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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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) September 17, 1997
0-21602
(Commission File Number)
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LCI INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3498232
(State of Incorporation) (IRS Employer
Identification Number)
8180 Greensboro Drive, Suite 800, McLean, Virginia 22102
(Address of registrant's principal executive office)
703-422-0220
(Registrant's telephone number)
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<PAGE>
ITEM 5. OTHER EVENTS
On September 17, 1997, LCI International, Inc. ("LCI"), LCI Acquisition
Corp., a Delaware corporation and newly formed, wholly-owned subsidiary of LCI
("Merger Sub") and USLD Communications Corp., a Delaware corporation ("USLD")
entered into an Agreement and Plan of Merger (the "Merger Agreement"), pursuant
to which, among other things, LCI will acquire USLD through the merger of Merger
Sub with and into USLD. Under the terms of the Merger Agreement, for each of
USLD's 16,590,336 outstanding shares of common stock, par value $.01 per share
(the "USLD Common Stock"), LCI will exchange a fraction of one share of LCI
common stock, par value $.01 per share (the "LCI Common Stock"), having a value
of $20.00 based upon the average price of LCI Common Stock for the 20 trading
days ending three days before the merger, subject to certain exceptions.
Assuming an average price of LCI Common Stock equal to $24.00, LCI would
exchange approximately .833 of one share of LCI Common Stock for each
outstanding share of USLD Common Stock. If the average price of LCI Common Stock
is more than $26.40, the exchange ratio will be fixed at .7576 shares of LCI
Common Stock for each outstanding share of USLD Common Stock. If the average
price is less than $21.60, the exchange ratio will be fixed at .9259 shares of
LCI Common Stock for each outstanding share of USLD Common Stock. If the average
price of LCI Common Stock is less than $20.40, either LCI or USLD may terminate
the Merger Agreement unless LCI agrees to an exchange ratio that would provide
at least $18.90 in value for each outstanding share of USLD Common Stock, based
upon the average stock price of LCI Common Stock. The merger is intended to be a
tax-free exchange. Consummation of the merger is subject to satisfaction or
waiver by the parties of certain closing conditions, including the receipt of
regulatory approvals, approvals by the stockholders of USLD and, if required,
LCI, pooling of interests treatment and other customary closing conditions. It
is expected that the merger will be completed in December 1997.
The foregoing description is qualified in its entirety by reference to
the full text of the Merger Agreement which is filed herewith as Exhibit 2 and
is incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits.
Exhibit Number Title
2 Agreement and Plan of Merger, dated as of September 17, 1997, by
and among LCI International, Inc., LCI Acquisition Corp. and USLD
Communications Corp.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LCI INTERNATIONAL, INC.
By: /s/ Lee M. Weiner
------------------------------------
Lee M. Weiner
Vice President - General Counsel
Date: September 23, 1997
<PAGE>
Exhibit Index
Exhibit Number Title Page
2 Agreement and Plan of Merger, dated as of September 17, 1997, by
and among LCI International, Inc., LCI Acquisition Corp. and USLD
Communications Corp.
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
LCI INTERNATIONAL, INC.
LCI ACQUISITION CORP.
and
USLD COMMUNICATIONS CORP.
Dated as of September 17, 1997
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
THE MERGER
SECTION 1.1 The Merger........................................... 2
SECTION 1.2 Effective Time. .................................... 2
SECTION 1.3 Effect of the Merger................................. 2
SECTION 1.4 Certificate of Incorporation; By-Laws................ 2
SECTION 1.5 Directors and Officers............................... 3
SECTION 1.6 Effect on Capital Stock.............................. 3
SECTION 1.7 Exchange of Certificates............................. 6
SECTION 1.8 Stock Transfer Books................................. 8
SECTION 1.9 No Further Ownership Rights in Company
Common Stock...................................... 8
SECTION 1.10 Lost, Stolen or Destroyed Certificates............... 8
SECTION 1.11 Tax and Accounting Consequences...................... 8
SECTION 1.12 Taking of Necessary Action; Further Action........... 8
SECTION 1.13 Material Adverse Effect.............................. 8
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 2.1 Corporate Organization............................... 9
SECTION 2.2 Capitalization....................................... 9
SECTION 2.3 Subsidiaries......................................... 10
SECTION 2.4 No Commitments to Issue Capital Stock................ 10
SECTION 2.5 Authorization; Execution and Delivery................ 11
SECTION 2.6 Governmental Approvals and Filings................... 11
SECTION 2.7 No Conflict.......................................... 11
SECTION 2.8 SEC Filings.......................................... 12
SECTION 2.9 Financial Statements; Absence of Undisclosed
Liabilities; Receivables.......................... 12
SECTION 2.10 Certain Other Financial Representations.............. 13
SECTION 2.11 Absence of Changes................................... 14
SECTION 2.12 Tax Matters.......................................... 15
SECTION 2.13 Relations with Employees and Sales Agents............ 16
SECTION 2.14 Benefit Plans........................................ 17
SECTION 2.15 Title to Properties.................................. 19
SECTION 2.16 Compliance with Laws; Legal Proceedings.............. 19
SECTION 2.17 Brokers.............................................. 19
SECTION 2.18 Intellectual Property................................ 20
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SECTION 2.19 Insurance............................................. 20
SECTION 2.20 Contracts; etc........................................ 21
SECTION 2.21 Permits, Authorizations, etc.......................... 22
SECTION 2.22 Environmental Matters................................. 22
SECTION 2.23 Company Acquisitions.................................. 23
SECTION 2.24 Books and Records..................................... 24
SECTION 2.25 Interested Party Transactions......................... 24
SECTION 2.26 Opinion of Financial Advisor.......................... 24
SECTION 2.27 Pooling Matters....................................... 24
SECTION 2.28 Registration Statement; Joint Proxy
Statement/Prospectus............................... 24
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
PARENT AND MERGER SUB
SECTION 3.1 Corporate Organization................................ 25
SECTION 3.2 Capitalization........................................ 25
SECTION 3.3 Subsidiaries.......................................... 26
SECTION 3.4 No Commitments to Issue Capital Stock................. 26
SECTION 3.5 Authorization; Execution and Delivery................. 26
SECTION 3.6 Governmental Approvals and Filings.................... 27
SECTION 3.7 No Conflict........................................... 27
SECTION 3.8 SEC Filings........................................... 27
SECTION 3.9 Financial Statements; Absence of Undisclosed
Liabilities; Receivables........................... 28
SECTION 3.10 Absence of Changes.................................... 29
SECTION 3.11 Tax Matters........................................... 29
SECTION 3.12 Relations with Employees and Sales Agents............. 31
SECTION 3.13 Benefit Plans......................................... 31
SECTION 3.14 Title to Properties................................... 32
SECTION 3.15 Compliance with Laws; Legal Proceedings............... 32
SECTION 3.16 Brokers............................................... 33
SECTION 3.17 Intellectual Property................................. 33
SECTION 3.18 Contracts; etc........................................ 34
SECTION 3.19 Permits, Authorizations, etc.......................... 34
SECTION 3.20 Environmental Matters................................. 34
SECTION 3.21 Books and Records..................................... 35
SECTION 3.22 Pooling Matters....................................... 35
SECTION 3.23 Registration Statement; Joint
Proxy Statement/Prospectus......................... 35
SECTION 3.24 Ownership of Merger Sub; No Prior Activities.......... 36
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ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 4.1 Conduct of Business by the Company Pending the
Merger.............................................. 36
SECTION 4.2 No Solicitation........................................ 38
SECTION 4.3 Conduct of Business by Parent Pending the Merger....... 40
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 Joint Proxy Statement/Prospectus; Registration
Statement........................................... 41
SECTION 5.2 Company Stockholders Meeting........................... 41
SECTION 5.3 Parent Stockholders Meeting............................ 42
SECTION 5.4 Access to Information; Confidentiality................. 42
SECTION 5.5 Consents; Approvals.................................... 42
SECTION 5.6 Agreements with Respect to Affiliates.................. 43
SECTION 5.7 Indemnification and Insurance.......................... 43
SECTION 5.8 Notification of Certain Matters........................ 44
SECTION 5.9 Further Action/Tax Treatment........................... 45
SECTION 5.10 Public Announcements; Communications with Employees.... 45
SECTION 5.11 Listing of Parent Common Stock......................... 45
SECTION 5.12 Conveyance Taxes....................................... 45
SECTION 5.13 Accountant's Letters................................... 46
SECTION 5.14 Pooling Accounting Treatment........................... 46
SECTION 5.15 Rights Agreement....................................... 46
SECTION 5.16 Delivery of Certain Reports............................ 46
SECTION 5.17 Receipt of Acknowledgments............................. 47
ARTICLE VI
CONDITIONS TO THE MERGER
SECTION 6.1 Conditions to Obligation of Each Party to Effect
the Merger.......................................... 47
SECTION 6.2 Additional Conditions to Obligations of Parent and Merger
Sub.................................................... 48
SECTION 6.3 Additional Conditions to Obligation of the Company..... 49
ARTICLE VII
TERMINATION
SECTION 7.1 Termination............................................ 50
SECTION 7.2 Effect of Termination.................................. 52
SECTION 7.3 Fees and Expenses...................................... 52
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ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 Effectiveness of Representations, Warranties and
Agreements............................................. 54
SECTION 8.2 Notices................................................ 54
SECTION 8.3 Certain Definitions.................................... 55
SECTION 8.4 Amendment.............................................. 56
SECTION 8.5 Waiver................................................. 56
SECTION 8.6 Headings; Construction................................. 56
SECTION 8.7 Severability........................................... 57
SECTION 8.8 Entire Agreement....................................... 57
SECTION 8.9 Assignment; Merger Sub................................. 57
SECTION 8.10 Parties in Interest.................................... 57
SECTION 8.11 Failure or Indulgence Not Waiver; Remedies
Cumulative.......................................... 58
SECTION 8.12 Governing Law.......................................... 58
SECTION 8.13 Counterparts........................................... 58
SECTION 8.14 WAIVER OF JURY TRIAL................................... 58
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of September 17, 1997 (this
"Agreement"), among LCI INTERNATIONAL, INC., a Delaware corporation ("Parent"),
LCI ACQUISITION CORP., a Delaware corporation and a direct, wholly-owned
subsidiary of Parent ("Merger Sub"), and USLD COMMUNICATIONS CORP., a Delaware
corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of Parent, Merger Sub and the Company
have each determined that it is advisable and in the best interests of their
respective stockholders for Parent to cause Merger Sub to merge with and into
the Company upon the terms and subject to the conditions set forth herein;
WHEREAS, in furtherance of such combination, the Boards of Directors of
Parent, Merger Sub and the Company have each approved the merger (the "Merger")
of Merger Sub with and into the Company in accordance with the applicable
provisions of the Delaware General Corporation Law (the "DGCL"), and upon the
terms and subject to the conditions set forth herein;
WHEREAS, Parent, Merger Sub and the Company intend, by approving
resolutions authorizing this Agreement, to adopt this Agreement as a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code"), and the regulations promulgated thereunder;
WHEREAS, Parent, Merger Sub and the Company intend that the Merger be
accounted for as a pooling-of-interests for financial reporting purposes; and
WHEREAS, pursuant to the Merger, each outstanding share (a "Share") of
the Company's Common Stock, par value $0.01 per share (together with the
preferred stock purchase right associated therewith, the "Company Common
Stock"), shall be converted into the right to receive the Merger Consideration
(as defined in Section 1.7(b)), upon the terms and subject to the conditions set
forth herein;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Parent, Merger Sub and the Company hereby agree as follows:
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ARTICLE I
THE MERGER
SECTION 1.1 The Merger. (a) Effective Time. At the Effective Time (as
defined in Section 1.2), and subject to and upon the terms and conditions of
this Agreement and the DGCL, Merger Sub shall be merged with and into the
Company, the separate corporate existence of Merger Sub shall cease, and the
Company shall continue as the surviving corporation. The Company as the
surviving corporation after the Merger is hereinafter sometimes referred to as
the "Surviving Corporation."
(b) Closing. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
7.1 and subject to the satisfaction or waiver of the conditions set forth in
Article VI, the closing under this Agreement (the "Closing") will take place on
or as promptly as practicable (and in any event within two Business Days) after
satisfaction or waiver of the conditions set forth in Article VI at the offices
of Kramer, Levin, Naftalis & Frankel, 919 Third Avenue, New York, New York,
unless another date, time or place is agreed to in writing by the parties
hereto. The day in which the Closing takes place is called the "Closing Date."
SECTION 1.2 Effective Time. On the Closing Date or as promptly as
practicable thereafter (and in any event within one Business Day thereafter),
the parties hereto shall cause the Merger to be consummated by filing a
certificate of merger as contemplated by the DGCL (the "Certificate of Merger"),
together with any required related certificates, 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 DGCL (the time of such filing being the
"Effective Time").
SECTION 1.3 Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in this Agreement, the Certificate of Merger and
the applicable provisions of the DGCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time 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 1.4 Certificate of Incorporation; By-Laws. (a) Certificate of
Incorporation. Unless otherwise determined by Parent prior to the Effective
Time, at the Effective Time the Certificate of Incorporation of the Company, as
in effect immediately prior to the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended as provided
by the DGCL and such Certificate of Incorporation; provided, however, that
Section 3 thereof shall be amended and restated in its entirety to provide that
the Surviving Corporation may engage in any lawful act or activity for which
corporations may be organized under the DGCL.
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(b) By-Laws. The By-Laws of the Company, as in effect immediately prior
to the Effective Time, shall be the By-Laws of the Surviving Corporation until
thereafter amended as provided by the DGCL, the Certificate of Incorporation of
the Surviving Corporation and such By-Laws; provided, however, that Article III,
Section 3.01 thereof shall be amended and restated in its entirety to provide
that the Surviving Corporation's Board shall consist of not less than three
members, all of a single class, with the exact number to be fixed from time to
time by resolution of the Board of Directors.
SECTION 1.5 Directors and Officers. The directors of Merger Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and ByLaws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the initial officers of
the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified.
SECTION 1.6 Effect on Capital Stock. At the Effective Time, by virtue
of the Merger and without any action on the part of the Parent, Merger Sub, the
Company or the holders of any of the following securities:
(a) Conversion of Securities. Each Share issued and outstanding
immediately prior to the Effective Time (excluding any Shares to be canceled
pursuant to Section 1.6(b)) shall be cancelled and extinguished and
automatically converted, subject to Section 1.6(f), into the right to receive
validly issued, fully paid and nonassessable shares of Common Stock, par value
$0.01, of Parent (together with the preferred stock purchase rights associated
therewith, the "Parent Common Stock") in the applicable ratio (the "Exchange
Ratio") as follows:
o If the Average Stock Price (as hereinafter defined) is greater
than or equal to $21.60 but less than or equal to $26.40, the
Exchange Ratio shall be equal to $20.00 divided by the Average
Stock Price.
o If the Average Stock Price is more than $26.40, the Exchange
Ratio shall be equal to .7576.
o Except as provided in the following paragraph, if the Average
Stock Price is less than $21.60, the Exchange Ratio shall be
equal to .9259.
o If the Average Stock Price is less than $20.40 and the Company
and Parent deliver their respective notices specified in Section
7.1(i), the Exchange Ratio shall be equal to $18.90 divided by
the Average Stock Price (or such higher ratio as specified in
Parent's notice).
Capitalized terms used in this section have the following meanings:
"Average Stock Price" means the average of the Daily Per Share
Prices for the twenty (20) consecutive trading days ending on the third
trading day prior to the
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Company Stockholders Meeting (as defined in Section 2.28); provided,
however, that, except with respect to Section 7.1(i), if the Closing
Date occurs more than three trading days after the Company Stockholders
Meeting, such consecutive trading days shall end on the second trading
day prior to the Closing Date.
"Daily Per Share Price" for any trading day means the weighted
average of the per share selling prices on the New York Stock Exchange,
Inc. (the "NYSE") of Parent Common Stock (as reported in the NYSE
Composite Transactions) for that day; provided, however, that if the
Parent Common Stock does not trade on any day in such period, the Daily
Per Share Price for such day means the average of the closing bid and
asked prices of Parent Common Stock on such day.
(b) Cancellation. Each Share held in the treasury of the Company and
each Share owned by Parent, Merger Sub or any direct or indirect wholly owned
subsidiary of the Company or Parent immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of the holder
thereof, cease to be outstanding, be canceled and retired without payment of any
consideration therefor and cease to exist.
(c) Assumption of Outstanding Stock Options and Warrants. (i) Each
option outstanding at the Effective Time to purchase shares of Company Common
Stock (a "Stock Option") granted under the USLD Communications Corp. 1990
Employee Stock Option Plan, as amended, the USLD Communications Corp. 1993
Non-Employee Director Plan, as amended, or any other stock plan or agreement of
the Company, which by its terms is not extinguished in the Merger (collectively,
the "Company Stock Option Plans"), shall be assumed by Parent and deemed to
constitute an option to acquire, on the same terms and conditions mutatis
mutandis as were applicable under such Stock Option prior to the Effective Time,
the number of shares of Parent Common Stock as the holder of such Stock Option
would have been entitled to receive pursuant to the Merger had such holder
exercised such option in full immediately prior to the Effective Time (not
taking into account whether or not such option was in fact exercisable) at a
price per share equal to (x) the aggregate exercise price for Company Common
Stock otherwise purchasable pursuant to such Stock Option divided by (y) the
number of shares of Parent Common Stock deemed purchasable pursuant to such
Stock Option; provided, however, that the number of shares of Parent Common
Stock that may be purchased upon exercise of any such Stock Option shall not
include any fractional share and, upon exercise of the Stock Option, a cash
payment shall be made for any fractional share based upon the Closing Price (as
hereinafter defined) of a share of Parent Common Stock on the trading day
immediately preceding the date of exercise. "Closing Price" shall mean, on any
day, the last reported sale price of one share of Parent Common Stock on the
NYSE. Within three Business Days after the Effective Time, Parent shall cause to
be delivered to each holder of an outstanding Stock Option an appropriate notice
setting forth such holder's rights pursuant thereto, and such Stock Option shall
continue in effect on the same terms and conditions. Parent shall comply with
the terms of the Company Stock Option Plans pursuant to which the Stock Options
were granted from and after the Effective Time.
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(ii) At the Effective Time, each warrant to purchase shares of Company
Common Stock (a "Warrant"), shall be assumed by Parent and deemed to constitute
a warrant to acquire, on the same terms and conditions mutatis mutandis as were
applicable under such Warrant prior to the Effective Time, the number of shares
of Parent Common Stock as the holder of such Warrant would have been entitled to
receive pursuant to the Merger had such holder exercised such Warrant in full
immediately prior to the Effective Time (not taking into account whether or not
such Warrant was in fact exercisable) at a price per share equal to (x) the
aggregate exercise price for Company Common Stock otherwise purchasable pursuant
to such Warrant divided by (y) the number of shares of Parent Common Stock
deemed purchasable pursuant to such Warrant; provided, however, that the number
of shares of Parent Common Stock that may be purchased upon exercise of any such
Warrant shall not include any fractional share and, upon exercise of such
Warrant, a cash payment shall be made for any fractional share based upon the
Closing Price (as hereinafter defined) of a share of Parent Common Stock on the
trading day immediately preceding the date of exercise.
(iii) Parent shall cause to be taken all corporate action necessary to
reserve for issuance a sufficient number of shares of Parent Common Stock for
delivery upon exercise of Stock Options and Warrants in accordance with this
Section 1.6(c). Within three Business Days after the Effective Time, Parent
shall cause the Parent Common Stock subject to Stock Options to be registered
under the Securities Act of 1933, as amended and the rules of the Securities and
Exchange Commission (the "SEC") thereunder (the "Securities Act"), pursuant to a
registration statement on Form S-8 (or any successor or other appropriate
forms), and shall use its best efforts to cause the effectiveness of such
registration statement (and the current status of the prospectus or prospectuses
contained therein) to be maintained for so long as the Stock Options remain
outstanding.
(iv) The Company shall take such action as is necessary to cause the
ending date of the then current offering period under its Employee Stock
Purchase Plan (as such term is defined in Section 2.14 of the Company Disclosure
Schedule) to be prior to the Effective Time and on such date as is determined in
accordance with the terms of such plan (the "Final Purchase Date"); provided,
that, such change in the offering period shall be conditioned upon the
consummation of the Merger. On the Final Purchase Date, the Company shall apply
the funds credited as of such date under such Employee Stock Purchase Plan
within each participant's payroll withholding account to the purchase of whole
shares of Company Common Stock in accordance with the terms of such Employee
Stock Purchase Plan.
(v) Employees of the Company as of the Effective Time shall be
permitted to participate in the Parent's Employee Stock Purchase Plan commencing
on the first enrollment date of such plan following the Effective Time, subject
to the eligibility provisions of such plan (with employees receiving credit, for
purposes of such eligibility provisions, for service with the Company or
Parent).
(d) Capital Stock of Merger Sub. The one share of common stock, $.01
par value, of Merger Sub issued and outstanding immediately prior to the
Effective Time
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shall be converted into and exchanged for 16,590,336 validly issued, fully paid
and nonassessable shares of common stock, $0.01 par value, of the Surviving
Corporation.
(e) Adjustments to Exchange Ratio. The Exchange Ratio shall be
appropriately adjusted to reflect fully the effect of any stock split, reverse
split, stock dividend (including any dividend or distribution of securities
convertible into Parent Common Stock), reorganization, recapitalization or other
like change with respect to Parent Common Stock occurring after the date hereof
and prior to the Effective Time.
(f) Fractional Shares. No certificates or scrip representing less than
one share of Parent Common Stock shall be issued upon the surrender for exchange
of a certificate or certificates which immediately prior to the Effective Time
represented outstanding Shares (the "Certificates"). In lieu of any such
fractional share, each holder of Shares who would otherwise have been entitled
to a fraction of a share of Parent Common Stock upon surrender of Certificates
for exchange shall be paid upon such surrender cash (without interest) in an
amount equal to such fraction multiplied by the Closing Price of Parent Common
Stock on the date of the Effective Time.
SECTION 1.7 Exchange of Certificates. (a) Exchange Agent. Parent shall
cause to be supplied, to or for such bank or trust company as shall be mutually
designated by the Company and Parent (the "Exchange Agent"), in trust for the
benefit of the holders of Company Common Stock, for exchange in accordance with
this Section 1.7, through the Exchange Agent, certificates evidencing the shares
of Parent Common Stock issuable pursuant to Section 1.6 in exchange for
outstanding Shares and the cash to be paid in lieu of fractional shares.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, Parent will instruct the Exchange Agent to mail to each holder
of record of Certificates (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Exchange Agent and
shall be in such form and have such other provisions as Parent may reasonably
specify), and (ii) instructions to effect the surrender of the Certificates in
exchange for the certificates evidencing shares of Parent Common Stock. Upon
surrender of a Certificate for cancellation to the Exchange Agent together with
such letter of transmittal, duly executed, and such other customary documents as
may be required pursuant to such instructions, the holder of such Certificate
shall be entitled to receive in exchange therefor (A) certificates evidencing
that number of whole shares of Parent Common Stock which such holder has the
right to receive in accordance with the Exchange Ratio in respect of the Shares
formerly evidenced by such Certificate, (B) any dividends or other distributions
to which such holder is entitled pursuant to Section 1.7(c), and (C) cash in
respect of fractional shares as provided in Section 1.6(f) (the shares of Parent
Common Stock and cash being, collectively, the "Merger Consideration"), and the
Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of Shares which is not registered in the transfer records
of the Company as of the Effective Time, shares of Parent Common Stock,
dividends, distributions and cash in respect of fractional shares may be issued
and paid in accordance with this Article I to a transferee if the Certificate
evidencing
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such Shares is presented to the Exchange Agent, accompanied by all documents
required to evidence and effect such transfer pursuant to this Section 1.7(b)
and by evidence that any applicable stock transfer taxes have been paid. Until
so surrendered, each outstanding Certificate that, prior to the Effective Time,
represented Shares will be deemed from and after the Effective Time, for all
corporate purposes, other than the payment of dividends and, subject to Section
1.6(f), to evidence the ownership of the number of whole shares of Parent Common
Stock, and cash in respect of fractional shares, into which such Shares shall
have been converted pursuant to the provisions hereof.
(c) Distributions With Respect to Unexchanged Shares. No dividends or
other distributions declared or made after the Effective Time with respect to
shares of Parent Common Stock payable to stockholders of record as of a date
after the Effective Time shall be paid to the holder of any unsurrendered
Certificate with respect to the shares of Parent Common Stock they are entitled
to receive pursuant to the provisions hereof until the holder of such
Certificate shall surrender such Certificate pursuant to Section 1.7(b). Subject
to applicable law, following surrender of any such Certificate, there shall be
paid to the record holder of the certificates representing whole shares of
Parent Common Stock issued in exchange therefor, without interest, at the time
of such surrender, the amount of dividends or other distributions payable to
stockholders of record as of a date after the Effective Time and theretofore
paid with respect to such whole shares of Parent Common Stock.
(d) Transfers of Ownership. If any certificate for shares of Parent
Common Stock is to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it will be a condition of the
issuance thereof that the Certificate so surrendered will be properly endorsed
and otherwise in proper form for transfer and that the Person requesting such
exchange will have paid to Parent or any agent designated by it any transfer or
other taxes required by reason of the issuance of a certificate for shares of
Parent Common Stock in any name other than that of the registered holder of the
certificate surrendered, or established to the satisfaction of Parent or any
agent designated by it that such tax has been paid or is not payable.
(e) No Liability. Neither Parent, Merger Sub nor the Company shall be
liable to any holder of Company Common Stock for any Merger Consideration
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
(f) Withholding Rights. Parent or the Exchange Agent shall be entitled
to deduct and withhold from the Merger Consideration otherwise payable pursuant
to this Agreement to any holder of Company Common Stock such amounts as Parent
or the Exchange Agent is required to deduct and withhold with respect to the
making of such payment under the Code, or any provision of state, local or
foreign tax law. To the extent that amounts are so withheld by Parent or the
Exchange Agent, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the Shares in respect of which
such deduction and withholding was made by Parent or the Exchange Agent.
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SECTION 1.8 Stock Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed, and there shall be no further
registration of transfers of the Company Common Stock thereafter on the records
of the Company.
SECTION 1.9 No Further Ownership Rights in Company Common Stock. The
Merger Consideration delivered upon the surrender for exchange of Shares in
accordance with the terms hereof shall be deemed to have been issued in full
satisfaction of all rights pertaining to such Shares, and there shall be no
further registration of transfers on the records of the Surviving Corporation of
Shares which were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Surviving Corporation for
any reason, they shall be canceled and exchanged as provided in this Article I.
SECTION 1.10 Lost, Stolen or Destroyed Certificates. In the event any
Certificate shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed Certificate, upon the
making of an affidavit of that fact by the holder thereof, such shares of Parent
Common Stock as may be required pursuant to Section 1.6; provided, however, that
Parent may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed Certificate to
deliver a bond in such sum as it may reasonably direct as indemnity against any
claim that may be made against Parent or the Exchange Agent with respect to the
Certificate alleged to have been lost, stolen or destroyed.
SECTION 1.11 Tax and Accounting Consequences. It is intended by the
parties hereto that the Merger shall (i) constitute a reorganization within the
meaning of section 368 of the Code, and (ii) subject to applicable accounting
standards, qualify for accounting treatment as a pooling of interests. The
parties hereto hereby adopt this Agreement as a "plan of reorganization" within
the meaning of sections 1.368-2(g) and 1.368-3(a) of the United States Treasury
Regulations.
SECTION 1.12 Taking of Necessary Action; Further Action. Each of
Parent, Merger Sub and the Company will take all such reasonable and lawful
action as may be necessary or appropriate in order to effectuate the Merger in
accordance with this Agreement as promptly as possible. If, at any time after
the Effective Time, any such further action is necessary or desirable to carry
out the purposes of this Agreement and to vest the Surviving Corporation with
full right, title and possession to all assets, property, rights, privileges,
powers and franchises of the Company and Merger Sub, the officers and directors
of the Company and Merger Sub immediately prior to the Effective Time are fully
authorized in the name of their respective corporations or otherwise to take,
and will take, all such lawful and necessary action.
SECTION 1.13 Material Adverse Effect. When used in connection with the
Company or any of its Subsidiaries or Parent or any of its Subsidiaries, as the
case may be, the term "Material Adverse Effect" means any change, effect or
circumstance that is or is reasonably likely to be materially adverse to the
business, operations, assets (including intangible assets), condition (financial
or otherwise), liabilities or results of operations of the
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Company and its Subsidiaries or Parent and its Subsidiaries, as the case may be,
in each case taken as a whole, other than such changes, effects or circumstances
that affect generally providers of telecommunications services similar to the
Company or Parent, as the case may be.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub
that, except as set forth in the written disclosure schedule delivered by the
Company to Parent (the "Company Disclosure Schedule"):
SECTION 2.1 Corporate Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own, operate and
lease its properties and assets as and where the same are owned, operated or
leased and to conduct its business as it is now being conducted. The Company is
in good standing and duly qualified or licensed as a foreign corporation to do
business in those jurisdictions listed in Section 2.1 of the Company Disclosure
Schedule, such jurisdictions being the only jurisdictions in which the location
of the property and assets owned, operated or leased by the Company or the
nature of the business conducted by the Company makes such qualification or
licensing necessary, except where the failure to be so qualified or licensed
would not reasonably be expected to have a Material Adverse Effect. The Company
has heretofore delivered to the Purchaser complete and correct copies of the
Company's Certificate of Incorporation and By-laws, as amended to and as in
effect on the date hereof.
SECTION 2.2 Capitalization. (a) The authorized capital stock of the
Company consists of 50,000,000 shares of Company Common Stock and 10,000,000
shares of preferred stock, par value $0.01 per share ("Company Preferred
Stock"). As of the date hereof, 16,590,336 shares of Company Common Stock and no
shares of Company Preferred Stock are issued and outstanding.
(b) All outstanding shares of Company Common Stock are validly issued
and outstanding, fully paid and nonassessable, and, except as set forth in the
Company's Certificate of Incorporation, there are no preemptive or similar
rights in respect of the Company Common Stock. All shares of Company Common
Stock issuable upon the exercise of Stock Options and Warrants will, when issued
in accordance therewith, be validly issued, fully paid and nonassessable. All
outstanding shares of Company Common Stock issued since July 1, 1994 were issued
in compliance in all material respects with all requirements of all applicable
federal and state securities laws.
(c) Section 2.2 of the Company Disclosure Schedule sets forth a
complete and correct list of (i) all Stock Options, and (ii) all Warrants,
indicating as to each holder
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thereof, the number of shares of Company Common Stock subject thereto and the
exercisability, exercise price and termination date therefor.
SECTION 2.3 Subsidiaries. (a) Except for the Subsidiaries listed in
Section 2.3(a) of the Company Disclosure Schedule, there are no entities 20% or
more of whose outstanding voting securities or other equity interests are owned,
directly or indirectly through one or more intermediaries, by the Company. Each
Subsidiary of the Company is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation (which
jurisdiction is indicated in Section 2.3(a) of the Company Disclosure Schedule)
and has all requisite corporate power and authority to own, operate and lease
its properties and assets as and where the same are owned, operated or leased by
such Subsidiary and to conduct its business as it is now being conducted. Each
Subsidiary is in good standing and duly qualified or licensed as a foreign
corporation to do business in each of the jurisdictions in which the location of
the property and assets owned, operated or leased by such Subsidiary or the
nature of the business conducted by such Subsidiary makes such qualification or
licensing necessary, except where the failure to be so qualified or licensed
would not reasonably be expected to have a Material Adverse Effect. The Company
has heretofore delivered to Parent complete and correct copies of each of its
Subsidiaries' certificate of incorporation and by-laws (or similar
organizational document), in each case as amended to and as in effect on the
date hereof.
(b) Section 2.3 of the Company Disclosure Schedule sets forth the
authorized capital stock of each Subsidiary of the Company, the number of
outstanding shares of each class of such capital stock and the Company's (or, in
the case of Subsidiaries indirectly owned by the Company, a specified
Subsidiary's) ownership of each such class. The Company or such Subsidiary has
good and valid title to all such shares free and clear of all mortgages,
pledges, claims, liens, security interests or other restrictions or encumbrances
of any kind or nature whatsoever ("Encumbrances"). All of the outstanding shares
of capital stock of each Subsidiary of the Company are validly issued, fully
paid and nonassessable, and there are no preemptive or similar rights in respect
of any shares of capital stock of any Subsidiary, other than preemptive rights
held solely by the Company. All of the outstanding shares of each Subsidiary of
the Company were issued in compliance in all material respects with all
requirements of all applicable federal and state securities laws. Except as set
forth in Section 2.3(b) of the Company Disclosure Schedule, neither the Company
nor any Subsidiary of the Company owns any capital stock of or other equity
interest of any kind or nature in any Person.
SECTION 2.4 No Commitments to Issue Capital Stock. Except for the Stock
Options and the Warrants and as set forth in Section 2.4 of the Company
Disclosure Schedule, there are no outstanding options, warrants, calls,
convertible securities or other rights, agreements, commitments or other
instruments pursuant to which the Company or any of its Subsidiaries is or may
become obligated to authorize, issue or transfer any shares of its capital stock
or any other equity interest. Except as set forth in Section 2.4 of the Company
Disclosure Schedule, there are no agreements or understandings in effect among
any of the stockholders of the Company or any such Subsidiary or with any other
Person and by which the Company or any such Subsidiary is bound with respect to
the voting, transfer, disposition
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or registration under the Securities Act of any shares of capital stock of the
Company or any of its Subsidiaries.
SECTION 2.5 Authorization; Execution and Delivery. The Company has all
requisite corporate power and authority to execute and deliver this Agreement
and, subject to obtaining any necessary stockholder approval of the Agreement,
to carry out its obligations hereunder. The execution, delivery and performance
of this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly authorized by all requisite
corporate action on the part of the Company, except that the Company's
stockholders are required to approve and adopt this Agreement. This Agreement
has been duly executed and delivered by the Company and, subject to such
stockholder approval 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,
except as such enforceability may be limited by (i) bankruptcy laws and similar
laws affecting creditor's rights generally and (ii) general principles of
equity, regardless of whether asserted in a proceeding in equity or at law.
SECTION 2.6 Governmental Approvals and Filings. No approval,
authorization, consent, license, clearance or order of, declaration or
notification to, or filing or registration with, any governmental or regulatory
authority is required in order (a) to permit the Company to consummate the
Merger or perform its obligations under this Agreement, or (b) to prevent the
termination of, or materially and adversely affect, any governmental right,
privilege, authority, franchise, license, permit or certificate of the Company
or any of its Subsidiaries to provide its services or carry on its business
("Governmental Licenses"), or to prevent any material loss or disadvantage to
the Company's business, by reason of the Merger, except for (i) filing and
recording of the Certificate of Merger as required by the DGCL, (ii) filings and
other required submissions under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), (iii) such other consents,
authorizations, filing, approvals and registrations (other than Governmental
Licenses relating to the provision of telecommunication services) which if not
made or obtained would not reasonably be expected to have a Material Adverse
Effect, and (iv) as set forth in Section 2.6 of the Company Disclosure Schedule.
SECTION 2.7 No Conflict. Subject to compliance with the Governmental
Licenses described in Section 2.6 of the Company Disclosure Schedule and
obtaining the other consents and waivers that are set forth and described in
Section 2.7 of the Company Disclosure Schedule (the "Private Consents"), neither
the execution, delivery and performance of this Agreement by the Company, nor
the consummation by the Company of the transactions contemplated hereby, will
(i) conflict with, or result in a breach or violation of, any provision of the
certificate of incorporation (or similar organizational document) or by-laws of
the Company or any of its Subsidiaries; (ii) conflict with, result in a breach
or violation of, give rise to a default, or result in the acceleration of
performance, or permit the acceleration or performance, under (whether or not
after the giving of notice or lapse of time or both) any Encumbrance, note,
bond, indenture, guaranty, lease, license, agreement or other instrument, writ,
injunction, order, judgment or decree to which the Company or any
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of its Subsidiaries or any of their respective properties or assets is subject;
(iii) give rise to a declaration or imposition of any Encumbrance upon any of
the properties or assets of the Company or any of its Subsidiaries; or (iv)
impair the Company's business or adversely affect any Governmental License
necessary to enable the Company and its Subsidiaries to carry on their business
as presently conducted, except, in the case of clauses (ii), (iii) or (iv), for
any conflict, breach, violation, default, acceleration, declaration, imposition
or impairment that would not reasonably be expected to have a Material Adverse
Effect.
SECTION 2.8 SEC Filings. (a) The Company has filed all forms, reports
and documents required to be filed with the SEC since October 1, 1993 and has
made available to Parent (i) its Annual Reports on Form 10-K for the fiscal
years ended September 30, 1994, 1995 and 1996; (ii) its Quarterly Reports on
Form 10-Q for the quarterly periods ended December 31, 1996, March 31, 1997 and
June 30, 1997; (iii) all proxy statements relating to the Company's meetings of
stockholders (whether annual or special) held since October 1, 1993; (iv) all
other reports or registration statements (other than Reports on Form 10-Q not
referred to in clause (ii) above or on Form 8-K filed before October 1, 1996)
filed by the Company with the SEC since October 1, 1993; and (v) all amendments,
supplements, exhibits and documents incorporated by reference to all such
reports and registration statements filed by the Company with the SEC
(collectively, the "Company SEC Reports"). Except as disclosed in Section 2.8 of
the Company Disclosure Schedule, the Company SEC Reports (i) were prepared in
accordance, and complied as of their respective dates in all material respects,
with the requirements of the Securities Act or the Securities Exchange Act of
1934, as amended and the SEC's rules thereunder (the "Exchange Act"), as the
case may be, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) 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 therein, in the light of the circumstances under which they were
made, not misleading. The Company has filed with the SEC as exhibits to the
Company SEC Reports all agreements, contracts and other documents or instruments
required to be so filed, and such exhibits are correct and complete copies of
such agreements, contracts and other documents or instruments. None of the
Company's Subsidiaries is required to file any forms, reports or other documents
with the SEC.
SECTION 2.9 Financial Statements; Absence of Undisclosed Liabilities;
Receivables. (a) The Company has heretofore delivered to Parent complete and
correct copies of the following financial statements (the "Company Financial
Statements"), all of which have been prepared from the books and records of the
Company and its Subsidiaries in accordance with generally accepted accounting
principles ("GAAP") consistently applied and maintained throughout the periods
indicated (except as may be indicated in the notes thereto and except that the
unaudited Company Financial Statements may not include all notes thereto
required by GAAP) and fairly present in all material respects the financial
condition of the Company and its Subsidiaries at their respective dates and the
results of their operations and cash flows for the periods covered thereby,
except that unaudited interim results were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be material
in amount:
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(i) audited consolidated balance sheets at September 30,
1995 and September 30, 1996 and audited consolidated statements
of income, cash flows and stockholders' equity of the Company and
its Subsidiaries for the fiscal years then ended, audited by
Arthur Andersen LLP, independent certified public accountants;
and
(ii) unaudited consolidated balance sheet (the "Company
Interim Balance Sheet") of the Company and its Subsidiaries at
June 30, 1997 (the "Company Interim Balance Sheet Date") and
consolidated statements of income and cash flows for the three
and nine months then ended.
Such statements of income do not contain any material item of special or
nonrecurring revenue or income or any material item of revenue or income not
earned in the ordinary course of business, except as expressly specified
therein.
(b) Except as and to the extent reflected or reserved against on the
Company Interim Balance Sheet, and except for liabilities which will not have a
Material Adverse Effect, neither the Company nor any of its Subsidiaries had, as
of the Company Interim Balance Sheet Date, any liabilities, debts or obligations
(whether absolute, accrued, contingent or otherwise) of any nature that would be
required as of such date to have been included on a balance sheet prepared in
accordance with GAAP. Since the Company Interim Balance Sheet Date, neither the
Company nor any of its Subsidiaries has incurred or suffered to exist any
liability, debt or obligation (whether absolute, accrued, contingent or
otherwise), except liabilities, debt and obligations incurred in the ordinary
course of business, consistent with past practice, none of which will have a
Material Adverse Effect.
(c) All receivables of the Company and its Subsidiaries (including
accounts receivable, loans receivable and advances) which are reflected in the
Company Interim Balance Sheet, and all such receivables which have arisen
thereafter and prior to the Effective Time, have arisen or will have arisen only
from bona fide transactions in the ordinary course of business, the carrying
value of such receivables approximate their fair market values, and adequate
reserves for the Company's receivables have been established in accordance with
prior practice and GAAP.
SECTION 2.10 Certain Other Financial Representations. (a) Except as set
forth in Section 2.10(a) of the Company Disclosure Schedule, the Company has not
since October 1, 1996 provided any material special promotions, discounts or
other incentives to its employees, agents, distributors or customers in
connection with the solicitation of new orders for service provided by the
Company or any Subsidiary, nor has any customer pre-paid any material amount for
services to be provided by the Company or any Subsidiary in the future, except
in connection with the purchasing of debit cards.
(b) To the Company's Knowledge, the Company and its Subsidiaries have
paid or fully provided for all access charges properly payable to local exchange
carriers for access facilities and have properly reported its percentage of
interstate use ("PIU") to such carriers, except where the failure to do so would
not result in a material liability of the
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Company or its Subsidiaries. As of the date hereof, to the Company's Knowledge,
the Company and its Subsidiaries do not have, and at the Closing the Company and
its Subsidiaries will not have, any material liability on account of PIU.
SECTION 2.11 Absence of Changes. Except as set forth in Section 2.11 of
the Company Disclosure Schedule or the Company SEC Reports, since October 1,
1996 the Company and its Subsidiaries have conducted their respective businesses
only in the ordinary course and neither the Company nor any of its Subsidiaries
has:
(a) other than certain of the Stock Options and Warrants as set forth
in Section 2.4 or 2.11 of the Company Disclosure Schedule, issued or sold or
authorized for issuance or sale, or granted any options or made other agreements
of the type referred to in Section 2.4 with respect to, any shares of its
capital stock or any other of its securities, or altered any term of any of its
outstanding securities or made any change in its outstanding shares of capital
stock or other ownership interests or its capitalization, whether by reason of a
reclassification, recapitalization, stock split or combination, exchange or
readjustment of shares, stock dividend or otherwise or redeemed, purchased or
otherwise acquired any of its or its parent's capital stock; provided, however,
the Company contemplates effecting the conversions set forth in Section 1.6;
(b) terminated or received any notice of termination of any material
contract, lease, license or other agreement or any Governmental License, or
suffered any damage, destruction or loss (whether or not covered by insurance)
that would reasonably be expected to have a Material Adverse Effect;
(c) made any change in the rate of compensation, commission, bonus or
other remuneration payable, or paid or agreed or orally promised to pay,
conditionally or otherwise, any bonus, extra compensation, pension or severance
or vacation pay, to any director or officer, or any material such change to any
employee of the Company or any of its Subsidiaries, except in any case in the
ordinary course of business consistent with prior practice or as required in
accordance with the agreements described in Section 2.13(b), or plans disclosed
in Section 2.14(a) of the Company Disclosure Schedule that were in effect as of
October 1, 1996;
(d) made any increase in or commitment to increase any employee
benefits, adopted or made any commitment to adopt any additional employee
benefit plan or made any contribution, other than regularly scheduled
contributions, to any Employee Benefit Plan, as defined in Section 2.14(a);
(e) changed any accounting practices, policies or procedures utilized
in the preparation of the Company Financial Statements, except as required by
GAAP, the SEC, the Financial Accounting Standards Board or as otherwise set
forth in the Company SEC Reports;
(f) suffered any change, event or condition that, in any case or in the
aggregate, has had or is reasonably likely to result in a Material Adverse
Effect; or
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(g) entered into any agreement or made any commitment to take any of
the types of action described in subparagraphs (a) through (f) of this Section
2.11.
SECTION 2.12 Tax Matters. (a) For purposes of this Agreement, "Tax" or
"Taxes" shall mean taxes, fees, levies, duties, tariffs, imposts and
governmental impositions or charges of any kind in the nature of (or similar to)
taxes, payable to any federal, state, local or foreign taxing authority,
including (without limitation) (i) income, franchise, profits, gross receipts,
ad valorem, net worth, value added, sales, use, service, real or personal
property, special assessments, capital stock, license, payroll, withholding,
employment, social security, workers' compensation, unemployment compensation,
utility, severance, production, excise, stamp, occupation, premiums, windfall
profits, transfer and gains taxes, and (ii) interest, penalties, additional
taxes and additions to tax imposed with respect thereto; and "Tax Returns" shall
mean returns, reports, and information statements with respect to Taxes required
to be filed with the Internal Revenue Service (the "IRS") or any other taxing
authority, domestic or foreign, including, without limitation, consolidated,
combined and unitary tax returns, including returns required in connection with
any Employee Benefit Plan (as defined in Section 2.14(a)).
(b) The Company on behalf of itself and all of its Subsidiaries hereby
represents that, other than as disclosed in Section 2.12(b) of the Company
Disclosure Schedule or the Company SEC Reports: The Company and its Subsidiaries
have timely filed all United States federal income Tax Returns and all other
material Tax Returns required to be filed by them. All such Tax Returns are
complete and correct in all material respects (except to the extent a reserve
has been established as reflected in the Company Interim Balance Sheet). The
Company and its Subsidiaries have timely paid and discharged all Taxes due in
connection with or with respect to the periods or transactions covered by such
Tax Returns and have paid all other Taxes as are due, except such as are being
contested in good faith by appropriate proceedings (to the extent that any such
proceedings are required), and there are no other Taxes that would be due if
asserted by a taxing authority, except with respect to which the Company is
maintaining reserves unless the failure to do so would not have a Material
Adverse Effect. Except as does not involve or would not result in liability to
the Company or any of its Subsidiaries that would have a Material Adverse
Effect, (i) there are no tax liens on any assets of the Company or any of its
Subsidiaries; (ii) neither the Company nor any of its Subsidiaries has granted
any waiver of any statute of limitations with respect to, or any extension of a
period for the assessment of, any Tax; (iii) no unpaid (or unreserved)
deficiencies for Taxes have been claimed, proposed or assessed by any taxing or
other governmental authority with respect to the Company or any of its
Subsidiaries; (iv) there are no pending or, to the Company's Knowledge,
threatened audits, investigations or claims for or relating to any liability in
respect of Taxes of the Company or any of its Subsidiaries; and (v) neither the
Company nor any of its Subsidiaries has requested any extension of time within
which to file any currently unfiled Tax Returns. The accruals and reserves for
Taxes (including deferred taxes) reflected in the Company Interim Balance Sheet
are in all material respects adequate to cover all Taxes accruable through the
date thereof (including Taxes being contested) in accordance with GAAP.
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(c) The Company on behalf of itself and all its Subsidiaries hereby
represents that, other than as disclosed in Section 2.12(c) of the Company
Disclosure Schedule or the Company SEC Reports, and other than with respect to
items the inaccuracy of which would not have a Material Adverse Effect: (i)
neither the Company nor any of its Subsidiaries is obligated under any agreement
with respect to industrial development bonds or other obligations with respect
to which the excludability from gross income of the holder for federal or state
income tax purposes could be affected by the transactions contemplated
hereunder; (ii) neither the Company nor any of its Subsidiaries is, or has been,
a United States real property holding corporation (as defined in section
897(c)(2) of the Code) during the applicable period specified in section
897(c)(1)(A)(ii) of the Code; (iii) neither the Company nor any of its
Subsidiaries has filed or been included in a combined, consolidated or unitary
return (or substantial equivalent thereof) of any Person other than the Company
and its Subsidiaries; (iv) neither the Company nor any of its Subsidiaries is
liable for Taxes of any Person other than the Company and its Subsidiaries, or
currently under any contractual obligation to indemnify any Person with respect
to Taxes, or a party to any tax sharing agreement or any other agreement
providing for payments by the Company or any of its Subsidiaries with respect to
Taxes; (v) except entities the beneficial ownership of which is wholly owned by
the Company and/or its Subsidiaries, neither the Company nor any of its
Subsidiaries is a party to any joint venture, partnership or other arrangement
or contract which could be treated as a partnership for United States federal
income tax purposes; (vi) neither the Company nor any of its Subsidiaries is a
party to any agreement, contract, arrangement or plan that would result (taking
into account the transactions contemplated by this Agreement), separately or in
the aggregate, in the payment of any "excess parachute payments" within the
meaning of section 280G of the Code; (vii) the prices for any property or
services (or for the use of property) provided by the Company or any of its
Subsidiaries to any other Subsidiary or to the Company have been arm's length
prices determined using a method permitted by the Treasury Regulations under
section 482 of the Code; (viii) neither the Company nor any of its Subsidiaries
is a "consenting corporation" under section 341(f) of the Code or any
corresponding provision of state, local or foreign law; (ix) neither the Company
nor any of its Subsidiaries has made an election or is required to treat any of
its assets as owned by another Person for federal income tax purposes or as
tax-exempt bond financed property or tax-exempt use property within the meaning
of section 168 of the Code (or any corresponding provision of state, local or
foreign law); and (x) the Company is not an investment company within the
meaning of section 368(a)(2)(F)(iii) of the Code.
SECTION 2.13 Relations with Employees and Sales Agents. (a) Except as
set forth in Section 2.13(a) of the Company Disclosure Schedule:
(i) No collective bargaining agreement with respect to the
business of the Company or any of its Subsidiaries is currently in effect or
being negotiated. Neither the Company nor any of its Subsidiaries has any
obligation to negotiate any such collective bargaining agreement.
(ii) There are no strikes or work stoppages pending or, to the
Company's Knowledge, threatened with respect to the employees of the Company or
any of its Subsidiaries, nor has any such strike or work stoppage occurred or,
to the Company's
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Knowledge, been threatened since October 1, 1994. There is no representation
claim or petition or complaint pending before the National Labor Relations Board
or any state or local labor agency and, to the Company's Knowledge, no question
concerning representation has been raised or threatened since October 1, 1994
respecting the employees of the Company or any of its Subsidiaries.
(iii) To the Company's Knowledge, no charges with respect to or
relating to the business of the Company or any its Subsidiaries are pending
before the Equal Employment Opportunity Commission, or any state or local agency
responsible for the prevention of unlawful employment practices, which would
reasonably be expected to have a Material Adverse Effect.
(b) Section 2.13(b) of the Company Disclosure Schedule contains a
complete and correct list of all material current employment, management or
other consulting agreements with any Persons employed or retained by the Company
or any of its Subsidiaries (including independent consultants and commission
agents), complete and correct copies of which have been delivered to Parent,
except that, with respect to agreements with commission agents, complete and
correct copies of all forms of agreements used by the Company have been
delivered to Parent. All of the Company's agreements with commission agents are
substantially similar to such forms of agreements.
SECTION 2.14 Benefit Plans. (a) Section 2.14(a) of the Company
Disclosure Schedule sets forth with respect to all current employees a full and
complete list of all executive compensation, deferred compensation, stock
ownership, stock purchase, stock option, restricted stock, performance share,
bonus and other incentive plans, pension, profit sharing, savings, thrift or
retirement plans, employee stock ownership plans, life, health, dental and
disability plans, vacation, severance pay, sick leave, dependent care, cafeteria
and tuition reimbursement plans, and any other "employee benefit plans" within
the meaning of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), currently maintained by the Company or any of its Subsidiaries or
with respect to which the Company or any of its Subsidiaries may have any
liability or obligation (direct, indirect, contingent or otherwise) to any
employee, former employee, director or former director (or any of their
dependents or beneficiaries) of the Company or any of its Subsidiaries or to any
governmental entity (individually, an "Employee Benefit Plan" and collectively,
the "Employee Benefit Plans"). There have been delivered to Parent or its
counsel complete and correct copies of all written Employee Benefit Plans.
(b) No Employee Benefit Plan is, a "defined benefit plan" within the
meaning of section 3(35) of ERISA to which ERISA applies and neither the Company
nor any of its Subsidiaries has any liability with respect to any such plan.
Neither the Company nor any of its Subsidiaries has ever contributed to, or
withdrawn in a complete or partial withdrawal from, any multiemployer plan
(within the meaning of Subtitle E of Title IV of ERISA) or incurred contingent
liability under section 4204 of ERISA. No Employee Benefit Plan provides for
medical or health benefits (through insurance or otherwise) to individuals other
than current employees of the Company or any of its Subsidiaries (or spouses and
dependents of such employees), except to the extent necessary to comply with
"Applicable
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Benefits Law" (including section 4980B of the Code). "Applicable Benefits Law"
refers to the legal requirements imposed upon employee benefit plans by the
United States or any political subdivision thereof (including COBRA and any
requirements enforced by the IRS with respect to employee benefit plans intended
to confer tax benefits on the Company, any of its Subsidiaries, any of their
respective employees, or any trust maintained in connection with such Employee
Benefit Plan).
(c) Each Employee Benefit Plan (and each related trust, insurance
contract and fund) is in compliance in all material respects in form and in
operation with all applicable requirements of Applicable Benefits Law (including
ERISA and the Code), and is being administered in all material respects in
accordance with all relevant plan documents to the extent consistent with
Applicable Benefits Law. There has been no prohibited transaction with respect
to any Employee Benefit Plan which would result in the imposition of any
material unpaid excise tax. To the Company's Knowledge, no Employee Benefit Plan
is under investigation or audit by the Department of Labor or Internal Revenue
Service other than as part of a routine tax audit of the Company. There are no
legal actions or suits pending or, to the Company's Knowledge, threatened
against or with respect to any Employee Benefit Plan or the assets of any such
Employee Benefit Plan or against any fiduciary of any such Employee Benefit Plan
and the Company has no Knowledge of any facts that could give rise to any such
actions. There has been full compliance in all material respects with the notice
and continuation requirements of section 4980B of the Code applicable to any
Employee Benefit Plan.
(d) Except to the extent set forth in Section 2.14(d) of the Company
Disclosure Schedule, no provision of any Employee Benefit Plan becomes effective
in the event of a change in control of the employer maintaining such Employee
Benefit Plan; neither the Company nor any of its Subsidiaries has agreed to the
creation of any new employee benefit plan or, with respect to any existing
Employee Benefit Plan, any increase in benefits or change in employee coverage
which would materially increase the expense of maintaining such Employee Benefit
Plan; no provision of any Employee Benefit Plan prohibits the employer
maintaining it from amending or terminating such Employee Benefit Plan at any
time and to the fullest extent that law permits. Except to the extent set forth
in Section 2.14(d) of the Company Disclosure Schedule, the consummation of the
Merger or any other transaction contemplated by this Agreement, in and of
itself, will not result in an increase in the amount of compensation or benefits
or accelerate the vesting or timing of payment of any benefits or compensation
payable under any Employee Benefit Plan in respect of any employee of the
Company or any of its Subsidiaries; and no employee or former employee of the
Company or any of its Subsidiaries will be entitled to any severance benefits
under the terms of any Employee Benefit Plan solely by reason of the
consummation of the Merger or any other transaction contemplated by this
Agreement.
(e) At no time since the organization of the Company or any of its
Subsidiaries has any entity (other than the Company, any such Subsidiary or
Billing Information Concepts Corp., or any Subsidiary of Billing Information
Concepts Corp.) been an "ERISA affiliate" of the Company, any such Subsidiary,
or both. "ERISA affiliate" means any trade or business, whether or not
incorporated, which together with the Company
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or any such Subsidiary, is or was at any time during such period treated as a
"single employer" within the meaning of section 414(b), (c), (m) or (o) of the
Code or a part of the same "controlled group" as the Company or any such
Subsidiary within the meaning of section 4001 of ERISA. The aggregate number of
leased employees (within the meaning of section 414(n) or (o) of the Code) of
the Company and its Subsidiaries does not exceed 10% of the aggregate number of
employees of the Company and its Subsidiaries.
(f) All actions required to be taken on behalf of any Employee Benefit
Plan that is a stockholder of the Company, in order to effectuate the Merger or
the other transactions contemplated by this Agreement, shall have been duly
authorized by the appropriate fiduciaries of such Employee Benefit Plan, and
shall comply with the terms of such Employee Benefit Plan, ERISA and other
applicable laws.
SECTION 2.15 Title to Properties. Except as set forth in the Company
SEC Reports or Section 2.15 of the Company Disclosure Schedule, the Company and
each of its Subsidiaries have good and indefeasible title to all of their
properties and assets, free and clear of all Encumbrances, except liens for
taxes not yet due and payable and such Encumbrances or other imperfections of
title, if any, as do not materially detract from the value of or interfere with
the present use of the property affected thereby or which would not reasonably
be expected to have a Material Adverse Effect, and except for Encumbrances which
secure indebtedness reflected in the Company Interim Balance Sheet.
SECTION 2.16 Compliance with Laws; Legal Proceedings. (a) Neither the
Company nor any of its Subsidiaries is in violation of, or in default with
respect to, any applicable statute, regulation, ordinance, writ, injunction,
order, judgment, decree or any Governmental License which violation or default
would reasonably be expected to have a Material Adverse Effect.
(b) Except as set forth in the Company SEC Reports or Section 2.16(b)
of the Company Disclosure Schedule, there is no order, writ, injunction,
judgment or decree outstanding and no legal, administrative, arbitration or
other governmental proceeding or investigation pending or, to the Company's
Knowledge, threatened, and there are no claims (including unasserted claims of
which the Company has Knowledge) against or relating to the Company or any of
its Subsidiaries or any of their respective properties, assets or businesses
that would reasonably be expected to have a Material Adverse Effect.
SECTION 2.17 Brokers. Except for ABN AMRO Chicago Corporation ("AACC"),
no broker, finder or investment advisor acted directly or indirectly as such for
the Company, any Subsidiary of the Company or, to the Company's Knowledge, any
stockholder of the Company in connection with this Agreement or the Merger, and
no broker, finder, investment advisor or other Person is entitled to any fee or
other commission, or other remuneration, in respect thereof based in any way on
any action, agreement, arrangement or understanding taken or made by or on
behalf of the Company, any Subsidiary of the Company or, to the Company's
Knowledge, any stockholder of the Company. The Company has heretofore furnished
to Parent a complete and correct copy of the agreement
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between AACC and the Company pursuant to which such firm would be entitled to
any payment relating to the transactions contemplated hereunder.
SECTION 2.18 Intellectual Property. (a) The Company and/or each of its
Subsidiaries owns, or is licensed or otherwise possesses legally enforceable
rights to use, all patents, trademarks, trade names, service marks, copyrights,
and any applications therefor, technology, know-how, computer software programs
or applications and tangible or intangible proprietary information or material
that are used in the business of the Company and its Subsidiaries as currently
conducted, except as would not reasonably be expected to have a Material Adverse
Effect.
(b) Except as disclosed in Section 2.18(b) of the Company Disclosure
Schedule or the Company SEC Reports or as would not reasonably be expected to
have a Material Adverse Effect: (i) The Company is not, nor will it be as a
result of the execution and delivery of this Agreement or the performance of its
obligations hereunder, in violation of any licenses, sublicenses and other
agreements as to which the Company is a party and pursuant to which the Company
is authorized to use any patents, trademarks, service marks or copyrights owned
by others ("Company Third-Party Intellectual Property Rights"); (ii) No claims
with respect to the patents, registered and material unregistered trademarks and
service marks, registered copyrights, trade names and any applications therefor
owned by the Company or any of its Subsidiaries (the "Company Intellectual
Property Rights"), any trade secret material to the Company, or Company Third
Party Intellectual Property Rights to the extent arising out of any use,
reproduction or distribution of Company Third Party Intellectual Property Rights
by or through the Company or any of its Subsidiaries, are currently pending or,
to the Company's Knowledge, have been threatened by any Person; or (iii) The
Company has no Knowledge of any valid grounds for any bona fide claims (1) to
the effect that the sale, licensing or use of any product or service as now
sold, licensed or used, or proposed for sale, license or use, by the Company or
any of its Subsidiaries infringes on any copyright, patent, trademark, service
mark or trade secret; (2) against the use by the Company or any of its
Subsidiaries, of any trademarks, trade names, trade secrets, copyrights,
patents, technology, know-how or computer software programs and applications
used in the business of the Company or any of its Subsidiaries as currently
conducted or as proposed to be conducted; (3) challenging the ownership,
validity or effectiveness of any of the Company Intellectual Property Rights or
other trade secret material to the Company; or (4) challenging the license or
legally enforceable right to use of Company Third Party Intellectual Rights by
the Company or any of its Subsidiaries.
(c) To the Company's Knowledge, there is no material unauthorized use,
infringement or misappropriation of any of the Company Intellectual Property
Rights by any third party, including any employee or former employee of the
Company or any of its Subsidiaries.
SECTION 2.19 Insurance. The Company has heretofore provided Parent with
true, complete and correct copies of all material fire and casualty, general
liability, business interruption, product liability and other insurance policies
maintained by the
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Company and its Subsidiaries. Neither the Company nor any of its Subsidiaries
has, since October 1, 1994, been denied or had revoked or rescinded any policy
of insurance.
SECTION 2.20 Contracts; etc. (a) Set forth in Section 2.20 of the
Company Disclosure Schedule is a complete and correct list of each of the
following agreements, leases and other instruments to which the Company or any
of its Subsidiaries is a party or by which Company or any of its Subsidiaries or
their respective properties or assets are bound:
(i) each service or other similar type of agreement under
which services are provided by any other Person to the Company or any
of its Subsidiaries which provides for a material change in the cost to
the Company or its Subsidiaries of such services or the type thereof as
a result of the transactions contemplated hereunder;
(ii) each operating lease (as lessor, lessee, sublessor or
sublessee) of any real or tangible personal property or assets that is
material to the Company and its Subsidiaries taken as a whole which
provides for a material change in the payments made or received by the
Company or its Subsidiaries, as the case may be, as a result of the
transactions contemplated hereunder;
(iii) each agreement under which services are provided by the
Company or any of its Subsidiaries to any material customer which
provides for a material decrease in the fees charged to such customer
or a material increase in the type or kind of services to be provided
by the Company or its Subsidiaries without a corresponding and
appropriate increase in the payments to be received by the Company or
its Subsidiaries, as the case may be, as a result of the transactions
contemplated hereunder;
(iv) any other material agreement, lease and other instrument
to which the Company or any of its Subsidiaries are a party or by which
they are bound, which provides for a material change in the terms
thereof as a result of the transactions contemplated hereunder;
(v) each agreement (including capital leases) under which any
money has been or may be borrowed or loaned (other than loans to
customers made in the ordinary course of business consistent with past
practice) or any note, bond, indenture or other evidence of
indebtedness (other than trade payables) has been issued or assumed
(other than those under which there remain no ongoing obligations of
the Company or any of its Subsidiaries), and each guaranty of any
evidence of indebtedness or other obligation, or of the net worth, of
any Person (other than endorsements for the purpose of collection in
the ordinary course of business); and
(vi) any agreement or other undertaking that restricts, in any
material respect, the Company or any of its Subsidiaries from providing
any telecommunications services, engaging in any telecommunications
business in any territory or hiring any employees.
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A complete and correct copy of each written agreement, lease or other type of
document required to be disclosed pursuant to this Section 2.20(a) has been
delivered to Parent.
(b) Each agreement, lease or other type of document required to be
filed as an exhibit to the Company's SEC Reports to which the Company or any of
its Subsidiaries is a party or by which the Company or any of its Subsidiaries
or their respective properties or assets are bound, except for those contracts,
the loss of which would not reasonably be expected to have a Material Adverse
Effect (collectively, the "Company Contracts"), is valid, binding and in full
force and effect and is enforceable by the Company or such Subsidiary in
accordance with its terms. Neither the Company nor any such Subsidiary is (with
or without the lapse of time or the giving of notice, or both) in breach of or
in default under any of the Company Contracts, and, to the Company's Knowledge,
no other party to any of the Company Contracts is (with or without the lapse of
time or the giving of notice, or both) in breach of or in default under any of
the Company Contracts, where such breach or default would reasonably be expected
to have a Material Adverse Effect. No existing or completed agreement to which
the Company or any of its Subsidiaries is a party is subject to renegotiation
with any governmental body.
SECTION 2.21 Permits, Authorizations, etc. All Governmental Licenses
and each other material approval, authorization, consent, license, certificate
of public convenience, order or other permit of all governmental agencies,
whether federal, state, local or foreign, necessary to enable the Company and
its Subsidiaries to own, operate and lease their properties and assets as and
where such properties and assets are owned, leased or operated and to provide
service and carry on their business as presently provided and conducted
(collectively, the "Company Permits") or required to permit the continued
conduct of such business following the Merger in the manner conducted on the
date of this Agreement are valid and in good standing with the issuing agencies
and not subject to any proceedings for suspension, modification or revocation,
except for such Company Permits which would not reasonably be expected to have a
Material Adverse Effect.
SECTION 2.22 Environmental Matters. (a) For purposes of this Agreement,
the capitalized terms defined below shall have the meanings ascribed to them
below.
(i) "Environmental Law(s)" means all federal, state or local
law (including common law), statute, ordinance, rule, regulation, code,
or other requirement relating to the environment, natural resources, or
public or employee health and safety and includes, but is not limited
to the Comprehensive Environmental Response Compensation and Liability
Act ("CERCLA"), 42 U.S.C. ss. 9601 et seq., the Hazardous Materials
Transportation Act, 49 U.S.C. ss. 1801 et seq., The Resource
Conservation and Recovery Act ("RCRA"), 42 U.S.C. ss. 6901 et seq., the
Clean Water Act, 33 U.S.C. Section ss. 1251 et seq., the Clean Air Act,
33 U.S.C. ss. 2601 et seq., the Toxic Substances Control Act, 15 U.S.C.
ss. 2601 et seq., the Oil Pollution Act of 1990, 33 U.S.C. ss. 2701 et
seq., and the Occupational Safety and Health Act, 29 U.S.C. ss. 651 et
seq., as such laws have been amended or
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supplemented, and the regulations promulgated pursuant thereto, and all
analogous state or local statutes and any applicable transfer statutes.
(ii) "Environmental Permits" means all approvals,
authorizations, consents, permits, licenses, registrations and
certificates required by any applicable Environmental Law.
(iii) "Hazardous Substance(s)" means, without limitation, any
flammable explosives, radioactive materials, urea formaldehyde foam
insulation, polychlorinated biphenyls, petroleum and petroleum products
(including but not limited to waste petroleum and petroleum products),
methane, hazardous materials, hazardous wastes, pollutants,
contaminants and hazardous or toxic substances, as defined in or
regulated under any applicable Environmental Laws.
(iv) "Release" means any past or present spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping or disposing of a Hazardous Substance into the
Environment.
(b) The Company and each Subsidiary of the Company has obtained all
Environmental Permits that are required for the lawful operation of its business
except for such Environmental Permits the failure of which to obtain would not
reasonably be expected to have a Material Adverse Effect. The Company and its
Subsidiaries (i) are in compliance with all terms and conditions of their
Environmental Permits and of any applicable Environmental Law, except for such
failure to be in compliance that would not reasonably be expected to have
Material Adverse Effect, and (ii) have not received written notice of any
material violation by or material claim against the Company or any such
Subsidiary under any Environmental Law.
(c) There have been no Releases, or threatened Releases of any
Hazardous Substances into, on or under any of the properties owned or operated
(or formerly owned or operated) by the Company or any such Subsidiary, in any
case in such a way as to create any liability (including the costs of
investigation and remediation) under any applicable Environmental Law that would
reasonably be expected to have a Material Adverse Effect.
(d) Neither the Company nor any of its Subsidiaries has been identified
as a potentially responsible party at any federal or state National Priority
List ("Superfund") site.
SECTION 2.23 Company Acquisitions. Section 2.23 of the Company
Disclosure Schedule hereto contains a complete and correct list of all
agreements ("Acquisition Agreements") executed by the Company or any of its
Subsidiaries since October 1, 1996 pursuant to which the Company or any of its
Subsidiaries has acquired or agreed to acquire all or any part of the stock or
assets (including any customer list) of any Person. A complete and correct copy
of each of the Acquisition Agreements has been delivered to Parent. Neither the
Company nor any such Subsidiary has any further material obligation or liability
under any of the Acquisition Agreements or as a result of the transactions
provided
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for therein, except as described in reasonable detail in Section 2.23 of the
Company Disclosure Schedule.
SECTION 2.24 Books and Records. All accounts, books, ledgers and
official and other records prepared and kept by the Company and its Subsidiaries
have been kept and completed in all material respects, and there are no material
inaccuracies or discrepancies contained or reflected therein.
SECTION 2.25 Interested Party Transactions. Except as set forth in
Section 2.25 of the Company Disclosure Schedule or the Company SEC Reports,
since October 1, 1996 no event has occurred that would be required to be
reported as a Certain Relationship or Related Transaction, pursuant to Item 404
of Regulation S-K promulgated by the SEC.
SECTION 2.26 Opinion of Financial Advisor. The Company has been advised
by its financial advisor, AACC, to the effect that in its opinion, as of the
date hereof, the Exchange Ratio is fair from a financial point of view to the
holders of Shares.
SECTION 2.27 Pooling Matters. The Company has provided to the Company's
independent accountants all information concerning actions taken or agreed to be
taken by the Company or any of its Affiliates on or before the date of this
Agreement that could reasonably be expected to adversely affect the ability of
Parent to account for the business combination to be effected by the Merger as a
pooling of interests. The Company has provided to Parent a letter from the
Company's independent public accountants to the effect that, after review, such
accountants know of no reason relating to the Company that should prevent the
Parent from accounting for the Merger as a pooling of interests.
SECTION 2.28 Registration Statement; Joint Proxy Statement/Prospectus.
The information supplied by the Company with respect to the Company and its
Subsidiaries and their respective officers, directors, stockholders and other
Affiliates (collectively, the "Company Information") for inclusion in the
Registration Statement (as defined in Section 3.23) shall not at the time the
Registration Statement is declared effective by the SEC 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 were made, not misleading. The Company
Information supplied by the Company for inclusion in the joint proxy
statement/prospectus to be sent to the stockholders of the Company in connection
with the meeting of the stockholders of the Company to consider the Merger (the
"Company Stockholders Meeting") and, if required, to the stockholders of the
Parent in connection with the meeting of the stockholders of the Parent (the
"Parent Stockholders Meeting" and, together with the Company Stockholders
Meeting, the "Stockholders Meetings") to consider the Parent Common Stock
Issuance (as defined in Section 5.3) (such joint proxy statement/prospectus as
amended or supplemented is referred to herein as the "Joint Proxy
Statement/Prospectus") will not, on the date the Joint Proxy
Statement/Prospectus (or any amendment thereof or supplement thereto) is first
mailed to stockholders, at the time of the Stockholders Meetings, or at the
Effective Time, contain any statement which, at such time and in light of the
circumstances under which it shall be made, is false or misleading with respect
to any material fact, or shall omit to state any material
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fact necessary in order to make the statements made therein, in light of the
circumstances under which they are made, not false or misleading; or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Stockholders
Meetings which has become false or misleading. If at any time prior to the
Effective Time any event relating to the Company or its Subsidiaries or any of
their respective officers, directors, stockholders or other Affiliates should be
discovered by the Company which should be set forth in an amendment to the
Registration Statement or a supplement to the Joint Proxy Statement/Prospectus,
the Company shall promptly inform Parent. The Joint Proxy Statement/Prospectus
shall comply in all material respects with the requirements of the Securities
Act and the Exchange Act. Notwithstanding the foregoing, the Company makes no
representation or warranty with respect to any information supplied by Parent or
Merger Sub which is contained or incorporated by reference in, or furnished in
connection with the preparation of, the Registration Statement or the Joint
Proxy Statement/Prospectus.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
PARENT AND MERGER SUB
Parent and Merger Sub, jointly and severally, hereby represent and
warrant to the Company that, except as set forth in the written disclosure
schedule delivered by Parent to the Company (the "Parent Disclosure Schedule"):
SECTION 3.1 Corporate Organization. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own, operate and
lease its properties and assets as and where the same are owned, operated or
leased and to conduct its business as it is now being conducted. Parent is in
good standing and duly qualified or licensed as a foreign corporation to do
business in those jurisdictions in which the location of the property and assets
owned, operated or leased by Parent or the nature of the business conducted by
Parent makes such qualification or licensing necessary, except where the failure
to be so qualified or licensed would not reasonably be expected to have a
Material Adverse Effect. Parent has heretofore delivered to the Company complete
and correct copies of Parent's Certificate of Incorporation and By-laws, as
amended to and as in effect on the date hereof.
SECTION 3.2 Capitalization. (a) The authorized capital stock of Parent
consists of 300,000,000 shares of Parent Common Stock and 15,000,000 shares of
preferred stock, par value $0.01 per share ("Parent Preferred Stock"). As of the
date hereof, 78,554,214 shares of Parent Common Stock and no shares of Parent
Preferred Stock are issued and outstanding.
(b) All outstanding shares of Parent Common Stock are validly issued
and outstanding, fully paid and nonassessable, and, except as set forth in
Parent's Certificate of
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Incorporation, there are no preemptive or similar rights in respect of Parent
Common Stock. All outstanding shares of Parent Common Stock issued since July 1,
1994 were issued in compliance in all material respects with all requirements of
all applicable federal and state securities laws.
SECTION 3.3 Subsidiaries. (a) The Subsidiaries of Parent listed in the
exhibits to Parent's SEC Reports (as defined in Section 3.8) constitute the only
material Subsidiaries of Parent. Each Subsidiary of Parent is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to own, operate and lease its properties and assets as and where the
same are owned, operated or leased by such Subsidiary and to conduct its
business as it is now being conducted. Each such Subsidiary is in good standing
and duly qualified or licensed as a foreign corporation to do business in each
of the jurisdictions in which the location of the property and assets owned,
operated or leased by such Subsidiary or the nature of the business conducted by
such Subsidiary makes such qualification or licensing necessary, except where
the failure to be so qualified or licensed would not reasonably be expected to
have a Material Adverse Effect.
(b) Parent or a Subsidiary of Parent has good and valid title to all
shares of each such Subsidiary owned by Parent or another Subsidiary of Parent,
free and clear of all Encumbrances. All of the outstanding shares of capital
stock of each Subsidiary of Parent are validly issued, fully paid and
nonassessable, and there are no preemptive or similar rights in respect of any
shares of capital stock of any such Subsidiary. All of the outstanding shares of
each Subsidiary of Parent were issued in compliance with all requirements of all
applicable federal and state securities laws. Except as set forth in Section
3.3(b) of the Parent Disclosure Schedule, neither the Parent nor any Subsidiary
of the Parent owns any capital stock of or other equity interest of any kind or
nature in any Person.
SECTION 3.4 No Commitments to Issue Capital Stock. Other than pursuant
to this Agreement and except for the stock options and warrants set forth in
Section 3.4 of the Parent Disclosure Schedule and in this Agreement, there are
no outstanding options, warrants, calls, convertible securities or other rights,
agreements, commitments or other instruments pursuant to which Parent or any of
its Subsidiaries is or may become obligated to authorize, issue or transfer any
shares of its capital stock or any other equity interest.
SECTION 3.5 Authorization; Execution and Delivery. Parent and Merger
Sub each has all requisite corporate power and authority to execute and deliver
and, subject to obtaining any necessary stockholder approval with respect to the
transactions contemplated hereunder, perform its obligations under this
Agreement. The execution, delivery and performance of this Agreement by Parent
and Merger Sub and the consummation by Parent or Merger Sub of the transactions
contemplated hereby have been duly authorized by all requisite corporate action
on the part of Parent and Merger Sub, except that the stockholders' of Parent
may be required to approve the Parent Common Stock Issuance. This Agreement has
been duly executed and delivered by Parent and Merger Sub and, subject to such
stockholder approval and assuming the due authorization, execution and delivery
by the other parties hereto, constitutes the legal, valid and binding obligation
of Parent and Merger Sub,
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enforceable against Parent and Merger Sub in accordance with its terms, except
as such enforceability may be limited by (i) bankruptcy laws and similar laws
affecting creditor's rights generally and (ii) general principles of equity,
regardless of whether asserted in a proceeding in equity or at law. The shares
of Parent Common Stock to be issued as part of the Merger Consideration and upon
the exercise of the Stock Options and Warrants have been duly reserved and
authorized for issuance upon consummation of the Merger, and when issued
pursuant to and in accordance with this Agreement or such Stock Option or
Warrants will be duly authorized, validly issued, fully paid and nonassessable
shares of Parent Common Stock.
SECTION 3.6 Governmental Approvals and Filings. No approval,
authorization, consent, license, clearance or order of, declaration or
notification to, or filing or registration with, any governmental or regulatory
authority is required in order (a) to permit Parent or Merger Sub to consummate
the Merger or perform its obligations under this Agreement, or (b) to prevent
the termination of, or materially and adversely affect, any Governmental License
of Parent or any of its Subsidiaries to provide its services or carry on its
business, or to prevent any material loss or disadvantage to Parent's business,
by reason of the Merger, except for (i) filing and recording of the Certificate
of Merger as required by the DGCL, (ii) filings and other required submissions
under the HSR Act, (iii) such other consents, authorizations, filing, approvals
and registrations which if not made would not reasonably be expected to have a
Material Adverse Effect, and (iv) as set forth in Section 3.6 of the Parent
Disclosure Schedule.
SECTION 3.7 No Conflict. Subject to compliance with any Governmental
Licenses described in Section 3.6 of the Parent Disclosure Schedule and
obtaining the consents and waivers that are set forth and described in Section
3.7 of the Parent Disclosure Schedule (the "Private Consents"), neither the
execution, delivery and performance of this Agreement by Parent or Merger Sub,
nor the consummation by Parent or Merger Sub of the transactions contemplated
hereby, will (i) conflict with, or result in a breach or violation of, any
provision of the certificate of incorporation (or similar organizational
document) or by-laws of Parent or any of its Subsidiaries; (ii) conflict with,
result in a breach or violation of, give rise to a default, or result in the
acceleration of performance, or permit the acceleration or performance, under
(whether or not after the giving of notice or lapse of time or both) any
Encumbrance, note, bond, indenture, guaranty, lease, license, agreement or other
instrument, writ, injunction, order, judgment or decree to which Parent or any
of its Subsidiaries or any of their respective properties or assets is subject;
(iii) give rise to a declaration or imposition of any Encumbrance upon any of
the properties or assets of Parent or any of its Subsidiaries; or (iv) impair
Parent's business or adversely affect any Governmental License necessary to
enable Parent and its Subsidiaries to carry on their business as presently
conducted, except, in the cases of clauses (ii), (iii) or (iv), for any
conflict, breach, violation, default, acceleration, declaration, imposition or
impairment that would not reasonably be expected to have a Material Adverse
Effect.
SECTION 3.8 SEC Filings. (a) The Parent has filed all forms, reports
and documents required to be filed with the SEC since January 1, 1994 and has
made available to the Company (i) its Annual Reports on Form 10-K for the fiscal
years ended December 31,
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1994, 1995 and 1996; (ii) its Quarterly Reports on Form 10-Q for the quarterly
periods ended March 31, 1997 and June 30, 1997; (iii) all proxy statements
relating to Parent's meetings of stockholders (whether annual or special) held
since January 1, 1994; (iv) all other reports or registration statements (other
than Reports on Form 10-Q not referred to in clause (ii) above or on Form 8-K
filed before January 1, 1997) filed by Parent with the SEC since January 1,
1994; and (v) all amendments, supplements, exhibits and documents incorporated
therein by reference to all such reports and registration statements filed by
Parent with the SEC (collectively, the "Parent SEC Reports"). Except as
disclosed in Section 3.8 of the Parent Disclosure Schedule, the Parent SEC
Reports (i) were prepared in accordance, and complied as of their respective
dates in all material respects, with the requirements of the Securities Act or
the Exchange Act, as the case may be, and (ii) did not at the time they were
filed (or if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing) 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 therein, in the light of the
circumstances under which they were made, not misleading. Parent has filed with
the SEC as exhibits to the Parent SEC Reports all agreements, contracts and
other documents or instruments required to be so filed, and such exhibits are
correct and complete copies of such agreements, contracts and other documents or
instruments. None of Parent's Subsidiaries is required to file any forms,
reports or other documents with the SEC.
SECTION 3.9 Financial Statements; Absence of Undisclosed Liabilities;
Receivables. (a) Parent has heretofore delivered to the Company complete and
correct copies of the following financial statements (collectively, the "Parent
Financial Statements"), all of which have been prepared from the books and
records of Parent and its Subsidiaries in accordance with GAAP consistently
applied and maintained throughout the periods indicated (except as may be
indicated in the notes thereto and except that the unaudited Parent Financial
Statements may not include all notes thereto required by GAAP) and fairly
present in all material respects the financial condition of Parent and its
Subsidiaries as at their respective dates and the results of their operations
and cash flows for the periods covered thereby, except that unaudited interim
results were or are subject to normal and recurring year-end adjustments which
were not or are not expected to be material in amount:
(i) audited consolidated balance sheets at December 31, 1995
and December 31, 1996 and audited consolidated statements of
income, cash flows and stockholders' equity of Parent and its
Subsidiaries for the fiscal years then ended, audited by Arthur
Andersen LLP, independent certified public accountants; and
(ii) unaudited consolidated balance sheet (the "Parent
Interim Balance Sheet") of Parent and its Subsidiaries as at June
30, 1997 (the "Parent Interim Balance Sheet Date") and
consolidated statements of income and cash flows for the three
and six months then ended.
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Such statements of income do not contain any material item of special or
nonrecurring revenue or income or any material item of revenue or income not
earned in the ordinary course of business, except as expressly specified
therein.
(b) Except as and to the extent reflected or reserved against on the
Parent Interim Balance Sheet, and except for liabilities which will not have a
Material Adverse Effect, neither Parent nor any of its Subsidiaries had, as of
the Parent Interim Balance Sheet Date, any liabilities, debts or obligations
(whether absolute, accrued, contingent or otherwise) of any nature that would be
required as of such date to have been included on a balance sheet prepared in
accordance with GAAP. Since the Parent Interim Balance Sheet Date, neither
Parent nor any of its Subsidiaries has incurred or suffered to exist any
liability, debt or obligation (whether absolute, accrued, contingent or
otherwise), except liabilities, debt and obligations incurred in the ordinary
course of business, consistent with past practice, none of which will have a
Material Adverse Effect.
(c) Except as set forth in Section 3.9 of the Parent Disclosure
Schedule, all receivables of the Parent and its Subsidiaries (including accounts
receivable, loans receivable and advances) which are reflected in the Parent
Interim Balance Sheet, and all such receivables which have arisen thereafter and
prior to the Effective Time, have arisen or will have arisen only from bona fide
transactions in the ordinary course of business, the carrying value of such
receivables approximate their fair market values and adequate reserves for
Parent's receivables have been established in accordance with prior practice and
GAAP.
SECTION 3.10 Absence of Changes. Except as set forth in Section 3.10 of
the Parent Disclosure Schedule or the Parent SEC Reports, since January 1, 1997,
Parent and its Subsidiaries have conducted their respective businesses only in
the ordinary course, and neither Parent nor any of its Subsidiaries has:
(a) terminated or received any notice of termination of any material
contract, lease, license or other agreement or any Governmental License, or
suffered any damage, destruction or loss (whether or not covered by insurance)
that would reasonably be expected to have a Material Adverse Effect;
(b) changed any accounting practices, policies or procedures utilized
in the preparation of the Parent Financial Statements, except as required by
GAAP, the SEC, the Financial Accounting Standards Board or as otherwise set
forth in the Parent SEC Reports;
(c) suffered any change, event or condition that, in any case or in the
aggregate, has had or is reasonably likely to result in a Material Adverse
Effect; or
(d) entered into any agreement or made any commitment to take any of
the types of action described in subparagraphs (a) through (c) of this Section
3.10.
SECTION 3.11 Tax Matters. (a) Parent on behalf of itself and all of its
Subsidiaries hereby represents that, other than as disclosed in Section 3.11(a)
of the Parent Disclosure Schedule or the Parent SEC Reports, Parent and its
Subsidiaries have timely filed
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all United States federal income Tax Returns and all other material Tax Returns
required to be filed by them. All such Tax Returns are complete and correct in
all material respects (except to the extent a reserve has been established as
reflected in the Parent Interim Balance Sheet). Parent and its Subsidiaries have
timely paid and discharged all Taxes due in connection with or with respect to
the periods or transactions covered by such Tax Returns and have paid all other
Taxes as are due, except such as are being contested in good faith by
appropriate proceedings (to the extent that any such proceedings are required),
and there are no other Taxes that would be due if asserted by a taxing
authority, except with respect to which Parent is maintaining reserves unless
the failure to do so would not have a Material Adverse Effect. Except as does
not involve or would not result in liability to Parent or any of its
Subsidiaries that would have a Material Adverse Effect, (i) there are no tax
liens on any assets of Parent or any of its Subsidiaries; (ii) neither Parent
nor any of its Subsidiaries has granted any waiver of any statute of limitations
with respect to, or any extension of a period for the assessment of, any Tax;
(iii) no unpaid (or unreserved) deficiencies for Taxes have been claimed,
proposed or assessed by any taxing or other governmental authority with respect
to Parent or any of its Subsidiaries; (iv) there are no pending or, the Parent's
Knowledge, threatened audits, investigations or claims for or relating to any
liability in respect of Taxes of Parent or any of its Subsidiaries; and (v)
neither Parent nor any of its Subsidiaries has requested any extension of time
within which to file any currently unfiled Tax Returns. The accruals and
reserves for Taxes (including deferred taxes) reflected in the Parent Interim
Balance Sheet are in all material respects adequate to cover all Taxes accruable
through the date thereof (including Taxes being contested) in accordance with
GAAP.
(b) Parent on behalf of itself and all its Subsidiaries hereby
represents that, other than as disclosed in Section 3.11(b) of the Parent
Disclosure Schedule or the Parent SEC Reports, and other than with respect to
items the inaccuracy of which would not have a Material Adverse Effect: (i)
neither Parent nor any of its Subsidiaries is obligated under any agreement with
respect to industrial development bonds or other obligations with respect to
which the excludability from gross income of the holder for federal or state
income tax purposes could be affected by the transactions contemplated
hereunder; (ii) neither Parent nor any of its Subsidiaries is, or has been, a
United States real property holding corporation (as defined in section 897(c)(2)
of the Code) during the applicable period specified in section 897(c)(1)(A)(ii)
of the Code; (iii) neither Parent nor any of its Subsidiaries has filed or been
included in a combined, consolidated or unitary return (or substantial
equivalent thereof) of any Person other than Parent and its Subsidiaries; (iv)
neither Parent nor any of its Subsidiaries is liable for Taxes of any Person
other than Parent and its Subsidiaries, or currently under any contractual
obligation to indemnify any Person with respect to Taxes, or a party to any tax
sharing agreement or any other agreement providing for payments by Parent or any
of its Subsidiaries with respect to Taxes; (v) except entities the beneficial
ownership of which is wholly owned by Parent and/or its Subsidiaries, neither
Parent nor any of its Subsidiaries is a party to any joint venture, partnership
or other arrangement or contract which could be treated as a partnership for
United States federal income tax purposes; (vi) neither Parent nor any of its
Subsidiaries is a party to any agreement, contract, arrangement or plan that
would result (taking into account the transactions contemplated by this
Agreement), separately or in the aggregate, in the payment of any "excess
parachute
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payments" within the meaning of section 280G of the Code; (vii) the prices for
any property or services (or for the use of property) provided by Parent or any
of its Subsidiaries to any other Subsidiary or to the Parent have been arm's
length prices determined using a method permitted by the Treasury Regulations
under section 482 of the Code; (viii) neither Parent nor any of its Subsidiaries
is a "consenting corporation" under section 341(f) of the Code or any
corresponding provision of state, local or foreign law; (ix) neither Parent nor
any of its Subsidiaries has made an election or is required to treat any of its
assets as owned by another Person for federal income tax purposes or as
tax-exempt bond financed property or tax-exempt use property within the meaning
of section 168 of the Code (or any corresponding provision of state, local or
foreign law); and (x) Parent is not an investment company within the meaning of
section 368(a)(2)(F)(iii) of the Code.
SECTION 3.12 Relations with Employees and Sales Agents. (a) Except as
set forth in Section 3.12 of the Parent Disclosure Schedule:
(a) No collective bargaining agreement with respect to the business of
Parent or any of its Subsidiaries is currently in effect or being negotiated.
Neither Parent nor any of its Subsidiaries has any obligation to negotiate any
such collective bargaining agreement.
(b) There are no strikes or work stoppages pending or, to Parent's
Knowledge, threatened with respect to the employees of Parent or any of its
Subsidiaries, nor has any such strike or work stoppage occurred or, to Parent's
Knowledge, been threatened since January 1, 1995. There is no representation
claim or petition or complaint pending before the National Labor Relations Board
or any state or local labor agency and, to Parent's Knowledge, no question
concerning representation has been raised or threatened since January 1, 1995
respecting the employees of Parent or any of its Subsidiaries.
(c) To Parent's Knowledge, no charges with respect to or relating to
the business of Parent or any its Subsidiaries are pending before the Equal
Employment Opportunity Commission, or any state or local agency responsible for
the prevention of unlawful employment practices, which would reasonably be
expected to have a Material Adverse Effect.
SECTION 3.13 Benefit Plans. (a) Complete and correct copies of all
material written Employee Benefit Plans of Parent and its Subsidiaries have been
filed as exhibits to the Parent's SEC Reports.
(b) No Employee Benefit Plan of Parent or any of its Subsidiaries is,
and no material employee benefit plan formerly maintained by Parent and/or any
of its Subsidiaries was, a "defined benefit plan" within the meaning of section
3(35) of ERISA to which ERISA applies. Neither the Parent nor any of its
Subsidiaries has ever contributed to, or withdrawn in a complete or partial
withdrawal from, any multiemployer plan (within the meaning of Subtitle E of
Title IV of ERISA) or incurred contingent liability under section 4204 of ERISA.
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(c) Each Employee Benefit Plan of Parent and its Subsidiaries (and each
related trust, insurance contract and fund) is in compliance in all material
respects in form and in operation with all applicable requirements of Applicable
Benefits Law (including ERISA and the Code), and is being administered in all
material respects in accordance with all relevant plan documents to the extent
consistent with Applicable Benefits Law. There has been no prohibited
transaction with respect to any Employee Benefit Plan of Parent or any of its
Subsidiaries which would result in the imposition of any material unpaid excise
tax. No Employee Benefit Plan of Parent or any of its Subsidiaries is under
investigation or audit by the Department of Labor or Internal Revenue Service
other than as part of a routine tax audit of Parent. There are no legal actions
or suits pending or, to Parent's Knowledge, threatened against any Employee
Benefit Plan of Parent or any of its Subsidiaries or the assets of any such
Employee Benefit Plan or against any fiduciary of any such Employee Benefit Plan
and Parent has no Knowledge of any facts that could give rise to any such
actions. There has been full compliance in all material respects with the notice
and continuation requirements of section 4980B of the Code applicable to any
Employee Benefit Plan of Parent and its Subsidiaries.
(d) The consummation of the Merger or any other transaction
contemplated by this Agreement, in and of itself, will not result in a material
increase in the amount of compensation or benefits or accelerate the vesting or
timing of payment of any benefits or compensation payable under any Employee
Benefit Plan in respect of any employee of Parent or any of its Subsidiaries.
(e) At no time since the organization of Parent or any of its
Subsidiaries has any entity (other than Parent or any such Subsidiary) been an
"ERISA affiliate" of Parent, any such Subsidiary, or both.
SECTION 3.14 Title to Properties. Except as set forth in the Parent SEC
Reports or Section 3.14 of the Parent Disclosure Schedule, Parent and each of
its Subsidiaries have good and indefeasible title to all of their properties and
assets, free and clear of all Encumbrances, except liens for taxes not yet due
and payable and such Encumbrances or other imperfections of title, if any, as do
not materially detract from the value of or interfere with the present use of
the property affected thereby or which would not reasonably be expected to have
a Material Adverse Effect, and except for Encumbrances which secure indebtedness
reflected in the Parent Interim Balance Sheet.
SECTION 3.15 Compliance with Laws; Legal Proceedings. (a) Neither
Parent nor any of its Subsidiaries is in violation of, or in default with
respect to, any applicable statute, regulation, ordinance, writ, injunction,
order, judgment, decree or any Governmental License which violation or default
would reasonably be expected to have a Material Adverse Effect.
(b) Except as set forth in the Parent SEC Reports or Section 3.15(b) of
the Parent Disclosure Schedule, there is no order, writ, injunction, judgment or
decree outstanding and no legal, administrative, arbitration or other
governmental proceeding or investigation pending or, to Parent's Knowledge,
threatened, and there are no claims (in-
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cluding unasserted claims of which Parent has Knowledge) against or relating to
Parent or any of its Subsidiaries or any of their respective properties, assets
or businesses that would reasonably be expected to have a Material Adverse
Effect.
SECTION 3.16 Brokers. Except for Lehman Brothers, no broker, finder or
investment advisor acted directly or indirectly as such for Parent, any
Subsidiary of Parent or, to Parent's Knowledge, any stockholder of Parent in
connection with this Agreement or the Merger, and no broker, finder, investment
advisor or other Person is entitled to any fee or other commission, or other
remuneration, in respect thereof based in any way on any action, agreement,
arrangement or understanding taken or made by or on behalf of Parent, any
Subsidiary of Parent or, to Parent's Knowledge, any stockholder of the Parent.
SECTION 3.17 Intellectual Property. (a) Parent and/or each of its
Subsidiaries owns, or is licensed or otherwise possesses legally enforceable
rights to use, all patents, trademarks, trade names, service marks, copyrights,
and any applications therefor, technology, know-how, computer software programs
or applications and tangible or intangible proprietary information or material
that are used in the business of Parent and its Subsidiaries as currently
conducted, except as would not reasonably be expected to have a Material Adverse
Effect.
(b) Except as disclosed in Section 3.17(b) of the Parent Disclosure
Schedule or the Parent SEC Reports or as would not reasonably be expected to
have a Material Adverse Effect: (i) Parent is not, nor will it be as a result of
the execution and delivery of this Agreement or the performance of its
obligations hereunder, in violation of any licenses, sublicenses and other
agreements as to which Parent is a party and pursuant to which Parent is
authorized to use any patents, trademarks, service marks or copyrights owned by
others ("Parent Third-Party Intellectual Property Rights"); (ii) No claims with
respect to the patents, registered and material unregistered trademarks and
service marks, registered copyrights, trade names and any applications therefor
owned by Parent or any of its Subsidiaries ("Parent Intellectual Property
Rights"), any trade secret material to Parent, or Parent Third Party
Intellectual Property Rights to the extent arising out of any use, reproduction
or distribution of Parent Third Party Intellectual Property Rights by or through
Parent or any of its Subsidiaries, are currently pending or, to Parent's
Knowledge, have been threatened by any Person; or (iii) Parent has no Knowledge
of any valid grounds for any bona fide claims (1) to the effect that the sale,
licensing or use of any product or service as now sold, licensed or used, or
proposed for sale, license or use, by Parent or any of its Subsidiaries
infringes on any copyright, patent, trademark, service mark or trade secret; (2)
against the use by Parent or any of its Subsidiaries of any trademarks, trade
names, trade secrets, copyrights, patents, technology, know-how or computer
software programs and applications used in the business of Parent or any of its
Subsidiaries as currently conducted or as proposed to be conducted; (3)
challenging the ownership, validity or effectiveness of any of Parent
Intellectual Property Rights or other trade secret material to Parent; or (4)
challenging the license or legally enforceable right to use of Parent Third
Party Intellectual Rights by Parent or any of its Subsidiaries.
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(c) To Parent's Knowledge, there is no material unauthorized use,
infringement or misappropriation of any of Parent Intellectual Property Rights
by any third party, including any employee or former employee of the Parent or
any of its Subsidiaries.
SECTION 3.18 Contracts; etc. (a) Each agreement, lease or other type of
document required to be filed as an exhibit to the Parent's SEC Reports to which
Parent or any of its Subsidiaries is a party or by which Parent or any of its
Subsidiaries or their respective properties or assets are bound, except for
those contracts, the loss of which would not reasonably be expected to have a
Material Adverse Effect (collectively, the "Parent Contracts"), is valid,
binding and in full force and effect and is enforceable by Parent or such
Subsidiary in accordance with its terms. Neither Parent nor any such Subsidiary
is (with or without the lapse of time or the giving of notice, or both) in
breach of or in default under any of the Parent Contracts, and, to Parent's
Knowledge, no other party to any of the Parent Contracts is (with or without the
lapse of time or the giving of notice, or both) in breach of or in default under
any of the Parent Contracts, where such breach or default would reasonably be
expected to have a Material Adverse Effect. No existing or completed agreement
to which Parent or any of its Subsidiaries is a party is subject to
renegotiation with any governmental body.
SECTION 3.19 Permits, Authorizations, etc. All Governmental Licenses
and each other material approval, authorization, consent, license, certificate
of public convenience, order or other permit of all governmental agencies,
whether federal, state, local or foreign, necessary to enable Parent and its
Subsidiaries to own, operate and lease their properties and assets as and where
such properties and assets are owned, leased or operated and to provide service
and carry on their business as presently provided and conducted or required to
permit the continued conduct of such business following the Merger in the manner
conducted on the date of this Agreement (collectively, the "Parent Permits") are
valid and in good standing with the issuing agencies and not subject to any
proceedings for suspension, modification or revocation, except for such Parent
Permits which would not reasonably be expected to have a Material Adverse
Effect.
SECTION 3.20 Environmental Matters. (a) Parent and each Subsidiary of
Parent has obtained all Environmental Permits that are required for the lawful
operation of its business except for such Environmental Permits the failure of
which to obtain would not reasonably be expected to have a Material Adverse
Effect. Parent and its Subsidiaries (i) are in compliance with all terms and
conditions of their Environmental Permits and are in compliance with and not in
default under any applicable Environmental Law, except for such failure to be in
compliance that would not reasonably be expected to have Material Adverse
Effect, and (ii) have not received written notice of any material violation by
or material claim against Parent or any such Subsidiary under any Environmental
Law.
(b) There have been no Releases or threatened Releases of any Hazardous
Substances (i) into, on or under any of the properties owned or operated (or
formerly owned or operated) by Parent or any such Subsidiary in such a way as to
create any liability (including the costs of investigation or remediation) under
any applicable Environmental Law that would reasonably be expected to have a
Material Adverse Effect.
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(c) Neither the Parent or its Subsidiaries have been identified as a
potentially responsible party at any federal or stated National Priority List
("superfund") site.
SECTION 3.21 Books and Records. All accounts, books, ledgers and
official and other records prepared and kept by Parent and its Subsidiaries have
been kept and completed in all material respects, and there are no material
inaccuracies or discrepancies contained or reflected therein.
SECTION 3.22 Pooling Matters. Parent has provided to Parent's
independent accountants all information concerning actions taken or agreed to be
taken by Parent or any of its Affiliates on or before the date of this Agreement
that could reasonably be expected to adversely affect the ability of Parent to
account for the business combination to be effected by the Merger as a pooling
of interests. Parent has provided Company a letter from Parent's independent
public accountants to the effect that, after review, such accountants know of no
reason relating to the Parent that should prevent the Parent from accounting for
the Merger as a pooling of interests.
SECTION 3.23 Registration Statement; Joint Proxy Statement/Prospectus.
Subject to the accuracy of the representations of the Company in Section 2.28,
the registration statement (the "Registration Statement") pursuant to which the
Parent Common Stock to be issued in the Merger will be registered with the SEC
shall not at the time the Registration Statement is declared effective by the
SEC contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The information supplied by Parent in writing specifically
for inclusion in the Joint Proxy Statement/Prospectus will not, on the date the
Joint Proxy Statement/Prospectus (or any amendment thereof or supplement
thereto) is first mailed to stockholders, at the time of the Stockholders
Meetings, or at the Effective Time, contain any statement which, at such time
and in light of the circumstances under which it shall be made, is false or
misleading with respect to any material fact, or shall omit to state any
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they are made, not false or misleading; or omit
to state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Stockholders
Meetings which has become false or misleading. If at any time prior to the
Effective Time any event relating to Parent or any of its Subsidiaries or any of
their respective officers, directors, stockholders or Affiliates should be
discovered by Parent which should be set forth in an amendment to the
Registration Statement or a supplement to the Joint Proxy Statement/Prospectus,
Parent shall promptly inform the Company. The Joint Proxy Statement/Prospectus
shall comply in all material respects with the requirements of the Securities
Act and the Exchange Act. Notwithstanding the foregoing, Parent makes no
representation or warranty with respect to any Company Information which is
contained or incorporated by reference in, or furnished in connection with the
preparation of, the Registration Statement or the Joint Proxy
Statement/Prospectus.
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SECTION 3.24 Ownership of Merger Sub; No Prior Activities. (a) Merger
Sub is a direct, wholly-owned subsidiary of Parent and was formed solely for the
purpose of engaging in the transactions contemplated by this Agreement.
(b) As of the date hereof and the Effective Time, expect for
obligations or liabilities incurred in connection with its incorporation or
organization and the transactions contemplated by this Agreement and except for
this Agreement and any other agreements or arrangements contemplated by this
Agreement, Merger Sub has not and will not have incurred, directly or
indirectly, through any subsidiary or affiliate, any obligations or liabilities
or engaged in any business activities of any type or kind whatsoever or entered
into any agreements or arrangements with any Person.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 4.1 Conduct of Business by the Company Pending the Merger.
During the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement or the Effective Time, the Company
covenants and agrees that, unless Parent shall otherwise agree in writing, the
Company shall conduct its business and shall cause the businesses of its
Subsidiaries to be conducted only in, and the Company and its Subsidiaries shall
not take any action except in, the ordinary course of business and in a manner
consistent with past practice, other than actions taken by the Company or its
Subsidiaries in order to facilitate the negotiation and execution of this
Agreement and the consummation of the transactions contemplated hereunder which
actions would not breach any of the Company's representations, warranties,
covenants or agreements herein; and the Company shall use reasonable commercial
efforts to preserve substantially intact the business organization of the
Company and its Subsidiaries, to keep available the services of the present
officers, employees, agents, distributors and consultants of the Company and its
Subsidiaries and to preserve the present relationships of the Company and its
Subsidiaries with customers, suppliers and other Persons with which the Company
or any of its Subsidiaries has significant business relations. By way of
amplification and not limitation, except as contemplated by this Agreement,
neither the Company nor any of its Subsidiaries shall, during the period from
the date of this Agreement and continuing until the earlier of the termination
of this Agreement or the Effective Time, directly or indirectly do, or propose
to do, any of the following without the prior written consent of Parent:
(a) amend or otherwise change the Company's Certificate of
Incorporation or By-Laws;
(b) issue, sell, pledge, dispose of or encumber, or authorize the
issuance, sale, pledge, disposition or encumbrance of, any shares of
capital stock of any class, or any options, warrants, convertible
securities or other rights of any kind to acquire any shares of
capital stock, or any other ownership interest (including, without
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limitation, any phantom interest) in the Company or any of its
Subsidiaries or Affiliates (except for the issuance of shares of
Company Common Stock issuable upon the exercise of the Warrants or
Stock Options, which Warrants and Stock Options are outstanding on the
date hereof or pursuant to the Company's Employee Stock Purchase
Plan);
(c) sell, pledge, dispose of or encumber any assets of the
Company or any of its Subsidiaries (except for sales, pledges,
dispositions and encumbrances of assets in the ordinary course of
business);
(d) (i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of any of its capital stock, except that a wholly
owned Subsidiary of the Company may declare and pay a dividend to its
parent, (ii) split, combine or reclassify any of its capital stock or
issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital
stock, or (iii) amend the terms or change the period of exercisability
of, purchase, repurchase, redeem or otherwise acquire, or permit any
Subsidiary to purchase, repurchase, redeem or otherwise acquire, any
of its securities or any securities of its Subsidiaries, including,
without limitation, shares of Company Common Stock or any option,
warrant or right, directly or indirectly, to acquire shares of Company
Common Stock;
(e) (i) acquire (by merger, consolidation, or acquisition of
stock or assets) any corporation, partnership or other business
organization or division thereof; (ii) incur any material indebtedness
for borrowed money, except for borrowings and reborrowing under the
Company's existing credit facilities or issue any debt securities or
assume, guarantee (other than guarantees of bank debt of the Company's
Subsidiaries under existing credit facilities entered into in the
ordinary course of business); (iii) endorse or otherwise as an
accommodation become responsible for, the obligations of any Person,
or make any material loans or advances, except for endorsements,
accommodations, loans or advancements in the ordinary course of
business consistent with prior practice; (iv) authorize any capital
expenditures or purchases of fixed assets other than in the ordinary
course of business consistent with prior practice and in the aggregate
less than $10,000,000 prior to December 31, 1997 and $18,000,000 prior
to March 31, 1998; or (v) enter into or amend any contract, agreement,
commitment or arrangement to effect any of the matters prohibited by
this Section 4.1(e);
(f) make any change in the rate of compensation, commission,
bonus or other remuneration payable, or pay or agree or promise to
pay, conditionally or otherwise, any bonus, extra compensation,
pension or severance or vacation pay, to any director, officer,
employee, salesman, distributor or agent of the Company or any of its
Subsidiaries except in the ordinary course of business consistent with
prior practice or as currently scheduled for various officers of the
Company beginning October 1, 1997 as required by such officers'
employment agreements, correct and complete copies of which agreements
have heretofore been delivered by the Company
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to Parent, or make any increase in or commitment to increase any
employee benefits, adopt or make any commitment to adopt any
additional employee benefit plan or make any contribution, other than
regularly scheduled contributions, to any Employee Benefit Plan;
(g) take any action to change accounting practices, policies or
procedures (including, without limitation, procedures with respect to
revenue recognition, payments of accounts payable or collection of
accounts receivable) except as required by the SEC, the Financial
Accounting Standards Board or GAAP;
(h) make any material tax election inconsistent with past
practice or settle or compromise any material federal, state, local or
foreign Tax liability or agree to an extension of a statute of
limitations, except to the extent the amount of any such settlement
has been reserved for in the financial statements contained in the
Company SEC Reports filed with the SEC prior to the date of this
Agreement and except as described in Section 4.1(h) of the Company
Disclosure Schedule;
(i) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, contingent or otherwise) that are
individually or in the aggregate material to the Company and its
Subsidiaries, other than the payment, discharge or satisfaction in the
ordinary course of business and consistent with past practice of
liabilities reflected or reserved against in the Company Financial
Statements or incurred thereafter in the ordinary course of business
and consistent with past practice;
(j) take any action to delist a security of the Company from any
securities exchange;
(k) recommend or take any action to adopt a plan of dissolution
or liquidation with respect to the Company or any of its Subsidiaries;
or
(l) take, or agree in writing or otherwise to take, any of the
actions described in Sections 4.1(a) through (k) above, or 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 performing or cause the
Company not to perform in all material respects its covenants herein.
SECTION 4.2 No Solicitation. (a) Upon execution of this Agreement, the
Company does not have, or shall immediately terminate any discussions with, any
third party concerning an Alternative Acquisition (as defined below). From and
after the date of this Agreement until the earlier of the Effective Time or the
termination of this Agreement in accordance with its terms, the Company shall
not, and shall not permit any officer, director, employee, investment banker or
other agent of the Company or any Subsidiary of the Company to, directly or
indirectly, (i) solicit, engage in discussions or negotiate with any Person
(whether such discussions or negotiations are initiated by the Company or
otherwise) or take any other action intended or designed to facilitate the
efforts of any Person, other than Parent, relating to the possible acquisition
of the Company or any of its Subsidiaries
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(whether by way of merger, purchase of capital stock, purchase of assets or
otherwise) or any material portion of its or their capital stock or assets (with
any such efforts by any such Person, including a firm proposal to make such an
acquisition, to be referred to as an "Alternative Acquisition"), (ii) provide
information with respect to the Company or any of its Subsidiaries to any
Person, other than Parent, relating to a possible Alternative Acquisition by any
Person, other than Parent, (iii) enter into an agreement with any person, other
than Parent, providing for a possible Alternative Acquisition, or (iv) make or
authorize any statement, recommendation or solicitation in support of any
possible Alternative Acquisition by any Person, other than by Parent.
(b) Notwithstanding the foregoing, the restrictions set forth in
Section 4.2(a) shall not prevent the Board of Directors of the Company (or its
agents pursuant to its instructions) from taking any of the following actions:
(i) furnishing information concerning the Company and its business, properties
and assets to any third party or (ii) engaging in discussions or negotiating
with such third party concerning an Alternative Acquisition, in either such case
provided that all of the following events shall have occurred: (1) such third
party is not an Affiliate of the Company and has made a written, bona fide
proposal to the Board of Directors of the Company to acquire the Company (which
proposal may be conditional) through an Alternative Acquisition which proposal
identifies a price or range of values to be paid for all of the outstanding
securities (including Stock Options and Warrants) or substantially all of the
assets of the Company, and if consummated, based on the advice of the Company's
investment bankers, the Board of Directors of the Company has determined, in
good faith, is more favorable to the stockholders of the Company, from a
financial point of view, than the terms of the Merger (a "Superior Proposal");
(2) the Company's Board of Directors has determined, based on the advice of its
investment bankers, that such third party is financially capable of consummating
such Superior Proposal; (3) the Board of Directors of the Company shall have
determined, after consultation with its outside legal counsel, that, the
fiduciary duties of the Board of Directors of the Company require the Company to
furnish information to and negotiate with such third party; and (4) Parent shall
have been notified in writing of such Alternative Acquisition, including all of
its terms and conditions, and shall have been given copies of such proposal.
Furthermore, nothing contained in this Agreement shall prevent the Company from
taking any position with respect to an Alternative Acquisition pursuant to Rules
14d-9 and 14e-2 under the Exchange Act which is consistent with the advice of
counsel concerning the fiduciary duties of the Board of Directors of the Company
under applicable law with respect to a tender offer commenced by a third party
other than an Affiliate of the Company.
(c) Notwithstanding the foregoing, the Company shall not provide any
non-public information to such third party unless (i) it has prior to or
contemporaneously therewith provided such information to Parent or Parent's
representatives; and (ii) the Company provides such non-public information
pursuant to a nondisclosure agreement with terms which are at least as
restrictive as the nondisclosure agreement heretofore entered into between
Parent and the Company.
(d) In addition to the foregoing, the Company shall not accept or enter
into any agreement concerning an Alternative Acquisition for a period of not
less than 48 hours
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after Parent's receipt of a notice of the material terms of such proposal of an
Alternative Acquisition. Upon compliance with all of the foregoing provisions of
this Section 4.2, the Company shall be entitled to (i) change its recommendation
concerning the Merger, and (ii) enter into an agreement with such third party
concerning an Alternative Acquisition provided that the Company shall
immediately make payment in full to Parent of the Fee as defined in Section 7.3
below.
(e) the Company shall ensure that the officers and directors of the
Company and its Subsidiaries and any investment banker or other financial
advisor or representative retained by the Company or any Subsidiary of the
Company are aware of the restrictions described in this Section 4.2.
(f) the Company shall be entitled to provide copies of this Section 4.2
to third parties who on an entirely unsolicited basis after the date hereof,
contact the Company concerning an Alternative Acquisition; provided that Parent
shall concurrently be notified of such contact and the delivery of such copy.
SECTION 4.3 Conduct of Business by Parent Pending the Merger. During
the period from the date of this Agreement and continuing until the earlier of
the termination of this Agreement or the Effective Time, Parent covenants and
agrees that, unless the Company shall otherwise agree in writing, Parent shall
conduct its business, and cause the businesses of its Subsidiaries to be
conducted only in, and Parent and its Subsidiaries shall not take any action
except in, the ordinary course of business and consistent with past practice,
except for actions taken by Parent or its Subsidiaries in order to facilitate
the negotiation and execution of this Agreement and the consummation of the
transactions contemplated hereunder which actions would not breach any of
Parent's or Merger Sub's representations, warranties, covenants and agreements
herein, and shall not directly or indirectly do, or propose to do, any of the
following without the prior written consent of the Company:
(a) amend or otherwise change Parent's Certificate of
Incorporation or By- Laws;
(b) declare, set aside, make or pay any cash dividend or other
distribution in respect of any of its capital stock, except that a
wholly owned Subsidiary of Parent may declare and pay a dividend to
its parent;
(c) take any action to delist a security of Parent from any
securities exchange;
(d) recommend or take any action to adopt a plan of dissolution
or liquidation with respect to Parent or any of its Subsidiaries; or
(e) take or agree in writing or otherwise to take any action
described in Sections 4.3(a) through (d) above or any action which
would make any of the representations or warranties of Parent or
Merger Sub contained in this Agreement
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untrue or incorrect or prevent Parent or Merger Sub from performing or
cause Parent or Merger Sub not to perform its covenants herein.
Nothing in this Section 4.3 or any other provision of this Agreement
shall prevent Parent from engaging in any discussions or entering into or
consummating any agreements or other arrangements with respect to (i) the sale
of all or substantially all of the Parent's capital stock or assets, (ii) any
material strategic alliance or (iii) the material acquisition (by merger,
consolidation or acquisition of stock or assets or otherwise) of any
corporation, partnership or other business organization or division thereof
((i), (ii) and (iii) each a "Material Parent Transaction") and no such actions
by Parent or any of its Subsidiaries with respect to a Material Parent
Transaction shall constitute a breach of any representation, warranty, covenant
or agreement of Parent or Merger Sub herein; provided, however, that after the
Joint Proxy Statement/Prospectus has been mailed to the stockholders of the
Company and prior to the then scheduled date of the Company Stockholders
Meeting, Parent will not initiate any discussions with respect to any Material
Parent Transaction, it being understood and agreed that nothing in this proviso
shall in any way affect Parent's right to respond to any such discussions
initiated by any third party who is not an Affiliate of the Company.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 Joint Proxy Statement/Prospectus; Registration Statement.
As promptly as practicable after the execution of this Agreement, and after the
furnishing by the Company and Parent of all information required to be contained
therein, which respective information each of Parent and Company covenant to use
their best efforts as promptly as possible following the date hereof to so
furnish, the Company and Parent shall file with the SEC a Registration Statement
on Form S-4 (or on such other form as shall be appropriate), which shall include
the Joint Proxy Statement/Prospectus relating to the adoption of this Agreement
and, consistent with Section 4.2, approval of the transactions contemplated
hereby by the stockholders of the Company and Parent pursuant to this Agreement,
and shall use all reasonable efforts to cause the Registration Statement to
become effective as soon thereafter as practicable. The Joint Proxy
Statement/Prospectus shall include the recommendation of the Boards of Directors
of the Company in favor of the Merger and of Parent in favor of the Parent
Common Stock Issuance, and such recommendations shall not be withdrawn modified
or changed in a manner adverse to Parent or Merger Sub or the Company,
respectively, subject to the last sentence of Section 5.2.
SECTION 5.2 Company Stockholders Meeting. The Company shall call the
Company Stockholders Meeting as promptly as practicable for the purpose of
voting upon the approval of the Merger, and the Company shall use its reasonable
best efforts to hold the Company Stockholders Meeting as soon as practicable
after the date on which the Registration Statement becomes effective. Unless
otherwise required under the applicable fiduciary duties of the directors of the
Company, as determined in accordance with Section
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4.2, the Company shall solicit from its stockholders proxies in favor of
approval of the Merger and this Agreement, shall take all other reasonable
action necessary or advisable to secure the vote or consent of stockholders in
favor of such approval and shall not take any action that could reasonably be
expected to prevent the vote or consent of stockholders in favor of such
approval.
SECTION 5.3 Parent Stockholders Meeting. Parent shall call the Parent
Stockholders Meeting as promptly as practicable for the purpose of authorizing
and approving the issuance by Parent of the Parent Common Stock in the Merger,
as contemplated by this Agreement (the "Parent Common Stock Issuance") as
required by the NYSE, and if so required by the NYSE, Parent shall use its
reasonable best efforts to hold the Parent Stockholders Meeting as soon as
practicable after the date on which the Registration Statement becomes
effective. Parent shall solicit from its stockholders proxies in favor of
approval of the Parent Common Stock Issuance, shall take all other reasonable
action necessary or advisable to secure the vote or consent of stockholders in
favor of such approval, if required, and shall not take any action that could
reasonably be expected to prevent such vote or consent of stockholders in favor
of such approval.
SECTION 5.4 Access to Information; Confidentiality. Upon reasonable
notice and subject to restrictions contained in confidentiality agreements to
which such party is subject (from which such party shall use reasonable efforts
to be released), the Company and Parent shall each (and shall cause each of
their Subsidiaries to) afford to the officers, employees, accountants, counsel
and other representatives of the other reasonable access, during the period
prior to the Effective Time, to all its properties, books, contracts,
commitments and records and, during such period, the Company and Parent each
shall (and shall cause each of their Subsidiaries to) furnish promptly to the
other all information concerning its business, properties and personnel as such
other party may reasonably request, and each shall make available to the other
the appropriate individuals (including attorneys, accountants and other
professionals) for discussion of the other's business, properties and personnel
as either Parent or the Company may reasonably request. Each party shall keep
such information confidential in accordance with the terms of the
confidentiality letter (the "Confidentiality Letter") between Parent and the
Company.
SECTION 5.5 Consents; Approvals. The Company and Parent shall each in
good faith use their reasonable best efforts to obtain all consents, waivers,
approvals, authorizations or orders (including, without limitation, all United
States and foreign governmental and regulatory rulings and approvals), and the
Company and Parent shall make all filings (including, without limitation, all
filings with United States and foreign governmental or regulatory agencies)
required in connection with the authorization, execution and delivery of this
Agreement by the Company and Parent and the consummation by them of the
transactions contemplated hereby. The Company and Parent shall furnish all
information required to be included in the Joint Proxy Statement/Prospectus and
the Registration Statement or for any application or other filing to be made
pursuant to the rules and regulations of any United States or foreign
governmental body in connection with the transactions contemplated by this
Agreement.
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SECTION 5.6 Agreements with Respect to Affiliates. The Company shall
deliver to Parent, prior to the date the Registration Statement becomes
effective under the Securities Act, a letter (the "Affiliate Letter")
identifying all Persons who are, at the time of the Company Stockholders
Meeting, anticipated to be "Affiliates" of the Company for purposes of Rule 145
under the Securities Act ("Rule 145"), or the rules and regulations of the SEC
relating to pooling of interests accounting treatment for merger transactions
(the "Pooling Rules"). The Company shall use its reasonable best efforts to
cause each Person who is identified as an "affiliate" in the Affiliate Letter to
deliver to Parent, no less than 30 days prior to the date of the Company
Stockholders Meeting, a written agreement (an "Affiliate Agreement") in
connection with restrictions on Affiliates under Rule 145 and pooling of
interests accounting treatment, in form mutually agreeable to the Company and
Parent.
SECTION 5.7 Indemnification and Insurance. (a) The By-Laws and
Certificate of Incorporation of the Surviving Corporation shall contain the
provisions with respect to indemnification set forth in the By-Laws and
Certificate of Incorporation 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 adversely affect the rights thereunder
as of the Effective Time of individuals who at the Effective Time were
directors, officers, employees or agents of the Company or its Subsidiaries,
unless such modification is required after the Effective Time by law.
(b) The Surviving Corporation shall, to the fullest extent permitted
under applicable law or under the Surviving Corporation's Certificate of
Incorporation or By-Laws, indemnify and hold harmless each present and former
director, officer, employee or agent of the Company or any of its subsidiaries
(collectively, the "Indemnified Parties") against any costs or expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages, liabilities and amounts paid in settlement in connection with any
claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative (collectively, "Actions"), (x) arising out of or
pertaining to the transactions contemplated by this Agreement, or (y) otherwise
with respect to any acts or omissions occurring at or prior to the Effective
Time, in each case to the same extent (including any provision for the
advancement of expenses) as provided in the Company's Certificate of
Incorporation or ByLaws or any applicable contract or agreement as in effect on
the date hereof, in each case for a period of six years after the Effective
Time; provided, however, that, in the event that any claim or claims for
indemnification are asserted or made within such six-year period, all rights to
indemnification in respect of any such claim or claims shall continue until the
disposition of any and all such claims. In the event of any such Action (whether
arising before or after the Effective Time), the Indemnified Parties shall
promptly notify the Surviving Corporation in writing, but the failure to so
notify shall not relieve the Surviving Corporation of its obligations under this
Section 5.7(b) except to the extent it is materially prejudiced by such failure,
and the Surviving Corporation shall have the right to assume the defense
thereof, including the employment of counsel reasonably satisfactory to such
Indemnified Parties. The Indemnified Parties shall have the right to employ
separate counsel in any such Action and to participate in (but not control) the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Parties unless (a) the
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Surviving Corporation has agreed to pay such fees and expenses, (b) the
Surviving Corporation shall have failed to assume the defense of such Action or
(c) the named parties to any such Action (including any impleaded parties)
include both the Surviving Corporation and the Indemnified Parties and such
Indemnified Parties shall have been reasonably advised by counsel that there may
be one or more legal defenses available to the Indemnified Parties which are in
conflict with those available to the Surviving Corporation. In the event such
Indemnified Parties employ separate counsel at the expense of the Surviving
Corporation pursuant to clauses (b) or (c) of the previous sentence, (i) any
counsel retained by the Indemnified Parties for any period after the Effective
Time shall be reasonably satisfactory to the Surviving Corporation; (ii) the
Indemnified Parties as a group may retain only one law firm to represent them in
each applicable jurisdiction with respect to any single Action unless there is,
under applicable standards of professional conduct, a conflict on any
significant issue between the positions of any two or more Indemnified Parties,
in which case each Indemnified Person with respect to whom such a conflict
exists (or group of such Indemnified Persons who among them have no such
conflict) may retain one separate law firm in each applicable jurisdiction;
(iii) after the Effective Time, the Surviving Corporation shall pay the
reasonable fees and expenses of such counsel, promptly after statements therefor
are received; and (iv) the Surviving Corporation will cooperate in the defense
of any such Action. The Surviving Corporation shall not be liable for any
settlement of any such Action effected without its written consent.
(c) The Surviving Corporation shall honor and fulfill in all respects
the obligations of the Company pursuant to indemnification agreements and
employment agreements (the employee parties under such agreements being referred
to as the "Officer Employees") with the Company's directors and officers
existing on the date hereof.
(d) For a period of six years after the Effective Time, Parent shall
cause the Surviving Corporation to maintain in effect, if available, directors'
and officers' liability insurance covering those Persons who are currently
covered by the Company's directors' and officers' liability insurance policy (a
correct and complete copy of which has been made available to Parent) on terms
comparable to those now applicable to directors and officers of the Company;
provided, however, that in no event shall the Surviving Corporation be required
to expend in excess of 300% of the annual premium currently paid by the Company
for such coverage; and provided further, that if the premium for such coverage
exceeds such amount, Parent or the Surviving Corporation shall purchase a policy
with the greatest coverage available for such 300% of such annual premium.
(e) The provisions of this Section 5.7 shall survive the consummation
of the Merger at the Effective Time, is intended to benefit the Company, the
Surviving Corporation, the Indemnified Parties and the Officer Employees, shall
be binding on all successors and assigns of the Surviving Corporation and shall
be enforceable by the Indemnified Parties and the Officer Employees.
SECTION 5.8 Notification of Certain Matters. The Company shall give
prompt notice to Parent, and Parent shall give prompt notice to the Company, of
(i) the occurrence or nonoccurrence of any event the occurrence or nonoccurrence
of which would
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be likely to cause any representation or warranty contained in this Agreement to
be materially untrue or inaccurate, or (ii) any failure of the Company, Parent
or Merger Sub, as the case may be, materially to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 5.8 shall not limit or otherwise affect the remedies available hereunder
to the party receiving such notice; and provided further that failure to give
such notice shall not be treated as a breach of covenant for the purposes of
Sections 6.2(b) or 6.3(b) unless the failure to give such notice results in
material prejudice to the other party.
SECTION 5.9 Further Action/Tax Treatment. Upon the terms and subject to
the conditions hereof, each of the parties hereto shall use all commercially
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all other things reasonably necessary, proper or advisable to
consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement, to obtain in a timely manner all necessary
waivers, consents and approvals and to effect all necessary registrations and
filings, and otherwise to satisfy or cause to be satisfied all conditions
precedent to its obligations under this Agreement. The foregoing covenant shall
not include any obligation by Parent to agree to divest, abandon, license or
take similar action with respect to any assets (tangible or intangible) of
Parent or the Company. Each of Parent, Merger Sub and the Company shall use its
commercially reasonable efforts to cause the Merger to qualify, and will not
(both before and after consummation of the Merger) take any actions which to its
Knowledge could reasonably be expected to prevent the Merger from qualifying, as
a reorganization under the provisions of section 368 of the Code.
SECTION 5.10 Public Announcements; Communications with Employees.
Parent and the Company shall consult with each other before issuing any press
release with respect to the Merger or this Agreement and shall not issue any
such press release or make any such public statement without the prior consent
of the other party, which shall not be unreasonably withheld; provided, however,
that a party may, without the prior consent of the other party, issue such press
release or make such public statement as may upon the advice of counsel be
required by law or the rules and regulations of the NYSE or the Nasdaq National
Market, as the case may be, if it has used all reasonable efforts to consult
with the other party. Parent and the Company shall cooperate with each other
with respect to, and endeavor in good faith to agree in advance upon the method
and content of, all written communications to employees of the Company and its
Subsidiaries, and all oral communications to groups of employees, prior to the
Effective Time.
SECTION 5.11 Listing of Parent Common Stock. Parent shall use its best
efforts to cause the shares of Parent Common Stock to be issued in the Merger
and upon the exercise of the Stock Options and Warrants to be listed, upon
official notice of issuance, on the NYSE prior to the Effective Time.
SECTION 5.12 Conveyance Taxes. Parent and the Company shall cooperate
in the preparation, execution and filing of all returns, questionnaires,
applications or other documents regarding any real property transfer or gains,
sales, use, transfer, value added, stock transfer and stamp taxes, any transfer,
recording, registration and other fees, and any
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similar taxes which become payable in connection with the transactions
contemplated hereby that are required or permitted to be filed on or before the
Effective Time and the Surviving Corporation shall be responsible for the
payment of all such taxes and fees.
SECTION 5.13 Accountant's Letters. Upon reasonable notice from the
other, the Company shall use its best efforts to cause Arthur Andersen LLP to
deliver to Parent, and Parent shall use its best efforts to cause Arthur
Andersen LLP to deliver to the Company, a letter covering such matters as are
requested by Parent or the Company, as the case may be, and as are customarily
addressed in accountant's "comfort" letters.
SECTION 5.14 Pooling Accounting Treatment. Parent and the Company each
agrees not to take any action that would reasonably be expected to adversely
affect the ability of Parent to account for the business combination to be
effected by the Merger as a pooling of interests, and Parent and the Company
each agrees to use its commercially reasonable efforts to take such action as
may be reasonably required to negate the impact of any past actions by Parent,
the Company or their respective Affiliates which would reasonably be expected to
adversely impact the ability of Parent to treat the Merger as a pooling of
interests. The taking by Parent or the Company of any action prohibited by the
previous sentence, or the failure of Parent or the Company to use its
commercially reasonable efforts to take any action required by the previous
sentence, if the Merger is not able to be accounted for as a pooling of
interests because of such action or failure to take action, shall constitute a
breach of this Agreement by such party for the purposes of Section 7.1(h).
SECTION 5.15 Rights Agreement. Prior to the Effective Time, the Company
shall take all necessary action to (i) render rights issued pursuant to the
Rights Agreement dated April 12, 1996 by and between the Company and U.S. Trust
Company of Texas, N.A., as Rights Agent (as amended, the "Company Rights
Agreement"), inapplicable to the Merger, and (ii) ensure that (x) neither Parent
nor any of its Affiliates (as defined in the Company Rights Agreement) is an
Acquiring Person (as defined in the Company Rights Agreement) and (y) no
Distribution Date, Triggering Event or Stock Acquisition Date (each as defined
in the Company Rights Agreement) shall occur by reason of the approval,
execution or delivery of this Agreement, or the announcement or consummation of
the Merger.
SECTION 5.16 Delivery of Certain Reports. Within 30 days after the date
of this Agreement, the Company shall deliver to Parent or its counsel complete
and correct copies of all trust agreements related to any Employee Benefit Plan,
insurance and other contracts and other funding arrangements, the current
summary plan descriptions and current summaries of material modifications
relating to each Employee Benefit Plan, the most recent Form 5500's which have
been filed with any appropriate government agency with respect to each Employee
Benefit Plan, the most recent favorable determination letter issued for each
Employee Benefit Plan and related trust that is intended to satisfy the
qualification requirements of sections 401(a) and 501(a) of the Code (and the
latest IRS form 5300 or 5307, whichever is applicable, filed with the IRS for
each such Employee Benefit Plan).
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SECTION 5.17 Receipt of Acknowledgments. The Company shall use its best
efforts to obtain prior to the Effective Time an acknowledgment in form and
substance reasonably satisfactory to Parent from all holders of Stock Options,
and shall obtain such acknowledgment from all holders of Stock Options who are
officers or directors of the Company, that such Stock Options from and after the
Effective Time are exercisable for shares of Parent Common Stock as provided in
Section 1.6(c) of this Agreement.
ARTICLE VI
CONDITIONS TO THE MERGER
SECTION 6.1 Conditions to Obligation of Each Party to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) Effectiveness of the Registration Statement. The Registration
Statement shall have been declared effective by the SEC under the
Securities Act. No stop order suspending the effectiveness of the
Registration Statement shall have been issued by the SEC and no
proceedings for that purpose and no similar proceeding in respect of
the Joint Proxy Statement/Prospectus shall have been initiated or
threatened by the SEC;
(b) Stockholder Approval. The Merger and this Agreement shall
have been approved by the requisite vote of the stockholders of the
Company, and the Parent Common Stock Issuance shall have been approved
by the requisite vote of the stockholders of Parent, if required;
(c) Listing. The shares of Parent Common Stock issuable in the
Merger shall have been authorized for listing on the NYSE upon
official notice of issuance;
(d) HSR Act. All waiting periods applicable to the consummation
of the Merger under the HSR Act shall have expired or been terminated;
(e) Governmental Actions. There shall not have been instituted,
pending or threatened any action or proceeding (or any investigation
or other inquiry that might result in such an action or proceeding) by
any governmental authority or administrative agency before any
governmental authority, administrative agency or court of competent
jurisdiction, domestic or foreign, nor shall there be in effect any
judgment, decree or order of any governmental authority,
administrative agency or court of competent jurisdiction, or any other
legal restraint (i) preventing or seeking to prevent consummation of
the Merger, (ii) prohibiting or seeking to prohibit or limiting or
seeking to limit Parent from exercising all material rights and
privileges pertaining to its ownership of the Surviving Corporation or
the ownership or operation by Parent or any of its Subsidiaries of all
or a material portion of the business or
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assets of Parent or any of its Subsidiaries (including the Surviving
Corporation or any of its Subsidiaries), or (iii) compelling or
seeking to compel Parent or any of its Subsidiaries to dispose of or
hold separate all or any material portion of the business or assets of
Parent or any of its Subsidiaries (including the Surviving Corporation
and its Subsidiaries), as a result of the Merger or the transactions
contemplated by this Agreement;
(f) Illegality. No statute, rule, regulation or order shall be
enacted, entered, enforced or deemed applicable to the Merger which
makes the consummation of the Merger illegal;
(g) Opinions of Counsel. The Company shall have received the
written opinion of Kramer, Levin, Naftalis & Frankel, in form
reasonably satisfactory to the Company, as to certain customary
corporate and legal matters relating to Parent, Merger Sub, the
Merger, this Agreement and the transactions contemplated hereby.
Parent and Merger Sub shall have received the written opinion of Arter
& Hadden, in form reasonably satisfactory to Parent, as to certain
customary corporate and legal matters relating to the Company, the
Merger, this Agreement and the transactions contemplated hereby; and
(h) Tax Opinions. The Company shall have received a written
opinion of Arter & Hadden, and Parent shall have received a written
opinion of Kramer, Levin, Naftalis & Frankel, in form and substance
reasonably satisfactory to each of them to the effect that the Merger
will constitute a reorganization within the meaning of section 368 of
the Code. Each party agrees to make all reasonable representations and
covenants in connection with the rendering of such opinions.
(i) Pooling. The Merger shall be accounted for as a pooling of
interests.
SECTION 6.2 Additional Conditions to Obligations of Parent and Merger
Sub. The obligations of Parent and Merger Sub to effect the Merger are also
subject to the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company contained in this Agreement shall be true
and correct in all respects on and as of the Effective Time with the
same force and effect as if made on and as of the Effective Time,
except for (i) changes contemplated by this Agreement, (ii) those
representations and warranties which address matters only as of a
particular date (which shall have been true and correct as of such
date, subject to clause (iii)), or (iii) where the failure to be true
and correct would not reasonably be expected to have a Material
Adverse Effect, and Parent and Merger Sub shall have received a
certificate to such effect signed by the Chief Executive Officer and
Chief Financial Officer of the Company;
(b) Agreements and Covenants. The Company shall have performed or
complied in all material respects with all agreements and covenants
required by this
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Agreement to be performed or complied with by it on or prior to the
Effective Time, and Parent and Merger Sub shall have received a
certificate dated as of the Effective Time to such effect signed by
the Chief Executive Officer and Chief Financial Officer of the
Company;
(c) Consents Obtained. All material consents, waivers, approvals,
authorizations or orders required to be obtained, and all material
filings required to be made, by the Company for the authorization,
execution and delivery of this Agreement, the consummation by it of
the transactions contemplated hereby and the continuation in full
force and effect of any and all material rights, documents, agreements
or instruments of the Company shall have been obtained and made by the
Company, except where the failure to receive such consents, waivers,
approvals, authorizations or orders or make such filings would not
reasonably be expected to have a Material Adverse Effect on the
Surviving Corporation or Parent;
(d) Opinion of Accountant. Parent shall have received an opinion
of Arthur Andersen LLP, independent certified public accountants,
regarding the qualification of the Merger as a pooling of interests
for accounting purposes, and Company shall have received an opinion of
Arthur Andersen LLP, independent certified public accountants,
regarding the qualification of the Merger as a pooling of interests
for accounting purposes. Such opinions shall be in form and substance
reasonably satisfactory to Parent; and
(e) Affiliate Agreements. Parent shall have received from each
Person who is identified in the Affiliate Letter as an "affiliate" of
the Company, an Affiliate Agreement, and such Affiliate Agreement
shall be in full force and effect.
(f) Agreements with Warrant Holders. Parent shall have received
from each Warrant holder and from the holders of Stock Options to
purchase at least 2.5 million shares of Company Common Stock an
acknowledgement in form and substance reasonably satisfactory to
Parent that such Warrant and Stock Options from and after the
Effective Time are exercisable for shares of Parent Common Stock as
provided in section 1.6(c) of this Agreement.
SECTION 6.3 Additional Conditions to Obligation of the Company. The
obligation of the Company to effect the Merger is also subject to the following
conditions:
(a) Representations and Warranties. The representations and
warranties of Parent and Merger Sub contained in this Agreement shall
be true and correct in all respects on and as of the Effective Time
with the same force and effect as if made on and as of the Effective
Time, except for (i) changes contemplated by this Agreement, (ii)
those representations and warranties which address matters only as of
a particular date (which shall have been true and correct as of such
date, subject to clause (iii)), or (iii) where the failure to be true
and correct would not reasonably be expected to have a Material
Adverse Effect, and the Company shall have received a certificate to
such effect signed by the Chief Financial Officer of Parent;
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(b) Agreements and Covenants. Parent and Merger Sub shall have
performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with
by them on or prior to the Effective Time, and the Company shall have
received a certificate dated as of the Effective Time to such effect
signed by the President and Chief Financial Officer of Parent; and
(c) Consents Obtained. All material consents, waivers, approvals,
authorizations or orders required to be obtained, and all material
filings required to be made, by Parent or Merger Sub for the
authorization, execution and delivery of this Agreement, the
consummation by them of the transactions contemplated hereby and the
continuation in full force and effect of any and all material rights,
documents, agreements or instruments of Parent shall have been
obtained and made by Parent and Merger Sub, except where the failure
to receive such consents, waivers, approvals, authorizations or orders
or make such filings would not be reasonably be expected to have a
Material Adverse Effect on the Surviving Corporation or Parent, and
except where Parent has requested the Company to take such reasonable
actions, including the transfer of assets and the execution of
management agreements or similar arrangements with Affiliates of the
Company, where, as a result of the consummation of such actions, the
failure to receive such consents, waivers, approvals, authorizations
or orders would not have a Material Adverse Effect on the Surviving
Corporation or Parent.
ARTICLE VII
TERMINATION
SECTION 7.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, notwithstanding approval thereof by the
stockholders of the Company or Parent:
(a) by mutual written consent duly authorized by the Boards of
Directors of Parent and the Company; or
(b) by either Parent or the Company if the Merger shall not have
been consummated by February 28, 1998 (provided that the right to
terminate this Agreement under this Section 7.1(b) shall not be
available (i) to any party whose failure to fulfill any obligation
under this Agreement has been the cause of or resulted in the failure
of the Merger to occur on or before such date or (ii) to Parent in the
event that a Material Parent Transaction has been the cause of or
resulted in the failure of the Merger to occur on or before such
date); or
(c) by either Parent or the Company if a court of competent
jurisdiction or governmental, regulatory or administrative agency or
commission shall have issued a
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nonappealable final order, decree or ruling or taken any other action
having the effect of permanently restraining, enjoining or otherwise
prohibiting the Merger (provided that the right to terminate this
Agreement under this Section 7.1(c) shall not be available to any
party who has not complied with its obligations under Section 5.9 and
such noncompliance materially contributed to the issuance of any such
order, decree or ruling or the taking of such action); or
(d) by either Parent or the Company if :
(i) subject to clause (iii) below, (x) the requisite vote of the
stockholders of the Company shall not have been obtained by
February 28, 1998, or (y) if required, the requisite vote of the
stockholders of Parent shall not have been obtained by February
28, 1998 ;
(ii) (x) the stockholders of the Company shall not have approved
the Merger and this Agreement at the Company Stockholders Meeting
or (y) if required, the stockholders of Parent shall not have
approved the Parent Common Stock Issuance at the Parent
Stockholders Meeting;
(iii) in the event that a Material Parent Transaction prevents
holding the Company Stockholders Meeting or the Parent
Stockholders Meeting, as the case may be, by February 28, 1998,
(x) the requisite vote of the stockholders of the Company shall
not have been obtained by the earlier of (1) the 45th consecutive
day that the Registration Statement is effective and (2) December
31, 1998 or (y) if required, the requisite vote of the
stockholders of Parent shall not have been obtained by the
earlier of (1) the 45th consecutive day that the Registration
Statement is effective and (2) December 31, 1998; or
(e) by the Company or Parent, if the Board of Directors of the
Company shall withdraw, modify or change its approval of this
Agreement or the Merger in a manner adverse to Parent or Merger Sub or
shall have resolved to do so, in each case in compliance with the
provisions of Section 4.2; or
(f) by Parent or the Company if any representation or warranty of
the Company, or Parent and Merger Sub, respectively, set forth in this
Agreement shall be untrue when made, such that the conditions set
forth in Sections 6.2(a) or 6.3(a), as the case may be, would not be
satisfied (a "Terminating Misrepresentation"); provided, however,
that, if such Terminating Misrepresentation is curable prior to the
Closing Date by the Company or Parent, as the case may be, through the
exercise of its commercially reasonable efforts and for so long as the
Company or Parent, as the case may be, continues to exercise such
commercially reasonable efforts, neither Parent nor the Company,
respectively, may terminate this Agreement under this Section 7.1(f);
or
(g) by Parent if any representation or warranty of the Company
shall have become untrue such that the condition set forth in Section
6.2(a) would not be
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satisfied (a "Company Terminating Change"), or by the Company if any
representation or warranty of Parent and Merger Sub shall have become
untrue such that the condition set forth in Section 6.3(a) would not
be satisfied (a "Parent Terminating Change" and together with a
Company Terminating Change, a "Terminating Change"), in either case
other than by reason of a Terminating Breach (as hereinafter defined);
provided, however, that if any such Terminating Change is curable
prior to Closing Date by the Company or Parent, as the case may be,
through the exercise of its commercially reasonable efforts, and for
so long as the Company or Parent, as the case may be, continues to
exercise such commercially reasonable efforts, neither Parent nor the
Company, respectively, may terminate this Agreement under this Section
7.1(g); or
(h) by Parent or the Company upon a breach of any covenant or
agreement on the part of the Company or Parent, respectively, set
forth in this Agreement, such that the conditions set forth in
Sections 6.2(b) or 6.3(b), as the case may be, would not be satisfied
(a "Terminating Breach"); provided, however, that, if such Terminating
Breach is curable prior to the Closing Date by the Company or Parent,
as the case may be, through the exercise of its commercially
reasonable efforts and for so long as the Company or Parent, as the
case may be, continues to exercise such commercially reasonable
efforts, neither Parent nor the Company, respectively, may terminate
this Agreement under this Section 7.1(h); or
(i) by the Company, if (x) the Average Stock Price for the twenty
(20) consecutive trading days ending on the third trading day prior to
the Company Stockholders Meeting is less than $20.40, (y) on or before
the second trading day prior to the date of the Company Stockholders
Meeting, the Company delivers to Parent written notice of its
intention, subject to the following clause (z), to terminate this
Agreement, and (z) Parent has not agreed by notice to the Company in
writing on or before one trading day prior to the date of the Company
Stockholders Meeting to an Exchange Ratio at least equal to $18.90
divided by the Average Stock Price. In the event Parent delivers its
notice specified in clause (z) of this Section 7.1(i), the Company
shall not have the right to terminate this Agreement pursuant to this
Section 7.1(i); or
(j) by Parent, if the Average Stock Price is less than $20.40.
SECTION 7.2 Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 7.1, this Agreement shall forthwith become
void and there shall be no liability on the part of any party hereto or of any
of its Affiliates, directors, officers or stockholders except (i) as set forth
in Section 7.3 and Section 8.1, and (ii) nothing herein shall relieve any party
from liability for any breach hereof.
SECTION 7.3 Fees and Expenses. (a) Except as set forth in this Section
7.3, all fees and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses, whether or not the Merger is consummated; provided, however, that
Parent and the Company shall share
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equally all SEC filing fees and printing expenses incurred in connection with
the printing and filing of the Joint Proxy Statement/Prospectus (including any
preliminary materials related thereto) and the Registration Statement (including
financial statements and exhibits) and any amendments or supplements thereto.
(b) The Company shall pay Parent a fee of $11,000,000 upon (i) the
termination of this Agreement pursuant to Section 7.1(d)(i)(x) or Section
7.1(d)(iii)(x)(1), provided that in either such case, such failure to obtain the
requisite vote is the result of a Terminating Misrepresentation by the Company
or a Terminating Breach by the Company, (ii) the termination of this Agreement
pursuant to Section 7.1(d)(ii)(x), provided, the average of the closing prices
(or the average of the closing bid and asked prices for any day on which the
Parent Common Stock does not trade) of the Parent Common Stock on the NYSE for
the three trading days immediately prior to the Company Stockholders Meeting is
not below $20.40, (iii) the termination of this Agreement pursuant to Section
7.1(e) or (iv) the termination of this Agreement for any reason other than a
Terminating Breach by Parent, a Terminating Misrepresentation by Parent, a
Terminating Change or pursuant to Section 7.1(a), Section 7.1(c), Section
7.1(d)(i)(y), (ii)(y) or (iii)(y)(1), Section 7.1(i) or Section 7.1(j), and the
Company enters into an agreement with a third party within six months of the
date of the termination of this Agreement relating to the possible acquisition
of the Company or any of its Subsidiaries (whether by way of merger, purchase of
capital stock, purchase of assets or otherwise) or any material portion of its
or their capital stock or assets.
(c) Parent shall pay the Company a fee of $11,000,000 upon (i) the
termination of this Agreement pursuant to Section 7.1(d)(i)(y) or Section
7.1(d)(iii)(y)(1), provided that in either such case, such failure to obtain the
requisite vote is the result of a Terminating Misrepresentation by Parent or a
Terminating Breach by Parent or (ii) the termination of this Agreement pursuant
to Section 7.1(d)(ii)(y).
(d) Upon termination of this Agreement by either Parent or the Company,
the respective parties hereto may seek any and all remedies available to it
under applicable law.
(e) The fee payable pursuant to Section 7.3(b) or 7.3(c) shall be paid
within one Business Day after a demand for payment following the occurrence of
any of the events described in Section 7.3(b) or Section 7.3(c); provided,
however, that, in no event shall the Company or Parent, as the case may be, be
required to pay such fee to the other party, if, immediately prior to the
termination of this Agreement, the party entitled to receive such fee was in
material breach of its obligations under this Agreement.
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ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 Effectiveness of Representations, Warranties and
Agreements. (a) Except as otherwise provided in this Section 8.1, the
representations, warranties, covenants and agreements of each party hereto shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of any other party hereto, any Person controlling any such
party or any of their officers, directors or representatives, whether prior to
or after the execution of this Agreement. The representations, warranties and
agreements in this Agreement shall terminate at the Effective Time or upon the
termination of this Agreement pursuant to Section 7.1, as the case may be,
except that the covenants and agreements set forth in Article I and Section 5.7
or 7.2 shall survive the Effective Time and those set forth in Section 7.3 shall
survive such termination. The Confidentiality Letter shall survive termination
of this Agreement as provided therein.
(b) Any disclosure made with reference to one or more Sections of the
Company Disclosure Schedule or the Parent Disclosure Schedule shall be deemed
disclosed with respect to each other section therein as to which such disclosure
is relevant provided that such relevance is reasonably apparent. Disclosure of
any matter in the Company Disclosure Schedule or the Parent Disclosure Schedule
shall not be deemed an admission that such matter is material.
SECTION 8.2 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 if and when delivered personally or by overnight courier to the parties
at the following addresses or sent by electronic transmission, with confirmation
received, to the telecopy numbers specified below (or at such other address or
telecopy number (or to such other Person's attention) for a party as shall be
specified by like notice):
(a) If to Parent or Merger Sub:
LCI International, Inc.
8180 Greensboro Drive
Suite 800
McLean, VA 22102
Telecopier No.: (703)714-1750
Telephone No.: (703) 848-4446
Attention: Lee M. Weiner, Esq.
Vice President and General Counsel
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With a copy to:
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, NY 10022
Telecopier No.: (212) 715-8000
Telephone No.: (212) 715-9100
Attention: Peter S. Kolevzon, Esq.
(b) If to the Company:
USLD Communications Corp.
9311 San Pedro, Suite 100
San Antonio, TX 78216
Telecopier No.: (210) 525-0389
Telephone No.: (210) 525-9009
Attention: W. Audie Long, Esq.
General Counsel
With a copy to:
Arter & Hadden
1717 Main Street, Suite 4100
Dallas, Texas 75201
Telecopier No.: (214) 741-7139
Telephone No.: (214) 761-4779
Attention: Joseph A. Hoffman, Esq.
SECTION 8.3 Certain Definitions. For purposes of this Agreement, the
term:
(a) "Affiliates" means a Person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is
under common control with, the first mentioned Person;
(b) "Business Day" means any day other than a day on which banks
in New York are required or authorized to be closed;
(c) "control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly or
as trustee or executor, of the power to direct or cause the direction
of the management or policies of a Person, whether through the
ownership of stock, as trustee or executor, by contract or credit
arrangement or otherwise;
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(d) "Knowledge" means the actual knowledge of the directors and
executive officers of such Person and its significant Subsidiaries who
are listed in Section 8.3 of the Company Disclosure Schedule, with
respect to the Company and its Subsidiaries, and Section 8.3 of the
Parent Disclosure Schedule, with respect to Parent and its
Subsidiaries.
(e) "Person" means an individual, corporation, partnership,
limited liability company, association, trust, unincorporated
organization other entity or group (as defined in Section 13(d)(3) of
the Exchange Act); and
(f) "Subsidiary" or "Subsidiaries" of the Company, the Surviving
Corporation, Parent or any other Person means any significant
corporation, partnership, limited liability company, or other legal
entity of which the Company, the Surviving Corporation, Parent or such
other Person, as the case may be (either alone or through or together
with any other Subsidiary), owns, directly or indirectly, more than
50% 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.
SECTION 8.4 Amendment. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective Boards of Directors
at any time prior to the Effective Time; provided, however, that, after approval
of the Merger and this Agreement by the stockholders of the Company, no
amendment may be made which by law requires further approval by such
stockholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed by the parties hereto.
SECTION 8.5 Waiver. At any time prior to the Effective Time, any party
hereto may with respect to any other party hereto (a) extend the time for the
performance of any of the obligations or other acts, (b) waive any inaccuracies
in the representations and warranties contained herein or in any document
delivered pursuant hereto, or (c) waive compliance with any of the agreements or
conditions contained herein. Any such extension or waiver shall be valid if set
forth in an instrument in writing signed by the party or parties to be bound
thereby.
SECTION 8.6 Headings; Construction. 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. In this Agreement (a) words
denoting the singular include the plural and vice versa, (b) "it" or "its" or
words denoting any gender include all genders, (c) the word "including" shall
mean "including without limitation," whether or not expressed, (d) any reference
to a statute shall mean the statute and any regulations thereunder in force as
of the date of this Agreement or the Effective Time, as applicable, unless
otherwise expressly provided, (e) any reference herein to a Section, Article or
Schedule refers to a Section or Article of or a Schedule to this Agreement,
unless otherwise stated, (f) when calculating the period of time within or
following which any act is to be done or steps taken, the date which is the
reference day in calculating such period shall be excluded and if the last day
of such
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period is not a Business Day, then the period shall end on the next day which is
a Business Day, and (g) any reference to a party's "best efforts" or
"commercially reasonable efforts" or like or similar phrases shall not include
any obligation of such party to pay, or guarantee the payment of, money or other
consideration to any third party or to agree to the imposition on such party or
its Affiliates of any condition reasonably considered by such party to be
materially burdensome to such party or its Affiliates.
SECTION 8.7 Severability. (a) 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
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent reasonably
possible.
(b) The Company and Parent agree that the fees provided in Sections
7.3(b) and 7.3(c) are fair and reasonable in the circumstances. If a court of
competent jurisdiction shall nonetheless, by a final, non-appealable judgment,
determine that the amount of any such fee exceeds the maximum amount permitted
by law, then the amount of such fee shall be reduced to the maximum amount
permitted by law in the circumstances, as determined by such court of competent
jurisdiction.
SECTION 8.8 Entire Agreement. This Agreement, together with any written
agreements relating to the transactions contemplated hereby entered into
contemporaneously with this Agreement, constitutes the entire agreement and
supersedes all prior agreements and undertakings (other than the Confidentiality
Letter), both written and oral, among the parties, or any of them, with respect
to the subject matter hereof, except as otherwise expressly provided herein.
SECTION 8.9 Assignment; Merger Sub. This Agreement shall not be
assigned by operation of law or otherwise, except that all or any of the rights
of Merger Sub hereunder may be assigned to any direct, wholly-owned Subsidiary
of Parent provided that no such assignment shall relieve the assigning party of
its obligations hereunder. Parent guarantees the full and punctual performance
by Merger Sub of all the obligations hereunder of Merger Sub or any such
assignees.
SECTION 8.10 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 other
Person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, including, without limitation, by way of subrogation, other
than Section 5.7 (which is intended to be for the benefit of the Indemnified
Parties and Officer Employees and may be enforced by such Indemnified Parties
and Officer Employees).
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SECTION 8.11 Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty, covenant or
agreement herein, nor shall any single or partial exercise of any such right
preclude other or further exercise thereof or of any other right. All rights and
remedies existing under this Agreement are cumulative to, and not exclusive of,
any rights or remedies otherwise available.
SECTION 8.12 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Delaware
applicable to contracts executed and fully performed within the State of
Delaware.
SECTION 8.13 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.
SECTION 8.14 WAIVER OF JURY TRIAL. EACH OF PARENT, MERGER SUB AND THE
COMPANY, AND EACH INDEMNIFIED PARTY AND OFFICER EMPLOYEE, HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY.
[This space intentionally left blank.]
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IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
LCI INTERNATIONAL, INC.
By /s/ H. Brian Thompson
-------------------------------
H. Brian Thompson
Chairman of the Board and
Chief Executive Officer
LCI ACQUISITION CORP.
By /s/ H. Brian Thompson
--------------------------------
H. Brian Thompson
Chairman of the Board and
Chief Executive Officer
USLD COMMUNICATIONS CORP.
By /s/ Larry M. James
-------------------------------
Larry M. James
Chairman of the Board,
Chief Executive Officer and
President
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