<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JUNE 8, 1998 (JUNE 4, 1998)
------------------------------
WORLD ACCESS, INC.
- --------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 0-19998 65-0044209
- --------------------------------------------------------------------------------
(STATE OR OTHER (COMMISSION FILE NUMBER) (IRS EMPLOYER
JURISDICTION OF IDENTIFICATION
INCORPORATION) NUMBER)
945 E. PACES FERRY ROAD, SUITE 2240, ATLANTA, GEORGIA 30326
- --------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (404) 231-2025
-----------------------------
<PAGE> 2
ITEM 5. OTHER EVENTS.
On June 4, 1998, World Access, Inc. ("World Access") announced that it
had entered into a definitive Agreement and Plan of Merger and Reorganization
(the "Merger Agreement") with WAXS INC., a wholly-owned subsidiary of World
Access ("New World Access"), Tail Acquisition Corporation, a wholly-owned
subsidiary of New World Access ("Merger Sub"), and Telco Systems, Inc. ("Telco")
pursuant to which, among other things, Merger Sub will merge with and into Telco
and Telco shall thereupon become a wholly-owned subsidiary of New World Access
(the "Merger").
As a result of the Merger, each outstanding share of Telco common
stock, $.01 par value per share ("Telco Common Stock"), shall be converted into
the right to receive that number of shares of (i) World Access common stock,
$.01 par value per share ("World Access Common Stock"), or (ii) if the
previously announced holding company reorganization shall have been consummated
on or before the time of the Merger, New World Access common stock, $.01 par
value per share ("New World Access Common Stock") (in either case, the "Merger
Common Stock") equal to the quotient of $17.00 divided by the average daily
closing price of World Access Common Stock as reported on Nasdaq on each of the
twenty consecutive trading days ending on the second business day prior to the
date of the Merger (the "Average Closing Price"), provided that if the Average
Closing Price is more than $36.00 per share, then each share of Telco Common
Stock will be converted into .4722 shares of Merger Common Stock and if the
Average Closing Price is less than $29.00 per share, then each share of Telco
Common Stock will be converted into .5862 shares of Merger Common Stock.
The Merger is intended to constitute a reorganization under Section
368(a) of the Internal Revenue Code of 1986, as amended, and will be accounted
for as a purchase. The consummation of the Merger is subject to (i) clearance
under the Hart-Scott-Rodino Improvements Act of 1976, as amended, (ii) the
approval by the respective stockholders of World Access (or New World Access, as
the case may be) and Telco, (iii) the approval by the stockholders of World
Access or New World Access (as the case may be) of an increase in the authorized
shares of common stock of such corporation, and (iv) the satisfaction or waiver
of customary conditions.
In connection with the Merger Agreement, Kopp Investment Advisors, Inc.
and the directors and certain executive officers of Telco entered into a
Stockholders Proxy Agreement with New World Access pursuant to which, among
other things, they agreed to vote an aggregate of approximately 8.0% of the
outstanding shares of Telco Common Stock in favor of the Merger.
The foregoing description of the Merger, the Merger Agreement and the
Stockholders Proxy Agreement is qualified in its entirety by reference to the
Merger Agreement and the Stockholders Proxy Agreement, each of which is filed as
an exhibit herewith and incorporated herein by reference. In addition, the Press
Release issued by World Access and Telco announcing the Merger is filed as an
exhibit herewith and incorporated herein by reference.
1
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits. The following exhibits are filed herewith by direct
transmission via "edgar."
2.1 Agreement and Plan of Merger and Reorganization dated as of
June 4, 1998 by and among World Access, Inc., WAXS INC., Tail
Acquisition Corporation and Telco Systems, Inc.
99.1 Stockholders Proxy Agreement dated as of June 4, 1998 among
WAXS INC., Kopp Investment Advisors, Inc. and directors and
certain officers of Telco Systems, Inc.
99.2 Press Release issued on June 4, 1998 announcing the execution
of the Merger Agreement.
2
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
WORLD ACCESS, INC.
By: /s/ Martin D. Kidder
---------------------------------
Martin D. Kidder
Its Vice President and Controller
Dated as of June 8, 1998
3
<PAGE> 5
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
<S> <C>
2.1 Agreement and Plan of Merger and Reorganization dated as of June 4,
1998 by and among World Access, Inc., WAXS INC., Tail Acquisition
Corporation and Telco Systems, Inc.
99.1 Stockholders Proxy Agreement dated as of June 4, 1998 among WAXS
INC., Kopp Investment Advisors, Inc. and directors and certain officers
of Telco Systems, Inc.
99.2 Press Release issued on June 4, 1998 announcing the execution of the
Merger Agreement.
</TABLE>
4
<PAGE> 1
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
among
WORLD ACCESS, INC.,
WAXS INC.,
TAIL ACQUISITION CORPORATION
and
TELCO SYSTEMS, INC.
Dated as of June 4, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
ARTICLE I DEFINITIONS.......................................................................................... 2
SECTION 1.01. Certain Defined Terms................................................................... 2
ARTICLE II THE MERGER.......................................................................................... 10
SECTION 2.01. The Merger.............................................................................. 10
SECTION 2.02. Closing................................................................................. 10
SECTION 2.03. Effective Time.......................................................................... 10
SECTION 2.04. Effect of the Merger.................................................................... 11
SECTION 2.05. Certificate of Incorporation; Bylaws; Directors and Officers of
Surviving Corporation....................................................... 11
ARTICLE III CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES.................................................. 11
SECTION 3.01. Conversion of Securities................................................................ 11
SECTION 3.02. Exchange of Shares Other than Treasury Shares........................................... 12
SECTION 3.03. Stock Transfer Books.................................................................... 13
SECTION 3.04. No Fractional Share Certificates........................................................ 13
SECTION 3.05. Options to Purchase Company Common Stock................................................ 14
SECTION 3.06. Certain Adjustments..................................................................... 15
SECTION 3.07. Undistributed Amounts................................................................... 15
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................................................ 15
SECTION 4.01. Organization and Qualification; Subsidiaries............................................ 15
SECTION 4.02. Certificate of Incorporation and Bylaws................................................. 16
SECTION 4.03. Capitalization.......................................................................... 16
SECTION 4.04. Authority Relative to this Agreement.................................................... 17
SECTION 4.05. No Conflict; Required Filings and Consents.............................................. 18
SECTION 4.06. Permits; Compliance with Laws........................................................... 18
SECTION 4.07. SEC Filings; Financial Statements....................................................... 20
SECTION 4.08. Absence of Certain Changes or Events.................................................... 21
SECTION 4.09. Employee Benefit Plans; Labor Matters................................................... 21
SECTION 4.10. Certain Tax Matters..................................................................... 24
SECTION 4.11. Contracts; Debt Instruments............................................................. 24
SECTION 4.12. Litigation.............................................................................. 24
SECTION 4.13. Environmental Matters................................................................... 25
SECTION 4.14. Intellectual Property................................................................... 25
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 4.15. Taxes................................................................................... 26
SECTION 4.16. Rule 145 Affiliates..................................................................... 26
SECTION 4.17. Brokers................................................................................. 26
SECTION 4.18. Certain Business Practices.............................................................. 26
SECTION 4.19. Transaction Expenses.................................................................... 26
SECTION 4.20. Interested Party Transactions........................................................... 27
SECTION 4.21. Charter Anti-takeover Provisions and State Takeover Statutes............................ 27
SECTION 4.22. Opinion of Financial Advisor............................................................ 27
ARTICLE V REPRESENTATIONS AND WARRANTIES OF WAG, PARENT
AND MERGER SUB................................................................................ 27
SECTION 5.01. Organization and Qualification; Subsidiaries............................................ 27
SECTION 5.02. Certificate of Incorporation and Bylaws................................................. 28
SECTION 5.03. Capitalization.......................................................................... 28
SECTION 5.04. Authority Relative to this Agreement.................................................... 29
SECTION 5.05. No Conflict; Required Filings and Consents.............................................. 29
SECTION 5.06. Permits; Compliance with Laws........................................................... 30
SECTION 5.07. SEC Filings; Financial Statements....................................................... 31
SECTION 5.08. Absence of Certain Changes or Events.................................................... 32
SECTION 5.09. Employee Benefit Plans; Labor Matters................................................... 32
SECTION 5.10. Certain Tax Matters..................................................................... 34
SECTION 5.11. Contracts; Debt Instruments............................................................. 34
SECTION 5.12. Litigation.............................................................................. 35
SECTION 5.13. Environmental Matters................................................................... 35
SECTION 5.14. Intellectual Property................................................................... 35
SECTION 5.15. Taxes................................................................................... 36
SECTION 5.16. Brokers................................................................................. 36
SECTION 5.17. Certain Business Practices.............................................................. 36
SECTION 5.18. Opinion of Financial Advisor............................................................ 37
SECTION 5.19. Interested Party Transactions........................................................... 37
SECTION 5.20. Ownership of Company Capital Stock...................................................... 37
SECTION 6.01. Conduct of Business by the Company Pending the Closing.................................. 37
SECTION 6.02. Conduct of Business by WAG and Parent Pending the Closing............................... 40
SECTION 6.03. Notices of Certain Events............................................................... 41
SECTION 6.04. Access to Information; Confidentiality.................................................. 41
SECTION 6.05. No Solicitation of Transactions......................................................... 42
SECTION 6.06. Letters of Accountants.................................................................. 43
SECTION 6.07. Subsequent Financial Statements......................................................... 43
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
SECTION 6.08. Control of Operations................................................................... 43
SECTION 6.09. Further Action; Consents; Filings....................................................... 43
ARTICLE VII ADDITIONAL AGREEMENTS.............................................................................. 44
SECTION 7.01. Registration Statement; Proxy Statement................................................. 44
SECTION 7.02. Stockholders' Meetings.................................................................. 46
SECTION 7.03. Rule 145 Affiliates..................................................................... 47
SECTION 7.04. Directors' and Officers' Indemnification................................................ 47
SECTION 7.05. No Shelf Registration................................................................... 49
SECTION 7.06. Public Announcements.................................................................... 49
SECTION 7.07. Nasdaq Listing.......................................................................... 49
SECTION 7.08. Blue Sky................................................................................ 49
SECTION 7.09. Company Stock Options................................................................... 49
SECTION 7.10. Tax Treatment........................................................................... 50
SECTION 7.11. Obligations of Parent and WAG........................................................... 50
SECTION 7.12. Company Employees....................................................................... 50
SECTION 7.13. Board of Directors of Parent and WAG.................................................... 51
ARTICLE VIII CONDITIONS TO THE MERGER.......................................................................... 51
SECTION 8.01. Conditions to the Obligations of Each Party to Consummate the
Merger...................................................................... 51
SECTION 8.02. Conditions to the Obligations of the Company............................................ 52
SECTION 8.03. Conditions to the Obligations of WAG and Parent......................................... 53
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER................................................................... 54
SECTION 9.01. Termination............................................................................. 54
SECTION 9.02. Effect of Termination................................................................... 56
SECTION 9.03. Amendment............................................................................... 56
SECTION 9.04. Waiver.................................................................................. 56
SECTION 9.05. Expenses................................................................................ 56
ARTICLE X GENERAL PROVISIONS................................................................................... 57
SECTION 10.01. Non-Survival of Representations and Warranties......................................... 57
SECTION 10.02. Notices................................................................................ 58
SECTION 10.03. Severability........................................................................... 58
SECTION 10.04. Assignment; Binding Effect; Benefit.................................................... 58
SECTION 10.05. Incorporation of Exhibits.............................................................. 58
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 10.06. Governing Law.......................................................................... 59
SECTION 10.07. Waiver of Jury Trial................................................................... 59
SECTION 10.08. Construction........................................................................... 59
SECTION 10.09. Counterparts........................................................................... 59
SECTION 10.10. Entire Agreement....................................................................... 60
</TABLE>
EXHIBITS
Exhibit 1.00(a) Form of Stockholder Proxy Agreement
Exhibit 7.03 Form of Company Affiliate Agreement
iv
<PAGE> 6
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION, dated as of June 4,
1998 (as amended, supplemented or otherwise modified from time to time, the
"AGREEMENT"), among WORLD ACCESS, INC., a corporation organized and existing
under the laws of the State of Delaware ("WAG"), WAXS INC., a corporation
organized and existing under the laws of the State of Delaware and a
wholly-owned subsidiary of WAG ("PARENT"), TAIL ACQUISITION CORPORATION, a
corporation organized and existing under the laws of the State of Delaware
("MERGER SUB") and a direct wholly-owned subsidiary of Parent, and TELCO
SYSTEMS, INC., a corporation organized and existing under the laws of the State
of Delaware (the "COMPANY");
W I T N E S S E T H:
WHEREAS, the boards of directors of WAG, Parent, Merger Sub and the
Company have each determined that it is consistent with and in furtherance of
their respective long-term business strategies and fair to and in the best
interests of their respective stockholders to combine the respective businesses
of WAG, Parent and the Company by means of a merger (the "MERGER") of Merger Sub
with and into the Company upon the terms and subject to the conditions set forth
herein and in accordance with the General Corporation Law of the State of
Delaware;
WHEREAS, concurrently with the execution of this Agreement and as an
inducement to Parent and Merger Sub to enter into this Agreement, Parent has
entered into a proxy agreement substantially in the form attached hereto as
Exhibit 1.00(a), dated as of the date hereof (the "STOCKHOLDERS PROXY
AGREEMENT"), with each of the Company's directors and senior executive officers
and Kopp Investment Advisors, Inc., a corporation organized and existing under
the laws of the State of Minnesota (each, a "PRINCIPAL STOCKHOLDER"), pursuant
to which each Principal Stockholder has granted to Parent a proxy to vote all of
the shares of Company Capital Stock (as hereinafter defined) held by such
Principal Stockholder, all upon the terms and subject to the conditions set
forth therein;
WHEREAS, on February 24, 1998, WAG, Parent, NACT Telecommunications,
Inc., a Delaware corporation and a majority-owned subsidiary of WAG ("NACT"),
WAXS Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of
Parent, and NACT Acquisition Corp., a Delaware corporation and a wholly-owned
subsidiary of Parent, entered into that certain Agreement and Plan of Merger and
Reorganization pursuant to which, among other things, each of WAG and NACT will
become wholly-owned subsidiaries of Parent (the "HOLDING COMPANY
REORGANIZATION"); and
WHEREAS, for United States Federal income tax purposes, it is intended
that the Merger qualify as a reorganization under the provisions of Section 368
of the Internal Revenue Code of 1986, as amended (together with the rules and
regulations promulgated thereunder, the "CODE");
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements set forth herein, and
other good and valuable consideration,
<PAGE> 7
the receipt and adequacy of which are hereby acknowledged, and intending to be
legally bound hereby, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. Unless the context otherwise
requires, the following terms, when used in this Agreement, shall have the
respective meanings specified below (such meanings to be equally applicable to
the singular and plural number of the terms so defined, unless the context
otherwise requires):
"AFFECTED EMPLOYEE" shall have the meaning specified in
Section 7.12(a).
"AFFILIATE" shall have the meaning specified in rule 144
promulgated under the Securities Act.
"AGREEMENT" shall have the meaning specified in the preamble
to this Agreement.
"ALTERNATIVE MERGER" shall have the meaning specified in
Section 2.01.
"BENEFICIAL OWNER" shall mean, with respect to any shares of
capital stock, a person who shall be deemed to be the beneficial owner of such
shares (i) which such person or any of its affiliates or associates (as such
term is defined in rule 12b-2 promulgated under the Exchange Act) beneficially
owns, directly or indirectly, (ii) which such person or any of its affiliates or
associates has, directly or indirectly, (A) the right to acquire (whether such
right is exercisable immediately or subject only to the passage of time),
pursuant to any agreement, arrangement or understanding or upon the exercise of
consideration rights, exchange rights, warrants or options, or otherwise, or (B)
the right to vote pursuant to any agreement, arrangement or understanding, or
(iii) which are beneficially owned, directly or indirectly, by any other persons
with whom such person or any of its affiliates or associates or person with whom
such person or any of its affiliates or associates has any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of any such shares of capital stock; provided, however, that a Person
shall not be deemed the beneficial owner of, or to beneficially own, any
security if the agreement, arrangement or understanding (written or oral) to
vote such security arises solely from a revocable proxy or consent given to such
person pursuant to a definitive proxy statement filed with the SEC and otherwise
in accordance with the rules and regulations under the Exchange Act.
"BLUE SKY LAWS" shall mean state securities or "blue sky"
laws.
"BROADVIEW" shall mean Broadview Associates LLC.
2
<PAGE> 8
"BUSINESS DAY" shall mean any day on which the principal
offices of the SEC in Washington, D.C. are open to accept filings, or, in the
case of determining a date when any payment is due, any day on which banks are
not required or authorized by law, regulation or executive order to close in New
York, New York.
"CAPITAL INCREASE" shall have the meaning specified in Section
7.01(b).
"CASH DEPOSIT" shall have the meaning specified in Section
3.04.
"CERTIFICATE OF MERGER" shall have the meaning specified in
Section 2.03.
"CLOSING" shall have the meaning specified in Section 2.02.
"CLOSING DATE MARKET PRICE" shall mean the average of the
daily closing price of the WAG Common Stock, in the event that the Holding
Company Reorganization shall not have been consummated, or Parent Common Stock,
in the event that the Holding Company Reorganization shall have been
consummated, in either case as reported on Nasdaq on each of the twenty
consecutive trading days ending on the Determination Date, provided that, in the
event that the Holding Company Reorganization shall have been consummated during
such twenty-day period, the Closing Date Market Price shall be calculated by
reference to the average of the daily closing price of the WAG Common Stock or
the Parent Common Stock, as the case may be, for the number of days such stock
was traded during such period.
"CODE" shall mean the meaning specified in the recitals
hereto.
"COMMON EXCHANGE RATIO" shall have the meaning specified in
Section 3.01(a).
"COMPANY FAIRNESS OPINION" shall mean the written opinion of
Broadview delivered to the board of directors of the Company (i) to the effect
that the exchange ratio to be offered the holders of the Company Common Stock in
the Merger is fair to the holders of such stock from a financial point of view,
and (ii) which has been authorized by Broadview for inclusion in the Proxy
Statement.
"COMPANY" shall have the meaning specified in the preamble to
this Agreement.
"COMPANY 1997 10-K" shall have the meaning specified in
Section 4.02.
"COMPANY AFFILIATE AGREEMENT" shall have the meaning specified
in Section 7.03(a).
"COMPANY BENEFIT PLANS" shall have the meaning specified in
Section 4.09(a).
"COMPANY CAPITAL STOCK" shall mean the Company Common Stock,
the Company Junior Common Stock and the Company Preferred Stock.
3
<PAGE> 9
"COMPANY COMMON STOCK" shall mean the Common Stock, par value
$0.01 per share, of the Company.
"COMPANY DISCLOSURE SCHEDULE" shall mean the disclosure
schedule delivered by the Company to Parent prior to the execution of this
Agreement and forming a part hereof.
"COMPANY JUNIOR COMMON STOCK" shall mean the Series A Junior
Common Stock, par value $0.01 per share, of the Company.
"COMPANY LICENSES" shall have the meaning specified in Section
4.14.
"COMPANY MATERIAL ADVERSE EFFECT" shall mean any change in or
effect on the business of the Company and the Company Subsidiaries that is, or
would reasonably be expected to be, materially adverse to the business, assets
(including intangible assets), liabilities (contingent or otherwise), condition
(financial or otherwise) or results of operations of the Company and the Company
Subsidiaries taken as a whole, other than any change or effect relating to this
Agreement or the transactions contemplated hereby or the announcement thereof.
"COMPANY MATERIAL CONTRACT" shall have the meaning specified
in Section 4.11.
"COMPANY PERMITS" shall have the meaning specified in Section
4.06.
"COMPANY PREFERRED STOCK" shall mean the Series A
Participating Cumulative Preferred Stock, $0.01 per share par value, of the
Company.
"COMPANY PRODUCTS" shall have the meaning specified in Section
4.06(b).
"COMPANY THIRD PARTY PRODUCTS" shall have the meaning
specified in Section 4.06(b).
"COMPANY REPORTS" shall have the meaning specified in Section
4.07(a).
"COMPANY STOCKHOLDERS' MEETING" shall have the meaning
specified in Section 7.01(a).
"COMPANY STOCK OPTION" shall have the meaning specified in
Section 3.05.
"COMPANY STOCK PLANS" shall mean the Company's 1980 Stock
Option Plan, the Company's 1988 Non-Statutory Stock Option Plan and the
Company's 1990 Stock Option Plan.
"COMPANY STOCK PURCHASE PLANS" shall have the meaning
specified in Section 4.03.
"COMPANY SUBSIDIARIES" shall have the meaning specified in
Section 4.01.
4
<PAGE> 10
"COMPETING TRANSACTION" shall mean any of the following
involving the Company or any Company Subsidiary whose business constitutes 30%
or more of the net revenues, net income or assets of the Company and its
subsidiaries, taken as a whole, as the case may be (other than the Merger
contemplated by this Agreement):
(i) any merger, consolidation, share exchange, business
combination or other similar transaction;
(ii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition of 15 percent or more of the assets of such party and
its subsidiaries, taken as a whole, in a single transaction or series
of related transactions except for the sale of inventory in the
ordinary course of business; or
(iii) any tender offer or exchange offer for 15 percent or
more of the outstanding voting securities of such party or the filing
of a registration statement under the Securities Act in connection
therewith.
"CONFIDENTIALITY AGREEMENT" shall mean the Mutual
Non-Disclosure and Confidentiality agreement dated as of November 7, 1997
between WAG and the Company.
"COSTS" shall have the meaning specified in Section 7.04(b).
"DELAWARE GENERAL CORPORATION LAW" shall mean the General
Corporation Law of the State of Delaware.
"DETERMINATION DATE" shall mean the second business day prior
to the date on which the Effective Time is expected to occur.
"$" shall mean United States Dollars.
"EFFECTIVE TIME" shall have the meaning specified in Section
2.03.
"ENVIRONMENTAL LAW" shall mean any Law and any enforceable
judicial or administrative interpretation thereof, including any judicial or
administrative order, consent decree or judgment, relating to pollution or
protection of the environment or natural resources, including those relating to
the use, handling, transportation, treatment, storage, disposal, release or
discharge of Hazardous Material, as in effect as of the date hereof.
"ENVIRONMENTAL PERMIT" shall mean any permit, approval,
identification number, license or other authorization required under or issued
pursuant to any applicable Environmental Law.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
5
<PAGE> 11
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended, together with the rules and regulations promulgated thereunder.
"EXCHANGE AGENT" shall have the meaning specified in Section
3.02.
"EXCHANGE FUND" shall have the meaning specified in Section
3.02.
"EXPENSES" shall mean, with respect to any party hereto, all
reasonable out-of-pocket expenses (including all fees and expenses of counsel,
accountants, investment bankers, experts and consultants to a party hereto and
its affiliates, but excluding any allocation of overhead) incurred by such party
or on its behalf in connection with or related to the authorization,
preparation, negotiation, execution and performance of its obligations pursuant
to this Agreement and the consummation of the Merger, the preparation, printing,
filing and mailing of the Registration Statement and the Proxy Statement, the
solicitation of stockholder approvals, the filing of HSR Act notice, if any, and
all other matters related to the closing of the Merger.
"FCC" shall have the meaning specified in Section 4.06(b).
"GOVERNMENTAL ENTITY" shall mean any United States federal,
state or local or any foreign governmental, regulatory or administrative
authority, agency or commission or any court, tribunal or arbitral body.
"GOVERNMENTAL ORDER" shall mean any order, writ, judgment,
injunction, decree, stipulation, determination or award entered by or with any
Governmental Entity.
"HAZARDOUS MATERIAL" shall mean (i) any petroleum, petroleum
products, by-products or breakdown products, radioactive materials,
asbestos-containing materials or polychlorinated biphenyls or (ii) any chemical,
material or substance defined or regulated as toxic or hazardous or as a
pollutant or contaminant or waste under any applicable Environmental Law.
"HOLDING COMPANY REORGANIZATION" shall have the meaning
specified in the recitals to this Agreement.
"HSR ACT" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, together with the rules and regulations
promulgated thereunder.
"INDEMNIFIED PARTIES" shall have the meaning specified in
Section 7.04(b).
"IRS" shall mean the United States Internal Revenue Service.
"LAW" shall mean any Federal, state, foreign or local statute,
law, ordinance, regulation, rule, code, order, judgment, decree, other
requirement or rule of law of the United States or any other jurisdiction, and
any other similar act or law.
6
<PAGE> 12
"LISTED AGREEMENTS" shall have the meaning specified in
Section 7.12(c).
"MERGER" shall have the meaning specified in the recitals to
this Agreement.
"MERGER SUB" shall have the meaning specified in the preamble
to this Agreement.
"MERGER SUB COMMON STOCK" shall have the meaning specified in
Section 3.01(c).
"MULTIEMPLOYER PLAN" shall have the meaning specified in
Section 4.09(b).
"MULTIPLE EMPLOYER PLAN" shall have the meaning specified in
Section 4.09(b)
"NACT" shall have the meaning specified in the recitals to
this Agreement.
"NASDAQ" shall mean The Nasdaq Stock Market National Market.
"PARENT" shall have the meaning specified in the preamble to
this Agreement.
"PARENT 1997 10-K" shall have the meaning specified in Section
5.02.
"PARENT AFFILIATE AGREEMENT" shall have the meaning specified
in Section 7.03(b).
"PARENT BENEFIT PLANS" shall have the meaning specified in
Section 5.09(a).
"PARENT COMMON STOCK" shall mean the Common Stock, par value
$0.01 per share, of Parent.
"PARENT DISCLOSURE SCHEDULE" shall mean the disclosure
schedule delivered by Parent to the Company prior to the execution of this
Agreement and forming a part hereof.
"PARENT FAIRNESS OPINION" shall mean the written opinion of
Robinson-Humphrey delivered to the board of directors of Parent and WAG (i) to
the effect that the consideration to be paid in the Merger is fair, from a
financial point of view, to Parent and WAG, and (ii) which has been authorized
by Robinson-Humphrey for inclusion in the Proxy Statement.
"PARENT LICENSES" shall have the meaning specified in Section
5.14.
"PARENT MATERIAL ADVERSE EFFECT" shall mean (i) prior to the
consummation of the Holding Company Reorganization, any change in or effect on
the business of WAG and the Parent Subsidiaries that is, or would reasonably be
expected to be, materially adverse to the business, assets (including intangible
assets), liabilities (contingent or otherwise), condition (financial or
otherwise) or results of operations of WAG and the Parent Subsidiaries taken as
a whole, other than any change or effect relating to this Agreement or the
transactions contemplated hereby or the announcement thereof and (ii) after the
consummation of the Holding Company
7
<PAGE> 13
Reorganization, any change in or effect on the business of Parent and the Parent
Subsidiaries that is, or would reasonably be expected to be, materially adverse
to the business, assets (including intangible assets), liabilities (contingent
or otherwise), condition (financial or otherwise) or results of operations of
Parent and the Parent Subsidiaries taken as a whole, other than any change or
effect relating to this Agreement or the transactions contemplated hereby or the
announcement thereof.
"PARENT MATERIAL CONTRACT" shall have the meaning specified in
Section 5.11.
"PARENT PERMITS" shall have the meaning specified in Section
5.06(a).
"PARENT REPORTS" shall have the meaning specified in Section
5.07(a).
"PARENT STOCKHOLDERS' MEETING" shall have the meaning
specified in Section 7.01(a).
"PARENT STOCK PLANS" shall mean WAG's 1991 Stock Option Plan,
WAG's 1998 Incentive Compensation Plan, WAG's Outside Directors' Warrant Plan,
and WAG's Directors Warrant Incentive Plan, all of which are to be assumed by
Parent upon consummation of the Holding Company Reorganization.
"PARENT SUBSIDIARIES" shall have the meaning specified in
Section 5.01.
"PERSON" shall mean an individual, corporation, partnership,
limited partnership, limited liability company, syndicate, person (including a
"person" as defined in Section 13(d)(3) of the Exchange Act), trust,
association, entity or government or political subdivision, agency or
instrumentality of a government.
"PRESURRENDER DIVIDENDS" shall have the meaning specified in
Section 3.02.
"PRINCIPAL STOCKHOLDER" shall have the meaning specified in
the recitals hereto.
"PROXY STATEMENT" shall have the meaning specified in Section
7.01(a).
"REGISTRATION STATEMENT" shall have the meaning specified in
Section 7.01(a).
"REPRESENTATIVES" shall have the meaning specified in Section
6.04(a).
"RESTRAINTS" shall have the meaning specified in Section
8.01(c).
"RESURGENS TRANSACTION" shall mean the pending acquisition by
WAG and Parent of (i) Cherry Communications Incorporated (d/b/a Resurgens
Communications Group) ("RCG") pursuant to that certain Agreement and Plan of
Merger and Reorganization dated as of May 12, 1998 to which WAG, Parent, RCG and
certain other persons are parties, and (ii) Cherry
8
<PAGE> 14
Communications U.K. Limited ("Cherry U.K.") pursuant to that certain Share
Exchange Agreement and Plan of Reorganization dated as of May 12, 1998 to which
WAG, Parent, the sole shareholder of Cherry U.K. and Cherry U.K. are parties.
"RIGHTS" shall have the meaning specified in Section 3.01(a).
"RIGHTS AGREEMENT" shall have the meaning specified in Section
4.03.
"ROBINSON-HUMPHREY" shall mean The Robinson-Humphrey Company,
LLC.
"RULE 145 AFFILIATE" shall mean, with respect to any specified
person, any other persons who are "affiliates" of such specified person within
the meaning of rule 145 (c) or (d) promulgated under the Securities Act.
"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, together with the rules and regulations promulgated thereunder.
"STOCKHOLDERS PROXY AGREEMENT" shall have the meaning
specified in the recitals to this Agreement.
"SUBSIDIARY" shall mean, with respect to any person, any
corporation, limited liability company, partnership, joint venture or other
legal entity of which such person (either alone or through or together with any
other subsidiary of such person) owns, directly or indirectly, a majority 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.
"SUPERIOR PROPOSAL" shall have the meaning specified in
Section 6.06.
"SURVIVING CORPORATION" shall have the meaning specified in
Section 2.01.
"TAXES" shall mean any and all taxes, fees, levies, duties,
tariffs, imposts and other charges of any kind (together with any and all
interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any Governmental Entity or taxing authority,
including taxes or other charges on or with respect to income, franchises,
windfall or other profits, gross receipts, property, sales, use, capital stock,
payroll, employment, social security, workers' compensation, unemployment
compensation or net worth; taxes or other charges in the nature of excise,
withholding, ad valorem, stamp, transfer, value-added or gains taxes; license,
registration and documentation fees; and customers' duties, tariffs and similar
charges.
"TERMINATING COMPANY BREACH" shall have the meaning specified
in Section 9.01(g).
9
<PAGE> 15
"TERMINATING PARENT BREACH" shall have the meaning specified
in Section 9.01(h).
"U.S. GAAP" shall mean United States generally accepted
accounting principles.
"WAG COMMON STOCK" shall mean the Common Stock, par value
$0.01 per share, of WAG.
ARTICLE II
THE MERGER
SECTION 2.01. The Merger. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with the Delaware General
Corporation Law, at the Effective Time, Merger Sub shall be merged with and into
the Company. As a result of the Merger, the separate corporate existence of
Merger Sub shall cease and the Company shall continue as the surviving
corporation of the Merger (the "SURVIVING CORPORATION"). Parent may, with the
Company's consent (which will not be unreasonably withheld), elect to amend this
Agreement to provide for a merger of the Company with and into Merger Sub or
Parent or one or more other affiliates of Parent (an "ALTERNATIVE MERGER");
provided, however, that (i) any such Alternative Merger shall not alter or
change the amount or kind of consideration to be issued to holders of Company
Capital Stock or Company Stock Options as provided for in this Agreement, (ii)
any such Alternative Merger shall not adversely affect the tax or accounting
treatment provided for herein and shall not materially delay consummation of the
transactions contemplated hereby, (iii) in the event of any such election, the
Company shall have the opportunity to update the Company Disclosure Schedule to
reflect additional items that are required to be set forth therein only as a
result of any differences between the Alternative Merger structure and that of
the Merger and (iv) Parent shall waive any failure to satisfy Section 8.03(a) or
8.03(b) to the extent such non-compliance results only from any differences
between the Alternative Merger structure and that of the Merger.
SECTION 2.02. Closing. Unless this Agreement shall have been terminated
and the Merger shall have been abandoned pursuant to Section 9.01 and subject to
the satisfaction or waiver of the conditions set forth in Article VIII, the
consummation of the Merger shall take place as promptly as practicable (and in
any event within three business days) after satisfaction or waiver of the
conditions set forth in Article VIII, at a closing (the "CLOSING") to be held at
such location as is agreed to by the parties hereto, unless another date is
agreed to by the Company and Parent.
SECTION 2.03. Effective Time. At the time of the Closing, the parties
shall cause the Merger to be consummated by filing a certificate of merger (the
"CERTIFICATE OF MERGER") with the Secretary of State of the State of Delaware in
such form as required by, and executed in accordance with the relevant
provisions of, the Delaware General Corporation Law (the date and
10
<PAGE> 16
time of such filing, or such later time as may be agreed by the parties hereto
and specified in the Certificate of Merger, being the "EFFECTIVE TIME").
SECTION 2.04. Effect of the Merger. At the Effective Time, the effect
of the Merger shall be as provided in the applicable provisions of the Delaware
General Corporation Law. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, except as otherwise provided herein, all
the property, rights, privileges, powers and franchises of the Company and
Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities
and duties of the Company and Merger Sub shall become the debts, liabilities and
duties of the Surviving Corporation.
SECTION 2.05. Certificate of Incorporation; Bylaws; Directors and
Officers of Surviving Corporation. Unless otherwise agreed by the Company and
Parent prior to the Effective Time, at the Effective Time:
(a) the certificate of incorporation and bylaws of Merger Sub,
as in effect immediately prior to the Effective Time, shall be the
certificate of incorporation and bylaws of the Surviving Corporation
until thereafter amended as provided by Law and such certificate of
incorporation or bylaws;
(b) the officers of the Company immediately prior to the
Effective Time shall be the initial officers of the Surviving
Corporation until their successors are elected or appointed and
qualified or until their resignation or removal; and
(c) the directors of Merger Sub immediately prior to the
Effective Time shall be the initial directors of the Surviving
Corporation until their successors are elected or appointed and
qualified or until their resignation or removal.
ARTICLE III
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 3.01. Conversion of Securities. At the Effective Time, by
virtue of the Merger and without any action on the part of Merger Sub, the
Company or the holders of any of the following securities:
(a) Each share of Company Common Stock (together with the
right to purchase one-hundredth (1/100th) of a share of Company
Preferred Stock (the "RIGHTS")) issued and outstanding immediately
prior to the Effective Time (other than any shares of Company Common
Stock to be cancelled pursuant to Section 3.01(b)) and all rights in
respect thereof shall forthwith cease to exist and shall be converted
into and become exchangeable for that number of shares of WAG Common
Stock (the "COMMON EXCHANGE RATIO") equal to the quotient of (i) $17.00
divided by (ii) the Closing Date
11
<PAGE> 17
Market Price; provided, however, that (x) if the Closing Date Market
Price is less than $29.00, then the Common Exchange Ratio shall be
equal to .5862, and (y) if the Closing Date Market Price is more than
$36.00, then the Common Exchange Ratio shall be equal to .4722;
(b) Each share of Company Capital Stock held in the treasury
of the Company and each share of Company Capital Stock owned by WAG or
Parent (in each case, together with any Rights) or of the Company
immediately prior to the Effective Time shall be cancelled and
extinguished without any conversion thereof and no payment shall be
made with respect thereto; and
(c) Each share of common stock, par value $0.01 per share, of
Merger Sub ("MERGER SUB COMMON STOCK") issued and outstanding
immediately prior to the Effective Time and all rights in respect
thereof shall forthwith cease to exist and shall be converted into and
become exchangeable for one newly and validly issued, fully paid and
nonassessable share of common stock of the Surviving Corporation.
SECTION 3.02. Exchange of Shares Other than Treasury Shares. Subject to
the terms and conditions hereof, at or prior to the Effective Time, WAG shall
appoint an exchange agent reasonably acceptable to the Company to effect the
exchange of shares of Company Common Stock for WAG Common Stock, in accordance
with the provisions of this Article III (the "EXCHANGE AGENT"). From time to
time after the Effective Time, WAG shall deposit, or cause to be deposited,
certificates representing WAG Common Stock for conversion of shares of Company
Common Stock, in accordance with the provisions of Section 3.01 (such
certificates, together with any dividends or distributions with respect thereto,
being herein referred to as the "EXCHANGE FUND"). Commencing immediately after
the Effective Time and until the appointment of the Exchange Agent shall be
terminated, each holder of a certificate or certificates theretofore
representing shares of Company Common Stock may surrender the same to the
Exchange Agent and, after the appointment of the Exchange Agent shall be
terminated, any such holder may surrender any such certificate to WAG. Such
holder shall be entitled upon such surrender to receive in exchange therefor a
certificate or certificates representing the number of full shares of WAG Common
Stock into which the shares of Company Common Stock theretofore represented by
the certificate or certificates so surrendered shall have been converted in
accordance with the provisions of Section 3.01, together with a cash payment in
lieu of fractional shares, if any, in accordance with Section 3.04, and any such
shares of WAG Common Stock shall be deemed to have been issued at the Effective
Time. Until so surrendered and exchanged, each outstanding certificate which,
prior to the Effective Time, represented issued and outstanding shares of
Company Common Stock shall be deemed for all corporate purposes of WAG, other
than the payment of dividends and other distributions, if any, to evidence
ownership of the number of full shares of WAG Common Stock into which the shares
of Company Common Stock theretofore represented thereby shall have been
converted at the Effective Time. Unless and until any such certificate
theretofore representing shares of Company Common Stock is so surrendered, no
dividend or other distribution, if any, payable to the holders of record of WAG
Common Stock as of any date subsequent to the Effective Time shall be paid to
the holder
12
<PAGE> 18
of such certificate in respect thereof. Upon the surrender of any such
certificate theretofore representing shares of Company Common Stock, however,
the record holder of the certificate or certificates representing shares of WAG
Common Stock issued in exchange therefor shall receive from the Exchange Agent
or from WAG, as the case may be, (i) payment of the amount of dividends and
other distributions, if any, which as of any date subsequent to the Effective
Time and until such surrender shall have become payable with respect to such
number of shares of WAG Common Stock ("PRESURRENDER DIVIDENDS") 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 such surrender and with a
payment date subsequent to such surrender payable with respect to such whole
shares of WAG Common Stock. No interest shall be payable with respect to the
payment of Presurrender Dividends upon the surrender of certificates theretofore
representing shares of Company Common Stock. After the appointment of the
Exchange Agent shall have been terminated, such holders of WAG Common Stock
which have not received payment of Presurrender Dividends shall look only to WAG
for payment thereof. Notwithstanding the foregoing provisions of this Section
3.02, risk of loss and title to such certificates representing shares of Company
Common Stock shall pass only upon proper delivery of such certificates to the
Exchange Agent, and neither the Exchange Agent nor any party hereto shall be
liable to a holder of shares of Company Capital Stock for any WAG Common Stock
or dividends or distributions thereon delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law or to a transferee
pursuant to Section 3.03. References in this Section 3.02 to Company Common
Stock shall be deemed to include the associated Rights.
SECTION 3.03. Stock Transfer Books. (a) At the Effective Time, each of
the stock transfer books of the Company with respect to shares of Company Common
Stock shall be closed, and there shall be no further registration of transfers
of shares of Company Common Stock thereafter on the records of any such stock
transfer books. In the event of a transfer of ownership of shares of Company
Common Stock that is not registered in the stock transfer records of the
Company, at the Effective Time, a certificate or certificates representing the
number of full shares of WAG Common Stock into which such shares of Company
Common Stock shall have been converted shall be issued to the transferee
together with a cash payment in lieu of fractional shares, if any, in accordance
with Section 3.04, and a cash payment in the amount of Presurrender Dividends,
if any, in accordance with Section 3.02, if the certificate or certificates
representing such shares of Company Capital Stock is or are surrendered as
provided in Section 3.02, accompanied by all documents required to evidence and
effect such transfer and by evidence of payment of any applicable stock transfer
tax.
(b) Notwithstanding anything to the contrary herein,
certificates surrendered for exchange by any person constituting a Rule 145
Affiliate of the Company shall not be exchanged until Parent shall have received
from such person an executed Company Affiliate Agreement, as provided in Section
7.03.
SECTION 3.04. No Fractional Share Certificates. Unless WAG otherwise
determines, no scrip or fractional share certificates for WAG Common Stock shall
be issued upon the surrender for exchange of certificates evidencing shares of
Company Capital Stock, and an
13
<PAGE> 19
outstanding fractional share interest shall not entitle the owner thereof to
vote, to receive dividends or to any rights of a stockholder of WAG or of the
Surviving Corporation with respect to such fractional share interest. In lieu of
fractional shares, each holder of shares of Company Common Stock who, except for
the provisions of this Section 3.04, would be entitled to receive a fractional
share of WAG Common Stock shall, upon surrender of the certificate or
certificates representing shares of Company Common Stock, be entitled to receive
an amount in cash (rounded to the nearest whole cent), without interest, equal
to the product obtained by multiplying (a) the fractional share interest to
which such holder would otherwise be entitled (after taking into account all
shares of Company Capital Stock held at the Effective Time by such holder) by
(b) the closing price for a share of WAG Common Stock reported on Nasdaq on the
first business day immediately prior to the Effective Time. At or prior to the
Effective Time, Parent shall pay to the Exchange Agent an amount in cash (the
"CASH DEPOSIT") sufficient for the Exchange Agent to pay each holder of Company
Common Stock the amount of cash in lieu of fractional shares to which such
holder is entitled pursuant to this Section 3.04. As soon as practicable after
the determination of the amount of cash, if any, to be paid to holders of
Company Common Stock with respect to any fractional share interests, the
Exchange Agent shall make available such amounts, net of any required
withholding, to such holders of Company Common Stock, subject to and in
accordance with the terms of Section 3.02. In no event shall either (i) the
total cash consideration paid to holders of Company Common Stock in lieu of
fractional shares exceed one percent (1%) of the value of the total
consideration issued to holders of Company Common Stock in exchange for their
Company Capital Stock or (ii) any record holder of Company Common Stock,
directly or indirectly, receive cash in an amount equal to or greater than the
value of one full share of WAG Company Stock.
SECTION 3.05. Options to Purchase Company Common Stock. At the
Effective Time, each option granted by the Company to purchase shares of Company
Common Stock (each, a "COMPANY STOCK OPTION") which is outstanding and
unexercised immediately prior to the Effective Time shall be assumed by WAG and
converted into an option to purchase shares of WAG Common Stock in such number
and at such exercise price as provided below and otherwise having the same terms
and conditions as in effect immediately prior to the Effective Time (except to
the extent that such terms, conditions and restrictions may be altered in
accordance with their terms as a result of the Merger, including vesting as such
shall (except as provided in Section 6.01(b)) be accelerated at the Effective
Time pursuant to the terms of such Company Stock Options):
(a) the number of shares of WAG Common Stock to be subject to
the new option shall be equal to the product of (i) the number of
shares of Company Common Stock subject to the original option and (ii)
the Common Exchange Ratio;
(b) the exercise price per share of Parent Common Stock under
the new option shall be equal to the quotient of (i) the exercise price
per share of Company Common Stock under the original option divided by
(ii) the Common Exchange Ratio; and
14
<PAGE> 20
(c) upon each exercise of options by a holder thereof, the
aggregate number of shares of WAG Common Stock deliverable upon such
exercise shall be rounded, if necessary, to the nearest whole share and
the aggregate exercise price shall be rounded up, if necessary, to the
nearest cent.
The adjustments provided herein with respect to any options which are "incentive
stock options" (as defined in Section 422 of the Code) shall be effected in a
manner consistent with the requirements of Section 424(a) of the Code.
SECTION 3.06. Certain Adjustments. If between the date of this
Agreement and the Effective Time, the outstanding shares of Company Capital
Stock or WAG Common Stock shall be changed into a different number of shares by
reason of any reclassification, recapitalization, split-up, combination or
exchange of shares, or any dividend payable in stock or other securities shall
be declared thereon with a record date within such period, then the exchange
ratios established pursuant to the provisions of Section 3.01 shall be adjusted
accordingly to provide to the holders of Company Capital Stock the same economic
effect as contemplated by this Agreement prior to such reclassification,
recapitalization, split-up, combination, exchange, dividend or increase. In the
event the Holding Company Reorganization is consummated prior to the Effective
Time, all references in this Article III to WAG and to WAG Common Stock shall be
deemed to be references to Parent and Parent Common Stock, respectively.
SECTION 3.07. Undistributed Amounts. Any portion of the Exchange Fund
or the Cash Deposit which remains undistributed for six months after the
Effective Time shall be delivered to WAG, and any holder of Company Common Stock
who has not theretofore complied with the provisions of this Article III shall
thereafter look only to WAG for satisfaction of their claims for WAG Common
Stock or any cash in lieu of fractional shares of WAG Common Stock and any
Presurrender Dividends.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub
that:
SECTION 4.01. Organization and Qualification; Subsidiaries. (a) The
Company and each directly and indirectly owned subsidiary of the Company (the
"COMPANY SUBSIDIARIES") has been duly organized and is validly existing and in
good standing (to the extent applicable) under the laws of the jurisdiction of
its incorporation or organization, as the case may be, and has the requisite
corporate power and authority and all necessary governmental approvals to own,
lease and operate its properties and to carry on its business as it is now being
conducted, except where the failure to be so organized, existing or in good
standing or to have such power, authority and governmental approvals would not
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect. The Company and each Company Subsidiary
15
<PAGE> 21
is duly qualified or licensed to do business, and is in good standing (to the
extent applicable), in each jurisdiction where the character of the properties
owned, leased or operated by it or the nature of its business makes such
qualification or licensing necessary, except for such failures to be so
qualified or licensed and in good standing that would not reasonably be expected
to have, individually or in the aggregate, a Company Material Adverse Effect.
(b) Section 4.01 of the Company Disclosure Schedule sets
forth, as of the date of this Agreement, a true and complete list of each
Company Subsidiary, together with (i) the jurisdiction of incorporation or
organization of each Company Subsidiary and the percentage of each Company
Subsidiary's outstanding capital stock or other equity interests owned by the
Company or another Company Subsidiary and (ii) an indication of whether each
Company Subsidiary is a "Significant Subsidiary" as defined in Regulation S-X
under the Exchange Act. Except as set forth in Section 4.01 of the Company
Disclosure Schedule, neither the Company nor any Company Subsidiary owns an
equity interest in any partnership or joint venture arrangement or other
business entity that is material to the financial condition, results of
operations, business or prospects of the Company and the Company Subsidiaries,
taken as a whole.
SECTION 4.02. Certificate of Incorporation and Bylaws. The copies of
the Company's certificate of incorporation and bylaws that are incorporated by
reference as exhibits to the Company's Annual Report on Form 10-K for the fiscal
year ended August 31, 1997 (the "COMPANY 1997 10-K") are true, complete and
correct copies thereof. Such certificate of incorporation and bylaws are in full
force and effect. The Company is not in violation of any of the provisions of
its certificate of incorporation or bylaws.
SECTION 4.03. Capitalization. The authorized capital stock of the
Company consists of 25,000,000 shares of Company Common Stock, 1,000,000 shares
of which have been designated as Company Junior Common Stock, and 5,000,000
shares of preferred stock, 200,000 of which have been designated as Company
Preferred Stock. As of the date hereof (i) 11,036,944 shares of Company Common
Stock are issued and outstanding, all of which are validly issued, fully paid
and nonassessable, (ii) no shares of Company Common Stock are held in the
treasury of the Company, (iii) no shares of Company Common Stock are held by the
Company Subsidiaries, (iv) 1,629,407 shares of Company Common Stock are reserved
for future issuance pursuant to employee stock options or stock incentive rights
granted under the Company Stock Plans, (v) 116,260 shares of Company Common
Stock are reserved for future issuance pursuant to the Company's 1983 Employee
Stock Purchase Plan and the Company's 1997 Foreign Employee Stock Purchase Plan
(collectively, the "Company Stock Purchase Plans"), (vi) 200,000 shares of
Company Preferred Stock are reserved for issuance pursuant to the Rights; and
(vii) no shares of Company Junior Common Stock are issued and outstanding.
Except for shares of Company Common Stock issuable pursuant to the Company Stock
Plans or pursuant to agreements or arrangements described in Section 4.03 of the
Company Disclosure Schedule or in the Company Reports and other than the Rights,
there are no options, warrants or other rights, agreements, arrangements or
commitments of any character to which the Company is a party or by which the
Company is bound relating to the issued or unissued capital stock of the Company
16
<PAGE> 22
or any Company Subsidiary or obligating the Company or any Company Subsidiary to
issue or sell any shares of capital stock of, or other equity interests in, the
Company or any Company Subsidiary. Section 4.03 of the Company Disclosure
Schedule sets forth a complete and correct list as of the date hereof of (w) the
number of options to purchase Company Common Stock outstanding and the number of
shares of Company Common Stock issuable thereunder, (x) the exercise price of
each such outstanding stock option, (y) the vesting schedule of each such
outstanding stock option and (z) the grantee or holder of each such option. All
shares of Company Common Stock subject to issuance as aforesaid, upon issuance
prior to the Effective Time on the terms and conditions specified in the
instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable. Except as described in Section
4.03 of the Company Disclosure Schedule, there are no outstanding contractual
obligations of the Company or any Company Subsidiary to repurchase, redeem or
otherwise acquire any shares of Company Capital Stock or any capital stock of
any Company Subsidiary. Each outstanding share of capital stock of each Company
Subsidiary is duly authorized, validly issued, fully paid and nonassessable and
each such share owned by the Company or another Company Subsidiary is free and
clear of all security interests, liens, claims, pledges, options, rights of
first refusal, agreements, limitations on the Company's or such other Company
Subsidiary's voting rights, charges and other encumbrances of any nature
whatsoever, except where the failure to own such shares free and clear would not
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect. Except as set forth in Section 4.03 of the Company
Disclosure Schedule, there are no outstanding contractual obligations of the
Company or any Company Subsidiary to provide funds to, or make any material
investment (in the form of a loan, capital contribution or otherwise) in, any
Company Subsidiary or any other person. Prior to the execution and delivery of
this Agreement, the Company has entered into Amendment No. 1 to that certain
Rights Agreement dated as of February 19, 1997 between the Company and The First
National Bank of Boston, a national banking association, as Rights Agent (the
"RIGHTS AGREEMENT"), relating to the Rights to amend the definition of
"Acquiring Person" set forth in Section 1 of the Rights Agreement.
SECTION 4.04. Authority Relative to this Agreement. The Company has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the Company
and the consummation by the Company of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate action, and no other
corporate proceedings on the part of the Company are necessary to authorize this
Agreement or to consummate such transactions (other than the approval of this
Agreement and the Merger by the holders of a majority of the outstanding shares
of Company Common Stock entitled to vote with respect thereto at the Company
Stockholders' Meeting and the filing and recordation of the Certificate of
Merger as required by the Delaware General Corporation Law). This Agreement has
been duly executed and delivered by the Company and, assuming the due
authorization, execution and delivery by the other parties hereto, constitutes
the legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms.
17
<PAGE> 23
SECTION 4.05. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by the Company do not, and the
performance by the Company of its obligations hereunder and the consummation of
the Merger will not, (i) conflict with or violate any provision of the
certificate of incorporation or bylaws of the Company or any equivalent
organizational documents of any Company Subsidiary, (ii) assuming that all
consents, approvals, authorizations and permits described in Section 4.05(b)
have been obtained and all filings and notifications described in Section
4.05(b) have been made, conflict with or violate any Law applicable to the
Company or any Company Subsidiary or by which any property or asset of the
Company or any Company Subsidiary is bound or affected or (iii) except as set
forth in Section 4.05(a) of the Company Disclosure Schedule, result in any
breach of or constitute a default (or an event which with the giving of notice
or lapse of time or both would reasonably be expected to become a default)
under, or give to others any right of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or other encumbrance on any
property or asset of the Company or any Company Subsidiary pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation, except, with respect to clauses
(ii) and (iii), for any such conflicts, violations, breaches, defaults or other
occurrences which would not reasonably be expected, individually or in the
aggregate, (A) to have a Company Material Adverse Effect or (B) to prevent or
materially delay the performance by the Company of its obligations pursuant to
this Agreement or the consummation of the Merger.
(b) The execution and delivery of this Agreement by the
Company do not, and the performance by the Company of its obligations hereunder
and the consummation of the Merger will not, require any consent, approval,
authorization or permit of, or filing by the Company with or notification by the
Company to, any Governmental Entity, except (i) pursuant to applicable
requirements of the Exchange Act, the Securities Act, Blue Sky Laws, the rules
and regulations of Nasdaq, state takeover laws, the premerger notification
requirements of the HSR Act, if any, the filing and recordation of the
Certificate of Merger as required by the Delaware General Corporation Law, and
as set forth in Section 4.05(b) of the Company Disclosure Schedule, and (ii)
where failure to obtain such consents, approvals, authorizations or permits, or
to make such filings or notifications, would not reasonably be expected,
individually or in the aggregate, (A) to have a Company Material Adverse Effect
or (B) to prevent or materially delay the performance by the Company of its
obligations pursuant to this Agreement or the consummation of the Merger.
SECTION 4.06. Permits; Compliance with Laws. The Company and the
Company Subsidiaries are in possession of all franchises, grants,
authorizations, licenses, establishment registrations, product listings,
permits, easements, variances, exceptions, consents, certificates,
identification and registration numbers, approvals and orders of any
Governmental Entity necessary for the Company or any Company Subsidiary to own,
lease and operate its properties or to produce, store, distribute and market its
products or otherwise to carry on its business as it is now being conducted
(collectively, the "Company Permits"), except where the failure to have, or the
suspension or cancellation of, any of the Company Permits would not reasonably
be expected to have, individually or in the aggregate, a Company Material
Adverse Effect, and, as
18
<PAGE> 24
of the date of this Agreement, no suspension or cancellation of any of the
Company Permits is pending or, to the knowledge of the Company, threatened,
except where the failure to have, or the suspension or cancellation of, any of
the Company Permits would not reasonably be expected to have, individually or in
the aggregate, a Company Material Adverse Effect. Neither the Company nor any
Company Subsidiary is in conflict with, or in default or violation of, (i) any
Law applicable to the Company or any Company Subsidiary or by which any property
or asset of the Company or any Company Subsidiary is bound or affected or (ii)
any Company Permits, except in the case of clauses (i) and (ii) for any such
conflicts, defaults or violations that would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect. Except as
set forth in Section 4.06(a) of the Company Disclosure Schedule, since August
31, 1997, neither the Company nor any Company Subsidiary has received from any
Governmental Entity any written notification with respect to possible conflicts,
defaults or violations of Laws, except for written notices relating to possible
conflicts, defaults or violations that would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect.
(b) Except as disclosed on Section 4.06(b) of the Company
Disclosure Schedule, since August 31, 1997, there have been no written notices,
citations or decisions by any governmental or regulatory body that any product
produced, manufactured or marketed at any time by the Company or any of the
Company Subsidiaries (the "COMPANY PRODUCTS"), other than a Company Third Party
Product (as defined below), is defective or fails to meet any applicable
standards promulgated by any such governmental or regulatory body, and no senior
executive officer of the Company or any of the Company Subsidiaries knows of any
such defect or failure which has not been remedied or is in the process of being
remedied. In the case of products which are produced or manufactured by third
parties and are distributed by the Company or any of the Company Subsidiaries
(the "COMPANY THIRD PARTY PRODUCTS"), to the knowledge of any of the senior
executive officers of the Company or any of the Company Subsidiaries, since
August 31, 1997, there have been no written notices, citations or decisions by
any governmental or regulatory body that any Company Third Party Product
distributed at any time by the Company or any of the Company Subsidiaries is
defective or fails to meet any applicable standards promulgated by any such
governmental or regulatory body, and none of the senior executive officers of
the Company or any of the Company Subsidiaries knows of any such defect or
failure which has not been remedied or is in the process of being remedied. The
Company and each of the Company Subsidiaries (i) has complied with the laws,
regulations, policies, procedures and specifications applicable to the Company
with respect to the design, manufacture, testing and inspection of Company
Products in the United States and the operation of manufacturing facilities in
the United States promulgated by the United States Federal Communications
Commission (the "FCC"), and (ii) has complied with the laws, regulations,
policies, procedures and specifications applicable to the Company or such
Company Subsidiary, as applicable, in any jurisdiction outside the United States
with respect to the design, manufacture, testing and inspection of Company
Products and the operation of manufacturing facilities outside of the United
States, except in the case of clause (i) or (ii) for such non-compliance as
would not have a Company Material Adverse Effect. Except as disclosed on Section
4.06(b) of the Company Disclosure Schedule, since August 31, 1997, there have
been no
19
<PAGE> 25
recalls, field notifications or seizures ordered or, to the knowledge of any of
the senior executive officers of the Company or any of its Subsidiaries,
threatened by any such governmental or regulatory body with respect to any of
the Company Products, other than Company Third Party Products, and neither the
Company nor any of the Company Subsidiaries has independently engaged in recalls
or field notifications. In the case of Company Third Party Products distributed
by the Company or any of the Company Subsidiaries, neither the Company nor any
of the Company Subsidiaries has received any notices or any recalls, field
notifications or seizures ordered or threatened by any such governmental or
regulatory body with respect to any of such Company Third Party Products, and
neither the Company nor any of the Company Subsidiaries has independently
engaged in recalls or field notifications.
(c) Except as set forth on Section 4.06(c)(i) of the Company
Disclosure Schedule, the Company or one or more of the Company Subsidiaries has
obtained, in all countries where the Company or such Company Subsidiary, as
applicable, is marketing or has marketed the Company Products, all applicable
licenses, registrations, approvals, clearances and authorizations required to be
obtained by it by local, state or Federal agencies in such countries regulating
the safety, effectiveness and market clearance of the Company Products in such
countries that are currently marketed by the Company or such Company Subsidiary,
as applicable, except where the failure to obtain such licenses, registrations,
approvals, clearances and authorizations would not have a Company Material
Adverse Effect. Section 4.06(c)(ii) of the Company Disclosure Schedule sets
forth a list of all licenses, registrations, approvals, permits and device
listings relating to Company Products. Section 4.06(c)(iii) of the Company
Disclosure Schedule sets forth a description of all inspections by regulatory
authorities, recalls, product actions and audits of Company Products since
August 31, 1997.
SECTION 4.07. SEC Filings; Financial Statements. (a) Except as
disclosed in Section 4.07 of the Company Disclosure Schedule, the Company has
timely filed all forms, reports, statements and documents required to be filed
by it (A) with the SEC and Nasdaq since August 31, 1995 through the date of this
Agreement (collectively and as amended, the "COMPANY REPORTS") and (B) with any
other Governmental Entities, including state regulatory authorities. Each
Company Report (i) was prepared in accordance with the requirements of the
Securities Act, the Exchange Act or the rules and regulations of Nasdaq, as the
case may be, and (ii) did not at the time it was filed contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. Each
form, report, statement and document referred to in clause (b) of this paragraph
was prepared in all material respects in accordance with the requirements of
applicable Law. Except as disclosed in Section 4.07 of the Company Disclosure
Schedule, no Company Subsidiary is subject to the periodic reporting
requirements of the Exchange Act or required to file any form, report or other
document with the SEC, Nasdaq, any other stock exchange or any other comparable
Governmental Entity.
(b) Each of the consolidated financial statements (including,
in each case, any notes thereto) contained in the Company Reports filed since
August 31, 1997 was prepared in
20
<PAGE> 26
accordance with U.S. GAAP applied on a consistent basis throughout the periods
indicated (except as may be indicated in the notes thereto) and each presented
fairly, in all material respects, the consolidated financial position of the
Company and the consolidated Company Subsidiaries as at the respective dates
thereof and for the respective periods indicated therein, except as otherwise
noted therein (subject, in the case of unaudited statements, to normal and
recurring year-end adjustments which did not have and would not reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect and as permitted by Form 10-Q of the SEC).
(c) Except as and to the extent set forth or reserved against
on the consolidated balance sheet of the Company and the Company Subsidiaries as
reported in the Company Reports, including the notes thereto, none of the
Company or any Company Subsidiary has any liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise) that would be
required to be reflected on a balance sheet or in notes thereto prepared in
accordance with U.S. GAAP, except for liabilities or obligations incurred in the
ordinary course of business consistent with past practice since August 31, 1997
that have not had and would not reasonably be expected to have, individually or
in the aggregate, a Company Material Adverse Effect.
SECTION 4.08. Absence of Certain Changes or Events. Since August 31,
1997, except as contemplated by or as disclosed in this Agreement, as set forth
in Section 4.08 of the Company Disclosure Schedule or as disclosed in any
Company Report filed since August 31, 1997 and prior to the date hereof, the
Company and the Company Subsidiaries have conducted their businesses only in the
ordinary course consistent with past practice and, since such date, there has
not been (i) any Company Material Adverse Effect, excluding any changes and
effects resulting from changes in economic, regulatory or political conditions
or changes in conditions generally applicable to the industries in which the
Company and the Company Subsidiaries are involved, (ii) any event that would
reasonably be expected to prevent or materially delay the performance of its
obligations pursuant to this Agreement and the consummation of the Merger by the
Company, (iii) any material change by the Company in its accounting methods,
principles or practices, (iv) any declaration, setting aside or payment of any
dividend or distribution in respect of the shares of Company Capital Stock or
any redemption, purchase or other acquisition of any of the Company's securities
or (v) any increase in the compensation or benefits or establishment of any
bonus, insurance, severance, deferred compensation, pension, retirement, profit
sharing, stock option (including the granting of stock options, stock
appreciation rights, performance awards or restricted stock awards), stock
purchase or other employee benefit plan, or any other increase in the
compensation payable or to become payable to any executive officers of the
Company or any Company Subsidiary except in the ordinary course of business
consistent with past practice.
SECTION 4.09. Employee Benefit Plans; Labor Matters. (a) Section
4.09(a) of the Company Disclosure Schedule lists all employee benefit plans (as
defined in Section 3(3) of ERISA) and all bonus, stock option, stock purchase,
restricted stock, incentive, deferred compensation, retiree medical or life
insurance, supplemental retirement, severance or other benefit plans, programs
or arrangements, and all employment, termination, severance or other
21
<PAGE> 27
contracts or agreements, whether legally enforceable or not, to which the
Company or any Company Subsidiary is a party, with respect to which the Company
or any Company Subsidiary has any obligation or which are maintained,
contributed to or sponsored by the Company or any Company Subsidiary for the
benefit of any current or former employee, officer or director of the Company or
any Company Subsidiary (collectively, the "COMPANY BENEFIT PLANS"). With respect
to each Company Benefit Plan, the Company has delivered or made available to
Parent a true, complete and correct copy of (i) such Company Benefit Plan and
the most recent summary plan description related to such Company Benefit Plan,
if a summary plan description is required therefor, (ii) each trust agreement or
other funding arrangement relating to such Company Benefit Plan, (iii) the most
recent annual report (Form 5500) filed with the IRS) with respect to such
Company Benefit Plan, (iv) the most recent actuarial report or financial
statement relating to such Company Benefit Plan and (v) the most recent
determination letter issued by the IRS with respect to such Company Benefit
Plan, if it is qualified under Section 401(a) of the Code. Neither the Company
nor any Company Subsidiary has any express or implied commitment, whether
legally enforceable or not, (i) to create, incur liability with respect to or
cause to exist any other employee benefit plan, program or arrangement, (ii) to
enter into any contract or agreement to provide compensation or benefits to any
individual or (iii) to modify, change or terminate any Company Benefit Plan,
other than with respect to a modification, change or termination required by
ERISA or the Code.
(b) None of the Company Benefit Plans is a multiemployer plan
(within the meaning of Section 3(37) or 4001(a)(3) of ERISA) (a "MULTIEMPLOYER
PLAN") or a single employer pension plan (within the meaning of Section
4001(a)(15) of ERISA) for which the Company or any Company Subsidiary could
incur liability under Section 4063 or 4064 of ERISA (a "MULTIPLE EMPLOYER
PLAN"). None of the Company Benefit Plans provides for or promises retiree
medical, disability or life insurance benefits to any current or former
employee, officer or director of the Company or any Company Subsidiary.
(c) Each Company Benefit Plan has been administered in all
material respects in accordance with its terms and all contributions required to
be made under the terms of any of the Company Benefit Plans as of the date of
this Agreement have been timely made or have been reflected on the most recent
consolidated balance sheet filed or incorporated by reference in the Company
Reports prior to the date of this Agreement. Except as set forth in Section
4.09(c) of the Company Disclosure Schedule, with respect to the Company Benefit
Plans, 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 or any
Company Subsidiary could be subject to any liability under the terms of such
Company Benefit Plans, ERISA, the Code or any other applicable Law which would
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect. No legal action, suit or claim is pending or, to the
knowledge of the Company, threatened with respect to any Company Benefit Plan
(other than claims for benefits in the ordinary course).
(d) Except as disclosed in Section 4.09(d) of the Company
Disclosure Schedule or except as would not reasonably be expected to have,
individually or in the aggregate, a
22
<PAGE> 28
Company Material Adverse Effect: (i) each Company Benefit Plan which is intended
to be qualified under Section 401(a) of the Code or Section 401(k) of the Code
has received a favorable determination letter from the IRS that it is so
qualified and each trust established in connection with any Company Benefit Plan
which is intended to be exempt from federal income taxation under Section 501(a)
of the Code has received a determination letter from the IRS that it is so
exempt, and no fact or event has occurred since the date of such determination
letter from the IRS to adversely affect the qualified status of any such Company
Benefit Plan or the exempt status of any such trust; (ii) each trust maintained
or contributed to by the Company or any Company Subsidiary which is intended to
be qualified as a voluntary employees' beneficiary association and which is
intended to be exempt from federal income taxation under Section 501(c)(9) of
the Code has received a favorable determination letter from the IRS that it is
so qualified and so exempt, and no fact or event has occurred since the date of
such determination by the IRS to adversely affect such qualified or exempt
status; (iii) there has been no prohibited transaction (within the meaning of
Section 406 of ERISA or Section 4975 of the Code) with respect to any Company
Benefit Plan; (iv) neither the Company nor any Company Subsidiary has incurred
any liability for any penalty or tax arising under Section 4971, 4972, 4980,
4980B or 6652 of the Code or any liability under Section 502 of ERISA, and no
fact or event exists which could give rise to any such liability; (v) no
complete or partial termination has occurred within the five years preceding the
date hereof with respect to any Company Benefit Plan; (vi) no Company Benefit
Plan is subject to Title IV of ERISA; (vii) none of the assets of the Company or
any Company Subsidiary is the subject of any lien arising under Section 302(f)
of ERISA or Section 412(n) of the Code; neither the Company nor any Company
Subsidiary has been required to post any security under Section 307 of ERISA or
Section 401(a)(29) of the Code; and no fact or event exists which could give
rise to any such lien or requirement to post any such security; (viii) all
contributions, premiums or payments required to be made with respect to any
Company Benefit Plan have been made on or before their due dates; and (ix) all
such contributions have been fully deducted for income tax purposes and no such
deduction has been challenged or disallowed by any government entity and no fact
or event exists which could give rise to any such challenge or disallowance.
(e) Except as set forth in Section 4.09(e) of the Company
Disclosure Schedule, neither the Company nor any Company Subsidiary is a party
to any collective bargaining or other labor union contract applicable to persons
employed by the Company or any Company Subsidiary and no collective bargaining
agreement is being negotiated by the Company or any Company Subsidiary. As of
the date of this Agreement, there is no labor dispute, strike or work stoppage
against the Company or any Company Subsidiary pending or, to the knowledge of
the Company, threatened which may interfere with the respective business
activities of the Company or any Company Subsidiary, except where such dispute,
strike or work stoppage would not reasonably be expected to have a Company
Material Adverse Effect. As of the date of this Agreement, to the knowledge of
the Company, there is no charge or complaint against the Company or any Company
Subsidiary pending before the National Labor Relations Board or any comparable
Governmental Entity pending or threatened in writing, except where such unfair
labor practice, charge or complaint would not reasonably be expected to have a
Company Material Adverse Effect.
23
<PAGE> 29
(f) The Company has delivered or made available to Parent
true, complete and correct copies of (i) all employment agreements with officers
and all consulting agreements of the Company and each Company Subsidiary
providing for annual compensation in excess of $100,000, (ii) all severance
plans, agreements, programs and policies of the Company and each Company
Subsidiary with or relating to their respective employees or consultants, and
(iii) all plans, programs, agreements and other arrangements of the Company and
each Company Subsidiary with or relating to their respective employees or
consultants which contain "change of control" provisions.
SECTION 4.10. Certain Tax Matters. Except as disclosed in the Company
Reports, neither the Company nor, to the knowledge of the Company, any of its
affiliates has taken or agreed to take any action that would reasonably be
expected to prevent the Merger from constituting a transaction qualifying under
Section 368 of the Code. The Company is not aware of any agreement, plan or
other circumstances that would reasonably be expected to prevent the Merger from
so qualifying under Section 368 of the Code.
SECTION 4.11. Contracts; Debt Instruments. Except as disclosed in the
Company Reports or in Section 4.11 of the Company Disclosure Schedule, there is
no contract or agreement that is material to the business, financial condition
or results of operations of the Company and the Company Subsidiaries taken as a
whole (each, a "COMPANY MATERIAL CONTRACT"). Except as disclosed in the Company
Reports or in Section 4.11 of the Company Disclosure Schedule, neither the
Company nor any Company Subsidiary is in violation of or in default under (nor
does there exist any condition which with the passage of time or the giving of
notice would reasonably be expected to cause such a violation of or default
under) any loan or credit agreement, note, bond, mortgage, indenture or lease,
or any other contract, license, agreement, arrangement or understanding to which
it is a party or by which it or any of its properties or assets is bound, except
for violations or defaults that would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect. Set forth
in Section 4.11 of the Company Disclosure Schedule is a description of any
material changes to the amount and terms of the indebtedness of the Company and
its subsidiaries as described in the notes to the financial statements
incorporated in the Company 1997 10-K.
SECTION 4.12. Litigation. Except as disclosed in the Company Reports or
in Section 4.12 of the Company Disclosure Schedule, there is no suit, claim or
action or, to the knowledge of the Company, proceeding or investigation pending
or threatened against the Company or any Company Subsidiary before any
Governmental Entity that would reasonably be expected to have, individually or
in the aggregate, a Company Material Adverse Effect, and, except as disclosed to
Parent, to the knowledge of the Company, there are no existing facts or
circumstances that would reasonably be expected to result in such a suit, claim,
action, proceeding or investigation. Except as disclosed to Parent, the Company
is not aware of any facts or circumstances which would reasonably be expected to
result in the denial of insurance coverage under policies issued to the Company
and the Company Subsidiaries in respect of such suits, claims, actions,
proceedings and investigations for which the Company has a reasonable
expectation of obtaining insurance coverage, except in any case as would not
reasonably be
24
<PAGE> 30
expected to have, individually or in the aggregate, a Company Material Adverse
Effect or as a result of the execution of this Agreement and consummation of
transactions hereunder. Except as disclosed in the Company Reports or in Section
4.12 of the Company Disclosure Schedule, neither the Company nor any Company
Subsidiary is subject to any outstanding order, writ, injunction or decree which
would reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect.
SECTION 4.13. Environmental Matters. Except as disclosed in the Company
Reports or in Section 4.13 of the Company Disclosure Schedule, or as would not
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect, (i) the Company and the Company Subsidiaries are in
compliance with all applicable Environmental Laws; (ii) all past noncompliance
of the Company or any Company Subsidiary with Environmental Laws or
Environmental Permits has been resolved without any pending, ongoing or future
obligation, cost or liability; and (iii) neither the Company nor any Company
Subsidiary has released a Hazardous Material at, or transported a Hazardous
Material to or from, any real property currently or formerly owned, leased or
occupied by the Company or any Company Subsidiary, in violation of any
Environmental Law.
SECTION 4.14. Intellectual Property. Except as set forth in Section
4.14 of the Company Disclosure Schedule, or as would not reasonably be expected
to have, individually or in the aggregate, a Company Material Adverse Effect,
(i) the Company and the Company Subsidiaries own or possess adequate licenses or
other valid rights to use all patents, patent applications, patent rights,
trademarks, trademark rights, trade names, trade dress, trade name rights,
copyrights and copyright registrations and applications, copyright rights,
service marks, trade secrets, applications for trademarks and for service marks,
know-how and other proprietary rights and information used or held for use in
connection with the respective businesses of the Company and the Company
Subsidiaries as currently conducted, free and clear of all liens, and (ii) the
Company is unaware of any assertion or claim challenging the ownership, use or
validity of any of the foregoing. Section 4.14 of the Company Disclosure
Schedule lists all material licenses, sublicenses and other agreements to which
the Company or any Company Subsidiary is a party and pursuant to which (i) any
third party is authorized to use any intellectual property right of the Company
or any Company Subsidiary or (ii) the Company or any Company Subsidiary is
authorized to use any intellectual property rights (other than pursuant to
shrink-wrap and software licenses) of a third party (collectively, the "Company
Licenses"), and includes the identity of all parties thereto, a description of
the nature and subject matter thereof, the royalty provisions, if any, therein
and the term thereof. The material Company Licenses are valid and binding
obligations of the Company, enforceable in accordance with their terms, and
there are no material breaches or defaults thereunder. Except as set forth in
Section 4.14 of the Company Disclosure Schedule, the conduct of the respective
businesses of the Company and the Company Subsidiaries as currently conducted
does not infringe upon any patent, patent right, license, trademark, trademark
right, trade dress, trade name, trade name right, service mark, copyright or
copyright right of any third party that would reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect. To the
knowledge of the Company, there are no infringements of any proprietary rights
owned by or licensed by or to the Company or any
25
<PAGE> 31
Company Subsidiary that could reasonably be expected to have, individually or in
the aggregate, a Company Material Adverse Effect.
SECTION 4.15. Taxes. Except as set forth in Section 4.15 of the Company
Disclosure Schedule and except for such matters that would not reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect, (i) the Company and each of the Company Subsidiaries has timely filed or
shall timely file all returns and reports required to be filed by it with any
taxing authority, taking into account any extension of time to file granted to
or obtained on behalf of the Company and the Company Subsidiaries, (ii) all
Taxes shown to be payable on such returns or reports have been or will be paid,
(iii) as of the date hereof, no deficiencies for any amount of Tax have been
asserted or assessed by any taxing authority against the Company or any Company
Subsidiary that are not adequately reserved for and (iv) the most recent
financial statements contained in the Company Reports reflect an adequate
reserve in accordance with U.S. GAAP for all taxes payable by the Company and
the Company Subsidiaries for all taxable periods and portions thereof accrued
through the date of such financial statements. Within ten days after the date
hereof, the Company and the Company Subsidiaries will make available to Parent
or its legal counsel for inspection copies of all income and sales and use tax
returns for all periods since the date of the Company's and the Company
Subsidiaries' incorporation.
SECTION 4.16. Rule 145 Affiliates. Section 4.16 of the Company
Disclosure Schedule sets forth the name and address of each person who is, in
the Company's reasonable judgment, a Rule 145 Affiliate of the Company.
SECTION 4.17. Brokers. Except for Broadview, no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the Merger based upon arrangements made by or on
behalf of the Company.
SECTION 4.18. Certain Business Practices. None of the Company, any
Company Subsidiary or any directors, officers, agents or employees of the
Company or any Company Subsidiary (in their capacities as such) has (i) used any
funds for unlawful contributions, gifts, entertainment or other unlawful
expenses relating to political activity, (ii) 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, (iii) consummated any transaction, made any
payment, entered into any agreement or arrangement or taken any other action in
violation of Section 1128B(b) of the Social Security Act, as amended, or (iv)
made any other unlawful payment.
SECTION 4.19. Transaction Expenses. Section 4.19 of the Company
Disclosure Schedule sets forth the Company's current, good faith, itemized
estimate, as of the date of this Agreement, of the fees and expenses the Company
will incur in connection with consummating the Merger and the other transactions
contemplated hereby.
26
<PAGE> 32
SECTION 4.20. Interested Party Transactions. Except as set forth in
Section 4.20 of the Company Disclosure Schedule or in the Company Reports and
except for transactions of the type described in the Company Reports which have
occurred since August 1, 1997 in the ordinary course of business, since August
31, 1997, no executive officer, director or stockholder of the Company or any of
the Company Subsidiaries has engaged in any business dealings with the Company
or any of the Company Subsidiaries (other than any such business dealings that
would not required to be disclosed in a proxy statement satisfying the
requirements of Regulation 14A promulgated under the Exchange Act filed on the
date hereof).
SECTION 4.21. Charter Anti-takeover Provisions and State Takeover
Statutes. The board of directors of the Company has approved by a majority of
the Disinterested Directors (as defined in the Company's Certificate of
Incorporation) the Merger, this Agreement, the Stockholders Proxy Agreement and
the transactions contemplated hereby and thereby, and such approval is
sufficient to render inapplicable to the Merger, this Agreement, the
Stockholders Proxy Agreement, and the transactions contemplated hereby and
thereby the provisions of the Company's Certificate of Incorporation requiring
the supermajority approval of the Company's stockholders and the provisions of
Section 203 of the Delaware General Corporation Law. To the knowledge of the
Company, no other state takeover statute or similar statute or regulation
applies or purports to apply to the Merger, this Agreement, the Stockholders
Proxy Agreement or the transactions contemplated hereby or thereby.
SECTION 4.22. Opinion of Financial Advisor. The Company has received
the Company Fairness Opinion.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF WAG, PARENT AND MERGER SUB
WAG, Parent and Merger Sub hereby jointly and severally represent and
warrant to the Company that:
SECTION 5.01. Organization and Qualification; Subsidiaries. WAG,
Parent, Merger Sub and each other subsidiary of Parent or WAG (the "PARENT
SUBSIDIARIES") has been duly organized and is validly existing and in good
standing (to the extent applicable) under the laws of the jurisdiction of its
incorporation or organization, as the case may be, and has the requisite
corporate power and authority and all necessary governmental approvals to own,
lease and operate its properties and to carry on its business as it is now being
conducted, except where the failure to be so organized, existing or in good
standing or to have such power, authority and governmental approvals would not
reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect. WAG, Parent, Merger Sub and each other Parent
Subsidiary is duly qualified or licensed to do business, and is in good standing
(to the extent applicable), in each jurisdiction where the character of the
properties owned, leased or operated by it or the nature of its business makes
such qualification or licensing necessary, except for such
27
<PAGE> 33
failures to be so qualified or licensed and in good standing that would not
reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect.
(b) Section 5.01 of the Parent Disclosure Schedule sets forth,
as of the date of this Agreement, a true and complete list of each Parent
Subsidiary, together with (i) the jurisdiction of incorporation or organization
of each Parent Subsidiary and the percentage of each Parent Subsidiary's
outstanding capital stock or other equity interests owned by Parent or another
Parent Subsidiary and (ii) an indication of whether each Parent Subsidiary is a
"Significant Subsidiary" as defined in Regulation S-X under the Exchange Act.
Except as set forth in Section 5.01 of the Parent Disclosure Schedule, neither
Parent nor any Parent Subsidiary owns an equity interest in any partnership or
joint venture arrangement or other business entity that is material to the
financial condition, results of operations, business or prospects of Parent and
the Parent Subsidiaries, taken as a whole.
SECTION 5.02. Certificate of Incorporation and Bylaws. The copies of
WAG's certificate of incorporation and bylaws that are incorporated by reference
as exhibits to WAG's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 (the "PARENT 1997 10-K") are true, complete and correct copies
thereof. Parent has heretofore furnished the Company with true, complete and
correct copies of the certificate of incorporation and bylaws of each of Parent
and Merger Sub. Such certificates and bylaws are in full force and effect.
Neither Parent nor Merger Sub is in violation of any of the provisions of its
certificate or bylaws.
SECTION 5.03. Capitalization. The authorized capital stock of Parent
consists of 40,000,000 shares of Parent Common Stock and 10,000,000 shares of
preferred stock. As of the date hereof (i) 1,000 shares of Parent Common Stock
are issued and outstanding, all of which are validly issued, fully paid and
nonassessable and owned by WAG, and (ii) no shares of Parent Common Stock are
held by the Parent Subsidiaries. As of the date hereof, there are no shares of
preferred stock of Parent issued and outstanding. The authorized capital stock
of WAG consists of 40,000,000 shares of WAG Common Stock and 10,000,000 shares
of preferred stock. As of the date hereof, (i) 21,878,713 shares of WAG Common
Stock are issued and outstanding, all of which are validly issued, fully paid
and nonassessable, (ii) no shares of WAG Common Stock are held in the treasury
of WAG, (iii) no shares of WAG Common Stock are held by the Parent Subsidiaries,
(iv) 4,621,774 shares of WAG Common Stock are reserved for future issuance
pursuant to stock options under the Parent Stock Plans, (v) 617,340 shares of
WAG Common Stock are reserved for issuance pursuant to outstanding warrants to
purchase shares of WAG Common Stock, and (vi) 3,105,485 shares of WAG Common
Stock are reserved for issuance upon conversion of WAG's 4.5% Convertible
Subordinated Notes due 2002. As of the date hereof, there are no shares of
preferred stock of WAG issued and outstanding. Upon consummation of the Holding
Company Reorganization, the Parent will succeed to the capitalization of WAG.
Except for the shares of WAG Common Stock issuable pursuant to the Parent Stock
Plans, the Holding Company Reorganization or the Resurgens Transaction or
pursuant to agreements or arrangements described in Section 5.03 of the Parent
Disclosure Schedule, there are no options, warrants or other rights, agreements,
arrangements or commitments of any character to which either WAG or Parent is a
party or by which either WAG
28
<PAGE> 34
or Parent is bound relating to the issued or unissued capital stock of WAG,
Parent, Merger Sub or any other Parent Subsidiary or obligating Parent, Merger
Sub or any other Parent Subsidiary to issue or sell any shares of capital stock
of, or other equity interests in, WAG, Parent, Merger Sub or any other Parent
Subsidiary. All shares of WAG Common Stock subject to issuance (and all shares
of Parent Common Stock upon consummation of the Holding Company Reorganization)
as aforesaid, upon issuance prior to the Effective Time on the terms and
conditions specified in the instruments pursuant to which they are issuable,
will be duly authorized, validly issued, fully paid and nonassessable. Except as
described in Section 5.03 of the Parent Disclosure Schedule, there are no
outstanding contractual obligations of WAG, Parent, Merger Sub or any other
Parent Subsidiary to repurchase, redeem or otherwise acquire any shares of WAG
Common Stock, Parent Common Stock or any capital stock of any Parent Subsidiary.
Each outstanding share of capital stock of each Parent Subsidiary is duly
authorized, validly issued, fully paid and nonassessable and each such share
owned by WAG, Parent or another Parent Subsidiary is free and clear of all
security interests, liens, claims, pledges, options, rights of first refusal,
agreements, limitations on WAG's, Parent's or such other Parent Subsidiary's
voting rights, charges and other encumbrances of any nature whatsoever, except
where the failure to own such shares free and clear would not reasonably be
expected to have, individually or in the aggregate, a Parent Material Adverse
Effect. Except as set forth in Section 5.03 of the Parent Disclosure Schedule,
there are no outstanding contractual obligations of WAG, Parent, Merger Sub or
any other Parent Subsidiary to provide funds to, or make any material investment
(in the form of a loan, capital contribution or otherwise) in, any Parent
Subsidiary or any other person.
SECTION 5.04. Authority Relative to this Agreement. WAG, Parent and
Merger Sub have all necessary corporate power and authority to execute and
deliver this Agreement, to perform their respective obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by WAG, Parent and Merger Sub and the consummation by WAG, Parent
and Merger Sub of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action, and no other corporate
proceedings on the part of WAG, Parent or Merger Sub are necessary to authorize
this Agreement or to consummate such transactions (other than the approval of
the issuance of the WAG Common Stock or the Parent Common Stock, as the case may
be, pursuant to the Merger and the increase in the authorized WAG Common Stock
or Parent Common Stock (after the Holding Company Reorganization) to 100,000,000
shares by the holders of a majority of the outstanding shares of WAG Common
Stock, in the event that the Holding Company Reorganization shall not have been
consummated by the time of the Parent Stockholders' Meeting, or Parent Common
Stock, in the event that the Holding Company Reorganization shall have been so
consummated, and the filing and recordation of the Certificate of Merger as
required by the Delaware General Corporation Law). This Agreement has been duly
executed and delivered by WAG, Parent and Merger Sub and, assuming the due
authorization, execution and delivery by the Company, constitutes the legal,
valid and binding obligation of WAG, Parent and Merger Sub, enforceable against
WAG, Parent and Merger Sub in accordance with its terms.
SECTION 5.05. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by WAG, Parent and Merger Sub do not,
and the performance by
29
<PAGE> 35
WAG, Parent and Merger Sub of their obligations hereunder and the consummation
of the Merger will not, (i) conflict with or violate any provision of the
certificate or articles of incorporation, as the case may be, or bylaws of WAG,
Parent or Merger Sub or any equivalent organizational documents of any other
Parent Subsidiary, (ii) assuming that all consents, approvals, authorizations
and permits described in Section 5.05(b) have been obtained and all filings and
notifications described in Section 5.05(b) have been made, conflict with or
violate any Law applicable to Parent or any other Parent Subsidiary or by which
any property or asset of WAG, Parent, Merger Sub or any other Parent Subsidiary
is bound or affected or (iii) except as set forth in Section 5.05(a) of the
Parent Disclosure Schedule, result in any breach of or constitute a default (or
an event which with the giving of notice or lapse of time or both would
reasonably be expected to become a default) under, or give to others any right
of termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or other encumbrance on any property or asset of WAG, Parent,
Merger Sub or any other Parent Subsidiary pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation, except, with respect to clauses (ii) and (iii), for
any such conflicts, violations, breaches, defaults or other occurrences which
would not reasonably be expected, individually or in the aggregate, (A) to have
a Parent Material Adverse Effect or (B) to prevent or materially delay the
performance by WAG, Parent or Merger Sub of its obligations pursuant to this
Agreement or the consummation of the Merger.
(b) The execution and delivery of this Agreement by WAG,
Parent and Merger Sub do not, and the performance by WAG, Parent and Merger Sub
of their respective obligations hereunder and the consummation of the Merger
will not, require any consent, approval, authorization or permit of, or filing
by WAG, Parent or Merger Sub with or notification by WAG, Parent or Merger Sub
to, any Governmental Entity, except (i) pursuant to applicable requirements of
the Exchange Act, the Securities Act, Blue Sky Laws, the rules and regulations
of Nasdaq, state takeover laws, the premerger notification requirements of the
HSR Act, if any, and the filing and recordation of the Certificate of Merger as
required by the Delaware General Corporation Law and (ii) where failure to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not reasonably be expected, individually or in
the aggregate, (A) to have a Parent Material Adverse Effect or (B) to prevent or
materially delay the performance by WAG, Parent or Merger Sub of its obligations
pursuant to this Agreement or the consummation of the Merger.
SECTION 5.06. Permits; Compliance with Laws. WAG, Parent, Merger Sub
and each other Parent Subsidiary is in possession of all franchises, grants,
authorizations, licenses, establishment registrations, product listings,
permits, easements, variances, exceptions, consents, certificates,
identification and registration numbers, approvals and orders of any
Governmental Entity necessary for WAG, Parent, Merger Sub or any other Parent
Subsidiary to own, lease and operate its properties or to store, distribute and
market its products or otherwise to carry on its business as it is now being
conducted (collectively, the "PARENT PERMITS"), except where the failure to
have, or the suspension or cancellation of, any of the Parent Permits would not
reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect, and, as of the date of this Agreement, no suspension or
cancellation of any of the Parent
30
<PAGE> 36
Permits is pending or, to the knowledge of Parent or WAG, threatened, except
where the failure to have, or the suspension or cancellation of, any of the
Parent Permits would not reasonably be expected to have, individually or in the
aggregate, a Parent Material Adverse Effect. None of WAG, Parent, Merger Sub or
any other Parent Subsidiary is in conflict with, or in default or violation of,
(i) any Law applicable to WAG, Parent, Merger Sub or any other Parent Subsidiary
or by which any property or asset of WAG, Parent, Merger Sub or any other Parent
Subsidiary is bound or affected or (ii) any Parent Permits, except in the case
of clauses (i) and (ii) for any such conflicts, defaults or violations that
would not reasonably be expected to have, individually or in the aggregate, a
Parent Material Adverse Effect. Except as set forth in Section 5.06(a) of the
Parent Disclosure Schedule, since December 31, 1997, neither WAG or Parent nor
any Parent Subsidiary has received from any Governmental Entity any written
notification with respect to possible conflicts, defaults or violations of Laws,
except for written notices relating to possible conflicts, defaults or
violations that would not reasonably be expected to have, individually or in the
aggregate, a Parent Material Adverse Effect.
SECTION 5.07. SEC Filings; Financial Statements. (a) WAG has timely
filed all forms, reports, statements and documents required to be filed by it
(A) with the SEC and Nasdaq since December 31, 1995 through the date of this
Agreement (collectively and as amended, the "PARENT REPORTS") and (B) with any
other Governmental Entities, including state regulatory authorities. Except as
disclosed in Section 5.07(a) of the Parent Disclosure Schedule, each Parent
Report (i) was prepared in accordance with the requirements of the Securities
Act, the Exchange Act or the rules and regulations of Nasdaq, as the case may
be, and (ii) did not at the time it was filed contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. Each form, report,
statement and document referred to in clause (b) of this paragraph was prepared
in all material respects in accordance with the requirements of applicable Law.
Except as disclosed in Section 5.07(a) of the Parent Disclosure Schedule, no
Parent Subsidiary is subject to the periodic reporting requirements of the
Exchange Act or required to file any form, report or other document with the
SEC, Nasdaq, any other stock exchange or any other comparable Governmental
Entity.
(b) Except as is provided in Section 5.07(b) of the Parent
Disclosure Schedule, each of the consolidated financial statements (including,
in each case, any notes thereto) contained in the Parent Reports filed since
December 31, 1997 was prepared in accordance with U.S. GAAP applied on a
consistent basis throughout the periods indicated (except as may be indicated in
the notes thereto) and each presented fairly, in all material respects, the
consolidated financial position of Parent and the consolidated Parent
Subsidiaries as at the respective dates thereof and for the respective periods
indicated therein, except as otherwise noted therein (subject, in the case of
unaudited statements, to normal and recurring year-end adjustments which did not
have and would not be reasonably expected to have, individually or in the
aggregate, to have a Parent Material Adverse Effect and as permitted by Form
10-Q of the SEC).
(c) Except as and to the extent set forth or reserved against
on the consolidated balance sheet of WAG and the Parent Subsidiaries as reported
in the Parent Reports, including
31
<PAGE> 37
the notes thereto, or as disclosed in Section 5.07(c) of the Parent Disclosure
Schedule, none of WAG, Parent or any Parent Subsidiary has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
that would be required to be reflected on a balance sheet or in notes thereto
prepared in accordance with U.S. GAAP, except for liabilities or obligations
incurred in the ordinary course of business consistent with past practice since
December 31, 1997 that have not had and would not reasonably be expected to
have, individually or in the aggregate, a Parent Material Adverse Effect.
SECTION 5.08. Absence of Certain Changes or Events. Since December 31,
1997, except as contemplated by or as disclosed in this Agreement, as set forth
in Section 5.08 of the Parent Disclosure Schedule or as disclosed in any Parent
Report filed since December 31, 1997 and the date hereof, WAG, Parent and the
Parent Subsidiaries have conducted their businesses only in the ordinary course
consistent with past practice and, since such date, there has not been (i) any
Parent Material Adverse Effect, excluding any changes and effects resulting from
changes in economic, regulatory or political conditions or changes in conditions
generally applicable to the industries in which WAG, Parent and the Parent
Subsidiaries are involved, (ii) any event that would reasonably be expected to
prevent or materially delay the performance of its obligations pursuant to this
Agreement and the consummation of the Merger by Merger Sub, (iii) any material
change by WAG in its accounting methods, principles or practices, (iv) any
declaration, setting aside or payment of any dividend or distribution in respect
of the shares of WAG Common Stock or Parent Common Stock or any redemption,
purchase or other acquisition of any of WAG's or Parent's securities, or (v) any
increase in the compensation or benefits or establishment of any bonus,
insurance, severance, deferred compensation, pension, retirement, profit
sharing, stock option (including the granting of stock options, stock
appreciation rights, performance awards or restricted stock awards), stock
purchase or other employee benefit plan, or any other increase in the
compensation payable or to become payable to any executive officers of Parent,
WAG or any Parent Subsidiary except in the ordinary course of business
consistent with past practice.
SECTION 5.09. Employee Benefit Plans; Labor Matters. (a) With respect
to all employee benefit plans (as defined in Section 3(3) of ERISA) and all
bonus, stock option, stock purchase, restricted stock, incentive, deferred
compensation, retiree medical or life insurance, supplemental retirement,
severance or other benefit plans, programs or arrangements, and all employment,
termination, severance or other contracts or agreements, whether legally
enforceable or not, to which WAG, Parent or any Parent Subsidiary is a party,
with respect to which WAG, Parent or any Parent Subsidiary has any obligation or
which are maintained, contributed to or sponsored by WAG, Parent or any Parent
Subsidiary for the benefit of any current or former employee, officer or
director of WAG, Parent or any Parent Subsidiary (collectively, the "PARENT
BENEFIT PLANS"), Parent has delivered or made available to the Company a true,
complete and correct copy of (i) such Parent Benefit Plan and the most recent
summary plan description related to such Parent Benefit Plan, if a summary plan
description is required therefor, (ii) each trust agreement or other funding
arrangement relating to such Parent Benefit Plan, (iii) the most recent annual
report (Form 5500) filed with the IRS with respect to such Parent Benefit Plan,
(iv) the most recent actuarial report or financial statement relating to such
Parent Benefit Plan and (v) the
32
<PAGE> 38
most recent determination letter issued by the IRS with respect to such Parent
Benefit Plan, if it is qualified under Section 401(a) of the Code. Neither WAG,
Parent nor any Parent Subsidiary has any express or implied commitment, whether
legally enforceable or not, (i) to create, incur liability with respect to or
cause to exist any other employee benefit plan, program or arrangement, (ii) to
enter into any contract or agreement to provide compensation or benefits to any
individual or (iii) to modify, change or terminate any Parent Benefit Plan,
other than with respect to a modification, change or termination required by
ERISA or the Code.
(b) None of the Parent Benefit Plans is a Multiemployer Plan
or a Multiple Employer Plan. None of the Parent Benefit Plans provides for or
promises retiree medical, disability or life insurance benefits to any current
or former employee, officer or director of WAG, Parent or any Parent Subsidiary.
(c) Each Parent Benefit Plan has been administered in all
material respects in accordance with its terms and all contributions required to
be made under the terms of any of the Parent Benefit Plans as of the date of
this Agreement have been timely made or have been reflected on the most recent
consolidated balance sheet filed or incorporated by reference in the Parent
Reports prior to the date of this Agreement. With respect to the Parent Benefit
Plans, no event has occurred and, to the knowledge of WAG or Parent, there
exists no condition or set of circumstances in connection with which WAG, Parent
or any Parent Subsidiary could be subject to any liability under the terms of
such Parent Benefit Plans, ERISA, the Code or any other applicable Law which
would reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect. No legal action, suit or claim is pending or, to WAG's
and Parent's knowledge, threatened with respect to any Parent Benefit Plan
(other than claims for benefits in the ordinary course).
(d) Other than as disclosed in Section 5.09(d) of the Parent
Disclosure Schedule or except as would not reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse Effect: (i) each
Parent Benefit Plan which is intended to be qualified under Section 401(a) of
the Code or Section 401(k) of the Code has received a favorable determination
letter from the IRS that it is so qualified and each trust established in
connection with any Parent Benefit Plan which is intended to be exempt from
federal income taxation under Section 501(a) of the Code has received a
determination letter from the IRS that it is so exempt, and no fact or event has
occurred since the date of such determination letter from the IRS to adversely
affect the qualified status of any such Parent Benefit Plan or the exempt status
of any such trust; (ii) each trust maintained or contributed to by WAG, Parent
or any Parent Subsidiary which is intended to be qualified as a voluntary
employees' beneficiary association and which is intended to be exempt from
federal income taxation under Section 501(c)(9) of the Code has received a
favorable determination letter from the IRS that it is so qualified and so
exempt, and no fact or event has occurred since the date of such determination
by the IRS to adversely affect such qualified or exempt status; (iii) there has
been no prohibited transaction (within the meaning of Section 406 of ERISA or
Section 4975 of the Code) with respect to any Parent Benefit Plan; (iv) neither
WAG, Parent nor any Parent Subsidiary has incurred any liability for any penalty
or tax arising under Section 4971, 4972, 4980, 4980B or 6652 of the Code or any
liability under
33
<PAGE> 39
Section 502 of ERISA, and no fact or event exists which could give rise to any
such liability; (v) no complete or partial termination has occurred within the
five years preceding the date hereof with respect to any Parent Benefit Plan;
(vi) no reportable event (within the meaning of Section 4043 of ERISA) has
occurred or is expected to occur with respect to any Parent Benefit Plan subject
to Title IV of ERISA; (vii) no Parent Benefit Plan had an accumulated funding
deficiency (within the meaning of Section 302 of ERISA or Section 412 of the
Code), whether or not waived, as of the most recently ended plan year of such
Parent Benefit Plan; (viii) none of the assets of WAG, Parent or any Parent
Subsidiary is the subject of any lien arising under Section 302(f) of ERISA or
Section 412(n) of the Code; neither WAG, Parent nor any Parent Subsidiary has
been required to post any security under Section 307 of ERISA or Section
401(a)(29) of the Code; and no fact or event exists which could give rise to any
such lien or requirement to post any such security; (ix) all contributions,
premiums or payments required to be made with respect to any Parent Benefit Plan
have been made on or before their due dates; (x) all such contributions have
been fully deducted for income tax purposes and no such deduction has been
challenged or disallowed by any government entity and no fact or event exists
which could give rise to any such challenge or disallowance; and (xi) as of the
Effective Time, no Parent Benefit Plan which is subject to Title IV of ERISA
will have an "unfunded benefit liability" (within the meaning of Section
4001(a)(18) of ERISA).
(e) Except as set forth in Section 5.09(e) of the Parent
Disclosure Schedule, neither WAG or Parent nor any Parent Subsidiary is a party
to any collective bargaining or other labor union contract applicable to persons
employed by WAG, Parent or any Parent Subsidiary and no collective bargaining
agreement is being negotiated by WAG, Parent or any Parent Subsidiary. As of the
date of this Agreement, there is no labor dispute, strike or work stoppage
against WAG, Parent or any Parent Subsidiary pending or, to the knowledge of WAG
or Parent, threatened which may interfere with the respective business
activities of WAG, Parent or any Parent Subsidiary, except where such dispute,
strike or work stoppage would not reasonably be expected to have, individually
or in the aggregate, a Parent Material Adverse Effect. As of the date of this
Agreement, to the knowledge of WAG or Parent, there is no charge or complaint
against WAG, Parent or any Parent Subsidiary pending before the National Labor
Relations Board or any comparable Governmental Entity pending or threatened in
writing, except where such unfair labor practice, charge or complaint would not
reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect.
SECTION 5.10. Certain Tax Matters. Except as disclosed in the Parent
Reports, neither WAG or Parent nor, to the knowledge of WAG or Parent, any of
its affiliates has taken or agreed to take any action that would reasonably be
expected to prevent the Merger from constituting a transaction qualifying under
Section 368 of the Code. Neither WAG nor Parent is aware of any agreement, plan
or other circumstances that would reasonably be expected to prevent the Merger
from so qualifying under Section 368 of the Code.
SECTION 5.11. Contracts; Debt Instruments. Except as disclosed in the
Parent Reports or in Section 5.11 of the Parent Disclosure Schedule, there is no
contract or agreement that is material to the business, financial condition or
results of operations of WAG, Parent and the
34
<PAGE> 40
Parent Subsidiaries taken as a whole (each, a "PARENT MATERIAL CONTRACT").
Except as disclosed in the Parent Reports, neither WAG or Parent nor any Parent
Subsidiary is in violation of or in default under (nor does there exist any
condition which with the passage of time or the giving of notice would
reasonably be expected to cause such a violation of or default under) any loan
or credit agreement, note, bond, mortgage, indenture or lease, or any other
contract, license, agreement, arrangement or understanding to which it is a
party or by which it or any of its properties or assets is bound, except for
violations or defaults that would not reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse Effect. Set forth in
Section 5.11 of the Parent Disclosure Schedule is a description of any material
changes to the amount and terms of the indebtedness of WAG, Parent and the
Parent Subsidiaries as described in the notes to the financial statements
incorporated in the Parent 1997 10-K.
SECTION 5.12. Litigation. Except as disclosed in the Parent Reports or
in Section 5.12 of the Parent Disclosure Schedule, there is no suit, claim or
action or, to the knowledge of WAG or Parent, proceeding or investigation
pending or threatened against WAG, Parent or any Parent Subsidiary before any
Governmental Entity that would reasonably be expected to have, individually or
in the aggregate, a Parent Material Adverse Effect, and, except as disclosed to
the Company, to the knowledge of WAG or Parent, there are no existing facts or
circumstances that would reasonably be expected to result in such a suit, claim,
action, proceeding or investigation. Except as disclosed to the Company, neither
WAG nor Parent is aware of any facts or circumstances which would reasonably be
expected to result in the denial of insurance coverage under policies issued to
WAG, Parent and the Parent Subsidiaries in respect of such suits, claims,
actions, proceedings and investigations, except in any case as would not
reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect or as a result of the execution of this Agreement and
consummation of transactions hereunder. Except as disclosed in the Parent
Reports, neither WAG or Parent nor any Parent Subsidiary is subject to any
outstanding order, writ, injunction or decree which would reasonably be expected
to have, individually or in the aggregate, a Parent Material Adverse Effect.
SECTION 5.13. Environmental Matters. Except as disclosed in the Parent
Reports or as would not reasonably be expected to have, individually or in the
aggregate, a Parent Material Adverse Effect, (i) WAG, Parent and the Parent
Subsidiaries are in compliance with all applicable Environmental Laws; (ii) all
past noncompliance of WAG, Parent or any Parent Subsidiary with Environmental
Laws or Environmental Permits has been resolved without any pending, ongoing or
future obligation, cost or liability; and (iii) neither WAG or Parent nor any
Parent Subsidiary has released a Hazardous Material at, or transported a
Hazardous Material to or from, any real property currently or formerly owned,
leased or occupied by WAG or Parent or any Parent Subsidiary in violation of any
Environmental Law.
SECTION 5.14. Intellectual Property. Except as would not reasonably be
expected to have, individually or in the aggregate, a Parent Material Adverse
Effect, (i) WAG, Parent and the Parent Subsidiaries own or possess adequate
licenses or other valid rights to use all patents, patent applications, patent
rights, trademarks, trademark rights, trade names, trade dress, trade name
rights, copyrights and copyright registrations and applications, copyright
rights, service
35
<PAGE> 41
marks, trade secrets, applications for trademarks and for service marks,
know-how and other proprietary rights and information used or held for use in
connection with the respective businesses of WAG, Parent and the Parent
Subsidiaries as currently conducted, free and clear of all liens, and (ii)
neither WAG nor Parent is aware of any assertion or claim challenging the
ownership, use or validity of any of the foregoing. Section 5.14 of the Parent
Disclosure Schedule lists all material licenses, sublicenses and other
agreements to which WAG, Parent or any Parent Subsidiary is a party and pursuant
to which (i) any third party is authorized to use any intellectual property
right of WAG, Parent or any Parent Subsidiary or (ii) WAG, Parent or any Parent
Subsidiary is authorized to use any intellectual property rights (other than
pursuant to shrink-wrap and software licenses) of a third party (collectively,
the "Parent Licenses"), and includes the identity of all parties thereto, a
description of the nature and subject matter thereof, the royalty provisions, if
any, therein and the term thereof. The material Parent Licenses are valid and
binding obligations of Parent, enforceable in accordance with their terms, and
there are no material breaches or defaults thereunder. Except as set forth in
Section 5.14 of the Parent Disclosure Schedule, the conduct of the respective
businesses of WAG, Parent and the Parent Subsidiaries as currently conducted
does not infringe upon any patent, patent right, trademark, trademark right,
trade dress, trade name, trade name right, service mark, copyright or copyright
right of any third party that would reasonably be expected to have, individually
or in the aggregate, a Parent Material Adverse Effect. To the knowledge of WAG
or Parent, there are no infringements of any proprietary rights owned by or
licensed by or to WAG, Parent or any Parent Subsidiary that would reasonably be
expected to have, individually or in the aggregate, a Parent Material Adverse
Effect.
SECTION 5.15. Taxes. Except as set forth in Section 5.15 of the Parent
Disclosure Schedule and except for such matters that would not reasonably be
expected to have, individually or in the aggregate, a Parent Material Adverse
Effect, (i) WAG, Parent, Merger Sub and each other Parent Subsidiary has timely
filed or shall timely file all returns and reports required to be filed by it
with any taxing authority, taking into account any extension of time to file
granted to or obtained on behalf of WAG, Parent, Merger Sub and the other Parent
Subsidiaries, (ii) all Taxes shown to be payable on such returns or reports have
been or will be paid, (iii) as of the date hereof, no deficiency for any amount
of Tax has been asserted or assessed by a taxing authority against WAG, Parent,
Merger Sub or any other Parent Subsidiary that have been adequately reserved
for, and (iv) the most recent financial statements contained in the Parent
Reports reflect an adequate reserve in accordance with U.S. GAAP for all Taxes
payable by WAG, Parent, Merger Sub and the other Parent Subsidiaries for all
taxable periods and portions thereof accrued through the date of such financial
statements.
SECTION 5.16. Brokers. Except for Robinson-Humphrey, no broker, finder
or investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the Merger based upon arrangements made by or on
behalf of WAG or Parent.
SECTION 5.17. Certain Business Practices. None of WAG, Parent, any
Parent Subsidiary or any directors, officers, agents or employees of WAG, Parent
or any Parent Subsidiary (in their capacities as such) has (i) used any funds
for unlawful contributions, gifts,
36
<PAGE> 42
entertainment or other unlawful expenses relating to political activity, (ii)
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, (iii)
consummated any transaction, made any payment, entered into any agreement or
arrangement or taken any other action in violation of Section 1128B(b) of the
Social Security Act, as amended, or (iv) made any other unlawful payment.
SECTION 5.18. Opinion of Financial Advisor. Parent and WAG have
received the Parent Fairness Opinion.
SECTION 5.19. Interested Party Transactions. Except as set forth in
Section 5.19 of the Parent Disclosure Schedule or in the Parent Reports, since
December 31, 1997, no executive officer, director or stockholder of Parent or
WAG or any of the Parent Subsidiaries has engaged in any business dealings with
Parent or WAG or any of the Parent Subsidiaries (other than any such business
dealings that would not required to be disclosed in a proxy statement satisfying
the requirements of Regulation 14A promulgated under the Exchange Act filed on
the date hereof).
SECTION 5.20. Ownership of Company Capital Stock. Except for the
Stockholders Proxy Agreement, none of WAG, Parent, or to WAG's or Parent's
knowledge, any of their affiliates, (i) beneficially owns (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, or (ii) is party to any
agreement, arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of, in each case, shares of Company Capital Stock.
ARTICLE VI
COVENANTS
SECTION 6.01. Conduct of Business by the Company Pending the Closing.
The Company agrees that, between the date of this Agreement and the Effective
Time, except as set forth in Section 6.01 of the Company Disclosure Schedule or
as expressly contemplated by any other provision of this Agreement, unless
Parent shall otherwise agree in writing, (x) the respective businesses of the
Company and the Company Subsidiaries shall be conducted only in, and the Company
and the Company Subsidiaries shall not take any action except in, the ordinary
course of business consistent with past practice and (y) the Company shall use
all reasonable efforts to keep available the services of such of the current
officers, significant employees and consultants of the Company and the Company
Subsidiaries and to preserve the current relationships of the Company and the
Company Subsidiaries with such of the corporate partners, customers, suppliers
and other persons with which the Company or any Company Subsidiary has
significant business relations in order to preserve substantially intact its
business organization. By way of amplification and not limitation, except as set
forth in Section 6.01 of the Company Disclosure Schedule or as expressly
contemplated by any other provision of this Agreement, neither the Company nor
any Company Subsidiary shall, between the date of this Agreement and
37
<PAGE> 43
the Effective Time, directly or indirectly, do, or agree to do, any of the
following without the prior written consent of Parent, which consent shall not
be unreasonably withheld or delayed:
(a) amend or otherwise change its certificate of incorporation
or bylaws or equivalent organizational documents;
(b) issue, sell, pledge, dispose of, grant, transfer, lease,
license, guarantee or encumber, or authorize the issuance, sale,
pledge, disposition, grant, transfer, lease, license or encumbrance of,
(i) any shares of capital stock of the Company or any Company
Subsidiary of any class, or securities convertible into or exchangeable
or exercisable for any shares of such capital stock, or any options,
warrants or other rights of any kind to acquire any shares of such
capital stock, or any other ownership interest (including any phantom
interest), of the Company or any Company Subsidiary except (A) pursuant
to the Rights Agreement, (B) pursuant to the Company Stock Purchase
Plans, (C) for issues of Company Common Stock pursuant to options
outstanding on the date hereof and disclosed as such pursuant to
Section 4.03 and (D) for employee stock option grants to non- executive
officers and directors of the Company; provided, however, that (v) such
grants are at fair market value, at a level consistent with past
practice and have vesting schedules consistent with past practice, (w)
Parent has received notice of the Company's intention to grant such
options, (x) the aggregate amount of such granted options does not
exceed 150,000 shares of Company Common Stock, (y) no person shall
receive a grant in excess of 7,000 shares of Company Common Stock and
(z) the vesting of such granted options shall not be accelerated as a
result of the Merger, or (ii) any material property or assets of the
Company or any Company Subsidiary, except in the ordinary course of
business;
(c) (i) acquire (including by merger, consolidation, or
acquisition of stock or assets) any interest in any corporation,
partnership, other business organization or person or any division
thereof; (ii) except for borrowings under existing credit facilities,
incur any indebtedness for borrowed money or issue any debt securities
or assume, guarantee or endorse, or otherwise as an accommodation
become responsible for, the obligations of any person for borrowed
money or make any loans or advances; (iii) terminate, cancel or request
any material change in, or agree to any material change in, any Company
Material Contract (other than the Rights Agreement) or enter into any
contract or agreement material to the business, results of operations
or financial condition of the Company and the Company Subsidiaries
taken as a whole; or (iv) make or authorize any capital expenditure,
other than capital expenditures in the ordinary course of business
consistent with past practice that have been budgeted for fiscal year
1998 and disclosed to Parent or capital expenditures that are not, in
the aggregate, in excess of $750,000 for the Company and the Company
Subsidiaries taken as a whole;
(d) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with
respect to any of its capital stock, except that any Company Subsidiary
may pay dividends or make other distributions to the Company or any
other Company Subsidiary;
38
<PAGE> 44
(e) reclassify, combine, split, subdivide or redeem, purchase
or otherwise acquire, directly or indirectly, any of its capital stock,
except pursuant to cashless exercise of stock options;
(f) amend or change the period (or permit any acceleration,
amendment or change not required by the terms of any of the Company
Stock Plans) of exercisability of options granted under the Company
Stock Plans or authorize cash payments in exchange for any Company
Stock Options granted under any of such plans;
(g) increase the compensation payable or to become payable to,
or pay or enter into any agreement or understanding to pay any bonus
to, its directors, officers, consultants or employees (other than
increases in compensation for non-officer employees that are in the
ordinary course of business consistent with past practice and the
payment of bonuses to non-officer employees that are in the ordinary
course of business consistent with past practice, provided that Parent
has received notice of the Company's intention to implement such
increase), or grant any rights to severance or termination pay to, or
enter into any employment or severance agreement which provides
benefits upon a change in control of the Company that would be
triggered by the Merger with, any director, officer, consultant or
other employee of the Company or any Company Subsidiary who is not
currently entitled to such benefits from the Merger or establish,
adopt, enter into or amend any collective bargaining, bonus, profit
sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination, severance
or other plan, agreement, trust, fund, policy or arrangement for the
benefit of any director, officer, consultant or employee of the Company
or any Company Subsidiary, except to the extent required by applicable
Law or the terms of a collective bargaining agreement;
(h) pay, discharge, settle or satisfy any claims, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent
or otherwise), other than the payment, discharge or satisfaction in the
ordinary course of business and consistent with past practice;
(i) take any action to change accounting policies or
procedures, other than actions in the ordinary course of business
consistent with past practice or as required by U.S.
GAAP;
(j) make any tax election or settle or compromise any material
Federal, state or local United States income tax liability, or any
income tax liability of any other jurisdiction, other than those made
in the ordinary course of business consistent with past practice and
those for which specific reserves have been recorded on the
consolidated balance sheet of the Company and the consolidated the
Company Subsidiaries dated as of August 31, 1997 included in the
Company 1997 10-K and only to the extent of such reserves;
39
<PAGE> 45
(k) enter into or amend any contract, agreement, commitment or
arrangement with, or enter into any transaction with, or make any
payment to or on account or behalf of, other than any such transactions
or payments pursuant to the agreements set forth on Section 6.01(m) of
the Company Disclosure Schedule, any affiliate of the Company or of any
Principal Stockholder other than compensation and benefits in the
ordinary course of business;
(l) knowingly take any action that would prevent or impede the
Merger from qualifying as a reorganization within the meaning of
Section 368 of the Code; or
(m) authorize or enter into any formal or informal agreement
or otherwise make any commitment to do any of the foregoing or to take
any action which would make any of the representations or warranties of
the Company contained in this Agreement untrue or incorrect in any
material respect or prevent the Company from consummating the Merger or
result in any of the conditions to the Merger set forth herein not
being satisfied.
SECTION 6.02. Conduct of Business by WAG and Parent Pending the
Closing. Each of WAG and Parent agrees that, between the date of this Agreement
and the Effective Time, except (i) as set forth in Section 6.02 of the Parent
Disclosure Schedule, (ii) subject to paragraph (e) below, for any actions taken
by WAG or Parent relating to any other acquisitions or business combinations
(including the Holding Company Reorganization and the Resurgens Transaction) or
(iii) as expressly contemplated by any other provision of this Agreement, unless
the Company shall otherwise agree in writing, (x) the respective businesses of
WAG, Parent and the Parent Subsidiaries shall be conducted only in, and WAG,
Parent and the Parent Subsidiaries shall not take any action except in, the
ordinary course of business consistent with past practice and (y) WAG and Parent
shall use all reasonable efforts to keep available the services of such of the
current officers, significant employees and consultants of WAG, Parent and the
Parent Subsidiaries and to preserve the current relationships of WAG, Parent and
the Parent Subsidiaries with such of the corporate partners, customers,
suppliers and other persons with which WAG, Parent or any Parent Subsidiary has
significant business relations in order to preserve substantially intact its
business organization. By way of amplification and not limitation, except (i) as
set forth in Section 6.02 of the Parent Disclosure Schedule, (ii) subject to
paragraph (e) below, for any actions taken by WAG or Parent relating to any
other acquisitions or business combinations (including the Holding Company
Reorganization and the Resurgens Transaction) or (iii) as expressly contemplated
by any other provision of this Agreement, neither WAG or Parent nor any Parent
Subsidiary shall, between the date of this Agreement and the Effective Time,
directly or indirectly, do, or agree to do, any of the following without the
prior written consent of the Company, which consent shall not be unreasonably
withheld or delayed:
(a) amend or otherwise change its certificate of incorporation
or bylaws or equivalent organizational documents;
(b) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with
respect to any of its capital stock, except that any
40
<PAGE> 46
Parent Subsidiary may pay dividends or make other distributions to
Parent or any other Parent Subsidiary;
(c) reclassify, combine, split, subdivide or redeem, purchase
or otherwise acquire, directly or indirectly, any of its capital stock;
(d) sell, transfer, license, sublicense or otherwise dispose
of any material assets;
(e) acquire (other than in connection with the Holding Company
Reorganization and the Resurgens Transaction) or enter into any
agreement to acquire all or substantially all of the capital stock or
assets of any other person or business unless upon advice of counsel
such transaction would not reasonably be expected to materially delay
or impede the consummation of the Merger;
(f) knowingly take any action that would prevent or impede the
Merger from qualifying as a reorganization within the meaning of
Section 368 of the Code; or
(g) authorize or enter into any formal or informal agreement
or otherwise make any commitment to do any of the foregoing or to take
any action which would make any of the representations or warranties of
WAG, Parent or Merger Sub contained in this Agreement untrue or
incorrect in any material respect or prevent WAG, Parent or Merger Sub
from performing or cause WAG, Parent or Merger Sub not to perform its
covenants hereunder or result in any of the conditions to the Merger
set forth herein not being satisfied.
SECTION 6.03. Notices of Certain Events. Each of Parent, WAG and the
Company shall give prompt notice to the other of (i) any notice or other
communication from any person alleging that the consent of such person is or may
be required in connection with the Merger; (ii) any notice or other
communication from any Governmental Entity in connection with the Merger; (iii)
any actions, suits, claims, investigations or proceedings commenced or, to its
knowledge, threatened against, relating to or involving or otherwise affecting
WAG, Parent, the Company, the Parent Subsidiaries or the Company Subsidiaries
that relate to the consummation of the Merger; (iv) the occurrence of a default
or event that, with the giving of notice or lapse of time or both, will become a
default under any Company Material Contract or Parent Material Contract; and (v)
any change that would reasonably be expected to have a Company Material Adverse
Effect or a Parent Material Adverse Effect or to delay or impede the ability of
either the Company or Parent (or WAG) to perform its obligations pursuant to
this Agreement and to effect the consummation of the Merger.
SECTION 6.04. Access to Information; Confidentiality. (a) Except as
required pursuant to any confidentiality agreement or similar agreement or
arrangement to which WAG, Parent or the Company or any of the Parent
Subsidiaries or the Company Subsidiaries is a party or pursuant to applicable
Law or the regulations or requirements of any stock exchange or other regulatory
organization with whose rules a party hereto is required to comply, from the
date of this
41
<PAGE> 47
Agreement to the Effective Time, WAG and Parent shall (and shall cause the
Parent Subsidiaries to) and the Company shall (and shall cause the Company
Subsidiaries to) (i) provide to the other (and its officers, directors,
employees, accountants, consultants, legal counsel, agents and other
representatives (collectively, "REPRESENTATIVES")) access at reasonable times
upon prior notice to its and its subsidiaries' officers, employees, agents,
properties, offices and other facilities and to the books and records thereof,
and (ii) furnish promptly such information concerning its and its subsidiaries'
business, properties, contracts, assets, liabilities and personnel as the other
party or its Representatives may reasonably request. No investigation conducted
pursuant to this Section 6.04 shall affect or be deemed to modify any
representation or warranty made in this Agreement.
(b) The parties hereto shall comply with, and shall cause
their respective Representatives to comply with, all of their respective
obligations under the Confidentiality Agreement with respect to the information
disclosed pursuant to this Section 6.04.
SECTION 6.05. No Solicitation of Transactions. The Company shall not,
directly or indirectly, and shall instruct its officers, directors, employees,
subsidiaries, agents or advisors or other representatives (including any
investment banker, attorney or accountant retained by it), not to, directly or
indirectly, solicit, initiate or knowingly encourage (including by way of
furnishing nonpublic information), or take any other action knowingly to
facilitate, any inquiries or the making of any proposal or offer (including any
proposal or offer to its stockholders) that constitutes, or may reasonably be
expected to lead to, any Competing Transaction, or enter into or maintain or
continue discussions or negotiate with any person in furtherance of such
inquiries or to obtain a Competing Transaction, or agree to or endorse any
Competing Transaction, or authorize or permit any of the officers, directors or
employees of the Company or any Company Subsidiary, or any investment banker,
financial advisor, attorney, accountant or other representative retained by the
Company or any Company Subsidiary, to take any such action; provided, however,
that (i) nothing contained in this Section 6.05 shall prohibit the board of
directors of the Company from complying with Rule 14e-2 promulgated under the
Exchange Act with regard to a tender or exchange offer not made in violation of
this Section 6.05, (ii) with regard to such an offer, after receiving the advice
of outside counsel, the board of directors of the Company determines in good
faith that it is highly probable that failing to do so would violate its
fiduciary duties, nothing contained in this Section 6.05 shall prohibit the
board of directors of the Company from considering and negotiating (including
furnishing nonpublic information) an unsolicited bona fide written acquisition
proposal which (A) was not received in violation of this Section 6.05, (B) if
executed or consummated would be a Competing Transaction and (C) is not subject
to financing or financing is, in the good faith judgment of the board of
directors of the Company after consultation with its financial advisors, highly
likely of being obtained by such third party, or (iii) if after receiving the
advice of outside counsel, the board of directors of the Company determines in
good faith that it is highly probable that failing to do so would violate its
fiduciary duties, nothing contained in this Section 6.05 shall prohibit the
board of directors of the Company from approving or recommending to the
stockholders of the Company an unsolicited bona fide written acquisition
proposal which (A) was not received in violation of this Section 6.05, (B) if
executed or consummated would be a Competing
42
<PAGE> 48
Transaction, (C) is not subject to financing or financing is, in the good faith
judgment of the board of directors of the Company after consultation with its
financial advisors, highly likely of being obtained by such third party and (D)
the board of directors of the Company determines in good faith, after advice of
its financial advisor to such effect, is more favorable to the Company's
stockholders than the transaction contemplated by this Agreement (any such
acquisition proposal, a "SUPERIOR PROPOSAL"). The Company shall notify Parent
promptly, and in no event later than one day after receipt, if any proposal or
offer, or any inquiry or contact with any person with respect thereto, regarding
a Competing Transaction is made. The Company immediately shall cease and cause
to be terminated all existing discussions or negotiations with any parties
conducted heretofore with respect to a Competing Transaction. Subject to the
fiduciary duties of the Board of Directors of the Company, the Company shall not
release any third party from, or waive any provision of, any confidentiality or
standstill agreement to which it is a party. The Company shall use its best
efforts to ensure that its officers, directors, employees, subsidiaries, agents
and advisors or other representatives (including any investment banker, attorney
or accountant retained by it) are aware of the restrictions described in this
Section 6.05.
SECTION 6.06. Letters of Accountants. Each of the Company and Parent
shall use all reasonable efforts to cause to be delivered to the other "comfort"
letters of each of Ernst & Young LLP and Price Waterhouse LLP, respectively,
each such letter dated and delivered as of the date the Registration Statement
shall have become effective and as of the Effective Time, and addressed to
Parent and the Company, respectively, in form reasonably satisfactory to the
recipient thereof and reasonably customary in scope and substance for letters
delivered by independent public accountants in connection with mergers such as
the Merger contemplated hereby.
SECTION 6.07. Subsequent Financial Statements. Prior to the Effective
Time, each of the Company and Parent (or WAG if the Holding Company
Reorganization has not yet been consummated) (i) shall consult with the other
prior to making publicly available its financial results for any period and (ii)
shall consult with the other prior to the filing of, and shall timely file with
the SEC, each Annual Report on Form 10-K, Quarterly Report on Form 10-Q and
Current Report on Form 8-K required to be filed by such party under the Exchange
Act and shall promptly deliver to the other copies of each such report filed
with the SEC.
SECTION 6.08. Control of Operations. Nothing contained in this
Agreement shall give Parent and/or WAG, directly or indirectly, the right to
control or direct the operations of the Company and the Company Subsidiaries
prior to the Effective Time. Prior to the Effective Time, each of Parent (and
WAG) and the Company shall exercise, consistent with the terms and conditions of
this Agreement, complete control and supervision over its respective operations.
SECTION 6.09. Further Action; Consents; Filings. (a) Upon the terms and
subject to the conditions hereof, each of the parties hereto shall use all
reasonable efforts to (i) take, or cause to be taken, all appropriate action,
and do, or cause to be done, all things necessary, proper or advisable under
applicable Law or otherwise to consummate and make effective the Merger, (ii)
obtain from Governmental Entities any consents, licenses, permits, waivers,
approvals,
43
<PAGE> 49
authorizations or orders required to be obtained or made by WAG, Parent, Merger
Sub, the Company or the Surviving Corporation or any of their respective
subsidiaries in connection with the authorization, execution and delivery of
this Agreement and the consummation of the Merger and (iii) make all necessary
filings, and thereafter make any other required or appropriate submissions, with
respect to this Agreement and the Merger required under (A) the rules and
regulations of Nasdaq, (B) the Securities Act, the Exchange Act and any other
applicable Federal or state securities Laws, (C) the HSR Act, and (D) any other
applicable Law. The parties hereto shall cooperate and consult with each other
in connection with the making of all such filings, including by providing copies
of all such documents to the nonfiling parties and their advisors prior to
filing, and giving due consideration to their views with respect thereto. No
party shall consent to any voluntary extension of any statutory deadline or
waiting period or to any voluntary delay of the consummation of the Merger at
the behest of any Governmental Entity without prior consultation of the other
parties hereto, and due consideration of such parties' views with respect
thereto.
(b) Each of the parties hereto shall promptly give (or cause
their respective subsidiaries to give) any notices regarding the Merger, this
Agreement or the transactions contemplated hereby or thereby to third parties
required under applicable Law or by any contract, license, lease or other
agreement to which it or any of its subsidiaries is bound, and use, and cause
its subsidiaries to use, all reasonable efforts to obtain any third party
consents required under any such contract, license, lease or other agreement in
connection with the consummation of the Merger or the other transactions
contemplated by this Agreement.
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.01. Registration Statement; Proxy Statement. (a) As promptly
as practicable after the execution of this Agreement, WAG, Parent and the
Company shall jointly prepare, and the Company, WAG and Parent shall file with
the SEC, a document or documents that will constitute (i) the prospectus forming
part of the registration statement on Form S-4 of WAG and Parent (together with
all amendments thereto, the "REGISTRATION STATEMENT"), in connection with the
registration under the Securities Act of the WAG Common Stock or the Parent
Common Stock to be issued to the Company's stockholders pursuant to the Merger
and (ii) the proxy statement or information statement with respect to the Merger
relating to the special meeting of the Company's stockholders (the "COMPANY
STOCKHOLDERS' MEETING") and WAG's or Parent's stockholders, as the case may be
(the "PARENT STOCKHOLDERS' MEETING"), to be held to consider approval of this
Agreement and the Merger contemplated hereby, in the case of the Company
Stockholders' Meeting, and approval of the issuance of Parent Common Stock or
WAG Common Stock, as the case may be, in the Merger, and the approval of an
increase in the authorized WAG Common Stock or Parent Common Stock (after the
Holding Company Reorganization) to 100,000,000 shares (such increase, the
"Capital Increase"), in the case of the Parent Stockholders' Meeting (together
with any amendments thereto, the "PROXY STATEMENT"). Copies of the Proxy
44
<PAGE> 50
Statement shall be provided to Nasdaq in accordance with its rules. If
applicable, each of the parties hereto shall use all reasonable efforts to cause
the Registration Statement to become effective as promptly as practicable after
the date hereof, and, prior to the effective date of the Registration Statement,
the parties hereto shall take all action required under any applicable Laws in
connection with the issuance of shares of WAG Common Stock or Parent Common
Stock pursuant to the Merger. WAG, Parent or the Company, as the case may be,
shall furnish all information concerning WAG, Parent or the Company as the other
parties may reasonably request in connection with such actions and the
preparation of the Registration Statement, if applicable, and Proxy Statement.
As promptly as practicable after the effective date of the Registration
Statement, the Proxy Statement shall be mailed to the stockholders of the
Company and of Parent or WAG, as applicable. Each of the parties hereto shall
cause the Proxy Statement to comply as to form and substance in all material
respects with the applicable requirements of (i) the Exchange Act, (ii) the
Securities Act, (iii) the rules and regulations of Nasdaq and (iv) the Delaware
General Corporation Law.
(b) The Proxy Statement shall include (i) subject to the
fiduciary duties of the Board of Directors of the Company, (A) the approval of
the Merger and the recommendation of the board of directors of the Company to
the Company's stockholders that they vote in favor of approval of this Agreement
and the Merger contemplated hereby, and (B) the Company Fairness Opinion, and
(ii) subject to the fiduciary duties of the Board of Directors of WAG or Parent,
as the case may be, (A) the approval of the issuance of Parent Common Stock or
WAG Common Stock, as the case may be, in the Merger and the Capital Increase and
the recommendation of the board of directors of WAG or Parent to WAG's or
Parent's stockholders, as applicable, that they vote in favor of issuance of
shares of Parent Common Stock or WAG Common Stock, as the case may be, in the
Merger and the Capital Increase, and (B) the Parent Fairness Opinion.
(c) No amendment or supplement to the Proxy Statement, if
applicable, or the Registration Statement shall be made without providing the
other parties the opportunity to review and comment thereon. If applicable, each
of the parties hereto shall advise the other parties hereto, promptly after it
receives notice thereof, of the time when the Registration Statement has become
effective or any supplement or amendment has been filed, of the issuance of any
stop order, of the suspension of the qualification of the WAG Common Stock or
the Parent Common Stock issuable in connection with the Merger for offering or
sale in any jurisdiction, or of any request by the SEC or Nasdaq for amendment
of the Proxy Statement or the Registration Statement or comments thereon and
responses thereto or requests by the SEC for additional information.
(d) None of the information supplied by the Company for
inclusion or incorporation by reference in the Registration Statement, if
applicable, or the Proxy Statement shall, at the respective times filed with the
SEC or other regulatory agency and, in addition, (A) in the case of the Proxy
Statement, at the date it or any amendments or supplements thereto are mailed to
stockholders of WAG or Parent in connection with the Parent Stockholders'
Meeting, and to stockholders of the Company in connection with the Company
Stockholders' Meeting, at the time of the Company Stockholders' Meeting, and at
the time of the Parent
45
<PAGE> 51
Stockholders' Meeting, and (B) in the case of the Registration Statement, when
it becomes effective under the Securities Act and at the Effective Time, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. If at any time prior to the Effective Time any event or circumstance
relating to the Company or any Company Subsidiary, or their respective officers
or directors, should be discovered by the Company that should be set forth in an
amendment or a supplement to the Registration Statement, if applicable, or Proxy
Statement, the Company shall promptly inform Parent and an appropriate amendment
or supplement shall promptly be filed with the SEC. All documents that the
Company is responsible for filing with the SEC in connection with the Merger
will comply as to form in all material respects with the applicable requirements
of the rules and regulations of Nasdaq, the Delaware General Corporation Law,
the Securities Act and the Exchange Act.
(e) None of the information supplied by WAG or Parent for
inclusion or incorporation by reference in the Registration Statement, if
applicable, or the Proxy Statement shall, at the respective times filed with the
SEC or other regulatory agency and, in addition, (A) in the case of the Proxy
Statement, at the date it or any amendments or supplements thereto are mailed to
stockholders of WAG or Parent in connection with the Parent Stockholders'
meeting, and to stockholders of the Company in connection with the Company
Stockholders' Meeting, at the time of the Company Stockholders' Meeting and at
the time of the Parent Stockholders' Meeting, and (B) in the case of the
Registration Statement, when it becomes effective under the Securities Act and
at the Effective Time, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
are made, not misleading. If, at any time prior to the Effective Time, any event
or circumstance relating to WAG or Parent or any Parent Subsidiary, or their
respective officers or directors, should be discovered by Parent that should be
set forth in an amendment or a supplement to the Registration Statement or Proxy
Statement, Parent shall promptly inform the Company and an appropriate amendment
or supplement shall promptly be filed with the SEC. All documents that WAG or
Parent is responsible for filing with the SEC in connection with the Merger will
comply as to form in all material respects with the applicable requirements of
the rules and regulations of Nasdaq, the Delaware General Corporation Law, the
Securities Act and the Exchange Act.
SECTION 7.02. Stockholders' Meetings. Subject to the fiduciary duties
of the Company's Board of Directors, in the case of the Company Stockholders'
Meeting, or the fiduciary duties of WAG's or Parent's Board of Directors, in the
case of the Parent Stockholders' Meeting, the Company shall call and hold the
Company Stockholders' Meeting and Parent shall call and hold the Parent
Stockholders' Meeting, as promptly as practicable after the Registration
Statement becomes effective for the purpose of voting upon the approval of this
Agreement and the transactions contemplated hereby pursuant to the Proxy
Statement, and the Company and Parent shall use all reasonable efforts to hold
the Company Stockholders' Meeting and the Parent Stockholders' Meeting on the
same day and as soon as practicable after the date on which the Registration
Statement becomes effective. If applicable and subject to the fiduciary duties
of the
46
<PAGE> 52
Board of Directors of the Company, the Company shall use all reasonable efforts
to solicit from its stockholders proxies in favor of the approval of this
Agreement and the Merger contemplated hereby pursuant to the Proxy Statement and
shall take all other action necessary or advisable to secure the vote or consent
of stockholders required by the Delaware General Corporation Law or applicable
stock exchange requirements to obtain such approval. If applicable and subject
to the fiduciary duties of the Board of Directors of Parent or WAG, Parent or
WAG, as applicable, shall use all reasonable efforts to solicit from its
stockholders proxies in favor of the issuance of Parent Common Stock or WAG
Common Stock, as the case may be, in the Merger and the Capital Increase
contemplated hereby pursuant to the Proxy Statement and shall take all other
action necessary or advisable to secure the vote of stockholders required by the
Delaware General Corporation Law or applicable stock exchange requirements to
obtain such approval, if required. Each of the parties hereto shall, subject to
the fiduciary duties of its Board of Directors, take all other action necessary
or, in the opinion of the other parties hereto, advisable to promptly and
expeditiously secure any vote or consent of stockholders required by applicable
Law and such party's certificate of incorporation, as the case may be, and
bylaws to effect the Merger.
SECTION 7.03. Rule 145 Affiliates. Not fewer than 45 days prior to the
Effective Time, the Company shall deliver to Parent a list of names and
addresses of each person who was, in the Company's reasonable judgment, at the
record date for the Company Stockholders' Meeting, a Rule 145 Affiliate of the
Company. The Company shall provide Parent such information and documents as
Parent shall reasonably request for purposes of reviewing such list. The Company
shall use all reasonable efforts to deliver or cause to be delivered to Parent,
prior to the Effective Time, an affiliate agreement in the form attached hereto
as Exhibit 7.03 (each, a "COMPANY AFFILIATE AGREEMENT"), executed by each of the
Rule 145 Affiliates of the Company identified in the above-referenced list. The
foregoing notwithstanding, Parent shall be entitled to place the legend only as
specified in the Company Affiliate Agreement on the certificates evidencing any
of the Parent Common Stock to be received by (i) any Rule 145 Affiliate of the
Company or (ii) any person Parent reasonably identifies (by written notice to
the Company) as being a person who may be deemed an "affiliate" within the
meaning of rule 145(c) or (d) promulgated under the Securities Act, and to issue
appropriate stop transfer instructions to the transfer agent for such Parent
Common Stock, consistent with the terms of the Company Affiliate Agreement,
regardless of whether such person has executed a Company Affiliate Agreement and
regardless of whether such person's name and address appear on Section 4.16 of
the Company Disclosure Schedule.
SECTION 7.04. Directors' and Officers' Indemnification. (a) The
certificate of incorporation and bylaws of the Surviving Corporation shall
contain the provisions with respect to indemnification that are set forth, as of
the date of this Agreement, in the certificate of incorporation and bylaws of
the Company, which provisions shall not be amended, repealed or otherwise
modified for a period of six years from the Effective Time in any manner that
would affect adversely the rights thereunder of individuals who at or at any
time prior to the Effective Time were directors, officers, employees,
fiduciaries or agents of the Company.
47
<PAGE> 53
(b) From and after the Effective Time, Parent, WAG and the
Surviving Corporation shall indemnify and hold harmless each present and former
director and officer of the Company (the "INDEMNIFIED PARTIES"), against any
costs or expenses (including reasonable attorneys' fees), judgments, fines,
losses, claims, damages or liabilities (collectively, "COSTS") incurred in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of or pertaining
to matters existing or occurring at or prior to the Effective Time, whether
asserted or claimed prior to, at or after the Effective Time, to the fullest
extent that the Company would have been permitted under Delaware law and under
its charter documents as in effect on the date hereof to indemnify such
Indemnified Parties, and WAG and Parent shall also advance expenses as incurred
to the fullest extent permitted under Delaware law upon receipt from the
applicable Indemnified Party to whom expenses are to be advanced of an
undertaking to repay such advances if it is ultimately determined such person is
not entitled to indemnification.
(c) In the event that either of the Surviving Corporation,
Parent or WAG or any of its successors or assigns (i) consolidates with or
merges into any other person and is not the continuing or surviving corporation
or entity of such consolidation or merger or (ii) transfers or conveys all or
substantially all of its properties and assets to any person, then, and in each
such case, proper provision will be made so that the successors and assigns of
Parent, WAG or the Surviving Corporation, as applicable, will assume the
obligations thereof set forth in this Section 7.04.
(d) The provisions of this Section 7.04 (i) are intended to be
for the benefit of, and will be enforceable by, each Indemnified Party, his or
her heirs and his or her representatives and (ii) are in addition to, and not in
substitution for, any other rights to indemnification or contribution that any
such person may have by contract or otherwise.
(e) For six years after the Effective Time, WAG or the
Surviving Corporation shall maintain in effect the Company's current directors'
and officers' liability insurance covering acts or omissions occurring prior to
the Effective Time with respect to those persons who are currently covered by
the Company's directors' and officers' liability insurance policy on terms with
respect to such coverage and amount no less favorable to the Company's directors
and officers currently covered by such insurance than those of such policy in
effect on the date hereof, provided that WAG may substitute therefor policies of
WAG or the Parent Subsidiaries containing terms with respect to coverage and
amount no less favorable to such directors or officers; provided, further, that
in no event shall WAG or the Surviving Corporation be required to pay aggregate
premiums for insurance under this Section 7.04(e) in excess of 150% of the
aggregate premiums paid by the Company in 1997 on an annualized basis for such
purpose; and, provided further, that if WAG or the Surviving Corporation is
unable to obtain the amount of insurance required by this Section 7.04(e) for
such aggregate premium, then WAG or the Surviving Corporation shall obtain as
much insurance as can be obtained for an annual premium equal to 150% of the
1997 premium.
48
<PAGE> 54
(f) WAG shall cause the Surviving Corporation or any successor
thereto to comply with its obligations under this Section 7.04.
SECTION 7.05. No Shelf Registration. Parent shall not be required to
amend or maintain the effectiveness of the Registration Statement for the
purpose of permitting resale of the shares of Parent Common Stock received
pursuant hereto by the persons who may be deemed to be "affiliates" of the
Company or Parent within the meaning of rule 145 promulgated under the
Securities Act.
SECTION 7.06. Public Announcements. Parent and the Company shall
consult with each other before issuing any press release or otherwise making any
public statements with respect to this Agreement or the Merger and shall not
issue any such press release or make any such public statement without the prior
written approval of the other, except to the extent required by applicable Law
or the requirements of the rules and regulations of Nasdaq, in which case the
issuing party shall use all reasonable efforts to consult with the other party
before issuing any such release or making any such public statement.
SECTION 7.07. Nasdaq Listing. Each of the parties hereto shall use all
reasonable efforts to obtain, prior to the Effective Time, the approval for
including in Nasdaq, effective upon official notice of issuance, of the shares
of WAG Common Stock or Parent Common Stock, as the case may be, into which the
shares of Company Capital Stock will be converted pursuant to Article III and
the shares of WAG Common Stock or Parent Common Stock, as the case may be, which
will be issuable upon exercise of Company Stock Options pursuant to Section
3.05.
SECTION 7.08. Blue Sky. Each of the parties hereto shall use all
reasonable efforts to obtain prior to the Effective Time all necessary blue sky
permits and approvals required under Blue Sky Laws to permit the distribution of
the shares of WAG Common Stock or Parent Common Stock, as the case may be, to be
issued in accordance with the provisions of this Agreement.
SECTION 7.09. Company Stock Options. (a) At the Effective Time, Parent,
in the case the Holding Company Reorganization shall have been consummated, or
WAG, in the case the Holding Company Reorganization shall not have been
consummated, shall assume, by virtue of this Agreement and without any further
action on the part of the Company, all of the Company's obligations with respect
to each outstanding Company Stock Option, whether previously vested or unvested.
Unless otherwise elected by Parent prior to the Effective Time, Parent or WAG
shall make such assumption in such manner that Parent or WAG (i) is a
corporation "assuming a stock option in a transaction to which Section 424(a)
applies" within the meaning of Section 424 of the Code or (ii) to the extent
that Section 424 of the Code does not apply to such Company Stock Option, would
be such a corporation were Section 424 of the Code applicable to such Company
Stock Option; and, if not so otherwise elected, after the Effective Time, all
references to the Company in the Company Stock Plans and the applicable Company
Stock Option agreements shall be deemed to refer to WAG, prior to the Holding
Company Reorganization, or Parent, following the Holding Company Reorganization,
which shall have
49
<PAGE> 55
assumed the Company Stock Plans as of the Effective Time by virtue of this
Agreement and without any further action on the part of the Company, Parent or
WAG. Each Company Stock Option so assumed under this Agreement shall continue to
have, and be subject to, the same terms and conditions set forth in the
applicable Company Stock Plan and the applicable Company Stock Option as in
effect immediately prior to the Effective Time, except as otherwise provided in
Section 3.05. Parent shall use all reasonable efforts to ensure that Company
Stock Options intended to qualify as incentive stock options under Section 422
of the Code prior to the Effective Time continue to so qualify after the
Effective Time.
(b) With respect to the Company Stock Plans, WAG or Parent, as
the case may be, shall take all corporate action necessary or appropriate to (i)
reserve for issuance the number of shares that will be subject to Company Stock
Options referred to in this Section 7.09 and (ii), no later than the Effective
Time, file a registration statement on Form S-8 (or any successor or other
appropriate form) with respect to the shares of WAG Common Stock or Parent
Common Stock, as the case may be, subject to such plan to the extent such
registration statement is required under applicable law in order for such shares
of common stock to be sold without restriction, and WAG and Parent shall use its
best efforts to maintain the effectiveness of such registration statement (and
maintain the current status of the prospectuses contained therein) for so long
as such benefits and grants remain payable and such options under such plans
remain outstanding.
SECTION 7.10. Tax Treatment. Each of Parent, WAG and the Company shall
use best efforts to cause the Merger to qualify as a reorganization under the
provisions of Section 368 of the Code and to obtain the opinions of counsel
referred to in Sections 8.02(c) and 8.03(c). In addition, following the
Effective Time, each of WAG, Parent and the Surviving Corporation agree not to
take any action that would cause the Merger to fail to so qualify.
SECTION 7.11. Obligations of Parent and WAG. Prior to consummation of
the Holding Company Reorganization, WAG will take all action necessary to cause
Parent and Merger Sub to perform their respective obligations under this
Agreement and to consummate the Merger on the terms and conditions set forth
herein. Following consummation of the Holding Company Reorganization, Parent
will take all action necessary to cause WAG and Merger Sub to perform their
respective obligations under this Agreement and to consummate the Merger on the
terms and conditions set forth herein.
SECTION 7.12. Company Employees. (a) Individuals who are employed by
the Company or the Company Subsidiaries as of the Effective Time shall remain
employees of the Company or the Company Subsidiaries, as applicable, immediately
following the Effective Time (each such employee, "Affected Employee"). For a
period of one year immediately following the Effective Time, the annual cash
compensation for each Affected Employee shall not be reduced without such
Affected Employee's consent and the insurance coverage, benefits and vacation
and 401(k) participation benefits provided to Affected Employees shall be, in
the aggregate, not less favorable than those provided to such employees
immediately prior to the Effective Time. Following the Effective Time, for
purposes of determining eligibility, vesting and level of
50
<PAGE> 56
benefits under all employee benefit plans (but not for pension benefit accrual
purposes) and, if applicable, for purposes of satisfying any waiting periods
concerning "preexisting conditions" and the satisfaction of any "copayment" or
deductible requirements, service with the Company or a Company Subsidiary or any
predecessor thereto prior to the Effective Time shall be treated, to the extent
permitted by law, as service with an "employer" to the same extent as if such
persons had been employees of WAG, Parent or a Parent Subsidiary, and provided
further that this Section 7.12(a) shall not be construed to limit the ability of
the applicable employer to terminate the employment of any Affected Employee or
to review employee benefits programs from time to time and to make such changes
as they deem appropriate.
(b) WAG and the Parent agree to honor, or to cause the
appropriate subsidiary to honor, in accordance with their terms all Company
Benefit Plans; provided, however, that the foregoing shall not prevent any party
from amending or terminating any such plan, contact, agreement, arrangement or
understanding in accordance with its terms.
(c) For the purpose of all Company Benefit Plans which include
the term "change in control", WAG and Parent acknowledge that the Merger
constitutes a "change in control" for all purposes pursuant to any such Company
Benefit Plans. In addition, WAG and Parent acknowledge that, with respect to the
Senior Termination Benefits Agreements listed in Schedule 7.12(c) (the "Listed
Agreements"), in light of WAG's and Parent's plans relating to management
assignments and responsibilities with respect to the business of the Company
from and after the Effective Time, each employee who is a party to any such
contract may, following consummation of the Merger, terminate employment
thereunder and, upon such termination, be entitled to termination payments and
benefits described therein.
SECTION 7.13. Board of Directors of Parent and WAG. Immediately prior
to the Effective Time, the boards of directors of Parent and WAG shall take all
action necessary to cause an individual mutually acceptable to the boards of
directors of the Company, on the one hand, and the boards of directors of Parent
and WAG, on the other hand, to be elected to fill the vacancy on the boards of
directors of Parent and WAG at the Effective Time; provided, however, that if
the Holding Company Reorganization shall have been consummated prior to the
Effective Time, then the individual selected pursuant to the foregoing provision
shall not be elected to serve as a director of WAG.
ARTICLE VIII
CONDITIONS TO THE MERGER
SECTION 8.01. Conditions to the Obligations of Each Party to Consummate
the Merger. The respective obligations of the parties hereto to consummate the
Merger, or to permit the consummation of the Merger, are subject to the
satisfaction or, if permitted by applicable Law, waiver of the following
conditions:
51
<PAGE> 57
(a) the Registration Statement shall have been declared
effective by the SEC under the Securities Act and no stop order
suspending the effectiveness of the Registration Statement shall have
been issued by the SEC and no proceeding for that purpose shall have
been initiated by the SEC and not concluded or withdrawn;
(b) this Agreement and the Merger shall have been duly
approved by the requisite vote of stockholders of the Company and the
issuance of the shares of WAG Common Stock or Parent Common Stock in
the Merger and the Capital Increase shall have been duly approved by
the requisite vote of the stockholders of WAG or Parent, as the case
may be, in any such case in accordance with the Delaware General
Corporation Law;
(c) no court of competent jurisdiction shall have issued
or entered any order, writ, injunction or decree, and no other
Governmental Entity shall have issued any order (collectively,
"Restraints"), which is then in effect and has the effect of making the
Merger illegal or otherwise prohibiting its consummation;
(d) any waiting period (and any extension thereof)
applicable to the consummation of the Merger under the HSR Act shall
have expired or be terminated;
(e) except with respect to the HSR Act (which is
addressed in Section 8.01(d)), all consents, approvals and
authorizations legally required to be obtained to consummate the Merger
shall have been obtained from all Governmental Entities, except where
the failure to obtain any such consent, approval or authorization would
not reasonably be expected to result in a change in or have an effect
on the business of the Company or Parent that is materially adverse to
the business, assets (including intangible assets), liabilities
(contingent or otherwise), condition (financial or otherwise) or
results of operations of WAG, Parent and the Parent Subsidiaries, taken
as a whole; and
(f) the shares of WAG Common Stock or Parent Common
Stock, as the case may be, into which the shares of Company Capital
Stock will be converted pursuant to Article III and the shares of WAG
Common Stock or Parent Common Stock, as the case may be, issuable upon
the exercise of Company Stock Options pursuant to Section 3.05 shall
have been authorized for inclusion in Nasdaq, subject to official
notice of issuance.
SECTION 8.02. Conditions to the Obligations of the Company. The
obligations of the Company to consummate the Merger, or to permit the
consummation of the Merger, are subject to the satisfaction or, if permitted by
applicable Law, waiver of the following further conditions:
(a) each of the representations and warranties of WAG,
Parent and Merger Sub contained in this Agreement that is qualified by
materiality or Parent Material Adverse Effect shall be true, complete
and correct on and as of the Effective Time as if made at and as of the
Effective Time (other than representations and warranties which address
matters only as of a certain date which shall be true, complete and
correct as of
52
<PAGE> 58
such certain date) and each of the representations and warranties that
is not so qualified shall be true, complete and correct in all material
respects on and as of the Effective Time as if made at and as of the
Effective Time (other than representations and warranties which address
matters only as of a certain date which shall be true, complete and
correct in all material respects as of such certain date), in each case
except as contemplated or permitted by this Agreement, and the Company
shall have received a certificate of the Chairman or President and
Chief Financial Officer of WAG and of Parent to such effect;
(b) WAG and Parent shall each have performed or complied
in all material respects with all material agreements and covenants
required by this Agreement to be performed or complied with by it on or
prior to the Effective Time and the Company shall have received a
certificate of the Chairman or President and Chief Financial Officer of
WAG and of Parent to that effect; and
(c) Skadden, Arps, Slate, Meagher & Flom LLP, special
counsel to the Company, shall have issued its opinion, such opinion
dated on or about the date of the Closing, addressed to the Company,
and reasonably satisfactory to it, based upon certain representations
of the Company and assumptions, to the effect that the Merger will be
treated for Federal income tax purposes as a reorganization qualifying
under the provisions of Section 368 of the Code and that each of the
Company, Merger Sub and Parent will be a party to the reorganization
within the meaning of Section 368(b) of the Code, which opinion shall
not have been withdrawn or modified in any material respect.
SECTION 8.03. Conditions to the Obligations of WAG and Parent. The
obligations of WAG and Parent to consummate the Merger, or to permit the
consummation of the Merger, are subject to the satisfaction or, if permitted by
applicable Law, waiver of the following further conditions:
(a) each of the representations and warranties of the Company
contained in this Agreement that is qualified by materiality or Company
Material Adverse Effect shall be true, complete and correct on and as
of the Effective Time as if made at and as of the Effective Time (other
than representations and warranties which address matters only as of a
certain date which shall be true, complete and correct as of such
certain date) and each of the representations and warranties that is
not so qualified shall be true, complete and correct in all material
respects on and as of the Effective Time as if made on and as of such
date (other than representations and warranties which address matters
only as of a certain date which shall be true, complete and correct in
all material respects as of such certain date), in each case except as
contemplated or permitted by this Agreement, and Parent shall have
received a certificate of the Chairman or President and Chief Financial
Officer of the Company to such effect;
(b) the Company shall have performed or complied in all
material respects with all material agreements and covenants required
by this Agreement to be performed or complied with by it on or prior to
the Effective Time and Parent shall have received a
53
<PAGE> 59
certificate of the Chairman or President and Chief Financial Officer of
the Company to that effect; and
(c) Rogers & Hardin LLP, counsel to WAG and Parent, shall have
issued its opinion, such opinion dated on or about the date of the
Closing, addressed to Parent, and reasonably satisfactory to it, based
upon certain representations of Parent and assumptions, to the effect
that the Merger will be treated for Federal income tax purposes as a
reorganization qualifying under the provisions of Section 368 of the
Code and that each of Parent, Merger Sub and the Company will be a
party to the reorganization within the meaning of Section 368(b) of the
Code, which opinion shall not have been withdrawn or modified in any
material respect.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.01. Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, notwithstanding
any requisite adoption and approval of this Agreement, as follows:
(a) by mutual written consent duly authorized by the boards of
directors of each of Parent and the Company;
(b) by either Parent or the Company, if the Effective Time
shall not have occurred on or before November 30, 1998; provided,
however, that in the event that the Effective Time has not occurred by
such time solely due to the failure to satisfy the condition specified
in Section 8.01(d) or 8.01(e), then such date may be extended, at the
option of Parent or the Company, until December 31, 1998; provided
further, that the right to terminate this Agreement under this Section
9.01(b) shall not be available to any party whose failure to fulfill
any obligation under this Agreement shall have caused, or resulted in,
the failure of the Effective Time to occur on or before such date;
(c) by either Parent or the Company, if any Restraint shall
have been entered and shall have become final and nonappealable,
provided that the party seeking to terminate this Agreement pursuant to
this Section 9.01(c) shall have used best efforts to prevent the entry
of and to remove such Restraint;
(d) by the Company, if prior to the Parent Stockholders'
Meeting, the board of directors of WAG or Parent, as the case may be,
withdraws, modifies or changes its recommendation of the issuance of
the WAG Common Stock or the Parent Common Stock, as applicable, in the
Merger or the Capital Increase in a manner adverse to the Company or
its stockholders or shall have resolved to do so;
54
<PAGE> 60
(e) by Parent, if prior to the Company Stockholders' Meeting,
(i) the board of directors of the Company withdraws, modifies or
changes its recommendation of this Agreement or the Merger in a manner
adverse to Parent or its stockholders or shall have resolved to do so,
or (ii) the board of directors of the Company shall have recommended to
the stockholders of the Company a Competing Transaction or shall have
resolved to do so, or (iii) a tender offer or exchange offer for 15
percent or more of the outstanding shares of capital stock of the
Company shall have been commenced and the board of directors of the
Company shall have failed to recommend against acceptance of such
tender offer or exchange offer by its stockholders (including by taking
no position with respect to the acceptance of such tender offer or
exchange offer by its stockholders);
(f) by Parent or the Company, (i) if this Agreement and the
Merger shall fail to receive the requisite votes for approval at the
Company Stockholders' Meeting or any adjournment or postponement
thereof or (ii) if the issuance of shares of WAG Common Stock or Parent
Common Stock, as the case may be, in the Merger or the Capital Increase
shall fail to receive the requisite votes for approval at the Parent
Stockholders' Meeting or any adjournment or postponement thereof;
(g) by Parent, 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, incomplete or incorrect, in either case such that
the conditions set forth in Section 8.03 would not be satisfied (a
"TERMINATING COMPANY BREACH"); provided, however, that if such
Terminating Company Breach is curable by the Company through the
exercise of its reasonable efforts within 30 days and for so long as
the Company continues to exercise such reasonable efforts, Parent may
not terminate this Agreement under this Section 9.01(g); and provided
further that the preceding proviso shall not in any event be deemed to
extend any date set forth in paragraph (b) of this Section 9.01;
(h) by the Company, upon breach of any representation,
warranty, covenant or agreement on the part of Parent, WAG and Merger
Sub set forth in this Agreement, or if any representation or warranty
of Parent shall have become untrue, incomplete or incorrect, in either
case such that the conditions set forth in Section 8.02 would not be
satisfied (a "TERMINATING PARENT BREACH"); provided, however, that if
such Terminating Parent Breach is curable by Parent through the
exercise of its reasonable efforts within 30 days and for so long as
Parent continues to exercise such reasonable efforts, the Company may
not terminate this Agreement under this Section 9.01(h); and provided
further that the preceding proviso shall not in any event be deemed to
extend any date set forth in paragraph (b) of this Section 9.01; or
(i) by the Company at any time prior to the Company
Stockholders' Meeting, if, as a result of a Superior Proposal by a
third party, the Board of Directors of the Company determines in good
faith after consultation with outside counsel that it is highly
probable
55
<PAGE> 61
that the Board of Directors would violate its fiduciary duties under
applicable law if it failed to accept the Superior Proposal.
SECTION 9.02. Effect of Termination. Except as provided in Section
9.05, in the event of termination of this Agreement pursuant to Section 9.01,
this Agreement shall forthwith become void, there shall be no liability under
this Agreement on the part of any party hereto or any of its affiliates or any
of its or their officers or directors, and all rights and obligations of each
party hereto shall cease, subject to the remedies of the parties hereto set
forth in Section 9.05(b); provided, however, that nothing herein shall relieve
any party hereto from liability for the willful or intentional breach of any of
its representations and warranties or the willful or intentional breach of any
of its covenants or agreements set forth in this Agreement.
SECTION 9.03. 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 the
approval of this Agreement by the stockholders of the Company, WAG or Parent, as
the case may be, no amendment may be made, except such amendments that have
received the requisite stockholder approval and such amendments as are permitted
to be made without stockholder approval under the Delaware General Corporation
Law, as applicable. This Agreement may not be amended except by an instrument in
writing signed by the parties hereto.
SECTION 9.04. Waiver. At any time prior to the Effective Time, any
party hereto may (a) extend the time for or waive compliance with the
performance of any obligation or other act of any other party hereto or (b)
waive any inaccuracy in the representations and warranties contained herein or
in any document delivered pursuant hereto. Any such extension or waiver shall be
valid if set forth in an instrument in writing signed by the party or parties to
be bound thereby.
SECTION 9.05. Expenses. (a) Except as set forth in this Section 9.05,
all Expenses incurred in connection with this Agreement and the Merger shall be
paid by the party incurring such Expenses, whether or not the Merger is
consummated, except that Parent and the Company each shall pay one-half of all
Expenses incurred solely for printing, filing and mailing the Registration
Statement and the Proxy Statement and all SEC and other regulatory filing fees
incurred in connection with the Registration Statement and the Proxy Statement
and any fees required to be paid under the HSR Act.
(b) In the event that (i) Parent shall terminate this
Agreement pursuant to Section 9.01(e); (ii) the Company shall terminate this
Agreement pursuant to Section 9.01(i); or (iii) (A) Parent shall terminate this
Agreement pursuant to Section 9.01(f) which termination is permissible solely
due to the Company's stockholders having failed to approve and adopt this
Agreement and the Merger at the Company Stockholders' Meeting, (B) at the time
of such failure to so approve this Agreement, there shall exist or be proposed a
Competing Transaction with respect to the Company and (C) within 12 months
thereafter, the Company shall enter into a definitive agreement with respect to
any Competing Transaction or any Competing Transaction
56
<PAGE> 62
shall be consummated; then, in the case of clause (i), (ii) or (iii) of this
Section 9.05(b), promptly (and in any event within two business days following
demand therefor) after such termination or, in the case of clause (iii) of this
Section 9.05(b), promptly after the execution and delivery of such agreement or
such consummation, the Company shall pay to Parent an amount equal to $5,500,000
plus all of Parent's Expenses, as evidenced by reasonable documentation, up to
an aggregate of $1,000,000.
(c) In the event that the Company shall terminate this
Agreement pursuant to Section 9.01(d) or Section 9.01(f)(ii), Parent shall pay
to the Company within two business days after such termination an amount equal
to $5,500,000 in the event of termination pursuant to Section 9.01(d) or
$2,000,000 in the event of termination pursuant to Section 9.01(f)(ii), in
either case, plus all of the Company's Expenses, as evidenced by reasonable
documentation, and in an amount no greater than $1,000,000, by wire transfer of
immediately available funds to an account designated by the Company; provided,
however, that, in the event both the Company and Parent would otherwise be
entitled to payments under this Section 9.05 in connection with the termination
of this Agreement pursuant to both Sections 9.01(f)(i) and (f)(ii), neither
party shall be required to make any payment under this Section 9.05.
(d) In the event that Parent shall terminate this Agreement
pursuant to Section 9.01(f)(i) and Parent is not otherwise entitled to payment
pursuant to Section 9.05(b), the Company shall pay to Parent within two business
days after such termination an amount equal to $2,000,000 plus all of Parent's
Expenses, as evidenced by reasonable documentation, and in an amount no greater
than $1,000,000, by wire transfer of immediately available funds to an account
designated by Parent; provided, however, that, in the event both the Company and
Parent would otherwise be entitled to payments under this Section 9.05 in
connection with the termination of this Agreement pursuant to both Sections
9.01(f)(i) and (f)(ii), neither party shall be required to make any payment
under this Section 9.05.
(e) Any payment required to be made pursuant to Section
9.05(b) shall be made to Parent not later than the date of the entry into an
agreement referred to therein and two business days after delivery to the
Company of notice of demand for payment and shall be made by wire transfer of
immediately available funds to an account designated by Parent in the notice of
demand for payment delivered pursuant to this Section 9.05(e). In no event shall
the Company be entitled to collect amounts pursuant to this Section 9.05
relating to more than one specified event.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01. Non-Survival of Representations and Warranties. The
representations and warranties in this Agreement shall terminate at the
Effective Time or upon the termination of this Agreement pursuant to Section
9.01, as the case may be. This Section 10.01 shall not
57
<PAGE> 63
limit any covenant or agreement herein which by its terms contemplates
performance after the Effective Time. Each party agrees that, except for the
representations and warranties contained in this Agreement and the Parent
Disclosure Schedule and the Company Disclosure Schedule, no party hereto has
made any other representations and warranties, and each party hereby disclaims
any other representations and warranties made by itself or any of its officers,
directors, employees, agents, financial and legal advisors or other
representatives, with respect to the execution and delivery of this Agreement or
the Merger contemplated herein, notwithstanding the delivery or disclosure to
any other party or any party's representatives of any documentation or other
information with respect to any one or more of the foregoing.
SECTION 10.02. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly given upon receipt) by delivery in person, by
telecopy or facsimile, by registered or certified mail (postage prepaid, return
receipt requested) or by a nationally recognized courier service to the
respective parties at their addresses set forth on the signature pages to this
Agreement (or at such other address for a party as shall be specified in a
notice given in accordance with this Section 10.02).
SECTION 10.03. 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 Merger 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 a mutually acceptable manner to the fullest
extent permitted by applicable Law in order that the Merger may be consummated
as originally contemplated to the fullest extent possible.
SECTION 10.04. Assignment; Binding Effect; Benefit. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto (whether by operation of Law or otherwise)
without the prior written consent of the other parties hereto; provided,
however, that Parent may assign its rights, interests and obligations hereunder
to any successor or parent entity of Parent whose shares are registered under
Section 12 of the Exchange Act (or will be so registered at the Effective Time).
Subject to the preceding sentence, this Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns. Notwithstanding anything contained in this Agreement to
the contrary, other than Section 7.04, nothing in this Agreement, expressed or
implied, is intended to confer on any person other than the parties hereto or
their respective successors and permitted assigns any rights or remedies under
or by reason of this Agreement.
SECTION 10.05. Incorporation of Exhibits. The Parent Disclosure
Schedule, the Company Disclosure Schedule and all Exhibits attached hereto and
referred to herein are hereby incorporated herein and made a part of this
Agreement for all purposes as if fully set forth herein.
58
<PAGE> 64
SECTION 10.06. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE
(WITHOUT REFERENCE TO CONFLICT OF LAW PRINCIPLES OTHER THAN THOSE DIRECTING
DELAWARE LAW). WAG, PARENT, MERGER SUB AND THE COMPANY EACH HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY DELAWARE OR FEDERAL COURT SITTING IN THE CITY
OF WILMINGTON, DELAWARE, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT, AND WAG, PARENT, MERGER SUB AND THE COMPANY EACH HEREBY
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY
BE HEARD AND DETERMINED IN SUCH DELAWARE STATE COURT OR SUCH FEDERAL COURT. WAG,
PARENT, MERGER SUB AND THE COMPANY EACH HEREBY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO
THE MAINTENANCE OF SUCH ACTION OR PROCEEDING.
SECTION 10.07. Waiver of Jury Trial. EACH PARTY HERETO HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY PROCEEDING (WHETHER BASED
ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
ANY TRANSACTION OR AGREEMENT CONTEMPLATED HEREBY OR THE ACTIONS OF ANY PARTY
HERETO IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF.
SECTION 10.08. Construction. The parties have participated jointly in
the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties, and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship of any
of the provisions of this Agreement. Any reference to any federal, state, local
or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context otherwise requires.
"Herein", "hereby", "hereunder", "hereof", "hereinbefore", "hereinafter" and
other equivalent words refer to this Agreement as a whole and not solely to the
particular Article or Section in which such word is used. When a reference is
made in this Agreement to a Section or Exhibit, such reference shall be to a
Section of, or an Exhibit to, this Agreement unless otherwise indicated. ANY
INFORMATION CONTAINED IN ANY SCHEDULE OR EXHIBIT TO THIS AGREEMENT SHALL BE
DEEMED TO HAVE BEEN DISCLOSED IN ALL SUCH SCHEDULES AND EXHIBITS. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever any of the words "include", "includes" or "including" is
used in this Agreement, it shall be deemed to be followed by the words "without
limitation".
SECTION 10.09. Counterparts. This Agreement may be executed and
delivered (including by facsimile transmission) in one or more counterparts, and
by the different parties hereto in separate counterparts, each of which when
executed and delivered shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
59
<PAGE> 65
SECTION 10.10. Entire Agreement. This Agreement (including the
Exhibits, the Parent Disclosure Schedule and the Company Disclosure Schedule)
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings among the
parties with respect thereto. No addition to or modification of any provision of
this Agreement shall be binding upon any party hereto unless made in writing and
signed by all parties hereto.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
60
<PAGE> 66
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
WORLD ACCESS, INC.
By: /s/ Steven A. Odom
-----------------------------------
Name: Steven A. Odom
Title: Chairman and Chief Executive Officer
2240 Resurgens Plaza
945 E. Paces Ferry Road
Atlanta, Georgia 30326
Telephone: (404) 231-2025
Telecopy: (404) 365-9847
Attention: Chief Executive Officer
with a copy to:
Rogers & Hardin LLP
2700 International Tower
229 Peachtree Street
Atlanta, Georgia 30303
Telephone: (404) 522-4700
Telecopy: (404) 525-2224
Attention: Steven E. Fox
WAXS INC.
By: /s/ Steven A. Odom
-------------------------------------
Name: Steven A. Odom
Title: Chairman and Chief Executive Officer
c/o WAG
2240 Resurgens Plaza
945 E. Paces Ferry Road
Atlanta, Georgia 30326
Telephone: (404) 231-2025
Telecopy: (404) 365-9847
Attention: Chief Executive Officer
<PAGE> 67
TAIL ACQUISITION CORP.
By: /s/ Steven A. Odom
-------------------------------------
Name: Steven A. Odom
Title: Chairman and Chief Executive Officer
c/o WAG
2240 Resurgens Plaza
945 E. Paces Ferry Road
Atlanta, Georgia 30326
Telephone: (404) 231-2025
Telecopy: (404) 365-9847
Attention: Chief Executive Officer
TELCO SYSTEMS, INC.
By: /s/ William B. Smith
--------------------------------------
Name: William B. Smith
Title: President and Chief Executive Officer
63 Nahatan Street
Norwood, Massachusetts 02062
Telephone: (781) 551-0300
Telecopy: (781) 255-2180
Attention: Chief Executive Officer
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Telephone: (212) 735-3000
Telecopy: (212) 735-2000
Attention: Lou R. Kling and Eric J. Friedman
<PAGE> 1
EXHIBIT 99.1
STOCKHOLDERS PROXY AGREEMENT
STOCKHOLDERS PROXY AGREEMENT (this "Agreement"), dated as of June 4,
1998, among WAXS INC., a Delaware corporation ("Parent"), and each other person
and entity listed on the signature pages hereof (each, a "Stockholder").
W I T N E S S E T H:
WHEREAS, as of the date hereof each Stockholder owns (either
beneficially or of record) the number of shares of common stock, par value $0.01
per share ("Company Common Stock"), of Telco Systems, Inc., a Delaware
corporation (the "Company"), set forth opposite such Stockholder's name on
Exhibit A hereto (all such shares of Company Capital Stock owned by the
Stockholders and any shares of Company Capital Stock hereafter acquired by the
Stockholders prior to the termination of this Agreement being referred to herein
as the "Shares");
WHEREAS, (i) Kopp Investment Advisors, Inc. ("Kopp") has "investment
power" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as
amended ("Rule 13d-3")) with respect to 3,614,569 Shares owned by clients who
have the right to terminate their advisory agreements with Kopp ("Client
Shares"), and (ii) Kopp has "voting power" (as defined in Rule 13d-3) with
respect to 415,600 Client Shares ("Client Voting Shares") (the Client Shares
that are not Client Voting Shares are referred to herein as "Client Advisory
Shares");
WHEREAS, Parent and the Company, among others, propose to enter into an
Agreement and Plan of Merger and Reorganization, dated as of the date hereof (as
the same may be amended from time to time, the "Merger Agreement"; capitalized
terms herein not otherwise defined herein shall have the meanings ascribed
thereto in the Merger Agreement), which provides, upon the terms and subject to
the conditions thereof, for the merger of a subsidiary of Parent with and into
the Company (the "Merger"); and
WHEREAS, as a condition to the willingness of Parent to enter into the
Merger Agreement, Parent has requested that each Stockholder agree, and, in
order to induce Parent to enter into the Merger Agreement, each Stockholder has
agreed, to grant Parent proxies to vote such Stockholder's Shares;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and covenants set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
<PAGE> 2
ARTICLE I
TRANSFER AND VOTING OF SHARES
SECTION 1.01. TRANSFER OF SHARES. During the term of this Agreement,
and except as otherwise provided herein, each Stockholder (other than Kopp with
respect to the Client Shares) shall not (a) sell, pledge or otherwise dispose of
any of its Shares if such transaction would result in the Stockholder no longer
having the power to vote or cause to be voted the Shares, (b) deposit its Shares
into a voting trust or enter into a voting agreement or arrangement with respect
to such Shares or grant any proxy with respect thereto or (c) enter into any
contract, option or other arrangement or undertaking with respect to the direct
or indirect acquisition or sale, assignment, transfer or other disposition of
any of the Company Capital Stock if such transaction would result in the
Stockholder no longer having the power to vote or cause to be voted the Shares.
SECTION 1.02. VOTING OF SHARES; FURTHER ASSURANCES. (a) Each
Stockholder, by this Agreement, with respect to those Shares that it owns of
record, does hereby constitute and appoint Parent, or any nominee of Parent,
with full power of substitution, during and for the term of this Agreement, as
its true and lawful attorney and proxy, for and in its name, place and stead, to
vote each of such Shares as its proxy, at every annual, special or adjourned
meeting of the stockholders of the Company (including the right to sign its name
(as stockholder) to any consent, certificate or other document relating to the
Company that the law of the State of Delaware may permit or require) (i) in
favor of the adoption of the Merger Agreement and approval of the Merger and the
other transactions contemplated by the Merger Agreement, (ii) against any
proposal for any recapitalization, merger, sale of assets or other business
combination between the Company and any person or entity (other than the Merger)
or any other action or agreement that would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of the Company
under the Merger Agreement or which could result in any of the conditions to the
Company's obligations under the Merger Agreement not being fulfilled, and (iii)
in favor of any other matter relating to consummation of the transactions
contemplated by the Merger Agreement. Each Stockholder further agrees to cause
the Shares owned by it beneficially to be voted in accordance with the
foregoing. Each Stockholder acknowledges receipt and review of a copy of the
Merger Agreement. Notwithstanding anything in this Section 1.02(a) to the
contrary, the Client Advisory Shares shall not be subject to this Section
1.02(a) and the Client Voting Shares shall cease to be subject to this Section
1.02(a) if and when the owner of such Client Voting Shares terminates its
advisory agreement with Kopp.
(b) Each Stockholder shall perform such further acts and
execute such further documents and instruments as may reasonably be required to
vest in Parent the power to carry out the provisions of this Agreement.
(c) Nothing contained in this Agreement shall be deemed to
restrict a Stockholder who is also a director of the Company from taking actions
in his capacity as a director as may be permitted under the Merger Agreement.
2
<PAGE> 3
SECTION 1.03. TERM OF AGREEMENT. This Agreement shall be effective as
of the date hereof and shall expire on the earlier of (a) the Effective Time and
(b) the date of the termination of the Merger Agreement pursuant to its terms.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
STOCKHOLDERS
Each Stockholder, severally and not jointly, hereby represents and
warrants to Parent as follows:
SECTION 2.01. DUE ORGANIZATION, ETC. Such Stockholder (if it is a
corporation, partnership or other legal entity) is duly organized and validly
existing under the laws of the jurisdiction of its organization. Such
Stockholder has full power and authority (corporate or otherwise) to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
action (corporate or otherwise) on the part of such Stockholder. This Agreement
has been duly executed and delivered by or on behalf of such Stockholder and,
assuming its due authorization, execution and delivery by Parent, constitutes a
legal, valid and binding obligation of such Stockholder, enforceable against
such Stockholder in accordance with its terms, subject to the effect of any
applicable bankruptcy, reorganization, insolvency, moratorium or similar laws
affecting creditors' rights generally and subject, as to enforceability, to the
effect of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
SECTION 2.02. NO CONFLICTS; REQUIRED FILINGS AND CONSENTS. (a) The
execution and delivery of this Agreement by such Stockholder do not, and the
performance of this Agreement by such Stockholder will not, (i) conflict with or
violate the Certificate of Incorporation or ByLaws or similar organizational
documents of such Stockholder (in the case of a Stockholder that is a
corporation, partnership or other legal entity), (ii) conflict with or violate
any law, rule, regulation, order, judgment or decree applicable to such
Stockholder or by which it or any of its properties is bound or affected, or
(iii) result in any breach of or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, or result
in the creation of a lien or encumbrance on any of the property or assets of
such Stockholder or (if such Stockholder is a corporation) any of its
subsidiaries pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which such Stockholder is a party or by which such Stockholder or any of its
properties is bound or affected, except for any such breaches, defaults or other
occurrences that would not cause or create a material risk of non-performance or
delayed performance by such Stockholder of its obligations under this Agreement.
(b) The execution and delivery of this Agreement by such
Stockholder do not, and the performance of this Agreement by such Stockholder
will not, require any consent,
3
<PAGE> 4
approval, authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, domestic or foreign, except (i) for
applicable requirements, if any, of the Exchange Act, and the HSR Act and (ii)
where the failure to obtain such consents, approvals, authorizations or permits,
or to make such filings or notifications, would not prevent or delay the
performance by such Stockholder of its obligations under this Agreement.
SECTION 2.03. TITLE TO SHARES. Other than with respect to Kopp to the
extent described in its Schedule 13D dated May 13, 1998 and in Exhibit A hereto,
such Stockholder is the record or beneficial owner of its Shares free and clear
of any proxy or voting restriction other than pursuant to this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent hereby represents and warrants to each Stockholder as follows:
SECTION 3.01. DUE ORGANIZATION, ETC. Parent is a corporation duly
organized and validly existing under the laws of the State of Delaware. Parent
has all necessary corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby by Parent have been duly authorized by all necessary
corporate action on the part of Parent. This Agreement has been duly executed
and delivered by Parent and, assuming its due authorization, execution and
delivery by the Stockholders, constitutes a legal, valid and binding obligation
of Parent, enforceable against Parent in accordance with its terms.
SECTION 3.02. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The
execution and delivery of this Agreement by Parent do not, and the performance
of this Agreement by Parent will not, (i) conflict with or violate the
Certificate of Incorporation or By-laws of Parent, (ii) conflict with or violate
any law, rule, regulation, order, judgment or decree applicable to Parent or by
which Parent or any of its properties is bound or affected, or (iii) result in
any breach of or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the property or assets of Parent
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which Parent is
a party or by which it or any of its properties is bound or affected, except for
any such breaches, defaults or other occurrences that would not cause or create
a material risk of non-performance or delayed performance by Parent of its
obligations under this Agreement.
(b) The execution and delivery of this Agreement by Parent do
not, and the performance of this Agreement by Parent will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority, domestic or foreign, except (i)
for applicable requirements, if any, of the Exchange Act and the HSR Act
4
<PAGE> 5
and (ii) where the failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not prevent or delay
the performance by Parent of its obligations under this Agreement.
ARTICLE IV
GENERAL PROVISIONS
SECTION 4.01. NOTICES. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been duly
given or made as of the date delivered, mailed or transmitted, and shall be
effective upon receipt, if delivered personally, mailed by registered or
certified mail (postage prepaid, return receipt requested) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like changes of address) or sent by electronic transmission to the telecopier
number specified below:
(a) If to Parent
WAXS INC.
945 E. Paces Ferry Road, Suite 2240
Atlanta, Georgia 30326
Attention: Chief Executive Officer
Telecopier No.: (404) 365-9847
with a copy to:
Rogers & Hardin LLP
2700 International Tower
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attention: Steven E. Fox
Telecopier No.: (404) 525-2224
(b) If to a Stockholder, to such Stockholder's address set
forth on Exhibit A.
SECTION 4.02. HEADINGS. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 4.03. 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
5
<PAGE> 6
as possible to the fullest extent permitted by applicable law in an acceptable
manner to the end that the transactions contemplated hereby are fulfilled to the
extent possible.
SECTION 4.04. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement of the parties and supersedes all prior agreements and undertakings,
both written and oral, between the parties, or any of them, with respect to the
subject matter hereof.
SECTION 4.05. ASSIGNMENT. This Agreement shall not be assigned by
operation of law or otherwise; provided, however, that Parent may assign its
rights, interests and obligations hereunder to any successor or parent entity of
Parent whose shares are registered under Section 12 of the Exchange Act (or will
be so registered at the Closing).
SECTION 4.06. 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 to or shall confer upon any person
any right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement.
SECTION 4.07. SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
SECTION 4.08. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO
CONTRACTS EXECUTED AND TO BE PERFORMED ENTIRELY WITHIN THAT STATE. PARENT AND
EACH OF THE STOCKHOLDERS EACH HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF
ANY DELAWARE STATE OR FEDERAL COURT SITTING IN THE CITY OF WILMINGTON, DELAWARE,
IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND
PARENT AND EACH OF THE STOCKHOLDERS HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN
RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH
DELAWARE STATE COURT OR SUCH FEDERAL COURT. PARENT AND EACH OF THE STOCKHOLDERS
EACH HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO,
THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR
PROCEEDING.
SECTION 4.09. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed as of the date first written above.
WAXS INC.
By: /s/ Steven A. Odom
-------------------------------------------
Name: Steven A. Odom
Title: Chairman and Chief Executive Officer
STOCKHOLDERS:
/s/ DEAN C. CAMPBELL
-------------------------------------------
DEAN C. CAMPBELL
/s/ STEWARD A. FLASCHEN
-------------------------------------------
STEWARD A. FLASCHEN
-------------------------------------------
EDWARD J. FONTENOT
/s/ SHELDON HORING
-------------------------------------------
SHELDON HORING
/s/ WILLIAM B. SMITH
-------------------------------------------
WILLIAM B. SMITH
/s/ WILLIAM J. STUART
-------------------------------------------
WILLIAM J. STUART
/s/ RICHARD J. NARDONE
-------------------------------------------
RICHARD J. NARDONE
/s/ PHILIP D. WILSON
-------------------------------------------
PHILIP D. WILSON
/s/ DAVID A. LEBEAU
-------------------------------------------
DAVID A. LEBEAU
[Signatures continued on next page]
<PAGE> 8
/s/ LeRoy C. Kopp
- -----------------------------------------------
LeRoy C. Kopp
/s/ LeRoy C. Kopp
- -----------------------------------------------
LeRoy C. Kopp Individual Retirement Account
Kopp Investment Advisors, Inc. Profit Sharing Trust
By: /s/ LeRoy C. Kopp
- -----------------------------------------------
LeRoy C. Kopp as Trustee
Kopp Family Foundation
By: /s/ LeRoy C. Kopp
- -----------------------------------------------
LeRoy C. Kopp, Director
Kopp Investment Advisors, Inc., for itself and as attorney-in-fact for certain
of its clients
By: /s/ LeRoy C. Kopp
- -----------------------------------------------
LeRoy C. Kopp, President
<PAGE> 9
EXHIBIT A
LIST OF STOCKHOLDERS
<TABLE>
<CAPTION>
========================================================================================================================
NUMBER OF SHARES OF COMPANY COMMON
NAME AND ADDRESS OF STOCKHOLDER STOCK OWNED BENEFICIALLY AND OF RECORD
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
LeRoy C. Kopp 100,000
c/o Kopp Investment Advisors, Inc.
7701 France Avenue South
Suite 500
Edina, MN 55435
- ------------------------------------------------------------------------------------------------------------------------
LeRoy C. Kopp IRA 130,000
c/o Kopp Investment Advisors, Inc.
7701 France Avenue South
Suite 500
Edina, MN 55435
- ------------------------------------------------------------------------------------------------------------------------
Kopp Investment Advisors, Inc. 7,000
Profit Sharing Trust
c/o Kopp Investment Advisors, Inc.
7701 France Avenue South
Suite 500
Edina, MN 55435
- ------------------------------------------------------------------------------------------------------------------------
Kopp Family Foundation 30,000
c/o Kopp Investment Advisors, Inc.
7701 France Avenue South
Suite 500
Edina, MN 55435
- ------------------------------------------------------------------------------------------------------------------------
Kopp Investment Advisors, Inc. 200,000
7701 France Avenue South
Suite 500
Edina, MN 55435
- ------------------------------------------------------------------------------------------------------------------------
Kopp Investment Advisors, Inc. 3,614,569
as attorney-in-fact*
c/o Kopp Investment Advisors, Inc.
7701 France Avenue South
Suite 500
Edina, MN 55435
</TABLE>
<PAGE> 10
EXHIBIT A
LIST OF STOCKHOLDERS
<TABLE>
<CAPTION>
========================================================================================================================
NUMBER OF SHARES OF COMPANY COMMON
NAME AND ADDRESS OF STOCKHOLDER STOCK OWNED BENEFICIALLY AND OF RECORD
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------
Dean C. Campbell 0
Telco Systems, Inc.
63 Nahatan Street
Norwood, MA 02062
(781) 551-0300
- ------------------------------------------------------------------------------------------------------------------------
Dr. Steward A. Flaschen 51,458**
Telco Systems, Inc.
63 Nahatan Street
Norwood, MA 02062
(781) 551-0300
- ------------------------------------------------------------------------------------------------------------------------
Edward J. Fontenot 0
Telco Systems, Inc.
63 Nahatan Street
Norwood, MA 02062
(781) 551-0300
- ------------------------------------------------------------------------------------------------------------------------
Dr. Sheldon Horing 0
Telco Systems, Inc.
63 Nahatan Street
Norwood, MA 02062
(781) 551-0300
- ------------------------------------------------------------------------------------------------------------------------
Dr. William B. Smith, President & CEO 10,422
Telco Systems, Inc.
63 Nahatan Street
Norwood, MA 02062
(781) 551-0300
- ------------------------------------------------------------------------------------------------------------------------
William J. Stuart, VP & CFO 400
Telco Systems, Inc.
63 Nahatan Street
Norwood, MA 02062
(781) 551-0300
- ------------------------------------------------------------------------------------------------------------------------
Richard J. Nardone 1,838
Telco Systems, Inc.
63 Nahatan Street
Norwood, MA 02062
(781) 551-0300
</TABLE>
<PAGE> 11
EXHIBIT A
LIST OF STOCKHOLDERS
<TABLE>
<CAPTION>
========================================================================================================================
NUMBER OF SHARES OF COMPANY COMMON
NAME AND ADDRESS OF STOCKHOLDER STOCK OWNED BENEFICIALLY AND OF RECORD
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------
Philip D. Wilson 0
Telco Systems, Inc.
63 Nahatan Street
Norwood, MA 02062
(781) 551-0300
- ------------------------------------------------------------------------------------------------------------------------
David A. LeBeau 1,022
Telco Systems, Inc.
63 Nahatan Street
Norwood, MA 02062
(781) 551-0300
========================================================================================================================
</TABLE>
* Kopp disclaims beneficial ownership of all Client Shares as they are managed
on behalf of clients under agreements terminable at will. Except for this
Agreement, Kopp has no agreement, arrangement or understanding for the purpose
of acquiring, holding, voting or disposing of any Shares in the Company.
** Includes 29,958 shares held indirectly by Dr. Flaschen in the Steward S.
Flaschen Revocable Investment Trust, 16,042 shares held indirectly by Dr.
Flaschen in the Joyce D. Flaschen Revocable Investment Trust and 5,458 shares
held indirectly by Dr. Flaschen in the Steward S.Flaschen Defined Benefit
Pension Plan.
<PAGE> 1
EXHIBIT 99.2
[LOGO] WORLD ACCESS, INC. NEWS RELEASE
SUMMARY: WORLD ACCESS, INC. AND TELCO SYSTEMS, INC. TO MERGE
FOR IMMEDIATE RELEASE
ATLANTA, GEORGIA - June 4, 1998 - WORLD ACCESS, INC. (Nasdaq: WAXS) and Telco
Systems, Inc. (Nasdaq: TELC) announced today that they have entered into a
definitive agreement to merge the two companies. The closing of the merger is
subject to the satisfaction of customary conditions, including the receipt of
stockholder and regulatory approvals. The transaction is expected to be
accounted for as a purchase and to qualify as a tax-free reorganization. The
combined company will retain the World Access name.
Telco Systems, based in Norwood, Massachusetts, has supplied products and
related services to the telecommunications industry since 1972. The company is
well known for its asynchronous fiber optic systems and intelligent channel
banks, with an installed base of over $1 billion. Today, the company
concentrates on the integrated access, high capacity multiplexer and Frame
Relay/ATM access markets. Telco Systems has established supply contracts with
leading telecommunications service providers, including NYNEX/Bell Atlantic,
GTE, British Telecom and Concert Communications, and has recently introduced
several new products, including its Access45(TM) and EdgeLink100(TM). During its
latest fiscal year, Telco Systems generated approximately $120 million in
revenues.
The merger agreement provides that each of the approximately 11 million shares
of Telco Systems common stock will be converted into shares of World Access
common stock having a value of $17.00 per share, based on the average daily
closing price of World Access common stock as reported on the Nasdaq National
Market System for a predefined period prior to the effective time of the merger
(the "Closing Price"). If the Closing Price is more than $36.00, then each share
of Telco Systems common stock will be converted into 0.4722 shares of World
Access common stock. If the Closing Price is less than $29.00, then each share
of Telco Systems common stock will be converted into 0.5862 shares of World
Access common stock.
The merger agreement has been unanimously approved by the Boards of Directors of
both companies. The Robinson-Humphrey Company, LLC is acting as financial
advisor to World Access on this transaction and Broadview Associates LLC is
representing Telco Systems.
The companies will be sponsoring a teleconference to review the planned merger
on Friday, June 5, 1998, at 8:30 a.m., EDT. To participate in this
teleconference, interested parties should call 212-346-6404. A taped replay will
be available on Friday from 12:00 p.m. to 8:00 p.m. and on Monday from 8:00 a.m.
to 5:00 p.m. To listen to the taped replay, call 1-800-633-8284 and enter
reservation #4374730 (international callers must dial 303-248-1201 and then the
reservation number). .
Steven A. Odom, Chairman and Chief Executive Officer of World Access, said, "The
combination of World Access and Telco Systems will strengthen our competitive
positioning in the global telecommunications market. The proprietary technology,
advanced product offerings and strong customer relationships contributed by
Telco Systems will significantly enhance our ability to support and service our
collective customers as they build new and/or upgrade existing
telecommunications networks. The merger is expected to be consummated in the
third quarter and positively impact World Access earnings per share for calendar
year 1999."
<PAGE> 2
Hensley E. West, President and Chief Operating Officer of World Access, added,
"We are pleased that Telco's team of experienced industry professionals will
continue to manage Telco Systems as a key division of World Access. Telco
Systems will become the cornerstone of our transport and access product areas,
encompassing several other existing World Access divisions. The integration of
these divisions will provide a technology and product focus geared towards
meeting the increasing demands for value-added network access systems. As a
result of the merger, we will provide our customers greater network solutions
capabilities, in addition to the network access services that will be available
as a result of the pending Resurgens acquisition."
Dr. William B. Smith, President and Chief Executive Officer of Telco Systems,
said, "The strong management team we've assembled at Telco Systems over the past
few years is excited to join forces with World Access. We have concentrated on
developing competitive high-speed multiplexer and integrated access systems
employed at the edge of the network and have recently released several new
products that are receiving excellent market acceptance. We look forward to
combining talents with World Access to offer our broad customer base a more
complete network solution."
While much of Telco Systems' revenue is generated through the sale of equipment
directly to approximately two dozen large service providers around the world,
the company brings to World Access a solid set of distribution partners,
including Walker and Associates, Sprint North Supply, GTE Supply, Alltel Supply
and TelSource. In addition, Telco Systems has relationships with over 40
distributors in international markets. The combined portfolio of World Access
and Telco Systems will give all of the combined company's sales channels a more
complete line of product solutions.
Each company brings to this alliance distinct competencies that will offer
immediate operational efficiencies, especially in the areas of manufacturing and
customer service. For example, World Access' manufacturing infrastructure
includes "rack `n stack" configuration capabilities that will be available for
Telco Systems' products and customers. With this capability, many different
product configurations can be pre-assembled and tested for immediate shipment,
offering a competitive advantage in the sales process. Both companies are ISO
certified, and have well established and documented operating procedures to
assure high quality products and services are provided to their customers.
World Access, Inc. develops, manufactures and markets wireline and wireless
switching, transport and access products for the global telecommunications
markets. The Company's products allow telecommunications service providers to
build and upgrade their central office and outside plant networks in order to
provide a wide array of voice, data and video services to their business and
residential customers. World Access offers digital switches, billing and network
telemanagement systems, cellular base stations, fixed wireless local loop
systems, intelligent multiplexers, microwave and millimeterwave radio systems
and other telecommunications network products. To support and complement its
product sales, the Company also provides its customers with a broad range of
design, engineering, manufacturing, testing, installation, repair and other
value-added services.
THIS PRESS RELEASE CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. ACTUAL RESULTS, INCLUDING THE LEVEL OF EARNINGS OF BOTH WORLD
ACCESS AND TELCO SYSTEMS, AND THE SUCCESS OF THE PROPOSED MERGER MAY DIFFER FROM
THE RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT
CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, RISKS ASSOCIATED WITH
ACQUISITIONS, SUCH AS DIFFICULTIES IN THE ASSIMILATION OF OPERATIONS,
TECHNOLOGIES AND PRODUCTS OF THE ACQUIRED COMPANIES, RISKS OF ENTERING NEW
MARKETS, COMPETITIVE RESPONSE, AND A DOWNTURN IN THE TELECOMMUNICATIONS
INDUSTRY. FOR A MORE DETAILED DESCRIPTION OF THE RISK FACTORS ASSOCIATED WITH
WORLD ACCESS AND TELCO SYSTEMS, PLEASE REFER TO THE SEC FILINGS OF THE
RESPECTIVE COMPANIES.
CONTACT: World Access, Inc. Steven A. Odom, Hensley E. West or Mark A. Gergel
(404-231-2025)
Telco Systems, Inc. William B. Smith, William J. Stuart or Betty Rock
(781-551-0300)
###
