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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): October 27, 1998
DAKOTA TELECOMMUNICATIONS GROUP, INC.
(Exact Name of Registrant as Specified in Charter)
DELAWARE 333-22025 91-1845100
(State or Other Jurisdic- (Commission (IRS Employer
tion of Incorporation) File Number) Identification No.)
29705 453RD AVENUE
IRENE, SOUTH DAKOTA 57037-0066
(Address of Principal Executive Offices) (Zip Code)
(605) 263-3301
(Registrant's Telephone Number, Including Area Code)
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Item 1. CHANGES IN CONTROL OF REGISTRANT.
On October 27, 1998, Dakota Telecommunications Group, Inc. (the
"Company") entered into an Agreement and Plan of Merger (the "Merger
Agreement") with McLeodUSA Incorporated ("McLeodUSA") and West Group
Acquisition Co., a wholly owned subsidiary of McLeodUSA ("MergerSub"). The
Merger Agreement is attached to this Form 8-K as Exhibit 2.1 and is
incorporated herein by reference.
Pursuant to the terms of the Merger Agreement, MergerSub will be
merged (the "Merger") with and into the Company and the Company will become
a wholly owned subsidiary of McLeodUSA. As a result of the Merger, each
share of the Company's common stock will be converted into the right to
receive 0.4328 of a share of McLeodUSA's Class A common stock (the
"Exchange Ratio"). The maximum number of shares of McLeodUSA's Class A
common stock issuable pursuant to the Merger (assuming the exercise of all
outstanding options to purchase the Company's common stock) is expected to
be approximately 1,295,000 shares. In addition, under the terms of the
Merger Agreement, each option to purchase the Company's common stock will
become or be replaced by an option to purchase a number of shares of
McLeodUSA's Class A common stock equal to the number of shares of the
Company's common stock that could have been purchased (assuming full
vesting) under the stock option multiplied by the Exchange Ratio.
McLeodUSA has agreed to register under the Securities Act of 1933 the
shares of its Class A common stock to be issued in the Merger.
Consummation of the Merger is subject to the satisfaction of
certain conditions, including (i) approval of the Merger Agreement and the
Merger by the stockholders of the Company, (ii) effectiveness of the
registration statement registering the shares of McLeodUSA's Class A common
stock to be issued in the Merger, (iii) compliance with all applicable
provisions of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and
the expiration of all applicable waiting periods thereunder, (iv) receipt
of required regulatory approvals and (v) certain other customary
conditions. Each director and certain executive officers of the Company
have entered into Voting Agreements pursuant to which, among other things,
they have agreed to vote their shares of common stock of the Company in
favor of the Merger Agreement and the Merger at a meeting of the
stockholders of the Company. The forms of Voting Agreement are attached as
Exhibits 99.1 and 99.2 to this Form 8-K and are incorporated herein by
reference. The form of Voting Agreement of Craig A. Anderson, the President,
Chief Financial Officer and Treasurer of the Company, is attached as
Exhibit 99.3 to this Form 8-K and is incorporated herein by reference.
A copy of the press release, dated October 28, 1998, issued by
McLeodUSA and the Company regarding the transaction described above is attached
as Exhibit 99.4 to this Form 8-K and is incorporated herein by reference.
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Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
The following documents are filed as exhibits to this report on
Form 8-K:
2.1 Agreement and Plan of Merger dated as of October 27, 1998 by
and among Dakota Telecommunications Group, Inc., McLeodUSA
Incorporated and West Group Acquisition Co.
99.1 Form of Voting Agreement of directors of Dakota
Telecommunications Group, Inc.
99.2 Form of Voting Agreement of certain executive officers of
Dakota Telecommunications Group, Inc. who are not also
directors.
99.3 Form of Voting Agreement of Craig A. Anderson.
99.4 Press Release of McLeodUSA Incorporated and Dakota
Telecommunications Group, Inc. dated October 28, 1998
announcing signing of Merger Agreement.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
Dated: November 9, 1998 DAKOTA TELECOMMUNICATIONS
GROUP, INC.
By /S/ CRAIG A. ANDERSON
Craig A. Anderson
President, Chief Financial Officer
and Treasurer
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EXHIBIT INDEX
EXHIBIT NUMBER DOCUMENT
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2.1 Agreement and Plan of Merger dated as of October 27, 1998 by
and among Dakota Telecommunications Group, Inc., McLeodUSA
Incorporated and West Group Acquisition Co.
99.1 Form of Voting Agreement of directors of Dakota
Telecommunications Group, Inc.
99.2 Form of Voting Agreement of certain executive officers of
Dakota Telecommunications Group, Inc. who are not also
directors.
99.3 Form of Voting Agreement of Craig A. Anderson.
99.4 Press Release of McLeodUSA Incorporated and Dakota
Telecommunications Group, Inc. dated October 28, 1998
announcing signing of Merger Agreement.
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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
MCLEODUSA INCORPORATED,
WEST GROUP ACQUISITION CO.
and
DAKOTA TELECOMMUNICATIONS GROUP, INC.
Dated as of October 27, 1998
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TABLE OF CONTENTS
PAGE
ARTICLE I THE MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . .2
SECTION 1.01. The Merger. . . . . . . . . . . . . . . . . . . . . . . . .2
SECTION 1.02. Effective Time. . . . . . . . . . . . . . . . . . . . . . .2
SECTION 1.03. Effect of the Merger. . . . . . . . . . . . . . . . . . . .2
SECTION 1.04. Certificate of Incorporation; Bylaws. . . . . . . . . . . .2
SECTION 1.05. Directors and Officers. . . . . . . . . . . . . . . . . . .3
ARTICLE II CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
AND OTHER INSTRUMENTS. . . . . . . . . . . . . . . . . . . . . .3
SECTION 2.01. Conversion of Securities. . . . . . . . . . . . . . . . . .3
SECTION 2.02. Exchange of Certificates or Instruments . . . . . . . . . .5
SECTION 2.03. Stock Transfer Books. . . . . . . . . . . . . . . . . . . .8
SECTION 2.04. Stock Options . . . . . . . . . . . . . . . . . . . . . . .8
SECTION 2.05. Closing . . . . . . . . . . . . . . . . . . . . . . . . . .9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . .9
SECTION 3.01. Organization and Standing . . . . . . . . . . . . . . . . 10
SECTION 3.02. Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.03. Certificate of Incorporation and Bylaws . . . . . . . . . 11
SECTION 3.04. Capitalization. . . . . . . . . . . . . . . . . . . . . . 11
SECTION 3.05. Authority; Binding Obligation . . . . . . . . . . . . . . 12
SECTION 3.06. No Conflict; Required Filings and Consents. . . . . . . . 13
SECTION 3.07. Licenses; Compliance. . . . . . . . . . . . . . . . . . . 14
SECTION 3.08. SEC Documents . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 3.09. Absence of Undisclosed Liabilities. . . . . . . . . . . . 16
SECTION 3.10. Absence of Certain Changes or Events. . . . . . . . . . . 16
SECTION 3.11. Litigation; Disputes. . . . . . . . . . . . . . . . . . . 18
SECTION 3.12. Debt Instruments. . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.13. Leases. . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.14. Other Agreements; No Default. . . . . . . . . . . . . . . 19
SECTION 3.15. Labor Relations . . . . . . . . . . . . . . . . . . . . . 21
SECTION 3.16. Pension and Benefit Plans . . . . . . . . . . . . . . . . 22
SECTION 3.17. Taxes and Tax Matters . . . . . . . . . . . . . . . . . . 26
SECTION 3.18. Customers . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 3.19. Certain Business Practices. . . . . . . . . . . . . . . . 28
SECTION 3.20. Insurance . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 3.21. Potential Conflicts of Interest . . . . . . . . . . . . . 29
SECTION 3.22. Receivables . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 3.23. Real Property . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 3.24. Books and Records . . . . . . . . . . . . . . . . . . . . 31
SECTION 3.25. Assets. . . . . . . . . . . . . . . . . . . . . . . . . . 31
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SECTION 3.26. No Infringement or Contest. . . . . . . . . . . . . . . . 31
SECTION 3.27. Opinion of Financial Advisor. . . . . . . . . . . . . . . 32
SECTION 3.28. Board Recommendation. . . . . . . . . . . . . . . . . . . 33
SECTION 3.29. Vote Required . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 3.30. Banks; Attorneys-in-fact. . . . . . . . . . . . . . . . . 33
SECTION 3.31. Voting Agreements . . . . . . . . . . . . . . . . . . . . 33
SECTION 3.32. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 3.33. Environmental Matters . . . . . . . . . . . . . . . . . . 34
SECTION 3.34. Disclosure. . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 3.35. Directors, Officers and Affiliates. . . . . . . . . . . . 35
SECTION 3.36. Copies of Documents . . . . . . . . . . . . . . . . . . . 35
SECTION 3.37. Condition and Operation of the System . . . . . . . . . . 36
SECTION 3.38. Affiliate Agreements. . . . . . . . . . . . . . . . . . . 36
SECTION 3.39. Rights Agreement. . . . . . . . . . . . . . . . . . . . . 36
SECTION 3.40. Reorganization. . . . . . . . . . . . . . . . . . . . . . 36
SECTION 3.41. State Takeover Statutes; Certain Charter
Provisions. . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 3.42. Dissenters Rights . . . . . . . . . . . . . . . . . . . . 37
SECTION 3.43. Year 2000 Compliance. . . . . . . . . . . . . . . . . . . 37
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND
ACQUIROR SUB . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 4.01. Organization and Qualification; Subsidiaries. . . . . . . 40
SECTION 4.02. Certificate of Incorporation and Bylaws . . . . . . . . . 41
SECTION 4.03. Authority; Binding Obligation . . . . . . . . . . . . . . 41
SECTION 4.04. No Conflict; Required Filings and Consents. . . . . . . . 41
SECTION 4.05. No Prior Activities of Acquiror Sub . . . . . . . . . . . 42
SECTION 4.06. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 4.07. SEC Documents . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 4.08. Acquiror Common Stock . . . . . . . . . . . . . . . . . . 43
SECTION 4.09. Capitalization. . . . . . . . . . . . . . . . . . . . . . 43
SECTION 4.10. Reorganization. . . . . . . . . . . . . . . . . . . . . . 44
SECTION 4.11. Compliance. . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 4.12. Disclosure. . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS . . . . . . . . . . . 45
SECTION 5.01. Conduct of Business of the Company. . . . . . . . . . . . 45
SECTION 5.02. Other Actions . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 5.03. Certain Tax Matters . . . . . . . . . . . . . . . . . . . 48
SECTION 5.04. Access and Information. . . . . . . . . . . . . . . . . . 49
SECTION 5.05. No Solicitation . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE VI ADDITIONAL AGREEMENTS. . . . . . . . . . . . . . . . . . . . . 51
SECTION 6.01. Registration Statement; Proxy Statement . . . . . . . . . 51
SECTION 6.02. Meeting of Stockholders . . . . . . . . . . . . . . . . . 53
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SECTION 6.03. Appropriate Action; Consents; Filings . . . . . . . . . . 53
SECTION 6.04. Letters of Accountants. . . . . . . . . . . . . . . . . . 54
SECTION 6.05. Update Disclosure; Breaches . . . . . . . . . . . . . . . 54
SECTION 6.06. Public Announcements. . . . . . . . . . . . . . . . . . . 55
SECTION 6.07. Employee Matters. . . . . . . . . . . . . . . . . . . . . 55
SECTION 6.08. Unaudited Financial Information . . . . . . . . . . . . . 55
SECTION 6.09. Environmental Matters . . . . . . . . . . . . . . . . . . 55
SECTION 6.10. Post-Signing SEC Documents. . . . . . . . . . . . . . . . 56
SECTION 6.11. Standstill Agreement. . . . . . . . . . . . . . . . . . . 56
SECTION 6.12. Affiliates; Tax Treatment . . . . . . . . . . . . . . . . 56
SECTION 6.13. Tax Returns . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 6.14. Reorganization. . . . . . . . . . . . . . . . . . . . . . 57
SECTION 6.15. Directors' and Officers' Insurance; Indemnification . . . 57
SECTION 6.16. Obligations of Acquiror Sub . . . . . . . . . . . . . . . 58
SECTION 6.17. Advisory Committee. . . . . . . . . . . . . . . . . . . . 58
SECTION 6.18. Capitalization of the Surviving Corporation . . . . . . . 59
SECTION 6.19. Acquiror Option Shares. . . . . . . . . . . . . . . . . . 59
SECTION 6.20. Dark Fiber Lease Agreement. . . . . . . . . . . . . . . . 59
SECTION 6.21. Certain Post-Merger Operations. . . . . . . . . . . . . . 59
SECTION 6.22. Forfeiture of Unclaimed Credits . . . . . . . . . . . . . 60
ARTICLE VII CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . . 60
SECTION 7.01. Conditions to Obligations of Each Party Under This
Merger Agreement. . . . . . . . . . . . . . . . . . . . . 60
SECTION 7.02. Additional Conditions to Obligations of Acquiror
and Acquiror Sub. . . . . . . . . . . . . . . . . . . . . 61
SECTION 7.03. Additional Conditions to Obligations of the Company . . . 63
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER. . . . . . . . . . . . . . 65
SECTION 8.01. Termination . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 8.02. Effect of Termination . . . . . . . . . . . . . . . . . . 66
SECTION 8.03. Expenses. . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 8.04. Amendment . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 8.05. Extension; Waiver . . . . . . . . . . . . . . . . . . . . 67
ARTICLE IX GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 9.01. Nonsurvival of Representations and Warranties . . . . . . 68
SECTION 9.02. Notices . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 9.03. Headings. . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 9.04. Severability. . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 9.05. Entire Agreement. . . . . . . . . . . . . . . . . . . . . 69
SECTION 9.06. Assignment. . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 9.07. Parties in Interest . . . . . . . . . . . . . . . . . . . 70
SECTION 9.08. Mutual Drafting . . . . . . . . . . . . . . . . . . . . . 70
SECTION 9.09. Specific Performance. . . . . . . . . . . . . . . . . . . 70
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SECTION 9.10. Governing Law . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 9.11. Counterparts. . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 9.12. Confidentiality.. . . . . . . . . . . . . . . . . . . . . 71
ARTICLE X DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 71
EXHIBITS
EXHIBIT A-1 FORM OF VOTING AGREEMENT
EXHIBIT A-2 FORM OF VOTING AGREEMENT (CRAIG A. ANDERSON)
EXHIBIT B LIST OF PERSONS TO SIGN VOTING AGREEMENTS
EXHIBIT C FORM OF AFFILIATE AGREEMENT
EXHIBIT D FORM OF EMPLOYMENT AGREEMENT
EXHIBIT E FORM OF DARK FIBER LEASE AGREEMENT
EXHIBIT F-1 FORM OF OPINION TO BE RENDERED BY COUNSEL TO THE
COMPANY
EXHIBIT F-2 FORM OF OPINION TO BE RENDERED BY SOUTH DAKOTA
COUNSEL TO THE COMPANY
EXHIBIT F-3 OPINIONS TO BE RENDERED BY REGULATORY COUNSEL TO THE
COMPANY
EXHIBIT G FORM OF TAX OPINION TO BE RENDERED BY COUNSEL TO
ACQUIROR
EXHIBIT H FORM OF ACQUIROR TAX CERTIFICATE
EXHIBIT I FORM OF COMPANY TAX CERTIFICATE
EXHIBIT J FORM OF OPINION TO BE RENDERED BY COUNSEL TO
ACQUIROR AND ACQUIROR SUB
EXHIBIT K FORM OF TAX OPINION TO BE RENDERED BY COUNSEL TO THE
COMPANY
EXHIBIT L FORM OF ACQUIROR TAX CERTIFICATE
EXHIBIT M FORM OF COMPANY TAX CERTIFICATE
SCHEDULES
SCHEDULE 5.01 PERMITTED ACTIONS
SCHEDULE 5.01(a)(i) PERMITTED BONUSES
SCHEDULE 5.01(a)(ii) AGREEMENTS WITH SEVERANCE OR TERMINATION PAY
OBLIGATIONS
SCHEDULE 5.01(a)(v) AGREEMENTS REQUIRING INCENTIVE AWARD GRANTS
SCHEDULE 5.01(a)(vi) AGREEMENTS REQUIRING PAYMENT OF COMPENSATION OR
BENEFITS
SCHEDULE 6.07 LIST OF COMPANY EMPLOYEES TO SIGN EMPLOYMENT
AGREEMENTS
SCHEDULE 6.15 AGREEMENTS PROVIDING FOR INDEMNIFICATION OF
DIRECTORS AND OFFICERS
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AGREEMENT AND PLAN OF MERGER, dated as of October 27, 1998 (this
"MERGER AGREEMENT"), among McLeodUSA Incorporated, a Delaware corporation
("ACQUIROR"), West Group Acquisition Co., a Delaware corporation
("ACQUIROR SUB") and a wholly owned subsidiary of Acquiror, and Dakota
Telecommunications Group, Inc., a Delaware corporation (the "COMPANY");
WHEREAS, Acquiror Sub, upon the terms and subject to the conditions of
this Merger Agreement and in accordance with the General Corporation Law of
the State of Delaware ("DELAWARE LAW"), will merge with and into the
Company (the "MERGER");
WHEREAS, the Board of Directors of the Company has (i) determined that
the Merger is fair to the holders of Company Capital Stock (as defined in
Section 3.04) and is in the best interests of such stockholders and
(ii) approved and adopted this Merger Agreement and the transactions
contemplated hereby and recommended approval and adoption of this Merger
Agreement by the stockholders of the Company (the "COMPANY STOCKHOLDERS");
WHEREAS, the Board of Directors of Acquiror has determined that the
Merger is in the best interests of Acquiror and its stockholders and the
Boards of Directors of Acquiror and Acquiror Sub have approved and adopted
this Merger Agreement and the transactions contemplated hereby;
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(a) of the United States Internal Revenue Code of 1986, as
amended (the "CODE"); and
WHEREAS, in order to induce Acquiror and Acquiror Sub to enter into
this Merger Agreement, concurrently herewith certain stockholders, each of
the directors and certain executive officers of the Company are entering
into voting agreements (the "VOTING AGREEMENTS") pursuant to which, among
other things, each such stockholder, director (in such director's capacity
as a stockholder) and executive officer (in such executive officer's
capacity as a stockholder) agrees to vote in favor of this Merger Agreement
and the Merger and against any Competing Transaction (as defined in
Section 5.05(a));
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.
<PAGE>
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 Delaware 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 surviving
corporation of the Merger (the "SURVIVING CORPORATION").
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 (as defined in Article X) (in any such case, the
"ARTICLES OF MERGER") with the Secretary of State of the State of Delaware,
in such form as required by, and executed in accordance with the relevant
provisions of, Delaware Law (the 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
in the applicable provisions of Delaware Law. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time,
all the property, rights, privileges, powers and franchises of Acquiror Sub
and the Company shall vest in the Surviving Corporation, and all debts,
liabilities and duties of Acquiror Sub and the Company shall become the
debts, liabilities and duties of the Surviving Corporation.
SECTION 1.04. CERTIFICATE OF INCORPORATION; BYLAWS.
(a) Unless otherwise mutually determined by Acquiror and the
Company prior to the Effective Time, at the Effective Time the certificate
of incorporation of the Company shall be amended in its entirety to conform
to the certificate of incorporation of Acquiror Sub in effect immediately
prior to the Effective Time, and shall become the certificate of
incorporation of the Surviving Corporation, until thereafter amended as
provided by Law (as defined in Article X) and such certificate of
incorporation; PROVIDED, HOWEVER, that Article 1 of the certificate of
incorporation of the Surviving Corporation shall be amended to read as
follows: "The name of the corporation is Dakota Telecommunications Group,
Inc."
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(b) Unless otherwise determined by Acquiror prior to the
Effective Time, at the Effective Time the bylaws of the Company shall be
amended in their entirety to conform to the bylaws of Acquiror Sub in
effect immediately prior to the Effective Time, and shall become the bylaws
of the Surviving Corporation until thereafter amended as provided by Law,
the certificate of incorporation of the Surviving Corporation and such
bylaws.
SECTION 1.05. DIRECTORS AND OFFICERS.
Immediately following the Effective Time, the Board of Directors of
the Surviving Corporation will be reconstituted to include a total of five
(5) directors, and will initially consist of Thomas W. Hertz, Craig A.
Anderson, Stephen C. Gray, J. Lyle Patrick and Clark E. McLeod, each to
hold office in accordance with the certificate of incorporation and bylaws
of the Surviving Corporation, and the initial officers of the Surviving
Corporation shall be the officers of the Company immediately prior to the
Effective Time, in each case until their respective successors are duly
elected or appointed and qualified.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES AND OTHER
INSTRUMENTS
SECTION 2.01. CONVERSION OF SECURITIES.
At the Effective Time, as provided in this Merger Agreement, by
virtue of the Merger and without any action on the part of Acquiror Sub,
the Company or the Company Stockholders:
(a) COMPANY COMMON STOCK AND CONVERSION-MERGER RIGHTS.
Each share of common stock, no par value per share, of the Company
("COMPANY COMMON STOCK") issued and outstanding immediately prior to
the Effective Time (other than any shares of Company Common Stock to
be canceled pursuant to Section 2.01(c)), and each right to receive
one share of Company Common Stock outstanding immediately prior to the
Effective Time (collectively, the "CONVERSION-MERGER RIGHTS") arising
from the Conversion-Merger (as defined in Article X), whether pursuant
to unexchanged Cooperative Interests (as defined in Article X) or
otherwise, in each case together with the associated Rights (as
defined in Section 3.04) shall be converted, subject to
Section 2.02(e), into the right to receive 0.4328 of a share of
Acquiror Common Stock (as defined in Article X) (the "EXCHANGE
RATIO"); it being understood that the maximum numbers of shares of
Acquiror Common Stock issuable pursuant to the Merger as contemplated
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under this Merger Agreement shall be 1,295,000 (assuming the exercise
of all Company Stock Options (as defined in Section 2.04) prior to the
Effective Time). All such shares of Company Common Stock, Conversion-
Merger Rights (including unexchanged Cooperative Interests) and
associated Rights shall no longer be outstanding and shall
automatically be canceled and retired, as appropriate, and shall cease
to exist, and each certificate or other instrument previously
representing any such shares, Conversion-Merger Rights (including
unexchanged Cooperative Interests) and associated Rights shall
thereafter represent the right to receive a certificate representing
the shares of Acquiror Common Stock into which such Company Common
Stock, Conversion-Merger Rights and associated Rights were converted
pursuant to the Merger and any cash, without interest, in lieu of
fractional shares. Certificates or other instruments which prior to
the Effective Time represented shares of Company Common Stock,
Conversion-Merger Rights (including certificates or other instruments
which prior to the Conversion-Merger represented Cooperative
Interests) and associated Rights shall be exchanged for certificates
representing whole shares of Acquiror Common Stock issued in
consideration therefor upon the surrender of such certificates or
instruments 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. In any event, if between the date of this
Merger Agreement and the Effective Time the outstanding shares of
Acquiror Common Stock shall have been changed into a different number
of shares or a different class, by reason of any stock dividend,
subdivision, reclassification, recapitalization, split, combination or
exchange of shares, the nature of the consideration to be received by
the Company Stockholders and the Exchange Ratio shall be appropriately
and correspondingly adjusted to reflect such stock dividend,
subdivision, reclassification, recapitalization, split, combination or
exchange of shares.
(b) CANCELLATION AND RETIREMENT OF COMPANY COMMON STOCK AND
CONVERSION-MERGER RIGHTS. All such shares of Company Common Stock
(other than any shares of Company Common Stock to be canceled pursuant
to Section 2.01(c)), Conversion-Merger Rights (including unexchanged
Cooperative Interests) and associated Rights referred to in
Section 2.01(a) shall no longer be outstanding and shall automatically
be canceled and retired, as appropriate, and shall cease to exist, and
each certificate or other instrument previously representing any such
shares, Conversion-Merger Rights (including unexchanged Cooperative
Interests) and associated Rights shall thereafter represent the right
to receive the shares of Acquiror Common Stock into which such Company
Common Stock, Conversion-Merger Rights (including unexchanged
Cooperative Interests) and associated Rights were converted pursuant
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to the Merger and any cash, without interest, in lieu of fractional
shares. The holders of certificates or other instruments which prior
to the Effective Time represented shares of Company Common Stock,
Conversion-Merger Rights (including the holders of certificates or
other instruments which prior to the Conversion-Merger represented
Cooperative Interests) and associated Rights shall cease to have any
rights with respect thereto except as otherwise provided herein or by
Law. Certificates or other instruments previously representing such
shares of Company Common Stock, such Conversion-Merger Rights
(including certificates or other instruments previously representing
such Cooperative Interests) and associated Rights shall be exchanged
for the whole shares of Acquiror Common Stock to be issued therefor
upon the surrender of such certificates or instruments 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.
(c) CANCELLATION OF TREASURY STOCK. Any shares of Company
Common Stock held in the treasury of the Company and any shares of
Company Common Stock owned by Acquiror or any direct or indirect
wholly owned subsidiary of Acquiror or of the Company immediately
prior to the Effective Time shall be canceled and extinguished without
any conversion thereof and no payment shall be made with respect
thereto.
(d) ACQUIROR SUB COMMON STOCK. Each share of common stock, par
value $0.01 per share, of Acquiror Sub issued and outstanding
immediately prior to the Effective Time shall be converted into and
exchanged for one newly and validly issued, fully paid and
non-assessable share of common stock of the Surviving Corporation.
SECTION 2.02. EXCHANGE OF CERTIFICATES OR INSTRUMENTS.
(a) EXCHANGE AGENT. As of the Effective Time, Acquiror shall
deposit, or shall cause to be deposited, with Norwest Bank Minnesota, N.A.,
or another bank or trust company designated by Acquiror and reasonably
acceptable to the Company (the "EXCHANGE AGENT"), for the benefit of the
holders of issued and outstanding Company Common Stock and associated
Rights for exchange through the Exchange Agent in accordance with this
Article II, certificates representing the whole shares of Acquiror Common
Stock issuable to such holders pursuant to Section 2.01 and cash in an
amount sufficient to permit payment of the cash payable in lieu of
fractional shares pursuant to Section 2.02(e) (such certificates for shares
of Acquiror Common Stock, together with any dividends or distributions with
respect thereto, and such amounts of cash, being hereafter referred to as
the "EXCHANGE FUND"). As of the Effective Time, Acquiror shall reserve and
keep available out of its authorized and unissued Acquiror Common Stock,
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the number of shares of Acquiror Common Stock that will be sufficient to
permit the exercise and exchange in full of all Conversion-Merger Rights
outstanding immediately prior to the Effective Time. The Exchange Agent
shall, pursuant to irrevocable instructions from Acquiror, deliver the
shares of Acquiror Common Stock to be issued and the amount of cash to be
paid to the holders of Company Common Stock and associated Rights pursuant
to Section 2.01 out of the Exchange Fund.
(b) EXCHANGE PROCEDURES. Promptly (and, in any event, within
seven (7) business days) after the Effective Time, Acquiror shall use its
reasonable best efforts to cause the Exchange Agent to mail to each holder
of record of a certificate or certificates of Company Common Stock which
immediately prior to the Effective Time represented outstanding shares of
Company Common Stock and associated Rights and to each holder of record of
a certificate or certificates or other instrument or instruments
representing Conversion-Merger Rights (including unexchanged Cooperative
Interests) which immediately prior to the Effective Time represented the
right to receive shares of Company Common Stock and associated Rights (all
such certificates and instruments, 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 proper delivery
of the Certificates to the Exchange Agent (in the case of Certificates
representing Company Common Stock) or Acquiror (in the case of Certificates
representing Conversion-Merger Rights) and shall be in customary form) and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing shares of Acquiror Common Stock.
Upon surrender of a Certificate for cancellation to the Exchange Agent (in
the case of Certificates of Company Common Stock) or Acquiror (in the case
of Certificates representing Conversion-Merger Rights), as specified in
such letter of transmittal, together with such letter of transmittal, duly
executed, and such other Documents as may reasonably be required pursuant
to such instructions, the holder of such Certificate shall be entitled to
receive promptly in exchange therefor a certificate representing that
number of whole shares of Acquiror Common Stock which such holder has the
right to receive in respect of such Certificate (after taking into account
all shares of Company Common Stock and Conversion-Merger Rights then held
by such holder under all such Certificates so surrendered), together with
any dividends or other distributions to which such holder is entitled
pursuant to Section 2.02(c) and cash in lieu of fractional shares of
Acquiror Common Stock to which such holder is entitled pursuant to
Section 2.02(e), and the Certificate so surrendered shall forthwith be
canceled. In the event of a transfer of ownership of shares of Company
Common Stock or Conversion-Merger Rights 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 may be paid
pursuant hereto to a transferee if the Certificates representing such
shares of Company Common Stock or Conversion-Merger Rights, properly
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endorsed or otherwise in proper form for transfer, are presented to the
Exchange Agent (in the case of Certificates representing Company Common
Stock) or Acquiror (in the case of Certificates representing Conversion-
Merger Rights), 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 this
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 in exchange therefor, together
with any dividends or other distributions to which such holder is entitled
pursuant to Section 2.02(c) and cash in lieu of any fractional shares 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, and no cash payment in lieu of fractional shares shall
be paid to any such holder pursuant to Section 2.02(e), until the holder of
such Certificate shall surrender such Certificate. Subject to the effect
of escheat, tax or other applicable Laws, following surrender of any such
Certificate, there shall be paid to the record holder of the certificates
representing whole shares of Acquiror Common Stock issued in exchange
therefor, without interest, (i) promptly, the amount of any cash payable
with respect to a fractional share of Acquiror Common Stock to which such
holder is entitled pursuant to Section 2.02(e) and the amount of dividends
or other distributions with 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, with 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.
(d) NO FURTHER RIGHTS IN COMPANY COMMON STOCK AND CONVERSION-
MERGER RIGHTS. All shares of Acquiror Common Stock issued upon conversion
of the shares of Company Common Stock, the Conversion-Merger Rights and the
associated Rights 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
shares of Company Common Stock, such Conversion-Merger Rights and such
associated Rights.
(e) NO FRACTIONAL SHARES. No fractional shares of Acquiror
Common Stock shall be issued upon surrender for exchange of the
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Certificates, and any such fractional share interests will not entitle the
owner thereof to vote or to any rights of a stockholder of Acquiror, but in
lieu thereof each holder of shares of Company Common Stock or Conversion-
Merger Rights 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 an amount in cash equal to the Average Trading Price (as
defined in Article X) on the Closing Date multiplied by the fraction of a
share of Acquiror Common Stock to which such holder would otherwise be
entitled. Such payment in lieu of fractional shares shall be administered
by the Exchange Agent (in the case of Certificates representing Company
Common Stock) or Acquiror (in the case of Certificates representing
Conversion-Merger Rights) pursuant to the procedures set forth in
Section 2.02(b).
(f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange
Fund which remains undistributed to the holders of Company Common Stock for
one (1) year after the Effective Time shall be delivered to Acquiror, upon
demand. Any holders of Company Common Stock 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 fractional shares of Acquiror Common Stock to which they
are entitled pursuant to Section 2.02(e). Any shares of Acquiror Common
Stock, any dividends or other distributions with respect to Acquiror Common
Stock, and any cash in lieu of fractional shares of Acquiror Common Stock
to which any holder of Company Common Stock or Conversion-Merger Rights
would otherwise be entitled pursuant to Section 2.01, Section 2.02(c) and
Section 2.02(e), respectively, which remain unclaimed by such holder on the
fourth anniversary of the Effective Time (or such earlier date immediately
prior to such time as such property would otherwise escheat to or become
the property of any Governmental Entity (as defined in Article X)) shall,
to the extent permitted by Law, become the property of Acquiror free and
clear of any claims or interest of any Person (as defined in Article X)
previously entitled thereto.
(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 Laws.
(h) LOST, STOLEN OR DESTROYED CERTIFICATES OR INSTRUMENTS. In
the event any certificate evidencing shares of Company Common Stock and any
certificate or other instrument evidencing Conversion-Merger Rights
(including unexchanged Cooperative Interests) which immediately prior to
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the Effective Time represented the right to receive shares of Company
Common Stock shall have been lost, stolen or destroyed, the Exchange Agent
(in the case of Certificates representing Company Common Stock) or Acquiror
(in the case of Certificates representing Conversion-Merger Rights) shall
issue in exchange for such lost, stolen or destroyed certificate or
instrument, upon the making of an affidavit of that fact by the holder
thereof, such shares of Acquiror Common Stock and cash, 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 or instrument 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 or instrument alleged to have been lost, stolen
or destroyed.
SECTION 2.03. STOCK TRANSFER BOOKS.
At the Effective Time, the stock transfer books of the Company shall
be closed and there shall be no further registration of transfers of shares
of Company Common Stock thereafter on the records of the Company. From and
after the Effective Time, the holders of certificates representing shares
of Company Common Stock outstanding immediately prior to the Effective Time
and the holders of certificates or other instruments evidencing Conversion-
Merger Rights (including unexchanged Cooperative Interests) which
immediately prior to the Effective Time represented the right to receive
shares of Company Common Stock shall cease to have any rights with respect
to such shares of Company Common Stock and Conversion-Merger Rights 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 the shares of Acquiror Common Stock issuable in
exchange therefor, 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. STOCK OPTIONS.
Prior to the Effective Time, the Company and Acquiror shall take such
action as may be necessary or appropriate for Acquiror, at its option, to
assume or to issue a substitute option with respect to each outstanding
unexpired and unexercised option to purchase shares of Company Common Stock
(collectively, the "COMPANY STOCK OPTIONS") under the Company's 1997 Stock
Incentive Plan (the "COMPANY STOCK PLAN") or granted to certain officers
independent of the Company Stock Plan, so that at the Effective Time each
Company Stock Option will become or be replaced by an option to purchase a
number of whole shares of Acquiror Common Stock (an "ACQUIROR OPTION")
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equal to the number of shares of Company Common Stock that could have been
purchased (assuming full vesting) under the Company Stock Option multiplied
by the Exchange Ratio (and eliminating any fractional share), at a price
per share of Acquiror Common Stock equal to the per-share option exercise
price specified in the Company Stock Option. Each substituted Acquiror
Option shall otherwise be subject to the same terms and conditions as apply
to the related Company Stock Option. The date of grant of each substituted
Acquiror Option for purposes of such terms and conditions shall be deemed
to be the date on which the corresponding Company Stock Option was granted.
As to each assumed Company Stock Option, at the Effective Time (i) all
references to the Company in the stock option agreements with respect to
the Company Stock Options being assumed shall be deemed to refer to
Acquiror; (ii) Acquiror shall assume all of the Company's obligations with
respect to the related Company Stock Option; and (iii) Acquiror shall issue
to each holder of a Company Stock Option a document evidencing the
foregoing assumption by Acquiror. Nothing in this Section 2.04 shall
affect the schedule of vesting with respect to the Company Stock Options in
accordance with the terms of such Company Stock Options, and Acquiror
acknowledges that the Company Stock Plan and the Company Stock Options
granted to Thomas W. Hertz and Craig A. Anderson independent of the Company
Stock Plan provide that such Company Stock Options will be 100% vested at
the Effective Time. The Company represents and warrants that the
assumption of Company Stock Options or substitution of Acquiror Options
therefor, as contemplated by this Section 2.04, may be effected pursuant to
the terms of the Company Stock Options, the Company Stock Plan and the
terms of the Company Stock Options granted to certain officers of the
Company independent of the Company Stock Plan without the consent of any
holder of a Company Stock Option and without liability to any such holder.
SECTION 2.05. CLOSING.
The parties agree that the Closing Event (as defined in Article X)
will take place at the offices of the Company in Irene, South Dakota on the
Closing Date (as defined in this Section 2.05). Subject to the terms and
conditions of this Merger Agreement, the closing of the Merger (the
"CLOSING") will take place as soon as practicable (but, in any event,
within five (5) business days) after satisfaction of the latest to occur
or, if permissible, waiver of the conditions set forth in Article VII
hereof (the "CLOSING DATE"), at the offices of Hogan & Hartson L.L.P.,
Columbia Square, 555 13th Street, N.W., Washington, D.C. 20004, unless
another date or place is agreed to in writing by the parties hereto.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as specifically set forth in the Disclosure Schedule delivered
by the Company to Acquiror prior to the execution and delivery of this
Merger Agreement (the "COMPANY DISCLOSURE SCHEDULE") (with a disclosure
with respect to a Section of this Merger Agreement to require a specific
reference in the Company Disclosure Schedule to the Section of this Merger
Agreement to which each such disclosure applies, and no disclosure to be
deemed to apply with respect to any Section to which it does not expressly
refer), the Company hereby represents and warrants (which representation
and warranty shall be deemed to include the disclosures with respect
thereto so specified in the Company Disclosure Schedule) to, and covenants
and agrees with, Acquiror and Acquiror Sub as follows, in each case as of
the date of this Merger Agreement, unless otherwise specifically set forth
herein or in the Company Disclosure Schedule:
SECTION 3.01. ORGANIZATION AND STANDING.
The Company is a corporation duly organized, validly existing and in
good standing under Delaware Law, and has the full and unrestricted
corporate power and authority to own, operate and lease its Assets (as
defined in Article X), to carry on its business as currently conducted, to
execute and deliver this Merger Agreement and to carry out the transactions
contemplated hereby. The Company is duly qualified to conduct business as
a foreign corporation and is in good standing in the states, countries and
territories listed in Section 3.01 of the Company Disclosure Schedule. The
Company is not qualified to conduct business in any other jurisdiction, 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 (as defined in Article X). The Conversion-Merger and the
other transactions contemplated thereby were effected in compliance with
all Laws.
SECTION 3.02. SUBSIDIARIES.
Except as set forth in Section 3.02 of the Company Disclosure
Schedule, the Company has no Subsidiaries (as defined in Article X) and
neither the Company nor any Subsidiary has any equity investment or other
interest in, nor has the Company or any Subsidiary made advances or loans
(other than for customary credit extended to customers of the Company in
the Ordinary Course of Business (as defined in Article X) and reflected in
the Financial Statements (as defined in Section 3.08) or incurred in the
Ordinary Course of Business since the date of the latest Financial
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Statements, and other than transfers among the Company and its wholly owned
Subsidiaries) to, any corporation, association, partnership, joint venture
or other entity. Section 3.02 of 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 October 22, 1998 of any such equity investment, other interest or
advance. All of such shares of capital stock or other equity interests of
Subsidiaries directly or indirectly held by the Company have been duly
authorized and validly issued and are outstanding, fully paid and
nonassessable. 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 (as defined in Article X), except as disclosed in Section 3.02
of the Company Disclosure Schedule. Each Subsidiary is a corporation duly
organized, validly existing and in good standing under the Laws of its
state or jurisdiction of incorporation (as listed in Section 3.02 of the
Company Disclosure Schedule), 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. Each Subsidiary is duly qualified to
conduct business as a foreign corporation and is in good standing in the
states, countries and territories listed in Section 3.02 of the Company
Disclosure Schedule. The Subsidiaries are not qualified to conduct
business in any other jurisdictions, 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
such qualification as a foreign corporation would not have a Company
Material Adverse Effect.
SECTION 3.03. CERTIFICATE 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 the 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 or assistant corporate secretaries.
Such certified copies are attached as exhibits to, and constitute an
integral part of, the Company Disclosure Schedule.
SECTION 3.04. CAPITALIZATION.
The authorized capital stock of the Company consists of (a) 10,000,000
shares of Company Common Stock, of which: (i) 2,161,136 shares are issued
and outstanding, all of which are duly authorized, validly issued, fully
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paid and nonassessable; (ii) 986 shares are held in the treasury of the
Company; (iii) 400,120 shares are reserved for issuance pursuant to Company
Stock Options; (iv) 390,524 shares are reserved for issuance in connection
with the Conversion-Merger; (v) 6,400 shares are reserved for issuance
pursuant to the terms of that certain Asset Purchase Agreement, dated as of
April 24, 1998, by and among the Company, Dakota Wireless Systems, Inc. and
Russell Dangel, sole proprietor of Hurley Communications (the "HURLEY
COMMUNICATIONS AGREEMENT"); and (vi) 20,000 shares are reserved for
issuance pursuant to the terms of that certain $250,000 9% Term Note, dated
July 1, 1998, by Dakota Wireless Systems, Inc. and the Company;
(b) 250,000 shares of Company preferred stock, without par value per share
("COMPANY PREFERRED STOCK") (of which 15,000 are designated "SERIES A
JUNIOR PARTICIPATING PREFERRED STOCK"), of which: (i) no shares are issued
and outstanding; (ii) no shares are held in the treasury of the Company;
and (iii) 15,000 shares are reserved for issuance pursuant to the Rights
Agreement (as defined in this Section 3.04). The Company Common Stock and
Company Preferred Stock are referred to collectively in this Merger
Agreement as the "COMPANY CAPITAL STOCK." Except as described in this
Section 3.04 or Section 3.04 of the Company Disclosure Schedule, no other
shares of Company Capital Stock have been reserved for any purpose. Except
(i) as set forth in clauses (a)(iii), (a)(iv) and (a)(vi) above, and
(ii) rights to purchase one one-hundredth of a share of Series A Junior
Participating Preferred Stock (the "RIGHTS") pursuant to a Rights Agreement
dated as of July 22, 1997 between the Company and Norwest Bank Minnesota,
N.A. (the "RIGHTS AGREEMENT"), there are no outstanding securities
convertible into or exchangeable for Company Common Stock, 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
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 (as defined in Article X) affecting or
relating to the voting, issuance, purchase, redemption, registration,
repurchase or transfer of Company Common Stock, any other securities of the
Company, or any capital stock or other securities of any Subsidiary, except
as contemplated hereunder. Since June 30, 1998, no shares of Company
Common Stock have been issued by the Company, except (i) for 48,000 shares
of Company Common Stock issued on or about July 2, 1998 pursuant to the
terms of that certain Merger Agreement, dated as of December 5, 1997, by
and among the Company, Dakota Wireless Systems, Inc., Vantek
Communications, Inc. and Van/Alert, Inc. or (ii) pursuant to (A) the
exercise of outstanding Company Stock Options in accordance with their
terms or (B) the Conversion-Merger as described in clause (a)(iv) above.
Each of the outstanding shares of Company Common Stock and of capital stock
of, or other equity interests in, the Subsidiaries was issued in compliance
with all applicable federal and state Laws concerning the issuance of
securities, and such shares or other equity interests owned by the Company
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or any Subsidiary are owned free and clear of all Encumbrances, except as
described in Section 3.04 of the Company Disclosure Schedules. 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 other Person. Except as set forth in Section 3.04 of
the Company Disclosure Schedule, there are no Agreements pursuant to which
any Person is or may be entitled to receive any of the revenues or
earnings, or any payment based thereon or calculated in accordance
therewith, of the Company or any Subsidiary, except for the existing
employment Agreements between the Company and Mr. Thomas Hertz and Mr.
Craig Anderson.
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 by the
holders of a majority of the outstanding shares of Company Common Stock in
accordance with Delaware Law and the Company's certificate of incorporation
and bylaws. 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 the effects of any applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or similar
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 and
the Subsidiaries 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 and the Subsidiaries of the transactions contemplated hereby and
thereby, do not and will not: (i) conflict with, or violate any provision
of, the certificate of incorporation or bylaws of the Company or the
certificate or articles of incorporation or bylaws of any Subsidiary;
(ii) subject to (A) obtaining the requisite approval and adoption of this
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Merger Agreement by the holders of a majority of the outstanding shares of
Company Common Stock in accordance with Delaware Law and the Company's
certificate of incorporation and bylaws 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 (as defined in
Article X), the Exchange Act (as defined in Article X), Blue Sky Laws (as
defined in Article X), the HSR Act (as defined in Article X), the
Communications Act (as defined in Article X), the Federal Aviation Act (as
defined in Article X), applicable state utility Laws, applicable municipal
franchise Laws and the filing and recordation of the Articles of Merger as
required by Delaware Law, conflict with or violate any Law applicable to
the Company or any Subsidiary, or any of their respective Assets;
(iii) subject to obtaining the consents and approvals set forth in
Section 3.06(b) of the Company Disclosure Schedule, conflict with, result
in any breach of, or 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 is a party or by which the Company or any
Subsidiary, or any of their respective Assets, may be bound; or (iv) except
as disclosed in Section 3.06(b) of the Company Disclosure Schedule, 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 or any Subsidiary or any of the Assets now owned or
hereafter acquired by the Company or any Subsidiary; 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 and that would not prevent the Company from
consummating the Merger on a timely basis.
(b) Except as set forth in Section 3.06(b) of the Company
Disclosure Schedule, the execution, delivery and performance by the Company
and the Subsidiaries 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 and the Subsidiaries 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) the approval and adoption of
this Merger Agreement by the holders of a majority of the outstanding
shares of Company Common Stock in accordance with Delaware Law and the
Company's certificate of incorporation and bylaws, (B) pursuant to the
applicable requirements, if any, of the Securities Act, the Exchange Act,
Blue Sky Laws, the HSR Act, the Communications Act, the Federal Aviation
Act, applicable state utility Laws and applicable municipal franchise Laws,
and (C) the filing and recordation of the Articles of Merger as required by
Delaware Law; or (ii) result in or give rise to any penalty, forfeiture,
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Agreement termination, right of termination, amendment or cancellation, or
restriction on business operations of Acquiror, the Company, the Surviving
Corporation or any Subsidiary, except for any Agreement not required to be
disclosed by the last sentence of this Section 3.06(b). Section 3.06(b) of
the Company Disclosure Schedule lists all Agreements that reasonably could
be interpreted or expected to require the consent or acquiescence of any
Person not party to this Merger Agreement with respect to any aspect of the
execution, delivery or performance of this Merger Agreement by the Company
and the Subsidiaries where (i) such Agreements are material to the
operation of the Company and the Subsidiaries or (ii) the failure to obtain
such consent or acquiescence would result in a Company Material Adverse
Effect.
SECTION 3.07. LICENSES; COMPLIANCE.
(a) Each of the Company and each Subsidiary is in possession of
all Licenses (as defined in Article X) 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 (as defined in
Article X), FAA (as defined in Article X) or state utilities Licenses or
municipal franchises, and all other material Company Licenses, are listed
and described in Section 3.07(a)(i) of the Company Disclosure Schedule.
Except as set forth in Schedule 3.07(a)(ii) 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 such Company License (or operations
thereunder) 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)(iii) 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 or any Subsidiary,
oral notice from any Governmental Entity or any other Person of any
allegation of any such violation or default under a Company License.
(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
certificate or articles of incorporation or bylaws 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
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clause (ii) that would not have a Company Material Adverse Effect. The
Company and the 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. The Conversion-Merger and the other transactions
contemplated thereby were effected in compliance with all Laws, neither the
Company nor any Subsidiary has received any notice, claim or allegation or
has knowledge that the Conversion-Merger or the other transactions
contemplated thereby were not effected in compliance with all Laws, and the
Company has undertaken significant efforts to attempt to locate the holders
of accounts of positive capital credit balances existing immediately prior
to the Conversion-Merger.
(c) Except as set forth in Schedule 3.07(c) of the Company
Disclosure Schedule, all 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 any related fees required to be paid have
been paid in full). Except as set forth in Section 3.07(c) of the Company
Disclosure Schedule, to the knowledge of the Company and the Subsidiaries,
all 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.
(d) Except as provided in Section 3.07(d) of the Company
Disclosure Schedule, neither the Company nor any Subsidiary has any
interest in any License (including both any Company License and any License
held by third parties in which the Company or any Subsidiary has an
interest) material to the operation of the Company or any Subsidiary that
is subject to restrictions on assignment or transfer based on the
circumstances under which the License was granted (such as eligibility or
auction rules), the status of construction and operation (such as rules
restricting resale for a certain period after construction), or any other
restrictions other than an ordinary course requirement for prior approval
of transactions such as the Merger contemplated herein.
(e) Neither the Company nor any Subsidiary is aware of any fact
or circumstance related to them that could reasonably be expected to cause
the filing of any objection to any application for any Governmental consent
required hereunder, lead to any delay in processing such application, or
require any waiver of any Governmental rule, policy or other applicable
Law.
SECTION 3.08. SEC DOCUMENTS.
Since January 1, 1997, the Company has filed or, in the case of
the Company Post-Signing SEC Documents (as defined in Section 6.10), will
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file all required reports, schedules, forms, statements and other Documents
with the SEC (as defined in Article X) (collectively, including the Company
Post-Signing SEC Documents, the "COMPANY SEC DOCUMENTS"). As of their
respective dates, the Company SEC Documents complied or, in the case of the
Company 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 Company SEC Documents
contained or, in the case of the Company Post-Signing SEC Documents, will
contain, any untrue statement of a material fact or omitted or, in the case
of the Company 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 consolidated financial statements of the Company
included in the Company SEC Documents (the "FINANCIAL STATEMENTS") comply
or, in the case of the Company 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 Company Post-Signing SEC Documents, will
have been prepared in accordance with GAAP (except, in the case of
unaudited statements, for the lack of normal year-end adjustments, the
absence of footnotes and as permitted by Form 10-QSB and Item 310 of
Regulation S-B of the SEC) applied on a consistent basis during the periods
subject thereto (except as may be indicated in the notes thereto) and
fairly present the consolidated financial position of the Company 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 adjustments and the
absence of footnotes). Except as disclosed in the Financial Statements, as
required by GAAP or as required by any Governmental Entity, the Company has
not, since December 31, 1997, made any change in accounting practices or
policies applied in the preparation of the Financial Statements.
SECTION 3.09. ABSENCE OF UNDISCLOSED LIABILITIES.
There are no liabilities or obligations (whether absolute or
contingent, matured or unmatured, known or unknown) of the Company or any
Subsidiary, including but not limited to liabilities for Taxes (as defined
in Article X), of a nature required by GAAP (giving effect to the
principles of materiality included therein) to be reflected, or reserved
against, in the balance sheet included in the Financial Statements and that
are not so reflected, or reserved against, therein. Except as described in
Section 3.09 of the Company Disclosure Schedule or reflected or reserved
against in the Financial Statements, since December 31, 1997, neither the
Company nor any Subsidiary has incurred any material liabilities or
obligations (whether absolute or contingent, matured or unmatured, known or
unknown) other than in the Ordinary Course of Business (as defined in
Article X).
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SECTION 3.10. ABSENCE OF CERTAIN CHANGES OR EVENTS.
Other than as set forth in Section 3.10 to the Company Disclosure
Schedule or as disclosed in the Company SEC Documents filed with the SEC
prior to the date hereof, since December 31, 1997, 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. Except as set
forth in Section 3.10 to the Company Disclosure Schedule or as disclosed in
the Company SEC Documents filed with the SEC prior to the date hereof,
since December 31, 1997, the Company and the Subsidiaries have conducted
their respective businesses substantially in the manner theretofore
conducted and only in the Ordinary Course of Business, and neither the
Company nor any Subsidiary has (a) incurred any damage, destruction or loss
not covered by insurance with respect to any material 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; (d) incurred, or become subject to, any
material obligation or liability (whether absolute or contingent, matured
or unmatured, known or unknown), except current liabilities incurred in the
Ordinary Course of Business; (e) 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 (as defined in Section 6.08) and
current liabilities incurred since December 31, 1997 in the Ordinary Course
of Business; (f) declared or made payment of, or set aside for payment, any
dividends 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 to the extent previously
reserved against in the Financial Statements 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; (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, 1997, 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 executive officers; (l) made or permitted any amendment or termination
of any material Agreement to which it is a party; (m) through negotiation
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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; (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 $60,000; (p) made capital expenditures,
or entered into commitments therefor, not provided for in the Company's
July 1998 CLEC Facilities Expansion Plan (a copy of which has been
furnished by the Company to Acquiror) or, if applicable, the Company's
subsequent capital budget (which capital budget shall have been approved by
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 except as required by GAAP; (r) entered into any
transaction of the type described in Section 3.19; (s) made any charitable
contributions or pledges exceeding $10,000 individually or $100,000 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 6.05.
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 (except for orders that Persons similarly situated,
engaged in similar businesses and owning similar Assets are operating under
or subject to), award, writ, injunction, decree or judgment of any court,
arbitrator or Governmental Entity, 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, 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,
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except for any such disputes 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
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. With
respect to the Documents listed on Section 3.12 of the Company Disclosure
Schedule, the Company and the Subsidiaries have performed all the
obligations required to be performed by any of them to date and are not in
default in any 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, except for any failure so to perform or any such default that
would not have a Company Material Adverse Effect.
SECTION 3.13. LEASES.
Section 3.13 of the Company Disclosure Schedule lists all leases
and other Agreements with a term in excess of one (1) year or requiring
payments in excess of $35,000 in the aggregate over its term under which
the Company or any Subsidiary is the 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. 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. 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. The Company and the
Subsidiaries have in all respects performed all material obligations
thereunder required to be performed by any of them to date. To the
knowledge of the Company or any Subsidiary, no party 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. 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 Agreement to which the Company or any Subsidiary is a party or by
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which the Company or any Subsidiary, or any of their respective Assets, is
bound, and which is:
(i) an Agreement with a term in excess of one (1) year or
requiring payments in excess of $10,000 in any twelve (12) month
period or $50,000 in the aggregate over its term for the employment of
any director, officer, employee, consultant or independent contractor,
or providing for severance payments to any such director, officer,
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 of materials,
supplies, services, merchandise or equipment involving payments of
more than $50,000 over its remaining term (including, without
limitation, periods covered by any option to renew by any party);
(v) an Agreement other than in the Ordinary Course of
Business for the purchase, sale or lease of any Asset with a purchase
or sale price or aggregate rental payment in excess of $50,000;
(vi) 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;
(vii) an Agreement for the sale of any of its
Assets or services or the grant of any preferential rights to purchase
any of its Assets, services or rights, other than in the Ordinary
Course of Business;
(viii) an Agreement that contains any provisions
requiring the Company or any Subsidiary to indemnify any other party;
(ix) a joint venture Agreement or other Agreement involving
the sharing of revenues or profits;
(x) an Agreement with an Affiliate (as defined in
Article X) of the Company or any Subsidiary;
(xi) an Agreement (including, without limitation, an
Agreement not to compete and an exclusivity Agreement) that reasonably
could be interpreted to impose any restriction on the business or
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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;
(xii) an Agreement material to the Company and its
Subsidiaries not otherwise described in this Section 3.14(a) which by
its terms does not terminate or is not terminable by the Company or by
a Subsidiary within thirty (30) days or upon thirty (30) days' (or
less) notice;
(xiii) an Agreement with any Governmental Entity;
(xiv) an Agreement with any of the twenty (20)
largest customers of the Company and the Subsidiaries, taken as a
whole (based on amounts billed), for each of (A) the year ended
December 31, 1997 and (B) the period from January 1, 1998 through the
date of this Merger Agreement;
(xv) a material Agreement to provide any customer with free
service or service at rates departing from the standard rate schedules
of the local, long distance, wireline or wireless telephone system or
cable television system operated by the Company or any Subsidiary; or
(xvi) any other Agreement (A) that is material to
the Company and the Subsidiaries, taken as a whole, or 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").
The Company has furnished Acquiror with true and complete copies of each
written Company Contract (including any amendments thereto) and a complete
written summary of each oral Company Contract.
(b) 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. All necessary
approvals of any Governmental Entity with respect thereto have been
obtained (except where the failure so to obtain any such approval would
not have a Company Material Adverse Effect), all necessary filings or
registrations therefor have been made, and there are no outstanding
disputes thereunder and, to the knowledge of the Company or any Subsidiary,
no threatened cancellation or termination thereof. The Company and the
Subsidiaries have performed all material obligations thereunder required to
be performed by any of them to date. To the knowledge of the Company and
the Subsidiaries, no party is in default in any material respect under any
of the Company Contracts, and there has not occurred any event which
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(whether with or without notice, lapse of time or the happening or
occurrence of any other event) would constitute such a default. No
Agreement has been canceled or otherwise terminated within the twelve (12)
months prior to the date of this Merger Agreement which would have been a
"Company Contract" had such Agreement not been canceled or terminated and
the cancellation or termination of which has had or is reasonably likely to
have a Company Material Adverse Effect. Except as specifically described
in Section 3.14(a) of the Company Disclosure Schedule, there has been no
written or oral modification or amendment to any Company Contract and there
are no reasonably expected changes to any Company Contract. 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 6.05.
SECTION 3.15. LABOR RELATIONS.
Section 3.15(a) of the Company Disclosure Schedule lists all
collective bargaining or other labor union Agreements to which the Company
or any Subsidiary is a party. Except as set forth in Section 3.15(b) of
the Company Disclosure Schedule, there are no strikes, work stoppages,
union organization efforts or other controversies (other than grievance
proceedings) 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, 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(c) of
the Company Disclosure Schedule, neither the Company nor any Subsidiary has
been notified by any Governmental Agency or counsel to any claimant of any
unresolved violation or alleged violation of any Law relating to equal
employment opportunity, civil or human rights, or employment discrimination
generally. Except as set forth in Section 3.15(d) to the Company
Disclosure Schedule, there are no collective bargaining Agreements,
employment Agreements between the Company or any Subsidiary and any of
their respective employees, or professional service Agreements not
terminable at will relating to the businesses and Assets of the Company or
of any Subsidiary. Except as set forth in Section 3.15(e) 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.
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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 during the past six (6) years has maintained any Plan (as defined in
Article X) or Other Arrangement (as defined in Article X), (ii) is or
during the past six (6) years has 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 terms of each Plan; (ii) all related trust Agreements or annuity
Agreements (and any other funding Document) for each Plan; (iii) for the
three (3) most recent plan years, all annual reports (Form 5500 series) on
each Plan that have been filed with any Governmental Entity; (iv) the
current summary plan description and subsequent summaries of material
modifications for each Title I Plan (as defined in Article X); (v) all DOL
(as defined in Article X) opinions on any Plan; (vi) all correspondence
with the PBGC (as defined in Article X) on any Plan exchanged during the
past three (3) years; (vii) all IRS (as defined in Article X) rulings,
opinions or technical advice relating to any Plan and the current IRS
determination letter issued with respect to each Qualified Plan (as defined
in Article X); and (viii) all current Agreements with service providers or
fiduciaries for providing services on behalf of any Plan. For each Other
Arrangement, the Company has furnished to Acquiror true and complete copies
of each policy, 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 with or other
submissions to any Governmental Entity, 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 (as defined in Article X).
(d) Section 3.16(d) of the Company Disclosure Schedule sets
forth each Individual Account Plan (as defined in Article X) that is an
ESOP (as defined in Article X) (indicating whether such ESOP is leveraged)
or otherwise invests in employer securities (as such term is defined in
Section 409(l) of the Code). The Company has furnished to Acquiror true
and complete copies of all loan Agreements and other related Documents for
each leveraged ESOP.
(e) The funding method used under each Minimum-Funding Plan (as
defined in Article X) does not violate the funding requirements in Title I,
Subtitle B, Part 3, of ERISA (as defined in Article X). For each Defined
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Benefit Plan (as defined in Article X), 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 Company 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 (as defined in Article X) and (ii) are 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 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 (as defined in Article X). All
Qualified Plans and any related trust Agreements or annuity Agreements (or
any other funding Document) comply and have complied with ERISA, the Code
(including, without limitation, the requirements for Tax qualification
described in Section 401 thereof), and all other Laws, except where the
failure so to comply would not have a Company Material Adverse Effect. 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
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Qualified Plan, and the Company has furnished to Acquiror true and complete
copies of all such determination letters and all correspondence relating to
the applications therefor, or the remedial amendment period under
Section 401(b) of the Code has not elapsed with regard to the initial
adoption of such Qualified Plan. All statements made by or on behalf of
the Company or any Subsidiary to the IRS in connection with applications
for determinations with respect to each Qualified Plan were true and
complete when made and continue to be true and complete. To the knowledge
of the Company and the Subsidiaries, 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 their 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 pertaining to the Plans, Other Arrangements and other employee or
employment related benefits, and all premiums and assessments relating to
all Plans or Other Arrangements. Neither the Company nor any Subsidiary
has any 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. Neither the Company nor any Subsidiary has any 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 arising under any Law
governing any Plan, and to the knowledge of the Company and the
Subsidiaries there exist no facts that could give rise to such a claim.
(k) Section 3.16(k) of the Company Disclosure Schedule describes
all transactions in which, to the knowledge of the Company and the
Subsidiaries, the Company or any Subsidiary or any of the Plans has engaged
in violation of Section 406(a) or 406(b) of ERISA for which no exemption
exists under Section 408 of ERISA and all "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. The
Company has furnished to Acquiror true and complete copies of each request
for a prohibited transaction exemption and each exemption obtained in
response to such request. All such requests were true and complete when
made and continue to be true and complete.
(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 the Financial Statements the current value of such premium
obligation that is accrued and unsatisfied as of the date of each such
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Financial Statement. Section 3.16(l) of the Company Disclosure Schedule
sets forth the amount of all such unpaid premium obligations (including,
without limitation, proportionate partial accruals for the current year).
Other than being required to make and making premium payments when due, no
liability to the PBGC has been incurred by the Company or by any Common
Control Entity (as defined in Article X) on account of Title IV of ERISA.
During the past three (3) 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 and the Subsidiaries,
no facts exist that would 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 (5) years.
(m) Section 3.16(m) of the Company Disclosure Schedule
identifies any terminated Plan 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 termination of a Qualified Plan.
(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 an "excess parachute
payment" pursuant to Section 280G of the Code.
(o) No Plan has within the past three (3) years experienced a
"reportable event" (as such term is defined in Section 4043(b) of ERISA)
that is not 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 furnished to Acquiror true and complete copies of each Form
5330 (Return of Excise Taxes Related to Employee Benefit Plans) that the
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Company or any Subsidiary filed on any Plan during the past three (3)
years. To their knowledge, the Company and the Subsidiaries have no
liability for Taxes required to be reported on Form 5330.
(r) Section 3.16(r) of the Company Disclosure Schedule lists all
funded Welfare Plans (as defined in Article X) 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 their 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 all material
respects 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) 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. 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 or could otherwise have a Company Material
Adverse Effect. The Company and the Subsidiaries have collected or
withheld all amounts that are required to be collected or withheld by them
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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 (as defined in Article X) becoming due after the date
hereof and before the Effective Time, will have prior to the Effective
Time) duly filed all Company Tax Returns required to be filed by the
Company and the Subsidiaries 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 any
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 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 or
incurred in the Ordinary Course of Business subsequent to the date of the
latest Financial Statement.
(c) Except as set forth in Section 3.17(c) of the Company
Disclosure Schedule, all 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,
settled or reserved for in the Financial Statements, for all taxable years
prior to and including the taxable year ended December 31, 1997. Except as
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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.
(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 at
any time made, agreed to, requested or required with respect to the Company
or any of the Subsidiaries since January 1, 1996.
(f) 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, 1991 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) 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).
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(g) The Company has complied in all material respects with all
rules and regulations relating to the withholding of Taxes.
SECTION 3.18. CUSTOMERS.
Except as set forth in Section 3.18 of the Company Disclosure
Schedule, to the knowledge of the Company and the Subsidiaries, the
relationships of the Company and the Subsidiaries with their customers are
good commercial working relationships. Except as set forth in Section 3.18
of the Company Disclosure Schedule, during the twelve (12) months prior to
the date of this Merger Agreement, no customer of the Company or any
Subsidiary which accounted for in excess of $50,000 of the revenues of the
Company and the Subsidiaries during such twelve (12) months has canceled or
otherwise terminated its relationship with the Company or any Subsidiary.
SECTION 3.19. CERTAIN BUSINESS PRACTICES.
Neither the Company, the Subsidiaries nor any of their officers,
directors or, to the knowledge of the Company or any Subsidiary, any of
their employees or agents (or stockholders, distributors, representatives
or other persons acting on the express, implied or apparent authority of
the Company or of any Subsidiary) have paid, given or received or have
offered or promised to pay, give or receive, any bribe or other unlawful
payment of money or other thing of value, any unlawful 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 or any Subsidiary (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 or any Subsidiary 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 and the Subsidiaries 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 title, 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
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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) to the knowledge of the Company or any Subsidiary, insure
against risks of the kind customarily insured against and in amounts
customarily carried by companies similarly situated and by companies
engaged in similar businesses and owning similar Assets and 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 through the respective dates set forth in Section 3.20 of the
Company Disclosure Schedule.
SECTION 3.21. POTENTIAL CONFLICTS OF INTEREST.
Except as set forth in Section 3.21 of the Company Disclosure
Schedule, neither any present nor, to the knowledge of the Company or any
Subsidiary, former employee with a salary in excess of $60,000, director,
or officer of the Company or any Subsidiary, nor, to the knowledge of the
Company or any Subsidiary, any stockholder who beneficially owns more than
5% of the capital stock of the Company or any Subsidiary, nor, to the
knowledge of the Company or any Subsidiary, any Affiliate of such employee,
director, officer, or stockholder:
(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 stockholder,
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 asserted 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, or amounts owing in the
Ordinary Course of Business in connection with such Person's purchase
of goods or services from the Company or any Subsidiary;
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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, 1995;
(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, 1995, 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 stockholders (as applicable) on a pro rata
basis.
SECTION 3.22. RECEIVABLES.
The accounts receivable of the Company and the Subsidiaries shown in
the latest Financial Statements and the Unaudited Balance Sheets, or
thereafter acquired by any of them, have been collected or are, to the
knowledge of the Company and the Subsidiaries, collectible in amounts not
less than the amounts thereof carried on the books of the Company and the
Subsidiaries, without right of recourse, defense, deduction, counterclaim,
offset or setoff on the part of the obligor, and can reasonably be expected
to be collected within ninety (90) days of the date incurred, except to the
extent of the allowance for doubtful accounts shown on such Audited Balance
Sheets and Unaudited Balance Sheets.
SECTION 3.23. REAL PROPERTY.
(a) Section 3.23(a) of the Company Disclosure Schedule lists all
the Real Property (as defined in Article X), specifying the owner of each
parcel thereof, and all such Real Property 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, marketable and insurable (at standard rates)
title to the Real Property respectively owned by them, including, without
limitation, all buildings, structures, fixtures and improvements thereon,
in each case free and clear of all Encumbrances.
(c) All buildings, structures, fixtures and other improvements
on the Real Property are fit for the uses to which they are currently
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devoted. All such buildings, structures, fixtures and improvements on the
Real Property conform to all Laws, except for any such non-conformance that
would not have a Company Material Adverse Effect. Except as set forth in
Schedule 3.23(c) of the Company Disclosure Schedule, to the knowledge of
the Company or any Subsidiary, the buildings, structures, fixtures and
improvements on each parcel of the Real Property lie entirely within the
boundaries of such parcel of the Real Property as specified in the
description set forth in Section 3.23(a) of the Company Disclosure
Schedule, and no structures of any kind encroach on the Real Property.
(d) Except as set forth in Schedule 3.23(d) of the Company
Disclosure Schedule, to the knowledge of the Company or any Subsidiary,
none of the owned Real Property is subject to any Agreement preventing or
limiting the Company's or any Subsidiary's right to convey or to use 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, to the extent necessary 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 the matters contained therein are appropriately and
accurately reflected in all material respects in the Financial Statements
in accordance with GAAP.
SECTION 3.25. ASSETS.
Except as set forth in Section 3.25 of the Company Disclosure
Schedule, the Company and the Subsidiaries have good, valid and marketable
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, 1997 (except for Assets
reflected in such Audited Balance Sheets and Unaudited Balance Sheets or
acquired since December 31, 1997 which have been sold or otherwise disposed
of in the Ordinary Course of Business), free and clear of all Encumbrances.
All 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.
(a) Section 3.26(a) of the Company Disclosure Schedule
identifies and describes each item of Intellectual Property (as defined in
Article X) (i) owned by the Company or a Subsidiary, (ii) owned by any
third party and used by the Company or any Subsidiary pursuant to license,
sublicense or other Agreement, or (iii) otherwise used by the Company or
any Subsidiary (including, in each case, specification of whether each such
item is owned, licensed or used by the Company or any Subsidiary).
(b) With respect to each item of Intellectual Property listed in
Section 3.26(a) of the Company Disclosure Schedule that is owned by the
Company or any Subsidiary, the Company and the Subsidiaries have the right
to bring action for infringement of such Intellectual Property. With
respect to the Intellectual Property listed in Section 3.26(a) of the
Company Disclosure Schedule that is used by the Company or a Subsidiary
pursuant to an Agreement, 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
Agreements. Except as set forth in Section 3.26(b) of the Company
Disclosure Schedule, to the knowledge of the Company and the Subsidiaries,
each item of Intellectual Property owned or used by the Company or any
Subsidiary immediately prior to the Closing will be owned or available for
use by the Company or such Subsidiary on identical terms and conditions
immediately after the Closing.
(c) As used in the businesses of the Company and the
Subsidiaries as currently conducted, none of the Intellectual Property
listed in Section 3.26(a) of the Company Disclosure Schedule infringes or
misappropriates or otherwise violates any Intellectual Property of any
other Person, nor 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. To the knowledge of
the Company or any Subsidiary, there are no pending or threatened claims
against the Company or any Subsidiary alleging that the conduct of the
Company's or any Subsidiary's business infringes or conflicts with any
Intellectual Property rights of others or that the Intellectual Property of
another Person infringes, misappropriates or violates any of the
Intellectual Property listed in Section 3.26(a) of the Company Disclosure
Schedule.
(d) The Company and the Subsidiaries own or possess adequate
rights to use all Intellectual Property necessary to the conduct of the
respective businesses of the Company and the Subsidiaries as currently
conducted.
(e) The Company and the Subsidiaries have not originated for
transmission through the Company's or the Subsidiaries' facilities any
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obscene, libelous or indecent material and have instituted a policy
pursuant to which the Company and the Subsidiaries will terminate any web
site hosted by the Company or any Subsidiary which contains obscene
material when the Company or any Subsidiary is made aware of such web site.
SECTION 3.27. OPINION OF FINANCIAL ADVISOR.
The Company has received the written opinion of Duff & Phelps, LLC on
or prior to the date of this Merger Agreement, to the effect that, as of
the date of such opinion, the consideration to be received pursuant to the
transactions contemplated under this Merger Agreement is fair to the
Company Stockholders from a financial point of view, and the Company will
promptly, after the date of this Merger Agreement, deliver a copy of such
opinion to Acquiror.
SECTION 3.28. BOARD RECOMMENDATION.
At a meeting duly called and held in compliance with Delaware Law, the
Board of Directors of the Company has adopted by unanimous vote 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 Stockholders.
SECTION 3.29. VOTE REQUIRED.
The affirmative vote of the holders of a majority of the outstanding
shares of Company Common Stock 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 3.30. BANKS; ATTORNEYS-IN-FACT.
Section 3.30 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.
SECTION 3.31. VOTING AGREEMENTS.
Voting Agreements in the form attached hereto as EXHIBIT A-1 (or, in
the case of Craig A. Anderson, EXHIBIT A-2) have been executed and
delivered to Acquiror prior to the execution of this Merger Agreement by
the Persons listed in EXHIBIT B and, to the knowledge of the Company or any
Subsidiary, each such Voting Agreement constitutes a legal, valid and
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binding obligation of the respective Person who is a party thereto,
enforceable against such Person in accordance with its terms.
SECTION 3.32. BROKERS.
No broker, finder or investment banker (other than Duff & Phelps, LLC)
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 or any of their respective Affiliates. 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 Duff & Phelps, LLC
pursuant to which such firm will be entitled to any payment relating to the
transactions contemplated by this Merger Agreement.
SECTION 3.33. ENVIRONMENTAL MATTERS.
Except for matters disclosed on the written environmental reports
received by Acquiror and prepared at Acquiror's expense prior to the date
hereof, copies of which have been previously furnished to the Company by
Acquiror:
(a) The Company and each of the Subsidiaries have complied and
are in compliance with, and the Real Property and all improvements thereon
are in compliance with, all Environmental Laws (as defined in Article X),
except where the failure so to comply would not have a Company Material
Adverse Effect.
(b) To the knowledge of the Company and the Subsidiaries,
neither the Company nor any Subsidiary has any liability under any
Environmental Law, nor is the Company or any Subsidiary responsible for any
liability of any other Person under any Environmental Law. Except as set
forth in Section 3.33(b) of the Company Disclosure Schedule, there are no
pending or, to the knowledge of the Company or any Subsidiary, threatened
actions, suits, claims, legal proceedings or other proceedings based on,
and neither the Company nor any Subsidiary, has received 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 since January 1, 1993 (or
prior thereto with respect to any such complaint, order, directive,
citation, notice of responsibility, notice of potential responsibility, or
information request which has not been finally resolved) or knows any
fact(s) which might reasonably be expected to 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 (as
defined in Article X) or any substances that pose a hazard to human health;
(ii) the current or past release or threatened release into the environment
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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;
(iii) the off-site disposal of Hazardous Materials originating on or from
the Real Property or the businesses or Assets of the Company or any
Subsidiary; (iv) any facility operations, procedures or designs of the
Company or any Subsidiary 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 or any
Subsidiary's activities (or the activities of the Company's or any
Subsidiary's predecessors in title) involving Hazardous Materials.
(c) The Company and the Subsidiaries 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 3.33(c) of the Company Disclosure Schedule. Except in
accordance with such Licenses, as described in Section 3.33(c) of the
Company Disclosure Schedule or as otherwise permitted by Law, there has
been no Hazardous Discharge (as defined in Article X) or discharge of any
other material regulated by such Licenses. Except as disclosed in
Section 3.33(c) of the Company Disclosure Schedule, to the knowledge of the
Company and the Subsidiaries no such Licenses are non-transferable or which
require consent, notification or other action to remain in full force and
effect following consummation of the Merger and the other transactions
contemplated hereby.
(d) Except as set forth in Section 3.33(d) of the Company
Disclosure Schedule, the Real Property contains no underground
improvements, including but not limited to treatment or storage tanks, or
underground piping associated with such tanks, used currently or in the
past for the storage, throughput or other management of Hazardous
Materials, and no portion of the Real Property is or has been used as a
dump or landfill or consists of or contains filled in land or wetlands.
SECTION 3.34. DISCLOSURE.
(a) None of the information supplied by the Company expressly
for inclusion (and so included or relied on for information included) in
(i) the Registration Statement (as defined in Section 6.01(a)) and (ii) the
Proxy Statement (as defined in Section 6.01(a)), at the respective times
that (w) the Registration Statement is filed with the SEC, (x) the
Registration Statement becomes effective, (y) the Proxy Statement is
mailed, and (z) any meeting of stockholders (and any adjournment thereof)
is held to consider, or written consents are effective with respect to
approval of, the transactions contemplated by this Merger Agreement, shall
contain any untrue statement of a material fact or omit to state any
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material fact necessary in order to make the statements therein, in light
of the circumstances under which they are made, not misleading.
(b) No representation or warranty by the Company, and no
Document furnished or to be furnished to Acquiror by the Company pursuant
to this Merger Agreement or otherwise in connection herewith or with the
transactions contemplated hereby, 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 they were made, not misleading. As of the
date of this Merger Agreement, the Company believes that, based upon the
assumptions contained therein (and subject to the risks disclosed therein),
the Company has a reasonable likelihood of attaining the results of its
July 1998 CLEC Facilities Expansion Plan, as furnished to Acquiror.
SECTION 3.35. DIRECTORS, OFFICERS AND AFFILIATES
Section 3.35 of the Company Disclosure Schedule lists all current
directors and executive 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.
SECTION 3.36. COPIES OF DOCUMENTS.
True and complete copies of all Documents listed in the Company
Disclosure Schedule have been furnished to Acquiror prior to the execution
of this Merger Agreement.
SECTION 3.37. CONDITION AND OPERATION OF THE SYSTEM.
(a) Section 3.37(a) of the Company Disclosure Schedule sets
forth all complaints regarding "slamming" or "cramming" (as such terms are
understood in the telephone industry) by the Company, any Subsidiary or any
of their respective employees, resellers, agents or representatives; and
(b) Section 3.37(b) of the Company Disclosure Schedule sets
forth all filings by the Company or any Subsidiary with the FCC, the NDPSC
(as defined in Article X), the SDPUC (as defined in Article X), the IUB (as
defined in Article X), the MPUC (as defined in Article X) or the FAA since
July 1, 1997.
SECTION 3.38. AFFILIATE AGREEMENTS.
In accordance with Section 6.12, the executive officers, directors and
certain Company Stockholders specified in Section 3.38 of the Company
Disclosure Schedule ("COMPANY AFFILIATES") have indicated to the Company
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that they intend to execute and deliver to Acquiror affiliate agreements in
substantially the form attached hereto as EXHIBIT C (the "AFFILIATE
AGREEMENTS") and each such Affiliate Agreement, when so executed and
delivered, will, to the knowledge of the Company, constitute a legal, valid
and binding obligation of the respective Company Affiliate who is a party
thereto, enforceable against such Company Affiliate in accordance with its
terms. Except as set forth in Section 3.38 of the Company Disclosure
Schedule, there are no affiliates of the Company as of the date hereof as
that term is used in SEC Rule 145.
SECTION 3.39. RIGHTS AGREEMENT.
Concurrently with the execution and delivery of this Merger Agreement,
the Company has executed and delivered for signature by Norwest Bank
Minnesota, N.A. as rights agent an amendment to the Rights Agreement which
(i) renders the Rights Agreement inapplicable to the Merger and the
transactions contemplated hereby and thereby; (ii) provides that
(A) Acquiror shall not be deemed an Acquiring Person (as defined in the
Rights Agreement), (B) the Distribution Date (as defined in the Rights
Agreement) shall not be deemed to occur, and (C) the Rights will not
separate from the shares of Company Common Stock, as a result of entering
into this Merger Agreement or consummating the transactions contemplated
hereby or thereby; and (iii) provides that the Rights shall cease to be
exercisable immediately prior to the Effective Time.
SECTION 3.40. REORGANIZATION.
To the knowledge of the Company, neither it nor any of the
Subsidiaries has taken any action or failed to take any action which action
or failure would jeopardize the qualification of the Merger as a
reorganization within the meaning of Section 368(a) of the Code.
SECTION 3.41. STATE TAKEOVER STATUTES; CERTAIN CHARTER PROVISIONS.
The Board of Directors of the Company has, to the extent such statutes
are applicable, taken all action (including appropriate approvals of the
Board of Directors of the Company) necessary to exempt the Company, the
Subsidiaries and affiliates, the Merger, this Merger Agreement and the
transactions contemplated hereby and thereby from Section 203 of Delaware
Law. To the knowledge of the Company, no other state takeover statutes or
charter or bylaw provisions are applicable to the Merger or this Merger
Agreement and the transactions contemplated hereby or thereby.
SECTION 3.42. DISSENTERS RIGHTS.
The shares of Company Common Stock are held of record by more than
2,000 stockholders and no Company Stockholder has any appraisal or
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dissenters' rights pursuant to the Certificate of Incorporation of the
Company arising from, or in connection with, the consummation of the Merger
and the other transactions contemplated hereby.
SECTION 3.43. YEAR 2000 COMPLIANCE.
(a) For purposes of this Section 3.43 only, the following terms
have the following meanings: (i) "EDUCATION" means quantifying the
awareness that employees have regarding the Year 2000 issue, including
understanding of the Year 2000 problem, what it means to be Year 2000
compliant, understanding known problems on the Company's and the
Subsidiaries' respective platforms, recommended solutions, and how to
create Year 2000 compliant products. Education also includes the full
participation and cooperation with Year 2000 activities as needed to
achieve Year 2000 compliance within the Company and the Subsidiaries; (ii)
"SURVEY" means identifying the components, including their vendors and/or
manufacturer's, with point of contact, address and phone, software version,
hardware model number, quantity and number of licenses, for all hardware
(mainframe, mid-range servers, connectivity equipment, personal computers,
printers, facilities, environmental systems such as heating, cooling,
power, and security, etc.), software applications, software products
(files, databases, spreadsheets, etc.), and electronic data interfaces
(including third party software and hardware) of the Company and each
Subsidiary; (iii) "BUSINESS CRITICAL/Y2K CRITICAL" means the percentage of
all of the components identified in the Survey which have been rated as
"high," "medium," or "low" for the following two questions: "How critical
is this component to the continued operation of the business?" and "What
level of Year 2000 impact is there on the component?;" (iv) "COST
ASSESSMENT" means the percentage of the components identified in the Survey
for which the cost of making the component Year 2000 compliant has been
estimated; (v) "DATE ASSESSMENT" means the percentage of all components
identified in the Survey for which a date has been estimated for fixing,
testing and implementation if they are not Year 2000 compliant or if
compliance is unknown; (vi) "CORRECTIONS" means that percentage of the
total number of components identified in the Survey that are not Year 2000
compliant and require correction/remediation to become compliant which have
been corrected; (vii) "REPLACEMENT" means that percentage of the total
number of components identified in the Survey that are not Year 2000
compliant and require replacement to become Year 2000 compliant which have
been replaced to date; (viii) "TESTING & VERIFICATION" means that
percentage of the total number of components identified in the Survey that
require testing and verification by the vendor and the user(s) which have
been tested and verified to date; (ix) "IMPLEMENTATION" means that
percentage of the total number of components identified in the Survey that
must be corrected or replaced to achieve Year 2000 compliance which have
been implemented into production status to date.
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(b) Set forth below are the current completion percentages and
the Company's target completion dates for the the operating units of the
Company and the Subsidiaries with respect to each of the Year 2000
compliance steps defined in Section 3.43(a): (i) ILEC operating unit:
(A) Education--50% complete; target completion 4th quarter 1998;
(B) Survey--25% complete; target completion 1st quarter 1999; (C) Business
Critical/Y2K Critical--0% complete; target completion 1st quarter 1999;
(D) Cost Assessment--0% complete; target completion 1st quarter 1999;
(E) Date Assessment--0% complete; target completion 1st quarter 1999;
(F) Corrections--0% complete; target completion 2nd quarter 1999;
(G) Replacement--0% complete; target completion 2nd quarter 1999;
(H) Testing & Verification--0% complete; target completion 2nd quarter
1999; and (I) Implementation--0% complete; target completion 3rd quarter
1999; (ii) CLEC operating unit: (A) Education--75% complete; target
completion 4th quarter 1998; (B) Survey--25% complete; target completion
1st quarter 1999; (C) Business Critical/Y2K Critical--0% complete; target
completion 1st quarter 1999; (D) Cost Assessment--0% complete; target
completion 1st quarter 1999; (E) Date Assessment--0% complete; target
completion 1st quarter 1999; (F) Corrections--0% complete; target
completion 2nd quarter 1999; (G) Replacement--0% complete; target
completion 2nd quarter 1999; (H) Testing & Verification--0% complete;
target completion 2nd quarter 1999; and (I) Implementation--0% complete;
target completion 3rd quarter 1999; (iii) VANTEK operating unit:
(A) Education--0% complete; target completion 4th quarter 1998; (B) Survey-
- -25% complete; target completion 1st quarter 1999; (C) Business
Critical/Y2K Critical--0% complete; target completion 1st quarter 1999;
(D) Cost Assessment--0% complete; target completion 1st quarter 1999;
(E) Date Assessment--0% complete; target completion 1st quarter 1999;
(F) Corrections--0% complete; target completion 2nd quarter 1999;
(G) Replacement--0% complete; target completion 2nd quarter 1999;
(H) Testing & Verification--0% complete; target completion 2nd quarter
1999; and (I) Implementation--0% complete; target completion 3rd quarter
1999; (iv) Datanet operating unit: (A) Education--50% complete; target
completion 4th quarter 1998; (B) Survey--50% complete; target completion
1st quarter 1999; (C) Business Critical/Y2K Critical--50% complete; target
completion 1st quarter 1999; (D) Cost Assessment--0% complete; target
completion 1st quarter 1999; (E) Date Assessment--0% complete; target
completion 1st quarter 1999; (F) Corrections--0% complete; target
completion 2nd quarter 1999; (G) Replacement--0% complete; target
completion 2nd quarter 1999; (H) Testing & Verification--50% complete;
target completion 2nd quarter 1999; and (I) Implementation--0% complete;
target completion 3rd quarter 1999; (v) MIS operating unit: (A) Education--
50% complete; target completion 4th quarter 1998; (B) Survey--50% complete;
target completion 1st quarter 1999; (C) Business Critical/Y2K Critical--50%
complete; target completion 1st quarter 1999; (D) Cost Assessment--0%
complete; target completion 1st quarter 1999; (E) Date Assessment--0%
complete; target completion 1st quarter 1999; (F) Corrections--0% complete;
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target completion 2nd quarter 1999; (G) Replacement--0% complete; target
completion 2nd quarter 1999; (H) Testing & Verification--50% complete;
target completion 2nd quarter 1999; and (I) Implementation--0% complete;
target completion 3rd quarter 1999; (vi) Cable TV operating unit:
(A) Education--50% complete; target completion 4th quarter 1998;
(B) Survey--25% complete; target completion 1st quarter 1999; (C) Business
Critical/Y2K Critical--0% complete; target completion 1st quarter 1999;
(D) Cost Assessment--0% complete; target completion 1st quarter 1999;
(E) Date Assessment--0% complete; target completion 1st quarter 1999;
(F) Corrections--0% complete; target completion 2nd quarter 1999;
(G) Replacement--0% complete; target completion 2nd quarter 1999;
(H) Testing & Verification--0% complete; target completion 2nd quarter
1999; and (I) Implementation--0% complete; target completion 3rd quarter
1999; (vii) Wireless operating unit: (A) Education--50% complete; target
completion 4th quarter 1998; (B) Survey--25% complete; target completion
1st quarter 1999; (C) Business Critical/Y2K Critical--50% complete; target
completion 1st quarter 1999; (D) Cost Assessment--0% complete; target
completion 1st quarter 1999; (E) Date Assessment--0% complete; target
completion 1st quarter 1999; (F) Corrections--0% complete; target
completion 2nd quarter 1999; (G) Replacement--0% complete; target
completion 2nd quarter 1999; (H) Testing & Verification--0% complete;
target completion 2nd quarter 1999; and (I) Implementation--0% complete;
target completion 3rd quarter 1999; (viii) Corporate Facilities operating
unit: (A) Education--25% complete; target completion 4th quarter 1998;
(B) Survey--10% complete; target completion 1st quarter 1999; (C) Business
Critical/Y2K Critical--0% complete; target completion 1st quarter 1999;
(D) Cost Assessment--0% complete; target completion 1st quarter 1999;
(E) Date Assessment--0% complete; target completion 1st quarter 1999;
(F) Corrections--0% complete; target completion 2nd quarter 1999;
(G) Replacement--0% complete; target completion 2nd quarter 1999;
(H) Testing & Verification--0% complete; target completion 2nd quarter
1999; and (I) Implementation--0% complete; target completion 3rd quarter
1999; and (ix) Internet operating unit: (A) Education--50% complete; target
completion 4th quarter 1998; (B) Survey--50% complete; target completion
1st quarter 1999; (C) Business Critical/Y2K Critical--50% complete; target
completion 1st quarter 1999; (D) Cost Assessment--0% complete; target
completion 1st quarter 1999; (E) Date Assessment--0% complete; target
completion 1st quarter 1999; (F) Corrections--0% complete; target
completion 2nd quarter 1999; (G) Replacement--0% complete; target
completion 2nd quarter 1999; (H) Testing & Verification--0% complete;
target completion 2nd quarter 1999; and (I) Implementation--0% complete;
target completion 3rd quarter 1999.
(c) The Company and the Subsidiaries have achieved the following
average total completion percentages (calculated by adding the current
completion percentage for each operating unit of the Company and the
Subsidiaries and dividing the sum by the number of operating units of the
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Company and the Subsidiaries) with respect to each of the Year 2000
compliance steps defined in Section 3.43(a): (i) Education--40%;
(ii) Survey--29%; (iii) Business Critical/Y2K Critical--20%; (iv) Cost
Assessment--0%; (v) Date Assessment--0%; (vi) Corrections--0%;
(vii) Replacement--0%; (viii) Testing & Verification--10%; and
(ix) Implementation--0%.
(d) To the knowledge of the Company and the Subsidiaries, the
Company's ILEC operating unit's telephone switches and key systems,
microwave systems, network equipment, fiber systems, satellite systems, and
telecommunications management systems to provide local and long distance
switched telephone service are Year 2000 compliant and Year 2000 ready.
Based on the Survey, vendor letters, and tests conducted by the Company,
the Company reasonably believes that the following software systems used in
the Company's or the Subsidiaries' operations are Year 2000 compliant:
(i) CommSoft billing software; (ii) Multiview accounting software;
(iii) Lucent switching, access and SONET systems; (iv) ILS software;
(v) Bay, Cisco and Livingston routers used by the Company in its
operations; and (vi) all cable headend equipment, except for its Scientific
Atlantic systems controllers, which are scheduled for a Year 2000 compliant
software upgrade on October 27, 1998. The Company reasonably estimates
that the total cost to bring the rest of the Company's and the
Subsidiaries' systems into Year 2000 compliance is approximately $250,000.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF ACQUIROR AND ACQUIROR SUB
Except as specifically set forth in the Disclosure Schedule delivered
by Acquiror and Acquiror Sub to the Company prior to the execution and
delivery of this Merger Agreement (the "ACQUIROR DISCLOSURE SCHEDULE")
(with a disclosure with respect to a Section of this Merger Agreement to
require a specific reference in the Acquiror Disclosure Schedule to the
Section of this Merger Agreement to which each such disclosure applies, and
no disclosure to be deemed to apply with respect to any Section to which it
does not expressly refer), Acquiror and Acquiror Sub hereby jointly and
severally represent and warrant (which representation and warranty shall be
deemed to include the disclosures with respect thereto so specified in the
Acquiror Disclosure Schedule) to the Company as follows, in each case as of
the date of this Merger Agreement, unless otherwise specifically set forth
herein or in the Acquiror Disclosure Schedule:
SECTION 4.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
Each of Acquiror, Acquiror Sub and Acquiror's Significant Subsidiaries
(as defined in Article X) is a corporation duly organized, validly existing
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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. Each of Acquiror, Acquiror Sub and
Acquiror's Significant Subsidiaries 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
(as defined in Article X).
SECTION 4.02. CERTIFICATE OF INCORPORATION AND BYLAWS.
Acquiror has furnished to the Company a true and complete copy of the
Amended and Restated Certificate of Incorporation of Acquiror and the
certificate 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 similar
Laws affecting creditors' rights generally and subject to the effect of
general equitable principles (whether considered in a proceeding in equity
or at law).
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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 Certificate of Incorporation or the Amended and Restated
Bylaws of Acquiror, or the certificate or articles of incorporation or
bylaws of Acquiror Sub or any of Acquiror's Significant Subsidiaries; 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, the Exchange Act, Blue Sky Laws, the HSR Act, the
Communications Act, the Federal Aviation Act, applicable state utility Laws
and applicable municipal franchise Laws, and the filing and recordation of
the Articles of Merger as required by Delaware Law, conflict with or
violate any Law applicable to Acquiror, Acquiror Sub or any of Acquiror's
Significant Subsidiaries, 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, Acquiror Sub or any of Acquiror's Significant
Subsidiaries is a party or by which Acquiror, Acquiror Sub or any of
Acquiror's Significant Subsidiaries, 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, Acquiror Sub or any of
Acquiror's Significant Subsidiaries or any of the Assets of Acquiror,
Acquiror Sub or any of Acquiror's Significant Subsidiaries; 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 and that would not prevent Acquiror or
Acquiror Sub from consummating the Merger on a timely basis.
(b) 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, the Exchange Act, Blue Sky Laws, the HSR Act, the
Communications Act, the Federal Aviation Act, and applicable state utility
Laws and applicable municipal franchise Laws and (B) the filing and
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recordation of the Articles of Merger as required by Delaware 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 Surviving Corporation
or any of Acquiror's Significant Subsidiaries, except with respect to any
Agreement not material to the operation of Acquiror, Acquiror Sub and
Acquiror's Significant Subsidiaries.
SECTION 4.05. NO PRIOR ACTIVITIES OF ACQUIROR SUB.
Acquiror Sub was formed solely for the purpose of engaging in the
transactions contemplated by this Merger Agreement and 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 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 or any of its Affiliates.
SECTION 4.07. SEC DOCUMENTS.
Since January 1, 1997, Acquiror has filed or, in the case of the
Acquiror Post-Signing SEC Documents (as defined in Section 6.10), will file
all required reports, schedules, forms, statements and other Documents with
the SEC (collectively, including the Acquiror Post-Signing SEC Documents,
the "ACQUIROR SEC DOCUMENTS"). As of their respective dates, the Acquiror
SEC Documents complied or, in the case of the Acquiror 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 Acquiror Post-Signing SEC Documents, will contain, any untrue
statement of a material fact or omitted or, in the case of the Acquiror
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
consolidated financial statements of Acquiror included in the Acquiror SEC
Documents comply or, in the case of the Acquiror 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 Acquiror Post-
Signing SEC Documents, will have been prepared in accordance with GAAP
(except, in the case of unaudited statements, for the lack of normal year-
end adjustments, the absence of footnotes and as permitted by Form 10-Q of
the SEC) applied on a consistent basis during the periods subject thereto
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(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 adjustments and the absence of
footnotes). Except as disclosed in the Acquiror SEC Documents, as required
by GAAP or as required by any Governmental Entity, Acquiror has not, since
December 31, 1997, made any change in accounting practices or policies
applied in the preparation of financial statements.
SECTION 4.08. ACQUIROR COMMON STOCK.
The Acquiror Common Stock to be issued and delivered to the Company
Stockholders pursuant to the Merger has been duly authorized and, when
issued in the Merger in accordance with this Merger Agreement, will be
validly issued, fully paid and nonassessable and will have been approved
for listing (subject to official notice of issuance) by The Nasdaq Stock
Market's National Market System.
SECTION 4.09. CAPITALIZATION.
The authorized capital stock of Acquiror consists of (a) 250,000,000
shares of Acquiror Common Stock, of which, as of October 23, 1998:
(i) 63,244,064 shares were issued and outstanding, all of which were duly
authorized, validly issued, fully paid and nonassessable; (ii) no shares
were held in the treasury of Acquiror; (iii) 11,090,936 shares were
reserved for issuance pursuant to outstanding options to purchase Acquiror
Common Stock granted to employees and certain other Persons; and
(iv) 245,536 shares were reserved for issuance pursuant to a Stock Option
Agreement dated August 21, 1998 between Acquiror and QST Enterprises, Inc.;
(b) 22,000,000 shares of Class B common stock, par value $.01 per share
("ACQUIROR CLASS B COMMON STOCK"), of which, as of October 23, 1998:
(i) no shares were issued and outstanding; (ii) no shares were held in the
treasury of Acquiror; and (iii) 1,300,683 shares were reserved for issuance
pursuant to outstanding options to purchase Acquiror Class B Common Stock
granted to a significant stockholder of Acquiror; and (c) 2,000,000 shares
of serial preferred stock, par value $.01 per share, of which: (i) no
shares are issued and outstanding; and (ii) no shares are held in the
treasury of Acquiror. Except for the options set forth in clauses
(a)(iii), (a)(iv) and (b)(iii) above, as of October 23, 1998, there were no
outstanding securities convertible into or exchangeable for capital stock
or any other securities of Acquiror, or any capital stock or other
securities of any of Acquiror's Significant 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
Acquiror or any of Acquiror's Significant Subsidiaries. Except as set
forth in Section 4.09(a) of the Acquiror Disclosure Schedule and except for
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Agreements relating to the options specified in clauses (a)(iii), (a)(iv)
and (b)(iii) above, there are no outstanding Agreements to which Acquiror
or any of its Significant Subsidiaries 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, or any
capital stock or other securities of any of Acquiror's Significant
Subsidiaries, except as contemplated hereunder. Each of the outstanding
shares of Acquiror Common Stock, and of capital stock of, or other equity
interests in, Acquiror's Significant Subsidiaries was issued in compliance
with all applicable federal and state Laws concerning the issuance of
securities, and, except as set forth in Section 4.09(b) of the Acquiror
Disclosure Schedule, such shares or other equity interests owned by
Acquiror or any of its Significant Subsidiaries are owned free and clear of
all Encumbrances. Except as contemplated by this Merger Agreement or as
set forth in Section 4.09(c) of the Acquiror Disclosure Schedule, there are
no obligations, contingent or otherwise, of Acquiror or any of its
Significant Subsidiaries 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 of Acquiror's Significant Subsidiaries or
any other Person. Except as set forth in Section 4.09(d) of the Acquiror
Disclosure Schedule, there are no Agreements pursuant to which any Person
is or may be entitled to receive any of the revenues or earnings, or any
payment based thereon or calculated in accordance therewith, of Acquiror or
any of its Significant Subsidiaries. No vote of the stockholders of
Acquiror is required in connection with the consummation of the Merger and
the other transactions contemplated hereby.
SECTION 4.10. REORGANIZATION.
To the knowledge of Acquiror, neither Acquiror, Acquiror Sub nor any
of Acquiror's Significant Subsidiaries has taken any action or failed to
take any action which action or failure would jeopardize the qualification
of the Merger as a reorganization within the meaning of Section 368(a) of
the Code.
SECTION 4.11. COMPLIANCE.
Neither Acquiror nor Acquiror Sub is aware of any fact or circumstance
related to them that could reasonably be expected to cause the filing of
any objection to any application for any Governmental consent required
hereunder, lead to any delay in processing such application, or require any
waiver of any Governmental rule, policy or other applicable Law.
SECTION 4.12. DISCLOSURE.
(a) None of the information supplied by Acquiror or Acquiror Sub
expressly for inclusion (and so included or relied on for information
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included) in (i) the Registration Statement and (ii) the Proxy Statement,
at the respective times that (w) the Registration Statement is filed with
the SEC, (x) the Registration Statement becomes effective, (y) the Proxy
Statement is mailed, and (z) any meeting of stockholders (and any
adjournment thereof) is held to consider, or written consents are effective
with respect to approval of, the transactions contemplated by this Merger
Agreement, shall contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein,
in light of the circumstances under which they are made, not misleading.
(b) No representation or warranty by Acquiror or Acquiror Sub,
and no Document furnished or to be furnished to the Company by Acquiror or
Acquiror Sub pursuant to this Merger Agreement or otherwise in connection
herewith or with the transactions contemplated hereby, 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 they were made, not
misleading.
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, carry on their
respective businesses only in the Ordinary Course of Business, use their
respective reasonable 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 reasonable
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, as consented to in writing
by Acquiror, or as provided in Schedule 5.01, 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 to, any director, officer or employee,
except for increases in the Ordinary Course of Business to employees
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who are not directors or officers and except for bonuses to the
employees and in the amounts set forth in Schedule 5.01(a)(i);
(ii) grant any severance or termination pay (other than pursuant to
the normal severance practices or existing Agreements of the Company
or any Subsidiary in effect on the date of this Merger Agreement as
described in Schedule 5.01(a)(ii)) to, or enter into any severance
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 benefits exceeding $10,000 in the aggregate not provided
for under any Plan 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 restricted stock, or the removal of
existing restrictions in any Plan or Other Arrangement or Agreement or
awards made thereunder), except for grants in the Ordinary Course of
Business (and subject to the limits set forth in Section 5.01(d)(iv)
in the case of grants of stock options) or as required under the
Agreements set forth in Schedule 5.01(a)(v), or (vi) take any action
to fund or in any other way secure the payment of compensation or
benefits under any Agreement, except as required under the Agreements
set forth in Schedule 5.01(a)(vi);
(b) declare, set aside or pay any dividend on, or make any other
distribution in respect of, outstanding shares of capital stock;
(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) except (i) in connection with Conversion-Merger Rights,
(ii) upon the exercise of Company Stock Options in accordance with
their terms, (iii) as required by the terms of the Hurley
Communications Agreement, or (iv) for grants of Company Stock Options
to directors and new employees in the Ordinary Course of Business, to
the extent that the aggregate number of shares of Company Common Stock
issuable under all Company Stock Options (whether or not vested)
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outstanding at any given time does not exceed 400,120, 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) except as contemplated by Agreements which have been
identified in Section 3.14(a) of the Company Disclosure Schedule,
acquire or agree to acquire, by merging or consolidating with, by
purchasing an equity interest in or a portion of the Assets of, or by
any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, or
otherwise acquire or agree to acquire any Assets of any other Person
(other than the purchase of assets from suppliers or vendors in the
Ordinary Course of Business);
(f) sell, lease, exchange, mortgage, pledge, transfer or
otherwise subject to any Encumbrance or dispose of, or agree to sell,
lease, exchange, mortgage, pledge, transfer or otherwise subject to
any Encumbrance or dispose of, any of its Assets, except for sales,
dispositions or transfers in the Ordinary Course of Business;
(g) adopt any amendments to its articles or certificate 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
ended December 31, 1997, except in either case as may be required by
Law, the IRS or GAAP;
(i) make or agree to make any new capital expenditure or
expenditures which are not included in the Company's July 1998 CLEC
Facilities Expansion Plan, a copy of which was furnished to Acquiror
(and, if the Effective Time has not occurred prior to the expiration
of the Company's July 1998 CLEC Facilities Expansion Plan, the
Company's subsequent capital budget, which budget shall have been
approved by Acquiror (such approval not to be unreasonably withheld)),
or which are in excess of $20,000,000 in equity in the aggregate;
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(j) (i) incur any indebtedness for borrowed money or guarantee
any such indebtedness of another Person (other than the Company or any
wholly owned Subsidiary), 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
(other than the Company or any wholly owned Subsidiary), enter into
any "keep well" or other Agreement to maintain any financial statement
condition of another Person (other than the Company or any wholly
owned Subsidiary) 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) 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 and other than the extension of credit to customers
of the Company or any Subsidiary in the Ordinary Course of Business;
(k) pay, discharge, settle or satisfy any 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 reflected or reserved against in, or contemplated by,
the most recent Financial Statement or incurred in the Ordinary Course
of Business, 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 change in any method of accounting or accounting
practice or policy other than those required by GAAP or a Governmental
Entity;
(n) 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 an Acquiror Material Adverse Effect
after the Effective Time, or that could reasonably be expected to
adversely affect the ability of the Company or any Subsidiary prior 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
(o) authorize, or commit or agree to do any of the foregoing.
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SECTION 5.02. OTHER ACTIONS.
The Company and Acquiror shall not, and shall not permit any of their
respective Affiliates to, knowingly 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 prepare and timely file with the relevant Taxing
authority all Company Tax Returns ("POST-SIGNING RETURNS") required to be
filed, which Post-Signing Returns shall be accurate in all material
respects, (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 Subsidiary 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, (a) afford to Acquiror and its
officers, employees, accountants, consultants, legal counsel and other
representatives reasonable access during normal business hours, subject to
reasonable advance notice, 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 may reasonably
request.
SECTION 5.05. NO SOLICITATION.
(a) The Company shall, shall use its reasonable best efforts to
cause its directors, and shall cause its officers, employees,
representatives, agents and Subsidiaries and their respective directors,
officers, employees, representatives and agents 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(a)).
The Company shall not, and shall cause the Subsidiaries not to, initiate,
solicit or encourage (including by way of furnishing information or
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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
reasonable 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 promptly notify Acquiror if any such
inquiries or proposals are received by the Company or any Subsidiary, or
any of its or their respective directors, officers, employees, agents,
investment bankers, financial advisors, attorneys, accountants or other
representatives, 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 (unless the Board of Directors of the Company, after consultation
with and based upon the written advice of independent legal counsel,
determines in good faith that such delivery would cause the Board of
Directors of the Company to breach its fiduciary duties to the Company
Stockholders), 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 fifteen percent (15%) or
more of the Assets of the Company and the Subsidiaries, taken as a whole,
or issuance of fifteen percent (15%) 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
fifteen percent (15%) 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 Stockholders of the Merger
Agreement or 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 after the date of this Merger Agreement which beneficially
owns or has the right to acquire beneficial ownership of, fifteen percent
(15%) or more of the then outstanding shares of capital stock of the
Company or any Subsidiary; or (vi) any Agreement to, or public announcement
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by the Company or any other Person of a proposal, plan or intention to, do
any of the foregoing.
(b) Notwithstanding anything to the contrary set forth in
subsection (a) above or elsewhere in this Merger Agreement, nothing
contained in this Merger Agreement shall prohibit the Board of Directors of
the Company from (i) furnishing information to, or entering into
discussions or negotiations with, any Person in connection with an
unsolicited BONA FIDE written proposal for a Competing Transaction from
such Person if (A) the Board of Directors of the Company, after
consultation with and based upon the written advice of independent legal
counsel, determines in good faith that such action is necessary for such
Board of Directors to comply with its fiduciary duties to the Company
Stockholders under applicable Law, (B) the Company enters into with such
Person a confidentiality agreement in reasonably customary form on terms
not more favorable to such Person than the terms contained in the
Confidentiality Agreement, and (C) the Board of Directors of the Company
reasonably believes in its good faith judgment after consultation with
independent financial advisors that such Person has the financial ability
to consummate a Competing Transaction; and (ii) failing to make or
withdrawing or modifying its recommendation for the Merger or making or
disclosing any position or taking any other action if the Board of
Directors of the Company, after consultation with and based on the written
advice of independent legal counsel, determines in good faith that such
action is necessary for such Board of Directors to comply with its
fiduciary duties to the Company Stockholders under applicable Law.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. REGISTRATION STATEMENT; PROXY STATEMENT
(a) As promptly as practicable after the execution of this
Merger Agreement, Acquiror shall prepare and file with the SEC a
registration statement on Form S-4 (such registration statement, together
with the amendments thereto being the "REGISTRATION STATEMENT"), containing
a proxy statement/prospectus, in connection with the registration under the
Securities Act of the shares of Acquiror Common Stock issuable pursuant to
Section 2.01, the vote of the Company Stockholders with respect to the
Merger (such proxy statement/prospectus, together with any amendments
thereof or supplements thereto, in each case in the form or forms mailed to
the Company Stockholders, being the "PROXY STATEMENT") and the other
transactions contemplated by this Merger Agreement. Acquiror agrees to
provide the Company with an opportunity to review and comment on the
Registration Statement and the Proxy Statement before filing. Acquiror
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agrees promptly to provide the Company with copies of all correspondence
from and all responsive correspondence to the SEC regarding the
Registration Statement and Proxy Statement. Acquiror agrees promptly to
notify the Company of all stop orders or threatened stop orders of which it
becomes aware with respect to the Registration Statement. Each of Acquiror
and the Company will use all reasonable efforts to have or cause the
Registration Statement to become effective as promptly as practicable, and
shall take any action required to be taken under any applicable federal or
state securities Laws in connection with the issuance of shares of Acquiror
Common Stock in the Merger. Each of Acquiror and the Company shall furnish
all information concerning it and the holders of its capital stock as the
other may reasonably request in connection with such actions. As promptly
as practicable after the Registration Statement shall have become
effective, the Company shall mail the Proxy Statement to its stockholders
and to the holders of Conversion-Merger Rights, and the Company shall
comply with the proxy solicitation rules and regulations under the Exchange
Act in connection with the solicitation of such stockholders and holders of
Conversion-Merger Rights. The Proxy Statement shall include the
recommendation of the Company's Board of Directors to the Company
Stockholders to vote to approve this Merger Agreement and the transactions
contemplated hereby, subject to Section 5.05(b) above.
(b) The information supplied by the Company for inclusion in the
Registration Statement shall not, at the time the Registration Statement is
declared effective, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in
order to make the statements therein not misleading. The information
supplied by the Company for inclusion in the Proxy Statement to be sent to
the Company Stockholders in connection with the meeting of the Company
Stockholders to consider the Merger (the "STOCKHOLDERS' MEETING") shall
not, at the date the Proxy Statement (or any amendment thereof or
supplement hereto) is first mailed to stockholders, at the time of the
Stockholders' Meeting or at the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they are made, not misleading.
If at any time prior to the Effective Time any event or circumstance
relating to the Company or any of its affiliates, or its or their
respective officers or directors, should be discovered by the Company which
should be set forth in an amendment to the Registration Statement or a
supplement to the Proxy Statement, the Company shall promptly inform
Acquiror. All documents that the Company is responsible for filing with
the SEC in connection with the transactions contemplated herein will comply
as to form and substance in all material respects with the applicable
requirements of the Securities Act and the rules and regulations thereunder
and the Exchange Act and the rules and regulations thereunder.
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(c) The information supplied by Acquiror for inclusion in the
Registration Statement shall not, at the time the Registration Statement is
declared effective, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in
order to make the statements therein not misleading. The information
supplied by Acquiror for inclusion in the Proxy Statement to be sent to the
Company Stockholders in connection with the Stockholders' Meeting shall
not, at the date the Proxy Statement (or any amendment thereof or
supplement thereto) is first mailed to stockholders, at the time of the
Stockholders' Meeting or at the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they are made, not misleading.
If at any time prior to the Effective Time any event or circumstance
relating to Acquiror or any of its respective affiliates, or its or their
respective officers or directors, should be discovered by Acquiror which
should be set forth in an amendment to the Registration Statement or a
supplement to the Proxy Statement, Acquiror shall promptly inform the
Company. All documents that Acquiror is responsible for filing with the
SEC in connection with the transactions contemplated herein will comply as
to form and substance in all material respects with the applicable
requirements of the Securities Act and the rules and regulations thereunder
and the Exchange Act and the rules and regulations thereunder.
(d) The Company and Acquiror each hereby (i) consents to the use
of its name and, on behalf of its subsidiaries and affiliates, the names of
such subsidiaries and affiliates and to the inclusion of financial
statements and business information relating to such party and its
subsidiaries and affiliates (in each case, to the extent required by
applicable securities Laws) in any registration statement or proxy
statement prepared by the Company or Acquiror pursuant to this Merger
Agreement; (ii) agrees to use its reasonable best efforts to obtain the
written consent of any Person retained by it which may be required to be
named (as an expert or otherwise) in such registration statement or proxy
statement; and (iii) agrees to cooperate, and to use its reasonable best
efforts to cause its subsidiaries and affiliates to cooperate, with any
legal counsel, investment banker, accountant or other agent or
representative retained by any of the parties specified in clause (i) in
connection with the preparation of any and all information required, as
determined after consultation with each party's counsel, to be disclosed by
applicable securities Laws in any such registration statement or proxy
statement.
SECTION 6.02. MEETING OF STOCKHOLDERS.
The Company shall promptly after the date of this Merger Agreement
take all action necessary in accordance with Delaware Law and its
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certificate of incorporation and bylaws to duly call, give notice of,
convene and hold the Stockholders' Meeting, and the Company shall consult
with Acquiror in connection therewith. Subject to Section 5.05(b) above,
the Company shall use its reasonable best efforts to solicit from the
Company Stockholders proxies or consents to approve this Merger Agreement
and the transactions contemplated hereby and shall take all other
reasonable actions necessary or advisable to secure the vote or consent of
the Company Stockholders required by Delaware Law to approve this Merger
Agreement and the transactions contemplated hereby.
SECTION 6.03. 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
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 making 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 discussing 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
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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 prior to or 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
Common 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 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.
SECTION 6.04. LETTERS OF ACCOUNTANTS.
The Company shall use its reasonable best efforts to cause to be
delivered to Acquiror "cold comfort" letters of Olsen Thielen & Co., LLC
dated the date on which the Registration Statement shall become effective
and the Effective Time, respectively, and addressed to Acquiror, reasonably
customary in scope and substance for letters delivered by independent
public accountants in connection with registration statements similar to
the Registration Statement and transactions such as those contemplated by
this Merger Agreement.
SECTION 6.05. UPDATE DISCLOSURE; BREACHES.
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, (ii) the occurrence, or non-occurrence, of any event
the occurrence, or non-occurrence, of which would be likely to cause any
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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, Acquiror or Acquiror Sub,
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 6.05
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
updated versions of Sections 3.10 and 3.14(a) of the Company Disclosure
Schedule as of the Closing Date, solely to reflect 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.
SECTION 6.06. PUBLIC ANNOUNCEMENTS.
Acquiror, Acquiror Sub 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 as may be required
by Law or any listing agreement with the NASD (as defined in Article X).
SECTION 6.07. EMPLOYEE MATTERS.
The Company and Acquiror shall use their respective reasonable best
efforts to cause the officers and employees of the Company and the
Subsidiaries listed in SCHEDULE 6.07 (the "COMPANY KEY EMPLOYEES") to enter
into employment, confidentiality and non-competition agreements, in the
form of Acquiror's standard Employment, Confidentiality and Non-Competition
Agreement, a copy of which is attached hereto as EXHIBIT D (the "EMPLOYMENT
AGREEMENTS"), at or prior to the Effective Time.
SECTION 6.08. 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
September 30, 1998 (the "UNAUDITED BALANCE SHEETS") and the related
unaudited consolidated statements of income of the Company and the
Subsidiaries for the one-month periods then ended (together with the
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Unaudited Balance Sheets, the "UNAUDITED FINANCIAL STATEMENTS"). The
Company will ensure that such Unaudited Financial 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 as of and for the
respective dates and time periods in accordance with accounting principles
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 6.09. ENVIRONMENTAL MATTERS.
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).
SECTION 6.10. POST-SIGNING SEC DOCUMENTS.
Each of the Company and Acquiror will file with the SEC all reports,
schedules, forms, statements and other Documents required to be filed by it
after the date of this Merger Agreement but before the Effective Time (in
the case of the Company, the "COMPANY POST-SIGNING SEC DOCUMENTS" and, in
the case of Acquiror, the "ACQUIROR POST-SIGNING SEC DOCUMENTS").
SECTION 6.11. STANDSTILL AGREEMENT.
If this Merger Agreement is terminated for any reason other than as a
result of the Company's willful failure to perform any covenant or
agreement or willful breach of any representation or warranty contained in
this Merger Agreement, and subject to compliance by the Company with the
terms of Section 8.03, then, for a period of three (3) years from the date
of this Merger Agreement, Acquiror shall not, directly or indirectly,
except pursuant to this Merger Agreement: (a) acquire or agree, offer,
seek or propose to acquire, or cause to be acquired, ownership of fifteen
percent (15%) or more of the Company's assets or businesses or fifteen
percent (15%) or more of the voting securities issued by the Company, or
any other rights or options to acquire such ownership (including from a
third party); (b) seek or propose to influence or control the Company's
management or policies, except that nothing contained herein shall restrict
Acquiror's right to vote any voting securities of the Company owned by
Acquiror; or (c) enter into any discussions, negotiations, arrangements or
understandings with any third party with respect to any of the foregoing.
SECTION 6.12. AFFILIATES; TAX TREATMENT.
Prior to the Effective Time, the Company shall use its reasonable best
efforts to obtain Affiliate Agreements from each Person listed in
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Section 3.38 of the Company Disclosure Schedule and any Person who may be
deemed to have become an affiliate of the Company (under SEC Rule 145 of
the Securities Act) after the date of this Merger Agreement and on or prior
to the Effective Time, PROVIDED that the Company shall use its reasonable
best efforts to obtain Affiliate Agreements from each such Person as soon
as practicable after the date of this Merger Agreement or the date on which
such Person attains such status, as the case may be. Each party hereto
shall use its reasonable best efforts to cause the Merger to qualify, and
shall not take any actions which could prevent the Merger from qualifying,
as a reorganization under the provisions of Section 368(a) of the Code.
SECTION 6.13. TAX RETURNS.
To the extent permitted under applicable Tax Laws, the Merger shall be
reported as a "reorganization" within the meaning of Section 368(a) of the
Code in all federal, state and local Tax Returns filed after the Effective
Time. Notwithstanding any other provision of this Merger Agreement, the
obligations set forth in this Section 6.13 shall survive the Effective Time
without limitation as to time or in any other respect.
SECTION 6.14. REORGANIZATION.
During the period from the date of this Merger Agreement through the
Effective Time, unless Acquiror and the Company shall otherwise agree in
writing, Acquiror and the Company shall not, and shall cause their
respective subsidiaries not to, knowingly take or fail to take any action
which action or failure would jeopardize the qualification of the Merger as
a reorganization within the meaning of Section 368(a) of the Code.
SECTION 6.15. DIRECTORS' AND OFFICERS' INSURANCE; INDEMNIFICATION.
Acquiror agrees that for the entire period from the Effective Time
until at least six (6) years after the Effective Time, (a) Acquiror will
cause the Surviving Corporation to maintain and to honor (including,
without limitation, by providing the Surviving Corporation with sufficient
funding) the Company's current directors' and officers' insurance and
indemnification policy and related arrangements, or an equivalent policy
and related arrangements, subject in either case to terms and conditions no
less advantageous to the present and former directors and officers of the
Company than those contained in the policy and arrangements in effect on
the date hereof, for all present and former directors and officers of the
Company, covering claims made and insurable events occurring prior to or
within six (6) years after the Effective Time (provided that the Surviving
Corporation will not be required to maintain such policy except to the
extent that the aggregate annual cost of maintaining such policy is not in
excess of two hundred percent (200%) of the current annual cost, in which
case the Surviving Corporation shall maintain such policies up to an annual
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cost of two hundred percent (200%) of the current annual cost); and
(b) Acquiror will cause the Surviving Corporation to maintain and to honor
(including, without limitation, by providing the Surviving Corporation with
sufficient funding) indemnification provisions, including, without
limitation, provisions for expense advances, for present and former
officers and directors in the Surviving Corporation's certificate of
incorporation and bylaws and the Agreements set forth in Schedule 6.15 to
the fullest extent permitted by Delaware Law. In the event of any
threatened or actual claim, action, suit, proceeding or investigation,
whether civil, criminal or administrative, including, without limitation,
any such claim, action, suit proceeding or investigation in which any of
the present or former officers or directors (the "MANAGERS") of the Company
is, or is threatened to be, made a party by reason of the fact that such
Manager is or was a director, officer, employee or agent of the Company, or
is or was serving at the request of the Company as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust
or other entity, whether before or after the Effective Time, the parties
hereto agree to cooperate and use their reasonable best efforts to defend
against and respond thereto. It is understood and agreed that the Company
shall indemnify and hold harmless, and after the Effective Time each of the
Surviving Corporation and Acquiror shall indemnify and hold harmless, as
and to the full extent that the Surviving Corporation would be permitted by
applicable Law (and as to matters arising from or relating to this Merger
Agreement and the possible change in control of the Company, to the full
extent that Acquiror would be permitted under applicable Law), each such
Manager against any losses, claims, damages, liabilities, costs, expenses
(including reasonable attorneys' fees), judgments, fines and amounts paid
in settlement in connection with any such claim, action, suit, proceeding
or investigation; and in the event of any such claim, action, suit,
proceeding or investigation (whether arising before or after the Effective
Time), (i) the Managers may retain counsel satisfactory to them, and the
Company, or the Surviving Corporation and Acquiror after the Effective
Time, shall pay all reasonable fees and expenses of such counsel for the
Managers promptly as statements therefor are received whether before or
after final determination of the matter, and (ii) the Company, or the
Surviving Corporation and Acquiror after the Effective Time, will use their
respective reasonable best efforts to assist in the vigorous defense of any
such matter; PROVIDED that neither the Company nor the Surviving
Corporation or Acquiror shall be liable for any settlement effected without
its prior written consent (which consent shall not be unreasonably
withheld); and PROVIDED FURTHER that the Company's, the Surviving
Corporation's and Acquiror's obligations hereunder shall only be reduced or
relieved when and if a court of competent jurisdiction shall ultimately
determine, and such determination shall have become final and non-
appealable, that indemnification of such Manager in the manner contemplated
is prohibited by applicable Law.
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SECTION 6.16. OBLIGATIONS OF ACQUIROR SUB.
Acquiror shall take all action necessary to cause Acquiror Sub and,
after the Effective Time, the Surviving Corporation, to perform its
obligations under this Merger Agreement and to cause Acquiror Sub to
consummate the Merger on the terms and conditions set forth in this Merger
Agreement.
SECTION 6.17. ADVISORY COMMITTEE.
Acquiror and the Company agree that following the Effective Time
(a) (i) those persons serving as members of the Board of Directors of the
Company as of the date hereof who are also serving as members of the Board
of Directors of the Company immediately prior to the Effective Time and
(ii) Edward D. Christensen, Jr., in each case provided such individuals do
not become employees of Acquiror, the Surviving Corporation or any of
Acquiror's subsidiaries following the Effective Time, shall be offered
positions on an advisory committee (the "ADVISORY COMMITTEE") that will be
established by and provide certain consulting services to the Board of
Directors of the Surviving Corporation at the request and direction of the
Board of Directors of the Surviving Corporation; (b) each person accepting
such a position on the Advisory Committee (the "ADVISORY COMMITTEE
MEMBERS") shall receive as compensation (i) a one-time grant of an option
to purchase 2,000 shares of Acquiror Common Stock pursuant to Acquiror's
1996 Employee Stock Option Plan and (ii) a quarterly fee of $2,000, plus
reimbursement for reasonable out-of-pocket travel expenses incurred in
connection with service as an Advisory Committee Member; (c) each Advisory
Committee Member shall be entitled to participate, at such Advisory
Committee Member's expense, in the medical and health insurance plans of
the Surviving Corporation as in effect from time to time, to the extent
permitted by the terms of such plans; and (d) the Advisory Committee shall
continue until the fifth anniversary of the Effective Time unless
terminated earlier by decision of Acquiror and the unanimous vote of the
Advisory Committee.
SECTION 6.18. CAPITALIZATION OF THE SURVIVING CORPORATION.
Promptly following the Closing, Acquiror will make a capital
contribution to the Surviving Corporation in the amount of $20,000,000.
SECTION 6.19. ACQUIROR OPTION SHARES.
Acquiror will use its reasonable best efforts to insure that any
shares of Acquiror Common Stock issued upon exercise of the Acquiror
Options referred to in Section 2.04 will be registered under the Securities
Act pursuant to a registration statement on Form S-8 and will be approved
for listing (subject to official notice of issuance) by The Nasdaq Stock
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Market's National Market System or an exchange, if shares of Acquiror
Common Stock are traded on such exchange.
SECTION 6.20. DARK FIBER LEASE AGREEMENT.
Immediately following the execution of this Merger Agreement, the
Company and Acquiror shall enter into a Dark Fiber Lease Agreement in the
form attached hereto as EXHIBIT E.
SECTION 6.21. CERTAIN POST-MERGER OPERATIONS.
It is the present intention of Acquiror that, following the Effective
Time:
(a) the Surviving Corporation will continue its corporate
existence as a wholly owned subsidiary of Acquiror, operating under the
name "Dakota Telecommunications Group, Inc.," and will continue to own and
operate all of its wholly owned subsidiaries;
(b) the principal place of business and main corporate office of
the Surviving Corporation will continue to be located at the Company's main
corporate office in Irene, South Dakota;
(c) no employee of the Company or any Subsidiary will be
terminated or suffer a reduction in salary or a change of employment title
or be required to relocate their residence solely as a result of the
Merger; PROVIDED, HOWEVER, that nothing herein will be deemed to prohibit
or limit in any way the ability of the Company or any of its subsidiaries
to terminate, reduce the salary or change the title of any employee between
the date hereof and the Effective Time;
(d) Acquiror will, or will cause the Surviving Corporation to,
continue to provide charitable contributions and community support within
the service areas of the Company and each of the Subsidiaries at levels
substantially comparable to the levels of charitable contributions and
community support provided by the Company and the Subsidiaries within their
service areas during the two-year period immediately prior to the date of
this Merger Agreement;
(e) Acquiror will honor, or will cause the Surviving Corporation
to honor, the obligations of the Company and the Subsidiaries under all
existing cable franchises granted by any community to the Company or any
Subsidiary; and
(f) the compensation and benefits of the employees of the
Company and the Subsidiaries, taken as a whole, will be at least equivalent
to current levels, except as adjusted for individual performance and except
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that the mix of compensation and benefits is anticipated to change over
time; a committee of employees of the Company and Acquiror will review the
current benefits of employees in order to make recommendations regarding
the future mix of compensation and benefits.
SECTION 6.22. FORFEITURE OF UNCLAIMED CREDITS.
The Company shall use its reasonable best efforts to take the actions
required pursuant to Section 47-16-54 ET SEQ. of the South Dakota Codified
Laws regarding the forfeiture of unclaimed credits.
ARTICLE VII
CONDITIONS PRECEDENT
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) EFFECTIVENESS OF THE REGISTRATION STATEMENT. The
Registration Statement shall have been declared effective by the SEC
under the Securities Act. No stop order suspending the effectiveness
of the Registration Statement shall have been issued by the SEC and no
proceedings for that purpose shall have been initiated or, to the
knowledge of Acquiror or the Company, threatened by the SEC. Acquiror
shall have received all other federal or state securities permits and
other authorizations necessary to issue Acquiror Common Stock in
exchange for Company Common Stock and to consummate the Merger.
(b) STOCKHOLDER APPROVAL. This Merger Agreement and the Merger
shall have been approved and adopted by the requisite vote of the
Company Stockholders.
(c) 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 or other order (whether temporary,
preliminary or permanent), in any case which is in effect and which
prevents or prohibits consummation of the Merger; PROVIDED, HOWEVER,
that each of the parties shall use its reasonable best efforts to
cause any such decree, judgment, injunction or other order to be
vacated or lifted.
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(d) HSR ACT. The applicable waiting period, together with any
extensions thereof, under the HSR Act shall have expired or been
terminated.
(e) OTHER APPROVALS. All consents, waivers, approvals and
authorizations required to be obtained, and all filings or notices
required to be made, by Acquiror or 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 Delaware 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, Acquiror Sub or any
of their respective directors or officers to criminal liability or
substantial penalties.
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. Each of the representations
and warranties of the Company 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 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 a Company Material Adverse
Effect, 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 or chief financial officer of the Company to that effect.
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(b) UPDATED COMPANY DISCLOSURE SCHEDULE. The revised versions
of Sections 3.10 and 3.14(a) of the Company Disclosure Schedule
delivered to Acquiror pursuant to Section 6.05 shall not disclose any
Company Material Adverse Effect as compared to such Sections of the
Company Disclosure Schedule as of the date of this Merger Agreement.
(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 or 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) OPINIONS OF COUNSEL. Acquiror shall have received from
Warner Norcross & Judd LLP, counsel to the Company, and David
Buechler, Esq., South Dakota counsel to the Company, opinions dated
the Closing Date, substantially in the forms attached hereto as
EXHIBIT F-1 and EXHIBIT F-2, respectively, and Acquiror shall have
received from Latham & Watkins, regulatory counsel to the Company, an
opinion dated the Closing Date, in usual and customary form reasonably
acceptable to the Company, to the effect of the opinion attached
hereto as EXHIBIT F-3.
(f) 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 Stock into Acquiror Common Stock pursuant
to the Merger, or seeking to place limitations on the ownership of
shares of Company Common Stock (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.
(g) ACCOUNTANT LETTERS. Acquiror shall have received from the
Company "cold comfort" letters of Olsen Thielen & Co. LLC dated the
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date on which the Registration Statement shall become effective and
the Effective Time, respectively, and addressed to Acquiror,
reasonably customary in scope and substance for letters delivered by
independent public accountants in connection with registration
statements similar to the Registration Statement and transactions such
as those contemplated by this Merger Agreement.
(h) FRACTIONAL SHARES. The aggregate of the fractional share
interests in Acquiror Common Stock to be paid in cash pursuant to
Section 2.02(e) of this Merger Agreement shall not be more than 5% of
the maximum aggregate number of shares of Acquiror Common Stock which
could be issued as a result of the Merger.
(i) EMPLOYMENT AGREEMENTS. Acquiror shall have received
executed copies of Employment Agreements from the Company Key
Employees unless the failure to receive an executed Employment
Agreement from any such Company Key Employee is the result of the
death or disability of such Company Key Employee.
(j) COMPANY MATERIAL ADVERSE EFFECT. Since December 31, 1997,
there shall not have occurred a Company Material Adverse Effect (or
any development that, insofar as reasonably can be foreseen, is
reasonably likely to result in any Company Material Adverse Effect)
not disclosed in the Company Disclosure Schedule.
(k) AFFILIATE AGREEMENTS. Acquiror shall have received, after
the date of this Merger Agreement and on or prior to the Closing Date,
a signed Affiliate Agreement from each Person listed in Section 3.38
of the Company Disclosure Schedule and any other Person who may be
deemed to have become an affiliate of the Company (under Rule 145 of
the Securities Act).
(l) TAX OPINION. Acquiror shall have received the opinion of
Hogan & Hartson L.L.P., counsel to Acquiror, in the form of EXHIBIT G,
dated the Closing Date, to the effect that the Merger will not result
in taxation to Acquiror or Acquiror Sub under the Code. In rendering
such opinion, Hogan & Hartson L.L.P. shall require delivery of and
rely upon the representation letters delivered by Acquiror, Acquiror
Sub and the Company substantially in the forms of EXHIBIT H and
EXHIBIT I hereto.
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:
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(a) REPRESENTATIONS AND WARRANTIES. Each of the representations
and warranties of Acquiror and Acquiror Sub 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 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 an Acquiror
Material Adverse Effect, 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 the chief executive officer or chief financial officer
of Acquiror to that effect.
(b) AGREEMENTS AND COVENANTS. Acquiror and Acquiror Sub 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 them on or prior to the Effective Time.
The Company shall have received a certificate of the chief executive
officer or chief financial officer of Acquiror and Acquiror Sub to
that effect.
(c) OPINION OF COUNSEL. The Company shall have received from
Hogan & Hartson L.L.P., counsel to Acquiror and Acquiror Sub, an
opinion dated the Closing Date, substantially in the form attached
hereto as EXHIBIT J.
(d) 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 Stock into Acquiror Common Stock pursuant
to the Merger, or (ii) seeking to restrain or prohibit the
consummation of the Merger.
(e) QUOTATION OF ACQUIROR COMMON STOCK. The Company shall have
received from Acquiror or The Nasdaq Stock Market's National Market
System evidence reasonably satisfactory to the Company that the shares
of Acquiror Common Stock to be issued in the Merger shall be quoted on
The Nasdaq Stock Market's National Market System immediately after the
Effective Time.
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(f) TAX OPINION. The Company shall have received the opinion of
Warner Norcross & Judd LLP, counsel to the Company, in the form of
EXHIBIT K, dated the Closing Date, to the effect that the Merger will
not result in taxation to the Company or the Company Stockholders
under the Code. In rendering such opinion, Warner Norcross & Judd LLP
shall require delivery of and rely upon the representation letters
delivered by Acquiror, Acquiror Sub and the Company substantially in
the forms of EXHIBIT L and EXHIBIT M hereto.
(g) AVERAGE TRADING PRICE. The Average Trading Price on the
Closing Date shall be greater than $10 per share of Acquiror Common
Stock; PROVIDED, HOWEVER, that if between the date of this Merger
Agreement and the Closing Date the outstanding shares of Acquiror
Common Stock shall have been changed into a different number of shares
or a different class by reason of any stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of
shares, then such dollar figure shall be appropriately and
correspondingly adjusted to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of
shares.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. TERMINATION.
This Merger Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of this Merger Agreement
and the Merger by the Company Stockholders:
(a) by mutual written consent of Acquiror and the Company;
(b) (i) by Acquiror, if there has been a breach by the Company
of any of its representations, warranties, covenants or agreements
contained in this Merger Agreement, or any such representation and
warranty shall have become untrue, in any such case such that
Section 7.02(a), Section 7.02(b) or Section 7.02(c) will not be
satisfied and such breach or condition has not been cured within ten
(10) business days following receipt by the Company of written notice
of such breach;
(ii) by the Company, if there has been a breach by Acquiror
or Acquiror Sub of any of its representations, warranties, covenants
or agreements contained in this Merger Agreement, or any such
representation and warranty shall have become untrue, in any such case
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such that Section 7.03(a) or Section 7.03(b) will not be satisfied and
such breach or condition has not been cured within ten (10) business
days following receipt by Acquiror of written notice of such breach;
(c) 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;
(d) by either Acquiror or the Company if the Agreement shall
fail to receive the requisite vote for approval and adoption by the
Company Stockholders at the Stockholders' Meeting;
(e) by either Acquiror or the Company if the Merger shall not
have been consummated by August 15, 1999; PROVIDED, HOWEVER, that this
Merger Agreement may be extended not more than sixty (60) days by
Acquiror or the Company by written notice to the other if the Merger
shall not have been consummated as a direct result of the Company
having failed by such date to receive all regulatory approvals or
consents required to be obtained by the Company with respect to the
Merger; PROVIDED FURTHER, that the right to terminate this Merger
Agreement under this Section 8.01(e) shall not be available to
(i) 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) 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; and
(f) by the Company, if in connection with a proposal for a
Competing Transaction the Board of Directors of the Company determines
in good faith, after consultation with and based upon the written
advice of independent legal counsel, that such action is necessary for
such Board of Directors to comply with their fiduciary duties under
applicable Law.
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, and each party hereby releases and waives
any claim that may otherwise exist in connection with this Merger Agreement
upon such termination, except (a) nothing herein shall (i) relieve any
party from liability for fraud or any willful or bad faith breach hereof or
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(ii) prevent any party from challenging the effectiveness of such
termination, and (b) Sections 6.11, 8.02, 8.03, 9.09 (with respect to
rights and obligations that survive termination) and 9.12 shall remain in
full force and effect and survive any termination of this Merger Agreement.
SECTION 8.03. EXPENSES.
(a) Subject to subsection (b) of this Section 8.03, whether or
not the Merger is consummated, all costs and expenses incurred in
connection with this Merger Agreement and the transactions contemplated
hereby, including the preparation of the Registration Statement, the Proxy
Statement and all other Documents contemplated hereby, shall be paid by the
party incurring such expense, except that expenses incurred in connection
with printing the documents distributed to Company Stockholders (including
the Proxy Statement) shall be paid by the Company and the registration and
filing fees incurred in connection with the Registration Statement and the
listing of the shares of Acquiror Common Stock to be issued pursuant hereto
on The Nasdaq Stock Market's National Market System, and fees, costs and
expenses associated with compliance with applicable state securities laws
in connection with the Merger shall be paid by Acquiror.
(b) If this Merger Agreement is terminated pursuant to
Section 8.01(f), then the Company shall (i) promptly, but in no event later
than three (3) business days after such termination, pay to Acquiror
$500,000, by wire transfer of immediately available funds to the account
designated by Acquiror and (ii) (A) if a Competing Transaction is
consummated prior to the first anniversary of such termination, then
simultaneously with the consummation of such Competing Transaction the
Company shall pay to Acquiror $2,000,000, by wire transfer of immediately
available funds to the account designated by Acquiror, or (B) if a
Competing Transaction is not consummated prior to the first anniversary of
such termination, then on the first anniversary of such termination the
Company shall, at its option, (1) pay to Acquiror $2,000,000, by wire
transfer of immediately available funds to the account designated by
Acquiror, or (2) issue to Acquiror 200,000 validly issued, fully paid and
non-assessable shares of Company Common Stock free of any preemptive rights
or any encumbrances, liens or charges of any kind, except that such shares
of Company Common Stock will not be registered under state or federal
securities Laws; PROVIDED, HOWEVER, that if between the date of this Merger
Agreement and the first anniversary of such termination the outstanding
shares of Company Common Stock shall have been changed into a different
number of shares or a different class by reason of any stock dividend,
subdivision, reclassification, recapitalization, split, combination or
exchange of shares, then such number of shares shall be appropriately and
correspondingly adjusted to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of
shares.
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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 Stockholders, no amendment may be made which would
reduce the amount or change the type of consideration into which each share
of Company Common 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
Article III or Article IV shall survive the Effective Time. This
Section 9.01 shall not limit any covenant or agreement of the parties which
by its terms contemplates performance after the Effective Time.
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):
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(a) If to Acquiror or Acquiror Sub:
McLeodUSA Incorporated
McLeodUSA Technology Park
6400 C Street SW
P.O. Box 3177
Cedar Rapids, Iowa 52406-3177
Telecopier No.: (319) 298-7901
Attention: Randall Rings
Vice President, General Counsel and Secretary
With a copy (which shall not constitute notice) to:
Hogan & Hartson L.L.P.
Columbia Square
555 Thirteenth Street, N.W.
Washington, DC 20004
Telecopier No.: (202) 637-5910
Attention: Joseph G. Connolly, Jr.
(b) If to the Company:
Dakota Telecommunications Group, Inc.
P.O. Box 66
29705 453rd Avenue
Irene, SD 57037-0066
Telecopier No.: (605) 263-3844
Attention: Thomas W. Hertz, Chairman and CEO
With a copy (which shall not constitute notice) to:
Warner Norcross & Judd LLP
900 Old Kent Building
111 Lyon Street, N.W.
Grand Rapids, MI 49503
Telecopier No.: (616) 752-2510
Attention: Tracy T. Larsen
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,
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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 (as defined in Article X) constitute the entire agreement of the
parties and supersede all prior agreements and undertakings, both written
and oral, among the parties, or any of them, with respect to the subject
matter hereof and, except as expressly provided in Section 9.07, 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, except for the provisions of
Section 6.15 and Section 6.17, which shall be for the benefit of, and shall
be enforceable by, the beneficiaries described therein and their heirs,
legal representatives, successors and assigns. Without limiting the
generality of the foregoing, the parties acknowledge and agree that
Section 6.21 shall under no circumstances be deemed to confer any right or
benefit upon any Person or be enforceable against any party or its
affiliates.
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. SPECIFIC PERFORMANCE.
In addition to any other remedies which any party may have at law or
in equity, (a) the Company hereby acknowledges that the Company Common
Stock and the Company and the Subsidiaries are unique, and that the harm to
Acquiror resulting from breaches by the Company of its obligations cannot
be adequately compensated by damages and (b) Acquiror and Acquiror Sub
hereby acknowledge that the Acquiror Common Stock and Acquiror and
Acquiror Sub are unique, and that the harm to the Company resulting from
breaches by the Acquiror or Acquiror Sub of their respective obligations
cannot be adequately compensated by damages. Accordingly, each party
agrees that the other parties shall have the right to have all obligations,
undertakings, agreements, covenants and other provisions of this Merger
Agreement specifically performed by such party and that the other parties
shall have the right to obtain an order or decree of such specific
performance in any of the courts of the United States of America or of any
state or other political subdivision thereof.
SECTION 9.10. GOVERNING LAW.
This Merger Agreement shall be governed by, and construed in
accordance with, the Laws of the State of Delaware, regardless of the Laws
that might otherwise govern under applicable principles of conflicts of
law.
SECTION 9.11. 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 9.12. CONFIDENTIALITY.
All information delivered to or obtained by or on behalf of any party
to this Merger Agreement shall be held pursuant to the Confidentiality
Agreement.
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.
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"ACQUIROR CLASS B COMMON STOCK" is defined in Section 4.09.
"ACQUIROR COMMON STOCK" means the Class A common stock, par value $.01
per share, of Acquiror.
"ACQUIROR DISCLOSURE SCHEDULE" is defined in Article IV.
"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), Assets or
liabilities of Acquiror and its subsidiaries, taken as a whole.
"ACQUIROR OPTIONS" is defined in Section 2.04.
"ACQUIROR POST-SIGNING SEC DOCUMENTS" is defined in Section 6.10.
"ACQUIROR SEC DOCUMENTS" is defined in Section 4.07.
"ACQUIROR SUB" is defined in the Preamble to this Merger Agreement.
"AFFILIATE" means: (a) with respect to an individual, any member of
such individual's family who resides in the same home; (b) with respect to
an entity, any officer, director, stockholder, partner or investor of or in
such entity; and (c) with respect to a Person, any Person which directly or
indirectly, through one or more intermediaries, Controls, is Controlled by,
or is under common Control with such Person.
"AFFILIATE" means, with respect to any Person, a Person that directly
or indirectly, through one or more intermediaries, Controls, is Controlled
by, or is under common Control with, such Person.
"AGREEMENT" means any concurrence of understanding and intention
between two or more Persons with respect to their relative rights and/or
obligations or with respect to a thing done or to be done (whether or not
conditional, executory, express, implied, in writing or meeting the
requirements of contract), including, without limitation, contracts,
leases, promissory notes, covenants, easements, rights of way, covenants,
commitments, arrangements and understandings.
"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.
"AVERAGE TRADING PRICE" means, on any given date, the average, during
the ten (10) trading days immediately prior to such date, of the daily
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closing prices for Acquiror Common Stock on The Nasdaq Stock Market's
National Market System as reported by Nasdaq.
"BENEFICIAL OWNER" means, with respect to any shares of Company Common
Stock, a Person who shall be deemed to be the beneficial owner of such
shares (i) which such Person or any of its affiliates or associates
beneficially owns, directly or indirectly, (ii) which such Person or any of
its affiliates or associates (as such term is defined in Rule 12b-2 under
the Exchange Act) has, directly or indirectly, (A) the right to acquire
(whether such right is exercisable immediately or subject only to the
passage of time), pursuant to any Agreement or upon the exercise of
conversion rights, exchange rights, warrants or options, or otherwise, or
(B) the right to vote pursuant to any Agreement, (iii) which are
beneficially owned, directly or indirectly, by any other Persons with whom
such Person or any of its affiliates or associates has any Agreement for
the purpose of acquiring, holding, voting or disposing of any such shares,
or (iv) pursuant to Section 13(d) of the Exchange Act and any rules or
regulations promulgated thereunder.
"BLUE SKY LAWS" means state securities or blue sky laws and the rules
and regulations thereunder.
"BUSINESS CRITICAL/Y2K CRITICAL" is defined in Section 3.43.
"BUSINESS DAY" means a day other than a Saturday, a Sunday or any
other day on which commercial banks in the State of South Dakota and in the
State of Iowa are authorized or obligated to be closed.
"CERTIFICATES" is defined in Section 2.02(b).
"CLOSING" is defined in Section 2.06.
"CLOSING DATE" is defined in Section 2.06.
"CLOSING EVENT" means a meeting to be held by certain officers of
Acquiror and certain officers and directors of the Company to acknowledge
and formally announce the Closing and to execute such Documents as may be
reasonably necessary to carry out such event.
"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.
"COMMUNICATIONS ACT" means the Communications Act of 1934, as amended,
and all Laws promulgated pursuant thereto or in connection therewith.
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"COMPANY" is defined in the Preamble to this Merger Agreement.
"COMPANY AFFILIATES" is defined in Section 3.38.
"COMPANY CAPITAL STOCK" is defined in Section 3.04.
"COMPANY COMMON STOCK" 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 KEY EMPLOYEES" is defined in Section 6.07.
"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), Assets or
liabilities of the Company and the Subsidiaries, taken as a whole.
"COMPANY POST-SIGNING SEC DOCUMENTS" is defined in Section 6.10.
"COMPANY PREFERRED STOCK" is defined in Section 3.04.
"COMPANY SEC DOCUMENTS" is defined in Section 3.08.
"COMPANY STOCK OPTIONS" is defined in Section 2.04.
"COMPANY STOCKHOLDERS" is defined in the Preamble to this Merger
Agreement.
"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
June 25, 1998 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).
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"CONVERSION-MERGER" means the transactions described in (i) Appendix A
to the Company's Registration Statement on Form S-4, Registration No. 333-
22025, filed with the SEC on June 12, 1997 and (ii) that certain Agreement
and Plan of Merger, dated as of February 14, 1997, between Dakota
Cooperative Telecommunications, Inc., Dakota Telecommunications Group, Inc.
and Dakota Telecommunications Group (Delaware), Inc.
"CONVERSION-MERGER RIGHTS" is defined in Section 2.01(a).
"COOPERATIVE" means Dakota Cooperative Telecommunications, Inc., the
predecessor of the Company prior to the Conversion-Merger.
"COOPERATIVE INTERESTS" mean shares of common stock, par value $5.00
per share, of the Cooperative, shares of preferred stock, par value $100.00
per share, of the Cooperative, and amounts credited on the books of the
Cooperative to the account of former members, which immediately prior to
the Effective Time had not been exchanged for shares of Company Common
Stock in connection with the Conversion-Merger and which represent the
right to receive shares of Company Common Stock.
"CORRECTIONS" is defined in Section 3.43.
"COST ASSESSMENT" is defined in Section 3.43.
"DATE ASSESSMENT" is defined in Section 3.43.
"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.
"DELAWARE LAW" is defined in the Preamble to this Merger Agreement.
"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, reports,
studies, financial statements (including, without limitation, the notes
thereto), other written financial information, schedules, certificates,
charts, maps, plans, photographs, letters, memoranda and all similar
materials.
"DOL" means the United States Department of Labor and its successors.
"EDUCATION" is defined in Section 3.43.
"EFFECTIVE TIME" is defined in Section 1.02.
"EMPLOYMENT AGREEMENTS" is defined in Section 6.07.
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"ENCUMBRANCE" means any mortgage, lien, pledge, encumbrance, security
interest, deed of trust, option, encroachment, reservation, order, decree,
judgment, condition, restriction, charge, Agreement, claim or equity of any
kind, 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 in the Financial
Statements and 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; and (iii) zoning restrictions, easements, licenses, covenants and
other restrictions affecting the use of the Real Property and of which no
executive officer of the Company or any Subsidiary has knowledge.
"ENVIRONMENTAL LAWS" means any Laws (including, without limitation,
the Comprehensive Environmental Response, Compensation, and Liability Act),
including any plans or other legally binding criteria promulgated pursuant
to such Laws, now or hereafter in effect relating to Hazardous Materials
generation, production, use, storage, treatment, transportation or
disposal, or noise control, or the protection of human health or the
environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and all Laws promulgated pursuant thereto or in connection
therewith.
"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.
"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).
"EXCHANGE RATIO" is defined in Section 2.01(a).
"FAA" means the United States Federal Aviation Administration and its
successors.
"FCC" means the United States Federal Communications Commission and
its successors.
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"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.
"GAAP" means United States generally accepted accounting principles.
"GOVERNMENTAL ENTITIES" (including the term "GOVERNMENTAL") means any
governmental, quasi-governmental or regulatory authority, whether domestic
or foreign.
"GROUP" is defined in Section 5.05(a).
"HAZARDOUS DISCHARGE" means any 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, radiation or
materials (whether solids, liquids or gases) that are regulated by a
Governmental Entity or defined or listed by a Governmental Entity as
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 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.
"HURLEY COMMUNICATIONS AGREEMENT" is defined in Section 3.04.
"IMPLEMENTATION" is defined in Section 3.43.
"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 (a) all inventions (whether patentable
or unpatentable and whether or not reduced to practice), all improvements
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thereto, and all patents, patent applications, and patent disclosures,
together with all reissuances, continuations, continuations-in-part,
revisions, extensions, and reexaminations thereof, (b) all trademarks,
service marks, trade dress, logos, trade names, and corporate names,
together with all translations, adaptations, derivations, and combinations
thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (c) all
copyrightable works, all copyrights, all rights to database information,
and all applications, registrations, and renewals in connection therewith,
(d) all mask works and all applications, registrations, and renewals in
connection therewith, (e) all trade secrets and confidential business
information (including ideas, research and development, know-how, formulas,
compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier
lists, pricing and cost information, and business and marketing plans and
proposals), (f) all computer software (including data and related
documentation), (g) all rights, including rights of privacy and publicity,
to use the names, likenesses and other personal characteristics of any
individual, (h) all other proprietary rights, and (i) all copies and
tangible embodiments thereof (in whatever form or medium) existing in any
part of the world.
"IRS" means the United States Internal Revenue Service and its
successors.
"IUB" means the Iowa Utilities Board.
"KNOWLEDGE" (including the terms "KNOWING" and "KNOWINGLY") will be
deemed to be present with respect to the Company and the Subsidiaries, on
the one hand, or Acquiror, on the other hand, when the matter in question
was brought to the attention of or, if due diligence had been exercised,
would have been brought to the attention of, any officer or responsible
employee of the Company or any Subsidiary, on the one hand, or Acquiror, on
the other hand.
"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).
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"LICENSE" means any franchise, grant, authorization, license, tariff,
permit, easement, variance, exemption, consent, certificate, approval or
order of any Governmental Entity.
"MANAGERS" is defined in Section 6.15.
"MERGER" is defined in the Preamble to this Merger Agreement.
"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").
"MPUC" means the Minnesota Public Utilities Commission.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" as such term is
defined in Section 3(37) of ERISA.
"NASD" means the National Association of Securities Dealers, Inc.
"NDPSC" means the North Dakota Public Service Commission.
"ORDINARY COURSE OF BUSINESS" means ordinary course of business
consistent with past practices and, in the reasonable judgment of a
diligent businessman, prudent business operations.
"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.
"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
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<PAGE>
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.
"PROXY STATEMENT" is defined in Section 6.01(a).
"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 owned, operated, or used by
the Company or any of the Subsidiaries as of December 31, 1996, and any
additional real property owned, operated, or used since that date, and, for
purposes of Section 3.33, any real property formerly owned or operated by
the Company or any of the Subsidiaries.
"REGISTRATION STATEMENT" is defined in Section 6.01(a).
"REPLACEMENT" is defined in Section 3.43.
"REPRESENTATIVE" is defined in Section 2.02(h).
"RIGHTS" is defined in Section 3.04.
"RIGHTS AGREEMENT" is defined in Section 3.04.
"SDPUC" means the South Dakota Public Utilities Commission.
"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.
"SIGNIFICANT SUBSIDIARY" means any subsidiary of Acquiror disclosed in
its most recent Annual Report on Form 10-K, and any other subsidiary that
would constitute a "Significant Subsidiary" of Acquiror within the meaning
of Rule 1-02 of Regulation S-X of the SEC.
"STATUTORY-WAIVER PLAN" means a Pension Plan that is not subject to
Title I, Subtitle B, Part 3, of ERISA (concerning "funding").
"STOCKHOLDERS' MEETING" is defined in Section 6.01(b).
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<PAGE>
"SUBSIDIARY" means a corporation, partnership, joint venture or other
entity of which the Company 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.
"SURVEY" is defined in Section 3.43.
"TAXES" (including the terms "TAX" and "TAXING") 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.
"TESTING & VERIFICATION" is defined in Section 3.43.
"TITLE I PLAN" means a Plan that is subject to Title I of ERISA.
"UNAUDITED BALANCE SHEETS" is defined in Section 6.08.
"UNAUDITED FINANCIAL STATEMENTS" is defined in Section 6.08.
"VOTING AGREEMENTS" is defined in the Preamble to this Merger
Agreement.
"WELFARE PLAN" means an "employee welfare benefit plan" as such term
is defined in Section 3(1) of ERISA.
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<PAGE>
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.
MCLEODUSA INCORPORATED
By: /s/Stephen C. Gray
Name: Stephen C. Gray
Title: President and Chief Operating Officer
WEST GROUP ACQUISITION CO.
By: /s/Stephen C. Gray
Name: Stephen C. Gray
Title: President and Chief Operating Officer
DAKOTA TELECOMMUNICATIONS
GROUP, INC.
By: /s/Thomas W. Hertz
Name: Thomas W. Hertz
Title: Chief Executive Officer
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EXHIBIT 99.1
FORM OF VOTING AGREEMENT
This VOTING AGREEMENT ("Voting Agreement") is entered into as
of October __, 1998 by and among McLeodUSA Incorporated, a Delaware
corporation ("Acquiror"), West Group Acquisition Co., a Delaware
corporation and a wholly owned subsidiary of Acquiror ("Acquiror Sub"),
and ______________, a stockholder (the "Stockholder") of Dakota
Telecommunications Group, Inc., a Delaware corporation (the "Company").
WHEREAS, pursuant to an Agreement and Plan of Merger, dated as
of October ___, 1998 (the "Merger Agreement"), by and among Acquiror,
Acquiror Sub and the Company, Acquiror Sub will be merged with and into
the Company (the "Merger") and, as a result of the Merger, the separate
corporate existence of Acquiror Sub shall cease and the Company shall
continue as the surviving corporation of the Merger (the "Surviving
Corporation");
WHEREAS, the Company, as the Surviving Corporation of the
Merger, will become a wholly owned subsidiary of Acquiror; and
WHEREAS, in order to induce Acquiror and Acquiror Sub to enter
into the Merger Agreement, the Stockholder has agreed to execute and
deliver to Acquiror this Voting Agreement;
NOW, THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS. Capitalized terms used and not defined
herein shall have the meanings specified in the Merger Agreement.
2. VOTING; FURTHER ASSURANCES. The Stockholder hereby
irrevocably agrees, for the period from the date hereof through the date
on which the Merger is consummated or the Merger Agreement is terminated
in accordance with the terms thereof, whichever is earlier (such period
being hereinafter referred to as the "Term"), to cast all votes
attributable to Company Capital Stock then beneficially owned by the
Stockholder and over which the Stockholder has voting power (the
"Shares") at any annual or special meeting of stockholders of the
Company, including any adjournments or postponements thereof (a
"Meeting"), in favor of the approval and adoption of the Merger
Agreement and Articles of Merger and approval of the Merger and against
any Competing Transaction. The Stockholder further agrees to grant to
the persons designated by the Company's Board of Directors, as such
Board may be constituted from time to time, as such Board's attorneys-
<PAGE>
in-fact or proxies with respect to such Meeting, a specific written
proxy (in such form as the Company is soliciting from other stockholders
of the Company) to vote (or, if present in person at such Meeting, to
vote) all Company Capital Stock which the Stockholder is entitled to
vote in favor of the approval and adoption of the Merger Agreement and
Articles of Merger and approval of the Merger and against any Competing
Transaction. Nothing in this Voting Agreement is intended to restrict
or limit the Stockholder's rights or obligations solely and exclusively
in his capacity as a director of the Company with respect to failing to
make or withdrawing or modifying his recommendation for the Merger or
making or disclosing any position or taking any other action if the
Board of Directors of the Company, after consultation with and based on
the written advice of independent legal counsel, determines in good
faith that such action is necessary for such Board of Directors to
comply with its fiduciary duties to the Company Stockholders under
applicable Law. The Stockholder agrees that he shall not enter into
any agreement or understanding the effect of which would be inconsistent
with or violative of the provisions and agreements contained herein,
including in this Section 2.
3. RESTRICTION ON TRANSFER, PROXIES AND NON-INTERFERENCE.
The Stockholder hereby agrees during the Term, and except as
specifically contemplated hereby, not to (i) directly or indirectly
sell, transfer, pledge, encumber, assign or otherwise dispose of, or
enter into any contract, option or other arrangement or understanding
with respect to the sale, transfer, pledge, encumbrance, assignment or
other disposition of, any of the Shares except to the extent a
transferee of the Shares, prior to and as a condition to any transfer of
the Shares, executes and delivers an agreement in substantially the form
hereof or such transfer is otherwise approved in advance in writing by
Acquiror and Acquiror Sub, (ii) grant any proxies, deposit any Shares
into a voting trust or enter into a voting agreement with respect to any
Shares or (iii) voluntarily take any action which would have the effect
of preventing or inhibiting the Stockholder from performing his
obligations under this Voting Agreement.
4. NO CONFLICT. The Stockholder hereby represents and
warrants to Acquiror and Acquiror Sub that the execution and delivery
of this Voting Agreement by such Stockholder does not, and the
performance of his obligations under this Voting Agreement will not,
(i) conflict with or violate any law, statute, ordinance, rule,
regulation, order, judgment or decree applicable to such Stockholder
or by which he or any of his properties is bound or affected, or
(ii) result in any breach of or constitute a default (or an event
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<PAGE>
which with or without notice or lapse of time or both would become a
default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation
of an Encumbrance on any of the Shares, pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which such Stockholder
is a party or by which such Stockholder or any of his Shares is bound
or affected, except for any such conflicts, violations, breaches,
defaults or other alterations or occurrences that would not prevent
the performance by such Stockholder of his obligations under this
Voting Agreement.
5. UNDERSTANDING OF THIS VOTING AGREEMENT. The
Stockholder has carefully read this Voting Agreement and has discussed
its requirements, to the extent such Stockholder believes necessary,
with his 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 Voting Agreement.
6. HEADINGS. The headings of the Sections of this Voting
Agreement are inserted for convenience of reference only and do not form
a part or affect the meaning hereof.
7. COUNTERPARTS. This Voting Agreement may be executed in
counterparts, each of which when so executed and delivered shall be an
original, but all of such counterparts shall together constitute one and
the same instrument.
8. ENTIRE AGREEMENT; ASSIGNMENT. This Voting Agreement
(i) constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, among the parties hereto with
respect to the subject matter hereof and (ii) shall not be assigned by
operation of law or otherwise.
9. GOVERNING LAW. This Voting Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware
regardless of the Laws that might otherwise govern under applicable
principles of conflicts of law.
10. SPECIFIC PERFORMANCE. The parties hereto agree that if
any of the provisions of this Voting Agreement are not performed in
accordance with their specific terms or are otherwise breached,
irreparable damage would occur, no adequate remedy at law would exist
and damages would be difficult to determine, and that the parties shall
be entitled to specific performance of the terms hereof, in addition to
any other remedy at law or equity.
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<PAGE>
11. PARTIES IN INTEREST. This Voting Agreement shall be
binding upon and inure solely to the benefit of each party hereto, and
nothing in this Voting Agreement, express or implied, is intended to or
shall confer upon any other person or persons any rights, benefits or
remedies of any nature whatsoever under or by reason of this Voting
Agreement.
12. AMENDMENT; WAIVERS. This Voting Agreement shall not be
amended, altered or modified except by an instrument in writing duly
executed by each of the parties hereto. No delay or failure on the part
of any party hereto in exercising any right, power or privilege under
this Voting Agreement shall impair any such right, power or privilege or
be construed as a waiver of any default or any acquiescence thereto. No
single or partial exercise of any such right, power or privilege shall
preclude the further exercise of such right, power or privilege, or the
exercise of any other right, power or privilege. No waiver shall be
valid against any party hereto, unless made in writing and signed by the
party against whom enforcement of such waiver is sought, and then only
to the extent expressly specified therein.
13. CONFLICT OF TERMS. In the event any provision of this
Voting Agreement is in direct conflict with, or inconsistent with, any
provision of the Merger Agreement, the provision of the Merger Agreement
shall control, except that no such provision in the Merger Agreement
shall impose additional duties on the Stockholder.
14. ADDITIONAL ACTIONS AND DOCUMENTS. Each of the parties
hereto hereby agrees to take or cause to be taken such further actions,
to execute, deliver and file or cause to be executed, delivered and
filed such further documents and instruments, and to obtain such
consents as may be necessary or as may be reasonably requested in order
to fully effectuate the purposes, terms and conditions of this Voting
Agreement.
15. TERMINATION. This Voting Agreement, and all rights and
obligations hereunder, shall terminate at the end of the Term.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Voting Agreement, or have caused this Voting Agreement to
be duly executed and delivered in their names and on their behalf as of
the date first written above.
MCLEODUSA INCORPORATED
By: __________________________________
Name:
Title:
WEST GROUP ACQUISITION CO.
By: __________________________________
Name:
Title:
STOCKHOLDER
By: __________________________________
Name: _________________________
Address: _________________________
_________________________
_________________________
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<PAGE>
EXHIBIT 99.2
FORM OF VOTING AGREEMENT
This VOTING AGREEMENT ("Voting Agreement") is entered into as
of October __, 1998 by and among McLeodUSA Incorporated, a Delaware
corporation ("Acquiror"), West Group Acquisition Co., a Delaware
corporation and a wholly owned subsidiary of Acquiror ("Acquiror Sub"),
and ______________, a stockholder (the "Stockholder") of Dakota
Telecommunications Group, Inc., a Delaware corporation (the "Company").
WHEREAS, pursuant to an Agreement and Plan of Merger, dated as
of October ___, 1998 (the "Merger Agreement"), by and among Acquiror,
Acquiror Sub and the Company, Acquiror Sub will be merged with and into
the Company (the "Merger") and, as a result of the Merger, the separate
corporate existence of Acquiror Sub shall cease and the Company shall
continue as the surviving corporation of the Merger (the "Surviving
Corporation");
WHEREAS, the Company, as the Surviving Corporation of the
Merger, will become a wholly owned subsidiary of Acquiror; and
WHEREAS, in order to induce Acquiror and Acquiror Sub to enter
into the Merger Agreement, the Stockholder has agreed to execute and
deliver to Acquiror this Voting Agreement;
NOW, THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS. Capitalized terms used and not defined
herein shall have the meanings specified in the Merger Agreement.
2. VOTING; FURTHER ASSURANCES. The Stockholder hereby
irrevocably agrees, for the period from the date hereof through the date
on which the Merger is consummated or the Merger Agreement is terminated
in accordance with the terms thereof, whichever is earlier (such period
being hereinafter referred to as the "Term"), to cast all votes
attributable to Company Capital Stock then beneficially owned by the
Stockholder and over which the Stockholder has voting power (the
"Shares") at any annual or special meeting of stockholders of the
Company, including any adjournments or postponements thereof (a
"Meeting"), in favor of the approval and adoption of the Merger
Agreement and Articles of Merger and approval of the Merger and against
any Competing Transaction. The Stockholder further agrees to grant to
the persons designated by the Company's Board of Directors, as such
Board may be constituted from time to time, as such Board's attorneys-
<PAGE>
in-fact or proxies with respect to such Meeting, a specific written
proxy (in such form as the Company is soliciting from other stockholders
of the Company) to vote (or, if present in person at such Meeting, to
vote) all Company Capital Stock which the Stockholder is entitled to
vote in favor of the approval and adoption of the Merger Agreement and
Articles of Merger and approval of the Merger and against any Competing
Transaction. The Stockholder agrees that he shall not enter into
any agreement or understanding the effect of which would be inconsistent
with or violative of the provisions and agreements contained herein,
including in this Section 2.
3. RESTRICTION ON TRANSFER, PROXIES AND NON-INTERFERENCE.
The Stockholder hereby agrees during the Term, and except as
specifically contemplated hereby, not to (i) directly or indirectly
sell, transfer, pledge, encumber, assign or otherwise dispose of, or
enter into any contract, option or other arrangement or understanding
with respect to the sale, transfer, pledge, encumbrance, assignment or
other disposition of, any of the Shares except to the extent a
transferee of the Shares, prior to and as a condition to any transfer of
the Shares, executes and delivers an agreement in substantially the form
hereof or such transfer is otherwise approved in advance in writing by
Acquiror and Acquiror Sub, (ii) grant any proxies, deposit any Shares
into a voting trust or enter into a voting agreement with respect to any
Shares or (iii) voluntarily take any action which would have the effect
of preventing or inhibiting the Stockholder from performing his
obligations under this Voting Agreement.
4. NO CONFLICT. The Stockholder hereby represents and
warrants to Acquiror and Acquiror Sub that the execution and delivery
of this Voting Agreement by such Stockholder does not, and the
performance of his obligations under this Voting Agreement will not,
(i) conflict with or violate any law, statute, ordinance, rule,
regulation, order, judgment or decree applicable to such Stockholder
or by which he or any of his properties is bound or affected, or
(ii) result in any breach of or constitute a default (or an event
which with or without notice or lapse of time or both would become a
default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation
of an Encumbrance on any of the Shares, pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which such Stockholder
is a party or by which such Stockholder or any of his Shares is bound
or affected, except for any such conflicts, violations, breaches,
defaults or other alterations or occurrences that would not prevent
-2-
<PAGE>
the performance by such Stockholder of his obligations under this
Voting Agreement.
5. UNDERSTANDING OF THIS VOTING AGREEMENT. The
Stockholder has carefully read this Voting Agreement and has discussed
its requirements, to the extent such Stockholder believes necessary,
with his 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 Voting Agreement.
6. HEADINGS. The headings of the Sections of this Voting
Agreement are inserted for convenience of reference only and do not form
a part or affect the meaning hereof.
7. COUNTERPARTS. This Voting Agreement may be executed in
counterparts, each of which when so executed and delivered shall be an
original, but all of such counterparts shall together constitute one and
the same instrument.
8. ENTIRE AGREEMENT; ASSIGNMENT. This Voting Agreement
(i) constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, among the parties hereto with
respect to the subject matter hereof and (ii) shall not be assigned by
operation of law or otherwise.
9. GOVERNING LAW. This Voting Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware
regardless of the Laws that might otherwise govern under applicable
principles of conflicts of law.
10. SPECIFIC PERFORMANCE. The parties hereto agree that if
any of the provisions of this Voting Agreement are not performed in
accordance with their specific terms or are otherwise breached,
irreparable damage would occur, no adequate remedy at law would exist
and damages would be difficult to determine, and that the parties shall
be entitled to specific performance of the terms hereof, in addition to
any other remedy at law or equity.
11. PARTIES IN INTEREST. This Voting Agreement shall be
binding upon and inure solely to the benefit of each party hereto, and
nothing in this Voting Agreement, express or implied, is intended to or
shall confer upon any other person or persons any rights, benefits or
remedies of any nature whatsoever under or by reason of this Voting
Agreement.
12. AMENDMENT; WAIVERS. This Voting Agreement shall not be
amended, altered or modified except by an instrument in writing duly
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<PAGE>
executed by each of the parties hereto. No delay or failure on the part
of any party hereto in exercising any right, power or privilege under
this Voting Agreement shall impair any such right, power or privilege or
be construed as a waiver of any default or any acquiescence thereto. No
single or partial exercise of any such right, power or privilege shall
preclude the further exercise of such right, power or privilege, or the
exercise of any other right, power or privilege. No waiver shall be
valid against any party hereto, unless made in writing and signed by the
party against whom enforcement of such waiver is sought, and then only
to the extent expressly specified therein.
13. CONFLICT OF TERMS. In the event any provision of this
Voting Agreement is in direct conflict with, or inconsistent with, any
provision of the Merger Agreement, the provision of the Merger Agreement
shall control, except that no such provision in the Merger Agreement
shall impose additional duties on the Stockholder.
14. ADDITIONAL ACTIONS AND DOCUMENTS. Each of the parties
hereto hereby agrees to take or cause to be taken such further actions,
to execute, deliver and file or cause to be executed, delivered and
filed such further documents and instruments, and to obtain such
consents as may be necessary or as may be reasonably requested in order
to fully effectuate the purposes, terms and conditions of this Voting
Agreement.
15. TERMINATION. This Voting Agreement, and all rights and
obligations hereunder, shall terminate at the end of the Term.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Voting Agreement, or have caused this Voting Agreement to
be duly executed and delivered in their names and on their behalf as of
the date first written above.
MCLEODUSA INCORPORATED
By: __________________________________
Name:
Title:
WEST GROUP ACQUISITION CO.
By: __________________________________
Name:
Title:
STOCKHOLDER
By: __________________________________
Name: _________________________
Address: _________________________
_________________________
_________________________
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<PAGE>
EXHIBIT 99.3
FORM OF VOTING AGREEMENT
This VOTING AGREEMENT ("Voting Agreement") is entered into as
of October __, 1998 by and among McLeodUSA Incorporated, a Delaware
corporation ("Acquiror"), West Group Acquisition Co., a Delaware
corporation and a wholly owned subsidiary of Acquiror ("Acquiror Sub"),
and Craig A. Anderson, a stockholder (the "Stockholder") of Dakota
Telecommunications Group, Inc., a Delaware corporation (the "Company").
WHEREAS, pursuant to an Agreement and Plan of Merger, dated as of
October ___, 1998 (the "Merger Agreement"), by and among Acquiror, Acquiror
Sub and the Company, Acquiror Sub will be merged with and into the Company
(the "Merger") and, as a result of the Merger, the separate corporate
existence of Acquiror Sub shall cease and the Company shall continue as the
surviving corporation of the Merger (the "Surviving Corporation");
WHEREAS, the Company, as the Surviving Corporation of the Merger,
will become a wholly owned subsidiary of Acquiror; and
WHEREAS, in order to induce Acquiror and Acquiror Sub to enter
into the Merger Agreement, the Stockholder has agreed to execute and
deliver to Acquiror this Voting Agreement;
NOW, THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS. Capitalized terms used and not defined herein
shall have the meanings specified in the Merger Agreement.
2. VOTING; FURTHER ASSURANCES. The Stockholder hereby
irrevocably agrees, for the period from the date hereof through the date on
which the Merger is consummated or the Merger Agreement is terminated in
accordance with the terms thereof, whichever is earlier (such period being
hereinafter referred to as the "Term"), to cast all votes attributable to
Company Capital Stock then beneficially owned by the Stockholder and over
which the Stockholder has voting power but excluding shares of Company
Capital Stock held solely in a fiduciary capacity in such Stockholder's
capacity as a member of the Administrative Committee of the Dakota
Telecommunications Group, Inc. Employee Stock Ownership Plan (the "Shares")
at any annual or special meeting of stockholders of the Company, including
any adjournments or postponements thereof (a "Meeting"), in favor of the
approval and adoption of the Merger Agreement and Articles of Merger and
approval of the Merger and against any Competing Transaction. The
Stockholder further agrees to grant to the persons designated by the
<PAGE>
Company's Board of Directors, as such Board may be constituted from time to
time, as such Board's attorneys-in-fact or proxies with respect to such
Meeting, a specific written proxy (in such form as the Company is
soliciting from other stockholders of the Company) to vote (or, if present
in person at such Meeting, to vote) all Company Capital Stock which the
Stockholder is entitled to vote in favor of the approval and adoption of
the Merger Agreement and Articles of Merger and approval of the Merger and
against any Competing Transaction. Nothing in this Voting Agreement is
intended to restrict or limit the Stockholder's rights or obligations
solely and exclusively in his capacity as a director of the Company with
respect to failing to make or withdrawing or modifying his recommendation
for the Merger or making or disclosing any position or taking any other
action if the Board of Directors of the Company, after consultation with
and based on the written advice of independent legal counsel, determines in
good faith that such action is necessary for such Board of Directors to
comply with its fiduciary duties to the Company Stockholders under
applicable Law. The Stockholder agrees that he shall not enter into any
agreement or understanding the effect of which would be inconsistent with
or violative of the provisions and agreements contained herein, including
in this Section 2.
3. RESTRICTION ON TRANSFER, PROXIES AND NON-INTERFERENCE. The
Stockholder hereby agrees during the Term, and except as specifically
contemplated hereby, not to (i) directly or indirectly sell, transfer,
pledge, encumber, assign or otherwise dispose of, or enter into any
contract, option or other arrangement or understanding with respect to the
sale, transfer, pledge, encumbrance, assignment or other disposition of,
any of the Shares except to the extent a transferee of the Shares, prior to
and as a condition to any transfer of the Shares, executes and delivers an
agreement in substantially the form hereof or such transfer is otherwise
approved in advance in writing by Acquiror and Acquiror Sub, (ii) grant any
proxies, deposit any Shares into a voting trust or enter into a voting
agreement with respect to any Shares or (iii) voluntarily take any action
which would have the effect of preventing or inhibiting the Stockholder
from performing his obligations under this Voting Agreement.
4. NO CONFLICT. The Stockholder hereby represents and warrants
to Acquiror and Acquiror Sub that the execution and delivery of this Voting
Agreement by such Stockholder does not, and the performance of his
obligations under this Voting Agreement will not, (i) conflict with or
violate any law, statute, ordinance, rule, regulation, order, judgment or
decree applicable to such Stockholder or by which he or any of his
properties is bound or affected, or (ii) result in any breach of or
constitute a default (or an event which with or without notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of an Encumbrance on any of the Shares, pursuant to, any note,
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<PAGE>
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which such Stockholder is a
party or by which such Stockholder or any of his Shares is bound or
affected, except for any such conflicts, violations, breaches, defaults or
other alterations or occurrences that would not prevent the performance by
such Stockholder of his obligations under this Voting Agreement.
5. UNDERSTANDING OF THIS VOTING AGREEMENT. The Stockholder has
carefully read this Voting Agreement and has discussed its requirements, to
the extent such Stockholder believes necessary, with his 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
Voting Agreement.
6. HEADINGS. The headings of the Sections of this Voting
Agreement are inserted for convenience of reference only and do not form a
part or affect the meaning hereof.
7. COUNTERPARTS. This Voting Agreement may be executed in
counterparts, each of which when so executed and delivered shall be an
original, but all of such counterparts shall together constitute one and
the same instrument.
8. ENTIRE AGREEMENT; ASSIGNMENT. This Voting Agreement
(i) constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, among the parties hereto with
respect to the subject matter hereof and (ii) shall not be assigned by
operation of law or otherwise.
9. GOVERNING LAW. This Voting Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware
regardless of the Laws that might otherwise govern under applicable
principles of conflicts of law.
10. SPECIFIC PERFORMANCE. The parties hereto agree that if any
of the provisions of this Voting Agreement are not performed in accordance
with their specific terms or are otherwise breached, irreparable damage
would occur, no adequate remedy at law would exist and damages would be
difficult to determine, and that the parties shall be entitled to specific
performance of the terms hereof, in addition to any other remedy at law or
equity.
11. PARTIES IN INTEREST. This Voting Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and nothing in
this Voting Agreement, express or implied, is intended to or shall confer
upon any other person or persons any rights, benefits or remedies of any
nature whatsoever under or by reason of this Voting Agreement.
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<PAGE>
12. AMENDMENT; WAIVERS. This Voting Agreement shall not be
amended, altered or modified except by an instrument in writing duly
executed by each of the parties hereto. No delay or failure on the part of
any party hereto in exercising any right, power or privilege under this
Voting Agreement shall impair any such right, power or privilege or be
construed as a waiver of any default or any acquiescence thereto. No
single or partial exercise of any such right, power or privilege shall
preclude the further exercise of such right, power or privilege, or the
exercise of any other right, power or privilege. No waiver shall be valid
against any party hereto, unless made in writing and signed by the party
against whom enforcement of such waiver is sought, and then only to the
extent expressly specified therein.
13. CONFLICT OF TERMS. In the event any provision of this
Voting Agreement is in direct conflict with, or inconsistent with, any
provision of the Merger Agreement, the provision of the Merger Agreement
shall control, except that no such provision in the Merger Agreement shall
impose additional duties on the Stockholder.
14. ADDITIONAL ACTIONS AND DOCUMENTS. Each of the parties
hereto hereby agrees to take or cause to be taken such further actions, to
execute, deliver and file or cause to be executed, delivered and filed such
further documents and instruments, and to obtain such consents as may be
necessary or as may be reasonably requested in order to fully effectuate
the purposes, terms and conditions of this Voting Agreement.
15. TERMINATION. This Voting Agreement, and all rights and
obligations hereunder, shall terminate at the end of the Term.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Voting Agreement, or have caused this Voting Agreement to be
duly executed and delivered in their names and on their behalf as of the
date first written above.
MCLEODUSA INCORPORATED
By: __________________________________
Name:
Title:
WEST GROUP ACQUISITION CO.
By: __________________________________
Name:
Title:
STOCKHOLDER
By: __________________________________
Name: _________________________
Address: _________________________
_________________________
_________________________
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<PAGE>
EXHIBIT 99.4
[MCLEODUSA INCORPORATED LOGO]
McLeodUSA Incorporated Dakota Telecommunications Group, Inc.
McLeodUSA Technology Park 29705 453rd Avenue
6400 C Street SW, PO Box 3177 Irene, South Dakota 57037-0066
Cedar Rapids, IA 52406-3177
Press & Investor Contact: Press & Investor Contact:
Bryce E. Nemitz Craig A. Anderson
[email protected] [email protected]
Phone: (319) 298-7800 Phone: (605) 338-8383
FAX: (319) 298-7767 FAX: (605) 335-3942
FOR IMMEDIATE RELEASE
MCLEODUSA AND DAKOTA TELECOMMUNICATIONS GROUP, INC.
SIGN MERGER AGREEMENT
MERGER MOBILIZES MAINSTREET PLAY IN THE DAKOTAS
CEDAR RAPIDS, IOWA, AND IRENE, SOUTH DAKOTA - OCTOBER 27, 1998 --
McLeodUSA Incorporated (NASDAQ/NMS:MCLD), a provider of integrated
telecommunications services in Midwest and Rocky Mountain states, and
Dakota Telecommunications Group, Inc. (DTG), a South Dakota-based
competitive local exchange carrier, today announced they have signed a
definitive agreement to merge their companies. The stock transaction will
involve the issuance of 1.28 million shares of McLeodUSA stock and the
assumption of $30.9 million in debt. The transaction is subject to a
number of conditions, including both DTG stockholder approval and
regulatory approval.
DTG, headquartered in Irene, South Dakota, traces its history back to
1903. Today, DTG offers an array of integrated communications products
including local and long distance phone services; cable television;
Internet access and web site services; operator services; wireless
communications including paging, mobile radio and cellular; and computer
networking services. DTG has 188 employees with offices in Irene, Sioux
Falls, Canton, Viborg and Yankton, SD, and in Marshall, MN. For the nine
months ended September 30, DTG recorded revenues of approximately $25
million and positive EBITDA of $2.5 million.
Steve Gray, President and Chief Operating Officer of McLeodUSA stated,
"This acquisition fits hand in glove with our overall strategy. DTG
operates in three of our key upper Midwest states, offering nearly
identical, fiber optic-based services in third and fourth-tier cities. The
management team at DTG shares our commitment to bringing state-of-the-art
<PAGE>
communications to markets where the incumbent phone and cable television
companies often fail to invest in new technologies and system upgrades."
Upon closing, McLeodUSA will gain approximately 300 route miles of
fiber optic network, 7,300 facility-based local access lines, 5,900 cable
television subscribers, and 6,800 Internet accounts. "Perhaps the most
valuable addition for McLeodUSA," stated Gray, "is the addition of a
motivated employee team of telecommunications professionals with a clear
focus on a key market area for McLeodUSA. DTG has the infrastructure and
organizational capabilities to accelerate our penetration as a facilities-
based provider in that region."
Thomas Hertz, CEO of Dakota Telecommunications Group, stated, "We look
forward to joining forces with the outstanding team of 5,000 at McLeodUSA.
Together we possess significant talent, energized by the opportunity
created by the opening of the local markets to competition. Both firms
have made significant inroads in their markets in the Dakotas in recent
years. Together, we will be able to offer current and future customers even
better services at greater value, with increased reliability on our fiber-
based network."
MainStreet is the McLeodUSA project name for constructing fiber optic
network in selected communities to connect directly to customers. Gray:
"The presence DTG has established in numerous communities will help
accelerate our MainStreet penetration. In addition, the McLeodUSA name is
already well known throughout South Dakota in that our Publishing Company
recently announced that our familiar black cover directories with the gold
star now cover every community in the state."
Dakota Telecommunications Group, Inc. is one of the first Competitive
Local Exchange Carriers to build new facilities in the smaller communities
in South Dakota, Iowa and Minnesota. In 1998, it completed four new
systems in Centerville, Viborg, Harrisburg, and Tea, South Dakota; and is
currently building a new system in Canton, South Dakota.
McLeodUSA, founded in June of 1991, is a provider of integrated
telecommunications services to business and residential customers. The
Company's telecommunications customers are located in ten Midwest and Rocky
Mountain states; future expansion will add 4 additional states. McLeodUSA
is a facilities-oriented telecommunications provider with 7 switches,
344,000 local lines, 5,000 employees, and nearly 5,600 route miles of fiber
optic network. In the next 12 months, the Company's publishing
subsidiaries will distribute nearly 16 million copies of competitive
directories in 20 states, reaching 27 million people or 10 percent of the
nation's population.
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