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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event reported) - August 25, 1997
TEXAS UTILITIES COMPANY
FORMERLY KNOWN AS TUC HOLDING COMPANY
(Exact name of registrant as specified in its charter)
TEXAS 1-12833 75-2669310
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
1601 BRYAN STREET, ENERGY PLAZA, DALLAS, TEXAS 75201
(Address of principal executive offices)
Registrant's telephone number, including area code - (214) 812-4600
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ITEM 5. OTHER EVENTS
On August 25, 1997, Texas Utilities Company (Company) announced that it
had entered into a definitive agreement to acquire Lufkin-Conroe Communications
Co. (LCC), a privately held, independent local exchange telephone company, with
sixteen exchanges that serve approximately 100,000 access lines in the Alto,
Conroe and Lufkin areas of Southeast Texas. LCC also provides access services
to a number of interexchange carriers who provide long distance services. LCC
owns fiber optic cable systems which it leases to interexchange carriers,
leases radio communications towers, and provides Internet access, cellular
mobile telephone, radio paging and private branch exchange (PBX) services to
local customers. LCC also provides interexchange long distance services, with
the primary focus being on business customers.
Under the terms of the agreement, the Company will acquire LCC for
approximately $328 million. The acquisition will be funded with $320 million
of the Company's common stock in a stock for stock exchange and the assumption
of approximately $8 million of net debt. The equity value is fixed, but the
number of shares to be issued is dependent on the price of the Company's common
stock at the time of close.
The transaction requires approval by LCC shareholders, is subject to a
Hart-Scott-Rodino review and requires FCC approval of the transfer of several
licenses held by LCC. The parties expect to conclude the transaction by early
1998.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Exhibits
2 - Agreement and Plan of Merger, dated as of August 23, 1997 among
the Company, TUCOM Acquisition Co. And LCC.
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SIGNATURE
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 thereunto duly authorized.
TEXAS UTILITIES COMPANY
By: /s/ ROBERT S. SHAPARD
-------------------------------
Robert S. Shapard
Treasurer and Assistant Secretary
Date: August 26, 1997
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EXHIBIT INDEX
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Exhibits DESCRIPTION
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2 - Agreement and Plan of Merger, dated as of August 23, 1997
among the Company, TUCOM Acquisition Co. And LCC.
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EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
TEXAS UTILITIES COMPANY
TUCOM ACQUISITION CO.
and
LUFKIN-CONROE COMMUNICATIONS CO.
Dated as of August 23, 1997
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TABLE OF CONTENTS
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Page
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ARTICLE I THE MERGER 1
SECTION 1.01. The Merger 1
SECTION 1.02. Effective Time 2
SECTION 1.03. Effect of the Merger 2
SECTION 1.04. Articles of Incorporation; Bylaws 2
SECTION 1.05. Directors 2
ARTICLE II CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES 3
SECTION 2.01. Conversion of Securities 3
SECTION 2.02. Exchange of Certificates 5
SECTION 2.03. Share Transfer Books 8
SECTION 2.04. Dissenting Shareholders 8
SECTION 2.05. Closing 9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY 9
SECTION 3.01. Organization and Standing 9
SECTION 3.02. Subsidiaries and Cellular Partnerships 9
SECTION 3.03. Articles of Incorporation and Bylaws 10
SECTION 3.04. Capitalization 11
SECTION 3.05. Authority; Binding Obligation 11
SECTION 3.06. No Conflict; Required Filings and Consents 12
SECTION 3.07. Licenses; Compliance 13
SECTION 3.08. Financial Information 14
SECTION 3.09. Undisclosed Liabilities 15
SECTION 3.10. Absence of Certain Changes or Events 15
SECTION 3.11. Litigation; Disputes 16
SECTION 3.12. Debt Instruments 17
SECTION 3.13. Leases 17
SECTION 3.14. Other Agreements; No Default 17
SECTION 3.15. Labor Relations 19
SECTION 3.16. Pension and Benefit Plans 20
SECTION 3.17. Taxes and Tax Matters 24
SECTION 3.18. Access Lines; Customers 27
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SECTION 3.19. Certain Business Practices 27
SECTION 3.20. Insurance 28
SECTION 3.21. Potential Conflicts of Interest 28
SECTION 3.22. Receivables 29
SECTION 3.23. Real Property 29
SECTION 3.24. Books and Records 30
SECTION 3.25. Assets 30
SECTION 3.26. No Infringement or Contest 31
SECTION 3.27. Board Recommendation 31
SECTION 3.28. Vote Required 31
SECTION 3.29. Banks; Attorneys-in-fact 31
SECTION 3.30. Voting Agreements 32
SECTION 3.31. Brokers 32
SECTION 3.32. Environmental Matters 32
SECTION 3.33. Disclosure 33
SECTION 3.34. Company Shareholders 33
SECTION 3.35. Directors and Officers 33
SECTION 3.36. Copies of Documents 34
SECTION 3.37. Operation of the Company's Business 34
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND ACQUIROR SUB 34
SECTION 4.01. Organization and Qualification; Subsidiaries 34
SECTION 4.02. Articles of Incorporation and Bylaws 35
SECTION 4.03. Authority; Binding Obligation 35
SECTION 4.04. No Conflict; Required Filings and Consents 35
SECTION 4.05. No Prior Activities of Acquiror Sub 36
SECTION 4.06. Brokers 36
SECTION 4.07. SEC Documents 36
SECTION 4.08. Acquiror Common Stock 37
SECTION 4.09. Capitalization 37
SECTION 4.10. Compliance 37
SECTION 4.11. Absence of Certain Changes or Events; Absence of
Undisclosed Liabilities 38
SECTION 4.12. Litigation 38
SECTION 4.13. Registration Statement 38
SECTION 4.14. Tax Matters 39
SECTION 4.15. Employee Matters; ERISA 39
SECTION 4.16. Environmental Matters 40
SECTION 4.17. Regulation as a Utility 40
SECTION 4.18. Insurance 40
SECTION 4.19. NRC Actions 41
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ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS 41
SECTION 5.01. Conduct of Business of the Company 41
SECTION 5.02. Other Actions 45
SECTION 5.03. Certain Tax Matters 45
SECTION 5.04. Access and Information 45
SECTION 5.05. No Solicitation 46
ARTICLE VI ADDITIONAL AGREEMENTS 47
SECTION 6.01. Meeting of Shareholders 47
SECTION 6.02. Appropriate Action; Consents; Filings 47
SECTION 6.03. Letters of Accountants 49
SECTION 6.04. Disclosure Schedules; Updated Disclosures; Breaches 49
SECTION 6.05. Public Announcements 50
SECTION 6.06. Employee Matters. 50
SECTION 6.07. Acquiror Information 50
SECTION 6.08. Obligations of Acquiror Sub 51
SECTION 6.09. Unaudited Financial Information 51
SECTION 6.10. Rule 145 Affiliates 51
SECTION 6.11. Environmental Matters 51
SECTION 6.12. Acquiror SEC Documents 52
SECTION 6.13. Directors' and Officers' Indemnification
and Insurance 52
ARTICLE VII CONDITIONS TO CLOSING 53
SECTION 7.01. Conditions to Obligations of Each Party Under
This Merger Agreement 53
SECTION 7.02. Additional Conditions to Obligations of Acquiror
and Acquiror Sub 54
SECTION 7.03. Additional Conditions to Obligations of the Company 56
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER 57
SECTION 8.01. Termination 57
SECTION 8.02. Effect of Termination 59
SECTION 8.03. Expenses 59
SECTION 8.04. Amendment 60
SECTION 8.05. Extension; Waiver 60
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ARTICLE IX GENERAL PROVISIONS 60
SECTION 9.01. Nonsurvival of Representations and Warranties 60
SECTION 9.02. Notices 61
SECTION 9.03. Headings 62
SECTION 9.04. Severability 62
SECTION 9.05. Entire Agreement 62
SECTION 9.06. Assignment 62
SECTION 9.07. Parties in Interest 62
SECTION 9.08. Mutual Drafting 62
SECTION 9.09. Governing Law 63
SECTION 9.10. Counterparts 63
SECTION 9.11. Further Assurances 63
ARTICLE X DEFINITIONS 63
Exhibit "A" Form of Voting Agreement and Irrevocable Proxy
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AGREEMENT AND PLAN OF MERGER, dated as of August 23, 1997 (this "Merger
Agreement"), among Texas Utilities Company, a Texas corporation ("Acquiror"),
TUCOM Acquisition Co., a Texas corporation ("Acquiror Sub") and a wholly owned
direct subsidiary of Acquiror, and Lufkin-Conroe Communications Co., a Texas
corporation (the "Company").
WHEREAS, upon the terms and subject to the conditions of this Merger
Agreement and in accordance with the Texas Business Corporation Act ("Texas
Law"), Acquiror Sub will merge with and into the Company (the "Merger") and the
Company shall continue as the sole surviving corporation of the Merger;
WHEREAS, the Board of Directors of the Company has approved and adopted
this Merger Agreement and the transactions contemplated hereby and has
recommended approval and adoption of this Merger Agreement by the shareholders
of the Company;
WHEREAS, the Board of Directors of Acquiror has determined that the
Merger is in the best interests of Acquiror and its shareholders, the Board of
Directors of Acquiror Sub has approved and adopted this Merger Agreement and
the transactions contemplated hereby and has recommended approval and adoption
of this Merger Agreement to its shareholder and the shareholder of Acquiror Sub
has approved and adopted this Merger Agreement; and
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a tax-free reorganization under the provisions of Section 368
of the United States Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this Merger
Agreement, and intending to be legally bound hereby, the parties hereto agree
as follows:
ARTICLE I
THE MERGER
SECTION 1.01. THE MERGER.
Upon the terms and subject to the conditions set forth in this Merger
Agreement, and in accordance with Texas Law, at the Effective Time (as defined
in Section 1.02) Acquiror Sub shall be merged with and into the Company. As a
result of the Merger, the separate corporate existence of Acquiror Sub shall
cease and the Company shall continue as the sole surviving corporation of the
Merger (the "Surviving Corporation") as a direct or indirect wholly owned
subsidiary of Acquiror.
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SECTION 1.02. EFFECTIVE TIME.
Subject to the provisions of Section 2.05, as promptly as practicable
after the satisfaction or, if permissible, waiver of the conditions set forth
in Article VII, the parties hereto shall cause the Merger to be consummated by
filing this Merger Agreement, articles of merger or other appropriate Documents
(in any such case, the "Articles of Merger") with the Secretary of State of the
State of Texas, in such form as required by, and executed in accordance with
the relevant provisions of, Texas Law (the effective date and time of such
filing being the "Effective Time").
SECTION 1.03. EFFECT OF THE MERGER.
At the Effective Time, the effect of the Merger shall be as provided by
the applicable provisions of Texas Law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the property, if
any, of Acquiror Sub shall succeed to, be possessed by and vest in the
Surviving Corporation, and any duties of Acquiror Sub shall succeed to, be
assumed by and become the duties of the Surviving Corporation, all without
further act or deed.
SECTION 1.04. ARTICLES OF INCORPORATION; BYLAWS.
(a) Unless otherwise determined by Acquiror prior to the
Effective Time, at the Effective Time the articles of incorporation of
Acquiror Sub, as in effect immediately prior to the Effective Time,
shall be the articles of incorporation of the Surviving Corporation,
until thereafter amended in accordance with Texas Law and such articles
of incorporation.
(b) Unless otherwise determined by Acquiror prior to the
Effective Time, at the Effective Time the bylaws of Acquiror Sub, as in
effect immediately prior to the Effective Time, shall be the bylaws of
the Surviving Corporation until thereafter amended in accordance with
Texas Law, the articles of incorporation of the Surviving Corporation
and such bylaws.
SECTION 1.05. DIRECTORS.
The directors of Acquiror Sub immediately prior to the Effective Time
shall be the initial directors of the Surviving Corporation, each to hold
office in accordance with the articles of incorporation and bylaws of the
Surviving Corporation.
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ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. CONVERSION OF SECURITIES.
At the Effective Time, by virtue of the Merger and without any action on
the part of Acquiror Sub, the Company or holders of any of the following
securities:
(a) Company Common Shares. Subject to the other provisions of
this Section 2.01, each share of common stock, par value $1.25 per
share, of the Company ("Company Common Shares") issued and outstanding
immediately prior to the Effective Time (other than any Company Common
Shares to be canceled pursuant to Section 2.01(c) or any Company Common
Shares ("Dissenting Shares") held by any shareholder of the Company who
elects to exercise appraisal rights under Texas Law) shall be converted,
subject to Sections 2.01(e) and 2.02(e), into the right to receive a
number of shares of the common stock, without par value, of Acquiror
("Acquiror Common Stock") (rounded to the nearest 1/1000th) (the "Common
Share Exchange Ratio") equal to the amount determined by dividing
$53.274 (the "Common Share Numerator," which is an amount determined by
dividing $320,000,000 by the outstanding Company Common Shares) by the
average of the closing sales price of Acquiror Common Stock as reported
on the NYSE Consolidated Transactions Tape on each of the 20 consecutive
trading days preceding the tenth trading day prior to the Effective Time
("Average Acquiror Price"); provided, however, that notwithstanding the
actual Average Acquiror Price, the Average Acquiror Price shall be
deemed to be $31.00 if the actual Average Acquiror Price is less than
$31.00 and shall be deemed to be $37.00 if the actual Average Acquiror
Price is greater than $37.00.
(b) Cancellation and Retirement of Company Common Shares. All
such shares of Company Common Shares referred to in Section 2.01(a)
(other than any Company Common Shares to be canceled pursuant to Section
2.01(c) or any Dissenting Shares) shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to exist,
and each certificate previously representing any such shares shall
thereafter represent the right to receive the shares and fractions
thereof of Acquiror Common Stock into which such Company Common Shares
were converted in the Merger. The holders of certificates previously
representing Company Common Shares outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to such
shares of Company Common Shares except as otherwise provided herein or
by Law. Certificates previously representing such Company Common Shares
shall be exchanged for the whole shares of Acquiror Common Stock to be
issued in consideration therefor upon the surrender of such certificates
in accordance with the provisions of Section 2.02, without interest. No
fractional share of Acquiror Common Stock shall be issued, and, in lieu
thereof, a cash payment shall be made pursuant to Section 2.02(e)
hereof.
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(c) Cancellation of Treasury Shares. Any Company Common Shares
held in the treasury of the Company and any shares of Company Common
Shares owned by any direct or indirect wholly owned subsidiary of the
Company immediately prior to the Effective Time shall be canceled and
extinguished without any conversion thereof and no payment shall be made
with respect thereto.
(d) Acquiror Sub Common Stock. Each share of common stock of
Acquiror Sub outstanding immediately prior to the Effective Time shall
be converted into the shares of common stock of the Surviving
Corporation and each certificate evidencing ownership of any such
Acquiror Sub shares as of the Effective Time shall evidence the same
number of shares of the Surviving Corporation.
(e) Adjustment of Common Share Exchange Ratio and Common Share
Numerator. The Common Share Exchange Ratio and Common Share Numerator
shall be subject to certain adjustments, as follows:
(i) In the event that between the date of this Merger
Agreement and the Effective Time the outstanding shares of
Acquiror Common Stock or Company Common Shares shall have been
changed into a different number of shares or a different class by
reason of any stock dividend, subdivision, reclassification,
recapitalization, split, reverse split, combination or exchange
of shares, or Acquiror shall have declared, paid or set aside a
distribution (other than a cash dividend) on the Acquiror Common
Stock, the Common Share Exchange Ratio shall be correspondingly
adjusted to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination, exchange
of shares, stock dividend or other distribution.
(ii) The CSN Adjustment Amount as of the Effective Time
shall be calculated in the manner set forth below based on
schedules prepared by the Company in accordance with GAAP on a
consolidated basis consistent with the Company's prior practices,
to which Deloitte & Touche LLP shall have applied confirmation
procedures acceptable to Acquiror and the Company within 10 days
after the Effective Time and reasonably acceptable to Acquiror
and the Company (the "Closing Schedules"):
CSN Adjustment Amount = L + C + T - CE - CH - U - B, where
L= long-term debt of the Company (exclusive of the
outstanding aggregate principal amount of 8.5% Debentures
of Eastex Celco Co.)
C= current maturities of long-term debt of the Company
T= unpaid out-of-pocket transaction costs of the Company for
the transactions contemplated by this Merger Agreement,
including legal, accounting and investment advisor fees
(the "Transaction Costs")
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CE= cash and cash equivalents of the Company (assuming for the
purposes of this calculation that any Bonuses that have
been paid by the Company have not been paid)
CH= an agreed value of $2,000,000 for the 32,917 shares of
common stock of Champion International Corporation owned
by the Company
U= an agreed value of $2,900,000 for the 208,930 shares of
common stock, the 105 shares of Series A Preferred Stock
and $315,000 principal amount of convertible debentures of
USTN Holdings, Inc. owned by the Company
B= an agreed base line level of net indebtedness of
$8,300,000.
If the CSN Adjustment Amount is negative, the Common Share
Numerator shall be reduced by an amount equal to (A) the aggregate
amount of the Bonuses less one-half of the CSN Adjustment Amount
(expressed as a positive number for purposes of this calculation),
divided by (B) 6,006,696. If the CSN Adjustment Amount is zero, the
Common Share Numerator shall be reduced by an amount equal to the
aggregate amount of the Bonuses divided by 6,006,696. If the CSN
Adjustment is positive, the Common Share Numerator shall be reduced by
an amount equal to (A) the sum of the aggregate amount of the Bonuses
plus the CSN Adjustment Amount divided by (B) 6,006,696. In each case
any reduction to the Common Share Numerator shall be rounded to the
nearest 1000th and in no case shall the Common Stock Numerator be
increased by this calculation.
SECTION 2.02. EXCHANGE OF CERTIFICATES.
(a) Exchange Agent. As of the Effective Time, Acquiror shall
transfer or cause to be transferred to Acquiror Sub as a capital
contribution and Acquiror Sub shall thereupon deposit, or shall cause to
be deposited, with a bank, trust company or other entity designated by
Acquiror (the "Exchange Agent"), and reasonably acceptable to the
Company, for the benefit of the holders of Company Common Shares, for
exchange through the Exchange Agent in accordance with this Article II,
certificates representing the shares of Acquiror Common Stock issuable
pursuant to Section 2.01 in exchange for outstanding Company Common
Shares (such certificates for shares of Acquiror Common Stock, together
with any dividends or distributions described in Section 2.02(c), and
such amounts of cash as shall be generated in accordance with Section
2.02(e)(ii) hereof, being hereafter referred to as the "Exchange Fund").
The Exchange Agent shall, pursuant to this Merger Agreement and
irrevocable instructions from the holders of Company Common Shares,
deliver the shares of Acquiror Common Stock to be issued pursuant to
Section 2.01 and the amount of cash to be paid pursuant to Section
2.02(e) out of the Exchange Fund.
(b) Exchange Procedures. Acquiror shall, promptly after the
delivery to the Acquiror of the Closing Schedules, mail to each holder
of record of a certificate or certificates which immediately prior to
the date of such mailing represented outstanding shares of Company
Common Shares (the "Certificates"): (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon
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proper delivery of the Certificates to the Exchange Agent and shall be
in customary form), and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for shares of Acquiror Common
Stock and cash in lieu of any fractional share. Upon surrender of
Certificates for cancellation to the Exchange Agent, together with such
letter of transmittal, duly completed and executed, and such other
Documents as may be required pursuant to such instructions, the holder
of such Certificate shall be entitled to receive in exchange therefor,
as soon as practicable after the delivery to Acquiror of the Closing
Schedules (i) a certificate representing that number of whole shares of
Acquiror Common Stock which such holder has the right to receive in
respect of the Company Common Shares formerly represented by such
Certificate (after taking into account all Company Common Shares then
held by such holder under all such Certificates so surrendered), and
(ii) the amount of cash in lieu of any fractional share of Acquiror
Common Stock to which such holder is entitled pursuant to Section
2.02(e). The Certificates so surrendered shall be canceled forthwith
following the Effective Time. In the event of a transfer of ownership of
Company Common Shares which is not registered in the transfer records of
the Company, the proper number of shares of Acquiror Common Stock may be
issued and the proper amount of cash in lieu of any fractional share may
be paid to a transferee if the Certificates representing such Company
Common Shares, properly endorsed or otherwise in proper form for
transfer, are presented to the Exchange Agent, accompanied by all
Documents required to evidence and effect such transfer and by evidence
that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by Section 2.02, each Certificate shall be
deemed at any time after the Effective Time to represent only the right
to receive upon such surrender the shares of Acquiror Common Stock
issuable pursuant to Section 2.01 in exchange therefor, and cash in lieu
of any fractional share of Acquiror Common Stock to which such holder is
entitled pursuant to Section 2.02(e). No interest will be paid or will
accrue on any cash payable pursuant to Sections 2.02(c) or 2.02(e).
(c) Distributions with Respect to Unexchanged Shares of
Acquiror Common Stock. No dividends or other distributions declared or
made after the Effective Time with respect to Acquiror Common Stock
with a record date after the Effective Time shall be paid to the holder
of any unsurrendered Certificate with respect to the whole shares of
Acquiror Common Stock represented thereby until the holder of such
Certificate shall surrender such Certificate. Subject to the effect of
escheat, tax, withholding or other applicable Laws, following surrender
of any such Certificate, there shall be paid, without interest, to the
record holder of the certificates representing whole shares of Acquiror
Common Stock issued in exchange therefor (i) promptly, the amount of
dividends or other distributions having a record date after the
Effective Time theretofore paid with respect to such whole shares of
Acquiror Common Stock, and (ii) at the appropriate payment date, the
amount of dividends or other distributions, having a record date after
the Effective Time but prior to surrender and a payment date occurring
after surrender, payable with respect to such whole shares of Acquiror
Common Stock.
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(d) No Further Rights in Company Capital Stock. All shares of
Acquiror Common Stock issued and all cash paid upon conversion of the
Company Common Shares in accordance with the terms hereof (including any
cash paid pursuant to Sections 2.02(c) or (e)) shall be deemed to have
been issued and paid in full satisfaction of all rights pertaining to
such Company Common Shares.
(e) No Fractional Shares. No fractional shares of Acquiror
Common Stock shall be issued upon surrender for exchange of the
Certificates, and any such fractional share interests will not entitle
the owner thereof to vote or to any rights of a shareholder of Acquiror.
Notwithstanding any other provision of this Merger Agreement, each
holder of Company Common Shares who would otherwise be entitled to
receive a fraction of a share of Acquiror Common Stock, after
aggregating all Certificates delivered by such holder, and rounding down
to the nearest whole share, shall receive, in lieu thereof, an amount in
cash determined as follows:
(i) As promptly as practicable following the delivery
to Acquiror of the Closing Schedules, the Exchange Agent shall
determine the excess of (x) the number of full shares of Acquiror
Common Stock over (y) the aggregate number of whole shares of
Acquiror Common Stock to be issued to holders of Company Common
Shares pursuant to Section 2.01, such excess being herein called
the "Excess Shares." As soon after the delivery to Acquiror of
the Closing Balance Schedules as practicable, the Exchange Agent,
as the agent for the holders of Company Common Shares, shall sell
the Excess Shares at the then prevailing prices on the NYSE, all
in the manner provided in subparagraph (ii) of this Section
2.02(e).
(ii) The sale of the Excess Shares by the Exchange Agent
shall be executed on the NYSE through one or more member firms of
the NYSE and shall be executed in round lots to the extent
practicable. Until the net proceeds of such sale or sales have
been distributed to the holders of Company Common Shares, the
Exchange Agent shall hold such proceeds in trust for the benefit
of such holders as part of the Exchange Fund. Acquiror shall pay
all commissions, transfer taxes and other out-of-pocket
transaction costs of the Exchange Agent reasonably incurred in
connection with such sales of Excess Shares. The Exchange Agent
shall determine the portion of such proceeds to which each holder
of Company Common Shares is entitled and distribute such amounts
in accordance with this Section 2.02.
(f) Termination of Exchange Fund. Any portion of the Exchange
Fund which remains undistributed to the holders of Company Common Shares
for one year after the Effective Time shall be delivered to Acquiror,
upon request, and any holders of Company Common Shares who have not
theretofore complied with this Article II shall thereafter look only to
Acquiror for the shares of Acquiror Common Stock to which they are
entitled pursuant to Section 2.01, any dividends or other distributions
with respect to Acquiror Common Stock to which they are entitled
pursuant to Section 2.02(c) and any cash in lieu of
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fractional shares of Acquiror Common Stock to which they are entitled
pursuant to Section 2.02(e).
(g) No Liability. None of Acquiror, Acquiror Sub, the Company
or the Exchange Agent shall be liable to any Person for any shares of
Acquiror Common Stock (or dividends or distributions with respect
thereto) or cash delivered to a public official pursuant to any
abandoned property, escheat or similar Law.
(h) Lost, Stolen or Destroyed Certificates. In the event any
certificate evidencing Company Common Shares shall have been lost,
stolen or destroyed, the Exchange Agent shall issue in exchange for such
lost, stolen or destroyed certificate, upon the making of an affidavit
of that fact by the holder thereof, such shares of Acquiror Common Stock
and cash for any fractional shares, if any, as may be required pursuant
to this Article II; provided, however, that the Exchange Agent or
Acquiror may, in its reasonable discretion and as a condition precedent
to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate to deliver a bond in such sum as it may reasonably
direct as indemnity against any claim that may be made against Acquiror,
the Surviving Corporation, or the Exchange Agent with respect to the
certificate alleged to have been lost, stolen or destroyed.
SECTION 2.03. SHARE TRANSFER BOOKS.
At the Effective Time, the share transfer books of the Company shall be
closed and there shall be no further registration of transfers of Company
Common Shares thereafter on the records of the Company. From and after the
Effective Time, the holders of certificates representing Company Common Shares
outstanding immediately prior to the Effective Time shall cease to have any
rights with respect to such Company Common Shares except as otherwise provided
herein or by Law. On or after the Effective Time, any Certificates presented to
the Exchange Agent or Acquiror for any reason shall be converted into shares of
Acquiror Common Stock and/or cash, including any dividends or other
distributions to which the holders thereof are entitled pursuant to Section
2.02(c) and any cash in lieu of fractional shares of Acquiror Common Stock to
which the holders thereof are entitled pursuant to Section 2.02(e).
SECTION 2.04. DISSENTING SHAREHOLDERS.
Subject to the terms and conditions hereof, at and after the Effective
Time, any holder of Company Common Shares who complies with Article 5.12 of
Texas Law (a "Dissenting Shareholder") shall be entitled to obtain payment from
the Surviving Corporation solely from the historical assets of the Company of
the fair value of such Dissenting Shareholder's Company Common Shares as
determined pursuant to Article 5.12 of Texas Law; provided, however, that no
such payment shall be made unless and until such Dissenting Shareholder has
surrendered to the Exchange Agent the Certificate representing the Company
Common Shares for which payment is being made. The Company shall give Acquiror
prompt notice of any demands for appraisal or withdrawals of demands for
appraisal received by the Company and any other Documents obtained by the
Company
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pursuant to the provisions of Article 5.12 of Texas Law, and, except with the
prior written consent of Acquiror, shall not settle or offer to settle any such
demands.
SECTION 2.05. CLOSING.
Subject to the terms and conditions of this Merger Agreement, the
closing of the Merger (the "Closing") will take place at 10:00 a.m. local time
on the second business day immediately following the date on which the last of
the conditions set forth in Article VII hereof is satisfied or, if permissible,
waived (the "Closing Date"), at the offices of Worsham, Forsythe & Wooldridge,
L.L.P., 30th Floor, Energy Plaza, 1601 Bryan Street, Dallas, Texas 75201,
unless another date or place is agreed to in writing by the parties hereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as specifically set forth in the Disclosure Schedule to be
delivered by the Company to Acquiror in accordance with the terms of Section
6.04 (the "Company Disclosure Schedule"), the Company hereby represents and
warrants (which representation and warranty shall be deemed to include the
disclosure with respect thereto so specified in the Company Disclosure
Schedule) to, and covenants and agrees with, Acquiror and Acquiror Sub as set
forth below, in each case as of the date of this Merger Agreement. With respect
to each representation and warranty set forth in Sections 3.06, 3.07, 3.09,
3.10, and 3.11 each reference therein to "Subsidiary" or "Subsidiaries" shall
be deemed to include the Cellular Partnerships, except that each such
representation and warranty as to the Cellular Partnerships shall be deemed to
be made to the Knowledge of the Company and the Subsidiaries.
SECTION 3.01. ORGANIZATION AND STANDING.
The Company is a corporation duly organized, validly existing and in
good standing under the Laws of the State of Texas, and has all requisite
corporate power and authority to own, operate and lease its Assets, to carry on
its business as currently conducted. The Company is not qualified to conduct
business in any jurisdiction other than Texas, and neither the nature of the
business conducted by the Company nor the character of the Assets owned, leased
or otherwise held by it makes any such qualification necessary, except where
the absence of such qualification as a foreign corporation would not have a
Company Material Adverse Effect.
SECTION 3.02. SUBSIDIARIES AND CELLULAR PARTNERSHIPS.
The Company has no Subsidiaries and no material investment or other
interest, whether by debt or equity, in any corporation, association,
partnership, joint venture or other entity, except as set forth in Section 3.02
of the Company Disclosure Schedule. Each of the limited partnerships in
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which the Company or a Subsidiary has any investment (the "Cellular
Partnerships") and the nature and amount as of a recent date of such investment
is identified in Section 3.02 of the Company Disclosure Schedule. The Company
Disclosure Schedule sets forth: (a) the authorized capital stock or other
equity interests of each direct and indirect Subsidiary of the Company and the
percentage of the outstanding capital stock or other equity interests of each
Subsidiary directly or indirectly owned by the Company, and (b) the nature and
amount as of a recent date of any such equity investment. All of such shares of
capital stock or other equity interests of Subsidiaries and the Cellular
Partnerships directly or indirectly held by the Company have been duly
authorized and validly issued and are outstanding, fully paid and
nonassessable. Except as set forth in Section 3.02 of the Company Disclosure
Schedule, the Company directly, or indirectly through wholly owned
Subsidiaries, owns all such shares of capital stock or other equity interests
of the direct or indirect Subsidiaries free and clear of all Encumbrances. All
equity interests in the Cellular Partnerships held by the Company directly or
indirectly through wholly owned Subsidiaries are owned free and clear of all
Encumbrances, except as set forth in the partnership agreements governing the
partnerships, copies of which have been made available to Acquiror. Each
Subsidiary is a corporation duly organized, validly existing and in good
standing under the Laws of the State of Texas, and has all requisite corporate
power and authority to own, operate and lease its Assets and to carry on its
business as currently conducted. Each Subsidiary is qualified to conduct
business and is in good standing in the State of Texas. The Subsidiaries are
not qualified to conduct business in any jurisdiction other than Texas, and
neither the nature of their businesses nor the character of the Assets owned,
leased or otherwise held by them makes any such qualification necessary, except
where the absence of licensing or qualification as a foreign corporation would
not have a Company Material Adverse Effect. None of the Company, the
Subsidiaries or the Cellular Partnerships is a "public utility company," a
"holding company," a "subsidiary company" or an "affiliate" of any public
utility company within the meaning of the Public Utility Holding Company Act of
1935, as amended ("PUHCA").
SECTION 3.03. ARTICLES OF INCORPORATION AND BYLAWS.
The Company has furnished to Acquiror a true and complete copy of the
certificate or articles of incorporation of the Company and of each Subsidiary,
as currently in effect, certified as of a recent date by the Secretary of State
(or comparable Governmental Entity) of their respective jurisdictions of
incorporation, and a true and complete copy of the bylaws of the Company and of
each Subsidiary, as currently in effect, certified by their respective
corporate secretaries. The Company has furnished to Acquiror a true and
complete copy of the agreement of limited partnership of each of the Cellular
Partnerships, as currently in effect, certified by an executive officer of the
Company and the certificate of limited partnership of each of the Cellular
Partnerships, as currently in effect, certified as of a recent date by the
Secretary of State (or comparable Governmental Entity) of their respective
jurisdictions of organization. All such certified copies are attached as
exhibits to, and constitute an integral part of, the Company Disclosure
Schedule.
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SECTION 3.04. CAPITALIZATION.
The authorized capital stock of the Company consists of 12,000,000
Company Common Shares, of which: (i) 6,006,696 shares are issued and
outstanding, all of which are duly authorized, validly issued, fully paid and
nonassessable; and (ii) no shares are held in the treasury of the Company. No
Company Common Shares have been reserved for any purpose. There are no
outstanding securities convertible into or exchangeable for Company Common
Shares, any other securities of the Company, or any capital stock or other
securities of any of the Subsidiaries and no outstanding options, rights
(preemptive or otherwise), or warrants to purchase or to subscribe for any
shares of such capital stock or other securities of the Company or any of the
Subsidiaries. Except as set forth in Section 3.04 of the Company Disclosure
Schedule, there are no outstanding Agreements to which the Company is a party
affecting or relating to the voting, issuance, purchase, redemption,
registration, repurchase or transfer of Company Common Shares, any other
securities of the Company, or any capital stock or other securities of any
Subsidiary, except as contemplated hereunder. Since December 31, 1996, no
Company Common Shares have been issued by the Company. Each of the outstanding
Company Common Shares and the capital stock of, or other equity interest in,
the Subsidiaries was issued in compliance with all applicable federal and state
Laws concerning the issuance of securities. The names and addresses of, and
number of shares or other securities held by, all holders of record of Company
Common Shares (the "Company Shareholders") and all holders of record of capital
stock or other securities of the Subsidiaries are set forth in Section 3.04 of
the Company Disclosure Schedule. All of the outstanding Company Common Shares
are owned by the Company Shareholders, free and clear, to the Knowledge of the
Company and the Subsidiaries, of all Encumbrances which to the Company's
Knowledge currently restrict the holder thereof from voting such shares in
favor of the Merger. Except as set forth in Section 3.04 of the Company
Disclosure Schedule, there are no obligations, contingent or otherwise, of the
Company or any Subsidiary to provide funds to, make any investment (in the form
of a loan, capital contribution or otherwise) in, or provide any guarantee with
respect to, any Subsidiary or any Cellular Partnership. Except as set forth in
Section 3.04 of the Company Disclosure Schedule and except for cash dividends
and employee bonuses paid or to be paid in the customary manner by the Company
(as set forth in Section 5.01(b) in the case of dividends), there are no
Agreements pursuant to which any Person is or may be entitled to receive from
Company or any Subsidiary any of the revenues or earnings, or any payment based
thereon or calculated in accordance therewith, of the Company, any Subsidiary
or any Cellular Partnership.
SECTION 3.05. AUTHORITY; BINDING OBLIGATION.
The execution and delivery by the Company of this Merger Agreement, the
execution and delivery by the Company and the Subsidiaries of all other
Documents contemplated hereby, and the consummation by the Company and the
Subsidiaries of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action, and no other corporate
proceedings on the part of the Company or the Subsidiaries are necessary to
authorize this Merger Agreement and the other Documents contemplated hereby, or
to consummate the transactions contemplated hereby and thereby, other than the
approval and adoption of this Merger Agreement
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by the holders of two-thirds of the outstanding Company Common Shares, in
accordance with Texas Law and the Company's articles of incorporation and
bylaws and the satisfaction (or waiver by Acquiror) of Section 7.02(f). This
Merger Agreement has been duly executed and delivered by the Company and
constitutes a legal, valid and binding obligation of the Company, enforceable
in accordance with its terms, except as such enforceability may be subject to
shareholder approval and all required regulatory approval, and to the effects
of any applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other Laws affecting creditors' rights generally
and subject to the effects of general equitable principles (whether considered
in a proceeding in equity or at law).
SECTION 3.06. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution, delivery and performance by the Company of
this Merger Agreement and all other Documents contemplated hereby, the
fulfillment of and compliance with the respective terms and provisions
hereof and thereof, and the consummation by the Company of the
transactions contemplated hereby and thereby, do not and will not: (i)
conflict with, or violate any provision of, the articles of
incorporation or bylaws of the Company, the certificate or articles of
incorporation or bylaws of any Subsidiary or the certificate or
agreement of limited partnership of any Cellular Partnership; (ii)
subject to (A) obtaining the requisite approval and adoption of this
Merger Agreement by the holders of two-thirds of the outstanding Company
Common Shares, in accordance with Texas Law and the Company's articles
of incorporation and bylaws and the satisfaction (or waiver by Acquiror)
of Section 7.02(f) and (B) obtaining the consents, approvals,
authorizations and permits of, and making filings with or notifications
to, the applicable Governmental Entity pursuant to the applicable
requirements, if any, of the Securities Act, Blue Sky Laws, the HSR Act,
the Communications Act, the Federal Aviation Act, applicable state
utilities Laws, applicable municipal franchise Laws and the filing and
recordation of the Articles of Merger as required by Texas Law, conflict
with or violate any Law applicable to the Company, any Subsidiary or any
Cellular Partnership, or any of their respective Assets; (iii) conflict
with, result in any breach of, constitute a default (or an event that
with notice or lapse of time or both would become a default) under any
Agreement to which the Company or any Subsidiary, or, any Agreement to
which any Cellular Partnership, is a party or by which the Company, any
Subsidiary or any Cellular Partnership or any of their respective
Assets, may be bound; or (iv) result in or require the creation or
imposition of, or result in the acceleration of, any indebtedness or any
Encumbrance of any nature upon, or with respect to, the Company, any
Subsidiary or any Cellular Partnership or any of the Assets now owned or
hereafter acquired by the Company, any Subsidiary or any Cellular
Partnership; except for any such conflict or violation described in
clause (ii), any such conflict, breach or default described in clause
(iii), or any such creation, imposition or acceleration described in
clause (iv) that would not have a Company Material Adverse Effect.
(b) Except as set forth in Section 3.06(b) of the Company
Disclosure Schedule, the execution, delivery and performance by the
Company of this Merger Agreement and all
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other Documents contemplated hereby, the fulfillment of and compliance
with the respective terms and provisions hereof and thereof, and the
consummation by the Company of the transactions contemplated hereby and
thereby, do not and will not: (i) require any consent, approval,
authorization or permit of, or filing with or notification to, any
Person not a party to this Merger Agreement, except (A) the approval and
adoption of this Merger Agreement by the holders of two-thirds of the
outstanding Company Common Shares, in accordance with Texas Law and the
Company's articles of incorporation and bylaws and the satisfaction (or
waiver by Acquiror) of Section 7.02(f), (B) pursuant to the applicable
requirements, if any, of the Securities Act, Blue Sky Laws, the HSR Act,
the Communications Act, the Federal Aviation Act, applicable state
utilities Laws and applicable municipal franchise Laws, and (C) the
filing and recordation of the Articles of Merger as required by Texas
Law; or (ii) result in or give rise to any penalty, forfeiture,
Agreement termination, right of termination, amendment or cancellation,
or restriction on business operations of Acquiror, the Company, the
Surviving Corporation, any Subsidiary or any Cellular Partnership.
SECTION 3.07. LICENSES; COMPLIANCE.
(a) The Company and each Subsidiary is in possession of all
Licenses necessary for the Company or any Subsidiary to own, lease and
operate its Assets or to carry on its business as it is now being
conducted (the "Company Licenses"), except where the failure to possess
any such Company License would not have a Company Material Adverse
Effect. All Company Licenses that are FCC, FAA or state utilities
Licenses or municipal franchises are listed and described in Section
3.07(a)(1) of the Company Disclosure Schedule, and all other material
Company Licenses are listed and described in Section 3.07(a)(2) of the
Company Disclosure Schedule. All Company Licenses are valid and in full
force and effect through the respective dates indicated in the Company
Disclosure Schedule, except for any such invalidity or failure to be in
full force and effect that would not, alone or in the aggregate, have a
Company Material Adverse Effect, and no suspension, cancellation,
complaint, proceeding, order or investigation of or with respect to any
Company License is pending or, to the Knowledge of the Company or any
Subsidiary, threatened. Neither the Company nor any Subsidiary is in
violation of or default under any Company License, except for any such
violation or default that would not have a Company Material Adverse
Effect. Except as set forth in Section 3.07(a)(3) of the Company
Disclosure Schedule, since December 31, 1996, neither the Company nor
any Subsidiary has received written or, to the Knowledge of the
Company, oral notice from any Governmental Entity of any such violation
or default.
(b) Neither the Company nor any Subsidiary is in violation of
or default under, nor has it breached: (i) any term or provision of its
articles of incorporation, bylaws or agreement of limited partnership or
(ii) any Agreement or restriction to which the Company or any Subsidiary
is a party or by which the Company or any Subsidiary, or any of their
respective Assets, is bound or affected, except for any such violation,
default or breach described in clause (ii) that would not have a Company
Material Adverse Effect. The Company and the
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Subsidiaries have complied and are in full compliance with all Laws,
except where the failure so to comply would not have a Company Material
Adverse Effect.
(c) To the Knowledge of the Company: (i) all material returns,
reports, statements and other Documents required to be filed by the
Company or any Subsidiary with any Governmental Entity have been filed
and complied with and are true, correct and complete in all material
respects, and (ii) all material records of every type and nature
relating to the Company Licenses or the business, operations or Assets
of the Company or any Subsidiary have been maintained in all material
respects in accordance with good business practices and the rules of any
Governmental Entity and are maintained at the Company or the appropriate
Subsidiary.
SECTION 3.08. FINANCIAL INFORMATION.
(a) The Company has prepared audited consolidated balance
sheets of the Company and the Subsidiaries as of the end of the fiscal
year ending on December 31 in each of 1996, 1995 and 1994 (the "Audited
Balance Sheets") and the related audited consolidated statements of
income, shareholders' equity and cash flows of the Company and the
Subsidiaries for each of such fiscal years (the Audited Balance Sheets
and such audited consolidated statements of income, shareholders' equity
and cash flows are hereinafter referred to collectively as the "Audited
Statements"), in each case, audited by Axley & Rode LLP in accordance
with generally accepted auditing standards and accompanied by the
related report of Axley & Rode LLP. A true and complete copy of each of
the Audited Statements has been delivered to Acquiror and is attached as
an exhibit to, and constitutes an integral part of, the Company
Disclosure Schedule. The Company has also prepared unaudited
consolidated balance sheets of the Company and the Subsidiaries as of
the last day of each calendar quarter ending after January 1, 1997
(including the unaudited consolidated balance sheets to be furnished to
Acquiror pursuant to Section 6.09, the "Unaudited Balance Sheets") and
the unaudited consolidated statements of income and cash flows of the
Company and the Subsidiaries for the quarterly periods then ended (the
Unaudited Balance Sheets and such statements of income and cash flows,
including the unaudited consolidated statements of income and cash flows
to be furnished to Acquiror pursuant to Section 6.09, are hereinafter
referred to collectively as the "Unaudited Statements" and, together
with the Audited Statements, as the "Financial Statements").
(b) The Financial Statements (including, without limitation,
the notes thereto): (i) are complete and correct in all material
respects, (ii) have been prepared in accordance with the books and
records of the Company and the Subsidiaries, and (iii) present fairly
the consolidated financial position of the Company and the Subsidiaries
and their consolidated results of operations and cash flows as of and
for the respective dates and time periods in accordance with GAAP
applied on a basis consistent with prior accounting periods, except as
noted thereon and subject to, in the case of the Unaudited Statements,
normal and recurring audit adjustments which were not or are not
expected to be material in amount. All changes in accounting methods
(for financial accounting purposes) made, agreed to,
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requested or required with respect to the Company or any of the
Subsidiaries since January 1, 1994 are reflected in the Financial
Statements.
SECTION 3.09. UNDISCLOSED LIABILITIES.
There are no material liabilities or obligations (whether absolute,
accrued, contingent or otherwise) of a nature required to be reflected by GAAP
in a consolidated corporate balance sheet, including but not limited to
liabilities for Taxes, that are not reflected on, or reserved against in, the
Audited Balance Sheets at the end of 1996, and the notes thereto. Except as
described in Section 3.09 of the Company Disclosure Schedule, since December
31, 1996, neither the Company nor any Subsidiary has incurred any material
liabilities or obligations (whether absolute, accrued, contingent or otherwise)
other than in the Ordinary Course of Business.
SECTION 3.10. ABSENCE OF CERTAIN CHANGES OR EVENTS.
Other than as set forth in Section 3.10 to the Company Disclosure
Schedule, since December 31, 1996, there has been no material adverse change,
and no change except in the Ordinary Course of Business, in the business,
operations, condition (financial or otherwise), Assets or liabilities of the
Company or any Subsidiary or, to the Company's Knowledge and excluding general
trends in the industry, no material adverse change in the prospects of the
Company or any Subsidiary. Except as set forth in Section 3.10 to the Company
Disclosure Schedule, since December 31, 1996, the Company and the Subsidiaries
have conducted their respective businesses substantially in the manner
heretofore conducted and only in the Ordinary Course of Business, and neither
the Company nor any Subsidiary has: (a) incurred any material damage,
destruction or loss not covered by insurance (except for industry-standard
deductibles) with respect to any Assets of the Company or of any such
Subsidiary; (b) issued any capital stock or other equity securities or granted
any options, warrants or other rights calling for the issuance thereof; (c)
issued any bonds or other long-term debt instruments, granted any options,
warrants or other rights calling for the issuance thereof, or borrowed any
funds other than in the Ordinary Course of Business; (d) incurred, or become
subject to, any material obligation or liability (whether absolute, contingent,
accrued or otherwise), except current liabilities incurred in the Ordinary
Course of Business; (e) except for debt reduction required by Company
obligations, discharged or satisfied any Encumbrance or paid any material
obligation or liability (whether absolute or contingent, matured or unmatured,
known or unknown) other than current liabilities shown in the Unaudited Balance
Sheets and current liabilities incurred since December 31, 1996, except in the
Ordinary Course of Business; (f) declared or made payment of, or set aside for
payment, any dividends (except for the dividends the payment of which is
reflected in the books and records of the Company on the date of this Merger
Agreement or described in Section 5.01(b)) or distributions of any Assets, or
purchased, redeemed or otherwise acquired any of its capital stock, any
securities convertible into capital stock, or any other securities; (g)
mortgaged, pledged or subjected to any Encumbrance any of its Assets; (h) sold,
exchanged, transferred or otherwise disposed of any of its Assets, or canceled
any debts or claims, except in each case in the Ordinary Course of Business;
(i) written down the value of any Assets or written off as uncollectible any
debt, notes or accounts receivable, except where previously reserved against in
the Financial Statements
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and not material in amount, and except for write-downs and write-offs in the
Ordinary Course of Business, none of which, individually or in the aggregate,
are material; (j) entered into any transactions other than in the Ordinary
Course of Business or which in the aggregate would have a Company Material
Adverse Effect; (k) increased the rate of compensation payable, or to become
payable, by it to any of its officers, employees, agents or independent
contractors over the rate being paid to them on December 31, 1996, except for
any increase in the rate of compensation payable, or to become payable, by it
in the Ordinary Course of Business to employees who are not directors or
officers; (l) made or permitted any amendment or termination of any material
Agreement to which it is a party; (m) through negotiation or otherwise made any
commitment or incurred any liability to any labor organization; (n) made any
accrual or arrangement for or payment of bonuses or special compensation of any
kind to any director, officer or employee, except for any accrual or
arrangement for or payment of bonuses or special compensation in the Ordinary
Course of Business to employees who are not directors or officers and bonuses
permitted in accordance with Section 5.01(a); (o) directly or indirectly paid
any severance or termination pay in excess of two months' salary to any officer
or employee with an annual salary in excess of $100,000; (p) made capital
expenditures, or entered into commitments therefor, not provided for in the
Company's capital budget for 1997 (a copy of which has been furnished by the
Company to Acquiror) or, if applicable, the Company's capital budget for 1998
(which capital budget has been furnished to Acquiror as provided in Section
5.01(i)), except for capital expenditures permitted by Section 5.01; (q) made
any change in any method of accounting or accounting practice; (r) entered into
any transaction of the type described in Section 3.19; (s) made any charitable
contributions or pledges exceeding $50,000 individually or $300,000 in the
aggregate; or (t) made any Agreement to do any of the foregoing. At the
Closing, the Company shall deliver to Acquiror an updated Section 3.10 to the
Company Disclosure Schedule in accordance with the provisions of Section 6.04.
SECTION 3.11. LITIGATION; DISPUTES
(a) Except as disclosed in Section 3.11(a) of the Company
Disclosure Schedule, there are no actions, suits, claims, arbitrations,
proceedings or investigations pending or, to the Knowledge of the
Company or any Subsidiary, threatened against, affecting or involving
the Company or any Subsidiary or their respective businesses or Assets,
or the transactions contemplated by this Merger Agreement, at law or in
equity, or before or by any court, arbitrator or Governmental Entity,
domestic or foreign. Neither the Company nor any Subsidiary is: (i)
operating under or subject to any order, award, writ, injunction, decree
or judgment of any court, arbitrator or Governmental Entity other than
regulations and orders imposed upon the Subsidiaries by the PUC and the
FCC as telecommunications utilities, or (ii) in default with respect to
any order, award, writ, injunction, decree or judgment of any court,
arbitrator or Governmental Entity.
(b) Except as set forth in Section 3.11(b) of the Company
Disclosure Schedule, neither the Company nor any Subsidiary is currently
involved in, or to the Knowledge of the Company or any Subsidiary,
reasonably anticipates any dispute with, any of its current or former
employees, agents, brokers, distributors, vendors, customers, business
consultants,
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franchisees, franchisors, representatives or independent contractors (or
any current or former employees of any of the foregoing Persons)
affecting the business or Assets of the Company or any Subsidiary,
except for any such dispute that, if resolved adversely to the Company
or any Subsidiary, would not have a Company Material Adverse Effect.
SECTION 3.12. DEBT INSTRUMENTS.
Section 3.12 of the Company Disclosure Schedule lists all material
mortgages, indentures, notes, guarantees and other Agreements for or relating
to borrowed money (including, without limitation, conditional sales agreements
and capital leases) to which the Company or any Subsidiary is a party or which
have been assumed by the Company or any Subsidiary or to which any Assets of
the Company or any Subsidiary are subject. To the Knowledge of the Company (i)
the Company and the Subsidiaries have performed all the material obligations
required to be performed by any of them to date under any of the foregoing, and
(ii) are not in default in any material respect under any of the foregoing, and
(iii) there has not occurred any event which (whether with or without notice,
lapse of time or the happening or occurrence of any other event) would
constitute such a default.
SECTION 3.13. LEASES.
Section 3.13 of the Company Disclosure Schedule lists all material
leases and other Agreements under which the Company or any Subsidiary is lessee
or lessor of any Asset, or holds, manages or operates any Asset owned by any
third party, or under which any Asset owned by the Company or by any Subsidiary
is held, operated or managed by a third party. To the Knowledge of the Company:
(i) the Company and the Subsidiaries are the owners and holders of all the
leasehold estates purported to be granted to them by the Documents listed in
Section 3.13 of the Company Disclosure Schedule, (ii) each such lease and other
Agreement is in full force and effect and constitutes a legal, valid and
binding obligation of, and is legally enforceable against, the respective
parties thereto and grants the leasehold estate it purports to grant free and
clear of all Encumbrances, (iii) the Company and the Subsidiaries have in all
respects performed all material obligations thereunder required to be performed
by any of them to date, (iv) no party to any such Agreement or arrangement is
in default in any material respect under any of the foregoing, and there has
not occurred any event which (whether with or without notice, lapse of time or
the happening or occurrence of any other event) would constitute such a
default, and (v) all of the Assets subject to such leases and other Agreements
are in a condition adequate for the uses to which they are currently being
used.
SECTION 3.14. OTHER AGREEMENTS; NO DEFAULT.
(a) Section 3.14(a) of the Company Disclosure Schedule lists
each material Agreement to which the Company or any Subsidiary is a
party or by which the Company or any Subsidiary is bound, and which is:
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(i) an Agreement for the employment of any director,
officer, salaried employee, consultant or independent contractor,
or providing for severance payments to any such director,
officer, salaried employee, consultant or independent contractor;
(ii) a license Agreement or distributor, dealer, sales
representative, sales agency, advertising, property management or
brokerage Agreement involving an annual payment in excess of
$50,000;
(iii) an Agreement with any labor organization or other
collective bargaining unit;
(iv) an Agreement for the future purchase or lease of
materials, supplies, services, merchandise, equipment or other
Assets involving payments of more than $250,000 over its
remaining term (including, without limitation, periods covered by
any option to renew by either party);
(v) a profit-sharing, bonus, incentive compensation,
deferred compensation, stock option, severance pay, stock
purchase, employee benefit, insurance, hospitalization, pension,
retirement or other similar plan or Agreement;
(vi) an Agreement for the sale of any of its material
Assets or the grant of any preferential rights to purchase any of
its material Assets or rights, other than in the Ordinary Course
of Business;
(vii) an Agreement that contains any provisions requiring
the Company or any Subsidiary to indemnify any other party;
(viii) a joint venture Agreement or other Agreement
involving the sharing of revenues or profits;
(ix) an Agreement with an Affiliate of the Company or
any Subsidiary;
(x) an Agreement (including, without limitation, an
Agreement not to compete or an exclusivity Agreement) that
reasonably could be interpreted to impose any restriction on the
business or operations of the Company or any Subsidiary, or any
of their respective Affiliates, prior to the Effective Time, or
on the business or operations of Acquiror or any of its
Affiliates after the Effective Time;
(xi) an Agreement with any Governmental Entity, except
tariffs and filings of public record with the PUC or the FCC;
(xii) an Agreement with any customer of the Company or
any Subsidiary that was billed an aggregate of $1 million during
the year ended December 31, 1996
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or $500,000 during the period from January 1, 1997 through the
date of this Merger Agreement;
(xiii) any other Agreement (A) that is material to the
Company and the Subsidiaries, taken as a whole, or to the conduct
of their businesses or operations, or (B) the absence of which
would have a Company Material Adverse Effect, (the foregoing
Agreements referred to herein as the "Company Contracts"). To the
Knowledge of the Company, the Company has made available to
Acquiror true and complete copies of each written Company
Contract (including any amendments thereto) and a written summary
of the material terms of each oral Company Contract.
(b) To the Knowledge of the Company: (i) each Company Contract
is in full force and effect and constitutes a legal, valid and binding
obligation of, and is legally enforceable against, the respective
parties thereto, (ii) all necessary approvals of any Governmental Entity
with respect thereto have been obtained, (iii) all necessary filings or
registrations therefor have been made, and there are no outstanding
disputes thereunder and, to the Knowledge of the Company, no threatened
cancellation or termination thereof, (iv) the Company and the
Subsidiaries have performed all material obligations thereunder required
to be performed by any of them to date, (v) no party is in default in
any material respect under any of the Company Contracts, and there has
not occurred any event which (whether with or without notice, lapse of
time or the happening or occurrence of any other event) would constitute
such a default, (vi) except as specifically described in Section 3.14(a)
of the Company Disclosure Schedule, there has been no material written
or oral modification or amendment to any Company Contract and, to the
Knowledge of the Company, there are no reasonably expected material
changes to any Company Contract, and (vii) at the Closing, the Company
shall deliver to Acquiror an updated Section 3.14(a) to the Company
Disclosure Schedule in accordance with the provisions of Section 6.04.
SECTION 3.15. LABOR RELATIONS.
Section 3.15(a) of the Company Disclosure Schedule lists all collective
bargaining or other labor Agreements to which the Company or any Subsidiary is
a party. There are no strikes, work stoppages, union organization efforts,
arbitrations, grievances or other controversies pending, threatened or
reasonably anticipated between the Company or any Subsidiary and (a) any
current or former employees of the Company or of any Subsidiary or (b) any
union or other collective bargaining unit representing such employees. The
Company and the Subsidiaries have complied and are in compliance with all Laws
relating to employment or the workplace, including, without limitation, Laws
relating to wages, hours, collective bargaining, safety and health, work
authorization, equal employment opportunity, employment discrimination,
immigration, withholding, unemployment compensation, worker's compensation,
employee privacy and right to know, except where the failure so to comply would
not have a Company Material Adverse Effect. Except as set forth in Section
3.15(b) of the Company Disclosure Schedule, neither the Company nor any
Subsidiary has been notified by any Governmental Agency, counsel to any
claimant, or any other Person of any
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<PAGE> 25
unresolved violation or alleged violation of any Law relating to employment,
equal employment opportunity, civil or human rights, or employment
discrimination generally. Except as set forth in Section 3.15(c) to the Company
Disclosure Schedule, there are no employment Agreements between the Company or
any Subsidiary and any of their respective employees, or professional service
Agreements relating to the businesses and Assets of the Company or of any
Subsidiary. Except as set forth in Section 3.15(d) to the Company Disclosure
Schedule, the consummation of the transactions contemplated hereby will not
cause Acquiror, the Surviving Corporation, the Company or any Subsidiary to
incur or suffer any liability relating to, or obligation to pay, severance,
termination or other payments to any Person, except that no warranty is made as
any customary payments historically made by the Company which would normally
result from a termination and are made because of a voluntary or involuntary
termination of employment because of the consummation of the transactions
contemplated hereby.
SECTION 3.16. PENSION AND BENEFIT PLANS.
(a) Except as set forth in Section 3.16(a) to the Company
Disclosure Schedule, neither the Company nor any Subsidiary (i)
maintains or has during the past six (6) years maintained any Plan or
Other Arrangement, (ii) is or has during the past six (6) years been a
party to any Plan or Other Arrangement or (iii) has obligations under
any Plan or Other Arrangement.
(b) The Company has furnished to Acquiror true and complete
copies of each of the following Documents: (i) the Documents setting
forth the current terms of each Plan; (ii) all current related trust
Agreements or annuity Agreements (and any other current funding
Document) for each Plan; (iii) for the three most recent plan years, all
annual reports (Form 5500 series), including all schedules and
attachments thereto, and summary annual reports, on each Plan; (iv) the
current summary plan description and subsequent summaries of material
modifications for each Title I Plan, and all administrative policies or
procedures relating to each Plan; (v) all Documents relating to or
describing any funding deficiencies or under funding of any Plan subject
to Title IV of ERISA; (vi) all correspondence with or from the DOL on
any Plan during the last three (3) years, and all DOL opinions on any
Plan; (vii) all correspondence with or from the PBGC on any Plan during
the past three (3) years; (viii) all correspondence with or from the IRS
on any Plan during the past three (3) years, and all IRS rulings,
opinions or technical advice relating to any Plan and the current IRS
determination letter issued with respect to each Qualified Plan; (ix)
all current Agreements with service providers or fiduciaries for
providing services on behalf of any Plan; and (x) all reports or similar
documents prepared in connection with any internal audits or studies of
any Plan during the last three (3) years. For each Other Arrangement,
the Company has furnished to Acquiror true and complete copies of each
Agreement or other Document setting forth or explaining the current
terms of the Other Arrangement, all related trust agreements or other
funding Documents (including, without limitation, insurance contracts,
certificates of deposit, money market accounts, etc.), all significant
employee communications, all correspondence or other submissions with
any Governmental Entity exchanged or made during the past three
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<PAGE> 26
(3) years, and all current Agreements with service providers or
fiduciaries for providing services on behalf of any Other Arrangement.
(c) No Plan is a Multiemployer Plan.
(d) No Plan is an ESOP.
(e) The funding method used under each Minimum-Funding Plan
does not violate the funding requirements in Title I, Subtitle B, Part
3, of ERISA. For each Defined Benefit Plan, the Company has furnished to
Acquiror a true and complete copy of the actuarial valuation reports
issued by the actuaries of that Defined Benefit Plan for the three (3)
most recent plan years, setting forth: (i) the actuarial present value
(based upon the same actuarial assumptions as were used for that period
for funding purposes) of all vested and nonvested accrued benefits under
that Defined Benefit Plan; (ii) the actuarial present value (based upon
the same actuarial assumptions, other than turnover assumptions, as were
used for that period for funding purposes) of vested benefits under that
Defined Benefit Plan; (iii) the net fair market value of that Defined
Benefit Plan's Assets; and (iv) a detailed description of the funding
method used under that Defined Benefit Plan.
(f) No "accumulated funding deficiency" as defined in Section
302(a)(2) of ERISA or Section 412 of the Code, whether or not waived,
and no "unfunded current liability" as determined under Section 412(l)
of the Code exists with respect to any Minimum-Funding Plan. No security
is required under Section 401(a)(29) of the Code as to any
Minimum-Funding Plan. Section 3.16(f) of the Company Disclosure Schedule
sets forth all unpaid obligations and liabilities of the Company and the
Subsidiaries to provide contributions currently due with respect to any
Minimum-Funding Plan.
(g) Section 3.16(g) of the Disclosure Schedule sets forth the
contributions that (i) the Company or any Subsidiary has promised or is
otherwise obligated to make under each Individual Account Plan that is a
Statutory-Waiver Plan and (ii) are due and unpaid as of the date of this
Merger Agreement.
(h) The Company and the Subsidiaries have made all
contributions and other payments required by and due under the terms of
each Plan and Other Arrangement and, except as set forth in Section
3.16(h) of the Company Disclosure Schedule, have taken no action during
the past three (3) years (other than actions required by Law) relating
to any Plan or Other Arrangement that will increase Acquiror's, the
Surviving Corporation's, the Company's or any Subsidiary's obligation
under any Plan or Other Arrangement.
(i) Section 3.16(i) of the Company Disclosure Schedule sets
forth a list of all Qualified Plans. Except as disclosed in Section
3.16(i) of the Company Disclosure Schedule, to the Company's Knowledge,
all Qualified Plans and any related trust Agreements or annuity
Agreements (or any other funding Document) comply and have complied (in
form and
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<PAGE> 27
administration) with ERISA, the Code (including, without limitation, the
requirements for Tax qualification described in Section 401 thereof),
and all other Laws in all material respects. The trusts established
under such Plans are exempt from federal income taxes under Section
501(a) of the Code. The Company and the Subsidiaries have received
determination letters issued by the IRS with respect to each Qualified
Plan as currently in effect, and the Company has furnished to Acquiror
true and complete copies of the most recent determination letter for
each Qualified Plan. To the Knowledge of the Company: (i) all statements
made by or on behalf of the Company or any Subsidiary to the IRS in
connection with applications for such determination letters with respect
to each Qualified Plan were true and complete when made and continue to
be true and complete and, (ii) nothing has occurred since the date of
the most recent applicable determination letter that would adversely
affect the tax-qualified status of any Qualified Plan.
(j) To the Company's Knowledge, the Company and the
Subsidiaries have complied in all material respects with all applicable
provisions of the Code, ERISA, the National Labor Relations Act, Title
VII of the Civil Rights Act of 1964, the Age Discrimination in
Employment Act, the Fair Labor Standards Act, the Securities Act, the
Exchange Act, and all other Laws, orders or assessments pertaining to
the Plans, Other Arrangements and other employee or employment related
benefits. Neither the Company nor any Subsidiary has any material
liability for any delinquent contributions within the meaning of Section
515 of ERISA (including, without limitation, related attorneys' fees,
costs, liquidated damages and interest) or for any arrearages of wages.
The Company has no Knowledge of pending unfair labor practice charges,
contract grievances under any collective bargaining agreement, other
administrative charges, claims, grievances or lawsuits before any Court,
arbiter or Governmental Entity relating to any Plan or Other
Arrangement, and to the Knowledge of the Company there exists no fact
that is reasonably likely to give rise to such a claim, charge,
grievance or suit.
(k) To the Company's Knowledge, none of the Company, any
Subsidiary or any of the Plans has engaged in any violation of Section
406(a) or 406(b) of ERISA for which no exemption exists under Section
408 of ERISA or any "prohibited transactions" (as such term is 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. Neither the Company nor any
Subsidiary, fiduciary or party-in-interest has requested a prohibited
transaction exemption with respect to any Plan, nor is the Company or
any Subsidiary aware of any circumstance pursuant to which such a
request is being contemplated or may be made.
(l) The Company and the Subsidiaries have paid all premiums
(and interest charges and penalties for late payment, if applicable) due
to the PBGC for each Defined Benefit Plan. The Company has reflected (or
shall reflect) in each of the Financial Statements the current value of
such premium obligation that is accrued and unsatisfied as of the date
of each such Financial Statement. Section 3.16(l) of the Company
Disclosure Schedule, sets forth the amount of all such unpaid premium
obligations (including, without limitation,
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<PAGE> 28
proportionate partial accruals for the current year). Other than being
required to make premium payments when due, no liability to the PBGC has
been incurred by the Company or by any Common Control Entity. During the
past three years, no filing has been made by, or required of, the
Company or any Common Control Entity with the PBGC, the PBGC has not
started any proceeding to terminate any Defined Benefit Plan that was or
is maintained or wholly or partially funded by the Company or any Common
Control Entity, and to the Knowledge of the Company no fact exists that
is reasonably likely to permit the PBGC to begin such a proceeding.
Neither the Company nor any Common Control Entity has, or will have as a
result of the transactions contemplated hereby, (i) withdrawn as a
substantial employer so as to become subject to Section 4063 of ERISA;
or (ii) ceased making contributions to any Pension Plan that is subject
to Section 4064(a) of ERISA to which the Company or any Common Control
Entity made contributions during the past five years.
(m) Section 3.16(m) of the Company Disclosure Schedule
identifies any terminated Plan or Other Arrangement that covered any
current or former employees of the Company or any Subsidiary, and any
other Plan that has been terminated, during the past three (3) years.
The Company has furnished to Acquiror true and complete copies of all
filings with any Governmental Entity, employee communications, board
minutes and all other Documents relating to each such Plan and Other
Arrangement termination. Except as disclosed in Section 3.16(m) of the
Company Disclosure Schedule, all liabilities and obligations of the
Company and Subsidiaries arising out of, or relating to, each such
termination, have been fully satisfied in all material respects.
(n) Except as set forth in Section 3.16(n) of the Company
Disclosure Schedule, no Plan or Other Arrangement, individually or
collectively, provides for any payment by the Company or any Subsidiary
to any employee or independent contractor that is not deductible under
Section 162(a)(1) or 404 of the Code or that is, or may be, an "excess
parachute payment" pursuant to Section 280G of the Code.
(o) Except as disclosed in Schedule 3.16(o) of the Company
Disclosure Schedule, no Plan has, within the past three (3) years,
experienced a "reportable event" (as such term is defined in Section
4043(b) of ERISA) whether or not such event is subject to an
administrative or statutory waiver from the reporting requirement.
(p) No Plan is a "qualified foreign plan" (as such term is
defined in Section 404A(e) of the Code), and no Plan is subject to the
Laws of any jurisdiction other than the United States of America or one
of its political subdivisions.
(q) The Company and the Subsidiaries have timely filed and the
Company has made available to Acquiror true and complete copies of each
Form 5330 (Return of Excise Taxes Related to Employee Benefit Plans)
that the Company or any Subsidiary filed on any Plan during the past
three (3) years. To the Company's Knowledge, the Company and the
Subsidiaries have no liability for Taxes required to be reported on Form
5330.
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(r) Section 3.16(r) of the Company Disclosure Schedule lists
all funded Welfare Plans that provide benefits to current or former
employees of the Company or any Subsidiary, or to their beneficiaries.
The funding under each Welfare Plan does not exceed and has not exceeded
the limitations under Sections 419A(b) and 419A(c) of the Code. To the
Company's Knowledge, the Company and the Subsidiaries are not subject to
taxation on the income of any Welfare Plan's welfare benefit fund (as
such term is defined in Section 419(e) of the Code) under Section
419A(g) of the Code.
(s) Section 3.16(s) of the Company Disclosure Schedule (i)
identifies all post-retirement medical, life insurance or other benefits
promised, provided or otherwise due now or in the future to current,
former or retired employees of the Company or any Subsidiary, (ii)
identifies the method of funding (including, without limitation, any
individual accounting) for all such benefits, (iii) discloses the funded
status of the Plans providing or promising such benefits, and (iv) sets
forth the method of accounting for such benefits to any key employees
(as defined in Section 416(i) of the Code) of the Company or any
Subsidiary.
(t) All Welfare Plans and the related trusts that are subject
to Section 4980B(f) of the Code and Sections 601 through 607 of ERISA
comply in all material respects with and have been administered in
compliance with the health care continuation-coverage requirements for
tax-favored status under Section 4980B(f) of the Code (formerly Section
162(k) of the Code), Sections 601 through 607 of ERISA, and all proposed
or final regulations under Section 162 of the Code explaining those
requirements.
(u) To the Knowledge of the Company, the Company and the
Subsidiaries have (i) filed or caused to be filed all returns and
reports on the Plans that they are required to file and (ii) paid or
made adequate provision for all fees, interest, penalties, assessments
or deficiencies that have become due pursuant to those returns or
reports or pursuant to any assessment or adjustment that has been made
relating to those returns or reports. To the Knowledge of the Company,
all other fees, interest, penalties and assessments that are due and
payable by or for the Company or any Subsidiary with respect to any Plan
have been timely reported, fully paid and discharged. There are no
unpaid fees, penalties, interest or assessments due from the Company or
any Subsidiary or from any other Person that are or could become an
Encumbrance on any Asset of the Company or any Subsidiary and would have
a Company Material Adverse Effect. To the Knowledge of the Company, the
Company and the Subsidiaries have collected or withheld all amounts that
are required to be collected or withheld by them to discharge their
obligations with respect to each Plan, and all of those amounts have
been paid to the appropriate Governmental Entity or set aside in
appropriate accounts for future payment when due.
SECTION 3.17. TAXES AND TAX MATTERS.
(a) The Company and the Subsidiaries have (or, in the case of
Company Tax Returns becoming due after the date hereof and before the
Effective Time, will have prior to
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<PAGE> 30
the Effective Time) duly filed all Company Tax Returns required to be
filed by the Company and the Subsidiaries since January 1, 1989 at or
before the Effective Time with respect to all applicable material Taxes.
No material penalties or other charges are or will become due with
respect to any such Company Tax Returns as the result of the late filing
thereof. All such Company Tax Returns are (or, in the case of returns
becoming due after the date hereof and before the Effective Time, will
be) true and complete in all material respects. The Company and the
Subsidiaries: (i) have paid all Taxes due or claimed to be due by any
Taxing authority in connection with any such Company Tax Returns
(without regard to whether or not such Taxes are shown as due on such
Company Tax Returns); or (ii) have established (or, in the case of
amounts becoming due after the date hereof, prior to the Effective Time
will have paid or established) in the Financial Statements adequate
reserves (in conformity with GAAP consistently applied) for the payment
of such Taxes. The amounts set up as reserves for Taxes in the Financial
Statements are sufficient for the payment of all unpaid Taxes, whether
or not such Taxes are disputed or are yet due and payable, for or with
respect to the applicable period, and for which the Company or any
Subsidiary may be liable in its own right (including, without
limitation, by reason of being a member of the same affiliated group) or
as a transferee of the Assets of, or successor to, any Person.
(b) Neither the Company nor any Subsidiary, either in its own
right (including, without limitation, by reason of being a member of the
same affiliated group) or as a transferee, has or at the Effective Time
will have any material liability for Taxes payable for or with respect
to any periods prior to and including the Effective Time in excess of
the amounts actually paid prior to the Effective Time or reserved for in
the Financial Statements, except for any Taxes due in connection with
the Merger.
(c) Except as set forth in Section 3.17(c) of the Company
Disclosure Schedule, all federal and Texas Company Tax Returns have been
examined by the relevant Taxing authorities, or closed without audit by
applicable Law, and all deficiencies proposed as a result of such
examinations have been paid or settled, for all taxable years prior to
and including the taxable year ended December 31, 1992. Except as set
forth in Section 3.17(c) of the Company Disclosure Schedule, there is no
action, suit, proceeding, audit, investigation or claim pending or, to
the Knowledge of the Company or any Subsidiary, threatened in respect of
any Taxes for which the Company or any Subsidiary is or may become
liable, nor has any deficiency or claim for any such Taxes been
proposed, asserted or, to the Knowledge of the Company or any
Subsidiary, threatened. Except as set forth in Section 3.17(c) of the
Company Disclosure Schedule, neither the Company nor any Subsidiary has
consented to any waivers or extensions of any statute of limitations
with respect to any taxable year of the Company or any Subsidiary.
Except as set forth in Section 3.17(c) of the Company Disclosure
Schedule, there is no Agreement, waiver or consent providing for an
extension of time with respect to the assessment or collection of any
Taxes against the Company or any Subsidiary, and no power of attorney
granted by the Company or any Subsidiary with respect to any Tax matters
is currently in force.
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(d) The Company has furnished to Acquiror true and complete
copies of all Company Tax Returns and all written communications with
any Governmental Entity relating to any such Company Tax Returns or to
any deficiency or claim proposed or asserted, irrespective of the
outcome of such matter, but only to the extent such items relate to Tax
years (i) which are subject to an audit, investigation, examination or
other proceeding, or (ii) with respect to which the statute of
limitations has not expired.
(e) Section 3.17(e) of the Company Disclosure Schedule sets
forth (i) all federal Tax elections that currently are in effect with
respect to the Company or any Subsidiary, and (ii) all elections for
purposes of foreign, state or local Taxes and all consents or Agreements
for purposes of federal, foreign, state or local Taxes in each case that
reasonably could be expected to affect or be binding upon the Surviving
Corporation or any Subsidiary or their respective Assets or operations
after the Effective Time. Section 3.17(e) of the Company Disclosure
Schedule sets forth all changes in accounting methods for Tax purposes
made, agreed to, requested or required with respect to the Company or
any of the Subsidiaries since January 1, 1994.
(f) Except for the Cellular Partnerships and except as set
forth in Section 3.17(f) of the Company Disclosure Schedule, neither the
Company nor any Subsidiary (i) is or has, since January 1, 1989, been a
partner in a partnership or an owner of an interest in an entity treated
as a partnership for federal income Tax purposes; (ii) since January 1,
1989, has executed or filed with the IRS any consent to have the
provisions of Section 341(f) of the Code apply to it; (iii) is subject
to Section 999 of the Code; (iv) is a passive foreign investment company
as defined in Section 1296(a) of the Code; or (v) is a party to an
Agreement relating to the sharing, allocation or payment of, or
indemnity for, Taxes (other than an Agreement the only parties to which
are the Company and the Subsidiaries).
(g) The Company has no Knowledge of, and believes that there
does not exist, any plan or intention on the part of the Company
Shareholders (a "Shareholder Plan") to engage in a sale, exchange,
transfer, distribution (including, without limitation, a distribution by
a partnership to its partners or by a corporation to its shareholders),
pledge, disposition or any other transaction which results in a
reduction in the risk of ownership or a direct or indirect disposition
(a "Sale") of a number of the shares of Acquiror Common Stock that are
to be issued to such Company Shareholders in the Merger, which would
reduce the Company Shareholders' ownership of Acquiror Common Stock to a
number of shares having an aggregate fair market value, as of the
Effective Time, of less than fifty percent (50%) of the aggregate fair
market value, immediately prior to the Merger, of all outstanding
Company Common Shares. For purposes of this paragraph, (i) Company
Common Shares with respect to which a Company Shareholder receives
consideration in the Merger other than Acquiror Common Stock (including,
without limitation, cash received pursuant to the exercise of
dissenters' rights or in lieu of fractional shares of Acquiror Common
Stock) and/or (ii) Company Common Shares with respect to which a Sale
occurs prior to and in contemplation of the Merger, shall be considered
outstanding Company Common Shares
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exchanged for Acquiror Common Stock in the Merger and then disposed of
pursuant to a Shareholder Plan. As a condition to Closing as provided in
Section 7.01(e) herein the Company will obtain from Company Shareholders
who hold in the aggregate at least 50% of the outstanding Company Common
Shares at the Effective Time a written statement confirming that such
Company Shareholders have at the time of the statement no plan or
intention to engage in a Sale of the Acquiror Common Stock received in
the Merger and that they will advise the Company if their plans or
intentions change prior to the Effective Time.
SECTION 3.18. ACCESS LINES; CUSTOMERS.
(a) Section 3.18(a) of the Company Disclosure Schedule sets
forth as of July 31, 1997, or other recent date as the Company and
Acquiror may agree to, the approximate number of (i) access lines for
local network service, (ii) network access customers for switched access
or special access services, (iii) long distance service customers, (iv)
voice mail service customers, (v) Internet access customers and (vi) all
other customer classifications of the Company, the Subsidiaries and the
Cellular Partnerships.
(b) Except as set forth in Section 3.18(b) of the Company
Disclosure Schedule, to the Knowledge of the Company, the relationships
of the Company, the Subsidiaries and the Cellular Partnerships with
their respective Material Customers are good commercial working
relationships. Except as set forth in Section 3.18(b) of the Company
Disclosure Schedule, during the twelve (12) months prior to the date of
this Merger Agreement, no Material Customer of the Company or any
Subsidiary has canceled or otherwise terminated its relationship with
the Company or any Subsidiary.
SECTION 3.19. CERTAIN BUSINESS PRACTICES.
To the Knowledge of Company, neither the Company nor the Subsidiaries
nor any Cellular Partnership nor the officers, directors, employees or agents
of the Company, any Subsidiary or any Cellular Partnership (or shareholders,
distributors, representatives or other persons acting on the express, implied
or apparent authority of the Company, any Subsidiary, or any Cellular
Partnership) have paid, given or received or have offered or promised to pay,
give or receive, any bribe or other unlawful, questionable payment of money or
other thing of value, any unlawful extraordinary discount, or any other
unlawful inducement, to or from any Person or Governmental Entity in the United
States or elsewhere in connection with or in furtherance of the business of the
Company, any Subsidiary or any Cellular Partnership (including, without
limitation, any offer, payment or promise to pay money or other thing of value
(a) to any foreign official or political party (or official thereof) for the
purposes of influencing any act, decision or omission in order to assist the
Company, any Subsidiary or any Cellular Partnership in obtaining business for
or with, or directing business to, any Person, or (b) to any Person, while
knowing that all or a portion of such money or other thing of value will be
offered, given or promised to any such official or party for such purposes).
The business of the Company, the Subsidiaries and, to the Knowledge of the
Company, the Cellular Partnerships
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<PAGE> 33
is not in any manner dependent upon the making or receipt of such payments,
discounts or other inducements.
SECTION 3.20. INSURANCE.
Section 3.20 of the Company Disclosure Schedule, lists and briefly
describes all policies of Asset, fire, hazard, casualty, liability, life,
worker's compensation and other forms of insurance of any kind owned or held by
the Company or any Subsidiary. All such policies: (a) are with insurance
companies reasonably believed by the Company to be financially sound and
reputable; (b) are in full force and effect; (c) are sufficient for compliance
by the Company and by each Subsidiary with all requirements of Law and of all
Agreements to which the Company or any Subsidiary is a party; (d) are valid and
outstanding policies enforceable against the insurer; (e) insure against risks
of the kind believed by the Company to be customarily insured against and in
amounts believed by the Company to be adequate to insure sufficiently against
such risks, and in the opinion of Company to provide adequate insurance
coverage for the businesses and Assets of the Company and the Subsidiaries; and
(f) provide that they will remain in full force and effect at least through the
Effective Time, except as set forth in Section 6.13.
SECTION 3.21. POTENTIAL CONFLICTS OF INTEREST.
Except as set forth in Section 3.21 of the Company Disclosure Schedule,
to the Knowledge of the Company, neither any present nor former director,
officer, or employee with a salary in excess of $100,000 of the Company or any
Subsidiary, nor any Affiliate of such director, officer or employee:
(a) owns, directly or indirectly, any interest in (except for
holdings in securities that are listed on a national securities
exchange, quoted on a national automated quotation system or regularly
traded in the over-the-counter market, where such holdings are not in
excess of two percent (2%) of the outstanding class of such securities
and are held solely for investment purposes), or is a shareholder,
partner, other holder of equity interests, director, officer, employee,
consultant or agent of any Person that is a competitor, lessor, lessee
or customer of, or supplier of goods or services to, the Company or any
Subsidiary, except where the value to such individual of any such
arrangement with the Company or any Subsidiary has been less than
$60,000 in the last twelve (12) months;
(b) owns, directly or indirectly, in whole or in part, any
Assets with a fair market value of $60,000 or more which the Company or
any Subsidiary currently uses in its business;
(c) has any cause of action or other suit, action or claim
whatsoever against, or owes any amount to, the Company or any
Subsidiary, except for claims arising in the Ordinary Course of Business
from any such Person's service to the Company or any Subsidiary as a
director, officer or employee;
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(d) has sold or leased to, or purchased or leased from, the
Company or any Subsidiary any Assets for consideration in excess of
$60,000 in the aggregate since January 1, 1994;
(e) is a party to any Agreement pursuant to which the Company
or any Subsidiary provides office space to any such Person, or provides
services of any nature to any such Person, other than in the Ordinary
Course of Business in connection with the employment of such Person by
the Company or any Subsidiary; or
(f) has, since January 1, 1994, engaged in any other material
transaction with the Company or any Subsidiary involving in excess of
$60,000, other than (i) in the Ordinary Course of Business in connection
with the employment of such Person by the Company or any Subsidiary, and
(ii) dividends, distributions and stock issuances to all common and
preferred shareholders (as applicable) on a pro rata basis.
SECTION 3.22. RECEIVABLES.
The accounts receivable of the Company and the Subsidiaries shown on the
Audited Balance Sheets and the Unaudited Balance Sheets, or thereafter acquired
by any of them, arose in the Ordinary Course of Business and represent amounts
owed by an account debtor for goods sold or services rendered by the Company
and the Subsidiaries, and the allowance for doubtful accounts shown on such
Audited Balance Sheets and Unaudited Balance Sheets was established in
accordance with past practice, and, in the reasonable judgment of the Company,
should be sufficient for such purposes.
SECTION 3.23. REAL PROPERTY.
(a) Section 3.23(a) of the Company Disclosure Schedule lists
all the material Real Property, specifying the owner of each parcel
thereof, and all Real Property of the Company is suitable and adequate
for the uses for which it is currently being used.
(b) Except as set forth in Section 3.23(b) of the Company
Disclosure Schedule, the Company and the Subsidiaries are the sole
owners of good, valid, fee simple, and indefeasible title to the
material Real Property listed in Section 3.23(a) of the Company
Disclosure Schedule respectively owned by them, including, without
limitation, all buildings, structures, fixtures and improvements
thereon, in each case free and clear of all Encumbrances and title
defects except for Encumbrances and title defects that would not have a
Company Material Adverse Effect.
(c) All buildings, structures, fixtures and other improvements
on the Real Property are fit for the uses to which they are currently
devoted. All such buildings, structures, fixtures and improvements on
the Real Property conform in all material respects to all Laws, except
for any such non-conformance that would not have a Company Material
Adverse Effect.
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(d) To the Company's Knowledge (i) none of the material Real
Property listed in Schedule 3.23(a) of the Company Disclosure Schedule
is subject to any Agreement or other restriction of any nature
whatsoever (recorded or unrecorded) preventing or limiting the Company's
or any Subsidiary's right to use it in the manner in which it is
currently being used, and (ii) except as set forth in Section 3.23(d) of
the Company Disclosure Schedule, none of such Real Property is subject
to any Agreement preventing or limiting the Company's or any
Subsidiary's right to convey it.
(e) No portion of the Real Property or any building,
structure, fixture or improvement thereon is the subject of any
condemnation, eminent domain or inverse condemnation proceeding
currently instituted or pending, and neither the Company nor any
Subsidiary has any Knowledge that any of the foregoing are, or will be,
the subject of any such proceeding.
(f) The Real Property has access to adequate electric, gas,
water, sewer and telephone lines, all of which are adequate for the uses
to which the Real Property is currently devoted.
SECTION 3.24. BOOKS AND RECORDS.
The books of account, stock records, minute books and other corporate
and financial records of the Company are complete and correct in all material
respects and have been maintained in accordance with good business practices
and applicable regulatory requirements, and the matters contained therein are
appropriately and accurately reflected in all material respects in the
Financial Statements.
SECTION 3.25. ASSETS.
Except as set forth in Section 3.25 of the Company Disclosure Schedule,
the Company and the Subsidiaries have valid and indefeasible title to all
material Assets respectively owned by them, including, without limitation, all
material Assets reflected in the Audited Balance Sheets and in the Unaudited
Balance Sheets and all material Assets purchased by the Company or by any
Subsidiary since December 31, 1996 (except for Assets reflected in such Audited
Balance Sheets and Unaudited Balance Sheets or acquired since December 31, 1996
which have been sold or otherwise disposed of in the Ordinary Course of
Business), free and clear of all Encumbrances, except for Encumbrances that are
reflected on the Unaudited Balance Sheets or Encumbrances that would not have a
Company Material Adverse Effect. Except as set forth in Section 3.25 of the
Company Disclosure Schedule, to the Company's Knowledge, all material personal
property of the Company and the Subsidiaries is in a condition adequate for the
uses for which it is currently being used.
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SECTION 3.26. NO INFRINGEMENT OR CONTEST.
Section 3.26 of the Company Disclosure Schedule sets forth all material
(i) trademarks, service marks, trade names, trade styles and all registrations
or applications therefor, (ii) patents, inventions and all registrations or
applications therefor, (iii) Company developed software or licensed software
used by the Company or any Subsidiary, and (iv) Agreements to which the Company
or any Subsidiary is a party, either as licensee or licensor, relating to any
of the foregoing, in each case owned, licensed or used by the Company or any
Subsidiary (including specification of whether each such item listed is owned,
licensed or used by the Company or any Subsidiary). With respect to the
material Intellectual Property that is owned by the Company or any Subsidiary,
the Company and the Subsidiaries have the right to enforce their proprietary
rights thereto. With respect to the Intellectual Property that is licensed to
the Company or any Subsidiary, such Intellectual Property can be used by the
Company and the Subsidiaries in their respective businesses as currently
conducted by them in accordance with the terms and conditions of such licenses.
As used in the businesses of the Company and the Subsidiaries as currently
conducted, none of the Company's or any Subsidiary's Intellectual Property
infringes or misappropriates or otherwise violates any Intellectual Property of
any other Person, nor to the Knowledge of Company, is the Company or any
Subsidiary otherwise in the conduct of their respective businesses infringing
upon, or alleged to be infringing upon, any Intellectual Property of any other
Person. Except as set forth in Section 3.26 of the Company Disclosure Schedule,
to the Company's Knowledge, the Company and the Subsidiaries own or possess
adequate rights to use all Intellectual Property materially necessary to the
conduct of the respective businesses of the Company and the Subsidiaries as
currently conducted.
SECTION 3.27. BOARD RECOMMENDATION.
At a meeting duly called and held in compliance with Texas Law, the
Board of Directors of the Company has adopted a resolution approving and
adopting this Merger Agreement and the transactions contemplated hereby and
recommending approval and adoption of this Merger Agreement and the
transactions contemplated hereby by the Company Shareholders.
SECTION 3.28. VOTE REQUIRED.
The affirmative vote of the holders of two-thirds of the outstanding
Company Common Shares is the only vote of the holders of any class or series of
capital stock of the Company necessary to approve the transactions contemplated
by this Merger Agreement.
SECTION 3.29. BANKS; ATTORNEYS-IN-FACT.
Section 3.29 of the Company Disclosure Schedule sets forth a complete
list showing the name of each bank or other financial institution in which the
Company or any Subsidiary has accounts (including a description of the names of
all Persons authorized to draw thereon or to have access thereto). Such list
also shows the name of each Person holding a power of attorney from the Company
or any Subsidiary and a brief description thereof.
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SECTION 3.30. VOTING AGREEMENTS.
A Voting Agreement and Irrevocable Proxy in the form attached hereto as
Exhibit "A" has been executed and delivered to Acquiror on or prior to the date
of this Merger Agreement from each member of the Board of Directors of the
Company that voted in favor of this Merger Agreement.
SECTION 3.31. BROKERS.
No broker, finder or investment banker (other than Daniel & Associates)
is entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Merger Agreement based upon
arrangements made by or on behalf of the Company or any Subsidiary. Prior to
the date of this Merger Agreement, the Company has furnished to Acquiror a
complete and correct copy of all Agreements between the Company and Daniel &
Associates pursuant to which such firm will be entitled to any payment relating
to the transactions contemplated by this Merger Agreement.
SECTION 3.32. ENVIRONMENTAL MATTERS.
(a) The Company and each of the Subsidiaries has complied and
is in compliance with, and the Real Property and all improvements
thereon are in compliance with, all Environmental Laws, except where the
failure so to comply would not have a Company Material Adverse Effect.
(b) Except as set forth in Section 3.32(b) of the Company
Disclosure Schedule, to the Knowledge of the Company, there are no
pending or threatened actions, suits, claims, legal proceedings or other
proceedings based on, and none of the Company, any Subsidiary or any
Cellular Partnership has received since January 1, 1992 any formal or
informal notice of any complaint, order, directive, citation, notice of
responsibility, notice of potential responsibility, or information
request from any Governmental Entity or any other Person or knows any
fact(s) which form the basis for any such actions or notices arising out
of or attributable to: (i) the current or past presence at any part of
the Real Property of Hazardous Materials or any substances that pose a
hazard to human health or an impediment to working conditions; (ii) the
current or past release or threatened release into the environment from
the Real Property (including, without limitation, into any storm drain,
sewer, septic system or publicly owned treatment works) of any Hazardous
Materials or any substances that pose a hazard to human health or an
impediment to working conditions; (iii) the off-site disposal of
Hazardous Materials originating on or from the Real Property or the
businesses or Assets of the Company, any Subsidiary or any Cellular
Partnership; (iv) any facility operations, procedures or designs of the
Company, any Subsidiary or any Cellular Partnership which do not conform
to requirements of the Environmental Laws; or (v) any violation of
Environmental Laws at any part of the Real Property or otherwise arising
from the Company's, any Subsidiary's or any Cellular Partnership's
activities, or the activities of the Company's or any Subsidiary's
predecessors in title, or the activities of any Person whose
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liability has or may have been retained or assumed contractually or by
operation of Law by the Company, any Subsidiary or any Cellular
Partnership, involving Hazardous Materials.
(c) To the Company's Knowledge, except as set forth in Section
3.32(c) of the Company Disclosure Schedule, the Company and the
Subsidiaries and the Cellular Partnerships, have been duly issued, and
currently have and will maintain through the Effective Time, all
Licenses required under any Environmental Law. A true and complete list
of such Licenses, all of which are valid and in full force and effect,
is set out in Section 3.32(c) of the Company Disclosure Schedule. Except
in accordance with such permits, licenses, certificates and approvals or
as described in Section 3.32(c) of the Company Disclosure Schedule, to
the Company's Knowledge, there has been no Hazardous Discharge or
discharge of any other material regulated by such Licenses.
(d) Except as set forth in Section 3.32(d) of the Company
Disclosure Schedule, to the Company's Knowledge, the Real Property
contains no underground storage tanks, or underground piping associated
with such tanks, used currently or in the past for the storage,
throughput or other management of Hazardous Materials.
SECTION 3.33. DISCLOSURE.
No representation or warranty by the Company in this Merger Agreement
contains or will contain any untrue statement of a material fact or omits or
will omit to state any material fact necessary in order to make the statements
contained therein, in light of the circumstances under which made, not
misleading. None of the information supplied or to be supplied by or on behalf
of the Company for inclusion in the Registration Statement will, at the time
the Registration Statement becomes effective under the Securities Act, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which made, not misleading.
SECTION 3.34. COMPANY SHAREHOLDERS.
Section 3.34 of the Company Disclosure Schedule lists all holders of
record of Company Common Shares showing their addresses of record.
SECTION 3.35. DIRECTORS AND OFFICERS.
Section 3.35 of the Company Disclosure Schedule lists all current
directors and officers of the Company and the Subsidiaries, showing each such
person's name, positions, and annual remuneration, bonuses and fringe benefits
paid by the Company or any Subsidiary for the current fiscal year and the most
recently completed fiscal year.
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SECTION 3.36. COPIES OF DOCUMENTS.
True and complete copies of all Documents listed in the Company
Disclosure Schedule have been made available to Acquiror.
SECTION 3.37. OPERATION OF THE COMPANY'S BUSINESS.
(a) Section 3.37(a) of the Company Disclosure Schedule sets
forth all complaints filed with the FCC or the PUC regarding "slamming"
(as such term is understood in the telephone industry) or other
allegations with respect to the Company, any Subsidiary or any of their
respective employees, resellers, agents or representatives since January
1, 1996; and
(b) Section 3.37(b) of the Company Disclosure Schedule sets
forth all material filings by the Company or any Subsidiary and, to the
Knowledge of the Company, by any Cellular Partnership, with the FCC, the
PUC or the FAA since January 1, 1996.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF ACQUIROR AND ACQUIROR SUB
Except as specifically set forth in the Disclosure Schedule to be
delivered by Acquiror and Acquiror Sub to the Company in accordance with the
provisions of Section 6.04 (the "Acquiror Disclosure Schedule"), Acquiror and
Acquiror Sub hereby jointly and severally represent and warrant (which
representation and warranty shall be deemed to include the disclosure with
respect thereto so specified in the Acquiror Disclosure Schedule) to the
Company as set forth below, in each case as of the date of this Merger
Agreement. With respect to each representation and warranty set forth in this
Article IV, (i) each reference herein to "Subsidiary" or "Subsidiaries" shall
be deemed to include the ENSERCH Subsidiaries except that each such
representation and warranty as to the ENSERCH Subsidiaries shall be deemed to
be made only to the Knowledge of the Acquiror and not otherwise and (ii) each
reference herein to "Acquiror Benefit Plan" shall be deemed to include such
plans sponsored by ENSERCH Corporation except that each such representation and
warranty to such plans shall be deemed to be made only to the Knowledge of the
Acquiror and not otherwise.
SECTION 4.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
Each of Acquiror and Acquiror Sub is a corporation duly organized,
validly existing and in good standing under the Laws of the jurisdiction of its
incorporation or organization, and has the full and unrestricted corporate
power and authority to own, operate and lease its Assets, and to carry on its
business as currently conducted Acquiror is duly qualified to conduct business
as a foreign corporation and is in good standing in the states, countries and
territories in which the nature of the business conducted by it or the
character of the Assets owned, leased or otherwise held by it makes such
qualification necessary, except where the absence of such qualification as a
foreign corporation would not have an Acquiror Material Adverse Effect.
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SECTION 4.02. ARTICLES OF INCORPORATION AND BYLAWS.
Acquiror has furnished to the Company a true and complete copy of the
Amended and Restated Articles of Incorporation of Acquiror and the articles of
incorporation of Acquiror Sub, as currently in effect, certified as of a recent
date by the Secretary of State (or comparable Governmental Entity) of their
respective jurisdictions of incorporation, and a true and complete copy of the
Amended and Restated Bylaws of Acquiror and the bylaws of Acquiror Sub, as
currently in effect, certified by their respective corporate secretaries. Such
certified copies are attached as exhibits to, and constitute an integral part
of, the Acquiror Disclosure Schedule.
SECTION 4.03. AUTHORITY; BINDING OBLIGATION.
Each of Acquiror and Acquiror Sub has the full and unrestricted
corporate power and authority to execute and deliver this Merger Agreement and
to carry out the transactions contemplated hereby. The execution and delivery
by Acquiror and Acquiror Sub of this Merger Agreement and all other Documents
contemplated hereby, and the consummation by Acquiror and Acquiror Sub of the
transactions contemplated hereby and thereby, have been duly authorized by all
necessary corporate action and no other corporate proceedings on the part of
Acquiror or Acquiror Sub are necessary to authorize this Merger Agreement and
the other Documents contemplated hereby, or to consummate the transactions
contemplated hereby and thereby. This Merger Agreement has been duly executed
and delivered by Acquiror and Acquiror Sub and constitutes a legal, valid and
binding obligation of Acquiror and Acquiror Sub in accordance with its terms,
except as such enforceability may be subject to the effect of any applicable
bankruptcy, insolvency fraudulent conveyance, reorganization, moratorium or
other Laws affecting creditors' rights generally and subject to the effect of
general equitable principles (whether considered in a proceeding in equity or
at law).
SECTION 4.04. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution, delivery and performance by Acquiror and
Acquiror Sub of this Merger Agreement and all other Documents
contemplated hereby, the fulfillment of and compliance with the
respective terms and provisions hereof and thereof, and the consummation
by Acquiror and Acquiror Sub of the transactions contemplated hereby and
thereby, do not and will not: (i) conflict with, or violate any
provision of, the Amended and Restated Articles of Incorporation or the
Amended and Restated Bylaws of Acquiror, or the articles of
incorporation or bylaws of Acquiror Sub; or (ii) subject to obtaining
the consents, approvals, authorizations and permits of, and making
filings with or notifications to, the applicable Governmental Entity
pursuant to the applicable requirements, if any, of the Securities Act,
Blue Sky Laws, the HSR Act, the Communications Act, the Federal Aviation
Act, applicable state utilities Laws and applicable municipal franchise
Laws, and the filing and recordation of the Articles of Merger as
required by Texas Law, conflict with or violate any Law applicable to
Acquiror or Acquiror Sub, or any of their respective Assets; (iii)
conflict with, result in any breach of, constitute a default (or an
event that with notice or lapse of time or both would become a default)
under any Agreement to which Acquiror or Acquiror Sub,
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is a party or by which Acquiror or Acquiror Sub, or any of their
respective Assets, may be bound; or (iv) result in or require the
creation or imposition of, or result in the acceleration of, any
indebtedness or any Encumbrance of any nature upon, or with respect to,
Acquiror or Acquiror Sub, or any of the Assets of Acquiror or Acquiror
Sub; except for any such conflict or violation described in clause (ii),
any such conflict, breach or default described in clause (iii), or any
such creation, imposition or acceleration described in clause (iv) that
would not have an Acquiror Material Adverse Effect.
(b) Except as set forth in Section 4.04(b) of the Acquiror
Disclosure Schedule, the execution, delivery and performance by Acquiror
and Acquiror Sub of this Merger Agreement and all other Documents
contemplated hereby, the fulfillment of and compliance with the
respective terms and provisions hereof and thereof, and the consummation
by Acquiror and Acquiror Sub of the transactions contemplated hereby and
thereby, do not and will not: (i) require any consent, approval,
authorization or permit of, or filing with or notification to, any
Person not party to this Merger Agreement, except (A) pursuant to the
applicable requirements, if any, of the Securities Act, Blue Sky Laws,
the HSR Act, the Communications Act, the Federal Aviation Act,
applicable state utilities Laws and applicable municipal franchise Laws,
and (B) the filing and recordation of the Articles of Merger as required
by Texas Law; or (ii) result in or give rise to any penalty, forfeiture,
Agreement termination, right of termination, amendment or cancellation,
or restriction on business operations of Acquiror or the Surviving
Corporation.
SECTION 4.05. NO PRIOR ACTIVITIES OF ACQUIROR SUB.
Acquiror Sub (i) was formed solely for the purpose of engaging in the
transactions contemplated by this Merger Agreement, (ii) has no assets except
the nominal capital required for incorporation under Texas Law, and (iii) has
engaged in no other business activities and has conducted its operations only
as contemplated hereby.
SECTION 4.06. BROKERS.
No broker or finder or investment banker (other than Communications
Capital Partners, LLC and Salomon Brothers Inc) is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Merger Agreement based upon arrangements made by or on
behalf of Acquiror.
SECTION 4.07. SEC DOCUMENTS.
Acquiror has filed all required reports, schedules, forms,
statements and other Documents with the SEC since January 1, 1991
(including the Post-Signing SEC Documents, the "Acquiror SEC
Documents"). As of their respective dates, the Acquiror SEC Documents
complied or, in the case of the Post-Signing SEC Documents, will comply
as to form in all material respects with the applicable requirements of
the Securities Act or the Exchange Act, as the case may be, and none of
the Acquiror SEC Documents contained or, in the case of the Post-Signing
SEC
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Documents, will contain, any untrue statement of a material fact or
omitted or, in the case of the Post-Signing SEC Documents, will omit to
state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The financial statements of
Acquiror included in the Acquiror SEC Documents comply or, in the case
of the Post-Signing SEC Documents, will comply as to form in all
material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have
been or, in the case of the Post-Signing SEC Documents, will have been
prepared in accordance with GAAP (except, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated
in the notes thereto) and fairly present the consolidated financial
position of Acquiror and its consolidated subsidiaries as of the dates
thereof and the consolidated results of operations and cash flows for
the periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments).
SECTION 4.08. ACQUIROR COMMON STOCK.
The Acquiror Common Stock, when issued and delivered to the Company
Shareholders pursuant to the Merger, will be duly authorized, validly issued,
fully paid and nonassessable, and will have been approved for listing on the
New York Stock Exchange.
SECTION 4.09. CAPITALIZATION.
The authorized capital stock of Acquiror consists of (a) 500,000,000
shares of Acquiror Common Stock, of which, as of August 5, 1997: (i)
240,510,829 shares were issued and outstanding, all of which were duly
authorized, validly issued, fully paid and nonassessable and free of preemptive
rights; (ii) no shares were held in the treasury of Acquiror; (iii) an
aggregate of approximately 9,400,000 shares were reserved for issuance pursuant
to employee and other plans of Acquiror, and (iv) an aggregate of 2,900,000
shares were reserved for issuance pursuant to the conversion of ENSERCH's 6
3/8% Convertible Subordinated Debentures due 2002; and (b) 50,000,000 shares of
serial preferred stock, without par value, of which: (i) no shares are issued
and outstanding; and (ii) no shares are held in the treasury of Acquiror.
Except for rights pursuant to plans and debentures included in clauses (a)(iii)
and (a)(iv) above, as of August 5, 1997, there were no outstanding securities
convertible into or exchangeable for capital stock or any other securities of
Acquiror, and no outstanding options, rights (preemptive or otherwise), or
warrants to purchase or to subscribe for any shares of such capital stock or
other securities of Acquiror. Except as set forth in Section 4.09(a) of the
Acquiror Disclosure Schedule and except for Agreements relating to the plans
and debentures specified in clauses (a)(iii) and (a)(iv) above, there are no
outstanding Agreements to which Acquiror is a party affecting or relating to
the voting, issuance, purchase, redemption, registration, repurchase or
transfer of capital stock or any other securities of Acquiror, except as
contemplated hereunder. Each of the outstanding shares of Acquiror Common Stock
was issued in compliance with all applicable federal and state Laws concerning
the issuance of securities.
SECTION 4.10. COMPLIANCE.
(a) Except as set forth in Section 4.10(a) of the Acquiror
Disclosure Schedule or as disclosed in the Acquiror SEC Documents,
neither Acquiror nor any of its Subsidiaries nor,
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to the Knowledge of Acquiror, any of its Joint Ventures, is in violation
of or under investigation with respect to, or has been given notice or
been charged with any violation of, any Law, exception for violations
that do not have, and, would not reasonably likely have, an Acquiror
Material Adverse Effect.
(b) Except as set forth in Section 4.10(b) of the Acquiror
Disclosure Schedule, Acquiror, its Subsidiaries and, to the Knowledge of
Acquiror, its Joint Ventures have all permits, licenses, franchises and
other governmental authorizations, consents and approvals necessary to
conduct their respective businesses as currently conducted, except those
the failure to obtain which would not reasonably likely have an Acquiror
Material Adverse Effect.
SECTION 4.11. ABSENCE OF CERTAIN CHANGES OR EVENTS; ABSENCE OF
UNDISCLOSED LIABILITIES.
(a) Except as set forth in the Acquiror SEC Documents or
Section 4.11 of the Acquiror Disclosure Schedule, no fact or condition
exists that would reasonably likely have, an Acquiror Material Adverse
Effect.
(b) Except as set forth in the Acquiror SEC Documents, neither
Acquiror nor any of its Subsidiaries has any liabilities or obligations
(whether absolute, accrued, contingent or otherwise) of a nature
required by GAAP to be reflected in a consolidated corporate balance
sheet, except liabilities, obligations or contingencies that are accrued
or reserved against in the consolidated financial statements of Acquiror
or reflected in the notes thereto for the year ended December 31, 1996,
or that were incurred after December 31, 1996 and would not reasonably
likely have an Acquiror Material Adverse Effect.
SECTION 4.12. LITIGATION.
Except as set forth in the Acquiror SEC Documents or as set forth in
Section 4.12 of the Acquiror Disclosure Schedule, there are no claims, suits,
actions or proceedings, pending or, to the Knowledge of Acquiror, threatened,
nor are there, to the Knowledge of Acquiror, any investigations or reviews
pending or threatened against, relating to or affecting Acquiror or any of its
Subsidiaries or Joint Ventures, or judgments, decrees, injunctions, rules or
orders of any court, governmental department, commission, agency,
instrumentality or authority or any arbitrator applicable to Acquiror or any of
its Subsidiaries or Joint Ventures, that would have, or would reasonably likely
have, an Acquiror Material Adverse Effect.
SECTION 4.13. REGISTRATION STATEMENT.
(a) None of the information supplied or to be supplied by or
on behalf of Acquiror for inclusion or incorporation by reference in the
Registration Statement will, at the time the Registration Statement
becomes effective under the Securities Act, contain any untrue statement
of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of
the circumstances under which made, not misleading.
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(b) The Registration Statement as of its date will comply as
to form in all material respects with the applicable provisions of the
Securities Act and the rules and regulations thereunder.
SECTION 4.14. TAX MATTERS.
(a) Except as set forth on Schedule 4.14 of the Acquiror
Disclosure Schedule, Acquiror and each of its Subsidiaries has (i) filed
within the time and in the manner prescribed by law, all required income
Tax Returns, Texas franchise Tax Returns and other Tax Returns
calculated on or with reference to income, profits, earnings or gross
receipts and all other Tax Returns required to be filed that would
report a material amount of Tax, (ii) paid all Taxes that are shown on
such Tax Returns as due and payable within the time and in the manner
prescribed by law except for those being contested in good faith and for
which adequate reserves have been established, and (iii) paid all
applicable material Taxes otherwise required to be paid.
(b) Except as set forth on Schedule 4.14(b) of the Acquiror
Disclosure Schedule, as of the date hereof there are no claims,
assessments, audits or administrative or court proceedings pending
against Acquiror or any of its Subsidiaries for any alleged deficiency
in Tax, and none of Acquiror or any of its Subsidiaries has executed any
outstanding waivers or comparable consents regarding the application of
the statute of limitations with respect to any Taxes or Tax Returns.
(c) Acquiror has established adequate accruals for Taxes and
for any liability for deferred Taxes in the Acquiror Financial
Statements in accordance with GAAP.
SECTION 4.15. EMPLOYEE MATTERS; ERISA.
Except as disclosed in the Acquiror SEC Documents or Section 4.15 of the
Acquiror Disclosure Schedule and except as would not, individually or in the
aggregate, be reasonably expected to result in an Acquiror Material Adverse
Effect:
(a) Each Acquiror Benefit Plan that is an "employee pension
benefit plan" as defined in Section 3(2) of ERISA and is intended to be
"qualified" within the meaning of Code Section 401(a) ("Acquiror Pension
Benefit Plan") and each trust under each such Acquiror Pension Benefit
Plan which is intended to be exempt from federal income taxation under
Code Section 501, has received a favorable determination letter from the
IRS to such effect, or is the subject of a previously submitted and
currently pending application for an IRS determination. Acquiror has
operated each Acquiror Benefit Plan in material compliance with all
applicable laws, rules and final regulations governing such plans,
including ERISA and the Code.
(b) All material contributions required to have been made to
the Acquiror Benefit Plans prior to the date hereof have been made.
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(c) Acquiror has not incurred any liability under Title IV of
ERISA relating to the termination of any Acquiror Pension Benefit Plan.
(d) Except as set forth in Section 4.15(d) of the Acquiror
Disclosure Schedule, (i) no "Reportable Event," as defined in ERISA, has
occurred with respect to any of the Acquiror Benefit Plans for which the
30-day notice requirement or penalty has not been waived by the PBGC;
(ii) there are no pending claims (other than routine claims for benefits
or claims pursuant to domestic relations orders) or lawsuits which have
been asserted or instituted against the assets of any of the trusts
under the Plans by present or former participants, their present or
former spouses, their beneficiaries, the Department of Labor, the
Internal Revenue Service or any other party; and (iii) Acquiror has not
engaged in any prohibited transactions with respect to any Acquiror
Benefit Plan, any or all of which would reasonably likely have an
Acquiror Material Adverse Effect.
SECTION 4.16. ENVIRONMENTAL MATTERS.
Except as disclosed in the Acquiror SEC Documents and except as would
not, individually or in the aggregate, be reasonably expected to result in an
Acquiror Material Adverse Effect, (i) Acquiror and its Subsidiaries are in
compliance with all applicable Environmental Laws and the terms and conditions
of all applicable Environmental Permits, (ii) there are no Environmental Claims
against the Acquiror or any of its Subsidiaries, and (iii) no Hazardous
Materials have been released, discharged or disposed of on any of the
properties owned or occupied by Acquiror or its Subsidiaries in any manner or
quantity which requires investigation, assessment, monitoring, remediation or
cleanup under current applicable Environmental Laws.
SECTION 4.17. REGULATION AS A UTILITY.
(a) Acquiror is a public utility holding company as defined in
the PUHCA exempt from all provisions of the PUHCA, except section
9(a)(2), by order of the SEC pursuant to section 3(a)(1) of the PUHCA.
Texas Utilities Electric Company, a Subsidiary of Acquiror is regulated
as a public utility in the State of Texas and in no other state and
Texas Utilities Fuel Company and ENSERCH Corporation, Subsidiaries of
Acquiror, are regulated as gas utilities in the State of Texas and in no
other state.
SECTION 4.18. INSURANCE.
(a) Except as set forth in Section 4.18(a) of the Acquiror
Disclosure Schedule, Acquiror and each of its Subsidiaries is insured in
such amounts and against such risks and losses believed by Acquiror to
be customary for companies conducting the respective businesses
conducted by Acquiror and its Subsidiaries during such time period.
(b) Except as set forth in Section 4.18(b) of the Acquiror
Disclosure Schedule, neither Acquiror nor any of its Subsidiaries has
received any notice of cancellation or termination, currently in effect,
with respect to any material insurance policy thereof.
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(c) All material insurance policies of Acquiror and its
Subsidiaries are valid and enforceable policies.
SECTION 4.19. NRC ACTIONS.
Except as set forth in Section 4.19 of the Acquiror Disclosure Schedule,
Acquiror is not in violation of, is not under investigation with respect to,
has not been given notice of or been charged with any actual or potential
violation of, and is not the subject of any ongoing proceeding, inquiry,
special inspection, diagnostic evaluation or other Nuclear Regulatory
Commission action (including rulemakings of general application that may affect
the conduct of Acquiror's business regarding the Comanche Peak Nuclear Power
Plant) of which Acquiror has actual Knowledge under the Atomic Energy Act, any
applicable regulations thereunder or the terms and conditions of any license
granted to Acquiror regarding the Comanche Peak Nuclear Power Plant
(collectively, "NRC Actions"), which NRC Actions would have, or Acquiror
reasonably believes would reasonably likely have, an Acquiror Material Adverse
Effect.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 5.01. CONDUCT OF BUSINESS OF THE COMPANY.
The Company hereby covenants and agrees that, from the date of this
Merger Agreement until the Effective Time, the Company, unless otherwise
expressly contemplated by this Merger Agreement or consented to in writing by
Acquiror, will, and will cause the Subsidiaries to and, to the extent, and only
to the extent, such action is permitted by law and the partnership agreements
and will not cause the Company or its Subsidiary, as the case may be, to become
or be treated as a general partner rather than a limited partner, will endeavor
to cause the Cellular Partnerships to, carry on their respective businesses
only in the Ordinary Course of Business, use their respective best efforts to
preserve intact their business organizations and Assets, maintain their rights
and franchises, retain the services of their officers and key employees and
maintain their relationships with customers, suppliers, licensors, licensees
and others having business dealings with them, and use their respective best
efforts to keep in full force and effect liability insurance and bonds
comparable in amount and scope of coverage to that currently maintained.
Without limiting the generality of the foregoing, except as otherwise expressly
contemplated by this Merger Agreement, from the date of this Merger Agreement
until the Effective Time the Company shall not, and shall not permit any of the
Subsidiaries to:
(a) (i) increase in any manner the compensation or fringe
benefits of, or pay any bonus or other form of special compensation to,
any director, officer or employee, except for (A) increases or bonuses
in the Ordinary Course of Business to employees who are not directors or
officers, (B) customary year-end bonuses to officers in accordance with
amounts provided for in the Company's 1997 budget, and (C) Bonuses; (ii)
grant any severance or termination pay (other than pursuant to the
normal severance, change-in-control, or similar policy of the Company or
any Subsidiary in effect on the date of this Merger Agreement) to,
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or enter into any severance, change-in-control or similar Agreement
with, any director, officer or employee, or enter into any employment
Agreement with any director, officer or employee; (iii) establish,
adopt, enter into or amend any Plan or Other Arrangement, except as may
be required to comply with applicable Law; (iv) pay any benefit not
required to be paid under any Plan, Agreement or Other Arrangement; (v)
grant any awards under any bonus, incentive, performance or other
compensation plan or arrangement or Plan or Other Arrangement (including
the grant of stock options, stock appreciation rights, stock-based or
stock-related awards, performance units, or the removal or acceleration
of existing restrictions or vesting criteria in any Plan or Other
Arrangement or Agreement or awards made thereunder), except for grants
in the Ordinary Course of Business; or (vi) except as set forth in
Schedule 5.01(a), take any action to fund or in any other way secure the
payment of compensation or benefits under any Agreement, Plan or Other
Arrangement;
(b) declare, set aside or pay any dividend on, or make any
other distribution in respect of, outstanding shares of capital stock of
Company or any of its Subsidiaries except for the following:
(i) if the Effective Time has not occurred prior to the
scheduled date for payment of the dividend in question, the
regular quarterly cash dividends in an amount not to exceed $0.34
per quarter per Company Common Share scheduled to be paid to
Company Shareholders on September 15, 1997, and December 15,
1997, and the special cash dividend in an amount not to exceed
$0.12 per Company Common Share scheduled to be paid to Company
Shareholders on December 1, 1997,
(ii) if the Effective Time has not occurred prior to the
scheduled date for payment of the dividend in question, the
regular quarterly cash dividend in an amount not to exceed $0.34
per quarter per Company Common Share that are provided for in the
budget of the Company for the year beginning January 1, 1998, and
are scheduled to be paid March 15, 1998, June 15, 1998, September
15, 1998, and December 15, 1998, and the special cash dividend in
an amount not to exceed $0.12 per Company Common Share that is
provided for in the budget of the Company for the year beginning
January 1, 1998, and is scheduled to be paid December 1, 1998,
and
(iii) dividends and other distributions to the Company
and its directly or indirectly wholly-owned Subsidiaries.
provided, however, with respect to provisions (i) and (ii) of this
provision (b), in the event that the Effective Time is going to occur at
a time which would cause the Company Shareholders to not receive the
quarterly dividend of either the Company or Acquiror for such quarter,
then the Company, prior to the Effective Time, may declare and pay its
regular $0.34 quarterly dividend for such calendar quarter and any $0.12
special dividend for December that would have been paid in that calendar
quarter;
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(c) (i) redeem, purchase or otherwise acquire any shares of
capital stock of the Company or any Subsidiary or any securities or
obligations convertible into or exchangeable for any shares of capital
stock of the Company or any Subsidiary, or any options, warrants or
conversion or other rights to acquire any shares of capital stock of the
Company or any Subsidiary or any such securities or obligations, or any
other securities thereof; (ii) effect any reorganization or
recapitalization; or (iii) split, combine or reclassify any of its
capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for, shares of
its capital stock;
(d) issue, deliver, award, grant or sell, or authorize the
issuance, delivery, award, grant or sale (including the grant of any
limitations in voting rights or other Encumbrances) of, any shares of
any class of its capital stock (including shares held in treasury), any
securities convertible into or exercisable or exchangeable for any such
shares, or any rights, warrants or options to acquire, any such shares,
or amend or otherwise modify the terms of any such rights, warrants or
options the effect of which shall be to make such terms more favorable
to the holders thereof;
(e) acquire or agree to acquire, by merger, consolidation,
purchase or otherwise, an equity interest in or a portion of the Assets
of any business or corporation, partnership, association or other
business organization or division thereof, or otherwise acquire or agree
to acquire any Assets of any other Person, except for the purchase of
Assets from suppliers or vendors in the Ordinary Course of Business and
except as contemplated in the current budgets of the Company and its
Subsidiaries and if the Effective Time does not occur prior to January
1, 1998, the budgets of Company and its Subsidiaries for the year
beginning January 1, 1998);
(f) sell, lease, exchange, mortgage, pledge, transfer or
otherwise subject to any Encumbrance or otherwise dispose of, or agree
to sell, lease, exchange, mortgage, pledge, transfer or otherwise
dispose of: (i) any of the Equity Investments or (ii) any other material
Assets except for normal dispositions, extensions to or replacements of
Assets in the Ordinary Course of Business consistent with prior practice
and those contemplated in the current budgets of Company and its
Subsidiaries and, if the Effective Time does not occur prior to January
1, 1998, the budgets of Company and its Subsidiaries for the year
beginning January 1, 1998;
(g) adopt any amendments to its articles of incorporation,
bylaws or other comparable charter or organizational documents;
(h) make or rescind any express or deemed election relating to
Taxes, settle or compromise any claim, action, suit, litigation,
proceeding, arbitration, investigation, audit or controversy relating to
Taxes, or change any of its methods of reporting income or deductions
for federal income tax purposes from those employed in the preparation
of the federal income tax returns for the taxable year ending December
31, 1995, except in either case as may be required by Law, the IRS or
GAAP;
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(i) make or agree to make any new capital expenditure or
expenditures which are not included in the Company's current capital
budget, a copy of which has been furnished to Acquiror (and, if the
Effective Time has not occurred prior to January 1, 1998, the Company's
capital budget for 1998, a copy of which has been furnished to
Acquiror), and which are, individually, in excess of $50,000 or, in the
aggregate, in excess of $500,000; provided, however, that the Company
agrees not to allow any material deterioration of its system and in any
event to make capital expenditures in an average monthly amount of not
less than $1,000,000 during each calendar month such average to be
calculated for the period from July 1, 1997, to the Effective Time;
(j) (i) incur any indebtedness for borrowed money or guarantee
any such indebtedness of another Person, issue or sell any debt
securities or warrants or other rights to acquire any debt securities of
the Company or any Subsidiary, guarantee any debt securities of another
Person, enter into any "keep well" or other Agreement to maintain any
financial statement condition of another Person or enter into any
Agreement having the economic effect of any of the foregoing, except for
short-term borrowings incurred in the Ordinary Course of Business, or
(ii) except capital contributions to Cellular Partnerships that are
required by the Cellular Partnerships, make any loans, advances or
capital contributions to, or investments in, any other Person other than
intra-group loans, advances, capital contributions or investments
between or among the Company and any of its wholly owned Subsidiaries;
(k) pay, discharge, settle or satisfy any material claims,
liabilities or obligations (whether absolute or contingent, matured or
unmatured, known or unknown), other than the payment, discharge or
satisfaction, in the Ordinary Course of Business or in accordance with
their terms, of liabilities (i) reflected or reserved against in, or
contemplated by, the most recent Financial Statement, (ii) incurred in
the Ordinary Course of Business, or (iii) associated with the
Transaction Costs, or waive any material benefits of, or agree to modify
in any material respect, any confidentiality, standstill or similar
Agreements to which the Company or any Subsidiary is a party;
(l) except in the Ordinary Course of Business, waive, release
or assign any rights or claims, or modify, amend or terminate any
Agreement to which the Company or any Subsidiary is a party;
(m) make any material change in any method of accounting or
accounting practice or policy other than those required by applicable
Laws or GAAP;
(n) make any filing, other than in the Ordinary Course of
Business, to change its rates on file or otherwise with any Governmental
Entity that could have a material adverse effect on the benefits
associated with the business combination provided herein;
(o) take any action or fail to take any action which could
reasonably be expected to have a Company Material Adverse Effect prior
to or after the Effective Time or that could reasonably be expected to
adversely effect the ability of the Company or any Subsidiary prior
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to the Effective Time, or Acquiror or any of its subsidiaries after the
Effective Time, to obtain consents of third parties or approvals of
Governmental Entities required to consummate the transactions
contemplated in this Merger Agreement; or
(p) authorize, or commit or agree to do any of the foregoing.
SECTION 5.02. OTHER ACTIONS.
The Company and Acquiror shall not, and shall not permit any of their
respective Affiliates to, take any action that would, or that could reasonably
be expected to, result in (a) any of the representations and warranties of such
party set forth in this Merger Agreement becoming untrue, or (b) any of the
conditions to the Merger set forth in Article VII not being satisfied.
SECTION 5.03. CERTAIN TAX MATTERS.
From the date hereof until the Effective Time, the Company and the
Subsidiaries (a) will accurately prepare and timely file with the relevant
Taxing authority all Company Tax Returns ("Post-Signing Returns") required to
be filed, (b) will timely pay all Taxes due and payable with respect to such
Post-Signing Returns, (c) will pay or otherwise make adequate provision for all
Taxes payable by the Company and the Subsidiaries for which no Post-Signing
Return is due prior to the Effective Time, and (d) will promptly notify
Acquiror of any action, suit, proceeding, claim or audit pending against or
with respect to the Company or any in respect of any Taxes.
SECTION 5.04. ACCESS AND INFORMATION.
For so long as this Merger Agreement is in effect, the Company shall,
and shall cause each Subsidiary to, and shall request each Cellular Partnership
to, (a) afford to Acquiror and its officers, employees, accountants,
consultants, legal counsel and other representatives reasonable access during
normal business hours to all of their respective properties, Agreements, books,
records and personnel and (b) furnish promptly to Acquiror (i) a copy of each
Document filed with, or received from any Governmental Entity and (ii) all
other information concerning their respective businesses, operations,
prospects, conditions (financial or otherwise), Assets, liabilities and
personnel as Acquiror and its representatives may reasonably request. Without
limiting the foregoing, the Company shall, and shall cause each Subsidiary to,
and request each Cellular Partnership to, confer on a regular and frequent
basis with one or more representatives of Acquiror to discuss operational
matters and the status of its ongoing operations. The Company will allow the
accounting firm of Deloitte & Touche, LLP to have reasonable and timely access
to the Company's books, records and personnel prior to the Closing Date to
verify the computations by Company officers for purposes of verifying the
Closing Schedules; provided, however, neither Company nor any of its
Subsidiaries nor any Cellular Partnership shall be required, by this Section
5.04 or any other provision of this Agreement, to provide access to or furnish
anything that would constitute a waiver of the attorney-client or any other
privilege or right of privacy or that is not reasonably necessary to the
performance of its obligations in connection with the transactions contemplated
by this Agreement.
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SECTION 5.05. NO SOLICITATION.
(a) The Company shall, and shall cause each of its
subsidiaries to and shall use its best efforts to cause all of the
directors, officers, employees, representatives and agents of Company
and each of its Subsidiaries to, immediately cease any discussions or
negotiations with any Person that may be ongoing with respect to a
Competing Transaction (as defined in this Section 5.05 below). The
Company shall not, and shall cause the Subsidiaries not to, initiate,
solicit or encourage (including by way of furnishing information or
assistance), or take any other action to facilitate, any inquiries or
the making of any proposal that constitutes, or may reasonably be
expected to lead to, any Competing Transaction, or enter into
discussions or furnish any information or negotiate with any Person or
otherwise cooperate in any way in furtherance of such inquiries or to
obtain a Competing Transaction, or agree to or endorse any Competing
Transaction, or authorize any of the directors, officers, employees,
agents or representatives of the Company or any Subsidiary to take any
such action, and the Company shall, and shall cause the Subsidiaries to,
direct and instruct and use its or their best efforts to cause the
directors, officers, employees, agents and representatives of the
Company and the Subsidiaries (including, without limitation, any
investment banker, financial advisor, attorney or accountant retained by
the Company or any Subsidiary) not to take any such action, and the
Company shall, and shall use its best efforts to cause all of the
directors, officers, employees, agents, investment brokers, financial
advisors, attorneys, accountants and other representatives to, promptly
notify Acquiror if any such inquiries or proposals are received by the
Company or any Subsidiary, and the Company shall promptly inform
Acquiror as to the material terms of such inquiry or proposal and, if in
writing, promptly deliver or cause to be delivered to Acquiror a copy of
such inquiry or proposal, and the Company shall keep Acquiror informed,
on a current basis, of the nature of any such inquiries and the status
and terms of any such proposals. For purposes of this Merger Agreement,
"Competing Transaction" shall mean any of the following involving the
Company or the Subsidiaries (other than the transactions contemplated by
this Merger Agreement): (i) any merger, consolidation, share exchange,
business combination, or other similar transaction; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition of ten
percent (10%) or more of the Assets of the Company and the Subsidiaries,
taken as a whole, or issuance of ten percent (10%) or more of the
outstanding voting securities of the Company or any Subsidiary in a
single transaction or series of transactions; (iii) any tender offer or
exchange offer for ten percent (10%) or more of the outstanding shares
of capital stock of the Company or any Subsidiary or the filing of a
registration statement under the Securities Act in connection therewith;
(iv) any solicitation of proxies in opposition to approval by the
Company Shareholders of the Merger; (v) any Person shall have acquired
beneficial ownership or the right to acquire beneficial ownership of, or
any "group" (as such term is defined under Section 13(d) of the Exchange
Act) shall have been formed which beneficially owns or has the right to
acquire beneficial ownership of, ten percent (10%) or more of the then
outstanding shares of capital stock of the Company or any Subsidiary; or
(vi) any Agreement to, or public announcement by the Company or any
other Person of a proposal, plan or intention to, do any of the
foregoing; provided, however, provisions (iii) and (v) above shall not
apply to the thirty-seven percent (37%) of the capital stock of East
Texas Fiber Line Incorporated, presently owned by Eastex Celco Company,
Inc.
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(b) Notwithstanding anything in this Section 5.05 to the
contrary, unless this Merger Agreement and the Merger shall have been
approved and adopted by the requisite vote of the Company Shareholders,
the Company may, to the extent that the Board of Directors of the
Company determines in good faith, based on the written advice of outside
legal counsel, that a failure to do so would reasonably be expected to
result in a breach of its fiduciary duties under applicable law,
participate in discussions or negotiations with, furnish information to,
and afford access to the Assets, books and records of the Company and
its Subsidiaries to any person or entity in connection with a possible
Competing Transaction.
(c) The provisions of this Section 5.05 shall continue in
effect for a period of six months following the termination of this
Merger Agreement.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. MEETING OF SHAREHOLDERS.
The Company shall promptly after the effective date of the Registration
Statement take all action necessary in accordance with Texas Law and its
articles of incorporation and bylaws to convene a meeting of the Company
Shareholders to consider the Merger (the "Company Shareholders' Meeting"), and
the Company shall consult with Acquiror in connection therewith, provided,
however, that it shall be a condition to the mailing of any notice or other
materials to the Company Shareholders that the Company shall have received an
opinion from Daniels & Associates, dated on or about the date of such notice
and materials, to the effect that as of the date thereof the Common Share
Exchange Ratio is fair from a financial point of view to the Company
Shareholders. The Company shall deliver to each Company Shareholder the
Acquiror Information prior to the Company Shareholders' Meeting. Prior to the
distribution thereof to the Company Shareholders, the Company shall make
available to Acquiror all Documents to be distributed to the Company
Shareholders in connection with the solicitation of shareholder approval of the
Merger, and shall only distribute Documents which Acquiror has approved in
advance, such approval not to be unreasonably withheld. The Company shall take
all actions reasonably necessary or advisable to secure the vote or consent of
the Company Shareholders required by Texas Law to approve the Merger. The
approval of this Merger Agreement by the Company Shareholders shall constitute
approval by Company Shareholders of the Bonuses to certain officers and other
employees of the Company and its Subsidiaries that are to be approved by the
Company Board of Directors in a meeting held prior to the meeting of the
Company Shareholders at which this Merger Agreement is voted upon.
SECTION 6.02. APPROPRIATE ACTION; CONSENTS; FILINGS.
(a) Upon the terms and subject to the conditions set forth in
this Merger Agreement, the Company and Acquiror shall use all reasonable
efforts to take, or cause to be taken, all appropriate action, and do,
or cause to be done, and to assist and cooperate with the other parties
in doing all things necessary, proper or advisable under applicable Law
or
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otherwise to consummate and make effective the transactions contemplated
by this Merger Agreement as promptly as practicable, including (i)
executing and delivering any additional instruments necessary, proper or
advisable to consummate the transactions contemplated by, and to carry
out fully the purposes of, this Merger Agreement, (ii) obtaining from
any Governmental Entities any Licenses required to be obtained or made
by Acquiror or the Company or any of their subsidiaries in connection
with the authorization, execution and delivery of this Merger Agreement
and the consummation of the transactions contemplated herein, including,
without limitation, the Merger, and (iii) making all necessary filings,
and thereafter make any other required submissions, with respect to this
Merger Agreement and the Merger required under (A) the Securities Act
and any other applicable federal or state securities Laws, (B) the HSR
Act and (C) any other applicable Law; provided that Acquiror and the
Company shall cooperate with each other in connection with the making of
all such filings, including providing copies of all such Documents to
the non- filing party and its advisors prior to filing and, if
requested, accepting all reasonable additions, deletions or changes
suggested in connection therewith. The Company and Acquiror shall
furnish to each other all information required for any application or
other filing to be made pursuant to the rules and regulations of any
applicable Law in connection with the transactions contemplated by this
Merger Agreement.
(b) (i) The Company and Acquiror shall give (or shall cause
their respective subsidiaries to give) any notices to third parties, and
use, and cause their respective subsidiaries to use, all reasonable
efforts to obtain any third party consents, approvals or waivers (A)
necessary, proper or advisable to consummate the transactions
contemplated in this Merger Agreement, (B) disclosed or required to be
disclosed in the Company Disclosure Schedule or the Acquiror Disclosure
Schedule, as the case may be, or (C) required to prevent a Company
Material Adverse Effect from occurring prior to or after the Effective
Time or an Acquiror Material Adverse Effect from occurring after the
Effective Time.
(ii) In the event that any party shall fail to obtain
any third party consent, approval or waiver described in subsection
(b)(i) above, such party shall use all reasonable efforts, and shall
take any such actions reasonably requested by the other parties hereto,
to minimize any adverse effect upon the Company and Acquiror, their
respective subsidiaries, and their respective businesses resulting, or
which could reasonably be expected to result after the Effective Time,
from the failure to obtain such consent, approval or waiver.
(c) From the date of this Merger Agreement until the Effective
Time, the Company and Acquiror shall promptly notify each other in
writing of any pending or, to the Knowledge of the Company or Acquiror
(or their respective subsidiaries), threatened action, proceeding or
investigation by any Governmental Entity or any other Person (i)
challenging or seeking damages in connection with the Merger or the
conversion of the Company Capital Stock into Acquiror Common Stock
pursuant to the Merger or (ii) seeking to restrain or prohibit the
consummation of the Merger or otherwise limit the right of Acquiror or
its subsidiaries to own or operate all or any portion of the businesses
or Assets of the Company or any Subsidiary. The Company and Acquiror
shall cooperate with each other in defending
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any such action, proceeding or investigation, including seeking to have
any stay or temporary restraining order entered by any court or other
Governmental Entity vacated or reversed.
(d) The Company shall not, nor shall the Company permit any of
its Subsidiaries to, engage in any activities that (i) would cause it to
become a "holding company," a "public utility company," a "subsidiary
company" or an "affiliate" of any public utility company within the
meaning of PUHCA, or (ii) would require the approval of the SEC under
Section 9(a)(2) of PUHCA.
SECTION 6.03. LETTERS OF ACCOUNTANTS.
The Company shall use its best efforts to cause to be delivered to
Acquiror a "cold comfort" letter of Axley & Rode LLP, its independent public
accountant, dated as of the Effective Time, and addressed to Acquiror,
reasonably customary in scope and substance for letters delivered by
independent public accountants in connection with transactions such as those
contemplated by this Merger Agreement.
SECTION 6.04. DISCLOSURE SCHEDULES; UPDATED DISCLOSURES; BREACHES.
(a) Within seven business days after the date of this Merger
Agreement, (i) Acquiror shall deliver to the Company the Acquiror
Disclosure Schedule and (ii) the Company shall deliver to Acquiror the
Company Disclosure Schedule. The Disclosure Schedules, when so
delivered, shall constitute an integral part of this Merger Agreement
and shall modify or otherwise affect the respective representations,
warranties, covenants or agreements of the parties hereto contained
herein to the extent that such representations, warranties, covenants or
agreements expressly refer to the Disclosure Schedules. Any and all
statements, representations, warranties or disclosures set forth in the
Disclosures Schedule shall be deemed to have been made on and as of the
date of this Merger Agreement so that the execution and delivery of this
Merger Agreement without the Company Disclosure Schedule or the Acquiror
Disclosure Schedule shall not be construed to cause Company or the
Acquiror, as the case may be, to be in breach of any of the terms and
conditions of this Merger Agreement.
(b) From and after the date of this Merger Agreement until the
Effective Time, each party hereto shall promptly notify the other
parties hereto by written update to its Disclosure Schedule of (i) any
representation or warranty made by it in connection with this Merger
Agreement becoming untrue or inaccurate in any material respect, (ii)
the occurrence, or non-occurrence, of any event the occurrence, or
non-occurrence, of which would be likely to cause any condition to the
obligations of any party to effect the Merger and the other transactions
contemplated by this Merger Agreement not to be satisfied, or (iii) the
failure of the Company or Acquiror, as the case may be, to comply with
or satisfy any covenant, condition or agreement to be complied with or
satisfied by it pursuant to this Merger Agreement which would be likely
to result in any condition to the obligations of any party to effect the
Merger and the other transactions contemplated by this Merger Agreement
not to be satisfied; provided, however, that the delivery of any notice
pursuant to this Section 6.04
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shall not cure any breach of any representation or warranty requiring
disclosure of such matter prior to the date of this Merger Agreement or
otherwise limit or affect the rights and remedies available hereunder to
the party receiving such notice. The Company shall deliver to Acquiror
supplements to Sections 3.10 and 3.14(a) of the Company Disclosure
Schedule as of the Closing Date, solely to reflect material events
occurring between the date of this Merger Agreement and the Closing
Date, or shall have notified Acquiror that no changes to such Sections
of the Company Disclosure Schedule are required.
(c) Information disclosed by Company pursuant to the Company
Disclosure Schedule and by the Acquiror pursuant to the Acquiror
Disclosure Schedule shall be subject to the terms of the Confidentiality
Agreement.
SECTION 6.05. PUBLIC ANNOUNCEMENTS.
Acquiror and the Company shall consult with each other before issuing or
making, and shall give each other the opportunity to review and comment upon,
any press release or other public statement with respect to the Merger and the
other transactions contemplated in this Merger Agreement, and shall not issue
any such press release or make any such public statement prior to such
consultation, except, in the case of Acquiror, as may be required by Law or any
listing agreement with any securities exchange.
SECTION 6.06. EMPLOYEE MATTERS.
(a) Acquiror shall offer Employment Agreements to each of the
Key Employees (other than Mr. G.I. Ross), each of which shall provide
for such person's employment within the Texas Utilities Company System
for a term of no less than two years and include such other provisions
as Acquiror may determine. Acquiror shall offer Mr. G.I. Ross an
Employment/Consulting Agreement which will provide for his employment by
the Company until his retirement on March 1, 1999, and thereafter
provide for his engagement as a consultant to the Company for an
additional three year term, all on such terms as Acquiror may determine.
(b) The Surviving Corporation shall determine promptly after
the Effective Time whether to continue or terminate the Company's
Directors' Deferred Fee Plan in accordance with its terms.
(c) The Surviving Corporation shall maintain the Company's
Management Security Plan (or a plan providing for a reasonably
equivalent level of benefits, including vesting) for a period of no less
than two years after the Effective Time.
SECTION 6.07. ACQUIROR INFORMATION.
Acquiror shall provide to the Company and its attorneys, accountants and
other representatives all information reasonably requested by any such Person
in connection with the
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preparation of a disclosure document to be utilized in the solicitation of
proxies in favor of the Merger from the Company Shareholders.
SECTION 6.08. OBLIGATIONS OF ACQUIROR SUB.
Acquiror shall take all action necessary to cause Acquiror Sub to
perform its obligations under this Merger Agreement and to consummate the
Merger on the terms and conditions set forth in this Merger Agreement.
SECTION 6.09. UNAUDITED FINANCIAL INFORMATION.
The Company will cause to be prepared and will furnish to Acquiror as
promptly as possible an unaudited consolidated balance sheet of the Company and
the Subsidiaries as of the last day of each month ending after July 31, 1997
and the unaudited consolidated statements of income and cash flows of the
Company and the Subsidiaries for the one-month periods then ended. The Company
will ensure that such Unaudited Statements are complete and correct in all
material respects, have been prepared in accordance with the books and records
of the Company and the Subsidiaries, and present fairly the consolidated
financial position of the Company and the Subsidiaries and their consolidated
results of operations and cash flows as of and for the respective dates and
time periods in accordance with GAAP applied on a basis consistent with prior
accounting periods, except as noted thereon and subject to normal and recurring
year-end adjustments which are not expected to be material in amount.
SECTION 6.10. RULE 145 AFFILIATES.
The Company shall identify in a letter to Acquiror all persons who are
"affiliates" of the Company (as such term is used in Rule 145 under the
Securities Act.). The Company shall use its best efforts to cause each such
person to deliver to the Company on or prior to the Closing Date a written
agreement to the effect that:
(i) any further disposition by such person of any Acquiror
Common Stock such person receives as a result of the Merger will be
accomplished in accordance with Rule 145 under the Securities Act; and
(ii) such person agrees that appropriate stop transfer
instructions may be established with respect to and, if requested by
Acquiror, appropriate legend may be placed on, the certificates
evidencing ownership of Acquiror Common Stock that such person receives
as a result of the Merger.
SECTION 6.11. ENVIRONMENTAL MATTERS.
(a) The Company will provide access to Acquiror to all
information in the possession, custody, or control of the Company or any
Subsidiary that pertains to the environmental history of the Real
Property and the operations of the Company, the Subsidiaries and the
Cellular Partnerships.
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(b) The Company will promptly furnish to Acquiror written
notice of any Hazardous Discharge or of any actions or notices described
in Section 3.33(b).
(c) The Company will permit Acquiror, at Acquiror's expense,
to cause to be prepared and delivered to Acquiror, with a copy to the
Company, prior to the Closing Date (i) a Phase I environmental report on
each parcel of the Real Property designated by Acquiror and (ii), if
recommended under the Phase I environmental report and so requested by
Acquiror, a Phase II environmental report, in each case prepared by an
environmental consultant acceptable to Acquiror (the "Environmental
Reports"). If any such Environmental Report discloses the occurrence of
any Hazardous Discharge, the presence of any Hazardous Materials or the
risk of contamination from any off-site Hazardous Materials, such
Environmental Report shall include an estimate of the cost of any
related remediation reasonably anticipated by the environmental
consultant.
SECTION 6.12. ACQUIROR SEC DOCUMENTS.
Acquiror will file with the SEC all reports, schedules, forms,
statements and other Documents required to be filed after the date of this
Merger Agreement but before the Effective Time (the "Post-Signing SEC
Documents").
SECTION 6.13 DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE.
(a) Acquiror agrees, for the entire period from the Effective
Time until at least six (6) years after the Effective Time, to cause the
Surviving Corporation and the presently existing Subsidiaries of Company
and their successors (each an "Indemnitor"), to the fullest extent
permitted by law, including without limitation Article 2.02-1 of the
Texas Business Corporation Act, to include and maintain in its articles
of incorporation and bylaws, (i) indemnification provisions for each of
the present and former officers and directors of Indemnitor and its
predecessor entity, if any, (and each of the present and former officers
and directors of Subsidiaries of the Company which was serving, or is
serving, in such position at the request of Indemnitor), indemnifying
each of them from all claims, losses, judgments, penalties, fines,
settlements and expenses actually incurred by such officer or director
in connection with a proceeding, as presently defined in Article 2.02-1
of the Texas Business Corporation Act, and (ii) provisions requiring
reasonable expenses incurred by such officer or director in connection
with such proceeding to be paid or reimbursed by Indemnitor as incurred
by such officer or director. Promptly after the Effective Time, Acquiror
agrees to cause the Surviving Corporation and the Subsidiaries of
Company, each to establish any such additional indemnification
arrangements in favor of its present and former officers and directors
as may be necessary so that each of them will continue to have the
benefit of the indemnification arrangements available to directors and
officers of the Surviving Corporation and its Subsidiaries for all
events or actions occurring subsequent to the Effective Time.
(b) For a period of six (6) years after the Effective Time,
Acquiror shall cause the Surviving Corporation and the Subsidiaries of
the Company to maintain in effect, with respect to events occurring
prior to the Effective Time, the policies of directors' and officers'
liability
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insurance maintained in effect by them at the Effective Time, provided
that they or Acquiror may substitute therefor policies of at least the
same coverage containing terms that are no less advantageous to the
extent such liability insurance can be maintained annually at a cost to
them not greater than 200% of the current aggregate premiums for the
policies currently maintained by them for their directors' and officers'
liability insurance; provided, further, that if such insurance cannot be
so maintained or obtained at such cost, they shall maintain or obtain as
much of such insurance as can be so maintained or obtained at a cost
equal to 200% of the current annual premium for directors' and officers'
liability insurance.
ARTICLE VII
CONDITIONS TO CLOSING
SECTION 7.01. CONDITIONS TO OBLIGATIONS OF EACH PARTY UNDER THIS MERGER
AGREEMENT.
The respective obligations of each party to effect the Merger and the
other transactions contemplated herein shall be subject to the satisfaction at
or prior to the Effective Time of the following conditions, any or all of which
may be waived by agreement of Acquiror and the Company, in whole or in part, to
the extent permitted by applicable Law:
(a) Shareholder Approval. This Merger Agreement and the Merger
shall have been approved and adopted by the requisite vote of the
Company Shareholders.
(b) No Order. No Governmental Entity or federal or state court
of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, executive order,
decree, judgment, injunction, stop order or other order (whether
temporary, preliminary or permanent), in any case which is in effect and
which provides damages in the event of or prevents or prohibits
consummation of the Merger; provided, however, that each of the parties
shall use their best efforts to cause any such decree, judgment,
injunction or other order to be vacated or lifted.
(c) HSR Act. The applicable waiting period, together with any
extensions thereof, under the HSR Act shall have expired or been
terminated.
(d) Other Approvals. All consents, waivers, approvals and
authorizations required to be obtained, and all filings or notices
required to be made, by Acquiror and the Company prior to consummation
of the transactions contemplated in this Merger Agreement (other than
the filing of the Articles of Merger in accordance with Texas Law) shall
have been obtained from and made with all required Governmental
Entities, except for such consents, waivers, approvals or authorizations
which the failure to obtain, or such filings or notices which the
failure to make, would not have a Company Material Adverse Effect or an
Acquiror Material Adverse Effect or be reasonably likely to subject the
Company, any Subsidiary, Acquiror,
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Acquiror Sub or any of their respective directors or officers to
criminal liability or substantial penalties.
(e) Tax Opinion. The Company and Acquiror shall have received
an opinion of Reid & Priest LLP, special counsel to the Acquiror, in
form and substance satisfactory to each of them and addressed to each of
them and upon which the Company Shareholders may rely, dated the Closing
Date, which opinion may be based on appropriate representations of the
Company and Acquiror and the representations of certain Company
Shareholders as set forth in Section 3.17(g) hereof, in form and
substance satisfactory to such counsel, to the effect that the Merger
will be a tax-free transaction described in Code Section 368 and that
the Company and the Company Shareholders who exchange their shares
solely for Acquiror Common Stock will recognize no gain or loss for
federal income tax purposes as a result of the consummation of the
Merger.
(f) Registration and Listing of Shares. The offer and sale of
the shares of Acquiror Common Stock issuable in the Merger shall be the
subject of an effective registration statement under the Securities Act.
The shares of Acquiror Common Stock issuable in the Merger shall have
been approved for listing on the NYSE upon official notice of issuance.
(g) No Challenge. There shall not be pending any action,
proceeding or investigation by any Governmental Entity (i) challenging
or seeking material damages in connection with the Merger or the
conversion of Company Common Shares into Acquiror Common Stock pursuant
to the Merger, or seeking to place limitations on the ownership of
shares of Company Common Shares (or shares of common stock of the
Surviving Corporation) by Acquiror or Acquiror Sub, (ii) seeking to
restrain or prohibit the consummation of the Merger or otherwise limit
the right of the Company, any Subsidiary, Acquiror or any of its
subsidiaries to own or operate all or any portion of the business or
Assets of the Company and the Subsidiaries or (iii) which otherwise is
likely to have a Company Material Adverse Effect or an Acquiror Material
Adverse Effect.
SECTION 7.02. ADDITIONAL CONDITIONS TO OBLIGATIONS OF ACQUIROR AND
ACQUIROR SUB.
The obligations of Acquiror and Acquiror Sub to effect the Merger and
the other transactions contemplated herein are also subject to the satisfaction
at or prior to the Effective Time of the following conditions, any or all of
which may be waived by Acquiror, in whole or in part, to the extent permitted
by applicable Law:
(a) Representations and Warranties. Subject to Section 6.04(a)
of this Merger Agreement and except as otherwise contemplated in this
Agreement, each of the representations and warranties of the Company
contained in this Merger Agreement shall be true and correct in all
material respects (except that where any statement in a representation
or warranty expressly includes a standard of materiality, such statement
shall be true and correct in all respects giving effect to such
standard) as of the date of this Merger Agreement and as of the
Effective Time as though made as of the Effective Time, except that
those
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representations and warranties which expressly address matters only as
of a particular date shall remain true and correct in all material
respects (except that where any statement in a representation or
warranty expressly includes a standard of materiality, such statement
shall be true and correct in all respects giving effect to such
standard) as of such date, and except (A) for changes contemplated by
this Merger Agreement or (B) for, in a representation and warranty that
does not expressly include a standard of materiality, any untrue or
incorrect statements therein that, considered in the aggregate, do not
indicate a Company Material Adverse Effect. Acquiror shall have received
a certificate of the chief executive officer and chief financial officer
of the Company to the effect of the foregoing.
(b) Updated Company Disclosure Schedule. The revised versions
of the Company Disclosure Schedule delivered to Acquiror pursuant to
Section 6.04 shall not disclose any Company Material Adverse Effect.
(c) Agreements and Covenants. The Company shall have performed
or complied in all material respects with all agreements and covenants
required by this Merger Agreement to be performed or complied with by it
on or prior to the Effective Time. Acquiror shall have received a
certificate of the chief executive officer and chief financial officer
of the Company to that effect.
(d) Consents Under Agreements. The Company or the appropriate
Subsidiary shall have obtained the consent or approval of each Person
whose consent or approval shall be required in connection with the
Merger under all Agreements to which the Company or any Subsidiary is a
party, except where the failure to obtain any such consents or
approvals, considered in the aggregate, would not have a Company
Material Adverse Effect or an Acquiror Material Adverse Effect.
(e) Opinion of Counsel. Acquiror shall have received from
Naman, Howell, Smith & Lee, a professional corporation, counsel to the
Company, an opinion dated the Closing Date, in form and substance
reasonably satisfactory to Acquiror, and containing such qualifications
as counsel shall reasonably deem appropriate under the circumstances.
(f) Dissenters. No more than five percent (5%) of the Company
Common Shares issued and outstanding immediately prior to the Effective
Time shall be Dissenting Shares.
(g) Accountant Letters. Acquiror shall have received from the
Company a "cold comfort" letter of Axley & Rode LLP, dated the Effective
Time and addressed to Acquiror, reasonably customary in scope and
substance for letters delivered by independent public accountants in
connection with transactions such as those contemplated by this Merger
Agreement.
(h) Employment/Consulting Agreements. Acquiror shall have
received from at least eight of the Key Employees a signed Employment
Agreement (or, in the case of Mr. G.I. Ross, an Employment and
Consulting Agreements) in form and substance reasonably acceptable to
Acquiror.
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(i) Company Material Adverse Effect. Since December 31,1996,
there shall not have occurred a Company Material Adverse Effect (or any
development that, insofar as reasonably can be foreseen, is likely to
result in any Company Material Adverse Effect).
(j) Environmental Matters. The Environmental Reports, if any,
shall indicate that the Real Property does not contain any Hazardous
Materials and is not subject to any risk of contamination from any off-
site Hazardous Materials, except to the extent that the presence of any
such Hazardous Materials or the risk of such contamination would not
have a Company Material Adverse Effect or an Acquiror Material Adverse
Effect.
SECTION 7.03. ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY.
The obligations of the Company to effect the Merger and the other
transactions contemplated herein are also subject to the satisfaction at or
prior to the Effective Time of the following conditions, any or all of which
may be waived by the Company, in whole or in part, to the extent permitted by
applicable Law:
(a) Representations and Warranties. Each of the
representations and warranties of Acquiror contained in this Merger
Agreement shall be true and correct as of the date of this Merger
Agreement and shall be true and correct in all material respects (except
that where any statement in a representation or warranty expressly
includes a standard of materiality, such statement shall be true and
correct in all respects giving effect to such standard) as of the
Effective Time as though made as of the Effective Time, except that
those representations and warranties which expressly address matters
only as of a particular date shall remain true and correct in all
material respects (except that where any statement in a representation
or warranty expressly includes a standard of materiality, such statement
shall be true and correct in all respects giving effect to such
standard) as of such date, and except (A) for changes permitted or
contemplated by this Merger Agreement or (B) in a representation and
warranty that does not expressly include a standard of materiality, any
untrue or incorrect statements therein that, considered in the
aggregate, do not indicate an Acquiror Material Adverse Effect. The
Company shall have received a certificate of an executive officer of
Acquiror to that effect.
(b) Agreements and Covenants. Acquiror shall have performed or
complied in all material respects with all agreements and covenants
required by this Merger Agreement to be performed or complied with by
it on or prior to the Effective Time. The Company shall have received a
certificate of an executive officer of Acquiror to that effect.
(c) Opinion of Counsel. The Company shall have received from
Worsham, Forsythe & Wooldridge, L.L.P., an opinion dated the Closing
Date, in form and substance reasonably satisfactory to the Company, and
containing such qualifications as counsel shall reasonably deem
appropriate under the circumstances.
(d) Fairness Opinion. The Company shall have received from
Daniels & Associates the opinion described in Section 6.01 hereof.
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(e) Acquiror Material Adverse Effect. Since December 31, 1996,
there shall not have occurred an Acquiror Material Adverse Effect (or
any development that, insofar as reasonably can be foreseen, is likely
to result in any Acquiror Material Adverse Effect).
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. TERMINATION.
This Merger Agreement may be terminated at any time (except where
otherwise indicated) prior to the Effective Time, whether before or after
approval of this Merger Agreement and the Merger by the Company Shareholders:
(a) by mutual written consent of Acquiror and the Company;
(b) by Acquiror, if (i) there shall have been any material
breach by Company of any representation or warranty of Company contained
in this Merger Agreement, or any material breach by Company of any
covenant or agreement of Company contained in this Merger Agreement,
(ii) such breach shall not have been remedied by Company within twenty
(20) days after receipt by Company of notice in writing from Acquiror,
specifying the nature of such breach and requesting that it be remedied
and (iii) such breach either is reasonably likely to result in a
material diminution of the benefit expected to be derived by Acquiror as
a result of the transactions contemplated by this Merger Agreement or is
reasonably likely to have a Company Material Adverse Effect;
(c) by the Company, if (i) there shall have been any material
breach by Acquiror of any representation or warranty of Acquiror
contained in this Merger Agreement, or any material breach by Acquiror
of any covenant or agreement of Acquiror contained in this Merger
Agreement, (ii) such breach shall not have been remedied by Acquiror
within twenty (20) days after receipt by Acquiror of notice in writing
from Company, specifying the nature of such breach and requesting that
it be remedied and (iii) such breach either is reasonably likely to
result in a material diminution of the benefits expected to be derived
by Company Shareholders as a result of the transactions contemplated by
this Merger Agreement or is reasonably likely to have an Acquiror
Material Adverse Effect;
(d) by Acquiror, within forty-five (45) days after the date
the Company delivers the Company Disclosure Schedule to Acquiror
pursuant to Section 6.04(a), upon Acquiror's determination, based on its
due diligence investigation and review of the Company and the
Subsidiaries and the Company Disclosure Schedule, that (i) there has
been, or is reasonably likely to be, a material diminution of the
benefits expected to be derived by Acquiror as a result of the
transactions contemplated by this Merger Agreement or (ii) a development
has occurred or information has been disclosed or discovered, that has,
or is reasonably likely to have, a Company Material Adverse Effect;
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(e) by either Acquiror or the Company if any decree, permanent
injunction, judgment, order or other action by any court of competent
jurisdiction or any Governmental Entity preventing or prohibiting
consummation of the Merger shall have become final and non-appealable;
(f) by either Acquiror or the Company if the Merger Agreement
shall fail to receive the requisite vote for approval and adoption by
the Company Shareholders at the Company Shareholders' Meeting;
(g) by either Acquiror or the Company if the Merger shall not
have been consummated by December 31, 1997; provided, however, that this
Merger Agreement may be extended not more than one hundred eighty (180)
days by Acquiror by written notice to the Company if the Merger shall
not have been consummated as a direct result of (1) the Company having
failed by such date to receive the regulatory approvals or consents
required to be obtained by the Company with respect to the Merger from
the FCC, or (2) the failure of the Company or Acquiror to successfully
resolve any challenge to the transactions contemplated by this Merger
Agreement by the Federal Trade Commission or the Department of Justice;
provided further, that the right to terminate this Merger Agreement
under this Section 8.01(g) shall not be available (i) to Acquiror, where
Acquiror's willful failure to fulfill any obligation under this Merger
Agreement has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before such date, or (ii) to the Company,
where the Company's willful failure to fulfill any obligation under this
Merger Agreement has been the cause of, or resulted in, the failure of
the Effective Time to occur on or before such date; or
(h) by Company upon two days' prior notice to Acquiror if, as
a result of a Competing Transaction by a party other than Acquiror or
any of its affiliates, the Board of Directors of the Company determines
in good faith that the fiduciary obligations of such directors under
applicable law require that such Competing Transaction be accepted;
provided, however, that
(i) the Board of Directors of Company shall have been
advised in writing by outside counsel that, notwithstanding a
binding commitment to consummate an agreement of the nature of
this Merger Agreement entered into in the proper exercise of
their applicable fiduciary duties, such fiduciary duties would
also require the directors to reconsider such commitment as a
result of such Competing Transaction, and
(ii) prior to any such termination, Company shall, and
shall cause its respective financial and legal advisors to,
negotiate with Acquiror to make such adjustments in the terms and
conditions of this Merger Agreement as would enable Company to
proceed with the transactions contemplated herein.
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SECTION 8.02. EFFECT OF TERMINATION.
In the event of termination of this Merger Agreement by either Acquiror
or the Company as provided in Section 8.01, this Merger Agreement shall
forthwith become void and there shall be no liability or obligation on the part
of Acquiror, Acquiror Sub or the Company or any of their respective directors
or officers except (i) as set forth in Sections 5.05, 6.04(c), 8.03 and 9.01
hereof, and (ii) Sections 5.05, 8.02, 8.03, 9.01, and 9.02 shall remain in full
force and effect and survive any termination of this Merger Agreement.
SECTION 8.03. EXPENSES.
(a) Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Merger Agreement and the
transactions contemplated hereby shall be paid by the party incurring
such expense, except as provided in Section 8.03(b) and Section 8.03(c)
below.
(b) If this Merger Agreement is terminated pursuant to Section
8.01(b) and the breach by Company was not the result of a willful
failure of the Company to fulfill any obligation under this Merger
Agreement, then the Company shall promptly reimburse Acquiror for its
out-of-pocket costs and expenses incurred in connection with this Merger
Agreement and the transactions contemplated hereby in an aggregate
amount not to exceed $750,000.
(c) If this Merger Agreement is terminated pursuant to Section
8.01(c) and the breach by Acquiror was not the result of a willful
failure of Acquiror to fulfill any obligation under this Merger
Agreement then Acquiror shall promptly reimburse Company for its out-of-
pocket costs and expenses incurred in connection with this Merger
Agreement and the transactions contemplated hereby in an aggregate
amount not to exceed $750,000.
(d) If this Merger Agreement is terminated by the Company
pursuant to Section 8.01(c) or Section 8.01(g) and the willful failure
of Acquiror to fulfill any obligation under this Merger Agreement has
been the cause of, or resulted in, such termination, then Acquiror shall
promptly pay to the Company a termination fee of $19,000,000.
(e) If this Merger Agreement is terminated by Acquiror
pursuant to Section 8.01(b) or Section 8.01(g) and the willful failure
of the Company to fulfill any obligation under this Merger Agreement has
been the cause of, or resulted in, such termination, then the Company
shall promptly pay to Acquiror a termination fee of $19,000,000.
(f) If this Merger Agreement is terminated for any reason and
the Company has breached Section 5.05 of the Merger Agreement, then the
Company shall promptly pay to Acquiror a termination fee of $19,000,000.
(g) If this Merger Agreement is terminated by Company pursuant
to Section 8.01(h), then the Company shall promptly pay to Acquiror a
termination fee of $19,000,000.
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(h) If the Company enters into a binding agreement with
respect to any Competing Transaction within six months after the
termination of this Merger Agreement for any reason other than Section
8.01(a) or Section 8.01(c), then the Company shall promptly pay to
Acquiror a termination fee of $19,000,000.
(i) The remedies identified in subsections (b) through (h) of
this Section 8.3 are alternatives and the application of one of these
remedies shall be exclusive and shall preclude the application of the
other remedies in this Section 8.03, except that the application of the
remedies in subsection (b) shall not preclude the application of either
subsection (f) or subsection (h). The parties agree that the agreements
contained in this Section 8.03 are an integral part of the transactions
contemplated by this Merger Agreement and constitute liquidated damages
and not a penalty.
SECTION 8.04. AMENDMENT.
This Merger Agreement may be amended by the parties hereto at any time
prior to the Effective Time; provided, however, that, after approval of the
Merger by the Company Shareholders, no amendment may be made which would reduce
the amount or change the type of consideration into which each share of Company
Capital Stock shall be converted pursuant to this Merger Agreement upon
consummation of the Merger. This Merger Agreement may not be amended except by
an instrument in writing signed by the parties hereto.
SECTION 8.05. EXTENSION; WAIVER.
At any time prior to the Effective Time, the parties hereto may (a)
extend the time for the performance of any of the obligations or other acts of
the other parties hereto, (b) waive any inaccuracies in the representations and
warranties contained herein or in any Document delivered pursuant hereto and
(c) subject to the proviso of Section 8.04, waive compliance with any of the
agreements or conditions contained herein. Any such extension or waiver shall
be valid if set forth in an instrument in writing signed by the party or
parties to be bound thereby. The failure of any party to assert any of its
rights under this Merger Agreement or otherwise shall not constitute a waiver
of such rights.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES.
None of the representations, warranties, covenants and agreements in
this Merger Agreement shall survive the Effective Time, except the covenants
and agreements contained in this Section 9.01, Articles I and II, Section
6.06(b) and (c), Section 6.13, Section 8.03(a) and Section 9.07, each of which
shall survive in accordance with its terms.
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SECTION 9.02. NOTICES.
All notices and other communications given or made pursuant hereto shall
be in writing and shall be deemed to have been duly given or made as of the
date delivered, mailed or transmitted if delivered personally, mailed by
registered or certified mail (postage prepaid, return receipt requested) or
sent by overnight courier (providing proof of delivery) to the parties at the
following addresses or sent by electronic transmission to the following
telecopier numbers (or at such other address or telecopy number for a party as
shall be specified by like notice):
(a) If to Acquiror or Acquiror Sub:
Texas Utilities Company
Energy Plaza
1601 Bryan Street
Dallas, Texas 75201
Telecopier No.: (214) 812-6787
Attention: Herbert H. Zureich, Jr.
With a copy (which shall not constitute notice) to:
Worsham, Forsythe & Wooldridge, L.L.P.
Energy Plaza, 30th Floor
1601 Bryan Street
Dallas, Texas 75201
Telecopier No.: (214) 880-001
Attention: Robert A. Wooldridge, Esq.
(b) If to the Company:
Lufkin-Conroe Communications Co.
321 N. First
Lufkin, Texas 75902
Telecopier No.: (409) 637-2591
Attention: G.I. Ross
With a copy (which shall not constitute notice) to:
Naman, Howell, Smith & Lee, A Professional Corporation
Texas Center, P. O. Box 1470
Waco, Texas 76703-1470
Telecopier No.: (254) 754-6331
Attention: Rex Whitaker, Esq.
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SECTION 9.03. HEADINGS.
The headings contained in this Merger Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Merger Agreement.
SECTION 9.04. SEVERABILITY.
If any term or other provision of this Merger Agreement is invalid,
illegal or incapable of being enforced by any rule of Law or public policy, all
other conditions and provisions of this Merger Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Merger Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner
to the end that transactions contemplated hereby are fulfilled to the extent
possible.
SECTION 9.05. ENTIRE AGREEMENT.
This Merger Agreement (together with the Exhibits, Schedules, the
Company Disclosure Schedule and the Acquiror Disclosure Schedule and the other
Documents delivered pursuant hereto) and the Confidentiality Agreement
constitute the entire agreement of the parties and supersede all prior
agreements and undertakings, both written and oral, between the parties, or any
of them, with respect to the subject matter hereof and, except as otherwise
expressly provided herein, are not intended to confer upon any other Person any
rights or remedies hereunder.
SECTION 9.06. ASSIGNMENT.
This Merger Agreement shall not be assigned by operation of Law or
otherwise.
SECTION 9.07. PARTIES IN INTEREST.
This Merger Agreement shall be binding upon and inure solely to the
benefit of each party hereto, and nothing in this Merger Agreement, express or
implied, other than the right to receive the consideration payable in the
Merger pursuant to Article II, is intended to or shall confer upon any other
Person any right, benefit or remedy of any nature whatsoever under or by reason
of this Merger Agreement.
SECTION 9.08. MUTUAL DRAFTING.
Each party hereto has participated in the drafting of this Merger
Agreement, which each party acknowledges is the result of extensive
negotiations between the parties.
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SECTION 9.09. GOVERNING LAW.
This Merger Agreement shall be governed by, and construed in accordance
with, the Laws of the State of Texas, regardless of the Laws that might
otherwise govern under applicable principles of conflicts of law.
SECTION 9.10. COUNTERPARTS.
This Merger Agreement may be executed and delivered in one or more
counterparts, and by the different parties hereto in separate counterparts,
each of which when executed and delivered shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
SECTION 9.11. FURTHER ASSURANCES.
Each party hereto shall execute such further documents and instruments
and take such further actions as may reasonably be requested by any other party
hereto in order to consummate the Merger in accordance with the terms hereof.
ARTICLE X
DEFINITIONS
For purposes of this Merger Agreement, the following terms, and the
singular and plural thereof, shall have the meanings set forth below:
"Acquiror" is defined in the Preamble to this Merger Agreement.
"Acquiror Benefit Plan" shall mean any "employee pension benefit plan"
or "employee welfare benefit plan," as defined in ERISA, of Acquiror.
"Acquiror Common Stock" is defined in Section 2.01.
"Acquiror Disclosure Schedule" is defined in Article IV.
"Acquiror Information" means (a) Acquiror's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996, (b) Acquiror's definitive proxy
statement dated April 4, 1997 and (c) Acquiror's quarterly report on Form 10-Q
for the period ending March 31, 1997.
"Acquiror Material Adverse Effect" means any event, change or effect
that, individually or when taken together with all other such events, changes
or effects, is or is reasonably likely to be materially adverse to the
business, operations, condition (financial or otherwise), prospects, results of
operation, assets or liabilities of the Acquiror and its Subsidiaries, taken as
a whole.
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"Acquiror Sub" is defined in the Preamble to this Merger Agreement.
"Affiliate" means with respect to a person or entity, any person or
entity which directly or indirectly, through one or more intermediaries,
Controls, is Controlled by, or is under common Control with such person or
entity.
"Agreement" means any enforceable contracts, leases, promissory notes,
covenants, easements, rights of way, commitments, arrangements and
understandings, whether written or oral.
"Articles of Merger" is defined in Section 1.02.
"Assets" means assets of every kind and everything that is or may be
available for the payment of liabilities (whether inchoate, tangible or
intangible), including, without limitation, real and personal property.
"Audited Balance Sheets" is defined in Section 3.08(a).
"Audited Statements" is defined in Section 3.08(a).
"Business Day" means a day other than a Saturday, a Sunday or any other
day on which commercial banks in the State of Texas are authorized or obligated
to be closed.
"Blue Sky Laws" means state securities or blue sky laws and the rules
and regulations thereunder.
"Bonuses" shall mean bonuses not paid in the Ordinary Course of Business
and in addition to those described in Section 5.01(a) (i)(A) or (B) and which
(i) in the aggregate do not exceed $5,000,000 and (ii) are approved by the
Board of Directors of the Company after non-binding consultation with Acquiror.
"Cellular Partnerships" is defined in Section 3.02.
"Certificates" is defined in Section 2.02(b).
"Closing" is defined in Section 2.05.
"Closing Schedules" is defined in Section 2.01(e).
"Closing Date" is defined in Section 2.05.
"Code" is defined in the Preamble to this Merger Agreement.
"Common Control Entity" means any trade or business under common control
(as such term is defined in Section 414(b) or 414(c) of the Code) with the
Company or any Subsidiary.
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"Common Share Exchange Ratio" is defined in Section 2.01(a).
"Common Share Numerator" is defined in Section 2.01(a).
"Communications Act" means the Communications Act of 1934, as amended by
the Telecommunications Act of 1996, and all Laws promulgated pursuant thereto
or in connection therewith.
"Company" is defined in the Preamble to this Merger Agreement.
"Company Common Shares" is defined in Section 2.01(a).
"Company Contracts" is defined in Section 3.14(a).
"Company Disclosure Schedule" is defined in Article III.
"Company Licenses" is defined in Section 3.07(a).
"Company Material Adverse Effect" means any event, change or effect
that, individually or when taken together with all other such events, changes
or effects, is or is reasonably likely to be materially adverse to the
business, operations, condition (financial or otherwise), prospects, results of
operation, assets or liabilities of the Company and the Subsidiaries, taken as
a whole.
"Company Shareholders" is defined in Section 3.04.
"Company Shareholders' Meeting" is defined in Section 6.01.
"Company Tax Returns" means all Tax Returns required to be filed by the
Company or any of the Subsidiaries (without regard to extensions of time
permitted by law or otherwise).
"Competing Transaction" is defined in Section 5.05(a).
"Confidentiality Agreement" means the Confidentiality Agreement, dated
November 22, 1996, between Acquiror and the Company.
"Control" (including the terms "Controlled by" and "under common Control
with") means, as used with respect to any Person, possession, directly or
indirectly or as a trustee or executor, of power to direct or cause the
direction of management or policies of such Person (whether through ownership
of voting securities, as trustee or executor, by Agreement or otherwise).
"Defined Benefit Plan" means a Plan that is or was a "defined benefit
plan" as such term is defined in Section 3(35) of ERISA.
"Dissenting Shareholder" is defined in Section 2.04.
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"Dissenting Shares" is defined in Section 2.01(a).
"Documents" means any paper or other material (including, without
limitation, computer storage media) on which is recorded (by letters, numbers
or other marks) information that may be evidentially used, including, without
limitation, legal opinions, mortgages, indentures, notes, instruments, leases,
Agreements, insurance policies, administrative policies or procedures, reports,
studies, financial statements (including, without limitation, the notes
thereto), other written information, schedules, certificates, charts, maps,
plans, photographs, letters, memoranda and all similar materials.
"DOL" means the United States Department of Labor and its successors.
"Effective Time" is defined in Section 1.02.
"Encumbrance" means any mortgage, lien, pledge, security interest, deed
of trust, option or other material restriction on a material right of
ownership, other than: (i) Taxes not yet due or the validity of which is being
contested in good faith by appropriate proceedings, and as to which the Company
shall, if appropriate under GAAP, have set aside on its books and records
adequate reserves; (ii) deposits under workmen's compensation, unemployment
insurance, social security and other similar Laws, or to secure the performance
of bids, tenders or contracts (other than for the repayment of borrowed money)
or to secure indemnity, performance or other similar bonds for the performance
of bids, tenders or contracts (other than for the repayment of borrowed money)
or to secure statutory obligations or surety or appeal bonds, or to secure
indemnity, performance or other similar bonds in the Ordinary Course of
Business; (iii) liens securing claims or demands of mechanics or materialmen;
(iv) liens which arise by operation of Law; (v) zoning restrictions, easements,
licenses, covenants and other restrictions affecting the use of the Real
Property; and (vi) liens securing purchase money security interests.
"ENSERCH Subsidiaries" means ENSERCH Corporation and the Subsidiaries
thereof.
"Environmental Laws" means any Laws (including, without limitation, the
Comprehensive Environmental Response, Compensation, and Liability Act),
including any plans, other criteria, or guidelines promulgated pursuant to such
Laws, now or hereafter in effect relating to Hazardous Materials generation,
production, use, storage, treatment, transportation, handling, management or
disposal, or noise control, or the protection of human health or the
environment.
"Environmental Reports" is defined in Section 6.12.
"Equity Investments" means the 32,917 shares of common stock of Champion
International Corp. and the 208,930 shares of common stock, 105 shares of
Series A Preferred Stock, and $315,000 principal amount of convertible
debentures of USTN Holdings, Inc. held by the Company.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and all Laws promulgated pursuant thereto or in connection therewith.
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"ESOP" means an "employee stock ownership plan" as such term is defined
in Section 407(d)(6) of ERISA or Section 4975(e)(7) of the Code.
"Excess Shares" is defined in Section 2.02(e).
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and all Laws promulgated pursuant thereto or in connection therewith.
"Exchange Agent" is defined in Section 2.02(a).
"Exchange Fund" is defined in Section 2.02(a).
"FAA" means the United States Federal Aviation Administration and its
successors.
"FCC" means the United States Federal Communications Commission and its
successors.
"Federal Aviation Act" means the Federal Aviation Act of 1958, as
amended, and all Laws promulgated pursuant thereto or in connection therewith.
"Financial Statements" is defined in Section 3.08(a).
"GAAP" means United States generally accepted accounting principles.
"Governmental Entities" means any governmental, quasi-governmental or
regulatory authority, whether domestic or foreign.
"Group" is defined in Section 5.05(a).
"Hazardous Discharge" means any actual or threatened emission, spill,
release or discharge (whether on Real Property, on property adjacent to the
Real Property, or at any other location or disposal site) into or upon the air,
soil or improvements, surface water or groundwater, or the sewer, septic
system, or waste treatment, storage or disposal systems servicing the Real
Property, in each case of Hazardous Materials used, stored, generated, treated
or disposed of at the Real Property.
"Hazardous Materials" means any wastes, substances or materials (whether
solids, liquids or gases) that are deemed hazardous, toxic, pollutants or
contaminants, including, without limitation, substances defined as "hazardous
wastes," "hazardous substances," "toxic substances," "radioactive materials,"
or other similar designations in, or otherwise subject to regulation under, any
Environmental Laws. "Hazardous Materials" includes, without limitation,
polychlorinated biphenyls (PCBs), asbestos, lead-based paints, and petroleum
and petroleum products (including, without limitation, crude oil or any
fraction thereof).
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and all Laws promulgated pursuant thereto or in connection
therewith.
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"Indemnitor" is defined in Section 6.13(a).
"Individual Account Plan" means a Plan that is or was an "individual
account plan" as such term is defined in Section 3(34) of ERISA.
"Intellectual Property" means (i) all fictitious business names,
trademarks, service marks, trade names, trade styles, brands, private labels,
copyrights and all registrations or applications therefor, (ii) all patents,
inventions, discoveries, industrial models, processes, designs and all
registrations or applications therefor, (iii) all trade secrets, know-how and
other technical data, (iv) all general intangibles of like nature, and (v) all
Agreements relating to any of the foregoing.
"IRS" means the United States Internal Revenue Service and its
successors.
"Joint Venture" shall mean, with respect to any Person, any corporation
or other entity (including partnerships and other business associations and
joint ventures) in which such Person or one or more of its Subsidiaries owns an
equity interest that is less than a majority of any class of the outstanding
voting securities or equity, other than equity interests held for passive
investment purposes that are less than 5% of any class of the outstanding
voting securities or equity.
"Key Employees" means the eleven officers of the Company or its
Subsidiaries on the date of this Merger Agreement.
"Knowledge" means actual conscious awareness of the matter in question.
A statement which is qualified by the phrase "to the Knowledge of the Company"
or "to the Company's Knowledge" means that no officer of the Company or any of
its Subsidiaries has Knowledge of the incorrectness of the statement. A
statement which is qualified by the phrase "to the Knowledge of Acquiror" or
"to Acquiror's Knowledge," means that no officer of the Acquiror or any of its
Subsidiaries has Knowledge of the incorrectness of the statement.
"Laws" means all foreign, federal, state and local statutes, laws,
ordinances, regulations, rules, resolutions, orders, tariffs, determinations,
writs, injunctions, awards (including, without limitation, awards of any
arbitrator), judgments and decrees applicable to the specified Person and to
the businesses and Assets thereof (including, without limitation, Laws relating
to securities registration and regulation; the sale, leasing, ownership or
management of real property; employment practices, terms and conditions, and
wages and hours; building standards, land use and zoning; safety, health and
fire prevention; and environmental protection, including Environmental Laws).
"License" means any franchise, grant, authorization, license, tariff,
permit, easement, variance, exemption, consent, certificate, approval or order
of any Governmental Entity.
"Material Customer" means the ten largest customers of the Company or
any Subsidiary determined by the revenues of the Company and any Subsidiary
during the twelve month period prior to the date of this Merger Agreement.
"Merger" is defined in the Preamble to this Merger Agreement.
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"Merger Agreement" is defined in the Preamble to this Merger Agreement.
"Minimum-Funding Plan" means a Pension Plan that is subject to Title I,
Subtitle B, Part 3, of ERISA (concerning "funding").
"Multiemployer Plan" means a "multiemployer plan" as such term is
defined in Section 3(37) of ERISA.
"NRC Actions" is defined in Section 4.19.
"NYSE" means the New York Stock Exchange.
"Other Arrangement" means a benefit program or practice providing for
bonuses, incentive compensation, vacation pay, severance pay, insurance,
restricted stock, stock options, employee discounts, company cars, tuition
reimbursement or any other perquisite or benefit (including, without
limitation, any fringe benefit under Section 132 of the Code) to employees,
officers or independent contractors that is not a Plan.
"Ordinary Course of Business" means ordinary course of business
consistent with past practices and prudent business operations.
"PBGC" means the Pension Benefit Guaranty Corporation or its successors.
"Pension Plan" means an "employee pension benefit plan" as such term is
defined in Section 3(2) of ERISA.
"Person" means an individual, corporation, partnership, joint venture,
trust, unincorporated organization or other entity, or a Governmental Entity.
"Plan" means any plan, program or arrangement, whether or not written,
that is or was an "employee benefit plan" as such term is defined in Section
3(3) of ERISA and (a) which was or is established or maintained by the Company
or any Subsidiary; (b) to which the Company or any Subsidiary contributed or
was obligated to contribute or to fund or provide benefits; or (c) which
provides or promises benefits to any person who performs or who has performed
services for the Company or any Subsidiary and because of those services is or
has been (i) a participant therein or (ii) entitled to benefits thereunder.
"Post-Signing Returns" is defined in Section 5.03.
"Post-Signing SEC Documents" is defined in Section 6.13.
"PUC" means the Public Utility Commission of Texas and its successors.
"PUHCA" is defined in Section 3.02.
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"Qualified Plan" means a Pension Plan that satisfies, or is intended by
the Company to satisfy, the requirements for Tax qualification described in
Section 401 of the Code.
"Real Property" means the real property (other than easements and rights
of way) owned or used by the Company and the Subsidiaries as of December 31,
1996, and any additional real property (other than easements and rights of way)
owned or used since that date.
"Registration Statement" shall be that Form S-4 filed with the SEC for
purposes of registering the Acquiror Common Stock to be received by Company
Shareholders as provided in Section 2.01(a).
"Sale" is defined in Section 3.17(g).
"SEC" means the United States Securities and Exchange Commission and Its
successors.
"Securities Act" means the Securities Act of 1933, as amended, and all
Laws promulgated pursuant thereto or in connection therewith.
"Shareholder Plan" is defined in Section 3.17(g).
"Statutory-Waiver Plan" means a Pension Plan that is not subject to
Title I, Subtitle B, Part 3, of ERISA (concerning "funding").
"Subsidiary" means a corporation, partnership, joint venture or other
entity of which the entity in question or the Company, or the Acquiror in the
case of Article IV, owns, directly or indirectly, at least 50% of the
outstanding securities or other interests the holders of which are generally
entitled to vote for the election of the board of directors or other governing
body or otherwise exercise Control of such entity.
"Surviving Corporation" is defined in Section 1.01.
"Taxes" means all federal, state, local and foreign taxes (including,
without limitation, income, profit, franchise, sales, use, real property,
personal property, ad valorem, excise, employment, social security and wage
withholding taxes) and installments of estimated taxes, assessments,
deficiencies, levies, imports, duties, license fees, registration fees,
withholdings, or other similar charges of every kind, character or description
imposed by any Governmental Entity, and any interest, penalties or additions to
tax imposed thereon or in connection therewith.
"Tax Returns" means all federal, state, local, foreign and other
applicable returns, declarations, reports and information statements with
respect to Taxes required to be filed with the IRS or any other Governmental
Entity or Tax authority or agency, including, without limitation, consolidated,
combined and unitary tax returns.
"Texas Law" is defined in the Preamble to this Merger Agreement.
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"Title I Plan" means a Plan that is subject to Title I of ERISA.
"Transaction Costs" is defined in Section 2.01(e)(ii).
"Unaudited Balance Sheets" is defined in Section 3.08(a).
"Unaudited Statements" is defined in Section 3.08(a).
"Welfare Plan" means an "employee welfare benefit plan" as such term is
defined in Section 3(1) of ERISA.
IN WITNESS WHEREOF, Acquiror, Acquiror Sub and the Company have caused
this Merger Agreement to be executed and delivered as of the date first written
above.
TEXAS UTILITIES COMPANY
By: /s/ H. JARRELL GIBBS
----------------------------------
Name: H. Jarrell Gibbs
Title: Vice Chairman
TUCOM ACQUISITION CO.
By: /s/ HERBERT H. ZUREICH, JR.
----------------------------------
Name: Herbert H. Zureich, Jr.
Title: Executive Vice President
LUFKIN-CONROE COMMUNICATIONS CO.
By: /s/ G. I. ROSS
----------------------------------
Name: G. I. Ross
Title: President
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EXHIBIT "A"
VOTING AGREEMENT AND IRREVOCABLE PROXY
VOTING AGREEMENT AND IRREVOCABLE PROXY (this "Agreement"), dated as of
August 23, 1997, between Texas Utilities Company, a Texas corporation (the
"Acquiror"), and the undersigned individual or entity who is the record and
beneficial owner (the "Shareholder") of the number of shares of common stock,
par value $1.25 per share, of Lufkin-Conroe Communications Co., a Texas
corporation (the "Company") set forth below (the "Shares").
WHEREAS, the Acquiror and the Company are entering into an agreement and
plan of merger by and among the Acquiror, the Company and TUCOM Acquisition Co.
("Acquiror Sub"), a wholly owned direct or indirect subsidiary of Acquiror (the
"Merger Agreement"), pursuant to which, among other things, the Company will be
merged with and into Acquiror Sub and the separate corporate existence of the
Company shall cease (the "Merger");
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, Acquiror has requested that the Shareholder execute and deliver this
Agreement to Acquiror. As an inducement for Acquiror to enter into the Merger
Agreement, the Shareholder is executing and delivering this Agreement to
Acquiror;
WHEREAS, the Shareholder is a shareholder of the Company, possesses the
power to vote the Shares and will receive a significant economic benefit as a
result of the Merger; and
WHEREAS, the Shareholder has received and read the Acquiror Information
(as defined in the Merger Agreement) and is willing to enter into this
Agreement to facilitate the consummation of the Merger.
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Definitions. Capitalized terms used but not defined herein shall have
the meanings specified in the Merger Agreement.
2. Voting Agreement. The Shareholder shall vote the Shares, or execute a
consent with respect to the Shares, in favor of the Merger at any annual,
special or adjourned meeting of the Company's shareholders of the Company for
the purpose of voting on, or at which any vote is taken related to, the Merger,
any consent in lieu of any such meeting or otherwise.
3. Proxy. (a) The Shareholder grants to the Acquiror an irrevocable proxy
and irrevocably makes, constitutes and appoints the Acquiror, and any designees
of the Acquiror, as the attorney and proxy of the Shareholder, with full power
of substitution and resubstitution, to exercise
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all voting, consent and other rights to approve the Merger and to defeat any
other proposal which would be reasonably likely to interfere with or impede the
Merger with respect to the Shares in respect of any annual, special or
adjourned meeting of the Company's shareholders of the Company for the purpose
of voting on, or at which any vote is taken related to, the Merger, as such
attorney and proxy or its designee or substitute shall in its sole discretion
deem proper. The Shareholder hereby revokes all prior powers of attorney and
proxies appointed by the undersigned at any time with respect to the Shares to
the extent inconsistent with this Agreement.
(b) This power of attorney and proxy is coupled with an interest and
is irrevocable, shall not be terminated by any act of the Shareholder or by
operation of law, by death, disability or incompetence of the Shareholder, by
lack of appropriate power or authority, or by the occurrence of any other event
or events and shall be binding on all beneficiaries, heirs at law, legatees,
distributees, successors, assigns and legal representatives of the Shareholder.
If after the execution of this Agreement the Shareholder shall die or become
incapacitated, cease to have appropriate power or authority, or if any other
such event or events shall occur, Acquiror is nevertheless authorized and
directed to vote the Shares in accordance with the terms of this Agreement as
if such death, incapacity, lack of appropriate power or authority or other
event or events had not occurred and regardless of notice thereof.
(c) The proxy granted herein shall expire at the earlier of (i) the
termination of the Merger Agreement in accordance with its terms, or (ii) the
Effective Time.
4. Agreement Not to Sell Shares. The Shareholder will not (i) directly or
indirectly, sell, transfer, assign, pledge, hypothecate or otherwise dispose of
or encumber any Shares, or enter into any contract, option, agreement or other
arrangement with respect to the foregoing, other than this Agreement; (ii)
directly or indirectly, solicit, encourage, participate in or initiate
discussions or negotiations with, or provide information to, any Person
concerning any direct or indirect sale or other disposition of the Shares;
(iii) take any action which could reasonably result in preventing the
consummation of the transactions contemplated by the Merger Agreement; or (iv)
take any action that would have the effect of preventing or disabling the
Shareholder from performing the Shareholder's obligations under this Agreement;
provided, however, that, notwithstanding clause (i) above, the Shareholder may
transfer Shares to any other shareholder of the Company (or a trust for the
primary benefit of any such shareholder), or in the case of Shareholder that is
a trust, to any beneficiary of such Shareholder (or a trust for the primary
benefit of such beneficiary), in each case provided that such transferee agrees
to be bound by the terms hereof and delivers to Acquiror an executed voting
agreement and irrevocable proxy in a form acceptable to Acquiror that has the
effect of continuing to subject such transferred Shares to the arrangements
described herein. Any shares of Common Stock of the Company (or any other
voting securities of the Company or securities convertible into shares of
Common Stock of the Company or other voting securities of the Company) acquired
by the Shareholder prior to the Effective Time shall be included in the Shares
subject to this Agreement.
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5. Legend. Each certificate evidencing the Shares shall be stamped or
otherwise imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A VOTING
AGREEMENT AND IRREVOCABLE PROXY DATED AS OF AUGUST 23, 1997 BETWEEN TEXAS
UTILITIES COMPANY AND THE SHAREHOLDER."
6. Understanding of this Agreement. The Shareholder has carefully read
this Agreement and has discussed its requirements, to the extent such
Shareholder believes necessary, with its counsel (which may be counsel to the
Company). The undersigned further understands that the parties to the Merger
Agreement will be proceeding in reliance upon this Agreement.
7. Specific Performance. The parties hereto agree that if any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached, irreparable damage would occur, no
adequate remedy at law would exist and damages would be difficult to determine
and that the parties shall be entitled to specific performance of the terms
hereof, in addition to any other remedy at law or equity.
8. Severability. If any part of any provision of this Agreement shall be
invalid or unenforceable in any respect, such part shall be ineffective to the
extent of such invalidity or unenforceability only, without in any way
affecting the remaining parts of such provision or the remaining provisions of
this Agreement.
9. Miscellaneous.
9.1. Binding Effect: No Assignment. This Agreement shall be binding
upon and inure solely to the benefit of the parties hereto and their respective
successors and legal representatives, heirs and assigns. This Agreement may not
be assigned by either party hereto without the consent of the other party.
9.2. Entire Agreement: Modification and Waiver. This Agreement
constitutes the entire agreement among the parties hereto with respect to the
subject matter hereof and supersedes all prior and contemporaneous agreements,
representations and understandings of the parties, both written and oral. No
supplement, modification or amendment of this Agreement shall be binding unless
executed in writing by the parties hereto. The waiver by a party of a breach of
any provision of this Agreement shall not operate as or be construed as a
waiver of any subsequent breach thereof.
9.3. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been given if
delivered personally or sent by cable, telegram, telecopier or telex to the
parties at the following addresses or at such other addresses as shall be
specified by the parties by like notice:
3
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(i) if to the Shareholder, to the address set forth below:
(ii) if to the Acquiror, to:
Texas Utilities Company
Energy Plaza
1601 Bryan Street
Dallas, Texas 75201
Attention: Herbert H. Zureich, Jr.
Facsimile: (214) 812-6787
with a copy (which shall not constitute notice) to:
Worsham, Forsythe & Wooldridge, L.L.P.
Energy Plaza, 30th Floor
1601 Bryan Street
Dallas, Texas 75201
Facsimile: (214) 880-0011
Attention: Robert A. Wooldridge, Esq.
9.4. Governing Law. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Texas applicable to agreements made and to be performed entirely within such
State.
9.5. Counterparts. This Agreement may be executed by the parties
hereto in one or more counterparts which together shall constitute a single
agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
TEXAS UTILITIES COMPANY
By:
-----------------------------------
Name:
----------------------------------
Title:
---------------------------------
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Shareholder
Shareholder:
Name:
----------------------------------
Address:
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-------------------------
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Facsimile No.:
-------------------------
No. of Shares:
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5
