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AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF JUNE 24, 1999
BY AND AMONG
OMNILYNX COMMUNICATIONS CORPORATION
AND
AXCES ACQUISITION, INC.
AND
AXCES, INC.
AND
MTM HOLDINGS CORPORATION
AND ITS
STOCKHOLDERS NAMED HEREIN
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1. Certain Defined Terms. . . . . . . . . . . . . . . . . . . . . 1
Section 1.2. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE II
THE MERGER AND RELATED MATTERS. . . . . . . . . . . . . . . . . . . . . . . . 18
Section 2.1. Certificate of Merger. . . . . . . . . . . . . . . . . . . . . 18
Section 2.2. The Effective Time . . . . . . . . . . . . . . . . . . . . . . 18
Section 2.3. Certain Effects of the Merger. . . . . . . . . . . . . . . . . 18
Section 2.4. Effect of the Merger on Capital Stock. . . . . . . . . . . . . 19
Section 2.5. Delivery, Exchange and Payment . . . . . . . . . . . . . . . . 19
Section 2.6. Fractional Shares. . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERAND EACH MTM
STOCKHOLDER JOINTLY AND SEVERALLY . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.1. Investment Representations . . . . . . . . . . . . . . . . . . 21
Section 3.2. Ownership and Status of Company Capital Stock. . . . . . . . . 21
Section 3.3. Power of the Stockholder; Approval of the Merger . . . . . . . 21
Section 3.4. No Conflicts or Litigation . . . . . . . . . . . . . . . . . . 22
Section 3.5. No Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.6. Preemptive and Other Rights; Waiver. . . . . . . . . . . . . . 23
Section 3.7. Control of Related Businesses. . . . . . . . . . . . . . . . . 23
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY, THE STOCKHOLDER AND
THE MTM STOCKHOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 4.1. Organization . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 4.2. Qualification. . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 4.3. Authorization; Enforceability; Absence of Conflicts;
Required Consents. . . . . . . . . . . . . . . . . . . . . . . 24
Section 4.4. Charter Documents and Records; No Violation. . . . . . . . . . 25
Section 4.5. No Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.6. Company Subsidiaries . . . . . . . . . . . . . . . . . . . . . 25
Section 4.7. Capital Stock of the Company . . . . . . . . . . . . . . . . . 25
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Section 4.8. Transactions in Capital Stock. . . . . . . . . . . . . . . . . 26
Section 4.9. No Bonus Shares. . . . . . . . . . . . . . . . . . . . . . . . 26
Section 4.10. Predecessor Status; etc. . . . . . . . . . . . . . . . . . . . 26
Section 4.11. Related Party Agreements . . . . . . . . . . . . . . . . . . . 26
Section 4.12. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 4.13. Financial Statements; Disclosure . . . . . . . . . . . . . . . 26
Section 4.14. Compliance With Laws . . . . . . . . . . . . . . . . . . . . . 27
Section 4.15. Certain Environmental Matters. . . . . . . . . . . . . . . . . 28
Section 4.16. Liabilities and Obligations. . . . . . . . . . . . . . . . . . 28
Section 4.17. Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.18. Owned and Leased Real Properties . . . . . . . . . . . . . . . 29
Section 4.19. Owned and Leased Personal Property . . . . . . . . . . . . . . 30
Section 4.20. Proprietary Rights . . . . . . . . . . . . . . . . . . . . . . 31
Section 4.21. Title to Other Properties. . . . . . . . . . . . . . . . . . . 33
Section 4.22. Commitments. . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 4.23. Capital Expenditures . . . . . . . . . . . . . . . . . . . . . 34
Section 4.24. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 4.25. Employee Matters . . . . . . . . . . . . . . . . . . . . . . . 35
Section 4.26. Compliance With ERISA, etc.. . . . . . . . . . . . . . . . . . 37
Section 4.27. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 4.28. Government Contracts . . . . . . . . . . . . . . . . . . . . . 40
Section 4.29. Absence of Change. . . . . . . . . . . . . . . . . . . . . . . 41
Section 4.30. Bank Relations; Powers of Attorney . . . . . . . . . . . . . . 42
Section 4.31. No Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND MERGER SUB . . . . . . . . . 43
Section 5.1. Merger Sub . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 5.2. Organization; Power. . . . . . . . . . . . . . . . . . . . . . 43
Section 5.3. Authorization; Enforceability; Absence of Conflicts;
Required Consents. . . . . . . . . . . . . . . . . . . . . . . 43
Section 5.4. Charter Documents. . . . . . . . . . . . . . . . . . . . . . . 44
Section 5.5. Capital Stock of Purchaser and Merger Sub. . . . . . . . . . . 45
Section 5.6. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 5.7. Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 5.8. Compliance With Laws; No Litigation. . . . . . . . . . . . . . 46
Section 5.9. No Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 5.10. Private Placement Memorandum . . . . . . . . . . . . . . . . . 46
Section 5.11. Registration and Other Rights. . . . . . . . . . . . . . . . . 46
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ARTICLE VI
COVENANTS EXTENDING TO THE EFFECTIVE TIME . . . . . . . . . . . . . . . . . . 47
Section 6.1. Access and Cooperation; Due Diligence. . . . . . . . . . . . . 47
Section 6.2. Conduct of Business Pending Closing. . . . . . . . . . . . . . 48
Section 6.3. Prohibited Activities. . . . . . . . . . . . . . . . . . . . . 49
Section 6.4. No Shop: Release of Directors. . . . . . . . . . . . . . . . . 50
Section 6.5. Notification of Certain Matters. . . . . . . . . . . . . . . . 51
Section 6.6. Supplemental Information . . . . . . . . . . . . . . . . . . . 51
Section 6.7. Cooperation in Connection With the IPO . . . . . . . . . . . . 52
Section 6.8. HSR Act Matters. . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE VII
THE CLOSING AND CONDITIONS TO CLOSING AND CONSUMMATION. . . . . . . . . . . . 53
Section 7.1. The Closing and Certain Conditions . . . . . . . . . . . . . . 53
Section 7.2. Conditions to the Obligations of Each Party. . . . . . . . . . 54
Section 7.3. Conditions to the Obligations of the Company, the
Stockholder and the MTM Stockholders . . . . . . . . . . . . . 55
Section 7.4. Conditions to the Obligations of Purchaser and Merger Sub. . . 56
ARTICLE VIII
COVENANTS FOLLOWING THE EFFECTIVE TIME. . . . . . . . . . . . . . . . . . . . 57
Section 8.1. Of Each Party Other Than the Company . . . . . . . . . . . . . 57
Section 8.2. Tax Liability. . . . . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE IX
INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 9.1. Survival of Representations and Warranties . . . . . . . . . . 59
Section 9.2. Indemnification of Purchaser Indemnified Parties . . . . . . . 59
Section 9.3. Indemnification of Stockholder Indemnified Parties . . . . . . 60
Section 9.4. Conditions of Indemnification. . . . . . . . . . . . . . . . . 61
Section 9.5. Remedies Exclusive . . . . . . . . . . . . . . . . . . . . . . 63
Section 9.6. Limitations on Indemnification . . . . . . . . . . . . . . . . 63
ARTICLE X
LIMITATIONS ON COMPETITION. . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 10.1. Prohibited Activities. . . . . . . . . . . . . . . . . . . . . 64
Section 10.2. Damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 10.3. Reasonable Restraint . . . . . . . . . . . . . . . . . . . . . 65
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Section 10.4. Severability; Reformation. . . . . . . . . . . . . . . . . . . 65
Section 10.5. Independent Covenant . . . . . . . . . . . . . . . . . . . . . 66
Section 10.6. Materiality. . . . . . . . . . . . . . . . . . . . . . . . . . 66
ARTICLE XI
TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 11.1. Termination of This Agreement. . . . . . . . . . . . . . . . . 66
Section 11.2. Liabilities in Event of Termination. . . . . . . . . . . . . . 67
ARTICLE XII
GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 12.1. Treatment of Confidential Information. . . . . . . . . . . . . 67
Section 12.2. Restrictions on Transfers of Purchaser Common Stock. . . . . . 69
Section 12.3. Brokers and Agents . . . . . . . . . . . . . . . . . . . . . . 71
Section 12.4. Assignment; No Third Party Beneficiaries . . . . . . . . . . . 71
Section 12.5. Entire Agreement; Amendment; Waivers . . . . . . . . . . . . . 71
Section 12.6. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 12.7. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 12.8. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 12.9. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . 73
Section 12.10. Exercise of Rights and Remedies. . . . . . . . . . . . . . . . 73
Section 12.11. Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 12.12. Reformation and Severability . . . . . . . . . . . . . . . . . 74
Section 12.13. Respecting the IPO . . . . . . . . . . . . . . . . . . . . . . 74
Section 12.14. Termination of the AXCES, Inc. 401(k) Plan . . . . . . . . . . 74
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "AGREEMENT") is made as
of June 24, 1999, among OmniLynx Communications Corporation, a Delaware
corporation ("PURCHASER"), AXCES Acquisition, Inc., a Delaware corporation and a
wholly owned subsidiary of Purchaser ("MERGER SUB"), AXCES, Inc., a Delaware
corporation (the "COMPANY"), MTM Holdings Corporation, a Texas corporation
("STOCKHOLDER"), and the persons listed on the signature pages of this Agreement
under the caption "MTM STOCKHOLDERS".
PRELIMINARY STATEMENTS
The parties to this Agreement wish to effect a business combination
pursuant to which:
(1) The Company will merge with and into Merger Sub (the
"MERGER") on the terms and subject to the conditions of this Agreement;
(2) Purchaser will acquire the stock of the entities other
than the Company identified in the accompanying Addendum I (each an
"OTHER FOUNDING COMPANY" and, collectively with the Company, the
"FOUNDING COMPANIES") under agreements entered into among the Other
Founding Companies, their stockholders, Purchaser and other subsidiaries
of Purchaser (collectively, the "OTHER AGREEMENTS"); and
(3) Following the Merger, Purchaser will effect a public
offering of shares of its common stock.
The respective boards of directors of Purchaser, Merger Sub, the Company
and the Stockholder have approved and adopted this Agreement to effect a
transaction involving a reorganization described in Section 368 of the Code.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, representations and undertakings contained in this Agreement, the
parties to this Agreement agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms have the meanings assigned to them below in this Section 1.1:
"ACQUISITION PROPOSAL" has the meaning specified in Section 6.4.
"AFFILIATE" means, as to any specified Person, any other Person
who, directly or indirectly through one or more intermediaries or
otherwise, controls, is controlled by or is under common control with the
specified Person. As used in this definition, "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person (whether through
ownership of Capital Stock of the Person, by contract, or otherwise).
"AGREED SETTLEMENT COSTS" means the actual out-of-pocket amounts
paid by the Company to settle any Litigation shown on SCHEDULE 4.12 in
order to cause an order dismissing such Litigation with prejudice to
be entered, or if such Litigation is not subject to such an order
being entered, an equivalent, final settlement thereof, and as to
which the Purchaser has given its prior written consent to the
settlement terms thereof and the amount of the settlement payment,
which consent shall not be unreasonably withheld.
"AGREEMENT" means this Agreement, including all attached
Schedules, Addenda, Annexes and Exhibits, as each of them may be amended,
modified or supplemented from time to time under their provisions or the
provisions of this Agreement.
"ALLOWABLE NEW INDEBTEDNESS" shall mean Indebtedness incurred by
the Company (i) not exceeding the principal amount of $3,000,000 in the
aggregate, (ii) bearing interest at not greater than the prime rate of
interest, as quoted by THE WALL STREET JOURNAL, plus 3%, (iii) incurred
not more than 30 days prior to the Closing, (iv) which is solely used to
fund distributions to the Stockholder allowed under Section 6.3(c), (v)
which may be repaid following the IPO Closing Date without penalty, and
(vi) the principal and all accrued interest of which is due and payable
not more than one year from the date of incurrence thereof.
"BUSINESS DAY" means a day other than Saturday, Sunday or any day
on which banks located in New York, New York or Houston, Texas are
authorized or obligated to close.
"CAPITAL LEASE" means a lease of (or other agreement conveying the
right to use) real or personal property that is required to be classified
and accounted for as a capital lease under GAAP as in effect on the date
of this Agreement.
"CAPITAL STOCK" means, with respect to: (a) any corporation, any
share, or any depositary receipt or other certificate representing any
share, of an equity ownership interest in the corporation; and (b) any
other Entity, any share, membership or other percentage interest, unit of
participation or other equivalent (however designated) of an equity
interest in the Entity.
"CASH COMPENSATION" means, as applied to any employee, nonemployee
director or officer of, or any natural person who performs consulting or
other independent contractor services for, the Company, the wages,
salaries, cash bonuses (discretionary and formula),
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fees and other cash compensation paid or payable by the Company to
that employee or other natural person.
"CEILING AMOUNT" means an amount equal to (i) the sum of (a) the
aggregate number of shares of Purchaser Common Stock issued to the
Stockholder as part of the Merger Consideration, plus (b) the aggregate
number of shares of Purchaser Common Stock that would be issuable if all
Purchaser Preferred Stock issued to the Stockholder as part of the Merger
Consideration was converted on the IPO Closing Date into Purchaser Common
Stock in accordance with the provisions thereof, times (ii) the IPO
Price.
"CERCLA" means the Comprehensive Environmental Response,
Conservation, and Liability Act of 1980, as amended.
"CERTIFICATE OF MERGER" means: the certificate of merger
respecting the Merger which contains the information required by the DGCL
to effect the Merger.
"CHARTER DOCUMENTS" means, with respect to any Entity at any time,
in each case as amended, modified and supplemented at that time, the
articles or certificate of formation, incorporation or organization (or
the equivalent organizational documents) of the Entity, (b) the bylaws or
limited liability company agreement or regulations (or the equivalent
governing documents) of the Entity, and (c) each document setting forth
the designation, amount and relative rights, limitations and preferences
of any class or series of the Entity's Capital Stock or of any rights in
respect of the Entity's Capital Stock.
"CLAIM NOTICE" has the meaning specified in Section 9.4.
"CLOSING" has the meaning specified in Section 7.1(a).
"CLOSING DATE" means the date of the Closing.
"CLOSING MEMORANDUM" means the form of closing memorandum to be
prepared by Purchaser for the Closing, in which there shall be included
the forms of certificates of officers, the opinions of counsel and
certain other documents to be delivered at the Closing as provided in
Article VII.
"CLOSING PRICE" shall mean the last reported sales price regular
way or, in case no such reported sale takes place on such day, the
average of the reported closing bid and asked prices regular way, in
either case on the principal national securities exchange on which the
Purchaser Common Stock is listed or admitted to trading or, if not listed
or admitted to trading on any national securities exchange, on the
National Association of Securities Dealers Automated Quotations National
Market System, or, if the Purchaser Common Stock is not listed or
admitted to trading on any national securities exchange or quoted on such
National Market System, the average of the closing bid and asked prices
in the
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over-the-counter market as furnished by any New York Stock Exchange
member firm selected from time to time by Purchaser for that purpose.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY COMMITMENT" has the meaning specified in Section 4.22.
"COMPANY COMMON STOCK" means the common stock, par value $1.00 per
share, of the Company.
"COMPANY DEFERRED TAX LIABILITY" shall mean the deferred tax
liability of the Company as shown on the Current Balance Sheet.
"COMPANY ERISA BENEFIT PLAN" has the meaning specified in Section
4.25(d).
"COMPANY ERISA PENSION PLAN" has the meaning specified in Section
4.25(d).
"COMPANY ERISA GROUP" means any "group of organizations" within
the meaning of Section 414(b), (c), (m) or (o) of the Code, or any
"controlled group" as defined in Section 4001(a)(14) of ERISA, of which
the Company is a member.
"COMPANY WORKING CAPITAL" shall mean the working capital of the
Company as determined in accordance with GAAP.
"CONFIDENTIAL INFORMATION" means, with respect to any Person, all
trade secrets and other confidential, nonpublic and/or proprietary
information of that Person, including information derived from designs,
reports, investigations, research, testing, development,
work-in-progress, codes, marketing and sales programs, capital
expenditure projects, cost summaries, pricing formulae, contract
analyses, financial information, projections, confidential filings
with any Governmental Authority and any other confidential, nonpublic
concepts, methods of doing business, ideas, materials or information
prepared or performed for, by or on behalf of that Person.
"COUNSEL FOR PURCHASER AND MERGER SUB" means Xxxxxx & Xxxxxx,
L.L.P.
"COUNSEL FOR THE COMPANY, THE STOCKHOLDER AND THE MTM
STOCKHOLDERS" means Verner, Liipfert, Bernhard, XxXxxxxxx and Hand
Chartered.
"CURRENT BALANCE SHEET" means the unaudited balance sheet of the
Company at March 31, 1999, which is included in the Initial Financial
Statements.
"CURRENT BALANCE SHEET DATE" means March 31, 1999.
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"CURRENT DATE" means any day during the 20-day period ending on
the date of the Closing.
"CURRENT MARKET PRICE" means (i) the average of the daily Closing
Prices of the Purchaser Common Stock for the 20 consecutive Trading Days
immediately preceding the date of determination thereof, or (ii) if the
Purchaser Common Stock is not listed on any national securities exchange
or quoted on the National Association of Securities Dealers Automated
Quotations National Market System or in the over-the-counter market, the
Fair Market Value.
"DAMAGE" to any specified Person means any cost, damage (including
any consequential, exemplary, punitive or treble damage) or expense
(including reasonable and necessary or appropriate fees and actual
expenses of and disbursements by attorneys, consultants, experts or other
Representatives and Litigation costs) to, any fine of or penalty on, or
any liability (including loss of earnings or profits) of any other nature
of, that Person.
"DAMAGE CLAIM" means, as asserted (a) against any specified
Person, any claim, demand or Litigation made or pending against that
Person for Damages to any other Person, or (b) by the specified Person,
any claim or demand of the specified Person against any other Person for
Damages to the specified Person.
"DERIVATIVE SECURITIES" of a specified Entity means any Capital
Stock or debt security or other Indebtedness of the specified Entity or
any other Person which is convertible into or exchangeable for, or any
option, warrant or other right to acquire, (a) any unissued Capital Stock
of the specified Entity or (b) any Capital Stock of the specified Entity
which has been issued and is being held by the Entity directly or
indirectly as treasury Capital Stock.
"DGCL" means the General Corporation Law of the State of Delaware.
"EFFECTIVE TIME" has the meaning specified in Section 2.2.
"ELECTION PERIOD" has the meaning specified in Section 9.4(b).
"EMPLOYEE POLICIES AND PROCEDURES" means at any time all employee
manuals and all material policies, procedures and work-related rules that
apply at that time to any employee, nonemployee director or officer of,
or any other natural person performing consulting or other independent
contractor services for, the Company.
"EMPLOYMENT AGREEMENT" means at any time (a) any agreement to
which the Company is a party which then relates to the direct or indirect
employment or engagement, or arises from the past employment or
engagement, of any natural person by the Company, whether as an employee,
a nonemployee officer or director, a consultant or other independent
5
contractor, a sales representative or a distributor of any kind,
including any employee leasing or service agreement and any
noncompetition agreement, and (b) any agreement between the Company and
any Person which arises from the sale of a business by that Person to the
Company or and limits that Person's competition with the Company.
"ENTITY" means any sole proprietorship, corporation, partnership
of any kind having a separate legal status, limited liability company,
business trust, unincorporated organization or association, mutual
company, joint stock company or joint venture.
"ENVIRONMENTAL LAWS" means any and all Governmental Requirements
relating to the environment or worker health or safety, including ambient
air, surface water, land surface or subsurface strata, or to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals or industrial, toxic or hazardous substances or wastes
(including Solid Wastes, Hazardous Wastes or Hazardous Substances) or
noxious noise or odor into the environment or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
recycling, removal, transport or handling of pollutants, contaminants,
chemicals or industrial, toxic or hazardous substances or wastes
(including petroleum, petroleum distillates, asbestos or
asbestos-containing material, polychlorinated biphenyls,
chlorofluorocarbons or hydrochlorofluorocarbons).
"ERISA" means the Employee Retirement Income Security Act of 1974.
"ERISA AFFILIATE" means, with respect to any specified Person at
any time, any other Person, including an Affiliate of the specified
Person, that is, or at any time within six years prior to that time was,
a member of any ERISA Group of which the specified Person is or was a
member at the same time.
"ERISA AFFILIATE PENSION PLAN" has the meaning specified in
Section 4.25(d).
"ERISA EMPLOYEE BENEFIT PLAN" means any "employee benefit plan" as
defined in Section 3(3) of ERISA and includes any ERISA Pension Benefit
Plan.
"ERISA PENSION BENEFIT PLAN" means any "employee pension benefit
plan," as defined in Section 3(2) of ERISA, including any plan that is
covered by Title IV of ERISA or subject to the minimum funding standards
under Section 412 of the Code (excluding any Multiemployer Plan).
"EXCESS TAX OBLIGATIONS" has the meaning specified in Section 8.2.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FAIR MARKET VALUE" shall mean the fair value of the Purchaser
Common Stock as determined by an independent investment banking or
appraisal firm experienced in the
6
valuation of such securities or property selected in good faith by the
Board of Directors of Purchaser or a committee thereof, or, if no such
investment banking or appraisal firm is, in the good faith judgment of
the Board of Directors or such committee, available to make such
determination, as determined in good faith by the Board of Directors
of Purchaser or such committee. Any determination of Fair Market Value
by an investment banking or appraisal firm, the Board of Directors or
a committee thereof shall be conclusive and described in a board
resolution.
"FINAL PROSPECTUS" means the prospectus included in the
Registration Statement at the time it becomes effective, except that if
the prospectus first furnished to the Underwriter after the Registration
Statement becomes effective for use in connection with the IPO differs
from the prospectus included in the Registration Statement at the time it
becomes effective (whether or not the prospectus so furnished to the
Underwriter is required to be filed with the SEC pursuant to Securities
Act Rule 424(b)), the prospectus so furnished to the Underwriter will be
the "FINAL PROSPECTUS."
"FINANCIAL STATEMENTS" means the Initial Financial Statements and
any subsequent financial statements of the Company delivered to Purchaser
prior to the Effective Time pursuant to Section 6.6.
"GAAP" means generally accepted accounting principles and
practices in the United States as in effect from time to time which have
been or are applied on a basis consistent with the most recent audited
Financial Statements delivered to Purchaser prior to the Effective Time.
"GENERAL RELEASE" means the general release of the Company to be
executed at or before, and delivered to Purchaser and the Company at, the
Closing, effective as of the Effective Time, by the Stockholder and each
MTM Stockholder, which general release shall be in the form of the
attached EXHIBIT 1.1-A, with its blanks appropriately completed.
"GOVERNMENTAL APPROVAL" means at any time any authorization,
consent, approval, permit, franchise, certificate, license, implementing
order or exemption of, or registration or filing with, any Governmental
Authority.
"GOVERNMENTAL AUTHORITY" means any national, state, county,
municipal or other government, domestic or foreign, or any agency, board,
bureau, commission, court, department or other instrumentality of any
such government.
"GOVERNMENTAL REQUIREMENT" means at any time (a) any law, statute,
code, ordinance, order, rule, regulation, judgment, decree, injunction,
order, writ, edict, award, authorization or other requirement of any
Governmental Authority in effect at that time or (b) any obligation
included in any certificate, certification, franchise, permit or license
issued by any
7
Governmental Authority or resulting from binding arbitration,
including any requirement under common law, at that time.
"GUARANTY" means, for any specified Person, without duplication,
any liability, contingent or otherwise, of that Person guaranteeing or
otherwise representing liability for any obligation of any other Person
(the "PRIMARY OBLIGOR") in any manner, whether directly or indirectly,
and including any liability of the specified Person, direct or indirect,
(a) to purchase or pay (or advance or supply funds for the purchase or
payment of) the other Person's obligation or to purchase (or to advance
or supply funds for the purchase of) any security for the payment of that
obligation, (b) to purchase property, securities or services for the
purpose of assuring the owner of that obligation of its payment, or
(c) to maintain working capital, equity capital or other financial
statement condition or liquidity of the primary obligor so as to enable
the primary obligor to pay that obligation; PROVIDED, HOWEVER, that the
term "GUARANTY" excludes endorsements for collection or deposit in the
ordinary course of the endorser's business.
"HSR ACT" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976.
"IMMEDIATE FAMILY MEMBER" means at any time: (a) with respect to a
natural person, any child or grandchild or spouse of such natural person
at that time, or any child of such natural person's spouse; and (b) with
respect to an Entity which has as an ultimate beneficial owner one or
more natural persons, or a natural person and his spouse, any child or
grandchild or spouse at that time (if not then an ultimate beneficial
owner of the Entity), or any child of the spouse, of the ultimate
beneficial owner or owners of the Entity (for purposes hereof, child or
grandchild includes those by blood or legal adoption).
"INDEBTEDNESS" of any Person means, without duplication, (a) any
liability of that Person (i) for borrowed money or arising out of any
extension of credit to or for the account of that Person (including
reimbursement or payment obligations with respect to surety bonds,
letters of credit, banker's acceptances and similar instruments), for the
deferred purchase price of property or services or arising under
conditional sale or other title retention agreements, other than trade
payables arising in the ordinary course of business, (ii) evidenced by
notes, bonds, debentures or similar instruments, (iii) in respect of
Capital Leases, or (iv) in respect of Interest Rate Protection
Agreements, (b) any liability secured by any Lien upon any property or
assets of that Person (or upon any revenues, income or profits of that
Person therefrom), whether or not that Person has assumed the liability
or otherwise become liable for its payment, or (c) any liability of
others of the type described in the preceding clause (a) or (b) in
respect of which that Person has incurred, assumed or acquired a
liability by means of a Guaranty.
"INDEMNITY NOTICE" has the meaning specified in Section 9.4(e).
"INDEMNIFIED PARTY" has the meaning specified in Section 9.4(b).
8
"INDEMNIFYING PARTY" has the meaning specified in Section 9.4(b).
"INFORMATION" means written information, including (a) data,
certificates, reports and statements (excluding Financial Statements) and
(b) summaries of unwritten agreements, arrangements, contracts, plans,
policies, programs or practices or of unwritten amendments or
modifications of, supplements to or waivers under any of the foregoing
documents.
"INITIAL FINANCIAL STATEMENTS" means (a) the audited balance
sheets of the Company at December 31, 1998, 1997 and 1996 and the related
audited statements of income, stockholders' equity and cash flows for
each of the Company's three fiscal years in the three-year period ended
December 31, 1998, together with the related audit report of Xxxxxxx Xxxx
Xxxxxxx of Texas, P.C. and (b) the Current Balance Sheet and the related
unaudited statements of income stockholders' equity and cash flows for
the three month period ended on the Current Balance Sheet.
"INTEREST RATE PROTECTION AGREEMENT" means, for any Person, an
interest rate swap, cap or collar agreement or similar arrangement
providing for the transfer or mitigation of interest rate risks of that
Person, either generally or under specific contingencies, between that
Person and any other Person.
"IPO" means the first time after May 1, 1999 a registration
statement filed under the Securities Act and respecting a primary
offering by Purchaser of shares of Purchaser Common Stock is declared
effective under the Securities Act and the shares registered by that
registration statement are issued and sold by Purchaser.
"IPO CLOSING DATE" means the date on which Purchaser first
receives payment for the shares of Purchaser Common Stock it sells to the
Underwriter in the IPO.
"IPO PRICE" means the price per share of Purchaser Common Stock
which is set forth as the "price to public" on the cover page of the
Final Prospectus.
"IPO PRICING DATE" means the date, if any, on which Purchaser and
the Underwriter agree in the Underwriting Agreement to the price per
share of Common Stock at which the Underwriter, subject to the terms and
conditions of the Underwriting Agreement, will purchase newly issued
shares of Purchaser Common Stock from Purchaser on the IPO Closing Date.
"IRS" means the Internal Revenue Service.
"LIEN" means, with respect to any property or asset of any Person
(or any revenues, income or profits of that Person therefrom), in each
case whether the same is consensual or nonconsensual or arises by
contract, operation of law, legal process or otherwise, (a) any mortgage,
lien, security interest, pledge, attachment, levy or other charge or
encumbrance
9
of any kind thereupon or in respect thereof or (b) any other
arrangement under which the same is transferred, sequestered or
otherwise identified with the intention of subjecting the same to, or
making the same available for, the payment or performance of any
liability in priority to the payment of the ordinary, unsecured
creditors of that Person, including any "ADVERSE CLAIM" (as defined in
Section 8-302(b) of each applicable Uniform Commercial Code) in the
case of any Capital Stock. For purposes of this Agreement, a Person
shall be deemed to own subject to a Lien any asset that Person has
acquired or holds subject to the interest of a vendor or lessor under
any conditional sale agreement, Capital Lease or other title retention
agreement relating to that asset.
"LITIGATION" means any action, case, proceeding, claim, grievance,
suit or investigation or other proceeding conducted by or pending before
any Governmental Authority or any arbitration proceeding.
"MATERIAL" means, as applied to any specified Entity, material to
the business, operations, property or assets, liabilities, financial
condition or results of operations of the specified Entity and its
Subsidiaries considered as a whole.
"MATERIAL ADVERSE EFFECT" means, with respect to the consequences
of any fact or circumstance (including the occurrence or non-occurrence
of any event) to the Company (or after the Effective Time the Surviving
Corporation and its Subsidiaries, if any, considered as a whole), that
such fact or circumstance has caused, is causing or can reasonably be
expected to cause, directly or indirectly, singly or in the aggregate
with other facts and circumstances, any Damages in excess of the
Threshold Amount.
"MATERIAL AGREEMENT" of an Entity means any contract or agreement
(a) to which the Entity or any of its Subsidiaries is a party, or by
which the Entity or any of its Subsidiaries is bound or to which any
property or assets of the Entity or any of its Subsidiaries is subject
and (b) which is Material to the Entity.
"MERGER CONSIDERATION" has the meaning specified in Section
2.4(a).
"MERGER SUB" means AXCES Acquisition, Inc., a Delaware
corporation.
"MERGER SUB COMMON STOCK" means the common stock, par value $1.00
per share, of Merger Sub.
"MINIMUM WORKING CAPITAL AMOUNT" means an amount equal to (i) the
sum of $600,000 plus the Recent Operating Profits, minus (ii) the amount
of any cash generated from Recent Operating Profits used to pay Agreed
Settlement Costs.
"MOODY'S" means Xxxxx'x Investors Service, Inc.
10
"MTM STOCKHOLDERS" means Xxxxxxx Avignon, Xxxxxxx Xxxxxxxx and
Xxxxxxx Till.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA, Section 414 of the Code or Section 3(37) of
ERISA.
"OPERATING PROFITS" means the net income plus non-cash expenses of
the Company determined in accordance with GAAP.
"ORGANIZATION STATE" means, as applied to (a) any corporation, its
state or other jurisdiction of incorporation, (b) any limited liability
company or limited partnership, the state or other jurisdiction under
whose laws it is organized and existing in that legal form, and (c) any
other Entity, the state or other jurisdiction whose laws govern that
Entity's internal affairs.
"OTHER AGREEMENTS" has the meaning specified in the Preliminary
Statements in this Agreement.
"OTHER COMPENSATION PLAN" means any compensation arrangement,
plan, policy, practice or program established, maintained or sponsored by
the Company, or to which the Company contributes, on behalf of any of its
employees, nonemployee directors or officers or other natural persons
performing consulting or other independent contractor services for the
Company, including all such arrangements, plans, policies, practices or
programs providing for severance pay, deferred compensation, incentive,
bonus or performance awards or the actual or phantom ownership of any
Capital Stock or Derivative Securities of the Company, but excluding all
Company ERISA Pension Plans and Employment Agreements.
"OTHER FOUNDING COMPANIES" has the meaning specified in the
Preliminary Statements in this Agreement.
"OTHER TRANSACTION DOCUMENTS" means the Other Agreements and the
other written agreements, documents, instruments and certificates at any
time executed pursuant to or in connection with the Other Agreements
(other than the Transaction Documents and the Underwriting Agreement),
all as amended, modified or supplemented from time to time.
"PARTIES" means the parties to this Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PERMITTED LIENS" means, as applied to the property or assets of
any Person (or any revenues, income or profits of that Person therefrom):
(a) Liens for Taxes if the same are not at the time due and delinquent;
(b) Liens of carriers, warehousemen, mechanics, laborers and materialmen
for sums not yet due; (c) Liens incurred in the ordinary course of that
Person's business in connection with worker's compensation, unemployment
insurance and other
11
social security legislation (other than pursuant to ERISA or Section
412(n) of the Code); (d) Liens incurred in the ordinary course of that
Person's business in connection with deposit accounts or to secure the
performance of bids, tenders, Services Contracts, trade contracts,
statutory obligations, surety and appeal bonds, performance and
return-of-money bonds and other obligations of like nature; (e)
easements, rights-of-way, reservations, restrictions and other similar
encumbrances incurred in the ordinary course of that Person's business
or existing on property and not materially interfering with the
ordinary conduct of that Person's business or the use of that
property; (f) defects or irregularities in that Person's title to its
real properties which do not materially diminish the value of the
surface estate or interfere with the ordinary conduct of that Person's
business or the use of any of such properties; (g) any interest or
title of a lessor of assets being leased by any Person pursuant to any
Capital Lease disclosed in SCHEDULE 4.19 or any lease that, under
GAAP, would be accounted for as an operating lease; and (h) Liens
securing purchase money Indebtedness disclosed in SCHEDULE 4.18 or
4.19 so long as the Liens do not attach to any property or assets
other than the properties or assets purchased with the proceeds of
such Indebtedness.
"PERSON" means any natural person, Entity, estate, trust, union or
employee organization or Governmental Authority or, for the purpose of
the definition of "ERISA Affiliate," any trade or business.
"PLAN" has the meaning specified in Section 4.26(a).
"PRIVATE PLACEMENT MEMORANDUM" means the Purchaser Private
Placement Memorandum dated as of June 22, 1999, relating to the offer of
Purchaser Common Stock, the Purchaser Preferred Stock and cash in
connection with the Merger.
"PROHIBITED TRANSACTION" means any transaction that is prohibited
under Section 4975 of the Code or Section 406 of ERISA and not exempt
under Section 4975 of the Code or Section 408 of ERISA.
"PROPERTY, PLANT AND EQUIPMENT" means at any time any property
that then would be included and classified as property, plant and
equipment on a consolidated balance sheet, prepared in accordance with
GAAP, of the Company.
"PROPORTIONATE DEFERRED TAX LIABILITY" shall mean, with respect to
each MTM Stockholder, such MTM Stockholder's proportionate part of the
Company Deferred Tax Liability.
"PROPRIETARY RIGHTS" means any or all of the following and all
rights in, arising out of, or associated therewith: (i) all United States
and foreign patents and applications therefor and all reissues,
divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (ii) all inventions (whether patentable or
not), invention disclosures, improvements, trade secrets, proprietary
information, know how, technology,
12
technical data and customer lists, and all documentation relating to
any of the foregoing; (iii) all copyrights, copyrights registrations
and applications therefor and all other rights corresponding thereto
throughout the world; (iv) all mask works, mask work registrations and
applications therefor; (v) all industrial designs and any registrations
and applications therefor throughout the world; (vi) all trade names,
logos, common law trademarks and service marks; trademark and service
xxxx registrations and applications therefor and all goodwill
associated therewith throughout the world; (vii) all databases and
data collections and all rights therein throughout the world; (viii)
all computer software including all source code, object code,
firmware, development tools, files, records and data, all media on
which any of the foregoing is recorded, all Uniform Resource Locators,
Web addresses, sites and domain names, (ix) any similar, corresponding
or equivalent rights to any of the foregoing, and (x) all documentation
related to any of the foregoing, that are used in and/or necessary to
the conduct of the Company's business as it currently is conducted or
is currently contemplated by the Company to be conducted, including,
without limitation, the design, development, manufacture, use, import
and sale of the products, technology and services of the Company
(including products, technology or services currently under
development).
"PRO RATA SHARE" means for each MTM Stockholder the fraction
expressed as a percentage and set forth in SCHEDULE 2.4, (a) the
numerator of which is the number of shares of outstanding common stock of
the Stockholder owned by that MTM Stockholder, as set forth in SCHEDULE
2.4, and (b) the denominator of which is the total number of shares of
outstanding common stock of the Stockholder owned by all MTM
Stockholders, as set forth in SCHEDULE 2.4.
"PURCHASER" means OmniLynx Communications Corporation, a Delaware
corporation.
"PURCHASER ACQUISITION CANDIDATE" means any Entity which shall
have been called on by any of the Company, Purchaser or a Subsidiary of
the Company or Purchaser in connection with the possible acquisition by
any of them of that Entity or with respect to which any of them has made
an acquisition analysis.
"PURCHASER COMMON STOCK" means the common stock, par value $.0001
per share, of Purchaser.
"PURCHASER INDEMNIFIED LOSS" has the meaning specified in Section
9.2(a).
"PURCHASER INDEMNIFIED PARTY" means Purchaser and its Affiliates
and each of their respective officers, directors, employees, agents and
counsel; PROVIDED, HOWEVER, that none of the Stockholder or any MTM
Stockholder will be a Purchaser Indemnified Party for purposes of this
Agreement, notwithstanding that the Stockholder or any MTM Stockholder is
a Purchaser Indemnified Party for purposes of one or more of the Other
Agreements.
13
"PURCHASER PREFERRED STOCK" means the Series B Convertible,
Redeemable Preferred Stock, par value $.0001 per share, of Purchaser, the
relative preferences, rights and limitations of which will be
substantially as set forth in the Certificate of Designation,
Preferences, Rights and Limitations of Series B 8% Cumulative Convertible
Preferred Stock Par Value $.0001 Per Share, of OmniLynx Communications
Corporation attached hereto as EXHIBIT 1.1-B.
"PURCHASER STOCK" means the Purchaser Common Stock and the
Purchaser Preferred Stock.
"QUALIFIED PLANS" has the meaning specified in Section 4.26(b).
"RECENT OPERATING PROFITS" means the Operating Profits of the
Company for the period from May 1, 1999 until the Closing Date.
"REGISTERED PROPRIETARY RIGHTS" means all United States,
international and foreign: (i) patents, patent applications (including
provisional applications); (ii) registered trademarks, applications to
register trademarks, intent-to-use applications, or other registrations
or applications related to trademarks; (iii) registered copyrights and
applications for copyright registration; (iv) any mask work registrations
and applications to register mask works; and (v) any other Company
Proprietary Rights that is the subject of an application, certificate,
filing, registration or other document issued by, filed with, or recorded
by, any state, government or other public legal authority, that are used
in and/or necessary to the conduct of the Company's business as it
currently is conducted or is currently contemplated by the Company to be
conducted, including, without limitation, the design, development,
manufacture, use, import and sale of the products, technology and
services of the Company (including products, technology or services
currently under development).
"REGISTRATION STATEMENT" means the registration statement
(including (a) each preliminary prospectus included therein prior to the
date on which that registration statement is declared effective under the
Securities Act (including any prospectus filed with the SEC pursuant to
Securities Act Rule 424(b)), (b) the Final Prospectus and (c) any
amendments thereof and all supplements and exhibits thereto) filed by
Purchaser with the SEC to register shares of Purchaser Common Stock under
the Securities Act for public offering and sale in the IPO.
"RELATED PARTY AGREEMENT" means any contract or other agreement,
written or oral, to which the Company is a party or is bound or by which
any property of the Company is bound or may be subject and (a) to which
the Stockholder or any of the Stockholder's Related Persons or Affiliates
also is a party, (b) of which the Stockholder or the Stockholder's
Related Persons or Affiliates is a beneficiary, or (c) as to which any
transaction contemplated thereby properly would be characterized (without
regard to the
14
amount involved) as a related party transaction for purposes of
applying the disclosure requirements of GAAP or the SEC applicable to
the Registration Statement.
"RELATED PERSON" of the Stockholder means: (a) if the Stockholder
is a natural person, (i) any Immediate Family Member of the Stockholder,
(ii) any Estate of the Stockholder or any Immediate Family Member of the
Stockholder, (iii) the trustee of any inter vivos or testamentary trust
of which all the beneficiaries are Immediate Family Members of the
Stockholder, and (iv) any Entity the entire equity interest in which is
owned by any one or more of the Stockholder and Immediate Family Members
of the Stockholder; and (b) if the Stockholder is an Entity, Estate or
trust, (i) any Person who owns an equity interest in the Stockholder on
the date hereof, (ii) any Person who would be a Related Person under
clause (a) of this definition of a natural person who is an ultimate
beneficial owner of the Stockholder, or (iii) any other Entity the entire
equity interest in which is owned by any one or more of the Stockholder
and Immediate Family Members of the Stockholder. As used in this
definition, "ESTATE" means, as to any natural person who has died or been
adjudicated mentally incompetent by a court of competent jurisdiction,
(i) that person's estate or (ii) the administrator, conservator,
executor, guardian or representative of that person's estate.
"REPRESENTATIVES" means, with respect to any Person, the
directors, officers, employees, Affiliates, accountants (including
independent certified public accountants), advisors, attorneys,
consultants or other agents of that Person, or any other representatives
of that Person or of any of that Person's directors, officers, employees,
Affiliates, accountants (including independent certified public
accountants), advisors, attorneys, consultants or other agents.
"REPORTABLE EVENT" means, with respect to any Company ERISA
Pension Plan, (a) the occurrence of any of the events set forth in
Section 4043(b) or 4043(c) (other than a Reportable Event as to which the
provision of 30 days' notice to the PBGC is waived under applicable
regulations), 4062(e) or 4063(a) of ERISA with respect to that plan,
(b) any event requiring the Company or any ERISA Affiliate to provide
security to that plan under Section 401(a)(29) of the Code, or (c) any
failure to make a payment required by Section 412(m) of the Code with
respect to that plan.
"RCRA" means the Resource Conservation and Recovery Act of 1976,
as amended.
"RESPONSIBLE OFFICER" means either Xxxxxxx Avignon or Xxxxxxx
Xxxxxxxx.
"RESTRICTED PAYMENT" means, with respect to any Entity at any
time, any of the following effected by the Entity: (a) any declaration or
payment of any dividend or other distribution, direct or indirect, on
account of any Capital Stock of that Entity or any Affiliate of the
Entity or (b) any direct or indirect redemption, retirement, purchase or
other acquisition for value of, or any direct or indirect purchase,
payment or sinking fund or similar deposit for the redemption,
retirement, purchase or other acquisition for value of, or
15
to obtain the surrender of, any then outstanding Capital Stock of the
Entity or any Affiliate of the Entity or any then outstanding
warrants, options or other rights to acquire or subscribe for or
purchase unissued or treasury Capital Stock of the Entity or any of
its Affiliates.
"RETURNS" means the returns, reports or statements (including any
information returns) any Governmental Requirement requires to be filed
for purposes of any Tax.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SERVICES CONTRACT" means any written or oral contract,
subcontract or other agreement under which the Company is or may become
obligated to provide services to or for any Person.
"SOLID WASTES, HAZARDOUS WASTES OR HAZARDOUS SUBSTANCES" have the
meanings ascribed to those terms in CERCLA, RCRA or any other
Environmental Law applicable to the business or operations of the Company
which imparts a broader meaning to any of those terms than does CERCLA or
RCRA.
"STOCKHOLDER INDEMNIFIED LOSS" has the meaning specified in
Section 9.3.
"STOCKHOLDER INDEMNIFIED PARTY" means (a) the Stockholder and each
of the Stockholder's Affiliates (other than the Company or, following the
Effective Time, the Surviving Corporation or Purchaser or any of its
Subsidiaries, if the Stockholder is an Affiliate of Purchaser), agents
and counsel and (b) prior to the Effective Time, the Company and each of
its officers, directors, employees, agents and counsel who are not
Stockholder Indemnified Parties within the meaning of clause (a) of this
definition.
"SUBSIDIARY" of any specified Person means at any time, any Entity
a majority of the Capital Stock of which is at that time owned or
controlled, directly or indirectly, by the specified Person.
"SUPPLEMENTAL INFORMATION" has the meaning specified in
Section 6.6.
"SURVIVING CORPORATION" means Merger Sub, which is to be
designated in the Certificate of Merger as the surviving corporation of
the Merger.
"TAX" or "TAXES" means all net or gross income, gross receipts,
net proceeds, sales, use, ad valorem, value added, franchise,
withholding, payroll, employment, excise, property, deed, stamp,
alternative or add-on minimum, environmental or other taxes, assessments,
duties, fees, levies or other governmental charges or assessments of any
nature imposed by
16
any Governmental Requirement, whether disputed or not, together with
any interest, penalties, additions to tax or additional amounts with
respect thereto.
"TAX LIABILITY" means the amount of any federal income tax
liability of the Company, the Stockholder or the MTM Stockholders
resulting from the taxable profits of the Company for the period
beginning January 1, 1999, and ending on the Closing Date, including
without limitation any built-in gains tax under Section 1374 of the Code
or any similar corporate level tax imposed on the Company by any taxing
authority.
"TAX LIABILITY RESERVE AMOUNT" means the amount of any (i)
unsecured credit available to Purchaser on any day from its existing
credit agreements, (ii) cash on hand, and (iii) holdings of debt or
equity securities readily tradeable on an established market and cash
equivalents such as certificates of deposit and money market shares.
"TAXING AUTHORITY" means any Governmental Authority having or
exercising jurisdiction with respect to any Tax.
"TERMINATION EVENT" means, with respect to any Company ERISA
Pension Plan, (a) any Reportable Event with respect to that plan which is
likely to result in the termination of that plan, (b) the termination of,
or the filing of a notice of intent to terminate, that plan or the
treatment of any amendment to that plan as a termination under Section
4041(c) of ERISA, or (c) the institution of proceedings to terminate, or
the appointment of a trustee to administer, that plan under Section 4042
of ERISA.
"TERRITORY" has the meaning specified in Section 10.1(a).
"THIRD PARTY CLAIM" has the meaning specified in Section 9.4(b).
"THRESHOLD AMOUNT" means $200,000.
"TRADING DAY" means each Monday, Tuesday, Wednesday, Thursday and
Friday, other than any day on which securities are generally not traded
on the securities exchange or in the securities market applicable to the
Purchaser Common Stock, or if there is no applicable securities exchange
or market, on the New York Stock Exchange.
"TRANSACTION DOCUMENTS" means this Agreement, the Certificate of
Merger, the General Release and the other written agreements, documents,
instruments and certificates executed pursuant to or in connection with
this Agreement (other than the Other Transaction Documents and the
Underwriting Agreement), including those specified in Article VII to be
delivered at or before the Closing, all as amended, modified or
supplemented from time to time.
"TRANSFER TAXES" has the meaning specified in Section 12.7.
17
"UNDERWRITER" means, collectively, (a) the investment banking
firms that prospectively may enter into the Underwriting Agreement and
(b) from and after the IPO Pricing Date, the investment banking firms
parties to the Underwriting Agreement.
"UNDERWRITING AGREEMENT" has the meaning specified in
Section 7.2(a)(iii).
"WELFARE PLAN" means an "employee welfare benefit plan" as defined
in Section 3(1) of ERISA.
"WORKING CAPITAL" means the working capital of the Company
determined in accordance with GAAP; provided that for purposes of making
such determination, the Allowable New Indebtedness and the proceeds
thereof shall not be included therein.
"YEAR 2000 COMPLIANT" means a product's ability to record, store,
process, calculate and present calendar dates falling on and after (and
if applicable, spans of time including) September 9, 1999 and January 1,
2000, and calculate any information dependent on or relating to such
dates in the same manner, and with the same functionality, data integrity
and performance, as such product's ability to record, store, process,
calculate and present calendar dates on or before September 8, 1999 and
December 31, 1999, or calculate any information dependent on or relating
to such dates.
Section 1.2. DEFINITIONS. Capitalized terms used in this Agreement
but not defined in Section 1.1 have the meanings assigned to them in the
Preliminary Statements or elsewhere in this Agreement, as the case may be.
ARTICLE II
THE MERGER AND RELATED MATTERS
Section 2.1. CERTIFICATE OF MERGER. On the terms and subject to the
conditions of this Agreement, the Company will cause a Certificate of Merger to
be duly executed and delivered on or promptly after the date of the Closing to
the Secretary of State of the State of Delaware.
Section 2.2. THE EFFECTIVE TIME. The effective time of the Merger
(the "EFFECTIVE TIME") will be the time specified in the Certificate of Merger
or, if the Certificate of Merger does not specify another time, on filing of the
Certificate of Merger.
Section 2.3. CERTAIN EFFECTS OF THE MERGER. At and as of the
Effective Time, (a) the Company will be merged with and into Merger Sub in
accordance with the provisions of the DGCL, (b) the Company will cease to exist
as a separate legal Entity, (c) Merger Sub will be the Surviving Corporation
and, as such, will, all with the effect provided by the DGCL, (i) possess all
the properties and rights, and be subject to all the restrictions and duties, of
the Company and Merger Sub and (ii) be governed by the laws of the State of
Delaware, (d) the Charter Documents of Merger
18
Sub then in effect will become and thereafter remain (until changed in
accordance with (i) applicable law, in the case of the certificate or
articles of incorporation or (ii) their terms, in the case of the bylaws) the
Charter Documents of the Surviving Corporation, provided the name of the
Surviving Corporation will be changed to "AXCES, Inc.," (e) the initial board
of directors of the Surviving Corporation will be the Persons named in
SCHEDULE 2.3, who will hold the office of director of the Surviving
Corporation subject to the provisions of the applicable laws of the State of
Delaware and the Charter Documents of the Surviving Corporation, and (f) the
officers of the Surviving Corporation immediately following the Merger will
be as set forth in SCHEDULE 2.3, and each of the Persons so designated in
SCHEDULE 2.3 will serve in each office specified for that Person in SCHEDULE
2.3, subject to the provisions of the Charter Documents of the Surviving
Corporation, until his or her successor is duly elected to, and, if
necessary, qualified for, that office.
Section 2.4. EFFECT OF THE MERGER ON CAPITAL STOCK. As of the
Effective Time, as a result of the Merger and without any action on the part of
any holder thereof:
(a) the shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares referred to in
Section 2.4(b) below) will (i) be converted into the right to receive,
without interest, on surrender of the certificate evidencing those
shares, the amount of cash and the number of whole and fractional shares
of Purchaser Common Stock and Purchaser Preferred Stock set forth or
determined as provided in SCHEDULE 2.4 (the "MERGER CONSIDERATION"),
(ii) cease to be outstanding and to exist, and (iii) be canceled and
retired;
(b) each share of Company Common Stock held in the treasury
of the Company will (i) cease to be outstanding and to exist and (ii) be
canceled and retired; and
(c) each share of Merger Sub Common Stock issued and
outstanding immediately prior to the Effective Time will be converted
into one share of Common Stock, $1.00 par value per share, of the
Surviving Corporation, and the shares of Common Stock of the Surviving
Corporation issued on such conversion will constitute all the issued and
outstanding shares of Capital Stock of the Surviving Corporation.
Each holder of a certificate representing shares of Company Common Stock
immediately prior to the Effective Time (other than the shares referred to in
Section 2.4(b) above) will, as of the Effective Time and thereafter, cease to
have any rights respecting those shares other than the right to receive, without
interest, the Merger Consideration.
Section 2.5. DELIVERY, EXCHANGE AND PAYMENT.
(a) At or after the Effective Time: (i) the Stockholder, as
the holder of certificates representing shares of Company Common Stock,
will, on surrender of its certificates to Purchaser (or any agent which
may be appointed by Purchaser for purposes of this Section 2.5), receive,
and Purchaser will pay and issue to the Stockholder, in each
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case subject to the provisions of Section 2.6, the Merger
Consideration; and (ii) until any certificate representing Company
Common Stock has been surrendered and replaced pursuant to this
Section 2.5, that certificate will, for all purposes, be deemed to
evidence ownership of the number of whole shares of Purchaser Common
Stock and Purchaser Preferred Stock included in the Merger
Consideration payable in respect of that certificate pursuant to
Section 2.4. All shares of Purchaser Common Stock and Purchaser
Preferred Stock issuable in the Merger will be deemed for all purposes
to have been issued by Purchaser at the Effective Time.
(b) The Stockholder will deliver to Purchaser (or any agent
that may be appointed by Purchaser for purposes of this Section 2.5), on
or before the IPO Closing Date, the certificates representing Company
Common Stock owned by the Stockholder, duly endorsed in blank by it, or
accompanied by stock powers duly executed by it in blank, and with all
necessary transfer tax and other revenue stamps, acquired at its expense,
affixed and canceled. The Stockholder shall cure any deficiencies in the
endorsement of the certificates or other documents of conveyance
respecting, or in the stock powers accompanying, the certificates
representing Company Common Stock delivered by it.
(c) No dividends (or interest) or other distributions
declared or earned after the Effective Time with respect to Purchaser
Common Stock and payable to the holders of record thereof after the
Effective Time will be paid to the holder of any unsurrendered
certificates representing shares of Company Common Stock for which shares
of Purchaser Common Stock have been issued in the Merger until the
unsurrendered certificates are surrendered as provided herein, but (i) on
such surrender, Purchaser will cause to be paid, to the Person in whose
name the certificates representing such shares of Purchaser Common Stock
shall then be issued, the amount of dividends or other distributions
previously paid with respect to such whole shares of Purchaser Common
Stock with a record date, or which have accrued, subsequent to the
Effective Time, but prior to surrender, and the amount of any cash
payable to such Person for and in lieu of fractional shares pursuant to
Section 2.06 and (ii) at the appropriate payment date or as soon as
practicable thereafter, Purchaser will cause to be paid to that Person
the amount of dividends or other distributions with a record date, or
which have been accrued, subsequent to the Effective Time, but which are
not payable until a date subsequent to surrender, which are payable with
respect to such number of whole shares of Purchaser Common Stock, subject
in all cases to any applicable escheat laws. No interest will be payable
with respect to the payment of such dividends or other distributions (or
cash for and in lieu of fractional shares) on surrender of outstanding
certificates.
Section 2.6. FRACTIONAL SHARES. Notwithstanding any other provision
of this Article II, no fractional shares of Purchaser Stock will be issued, and
if the Stockholder is otherwise entitled to receive a fractional share of
Purchaser Stock but for this Section 2.6, it will instead be entitled to receive
a whole share in lieu thereof.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
AND EACH MTM STOCKHOLDER JOINTLY AND SEVERALLY
Each MTM Stockholder, severally with respect to representations relating
to him and jointly and severally with the Stockholder with respect to
representations relating to the Stockholder, and the Stockholder, with respect
to representations relating to the Stockholder, represents and warrants to
Purchaser that all the following representations and warranties in this
Article III are true and correct:
Section 3.1. INVESTMENT REPRESENTATIONS. (i) The Stockholder will be
acquiring the shares of Purchaser Stock to be issued to it pursuant to Section
2.4 solely for the Stockholder's account, for investment purposes only and with
no current intention or plan to distribute, sell or otherwise dispose of any of
those shares in connection with any distribution; (ii) neither the Stockholder
nor such MTM Stockholder is a party to any agreement or other arrangement for
the disposition of any shares of Purchaser Stock other than this Agreement;
(iii) unless otherwise specified on Schedule 3.1, the Stockholder and such MTM
Stockholder is an "accredited investor" as defined in Securities Act Rule
501(a); (iv) the Stockholder and such MTM Stockholder (A) is able to bear the
economic risk of the Stockholder's investment in the Purchaser Stock to be
acquired by it pursuant to this Agreement, (B) can afford to sustain a total
loss of that investment, (C) has such knowledge and experience in financial and
business matters that he is capable of evaluating the merits and risks of the
proposed investment in the Purchaser Stock, (D) has had an adequate opportunity
to ask questions and receive answers from the officers of Purchaser concerning
any and all matters relating to the transactions contemplated by this Agreement,
including the background and experience of the current and proposed officers and
directors of Purchaser and the plans for the operations of the business of
Purchaser, and (E) has asked all questions of the nature described in preceding
clause (D), and all those questions have been answered to its satisfaction; and
Section 3.2. OWNERSHIP AND STATUS OF COMPANY CAPITAL STOCK. The
Stockholder is the record and beneficial owner of all of the issued and
outstanding shares of Company Capital Stock free and clear of all Liens. No
Derivative Securities of the Company are outstanding and there are no contracts,
agreements or plans obligating the Company to issue any Derivative Securities.
Section 3.3. POWER OF THE STOCKHOLDER; APPROVAL OF THE MERGER.
(a) The Stockholder and such MTM Stockholder has the full
power, legal capacity and authority to execute and deliver this Agreement
and each other Transaction Document to which the Stockholder or such MTM
Stockholder is a party and to perform the Stockholder's and such MTM
Stockholder's obligations in this Agreement and in all other Transaction
Documents to which the Stockholder and such MTM Stockholder are a party.
This Agreement constitutes, and each such other Transaction Document,
when executed and delivered by the Stockholder and such MTM Stockholder,
will constitute, the legal, valid and
21
binding obligation of the Stockholder and such MTM Stockholder,
enforceable against the Stockholder and such MTM Stockholder in
accordance with its terms, except as their enforceability may be (i)
limited by any applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors'
rights generally and (ii) subject to general principles of equity
(regardless of whether enforceability is considered in a proceeding in
equity or at law). The Stockholder and such MTM Stockholder have, in
accordance with all applicable Governmental Requirements and, with
respect to the Stockholder, its Charter Documents, obtained all
approvals and taken all actions necessary for the authorization,
execution, delivery and performance by the Stockholder and such MTM
Stockholder of this Agreement and the other Transaction Documents to
which the Stockholder and such MTM Stockholder are a party.
(b) The Stockholder has voted all the shares of Company
Capital Stock owned by it and entitled to a vote or votes on the
consummation of the Merger, in any one or more of the manners prescribed
or permitted by the Company's Charter Documents or the Governmental
Requirements of the Company's Organization State, whichever are
controlling, to approve this Agreement and the consummation of the Merger
and the other transactions contemplated by this Agreement.
Section 3.4. NO CONFLICTS OR LITIGATION. The execution, delivery and
performance in accordance with their respective terms by the Stockholder and
such MTM Stockholder of this Agreement and the other Transaction Documents to
which the Stockholder and such MTM Stockholder are or will be a party do not and
will not (a) violate any Governmental Requirement, (b) breach or constitute a
default under any agreement or instrument to which the Stockholder or such MTM
Stockholder is a party or by which the Stockholder, such MTM Stockholder or any
of the shares of Company Capital Stock owned by the Stockholder is bound,
(c) result in the creation or imposition of, or afford any Person the right to
obtain, any Lien upon any of the shares of Company Capital Stock owned by the
Stockholder (or upon any revenues, income or profits of the Stockholder
therefrom) or (d) violate the Stockholder's Charter Documents. No Litigation is
pending or, to the knowledge of the Stockholder and such MTM Stockholder,
threatened to which the Stockholder or such MTM Stockholder is or may become a
party which (a) questions or involves the validity or enforceability of any of
the Stockholder's or such MTM Stockholder's obligations under any Transaction
Document or (b) seeks (or reasonably may be expected to seek) (i) to prevent or
delay the consummation by the Stockholder and such MTM Stockholder of the
transactions contemplated by this Agreement to be consummated by the Stockholder
and such MTM Stockholder or (ii) Damages in connection with any consummation by
the Stockholder and such MTM Stockholder of the transactions contemplated by
this Agreement.
Section 3.5. NO BROKERS. Neither the Stockholder nor such MTM
Stockholder has, directly or indirectly, in connection with this Agreement or
the transactions contemplated hereby (a) employed any broker, finder or agent or
(b) agreed to pay or incurred any obligation to pay any broker's or finder's
fee, any sales commission or any similar form of compensation.
22
Section 3.6. PREEMPTIVE AND OTHER RIGHTS; WAIVER. Except for the
right of the Stockholder to receive shares of Purchaser Stock as a result of the
Merger or to acquire Purchaser Stock pursuant to any written option or warrant
granted by Purchaser to the Stockholder, the Stockholder and such MTM
Stockholder either (a) does not have any statutory or contractual preemptive or
other right of any kind (including any right of first offer or refusal) to
acquire any shares of Company Capital Stock or Purchaser Stock or (b) hereby
irrevocably waives each such right of that type the Stockholder or such MTM
Stockholder has or may have.
Section 3.7. CONTROL OF RELATED BUSINESSES. Except as accurately set
forth in SCHEDULE 3.7, neither the Stockholder nor such MTM Stockholder is,
alone or with one or more other Persons, the controlling Affiliate of any
Entity, business or trade (other than the Company) that (a) is engaged in any
line of business which is the same as or similar to any line of business in
which the Company is engaged or (b) is, or has within the three-year period
ending on the date of this Agreement, engaged in any transaction or been a party
to any agreement with the Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY, THE STOCKHOLDER AND THE MTM STOCKHOLDERS
The Company and the Stockholder jointly and severally represent and
warrant to, and agree with, and each MTM Stockholder severally with respect to
themselves but jointly and severally with the Company and the Stockholder,
represents and warrants to, and agrees with, Purchaser that all the following
representations and warranties in this Article IV are true and correct:
Section 4.1. ORGANIZATION.
(a) The Organization State of the Company is the State of
Delaware, and the Company (i) is a corporation duly organized, validly
existing and in good standing under the laws of that State and (ii) has
the corporate power and authority under those laws and its Charter
Documents to own or lease and to operate its properties and to carry on
its business as now conducted; and
(b) the authorized Capital Stock of the Company is comprised
of 1,000 shares of Company Common Stock, of which 1,000 shares have been
issued and are now outstanding, no shares are held by the Company as
treasury shares and no outstanding Derivative Securities of the Company
exist.
Section 4.2. QUALIFICATION. SCHEDULE 4.2 accurately lists all the
jurisdictions in which the Company is authorized or qualified to own or lease
and to operate its properties or to carry on its business as now conducted. The
Company does not own, lease or operate property or carry on any business in any
jurisdiction not listed in SCHEDULE 4.2.
23
Section 4.3. AUTHORIZATION; ENFORCEABILITY; ABSENCE OF CONFLICTS;
REQUIRED CONSENTS.
(a) The execution, delivery and performance by the Company of
this Agreement and each other Transaction Document to which it is or will
be a party, and the effectuation of the Merger and the other transactions
contemplated hereby and thereby, are within its corporate or other power
under its Charter Documents and all applicable Governmental Requirements
of its Organization State and have been duly authorized by all
proceedings, including actions permitted to be taken in lieu of
proceedings, required under its Charter Documents and all applicable
Governmental Requirements of the Organization State.
(b) This Agreement has been, and each of the other
Transaction Documents to which the Company is or will be a party, when
executed and delivered to Purchaser (or, in the case of the Certificate
of Merger, the applicable Governmental Authorities) will have been, duly
executed and delivered by the Company and is, or when so executed and
delivered will be, the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms,
except as enforceability may be (i) limited by any applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and (ii) subject to general
principles of equity (regardless of whether enforceability is considered
in a proceeding in equity or at law).
(c) The execution, delivery and performance in accordance
with their respective terms by the Company of the Transaction Documents
to which it is a party do not and will not (i) violate, breach or
constitute a default under (A) the Charter Documents of the Company,
(B) any Governmental Requirement applicable to the Company or (C) except
as set forth in SCHEDULE 4.3, any Material Agreement of the Company,
(ii) except as set forth in SCHEDULE 4.3, result in the acceleration or
mandatory prepayment of any Indebtedness, or any Guaranty not
constituting Indebtedness, of the Company or afford any holder of any of
that Indebtedness, or any beneficiary of any of those Guaranties, the
right to require the Company to redeem, purchase or otherwise acquire,
reacquire or repay any of that Indebtedness, or to perform any of those
Guaranties, (iii) cause or result in the imposition of, or afford any
Person the right to obtain, any Lien upon any property or assets of the
Company (or upon revenues, income or profits of the Company therefrom),
(iv) except as set forth in SCHEDULE 4.3, result in the revocation,
cancellation, suspension or material modification, in any single case or
in the aggregate, of any Governmental Approval possessed by the Company
at the date hereof and necessary for the ownership or lease or the
operation of its properties or the carrying on of its business as now
conducted, including any necessary Governmental Approval under each
applicable Environmental Law, or (v) except as set forth in SCHEDULE 4.3,
entitle any Person other than the Company to revoke, cancel, suspend or
materially modify any Company Commitment.
(d) Except for (i) the filing of the Certificate of Merger
with the applicable Governmental Authorities, (ii) filings of the
Registration Statement under the Securities Act and the SEC order
declaring the Registration Statement effective under the Securities Act,
24
and (iii) as may be required by the HSR Act or the applicable state
securities or blue sky laws, no Governmental Approvals are required to be
obtained, and no reports or notices to or filings with any Governmental
Authority are required to be made, by the Company for the execution,
delivery or performance by the Company of the Transaction Documents to
which it is a party, the enforcement against the Company of its
obligations thereunder or the effectuation of the Merger and the other
transactions contemplated thereby and no approvals or consents of third
Persons are necessary to consummate the transactions contemplated hereby.
Section 4.4. CHARTER DOCUMENTS AND RECORDS; NO VIOLATION. The Company
has caused true, complete and correct copies of the Charter Documents, each as
in effect on the date hereof, and the minute books and similar corporate or
other records of the Company to be delivered or otherwise made available to
Purchaser. No breach or violation of any Charter Document of the Company has
occurred and is continuing.
Section 4.5. NO DEFAULTS. No act or omission by the Company has
occurred, and to the knowledge of the Company, the MTM Stockholders and the
Stockholder, no other condition or state of facts exists, or, with the giving of
notice or the lapse of time or both, would exist, which (a) entitles any holder
of any outstanding Indebtedness, or any Guaranty not constituting Indebtedness,
of the Company, or a representative of the holder, to accelerate the maturity,
or require a mandatory prepayment of that Indebtedness or Guaranty, or affords
the holder or its representative, or any beneficiary of that Guaranty, the right
to require the Company to redeem, purchase or otherwise acquire, reacquire or
repay any of that Indebtedness, or to perform that Guaranty in whole or in part,
(b) entitles any Person to obtain any Lien (other than a Permitted Lien) upon
any properties or assets of any of the Company (or upon revenues, income or
profits of the Company therefrom), or (c) constitutes a violation or breach of,
or a default under, any Material Agreement of the Company by the Company.
Section 4.6. COMPANY SUBSIDIARIES. The Company does not own, and has
never owned, of record or beneficially, directly or indirectly through any
Person, and does not control, directly or indirectly through any Person or
otherwise, any Capital Stock or Derivative Securities of any Entity.
Section 4.7. CAPITAL STOCK OF THE COMPANY. All the issued and
outstanding shares of Capital Stock of the Company have been duly authorized and
validly issued in accordance with the applicable Governmental Requirements of
its Organization State and Charter Documents and are fully paid and
nonassessable. The Company has not issued or sold any shares of its outstanding
Capital Stock in breach or violation of (a) any applicable federal or state
securities laws, any statutory or contractual preemptive rights, or any other
rights of any kind (including any rights of first offer or refusal), of any
Person or (b) the terms of any of its Derivative Securities which then were
outstanding. No Person has, otherwise than solely by reason of that Person's
right, if any, to vote shares of the Capital Stock of the Company it holds (to
the extent those shares afford their holder any voting rights) any right to vote
on any matter with the holders of Capital Stock of the Company.
25
Section 4.8. TRANSACTIONS IN CAPITAL STOCK. Except as accurately set
forth in SCHEDULE 4.8: (a) the Company has no fixed or contingent obligation to
purchase, redeem or otherwise acquire or reacquire any of its equity securities
or any interests therein or to pay any dividend or make any distribution in
respect thereof, and (b) no transaction has been effected, and no action has
been taken, respecting the equity ownership of the Company, in either case in
contemplation of the transactions described in this Agreement.
Section 4.9. NO BONUS SHARES. Except as accurately set forth in
SCHEDULE 4.9, no outstanding share of Capital Stock of the Company was issued
for less than its fair market value at the time of its issuance or was issued in
exchange for any consideration other than cash.
Section 4.10. PREDECESSOR STATUS; ETC. SCHEDULE 4.10 accurately lists
all the legal and assumed names of all predecessor companies for the past five
years of the Company including the names of any Entities from which the Company
previously acquired material assets. Except as accurately disclosed in SCHEDULE
4.10, the Company has not been a Subsidiary or division of another corporation
or a part of an acquisition that was later rescinded.
Section 4.11. RELATED PARTY AGREEMENTS. Except as set forth in
SCHEDULE 4.11, each Related Party Agreement in effect on the date of this
Agreement will have been terminated as of the IPO Closing Date, and no Related
Party Agreement will exist then or thereafter.
Section 4.12. LITIGATION. Except as accurately disclosed in SCHEDULE
4.12, no Litigation is pending or, to the knowledge of the Company, the MTM
Stockholders and the Stockholder, threatened to which the Company is or may
become a party.
Section 4.13. FINANCIAL STATEMENTS; DISCLOSURE.
(a) FINANCIAL STATEMENTS. Except as accurately disclosed in
SCHEDULE 4.13, the Financial Statements (including in each case the
related Sections and notes) delivered to Purchaser by the Company
present fairly, in all material respects, the financial position of the
Company at the respective dates of the balance sheets included therein
and the results of its operations and its cash flows for the respective
periods set forth therein and have been prepared in accordance with GAAP
(except in the case of unaudited statements for the omission of footnotes
and normal year end audit adjustments). As of the date of each balance
sheet included in all previously delivered Financial Statements, the
Company did not have any outstanding Indebtedness to any Person or any
liabilities of any kind (including contingent obligations, Tax
assessments or forward or long-term commitments), or any unrealized or
anticipated loss, which in the aggregate then were Material to the
Company and required to be reflected in those Financial Statements or in
the notes related thereto in accordance with GAAP which were not so
reflected.
(b) DISCLOSURE. To the knowledge of the Company, the MTM
Stockholders and the Stockholder:
26
(1) all Information (other than financial budgets and
projections) that (A) is set forth in the Schedules hereto,
(B) has been delivered to Purchaser by or on behalf of the Company
pursuant to an express requirement of this Agreement, or (C) has
been furnished to Purchaser by or on behalf of the Company and
included in the Registration Statement under the captions "THE
COMPANY," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS," "BUSINESS," "MANAGEMENT,"
and "CERTAIN TRANSACTIONS" in any prospectus forming a part of the
Registration Statement is, taken together, true and correct in all
material respects and does not contain any untrue statement of a
material fact or omit to state a material fact necessary in order
to make the statements contained therein not materially misleading
in light of the circumstances under which the statements were
made; and
(2) all financial budgets and projections that have been
or are hereafter from time to time prepared by the Company or any
of its Representatives and made available prior to the Effective
Time to Purchaser pursuant to or in connection with this
Agreement, any other Transaction Document or the transactions
contemplated hereby or thereby have been and will be prepared and
furnished to Purchaser in good faith and were and will be based on
facts and assumptions that are believed by the management of the
Company to be reasonable in light of the then current and
reasonably foreseeable business conditions of the Company and
represented and will represent management's good faith estimate of
the projected financial performance of the Company based on the
information available to the Responsible Officer at the time so
furnished (it being acknowledged by Purchaser that the budgets and
projections referred to in this clause (ii) are derived from
judgments made by the Company's management and are only estimates
of future results based on assumptions made at the time of their
preparation, and that there can be no assurance that the budgets
or projections will be obtained or maintained or that actual
results will not be different from those budgeted or projected).
Section 4.14. COMPLIANCE WITH LAWS.
(a) Except as accurately disclosed in SCHEDULE 4.14, (i) the
Company possesses all necessary licenses, registrations and
qualifications required for the conduct of its business, and (ii) to the
knowledge of the Stockholder, the MTM Stockholders, and the Company, the
Company is in compliance in all material respects with the terms and
conditions of all Governmental Approvals necessary for the ownership or
lease and the operation of its properties (including all the facilities
and sites it owns or holds under any lease) and the carrying on of its
business as now conducted. The Company has identified in SCHEDULE 4.14
all the Governmental Approvals it possesses. To the knowledge of the
Company, the Stockholder and the MTM Stockholders, all the Governmental
Approvals identified in SCHEDULE 4.14, are valid. Except as accurately
disclosed in SCHEDULE 4.14, the Company has
27
not received any notice from any Governmental Authority of its
intention to cancel, terminate or not renew any of those Governmental
Approvals.
(b) Except as accurately disclosed in SCHEDULE 4.14, the
Company: (i) has been and continues to be in compliance in all material
respects with all Governmental Requirements applicable to it or any of
its presently or previously owned or operated properties (including all
the facilities and sites now or previously owned or held by it under any
lease), businesses or operations, including all applicable Governmental
Requirements under ERISA and Environmental Laws and (ii)(A) the Company
has not received any notice from any Governmental Authority which
asserts, or raises the possibility of assertion of, any noncompliance by
the Company with any Governmental Requirements and (B) to the knowledge
of the Company, the MTM Stockholders and the Stockholder, no condition or
state of facts exists which would provide a valid basis for any such
assertion.
Section 4.15. CERTAIN ENVIRONMENTAL MATTERS. Except as accurately
disclosed in SCHEDULE 4.15: (a) to the knowledge of the Company, the MTM
Stockholders and the Stockholder, the Company has complied, and remains in
compliance, with the provisions of all Environmental Laws applicable to it or
any of its presently owned or operated facilities, sites or other properties,
businesses and operations and which relate to the reporting by the Company of
all sites presently owned or operated by it where Solid Wastes, Hazardous Wastes
or Hazardous Substances have been treated, stored, disposed of or otherwise
handled; (b) no release (as defined in the applicable Environmental Laws) at,
from, in or on any site owned or operated by the Company has occurred which, if
all relevant facts were known to the relevant Governmental Authorities,
reasonably could be expected to require remediation to avoid deed record
notices, restrictions, liabilities or other consequences that would not be
applicable if the release had not occurred; (c) the Company has not transported
or arranged for the transportation of any Solid Wastes, Hazardous Wastes or
Hazardous Substances to, or disposed or arranged for the disposition of any
Solid Wastes, Hazardous Wastes or Hazardous Substances at, any off-site location
that could lead to any valid claim against the Company, Purchaser or Merger Sub,
as a potentially responsible party or otherwise, for any clean-up costs,
remedial work, damage to natural resources, personal injury or property damage,
including any claim under CERCLA; and (d) no storage tanks exist, or, to the
knowledge of the Company, the MTM Stockholders and the Stockholder, have
existed, on or under any of the properties owned or operated by the Company from
which any Solid Wastes, Hazardous Wastes or Hazardous Substances have been
released into the surrounding environment. The Company has provided Purchaser
with copies (or if not available, accurate written summaries) of all
environmental investigations, studies, audits, reviews and other analyses
conducted by or on its behalf, or which otherwise are in the possession, of the
Company respecting any facility, site or other property now or previously owned
or operated by the Company.
Section 4.16. LIABILITIES AND OBLIGATIONS. SCHEDULE 4.16 accurately
lists all present liabilities, of every kind, character and description and
whether accrued, absolute, fixed, contingent or otherwise, of the Company which
exceed or reasonably could be expected to exceed $25,000 and which (a) are not
otherwise reflected on SCHEDULE 4.12, (b) had been incurred prior to the Current
28
Balance Sheet Date, but are not reflected on the Current Balance Sheet, or
(c) were incurred after the Current Balance Sheet otherwise than in the ordinary
course of business, and consistent with the past practice, of the Company, in
each case other than (i) obligations and liabilities of the Company in respect
of the Company Commitments, (ii) obligations and liabilities of the Company in
respect of each Company ERISA Benefit Plan, and (iii) obligations and
liabilities of the Company set forth in the Sections hereto. SCHEDULE 4.16 also
accurately lists and describes, for the Company: (a) each of its outstanding
secured and unsecured Guaranties not constituting its Indebtedness and, for each
of those Guaranties, whether the Stockholder or Related Person or Affiliate of
the Stockholder is a Person whose obligation is covered by that Guaranty, and
(b) for each of the items listed under clause (a) of this sentence, (i) if that
item is secured by any property or asset of the Company, the nature of the
security, and (ii) if that item is covered in whole or in part by a Guaranty of
the Stockholder or any Related Person or Affiliate of the Stockholder, the name
of the guarantor.
Section 4.17. RECEIVABLES. Except as accurately set forth in SCHEDULE
4.17, all the accounts and notes or other advances receivable of the Company
reflected on the Current Balance Sheet were collected, or are, in the good faith
belief of the Company's management, collectible, in the respective amounts so
reflected, net of the reserves, if any, reflected in the Current Balance Sheet.
Section 4.18. OWNED AND LEASED REAL PROPERTIES.
(a) SCHEDULE 4.18 accurately lists and correctly describes in
all material respects: (i) all real properties owned by the Company and,
for each of those properties, its address, the type and square footage of
each structure located thereon and the nature of its use in the business
of the Company; (ii) all real properties of which the Company is the
lessee and, for each of those properties, its address, the type and
square footage of each structure located thereon which the Company is
leasing, the annual rental rate, the expiration date of its lease and the
use made of the leased property in the business of the Company; and
(iii) in the case of each real property listed as being owned, whether it
was previously owned, and in the case of each real property listed as
being leased, whether it is presently owned, by the Stockholder or any of
its Related Persons or Affiliates (other than the Company).
(b) The Company has provided Purchaser with true, complete
and correct copies of all title reports and title insurance policies
owned or in the possession of the Company and relating to any of the real
properties identified in SCHEDULE 4.18 as being owned. Except as
accurately set forth in that Section or those reports and policies, and
except for Permitted Liens, the Company owns in fee, and has good, valid
and indefeasible title to, free and clear of all Liens, each property
listed in that Section as being owned.
(c) The Company has provided Purchaser with true, correct and
complete copies of all leases under which the Company is leasing each of
the real properties listed in SCHEDULE 4.18 as being leased, and, except
as accurately set forth in SCHEDULE 4.18, (i) each of the listed leases
is, to the knowledge of the Company, the MTM Stockholders, and the
29
Stockholder, valid and binding on the lessor party thereto, and (ii) the
lessee party thereto has not sublet any of the leased space to any Person
other than the Company.
(d) The fixed assets of the Company are affixed only to one
or more of the real properties listed in SCHEDULE 4.18 and, except as
accurately set forth in that Section, are well-maintained and adequate
for the purposes for which they presently are being used or held for use,
ordinary wear and tear excepted.
(e) The Company has accurately described, in all material
respects, in SCHEDULE 4.18 all plans or projects involving the opening of
new operations, the expansion of any existing operations or the
acquisition of any real property or existing business, with respect to
which management of the Company has made any expenditure in the two-year
period prior to the date of the Agreement in excess of $25,000, or which
if pursued by the Company would require additional capital expenditures
in excess of $25,000.
Section 4.19. OWNED AND LEASED PERSONAL PROPERTY.
(a) SCHEDULE 4.19 accurately lists, in all material respects,
all machinery, equipment and other personal property included in the
Property, Plant and Equipment owned and leased by the Company, which list
states, in the case of each of those properties listed as being owned,
whether it was previously owned, and in the case of each of those
properties listed as being leased, whether it is presently owned, by the
Stockholder or any of its Related Persons or Affiliates (other than the
Company).
(b) Except as accurately set forth in SCHEDULE 4.19 and
except for Permitted Liens, the Company has good, valid and indefeasible
title to, free and clear of all Liens, each asset listed in that Section
as being owned, free and clear of all Liens.
(c) The Company has provided Purchaser with true, correct and
complete copies of all leases under which the Company is leasing each of
the properties listed in SCHEDULE 4.19 as being leased and all leases
referred to in SCHEDULE 4.21 and, except as accurately set forth in
SCHEDULE 4.19, (i) each of those leases is, to the knowledge of the
Company, the MTM Stockholders and the Stockholder, valid and binding on
the lessor party thereto, and (ii) the Company has not sublet any of the
leased property to any other Person.
(d) Except as accurately set forth in SCHEDULE 4.19, all
items of machinery, equipment and other personal property listed therein
are in good working order and condition, ordinary wear and tear excepted,
and adequate for the purposes for which they presently are being used or
held for use.
30
Section 4.20. PROPRIETARY RIGHTS.
(a) SCHEDULE 4.20(a) lists all Proprietary Rights and lists
any proceedings or actions before any court, tribunal (including the
United States Patent and Trademark Office (the "PTO") or equivalent
authority anywhere in the world) related to any of the Proprietary
Rights.
(b) Except as set forth in SCHEDULE 4.20(b), the Company
(i) owns or has the legal right to use all Proprietary Rights, including
all Proprietary Rights licensed to the Company, that are necessary to the
conduct of its business as now conducted, in each case free of any claims
or infringements known to the Company, (ii) is the exclusive owner of all
trademarks and trade names used in connection with the operation or
conduct of the business of the Company, including the sale of any
products or technology or the provision of any services by the Company,
and (iii) owns exclusively, and has good title to, all copyrighted works
that are Company products or other works of authorship that the Company
otherwise purports to own.
(c) To the extent that any Proprietary Rights have been
developed or created by any person other than the Company for which the
Company has, directly or indirectly, paid, the Company has a written
agreement with such person with respect thereto and the Company thereby
has obtained ownership of, and is the exclusive owner of, all such
Proprietary Rights by operation of law or by valid assignment.
(d) Except as set forth in SCHEDULE 4.20(d), the Company has
not transferred ownership of or granted any license of or right to use or
authorized the retention of any rights to use any of the Proprietary
Rights to any other person.
(e) Other than "shrink-wrap" and similar widely available
commercial end-user licenses, the contracts, licenses and agreements
listed in SCHEDULE 4.20(e) include all contracts, licenses and agreements
to which the Company is a party with respect to any Proprietary Rights.
No person who has licensed Proprietary Rights to the Company has
ownership rights or license rights to improvements made by the Company in
such Proprietary Rights which have been licensed to the Company.
(f) SCHEDULE 4.20(f) lists all contracts, licenses and
agreements between the Company and any other person wherein or whereby
the Company has agreed to, or assumed, any obligation or duty to warrant,
indemnify, reimburse, hold harmless, guaranty or otherwise assume or
incur any obligation or liability or provide a right of rescission with
respect to the infringement or misappropriation by the Company or such
other person of the Proprietary Rights of any person other than the
Company.
(g) The operation of the business of the Company as it
currently is conducted or is currently contemplated by the Company to be
conducted, including but not limited to
31
the Company's design, development, use, import, manufacture and
sale of the products, technology or services (including products,
technology or services currently under development) of the Company
does not infringe or misappropriate the Proprietary Rights of any
person, violate the rights of any person (including rights to privacy
or publicity), or constitute unfair competition or trade practices
under the laws of any jurisdiction, and the Company has not received
notice from any person claiming that such operation or any act,
product, technology or service (including products, technology or
services currently under development) of the Company infringes or
misappropriates the Proprietary Rights of any person or constitutes
unfair competition or trade practices under the laws of any
jurisdiction (nor is the Company aware of any basis therefor).
(h) Each item of Registered Proprietary Rights is valid and
subsisting, all necessary registration, maintenance and renewal fees in
connection with such Registered Proprietary Rights have been paid and all
necessary documents and certificates in connection with such Registered
Proprietary Rights have been filed with the relevant patent, copyright,
trademark or other authorities in the United States or foreign
jurisdictions, as the case may be, for the purposes of maintaining such
Registered Proprietary Rights.
(i) There are no contracts, licenses or agreements between
the Company and any other person with respect to Proprietary Rights under
which there is any dispute known to the Company regarding the scope of
such agreement, or performance under such agreement including with
respect to any payments to be made or received by the Company thereunder.
(j) Except as set forth in SCHEDULE 4.20(j), to the knowledge
of the Company, the MTM Stockholders and the Stockholder, no person is
infringing or misappropriating any of the Proprietary Rights.
(k) The Company has taken commercially reasonable steps to
protect the Company's rights in confidential information and trade
secrets of the Company or provided by any other person to the Company.
(l) No Proprietary Rights or product, technology or service
of the Company are subject to any proceeding or outstanding decree,
order, judgment, agreement or stipulation that restricts in any manner
the use, transfer or licensing thereof by the Company or may affect the
validity, use or enforceability of such Proprietary Rights.
(m) To the Company's, the MTM Stockholders' and the
Stockholder's knowledge, no (i) product, technology, service or
publication of the Company, (ii) material published or distributed by the
Company, or (iii) conduct or statement of Company constitutes obscene
material, a defamatory statement or material, false advertising or
otherwise violates any law or regulation.
32
(n) The Company neither manufacturers nor sells products the
functionality of which is dependent upon such products being Year 2000
Compliant. The Company's internal computer and technology products and
systems are Year 2000 Compliant.
Section 4.21. TITLE TO OTHER PROPERTIES. In each case, free and clear
of all Liens except for Permitted Liens and as accurately set forth in SCHEDULE
4.21, the Company has good and valid title to, or holds under a lease valid and
binding on the lessor party thereto, all its tangible personal properties and
assets (other than Property, Plant and Equipment) that individually is or in the
aggregate are Material to the Company.
Section 4.22. COMMITMENTS.
(a) In SCHEDULE 4.22(a), the Company has completely and
accurately listed each of the following (each a "COMPANY COMMITMENT") to
which the Company is a party or by which any of its properties is bound
and which presently remains executory in whole or in any part:
(i) each partnership, joint venture or cost-sharing
agreement;
(ii) each guaranty or suretyship, indemnification or
contribution agreement or performance bond;
(iii) each instrument, agreement or other obligation
evidencing or relating to Indebtedness of the Company or to money
lent or to be lent to another Person;
(iv) each contract to purchase or sell real property;
(v) each Services Contract for which either the contract
price or the cost of performance will or could reasonably be
expected to exceed $25,000 (each a "MATERIAL SERVICES CONTRACT"),
except Service Contracts with Company customers for providing long
distance service;
(vi) each Related Party Agreement involving total
payments within any 12-month period in excess of $10,000 and which
is not terminable without penalty on no more than 30 days' prior
notice;
(vii) each agreement (other than Services Contracts
and routine purchase orders or purchase order acknowledgments
issued or received in the ordinary course of business) for the
acquisition or provision of services, supplies, equipment,
inventory, fixtures or other property involving more than $25,000
in the aggregate;
(viii) each contract containing any noncompetition
agreement, covenant or undertaking; or
33
(ix) each other agreement or commitment not made in the
ordinary course of business that is Material to the Company.
True, correct and complete copies of all written Company Commitments, and
true, correct and complete written descriptions of all oral Company
Commitments, have been delivered or made available to Purchaser. Except
as accurately set forth in SCHEDULE 4.22(a): (i) there are no existing or
asserted defaults, events of default or events, occurrences, acts or
omissions that, with the giving of notice or lapse of time or both, would
constitute defaults or events of default under any Company Commitment
which is Material to the Company by the Company or, to the knowledge of
the Company, the MTM Stockholders and the Stockholder, any other party
thereto; and (ii) no penalties have been incurred, nor are amendments
pending, with respect to any Company Commitment which is Material to the
Company. The Company Commitments are in full force and effect and are
valid and enforceable obligations of the Company and, to the knowledge of
the Company, the MTM Stockholders and the Stockholder, the other parties
thereto, in accordance with their respective terms, and no defenses,
off-sets or counterclaims have been asserted or, to the knowledge of the
Company, the MTM Stockholders and the Stockholder, may be made by any
party thereto (other than by the Company), nor has the Company waived any
rights thereunder, except as accurately described in SCHEDULE 4.22(a).
(b) Except as accurately disclosed in SCHEDULE 4.22(b) or
contemplated hereby or by any other Transaction Document to which the
Company or the Stockholder is a party: (i) neither the Company nor the
Stockholder has received notice of any plan or intention of any other
party to any Company Commitment to exercise any right to cancel or
terminate any Company Commitment, and neither the Company nor the
Stockholder knows of any condition or state of facts, including the
consummation of the Merger, which would justify the exercise of such a
right; and (ii) neither the Company nor the Stockholder currently
contemplates, or has reason to believe any other Person currently
contemplates, any amendment or change to any Company Commitment.
Section 4.23. CAPITAL EXPENDITURES. The Company has not currently
budgeted any amounts for capital expenditures to be incurred by the Company
during the balance of the Company's current and next ensuing fiscal years.
Section 4.24. INSURANCE. Except as accurately set forth in SCHEDULE
4.24: (a) the Company has provided Purchaser with: (i) a list of all insurance
policies carried by the Company; (ii) an accurate list of all insurance loss
runs and worker's compensation claims received for the most recently ended three
policy years; and (iii) true, complete and correct copies of all insurance
policies carried by the Company which are in effect, all of which have been
issued by insurers of recognized responsibility and currently are, and will
remain without interruption through the IPO Closing Date (or will be renewed or
replaced with comparable coverage), in full force and effect; (b) no insurance
carried by the Company has been canceled by the insurer during the past five
years, and the Company has never been denied coverage; and (c) neither the
Company nor the Stockholder has
34
received any notice or other communication from any issuer of any listed
insurance policy of any material increase in any deductibles, retained
amounts or the premiums payable thereunder, and, to the knowledge of the
Company, the MTM Stockholders and the Stockholder, no such increase in
deductibles, retainages or premiums is threatened.
Section 4.25. EMPLOYEE MATTERS.
(a) CASH COMPENSATION. SCHEDULE 4.25(a) accurately lists the
names, titles and rates of annual Cash Compensation, at the Current
Balance Sheet Date and at the date hereof (and the portions thereof
attributable to salary or the equivalent, fixed bonuses, discretionary
bonuses and other Cash Compensation, respectively) of all key employees
(including all employees who are officers or directors), nonemployee
officers, nonemployee directors and key consultants and independent
contractors of the Company.
(b) EMPLOYMENT AGREEMENTS. SCHEDULE 4.25(b) accurately lists
all Employment Agreements remaining executory in whole or in part on the
date hereof, complete and correct copies of all of which have been
provided to Purchaser by the Company. The Company is not a party to any
oral Employment Agreement which is a term agreement.
(c) OTHER COMPENSATION PLANS. SCHEDULE 4.25(c) accurately
lists all Other Compensation Plans either remaining executory at the date
of this Agreement or to later become effective. The Company has provided
Purchaser with a true, correct and complete copy of each of the listed
Other Compensation Plans that is in writing and an accurate description
of each of the listed Other Compensation Plans that is not written.
Except as accurately set forth in SCHEDULE 4.25(c), each of the Other
Compensation Plans, including each that is a Welfare Plan, may be
unilaterally amended or terminated by the Company without liability to
it, except as to benefits accrued thereunder prior to amendment or
termination.
(d) ERISA BENEFIT PLANS. SCHEDULE 4.25(d) accurately
(i) lists each ERISA Pension Benefit Plan (A) the funding requirements of
which (under Section 301 of ERISA or Section 412 of the Code) are, or at
any time during the six-year period ending on the date of this Agreement
were, in whole or in part, the responsibility of the Company, or
respecting which the Company is, or at any time during that period was, a
"contributing sponsor" or an "employer" as defined in Sections
4001(a)(13) and 3(5), respectively, of ERISA (each plan described in this
clause (A) being a "COMPANY ERISA PENSION PLAN"), (B) each other ERISA
Pension Benefit Plan respecting which an ERISA Affiliate is, or at any
time during that period was, such a "contributing sponsor" or "employer"
(each plan described in this clause (B) being an "ERISA AFFILIATE PENSION
PLAN"), and (C) each other ERISA Employee Benefit Plan that is being, or
at any time during that period was, sponsored, maintained or contributed
to by the Company (each plan described in this clause (C) and each
Company ERISA Pension Plan being a "COMPANY ERISA BENEFIT PLAN"),
(ii) states the termination date of each Company ERISA Benefit Plan and
ERISA Affiliate Pension Plan that has been
35
terminated, and (iii) identifies for each ERISA Affiliate Pension Plan
the relevant ERISA Affiliates. The Company has provided Purchaser with
true, complete and correct copies of (i) each Company ERISA Benefit
Plan and ERISA Affiliate Pension Plan, (ii) each trust agreement
related thereto, and (iii) all amendments to all such plans and trust
agreements. Except as accurately set forth in SCHEDULE 4.25(d), (i)
the Company is not, nor at any time during the six-year period ended on
the date of this Agreement was not, a member of any ERISA Group that
currently includes, or included when the Company was a member, among
its members any Person other than the Company, and (ii) no Person
is an ERISA Affiliate of the Company.
(e) EMPLOYEE POLICIES AND PROCEDURES. SCHEDULE 4.25(e)
accurately lists all Employee Policies and Procedures. The Company has
provided Purchaser with a copy of all written Employee Policies and
Procedures and a written description of all material unwritten Employee
Policies and Procedures the continuance or discontinuance of which could
reasonably be expected to have a Material Adverse Effect.
(f) UNWRITTEN AMENDMENTS. Except as accurately described in
SCHEDULE 4.25(f), no material unwritten amendments have been made,
whether by oral communication, pattern of conduct or otherwise, with
respect to any of the Employment Agreements, Other Compensation Plans or
Employee Policies and Procedures.
(g) LABOR COMPLIANCE. The Company has been and is in
compliance in all material respects with all applicable Governmental
Requirements respecting employment and employment practices, terms and
conditions of employment and wages and hours, and the Company is not
liable for any arrears of wages or penalties for failure to comply with
any of the foregoing. The Company has not engaged in any unfair labor
practice or discriminated on the basis of race, color, religion, sex,
national origin, age, disability or handicap in its employment conditions
or practices. Except as accurately set forth in SCHEDULE 4.25(g), there
are no (i) unfair labor practice charges or complaints or racial, color,
religious, sex, national origin, age, disability or handicap
discrimination charges or complaints pending or, to the knowledge of the
Company, the MTM Stockholders and the Stockholder, threatened against the
Company before any Governmental Authority (nor, to the knowledge of the
Company, the MTM Stockholders and the Stockholder, does any valid basis
therefor exist) or (ii) existing or, to the knowledge of the Company, the
MTM Stockholders and the Stockholder, threatened labor strikes, disputes,
grievances, controversies or other labor troubles affecting the
Company (nor, to the knowledge of the Company, the MTM Stockholders and
the Stockholder, does any valid basis therefor exist).
(h) UNIONS. Neither the Company nor any ERISA Affiliate has
ever been a party to any agreement with any union, labor organization or
collective bargaining unit. No employees of the Company are represented
by any union, labor organization or collective bargaining unit. Except
as accurately set forth in SCHEDULE 4.25(h), to the knowledge of the
Company, the MTM Stockholders and the Stockholder, none of the employees
of the
36
Company have threatened to organize or join a union, labor organization
or collective bargaining unit.
(i) NO ALIENS. All employees of the Company are citizens of,
or are authorized in accordance with federal immigration laws to be
employed in, the United States.
(j) CHANGE OF CONTROL BENEFITS. Except as accurately set
forth in SCHEDULE 4.25(j), the Company is not a party to any agreement,
and has not established any policy, practice or program, requiring it to
make a payment or provide any other form of compensation or benefit or
vesting rights to any person performing services for the Company which
would not be payable or provided in the absence of this Agreement or the
consummation of the transactions contemplated by this Agreement,
including any parachute payment under Section 280G of the Code.
(k) RETIREES. The Company does not have any obligation or
commitment to provide medical, dental or life insurance benefits to or on
behalf of any of its employees who may retire or any of its former
employees who have retired except (i) as may be required pursuant to the
continuation of coverage provisions of Section 4980B of the Code, the
applicable parallel provisions of ERISA and any applicable state law,
(ii) continuation of benefits in the event of disability, and
(iii) conversion privileges provided under any insured Company ERISA
Employee Benefit Plans.
Section 4.26. COMPLIANCE WITH ERISA, ETC.
(a) COMPLIANCE. Each of the Company ERISA Benefit Plans and
Other Compensation Plans (each, a "PLAN") (i) is in substantial
compliance with all applicable provisions of ERISA, as well as with all
other applicable Governmental Requirements, and (ii) has been
administered, operated and managed in accordance with its governing
documents.
(b) QUALIFICATION. All Plans that are intended to qualify
under Section 401(a) of the Code (the "QUALIFIED PLANS") are so qualified
and have been determined by the IRS to be so qualified (or application
for determination letters have been timely submitted to the IRS). The
Company has provided Purchaser with true, complete and correct copies of
the current plan determination letters, most recent actuarial valuation
reports, if any, most recent Form 5500, or, as applicable, Form 5500-C/R,
filed with respect to each Qualified Plan and most recent trustee or
custodian report. To the extent that any Qualified Plans have not been
amended to comply with applicable Governmental Requirements, the remedial
amendment period permitting retroactive amendment of these Qualified
Plans has not expired and will not expire within 120 days after the
Effective Time. All reports and other documents required to be filed
with any governmental agency or distributed to plan participants or
beneficiaries (including annual reports, summary annual reports,
actuarial reports, PBGC-1 Forms, audits or Returns) have been timely
filed or distributed.
37
(c) NO PROHIBITED TRANSACTIONS, ETC. None of the
Stockholder, the MTM Stockholders, any Plan or the Company has engaged in
any Prohibited Transaction. No Plan has incurred an accumulated funding
deficiency, as defined in Section 412(a) of the Code and Section 302(a)
of ERISA, and no circumstances exist under which the Company could have
any direct or indirect liability whatsoever (including being subject to
any statutory Lien to secure payment of any such liability), to the PBGC
under Title IV of ERISA or to the IRS for any excise tax or penalty with
respect to any Plan maintained or contributed to by the Company or any of
its ERISA Affiliates. Further:
(i) there have been no terminations, partial
terminations or discontinuances of contributions to any Qualified
Plan without a determination by the IRS that such action does not
adversely affect the tax-qualified status of that plan;
(ii) no Termination Event has occurred;
(iii) no Reportable Event has occurred with respect
to any Plan which was not properly reported;
(iv) the valuation of assets of any Qualified Plan, as of
the Effective Time, will equal or exceed the actuarial present
value of all "BENEFIT LIABILITIES" (within the meaning of Section
40001(a)(16) of ERISA) under that plan in accordance with the
assumptions contained in the Regulations of the PBGC governing the
funding of terminated defined benefit plans;
(v) with respect to Plans qualifying as "GROUP HEALTH
PLANS" under Section 4980B of the Code or Section 607(l) or 609 of
ERISA and related regulations (relating to the benefit
continuation rights imposed by "COBRA" or qualified medical child
support orders), the Company, the MTM Stockholders and the
Stockholder have complied in all material respects with all
reporting, disclosure, notice, election and other benefit
continuation and coverage requirements imposed thereunder as and
when applicable to those plans, and the Company has not incurred
(or will not incur) any direct or indirect liability or is (or
will be) subject to any loss, assessment, excise tax penalty, loss
of federal income tax deduction or other sanction, arising on
account of or in respect of any direct or indirect failure by the
Company, any MTM Stockholder or the Stockholder, at any time prior
to the Effective Time, to comply with any such federal or state
benefit continuation or coverage requirement, which is capable of
being assessed or asserted before or after the Effective Time
directly or indirectly against the Company, the Stockholder, any
MTM Stockholder, the Surviving Corporation or Purchaser with
respect to any of those group health plans;
(vi) the Financial Statements as of the Current Balance
Sheet Date reflect the approximate total pension, medical and
other benefit liability for all Plans, and
38
no material funding changes or irregularities are reflected
thereon which would cause those Financial Statements to be
not representative of prior periods; and
(vii) the Company has not incurred liability under
Section 4062 of ERISA.
(d) MULTIEMPLOYER PLANS. Except as set forth in SCHEDULE
4.26(d), the Company and no ERISA Affiliate, is not or at any time
during the six-year period ended on the date of this Agreement was not
obligated to contribute to a Multiemployer Plan. The Company and no
ERISA Affiliate of any of them, has not made a complete or partial
withdrawal from a Multiemployer Plan so as to incur withdrawal liability
as defined in Section 4201 of ERISA.
(e) CLAIMS AND LITIGATION. Except as accurately set forth in
SCHEDULE 4.26(d), no Litigation or claims (other than routine claims for
benefits) are pending or, to the knowledge of the Company, the
Stockholder and the MTM Stockholders, threatened against, or with
respect to, any of the Plans or with respect to any fiduciary,
administrator or sponsor thereof (in their capacities as such), or any
party-in-interest thereof.
(f) EXCISE TAXES, DAMAGES AND PENALTIES. No act, omission or
transaction has occurred which would result in the imposition on the
Company of (i) breach of fiduciary duty liability damages under Section
409 of ERISA, (ii) a civil penalty assessed pursuant to Section 502 of
ERISA or (iii) any excise tax under applicable provisions of the Code
with respect to any Plan.
(g) VEBA WELFARE TRUST. Any trust funding a Plan which is
intended to be exempt from federal income taxation pursuant to Section
501(c)(9) of the Code, satisfies the requirements of that section and has
received a favorable determination letter from the IRS regarding the
Plan's exempt status and has not, since receipt of the most recent
favorable determination letter, been amended or operated in a way that
would adversely affect its exempt status.
Section 4.27. TAXES.
(a) Each of the following representations and warranties in
this Section 4.27 is qualified to the extent set forth in SCHEDULE 4.27.
(b) All Returns required to be filed with respect to any Tax
for which the Company is liable have been duly and timely filed with the
appropriate Taxing Authority, each Tax shown to be payable on each such
Return has been paid, each Tax payable by the Company by assessment has
been timely paid in the amount assessed, and adequate reserves have been
established on the consolidated books of the Company for all Taxes for
which the Company is liable, but the payment of which is not yet due.
The Company is not and never has been, liable for any Tax payable by
reason of the income or property of a Person other
39
than the Company. The Company has timely filed true, correct and
complete declarations of estimated Tax in each jurisdiction in which
any such declaration is required to be filed by it. No Liens for Taxes
exist upon the assets of the Company except Liens for Taxes which are
not yet due. The Company is not, and never has been, subject to Tax in
any jurisdiction outside of the United States. No Litigation with
respect to any Tax for which the Company is asserted to be liable is
pending or, to the knowledge of the Company, the MTM Stockholders or
the Stockholder, threatened, and no basis which the Company, the MTM
Stockholders or the Stockholder believes to be valid exists on which
any claim for any such Tax can be asserted against the Company. There
are no requests for rulings or determinations in respect of any Taxes
pending between the Company and any Taxing Authority. No extension of
any period during which any Tax may be assessed or collected and for
which the Company is or may be liable has been granted to any Taxing
Authority. The Company is not and never has been a party to any tax
allocation or sharing agreement. All amounts required to be withheld
by the Company and paid to governmental agencies for income, social
security, unemployment insurance, sales, excise, use and other Taxes
have been collected or withheld and paid to the proper Taxing
Authority. The Company has made all deposits required by law to be
made with respect to employees' withholding and other employment Taxes.
(c) Neither the Company nor the Stockholder is a "foreign
person," as that term is referred to in Section 1445(f)(3) of the Code.
(d) The Company has not filed a consent pursuant to Section
341(f) of the Code or any comparable provision of any other tax statute
and has not agreed to have Section 341(f)(2) of the Code or any
comparable provision of any other Tax statute apply to any disposition of
an asset. No asset of the Company is subject to any provision of
applicable law which eliminates or reduces the allowance for depreciation
or amortization in respect of that asset below the allowance generally
available to an asset of this type. No accounting method changes of the
Company exist or are proposed or threatened which could give rise to an
adjustment under Section 481 of the Code.
(e) The Stockholder made an effective, valid and binding
election to treat the Company as a qualified subchapter S subsidiary
pursuant to Section 1361 of the Code effective January 1, 1998 and has,
or caused to have been, maintained the Company's status as a qualified
subchapter S subsidiary without lapse or interruption from the date of
said election until the date hereof. The Stockholder (i) made an
effective, valid and binding S election pursuant to Section 1362 of the
Code effective January 1, 1998, and (ii) maintained its status as an
S Corporation pursuant to Section 1361 of the Code without lapse or
interruption from the date of said election until the date hereof.
Section 4.28. GOVERNMENT CONTRACTS. Except as accurately set forth in
SCHEDULE 4.28, the Company is not a party to any governmental contract subject
to price redetermination or renegotiation.
40
Section 4.29. ABSENCE OF CHANGE. Since the Current Balance Sheet Date,
except as accurately set forth in SCHEDULE 4.29, none of the following has
occurred with respect to the Company:
(a) any circumstance, condition, event or state of facts
(either singly or in the aggregate), other than conditions affecting the
economy industry generally, which has caused, is causing or could
reasonably be expected to cause a Material Adverse Effect on the Company;
(b) any change in its authorized Capital Stock or in any of
its outstanding Capital Stock or Derivative Securities;
(c) any Restricted Payment;
(d) any increase in, or any commitment or promise to
increase, the rates of Cash Compensation as of the date hereof, or the
amounts or other benefits paid or payable under any Company ERISA Pension
Plan or Other Compensation Plan, except for ordinary and customary
bonuses and salary increases for employees (other than the MTM
Stockholders or their respective Immediate Family Members) at the times
and in the amounts consistent with its past practice;
(e) any work interruptions, labor grievances or claims filed,
or any similar event or condition of any character, that will have a
Material Adverse Effect on the Surviving Corporation following the
Effective Time;
(f) any distribution, sale or transfer of, or any Company
Commitment to distribute, sell or transfer, any of its assets or
properties of any kind which singly is or in the aggregate are Material
to the Company, other than distributions, sales or transfers in the
ordinary course of this business and consistent with its past practices
to Persons other than to the Stockholder, the MTM Stockholders and their
respective Immediate Family Members and Affiliates;
(g) any cancellation, or agreement to cancel, any
Indebtedness, obligation or other liability owing to it, including any
Indebtedness, obligation or other liability of the Stockholder or any
Related Person or Affiliate thereof except for adjustments to bills in
the course of good faith disputes with customers in a manner consistent
with past practice that do exceed $10,000 in the aggregate;
(h) any plan, agreement or arrangement granting any
preferential rights to purchase or acquire any interest in any of its
assets, property or rights or requiring consent of any Person to the
transfer and assignment of any such assets, property or rights;
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(i) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets
outside of the ordinary course of its business or not consistent with its
past practices;
(j) any waiver of any of its rights or claims that singly is
or in the aggregate are Material to the Company;
(k) any transaction by it outside the ordinary course of its
business or not consistent with its past practices and which involves in
excess of $25,000;
(l) any incurrence by it of any Indebtedness or any Guaranty
not constituting its Indebtedness, or any Company Commitment to incur any
Indebtedness or any such Guaranty;
(m) any investment in the Capital Stock, Derivative
Securities or Indebtedness of any Person, other than a Permitted
Investment;
(n) except in accordance with the Company's consolidated
capital expenditure budget for the Company's current fiscal year, any
capital expenditure or series of related capital expenditures by the
Company in excess of $25,000, or commitments by the Company to make
capital expenditures totaling in excess of $25,000; or
(o) any cancellation or termination of a Material Agreement
of the Company.
Section 4.30. BANK RELATIONS; POWERS OF ATTORNEY. SCHEDULE 4.30
accurately lists and identifies:
(a) the name of each financial institution in which the
Company has borrowing or investment arrangements, deposit or checking
accounts or safe deposit boxes;
(b) the types of those arrangements and accounts, including,
as applicable, names in which accounts or boxes are held, the account or
box numbers and the name of each Person authorized to draw thereon or
have access thereto; and
(c) the name of each Person holding a general or special
power of attorney from the Company and a description of the terms of each
such power.
Section 4.31. NO BROKERS. The Company and the Stockholders have not,
directly or indirectly, in connection with this Agreement or the transactions
contemplated hereby, employed any broker, finder or agent, or agreed to pay or
incurred any obligation to pay any broker's or finder's fee, any sales
commission or any similar form of compensation.
42
Section 4.32. COUNSEL. The Company, the Stockholder and each MTM
Stockholder have been represented by attorneys, accountants and other counsel of
their own choosing, and have not relied in any way on any statements, advice or
opinion, whether written or oral, of Counsel for Purchaser and Merger Sub with
respect to this Agreement, the transactions contemplated hereby and any actual
or potential consequences, including any actual or potential Tax consequences,
hereof and thereof on Purchaser, the Company, the Stockholder and such MTM
Stockholder, except the opinion of Counsel for Purchaser and Merger Sub to be
delivered pursuant to Section 7.3(ii)(B).
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PURCHASER AND MERGER SUB
Purchaser and Merger Sub jointly and severally represent and warrant to
the Company and the Stockholder that all the following representations and
warranties in this Article V are true and correct:
Section 5.1. MERGER SUB. (a) Merger Sub is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, (b) no Derivative Securities of Merger Sub are outstanding, and
(c) Merger Sub has been organized for the sole purpose of participating in the
Merger and has not, and will not, engage in any activities other than those
necessary to effectuate the Merger.
Section 5.2. ORGANIZATION; POWER. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and each of Purchaser and Merger Sub has all requisite corporate power
and authority under the laws of this Organization State and its Charter
Documents to own or lease and to operate its properties presently and following
the Effective Time and to carry on its business as now conducted and as proposed
to be conducted following the Effective Time. Merger Sub has not engaged in any
operations since its organization other than in connection with their formation
and capitalization and the transactions contemplated by this Agreement and the
Other Agreements.
Section 5.3. AUTHORIZATION; ENFORCEABILITY; ABSENCE OF CONFLICTS;
REQUIRED CONSENTS.
(a) The execution, delivery and performance by each of
Purchaser and Merger Sub of this Agreement and each other Transaction
Document to which it is a party, and the effectuation of the Merger and
the other transactions contemplated hereby and thereby, are within its
corporate power under its Charter Documents and the applicable
Governmental Requirements of its Organization State and have been duly
authorized by all proceedings, including actions permitted to be taken in
lieu of proceedings, required under its Charter Documents and the
applicable Governmental Requirements of its Organization State.
43
(b) This Agreement has been, and each of the other
Transaction Documents to which either of Purchaser or Merger Sub is a
party, when executed and delivered to the other parties thereto (or, in
the case of the Certificate of Merger, the applicable Governmental
Authorities), will have been, duly executed and delivered by it and is,
or when so executed and delivered will be, its legal, valid and binding
obligation, enforceable against it in accordance with its terms, except
as enforceability may be (i) limited by any applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and (ii) subject to general
principles of equity (regardless of whether enforceability is considered
in a proceeding in equity or at law).
(c) The execution, delivery and performance in accordance
with their respective terms by each of Purchaser and Merger Sub of the
Transaction Documents to which it is a party do not and will not
(i) violate, breach or constitute a default under (A) the Charter
Documents of Purchaser or Merger Sub, (B) any Governmental Requirement
applicable to Purchaser or Merger Sub or (C) any Material Agreement of
Purchaser or Merger Sub, (ii) result in the acceleration or mandatory
prepayment of any Indebtedness, or any Guaranty not constituting
Indebtedness, of Purchaser or Merger Sub or afford any holder of any of
that Indebtedness, or any beneficiary of any of those Guaranties, the
right to require Purchaser or Merger Sub to redeem, purchase or otherwise
acquire, reacquire or repay any of that Indebtedness, or to perform any
of those Guaranties, (iii) cause or result in the imposition of, or
afford any Person the right to obtain, any Lien upon any property or
assets of Purchaser or Merger Sub (or upon any revenues, income or
profits of either Purchaser or Merger Sub therefrom) or (iv) result in
the revocation, cancellation, suspension or material modification, in any
single case or in the aggregate, of any Governmental Approval possessed
by Purchaser or Merger Sub at the date of this Agreement and necessary
for the ownership or lease and the operation of its properties or the
carrying on of its business as now conducted, including any necessary
Governmental Approval under each applicable Environmental Law.
(d) Except for (i) the filing of the Certificate of Merger
with the applicable Governmental Authorities, (ii) filings of the
Registration Statement under the Securities Act and a registration
statement on Form 8-A with respect to the registration of the Purchaser
Common Stock under the Exchange Act and the SEC order declaring those
registration statements effective under the Securities Act and the
Exchange Act, respectively, and (iii) as may be required by the HSR Act
or the applicable state securities or blue sky laws, no Governmental
Approvals are required to be obtained, and no reports or notices to or
filings with any Governmental Authority are required to be made, by
Purchaser or Merger Sub for the execution, delivery or performance by
Purchaser or Merger Sub of the Transaction Documents to which it is a
party, the enforcement against Purchaser or Merger Sub, as the case may
be, of its obligations thereunder or the effectuation of the Merger and
the other transactions contemplated thereby.
Section 5.4. CHARTER DOCUMENTS. Purchaser has delivered to the
Company true, complete and correct copies of the Charter Documents of each of
Purchaser and Merger Sub. No breach or
44
violation of any Charter Document of either Purchaser or Merger Sub has
occurred and is continuing.
Section 5.5. CAPITAL STOCK OF PURCHASER AND MERGER SUB.
(a) Immediately prior to the Effective Time, (i) the
authorized Capital Stock of Purchaser will be comprised of (A) 25,000,000
shares of Purchaser Common Stock and (B) 3,000,000 shares of preferred
stock, $.0001 par value per share, (ii) before giving effect to the
Merger and the merger transactions contemplated by the Other Agreements,
(A) the number of shares of Purchaser Common Stock then issued and
outstanding, will be as set forth in the Registration Statement when it
becomes effective under the Securities Act, (B) no shares of the
Purchaser preferred stock then will be issued or outstanding, and
(C) Purchaser will have authorized and reserved for issuance, pursuant to
Other Compensation Plans or the exercise of Derivative Securities the
number of shares of Purchaser Common Stock set forth in the Registration
Statement when it becomes effective under the Securities Act.
(b) The authorized Capital Stock of Merger Sub is comprised
of 1,000 shares of Merger Sub Common Stock, all of which shares are
issued, outstanding and owned, of record and beneficially, by Purchaser.
(c) All shares of Purchaser Common Stock and Merger Sub
Common Stock outstanding immediately prior to the Effective Time, and all
shares of Purchaser Common Stock and Purchaser Preferred Stock to be
issued pursuant to Section 2.4, when issued, will have been duly
authorized and validly issued in accordance with the DGCL and their
issuer's Charter Documents, and will be fully paid and nonassessable.
None of the shares of Purchaser Stock to be issued pursuant to
Section 2.4 will, when issued, have been issued in breach or violation of
(i) any applicable statutory or contractual preemptive rights, or any
other rights of any kind (including any rights of first offer or
refusal), of any Person or (ii) the terms of any of its Derivative
Securities then outstanding.
Section 5.6. SUBSIDIARIES. Immediately prior to the IPO Closing Date,
(a) Purchaser will have no Subsidiaries other than as described in the Private
Placement Memorandum, (b) Merger Sub will have no Subsidiaries, and (c) neither
Purchaser nor Merger Sub will own, of record or beneficially, directly or
indirectly through any Person or otherwise (except pursuant hereto or to the
Other Agreements), any Capital Stock or Derivative Securities of any Entity not
described in this Section 5.6 as a Subsidiary of Purchaser (in the case of
Purchaser) or any Entity (in the case of Merger Sub).
Section 5.7. LIABILITIES. Except as disclosed in the Private
Placement Memorandum, neither Purchaser nor Merger Sub has any material
liabilities of any kind other than those incurred in connection with this
Agreement and the Other Agreements and the transactions contemplated hereby and
thereby, including the IPO.
45
Section 5.8. COMPLIANCE WITH LAWS; NO LITIGATION. Each of Purchaser
and Merger Sub is in compliance with all Governmental Requirements applicable to
it, and no Litigation is pending or, to the knowledge of Purchaser, threatened
to which Purchaser or Merger Sub is or may become a party which questions or
involves the validity or enforceability of any obligation of Purchaser or Merger
Sub under any Transaction Document, or which seeks (or reasonably may be
expected to seek) (a) to prevent or delay consummation by Purchaser or Merger
Sub of the transactions contemplated by this Agreement to be consummated by
Purchaser or Merger Sub, as the case may be, or (b) Damages from Purchaser or
Merger Sub in connection with any such consummation.
Section 5.9. NO BROKERS. Neither Purchaser nor Merger Sub has
directly or indirectly, in connection with this Agreement or the transactions
contemplated hereby, employed any broker, finder or agent, or agreed to pay or
incurred any obligation to pay any broker's or finder's fee, any sales
commission or any similar form of compensation, other than fees payable to
Benchmark Equity Group, Inc. as disclosed in the Private Placement Memorandum or
the Registration Statement.
Section 5.10. PRIVATE PLACEMENT MEMORANDUM. At the date hereof, the
Private Placement Memorandum (other than the historical financial statements,
including the notes thereto, of the Founding Companies (other than the Company)
and the historical information contained therein respecting the Company and the
Stockholder, to which this Section 5.10 does not apply) does not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements contained therein not materially misleading in
the light of the circumstances under which those statements are made.
Section 5.11. REGISTRATION AND OTHER RIGHTS. Except as set forth in
the Private Placement Memorandum or the Registration Statement, at the Effective
Time Purchaser will have no (a) commitment to any Person to cause securities of
Purchaser to be registered under the Securities Act or the securities laws of
any state, (b) outstanding Derivative Securities, or (c) outstanding agreements
or commitments of any character committing Purchaser to issue or acquire shares
of its Capital Stock or Derivative Securities.
Section 5.12. COUNSEL. Purchaser and Merger Sub have been represented
by attorneys, accountants and other counsel of their own choosing, and have not
relied in any way on any statements, advice or opinion, whether written or oral,
of Counsel for the Company, the Stockholder and the MTM Stockholders, with
respect to this Agreement, the transactions contemplated hereby and any actual
or potential consequences, including any actual or potential Tax consequences,
hereof and thereof on Purchaser and Merger Sub, except the opinion of Counsel
for the Company, the Stockholder and the MTM Stockholders to be delivered
pursuant to Section 7.4(a)(ii)(B).
46
ARTICLE VI
COVENANTS EXTENDING TO THE EFFECTIVE TIME
Section 6.1. ACCESS AND COOPERATION; DUE DILIGENCE.
(a) From the date of this Agreement until the IPO Closing
Date, the Company, for the benefit of Purchaser and each Other Founding
Company, will (i) afford to the Representatives of Purchaser and each
Other Founding Company reasonable access to all the key employees, sites,
properties, books and records of the Company, (ii) provide Purchaser with
such additional financial and operating data and other information
relating to the business and properties of the Company as Purchaser or
any Other Founding Company may from time to time reasonably request, and
(iii) cooperate with Purchaser and each Other Founding Company and their
respective Representatives in the preparation of any documents or other
material which may be required in connection with any Transaction
Documents or any Other Transaction Documents. Purchaser and Merger Sub
agree, for the benefit of the Company, the Stockholder and the MTM
Stockholders, that they will treat all Confidential Information of the
Company, the Stockholder and each MTM Stockholder obtained by them in
connection with the negotiation and performance of this Agreement as
confidential in accordance with the provisions of Section 12.1. In
addition, Purchaser will cause each Other Founding Company to enter into
a provision identical to this Section 6.1 to require each Other Founding
Company to (i) provide to the Company such information relating to such
Other Founding Company as the Company may reasonably request in relation
to the transactions contemplated by this Agreement and the Other
Agreements and (ii) keep confidential any Confidential Information
respecting the Company obtained by that Other Founding Company.
(b) Each of the Company, the Stockholder and the MTM
Stockholders will use its best efforts to secure, as soon as practicable
after the execution of this Agreement, all approvals or consents of third
Persons as may be necessary to consummate the transactions contemplated
hereby.
(c) From the date hereof until the IPO Closing Date,
Purchaser and Merger Sub will (i) afford to the Representatives of the
Company, the Stockholder and the MTM Stockholders access to all sites,
properties, books and records of Purchaser and Merger Sub, (ii) provide
the Company with such additional financial and operating data and other
information relating to the business and properties of Purchaser and
Merger Sub as the Company, the Stockholder or any MTM Stockholder may
from time to time reasonably request, and (iii) cooperate with the
Company, the Stockholder and the MTM Stockholders and their respective
Representatives in the preparation of any documents or other material
which may be required in connection with any Transaction Documents. Each
MTM Stockholder, the Stockholder and the Company agree, for the benefit
of Purchaser and each Other Founding Company, that they will treat all
Confidential Information of Purchaser,
47
Merger Sub and the Other Founding Companies obtained by them in
connection with the negotiation and performance of this Agreement or the
due diligence investigations conducted with respect to each Other
Founding Company as confidential in accordance with the provisions of
Section 12.1.
(d) If this Agreement is terminated pursuant to Section 11.1,
(i) Purchaser promptly will return all written Confidential Information
of the Company, the Stockholder and each MTM Stockholder it then
possesses to the Company, and (ii) the Company, the Stockholder and each
MTM Stockholder promptly will return all written Confidential Information
of Purchaser, Merger Sub and the Other Founding Companies it then
possesses to Purchaser.
Section 6.2. CONDUCT OF BUSINESS PENDING CLOSING. From the date of
this Agreement until the Effective Time, the Company will, except as and only to
the extent set forth in SCHEDULE 6.2:
(a) carry on its businesses in substantially the same manner
as it has before, and not introduce any material new method of
management, operation or accounting;
(b) maintain its properties and facilities, including those
held under leases, in as good working order and condition as at present,
ordinary wear and tear excepted;
(c) perform all its obligations under agreements relating to
or affecting its assets, properties and other rights;
(d) keep in full force and effect, without interruption, all
its present insurance policies or other comparable insurance coverage;
(e) use reasonable commercial efforts to (i) maintain and
preserve its business organization intact, (ii) retain its present
employees, and (iii) maintain its relationships with suppliers,
subcontractors, customers and others having business relations with it;
(f) comply with all applicable Governmental Requirements; and
(g) except as required or expressly permitted by this
Agreement, maintain the instruments and agreements governing its
outstanding Indebtedness and leases on their present terms and not enter
into new or amended Indebtedness (except the Allowable New Indebtedness)
or lease instruments or agreements involving amounts over $5,000 in any
case or $25,000 in the aggregate, except for Service Contracts with
Company customers for providing long distance service in accordance with
current practice, without the prior written consent of Purchaser (which
consent will not be unreasonably withheld).
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Section 6.3. PROHIBITED ACTIVITIES. From the date of this Agreement
until the Effective Time, without the prior written consent of Purchaser (which
will not be unreasonably withheld) or unless as required or expressly permitted
by this Agreement, the Company will not:
(a) make any change in its Charter Documents;
(b) issue any of its Capital Stock or issue or otherwise
create any of its Derivative Securities;
(c) make any Restricted Payment, other than as provided in
this Section 6.3 and except for distributions or dividends of cash by the
Company to the Stockholder which, including the proceeds of the Allowable
New Indebtedness, in the aggregate do not exceed $6,500,000 and which do
not cause the Working Capital to be less than the Minimum Working Capital
Amount on the Closing Date;
(d) make any investments (other than Permitted Investments)
in the Capital Stock, Derivative Securities or Indebtedness of any
Person;
(e) enter into any contract or commitment (other than a
Services Contract with a Company customer for providing long distance
service in accordance with current practice) or incur or agree to incur
any liability or make any capital expenditures in a single transaction or
a series of related transactions involving an aggregate amount of more
than $25,000 otherwise than in the ordinary course of its business and
consistent with its past practice;
(f) increase or commit or promise to increase the Cash
Compensation payable or to become payable to any officer, director,
stockholder, employee or agent, consultant or independent contractor of
the Company or make any discretionary bonus or management fee payment to
any such Person, except bonuses or salary increases to employees (other
than the MTM Stockholders or their Immediate Family Members), and bonuses
to the MTM Stockholders (in their capacities as employees of the Company)
as a result of the current calendar year performance of the Company, at
the times and in the amounts consistent with its past practice, which
bonuses do not cause the Working Capital to be less than the Minimum
Working Capital Amount;
(g) create or assume any Liens (other than Permitted Liens)
upon any of its assets or properties, whether now owned or hereafter
acquired, except for purchase money Liens incurred in connection with the
acquisition of equipment with an aggregate cost not in excess of $10,000
and necessary or desirable for the conduct of the business of the
Company;
(h) adopt, establish, amend or terminate any ERISA Employee
Benefit Plan, or any Other Compensation Plan or Employee Policies and
Procedures, or take any
49
discretionary action, or omit to take any contractually required action,
if that action or omission could either (i) deplete the assets of any
ERISA Employee Benefit Plan or any Other Compensation Plan or (ii)
increase the liabilities or obligations under any such plan;
(i) sell, assign, lease or otherwise transfer or dispose of
any of its owned or leased Property, Plant or Equipment otherwise than in
the ordinary course of its business and consistent with its past
practice;
(j) negotiate for the acquisition of any business or the
start-up of any new business;
(k) merge, consolidate or effect a share exchange with, or
agree to merge, consolidate or effect a share exchange with, any other
Entity;
(l) waive any of its material rights or claims, provided that
it may negotiate and adjust bills in the course of good faith disputes
with customers in a manner consistent with past practice;
(m) commit a material breach of or amend materially or
terminate any Material Agreement of the Company or any of its
Governmental Approvals;
(n) enter into any other transaction (i) outside the ordinary
course of its business and not consistent with its past practice or
(ii) prohibited hereby; or
(o) settle, or pay any amounts in settlement of, any
Litigation; provided that the Company may pay Agreed Settlement Costs if
the aggregate Recent Operating Costs at the time of payment thereof are
positive and the payment of such Agreed Settlement Costs will not cause
such aggregate Recent Operating Profits to be negative.
Section 6.4. NO SHOP: RELEASE OF DIRECTORS.
(a) Each of the Company, the Stockholder and the MTM
Stockholders agrees that, from the date of this Agreement until the
Effective Time, neither the Company, the Stockholder nor such MTM
Stockholder, nor any of their respective officers and directors shall,
and the Company, the Stockholder and each MTM Stockholder will direct and
use their best efforts to cause each of their respective Representatives
not to, initiate, solicit or encourage, directly or indirectly, any
inquiries or the making or implementation of any proposal or offer
(including any proposal or offer to the Stockholder or the MTM
Stockholders) with respect to a merger, acquisition, consolidation or
similar transaction involving, or any purchase of all or any significant
portion of the assets or any equity securities of, the Company or the
Stockholder (any such proposal or offer being herein called an
"ACQUISITION PROPOSAL") or engage in any activities, discussions or
negotiations concerning, or provide any Confidential Information
respecting, the Company, any Other
50
Founding Company or Purchaser to, or have any discussions with, any
Person relating to an Acquisition Proposal, or otherwise facilitate any
effort or attempt to make or implement an Acquisition Proposal. The
Company, the Stockholder and each MTM Stockholder will: (i) immediately
cease and cause to be terminated any existing activities, discussions or
negotiations with any Persons previously conducted with respect to any
of the foregoing, and each will take the steps necessary to inform the
Persons referred to in the first sentence of this Section 6.4(a) of the
obligations undertaken in this Section 6.4(a); and (ii) notify Purchaser
immediately if any such inquiries or proposals are received by, any such
information is requested from or any such discussions or negotiations are
sought to be initiated or continued with the Company, the Stockholder or
any MTM Stockholder.
(b) Each of the Company, the Stockholder and the MTM
Stockholders hereby (i) waives every right, if any, the Governmental
Requirements of the Company's Organization State afford the Company, the
Stockholder or the MTM Stockholders to require the Company's directors,
in the exercise of their fiduciary duties in their capacity as such, to
engage in any of the activities prohibited by this Section 6.4 and
(ii) releases each such person from any and all liability he might
otherwise have to the Company, the Stockholder or any MTM Stockholders
but for this release.
Section 6.5. NOTIFICATION OF CERTAIN MATTERS. The Stockholder, the
MTM Stockholders and the Company shall give prompt notice to Purchaser of
(a) the existence or occurrence of each condition or state of facts which
becomes known to them and which will or reasonably could be expected to cause
any representation or warranty of the Company, the Stockholder or any MTM
Stockholder contained herein to be untrue or incorrect in any material respect
at or prior to the Closing or on the IPO Closing Date and (b) any material
failure of the Stockholder, any MTM Stockholder or the Company to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
that Person hereunder. Purchaser shall give prompt notice to the Company of
(a) the existence or occurrence of each condition or state of facts which will
or reasonably could be expected to cause any representation or warranty of
Purchaser or Merger Sub contained herein to be untrue or inaccurate at or prior
to the Closing or on the IPO Closing Date and (b) any material failure of
Purchaser or Merger Sub to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder. The delivery of any
notice pursuant to this Section 6.5 shall not be deemed to (a) modify the
representations or warranties herein of the party delivering that notice, or any
other party, which modification may be made only pursuant to Section 6.6,
(b) modify the conditions set forth in Article VII or (c) limit or otherwise
affect the remedies available hereunder to the party receiving that notice.
Section 6.6. SUPPLEMENTAL INFORMATION. Each of the Company, the
Stockholder and the MTM Stockholders agrees that, with respect to its
representations and warranties contained in this Agreement, it will have the
continuing obligation until the Closing to provide Purchaser promptly with such
additional supplemental Information (collectively, the "SUPPLEMENTAL
INFORMATION"), in the form of (a) amendments to then existing Schedules or
(b) additional Schedules, as would be necessary, in the light of the
circumstances, conditions, events and states of facts then known to the
51
Company, the Stockholder or any MTM Stockholder, to make each of those
representations and warranties true and correct as of the Closing and on the
IPO Closing Date. For purposes only of determining whether the conditions to
the obligations of Purchaser and Merger Sub which are specified in Sections
7.4(a)(i) and 7.4(b)(ii) have been satisfied, and not for any purpose under
Article IX, the Schedules as of the Closing and on the IPO Closing Date shall
be deemed to be the Schedules as of the date hereof as amended or
supplemented by the Supplemental Information provided to Purchaser prior to
the Closing pursuant to this Section 6.6; PROVIDED, HOWEVER, that if the
Supplemental Information so provided discloses the existence of
circumstances, conditions, events or states of facts which, in any
combination thereof, (a) have had a Material Adverse Effect on the Company
which was not reflected in the determination of the Merger Consideration or,
in the judgment of Purchaser (which shall be conclusive for purposes of this
Section 6.6 and Article XI, but not for any purpose of Article IX), (b) are
having or will have a Material Adverse Effect on the Company or the Surviving
Corporation, as the case may be, Purchaser will be entitled to terminate this
Agreement pursuant to Section 11.1(a)(iv) and treat as Purchaser Indemnified
Losses for all purposes of Article IX (which treatment will not prejudice the
right of the Stockholder or any MTM Stockholder under Article IX to contest
Damage Claims made by Purchaser in respect of those Purchaser Indemnified
Losses) all Damages to the Company or the Surviving Corporation which are
attributable to the circumstances, conditions, events and states of facts
first disclosed herein after the date hereof in the Supplemental Information;
and PROVIDED FURTHER, HOWEVER, that if the circumstances, conditions, events
or states of facts disclosed in the Supplemental Information and having or
judged to have in the future such a Material Adverse Effect (A) have not
resulted from a breach by the Company, the Stockholder or the MTM
Stockholders of any of their covenants set forth in Article VI or elsewhere
in this Agreement and (B) do not indicate that any representation or warranty
of the MTM Stockholders, the Stockholder and the Company made in Articles III
and IV shall have been untrue or inaccurate at the date of this Agreement,
then Purchaser shall only be entitled to terminate this Agreement pursuant to
Section 11.1(a)(iv), and shall not be entitled to treat as Purchaser
Indemnified Losses any such Damages to the Company or the Surviving
Corporation. Purchaser will provide the Company with copies of the
Registration Statement, including all pre-effective amendments thereto,
promptly after the filing thereof with the SEC under the Securities Act.
Section 6.7. COOPERATION IN CONNECTION WITH THE IPO. The Company, the
Stockholder and the MTM Stockholders will (a) provide Purchaser and the
Underwriter with all the Information concerning the Company, the Stockholder or
any of the MTM Stockholders which is reasonably requested by Purchaser and the
Underwriter from time to time in connection with effecting the IPO and
(b) cooperate with Purchaser and the Underwriter and their respective
Representatives in the preparation and amendment of the Registration Statement
(including the Financial Statements) and in responding to the comments of the
SEC staff, if any, with respect thereto. The Company, the Stockholder and each
MTM Stockholder agree promptly to (a) advise Purchaser if, at any time during
the period in which a prospectus relating to the IPO is required to be delivered
under the Securities Act, any information contained in the then current
Registration Statement prospectus concerning the Company, the Stockholder or the
MTM Stockholders becomes incorrect or
52
incomplete in any material respect and (b) provide Purchaser with the
information needed to correct or complete that information.
Section 6.8. HSR ACT MATTERS. If Purchaser shall determine that
filings under the HSR Act are necessary or appropriate in connection with the
effectuation of the Merger or the consummation of the acquisitions contemplated
by the Other Agreements, and advises the Company in writing of that
determination, the Company promptly will compile and file under the HSR Act such
information respecting it as the HSR Act requires of an Entity to be acquired,
and the expiration or termination of the applicable waiting period and any
extension thereof under the HSR Act shall be deemed a condition precedent set
forth in Section 7.2(b).
ARTICLE VII
THE CLOSING AND CONDITIONS TO CLOSING AND CONSUMMATION
Section 7.1. THE CLOSING AND CERTAIN CONDITIONS. On or before the IPO
Pricing Date, the Parties will take all actions necessary to (i) effect the
Merger on the IPO Closing Date (including, as permitted by the DGCL, (A) the
execution of a Certificate of Merger meeting the requirements of DGCL and
providing that the Merger will become effective on the IPO Closing Date and
(B) the filing of the Certificate of Merger with the Secretary of State of the
State of Delaware), (ii) verify the existence and ownership of the certificates
evidencing the Company Common Stock to be exchanged for the Merger Consideration
pursuant to Section 2.5, and (iii) satisfy the document delivery requirements to
which the obligations of the Parties to effect the Merger and the other
transactions contemplated hereby are conditioned by the provisions of this
Article VII (all those actions collectively being the "CLOSING"). The Closing
will take place at the offices of Xxxxxx & Xxxxxx, L.L.P., 000 Xxxxxxxxx,
Xxxxxxx, Xxxxx at 10:00 a.m., Houston time, or at such later time on the IPO
Pricing Date as Purchaser shall specify by written notice to the Company. The
actions taken at the Closing will not include the completion of either the
Merger or the delivery of the Company Common Stock or the Merger Consideration
pursuant to Section 2.5. Instead, on the IPO Closing Date, the Certificate of
Merger will become effective pursuant to Section 2.2, and all transactions
contemplated by this Agreement to be closed or completed on or before the IPO
Closing Date, including the surrender of the Company Common Stock in exchange
for the Merger Consideration will be closed or completed, as the case may be.
During the period from the Closing to the IPO Closing Date, this Agreement may
be terminated by the parties only pursuant to Section 11.1 (b)(i).
53
Section 7.2. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY.
(a) The obligation of each Party to take the actions
contemplated to be taken by that Party at the Closing is subject to the
satisfaction or waiver of each of the following conditions on or before
the date of the Closing:
(i) NO LITIGATION. No Litigation shall be pending on
the date of the Closing to restrain, prohibit or otherwise
interfere with, or to obtain material damages or other relief from
Purchaser or the Surviving Corporation in connection with, the
consummation of the Merger or the IPO;
(ii) GOVERNMENTAL APPROVALS. All Governmental Approvals
(other than the acceptance for filing of the Certificate of
Merger) required to be obtained by any of the Company, Purchaser
and Merger Sub in connection with the consummation of the Merger
and the IPO shall have been obtained; and
(iii) THE REGISTRATION STATEMENT. (A) The Registration
Statement shall have been declared effective under the
Securities Act by the SEC; (B) no stop order suspending the
effectiveness of the Registration Statement shall have been
issued by the SEC, and the SEC shall not have initiated or
threatened to initiate Litigation for that purpose; (C) the
Underwriter shall have agreed in writing (the "UNDERWRITING
AGREEMENT," which term includes the related pricing agreement,
if any) to purchase from Purchaser on a firm commitment basis
for resale to the public initially at the IPO Price, subject to
the conditions set forth in the Underwriting Agreement, such
number of shares of Purchaser Common Stock covered by the
Registration Statement; and (D) neither the Registration
Statement nor the Final Prospectus shall contain any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements contained therein not
materially misleading in the light of the circumstances under
which those statements are made.
(b) The obligation of each Party hereto with respect to the
actions to be taken on the IPO Closing Date is subject to the
satisfaction on that date of each of the following conditions:
(i) NO LITIGATION. No Litigation shall be pending on
the IPO Closing Date to restrain, prohibit or otherwise interfere
with, or to obtain material damages or other relief from Purchaser
or the Surviving Corporation in connection with, the consummation
of the Merger or the IPO;
(ii) GOVERNMENTAL APPROVALS. All Governmental Approvals
required to be obtained by the Company (including, without
limitation, the Governmental Approvals shown on SCHEDULE 4.3 for
which consents are required), Purchaser and
54
Merger Sub in connection with the consummation of the Merger and
the IPO shall have been obtained;
(iii) REGISTRATION STATEMENT AND FINAL PROSPECTUS.
Neither the Registration Statement, in its form at the Effective
Time, nor the Final Prospectus shall contain any untrue statement
of a material fact or omit to state any material fact necessary in
order to make the statements contained therein not materially
misleading in the light of the circumstances under which those
statements are made; and
(iv) REGISTRATION RIGHTS AGREEMENT. The Stockholder and
the Purchaser shall have entered into the Registration Rights
Agreement in the form of EXHIBIT 7.2 hereto.
Section 7.3. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY, THE
STOCKHOLDER AND THE MTM STOCKHOLDERS. The obligations of the Company, the
Stockholder and each MTM Stockholder with respect to actions to be taken by them
at or before the Closing and the actions to be taken on the IPO Closing Date are
subject to the satisfaction, or the written waiver by the Company on behalf of
itself, the Stockholder and each MTM Stockholder pursuant to Section 12.5 on or
before the date of the Closing of, in addition to the conditions specified in
Section 7.2(a) or 7.2(b), as applicable, all the following conditions:
(i) REPRESENTATIONS AND WARRANTIES. All the
representations and warranties of Purchaser and Merger Sub in
Article V shall be true and correct in all material respects as of
the Closing as though made at that time;
(ii) DELIVERY OF DOCUMENTS. Purchaser shall have
delivered to the Company, with copies for each Stockholder:
(A) a Purchaser officer's certificate respecting
the representations and warranties of Purchaser and
Merger Sub in Article V and compliance with the covenants
of Purchaser and Merger Sub in Article VI and in the form
thereof attached as an exhibit to the Closing Memorandum;
(B) opinions dated the IPO Closing Date and
addressed to the Company and the Stockholder from Counsel
for Purchaser and Merger Sub substantially in the form
thereof attached as exhibits hereto;
(C) a certificate of the secretary or any
assistant secretary of Purchaser in the form thereof
(without attachments thereto) attached as an exhibit to
the Closing Memorandum and respecting, and to which there
shall be attached, (a) the Charter Documents of Purchaser
and Merger Sub (certified by the Secretary of State of
the State of Delaware); (b) the resolutions of the boards
of directors of Purchaser and Merger Sub
55
respecting the Transaction Documents and the transactions
contemplated thereby; (c) a certificate respecting the
incumbency and true signatures of the Purchaser and Merger
Sub officers who execute the Transaction Documents on
behalf of Purchaser and Merger Sub, respectively; (d) a
specimen certificate evidencing shares of Purchaser Common
Stock and a specimen certificate evidencing shares of
Purchaser Preferred Stock; (e) the prospectus included in
the Registration Statement when it became effective; and
(f) a facsimile copy of the Underwriting Agreement as
executed and delivered by Purchaser and the Underwriter;
and
(D) a certificate, dated as of a Current Date,
duly issued by the Secretary of State of the State of
Delaware, showing Purchaser to be in good standing and
authorized to do business in that State.
Section 7.4. CONDITIONS TO THE OBLIGATIONS OF PURCHASER AND MERGER
SUB.
(a) The obligations of Purchaser and Merger Sub with respect
to actions to be taken by them at or before the Closing are subject to
the satisfaction on or before the date of the Closing of, in addition to
the conditions specified in Section 7.2 (a) and Section 7.2(b), all the
following conditions:
(i) REPRESENTATIONS AND WARRANTIES. All the
representations and warranties of the Stockholder, each MTM
Stockholder and the Company in Articles III and IV shall be true
and correct in all material respects as of the Closing as though
made at that time;
(ii) DELIVERY OF DOCUMENTS. The Stockholder, the MTM
Stockholders and the Company shall have delivered to Purchaser:
(A) a Company officer's certificate, signed by a
Responsible Officer of the Company, a Stockholder
officer's certificate, signed by a Responsible Officer of
the Stockholder, and a certificate from each MTM
Stockholder, signed by such MTM Stockholder, in each case
respecting the representations and warranties of the
Stockholder, such MTM Stockholder and the Company in
Articles III and IV and compliance with the covenants of
the Stockholder, such MTM Stockholder and the Company in
Article VI and in the form thereof attached as an exhibit
to the Closing Memorandum;
(B) opinions dated the IPO Closing Date and
addressed to Purchaser from Counsel for the Company, the
Stockholder and the MTM Stockholders substantially in the
form thereof attached as exhibits hereto;
56
(C) a certificate of the secretary or any
assistant secretary of the Company in the form thereof
(without attachments thereto) attached as an exhibit to
the Closing Memorandum and respecting, and to which is
attached, (a) the Charter Documents of the Company;
(b) the resolutions of the board of directors of the
Company respecting the Transaction Documents and the
transactions contemplated thereby; and (c) a certificate
respecting the incumbency and true signatures of the
Responsible Officers who execute the Transaction
Documents on behalf of the Company;
(D) from the Stockholder and each MTM
Stockholder, a General Release duly executed and
delivered by the Stockholder or that MTM Stockholder; and
(E) for the Company, a certificate, dated as of a
Current Date, duly issued by the appropriate Governmental
Authorities in its Organization State and, unless waived
by Purchaser, in each other jurisdiction listed for it in
SCHEDULE 4.2 showing it to be in good standing and
authorized to do business in its Organization State and
those other jurisdictions and that all state franchise
and/or income tax returns and taxes due by it in its
Organization State and those other jurisdictions for all
periods prior to the Closing have been filed and paid;
(iii) TERMINATION OF PLAN. The Company shall have
terminated the AXCES, Inc. 401(k) Plan; and
(iv) WORKING CAPITAL. The Working Capital shall not be
less than the Minimum Working Capital Amount.
(b) The obligations of Purchaser and Merger Sub with respect
to the actions to be taken on the IPO Closing Date are subject to the
satisfaction on that date of (i) all the conditions set forth in Section
7.02(b), if any, and (ii) the condition that all the representations and
warranties of the Stockholder, the MTM Stockholders and the Company in
Articles III and IV shall be true and correct in all material respects as
of the IPO Closing Date as though made on that date.
ARTICLE VIII
COVENANTS FOLLOWING THE EFFECTIVE TIME
Section 8.1. OF EACH PARTY OTHER THAN THE COMPANY. From and after the
Effective Time, subject to the waiver provisions of SCHEDULE 11.5, each Party
(other than the Company) will comply with the following covenants.
57
(a) DISCLOSURE. If, subsequent to the IPO Pricing Date and
prior to the 25th day after the date of the Final Prospectus, the
Stockholder becomes aware of any fact or circumstance which would change
a representation or warranty of the Company or the Stockholder in this
Agreement or would affect any document delivered pursuant hereto in any
material respect, Stockholder will promptly give notice of that fact or
circumstance to Purchaser.
(b) PREPARATION AND FILING OF TAX RETURNS. Each party hereto
will, and will cause its Affiliates to, provide to each of the other
parties hereto such cooperation and information as any of them reasonably
may request in filing any Return, amended Return or claim for refund,
determining a liability for Taxes or a right to refund of Taxes or in
conducting any audit or other proceeding in respect of Taxes. This
cooperation and information shall include providing copies of all
relevant portions of the relevant Returns, together with such
accompanying Sections and work papers, documents relating to rulings or
other determinations by Taxing Authorities and records concerning the
ownership and Tax bases of property as are relevant which a party
possesses. Each party will make its employees, if any, reasonably
available on a mutually convenient basis at its cost to provide an
explanation of any documents or information so provided. Subject to the
preceding sentence, each party required to file Returns pursuant to this
Agreement shall bear all costs attributable to the preparation and filing
of those Returns.
Section 8.2. TAX LIABILITY. Following the Closing Date, the Surviving
Corporation shall, and Purchaser shall cause the Surviving Corporation to, pay
to the Stockholder and the MTM Stockholders the amount of the Tax Liability and
the reasonable fees and actual expenses of and disbursements by ("TAX EXPERT
COSTS") attorneys, accountants, financial advisors or other consultants engaged
to provide advice, documentation or representation relating to methods to
decrease or defer any Tax Liability ("TAX EXPERTS"), not to exceed in the
aggregate $1,600,000 for the Tax Liability and the Tax Expert Costs. Such
payments shall be payable on written demand, not to exceed in the aggregate
$400,000 in any calendar quarter, which written demand, with respect to any
amounts in excess of $800,000 in the aggregate, shall be accompanied and
supported by (a) documentation of corporate or personal estimated income tax
deposits, (b) signed corporate or personal income tax returns or extension
requests, or (c) documentation of Tax Expert Costs reasonably acceptable to
Purchaser. If the amount of the Tax Liability plus the Tax Expert Costs exceeds
$1,600,000 in the aggregate (such excess amount being "EXCESS TAX OBLIGATIONS"),
the Stockholder and the MTM Stockholders, severally with respect to each other
but jointly and severally with the Stockholder, shall assume and be liable to
pay the Excess Tax Obligations. If at any time while the Surviving Corporation
is obligated to pay any amounts to the Stockholder or any MTM Stockholder
pursuant to this Section 8.2 Purchaser's Tax Liability Reserve Amount is less
than the excess, if any, of (y) $1,600,000 over (z) the total Tax Liability and
Tax Expert Costs previously paid to the Stockholder and the MTM Stockholders by
the Surviving Corporation, the Stockholder shall have the option to require that
Purchaser obtain a letter of credit from a commercial bank or other financial
institution reasonably acceptable to the Stockholder in the amount of such
deficiency and which may be drawn on by the Stockholder in the event the Company
fails to pay timely any Tax Liability or Deferred
58
Tax Expert Costs for which it is liable hereunder. Notwithstanding any
provision herein to the contrary, in no event shall the Surviving Corporation
or the Purchaser (i) be liable for any federal or state income tax due on
income reportable for tax purposes and attributable to operations of the
Company prior to January 1, 1999 ("PRIOR TAX LIABILITY"), or (ii) be
obligated to take any position, including on any tax return or otherwise,
based on any Tax Expert advice or opinion not satisfactory to the Purchaser
in its sole, absolute and unfettered discretion.
ARTICLE IX
INDEMNIFICATION
Section 9.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All the
provisions of this Agreement will survive the Closing and the Effective Time
notwithstanding any investigation at any time made by or on behalf of any party
hereto or the provision of any Supplemental Information pursuant to Section 6.6,
provided that (a) the representations and warranties of the Stockholder and the
MTM Stockholders in this Agreement and in any certificate delivered pursuant
hereto will survive for a period of two years from the Effective Time; and
(b) the representations and warranties of Purchaser, Merger Sub and the Company
in this Agreement and in any certificate delivered pursuant hereto will
terminate and expire at the Effective Time. After a representation and warranty
has terminated and expired, no indemnification will or may be sought on the
basis of that representation and warranty by any Person who would have been
entitled pursuant to this Article IX to indemnification on the basis of that
representation and warranty prior to its termination and expiration, provided
that, in the case of each representation and warranty that will terminate and
expire as provided in this Section 9.1, no claim presented in writing for
indemnification pursuant to this Article IX on the basis of that representation
and warranty prior to its termination and expiration will be affected in any way
by the termination and expiration.
Section 9.2. INDEMNIFICATION OF PURCHASER INDEMNIFIED PARTIES.
(a) Subject to the applicable provisions of Sections 9.1 and
9.6, the Stockholder and each MTM Stockholder, jointly and severally,
except that, with respect to the indemnity in clause (v) below, each MTM
Stockholder shall be joint and several with the Stockholder and several
among themselves as to such MTM Stockholder's proportionate part of any
Excess Tax Obligations and any Prior Tax Liability, covenants and agrees
that it will indemnify each Purchaser Indemnified Party against, and hold
each Purchaser Indemnified Party harmless from and in respect of, all
Damages that arise from, are based on or relate or otherwise are
attributable to (i) any breach of the representations and warranties of
the Stockholder or the Company set forth herein or in certificates
delivered in connection herewith, (ii) any nonfulfillment of any covenant
or agreement on the part of the Stockholder or the Company under this
Agreement, (iii) any liability under the Securities Act, the Exchange Act
or other applicable Governmental Requirement which arises out of or is
based on (A) any untrue statement of a material fact relating to the
Stockholder and the Company,
59
or either of them, which is (1) provided to Purchaser or its counsel by
the Company or the Stockholder and (2) contained in any preliminary
prospectus relating to the IPO, the Registration Statement or any
prospectus forming a part thereof, or any amendment thereof or
supplement thereto, or (B) any omission or alleged omission to state
therein a material fact relating to the Stockholder and the Company, or
either of them, required to be stated therein or necessary to make the
statements therein not misleading, and not provided to Purchaser or its
counsel by the Company or the Stockholder, (iv) the litigation, claims
and other matters described on SCHEDULE 4.12 (except to the extent such
Damages constitute fees of, expenses of and disbursements, by attorneys,
consultants, experts or other Representatives and Litigation costs), or
(v) the amount of any Excess Tax Obligations and any Prior Tax Liability
(each such Damage Claim and each Damage Claim described in Section
9.02(b) being a "PURCHASER INDEMNIFIED LOSS").
(b) Subject to the applicable provisions of Sections 9.1 and
9.6, each MTM Stockholder, severally and not jointly with any other
Person, covenants and agrees that he will indemnify each Purchaser
Indemnified Party against, and hold each Purchaser Indemnified Party
harmless from and in respect of, all Damage Claims that arise from, are
based on or relate or otherwise are attributable to (i) any breach of the
representations and warranties of that MTM Stockholder herein or in any
certificates delivered in connection herewith, (ii) any nonfulfillment of
any several, and not joint and several, agreement on the part of that MTM
Stockholder under this Agreement or (iii) any liability under the
Securities Act, the Exchange Act or other applicable Governmental
Requirement which arises out of or is based on (A) any untrue statement
or alleged untrue statement of a material fact relating solely to that
MTM Stockholder which is (1) provided to Purchaser or its counsel by that
MTM Stockholder and (2) contained in any preliminary prospectus relating
to the IPO, the Registration Statement or any prospectus forming a part
thereof, or any amendment thereof or supplement thereto, or (B) any
omission or alleged omission to state therein a material fact relating
solely to that MTM Stockholder required to be stated therein or necessary
to make the statements therein not misleading, and not provided to
Purchaser or its counsel by that MTM Stockholder.
Section 9.3. INDEMNIFICATION OF STOCKHOLDER INDEMNIFIED PARTIES.
Purchaser covenants and agrees that it will indemnify each Stockholder
Indemnified Party against, and hold each Stockholder Indemnified Party harmless
from and in respect of, all Damage Claims (that arise from, are based on or
relate or otherwise are attributable to (i) any breach by Purchaser or Merger
Sub of their representations and warranties set forth herein or in their
certificates delivered to the Company or the Stockholders in connection
herewith, (ii) any nonfulfillment of any covenant or agreement on the part of
Purchaser or Merger Sub under this Agreement (each such Damage Claim being a
"STOCKHOLDER INDEMNIFIED LOSS"); (iii) any liability under the Securities Act,
the Exchange Act or other applicable Governmental Requirement which arises out
of or is based on (A) any untrue statement or alleged untrue statement of a
material fact relating to Purchaser, Merger Sub or any of the Other Founding
Companies contained in any preliminary prospectus relating to the IPO, the
Registration Statement or any prospectus forming a part thereof, or
60
any amendment thereof or supplement thereto, or (B) any omission or alleged
omission to state therein a material fact relating to Purchaser, Merger Sub
or any of the Other Founding Companies, or any of them, required to be stated
therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made or (iv) the Tax
Liability plus the Tax Liability Costs to the extent that the amount thereof
does not exceed $1,600,000 in the aggregate.
Section 9.4. CONDITIONS OF INDEMNIFICATION.
(a) All claims for indemnification under this Agreement shall
be asserted and resolved as provided in this Section 9.4.
(b) A party claiming indemnification under this Agreement (an
"INDEMNIFIED PARTY") shall promptly (i) notify the party from whom
indemnification is sought (the "INDEMNIFYING PARTY") of any third-party
claim or claims asserted against the Indemnified Party ("THIRD PARTY
CLAIM") that could give rise to a right of indemnification under this
Agreement and (ii) transmit to the Indemnifying Party a written notice
("CLAIM NOTICE") describing in reasonable detail the nature of the Third
Party Claim, a copy of all papers served with respect to the claim (if
any), an estimate of the amount of damages attributable to the Third
Party Claim to the extent feasible (which estimate shall not be
conclusive of the final amount of the claim) and the basis for the
Indemnified Party's request for indemnification under this Agreement.
Except as set forth in Section 9.2, the failure to promptly deliver a
Claim Notice shall not relieve the Indemnifying Party of its obligations
to the Indemnified Party with respect to the related Third Party Claim
except to the extent that the resulting delay is materially prejudicial
to the defense of the claim. Within 15 days after receipt of any Claim
Notice (the "ELECTION PERIOD"), the Indemnifying Party shall notify the
Indemnified Party (i) whether the Indemnifying Party disputes its
potential liability to the Indemnified Party under this Article IX with
respect to the Third Party Claim and (ii) if the Indemnifying Party does
not dispute its potential liability to the Indemnified Party with respect
to the Third Party Claim, whether the Indemnifying Party desires, at the
sole cost and expense of the Indemnifying Party, to defend the
Indemnified Party against the Third Party Claim.
(c) If the Indemnifying Party does not dispute its potential
liability to the Indemnified Party and notifies the Indemnified Party
within the Election Period that the Indemnifying Party elects to assume
the defense of the Third Party Claim, then the Indemnifying Party shall
have the right to defend, at its sole cost and expense, the Third Party
Claim by all appropriate proceedings, which proceedings shall be
prosecuted diligently by the Indemnifying Party to a final conclusion or
settled at the discretion of the Indemnifying Party in accordance with
this Section 9.4(c) and the Indemnified Party will furnish the
Indemnifying Party with all information in its possession with respect to
the Third Party Claim and otherwise cooperate with the Indemnifying Party
in the defense of the Third Party Claim; PROVIDED, HOWEVER, that the
Indemnifying Party shall not enter into any settlement with respect to
any Third Party Claim that purports to limit the activities of, or
61
otherwise restrict in any way, any Indemnified Party or any Affiliate of
any Indemnified Party without the prior consent of that Indemnified Party
(which consent may be withheld in the reasonable discretion of that
Indemnified Party). The Indemnified Party is hereby authorized, at the
sole cost and expense of the Indemnifying Party if found liable
hereunder, to file, during the Election Period, any motion, answer or
other pleadings that the Indemnified Party shall deem necessary or
appropriate to protect its interests or those of the Indemnifying Party.
The Indemnified Party may participate in, but not control, any defense or
settlement of any Third Party Claim controlled by the Indemnifying Party
pursuant to this Section 9.4(c) and will bear its own costs and expenses
with respect to its participation; PROVIDED, HOWEVER, that if the named
parties to any such action (including any impleaded parties) include both
the Indemnifying Party and the Indemnified Party, and the Indemnified
Party has been advised in writing by counsel that there may be one or
more legal defenses available to it which are different from or
additional to those available to the Indemnifying Party, then the
Indemnified Party may employ separate counsel at the expense of the
Indemnifying Party, and, on its written notification of that employment,
the Indemnifying Party shall not have the right to assume or continue the
defense of the action on behalf of the Indemnified Party.
(d) If the Indemnifying Party (i) within the Election Period
(A) disputes its potential liability to the Indemnified Party under this
Article IX, (B) elects not to defend the Indemnified Party pursuant to
Section 9.4(c) or (C) fails to notify the Indemnified Party that the
Indemnifying Party elects to defend the Indemnified Party pursuant to
Section 9.4(c) or (ii) elects to defend the Indemnified Party pursuant to
Section 9.4(c) but fails diligently and promptly to prosecute or settle
the Third Party Claim, then the Indemnified Party shall have the right to
defend, at the sole cost and expense of the Indemnifying Party (if the
Indemnified Party is entitled to indemnification hereunder), the Third
Party Claim by all appropriate proceedings, which proceedings shall be
promptly and vigorously prosecuted by the Indemnified Party to a final
conclusion or settled. The Indemnified Party shall have full control of
such defense and proceedings. Notwithstanding the foregoing, if the
Indemnifying Party has delivered a written notice to the Indemnified
Party to the effect that the Indemnifying Party disputes its potential
liability to the Indemnified Party under this Article IX and if such
dispute is resolved in favor of the Indemnifying Party, the Indemnifying
Party shall not be required to bear the costs and expenses of the
Indemnified Party's defense pursuant to this Section 9.4 or of the
Indemnifying Party's participation therein at the Indemnified Party's
request, and the Indemnified Party shall reimburse the Indemnifying Party
in full for all reasonable and appropriate costs and expenses of such
litigation. The Indemnifying Party may participate in, but not control,
any defense or settlement controlled by the Indemnified Party pursuant to
this Section 9.4(d), and the Indemnifying Party shall bear its own costs
and expenses with respect to such participation.
(e) If any Indemnified Party should have a claim against any
Indemnifying Party hereunder that does not involve a Third Party Claim,
the Indemnified Party shall transmit to the Indemnifying Party a written
notice (the "INDEMNITY NOTICE") describing in reasonable
62
detail the nature of the claim, an estimate of the amount of Damages
attributable to that claim to the extent feasible (which estimate shall
not be conclusive of the final amount of the claim) and the basis of the
Indemnified Party's request for indemnification under this Agreement. If
the Indemnifying Party does not notify the Indemnified Party within 15
days from its receipt of the Indemnity Notice that the Indemnifying Party
disputes the claim, the claim specified by the Indemnified Party in the
Indemnity Notice shall be deemed a liability of the Indemnifying Party
hereunder. If the Indemnifying Party has timely disputed the claim, as
provided above, the dispute shall be resolved by proceedings in an
appropriate court of competent jurisdiction if the parties do not reach a
settlement of such dispute within 30 days after notice of the dispute is
given.
(f) Payments of all amounts owing by an Indemnifying Party
pursuant to this Article IX relating to a Third Party Claim shall be made
within 30 days after the latest of (i) the settlement of that Third Party
Claim, (ii) the expiration of the period for appeal of a final
adjudication of that Third Party Claim or (iii) the expiration of the
period for appeal of a final adjudication of the Indemnifying Party's
liability to the Indemnified Party under this Agreement. Payments of all
amounts owing by an Indemnifying Party pursuant to Section 9.4(e) shall
be made within 30 days after the later of (i) the expiration of the
30-day Indemnity Notice period or (ii) the expiration of the period for
appeal of a final adjudication of the Indemnifying Party's liability to
the Indemnified Party under this Agreement. Any payments owing by a
Stockholder Indemnifying Party under this Article IX may, at such
Stockholder Indemnifying Party's sole option, be paid either in cash or
by surrendering a number of shares of Purchaser Preferred Stock that
would be convertible into a number of shares of Purchaser Common Stock,
and if all of the Purchaser Indemnifying Party's Purchaser Preferred
Stock has been surrendered, a number of shares of Purchaser Common Stock,
equal to the amount obtained by dividing the amount of the payment by the
Current Market Price; provided that if such Stockholder Indemnifying
Party elects to pay such obligation by surrendering shares of Purchaser
Common Stock and/or Purchaser Preferred Stock and the aggregate Current
Market Price of all of such Stockholder Indemnifying Party's shares is
less than its liability, the surrender to the Indemnified Party by such
Stockholder Indemnifying Party of all of its Purchaser Common Stock and
Purchaser Preferred Stock shall constitute complete satisfaction of all
of its indemnity obligations under this Agreement.
Section 9.5. REMEDIES EXCLUSIVE. Except as otherwise expressly
provided in this Agreement, the remedies provided in this Article IX are the
exclusive remedies available to one party against the other, either at law or in
equity, in respect of any matter indemnified against in this Article IX.
Section 9.6. LIMITATIONS ON INDEMNIFICATION.
(a) Notwithstanding the provisions of Section 9.2(a), neither
the MTM Stockholders nor the Stockholder shall be required to indemnify
or hold harmless any of the Purchaser Indemnified Parties on account of
any Purchaser Indemnified Loss under Section 9.2(a) unless the liability
of the MTM Stockholders and the Stockholder in respect of that Purchaser
Indemnified Loss, when aggregated with the liability of the MTM
Stockholders and the Stockholders in respect of all Purchaser Indemnified
Losses under Section 9.2(a), exceeds, and only to the extent the
aggregate amount of all those Purchaser Indemnified Losses does exceed,
the Threshold Amount; provided that for purposes of the indemnity
obligation pursuant to Section 9.2(a)(iv), the Threshold Amount shall be
increased by the excess of any Recent Operating Profits over Agreed
Settlement Costs. In no event shall (i) the aggregate joint and
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several liability of the MTM Stockholders and the Stockholder under this
Agreement, including Sections 9.2(a) and 9.2(b), exceed the Ceiling
Amount or (ii) the aggregate liability of any MTM Stockholder under this
Agreement, including Sections 9.2(a) and 9.2(b), exceed the sum of
$2,000,000. The foregoing limitations in this Section 9.6(a) shall not
apply to the indemnity obligations of the Purchaser and the MTM
Stockholders with respect to any Excess Tax Obligations or Prior Tax
Liability.
(b) Notwithstanding the provisions of Section 9.3, Purchaser
shall not be required to indemnify or hold harmless any of the
Stockholder Indemnified Parties on account of the Stockholder Indemnified
Loss unless the liability of Purchaser in respect of that Stockholder
Indemnified Loss, when aggregated with the liability of Purchaser in
respect of all Stockholder Indemnified Losses, exceeds, and only to the
extent the aggregate amount of all those Stockholder Indemnified Losses
does exceed, the Threshold Amount, other than for a failure to deliver
the Merger Consideration (but then only to the extent of the undelivered
Merger Consideration) and with respect to its agreement to cause the
Surviving Corporation to pay, and its indemnity obligations relating to,
Tax Liability and Tax Expert Costs. In no event shall Purchaser be
liable under this Agreement, including Section 9.3, (i) for any amount in
excess of the Ceiling Amount, other than for a failure to deliver the
Merger Consideration (but then only to the extent of the undelivered
Merger Consideration), (ii) for any amount of Tax Liability plus Tax
Expert Costs in excess of (A) $1,600,000 in the aggregate, or (B)
$400,000 in any calendar quarter, or (iii) for any Prior Tax Liability.
ARTICLE X
LIMITATIONS ON COMPETITION
Section 10.1. PROHIBITED ACTIVITIES. The Stockholder and each MTM
Stockholder agrees that it will not during the period beginning on the date
hereof and ending on the third anniversary of the date hereof, directly or
indirectly, for any reason, for its own account or on behalf of or together with
any other Person:
(a) engage as an officer, director or in any other managerial
capacity or as an owner, co-owner or other investor of or in, whether as
an employee, independent contractor, consultant or advisor, in any
business in competition with the Company, Purchaser or any Subsidiary of
Purchaser (Purchaser and its Subsidiaries collectively being called
"Purchaser" for purposes of this Article X) within any territory
surrounding any office or facility (each a "FACILITY") in which the
Company was engaged in business on the date hereof or immediately prior
to the Effective Time (for purposes of this Article X, the territory
surrounding a facility shall be: (i) the city, town or village in which
the facility is located, (ii) the county or parish in which the facility
is located, (iii) the counties or parishes contiguous to the county or
parish in which the facility is located, and (iv) the area located within
100 miles of the facility, all of such locations being herein
collectively called the "TERRITORY");
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(b) call on any natural Person who is at that time employed
by the Company or Purchaser with the purpose or intent of attracting that
person from the employ of the Company or Purchaser, provided that the
Stockholder and the MTM Stockholders may call on and hire any of their
respective Immediate Family Members;
(c) call on any Person that at that time is, or at any time
within one year prior to that time was, a customer of the Company or
Purchaser within the Territory, (i) for the purpose of soliciting or
selling any product or service in competition with the Company or
Purchaser within the Territory and (ii) with the knowledge of the
customer relationship; or
(d) call on any Purchaser Acquisition Candidate, with the
knowledge of that Person's status as an Purchaser Acquisition Candidate,
for the purpose of acquiring that Person or arranging the acquisition of
that Person by any Person other than Purchaser.
Notwithstanding the foregoing, the Stockholder and the MTM Stockholders may own
and hold as a passive investment up to 5% in the aggregate of a class of the
outstanding Capital Stock of a competing Entity business if that class of
Capital Stock is publicly traded.
Section 10.2. DAMAGES. Because of the difficulty of measuring economic
losses to Purchaser as a result of any breach by the Stockholder or any MTM
Stockholder of its covenants in Section 10.1, and because of the immediate and
irreparable damage that could be caused to Purchaser for which it would have no
other adequate remedy, the Stockholder and each MTM Stockholder agrees that
Purchaser may enforce the provisions of Section 10.1 by injunctions and
restraining orders against the Stockholder and each MTM Stockholder if it
breaches any of those provisions.
Section 10.3. REASONABLE RESTRAINT. The Parties each agree that
Sections 10.1 and 10.2 impose a reasonable restraint on the Stockholder and each
MTM Stockholder in light of the activities and business of Purchaser on the date
hereof, the current business plans of Purchaser and the investment by the
Stockholder and each MTM Stockholder in Purchaser as a result of the Merger.
Section 10.4. SEVERABILITY; REFORMATION. The covenants in this Article
X are severable and separate. The unenforceability of any specific covenant in
this Article X is not intended by any Party to, and shall not, affect the
provisions of any other covenant in this Article X. If any court of competent
jurisdiction determines that the scope, time or territorial restrictions set
forth in Section 10.1 are unreasonable as applied to the Stockholder or any MTM
Stockholder, the Parties acknowledge their mutual intention and agreement that
those restrictions be enforced to the fullest extent the court deems reasonable,
and thereby shall be reformed to that extent as applied to the Stockholder or
such MTM Stockholder.
Section 10.5. INDEPENDENT COVENANT. All the covenants in this Article
X are intended by each Party to, and shall, be construed as an agreement
independent of any other provision in this Agreement, and the existence of any
claim or cause of action of the Stockholder against Purchaser,
65
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by Purchaser of any covenant in this Article X. It
is specifically agreed that the period specified in Section 10.1 shall be
computed in the case of the Stockholder and each MTM Stockholder by excluding
from that computation any time during which the Stockholder or such MTM
Stockholder is in violation of any provision of Section 10.1. The covenants
contained in this Article X shall not be affected by any breach of any other
provision of this Agreement by any Party.
Section 10.6. MATERIALITY. The Company, each MTM Stockholder and the
Stockholder, severally and not jointly with any other Person, hereby agree that
this Article X is a material and substantial part of the transactions
contemplated by this Agreement.
ARTICLE XI
TERMINATION
Section 11.1. TERMINATION OF THIS AGREEMENT.
(a) This Agreement may be terminated at any time prior to the
Closing solely:
(i) by the mutual written consent of Purchaser and the
Company;
(ii) by the Stockholder or the Company, on the one hand,
or by Purchaser, on the other hand, if the transactions
contemplated by this Agreement to take place at the Closing shall
not have been consummated by October 31, 1999, unless the failure
of such transactions to be consummated results from the willful
failure of the Party (or in the case of the Stockholder and the
Company, either of them or any MTM Stockholder) seeking to
terminate this Agreement to perform or adhere to any agreement
required hereby to be performed or adhered to by that Party prior
to or at the Closing or thereafter on the IPO Closing Date;
(iii) by the Stockholder or the Company, on the one
hand, or by Purchaser, on the other hand, if a material breach or
default shall be made by the other Party (or in the case of the
Stockholder and the Company, either of them or any MTM
Stockholder) in the observance or in the due and timely
performance of any of the covenants, agreements or conditions
contained herein; or
(iv) by Purchaser if it is entitled to do so as provided
in Section 6.6;
(b) This Agreement may be terminated after the Closing
solely:
(i) by Purchaser or the Company if the Underwriting
Agreement is terminated pursuant to its terms after the Closing
and prior to the consummation of the IPO; or
66
(ii) automatically and without action on the part of any
party hereto if the IPO is not consummated within 15 Business Days
after the date of the Closing.
(c) If this Agreement is terminated pursuant to this Section
11.1, the Merger will be deemed for all purposes to have been abandoned
and of no force or effect. If this Agreement is terminated pursuant to
this Section 11.1 after the Certificate of Merger has been filed with the
Secretary of State of the State of Delaware, but before the IPO has been
consummated, Purchaser will take all actions that Counsel for the Company
and the Stockholders advises Purchaser are required by the applicable
laws of the State of Delaware to rescind the Merger.
Section 11.2. LIABILITIES IN EVENT OF TERMINATION. If this Agreement
is terminated pursuant to Section 11.1, there shall be no liability or
obligation on the part of any Party except (a) as provided in Section 12.7, (b)
to the extent that such liability is based on the breach of that Party of any of
its or his representations, warranties or covenants set forth in of this
Agreement.
ARTICLE XII
GENERAL PROVISIONS
Section 12.1. TREATMENT OF CONFIDENTIAL INFORMATION.
(a) (i) Each of the Company, each MTM Stockholder and the
Stockholder, severally and not jointly with any other Person,
acknowledges that it has or may have had in the past, currently has and
in the future may have access to Confidential Information of the Company,
the Other Founding Companies and their Subsidiaries and Purchaser and its
Subsidiaries. Each of the Company, each MTM Stockholder and the
Stockholder, severally and not jointly with any other Person, agrees that
it will keep confidential all such Confidential Information furnished to
it and, except with the specific prior written consent of Purchaser will
not disclose such Confidential Information to any Person except
(a) Representatives of Purchaser (on a need to know basis), (b) its own
Representatives, provided that these Representatives (other than counsel)
agree to the confidentiality provisions of this Section 12.1; and
provided, further, that Confidential Information shall not include
(i) such information which becomes known to the public generally through
no fault of the Stockholder or such MTM Stockholder, (ii) information
required to be disclosed by law or the order of any governmental
authority under color of law, provided, that prior to disclosing any
information pursuant to this clause (ii), the Stockholder or such MTM
Stockholder shall, if possible, give prior written notice thereof to
Purchaser and provide Purchaser with the opportunity to contest such
disclosure, or (iii) information the disclosure of which the disclosing
party reasonably believes is required in connection with the defense of a
lawsuit against the disclosing party. In the event of a breach or
threatened breach by the Stockholder or any MTM Stockholder of the
provisions of this Section 12.1 with respect to any Confidential
Information, Purchaser shall be entitled to an injunction restraining the
67
Stockholder or such MTM Stockholder from disclosing, in whole or in part,
that Confidential Information. Nothing herein shall be construed as
prohibiting Purchaser from pursuing any other available remedy for such
breach or threatened breach, including the recovery of damages.
(ii) Each of Purchaser and Merger Sub, severally and not
jointly with any other Person, acknowledges that it has or may have had
in the past, currently has and in the future may have access to
Confidential Information of the Company, the Stockholder and each MTM
Stockholder. Each of Purchaser and Merger Sub, severally and not jointly
with any other Person, agrees that it will keep confidential all such
Confidential Information furnished to it and, except with the specific
prior written consent of the Stockholder will not disclose such
Confidential Information to any Person except (a) Representatives of
Purchaser or Merger Sub (on a need to know basis), (b) its own
Representatives, provided that these Representatives (other than counsel,
accountants and underwriters) agree to the confidentiality provisions of
this Section 12.1; and provided, further, that Confidential Information
shall not include (i) such information which becomes known to the public
generally through no fault of the Purchaser or Merger Sub
(ii) information required to be disclosed by law or the order of any
governmental authority under color of law, provided, that prior to
disclosing any information pursuant to this clause (ii), Purchaser or
Merger Sub shall, if possible, give prior written notice thereof to the
Stockholder and provide the Stockholder with the opportunity to contest
such disclosure, or (iii) the disclosing party reasonably believes that
such disclosure is required in connection with the defense of a lawsuit
against the disclosing party. In the event of a breach or threatened
breach by the Purchaser and Merger Sub of the provisions of this
Section 12.1 with respect to any Confidential Information, the
Stockholder shall be entitled to an injunction restraining the Purchaser
or Merger Sub from disclosing, in whole or in part, that Confidential
Information. Nothing herein shall be construed as prohibiting the
Stockholder from pursuing any other available remedy for such breach or
threatened breach, including the recovery of damages. The obligations of
Purchaser and Merger Sub, and the rights and remedies of the Stockholder
and each MTM Stockholder, under Section 6.1(a) and this Section
12.1(a)(ii) shall terminate with respect to Confidential Information of
the Company on the IPO Closing Date.
(b) Because of the difficulty of measuring economic losses as
a result of the breach of the foregoing covenants in Section 12.1(a), and
because of the immediate and irreparable damage that would be caused to
the nonbreaching Party for which it would have no other adequate remedy
each Party agrees that the nonbreaching Party may enforce the provisions
of Section 12.1(a) by injunctions and restraining orders against each of
Party who breaches any of those provisions.
(c) The obligations of the parties under this Section 12.1
shall survive the termination of this Agreement.
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Section 12.2. RESTRICTIONS ON TRANSFERS OF PURCHASER COMMON STOCK.
(a) During the two-year period following the IPO Closing Date
(the "RESTRICTED PERIOD"), the Stockholder will not voluntarily:
(i) sell, assign, exchange, transfer, encumber, pledge, distribute,
appoint or otherwise dispose of (A) any shares of Purchaser Common Stock
and Purchaser Preferred Stock (and shares of Purchaser Common Stock
issued on conversion thereof, if any) received by the Stockholder in the
Merger or (B) any interest in (including any option to buy or sell) any
such shares of Purchaser Common Stock and Purchaser Preferred Stock (and
shares of Purchaser Common Stock issued on conversion thereof, if any),
in whole or in part, and Purchaser will have no obligation to, and shall
not, treat any such attempted transfer as effective for any purpose; or
(ii) engage in any transaction, whether or not with respect to any shares
of Purchaser Common Stock and Purchaser Preferred Stock (and shares of
Purchaser Common Stock issued on conversion thereof, if any) or any
interest therein, the intent or effect of which is to reduce the risk of
owning the shares of Purchaser Common Stock and Purchaser Preferred Stock
(and shares of Purchaser Common Stock issued on conversion thereof, if
any) acquired pursuant to Section 2.04 (including, for example engaging
in put, call, short-sale, straddle or similar market transactions);
PROVIDED, HOWEVER, that if the average closing price of the Purchaser
Common Stock (as reported by the principal exchange or market upon which
the Purchaser Common Stock is then listed) for the ten trading day period
prior to (i) the end of the twelfth month following the IPO Closing Date,
(ii) the end of the fifteenth month following the IPO Closing Date, (iii)
the end of the eighteenth month following the IPO Closing Date, or (iv)
the end of the twenty-first month following the IPO Closing Date, each
such ten trading day period a "Measurement Period," is greater than or
equal to $17 per share, then (i) ten percent, (ii) an additional twenty
percent, (iii) an additional thirty percent or (iv) an additional forty
percent, respectively, of Purchaser Common Stock and shares of Purchaser
Common Stock actually issued upon conversion of Purchaser Preferred
Stock, if any, received by Stockholder in the Merger shall irrevocably be
released from the restrictions of this Section 12.2(a) following the
applicable Measurement Period; and, PROVIDED, FURTHER, that this Section
12.2 shall not restrict any transfer of Purchaser Common Stock and
Purchaser Preferred Stock (and shares of Purchaser Common Stock issued on
conversion thereof, if any) acquired by the Stockholder pursuant to
Section 2.4 to any of that Stockholder's Related Persons who agree in
writing to be bound by the provisions of Section 12.1 and this Section
12.2. The certificates evidencing the Purchaser Common Stock delivered
to the Stockholder pursuant to Section 2.5 and upon conversion of the
Purchaser Preferred Stock and the Purchaser Preferred Stock will bear a
legend substantially in the form set forth below and containing such
other information as Purchaser may deem necessary or appropriate:
EXCEPT PURSUANT TO THE TERMS OF THE AGREEMENT AND PLAN OF
MERGER AMONG THE ISSUER, THE HOLDER OF THIS CERTIFICATE AND
THE OTHER PARTIES THERETO, THE SHARES REPRESENTED BY THIS
CERTIFICATE MAY NOT BE VOLUNTARILY SOLD, ASSIGNED,
EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED,
APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL
NOT
69
BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED VOLUNTARY
SALE, ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE, PLEDGE,
DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION OF ANY OF
THOSE SHARES, DURING THE ___-MONTH PERIOD ENDING ON
________ (THE "RESTRICTED PERIOD"). ON THE WRITTEN
REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER
AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP
ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE EXPIRATION
OF THE RESTRICTED PERIOD.
(b) The Stockholder (i) acknowledges that the shares of
Purchaser Common Stock to be delivered to it pursuant to Section 2.4 and
upon conversion of the Purchaser Preferred Stock and the shares of
Purchaser Preferred Stock (A) have not been and, subject to the
Stockholder's rights under the Registration Rights Agreement, will not be
registered under the Securities Act and therefore may not be resold by it
without compliance with the Securities Act and (B) will, as a result of
their restrictions on transferability which are imposed by this Agreement
during the Restricted Period, have a value materially less at the
Effective Time than the value of then freely tradeable shares of
Purchaser Common Stock and Purchaser Preferred Stock, and (ii) covenants
that none of the shares of Purchaser Common Stock issued to it pursuant
to SCHEDULE 2.4 or upon conversion of the Purchaser Preferred Stock or
the shares of Purchaser Preferred Stock will be offered, sold, assigned,
pledged, hypothecated, transferred or otherwise disposed of except after
full compliance with all the applicable provisions of the Securities Act
and the rules and regulations of the SEC and applicable state securities
laws and regulations. All certificates evidencing shares of Purchaser
Common Stock issued pursuant to SCHEDULE 2.4 and, subject to the
Stockholder's rights under the Registration Agreement, upon conversion of
the Purchaser Preferred Stock and the shares of Purchaser Preferred Stock
will bear the following legend in addition to the legend prescribed by
Section 12.2(a):
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY ONLY
BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER HEREOF
COMPLIES WITH THAT ACT AND OTHER APPLICABLE SECURITIES
LAWS.
In addition, certificates evidencing shares of Purchaser Common Stock
issued to the Stockholder pursuant to SCHEDULE 2.4 and upon conversion of
the Purchaser Preferred and the shares of Purchaser Preferred Stock will
bear any legend required by (i) the securities or blue sky laws of the
state in which that Stockholder resides or (ii) the Underwriter in
connection with any agreement of that Stockholder with the Underwriter to
the effect set forth in Section 12.2(a).
Section 12.3. BROKERS AND AGENTS. The Stockholder and each MTM
Stockholder jointly and severally represents and warrants to Purchaser that
neither the Stockholder, such MTM Stockholder nor the Company has not directly
or indirectly employed or become obligated to pay any broker or similar agent in
connection with the transactions contemplated hereby and agree,
70
without regard to the Threshold Amount limitations set forth in Article IX,
to indemnify Purchaser against all Damage Claims arising out of claims for
any and all fees and commissions of brokers or similar agents employed or
promised payment by the Company. The Purchaser and Merger Sub each jointly
and severally represents and warrants to Purchaser and each MTM Stockholder
that neither Purchaser nor Merger Sub has directly or indirectly employed or
become obligated to pay any broker or similar agent in connection with the
transactions contemplated hereby, other than fees payable to Benchmark Equity
Group, Inc. as disclosed in the Private Placement Memorandum or the
Registration Statement, and agree, without regard to the Threshold Amount
limitations set forth in Article IX, to indemnify the Stockholder and each
MTM Stockholder against all Damage Claims arising out of claims for any and
all fees and commissions of brokers similar agents employed or promised
payment by the Purchaser or Merger Sub.
Section 12.4. ASSIGNMENT; NO THIRD PARTY BENEFICIARIES. This Agreement
and the rights of its Parties may not be assigned (except by operation of law)
and shall be binding on and inure to the benefit of the Parties and their
respective heirs, legal representatives, successors and permitted assigns.
Neither this Agreement nor any other Transaction Document is intended, or shall
be construed, deemed or interpreted, to confer on any Person not a party hereto
or thereto any rights or remedies hereunder or thereunder, except as provided in
Section 6.4(b), in Article IX, or as otherwise provided expressly herein or
therein.
Section 12.5. ENTIRE AGREEMENT; AMENDMENT; WAIVERS. This Agreement and
the documents delivered pursuant to it constitute the entire agreement and
understanding among the Parties and supersede all prior agreements and
understandings, both written and oral, relating to the subject matter of this
Agreement. This Agreement may be amended, modified or supplemented, and any
right hereunder may be waived, if, but only if, the amendment, modification,
supplement or waiver is in writing and signed by the Stockholder, each MTM
Stockholder, the Company and Purchaser. The waiver of any of the terms and
conditions of this Agreement shall not be construed or interpreted as, or deemed
to be, a waiver of any of its other term or conditions.
Section 12.6. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which will be an original, but all of which together will
constitute one and the same instrument.
Section 12.7. EXPENSES. Whether or not the transactions contemplated
hereby are consummated, (a) Purchaser will pay the fees, expenses and
disbursements of Purchaser and Merger Sub and their Representatives which are
incurred in connection with the subject matter of this Agreement and any
amendments to this Agreement including all costs and expenses incurred in the
performance of and compliance with all conditions to be performed by Purchaser
and Merger Sub under this Agreement, including the costs of preparing the
Registration Statement, (b) the Company may pay any reasonable fees, expenses
and disbursements of Counsel for the Company and the Stockholder incurred in
connection with the subject matter of this Agreement and the Registration
Statement on or before the IPO Closing Date, and (c) the Stockholder will pay
from its funds, and not from funds of the Company all sales, use, transfer and
other similar taxes and fees (collectively,
71
"TRANSFER TAXES") incurred in connection with the transactions contemplated
hereby. The Stockholder will file all necessary documentation and Returns
with respect to all Transfer Taxes. In addition, the Stockholder
acknowledges that it, and not the Company, Purchaser or the Surviving
Corporation, will pay all Taxes due upon receipt of the Merger Consideration
payable to the Stockholder pursuant to Article II.
Section 12.8. NOTICES. All notices required or permitted hereunder
shall be in writing, and shall be deemed to be delivered and received (a) if
personally delivered or if delivered by telex, telegram, facsimile or courier
service, when actually received by the Party to whom notice is sent or (b) if
delivered by mail (whether actually received or not), at the close of business
on the third Business Day next following the day when placed in the mail,
postage prepaid, certified or registered, addressed to the appropriate Party or
Parties, at the address of such Party set forth below (or at such other address
as such party may designate by written notice to all other Parties in accordance
herewith):
(1) if to Purchaser or Merger Sub, addressed to it at:
OmniLynx Communications Corporation
000 Xxxxxx Xx.
Xxxxxxx, XX 00000
Attn.: Xxxxxxxxxxx Xxxxx,
Chief Executive Officer
with copies (which shall not constitute notice for purposes of
this Agreement) to:
Xxxxxx & Xxxxxx, L.L.P.
000 Xxxxxxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxx 00000-0000
Attn: Xxxxxx X. Xxxxx
Telephone: (000) 000-0000
Telecopy No.: (000) 000-0000
Xxxxxx Xxxxxxx
ARC Networks
0000 Xxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Telecopy No.: (000) 000-0000
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(2) if to the Stockholder, addressed to it at:
MTM Holdings, Inc.
0000 Xxxxxx
Xxxxxxx, Xxxxx 00000
Attn: Xxxxxxx Xxxxxxxx
Telecopy No.: (000) 000-0000
(3) if to the Company, addressed to it at:
AXCES, Inc.
0000 Xxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attn: Xxxxxxx Avignon
Telecopy No.: (000) 000-0000
with copies (which shall not constitute notice for purposes of
this Agreement) to:
Verner, Liipfert, Bernhard, XxXxxxxxx and Hand,
Chartered
0000 Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attn: Xxxxxx X. Xxxxxxx
Telecopy No.: (000) 000-0000
(4) if to the MTM Stockholders, addressed to them at
their respective addresses shown on the signature
pages hereto.
SECTION 12.9. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE, WITH THE SUBSTANTIVE LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO
THE CONFLICTS OF LAW PROVISIONS THEREOF.
Section 12.10. EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise
provided herein, no delay or omission in the exercise of any right, power or
remedy accruing to any Party as a result of any breach or default hereunder by
any other Party shall impair any such right, power or remedy, nor shall it be
construed, deemed or interpreted as a waiver of or acquiescence in any such
breach or default, or of any similar breach or default occurring later; nor
shall any waiver of any single breach or default be construed, deemed or
interpreted as a waiver of any other breach or default hereunder occurring
before or after that waiver.
Section 12.11. TIME. Time is of the essence in the performance of this
Agreement in all respects.
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Section 12.12. REFORMATION AND SEVERABILITY. If any provision of this
Agreement is invalid, illegal or unenforceable, that provision shall, to the
extent possible, be modified in such manner as to be valid, legal and
enforceable but so as to most nearly retain the intent of the Parties as
expressed herein, and if such a modification is not possible, that provision
shall be severed from this Agreement, and in either case the validity, legality
and enforceability of the remaining provisions of this Agreement shall not in
any way be affected or impaired thereby.
Section 12.13. RESPECTING THE IPO. Each of the Company, the MTM
Stockholders and the Stockholder acknowledges and agrees that: (a) no firm
commitment, binding agreement or promise or other assurance of any kind, whether
express or implied, oral or written, exists at the date hereof that the
Registration Statement will become effective or that the IPO will occur at a
particular price or within a particular range of prices or occur at all;
(b) neither Purchaser or any of its Representatives nor any prospective
underwriters in the IPO will have any liability to the Company, the Stockholder,
any MTM Stockholder or any of their respective Affiliates or associates for any
failure of (i) the Registration Statement to become effective (provided,
however, that Purchaser will use its reasonable best efforts to cause the
Registration Statement to become effective prior to October 31, 1999) or
(ii) the IPO to occur at a particular price or within a particular range of
prices or to occur at all; and (c) the decision of Stockholder and each MTM
Stockholder to enter into this Agreement, or to vote in favor of or consent to
the Merger, has been or will be made independent of, and without reliance on,
any statements, opinions or other communications of, or due diligence
investigations that have been or will be made or performed by, any prospective
underwriter relative to Purchaser or the IPO. The Underwriter shall have no
obligation to any of the Company, any MTM Stockholder and the Stockholder with
respect to any disclosure contained in the Registration Statement.
Section 12.14. TERMINATION OF THE AXCES, INC. 401(k) PLAN. The Company
hereby covenants and agrees to amend and terminate the AXCES, Inc. 401(k) Plan
(the "DESIGNATED PLAN") prior to the Closing Date by adopting board resolutions
and an agreement for amendment and termination of the Designated Plan and by
requesting a determination letter from the IRS to the effect that the
Designated Plan is a qualified plan under Section 401(a) of the Code upon its
termination and that the trust used to fund the Designated Plan is tax exempt
under Section 501(a) of the Code. After the effective date of termination of
the Designated Plan, the Designated Plan shall be "frozen" pending distribution
of its assets to participants and their beneficiaries. No persons who are not
participants as of the termination date shall be eligible to participate in the
Designated Plan or receive benefits thereunder, and no distributions shall be
made by the Designated Plan except normal distributions in the ordinary course
of business to or on behalf of employees who have separated service with the
Company. As soon as administratively practicable following receipt of a
favorable IRS determination letter, the trustee of the Designated Plan shall
effectuate distributions of all remaining assets from the Designated Plan and,
thereafter, it shall be liquidated. After liquidation of the Designated Plan,
the Surviving Corporation agrees to file a final IRS form 5500 for the Plan with
the IRS.
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first above written.
OMNILYNX COMMUNICATIONS CORPORATION
By: /s/ Xxxxxxxxxxx X. Xxxxx
------------------------------------------
Xxxxxxxxxxx X. Xxxxx,
Chief Executive Officer
AXCES ACQUISITION INC.
By: /s/ Xxxxxxxxxxx X. Xxxxx
------------------------------------------
Xxxxxxxxxxx X. Xxxxx,
President
AXCES, INC.
By: /s/ Xxxxxxx Avignon
------------------------------------------
Xxxxxxx Avignon
Chairman and Chief Executive Officer
MTM HOLDINGS CORPORATION
By: /s/ Xxxxxxx Xxxxxxxx
------------------------------------------
Xxxxxxx Xxxxxxxx
President
75
"MTM STOCKHOLDERS"
/s/ Xxxxxxx Avignon
---------------------------------------------
Xxxxxxx Avignon
12631 Broken Bough
Xxxxxxx, Xxxxx 00000
/s/ Xxxxxxx Till
---------------------------------------------
Xxxxxxx Till
12511 Overcup
Xxxxxxx, Xxxxx 00000
/s/ Xxxxxxx Xxxxxxxx
---------------------------------------------
Xxxxxxx Xxxxxxxx
00 Xxxx Xxxx
Xxxxxxx, Xxxxx 00000
76
SCHEDULE 2.3
Directors: Xxx Xxxxxxx
Xxxxxxx Xxxxxxxx
Officers: Xxxxxx Xxxxxxx, President and Secretary
77
SCHEDULE 2.4
MERGER CONSIDERATION
(1) 700,000 shares of Purchaser Common Stock; and
(2) 60,000 shares of Purchaser Preferred Stock.
78
