<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): AUGUST 1, 1994
IDB COMMUNICATIONS GROUP, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE
(State or Other Jurisdiction of Incorporation)
0-14972 93-0933098
(Commission (I.R.S. Employer
File No.) Identification No.)
10525 WEST WASHINGTON BOULEVARD, CULVER CITY, CALIFORNIA 90232-1922
(Address of Principal Executive Offices) (Zip Code)
(213) 870-9000
(Registrant's Telephone Number, Including Area Code)
<PAGE>
ITEM 5. OTHER EVENTS.
IDB Communications Group, Inc., a Delaware corporation ("IDB"), and LDDS
Communications, Inc., a Georgia corporation ("LDDS"), have entered into a
definitive agreement, a copy of which is filed herewith as Exhibit 2.1 to this
Report, providing for the acquisition of IDB by LDDS. The acquisition is
structured as a merger of a newly-formed, wholly-owned subsidiary of LDDS into
IDB. Under the terms of the agreement, IDB stockholders will receive in the
merger a minimum of .450867 LDDS share for each IDB share if LDDS shares are
valued at $22 or more, or a maximum of .520231 LDDS share for each IDB share if
LDDS shares are valued at $16 or less. The exchange ratio decreases by .001445
LDDS share for every $.125 increase in LDDS share value between $16 and $22.
The transaction will be a tax-free exchange accounted for on a
pooling-of-interests basis. Completion of the merger is subject to, among other
things, customary closing conditions, approval of the stockholders of IDB and
LDDS and certain regulatory approvals. IDB and LDDS issued a joint press
release dated August 1, 1994, a copy of which is filed herewith as Exhibit 99.1
to this Report.
IDB announced its intention to restate its financial results for the
quarter ended March 31, 1994 in a press release dated August 1, 1994, a copy of
which is filed herewith as Exhibit 99.2 to this Report.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
None.
(b) PRO FORMA FINANCIAL INFORMATION.
None.
(c) EXHIBITS.
Exhibit
NO. DESCRIPTION
2.1 Agreement and Plan of Merger dated August 1, 1994 (Exhibits
and Schedules to the Agreement and Plan of Merger dated August 1, 1994 will be
furnished supplementally to theSecurities and Exchange Commission upon the
request of the Commission)
99.1 Press Release dated August 1, 1994
99.2 Press Release dated August 1, 1994
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Culver City, State of
California, on August 2, 1994.
IDB COMMUNICATIONS GROUP, INC.
By: /S/ RUDY WANN
-------------------
Rudy Wann
Vice President and Chief Financial
Officer
3
<PAGE>
Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
By and Among
IDB COMMUNICATIONS GROUP, INC.,
123 CORP.
and
LDDS COMMUNICATIONS, INC.
Dated
August 1, 1994
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I TERMS OF THE MERGER........................................ 1
1.1 The Merger........................................... 1
1.2 Effective Time....................................... 1
1.3 Merger Consideration................................. 2
1.4 Stockholders' Rights upon Merger..................... 3
1.5 Surrender and Exchange of Shares..................... 3
1.6 Options.............................................. 3
1.7 Certificate of Incorporation......................... 4
1.8 Bylaws............................................... 4
1.9 Directors and Officers............................... 4
1.10 Other Effects of Merger.............................. 4
1.11 Registration Statement; Prospectus/Joint Proxy
Statement............................................ 4
1.12 Tax-Free Reorganization.............................. 6
1.13 Additional Actions................................... 6
ARTICLE II REPRESENTATIONS, WARRANTIES AND CERTAIN COVENANTS
OF TARGET............................................ 6
2.1 Organization and Good Standing....................... 6
2.2 Capitalization....................................... 7
2.3 Subsidiaries......................................... 7
2.4 Authorization; Binding Agreement..................... 8
2.5 Governmental Approvals............................... 8
2.6 No Violations........................................ 8
2.7 Securities Filings and Litigation.................... 9
2.8 Target Financial Statements......................... 10
2.9 Absence of Certain Changes or Events................ 10
2.10 Compliance with Laws................................ 11
2.11 Permits............................................. 11
2.12 Finders and Investment Bankers...................... 11
2.13 Contracts........................................... 11
2.14 Employee Benefit Plans.............................. 12
2.15 Taxes and Returns................................... 14
2.16 Liabilities......................................... 15
2.17 Environmental Matters............................... 15
2.18 Intellectual Property............................... 16
2.19 Real Estate......................................... 16
2.20 Corporate Records................................... 16
2.21 Title to and Condition of Personal Property......... 17
2.22 No Adverse Actions.................................. 17
2.23 Labor Matters....................................... 17
2.24 Insurance........................................... 18
2.25 Fairness Opinions................................... 18
2.26 SCI Relationship.................................... 18
2.27 Disclosure.......................................... 18
ARTICLE III REPRESENTATIONS, WARRANTIES AND CERTAIN COVENANTS OF
THE COMPANY AND ACQUISITION SUBSIDIAR..................... 18
3.1 Organization and Good Standing...................... 18
3.2 Capitalization...................................... 19
3.3 Subsidiaries........................................ 19
(i)
<PAGE>
3.4 Authorization; Binding Agreement.................... 20
3.5 Governmental Approvals.............................. 20
3.6 No Violations....................................... 20
3.7 Securities Filings and Litigation................... 21
3.8 Company Financial Statements........................ 22
3.9 Absence of Certain Changes or Events................ 22
3.10 Compliance with Laws................................ 23
3.11 Permits............................................. 23
3.12 Finders and Investment Bankers...................... 23
3.13 Contracts........................................... 23
3.14 Employee Benefit Plans.............................. 24
3.15 Taxes and Returns................................... 25
3.16 Liabilities......................................... 25
3.17 Environmental Matters............................... 26
3.18 Intellectual Property............................... 26
3.19 Corporate Records................................... 26
3.20 Title to and Condition of Property.................. 26
3.21 No Adverse Actions.................................. 27
3.22 Labor Matters....................................... 27
3.23 Insurance........................................... 27
3.24 Fairness Opinion.................................... 28
3.25 Disclosure.......................................... 28
ARTICLE IV ADDITIONAL COVENANTS OF TARGET............................ 28
4.1 Conduct of Business of Target and Target
Subsidiaries........................................ 28
4.2 Notification of Certain Matters..................... 31
4.3 Access and Information.............................. 31
4.4 Stockholder Approval................................ 32
4.5 Reasonable Business Efforts......................... 32
4.6 Public Announcements................................ 32
4.7 Compliance.......................................... 32
4.8 Benefit Plans....................................... 33
4.9 No Inconsistent Activities.......................... 33
4.10 Securities and Stockholder Materials................ 33
4.11 Tax Opinion Certification........................... 33
4.12 Pooling of Interests................................ 33
4.13 Resignation of Directors and Officers............... 34
4.14 Noncompete and Confidentiality Agreements........... 34
4.15 Affiliate Agreements................................ 34
4.16 Options............................................. 34
ARTICLE V ADDITIONAL COVENANTS OF THE COMPANY....................... 34
5.1 Conduct of Business of the Company and the Company
Subsidiaries........................................ 34
5.2 Notification of Certain Matters..................... 37
5.3 Access and Information.............................. 37
5.4 Shareholder Approval................................ 37
5.5 Reasonable Business Efforts......................... 37
5.6 Public Announcements................................ 38
5.7 Compliance.......................................... 38
5.8 SEC and Shareholder Filings......................... 38
5.9 Board Representation................................ 38
(ii)
<PAGE>
5.10 Benefit Plans....................................... 39
5.11 Pooling of Interests................................ 39
5.12 Directors' and Officers' Indemnification............ 39
ARTICLE VI CONDITIONS................................................ 40
6.1 Conditions to Each Party's Obligations.............. 40
6.1.1 Stockholder Approval......................... 40
6.1.2 No Injunction or Action...................... 40
6.1.3 Governmental Approvals....................... 40
6.1.4 HSR Act...................................... 41
6.1.5 Required Consents............................ 41
6.1.6 Registration Statement....................... 41
6.1.7 Blue Sky..................................... 41
6.1.8 Pooling Treatment............................ 41
6.1.9 Tax Opinion.................................. 42
6.1.10 Lenders' Consent............................. 42
6.2 Conditions to Obligations of Target................. 42
6.2.1 Company Representations and Warranties........ 42
6.2.2 Performance by the Company.................... 42
6.2.3 No Material Adverse Change.................... 42
6.2.4 Certificates and Other Deliveries............. 43
6.2.5 Opinion of Company Counsel.................... 43
6.2.6 Fairness Opinions............................. 43
6.2.7 Quotation of Company Stock.................... 43
6.2.8 Comfort Letters............................... 43
6.3 Conditions to Obligations of the Company............ 43
6.3.1 Target Representations and Warranties......... 44
6.3.2 Performance by Target......................... 44
6.3.3 No Material Adverse Change.................... 44
6.3.4 Certificates and Other Deliveries............. 44
6.3.5 Opinion of Target Counsel..................... 44
6.3.6 Fairness Opinion.............................. 44
6.3.7 Comfort Letters............................... 45
6.3.8 SCI Acquisition............................... 45
6.3.9 Termination and Severance..................... 45
6.4 Accounting Contingency.............................. 45
ARTICLE VII TERMINATION AND ABANDONMENT............................... 46
7.1 Termination......................................... 46
7.2 Procedure and Effect of Termination................. 47
ARTICLE VIII MISCELLANEOUS............................................. 48
8.1 Confidentiality..................................... 48
8.2 Amendment and Modification.......................... 49
8.3 Waiver of Compliance; Consents...................... 49
8.4 Survival of Representations and Warranties.......... 49
8.5 Survival of Covenants............................... 49
8.6 Notices............................................. 49
8.7 Binding Effect; Assignment.......................... 50
8.8 Expenses; Time of Payment........................... 50
8.9 Governing Law....................................... 50
8.10 Counterparts........................................ 50
8.11 Interpretation...................................... 51
(iii)
<PAGE>
8.12 Entire Agreement.................................... 51
8.13 Materiality......................................... 51
8.14 Severability........................................ 51
(iv)
<PAGE>
LIST OF EXHIBITS
EXHIBIT DESCRIPTION
1.1 Form of Delaware Certificate of Merger
2.1 Target Jurisdictions of Organization and
Qualification
2.2 Rights to Purchase Target Stock
2.3(a) Target Ownership Interests
2.3(b) Target Restrictions as to Capital Stock and Other
Interests Held
2.3(c) Exceptions as to Target Subsidiary Securities
2.3(d) Rights with respect to Target Subsidiary
Securities
2.5 Regulatory Consents
2.6 Target Required Approvals
2.7 Target Litigation
2.9 Target Subsequent Events
2.13 Target Material Contracts
2.14(a) Target Employee Benefit Plans
2.14(b) Plan Contribution Deductibility Exceptions
2.14(c) Restrictions on Plan Amendment or Termination
2.14(d) Severance Obligations
2.15 Target Tax Matters
2.16 Target Obligations
2.17 Target Environmental Matters
2.18 Target Intellectual Property
2.19(a) Target Owned Real Property
2.19(b) Target Leased Real Property
2.20 Target Records Off Premises
2.23 Target Labor Matters
(v)
<PAGE>
2.26 SCI Agreements
3.1 Company Jurisdictions of Organization and
Qualification
3.2 Rights to Purchase Company Stock
3.15 Company Tax Matters
4.8 Target Benefit Plan Grants
4.15 Form of Target Affiliate Agreement
6.2.5 Opinion of Counsel to the Company
6.3.5 Opinion of Counsel to Target
(vi)
<PAGE>
GLOSSARY OF DEFINED TERMS
Term Page Where
- - ---- Defined
-------
Accounting Contingency......................................................46
Acquisition Subsidiary.......................................................1
Active Company Subsidiaries.................................................18
Affiliate...................................................................51
Agreement....................................................................1
Alternative Transaction.....................................................47
Benefit Plan................................................................12
Certificate of Merger........................................................1
Certificates.................................................................3
Claim Notice................................................................16
Closing......................................................................1
Closing Date.................................................................1
Code.........................................................................6
Company......................................................................1
Company Benefit Plan........................................................24
Company Financial Statements................................................22
Company Material Adverse Effect.............................................19
Company Material Contract...................................................23
Company Modified Representation.............................................42
Company Nonmodified Representation..........................................42
Company Permits.............................................................23
Company Preferred Stock.....................................................19
Company Securities Filings..................................................21
Company Stock................................................................2
Company Subsidiaries........................................................18
Consent......................................................................8
Credit Agreement............................................................19
Delaware Code................................................................1
Effective Time...............................................................1
Enforceability Exceptions....................................................8
Environmental Laws..........................................................15
ERISA.......................................................................12
Event.......................................................................10
Exchange Agent...............................................................3
Exchange Ratio...............................................................2
Final Order.................................................................41
Governmental Authority.......................................................8
HSR Act......................................................................8
Intellectual Property.......................................................16
IRS.........................................................................12
Law..........................................................................9
Litigation...................................................................9
Merger.......................................................................1
Merger Consideration.........................................................2
NASD.........................................................................8
Note Agreements.............................................................19
Person......................................................................51
(vii)
<PAGE>
Prospectus/Joint Proxy Statement.............................................4
Registration Statement.......................................................4
Relevant Statements.........................................................45
SCI.........................................................................18
SCI Acquisition Agreement...................................................45
SCI Agreement...............................................................18
SEC..........................................................................4
Securities Act...............................................................4
Securities Exchange Act......................................................4
Share Value..................................................................2
Significant Acquisition.....................................................36
Subsequent Periodic Filings.................................................32
Subsidiary..................................................................51
Surviving Corporation........................................................1
Surviving Corporation Common Stock...........................................3
Surviving Corporation Material Adverse Effect...............................41
Target.......................................................................1
Target Ancillary Agreements..................................................8
Target Common Stock..........................................................2
Target Financial Statements.................................................10
Target Material Adverse Effect...............................................6
Target Material Contract....................................................11
Target Modified Representation..............................................44
Target Nonmodified Representation...........................................44
Target Notes.................................................................7
Target Options...............................................................3
Target Permits..............................................................11
Target Preferred Stock.......................................................7
Target Real Property Leases.................................................16
Target Securities Filings....................................................9
Target Shares................................................................2
Target Subsidiaries..........................................................6
Target Tax Opinion Certificate..............................................33
Tax.........................................................................14
(viii)
<PAGE>
AGREEMENT AND PLAN OF MERGER
- - --------------------------------------------------
This Agreement and Plan of Merger (the "AGREEMENT") is made as of August
1, 1994, by and among LDDS Communications, Inc., a Georgia corporation (the
"COMPANY"), 123 Corp., a Delaware corporation and wholly owned subsidiary of
the Company ("ACQUISITION SUBSIDIARY"), and IDB Communications Group, Inc., a
Delaware corporation ("TARGET").
RECITALS
A. The respective Boards of Directors of Target, Acquisition Subsidiary
and the Company have approved the merger (the "MERGER") of Acquisition
Subsidiary with and into Target in accordance with the laws of the State of
Delaware and the provisions of this Agreement.
B. Target, Acquisition Subsidiary and the Company desire to make
certain representations, warranties and agreements in connection with, and
establish various conditions precedent to, the Merger.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
TERMS OF THE MERGER
1.1 THE MERGER. Upon the terms and subject to the conditions of
this Agreement, the Merger shall be consummated in accordance with the Delaware
General Corporation Law (the "DELAWARE CODE"). At the Effective Time (as
defined in SECTION 1.2, below), upon the terms and subject to the conditions
of this Agreement, Acquisition Subsidiary shall be merged with and into Target
in accordance with the Delaware Code and the separate existence of Acquisition
Subsidiary shall thereupon cease, and Target, as the surviving corporation in
the Merger (the "SURVIVING CORPORATION"), shall continue its corporate
existence under the laws of the State of Delaware as a subsidiary of the
Company. The parties shall prepare and execute a certificate of merger in
substantially the form attached hereto as EXHIBIT 1.1 (the "CERTIFICATE OF
MERGER") in order to comply in all respects with the requirements of the
Delaware Code and with the provisions of this Agreement.
1.2 EFFECTIVE TIME. The Merger shall become effective at the time
of the filing of the Certificate of Merger with the Secretary of State of
Delaware in accordance with the applicable provisions of the Delaware Code or at
such later time as may be specified in the Certificate of Merger. The
Certificate of Merger shall be filed as soon as practicable after all of the
conditions set forth in this Agreement have been satisfied or waived by the
party or parties entitled to the benefit of the same. Target and the Company
shall agree upon the time of such filing and the place where the closing of the
Merger (the "CLOSING") shall occur. The time when the Merger shall become
effective is herein referred to as the "EFFECTIVE TIME" and the date on which
the Effective Time occurs is herein referred to as the "CLOSING DATE."
<PAGE>
1.3 MERGER CONSIDERATION. Subject to the provisions of this
Agreement, at the Effective Time, each issued and outstanding share ("TARGET
SHARES") of common stock, par value $.01 per share, of Target (the "TARGET
COMMON STOCK") shall, by virtue of the Merger and without any action on the
part of the holder thereof, be converted into the right to receive, and there
shall be paid and issued as hereinafter provided in exchange for the Target
Shares, the following consideration (the "MERGER CONSIDERATION"): (a) if the
Share Value (as hereinafter defined) is $16.00 or lower, .520231 of a share of
the common stock of the Company, par value $.01 per share (the "COMPANY
STOCK"); (b) if the Share Value is $22.00 or greater, .450867 of a share of
Company Stock; or (c) if the Share Value is greater than $16.00 but lower than
$22.00, that portion of a share of Company Stock set forth next to the
applicable Share Value listed below (provided that if the Share Value falls
between any two of the Share Values listed below, the portion of a share of
Company Stock shall be that applicable to the lower of the two Share Values).
The applicable exchange ratio determined pursuant to the foregoing is herein
referred to as the "EXCHANGE RATIO."
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------------------------
Portion of Share Portion of Share Portion of Share
Share Value of Company Stock Share Value of Company Stock Share Value of Company Stock
- - --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$22.000 0.450867 $20.000 0.473988 $18.000 0.497110
$21.875 0.452312 $19.875 0.475434 $17.875 0.498555
$21.750 0.453757 $19.750 0.476879 $17.750 0.500000
$21.625 0.455202 $19.625 0.478324 $17.625 0.501445
$21.500 0.456647 $19.500 0.479769 $17.500 0.502890
$21.375 0.458092 $19.375 0.481214 $17.375 0.504335
$21.250 0.459538 $19.250 0.482659 $17.250 0.505780
$21.125 0.460983 $19.125 0.484104 $17.125 0.507225
$21.000 0.462428 $19.000 0.485549 $17.000 0.508671
$20.875 0.463873 $18.875 0.486994 $16.875 0.510116
$20.750 0.465318 $18.750 0.488439 $16.750 0.511561
$20.625 0.466763 $18.625 0.489884 $16.625 0.513006
$20.500 0.468208 $18.500 0.491329 $16.500 0.514451
$20.375 0.469653 $18.375 0.492775 $16.375 0.515896
$20.250 0.471098 $18.250 0.494220 $16.250 0.517341
$20.125 0.472543 $18.125 0.495665 $16.125 0.518786
$16.000 0.520231
- - --------------------------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------------------------
</TABLE>
For purposes hereof, the "SHARE VALUE" shall be an amount equal to
the average closing trade price of the Company Stock for the thirty (30)
consecutive trading days prior to the date three (3) business days prior to the
Closing Date as reported on the Nasdaq Stock Market.
No fractional shares of the Company Stock shall be issued pursuant
to the Merger nor will any fractional share interest involved entitle the holder
thereof to vote, to receive dividends or to exercise any other rights of a
shareholder of the Company. In lieu thereof, any person who would otherwise be
entitled to a fractional share of the Company Stock pursuant to the provisions
hereof shall receive an amount in cash equal to the value of such fractional
share. The value of such fractional share shall be the product of such fraction
(rounded down to the nearest hundredth of a share) multiplied by the Share
Value.
Each share of Target Common Stock held in the treasury of Target or
by a wholly owned subsidiary of Target shall be cancelled as of the Effective
Time and no Merger Consideration shall be payable with respect thereto. From
and after the Effective Time,
<PAGE>
there shall be no further transfers on the stock transfer books of Target of any
of the Target Shares.
Subject to the provisions of this Agreement, at the Effective Time,
the shares of Acquisition Subsidiary common stock outstanding immediately prior
to the Merger shall be converted, by virtue of the Merger and without any action
on the part of the holder thereof, into one share of the common stock of the
Surviving Corporation (the "SURVIVING CORPORATION COMMON STOCK"), which one
share of the Surviving Corporation Common Stock shall constitute all of the
issued and outstanding capital stock of the Surviving Corporation.
1.4 STOCKHOLDERS' RIGHTS UPON MERGER. Upon consummation of
the Merger, the certificates which theretofore represented Target Shares (the
"CERTIFICATES") shall cease to represent any rights with respect thereto, and,
subject to applicable Law (as hereinafter defined) and this Agreement, shall
only represent the right to receive the Merger Consideration and the amount of
cash, if any, payable in lieu of fractional shares of the Company Stock into
which their Target Shares have been converted pursuant to this Agreement.
Target represents and warrants that the holders of the Target Shares are not
entitled to appraisal rights under applicable Law or the Certificate of
Incorporation of Target, provided the conditions of Section 262(b)(1) of the
Delaware Code are satisfied and the provisions of Section 262(b)(2) of the
Delaware Code are not applicable.
1.5 SURRENDER AND EXCHANGE OF SHARES. After the Effective
Time, each holder of a Target Share shall surrender and deliver the Certificates
to First Union National Bank of North Carolina or such other bank or trust
company as may be designated by the Company (the "EXCHANGE AGENT") together
with a duly completed and executed transmittal letter provided by the Exchange
Agent. Upon such surrender and delivery, the holder shall receive a certificate
representing the number of whole shares of the Company Stock to which such
holder is entitled pursuant to this Agreement plus any cash payable in lieu of
fractional shares. Until so surrendered and exchanged, each outstanding
Certificate after the Effective Time shall be deemed for all purposes to
evidence the right to receive that number of whole shares of the Company Stock
into which the Target Shares have been converted pursuant to this Agreement,
plus any cash payable in lieu of fractional shares; PROVIDED, HOWEVER, that
no dividends or other distributions, if any, in respect of the shares of the
Company Stock, declared after the Effective Time and payable to holders of
record after the Effective Time, shall be paid to the holders of any
unsurrendered Certificates until such Certificates and transmittal letters are
surrendered and delivered as provided herein. Subject to applicable Law, after
the surrender and exchange of Certificates, the record holders thereof will be
entitled to receive any such dividends or other distributions without interest
thereon, which theretofore have become payable with respect to the number of
shares of the Company Stock for which such Certificates were exchangeable.
Holders of any unsurrendered Certificates shall not be entitled to vote the
Company Stock until such Certificates are exchanged pursuant to this Agreement.
1.6 OPTIONS. At the Effective Time, the Company shall cause
each holder of a then-outstanding and unexercised option or warrant exercisable
for shares of Target Common Stock ("TARGET OPTIONS") to receive, by virtue of
the Merger and without any action on the part of the holder thereof, options or
warrants exercisable for shares of Company Stock having the same terms and
conditions as the Target Options except that the exercise price and the number
of shares issuable upon exercise shall be divided and
<PAGE>
multiplied, respectively, by the Exchange Ratio. The Company acknowledges that
at the Effective Time, all such options shall be vested and exercisable to the
extent provided in the Target Options or, subject to the provisions of this
Agreement, applicable employment agreements. The Company shall file or cause to
be filed all registration statements on Form S-8 or other appropriate form and
all other registrations and qualifications as may be necessary in connection
with the sale of Company Stock contemplated by such Target Options subsequent to
the Effective Time.
1.7 CERTIFICATE OF INCORPORATION. At and after the Effective
Time, the Certificate of Incorporation of Target shall be the Certificate of
Incorporation of the Surviving Corporation (subject to any subsequent
amendment).
1.8 BYLAWS. At and after the Effective Time, the Bylaws of
Target shall be the Bylaws of the Surviving Corporation (subject to any
subsequent amendment).
1.9 DIRECTORS AND OFFICERS. At and after the Effective Time,
until their successors are duly elected or appointed, the directors and the
officers of the Surviving Corporation shall be as follows:
DIRECTORS OFFICERS
Carl J. Aycock Bernard J. Ebbers - President
Bernard J. Ebbers Charles T. Cannada - Secretary and
Treasurer
1.10 OTHER EFFECTS OF MERGER. The Merger shall have all
further effects as specified in the applicable provisions of the Delaware Code.
1.11 REGISTRATION STATEMENT; PROSPECTUS/JOINT PROXY STATEMENT.
(a) For the purposes of (i) registering the issuance of the
Company Stock to holders of the Target Shares in connection with the Merger with
the Securities and Exchange Commission ("SEC") under the Securities Act of
1933, as amended, and the rules and regulations thereunder (the "SECURITIES
ACT"), and complying with applicable state securities laws, and (ii) holding
the meeting of Target stockholders to vote upon the adoption of this Agreement,
the Company and Target will cooperate in the preparation of a registration
statement on Form S-4 (such registration statement, together with any and all
amendments and supplements thereto, being herein referred to as the
"REGISTRATION STATEMENT"), including a prospectus/joint proxy statement
satisfying all applicable requirements of applicable state securities laws, the
Securities Act and the Securities Exchange Act of 1934, as amended, and the
rules and regulations thereunder (the "SECURITIES EXCHANGE ACT"). Such
prospectus/joint proxy statement in the form mailed by Target and the Company to
their respective stockholders, together with any and all amendments or
supplements thereto, is herein referred to as the "PROSPECTUS/JOINT PROXY
STATEMENT."
(b) Target will furnish the Company with such information
concerning Target and its subsidiaries as is necessary in order to cause the
Prospectus/Joint Proxy Statement, insofar as it relates to Target and its
subsidiaries, to comply with applicable Law. None of the information relating
to Target and its subsidiaries supplied by Target for inclusion in the
Prospectus/Joint Proxy Statement will be false or misleading with respect to
<PAGE>
any material fact or will omit 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. Target agrees promptly
to advise the Company if at any time prior to the respective meetings of
stockholders of Target or the Company any information provided by it in the
Prospectus/Joint Proxy Statement is or becomes incorrect or incomplete in any
material respect and to provide the Company with the information needed to
correct such inaccuracy or omission. Target will furnish the Company with such
supplemental information as may be necessary in order to cause the
Prospectus/Joint Proxy Statement, insofar as it relates to Target and its
subsidiaries, to comply with applicable Law after the mailing thereof to the
stockholders of Target or the Company.
(c) The Company will furnish Target with such information
concerning the Company and its subsidiaries as is necessary in order to cause
the Prospectus/Joint Proxy Statement, insofar as it relates to the Company and
its subsidiaries, to comply with applicable Law. None of the information
relating to the Company and its subsidiaries supplied by the Company for
inclusion in the Prospectus/Joint Proxy Statement will be false or misleading
with respect to any material fact or will omit 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 were made, not
misleading. The Company agrees promptly to advise Target if at any time prior
to the respective meetings of stockholders of Target or the Company any
information provided by it in the Prospectus/Joint Proxy Statement is or becomes
incorrect or incomplete in any material respect and to provide Target with the
information needed to correct such inaccuracy or omission. The Company will
furnish Target with such supplemental information as may be necessary in order
to cause the Prospectus/Joint Proxy Statement, insofar as it relates to the
Company and its subsidiaries, to comply with applicable Law after the mailing
thereof to stockholders of Target or the Company.
(d) The Company, as promptly as practicable, will file the
Registration Statement with the SEC and appropriate materials with applicable
state securities agencies and will use all reasonable efforts to cause the
Registration Statement to become effective under the Securities Act and all such
state filed materials to comply with applicable state securities laws. Target
authorizes the Company to utilize in the Registration Statement and in all such
state filed materials, the information concerning Target and its subsidiaries
provided to the Company in connection with, or contained in, the
Prospectus/Joint Proxy Statement. The Company promptly will advise Target when
the Registration Statement has become effective and of any supplements or
amendments thereto, and the Company will furnish Target with copies of all such
documents. Target shall not distribute any written material that would
constitute, as advised by O'Melveny & Myers or Richards, Layton & Finger, or
other reputable counsel to Target, a "prospectus" relating to the Merger or the
Company Stock within the meaning of the Securities Act or any applicable state
securities law without the prior written consent of the Company.
1.12 TAX-FREE REORGANIZATION. The parties intend that the
Merger qualify as a tax-free reorganization pursuant to Section 368 of the
Internal Revenue Code of 1986, as amended, and the regulations thereunder (the
"CODE").
1.13 ADDITIONAL ACTIONS. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments,
<PAGE>
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in the Surviving Corporation its
right, title or interest in, to or under any of the rights, properties or assets
of Acquisition Subsidiary or Target or otherwise to carry out this Agreement,
the officers and directors of the Surviving Corporation shall be authorized to
execute and deliver, in the name and on behalf of Acquisition Subsidiary or
Target, all such deeds, bills of sale, assignments and assurances and to take
and do, in the name and on behalf of Acquisition Subsidiary or Target, all such
other actions and things as may be necessary or desirable to vest, perfect or
confirm any and all right, title and interest in, to and under such rights,
properties or assets in the Surviving Corporation or otherwise to carry out this
Agreement.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND CERTAIN COVENANTS OF TARGET
Except as expressly set forth in the Exhibits attached hereto, and
subject to SECTION 6.4, Target represents, warrants and/or covenants to and
with the Company as follows:
2.1 ORGANIZATION AND GOOD STANDING. Target and each of its
subsidiaries (which subsidiaries are listed on EXHIBIT 2.1 attached hereto and
are herein referred to as the "TARGET SUBSIDIARIES") is a corporation or
partnership duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or organization and has all requisite
corporate or partnership power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. Target and each
of the Target Subsidiaries is duly qualified or licensed and in good standing to
do business in each jurisdiction in which the character of the property owned,
leased or operated by it or the nature of the business conducted by it makes
such qualification or licensing necessary, except where the failure to be so
duly qualified or licensed and in good standing does not or would not have a
material adverse effect on the business, assets (including, but not limited to,
intangible assets), condition (financial or otherwise), properties (including,
but not limited to, intangible properties), liabilities or the results of
operations of Target and the Target Subsidiaries taken as a whole ("TARGET
MATERIAL ADVERSE EFFECT;" it being understood and expressly acknowledged by the
Company that, for any and all purposes of this Agreement, under no circumstances
shall any event, condition or fact to the extent relating to, attributable to or
otherwise arising out of the Accounting Contingency (as defined in SECTION 6.4
hereof), or any action or other event or matter to the extent permitted or
contemplated by the provisions of this Agreement, constitute, or be deemed to
have caused, a Target Material Adverse Effect). EXHIBIT 2.1 attached hereto
contains a complete and accurate list of the jurisdictions of incorporation or
organization and qualification or license of Target and the Target Subsidiaries
as of the date of this Agreement. Target has heretofore made available to the
Company accurate and complete copies of the Certificates or Articles of
Incorporation and Bylaws, or equivalent governing instruments, as currently in
effect, of Target and each of the Target Subsidiaries.
2.2 CAPITALIZATION. As of the date hereof, the authorized
capital stock of Target consists of 200,000,000 shares of Target Common Stock
and 5,000,000 shares of preferred stock, par value $.01 per share (the "TARGET
PREFERRED STOCK"). As of the date immediately prior to the date hereof, (a)
74,193,124 shares of Target Common Stock were
<PAGE>
issued and outstanding, (b) no shares of Target Common Stock were issued and
held in the treasury of Target, and (c) no shares of Target Preferred Stock were
issued or outstanding. No other capital stock of Target is authorized or
issued. All issued and outstanding shares of the Target Common Stock are duly
authorized, validly issued, fully paid and non-assessable and were issued free
of preemptive rights and in compliance with applicable securities laws and
regulations. Except as set forth on EXHIBIT 2.2 attached hereto, as of the
date of this Agreement, there are no outstanding rights, subscriptions,
warrants, puts, calls, unsatisfied preemptive rights, options or other
agreements of any kind relating to any of the outstanding, authorized but
unissued, unauthorized or treasury shares of the capital stock or any other
security of Target and, except for the $195,500,000 aggregate principal amount
of 5% Convertible Subordinated Notes due March 15, 2003, issued by Target (the
"TARGET NOTES"), there is no authorized or outstanding security of any kind
convertible into or exchangeable for any such capital stock or other security.
There are no restrictions upon the transfer of or otherwise pertaining to the
securities (including, but not limited to, the ability to pay dividends thereon)
or retained earnings of Target and the Target Subsidiaries or the ownership
thereof other than those, if any, imposed pursuant to the rights, subscriptions,
warrants, puts, calls, options and other agreements listed in EXHIBIT 2.2
attached hereto or pursuant to the Securities Act, the Securities Exchange Act,
applicable state securities laws or other applicable Law.
2.3 SUBSIDIARIES. EXHIBIT 2.3(a) attached hereto sets forth
the name and percentages of outstanding capital stock or other interest held,
directly or indirectly, by Target, with respect to each Target Subsidiary.
Except as set forth on EXHIBIT 2.3(b) attached hereto, all of the capital
stock and other interests of the Target Subsidiaries so held by Target are owned
by it or a Target Subsidiary as indicated on said EXHIBIT 2.3(a), free and
clear of any claim, lien, encumbrance, security interest or agreement with
respect thereto. Other than the capital stock or other interests held by Target
in the Target Subsidiaries and the investment securities as set forth on
EXHIBIT 2.3(a) attached hereto, neither Target nor any Target Subsidiary owns
any direct or indirect equity interest in any person, domestic or foreign, and
is not a partner or member in or subject to any joint venture, partnership,
limited liability company or other arrangement or contract that is treated as a
partnership for federal income tax purposes. Except as set forth on EXHIBIT
2.3(c) attached hereto, all of the outstanding shares of capital stock in each
of the Target Subsidiaries are duly authorized, validly issued, fully paid and
non-assessable and were issued free of preemptive rights and in compliance with
applicable securities laws and regulations. Except as set forth on EXHIBIT
2.3(d) attached hereto, there are no irrevocable proxies or similar obligations
with respect to such capital stock of the Target Subsidiaries and no equity
securities or other interests of any of the Target Subsidiaries are or may
become required to be issued or purchased by reason of any options, warrants,
rights to subscribe to, puts, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into or exchangeable for,
shares of any capital stock of any Target Subsidiary, and there are no
contracts, commitments, understandings or arrangements by which any Target
Subsidiary is bound to issue additional shares of its capital stock, or options,
warrants or rights to purchase or acquire any additional shares of its capital
stock or securities convertible into or exchangeable for such shares.
2.4 AUTHORIZATION; BINDING AGREEMENT. Target has all
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the
<PAGE>
Target Tax Opinion Certificate (as hereinafter defined) and the Certificate of
Merger (the "TARGET ANCILLARY AGREEMENTS") and the consummation of the Merger
have been duly and validly authorized by Target's Board of Directors and,
subject to compliance with the fiduciary duties of Target's directors under
applicable Law as advised by O'Melveny & Myers or Richards, Layton & Finger, or
other reputable counsel to Target, no other corporate proceedings on the part of
Target or any Target Subsidiary are necessary to authorize the execution and
delivery of this Agreement and the Target Ancillary Agreements or to consummate
the Merger (other than the adoption of this Agreement by the stockholders of
Target in accordance with the Delaware Code and the Certificate of Incorporation
and Bylaws of Target). This Agreement has been duly and validly executed and
delivered by Target and constitutes, and upon execution and delivery thereof as
contemplated by this Agreement, the Target Ancillary Agreements will constitute,
the legal, valid and binding agreements of Target, enforceable against Target in
accordance with its and their respective terms, except to the extent that
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally and by principles of equity regarding the availability of
remedies ("ENFORCEABILITY EXCEPTIONS").
2.5 GOVERNMENTAL APPROVALS. No consent, approval, waiver or
authorization of, notice to or declaration or filing with ("CONSENT"), any
nation or government, any state or other political subdivision thereof, any
entity, authority or body exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government,
including, without limitation, any governmental or regulatory authority, agency,
department, board, commission or instrumentality, any court, tribunal or
arbitrator and any self-regulatory organization ("GOVERNMENTAL AUTHORITY") on
the part of Target or any of the Target Subsidiaries is required in connection
with the execution or delivery by Target of this Agreement and the Target
Ancillary Agreements or the consummation by Target of the transactions
contemplated hereby or thereby other than (i) the filing of the Certificate of
Merger with the Secretary of State of Delaware in accordance with the Delaware
Code, (ii) filings with the SEC, state securities laws administrators and the
National Association of Securities Dealers, Inc. ("NASD"), (iii) Consents from
or with Governmental Authorities set forth on EXHIBIT 2.5 attached hereto,
(iv) filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder (the "HSR ACT"),
and (v) those Consents that, if they were not obtained or made, do not or would
not have a Target Material Adverse Effect or materially and adversely affect the
ability of Target to perform its obligations as set forth herein or to
consummate the transactions contemplated hereby.
2.6 NO VIOLATIONS. The execution and delivery of this
Agreement and the Target Ancillary Agreements, the consummation of the
transactions contemplated hereby and thereby and compliance by Target with any
of the provisions hereof or thereof will not (i) conflict with or result in any
breach of any provision of the Certificate and/or Articles of Incorporation or
Bylaws or other governing instruments of Target or any of the Target
Subsidiaries, (ii) except as set forth on EXHIBIT 2.6 attached hereto, require
any Consent under or result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration or augment the performance
required by Target or any Target Subsidiary, as applicable) under any of the
terms, conditions or provisions of any Target Material Contract (as hereinafter
defined) or other obligation to which Target or any Target Subsidiary is a
<PAGE>
party or by which any of them or any of their properties or assets may be bound,
(iii) result in the creation or imposition of any lien or encumbrance of any
kind upon any of the assets of Target or any Target Subsidiary, or (iv) subject
to obtaining the Consents from Governmental Authorities referred to in SECTION
2.5, above, contravene any applicable provision of any constitution, treaty,
statute, law, code, rule, regulation, ordinance, policy or order of any
Governmental Authority or any orders, decisions, injunctions, judgments, awards
and decrees of or agreements with any court or other Governmental Authority
("LAW") currently in effect to which Target or any Target Subsidiary or its or
any of their respective assets or properties are subject, except in the case of
clauses (ii), (iii) and (iv), above, for any deviations from the foregoing which
do not or would not have a Target Material Adverse Effect.
2.7 SECURITIES FILINGS AND LITIGATION. Target has made
available to the Company true and complete copies of (i) its Annual Reports on
Form 10-K, as amended, for the years ended December 31, 1991, 1992 and 1993, as
filed with the SEC, (ii) its proxy statements relating to all of the meetings of
stockholders (whether annual or special) of Target and the Target Subsidiaries
since January 1, 1991, and on or before the date hereof, as filed with the SEC,
and (iii) all other reports, statements and registration statements and
amendments thereto (including, without limitation, Quarterly Reports on Form
10-Q and Current Reports on Form 8-K, as amended) filed by Target with the SEC
since January 1, 1991, and on or before the date hereof. The reports and
statements set forth in clauses (i) through (iii), above are referred to
collectively herein as the "TARGET SECURITIES FILINGS." As of their
respective dates, or as of the date of the last amendment thereof, if amended
after filing, none of the Target Securities Filings (including all schedules
thereto and disclosure documents incorporated by reference therein), contained
or, as to Target Securities Filings subsequent to the date hereof, will contain
any untrue statement of a material fact or omitted or, as to Target Securities
Filings subsequent to the date hereof, will omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. Each of
the Target Securities Filings at the time of filing or as of the date of the
last amendment thereof, if amended after filing, complied or, as to Target
Securities Filings subsequent to the date hereof, will comply in all material
respects with the Securities Exchange Act or the Securities Act, as applicable.
As of the date of this Agreement, there is no action, cause of action, claim,
demand, suit, proceeding, citation, summons, subpoena, inquiry or investigation
of any nature, civil, criminal, regulatory or otherwise, in law or in equity, by
or before any court, tribunal, arbitrator or other Governmental Authority
("LITIGATION") pending or, to the knowledge of Target, threatened against
Target or any Target Subsidiary, any officer, director, employee or agent
thereof, in his or her capacity as such, or otherwise relating to Target, any
Target Subsidiary or the securities of any of them, or any properties or rights
of Target or any of the Target Subsidiaries, other than as set forth in EXHIBIT
2.7 attached hereto or in a Target Securities Filing, or such as are not
presently expected by the management of Target, in the reasonable exercise of
its judgment as advised by counsel, to have a Target Material Adverse Effect.
No event has occurred as a consequence of which Target would be required to file
a Current Report on Form 8-K pursuant to the requirements of the Securities
Exchange Act as to which such a report has not been timely filed with the SEC.
2.8 TARGET FINANCIAL STATEMENTS. The consolidated balance
sheets as of December 31, 1993, 1992 and 1991, and the consolidated income
statements and consolidated statements of stockholders' equity and of cash flows
for the fiscal years then
<PAGE>
ended and the consolidated balance sheet, consolidated income statement and
consolidated statements of stockholders' equity and of cash flows at and for the
period ended March 31, 1994 of Target and the Target Subsidiaries included, in
each case, in the Target Securities Filings (the "TARGET FINANCIAL
STATEMENTS") have been provided to the Company. The Target Financial
Statements were prepared in accordance with generally accepted accounting
principles applicable to the business of Target and the Target Subsidiaries
consistently applied in accordance with past accounting practices and fairly
present (including, but not limited to, the inclusion of all adjustments with
respect to interim periods which are necessary to present fairly the financial
condition and assets and liabilities or the results of operations of Target and
the Target Subsidiaries on a consolidated basis) the financial condition and
assets and liabilities or the results of operations of Target and the Target
Subsidiaries as of the dates and for the periods indicated on a consolidated
basis. Except as reflected in the Target Financial Statements, as of their
respective dates, neither Target nor any Target Subsidiary had any debts,
obligations, guaranties of obligations of others or liabilities (contingent or
otherwise) that would be required in accordance with generally accepted
accounting principles to be disclosed in the Target Financial Statements.
Target shall provide to the Company as promptly as practicable copies of the
consolidated balance sheets, consolidated income statements and consolidated
statements of stockholders' equity and of cash flows of Target and the Target
Subsidiaries (a) for any fiscal quarter or year ending after March 31, 1994,
which quarterly or annual statements shall be prepared in conformity with
generally accepted accounting principles applicable to the business of Target
and the Target Subsidiaries (except to the extent necessary to comply with the
requirements of the SEC applicable to the financial statements to be included in
Target's Quarterly Reports on Form 10-Q or Annual Reports on Form 10-K under the
Securities Exchange Act, as applicable), and (b) as and to the extent prepared
in the ordinary course for Target's internal management purposes, for any month
ending after March 31, 1994 (together with supporting consolidating financial
statements), which monthly statements shall be prepared in conformity with
Target's past practices with regard thereto, and shall fairly present the
financial condition and assets and liabilities or the results of operations of
Target and the Target Subsidiaries as of the dates and for the periods
indicated. The Company acknowledges that the interim financial statements
referred to in clause (b) above will not include any footnotes and will be
subject to adjustment in the ordinary course.
2.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth
in the Target Securities Filings or in EXHIBIT 2.9 attached hereto, since
December 31, 1993, through the date of this Agreement, there has not been: (i)
any event, occurrence, fact, condition, change, development or effect
("EVENT") that has had or would have a Target Material Adverse Effect; (ii)
any declaration, payment or setting aside for payment of any dividend (except to
Target or a Target Subsidiary) or other distribution or any redemption, purchase
or other acquisition of any shares of capital stock or securities of Target or
any Target Subsidiary; (iii) any return of any capital or other distribution of
assets to stockholders of Target or any Target Subsidiary (except to Target or a
Target Subsidiary); (iv) other than in the ordinary course or in an amount not
in excess of $500,000 individually or $2,000,000 in the aggregate, any
investment of a capital nature by Target or any Target Subsidiary by the
purchase of any property or assets; (v) any acquisition (by merger,
consolidation or acquisition of stock or assets) of any person or business; (vi)
any sale, disposition or other transfer of assets or properties of Target or any
Target Subsidiary having a net book value in excess of $500,000 individually or
$2,000,000 in the aggregate; (vii) any material change in accounting methods or
practices or any change in depreciation or
<PAGE>
amortization policies or rates of depreciation or amortization applicable to
Target or any Target Subsidiary; (viii) any agreement by Target or any Target
Subsidiary to take any action that would require Target or a Target Subsidiary
to violate SECTION 4.1 of this Agreement; or (ix) any failure by Target or any
Target Subsidiary to conduct its business in the ordinary course consistent with
past practice.
2.10 COMPLIANCE WITH LAWS. The business of Target and each
Target Subsidiary has been operated in compliance with all Laws and all tariffs,
rules and regulations of local exchange carriers and inter-exchange carriers
applicable thereto, except for any instances of non-compliance which do not or
would not have a Target Material Adverse Effect. Without limiting the
generality of the foregoing, neither Target nor any Target Subsidiary has
engaged in carrying transit or indirect traffic in violation of applicable Laws
which violation would have a Target Material Adverse Effect.
2.11 PERMITS. (i) Target and the Target Subsidiaries have all
permits, certificates, licenses, approvals, tariffs and other authorizations
required in connection with the operation of their business (collectively,
"TARGET PERMITS"), (ii) neither Target nor any Target Subsidiary is in
violation of any Target Permit, and (iii) no proceedings are pending or, to the
knowledge of Target, threatened, to revoke or limit any material Target Permit,
except, in the case of clause (i) or (ii) above, those the absence or violation
of which do not or would not have a Target Material Adverse Effect.
2.12 FINDERS AND INVESTMENT BANKERS. Neither Target nor any of
its officers or directors has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated hereby other than Hambrecht & Quist
Incorporated and Chemical Securities, Inc. pursuant to certain agreements,
accurate and complete copies of which have been provided to the Company.
2.13 CONTRACTS. Except as set forth in EXHIBIT 2.13 attached
hereto, neither Target nor any Target Subsidiary is a party or is subject to any
note, bond, mortgage, indenture, contract, lease, license, agreement,
understanding, instrument, bid or proposal described in the following sentence
("TARGET MATERIAL CONTRACT") that is not described in or filed as an exhibit
to any Target Securities Filing as required by the Securities Act or the
Securities Exchange Act, as the case may be. For purposes of this SECTION
2.13, a Target Material Adverse Contract shall be a note, bond, mortgage,
indenture, contract, lease, license, agreement, understanding, instrument, bid
or proposal required to be described in or filed as an exhibit to any document
filed under the Securities Act or the Securities Exchange Act or (other than
customer and supplier contracts terminating or terminable, without penalty in
excess of $10,000, on or before December 31, 1994) with respect to which the
financial obligation of Target or a Target Subsidiary thereunder or applicable
to the assets or properties of Target or a Target Subsidiary exceeds $2,500,000
after December 31, 1994, but during the term thereof. Target has made available
to the Company true and accurate copies of the Target Material Contracts. As of
the date of this Agreement and to Target's knowledge, all such Target Material
Contracts are valid and binding and are in full force and effect and enforceable
in accordance with their respective terms, subject to the Enforceability
Exceptions. As of the date of this Agreement, except as set forth in EXHIBIT
2.6 attached hereto and for such as do not or would not have a Target Material
Adverse Effect, (i) no Consent of any person is needed in order that each such
Target Material Contract shall
<PAGE>
continue in full force and effect in accordance with its terms without penalty,
acceleration or rights of early termination by reason of the consummation of the
Merger, and (ii) except for such as do not or would not have a Target Material
Adverse Effect, neither Target nor any Target Subsidiary is in violation or
breach of or default under any such Target Material Contract, nor to Target's
knowledge is any other party to any such Target Material Contract in violation
or breach of or default under any such Target Material Contract.
2.14 EMPLOYEE BENEFIT PLANS. Except as set forth in EXHIBIT
2.14(a) or EXHIBIT 2.14(d) attached hereto, there are no Benefit Plans (as
defined below) maintained or contributed to by Target or any member of Target's
controlled group under which Target, a Target Subsidiary or the Surviving
Corporation could incur any material liability. A "BENEFIT PLAN" shall
constitute (i) an employee benefit plan as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended, together with all
regulations thereunder ("ERISA"), even if, because of some other provision of
ERISA, such plan is not subject to any or all of ERISA's provisions, and (ii)
whether or not described in the preceding clause, (a) any pension, profit
sharing, stock bonus, deferred or supplemental compensation, retirement, thrift,
stock purchase or stock option plan, or any other compensation, welfare, fringe
benefit or retirement plan, program, policy, understanding or arrangement of any
kind whatsoever, whether formal or informal, oral or written, providing for
benefits for or the welfare of any or all of the current or former employees or
agents of Target or any Target Subsidiary or their beneficiaries or dependents,
(b) a multi-employer plan as defined in Section 3(37) of ERISA, or (c) a
multiple employer plan as defined in Section 413 of the Code.
With respect to each Benefit Plan (where applicable): Target has
made available to the Company complete and accurate copies of (i) all plan and
trust texts and agreements, material insurance contracts and other material
funding arrangements; (ii) annual reports on the Form 5500 series for the last
year; (iii) financial statements and/or annual and periodic accountings of plan
assets for the last year; (iv) the most recent determination letter received
from the Internal Revenue Service ("IRS"); (v) actuarial valuations for the
last year; and (vi) the most recent summary plan description as defined in
ERISA.
Except as set forth in EXHIBIT 2.14(b) attached hereto, with
respect to each Benefit Plan while maintained or contributed to by Target or a
Target Subsidiary: (i) if intended to qualify under Code Sections 401(a) or
403(a), such Benefit Plan has received a favorable determination letter from the
IRS that it so qualifies, and its trust is exempt from taxation under Code
Section 501(a) and nothing has since occurred to cause the loss of the Benefit
Plan's qualification; (ii) such Benefit Plan has been administrated in
substantial accordance with its terms and applicable Laws; (iii) to the
knowledge of the Target, no event has occurred and there exist no circumstances
under which Target, a Target Subsidiary or the Surviving Corporation would incur
liability under ERISA, the Code or otherwise in addition to the payment of
nondelinquent benefits, contributions and expenses currently contemplated by
such Benefit Plans; (iv) no accumulated funding deficiency as defined in Code
Section 412 has occurred or exists; (v) no non-exempt prohibited transaction as
defined under ERISA and the Code has occurred; (vi) no reportable event as
defined in Section 4043 of ERISA has occurred (excluding events for which the
30-day notice requirement has been waived); (vii) all contributions and premiums
due have fully been made and paid on a timely basis; and (viii) all
contributions made or required to be made under any Benefit Plan intended to be
deductible meet the requirements for deductibility under the Code, and all
contributions
<PAGE>
accrued prior to the Effective Time which have not been made have been properly
recorded on the books of Target, except in the cases of clauses (iii)-(viii),
above, for any deviations from the foregoing which do not or would not have a
Target Material Adverse Effect.
Neither Target nor any Target Subsidiary has any material liability,
joint or otherwise, for any withdrawal liability (potential, contingent or
otherwise) under Title IV of ERISA for a complete or partial withdrawal from any
multi-employer plan by any member of a controlled group of employers (as used in
ERISA) of which Target is or was a member.
With respect to each Benefit Plan which is subject to Title IV of
ERISA: (i) except as disclosed in the Target Financial Statements (or footnotes
thereto), as of the Effective Time, the market value of its assets (exclusive of
any contribution due to such Benefit Plan) equals or exceeds the present value
of benefit liabilities as of the latest actuarial evaluation date for such plan
(but not earlier than 12 months prior to the date hereof), and since the last
evaluation date, there have been no amendments to such plans that materially
increase the present value of actuarial benefits nor any other material adverse
changes in the funding status of such plan, and (ii) neither Target nor any
Target Subsidiary has incurred nor is expected to incur any actual or contingent
liability arising from a partial or complete plan termination, except in each
case, for any deviations from the foregoing which do not or would not have a
Target Material Adverse Effect.
With respect to each Benefit Plan which is a welfare plan (as
defined in ERISA Section 3(1)): (i) any liability for medical or death benefits
with respect to current or former employees beyond their termination of
employment (except as required by applicable Law) is set forth in the Target
Financial Statements (or footnotes thereto) to the extent required to be so set
forth by applicable accounting principles; (ii) there are no reserves, assets,
surplus or prepaid premiums under any such plan; (iii) except as set forth in
EXHIBIT 2.14(c) attached hereto, no express term or provision of any such plan
prohibits the amendment or termination thereof; and (iv) Target and the Target
Subsidiaries have complied with Code Section 4980B, except, in each case, for
any deviations from the foregoing which do not or would not have a Target
Material Adverse Effect.
Except as contemplated by SECTIONS 1.6, 4.1 AND 4.8 hereof and as
set forth in EXHIBIT 2.14(d) attached hereto, the consummation of the Merger
will not (i) entitle any individual to severance pay, or (ii) accelerate the
time of payment or vesting of benefits or increase the amount of compensation
due to any individual.
2.15 TAXES AND RETURNS. (a) Except as disclosed in EXHIBIT
2.15 attached hereto, Target and each of the Target Subsidiaries has timely
filed, or caused to be timely filed, all federal, state, local and foreign
income, gross receipts, sales, use, property, production, payroll, franchise,
withholding, employment, social security, license, excise, transfer, gains, and
other tax returns or reports required to be filed by it, and has paid or
withheld, or caused to be paid or withheld, all taxes of any nature whatsoever,
including any related penalties, interest and liabilities (any of the foregoing
being referred to herein as a "TAX"), required to be paid or withheld, other
than such Taxes for which adequate reserves in the Target Financial Statements
have been established and which are being contested in good faith. Except as
set forth in EXHIBIT 2.15 attached hereto, there are no claims or assessments
pending against Target or any Target Subsidiary for any alleged deficiency in
any Tax, and Target does not know of any threatened Tax claims or assessments
against
<PAGE>
Target or any Target Subsidiary (other than those for which adequate reserves in
the Target Financial Statements have been established). Neither Target nor any
Target Subsidiary has made an election to be treated as a "consenting
corporation" under Section 341(f) of the Code. Except as set forth in EXHIBIT
2.15 attached hereto, neither Target nor any of the Target Subsidiaries has
made an election under Section 338 of the Code or has taken any action that
would result in any tax liability of Target or any of the Target Subsidiaries as
a result of a deemed election within the meaning of Section 338 of the Code.
Except as set forth in EXHIBIT 2.15 attached hereto, as of the date of this
Agreement, neither Target nor any Target Subsidiary has any waivers or
extensions of any applicable statute of limitations to assess any Taxes. Except
as set forth in EXHIBIT 2.15 attached hereto, as of the date of this
Agreement, there are no outstanding requests by Target or a Target Subsidiary
for any extension of time within which to file any return or within which to pay
any Taxes shown to be due on any return. Except as set forth on EXHIBIT 2.15
attached hereto, as of the date of this Agreement, no taxing authority is
conducting or has threatened or notified Target or any Target Subsidiary that it
intends to conduct, an audit of any prior tax period of Target or any of its
past or present subsidiaries. Except as disclosed in EXHIBIT 2.15 attached
hereto, to the knowledge of Target, no Target Subsidiary has ever been an "S"
corporation under the Code.
(b) A listing of all tax sharing agreements or similar
arrangements with respect to or involving Target and the Target Subsidiaries is
set forth in EXHIBIT 2.15 attached hereto.
(c) Except as may be incurred pursuant to the agreements
listed on EXHIBITS 2.14(d) OR 2.23 attached hereto, and except as set forth in
EXHIBIT 2.15 attached hereto, neither Target nor any of the Target
Subsidiaries has made or become obligated to make, or will, as a result of the
transactions contemplated by this Agreement, make or become obligated to make,
any "excess parachute payment" as defined in Section 280G of the Code (without
regard to subsection (b) (4) thereof).
(d) To Target's knowledge, neither Target nor any Target
Subsidiary is or has been a United States real property holding company (as
defined in Section 897(c)(2) of the Code) during the applicable period specified
in Section 897(c)(1)(A)(ii) of the Code.
(e) Except as provided in EXHIBIT 2.15 attached hereto,
neither Target nor any Target Subsidiary is a person other than a United States
person within the meaning of the Code.
(f) Except as set forth on EXHIBIT 2.15 attached hereto,
none of the material assets of Target or of any Target Subsidiary is property
which Target or any Target Subsidiary is required to treat as being owned by any
other person pursuant to the so-called "safe harbor lease" provisions of former
Section 168(f)(8) of the Code.
2.16 LIABILITIES. From December 31, 1993 through the date of
this Agreement, except as expressly disclosed in the Target Securities Filings
or in EXHIBIT 2.16 attached hereto and except as do not or would not have a
Target Material Adverse Effect, as of the date of this Agreement, Target and the
Target Subsidiaries do not have any direct or indirect indebtedness, liability,
claim, loss, damage, deficiency, obligation or responsibility, fixed or unfixed,
choate or inchoate, liquidated or unliquidated, secured or unsecured,
<PAGE>
accrued, absolute, contingent or otherwise, whether or not of a kind required by
generally accepted accounting principles to be set forth in a financial
statement other than those incurred in the ordinary course of business and in an
amount not in excess of $2,000,000 individually. Except as set forth on
EXHIBIT 2.16 attached hereto or reflected in the Target Securities Filings, as
of the date of this Agreement, neither Target nor the Target Subsidiaries have
any material (i) obligations in respect of borrowed money, (ii) obligations
evidenced by bonds, debentures, notes or other similar instruments, (iii)
obligations which would be required by generally accepted accounting principles
to be classified as "capital leases," (iv) obligations to pay the deferred
purchase price of property or services, except trade accounts payable arising in
the ordinary course of business and payable not more than twelve (12) months
from the date of incurrence, and (v) any guaranties of any obligations of any
other person.
2.17 ENVIRONMENTAL MATTERS. As of the date of this Agreement,
(i) Target and the Target Subsidiaries are in compliance in all material
respects with all applicable Environmental Laws (as hereinafter defined), (ii)
there is no civil, criminal or administrative judgment, action, suit, demand,
claim, hearing, notice of violation, investigation, proceeding, notice or demand
letter pending or, to the knowledge of Target, threatened against Target, a
Target Subsidiary or any of their properties pursuant to Environmental Laws, and
(iii) except as set forth on EXHIBIT 2.17 attached hereto, there are no past
or present Events which, as of the date of this Agreement, are reasonably
expected to prevent compliance with, or which have given rise to or will give
rise to liability under, Environmental Laws, except in each case, for such as do
not or would not have a Target Material Adverse Effect. As used herein the term
"ENVIRONMENTAL LAWS" shall mean Laws relating to pollution, waste control, the
generation, presence or disposal of asbestos, hazardous or toxic wastes or
substances, the protection of the environment, environmental activity or public
health and safety.
2.18 INTELLECTUAL PROPERTY. EXHIBIT 2.18 attached hereto
sets forth a list of all patents, trademarks, service marks, trade names,
copyrights, franchises and similar rights ("INTELLECTUAL PROPERTY") of or used
by Target and the Target Subsidiaries, all applications for any of the foregoing
and all permits, grants and licenses or other rights running to or from Target
or any of the Target Subsidiaries relating to any of the foregoing that, with
respect to each of the foregoing matters, are material to the business of Target
and the Target Subsidiaries, taken as a whole. Except as set forth on EXHIBIT
2.18, (i) Target or one of the Target Subsidiaries, as indicated thereon, own,
or are licensed to, or otherwise have, the right to use all Intellectual
Property set forth thereon, (ii) the rights of Target and the Target
Subsidiaries in the foregoing are, subject to the rights of any licensor
thereof, free and clear of any liens or other encumbrances and restrictions and
Target and the Target Subsidiaries have not received, as of the date of this
Agreement, notice of any adversely-held Intellectual Property of any other
person, or notice of any charge or claim of any person relating to such
Intellectual Property or any process or confidential information of Target and
the Target Subsidiaries ("CLAIM NOTICE"), except, in each case, for any
deviations from the foregoing which do not or would not have a Target Material
Adverse Effect. Target shall promptly notify, and shall cause the Target
Subsidiaries to promptly notify, the Company of any Claim Notice received by
Target or a Target Subsidiary after the date of this Agreement.
2.19 REAL ESTATE.
<PAGE>
(a) EXHIBIT 2.19(a) attached hereto sets forth a true,
correct and complete schedule as of the date of this Agreement of all real
property owned by Target or any of the Target Subsidiaries. Target or one of
the Target Subsidiaries, as indicated thereon, is the owner of fee title to the
real property described on said EXHIBIT 2.19(a) and to all of the buildings,
structures and other improvements located thereon free and clear of any
mortgage, deed of trust, lien, pledge, security interest, claim, lease, charge,
option, right of first refusal, easement, restrictive covenant, encroachment or
other survey defect, encumbrance or other restriction or limitation except for
the matters listed on said EXHIBIT 2.19(a) and any exceptions, encumbrances,
restrictions or limitations which, individually or in the aggregate, do not or
would not have a Target Material Adverse Effect.
(b) EXHIBIT 2.19(b) attached hereto sets forth a true,
correct and complete schedule as of the date of this Agreement of all material
leases, subleases, licenses or other agreements under which Target or any of the
Target Subsidiaries uses or occupies, or has the right to use or occupy, now or
in the future, any real property or improvements thereon (the "TARGET REAL
PROPERTY LEASES"), which schedule sets forth the date of and parties to each
Target Real Property Lease and the date of and parties to each amendment,
modification and supplement thereto. Except for the matters listed on said
EXHIBIT 2.19(b) and for such as do not or would not have a Target Material
Adverse Effect, Target or a Target Subsidiary, as indicated thereon, holds the
leasehold estate under and interest in each Target Real Property Lease free and
clear of all liens, encumbrances and other rights of occupancy.
2.20 CORPORATE RECORDS. The respective corporate record books
of or relating to Target and each of the Target Subsidiaries made available to
the Company by Target contain accurate and complete records of (i) all material
corporate actions of the respective stockholders and directors (and committees
thereof) of Target and the Target Subsidiaries, (ii) the Certificate and/or
Articles of Incorporation, Bylaws and/or other governing instruments, as
amended, of Target and the Target Subsidiaries, and (iii) the issuance and
transfer of stock of Target and the Target Subsidiaries. Except as set forth on
EXHIBIT 2.20 attached hereto, neither Target nor any Target Subsidiary has any
of its material records or information recorded, stored, maintained or held off
the premises of Target and the Target Subsidiaries.
2.21 TITLE TO AND CONDITION OF PERSONAL PROPERTY. Target and
each of the Target Subsidiaries have good and marketable title to, or a valid
leasehold interest in, all material items of personal property reflected in the
Target Financial Statements dated March 31, 1994, or currently used in the
operation of their business, and such property or leasehold interests are free
and clear of all liens, claims, charges, security interests, options, or other
title defects or encumbrances, except for property disposed of in the ordinary
course since the date thereof consistent with the provisions of SECTION 2.9,
above, and such exceptions to title and liens, claims, charges, security
interests, options, title defects or encumbrances which do not or would not have
a Target Material Adverse Effect. As of the date of this Agreement, such
personal property is in good operating condition and repair (ordinary wear and
tear excepted), is suitable for the use to which the same is customarily put by
Target or any Target Subsidiary, is free from defects and is of a quality and
quantity presently usable in the ordinary course of the operation of the
business of Target and the Target Subsidiaries, except for instances which do
not or would not have a Target Material Adverse Effect.
<PAGE>
2.22 NO ADVERSE ACTIONS. As of the date of this Agreement,
there is no existing, pending or, to the knowledge of Target, threatened
termination, cancellation, limitation, modification or change in the business
relationship of Target or any of the Target Subsidiaries, with any supplier,
customer or other person except those which do not or would not have a Target
Material Adverse Effect. None of Target, any Target Subsidiary or, to the
knowledge of Target, any director, officer, agent, employee or other person
acting on behalf of any of the foregoing has used any corporate funds for
unlawful contributions, payments, gifts, entertainment or other unlawful
expenses relating to political activity, or made any direct or indirect unlawful
payments to governmental or regulatory officials.
2.23 LABOR MATTERS. Except as set forth on EXHIBIT 2.23
attached hereto, neither Target nor any of the Target Subsidiaries has any
material obligations, contingent or otherwise, under any employment or
consulting agreement, collective bargaining agreement or other contract with a
labor union or other labor or employee group. To the knowledge of Target, as of
the date of this Agreement, there are no efforts presently being made or
threatened by or on behalf of any labor union with respect to the unionizing of
employees of Target or any Target Subsidiary. As of the date of this Agreement,
there is no unfair labor practice complaint against Target or any Target
Subsidiary pending or, to the knowledge of Target, threatened before the
National Labor Relations Board; there is no labor strike, dispute, slowdown or
stoppage pending or, to the knowledge of Target, threatened against or involving
Target or any Target Subsidiary; no representation question exists respecting
the employees of Target or any Target Subsidiary; no grievance or internal or
informal complaint exists, no arbitration proceeding arising out of or under any
collective bargaining agreement is pending and no claim therefor has been
asserted; no collective bargaining agreement is currently being negotiated by
Target or any Target Subsidiary; and neither Target nor any Target Subsidiary is
experiencing any work stoppage, strike or slowdown, except, as to each of the
foregoing, for matters which do not or would not have a Target Material Adverse
Effect.
2.24 INSURANCE. As of the date of this Agreement, neither
Target nor any of the Target Subsidiaries has received notice of default under,
or intended cancellation or nonrenewal of, any material policies of insurance
which insure the properties, business or liability of Target and the Target
Subsidiaries, nor has Target or any Target Subsidiary been refused any insurance
for material coverage by an insurance carrier to which it has applied for
insurance.
2.25 FAIRNESS OPINIONS. Target's Board of Directors has
received from its financial advisors, Hambrecht & Quist Incorporated and
Chemical Securities, Inc., opinions to the effect that the Merger Consideration
is fair to the holders of the Target Shares from a financial point of view.
2.26 SCI RELATIONSHIP. The only transactions between Target or
any of the Target Subsidiaries and Southwest Communications, Inc., a Delaware
corporation ("SCI"), are under the two agreements identified in EXHIBIT 2.26
attached hereto ("SCI AGREEMENTS"). The only services or equipment provided
to SCI by Target or a Target Subsidiary or by SCI to Target or a Target
Subsidiary, and the only obligations of SCI to Target or a Target Subsidiary or
of Target or a Target Subsidiary to SCI, are as set forth in the SCI Agreements.
<PAGE>
2.27 DISCLOSURE. All information and documents provided prior
to the date of this Agreement, and all information and documents subsequently
provided, to the Company or its representatives by or on behalf of Target are or
contain, or will be or will contain as to subsequently provided information or
documents, true, accurate and complete information in all material respects with
respect to the subject matter thereof and are, or will be as to subsequently
provided information or documents, reasonably responsive to any specific request
made by or on behalf of the Company or its representatives.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND
CERTAIN COVENANTS OF THE COMPANY
AND ACQUISITION SUBSIDIARY
Except as expressly set forth in the Exhibits attached hereto, the
Company represents, warrants and/or covenants to and with Target as follows:
3.1 ORGANIZATION AND GOOD STANDING. The Company and each of
its subsidiaries, including Acquisition Subsidiary, (the "COMPANY
SUBSIDIARIES") that is an active and operating Company Subsidiary (the "ACTIVE
COMPANY SUBSIDIARIES") is a corporation or limited partnership duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization and has all requisite corporate or partnership
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted. The Company and each of the Active Company
Subsidiaries is duly qualified or licensed and in good standing to do business
in each jurisdiction in which the character of the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except where the failure to be so duly
qualified or licensed and in good standing does not or would not have a material
adverse effect on the business, assets (including, but not limited to,
intangible assets), condition (financial or otherwise), properties (including,
but not limited to, intangible properties), liabilities or the results of
operations of the Company and the Company Subsidiaries taken as a whole
("COMPANY MATERIAL ADVERSE EFFECT;" it being understood and expressly
acknowledged by the Target that, for any and all purposes of this Agreement,
under no circumstances shall any action or other event or matter to the extent
permitted or contemplated by the provisions of this Agreement, constitute, or be
deemed to have caused, a Company Material Adverse Effect). EXHIBIT 3.1
attached hereto contains a complete and accurate list of the jurisdictions of
incorporation or organization and qualification or license of the Company and
the Company Subsidiaries as of the date of this Agreement. The Company has
heretofore made available to Target accurate and complete copies of the
Certificates or Articles of Incorporation and Bylaws, or equivalent governing
instruments, as currently in effect, of the Company and each of the Active
Company Subsidiaries.
3.2 CAPITALIZATION. As of the date hereof, the authorized
capital stock of the Company consists of 500,000,000 shares of the Company
Stock, and 50,000,000 shares of preferred stock, par value $.01 per share (the
"COMPANY PREFERRED STOCK"). As of July 25, 1994, (a) 121,029,760 shares of
the Company Stock were issued and outstanding, and (b) 10,896,785 shares of
Series 1 and 2,000,000 shares of Series 2 Company Preferred Stock were
authorized, issued and outstanding. No other capital stock of the Company is
<PAGE>
authorized or issued. All issued and outstanding shares of the Company Stock
and the Company Preferred Stock are duly authorized, validly issued, fully paid
and non-assessable and were issued free of preemptive rights and in compliance
with applicable securities laws and regulations. Except as set forth in
EXHIBIT 3.2 attached hereto, as of the date of this Agreement, there are no
outstanding rights, subscriptions, warrants, puts, calls, unsatisfied preemptive
rights, options or other agreements of any kind relating to any of the
outstanding authorized but unissued, unauthorized or treasury shares of the
capital stock or any other security of the Company, and there is no authorized
or outstanding security convertible into or exchangeable for any such capital
stock or other security. Except for the restrictions pursuant to the Credit
Agreement dated as of December 4, 1992, as amended, by and among the Company and
the Lenders, Co-Agents and Administrative Agent identified therein (the "CREDIT
AGREEMENT"), and the Note Agreements dated as of December 4, 1992, by and among
the Company and the Purchasers identified therein (the "NOTE AGREEMENTS"),
there are no restrictions upon the transfer or otherwise pertaining to the
securities (including, but not limited to, the ability to pay dividends thereon)
or retained earnings of the Company and the Company Subsidiaries or the
ownership thereof other than those, if any, imposed by the Securities Act, the
Securities Exchange Act, applicable state securities laws or other applicable
Law.
3.3 SUBSIDIARIES. EXHIBIT 3.1 attached hereto sets forth
the percentages of outstanding capital stock or other interests held, directly
or indirectly, by the Company with respect to each Company Subsidiary as of the
date of this Agreement. All of the capital stock and other interests of the
Active Company Subsidiaries so held by the Company are owned by it or an Active
Company Subsidiary, free and clear of any claim, lien, encumbrance, security
interest or agreement with respect thereto. All of the outstanding shares of
capital stock in each of the Active Company Subsidiaries are duly authorized,
validly issued, fully paid and non-assessable and were issued free of preemptive
rights and in compliance with applicable securities laws and regulations. There
are no irrevocable proxies or similar obligations with respect to such capital
stock of the Active Company Subsidiaries and no equity securities or other
interests of any of the Active Company Subsidiaries are or may become required
to be issued or purchased by reason of any options, warrants, right to subscribe
to, puts, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for, shares of any capital
stock of any Active Company Subsidiary, and there are no contracts, commitments,
understandings or arrangements by which any Active Company Subsidiary is bound
to issue additional shares of its capital stock, or options, warrants, or rights
to purchase or acquire any additional shares of capital stock or securities
convertible into or exchangeable for such shares. Neither the Company nor any
of its subsidiaries beneficially owns, directly or indirectly, more than 30
shares of the capital stock of Target.
3.4 AUTHORIZATION; BINDING AGREEMENT. The Company has all
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the Merger have been duly and
validly authorized by the Board of Directors of the Company and Acquisition
Subsidiary, and, subject to compliance with the fiduciary duties of the
Company's directors under applicable Law as advised by Bryan Cave, or other
reputable counsel to the Company, no other corporate proceedings on the part of
the Company or any Company Subsidiary are necessary to authorize the execution
and delivery of this Agreement or to consummate the Merger (other than the
requisite approval by the
<PAGE>
shareholders of the Company of the issuance of the Company Stock pursuant to the
Merger). This Agreement has been duly and validly executed and delivered by
each of the Company and Acquisition Subsidiary and constitutes the legal, valid
and binding agreement of each of the Company and Acquisition Subsidiary,
enforceable against each of the Company and Acquisition Subsidiary in accordance
with its terms, subject to the Enforceability Exceptions.
3.5 GOVERNMENTAL APPROVALS. No Consent from or with any
Governmental Authority on the part of the Company or any of the Company
Subsidiaries is required in connection with the execution or delivery by the
Company of this Agreement or the consummation by the Company of the transactions
contemplated hereby or thereby other than (i) filings with the SEC, state
securities laws administrators and the NASD, (ii) Consents from or with
Governmental Authorities, (iii) filings under the HSR Act, and (iv) those
Consents that, if they were not obtained or made, do not or would not have a
Company Material Adverse Effect or materially and adversely affect the ability
of the Company to perform its obligations set forth herein or to consummate the
transactions contemplated hereby.
3.6 NO VIOLATIONS. The execution and delivery of this
Agreement, the consummation of the transactions contemplated hereby and
compliance by the Company with any of the provisions hereof will not (i)
conflict with or result in any breach of any provision of the Certificate and/or
Articles of Incorporation or Bylaws or other governing instruments of the
Company or any of the Company Subsidiaries, (ii) except for Consents under the
Credit Agreement and the Note Agreements, require any Consent under or result in
a violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation
or acceleration or augment the performance required by the Company or any
Company Subsidiary, as applicable) under any of the terms, conditions or
provisions of any Company Material Contract (as hereinafter defined) or other
obligation to which the Company or any Company Subsidiary is a party or by which
any of them or any of their properties or assets may be bound, (iii) result in
the creation or imposition of any lien or encumbrance of any kind upon any of
the assets of the Company or any Company Subsidiary, or (iv) subject to
obtaining the Consents from Governmental Authorities referred to in SECTION
3.5, above, contravene any Law currently in effect to which the Company or any
Company Subsidiary or its or any of their respective assets or properties are
subject, except in the case of clauses (ii), (iii) and (iv), above, for any
deviations from the foregoing which do not or would not have a Company Material
Adverse Effect.
3.7 SECURITIES FILINGS AND LITIGATION. The Company has made
available to Target true and complete copies of (i) its Annual or Transition
Reports on Form 10-K, as amended, for the years ended December 31, 1991, 1992
and 1993 or periods included therein, as filed with the SEC, (ii) its proxy
statements relating to all of the meetings of shareholders (whether annual or
special) of the Company and the Company Subsidiaries since January 1, 1991, and
on or before the date hereof, as filed with the SEC, and (iii) all other
reports, statements and registration statements and amendments thereto
(including, without limitation, Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K, as amended) filed by the Company with the SEC since January
1, 1991, and on or before the date hereof. The reports and statements set forth
in clauses (i) through (iii), above, are referred to collectively as the
"COMPANY SECURITIES FILINGS"). As of their respective dates, or as of the
date of the last amendment thereof, if amended after filing, none of the Company
Securities
<PAGE>
Filings (including all schedules thereto and disclosure documents incorporated
by reference therein), contained or, as to Company Securities Filings subsequent
to the date hereof, will contain any untrue statement of a material fact or
omitted or, as to Company Securities Filings subsequent to the date hereof, will
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. Each of the Company Securities Filings at the time of
filing or as of the date of the last amendment thereof, if amended after filing,
complied or, as to Company Securities Filings subsequent to the date hereof,
will comply in all material respects with the Securities Exchange Act or the
Securities Act, as applicable. As of the date of this Agreement, there is no
Litigation pending or, to the knowledge of the Company, threatened against the
Company or any Company Subsidiary, any officer, director, employee or agent
thereof, in his or her capacity as such, or otherwise relating to the Company,
any Company Subsidiary or the securities of any of them, or any properties or
rights of the Company or any of the Company Subsidiaries, which is required to
be described in any Company Securities Filing that is not so described. No
event has occurred as a consequence of which the Company would be required to
file a Current Report on Form 8-K pursuant to the requirements of the Securities
Exchange Act as to which such a report has not been timely filed with the SEC.
3.8 COMPANY FINANCIAL STATEMENTS. The consolidated balance
sheets as of December 31, 1993, 1992 and 1991, and the consolidated income
statements and consolidated statements of stockholders' equity and of cash flows
for the fiscal years then ended and the consolidated balance sheet, consolidated
income statement and consolidated statements of shareholders' equity and of cash
flows at and for the period ended March 31, 1994, of the Company and the Company
Subsidiaries included, in each case, in the Company Securities Filings (the
"COMPANY FINANCIAL STATEMENTS") have been provided to Target. The Company
Financial Statements fairly present (including, but not limited to, the
inclusion of all adjustments with respect to interim periods which are necessary
to present fairly the financial condition and assets and liabilities or the
results of operations of the Company and the Company Subsidiaries on a
consolidated basis) the financial condition and assets and liabilities or the
results of operations of the Company and the Company Subsidiaries as of the
dates and for the periods indicated on a consolidated basis. Except as noted
thereon, the Company Financial Statements were prepared in accordance with
generally accepted accounting principles applicable to the business of the
Company and the Company Subsidiaries consistently applied in accordance with
past accounting practices. Except as reflected in the Company Financial
Statements, as of their respective dates, neither the Company nor any Company
Subsidiary had any debts, obligations, guaranties of obligations of others or
liabilities (contingent or otherwise) that would be required in accordance with
generally accepted accounting principles to be disclosed in the Company
Financial Statements. The Company shall provide to Target as promptly as
practicable copies of the consolidated balance sheets, consolidated income
statements and consolidated statements of shareholders' equity and of cash flows
of the Company and the Company Subsidiaries (a) for any fiscal quarter or year
ending after March 31, 1994, which quarterly or annual statements shall be
prepared in conformity with generally accepted accounting principles applicable
to the business of the Company and the Company Subsidiaries (except to the
extent necessary to comply with the requirements of the SEC applicable to the
financial statements to be included in the Company's Quarterly Reports on Form
10-Q or Annual Reports on Form 10-K under the Securities Exchange Act, as
applicable), and (b) as and to the extent prepared in the ordinary course for
the Company's internal management purposes, for any month ending
<PAGE>
after March 31, 1994 (together with supporting consolidating financial
statements), which monthly statements shall be prepared in conformity with the
Company's past practices with regard thereto, and shall fairly present the
financial condition and assets and liabilities or the results of operations of
the Company and the Company Subsidiaries, as of the dates and for the periods
indicated. Target acknowledges that the interim financial statements referred
to in clause (b) above will not include any footnotes and will be subject to
adjustment in the ordinary course.
3.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth
in the Company Securities Filings, since December 31, 1993, through the date of
this Agreement, there has not been: (i) any Event that has had or would have a
Company Material Adverse Effect; (ii) any declaration, payment or setting aside
for payment of any dividend (except to the Company or a Company Subsidiary or
required dividends on outstanding preferred stock) or other distribution or any
redemption, purchase or other acquisition of any shares of capital stock or
securities of the Company or any Company Subsidiary; (iii) any return of any
capital or other distribution of assets to shareholders of the Company or any
Company Subsidiary (except to the Company or a Company Subsidiary); (iv) other
than in the ordinary course or in an amount not in excess of $35,000,000
individually or $70,000,000 in the aggregate, any investment of a capital nature
by the Company or any Company Subsidiary by the purchase of any property or
assets; (v) any acquisition (by merger, consolidation or acquisition of stock or
assets) of any person or business involving a purchase price in excess of
$150,000,000; (vi) other than in the ordinary course, any sale, disposition or
other transfer of assets or properties of the Company or any Company Subsidiary
having a net book value in excess of $5,000,000 individually or $20,000,000 in
the aggregate; (vii) any material change in accounting methods or practices or
any change in depreciation or amortization policies or rates of depreciation or
amortization applicable to the Company or a Company Subsidiary; (viii) any
agreement by the Company or any Company Subsidiary to take any action that would
require the Company or a Company Subsidiary to violate SECTION 5.1 of this
Agreement; or (ix) any failure by the Company or any Company Subsidiary to
conduct its business in the ordinary course consistent with past practice.
3.10 COMPLIANCE WITH LAWS. The business of the Company and
each Company Subsidiary has been operated in compliance with all Laws and all
tariffs, rules and regulations of local exchange carriers and inter-exchange
carriers applicable thereto, except for any instances of non-compliance which do
not or would not have a Company Material Adverse Effect. Without limiting the
generality of the foregoing, neither the Company nor any Company Subsidiary has
engaged in carrying transit or indirect traffic in violation of applicable Laws
which violation would have a Company Material Adverse Effect.
3.11 PERMITS. (i) the Company and the Company Subsidiaries
have all permits, certificates, licenses, approvals, tariffs and other
authorizations required in connection with the operation of their business
(collectively, "COMPANY PERMITS"), (ii) neither the Company nor any Company
Subsidiary is in violation of any Company Permit, and (iii) no proceedings are
pending or, to the knowledge of the Company, threatened, to revoke or limit any
material Company Permit, except, in the case of clause (i) or (ii) above, those
the absence or violation of which do not or would not have a Company Material
Adverse Effect.
<PAGE>
3.12 FINDERS AND INVESTMENT BANKERS. Neither the Company nor
any of its officers or directors has employed any broker or finder other than
The Breckenridge Group, Inc. or otherwise incurred any liability for any
brokerage fees, commissions or finders' fees in connection with the transactions
contemplated hereby.
3.13 CONTRACTS. Neither the Company nor any Company Subsidiary
is a party to any note, bond, mortgage, indenture, contract, lease, license,
agreement, understanding, instrument, bid or proposal ("COMPANY MATERIAL
CONTRACT") required to be described in or filed as an exhibit to any Company
Securities Filing that is not described in or filed as required by the
Securities Act or the Securities Exchange Act, as the case may be. The Company
has made available to Target true and accurate copies of the Company Material
Contracts as included in the Company Securities Filings. As of the date of this
Agreement, and to the Company's knowledge, all such Company Material Contracts
are valid and binding and are in full force and effect and enforceable in
accordance with their respective terms, subject to the Enforceability
Exceptions. As of the date of this Agreement, except as referenced in this
Agreement and for such as do not or would not have a Company Material Adverse
Effect, (i) no Consent of any person is needed in order that such Company
Material Contract shall continue in full force and effect in accordance with its
terms without penalty, acceleration or rights of early termination by reason of
the consummation of the Merger, and (ii) except for such as do not or would not
have a Company Material Adverse Effect, neither the Company nor any Company
Subsidiary is in violation or breach of or default under any such Company
Material Contract, nor to the Company's knowledge is any other party to any such
Company Material Contract in violation or breach of or default under any such
Company Material Contract.
3.14 EMPLOYEE BENEFIT PLANS. With respect to each Benefit Plan
maintained or contributed to by the Company or any member of the Company's
controlled group under which the Company or a Company Subsidiary could incur any
material liability ("COMPANY BENEFIT PLAN") (where applicable): the Company
has made available to Target complete and accurate copies of (i) all plan and
trust texts and agreements, material insurance contracts and other material
funding arrangements; (ii) annual reports on the Form 5500 series for the last
year; (iii) financial statements and/or annual and periodic accountings of plan
assets for the last year; (iv) the most recent determination letter received
from the IRS; (v) actuarial valuations for the last year; and (vi) the most
recent summary plan description as defined in ERISA.
With respect to each Company Benefit Plan while maintained or
contributed to by the Company or a Company Subsidiary: (i) if intended to
qualify under Code Sections 401(a) or 403(a), such Company Benefit Plan has
received a favorable determination letter from the IRS that it so qualifies, and
its trust is exempt from taxation under Code Section 501(a) and nothing has
since occurred to cause the loss of the Company Benefit Plan's qualification;
(ii) such Company Benefit Plan has been administrated in substantial accordance
with its terms and applicable Laws; (iii) to the knowledge of the Company, no
event has occurred and there exist no circumstances under which the Company or a
Company Subsidiary would incur liability under ERISA, the Code or otherwise in
addition to the payment of nondelinquent benefits, contributions and expenses
currently contemplated by such Benefit Plans; (iv) no accumulated funding
deficiency as defined in Code Section 412 has occurred or exists; (v) no
non-exempt prohibited transaction as defined under ERISA and the Code has
occurred; (vi) no reportable event as defined in Section 4043 of ERISA has
<PAGE>
occurred (excluding events for which the 30-day notice requirement has been
waived); (vii) all contributions and premiums due have fully been made and paid
on a timely basis; and (viii) all contributions made or required to be made
under any Company Benefit Plan intended to be deductible meet the requirements
for deductibility under the Code, and all contributions accrued prior to the
Effective Time which have not been made have been properly recorded on the books
of the Company, except in the cases of clauses (iii) - (viii), above, for any
deviations from the foregoing which do not or would not have a Company Material
Adverse Effect.
Neither the Company nor any Company Subsidiary has any material
liability, joint or otherwise, for any withdrawal liability (potential,
contingent or otherwise) under Title IV of ERISA for a complete or partial
withdrawal from any multi-employer plan by any member of a controlled group of
employers (as used in ERISA) of which the Company is or was a member.
With respect to each Company Benefit Plan which is subject to Title
IV of ERISA: (i) except as disclosed in the Company Financial Statements (or
footnotes thereto), as of the Effective Time, the market value of its assets
(exclusive of any contribution due to such Company Benefit Plan) equals or
exceeds the present value of benefit liabilities as of the latest actuarial
evaluation date for such plan (but not earlier than 12 months prior to the date
hereof), and since the last evaluation date, there have been no amendments to
such plans that materially increase the present value of actuarial benefits nor
any other material adverse changes in the funding status of such plan, and (ii)
neither the Company nor any Company Subsidiary has incurred nor is expected to
incur any actual or contingent liability arising from a partial or complete plan
termination, except in each case, for any deviations from the foregoing which do
not or would not have a Company Material Adverse Effect.
With respect to each Company Benefit Plan which is a welfare plan
(as defined in ERISA Section 3(1)): (i) any liability for medical or death
benefits with respect to current or former employees beyond their termination of
employment (except as required by applicable Law) is set forth in the Company
Financial Statements (or footnotes thereto) to the extent required to be so set
forth by applicable accounting principles; (ii) there are no reserves, assets,
surplus or prepaid premiums under any such plan; and (iii) the Company and the
Company Subsidiaries have complied with Code Section 4980B, except in each case,
for any deviations from the foregoing which do not or would not have a Company
Material Adverse Effect.
3.15 TAXES AND RETURNS. (a) Except as disclosed in EXHIBIT
3.15 attached hereto, the Company and each of the Company Subsidiaries has
timely filed, or caused to be timely filed, all Tax returns or reports required
to be filed by it, and has paid or withheld, or caused to be paid or withheld,
all Taxes required to be paid or withheld, other than such Taxes for which
adequate reserves in the Company Financial Statements have been established and
which are being contested in good faith, except for any deviations from the
foregoing which do not or would not have a Company Material Adverse Effect.
Other than matters which do not or would not have a Company Material Adverse
Effect, there are no claims or assessments pending against the Company or any
Company Subsidiary for any alleged deficiency in any Tax, and the Company does
not know of any threatened Tax claims or assessments against the Company or any
Company Subsidiary (other than those for which adequate reserves in the Company
Financial Statements have been established). Except as set
<PAGE>
forth in EXHIBIT 3.15 attached hereto, as of the date of this Agreement,
neither the Company nor any Company Subsidiary has any waivers or extensions of
any applicable statute of limitations to assess any Taxes. Except as set forth
in EXHIBIT 3.15 attached hereto, as of the date of this Agreement, there are
no outstanding requests by the Company or a Company Subsidiary for any extension
of time within which to file any return or within which to pay any Taxes shown
to be due on any return. Except as set forth on EXHIBIT 3.15 attached hereto,
as of the date of this Agreement, no taxing authority is conducting or has
threatened or notified the Company or any Company Subsidiary that it intends to
conduct, an audit of any prior tax period of the Company or any of its past or
present subsidiaries.
3.16 LIABILITIES. From December 31, 1993 through the date of
this Agreement, except as expressly disclosed in the Company Securities Filings
and except as do not or would not have a Company Material Adverse Effect, as of
the date of this Agreement, the Company and the Company Subsidiaries do not have
any direct or indirect indebtedness, liability, claim, loss, damage, deficiency,
obligation or responsibility, fixed or unfixed, choate or inchoate, liquidated
or unliquidated, secured or unsecured, accrued, absolute, contingent or
otherwise, whether or not of a kind required by generally accepted accounting
principles to be set forth in a financial statement other than those incurred in
the ordinary course of business. Except as reflected in the Company Securities
Filings, as of the date of this Agreement, neither the Company nor the Company
Subsidiaries have any material (i) obligations in respect of borrowed money,
(ii) obligations evidenced by bonds, debentures, notes or other similar
instruments, (iii) obligations which would be required by generally accepted
accounting principles to be classified as "capital leases," (iv) obligations to
pay the deferred purchase price of property or services, except trade accounts
payable arising in the ordinary course of business and payable not more than
twelve (12) months from the date of incurrence, and (v) any guaranties of any
obligations of any other person.
3.17 ENVIRONMENTAL MATTERS. As of the date of this Agreement,
(i) the Company and the Company Subsidiaries are in compliance in all material
respects with all applicable Environmental Laws, (ii) there is no civil,
criminal or administrative judgment, action, suit, demand, claim, hearing,
notice of violation, investigation, proceeding, notice or demand letter pending
or, to the knowledge of the Company, threatened against the Company, a Company
Subsidiary or any of their properties pursuant to Environmental Laws, and (iii)
there are no past or present Events which, as of the date of this Agreement, are
reasonably expected to prevent compliance with, or which have given rise to or
will give rise to liability under, Environmental Laws, except in each case, for
such as do not or would not have a Company Material Adverse Effect.
3.18 INTELLECTUAL PROPERTY. The Company or one of the Company
Subsidiaries own, or are licensed to, or otherwise have, the right to use all
Intellectual Property used by the Company or a Company Subsidiary, and the
rights of the Company and the Company Subsidiaries in such Intellectual Property
are, subject to the rights of any licensor thereof, free and clear of any liens
or other encumbrances and restrictions and the Company and the Company
Subsidiaries have not received, as of the date of this Agreement, any Claim
Notice relating to such Intellectual Property or any process or confidential
information of the Company and the Company Subsidiaries, except for any
deviations from the foregoing which do not or would not have a Company Material
Adverse Effect. The Company shall promptly notify, and shall cause the Company
Subsidiaries to promptly
<PAGE>
notify, Target of any Claim Notice received by the Company or a Company
Subsidiary after the date of this Agreement.
3.19 CORPORATE RECORDS. The respective corporate record books
of or relating to the Company and each of the Company Subsidiaries made
available to Target by the Company contain accurate and complete records of (i)
all material corporate actions of the respective shareholders and directors (and
committees thereof) of the Company and the Company Subsidiaries, (ii) the
Certificate and/or Articles of Incorporation, Bylaws and/or other governing
instruments, as amended, of the Company and the Company Subsidiaries, and (iii)
the issuance and transfer of stock of the Company and the Company Subsidiaries.
3.20 TITLE TO AND CONDITION OF PROPERTY. The Company and each
of the Company Subsidiaries have good and marketable title to, or a valid
leasehold interest in, any real property and all material items of personal
property reflected in the Company Financial Statements dated March 31, 1994, or
currently used in the operation of their business, and such property or
leasehold interests are free and clear of all liens, claims, charges, security
interests, options, or other title defects or encumbrances, except for property
disposed of in the ordinary course since the date thereof and such exceptions to
title and liens, claims, charges, security interests, options, title defects or
encumbrances which do not or would not have a Company Material Adverse Effect.
As of the date of this Agreement, such personal property is in good operating
condition and repair (ordinary wear and tear excepted), is suitable for the use
to which the same is customarily put by the Company or any Company Subsidiary,
is free from defects and is of a quality and quantity presently usable in the
ordinary course of the operation of the business of the Company and the Company
Subsidiaries, except for instances which do not or would not have a Company
Material Adverse Effect.
3.21 NO ADVERSE ACTIONS. As of the date of this Agreement,
there is no existing, pending or, to the knowledge of the Company, threatened
termination, cancellation, limitation, modification or change in the business
relationship of the Company or any of the Company Subsidiaries, with any
supplier, customer or other person except those which do not or would not have a
Company Material Adverse Effect. None of the Company, any Company Subsidiary
or, to the knowledge of the Company, any director, officer, agent, employee or
other person acting on behalf of any of the foregoing has used any corporate
funds for unlawful contributions, payments, gifts, entertainment or other
unlawful expenses relating to political activity, or made any direct or indirect
unlawful payments to governmental or regulatory officials.
3.22 LABOR MATTERS. Neither the Company nor any of the Company
Subsidiaries has any material obligations, contingent or otherwise, under any
employment or consulting agreement, collective bargaining agreement or other
contract with a labor union or other labor or employee group. To the knowledge
of the Company, as of the date this Agreement, there are no efforts presently
being made or threatened by or on behalf of any labor union with respect to the
unionizing of employees of the Company or any Company Subsidiary. As of the
date of this Agreement, there is no unfair labor practice complaint against the
Company or any Company Subsidiary pending or, to the knowledge of the Company,
threatened before the National Labor Relations Board; there is no labor strike,
dispute, slowdown or stoppage pending or, to the knowledge of the Company,
threatened against or involving the Company or any Company Subsidiary; no
representation question
<PAGE>
exists respecting the employees of the Company or any Company Subsidiary; no
grievance or internal or informal complaint exists, no arbitration proceeding
arising out of or under any collective bargaining agreement is pending and no
claim therefor has been asserted; no collective bargaining agreement is
currently being negotiated by the Company or any Company Subsidiary; and neither
the Company nor any Company Subsidiary is experiencing any work stoppage, strike
or slowdown, except as to each of the foregoing, for matters which do not or
would not have a Company Material Adverse Effect.
3.23 INSURANCE. As of the date of this Agreement, neither the
Company nor any of the Company Subsidiaries has received notice of default
under, or intended cancellation or nonrenewal of, any material policies of
insurance which insure the properties, business or liability of the Company and
the Company Subsidiaries, nor has the Company or any Company Subsidiary been
refused any insurance for material coverage by an insurance carrier to which it
has applied for insurance.
3.24 FAIRNESS OPINION. The Company's Board of Directors has
received from its financial advisors, The Breckenridge Group, Inc., an opinion
to the effect that the Merger Consideration is fair to the Company from a
financial point of view.
3.25 DISCLOSURE. All information and documents provided prior
to the date of this Agreement, and all information and documents subsequently
provided, to Target or its representatives by or on behalf of the Company are or
contain, or will be or will contain as to subsequently provided information or
documents, true, accurate and complete information in all material respects with
respect to the subject matter thereof and are, or will be as to subsequently
provided information or documents, reasonably responsive to any specific request
made by or on behalf of Target or its representatives.
ARTICLE IV
ADDITIONAL COVENANTS OF TARGET
Target represents, covenants and agrees as follows:
4.1 CONDUCT OF BUSINESS OF TARGET AND TARGET SUBSIDIARIES.
Except as expressly contemplated by this Agreement, during the period from the
date hereof to the Effective Time, Target shall conduct, and it shall cause the
Target Subsidiaries to conduct, its or their businesses in the ordinary course
and consistent with past practice, subject to the limitations contained in this
Agreement, and Target shall, and it shall cause the Target Subsidiaries to, use
its or their reasonable business efforts to preserve intact its business
organization, to keep available the services of its officers and employees and
to maintain satisfactory relationships with all persons with whom it does
business. Without limiting the generality of the foregoing, and except as
otherwise expressly provided in this Agreement, after the date hereof and prior
to the Effective Time, neither Target nor any Target Subsidiary will, without
the prior written consent of the Company:
(i) amend or propose to amend its Certificate or Articles
of Incorporation or Bylaws (or comparable governing instruments);
<PAGE>
(ii) authorize for issuance, issue, grant, sell, pledge,
dispose of or propose to issue, grant, sell, pledge or dispose of any shares of,
or any options, warrants, commitments, subscriptions or rights of any kind to
acquire or sell any shares of, the capital stock or other securities of Target
or any Target Subsidiary including, but not limited to, any securities
convertible into or exchangeable for shares of stock of any class of Target or
any Target Subsidiary, except for the issuance of shares of Target Common Stock
pursuant to the exercise of stock options or warrants or the conversion of
convertible securities outstanding on the date hereof or issuable pursuant to
Target's 401(k) Savings and Retirement Plan in accordance with their present
terms, and except that Target may, after giving prior notice to the Company,
adopt and implement a stockholder rights plan pursuant to which rights to
purchase shares of the capital stock or other securities of Target or any Target
Subsidiary may be distributed to Target's stockholders in the event that any
person shall acquire in excess of a designated number of shares of Target Common
Stock (provided, however, that such plan is not inconsistent with Target's
fulfillment of its obligations under this Agreement);
(iii) split, combine or reclassify any shares of its capital
stock or declare, pay or set aside any dividend or other distribution (whether
in cash, stock or property or any combination thereof) in respect of its capital
stock, or redeem, purchase or otherwise acquire or offer to acquire any shares
of its capital stock or other securities, other than dividends or distributions
to Target or a Target Subsidiary;
(iv) except, in each case (other than clause (d) and, in the
case of clause (e), subject to SECTION 4.1(x) below), in the ordinary course
of business consistent with past practice, (a) except for debt (including, but
not limited to, obligations in respect of capital leases) not in excess of
$5,000,000 in the aggregate for all entities combined, create, incur or assume
any short-term debt, long-term debt or obligations in respect of capital leases;
(b) assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, indirectly, contingently or otherwise) for the obligations of
any person, except for obligations permitted by this Agreement of any wholly
owned subsidiary of Target in the ordinary course of business consistent with
past practice; (c) make any capital expenditures or make any loans, advances or
capital contributions to, or investments in, any other person (other than
customary travel or business advances to employees and currently committed
capital expenditures not in excess of $2,000,000 individually or $20,000,000 in
the aggregate, as disclosed to the Company in Target's capital budgets); (d)
acquire the stock or assets of, or merge or consolidate with, any other person;
or (e) enter into any material contractual liability or obligation (absolute,
accrued, contingent or otherwise);
(v) sell, transfer, mortgage, pledge or otherwise dispose
of, or encumber, or agree to sell, transfer, mortgage, pledge or otherwise
dispose of or encumber, any material assets or properties, real, personal or
mixed;
(vi) increase in any manner the compensation of any of its
officers or employees other than increases required pursuant to the Target
Material Contracts or any contract or agreement listed on EXHIBIT 2.23
attached hereto in accordance with their terms in effect on the date hereof and
increases in the ordinary course of business consistent with past practice not
in excess on an individual basis of the lesser of 10% of the current
compensation of such individual or $10,000 per annum, or enter into, establish
or amend any employment, consulting, retention, change in control, collective
bargaining, bonus or other incentive
<PAGE>
compensation, profit sharing, health or other welfare, stock option or other
equity, pension, retirement, vacation, severance, deferred compensation or other
compensation or benefit plan, policy, agreement, trust, fund or arrangement
with, for or in respect of, any shareholder, officer, director, other employee,
agent, consultant or affiliate, except in each case, in the ordinary course of
business consistent with past practice, and except, again in each case, that (a)
Target may compromise or settle its obligations under any existing employment
agreements by payment of not more than $13,000,000 in the aggregate to its
employees as previously disclosed to the Company, and (b) Target may pay bonuses
to its key employees in the amounts listed on the letter of even date herewith
delivered by Target to the Company, as Target deems necessary in order to
encourage such employees to continue their employment from the date hereof until
the Effective Time, payable only if such employment so continues, and the
Company acknowledges and agrees that none of the foregoing shall be deemed to
constitute a Target Material Adverse Effect;
(vii) make any elections with respect to Taxes that are
inconsistent with the prior elections reflected in the Target Financial
Statements as of and for the period ended December 31, 1993;
(viii) compromise, settle, grant any waiver or release
relating to or otherwise adjust any Litigation, except routine Litigation in the
ordinary course of business consistent with past practice, involving no payment
or a payment not in excess of $100,000 individually or $500,000 when aggregated
with all such payments for all entities combined;
(ix) enter into any lease or amend any lease of real
property;
(x) enter into or amend any agreement or transaction (a)
pursuant to which the aggregate financial obligation of Target or a Target
Subsidiary or the value of the services to be provided could exceed $1,000,000,
(b) having a term of more than 12 months and pursuant to which the aggregate
financial obligation of Target or a Target Subsidiary or the value of the
services to be provided could exceed $50,000 per year, or (c) which is not
terminable upon no more than 30 days' notice by Target or the Target Subsidiary
involved without penalty in excess of $500,000 individually or $1,000,000 when
aggregated with the penalties under all such agreements or transactions;
(xi) change any accounting practices reflected in the Target
Financial Statements as of and for the period ended May 31, 1994, except as
required by generally accepted accounting principles or Laws as agreed to or
requested by Target's auditors after consultation with the Company's auditors;
(xii) prior to making any significant decision required or
permitted to be made by Target under the terms of its Certificate of
Incorporation, Bylaws or indemnification agreements in respect to the
indemnification of any person who may become an Indemnified Party under SECTION
5.12 hereof, Target shall consult with the Company concerning such decision;
and Target shall not take any action in bad faith which materially increases the
obligations of Target or the Company pursuant to said SECTION 5.12; or
(xiii) agree, commit or arrange to do any of the foregoing.
<PAGE>
Furthermore, Target covenants, represents and warrants that from and
after the date hereof, unless the Company shall otherwise expressly consent in
writing, and except for any deviations from the following that do not or would
not have a Target Material Adverse Effect, Target shall, and Target shall cause
each Target Subsidiary to, use its or their reasonable business efforts to:
(i) keep in full force and effect insurance comparable in
amount and scope of coverage to insurance now carried by it;
(ii) pay all accounts payable and other obligations, when
they become due and payable, in the ordinary course of business
consistent with past practice and with the provisions of this
Agreement, except if the same shall be contested in good faith, and,
in the case of the failure to pay any material accounts payable or
other obligations which shall be contested in good faith, only after
consultation with the Company; and
(iii) comply in all material respects with all Laws
applicable to it or any of its properties, assets or business and
maintain in full force and effect all Target Permits necessary for,
or otherwise material to, such business.
4.2 NOTIFICATION OF CERTAIN MATTERS. Target shall give prompt
notice to the Company if any of the following occur after the date hereof but
prior to the Effective Time: (i) any notice of, or other communication relating
to, a default or Event which, with notice or lapse of time or both, would become
a default under any Target Material Contract which could have a Target Material
Adverse Effect; (ii) receipt of any notice or other communication from any third
party alleging that the Consent of such third party is or may be required in
connection with the transactions contemplated by this Agreement; (iii) receipt
of any material notice or other communication from any regulatory authority
(including, but not limited to, the NASD or any securities exchange) in
connection with the transactions contemplated by this Agreement; (iv) the
occurrence of an Event which would have a Target Material Adverse Effect; (v)
the commencement or threat of any Litigation involving or affecting Target or
any Target Subsidiary, or any of their respective properties or assets, or, to
its knowledge, any employee, agent, director or officer, in his or her capacity
as such, of Target or any Target Subsidiary which, if pending on the date
hereof, would have been required to have been disclosed in this Agreement or
which relates to the consummation of the Merger or any material development in
connection with any Litigation disclosed or required to be disclosed by Target
in or pursuant to this Agreement or the Target Securities Filings; and (vi) the
occurrence of any Event that would cause a breach by Target of any provision of
this Agreement or a Target Ancillary Agreement or that, if such Event had
occurred on the date hereof, would have been required to have been disclosed in
this Agreement.
4.3 ACCESS AND INFORMATION. Between the date of this
Agreement and the Effective Time, Target and the Target Subsidiaries will give
the Company and its authorized representatives (including, without limitation,
financial advisors, accountants and legal counsel) at all reasonable times
reasonable access to all plants, offices, warehouses and other facilities and,
subject to applicable Law and compliance with contractual obligations, as to
which the Company has been advised by Target, to all contracts, agreements,
commitments, books and records (including, but not limited to, tax returns) of
Target and the Target
<PAGE>
Subsidiaries, will permit the foregoing to make such reasonable inspections as
they may require and will cause its officers promptly to furnish the Company
with (a) such financial and operating data and other information with respect to
the business and properties of Target and the Target Subsidiaries as the Company
may from time to time reasonably request, and (b) a copy of each report,
schedule and other document filed or received by Target or any Target Subsidiary
pursuant to the requirements of applicable securities laws or the NASD or
applicable securities exchange.
4.4 STOCKHOLDER APPROVAL. As soon as practicable, Target will
take all steps necessary to duly call, give notice of, convene and hold a
meeting of its stockholders for the purpose of adopting this Agreement and for
such other purposes as may be necessary or desirable in connection with
effectuating the transactions contemplated hereby. Subject to directors'
fiduciary obligations under applicable Law as advised by O'Melveny & Myers or
Richards, Layton & Finger, or other reputable counsel to Target, the Board of
Directors of Target (i) will recommend to the stockholders of Target that they
adopt this Agreement and approve the transactions contemplated hereby, and (ii)
will use reasonable business efforts to obtain any necessary adoption and
approval by Target's stockholders of this Agreement and the transactions
contemplated hereby.
4.5 REASONABLE BUSINESS EFFORTS. Subject to directors'
fiduciary obligations under applicable Law as advised by O'Melveny & Myers or
Richards, Layton & Finger, or other reputable counsel to Target, and the terms
and conditions herein provided, Target agrees to use reasonable business efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the Merger and the transactions contemplated by this
Agreement including, but not limited to (i) obtaining the Consent of Target's
lenders and others to this Agreement and the transactions contemplated hereby,
(ii) the defending of any Litigation against Target or any Target Subsidiary
challenging this Agreement or the consummation of the transactions contemplated
hereby, (iii) obtaining all Consents from Governmental Authorities required for
the consummation of the Merger and the transactions contemplated thereby, and
(iv) timely making all necessary filings under the HSR Act. Subject to
directors' fiduciary obligations under applicable Law as advised by O'Melveny &
Myers or Richards, Layton & Finger, or other reputable counsel to Target, and
upon the terms and subject to the conditions hereof, Target agrees to use
reasonable business efforts to take, or cause to be taken, all actions and to
do, or cause to be done, all things necessary to satisfy the conditions of the
closing set forth herein. Target will consult with counsel for the Company as
to, and will permit such counsel to participate in, at the Company's expense,
any Litigation referred to in clause (ii) above brought against or involving
Target or any Target Subsidiary.
4.6 PUBLIC ANNOUNCEMENTS. So long as this Agreement is in
effect, Target shall not, and shall cause its affiliates not to, issue or cause
the publication of any press release or any other announcement with respect to
the Merger or the transactions contemplated by this Agreement without the
consent of the Company, except where such release or announcement is required by
applicable Law or pursuant to any applicable listing agreement with, or rules or
regulations of, the NASD, in which case Target, prior to making such
announcement, shall consult with the Company regarding the same.
<PAGE>
4.7 COMPLIANCE. In consummating the Merger and the
transactions contemplated hereby, Target shall comply in all material respects
with the provisions of the Securities Exchange Act and the Securities Act and
the rules and regulations thereunder and all other applicable Laws and shall
otherwise file when required all material documents ("SUBSEQUENT PERIODIC
FILINGS") required by the Securities Exchange Act to be filed by Target with
the SEC after the date hereof. All Subsequent Periodic Filings shall comply in
all material respects with the Securities Exchange Act and shall not contain any
untrue statement of a material fact, or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
4.8 BENEFIT PLANS. Between the date of this Agreement and
through the Effective Time, except as disclosed on EXHIBIT 4.8 attached
hereto, or as contemplated or permitted by the provisions of SECTION 4.1
hereof, no discretionary award or grant under any Benefit Plan or program of
Target or a Target Subsidiary shall be made without the consent of the Company;
nor shall Target or a Target Subsidiary take any action or permit any action to
be taken to accelerate the vesting of any options previously granted pursuant to
any such benefit plan or program. The Company acknowledges, however, that
certain outstanding options of Target vest and become exercisable at the
Effective Time pursuant to terms applicable thereto. Except as to such vesting
and acceleration, neither Target nor any Target Subsidiary shall make any
amendment to any benefit plan or program, any awards thereunder or the terms of
any security convertible into or exchangeable for capital stock without the
consent of the Company.
4.9 NO INCONSISTENT ACTIVITIES. Subject to continued
compliance with the fiduciary duties of Target's directors under applicable Law
as advised by O'Melveny & Myers or Richards, Layton & Finger, or other reputable
counsel to Target, Target will not, and will direct its officers, directors and
other representatives not to, directly or indirectly, initiate, solicit or
encourage discussions or negotiations with, or provide any information or
assistance to, any third party concerning any acquisition of shares of capital
stock of Target or a Target Subsidiary or any of the assets of Target or a
Target Subsidiary (whether by merger, consolidation, purchase of assets, tender
offer or otherwise). Target will promptly notify the Company of Target's
receipt of any proposal in respect of any such transaction. Neither Target nor
any Target Subsidiary will release any third party from any material
confidentiality agreement.
4.10 SECURITIES AND STOCKHOLDER MATERIALS. Target shall send
to the Company a copy of all public reports and materials as and when it sends
the same to its stockholders, the SEC or any state or foreign securities
commission. Target shall notify the Company promptly in the event of any
material developments concerning the Accounting Contingency.
4.11 TAX OPINION CERTIFICATION. Target shall use reasonable
business efforts to cause Mr. Jeffrey P. Sudikoff to timely execute and deliver
a certificate to the effect that he has no plan or intention to sell, exchange
or otherwise dispose of the Company Stock received in the Merger. If this
continues to be true, Target shall execute and deliver a certificate that it is
not aware of any such plan or intention on the part of Mr. Sudikoff or others to
dispose of the Company Stock received by them in the Merger ("TARGET TAX
OPINION CERTIFICATE").
<PAGE>
4.12 POOLING OF INTERESTS. Target shall not take, and shall
use reasonable business efforts to ensure that none of the Target Subsidiaries
and its and their respective stockholders, directors, officers or employees
takes, any action that would result in the Merger not qualifying for
pooling-of-interests accounting treatment in accordance with Accounting
Principles Board Opinion No. 16.
4.13 RESIGNATION OF DIRECTORS AND OFFICERS. Target shall use
reasonable business efforts to cause the officers and directors of Target and
the Target Subsidiaries as the Company may request to resign their positions as
such as of the Effective Time.
4.14 NONCOMPETE AND CONFIDENTIALITY AGREEMENTS. Target and the
Company shall cooperate to seek to obtain noncompete and confidentiality
agreements on reasonable terms from key employees (other than those who have
entered into employment or similar agreements with the Company which include
noncompete and confidentiality provisions) of Target or a Target Subsidiary as
may be reasonably requested by the Company.
4.15 AFFILIATE AGREEMENTS. Target shall use reasonable
business efforts to cause each person who is an "affiliate" of Target within the
meaning of Rule 145 promulgated under the Securities Act to enter into an
agreement with the Company at or prior to the Effective Time in the form
attached hereto as EXHIBIT 4.15.
4.16 OPTIONS. Target's Board of Directors shall resolve to
rescind the previous actions regarding options or warrants exercisable for
shares of Target Common Stock granted to Messrs. Sudikoff, Edward R. Cheramy and
Rudy Wann subject to approval by the stockholders of Target, such rescission to
be effective at the Effective Time.
ARTICLE V
ADDITIONAL COVENANTS OF THE COMPANY
The Company covenants and agrees as follows:
5.1 CONDUCT OF BUSINESS OF THE COMPANY AND THE COMPANY
SUBSIDIARIES.
(a) CONDUCT OF BUSINESS. Except as expressly contemplated by
this Agreement, during the period from the date hereof to the Effective Time,
the Company shall conduct, and it shall cause the Company Subsidiaries to
conduct, its or their businesses in the ordinary course and consistent with past
practice, subject to the limitations contained in this Agreement, and the
Company shall, and it shall cause the Company Subsidiaries to, use its or their
reasonable business efforts to preserve intact its business organization, to
keep available the services of its officers and employees and to maintain
satisfactory relationships with all persons with whom it does business. Without
limiting the generality of the foregoing, and except as otherwise expressly
provided in this Agreement, after the date hereof and prior to the Effective
Time, neither the Company nor any Company Subsidiary will, without the prior
written consent of Target:
<PAGE>
(i) amend or propose to amend its Certificate or Articles
of Incorporation or Bylaws (or comparable governing instruments);
(ii) authorize for issuance, issue, grant, sell, pledge,
dispose of or propose to issue, grant, sell, pledge or dispose of any shares of,
or any options, warrants, commitments, subscriptions or rights of any kind to
acquire or sell any shares of, the capital stock or other securities of the
Company or any Company Subsidiary including, but not limited to, any securities
convertible into or exchangeable for shares of stock of any class of the Company
or any Company Subsidiary, except for the issuance of shares of Company Common
Stock pursuant to the exercise of stock options or warrants or the conversion of
convertible securities outstanding on the date hereof in accordance with their
present terms and those stock options or warrants or convertible securities
granted, issued or otherwise outstanding after the date hereof as contemplated
by SECTION 5.1(c), below;
(iii) split, combine or reclassify any shares of its capital
stock or declare, pay or set aside any dividend (other than required dividends
on outstanding preferred stock) or other distribution (whether in cash, stock or
property or any combination thereof) in respect of its capital stock, or redeem,
purchase or otherwise acquire or offer to acquire any shares of its capital
stock or other securities;
(iv) (a) except for debt (including, but not limited to,
obligations in respect of capital leases) not in excess of $175,000,000 in the
aggregate for all entities combined, create, incur or assume any short-term
debt, long-term debt or obligations in respect of capital leases; (b) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
indirectly, contingently or otherwise) for the obligations of any person, except
for obligations permitted by this Agreement of any wholly owned subsidiary of
the Company in the ordinary course of business consistent with past practice; or
(c) as to the Company, merge or consolidate with any other person, unless the
Company is the surviving entity; except, in the case of clauses (a) and (b), in
the ordinary course of business consistent with past practice or incident to a
Significant Acquisition (as hereinafter defined) or an action referenced in
SECTION 5.1(c), below;
(v) sell, transfer, mortgage, pledge or otherwise dispose
of, or encumber, or agree to sell, transfer, mortgage, pledge or otherwise
dispose of or encumber, any material assets or properties, real, personal or
mixed, other than in the ordinary course of business consistent with past
practice; or
(vi) agree, commit or arrange to do any of the foregoing.
Furthermore, the Company covenants, represents and warrants that
from and after the date hereof, unless Target shall otherwise expressly consent
in writing, the Company shall, and the Company shall cause each Company
Subsidiary to, use its or their reasonable business efforts to comply in all
material respects with all Laws applicable to it or any of its properties,
assets or business and maintain in full force and effect all the Company Permits
necessary for, or otherwise material to, such business.
(b) CONSULTATION WITH TARGET RE: SIGNIFICANT ACQUISITIONS. The
Company shall notify Target of its intention to make any Significant Acquisition
(as hereinafter defined) promptly after the execution of any agreement providing
therefor. The Company
<PAGE>
shall promptly thereafter provide Target (and Target's financial and accounting
advisors and legal counsel) with such information and documentation relating to
the terms of such Significant Acquisition and the participants therein as they
may reasonably request, subject to the proposed recipient executing and
delivering such confidentiality undertaking as the participants therein may
reasonably require. Within 10 days after the date that the Company is notified
by Target that no further information is required pursuant to the foregoing with
respect to any such Significant Acquisition, and in any event within 30 days
after the notice required by this SECTION 5.1(b) is given by the Company to
Target of the intention to make the Significant Acquisition, Target shall, by
written notice to the Company, either grant its consent thereto or inform the
Company (if such is the case) that Target's Board of Directors, in the exercise
of its fiduciary duties under applicable Law as advised by O'Melveny & Myers or
Richards, Layton & Finger or other reputable counsel to Target, has determined
that the Merger is no longer in the best interests of the stockholders of Target
and that Target is terminating this Agreement pursuant to the provisions of
SECTION 7.1(iii)(c) hereof. The failure of Target to so notify the Company
shall constitute a consent to such Significant Acquisition. In the event Target
consents to any such Significant Acquisition, the consummation thereof shall be
deemed contemplated by this Agreement and shall not constitute a breach of any
covenant, representation, warranty or condition herein or a Company Material
Adverse Effect, except that any Events discovered or occurring after such
consent which would materially adversely affect the business, assets (including
but not limited to intangible assets) condition (financial or otherwise),
properties (including, but not limited to, intangible properties), liabilities,
or the results of operations of the Company and the Company Subsidiaries after
giving affect to such Significant Acquisition and the Merger, shall (without
limiting other matters which may also constitute a Company Material Adverse
Effect) be deemed to constitute a Company Material Adverse Effect. The Company
shall not make a Significant Acquisition except in compliance with this SECTION
5.1(b).
For purposes hereof, "SIGNIFICANT ACQUISITION" shall mean
any acquisition transaction, whether structured as a merger or an acquisition of
equity securities or assets or otherwise, proposed to be made by the Company or
any Company Subsidiary with or involving Williams Telecommunications Group, Inc.
or any of its affiliates.
(c) EXCEPTIONS. Notwithstanding the foregoing, nothing in this
Agreement shall preclude the Company or any Company Subsidiary from taking any
or all of the following actions and actions incident thereto or require the
consent of Target with respect thereto:
(i) subject to the provisions of SECTIONS 5.1(b) AND
5.1(a)(iv) hereof, if applicable, one or more acquisitions, directly or
indirectly, of any securities or assets of third parties;
(ii) grants of options having an exercise price at least
equal to the market price of the underlying Company Stock on the grant date to
employees of the Company or its subsidiaries and the issuance of Company Stock
upon the exercise of such options;
(iii) declaration and payment of dividends and other
distributions to the Company by its subsidiaries; and
<PAGE>
(iv) draws under and pursuant to the Credit Agreement.
5.2 NOTIFICATION OF CERTAIN MATTERS. The Company shall give
prompt notice to Target of: (i) any notice of, or other communication relating
to, a default or Event which, with notice or lapse of time or both, would become
a default under any Company Material Contract which could have a Company
Material Adverse Effect; (ii) receipt of any notice or other communication from
any third party alleging that the Consent of such third party is or may be
required in connection with the transactions contemplated by this Agreement;
(iii) receipt of any material notice or other communication from any regulatory
authority (including, but not limited to the NASD) in connection with the
transactions contemplated by this Agreement; (iv) the occurrence of an Event
which would have a Company Material Adverse Effect; (v) the commencement or
threat of any Litigation involving or affecting the Company or any Company
Subsidiary or any of their respective properties or assets, or, to its
knowledge, any employee, agent, director or officer, in his or her capacity as
such, of the Company or any Company Subsidiary which, if pending on the date
hereof, would have been required to have been disclosed in this Agreement or
which relates to the consummation of the Merger or any material development in
connection with any Litigation disclosed or required to be disclosed by the
Company in or pursuant to this Agreement or the Company Securities Filings; and
(vi) the occurrence of any Event that would cause a breach by the Company of any
provision of this Agreement or that, if such Event had occurred on the date
hereof, would have been required to have been disclosed in this Agreement.
5.3 ACCESS AND INFORMATION. Between the date of this
Agreement and the Effective Time, the Company will give Target and its
authorized representatives (including, without limitation, its financial
advisors, accountants and legal counsel) at all reasonable times reasonable
access to all plants, offices, warehouses and other facilities and, subject to
applicable Law and compliance with contractual obligations, as to which Target
has been advised by the Company, to all material contracts, agreements,
commitments, books and records (including, but not limited to, tax returns) of
the Company and the Company Subsidiaries, will permit Target to make such
reasonable inspections as it may require and will cause its officers promptly to
furnish Target with (a) such financial and operating data and other information
with respect to the business and properties of the Company and the Company
Subsidiaries as Target may from time to time reasonably request, and (b) a copy
of each material report, schedule and other document filed or received by the
Company or any Company Subsidiary pursuant to the requirements of federal or
state securities laws or the NASD.
5.4 SHAREHOLDER APPROVAL. As soon as practicable, the Company
will take all steps necessary to duly call, give notice of, convene and hold a
meeting of its shareholders for the purpose of approving the issuance of the
Company Stock pursuant to the Merger. Subject to directors' fiduciary
obligations under applicable Law as advised by Bryan Cave, or other reputable
counsel to the Company, the Board of Directors of the Company (i) will recommend
to the shareholders of the Company that they approve the issuance of the Company
Stock pursuant to the Merger, and (ii) will use reasonable business efforts to
obtain any necessary approval by the Company's shareholders of the issuance of
the Company Stock pursuant to the Merger.
<PAGE>
5.5 REASONABLE BUSINESS EFFORTS. Subject to directors'
fiduciary obligations under applicable Law as advised by Bryan Cave, or other
reputable counsel to the Company, and the terms and conditions herein provided,
the Company agrees to use reasonable business efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all things necessary, proper
or advisable to consummate and make effective as promptly as practicable the
Merger and the transactions contemplated by this Agreement including, but not
limited to (i) obtaining the Consent of the Company's lenders to this Agreement
and the transactions contemplated hereby, (ii) the defending of any Litigation
against the Company or a Company Subsidiary challenging this Agreement or the
consummation of the transactions contemplated hereby, (iii) obtaining all
Consents from Governmental Authorities required for the consummation of the
Merger and the transactions contemplated thereby, and (iv) timely making all
necessary filings under the HSR Act. Subject to such duties, and upon the terms
and subject to the conditions hereof, the Company agrees to use reasonable
business efforts to take, or cause to be taken, all actions and to do, or cause
to be done, all things necessary to satisfy the other conditions of the closing
set forth herein. The Company will consult with counsel for Target as to, and
will permit such counsel to participate in, at Target's expense, any Litigation
referred to in clause (ii) above brought against or involving the Company or a
Company Subsidiary.
5.6 PUBLIC ANNOUNCEMENTS. So long as this Agreement is in
effect, the Company shall not, and shall cause its affiliates not to, issue or
cause the publication of any press release or any other announcement with
respect to the Merger or the transactions contemplated by this Agreement without
the consent of Target, except where such release or announcement is required by
applicable Law or pursuant to any applicable listing agreement with, or rules or
regulations of, the NASD, in which case the Company, prior to making such
announcement, will consult with Target regarding the same.
5.7 COMPLIANCE. In consummating the Merger and the
transactions contemplated hereby, the Company shall comply in all material
respects with the provisions of the Securities Exchange Act and the Securities
Act and the rules and regulations thereunder and all other applicable Laws and
shall otherwise file when required all Subsequent Periodic Filings to be filed
by the Company with the SEC after the date hereof. All of the Company's
Subsequent Periodic Filings shall comply in all material respects with the
Securities Exchange Act and shall not contain any untrue statement of a material
fact, or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
5.8 SEC AND SHAREHOLDER FILINGS. The Company shall send to
Target a copy of all public reports and materials as and when it sends the same
to its shareholders, the SEC or any state or foreign securities commission.
5.9 BOARD REPRESENTATION. Promptly after the Effective Time,
the Company shall cause Mr. Sudikoff or, if Mr. Sudikoff is unable or declines
to serve, such other person as may be designated prior to the Effective Time by
the Board of Directors of Target to be elected or appointed to the Board of
Directors of the Company, provided Mr. Sudikoff or such other person, as the
case may be, consents thereto and, in the reasonable judgment of the Company's
Board of Directors, is qualified to serve.
<PAGE>
5.10 BENEFIT PLANS. After the Effective Time, the Company
shall arrange for each employee or participant in any of the Benefit Plans of
Target or a Target Subsidiary as are in effect on the date hereof to participate
in any counterpart Benefit Plans of the Company in accordance with the
eligibility criteria thereof, provided that (a) such participants shall receive
full credit for years of service with Target or any affiliate of Target prior to
the Merger for all purposes for which such service was recognized under the
Benefit Plan of Target, including, but not limited to, recognition of service
for eligibility, vesting, eligibility to participate and eligibility for
disability and early retirement benefits (including subsidies relating to such
benefits) and the amount of benefits, (b) such participants shall participate in
the Company Benefit Plans on terms no less favorable than those offered by the
Company or any of its subsidiaries to similarly situated employees, (c) any
provisions in the Benefit Plans of the Company which restrict benefits by reason
of pre-existing conditions shall be waived to the extent the insurer thereunder
will permit such waiver without an increase in premiums or other cost to the
Company, and (d) each employee of Target shall receive credit under the Benefit
Plans of the Company for co-payments and payments under a deductible limit made
by them during the current plan year in accordance with the corresponding Target
Benefit Plan to the extent the insurer thereunder will permit such credit
without an increase in premiums or other cost to the Company.
5.11 POOLING OF INTERESTS. The Company shall not take, and
shall use reasonable business efforts to ensure that none of the Company
Subsidiaries and its and their respective shareholders, directors, officers or
employees takes, any action that would result in the Merger not qualifying for
pooling-of-interests accounting treatment in accordance with Accounting
Principles Board Opinion No. 16.
5.12 DIRECTORS' AND OFFICERS' INDEMNIFICATION AND DEFENSE.
(a) From and after the Effective Time, the Company and the
Surviving Corporation, jointly and severally, shall, to the full extent provided
in Target's Certificate of Incorporation, Bylaws and applicable indemnification
agreements as in effect on the date hereof, as the case may be, indemnify,
defend, advance the costs of defense and hold harmless each present and former
director, officer, employee and agent of Target (each, together with such
person's heirs, executors and administrators, an "INDEMNIFIED PARTY" and
collectively, the "INDEMNIFIED PARTIES") against any costs or expenses
(including attorneys' fees), judgments, fines, and amounts paid in settlement in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of, relating to or
in connection with any action or omission occurring at or prior to the Effective
Time (including, without limitation, acts or omissions in connection with such
persons' serving as an officer, director or other fiduciary in any entity if
such service was at the request or for the benefit of Target) including, without
limitation, those arising out of or pertaining to the transactions contemplated
by this Agreement and those arising out of or pertaining to the Accounting
Contingency, and otherwise observe all of Target's or any Target Subsidiary's
obligations under such Certificate of Incorporation, Bylaws or agreements. In
the event of any such claim, action, suit, proceeding or investigation (whether
arising before or after the Effective Time), to the full extent contemplated by
Target's Certificate of Incorporation, Bylaws and applicable indemnification
agreements, the Company, the Surviving Corporation, their respective affiliates
and the Indemnified Parties will cooperate in the defense of any such matter.
To the extent, if any, that any determination is required to be made with
respect to whether an Indemnified Party's conduct
<PAGE>
complies with applicable standards, such determination shall be made by
independent counsel acceptable to the Company and the Indemnified Party.
(b) In the event the Surviving Corporation or the Company or any
of their successors or assigns (i) consolidates with or merges into any other
person and shall not be the continuing or surviving corporation or entity of
such consolidation or merger, or (ii) transfers all or substantially all of its
properties and assets to any person, then and in each such case, proper
provisions shall be made so that the successors and assigns of the Surviving
Corporation or the Company, as applicable, shall also agree to assume the
obligations set forth in this SECTION 5.12.
ARTICLE VI
CONDITIONS
6.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective
obligations of each party to effect the Merger shall be subject to the
fulfillment or waiver at or prior to the Effective Time of the following
conditions:
6.1.1 STOCKHOLDER APPROVAL. This Agreement shall have
been adopted at or prior to the Effective Time by the requisite vote
of the stockholders of Target in accordance with the Delaware Code
and the issuance of the Company Stock pursuant to the Merger shall
have been approved by the requisite vote of the shareholders of the
Company pursuant to the rules and regulations of the NASD.
6.1.2 NO INJUNCTION OR ACTION. No order, statute, rule,
regulation, executive order, stay, decree, judgment or injunction
shall have been enacted, entered, promulgated or enforced by any
court or other Governmental Authority which prohibits or prevents
the consummation of the Merger and which has not been vacated,
dismissed or withdrawn by the Effective Time. Target and the
Company shall use their reasonable business efforts to have any of
the foregoing vacated, dismissed or withdrawn by the Effective Time.
6.1.3 GOVERNMENTAL APPROVALS. All material Consents of
any domestic or foreign Governmental Authority required for the
consummation of the Merger and the transactions contemplated by this
Agreement shall have been obtained and, in the case of Consents of
the Federal Communications Commission and state public utility or
service commissions (or analogous bodies), shall have been obtained
by Final Order (as hereafter defined), except for those the failure
of which to obtain would not have a material adverse effect on the
business, assets (including, but not limited to, intangible assets),
condition (financial or otherwise), properties (including, but not
limited to, intangible properties), liabilities or the result of
operations of the Surviving Corporation and its subsidiaries taken
as a whole immediately after the Effective Time ("SURVIVING
CORPORATION MATERIAL ADVERSE EFFECT"). The term "FINAL ORDER"
with respect to any Consent of a Governmental Authority shall mean
an action by the appropriate Governmental Authority as to which:
(i) no request for stay by such Governmental Authority of the action
is pending, no
<PAGE>
such stay is in effect, and, if any deadline for filing any such
request is designated by statute or regulation, it has passed; (ii)
no petition for rehearing or reconsideration of the action is
pending before such Governmental Authority, and no appeal or
comparable administrative remedy with such or any other Governmental
Authority is pending before such Governmental Authority, and the
time for filing any such petition, appeal or administrative remedy
has passed; (iii) such Governmental Authority does not have the
action under reconsideration on its own motion and the time for such
reconsideration has passed; and (iv) no appeal to a court, or
request for stay by a court, of the Governmental Authority action is
pending or in effect, and if any deadline for filing any such appeal
or request is designated by statute or rule, it has passed.
6.1.4 HSR ACT. Any waiting period applicable to the
Merger under the HSR Act shall have expired or earlier termination
thereof shall have been granted and no action shall have been
instituted by either the United States Department of Justice or the
Federal Trade Commission to prevent the consummation of the
transactions contemplated by this Agreement or to modify or amend
such transactions in any material manner (including, without
limitation, any actions requiring any material divestiture of assets
of the Target or any Target Subsidiary having a Surviving
Corporation Material Adverse Effect) or, if any such action shall
have been instituted, it shall have been withdrawn or a final
judgment shall have been entered against such Department or
Commission, as the case may be.
6.1.5 REQUIRED CONSENTS. Any required Consents of any
person to the Merger or the transactions contemplated hereby,
including, without limitation, the Consents of the respective
lenders of the Company (subject to the limitation set forth in
SECTION 6.1.10, below) and Target, shall have been obtained and be
in full force and effect, except for those the failure of which to
obtain would not have a Surviving Corporation Material Adverse
Effect.
6.1.6 REGISTRATION STATEMENT. The Registration Statement
shall have been declared effective and no stop order suspending the
effectiveness of the Registration Statement shall have been issued
and no proceeding for that purpose shall have been initiated or
threatened by the SEC.
6.1.7 BLUE SKY. The Company shall have received all
state securities law authorizations necessary to consummate the
transactions contemplated hereby.
6.1.8 POOLING TREATMENT. The Company and Target shall
have received the written opinion of their respective independent
certified public accountants that the Merger qualifies for
pooling-of-interests accounting treatment in accordance with
Accounting Principles Board Opinion No. 16 and the accounting staff
of the SEC shall not have asserted or threatened in writing to
assert a determination to the contrary which has not been rescinded.
<PAGE>
6.1.9 TAX OPINION. Target shall have received an opinion
of Target's tax counsel to the effect that if the Merger is
consummated in accordance with the provisions of this Agreement, the
stockholders of Target will not recognize gain or loss for federal
income tax purposes in connection with their receipt of the Merger
Consideration, except to the extent that they receive cash in lieu
of fractional shares.
6.1.10 LENDERS' CONSENT. The Company's lenders under the
Credit Agreement, and its prospective lenders under the new credit
arrangement incident to the Significant Acquisition, if any, shall
have consented to the transactions contemplated by this Agreement on
terms and conditions reasonably satisfactory to the Company;
provided, however, that this condition shall be deemed waived unless
the Company gives notice to Target either within forty-five (45)
days after the date of this Agreement as to consent under the Credit
Agreement, or on or before October 15, 1994, as to consent with
respect to the new credit arrangement, that such condition has not
been satisfied and that Target or the Company elects to terminate
this Agreement as a result thereof.
6.2 CONDITIONS TO OBLIGATIONS OF TARGET. The obligation of
Target to effect the Merger shall be subject to the fulfillment at or prior to
the Effective Time of the following additional conditions, any one or more of
which may be waived by Target:
6.2.1 COMPANY REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company contained in this
Agreement that are modified by materiality or Company Material
Adverse Effect ("COMPANY MODIFIED REPRESENTATION") shall be true
and correct in all respects, and those that are not so modified
("COMPANY NONMODIFIED REPRESENTATION") shall be true and correct
in all material respects, on the date hereof and, except in each
case for changes contemplated by this Agreement, as of the Effective
Time as if made at and as of the Effective Time.
6.2.2 PERFORMANCE BY THE COMPANY. The Company shall have
performed and complied with all of the covenants and agreements in
all material respects and satisfied in all material respects all of
the conditions required by this Agreement to be performed or
complied with or satisfied by the Company at or prior to the
Effective Time.
6.2.3 NO MATERIAL ADVERSE CHANGE. There shall not have
occurred after the date hereof any Event that has or would have a
Company Material Adverse Effect.
6.2.4 CERTIFICATES AND OTHER DELIVERIES. The Company
shall have delivered to Target (i) a certificate executed on its
behalf by its President or another authorized officer to the effect
that the conditions set forth in SUBSECTIONS 6.2.1, 6.2.2 AND
6.2.3, above, have been satisfied; (ii) a certificate of existence
from the Secretary of State of the State of Georgia stating that the
Company is a validly existing corporation together with a
certificate of good
<PAGE>
standing from the Secretary of State of Delaware stating that
Acquisition Subsidiary is a validly existing corporation in good
standing; (iii) duly adopted resolutions of the Board of Directors
of each of the Company and Acquisition Subsidiary approving the
execution, delivery and performance of this Agreement and the
instruments contemplated hereby, and of the shareholders of the
Company approving the issuance of the Company Stock pursuant to the
Merger, each certified by the Secretary or the Assistant Secretary
of the Company; and (iv) a true and complete copy of the Certificate
or Articles of Incorporation, as amended, of the Company and
Acquisition Subsidiary certified by the Secretary of State of the
state of incorporation, and a true and complete copy of the Bylaws,
as amended, of the Company and Acquisition Subsidiary certified by
the Secretary or Assistant Secretary of the Company or Acquisition
Subsidiary, as applicable.
6.2.5 OPINION OF COMPANY COUNSEL. Target shall have
received an opinion of counsel to the Company, in form and substance
reasonably satisfactory to Target, covering the matters set forth in
EXHIBIT 6.2.5 attached hereto.
6.2.6 FAIRNESS OPINIONS. Neither of the written opinions
of Target's financial advisors referenced in SECTION 2.25, above,
shall have been withdrawn at or prior to the meeting of the
stockholders of Target referenced in SECTION 4.4, above.
6.2.7 QUOTATION OF COMPANY STOCK. The shares of Company
Stock comprising the Merger Consideration shall have been admitted
for quotation on the Nasdaq Stock Market.
6.2.8 COMFORT LETTERS. Target shall have received
"comfort letters" from the independent certified public accountants
for the Company, dated the date on which the Registration Statement,
or last amendment thereto, shall become effective, and dated the
Closing Date, addressed to the Board of Directors of each of Target
and the Company, covering such matters as Target shall reasonably
request with respect to facts concerning the financial condition of
the Company and the Company Subsidiaries and customary for such
certified public accountants to deliver in connection with a
transaction similar to the Merger.
6.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligations
of the Company to effect the Merger shall be subject to the fulfillment at or
prior to the Effective Time of the following additional conditions, any one or
more of which may be waived by the Company:
6.3.1 TARGET REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Target contained in this Agreement
that are modified by materiality or Target Material Adverse Effect
("TARGET MODIFIED REPRESENTATION") shall be true and correct in
all respects, and those that are not so modified ("TARGET
NONMODIFIED REPRESENTATION") shall be true and correct
<PAGE>
in all material respects, on the date hereof and, in each case
except for changes contemplated by this Agreement, as of the
Effective Time as if made at and as of the Effective Time.
6.3.2 PERFORMANCE BY TARGET. Target shall have performed
and complied with all the covenants and agreements in all material
respects and satisfied in all material respects all the conditions
required by this Agreement to be performed or complied with or
satisfied by Target at or prior to the Effective Time.
6.3.3 NO MATERIAL ADVERSE CHANGE. There shall have not
occurred after the date hereof any Event that has or would have a
Target Material Adverse Effect or a Surviving Corporation Material
Adverse Effect.
6.3.4 CERTIFICATES AND OTHER DELIVERIES. Target shall
have delivered, or caused to be delivered, to the Company (i) a
certificate executed on its behalf by its Chairman or another duly
authorized officer to the effect that the conditions set forth in
SUBSECTIONS 6.3.1, 6.3.2 AND 6.3.3, above, have been satisfied;
(ii) a certificate of good standing from the Secretary of State of
Delaware and of comparable authority in other jurisdictions in which
Target and the Target Subsidiaries are incorporated or qualified to
do business stating that each is a validly existing corporation in
good standing; (iii) duly adopted resolutions of the Board of
Directors and stockholders of Target approving the execution,
delivery and performance of this Agreement, the Target Ancillary
Agreements and the instruments contemplated hereby and thereby,
certified by the Secretary of Target; and (iv) a true and complete
copy of the Certificate and Articles of Incorporation or comparable
governing instruments, as amended, of Target and each of the Target
Subsidiaries certified by the Secretary of State of the state of
incorporation or comparable authority in other jurisdictions, and a
true and complete copy of the Bylaws or comparable governing
instruments, as amended, of Target and each of the Target
Subsidiaries certified by the Secretary of Target or the Target
Subsidiaries, as applicable.
6.3.5 OPINION OF TARGET COUNSEL. The Company shall have
received the opinion of counsel to Target, in form and substance
reasonably satisfactory to Target, covering the matters set forth in
EXHIBIT 6.3.5 attached hereto.
6.3.6 FAIRNESS OPINION. The written opinion of the
Company's financial advisors referenced in SECTION 3.24, above,
shall not have been withdrawn at or prior to the meeting of the
shareholders of the Company referenced in SECTION 5.4, above.
6.3.7 COMFORT LETTERS. The Company shall have received
"comfort letters" from the independent certified public accountants
for Target dated the date on which the Registration Statement, or
last amendment thereto, shall become effective, and dated the
Closing Date, addressed to the Board of
<PAGE>
Directors of each of Target and the Company, covering such matters
relating to periods for which Target's recently retained independent
certified public accountants have been retained and any periods
ending after the date of this Agreement as the Company shall
reasonably request with respect to facts concerning the financial
condition of Target and the Target Subsidiaries and customary for
such certified public accountants to deliver in connection with a
transaction similar to the Merger.
6.3.8 SCI ACQUISITION. An agreement for the acquisition
of SCI or its assets by Target or the Surviving Corporation for
consideration not in excess of $1,000 in form and substance
reasonably acceptable to the Company, which agreement, by its terms,
shall not expose any director, officer, employee or shareholder of
SCI to liability after the Effective Time (the "SCI ACQUISITION
AGREEMENT") shall have been duly executed and delivered by SCI and
the stockholders of SCI on or before August 31, 1994, and such
acquisition shall have been consummated in accordance with the SCI
Acquisition Agreement, as the same may have been amended with the
consent of the Company, prior to or at the Effective Time.
6.3.9 TERMINATION AND SEVERANCE. Target shall have
terminated or arranged for the termination of employment agreements
with Messrs. Sudikoff, Cheramy and Hartz as permitted by SECTION
4.1(a)(vi), above.
6.4 ACCOUNTING CONTINGENCY. Notwithstanding any other
provision of this Agreement, the Company acknowledges that it has reviewed all
statements (the "RELEVANT STATEMENTS") made by Target concerning the
Accounting Contingency (as hereinafter defined) in the Target Securities Filings
and related correspondence with the SEC, accurate and complete reproductions of
the originals of which have been provided to the Company prior to the date
hereof, including, without limitation, the Current Report on Form 8-K filed with
the SEC on May 31, 1994, and on Form 8-K/A filed with the SEC on June 14, 1994,
and further acknowledges that, except as to the Relevant Statements, it is not
relying upon any statement, representation, warranty or other disclosure made by
Target or any of Target's directors, officers, employees, accountants, agents,
or advisers respecting the Accounting Contingency, or any facts or circumstances
relating to the Accounting Contingency, for any purpose. Notwithstanding any
representation, warranty or covenant of Target contained in this Agreement, or
any condition to the obligations of the Company provided for in this Agreement,
the Company acknowledges (a) the existence of the Accounting Contingency, (b)
that, but for the exclusion thereof from the definition of "TARGET MATERIAL
ADVERSE EFFECT," the Accounting Contingency might otherwise constitute or give
rise to a Target Material Adverse Effect, and (c) that no representation or
warranty of Target set forth in this Agreement shall be deemed to have been
inaccurate, breached or violated, no covenant of Target contained in this
Agreement shall be deemed to have been breached and no condition to the
obligations of the Company set forth in this Agreement shall be deemed to be
unsatisfied as a result of the Accounting Contingency or the claims of any
persons (or the costs, expenses, liabilities or damages relating to such claims)
arising out of or in connection with the Accounting Contingency, except and only
to the extent that such inaccuracy, breach, violation or unsatisfied condition
is attributable to a false or misleading statement with respect to any material
fact or the omission to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in light of the
<PAGE>
circumstances under which they were made, not misleading in the Relevant
Statements the reliability of which is not otherwise questioned by other
disclosures in the Relevant Statements filed with the SEC since December 31,
1993.
For purposes of this Agreement, "ACCOUNTING CONTINGENCY" shall
mean any of the following: any matters disclosed, discussed, identified or
described in the Target Securities Filings on Form 8-K filed with the SEC on May
31, 1994, or on Form 8-K/A filed with the SEC on June 14, 1994, or in the SEC's
comments thereon and Target's responses to the same (accurate and complete
reproductions of the originals of such comments and responses have been provided
to the Company prior to the date hereof), relating to accounting disagreements
between Target and Deloitte & Touche, or the resignation on May 23, 1994 of
Deloitte & Touche as Target's auditors, or accounting adjustments or
restatements relating to the financial statements of Target for Target's fiscal
quarter ended March 31, 1994 contained in the Quarterly Report on Form 10-Q
filed by Target with the SEC on May 23, 1994, and all Litigation ongoing,
pending, threatened or subsequently commenced to the extent arising or resulting
from, or otherwise relating to, in any manner to any of such matters or the
consequences and results of any such matters.
ARTICLE VII
TERMINATION AND ABANDONMENT
7.1 TERMINATION. This Agreement may be terminated and the
Merger contemplated hereby may be abandoned at any time prior to the Effective
Time, whether before or after approval by the stockholders of Target or the
Company and Acquisition Subsidiary:
(i) by action of the Board of Directors of each of Target
and the Company;
(ii) by Target or the Company if the Merger shall not have
been consummated on or before March 31, 1995 (or such later date as may be
agreed to by Target and the Company), or if the requisite approvals of the
respective stockholders of either Target or the Company are not obtained at
meetings convened therefor;
(iii) by Target if (a) there are any breaches of any Company
Modified Representation or any material breaches of any Company Nonmodified
Representation, (b) the Company has breached or failed to perform,
notwithstanding satisfaction or due waiver of all conditions thereto, any of its
material covenants or agreements contained herein as to which notice specifying
such misrepresentation, breach or failure has been given to the Company promptly
after the discovery thereof and the Company has failed to cure or otherwise
resolve the same to the reasonable satisfaction of Target within 30 days after
receipt of such notice, (c) Target so elects pursuant to SECTION 5.1(b)
hereof; or (d) Target so elects pursuant to SECTION 6.1.10 hereof;
(iv) by the Company if (a) there are any breaches of any
Target Modified Representation or any material breaches of any Target
Nonmodified Representation, (b) Target has breached or failed to perform,
notwithstanding satisfaction or due waiver of all conditions thereto, any of its
material covenants or agreements contained
<PAGE>
herein as to which notice specifying such misrepresentation, breach or failure
has been given to Target promptly after the discovery thereof and Target has
failed to cure or otherwise resolve the same to the reasonable satisfaction of
the Company within 30 days after receipt of such notice, or (c) the Company so
elects pursuant to SECTION 6.1.10 hereof;
(v) by Target or the Company if a court of competent
jurisdiction or other Governmental Authority shall have issued an order, decree
or ruling or taken any other action restraining, enjoining or otherwise
prohibiting the Merger and such order, decree, ruling or other action shall have
become final and nonappealable; or
(vi) by the Company or Target if, in seeking to fulfill
directors' fiduciary obligations under applicable Law as advised by O'Melveny &
Myers or Richards, Layton & Finger, or other reputable counsel to Target: (a)
Target enters into an agreement in principle, letter of intent or definitive
agreement with respect to any (1) acquisition or purchase by any person of all
or a significant portion of the assets of, or any significant equity interest
in, Target or a Target Subsidiary (other than acquisitions of Target
Subsidiaries or their assets by other Target Subsidiaries approved by the
Company), or (2) merger, consolidation or other business combination with any
person (each of the foregoing being an "ALTERNATIVE TRANSACTION"); or (b) the
Board of Directors of Target has withdrawn or modified adversely its
recommendation of the Merger by reason of an Alternative Transaction
7.2 PROCEDURE AND EFFECT OF TERMINATION. In the event of
termination of this Agreement and abandonment of the Merger by Target or the
Company pursuant to SECTION 7.1, above, written notice thereof shall promptly
be given to the other party hereto and this Agreement shall terminate and the
Merger shall be abandoned without further action by either of the parties
hereto. If this Agreement is terminated as provided herein, neither party
hereto shall have any liability or further obligation to the other party under
the terms of this Agreement except for breach by such party or with respect to
the provisions of SECTIONS 7.2, 8.1 AND 8.7 hereof. In the event of
termination of this Agreement (i) by the Company as provided in SECTION
7.1(iv)(a) hereof by reason of a breach that was neither willful nor undertaken
in bad faith, (ii) by the Company as provided in SECTION 7.1(iv)(b) hereof by
reason of a breach or failure by Target that was neither willful nor undertaken
in bad faith, or (iii) by Target as provided in SUBSECTION 7.1(vi), above,
Target promptly after such termination shall pay the Company in cash the sum of
$8,000,000; provided, however, that no such payment shall be required in the
event of termination pursuant to SUBSECTION 7.1(vi)(b), above, unless and
until Target, within a period of six months after said termination, enters into
an agreement in principle, letter of intent or definitive agreement respecting
an Alternative Transaction. The amount of such payment represents a reasonable,
good faith estimate of the damages in such event and does not constitute a
penalty. Such payment shall be the only right or remedy of the Company for the
circumstances described and such payment shall constitute liquidated damages in
the event of such termination with no other liability or obligation on the part
of Target. In the event of termination of this Agreement (i) by Target as
provided in SUBSECTION 7.1(iii)(a) hereof by reason of a breach that was
neither willful nor undertaken in bad faith, or (ii) by Target as provided in
SUBSECTION 7.1(iii)(b) hereof by reason of a breach or failure by the Company
that was neither willful nor undertaken in bad faith, the Company promptly
after such termination shall pay Target in cash the sum of $8,000,000. The
amount of such payment represents a reasonable, good faith estimate of the
out-of-pocket costs of Target in such event and does
<PAGE>
not constitute a penalty. Such payment shall be the only right or remedy of
Target for the circumstances described and such payment shall constitute
liquidated damages in the event of such termination with no other liability or
obligation on the part of the Company.
ARTICLE VIII
MISCELLANEOUS
8.1 CONFIDENTIALITY. Unless (i) otherwise expressly provided
in this Agreement, (ii) required by applicable Law or any listing agreement
with, or the rules and regulations of, any applicable securities exchange or the
NASD, (iii) necessary to secure any required Consents as to which the other
party has been advised, or (iv) consented to in writing by the Company and
Target, this Agreement and any information or documents furnished in connection
herewith shall be kept strictly confidential by Target, the Company and their
respective officers, directors, employees and agents. Prior to any disclosure
pursuant to the preceding sentence, the party intending to make such disclosure
shall consult with the other party regarding the nature and extent of the
disclosure. Nothing contained herein shall preclude disclosures to the extent
necessary to comply with accounting, SEC and other disclosure obligations
imposed by law. To the extent required by such disclosure obligations, the
Company or Target, after consultation with the other party, may file with the
SEC a Current Report on Form 8-K pursuant to the Securities Exchange Act with
respect to the Merger, which report may include, among other things, financial
statements and pro forma financial information with respect to the other party.
In connection with any filing with the SEC of a registration statement or
amendment thereto under the Securities Act, Target or the Company, after
consultation with the other party, may include a prospectus containing any
information required to be included therein with respect to the Merger,
including, but not limited to, financial statements and pro forma financial
information with respect to the other party, and thereafter distribute said
prospectus. The Company and Target shall cooperate with the other and provide
such information and documents as may be required in connection with any such
filings. In the event the Merger is not consummated, each party shall return to
the other all documents furnished by the other and will hold in absolute
confidence any information obtained from the other party except to the extent
(i) such party is required to disclose such information by Law or such
disclosure is necessary or desirable in connection with the pursuit or defense
of a claim, (ii) such information was known by such party prior to such
disclosure or was thereafter developed or obtained by such party independent of
such disclosure, or (iii) such information becomes generally available to the
public or is otherwise no longer confidential. Prior to any disclosure of
information pursuant to the exception in clause (i) of the preceding sentence,
the party intending to disclose the same shall so notify the party which
provided the same in order that such party may seek a protective order or other
appropriate remedy should it choose to do so.
8.2 AMENDMENT AND MODIFICATION. To the extent permitted by
applicable Law, this Agreement may be amended, modified or supplemented only by
a written agreement among Target, Acquisition Subsidiary and the Company,
whether before or after approval of this Agreement by the stockholders of Target
and Acquisition Subsidiary or approval of the issuance of the Company Stock
pursuant to the Merger by the shareholders of the Company.
<PAGE>
8.3 WAIVER OF COMPLIANCE; CONSENTS. Any failure of Target on
the one hand, or the Company on the other hand, to comply with any obligation,
covenant, agreement or condition herein may be waived by the Company on the one
hand, or Target on the other hand, only by a written instrument signed by the
party granting such waiver, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. Whenever this Agreement requires or permits consent by or on behalf of
any party hereto, such consent shall be given in writing in a manner consistent
with the requirements for a waiver of compliance as set forth in this SECTION
8.3.
8.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
respective representations and warranties of Target and the Company contained
herein or in any certificates or other documents delivered at the Closing shall
survive the execution and delivery of this Agreement but shall terminate at the
Effective Time.
8.5 SURVIVAL OF COVENANTS. The respective covenants of Target
and the Company contained herein or in any certificates or other documents
delivered at the Closing shall survive the execution and delivery of this
Agreement but shall terminate at the Effective Time, except for those contained
in SECTIONS 5.9, 5.10 and 5.12.
8.6 NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given when delivered
in person, by facsimile, receipt confirmed, or on the next business day when
sent by overnight courier or on the second succeeding business day when sent by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at the following addresses (or at such other address for a
party as shall be specified by like notice):
(i) if to Target, to:
IDB Communications Group, Inc.
10525 West Washington Boulevard
Culver City, California 90232-1922
Attention: Jeffrey P. Sudikoff
Telecopy: (213) 870-3400
with a copy to:
O'Melveny & Myers
400 South Hope Street, 15th Floor
Los Angeles, California 90071-2899
Attention: C. James Levin, Esq.
Telecopy: (213) 669-6407
and
(ii) if to the Company, to:
LDDS Communications, Inc.
515 East Amite Street
<PAGE>
Jackson, Mississippi 39201-2702
Attention: Bernard J. Ebbers
Telecopy: (601) 360-8616
with a copy to:
LDDS Communications, Inc.
10777 Sunset Office Drive
Suite 330
St. Louis, Missouri 63127
Attention: P. Bruce Borghardt, Esq.
Telecopy: (314) 984-0734
8.7 BINDING EFFECT; ASSIGNMENT. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by either of the parties hereto prior to the Effective Time without the
prior written consent of the other party hereto. This Agreement is not intended
to confer upon any person other than the parties hereto any rights or remedies
hereunder, except for those in favor of the Indemnified Parties under SECTION
5.12, above.
8.8 EXPENSES; TIME OF PAYMENT. All fees, costs and expenses
required or contemplated by, or incurred in connection with, this Agreement and
the transactions contemplated hereby shall be paid by the party incurring such
costs or expenses, subject to the rights of such party contemplated under
SECTION 7.2, above.
8.9 GOVERNING LAW. This Agreement shall be deemed to be made
in, and in all respects shall be interpreted, construed and governed by and in
accordance with the internal laws of, the State of Delaware.
8.10 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.11 INTERPRETATION. The article and section headings
contained in this Agreement are solely for the purpose of reference, are not
part of the agreement of the parties and shall not in any way affect the meaning
or interpretation of this Agreement. As used in this Agreement, (i) the term
"PERSON" shall mean and include an individual, a partnership, a joint venture,
a corporation, a limited liability company, a trust, an association, an
unincorporated organization, a Governmental Authority and any other entity; (ii)
the term "AFFILIATE," with respect to any person, shall mean and include any
person controlling, controlled by or under common control with such person; and
(iii) the term "SUBSIDIARY" of any specified person shall mean any corporation
50 percent or more of the outstanding voting power of which, or any partnership,
joint venture, limited liability company or other entity 50 percent or more of
the total equity interest of which, is directly or indirectly owned by such
specified person.
<PAGE>
8.12 ENTIRE AGREEMENT. This Agreement and the documents or
instruments referred to herein including, but not limited to, the Exhibits
attached hereto, which Exhibits are incorporated herein by reference, embody the
entire agreement and understanding of the parties hereto in respect of the
subject matter contained herein. There are no restrictions, promises,
representations, warranties, covenants, or undertakings, other than those
expressly set forth or referred to herein. This Agreement supersedes all prior
agreements and the understandings between the parties with respect to such
subject matter.
8.13 MATERIALITY. Each of Target, the Company and Acquisition
Subsidiary acknowledges that the listing or description, or failure to list or
describe, any item on or in any of the Exhibits to this Agreement shall not
constitute a standard of materiality, and that no implication shall be drawn
that information provided therein is necessarily material or otherwise required
to be disclosed or that the inclusion or exclusion of such information
establishes or implies a standard of materiality, a standard for what is or is
not in the ordinary course of business or any other standard for disclosure set
forth in this Agreement.
8.14 SEVERABILITY. In case any provision in this Agreement
shall be held invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof shall not in any way be
affected or impaired thereby.
<PAGE>
IN WITNESS WHEREOF, the Company, Acquisition Subsidiary and Target
have caused this Agreement to be signed and delivered by their respective duly
authorized officers as of the date first above written.
LDDS COMMUNICATIONS, INC.
By /S/ Bernard J. Ebbers
------------------------------------------
Name: Bernard J. Ebbers
-------------------------------------
Title: President
------------------------------------
123 CORP.
By /S/ Bernard J. Ebbers
------------------------------------------
Name: Bernard J. Ebbers
-------------------------------------
Title: President
------------------------------------
IDB COMMUNICATIONS GROUP, INC.
By: /S/ Jeffrey P. Sudikoff
-----------------------------------------
Name: Jeffrey P. Sudikoff
------------------------------------
Title:Chairman and Chief Executive Officer
------------------------------------
(061194.1J)
<PAGE>
Exhibit 99.1
PRESS RELEASE
Contact: Bernard J. Ebbers Peter F. Hartz
President and CEO Senior Vice President
LDDS Communications, Inc. IDB Communications Group, Inc.
(601) 360-8600 (213) 240-3721
LDDS COMMUNICATIONS, INC.
TO ACQUIRE IDB COMMUNICATIONS GROUP, INC.
IN A TAX-FREE EXCHANGE
JACKSON, Miss. and LOS ANGELES, Cal. (August 1, 1994) -- LDDS Communications,
Inc. (Nasdaq NM/LDDS) and IDB Communications Group, Inc. (Nasdaq NM/IDBX) today
jointly announced that they have entered into a definitive agreement calling for
the acquisition of IDB by LDDS, subject to various terms and conditions
including approval of regulatory authorities and shareholders of both companies.
Under terms of the agreement, the transaction will be a tax-free exchange
and accounted for on a pooling of interests basis. The agreement calls for
holders of IDB shares to receive a minimum of .450867 LDDS share for each IDB
share if LDDS shares are valued at $22 or more; or a maximum of .520231 LDDS
share for each IDB share if LDDS shares are valued at $16 or less. The exchange
ratio changes by .001445 LDDS share for every $.125 change in LDDS share value
between $22 and $16.
In addition, the $195 million in convertible subordinated notes issued by
IDB will remain outstanding and the note holders will receive the corresponding
exchange ratio adjustment to their common stock conversion price.
Bernard J. Ebbers, president and chief executive officer of LDDS,
commented, "LDDS is rapidly achieving one of its four stated goals that includes
being a significant and major player in the international arena. The acquisition
of IDB by LDDS is a tremendous opportunity to complement and expand the domestic
and international growth potential of each company. This is an important
acceleration of our strategy to penetrate the lucrative segments of the
international market, but it is only a first step."
Jeffrey P. Sudikoff, chairman and chief executive officer of IDB, added,
"I have long believed in the synergy of a transaction between IDB and a domestic
carrier. The marriage of IDB's international network and the LDDS domestic
network makes the company a significant competitor in the industry. We believe
this deal is forward thinking and is in the best interest of the shareholders of
our company."
Ebbers stated that LDDS has expended considerable resources to make a
thorough examination of the well publicized events surrounding IDB and has
evaluated each in the assessment of the company and the quality of its future
earnings. "The cost savings that can be achieved by integrating our domestic and
international network facilities and combining our operations should be
substantial. We expect that the transaction will be accretive to 1995 earnings
per share," concluded Ebbers.
<PAGE>
LDDS Communications, Inc. provides domestic and international long
distance telecommunications services through its digital network to business and
residential customers. The shares of LDDS trade on The Nasdaq Stock Market under
the symbol LDDS.
IDB Communications Group, Inc. is a global telecommunications company that
operates a domestic and international communications network providing its
customers with international private line and long distance telephone services,
radio and television transmission services, facsimile and data connections,
mobile satellite communications capabilities and the design and integration of
satellite networks worldwide. The shares of IDB trade on The Nasdaq Stock Market
under the symbol IDBX.
# # #
<PAGE>
Exhibit 99.2
Contact: Peter Hartz
Sr. VP, IDB
(213) 240-3721
Michael Sitrick
Michael Kolbenschlag
Sitrick Krantz & Co.
(310) 788-2850
IDB ANNOUNCES INTENTION TO RESTATE
FIRST QUARTER EARNINGS
LOS ANGELES, CA -- August 1, 1994 -- IDB Communications Group, Inc.
(Nasdaq NM/IDBX) today announced its intention to restate its financial results
for the first quarter ended March 31, 1994. In a discussion relating to the
recently announced proposed acquisition of IDB by LDDS Communications, Inc.,
Jeffrey P. Sudikoff, Chairman and Chief Executive Officer of IDB, stated that
IDB would restate its first quarter results to eliminate approximately $6
million of pre-tax income, approximately $5 million of which relates to a sale
of transponder capacity and approximately $1 million of which relates to
purchase accounting adjustments. The result of the restatement will be a
reduction of first quarter net income from $.12 per share to approximately $.08
per share.
Mr. Sudikoff also stated that, in part as a result of costs associated
with the abandoned acquisition of Peoples Telephone and the resignation of its
former auditors and in part as a result of increased operating costs, IDB
expects to report essentially break even results for its second quarter ended
June 30, 1994. IDB will not have definitive results for its second quarter
available prior to mid or late August.
Mr. Sudikoff further announced that IDB and its new auditors were
assessing implementation of an accounting change relating to the accrual of
revenue associated with inbound international traffic. IDB has not determined
the impact of any such change upon its second quarter or its 1994 results of
operations.
IDB Communications Group, Inc. is a global telecommunications company that
operates a domestic and international communications network providing its
customers with
international private line and long distance telephone services, radio and
television transmission services, facsimile and data connections, mobile
satellite communications capabilities and the design and integration of
satellite networks worldwide.
###
