
Agreement), and such issuance is based on any understanding, agreement or
arrangement entered into or agreed upon prior to the Closing and to which
Telstar or the Company is a party, the Company shall, prior to the issuance of
any other shares of common stock, issue to Buyer sufficient shares of common
stock so that Buyer shall at all times hold not less than fifty-one percent
(51%) of the issued and outstanding common stock of the Company, after giving
effect to any pending issuance of such shares.
10.3 Election of Directors. The parties recognize that it is their
intent that the Company have a board of directors comprised of five members, and
that three of the members to be selected by Buyer, one to be selected by Telstar
and one to be selected by Stephen Davies. Buyer and Telstar agree, subject to
their fiduciary obligations, to vote their shares of common stock for the
election of the nominees selected as provided in this Section 10.3.
10.4 Actions Requiring Director Approval. Buyer, Telstar and the
Company agree that the following matters must be decided by a majority of the
members of the Company's Board of Directors at a duly called meeting of the
Board of Directors (which meeting may be by telephone), or by written consent of
the Board of Directors in conformance with applicable law:
10.4.1 any change in the Company's primary banking
relationships;
10.4.2 any decision to enter into a lease of real property
with required annual lease payments of $75,000 or more;
10.4.3 any change to the signatories on the Company's bank
accounts or investment accounts;
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10.4.4 any capital expenditures in excess of $100,000 to
be incurred in a single twelve-month period, whether individually or in the
aggregate; and
10.4.5 any employment agreement providing for annual
compensation of $100,000 or more.
10.5 Actions Requiring Telstar Approval. Buyer, Telstar and the
Company agree that the Company shall not enter into or consummate any agreement
contemplating the following transactions without the prior consent of Telstar,
which consent shall not be unreasonably withheld or delayed:
10.5.1 the issuance of any shares of common stock, or any
capital stock convertible into or exchangeable for common stock, including,
without limitation, an initial public offering of the Company's common stock,
other than shares required to be issued pursuant to this Agreement or pursuant
to agreements or understandings entered into prior to the Closing by Telstar or
the Company;
10.5.2 the sale of all or substantially all of the assets
of the Company;
10.5.3 the merger, consolidation or reorganization of the
Company with or into another entity in which the Company is not the surviving
entity; or
10.5.4 the dissolution or liquidation of the Company.
10.6 Right of First Refusal.
10.6.1 Notice of Offer. If Buyer or Telstar receives a
bona fide offer by a third party to purchase all or any of that shareholder's
shares of capital stock of the Company (the "Selling Shareholder") which the
Selling Shareholder is willing to accept (the "Offer"), shall give notice
thereof to the Company and to the other Shareholder (the "Non-Selling
Shareholder"). The notice shall specify:
(a) The number of and identity of the Shares proposed to
be Transferred (the "Offered Shares");
(b) The identity of the proposed Transferee;
(c) The consideration to be received for the Offered
Shares; and
(d) The terms and conditions upon which the Selling
Shareholder intends to make the Transfer.
This notice shall be accompanied by a true and complete copy of the proposed
Transferee's written Offer and shall constitute an offer by the Selling
Shareholder to Transfer the Offered Shares to the Non-Selling Shareholder as
more fully set forth below.
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10.6.2 Non-Selling Shareholder's Right of First Refusal.
The Non- Selling Shareholder shall have the right to purchase all or a portion
of the Offered Shares at the price per Share and on the terms set forth in the
Offer, which it may exercise only by giving written notice thereof to the
Selling Shareholder (the "Acceptance") during the thirty (30) day period
following the receipt of the Selling Shareholder's notice. The Acceptance shall
specify the number of the Offered Shares that the Non-Selling Shareholder
desires to purchase. 10.6.3 Closing for Right of First Refusal Purchase. If the
Non- Selling Shareholder exercises its right to purchase the Offered Shares, the
closing of such purchase shall take place on or before the thirtieth (30th) day
following the date that the Non-Selling Shareholder gave notice of the exercise
of its right to purchase such Shares. The Non-Selling Shareholder shall give
written notice to the Selling Shareholder of the closing date and the location
of the closing for the purchase by that party, at least five (5) days prior to
such date.
10.6.4 Transfer of Offered Shares to Third Party.
Notwithstanding any other provision in this Agreement, if and only if the
Non-Selling Shareholder either (i) does not exercise its right to purchase all
of the Offered Shares in accordance with the terms and conditions set forth in
this Section 10.6 or (ii) after exercising such right, the Non-Selling
Shareholder fails to consummate such purchases through no fault of the Selling
Shareholder, then the Selling Shareholder may carry out its proposed Transfer to
the proposed Transferee in accor dance with the terms set forth in the Offer,
provided that such Transfer is consummated on or before the one hundred
twentieth (120th) day following the date of the Offer. If the Selling
Shareholder consummates the proposed Transfer pursuant to this subparagraph, the
Non-Selling Shareholders shall not be obligated or entitled to purchase any or
all of the Offered Shares. Any purchaser or other Transferee shall hold the
Offered Shares under, and agree in writing to be bound by, all of the terms of
this Agreement. No Transfer of any of the Offered Shares or any interest therein
shall be made after the end of the one hundred twenty (120) day period referred
to above, nor shall any material change in the price or terms of the Transfer
from those set forth in the Offer be permitted, unless the Selling Shareholder
gives notice to the Non-Selling Shareholder of a new Offer.
10.6.5 Permitted Transfers. The provisions of this Section
10.6 shall not apply to any Transfer, whether or not for consideration, by
Telstar or Buyer to a wholly-owned subsidiary or sole shareholder.
10.7 No Sale of Shares. Telstar and Buyer each agree not to sell or
transfer any shares of capital stock of the Company (including, without
limitation, the Preferred Shares), without the prior consent of the other party.
10.8 Termination of Provisions. Other than Section 10.3, the
provisions of this Section 10 shall terminate when the Letter of Credit has been
released and when all of the Preferred Shares have been redeemed or acquired by
Buyer or its designee.
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11. General Provisions.
11.1 Expenses. Except as otherwise expressly provided in this
Agreement, each party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution, and performance of this
Agreement and the Contemplated Transactions, including all fees and expenses of
agents, representatives, counsel, and accountants. In the event of termination
of this Agreement, the obligation of each party to pay its own expenses will be
subject to any rights of such party arising from a breach of this Agreement by
another party. Buyer shall pay the New York State stock transfer tax applicable
to the transfer of the Shares to Buyer; Telstar and the Company shall pay any
other stock transfer taxes payable with respect to such transfer.
11.2 Public Announcements. Any public announcement or similar
publicity with respect to this Agreement or the Contemplated Transactions will
be issued, if at all, at such time and in such manner as Buyer determines.
Unless consented to by Buyer in advance or required by Legal Requirements, prior
to the Closing Telstar and the Company shall, and shall cause the Acquired
Companies to, keep this Agreement strictly confidential and may not make any
disclosure of this Agreement to any Person. Telstar, the Company and Buyer will
consult with each other concerning the means by which the Acquired Companies'
employees, customers, and suppliers and others having dealings with the Acquired
Companies will be informed of the Contemplated Transactions, and Buyer will have
the right to be present for any such communication.
11.3 Confidentiality. Between the date of this Agreement and the
Closing Date, Buyer, Telstar and the Company will maintain in confidence, and
will cause the directors, officers, employees, agents, and advisors of Buyer and
the Acquired Companies to maintain in confidence, and not use to the detriment
of another party or an Acquired Company any written, oral, or other information
obtained in confidence from another party or an Acquired Company in connection
with this Agreement or the Contemplated Transactions, unless (a) such
information is already known to such party or to others not bound by a duty of
confidentiality or such information becomes publicly available through no fault
of such party, (b) the use of such information is necessary or appropriate in
making any filing or obtaining any consent or approval required for the
consummation of the Contemplated Transactions, or (c) the furnishing or use of
such information is required by legal proceedings. If the Contemplated
Transactions are not consummated, each party will return or destroy as much of
such written information as the other party may reasonably request.
11.4 Notices. All notices, consents, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by telecopier (with written confirmation of receipt),
provided that a copy is mailed by registered mail, return receipt requested, or
(c) when received by the addressee, if sent by a nationally recognized overnight
delivery service (receipt requested), in each case to the appropriate addresses
and telecopier numbers set forth below (or to such other addresses and
telecopier numbers as a party may designate by notice to the other parties):
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Telstar: Telstar Holdings Limited
Prospect Studios, Barnes High Street
London SW139LE, England
Attention: Group Finance Director
Facsimile No.: 011-44-181-878-8470
Company: U.S. Computer Group
4 Dubon Court
Farmingdale, New York 11735
Attention: President
Facsimile No.: 516-753-6096
Buyer: Tech Electro Industries, Inc.
2941 Main Street
Suite 300-A
Santa Monica, California 90405
Attention: Chief Financial Officer
Facsimile No.: 310-392-0733
with a copy to:
Jeffer, Mangels, Butler & Marmaro LLP
2121 Avenue of the Stars, 10th Floor
Los Angeles, California 90067
Attention: Robert E. Braun, Esq.
Facsimile No.: 310-203-0567
11.5 Jurisdiction; Service of Process. Any action or proceeding
seeking to enforce any provision of, or based on any right arising out of, this
Agreement may be brought against any of the parties in the courts of the State
of California, County of Los Angeles, or, if it has or can acquire jurisdiction,
in the United States District Court for the Central District of California, and
each of the parties consents to the jurisdiction of such courts (and of the
appropriate appellate courts) in any such action or proceeding and waives any
objection to venue laid therein. Process in any action or proceeding referred to
in the preceding sentence may be served on any party anywhere in the world.
11.6 Further Assurances. The parties agree (a) to furnish upon
request to each other such further information, (b) to execute and deliver to
each other such other documents, and (c) to do such other acts and things, all
as the other party may reasonably request for the purpose of carrying out
the intent of this Agreement and the documents referred to in this Agreement.
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11.7 Waiver. The rights and remedies of the parties to this
Agreement are cumulative and not alternative. Neither the failure nor any delay
by any party in exercising any right, power, or privilege under this Agreement
or the documents referred to in this Agreement will operate as a waiver of such
right, power, or privilege, and no single or partial exercise of any such right,
power, or privilege will preclude any other or further exercise of such right,
power, or privilege or the exercise of any other right, power, or privilege. To
the maximum extent permitted by applicable law, (a) no claim or right arising
out of this Agreement or the documents referred to in this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation of the
claim or right unless in writing signed by the other party; (b) no waiver that
may be given by a party will be applicable except in the specific instance for
which it is given; and (c) no notice to or demand on one party will be deemed
to be a waiver of any obligation of such party or of the right of the party
giving such notice or demand to take further action without notice or demand as
provided in this Agreement or the documents referred to in this Agreement.
11.8 Entire Agreement and Modification. This Agreement supersedes
all prior agreements between the parties with respect to its subject matter
(including the Letter of Intent between Buyer and Telstar dated November 10,
1997 and the Original Stock Purchase Agreement and the Amendments thereto) and
constitutes (along with the documents referred to in this Agreement including,
without limitation, the Disclosure Letter) a complete and exclusive statement of
the terms of the agreement between the parties with respect to its subject
matter. This Agreement may not be amended except by a written agreement executed
by the party to be charged with the amendment.
11.9 Disclosure Letter.
11.9.1 The disclosures in the Disclosure Letter, and those
in any Supplement thereto, must relate only to the representations and
warranties in the Section of the Agreement to which they expressly relate and
not to any other representation or warranty in this Agreement.
11.9.2 In the event of any inconsistency between the
statements in the body of this Agreement and those in the Disclosure Letter
(other than an exception expressly set forth as such in the Disclosure Letter
with respect to a specifically identified representation or warranty), the
statements in the body of this Agreement will control.
11.10 Assignments, Successors, and No Third-party Rights. Neither
party may assign any of its rights under this Agreement without the prior
consent of the other parties except that Buyer may assign any of its rights
under this Agreement to any Subsidiary of Buyer. Subject to the preceding
sentence, this Agreement will apply to, be binding in all respects upon, and
inure to the benefit of the successors and permitted assigns of the parties.
Nothing expressed or referred to in this Agreement will be construed to give any
Person other than the parties to this Agreement any legal or equitable right,
remedy, or claim under or with respect to this Agreement or any provision of
this Agreement. This Agreement and all of its provisions and conditions are for
the sole and exclusive benefit of the parties to this Agreement and their
successors and assigns.
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11.11 Severability. If any provision of this Agreement is held
invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and effect. Any
provision of this Agreement held invalid or unenforceable only in part or degree
will remain in full force and effect to the extent not held invalid or
unenforceable.
11.12 Section Headings, Construction. The headings of Sections in
this Agreement are provided for convenience only and will not affect its
construction or interpretation. All references to "Section" or "Sections" refer
to the corresponding Section or Sections of this Agreement. All words used in
this Agreement will be construed to be of such gender or number as the
circumstances require. Unless otherwise expressly provided, the word
"including" does not limit the preceding words or terms.
11.13 Time of Essence. With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.
11.14 Governing Law. This Agreement will be governed by the laws of
the State of California without regard to principles of conflicts of laws.
11.15 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
Buyer: TECH ELECTRO INDUSTRIES, INC.
-----------------------------
By: /s/ STEVEN SCOTT
-----------------------------
Its Executive Vice President
Telstar: TELSTAR HOLDINGS LIMITED
-----------------------------
By: /s/ SIMON FLANNACK
-----------------------------
Its Group Finance Director
Company: US COMPUTER GROUP INC.
----------------------------
By: /s/ STEVEN DAVIES
----------------------------
Its President
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