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EX-10.1
2
MERGER AGREEMENT AND AMENDMENTS
EXHIBIT 10.1
------------
January 18, 2000
AGREEMENT AND PLAN OF MERGER
By and Among
HEADS UP TECHNOLOGIES, INC.,
INTELLICALL, INC.
and H.U.T.I. ACQUISITION, INC.
Dated as of January 18, 2000
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TABLE OF CONTENTS
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<S> <C> <C>
ARTICLE I. THE MERGER...................................................................................2
SECTION 1.1 THE MERGER...............................................................................2
SECTION 1.2 EFFECTIVE TIME OF THE MERGER.............................................................2
SECTION 1.3 CONVERSION AND CANCELLATION OF SECURITIES................................................3
SECTION 1.4 EXCHANGE OF CERTIFICATES.................................................................3
SECTION 1.5 AGREEMENT BY SHAREHOLDERS................................................................5
ARTICLE II. DETERMINATION OF EXCHANGE RATIO..............................................................5
SECTION 2.1 DISCLOSURE SCHEDULES.....................................................................5
SECTION 2.2 DETERMINATION OF EXCHANGE RATIO..........................................................6
SECTION 2.3 NO FRACTIONAL SHARES.....................................................................6
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................................7
SECTION 3.1 ORGANIZATION AND AUTHORITY...............................................................7
SECTION 3.2 NO BREACH................................................................................8
SECTION 3.3 CONSENTS AND APPROVALS...................................................................8
SECTION 3.4 CAPITALIZATION...........................................................................8
SECTION 3.5 FINANCIAL STATEMENTS.....................................................................8
SECTION 3.6 ABSENCE OF CERTAIN CHANGES...............................................................9
SECTION 3.7 ABSENCE OF THE UNDISCLOSED LIABILITIES...................................................9
SECTION 3.8 COMPLIANCE WITH LAW......................................................................9
SECTION 3.9 TAXES...................................................................................10
SECTION 3.10 ABSENCE OF LITIGATION...................................................................10
SECTION 3.11 TITLE TO PROPERTY.......................................................................10
SECTION 3.12 INTELLECTUAL PROPERTY...................................................................10
SECTION 3.13 EMPLOYEE BENEFIT PLANS; EMPLOYMENT AGREEMENTS...........................................11
SECTION 3.14 MATERIAL CONTRACTS......................................................................13
SECTION 3.15 LABOR MATTERS...........................................................................14
SECTION 3.16 ENVIRONMENTAL MATTERS...................................................................14
SECTION 3.17 INSURANCE...............................................................................15
SECTION 3.18 VOTE REQUIRED...........................................................................15
SECTION 3.19 AFFILIATES..............................................................................15
SECTION 3.20 CERTAIN BUSINESS PRACTICES..............................................................15
SECTION 3.21 CUSTOMERS AND SUPPLIERS.................................................................16
SECTION 3.22 BANK ACCOUNTS...........................................................................16
SECTION 3.23 BUSINESS PLAN...........................................................................16
SECTION 3.24 YEAR 2000 ISSUES........................................................................16
SECTION 3.25 PROXY STATEMENT AND OTHER INFORMATION...................................................16
SECTION 3.26 BROKERS AND FINDERS.....................................................................16
(i)
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ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.....................................17
SECTION 4.1 ORGANIZATION AND AUTHORITY..............................................................17
SECTION 4.2 NO BREACH...............................................................................18
SECTION 4.3 CONSENTS AND APPROVALS..................................................................18
SECTION 4.4 CAPITALIZATION..........................................................................18
SECTION 4.5 SEC REPORTS; FINANCIAL STATEMENTS.......................................................19
SECTION 4.6 ABSENCE OF CERTAIN CHANGES..............................................................19
SECTION 4.7 ABSENCE OF UNDISCLOSED LIABILITIES......................................................19
SECTION 4.8 COMPLIANCE WITH LAW.....................................................................19
SECTION 4.9 TAXES...................................................................................20
SECTION 4.10 ABSENCE OF LITIGATION...................................................................20
SECTION 4.11 TITLE TO PROPERTY.......................................................................20
SECTION 4.12 INTELLECTUAL PROPERTY...................................................................21
SECTION 4.13 EMPLOYEE BENEFIT PLANS; EMPLOYMENT AGREEMENTS...........................................21
SECTION 4.14 MATERIAL CONTRACTS......................................................................23
SECTION 4.15 LABOR MATTERS...........................................................................23
SECTION 4.16 ENVIRONMENTAL MATTERS...................................................................23
SECTION 4.17 INSURANCE...............................................................................24
SECTION 4.18 VOTE REQUIRED...........................................................................24
SECTION 4.19 AFFILIATES..............................................................................24
SECTION 4.20 CERTAIN BUSINESS PRACTICES..............................................................24
SECTION 4.21 CUSTOMERS AND SUPPLIERS.................................................................24
SECTION 4.22 YEAR 2000 ISSUES........................................................................24
SECTION 4.23 PROXY STATEMENT AND OTHER INFORMATION...................................................24
SECTION 4.24 BROKERS.................................................................................25
ARTICLE V. OTHER AGREEMENTS............................................................................25
SECTION 5.1 ELECTION OF NEW PARENT DIRECTORS AND OFFICERS...........................................25
SECTION 5.2 CONDUCT OF BUSINESS PENDING MERGER......................................................25
SECTION 5.3 ACCESS TO INFORMATION...................................................................27
SECTION 5.4 PREPARATION OF FORM S-4 AND PROXY STATEMENT.............................................28
SECTION 5.5 AMEX EXCHANGE LISTING...................................................................30
SECTION 5.6 REASONABLE BEST EFFORTS.................................................................30
SECTION 5.7 PUBLIC ANNOUNCEMENTS; CONFIDENTIALITY...................................................30
SECTION 5.8 NOTIFICATION............................................................................30
SECTION 5.9 MEETINGS OF STOCKHOLDERS................................................................30
SECTION 5.10 REGULATORY AND OTHER AUTHORIZATIONS.....................................................31
SECTION 5.11 FURTHER ASSURANCES......................................................................31
SECTION 5.12 EMPLOYEE BENEFITS.......................................................................31
SECTION 5.13 MERGER SUB..............................................................................32
SECTION 5.14 LETTER FROM ACCOUNTANTS.................................................................32
SECTION 5.15 NO SOLICITATION.........................................................................33
(ii)
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ARTICLE VI. CLOSING AND CLOSING DATE; CONDITIONS TO CLOSING.............................................34
SECTION 6.1 CLOSING AND CLOSING DATE................................................................34
SECTION 6.2 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY, PARENT AND MERGER SUB.....................34
SECTION 6.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUB...........................35
SECTION 6.4 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY.....................................36
ARTICLE VII. TERMINATION.................................................................................37
SECTION 7.1 TERMINATION.............................................................................37
SECTION 7.2 EFFECT OF TERMINATION...................................................................40
SECTION 7.3 FEES AND EXPENSES.......................................................................40
ARTICLE VIII. MISCELLANEOUS...............................................................................40
SECTION 8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES..............................................40
SECTION 8.2 AMENDMENT...............................................................................41
SECTION 8.3 WAIVER..................................................................................41
SECTION 8.4 ENTIRE AGREEMENT........................................................................41
SECTION 8.5 NOTICES.................................................................................41
SECTION 8.6 GOVERNING LAW...........................................................................42
SECTION 8.7 DESCRIPTIVE HEADINGS....................................................................42
SECTION 8.8 PARTIES IN INTEREST.....................................................................42
SECTION 8.9 COUNTERPARTS............................................................................43
SECTION 8.10 CERTAIN DEFINITIONS.....................................................................43
SECTION 8.11 PERSONAL LIABILITY......................................................................43
SECTION 8.12 BINDING EFFECT, ASSIGNMENT..............................................................43
SECTION 8.13 SEVERABILITY............................................................................44
SECTION 8.14 SPECIFIC PERFORMANCE....................................................................44
SECTION 8.15 LEGAL FEES; COSTS.......................................................................44
SECTION 8.16 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE...................................44
(iii)
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement"), dated as of
January 18, 2000, is made by and among Heads Up Technologies, Inc., a Texas
corporation (the "Company"), Intellicall, Inc., a Delaware corporation (the
"Parent"), and H.U.T.I. Acquisition, Inc., a Texas corporation and
wholly-owned subsidiary of Parent ("Merger Sub").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Merger Sub will merge into the Company (the "Merger") pursuant
to the Texas Business Corporation Act (the "TBCA") and upon the terms and
subject to the conditions set forth in this Agreement, and pursuant thereto each
outstanding share of Common Stock of the Company, par value $.01 per share (the
"Company Common Stock"), not owned directly or indirectly by the Company or
Parent or their respective subsidiaries will be converted into the number of
shares of Common Stock of the Parent, par value $.01 per share (the "Parent
Common Stock"), to be determined in the manner set forth herein;
WHEREAS, the Board of Directors of the Company has determined that the
Merger is fair to, and in the best interests of, the Company and its
shareholders and has approved this Agreement and the transactions contemplated
hereby and recommended approval of this Agreement by the shareholders of the
Company;
WHEREAS, the Board of Directors of Parent has determined that the
Merger is fair to, and in the best interests of, Parent and its stockholders and
has approved this Agreement and the transactions contemplated hereby and
recommended approval by the stockholders of Parent of the issuance of Parent
Common Stock in connection with this Agreement;
WHEREAS, the Board of Directors of Merger Sub has approved this
Agreement and Parent, as the sole stockholder of Merger Sub, will approve this
Agreement promptly after the execution hereof by the parties hereto; and
WHEREAS, for federal income tax purposes, it is intended that the
Merger qualify as a reorganization under the provisions of section 368(a) of the
United States Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the respective representations,
warranties, covenants, agreements and conditions set forth below, the parties
hereto, intending to be legally bound, hereby agree as follows:
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ARTICLE I.
THE MERGER
Section 1.1 The Merger.
(a) Subject to the terms and conditions hereof and in accordance with the TBCA,
at the Effective Time (as defined in Section 1.2): (i) Merger Sub shall be
merged with and into the Company and the separate existence of Merger Sub shall
cease; (ii) the Company, as the surviving corporation in the Merger (the
"Surviving Corporation"), (A) shall be a wholly-owned subsidiary of Parent, (B)
shall continue its corporate existence under the laws of the State of Texas, (C)
shall change its present name to a name designated by Parent, and (D) shall
succeed to all rights, assets, liabilities and obligations of Merger Sub and the
Company in accordance with the TBCA; (iii) except as provided in Section 1.1(b),
the Articles of Incorporation of the Company, as in effect immediately prior to
the Effective Time, shall continue as the articles of incorporation of the
Surviving Corporation; (iv) the Bylaws of the Company, as in effect immediately
prior to the Effective Time, shall continue as the bylaws of the Surviving
Corporation; (v) the directors of the Merger Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation, each to hold
office in accordance with the articles of incorporation and bylaws of the
Surviving Corporation, and (vi) the officers of the Merger Sub immediately prior
to the Effective Time shall be the officers of the Surviving Corporation, each
to hold office in accordance with the bylaws of the Surviving Corporation, in
each case until their respective successors are duly elected or appointed and
qualified. From and after the Effective Time, the Merger shall have all the
effects provided by applicable law.
(b) At the Effective Time: (i) The Articles of Incorporation of the Company
shall be amended to change the name of the Company to a name designated by
Parent; and (ii) the Articles of Incorporation of the Company shall be
amended to provide as follows:
The aggregate number of shares which the corporation shall have
authority to issue is one thousand (1,000), of the par value of one
cent ($.01) each, to be designated 'Common Stock'."
Section 1.2 Effective Time of the Merger. As soon as practicable after the
Closing Date (as defined in Section 6.1 hereof) the parties shall cause the
Merger to be consummated by the filing of Articles of Merger (the "Articles of
Merger") with the Secretary of State of Texas, in such form as required by, and
executed in accordance with the relevant provisions of, the TBCA, (the date and
time of such filing, or such later date or time agreed upon by Parent and the
Company and set forth therein, being called the "Effective Time").
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Section 1.3 Conversion and Cancellation of Securities.
(a) At the Effective Time, each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time (other than shares of
Company Common Stock described in Section 1.3(b) hereof) shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into a number of shares of Parent Common Stock (rounded to four decimal places)
equal to the Exchange Ratio. The Exchange Ratio shall be the number established
in the manner described in Article II.
(b) At the Effective Time, each share of Company Common Stock held in the
treasury of the Company and each share of Company Common Stock owned by Parent
or any direct or indirect wholly owned subsidiary of the Company or Parent
immediately prior to the Effective Time, shall by virtue of the Merger and
without any action on the part of the holder thereof, be automatically canceled
and retired and cease to exist, and no cash, securities or other property shall
be payable in respect thereof.
(c) At the Effective Time, each share of Merger Sub common stock, par value $.01
per share ("Merger Sub Common Stock"), validly issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action by the holder thereof, be converted into one validly issued,
fully paid and nonassessable share of Common Stock, par value $.01 per share, of
the Surviving Corporation ("Surviving Corporation Common Stock").
(d) Notwithstanding the foregoing, if between the date of this Agreement and the
Effective Time, the outstanding shares of Parent Common Stock or Company Common
Stock shall have been changed into a different number of shares or a different
class, by reason of any stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares, the Exchange Ratio
shall be correspondingly adjusted to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares.
Section 1.4 Exchange of Certificates.
(a) Parent's stock transfer agent (or another bank or trust company selected by
Parent and reasonably acceptable to the Company) shall act as exchange agent
(the "Exchange Agent") in connection with the surrender of certificates
evidencing shares of Company Common Stock converted into shares of Parent Common
Stock pursuant to the Merger. On or prior to the Closing Date, Parent shall
deposit with the Exchange Agent one or more certificates representing the shares
of Parent Common Stock to be issued in the Merger (the "Merger Stock"), which
shares of Merger Stock shall be deemed to be issued at the Effective Time.
(b) As soon as practicable after the Effective Time, Parent shall cause the
Exchange Agent to mail to each person who was, at the Effective Time, a holder
of record of a certificate or certificates that immediately prior to the
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Effective Time evidenced outstanding shares of Company Common Stock (the
"Certificates") (i) a letter of transmittal specifying that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent, which shall be in a form and
contain any other provisions as Parent and the Company may reasonably agree and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing the Merger Stock. Upon the proper
surrender of Certificates to the Exchange Agent, together with a properly
completed and duly executed letter of transmittal and such other documents as
may be reasonably required by the Exchange Agent, the holder of such Certificate
shall, subject to the provisions of Section 2.3, be entitled to receive in
exchange therefor certificates representing the shares of Merger Stock that such
holder has the right to receive pursuant to the terms hereof (together with any
dividend or distribution with respect thereto made after the Effective Time),
and the Certificate so surrendered shall be canceled. In the event of a transfer
of ownership of Company Common Stock that is not registered in the transfer
records of the Company, a certificate representing the proper number of shares
of Merger Stock may be issued to a transferee if the Certificate representing
such Company Common Stock is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and by evidence
reasonably satisfactory to the Surviving Corporation and Parent that any
applicable stock transfer tax has been paid.
(c) Except as specified in Section 1.4(h), after the Effective Time, each
outstanding Certificate which theretofore represented shares of Company Common
Stock shall, until surrendered for exchange in accordance with this Section 1.4,
be deemed for all purposes to evidence ownership of the number of full shares of
Parent Common Stock into which the shares of Company Common Stock (which, prior
to the Effective Time, were represented thereby) shall have been so converted.
(d) Except as otherwise expressly provided herein, Parent shall pay all charges
and expenses, including those of the Exchange Agent, in connection with the
exchange of Certificates for shares of Merger Stock. Any Merger Stock deposited
with the Exchange Agent pursuant to Section 1.4(a) hereof, and not exchanged
pursuant to Section 1.4(b) hereof for Company Common Stock within six months
after the Effective Time, shall be returned by the Exchange Agent to Parent,
which shall thereafter act as exchange agent, subject to the rights of holders
of Company Common Stock hereunder.
(e) At the Effective Time, the stock transfer books of the Company shall be
closed and no transfer of shares of Company Common Stock shall thereafter be
made.
(f) None of Parent, Merger Sub, the Company, the Surviving Corporation or the
Exchange Agent will be liable to any holder of shares of Company Common Stock
for any shares of Merger Stock, dividends or distributions with respect thereto
delivered to a state abandoned property administrator or other public official
pursuant to any applicable abandoned property, escheat or similar law.
(g) If any Certificates shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming such Certificates to
be lost, stolen or destroyed, and delivery of such bond or other indemnity as
the Exchange Agent may reasonably request, the Exchange Agent will, subject to
the provisions of Section 2.2, deliver in exchange for such lost,
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stolen or destroyed Certificates one or more certificates representing the
Merger Stock deliverable in respect thereof, as determined in accordance with
the terms hereof.
(h) No dividend or other distribution declared or made with respect to the
Merger Stock with a record date after the Effective Time shall be paid to the
holder of any unsurrendered Certificate with respect to the shares of Merger
Stock issuable upon surrender thereof until the holder of such Certificate shall
surrender such Certificate in accordance with Section 1.4(b). Subject to the
effect of applicable law, following surrender of any such Certificate there
shall be paid, without interest, to the record holder of each certificate
representing whole shares of Merger Stock issued in exchange therefor: (i) at
the time of such surrender, the amount of dividends or other distributions with
a record date after the Effective Time theretofore paid with respect to such
whole shares of Merger Stock, and (ii) at the appropriate payment date, the
amount of dividends or other distributions with a record date after the
Effective Time but prior to surrender of such Certificate and a payment date
subsequent to such surrender payable with respect to such whole shares of Merger
Stock.
(i) The Parent shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any former holder of Company
Common Stock such amounts as the Parent is required to deduct and withhold with
respect to the making of such payment under the Code, or any other provision of
federal, state, local or foreign tax law. To the extent that amounts are so
withheld by the Parent, the withheld amounts shall be treated for all purposes
of this Agreement as having been paid to the former holder of the Company Common
Stock Shares in respect of which such deduction and withholding was made by the
Parent.
Section 1.5 Agreement by Shareholders. Notwithstanding any provision to the
contrary, no holder of Shares of Company Common Stock shall be entitled to
receive any Shares of Merger Stock until such holder agrees to be bound by the
terms of Section 5.4(c) of this Agreement.
ARTICLE II.
DETERMINATION OF EXCHANGE RATIO
Section 2.1 Disclosure Schedules.
(a) The Company and Parent acknowledge that the Company and the Parent have not
had an adequate opportunity to (i) prepare the Company Disclosure Schedule or
Parent Disclosure Schedule referred to in Articles III and IV, respectively, or
(ii) complete its investigation of the business and operations of the other.
Accordingly, the Company and the Parent shall, on or before the thirteenth day
after the date of this Agreement, deliver to the other party a Disclosure
Schedule setting forth, in reasonable detail, any exceptions to the
representations made by such party in Article III or IV, as the case may be, or
any additional information required to be disclosed pursuant to such Articles.
(b) The information provided in the Company Disclosure Schedule and Parent
Disclosure Schedule shall contain a specific reference to the Section of this
Agreement to which such
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information relates. Any inaccuracy of any representation or warranty made by
the Company or the Parent (and the Merger Sub) in this Agreement shall not be
deemed to be a breach of such representation or warranty if such inaccuracy is
remedied by the information contained in the Company Disclosure Schedule or
Parent Disclosure Schedule, as the case may be.
Section 2.2 Determination of Exchange Ratio.
(a) No later than five days after the Parent receives the Company's Disclosure
Schedule, the Parent shall deliver to the Company a notice (the "Parent's
Notice") that either (i) states the Exchange Ratio, which, subject to Section
2.3, shall not be less than 1.30 nor more than 1.40, or (ii) states that the
Company Disclosure Schedule, or the due diligence investigation theretofore
conducted by the Parent, causes the Board of Directors of the Parent to conclude
that there exists material information concerning the Company that (A) may be
reasonably expected to materially and adversely affect the financial condition,
operations, business or prospects of the Company or the enforceability of this
Agreement, and (B) if known at the date of this Agreement, the Parent would not
have entered into this Agreement, at least not at an Exchange Ratio of 1.3 or
higher. If the Parent's Notice contains the statement described in clause (ii)
of the preceding sentence, then the Parent may, at its option: (i) within 10
days after the date on which the Parent receives the Company Disclosure
Schedule, terminate this Agreement pursuant to Section 7.1(c); or (ii) proceed
with the transactions contemplated by this Agreement, with an Exchange Ratio of
1.3. If the Parent's Notice states an Exchange Ratio of 1.3 or higher, then the
Exchange Ratio stated in the notice shall, subject to Section 2.3, be conclusive
and binding on each party, and shall be the Exchange Ratio for purposes of this
Agreement, unless within five business days after its receipt of both the Parent
Disclosure Schedule and the Parent's Notice, the Company delivers to the Parent
notice stating that (x) the Parent Disclosure Schedule, or the due diligence
investigation conducted by the Company, causes the Board of Directors of the
Company to conclude that there exists material information concerning the Parent
that may be reasonably expected to materially and adversely affect the financial
condition, operations, business of the Parent or the enforceability of this
Agreement, and (y) if known at the date of this Agreement, the Company would not
have entered into this Agreement, at least not at the Exchange Ratio proposed by
the Parent. If the Company delivers such written notice within such five day
period, then the Company and the Parent shall negotiate in good faith with a
view toward agreement upon the amount of the Exchange Ratio. If the Company and
the Parent are unable to resolve their differences within five days from the
Parent's receipt of the Company's notice of objection, either party may, at its
option terminate this Agreement pursuant to Section 7.1(b)(iii) or 7.1(c)(iii),
as appropriate.
(b) If the Company and the Parent establish an Exchange Ratio in the manner
provided above, they will promptly enter into an amendment of this Agreement
modifying Section 1.3 of this Agreement to provide for the agreed upon Exchange
Ratio.
Section 2.3 No Fractional Shares. No certificates or scrip evidencing fractional
shares of Merger Stock shall result from the application of the Exchange Ratio.
Instead, if the Exchange Ratio established in the manner described in Section
2.2 would otherwise result in a fractional interest, the Exchange Ratio shall be
adjusted so that (a) if the fractional
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interest is less than one half of a share, the interest will be eliminated or
rounded down to the nearest full share, and (b) if the fractional interest is
equal to or greater than one half of a share, the interest will be rounded up to
the nearest full share.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the disclosure letter to be delivered by the
Company to the Parent pursuant to Section 2.1 (the "Company's Disclosure
Schedule"), the Company represents and warrants to Parent as follows:
Section 3.1 Organization and Authority.
(a) The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas, has all requisite corporate power
and authority to own, lease and operate its properties and to carry on its
business as it is now being conducted and is duly qualified and in good standing
to do business in each jurisdiction in which the nature of the business
conducted by it or the ownership or leasing of its properties makes such
qualification necessary, other than where the failure to be so duly qualified
and in good standing would not have a Company Material Adverse Effect. (The term
"Company Material Adverse Effect" as used in this Agreement shall mean any
change or effect that, individually or when taken together with all other such
changes or effects, would be materially adverse to the financial condition,
operations or current business of the Company, excluding, however, all changes
or effects caused by general economic or industry-wide conditions or resulting
from any change in law or GAAP (as defined in Section 3.5).) The Company has
delivered true and complete copies of its articles of incorporation and by-laws
to the Parent. The Company has all requisite corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. All necessary action, corporate or otherwise, required to
have been taken by or on behalf of it by applicable law, its certificate of
incorporation or otherwise to authorize (i) the approval, execution and delivery
on its behalf of this Agreement and (ii) its performance of its obligations
under this Agreement and the consummation of the transactions contemplated
hereby has been taken, except that the transactions must be approved by the
stockholders of the Company. This Agreement constitutes the Company's valid and
binding agreement, enforceable against it in accordance with its terms, except
(A) as the same may be limited by applicable bankruptcy, insolvency, moratorium
or similar laws of general application relating to or affecting creditors'
rights, including without limitation, the effect of statutory or other laws
regarding fraudulent conveyances and preferential transfers, and (B) for the
limitations imposed by general principles of equity.
(b) The Company does not have any subsidiary (as that term is defined in Section
8.10(e)). Except as disclosed in Section 2.1(b) of the Company Disclosure
Schedule, the Company does not directly or indirectly own any interest in any
other corporation, partnership, joint venture or other business association or
entity which is material to the Company.
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Section 3.2 No Breach. The execution and delivery of this Agreement do
not, and the consummation of the transactions contemplated hereby will not,
(i) violate or conflict with the Company's articles certificate of
incorporation or bylaws or (ii) constitute a breach or default (or an event
that with notice or lapse of time or both would become a breach or default)
or give rise to any lien, third party right of termination, cancellation,
material modification or acceleration under any agreement, understanding or
undertaking to which the Company or any subsidiary is a party or by which it
is bound, except where such breach, default, lien, third party right,
cancellation, modification or acceleration would not have a Company Material
Adverse Effect, or (iii) constitute a violation of any law, rule or
regulation to which the Company is subject.
Section 3.3 Consents and Approvals. Neither the execution and delivery by
the Company of this Agreement nor the consummation by the Company of the
transactions contemplated hereby will require the Company to obtain any consent,
approval, authorization or permit of, or to make any filing with or give any
notification to, any governmental or regulatory authority, except (i) for filing
of the Articles of Merger pursuant to the TBCA and (ii) where the failure to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not prevent the Company from performing its
obligations under this Agreement without having a Company Material Adverse
Effect.
Section 3.4 Capitalization.
(a) The Company's authorized capital stock consists of 20,000,000 shares of
Company Common Stock, of which 8,388,400 were issued and outstanding as of
January 1, 2000 (with zero shares held in treasury). Since January 1, 2000, no
shares of Company Common Stock were issued. As of January 1, 2000, there were
outstanding options and warrants to purchase 530,000 shares of Company Common
Stock with no warrants or option issued after January 1, 2000. Each of the
issued shares of capital stock of the Company is duly authorized, validly issued
and fully paid and nonassessable, and has not been issued in violation of (nor
are any of the authorized shares of capital stock of, or other equity interests
in, the Company subject to) any preemptive or similar rights created by statute,
the Articles of Incorporation or Bylaws of the Company, or any agreement to
which the Company is a party or is bound. Except for such stock options and
warrants, there are no existing options, warrants, calls, subscriptions, or
other rights or other agreements or commitments obligating the Company to issue,
transfer or sell any shares of capital stock of the Company. There are no voting
trusts or other agreements or understandings to which the Company is a party
with respect to the voting of capital stock of the Company.
(b) No bonds, debentures, notes or other indebtedness of the Company having the
right to vote (or convertible into or exchangeable or exercisable for securities
having the right to vote) on any matters on which stockholders may vote is
issued or outstanding.
Section 3.5 Financial Statements. The Company has delivered to the Parent
true and complete copies of (i) its balance sheets as of December 31, 1997
and 1998, (ii) its statements of operations, stockholders' equity and cash
flows for each of the three fiscal years in the period ended December 31,
1998 and (iii) the notes thereto, certified by Deloitte & Touche LLP, whose
reports
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thereon are included therewith. Such financial statements were prepared in
accordance with United States generally accepted accounting principles ("GAAP")
and present fairly the Company's financial position and the results of its
operations and cash flows as of the relevant dates thereof and for the periods
covered thereby. The Company has also delivered to the Parent true and complete
copies of (i) its balance sheets as of September 30, 1998 and September 30,
1999, (ii) its consolidated statements of operations, stockholder's equity and
cash flows for the nine months ended September 30, 1998 and 1999 and (iii) the
notes thereto. Such unaudited financial statements were prepared in accordance
with GAAP, and present fairly the Company's financial position and the results
of its operations and cash flows as of the relevant dates thereof and for the
periods covered thereby, subject to year-end adjustments.
Section 3.6 Absence of Certain Changes.
(a) Except as otherwise disclosed in the Company's Disclosure Statement, since
September 30, 1999 there have not been any events or conditions of any character
that, individually or in the aggregate, have or would reasonably be expected to
have a Company Material Adverse Effect.
(b) During the period from September 30, 1999 to the date of this Agreement, the
Company has not engaged in any conduct that is proscribed during the period from
the date of this Agreement to the Effective Time by clauses (i) through (x) of
Section 5.2(b).
Section 3.7 Absence of the Undisclosed Liabilities. The Company does not
have any material indebtedness, liability or obligation of the type required
by GAAP to be reflected on a balance sheet that is not reflected or reserved
against in the balance sheet, dated as of September 30, 1999, delivered to
the Parent or otherwise disclosed in Section 3.7 of the Company Disclosure
Statement, except for such indebtedness, liabilities or obligations which
have arisen after such date in the ordinary course of business.
Section 3.8 Compliance With Law. The Company holds all licenses, franchises,
certificates, consents, permits and authorizations from all governmental
authorities necessary for the lawful conduct of its business, except where the
failure to hold any of the foregoing would not have a Company Material Adverse
Effect. The Company has not violated, nor is it in violation of, any such
licenses, franchises, certificates, consents, permits or authorizations or, to
the Company's knowledge, any applicable statutes, laws, ordinances, rules and
regulations (including, without limitation, any of the foregoing related to
occupational safety, environmental protection, unfair competition, labor
practices or corrupt practices) of any governmental authorities, except where
such violations do not, and insofar as reasonably can be foreseen will not, have
a Company Material Adverse Effect, and the Company has not received any notice
from a governmental or regulatory authority within three years of the date
hereof of any such violation.
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Section 3.9 Taxes.
(a) All Tax Returns required to be filed before the date hereof by the Company
with respect to any of its income, properties or operations, are in all material
respects true, complete and correct and have been duly filed in a timely manner,
and all taxes shown as due on such Tax Returns have been paid, except where the
failure to so file or pay would not have a Company Material Adverse Effect. For
purposes of this Agreement, "Tax Return" means any return, report, statement,
information statement and the like required to be filed with any authority with
respect to any tax imposed by any governmental authority.
(b) To the Company's knowledge, (i) there are no claims, investigations or
assessments pending or threatened against the Company for any alleged deficiency
in taxes, and (ii) there is no audit or investigation currently being conducted
that could cause the Company to be liable for any taxes, which in any case would
have a Company Material Adverse Effect.
(c) The Company has complied in all material respects with all tax withholding
provisions of applicable federal, state and local laws and have paid over to the
proper governmental authorities all amounts required to be so withheld or paid
over before the date hereof, except where the failure to so withhold or pay
would not have a Company Material Adverse Effect.
Section 3.10 Absence of Litigation. There are no claims, actions, suits,
proceedings or investigations pending or, to the knowledge of the Company,
threatened against the Company, or any properties or rights of the Company,
before any court, arbitrator or administrative, governmental or regulatory
authority or body, domestic or foreign, that, in the event of an adverse
decision or outcome, could reasonably be expected to have a Company Material
Adverse Effect.
Section 3.11 Title to Property. The Company has defensible title to all of its
properties and assets, free and clear of all liens, charges and encumbrances
except liens for taxes not yet due and payable and such liens or other
imperfections of title, if any, as do not materially detract from the value of
or interfere with the present use of the property affected thereby or which
would not have a Company Material Adverse Effect. To the Company's knowledge,
all leases pursuant to which the Company leases from others real or personal
property are valid and effective in accordance with their respective terms, and
there is not, to the knowledge of the Company, under any of such leases, any
existing default or event of default (or event which with notice or lapse of
time, or both, would constitute a material default or event of default and in
respect of which the Company has not taken adequate steps to prevent such a
default from occurring) except where the lack of such validity and
effectiveness, or the existence of such default or event of default would not
have a Company Material Adverse Effect.
Section 3.12 Intellectual Property.
(a) Section 3.12 of the Company Disclosure Schedule lists each existing United
States and foreign patent, trademark, trade name, service mark, copyright, trade
secret, and applications therefor that are material to the Company's business as
currently conducted (the "Company
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Intellectual Property Rights"). The Company owns, or possesses adequate
licenses or other valid rights to use, the Company Intellectual Property Rights.
(b) The conduct of the business of the Company as now conducted does not, to the
Company's knowledge, infringe any valid patents, trademarks, trade names,
service marks or copyrights of others. The consummation of the transactions
contemplated hereby will not result in the loss or impairment of any Company
Intellectual Property Rights. To the best of the Company's knowledge, no third
party has interfered with, infringed upon, misappropriated, diluted, violated or
otherwise come into conflict with any Company Intellectual Property Rights,
except for misappropriations and violations which, individually or in the
aggregate, would not have a Material Adverse Effect on the Company.
(c) The Company has started the process for two internet-related patent
applications and has formally established the date of invention.
Section 3.13 Employee Benefit Plans; Employment Agreements.
(a) The Company's Disclosure Schedule lists all employee benefit plans (as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) and all bonus, stock option, stock purchase, incentive,
deferred compensation, supplemental retirement, severance and other similar
fringe or employee benefit plans, programs or arrangements, and any current or
former employment or executive compensation or severance agreements, written or
otherwise, for the benefit of, or relating to, any employee of the Company, any
trade or business (whether or not incorporated) which is a member of a
controlled group including the Company or which is under common control with the
Company (a "Company ERISA Affiliate") within the meaning of section 414 of the
Code, as well as each plan with respect to which the Company or a Company ERISA
Affiliate could incur liability under Section 4069 (if such plan has been or was
terminated) or Section 4212(c) of ERISA (together, the "Benefit Plans"),
excluding former agreements under which the Company has no remaining
obligations. Copies of each of the following, to the extent applicable, have
been made available to Parent with respect to each Benefit Plan: the most recent
annual report (Form 5500) filed with the Internal Revenue Service (the "IRS"),
the plan document, the trust agreement, the most recent summary plan description
if required by ERISA, the most recent actuarial report or valuation relating to
each Benefit Plan subject to Title IV of ERISA, and the most recent
determination letter issued by the IRS with respect to any Benefit Plan intended
to be qualified under section 401 of the Code.
(b) With respect to each Benefit Plan, no event has occurred and, to the
knowledge of the Company, there exists no condition or set of circumstances in
connection with which the Company could be subject to any liability under the
terms of such Benefit Plan, ERISA, the Code, or any other applicable law, other
than any condition or set of circumstances that could not reasonably be expected
to have a Company Material Adverse Effect.
(c) Each Benefit Plan intended to be qualified under section 401 of the Code (i)
satisfies in form the requirements of such section except to the extent
amendments are not required by law
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to be made until a date after the Effective Time, (ii) has received a favorable
determination letter from the IRS regarding such qualified status, and (iii) has
not, since receipt of the most recent favorable determination letter, been
amended in a way that would adversely affect its qualified status.
(d) There are no actions, suits, or claims pending (other than routine claims
for benefits) or, to the knowledge of the Company, threatened against, or with
respect to, any Benefit Plan or its assets that could reasonably be expected to
have a Company Material Adverse Effect.
(e) To the knowledge of the Company, there is no matter pending (other than
routine qualification determination filings) with respect to any Benefit Plans
before the IRS, the U.S. Department of Labor, the Pension Benefit Guaranty
Corporation (the "PBGC") or any other governmental authority.
(f) All material contributions required to be made to Benefit Plans pursuant to
their terms and the provisions of ERISA, the Code, or any other applicable law
have been timely made.
(g) As to each Benefit Plan subject to Title IV of ERISA, (i) there has been no
event or condition which presents a significant risk of plan termination, (ii)
no accumulated funding deficiency, whether or not waived, within the meaning of
Section 302 of ERISA or section 412 of the Code has been incurred, (iii) no
reportable event within the meaning of Section 4043 of ERISA (for which the
disclosure requirements of Regulation section 4043.1 et seq., promulgated by the
PBGC, have not been waived) has occurred within six years prior to the date of
this Agreement, (iv) no notice of intent to terminate such Benefit Plan has been
given under Section 4041 of ERISA, (v) no proceeding has been instituted under
Section 4042 of ERISA to terminate such Benefit Plan, (vi) no liability to the
PBGC has been incurred (other than with respect to required premium payments),
(vii) no withdrawal liability, within the meaning of Section 4201 of ERISA, has
been incurred, which withdrawal liability has not been satisfied, and (viii) the
assets of the Benefit Plan equal or exceed the actuarial present value of the
benefit liabilities, within the meaning of Section 4041 of ERISA, under the
Benefit Plan, based upon reasonable actuarial assumptions and the asset
valuation principles established by the PBGC.
(h) No Benefit Plan provides retiree medical or retiree life insurance benefits
to any person.
(i) Neither the Company nor any Company ERISA Affiliate contributes or has an
obligation to contribute, and has not within six years prior to the date of this
Agreement contributed or had an obligation to contribute to, a multiemployer
plan within the meaning of Section 3(37) of ERISA.
(j) The Company's Disclosure Schedule sets forth a true and complete list, as of
the date of this Agreement, of each current or former employee, officer or
director of the Company who holds any option to purchase Company Common Stock as
of the date hereof (collectively, the "Company Stock Options"), together with
the number of shares of Company Common Stock which are subject to such option,
the date of grant of such option, the extent to which such option is vested (or
will
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become vested within six months from the date hereof, or as a result of, the
Merger), the option price of such option (to the extent determined as of the
date hereof), whether such option is intended to qualify as an incentive stock
option within the meaning of Section 422(b) of the Code (an "ISO"), and the
expiration date of such option. The Company's Disclosure Schedule also sets
forth the total number of such ISOs and such nonqualified options. The Company
has furnished Parent with complete copies of the plans (collectively, the
"Company Option Plans") pursuant to which the Company Stock Options were issued.
(k) Prior to the 30th day after the date of this Agreement, the Company will
make available to Parent: (i) copies of all employment agreements with officers
of the Company; (ii) a schedule listing all officers of the Company who have
executed a non-competition agreement with the Company; (iii) copies (or
descriptions) of all severance agreements, programs and policies of the Company
with or relating to its employees, except programs and policies required to be
maintained by law; and (iv) copies of all plans, programs, agreements and other
arrangements of the Company with or relating to its employees which contain
change in control provisions.
(l) The Company has not taken any of the following or other similar actions
since January 1, 2000: the acceleration of vesting, waiving of performance
criteria or the adjustment of awards or any other actions permitted upon a
change in control of the Company with respect to any of the Benefit Plans or any
of the plans or other arrangements described in Section 3.13(j).
Section 3.14 Material Contracts.
(a) Section 3.14 of the Company Disclosure Schedule contains a complete and
accurate list, and the Company has delivered to the Parent true and complete
copies, of the following (a "Company Material Contract"):
(i) each contract that involves performance of services or delivery of
goods or materials by or to the Company of an amount or value
in excess of $100,000;
(ii) each contract, including notes, loan agreements and other debt
instruments, that was not entered into in the ordinary course of
business and that involves potential expenditures or receipts of the
Company in excess of $100,000;
(iii) each lease, rental or occupancy agreement, license, installment and
conditional sale agreement, and other contract affecting the ownership
of, leasing of, title to, use of, or any leasehold or other interest
in, any real or personal property (except personal property leases and
installment and conditional sales agreements having a value per item or
aggregate payments of less than $250,000 and with terms of less than
one year);
(iv) each joint venture, partnership, and other contract (however named)
involving a sharing of profits, losses, costs, or liabilities by the
Company with any other person;
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(v) each contract containing covenants that in any way purport to restrict
the business activity of the Company;
(vi) each contract providing for payments to or by any person based on
sales, purchases or profits of the Company, other than direct payments
for goods or services;
(vii) each power of attorney granted by the Company that is currently
effective and outstanding;
(viii) each contract of the Company for capital expenditures in excess
of $50,000;
(ix) each written warranty, guaranty, and or other similar undertaking with
respect to contractual performance extended by the Company;
(x) each contract pursuant to which the Company has granted preemptive,
first refusal, registration or similar rights with respect to its
capital stock; and
(xi) any other contract that is material to the condition, operations,
business or prospects of the Company.
(b) All Company Material Contracts are in full force and effect, the Company has
performed its obligations thereunder to date and, to the knowledge of the
Company, each other party thereto has performed its obligations thereunder to
date, other than any failure of any such Company Material Contract to be in full
force and effect or any nonperformance thereof that could not reasonably be
expected to have a Company Material Adverse Effect.
(c) The Company has no reason to believe that it will not be able to negotiate
and enter into a satisfactory agreement relating to the matters set forth on
Section 3.14(c) of the Company Disclosure Schedule.
Section 3.15 Labor Matters.
(a) There are no controversies pending or, to the knowledge of the Company,
threatened, between the Company and any of its employees, which controversies
have or may reasonably be expected to have a Company Material Adverse Effect.
(b) The Company is not a party to any collective bargaining agreement or other
labor union contract applicable to persons employed by the Company nor does the
Company know of any activities or proceedings of any labor union to organize any
such employees.
(c) The Company has no knowledge of any strikes, slowdowns, work stoppages,
lockouts or threats thereof, by or with respect to any employees of the Company.
Section 3.16 Environmental Matters. Except in all cases as, in the aggregate,
have not had and could not reasonably be expected to have a Company Material
Adverse Effect, the Company, to
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the Company's knowledge, (i) has obtained all applicable permits, licenses and
other authorizations which are required under foreign, federal, state or local
laws relating to pollution or protection of the environment, including laws
relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants, or hazardous or toxic materials or wastes into ambient
air, surface water, ground water or land or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants or hazardous or toxic
materials or wastes by the Company (or its agents); (ii) is in compliance with
all terms and conditions of such required permits, licenses and authorizations,
and also are in compliance with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in such laws or contained in any regulation, code, plan, order,
decree, judgment, notice or demand letter issued, entered, promulgated or
approved thereunder; (iii) is not aware of nor has received notice of any event,
condition, circumstance, activity, practice, incident, action or plan which is
reasonably likely to interfere with or prevent continued compliance with or
which would give rise to any common law or statutory liability, or otherwise
form the basis of any claim, action, suit or proceeding, based on or resulting
from the Company's (or any of its agents') manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling or the
emission, discharge or release into the environment, of any pollutant,
contaminant, or hazardous or toxic material or waste; and (iv) has taken all
actions necessary under applicable requirements of foreign, federal, state or
local laws, rules or regulations to register any products or materials required
to be registered by the Company (or any of its agents) thereunder.
Section 3.17 Insurance. The Company maintains general liability and other
business insurance that the Company believes to be reasonably prudent for its
business.
Section 3.18 Vote Required. The affirmative vote of the holders of a 2/3
majority of the outstanding Common Stock is the only vote of the holders of any
class or series of the Company's capital stock necessary to approve this
Agreement.
Section 3.19 Affiliates. The Company's Disclosure Schedule identifies all
persons who, to the knowledge of the Company, may be deemed to be affiliates of
the Company under Rule 145 of the Securities Act of 1933, as amended (the
"Securities Act"). The Company will use its reasonable best efforts to deliver
to Parent within 30 days after the date of this Agreement an executed letter
agreement, in form reasonably acceptable to Parent, from each of the persons so
identified, in which such person acknowledges, and agrees to abide by, the
requirements of affiliates under Rule 145.
Section 3.20 Certain Business Practices. None of the Company or any directors,
officers, agents or employees of the Company has (a) used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity, (b) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns or violated any provision of the Foreign Corrupt Practices Act of
1977, as amended (the "FCPA"), (c) consummated any transaction, made any
payment, entered into any
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agreement or arrangement or taken any other action in violation of Section
1128B(b) of the Social Security Act, as amended, or (d) made any other unlawful
payment, which in any case would have a Company Material Adverse Effect.
Section 3.21 Customers and Suppliers. Section 3.21 of the Company Disclosure
Schedule sets forth the 10 most significant third-party suppliers to, and the 10
most significant third-party customers of, the Company (in terms of payments to
or by such person) during the eleven-month period ending on November 30, 1999.
To the knowledge of the Company, there is no present intent of any significant
customer or supplier of the Company to discontinue or substantially alter its
relationship with the Company or do so upon consummation of the Merger.
Section 3.22 Bank Accounts. Schedule 3.22 of the Company Disclosure Schedule
sets forth each bank, savings institution and other financial institution with
which the Company has an account or safe deposit box and the names of all
persons authorized to draw thereon or have access thereto.
Section 3.23 Business Plan. The Company has delivered to the Parent a true and
accurate copy of its business plan for the year 2000. Except as disclosed in
Section 3.23 of the Company Disclosure Schedule, the Company has no reason to
believe that the plans, objectives, actions and projections contemplated by the
business plan will not be realized.
Section 3.24 Year 2000 Issues. Except for matters which, individually and
in the aggregate, would not have a Material Adverse Effect on the Company,
all proprietary and third-party licensed computer systems, including computer
hardware and software, owned, leased or licensed by the Company and computer
software incorporated in products manufactured by the Company (a) can
accurately and without interruption recognize and manipulate date information
relating to dates prior to, on and after January 1, 2000 and (b) can
accurately and without interruption interact with other year 2000 compliant
computer systems and computer software in a way that does not compromise
their ability to correctly recognize the advent of the year 2000 or to
accurately and without interruption recognize and manipulate date information
relating to dates prior to, on or after January 1, 2000. The Company has not
experienced any year 2000 related problems to date and it does not anticipate
that it will have to incur any costs in the future to achieve year 2000
compliance of its computer systems, hardware, software, or products.
Section 3.25 Proxy Statement and Other Information. None of the information
related to Company which is supplied by the Company for inclusion in the Proxy
Statement described in Section 5.4(a) hereof will, at the time the Proxy
Statement is mailed or at the time of the meeting of stockholders to which the
Proxy Statement relates, contain any untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, except that no
representation or warranty is otherwise made by the Company with respect to the
Proxy Statement.
Section 3.26 Brokers and Finders. Neither the Company nor any of its officers,
directors or employees has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finder's fees in connection
with the transactions contemplated herein, except that
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the Company intends to employ a financial advisor. As soon as practicable, the
Company will deliver to Parent a copy of all agreements pursuant to which such
financial advisor will be entitled to any payment relating to the transactions
contemplated by this Agreement.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Except as set forth on the disclosure letter to be delivered by the
Parent and the Merger Sub to the Company pursuant to Section 2.1 (the
"Parent's Disclosure Schedule"), Parent and Merger Sub each, jointly and
severally, represents and warrants to the Company as follows:
Section 4.1 Organization and Authority.
(a) Each of the Parent and the Merger Sub is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
in the case of Parent, and Texas, in the case of Merger Sub, has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as it is now being conducted and is duly qualified and
in good standing to do business in each jurisdiction in which the nature of
the business conducted by it or the ownership or leasing of its properties
makes such qualification necessary, other than where the failure to be so duly
qualified and in good standing would not have a Parent Material Adverse
Effect. (The term "Parent Material Adverse Effect" as used in this Agreement
shall mean any change or effect that, individually or when taken together with
all such other changes or effects, would be materially adverse to the
financial condition, operations or current business of Parent, excluding,
however, all changes or effects caused by general economic or industry-wide
conditions or resulting from any change in law or GAAP.) It has all requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. All necessary action,
corporate or otherwise, required to have been taken by or on behalf of it by
applicable law, its charter document or otherwise to authorize (i) the
approval, execution and delivery on its behalf of this Agreement and (ii) its
performance of its obligations under this Agreement and the consummation of
the transactions contemplated hereby has been taken, except that the
transactions must be approved by its stockholders. This Agreement constitutes
its valid and binding agreement, enforceable against it in accordance with its
terms, except (A) as the same may be limited by applicable bankruptcy,
insolvency, moratorium or similar laws of general application relating to or
affecting creditors' rights, including without limitation, the effect of
statutory or other laws regarding fraudulent conveyances and preferential
transfers, and (B) for the limitations imposed by general principles of equity.
(b) The Parent does not have any subsidiary. Except as disclosed in Section
4.1 on the Parent's Disclosure Schedule, Parent does not directly or
indirectly own any interest in any other corporation, partnership, joint
venture or other business association or entity which is material to Parent.
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Section 4.2 No Breach. Assuming that the consents described in Section 4.2 of
the Parent Disclosure Schedule are obtained, the execution and delivery of
this Agreement do not, and the consummation of the transactions contemplated
hereby will not, (i) violate or conflict with its charter or bylaws or (ii)
constitute a breach or default (or an event that with notice or lapse of time
or both would become a breach or default) or give rise to any lien, third
party right of termination, cancellation, material modification or
acceleration under any agreement, understanding or undertaking to which it is
a party or by which Parent is bound, except where such breach, default, lien,
third party right, cancellation, modification or acceleration would not have a
Parent Material Adverse Effect, or (iii) constitute a violation of any law,
rule or regulation to which Parent is subject.
Section 4.3 Consents and Approvals. Neither the execution and delivery of this
Agreement by it nor its consummation of the transactions contemplated hereby
will require Parent or Merger Sub to obtain any consent, approval,
authorization or permit of, or to make any filing with or give any
notification to, any governmental or regulatory authority, except (i) for
filings required under the Securities Exchange Act of 1934 (the "Exchange
Act"), (ii) for filing of the Certificate of Merger pursuant to the DGCL,
(iii) for registration of Parent Company Stock and related filings under the
Securities Act of 1933 (the "Securities Act") and applicable state securities
or blue sky laws and (iv) where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or
notifications, would not prevent it from performing its obligations under this
Agreement without having a Parent Material Adverse Effect.
Section 4.4 Capitalization.
(a) Parent's authorized capital stock consists of (i) 20,000,000 shares of
Parent Common Stock, of which 12,080,175 were issued and outstanding as of
September 30, 1999, and (ii) 1,000,000 shares of Preferred Stock, par value
$.01 per share, of which 0 shares were issued and outstanding as of September
30, 1999. Since September 30, 1999, 1,000,000 shares of Parent Common Stock
have been issued. No other shares of Parent Common Stock have been issued,
except upon exercise of employee stock options or upon conversion of shares of
Preferred Stock or pursuant to the Parent's Employee Stock Purchase Plan and
no additional shares of Preferred Stock have been issued. As of September 30,
1999, there were outstanding options to purchase 4,588,768 shares of Parent
Common Stock and no options have been granted after September 30, 1999, except
for options granted to employees in the ordinary course of business consistent
with past practice. As of the date of this Agreement, warrants to purchase
2,097,123 shares of Parent Common Stock are issued outstanding. Each of the
issued shares of capital stock of, or other equity interests in, of the Parent
is duly authorized, validly issued and, in the case of shares of capital
stock, fully paid and nonassessable, and have not been issued in violation of
(nor are any of the authorized shares of capital stock of, or other equity
interests in, the Parent subject to) any preemptive or similar rights created
by statute, the Certificate of Incorporation or Bylaws of the Parent, or any
agreement to which the Parent is a party or is bound.
(b) Except as disclosed in Section 4.4 of the Parent Disclosure Schedule, no
bonds, debentures, notes or other indebtedness of the Parent having the right
to vote (or convertible into or
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exchangeable or exercisable for securities having the right to vote) on any
matters on which stockholders may vote is issued or outstanding.
(c) Merger Sub's authorized capital stock consists of 1,000 shares of Merger
Sub Common Stock, all of which have been issued to the Parent and are
outstanding.
Section 4.5 SEC Reports; Financial Statements. Parent has filed all required
forms, reports and documents with the SEC pursuant to the Exchange Act since
December 31, 1998 (collectively, the "Parent's SEC Reports"). The audited
financial statements of Parent contained, or incorporated by reference, in
Parent's Annual Report on Form 10-K for the year ended December 31, 1998,
which consist of (i) consolidated balance sheets as of December 31, 1997 and
1998, (ii) consolidated statements of income, stockholders' equity and cash
flows for each of the three fiscal years in the period ended December 31,
1998, and (iii) the notes thereto, certified by PriceWaterhouseCoopers LLP
("Parent's Auditors"), whose report thereon is included therewith, were
prepared in accordance with GAAP and present fairly Parent's financial
condition and the results of its operations as of the relevant dates thereof
and for the periods covered thereby. The unaudited financial statements of
Parent contained in its Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 1999 (the "Parent 10-Q"), which consist of condensed
consolidated balance sheets as of September 30, 1998 and September 30, 1999,
condensed consolidated statements of income, stockholder's equity and cash
flows for the nine months ended September 30, 1998 and 1999, and notes
thereto, were prepared in accordance with GAAP, and present fairly Parent's
financial condition and the results of its operations as of the relevant dates
thereof and for the period covered thereby, subject to year-end adjustments.
Section 4.6 Absence of Certain Changes.
(a) Except as otherwise disclosed in Parent's SEC Reports (without further
amendment) or the Parent's Disclosure Schedule, since September 30, 1999 there
have not been any events or conditions of any character that, individually or
in the aggregate, have or would reasonably be expected to have a Parent
Material Adverse Effect.
(b) During the period from September 30, 1999 to the date of this Agreement,
the Parent has not engaged in any conduct that is proscribed during the period
from the date of this Agreement to the Effective Time by clauses (i) through
(x) of Section 5.2(b).
Section 4.7 Absence of Undisclosed Liabilities. The Parent does not have any
material indebtedness, liability or obligation of the type required by GAAP to
be reflected on a balance sheet that is not reflected or reserved against in
the balance sheet dated as of September 30, 1999 included or incorporated in
the Parent 10-Q or otherwise disclosed in the Parent SEC Reports or the
Parent's Disclosure Schedule, except for such indebtedness, liabilities or
obligations which have arisen after such date in the ordinary course of
business.
Section 4.8 Compliance With Law. The Parent holds all licenses, franchises,
certificates, consents, permits and authorizations from all governmental
authorities necessary for the lawful
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conduct of its business, except where the failure to hold any of the foregoing
would not have a Parent Material Adverse Effect. The Parent has not violated,
nor is it in violation of, any such licenses, franchises, certificates,
consents, permits or authorizations or, to Parent's knowledge, any applicable
statutes, laws, ordinances, rules and regulations (including, without
limitation, any of the foregoing related to occupational safety, storage,
disposal, discharge into the environment of hazardous wastes, environmental
protection, conservation, unfair competition, labor practices or corrupt
practices) of any governmental authorities, except where such violations do
not, and insofar as reasonably can be foreseen will not, have a Parent
Material Adverse Effect, and the Parent has not received any notice from a
governmental or regulatory authority within three years of the date hereof of
any such violation.
Section 4.9 Taxes.
(a) All Tax Returns required to be filed before the date hereof by Parent with
respect to any of the income, properties or operations, are in all material
respects true, complete and correct and have been duly filed in a timely
manner, and all taxes shown as due on such Tax Returns have been paid, except
where the failure to so file or pay would not have a Parent Material Adverse
Effect.
(b) To Parent's knowledge, (i) there are no claims, investigations or
assessments pending or threatened against Parent or its subsidiaries for any
alleged deficiency in taxes, and (ii) there is no audit or investigation
currently being conducted that could cause Parent to be liable for any taxes,
which in any case would have a Parent Material Adverse Effect.
(c) Parent has complied in all material respects with all tax withholding
provisions of applicable federal, state and local laws and have paid over to
the proper governmental authorities all amounts required to be so withheld or
paid over before the date hereof, except where the failure to so withhold or
pay would not have a Parent Material Adverse Effect.
Section 4.10 Absence of Litigation. There are no claims, actions, suits,
proceedings or investigations pending or, to the knowledge of Parent,
threatened against Parent, or any properties or rights of Parent or any of its
subsidiaries, before any court, arbitrator or administrative, governmental or
regulatory authority or body, domestic or foreign, that, in the event of an
adverse decision or outcome, could reasonably be expected to have a Parent
Material Adverse Effect.
Section 4.11 Title to Property. Parent has defensible title to all of its
properties and assets, free and clear of all liens, charges and encumbrances
except liens for taxes not yet due and payable and such liens or other
imperfections of title, if any, as do not materially detract from the value of
or interfere with the present use of the property affected thereby or which
would not have a Parent Material Adverse Effect. To Parent's knowledge, all
leases pursuant to which Parent leases from others real or personal property
are valid and effective in accordance with their respective terms, and there
is not, to the knowledge of Parent, under any of such leases, any existing
default or event of default (or event which with notice or lapse of time, or
both, would constitute a material default or event of default and in respect
of which the Parent has not taken adequate steps to prevent such a
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default from occurring) except where the lack of such good standing, validity
and effectiveness, or the existence of such default or event of default would
not have a Parent Material Adverse Effect.
Section 4.12 Intellectual Property.
(a) Section 4.12 of the Parent Disclosure Schedule lists all existing United
States and foreign patents, trademarks, trade names, service marks,
copyrights, trade secrets, and applications therefor that are material to the
Parent's business as currently conducted (the "Parent Intellectual Property
Rights"). The Parent owns, or possesses adequate licenses or other valid
rights to use, such Parent Intellectual Property Rights.
(b) The conduct of the business of the Parent as now conducted does not, to
the Parent's knowledge, infringe any valid patents, trademarks, tradenames,
service marks or copyrights of others. The consummation of the transactions
contemplated hereby will not result in the loss or impairment of any Parent
Intellectual Property Rights. To the best of the Parent's knowledge, no third
party has interfered with, infringed upon, misappropriated, diluted, violated
or otherwise come into conflict with any Parent Intellectual Property Rights,
except for misappropriations and violations which, individually or in the
aggregate, would not have a Material Adverse Effect on the Parent.
Section 4.13 Employee Benefit Plans; Employment Agreements.
(a) The Parent's Disclosure Schedule lists all employee benefit plans (as
defined in ERISA) and all bonus, stock option, stock purchase, incentive,
deferred compensation, supplemental retirement, severance and other similar
fringe or employee benefit plans, programs or arrangements, and any current or
former employment or executive compensation or severance agreements, written
or otherwise, for the benefit of, or relating to, any employee of the Parent,
any trade or business (whether or not incorporated) which is a member of a
controlled group including the Parent or which is under common control with
the Parent (a "Parent ERISA Affiliate") within the meaning of section 414 of
the Code, as well as each plan with respect to which the Parent or a Parent
ERISA Affiliate could incur liability under Section 4069 (if such plan has
been or was terminated) or Section 4212(c) of ERISA (together, the "Parent
Benefit Plans"), excluding former agreements under which the Parent has no
remaining obligations. Copies of each of the following, to the extent
applicable, have been made available to the Company with respect to each
Parent Benefit Plan: the most recent annual report (Form 5500) filed with the
IRS, the plan document, the trust agreement, the most recent summary plan
description if required by ERISA, the most recent actuarial report or
valuation relating to each Benefit Plan subject to Title IV of ERISA, and the
most recent determination letter issued by the IRS with respect to any Benefit
Plan intended to be qualified under section 401 of the Code.
(b) With respect to each Parent Benefit Plan, no event has occurred and, to
the knowledge of Parent, there currently exists no condition or set of
circumstances, in connection with which Parent or any of its subsidiaries
could be subject to any liability under the terms of such Parent Benefit Plan,
ERISA, the Code or any other applicable law which would have a Parent Material
Adverse Effect.
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(c) Each Parent Benefit Plan intended to be qualified under section 401 of the
Code (i) satisfies in form the requirements of such section except to the
extent amendments are not required by law to be made until a date after the
Effective Time, (ii) has received a favorable determination letter from the
IRS regarding such qualified status, and (iii) has not, since receipt of the
most recent favorable determination letter, been amended in a way that would
adversely affect its qualified status.
(d) There are no actions, suits, or claims pending (other than routine claims
for benefits) or, to the knowledge of the Parent, threatened against, or with
respect to, any Parent Benefit Plan or its assets that could reasonably be
expected to have a Parent Material Adverse Effect.
(e) To the knowledge of the Parent, there is no matter pending (other than
routine qualification determination filings) with respect to any Parent
Benefit Plans before the IRS, the U.S. Department of Labor, the PBGC or any
other governmental authority.
(f) All material contributions required to be made to Parent Benefit Plans
pursuant to their terms and the provisions of ERISA, the Code, or any other
applicable law have been timely made.
(g) As to each Parent Benefit Plan subject to Title IV of ERISA, (i) there has
been no event or condition which presents a significant risk of plan
termination, (ii) no accumulated funding deficiency, whether or not waived,
within the meaning of Section 302 of ERISA or section 412 of the Code has been
incurred, (iii) no reportable event within the meaning of Section 4043 of
ERISA (for which the disclosure requirements of Regulation section 4043.1 et
seq., promulgated by the PBGC, have not been waived) has occurred within six
years prior to the date of this Agreement, (iv) no notice of intent to
terminate such Parent Benefit Plan has been given under Section 4041 of ERISA,
(v) no proceeding has been instituted under Section 4042 of ERISA to terminate
such Parent Benefit Plan, (vi) no liability to the PBGC has been incurred
(other than with respect to required premium payments), (vii) no withdrawal
liability, within the meaning of Section 4201 of ERISA, has been incurred,
which withdrawal liability has not been satisfied, and (viii) the assets of
the Parent Benefit Plan equal or exceed the actuarial present value of the
benefit liabilities, within the meaning of Section 4041 of ERISA, under the
Parent Benefit Plan, based upon reasonable actuarial assumptions and the asset
valuation principles established by the PBGC.
(h) Neither the Parent nor Parent ERISA Affiliates contributes or has an
obligation to contribute, and has not within six years prior to the date of
this Agreement contributed or had an obligation to contribute to, a
multiemployer plan within the meaning of Section 3(37) of ERISA.
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Section 4.14 Material Contracts.
(a) Set forth in Section 4.14(a) of the Parent Disclosure Schedule is a list
of each contract, lease, indenture, agreement, arrangement or understanding to
which Parent is subject that is of a type that would be required to be
included as an exhibit to a Form S-1 Registration Statement pursuant to the
rules and regulations of the SEC if such registration statement was filed by
Parent (the "Parent Material Contracts").
(b) All Parent Material Contracts are in full force and effect, the Parent has
performed its obligations thereunder to date and, to the knowledge of the
Parent, each other party thereto has performed its obligations thereunder to
date, other than any failure of any such Parent Material Contract to be in
full force and effect or any nonperformance thereof that could not reasonably
be expected to have a Parent Material Adverse Effect.
Section 4.15 Labor Matters.
(a) There are no controversies pending or, to the knowledge of the Parent,
threatened, between the Parent and any of its employees, which controversies
have or may reasonably be expected to have a Parent Material Adverse Effect.
(b) The Parent is not a party to any collective bargaining agreement or other
labor union contract applicable to persons employed by the Parent nor does the
Parent know of any activities or proceedings of any labor union to organize
any such employees.
(c) The Parent has no knowledge of any strikes, slowdowns, work stoppages,
lockouts or threats thereof, by or with respect to any employees of the Parent.
Section 4.16 Environmental Matters. Except in all cases as, in the aggregate,
have not had and could not reasonably be expected to have a Parent Material
Adverse Effect, Parent, to Parent's knowledge, (i) has obtained all applicable
permits, licenses and other authorizations which are required under foreign,
federal, state or local laws relating to pollution or protection of the
environment, including laws relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants, or hazardous or toxic
materials or wastes into ambient air, surface water, ground water or land or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants,
contaminants or hazardous or toxic materials or wastes by Parent (or its
agents); (ii) is in compliance with all terms and conditions of such required
permits, licenses and authorizations, and also are in compliance with all
other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in such laws or
contained in any regulation, code, plan, order, decree, judgment, notice or
demand letter issued, entered, promulgated or approved thereunder; (iii) as of
the date hereof, is not aware of nor have received notice of any event,
condition, circumstance, activity, practice, incident, action or plan which is
reasonably likely to interfere with or prevent continued compliance with or
which would give rise to any common law or statutory liability, or otherwise
form the basis of any claim, action, suit or proceeding, based on or resulting
from Parent's (or any
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of its agents') manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling or the emission, discharge or release
into the environment, of any pollutant, contaminant, or hazardous or toxic
material or waste; and (iv) have taken all actions necessary under applicable
requirements of foreign, federal, state or local laws, rules or regulations to
register any products or materials required to be registered by the Parent (or
any of its agents) thereunder.
Section 4.17 Insurance. Parent maintains general liability and other business
insurance that Parent believes to be reasonably prudent for its business.
Section 4.18 Vote Required. The only vote of the holders of any class or
series of Parent's capital stock necessary to approve the issuance of the
Parent Common Stock in the Merger (other than the vote required to amend the
Company's authorized number of shares of Parent Common Stock) is pursuant to
the rules of AMEX. In accordance with such rule, the affirmative vote of the
holders of a majority of the outstanding shares of Parent Common Stock voting
on the proposal to so issue the Parent Common Stock is required and the total
vote cast on such proposal must represent over 50% in interest of the
outstanding Parent Common Stock. Parent, as the sole stockholder of Merger
Sub, will promptly vote to approve this Agreement.
Section 4.19 Affiliates. Except for the directors and executive officers of
Parent, there are no persons who, to the knowledge of Parent, may be deemed to
be affiliates of Parent under Rule 1-02 of Regulation S-X of the SEC.
Section 4.20 Certain Business Practices. None of Parent or any directors,
officers, agents or employees of Parent has (a) used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity, (b) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties
or campaigns or violated any provision of the FCPA, (c) consummated any
transaction, made any payment, entered into any agreement or arrangement or
taken any other action in violation of Section 1128(B)(b) of the Social
Security Act, as amended, or (d) made any other unlawful payment, which in any
case would have a Parent Material Adverse Effect.
Section 4.21 Customers and Suppliers. Section 4.21 of the Parent Disclosure
Schedule sets forth the 10 most significant third-party suppliers to, and the
10 most significant third-party customers of, the Parent (in terms of payments
to or by such persons) during the eleven-month period ending on November 30,
1999. To the knowledge of the Parent, there is no present intent of any
significant customer, vendor or supplier of the Parent to discontinue or
substantially alter its relationship with the Parent or upon consummation of
the Merger.
Section 4.22 Year 2000 Issues. The disclosures set forth in the Parent SEC
Reports concerning potential computer hardware and software problems
associated with the year 2000 are true and correct in all material respects.
Section 4.23 Proxy Statement and Other Information. None of the
information related to Parent which is supplied by Parent for inclusion
in the Proxy Statement described in Section 5.4(a)
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hereof will, at the time the Proxy Statement is mailed or at the time of the
meeting of stockholders to which the Proxy Statement relates, contain any
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, except that no representation or
warranty is otherwise made by Parent or Merger Sub with respect to the Proxy
Statement.
Section 4.24 Brokers. Neither the Parent, the Merger Sub nor any of their
officers, directors or employees has employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finder's fees in
connection with the transactions contemplated herein.
ARTICLE V.
OTHER AGREEMENTS
Section 5.1 Election of New Parent Directors and Officers. Subject to
occurrence of the Merger and subject to the rights of Banca Del Gottardo to
appoint two of the members of the Board of Directors of the Parent, Parent
shall take all action necessary under its bylaws or otherwise to cause the
number of members constituting the whole Board of Directors of the Parent to
be five and to elect Messrs.William O. Hunt, John J. McDonald, Jr., Robert C.
Harshaw, Nick Stanfield and a person to be agreed upon by Parent and the
Company to Parent's Board of Directors, effective the Effective Time. Such
persons shall hold office until the next annual meeting of Parent's
stockholders and until their successors shall have been elected and qualified.
Parent's Board of Directors shall nominate such persons for re-election at
Parent's next annual meeting of stockholders, if such persons are then willing
and able to continue to serve on Parent's Board of Directors.
Section 5.2 Conduct of Business Pending Merger.
(a) From the date of this Agreement until the Effective Time, unless otherwise
contemplated by this Agreement or consented to in writing by the other party,
each of the Company and the Parent shall:
(i) operate its business in all material respects in the usual and
ordinary course consistent with past practice; and
(ii) use all reasonable best efforts to preserve substantially intact its
business organization, maintain and keep its material properties and
assets in as good repair and condition as at present, ordinary wear and
tear excepted, retain the services of its respective key employees and
maintain its relationships with its material customers and suppliers.
(b) Except as contemplated by this Agreement or otherwise consented to in
writing by the other party, from the date of this Agreement until the
Effective Time, each of the Company and the Parent shall not do any of the
following:
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(i) adopt any amendments to its certificate or articles of incorporation
which would alter the terms of the Company Common Stock or Parent
Common Stock or would have an adverse impact on the consummation of the
transactions contemplated by this Agreement;
(ii) declare, set aside or pay any dividend or other distribution (whether
in cash, stock or property or any combination thereof) in respect of
its capital stock, or, except as provided in the terms of the Parent's
Preferred Stock, redeem or otherwise acquire any of its securities;
(iii) issue, sell, deliver or agree or commit to issue, sell or deliver
(whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or otherwise) any stock
of any class or any other securities or amend any of the terms of any
such securities or agreements outstanding on the date hereof; provided,
however, the Company or the Parent may issue shares of Company Common
Stock or Parent Common Stock, respectively, upon the exercise of
employee stock options, warrants outstanding on the date of this
Agreement, the Parent's Employee Stock Purchase Plan or the Parent's
Preferred Stock outstanding on the date hereof;
(iv) (A) create, incur or assume any long-term debt (including obligations
in respect of capital leases but excluding any intercompany
indebtedness) that is material to the Company or the Parent, as the
case may be, (B) assume, guarantee, endorse or otherwise become liable
or responsible (whether directly, contingently or otherwise) for the
obligations of any person other than the Company or the Parent that is
material to the Company or the Parent, as the case may be, or (C) make
any loans, advances or capital contributions to, or investments in, any
person other than the Company or the Parent, which loans, advances or
capital contributions are material to the Company or the Parent, as the
case may be;
(v) acquire, sell, lease or dispose of any assets that are material to the
Company or the Parent, as the case may be, other than sales that are in
the ordinary and usual course of business consistent with past practice
and, in the case of the Parent, sales or dispositions of shares or the
assets of ILD Telecommunications, Inc.;
(vi) mortgage, pledge or subject to any lien, lease, security interest or
other charge or encumbrance any of its properties or assets, tangible
or intangible, material to the Company or the Parent, as the case may
be;
(vii) (A) increase the compensation payable to or to become payable to any
director or officer, except for increases in salary or wages payable or
to become payable in the ordinary course of business and consistent
with past practice; (B) grant any severance or termination pay (other
than pursuant to agreements in effect on the date of this Agreement)
to, or enter into or amend any benefit plan (except for administrative
or technical amendments necessary to comply with applicable law) or any
employment or severance agreement with, any director, officer or
employee;
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(viii) (A) effect any reorganization or recapitalization or (B) split, combine
or reclassify any of its capital stock or issue or authorize or propose
the issuance of any other securities in respect of, in lieu of or in
substitution for, shares of its capital stock;
(ix) change any of its methods of accounting in effect at September 30,
1999, except as may be required by law or GAAP; or
(x) take, or agree in writing or otherwise to take, any of the foregoing
actions or any actions that would (A) make any representation or
warranty of the Company or the Parent, as the case may be, contained in
this Agreement untrue or incorrect as of the date when made or as of
the Closing Date, (B) result in any of the conditions of this Agreement
not being satisfied, or (C) be inconsistent with the terms of this
Agreement or the transactions contemplated hereby.
Section 5.3 Access to Information.
(a) Between the date of this Agreement and the Effective Time, the Company
will (i) give Parent and its authorized representatives reasonable access,
during regular business hours upon reasonable notice, to all offices and other
facilitates and to all of its books and records, (ii) permit Parent to make
such reasonable inspections as it may require, and (iii) cause its officers
and those of its subsidiaries to furnish Parent with such financial and
operating data and other information with respect to the business and
properties of the Company, as Parent may from time to time reasonably request
and as the Company may have on hand or be able to produce without hardship.
(b) Between the date of this Agreement and the Effective Time, Parent will (i)
give the Company and its authorized representatives reasonable access, during
regular business hours upon reasonable notice, to all offices and other
facilitates and to all of its books and records, (ii) permit the Company to
make such reasonable inspections as it may require, and (iii) cause its
officers to furnish the Company with such financial and operating data and
other information with respect to the business and properties of Parent as the
Company may from time to time reasonably request and as Parent may have on
hand or be able to produce without hardship.
(c) Notwithstanding the foregoing provisions of this Section 5.3, neither
party shall be required to grant access or furnish information to the other
party to the extent that such access or the furnishing of such information is
prohibited by law or by confidentiality agreements with third parties in
effect on the date hereof.
(d) Each party to this Agreement shall hold in confidence all nonpublic
information received from the other party to this Agreement until such time as
such information is otherwise publicly available and, if this Agreement is
terminated, each party will deliver to the other party all documents, work
papers and other materials (including copies) obtained by such party or on its
behalf from the other party as a result of this Agreement or in connection
herewith, whether so obtained before or after the execution hereof.
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Section 5.4 Preparation of Form S-4 and Proxy Statement.
(a) Parent shall prepare and file with the SEC at such appropriate time as
determined by Parent, a proxy statement relating to the shareholders meeting
of Parent to be held in connection with the Merger, as amended or supplemented
from time to time (as so amended or supplemented, the "Proxy Statement") and
Parent shall prepare and file with the SEC at such appropriate time as
determined by Parent, a registration statement on Form S-4 with respect to the
Parent Common Stock issuable in the Merger, and in which the Proxy Statement
will be included within the prospectus. Parent and the Company shall use all
reasonable efforts to have the Form S-4 declared effective by the SEC as
promptly as practicable after such filing. Prior to the Effective Date, Parent
shall also take any action (other than qualifying as a foreign corporation or
taking any action which would subject it to service of process in any
jurisdiction where Parent is not now so qualified or subject) required to be
taken under applicable state blue sky or securities laws in connection with
the issuance of Parent Common Stock in connection with the Merger and will pay
all expenses incident thereto. If at any time prior to the Effective Time any
event shall occur that should be set forth in an amendment of or a supplement
to the Form S-4, Parent shall prepare and file with the SEC such amendment or
supplement as soon thereafter as is reasonably practicable. Parent and the
Company shall cooperate with each other in the preparation of the Form S-4 and
the Proxy Statement and any amendment or supplement thereto, and each shall
notify the other of the receipt of any comments of the SEC with respect to the
Form S-4 and any amendment or supplement thereto or for additional
information, and shall provide to the other promptly copies of all
correspondence between Parent or the Company, as the case may be, and the SEC
with respect to the Form S-4 or the Proxy Statement. Each of Parent and the
Company agrees to use its reasonable best efforts, after consultation with
each other, to respond promptly to all such comments of and requests by the
SEC and to cause (i) the Form S-4 to be declared effective by the SEC at the
earliest practicable time following such filing and to be kept effective as
long as is necessary to consummate the Merger, and (ii) the Proxy Statement to
be mailed to the holders of Parent Common Stock entitled to vote at the
meeting of the stockholders of Parent at the earliest practicable time.
(b) Parent agrees that the Form S-4, when declared effective by the SEC, will
not contain an 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; provided, however, that the foregoing shall not apply to the
extent that any such untrue statement of a material fact or omission to state
a material fact was made by Parent in reliance upon and in conformity with
written information concerning the Company or any of its affiliates furnished
to Parent by the Company or any of its affiliates. Parent will advise the
Company, promptly after it receives notice thereof, of the time when the Form
S-4 has become effective or any supplement or amendment has been filed, of the
issuance of any stop order, or the suspension of the qualification of Parent
Common Stock issuable in connection with the Merger for offering or selling in
any jurisdiction or any request by the SEC for amendment of the Proxy
Statement or the Form S-4 or comments thereon and responses thereto or
requests for additional information.
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(c) Each shareholder of the Company receiving Merger Stock agrees that,
although the Merger Stock has been registered under the Securities Act, the
Merger Stock may only be transferred, sold or otherwise disposed of according
to the following schedule:
<TABLE>
<CAPTION>
Days Following The Total % of Merger Stock Issued
Effective Date To Such Shareholder Which May Be Sold
<S> <C>
0-90 days 0%
91-180 days 10%
181-270 days 30%
271-360 days 60%
Over 360 days 100%
</TABLE>
; and each of such shareholders agrees to hold the Merger Stock subject to
such restriction, and further agrees that all certificates representing the
Merger Stock shall contain substantially the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
PROVISIONS OF AN AGREEMENT AND PLAN OF MERGER, DATED AS OF JANUARY 18,
2000, AS MAY BE AMENDED, AND MAY NOT BE TRANSFERRED SOLD OR OTHERWISE
DISPOSED OR EXCEPT AS OTHERWISE PROVIDED THEREIN. THE CORPORATION WILL
FURNISH A COPY OF SUCH AGREEMENT TO THE RECORD HOLDER OF THIS
CERTIFICATE WITHOUT CHARGE ON REQUEST TO THE CORPORATION AT ITS
PRINCIPAL PLACE OF BUSINESS OR REGISTERED OFFICE.
Notwithstanding the foregoing, the limitations set forth in this Section
5.4(c) shall not apply to individuals that hold 2000 or fewer shares of
Company Common Stock as of the date of this Agreement.
(d) Notwithstanding the preceding provisions of this Section 5.4, as a
condition (which shall be for the benefit of both the Company and the Parent)
to the recommendation of the Board of Directors of the Company or the Parent
to their stockholders, the holding of a stockholders' meeting and the mailing
of the Proxy Statement, (i) the Parent must receive (A) the opinion of
Houlihan, Lokey, Howard & Zukin to the effect that the Merger is fair to the
Parent and its stockholders from a financial point of view, and (B) the
letters of KPMG LLP referred to in Section 5.14, and (ii) neither of such
opinion or letters shall have been withdrawn, revoked, or modified.
Additionally, the Parent need not hold a stockholders meeting, mail the Proxy
Statement or complete the Merger unless, prior to the filing of preliminary
proxy materials and, at Parent's option filing of the Form S-4 with the SEC,
the Parent shall have received copies of an agreement, satisfactory in form
and substance to the Parent, pursuant to which the holders of at least
6,000,000 shares of the Company
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Common Stock shall have irrevocably agreed to vote, or granted Parent an
irrevocable proxy to vote, all their shares in favor of this Agreement, the
Merger and all other related transactions and events.
Section 5.5 AMEX Exchange Listing. Parent shall use all reasonable best
efforts to obtain, prior to the Effective Time, approval for listing of the
Parent Common Stock to be issued pursuant to the Merger on the AMEX upon
official notice of issuance.
Section 5.6 Reasonable Best Efforts. Subject to the fiduciary duties of the
Company's and the Parent's Board of Directors, each of the parties hereto
agrees to use its reasonable best efforts to take, or cause to be taken, all
appropriate action, and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and
make effective the transactions contemplated by this Agreement in the most
expeditious manner practicable, including, but not limited to, the
satisfaction of all conditions to the Merger.
Section 5.7 Public Announcements; Confidentiality. Except as may be required
by applicable law, no party hereto shall make any public announcements or
otherwise communicate with any news media or any other party with respect to
this Agreement or any of the transactions contemplated hereby without prior
consultation with the other parties as to the timing and contents of any such
announcement or communications as may be reasonable under the circumstances;
provided, however, that nothing contained herein shall prevent any party from
(i) promptly making all filings with governmental authorities as may, in its
judgment, be required or advisable in connection with the execution and
delivery of this Agreement or the consummation of the transactions
contemplated hereby or (ii) disclosing the terms of this Agreement to such
party's legal counsel, financial advisors or accountants in furtherance of the
transactions contemplated by this Agreement. The press release announcing the
execution and delivery of this Agreement shall be a joint press release of the
Company and Parent.
Section 5.8 Notification. Each party hereto shall, in the event of, or
promptly after obtaining knowledge of the occurrence or threatened occurrence
of, any fact or circumstance that would cause or constitute a material breach
of any of its representations and warranties set forth herein, give notice
thereof to the other parties and shall use its reasonable best efforts to
prevent or promptly to remedy such breach.
Section 5.9 Meetings of Stockholders. Subject to the provisions of Section
5.4(d), each of Parent and the Company shall take all action necessary, in
accordance with the Delaware General Corporation Law (the "DGCL") and the TBCA
and its charter and bylaws, to duly call, give notice of, convene and hold a
meeting of its stockholders as promptly as practicable, in the case of the
Company, to consider and vote upon the approval of this Agreement, and, in the
case of Parent, to vote upon the issuance of Parent Common Stock pursuant to
the Merger and amendments of the Parent's Certificate of Incorporation to
change its name to the name designated by Parent and to increase the number of
authorized shares of Parent Common Stock (collectively, the "Transactions").
The stockholder votes required for the approval of the Transactions shall be
the vote required by the TBCA and its charter and bylaws, in the case of the
Company, and the DGCL and the rules of AMEX, in the case of Parent. Subject to
the fiduciary duties of the Boards of Directors under
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applicable law as advised by outside counsel and the provisions of Section
5.4(d), the Company and Parent shall use their reasonable best efforts to
solicit from their respective stockholders proxies in favor of approval of the
Transactions and to take all other action necessary to secure the votes of
stockholders required to effect the Transactions.
Section 5.10 Regulatory and Other Authorizations
(a) Each party hereto agrees to use its reasonable best efforts to obtain all
authorizations, consents, orders and approvals of federal, state, local and
foreign regulatory bodies and officials and non-governmental third parties
that may be or become necessary for (i) its execution and delivery of, and the
performance of its obligations pursuant to, this Agreement and (ii) the
ownership of the Surviving Corporation by Parent, and each party will
cooperate fully with the other parties in promptly seeking to obtain all such
authorizations, consents, orders and approvals.
(b) In connection with and without limiting the foregoing, the Company and
Parent shall (i) take all action necessary to ensure that no state takeover
statute or similar statute (including Articles 13.01-13.08 of the TBCA) or
regulation is or becomes applicable to the Merger, this Agreement or any of
the other transaction contemplated hereby and (ii) if any state takeover
statute or similar statute or regulation becomes applicable to the Merger,
this Agreement or any of the other transactions contemplated hereby, take all
action necessary to ensure that the Merger and the other transactions
contemplated hereby may be consummated as promptly as practicable on the terms
contemplated by this Agreement and otherwise to minimize the effect of such
statute or regulation on the Merger and the other transactions contemplated by
this Agreement.
Section 5.11 Further Assurances. Each of the parties hereto shall execute such
documents and other instruments and take such further actions as may be
reasonably required or desirable to carry out the provisions hereof and
consummate the transactions contemplated hereby or, at and after the Effective
Time, to evidence the consummation of the transactions contemplated by this
Agreement. Upon the terms and subject to the conditions hereof, each of the
parties hereto shall take or cause to be taken all actions and to do or cause
to be done all other things necessary, proper or advisable to consummate and
make effective as promptly as practicable the transactions contemplated by
this Agreement and to obtain in a timely manner all necessary waivers,
consents and approvals and to effect all necessary registrations and filings.
Section 5.12 Employee Benefits.
(a) Parent hereby agrees to provide to officers and employees of the Company
who become or remain regular (full-time) employees of Parent or any of its
subsidiaries ("Continuing Employees"), employee benefits, other than stock
options, no less favorable than those provided by Parent to their similarly
situated officers and employees. Any employee of the Company who becomes a
participant in any employee benefit plan, program, policy, or arrangement of
Parent or any of its subsidiaries after the Effective Time shall be given
credit under such plan, program, policy, or arrangement for all service with
the Company prior to becoming such a participant for purposes of eligibility
and vesting.
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(b) The Parent shall assume, effective at the Effective Time, each Company
Option Plan and each Company Stock Option that remains unexercised in whole or
in part as of the Effective Time and substitute shares of Parent Common Stock
for the shares of Company Common Stock purchasable under each such assumed
option ("Assumed Option"), which assumption and substitution shall be effected
as follows:
(i) the Assumed Option shall have the same terms and conditions as the
Company Stock Option being assumed, subject to Section 5.12(b)(ii) and
(iii) below;
(ii) the number of shares of Parent Common Stock purchasable under the
Assumed Option shall be equal to the number of shares of Parent Common
Stock that the holder of the Company Stock Option being assumed would
have received (without regard to any vesting schedule) upon
consummation of the Merger had such Company Stock Option been exercised
in full immediately prior to consummation of the Merger; and
(iii) the per share exercise price of such Assumed Option shall be an amount
(rounded to the nearest cent) equal to the per share exercise price of
the Company Stock Option being assumed divided by the number of shares
of Parent Common Stock issuable in the Merger for each share of Company
Common Stock.
If the foregoing calculation results in an Assumed Option being exercisable
for a fraction of a share of Parent Common Stock, then the number of shares of
Parent Common Stock subject to such Assumed Option shall be rounded down to
the nearest whole number of shares, and the total exercise price for the
Assumed Option shall be reduced by the exercise price of the fractional share.
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(c) Parent shall take all corporate action necessary to reserve for issuance
a sufficient number of shares of Parent Common Stock for delivery upon
exercise of the Assumed Options.
Section 5.13 Merger Sub. Prior to the Effective Time, Merger Sub shall not
conduct any business or make any investments other than as specifically
contemplated by this Agreement and will not have any assets (other than a de
minimis amount of cash paid to Merger Sub for the issuance of its stock to
Parent) or liabilities.
Section 5.14 Letter from Accountants. The Company shall use reasonable best
efforts to cause to be delivered to the Company and Parent two letters from
KPMG LLP, one dated no earlier than three business days prior to the date on
which the Proxy Statement is mailed to the Parent's stockholders and one
dated no earlier than three business days prior to the Closing Date, each
addressed to the Boards of Directors of the Company and Parent concerning the
Company, in form reasonably satisfactory to Parent and customary in scope for
comfort letters delivered by independent public accountants in connection
with registration statements containing a prospectus similar to the Proxy
Statement.
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Section 5.15 No Solicitation.
(a) Subject to Section 5.15(c), Parent shall not (and Parent shall use its
reasonable best efforts to cause its officers, directors, employees,
representatives and agents, including, but not limited to, investment
bankers, attorneys and accountants, not to), directly or indirectly,
encourage, solicit, participate in or initiate discussions or negotiations
with, provide any information to, or enter into any agreement with, any
person (other than the Company, any of its affiliates or representatives)
concerning any merger, business combination, tender offer, exchange offer,
sale of assets (other than as expressly permitted by Section 5.2), sale of
shares of capital stock or debt securities or similar transactions involving
Parent or any division or operating or principal business unit of Parent (a
"Parent Acquisition Proposal"). Parent will immediately cease any existing
activities, discussions or negotiations with any parties (other than the
Company) conducted heretofore with respect to any of the foregoing.
(b) Subject to Section 5.15(c), the Company shall not (and shall use its
reasonable best efforts to cause its officers, directors, employees,
representatives and agents, including, but not limited to, investment
bankers, attorneys and accountants, not to), directly or indirectly,
encourage, solicit, participate in or initiate discussions or negotiations
with, provide any information to, or enter into any agreement with, any
person (other than Parent, any of its affiliates or representatives)
concerning any merger, business combination, tender offer, exchange offer,
sale of assets (other than as expressly permitted by Section 5.2), sale of
shares of capital stock or debt securities or similar transactions involving
the Company or any division or operating or principal business unit of the
Company (a "Company Acquisition Proposal"). The Company will immediately
cease any existing activities, discussions or negotiations with any parties
(other than the Parent) conducted heretofore with respect to any of the
foregoing.
(c) Notwithstanding the provisions of Section 5.15(a) and (b), prior to the
approval by its stockholders of the transactions contemplated by this
Agreement, Parent or the Company, as the case may be, may, directly or
indirectly, provide access to furnish information concerning its business,
properties or assets to any person pursuant to appropriate confidentiality
agreements, and may negotiate and participate in discussions and negotiations
with such person, if (i) such person has submitted an unsolicited bona fide
written proposal to the Board of Directors of Parent or the Company, as the
case may be, relating to any such transaction, (ii) such proposal provides
for the acquisition for cash and/or publicly traded securities of all of the
outstanding Parent Common Stock or Company Common Stock, (iii) the Board of
Directors of Parent or the Company, as the case may be, determines in good
faith, after consultation with its independent financial advisor, that such
proposal is more favorable to the holders of Parent Common Stock or Company
Common Stock than the Merger and is fully financed or reasonably capable of
being financed or otherwise consummated, and (iv) the Board of Directors of
Parent or the Company, as the case may be, determines in good faith, after
consultation with independent legal counsel, that the failure to provide such
information or access or to engage in such discussions or negotiations would
be inconsistent with their fiduciary duties to Parent's or the Company's
stockholders under applicable law. A proposal meeting all of the criteria in
the preceding sentence is referred to as a "Superior Proposal." Parent or the
Company
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will immediately notify the other party of the Parent Acquisition Proposal,
or Company Acquisition Proposal, respectively, and will keep the other party
fully apprised of all developments with respect to any such Acquisition
Proposal. Subject to the last sentence of this Section 5.15(c) and
notwithstanding anything to the contrary contained in this Agreement, except
in connection with the valid termination of this Agreement pursuant to
Section 7.1(b)(ii) or 7.1(c)(ii) hereof, neither the Board of Directors of
Parent or the Company nor any committee thereof shall (i) approve or
recommend, or propose to approve or recommend, any Parent Acquisition
Proposal or Company Acquisition Proposal, respectively, (ii) enter into any
agreement (other than a confidentiality agreement) with respect to any Parent
or Company Acquisition Proposal or (iii) withdraw or modify, or propose to
withdraw or modify, in a manner adverse to the other party, the approval or
recommendation by its Board of Directors or a committee thereof of the
Merger, this Agreement or the issuance of the Parent Common Stock to be
issued pursuant to the Merger. Nothing contained in this Section shall
prohibit Parent or its Board of Directors from taking and disclosing to their
stockholders a position with respect to a tender offer by a third party
pursuant to Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act.
ARTICLE VI.
CLOSING AND CLOSING DATE; CONDITIONS TO CLOSING
Section 6.1 Closing and Closing Date. As soon as practicable after the
satisfaction or waiver of the conditions set forth herein and prior to the
filing of the Certificate of Merger and Articles of Merger, a closing of the
transactions contemplated hereby (the "Closing") shall take place at the
offices of Jackson Walker, L.L.P. 901 Main Street, Suite 6000, Dallas, Texas
or at such other location as the parties may agree in writing. The date on
which the Closing occurs is referred to as the "Closing Date."
Section 6.2 Conditions to the Obligations of the Company, Parent and Merger
Sub. The respective obligations of the Company, on the one hand, and Parent
and Merger Sub, on the other hand, to consummate the transactions
contemplated hereby are subject to the satisfaction at or prior to the
Closing Date of the following conditions, any or all of which may be waived
in writing by the parties hereto, in whole or in part, to the extent
permitted by applicable law:
(a) this Agreement shall have been approved by the shareholders of the
Company as contemplated hereby;
(b) the issuance of Parent Common Stock pursuant to the Merger, the change of
the Parent's name and the increase in the number of authorized shares of the
Parents' Common Stock shall have been approved by the stockholders of Parent as
contemplated hereby;
(c) the shares of Parent Common Stock to be issued in the Merger shall
have been approved for listing on the AMEX upon official notice of issuance;
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(d) any governmental or regulatory notices or approvals, including blue sky
approvals, required with respect to the transactions contemplated hereby shall
have been either filed or received;
(e) no federal, state or foreign governmental authority or other agency or
commission or court of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any statute or rule, regulation, injunction or
other order (whether temporary or preliminary or permanent) which remains in
effect and which has the effect of making the transactions contemplated hereby
illegal or otherwise prohibiting the transactions contemplated by this
Agreement, or which questions the validity or the legality of the transactions
contemplated hereby and which could reasonably be expected to materially and
adversely affect the value of the business of the Company or the Parent;
(f) the Form S-4 shall have become effective in accordance with the Securities
Act, and no stop order suspending such effectiveness shall have been issued and
remain in effect and no proceeding seeking such an order shall be pending or
threatened.
(g) the Board of Directors of the Company shall be reasonably satisfied
with the Parent's liquidation, disposition or other plans for the shares of
stock of ILD Telecommunications, Inc. held by the Parent as of the date hereof.
Section 6.3 Additional Conditions to Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to effect the Merger and the other
transactions contemplated hereby are also subject to the satisfaction at or
prior to the Closing Date of the following conditions, any or all of which may
be waived in writing by Parent, in whole or in part, to the extent permitted by
applicable law:
(a) each of the representations and warranties of the Company contained in this
Agreement shall be true and correct except to the extent that the breach thereof
shall not constitute a Company Material Adverse Effect as of the Closing Date as
though made on and as of the Closing Date (except to the extent such
representations and warranties specifically relate to an earlier date, in which
case such representations and warranties shall be true and correct as of such
earlier date), and Parent and Merger Sub shall have received a certificate of
the President or Chief Financial Officer of the Company, dated the Closing Date,
to such effect;
(b) the Company shall have performed or complied in all material respects with
all agreements and covenants required by this Agreement to be performed or
complied with by it on or prior to the Closing Date, and Parent and Merger Sub
shall have received a certificate of the President or the Chief Financial
Officer of the Company, dated the Closing Date, to that effect;
(c) since the date of this Agreement, there shall not have been any material
adverse change, or changes which in the aggregate are materially adverse, in the
financial condition, operations or current business of the Company (excluding
changes caused by general economic or industry-wide conditions or resulting from
any change in law or GAAP);
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(d) Jackson Walker L.L.P. shall have delivered to the Parent its written opinion
(which may be based upon certain representations of management of the Company
and Parent and others and upon certain assumptions) as of the date that the
Proxy Statement is first mailed to the Parent's stockholders substantially to
the effect that (i) the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Code and (ii) Parent, Merger Sub and the
Company will each be a party to that reorganization within the meaning of
Section 368(b) of the Code, and such opinion shall not have been withdrawn or
modified in any material respect;
(e) the opinion referred to in Section 5.4(d)(i) shall not have been withdrawn,
rescinded or revoked and the Parent shall have received the letters referred to
in Section 5.14;
(f) the Parent shall have obtained the consent or approval of each person (other
than the governmental approvals referred to in Section 6.2(d)), whose consent or
approval shall be required in order to permit the Parent to consummate the
transactions contemplated hereby, except those for which failure to obtain such
consents and approvals would not, individually or in the aggregate, have a
material adverse effect (i) on the Parent or (ii) upon the consummation of the
transactions contemplated by this Agreement;
(g) Robert Harshaw shall have entered into an employment agreement with the
Parent or the Company and John J. McDonald shall have entered into an employment
agreement with the Parent, each agreement having a term of at least three (3)
years and other terms and conditions satisfactory to the Parent;
(h) the condition set forth in the last sentence of Section 5.4(d) above
shall have been satisfied as provided therein.
(i) The holders of shares of Parent Common Stock and the holders of
shares of Company Common Stock shall not have exercised dissenters' or appraisal
rights.
Section 6.4 Additional Conditions to Obligations of the Company. The obligations
of the Company to effect the Merger and the other transactions contemplated
hereby are also subject to the satisfaction at or prior to the Closing Date of
the following conditions, any or all of which may be waived in writing by the
Company, in whole or in part, to the extent permitted by applicable law:
(a) each of the representations and warranties of Parent and Merger Sub
contained in this Agreement shall be true and correct except to the extent that
the breach thereof shall not constitute a Parent Material Adverse Effect as of
the Closing Date as though made on and as of the Closing Date (except to the
extent such representations and warranties specifically relate to an earlier
date, in which case such representations and warranties shall be true and
correct as of such earlier date), and the Company shall have received a
certificate of the President or the Chief Financial Officer of each of Parent
and Merger Sub, dated the Closing Date, to such effect;
(b) Parent and Merger Sub shall have performed or complied in all material
respects with all agreements and covenants required by this Agreement to be
performed or complied with by them
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on or prior to the Closing Date, and the Company shall have received a
certificate of the President or the Chief Financial Officer of each of Parent
and Merger Sub, dated the Closing Date, to that effect;
(c) Since the date of this Agreement, there shall not have been any material
adverse change or change which in the aggregate are materially adverse, in the
financial condition, operations or current business of the Parent (excluding
changes caused by general economic or industry-wide conditions or resulting from
any change in law or GAAP);
(d) Jackson Walker L.L.P. shall have delivered to the Company its written
opinion (which may be based upon certain representations of management of the
Company and Parent and others and upon certain assumptions) as of the date that
the Proxy Statement is first mailed to the Company's shareholders substantially
to the effect that (i) the Merger will constitute a reorganization within the
meaning of section 368(a) of the Code, (ii) Parent, Merger Sub and the Company
will each be a party to that reorganization within the meaning of section 368(b)
of the Code, and (iii) no gain or loss for U.S. federal income tax purposes will
be recognized by the holders of Company Common Stock upon receipt of shares of
Parent Common Stock in the Merger, except with respect to any cash received in
lieu of a fractional share interest in Parent Common Stock, and such opinion
shall not have been withdrawn or modified in any material respect;
(e) The Bylaws of Parent shall have been amended, effective as of the Effective
Time, in compliance with Section 5.1 of this Agreement and the persons specified
in such Section shall have been elected or appointed to the position described
in that Section; and
(f) The Company shall have obtained the consent or approval of each person
(other than the governmental approvals referred to in Section 6.1(d)), whose
consent or approval shall be required in order to permit the Company to
consummate the transactions contemplated hereby, except those for which failure
to obtain such consents and approvals would not, individually or in the
aggregate, have a material adverse effect (i) on the Company or (ii) upon the
consummation of the transactions contemplated by this Agreement.
ARTICLE VII.
TERMINATION
Section 7.1 Termination. This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Effective Time,
whether before or after approval of this Agreement by the Company's or the
Parent's stockholders:
(a) by mutual written consent duly authorized by the Boards of Directors
of the Company and Parent;
(b) by Parent:
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(i) upon a breach of any representation, warranty, covenant or agreement on
the part of the Company set forth in this Agreement, or if any
representation or warranty of the Company shall have become untrue, in
either case such that the conditions set forth in Section 6.3(a) or
Section 6.3(b) of this Agreement, as the case may be, would be
incapable of being satisfied by April 15, 2000 (the "Outside Date");
provided, however, that in any case a willful material breach shall be
deemed to cause such conditions to be incapable of being satisfied for
purposes of this Section 7.1(b); or
(ii) if, prior to the Effective Time, the Board of Directors of Parent
(or any committee hereof) shall have withdrawn, or modified or
changed in a manner adverse to the Company, its approval or
recommendation of the issuance of shares of Parent Common Stock
pursuant to the Merger in order to approve and permit Parent to
executive a definitive agreement providing for a Superior
Proposal; provided that (A) at least 5 business days prior to
terminating this Agreement pursuant to this Section 7.1(b)(ii)
Parent has provided the Company with written notice advising the
Company that the Board of Directors of Parent has received a Superior
Proposal that it intends to accept, specifying the material terms
and conditions of such Superior Proposal and identifying the
person making such Superior Proposal, (B) Parent shall have
caused its financial and legal advisors to negotiate in good faith
with the Company to make such adjustments in the terms and
conditions of this Agreement as would enable Parent to proceed with
the transactions contemplated herein on such adjusted terms,
(C) simultaneously with any termination of this Agreement
pursuant to Section 7.1(b)(ii), Parent shall pay to the Company
the Termination Fee (as defined in Section 7.3(c)), and (D) Parent
may not terminate this Agreement pursuant to this Section 7.1(b)(ii)
if Parent is in material breach of this Agreement; or
(iii) within 10 days after the date the Company shall have delivered the
Company Disclosure Schedule pursuant to Section 2.1 if, as a result of
the Company Disclosure Schedule, or the due diligence investigation
theretofore conducted by the Parent (regardless of whether Disclosure
Schedule is delivered), the Board of Directors of Parent shall have
concluded that there exists information concerning the Company that (x)
may reasonably be expected to materially and adversely affect the
financial condition, operations or current business of the Company or
the enforceability of this Agreement, and (y) if such information were
known at the date of this Agreement, the Parent would not have entered
into this Agreement; or
(c) by the Company:
(i) upon a breach of any representation, warranty, covenant or agreement on
the part of Parent or Merger Sub set forth in this Agreement, or if any
representation or warranty of Parent shall have become untrue, in
either case such that the conditions set forth in Section 6.4(a) or
Section 6.4(b) of this Agreement, as the case may be, would be
incapable of being satisfied by the Outside Date; provided, however,
that in any case, a willful breach shall be
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deemed to cause such conditions to be incapable of being satisfied
for purposes of this Section 7.1(c);
(ii) if, prior to the Effective Time, the Board of Directors of the Company
(or any committee thereof) shall have withdrawn, or modified or
changed in a manner adverse to the Parent, its approval or
recommendation of the Merger in order to approve and permit the
Company to execute a definitive agreement providing for a
Superior Proposal; provided that (A) at least 5 business days
prior to terminating this Agreement pursuant to this Section
7.1(c)(ii) Company has provided the Parent with written notice
advising the Parent that the Board of Directors of the Company has
received a Superior Proposal that it intends to accept,
specifying the material terms and conditions of such Superior
Proposal and identifying the person making such Superior Proposal,
(B) the Company shall have caused its financial and legal advisors
to negotiate in good faith with the Parent to make such adjustments
in the terms and conditions of this Agreement as would enable Parent
to proceed with the transactions contemplated herein on such
adjusted terms; (C) simultaneously with any termination of this
Agreement pursuant to this Section 7.1(c)(ii), the Company shall
pay to the Parent the Termination Fee (as defined in Section 7.3(c)),
and (D) the Company may not terminate this Agreement pursuant to
this Section 7.1(c)(ii) if the Company is in material breach of
this Agreement; or
(iii) within 10 days after the date the Parent shall have delivered the
Parent Disclosure Schedule pursuant to Section 2.1 if, as a result of
such Parent Disclosure Schedule, or the due diligence investigation
theretofore conducted by the Company, the Board of Directors of the
Company shall have concluded that there exists material information
concerning the Parent that (x) may reasonably be expected to materially
and adversely affect the financial condition, operations or current
business of the Parent or the enforceability of this Agreement, and (y)
if such information were known at the date of this Agreement, the
Company would not have entered into this Agreement; or
(d) by either Parent or the Company if the Merger shall not have been
consummated on or before the Outside Date; or
(e) by either Parent or the Company if this Agreement shall fail to receive the
requisite vote for approval by the stockholders of the Company at the Company's
stockholders' meeting referred to in Section 5.9 or if the issuance of the
Parent Common Stock in connection with the Merger or the increase in the number
of authorized shares of Parent Common Stock shall fail to receive the requisite
vote for approval by the stockholders of Parent at the Parent's stockholders
meeting referred to in Section 5.9.
The right of any party hereto to terminate this Agreement pursuant to
this Section 7.1 shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of any party hereto or any of their
respective officers, directors, representatives or agents, whether prior to or
after the execution of this Agreement.
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Section 7.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 7.1 hereof, this Agreement, except as provided in
Sections 7.3 and 8.15, shall forthwith become null and void and have no effect,
without any liability on the part of any party or its directors, officers or
stockholders except as set forth in Sections 7.3 and 8.15.
Section 7.3 Fees and Expenses.
(a) Subject to Section 7.3(c), all Expenses (as defined in paragraph (b) of this
Section 7.3) incurred by the parties hereto shall be (i) borne solely and
entirely by the party which has incurred such Expenses; provided, however, that
(i) the allocable share of Parent and Merger Sub as a group and the Company for
all Expenses related to printing and mailing the Proxy Statement shall be
three-fourths by Parent and one-fourth by the Company one-half each; (ii) that
Parent may, at its option, pay any Expenses of the Company, and (iii) Parent
shall pay all SEC filing fees.
(b) "Expenses" as used in this Agreement shall include all out-of-pocket
expenses (including, without limitation, all fees and expenses of counsel,
accountants, investment bankers, experts and consultants to a party hereto and
its affiliates) incurred by a party or on its behalf in connection with or
related to the authorization, preparation, negotiation, execution and
performance of this Agreement, the preparation, printing, filing and mailing of
the Proxy Statement, the solicitation of stockholder approvals and all other
matters related to the consummation of the transactions contemplated hereby.
(c) If the Parent shall terminate this Agreement pursuant to Section 7.1(b)(ii)
or the Company shall terminate the Agreement pursuant to Section 7.1(c)(ii), the
party terminating this Agreement shall pay to the other party (not later than
five business days after such termination of this Agreement) an amount equal to
the reasonable Expenses of such other party (the "Termination Fee").
(d) Parent and the Company agree that the agreements contained in Section 7.3(c)
are an integral part of the transactions contemplated by this Agreement and
constitute liquidated damages and not a penalty. If one party fails to promptly
pay to the other any amounts due under such Section 7.3(c), the defaulting party
shall pay the costs and expenses (including legal fees and expenses) in
connection with any action, including the filing of any lawsuit or other legal
action, taken to collect payment, together with interest on any unpaid amounts
at the publicly announced prime or base rate of The Wall Street Journal -
Southwest Edition from the date such amount was required to be paid.
ARTICLE VIII.
MISCELLANEOUS
Section 8.1 Survival of Representations and Warranties. The representations and
warranties contained herein shall not survive beyond the Effective Time. This
Section 8.1 shall not limit any covenant or agreement of the parties hereto
which by its terms requires performance after the Effective Time.
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Section 8.2 Amendment. This Agreement may be amended by the parties hereto by
action taken by or on behalf of their respective Boards of Directors at any time
prior to the Effective Time; provided, however, that after approval of this
Agreement by the stockholders of the Company or the Parent, (i) no amendment,
which under applicable law may not be made without the approval of the
shareholders of the Company, may be made without such approval, and (ii) no
amendment, which under the applicable rules of the AMEX or applicable law, may
not be made without the approval of the stockholders of Parent, may be made
without such approval. This Agreement may not be amended except by an instrument
in writing signed by all parties hereto.
Section 8.3 Waiver. At any time prior to the Effective Time, either party hereto
may (a) extend the time for the performance of any of the obligations or other
acts of the other party hereto, (b) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document delivered pursuant hereto and (c) waive compliance by the other party
with any of the agreements or covenants contained herein. Any such extension or
waiver shall be valid only if set forth in an instrument in writing signed by
the party or parties to be bound thereby. For purposes of this Section 8.3,
Parent and Merger Sub shall be deemed to be one party.
Section 8.4 Entire Agreement. This Agreement (together with the Exhibits, the
Company's Disclosure Statement and Parent's Disclosure Statement) constitute the
entire agreement among the parties with respect to the subject matter hereof and
supersede all prior written and oral and all contemporaneous oral agreements and
understandings with respect to the subject matter hereof.
Section 8.5 Notices. All notices and other communications hereunder shall be in
the English language, in writing and shall be deemed to have been duly given
when delivered in person, by telecopy, or by registered or certified mail
(postage prepaid, return receipt requested) to the respective parties as
follows:
if to Parent or Merger Sub:
Intellicall Inc.
2155 Chenault, Suite 410
Carrollton, TX 75006-5023
Telecopy: 972-416-9454
Attention: John McDonald
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with a copy to:
Richard F. Dahlson, Esq.
Jackson Walker, L.L.P.
901 Main Street, Suite 6000
Dallas, TX 75202
Telecopy: 214-953-6187
if to the Company:
Heads Up Technologies, Inc.
2033 Chenault, Suite 100
Carrollton, TX 75006
Telecopy: 972-407-1758
Attention: Rob Harshaw
with a copy to:
Lewis T. Sweet, Jr.
3811 Turtlecreek Blvd., Suite 320
Dallas, TX 75219
Telecopy: 214-651-3008
or to such other address as the party to whom notice is given may have
previously furnished to the others in writing in the manner set forth above. Any
notice or communication delivered in person shall be deemed effective on
delivery. Any notice or communication sent by telecopy shall be deemed effective
on the first business day at the place of which such notice or communication is
received following the day on which such notice or communication was sent. Any
notice or communication sent by registered or certified mail shall be deemed
effective on the fifth business day at the place from which such notice or
communication was mailed following the day in which such notice or communication
was mailed.
Section 8.6 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas regardless of the laws that might
otherwise govern under principles of conflicts of laws applicable thereto.
Section 8.7 Descriptive Headings. The descriptive headings herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
Section 8.8 Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended
42
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to confer upon any other person any rights or remedies of any nature whatsoever
under or by reason of this Agreement.
Section 8.9 Counterparts. This Agreement may be executed in counterparts, by
original or facsimile signatures, each of which shall be deemed to be an
original, but all of which shall constitute one and the same agreement.
Section 8.10 Certain Definitions. For the purposes of this Agreement,
the term:
(a) "affiliate" means a person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with, the
first mentioned person;
(b) "business day" means any day other than a day on which banks in the
State of Texas are authorized or obligated to close;
(c) "knowledge" or "known" shall mean, with respect to any matter in question,
if an executive officer of the Company or Parent, as the case may be, has actual
knowledge of such matter or should have had knowledge with the exercise of due
diligence;
(d) "person" means an individual, corporation, partnership, association,
trust, unincorporated organization or other entity; and
(e) "subsidiary" or "subsidiaries" of the Company, Parent, the Surviving
Corporation or any other person, means any corporation, partnership, joint
venture or other legal entity of which the Company, Parent, the Surviving
Corporation or any such other person, as the case may be (either alone or
through or together with any other subsidiary), owns, directly or indirectly,
50% or more of the stock or other equity interests, the holders of which are
generally entitled to vote for the election of the board of directors or other
governing body of such corporation or other legal entity. References herein to
the shares of capital stock of any subsidiary not organized as a corporation
shall be deemed to relate to the equity interests in such subsidiary, however
denominated.
When used in this Agreement, the plural includes the singular, and vice
versa, a neuter pronoun includes the masculine and feminine, and, whether
expressly stated or not, the term "including" means including without
limitation.
Section 8.11 Personal Liability. This Agreement shall not create or be deemed to
create or permit any personal liability or obligation on the part of any direct
or indirect stockholder of the Company or Parent or any officer, director,
employee, agent, representative or investor of any party hereto.
Section 8.12 Binding Effect, Assignment. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective legal
representatives and successors. This Agreement may not be assigned by any party
hereto.
43
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Section 8.13 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
Section 8.14 Specific Performance. The parties hereby acknowledge and agree that
the failure of any party to perform its agreements and covenants hereunder,
including its failure to take all actions as are necessary on its part to the
consummation of the Merger, will cause irreparable injury to the other parties
for which damages, even if available, will not be an adequate remedy.
Accordingly, each party hereby consents to the issuance of injunctive relief by
any court of competent jurisdiction to compel performance of such party's
obligations and to the granting by any court of the remedy of specific
performance of its obligations hereunder.
Section 8.15 Legal Fees; Costs. If any party hereto institutes any action or
proceeding, whether before a court or arbitrator, prior to the Effective Date,
to enforce any provision of this Agreement, the prevailing party therein shall
be entitled to receive from the losing party reasonable attorneys' fees and
costs incurred in such action or proceeding, whether or not such action or
proceeding is prosecuted to judgment.
Section 8.16 Failure or Indulgence Not Waiver; Remedies Cumulative. No failure
or delay on the part of any party hereto in the exercise of any right hereunder
shall impair such right or be construed to be a waiver of, or acquiescence in,
any breach of any representation, warranty or agreement herein, nor shall any
single or partial exercise of any such right preclude other or further exercise
thereof or of any other right. All rights and remedies existing under this
Agreement are cumulative to, and not exclusive to, and not exclusive of, any
rights or remedies otherwise available.
44
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by one of its officers thereunto duly authorized,
effective as of the day and year first above written.
HEADS UP TECHNOLOGIES, INC.
By:
-------------------------------------------------
Name:
--------------------------------------------
Title:
-------------------------------------------
INTELLICALL, INC.
By:
-------------------------------------------------
Name:
--------------------------------------------
Title:
-------------------------------------------
H.U.T.I. ACQUISITION, INC.
By:
-------------------------------------------------
Name:
--------------------------------------------
Title:
-------------------------------------------
45
<PAGE>
FIRST AMENDMENT TO AGREEMENT
AND PLAN OF MERGER
THIS FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER (this
"Amendment") is executed as of January 31, 2000, by and among Heads Up
Technologies, Inc., a Texas corporation, (the "Company"), Intellicall,
Inc., a Delaware corporation (the "Parent"), and H.U.T.I. Acquisition,
Inc., a Texas corporation and wholly-owned subsidiary of Parent
("Merger Sub").
RECITALS:
WHEREAS, the Company, the Parent, and the Merger Sub entered into that
certain Agreement and Plan of Merger dated as of January 18, 2000 (the
"Agreement"); and
WHEREAS, pursuant to Section 2.1(a) of the Agreement, the Company and
the Parent agreed to deliver the other disclosure schedules by January 31, 2000;
and
WHEREAS, the Company, the Parent, and the Merger Sub desire to amend
Section 2.1(a) of the Agreement to provide an extension of time to the Company
and the Parent for delivering such disclosure schedules.
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein and for good and valuable consideration, the adequacy, receipt and
sufficiency of which are hereby acknowledged, the undersigned hereby agree as
follows:
1. Amendment. Section 2.1(a) of the Agreement is hereby
deleted and the following provision shall replace it:
Section 2.1 Disclosure Schedules.
(a) The Company and Parent acknowledge that the Company and
the Parent have not had an adequate opportunity to (i) prepare the
Company Disclosure Schedule or Parent Disclosure Schedule referred to
in Articles III and IV, respectively, or (ii) complete its
investigation of the business and operations of the other. Accordingly,
the Company and the Parent shall, on or before February 14, 2000,
deliver to the other party a Disclosure Schedule setting forth, in
reasonable detail, any exceptions to the representations made by such
party in Article III or IV, as the case may be, or any additional
information required to be disclosed pursuant to such Articles.
2. Deadlines on Business Days. The Agreement is hereby
augmented by the addition of the following Section 8.17:
Section 8.17 Deadlines to Fall on Business Days. To the extent that any
deadline for an event to occur under this Agreement falls on a day that
is not a business day, such deadline shall automatically be extended to
the following business day.
3. Continuing Effect. Except as modified and amended hereby,
the Agreement is and shall remain in force and effect in accordance with
its terms.
4. Counterparts; Telecopies. This Amendment may be executed
in several counterparts, all of which are identical, each of which shall be
deemed an original, and all of which counterparts together shall constitute
one and the same instrument.
5. Governing Law. This Amendment shall be governed by and
construed in accordance with, the laws of the State of Texas, regardless of
the laws that might otherwise govern under principles of conflicts of laws
applicable thereto.
[Intentionally Left Blank]
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Amendment to be
executed on its behalf by one of its officers thereunto duly authorized,
effective as of the day and year first above written.
HEADS UP TECHNOLOGIES, INC.
By:
------------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
INTELLICALL, INC.
By:
------------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
H.U.T.I. ACQUISITION, INC.
By:
------------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
<PAGE>
AMENDMENT NO. 3 TO AGREEMENT
AND PLAN OF MERGER
THIS AMENDMENT NO. 3 TO AGREEMENT AND PLAN OF MERGER (this
"Amendment") is executed as of April 15, 2000, by and among Heads Up
Technologies, Inc., a Texas corporation, (the "Company"), Intellicall, Inc.,
a Delaware corporation (the "Parent"), and H.U.T.I. Acquisition, Inc., a
Texas corporation and wholly-owned subsidiary of Parent ("Merger Sub").
RECITALS:
A. The Company, Parent, and Merger Sub are parties to that certain
Agreement and Plan of Merger, dated as of January 18, 2000, as amended (the
"Agreement").
B. The Company, Parent, and Merger Sub desire to amend the Agreement to
the extent provided below.
C. NOW, THEREFORE, in consideration of the mutual covenants set forth herein and
for good and valuable consideration, the adequacy, receipt and sufficiency of
which are hereby acknowledged, the undersigned hereby agree as follows:
AMENDMENTS
1. Amendment. The term "Outside Date" (as defined in Section 7.1(c) of
the Agreement) is hereby changed from April 15, 2000, to July 30, 2000.
MISCELLANEOUS
1. Continuing Effect. Except as modified and amended hereby, the
Agreement is and shall remain in force and effect in accordance with its terms.
2. Counterparts; Telecopies. This Amendment may be executed in
several counterparts, all of which are identical, each of which shall be
deemed an original, and all of which counterparts together shall constitute
one and the same instrument.
3. Governing Law. This Amendment shall be governed by and construed
in accordance with, the laws of the State of Texas, regardless of the laws
that might otherwise govern under principles of conflicts of laws applicable
thereto.
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Amendment to be
executed on its behalf by one of its officers thereunto duly authorized,
effective as of the day and year first above written.
HEADS UP TECHNOLOGIES, INC.
By:
------------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
INTELLICALL, INC.
By:
------------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
H.U.T.I. ACQUISITION, INC.
By:
------------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
2
