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EXHIBIT 2.2
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
STARTEC GLOBAL COMMUNICATIONS CORPORATION,
STARS ACQUISITION CORP.,
CAPSULE COMMUNICATIONS, INC.,
GOLD & APPEL TRANSFER, S.A,
AND
FOUNDATION FOR THE INTERNATIONAL
NON-GOVERNMENTAL DEVELOPMENT OF SPACE
NOVEMBER 2, 2000
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TABLE OF CONTENTS
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ARTICLE I THE MERGER......................................................................................1
1.1 The Merger......................................................................................1
1.2 Closing; Effective Time.........................................................................2
1.3 Certificate of Incorporation; Bylaws............................................................2
1.4 Directors and Officers..........................................................................2
1.5 Effect on Target Common Stock and Options.......................................................2
1.6 Exchange Procedures.............................................................................5
1.7 No Further Ownership Rights in Target Common Stock..............................................7
1.8 Lost, Stolen or Destroyed Certificates..........................................................7
1.9 Tax and Accounting Consequences.................................................................7
ARTICLE II REPRESENTATIONS AND WARRANTIES OF TARGET AND TARGET SUBSIDIARIES...............................7
2.1 Organization, Standing and Power................................................................8
2.2 Capital Structure...............................................................................9
2.3 Authority; No Conflict..........................................................................9
2.4 SEC Documents; Financial Statements............................................................10
2.5 Absence of Certain Changes.....................................................................11
2.6 Disclosure Documents...........................................................................12
2.7 Accounts Receivable............................................................................13
2.8 Litigation.....................................................................................13
2.9 Restrictions on Business Activities............................................................13
2.10 Title to Property; Absence of Liens............................................................13
2.11 Intellectual Property..........................................................................14
2.12 Environmental Matters..........................................................................16
2.13 Taxes..........................................................................................17
2.14 Employee Benefit Plans.........................................................................18
2.15 Employees and Consultants......................................................................21
2.16 Certain Agreements Affected by the Merger......................................................22
2.17 Related-Party Transactions.....................................................................22
2.18 Insurance......................................................................................22
2.19 Compliance with Laws; Governmental Authorizations..............................................22
2.20 Brokers'and Finders'Fees.......................................................................23
2.21 Board Approval; Stockholder Approval...........................................................23
2.22 Customers and Suppliers........................................................................23
2.23 Material Contracts.............................................................................24
2.24 No Breach of Material Contracts................................................................25
2.25 Minute Books...................................................................................25
2.26 Complete Copies of Materials...................................................................26
2.27 Year 2000 Compatibility........................................................................26
2.28 Reorganization.................................................................................26
2.29 Export Control Laws and Foreign Corrupt Practices Act..........................................26
2.30 Representations Complete.......................................................................27
2.31 Registration Rights............................................................................27
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2.32 Functionality of Technology....................................................................27
2.33 Beneficial Ownership of Acquiror Stock.........................................................27
2.34 Immigration Matters............................................................................27
2.35 Telecommunications Licenses....................................................................28
ARTICLE III REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND MERGER SUB....................................29
3.1 Organization, Standing and Power...............................................................29
3.2 Capital Structure..............................................................................30
3.3 Authority; No Conflict.........................................................................30
3.4 SEC Documents; Financial Statements............................................................31
3.5 Reorganization.................................................................................32
3.6 Absence of Undisclosed Liabilities.............................................................32
3.7 Representations Complete.......................................................................32
3.8 Disclosure Documents...........................................................................32
3.9 Beneficial Ownership of Target Stock...........................................................32
3.10 Litigation.....................................................................................33
3.11 Restrictions on Business Activities............................................................33
3.12 Employee Benefit Plans.........................................................................33
3.13 Brokers'and Finders'Fees.......................................................................35
3.14 Board Approval; Stockholder Approval...........................................................35
3.15 Absence of Certain Changes.....................................................................36
3.16 Compliance with Laws; Governmental Authorizations..............................................36
ARTICLE IV COVENANTS OF TARGET AND TARGET PRINCIPAL STOCKHOLDERS.........................................36
4.1 Information and Board Observation Rights.......................................................36
4.2 Regulatory Approvals...........................................................................37
4.3 Conduct of Business............................................................................37
4.4 Meeting of Stockholders of Target; Document Preparation........................................39
4.5 Consents.......................................................................................40
4.6 Current Information; Advice of Changes.........................................................40
4.7 No Solicitation of Other Offers................................................................41
4.8 Taxes..........................................................................................42
4.9 Public Announcements...........................................................................42
4.10 Cooperation and Conditions.....................................................................43
4.11 Tax Free Reorganization........................................................................43
ARTICLE V COVENANTS OF ACQUIROR AND MERGER SUB...........................................................43
5.1 Information....................................................................................43
5.2 Applications to Governmental Entities..........................................................44
5.3 Conduct of Business............................................................................44
5.4 Acquiror Common Stock..........................................................................44
5.5 Registration of Shares.........................................................................44
5.6 Meeting of Stockholders of Acquiror; Document Preparation......................................45
5.7 Consents.......................................................................................46
5.8 Current Information; Advice of Changes.........................................................46
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5.9 Public Announcements...........................................................................47
5.10 Cooperation and Conditions.....................................................................47
5.11 Tax Free Reorganization........................................................................47
5.12 Continuity of Business Enterprise..............................................................47
5.13 Nasdaq Listing.................................................................................47
ARTICLE VI CONDITIONS TO ACQUIROR'S AND MERGER SUB'S OBLIGATIONS.........................................48
6.1 Representations, Warranties, and Covenants.....................................................48
6.2 Representations, Warranties, and Covenants in the Voting Agreement.............................48
6.3 No Adverse Changes.............................................................................48
6.4 Stockholder Approval...........................................................................49
6.5 Other Evidence.................................................................................49
6.6 No Adverse Proceedings, Events, or Regulatory Requirements.....................................49
6.7 Consents, Etc..................................................................................49
6.8 Opinions of Counsel............................................................................50
6.9 Securities Matters.............................................................................50
6.10 280G Agreements................................................................................50
6.11 Resignation of Directors and Officers..........................................................50
6.12 Target Certificates............................................................................50
6.13 Termination of Pension Plan....................................................................50
6.14 Nasdaq Listing.................................................................................51
ARTICLE VII CONDITIONS TO TARGET'S OBLIGATIONS...........................................................51
7.1 Representations, Warranties, and Covenants.....................................................51
7.2 No Adverse Changes.............................................................................51
7.3 Stockholder Approval...........................................................................51
7.4 Other Evidence.................................................................................51
7.5 No Adverse Proceedings, Events, or Regulatory Requirements.....................................52
7.6 Consents, Etc..................................................................................52
7.7 Opinion of Counsel.............................................................................52
7.8 Securities Matters.............................................................................52
7.9 Nasdaq Listing.................................................................................53
7.10 Rights Plan....................................................................................53
7.11 Acquiror Certificate...........................................................................53
ARTICLE VIII TERMINATION, EXPENSES, AMENDMENT AND WAIVER.................................................53
8.1 Termination....................................................................................53
8.2 Effect of Termination..........................................................................54
8.3 Expense........................................................................................54
8.4 Extension; Waiver..............................................................................55
ARTICLE IX GENERAL PROVISIONS............................................................................55
9.1 Survival of Representations, Warranties and Covenants..........................................55
9.2 Notices........................................................................................55
9.3 Interpretation.................................................................................57
9.4 Counterparts...................................................................................57
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9.5 Entire Agreement; Third Party Beneficiaries....................................................57
9.6 Severability...................................................................................57
9.7 Remedies Cumulative............................................................................58
9.8 Governing Law..................................................................................58
9.9 Assignment; Amendment; Binding Effect..........................................................58
9.10 Rules of Construction..........................................................................59
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SCHEDULES
Target Disclosure Schedule
Acquiror Disclosure Schedule
EXHIBITS
Exhibit A Certificate of Merger
Exhibit B-1 Legal Opinion of Swidler Berlin Shereff Friedman, LLP
Exhibit B-2 Legal Opinion of Dancia Penn & Co
Exhibit C Legal Opinion of Piper Marbury Rudnick & Wolfe LLP
Exhibit D Section 280G Agreement
Exhibit E Form of Unsecured Promissory Note
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "AGREEMENT") is made
and entered into as of November 2, 2000 by and among Startec Global
Communications Corporation, a Delaware corporation ("ACQUIROR"), Stars
Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of
Acquiror ("MERGER SUB"), Capsule Communications, Inc., a Delaware corporation
("TARGET"), Gold & Appel Transfer, S.A., a British Virgin Islands corporation
("GOLD & APPEL"), and Foundation for the International Non-Governmental
Development of Space, a Delaware corporation (the "FOUNDATION") (Gold & Appel
and the Foundation are collectively referred to herein as the "TARGET PRINCIPAL
STOCKHOLDERS").
RECITALS
A. The Boards of Directors of Target, Acquiror and Merger Sub
believe it is in the best interests of their respective companies and the
stockholders of their respective companies that Target and Merger Sub combine
into a single company through the statutory merger of Merger Sub with and into
Target with Target being the surviving corporation in the merger (the "MERGER")
and, in furtherance thereof, have approved the Merger.
B. Target, Acquiror, Merger Sub and the Target Principal
Stockholders desire to make certain representations and warranties and other
agreements and covenants in connection with the Merger.
C. The parties intend, by executing this Agreement, to adopt a plan
of reorganization within the meaning of Section 368 of the Internal Revenue Code
of 1986, as amended (the "CODE"), and to cause the Merger, if possible, to
qualify as a reorganization under the provisions of Sections 368(a)(1)(A) and
368(a)(2)(E) of the Code.
D. Concurrent with the execution of this Agreement and as an
inducement to Acquiror to enter into this Agreement, (i) Gold & Appel and Walt
Anderson, and (ii) Foundation are each entering into an agreement (the "VOTING
AGREEMENTS") to vote the shares of common stock $.001 par value of Target
("TARGET COMMON STOCK") beneficially owned or controlled by them to approve this
Agreement and the Merger and the other transactions contemplated hereby and
against any competing proposals.
NOW, THEREFORE, in consideration of the covenants and representations
set forth herein, and for other good and valuable consideration, the parties
agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER
At the Effective Time (as hereinafter defined) and subject to and upon
the terms and conditions of this Agreement, the Certificate of Merger
substantially in the form attached
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hereto as Exhibit A (the "CERTIFICATE OF MERGER") and the applicable provisions
of the Delaware General Corporation Law ("DELAWARE LAW"), Merger Sub shall be
merged with and into Target, in accordance with Delaware Law, the separate
corporate existence of Merger Sub shall cease and Target shall continue as the
surviving corporation. Target as the surviving corporation after the Merger is
hereinafter sometimes referred to as the "SURVIVING CORPORATION."
1.2 CLOSING; EFFECTIVE TIME
The closing of the transactions contemplated hereby (the "CLOSING")
shall be held at the offices of the Acquiror, on the fifth business day
following the satisfaction or waiver of all conditions to the obligations of the
parties to consummate the transactions contemplated hereby, but in no event
later than the close of business on March 31, 2001, time being of the essence
(the date on which the Closing shall occur being the "CLOSING DATE"). On the
Closing Date, the parties hereto shall cause the Merger to be consummated by
filing the Certificate of Merger with the Secretary of State of the State of
Delaware, in accordance with the relevant provisions of Delaware Law (the time
and date of such filing being the "EFFECTIVE TIME" and the "EFFECTIVE DATE,"
respectively).
1.3 CERTIFICATE OF INCORPORATION; BYLAWS
(a) At the Effective Time, the certificate of incorporation of
Target, as in effect immediately prior to the Effective Time, shall be the
certificate of incorporation of the Surviving Corporation until thereafter
amended as provided by Delaware Law and such certificate of incorporation.
(b) At the Effective Time, the bylaws of Target, as in effect
immediately prior to the Effective Time, shall be the bylaws of the Surviving
Corporation until thereafter amended as provided by Delaware Law and such
bylaws.
1.4 DIRECTORS AND OFFICERS
At the Effective Time, the directors of Merger Sub immediately prior
to the Effective Time shall be the directors of the Surviving Corporation, to
hold office until such time as such directors resign, are removed or their
respective successors are duly elected or appointed and qualified. At the
Effective Time, the officers of Merger Sub immediately prior to the Effective
Time shall be the officers of the Surviving Corporation, to hold office until
such time as such officers resign, are removed or their respective successors
are duly elected or appointed and qualified.
1.5 EFFECT ON TARGET COMMON STOCK AND OPTIONS
By virtue of the Merger and without any action on the part of
Acquiror, Merger Sub, Target or the holders of any of Target's securities:
(a) CONVERSION OF TARGET COMMON STOCK. Subject to SECTION 1.5(c)
below, on the Effective Date, each share of Target Common Stock outstanding
immediately prior to the Effective Date (other than shares (the "DISSENTING
SHARES") with respect to which dissenter's rights shall have been perfected in
accordance with Delaware Law), shall, without any action on
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the part of the holder thereof, be canceled and converted into the number of
shares of the common stock of Acquiror, $0.01 par value per share ("ACQUIROR
COMMON STOCK") (rounded to the nearest 0.01 share) which results after
multiplication by 0.1333 (the "CONVERSION RATIO"); PROVIDED HOWEVER, that in the
event that the "Weighted Average Stock Price" (as defined below) of Acquiror
Common Stock is less than $5.25 per share, the Conversion Ratio shall be
increased (but not decreased) to the extent necessary to cause the consideration
to be received (subject to Section 1.5(c) below in the case of Gold & Appel and
Foundation) for each 7.5 shares of Target Common Stock to be that number of
shares of Acquiror Common Stock with an aggregate value (calculated for this
purpose based on one share of Acquiror Common Stock having a value equal to the
Weighted Average Stock Price) equal to $5.25; PROVIDED FURTHER that such
adjustment may not increase the Conversion Ratio above 0.1647.
"Weighted Average Stock Price" shall mean the average of the daily high and low
trade prices reported on Nasdaq of Acquiror Common Stock for the 15 trading days
ending on the trading date that is one day before the Effective Date, weighted
based on the volume of trades during each of those 15 trading days.
(b) FRACTIONAL SHARES. No certificates for fractional shares of
Acquiror Common Stock shall be issued; in lieu thereof, each holder otherwise
entitled to a fractional interest shall receive an amount in cash based on the
market value of Acquiror Common Stock equal to $10.50 per share. Each such
holder shall have no other rights with respect to such fractional interest and
shall have no rights as a stockholder of Acquiror.
(c) NOTES TO TARGET PRINCIPAL STOCKHOLDERS. In lieu of receiving
248,571 of the shares of Acquiror Common Stock it would otherwise receive under
SECTION 1.5(a), Gold & Appel shall receive a $2,610,000.00 unsecured note
substantially in the form attached as EXHIBIT E hereto (the "GOLD & APPEL
NOTE"), and (B) in lieu of receiving 37,143 of the shares of Acquiror Common
Stock it would otherwise receive under SECTION 1.5(a), Foundation shall receive
a $390,000.00 unsecured note substantially in the form attached as EXHIBIT E
hereto (the "FOUNDATION NOTE"). Collectively, the Gold & Appel Note and the
Foundation Note are collectively referred to herein as the "NOTES."
(d) CONVERSION OF TARGET STOCK OPTIONS. At the Effective Time, each
option to purchase Target Common Stock granted by the Target pursuant to Target
Stock Option Plans (as defined in SECTION 2.2 hereof) ("TARGET OPTION") which is
outstanding and unexercised immediately prior to the Effective Time (whether or
not vested or exercisable) and which is listed in SECTION 2.2 of the Target
Disclosure Schedule, will be converted as of the Effective Time into an
equivalent stock option ("ACQUIROR STOCK OPTION") to purchase Acquiror Common
Stock in an amount and at an exercise price determined as follows:
(x) The number of shares of Acquiror Common Stock to be subject
to the Acquiror Stock Option shall be equal to the number of shares of Target
Common Stock subject to the original Target Option multiplied by the Conversion
Ratio, rounded to the nearest whole share; and
(y) The exercise price per share of Acquiror Common Stock under
the Acquiror Stock Option shall be equal to the exercise price per share of
Target Common Stock under the Target Stock Option divided by the Conversion
Ratio, rounded to the nearest penny.
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The adjustments provided in this SECTION 1.5(d) with respect to
any Target Stock Option which are "incentive stock options" (as defined in
Section 422 of the Internal Revenue Code of 1986, as amended (the "CODE") shall
be and are intended to be effected in a manner which is consistent with Section
424(a) of the Code. The Target Stock Option Plans under which the Target Stock
Options were issued shall be assumed by Acquiror, and the duration, vesting
schedule and other terms of the Acquiror Stock Option shall be the same as the
Target Stock Option as described in SECTION 2.2 of the Target Disclosure
Schedule, except as provided above and except that all references to Target
shall be deemed to be references to Acquiror and the number of shares subject
thereto and the exercise price shall be adjusted in accordance with this SECTION
1.5(d). Within thirty (30) days following the Effective Time, Acquiror shall
deliver to former holders of Target Stock Option appropriate agreements
representing the right to acquire Acquiror Common Stock on the terms and
conditions set forth in this SECTION 1.5(d).
(e) CAPITAL STOCK OF MERGER SUB. At the Effective Time, each share of
Merger Sub common stock, par value $0.01 per share, issued and outstanding
immediately prior to the Effective Time shall be converted into and exchanged
for one validly issued, fully paid and nonassessable share of common stock,
$0.001 par value, of the Surviving Corporation. Each stock certificate of Merger
Sub evidencing ownership of any such shares shall continue to evidence ownership
of such shares of capital stock of the Surviving Corporation.
(f) ADJUSTMENTS TO CONVERSION RATIO. The Conversion Ratio shall be
adjusted to reflect fully the effect of any stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible into
Acquiror Common Stock or Target Common Stock, reorganization, recapitalization
or other like change with respect to Acquiror Common Stock or Target Common
Stock) occurring after the date hereof and prior to the Effective Time.
(g) DISSENTERS' RIGHTS. Any Dissenting Shares, which as of the
Effective Date the holder thereof has not withdrawn or lost any right to such
appraisal, shall not be converted into Acquiror Common Stock or represent the
right to receive shares of Acquiror Common Stock and shall not receive or
represent the right to receive any cash in lieu of fractional shares but instead
shall be converted into the right to receive such consideration as may be
determined to be due with respect to such Dissenting Shares pursuant to Delaware
Law. The Target shall give the Acquiror (i) prompt notice of any written demands
for appraisal of any shares of Target Common Stock, withdrawals or modifications
of such demands, and any other instruments served pursuant to Delaware Law and
received by the Target which relate to any such demand for appraisal and (ii)
the opportunity to participate in all negotiations and proceedings which take
place prior to the Closing. Target agrees that, except with the prior written
consent of Acquiror, it will not make any payment with respect to, or settle or
offer to settle, any claim, demand or other Liability with respect to any
Dissenting Shares. Each holder of Dissenting Shares (a "DISSENTING STOCKHOLDER")
who, pursuant to the provisions of Delaware Law becomes entitled to payment of
the fair value for shares of Target Common Stock shall receive payment therefor
(but only after the value therefor shall have been agreed upon or finally
determined pursuant to such provisions) and thereupon such Dissenting Shares
shall be canceled, retired and cease to exist. If, after the Effective Time, any
Dissenting Shares shall lose their status as Dissenting Shares (either because
the Dissenting Stockholder withdraws, fails to perfect or otherwise loses the
right to appraisal), Acquiror shall issue and deliver, upon surrender by such
Dissenting
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Stockholder of a certificate or certificates representing shares of Target
Common Stock, the number of shares of Acquiror Common Stock to which such
Dissenting Stockholder would otherwise be entitled under SECTION 1.5(a) and the
Certificate of Merger, without interest thereon. Notwithstanding any provision
of this Agreement to the contrary, Acquiror shall have the right to terminate
this Agreement and be released from all obligations hereunder if, immediately
prior to the proposed Effective Date, Target stockholders holding in excess of
4.9% of the outstanding shares of Target Common Stock have demanded appraisal
rights (which demands have not been withdrawn).
1.6 EXCHANGE PROCEDURES.
(a) EXCHANGE AGENT. Acquiror's transfer agent, or such other bank or
trust company selected by Acquiror and reasonably acceptable to Target, shall
act as exchange agent (the "EXCHANGE AGENT") in the Merger.
(b) ACQUIROR TO PROVIDE ACQUIROR COMMON STOCK, NOTES AND CASH. At the
Effective Time, Acquiror shall furnish to the Exchange Agent in accordance with
this ARTICLE I, through such reasonable procedures as Acquiror may adopt, (i)
the shares of Acquiror Common Stock issuable pursuant to SECTION 1.5(a) in
exchange for shares of Target Common Stock outstanding immediately prior to the
Effective Time, (ii) the Notes issuable to each of the Target Principal
Stockholders, and (iii) cash in an amount sufficient to permit payment of cash
in lieu of fractional shares pursuant to SECTION 1.5(b) (collectively, the
"MERGER CONSIDERATION").
(c) EXCHANGE PROCEDURES. (i) Promptly after the Effective Time,
Acquiror shall cause the Exchange Agent to mail to each non-Target Principal
Stockholder of record (the "FORMER TARGET STOCKHOLDERS") a certificate or
certificates (the "CERTIFICATE(S)") which immediately prior to the Effective
Time represented outstanding shares of Target Common Stock, whose shares were
converted into the right to receive shares of Acquiror Common Stock pursuant to
SECTION 1.5(a), (x) a letter of transmittal, in a form to be mutually agreed
upon by Target and Acquiror prior to Closing (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon receipt of the Certificates by the Exchange Agent, and shall be in
such form and have such other provisions as Acquiror may reasonably specify) (y)
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing shares of Acquiror Common Stock (and cash in lieu
of fractional shares). Upon surrender of a Certificate for cancellation to the
Exchange Agent, together with such letter of transmittal, duly completed and
validly executed in accordance with the instructions thereto, the holder of such
Certificate shall be entitled to receive in exchange therefor a certificate
representing the number of whole shares of Acquiror Common Stock and a check
representing the amount of cash in lieu of fractional shares and unpaid
dividends and distributions, if any, to which such holder is entitled, after
giving effect to any required tax withholdings and the Certificate so
surrendered shall forthwith be canceled. If payment is to be made to a person
other than the registered holder of the Certificate surrendered, it shall be a
condition of such payment that the Certificate so surrendered shall be properly
endorsed or otherwise in proper form for transfer and that the person requesting
such payment shall pay any transfer or other taxes required by reason of the
payment to a person other than the registered holder of the Certificate
surrendered or establish to the reasonable satisfaction of Acquiror or the
Exchange Agent that such tax has been paid or is not applicable. Until so
surrendered, each
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outstanding Certificate that, prior to the Effective Time, represented shares of
Target Common Stock will be deemed from and after the Effective Time, for all
corporate purposes, other than the payment of dividends, to evidence the
ownership of the number of full shares of Acquiror Common Stock into which such
shares of Target Common Stock shall have been so converted and the right to
receive an amount in cash in lieu of fractional shares pursuant to SECTION
1.5(b).
(ii) For each of the Target Principal Stockholders, the exchange procedures
shall be the same as those set forth in SECTION 1.6(c)(i) hereof, or as
otherwise mutually agreed between Acquiror and any such Target Principal
Stockholder, except that the Exchange Agent shall also include instructions for
use in effectuating the issuance of the Notes. Notwithstanding the foregoing, by
written notice to Acquiror on or prior to the Closing Date, either Target
Principal Stockholder may elect to deliver at Closing all or any of the
Certificates held thereby, in which event the Acquiror shall deliver to such
electing Target Principal Stockholder the Merger Consideration to which it is
entitled. The number of shares of Acquiror Common Stock and the amount of the
Notes issued to each of the Target Principal Stockholders shall be in accordance
with SECTIONS 1.5(a) AND 1.5(c).
(d) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or
other distributions 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 shares of Acquiror Common Stock represented
thereby until the holder of record of such Certificate surrenders such
Certificate. Subject to applicable Law (as defined in SECTION 2.19 hereof),
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, at the time of such surrender,
the amount of any such dividends or other distributions with a record date after
the Effective Time which would have been previously payable (but for the
provisions of this SECTION 1.6(d)) with respect to such shares of Acquiror
Common Stock.
(e) TRANSFERS OF OWNERSHIP. If any certificate for shares of Acquiror
Common Stock is to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it shall be a condition of the
issuance thereof that the Certificate so surrendered is properly endorsed and
otherwise in proper form for transfer and that the person requesting such
exchange will have paid to Acquiror or the Exchange Agent any transfer or other
Taxes (as defined in SECTION 2.13) required by reason of the issuance of a
certificate for shares of Acquiror Common Stock in any name other than that of
the registered holder of the Certificate surrendered, or established to the
satisfaction of Acquiror or the Exchange Agent that such Tax has been paid or is
not payable.
(f) NO LIABILITY. Notwithstanding anything to the contrary in this
SECTION 1.6, no party hereto or any of their respective agents shall be liable
to any person for any amount properly paid to a public official pursuant to any
applicable abandoned property, escheat or similar Law.
(g) DISSENTING SHARES. The provisions of this SECTION 1.6 also shall
apply to Dissenting Shares that lose their status as such, except that the
obligations of Acquiror under this SECTION 1.6 shall commence on the date of
loss of such status and the holder of such shares shall
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be entitled to receive in exchange for such shares the number of shares of
Acquiror Common Stock to which such holder is entitled pursuant to SECTION 1.5.
1.7 NO FURTHER OWNERSHIP RIGHTS IN TARGET COMMON STOCK
All shares of Acquiror Common Stock issued upon the surrender for
exchange of shares of Target Common Stock in accordance with the terms hereof
shall be deemed to have been issued in full satisfaction of all rights
pertaining to such shares of Target Common Stock, and there shall be no further
registration of transfers on the records of the Acquiror of shares of Target
Common Stock which were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates are presented to the Acquiror for any
reason, they shall be canceled and exchanged as provided in this ARTICLE I.
1.8 LOST, STOLEN OR DESTROYED CERTIFICATES
In the event any Certificate shall have been lost, stolen or
destroyed, the Acquiror shall issue or cause to be issued in exchange for such
lost, stolen or destroyed Certificate, upon the making of an affidavit of that
fact by the holder thereof, such shares of Acquiror Common Stock as may be
required pursuant to SECTION 1.5; provided, however, that Acquiror may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed Certificate to deliver a bond in such
sum as it may reasonably direct as indemnity against any claim that may be made
against Acquiror, the Surviving Corporation or any of their agents with respect
to the Certificate alleged to have been lost, stolen or destroyed.
1.9 TAX AND ACCOUNTING CONSEQUENCES
It is intended by the parties hereto that the Merger shall, if
possible, constitute a reorganization within the meaning of Section 368 of the
Code. No party shall take any action which would, to such party's knowledge,
cause the Merger to fail to so qualify as a reorganization within the meaning of
Section 368 of the Code.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
TARGET AND TARGET SUBSIDIARIES
In this Agreement, any reference to any event, change, condition or
effect being "material" with respect to any entity means any material event,
change, condition or effect related to the financial condition, properties,
assets (including intangible assets), liabilities, business, prospects,
operations or results of operations of such entity and its subsidiaries, taken
as a whole. In this Agreement, any reference to a "MATERIAL ADVERSE EFFECT" with
respect to any entity means any event, change or effect that is materially
adverse to the financial condition, properties, assets (including intangible
assets), Liabilities (as defined in SECTION 2.5 hereof), business, prospects,
operations or results of operations of such entity and its subsidiaries, taken
as a whole; provided, that for purposes of SECTION 6.1 and SECTION 7.1, changes
or effects which are primarily and directly cause by the execution and delivery
of this Agreement or the announcement of the transactions contemplated hereby
shall not constitute a Material Adverse Effect (it being understood that in any
controversy concerning the applicability of this proviso,
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the party claiming the benefit of this proviso shall have the burden of proof
with respect to the elements of such proviso).
In this Agreement, the words "aware," "knowledge" or similar words,
expressions or phrases with respect to a party means such party's actual
knowledge after inquiry of the executive officers (as defined in SEC Rule 405 of
the Securities Act of 1933, as amended (the "SECURITIES ACT")), and directors of
such party and its subsidiaries.
Target represents and warrants to Acquiror and Merger Sub that the
statements contained in this ARTICLE II are true and correct, except as set
forth in the disclosure schedule delivered by Target to Acquiror immediately
prior to the execution and delivery of this Agreement (the "TARGET DISCLOSURE
SCHEDULE"). The Target Disclosure Schedule shall be arranged in paragraphs
corresponding to the numbered Sections contained in this ARTICLE II, and the
disclosure in any Section shall qualify only the corresponding Section in this
ARTICLE II. Any reference in this ARTICLE II to an agreement being "enforceable"
shall be deemed to be qualified to the extent such enforceability is subject to
(i) Laws of general application relating to bankruptcy, insolvency, moratorium,
fraudulent conveyance and the relief of debtors and (ii) the availability of
specific performance, injunctive relief and other equitable remedies. In this
ARTICLE II, "TARGET" will be deemed to include Target and its predecessors,
unless the context otherwise requires.
2.1 ORGANIZATION, STANDING AND POWER
Target has no subsidiaries and is not a party to any joint venture or
partnership other than as listed in SECTION 2.1 of the Target Disclosure
Schedule (collectively, the "TARGET SUBSIDIARIES"). Target and each of the
Target Subsidiaries is a corporation duly organized, validly existing and in
good standing under the Laws of its jurisdiction of incorporation and has full
corporate power and authority to conduct its business as presently conducted.
Target has full corporate power and authority to enter into this Agreement and
to carry out the transactions contemplated by this Agreement. Except as set
forth in SECTION 2.1 of the Target Disclosure Schedule, Target and each of the
Target Subsidiaries is duly qualified and in good standing to do business as a
foreign corporation in each jurisdiction where the character of the property
owned or leased by it or the nature of its activities makes such qualifications
necessary except where the failure to be so qualified would not have a Material
Adverse Effect on Target. Target and each of the Target Subsidiaries has
furnished to Acquiror true and complete copies of its certificate or articles of
incorporation and bylaws, each as amended to date and currently in effect and
said copies are true, correct and complete, and contain all amendments through
the date hereof. Target and each of the Target Subsidiaries is not in violation
of any of the provisions of its certificate or articles of incorporation or
bylaws. Target is the sole owner of all outstanding shares of capital stock of
each of the Target Subsidiaries and all such shares are duly authorized, validly
issued, fully paid and nonassessable. All of the outstanding shares of capital
stock of each of the Target Subsidiaries is owned by Target free and clear of
any "Liens" (as defined below) other than "Permitted Liens" (as defined below).
"LIENS" means any mortgage, lien (including mechanics, warehousemen, laborers
and landlords liens), claim, pledge, charge, security interest, preemptive
right, right of first refusal, option, judgment, title defect or encumbrance of
any kind. "PERMITTED LIENS" means (i) mechanic's, materialmen's and similar
Liens, and (ii) Liens for taxes not yet due and payable. There are no
outstanding subscriptions,
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options, warrants, puts, calls, rights, exchangeable or convertible securities
or other commitments or agreements of any character relating to the issued or
unissued capital stock or other securities of the Target Subsidiaries, or
otherwise obligating Target or any of the Target Subsidiaries to issue,
transfer, sell, purchase, redeem or otherwise acquire any such securities.
Neither Target nor any of the Target Subsidiaries owns, directly or indirectly,
any equity or similar interest in, or any interest convertible into or
exchangeable or exercisable for, any equity or similar interest in, any
corporation, partnership, joint venture or other business association or entity,
other than as listed on SECTION 2.1 of the Target Disclosure Schedule.
2.2 CAPITAL STRUCTURE
The authorized capital stock of Target consists of 100,000,000 shares
of Target Common Stock, of which 22,448,444 shares are issued and outstanding as
of the date hereof, and 2,000,000 shares of preferred stock, par value $0.01 per
share, of which no shares are issued and outstanding. All of the issued and
outstanding shares of Target Common Stock have been duly authorized and validly
issued and are fully paid and nonassessable. Except as set forth in SECTION 2.2
of the Target Disclosure Schedule, (a) no subscription, warrant, option,
agreement, convertible security or other right (contingent or otherwise) to
purchase or acquire from Target any shares of capital stock of Target is
authorized, reserved or outstanding, (b) Target has no obligation (contingent or
otherwise) to issue any subscription, warrant, option, convertible security or
other such right or to issue or distribute to holders of any shares of its
capital stock any evidences of indebtedness or assets of Target, (c) Target has
no obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any shares of its capital stock or any interest therein or to pay any dividend
or make any other distribution in respect thereof and (d) no other shares of
capital stock of the Target are issued and outstanding. True and complete copies
of all agreements and instruments relating to or issued under Target's 1999
Stock Option Plan and Target's 1996 Stock Option Plan (collectively, the "TARGET
STOCK OPTION PLANS") have been made available to Acquiror, and such agreements
and instruments have not been amended, modified or supplemented, and there are
no agreements to amend, modify or supplement such agreements or instruments from
the forms made available to Acquiror. Target has reserved 6,500,000 shares of
Target Common Stock for issuance pursuant to the Target Stock Option Plans and
as of the date hereof, the maximum number of options to be issued under the
Target's 1999 Stock Option Plan are 3,000,000 and the maximum number of options
to be issued under the Target's 1996 Stock Option Plan are 3,500,000. All of the
issued and outstanding securities of Target, including those offered pursuant to
the Target Stock Option Plans, have been offered, issued and sold by Target in
compliance in all material respects with applicable federal and state securities
Laws.
2.3 AUTHORITY; NO CONFLICT
The execution, delivery and performance by Target of this Agreement
and the Certificate of Merger, and the consummation by Target of the
transactions contemplated hereby and thereby, have been duly authorized by all
necessary corporate action on the part of Target subject only to the approval of
this Agreement and the Merger by the affirmative vote of the holders of a
majority of the outstanding Target Common Stock. This Agreement has been duly
executed and delivered by Target and constitutes a valid and binding obligation
of Target enforceable against Target in accordance with its terms. The
Certificate of Merger, upon
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execution, will constitute a valid and binding obligation of Target enforceable
against Target in accordance with its terms.
Except as set forth in SECTION 2.3 of the Target Disclosure Schedule,
the execution, delivery and performance of this Agreement by Target does not,
and the consummation of the transactions contemplated hereby will not, conflict
with, or result in any violation of, or breach of or default under (with or
without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of any
benefit under, or require a waiver or consent under (x) its Certificate of
Incorporation or Bylaws (each as amended to date), (y) any mortgage, indenture,
material lease, material contract or other material agreement or material
instrument binding upon the Target or any of the Target Subsidiaries, or (z) any
permit, concession, franchise, material license, judgment, order, decree, Law,
judgment, or injunction or other similar authorization held by Target or any of
the Target Subsidiaries or applicable to Target, any of the Target Subsidiaries
or any of their properties or assets.
No consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any Governmental Entity
is required on the part of Target or any of the Target Subsidiaries in
connection with the execution and delivery of this Agreement or the consummation
of the other transactions contemplated by this Agreement, except for (i) the
filing of the Certificate of Merger, (ii) compliance with any applicable
requirements of the Securities Act, and the rules and regulations promulgated
thereunder (iii) such filings as may be required under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended ("HSR"), (iv) such other filings
or registrations with, or authorizations, consents or approvals of, Governmental
Entities, the failure of which to make or obtain would not reasonably be
expected to have a Material Adverse Effect on Target, and (v) the Required
Telecommunications Consents (as defined in SECTION 2.35 hereof).
The terms of the Target Stock Option Plans permit the assumption
thereof by Acquiror or the substitution of options to purchase Acquiror Common
Stock as provided in this Agreement, without the consent or approval of the
holders of such options, the Target stockholders or otherwise and without any
acceleration of the exercise schedule or vesting provisions in effect for such
options.
2.4 SEC DOCUMENTS; FINANCIAL STATEMENTS
As of their respective filing dates and, except to the extent that
subsequent Exchange Act (as defined below) statements, reports and filings
correct earlier Exchange Act statements, reports and filings, as of the date
hereof, each statement, report, filing, registration statement (with the
prospectus in the form filed pursuant to Rule 424(b) of the Securities Act),
definitive proxy statement and other document filed with the Securities and
Exchange Commission (the "SEC") by Target (collectively, the "TARGET SEC
DOCUMENTS") complied in all material respects with the applicable requirements
of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and the
Securities Act, and none of the Target SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances in
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which they were made, not misleading, except to the extent corrected by a
subsequently filed Target SEC Document.
Target has filed with the SEC an Annual Report on Form 10-K for the
fiscal year ended December 31, 1999 (the "TARGET 10-K") and a Quarterly Report
on Form 10-Q for the fiscal quarter ended June 30, 2000 (the "TARGET 10-Q"). The
financial statements included in the Target 10-K and the Target 10-Q
(collectively, the "TARGET FINANCIAL STATEMENTS") are complete and correct in
all material respects as of their respective dates, and were prepared in
accordance with generally accepted accounting principles ("GAAP") (except that
the unaudited financial statements do not have complete notes thereto and are
subject to normal year-end adjustments) applied on a consistent basis throughout
the periods indicated and with each other (except as may be indicated in the
notes thereto). The Target Financial Statements fairly present in all material
respects the consolidated financial condition and operating results of Target as
of the dates, and for the periods, indicated therein, subject to normal year-end
audit adjustments. Target maintains and will continue to maintain a standard
system of accounting established and administered in accordance with GAAP. The
Target Financial Statements complied as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto as of their respective dates. The balance sheet
of Target, dated as of December 31, 1999 included in the Target 10-K is herein
referred to as the "TARGET BALANCE SHEET."
2.5 ABSENCE OF CERTAIN CHANGES
Since December 31, 1999 (the "TARGET BALANCE SHEET DATE"), Target and
the Target Subsidiaries have conducted their business in the ordinary course
consistent with past practice and, except as set forth in SECTION 2.5 of the
Target Disclosure Schedule, there has not occurred: (a) any change, event,
condition or development of a state of circumstances or facts (whether or not
covered by insurance) that has resulted in, or would result in, a Material
Adverse Effect on Target; (b) any acquisition, sale or transfer of any material
asset of Target or any of the Target Subsidiaries other than in the ordinary
course of business and consistent with past practice (including transfers of
Target Intellectual Property (as defined in SECTION 2.11 hereof) on a
non-exclusive basis to Target's or any of the Target Subsidiaries' customers,
distributors or other licensees in the ordinary course of business and
consistent with past practice); (c) any change in accounting methods or
practices (including any change in depreciation or amortization policies or
rates) by Target or any of the Target Subsidiaries or any revaluation by Target
or any of the Target Subsidiaries of any of its assets; (d) any declaration,
setting aside, or payment of a dividend or other distribution with respect to
the capital stock of Target, or any direct or indirect redemption, purchase or
other acquisition by Target of its capital stock; (e) any reduction greater than
$10,000 in the amounts of coverage provided by existing casualty and liability
insurance policies with respect to the business or properties of Target or any
of the Target Subsidiaries; (f) any repurchase, redemption or other acquisition
by Target of any outstanding shares of capital stock or other securities of or
other ownership interests in the Target; (g) any Material Contract (as defined
in SECTION 2.23 hereof) entered into by Target or any of the Target
Subsidiaries; (h) any amendment or termination of, or default under, any
contract or agreement to which Target or any of the Target Subsidiaries is a
party or by which it is bound which would reasonably be expected to have a
Material Adverse Effect on Target; (i) any amendment or change to the
certificate or articles of incorporation or bylaws of Target or any of the
Target Subsidiaries or
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any proposal by the Board of Directors or stockholders of Target or any of the
Target Subsidiaries relating thereto; (j) except as set forth in SECTION 2.5(j)
of the Target Disclosure Schedule, any (x) grant of any severance or termination
pay to any director, officer, or employee of Target or any of the Target
Subsidiaries in an amount in excess of $10,000 individually or $50,000 in the
aggregate, (y) entering into of any employment, deferred compensation or other
similar agreement (or any amendment to any such existing agreement) with any
director, officer or employee of Target or any of the Target Subsidiaries in an
amount in excess of $10,000 individually or $50,000 in the aggregate, (z)
increase in or modification of the compensation or benefits payable by Target or
any of the Target Subsidiaries under any of its existing severance or
termination pay policies or employment agreements to any of its consultants,
independent contractors, directors or employees; (k) entering into any
contracts, agreement, extension of credit, business arrangement or other
relationship of any kind with any of the following persons: (i) any officer or
director of Target or any of the Target Subsidiaries; (ii) any stockholder
owning five percent or more of the outstanding Common Stock of Target; or (iii)
any "affiliate" or "associate" (as such terms are defined in SEC Rule 405 of the
Securities Act (an "AFFILIATE(S)") of the foregoing persons or any business in
which any of the foregoing persons is an officer, director, employee, or five
percent or greater equity owner; or (l) any obligation, agreement or ongoing
negotiation by Target or any of the Target Subsidiaries to do any of the things
described in the preceding clauses (a) through (k) (other than negotiations with
Acquiror and its representatives regarding the transactions contemplated by this
Agreement).
Target and each of the Target Subsidiaries have no Liabilities (as
defined below) of any nature (matured or unmatured, fixed or contingent) other
than (a) those set forth or adequately reserved for in the Target Balance Sheet,
(b) those not required to be set forth or adequately reserved for in the Target
Balance Sheet under GAAP, (c) those incurred in the ordinary course of business
since December 31, 1999 which are consistent with past practice, and (d) those
incurred in connection with the execution of this Agreement. "LIABILITIES" or
"LIABILITY" mean any direct or indirect indebtedness, liability, assessment,
claim, loss, damage, deficiency, obligation or responsibility, fixed or unfixed,
choate or inchoate, liquidated or unliquidated, secured or unsecured, accrued,
absolute, actual or potential, contingent or otherwise (including any liability
under any guaranties, letter of credit, performance credits or with respect to
insurance loss accruals).
2.6 DISCLOSURE DOCUMENTS
None of the written information supplied or to be supplied by Target
or the Target Principal Stockholders for inclusion in and that is actually
included in (i) the Joint Proxy Statement/Prospectus (as defined in SECTION 5.5
hereof), and (ii) the Registration Statement (as defined in SECTION 5.5 hereof),
will, in the case of the Joint Proxy Statement/Prospectus, at the time of
mailing of the Joint Proxy Statement/Prospectus and at the time of the meeting
of the shareholders to be held in connection with the Merger and at the
Effective Time, contain any untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading or will, in the case of the Registration Statement, at the
time the Registration Statement becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to
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make the statements therein, in light of the circumstances in which they were
made, not misleading.
2.7 ACCOUNTS RECEIVABLE
The accounts receivable reflected in the Target Financial Statements
arose in the ordinary course of business and consistent with past practice and
represent valid receivables not subject to defense offsets, returns, set off,
counter claim, allowances or credits of any kind, and are collectible (subject
to the reserve for bad debt set forth in the Target Financial Statements),
represent bona fide claims against debtors for sales or services performed or
other charges, and all goods sold or services performed that gave rise to such
accounts were delivered or performed in all material respects in accordance with
applicable orders, contracts or customer requirements. Allowances for doubtful
accounts and returns have been prepared in accordance with the past practices of
Target. The accounts receivable of Target arising after the Target Balance Sheet
Date and prior to the date hereof arose in the ordinary course of business and
consistent with past practice. No agreement for deduction or discount has been
made with respect to any accounts receivable.
2.8 LITIGATION
Except as set forth in SECTION 2.8 of the Target Disclosure Schedule,
there is no private or Governmental Entity action, suit, proceeding, claim,
arbitration or investigation pending, or to the knowledge of Target, threatened
before any agency, court or tribunal, foreign or domestic, against Target, any
of the Target Subsidiaries or any of their respective properties or assets or
any of their officers or directors (in their capacities as such). There is no
judgment, decree, writ, injunction, or order against Target, any of the Target
Subsidiaries or any of its directors or officers (in their capacities as such),
that would prevent, enjoin, or materially alter or delay any of the transactions
contemplated by this Agreement. Further, there are no actions, suits,
proceedings, claims, arbitrations or investigations initiated by Target or any
of the Target Subsidiaries, or that Target or any of the Target Subsidiaries
presently intends to initiate. Neither Target nor any of the Target Subsidiaries
is aware of any fact or condition now existing that could reasonably be expected
to give rise to any material action, suit, proceeding, claim, arbitration or
investigation against Target or any of the Target Subsidiaries or any of its
properties or any of its officers or directors (in their capacities as such).
2.9 RESTRICTIONS ON BUSINESS ACTIVITIES
There is no agreement, judgment, injunction, order or decree binding
upon Target or any of the Target Subsidiaries which would reasonably be expected
to have the effect of prohibiting or impairing any current business practice of
Target or any of the Target Subsidiaries, any acquisition of property by Target
or any of the Target Subsidiaries or the conduct of business by Target as
currently conducted by Target or any of the Target Subsidiaries.
2.10 TITLE TO PROPERTY; ABSENCE OF LIENS
Target and each of the Target Subsidiaries has good and valid title to
all material items of its properties, interests in properties and assets, real
and personal, reflected in the Target Balance Sheet or acquired after the Target
Balance Sheet Date (except properties, interests in
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properties and assets sold or otherwise disposed of since the Target Balance
Sheet Date in the ordinary course of business and consistent with past
practice), or with respect to leased properties and assets, valid leasehold
interests in, free and clear of all Liens of any kind or character, except for
(a) Permitted Liens, (b) such imperfections of title and Liens as do not and
will not materially detract from or interfere with the use of the properties
subject thereto or affected thereby, or otherwise materially impair business
operations involving such properties, and (c) those Liens shown on SECTION 2.10
of the Target Disclosure Schedule. The real properties, structures, buildings,
and the material items of tangible personal property owned, operated, or leased
by Target or any of the Target Subsidiaries are (x) maintained properly and in
working condition, except for depletion, depreciation, and ordinary wear and
tear, (y) suitable for the uses for which they are currently used, and (z) free
from any known structural defects. There are no Laws, conditions of record, or
other impediments which materially interfere with the intended uses by Target or
any of the Target Subsidiaries of the real property or material items of
tangible personal property owned or leased by them. Neither Target nor any of
the Target Subsidiaries has received any notice of any violation of any
applicable Law, building code, zoning ordinance, or other similar Law. All
properties used in the operations of Target and each of the Target Subsidiaries
are reflected in the Target Balance Sheet to the extent GAAP requires the same
to be reflected. SECTION 2.10 of the Target Disclosure Schedule identifies each
parcel of real property owned or leased by Target and all of the Target
Subsidiaries.
2.11 INTELLECTUAL PROPERTY
(a) Each of the Target and the Target Subsidiaries owns or is
licensed for, and in any event possesses sufficient and legally enforceable
rights with respect to, all Intellectual Property (as hereinafter defined) that
is used, exercised or exploited ("USED") in, or that is necessary for, its
business as currently conducted ("TARGET INTELLECTUAL PROPERTY," which term will
also include all other Intellectual Property now owned by or licensed to Target
or any of the Target Subsidiaries) without any conflict with or infringement or
misappropriation of any rights or property of others ("INFRINGEMENT"). Such
ownership, licenses and rights are exclusive except (i) with respect to
Inventions (as hereinafter defined) in the public domain that are not important
differentiators of the business as presently conducted of Target or any of the
Target Subsidiaries, or (ii) with respect to standard, generally commercially
available, "off-the-shelf" third party products that form a part of any current
product, or service offering of Target or any of the Target Subsidiaries.
Neither Target nor any of the Target Subsidiaries is party to any agreement,
arrangement, or has granted any Lien, or any other right of any character
entitling any entity other than the Acquiror to any interests in the Target
Intellectual Property.
(b) No Target Intellectual Property was conceived or developed
directly or indirectly with or pursuant to funding with or from a Governmental
Entity or in connection with a Governmental Entity contract. In this Agreement,
"INTELLECTUAL PROPERTY" means: (A) inventions (whether or not patentable); trade
names, trademarks, service marks, logos and other designations (collectively,
"MARKS"); works of authorship; mask works; data; technology, know-how, trade
secrets, ideas and information; designs; formulas; algorithms; processes;
schematics; computer software (in source code and/or object code form); and all
other intellectual and industrial property of any sort (collectively,
"INVENTIONS") and (B) patent rights; Mark rights; copyrights; mask work rights;
sui generis database rights; trade secret rights; rights to domain names; moral
rights; and all other intellectual and industrial property rights of any sort
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throughout the world, and all applications, registrations, issuances and the
like with respect thereto of Target and each of the Target Subsidiaries
(collectively, "IP RIGHTS"). All copyrightable matter within Target Intellectual
Property has been created by persons who were employees or contractors, covered
by work-made-for-hire agreements, of Target or the Target Subsidiaries at the
time of creation and no third party has or will have "moral rights" or rights to
terminate any assignment or license with respect thereto. Neither Target nor any
of the Target Subsidiaries has received any written or verbal communication
alleging that Target or any of the Target Subsidiaries have been or may be
(whether in its current or proposed business or otherwise) engaged in, liable
for or contributing to any Infringement, nor are Target or any of the Target
Subsidiaries aware of any fact or condition now existing that could reasonably
be expected to give rise to any material communication in the future.
(c) To the extent included in Target Intellectual Property (but
excluding Intellectual Property licensed to Target only on a nonexclusive
basis), SECTION 2.11 of the Target Disclosure Schedule lists (by name, number,
jurisdiction, owner and, where applicable, the name and address of each inventor
and a brief description of) all patents and patent applications; all registered
and unregistered Marks; and all registered and, if material, unregistered
copyrights and mask works; and all other issuances, registrations, applications
and the like with respect to those or any other IP Rights. No cancellation,
termination, expiration or abandonment of any of the foregoing (except natural
expiration or termination at the end of the full possible term, including
extensions and renewals, and failures to obtain allowable subject matter for
patent applications from applicable registration authorities) is anticipated by
Target or any of the Target Subsidiaries. The IP Rights do not infringe on or
conflict with the rights or intellectual property rights of third parties, and
neither Target nor any of the Target Subsidiaries have received any notice (oral
or written) contesting its right to use any such rights IP Rights. Further the
validity of the IP Rights have not been otherwise challenged by any third party.
The IP rights have also not been and are not the subject of any pending or
threatened litigation or claim of infringement or validation.
(d) To the knowledge of Target, there is no unauthorized Use,
disclosure, infringement or misappropriation of any Target Intellectual Property
(excluding any such activity with respect to third party Intellectual Property
outside the scope of any exclusivity granted to Target or any of the Target
Subsidiaries) by any third party, including, without limitation, any employee or
former employee of Target or any of the Target Subsidiaries.
(e) Each of the Target and the Target Subsidiaries has taken
necessary and appropriate steps to protect and preserve the confidentiality of
all Target Intellectual Property that is not otherwise disclosed in published
patents or patent applications or registered copyrights (collectively, the
"TARGET CONFIDENTIAL INFORMATION"). All use by and disclosure to employees or
third parties of Target Confidential Information has been on a need-to-know
basis and pursuant to the terms of valid and binding written confidentiality and
nonuse/restricted-use agreements. Target or any of the Target Subsidiaries has
not disclosed or delivered to any third party, or permitted the disclosure or
delivery to any escrow holder or other person any part of any Target
Intellectual Property and/or Target computer program source code or object code.
(f) To the knowledge of Target, Target and each of the Target
Subsidiaries have not in the past and are not currently using, exercising or
exploiting (i) any Inventions of any
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of its past or present employees or contractors (or people currently intended to
be hired) made prior to or outside the scope of their employment by Target or
the Target Subsidiaries or (ii) any confidential information or trade secrets of
any former employer of any such person.
(g) There are no actions that must be taken by Target or any of the
Target Subsidiaries within 60 days following the Closing Date that, if not
taken, would result in the loss of any Intellectual Property, including the
payment of any registration, maintenance or renewal fees or the filing of any
responses to U.S. Patent and Trademark Office actions, documents, applications
or declarations for the purposes of obtaining, maintaining, perfecting,
preserving or renewing any Intellectual Property.
2.12 ENVIRONMENTAL MATTERS
(a) The following terms shall be defined as follows:
(i) "ENVIRONMENTAL AND SAFETY LAWS" shall mean any federal,
state, local or foreign Laws, ordinances, codes, regulations, rules and orders
relating to the protection of the environment, or that classify, regulate, call
for the remediation of, require reporting with respect to, or list or define
air, water, groundwater, solid waste, hazardous or toxic substances, materials,
wastes, pollutants or contaminants, or which relate to the health and safety of
employees, workers or other persons, including the public, as in effect on the
date hereof.
(ii) "HAZARDOUS MATERIALS" shall mean any toxic or hazardous
substance, material or waste or any pollutant or contaminant, or infectious or
radioactive substance or material, including without limitation, such
substances, materials, wastes, pollutants defined in or regulated under any
Environmental and Safety Laws.
(iii) "PROPERTY" shall mean all real property leased or owned by
Target either currently or in the past.
(iv) "FACILITIES" shall mean all buildings and improvements on
the Property of Target.
(b) Target and each of the Target Subsidiaries represents and
warrants as follows: (i) no methylene chloride or asbestos is contained in or
has been used at or released from the Facilities; (ii) all Hazardous Materials
and wastes which have been used or generated in the conduct of Target's or any
of the Target Subsidiaries' business or otherwise used or disposed of by Target,
any of the Target Subsidiaries or, to Target's knowledge, any other person, on,
under or from any of the Facilities have been used, handled and disposed of in
material compliance with all Environmental and Safety Laws; and (iii) neither
Target nor any of the Target Subsidiaries has received any written notice of any
noncompliance of the Facilities or of its past or present operations with
Environmental and Safety Laws; (iv) no notices, administrative actions or suits
are pending or, to the knowledge of Target, threatened relating to a violation
of any Environmental and Safety Laws; (v) neither Target nor any of the Target
Subsidiaries has received written notice that it is a potentially responsible
party under the federal Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), or analogous state statute or any similar foreign law
or regulation requiring assessment or clean up, arising out of events occurring
prior to the Closing Date; (vi) there have not been in the past, and
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are not now, any Hazardous Materials on, under or migrating to or from the
Facilities or Property, for which Target or any of the Target Subsidiaries could
reasonably be expected to have a Liability; (vii) there have not been in the
past, and are not now, any underground tanks at, on or under the Property
including without limitation, treatment or storage tanks, sumps, or water, gas
or oil wells; (viii) there are no polychlorinated biphenyls ("PCBS") deposited,
stored, disposed of or located on the Property or Facilities or any equipment on
the Property containing PCBs at levels in excess of 50 parts per million; (ix)
there is no formaldehyde on the Property or in the Facilities, nor any
insulating material containing urea formaldehyde in the Facilities; (x) the
Facilities and the activities of Target and each of the Target Subsidiaries
therein have at all times been in material compliance with all Environmental and
Safety Laws; (xi) Target and each of the Target Subsidiaries have all the
permits and licenses required to be issued for its operations and are in full
compliance with the terms and conditions of those permits; and (xii) all written
environmental assessments known to Target or any of the Target Subsidiaries of
its current or past Properties or Facilities have been provided to Acquiror.
2.13 TAXES
Target, each of the Target Subsidiaries and any consolidated,
combined, unitary or aggregate group (and all members thereof) for Tax purposes
of which Target or any of the Target Subsidiaries is or has been a member, have
properly completed and timely filed with all appropriate Governmental Entities,
all Tax Returns, estimates and reports required to be filed by them and have
paid all Taxes shown thereon to be due or which otherwise are or have become due
and payable prior to the date hereof. The accruals and reserves reflected in the
Target Financial Statements specified as being with respect to Taxes are
adequate to cover all Taxes that are or may become payable or that have accrued
as a result of the operations of Target and each of the Target Subsidiaries for
all periods prior to the date of such Target Financial Statements and that have
not been paid as of the date hereof. Neither Target nor any of the Target
Subsidiaries have any Liability for unpaid Taxes accruing prior to the date of
the Target Balance Sheet Date (except to the extent adequately provided for by
the above-specified accruals and/or reserves) or accruing after the Target
Balance Sheet Date except for Taxes incurred in the ordinary course of business
and consistent with past practice subsequent to the Target Balance Sheet Date.
Except as set forth in SECTION 2.13 of the Target Disclosure Schedule, there is:
(a) no claim for Taxes that is a Lien against the property of Target or any of
the Target Subsidiaries is being asserted against Target or any of the Target
Subsidiaries other than Liens for Taxes not yet due and payable; (b) no audit of
any Tax Return of Target or any of the Target Subsidiaries being conducted or,
to the knowledge of Target, threatened or contemplated by a Tax Authority; and
(c) no extension of any statute of limitations on the assessment of any Taxes
granted by Target or any of the Target Subsidiaries and currently in effect.
Neither Target nor any of the Target Subsidiaries have been or will be required
to include any material adjustment in Taxable income for any Tax period (or
portion thereof) pursuant to Section 481 or 263A of the Code or any comparable
provision under state or foreign Tax Laws as a result of transactions, events or
accounting methods employed prior to the Merger. Target and the Target
Subsidiaries have not filed nor will they file any consent to have the
provisions of paragraph 341(f)(2) of the Code (or comparable provisions of any
state Tax Laws) apply to Target or any of the Target Subsidiaries. Neither
Target nor any of the Target Subsidiaries is a party to any Tax sharing or Tax
allocation agreement nor does Target or any of the Target Subsidiaries have any
Liability or potential Liability to another party under any such agreement.
Neither Target nor any of the Target
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Subsidiaries has filed any disclosures under Section 6662 or comparable
provisions of state, local or foreign Law to prevent the imposition of penalties
with respect to any Tax reporting position taken on any Tax Return. Neither
Target nor any of the Target Subsidiaries has ever been a member of a
consolidated, combined, unitary or aggregate group of which Target or any of the
Target Subsidiaries was not the ultimate parent corporation. Neither Target nor
any of the Target Subsidiaries has in its possession receipts for any Taxes paid
to foreign Tax Authorities. Neither Target nor any of the Target Subsidiaries is
or has ever been a "United States real property holding corporation" within the
meaning of Section 897 of the Code. For purposes of this Agreement, the
following terms have the following meanings: "TAX" (and, with correlative
meaning, "TAXES" and "TAXABLE") means (x) any net income, alternative or add-on
minimum tax, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property, environmental or windfall
profit tax, custom duty or other tax, Governmental Entity fee or other like
assessment or charge of any kind whatsoever, together with any interest or any
penalty, addition to tax or additional amount imposed by any Governmental Entity
(a "TAX AUTHORITY") responsible for the imposition of any such tax (domestic or
foreign), (y) any liability for the payment of any amounts of the type described
in (x) as a result of being a member of an affiliated, consolidated, combined,
unitary or aggregate group for any Taxable period, and (z) any liability for the
payment of any amounts of the type described in (x) or (y) as a result of being
a transferee of or successor to any person or as a result of any express or
implied obligation to indemnify any other person. As used herein, "TAX RETURN"
shall mean any return, statement, report or form (including, without limitation,
estimated tax returns and reports, withholding tax returns and reports and
information returns and reports) required to be filed with respect to Taxes. As
used in this SECTION 2.13, the term "TARGET" means Target and any entity
included in, or required under GAAP to be included in, any of the Target
Financial Statements.
2.14 EMPLOYEE BENEFIT PLANS
(a) SECTION 2.14 of the Target Disclosure Schedule lists, with
respect to Target and each of the Target Subsidiaries, any trade or business
(whether or not incorporated) which is treated as a single employer with Target
or with any of the Target Subsidiaries (an "ERISA AFFILIATE") within the meaning
of Section 414(b), (c), (m) or (o) of the Code, (i) all material employee
benefit plans (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), (ii) each loan to any non-officer
employee, officer or director and any stock option, stock purchase, phantom
stock, stock appreciation right, supplemental retirement, severance, sabbatical,
medical, dental, vision care, disability, employee relocation, cafeteria benefit
(Code Section 125) or dependent care (Code Section 129), life insurance or
accident insurance plans, programs or arrangements, (iii) all bonus, pension,
profit sharing, savings, deferred compensation or incentive plans, programs or
arrangements, (iv) other fringe or employee benefit plans, programs or
arrangements that apply to senior management of Target or any of the Target
Subsidiaries and that do not generally apply to all employees, and (v) any
current or former employment or executive compensation or severance agreements,
written or otherwise, as to which unsatisfied obligations of Target or any of
the Target Subsidiaries of greater than $10,000 remain for the benefit of, or
relating to, any present or former employee, consultant or director of Target or
any of the Target Subsidiaries (together, the "TARGET EMPLOYEE PLANS").
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(b) Target has furnished to Acquiror a copy of each of the Target
Employee Plans and related plan documents (including trust documents, insurance
policies or contracts, employee booklets, summary plan descriptions and other
authorizing documents, and any material employee communications required by Law
relating thereto) and has, with respect to each Target Employee Plan which is
subject to ERISA reporting requirements, provided copies of the Form 5500
reports filed for the last three plan years. Any Target Employee Plan intended
to be qualified under Section 401(a) of the Code has either obtained from the
Internal Revenue Service a favorable determination letter as to its qualified
status under the Code, including all amendments to the Code effected by the Tax
Reform Act of 1986 and subsequent legislation, or has applied (or has time
remaining in which to apply) to the Internal Revenue Service for such a
determination letter prior to the expiration of the requisite period under
applicable Treasury Regulations or Internal Revenue Service pronouncements in
which to apply for such determination letter and to make any amendments
necessary to obtain a favorable determination or has been established under a
standardized prototype plan for which an Internal Revenue Service opinion letter
has been obtained by the plan sponsor and is valid as to the adopting employer.
Target has also furnished Acquiror with the most recent Internal Revenue Service
determination or opinion letter issued with respect to each such Target Employee
Plan, and nothing has occurred since the issuance of each such letter which
could reasonably be expected to cause the loss of the tax-qualified status of
any Target Employee Plan subject to Code Section 401(a). Target has also
furnished Acquiror with all registration statements and prospectuses prepared in
connection with each Target Employee Plan.
(c) (i) None of the Target Employee Plans promises or provides
retiree medical or other retiree welfare benefits to any person other than as
required under the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA"); (ii) there has been no "prohibited transaction," as such term is
defined in Section 406 of ERISA and Section 4975 of the Code, with respect to
any Target Employee Plan, which would reasonably be expected to have, in the
aggregate, a Material Adverse Effect on Target; (iii) each Target Employee Plan
has been administered in all material respects in accordance with its terms and
in compliance with the requirements prescribed by any and all statutes, rules
and regulations (including ERISA and the Code), and each ERISA Affiliate has
performed in all material respects all obligations required to be performed by
it under, is not in any material respect in default under or violation of, and
has no knowledge of any material default or violation by any other party to, any
of the Target Employee Plans; (iv) Target, the Target Subsidiaries, or any ERISA
Affiliate are not subject to any material Liability or penalty under Sections
4976 through 4980 of the Code or Title I of ERISA with respect to any of the
Target Employee Plans; (v) all material contributions required to be made by
Target, the Target Subsidiaries and any ERISA Affiliate to any Target Employee
Plan have been made on or before their due dates and a reasonable amount has
been accrued for contributions to each Target Employee Plan for the current plan
years; (vi) with respect to each Target Employee Plan, no "reportable event"
within the meaning of Section 4043 of ERISA (excluding any such event for which
the 30 day notice requirement has been waived under the regulations to Section
4043 of ERISA) nor any event described in Section 4062, 4063 or 4041 of ERISA
has occurred; (vii) no Target Employee Plan is covered by, and none of Target,
the Target Subsidiaries and any ERISA Affiliate has incurred or expects to incur
any Liability under Title IV of ERISA or Section 412 of the Code; and (viii)
each Target Employee Plan can be amended, terminated or otherwise discontinued
after the Effective Time in accordance with its terms, without any material
Liability to Acquiror (other than ordinary
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administrative expenses typically incurred in a termination event). For purposes
of subparts (iv), (v), (vii) and (viii) of this SECTION 2.14(c), "material"
shall be deemed to include any amount in excess of $10,000 in the aggregate.
With respect to each Target Employee Plan subject to ERISA as either an employee
pension plan within the meaning of Section 3(2) of ERISA or an employee welfare
benefit plan within the meaning of Section 3(1) of ERISA, Target and the Target
Subsidiaries have prepared in good faith and timely filed all requisite
Governmental Entity reports (which were true and correct as of the date filed)
and has properly and timely filed and distributed or posted all notices and
reports to employees required to be filed, distributed or posted with respect to
each such Target Employee Plan. No suit, administrative proceeding, action or
other litigation has been brought, or to the knowledge of Target is threatened
against or with respect to any such Target Employee Plan, including any audit or
inquiry by the Internal Revenue Service or United States Department of Labor.
Except as set forth in SECTION 2.14 of the Target Disclosure Schedule, no
payment or benefit which will or may be made by Target or any of the Target
Subsidiaries to any person will be characterized as an "excess parachute
payment" within the meaning of Section 280G(b)(1) of the Code.
(d) With respect to each Target Employee Plan, Target and the Target
Subsidiaries have complied in all material respects with (i) the applicable
health care continuation and notice provisions of COBRA and the regulations
(including proposed regulations) thereunder, (ii) the applicable requirements of
the Family Medical and Leave Act of 1993 and the regulations thereunder, and
(iii) the applicable requirements of the Health Insurance Portability and
Accountability Act of 1996 and the regulations (including proposed regulations)
thereunder.
(e) There has been no amendment to, written interpretation or
announcement (whether or not written) by Target, the Target Subsidiaries or any
ERISA Affiliate relating to, or change in participation or coverage under, any
Target Employee Plan which would materially increase the expense of maintaining
such plan above the level of expense incurred with respect to that plan for the
most recent fiscal year included in Target's Financial Statements.
(f) Neither Target nor any of the Target Subsidiaries currently
maintains, sponsors, participates in or contributes to, nor have they ever
maintained, established, sponsored, participated in, or contributed to, any
pension plan (within the meaning of Section 3(2) of ERISA) which is subject to
Part 3 of Subtitle B of Title I of ERISA, Title IV of ERISA or Section 412 of
the Code.
(g) None of Target, the Target Subsidiaries or any ERISA Affiliate is
a party to, or has made any contribution to or otherwise incurred any obligation
under, any "multiemployer plan" as defined in Section 3(37) of ERISA.
(h) Except as set forth in SECTION 2.14 of the Target Disclosure
Schedule, there is no agreement, contract or arrangement to which Target or any
of the Target Subsidiaries is a party that may result in the payment of any
amount that would not be deductible by reason of Section 280G or Section 404 of
the Code.
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2.15 EMPLOYEES AND CONSULTANTS
Target has provided Acquiror with a true and complete list of all
persons employed by Target and each of the Target Subsidiaries, all persons who
perform work for Target and each of the Target Subsidiaries pursuant to any
agreement(s) between Target or any of the Target Subsidiaries and any employment
agency, and all independent contractors of Target and Target Subsidiaries as of
the date hereof and the position and total compensation, including base salary
or wages, bonus, commissions, and all other available forms of compensation,
payable to each such individual. SECTION 2.15 of the Target Disclosure Schedule
lists all current written or oral employment agreements, independent contractor
agreements, consulting agreements or termination or severance agreements to
which Target and each of the Target Subsidiaries is a party. A true and correct
copy of any employment, independent contractor or consulting agreement which
varies in any material terms from the standard form agreement of Target or any
of the Target Subsidiaries has been provided to Acquiror. This Agreement and the
transactions contemplated hereby do not and will not violate any such
employment, independent contractor or consulting agreements. Target and each of
the Target Subsidiaries is in compliance in all material respects with all
currently applicable Laws and regulations respecting employment, discrimination
in employment, terms and conditions of employment, wages, hours and occupational
safety and health and employment practices, and is not engaged in any unfair
labor practice. All individuals performing services for Target or any of the
Target Subsidiaries as independent contractors (defined as any individual who
provides services for Target or any of the Target Subsidiaries who is not
treated as a common-law employee for purposes of statutory withholdings and/or
employment benefits) at any time are properly classified as independent
contractors pursuant to all applicable regulations, including but not limited to
I.R.S. Revenue Ruling 87-41, 1987-1 C.B. 296. Target and each of the Target
Subsidiaries has withheld all amounts required by Law or by agreement to be
withheld from the wages, salaries, and other payments to employees; and is not
liable for any arrears of wages or any taxes or any penalty for failure to
comply with any of the foregoing. Neither Target nor any of the Target
Subsidiaries is liable for any payment to any trust or other fund or to any
Governmental Entity, with respect to unemployment compensation benefits, social
security or other benefits or obligations for employees (other than routine
payments to be made in the normal course of business and consistent with past
practice). There are no pending claims against Target or any of the Target
Subsidiaries under any workers compensation plan or policy or for long term
disability. There are no claims or controversies pending or, to the knowledge of
Target, threatened, between Target or any of the Target Subsidiaries and any of
their employees, which claims or controversies have or could reasonably be
expected to result in a Material Adverse Effect on Target. Neither Target nor
any of the Target Subsidiaries is a party to any collective bargaining agreement
or other labor union contract nor does Target or any of the Target Subsidiaries
know of any activities or proceedings of any labor union to organize any such
employees. To the knowledge of Target, no employees or independent contractors
of Target or any of the Target Subsidiaries are in violation of any term of any
employment contract, patent disclosure agreement, enforceable noncompetition
agreement, or any enforceable restrictive covenant to a former employer or
customer relating to the right of any such employee or independent contractor to
be employed by Target or any of the Target Subsidiaries because of the nature of
the business conducted or presently proposed to be conducted by Target or any of
the Target Subsidiaries or to the use of trade secrets or proprietary
information of others. Except as set forth in SECTION 2.15 of the Target
Disclosure Schedule, as of the date hereof, no employees or
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independent contractors of Target or any of the Target Subsidiaries have given
notice to Target or to any of the Target Subsidiaries, nor is Target or any of
the Target Subsidiaries otherwise aware, that any such employee intends to
terminate his or her employment with Target or any of the Target Subsidiaries.
2.16 CERTAIN AGREEMENTS AFFECTED BY THE MERGER
Except as set forth in SECTION 2.16 of the Target Disclosure Schedule,
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (a) result in any payment (including,
without limitation, severance, unemployment compensation, golden parachute,
bonus or otherwise) becoming due to any director, employee or consultant of
Target or any of the Target Subsidiaries, (b) increase any benefits otherwise
payable by Target, or any of the Target Subsidiaries or (c) result in the
acceleration of the time of payment or vesting of any such benefits.
2.17 RELATED-PARTY TRANSACTIONS
Except as set forth in SECTION 2.17 of the Target Disclosure Schedule,
neither the Target nor any of the Target Subsidiaries has any contract,
agreement, extension of credit, business arrangement, or other relationship of
any kind with any of the following persons: (a) any officer or director of
Target or any of the Target Subsidiaries; (b) any stockholder owning five
percent (5%) or more of the outstanding Common Stock of Target or any of the
Target Subsidiaries; or (c) any Affiliate of the foregoing persons or any
business in which any of the foregoing persons is an officer, director,
employee, or five percent (5%) or greater equity owner.
2.18 INSURANCE
SECTION 2.18 of the Target Disclosure Schedule lists all policies of
insurance and bonds, and the respective amounts of such policies and bond,
carried by Target or any of the Target Subsidiaries. There is no claim pending
under any of such policies or bonds or as to which coverage has been questioned,
denied or disputed by the underwriters of such policies or bonds. All premiums
due and payable under all such policies and bonds have been paid and Target and
the Target Subsidiaries are otherwise in compliance with the terms of such
policies and bonds. Neither Target nor any of the Target Subsidiaries has any
knowledge of any threatened termination of, nor has it received notice of, any
material premium increase with respect to, any of such policies.
2.19 COMPLIANCE WITH LAWS; GOVERNMENTAL AUTHORIZATIONS
Target and each of the Target Subsidiaries have complied with and is
in compliance with all laws, statutes, ordinances, rules, regulations
(collectively, "LAW(S)"), judgments, orders, decrees, directives, consent
agreements, memoranda of understanding, permits, concessions, grants franchises,
licenses, and other Governmental Entity authorizations or approvals applicable
to it, or any of its properties. Except for Telecommunications Licenses, which
are specifically covered in SECTION 2.35, all licenses, authorizations, consents
and approvals (collectively, "GOVERNMENTAL AUTHORIZATIONS") of any court,
administrative agency or commission or other federal, state, county, municipal,
domestic or foreign governmental or regulatory authority or instrumentality
("GOVERNMENTAL ENTITY" or "GOVERNMENTAL ENTITIES")
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and all other permits, concessions, grants and franchises necessary for the
conduct of the business of Target and the Target Subsidiaries as now conducted
have been duly obtained and are in full force and effect, and there are no
proceedings pending or, to the knowledge of Target, threatened which may result
in the revocation, cancellation, suspension, or materially adverse modification
of any thereof, except to the extent the foregoing would not have a Material
Adverse Effect on Target.
2.20 BROKERS' AND FINDERS' FEES
Except as expressly provided in the letter agreement, dated August 23,
2000, between Target and Ferris, Baker Watts, Inc., a true and complete copy of
which has been furnished to the Acquiror, no agent, broker, investment banker,
person or firm acting directly or indirectly on behalf of Target or any of the
Target Subsidiaries or the Target Principal Stockholders or under the authority
of Target or any of the Target Subsidiaries or the Target Principal Stockholders
is or will be entitled to any broker's or finder's fee or any other commission
or similar fee directly or indirectly from any of the parties hereto in
connection with any of the transactions contemplated hereby.
2.21 BOARD APPROVAL; STOCKHOLDER APPROVAL
The Board of Directors of Target has unanimously (a) approved this
Agreement and the Merger, (b) determined that in its opinion the Merger is
advisable and in the best interests of the stockholders of Target and (c)
recommended that the stockholders of Target approve this Agreement and the
Merger. The affirmative vote of the holders of a majority of the outstanding
shares of Target Common Stock outstanding on the record date set for the
determination of stockholders entitled to vote on or consent to the Merger is
the only vote or consent of the holders of Target capital stock necessary to
approve this Agreement and the Merger.
2.22 CUSTOMERS AND SUPPLIERS
As of the date hereof, no customer which individually accounted for
more than 5% of Target's gross revenues during the 12-month period preceding the
date hereof, and no material supplier of Target or any of the Target
Subsidiaries during such period, has canceled or otherwise terminated, or made
any threat to Target or any of the Target Subsidiaries to cancel or otherwise
terminate its relationship with Target or with any of the Target Subsidiaries
for any reason including, without limitation the consummation of the
transactions contemplated hereby, or has at any time on or after the Target
Balance Sheet Date decreased materially its services or supplies to Target or
any of the Target Subsidiaries in the case of any such supplier, or its usage of
the services or products of Target or any of the Target Subsidiaries in the case
of such customer and all amounts owing from such customers, if not in dispute,
have been paid in accordance with their respective terms. Target and each of the
Target Subsidiaries have not knowingly breached, so as to provide a benefit to
Target that was not intended by the parties, any agreement with, or engaged in
any fraudulent conduct with respect to, any customer or supplier of Target or
any of the Target Subsidiaries.
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2.23 MATERIAL CONTRACTS
SECTION 2.23 of the Target Disclosure Schedule sets forth a list of
all material agreements or commitments ("MATERIAL CONTRACTS") of any nature to
which Target or any of the Target Subsidiaries are a party or by which it is
bound, including without limitation:
(a) each agreement which requires future expenditures by Target, or
any of the Target Subsidiaries, in excess of $10,000 or which might result in
payments to Target or to any of the Target Subsidiaries in excess of $10,000;
(b) all employment and consulting agreements;
(c) employee benefit, Target Employee Plans, bonus, pension, profit
sharing, stock option, stock purchase and similar plans and arrangements;
(d) any agreement between Target or any of the Target Subsidiaries
and a third party relating to sharing, licensing, or developing any product,
technology or Target Intellectual Property;
(e) any agreement for the borrowing of money or line of credit, trust
indenture, mortgage, promissory note, loan agreement or any currency exchange,
commodities or other hedging arrangement or any leasing transaction of the type
required to be capitalized in accordance with GAAP;
(f) agreements with respect to Liens;
(g) any agreement which provides for the restraint or restriction of
the right to compete with any person in the conduct of its business by Target or
any of the Target Subsidiaries;
(h) any confidentiality, secrecy or non-disclosure agreement with any
party other than those that are on Target's standard form previously provided to
Acquiror or those that by their terms prohibit disclosure of such agreement to
Acquiror;
(i) any distributor, reseller, agency or manufacturer's
representative contract other than (a) those that are on Target's standard form
previously provided to Acquiror and (b) those that are terminable at will by
Target without Target incurring, directly or indirectly, any premium, penalty,
fees, taxes or other obligation relating to such termination;
(j) any material contract to support or maintain the products or
services of Target or any of the Target Subsidiaries, that expires or may be
renewed at the option of any person other than Target or any of the Target
Subsidiaries;
(k) any agreement of guarantee, support, assumption or endorsement
of, or any similar commitment with respect to, the Liabilities (as defined in
SECTION 2.5) of any other person of entity;
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(l) any agreement pursuant to which Target or any of the Target
Subsidiaries have deposited or is required to deposit with an escrow holder or
any other person or entity, all or part of the source code (or any algorithm or
documentation contained in or relating to any source code) of any Target
Intellectual Property;
(m) except as set forth in SECTION 2.23(m) of the Target Disclosure
Schedule, any agreement to indemnify, hold harmless or defend any other person
with respect to any assertion of personal injury, damage to property or
Intellectual Property infringement, misappropriation or violation or warranting
the lack thereof, other than indemnification provisions contained in a customary
purchase orders/purchase agreements/product licenses arising in the ordinary
course of business and consistent with past practice;
(n) any joint venture agreements and shareholder's agreements;
(o) any agreement with any labor union;
(p) any lease of real property;
(q) any lease of personal property with an annual lease or other
payment in excess of $5,000; and
(r) any agreement with any person with whom Target does not deal at
arm's length.
2.24 NO BREACH OF MATERIAL CONTRACTS
Except to the extent they have previously expired in accordance with
their terms, Target and each of the Target Subsidiaries have performed in all
material respects all of the obligations required to be performed by it, and is
not in default under any Material Contract. Each of the Material Contracts is
(as to Target and each of the Target Subsidiaries) in full force and effect,
unamended, and there exists no default or event of default or event, occurrence,
condition or act, with respect to Target or any of the Target Subsidiaries or to
the knowledge of Target with respect to the other contracting party, or
otherwise that, with or without the giving of notice, the lapse of the time or
the happening of any other event or conditions, would reasonably be expected to
(a) become a default or event of default under any Material Contract, (b) result
in the loss or expiration of any material right or option by Target or by any of
the Target Subsidiaries (or the gain thereof by any third party) under any
Material Contract or (c) result in the release, disclosure or delivery to any
third party of any source materials. True, correct and complete copies of all
Material Contracts have been delivered to the Acquiror.
2.25 MINUTE BOOKS
The minute books of Target and each of the Target Subsidiaries have
been made available to Acquiror and contain true and complete copies of all
resolutions adopted and all other material actions taken at all meetings of
directors and stockholders and all actions by written consent since the time of
incorporation of Target and each of the Target Subsidiaries through the date of
this Agreement.
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2.26 COMPLETE COPIES OF MATERIALS
Copies of each document which has been delivered by Target to Acquiror
or its counsel or other representatives in connection with their legal and
accounting due diligence review of Target and the Target Subsidiaries are true
and complete.
2.27 YEAR 2000 COMPATIBILITY
Target and each of the Target Subsidiaries are Year 2000 compliant.
None of the products and services sold, licensed, rendered, or otherwise
provided by Target and the Target Subsidiaries in the conduct of their business
have malfunctioned, ceased to function, generated materially incorrect data or
produced materially incorrect results or caused any of the above with respect to
the property or business of third parties using such products or services when
processing, providing or receiving (a) date-related data from, into and between
the Twentieth (20th) and Twenty-First (21st) centuries or (b) date-related data
in connection with any valid date in the Twentieth (20th) and Twenty-First
(21st) centuries, including leap year calculations. Target and the Target
Subsidiaries have not made any other representations or warranties specifically
relating to the ability of any product or service sold, licensed, rendered or
otherwise provided by Target or the Target Subsidiaries in the conduct of their
business to operate without malfunction, to operate without ceasing to function,
to generate correct data or to produce correct results when processing,
providing or receiving (x) date-related data from, into and between the
Twentieth (20th) and Twenty-First (21st) centuries and (y) date-related data in
connection with any valid date in the Twentieth (20th) and Twenty-First (21st)
centuries.
2.28 REORGANIZATION
Except as set forth in the preliminary letter issued by Deloitte &
Touche, LLP, Target's independent accountants, as of the date hereof, neither
Target, the Target Subsidiaries, nor any of their Affiliates have taken or
agreed to take any action, nor does Target or any of the Target Subsidiaries
have knowledge of any fact or circumstance, that would prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the Code.
2.29 EXPORT CONTROL LAWS AND FOREIGN CORRUPT PRACTICES ACT
Target and the Target Subsidiaries have conducted their export
transactions in accordance with applicable provisions of United States export
control Laws, including but not limited to the Export Administration Act and
implementing Export Administration Regulations. Without limiting the foregoing:
(a) Target and each of the Target Subsidiaries have obtained all
export licenses and other approvals required for their exports of products,
software and technologies from the United States;
(b) Target and each of the Target Subsidiaries is in compliance with
the terms of all applicable export licenses or other approvals;
(c) There are no pending or threatened claims against Target or any
of the Target Subsidiaries with respect to such export licenses or other
approvals;
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(d) There are no actions, conditions or circumstances pertaining to
the export transactions of Target and the Target Subsidiaries that may give rise
to any future claims; and
(e) No consents or approvals for the transfer of export licenses to
Acquiror are required, or such consents and approvals can be obtained
expeditiously without material cost.
Target, the Target Subsidiaries and their employees are in compliance
with the U.S. Foreign Corrupt Practices Act, as amended, including without
limitation, the books and records provisions thereof.
2.30 REPRESENTATIONS COMPLETE
None of the representations or warranties made by Target herein or in
any Schedule hereto, including the Target Disclosure Schedule, or in any
certificate furnished by Target pursuant to this Agreement, when all such
documents are read together in their entirety, contains or will contain at the
Effective Time any untrue statement of a material fact, or omits or will omit at
the Effective Time to state any material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances under
which made, not misleading.
2.31 REGISTRATION RIGHTS
There is no agreement of Target or any of the Target Subsidiaries to
register under the Securities Act any shares of Target Common Stock or any
shares of Target capital stock issuable upon the exercise of Target Stock
Options or other securities, except pursuant to agreements that will be
terminated or that will terminate pursuant to their terms at or prior to the
Closing.
2.32 FUNCTIONALITY OF TECHNOLOGY
All materials and technology (including but not limited to all
hardware, software, platforms, cables, and switches) required by Target and each
of the Target Subsidiaries to perform its business as currently conducted or as
proposed to be conducted are free from material defects and will continue to
perform substantially in the manner in which they currently perform. Target and
each of the Target Subsidiaries have all permissions, rights, authority and
documentation necessary to perform its business as currently conducted or as
proposed to be conducted.
2.33 BENEFICIAL OWNERSHIP OF ACQUIROR STOCK
As of the date hereof, Target does not beneficially own any shares of
Acquiror Common Stock or have any option, warrant, or right of any kind to
acquire the beneficial ownership of any Acquiror Common Stock, except pursuant
to the terms of this Agreement.
2.34 IMMIGRATION MATTERS
Target has complied with all Laws relating to verification of
employment eligibility of its employees, including but not limited to,
Verification of the Employment
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eligibility of Target's employees in accordance with Section 274A of the
Immigration and Nationality Act, as amended (8 U.S.C. Section 1324 (a)).
2.35 TELECOMMUNICATIONS LICENSES
(a) SECTION 2.35(a) of the Target Disclosure Schedule contains a
complete list of all Federal Communications Commission ("FCC") licenses and
authorizations held by Target (the "FCC LICENSES"), and all state certificates
of public convenience and necessity and other operating authorizations issued by
state public utility commissions or similar state governmental agencies
(collectively, "PUCs") (such PUC certificates and authorizations collectively,
the "STATE AUTHORIZATIONS," and together with the FCC Licenses, the
"TELECOMMUNICATIONS LICENSES"). The FCC Licenses are all of the licenses,
authorizations, consents and approvals necessary from the FCC for each of Target
and the Target Subsidiaries to conduct its business as currently conducted.
Except as set forth in SECTION 2.35(a) of the Target Disclosure Schedule, the
State Authorizations are all of the licenses, authorizations, consents and
approvals necessary from the PUCs for each of Target and the Target Subsidiaries
to conduct its business as currently conducted.
(b) Except as described in SECTION 2.35(b) of the Target Disclosure
Schedule (the "REQUIRED TELECOMMUNICATIONS CONSENTS"), there is no consent,
approval, authorization, or order of, or filing with, the FCC or any other
federal, state or local governmental or regulatory authority, or consent,
approval, authorization, agreement or verification of or by any of the customers
of Target or any of the Target Subsidiaries, that is required to consummate the
transactions contemplated by this Agreement and for the Surviving Corporation to
continue operating the business of Target or the business of the Target
Subsidiaries in the same manner as Target and the Target Subsidiaries currently
conduct business;
(c) Target and each of the Target Subsidiaries have at all times been
in compliance with the Communications Act of 1934, as amended, and the FCC
rules, regulations and policies, including the FCC rules, regulations and
policies concerning "slamming," as well as all applicable state regulation of
local exchange and inter-exchange telecommunications services, including the
rules concerning "slamming", and has timely and completely performed all
obligations imposed on Target and the Target Subsidiaries thereunder; and
(d) The Telecommunications Licenses are valid and in full force and
effect, unimpaired by any material condition and under the exclusive control of
Target or any of the Target Subsidiaries, and Target and each of the Target
Subsidiaries have timely and completely performed all obligations required
thereunder. No application, complaint, action, investigation or proceeding is
pending or, to the knowledge of Target, threatened, that would reasonably be
expected to result in loss, revocation, cancellation or suspension of the
Telecommunications Licenses or other administrative or judicial sanction with
respect to Target and the Target Subsidiaries.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND MERGER SUB
Acquiror and Merger Sub represent and warrant to Target that the
statements contained in this ARTICLE III are true and correct, except as set
forth in the disclosure schedule delivered by Acquiror to Target immediately
prior to the execution and delivery of this Agreement (the "ACQUIROR DISCLOSURE
SCHEDULE"). The Acquiror Disclosure Schedule shall be arranged in paragraphs
corresponding to the numbered Sections contained in this ARTICLE III, and the
disclosure in any Section shall qualify only the corresponding Section in this
ARTICLE III. Any reference in this ARTICLE III to an agreement being
"enforceable" shall be deemed to be qualified to the extent such enforceability
is subject to (i) Laws of general application relating to bankruptcy,
insolvency, moratorium, fraudulent conveyance and the relief of debtors and (ii)
the availability of specific performance, injunctive relief and other equitable
remedies. In this Article III, "ACQUIROR" will be deemed to include Acquiror and
its predecessors, unless the context otherwise requires.
3.1 ORGANIZATION, STANDING AND POWER
Acquiror and Merger Sub have no subsidiaries or affiliated companies
and are not each a party to any material joint venture or partnership
(collectively, the "ACQUIROR SUBSIDIARIES") other than as listed in SECTION 3.1
of the Acquiror Disclosure Schedule. Each of Acquiror and Acquiror Subsidiaries,
including Merger Sub, is a corporation duly organized, validly existing and in
good standing under the Laws of its jurisdiction of incorporation and has full
corporate power and authority to conduct its business as presently conducted.
Acquiror and Merger Sub have full corporate power and authority to enter into
this Agreement and to carry out the transactions contemplated by this Agreement.
Acquiror and each of the Acquiror Subsidiaries has all Governmental
Authorizations of any Governmental Entity required to carry on its business as
now conducted, except where the failure to have such Governmental Authorizations
would not have a Material Adverse Effect on Acquiror. Each of Acquiror and
Acquiror Subsidiaries is duly qualified and in good standing to do business as a
foreign corporation in each jurisdiction where the character of the property
owned or leased by it or the nature of its activities makes such qualifications
necessary except where the failure to be so qualified would not have a Material
Adverse Effect on Acquiror. Each of Acquiror and Acquiror Subsidiaries has
furnished to Target true and complete copies of its certificate of incorporation
and bylaws, each as amended to date and currently in effect, and said copies are
true, correct and complete, and contain all amendments through the date hereof.
Each of Acquiror and Acquiror Subsidiaries is not in violation of any of the
provisions of its certificate of incorporation or bylaws. Acquiror is the sole
owner of all outstanding shares of capital stock of each of the Acquiror
Subsidiaries and all such shares are duly authorized, validly issued, fully paid
and non-assessable. There are no outstanding subscriptions, options, warrants,
puts, calls, rights, exchangeable or convertible securities or other commitments
or agreements of any character relating to the issued or unissued capital stock
or other securities of the Acquiror Subsidiaries, or otherwise obligating
Acquiror or any of the Acquiror Subsidiaries to issue, transfer, sell, purchase,
redeem or otherwise acquire any such securities. Neither Acquiror nor any of the
Acquiror Subsidiaries owns, directly or indirectly, any equity or similar
interest in, or any
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interest convertible into or exchangeable or exercisable for, any equity or
similar interest in, any corporation, partnership, joint venture or other
business association or entity.
3.2 CAPITAL STRUCTURE
The authorized capital stock of Acquiror consists of 40,000,000 shares
of Acquiror Common Stock, par value $0.01 per share, and 1,000,000 shares of
preferred stock, par value $0.01 per share, of which there were issued and
outstanding as of the close of business on June 30, 2000, 14,306,914 shares of
Acquiror Common Stock and no shares of preferred stock. The authorized capital
stock of Merger Sub consists of one thousand (1,000) shares of common stock, par
value $0.01 per share, of which 100 are issued and outstanding and held by
Acquiror. All of the outstanding shares of capital stock of each of the Acquiror
Subsidiaries is owned by Acquiror free and clear of any Liens other than
Permitted Liens and those Liens shown on Section 3.2 of the Acquiror Disclosure
Schedule. All outstanding shares of Acquiror and Merger Sub have been duly
authorized, validly issued, fully paid and are nonassessable and free of any
Liens other than Permitted Liens, those Liens shown on SECTION 3.2 of the
Acquiror Disclosure Schedule and, in the case of Acquiror only, Liens created by
or imposed upon the holders of the shares thereof. The shares of Acquiror Common
Stock to be issued pursuant to the Merger will be, upon issuance, duly
authorized, validly issued, fully paid and nonassessable, and no stockholder of
Acquiror will have any preemptive right of subscription or purchase in respect
thereof.
3.3 AUTHORITY; NO CONFLICT
The execution, delivery and performance by Acquiror and Merger Sub of
this Agreement and the Certificate of Merger, and the consummation by Acquiror
and Merger Sub of the transactions contemplated hereby and thereby, have been
duly authorized by all necessary corporate action on the part of Acquiror and
Merger Sub, subject only to the approval of this Agreement and the Merger by the
affirmative vote of the holders of a majority of the outstanding Acquiror Common
Stock. This Agreement has been duly executed and delivered by Acquiror and
Merger Sub and constitutes a valid and binding obligation of Acquiror and Merger
Sub enforceable against Acquiror and Merger Sub in accordance with its terms.
The Certificate of Merger, upon execution will constitute a valid and binding
obligation of Acquiror and Merger Sub enforceable against Acquiror and Merger
Sub in accordance with its terms.
The execution, delivery and performance of this Agreement by Acquiror
and Merger Sub do not, and the consummation of the transactions contemplated
hereby will not, (i) conflict with, or result in any violation of, or breach of
or default under (with or without notice or lapse of time, or both), or give
rise to a right of termination, cancellation or acceleration of any obligation
or loss of any benefit under, or require a waiver or consent under (x) its
Certificate of Incorporation or Bylaws (each as amended to date), (y) any
mortgage, indenture, material lease, material contract or other material
agreement or material instrument binding upon the Acquiror, Merger Sub or any of
the Acquiror Subsidiaries, or (z) any permit, concession, franchise, material
license, judgment, order, decree, Law, judgment, or injunction, or other similar
authorization held by Acquiror, Merger Sub or any of the Acquiror Subsidiaries
or applicable to Acquiror, Merger Sub or any of the Acquiror Subsidiaries or any
of their properties or assets.
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No consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any Governmental Entity
is required on the part of Acquiror and Merger Sub or any of the Acquiror
Subsidiaries in connection with the execution and delivery of this Agreement or
the consummation of the other transactions contemplated by this Agreement,
except for (i) the filing of the Certificate of Merger, (ii) compliance with any
applicable requirements of the Securities Act and the rules and regulations
promulgated thereunder (iii) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
state securities or "blue sky" Laws and the securities Laws of any foreign
country; (iv) such filings as may be required under the HSR, (v) such other
filings or registrations with, or authorizations, consents or approvals of,
Governmental Entities, the failure of which to make or obtain would not
reasonably be expected to have a Material Adverse Effect on Acquiror, and (vi)
the Required Telecommunication Consents.
3.4 SEC DOCUMENTS; FINANCIAL STATEMENTS
As of their respective filing dates and, except to the extent that
subsequent Exchange Act statements, reports and filings correct earlier Exchange
Act statements, reports and filings, as of the date hereof, each statement,
report, filing, registration statement (with the prospectus in the form filed
pursuant to Rule 424(b) of the Securities Act), definitive proxy statement and
other document filed with the SEC by Acquiror since December 31, 1999
(collectively, the "ACQUIROR SEC DOCUMENTS") complied in all material respects
with the applicable requirements of the Exchange Act and the Securities Act, and
none of the Acquiror SEC Documents contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances in
which they were made, not misleading, except to the extent corrected by a
subsequently filed Acquiror SEC Document.
Acquiror has filed with the SEC an Annual Report on Form 10-K for the
fiscal year ended December 31, 1999 (the "ACQUIROR 10-K") and a Quarterly Report
on Form 10-Q for the fiscal quarter ended June 30, 2000 (the "ACQUIROR FORM
10-Q"). The financial statements included in the Acquiror 10-K and the Acquiror
10-Q (collectively, the "ACQUIROR FINANCIAL STATEMENTS") are complete and
correct in all material respects as of their respective dates, and were prepared
in accordance with GAAP (except that the unaudited financial statements do not
have complete notes thereto and are subject to normal year-end audit
adjustments) applied on a consistent basis throughout the periods indicated and
with each other (except as may be indicated in the notes thereto). The Acquiror
Financial Statements fairly present in all material respects the consolidated
financial condition and operating results of Acquiror as of the dates, and for
the periods, indicated therein, subject to normal year-end audit adjustments.
Acquiror maintains and will continue to maintain a standard system of accounting
established and administered in accordance with GAAP. The Acquiror Financial
Statements complied as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto as of their respective dates. The balance sheet of Acquiror
dated as of December 31, 1999 included in the Acquiror 10-K is herein referred
to as the "ACQUIROR BALANCE SHEET."
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3.5 REORGANIZATION
As of the date hereof, to Acquiror's knowledge neither Acquiror nor
any of its Affiliates has taken or agreed to take any action, nor does Acquiror
have knowledge of any fact or circumstance, that would prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the Code.
3.6 ABSENCE OF UNDISCLOSED LIABILITIES
Acquiror has no material Liabilities of any nature (matured or
unmatured, fixed or contingent) other than (a) those set forth or adequately
reserved for in the Acquiror Balance Sheet, (b) those not required to be set
forth or adequately reserved for in the Acquiror Balance Sheet under GAAP, (c)
those incurred in the ordinary course of business since the date of the Acquiror
Balance Sheet which are not, individually or in the aggregate material, and
consistent with past practice, and (d) those incurred in connection with the
execution of this Agreement.
3.7 REPRESENTATIONS COMPLETE
None of the representations, warranties or statements made by Acquiror
herein or in any Schedule hereto, including the Acquiror Disclosure Schedule, or
certificate furnished by Acquiror pursuant to this Agreement, when all such
documents are read together in their entirety, contains or will contain at the
Effective Time any untrue statement of a material fact, or omits or will omit at
the Effective Time to state any material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances under
which made, not misleading.
3.8 DISCLOSURE DOCUMENTS
None of the written information supplied or to be supplied by Acquiror
or Merger Sub for inclusion in and that is actually included in (i) the Joint
Proxy Statement/Prospectus, and (ii) the Registration Statement, will, in the
case of the Joint Proxy Statement/Prospectus, at the time of mailing of the
Joint Proxy Statement/Prospectus and at the time of the meeting of the
shareholders to be held in connection with the Merger and at the Effective Time,
contain any untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not misleading
or will, in the case of the Registration Statement becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading.
3.9 BENEFICIAL OWNERSHIP OF TARGET STOCK
As of the date hereof, Acquiror does not beneficially own any shares
of Target Common Stock or have any option, warrant, or right of any kind to
acquire the beneficial ownership of any Target Common Stock, except pursuant to
the terms of this Agreement and the Voting Agreement.
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3.10 LITIGATION
There is no private or Governmental Entity action, suit, proceeding,
claim, arbitration or investigation pending or to the knowledge of Acquiror,
threatened before any agency, court or tribunal, foreign or domestic against
Acquiror, any of the Acquiror Subsidiaries or any of their respective properties
or any of their officers or directors (in their capacities as such). There is no
judgment, decree, writ, injunction, or order against Acquiror, any of the
Acquiror Subsidiaries or any of their respective directors or officers (in their
capacities as such), that would prevent, enjoin or materially alter or delay any
of the transactions contemplated by this Agreement. Further, there are no
actions, suits, proceedings, claims, arbitrations or investigations initiated by
Acquiror or any of the Acquiror Subsidiaries, or that Acquiror or any of the
Acquiror Subsidiaries presently intends to initiate.
3.11 RESTRICTIONS ON BUSINESS ACTIVITIES
There is no agreement, judgment, injunction, order or decree binding
upon Acquiror or any of the Acquiror Subsidiaries which would reasonably be
expected to have the effect of prohibiting or impairing any current business
practice of Acquiror or any of the Acquiror Subsidiaries, any acquisition of
property by Acquiror or any of the Acquiror Subsidiaries or the conduct of
business by Acquiror as currently conducted by Acquiror or any of the Acquiror
Subsidiaries.
3.12 EMPLOYEE BENEFIT PLANS
(a) SECTION 3.12 of the Acquiror Disclosure Schedule lists, with
respect to Acquiror and each of the Acquiror Subsidiaries, any trade or business
(whether or not incorporated) which is treated as a single employer with
Acquiror or with any of the Acquiror Subsidiaries (an "ACQUIROR ERISA
AFFILIATE") within the meaning of Section 414(b), (c), (m) or (o) of the Code,
(i) all material employee benefit plans (as defined in Section 3(3) of ERISA),
(ii) any material stock option, stock purchase, phantom stock, stock
appreciation right, supplemental retirement, severance, sabbatical, medical,
dental, vision care, disability, employee relocation, cafeteria benefit (Code
Section 125) or dependent care benefit (Code Section 129), life insurance or
accident insurance plans, programs or arrangements, (iii) all material bonus,
pension, profit sharing, savings, deferred compensation or incentive plans,
programs or arrangements, (iv) other material fringe or employee benefit plans,
programs or arrangements that apply to senior management of Acquiror or any of
the Acquiror Subsidiaries and that do not generally apply to all employees, and
(v) any current or former employment or executive compensation or severance
agreements, written or otherwise, as to which unsatisfied obligations of
Acquiror or any of the Acquiror Subsidiaries of greater than $10,000 remain for
the benefit of, or relating to, any present or former employee, consultant or
director of Acquiror or any of the Acquiror Subsidiaries (together, the
"ACQUIROR EMPLOYEE PLANS").
(b) Acquiror has furnished to Target a copy of each of the Acquiror
Employee Plans and related plan documents and amendments thereto (including
trust documents, insurance policies or contracts, employee booklets, summary
plan descriptions and other authorizing documents, and any material employee
communications required by Law relating thereto) and has, with respect to each
Acquiror Employee Plan which is subject to ERISA reporting requirements,
provided copies of the Form 5500 reports filed for the last three plan years.
Any
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Acquiror Employee Plan intended to be qualified under Section 401(a) of the Code
is so qualified. Acquiror has also furnished Target with the most recent
Internal Revenue Service determination or opinion letter issued with respect to
each such Acquiror Employee Plan, and nothing has occurred since the issuance of
each such letter which could reasonably be expected to cause the loss of the
tax-qualified status of any Acquiror Employee Plan subject to Code Section
401(a). Acquiror has also furnished Target with all registration statements and
prospectuses prepared in connection with each Acquiror Employee Plan.
(c) (i) None of the Acquiror Employee Plans promises or provides
retiree medical or other retiree welfare benefits to any person other than as
required under the COBRA; (ii) there has been no "prohibited transaction," as
such term is defined in Section 406 of ERISA and Section 4975 of the Code, with
respect to any Acquiror Employee Plan, which would reasonably be expected to
have, in the aggregate, a Material Adverse Effect on Acquiror; (iii) each
Acquiror Employee Plan has been administered in all material respects in
accordance with its terms and in compliance with the requirements prescribed by
any and all statutes, rules and regulations (including ERISA and the Code), and
each Acquiror ERISA Affiliate has performed in all material respects all
obligations required to be performed by it under, is not in any material respect
in default under or violation of, and has no knowledge of any material default
or violation by any other party to, any of the Acquiror Employee Plans; (iv)
Acquiror, the Acquiror Subsidiaries, or any Acquiror ERISA Affiliate are not
subject to any material Liability or penalty under Sections 4976 through 4980 of
the Code or Title I of ERISA with respect to any of the Acquiror Employee Plans;
(v) all material contributions required to be made by Acquiror, the Acquiror
Subsidiaries and any Acquiror ERISA Affiliate to any Acquiror Employee Plan have
been made on or before their due dates and a reasonable amount has been accrued
for contributions to each Acquiror Employee Plan subject to Title IV of ERISA
for the current plan years; (vi) with respect to each Acquiror Employee Plan
subject to Title IV of ERISA, no "reportable event" within the meaning of
Section 4043 of ERISA (excluding any such event for which the 30 day notice
requirement has been waived under the regulations to Section 4043 of ERISA) nor
any event described in Section 4062, 4063 or 4041 of ERISA has occurred; (vii)
no Acquiror Employee Plan is covered by, and none of Acquiror, the Acquiror
Subsidiaries and any Acquiror ERISA Affiliate has incurred or expects to incur
any material Liability under Title IV of ERISA or Section 412 of the Code; and
(viii) each Acquiror Employee Plan can be amended, terminated or otherwise
discontinued after the Effective Time in accordance with its terms, without any
material Liability to Acquiror (other than ordinary administrative expenses
typically incurred in a termination event). For purposes of subparts (iv), (v),
(vii) and (viii) of this Section 3.12(c), "material" shall be deemed to include
any amount in excess of $10,000 in the aggregate. With respect to each Acquiror
Employee Plan subject to ERISA as either an employee pension plan within the
meaning of Section 3(2) of ERISA or an employee welfare benefit plan within the
meaning of Section 3(1) of ERISA, Acquiror and the Acquiror Subsidiaries have
prepared in good faith and timely filed all requisite Governmental Entity
reports (which were true and correct as of the date filed) and has properly and
timely filed and distributed or posted all notices and reports to employees
required to be filed, distributed or posted with respect to each such Acquiror
Employee Plan. Except for routine claims for benefits, no suit, administrative
proceeding, claim, action or other litigation has been brought, or to the
knowledge of Acquiror or any of the Acquiror Subsidiaries is threatened against
or with respect to any such Acquiror Employee Plan, including any audit or
inquiry by the Internal Revenue Service or United States Department of Labor.
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(d) With respect to each Acquiror Employee Plan, Acquiror and the
Acquiror Subsidiaries have complied in all material respects with (i) the
applicable health care continuation and notice provisions of COBRA and the
regulations (including proposed regulations) thereunder, (ii) the applicable
requirements of the Family Medical and Leave Act of 1993 and the regulations
thereunder, and (iii) the applicable requirements of the Health Insurance
Portability and Accountability Act of 1996 and the regulations (including
proposed regulations) thereunder.
(e) There has been no amendment to, written interpretation or
announcement (whether or not written) by Acquiror, the Acquiror Subsidiaries or
any Acquiror ERISA Affiliate relating to, or change in participation or coverage
under, any Acquiror Employee Plan which would materially increase the expense of
maintaining such plan above the level of expense incurred with respect to that
plan for the most recent fiscal year included in Acquiror's Financial
Statements.
(f) Neither Acquiror nor any of the Acquiror Subsidiaries currently
maintains, sponsors, participates in or contributes to, nor have they ever
maintained, established, sponsored, participated in, or contributed to, any
pension plan (within the meaning of Section 3(2) of ERISA) which is subject to
Part 3 of Subtitle B of Title I of ERISA, Title IV of ERISA or Section 412 of
the Code.
(g) None of Acquiror, the Acquiror Subsidiaries or any Acquiror ERISA
Affiliate is a party to, or has made any contribution to or otherwise incurred
any obligation under, any "multiemployer plan" as defined in Section 3(37) of
ERISA.
(h) There is no agreement, contract or arrangement to which Acquiror
or any of the Acquiror Subsidiaries is a party that may result in the payment of
any amount that would not be deductible by reason of Section 404 of the Code.
3.13 BROKERS' AND FINDERS' FEES
No agent, broker, investment banker, person or firm acting directly or
indirectly on behalf of Acquiror or any of the Acquiror Subsidiaries or under
the authority of Acquiror or any of the Acquiror Subsidiaries is or will be
entitled to any broker's or finder's fee or any other commission or similar fee
directly or indirectly from any of the parties hereto in connection with any of
the transactions contemplated hereby.
3.14 BOARD APPROVAL; STOCKHOLDER APPROVAL
The Boards of Directors of Acquiror and Merger Sub have unanimously
(a) approved this Agreement and the Merger, (b) determined that in its opinion
the Merger is advisable and in the best interests of the stockholders of
Acquiror and Merger Sub, respectively, and (c) recommended that the stockholders
of Acquiror and Merger Sub approve this Agreement and the Merger. Acquiror, as
the sole stockholder of Merger Sub, has approved this Agreement and the Merger.
The affirmative vote of the holders of a majority of the outstanding shares of
Acquiror Common Stock outstanding on the record date set for the determination
of stockholders entitled to vote on or consent to the Merger is the only vote or
consent of the holders of Acquiror capital stock necessary to approve this
Agreement and the Merger.
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3.15 ABSENCE OF CERTAIN CHANGES
Since December 31, 1999 (the "ACQUIROR BALANCE SHEET DATE"), Acquiror,
Merger Sub and the Acquiror Subsidiaries have conducted their business in the
ordinary course consistent with past practice and there has not occurred: (a)
any change, event, condition or development of a state of circumstances or facts
(whether or not covered by insurance) that has resulted in, or would result in,
a Material Adverse Effect on Acquiror; (b) any change in accounting methods or
practices (including any change in depreciation or amortization policies or
rates) by Acquiror, Merger Sub or any of the Acquiror Subsidiaries or any
revaluation by Acquiror, Merger Sub or any of the Acquiror Subsidiaries of any
of its assets; (d) any amendment or termination of, or default under, any
contract or agreement to which Acquiror, Merger Sub or any of the Acquiror
Subsidiaries is a party or by which it is bound which would reasonably be
expected to have a Material Adverse Effect on Acquiror; (e) any amendment or
change to the certificate or articles of incorporation or bylaws of Acquiror,
Merger Sub or any of the Acquiror Subsidiaries or any proposal by the Board of
Directors or stockholders of Acquiror, Merger Sub or any of the Acquiror
Subsidiaries relating thereto; or (f) any negotiation or agreement by of
Acquiror, Merger Sub or any of the Acquiror Subsidiaries to do any of the things
described in the preceding clauses (a) through (e) (other than negotiations with
Target and its representatives regarding the transactions contemplated by this
Agreement).
3.16 COMPLIANCE WITH LAWS; GOVERNMENTAL AUTHORIZATIONS
Except to the extent the following would not have a Material Adverse
Effect on Acquiror, (i) Acquiror, Merger Sub and each of the Acquiror
Subsidiaries have complied with and is in compliance with all Laws, judgments,
orders, decrees, directives, consent agreements, memoranda of understanding,
permits, concessions, grants franchises, licenses, and other Governmental Entity
authorizations or approvals applicable to it, or any of its properties; and (ii)
all permits, concessions, grants, franchises, licenses, and other Governmental
Entity authorizations and approvals necessary for the conduct of the business of
Acquiror, Merger Sub and the Acquiror Subsidiaries as now conducted have been
duly obtained and are in full force and effect, and there are no proceedings
pending or, to the knowledge of Acquiror, threatened which may result in the
revocation, cancellation, suspension, or materially adverse modification of any
thereof.
ARTICLE IV
COVENANTS OF TARGET AND TARGET PRINCIPAL STOCKHOLDERS
Except as otherwise consented to in writing by Acquiror after the date
of this Agreement, Target and the Target Principal Stockholders covenant to and
agree with Acquiror and Merger Sub as follows:
4.1 INFORMATION AND BOARD OBSERVATION RIGHTS
(a) Target shall, upon reasonable notice, give to Acquiror and to its
officers, accountants, counsel, financial advisors, and other representatives,
reasonable access during their normal business hours throughout the period prior
to the Effective Date to all of their properties, books, contracts, commitments,
and stockholder lists and records. Target will, at its own
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expense, furnish Acquiror during such period with all such information
concerning their affairs as Acquiror may reasonably request, including
information for use in determining if the conditions of ARTICLE VI have been
satisfied, information necessary to prepare the regulatory filings or
applications to be filed with Governmental Entities to obtain the approvals
referred to in SECTION 4.2, and information for use in any other necessary
filings to be made with appropriate Governmental Entities. No information or
knowledge obtained in any investigation pursuant to this SECTION 4.1 shall
affect or be deemed to modify any representation or warranty contained herein or
the conditions to the obligations of the parties to consummate the Merger.
(b) Target shall permit up to two (2) individuals selected by
Acquiror to attend all regular and special meetings of the Target's Board of
Directors in a nonvoting capacity and to receive copies of all actions taken or
proposed to be taken by the Target's Board of Directors and all materials
distributed to or reviewed by the Target Board of Directors.
(c) Target and the Target Principal Stockholders acknowledge that
information received by it or them concerning Acquiror and its operations is
subject to the Confidentiality Agreement dated as of June 3, 2000 by and among
Target and the Acquiror (the "CONFIDENTIALITY AGREEMENT").
4.2 REGULATORY APPROVALS
Target and the Target Principal Stockholders shall cooperate with
Acquiror's efforts to obtain all necessary regulatory approvals of Governmental
Entities of the transactions contemplated by this Agreement including, but not
limited to approval under the HSR and the Required Telecommunication Consents
and shall use its commercially reasonable efforts to secure favorable action on
such applications, including without limitation commercially reasonable efforts
to pursue an appeal of a denial of a regulatory approval.
4.3 CONDUCT OF BUSINESS
After the date of this Agreement and pending the Effective Date,
neither Target nor any of the Target Subsidiaries shall cause or permit,
directly or indirectly, through Target, any of the Target Subsidiaries or
otherwise, any of the following, without the prior written consent of Acquiror:
(a) any change, supplement or amendment in its Certificate of Incorporation or
By-laws; (b) except with respect to Target stock options outstanding on the date
of this Agreement which are or may become subject to exercise according to their
terms as they exist on the date hereof, neither the Target nor any of the Target
Subsidiaries shall change their respective authorized, issued, or outstanding
capital stock or issue, deliver or sell or authorize or propose the issuance,
delivery or sale of, or purchase or propose the purchase of, any shares of their
respective capital stock or securities convertible into, or subscriptions,
rights, warrants or options to acquire, or other agreements or commitments of
any character obligating them to issue any such shares or other convertible
securities; (c) in the case of Target only, declare or pay any cash or other
dividends in respect of any shares of its respective capital stock; (d) any
increase in employee compensation or benefit levels (except for annual increases
not in excess of amounts established by its regular past practices), or
establishment of or any increase in any employment, compensation, bonus,
pension, option, incentive or deferred compensation, retirement, death, profit
sharing, or similar agreements or benefits of any of its respective past,
present, or future officers, directors or employees, or any modification of the
existing employment agreements
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with any officers or employees; (e) any change in any of its accounting policies
or practices unless required by GAAP; (f) incur or commit to incur any
indebtedness for borrowed money except pursuant to the terms and conditions of
the Loan and Security Agreement by and between Century Business Credit
Corporation and Target dated May 11, 1995, as amended through the date hereof
and in the form delivered to Acquiror provided that the amount outstanding under
such agreement shall not exceed $2.0 million and all proceeds shall be used for
ordinary business purposes consistent with past practice; (g) guarantee any
indebtedness or issue or sell any debt securities or guarantee any debt
securities of others; (h) obligate itself to make or undertake to make any
capital expenditure in excess of $50,000 in the aggregate; (i) enter into any
material contract, agreement, license or commitment, or violate, amend or
otherwise modify or waive any of the terms of any of its Material Contracts,
agreements or licenses without the prior written consent of Acquiror, except for
entering into a tail directors'-and-officers' insurance policy with premiums
payable by the Target or any Target Subsidiary not to exceed $34,500 in the
aggregate; (j) reduce the amount or limit the coverage of any of its insurance
policies; (k) transfer to or license any person or entity or otherwise extend,
amend or modify any rights to Target Intellectual Property: (l) revalue any of
its assets, including without limitation writing down the value of inventory or
writing off notes or accounts receivable; (m) sell, lease, license or otherwise
dispose of or encumber any of its properties or assets except for the sales of
cellular telephone equipment, pagers and debit cards in the ordinary course of
business consistent with past practice; (n) terminate or waive any right of
substantial value; (o) commence a lawsuit or arbitration proceeding other than
(i) for the routine collection of bills; (ii) in such cases where it in good
faith determines that failure to commence suit would result in the material
impairment of a valuable asset of its business, PROVIDED that it consults with
Acquiror prior to the filing of such a suit, or (iii) for a breach of this
Agreement; (p) acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial 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
material amount of assets; (q) make any Tax election, change any Tax election,
adopt any Tax accounting method, change any Tax accounting method, enter into
any closing agreement, settle any Tax claim or assessment or consent to any Tax
claim or assessment; (r) accelerate, amend or change the period of
exercisability or vesting of options or other rights granted under its stock
plans or authorize cash payments in exchange for any options or other rights
granted under any of such plans; (s) enter into or amend any agreements pursuant
to which any other party is granted exclusive marketing, manufacturing or other
exclusive rights of any type or scope with respect to any of its products or
technology, except with respect to entering into an agreement with BamNet
Corporation relating to the development and implementation of a marketing plan
for Target's 10-10-200(0) services; (t) engage in any related party transactions
as defined in SECTION 2.17, (u) pay, discharge or satisfy in an amount in excess
of $10,000 in any one case or $20,000 in the aggregate, any claim, Liability,
other than (i) arising in the ordinary course of business and consistent with
past practice and (ii) the payment, discharge or satisfaction of liabilities
reflected or reserved against in the Target Financial Statements, or (v) take or
agree in writing or otherwise to take, directly or indirectly, any of the
actions described in clauses (a) through (u) above, or any action which would
make any of its representations or warranties contained in this Agreement untrue
or incorrect or prevent it from performing or cause it not to perform its
covenants hereunder or delay, deter or prevent the conditions in Articles VI and
VII of this Agreement from being satisfied. Notwithstanding the foregoing, upon
Acquiror's request,
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Target shall terminate Target's 401(k) Plan, effective as of the date
immediately preceding the Effective Date.
Furthermore, pending the Effective Date, Target shall, and shall cause
each of the Target Subsidiaries to, (a) conduct its business only in the
ordinary course and use commercially reasonable efforts consistent with past
practice and policies to preserve intact its present business organizations,
keep available the services of its present officers and key employees and
preserve its relationships with customers, suppliers, distributors, licensors,
licensees and others having business dealings with it, to the end that its
goodwill and ongoing business shall be unimpaired at the Effective Time, (b)
continue in effect the present method of conducting its business, (c) give all
notices and other information required to be given to its employees, any
collective bargaining unit representing any group of employees, and any
applicable Government Entity under the National Labor Relations Act, the Code,
the Consolidated Omnibus Budget Reconciliation Act, and other applicable Law in
connection with the transactions provided for in this Agreement, (d) consult
with Acquiror as to making decisions or actions in matters other than those in
the ordinary course of business, and (e) use its commercially reasonable efforts
to maintain all Telecommunications Licenses.
4.4 MEETING OF STOCKHOLDERS OF TARGET; DOCUMENT PREPARATION
(a) Target will duly call and convene a meeting of its stockholders
to act upon the transactions contemplated hereby as soon as practicable. Except
to the extent legally required for the discharge by Target's Board of Directors
of its fiduciary duties, Target and its Board of Directors will recommend
approval of this Agreement and the Merger to its stockholders, and will use
commercially reasonable efforts to obtain a favorable vote thereon. The calling
and holding of such meeting and all notices, transactions, documents, and
information related thereto will be in material compliance with all applicable
Laws.
(b) Target shall furnish Acquiror with such information concerning
Target and the Target Principal Stockholders as is necessary in order to
cause the Joint Proxy Statement/Prospectus (as defined in SECTION 5.5),
insofar as it relates to others, to comply with SECTION 5.5. The Joint Proxy
Statement/Prospectus shall contain, among other matters, the recommendation
of the Board of Directors of Target that the Target stockholders approve the
Merger and this Agreement and the conclusion of the Target Board of Directors
that the terms and conditions of the Merger are fair and reasonable to the
stockholders of Target (subject in each case to any limitations or
qualifications required by Law for the discharge by Target's Board of
Directors of its fiduciary duties, as described in an opinion of counsel of
Swidler Berlin Shereff Friedman, LLP addressed to Target and made available
to Acquiror). Target agrees promptly to advise Acquiror if at any time prior
to the Target stockholders' meeting, any information provided by Target in
the Joint Proxy Statement/Prospectus becomes incorrect or incomplete in any
material respect and to provide Acquiror with the information needed to
correct such inaccuracy or omission. Target shall furnish Acquiror with such
supplemental information as may be necessary in order to cause the Joint
Proxy Statement/Prospectus, insofar as it relates to Target, to comply with
SECTION 5.5 after the mailing thereof to Target stockholders. The information
provided and the representations made by Target to Acquiror in connection
with the Registration Statement described in SECTION 5.5, both at the time
such information and representations are provided and made and at the
Effective Date, will be true
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and accurate in all material respects and will not contain any false or
misleading statement with respect to any material fact or omit to state any
material fact required to be stated therein or necessary in order (i) to make
the statements made therein not false or misleading, or (ii) to correct any
statement contained in an earlier communication with respect to such information
or representations which has become false or misleading. Target may rely upon
all information provided to it by Acquiror and its representatives in the
preparation of the Joint Proxy Statement/Prospectus and shall not be liable for
any untrue statement of a material fact or any omission to state a material fact
in the Joint Proxy Statement/Prospectus, if such statement is made in reliance
upon any written information provided to it by Acquiror or by any of its
officers or authorized representatives specifically for inclusion in the Joint
Proxy Statement/Prospectus.
(c) Target shall promptly furnish Acquiror with such information
regarding the Target stockholders as Acquiror requires to enable it to determine
what filings are required under applicable state securities Laws. Target
authorizes Acquiror to utilize in such filings the information concerning Target
provided to Acquiror in connection with, or contained in, the Joint Proxy
Statement/Prospectus. Target shall promptly notify Acquiror of all
communications, oral, or written, with the SEC concerning the Registration
Statement and the Joint Proxy Statement/Prospectus.
4.5 CONSENTS
Target will use commercially reasonable efforts to obtain any
consents, approvals, landlord estoppel certificates or waivers from third
parties required in connection with the transactions contemplated hereunder.
4.6 CURRENT INFORMATION; ADVICE OF CHANGES
(a) During the period from the date of this Agreement to the
Effective Time, Target will cause one or more of its designated representatives
to confer on a weekly or more frequent basis with representatives of Acquiror
regarding its business, operations, properties, assets, and condition (financial
or otherwise) and matters relating to the completion of the transactions
contemplated herein. As soon as reasonably available, but in no event more than
45 days after the end of each calendar quarter (other than the last calendar
quarter of each calendar year) ending after the date of this Agreement, Target
will deliver to Acquiror its quarterly reports on Form 10-Q, as filed with the
SEC under the Exchange Act. As soon as reasonably available, but in no event
more than 90 days after the calendar year, Target will deliver to Acquiror its
Annual Report on Form 10-K as filed with the SEC under the Exchange Act.
(b) Between the date of this Agreement and the Effective Time, Target
shall promptly advise Acquiror, by written update to the Target Disclosure
Schedule, of (a) the occurrence or non-occurrence of any event which would be
likely to cause any condition to the obligations of Acquiror to effect the
Merger and the other transactions contemplated by this Agreement not to be
satisfied, or (b) the failure of Target or the Target Principal Stockholders to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by them pursuant to this Agreement which would be likely to result
in any condition to the obligations of Acquiror to effect the Merger and the
other transactions contemplated by this Agreement not to be satisfied. The
delivery of any notice pursuant to this SECTION 4.6 shall not
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cure any breach of any representation or warranty requiring disclosure of such
matter prior to the date of this Agreement or otherwise limit or affect the
remedies available hereunder to Acquiror.
4.7 NO SOLICITATION OF OTHER OFFERS
(a) Target and the Target Principal Stockholders agree that neither
they nor any of their respective officers, directors, Affiliates, subsidiaries
or employees shall, and Target and the Target Principal Stockholders shall
direct and use commercially reasonable efforts to cause their agents and
representatives (including, without limitation, any investment banker, attorney,
or accountant retained by them) not to, directly or indirectly, take any action
to solicit or initiate any inquiries or the making of any offer or proposal
(including without limitation any proposal to stockholders of Target, or any of
the Target Subsidiaries) with respect to a merger, consolidation, business
combination, liquidation, reorganization, sale or other disposition of any
significant portion of assets, sale of shares of capital stock, or similar
transactions involving Target or any of the Target Subsidiaries (any such
inquiry, offer, or proposal, an "ACQUISITION PROPOSAL"), or engage in any
negotiations concerning, or provide any confidential information or data to, or
have any discussions with, any person relating to an Acquisition Proposal. As of
the date hereof, neither Target nor the Target Principal Stockholders is engaged
in any negotiations or discussions relating to an Acquisition Proposal. Target
and the Target Principal Stockholders shall promptly notify Acquiror orally and
in writing of, and keep it fully and currently informed on, any Acquisition
Proposal or any inquiries with respect thereto, such written notification to
include the identity of the person making such inquiry or Acquisition Proposal
and such other information with respect thereto as is reasonably necessary to
apprise Acquiror of the material terms of such Acquisition Proposal. Target and
the Target Principal Stockholders shall give Acquiror contemporaneous written
notice upon engaging in discussions or negotiations with, or providing any
information regarding Target or any of the Target Subsidiaries to, any such
person regarding an Acquisition Proposal. Nothing in this Section 4.7(a) shall
be deemed to require Target's Board of Directors to take any action that would
cause Target's Board of Directors to violate its fiduciary duties as required by
Law, as described in an opinion of counsel of Swidler Berlin Shereff Friedman,
LLP addressed to Target and made available to Acquiror.
(b) Target and the Target Principal Stockholders agrees that
irreparable damage would occur in the event that the provisions of this SECTION
4.7 were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed by the parties hereto that Acquiror shall be
entitled to seek an injunction or injunctions to prevent breaches of this
SECTION 4.7 and to enforce specifically the terms and provisions hereof in any
court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which the parties may be entitled at Law or in
equity.
In the event Target, any Target Subsidiary, any Target Principal
Stockholder, or any affiliate or associate of any of them, enters into any
letter of intent or agreement with respect to an Acquisition Proposal at any
time from the date hereof to the date which is one year from the date hereof
(unless such letter of intent or agreement was entered into following the
termination of this Agreement pursuant to Section 8.1(a), (b), (c) or (e), or
pursuant to clause (iii) of Section 8.1(d) due to dissenters not affiliated or
associated with Target or any Target Principal Stockholder), Acquiror shall
receive, as liquidated damages (the "LIQUIDATED DAMAGES"), the sum of $3,000,000
as full and final settlement of all claims under this provision. Acquiror shall
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have the right to receive the Liquidated Damages whether or not Target, any
Target Subsidiary, any Target Principal Stockholder, or any affiliate or
associate of any of them, as applicable, entered into such letter of intent or
agreement believing it was, for the purpose of, or with the intent of, observing
its fiduciary duties as required by Law, as advised by Swidler Berlin Shereff
Friedman, LLP, or otherwise. The liquidated damages described herein are the
parties' sole remedy for a violation of this provision. The parties waive any
right to resort to any other remedies, whether at law or in equity, or any other
measure or type of damages, including but not limited to lost profits that may
be alleged by reason of such violation. The parties acknowledge that it would be
extremely impractical and difficult to ascertain the actual damages suffered by
the non-violating party for a violation of this provision. Each party has
carefully considered the loss to the other occasioned by a violation of this
provision and all damages, general and specific, which Acquiror, the Target
Principal Stockholders and the Target suffer as a result of a violation of this
provision. The parties have determined that the amount of the liquidated damages
is a fair and reasonable estimate of those damages and it shall not be construed
as a penalty.
4.8 TAXES
Target shall have filed with appropriate federal, state, county,
municipal, or foreign Tax Authorities all Tax Returns required to be filed
(taking any applicable extensions into consideration) on or before the Effective
Date and shall have paid (or shall have made adequate provision or set up an
adequate actual reserve on the financial statements referred to in SECTION 2.4
for the payment of) all Taxes imposed by any Tax Authority with respect to any
Pre-Closing Tax Period (as hereinafter defined), together with any interest,
additions, or penalties related to any such taxes. For purposes of this SECTION
4.8, any reference to Target shall be deemed to include any corporation more
than fifty percent (50%) of the outstanding capital stock (by vote or value) of
which is owned by Target. "PRE-CLOSING TAX PERIOD" shall mean (i) each taxable
period that ends on or before the Effective Date, and (ii) any taxable period
that includes (but does not end on) the Effective Date (the period described in
this clause (ii) being hereafter referred to as a "STRADDLE PERIOD"). In the
case of any Tax for a Straddle Period, the covenant in this SECTION 4.8 shall be
limited to the Pre-Closing Tax Amount determined as follows:
(A) In the case of a periodic Tax that is not based on income or
receipts (e.g., an ad valorem property tax), the "PRE-CLOSING TAX AMOUNT"
shall be an amount equal to the amount of such Tax for the entire Straddle
Period multiplied by a fraction the numerator of which is the number of
days elapsed between the beginning of the Straddle Period and the Effective
Date, and the denominator of which is the total number of days in the
Straddle Period; and
(B) in the case of any other Tax, the "PRE-CLOSING TAX AMOUNT" shall
be the amount of such Tax for which Target would have been liable if the
Straddle Period had ended as of the close of business on the day of the
Effective Date.
4.9 PUBLIC ANNOUNCEMENTS
Between the date of this Agreement and the Effective Date, Target and
the Target Principal Stockholders will consult with Acquiror before issuing any
press release or otherwise making any public statements with respect to this
Agreement and the transactions contemplated
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hereby and shall not issue any such press release or make any such public
statement prior to such consultation, except as counsel may advise is required
by Law.
4.10 COOPERATION AND CONDITIONS
Target and the Target Principal Stockholders shall use their
commercially reasonable efforts to ensure that the conditions specified in
ARTICLE VI have been satisfied on a prompt basis. Target and the Target
Principal Stockholders agree to use their commercially reasonable efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable Laws to consummate and
make effective the transactions contemplated by this Agreement, including
cooperating fully with the other party, including by provision of information.
4.11 TAX FREE REORGANIZATION
Neither Target nor the Target Principal Stockholders will, directly or
indirectly, either before or after consummation of the Merger, take any action
which would cause the Merger to fail to constitute a "reorganization" within the
meaning of Code Section 368 and the Target and the Target Principal Stockholders
will use commercially reasonable efforts not to permit any of their directors,
officers, employees, stockholders, agents, consultants, or other representatives
to take any such action.
ARTICLE V
COVENANTS OF ACQUIROR AND MERGER SUB
Except as otherwise consented to in writing by Target after the date
of this Agreement, Acquiror and Merger Sub covenant to and agree with Target as
follows:
5.1 INFORMATION
(a) Acquiror and Merger Sub shall, upon reasonable notice, give to
Target and to its officers, accountants, counsel, financial advisors, and other
representatives, reasonable access during Acquiror's normal business hours
throughout the period prior to the Effective Date to all of their properties,
books, contracts, commitments, reports of examination (consistent with
applicable Law) and records. Acquiror and Merger Sub will, at their own expense,
furnish Target during such period with all such information concerning their
affairs as Target may reasonably request, including information for use in
determining if the conditions of ARTICLE VII have been satisfied and for use in
any other necessary filings to be made by Target with appropriate Governmental
Entities. No information or knowledge obtained in any investigation pursuant to
this SECTION 5.1 shall affect or be deemed to modify any representation or
warranty contained herein or the conditions to the obligations of the parties to
consummate the Merger.
(b) Acquiror acknowledges that information received by it concerning
Target and its operations is subject to the Confidentiality Agreement.
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5.2 APPLICATIONS TO GOVERNMENTAL ENTITIES
Acquiror will promptly prepare and file with the appropriate
Governmental Entities an application requesting the regulatory approvals
including, but not limited to approval under the HSR and the Required
Telecommunication Consents and shall use its commercially reasonable efforts to
secure favorable action on such applications, including without limitation
commercially reasonable efforts to pursue an appeal of a denial of a regulatory
approval.
5.3 CONDUCT OF BUSINESS
After the date of this Agreement and pending the Effective Date,
neither Acquiror nor Merger Sub shall cause or permit, directly or indirectly,
through Acquiror, Merger Sub or otherwise, any of the following, without the
prior written consent of Target: (a) effect any change or amendment in its
Certificate of Incorporation or By-laws; (b) in the case of Acquiror only,
declare or pay any cash dividends in respect of its Common Stock; (c) make any
change in any of its accounting policies or practices in a manner materially
affecting the consolidated assets, liabilities or results of operations of
Acquiror, unless required by GAAP, or (d) take or agree in writing or otherwise
to take, directly or indirectly, any of the actions described in clauses (a)
through (c) above, or any action which would make any of its representations or
warranties contained in this Agreement untrue or incorrect or prevent it from
performing or cause it not to perform its covenants hereunder or delay, deter or
prevent the conditions in Articles VI and VII of this Agreement from being
satisfied. Pending the Effective Date, Acquiror shall (x) use commercially
reasonable efforts to preserve its business organization and assets and to keep
available the services of its officers and employees, and (y) continue in effect
the present method of conducting its business.
5.4 ACQUIROR COMMON STOCK
On the Effective Date, the Acquiror Common Stock to be issued in
exchange for the Target Common Stock pursuant to the terms of this Agreement
shall be duly authorized, validly issued, fully paid, and non-assessable, free
of preemptive rights and free and clear of all Liens created by or through
Acquiror, with no personal liability attaching to the ownership thereof. The
Acquiror Common Stock to be issued upon exchange for the Target Common Stock
pursuant to the terms of this Agreement will be issued in all material respects
in accordance with applicable state and federal Laws, rules, and regulations.
5.5 REGISTRATION OF SHARES
Acquiror, with the assistance of Target and its representatives, will
promptly file a Registration Statement with the SEC which shall include a joint
proxy statement for Target and for Acquiror and a prospectus which shall satisfy
all applicable requirements of applicable state and federal Laws, including the
Securities Act, the Exchange Act, and applicable state securities Laws and the
rules and regulations thereunder (such joint proxy statement information
statement and prospectus, together with any and all amendments or supplements
thereto, being herein referred to as the "JOINT PROXY STATEMENT/PROSPECTUS," and
the various documents to be filed by Acquiror under the Securities Act with the
SEC to register the Acquiror Common Stock into which shares of the Common Stock
of Target held by stockholders will be converted, including the Joint Proxy
Statement/Prospectus, are referred to herein as the "REGISTRATION STATEMENT").
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The number of shares to be registered will be an amount sufficient to allow all
of the shares of the Acquiror Common Stock issued to holders of the Common Stock
of Target pursuant to this Agreement to be registered under the Securities Act.
Acquiror will use commercially reasonable efforts to secure the effectiveness of
the Registration Statement and, after the Registration Statement has been
declared effective, will issue the shares so registered to the holders of the
Target Common Stock of Target on the Effective Date. Acquiror may rely upon all
information provided to it by Target and its representatives in the preparation
of the Registration Statement, any post-effective amendment thereto and the
Joint Proxy Statement and shall not be liable for any untrue statement of a
material fact or any omission to state a material fact in the Registration
Statement, the post-effective amendment, or the Joint Proxy Statement, if such
statement is made in reliance upon any information provided to it by Target or
by any of its officers or representatives. Acquiror shall promptly take all such
actions as may be necessary or appropriate in order to comply in all material
respects with all applicable securities Laws of any state having jurisdiction
over the transactions contemplated by this Agreement and the Merger. Acquiror
shall furnish Target with copies of all such filings and keep Target advised of
the status thereof. Acquiror shall promptly notify Target of all communications,
oral or written, with the SEC concerning the Registration Statement and the
Joint Proxy Statement/Prospectus. Prior to the Effective Time, Acquiror shall
file with the Nasdaq Stock Market ("NASDAQ") a Notification Form for Listing of
Additional Shares with respect to the shares of Acquiror Common Stock issuable
upon conversion of the Target Common Stock in the Merger.
Acquiror shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Acquiror Common Stock for delivery
upon exercise of the Acquiror Stock Option in accordance with SECTION 1.5(d).
Acquiror shall file a registration statement on Form S-8 (or any successor)
form) or another appropriate form, and use its commercially reasonable efforts
to cause such Form S-8 to become effective as soon as practicable after the
Effective Time, with respect to Acquiror Common Stock subject to the Acquiror
Stock Options and shall use commercially reasonable efforts to maintain the
effectiveness of such registration statement or registration statements (and
maintain the current status of the prospectus or prospectuses contained therein)
for so long as such options remain outstanding. With respect to those
individuals who as of the Effective Time will be subject to the reporting
requirements under Section 16(a) of the Exchange Act, with regard to
transactions in Acquiror securities, Acquiror shall take such action as may be
necessary at or before the Effective Time to cause the receipt of Acquiror Stock
Options pursuant to SECTION 1.5(d) to be exempt from Section 16(b) of the
Exchange Act.
5.6 MEETING OF STOCKHOLDERS OF ACQUIROR; DOCUMENT PREPARATION
(a) If required by applicable Law, Acquiror shall duly call and
convene a meeting of its stockholders to act upon the transactions contemplated
hereby as soon as practicable. Except to the extent legally required for the
discharge by the board of directors of its fiduciary duties, Acquiror will
recommend approval of this Agreement and the Merger to its stockholders and will
use commercially reasonable efforts to obtain a favorable vote thereon. The
calling and holding of such meeting and all notices, transactions, documents,
and information related thereto will be in material compliance with all
applicable Laws.
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(b) Acquiror shall furnish such information concerning Acquiror as is
necessary in order to cause the Proxy Statement/Prospectus, insofar as it
relates to it to comply with SECTION 5.5. Acquiror agrees promptly to advise
Target if at any time prior to the Acquiror stockholders' meeting, any
information provided by Acquiror in the Joint Proxy Statement/Prospectus becomes
incorrect or incomplete in any material respect and to provide Target with the
information needed to correct such inaccuracy or omission. Acquiror shall
furnish Target with such supplemental information as may be necessary in order
to cause the Joint Proxy Statement/Prospectus, insofar as it relates to
Acquiror, to comply with SECTION 5.5 after the mailing thereof to Acquiror
stockholders. The information provided and the representations made by Acquiror
to Target in connection with the Joint Proxy Statement/Prospectus, both at the
time such information and representations are provided and made and at the
Effective Date, will be true and accurate in all material respects and will not
contain any false or misleading statement with respect to any material fact or
omit to state any material fact required to be stated therein or necessary in
order (i) to make the statements made therein not false or misleading, or (ii)
to correct any statement contained in an earlier communication with respect to
such information or representations which has become false or misleading.
Acquiror may rely upon all information provided to it by Target and its
representatives in the preparation of the Joint Proxy Statement/Prospectus and
shall not be liable for any untrue statement of a material fact or any omission
to state a material fact in the Joint Proxy Statement/Prospectus, if such
statement is made in reliance upon any written information provided to it by
Target or by any of its officers or authorized representatives specifically for
inclusion in the Joint Proxy Statement/Prospectus.
5.7 CONSENTS
Acquiror will use commercially reasonable efforts to obtain any
consents, approvals, landlord estoppel certificates or waivers from third
parties required in connection with the transactions contemplated hereunder.
5.8 CURRENT INFORMATION; ADVICE OF CHANGES
(a) During the period from the date of this Agreement to the
Effective Date, Acquiror will cause one or more of its designated
representatives to confer on a weekly or more frequent basis with
representatives of Target regarding its business, operations, properties,
assets, and condition (financial or otherwise) and matters relating to the
completion of the transactions contemplated herein. As soon as reasonably
available, but in no event more than 45 days after the end of each calendar
quarter (other than the last calendar quarter of each calendar year) ending
after the date of this Agreement, Acquiror will deliver to Target its quarterly
reports on Form 10-Q, as filed with the SEC under the Exchange Act. As soon as
reasonably available, but in no event more than 90 days after the calendar year,
Acquiror will deliver to Target its Annual Report on Form 10-K as filed with the
SEC under the Exchange Act.
(b) Between the date of this Agreement and the Effective Time,
Acquiror shall promptly advise Target, by written update to the Acquiror
Disclosure Schedule, of (a) the occurrence or non-occurrence of any event which
would be likely to cause any condition to the obligations of Target or the
Target Principal Stockholders to effect the Merger and the other transactions
contemplated by this Agreement not to be satisfied, or (b) the failure of
Acquiror to
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comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it pursuant to this Agreement which would be likely to result in
any condition to the obligations of Target or the Target Principal Stockholders
to effect the Merger and the other transactions contemplated by this Agreement
not to be satisfied. The delivery of any notice pursuant to this SECTION 5.8
shall not cure any breach of any representation or warranty requiring disclosure
of such matter prior to the date of this Agreement or otherwise limit or affect
the remedies available hereunder to Target or the Target Principal Stockholders.
5.9 PUBLIC ANNOUNCEMENTS
Between the date of this Agreement and the Effective Date, Acquiror
will consult with Target before issuing any press release or otherwise making
any public statements with respect to this Agreement and the transactions
contemplated hereby and shall not issue any such press release or make any such
public statement prior to such consultation, except as counsel may advise is
required by Law.
5.10 COOPERATION AND CONDITIONS
Acquiror shall use commercially reasonable efforts to ensure that the
conditions specified in ARTICLE VII have been satisfied on a prompt basis.
Acquiror agrees to use commercially reasonable efforts to take, or cause to be
taken, all action and to do, or cause to be done, all things necessary, proper
or advisable under applicable Laws and regulations to consummate and make
effective the transactions contemplated by this Agreement, including cooperating
fully with the other party, including by provision of information.
5.11 TAX FREE REORGANIZATION
Acquiror will not, directly or indirectly, either before or after
consummation of the Merger, take any action which would cause the Merger to fail
to constitute a "reorganization" within the meaning of Code Section 368 and the
Acquiror will use commercially reasonable efforts not to permit any of its
directors, officers, employees, stockholders, agents, consultants, or other
representatives to take any such action.
5.12 CONTINUITY OF BUSINESS ENTERPRISE.
As of the date hereof, it is the intent of Acquiror and/or the
Surviving Corporation and any other member of the qualified group (as defined in
Treasury Regulation Section 1.368-1(d)) to continue at least one significant
historic business line of Target or use at least a significant portion of
Target's historic business assets in a business, in each case within the meaning
of Treasury Regulation Section 1.368-1(d).
5.13 NASDAQ LISTING.
Acquiror shall use all commercially reasonable efforts to cause the
Acquiror Common Stock to be issued in connection with the Merger and under the
Target Employee Plans to be approved for listing on Nasdaq, subject to official
notice of issuance, prior to the Closing Date.
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ARTICLE VI
CONDITIONS TO ACQUIROR'S AND MERGER SUB'S OBLIGATIONS
Unless waived in writing by Acquiror in its sole discretion, all
obligations of Acquiror and Merger Sub hereunder shall be subject to the
fulfillment prior to or at the Effective Date of the following conditions:
6.1 REPRESENTATIONS, WARRANTIES, AND COVENANTS
Except as disclosed in the Target Disclosure Schedule dated the date
of this Agreement, (i) the representations and warranties of Target in this
Agreement shall be true and correct in all material respects (except for such
representations and warranties that are qualified by their terms by a reference
to materiality which representations and warranties as so qualified shall be
true in all respects) on and as of the Effective Time as though such
representations and warranties were made on and as of such time (except that
representations and warranties which by their express terms are made on and as
of a specified earlier date shall be made only on and as of such specified
earlier date) and (ii) Target and the Target Principal Stockholders shall have
performed and complied in all material respects with all covenants, obligations
and conditions of this Agreement required to be performed and complied with by
them as of the Effective Time.
6.2 REPRESENTATIONS, WARRANTIES, AND COVENANTS IN THE VOTING AGREEMENT
The representations, covenants and warranties of Target Principal
Stockholders and Walt Anderson in the Voting Agreements shall be true and
correct in all material respects on and as of the Effective Time as though such
representations and warranties were made on and as of such time (except that
representations and warranties which by their express terms are made on and as
of a specified earlier date shall be made only on and as of such specified
earlier date) and (ii) the Target Principal Stockholders and Walt Anderson shall
have performed and complied in all material respects with all covenants,
obligations and conditions of the Voting Agreement required to be performed and
complied with by them as of the Effective Time.
6.3 NO ADVERSE CHANGES
There shall not have been any materially adverse change in the
condition (financial or otherwise), results of operations, assets, liabilities,
business or prospects of Target or any of the Target Subsidiaries from June 30,
2000 to the Effective Date. For purposes of this SECTION 6.3, a "MATERIALLY
ADVERSE CHANGE" shall include, without limitation, (a) a reduction of the
stockholders' equity of Target to less than the amount set forth in the
"Stockholders' Equity" column in the table below for any date falling before the
corresponding "Period Ending Date", or (b) a decrease in the net working capital
of Target to less than the amount set forth in the "Net Working Capital" column
in the table below for any date falling before the corresponding "Period Ending
Date," each such determination to be made (i) in accordance with GAAP; (ii)
excluding the expenses incurred by Target through the Closing Date in connection
with this Agreement and the transactions contemplated hereby, not to exceed in
the aggregate for all periods the amount of Two Hundred Forty Thousand Dollars
($240,000); and (iii) excluding any amount payable by Target in connection with
any settlement agreement executed in connection with the resolution of the
pending litigation captioned SCULLY V. US WATS, ET AL, U.S.D.C., E.D.
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Pa, 97-CV-4051, PROVIDED, HOWEVER, that any such settlement agreement must be
approved in writing by Acquiror prior to its execution.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
PERIOD ENDING DATE STOCKHOLDERS' EQUITY NET WORKING CAPITAL
--------------------------------------------------------------------------------
<S> <C> <C>
November 30, 2000 $600,000 (-$2,400,000)
--------------------------------------------------------------------------------
December 31, 2000 $300,000 (-$2,600,000)
--------------------------------------------------------------------------------
January 31, 2001 $0 (-$2,800,000)
--------------------------------------------------------------------------------
February 28, 2001 (-$300,000) (-$3,000,000)
--------------------------------------------------------------------------------
March 31, 2001 (-$600,000) (-$3,200,000)
--------------------------------------------------------------------------------
</TABLE>
6.4 STOCKHOLDER APPROVAL
The holders of not less than a majority of the issued and outstanding
voting stock of Target and Acquiror shall have approved this Agreement and the
Merger.
6.5 OTHER EVIDENCE
Target shall have delivered to Acquiror such further certificates and
documents evidencing due action in accordance with this Agreement, including
certified copies of all applicable proceedings of stockholders and directors of
Target pertaining to the transactions under this Agreement, as Acquiror shall
reasonably request.
6.6 NO ADVERSE PROCEEDINGS, EVENTS, OR REGULATORY REQUIREMENTS
No action or proceeding, including but not limited to any temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition, preventing the consummation of the Merger shall be in effect, nor
shall any action or proceeding brought by a Governmental Entity, seeking any of
the foregoing be pending; nor shall there be any action taken, or any statute,
rule, regulation or order enacted, entered, enforced or deemed applicable to the
Merger, which makes the consummation of the Merger illegal. The parties shall
have procured all other regulatory approvals, consents, waivers, or
administrative actions of Governmental Entities or other persons or agencies
that are necessary or appropriate to the consummation of the transactions
contemplated by this Agreement, including but not limited to those specifically
referenced in SECTION 4.2 hereof, and no approval, consent, waiver, or
administrative action shall have included any condition or requirement that
would (i) result in a materially adverse effect on Acquiror or Target, or (ii)
so materially and adversely affect the economic or business benefits of the
Merger that Acquiror, in the sole judgment of Acquiror, would not have entered
into this Agreement had such conditions or requirements been known at the date
hereof.
6.7 CONSENTS, ETC.
All requisite consents, approvals, landlord estoppel certificates,
waivers, undertakings, memoranda, agreements, exercises, and terminations by
third parties which Target and the Target Principal Stockholders have covenanted
to use commercially reasonable efforts to obtain under SECTIONS 4.2 AND 4.5
shall have been obtained by Target or waived by Acquiror.
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6.8 OPINIONS OF COUNSEL
Acquiror shall have received opinions of counsel to Target, dated the
Effective Date, in form and substance reasonably satisfactory to Acquiror,
covering the matters set forth in Exhibits B-1 and B-2. In rendering such
opinion Target's counsel shall require the delivery of and rely upon certain
customary representation letters delivered by Target and the Target Principal
Stockholders, which letters shall be in form an substance reasonably
satisfactory to such counsel.
6.9 SECURITIES MATTERS
Acquiror shall have filed a Registration Statement with the SEC under
the Securities Act pertaining to the shares of Acquiror Common Stock to be
issued to the stockholders of Target pursuant to this Agreement and the Merger,
and such Registration Statement shall have become effective and there shall not
be in effect a stop order with respect thereto.
6.10 280G AGREEMENTS
Acquiror shall have received executed and delivered copies Section
280G Agreements substantially in the form of EXHIBIT D hereto from each person
identified by Target or Acquiror as potentially receiving excess parachute
payments, as defined in Section 280G of the Code, in connection with the Merger.
6.11 RESIGNATION OF DIRECTORS AND OFFICERS
The directors and officers of Target and each of the Target
Subsidiaries in office immediately prior to the Effective Time shall have
resigned effective as of the Effective Time and duly executed resignation
letters shall have been delivered to Acquiror from each such director and
officer.
6.12 TARGET CERTIFICATES
Target shall have delivered to Acquiror a certificate dated as of the
Closing Date and signed by its Chief Executive Officer and Secretary to the
effect that each of the conditions specified above in SECTIONS 6.1, 6.2, 6.3,
6.4, 6.6, 6.7, and 6.13 is satisfied in all respects. The Target Principal
Stockholders shall have delivered to Acquiror a certificate dated as of the
Closing Date and signed by its Chief Executive Officer and Secretary to the
effect that the conditions specified above in SECTION 6.2 and 6.7 relating to
such Target Principal Stockholder is satisfied in all respects.
6.13 TERMINATION OF PENSION PLAN
Unless otherwise stated by Acquiror in writing, Target shall,
immediately prior to the Closing Date, terminate Target's 401(k) Plan (the
"401(k) PLAN") and no further contributions shall be made to the 401(k) Plan,
provided that as a condition of such termination Target's employees shall be
eligible to participate in Acquiror's 401(k) plan immediately following the
Closing Date. Target shall provide to Acquiror (i) executed resolutions by the
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Board of Directors of Target authorizing the termination and (ii) an executed
amendment to the 401(k) Plan sufficient to assure compliance with all applicable
requirements of the Code and regulations thereunder so that the tax-qualified
status of the 401(k) Plan will be maintained at the time of termination.
6.14 NASDAQ LISTING.
The Acquiror Common Stock to be issued in connection with the Merger
and under the Target Employee Plans shall have been approved for listing on
Nasdaq, subject to official notice of issuance.
ARTICLE VII
CONDITIONS TO TARGET'S OBLIGATIONS
Unless waived in writing by Target in its sole discretion, all
obligations of Target a hereunder shall be subject to the fulfillment prior to
or at the Effective Date of the following conditions:
7.1 REPRESENTATIONS, WARRANTIES, AND COVENANTS
Except as disclosed in the Acquiror Disclosure Schedule dated the date
of this Agreement, (i) the representations and warranties of Acquiror and Merger
Sub in this Agreement shall be true and correct in all material respects (except
for such representations and warranties that are qualified by their terms by a
reference to materiality which representations and warranties as so qualified
shall be true in all respects) on and as of the Effective Time as though such
representations and warranties were made on and as of such time (except that
representations and warranties which by their express terms are made on and as
of a specified earlier date shall be made only on and as of such specified
earlier date) and (ii) Acquiror and Merger Sub shall have performed and complied
in all material respects with all covenants, obligations and conditions of this
Agreement required to be performed and complied with by them as of the Effective
Time.
7.2 NO ADVERSE CHANGES
There shall not have been any materially adverse change in the
condition (financial or otherwise), results of operations, assets, liabilities,
business or prospects of Acquiror from June 30, 2000 to the Effective Date.
7.3 STOCKHOLDER APPROVAL
The holders of not less than a majority of the issued and outstanding
voting stock of Acquiror and Target shall have approved this Agreement and the
Merger.
7.4 OTHER EVIDENCE
Acquiror shall have delivered to Target such further certificates and
documents evidencing due action in accordance with this Agreement, including
certified copies of all
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applicable proceedings of stockholders and directors of Acquiror pertaining to
the transactions under this Agreement, as Target shall reasonably request.
7.5 NO ADVERSE PROCEEDINGS, EVENTS, OR REGULATORY REQUIREMENTS
No action or proceeding, including but not limited to any temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition, preventing the consummation of the Merger shall be in effect, nor
shall any action or proceeding brought by an administrative agency or commission
or other Governmental Entity seeking any of the foregoing be pending; nor shall
there be any action taken, or any statute, rule, regulation or order enacted,
entered, enforced or deemed applicable to the Merger, which makes the
consummation of the Merger illegal. The parties shall have procured all other
regulatory approvals, consents, waivers, or administrative actions of
Governmental Entities or other persons or agencies that are necessary or
appropriate to the consummation of the transactions contemplated by this
Agreement, including but not limited to those specifically referenced in SECTION
4.2 hereof, and no approval, consent, waiver, or administrative action shall
have included any condition or requirement that would (i) result in a materially
adverse effect on Acquiror or Target, or (ii) so materially and adversely affect
the economic or business benefits of the Merger that Target, in the sole
judgment of Target, would not have entered into this Agreement had such
conditions or requirements been known at the date hereof.
7.6 CONSENTS, ETC.
All requisite consents, approvals, landlord estoppel certificates or
waivers, undertakings, memoranda, agreements, exercises, and terminations by
third parties which Acquiror has covenanted to use commercially reasonable
efforts to obtain under SECTIONS 5.2 AND 5.7 shall have been obtained by
Acquiror or waived by Target.
7.7 OPINION OF COUNSEL
Target shall have received an opinion of counsel to Acquiror, dated
the Effective Date, in form and substance reasonably satisfactory to Target,
covering the matters set forth in EXHIBIT C. In rendering such opinion
Acquiror's counsel shall require the delivery of and rely upon certain customary
representation letters delivered by Acquiror, which letters shall be in form an
substance reasonably satisfactory to such counsel.
7.8 SECURITIES MATTERS
Acquiror shall have filed a Registration Statement with the SEC under
the Securities Act, pertaining to the shares of Acquiror Common Stock to be
issued to the stockholders of Target pursuant to this Agreement and the Merger,
and such Registration Statement shall have become effective and there shall not
be in effect a stop order with respect thereto. The shares of Acquiror Common
Stock to be issued to the stockholders of Target pursuant to this Agreement and
the Merger shall have been approved upon official notice of issuance for
quotation on Nasdaq, subject to official notice of issuance.
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7.9 NASDAQ LISTING.
The Acquiror Common Stock to be issued in connection with the Merger
and under the Target Employee Plans shall have been approved for listing on
Nasdaq, subject to official notice of issuance.
7.10 RIGHTS PLAN.
The issuance of the Acquiror Common Stock to be issued in connection
with the Merger shall not result in the issuance of any securities under the
Acquiror's Shareholder Rights Agreement dated as of March 26, 1998 between
Acquiror and Continental Stock Transfer & Trust Company as amended through the
date hereof.
7.11 ACQUIROR CERTIFICATE
Acquiror shall have delivered to Target a certificate dated as of the
Closing Date and signed by its Chief Executive Officer and Secretary to the
effect that each of the conditions specified above in SECTIONS 7.1, 7.2, 7.3,
7.5, 7.6, 7.8 and 7.10 is satisfied in all material respects.
ARTICLE VIII
TERMINATION, EXPENSES, AMENDMENT AND WAIVER
8.1 TERMINATION
In addition to those termination rights provided for in SECTION
1.5(g), this Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval of the matters presented in connection
with the Merger by the stockholders of Target or Acquiror, in the following
manner:
(a) by mutual consents duly authorized by the Boards of Directors of
Acquiror and Target;
(b) by either Acquiror or Target, if, (i) without fault of the
terminating party, the Closing shall not have occurred on or before March 31,
2001 (provided, that a later date may be agreed upon in writing by the parties
hereto, and provided further, that the right to terminate this Agreement under
this clause (b)(i) shall not be available to any party whose action or willful
failure to act has been a principal cause of or resulted in the failure of the
Closing to occur on or before such date and such action or failure to act
constitutes a breach of this Agreement), or (ii) any permanent injunction or
other order of a court or other competent authority preventing the consummation
of the Merger shall have become final and nonappealable;
(c) by Target, if, (i) any representation or warranty of Acquiror
not qualified by its terms to materiality set forth in this Agreement shall
have been untrue when made in any material respect (or any representation or
warranty qualified as to materiality shall have been untrue in any respect
when made), or (ii) Acquiror shall materially breach any obligation or
agreement hereunder in a manner causing conditions precedent to the Closing
not to be satisfied and such breach shall not have been cured within 30 days
of receipt by Acquiror of written
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notice of such breach; provided, that the right to terminate this Agreement by
Target under this paragraph (c) shall not be available to Target where Target is
at that time in material breach of this Agreement;
(d) by Acquiror, if, (i) any representation or warranty of Target not
qualified by its terms to materiality set forth in this Agreement shall have
been untrue when made in any material respect (or any representation or warranty
qualified as to materiality shall have been untrue in any respect when made),
(ii) Target shall materially breach any obligation or agreement hereunder in a
manner causing conditions precedent to the Closing not to be satisfied and such
breach shall not have been cured within 30 days of receipt by Target of written
notice of such breach; provided, that the right to terminate this Agreement by
Acquiror under this paragraph (d) shall not be available to Acquiror where
Acquiror is at that time in material breach of this Agreement or (iii)
termination is permitted as provided in SECTION 1.5(g); and
(e) by Target, if the Weighted Average Stock Price, as defined in
SECTION 1.5, is less than $4.25.
8.2 EFFECT OF TERMINATION
In the event of termination of this Agreement as provided in SECTION
8.1, this Agreement shall forthwith become void and there shall be no Liability
on the part of Acquiror or Target or their respective officers, directors,
stockholders or Affiliates, except to the extent that such termination results
from the breach by a party hereto of any of its representations, warranties or
covenants set forth in this Agreement; PROVIDED that the provisions of SECTION
4.1(b) AND 5.1(b), this SECTION 8.2 (EFFECT OF TERMINATION), SECTION 8.3
(EXPENSES) and ARTICLE IX shall remain in full force and effect and survive any
termination of this Agreement.
8.3 EXPENSE
(a) Subject to paragraphs (b) and (c) below, whether or not the
Merger is consummated, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby (including, without
limitation, the fees and expenses of advisers, accountants and legal counsel)
shall be paid by the party incurring such expense and Target and Acquiror shall
each pay its own filing fees in respect of any regulatory approvals required in
order to consummate the Merger; PROVIDED, HOWEVER, that if the Closing occurs,
the expenses incurred by Target through the Closing Date in connection with this
Agreement and the transactions contemplated hereby (including, without
limitation, the fees and expenses of its advisors, accountants and legal
counsel), in the amount of Five Hundred Ten Thousand Dollars ($510,000) payable
to Ferris, Baker Watts, Inc. and in the amount of Two Hundred Forty Thousand
Dollars ($240,000) payable to other parties shall be paid by Acquiror and/or
Surviving Corporation at the Closing via wire transfer of immediately available
funds. Any such expenses incurred by Target in connection with this Agreement
and the transactions contemplated hereby (including, without limitation, the
fees and expenses of its advisors, accountants and legal counsel) and (i) not
presented to Acquiror and/or Surviving Corporation within thirty (30) days of
the Closing or (ii) which cause the aggregate amount of such expenses to exceed
Seven Hundred Fifty Thousand Dollars ($750,000), shall be the sole obligation of
the Target Principal Stockholders.
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(b) In the event that Acquiror shall terminate this Agreement
pursuant to SECTION 8.1(d), Target shall reimburse Acquiror for all reasonable
out-of-pocket fees and expenses incurred by Acquiror in connection with this
Agreement and the transactions contemplated hereby (including, without
limitation, the fees and expenses of its advisors, accountants and legal
counsel).
(c) In the event that Target shall terminate this Agreement pursuant
to SECTION 8.1(c), Acquiror shall reimburse Target for all reasonable
out-of-pocket fees and expenses incurred by Target in connection with this
Agreement and the transactions contemplated hereby (including, without
limitation, the fees and expenses of its advisors, accountants and legal
counsel).
8.4 EXTENSION; WAIVER
At any time prior to the Effective Time any party hereto may, to the
extent legally allowed, (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions for the benefit of such party contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
ARTICLE IX
GENERAL PROVISIONS
9.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
None of the representations and warranties set forth in this Agreement
shall survive the Closing; provided however, that there shall be no limitation
period for matters involving fraud. The covenants and agreements of the parties
shall survive until the expiration of the time period for their performance as
provided herein.
9.2 NOTICES
All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally or by commercial delivery service,
or mailed by registered or certified mail (return receipt requested) or sent via
facsimile (with confirmation of receipt) to the parties at the following address
(or at such other address for a party as shall be specified by like notice):
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(a) if to Acquiror or Merger Sub, to:
Startec Global Communications Corporation
10411 Motor City Drive
Bethesda, Maryland 20817
Attention: Prabhav V. Maniyar
Yolanda Stefanou Faerber, Esq.
Facsimile No.: (301) 365-1744
Telephone No.: (301) 365-8959
with a copy to:
Piper Marbury Rudnick & Wolfe LLP
6225 Smith Avenue
Baltimore, Maryland 21209-3600
Attention: Wm. David Chalk
Facsimile No.: (410) 580-3001
Telephone No.: (410) 580-4120
(b) if to Target, to:
Capsule Communications, Inc.
2 Greenwood Square
3331 Street Road
Suite 275
Bensalem, Pennsylvania 19020
Attention: David Hurwitz
Facsimile No.: (800) 253-0303
Telephone No.: (215) 244-3433
with a copy to:
Swidler Berlin Shereff Friedman, LLP
3000 K Street, N.W.
Suite 300
Washington, DC 20007
Attention: Sean P. McGuinness
Facsimile No.: (202) 424-7643
Telephone No.: (202) 945-6979
(c) if to Target Principal Stockholders, to:
c/o Walt Anderson
1023 31st Street, 4th Floor
Washington, D.C. 20007
Facsimile No.: (202) 467-1499
Telephone No.: (202) 467-1750
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with a copy to:
Swidler Berlin Shereff Friedman, LLP
3000 K Street, N.W.
Suite 300
Washington, DC 20007
Attention: Sean P. McGuinness
Facsimile No.: (202) 424-7643
Telephone No.: (202) 945-6979
9.3 INTERPRETATION
When a reference is made in this Agreement to Exhibits, such reference
shall be to an Exhibit to this Agreement unless otherwise indicated. The words
"include," "includes" and "including" when used herein shall be deemed in each
case to be followed by the words "without limitation." The phrase "made
available" in this Agreement shall mean that the information referred to has
been made available if requested by the party to whom such information is to be
made available. The phrases "the date of this Agreement", "the date hereof", and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to November 2, 2000. The table of contents and headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
9.4 COUNTERPARTS
This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement and shall become effective
when one or more counterparts have been signed by each of the parties and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart.
9.5 ENTIRE AGREEMENT; THIRD PARTY BENEFICIARIES
This Agreement and the documents and instruments and other agreements
specifically referred to herein or delivered pursuant hereto, including the
Exhibits, the Schedules, the Target Disclosure Schedule and the Acquiror
Disclosure Schedule (a) constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, except for the Confidentiality Agreement, which shall
continue in full force and effect, and shall survive any termination of this
Agreement or the Closing, in accordance with its terms and (b) are not intended
to confer upon any other person any rights or remedies hereunder.
9.6 SEVERABILITY
In the event that any provision of this Agreement, or the application
thereof, becomes or is declared by a court of competent jurisdiction to be
illegal, void or unenforceable, the remainder of this Agreement will continue in
full force and effect and the application of such provision to other persons or
circumstances will be interpreted so as reasonably to effect the intent of the
parties hereto. The parties further agree to replace such void or unenforceable
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provision of this Agreement with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business and other purposes of
such void or unenforceable provision.
9.7 REMEDIES CUMULATIVE
Except as otherwise provided herein, any and all remedies herein
expressly conferred upon a party will be deemed cumulative with and not
exclusive of any other remedy conferred hereby, or by Law or equity upon such
party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
9.8 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware without regard to applicable principles of
conflicts of law or, to the extent applicable, the federal Laws of the United
States of America. Each of the parties hereto irrevocably consents to the
exclusive jurisdiction of any court located within the State of Delaware, in
connection with any matter based upon or arising out of this Agreement or the
matters contemplated herein, agrees that process may be served upon them in any
manner authorized by the Laws of the State of Delaware for such persons and
waives and covenants not to assert or plead any objection which they might
otherwise have to such jurisdiction and such process. THE PARTIES HERETO HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY OF THEM MAY HAVE TO
A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE PARTIES
HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT FOR ACQUIROR TO ENTER INTO THIS
AGREEMENT.
9.9 ASSIGNMENT; AMENDMENT; BINDING EFFECT
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto (whether by operation
of Law or otherwise) without the prior written consent of the other parties. The
parties hereto may cause this Agreement to be amended at any time by execution
of an instrument in writing signed on behalf of each of the parties hereto and,
in the case of Acquiror and Target, approved by their respective Boards of
Directors; provided that an amendment made subsequent to adoption of this
Agreement by the stockholders of Target and Acquiror shall not (a) alter or
change the amount or kind of consideration to be received on conversion of the
Target Common Stock, (b) alter or change any term of the Certificate of
Incorporation of the Surviving Corporation to be effected by the Merger, or (c)
alter or change any of the terms and conditions of this Agreement if such
alteration or change would adversely affect the holders of Target Common Stock.
Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of and be enforceable by the parties and their respective successors
and permitted assigns.
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9.10 RULES OF CONSTRUCTION
The parties hereto agree that they have been represented by counsel
during the negotiation, preparation and execution of this Agreement and,
therefore, waive the application of any Law, holding or rule of construction
providing that ambiguities in an agreement or other document will be construed
against the party drafting such agreement or document.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, Target, Acquiror, Merger Sub, Gold & Appel
Transfer, S.A., The Foundation for the Non-Governmental Development of Space
have caused this Agreement to be executed and delivered, by their respective
officers thereunto duly authorized in the case of corporate parties as the case
may be, all as of the date first written above.
ATTEST: STARTEC GLOBAL
COMMUNICATIONS CORPORATION
/s/ Yolanda Stefanou Faerber By: /s/ Ram Mukunda (SEAL)
---------------------------------- -------------------------------------
Yolanda Stefanou Faerber (SEAL) Name: Ram Mukunda
Secretary Title: President and Chief
Executive Officer
ATTEST: STARS ACQUISITION CORP.
/s/ Yolanda Stefanou Faerber By: /s/ Ram Mukunda (SEAL)
---------------------------------- -------------------------------------
Yolanda Stefanou Faerber (SEAL) Name: Ram Mukunda
Secretary Title: President and Chief
Executive Officer
[SIGNATURES CONTINUED ON FOLLOWING PAGES]
60
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ATTEST: CAPSULE COMMUNICATIONS, INC.
/s/ John Riedel By: /s/ David B. Hurwitz (SEAL)
---------------------------------- -------------------------------------
John Riedel (SEAL) Name: David B. Hurwitz
Title: President and Chief
Executive Officer
[SIGNATURES CONTINUED ON FOLLOWING PAGES]
61
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ATTEST: GOLD & APPEL TRANSFER, S.A.
/s/ John Riedel By: /s/ Walt Anderson (SEAL)
---------------------------------- -------------------------------------
John Riedel (SEAL) Name: Walt Anderson
Title: Attorney-in-Fact
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
62
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ATTEST: FOUNDATION FOR
THE INTERNATIONAL
NON-GOVERNMENTAL
DEVELOPMENT OF SPACE
/s/ Suzanna Kang By: /s/ Walt Anderson (SEAL)
---------------------------------- -------------------------------------
Suzanna Kang (SEAL) Name: Walt Anderson
Title: President
[END SIGNATURE PAGES]
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